Legal Basis for Barangay Supplemental Budget: Insights from the Local Government Code and DBM Guidelines in the Philippines

Introduction

In the Philippine local governance framework, barangays serve as the most basic political units, responsible for delivering essential services to communities. Effective financial management is crucial for barangays to fulfill their mandates, and this includes the preparation and enactment of budgets. While annual budgets form the cornerstone of fiscal planning, supplemental budgets provide flexibility to address unforeseen needs or capitalize on additional resources. This article explores the legal foundations for barangay supplemental budgets, primarily anchored in the Local Government Code of 1991 (Republic Act No. 7160, or LGC) and supplemented by guidelines from the Department of Budget and Management (DBM). It delves into the statutory provisions, procedural requirements, funding sources, limitations, and oversight mechanisms, offering a comprehensive overview within the Philippine context.

The Local Government Code as the Primary Legal Framework

The LGC establishes the overarching legal basis for local fiscal administration, including budgeting processes for all local government units (LGUs), with specific applicability to barangays. Enacted to decentralize governance and empower local units, the Code emphasizes fiscal autonomy while ensuring accountability and transparency.

Key Provisions on Budgeting

Under Title Five of the LGC, "Local Fiscal Administration," budgeting is detailed in Sections 305 to 331. Barangays, as LGUs, must adhere to these rules, adapted to their scale.

Annual Budget Requirement (Section 316): Every barangay is mandated to prepare an annual budget covering estimates of income and expenditures for the ensuing fiscal year. This budget must be enacted through an ordinance by the Sangguniang Barangay (Barangay Council) and approved by the Punong Barangay (Barangay Captain).
Supplemental Budgets (Section 321): This section explicitly authorizes supplemental appropriations. A supplemental budget may be enacted when:
- There are funds actually available, as certified by the local treasurer, which were not appropriated in the annual budget.
- Additional funds accrue from new revenue sources not anticipated in the annual budget.
- Savings from previous appropriations become available due to the completion or abandonment of projects, or from unexpended balances.
The provision states: "Supplemental appropriations may likewise be enacted in the event of newly projected revenue sources not included in the annual budget or in case of amounts actually exceeding the anticipated levels." This ensures that barangays can respond to emergent needs without disrupting fiscal discipline.
Funding Sources for Supplemental Budgets (Section 322): Supplemental appropriations must be sourced from:
- Unappropriated balances from the previous fiscal year.
- Newly certified available funds.
- Savings in the appropriations of the annual budget.
Importantly, no supplemental budget can be enacted without a certification from the barangay treasurer confirming the availability of funds.
Procedural Enactment (Sections 319-320): The process mirrors that of the annual budget. The Punong Barangay submits a proposed supplemental budget to the Sangguniang Barangay, which reviews and enacts it via ordinance. Public hearings may be required for transparency, especially if the supplemental budget involves significant reallocations.
Limitations and Prohibitions (Section 325): Supplemental budgets are subject to caps and restrictions:
- Appropriations for personal services (salaries, wages) cannot exceed 55% of the total annual income from regular sources realized in the previous fiscal year for barangays.
- No funds can be appropriated for items disallowed by law or exceeding amounts prescribed by law.
- Supplemental budgets cannot be used to create new positions or increase salaries beyond authorized limits without prior approval from higher authorities.
Review and Approval (Section 327): Once enacted, the barangay supplemental budget is subject to review by the City or Municipal Sangguniang Bayan/Panlungsod to ensure compliance with the LGC. The reviewing body may declare the ordinance inoperative if it finds violations, such as improper funding sources or exceedance of appropriation limits.

These LGC provisions underscore the principle of fiscal responsibility, ensuring that supplemental budgets are not tools for unchecked spending but mechanisms for adaptive governance.

DBM Guidelines: Operationalizing the LGC Provisions

The DBM, as the executive agency overseeing national and local budgeting, issues guidelines to implement the LGC. These are typically embodied in Budget Operations Manuals, Circulars, and Joint Memoranda with other agencies like the Department of the Interior and Local Government (DILG). For barangays, DBM guidelines provide detailed procedural and technical instructions, bridging statutory requirements with practical application.

Core DBM Instruments

Budget Operations Manual for Barangay (BOMB): This manual, periodically updated by DBM, serves as the primary guide for barangay budgeting. It elaborates on LGC provisions, offering templates, forms, and step-by-step processes. Key aspects include:
- Certification of Funds: The barangay treasurer must issue a Certificate of Availability of Funds (CAF) before any supplemental budget proposal. This includes verifying sources like Internal Revenue Allotment (IRA) shares, local taxes, fees, or grants.
- Supplemental Budget Preparation: The manual requires the use of standardized forms (e.g., Supplemental Budget Preparation Forms) detailing proposed additional appropriations, aligned with priority sectors like health, education, peace and order, and disaster risk reduction.
DBM Local Budget Circulars: Various circulars address supplemental budgets specifically:
- Local Budget Circular No. 144 (2023 Update): This circular, among others, provides guidelines on the utilization of the Barangay Development Fund (BDF) and other special funds. It allows supplemental budgets for reallocating unutilized BDF portions, provided they align with the Barangay Development Plan.
- Guidelines on the Release and Utilization of IRA: DBM, in coordination with the Department of Finance, issues annual guidelines on the National Tax Allotment (NTA, formerly IRA). Unexpected increases in NTA shares can trigger supplemental budgets, with DBM requiring prompt reporting and enactment within specified timelines.
Joint Circulars with DILG and COA: For instance:
- DBM-DILG Joint Memorandum Circular No. 1, s. 2016: This emphasizes full disclosure policies, mandating that supplemental budget ordinances be posted in conspicuous places and submitted to the DILG for monitoring.
- Integration with the Commission on Audit (COA) rules ensures that supplemental budgets undergo post-audit to prevent irregularities.

Procedural Steps Under DBM Guidelines

Identification of Need: The Punong Barangay, in consultation with the Sangguniang Barangay, identifies the need for additional appropriations, supported by the treasurer's certification.
Proposal Drafting: Using DBM-prescribed forms, the proposal outlines:
- Estimated additional income.
- Proposed expenditures, categorized by object (e.g., Maintenance and Other Operating Expenses - MOOE, Capital Outlay).
- Justification linking to the Annual Investment Program or Barangay Disaster Risk Reduction and Management Plan.
Deliberation and Enactment: The Sangguniang Barangay conducts sessions, potentially including public consultations, and passes the ordinance.
Submission and Review: The ordinance is forwarded to the city/municipal treasurer and Sanggunian for review within 10 days. DBM guidelines stipulate that any disallowance must be communicated promptly.
Implementation and Reporting: Upon approval, funds are obligated and disbursed. Quarterly reports on budget performance are required under DBM's eSRE (Electronic Statement of Receipts and Expenditures) system.

Special Considerations in DBM Guidelines

Calamity Funds: Under Section 324 of the LGC and DBM guidelines, 5% of regular income is set aside for the Local Disaster Risk Reduction and Management Fund (LDRRMF). Supplemental budgets can realign up to 30% of this fund for quick response in declared calamities.
Gender and Development (GAD) Budget: At least 5% of the barangay budget must be for GAD programs; supplemental budgets must not dilute this allocation.
Youth and Senior Citizens Funds: Mandated allocations (e.g., 10% for Sangguniang Kabataan) must be preserved or augmented proportionally.
Pandemic or Emergency Responses: Post-COVID guidelines (e.g., DBM Circulars from 2020-2022) allowed expedited supplemental budgets for health emergencies, setting precedents for future crises.

Challenges and Compliance Issues

While the LGC and DBM frameworks provide robust bases, challenges persist:

Fund Availability: Barangays often face delays in NTA releases, complicating supplemental budget timing.
Capacity Building: Many barangay officials require training on DBM forms and procedures, addressed through DILG's capacity development programs.
Accountability: Violations, such as unauthorized expenditures, can lead to administrative sanctions under the LGC (Section 389) or criminal liability under anti-graft laws (RA 3019).

COA annual audits ensure compliance, with findings potentially leading to disallowances or surcharges.

Conclusion

The legal basis for barangay supplemental budgets in the Philippines is firmly rooted in the LGC's provisions for fiscal autonomy and supplemented by DBM's operational guidelines, ensuring responsive yet disciplined financial management. By adhering to these frameworks, barangays can effectively address community needs, promote sustainable development, and uphold transparency. Continuous updates to DBM issuances reflect evolving governance demands, reinforcing the system's adaptability in the Philippine local context.