This document provides information about the Bureau of Local Government Finance (BLGF) and its role in issuing certificates of net debt service ceiling and borrowing capacity to local government units in the Philippines. The BLGF, an attached agency of the Department of Finance, is mandated to develop plans to improve resource management and collection systems for local governments. It evaluates requests from local governments for loans by reviewing financial documents, computing debt ceilings and borrowing limits, and issuing certificates to allow loans. The certificate specifies the approved loan terms, borrowing limits, and other details in accordance with the department order and local finance circulars governing local government borrowing.

1. D E PA RT M E N T O F F I N A N C E
BUREAU OF LOCAL GOVERNMENT FINANCE
Net Debt Service Ceiling
and Borrowing Capacity of
Local Government Units

2. • Attached agency of the DOF
• Supports the DOF in its mandate to
“supervise the revenue operations of all
local government units”
The Bureau of Local Government Finance
• Central Office in Manila, with 15 Regional Offices
• Mandated to “develop and promote plans and
programs for the improvement of resource management
systems, collection enforcement mechanisms and credit
utilization schemes at the local levels”
• Issues Certificate of Net Debt Service Ceiling (NDSC)
and Borrowing Capacity (BC) to LGUs

3. • Sec. 296 of LGC: Basic policy that LGUs
may create indebtedness and avail of credit
facilities
• Art. 403 of LGC IRR: DOF is mandated to
render technical assistance to any LGU in the availment
of credit facilities, flotation of bonds, contracting of loans
and issue guidelines for the purpose
• Sec. 324 of LGC: Appropriations of 20% of the LGU’s
regular income for debt servicing
• Government regulates through ex ante controls:
1. Securing the Certificate of Net Debt Service Ceiling
and Net Borrowing Capacity from the BLGF
2. Favorable Monetary Board opinion from the BSP
Legal Basis of Certification

4. • Department Order No. 054-2016: DOF order
prescribes the updated and streamlined guidelines
governing the issuance of Certificate of NDSC and BC
(“Certificate) to all LGUs.
Legal Basis of Certification

5. • Local Finance Circular (LFC) No. 1-2000, dated 19
January 2000: issued to enhance the access of all
LGUs to credits and other forms of indebtedness.
• LFC No. 01-2012: Amended the previous LFC, and
released on 16 April 2012, to ensure a more accurate
and appropriate evaluation of the maximum borrowing
and debt servicing capacities of all LGUs.
• LFC No. 01-2014: Issued on April 22, 2014 for 171
LGUs affected by Typhoon Yolanda, from 12 to 4
requirements, and extending the validity by 1 year
DOF Policies on LGU Loan Certification

6. LGU Loan Application Process
Evaluate LGU request
and supporting
documentary
requirements
Local Government Unit (LGU) Lending Institution Bureau of Local Government Finance (BLGF) Bangko Sentral ng Pilipinas
Submit Letter of Intent and negotiate
with the lending institution
Submit to BLGF a written request for
certification of LGU Net Debt Service
Ceiling and Borrowing Capacity, with
complete supporting documents pursuant
to DOF Local Finance Circular No 01-2012
Local Council, through a
Resolution/Ordinance,
authorizes the Local Chief
Executive to negotiate and
contract loans and other
forms of indebtedness
Pre-Evaluation/Setting of
Terms and Conditions
BLGF-RO BLGF-CO
Documents
Complete/
Compliant?
Submit the required
additional documents
No
Yes
Evaluate financial reports
of the LGU
Compute preliminarily
LGU Net Debt Service
Ceiling and Borrowing
Capacity (NDSCBC)
Re-negotiate with the lending
institution for lower interest
rate, longer tenor, or consider
other lending institutions, then
re-submit to BLGF
Proposed Loan
Higher than BLGF
Certification?
Yes
No
Submit to BSP a written request for
Monetary Board Opinion
Submit to BLGF-CO all documentary
requirements and the preliminary
computation for the issuance of
certificate of NDSCBC
Final computation and
issuance of certificate
of NDSCBC
Evaluate LGU request
and supporting
documentary
requirements
Monetary Board renders
Opinion on the Monetary
Balance and Payments
implications of the proposed
LGU borrowing, per BSP
Circular No.769 s. 2012
Submit to the Lending Institutions
the BLGF Certification, MB Opinion
and Other Requirements
Approval and Signing of
Loan Agreement with the
LGU
Release of Loan
Record receipt of Loan Proceeds
and prepare borrowing reports for
submission to BLGF-RO and BSP
Receive LGU Post Borrowing
Report
Receive LGU Post Borrowing
Report

7. 1. Letter request from the Local Chief Executive indicating:
- The lending institution where to apply for a loan;
- Terms and condition of the proposed loan; and
- The purpose of the loan.
2. Certification of existing of loan/s duly certified by the Local
Treasurer with the following details:
• Types of loans & other obligations contracted;
• Purpose of the loans & other obligations contracted;
• Name of the lending institutions;
• Date of approval & maturity;
• Terms & conditions (interest rate & number of years to pay);
• Remaining balances of loans and other obligations; and
• Annual amortization schedules (segregating the principal from the
interest) issued by the lending institution.
Streamlined Documentary
Requirements for Certification

8. 3. COA Annual Audit Certificate for the past 3 fiscal years showing no
adverse finding against the LGU, which is supported by the following year-
end financial reports:
• Pre-closing trial balance (general fund);
• Detailed Statement of Financial Performance
4. Certification issued by the lending institution stating that it shall not
require LGU deposits as compensating balance for the loan if such lending
institution is not (1) not an authorized government depository bank or (2) an authorized
government bank required to obtain the prior approval of the Department of Finance as
provided under the DOF Department Order No. 27-05 (Banks other than LBP and DBP);
Streamlined Documentary
Requirements for Certification

9. 1. Letter request from the Local Chief Executive indicating:
- The lending institution where to apply for a loan;
- Terms and condition of the proposed loan; and
- The purpose of the loan.
2. Certification of existing of loan/s duly certified by the Local
Treasurer with the following details:
• Types of loans & other obligations contracted;
• Purpose of the loans & other obligations contracted;
• Name of the lending institutions;
• Date of approval & maturity;
• Terms & conditions (interest rate & number of years to pay);
• Remaining balances of loans and other obligations; and
• Annual amortization schedules (segregating the principal from the
interest) issued by the lending institution.
Certified true copy of declaration.
Streamlined Documentary Requirements for
Certification
- LGUs affected by Natural and/or Man Made Disaster

10. • Certifies the amounts pertaining to:
• Net Debt Service Ceiling (NDSC)
• Borrowing Capacity (BC)
• Terms of the loan (period, interest, grace period, etc.)
• Name of lending institution
• Purpose of the loan
• Certificate number and date issued
• Notes on the certificate
Features of the Certificate

11. • Debt Service Ceiling (DSC)
• 20% x Annual Regular Income (ARI)
• Where ARI is the average previous 3-year locally
sourced income + other shares from national taxes
based on COA data, + actual annual IRA based on
DBM data
• Net DSC (NDSC)
• DSC – All amortizations payable during the year
• Borrowing Capacity (BC)
• NDSC x Annuity Factor
Computing the NDSC and BC

12. THANK YOU
visit www.blgf.gov.ph