Blgf Performance Rating System and CCS

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Performance Rating System and Competency Certification System for Phil. LGU treasurers

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Enhancing the Performance of Local Treasurers Using the Proposed BLGF Performance Standards for LGU Treasurers and the LGU Treasurer Certification and Re-Certification System (CCS) :

Key discussion results among BLGF top management with technical advice from: Norman R. Ramos LGU Finance Adviser ADB TA 7451-Support to Local Government Financing Revised July 2011 Enhancing the Performance of Local Treasurers Using the Proposed BLGF Performance Standards for LGU Treasurers and the LGU Treasurer Certification and Re-Certification System (CCS)

Components of the System:

Components of the System 2 Local Treasurer Competency Certification and Re-Certification System. Local Treasurer Performance Standards. BLGF-provided Support Tools.

Existing BLGF Performance Standards:

Existing BLGF Performance Standards 3

Proposed Refocused and Simplified BLGF Performance Standards :

Proposed Refocused and Simplified BLGF Performance Standards 4

Salient Features of Refocused and Simplified BLGF Performance Rating Standard :

Five major operational goals: Collect all current key local revenues due. Cost-effective collection efforts. Stable and reliable local revenue growth. Maintain a reasonable level of receivables for RPT. Optimum cash management. There is a corresponding performance indicator for each operational goal that can be computed using data submitted via the SRE system. Option for BLGF to set performance benchmarks either on just a LGU-type and LGU-class levels or a combination of LGU-type-class and regional levels. Operational goals and performance indicators are all directed towards improvements in LGU financial performance as measured by the LGFPMS. Salient Features of Refocused and Simplified BLGF Performance Rating Standard 5

1. Collect All Current Local Revenues Due :

Defined as the 4 key local revenue sources (KLR): Real Property Tax (RPT) Business Taxes (BT) Fees and Charges (FC) Economic Enterprises (EE) Computed as KLR = (RPT + BT + FC + EE) as reported in the Statement of Receipts and Expenditures (SRE). Benchmark : BLGF-set 90% collection of target. 1. Collect All Current Local Revenues Due 6

2. Cost Effective Local Revenue Collection Efforts :

2. Cost Effective Local Revenue Collection Efforts 7 Defined as minimizing the total cost of collection per peso of local revenue collected (TCC) Computed as: TCC = Where : TLRCC = Expenditures of Assessor’s Office + Fraction of Treasurer’s Office (0.20 for provinces, 0.50 for cities, and 0.80 for municipalities) + Business Permits and Licensing Office (BPLO) in case BPLO is not under the Treasurer’s Office; and TLRC = Total Local Revenues. Both will be based on values reported in the SRE. According to the International Property Tax Institute (IPTI), TCCs in developed countries range from 2 to 5%. TCC > 10% is symptomatic of problems. Benchmark: LGFPMS benchmark that TCC of LGU ≤ that of the average TCC of the LGU type and income class to which it belongs

3. Stable and Reliable Local Revenue Growth :

3 . Stable and Reliable Local Revenue Growth 8 Defined as growth in per capita local revenues (PCLRG) Computed as : PCLRG = Where PCLR = per capita local revenue as computed from SRE data Benchmark: LGFPMS benchmark that growth in per capita locally sourced revenue for an LGU ≥ average for the LGU type and income class to which the LGU belongs.

4. Maintain a Manageable Level of Receivables for RPT :

Defined as maintaining a maximum 1-year aging period for RPT receivables, that is, the amount of prior years’ RPT collection in the current year should at the minimum match the reasonably collectible amount from the immediate past year. Computed as: Amount of prior years’ RPT collection net of collectibles from problematic accounts, e.g., yet to be transferred CARP lands and restricted accounts, in the current year as reported in the SRE Benchmarks: Amount of prior years’ RPT collection in current year ≥ reasonably collectible RPT amount from the immediate past year. 4 . Maintain a Manageable Level of Receivables for RPT 9

5. Optimum Cash Management :

5. Optimum Cash Management 10 Defined as maximizing returns from free cash holdings of LGUs (RFCH) Computed as: RFCH = *100 as reported in the SRE Benchmark : RFCH ≥ Average of the 182-day Treasury Bill rates for the year

Proposed Points for Performance Standard Criteria :

Proposed Points for Performance Standard Criteria 11 Current local revenue collection efforts: 35 Cost effectiveness in local revenue collection: 20 Growth in local revenue collection: 20 Management of RPT receivable: 15 Cash management: 10 Total 100

Proposed Scoring Table for Performance Rating Standards Criteria :

Proposed Scoring Table for Performance Rating Standards Criteria 12

Proposed Scoring Procedure :

Proposed Scoring Procedure 13 Compute the performance standard indicators for each LGU. Compare each of the computed indicators against their corresponding benchmarks as follows: Raw Rating ( RR) = * 100 Use the scoring table to compute the equivalent points for each of the computed indicators 100% attainment of the benchmark, that is RR =100 means the Treasurer gets the maximum equivalent points for the corresponding performance standard. As the RR goes down below 100, the equivalent point that the Treasurer gets for the performance standard correspondingly goes down as shown in the scoring table. Tally the equivalent point scores for each of the performance standards to the get the overall point score of the Treasurer. Convert the overall point score to adjectival rating using the next table.

Proposed Overall Performance Rating for Treasurers :

Proposed Overall Performance Rating for Treasurers 14 Those who get unsatisfactory ratings will be required by BLGF management to take the appropriate remedial courses appropriate to the areas where the concerned treasurer is found to be deficient within the year following the unsatisfactory rating. Only those who get consistent ( 2-3 years ) outstanding or very satisfactory performance will be considered by BLGF management for promotion assuming he or she meets the competency requirements for the higher position. A consistent outstanding or very satisfactory performance may constitute a waiver for the eligibility requirements of the CCS examination.

Qualities, Skills and Knowledge required of a “Good” Treasurer :

Qualities, Skills and Knowledge required of a “Good” Treasurer 15 A good treasurer will : be capable of handling figures and cash; have an orderly mind and methodical way of thinking; have experience in dealing with large sums of money and budgets; have experience of financial control and budgeting; have an eye for detail; be available to be contacted for ad hoc advice; have a financial qualification or relevant experience; have experience in fund management for LGU employee social benefits including pension schemes; good communication and interpersonal skills ; and ability to ensure decisions are taken and followed-up. The proposed BLGF Competency Certification and Re-certification system seeks to rate and at the same time continually develop the necessary qualities , skills , and knowledge among LGU treasurers in the Philippines, and help them reach and maintain outstanding performance ratings.

Objectives of the Local Treasurer Certification and Re-Certification System :

Objectives of the Local Treasurer Certification and Re-Certification System Objectives of the Certification and Re-certification System: To enhance the quality of local treasury services provided to the LGUs and the public. To increase the value of treasury services to the LGU management group, especially the LFC. To rate and increase the professional competency of local treasurers so that they can consistently meet the BLGF performance targets. To encourage personal growth among local treasurers. To provide professional recognition of local treasurers. This program establishes standards that recognize professional attainment and provides a system through which the required standards can be met. On completion of these standards, the applicant is recognized professionally by the Philippine Association of Local Treasurers and Assessors (PHALTRA) as a Certified Local Treasurer of the Philippines . 16

Major Areas of the Local Treasurer Certification and Re-Certification System :

Major Areas of the Local Treasurer Certification and Re-Certification System Certification. Certification rates and increases the treasurer’s value within his/her LGU and within BLGF. It makes him/her more competitive for promotions and incentives, raises his/her sense of professional accomplishment, and enhances his/her level of administrative and functional expertise. Certification also is a credential he/she can carry beyond government service into other career pursuits. Continuing Competency Maintenance And Buildup . Continuing education is vital for treasurers, who must cope with the growing complexity of treasury operations, changes in national and local laws and regulations, and the proliferation of new and complex financial tools and techniques. To ensure that competence is maintained through continuous professional development, re-certification at a pre-defined 5-year time interval is required by the system. 17

Legal Basis of the Competency Requirements :

Legal Basis of the Competency Requirements Competency may be construed to refer to the expertise and experience required for a treasurer to fulfill the tasks spelled out in Section 470 d of the Local Government Code (LGC.) 18

Legal Basis of the Competency Requirements :

Legal Basis of the Competency Requirements The job requirements is further spelled out in detail in Article 122 (b3) and (b4) of the Implementing Rules and Regulations (IRR) of the LGC. 19

Legal Basis of the Competency Requirements :

Legal Basis of the Competency Requirements Article 1 Section 1 of RA 10143 or Philippine Tax Academy Act, which lapsed into law July 31, 2010, explicitly states that: “It is the policy of the State to train, mold, enhance and develop capabilities of tax collectors and administrators to help improve their tax collection efficiency and to become competent and effective public servants for the national interest .” Article 2 Section 4 further states that: “All existing officials and personnel of the BIR, the BOC and the BLGF shall be required to undergo the re-tooling and enhancement seminars and training programs to be conducted by the Philippine Tax Academy.” “All applicants to the said bureaus shall also be required to pass the basic courses before they can be hired whether on contractual or permanent status. 20

Legal Basis of the Competency Requirements :

Legal Basis of the Competency Requirements Section 4 of the of the final draft of the IRR of the Act dated 8 April 2011 explicitly states that: “Officials and personnel of the BIR, BOC and BLGF shall be required to undergo the re-tooling and enhancement seminars and training programs to be conducted by the Academy. The said officials and personnel shall be recommended by the respective Heads of the Bureaus based on their Training Needs Analyses (TNA). The DOF may require its employees to undergo the seminars and training program of the Academy .” “For purposes of this IRR, officials and personnel include officials and technical staff directly involved in tax and customs administration and collection. “ “As a pre-condition to appointment and/or designation by the Heads of the Bureaus to positions involved in tax and customs collection and administration in the BIR, BOC and BLGF, whether contractual or permanent, all appointees/designees shall be required to undergo and pass the basic courses administered by the Academy. The appointees/designees shall undergo the basic courses after they have successfully passed the required pre-employment examinations and complied with other existing requirements of the respective Bureaus .” 21

Legal Basis of the Competency Requirements :

Legal Basis of the Competency Requirements BLGF need to officially endorse to the Civil Service Commission (CSC) the CCS for the explicit inclusion of the competency requirements in the pertinent CSC rules and regulations for the appointment of Treasurers as provided for Article 122 b(1) of the IRR of the LGC. 22

Proposed Coverage and Validity of Certification :

Proposed Coverage and Validity of Certification All incumbent (except those retiring within 5 years) and aspiring local treasurers are required to pass the certification requirements required by their existing or aspired-for positions. Certifications expire in 5 years from the date of issuance . At end of the period recertification is necessary. The proposed 3-level certification requirements applicable to each major treasury position are as follows: Basic : 6 th to 4 th class LGU Intermediate : 3 rd to 2 nd class LGU Advanced : 1 st class LGU and HUCs and special cities (Manila and Quezon City) 23

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Proposed System Development Phase:

Prior to the full operationalization of the PHILTAX BLGF Institute, the development and of the system will be undertaken by BLGF/DOF PHILTAX representative with active collaboration and participation from the CSC, the Local Government Academy (LGA), the PHALTRA, and members of the academe . The primary initiator and result user of the system will be BLGF Valuable technical inputs will be solicited during the detailed system design phase from DOF PHILTAX representative CSC, LGA, PHALTRA, and the academe via a Study Committee to be put up and chaired by BLGF. Proposed System Development Phase 25

Proposed System Implementation Phase :

Pre-PHILTAX BLGF Institute The testing component of the certification program will be directly handled by the CSC . The running of the competency buildup component will be handled by an accredited network of training institutions /trainors drawn from the LGA network, the PHALTRA network , and from existing and capable academic institutions not presently part of the 2 aforementioned networks. Post-PHILTAX BLGF Institute Once PHILTAX BLGF Institute becomes fully operational, the system will be run by PHILTAX . Proposed Schedule Competency testing will be held every June of the applicable year. Competency certificates will be issued during the national convention of PHALTRA following the applicable June examination to give “peer” recognition to the certified treasurers. Proposed System Implementation Phase 26

Proposed Certification Process for Incumbent Treasurers :

All incumbent treasurers will be required to take the certification tests except those who will be retiring within 5 years from the 1 st year of implementation of competency testing. The rationale for the exemption is that a treasurer who fails to be certified is given 2 years to be certified and the validity of the certification is 5 years so it will do him/her little good to have a treasurer retiring within 5 years certified . The minimum eligibility requirement for testing will be waived for incumbent treasurers. Incumbent treasurers who fail to make the grade in the initial testing will be given “ coaching ” as to what remedial courses he/she should take and is given up to 2 years to pass the appropriate certification examination. In the meanwhile, he/she will be given a probationary competency certificate . Treasurers who fail the 2 nd time will be encouraged to take voluntary retirement or formally take the entire prescribed competency course in PHILTAX or an accredited institution before re-testing. Proposed Certification Process for Incumbent Treasurers 27

Proposed Certification Process For New Treasurers :

All aspiring treasurers must be competency certified for the position they are aspiring. Those aspiring to take the competency tests must first meet the minimum testing eligibility requirements in terms of education and relevant experience for them to be allowed to take the competency examination. New aspirants who fail the 1 st time will be given coaching as to remedial courses and be allowed to retake the competency examination a 2 nd time within 2 years . After a 2 nd failure, the applicant will be directed to formally take the entire prescribed competency course in PHILTAX or an accredited institution before being allowed to take the test a 3 rd time . Proposed Certification Process For New Treasurers 28

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Proposed Use of the Certification and Performance Rating Systems as Basis for the Promotion of Treasurers:

Upward movement within each competency level whether to a higher LGU income class or from a one LGU type to the next, e.g., municipality to a city, will be based on performance ratings . Upward movement to the next higher competency level requires competency certification for that level + a required minimum very satisfactory performance rating from his current position. Proposed Use of the Certification and Performance Rating Systems as Basis for the Promotion of Treasurers 30

Eligibility Standards for Competency Testing:

Any applicant for competency certification testing must meet the following minimum eligibility standards: General Standards : The candidate must be an incumbent or nominee local treasurer or assistant treasurer, or other municipal officer charged with the performance or supervision of treasury responsibilities. The candidate must believe in and practice the governing rules and regulations of PHALTRA . The candidate must furnish a letter of sponsorship from any active member of PHALTRA . Written applications with support documentation and the required testing fee for the current year June test should be in no later than 15 January of the applicable year. The applicant must earn a minimum of documented or attested 100 Education and Experience Standards points . Eligibility Standards for Competency Testing 31

Eligibility Standards for Competency Testing:

Education Standards A maximum of 60 points toward eligibility for certification testing may be earned from the following Education Standards: Completion with a grade of 2.0 (80) or better of college or university courses related to treasury work. One point per credit. Maximum = 25 points Attendance at a BLGF/PHALTRA-conducted treasury-related training. Ten points per training. Maximum = 50 points Completion of a bachelor's degree in public administration, accounting, finance economics, law, planning or a related field approved by the Certification Committee. 50 points . Completion of a bachelor's degree in an unrelated field. 15 points . Completion of a master's degree in a related field. 50 points . Completion of a doctoral degree in a related field. 50 points. Attendance at the annual PHALTRA conference. 5 points per year. Maximum = 20 points . 32 Eligibility Standards for Competency Testing

Eligibility Standards for Competency Testing:

Experience Standards A maximum of 60 points toward eligibility for certification testing may be earned from the following Experience Standards: Experience as local treasurer, assistant treasurer, assessor, LGU accountant or budget officer. Five points per year. Maximum = 25 points Administrative or legislative experience in local government before municipal treasury work. Two points per year. Maximum = 2 0 points . Administrative experience in national government or in business or industry before municipal treasury work. One point per year. Maximum = 10 points. Receipts of special awards presented by the PHALTRA, professional organizations and academic institutions in relevant fields. Five points each. Maximum = 15 points . Lecturer/resource person in an approved course toward certification. One point per hour of lecture or instruction. Maximum = 10 points . Publication of technical article in journals, newsletters, magazines and newspapers of national circulation (excluding tabloids). Two points per article. Maximum = 10 points . 33 Eligibility Standards for Competency Testing

Indicative Treasurer Competency Buildup Courses:

A 10-part course is proposed to constitute the competency development agenda for Certified Local Treasurers of the Philippines . This competency development agenda should be translated to competency examination questions and competency buildup courses to be conducted by accredited training institutions either through formal classroom work or via distance education mode. The proposed courses are classified as to which will be required for meeting the competency requirements of the 3 competency grades: Basic , Intermediate , and Advanced . Indicative Treasurer Competency Buildup Courses 34

Indicative Treasurer Competency Buildup Courses:

Part 1. Treasury Operations (For Basic, Intermediate, and Advanced Treasury Professional Levels) Fiscal Organization of Local Governments 1.1 Political and Corporate Nature of Local Governments 1.2 Authority and Criteria for Creation of LGUs 1.3 Common Requirements for Creation and Conversion of LGUs 1.4 Division, Merger, and Abolition of LGUs Roles and Responsibilities of the Local Treasurer and Assistant Treasurer 2.1 General Functions 2.2 Specific Functions 2.3 Specific Roles 35 Indicative Treasurer Competency Buildup Courses

Indicative Treasurer Competency Buildup Courses:

Types of Local Income and Revenues Collected by LGUs 3.1 Taxing Powers of LGUs 3.2 Common Limitations on Taxing Powers 3.3 Non-Tax Revenues 3.4 Fees and Charges 3.5 Internal Revenue Allotment 3.6 Shares in Proceeds of National Taxes 3.7 Special Shares from National Taxes 3.8 Other Receipts Collection of Revenues and Other Receipts 4.1 General Controls on Collection 4.2 Control and Accountability for Accountable Forms 4.3 Policies , Rules and procedures in Recording of Receipts , Deposits, Remittances 4.4 Forms and Reports 4.5 Examination of Books of Accounts of Businesses BLGF Financial Decision Support Tools 5.1 LGU Revenue Forecasting Template 5.2 LGU Cash Flow Forecasting Template 5.3 LGU Debt Capacity Certification System 5.4 Creditworthiness Rating System 5.5 Local Government Financial Performance Monitoring System (LGFPMS) 5.6 Financing Modalities and Debt Management Manuals Expenditures and Disbursements Managem ent 5.1 General Classification of Funds 5.2 Types of Appropriations 5.3 Allotments System 5.4 Obligation of Local Funds 5.5 Government Expenditures 5.6 Requirements on Disbursements 5.7 Modes of Disbursements 36 Indicative Treasurer Competency Buildup Courses

Indicative Treasurer Competency Buildup Courses:

Part 2. Financial Environment (For Basic, Intermediate, and Advanced Treasury Professional Levels) 1. Financial Institutions: Functions and Services 2. Supervisory and Regulatory Agencies 3. Pertinent Legislations Part 3. Financial Accounting Basic Accounting (Basic Level) 1.1 Introduction to Financial Accounting and Financial Statements 1.2 Analyzing and Recording Transactions 1.3 Adjusting Accounts 1.4 Closing Entries and the Classified Balance Sheet 1.5 Internal Control and Cash 1.6 Receivables 1.7 Capital Assets and Goodwill 1.8 Current and Long-term Liabilities 1.9 Accounting for LGUs 1.10 Reporting and Analyzing Cash Flows 1.11 Analyzing Financial Statements 37 Indicative Treasurer Competency Buildup Courses

Indicative Treasurer Competency Buildup Courses:

Intermediate Accounting (Intermediate Level ) 2.1 The Income Statement and the Retained Earnings Statement 2.2 The Balance Sheet 2.2 The Cash Flow Statement 2.3 Revenue and Expense Recognition 2.4 Current Monetary Balances 2.5 Inventories and Cost of Sales 2.6 Capital Assets, Goodwill, and Deferred Charges 2.7 Amortization and Impairment 2.8 Investments in Debt and Equity Securities 2.9 Liabilities 2.10 Shareholders ’ Equity 2.11 Complex and Equity Instruments 2.12 Accounting for Corporate Income Tax 2.13 Accounting for Leases 2.14 Pensions and Other Post-Retirement Benefits 2.15 Financial Statement Analysis Advanced Accounting (Advanced Level) 3.1 Investments in Equity Securities 3.2 Business Combinations 3.3 Interests in Joint Ventures 38 Indicative Treasurer Competency Buildup Courses

Indicative Treasurer Competency Buildup Courses:

Part 4. Financial Planning and Analysis Financial Concepts (Basic Level) 1.1 Time Value of Money 1.2 Opportunity Cost 1.3 Cost of Capital 1.4 Nominal and Effective Interest Rate Capital Budgeting Decision Analysis Tools (Intermediate Level ) 2.1 Net Present Value (NPV) 2.2 Internal Rate of Return (IRR) 2.3 Payback Periods (PP) 2.4 Discounted Payback Periods (DPP) 2.5 Return on Investment (ROI) Other Decision Analysis Tools (Advanced Level) 3.1 Benefit-Cost Analysis Developing a Financial Plan (Advanced Level ) 39 Indicative Treasurer Competency Buildup Courses

Indicative Treasurer Competency Buildup Courses:

P art 5. Working Capital Tools (Intermediate Level) Credit and Accounts Receivables 1.1 Credit Policies 1.2 Credit Standards 1.3 Billing and Collection Methods 1.4 Accounts Receivables Monitoring and Control 1.6 Financing Accounts Receivables 1.7 Legislations Affecting Credit and Collection Accounts Payable 2.1 Disbursement System Considerations Part 6. Payment Systems (Advanced Level) Paper-Based Payments 1.1 Check Clearing Process 1.2 Settlement and Funds Availability 1.3 Regulations on Paper Payment Instruments Electronic Payments Payment System Risk 3.1 System Risk 3.2 Payment Risk 40 Indicative Treasurer Competency Buildup Courses

Indicative Treasurer Competency Buildup Courses:

Part 7. Cash Positioning (Advanced Level) Cash Management System Considerations Collections 2.1 Collection Float 2.2 Collection Process Improvement 2.3 Collection System Information Management Disbursements 3.1 Disbursements Products 3.2 Electronic Disbursement Methods 3.3 Managing Disbursement Information 41 Indicative Treasurer Competency Buildup Courses

Indicative Treasurer Competency Buildup Courses:

Part 8. Liquidity Management Cash Forecasting (Basic Level) 1.1 Objectives of Cash Forecasting 1.2 Forecasting Considerations 1.3 Short-Term Forecasting Techniques Short Term Investments (Intermediate Level) 2.1 Short term Investment Policy 2.2 Investment Risk Considerations 2.3 Yield Calculations for Short Term Investments Short Term Financing (Intermediate Level) 3.1 Short Term Financing Considerations 3.2 Planning Credit Needs 3.3 Short Term Financing Objectives 3.4 Short Term Funding Alternatives 42 Indicative Treasurer Competency Buildup Courses

Indicative Treasurer Competency Buildup Courses:

Part 9. Auditing Principles (Intermediate Level) 1. Professional Ethics, Audit Objectives, Phases of the Audit, and Audit Evidence 2. Internal Control, Assessment of Control Risk, and Audit Program Concepts 3. Advanced Information Systems and Audit Sampling 4. Audit of Sales and Receivables Cycle 5. Audit of Purchases and Payables Cycle 6. Audit of Payroll and Inventory Cycles 7. Completion of the Audit, and Other Types of Auditing 8. Fraud Part 10.Technical Communications Development (Basic Level) 1. Technical Writing 2. Effective Business Writing 3. Document Design and Production Principles 43 Indicative Treasurer Competency Buildup Courses

Immediate Next Steps:

BLGF top management to initiate initial meetings including organizational meeting for Study Committee for the detailing out of the system development and implementation framework and steps of the competency certification module. Suggested organizational c omposition of Study Committee BLGF DOF representing PHILTAX CSC LGA Academe PHALTRA (PACTAP and MUNTAP) LGU leagues Immediate Next Steps 44

Immediate Next Steps:

DOF officially endorses competency requirements to the CSC for inclusion in in the pertinent CSC rules and regulations for the appointment of Treasurers as provided for Article 122 b(1) of the IRR of the LGC. Immediate Next Steps 45

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