PURSEpective ON CODEF (PART 4 of 4)

So, when the law says “addition”, then why “subtract”?

In the Local Budget Memorandum or LBM No. 77, dated May 15, 2018, the IRA for provinces, cities, municipalities and barangays or PCMBs are lower that the amounts actually certified by BIR for 2019.  However, the total IRA reflected seems to be at the same level of P575.520 Billion, the fact that DBM deducted the P 6.476B CODEF from the total IRA, it has in effect reduced the total IRA share of PCMBs by P7.771B.  This is because under Sec. 2849 of RA 7160, LGUs, “IN ADDITION TO THE IRA”, shall “be entitled to receive the amount equivalent to the cost of devolved personal services.”

BIR certified the mandated IRA shares of the PCMBs based on the total IRA, as provided for in Sec. 284 and 285 of RA 7160. In contrast, DBM’s computation for the PCMBs’ respective IRA shares were lower when compared with BIR’s certification by P6.476B due to the deduction of the cost of devolved functions from the Total IRA.  The mandated IRA share of PCMs were reduced by P 2.845B, P 1.031 B, and P2.599 B, respectively. Barangays, however, get no share from the CODEF because the functions and services were not devolved to their level. Nonetheless, the Barangays’ IRA share was, in effect, also reduced by P1.295B.   (See Table 1 below)

Table 1: Comparative FY 2019 IRA share for PCMBs (Source:  BIR-certified IRA and DBM LBM 77) – File: League of Provinces of the Philippines

It was DBM that sought this legal opinion from the Department of Justice (DOJ) in 1992 when it tried to insert  Special Provision No. 110 in the 1993 NEP to deduct the CODEF from the IRA but the House Committee on Appropriations insisted on the intent of Sec. 284 of RA 7160.  DOJ already ruled on this matter in its DOJ Opinion 151, s. 1992 11 upholding the position of the House Committee on Appropriations that the “earmarking” of the CODEF from the IRA in effect reduced the IRA shares of LGUs, and, therefore, violative of Sections 284 and 285 of the Local Government Code”.  Former DOJ Sec. Franklin Drilon said in his Opinion that:   “Clearly, therefore, there is no basis for DBM to set aside the sum of P4,960,655,000 for augmentation of deficiencies in the cost of devolved percentage share in the IRA.”  And in fact, this Special Provision was deleted by Congress that year.  The CODEF distribution is subject to DBM rules and regulations.  Why should it, therefore, be deducted from the IRA when the IRA should be automatically released and should not be subject to any lien nor holdback?

Despite this DOJ ruling, DBM has managed to still deduct the CODEF from the total IRA through its Local Budget Memorandum that in effect reduced the respective IRA shares of PCMBs, even if this is glaringly inconsistent with those certified by BIR.  Such has been the case since 1992.  As a result, the total IRA shortfall has amounted to P 196 Billion for FYs 1995-2019, broken down as follows:  P69B for Provinces, P22B for cities, P65 B for municipalities, and P 40 B for Barangays. 

So, when the law says “addition”, then why “subtract”?  There is actually no legal basis for this subtraction policy.  Nonetheless, DBM’s “PURSEpective” on this has prevailed.  We are hopeful that this will be curtailed under the Duterte administration through the issuance of a supplemental LBM for FY 2019 that is at least consistent with what is duly certified by the BIR. 

If only we had the proper mechanism to validate and comment on the IRA share of LGUs annually, these could have been avoided.  The national government should really provide an avenue where LGUs can effectively be proactive rather than reactive, i.e. after the fact that the IRA has already been diminished.  If left unresolved, this will further aggravate the ability of LGUs to adequately provide basic services to the people. 


9 RA 7160, Sec. 284.  “Allotment of Internal Revenue Taxes. - Local government units shall have a share in the national internal revenue taxes based on the collection of the third fiscal year preceding the current fiscal year as follows: (a) On the first year of the effectivity of this Code, thirty percent (30%); (b) On the second year, thirty-five percent (35%); and (c) On the third year and thereafter, forty percent (40%).  x x x  . . . Provided, further, That in the first year of the effectivity of this Code, the local government units shall, IN ADDITION TO THE THIRTY PERCENT (30%) INTERNAL REVENUE ALLOTMENT, which shall include the cost of devolved functions for essential public services, BE ENTITLED TO RECEIVE THE AMOUNT EQUIVALENT TO THE COST OF DEVOLVED PERSONAL SERVICES.” (UNDERLINING SUPPLIED)

10 Special Provision No. 1, NEP 1993:  “1.  Release of Funds.  Of the amount herein appropriated and pursuant to Sec. 284 of RA 7160, the Local Government Code of 1991, the sum of P31,439,345,000 shall be apportioned among the local government units in accordance with the formula provided under Sec. 285 of the Code and shall be released directly by the Department of Budget and Management to the local government units concerned without need of any further action and which shall not be subject to any lien or holdback  that may be imposed by the national government for whatever purpose.  The remaining sum of P4,960,655.000 shall cover deficiencies in the cost of devolved functions and activities and shall be released to the concerned local government units in accordance with the actual locational distribution of concomitantly transferred personnel and facilities pursuant to such rules and regulations as may be issued for the purpose by the Department of Budget and Management.”
11 DOJ OPINION NO. 151 s. 1992.  Legality/validity of Special Provision No. 1 of the Internal Revenue Allotment of the CY 1993 National Expenditures Program   which earmarked P31,439,345,000.00 for appointment among local government units and P4,960,000.00 (from the IRA) for augmentation of deficiencies in the cost of devolved functions and activities.    see link:  https://www.doj.gov.ph/opinion.html?y=1992

Excerpts from the DOJ Legal Opinion (151, s. 1992): “It bears emphasis that the provision of Sec. 284 is couched in mandatory language which accepts no other interpretation other than the percentage of IRA due the LGUs in the second year should be given intact to the LGUs concerned and subject only to the aforementioned circumstance and conditions. There is no mention that a certain percentage of the IRA should be allocated or set aside to cover the costs of devolved functions and activities.  It is only in the first year (1992) of the effectivity of the new LGCode that the IRA share of LGUs shall include the cost of devolved functions for essential public services.  Clearly, therefore, there is no basis for DBM to set aside the sum of P4,960,655,000 for augmentation of deficiencies in the cost of devolved percentage share in the IRA.  Stated otherwise, it is up to the LGUs concerned how much amount or what percentage of the IRA due them for CY 1993 should be set aside to cover the costs of devolved functions and activities subject only to the specific provisions of Article 384 of the Rules and Regulations of the LGCode.  In view of the foregoing, we agree with the position taken by the Chairman and members of the Appropriations Committee that the earmarking of five percent (5%) of the CY 1993 IRA in the amount of P4,960,655,000 to be used for the ‘augmentation scheme” as conceptualized by the Special provision in effect reduced the IRA shares of the LGUs, and therefore, violative of Sections 284 and 285 of the Local Government Code.”     (Signed by former DOJ Secretary Franklin Drilon)

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About the Author
Sandra Tablan Paredes is presently the Executive Director of the League of Provinces of the Philippines (LPP) since October, 2016 although she previously served LPP as Director from 1997 to 2004 Sandy helped organize ULAP in 1998 with former Governor Joey Lina and advocated for the LGUs' rightful IRA share, among other league advocacies, programs and projects to help local officials ensure local and fiscal autonomy and good governance. Recently served as concurrent interim Executive Director of ULAP from Jan-March 31, 2017. You can email her at This email address is being protected from spambots. You need JavaScript enabled to view it.
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