Support to the Local Government Units for More Effective and

Accountable Public Finance Management (LGU PFM 2)

MANUAL ON SETTING UP AND OPERATING

LOCAL ECONOMIC ENTERPRISES
INTRODUCTION
BACKGROUND
1. Primary operative principle of decentralization the establishment
of an accountable, efficient and dynamic organizational structure
and operating mechanism in LGUs that will meet the priority needs
and service requirements of the people (RA7160)
2. Policy mandates on provision of public goods and services by LGUs
(RA 7160)
3. LEEs are included in such structure and operating mechanism for the
provision of goods and services
BACKGROUND

4. Need for self-reliance of LGUs (RA 7160)

5. Self-reliance of LEEs as principal indicator for policy-based
budgeting in the PFMAT
6. Dismal track record of most LEEs per review by Castel and Manasan
OBJECTIVES
1. Provide an official guide to help LGUs:
a. decide whether to use LEE as the mode of public service and utility
provision to its constituency,
b. conceptualize, plan, set up and operate purposeful LEEs that effectively
contribute to the attainment of their respective development goals and
objectives.
c. assess whether existing LEEs are viable and should continue to operate

2. The manual serves as a reference guide for oversight agencies,

NGOs and CSOs.
LOCAL ECONOMIC
ENTERPRISES (LEEs)
WHAT IS AN LEE?
Ventures wholly or partially owned by LGUs that generate revenue/income
through sale of services and goods to meet a perceived constituency demand.
Section 17 of the LGC Basic Services and Facilities.
Two Kinds of LEE:
Public Utilities (PUs)
Other Economic Enterprises (OEEs)

What are PUs?

PUs are enterprises created by the Local Sanggunian through an ordinance
for the purpose of providing an everyday basic necessity or service to the
public at large which otherwise cannot be provided adequately by the
private sector.
What are PUs?
These LGU PUs shall be limited to:
Water supply
Power supply and distribution

Telecommunications

Sanitation

Public transportation and transport terminals

What are OEEs?
OEEs are LGU commercially operated establishments
created by the Local Sanggunian through an
ordinance for the purpose of improving production
and delivery of marketable goods or services for
specific market groups.
What are OEEs?
These include:
Public markets and shopping centers
Slaughterhouses, livestock trading and animal raising
Fish landing, ice plants and cold storage facilities
Post harvest facilities (grain storage, drying, milling)
Commercial retail and office spaces
Public parks, sports and recreational facilities
Public cemeteries
Local hospitals
Local colleges
ROLE OF LEEs IN LGU DEVELOPMENT
Provide wider access to goods and services affordable to a larger
segment of LGU population
Means to augment LGU revenues
Attract investors
POLICY FRAMEWORK

The basis for creation and operation of

LEEs is the LGC including related
circulars and related national laws.
 OPERATING PRINCIPLES
Responsibilities of LGUs to set up appropriate service delivery structures and mechanisms to meet the basic needs of
its constituents. (Section 3(b), LGC)
Inter-LGU partnerships in the provision of services and facilities including joint ventures in LEEs. (Section 3(f), LGC)
Private sector participation in LGU service delivery structures and mechanisms including LEEs (Section 3(l), LGC)
Basic Function of LGUs (Section 15, LGC):
Political subdivision of national government
Corporate body representing its constituency
LGUs enjoy full autonomy in the exercise of their proprietary functions and in the management of their economic
enterprises, subject to the limitations provided in LGC and other applicable laws. (Section 22(d), LGC)
The creation of LEEs as part of the exercise of LGU powers incidental to the efficient and effective provision of basic
services and facilities. (Section 17(a), LGC)
Ensure active participation of private sector in local governance. (Section 17(j), LGC)
Section 17(g) and Section 17(j) of the LGC implies that the LGU can subsidize LEEs as long as the services and facilities
provided are covered under Section 17(b) and the LGU opts not to charge for the delivery for basic services and
facilities.
EFFECTIVE LEE

An effective LEE contributes to the quality service

delivery goals of the LGUs

How?
 EFFECTIVE LEE
An effective LEE must be designed, set up, operated and managed in accordance
with a well-prepared Feasibility Study (FS) with a detailed Business Plan (BP) that
ensures that the proposed LEE :
1. Has clear vision, mission, goals set out in the LEE Business Plan
2. Supports LGU development goals and objectives embodied in PDPFP/CDP and its
corresponding LDIP
3. Augments, not compete, with the private sector
4. Operates under the principle of financial self-sufficiency via full cost recovery
5. Will be managed under a performance based approach with efficiency and
effectiveness in service delivery
6. Publishes annual performance reports that provide accountability and transparency
PLANNING AND IMPLEMENTING
PROCEDURES FOR PROPOSED LEEs
Step 1: Evaluate whether the LGU should engage in LEE
LFC will assess whether establishment of proposed LEE is warranted with the
following consideration:
Marketable

There is measurable demand and that corresponding user charges may be levied on the
use of the LEE output

Feasibility Study-Based. The FS:

shall show proof of the economic/social viability of the LEE in the long term in terms of
sufficient demand and
shall show that prospective constituency users are able and willing to pay for the use of
the LEE output. (through availability-to-pay and willingness-to-pay surveys)
Step 1: Evaluate whether the LGU should engage in LEE

Hurdle Criteria for the Appropriateness of an LEE

a. Satisfy both the economic and social objectives as reflected in their
CDP/LDIP
b. Fill gaps and services not adequately provided by private sectors. The
following points should be clearly established:
1. Legitimate and necessary role in the provision of the output of LEEs
2. The need to play a primary role in the provision of the proposed output to be
provided by LEEs
3. Output cannot be provided wholly or partly by private sectors
Step 1: Evaluate whether the LGU should engage in LEE

Operate as a business enterprise with its own business plan and

budget.
Operate with appropriate staffing complement to satisfy its
operating objectives.
Step 1: Evaluate whether the LGU should engage in LEE

Alternative modes of Service Delivery

a. If economic and social objectives are not satisfied, and gaps

are not filled:
1. Good/service should not be provided by the LGU.
2. Provision of the good/service should be left to the private sector.
Step 1: Evaluate whether the LGU should engage in LEE

Alternative modes of Service Delivery

b. If economic and social objectives are satisfied and gaps are
filled but cannot not operate as business enterprise with own
business plan nor operate with staffing:
Partner with the private sector- OPTIONS:
Contracting out
Build-operate-transfer (BOT)
Joint ventures
Inter LGU partnerships
 Figure 1. Process Flow for LGU Decision-Making on the Creation of LEEs

Steps/Criteria Service Delivery Mode

Project Formal project proposal supported by Project Brief as

Proposal prescribed in both the PDIP and LDIP

Hurdle Does the project satisfy both the economic and social
Criterion 1 objectives of the LGU as reflected in their
(CR1) PDPFP/CDP/LDIP?

Hurdle Does the project output fill gaps and services not
Criterion 2 adequately provided by the private sector and does not
(CR2) compete with the private sector?

N
CR1 &
LGU should not provide the
CR2 Private sector
satisfied? proposed good or service

Y
 Figure 1. Process Flow for LGU Decision-Making on the Creation of LEEs

Steps/Criteria Service Delivery Mode

Hurdle
Can the composed LEE be operated as a business
Criterion 3
enterprise with its own BP and budget?
(CR3)

Hurdle
Can the proposed LEE be operated with appropriate
Criterion 4
staffing complement to satisfy its operating objectives?
(CR4)

N
CR3 & PPP or partnership
CR4
Satisfied?
with other LGUs

Y
Plan, set-up
& operate LEE
LEE
Step 2: Conduct a Feasibility Study for the Proposed LEE

Five major components:

Market Situation Analysis
Establish the volume of demand, what the beneficiaries can and are
willing to pay (user fees and charges and taxes)
Identify competing products and services as well as potential target
markets and customers
Position the LEE products or services against its competitors
Step 2: Conduct a Feasibility Study for the Proposed LEE

Five major components:

Technical Analysis
Properly align the project scope, design and specifications with the
market situation
Ensure that the project scope, design and specifications have no adverse
environmental impact
Provide for mitigation in the project design and costs
Step 2: Conduct a Feasibility Study for the Proposed LEE

Five major components:

Financial (Economic) Sustainability Analysis

Establish financial viability in terms of adequate funds flow for the
project cost and the subsequent operating and maintenance costs
Performs a formal but optional social benefit-cost analysis
Step 2: Conduct a Feasibility Study for the Proposed LEE

Five major components:

Organizational Analysis
Identify organizational structure and manpower requirements

Regulatory and Other Pre-Operational Requirements

Listdown necessary permits, leases, licenses, insurance, and other
operating requirements
Figure 2. Process Flowchart in Conducting a Feasibility Study

START

Excess Ability and

Market
Market Willingness
Analysis
Demand to Pay

Technical
Market Volume Analysis Pricing

Optimum Technology,
Design & Cost for the LEE
output
Figure 2. Process Flowchart in Conducting a Feasibility Study

Optimum Technology,
Design & Cost for the LEE
output

Financial &
Economic
Sustainability
Analysis
LEE
Sustainability
-Sufficient demand volume
-Affordable Pricing
-Adequate cost recovery
-Sufficient financial incentives

END
 Step 3: Assess Potential LEE Financing Sources
Funding sources:
Current Available LGU Revenues
Composed of local taxes, fees and charges, revenues from existing LEE reserves, surpluses, and the IRA.
Borrowings
Include direct loans, lending institutions, and bond proceeds.
Foreign and Local Grants
Includes central government funds for hard and soft development projects
Capital Income
Derived from sales or use of existing LGU assets
Cost Recovery Elements
User fees and charges, and revenue anticipating measures like special levies, and earmarked taxation
Cost Sharing
Cost can be shared with other LGUs, national government, or private sector.
Public-Private Partnership (PPP)
Private sector resources can be mobilized through BOT and its variants, lease financing, and
contractor/supplier credit
Donations
May be from public or private entities
Step 4: Select Financing Sources
Instruments to finance investment cost of an LEE:
Adequacy of funds
Impacts
Political and administrative feasibility
Legality

Step 5: Present the Feasibility Study Findings to the LCE

LFC should present to the LCE the result of Feasibility Study.
If LEE is viable, a Business Plan (BP) shall be prepared. Each LEE
shall have its own BP.
Step5: Present the Feasibility Study
Findings to the LCE

LFC should present to the LCE the result of Feasibility Study.

If LEE is viable, a Business Plan (BP) shall be prepared. Each LEE
shall have its own BP.
Step 6: Prepare a 5-Year Business Plan

The business plan (BP) - prepared by the designated

LGU personnel or duly hired external consultant.
BP is a dynamic plan which should be revised as
needed.
Contents of BP are:

LEEGoals, Potential and Outlook

Marketing Analysis Plan
Management and Personnel Plan
More Steps:

Step 7: Prepare and Present the Proposal for the Establishment of the
LEE (Feasibility Study and Business Plan) to the Sanggunian as Basis for
the Enactment of an Ordinance Creating LEE.
Step 8: Enact the Ordinance Creating the LEE
PROCESS FLOW CHART

PRESENT THE FS
EVALUATE CONDUCT A ASSESS PROPOSE FINDINGS AND
WHETHER THE FEASIBILITY STUDY POTENTIAL LEE FINANCING RECOMMENDED
LGU SHOULD (FS) FOR THE FINANCING SOURCES FUNDING SOURCE
ENGAGE IN LEE PROPOSED/NEW SOURCES TO THE LCE
LEE

If LCE decides to
create the LEE

PREPARE THE PROPOSAL FOR

THE ESTABLISHMENT OF THE
ENACT THE LEE (INCLUDING APPENDED FS PRESENT TO THE PREPARE A 5
ORDINANCE & BP) TO THE LOCAL LCE 5-YEAR BP FOR YEAR BUSINESS
CREATING THE SANGGUNINAN AS BASIS EACH LEE PLAN (BP) FOR
LEE FOR THE ENACTMENT OF AN EACH LEE
ORDINANCE CREATING THE
LEE
IMPLEMENTING PROCEDURES FOR
EXISTING LEEs
Step 1: Continue LEE Operations but Make the Necessary Changes to
Comply With the Legal Provisions and Other Requirements Governing LEEs

a. Set up and maintain a special account in the General Fund for each LEE.
For the next period:
b. Exclude salaries, wages, and RATA of LEE officials and employees from the Annual Budget
(General Fund)
c. Charge appropriations for PS of LEEs against its own AOB
d. Exclude the salaries, wages, and allowances of LEE in the computation of the maximum amount of
PS of LGU.
e. Ensure that no LEE official or employee has salary rate higher than the maximum fixed for his
position.
f. Check that each LEE has own separate AOB.
g. Include PPAs of the LEE in the LDIP and AIP.
h. Use the following formula in application of profits or income of LEE:
1. Cost improvement, repair, and related expenses of LEE
2. Return of advances or loans received from General Fund.
i. Ensure that the LEE budget is authorized by the Sanggunian through Appropriation Ordinance.
Step 2: If Detailed Personnel are Assigned to the LEE: Prepare a
5-Year Staffing Plan and Staff Transition Strategy

Prepare staffing plan which includes hiring of full time staffs in the management and
operations of LEE.
At the end of 5 years, LEE should be staffed with full time personnel.

Step 3: Prepare a 5-Year Business Pan for each LEE

The LFC shall prepare the Business Plan (BP).
The business plan (BP) should cover all relevant facets of the LEEs operations
including management, operations, staffing, risk analysis, marketing, and sales.
BP is a dynamic plan which should be revised as needed.
Present to the LCE the 5-Year Business Plan for Each LEE

The LFC shall present the BP to the LCE and stress on

importance of turning around LEE operations towards financial
self-sufficiency.
PROCESS FLOW CHART

IF DETAILED
PERSONNEL ARE PREPARE A 5 YEAR STAFFING PLAN AND STAFF
ASSIGNED TO THE LEE TRANSITION STRATEGY

CONTINUE LEE OPERATIONS

BUT MAKE NECESSARY
CHANGES TO COMPLY WITH
THE LEGAL PROVISIONS &
OTHER REQUIREMENTS IF NO DETAILED PERSONNEL
GOVERNING LEEs ARE ASSIGNED TO LEE (OR
ALL LEE PERSONNEL ARE PREPARE A 5 YEAR BUSINESS PLAN (BP) FOR EACH
HIRED OUT OF LEE BUDGET LEE
AND WORKING FULL TIME
ON THE LEE)

PRESENT TO LCE THE 5-YEAR BP FOR EACH LEE

BUDGET PROCESS
Budget Process
Pre-Budget Preparation Activities

Budget Preparation

Budget Authorization

Budget Review

Budget Execution

Budget Accountability
Budget Process
Pre-Budget Preparation Activities

Budget Preparation

Budget Authorization

Budget Review

Budget Execution

Budget Accountability
PRE-BUDGET PREPARATION ACTIVITIES
For Proposed LEE:
The feasibility should be established in accordance with the procedures set
out in Section 3.4 of the Guidebook.

For Existing LEE:

A financial performance review based on criteria and procedures set out in
Section 5.6.3 of the Guidebook.
Budget Process
Pre-Budget Preparation Activities

Budget Preparation

Budget Authorization

Budget Review

Budget Execution

Budget Accountability
BUDGET PREPARATION
Step 1: Include in the Budget Call of the Gen Fund
Annual Budget
Objectives,major thrusts and policy directions and strategies
Major assumptions in estimating the revenue/income and
expenditures
Estimated revenue/income and expenditure ceiling

Expected output/results

Budget calendar and budget preparation forms as prescribed

in the BOM
 BUDGET PREPARATION
Step 2: Prepare and Submit the AOB of LEEs
TheHead of LEE shall prepare the budget proposal and
submit to LCE through the local budget officer.
Two parts of budget proposal:
Current operating expenditures
Capital outlays
The estimates for COEs and COs should be consistent with the
BP.
Prepare the PPMP for its different programs, projects and
activities to support the LEE budget proposal.
BUDGET PREPARATION

Step 3: Conduct Budget Hearings and Evaluate AOB

Proposals
The LFC should initially evaluate the LEE AOB proposal.
The LFC shall spearhead the conduct of budget hearing which shall be
undertaken for the purpose of:
Rationalizing the continued existence of the LEE
Determining the LEEs contribution to the development goals
Validating the committed outputs and performance targets
Recomputing the estimates of COE and CO.
 BUDGET PREPARATION
Step 4: Include the AOB of LEE in the LEP to be submitted to LCE
TheLEP should be prepared in accordance with guidelines and forms as
prescribed in BOM 2016 edition.
Step 5: Provide inputs re AOB of LEEs for the Budget Message
Step 6: Submit the LEE AOB to the Local Sanggunian
Budget Process
Pre-Budget Preparation Activities

Budget Preparation

Budget Authorization

Budget Review

Budget Execution

Budget Accountability
BUDGET AUTHORIZATION
Step 1: Enact the Appropriation Ordinance
Check the Budget Document Submitted
Evaluate the AOB

Deliberate on the budget

Authorize the Annual Budget

Step 2: Approve the Appropriation Ordinance for LEE

Step 3: Submit the Appropriation Ordinance for Review
Budget Process
Pre-Budget Preparation Activities

Budget Preparation

Budget Authorization

Budget Review

Budget Execution

Budget Accountability
 BUDGET REVIEW
Step 1: Check appropriation ordinance with the appended Budget Documents
Check budget documents (with required signatures) submitted together with the Appropriation
Ordinance.
Step 2: Review the Appropriation Ordinance
Check that appropriation for PS is charged to LEE Operations
Check whether LEE is included in approved AIP
Ensure that no official or employee is allowed a higher salary rate than the maximum fixed for his
position
Check that each LEE has its own separate AOB
Check application of profits or income
Cost of improvement, repair and other related expenses
Return of advances or loans
Check that budget is authorized through an appropriation ordinance
Check that the AOB is presented separately
Budget Process
Pre-Budget Preparation Activities

Budget Preparation

Budget Authorization

Budget Review

Budget Execution

Budget Accountability
 BUDGET EXECUTION

Step 1: Record the Approved Appropriation in LEEs Books of Accounts

The entire LEE AOB shall be recorded in the books of accounts.
Step 2: Prepare the Cash and Summary of Financial and Physical
Performance targets using the Prescribed Forms in the BOM 2015 Edition
Prepare the cash program
Prepare the summary of Financial and Physical Performance Targets
Prepare the detailed financial and performance targets
Prepare Annual Procurement Plan (APP)
Step 3: Obligate and Disburse Funds
Step 4: Adjust Cash Program and for Shortages and Overages
Budget Process
Pre-Budget Preparation Activities

Budget Preparation

Budget Authorization

Budget Review

Budget Execution

Budget Accountability
BUDGET ACCOUNTABILITY
Step 1: Monitor Revenue/Income and Expenditure
Estimated revenue/income and expenditures are recorded in the books and shall be
compared with actual collections and disbursements for the same period.
Expenditures are tracked and monitored.

Step 2: Prepare and Submit Physical and Financial Reports to the LCE and Local
Sanggunian through the LFC
Physical Report:
Physical Report of Operations
Financial Reports:
Statement of Revenue/Income and Expenditures
Cash Flow Statement
Schedule/Aging of accounts Payable
Schedule/Aging of Accounts Receivable
Other financial reports
BUDGET ACCOUNTABILITY
Step 3: Conduct Semi-Annual Financial Self-Sufficiency Review of each LEE
Six months after instituting necessary changes in LEE operations, LFC shall conduct
semi-annual Financial Self-Sufficiency Review.
The cost in operating the LEE should be thoroughly examined in order to correctly
attribute the costs to the LEE vs. General Fund.
Proper attribution of costs should be done depending on the time spent between
at the LEE and at his/her LGU unit.
If staff of the Treasurers Office divides his time between public market, then his
salary can be attributed as follows:
Charged against the LEE: monthly salary multiplied by percentage of time attributed in
public market
Charged against the General Fund: monthly salary multiplied by percentage of time
attributed in treasurys Office
 PROCESS FLOW CHART
FOR EXISTING LEE: FOR PROPOSED/NEW LEE:

CONTINUE LEE OPERATIONS BUT MAKE NECESSARY EVALUATE WHETHER THE LGU SHOULD
CHANGES TO COMPLY WITH THE LEGAL PROVISIONS & ENGAGE IN LEE
OTHER REQUIREMENTS GOVERNING LEEs

IF NO DETAILED
IF DETAILED CONDUCT A FEASIBILITY STUDY (FS) FOR THE
PERSONNEL
PERSONNEL PROPOSED/NEW LEE
ARE ASSIGNED
ARE
TO LEE (OR ALL
ASSIGNED
LEE
TO THE LEE
PERSONNEL
ARE HIRED OUT PRESENT THE FS FINDINGS TO THE LCE
OF LEE BUDGET
PREPARE A 5 YEAR AND
STAFFING PLAN AND WORKING
STAFF TRANSITION FULL TIME ON
STRATEGY THE LEE) ASSESS POTENTIAL LEE FINANCING
SOURCES

SELECT FINANCING SOURCES

PREPARE A 5 YEAR BUSINESS PLAN (BP) FOR EACH
LEE
 PROCESS FLOW CHART
FOR EXISTING LEE: FOR PROPOSED/NEW LEE:

PRESENT TO LCE THE 5-YEAR BP FOR PREPARE A 5 YEAR BUSINESS PLAN (BP)
EACH LEE FOR EACH LEE

PRESENT TO THE LCE THE PROPOSED

FINANCING SOURCE AND 5-YEAR BP
FOR EACH LEE

PREPARE THE PROPOSAL FOR THE

ESTABLISHMENT OF THE LEE (INCLUDING
APPENDED FS & BP) TO THE LOCAL
SANGGUNINAN AS BASIS FOR THE
ENACTMENT OF AN ORDINANCE CREATING
THE LEE

ENACT THE ORDINANCE CREATING THE LEE

 PROCESS FLOW CHART
FOR EXISTING LEE: FOR PROPOSED/NEW LEE:

PRE-BUDGET PREPARATION: USE FINDINGS

OF APPENDED BP & SEMI-ANNUAL FINANCIAL PRE-BUDGET PREPARATION: USE
SELF-SUFFICIENCY REVIEWS (SAFSSRs) TO FINDINGS OF APPENDED FS & BP TO
SUPPORT BUDGET REQUEST FOR SUPPORT BUDGET REQUEST FOR NEW LEE.
CONTINUOUS OPERATIONS OF THE LEE

BUDGET PREPARATION:
1. INCLUDE IN THE BUDGET CALL OF THE GENERAL FUND ANNUAL BUDGET THE SPECIFIC GUIDELINES FOR PREPARATION
OF LEE AOB.
2. PREPARE AND SUBMIT LEE AOB.
3. CONDUCT BUDGET HEARINGS AND EVALUATE LEE AOB BUDGET PROPOSAL.
4. INCLUDE THE LEE AOB IN THE LEP THAT WILL BE SUBMITTED TO THE LCE FOR APPROVAL.
5. PROVIDE INPUTS PERTINENT TO THE LEE AOB FOR BUDGET MESSAGE.
6. SUBMIT THE LEE AOB TO THE LOCAL SANGGUNIAN.

BUDGET AUTHORIZATION:
1. ENACT THE APPROPRIATION ORDINANCE
2. APPROVE THE APPROPRIATION ORDINANCE FOR LEE
3. SUBMIT THE APPROPRIATION ORDINANCE FOR REVIEW
 PROCESS FLOW CHART

BUDGET REVIEW:
1. CHECK THE APPROPRIATION ORDINANCE WITH THE APPENDED BUDGET DOCUMENTS
2. REVIEW THE APPROPRIATION ORDINANCE
3. ISSUE THE REVIEW ACTION

BUDGET EXECUTION:
1. RECORD THE APPROVED APPROPRIATION IN LEES BOOKS OF ACCOUNTS
2. PREPARE CASH & SUMMARY OF FINANCIAL & PHYSICAL PERFORMANCE TARGETS USING PRESCRIPED FORMS IN THE BOM
2015 EDITION
3. OBLIGATE & DISBURSE FUNDS
4. ADJUST CASH PROGRAM & FOR SHORTAGES AND OVERAGES
5. PROVIDE CORRECTIVE MEASURES FOR NEGATIVE DEVIATIONS

BUDGET ACCOUNTABILITY:
1. MONITOR REVENUE/INCOME & EXPENDITURE
2. PREPARE & SUBMIT PHYSICAL & FINANCIAL REPORTS TO THE LCE & LOCAL SANGGUNIAN THROUGH THE LOCAL FINANCE
COMMITTEE (LCE)
3. CONDUCT SAFSSR OF EACH LEE
4. PREPARE & DISCUSS SAFSSR REPORTS TO THE LCE & LOCAL SANGGUNIAN
ASSESSMENT OF LEEs AND
RECOMMENDATIONS
At the End of 5th Year, Prepare the FSSE Report and Decide Whether the LEE
Should Continue its Operations

Prepare financial self sufficiency evaluation (FSSE) report which shall use 10
SAFSSR reports for the 5-year period
The designated LGU staff or consultant shall prepare the FSSE report with the
following:
Summarized side by side SAFSSR Findings
Computed cumulative totals of income and expenses
Financial self sufficiency ration of the LEE
Explanation or analysis of LEEs financial self-sufficiency situation
Recommendation on whether the LEE shall continue to operate and related actions
The reports shall yield either one of the two alternative findings:
Financial self-sufficiency or 100% cost recovery and/or net income is ACHIEVED at the end
of 5 years.
Financial self-sufficiency is NOT ACHIEVED at the end of 5 years or less than 100% cost
recovery and net loss.
Financial Self-Sufficiency is Achieved at the End of 5 Years

Continue LEE operations

Continue to conduct semi-annual financial self-sufficiency reviews (SAFSSR)
At the end of the 5-year period, prepare the FSSE Report

Financial Self Sufficiency is Not Achieved at the End of 5 Years

Conduct Facility Utilization Audit (FUA)
Conduct Facility Cost Audit (FCA)
LEE shall continue its operations where 3 conditions are present:
LEE services/products and facility patronage can be improved
Facility users are willing and able to pay higher user fees
Increase in rates to recover the true cost is socially and politically acceptable.
 Financial Self Sufficiency is Not Achieved at the End of 5 Years

If all 3 conditions are present:

1. Prepare 5-year BP sustainability strategies covering next 5 years
2. Prepare, submit and present the FUA report, FCA report and BP to the LCE and
local Sanggunian
3. Continue LEE operations
4. Implement 5-year BP starting succeeding year
5. Continue to prepare SAFSSR reports
6. At the end of 5 years, prepare FSSE report
In case not all conditions are present, LFC shall recommend an exit strategy:
Service Shedding
Closure
Divestment
 PROCESS FLOW CHART

AT THE END OF THE 5-YEAR PERIOD, PREPARE THE FSSE REPORT AND DECIDE WHETHER THE LEE SHOULD CONTINUE ITS
OPERATIONS
FINANCIAL SELF FINANCIAL
SUFFICIENCY IS SELF
ACHIEVED AT SUFFICIENCY
THE END OF 5 IS NOT
YEARS ACHIEVED AT
THE END OF 5
1. CONTINUE OPERATIONS YEARS
2. CONTINUE TO PREPARE SAFSSR REPORTS
1. CONDUCT FACILITY UTILIZATION AUDIT
2. CONDUCT FACILITY COST AUDIT
3. DETERMINE IF LEE SHOULD CONTINUE ITS OPERATIONS
IF ALL 3 IF NOT ALL 3
CONDITIONS FOR CONDITIONS
CONTINUED LEE FOR
OPERATIONS ARE CONTINUED
PRESENT LEE
OPERATIONS
ARE PRESENT
1. PREPARE A 5-YEAR BP INCLUDING SUSTAINABILITY STRATEGIES
2. PREPARE, SUBMIT AND PRESENT AUDIT REPORTS AND 5-YEAR BP TO LCE AND SANGGUNIAN
3. CONTINUE LEE OPERATIONS
4. IMPLEMENT 5-YEAR BP
5. CONTINUE TO PREPARE SAFSSR REPORTS
EXIT STRATEGY