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Submission of LGU Annual Budget

Background

In order to prevent a situation wherein local government units (LGU) will operate in a re enacted budget and frustrate the needed developmental initiatives and fiscal reforms, the Department issued Memorandum Circular No 2021 to provide guidance and remind all Local Chief Executives (LCEs), Vice-Mayors and members of the Sanggunian on the timely submission and enactment of the LGU s annual appropriation budget for fiscal year 2022. 

Of recent, complaints have reached the Department that there are local sanggunians which whimsically, capriciously and arbitrarily use their legislative authorization power under Section 319 of RA 7160 or the Local Government Code of 1991 (LGC) in the enactment of the local government unit’s annual budget resulting to re enacted budgets 

In line with this and to bolster the call against the practice of re enacting the budget, the Department strongly enjoins all Local Chief Executives (LCEs) Vice-Mayor and Members of the Sanggunian to ensure the timely passage of the Local Annual Appropriation Ordinance. 

The sanggunians are guided by Local Budget Circular No. 112 with subject “Budget Operations Manual for Local Government Units” 2016 Edition, issued by the Department of Budget and Management (DBM) in the budget authorization phase, as follows: 

2.5 Steps in the Budget Authorization Phase

Step 1 XXX

1.2 Evaluate the Budget 

The Sanggunian, with the assistance of the Local Finance Committee (LFC) shall evaluate and deliberate on the Local Expenditure Program (LEP) in terms of compliance with the budgetary requirements and general limitations.

The Receipts Portion in the LEP

* To check the budget year’s aggregate estimated income which will be compared with the aggregate expenditure program (Section 234 (a), RA 7160)

* To check if the taxes and fees identified as sources of the estimated income are in accordance with the approved Local Revenue Code

* To check if the estimated receipts form RPT correspond to the total amount of due and demandable RPT including delinquent accounts  

The Expenditure Program 

* Determine the overall level of Appropriatins by department/office/unit and special purpose appropriations and the overall total 

* To check the provisions for associated PS costs, Philhealth, GSIS premiums, Pag-IBIG, PERA, Yearend Bonus, Cash Gift, RATA

* To check the provision for debt services does not exceed the ceiling required by law which 20% of the regular income of the LGU concerned (Section 324 (b) RA 7160)

* To check the provision for LDRRMF is not less than 5% of the estimated regular income required by law (RA101)

* To check that the provision from IRA for development projects is not less than 20% required by law (Section 287, RA 7160)

* To check that the provision for discretionary expenses, if any, does not exceed 2% of the actual receipts derived from RPT in the next preceding year (Section 325 (h) RA 7160 and 

* To verify if the project in the budget are consisted with the AIP

All LCEs, VMs and members are reminded on their compliance on the timelines and deadlines for the timely submissions and enactment of the annual budget

Activity Legal Basis Deadline

Preparation of the Budget by the LCE Section 318 of the LGC October 16

Legislative Authorization of the Budget Section 319 of the LGC December 31

Failure to enact the required ordinance for the FY 2022 Annual Budget, the budget for the previous year shall be re-enacted and will have the following disadvantages :

1. 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 for the preceding year shall be deemed re-enacted and disbursement of funds shall be in accordance therewith 

2. No creation of positions 

3. No new programs, projects and activities 

4. No utilization of the increase in the LGU’s share in the internal revenue allotment for the year since the same is not covered by an Appropriation Ordinance

5. Non - implementation of non - recurring activities no matter how vital they may be and 

6. No supplemental appropriations 

Updates

• Annual Budget Update

Legal Bases / References

• MC 2022 - 004 Monitoring of the Submission and Approval of FY 2022 Budget of Local Government 

• MC 2021 - 109 Gampanin ng mga Lokal na Opisyal sa Pagsumite at Pag-papaganap ng Badyet para sa mga Lokal na Pamahalaan sa buong Bansa para sa susunod na Taon 

• RA 7160 The Local Government Code of 1991

LGMED References

• R10-LGMED-2025-09-17-009 MONITORING OF THE SUBMISSION AND APPROVAL OF FY 2026 BUDGET OF LOCAL GOVERNMENTS