A private buyer asks what solar costs. An LGU planning officer asks which budget line it comes from and whether the use is allowable. This page answers the second question — where the money comes from and how to establish that solar qualifies.
The 20% Development Fund is the share of a Philippine LGU's annual National Tax Allotment that Section 287 of RA 7160 (the Local Government Code of 1991) requires be appropriated for development projects. The minimum appropriation is not less than 20% of the annual NTA.
The fund's utilisation is governed by DBM-DOF-DILG Joint Memorandum Circular No. 1, dated 4 November 2020. A supplemental circular dated 27 April 2023 formalised the terminology change from Internal Revenue Allotment (IRA) to National Tax Allotment (NTA) — the correct term as of 2026. Content referring to the IRA is using outdated terminology.
Solar hardware and installation qualifies as a capital development project under the 20% Development Fund's eligible-use test: projects necessary, appropriate, or incidental to efficient and effective local governance and essential to the general welfare. Every item in the fund's exclusion list is an operating-expense category. None of the exclusions cover capital equipment.
This is the argument an LGU planning officer needs to make internally when proposing a solar project. State it directly: the eligible-use test is satisfied because solar is a capital investment in public infrastructure that reduces the cost of local governance (lower electricity bills for public buildings) and improves general welfare (lighting, health facility reliability, water supply). The exclusions are limited to operating expenses.
These four categories are explicitly excluded by DBM-DOF-DILG JMC No. 1, s. 2020. All are operating-expense categories:
Solar panels, inverters, battery systems, mounting structures, and installation labour are capital expenditures — none appear on this list.
The Local Disaster Risk Reduction and Management Fund (LDRRMF) reserves not less than 5% of an LGU's estimated revenue from regular sources, under Section 21 of RA 10121 (the Philippine Disaster Risk Reduction and Management Act of 2010). The fund is split between two distinct purposes:
Solar for evacuation centers and backup power facilities is preparedness and mitigation spending. It draws from the 70% portion. The 30% Quick Response Fund is held in reserve for post-disaster response — it is the wrong budget pocket to reference when proposing a solar project. An LGU procurement officer who hears a supplier cite "the 5% LDRRMF" without naming the 70% preparedness sub-allocation has not received a complete answer. Naming the 70% explicitly signals that you understand how their budget is structured.
Unexpended LDRRMF does not lapse at year-end. Under RA 10121, unspent balances accrue to a special trust fund reserved exclusively for disaster risk reduction and management activities for five years. After five years, remaining balances revert to the general fund.
This creates a real planning issue for LGUs: accumulated trust fund balances are earmarked money that must find a qualifying DRRM project, or eventually revert. An LGU sitting on a multi-year accumulated LDRRMF balance has a budget that is actively looking for preparedness and mitigation investments — and solar for evacuation centers or backup power qualifies.
Does your LGU hold accumulated LDRRMF trust fund balances from prior years? If yes, a solar installation for an evacuation center or community backup facility is a qualifying use — and spending it on infrastructure is preferable to having it revert.
Unexpended LDRRMF accrues to a special trust fund for up to 5 years. After year 5, remaining balances revert to the general fund under RA 10121.
Fund selection follows facility type. The two funds are separate budget lines — an LDRRMF-funded project does not compete against other development projects for the 20% Development Fund. An LGU can appropriately use both in the same fiscal year for different facility types.
| 20% Development Fund | LDRRMF (70% Preparedness) | |
|---|---|---|
| Legal basis | Section 287, RA 7160 | Section 21, RA 10121 |
| Minimum share | Not less than 20% of annual NTA | Not less than 5% of estimated revenue (70% of that) |
| Eligible use test | Capital development projects for local governance and general welfare | Preparedness and mitigation activities (pre-disaster) |
| Solar application | Streetlights, barangay halls, health units, water pumps | Evacuation centers, backup power, DRRM facilities |
| Unexpended funds | Subject to general budgeting rules | Accrue to special trust fund for 5 years |
| Governing issuance | DBM-DOF-DILG JMC No. 1, 4 Nov 2020 | RA 10121, LDRRMP, AIP |
SolarStream understands the 20% Development Fund, LDRRMF, and the procurement process under RA 12009. We work with barangay officers and municipal engineers before the AIP cycle — not after.
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