Institute of Politics and Governance

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2000 INTERNAL REVENUE ALLOTMENT UPDATE
Dennis S. Lopez
(continued)

The said Circular, in effect directs the Local Development Councils to redo their Annual
Investment Plans to be funded out of the Development Fund. Note that the Circular was issued last March 14, 2000 or near the close of the first quarter of 2000.

Furthermore, under item 3.3 on the Release of Cash Requirement for the 20% Development Fund provides that the cash requirement corresponding to the 20% development fund shall be released by the DBM Regional Offices concerned on the basis of the quarterly cost requirement. Moreover, the quarterly IRA allocation inclusive of the Development Fund shall not exceed 25% of the annual IRA share of the LGU and when necessary, the progress billing scheme may be adopted in the release of cash requirements.

With this imposition, ULAP raised four (4) valid issues to which DBM responded accordingly last May 19, 2000:

1) Duplication in requiring LGUs to submit a separate AIP other than that submitted / including in the annual budget. This would mean that the LGUs would have to reprogram everything, particularly their expenditure pattern. The DBM said that their Regional Offices (RO) have already been instructed to consider the AIPs submitted and included in their annual budgets. Inasmuch as only provinces and highly urbanized cities are submitted for review to our Regional Offices, the budget officers of provinces, component cities and municipalities have been requested to assist our Regional Offices in culling out from the annual budget of LGUs under the individual provinces, the AIPs which pertain to the 20% development fund, for submission to DBM Regional Offices;

2) Return by DBM ROs of AIPs sumitted by LGUs due to non-conformity with provision of implementing guidelines and form. According to DBM, they have already instructed their ROs not to return the AIPs submitted by the LGUs to release the 20% development fund with notation should there be projects which are outside of the priority areas or not consistent with E.O. 189;

3) Why require AIP Form No. 1? DBM admitted that Form No. 1 is intended for cash programming purposes and to facilitate consolidation.

4) Period of Review of AIPs by DBM Ros. DBM relayed to ULAP that under LBC 70,one month from the receipt of the AIP,DBM is to review and respond to the LGUs, otherwise the AIP is deemed as compliance by LGUs with the provisions of E.O. 189.

According to the League of Provinces, the provinces have complied with E.O. 189 and
LBC 70 and are now being released portions of their 20% development fund for the first quarter.

This national imposition clearly dips into the manner how LGUs should spend for their development plans. The added burden of culling out from their budget the projects funded out of the 20% development is not only an administrative nightmare, it also in a sense telling the LGUs not to proceed if DBM does not say so.

Executive Order 190

"DIRECTING THE DEPARTMENT OF BUDGET AND MANAGEMENT TO REMIT DIRECTLY THE CONTRIBUTIONS AND OTHER REMITTANCES OF LOCAL GOVERNMENT UNITS TO CONCERNED NATIONAL GOVERNMENT AGENCIES (NGA), GOVERNMENT FINANCIAL INSTITUTIONS (GFI) AND GOVERNMENT OWNED AND/OR CONTROLLED CORPORATIONS (GOCC)."

The contributions and remittances to national agencies concerned here are the GSIS, PAG-IBIG Fund, Employees Compensation Insurance Premium, Health Insurance Fund and the BIR authorized withholding tax.

There are brewing problems in the implementation of this order. It seems that in the case of GSIS remittances, the LGUs books and GSIS records do not reconcile with each other. LGUs claim that the have already paid while the GSIS says otherwise. The problem is that based on the Executive Order, the DBM shall remit directly to the concerned agencies the LGU contributions, which shall likewise be deducted, from the IRA.

There is no figure available as to the aggregate amount of the contributions and remittances of the LGUs. The DBM's deduction will definitely be based on the records of the concerned national agencies.

The Local Government Service Equalization Fund (LGSEF)

In the 2000 GA under the Special Provisions of the IRA it states that "PROVIDED, That the amount of Five Billion Pesos (P5,000,000,000) shall be earmarked for the Local Government Equalization Fund for the funding requirements of projects and activities arising from full an efficient implementation of devolved functions and services of local government units pursuant to R.A.7160 otherwise known as the Local Government Code of 1991: PROVIDED, FURTHER, That such amount shall be released to the local government units in accordance with the implementing rules and regulations, including such mechanisms and guidelines for the equitable allocations and distributions of said fund among local government units subject to the guidelines prescribed by the Oversight Committee on Devolution as constituted pursuant to Book IV,Sec.533(b) of R.A.7160."

This Special Provision likewise appeared in the 1999 GAA. For the 1999 LGSEF only P12 Million is not release to the LGUs. In 1999, the Oversight Committee on Devolution (OCD) came up with the implementing guidelines including the mechanisms for the equitable allocation of the said fund, approved the following scheme (OCD Resolution No.99-005):

* 40% Allocated in accordance with the formula prescribed for under the Local Government Code of 1991 (OCD Resolution 99-006)

* 40% Allocated in accordance with a modified 1992 Cost of Devolved
Function (CODEF) sharing scheme, as follows (OCD Resolution
99-006):

Provinces 40%
Cities 20%
Municipalities 40%

* 20% Shall be earmarked to support Local Affirmative Projects and other priority initiatives submitted by LGUs to the OCD in accordance with its prescribed guidelines (OCD Resolution No.99-003).

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