2010/2011 rapid assessment of the seal of good ......2010/2011 rapid assessment of the seal of good...

2010/2011 Rapid Assessment of the Seal of Good Housekeeping and Performance Challenge Fund Program

October 2012

Prepared by:

CODE-NGO, LSIG, PhilDHRRA, and TAN

Contract No. 7160831

AAA on Institutionalizing Incentive Systems for Local Governance and Performance

AusAID World Bank Development Trust Fund

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

wb469252

Typewritten Text

wb469252

Typewritten Text

wb469252

Typewritten Text

87055

wb469252

Typewritten Text

of 34

ACKNOWLEDGEMENTS

This rapid assessment of the 2010 Performance Challenge Fund (PCF) Program and 2011 Seal of Good

Housekeeping (SGH) Program of the Department of the Interior and Local Government (DILG) of the

Philippines was prepared with support from the World Bank and the Australian Agency for International

Development (AusAID) through the AusAID-World Bank Development Trust Fund. The Study Team

conducted an evaluation of the implementation of local government subprojects financed through the

2010 PCF Program and an evaluation of the incentive effects of the 2011 PCF and SGH Program

implemented nationwide. This rapid assessment was conducted by a consortium of civil society

organizations led by the Caucus of Development NGO Networks (CODE-NGO), and which included the

La Salle Institute of Governance (LSIG), the Philippine Partnership for the Development of Human

Resources in Rural Areas (PhilDHRRA), and the Transparency and Accountability Network (TAN). This

report was prepared by a Study Team composed of Sixto Donato C. Macasaet and Jose Antonio Pacapac

(CODE-NGO); Jennifer Javier, Ivy Marian Panganiban, and Divina Luz Lopez (PhilDHRRA); Leslie

Flores, Reylynne dela Paz, Maria Flora May Cerna, Jowil Mejia Plecerda, and Vincent Lazatin (TAN);

and Ian Jayson Hecita, Monica Edralin, and Francisco Magno (LSIG).

The Study Team also acknowledges Felix Deyta and Norte Sentro, Luisita Esmao and the Ugnayan ng

mga Magsasaka sa Quezon (UGMA), Emilia Roslinda and the Participatory Research, Organization of

Communities and Education towards Struggle for Self-reliance of Bohol (PROCESS-Bohol), Surigao Sur

Organization for Human Development, Inc. (SSOFHDEV), Technology Outreach and Community Help

Foundation, Inc. (TOUCH), Xavier Agricultural Extension Services (XAES), and Michelle Cleofas, for

assisting in the conduct of the field research for this assessment.

The Study Team would especially like to express its gratitude to the DILG for providing valuable insights

and support for this study, including Austere Panadero (Undersecretary for Local Government), Manuel

Gotis (Director, Bureau of Local Government Development), Anna Liza Bonagua (Assistant Director,

Bureau of Local Government Development), Susita Bulawit (Chief, Local Administrative Development

Division, Bureau of Local Government Development), and the Regional Directors and staff of the

Regional Offices of Region I, Region IV-A, Region VI, Region VII, and Region X.

The Study Team would also like to thank the Mayors, Governors, and staff of the following local

governments for participating in and supporting this assessment: Alilem, Ilocos Sur; Santol, La Union;

Balilihan, Bohol; Carrascal, Surigao del Sur; Catigbian, Bohol; Naawan, Misamis Oriental; Pitogo,

Quezon; Quezon, Isabela; Saguday, Quirino; Tampilisan, Zamboanga del Norte; Laoac, Pangasinan;

Balungao, Pangasinan; Magdalena, Laguna; Sta. Maria, Laguna; Anilao, Iloilo; San Dionisio, Iloilo;

Talisay, Negros Occidental; Victorias, Negros Occidental; Siquijor; and Camiguin.

The findings, interpretations, and conclusions expressed in this report are entirely those of the Study

Team. They do not necessarily represent the views of AusAID or the International Bank for

Reconstruction and Development/World Bank, its affiliated organizations, or those of the Executive

Directors of the World Bank or the governments they represent.

of 34

TABLE OF CONTENTS

List of Acronyms .......................................................................................................................................... 4

Executive Summary ...................................................................................................................................... 5

Introduction ................................................................................................................................................... 8 Objectives of the Assessment ................................................................................................................... 8 Methodology and Limitations of the Study .............................................................................................. 8

Policy Issuances Supporting the 2010/11 SGH and PCF Programs ........................................................... 12

Study Findings on Objective 1: Evaluation of Subprojects of the 2010 PCF Program .............................. 17 Summary of Findings ............................................................................................................................. 17 Detailed Findings .................................................................................................................................... 18

Study Findings on Objective 2: Evaluation of Incentive Effects of the 2011 SGH/PCF Program ............. 26 Summary of Findings ............................................................................................................................. 26 Detailed Findings ................................................................................................................................... 26

Recommendations ....................................................................................................................................... 31

List of Annexes

Annex A. Assessment Tools for LGU Projects

Annex B. Guide Questions for Key Informant Interviews

Annex C. List of Actual Documents gathered for Objective 1 Desk Review

Annex D. Inventory of existing project assessment tools

Annex E. Accomplished On-site Project Evaluation tools

Annex F. Field Reports

Annex G. PCF Program Process Flow

Annex H. Selection process of LGUs for 2011 SGH case studies

Annex I. Survey Form for Local Chief Executives

Annex J. Case Study Narratives

of 34

LIST OF ACRONYMS

Annual Investment Plan AIP

Bids and Awards Committee BAC

Bureau of Local Government Development BLGD

Bureau of Local Government Supervision BLGS

Caucus of Development NGO Networks CODE-NGO

Civil Society Organization CSO

Climate Change Adaptation CCA

Central Office CO

Commission on Audit COA

Department of Budget and Management DBM

Department of the Interior and Local Government DILG

Department Order DO

Disaster Risk Reduction DRR

Financial Management Service FMS

Full Disclosure Policy FDP

Government Procurement Reform Act GPRA

Internal Audit Service IAS

La Salle Institute of Governance LSIG

Local Chief Executive LCE

Local Development Council LDC

Local Economic Development LED

Local Government Unit LGU

Memorandum Circular MC

Memorandum of Agreement MOA

Millennium Development Goals MDG

Municipal Local Government Operations Officer MLGOO

Office of Project Development Services OPDS

Office of Public Affairs OPA

Performance Challenge Fund PCF

Philippine Partnership for the Development of Human Resources in Rural Areas PhilDHRRA

Priority Development Assistance Fund PDAF

Provincial Local Government Officer PLGOO

Regional Office RO

Regional Performance Challenge Fund Management Team RPCFMT

Seal of Good Housekeeping SGH

Transparency and Accountability Network TAN

wb469252

Typewritten Text

of 34

EXECUTIVE SUMMARY

On October 2011 to March 2012, the Caucus of Development NGO Networks (CODE-NGO), La Salle

Institute of Governance (LSIG), Philippine Partnership for the Development of Human Resources in

Rural Areas (PhilDHRRA), and Transparency and Accountability Network (TAN) undertook a Rapid

Assessment of the Seal of Good Housekeeping (SGH) and Performance Challenge Fund (PCF) Programs

of the Department of the Interior and Local Government (DILG).

This assessment aims to support the DILG in strengthening the design and implementation of the SGH

and PCF programs in subsequent years. The assessment has the following specific objectives:

1. Evaluate the project implementation of the Local Government Unit (LGU) subprojects that were

co-financed through the 2010 PCF Program; and

2. Evaluate the incentive effects of the 2011 PCF Program on LGU behavior including a review of

the processes undertaken by the DILG in developing the SGH criteria and the subsequent LGU

assessment implemented by DILG to recognize LGUs in 2011.

Evaluation of 2010 PCF Subproject Implementation

For the first objective, the general approach was to assess the 2010 subprojects based on timeliness, cost

efficiency, quality, and responsiveness. To achieve this, desk review and on-site subproject evaluation

were conducted.

On compliance by LGUs with the PCF proposal requirements, almost all guidelines and requirements

were followed by all LGUs. As required by the PCF guidelines, all the subprojects were aligned with

national priorities and Annual Investment Plans (AIPs). The subprojects were also found to be responsive

to the needs of the municipality. The study indicates however that the DILG did not follow a major

guideline in two instances when it approved ineligible subprojects for PCF funding.

In terms of LGU implementation of PCF subprojects, only two-thirds of the awarded subprojects in 2010

had been completed as of January 2012. All completed subprojects evaluated on-site were implemented

according to proposals and almost all LGUs complied with the 20 percent LGU counterpart required in

2010. In terms of procurement, all 10 LGUs evaluated on-site had no issues based on Bids and Awards

Committee (BAC) reports. On quality however, almost all subprojects assessed did not completely pass a

“quality checklist” developed by the Study Team based on basic project quality standards.

The monitoring and information management system of the 2010 PCF Program was inadequate for

effective monitoring. The review of documents of the 2010 PCF subprojects showed that some data from

the DILG Central Office (CO) were either vague or inaccurate. While more information useful for project

evaluation were available at the DILG Regional Offices (ROs), the existing reporting mechanisms at that

time made it difficult for details to be verified by the CO for effective monitoring of the PCF Program as

a whole.

There was also evidence suggesting that the DILG ROs may have been placed under conflicting pressures

of evaluating the LGU proposals for PCF in 2010 and ensuring that the program was fully implemented in

the limited time available. This may have affected their evaluations of the LGU proposals.

of 34

Evaluation of the Incentive Effects of the 2011 SGH/PCF Program

The Study Team conducted a desk review, survey, key informant interviews, and case studies in

evaluating the incentive effects of the 2011 PCF Program with respect to its stated goal of providing

incentives to LGUs to adopt “good housekeeping” practices and to align projects with national

government priorities and strategies.

The findings of this study on the incentive effects of the 2011 PCF grant on LGU behavior had mixed

results. While LGUs expressed their appreciation for the assistance provided by the PCF grant for local

projects, its intended effect to incentivize LGUs to adopt good practices were likely to have been

weakened by the DILG not clearly informing LGUs that they were being assessed for a seal that aimed to

determine eligibility for the PCF. The ineffective SGH and PCF information dissemination and

coordination resulted in LGUs’ weak understanding about the incentive links of the SGH assessment and

the PCF grant. The PCF’s incentive effects were also weakened by LGUs broadly considering the

attainment of the SGH as an incentive in itself, as it provided public validation for their good practices.

This indicates that for certain LGUs, the honor of being awarded the SGH may have served as a stronger

motivating factor than the PCF grants in 2011.

The challenges faced in the PCF implementation led some LGUs to develop unfavorable perceptions on

the 2011 PCF Program. The lack of time, human resources and technical capacity on the part of some

DILG ROs were considered as reasons for the inconsistent and, at times, rushed implementation of the

program, resulting in the impression among a few of the early grantees of the program that

accommodations were made later to allow the DILG to speed up implementation of the program to meet

national government deadlines.

Recommendations

This assessment supports the DILG in its continued and expanded implementation of the SGH and PCF

programs. Several recommendations are proposed to address gaps identified in the 2010 and 2011 pilot

implementation of the program. These recommendations are meant to: a) improve understanding of the

incentive mechanism based on these past experiences; b) ensure maximization of the strengths of the

SGH and PCF; and c) ensure effective utilization of the increased resources being allocated for the

program.

The DILG should take steps to ensure the consistent and timely implementation of the PCF Program,

which was identified as a significant factor that weakened its incentive effects. Implementation was

affected by the lack of time and capacity of the concerned DILG offices and personnel to fully implement

assigned tasks. In addition, there is also a need for stronger commitment from the DILG to implement the

tasks and roles of different offices and staff involved. A clearer and more comprehensive internal and

external communication of the objectives of the PCF to LGUs will prevent misinterpretations by LGUs of

the program. It is also important for DILG’s information management and reporting systems to be

strengthened.

The DILG should also consider the application of the PCF as an incentive for higher-level good

governance practices, especially on indicators for participatory governance. This will allow the DILG to

build on the awareness of LGUs of the SGH and further encourage improvements in local governance and

position the PCF as a stronger incentive in light of on-going efforts by other agencies to begin using the

SGH Bronze as a requirement for financial assistance to LGUs. The DILG should study how to integrate

other national government programs on participatory local governance, such as the Bottom Up Budgeting

and National Community-Driven Development programs, with the SGH. Specific formal mechanisms and

indicators may also be derived from the Local Government Code.

of 34

Further study is recommended to better understand and take advantage of the strengths identified by this

assessment of the SGH and PCF programs. Some of the key strengths found were the strong awareness of

the PCF that has gradually been generated among LGUs, the LGUs’ eagerness to promote their having

received the SGH to their constituents, and the peer pressure that developed among LGUs that enticed

LGUs to want to attain the SGH. A better understanding of the awareness and appreciation by LGUs of

the SGH is needed to allow the DILG to leverage the incentives effect of the SGH on LGUs and to take

advantage of how some LGUs have eagerly promoted the SGH to their constituents as recognition of

good governance practices.

It is also recommended that the DILG take steps to address specific issues in the PCF subproject proposal,

approval, monitoring, and evaluation processes. Subproject proposals should clearly identify the

components funded by the PCF to ensure uniformity and feasibility in the monitoring of the physical

accomplishment and financial utilization of LGU subprojects. Guidelines on allowable counterpart

funding sources should also be clarified. To avoid delays in implementation, PCF subprojects should be

required to be ready for immediate implementation by having already accomplished project requirements.

The DILG should also re-include a list of ineligible projects in its policies as it proved helpful in

providing clear guidance for proposal evaluations. Finally, to help ensure consistent implementation, the

creation of five-member Regional PCF Subproject Evaluation Committees is recommended, with the

inclusion of two external members who will serve as third party validators of the evaluation and approval

process.

On the PCF subproject implementation and monitoring process, it is recommended that random on-site

checks be performed on LGU subprojects by DILG teams that include external third party members. The

monitoring guidelines on the definition of subproject completion must also be clarified as LGUs and

DILG personnel have had different interpretations leading to inconsistent reports. The report formats used

by DILG should also be revised to allow monitoring staff to more easily track and monitor subproject

components and finances.

of 34

INTRODUCTION

Objectives of the Assessment

The broad goal of the Rapid Assessment is to support the Department of the Interior and Local

Government (DILG) in strengthening the design and implementation of the Seal of Good Housekeeping

(SGH) and Performance Challenge Fund (PCF) programs in subsequent years.

The Rapid Assessment has two specific objectives:

1. Evaluate the project implementation of the Local Government Unit (LGU) subprojects that were

co-financed through the 2010 PCF Program

The key focus of the assessment is to validate whether the LGU subprojects were implemented according

to the project proposals approved by the Regional PCF Management Team. This is an important process

in the program management cycle for the PCF to ensure that the program’s objective of assisting less able

LGUs in implementing projects for local economic development and poverty reduction is achieved. In

addition, the evaluation process also aims to inform the design of DILG’s monitoring and evaluation

system for PCF subprojects. There is a need to develop simple yet functional monitoring systems and

tools to cope with the potential volume of projects to be monitored in the succeeding rounds of the PCF.

2. Evaluate the incentive effects of the 2011 PCF Program on LGU behavior

The study seeks to determine whether the design of the PCF program as a type of performance-based

matching grant provided the necessary incentives for LGUs to achieve the following:

a. Attain the Seal of Good Housekeeping through:

1) Compliance with the Full Disclosure Policy (FDP) of the DILG

2) Practice of sound fiscal management measured by the absence of an adverse opinion or

disclaimer by the Commission on Audit (COA) on the Annual Audit Report of the LGU

b. Implement local projects that are aligned with national development goals and priorities to

achieve the Millennium Development Goals (MDGs), boost tourism and local economic

development (LED), and comply with the Philippine Disaster Risk Reduction and Management

Act of 2010 and the Ecological Solid Waste Management Act of 2000

The study also reviewed the process undertaken by the DILG in developing the SGH and PCF criteria.

The review likewise included the subsequent assessment in choosing SGH and PCF awardees. It also

determined whether the inclusion of civil society organizations (CSOs) in the LGU assessment proceeded

according to DILG’s plan and whether this design feature produced the effects that the DILG intended.

Methodology and Limitations of the Study

1. For the first objective of evaluating the 2010 PCF subproject implementation by LGUs, the

subprojects were assessed based on timeliness, cost efficiency, quality, and responsiveness by

utilizing desk reviews of subproject documents and on-site evaluations of selected subprojects.

1.1. Desk review

A desk review of all 30 PCF subprojects in 2010 was conducted. The review used the reports submitted

by the LGUs to track the progress of the subprojects. These reports include the Approved Quarterly

of 34

Physical Accomplishment Reports, Fund Utilization Reports, Liquidation Reports verified by the COA

Field Office, Signed Memoranda of Agreement (MOA) between the DILG and the LGU, and

status/progress reports by the DILG Regional Office (RO)/PCF Technical Working Group.

The actual desk review was constrained by the limited availability of documents. Information that

covered all the 30 subprojects and could be used to comparatively evaluate all subprojects was only

available from the 2010 PCF Program report published by the DILG on its website, which had limited

information. Supplementary data from other documents was available for 15 of the 30 subprojects, but the

varying nature and content of these documents also limited the assessment and comparisons possible.

The specific source documents and scope of comparisons are cited, where applicable, in the findings.

Also, observations from the experience of data gathering are reflected in the assessment as well as

recommendations for the monitoring and evaluation system of the PCF Program.

1.2. On-site evaluation

Ten subprojects underwent on-site evaluation to assess the quality and responsiveness of the subprojects.

The on-site evaluation included field validation of the LGU subprojects, key informant interviews, and

review of documents. The on-site evaluation used simple assessment tools developed by the research

team. These tools were designed in a way that would be easy for the Bureau of Local Government

Development (BLGD) and Internal Audit Service (IAS) to adopt and replicate for the DILG’s PCF

subproject monitoring and evaluation system given the increasing number of LGUs qualified for the PCF.

Below is the table of LGUs that were selected for on-site evaluation.

Table 1. Information on LGUs and 2010 PCF subprojects selected for on-site evaluation

LGU Subproject Name based on PCF

Accomplishment Report of DILG

National

Program

Income

Class

Santol, La Union Construction of Santol Development Center MDG 5th

Alilem, Ilocos Sur Improvement of Abatan-Daddaay Proper Farm-to-

Market Road (FMR) LED 5th

Saguday, Quirino Construction of Open-Air Public Market Building LED 5th

Quezon, Isabela Sanitary Landfill DRR/CCA 4th

Balilihan, Bohol Provision of Potable Water Supply MDG 5th

Tampilisan, Zamboanga

del Norte Multi-Purpose Hall (LGU Training Center) LED 4th

Pitogo, Quezon Concreting/ Rehabilitation of Barangay Road LED 5th

Catigbian, Bohol Development of Abatan River LED 4th

Carrascal, Surigao del Sur Improvement of Water System Level 3 MDG 4th

Naawan, Misamis Oriental Urban Road Development LED 4th

The research team developed project assessment tools for the four different types of subprojects

monitored: roads, buildings, potable water systems, and sanitary landfills.1

The members of the

consortium built upon existing assessment tools for infrastructure that have been used in previous

monitoring activities.2

Aside from validation of the subproject description stipulated in the proposal and subproject quality

assessment, the on-site validation looked into the subproject and beneficiary selection process of the

LGU, accessibility and utility of facility/subproject to intended beneficiaries, identification of causes for

1 Annex A. Assessment Tools for LGU Projects

2 Annex D. Inventory of existing project assessment tools

of 34

delay and other problems encountered during subproject implementation, compliance with the principles

of transparency and accountability provided in the Government Procurement Reform Act (GPRA), and

LGU sustainability and subproject maintenance plan.

Customized tools and structured guide questions for the key informant interviews3 were developed and

these were administered for the 10 subprojects targeting the following key informants:

a. LGU officials (Municipal Mayor, Municipal Planning and Development Coordinator, Municipal

Engineer, relevant Sanggunian Committee representative and Bids and Awards Committee (BAC)

Chairperson)

b. DILG officials (Municipal Local Government Operations Officer)

c. CSOs (representatives in the Local Development Council, BAC Observer, other relevant CSOs)

d. Selected community beneficiaries

Additional subproject documents were also requested from the LGU for reference and review. These

include documents such as:

a. Program of Work

b. Detailed engineering

c. Progress/ Completion Reports

d. Annual Investment Plan (AIP)

e. Straight-line diagram (for roads)

f. Feasibility study

g. Annual Procurement Plan

h. Project Contract

i. BAC report

j. Contractor’s profile

2. For the second objective of assessing the incentive effects of the 2011 PCF Program on LGU

behavior, the Study Team conducted desk reviews, key informant interviews, case studies, and a

survey of participating LGUs.

2.1. Desk Review

The desk review entailed the examination of documents and reports of the DILG on the procedures

followed in developing the SGH criteria and the subsequent LGU assessment for the SGH in 2011. The

review looked into the drivers and barriers to LGU compliance with the SGH and PCF requirements at

every phase of the process.4

2.2. Key Informant Interviews

Interviews with identified key informants from the PCF Steering Committee5 and the PCF Project

Management Team6 were conducted in order to document and assess the relevant policy instruments and

program processes.

2.3. Survey

A survey was conducted for all 4th to 6

th class LGUs, including both SGH recipients and LGUs that did

not receive the SGH. It aimed to identify the factors that enabled or prevented the envisioned effects of

the PCF. The survey helped in validating the hypothesized relationship between the incentive program

3 Annex B. Guide Questions for Key Informant Interviews

4 Annex G. PCF Program Process Flow

5 PCF Steering Committee members: DILG Secretary, DILG Undersecretary for Local Governance, Assistant

Secretary for Finance and Controllership, BLGD Director, BLGS Director, OPDS Director, FMS Director, IAS

Director, and OPA Director 6 PCF Project Management Team members: focal persons from BLGD, BLGS, OPDS, FMS, IAS, and OPA

of 34

and behavioral change in LGUs. A pre-test was conducted in one municipality to refine the survey

instrument.

The survey questionnaire was made up of mostly structured response items aimed at gathering descriptive

information on LGU behavior and LGU experiences in complying with SGH and PCF requirements.7 The

questionnaire had two parts: Part I was composed of items that referred to SGH compliance variables and

were answered by all sampled LGUs; Part II was composed of questions regarding PCF requirements for

LGUs that were SGH recipients and were qualified to apply for the PCF.

The survey was addressed to the local chief executives (LCE) and was designed to be self-administered.

The survey questionnaires were sent to LGUs thru fax and email on January 23, 2012. The LGUs were

expected to return the accomplished survey forms within two to three weeks after the distribution. They

were also instructed to return the survey forms thru fax, email, or courier. The DILG also released on

February 2, 2012 a Memorandum Circular (MC) for the strict compliance of concerned LGUs with the

survey. The deadline for submission of the questionnaire was extended and the last survey form was

received March 1, 2012. A total of 303 out of 723 LGUs participated in the survey. The following table

presents the population and the actual sample size of the survey:

Table 2. 2011 SGH survey population and sample size of LGUs

LGU Class Municipality City Province Total

Population Sample Population Sample Population Sample Population Sample

4th

394 192 27 14 4 1 425 207

5th

272 92 1 1 3 1 276 94

6th

22 2 - - - - 22 2

Total 688 286 28 15 7 2 723 303

2.4. Case Studies

The case studies seek to describe the detailed and unique experiences of the LGUs as they comply with

the requirements of the PCF program. Ten 4th to 6

th class LGUs were identified as case studies with the

use of multiple criteria, including geographical spread (Luzon, Visayas, and Mindanao), LGU level

(municipality, city, and province), distinct governance patterns, and trends in SGH passing rate.8

Table 3. List of LGUs and DILG ROs selected for case studies

Cases SGH Recipient Without SGH LGU Level DILG Offices

Laoac, Pangasinan X Municipality Region I

Balungao, Pangasinan X Municipality Region I

Magdalena, Laguna X Municipality Region IV-A

Sta. Maria, Laguna X Municipality Region IV-A

Anilao, Iloilo X Municipality Region VI

San Dionisio, Iloilo X Municipality Region VI

Talisay, Negros Occidental X City Region VI

Victorias, Negros Occidental X City Region VI

Siquijor X Province Region VII

Camiguin X Province Region X

Total 7 3 10 5

7 Annex I. Survey Form for Local Chief Executives

8 Annex H. Selection process of LGUs for 2011 SGH case studies

of 34

POLICY ISSUANCES FOR 2010/11 SGH AND PCF PROGRAMS

The DILG issued guidelines for the implementation of the SGH and PCF Program through various MCs

and policies that outline the planned program design based on their ideal implementation. The list of

policy issuances is shown in Table 4.

Table 4. List of Policy Issuances for the Implementation of the SGH and PCF programs

MC No. Subject Date Issued

Seal of Good Housekeeping

MC 2011-095 Seal of Good Housekeeping for Local Governments, CY 2011 Implementation July 1, 2011

MC 2012-068 Implementing Guidelines in the Availment of 2012 PCF April 13, 2012

MC 2012-078 Scaled-up Seal of Good Housekeeping April 25, 2012

Performance Challenge Fund

MC 2010

(Unnumbered) Interim Guidelines on the Pilot Implementation of the PCF for LGUs October 14, 2010

MC 2010

(Unnumbered) Supplemental Guidelines for the 2010 Pilot Implementation of the PCF Grant October 29, 2010

DO 2011-601 Creation of PCF Project Management Committees April 27, 2011

MC 2011-62 Guidelines in the Implementation of the PCF April 27, 2011

MC 2011-123 Supplemental Guidelines in accessing the 2011 PCF August 31, 2011

MC 2011-162 Supplemental Guidelines in the Implementation of 2011 Performance PCF to

support the Gawad Pamana ng Lahi Award

November 8,

2011

MC 2011-170

Revised guidelines on the Implementation of PCF in view of the temporary

suspension and rationalization of the national government-local government

unit cost-sharing policy

November 16,

2011

MC 2012-021 Rapid Assessment Survey for the 2011 SGH and PCF February 2, 2012

MC 2012-028 Posting of PCF and LGSF-Supported LGU Projects and DILG Representation

in Groundbreaking and Inauguration of said projects February 9, 2012

1. 2010 PCF Pilot Program Policies and Implementation Process

Two unnumbered memoranda were issued by DILG in October 2010 to provide guidelines for the pilot

PCF implementation. Based on these memoranda, the 2010 PCF Program aimed to:

a. Recognize good governance by providing an incentive for LGUs to adopt practices of “good

housekeeping”

b. Provide an incentive for LGUs to align project implementation with national government

strategic thrusts and goals, consistent with the administration’s priority programs and projects

supportive of the MDGs

These two memoranda outlined the criteria for eligibility for the PCF and the procedures for accessing the

PCF. Some of the salient provisions of the policies are as follows:

a. The PCF shall be open to all 4th to 6

th class municipalities that passed the test of good

housekeeping.

b. The top-ranked 15 municipalities shall submit a letter of interest to the DILG along with the

following:

1) Project design: inclusive of description, location, work plan, and project schedule, budget and

financing plan, project management, and other financing partners or supplementary financing,

if any

of 34

2) Sanggunian Resolution that authorizes the LCE to enter into a MOA for the PCF grant,

approves the allocation of LGU funds as counterpart to the PCF grant, and certifies that the

project is included in the 2011 AIP

3) Certification from the Municipal Treasurer that the project has a budget allocation from the

20 percent Local Development Fund equivalent to at least 20 percent of the project cost

c. The amount of PCF grant for an eligible municipality is the project cost less the contribution of

the municipality and other sources, a maximum of 50 percent of the project cost, or PhP

1,000,000, whichever is lower.

d. All documentary requirements shall be submitted to the DILG RO not later than November 15,

2010.

e. After satisfactory compliance with PCF grant requirements, the DILG RO shall release the PCF

to the LGU grantee upon signing of the MOA between the DILG and the LGU recipient. The

release period of the PCF to the LGUs is November 22-26, 2010.

f. The PCF shall not be used to finance tax payments, salaries and recurrent cost, and micro credits

and loans.

g. Monitoring and Evaluation:

1) The Financial Management Service (FMS) shall monitor and prepare the consolidated status

of the fund disbursement. The PCF Technical Working Group (TWG) shall prepare the

progress report of project implementation including status of project implementation of the

PCF-funded projects

2) The DILG RO shall monitor the progress of project implementation by the LGUs and

disbursement of funds by the LGU grantee and submit a consolidated status report on the

implementation of PCF-funded projects and liquidation report to the FMS

3) The DILG shall submit to the House Committee on Appropriations, Senate Committee on

Finance, and to the Department of Budget and Management (DBM) quarterly reports on the

financial and physical accomplishment of the fund as well as post these in the DILG website

on a quarterly basis – including the list of LGU beneficiaries with corresponding financial

subsidy, projects undertaken by the LGU beneficiaries, utilization of funds, and program

evaluation report.

2. 2011 PCF Program Policies and Implementation Process

For the 2011 PCF implementation, clearer guidelines were provided by DILG as embodied in two MCs

(2011-62, 2011-123). The significant enhancements from the 2010 guidelines are as follow:

a. Criteria of eligibility for LGUs

1) Passed the criteria for the 2011 SGH

b. Criteria of eligibility for LGUs that were recipients of 2010 PCF

1) Passed the criteria for the 2011 SGH

2) Completed the 2010 PCF-supported subprojects

3) Submitted to the concerned DILG RO the corresponding Project Completion Report and

Report of Disbursement verified by COA Field Office.

c. Prioritized for PCF shall be 4th to 6

th class LGUs. In the event that the fund has a remaining

balance, the next priority shall be 3rd

class LGUs which shall be ranked according to poverty

incidence.

d. Cost-sharing scheme between the National Government and the eligible LGU shall be

implemented as a matching fund or on a 50-50 sharing scheme based on LGU level (Province –

PhP7M, City – PhP3M, Municipality – PhP1M).

e. DILG provided a menu of eligible projects according to the national government’s thrusts and

priorities:

of 34

1) Attainment of MDGs (school buildings, rural health units and health centers, birthing

facilities, water and sanitation systems, farm-to-market roads, housing and settlements)

2) Promotion of LED (local roads and bridges, tourism facilities, irrigation systems, post harvest

facilities, cold storage facilities, ports and wharves, and other economic infrastructures and

growth enhancing projects such as markets, slaughterhouses, and water supply systems)

3) Climate change adaptation (CCA) and disaster risk reduction (DRR) (flood control,

reforestation, solid waste management facilities, storm drainages, dikes and related flood

protection measures, slope protection, evacuation centers, rain water collectors, early warning

devices and rescue equipment)

f. An LGU may only receive the PCF once but the grant may be applied to as many projects as the

LGU may wish. The projects should be implementable within one year.

g. The PCF subsidy was to be released to eligible LGUs upon submission to the concerned DILG

RO of a Certification on the utilization of at least 50 percent of the LGU’s counterpart and/or

completion of at least 30 percent of project implementation. However, in view of Memorandum

Order (MO) No. 24 issued by the Office of the President (September 2011) on Temporary

Suspension and Rationalization of the National Government-Local Government Unit Cost-

Sharing Policy, the requirement for counterpart funding utilization for fund release was later

waived. Thus, the PCF subsidy was released to the LGU upon signing of the MOA with the

DILG.

h. Aside from the project proposal, the LGU shall submit the following documents as part of PCF

requirements: Program of Work, Detailed Estimates, and Detailed Engineering Design (for

infrastructure projects).

i. Prescribed forms for Quarterly Physical and Financial Progress Reports and Project Completion

Report were included in MC 2011-123.

j. All LGU PCF recipients shall post in conspicuous places within public buildings/websites or print

media the progress of project implementation and completed projects, including disbursed funds

for both LGU counterpart and the PCF. DILG representatives shall also be present during

groundbreaking activities and inauguration ceremonies.

The reports required for submission to monitor the program’s implementation are shown in Figure 1.

Figure 1. PCF Subproject Monitoring Reporting system

LGU

• Quarterly Physical and Financial Progress Report

• Quarterly Disbursement Report verified by COA

• Project Completion Report

• Certificate of Completion

• Certificate of Acceptance (if by contract)

• Disbursement Report verified by COA

DILG Regional Offices

• Consolidated Quarterly Physical and Financial Progress Report

DILG Central Office (FMS, BLGD)

• Consolidated Quarterly Physical and Financial Progress Report

• List of LGU recipients

• Amount of financial subsidy

• Fund utilization

• Program evaluation and/or assessment reports

DBM

House Committee on Appropriations

Senate Committee on Finance

of 34

The implementing structure for the PCF is shown in Figure 2. Worth noting is that CSO representatives

should be invited as part of the PCF Steering Committee. However, there were no guidelines on the

number of CSO representatives to be invited and on the CSO selection criteria. At the regional level, CSO

representatives should also have been invited to participate in the conduct of assessment and validation of

internal housekeeping, review, appraisal of project proposals, and monitoring and evaluation of PCF-

funded projects of LGUs, yet there were no further guidelines detailing the procedures for CSO

participation.

Figure 2. Implementing Structure for the PCF

3. 2011 SGH Program Policies and Implementation Process

The 2011 SGH recognized local governments that gave primacy to the principles of accountability and

transparency. It covered provinces, cities, and municipalities nationwide. The qualification criteria were

as follows:

a. On sound fiscal management – absence of an “adverse” or “disclaimer” COA opinion on its

financial statements on the immediately preceding year prior to the roll-out of the Seal,

assessment and validation, and

b. On accountable and transparent governance – compliance with the FDP on local budget and

finances, bids and public offerings, as stipulated in the DILG MCs 2010-083 and 2011-08, and as

prescribed in the General Appropriations Act of 2011.

The DILG issued Department Order (DO) 2011-601 on April 27, 2011, which created the PCF Project

Management Committees. The Project Management Committees were created at the national and regional

level offices of the DILG. These teams were also tasked with the implementation of the 2011 SGH

Program.

PCF Steering Committee

• Chair: DILG Secretary

• Vice Chair: DILG Undersecretary for Local Governance

• Members

• Asst. Sec. for Finance and Controllership

• BLGD Director

• BLGS Director

• OPDS Director

• FMS Director

• IAS Director

• OPA Director

• Invited CSO representatives

PCF Project Management Team

• BLGS (Assessment and validation of SGH)

• BLGD (Application and monitoring PCF requirements)

• OPDS (Project proposal review and appraisal)

• FMS (Fund management and release)

• IAS (Monitoring and evaluation)

• OPA (Communication and advocacy)

Regional PCF Management Team

• Chair: DILG Regional Director

• Vice Chair: DILG Asst. Regional Director

• Members:

• LGPMS Focal Person

• SGH/PCF Focal Person

• Head, Project Development Management Unit or Special Project

• Regional Accountant

• Regional Budget Officer

• Provincial SGH/PCF Focal Person

• CSO representatives to be invited to undertake certain functions

of 34

At the national level, the PCF Steering Committee was created to provide policy guidance and oversight

on the overall administration of the 2011 PCF Program. The Secretary of the DILG chairs the Committee.

Its members are the Undersecretary for Local Government, Assistant Secretary for Finance and

Controllership, the BLGD Director, the Bureau of Local Government Supervision (BLGS) Director, the

Office of Project Development Services (OPDS) Director, the Financial Management Service (FMS)

Director, the IAS Director, and the Office of Public Affairs (OPA) Director.

The Project Management Committee was also created at the national level to lead in the implementation

of specific project components. It is composed of focal persons from the BLGD, BLGS, OPDS, FMS,

IAS, and OPA. The Project Management Committee was tasked to carry out program implementation and

provide assistance to Regional Offices. The BLGD was assigned to lead the application and monitoring of

PCF requirements. The BLGS was tasked with the assessment and validation of the SGH. The OPDS was

tasked with subproject proposal review and appraisal. The FMS was tasked to release and manage the

PCF funds. The IAS was tasked to monitor and evaluate the PCF program, and the OPA was tasked to

communicate and advocate for the PCF Program.

The DILG Regional PCF Management Team (RPCFMT) was tasked to conduct the assessment and

validation of internal housekeeping; facilitate the application and compliance with requirements of

eligible LGUs; review and appraise project proposals from LGUs; manage and release the PCF subsidy;

and monitor and evaluate PCF funded subprojects. CSOs should have been invited in the assessment for

SGH, appraisal of PCF proposals, and monitoring and evaluation of PCF subprojects.9

9 DILG Department Order 2011-601 dated April 27, 2011.

of 34

STUDY FINDINGS ON OBJECTIVE 1:

EVALUATION OF SUBPROJECTS OF THE 2010 PCF PROGRAM

Summary of Findings

This rapid assessment of the 2010 PCF program evaluated the implementation by the 30 pilot LGUs of

the PCF funded subprojects and their compliance with the program guidelines. LGU subprojects were

assessed based on timeliness, cost efficiency, project quality, and responsiveness to the actual priority

needs of the community. The implementation by the DILG of the PCF program was also reviewed. The

key findings of the Study Team are as follows:

1. Guidelines and requirements were generally followed by the DILG in evaluating the subproject

proposals from LGUs. Almost all projects approved for PCF funding were eligible under the

program. The objective of supporting the convergence of local public plans and projects with the

national priority agenda such as the Millennium Development Goals (MDGs), Local Economic

Development (LED), Climate Change Adaptation (CCA), and Disaster Risk Reduction (DRR) was

also achieved through the alignment of the proposed subprojects with these stated priority areas.

Some evidence also suggested that the PCF subprojects were responsive to the actual priority needs of

the constituents and that the LGUs followed a sound process in selecting the subproject for funding.

It was only in approving two projects for funding that the DILG did not follow a major guideline. One

project was a lending program while the other had a large capital assistance component. These

activities were ineligible for funding from the PCF based on the 2010 guidelines.

2. Only two-thirds of subprojects funded by 2010 PCF grants had been completed as of the assessment

done in December 2011 to January 2012. Of the completed subprojects that were evaluated on-site,

all were implemented according to the proposed specifications. It also appeared that there were no

issues in procurement based on the BAC reports from the LGUs. However, almost all subprojects did

not pass a “quality checklist” developed by the Study Team for assessing LGU subprojects. Also,

some LGUs were not compliant with the counterpart fund required by the 2010 PCF.

Different factors related to pre-implementation requirements and preparations caused the delays in

implementing the PCF subprojects. For the others, subprojects were generally implemented according

to their respective proposals specifications. However, further evaluation of subproject quality using a

simple checklist of other minimum standards and requirements based on applicable laws or industry

practices revealed that LGU subprojects were not of top quality.

3. Finally, the experience of the Study Team in conducting this assessment suggests that there were

some gaps in the monitoring system for the 2010 PCF Program. The DILG ROs also appeared to have

difficulties in harmonizing their roles of evaluating LGUs subprojects and ensuring the efficient

implementation of the PCF Program.

Only the subproject title and summaries of information on physical accomplishment and financial

utilization are transmitted to and used by the DILG CO in monitoring the progress of the PCF

Program and LGU subprojects. However, some information from the DILG CO was found to have

been vague or inaccurate when verified using other supporting subproject documents or on-site

evaluation results. Also, the experience of the Study Team showed that pertinent information that

could have been used to verify subproject information was available at the DILG ROs, but was not

provided to or easily accessible by evaluating staff from the DILG CO.

of 34

Lastly, evidence suggests that DILG ROs appeared to have been given conflicting roles or

responsibilities. While they were formally designated as the evaluators of LGU subproject proposals

for the PCF, it is apparent that they experienced some pressure from the DILG CO to quickly and

fully implement the granting of the PCF to the thirty pilot LGUs under the 2010 PCF Program.

Detailed Findings

The 2010 PCF program had three stated objectives:10

a) to provide incentives for LGUs to adopt practices

of “good housekeeping;” b) to provide incentives for LGUs to align projects with the national priority

plans (achievement of MDGs, LED, promotion of DRR/CCA); and c) to provide financial assistance for

less able LGUs to implement projects on economic development and poverty reduction. By the design of

the program, the first two objectives are achieved by requiring LGUs to comply with the eligibility

requirements for the PCF grant. The PCF was awarded to the top 30 4th to 6

th class municipalities based

on an assessment led by the BLGS using measures and benchmarks of good housekeeping. Also, projects

proposed for the grant must follow the criteria for eligible projects (i.e., addresses MDGs, promotes local

economic development, promotes DRR/CCA). The third objective is achieved by the awarding of the

PCF grant to supplement LGU funds for projects.

The table below outlines the timing of implementation of the 2010 PCF program.

Table 5. PCF 2010 Implementation Timeline

Date Implemented Activity

October 14, 2010 Issuance of memo on “Interim Guidelines on the Pilot Implementation of the Performance

Challenge Fund for Local Government Units”

- Refers to first batch of 15 LGU awardees

October 29, 2010 Issuance of memo on “Supplemental Guidelines for the 2010 Pilot Implementation of the

Performance Challenge Fund Grant”

- Still refers to first batch of 15 LGU awardees

- Adds specific deadlines for submission of requirements, assessment by DILG

Regional Offices, and release of PCF grant

- Provided drafts for Project Proposal and MOA between LGU and DILG

November 15, 2010 Deadline of submission of PCF project proposals and documentary requirements to DILG

Regional Office. LGUs were given 2 weeks to prepare the requirements (assuming the

memo was disseminated to them immediately).

November 15-19, 2010 Period of assessment by DILG Regional Office of LGU proposals

November 22-26, 2010 Release of PCF grant by DILG Regional Office to LGU, upon signing of MOA

December 15, 2010 Deadline of submission of Official Receipt from Municipal Treasurer to DILG Financial

Management Service

The DILG MCs issued on October 14 and 29, 2010, only mentioned the first batch of 15 LGUs. With this,

it was assumed that the second batch of 2010 PCF awardees were not yet selected at the time, and

therefore, the timeline mentioned in the memorandum only applied to the first batch.

Documents received from and interviews with some of the LGUs showed that the PCF grants were

released to them only between December 2010 and up to as late as March and April 2011. Based on this

sequence of events, it may be assumed that these LGUs were selected later in November but were

required to comply with the requirements from then until December. It appears that these LGUs also had

only two weeks to comply with the PCF proposal requirements. Also, some of these LGUs had less time

10

“Performance Challenge Fund Program” briefer attached to October 14, 2010 Interim Guidelines on the Pilot

Implementation of the Performance Challenge Fund for LGUs

of 34

to complete their PCF subprojects within the one-year timeframe required due to the late release of the

PCF to them.

Table 6. 1

st and 2

nd Batches of Pilot LGU PCF recipients in 2010

First batch of 2010 PCF Recipients Second batch of 2010 PCF Recipients

1. Santol, La Union

2. Pitogo, Quezon

3. Sto. Domingo, Albay

4. Mobo, Masbate

5. Balete, Aklan

6. Anilao, Iloilo

7. Catigbian, Bohol

8. Balilihan, Bohol

9. San Agustin, Surigao del Sur

10. Naawan, Misamis Oriental

11. Damulog, Bukidnon

12. Clarin, Misamis Occidental

13. Leon B. Postigo, Zamboanga del Norte

14. Tampilisan, Zamboanga del Norte

15. Datu Paglas, Maguindanao

1. Alilem, Ilocos Sur

2. Banaue, Ifugao

3. Lagawe, Ifugao

4. Quezon, Isabela

5. Saguday, Quirino

6. Mataas na Kahoy, Batangas

7. Camaligan, Camarines Sur

8. Maribojoc, Bohol

9. Amlan, Negros Occidental

10. Kawayan, Biliran

11. San Jose, Dinagat Island

12. Cagwait, Surigao del Sur

13. Carrascal, Surigao del Sur

14. Calamba, Misamis Occidental

15. Dujali, Davao del Norte

The assessment under Objective 1 evaluated: a) the implementation by the DILG of the 2010 PCF

Program vis-à-vis the program guidelines; and b) the implementation by the LGUs of the PCF funded

subprojects.

1. Assessment of the Compliance with Guidelines on the Evaluation of LGU PCF Subproject

Proposals

1.1. The subproject types of almost all subprojects approved by DILG Regional Offices for PCF grant

funding were compliant with eligibility guidelines.

Almost all subprojects approved by the DILG ROs were compliant with eligibility guidelines. There was

evidence however, suggesting that two PCF subprojects were not in line with guidelines prohibiting the

use of the PCF for micro credits and loans11

.

The first subproject was a loan program of the municipality of Santol, La Union. Based on interviews

during the on-site evaluation, the DILG RO, which had the primary responsibility of evaluating and

approving PCF project proposals, stated that they also referred the project to the DILG CO for approval.

However, this project was reflected in the PCF program summary accomplishment report published by

the DILG CO as “Construction of Santol Development Center”, which is an inaccurate description of the

project.

The second municipality, Maribojoc, Bohol, used the PCF to supplement a larger program which had

capital assistance accounting for more than two-thirds of the program’s budget. The subproject proposal

from the LGU did not specify what component the PCF grant was to be used for. In this case, it is not

outright clear that the PCF grant was used for loans, but it is quite likely, given that a large portion of the

budget of this subproject was allocated for a capital assistance component.

11

October 14, 2010. Interim Guidelines on the Pilot Implementation of the Performance Challenge Fund for LGUs

of 34

1.2. All PCF subprojects were verified to be compliant with the proposal requirements of being aligned

with national priorities and included in the AIP of the LGU.

It was verified that all subprojects proposed for PCF funding were compliant with the requirement of

being in line with the priorities of the national government of addressing the achievement of the MDGs,

enhancing LED, or promoting DRR/CCA. This was confirmed for all 15 subprojects that had verifiable

project details using additional documents from the LGUs and DILG ROs.

All subprojects were also compliant with the requirement of being included in the AIP of the LGU. This

was verified for all 10 subprojects that were evaluated on-site, where the AIP was available for review by

the assessment team.

1.3. Evidence suggests that all subprojects evaluated on-site were responsive to the needs of the

municipality.

The key informant interviews elicited information on whether the project users and beneficiaries agreed

with the choosing of the subproject and if the subproject addressed a priority need of the municipality. All

interviewees agreed that the subprojects indeed addressed their priority needs. In fact, the beneficiaries

would still have chosen the same subproject if given the chance.

LGUs in four of the municipalities also claimed that they had direct consultations with the targeted

beneficiaries of the subproject as additional basis for their proposal. In one municipality, this was

confirmed in interviews with the users of the road project funded by the PCF grant.

1.4. Some evidence also suggests that LGUs used an objective selection process, or had some technical

basis, in identifying the subproject for their PCF grant.

It was verified that the LGUs of all 10 subprojects evaluated on-site had objective or technical basis for

their subproject choice. Four had technical basis for their subprojects, i.e., inclusion in larger programs

already being planned or implemented at the time, results of a technical workshop undergone by the LGU,

and results of the Community-Based Monitoring System. In addition to these four LGUs, one LGU

addressed an apparent need: traffic congestion in front of the school addressed by a road project.

For the last five LGUs, CSOs who were members of the MDCs were present for key informant

interviews. They confirmed that CSOs were able to participate in the planning and consultation process of

the MDC in formulating the AIP, which the LGUs used as basis for their PCF subproject proposals.

2. Evaluation of LGU Implementation of PCF Funded Subprojects

2.1. Only two-thirds of subprojects awarded PCF funding in 2010 had been completely implemented as

of December 2011 to January 2012.

The 2010 PCF guidelines stated that subprojects must be completed within one year. Implementation of

10 of the 30 projects funded in 2010 is still on-going or has not yet started as of December 2011 to

January 2012. The October 2011 PCF Report of the DILG listed only six projects as still on-going.

However, based on subproject documents and on-site evaluation, in addition to these are three more

subprojects that are still being implemented and one subproject that has not yet started implementation.

Findings for these four latter projects based on project documents and on-site evaluation are shown below

in Table 7.

of 34

Table 7. Physical Accomplishment Status for Uncompleted 2010 PCF subprojects as of January 2012

LGU/PCF Subproject Accomplishment

status Findings

Amlan, Negros Oriental/

Establishment of Agri-

Vocational Technical High

School

Not yet started. Based on an ocular inspection report by DILG CO staff,

the delay was caused by negotiations for the purchase of

the land for the proposed high school building, including

the appraisal the LGU requested to value the land. The

appraisal was released at the time of the ocular visit,

December 2011.

PCF fund was released on April 14, 2011, two months after

the signing of the MOA on January 31, 2011.

The inclusion of this project in the list of completed

projects was due to a Project Completion Report submitted

by the LGU to the DILG CO dated October 4, 2011.

Leon B. Postigo, Zamboanga

Del Norte/ Rehabilitation of

Municipal Health Center

35 percent

accomplished as of

Dec 2011

Target project end:

Dec 2011

Project started: Jan

3, 2011

Slow implementation caused by the delayed clearance

from COA of the demolition of the old health center,

which was issued only on July 2011, after the target project

start date of January 2011.

As of Dec. 2011, 75% of the PCF grant had already been

utilized.

Maribojoc, Bohol/ Maribojoc

Integrated Resources

Development and Management

Program

30 percent

accomplished as of

Dec 2011

Project started:

September 2011

The ocular inspection report of DILG CO staff contains no

information on the cause of the delay in implementation, or

details on why the LGU submitted a Project Completion

Report already.

Tampilisan, Zamboanga del

Norte/ Production of organic

fertilizer/soil enhancer –

Construction of materials

recovery facility (MRF) and

waste segregation building

70 percent

accomplished as of

Jan 2012

Target project start:

April 4, 2011

Target project end:

June 4, 2011

Available information from the ocular inspection report of

DILG CO staff shows that the project only started being

implemented in September 2011, instead of the target start

date of April 2011. Reported causes of the delay include

the late bidding for the procurement of construction

materials and the need for good weather for transportation

of materials due to rough condition of the road to the

project site.

2.2. PCF subprojects were generally implemented according to the subproject proposal specifications.

Based on on-site evaluation of seven PCF subprojects that have finished implementation, almost all

subprojects were completely implemented according to planned specifications in the proposals. One

subproject only had minor deviations in the implementation of its road project. The LGU of Pitogo,

Quezon made its road project greater in total length than its proposal by making some sections of the road

half the proposed 4-meter width. Otherwise, there were no major deviations noted in the seven

subprojects.

of 34

2.3. Almost all PCF subprojects did not completely pass a “quality checklist” assessing general good

quality specifications of the different project types.

Subproject assessment tools were drafted to evaluate the quality of PCF subprojects based on metrics

beyond those contained in the subproject proposal specifications using references such as industry

standards and applicable regulatory laws.12

These tools were designed with the capacity and heavy

workload of most DILG field personnel in mind, and thus, did not require specialized technical

knowledge. These tools were made mainly in checklist form for easy usage.

Based on the tools developed for evaluating the particular project types of the 2010 PCF subprojects that

were evaluated on-site, only one subproject passed all the requirements in the quality checklist. The

following table summarizes the common problems that were identified among the PCF subprojects that

were evaluated using the assessment tool:

Table 8. Common Problems Identified from Subproject Assessment Tool Evaluation

13

Subproject Type Summary of Findings

Sanitary landfill - Has a nearby body of water

- Does not have lights

- Does not have an Operations and Maintenance Plan (OMP)

- Does not have funds accounting separate from general LGU funds

- Did not have feasibility study

Potable water

projects - Do not have an OMP

- Do not have separate accounting of funds

Eco-park lodging

houses - Does not have an OMP

- Does not have separate accounting of funds

- Did not have feasibility study

- Have some visible physical defects e.g. leaking roof, water leaks in bathrooms, hole in

the shower room wall

Road projects - Have visible defects e.g. cracks, scouring, non-uniform brooming

2.4. All subprojects evaluated on-site had no issues on procurement based on the BAC reports.

This evaluation on the procurement done for the subprojects was based on a basic checklist of required

bidding reports, which all LGUs were able to provide and completely comply with.

2.5. Almost all LGUs complied with the 20 percent minimum counterpart required in 2010 for the PCF

subproject.

Out of the 14 subprojects where data was available, 11 LGUs complied with the counterpart requirement.

Seven LGUs (Alilem, Amlan, Balete, Leon Postigo, Maribojoc, Santol, and Tampilisan) provided 50

percent or more counterpart contribution. Santol, La Union, provided the highest counterpart contribution

(75 percent of project cost), though the subproject is technically not valid based on the PCF guidelines.

Another four LGUs contributed less than 50 percent but more than 20 percent counterpart funds for

subproject implementation. These were Balilihan, Naawan, Pitogo, and Quezon.

Only three LGUs (Anilao, Catigbian, and Saguday) provided less than the 20 percent counterpart

contribution required in the 2010 PCF guidelines. This information is summarized in the table below.

12

Annex A. Assessment Tools for LGU Subprojects 13

Annex E. Accomplished On-site Project Evaluation Tools

of 34

Table 9. 2010 PCF Subproject Cost and LGU Counterpart

LGU Subproject

Total

Subproject

Cost (PhP)

PCF Grant

(PhP)

LGU

Counterpart

(PhP)

LGU

Counterpart

as % of Total

Project Cost

Alilem, Ilocos

Sur

Improvement of Abatan-

Daddaay Proper FMR (PCF),

Improvement of Alilem Roads

and Concreting of Poblacion-

Batbato FMR

2,522,305.16 1,000,000 1,522,305.16 60%

Amlan, Negros

Oriental

Establishment of Agri-

Vocational Technical High

School

2,000,000 1,000,000 1,000,000 50%

Anilao, Iloilo Municipal Livelihood

Development Program (Shrimp

paste processing project)

1,100,000 1,000,000 100,000 9%

Balete, Aklan Rehabilitation/ Improvement of

Sitio Anao Farm-to-Market

Road

2,000,000 1,000,000 1,000,000 50%

Balilihan,

Bohol

Provision of potable water

supply in Barangays

Haguilanan Grande, Sagasa,

Cantomimbo, Sal-ing, San

Roque, Boctol, and Cabad

1,344,520 1,000,000 344,520 26%

Catigbian,

Bohol

Development of Abatan

upstream Eco-Adventure Park 1,150,000 1,000,000 150,000 13%

Leon B.

Postigo,

Zamboanga del

Norte

Rehabilitation of municipal

health center 2,500,000 1,000,000 1,500,000 60%

Maribojoc,

Bohol

Maribojoc Integrated

Resources Development and

Management Program

3,200,000 1,000,000 2,200,000 69%

Naawan,

Misamis

Oriental

Construction of drainage

system and concreting of curb

and gutter, and walkway

1,470,000 1,000,000 470,000 32%

Pitogo,

Quezon

Concreting/rehabilitation of

Soliyao-Pacatin Barangay Road 1,500,000 1,000,000 500,000 33%

Quezon,

Isabela

Construction of sanitary landfill

facilities 1,500,000 1,000,000 500,000 33%

Saguday,

Quirino

Construction of 100 sq. meters

open-air market building 1,200,000 1,000,000 200,000 17%

Santol, La

Union

Santol Development Center –

loan facility 4,000,000 1,000,000 3,000,000 75%

Tampilisan,

Zamboanga del

Norte

Production of organic

fertilizer/soil enhancer 2,857,500 1,000,000 1,857,500 65%

In the case of the Catigbian subproject, the reported total subproject cost did not include other

components of the subproject that were funded by third party sources, such as the Priority Development

Assistance Fund (PDAF) of a senator, thus resulting in a reduced total subproject cost and reduced LGU-

raised counterpart. This format of subproject cost reporting however, was not followed in other

subprojects, such as the loan program of Santol, which included other fund sources in the total subproject

cost.

of 34

Also, some LGUs used old projects as counterpart for the PCF subproject. One LGU used a different

component of the PCF funded road subproject, which was completed almost a year ago, as its counterpart

for the new proposed project.

3. Findings on PCF Subproject Monitoring and Evaluation

3.1. Some information from the DILG Central Office on the 2010 PCF Program was inaccurate or

vague.

One inaccuracy was that four subprojects were reported as completed in the PCF Accomplishment Report

of October 31, 2011, prepared by the DILG CO but were actually still on-going.14

Based on the report,

only six of the 30 LGUs had on-going PCF subprojects. These were: a) Damulog, Bukidnon; b) Calamba,

Misamis Occidental; c) Clarin, Misamis Occidental; d) Naawan, Misamis Oriental; e) Banawe, Ifugao;

and f) Carrascal, Surigao del Sur. However, based on available subproject documents and/or the field

visits by the Study Team, four other subprojects (Amlan, Leon Postigo, Maribojoc, and Tampilisan) were

still on-going and not yet completed as of January 2012.

This was due to, among other possible reasons, the lack of clarity in the guidelines explaining project

completion reporting. Some LGUs reported the PCF subproject as completed when in fact, only the

particular project component funded by the PCF grant was completed, but not the total subproject. Some

LGUs followed a different method and reported physical accomplishment based on the implementation

status of the whole subproject.

Also, six subprojects had vague or misleading names reported to and by the DILG CO. The PCF

Accomplishment Report of October 31, 2011, enumerates the subprojects implemented by the 30 pilot

LGUs. Discerning the subproject type based on the title is difficult in the case of some LGUs since some

of the titles are general in nature while others are “misleading” and do not reflect the actual nature of the

subproject implemented by the LGU.

For instance, in Santol, La Union, the PCF report published shows that the subproject of the LGU is the

construction of a building (“Construction of Santol Development Center”). However, upon review of the

subproject documents and on-site evaluation, the subproject was actually a savings and loan program for

farmers, micro entrepreneurs, and LGU officials and employees. Another example is the reported

subproject in Tampilisan, Zamboanga del Norte, where the DILG report states that the project is a

“Multipurpose Hall (LGU Training Center).” In actuality, the subproject implemented by the LGU is a

materials recovery facility and waste segregation building for organic fertilizer generation.

14

“2011 Performance Challenge Fund (PCF) as of October 31, 2011” report posted on DILG website, accessed on

August 28, 2012

of 34

Table 10. Vague/Misleading Project Names reported in the PCF Accomplishment Report (October 31, 2011)

LGU Project Names in the

DILG PCF Report Actual subproject implemented by LGU

Catigbian,

Bohol

Development of Abatan

River

Development of Abatan upstream Eco-Adventure Park,

particularly the construction of tourist lodging facilities (two

2-room buildings) inside the Eco-Adventure Park

Maribojoc,

Bohol

Maribojoc Integrated

Resources Development

and Management Program

Maribojoc Integrated Resources Development and

Management Program – formation of communities into

agricultural/entrepreneurial productivity centers

Mobo,

Masbate

Education Facilities

Improvement

Construction of one unit two-classroom school building

Naawan,

Misamis Oriental

Urban Road Development Construction of drainage system and concreting of curb and

gutter and walkway

Santol,

La Union

Construction of Santol

Development Center

Santol Development Center - An LGU-managed institution

for savings and loan assistance)

Tampilisan,

Zamboanga del Norte

Multi-Purpose Hall (LGU

Training Center)

Production of organic fertilizer/soil enhancer – Construction

of materials recovery facilities (MRF) and waste segregation

building

3.2. The experience of the Study Team in collecting information for this assessment suggests that

information that could have been used to clarify or verify the limited subproject information at the

DILG CO was available at the DILG ROs, but was not easily accessible by evaluating staff.

It was found that documents available at the DILG regional level contained useful information that could

have been used by evaluating staff at the DILG CO to clarify vague subproject information or to verify

incorrect information. The experience of the Study Team suggests that there may have been some

information available at the DILG central level as well, but there was poor document management,

making these documents inaccessible and illustrating that available documentary resources were not being

used effectively. Also, it was shared by DILG staff that the standard process that was used for the 2010

PCF Program was that bulk of subproject documents submitted by LGUs to the DILG was in hard copy

form and remained with the ROs. Only summary reports were collected by CO evaluating staff from the

DILG ROs. However, this information system proved ineffective in providing useful information to the

DILG CO for monitoring the PCF subprojects and the progress of the PCF Program as a whole.

3.3. The study suggests that DILG Regional Offices may have been placed under conflicting pressures

of evaluating and approving PCF proposals from LGUs while ensuring the awarding of PCF grants

to 30 LGUs in the 2010 pilot PCF Program.

It could be seen in the implementation guidelines that the primary responsibility of implementing the

2010 pilot PCF Program lay with the DILG ROs. The achievement of the objectives of this program was

dependent on the consistent implementation of its guidelines on subproject proposals for awarding the

PCF grant. However, it was seen that aside from their primary responsibility, there were also pressures on

the DILG ROs to finish the completion of the pilot PCF Program in the protracted timeframe of only two

months. These conflicting pressures on the DILG ROs were seen as potential factors that could have

caused the approval of ineligible subprojects.

of 34

STUDY FINDINGS ON OBJECTIVE 2:

EVALUATION OF INCENTIVE EFFECTS OF THE 2011 SGH/PCF

PROGRAM

Summary of Findings

This rapid assessment evaluated the incentive effects of the 2011 PCF program with respect to its stated

goal of providing incentives for LGUs to adopt “good housekeeping” practices and to align projects with

national government priorities and strategies.

1. The findings of this study were inconclusive with regard to the incentive effects of the 2011 PCF

Program on LGU behavior. Evidence suggests that the intended incentive effects were likely to have

been affected by the weakness of information dissemination and coordination of the SGH assessment

and PCF program resulting from the lack of knowledge of the LGUs about the linkage of SGH

attainment to the PCF grant guidelines and process. Results from the survey of 4th to 6

th class LGUs

that were the main target beneficiaries of the 2011 PCF program indicate that LGUs considered

eligibility for the PCF as only third among six motivations for complying with the SGH.

Weaknesses in the coordination of the 2011 SGH assessments of the LGUs weakened the link

between the PCF program and the SGH, as the DILG assessed LGUs for the SGH initially without

the full awareness by the LGUs of the PCF guidelines and process. Furthermore, many LGUs that

were assessed in the early rounds of the SGH evaluation did not have knowledge or full

understanding of the PCF program, which compromised the intended incentive effects of the PCF.

Also, LGUs broadly considered the attainment of the SGH as an incentive in itself, as it provided

public validation for their good practices. This indicates that the honor of being awarded the SGH

may have served as a stronger motivating factor than the PCF grants in 2011 for certain LGUs.

2. Implementation capacity challenges and policy changes in the middle of implementation of the 2011

SGH Program led to some negative effects on LGU perception of the program. The lack of time and

weak capacity in the part of some DILG ROs led to inconsistent and seemingly rushed

implementation. Because of this, some of the early grantees of the PCF got the impression that the

criteria and requirements for the SGH and PCF were watered down later in the year or that other

LGUs were unfairly accommodated to facilitate the speedier implementation of the program by the

DILG to meet national government deadlines.

Policy changes made by the DILG in the middle of implementing the program in 2011 caused

inconsistencies in application of the guidelines between the earlier and later rounds of SGH

assessment. LGUs which had received the SGH earlier misunderstood the details and intent of the

DILG in implementing these policy changes, causing them to have negative perceptions that may

have weakened the incentive effects of the program.

Detailed Findings

On August 31, 2010, the DILG released MC 2010-83 or the Full Disclosure Policy (FDP), which

mandated the “Full Disclosure of Local Budget and Finances, and Bids and Public Offerings” by LGUs.

The MC aimed to make LGUs value performance, transparency, meaningful development, and public

accountability. However, LGU compliance remained low in the seven months after the announcement of

the order. A report from the DILG showed that in 2010, only 20 percent of LGUs fully complied with the

FDP. The first quarter of 2011 only had 12.9 percent full compliance while the second quarter of the same

of 34

year only had 31 percent of LGUs fully complied with the FDP. Most LGUs were only able to report

partial compliance, with 76.5 percent LGUs complying with disclosure of 2011 first quarter documents

and 57 percent complying with disclosure of 2011 second quarter documents.15

To encourage wider LGU compliance to the FDP, the DILG implemented the SGH in 2011. The program

recognized LGUs that were found to practice good internal housekeeping particularly in the areas of

transparency and accountability (reflected by compliance with the FDP) and sound fiscal management

(reflected by the absence of an “adverse” or disclaimer opinion on the most recent COA Annual Audit

Report). LGUs that complied with these criteria were awarded the SGH and consequently eligible to

access matching grants from the 2011 PCF program, which was intended as an incentive program for

LGUs to attain the SGH and to implement projects that were aligned with national priorities. The table

below outlines the timing of the implementation of the SGH and PCF programs in 2011.

Table 11. 2011 SGH and PCF Implementation Timeline

Date Implemented Activity

April 27, 2011 Issuance of MC 2011-62 on “Guidelines in the Implementation of the Performance Challenge

Fund (PCF)”

Issuance of DO 2011-601 on “Creation of Performance Challenge Fund (PCF) Project

Management Committees”

May 18, 2011 First Inter-Agency Technical Working Group Meeting for PCF

- Preparation of advocacy materials (Manuals, flyers, presentation materials, and

communication plan)

- PCF orientation/ roll out to all DILG Regional Directors, Regional Focal Persons, Project

Development Management Unit Focal Persons, and Central Office Management

July 2011 End of Round 1 assessment and validation of SGH for 4th

-5th

class cities and 4th

-6th

municipalities

August 2011 End of Round 2 assessment and validation of SGH for 1st-3

rd class provinces, cities, and

municipalities

August 31,

2011

Issuance of MC 2011-123 on “Supplemental Guidelines in Accessing the 2011 Performance

Challenge Fund (PCF)”

September 19,

2011

Issuance by the Office of the President of Memorandum Order No. 24 on “Temporary Suspension

and Rationalization of the National Government-Local Government Unit Cost Sharing Policy”

October-

December 2011

Round 3 of SGH assessment and validation for LGUs which were not assessed during Rounds 1

and 2 and other LGUs which did not receive the SGH in the first two rounds of validation

November 16,

2011

Issuance of MC 2011-170 on “Revised Guidelines on the Implementation of the Performance

Challenge Fund in View of Temporary Suspension and Rationalization of the National

Government-Local Government Unit Cost Sharing Policy”

After the first round of SGH evaluation in July 2011, which covered 4th to 6

th income class cities and

municipalities, 319 LGUs were awarded the SGH. This was only 45 percent of the 716 cities and

municipalities which belong to the 4th to 6

th income classes, and 18 percent of the total number of LGUs.

In the second round of evaluation in August 2011, which expanded the coverage to 1st to 3

rd income class

provinces, cities, and municipalities were assessed for the SGH, 547 LGUs or 31.9 percent of the total

number of LGUs were awarded the SGH. A third round of evaluation was organized in the last quarter of

2011 for other LGUs that were not assessed by the DILG and those that were initially unable to comply

with the requirements of the SGH. An additional 461 LGUs or 26.9 percent of the total number of LGUs

were given the SGH. A total of 1,327 LGUs, or 77 percent of the total number of LGUs, were eventually

awarded the SGH by the end of 2011.16

15

DILG Regional Reports as of October 31, 2011. 16

DILG report on Seal of Good Housekeeping, CY 2011, No. of SGH Recipients, and LGU by type as of March 30,

2012

of 34

Table 12. Number of SGH Recipients in 2011

SGH Assessment Round

Round 1

(4th

-6th

class cities &

municipalities)

Round 2

(1st-3

rd class LGUs)

Round 3

(LGUs not assessed or

awarded in R1 & R2) Total

SGH Assessment Period July 2011 August 2011 Oct - Dec 2011

No. of SGH Recipients 319 547 461 1,327

Total no. of LGUs covered

per round 716 997 847 1,713

% of LGUs receiving SGH

out of LGUs covered 44.5% 54.9% 54.4% 77.5%

1. Incentive Effects of the PCF Grant in the 2011 SGH Program

The findings of this study were inconclusive on the incentive effects of the 2011 PCF performance-based

grants on LGU behavior. The results from the survey in the table below show that eligibility for the PCF

was only ranked third as a motivation for complying with the SGH. The potential effect of the PCF to

incentivize LGUs to attain for the SGH was probably not as strong as intended by the program. Evidence

suggests that the planned incentive effect of the PCF grant was weakened by several factors.

Table 13. LGU Ranking of Motivation to Comply with SGH criteria in 2011

Motivation Mean Rank

(standard deviation)

Number of

Respondents

To improve LGU performance 1.58 (0.89) 231

To get recognition as a model LGU 2.61 (1.02) 228

To be eligible for the PCF 2.75 (1.06) 229

To avoid sanctions for non-compliance 3.23 (1.24) 214

To gain political mileage 4.63 (0.76) 205

To promote transparency 5.86 (0.38) 7

1.1. The incentive effect of the 2011 PCF program was weakened by the lack of awareness of many

LGUs that they were being assessed for the SGH and about the link of the SGH with the PCF

grant. This resulted from weaknesses in the information dissemination and coordination of the

2011 SGH assessments and PCF program.

The incentive mechanism of the PCF grant requires the awareness of LGUs of the intent of the program to

award LGUs with the SGH in order for them to be eligible to apply for the PCF. However, results indicate

that this incentive mechanism was weakened by the manner of information dissemination by the DILG of

the 2011 PCF program. LGUs were not effectively informed about the links of the SGH assessments and

PCF eligibility guidelines and process. According to key informants from the DILG, LGUs were

assessed for compliance with SGH requirements without their knowledge of the PCF program. In

addition, a number of LGUs which obtained the SGH had no knowledge that they were being assessed for

the SGH or that they would be eligible to access the PCF. In some case studies, the LCEs were surprised

that they were receiving an award and did not know that they would be able to access a potential grant for

their local development projects.

Interviews with LGUs also showed that they were willing to fulfill PCF subproject proposal and reporting

requirements in order to gain subsidy funding from the PCF. However, the information regarding when

and how they are eligible to receive the PCF needed to be communicated to the LGUs more clearly.

1.2. Awareness of the incentive system of the PCF may have been overtaken by the SGH award itself

being seen as a significant reward by LGUs.

of 34

The incentive effect of the PCF grant in 2011 on LGUs may also have been weakened or overtaken by the

apparent knowledge of and significance given to the SGH as a separate award by LGUs. It can be

observed that LGUs have more knowledge about the SGH than the PCF grant. This may have been the

result of the lack of information provided to the LGUs about the incentive links of the PCF grant and the

SGH assessments. Several results from the study showed the knowledge and importance given to the

SGH by LGUs. The first is the reaction or reception of LGUs to being awarded the SGH. Based on the

case studies of LGUs, the SGH was considered a sign of recognition that the LGU was performing well

and exhibited good governance practices in transparency and accountability. Several case study LGUs

placed the SGH plaque that they were awarded in the most conspicuous area of the city or municipal hall.

Some LGUs also publicly announced receiving the SGH in the local media, while other LCEs informed

their peer LGUs in meetings of the Leagues of Cities and Municipalities that they had received the SGH.

LGUs which had not initially received the SGH proceeded to ask other LGUs how to obtain the award.

They also asked the Regional and Provincial Directors of the DILG about the requirements for the SGH

after hearing about it from the other LGUs. In some cases, LGUs which had not received the SGH felt

“ostracized” and “out” for not having received the recognition. The survey also showed that LGUs

considered the SGH as important, regardless of their having received it or not.

Table 14: Importance of the SGH to LGUs in 2011

Importance SGH Recipients (n=274) Non-SGH Recipients (n=29)

Frequency Percentage Frequency Percentage

Important 262 95.6 24 82.8

No Response 12 4.4 5 17.2

The survey results also suggest that the SGH was seen as a significant enough reward by LGUs for

complying with the good housekeeping requirements. As shown in the table below, 89.4 percent of

respondent LGUs said that they would still comply with the requirements of the SGH even without the

PCF grant.

Table 15. Compliance by LGUs with SGH without PCF

LGU Response (n=274) Frequency Percentage

Will comply with SGH without PCF 245 89.4

Will not comply with SGH without PCF 18 6.6

No response 11 4.0

2. Unfavorable LGU Perceptions on the 2011 SGH Program

2.1. Perception of inconsistent and uneven implementation of the SGH and PCF programs emerged

among some LGUs

The effectiveness of the incentive mechanism of the PCF may have been weakened by the challenges

faced by some DILG ROs in fully implementing the 2011 SGH Program within its prescribed timeframes.

Some ROs failed to completely assess and validate all the LGUs covered in the first two rounds of SGH

assessment. Key informant interviews indicated that some ROs lacked staff support to finish all the LGU

assessments within the prescribed deadlines of the DILG CO. The ROs were collectively tasked to assess

716 LGUs in the first round and 997 LGUs in the second round.

Some DILG ROs also had limited technical expertise to evaluate PCF subproject proposals and lacked

personnel to process the proposals they received in a timely manner. The DILG conferred the SGH on

319 LGUs, 547 LGUs, and 461 LGUs, respectively, in each of the three rounds. These were also the

of 34

number of LGU subproject proposals that ROs potentially needed to evaluate for each round. Some DILG

ROs expressed difficulty in processing the number of PCF proposals. The perceived inefficiency and

inconsistency in the implementation of the SGH and PCF in 2011 may have negatively affected the

perception of the program of LGUs

The third and last round of assessments of the SGH conducted in October to December 2011 covered

LGUs that the DILG failed to assess in the first two rounds, as well as LGUs that failed to comply with

the SGH requirements in the first two rounds. This suggests that ROs could have failed to assess some

LGUs in the first two rounds of SGH assessment that may have been compliant with the SGH. In

addition, some LGUs which received the SGH as part of the earlier batches believed that the purpose of

the third round of SGH assessments was to allow other LGUs which did not pass the first two rounds to

“catch up” and receive the SGH under less stringent requirements. Indeed, some LGUs were awarded the

SGH only in the last quarter of 2011, extending to the latter part of December in some cases. DILG’s

conduct of the three rounds of SGH assessments and the seemingly rushed awarding for other LGUs were

viewed by some LGUs as “watering down” the value of the SGH and the PCF grant. These unfavorable

perceptions may have diluted the intended incentive effects of the PCF grant as it was seen by some as

becoming easier to access in the latter part of the year.

2.2. Policy changes in the middle of implementation of the PCF Program may have also affected the

perception of LGUs

The changes in the policies of the 2011 PCF program made in the middle of implementation affected how

LGUs perceived the PCF program and weakened its incentive value. LGUs that had received their PCF

grant in the earlier rounds and DILG ROs interviewed for the case studies expressed their impression that

the requirements of the SGH were relaxed by the DILG later in 2011 to resolve the problem of not being

able to spend the total budget allocated for the PCF in the prescribed time. Changes in the policy included

the immediate release of the PCF subsidy upon signing of a MOA between the LGU and the DILG as

long it was stipulated in the agreement that PCF shall have funding support incorporated in the AIP. This

change was released in MC 2011-170, which revised the guidelines on releasing of the PCF to LGU in

view of the temporary suspension by the President of the “national government-local government unit

cost-sharing policy” or local counterpart requirement.

of 34

RECOMMENDATIONS

The DILG is already implementing the SGH and PCF programs in 2012 with the release of MC 2012-68

on the “Implementing Guidelines in the Availment of 2012 Performance Challenge Fund (PCF)” and MC

2012-78 on “Scaled up Seal of Good Housekeeping.” The 2012 PCF Program was also given a larger

budget and a larger target for the number of LGUs beneficiaries. The national government has also sought

to scale-up the impact of DILG’s local governance initiatives by linking LGU programs of other

government agencies with the SGH – including the use of the SGH as a requirement for gaining access to

financial assistance from national government agencies through the Bottom Up Budgeting and Planning

mechanism, and the use of the SGH as a requirement for LGUs to access credit from government

financial institutions.

The Study Team supports the continued and expanded implementation of these programs based on the

positive findings of this assessment. However, this scaled up implementation entails a greater need to

better understand the incentive effects of the SGH and PCF program, to ensure effective use of resources,

and to maximize the potential of the program for promoting good governance among LGUs.

1. Overall Recommendations for the SGH and PCF Program

1.1. Recommendations for Improving the Incentive Effects of the SGH and PCF Programs

The effectiveness of the behavior changing effects of the program was affected by the weakening of the

link between the desired behaviors and the incentives due to challenges in the implementation of the

program. The following steps may be taken to improve the effectiveness of the program:

a. The DILG should be strict in implementing the guidelines of the PCF program according to its

timeline. Time-bound, predictable, strict, and consistent implementation of the policies of

incentive programs can strongly encourage LGUs to redouble their efforts in complying with the

SGH and PCF. In this regard, a level of consistency should also be maintained in communicating

the objectives and guidelines of the programs to LGUs to make the behavioral conditions for

access to the grant clear, thus facilitating the intended behavior changes. The implementation of

the guidelines should be fair, consistent, and strict.

b. The DILG should strongly commit to fully implementing the program guidelines with respect to

the responsibilities of the different DILG offices and officers involved in program

implementation. While DILG personnel may now have a better understanding of the PCF

program after the implementation in 2010 and 2011, gaps in understanding may be addressed by a

more comprehensive internal communication plan.

c. To address the challenges in program implementation, the DILG may explore investing in

additional staff and capacity building for the implementers of the PCF program especially in the

ROs. The success of the PCF Program rests on the capacity, motivation, and level of commitment

of the DILG Project Management Committee and Regional PCF Management Committees,

including the MLGOOs/ CLGOOs/ PLGOOs. The DILG should consider allotting a portion of

the total PCF budget in future years for project management and capacity building activities. The

allotment for project management can be used to hire new staff, cover for logistical costs for

assessments and validations, and organize trainings and seminars for effective implementation of

the PCF program, such as training on data management, reporting, and communication.

d. A communication plan for the SGH and PCF should also be actively and purposefully developed

and implemented by the DILG, to ensure clear understanding of the design and objectives of the

program among LGUs and to prevent misunderstanding of the purpose and guidelines of the PCF.

A clear and uniform understanding of the PCF by LGUs coming from a more comprehensive

of 34

communication from DILG will allow LGUs to better participate in the PCF program based on its

intended design as an incentive linked to good governance criteria. This can also leverage LGU

and public awareness already started in 2011 as a strategy to promote good local governance to

the public, allowing constituents to participate in the PCF program and making LGUs more

accountable to them.

e. The DILG CO should also improve its horizontal and vertical coordination. Improvements in

availability of and ease of access to data through better data management and reporting systems

can help in improving coordination and effectiveness of monitoring. The use of electronic copies

of reports allows for easier transmission through the internet and provides easier access and data

management. This will ensure that the DILG CO can more easily validate its information on PCF

funded subprojects and ensure consistent implementation of the program.

1.2. Recommendations for the Scaling-up of the SGH and PCF Programs

With already 77.5 percent of LGUs having obtained the SGH in 2011, the DILG was able to gain the

widespread awareness and participation of LGUs in the program. The Study Team is supportive of the

policy design of MC 2012-78 outlining the use of several levels of SGH. With the use of the 2011 SGH

criteria as 2012 SGH Bronze and an expanded set of criteria as 2012 SGH Silver, DILG can further

increase the number of SGH awardees, while also pushing the 2011 SGH awardees to improve their

performance on “good housekeeping.”

a. It is recommended that the DILG consider targeting the PCF program as an incentive for higher-

level criteria of “good housekeeping” or good local governance, such as those found in the 2012

SGH Silver. In doing so, the PCF may be better positioned to provide a strong incentive for

LGUs to improve local governance in other important aspects such as local planning,

participatory budgeting, and monitoring and evaluation of local public service delivery. The

DILG may also consider reinforcing the formal mechanisms mandated by the Local Government

Code (LGC) such as the Local Special Bodies (LSB) and the participatory processes in planning

and investment programming as espoused in its Implementing Rules and Regulations, such as

composition, key functions, and major outputs, instead of just merely alluding to the presence of

LSBs as an indicator. Previous initiatives of the DILG that attempted to define LSB functionality

in terms of more specific set of indicators may be retrieved, reviewed and considered. Not to be

overlooked is DILG MC 2010-73 that provides the detailed guidelines on the accreditation and

selection of CSOs in various LSBs.

b. The DILG should also study how Bottom Up Budgeting (BUB) and the community-driven

development programs of various national agencies can be integrated in the development of

criteria and measures of participatory local governance. For instance, the BUB may require an

LGU to be an SGH Bronze awardee in order to qualify for the BUB. It may consider using

indicators of LGU support for community driven development programs being implemented in

their area as a participatory governance indicator for the SGH, such that supporting community

driven development unlocks PCF funds for the LGU. The DILG may also consider using

feedback from CSO participants in BUB as an indicator for the SGH. The PCF may also promote

for assistance projects that are selected and prioritized through the BUB process, particularly

those that signify high impact in terms of addressing poverty in the area. These proposals would

reinforce and complement parallel efforts of the national government to promote participatory

local governance.

c. CSO involvement should also be strongly promoted at all levels of project management,

especially in the monitoring and evaluation of the overall PCF Program. A portion of the PCF

project management fund can be used to develop and implement sub-projects to further engage

of 34

CSOs in the PCF program. The DILG should consider providing incentives to capacitate CSOs to

monitor LGUs which have been awarded the SGH and to participate in local governance.

1.3. Recommendations for Further Study

The findings of the Study Team were based on the initial implementation of the SGH and PCF in 2010

and 2011. As DILG continues to expand and scale-up these programs, the findings of the rapid

assessment may be further deepened in the following ways.

a. The DILG should explore how it can better understand and leverage the incentive effect of the

SGH itself on LGUs. The results indicate that public recognition and peer pressure increased the

desire of LGUs to attain the SGH, and facilitated awareness and appreciation of the SGH among

them.

b. The DILG should also seek to further understand the public awareness aspect of awarding the

SGH to LGUs, especially on how accountability, transparency, and participation in local

governance can be further enabled by public awareness of the SGH and PCF. LGUs had eagerly

promoted their having received the SGH in 2011, not just to their peers, but also to local media

and the public.

c. The DILG can also look more deeply into how some LGUs who did not receive the SGH were

pressured by the fact that most other LGUs had received it to take steps to know more about the

SGH and how to attain it. This peer pressure was a clear driver of LGUs wanting to obtain the

SGH Program, which the DILG can better leverage in the future.

d. To have a more definitive understanding of the effect of the PCF on changing behaviors of LGUs,

the DILG should look into measuring LGUs performance and behaviors, as well as trends in LCE

decision making after a period of time, when the PCF Program has been more internalized and

understood by LGUs. This will also allow the DILG to look at trends in behavior and decision

making of LGUs over time, compared with the baseline findings from this assessment.

2. Recommendations on the Implementation Process of the SGH and PCF Program

2.1. PCF Subproject Proposal Requirements, Evaluation, and Approval

a. Subproject proposals must clearly identify what component of the project will be funded by the

PCF grant, including the work plan is for this distinct component, so that the DILG monitoring

personnel can specifically track and monitor this project component. The DILG ROs have the

obligation to ensure that they can monitor the subprojects that they approve for PCF grant

funding, even with constraints to their technical capacities. This is to ensure that the DILG can

feasibly monitor the compliance of LGUs with requirements on counterpart spending of the LGU,

on the one-year completion of the project, and any other guideline required by the DILG to

comply with the proper accounting and liquidation of the PCF grants. To this end, this assessment

recommends that the subproject proposal format be revised to require a clear work plan.

b. The guidelines on the eligible sources for counterpart funding must be clarified. Specifically,

DILG should clarify whether the counterpart can only be sourced from the LGU’s own funds, or

if it can be sourced from third parties, such as the PDAF. Another sourcing of LGU counterpart

funding that should be explained further is the use of other LGU projects, to avoid its abuse by

LGUs. It is recommended that for LGU projects to be eligible as counterpart for PCF subprojects,

they should have been completed within a specified timeframe (e.g. within the current calendar

year of the PCF program).

c. It is recommended that third party sourcing of funds be eligible as counterpart funds to allow the

LGU greater flexibility in selecting subprojects for PCF grant funding. Sources of counterpart

of 34

funding should be clearly reflected in the financial reports of the LGU and in the monitoring

system of the DILG.

d. To help ensure that subproject implementation is not delayed, projects must be required to be in a

“ready for roll out” state. All project requirements – such as permits, acquisition of land and right

of way, and other similar project implementation pre-requisites – must be accomplished already

at the time of the preparation of the subproject proposal, and copies of these must be annexed to

the proposal.

e. The responsiveness of PCF subprojects to local needs can be further ensured by requiring the

project proposal to be signed by three civil society members of the Local Development Council

identified by the CSO representatives from among themselves. This would allow the PCF

program to leverage the LGU-CSO partnerships being built by other national government

programs, especially the Bottom-Up Budgeting/Local Anti-Poverty Action Planning led by the

DBM. This is recommended in addition to the current guideline requiring the subproject to be

included in the AIP of the LGU. While it is assumed that the AIP was crafted in consultation with

various stakeholders who compose the LDC, experience shows that this is not the case for most

LDCs of LGUs. The requirement to have civil society members of the LDC sign off on the

subproject proposal further pushes the participatory governance thrust of the PCF program.

f. It is also recommended that a negative list of ineligible project types be re-included in the

guidelines, in addition to the list of eligible projects that was added in the 2011 PCF guidelines.

This will improve the clarity of these guidelines and give more guidance to the DILG Regional

personnel evaluating and approving the LGU subproject proposals.

g. In order to ensure that guidelines on the evaluation and approval of PCF subproject proposals are

followed, it is recommended that a Regional PCF Subproject Evaluation Committee be formed.

The Committee may be composed of five members, with at least two members from outside

DILG. These third party members can come from the private sector, non-government

organizations and people’s organizations, the academe, or other civil society groups. They will

act as third party validation of the evaluation and approval of subproject proposals submitted by

the LGUs.

2.2. PCF Subproject Implementation and Monitoring

a. The guidelines for the LGU subproject monitoring should include random on-site checks by

teams composed of DILG staff and external third party members. This is to ensure that LGUs are

implementing projects according to their proposed plans. As the number of PCF grant recipients

is expected to sharply increase, random checks instead of a complete checking will be necessary

given the limited resources of the DILG.

b. The DILG should also clarify the meaning of “PCF subproject completion” as referring to either

the completion of the particular PCF component, or the total project which the PCF is

supplementing, based on applicable public audit and accountability guidelines. The ambiguity of

the previous guideline in the different situations faced DILG monitoring personnel as well as

reporting LGUs caused differences in the interpretation of the meaning of project completion.

The DILG should take into account situations such as the use of PCF subsidy by LGUs to

supplement large, multi-component, multi-LGU, or multi-year projects.

c. It is also recommended that the format of the Quarterly Project Reports and the Project

Completion Report be revised to facilitate easier tracking of the project implementation and PCF

fund utilization vis-à-vis the proposed work plan to be added to the LGU subproject proposal.

The guidelines should be revised to better clarify the role of the LGU, DILG Regional Office, and

DILG Central Office (through its different Bureaus) in subproject monitoring, such that accurate

and effective monitoring is maintained at all levels.