FY 2018 Internal Revenue Allotment and Guidelines on Preparation of FY 2018 Annual Budgets of LGUs

June 1, 2017

DBM LOCAL BUDGET MEMORANDUM NO. 075-17

 

1.0 PURPOSE

1.1 To inform the local government units (LGUs) of their Internal Revenue Allotment (IRA) shares for FY 2018 based on the certification of the Bureau of Internal Revenue (BIR) on the computation of the share of LGUs from the actual collection of national internal revenue taxes in FY 2015 pursuant to Article 409 of the Implementing Rules and Regulations (IRR) of the Local Government Code of 1991 (Republic Act [RA] No. 7160); and

1.2 To prescribe the guidelines on the preparation of the FY 2018 annual budgets of LGUs. CAIHTE

2.0 GUIDELINES

2.1 Allocation of the FY 2018 IRA

2.1.1 In the computation of IRA allocation of LGUs, the following factors are taken into consideration:

2.1.1.1 The FY 2015 Census of Population by Province, City, Municipality, and Barangay, as approved through Proclamation No. 1269 dated May 19, 2016; 1 and

2.1.1.2 The FY 2001 Master List of Land Area certified by the Land Management Bureau pursuant to Oversight Committee on Devolution Resolution No. 1, s. 2005 dated September 12, 2005.

2.1.2 Moreover, in view of the receipt by the Department of Budget and Management (DBM) of the documents and records submitted by the Autonomous Region in Muslim Mindanao Government showing that the Municipality of Shariff Saydona Mustapha in the Province of Maguindanao had met all the requirements for the creation of a municipality under RA No. 7160 at the time of its creation, the said Municipality is included in the computation of the FY 2018 IRA allocation of LGUs.

2.1.3 Any valid adjustments, changes, modifications or alterations in any of the factors affecting the computation of the IRA that occurred or happened during the year, including final and executory court decisions, shall be governed by the applicable General Provision in the FY 2018 General Appropriations Act.

2.2 Preparation of the FY 2018 Annual Budgets of LGUs

2.2.1 For the purpose of preparing the FY 2018 annual budgets, the total IRA shares of LGUs shall be P522.748 Billion per certification of the BIR on the actual national internal revenue taxes collected in FY 2015. The FY 2018 IRA level is P35.863 Billion or 7.37% higher than the FY 2017 IRA level. aScITE

2.2.2 Pursuant to Sections 284 and 285 of RA No. 7160, summarized below are the total shares by level of LGU in the FY 2018 IRA.

2.2.3 The details by region and by level of LGU are reflected in Annex A hereof. The LGUs shall be notified of their individual IRA allocation by the DBM Regional Offices (ROs) concerned.

2.2.4 In addition to the IRA, some LGUs are entitled to the following Special Shares in the Proceeds of National Taxes:

• Share in the proceeds from the utilization and development of national wealth within their territorial jurisdiction pursuant to Sections 289 to 291 of RA No. 7160;

• Excise tax on Virginia Tobacco cigarettes pursuant to RA No. 7171; 2

• Excise tax on Burley and Native Tobacco products pursuant to RA No. 8240, 3 as amended by RA No. 10351; 4

• Gross income taxes paid by all businesses and enterprises within the ECOZONES pursuant to RA No. 7922, 5 as amended by RA No. 9400; 6

• Value-added Tax pursuant to RA No. 7643; 7 and

• Value-added Tax in lieu of Franchise Tax pursuant to RA Nos. 7953 8 and 8407. 9

 LGUs are advised to coordinate with the appropriate revenue collecting agencies and government corporations to reconcile their records with those of the collecting agencies to determine the amount of their shares from the above-mentioned taxes.

2.2.5 Priorities in the Use of the IRA and Other Local Resources

2.2.5.1 Pursuant to Section 17 (g) of RA No. 7160, the IRA and other local resources shall first cover the cost of providing basic services and facilities enumerated under Section 17 (b) thereof, particularly those devolved by the Department of Health, Department of Social Welfare and Development, Department of Agriculture and the Department of Environment and Natural Resources, as well as other agencies of the National Government, before applying the same for other purposes. DETACa

2.2.5.2 Each LGU shall appropriate in its Annual Budget no less than twenty percent (20%) of its IRA for development projects as mandated under Section 287 of RA No. 7160. The same shall be utilized in accordance with the Department of the Interior and Local Government (DILG)-DBM Joint Memorandum Circular (JMC) No. 2017-1 dated February 22, 2017. 10

2.2.5.3 As provided under Section 21 of RA No. 10121, 11 and Rule 18 of its IRR, not less than 5% of the estimated revenue of LGUs from regular sources 12 shall be set aside as the Local Disaster Risk Reduction and Management Fund and shall be utilized in accordance with the pertinent provisions of laws, rules and regulations.

2.2.6 Pursuant to Section 305 (h) of RA No. 7160, local budget plans and goals shall, as far as practicable, be harmonized with national development plans, goals, and strategies in order to optimize the utilization of resources and to avoid duplication in the use of fiscal and physical resources.

 To this end, LGUs are encouraged to align their programs, projects and activities (PPAs) with the priorities of the national government, specifically those embodied under the Philippine Development Plan and Public Investment Program for 2017-2022.

 Moreover, in accordance with Section 2 of the Office of the President MC No. 12 dated October 24, 2016, the PPAs of LGUs shall have a results-oriented focus on national development goals and shall be in line with AMBISYONNATIN2040, the 2030 Agenda for Sustainable Development, which is anchored on a set of Sustainable Development Goals (SDGs), and the President's 0+10-Point Socio-Economic Agenda.

2.2.7 Further, in line with the current Administration's priority to eradicate the problem of illegal drugs in the country, LGUs are hereby enjoined to comply with the pertinent provisions of RA No. 9165, 13 including its IRR, to wit:

"SECTION51. Local Government Units' Assistance. — The LGUs shall appropriate a substantial portion of their respective annual budgets to assist in or enhance the enforcement of the Act giving priority to preventive or educational programs and the rehabilitation or treatment of drug dependents. HEITAD

(a) Consistent with the principles of local autonomy, the local sanggunians shall appropriate substantial funds from their annual budgets to be utilized in assisting or enhancing the enforcement of the Act, giving priority to educational programs on drug abuse prevention and control and rehabilitation and treatment of drug dependents, such amount to be determined by the sanggunian concerned based on the perceived need of the locality." Specifically, LGUs are encouraged to provide funds in their annual budgets for the: (i) conduct of barangay clearing operations, including rehabilitation and after care of drug users in coordination with the Department of Health and the Department of Social Welfare and Development; (ii) establishment of Special Drug Education Centers; and (iii) strengthening of the criminal justice system, among others.

2.2.8 Section 305 (i) of RA No. 7160 provides that local budgets shall operationalize approved local development plans. For this purpose, LGUs shall prepare the total resource Annual Investment Program (Annex B) for the budget year, which shall be culled-out from the Local Development Investment Program, which in turn shall be based on the approved Comprehensive Development Plan in the case of cities and municipalities, and Provincial Development and Physical Framework Plan in the case of provinces.

2.2.9 The FY 2018 Annual Budgets of LGUs shall be prepared in accordance with the procedures and schedules prescribed under RA No. 7160, and the Budget Operations Manual (BOM) for LGUs, 2016 Edition, which include the following modified Local Budget Preparation (LBP) forms: aDSIHc

• LBP Form No. 1 — Budget of Expenditures and Sources of Financing (Annex C);

• LBP Form No. 2 — Programmed Appropriation and Obligation by Object of Expenditure (Annex D);

• LBP Form No. 2-A — Programmed Appropriation and Obligation for Special Purpose Appropriations (Annex E);

• LBP Form No. 3 — Plantilla of Personnel (Annex F);

• LBP Form No. 3-A — Personnel Schedule (Annex G);

• LBP Form No. 4 — Mandate, Vision/Mission, Major Final Output, Performance Indicators and Targets (Annex H);

• LBP Form No. 5 — Statement of Indebtedness (Annex I);

• LBP Form No. 6 — Statement of Statutory and Contractual Obligations and Budgetary Requirements (Annex J); and

• LBP Form No. 7 — Statement of Fund Allocation by Sector (Annex K).

2.2.10 In accordance with the DBM-Climate Change Commission-DILG JMC No. 2015-01 dated July 23, 2015, 14 LGUs shall identify, tag, and prioritize their respective climate change PPAs.

2.2.11 Together with the Annual Budget (Local Expenditure Program), the following documents shall be prepared and submitted to the local sanggunian for budget authorization purposes:

• Budget Message

• Plantilla of Personnel

• Statement of Indebtedness

• Annual Operating Budget for Local Economic Enterprise(s), if any

• Annual Investment Program, duly approved by the Sanggunian through a Resolution, and supported by the following:

o DILG-endorsed Gender and Development Plan and Budget;

o Office of Civil Defense-reviewed Local Disaster Risk Reduction and Management Plan;

o Local Climate Change Action Plan;

o Peace and Order Plan;

o List of PPAs for the Local Council for the Protection of Children;

o List of PPAs for Senior Citizens and Persons with Disabilities; and

o List of PPAs to Combat Acquired Immune Deficiency Syndrome (AIDS). ATICcS

2.2.12 The FY 2018 Annual Budgets of LGUs shall be prepared consistent with the Revised Chart of Accounts for LGUs, as prescribed under Commission on Audit Circular No. 2015-009 dated December 1, 2015. 15

2.2.13 The FY 2018 Annual Budgets of LGUs shall likewise include PPAs that can be attributed and built-in within the budget level for the following:

• Gender and Development pursuant to RA No. 7192, 16 RA No. 9710, 17 and Philippine Commission on Women-DILG-DBM-National Economic and Development Authority JMC No. 2016-01 dated January 12, 2016; 18

• Senior Citizens and Persons with Disabilities pursuant to RA No. 9994 19 amending RA No. 7432, 20 and RA No. 9442 21 amending RA No. 7277; 22

• Combatting AIDS pursuant to RA No. 8504; 23 and

• Implementation of the programs of the Local Councils for the Protection of Children pursuant to RA No. 9344. 24

3.0 LGUs may coordinate with the DBM ROs for the necessary technical assistance in the preparation of their respective FY 2018 Annual Budgets, including the use of the Electronic Budget (eBudget) System for LGUs.

4.0 It is understood that the disbursement of funds shall be in accordance with pertinent budgeting, accounting, and auditing rules and regulations.

5.0 Please be guided accordingly.

(SGD.) BENJAMIN E. DIOKNOSecretary

ANNEX A

FY 2018 IRA of LGUs

ANNEX B

FY________ Annual Investment Program (AIP)

ANNEX C

Budget of Expenditures and Sources of Financing

ANNEX D

Programmed Appropriation and Obligation by Object of Expenditure

ANNEX E

Programmed Appropriation and Obligation for Special Purpose Appropriations

ANNEX F

Plantilla of LGU Personnel FY ______

ANNEX G

Personnel Schedule FY ________

ANNEX H

Mandate, Vision/Mission, Major Final Output, Performance Indicators and Targets FY ____

ANNEX I

Statement of Indebtedness

ANNEX J

Statement of Statutory and Contractual Obligations and Budgetary Requirements FY ____

ANNEX K

Statement of Fund Allocation by Sector CY ___

Footnotes

1. Declaring as Official the 2015 Population of the Philippines by Province, City/Municipality, and Barangay, based on the 2015 Census of Population Conducted by the Philippine Statistics Authority.

2. An Act to Promote the Development of the Farmers in the Virginia Tobacco-Producing Provinces.

3. An Act Amending Sections 138, 139, 140, and 142 of the National Internal Revenue Code, as amended, and for Other Purposes.

4. The Sin Tax Reform Law.

5. Cagayan Economic Zone Act of 1995.

6. An Act Amending RA No. 7227, as amended, otherwise known as the Bases Conversion and Development Act of 1992, and for Other Purposes.

7. An Act to Empower the Commissioner of Internal Revenue to Require the Payment of the Value-Added Tax (VAT) Every Month and to Allow LGUs to Share in VAT Revenue, Amending for this Purpose Certain Sections of the National Internal Revenue Code.

8. An Act Amending RA No. 6632, entitled, "An Act Granting the Philippine Racing Club, Inc., a Franchise to Operate and Maintain a Race Track for Horse Racing in the Province of Rizal, and Extending the said Franchise by Twenty-Five Years from the Expiration of the Term Thereof."

9. An Act Amending RA No. 6631, entitled, "An Act Granting the Manila Jockey Club, Inc., a Franchise to Construct, Operate, and Maintain a Racetrack for Horse Racing in the City of Manila or Any Place within the Provinces of Bulacan, Cavite or Rizal and Extending the said Franchise by Twenty-Five Years from the Expiration of the Term Thereof."

10. Updated Guidelines on the Appropriation and Utilization of the 20% of the Annual IRA for Development Projects.

11. Philippine Disaster Risk Reduction and Management Act of 2010.

12. Based on the Bureau of Local Government Finance MC No. 16-2015 dated June 19, 2015 re Local Public Financial Management (PFM) Tools for the Electronic Statement of Receipts and Expenditures (which include the Guidebook for the New Local Government Financial Performance Monitoring System), regular revenues refer to taxes, fees, and receipts actually realized, including the IRA and other shares provided for in Sections 284, 290 and 291 of RA No. 7160, but exclusive of non-recurring receipts such as national aids, grants, financial assistance, loan proceeds, sales of assets, miscellaneous income/receipts and other similar receipts.

13. Comprehensive Dangerous Drugs Act.

14. Revised Guidelines for Tagging/Tracking Climate Change Expenditures in the Local Budget (Amending JMC No. 2014-01 dated August 7, 2014).

15. Prescribing the Revised Chart of Accounts for Local Government Units.

16. Women in Development and Nation Building Act.

17. The Magna Carta of Women.

18. Amendments to Philippine Commission on Women-DILG-DBM-National Economic and Development Authority JMC No. 2013-01: Guidelines on the Localization of the Magna Carta of Women.

19. Expanded Senior Citizens Act of 2010.

20. An Act to Maximize the Contribution of Senior Citizens to Nation Building, Grant Benefits and Special Privileges and for Other Purposes.

21. An Act Amending RA No. 7227, Otherwise Known as the "Magna Carta for Disabled Persons," and for Other Purposes.

22. Magna Carta for Disabled Persons.

23. Philippine AIDS Prevention and Control Act of 1998.

24. Juvenile Justice and Welfare Act of 2006.

Published in The Philippine Star on June 3, 2017.