This document discusses the linkage between local planning and budgeting in the Philippines. It provides the legal basis for harmonizing local development plans with budgets. The key documents in the plan-budget cycle are the Development Plan, Local Development Investment Program, Annual Investment Program, and local budgets. The process involves developing long-term development plans, prioritizing projects and programs, determining resource requirements, and allocating budgets accordingly to operationalize approved development plans. The goal is to achieve efficiency and effectiveness in resource allocation across all local government units.

1. Local Planning
and Budgeting
Linkage

2.  Legal Basis of Plan-Budget Linkage
 Harmonizing Plans with the Budget
• Development Plan for Provinces and
Highly-Urbanized Cities
• Development Plan for Cities and
Municipalities
• Local Development Investment Program
• Annual Investment Program
• Policy Guides on a Plan-Budget Linkage
• Synchronizing the Plan-Budget Calendar
 The Plan-Budget Cycle

3. LEGAL BASIS
There are four basic principles provided in the Local Code of 1991:
1. Local budget plans and goals shall, as far as practicable, be
harmonized with national development plans, goals and strategies
in order to optimize the utilization of resources and to avoid
duplication in the use of fiscal and physical resources (Section 305
h);
2. Local budgets shall operationalize approved local development
plans (Section 305 i);
3. Local governments shall formulate sound financial plans. The local
budgets shall be based on functions, projects and activities in terms
of expected results (Section 305 g);
4. Budgets of LGUs shall include a brief description of the functions,
projects and activities for the ensuing fiscal year; expected results
for each function, project and activity; and the nature of work to be
performed, including the objects of expenditure for each function,
project and activity (Section 317b 3).
LEGAL BASIS

4. HARMONIZING PLANS WITH THE
BUDGET
The purpose of harmonizing local plans with budgets is
clearly provided in DBM-NEDA-DILG-DOF JMC No. 1, Series of
2007 dated 08 March 2007. It will set a common direction in the
implementation and achievement of local endeavors in harmony
with national development goals and objectives. It will strengthen
the interface and complementation between LGUs, national
government agencies (NGAs), among all LGUs in all levels
(vertically and horizontally), and funding institutions and donor
agencies in the planning, investment programming, budgeting
and expenditure management, and revenue administration.
The harmonization of local plans with national development
goals is essential in achieving efficiency and effectiveness in the
allocation of resources. It will starts with the preparation of a
development plan at least for 6 years for provinces.

5. Development Plan for Provinces and Highly-
Urbanized Cities
The Provincial Development and Physical Framework
Plan (PDPFP)- is a six-year plan that merges the traditionally
separate provincial physical framework plan and provincial
development plan to address the disconnection between
spatial and sectoral factors and between medium-and long-
term concerns. The PDPFP contains the long-term vision of
the province, and identifies development goals, strategies,
objectives/targets and corresponding PPAs which serve as
primary inputs to provincial investment programming and
subsequent budgeting and plan implementation (DBM-
NEDA-DILG-DOF JMC No. 1, series of 2007).

6. Development Plan for Cities and
Municipalities
The long-term development plan for cities and
municipalities is called the Comprehensive Development
Plan (CDP). The CDP is a multi-sectoral plan formulated at
the city/municipal level embodying the vision, sectoral goals,
objectives development strategies, and policies within the
term of LGU officials and the medium-term. It contains
corresponding PPAs which serve as primary inputs to
investment programming and subsequent budgeting and
implementation of projects for the growth and development of
local government territories (DBM-NEDA-DILG-DOF JMC
No. 01, Series of 2007)

7. Local Development Investment Program
Section 305 (i) of R.A. No. 7160 explicitly provides that
local budgets shall operationalize approved local
development plans. This implies that the preparation of
local plans shall precede the preparation of local budgets.
On the basis, therefore, of the approved PDPFP for
provinces and CDP for cities and municipalities, a
programming document called the Local Development
Investment Program (LDIP) shall be prepared.
Investment programming covers 3 to 6 years. The LDIP at
the provincial level is a six-year rolling program coincide
with the time frame of the PDPFP.

8. Local Development Investment Program
(cont’d)
The LDIP is a basic document linking the local plan to
the budget. It contains a prioritized list of PPAs which are
derived from the CDP in the case of cities and municipalities,
and the PDPFP in the case of cities and provinces, matched
with financing resources, and to be implemented annually
within a three to six-year period. The first three (3) years of
the LDIP shall be firmed up along with the priorities of the
incumbent LCEs (DBM-NEDA-DILG-DOF JMC No. 01,
Series of 2007).

9. Annual Investment Program
Another document to be submitted by the LDC to the LFC
as mandated under Article 410 of the IRR of R.A. No. 7160 is
the AIP prepared and approved during the fiscal year before
budget preparation.
The AIP refers to the annual slice of the LDIP which
constitutes the total resource requirements for all PPAs,
consisting of the annual capital expenditure and regular
operating requirements of the LGU.
The AIP, therefore, is the yearly program of expenditures
both for capital and current operating requirements of the
LGU that will serve as basis for the preparation of Annual and
Supplemental Budgets. As document reflecting the total
resource requirements for the year, the AIP is a document
that reinforces plan-budget linkage.

10. The Plan-Budget Link Model

11. The linkage between planning & budgeting takes place
when the AIP, after having been reviewed & endorsed
by the Sanggunian, is used by the LFC in the
preparation of sectoral ceilings.
PLAN BUDGET
ANNUAL
INVESTMENT
PROGRAM

12. Policy Guides on a Plan-Budget Linkage
Development planning shall not be limited to
projects and activities to be funded by the 20%
Development Fund. The entire annual/
supplemental budgets shall be dedicated to
sustainable human development in order to
achieve the twin goals of eliminating poverty and
promoting economic growth. Development
planning in general is medium-term and for
provinces, covers a six-year period rolling plan.

13. Policy Guides on a Plan-Budget Linkage
(cont’d)
Local elective officials shall develop the
capacity to mobilize resources and ensure
program sustainability. It is their responsibility to
develop the capabilities of their people in the
long-term so that the well-being of present and
future generations is not undermined.

14. Policy Guides on a Plan-Budget Linkage
(cont’d)
Local budgets shall be policy-driven and performance
- based. Policy formulation shall include:
• Explicit policy directions to eliminate poverty and
unemployment; and
• Policies on how the budget shall be financed in the
medium-term and how it is shall be allocated among
priority PPAs in the short-term. The LFC shall
recommend to the LCE alternative sources of financing
the budget and a rational criteria for allocating available
resources.

15. Synchronizing the Plan-Budget Calendar
(SUMMARIZED)
Jan 1 - 15
Jan 16 - 31
Feb. 1 - 15
LCE issues Executive Order directing the updating of
the LDIP & the AIP
Review of all objectives and policies
• Objective setting / Strategy formulation
• Policy revision/ formulation
• Prioritization of PPAs
• Consolidation of revised objectives, strategies &
prioritized PPAs
Feb. 16 - 28 • Input review results in AIP forms
• Multi-stakeholder consultation on draft AIP

16. March 1-15 • Match investment requirements with available
resources.
• Revise draft AIP if resources are inadequate;
formulate needed policies
• Finalize AIP for endorsement to Sanggunian
• Sanggunian deliberates
March 16-30 LFC elevates to higher LGU/ NGRO AIP – identified
projects that cannot be financed by the concerned
lower LGU.
April 1- 30 Higher LDC deliberates on projects proposed by
lower LGU for funding.

17. May 1- June 15
June 16-30
July 1-Aug. 15
LFC prepares profiles of PPAs to be funded from the
General Fund of the LGU
• LCE issues “Budget Call” based on AIP (done after
the initial IRA share is released by DBM)
• LFC finalizes spending ceiling by sector/ office
• LFC conducts workshop / forum on the Budget
Call
Department Heads prepare & submit budget
proposals
Aug. 16–Sept. 15 LFC conducts technical budget hearings on
proposals submitted by Department Heads

18. Sept. 16 - 30
Oct. 1 - 15
LFC consolidates budget proposals into a Local
Expenditure Program (LEP) and prepares the Budget
of Expenditure and Sources of Financing (BESF)
LCE prepares Budget message & submits the same to
the Sanggunian with the Executive Budget consisting
of the LEP & BESF.

19. THE PLAN-BUDGET CYCLE
CURRENT
YEAR
(Jan.- June)
CURRENT
YEAR
(July- Dec.)
BUDGET
YEAR
(Jan.- Dec.)

20. AIP Preparation
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