DEPARTMENT OF BUDGET AND MANAGEMENT

FORUM ON
BUDGETARY UPDATES:
Local Budget Circular Nos.
147, 148, 152 & 153

December 6-7, 2023

 POLICY GUIDELINES/
BUDGETARY UPDATES

LBC No 147 LBC No 148 LBC No 152 LBC No 153

Dated July 29, 2022 Dated December 23, 2023 Dated August 02, 2023 Dated August 31, 2023
 POLICY GUIDELINES

Local Budget Circular No. 147

dated July 29, 2022
ADOPTION OF THE
ENHANCED PUBLIC
FINANCIAL MANAGEMENT
TOOLS (PFMAT) FOR LOCAL
GOVERNMENT UNITS AND IRS
ELECTRONIC VERSION
 PFM (Public Financial Management)
• A system of rules, procedures & practices for government to
manage public finances.
• It encompasses 7 elements: Budgeting, Accounting, Auditing, Cash
Management, Procurement, Revenue Generation, and Public
ePFMAT
Reporting on Public Sector Financial Operations
(Enhanced Public Financial
02 PFMIP 04
Management Tool) (Public Financial Management

A web-based electronic PFMAR Improvement Plan)

self-assessment instrument
designed to be used by LGUs in
evaluating the performance of
LGU PFM system
01
(Public Financial Management
Report)
improve PFM systems in the LGU.
PFMAR summarizes the results
of the PFMAT in five (5) parts.
Recommendations under the
PFMAR are detailed in the
PFMIP.
The PFMIP outlines the ANNEX A:
programs/projects/ activities
which will be undertaken to PFMIP Implementation
Monitoring Table
The Monitoring Table monitors
the implementation of
programs/ projects/ activities
03 that are included in the LGU
PFMIP.

4
PUBLIC FINANCIAL
MANAGEMENT (PFM)
It is a system of rules, procedures, and practices
for government to manage public finances.

It covers three critical areas -

(1) generating revenues,
(2) allocating resources, and
(3) managing expenditures.

5
Implementing Framework and Institutional
Structures
Section 3, Article X of the Constitution
“The Congress shall enact a local government code which shall provide
for a more responsive and accountable local government structure
instituted through a system of decentralization with effective
1987 Philippine Constitution mechanisms of recall, initiative, and referendum, allocate among the
different local government units their powers, responsibilities, and
resources xxx”

Section 2 of RA 7160

“Toward this end, the State shall provide for a more responsive and
Local Government Code of 1991 accountable local government structure instituted through a system of
decentralization whereby local government units shall be given more
powers, authority, responsibilities, and resources.”

DBM-DILG-DOF-NEDA JMC No. 2015-1

dated Feb. 24, 2015
Pertinent rules and regulations
Directed the Adoption of the Local Government Units Public
Financial Management Reform Roadmap and Implementation
Strategy

6
 WHY ASSESS PFM?
✔ Aggregate Fiscal Discipline
✔ Strategic Allocation of Resources
✔ Efficient Service Delivery

7
HOW TO CONDUCT THE
PFM ASSESSMENT?

Through the use of Enhanced

Public Financial Management
Assessment Tool (PFMAT)

8
WHEN IS PFM ASSESSMENT DONE?
PFM assessment is done every three (3) years.
Use of immediately preceding year’s data instead of the two-year or three-
year periods data to reflect immediately preceding year’s actual
performance.
PFMAR Covered Enhanced PFMIP Covered
Assessment Year Annex A: Monitoring Table
Period Period

2016 (PFMAT) 2013-2015 2016-2018 as of: June 30, 2017 & June 30,
2019

2019 (PFMAT) 2016-2018 2019-2021 as of: June 30, 2020, June 30, 2021
& June 30, 2022

2022 (ePFMAT) 2021 2022-2024 as of: June 30, 2023 & June 30,
2024

2025 (ePFMAT) 2024 2025-2027 as of: June 30, 2026 & June 30,
2027 9
WHAT PFM REPORTS MUST BE SUBMITTED BY
THE LGUs THIS 2022?
PFMAR (2021)

PFMIP (2022-2024)
-together with the PFMIP Resolution

WHAT PFM REPORTS MUST BE SUBMITTED BY

THE LGUs THIS 2023?
Monitoring Table – Annex A (2023)

Deadline of submission:
On or before September 1, 2023
10
WHAT IS NEW IN THE UPDATED PFMAT?
FULLY COMPUTERIZED SYSTEM
The updated PFMAT is a fully computerized system, thus it is now
named as the ePFMAT

2022 ePFMAT
2012 PFMAT

11
WHAT IS NEW IN THE UPDATED PFMAT?
PILLARS OF PFM
Shift from Critical Dimension of PFM to Pillars of PFM

2022 ePFMAT 2012 PFMAT

SEVEN (7) PILLARS OF A GOOD PFM SYSTEM CRITICAL DIMENSIONS OF PERFORMANCE OF A GOOD PFM
SYSTEM

1. Policy-based Budgeting 1. Policy-based Budgeting

2. Comprehensiveness & Transparency 2. Comprehensiveness & Transparency

3. Credibility of the Budget 3. Credibility of the Budget

4. Predictability & Control in Budget Execution 4. Predictability & Control in Budget Execution

5. Accounting, Recording & Reporting 5. Accounting, Recording & Reporting

6. Internal and External Audit 6. Internal and External Audit

7. Citizens’ Participation in the Budget Process 7. Citizens’ Participation in the Budget Process
12
 WHAT IS NEW IN THE UPDATED PFMAT?
USE OF IMMEDIATELY PRECEDING YEAR

The use of the immediately preceding year’s data in lieu of the two-year
and three-year periods data
2022 ePFMAT 2012 PFMAT

DATA TO BE USED IN DATA TO BE USED IN

ASSESSMENT YEAR ACCOMPLISHING THE ASSESSMENT YEAR ACCOMPLISHING THE
ePFMAT ePFMAT

2022 2021 2020 2017-2019

2023 2022 2022 2019-2021

2024 2021-2023

13
 WHAT IS NEW IN THE UPDATED PFMAT?
SEQUENCE OF PRESENTATION OF THE SEVEN (7) PILLARS OF PFM
In the ePFMAT, the indicators and sub-indicators will be presented only
under its mother Pillar.

2022 ePFMAT

2012 PFMAT

14
WHAT IS NEW IN THE UPDATED PFMAT?
REDUCTION OF INDICATORS AND SUB-INDICATORS
In the ePFMAT, the indicators have been reduced from 20 to 18, and
the sub-indicators have been reduced from 28 to 27.
PILLAR NO. 4- PREDICTABILITY & CONTROL IN BUDGET EXECUTION
Indicators Not Included in ePFMAT :
1. Effectiveness of payroll controls
2. Effectiveness of internal controls for non-Personal Services (PS) expenditures

PILLAR NO. 6- INTERNAL AND EXTERNAL AUDIT

Sub-indicators Not Included in the ePFMAT :

1. Existence of an operational Internal Audit Service (IAS)
2. Frequency and distribution of internal audit reports

New Sub-indicator in the ePFMAT:

1. Conduct of Internal Audit and Reporting 15
WHAT IS NEW IN THE UPDATED PFMAT?
SCORING MATRIX AND DATA TABLE
Under the 2012 PFMAT, the table for scoring has no label. To
differentiate it from the Data Table, it is now labeled as Scoring Matrix.

16
 WHAT IS NEW IN THE UPDATED PFMAT?
UPDATES OF DATA TABLES
Due to the shift from the 3-year data to the immediately preceding year’s data,
the criteria for the 14 data tables using 3 years or 2-year data were modified.

2022 ePFMAT 2012 PFMAT

Sub-indicator 1.3.2- Timely enactment and approval of the Appropriation Ordinance authorizing the Annual Budget

4 In the immediately preceding year, the Appropriation Ordinance authorizing the In ALL the last three years, the Appropriation Ordinance authorizing the Annual
Annual Budget was enacted by the Local Sanggunian AND approved by the Local Budget was enacted by the Local Sanggunian AND approved by the Local Chief
Chief Executive PRIOR to the start of the budget year. Executive PRIOR to the start of the budget year.

3 In the immediately preceding year, the Appropriation Ordinance authorizing the TWICE in the last three years, the Appropriation Ordinance authorizing the
Annual Budget was enacted by the Local Sanggunian PRIOR to the start of the Annual Budget was enacted by the Local Sanggunian AND approved by the Local
budget year BUT was approved by the Local Chief Executive AFTER the start of the Chief Executive PRIOR to the start of the budget year.
budget year.

2 In the immediately preceding year, the Appropriation Ordinance authorizing the ONCE in the last three years, the Appropriation Ordinance authorizing the
Annual Budget was both enacted by the Local Sanggunian AND approved by the Annual Budget was enacted by the Local Sanggunian AND approved by the Local
Local Chief Executive during the 1st quarter of the budget year. Chief Executive PRIOR to the start of the budget year.

17
 WHAT IS NEW IN THE UPDATED PFMAT?
UPDATES OF DATA TABLES
Due to the shift from the 3-year data to the immediately preceding year’s data,
the criteria for the 14 data tables using 3 years or 2-year data were modified.
2022 ePFMAT 2012 PFMAT
Sub-indicator 1.3.2- Timely enactment and approval of the Appropriation Ordinance authorizing the Annual Budget

2 In the immediately preceding year, the Appropriation Ordinance authorizing the ONCE in the last three years, the Appropriation Ordinance authorizing the Annual
Annual Budget was both enacted by the Local Sanggunian AND approved by the Local Budget was enacted by the Local Sanggunian AND approved by the Local Chief
Chief Executive during the 1st quarter of the budget year. Executive PRIOR to the start of the budget year.

1 In the immediately preceding year, the Appropriation Ordinance authorizing the In ALL the last three years, the Appropriation Ordinance authorizing the Annual
Annual Budget was both enacted by the Local Sanggunian AND approved by the Local Budget was enacted by the Local Sanggunian PRIOR to the start of the budget year
Chief Executive AFTER the 1st quarter of the budget year. BUT was approved by the LCE AFTER the start of the budget year.

0 In the immediately preceding year, the LGU has not passed the Appropriation In ALL the last three years, the Appropriation Ordinance authorizing the Annual
Ordinance authorizing the Annual Budget thus it is operating under a reenacted Budget was enacted by the Local Sanggunian AND approved by the Local Chief
budget. Executive AFTER the start of the budget year.
18
 WHAT IS NEW IN THE UPDATED PFMAT?
UPDATES OF DATA TABLES
Due to the shift from the 3-year data to the immediately preceding year’s data,
the criteria for the 14 data tables using 3 years or 2-year data were modified.

2022 ePFMAT 2012 PFMAT

DATE OF ACTUAL DATE OF ACTUAL DATE OF

ENACTMENT BY THE DATE OF THE ENACTMENT OF THE APPROVAL/VETO OF
FISCAL YEAR BEING SANGGUNIAN OF APPROVAL BY THE FISCAL YEAR APPROPRIATION THE APPROPRIATION SOURCE DOCUMENTS
ASSESSED THE LCE OF THE ORDINANCE ORDINANCE
(PLS SPECIFY) APPROPRIATION APPROPRIATION
ORDINANCE ORDINANCE
Year 1

Year 2

Year 3

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WHAT IS NEW IN THE UPDATED PFMAT?
GUIDE TO INTERPRETATION AND ANALYSIS OF SCORES
-In Annex B of the ePFMAT manual, there are synopsis tables for each
Pillar that provide sample descriptions that would help LGUs prepare
their PFM Assessment Report.

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 THE ELECTRONIC PFMAT (ePFMAT) FOR LGUS

-To facilitate the evaluation of the performance of the PFM systems of LGUs, an
ePFMAT system for LGUs was designed and developed by the DBM under the
auspices of the Asian Development Bank Technical Assistance.

-The ePFMAT for LGUs is a fully web-based electronic self-assessment instrument

designed to automate the assessment of LGUs' PFM system following the
procedures outlined in the enhanced PFMAT Manual.

The system has the facility to record the scores and generate the assessment
results at the LGU level, and consolidate results at the regional and national
levels.
21
 THE ELECTRONIC PFMAT (ePFMAT) FOR LGUS

-The system also provides assistance in the preparation of the PFM

Improvement Plan by generating the summary scores per pillar and their
corresponding initial interpretations.

-The ePFMAT for LGUs is free of charge to LGUs interested in automating

the examination or evaluation of their financial systems and operations.
The ePFMAT for LGUs can be accessed through the following link:
https://epfmat.dbm.gov.ph.

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 Step 5
Responsible Unit/Office
accomplishes the assessment

HOW TO CONDUCT THE using the ePFMAT

Step 4
PFM ASSESSMENT? PFM Team ensures availability of
access to required data/
information
Step 3
PFM Team orients the LCE and
the Local Sanggunian

Step 2
PFM Team meets to review and
understand the ePFMAT

Step 1
Local Chief Executive (LCE)
organizes the PFM Team thru
an Executive Order
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ROLL-OUT OF THE ENHANCED PFMAT FOR LGUs AND ePFMAT

-To ensure the widest application of the enhanced PFMAT for

LGUs and the ePFMAT, the orientation thereon shall be
conducted by the DBM Ros for all provinces, cities, and
municipalities within their respective geographical
jurisdictions. Technical assistance in the preparation of the
PFMAR and PFMIP will likewise be extended by the DBM ROs
concerned, whenever necessary.

24
 POLICY GUIDELINES

Local Budget Circular No. 148

dated December 23, 2022

Implementing Guidelines on
the Grant of Honorarium to SK
Officials Pursuant to Republic
Act No. 11768
Grant of Honorarium to SK Officials
Legal Basis
➢ The [SK] members, including the [SK] treasurer and secretary, shall
receive a monthly honorarium, chargeable against the [SK] funds, in
addition to any other compensation provided by this Act and shall
be granted at the end of every regular monthly [SK] meeting:
Provided, That the monthly honorarium shall not exceed the
monthly compensation received by their [SK] chairperson:
Provided, further, That not more than twenty-five percent (25%) of
the [SK] funds shall be allocated for personnel services. The DBM
shall issue the necessary guidelines implementing this provision.
Grant of Honorarium to SK Officials
Legal Basis
➢ The LGUs may provide additional honorarium as well as social
welfare contributions and hazard pay to the [SK] chairperson and
the elected and appointed members through their own local
ordinances:
➢ Provided, That the honorarium as stated in this section shall be
subject to the post-audit jurisdiction of the [Commission on Audit]
COA; and xxx
Grant of Honorarium to SK Officials
Rationale
➢ To prescribe the guidelines and procedures on the grant of
honorarium to SK Members, SK Treasurer, and SK Secretary,
henceforth collectively referred to as "SK Officials," pursuant to
Section 4 of RA No. 11768.
Grant of Honorarium to SK Officials
Policy Guidelines
➢ In the performance of their duties enumerated under Sections
8, 14, and 15 of RA No. 10742, the SK Officials shall each
receive a monthly honorarium, chargeable against the SK funds,
in addition to any other compensation provided by RA No.
11768, and shall be granted at the end of the month.
➢ Other compensation not authorized by the Act, such as Mid-
Year Bonus, Year-End Bonus, Clothing/Uniform Allowance, and
other unauthorized benefits/allowances, shall not be granted to
the SK Officials.
Grant of Honorarium to SK Officials
Policy Guidelines
➢ The SK chairperson automatically serves as an ex officio member
of the Sangguniang Barangay pursuant to Section 430 of RA No.
7160. He or she enjoys the same privileges as the regular
Sangguniang Barangay members and he or she shall be entitled
to a pro-rata honoraria for every session of the Sangguniang
Barangay he or she has attended.
➢ As such, the SK chairperson shall no longer be entitled to receive
any honorarium charged against the regular SK funds, except
those funded by higher-level LGUs, subject to the limitations in
Section 3.2 hereof.
Grant of Honorarium to SK Officials
Policy Guidelines
➢ The amount of the monthly honorarium of the SK Officials shall be
subject to their attendance at SK meetings, deliberations, and official
activities of the SK.
➢ The monthly honorarium shall be pro-rated based on the actual work
and/or attendance vis-a-vis the work and/or meeting schedule or
performance standards as may be prescribed under the internal rules of
the SK concerned.
➢ The monthly honorarium to be received by SK Officials shall not exceed
the rate equivalent to Salary Grade (SG) 9, Step 1 in the salary schedule
implemented by the city or municipality/ where the barangay belongs.
Grant of Honorarium to SK Officials
Policy Guidelines
 The monthly honorarium of the SK Officials shall be monitored by the Budget
Monitoring Officer in a separate budget registry for Personal Services (PS)
and recorded in the appropriate registers being maintained by the SK
Treasurer. The amount to be allocated for PS shall not be more than twenty-
five percent (25%) of the SK funds.
 For this purpose, SK funds shall refer to the:
(i) ten percent (10%) of the general fund of the mother barangay that is set
aside for the SK for the budget year; and
(ii) other funds accruing to the general fund of the SK, such as the proceeds
from their fund-raising activities
Grant of Honorarium to SK Officials
Policy Guidelines
 If the prescribed rate of the SG cannot be fully provided, the proportionate
and uniform monthly honorarium shall be determined and approved by the
SK through a resolution.
 The total honorarium to be included in the SK Annual Budget shall cover SK
Officials, whether the SK position is filled or vacant.
 The grant of honorarium to SK Officials shall be included in the
Comprehensive Barangay Youth Development Plan and Annual Barangay
Youth Investment Program of the SK, and shall be subject to the SK planning
and budgeting process pursuant to DBM)-DILG-NYC JMC No. 1, s. 2019 dated
January 23, 2019 and DILG MC No. 2019-151 dated September 10, 2019.
Grant of Honorarium to SK Officials
Additional Honorarium from the LGUs
 The LGUs, i.e., provinces, cities, municipalities, and barangays, may provide
additional honorarium, as well as social welfare contributions and hazard pay,
to the SK chairperson and the elected and appointed members through their
own local ordinances; Provided, that the grant of the additional honorarium
shall be subject to the request of SK Officials, through a letter by the SK
Chairperson, in accordance with Item 3.2.6 of this Circular, submitted to the
LGUs concerned prior to the budget year.
Grant of Honorarium to SK Officials
Additional Honorarium from the LGUs
 The grant of additional honorarium, as well as social welfare contributions and
hazard pay, to the SK chairperson and the elected and appointed members
shall be taken up as financial subsidy to SK in the book of accounts of the LGU
concerned. The release of which shall be contingent on the fulfillment of the
requirements set forth and agreed upon by both parties in a Memorandum of
Agreement or contract.
 The additional honorarium, as well as social welfare contributions and hazard
pay, shall be subject to their attendance to SK meetings, deliberations, and
official activities of the SK.
Grant of Honorarium to SK Officials
Additional Honorarium from the LGUs
 In no case shall the grant of additional honorarium to SK Officials result in
a situation where the total honoraria to be received by the SK Officials
will be more than the amount of honorarium being received by the
barangay officials of the mother barangay of the SK.
 In the case of the SK chairperson, the total honorarium to be received shall not
be more than the amount of honorarium being received by the members of
the Sangguniang Barangay. The LGU officials concerned shall establish a
mechanism or system to ensure that this policy is strictly observed and
enforced.
Grant of Honorarium to SK Officials
Additional Honorarium from the LGUs
 The grant of additional honorarium to be received by the SK chairperson and
the elected and appointed members shall not result in the total honorarium
exceeding the rate equivalent to SG 9, Step 1 in the salary schedule
implemented by the city or municipality.
 In determining the amount of additional honorarium, as well as social welfare
contributions and hazard pay, to be given to the SK chairperson and the
elected and appointed members, funding priorities shall be observed and the
LGUs concerned must ensure the grant of the same will not significantly affect
the LGU's capability to allocate adequate funds for the delivery of basic
services and facilities and implementation of developmental projects.
Grant of Honorarium to SK Officials
Additional Honorarium from the LGUs
 The additional honorarium, as well as social welfare contributions and hazard
pay, to be given to the SK chairperson and the elected and appointed
members, shall be included In the Annual Investment Program of LGUs
concerned.
 The additional honorarium, as well as social welfare contributions and hazard
pay, to be given to the entitled SK chairperson and the elected and appointed
members, shall be transferred/downloaded to the account of the SK in
accordance with Item 3.4 of the Handbook on the Financial Transactions of the
Sangguniang Kabataan issued through COA Circular No. 2020-003 dated
January 28, 2020.
Grant of Honorarium to SK Officials
Additional Honorarium from the LGUs
 The additional honorarium, as well as social welfare contributions and hazard
pay shall be accounted for and recorded in the Registry of Specific Purpose
Fund Commitments, Payments, and Balances of the SK concerned. Therefore,
the same shall no longer be subject to the planning and budgeting process of
the SK.
 The grant of additional honorarium, as well as social welfare contributions and
hazard pay, to the SK Officials, charged against LGU funds shall be subject to
pertinent budgeting, accounting and auditing laws, rules and regulations.
Grant of Honorarium to SK Officials
Monitoring and Evaluation System
 Online submissions for the monitoring and evaluation of reports through the
SK Web Portal will likewise be issued by the DILG and NYC.
 The DILG shall be responsible for the monitoring and evaluation of the grant
of additional honorarium, as well as social welfare contributions and hazard
pay, charged against the LGU funds, to the SKs.
Grant of Honorarium to SK Officials
Responsibility and Accountability
 The responsibility and accountability in the determination and payment of
honorarium to SK Officials charged against the SK funds shall rest upon the SK
chairperson and the elected and appointed members.
 Payment of additional honorarium, social welfare contributions, and hazard
pay charged against the LGU funds shall rest upon the local chief executives
and other local officials concerned.
 It is also the responsibility of the said SK and local officials to ensure that
public funds are strictly utilized in accordance with applicable budgeting,
accounting, and auditing laws, rules and regulations.
 POLICY GUIDELINES

Local Budget Circular No. 152

dated August 02, 2023

BUDGET OPERATIONS
MANUAL FOR LOCAL
GOVERNMENT UNITS
(BOM for LGUs), 2023 EDITION
 ENHANCEMENTS AND NEW FEATURES
OF THE BOM for LGUs, 2023 EDITION

• Discussion on the fundamental principles governing local taxation

and fiscal matters, limitations on the taxing powers of LGUs, and
fundamental principles in local government budgeting;
• Enhanced framework for strengthening policy-based budgeting;
• Streamlining and updating of local budget forms;
• Introduction of the Cash Budgeting System; and
• Integration of other developments concerning local budget
operations.
PART I:
BUDGETING FRAMEWORK FOR
LOCAL GOVERNMENT UNITS
Fundamental Principles Governing Local Taxation and Fiscal Matters
Participatory Budgeting
Policy-Based Budgeting
Performance-Informed Budgeting
New Approach in Budgeting: Cash Budgeting System
 CASH BUDGETING SYSTEM
• As a general rule, unexpended balances of appropriations shall
lapse at the end of the fiscal year pursuant to Sections 322 and
328 of the LGC.

• For CO appropriations, the same shall remain valid in the ensuing

fiscal years until fully spent, reverted or the project is completed.

• The LCE and/or local sanggunian may provide for the adoption of
the CBS in the General Provision of the AO authorizing the annual
budget.
 CASH BUDGETING SYSTEM

(g) Local governments shall formulate sound financial plans, and local
budgets shall be based on functions, activities, and projects, in terms
of expected results;

(h) Local budget plans and goals shall, as far as practicable, be

harmonized with national development plans, goals, and strategies in
order to optimize utilization of resources and to avoid duplication in
use of fiscal and physical resources;”
- Section 305 [g] [h] of the LGC
 FUNDAMENTAL PRINCIPLES OF CBS
• Annual budget should only contain the projected budget requirements of PPAs that
can be fully implemented and paid within the fiscal year covered by the AO. Hence,
PPAs included in the annual budget should be completed by the end of the fiscal
year.

• All appropriations for a fiscal year shall be available for obligation and disbursement
only until the end of the same fiscal year. Specifically, the construction of
infrastructure projects, delivery of goods and services, inspection, and
acceptance shall be made within the fiscal year.

• Corresponding payments shall be made within the same fiscal year, which may be
extended until the end of the EPP, which shall be a period of three (3) months after the
end of the validity of appropriations, unless another period has been determined by
the sanggunian, upon recommendation of the LCE.
 FUNDAMENTAL PRINCIPLES OF CBS
• The LGUs may undertake Early Procurement activities, especially for CO
projects, subject to the appropriate guidelines on the matter.

• Transition to the CBS may include:

a) Multi-year planning activities;
b) Limiting budget provision to implementation-ready projects; and
c) Formulation of a Procurement Strategy and conduct of EPA to
enable full implementation of PPAs within the fiscal year.
 BENEFITS OF ADOPTING CBS
• Include only implementation-ready projects in their local budgets.

• LGUs will only need to focus on implementing the current year’s

budget.

• Immediate provision of intended public services.

• Transactions with contractors and suppliers will be smoother, more

transparent, and faster.

• LGUs’ administrative load and accounting for the use of funds will
substantially decrease and be simplified.

• Non-compliance by contractors and suppliers are likely lessened.

 POLICY GUIDELINES

Local Budget Circular No. 153

dated August 31, 2023

INTERNAL AUDIT MANUAL

FOR LOCAL GOVERNMENT
UNITS (IAM for LGUs), 2023
EDITION
 BACKGROUND
• The IAM for LGUs was first issued by the Department of Budget
and Management (DBM) through Local Budget Circular (LBC) No.
110 dated10 June 2016, pursuant to its mandate under Executive
Order No. 292, s. 1987, 1 and the following Office of the President
issuances directing the Department to promulgate the necessary
rules and regulations for the strengthening of the internal control
systems (ICS) in government
 BACKGROUND
• The IAM for LGUs aims to provide a guide in establishing,
maintaining, and operating an Internal Audit Service Unit (IAU) in
LGUs. It is anchored on the Philippine Government Internal Audit
Manual (PGIAM) issued by the DBM through Circular Letter (CL)
No. 2011-5 dated 19 May 2011.
 THE IAM for LGUs, 2023 EDITION
The IAM for LGUs, 2023 Edition serves as a generic guide for internal
auditors in LGUs to help them:
• Understand the legal bases, nature, and scope of the internal audit
function in the Philippine public sector, including the institutional
arrangements, protocols, and processes for the conduct of the same;

• Identify and prioritize potential audit areas for appraisal as they

progress in the internal audit activity, and;

• Describe the logical procedures to facilitate a structured and

systematic approach in internal auditing.
 THE IAM for LGUs, 2023 EDITION
Among the major changes that have been adopted in the IAM for LGUs,
2023 Edition are as follows

• Clearer guidelines on the establishment of an IAU, including its organization,

staffing, and reporting line;
• Stronger justification on the delineation of the role of the local accountant in
relation to internal audit;
• Delineation of the roles and responsibilities of various key players in the LGU
on internal control and internal audit to foster participation and involvement
at all levels;
• Provision of concrete examples of the various types of audits that can be
performed by the IAU in the LGU;
 THE IAM for LGUs, 2023 EDITION
Among the major changes that have been adopted in the IAM for LGUs,
2023 Edition are as follows

• Provision of more comprehensive and detailed internal audit processes, and

general templates on internal audit reports, plans, and communications to
better guide internal auditors;
• Inclusion of actual examples of non-audit functions, as well as the appropriate
series of actions to be taken by the IAU when it is instructed to do the same;
and

• Clarification on the distinction between internal audit and internal quality

audit; authority, purpose, and functions of an IAU; and involvement of internal
auditors in the improvement of operations, among others.
Overview of Subject Matter

• Internal controls are management controls

• We all operate internal controls e.g. when we follow approved
management procedures for filing documents
• Internal audit is concerned with whether internal controls are
well designed and properly operated
• Internal audit is not about fault finding - it is not adversarial
function
• Internal audit is a problem solving partner to help LGUs
achieve their development vision, goals and right outcomes
Key Benefits of Internal Audit for LGUs
• IA assists LCE by evaluating whether LGUs are complying with policies & laws.

• IA provides independent findings on which policies & programs are working or

not working well, gives unique position to identify better practices & recommend
ways to improve delivery.

• IA by looking ahead can play major role in identifying risks facing LGUs and
mitigating those risks & identifying opportunities.
 ROLL-OUT ACTIVITIES
• To ensure the widest dissemination and application of the IAM for LGUs, 2023
Edition, the roll-out activities shall be conducted by the DBM for all provinces,
cities, and municipalities. In addition, capacity-building training shall be
provided to the lAUs of LGUs concerned to ensure their full adoption of the
IAM for LGUs, 2023 Edition in the operationalization of their internal audit
functions.
THANK YOU!