bureau of local government finance department of finance

BUREAU OF LOCAL GOVERNMENT FINANCEDEPARTMENT OF FINANCE

Financial Managementand Accountability

for Sustainable Local Governance

Revenue Generation

Budgeting (Expenditure Management

+Procurement)

Cash Management

Debt Management

Accounting

Auditing

Public Reporting on

Financial Operations

PUBLIC FINANCIAL MANAGEMENTThe Framework

Effective and Accountable

PFM PLAN

Effective and Accountable

PFM PFM

Revenue Generation

Budgeting (Expenditure Management)

Cash Management

Debt Management

Accounting

Auditing

Public Reporting on

Financial Operations

PUBLIC FINANCIAL MANAGEMENTThe Framework

PLAN

1. THE LGU PFM REFORM ROADMAP 2. THE PFM REFORM IMPLEMENTATION

STRATEGY

Outline of Presentation

2 Ws and 1 H of the LGU PFM Reform Roadmap

Why, What and How….

LGU PFM Reform Implementation Strategy

Why develop the LGU PFM Reform Roadmap?

BASIC CONSIDERATIONS:

1. CAPACITY TO HANDLE FUNDS

2. CAPABILITY TO IMPLEMENT PROJECTS

3. OPERATIONAL ACCOUNTABILITY MECHANISMS

Why develop the LGU PFM Reform Roadmap?

Effective and Accountable Public

Financial Management

Need for a Single and Comprehensive Guide to

address Weak PFM

o Lack of fiscal sustainability and poor expenditure management

o Inadequate accountability mechanisms

o Weak coordination among Oversight Agencies (OAs) and between OAs and LGUs

What is the LGU PFM Reform Roadmap?

o A strategic guide on what we (LGUs) want to do and achieve with our PFM in the immediate, medium and long term periods to attain our desired end-state (goal)o complemented by a well-designed

action program that details the activities and timeframe on how and when we could reach our PFM goal and vision.

Impact of the Roadmap

Two very crucial systems in the efficient and effective delivery of services!

o Provide LGUs with strategic directions to strengthen their PFM system towards improved revenue generation and expenditure management

Impact of the Roadmap

o Guide Development Partners in identifying possible entry points for financial support and other interventions

o Assist the OAs to strengthen their coordination in better supporting PFM reforms identified, designed and being implemented by the LGUs

How was the LGU PFM Reform Roadmap

developed?established the current state of LGU

PFM system

identified the desired end-state of the said system

laid down the policy agenda that will help both LGUs and Oversight

Agencies (OAs) in getting to the desired end-state

Established Baseline InformationCurrent

State• Rapid Assessment prepared by the Technical

Assistance Team• PFMAT results of 550 FY 2013 Grassroots

Participatory Budgeting Process (Bottom-up Budgeting) focus LGUs


developed?

1

2

SUPPORT TO THE LOCAL GOVERNMENT UNITS FOR MORE EFFECTIVE AND ACCOUNTABLE PUBLIC FINANCIAL MANAGEMENT (LGU PFM 2 PROJECT)

Established Baseline InformationCurrent

State• Rapid Assessment prepared by the Technical

Assistance Team• PFMAT results of 550 FY 2013 Grassroots

Participatory Budgeting Process (Bottom-up Budgeting) focus LGUs


developed?

Took stock of the current directions and initiatives undertaken by government and

development partners

1

2

1

Established Baseline Information

Current State

• Rapid Assessment prepared by the Technical Assistance Team

• PFMAT results of 550 FY 2013 Grassroots Participatory Budgeting Process (Bottom-up Budgeting) focus LGUs



developed?

PFMAT is a self-assessment, evidence-based instrument which describes the characteristics of an open

and orderly PFM system. It is a diagnostic tool which will help LGUs identify the strengths and weaknesses of

their PFM system as basis for improvement measures.

2

PFMAT Results


o FY 2013 Bottom-up Budgeting (BuB) focus LGUs earned a total mean rating of 2.34

o Indicates that elements of an open and orderly PFM system are not complete but what exist are already fully operational

PFMAT Results


o Lowest ratings indicate the elements not yet in place:» Internal and External

Audit» Policy-based Budgeting» Accounting, Recording

and Reporting

PFMAT Results


INTERNAL & EXTERNAL AUDIT• Most LGUs do not have Internal Audit

Service (IAS) Units• No internal audit reports which are

prepared for management to act upon• Settlement of disallowances and

compliance with audit recommendations by the LGUs are low

PFMAT Results


POLICY-BASED BUDGETING• Strong link between AIP and Budget

but weak linkage among development plans (PDPFP/CDP-LDIP-AIP)• CDP not prepared by most LGUs

• LEEs not financially self-reliant• Only 1 to 2 PFM Improvement

Policies included in the Budgets

PFMAT Results


ACCOUNTING, RECORDING & REPORTING

• LGUs are not able to fully comply with the reglementary periods for reconciling bank accounts and liquidating cash advances


Current Issues in PFM identified and validated by Stakeholders (OAs and LGUs)

Current State

• Rapid Assessment prepared by the Technical Assistance Team

• PFMAT results of 550 FY 2013 Grassroots Participatory Budgeting Process (Bottom-up Budgeting) focus LGUs

• Consultation Workshops with stakeholders


developed?

Validated in nationwide Consultation Workshops with OAs and LGUs (October 2013 – March 2014)

1

2

3

Validation of PFMAT Results


POLICY-BASED BUDGETING

PFMAT RESULTS VOICE OF THE STAKEHOLDERS• Strong link between AIP and

Budget but weak linkage among development plans (PDPFP/CDP-LDIP-AIP)

• LEEs not financially self-reliant• Only 1 to 2 PFM Improvement

Policies included in the Budgets

• Weak alignment between Development Plans & Budget

• Lack of long-term planning perspective• Lack of alignment between PPAs and policies

and current issues• Weak LEEs• There are bottlenecks in the budgeting

process

Participants to the Consultations:


REGION NO. OF LGUs

NO. OF PAX REGION NO. OF

LGUsNO. OF

PAX

CAR 7 9 6 10 13

NCR 5 8 7 5 5

1 6 6 8 4 4

2 6 9 9 5 6

3 4 6 10 3 3

4A 5 5 11 12 16

4B 4 4 12 6 9

5 5 6 13 6 6



REGION NO. OF LGUs

NO. OF PAX REGION NO. OF

LGUsNO. OF

PAX

CAR 7 9 6 10 13

NCR 5 8 7 5 5

1 6 6 8 4 4

2 6 9 9 5 6

3 4 6 10 3 3

4A 5 5 11 12 16

4B 4 4 12 6 9

5 5 6 13 6 6

TOTAL LGUS = 93

TOTAL PARTICIPANTS = 115



•18PROVINCES

•31CITIES

•44MUNICIPALITIES


Determined by Stakeholders (OAs & LGUs)

Desired End-State


developed?

“An open and transparent LGU PFM System that is stable

and sustainable, renders financial

compliance, underpins efficient

and effective delivery of services, ensures the highest level of accountability and provides genuine

citizens’ participation.”

GOAL“An LGU service

delivery system that lowers the cost of doing business,

stimulates private investments,

generates employment and

income opportunities, improves welfare

levels for LGU constituents and accelerates local

economic growth.”

VISION• Strong linkage of long term plans with

Annual Budget• Budget requirements understood by

all and stirs public involvement in the budget process

• Sufficient funds for programs and projects anchored on long term plans

• Self-reliant LGUs that generate sufficient local revenues to support budget expenditures

• Simplified financial systems that yield timely, accurate and credible financial information

• Functional and operational Internal Audit Service which leads to zero COA disallowances

• Quality participation of CSOs in the planning and budgeting process

STAKEHOLDERS’ VOICE


Determined by Stakeholders (OAs and LGUs)

Issue and Policy

Agenda


developed?

Link between PDPFP / CDP –LDIP – AIP and

Budget

ISSUE

Strengthen the linkage between

PDPFP/ CDP –LDIP – AIP and

Budget

POLICY AGENDA

ROADMAPIMPLEMENTATION STRATEGY

SUPPORT TO THE LOCAL GOVERNMENT UNITS FOR MORE EFFECTIVE AND ACCOUNTABLE

PUBLIC FINANCIAL MANAGEMENT (LGU PFM 2 PROJECT)This project is funded by the European Union and implemented by the Government of the

Philippines

The LGU PFM REFORM

The LGU PFM Reform Implementation Strategy


Operationalizes the LGU PFM

Reform Roadmap

Lays down the specific actions to be done to carry out the policy

agenda that will result to the outcomes

Anticipates the implementation risks

and identifies mitigating measures

The LGU PFM Reform Implementation Strategy Matrix


Issue

Link between PDPFP/ CDP – LDIP – AIP and Budget

Policy Agenda

Strengthen Linkage between PDPFP/ CDP –

LDIP – AIP and

Budget

Implementation Strategy

(OAs)

Enhance CDP / LDIP

Manual

Implementation Strategy

(LGUs)

Issue policy

reiterating complianc

e with Enhanced

CDP Manual

Outcomes

2016 All LGUs

fully capacitated to prepare CDPs with matching

LDIPs from which AIPs are derived

Risks

Capacity of ROs’

technical personnel to provide

TA to LGUs

Mitigation

CapDev for ROs on PFM tools

Immediate Outputs from the Oversight Agencies


1. Enhanced Joint Memorandum Circular No. 1 on the Harmonization of Local Planning, Investment Programming, Revenue Administration, Budgeting and Expenditure Management

2. Enhanced Public Financial Management Assessment Tool for LGUs and Software

3. Enhanced CDP/LDIP Manual

4. Guidebook on Local Economic Enterprises

5. Enhanced Full Disclosure Policy

6. Standard Revenue and Expenditure, Cash Flow Forecasting Tools

Immediate Outputs from the Oversight Agencies


7. Recommendations on the Amendment of the Local Government Code

8. Enhanced Revenue Generation Manuals (LTOM, MELTO, AEEM)

9. Harmonized Policy on CSO accreditation and Handbook on CSO Participation in the Budget Process

10. Harmonized Financial Reports and Templates

11. Localized Internal Audit Manual

12. Revised Budget Operations Manual for LGUs

Core Approaches to Implementation of PFM Reforms


1. Multiply sponsorship in the implementation of the LGU PFM Reform

Expand the engagement of all stakeholders in the implementation of LGU PFM Reforms to ensure attainment of:

• Improved Capacities of OAs and LGUs

• Improved LGU PFM systems• Improved service delivery by LGUs

Proposed Structure


National Inter-Agency Team

High-level representatives of OAs supported by TWG from LGU Policy Units of OAs

LGU PFM Teams

Regional Inter-Agency TeamsSupported by Composite PFM Team

Transition Set-upLGU PFM Reform

Roadmap

Project Steering Committee

High-level representatives of OAs supported by PTWG

LGU PFM Teams

Regional Inter-Agency TeamsRIAT supported by Composite PFM Team


2. Empower LGUs to customize their PFM Improvement Plan (PFMIP)

LGU stakeholders and sponsors will be enabled to assess their PFM system, design and actualize their PFMIPs based on their own

level of readiness



3. Harmonize and coordinate Oversight Agencies’ technical support to LGUs

LGU PFM Reforms seeks to institutionalize

convergence of the OAs in providing technical assistance to LGUs



4. Capacitate Oversight Agencies and LGUs to Manage the Reform

OA and LGU Stakeholders and Sponsors/Champions

will be capacitated on change management


WHAT IS THE CONNECTION AMONG THE ROADMAP,

IMPLEMENTATION STRATEGY AND PFMIP?

SUPPORT TO THE LOCAL GOVERNMENT UNITS FOR MORE EFFECTIVE AND ACCOUNTABLE

PUBLIC FINANCIAL MANAGEMENT (LGU PFM 2 PROJECT)This project is funded by the European Union and implemented by the Government of the

Philippines

The Roadmap, Implementation Strategy & PFMIP


RoadmapA strategic guide on what we (LGUs)

want to do and achieve with our PFM

in the immediate, medium and long

term periods to attain our desired end-state

(vision)

Implementation StrategyLays down the

specific actions to be done to carry

out the policy agenda that will

result to the outcomes, and anticipates the

implementation risks and identifies

mitigating measures

PFMIPDetails the specific activities which the LGU will undertake to

strengthen its PFM System over a given

period of time together with the

resources needed to carry them out

Prepared jointly by LGUs and OAs to serve as their

overall strategic guidePrepared by LGUs to implement PFM

reforms

The LGU PFM Reform Roadmap


Issues to be

Addressed (1)Link

between PDPFP/CDP –LDIP – AIP and Budget

Policy Agenda

(2)

Strengthen the linkage between

PDPFP/CDP –LDIP – AIP and Budget

Outcomes (3)

All LGUs capacita-

ted to prepare

and update their CDPs and

matching LDIPs from which AIP is culled

2016 2019 2022

LGUs prepare

and update their CDPs and

matching LDIPs from which AIP is culled

Strong linkage

between PDPFP/ CDP -

LDIP-AIP and

Budget ensured

Responsible Units(5)

DILGNEDADBMBLGFLGUs

Indicators

(4)

2016·Proportion

of LGUs with enacted or

draft PDPFPs/CD

Ps and LDIPs prepared and harmonized according

with DILG/NEDA Guidelines

The Implementation Strategy


Issues to be

Addressed (1)

Link betwee

n PDPFP/CDP –LDIP –

AIP and Budget

Policy Agenda

(2)

Strengthen the

linkage between PDPFP/

CDP –LDIP – AIP and Budget

Outcomes (4)

All LGUs capacita-

ted to prepare

and update their

CDPs and matching

LDIPs from

which AIP is culled

2016 2019 2022

LGUs prepare

and update their

CDPs and matching

LDIPs from

which AIP is culled

Strong linkage

between PDPFP/ CDP -

LDIP-AIP and

Budget ensured

Implementation Strategies (3)

Enhance CDP/LDIP Manual

including incorpora-tion of GPBP

principles and

alignment with

PDPFP / PDIP at

provincial level

Issue policy

reiterating complianc

e with updated

CDP / LDIP Manual

OAs LGUs Mitigation

Risks

Risk Register (5)

Capacity of ROs’

technical personnel to provide

TA to LGUs

CapDev for ROs on PFM

tools

The PFM Improvement Plan (PFMIP)


Issues to be

Addressed (1)

Link between PDPFP / CDP –LDIP –

AIP and Budget

Policy Agenda

(2)

Strengthen the

linkage between PDPFP/

CDP –LDIP – AIP and Budget

Implemen-tation

Strategies (3)

Issue policy reiterating compliance

with updated

CDP / LDIP Manual

Outputs (5)

Executive Order /

Sanggunian Resolution

Budget(8)

P20,000.00

Activities (4)

Conduct orientation

on the updated

CDP / LDIP ManualIssue

Executive Order /

Sanggunian Resolution

Responsible Unit

(6)

LPDO

LCE / Sanggunia

n

Schedule(7)

January 2015

February 2015

LGU: Municipality of San JulianFor Fiscal Year 2015


Prioritizing the Specific Activities for the PFMIP

Categorize Tasks

Identify what is most feasible and have the highest value in terms of visible impact in the shortest time• In what order do actions need to be taken• What are the interdependencies in our activities?• What is the local capacity to absorb change?

Short-term

Medium-term

Long-term


“What is technicall

y most important may not

be tactically feasible.”

Balance Technical with Tactical Considerations:• Technical Aspects – what needs

to be done to improve PFM

• Resources – personnel, financial and other logistics

• Political Demand – what is wanted and can be supported by key stakeholders (LCE & Local Sanggunian)

Prioritizing the Specific Activities for the PFMIP

Ano’ng Iskor ng ‘yong Bayan?

LGU FISCAL SUSTAINABILITY SCORECARDFinancial Management Performance Review for Local Government Units

FY2009FY2010FY2011FY2012

0.91%

0.86%0.89%

0.80%

2009 2010 2011 2012

Declining, <1%locally sourced income to GDP

Perspective“Supervision of revenue operations of all LGUs”“Monitor and support the implementation of policies and measures on local revenue administration”

Assessment of fiscal indicators necessary for exercise of mandateAgency has to have a systematic, not sporadic, process for regular assessment of fiscal performance of LGUs

Protection of revenue integrity, data analytics and metrics Closer, thorough monitoring of revenue performance of LGUsEvidence- and policy-based performance assessment of local treasurers and assessorsGeneral housekeeping of reportsVisit in BIR revenue regions / BOC ports /LGUs

Directives

of the Secretary

of

Finance

Basis for Evaluation

DOF Department Order No. 08-2011: Statement of Receipts and Expenditures

Treasurer: eSRE System in the LGUs

Assessor: Quarterly Reports on Real Property Assessments

LGU Fiscal Performance Monitoring System

BLGF’s Local Revenue Targets

SMV Profile and Ordinances of LGUs?

Local Government UnitFISCAL SUSTAINABILITY S C O R E C A R DDirective of the SecretaryBaselining the LGU performance from FY2009 to FY2012Validating the LGU data and testing the integrity of BLGF reportsCompliance monitoring on DOF directives and other relevant regulationsPublication of LGU performancePolicy setting purposes

Indicators

Financial (Quantitative) - 90%KRA 1 - Revenue Generation CapacityKRA 2 - Local Collection GrowthKRA 3 - Expenditure Management

Non-Financial (Qualitative) - 10%KRA 4 - 6 - Reportorial Compliance

Pass

Fail

100%

P

Financial IndicatorsKRA 1. Revenue Generation Capacity

Indicator1.1 Regular income level1.2 Local revenue level1.3 Local revenue growth (tax and non-tax revenues)1.4 Dependence on locally sourced income

1.5 Dependence on IRA1.6 Dep. on Other Shares from National Tax Collection

Focusing on Actual Utilization, not Budget AppropriationStatutory Obligations and Limitations

Financial IndicatorsKRA 3. Expenditure Management

Indicator3.1 Expenditure Per Capita3.2 Use of IRA for Local Devt. Project (>=20% of IRA)

3.3 Limitation on Expenditure for PS (<=45%/55% of Regular Income of the Next Preceding Fiscal Year)3.4 Limitation on Debt Service (<=20% of IRA)

P

7 out of 10 Treasurers Did Not Submit SRE on Time

Non-Financial IndicatorsKRA 4. eSRE

Indicator

Submission of Timely and Accurate eSRE

15 Cities & Provinces have new SMVs effective 2014

But 130+ More Are Already DUE…

Non-Financial IndicatorsKRA 5. SMV Updating

Indicator

Regular Updating of SMV andConduct of General Revision of Property Assessments

Is the assessor correctly accomplishing the QRRPA?Are there properties with restrictions? Is the land area correct?

Non-Financial IndicatorsKRA 6. Quarterly Report on Real Property Assessments (QRRPA)

Indicator

Submission of Timely andAccurate QRRPA

Final Rating

KRA Max Score

Quantitative 901. Revenue Generation Capacity 602. Local Collection Growth 203. Expenditure Management 10

Qualitative 104. Timely & Accurate eSRE Report 4

5. Current & Updated SMV 36. Timely & Accurate QRRPA 3

Final RatingWeighted

ScoreGrad

e Rating Remarks

>=80 A Excellent All revenue and expenditure indicators are strong; full compliance with reportorial requirements

>=70 but <80 B Very Good

Most of the revenue and expenditure indicators are met very satisfactorily; high compliance with reportorial requirements

>=60 but <70 C Good

Most of the revenue and expenditure indicators are above average performance; minimum level of compliance with reportorial requirements

>=50 but <60 D Average

Revenue and expenditure indicators have not significantly changed and are generally on the average; minimum level of compliance with reportorial requirements

>=40 but <50 E Needs

ImprovementAlmost all of the key revenue and expenditure indicators need to be improved and validated; minimum reportorial requirements are not complied with

<40 F PoorAll revenue and expenditure indicators are way below the benchmarks; key reportorial requirements are incomplete/not submitted and/or require further validation

Methodology Utilized the BLGF SRE of all provinces, cities, and municipalities, and the QRRPA of provinces and cities from FY2009-FY2012

Run date of SRE: 15 August 2013

Processed individual SRE fields per LGU (initially cities and provinces) through pivot tables

Benchmarking and national comparison through DOF income classification as of 2008

One-on-one data- and process- validation with LGUs and BLGF regions

Sample Preliminary Scorecardxxx

Sample Preliminary Scorecard

RPT Collection Efficiency & YoY Collection Performance

VISIT ISKOR.BLGF.GOV.PH

In the pipeline…

Linking of Scorecards with “Open Data Initiative” Credit rating for LGUs will be nextContinuous monitoring and improvement of SRE’s integrityMunicipal scorecards release by early JuneRegional BLGF staff to be trained on LGU FSS

Ano’ng Iskor ng

‘yong Bayan?

THANK YOU!

bureau of local government finance department of finance

Documents

pfm effective

pfm goal

lgu pfm reform roadmapwhy

pfm reforms

accountable pfm planpfm

roadmap lgus

orderly pfm system

financial support