PERFORMANCE CHALLENGE FUND FOR LGUs The Performance Challenge

PERFORMANCE CHALLENGE FUND FOR LGUs

The Performance Challenge Fund for Local Government Units (PC Fund) an incentive fund to LGUs in the form of counterpart funding to high-impact capital investment projects in the Annual Investment Program and funded the 20% Development Fund consistent with national priorities seek to rationalize national government intergovernmental transfers to LGUs, and encourage alignment of local development initiatives with national government development thrust and priorities.

OBJECTIVES Recognize good governance performance particularly in the adoption of “good housekeeping” governance areas of planning, budgeting, revenue mobilization, financial management and budget execution, procurement, and resource mobilization Seek improvements in LGU performance by linking incentives/financial grants with performing LGUs based on an established set of requirements and condition Encourage alignment local development programs with national development goals and priorities Stimulate LGU and private sector investments in sectors prioritized by the national government

TARGET BENEFICIARIES LGUs may be targeted based on Option 1: Income class (3 rd class below) Option 2: Alternative indicators of fiscal need (e. g. , income/IRA per capita, or poverty incidence) Option 3: Level of LGUs (provinces, or cities or municipalities) Option 4: Open to all LGUs which pass the eligibility criteria – Seal of Good Housekeeping Number of target LGUs may be limited by the volume of grants that are sizeable enough to be attractive to targeted LGUs P 5 M grant/each for 100 municipalities, or P 10 M grant/each for 50 provinces, or P 10 M grant/each for 50 cities, or

GRANT CONDITIONS AND ELIGIBILITY CRITERIA Eligibility criteria (qualification) comply with the following criteria as seal of good housekeeping in key governance areas of planning, budgeting, revenue mobilization, financial management and budget execution, procurement, and resource mobilization in order to qualify for the grant Grant Condition (competition) qualified LGUs will be selected on the basis of their equity funding from the LGU 20% development fund on investments it would finance using the grant priority to LGUs with partnership agreement and counterpart support with other LGUs and/or private sector.

Seal of Good Housekeeping Area • Good Planning • Sound Fiscal Management • Values Transparency and Accountability • Valuing of Performance Monitoring Indicator Updated and approved Comprehensive Land Use Plan (optional) Updated and approved Comprehensive Development Plan Updated and approved Annual Investment Plan Presence of Executive- Legislative Agenda Result of COA Audit (acceptable level) LGU Annual Budget approved and compliant to legal and statutory requirement Percentage of cost to collect revenues to total local revenues (50% or less) Growth in local revenues over 3 years Presence of Updated Revenue Code (every 5 years) Presence of updated Schedule of Market Values (every 3 years) Regular submission of Statement of Receipts and Expenditures (quarterly) Functionality of Local Special Bodies Transparency of the procurement process Compliance to the Anti-Red Tape Law Full disclosure of local budget and finances, and bids and public offerings through posting in conspicuous places within public buildings in the locality, or in print media of community or general circulation, and in their website Performance Monitoring Tool or Scorecard System being utilized Published State of Local Governance Performance Report, State of Development Report, and Financial Report Awards Received for Exemplary Performance

ALLOCATION OF GRANT OPTION Option 1: P 5 M grant each for 100 qualified municipalities. This will benefit 100 of 1500 municipalities Option 2: P 10 M grant each for 50 Option 4: By Auction 3 grants of P 20 M 40 grants of P 10 M This will benefit 43 LGUs. provinces. This will benefit 50 of 80 provinces. Option 3: P 10 M grant each for 50 cities. This will benefit 50 of 130 cities. PROS More LGUs can access (100 municipalities with counterpart from 100 provinces) With more multiplier effect - 50 provinces with counterpart from atleast 150 municipalities if each province will have at least 3 component municipal/city partners Strengthens the oversight function over component cities and municipalities Provinces can influence their component cities and municipalities to align their projects with provincial and national priorities In view of having denser population, more constituents to benefit from project Encourage competition among LGUs to align projects under DF with national priorities (ranking shall be based on LGU equity funding from the 20% DF) CONS A province may have to provide counterpart to more than 1 municipality Less coverage 100/1500 munis = less impact Prone to political partiality/bias Cities are in less need of financial subsidy that provinces and municipalities, in view of higher IRA share No counterparting from provinces Would still require identification of level of LGU as grant beneficiaries

Illustration of Multiplier Effect for Provinces as Target Beneficiaries P 10 M Performance Challenge Fund Municipal counterpart P 10 M Provincial counterpart Local Development Project Municipal counterpart

UTILIZATION OF GRANTS Project-Specific Matching Grant vs. Local Development Fund “top-up” Will the grants be used to match LGU investments in identified projects or will these be allowed to enhance the overall LDF of the LGU? Project-Specific Marching Grant Local Development Fund “top-up” Variable grant to LGUs based on the Uniform grant to LGUs size of proposed capital investment LGUs will have leeway to project chose projects from a May limit coverage in view of larger menu of investment projects requirements for some projects that support national Will require review of project priorities proposals

ELIGIBLE PROJECTS The grants may support capital investments from a menu of investment projects that support national priorities, particularly PNnoy priority programs on: Improving Social Services (e. g. school buildings, hospital and health centers, housing and settlements), Providing Public infrastructure (e. g. local roads and bridges, railways, ports and wharves), Enhancing Economic Services (e. g. tourism facilities, irrigation systems, post harvest facilities, cold storage facilities, and other economic infrastructures and growth enhancing projects such as market, slaughterhouses, and water supply system) Adapting to Climate Change and Preparing for Disaster (e. g. flood control, reforestation, solid waste management facilities, evacuation centers, early warning and devices and rescue equipment) Promoting Good Governance (Anti-Red Tape/ Anti-Corruption Systems)

ELIGIBLE PROJECTS In financing projects, the PC Fund may be used for the following: as counterpart funds foreign-assisted projects of the LGUs as co-financing for joint projects with other LGUs as counterpart for projects of the LGUs with the private sector in the context of public partnership in establishing more economic activities FC Fund can not be used to finance the following: Tax payment Salaries and recurrent cost Micro credits and loans

FUND MANAGEMENT DILG with the DBM shall jointly administer the PC Fund subject to policy and implementation guidelines which shall be formulated by the PC Fund Management Board shall be headed by the DILG and composed of the DBM, DOF, and League(s) of LGUs. The Fund Management Board shall prescribe the policy guidelines for the effective implementation of the PC Fund including fund utilization and project implementation, and focusing on the following: Mechanics for the availment of grant and utilization of fund, Evaluation guidelines for assessing LGU applications for grant Monitoring & evaluation mechanism to track the progress in the implementation of PC Fund funded projects Post audit procedures of the program. Regional Assessment Team shall be compose of DILG, DBM, DOF and COA to assess LGUs on basic good housekeeping DILG shall as act as the Technical Secretariat of the PC Fund Management Board.

INSTITUTIONAL ARRANGEMENT Fund Management Board -----------(DILG, DBM, DOF, COA and LGU League(s) DILG as Secretariat Regional Assessment Teams. Regional Assessment (DILG, DBM, DOF, COA) Teams Regional Assessment Teams (DILG, DBM, DOF, COA)

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