CR: LLLS-2021-10-07-003

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Republic of the Philippines

DEPARTMENT OF THE INTERIOR AND LOCAL GOVERNMENT
DILG-NAPOLCOM Center, EDSA cor. Quezon Avenue, West Triangle, Quezon City
www. dilq. qov. ph

MEMORANDUM CIRCULAR
No. 2022-004

TO ALL PROVINCIAL GOVERNORS, CITY MAYORS, MUNICIPAL

MAYORS, PRESIDING OFFICERS AND MEMBERS OF THE
SANGGUNIAN, DILG REGIONAL, PROVINCIAL AND CITY
DIRECTORS, CITY AND MUNICIPAL LOCAL GOVERNMENT
OPERATIONS OFFICERS, AND OTHERS CONCERNED

SUBJECT SUPPLEMENTAL ADVISORY TO DILG MEMORANDUM

CIRCULAR NO. 2021-109 AND ADDITIONAL GUIDANCE ON
LOCAL ANNUAL BUDGET AUTHORIZATION

DATE JAN 19 2022

In order to prevent a situation wherein local government units ( LGU) will operate in a
re-enacted budget and frustrate the needed developmental initiatives and fiscal
reforms, the Department issued Memorandum Circular No. 2021-1091 to provide
guidance and remind all Local Chief Executives (LCEs) , Vice-Mayors, and members
of the Sanggunian on the timely submission and enactment of the LGU ’s annual
appropriation budget for fiscal year 2022.

Of recent, complaints have reached the Department that there are local sanggunians
which whimsically, capriciously and arbitrarily use their legislative authorization power
under Section 319 of RA 7160 or the Local Government Code of 1991 (LGC) in the
enactment of the local government unit’s annual budget resulting to re-enacted
budgets.

In line with this and to bolster the call against the practice of re-enacting the budget ,
the Department strongly enjoins all Local Chief Executives (LCEs) , Vice-Mayor , and
Members of the Sanggunian to ensure the timely passage of the Local Annual
Appropriation Ordinance.

The sanggunians are guided by Local Budget Circular No. 112 with subject “ Budget
Operations Manual for Local Government Units” , 2016 Edition, issued by the
Department of Budget and Management (DBM) in the budget authorization phase, as
follows:

papaganap ng Badyet para sa mga

1
Re: Gampanin ng mga Lokal na Opisyal sa Pagsumite at Pag-
na taon
Lekal na Pamahalaan sa Buong bansa para sa susunod
Matino, Mahusay at Maasahan”
Trunkline Ne.: 8876-34-54
 “2.5 Steps in the Budget Authorization Phase

Step 1 xxx

1.2 Evaluate the Budget

The Sanggunian, with the assistance of the Local Finance

Committee (LFC), shall evaluate and deliberate on the Local
Expenditure Program ( LEP) in terms of compliance with the
budgetary requirements and general limitations.

The Receipts Portion in the LEP

To check the budget year’s aggregate estimated

income which will be compared with the aggregate
expenditure program [ Section 324 (a), RA 7160];
* To check if the taxes and fees identified as sources of
the estimated income are in accordance with the
approved Local Revenue Code;
To check if the estimated receipts from Real Property
Taxes (RPT) correspond to the total amount of due and
demandable RPT, including delinquent accounts;

The Expenditure Program

Determine the overall level of appropriations by

department/office/unit and special purpose
appropriations and the overall total;

• To check the provisions for associated PS costs,

e.g. Philhealth, GSIS premiums, Pag-IBIG, PERA,
Year-end Bonus and Cash Gift , RATA, etc;

« To check that the provision for debt services does

not exceed the ceiling required by law which is 20%
of the regular income of the LGU concerned
[Section 324 (b), RA 7160];

To check that the provision for Local Disaster and

Risk Reduction Management Fund (LDRRMF) is
not less than 5% of the estimated regular income
required by law (RA 10121);

- To check that the provision from IRA for

development projects is not less than 20% required
2
by law (Section 287, RA 7160) ;

-LBM) No. 82 re; Indicative

See also Budget and Management Local Budget Memorandum DBM
2 (
Units (LGUs) and
FY 2022 National Tax Allotment (NTA) Shares of Local Government LGUs dated 14 June 2021
Budgets of
Guidelines on the Preparation of the FY 2022 Annual
Page 2 of 4
 To check that the provision for discretionary
expenses, if any , does not exceed 2% of the actual
receipts derived from basic Real Property Tax
(RPT) in the next preceding year [Section 325 (h) ,
RA 7160]; and

To verify if the projects in the budget are consistent

with the AIP. ”

To reiterate, the Department calls the attention of all elective local officials to pass their
Appropriations Ordinance on time and accordingly put the welfare of their constituents
as their topmost priority. Furthermore, all LCEs, Vice-Mayors, and members of the
Sanggunian are reminded on their compliance on the timelines and deadlines for the
timely submissions and enactment of the annual budget , to wit:

Activity Legal basis Deadline

Preparation of the Budget
by the Local Chief Executive Section 318 of the LGC October 16

Legislative Authorization of
the Budget Section 319 of the LGC December 31

Failure to enact the required ordinance for the FY 2022 Annual Budget, the budget for
the previous year shall be re-enacted3 and will have the following disadvantages:

1. Only the annual appropriations for salaries and wages of existing positions,
statutory and contractual obligations, and essential operating expenses
authorized in the annual and supplemental for the preceding year shall be

3
SECTION 323. Failure to Enact the Annual Appropriations. - In case the sanggunian concerned fails to pass
the ordinance authorizing the annual appropriations at the beginning of the ensuing fiscal year, it shall
continue to hold sessions, without additional remuneration for its members, until such ordinance is
approved, and no other business may be taken up during such sessions. If the sanggunian still fails to
enact such ordinance after ninety ( 90) days from the beginning of the fiscal year, the ordinance
authorizing the appropriations of the preceding year shall be deemed reenacted and shall remain in force
and effect until the ordinance authorizing the proposed appropriations is passed by the sanggunian
concerned . However, only the annual appropriations for salaries and wages of existing positions, statutory and
contractual obligations, and essential operating expenses authorized in the annual and supplemental budgets
for
preceding year shall be deemed reenacted and disbursement of funds shall be in accordance therewith.
the

from the estimates

In the implementation of such reenacted ordinance, the local treasurer concerned shall exclude
nonrecurring sources , like national aids, proceeds from
of income for the preceding fiscal year those realized from
year adjustments , and other analogous sources of income . No ordinance authorizing
loans, sale of assets, prior
supplemental appropriations shall be passed in place of the annual appropriations .

appropriations, the local treasurer

In case the revised income estimates be less than the aggregate reenacted
the sanggunian concerned which shall, within ten (10) days from the receipt
concerned shall accordingly advise authorized by the
revised appropriations
of such advice , make the necessary adjustments or reductions. The
” (Emphasis Supplied )
sanggunian concerned shall then be the basis for disbursements.

Page 3 of 4
 *

deemed re-enacted and disbursement of funds shall be in accordance

therewith;

2. No creation of positions;

3. No new programs, projects and activities;

4. No utilization of the increase in the LGU’s share in the internal revenue

allotment for the year since the same is not covered by an Appropriation
Ordinance4;

5. Non-implementation of non-recurring activities no matter how vital they may

be; and

6. No supplemental appropriations.

When an LGU operates under a re-enacted budget, it shall use the same amount of
funds provided in the previous year. It also means new government projects would
have to be delayed and some key services will be affected until the new budget is
approved. Therefore, the local government is unable to fully execute its programs and
projects. This is obviously aggravated by our continuous combat against COVID-19
and other natural disasters to the detriment of their constituents.

All elective local officials should endeavor and work together to pass their
Appropriations Ordinance on time and accordingly put the welfare of their constituents
as their topmost priority.

Hence, the DILG, in the exercise of general supervision over provinces, highly
urbanized cities, and independent component cities, requires all elective local officials
who will fail to submit and/or enact appropriation ordinance within the aforementioned
timeline to submit a written explanation under oath cogent explanations, reasons,
justifications for the nonfeasance in enacting the annual appropriation ordinance.

Furthermore, in the exercise of its supervision over component LGUs, the province
with respect to component cities and municipalities and the city and municipality with
respect to barangays are likewise encouraged and enjoined to require the same.

All DILG Regional Directors, Provincial Directors, City Directors, City and Municipal
Local Government Operations officers are hereby directed to cause the widest
dissemination of this Memorandum Circular. You are likewise instructed to submit a
monthly report every 30th day of the month starting this month on the status of
compliance of all LGUs to DILG Memorandum Circular No. 2021-109 and this
Memorandum Circular.

For strict compliance

SGSKSB

RDOwl. AND
^ r
DILG

Secretary
OUSLG/MLI/LLS /RPB/gms/anor
JH
a'Sm
4
Subject to the ruling of the Supreme Court in the Mandanas
case. O SEC 01182022- 043
DILG-

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