Allowable “Non-Essential” Expenditures Under a Reenacted LGU Budget (Philippine Context)

Synopsis

When a local sanggunian fails to pass the annual appropriation ordinance (AAO) on time, the previous year’s appropriation ordinance is deemed reenacted until a new AAO takes effect. In that interim, LGUs may continue funding recurring and previously authorized items but cannot introduce new programs, projects, and activities (PPAs) or expand purposes beyond what the prior ordinance allowed. This article explains what that means for so-called “non-essential” spending—e.g., travel, trainings, representation, celebrations, memberships, advertising—and provides a compliance checklist for budget officers, BACs, and auditors.

Bottom line: If the expense was a recurring MOOE item already authorized last year and is necessary, reasonable, and directly connected to official functions, it can usually continue at last year’s level and purpose. Anything new, expanded, or capital-intensive must wait for the new AAO (or be covered by a lawful special/supplemental appropriation and funding source).

Legal Framework (key principles)

Local Government Code (LGC) core rules on public finance (e.g., fiscal responsibility; appropriations exclusively for public purposes; limitations on personal services; accountability of officers).
Reenactment rule (LGC): If the AAO is not passed, the immediately preceding AAO is deemed reenacted—so only items actually appropriated there may be obligated, generally at prior-year levels and for the same purposes.
Appropriation specificity: Funds are purpose-bound. Even during reenactment, officials cannot realign to unappropriated purposes absent proper legal authority.
Procurement law: The APP/PPMP of the prior year governs routine procurements; no new lines for new PPAs; emergency or alternative methods are allowed only under the usual statutory conditions.
COA audit standards: Necessity, reasonableness, and direct relation to official functions remain controlling tests. “Lavish, excessive, extravagant or unconscionable” expenditures are disallowable—reenacted or not.

(Statutory text and implementing guidance use varying terms; this article synthesizes the commonly applied principles in LGU audits.)

What “Reenacted” Actually Covers

A reenacted budget extends the previous year’s authorized items until a new AAO is effective. In practice:

Allowed to continue
- Recurring Personal Services (PS) for existing plantilla positions and authorized benefits mandated by law.
- Recurring MOOE line items that supported ongoing operations last year (e.g., office supplies, utilities, communications, routine travel, repairs & maintenance, janitorial/security contracts, subscriptions already in place).
Not allowed / must wait
- New positions, reclassification/upgrading not previously authorized, or increases without legal basis.
- New PPAs, new capital outlay (CO), or expansion of scope/purpose beyond prior authorization.
- Spending on items that had no line or were zero in the prior AAO (unless covered by a valid supplemental appropriation with funding source).

Defining “Non-Essential” in Practice

“Non-essential” has no single statutory definition. In LGU finance, it colloquially refers to discretionary or support-type MOOE that is not strictly indispensable to basic service delivery. The legality of paying these items during reenactment turns on (a) prior authorization, (b) necessity/reasonableness, and (c) purpose alignment.

Examples of “Non-Essential” Categories and Their Typical Treatment

Category	Generally Allowable Under Reenacted Budget?	Conditions/Boundaries
Local travel (meetings, coordination)	Yes, if previously appropriated as a generic travel MOOE	Must be official, necessary, within prior-year purpose and aggregate level; foreign travel is scrutinized and often deferred unless clearly necessary and previously authorized.
Trainings/seminars	Yes, if last year’s AAO carried a training MOOE and the training is needed for functions	Keep within prior-year cost ceilings, align with competency plans; avoid new large-scale events or foreign programs not contemplated before.
Representation/entertainment	Cautiously yes if previously appropriated	Limited, modest, directly tied to official duties (e.g., hosting mandated meetings). Extravagant or ceremonial spending risks disallowance.
Anniversary/Foundation/Fiesta events	Usually no unless a specific recurring line existed	If last year’s AAO had a specific, recurring line for a modest civic event, it may continue at prior levels; new or expanded festivities should wait.
Advertising/publicity	Yes, if prior AAO carried an information/IEC line	Must be tied to public information mandates; no image-building.
Membership dues & subscriptions	Yes, if continuing memberships/subscriptions existed	Renewals OK; new memberships generally wait.
Gifts/tokens/prizes	Generally risky	Allow only if specifically appropriated previously for a program (e.g., livelihood contest prizes) and clearly for public purpose; otherwise avoid.
Donations/financial assistance	Limited	Must satisfy LGC authority and prior appropriations (e.g., calamity assistance with legal basis). New grant programs should wait.
Vehicle rentals/fuel for field work	Yes, if part of prior MOOE	Keep trips official and documented; no expansion beyond typical operational needs.

Heuristic: If you can point to a prior-year line item, explain why the expense is operationally necessary today, and show that the amount/purpose did not expand, you’re likely within bounds.

Items That Are Generally Not Allowed During Reenactment

New or expanded PPAs (e.g., launching a new scholarship program, new livelihood grants, new festivals).
Capital Outlay not carried in the prior ordinance (new vehicles, heavy equipment, building construction, major IT systems).
Creation of positions, salary upgrades without a specific legal mandate or prior appropriation.
Multi-year contracts starting year-one obligations that presuppose new appropriations (unless clearly and lawfully charged to an existing prior-year item and within its purpose/level).
Large-scale branding/advocacy campaigns that change scope beyond prior information lines.

Special Funds and Accounts: Are They Frozen?

Not everything moves with the AAO. Know which funds are insulated by their own statutes/rules:

Trust Funds (including conditional grants, donations): Usable strictly for their trust purpose, unaffected by reenactment—but only for that purpose.
DRRM Fund: Governed by disaster law and local DRRM plans; quick response components and prevention/mitigation uses continue if properly programmed. New projects outside approved plans should wait.
Economic Enterprise Funds / Special Accounts: Operations may continue if supported by their own valid income/appropriation structure that carried over.
SEF (Special Education Fund): Appropriated by the Local School Board; execution follows SEF rules and approved program. New SEF initiatives need proper board approval.

20% Development Fund (DF): Because DF finances projects chosen annually via the AIP, new DF projects should generally wait. Ongoing, previously obligated projects can continue; avoid starting new ones that were not in last year’s approved list.

Procurement Under a Reenacted Budget

APP/PPMP: Use the prior-year APP for recurring goods/services. Avoid adding new lines for PPAs that lack prior appropriation.
Lot sizing & frequency: Keep same scale/periodicity as the prior year where practicable; avoid “front-loading” that effectively increases last year’s levels.
Alternative methods: Allowed only if conditions are met (e.g., small value, lease of venue) and the underlying purpose is a valid, previously appropriated item.
Framework/continuing contracts: Renew only if the prior AAO contemplated them and renewal is within previously authorized levels/purposes; otherwise, bridge with the most conservative compliant option.

Using Supplemental Appropriations While Reenacted

A supplemental budget may be passed if there is a valid funding source (e.g., certified savings or new revenue) and the appropriation observes all LGC requirements. However, using a supplemental to launch “new” non-essential initiatives while the main AAO is pending is legally sensitive and invites audit risk. Limit supplemental action to indispensable, legally supported needs (e.g., unforeseen but necessary MOOE for basic services) and document the necessity and funding source meticulously.

Guardrails That Still Apply

Personal Services caps and other LGC fiscal limitations still bind.
Public purpose, necessity, reasonableness remain the audit tests—especially for non-essential spending.
No diversion/realignment to items not covered by the prior AAO without proper legal authority.
Documentation: Travel orders, activity designs, attendance lists, utilization reports, BAC minutes, market studies, and price reasonableness evaluations are critical.

Practical Playbook (Checklists & Examples)

A. “Can We Pay This?” Checklist

Is there a prior-year appropriation line for this exact purpose/object of expenditure?
Is the activity recurring, ordinary, and necessary to perform mandated functions?
Will the total spending stay within last year’s level for that line (or a defensible, proportionate share if seasonal)?
Does it directly relate to official duties (not private benefit, not image-building)?
Are documents complete (program of activity, quotations, travel orders, post-activity report, etc.)?
Not a capital outlay / new PPA / position?
No law, ordinance, or circular prohibits or limits it (e.g., austerity or anti-extravagance rules)?

If your first No is at steps 1–3, defer until the new AAO (or secure a proper supplemental appropriation with funding source and legal basis).

B. Safe Illustrative Calls (MOOE that often pass)

Quarterly office supplies re-order at historical levels.
Local travel for mandated meetings, inspections, and monitoring.
Modest training for compliance topics already calendared (e.g., procurement, records management).
Routine repairs & maintenance of existing facilities/equipment.
Utilities, internet, software renewals already in place last year.
Membership renewals in leagues/associations that were previously paid and are tied to official mandates.

C. Red-Flag Calls (Likely to be Disallowed)

Launching a new cultural festival or expanding last year’s event budget.
Foreign travel not previously contemplated or lacking clear necessity.
New vehicle or IT system acquisition.
Honoraria/allowances not expressly authorized last year or by law.
Public relations campaigns with no prior line or that go beyond public information needs.

Roles & Documentation Tips

Budget Officer: Issue a reenactment spending memo mapping each allowable routine expense to its prior-year line, with conservative quarterly allotments.
BAC/Procurement: Publish an interim APP that mirrors prior-year recurring items; tag anything deferred pending the new AAO.
Departments: Attach purpose mapping sheets (Prior AAO → Object Code → Current Activity) to every request.
Accounting/Treasury: Enforce “same-purpose, same-level” controls; flag attempts to split or front-load procurements.
Internal Audit: Pre-audit spot checks on non-essential items; verify necessity and documentation.

Frequently Asked Questions

1) Can we still hold our LGU’s foundation day program? Only if the prior AAO had a specific, recurring line for it and you keep within that purpose and historical level. Any expansion (new shows, larger prizes, new venues) should wait.

2) May we send staff to a national conference? If the travel/training MOOE existed last year and attendance advances mandated functions, yes—local and modest by default. Foreign trips or premium events require heightened justification and are best deferred.

3) Our copier lease expired; can we renew or re-bid? Yes, if last year’s AAO funded the service and you’re renewing or re-procuring substantially the same service at comparable scope/cost.

4) Can we realign savings from utilities to buy tablets? No, not to a new capital outlay that lacked prior appropriation for that purpose.

5) What about payments from trust funds (e.g., a donor-funded project)? Trust funds are usable only for the trust purpose and are not frozen by reenactment—provided the expense is within the trust agreement and approved plan.

Model Policy Snippet (for your Administrative Order)

“Until the new AAO takes effect, departments shall incur obligations only against items appropriated in the immediately preceding AAO, limited to recurring and indispensable operating expenses, and strictly for the same purposes and levels. No new PPAs, capital outlays, or expansions shall be initiated. All non-indispensable MOOE (travel, trainings, representation, celebrations, publicity, memberships) must (a) cite the exact prior-year line, (b) demonstrate necessity/reasonableness, and (c) meet all documentation and procurement requirements. Violations are subject to disallowance and administrative accountability.”

Takeaways

Reenactment is not a spending freeze—it’s a freeze on novelty and expansion.
“Non-essential” items live or die on prior authorization, necessity, and proportionality.
When unsure, treat the item as deferred or seek a proper supplemental appropriation with a defensible funding source.

This article is general guidance. For specific cases, examine your prior AAO, AIP/APP, special fund rules, and the most recent COA/DBM guidance applicable to your LGU.