Assessment of the Performance Challenge Fund and the Seal of Good Local Governance: Perceptions from Municipalities

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The Performance Challenge Fund (PCF), established by the DILG in 2010, is a performance-based incentive program that gives financial subsidies to local government units (LGUs) that are awarded with the Seal of Good Local Governance (SGLG). Almost a decade after its introduction, how has the PCF evolved and been appreciated by local governments? Facing challenges such as budgetary constraints and the presence of other national government programs that offer support to local governments, is there a need for improvements in the design of the PCF and what are these areas that might foster improved governance for all local governments? To answer these questions, this study uses the results of a nationwide survey of all municipalities in the Philippines, focusing on the perceptions of the core members of the municipal planning team on the usefulness and importance of the PCF. Survey showed that majority of the local government respondents appreciated the PCF and recognized its importance. But the evidence also showed that about 20 percent of surveyed municipalities were never eligible to receive the PCF. Most of these municipalities were from the 5th and 6th income class, concentrated in the Bicol, Central and Eastern Visayas regions. In addition, there were some LGUs that were either consistently or not consistent recipients of the PCF. These results must be considered by policymakers especially with the recent passage of the Seal of Good Local Governance Law.