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

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Option1: Income class (3rd 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


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P5M grant/each for 100 municipalities, or
P10M grant/each for 50 provinces, or
P10M 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: P5M grant each for
100 qualified municipalities.
This will benefit 100 of 1500
municipalities
Option 2: P10M grant each for




Option 4: By Auction
3 grants of P 20M
40 grants of P 10M
This will benefit 43 LGUs.


50 provinces. This will benefit
50 of 80 provinces.
Option 3: P10M 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 atleast150
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
P10M
Performance
Challenge Fund
Municipal
counterpart
P 10 M
Provincial
counterpart
Local
Development
Project
Municipal
counterpart
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 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:
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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:


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as counterpart funds for 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:

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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.

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:

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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
TeamsRegional Assessment
Regional Assessment
(DILG, DBM, DOF, COA)
Teams
Regional Assessment
Teams
(DILG, DBM, DOF, COA)
Teams
(DILG, DBM, DOF, COA)
(DILG, DBM, DOF, COA)
THANK YOU…