Development of the BLGF Financial Management Tools Under the Technical Assistance of the Asian Development Bank

March 16, 2011 BLGF MEMORANDUM CIRCULAR NO. 005-11 TO : All Bureau Officials and Personnel; Regional Directors for Local Government Finance; Provincial, City and Municipal Treasurers and Others Concerned SUBJECT : Development of the BLGF Financial Management Tools Under the Technical Assistance of the Asian Development Bank Pursuant to BLGF Office Order No. 67-2010 dated July 21, 2010 providing for the implementation framework of the Asian Development Bank Technical Assistance 7451-PHI: Support to Local Government Financing, the Bureau of Local Government Finance (BLGF) shall develop Financial Management Tools for the local government units (LGUs) which will provide an enabling environment in decentralization reform program by enhancing local financial management, planning and expenditure system anchored on reduced internal revenue allotment (IRA) dependence and improved access to credit finance to cost-effectively deliver critical local public services. The following LGU Financial Management Tools shall be developed to serve as the financial management, monitoring and capacity building instruments and systems of the BLGF: 1. LGU Fiscal Capacity Model: The LGU Fiscal Capacity Model is a computer-based forecasting model for LGU fiscal capacity that shall be used to generate LGU-level forecasts to serve as the basis for the BLGF debt-borrowing capacity certification process. It shall also serve as the basis for the setting of revenue targets for local treasurers. 2. LGU Debt Monitoring and Debt Capacity Certification System: The system helps BLGF ensure that debts of LGUs are within reasonable limits and within the capacity of the LGUs to pay on time through an improved debt-service certification process. By making the monitoring system a part of the loan approval process, the debt data becomes a key and useful part of the debt-service certification process of BLGF. 3. LGU Creditworthiness Rating System: The system will make use of the data in the credit information database including any new proposed project cash flow and the Statement of Receipts and Expenditures (SRE) as regards LGU creditworthiness (based on historical and forecast cash flows). The creditworthiness system is intended to be used by government and private financing institutions including MDFO as a tool/instrument in assessing the LGU's creditworthiness as to their capacity and willingness to pay its debt obligations. The BLGF through its partners ADB and Poyry IDP Consult, Inc. shall develop the aforementioned LGU Financial Management Tools for implementation/adoption of LGUs. The partnership includes, among others, the development of automated systems, instructional manuals, briefing/information materials and training modules. Activities leading to the adoption of the LGU Financial Management Tools shall be included in the regular functions or projects of the BLGF. All concerned are hereby enjoined to support the development and implementation of the abovementioned LGU Financial Management Tools. (SGD.) MA. PRESENTACION R. MONTESA, CESO III Executive Director and ADB TA 7451 Project Steering Committee Chairperson