No bank loans for LGUs without good housekeeping seal - DILG

By MYLES JOSEPH E. COLASITO
August 5, 2012

TACLOBAN CITY  –  The Department of the Interior and Local Government (DILG) today hailed new rules that allows only local governments that have been conferred with its Seal of Good Housekeeping (SGH) to secure a loan from banks and other financial institutions.

DILG-8 Regional Director Pedro A. Noval Jr. said that as a result of talks between DILG Secretary Jesse Robredo and Finance Secretary Cesar Purisima, the Bureau of Local Government Finance (BLGF) issued Finance Circular 1-2012 on April 16, 2012 listing down SGH as one of the stringent requisites for LGUs applying for authority to borrow money from banks and other financial institutions.

“We are glad that SGH is now being recognized by other national government agencies and other concerned sectors as an effective way to determine whether an LGU has good financial management; is ready to secure loans; and pay for them,” Dir. Noval said. He believes that this will further encourage LGUs to observe transparency and accountability.

The SGH is being conferred to local government units (LGUs) that have no adverse report from the Commission on Audit, and complied with the posting of the required 12 financial documents. SGH awardees are also eligible to receive an incentive fund ranging from P1 million to P7 million for their local development projects.

Just recently, the DILG launched the SGH Bronze, Silver and Gold wherein aside from the two previous requirements, additional requisites include compliance with the Government Procurement Act and the Anti-Red Tape Act, a comprehensive development plan, and an above benchmark performance in the local governance performance management system.

Secretary Robredo in a statement said that with the inclusion of SGH as an additional requirement for borrowing LGUs, “good local governance is fast becoming the norm and is the way to go for local governments.”

“Now, only those LGUs with the Seal and who walk the Daang Matuwid will be able to borrow money from banks to finance their local projects,” the DILG Secretary said.

The BLGF circular laid out new documentary requirements, which LGUs need to submit to BLGF before they can be granted Certificates of Borrowing and Debt Service Capacities should they need to borrow money.

The BLGF circular superseded Local Finance Circular 1-2000 issued on January 19, 2000. Under the new circular, aside from the Seal of Good Housekeeping, the following documents were added to the original requirements: letter-request from the local chief executive; certification from the local legislative body that the proposed project to be financed by the loan is included in the Approved Annual Investment Plan for the current year; authenticated copy of the resolution authorizing the local chief executive to negotiate and contract a loan; proof of compliance with the full disclosure policy of the DILG, among others.