THE GOVERNMENT issued new rules giving local government units (LGUs) more leeway to decide on which projects to support with their development funds (DFs), but added reporting requirements to ensure accountability.

Joint Memorandum Circular (JMC) No. 1 was issued by the Departments of Finance, (DoF) Budget and Management (DBM) and the Interior and Local Government (DILG) to overhaul the rules for using DFs.

LGUs are required to set aside at least 20% of their annual internal revenue allotment for development projects — the so-called 20% DF.

“This JMC is being issued to increase the responsiveness of the guidelines and promote greater autonomy, transparency and accountability in the LGUs’ appropriation and utilization of their respective 20% DFs, as provided under RA No. 7160,” according to the circular dated Nov. 4 and published on Wednesday. RA 7160 is the Local Government Code.

LGUs now have more freedom to decide on which projects and programs to support with 20% DFs, removing specific restrictions contained in the old rules, according to John Aries S. Macaspac, director of the DBM’s Local Government and Regional Coordination Bureau.

“The LGUs will now have greater leeway and flexibility to choose programs and projects, which they deem are responsive to the development needs of their respective constituents, since we did not prescribe the specific project menu, but merely general policies that should be observed by LGUs,” Mr. Macaspac said in a Viber message Thursday.

The circular noted that LGUs can use the funds to support priority development projects based on their medium-term plans. Such projects must be identified as necessary, vital in promoting general welfare; well-planned; and ready for procurement and implementation.

It said local governments can also seek technical assistance from agencies in the national government such as the Agriculture department, DBM, DoF, DILG, Public Works department, and the National Economic and Development Authority, among others, to help them assess which relevant and responsive projects to prioritize.

The funds cannot still be used for personnel service expenditures such as salaries, overtime pay and other benefits, for administrative and travel expenses, registration and participation fees for training and seminars, payment for furniture, equipment and appliances of administrative offices, as well as to buy or repair vehicles.

However, Mr. Macaspac said the new rules also contained an improved reporting system for the use of DFs.

“As regards transparency and accountability, that was further strengthened in the new JMC given the institutionalization of the use of the system of the DoF-BLGF (the Bureau of Local Government Finance) in the reporting of utilization by LGUs,” he said.

The circular directs local governments to submit quarterly reports on their usage of the 20% DF following the requirements of the BLGF.

The BLGF will monitor and maintain a database of fund usage based on the submitted reports.

“The responsibility and accountability in ensuring that the development projects funded under the 20% DF comply with the guidelines under this JMC and optimally contribute to the attainment of desirable socio-economic targets and outcomes of the LGU shall rest upon the local chief executive and other officials concerned,” it said.

In March, the government allowed LGUs to use their 20% DF to supplement their spending on pandemic containment measures. — Beatrice M. Laforga