DEPARTMENT OF BUDGET AND MANAGEMENT

LOCAL BUDGET PREPARATION

JOHN ARIES S. MACASPAC

Director IV, DBM-SPIB
 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
 FUNDAMENTAL PRINCIPLES GOVERNING
LOCAL TAXATION AND FISCAL MATTERS
• Taxation and other revenue-raising powers of LGUs are governed
by the fundamental principles embodied under Sections 130
and 132 of the LGC.
• Section 133 of the LGC provides for the limitations on the taxing
powers of the LGUs.
• Section 305 of the LGC provides the following fundamental
principles which govern the financial affairs, transactions, and
operations of LGUs.
PART II:
THE LOCAL BUDGET PROCESS
Budget Preparation Phase
Accountability Preparation
Budget Authorization Phase
Budget Review Phase
Execution
Authorization
Budget Execution Phase
Budget Accountability Phase
Review
 LEGAL BASIS

Upon receipt of the statements of income and expenditures

from the treasurer, the budget proposals of the heads of
departments and offices, and the estimates of income and
budgetary ceilings from the local finance committee, the
local chief executive shall prepare the executive budget for
the ensuing fiscal year in accordance with the provisions of
this Title.
- Section 318 of the LGC
BUDGET PREPARATION PHASE

LOCAL BUDGET MEMORANDUM

NO. 87 DATED JUNE 9, 2023

INDICATIVE FY 2024 NATIONAL

TAX ALLOTMENT SHARES OF LGUs
AND GUIDELINES ON THE
PREPARATION OF THE FY 2024
ANNUAL BUDGETS OF LGUs
KEY PLAYERS IN BUDGET PREPARATION

Local Chief Local Finance

Executive Committee Local Treasurer Local Budget Officer

Local Planning
Department/ CSO and Private
and Development Local Accountant
Coordinator Office Heads Sector Groups
 BUDGET PREPARATION FLOWCHART
LOCAL CHIEF LCE/LFC DEPARTMENT
LCE/LFC
EXECUTIVE DEPARTMENT HEADS HEADS

Prepare and Submit

Issue the Budget Call Conduct Budget Forum
Budget Proposals
(June 16) (June 16)
(July 15)

Conduct Budget
Hearing
(August 15)

Prepare the
Executive Budget
(October 10)

Submit the Executive Prepare the Budget

Budget to the Sanggunian Message
(October 16) (October 10)
 Prepare and Review and
Issue the Conduct Submit Budget Consolidate Budget
Budget Call Budget Forum Proposals Proposals

01 02
BUDGET
PREPARATION
PHASE
ANNUAL BUDGET 05 04 03

Submit Executive Prepare the Prepare the Conduct

Budget to the Budget Local Expenditure Budget
Sanggunian Message Program Hearing
STEP 1

ISSUE THE BUDGET CALL

CONTENT OF IMPORTANCE OF
BUDGET CALL
BUDGET CALL BUDGET CALL
1. Spending ceilings by major • Emphasizes policy objectives of
A directive from the the budget
expenditure;
LCE specifying the 2. Resource allocation scheme
• Emphasizes guidelines to be
objectives, policy observed in the preparation of
or fiscal policy decisions; budget proposals.
decisions strategies, 3. Objectives, strategies and • Focuses on the outputs aimed to
financing priority PAPs; be produced during the budget
requirements and 4. Expected results; year.
5. Budget Calendar and budget • Firms up policy decisions on
prioritized PPAs by preparation forms; and how the budget shall be
sector/office as 6. Other administrative financed; and
• Prescribes budget preparation
reflected in the AIP. guidelines
schedule and forms.
STEP 1

CONDUCT OF BUDGET FORUM

1.Invite all stakeholders to a one-day Budget Forum to explain and discuss:
• objectives for the budget year, major thrusts and policy decisions;
• sources of income for the past 3 years;
• income estimates and corresponding assumptions;
• spending ceilings and budget strategies;
• timelines of activities; and
• forms to be used.
2. Use focused group discussion to encourage group participation; and
3. Close the forum by summarizing all issues raised.
STEP 2

PREPARE AND SUBMIT BUDGET PROPOSALS

A. Firm up Major Final Outputs (MFOs), Identify Performance
Indicators, and Set Targets

• The MFOs shall be firmed up to ensure alignment with the

Department’s organizational outcome, mandate, vision, and
mission.

• Identification of Performance Indicators measures quantity,

quality, and timeliness of service delivery

• Set target(s) in consideration of resource availability vis-à-vis

what should be delivered by the Department
STEP 2

PREPARE AND SUBMIT BUDGET PROPOSALS

B. Estimate Costs for the Budget Year
• Personal Services refers to payment of salaries, wages and other compensation
of permanent, temporary, contractual, and casual employees of the LGU;

• MOOE refers to the purchase of goods and services for the conduct of normal LGU
operations within the fiscal year, including goods and services that will be used or
consumed during the budget year;

• Financial Expenses - Bank charges, interest expense, commitment fees; and

• Capital Outlay refer to purchase of goods and services, the benefits of which
extend beyond the fiscal year and which add to the assets of the LGU
concerned.
STEP 2

PREPARE AND SUBMIT BUDGET PROPOSALS

C. Prepare the PPMP for the Budget Year

• Firm up the PPMP prepared based on the approved AIP,

considering the available resources (budget ceilings) of the
Department.

D. Consolidate PPMPs into APP

• Decisions on the mode of procurement, type, and specifications

of items to be procured, when to procure, and costs have been
considered
STEP 2

PREPARE AND SUBMIT BUDGET PROPOSALS

E. Review and Consolidate Budget Proposals

• Consistency with policies in Budget Call

• Compliance with budgetary requirements, general limitations,
and other provisions under RA No. 7160
• Accuracy of vertical and horizontal computations

All budget proposals shall be consolidated by the LBO for

submission to the LFC to be used in the conduct of budget
hearings.
STEP 3
CONDUCT BUDGET HEARINGS
AND EVALUATE BUDGET PROPOSALS

CONDUCT TECHNICAL EVALUATE

BUDGET HEARINGS BUDGET PROPOSALS
• Review rationale of the • Rationale of the PPAs;
Department/Office;
• Major Final Outputs,
• Review PPAs by Performance Indicators
Department/Office; criteria, targets
• Validate output projection;
• Cost criterion
and
• Review costs estimates.
STEP 4
PREPARE THE LOCAL EXPENDITURE PROGRAM
STEP 4
PREPARE THE LOCAL EXPENDITURE PROGRAM
STEP 4
PREPARE THE LOCAL EXPENDITURE PROGRAM
STEP 4
PREPARE THE LOCAL EXPENDITURE PROGRAM

PART 1. RECEIPTS PROGRAM

a. Local Sources
b. External Sources
c. Non-Income Receipts
The Receipts Program shall comply with the following:
a. Taxes, fees, or charges identified as sources are in accordance with the
revenue ordinances of the LGU (Section 132 of the LGC); and

b. The estimated receipts from RPT correspond to the total amount of

due and demandable RPT, including delinquent accounts.
STEP 4
PREPARE THE LOCAL EXPENDITURE PROGRAM

PART 1. RECEIPTS PROGRAM

a. Local Sources
b. External Sources
c. Non-Income Receipts

PART 2. EXPENDITURE PROGRAM

a. Proposed New Appropriations by PPA
Each Department/Office shall present its Performance Information
which includes its mandate, vision, mission, organizational outcome,
MFOs and corresponding PIs, targets, and the proposed budgets by
expense class (PS, MOOE, FE, and CO).
STEP 4
PREPARE THE LOCAL EXPENDITURE PROGRAM
RULES ON THE PREPARATION OF THE EXPENDITURE PROGRAM
Each Department/Office shall ensure compliance with the following
requirements:
a. 20% of the NTA for Development Projects (Section 287 of the LGC)
b. Budgetary Requirements (Section 324 of the LGC)
c. General Limitations (Section 325 of the LGC)
d. Budgetary Requirements by Attribution
e. Compliance with Other Applicable Laws, Rules, and Regulations
f. Annual Operating Budget of Local Economic Enterprise
STEP 4
RULES ON THE PREPARATION OF THE EXPENDITURE PROGRAM

A. 20% of the NTA for Development Projects

• No less than 20% of the NTA intended for development projects (Section
287 of the LGC

• DBM-DOF-DILG JMC No. 1 dated November 4, 2020 - sets the general

policies and guidelines to be observed by LGUs in identifying and
implementing development projects to be funded under the 20% DF,
including the prescription of the prohibited expenditure items.

• DBM-DOF-DILG Joint Memorandum Circular No. 1 dated April 27, 2023

– supplemental guidelines for the implementation of CBMS as
prescribed under RA No. 11315.
STEP 4
RULES ON THE PREPARATION OF THE EXPENDITURE PROGRAM

B. Budgetary Requirements (Section 324 of the LGC)

• Aggregate amount appropriated does not exceed the estimates of
income;
• Full provision shall be made for all statutory and contractual obligations
of the LGU, and that the amount of appropriations for debt servicing do
not exceed 20% of the regular income of the LGU;
• Aid to component barangays - Not less than Php 1,000.00 per barangay;
and
• LDRRMF - Not less than 5% of the estimated revenue from regular
sources (Section 21 of RA No. 10121 and NDRRMC-DBM-DILG JMC No.
2013-1 dated March 25, 2013)
STEP 4
RULES ON THE PREPARATION OF THE EXPENDITURE PROGRAM

C. General Limitations
• PS Limitation (Section 325 [a] of the LGC);

• No official or employee shall be entitled to a salary rate higher than the

maximum fixed for the position or other positions of equivalent rank by
applicable laws or rules and regulations issued thereunder (Section 325
[b] of the LGC);

• No local fund shall be appropriated to increase or adjust salaries or

wages of officials and employees of the national government, except as
may be expressly authorized by law (Section 325 [c] of the LGC);
STEP 4
RULES ON THE PREPARATION OF THE EXPENDITURE PROGRAM

C. General Limitations
• In cases of abolition of positions and the creation of new ones resulting
from the abolition of existing positions in the career service, such
abolition or creation is made in accordance with pertinent provisions of
the LGC and civil service laws, rules and regulations (Section 325 [d] of
the LGC);

• Positions in the official plantilla for career positions which are occupied
by incumbents holding permanent appointment shall be covered by
adequate appropriations (Section 325 [e] of the LGC);
STEP 4
RULES ON THE PREPARATION OF THE EXPENDITURE PROGRAM

C. General Limitations
• No changes in designation or nomenclature of positions resulting in a
promotion or demotion in rank or increase or decrease in compensation
shall be allowed, except when the position is actually vacant, and the
filling of such position shall be strictly made in accordance with civil
service laws, rules and regulations (Sections 325 [f] of the LGC);

• The creation of new positions and salary increases or adjustments shall

in no case be made retroactive (Section 325 [g] of the LGC); and

• The annual appropriations for discretionary purposes of the LCE shall

not exceed two percent (2%) of the actual receipts derived from basic
RPT in the next preceding calendar year.
STEP 4
RULES ON THE PREPARATION OF THE EXPENDITURE PROGRAM

D. Budgetary Requirements by Attribution

• Gender and Development Budget;

• Local Council for the Protection of Children –1% of the NTA of

barangays, municipalities, and cities;

• PPAs and services that will address the needs of senior citizens and
differently-abled persons;

• Community-based HIV/AIDS prevention and care services; and

• PPAs to address the Problem of Illegal Drugs.

STEP 4
RULES ON THE PREPARATION OF THE EXPENDITURE PROGRAM

E. Compliance with Other Applicable Laws, Rules and Regulations

• All PPAs shall be included/listed in the AIP (Section 305 [i] of the LGC);

• Confidential Fund – shall not exceed 30% of the total annual amount
allocated for the LGU’s Peace and Order Program; and

• Other items of expenditure that are expressly prescribed or authorized

under existing laws, rules, and regulations.

Among others, verify if appropriations for specific purposes required by law,

which may be attributed to regular PPAs, are fully provided.

For guidance, LGUs may refer to Local Budget Review Form No. 2.
STEP 4
RULES ON THE PREPARATION OF THE EXPENDITURE PROGRAM

F. Annual Operating Budget of Local Economic Enterprise

• The LGU maintains a special account in the GF for the LEE (Section 313
[a] of the LGC).

• Salaries, wages, and RATA of LEE officials and employees shall not be
included in the annual or supplemental budget or in the computation of
the maximum amount for PS of the LGU.
• The appropriations for PS of LEEs shall be charged to their respective
budgets (Section 325 [a] of the LGC).
• No LEE official or employee is allowed a salary rate higher than the
maximum fixed for the position or other positions of equivalent rank.
STEP 4
RULES ON THE PREPARATION OF THE EXPENDITURE PROGRAM

F. Annual Operating Budget of Local Economic Enterprise

• PPAs of LEE are included in the AIP.

• Under Section 313 of the LGC, the rule on the treatment of the income of
the LEE is as follows:
a. The costs of improvement, repair, and other related expenses of the LEE
shall be deducted from the income from the operation of the said LEE;
b. The balance thereof shall first be applied for the return of advances or
loans made; and
c. Any excess shall form part of the GF of the LGU.

• The AOB of each LEE is presented separately in the LEP.

STEP 4
PREPARE THE LOCAL EXPENDITURE PROGRAM

PART 1. RECEIPTS PROGRAM

a. Local Sources
b. External Sources
c. Non-Income Receipts

PART 2. EXPENDITURE PROGRAM

a. Proposed New Appropriations by PPA
b. Proposed New Appropriations by Object of Expenditures
c. Special Purpose Appropriations
STEP 4
PREPARE THE LOCAL EXPENDITURE PROGRAM
SPECIAL PURPOSE APPROPRIATIONS
• Appropriation for Development Projects (Section 287 of the LGC);
• Appropriation for Disaster Risk Reduction and Management
Program (Section 324 [d] of the LGC, as amended under Section
21 of RA No. 10121);
• Appropriation for Debt Service (Section 324 [b] of the LGC);
• Advances or Loans to LEEs/PUs (Section 313 of the LGC);
• Aid to Barangays (Section 324 [c] of the LGC); and
• Other special purpose appropriations as authorized by law.
STEP 4
PREPARE THE LOCAL EXPENDITURE PROGRAM

PART 1. RECEIPTS PROGRAM

a. Local Sources
b. External Sources
c. Non-Income Receipts

PART 2. EXPENDITURE PROGRAM

a. Proposed New Appropriations by PPA
b. Proposed New Appropriations by Object of Expenditures
c. Special Purpose Appropriations
d. Special Provisions
STEP 4
PREPARE THE LOCAL EXPENDITURE PROGRAM

PART 3. GENERAL PROVISIONS

• Policies and guidelines on receipts and expenditures
• All items in the GP shall be supported by rules and policies
issued by oversight agencies.

PART 4. SUMMARY OF THE PROPOSED NEW APPROPRIATIONS

• Summary of New Appropriations by Expense Class, by Object of
Expenditure and by Sector, and by Department/Office
• Summary of All Statutory and Contractual Obligations
STEP 5
PREPARE THE BUDGET MESSAGE

Budget Message
The budget document shall
contain a budget message
of the local chief executive
set forth in brief the
significance of the executive
budget, particularly in
relation to the approved
local development plan.”
- Section 314 (b) (1) of the LGC
STEP 6

SUBMIT THE LOCAL EXPENDITURE PROGRAM

TO THE SANGGUNIAN
Submit the LEP, together with the following documents, to the
sanggunian not later than the 16th of October of the current fiscal
year (Section 318 of the LGC):
• Budget Message;
• Plantilla of Personnel (LBP Form No. 3);
• Statement of Indebtedness (LBP Form No. 5);
• Annual Operating Budget of LEE/s, if any; and
• AIP, duly approved by the local sanggunian.
 GENERAL RULE
All budgetary proposals shall be included and considered
in the budget preparation process. After the LCE
concerned shall have submitted the executive budget to
the sanggunian, no ordinance providing for a
supplemental budget shall be enacted (Section 321 of the
BUDGET LGC).
PREPARATION EXCEPTIONS
PHASE
a. When supported by funds actually available as
SUPPLEMENTAL certified by the local treasurer
BUDGET b. If covered by new revenue source/s
c. In times of public calamity

The LCE shall prepare the Supplemental Budget using

LBP Form Nos. 8 and 9.
 SUPPLEMENTAL BUDGET
EXCEPTIONS
• When supported by funds actually available as certified by the local
treasurer
Funds actually available - amount of money actually collected, as certified
by the local treasurer, at any given point during the fiscal year, which is
over and above the estimated income collection for that point in the year.

Funds are actually available when realized income exceeds estimated

income as of any given day, month, or quarter of a given fiscal year.

Funds are likewise deemed actually available when there are savings as
defined under Article 454 [b] [1] of the IRR of the LGC.
 SUPPLEMENTAL BUDGET
EXCEPTIONS
• If covered by new revenue source/s
New revenue source - money measure not otherwise considered during
the preparation and enactment of the annual budget.

Such new revenue measures include:

✓ ordinance passed by the sanggunian during the fiscal year but after
the annual budget had already been enacted into law which imposes
or raises new or existing local taxes, charges, fees, fines or penalties
✓ new or higher remittances, contributions, subsidies or grants in aid
from the NG or from government corporations and private entities
which have not been included in the estimates of income
 SUPPLEMENTAL BUDGET

EXCEPTIONS
• In times of public calamity
By way of budgetary realignment to set aside appropriations for the
purchase of supplies and materials or the payment of services, which are
exceptionally urgent or absolutely indispensable to prevent imminent
danger to, or loss of, life or property, in the jurisdiction of the LGU or in
other areas declared in a state of calamity by the President or the local
sanggunian.
Section 321 of the LGC; Article 417 of the IRR of the LGC, as amended by Administrative Order No. 47; and NDRRMC
Memorandum Order No. 60, s. 2019
 SUPPLEMENTAL BUDGET
EXCEPTIONS
• In times of public calamity
In such case, the AO shall clearly indicate the following:

a. The sources of funds available for appropriations as certified under

oath jointly by the local treasurer and the local accountant, and
attested to by the LCE;

b. The items of appropriations affected; and

c. The reasons for the change.

LBP FORM NO. 1
LBP FORM NO. 2 LBP FORM NO. 3
LBP FORM NO. 4 LBP FORM NO. 5
LBP FORM NO. 6 LBP FORM NO. 7
LBP FORM NO. 8 LBP FORM NO. 9
THANK YOU!