Manual on Sectoral and Barangay Planning, Programming and Budgeting System    VOLUME V ANNEX B 


Comprehensive Land Use Planning puts into practice the essence of local autonomy among LGUs. This continuum of processes and its outputs which come in the form of a Development Plan, Investment Programs and City Budget set the direction which the City of Makati has to take to enable itself together with the key development partners to realize their fullest development as a self-reliant highly urbanized community and to transform themselves into active partners in the attainment of national goals. This Manual covers the issues, problems and concerns that the City faces as well as considers the financial environment where it operates. 1.1 Aims of the Guidelines

This aims to develop the knowledge and understanding of the major development issues and challenges facing the City of Makati. Important concepts and processes are defined here to provide an introduction to the language of development planners, investment programmers and fiscal managers. This also intends to assist City Government Departments, Sectoral Groups and Barangay Councils in undertaking development planning, investment programming and budgeting. Flowcharts, worksheets and forms are provided as tools in facilitating the preparation of the Medium-Term Development Plan, Annual Investment Plan, Barangay Development Plan, SK Development Plan, and Annual City Budget. 1.2

Learning Objectives To appreciate and understand the dynamics of the local development planning, investment programming and budgeting To describe the roles of the stakeholders in all stages of local development planning, investment programming and budgeting To institutionalize the processes identified and apply the concepts and tools presented To list the issues that the City must consider and prioritize, and assess its financial capability and potential To come up with a Medium-Term Development Plan, Annual Investment Plan, Barangay Development Plan, SK Development Plan, and City Budget which are responsive to the needs of the key stakeholders and the goals set in the Ten-Year Development Agenda for the City of Makati


Manual on Sectoral and Barangay Planning, Programming and Budgeting System    VOLUME V ANNEX B 



Getting Organized

Interactive discussion, workshops, consultation, participative and technical assessments are among the methodologies to be employed in the process of undertaking development planning-investment programming and budgeting. 2.0 CONCEPTS, LEGAL FRAMEWORK AND PROCESSES
Vision Setting/ Review

2.1 Legal Mandate Development planning is mandated by law. The Local Government Code pf 1981 (R.A. 7160); The Urban Development and Housing Act of 1992 (RA 7279);; and The Social Reform and Poverty Alleviation Act of 1997 (R.A. 8425) all mandated the formulation of local development plans. As defined by the Local Government Code, the barangay is “the primary planning and implementing unit of government policies, plans, programs, projects and activities in the community, and as a forum wherein the collective views of the people may be expressed crystallized and considered” Furthermore, the Local Government Code also stipulated the creation of barangay development councils. Sec. 106 states that “each local government unit (including barangays) shall have a comprehensive multi-sectoral development plan to be initiated by its development council and approved by its sanggunian. For this purpose, the development council at the barangay level shall assist the corresponding sanggunian in setting the direction of economic and social development, and coordinating development efforts within its territorial jurisdiction.”
Situation Analysis

Goals & Objectives, Target Setting

Formulation of Policies

Generation of Strategies

Evaluation & Selection of Strategy

Detailing of Chosen Strategy

Plan Implementation

Monitoring, Evaluation and Feedback

Figure 1 Local Development Planning Process


Manual on Sectoral and Barangay Planning, Programming and Budgeting System    VOLUME V ANNEX B 

PHILIPPINE LEGISLATION, MANDATED DEVELOPMENT PLANS AND PARTICIPATORY PLANNING POLICIES • The Local Government Code of 1991 (RA 7160) • The Comprehensive Land Use Plan (CLUP) which is a long-term guide for the development of the area legislated through the Zoning Ordinance covering 10-15 years The Comprehensive Development Plan (CDP) which is a medium-term plan of action implementing the CLUP that can cover a period of 3-6 years The Local Development Investment Plan (LDIP) which is a short-term plan containing the programs and projects based on the CLUP and CDP which covers a period of 3 years The Annual Investment Plan which is a tool for annually linking the approved CDP and LDIP with the annual City Budget The National Urban Development and Housing Framework, prepared by the Housing and Land Use Regulatory Board every five years, refers to the comprehensive plan for urban and urbanizable areas aimed at achieving the objectives of the Urban Development and Housing Program An area-based, sectoral and focused intervention to poverty alleviation to institutionalize and enhance the Social Reform Agenda (SRA) which embodies the results of the series of consultations and summits on poverty alleviation. Book 1, Chapter 1, Section 3 (j) & (1) Book 1, Chapter 4, Section 34, states that “local government units should promote the establishment and operation of people’s and nongovernmental organizations to become active partners in the pursuit of local autonomy.” Book 3, Section 476, b (7), describes among the responsibilities of the City Planning and Development Coordinator to “promote people participation in development planning within the local government unit concerned.” Article 1, Section 2 (e): Encourage more people’s participation in the urban development process.

The Urban Development and Housing Act of 1992 (RA 7279)

The Social Reform and Poverty Alleviation Act of 1997 (RA 8425)

Section 2, 4 (b): The SRA shall be enhanced by government in equal partnership with the different sectors through appropriate and meaningful consultations and participation in governance. Section 5 (6): Institutionalization of basic sectoral and NGO participation in effective planning, decision-making, implementation, monitoring and evaluation of the SRA at all levels.

The Implementing Rules and Regulations of the Local provided that the barangay development council shall have the mobilize people’s participation in local development efforts; development plans; and monitor and evaluate the implementation programs and projects.”

Government Code following functions: prepare barangay of national or local


Manual on Sectoral and Barangay Planning, Programming and Budgeting System    VOLUME V ANNEX B 


Annual Investment Planning/Barangay Development Planning (Local Development Investment Programming)

2.2.1 Concept. This is a process of allocating the investible portion of the annual general fund budget for funding the development programs, projects and activities identified in the Comprehensive Land Use Plan (CLUP) and the Comprehensive Development Plan (CDP). The LDIP is coterminous with the CDP, i.e., it has a time frame of three (3) years broken down into annual streams of fund allocation for projects determined to be of high priority by the incumbent officials in consultation with their various constituencies. As a guide to public spending, the LDIP is intended to result in increased socio-cultural wellbeing of the residents as well as accelerate local economic development by eliciting and orchestrating desired private sector investments. 2.2.2 Mandate. Section 109, Title 6 of the Local Government Code mandates the Local Development Council (LDC) to “formulate medium-term and annual development investment programs.” The LDC is headed by the LCE with the following members: all punong barangays in the city/municipality, Chairman of the Committee on Appropriations of the Sanggunian, the congressman or his representative, and representatives of NGOs operating in the city/municipality, as the case maybe, who shall constitute not less than one-fourth of the members of the fully organized council (Section 107). Pursuant to Section 109 of the Code, the LDC shall also exercise the following functions: • • • • • Formulate long-term, medium-term and annual socio-economic development plans and policies; Appraise and prioritize socioeconomic development programs and projects; Formulate local investment incentives to promote the inflow and direction of private investment capital; Coordinate, monitor and evaluate the implementation of the development programs and projects; and Perform such other functions as maybe provided bylaw or competent authority.

2.2.3 Process. The LDC shall form an executive committee which shall be the highest government body when the council is not in session. It is empowered to represent the LDC and act in its behalf in between sessions. Refer to the Local Government Code for the composition, powers and functions of the executive committee which basically serves as the implementing arm of the LDC. LDCs shall also organize sectoral or functional committees to assist them in performing their functions (Section 112, RA 7160). There is no substantive change here, except that in EO 319, these sectoral committees shall be formed according to the rules and regulations prescribed under EO 112. The UDPO shall serve as the secretariat to LDC which shall provide technical support, document proceedings, and prepare reports. The LDC may avail of the services of NGOs or educational or research institutions for this purpose. Under the Code, the secretariat, which is headed by the City Planning and Development Coordinator, shall


Manual on Sectoral and Barangay Planning, Programming and Budgeting System    VOLUME V ANNEX B 

also render such other assistance as the council may require in discharging its functions (Section 113, RA 7160 and EO 319). The AIP/BDP procedural flow is described briefly in Figure 2. Figure 2. AIP/BDP Process and Development Planning-Investment Programming-Budgeting and Implementation Cycle























3.0 OBJECTIVES Chart prepared by Professor Ernesto Serote.


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This Manual provides a methodology to assist department and barangay officials, staff and other community stakeholders in preparing an Annual Investment Plan/Barangay Development Plan; program the implementation of a range of programs, projects and tasks; prepare an annual and multi–year budget; and evaluate the implementation of the programs and projects in the Annual Investment Plan/Barangay Development Plan. The Manual is a guideline for sector/department and barangay officials, staff, barangay residents, and other barangay and city stakeholders in preparing an Annual Investment Plan and Barangay Development Plan. 4.0 PLANNING ORGANIZATION

In preparing an Annual Investment Plan/Barangay Development Plan, the Sector/Department Head or Barangay Chairman should create a Sectoral/Department Planning Team (S/DPT) or Barangay Planning Team (BPT). The S/DPT or BPT shall serve as the technical working group of the sector/department or barangay in conducting the studies, surveys, analysis, organization of sector/department/barangay consultations and putting together reports necessary in the formulation of the Annual Investment Plan/Barangay Development Plan. It shall also serve as the secretariat of the City Development Council/Barangay Development Council. 5.0 5.1 THE PLANNING PROCESS In preparing an Annual Investment Plan, Barangay Development Plan, and SK Development Plan, four (4) basic questions should be asked. These are: 5.1.1 5.1.2 5.1.3 5.1.4 5.2 Where are we now? Where would we like to be? What issues do we need to address to get there? What actions do we need to take to get there?

Situation Analysis: Where are we now?

In answering the first question, the S/DPT or BPT needs to undertake a situation analysis. A situation analysis provides the sector/department or barangay a detailed profile of their community. It is like a medical chart of a patient which contains the results of different tests showing the health condition of the patient. Thus the situation analysis will show a detailed and comprehensive description of the current conditions of the sector and the barangay will cover areas such as demography or population, economic development, social conditions, physical status including infrastructure, environment and finance among others. In order to get a detailed and comprehensive profile of the sector or barangay, the following data should be collected either from primary data such as surveys and census or secondary data contained in city or national data and information bases. Major Data categories A. B. C. D. E. F. Demography Health Education Social Welfare Housing Protective Services


Manual on Sectoral and Barangay Planning, Programming and Budgeting System    VOLUME V ANNEX B 

G. H. I. J. K. L.

Sports and Recreation Economics Land Use Environmental Management Infrastructure Governance and Institutional

Based on these data, the S/DPT or BPT will then prepare a diagnostic report which will show the current situation in the barangay, such as: For the barangays, the key data are the following: Sub-categories A. Demography Population per Barangay Household population and HH size Migration Rate Migration Pattern Day time and Night time population Number of transients/ renters Number of home owners no longer living in Makati but are voters Number non-resident voters Number of Households with renters B. Health Ten Leading Causes of Death Age Distribution of Deaths Ten Leading Causes of Morbidity Infant Mortality Rates Ten Leading Causes of Infant Deaths Prevalence of Severe Malnutrition Disability Profile o o o o o o o Visual Hearing Speech Orthopedic Deformities Mental Motor

C. Facilities Number of Medical Professionals Number of yellow card holders


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D. Education Participation Rate Retention Rate Drop-Out Rate Completion Rate Number of out of school youth E. Social Welfare Number of surveyed street children, mendicants Elderly Profile of Drug dependents by street F. Housing Inventory of Urban Poor Settlements Number of Urban Poor/ Informal Settlers Number of homeless families/ individuals Number of HH who are not Squatters but are living in depressed area HH without access to electricity, telecom, water supply Profile of housing occupancy o owner occupied o owner occupied but shared with renters o solely rented/ leased to single family occupants o solely rented/ leased to multiple occupants Lease/ rental value o o o whole dwelling unit room bed spacer

Cost of rent (public housing, condo rooms etc) G. Protective Services Public Safety Frequency and Type of Crime Committed Percentage of crime victims by sex Percentage of abusers of minors by sex Number of crime incidence where suspects have been apprehended Average duration of litigation Peace and order Incidence of index and non-index Crimes Incidence of terrorism and kidnapping Fire Incidence Status Number of illegally parked vehicles


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H. Economics Labor Force Employment Rate Unemployment Rate Underemployment rate Family Income & Expenditure Per capita income of family Sources of family income Average family income Average family expenditure Number of HH with Income above poverty threshold Number of HH with income above food threshold Number of residents working abroad Number of establishments – by type, size, ownership I. Land Use Blighted Areas Existing Land Use Map J. Environmental Management Land Quality Percentage of waste disposed Solid waste collection: m3/day or tons/day Disposal method Water Quality Percentage of squatter colonies on riverside K. Infrastructure Water Supply & distribution Percentage of HH with access to potable water Power & electrification Percentage of HH with electricity connection Telephone density (per 100 population) Percentage of HH with computers Sewerage Number of HH with sanitary toilets For the detailed sectoral data requirements, refer to Annex 1 for the sectoral guidelines. Each sector is asked to come up with the following: 1. Key Data Requirements (include primary and secondary data and sources) Among the basic data requirements that the City should have are the physical features and demographic data which serve as fundamental basic of analysis.


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GENERAL PHYSICAL CHARACTERISTICS • • • • • • • • • • • • • • • Location and Neighboring LGUs Land Area by Barangay, Number of Purok/Sitio (including Barangay Proper) Barangay Lay Distance from Barangay Proper to Poblacion Approximate travel time from Barangay Proper to Poblacion Means of access to barangay (state whether (i) all year round, (ii) dry season only, (iii) wet season, (iv) never; and state why for (ii), (iii) and (iv)) Trail footpaths Topography Slope Soil Geology, Geomorphology, Hydrogeology Tidal Regime Water Resources (ground water, surface water) Climate Land Use

DEMOGRAPHIC PROFILE 1. Population Change
• • • • • •

Components of Population Change Fertility Mortality Migration Historical Growth of the Population/Trends Projected Total Population

2. Population Distribution
• • • • •

Total Population/Households By Barangay Urban/Rural Distribution Urbanization Trends Density Projected Total Population/No. of Households By Barangay

3. Population Composition
• • • •

Total Population By Age Group and Sex Age Dependency Ratios Labor Force and Employment Projected Total Population By Age-Group, By Sex

4. Other Population Descriptions
• • • • • •

Marital Status Mother Tongue/Ethnicity Religious Affiliation Literacy Rate Disabled Persons Residence of Population Over 5 Years Period


Manual on Sectoral and Barangay Planning, Programming and Budgeting System    VOLUME V ANNEX B 

5. POPDEV 27 Core Indicators

Population Processes 1. Crude Birth Rate 2. Crude Death Rate 3. Total Fertility Rate 4. Maternal Mortality Rate

Population Outcomes 5. Annual Population Growth Rate 6. Percentage of Population by Five-Year Age Group and by Sex 7. Percentage of Urban Population by Sex

Development Processes 8. Percentage Distribution of Local Government Expenditures by Specific Activities 9. Labor Force Participation Rate by Sex 10. Length of Local Government Roads by surface Type 11. Elementary and Secondary Cohort Survival Rates 12. Doctor-Population Ratio 13. Hospital Bed-Population Ratio 14. Percent of births attended by Health Personnel 15. Contraceptive Prevalence Rate 16. Percentage Distribution of Households by Type of Housing Unit Occupied 17. Percentage Distribution of Households by Main Source of Water Supply 18. Percentage Distribution of Households by Type of Toilet Facilities Being Used 19. Percentage Distribution of Households by Type of Garbage Disposal 20. Crime Rate by Type 21. Percentage Distribution of DSWD Clienteles Served by Type and by Sex

Development Outcomes 22. Unemployment Rate, Total and by Sex 23. Average Family Income 24. Literacy Rate by Sex 25. Percentage of Malnourished 7-10 Years Old Children 26. Percentage of Infants with Low Birth Weight 27. Morbidity Rates by Leading Causes

From the diagnostic report, the S/DPT or BPT will be able to identify problems, issues, constraints, external influences and concerns as well as positive characteristics of the sector or barangay. The diagnostic report should be detailed, specific and supported by verifiable and empirical data in order to provide a clear and definite picture of the sector or barangay. For example in the section on demography, the diagnostic report should include not only a breakdown of population by age, and sex but must also distinguish how many are landowner/ resident/ voter and non-voter; long-term tenant /resident/voter and nonvoter; landowner /non-resident/ voter or non-voter short term or transient/ resident/ voter or non-voter. In the section on economic conditions, the diagnostic report should include income by type of resident. The diagnostic report should differentiate which among the


Manual on Sectoral and Barangay Planning, Programming and Budgeting System    VOLUME V ANNEX B 

establishments in the barangay are owned by barangay residents and which ones are owned by non-residents defined in terms of chain establishments or not. For the sectors, the diagnostic report should contain a section listing down the problems, issues, constraints and concerns of the sector by barangay, while for the barangay it should be by sub-sector. The S/DPT or BPT together with other stakeholders and residents will discuss the Diagnostic Report. The problems, issues, constraints and concerns will then be ranked according to severity, urgency and impact on the sector or barangay. In ranking the problems, the S/DPT or BPT will then give a score of one (1) to five (5) to each problem, with five (5) being the most serious, urgent, or has the highest impact, and one (1) being the least serious or urgent. The S/DPT or BPT will then add the scores for each problem identified. Problem 1: 5+4+3+5+3+4 = 24 Problem 2: 3+4+2+5+4+3 = 21 Problem 3: 4+5+2+1+4+3 = 19 In this example, Problem A is the most serious and urgent problem, while Problem 2 is the next and Problem 3 is the least urgent. To further analyze the current situation, the problems, issues, constraints and concerns, a problem tree or fishbone analysis should be used. These tools illustrate the linkages of problems to one another and define the hierarchy of sub-problems within a single problem. Fishbone analysis is a way of establishing, identifying, analyzing and presenting possible causes connected with a problem or condition. Fishbone analysis is focused on presenting the context and content of the problem. It creates possibilities for potential solutions to the problem. Choose a particular problem to be analyzed. Write the problem on the head of the fish or the main bone. Identify the main factors causing the problem. Draw branch arrows to the main arrow. Write the major possible causes previously identified on each branch. Identify the detailed factors of each major cause. Draw smaller bones or arrows to the branch arrows. Write each detailed factor on each small twig or arrow. Continue connecting more arrows to the twig arrows. If arrows are connected to twig arrows, it means that the causes of the problem have underlying causes. Check whether all the factors that may be causing the problem have been completely identified and reflected in the diagram. Check if the relationship of causes to the core and secondary causes is properly illustrated. Example: Problem – low achievement level of Makati elementary students in math, science and english. A problem tree or fishbone analysis will show that there are many interrelated problems which contribute to this such as lack of qualified math, science and English teachers because of low pay and competition from other employment opportunities which provide higher pay. The low pay is due to the salary Standardization Law. Another sub-problem is the poor study habits of students due to lack of supervision of parents who have to work because of the difficult economic situation. The problem tree or fishbone analysis should be presented for each problem to help evaluate the strategies, programs and projects which will be formulated later.


Manual on Sectoral and Barangay Planning, Programming and Budgeting System    VOLUME V ANNEX B 

Like the fishbone analysis, the problem tree analysis illustrates how problems are linked and interrelated in a situation. The illustration defines the causes and effects of identified core problems and other corollary problems which may result from these core problems. As in fishbone analysis, the S/DPT or BPT will identify a core problem. Then the team establishes the cause and effect relationship among the problems identified. Draw a tree trunk and write the core problem. Identify the main causes of the problem and diagram these as primary roots. Secondary roots are drawn to illustrate secondary causes emanating from the primary causes and so on. The effects of the main problem are then drawn as main branches and labeled according to the main effects or consequences of the main problem. Secondary effects derived from the primary effects and so on. Roots with the most secondary and tertiary connections are the primary causes while those with the most linkages of branches and twigs are the biggest impact of the main problem.

After completing the Diagnostic Report and upon completion of the problem identification, problem ranking and fishbone/ problem tree analysis, the S/DPT or BPT


Manual on Sectoral and Barangay Planning, Programming and Budgeting System    VOLUME V ANNEX B 

would now have a comprehensive and clear grasp of the situation prevailing in their sector or barangay. The S/DPT or BPT should now proceed to conducting a SWOT Analysis using the findings contained in the Diagnostic Report. A SWOT Analysis is a frequently used technique in situation analysis. It seeks to organize information about the sector or barangay along four (4) categories that are likely to have the greatest impact on the future of the sector or barangay. It is also a way to analyze the sector or barangay’s position in relation to its internal and external environment. The SWOT Analysis will be carried out after the completion of the Diagnostic Report which provides a quantifiable analysis of the sector or barangay’s strengths, weaknesses, opportunities and threats. The indicators may be compared against city, metropolitan or national standards in order to compare the sector or barangay’s situation against other cities in the country/ barangays in Makati or elsewhere. The purpose of SWOT is to bring out critical issues that exist in the minds of the sectoral and barangay officials, the S/DPT, the BPT, and other stakeholders. This process will help the S/DPT or BPT focus their attention on areas which require in-depth analysis. The following are questions which may be used as guide in conducting a SWOT Analysis: Strengths What are the advantages of the sector or barangay? What does the sector or barangay do well? What are the positive characteristics of the barangay in terms of economic, social, physical, environment, finance and governance factors? What are the internal problems being faced by the sector or barangay? What is not being done or done unsatisfactorily? What are the internal issues, constraints and concerns? What are the policies, regulatory and institutional limitations to improving delivery of service or addressing problems? What are the trends happening in Makati, the metropolitan area, the country, in Asia and the rest of the world which presents opportunities for the sector or barangay? These can include development trends, changes in policy at the national level, developments in technology, trends in doing things at the global level such as outsourcing of jobs or problems in other countries which the sector or barangay can explore. What external obstacles does the sector or barangay face? This includes factors which the sector or barangay has no control over such as national government laws such as the Salary Standardization Law, economic slowdown, devaluation among others.





Manual on Sectoral and Barangay Planning, Programming and Budgeting System    VOLUME V ANNEX B 

Strength Economic Social Physical Environment Governance and Institutional





Vision Formulation: Where would we like to be?

Upon completion of the SWOT Analysis, the S/DPT or BPT can now proceed to answering the next question. Where would we like to be? In answering the question: “Where would we like to be?”, the S/DPT or BPT will have to formulate a draft Vision for the sector or barangay. The S/DPT or BPT will take the results of the SWOT analysis, the Diagnostic Report, Problem Identification/Ranking, and Fishbone/Problem Tree Analysis and use these in formulating a draft Sector or Barangay Vision. In formulating the draft Vision, the S/DPT or BPT Team should frame the question within a specific timeframe such as “Where would we want to be in five years?’. In order to establish a reference to determine when the vision will be achieved and whether it will be achieved within that timeframe. The Vision should be a shared aspiration or goal of the whole sector or barangay and not just the S/DPT or BPT. Thus, it is important that consultations with as wide a cross-section of the sector or barangay as possible should be undertaken. The Vision should also be measurable and verifiable so at the end of each year in the five- year timeline, the sector or barangay can measure its achievement vis-à-vis the Vision. After five (5) years, the achievement of the vision should be quantifiable. All strategies, programs and projects should be aligned to the vision and the achievement of such. Features of the Vision include the following: Graphic – It should evoke a vivid image sector officials or residents of the barangay would like to see their sector or barangay transformed into. Example: A Tree-lined, Garden Barangay. Specific – It should be descriptive and refer specifically to the sector or barangay. Example: The Heritage Center of the City. The Entertainment Zone. The Automotive Village. Time-bound – The Vision should include a definite time frame for achieving the Vision. Example: Vision 2020. Simple – the Vision should not have abstract and complicated words that are difficult to remember or understand. All residents of whatever income class or educational attainment should understand the Vision and relate to it.


Manual on Sectoral and Barangay Planning, Programming and Budgeting System    VOLUME V ANNEX B 

Shared – The Vision should be based on common values, aspirations and dreams of as great a cross-section of the sector or barangay and not just the S/DPT or BPT or a few but influential residents. In order for all stakeholders to have a common understanding of how to make their vision a reality, it is necessary that the Vision Statement be translated into a Mission Statement with quantitative performance targets or indicators that embody the kind of development being envisioned. A sample Mission Statement could include the following quantitative performance targets: Reduce flooding by fifty percent (50%) Reduce traffic by thirty percent (30%) Totally eradicate drug addiction among the youth Minimize the incidence of crime by eighty percent (80%) Reduce unemployment by fifty percent (50%) In quantifying the mission, the sector or barangay should choose indicators which are most relevant to the vision it has formulated. If the sector or barangay seeks to be a Heritage Barangay and a Tourist Destination it should include in the mission indicators such as increase number of tourists, facilities and attractions. Performance targets can also be presented in the form of maps showing the physical implications of the Vision formulated. Maps are visual images of describing future scenarios and attributes of the barangay. The vision formulated as a result of the sectoral or barangay consultations will now serve as the focus of all efforts of the sector or barangay. 5.4 Strategy Formulation: What issues do we need to address to get there?

The S/DPT or BPT can now proceed to the next phase of the process and answer the question: “What issues do we need to address to get there?” In the preceding phases, the city’s/ barangay’s current conditions were identified and the vision for its future determined. In this phase, the S/DPT or BPT will identify the challenges in achieving the vision. Key issues will now be further assessed and prioritized according to urgency and available resources. Once the priority list is developed, the S/DPT or BPT should now identify the corresponding options available to bridge the gap between the current situation and the achievement of the vision. The purpose of this phase is to build on information generated from previous phases to define and prioritize sectoral or barangay development issues and design appropriate, relevant and responsive strategies and actions to address them. Based on the SWOT Analysis, possible strategies should be identified and formulated. Strategies should be formulated according to the following:


Manual on Sectoral and Barangay Planning, Programming and Budgeting System    VOLUME V ANNEX B 

Strengths-Opportunities Strategies Strategies that maximize strengths of the sector or barangay while utilizing opportunities around it. Example: For sectors Strength: Opportunity: Strategy: Makati is the country’s financial district. There is an increase in number of working population from different areas. Develop a housing program for the housing population.

For barangays Strength: Opportunity: Strategy: The barangay has a number of heritage sites. The City has been declared a Tourist Center. Develop heritage sites to promote tourist-oriented activities in the barangay.

Weakness-Opportunities Strategies Strategies which use opportunities to address weaknesses. Example: For sectors Weakness: Opportunity: Strategy: residents For barangays Weakness: Opportunity: Strategy: The barangay has a lot of dilapidated and deteriorating residential structures. There is a high demand for rental housing. Promote the improvement of deteriorating structures in the barangay by encouraging the conversion into rental housing. There is a high unemployment rate within Makati. There is an increasing number of ICT jobs in the City. Develop a workforce development program focusing on ICT for city

Strengths-Threats Strategies Strategies which use the barangay’s strengths toward the threats. Example: For sectors Strength: Threat: Strategy: Makati has the best social development program. The proliferation of informal settlers remains unresolved. Develop an affordable housing program for the informal settlers.


Manual on Sectoral and Barangay Planning, Programming and Budgeting System    VOLUME V ANNEX B 

For barangays Strength: Threat: Strategy: The barangay has sizable open land. New commercial development in the adjacent city has drawn many residents to shop there. Encourage the development of commercial space in available land.

Weaknesses-Threats Strategies Strategies which address weaknesses to minimize impact of threats. Example: For the sectors Weakness: Threat: Strategy: The cost of office space in Makati is relatively high. Commercial and business centers are emerging in nearby cities Provision of business retention incentives to firms currently located in the city; and/or develop satellite business centers which have lesser office space cost.

For barangays Weakness: Threat: Strategy: The barangay has many informal settlers. Poverty in the nearby provinces is causing increased migration in the barangay where many of their relatives live. Relocate, decrease or control the number of informal settlers in the barangay.

The strategies formulated will form the long list of sectoral or barangay strategies which will then be evaluated as to which will be undertaken. The Sector should formulate a set of criteria relevant to the sector or barangay which it will use in evaluating the strategies identified. Weights should be given each criterion to determine the relative importance of each in relation to the set. Examples of criteria are: 5.4.1 5.4.2 5.4.3 5.4.4 5.4.5 5.4.6 54.7 Financial viability Social and political stability Priority need or ranking in priority problem Connectivity to other strategies No. of beneficiaries and social impact Environmental implication Impact on barangay/city productivity

To validate the prioritized strategies formulated using the SWOT Analysis, the S/DPT or BPT will now use the results of the problem identification and prioritization; and the fishbone/ problem tree analysis done in the first phase. Using the priority problems defined, the S/DPT or BPT should then formulate strategies to address these priority issues and if needed, formulate related, corollary or sub-strategies to address the secondary causes of the main problem. A parallel fishbone or tree could be drawn to illustrate corresponding strategies to the priority problems. The results of the two strategy formulation exercises can be compared and a final list of strategies chosen by using a set of criteria based on urgency, degree of impact in


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terms of its effect on interrelated problems, magnitude of contribution to the achievement of the vision among others. The final list of strategies should be presented and discussed with the sector officials, Barangay Development Council and as wide a cross section of the sector or barangay as possible to get the community agreement and support to the strategies. 5.5 Program and Project Identification: What actions must we take to get there?

After evaluating the strategies and prioritizing them, programs and projects should then be identified for implementing each strategy. Programs and projects need not be limited to only physical projects, studies or activities. It should also include necessary policy recommendations, legislative action, regulatory reform and/or institutional changes necessary to carry out the strategy effectively. The programs and projects should not be limited to what the sector or barangay should be doing but also what the city government, national agencies and the private sector can do to carry out the strategy. Programs which require cooperation with other sectors or adjacent barangays, barangay clusters or several barangay clusters should also be identified if such programs are necessary to address sectoral or barangay problems and achieve the sectoral or barangay vision. These should be in the following format. Strategy 1 Program 1 Project 1 Project 2 Project 3 Program 2 Project 1 Project 2 Strategy 2 Program 1 Project 1 Project 2 Example: Using the previous example of the problem of low achievement level of Makati elementary students in math, science and English, we can formulate this into a strategy: Strategy: Increase achievement levels of Makati elementary students in Math, Science and English by undertaking an aggressive recruitment program. Program 1: Enter into a collaboration/partnership with the private sector. Organize an Education Development Council which involves private educational institutions, NGOs and business corporations primarily to provide technical and financial support to raising the achievement level. Promote volunteers from Makati professionals to donate a few hours of their time to teach math, science, and english in Makati’s public schools.

Project 1:

Project 2:


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Project 3:

Encourage new graduates in math, sciences, and english to devote a year after graduation to teaching in Makati schools. This will be supported financially by the Education Development Council and the City Government.







S Study or Survey

Packaged Program Policy/Regulatory Reform Others

Development Project Institutional Building









Million Pesos Million Pesos Million Pesos Million Pesos

Annual Requirement Expenditure for Operation & Maintenance:

lion Pesos


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The first step in programming is the forecasting of revenues. It will give the sector officials or Barangay Development Council and the S/DPT and BPT a basis for determining which of the priority programs and projects can be implemented given the resources available. The revenue forecasts consist of the expected revenues given normal conditions and additional revenues due to discretionary changes and administrative measures. Discretionary changes may consist of increasing the rates or bases of the taxes, fees or charges and other changes in the tax structure that require legislative actions. Administrative measures are those that are implemented even without legislative action such as increased tax collection efficiency, improvement in assessment, improvement in fiscal information base and improvement in collection systems and procedures. After revenues are forecasted, the normal operating expenditures of the sector or barangay including on-going or continuing projects are determined. Based on the forecasted revenues and expenditures, the available sector budget or barangay revenues for new priority programs and projects is determined or estimated. This is then used to identify which programs and projects – classified as capital expenditures, maintenance and operating expenses, studies, policy/ regulatory and institutional reform and others not otherwise classified. The S/DPT or BPT proceeds to distribute the revenues available among the priority projects which will be implemented or undertaken in the first year. Earlier identified priority projects which should be or can be implemented and funded by other levels of government such as city departments, national agencies or the private sector should be classified as such. Priority projects which cannot be funded by any source can be considered for loan financing or other forms of funding including joint venture or BOT. Priority projects which cannot be funded in whole or in part in the first year is programmed for succeeding years based on their level of priority, duration of implementation and impact on the achievement of the Vision. This list of program of implementation of priority programs and projects including implementing units and funding sources should be transformed into a Five-Year Capital Investment Folio or Five-Year Investment Plan which will be the basis of the Barangay Annual Investment Plan. Programs and projects can be rolled forward or backward depending on the availability of resources and the implementation capability of the barangays as well as other implementing units.



The Local Government Budget is the LGU’s financial plan and instrument to implement the local development plan and local development investment program. It embodies the estimated income certified as reasonably collectible and projected appropriations covering the proposed expenditures for the ensuing fiscal year.


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The LGU Budget embodies the estimated income certified as reasonably collectible and projected appropriations covering the proposed expenditures for the ensuing fiscal year, otherwise known as the annual financial plan of the LGU. Such estimated income and proposed expenditures are consolidated in a budget document which is the instrument used by the local chief executive to present a comprehensive financial plan to the Sanggunian concerned. The annual budget of the LGU becomes operative and executory after the sanggunian has given its legislative authorization by enacting an appropriations ordinance. Without such appropriation ordinance, no money shall be paid out of the local treasury. 7.1 Mandate. The Local Government Code of 1991 provides the mandate of LGUs on budgeting. As a body politic and corporate entity, “every LGU shall exercise the powers expressly granted, those necessarily implied therefrom, as well as powers necessary, appropriate or incidental for its efficient and effective governance, and those which are essential for the promotion of the general welfare.” (Section 16) This means that LGUs shall prepare an annual budget to carry out their mandated functions and duties which also include “efficient and effective provision of the basic services and facilities.” (Section 17) Fundamental Budgeting Principles. The local government budget becomes operative and executory once given a legislative authorization by the Sanggunian concerned. The authority to spend is provided when the local government budget is in compliance with the following fundamental principles stipulated in the Local Government Code of 1991, Section 305 as follows: 1. No money shall be paid out of the local treasury except in pursuance of an appropriations ordinance or law; 2. Local government funds and monies shall be spent solely for public purposes; 3. Local revenue is generated only from sources expressly authorized by law or ordinance, and collection thereof shall at all times be acknowledged properly; 4. All monies officially received by a local government officer in any capacity or in any occasion shall be accounted for as local funds, unless otherwise provided by law; 5. Trust funds in the local treasury shall not be paid out except in fulfillment of the purpose for which the trust was created or the funds received; 6. Every officer of the LGU whose duties permit or require the possession or custody of local funds shall be properly bonded, and such officer shall be accountable and responsible for said funds and for the safekeeping thereof in conformity with the provisions of the law; 7. Local government shall formulate sound financial plans, and the local budgets shall be based on functions, activities, and projects, in terms of expected results; 8. 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 us e of fiscal and physical resources; 9. Local budget shall operationalize approved local development plans;


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10. Local government units shall ensure that their respective budgets incorporate the requirement of their component units and provide for equitable allocation of resources among these component units; 11. National planning shall be based on local planning to ensure that the needs and aspirations of the people are articulated by the local government unit in their respective local development plans are considered in the formulation of budgets of national line agencies or offices; 12. Fiscal responsibility shall be shared by all those exercising authority over the financial affairs, transactions, and operations of the local government units; and 13. The local government unit shall endeavor to have a balanced budget in end fiscal year of operation. Budgetary Requirements. Section 324 also states that the budgets of LGUs should comply with the following requirements: 14. The aggregate amount appropriated not exceeding the estimated income certified collectible by the local treasurer; 15. Full provisions are made for all statutory and contractual obligations of the local government; 16. Aids to legally constituted barangays are provided in amounts not exceeding P1,00.00 per barangay; and 17. Two (2) percent of the estimated revenue from regular sources is set-up as a yearly unappropriated reserve to cover unforeseen expenditures arising from the occurrence if natural calamities or financial dislocation on account thereof. In addition to the fundamental principles and budgetary requirements, the Code also enumerates general limitations to be complied with by the provincial, city and municipal governments in the use of their funds as follows: 1. The total appropriations, whether annual or supplemental, for personal services of a local government unit for one (1) fiscal year shall not exceed forty-five percent (45%) in the case of first to third class provinces, cities, and municipalities, and fifty-five (55%) in the case of fourth class or lower, of the total annual income from regular sources realized in the next preceding fiscal year. The appropriations for salaries, wages, representation and transportation allowances of officials and employees of the public utilities and economic enterprises owned, operated and maintained by the LGU concerned shall not be included in the annual budget or in the computation of the maximum amount for personal services. The appropriations for the personal services of such economic enterprises shall be charged to their respective budgets; 2. No official or employee shall be entitled to a salary rate higher than the maximum fixed for his position or other positions of

Budget Preparation

Budget Authorization

Budget Review

Budget Execution

Budget Accountability Figure 3 Local Budget Process 23

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equivalent rank by applicable laws or rules and regulations issued thereunder; 3. No local fund shall be appropriated to increase or adjust salaries or wages of officials and employees of the national government, except as may be expressly authorized by law; 4. In cases of abolition of positions and the creation of new ones resulting from the abolition or creation shall be made in accordance with pertinent provisions of this code and the civil service law, rules and regulations; 5. Positions in the official plantilla for career position which are occupied by incumbents holding permanent appointments shall be covered by adequate appropriations; 6. No changes in designation or nomenclature of positions resulting in a promotion or demotion in rank or increase or decrease in compensation shall be allowed, except when the position is actually vacant, and the filling of such positions shall be strictly made in accordance with the civil service law rules, and regulations; 7. The creation of new positions and salary increases of adjustments shall in no case be made retroactive; and 8. The annual appropriations for discretionary purposes of the local chief executive shall not exceed two percent (2%) of the actual receipts derived from basic real property tax in the next preceding calendar year. Discretionary funds shall be disbursed only for public purposes to be supported by appropriate vouchers and subject to such guidelines as may be prescribed by law. No amount shall be appropriated for the same purpose except as authorized under this Section. 7.2 Process. As illustrated in Figure 3, the Local Budget Process has five stages or phases as follows: 1. Budget Preparation This is the first phase of the local government budget process which involves three stages, namely: 1) budget planning, including some estimation, and programming of expenditures to undertake priority functions, programs, projects and activities; 2) cost estimation and 3) executive review. The outcome of the process is the Executive Budget consisting of accomplished budget preparation forms and other budget documents, which is submitted by the Local Chief executive to the Sanggunian for authorization. Budget planning includes the following: 1) setting of budget policies, objectives, thrust and priorities; 2) determination of fiscal targets on income; 3) determination of sectoral expenditure ceiling and the aggregate level of expenditures; and 4) formulation of programs. 2. Budget Authorization This the second phase in the local government budget process which starts from the time the Local Chief Executive (LCE) submits the budget to the Sanggunian for


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legislative deliberation and ends with the enactment of the corresponding appropriation ordinance (the legislative instrument authorizing the budget). 3. Budget Review This is the third phase of the budget process. The appropriation ordinance enacted by the Sanggunian authorizing the proposed program of income and expenditures or the budget submitted by the Local Chief Executive has to pass through a process of review by the reviewing officer/s so designated by law. It determines whether or not the annual or supplemental budgets are operative and wholly executory or inoperative in part or in its entirety. 4. Budget Execution This is the fourth phase in the local budget process which involves the release of funds appropriated for the performance/prosecution of functions/projects/activities. The activities during this phase of local budgeting take place before the beginning of the budget year. Budget Execution starts with the preparation of and preparation of the Work and Financial Plans (WFPs) by the Department Heads and submitted to the Local Chief Executive through the Local Budget Officer for evaluation. When the Local Chief Executive approves the WFPs, the Local Budget Officer prepares the Advice of Allotment (AA) based on the approved WFPs and submittal of the same to the Local Chief Executive. With the approval of the AAs from the Local Chief Executive, the Local Budget Officer transmits back the AAs to concerned Department/Office Heads. 5. Budget Accountability The last phase of the local budget process is budget accountability, which refers to the accounting for the performance of the LGU in terms of income/revenue generation and resource utilization. This process encompasses the recording and reporting of estimated and actual income and expenditures as well as the evaluation of fiscal operation vis-à-vis planned targets.

8.0 SECTORAL PLANNING AND INVESTMENT PROGRAMMING 8.1 Concepts. The five development sectors (social, economic, physical, environmental and institutional sectors) are abstract concepts which are nevertheless useful help to understanding the even more abstract concept “development”. Each of the sectors may be seen as an aspect or dimension of development. Each sector has a specific function to contribute to development; the absence of one or a few of these sectors makes holistic development not possible. In this undertaking, the institutional sector is split into administrative sector and financing sector. 8.2 Mandate. It is the policy of the State to encourage non-governmental, communitybased, or sectoral organizations to participate in activities that promote the welfare of the nation (Sec 23 of 1987 Constitution). Furthermore, the Local Government Code encourages LGUs to link up with the private sector, non-government organizations (NGOs), and people’s organizations (POs) as partners in pursuing local development. Such linkage may come in the form of joint venture and other cooperative arrangements as well as financial and other assistance (Section 35 and 36).


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The Code explicitly mandates NGOs and PO participation in the participation in the Local Development Council, which assists the Sangguniang Panlungsod in setting the direction of economic and social development, in coordinating development efforts within its territorial jurisdiction, and its initiating a comprehensive multi-sectoral comprehensive development plan to be approved by the Sanggunian (Section 106, LGC of 1991). This mandate only assures civil society participation at the development planning level but not necessarily extending to the vast arena of implementation particularly in local budgeting process. Although the NGOs and POs are not identified as members of the Local Finance Committee, the role and responsibilities of civil society organizations in terms being active partners in local development may be extended through informal structures and venues such as organizing ad-hoc or steering committees and holding deliberations, dialogues or consultations with concerned agencies and LGU officials. 8.3 Process. The Sectoral groups shall present the database according to the five (5) identified sectors, namely: Social, Economic, Environmental Management, Physical/ Infrastructure, Institutional Development and Management (Administrative and Financial). Venues for intra and inter-sectoral consultation and planning workshops shall be provided to the different interest groups to create an opportunity to air issues and concerns that directly affect their sectors as well as identify their implications and possible solutions. Interconnection of among and between issues and concerns may be presented using different models (e.g., population and development analytical framework, streams analytical model, problem tree model, etc.) and matrices (problemsolution finding matrix, technical findings, issues-opportunities-implication-policy option matrix, etc.) Refer to the tools to be employed by the sectoral groups in Annex 1. 9.0 INSTITUTIONALIZING PLANNING AND INVESTMENT PROGRAMMING

9.1 Concept and Objective. The term “institutionalize” means to incorporate into a structured and often highly formalized system. Institutionalizing development planning and investment programming means to incorporate structures and formalized the processes, local planning structures, local skilled individuals and other available local human resources who may contribute to the planning and implementation of the Medium-Term Development Plan, Medium-Term Investment Program, Annual Investment Program and City Budget. Organizing the Institutions for Planning, Investment Programming and Budgeting aims to:
• • • •

Gain commitment and involvement of executive and legislative bodies and well as other stakeholders Ensure availability of resources in terms of human resources/personnel and financial resources Obtain valuable inputs and creative ideas from people in the community to address development issues and concerns Identify similar and different concerns in the community and open venues for unity and conflict resolution among the different interest groups or stakeholders in the concerned LGU; and Gain support and bring about a sense of community ownership of the MTDP and AIP, which will help to ensure the realization of the vision, goals and objectives as well successful implementation of the programs and projects.


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9.2 Mandate. Title 3, Section 76 of the Local Government Code (RA 7160) stipulates that every LGU shall design and implement its own organizational structure and staffing pattern taking into consideration its service requirements and financial capability, subject to the minimum standards and guidelines prescribed by the Civil Service Commission. The design and structure of the Local Planning and Development Office shall be designed in accordance with the powers, functions and duties of the appointive officials common to all municipalities, cities and provinces as stipulated in Title 5, Article 6, Section 476, of RA 7160. The organization and functions of the Local Development Council (LDC) are described in the Title 6, Sections 106-115 of RA 7160. In particular, Section 112 of RA 7160 provides that the LDCs may form a sectoral or functional committees to assist them in the performance of their functions. As enumerated in Rule XXIII, Article 182 of the Implementing Rules and Regulations of RA 7160, the duties and functions of the sectoral committees are as follows:
• •

Assess Available Resources

Organize the Local Planning Team

• • • • •

Provide the LDC with data and information essential to the formulation of plans, programs and activities; Define sectoral or functional objectives, set targets, and identify programs, projects and activities for the particular sector or function; Collate and analyze information and statistics and conduct related studies; Conduct public hearings on vital issues affecting the sector or function; Coordinate planning, programming, and implementation of programs, projects and activities within each sector; Monitor and evaluate programs and projects; and Perform such other functions as may be assigned by the LDC.

Create the Stakeholders Group

Mobilize Technical Working Groups

Identify Partners and Challengers

9.3 Process. As illustrated in Figure 4, the process in getting organized for planning, investment programming and budgeting at the local level are as follows: 9.3.1 Assessing Available Resources

Select Planning Consultant(s), if needed

This step includes the: 1. Conduct performance evaluation of concerned personnel and institutional structures, particularly the City’s Urban Development Department 2. Evaluate office capability in terms of facilities and space for planning 3. Review available financial resources allocated for planning 4. Provide necessary recommendation for consideration in the local budget. If local resources are limited, augment

Establish Terms of Reference

Figure 4 Getting Organized


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through tapping external sources to fund planning undertakings The evaluation of the City’s human resources and local planning organization in intended to provide recommendations for improving and institutionalizing appropriate organizational changes in the City Government Organization including the planning arms to become responsive to its planning needs. The Local Planning Team is comprised of the Local Chief Executive as Head, Local Sanggunian, the Local Development Council, Sectoral/Functional Committees, Local Planning and Development Office, Department Heads, Stakeholders Group and Technical Working Groups for Local Planning. 9.3.2 Organizing the Local Planning Team

The steps are: 1. Organize/strengthen the Local Planning and Development Office (CPDO or MPDO) 2. For new local administration, reconstitute the Local Development Council (LDC) and Local Sanggunian Committees, if necessary. This may require accreditation of NGOs and POs by the Local Sanggunian and/or recruitment of technically competent legal cum environmental planning experts in the Local Sanggunian. 3. Mobilize the Local Development Council (CDC/MDC) to undertake preparation and formulation of CLUP Issuance of Executive Order creating the Local Planning Team Refer to Figure 5 for the Local Planning Structure. 9.3.3 Creating the Stakeholders Group

In creating the Stakeholders Group, it is essential to employ a holistic approach or procedure to gain a better understanding of the system, and to address the impact of changes to that system, by means of identifying key stakeholders and assessing their respective interests in the system. Patterns of common ground and possible conflicts among stakeholders are identified and used as a basis for development management options. Stakeholders can be any individual or groups of people, organized or unorganized, who share an interest or stake in a particular issue or system. A dichotomy between stakeholders is those who affect or determine decisions and those who can be affected, either positively or negatively, by decisions, actions or consequences of the land use plan.


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Figure 5. Local Planning Structure

. Political

Local Sanggunian

Local Chief Executive (Mayor)

Local Development Council


Local Special Bodies Executive Committee

Other Departments

Urban Development Department

Technical Working Group(s)
Standing Committees Department Representatives Sectoral Development Committee

Social Sector Economic Sector Environmental Sector

Physical/Infrastructure Sector

Administrative Sector Finance Sector


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9.3.4 Organizing Technical Working Groups This entails the following steps: 1. Organize a small body of ten (10) to twenty (20) stakeholder representatives per sector who have a particular interest or expertise in a specific issue or problem. They may come from different professional disciplines, city/municipal departments, and sectors. 2. Direct the TWGs to play lead roles in research, issue analysis, participatory and technical assessment. 3. Identify TWG Coordinators who shall coordinate inter-sectoral technical analysis of issues, needs, opportunities, among other concerns 9.3.5 Identifying the Partners and Challengers

The City should identify its partners (supportive allies who would pave the way for the efficient and effective formulation of development goals, objectives and targets as well as supporters in implementing and monitoring the MTDP and AIP and executing the City Budget. They provide support in legislative and budget advocacy as well as community information and education campaign. The planning, investment programming and budgeting arena is not composed of all “yes” participants and stakeholders. Even in the LGU side, challengers within the local government system whose interests do not conform with the local administration are inevitable. They may come as a political opposition block which may pose threat in the coming up with a consensus or challenging interest groups. 9.3.6 Selecting Consultants

When the LGU is assessed to have a limited technical capability to prepare/update its MTDP, MTIP or AIP, an individual consultant or private consulting firms may be hired per general guidelines provided by the Department of Interior and Local Government (DILG) and existing laws on procurement of professional services. 9.3.7 Establishing the Terms of Reference

This mainly refers to the process of determining the scope of development planning, investing programming and budgeting and reviewing terms of reference periodically to assure that these are being observed and are up-to-date. These factors will ultimately determine how comprehensive or focused the planning, investment programming and budgeting efforts will be. The local planning actors may decide that resources for development planning are not adequate to effect a simultaneous review of the full range of development issues facing the local community. In this case, the resulting development planning approach would be designed to focus on priority issues identified while simultaneously considering the impact of activities in other areas upon it. 10.0 CONSTITUTIONAL AND LEGAL BASES

Each LGU has the power to create its own sources of revenue and to levy taxes, fees, and charges, subject to such guidelines and limitations as the Congress may provide, consistent with the basic policy of local autonomy (Section 5, Article X, l987 Constitution).


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Each LGU shall exercise its power to create its own sources of revenue and levy taxes, fees, and charges subject to the provisions herein and consistent with the basic policy of local autonomy. (Section 129, Local Government Code of 1991) 10.1 Economics of Public Finance Considerations
On the Distribution of the Burden

“Ability-to-Pay” Principle “Benefits Received” Principle
On Smith’s Principles of Taxation/Canons of Taxation

Equity Certainty Convenience Economy Adequacy 10.2 The Dual Nature of Local Government Units Political and Corporate Nature of Local Government Units. – Every local government unit created or recognized under this Code is a body politic and corporate endowed with powers to be exercised by it in conformity with law. As such, it shall exercise powers as a political subdivision of the National government and as a corporate entity representing the inhabitants of its territory. (Section 25, Local Government Code of 1991) 10.3 Administrative Concerns
Administrative concerns encompass the following:

The organization for local revenue administration Systems and procedures Costs 10.4 Sources of Barangay Revenues

A. TAX REVENUE Imposition Rates On stores or retailers with fixed business At a rate not exceeding one percent (1%) of such establishments with gross sales or receipts of the gross sales or receipts. preceding calendar year of Fifty thousand pesos (P50,000.00) or less, in the case of cities, and Thirty thousand pesos (P30,000.00) or less, in the case of municipalities. (Sec. 152(a), RA 7160, Local Government Code of 1991) Surcharge in unpaid taxes.(Sec. 168, RA 17160) B. SHARES FROM LOCAL TAXES Real Property Tax (Sec. 271, RA 7160) Barangays within component municipalities Not exceeding 25%

Shares 25% for the barangay where the property is located


Manual on Sectoral and Barangay Planning, Programming and Budgeting System    VOLUME V ANNEX B  Barangays in cities and municipalities within MMA. 30% to be distributed among the component barangays as follows: 50% to the barangay where the property is located and 50% equally to all component barangay. Community Tax (Sec. 164(C), RA 7160) One-half (1/2) of collections collected by the barangay treasurer Tax on Sand, Gravel and Other Quarry resources 40% for the barangay where the sand, gravel, and (Sec. 138, RA 7160) other quarry resources is extracted. C. SHARES FROM NATIONAL TAXES 20% of the 40% share of all LGUs based on the Internal Revenue Taxes collection for the third preceding fiscal year, • Income tax distributed as follows: 60% based on population • Excise tax and donor’s tax 40% equal sharing. P80,000 for barangays with • Value-added tax population with at least 100. • Other percentage taxes • Taxes imposed by special laws, e.g., travel tax (Sec. 285, RA 7160) Share from the development of utilization of the 35% of the 40% share of the LGUs (allocated to the national wealth (Sec. 292, RA 7160) barangay where the natural resource is located.) D. Service Fees or Charges Fees or charges for services rendered in connection with the regulation of use of barangayowned properties or service facilities, such as palay, copra, or tobacco driers. (Sec. 152(b), RA 7160) E. Barangay Clearance Barangay clearance Sec. 152(c), RA 7160 Reasonable amount to cover cost of “regulation or the use of barangay-owned properties or service facilities.”

Reasonable amount, but must not be more than 50% of mayors permit fee.

F. Other Fees and Charges On commercial breeding of fighting cocks (annual sale of more than five (5) fighting cock of registered Cost of regulation breeder) On cockfights and cockpits On places of recreation which charge admission fees Not less than the rates specified in ART 240(d)(4) On billboards, signboards, neon signs and outdoor of the IRR advertisements (Sec. 152(d), RA 7160) G. Fees and Service or User Charges Under the Cost of regulation Common Revenue-Raising Powers of LGUs Reasonable rates to recover cost of providing the Secretary’s Fees service. Solid Waste Disposal Health Services Physical Examination Cemetery Fees Other Services Toll fees or charges for the use of any public road, Reasonable rates to recover cost and expenses for pier or wharf, waterway, bridge, ferry or maintaining the facility. telecommunication system funded and constructed by the barangay Reasonable rates of returns. Operation of Economic Enterprises • Barangay Markets • Multi-purpose Halls • Barangay Waterworks


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• •

Not less than P1,000 per barangay

10.5 Other Sources

Solicitations of monies or properties from private agencies and individuals for specific purposes, to accrue to the barangay as trust fund Grants-in-Aids, subsidies, contributions, and revenues made available to the barangays from national, provincials, city or municipal funds

10.6 Proceeds from fund raising activities Suggested Contents of a Barangay Revenue Code Chapter I Chapter II Chapter III Chapter IV Chapter V - General Provisions - Tax on Business - Service Fees and Charges - Economic Enterprises - General Administrative Provisions

10.7 Steps in the Enactment of a Revenue Code 1. Filing of Draft Code 2. Publication for three (3) consecutive days in a newspaper of local circulation/posting simultaneously in four (4) conspicuous places. Within ten (10) days from date of filing [Art. 276(b)(1)] 3. Sending of written notices of proposed ordinance, including copy thereof, to interested parties in the barangay [Art 276(b)(2)] 4. Public Hearings not earlier than ten (10) days from sending out of notices/last day of publication/last day of posting, whichever is later [Art. 276(b)(3)] 5. Sanggunian Committee Report, Sanggunian deliberations, approval [Internal Rules] 6. Approval by majority of all sanggunian barangay members, to be signed by the punong barangay [ Section 54(c)] 7. Submission of approved Revenue Code top sangguniang panlungsod/bayan within ten (10) days after approval [Section 57 8. Effectivity. Ten (10) days after and posting, unless otherwise stated in the ordinance. In case effectivity falls on any other date other than the beginning of the quarter, the same shall be considered as effective at the beginning of the next quarter and taxes, fees, and charges due shall begin to accrue therefrom [Section 59/.Art. 276] 9. Copies furnished treasurer for public dissemination [Section 189] 10. For ordinances with penal sanctions: Posting for a minimum of three (3) consecutive weeks and publication in a newspaper of general circulation, where available; transmittal of official copies to the Chief Executive Officer of the Official Gazette [Section 511]


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[Sections refer to Local Government Code of 1991; Articles to the Implementing Rules and Regulations of R.A. 7160. Publication requirements are optional for barangays. Public hearings prior to enactment are, however, mandatory.] 10.8 Planning and Budgeting Linkage One of the local budgeting principles specified in the Code is that ‘local government budget shall operationalize the approved local development plans’. This emphasizes the need and the importance of linking planning with budgeting. The plan specifies the programs, projects and activities, which shall be supported by the funds being budgeted for the period. Without the plan or priority programs and projects, there is no basis for the programming of funds. There is no basis for budgeting. The plan sets the priority areas of services and specifies the target output and accomplishments. The budget, on the other hand, programs or allocate the resources available to carry out the activities required to accomplish the targets. The national planning and budgeting processes follow this principle. So do the local planning and budgeting processes (Local Government Budgeting Manual). 10.8.1 Fundamental Budgeting Principles of Local Government Units The following fundamental principles shall govern local government budgeting: 1. National planning shall be based on regional and local planning to ensure that the needs and aspirations of the people as well as those of the LGUs shall be considered in the formulations of budgets of National Government Agencies; 2. Local budget plans and goals shall, as far as practicable, be harmonized with national development goals and strategies in order to optimize the utilization of resources and to avoid duplication in the use of fiscal and physical resources; 3. LGUs shall formulate sound financial plans and local budgets shall be based on functions, activities and projects in terms expected results; 4. LGU’S shall ensure that their respective budgets incorporate the requirements of their component LGUs and provide for equitable allocation of resources among these LGUs; 5. Local government budget shall operationalize approved Local Development Plans; 6. No money shall be paid out of local treasury except in pursuance of appropriations ordinance or law; 7. LGU shall endeavor to have a balanced budget in each fiscal year of operation; 8. Local government funds and monies shall be spent solely for public purposes; 9. Trust funds in local treasury shall not be paid out except in fulfillment of the purpose for which the trust was created or the funds received; 10. Fiscal responsibility shall be shared by all those experiencing authority over the financial affairs transactions and operations of LGUs; 11. Local revenue is generated only from sources expressly authorized by law or ordinance or collection thereof shall at all time be acknowledge properly; 12. All monies officially received by a local government officer in any capacity or on any occasion shall be accounted for as local funds unless otherwise provided by law; and 13. Every officer of LGU whose duties permit or require the possession of custody of local funds shall be properly bonded and such officer shall be accountable and


Manual on Sectoral and Barangay Planning, Programming and Budgeting System    VOLUME V ANNEX B 

responsible for said funds and for the safekeeping thereof in conformity with the provisions of law. (Budget Operations Manual for LGUs) 10.8.2 The Budget Process There are five (5) phases in the budget process, namely: (1) budget preparation, (2) budget authorization, (3) budget review, (4) budget execution, and (5) budget accountability 1. Preparation – Upon receipt of the statement of income and expenditures, the punong barangay prepares the budget for the ensuing fiscal year, observing the applicable budgetary requirements and limitations. The “executive budget” must be submitted to the sangguniang barangay not later than October 16th of the current year under pain of sanctions 2. Authorization – The barangay budget is authorized by the Sangguniang Barangay thru the enactment of an Appropriation Ordinance. 3. Review – The Sangguniang Panlungsod/bayan, through the city/budget officer, reviews the barangay budget. 4. Execution – The implementation of the approved budget. 5. Accountability – The accurate recording and reporting of income and expenditures, and the evaluation of accomplishments vis-à-vis planned targets. (Local Government Budgeting Manual) 10.8.3 The Budgetary Requirements

1. The aggregate amount appropriated shall not exceed the estimates of income; 2. Full provision shall be made for all statutory and contractual obligations…
Provided, that the amount of appropriations for debt servicing shall not exceed twenty percent (20%) of the regular income of local government unit concerned; 3. Five percent (5%) of the estimated income from regular sources shall be set aside as an annual lump sum appropriation for unforeseen expenditures arising from the occurrence of calamities (Section 324, Local Government Code of 1991). 10.8.4 Other Mandatory Appropriations 1. Appropriation in the annual budget of not less than twenty percent (20%) of the barangay’s internal revenue allotment for development projects. (Section 287, Local Government Code of 1991) 2. Appropriation for Sangguniang Kabataan (SK) programs, projects, and activities equivalent to ten percent (10%) of the general fund of the barangay for the budget year. 3. Provision for the delivery of basic services pursuant to Section 17 of R. A. 7160. 10.8.5 General Limitations The limitations applicable to barangays are:


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1. The amount expendable for personal services shall not exceed fifty-five percent (55%) of the total annual income from regular sources realized in the next preceding fiscal year. 2. The annual appropriations for discretionary purposes of the Punong Barangay shall not exceed two percent (2%) of the actual receipts from the basic real property tax in the next preceding fiscal year. 10.8.6 Position Classification and Compensation of Barangay Officials and Personnel Punong Barangay Sangguniang Barangay members, Barangay Secretary and Barangay Treasurer Utility Worker Clerk I Accounting Clerk I Barangay Health Aide Revenue Collection Clerk I Day Care Worker I Administrative Assistant SG 14

SG 10 SG 1 SG 3 SG 4 SG 4 SG 5 SG 6 SG 8

(Local Budget Circular No. 63, October 22, 1996) 11.0 UNDERSTANDING BARANGAY FINANCIAL STATEMENTS The Accounting System Effective on January 1, 2002, the New Government Accounting System (NGAS) was prescribed for all local government units (LGUs), except barangays. (COA Circular No. 2002-003 dated June 20, 2002) In other words, the modified accrual system is not applicable to barangays and, therefore, the actual cash for receipts and obligations for expenditures will continue to be observed by the barangays. The accounting cycle for barangays may be illustrated, as follows: The Accounting System
Event Transaction Documentation Approvals Books Of Accounts

Statement Of Operation Trial Balance Balance Sheet


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Statement of Operations 1 INCOME Real Property Taxes Business Taxes and Licenses Internal Revenue Allotments Operating and Service Income Miscellaneous Income Aids, Grants and Subsidies Total Income Deduct Expenditures Personal Services Maintenance and other Operating Expenses Capital Outlay Total Expenditure EXCESS (DEFICIT) OF INCOME OVER EXPENDITURES ADD, Cumulative Results of Operation at the Beginning of the period Cumulative Results of Operation at the End of the period (see balance sheet) CUMULATIVE RESULTS OF OPERATION BREAKDOWN: Unappropriated Appropriated Residual Equity on Investor P___________ P___________ P____________

P___________ P___________ P___________ P___________ P___________ P___________ P__________

P__________ P___________ P___________ P___________




The formats for the Statement of Operations and Balance Sheet presented here conform to the Barangay Accounting Manual, COA Circular No. 93-396. The recording and reporting system formats appearing in the annexes are adopted from the Bureau of Local Government Finance system SIE System.



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Balance Sheet ASSETS (What the Barangay Has) Cash in Barangay Treasure Cash in the City/Municipal Treasury Cash in Bank Cash, Disbursing Officer Receivables, Miscellaneous Inventories, Miscellaneous Fixed Assets – Land and Land Improvements Fixed Assets – Building and Structures Fixed Assets – Furniture, Fixtures, Equipment, Work Animals & books TOTAL ASSETS LIABILITIES (What the Barangay Owes) Payable, Barangay Obligations Payable Miscellaneous Special Trust Funds TOTAL LIABILITIES RESIDUAL EQUITIES (What the Barangay Owns) Cumulative Results of Operations (See Statement of Operations) Invested Capital TOTAL RESIDUAL EQUITY TOTAL LIABILITIES AND RESIDUAL EQUITY P_________ P_________ P_________ P _________ P ___________ P____________ P____________ P____________ P____________ P____________ P____________ P____________

P____________ P____________


P_________ P_________ P_________


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The Statement of Operations and the Balance Sheet are derived from the Trial Balance. The Statement of Operations show the Income and the Expenditures from the beginning of the fiscal year up to the date the Statement is made. The Balance Sheet shows the financial condition of the barangay as of a given date. For development planning and budgeting the data provided by the Statement of Operations in relation to prior years’ data are useful. In the next session the manner by which the financial data provided by the financial statements are translated into user-friendly information will be illustrated. 11.1 Setting-Up a Barangay Financial Data Bank Financial analysis is enhanced by tabulating data for five (5) years in the following manner: Template 1 Income
Year 1 Year 2 P____ P____ P____ P____ P____ P____ Year 3 P____ P____ P____ P____ P____ P____ Year 4 P____ P____ P____ P____ P____ P____ Year 5

Real Property Taxes Business Taxes and Licenses Internal Revenue Allotment Miscellaneous Income Aids, Grants and Subsidies TOTALS

P____ P____ P____ P____ P____ P____

P____ P____ P____ P____ P____

Year 1

Year 2 P____ P____

Year 3 P____ P____

Year 4 P____ P____

Year 5 P____ P____

Personal Services Maintenance and other Operating Expenses Capital Outlay

P____ P____

P____ P____

P____ P____

P____ P____

P____ P____

P____ P____

1. For Template 1 the absolute Peso values are entered. To standardize values, the following methods are employed: 2. Divide the individual items in each row (say year 1) by the total of the row to arrive at percentages. Repeat the process for the other rows. Enter these percentages in lieu of the absolute peso values in Template 1 to comprise


Manual on Sectoral and Barangay Planning, Programming and Budgeting System    VOLUME V ANNEX B 

Template 2, which provide the profiles of the income and expenditures for the given years. 3. For Template 3, divide each item by the population, to arrive at the per capita figures.

Standardized values provide a convenient way for comparing financial data of the barangay against those of the city and the other barangays. The same data in Template 1 can be used for forecasting income and expenditures. Two (2) techniques are commonly employed: 1. The average growth method, and 2. The linear regression method Performance measurements can be developed from the data in Template.


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