Bureau of Local Government Finance Opinion

June 28, 2010 BUREAU OF LOCAL GOVERNMENT FINANCE OPINION Ms. Nelia A. Barlis City Treasurer and Chairperson, Local Finance Committee City Hall Makati City Madam : This refers to your letter dated May 21, 2009, requesting for this Bureau's opinion in connection with the proposed establishment by the City Government of Makati in partnership with the Land Bank of the Philippines of a PhP300M stimulus fund for the Makati-based Small and Medium Enterprises (SMEs ) adversely affected by the global financial crisis. For your guidance, enclosed herein is a copy of the letter dated May 31, 2006, addressed to the City Secretary and OIC, Law Department of Makati City, wherein in a similar query, this Bureau opined, as follows: "In this regard, this Bureau does not find any provision from the Local Government Code of 1991 (R.A. 7160) wherein local government units may extend a loan to private corporations or institutions, albeit, the provision on inter-local government loans, grants and subsidies under Section 300 thereof, as follows: SaHIEA 'SEC. 300. Inter-Local Government Loans, Grants, and Subsidies . Provinces, cities and municipalities may, upon approval of the majority of all members of the sanggunian concerned and in amounts not exceeding their surplus funds , extend loans, grants, or subsidies to their local government units under such terms and conditions as may be agreed upon by the contracting parties. 'Local government units may, upon approval of their respective sanggunian , jointly or severally contract loans, credits, and other forms of indebtedness for purposes mutually beneficial to them. '(emphases supplied)' "On the other hand, the powers of local government units are clearly defined under the following provisions of the same Code: 'SEC. 18. Power to Generate and Apply Resources . Local government units shall have the power and authority . . . to apply their resources and assets for productive, developmental, or welfare purposes, in the exercise or furtherance of their governmental or proprietary powers and functions and thereby ensure their development into self-reliant communities and active participants in the attainment of national goals.' cETDIA 'SEC. 22 Corporate Powers. (a) Every local government unit, as a corporation, shall have the following powers: 'xxx xxx xxx. '(5) To enter into contracts, and '(6) To exercise such other powers as are granted to corporations, subject to the limitations provided in this Code and other laws. 'xxx xxx xxx. '(d) Local government units shall enjoy full autonomy in the exercise of their propriety functions and in the management of their economic enterprises, subject to the limitations provided in this Code and other applicable laws.' 'Sec. 35. Linkages with People's and Non-governmental Organizations . Local government units may enter into joint ventures and such other cooperative arrangements with people's and non-governmental organizations to engage in the delivery of certain basic services, capability-building and livelihood projects, and to develop local enterprises designed to improve productivity and income, diversify agriculture, spur rural industrialization, promote ecological balance, and enhance the economic and social well-being of the people.' HcDATC "In the exercise of these powers, prior authorization by the local council or sanggunian is necessary likewise under the aforementioned Section 22 of the same Code, as follows: 'SEC. 22. . . . '(c) Unless otherwise provided in this Code, no contact may be entered into by the local chief executive in behalf of the local government unit without prior authorization by the sanggunian concerned. . . . .' "On final note, the law is the source of powers of local government units and in this light, this Bureau opines that unless restrained by the provisions of the fundamental law or the 1987 Constitution in local governments and the Local Government Code of 1991, as well as, all other existing and relevant laws, acts, decrees, executive orders, proclamations and administrative rules and regulations not inconsistent therewith, a municipal corporation such as that city has the discretion to select the means and methods of exercising its powers. Provided, further that the means thus selected are reasonable, in conformity with sound financial practices and methods, and in accordance with accounting and auditing rules and regulations; and are not meant to give any private party or parties unwarranted benefits or advantage to the prejudice of the municipal corporation and ultimately to its constituents." DHSEcI At this juncture, we wish to underscore the limitations on the use of public funds as provided under Section 29 (2), Article VI of the 1987 Constitution, prohibiting the use of public funds for religious purposes, and conformably Section 335 of the Local Government Code of 1991, providing that local funds shall not be appropriated for religious or private purposes, viz. : "Section 29. . . . "xxx xxx xxx (2) No public money or property shall be appropriated, applied, paid, or employed, directly or indirectly, for the use, benefit, or support of any sect, church, denomination, sectarian institution, or system of religion, or of any priest, preacher, minister, other religious teacher, or dignitary as such, except when such priest, preacher, minister, or dignitary is assigned to the armed forces, or to any penal institution, or government orphanage or leprosarium." "SEC. 335. Prohibitions Against Expenditures for Religious or Private Purposes. No public money or property shall be appropriated or applied for religious or private purposes." On the other hand, this Bureau finds nothing objectionable on the matter of partnership with the Land Bank of the Philippines in facilitating any lawful undertaking by a local government unit considering that the Land Bank is a government servicing bank. TaSEHC Trusting that this has provided you the proper guidance regarding your query. Very truly yours, (SGD.) MA. PRESENTACION R. MONTESA Executive Director