Budget Authorization and Review PDF

BUDGET OPERATIONS MANUAL FOR LOCAL GOVERNMENT UNITS (2023 Edition) BUDGET AUTHORIZATION ATTY. JANET B. ABUEL, CPA, MPP, LLM Undersecretary Department of Budget and Management THE LOCAL BUDGET PROCESS  BUDGET AUTHORIZATION (PP....

BUDGET OPERATIONS MANUAL FOR LOCAL GOVERNMENT UNITS (2023 Edition) BUDGET AUTHORIZATION ATTY. JANET B. ABUEL, CPA, MPP, LLM Undersecretary Department of Budget and Management THE LOCAL BUDGET PROCESS  BUDGET AUTHORIZATION (PP. 90-126, BOM 2023) o Second phase in the local budget process o Start – receipt of Local Expenditure Program (LEP) submitted by the Local Chief Executive (LCE) to the Sanggunian legal basis  WHAT MARKS THE START OF THE BUDGET AUTHORIZATION PHASE? LCE shall submit the executive budget to the Sanggunian – NOT LATER THAN 16th of OCTOBER of the current fiscal year (Sec 318, LGC) LIABILITY FOR FAILURE TO SUBMIT AN EXECUTIVE BUDGET Failure to submit the budget within the prescribed period – Subjects LCE to criminal and administrative penalties provided under the Code and other applicable laws (Sec 318, LGC)  Section 60 – Grounds for disciplinary actions  (Sections 61-68 – other rules on disciplinary actions)  Villanueva vs. Ople, G.R. No. 165125, Nov. 18, 2005  VILLANUEVA VS. OPLE (G.R. No. 165125, November 18, 2005, 3rd Division) The Municipal Mayor and Vice-Mayor were charged by the Petitioners before the Office of the Ombudsman for violation of Section 3(e) of RA No. 3019 or the Anti-Graft and Corrupt Practices Act, in relation to Sections 305 (a), 318 and 351 of the LGC. Among others, the Petitioners alleged that the FY 2003 proposed Annual Budget of the Municipality was submitted by the Mayor belatedly to the Sangguniang Bayan, only on June 11, 2003, instead of October 16 of the preceding year, as mandated by Section 318 of the LGC. 6  Villanueva vs. Ople (2005) SC, in part, held: Fourth, petitioners relied solely on Section 318 of the LGC, which allegedly exposed the mayor to criminal liability for delay in submitting a budget proposal. The pertinent provision reads: ‘Sec. 318. Preparation of the Budget by the Local Chief Executive. — Upon receipt of the statements of income and expenditures from the treasurer, the budget proposals of the heads of departments and offices, and the estimates of income and budgetary ceilings from the local finance committee, the local chief executive shall prepare the executive budget for the ensuing fiscal year in accordance with the provisions of this Title. The local chief executive shall submit the said executive budget to the sanggunian concerned not later than the sixteenth (16th) of October of the current fiscal year. Failure to submit such budget on the date prescribed herein shall subject the local chief executive to such criminal and administrative penalties as provided for under this Code and other applicable laws.’ Under the above LGC provision, criminal liability for delay in submitting the budget is qualified by various circumstances. For instance, the mayor must first receive the necessary financial documents from other city officials in order to be able to prepare the budget. In addition, criminal liability must conform to the provisions of the LGC and other applicable laws. Noteworthy is the fact that petitioners failed to present evidence that would fulfill these qualifications stated in the law.  BUDGET AUTHORIZATION o Anchored on the fundamental principle – “No money shall be paid out of the local treasury except in pursuance of an Appropriation Ordinance or law.” (Section 305 [a], LGC) legal basis BUDGET AUTHORIZATION o Legal Basis – “On or before the end of the current fiscal year, the Sanggunian concerned shall enact, through an ordinance, the annual budget of the local government unit for the ensuing fiscal year on the basis of the estimates of income and expenditures submitted by the local chief executive.” (Section 319, LGC) steps BUDGET AUTHORIZATION KEY PLAYERS: (pp. 90-91) 1. Local Chief Executive 2. Sanggunian 3. Committee on Appropriations/Finance 4. Secretary to the Sanggunian 5. Local Finance Committee 6. Heads of Departments or Offices 7. Civil Society Organizations (CSOs)/Private Sector Groups  STEPS IN BUDGET AUTHORIZATION ON OR BEFORE 1. ENACT THE AO BEGINNING OF ENSUING YEAR 2. APPROVE THE AO ON OR BEFORE BEGINNING OF ENSUING YEAR 3. POST THE AO NLT 5 DAYS AFTER APPROVAL OF AO 4. SUBMIT THE AO FOR REVIEW WITHIN 3 DAYS AFTER APPROVAL OF AO  STEP 1: ENACT THE APPROPRIATION ORDINANCE (P. 60) CHECK THE BUDGET EVALUATE THE BUDGET DOCUMENTS SUBMITTED Lorem Ipsum is simply dummy text of the printing and typesetting industry. 1 2 Lorem Ipsum is simply dummy text of the printing and typesetting industry. Lorem Ipsum is simply dummy text of ENACT THE Lorem Ipsum is simply dummy text of the printing and typesetting industry. APPROPRIATION the printing and typesetting industry. ORDINANCE 3 4 DELIBERATE ON THE BUDGET AUTHORIZE THE BUDGET 1st sub  STEP 1: ENACT THE APPROPRIATION ORDINANCE (P. 93) CHECK THE BUDGET DOCUMENTS SUBMITTED Sanggunian, with the Lorem Ipsum is simply dummy text of assistance of the LFC, checks if the printing and typesetting industry. 1 the submitted budget documents are complete Lorem Ipsum is simply dummy text of ENACT THE Use Local Budget Authorization the printing and typesetting industry. APPROPRIATION Forms: ORDINANCE ✓ No. 1A – Checklist on Documentary and Signature Requirements – Annual Budget ✓ No. 1B - Checklist on Documentary and Signature Requirements – Supplemental Budget 1a STEP 1.1 CHECK THE BUDGET DOCUMENTS SUBMITTED LBA FORM NO. 1A - ANNUAL BUDGET (P. 109) Document Signatory Budget Message Local Chief Executive (LCE) Local Expenditure Program LCE Plantilla of Personnel Human Resource Management Officer (HRMO) Local Budget Officer (LBO) LCE Annual Operating Budget of Head of LEE Local Economic Enterprise LCE (LEE), if any 1b STEP 1.1 CHECK THE BUDGET DOCUMENTS SUBMITTED LBA FORM NO. 1A - ANNUAL BUDGET (P. 109) Document Signatory Annual Investment Program (AIP) (approved by the LDC [p. 23]; approved by the Sanggunian through a Resolution) AIP Local Planning and Development Coordinator (LPDC) LBO LCE Resolution approving the AIP Secretary to the Sanggunian (SS) Presiding Officer (PO) LCE 1b LBA FORM NO. 1B – SUPPLEMENTAL BUDGET (P. 110) Document Signatory Funds Actually Available Certified Statement of Additional Local Realized Income Treasurer (LT) and Local Accountant (LA) Certification of Savings LT and LA LBA FORM NO. 1B – SUPPLEMENTAL BUDGET (P. 110) Document Signatory New Revenue Measure/s (NRM) Certified Statement of Income LT from NRM LA Copy of Tax Ordinance – basis of NRM SS Copy of official communication stating PO that the LGU is recipient of new or LCE higher remittances, contributions, subsidies or grants in aid from the National Government or from government corporations and private entities Copy of official communication/documents re approved loan  LBA FORM NO. 1B – SUPPLEMENTAL BUDGET (P. 110) Document Signatory Realignment of Appropriations in times of Public Calamity LT Certificate, under oath, of Source of Funds LA Available for Appropriations LCE Statement of Supplemental Appropriations LBO LCE Supplemental AIP (approved by the LDC; approved by the Sanggunian through a Resolution) AIP LPDC, LBO, LCE Resolution approving the AIP SS, PO, LCE  STEP 1: ENACT THE APPROPRIATION ORDINANCE CHECK THE BUDGET EVALUATE THE BUDGET DOCUMENTS SUBMITTED Sanggunian, with the Sanggunian, with the assistance of the LFC, checks if theLorem submitted budget Ipsum is simply dummy text of the printing and typesetting industry. 1 2 assistance of the LFC, shall Lorem Ipsum is simply dummy text of evaluate the budget the printing as to and typesetting industry. documents are complete compliance with budgetary requirements and general ENACT THE limitations Use Local Lorem Budget Ipsum is simply dummy textAuthorization of Lorem Ipsum is simply dummy text of the printing and typesetting industry. Form Nos. 1A and 1B APPROPRIATION the printing and typesetting industry. ORDINANCE receipts  STEP 1.2 EVALUATE THE BUDGET (PP. 94-97) Part 1. Receipts Program a. Taxes, fees or charges identified as sources are in accordance with the revenue ordinances of the LGU; and b. The estimated receipts from RPT correspond to the total amount of due and demandable RPT, including delinquent accounts. exp  STEP 1.2 EVALUATE THE BUDGET Part 2. Expenditure Program A. Budgetary Requirements (Section 324, LGC) The aggregate amount appropriated does not exceed the estimates of income (BY) Full provision shall be made for all statutory and contractual obligations of the LGU, and that the amount appropriated for debt servicing does not exceed twenty percent (20%) of the regular income of the LGU (BY) Aid to component barangays shall be provided in amounts of not less than One Thousand Pesos (P1,000) per barangay (BY) app  STEP 1.2 EVALUATE THE BUDGET Expenditure Program Not less than 5% of the estimated revenue from regular sources (BY) shall be set aside as the Local Disaster Risk Reduction Management Fund (LDRRMF), of which 30% lumpsum allocation for QRF and 70% for disaster prevention and mitigation, preparedness, response, rehabilitation and recovery (Sec 21, RA No. 10121; and NDRRMC-DBM-DILG JMC No. 2013-1 dated March 25, 2013) app  Expenditure Program B. Provision for development projects – no less than 20% of IRA (NTA) for the BY (Sec 287, LGC) ❑Authorized Uses (DBM-DOF-DILG JMC No. 1 [11/4/20] – Revised Guidelines on the Appropriation and Utilization of the 20% of the IRA [NTA]) ❑Quisumbing, et al. vs. Garcia, et al. GR No. 175527, 08 December 2008 (re Section 22 (c), LGC - Unless otherwise provided in this Code, no contract may be entered into by the local chief executive in behalf of the local government unit without prior authorization by the sanggunian concerned.) app  QUISUMBING VS. GARCIA (G.R. No. 175527, December 08, 2008, En Banc) In the COA audit report covering the 2004 financial audit of the Province of Cebu, it stated that several contracts entered into by the Provincial Governor were not supported by a Sangguniang Panlalawigan Resolution authorizing the Provincial Governor to enter into a contract, as required under Section 22 of the LGC. The audit team recommended that LCE must secure the required authorization from the Sanggunian. The Provincial Governor sought reconsideration of the findings and recommendation of the COA, but nevertheless, filed a Petition for Declaratory Relief before the RTC. The Governor alleged that the infrastructure contracts complied with the bidding procedures under RA No. 9184, the Government Procurement Reform Act, and were entered into pursuant to the general and/or supplemental appropriation ordinances passed by the Sangguniang Panlalawigan, thus, a separate authority to enter into such contracts was no longer necessary. 24  QUISUMBING VS. GARCIA (2008) The RTC ruled, among others, that it is only when the contract (entered into by the LCE) involves obligations which are not backed by prior ordinances that the prior authority of the Sanggunian concerned is required, and that in the case, the Sangguniang Panlalawigan had already given its prior authorization when it passed the appropriation ordinances which authorized the expenditures in the questioned contracts. The Petitioners, all members of the Sangguniang Panlalawigan, assailed the decision of the RTC before the Supreme Court. Nevertheless, in the course of the proceedings, it became apparent that the Province was operating under a reenacted budget in 2004. 25  QUISUMBING VS. GARCIA (2008) UNDER REENACTED BUDGET, CONTRACTUAL OBLIGATIONS NOT IN THE PREVIOUS YEAR’S ANNUAL AND SUPPLEMENTAL BUDGETS CANNOT BE DISBURSED; NEW INFRASTRUCTURE CONTRACTS ARE NOT INCLUDED AS REENACTED ITEMS, THUS, REQUIRE PRIOR APPROVAL OF THE SANGGUNIAN. There appear two basic premises from which the Court can proceed to discuss the question of whether prior approval by the Sangguniang Panlalawigan was required before Gov. Garcia could have validly entered into the questioned contracts. First, the Province of Cebu was operating under a reenacted budget in 2004. Second, Gov. Garcia entered into contracts on behalf of the province while this reenacted budget was in force. 26  QUISUMBING VS. GARCIA (2008) The fact that the Province of Cebu operated under a reenacted budget in 2004 lent a complexion to this case which the trial court did not apprehend. Sec. 323 of R.A. No. 7160 provides that in case of a reenacted budget, only the annual appropriations for salaries and wages of existing positions, statutory and contractual obligations, and essential operating expenses authorized in the annual and supplemental budgets for the preceding year shall be deemed reenacted and disbursement of funds shall be in accordance therewith. It should be observed that, as indicated by the word only preceding the above enumeration in Sec. 323, the items for which disbursements may be made under a reenacted budget are exclusive. Clearly, contractual obligations which were not included in the previous year’s annual and supplemental budgets cannot be disbursed by the local government unit. It follows, too, that new contracts entered into by the LCE require the prior approval of the sanggunian. 27  QUISUMBING VS. GARCIA (2008) WHEN THE APPROPRIATION ORDINANCE IS DEEMED SUFFICIENT AUTHORIZATION OF THE SANGGUNIAN FOR THE LOCAL CHIEF EXECUTIVE TO ENTER INTO CONTRACTS. The question of whether a sanggunian authorization separate from the appropriation ordinance is required should be resolved depending on the particular circumstances of the case. Resort to the appropriation ordinance is necessary in order to determine if there is a provision therein which specifically covers the expense to be incurred or the contract to be entered into. Should the appropriation ordinance, for instance, already contain in sufficient detail the project and cost of a capital outlay such that all that LCE needs to do after undergoing the requisite public bidding is to execute the contract, no further authorization is required, the appropriation ordinance already being sufficient. 28  QUISUMBING VS. GARCIA (2008) On the other hand, should the appropriation ordinance describe the projects in generic terms such as infrastructure projects, inter-municipal waterworks, drainage and sewerage, flood control, and irrigation systems projects, reclamation projects or roads and bridges, there is an obvious need for a covering contract for every specific project that in turn requires approval by the sanggunian. Specific sanggunian approval may also be required for the purchase of goods and services which are neither specified in the appropriation ordinance nor encompassed within the regular personal services and maintenance operating expenses. 29 Quisumbing ruling reiterated in recent cases: Verceles, Jr. vs. COA (G.R. No. 211553 dated September 13, 2016 Municipality of Corella v. Philkonstrak (G.R. No. 218663, February 28, 2022)  VERCELES VS. COA (G.R. No. 211553, September 13, 2016, En Banc) The Provincial Government of Catanduanes, represented by then Governor Verceles, and the Provincial Environment and Natural Resources Office (PENRO) entered into several Memoranda of Agreement (MOA) to implement the TREE SEEDLINGS PRODUCTION PROJECT. The cost of the project was allegedly paid out of the Economic Development Fund (EDF) allocation in the provincial budget for CYs 2001 and 2002. EDF = 20% portion of the province's IRA for development projects. 31  VERCELES VS. COA (2016) June 11, 2001 - Sangguniang Panlalawigan (SP) passed Resolution No. 067-2001 giving blanket authority to the governor to enter into contracts on behalf of the province. SP Resolution Nos. 068-2001 and 069-2001 - reaffirmed the authority given to the governor. On the same date, SP also resolved to give the governor the power to realign, revise, or modify items in the provincial budget. October 12, 2001 - SP issued Resolution No. 104-A- 2001 which effectively REVOKED the blanket authority given to the governor to enter into contracts on behalf of the Province. 32  VERCELES VS. COA (2016) Amount MOA Date Supposed Authority Funding Source (in pesos) SP Resolution No. 67- 2001; affirmed in SP EDF allocation, CY 2001 Budget 1st MOA 27 Sept 2001 1.5 Million Resolution Nos. 68- 2001 and 69-2001 SP SP Resolution No. 104- - 12 Oct 2001 - Revocation A-2001 Savings from the EDF (CY 2001) 2nd MOA 30 Oct 2001 1.5 MillionSame as 1st MOA transferred to the Environment Management Program 3rd MOA 6 May 2002 3 Million Same as 1st MOA EDF allocation, CY 2002 Budget Savings from the EDF (CY 2002) transferred to Trees Seedling 4th MOA 22 Aug 2002 3 Million Same as 1st MOA Production of Environmental Safeguard Savings from the EDF (CY 2002) transferred to Trees Seedling 5th MOA 26 Sept 2002 1 Million Same as 1st MOA Production of Environmental Safeguard 33  VERCELES VS. COA (2016) February 4, 2003 - COA Audit Team Leader issued an Audit Observation Memorandum (AOM) - Verceles should have SOUGHT PRIOR AUTHORITY FROM THE SP pursuant to Sections 22 (c) and 465 (b) (1) (vi) of the LGC before executing any MOA after the issuance of Resolution No. 104-A-2001. Eventually, Notices of Disallowance issued totalled to P7,528,175.46. Verceles sought available remedies within COA, but ultimately, COA upheld the disallowances. COA held that: the augmentations or realignments made by Verceles to fund the 2nd, 4th and 5th MOAs were CONTRARY TO SECTION 336 OF THE LGC. The disbursements also violated Section 85 (1) of PD No. 1445 (Government Auditing Code of the Philippines) and Section 305 (1) of the LGC. at the time Verceles made the augmentations to fund the 2nd, 4th and 5th MOAs, HE WAS NOT AUTHORIZED BY THE SP, and that the CY 2003 APPROPRIATION ORDINANCE (AO) COULD NOT RATIFY THE MOAs ENTERED INTO IN CYs 2001 AND 2002. 34  VERCELES VS. COA (2016) Verceles elevated the case to the Supreme Court (SC). SC partly agreed with Verceles. The prior authorization for the LCE to enter into contracts on behalf of the LGU may be in the form of an AO passed for the year which specifically covers the project, cost, or contract to be entered into by the LGU. The case of Quisumbing v. Garcia on this point is instructive. Explained simply, the LGC requires the LCE to secure prior authorization from the sanggunian before he can enter into contracts on behalf of the LGU. A separate prior authorization is no longer required if the specific projects are covered by appropriations in the annual budget of the LGU. The AO passed by the sanggunian is the LCE’s authority to enter into a contract implementing the project. 35  VERCELES VS. COA (2016) As required in Quisumbing, the LCE must inquire if the provisions in the AO specifically cover the expense to be incurred or the contract to be entered into. If the project or program is identified in the AO in sufficient detail, then there is no more need to obtain a separate or additional authority from the sanggunian. In such case, the project and the cost are already identified and approved by the sanggunian through the AO. To require the LCE to secure another authorization for a project that has been specifically identified and approved by the sanggunian is antithetical to a responsive local government envisioned in the Constitution and in the LGC. 36  VERCELES VS. COA (2016) 1st MOA (2001 EDF) Relevant in the present case is the EDF, a lump-sum fund intended for the economic development projects of the Province. The description 'economic development,' by itself, is a generic term as it does NOT READILY SPECIFY THE PROJECTS that may be covered by the lump-sum appropriation. To stress, the CY 2001 AO DID NOT AT ALL IDENTIFY THE PROJECTS to be funded by the EDF. On this basis, Verceles should have clearly obtained prior approval from the SP before he entered into the 1st MOA. Quisumbing instructs us that should the AO describe the projects in generic terms, there is a need for a covering contract for every specific project that in turn requires approval by the sanggunian. 37  VERCELES VS. COA (2016) Thus, the blanket authority, even granting that Verceles vetoed its revocation, was not a sufficient authority for him to enter into the 1st MOA as he was not specifically authorized to do so. Further, Section 6 of the 2001 AO stated that "appropriations under the 20% EDF shall be approved by the Sanggunian Panlalawigan." Obviously, the SP wanted to ensure that the projects to be funded by the EDF still go through the deliberations of the SP members precisely because these projects had not been previously identified and approved by the SP. Since the 2001 EDF was a lump-sum amount not yet apportioned to specified development projects, Verceles needed to secure prior authority from the SP. Having failed to secure prior authority, the 1st MOA was unauthorized and properly disallowed. 38  VERCELES VS. COA (2016) 2nd MOA - Savings from the 2001 EDF transferred to the Environment Management Program Section 336, LGC - Use of Appropriated Funds and Savings ❑ General Rule o Funds shall be available exclusively for the specific purpose for which they have been appropriated. No ordinance shall be passed authorizing any transfer of appropriations from one item to another ❑ Exception (Use of Savings and Augmentation) The LCE or the presiding officer of the Sanggunian may, BY ORDINANCE, be authorized to augment any item in the approved annual budget for their respective offices from savings in other items WITHIN THE SAME EXPENSE CLASS of their respective appropriations (Sec 336, LGC) 39  VERCELES VS. COA (2016) 2nd MOA (2001 EDF – FROM USE OF SAVINGS) There was no valid augmentation made in CY 2001 that could have covered the cost of the 2nd MOA. As already discussed, the CY 2001 AO did not identify the specific projects or items to be funded by the EDF. How could Verceles transfer savings from non-existent items (in the EDF) to augment the tree seedlings propagation project? The project that was supposed to be augmented was also not identified in the CY 2001 AO. Augmentation was legally impossible as there were no items from which savings could have been generated from and there was no item to which such savings could have been transferred. The 2nd MOA was thus correctly disallowed. 40  VERCELES VS. COA (2016) 3rd MOA (2002 EDF) In stark contrast, the CY 2002 AO clearly, specifically and expressly set aside P3,000,000.00 to fund the tree seedlings production project of the Province. This served as sufficient authority for Verceles to execute the 3rd MOA. Thus, the COA gravely abused its discretion when it disallowed the third MOA and insisted that Verceles should have secured a separate and additional authority from the SP. The COA ignored Section 3 of the CY 2002 AO, which specifically identified the tree seedlings production project with a P3,000,000.00 allocation. 41  VERCELES VS. COA (2016) 4th and 5th MOAs – FROM USE OF SAVINGS Section 336 of the LGC requires an implementing ordinance so that the LCE can augment items in the annual budget of the LGU. Applying Araullo v. Aquino III, the AO of a given fiscal year must expressly authorize the LCE before he can make augmentations in that particular year, or at the very least, he must be authorized by ordinance before he can make augmentations. 42  VERCELES VS. COA (2016) Verceles posits that the authority to augment items in the approved annual budget may be given retroactively, that is, after the augmentations have been made. He cited Section 8 of the CY 2003 AO of the province: “Section 8. Authority to Augment Items and Figures in the Budget and Ratification of Previous Acts of the Provincial Governor. — The Provincial Governor is hereby authorized to effect and is hereby considered to have been authorized, and the Sangguniang Panlalawigan hereby approves and ratifies all augmentations of items and figures in the CY 2003 Budget that includes the 20% Economic Development Fund (EDF) for CY 2003, and previous budgets and 20% [EDFs], and all modifications, revisions, thereof that may be considered as augmentations xxx” 43  VERCELES VS. COA (2016) SC affirmed the COA's disallowance of the 4th and 5th MOAs: First, the power of the LCE to augment items under Section 336 of the LGC is a mere exception to the general rule that funds shall be available exclusively for the specific purpose for which they have been appropriated. ❑ Exceptions are strictly construed and apply only so far as their language fairly warrants, with all doubts being resolved in favor of the general proviso rather than the exception. ❑ As an exception to the general rule, all the requirements for a valid augmentation must be strictly complied with. One such requirement is that the LCE must be authorized by an ordinance. 44  VERCELES VS. COA (2016) ❑ Consistent with the strict construction approach, we rule that the requisite "authorized by ordinance" does not necessarily and automatically include "ratified by ordinance.” ❑ The exception clause of Section 336 states: "the local chief executive... may, by ordinance, be authorized to augment any item in the approved annual budget...." The key phrase is "by ordinance, be authorized to augment." We must therefore interpret this phrase in a manner that does not easily erode the basic principle that funds shall be available exclusively for the specific purpose for which they have been appropriated. ❑ To "authorize" means "to empower; to give a right or authority to act." It means "to endow with authority or effective legal power, warrant or right; to permit a thing to be done in the future." 45  VERCELES VS. COA (2016) ❑ Thus, strictly speaking, the governor must be duly authorized before he can make augmentations. We highlight the words "to augment" suggesting that what is being authorized is an act that has yet to happen. ❑ Nevertheless, our ruling in the present case should not be taken to mean that the LGC prohibits the ratification of previously unauthorized augmentations. We only want to underscore the necessity of an existing authority before the LCE can make augmentations. The Court recognizes that there may be narrow instances where past augmentations can be shown to have fully complied with all the requisites (except for the authority by ordinance requisite) for a valid augmentation, in which cases, ratification is allowed. Such is not the case here. 46  VERCELES VS. COA (2016) Second, the all-encompassing nature of the blanket ratification by the SP of all the augmentations made in the past budgets rendered such ratification ineffective. We note the very broad wording of Section 8 of CY 2003 AO. Without qualification, it approved all past augmentations regardless of whether such augmentations could have been legally permissible. By the expedient passing of the CY 2003 AO, the SP presumed that all requisites for augmentation were complied with, effectively bypassing the said requisites. This cannot be allowed as there are strict requirements before augmentations can be made; the existence of actual savings is just one example. 47  VERCELES VS. COA (2016) Third, Section 26 of the CY 2002 appropriation ordinance of the province provides that "[a]ll realignments of fund shall be approved by the Sangguniang Panlalawigan.” In contrast to the CYs 2001 and 2003 AOs, which expressly authorized the governor to realign, revise, modify, or change items in the annual budget, Section 26 of the CY 2002 AO is couched in a markedly different language. The SP effectively withheld from Verceles the authority to make augmentations by requiring its approval for all realignments of funds. 48  MUNICIPALITY OF CORELLA VS. PHILKONSTRAK (G.R. No. 218663, February 28, 2022, 2nd Division) In 2009, the Municipality of Corella, Bohol, conducted a public bidding for the rehabilitation and improvement of its municipal waterworks system project. Philkonstrak was the winning bidder. Corella, through then Mayor Rapal, entered into a contract with Philkonstrak for the same project for a total amount of P15,997,732.63. Philkonstrak procured the materials, equipment, and the labor force for the mobilization of construction works. As of December 2009, Philkonstrak accomplished more than 50% of the work essential for the project for which Philkonstrak expended P8,233,000.00. However, incumbent Mayor Tocmo refused to pay and denied liability, so Philkonstrak was forced to suspend construction works. Tocmo denied liability and questioned the validity of the contract averring that Rapal had no authority to enter into such contract during his term as Mayor of Corella. 49 MUNICIPALITY OF CORELLA VS. PHILKONSTRAK (2022) Philkonstrak filed a complaint for collection of sum of money against Corella and Rapal before the Construction Industry Arbitration Commission (CIAC) claiming: – It had already undertaken more than 50% of the construction work for the project, which caused it to incur the amount of P8,233,000.00 – It incurred P4M for other materials that were not yet installed The CIAC issued a Decision finding the contract between Philkonstrak and Corella as valid. Thus, Corella, through its present Mayor Tocmo breached the contract when he refused to honor the obligation. The CIAC ordered Corella to pay Philkonstrak the total amount of P12,844,650.00, which includes claims for unpaid billings, delivered but uninstalled materials, and accrued interest. CIAC exonerated Rapal from liability. Corella filed a Petition for Review before the Court of Appeals (CA). The CA dismissed Corella's Petition for Review, finding no cogent reason to reverse and set aside the CIAC Decision. 50 MUNICIPALITY OF CORELLA VS. PHILKONSTRAK (2022) The petition is granted in part. The contract between Philkonstrak and Corella is not valid and binding. However, Corella is obliged to pay Philkonstrak on the basis of the principle of quantum meruit. NO SEPARATE SANGGUNIANG BAYAN AUTHORIZATION IS NECESSARY WHEN THE APPROPRIATION ORDINANCE (AO) IS SUFFICIENT IN DETAIL. Tocmo asserts that before then Mayor Rapal entered into the contract on behalf of Corella with Philkonstrak, two separate and distinct requirements were necessary, but not complied with: (1)prior authorization from the Sangguniang Bayan of Corella, in accordance with Section 22 (c) of the LGC and Section 37 of the GPRA; and (2)the AO or resolution authorizing or directing the payment of money or creating a liability, in accordance with Article 107 (g) of the IRR of the LGC. 51 MUNICIPALITY OF CORELLA VS. PHILKONSTRAK (2022) The Court disagrees. It must be emphasized that such issue is not novel. In the landmark case of Quisumbing v. Garcia (Quisumbing) the Court delineated when a Sangguniang Bayan authorization is still necessary to accompany the AO and when it is not. Depending on the circumstances of the case, if the project is provided for in sufficient detail in the AO, meaning the transactions, bonds, contracts, documents, and other obligations the Mayor would enter into in behalf of the municipality, among others, are enumerated, then no separate authorization is necessary. On the other hand, if the project is merely couched in general and generic terms, then a separate approval by the Sangguniang Bayan in accordance with the law is required. 52 MUNICIPALITY OF CORELLA VS. PHILKONSTRAK (2022) Verceles, Jr. v. Commission on Audit (Verceles) citing Quisumbing, elaborated: ❑ The LGC requires the LCE to secure prior authorization from the Sanggunian before he can enter into contracts on behalf of the LGU. A separate prior authorization is no longer required if the specific projects are covered by appropriations of the LGU. ❑ The AO passed by the Sanggunian is the LCE’s authority to enter into a contract implementing the project. ❑ As required in Quisumbing, the LCE must inquire if the provisions in the AO specifically covers the expense to be incurred or the contract to be entered into. ❑ If the project or program is identified in the AO in sufficient detail, then there is no more need to obtain a separate or additional authority from the Sanggunian. In such case, the project and the cost are already identified and approved by the Sanggunian through the AO. ❑ To require the LCE to secure another authorization for a project that has been specifically identified and approved by the Sanggunian is antithetical to a responsive local government envisioned in the Constitution and in the LGC. 53 MUNICIPALITY OF CORELLA VS. PHILKONSTRAK (2022) As the Verceles case explained, "sufficient authority" in an AO simply means specifically and expressly setting aside an amount of money for a certain project or program. In the case at bar, the Court finds that there is no need for a separate authorization from the Sangguniang Bayan as the AO, Municipal Ordinance No. 2010-02, identified the project or program in sufficient detail, and not just in general or generic terms. The one-paged AO specifically and expressly set aside an amount of money, P27,000,000.00, for certain projects, including the purchase of specific heavy equipment and rehabilitation/improvement of the existing waterworks system of the municipality. Municipal Ordinance No. 2010-02, having sufficiently covered the project and the cost in detail, need not be accompanied by a prior Sangguniang Bayan authorization any longer. 54  STEP 1.2 EVALUATE THE BUDGET Expenditure Program C. General Limitations (Section 325, LGC) ▪ Total appropriations, whether annual or supplemental, for PS of a LGU for one (1%) fiscal year ▪ shall not exceed 45% in the case of 1st to 3rd class provinces, cities and municipalities, and 55% in the case of fourth class or lower ▪ of the total annual income from regular sources realized in the next preceding fiscal year (LBC No. 156 (4/15/24) – Guidelines on the Implementation of Personal Services (PS) Limitation on Local Government Budgets and Determination of Waived PS Items…and Years Thereafter) (The Sanggunian may use LBR Form Nos. 2A and 2B of the BOM on PS Cost and Limitation, for guidance [pp. 153-154])  STEP 1.2 EVALUATE THE BUDGET Expenditure Program C. General Limitations (Section 325, LGC) ▪ No official or employee shall be entitled to a salary rate higher than the maximum fixed for the position or other positions of equivalent rank by applicable laws or rules and regulations issued ✓ Compare the authorized salary grade and salary for each position with the authorized rate in the Salary Schedule being implemented by the LGU. The Plantilla of Personnel and the Index of Occupational Services may be used for the purpose  STEP 1.2 EVALUATE THE BUDGET Expenditure Program C. General Limitations (Section 325, LGC) ▪ 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 ▪ In cases of abolition of positions and the creation of new ones resulting from the abolition of existing positions in the career service, such abolition or creation is made in accordance with pertinent provisions of the LGC and civil service laws, rules and regulations  STEP 1.2 EVALUATE THE BUDGET Expenditure Program C. General Limitations (Section 325, LGC) ▪ Positions in the official plantilla for career positions which are occupied by incumbents holding permanent appointment shall be covered by adequate appropriations ▪ No changes in designation or nomenclature of positions resulting in a promotion or demolition in rank or increase or decrease in compensation shall be allowed, except when the position is actually vacant, and the filling of such position shall be strictly made in accordance with civil service laws, rules and regulations  STEP 1.2 EVALUATE THE BUDGET Expenditure Program C. General Limitations (Section 325, LGC) ▪ The annual appropriations for discretionary purposes of the LCE shall not exceed 2% of the actual receipts derived from basic RPT 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 except as authorized under the Section. (See Abella VS. COA; G.R. No. 238940, April 19, 2022, En Banc)  ABELLA VS. COA (G.R. No. 238940, April 19, 2022, En Banc) EME appropriations and discretionary funds have the same purpose, i.e., to have an available source of funds for certain expenses in relation to the discharge of official functions which are not covered by the regular budget allocation. It is noteworthy that SP Ordinance No. 2557-2004, which was the basis of the disallowed disbursements, already had an appropriation for the Office of the City Mayor's discretionary expenses. Thus, separate amounts appropriated in the local budget ordinance are patent circumventions of the limitation under Section 325(h) of the LGC. To stress, the provision expressly prohibits the appropriation of a separate amount for discretionary purposes other than the two percent (2%) allocated for the local chief executive's discretionary fund.  ABELLA VS. COA (2022) Furthermore, the COA Regional Director correctly observed that the SP designated its Mayor, Vice Mayor, and SP/Government Department Heads as having equal ranks to those officials entitled to EME under the General Appropriations Acts (GAA) of 2004 to 2009, to wit: Department Secretary, Department Assistant Secretary, and "Assistant Bureau/Director." The SP designations were, however, made without authorization from the DBM, which was a patent contravention of the GAAs. The pertinent GAA provisions are clear that only those officials named in the GAA, the officers of equivalent rank as the DBM authorized, and the offices under them are entitled to claim EME in the amounts provided in the GAAs.  ABELLA VS. COA (2022) Petitioners cannot rely on the principle of local autonomy to validate the EME disbursements which were based on a provision in the local ordinance that patently contravenes the prescribed limitations in the LGC and the GAAs. The concept of local autonomy does not preclude intervention by the national government in the form of supervision to ensure that the local programs, fiscal and otherwise, are consistent with the national goals. Fiscal decentralization — as an aspect of local autonomy — "does not signify the absolute freedom of the LGUs to create their own sources of revenue and to spend their revenues unrestrictedly or upon their individual whims and caprices.”  STEP 1.2 EVALUATE THE BUDGET Expenditure Program D. Compliance with Provisions of Other Applicable Laws, Rules and Regulations ▪ Projects in the AO are found in the approved AIP ▪ No items in the AO are specifically prohibited by law ▪ Other items of expenditures are expressly prescribed or authorized under existing laws, rules and regulations  STEP 1.2 EVALUATE THE BUDGET Expenditure Program e. Annual Operating Budget (AOB) of Local Economic Enterprise (LEE) ▪ Special Account in the General Fund ▪ Appropriation for PS should be charged to the LEE budget ▪ Subsidies from the GF to LEE should not be used for PS ▪ LEE PPAs should be included in the AIP  STEP 1.2 EVALUATE THE BUDGET Expenditure Program The AOB of each LEE is presented separately in the LEP which shall be included for enactment by the Sanggunian. The Sanggunian may refer to Local Budget Circular No. 111 dated June 10, 2016 prescribing the Manual on the Setting Up and Operation of LEE.  STEP 1.2 EVALUATE THE BUDGET The proposed APP, which is the consolidation of PPMPs of all Departments/Offices or end-user units in the LGU, which includes all procurement activities and schedules planned for the budget year that are integrated in the AIP, may be used by the sanggunian in its evaluation of the LEP, among others. 3rd sub  STEP 1: ENACT THE APPROPRIATION ORDINANCE CHECK THE SUBMITTED EVALUATE THE BUDGET BUDGET DOCUMENTS Sanggunian, with the Sanggunian, with the assistance of the LFC, checks if theLorem submitted budget Ipsum is simply dummy text of the printing and typesetting industry. 1 2 assistance of the LFC, shall evaluate Lorem theIpsum budget asof to is simply dummy text the printing and typesetting industry. documents are complete compliance with budgetary Use Local Budget Authorization requirements and general limitations Form Nos. 1A and 1B Lorem Ipsum is simply dummy text of ENACT THE Lorem Ipsum is simply dummy text of the printing and typesetting industry. APPROPRIATION the printing and typesetting industry. ORDINANCE The Sanggunian shall consider the budget as a priority measure if certified as urgent by the LCE. 3 DELIBERATE ON THE BUDGET irp  STEP 1.3 DELIBERATE ON THE BUDGET (PP. 97-100) ❑ Procedures in the deliberation may vary depending on the Sanggunian’s Internal Rules of Procedure (IRP) ❑ The Committee on Appropriations/Finance may conduct its own budget hearings and may call upon the LFC and Department Heads ❑ The LFC, in assisting the Sanggunian, shall: ✓ Make available pertinent data ✓ Be present during committee hearings and Sanggunian sessions, as may be required ❑ When allowed in the IRP, CSOs may be invited to attend and provide inputs bud req  STEP 1.3 DELIBERATE ON THE BUDGET ❑ The Department Heads, as authorized by the LCE, may, when requested by the Sanggunian to appear before the Sanggunian to explain or justify their budgets, present the following: ✓ The mandate, vision/mission, major final output, performance indicators and targets, functions and corresponding projects of the departments/offices ✓ The nature of the work to be performed for each program, project and activity measured in terms of expected results, proposed funding, organizational setup/staffing modification, personnel complement ✓ The accomplishments of the department/office for the preceding fiscal year bud req  STEP 1.3 DELIBERATE ON THE BUDGET ❑The Sanggunian shall, among others, ensure that the provisions on budgetary requirements and general limitations under RA No. 7160 and other laws are strictly complied with in the proposed budget. ❑ Guide Questions (p. 99) 4th sub  STEP 1: ENACT THE APPROPRIATION ORDINANCE CHECK THE SUBMITTED EVALUATE THE BUDGET BUDGET DOCUMENTS Sanggunian, with the Sanggunian, with the assistance of the LFC, checks if theLorem submitted budget Ipsum is simply dummy text of 1 2 assistance of the LFC, shall evaluate the budget as to Lorem Ipsum is simply dummy text of the printing and typesetting industry. documents are complete compliance withandbudgetary the printing typesetting industry. requirements and general Use Local Budget Authorization limitations Form Nos. 1A and 1B Lorem Ipsum is simply dummy text of ENACT THE Lorem Ipsum is simply dummy text of the printing and typesetting industry. APPROPRIATION the printing and typesetting industry. ORDINANCE The Sanggunian shall consider the budget as a priority After deliberation, the Sanggunian measure if certified as urgent by the LCE. 3 4 authorizes the budget through an ordinance DELIBERATE ON THE BUDGET AUTHORIZE THE BUDGET content  STEP 1.4 AUTHORIZE THE BUDGET (PP. 100-106) ❑ Contents of the Appropriation Ordinance ✓ An assigned number, title or caption, enacting or ordaining clause, and the date of proposed effectivity (Article 107 [b], IRR of RA No. 7160) ✓ A provision identifying the documents appended to the AO that will form an integral part thereof – Plantilla of Personnel; Annual Operating Budget(s) of LEEs, if any ✓ Receipts Program ✓ Expenditure Program by Department/Office/Unit ✓ Special Purpose Appropriations shall be reflected under the appropriate implementing Department/Office/Unit ✓ General Provisions ✓ Summary of New Appropriations by Object of Expenses and by Sector, and by Department/Office, and Summary Statement of all Statutory and Contractual Obligations Due  STEP 1.4 AUTHORIZE THE BUDGET ❑Sample Format No. 1 – Ordinance Authorizing Annual Appropriations (pp. 112-119) ❑Sample Format No. 2 – Ordinance Authorizing Supplemental Appropriations (pp. 120-121)  STEP 1.4 AUTHORIZE THE BUDGET LIMITATIONS ON LEGISLATIVE ACTION ❑The Local Sanggunian – oMay not increase the proposed amount in the executive budget oMay not include new items except to provide for statutory and contractual obligations obut in no case shall it exceed the total appropriations in the executive budget (Art 415, IRR of LGC) LIMITATIONS ON LEGISLATIVE ACTION ❑The Local Sanggunian – oMay not increase the proposed amount in the executive budget o(Sarmiento vs. The Treasurer of the Philippines [GR Nos. 125680 and 126313, September 04, 2001] – refers to total budget not individual items of appropriations) LIMITATIONS ON LEGISLATIVE ACTION ❑The Local Sanggunian – oMay not include new items except to provide for statutory and contractual obligations obut in no case shall it exceed the total appropriations in the executive budget (Art 415, IRR of LGC)  LIMITATIONS ON LEGISLATIVE ACTION ❑Application – is the act of the Sanggunian proper? o Proposed executive budget – total amount is P100M Scenario 1 - LCE included only 10% development fund (P7M; Sanggunian increased to 20% - added P7M in the AO for development projects Scenario 2 - LCE forgot to include payment for loans due amounting to P7M; Sanggunian added P7M in the AO for payment of loans Scenario 3 – LCE did not include funding provision for trainings and seminars; Sanggunian included P5M for trainings and seminars which it deducted from other proposed items that were not mandatory and of least priority – so that the total amount of the proposed budget is not exceeded  STEP 1.4 AUTHORIZE THE BUDGET ❑The AO shall require the affirmative vote of a MAJORITY of ALL Sanggunian Members for its passage (Article 107 (g), IRR) ❑The vice-LCE is the Presiding Officer of the Sanggunian but he does not vote, except only to break a tie (Sec 49, LGC; Art 102, IRR) ❑WHAT IS MAJORITY? SC – MAJORITY IS THE NUMBER GREATER THAN HALF OR MORE THAN HALF OF ANY TOTAL (Zamora vs. Caballero ) ❑ How to count ALL Sangunian Members for purposes of Quorum and Voting – Javier vs. Cadiao (2016)  STEP 1.4 AUTHORIZE THE BUDGET ❑ Voting Requirement to Enact an AO Latest Jurisprudence – MUNICIPALITY OF CORELLA VS. PHILKONSTRAK (GR No. 218663, February 28, 2022) See also – ❑ JAVIER VS. CADIAO (GR No. 185369, August 03, 2016) ❑ ZAMORA VS. CABALLERO (GR No. 147767, January 14, 2004) cont  JAVIER VS. CADIAO (G.R. No. 185369, August 03, 2016, Third Division) VICE GOVERNOR COUNTED AS A MEMBER OF THE SANGGUNIAN FOR PURPOSES OF ASCERTAINING QUORUM, BUT EXCLUDED IN DETERMINING THE REQUIRED VOTE The Vice Governor, as the Presiding Officer, shall be considered a part of the SP for purposes of ascertaining if a quorum exists. In determining the number which constitutes as the majority vote, the Vice Governor is excluded. The Vice Governor's right to vote is merely contingent and arises only when there is a tie to break. 80  ZAMORA VS. CABALLERO (G.R. No. 147767, January 14, 2004, Third Division) TEMPORARY PRESIDING OFFICER CANNOT VOTE AS A SANGGUNIAN MEMBER IF THERE IS NO TIE TO BREAK. This Court is faced with an act clearly intended to circumvent an express prohibition under the law a situation that will not be condoned. The LGC clearly limits the power of presiding officers to vote only in case of a tie. While acting as presiding officer, BM Osorio may not, at the same time, be allowed to exercise the rights of a regular board member including that of voting even when there is no tie to break. A temporary presiding officer who merely steps into the shoes of the presiding officer could not have greater power than that possessed by the latter who can vote only in case of a tie. 81  CORELLA VS. PHILKONSTRAK (2022) An AO requires the affirmative vote of a majority of ALL the Sanggunian members. Article 107(g) of the IRR of the LGC provides the general rule that no ordinance or resolution shall be passed by the Sanggunian without prior approval of a majority of all the members present. The exception to the general rule is that for ordinances or resolutions authorizing or directing the payment of money or creating a liability, what is needed is the affirmative vote of a majority of all the Sanggunian members, WHETHER PRESENT OR NOT. Simply, the quorum in the general rule depends on the number of the Sanggunian members present while the quorum in the exception depends on the total number of Sanggunian members voted into office. 82  CORELLA VS. PHILKONSTRAK (2022) In the case at bar, Corella asserts that Municipal Ordinance No. 2010-02, the AO in question, directs and authorizes the payment of money; thus, requires a majority vote of all the members of the Sangguniang Bayan, not only of the members present. Thus, since the Sangguniang Bayan of Corella is composed of a total of 11 members, the majority vote of six is required in order for municipal ordinance no. 2010-02 to be valid and binding. However, the municipal ordinance only obtained five affirmative votes, based on the quorum on the Sanggunian members present at that time, which was eight members. Thus, Tocmo contends that Municipal Ordinance No. 2010- 02 is null and void. Consequently, the contract between Corella and Philkonstrak is null and void too. 83  CORELLA VS. PHILKONSTRAK (2022) DILG Central Office, under DILG Opinion No. 103 s. 2001 dated December 18, 2001, that the LGC does not expressly prescribe for a specific voting requirement for the passage of an appropriation ordinance. Hence, the general rule on the passage of an ordinance should be made to apply. The pertinent provision on the matter is Article 107 (g) of the Rules and Regulations Implementing R.A. 7160 x x x. In this case, the DILG Opinion was given as a contemporaneous administrative construction of the term "appropriation ordinance" and "that the Local Government Code does not expressly prescribe for a specific voting requirement for the passage of the same." However, the Court finds the construction of the DILG clearly erroneous. 84  CORELLA VS. PHILKONSTRAK (2022) The term "appropriation," as defined under Section 306, Title V of the LGC "refers to an authorization made by ordinance, directing the payment of goods and services from local government funds under specified conditions or for specific purposes." Juxtaposing this definition with the exception in Article 107(g) of the IRR of the LGC, that "any ordinance x x x authorizing or directing the payment of money x x x, shall require the affirmative vote of a majority of all the sanggunian members," it is express and clear that an "appropriation ordinance" is one such ordinance contemplated in the exception. 85  CORELLA VS. PHILKONSTRAK (2022) The definition of the term "appropriation" in the LGC is clear: [i]t is an authorization made by an ordinance that directs the payment of money. The exception to the general rule of the prescribed voting requirement in the IRR of the LGC is clear: an ordinance that directs or authorizes the payment of money needs a quorum of ALL the sanggunian members, not only of those sanggunian members present. The Court, thus, holds that the DILG Opinion is erroneous, and the CIAC and CA wrongfully applied the same to their Decisions. 86 ❑Application – e.g., Municipality ▪ How many is the total membership of the SB for determining “Majority”? ❑ For Quorum ✓ 8 Regular Members ✓ 1 ABC President ✓ 1 SK Federation President ✓ 1 VM as Presiding Officer Total = 11; Hence, majority is 6 ❑ For Voting × exclude the Presiding Officer Total = 10; Hence, majority is 6 ❑Application to Municipality ▪ 10 members and VM (PO) present = 11 ▪ Votes: ✓ 5 members – yes x 5 members – no Questions: 1. Quorum? 2. Will the PO vote? 3. If PO voted yes, is the vote sufficient to enact the AO? ▪ 8 members and PO present = 9 ▪ Votes: ✓ 4 members – yes x 4 members – no ❑Application – e.g., Province ▪ How many is the total membership of the SP for determining “Majority”? ❑ For Quorum ✓ 10 Regular Members ✓ 1 President, Philippine Councilors League–Leyte ✓ 1 President, SK Provincial Federation ✓ 1 President, Provincial Association of Barangay Captains ✓ 1 VG as Presiding Officer Total = 14; Hence, majority is 8 ❑ For Voting × exclude the Presiding Officer Total = 13; Hence, majority is 7 ❑Application to Province ▪ 12 members and VG (PO) present = 13 ▪ 1 member absent ▪ Votes: ✓ 6 members – yes x 6 members – no Questions: 1. Quorum? Yes, required is AL 8 2. Will the PO vote? Yes, there is a tie 3. If PO voted yes, is the vote sufficient to enact the AO? YES. The PO’s yes vote is the 7th vote, thus, COMPLIANT to the minimum 7 votes ❑Application to Province ▪ 10 members and VG (PO) present = 11 ▪ 3 members absent ▪ Votes: ✓ 5 members – yes x 5 members – no Questions: 1. Quorum? Yes, required is AL 8 2. Will the PO vote? Yes, there is a tie 3. If PO voted yes, is the vote sufficient to enact the AO? NO. The PO’s yes vote is the 6th vote, thus, NOT compliant to the minimum 7 votes  STEP 1.4 AUTHORIZE THE BUDGET ❑The enacted AO shall – ❑Be stamped with seal of Sanggunian ❑Recorded in a book kept for the purpose ❑Be signed by the Secretary to the Sanggunian ❑Be presented to the Presiding Officer for his signature ❑Be forwarded to the LCE for approval (Duties of Secretary to the Sanggunian - Sec 469, LGC; Art 122, IRR)  BUDGET AUTHORIZATION ON OR BEFORE ENACT THE APPROPRIATION BEGINNING OF ENSUING YEAR ORDINANCE APPROVE THE APPROPRIATION ON OR BEFORE BEGINNING OF ORDINANCE ENSUING YEAR actions  STEP 2: APPROVE THE APPROPRIATION ORDINANCE (PP. 106-107) The Sanggunian may override the veto by 2/3 vote of all its members Affix his Return the AO with his signature APPROVE VETO objections Veto may be on every partial or total page of Communicated by the LCE to the the AO Sanggunian within 15 (P)/ 10 (C, M) days format  Veto Power of the LCE o The LCE may veto any ordinance – ultra vires (that is, “beyond the powers”); or – prejudicial to the public welfare; and – state his reasons in writing (Sec 55, LGC)  Veto Power of the LCE o The LCE, except the Punong Barangay, shall have the power to veto – – any particular item or items of an AO – an ordinance or resolution adopting a local development plan and public investment program – an ordinance directing the payment of money or creating liability (Sec 55, LGC)  Veto Power of the LCE The veto shall be communicated by the LCE to the Sanggunian within- 15 days – province 10 days - city or municipality Failure to communicate – ❖the ordinance shall be deemed approved as if the LCE had signed it (Sec 54 [b], LGC)  Veto Power of the LCE o The veto shall not affect the item or items that are not objected to o The vetoed item or items shall not take effect unless the Sanggunian overrides the veto – – otherwise, the item or items in the AO of the previous year corresponding to those vetoed, if any, shall be deemed reenacted o The LCE may veto an ordinance or resolution only once (Sec 55, LGC)  Veto Power of the LCE o Sample Format No. 4 – Veto Message - Partial Veto (p. 123) o Sample Format No. 5 – Veto Message - Total Veto (p. 124)  Override of the Veto o The Sanggunian may override the veto of the LCE by two-thirds (2/3) vote of ALL its members o Such override will make the ordinance effective for all legal intents and purposes even without the approval of the LCE (Sec 55 [c], LGC; Art 109 [c], IRR of LGC)  BUDGET AUTHORIZATION ON OR BEFORE ENACT THE APPROPRIATION BEGINNING OF ENSUING YEAR ORDINANCE APPROVE THE APPROPRIATION ON OR BEFORE BEGINNING OF ORDINANCE ENSUING YEAR POST THE APPROPRIATION NLT 5 DAYS AFTER ORDINANCE APPROVAL OF AO how  STEP 3: POST THE AO (P. 107) The Appropriation The Secretary to the Ordinance shall take effect Sanggunian shall cause the after 10 days from the date posting of an ordinance or a copy thereof is posted resolution in the bulletin board at the entrance of the LGU hall and in at least 2 conspicuous places not later than 5 days after approval thereof Image result for REMINDER The text of the ordinance or resolution shall be disseminated and posted in Filipino or English or in a language or dialect understood by majority of the In Tañada vs. Tuvera, the people in the LGU Supreme Court declared that a law “which has not been published has no force and effect.” 4th step EFFECTIVITY AND POSTING OF AO Unless otherwise stated in the ordinance or resolution approving the local development plan and public investment program, the same shall take effect AFTER TEN (10) DAYS from the date a copy thereof is posted - o in a bulletin board at the entrance of the provincial capitol, or city, municipal or barangay hall; AND o in at least two (2) other conspicuous places in the LGU (Sec 59 [a], LGC)  EFFECTIVITY AND POSTING OF AO The Secretary to the Sanggunian shall cause the posting of an ordinance or resolution in the bulletin board at the entrance of the provincial capitol, and city, municipal, or barangay hall, and in at least two (2) conspicuous places in the LGU concerned NOT LATER THAN FIVE (5) DAYS AFTER APPROVAL thereof (Sec 59 [b], LGC)  EFFECTIVITY AND POSTING OF AO The text of the ordinance or resolution shall be disseminated and posted in Filipino or English and in the language or dialect understood by the majority of the people in the LGU, and the Secretary to the Sanggunian shall record such fact in a book kept for the purpose, stating the dates of approval and posting. (Sec 59 [a], LGC)  BUDGET AUTHORIZATION ON OR BEFORE ENACT THE APPROPRIATION BEGINNING OF ENSUING YEAR ORDINANCE APPROVE THE APPROPRIATION ON OR BEFORE BEGINNING OF ORDINANCE ENSUING YEAR POST THE APPROPRIATION NLT 5 DAYS AFTER ORDINANCE APPROVAL OF AO SUBMIT THE APPROPRIATION ORDINANCE FOR REVIEW WITHIN 3 DAYS AFTER APPROVAL OF AO Step 4. Submit the AO for Review (pp. 107-108) o Component cities and municipalities - – Secretary to the Sanggunian - shall forward copies of the approved AO to the Sangguniang Panlalawigan for review – Within 3 days after approval by the LCE (Sec 56, LGC) Step 4. Submit the AO for Review o Provinces, highly urbanized cities, independent component cities and municipalities within the Metropolitan Manila Area – – Secretary to the Sanggunian - transmit to the DBM copies of approved AO for review (Sec 326, LGC)  EFFECTIVITY OF BUDGETS ✓ The ordinance enacting the annual budget shall take effect at the beginning of the ensuing calendar year (Section 320, LGC). ✓ An ordinance enacting a supplemental budget shall take effect upon its approval or on the date fixed therein (Section 320, LGC). ✓ The effectivity of budgets is further subject to compliance with the posting requirements. sample ao  EFFECT OF FAILURE TO ENACT THE BUDGET (pp. 176-177) ❑In case the Sanggunian fails to pass the ordinance authorizing the annual appropriations by January 1st – CONSEQUENCES: oThe AO of the preceding year shall be deemed reenacted ✓Annual and Supplemental Budgets  EFFECT OF FAILURE TO ENACT THE BUDGET ❑CONSEQUENCES: oThe Sanggunian shall continue to hold sessions without additional remuneration for its members until the AO is approved oNo other business shall be taken up in such sessions (Section 323, LGC; Article 415, IRR of LGC)  Effect of Failure to Enact the Budget ❑Items of appropriations deemed reenacted – Salaries and wages of existing positions – Statutory and Contractual Obligations – Essential operating expenses ✓ As authorized in the AB and SBs LGU is in the best position to determine which are essential operating expenses or those which are necessary for the operation of the LGU to carry out its mandate of providing efficient and effective basic services Effect of Failure to Enact the Budget ❑No ordinance authorizing supplemental appropriations shall be passed in place of the annual appropriations (Sec 323, LGC)  IMPLEMENTATION OF REENACTED BUDGET Local Treasurer 1. Excludes from the estimates of income for the preceding fiscal year those realized from non-recurring sources 2. Compares the revised income estimates with aggregate reenacted appropriations  IMPLEMENTATION OF REENACTED BUDGET Local Treasurer 3. If income is less than appropriations, advise the Sanggunian concerned ◼ Sanggunian, within 10 days from receipt of advice, make necessary adjustments ◼ The revised appropriations authorized by the Sanggunian shall then be the basis for disbursements (Sec 323, LGC)  Duration of the Reenacted Budget ❑The reenacted budget shall remain in force and effect until the ordinance authorizing the proposed appropriations is passed by the Sanggunian (Sec 323, LGC) BUDGET REVIEW  BUDGET REVIEW (pp. 127-163) 3rd phase in the budget process Purpose - To determine if Appropriation Ordinance (AO) has complied with: ✓ budgetary requirements and general limitations in the Local Government Code of 1991 (LGC) ✓ other applicable laws Start - reviewing authority receives the AO End - issuance of the review action  LEGAL BASES Within three (3) days after approval of the ordinance authorizing annual or supplemental appropriations, the Secretary to the Sanggunian shall forward the said ordinance to the DBM Regional Office (RO) or Sangguniang Panlalawigan (SP) for review (Sec. 56 in relation with Secs. 326 and 327, LGC)  LEGAL BASES “The [DBM] shall review ordinances authorizing the annual or supplemental appropriations of provinces, highly-urbanized cities, independent component cities, and municipalities within the Metropolitan Manila Area in accordance with the immediately succeeding section.” (Sec. 326, LGC) “The sangguniang panlalawigan shall review the ordinance authorizing annual or supplemental appropriations of component cities and municipalities in the same manner and within the same period prescribed for the review of other ordinances.” (Sec. 327, LGC)  KEY PLAYERS Official/Office Function Secretary to the Forward AO to reviewing authority – SP/DBM- Sanggunian RO (Sec. 56 in relation with Secs. 326 and 327, LGC) Sangguniang Review the AO of component cities and Panlalawigan municipalities within the province (Sec. 327, LGC) Provincial Finance Assist the SP in the review and evaluation of Committee budgets of component cities and municipalities and recommend the appropriate action thereon (Sec. 327, LGC)  KEY PLAYERS Official/Office Function DBM ROs Review the AO of provinces, HUCs, ICCs, and municipalities within the Metropolitan Manila Area (Sec 326, LGC) Civil Society Check the LGU compliance with the budget Organizations review, following the Handbook on the (CSOs) and Participation of CSOs in the Local Budget Private Sector Process  REGLEMENTARY PERIOD OF REVIEW The Appropriation Ordinance of provinces, highly-urbanized cities, independent component cities, component cities and municipalities shall be reviewed within 90 days from receipt of copies of such ordinances (Sec 327, LGC)  COMMON QUESTION Can the budget already be implemented pending the review thereof by the sanggunian?  Steps in Budget Review 1. Check the AO and appended budget documents 2. Review the AO 3. Prepare and issue the Review Action HOW IS THE BUDGET REVIEW DONE? Step 1 – Check the AO with the Appended Budget Documents – FOR ANNUAL BUDGET AB Checklist (LBR Form No. 1A, p. 136) – FOR SUPPLEMENTAL BUDGET SB Checklist (LBR Form No. 1B, pp. 137-138) HOW IS THE BUDGET REVIEW DONE? Incomplete Submission - Lack of required documents or signatures AO shall not be reviewed and shall be officially returned, in writing, by the DBM RO or SP ✓to the LGU concerned through its Secretary to the Sanggunian ✓requiring the resubmission of the same with the necessary budget documents and/or signatures HOW IS THE BUDGET REVIEW DONE? Step 2. Review the AO ❑as to compliance with – ✓budgetary requirements (Sec 324, LGC) ✓general limitations (Sec 325, LGC) ✓requirements of other provisions of LGC and other applicable laws  FAILURE TO REVIEW WITHIN THE 90-DAY PERIOD ❑If within 90 days from receipt of the copy of AO, the DBM RO or Sanggunian Panlalawigan takes no action thereon shall be deemed to have been reviewed in accordance with law and shall CONTINUE to be in full force and effect (Sec. 327, LGC) HOW IS THE BUDGET REVIEW DONE? ▪ Step 3. Issue the Review Action ❑Prepare the Table Recapitulating the Findings and Possible Review Action (LBR Form No. 2) Illustrative Example (pp. 139-152)  REVIEW ACTIONS Declare the AO OPERATIVE IN ITS ENTIRETY When it fully complies with the budgetary requirements and general limitations set forth under LGC (Sec. 327, LGC) Does not violate any other provisions of laws  REVIEW ACTIONS Declare the AO OPERATIVE IN ITS ENTIRETY, SUBJECT TO CONDITIONS - Certain items of appropriation require prior clearance or documentation Certain items of appropriation require prior approval by appropriate authorities  REVIEW ACTIONS Declare the AO OPERATIVE IN ITS ENTIRETY, SUBJECT TO CONDITIONS - Certain items of appropriation are found to be deficient from what is prescribed by law and need to be increased (e.g., insufficient provisions for PhilHealth, GSIS premiums for some employees) ❑except in cases where the AO has to be declared inoperative in its entirety  REVIEW ACTIONS Declare the AO OPERATIVE IN ITS ENTIRETY, SUBJECT TO CONDITIONS - Other conditions that need to be complied with to make the parts of the AO operative.  REVIEW ACTIONS Declare the AO INOPERATIVE IN ITS ENTIRETY When appropriation exceeds estimates of income (Sec. 324 [a], LGC) Non-provision or insufficient provision for any of the budgetary requirements under Sec. 324 of LGC  REVIEW ACTIONS Declare the AO INOPERATIVE IN ITS ENTIRETY Non-provision or insufficient provision of the 20% of the NTA for development projects (Sec. 287, LGC) When ALL the projects included in the AO are different from those listed in the AIP  REVIEW ACTIONS Declare the AO INOPERATIVE IN ITS ENTIRETY When the AIP is approved/adopted by the Sanggunian after the enactment of the AO for Annual Budget Sec. 305 (i) of LGC states that, “local budgets shall operationalize approved local development plans”  REVIEW ACTIONS Declare the AO INOPERATIVE IN ITS ENTIRETY When no sufficient appropriation is provided for payment of loans and other indebtedness incurred or when no provision is made to redeem or retire bonds, debentures, securities, notes and other obligations issued (Sec. 303, LGC)  REVIEW ACTIONS ❑ Declare AO INOPERATIVE IN PART – When some items are contrary to limitation or in excess of the amount prescribed by LGC (e.g., PS Limitation, Discretionary Fund…) When some items have no legal basis (e.g., COLA, EPSA [see Veloso vs. COA; G.R. No. 193677, September 6, 2011])  REVIEW ACTIONS ❑ Declare AO INOPERATIVE IN PART – When some PPAs not included in the approved AIP are funded under the annual/ supplemental budget When the amount appropriated in the AO is higher than the amount provided in the AIP for the same PPA  EFFECTS OF REVIEW ACTION ❑AO operative in its entirety - AO shall continue to be in full force and effect ❑AO operative in its entirety, subject to conditions ✓items not subject to conditions shall continue to be in full force and effect ✓items of appropriation subject to conditions shall take effect only upon compliance with the conditions imposed  EFFECTS OF REVIEW ACTION ❑AO inoperative in its entirety 1. AO loses force and effect If it is the ordinance authorizing the AB declared inoperative in its entirety LGU to operate under a reenacted budget effective immediately until such time that the new ordinance authorizing the annual appropriations is enacted and approved  EFFECTS OF REVIEW ACTION 2.Local Treasurer shall not make further disbursements of funds from any of the items of appropriation declared inoperative, disallowed, or reduced (Sec 327, LGC) 3. The budget shall be revised to comply with the provisions of law and authorized through another AO to be submitted to the reviewing authority  EFFECTS OF REVIEW ACTION ❑AO inoperative in part: The local treasurer shall not make further disbursements of funds from any of the items of appropriation declared inoperative, disallowed, or reduced (Sec 327, LGC) Only the items of appropriation that have not been declared inoperative, or have not been disallowed, shall continue to be in full force and effect FORMAT OF THE REVIEW ACTION ❑The review action by the DBM RO shall be in the form of a letter, while that of the SP shall be in the form of a Resolution. All the findings must be disclosed in the review action. ✓Sample Formats of Review Letters and Resolutions (pp. 155-162) NATURE OF THE REVIEW ACTION ❑does not amend the act of the Sanggunian as embodied in the AO ❑primary purpose is to determine whether the AO has complied with the provisions of law, rules, and regulations NATURE OF THE REVIEW ACTION ❑findings of reviewing authority merely enumeration of infractions of budgetary requirements, general limitations and other provisions of LGC and other applicable laws, rules, and regulations recommendations of what specific actions the Sanggunian will take to comply with the provisions of law NATURE OF THE REVIEW ACTION ❑The condition requiring provision for deficiencies shall be acted upon in the next supplemental budget ❑The review action does not authorize an item or items of appropriation that is/are specifically prohibited by law Based on jurisprudence, “For an ordinance to be valid, it shall not violate any law or statute.” (Magtajas vs. Pryce Properties Corp., Inc., 234 SCRA 255)  STAMP OF REVIEW Stamp of review of the DBM RO or SP shall be affixed on every page of the reviewed AO Duly signed by the DBM Regional Director or by the Secretary to the Sanggunian and/or the Presiding Officer, as the case may be Sample format (p. 163) RETURN OF THE REVIEWED AO TO THE LGU The DBM RO or SP shall, within the 90-day reglementary period, advise the Sanggunian concerned, through the LCE, of the action on the AO reviewed (Sec. 327, LGC)  ENFORCEMENT OF ORDINANCES OR RESOLUTIONS AFTER DISAPPROVAL BY REVIEWING AUTHORITY ❑Any attempt to enforce any disapproved ordinance or resolution adopting the local development plan and public investment program, after disapproval by the LCE or by the reviewing authority, shall be sufficient ground for the suspension or dismissal of the official or employee concerned (Art. 112, IRR of LGC)  COMMON QUESTION Can the budget already be implemented pending the review thereof by the sanggunian? YES!!!  FAQs ✓ Budget Authorization ❑ (pp. 260-271, 2023 BOM for LGUs) ✓ Budget Review ❑ (pp. 271-273 , 2023 BOM for LGUs) thank you!!!