Wa0007

Distributed by Prof Shafaat Yar Khan for CSS Aspirants
Philippine Institute for Development Studies
Indicators of Good Governance:

Developing an Index of Governance
Quality at the LGU Level
Rosario G. Manasan et al.
DISCUSSION PAPER SERIES NO. 99-04
The PIDS Discussion Paper Series

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March 1999
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INDICATORS OF GOOD GOVERNANCE:

DEVELOPING AN INDEX OF
GOVERNANCE QUALITY
A T T HE L GU L E V E L
Rosario G. Manasan
Eduardo T. Gonzalez
Romualdo B. Gaffud
February 1999

TABLE OF CONTENTS
Page
1. INTRODUCTION 1
1.1. Objective of the Study 1

1.2. Limitations 2
2. REVIEW OF LITERATURE 2
2.1. Elements of Good Governance 3

2.2. Measuring the Performance of Governments 8
2.3. Construction of Composite Welfare/Human Development Indices 12
3. APPROACH AND METHODOLOGY 15
3.1. Overall Framework 15

3.2. Data and Measurement 15
4. CONSTRUCTION OF A GOVERNANCE INDEX 19
4.1. Choosing the Key Dimensions of Governance 19

4.2. Choosing the Indicators 21
4.3. Quantification and Measurement 28
4.4. Results of Pilot Tests 30
5. INSTITUTIONALIZATION ISSUES 36
6. SUGGESTED FUTURE REFINEMENTS 37
REFERENCES 39
2
LIST OF TABLES
Page
Table 1 Governance Index, Version 1 31
Table 2 Governance Index, Version 2 32
LIST OF FIGURES
Figure 1 Objective Tree for Good Governance Indicators, Version 1 17
Figure 2 Objective Tree for Good Governance Indicators, Version 2 18
Figure 3 Governance Quality Index and HDI 34
Figure 4 Comparison of GQI1 and GQI2 34
Figure 5 Comparison of SOII1 and SOII2 35
Figure 6 Comparison of Part I1 and PartI2 35
LIST OF APPENDICES
Appendix 1 Questionnaire/Survey Instruments 41
Appendix 2 Preliminary List of Performance Indicators 43
Appendix 3 Formulae Used to Compute the Different Indices 46
Appendix 4a Highlights of the National Workshop on 50

Governance Indicators, Carlos P. Romulo Hall,
NEDA sa Makati, October 30, 1998
Appendix 4b Highlights of the Workshop on Governace Indicators 58

RDC Conference Hall, NEDA, Iloilo City
18 September 1998
Appendix 4c Highlights of the Presentation of the UNDP-Funded 69

Study on Indicators of Good Governance: Developing
An Index of Governance at the Local Level
Apo View Hotel, August 14, 1998
3
INDICATORS OF GOOD GOVERNANCE:

DEVELOPING AN INDEX OF GOVERNANCE QUALITY AT THE LGU LEVEL
Rosario G. Manasan, Eduardo T. Gonzalez and Romualdo B. Gaffud
1. INTRODUCTION
Ask people what they think of governance and they will probably tell you: government,
authority, control, power.
True, it may be all these but there=s more.
Governance has been defined as Athe manner in which power is exercised in the
management of a country=s economic and social resources for development.@ However,
governance is not simply about how government conducts business in its own sphere. It is also
about how government interacts with civil society. It tells how well government has encouraged
and facilitated people=s participation not only in the delivery of services but also in the evaluation
and monitoring of government performance itself.
Governance is a complex concept. It includes the state=s institutions and structures,

decisionmaking processes, capacity to implement and the relationship between government
officials and the public (Landell-Mills and Serageldin 1992).
As such, governance has both political and technical dimensions. It relates to a nation=s
political system and how this functions in relation to public administration. At the same time, it
also involves the efficiency and effectiveness of public management. The key to improving the
level of governance is to find rules and norms that create incentives for state agencies, officials
and civil society to act in the collective interest at the least cost to society (World Bank 1997).
1.1. Objectives of the Study
The primary objectives of this study are: to develop measurable indicators of good
governance at the local government level; to test how applicable and acceptable good governance
indicators are in evaluating and monitoring LGU performance; and to find out how these
indicators can be integrated in the monitoring and evaluation system within the framework of
Sustainable Human Development.
In particular, this study attempts to develop a composite index of the quality of

governance at the local government level. In doing so, the biggest challenge lies in being able to
reduce the multiple facets of the governance concept into a small number of key observable
dimensions. The next one is to define a limited number of indicators which are able to capture
the essence of each dimension and which can be measured with some consistency and
comparability over time and space.
The governance quality index that was constructed for this study focuses on three
principal elements: one, capacity of the LGU to mobilize and utilize resources; two, efficiency and
4
effectiveness in theDistributed
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This is not to say that this study's view of governance is limited to these aspects alone.
Indeed, it is recognized that on a broad scale, governance indicators should also encompass the
legal framework for development including the judicial system (World Bank 1992), economic
management, and egalitarian income distribution (Huther and Shah 1998). However, this study
deems that these dimensions of governance are more applicable to the central government than
to LGUs.
1.2. Limitations
While the better measures of governance are based on outcome indicators (like the
UNDP's human development index, HDI), outcome indicators are usually not measured often
enough (either because it is costly to do so or because many outcome indicators do not show
significant changes when measured frequently) for them to be more useful the perspective of
development administration. In this regard, the use of input, output or process indicators may be
justified on the grounds that these intermediate indicators serve as forerunners of the
corresponding outcome indicators. This, of course, presupposes a robust link between the
intermediate indicators and the outcome indicators. For instance, studies have shown a strong
connection between government social/human development expenditures and HDI (UNDP 1996).
Countries which spend more on social/human development tend to rank high in HDI.
The governance indicators developed in this study are, at best, limited to "end points" or
output indicators. The indices constructed are not intended to supply information on why the
results are the way they are. They will not explain why some LGUs perform better than others.
The indices developed may provide some clues, but they are generally scorecards. To determine
the reasons for the outcomes would require a full-blown evaluation type assessment that is outside
the scope of this study.1
2. REVIEW OF LITERATURE
This section surveys two classes of works that are relevant in the task of constructing
indicators of good governance. The first group focuses on the conceptual underpinnings of
governance. The second one deals with the more empirical concern for performance
measurement.
1
Cook et al. (1993) point out that only an in-depth evaluation can measure impacts and can tell what produced them.
Evaluations seek to identify causal relationships. In contrast, performance measurement focuses on effectiveness and efficiency and
provides a feedback to managers and policy makers.

5
2.1. Distributed
Elements of by Prof Shafaat Yar Khan for CSS Aspirants
Good Governance
It has been observed that it is the quality of governance and not the type of political
regime that has made the difference in the economic performance of Asian countries. Project
evaluations conducted by the Asian Development Bank and the World Bank show that the project
performance of countries are largely determined by the overall capacity for administration or
implementation.
These findings would seem to indicate the significance of the non-political and functional
elements in the strategic interactions between government and citizens. Moreover, they highlight
these fundamentals: accountability, transparency and predictability (Root, 1995). In like manner,
the World Bank emphasizes four dimensions of governance: capacity and efficiency of the public
sector, accountability, legal framework for development, and transparency and information.
On the other hand, Lander-Mills and Serageldin (1992) include the following as the
critical elements that make up good governance: political and bureaucratic accountability, freedom
of association, objective and efficient judiciary, freedom of information and expression, and
efficient public institutions.
Meanwhile, Huther and Shah (1998) consider four observable aspects of governance:
citizen exit and voice, government orientation (judicial efficiency, bureaucratic efficiency and lack
of corruption), social development (i.e., human development in the tradition of UNDP plus
equity) and economic management.
Accountability, Participation. Accountability holds public officials responsible for

government behavior and makes it imperative for them to be responsive to the needs of the
citizenry. At the local level, it refers to the flexibility of structures that would allow beneficiaries
to improve program/project design and implementation. It also entails the establishment of
criteria to measure the performance of local officials and the creation of oversight mechanisms
to ensure that standards are met.
Accountability may be obtained at two levels: macro-level accountability and micro-level

accountability (Paul 1991, World Bank 1992).
Macro-level accountability refers to the system whereby ministers are accountable to the
legislature and/or political leadership and whereby civil servants are accountable to the ministers.
As such, it has two main aspects: financial accountability and economic accountability.
On the one hand, financial accountability involves: "a properly functioning government
accounting system for effective expenditure control and cash management; an external audit
system which reinforces expenditure control by exposure and sanctions against mis-spending and
corruption; and mechanisms to review and act on the results of audits and to ensure that follow-up
action is taken to remedy problems identified@ (World Bank 1992).
On the other hand, economic accountability refers to the evaluation and monitoring of
efficient use of resources in government. It may be reflected in performance contracts,
memorandums of understanding, value for money audits and legislative review of ministry or
department activities.
Macro-level accountability may be promoted by: making comprehensive and timely

information available; classifying expenditures in a manner consistent with budget programs; doing
6
appropriate analyses for decisionmaking; comparing budgets with results; improving the
organization and accounting system in the finance ministry; increasing the legal requirements for
financial reporting; ensuring the independence of the audit organization; and focusing on Avalue
for money@ audits.
In contrast, micro-level accountability results from two basic factors. The first refers to
the willingness and ability of the public to Aexit@, meaning to consider other options when
dissatisfied with a public service (Paul 1991). Exit is greatly influenced by the degree to which
the public has access to alternative suppliers of a given public service. Policies and mechanisms
that promote greater competition like deregulation, contracting out of services to multiple private
providers and public-private or public-public competition enhances exit.
Citing Baumol and Lee (1991), the World Bank (1992) noted that contestability is crucial
in creating a competitive environment. That is, when incumbents are made to bid for contracts
along with outside competitors or when regulations favor new entrants, then incumbents are more
conscious of turning in a good performance.
The second aspect of micro-level accountability refers to the willingness and ability of the
public to exert pressure on providers to perform well (i.e., the use of Avoice@). Voice depends on
the degree to which the public can influence the quality and quantity of a service through some
form of articulation of preferences.
A survey of beneficiaries' satisfaction with the amount of services provided is one way
of providing "voice mechanisms." So are procedures for making complaints and institutions like
the ombudsman. Participation of non-government organizations or private sector representatives
in decision-making or regulatory bodies is still another way of promoting voice.
The choice between exit and voice mechanisms should be guided by the factors which
foster each of these options. The potential for exit depends on the presence of economies of scale
(monopoly, e.g., the telecommunications industry used to consist of only one big industry player;
so with the local airline industry), legal barriers to entry and spatial barriers to exit (e.g.,
remoteness of a village so that it is efficiently served by only one school or clinic).
In contrast, the potential for voice is influenced by legal, institutional and informational
barriers facing the public, the public=s level of income and education, and non-differentiability of
the public service. For example, the absence of freedom of association, of participation and of
expression certainly hampers the exercise of voice. So does lack of information. Also, low
education levels constrain the public=s ability to evaluate options and participate in public debates.
Paul (1991) posits the following propositions in evaluating the menu of exit/voice options.
First, when the public service operates as a local monopoly due to spatial barriers and when the
public is characterized by low incomes and legal, institutional and informational barriers, improved
accountability is better achieved through the use of voice. Under these conditions, the use of
voice is likely to be stimulated by the intervention of agents outside of the local community (e.g.,
NGOs).

Second, when the public service is characterized by large economies of scale and/or legal
barriers to entry, when service differentiation is difficult and when the public is not constrained
by low incomes and limited information, voice will tend to be used to induce greater
accountability. The use of voice under these conditions is likely to be initiated by the public and
not through external agents.
Third, when public service can be differentiated, when it is not constrained by economies
of scale and the public faces income, informational and institutional barriers, improved
accountability is achieved through the use of exit.
The World Bank (1992) also asserts that micro-level accountability reinforces macro-level
accountability. On the other hand, Paul (1991) makes a stronger statement in noting that overall
public accountability is sustainable only if macro-level accountability is reinforced by micro-
level accountability but that competition and/or participation cannot substitute for good
financial and economic accountability.
Lander-Mills and Serageldin (1992) adds a third dimension to public accountability:

political accountability. In their view, political accountability is enhanced by the presence of a
system of popular choice which makes governments responsive to popular demand.
Transparency and Information. Transparency implies the provision of relevant and

reliable information to all. The private sector needs accurate and timely information about the
economy and government policies for effective decision making. Transparency in decision making
and implementation reduces uncertainty and can curb corruption among public officials. It
complements and reinforces accountability (by enhancing efficient use of resources and by
promoting participation) as well as predictability (by lowering uncertainty and transactions costs).
Predictability, Presence of Legal Framework. Predictability refers to the fair and

consistent application of laws, regulations and policies. This is important in creating a stable
economic environment that allows prospective investors to assess opportunities and risks, to
transact business with one another and to have a reasonable assurance or recourse against
arbitrary interference (World Bank 1992).
Predictability has five critical elements: "(1) there is a set of rules known in advance; (2)
the rules are actually in force; (3) there are mechanisms assuring application of the rules; (4)
conflicts are resolved through binding decisions of an independent judicial body; (5) there are
procedures for amending the rules when they no longer serve their purpose."
Efficiency of public sector. A capable public sector is one which collects its revenues
efficiently, and one which plans, programs, and budgets its expenditures soundly.
Social development. Good governance is one which promotes the health and well-being
of its citizenry in a manner that is equitable.
Sound economic management. For Huther and Shah (1998), sound economic
management may be observed through the government=s outward orientation, central bank=s
independence, and the debt-to-GDP ratio.

Along the same lines, Osborne and Gaebler (1992) enumerate the characteristics of good
governments -- decentralized, catalytic, community-owned, competitive, mission-driven, results-
oriented, customer-driven, enterprising, anticipatory and market-oriented. These are the same
qualities that characterize the best-run companies or corporations.
In the midst of serious social problems and swift global transformations, the authors
espouse a highly decentralized, non-traditional form of governance to maximize productivity and
effectiveness. Good governance based on these principles would mean a shift from traditional to
new roles and structures.
Catalytic and community-owned government. Local chief executives now assume the
role of facilitating problem solving by stimulating the community into action. They are no longer
confined to the tasks of collecting taxes and delivering services. They are also involved in
defining community problems and mobilizing scarce public and private resources to achieve
community aspirations.
A catalytic local government assumes more "steering" functions (as opposed to "rowing")
by "leading society, convincing its various interest groups to embrace common goals and
strategies." As such, the focus of a catalytic government ( or one that acts as a change agent)
shifts from "doing" things (from delivering services) to making more policy decisions and putting
more social and economic institutions into motion. It is also one that ensures that other
institutions are delivering services (in lieu of hiring more public employees to do the job).
Catalytic local governments may contract out some services but privatization is just one
of the answers. It is not the only answer. Community services and programs offered by local
governments should be designed such that the clients are empowered and become less dependent
on government for their needs. Ownership of programs by the community should be facilitated
by local officials through the self-help process. Non-governmental organizations and people's
organizations should be tapped to assist in promoting self-help and in formulating and
implementing development projects.
Competitive, enterprising, anticipatory, results-oriented governance. Local

governments, as further illustrated by Osborne and Gaebler (1992), should take a competitive
stance to achieve greater efficiency. They should promote competition among service providers
to keep costs down and to induce excellence for greater customer satisfaction. Local
governments could enhance competition by encouraging private firms to provide goods and
services that were previously provided by the public sector either by load shedding (with the
government consciously withdrawing from public provision), procurement or contracting.2
They should also be enterprising in the sense that they should look for innovative ways
of creating revenue (e.g., charging user fees for some public services, like the use of public rest
rooms, parking lots) and investing for returns (i.e., evaluating the returns on their spending as if
2
Contracting is not easy. Referring to Donahue (xxxx), Osborne and Gaebler note that contracting works best when public
agencies can define precisely what they want done, generate competition for the job, evaluate a contractor's performance and replace
or penalize those who fail to achieve expected performance levels.

it were an investment). It is also important that governments put the right incentive structure in
place. One way of doing so is by allowing governments/agencies/departments to keep some of
the money they make or save through such mechanisms like shared savings/earnings and revolving
or enterprise funds.
Good governance, moreover, translates to effective structuring of the market place or

creating incentives and alternatives/choices for people that lead to a certain vision. To make this
possible, reforms ought to take place such as the eradication of red tape and restrictive budget
procedures typical in bureaucracies. A simplification of rules and structures makes way for
greater participation by the private sector.
Good local governance requires foresight. Local governments should focus more on
prevention rather than cure as it is easier and less expensive to solve problems rather than to
respond to crises. Prevention is particularly beneficial in health care and environmental
protection. Thus, good governments are able to anticipate the future and to make decisions based
on foresight (e.g., through strategic planning).
A results-oriented local government gives more attention to funding, monitoring and

measuring project/program outcomes rather than inputs (Osborne and Gaebler 1992). In contrast,
when institutions are funded according to inputs, they have little incentive to turn in a good
performance. In this light, a set of performance measures and, possibly, a system of linking
funding or rewards with results is needed to ensure that program outcomes are achieved.3
At the personnel level, Root (1995) adds that clear career paths and adequate
compensation are essential in improving staff productivity. There is a need to establish
mechanisms to evaluate performance so that promotion is based on achievement. Compensation
and other incentives which include opportunities to upgrade skills should be linked with successful
program implementation.
Decentralized decisionmaking and fiscal responsibility. Shah (1994) argues that

decentralization of fiscal responsibility contributes to the efficient provision of local public
services since expenditures are matched closely which local preferences and needs. Moreover,
accountability is promoted by the clearer and closer linkage between the benefits and costs of
local public services. Oates (1972) further emphasizes the principle of subsidiarity: public services
are provided most efficiently by "the jurisdiction having control over the minimum geographic
area that would internalize benefits and costs of such provision."
Moreover, the greater responsiveness of local governments to local demands encourages

fiscal responsibility and efficiency if financing is also decentralized and interjurisdictional
competition and innovation are enhanced (Root 1995). In line with this, the principle of
subsidiarity has also been put forward with respect to taxation: lower levels of government
should be assigned to collect taxes unless a convincing case can be made for it to be given to
higher levels of government.
3
0sborne and Gaebler pointed out that many times performance measurement achieves good results quite independently
of the reward/incentive system.
10

Thus, decisionmaking should occur at the lowest level of government on the grounds of
efficiency, accountability, manageability and autonomy. However, economies of scale and
benefit-cost spillovers (or externalities) may alter these results somewhat. Economies of scale
arise when the costs of production (per unit of output) decline with the scale of production. In
many countries, for instance, the cost per resident of delivering specific types of services (like
water supply and sewage treatment) decreases as the number of residents increases. Similarly,
certain services require specialty services that can only be justified for large client populations.
Examples of these are tertiary hospitals, fire-fighting equipment for high-rise buildings, etc. (Bahl
and Linn 1992). In these cases, the optimal size Aplant@ for providing certain kinds of services in
the most-cost effective manner may be larger than a local jurisdiction.
On the other hand, benefit-cost spillovers occur when the benefits/cost of a public service
are realized by non-residents of the jurisdiction providing the said service to its constituents. For
instance, local health services such as immunization lower the morbidity risks not only of the
residents of a given municipalities but also those of other municipalities (Capuno and Solon 1996).
Similarly, polluting activities in upstream municipalities increase the health risks and,
consequently, the demand for health services in downstream municipalities.
Optimal size of jurisdiction will vary with specific instances of economies scale and
benefit-cost spillouts. The optimal provision of public services is ensured when the marginal
benefit equals the marginal cost of production. This is achieved when the benefit area and the
political jurisdiction are congruent. When this occurs fiscal equivalency is said to be in place
(Oslon 1969). In such a situation, the free-rider problem is surmounted. However, the fiscal
equivalency principle may require a different-sized jurisdiction for each public service.
According to Paderanga (1996), government has become more responsive to local

conditions with the devolution of powers to local authorities. He claims that current problems
with decentralization and devolution call for a systems audit and staff training program. This
means there is need to properly identify what functions must be devolved including the specific
levels and forms of such functions. Moreover, there is need to implement an effective training
program that will rapidly upgrade the level of competence in local governments .
2.2 Measuring the Performance of Governments
Output-input efficiency measures. According to Hatry et. al., (1992), efficiency

measures of local governance are output-input ratios with outputs defined in terms of (1) work
load, (2) some measure of effectiveness, and (3) equipment and personnel utilization rates.4
4
Hatry, et. al. give examples of these measurements. One of their illustrations is on fire protection and is shown below:
Fire Protection--Measures of Efficiency
Type 1: Output in units of work load over input

number of firecalls responded to per dollar
number of fire prevention inspections per dollar, perhaps categorized by residential or commercial
Type 2: Output in units of effectiveness over input
11

In the first measure, one or more physical work load units can be identified as outputs.
These outputs are then related to the amount of resources used in producing them. The second
measure considers output in terms of the quality of service provided. This type of measure,
however, shares a shortcoming that is common to all effectiveness measures. It is often difficult
to obtain some desirable indication of effectiveness in terms of the success of prevention effort
i.e. prevention of crimes, fire, traffic accidents, or diseases.
In these cases, the approach often used is to measure the number of incidents not
prevented -- the number of crimes, fire, traffic accidents, or prevailing diseases. The authors then
argue that relating these to cost or time does not make sense. Expressing effectiveness measures
as percentages likewise is not of much use; they should be converted to numbers which can be
used in the ratios.
The third measure reflects the amount of specific resources that are utilized (or not
utilized) for potentially productive activities. This type of measure does not directly assess the
amount of output obtained from these resources and, thus, should be considered only as proxy
indicator.
Hatry et al. (1992) caution that efficiency implies a certain level and quality of service.
An increase in output-input ratio is not really an efficiency improvement if the quality of service
is not maintained, at the very least. Thus, it is necessary to examine both efficiency and
effectiveness measures to see the whole picture of government performance. Moreover, the
number of activities in local governments that can be measured seems endless. This could lead
to excessive and tedious data collection and should be avoided.
In like manner, Gaffud (1997) enumerates three elements that are essential in constructing
indicators for measuring the performance of the public sector: efficiency, effectiveness and
economy. Efficiency links outputs to costs; effectiveness ensures the attainment of organizational
objectives/goals; and, economy matches actual to planned costs.
Some of the measurements illustrated above, where quantitative indicators are involved,
may not actually work because of difficulties in measuring public sector outputs not only in value
but, at times, also in physical terms. Gaffud (1997) contends that public sector outputs are
number of fires fought for which less than a target amount of spread occurred per suppression
number of households and business establishments "protected" per dollar, with "protected" defined as those establishments
without a fire during the period
Type 3: Utilization Measures

percentage of downtime of major fire equipment
percentage of time fire crews are understaffed
12

usually intermediate products that are, at best, "proxies" for the intended final output. Examples
of these are outputs produced by regulatory and social service agencies.
While the output of some government agencies can be measured (like postal services
where service and cost comparisons with those incurred by private firms can be made),
measurement of public sector output in other areas (like defense, regulatory activities and social
welfare programs) remain elusive. Thus, input indicators as proxies for non-market outputs are
generally acceptable.
Well-being indicators. Several sets of indicators have been made to assess the
accomplishment of government in promoting human or social development. The Social Indicators
Project (SIP) done in 1973 by the Development Academy of the Philippines (DAP) was a
pioneering effort in formulating a set of indicators to gauge the performance of government.
It was meant to measure the state as well as the perception of human well-being in the
country for a particular short-term period. Mangahas (1976) then thought that the indices could
be linked to specific programs of government to truly reflect the essence of the social indicators
system. The said indicator system could thus be further developed as a basis to evaluate the
actual performance of local government officials.
The SIP considered social concerns as the goals of Philippine society and treated social
indicators as synonymous to welfare indicators. Present welfare consists not only of the welfare
of Filipinos currently alive but also of the welfare of future generations (Mangahas 1976). The
terms welfare, social, and development have been said to carry some value or ethical content. In
coming up with welfare indicators, it has been argued that indicators cannot and need not be free
of value judgment. What is more important is that elements of the judgment should be made
explicit.
Research on social concerns and social indicators done in other countries supplied the
guidelines used by the SIP in drawing up the list of basic Philippine social concerns. The
following social concerns were found to be universal and not at all unique to any country: health
and nutrition, learning, income and consumption, employment, non-human productive resources,
housing, utilities and the environment, public safety and justice, political values, and social
mobility.
For each concern a limited number of measurable variables or indicators were drawn up.
The indicators chosen were those which are reliable, replicable, and simple to interpret in order
to be easily understood by the end-users -- the general public. Also, there was a preference in
favor of final rather than intermediate indicators.
In other words, the indicators should reflect the outputs rather than the inputs of the social
system. For instance, it was noted that the crime rate is a preferable indicator than the number
of policemen per block. In like manner, the proportion of people who are ill is a better indicator
than the number of hospitals beds available.
13
Measuring the citizen's level of awareness or satisfaction. For all the technical
difficulties they present, experiential (or public opinion) surveys are perhaps the best way of
seeing how things are from the citizens' point of view. And as Jurado (1976) amply demonstrates,
these indicators may come in neat quantifiable bundles. Consider three subjective indicators:
index of political awareness, index of political participation, and index of political efficiency.
For each index, the general formula can be given as
n
Index = (1/n) ∑ PS i
i=1
where PS is the average score on political awareness by respondents i, and

n is number of respondents. In turn,
PS i = ∑ W ij
j=1
where Wij is the score of respondent i on item j of political awareness, participation or efficacy
where there are a total of k items.
To measure political awareness/efficacy, respondents are asked to indicate their awareness

(or perceptions on the efficacy) of k government programs or policies. To gauge political
participation, for instance, the respondents may be given five areas of community activities and
asked to identify what form of community participation they would undertake if given the chance
to participate.
Similarly, perceptions on welfare or human conditions may be quantified through ranking

which is an average subjective rating by the people themselves of the degree to which they felt,
for example, they are well-off. The weakness, however, of this approach is that it does not
indicate specific areas of failure and success, and it is not always accurate since it relies heavily
on people's perceptions/expectations that change from time to time. To illustrate: the average
rating may drop despite rising levels of living because of high expectations that were unfulfilled.
Recent local government performance indicators. Gaffud (1997) argues that the
indicators to be formulated for local governance should not be unidimensional. Decentralization
should not be viewed simply as the one-way process of transferring power and resources from the
national government to local government units. He suggests that governance should be treated
as an interactive system that brings together the state, local governments and civil society in a
continuing dialogue across vertical and horizontal lines.
14
In the manner of Osborne and Gaebler (1992), Gaffud favors local governments (1) that
experiment with organizational combinations featuring partnerships with national government
agencies and civil society, (2) that continue to carry out their role as providers while national
government agencies, the private sector and civil society may act as producers of basic services.
A distinction is made between the provision and production of basic services. Local
governments act solely as providers. They could, of course, share or delegate the production
function through assignment or contract to others, either to national government agencies, other
public sector organizations, or private enterprises. As providers, local governments are
concerned with "creating" the policy environment, making resources available, and directing
resource use toward planned priorities.
In this context, Gaffud maintains that local governments have three main strategic
objectives: to increase revenues; to improve the effectiveness of the communities with regard to
service delivery and to ensure the right mix of policy and administrative initiatives for continuing
decentralization.
Various indicators to gauge increased revenue generation have been proposed by Gaffud:
tax effort, tax collection rates, ratio of local government revenues to total national revenue, ratio
of internally generated revenues to total local government revenues and ratio of local taxes to
total local government revenue.
Various indicators of effectiveness of service delivery at the community level have

likewise been formulated: percentage of total local government expenditures for human
development priorities, level of attainment of local governments in delivering devolved basic
services (in health, public works, agriculture), extent of partnership in service delivery between
local governments and civil society institutions, and number of functioning local school and health
boards.
Gaffud notes that the policy and administrative environment should be ensured for
continuing decentralization. This may be reflected in the following: share of local governments
in total public sector budget, proportion of national agency budgets under the discretion of the
regional development councils, partnership between national government agencies and inter-local
government, consortium arrangements for implementation of devolved and non-devolved basic
services, and number of projects proposed by local boards supported by regional field offices.
2.3. Construction of Composite Welfare/Human Development Indices
The need to develop a single index for various aspects of governance is generally
perceived to be important. Paqueo (1976) contends that despite difficulties in coming up with an
index to monitor the health of the people, there is pressure to have one just like the GNP which
is used to monitor the nation's economic health. Construction of a composite measure of human
development which expresses various components in a single magnitude is difficult but several
successful efforts have been made since.
Human Development Index. The human development index (HDI), for one, has been
widely accepted. The HDI is based on three indicators: longevity, educational attainment and
standard of living (UNDP 1996). The UNDP's HDI methodology was used by the 1997
Philippine Human Development Report (PHDR) in computing provincial level HDI for the
15
Philippines (HDN/UNDP 1997). As with the international computation, fixed minimum and
maximum values are applied; life expectancy at birth: 25 years and 85 years; adult literacy; 0%
and 100%; combined primary, secondary and tertiary enrolment ratios: 0% and 100%; and real
GDP per capita: P3,350 and P19,056 for the period 1991-1994, both expressed in 1985 prices.
For every province, an index each for life expectancy, literacy and income is computed
according to the general formula:
Actual X i - Minimum X i
Ii=
Maximum X i - Minimum X i
where the index Ii refers to the index for each of the three components. The HDI for a province
is then obtained by taking the average of the three components:
HDI = (1/3) ( I 1 + I 2 + I 3 )
Capability Poverty Measure. The capability poverty measure (CPM) is another index
composed of three indicators: the percentage of children under five who are underweight; the
percentage of births unattended by trained health personnel; and, the percentage of women aged
15 years and above who are illiterate (UNDP 1996). These indicators reflect the percentage of
the population with capability shortfalls in three corresponding dimensions of human
development: living a healthy, well-nourished life; having the capability of safe and healthy
reproduction; and being literate and knowledgeable.
UNDP (1996) asserts that indicators to measure deprivation in capabilities should directly
reflect capability shortfalls. If unavailable, substitute indicators could be use, e.g., the availability
of trained health personnel to attend births, access to health services, potable water and adequate
sanitation. Nevertheless, indicators of actual access is better than those of potential access. For
instance, rates of immunization or use of oral rehydration therapy are preferable to data on travel
time to a primary health care center in monitoring the effectiveness of the public health system.
The CPM differs from the HDI in that it deals with people's lack of capabilities, not with
the average level of capability in the country. The CPM is a more people-centered measure of
poverty. It recognizes that human deprivation occurs in a number of critical dimensions. Thus,
it is multidimensional. Unlike income (which is the more conventional way of measuring poverty),
capabilities are ends rather than means. They are not measured in terms of inputs but in terms of
human development outcomes -- in the quality of people's lives.
The expansion of capabilities defines human development. However, the present

formulation of the CPM is faulted by its critics precisely because of the exclusion of income in the
index. They argue that the CPM should not ignore income in its formulation in the same manner
that the HDI includes per capita GDP.
However, the 1996 Human Development Report argues that lack of opportunity signifies
that access to the means to develop or maintain essential human capabilities is not being
adequately provided. Thus, indicators of the availability of social services which are the direct
16
means to ensuring a decent standard of living would be of better use than proxy indicators or
indirect measures like income as in the human development index.
The three variables used in the CPM are given equal weight in the composite index. This
implies that each is a basic capability that cannot substitute for another that is lacking. Since the
three are foundational capabilities, it is assumed that policy should not seek to trade one off
against another. If flexibility in weights is desired, it has been suggested that respondents to
surveys be asked to assign weights to each capability by allocating a fixed total.
Minimum Basic Needs. Reyes and Alba (1994) cite the difficulty in coming up with a
single index of welfare status. They argue that the Under 5 Mortality Rate (U5MR)
recommended by UNICEF may be the best available indicator of overall social development
because of its broad coverage. However, they do recognize the need to consider several measures
to gauge the conditions of the household or individual.
They note that it is important for policy makers to determine how sensitive the indicators
are to changes in macro policies, i.e., the impact of macro policies on vulnerable groups. They
contend that it is essential to focus on indicators that are sensitive to policy changes, even if they
measure only one facet of human welfare. The minimum basic needs (MBN) indicators which
were formulated by an inter-agency group for the use of the Presidential Commission to Fight
Poverty are examples of such indicators.
The minimum basic needs indicators cover three important areas of concern: survival,
security and enabling needs. Indicators under each area are enumerated below:
Survival
* Health: infant mortality rate, child mortality rate
* Nutrition: prevalence of moderate and severe underweight, prevalence of acute and

chronic malnutrition, prevalence of micronutrient deficiencies (anemia, endemic goiter,
xerophthalmia), income above the food threshold
* Water and sanitation: proportion of households with sanitary toilet facilities, proportion
of households with access to safe water supply
Security
* Income and security: income above the total poverty threshold, amount of household
savings, employment or unemployment
* Shelter: proportion of households in makeshift houses
* Peace and order: crime incidence, incidence of armed encounters
Enabling Needs
* Basic education and literacy: elementary enrolment, rate of completion, basic and
functional literacy
17
* Participation: membership in at least one area-based community organization, participation

in formal electoral exercises
3. APPROACH AND METHODOLOGY
3.1. Overall Framework
As a general approach, this study first develops a conceptual framework that helps define
the key observable dimensions of governance. Next, it further breaks down each of these
dimensions into their principal elements. In turn, a limited number of measurable indicators that
are able to represent the more important character of each of these elements are delineated.
This study adapts the objective tree approach used by Gaffud (1997). Thus, overall
development goal of the LGU is delineated as improved performance in social/human
development. Three strategic objectives are, then, deemed essential to the achievement of this
overall goal: (1) optimized resource support for human/social development concerns; (2)
enhanced effectiveness/efficiency in social service delivery; and (3) accountability systems
developed and installed (Figure 1).
In turn, each of these three strategic objectives are defined in terms of component
elements or result packages (RPs). In particular, the "optimized resource support" objective is
broken down into 3 RPs: revenue generation; revenue use; and, adoption of systems to sustain
revenue generation and utilization. Similarly, the "effectiveness/efficiency in social service
delivery" objective is supported by 1 RP: beneficiaries satisfaction with social services delivered.
On the other hand, the "accountability" objective is further specified to include the following result
packages: financial accountability systems developed and implemented; and micro-level
accountability systems developed and implemented.
Section 4 presents in detail the conceptual basis for the choice of dimensions, principal
elements of each dimension and performance indicators for each of these elements. This choice
is largely driven by the governance concepts expounded in Section 2. It attempts to address the
following questions. (1) Do these three dimensions of governance adequately capture LGU
performance in attaining the overall development goal? (2) Do the different result packages
satisfactorily support each of the strategic objective they represent? (3) How well do the
performance indicators/measures relate to each of the result packages? (4) How do the
alternative performance indicators rank in terms of the different criteria set for choosing
performance indicators?
3.2. Data and Measurement
Data gathering. Most of the indicators listed in Figure 1 and Figure 2 can be measured
based on LGU records, financial statements, other pertinent documents and key informant
interviews with local government officials and NGO representatives. For instance, all the
indicators belonging to Strategic Objective I are of this type. In measuring these indicators,
existing LGU records in the pilot LGUs were checked and validated by interviews with key local
officials.
18
However, some of the indicators in Figure 1 are based on experiential/attitudinal data

that required the conduct of public opinion surveys (e.g., those relating to micro-level
accountability). In this regard, the respondents to the opinion surveys were drawn from local
residents using multistage (cluster) sampling. In the first stage, 2 barangays (one urban barangay
and one rural barangay) were drawn randomly from the different barangays in each pilot LGU.
Barangays were differentiated as to their urban character in order to capture differences in the
usage/satisfaction of the residents for specified functions.
In the second stage, a random sample of individual respondents was drawn in each of the
selected barangays. Since a complete listing of the residents in these barangays was not easily
available, randomness was assured by interviewing household heads in every other house lined
up along the various thoroughfares in these barangays.
The coverage of the public opinion survey conducted in this study was sketchy because
of time and resource constraints. On the average, some 50 respondents were interviewed for each
pilot LGU. Admittedly, this number is not large enough to yield a decent margin of error but the
surveys undertaken for purposes of this study were primarily done to pilot test the questionnaire
and assess the feasibility of applying this approach in a more rigorous manner in future
researches.
The questionnaire used for drawing out citizen's perception/satisfaction with service
delivery and overall governance was patterned after the Social Weather Station (SWS) surveys
(Appendix 1).
Criteria in selecting indicators. In the beginning, the number of measures included in the
preliminary list of indicators was too large in number (and thus, too complicated) to be of much
use to local chief executives, NGA heads or local voters (Appendix 2). However, the list was
trimmed down in the course of the study (during field testing and consultative workshops) based
on the following criteria:5 how specific, how quantifiable, how universal, how credible, how
simple and acceptable the indicators are.
Specificity demands that the indicators provide information that are dis-aggregated
enough across functions or levels of government to be meaningful to the various users of the
indicator system proposed. This implies that the indicators cannot be the Aone-size-fits-all@ type.
In contrast, universality implies that the indicators can standardized to fit all levels of government
or functions.
For purposes of this study, quantifiability means the indicators can be measured in terms
of either an ordinal/cardinal scale or binary type responses.6 The latter includes, for example,
indicators that relate to the presence/absence of certain modes of service provision or revenue
generation.
5
These criteria are drawn largely from the works of Jackson and Palmer ( 1988) and Gaffud ( 1997).
6
In this sense, even citizen's perception are quantifiable.
19
FIGURE 1
OBJECTIVE TREE FOR GOOD GOVERNANCE INDICATORS, VERSION 1
Development Goal
Improved LGU
Performance
In Social Development
Strategic Objective I Strategic Objective II Strategic Objective III
Optimized Resource Enhanced Effectiveness Support Systems and

Support for Human In Services Delivery Accountability Measures
Priority Concerns Installed
I.1. REVENUE GENERATION II.1. BENEFICIARIES III.1. MACRO-LEVEL

SATISFACTION WITH ACCOUNTABILITY
I.1.1. Local revenue effort -- per SOCIAL SERVICES SYSTEMS DEVELOPED
capita local source revenue PROVIDED AND IMPLEMENTED
I.1.2. Cost recovery effort -- ratio of II.1.1. Beneficiaries= net satisfaction III.1.1. Results of COA audit
Revenue to expenditure from rate with specific services
Economic enterprise provided III.2. MICRO-LEVEL
ACCOUNTABILITY
I.2. REVENUE UTILIZATION MEASURES IN PLACE
I.2.1. Per capita social service III.2.1. Presence of voice

Expenditure mechanism -- citizen
participation in and
I.2.1. Social service expenditure empowerment of NGOs
Ratio -- ratio of social service and barangays
Expenditure to total LGU
Expenditure III.2.2. Presence of exit mechanism
-- use of market-oriented
I.3. ADOPTION OF SYSTEMS mechanisms in service
FOR INCREASED delivery
SUSTAINABILITY OF
RESOURCE GENERA-
TION AND UTILIZATION
I.3.1. Regularity in the conduct of

General revision of schedule
of market values
I.3.2. Annual Development Plan

Approved by Sanggunian
20
FIGURE 2
OBJECTIVE TREE FOR GOOD GOVERNANCE INDICATORS, VERSION 2
Development Goal
Improved LGU
Performance

I.1. REVENUE GENERATION II.1. ADEQUACY OF III.1. MACRO-LEVEL

SERVICES PROVIDED ACCOUNTABILITY
I.1.1. Local revenue effort -- per SYSTEMS DEVELOPED
capita local source revenue II.1.1. Programming of service AND IMPLEMENTED
delivery inputs in compliance
I.1.2. Cost recovery effort -- ratio with national benchmarks III.1.1. Results of COA audit
of revenue to expenditure
from economic enterprise II.2. STRONG LGU-NGA III.2. MICRO-LEVEL
COOPERATION ACCOUNTABILITY
I.2. REVENUE UTILIZATION MEASURES IN PLACE
II.2.1. Presence/absence of
I.2.1. Per capita social service NG-LGU cooperative III.2.1. Presence of voice
expenditure agreements mechanism -- participation
of NGO representatives in
I.2.1. Social service expenditure local special bodies
ratio -- ratio of social service
expenditure to total LGU III.2.2. Presence of exit mechanism
expenditure -- use of market-oriented
mechanisms in service
I.3. ADOPTION OF SYSTEMS delivery
FOR INCREASED
SUSTAINABILITY OF
RESOURCE GENERA-
TION AND UTILIZATION
I.3.1. Regularity in the conduct of

general revision of schedule
of market values
I.3.2. Annual Development Plan

Approved by Sanggunian
21
On the other hand, credibility refers to the absence of known systematic built-in bias in the
measurement of the indicators. Simplicity implies that the indicators are clearly consistent with
the overall development goal as well as with the three strategic objectives.7 Lastly, acceptability
with the various stakeholders is validated in the workshops that were conducted in the course of
this study.
It should be pointed out that these criteria are not entirely compatible with one another.
Some trade-offs between the different criteria are evident. This is particularly true with regard
to specificity and universality.
Composite indices. A composite index is constructed corresponding to each of the

strategic objectives. Furthermore, the composite indices, thus, derived are consolidated into an
overall governance index.
Initially, equal weights are assigned to the different indicators (and different result
packages). These weights are, then, subjected to validation during the sub-national and national
workshops/consultations conducted in the course of the study.
Pilot Testing. Given time and resource constraints, the measurement of the indicators
presented in Figure 1 and Figure 2, as well as the construction of the composite indices were
pilot tested in 3 pre-selected LGU clusters. Each cluster consisted of three jurisdictions (one
provincial government (PLGU), one city government (CLGU) and one municipal government
(MLGU). The clusters were chosen on the basis of their provincial level HDI.
* High HDI : Cavite PLGU, Trece Martirez CLGU and Noveleta MLGU
* Medium HDI: Davao del Norte PLGU, Davao CLGU, and Mabini MLGU
* Low HDI: Antique PLGU, San Jose MLGU, and Hamtic MLGU
4. CONSTRUCTION OF A GOVERNANCE INDEX
4.1. Choosing the Key Dimensions of Governance
As local governments make the painful passage to a decentralized set-up, they will be
under close scrutiny to improve their performance especially in human development. This is in
keeping with the mandate of the Local Government Code to establish LGUs that are performance-
based and possessed of greater managerial accountability for social or human development
outcomes.
Synthesizing the various elements of good governance that emerge from the survey of
literature, the present study starts with the premise that good governance at the LGU level is
primarily determined by how well LGUs perform in improving the quality of life of their
constituents, i.e., how efficient and effective LGUs are in bringing about social/human
development.
7
Simplicity is largely assured by the objective tree approach that is followed in this study.
22

LGUs not only provide goods and services. Before they can even start to do that they
must first mobilize and allocate resources. They also invest resources and negotiate contracts.
All these activities impact strongly on final social outcomes. Thus, the way LGUs manage
resources is extremely important. In this sense, local authorities need to govern on the basis of
consistency and transparency of processes and broad-based community support.
A responsive regulatory framework can expedite social development, if enforced

consistently. It is a necessary condition for good governance. Equally necessary is an external
environment in which people are sufficiently aware and involved to demand better performance.
This includes a built-in mechanism for listening to the community, forming partnerships with civil
society and other levels of government and accepting feedback from oversight agencies.
If these conditions are met, LGUs would be in a good position to improve social results
for a given amount of social spending. This should set off a virtuous circle in which each action
makes the next one less difficult. But to chart the progress of LGUs at each stage, indicators are
needed that would assess how responsive and accountable decisions are at the local level.
Given this perspective, it is imperative that LGUs pursue the following three strategic
objectives if they are to attain the overall goal of achieving a higher level of human development
in their areas of jurisdiction (Figure 1 and Figure 2).8
(1) Optimized resource support for human priority concerns.
This does not only mean raising and allocating money (even if budgeted for human
development concerns). It also means diversifying revenue sources as well as providing
the policy and legal framework to ensure a steady source of income that can be
programmed for productive use.
(2) Improved effectiveness and efficiency in social services delivery.
LGUs need to make serious attempts to (a) observe standards and benchmarks
for devolved social services; (b) increase the level of satisfaction of beneficiaries with the
services delivered; ( c) use non-traditional and innovative modes of service delivery; and
(d) encourage private institutions to take an active part in social service delivery.
(3) Responsive and transparent decisions.
This requires the presence of a pro-active citizen feedback mechanism and strong
intergovernmental relations to promote innovations in local resource management and
social service provision. It also means that accounting and auditing procedures that
promote restraint (to curb corruption and arbitrary action) and flexibility (to encourage
new and better ways of doing things) are developed and implemented.
8
Admittedly, governance has other dimensions in addition to the three outlined above: legal framework for
development including a sound judicial system, economic management, and egalitarian income distribution. However, it
is deemed that these facets are less important for local governments as opposed to central governments.
23
4.2. Choosing the Indicators
Strategic Objective I: Optimized Resource Support for Human Priority Concerns. The
capacity of LGUs to provide social services is largely determined by their financial resources and
their ability to manage such resources vis-a-vis competing demands. With devolution, LGUs are
faced with greater expenditure responsibilities. Thus, one of the major challenges they must deal
with is how to mobilize additional revenues from local sources even with the higher IRA share
mandated under the 1991 Local Government Code.
In this regard, LGUs must increasingly seek to diversify their revenue sources, particularly
through the institution of cost recovery measures. That is, they have to look beyond traditional
sources of revenue like the real property tax and local business taxes. Although higher local taxes
are usually met with some resistance, experience in other countries shows that citizens generally
have a greater willingness to pay fees in exchange for benefits received or services rendered.
At the same time, LGUs now have greater responsibility in providing human development
concerns with the devolution of many health and social welfare functions previously discharged
by national government agencies. To a large extent, the ability of LGUs to provide adequate
social services will be determined by the amount of resources they allocate to these sectors.
However, while increased financial support to the social service sectors is an advantage,
it is not sufficient in ensuring improvement in the quality of life of local constituents. Just as
important are effective and efficient service delivery mechanisms as well as strong accountability
mechanisms. In addition to the actual generation and utilization of revenues, the achievement of
Strategic Objective I also requires that systems and processes that will enhance the sustainability
of these activities are put in place.
To sum up, the "optimized resource support" objective is broken down into 3 result
packages: revenue generation; resource utilization; and adoption of systems and processes for
increased sustainability of revenue generation and utilization efforts.
In turn, two performance indicators are proposed for revenue generation: local revenue
effort and cost recovery in key economic enterprises or relevant service sector of the LGU.
Revenue Generation. Local revenue effort may be measured in numerous ways. Among
others, Gaffud (1997) suggests efficient collection of real property tax, ratio of real property tax
to total LGU income, ratio of local business taxes to total LGU income, and ratio of the IRA to
total LGU income.
These measures, however, share a number of common weaknesses. Most of these

indicators, if used singly, tend to favor certain types of LGUs. For instance, the ratio of local
business taxes to total LGU income would tend to rate more urbanized LGUs favorably since
these LGUs are generally able to raise more revenues from local business taxes (compared with
rural LGUs) because of the bigger share of transactions with industrial/commercial character (and,
therefore, taxable) in these LGUs.
24

Moreover, these indicators, if taken individually, provide a limited and incomplete view
of LGU revenue generation effort. On the other hand, if they are used in conjunction with one
another, the indicator system will get too complicated.
Hence, this study recommends the use of per capita local source revenue to measure local
revenue effort. In principle, revenue effort is measured by comparing actual revenues with the
revenue base. Because of the absence of more relevant data on the local revenue base, population
is used as a proxy for the same.
Cost recovery in key economic enterprises or service sector is measured as the ratio of
actual revenues from the specified economic enterprise to the actual expenditures on the said
enterprise. For cities and municipalities, the key economic enterprise considered is the public
market. Since provincial governments do not operate economic enterprises, cost recovery is
defined in terms of the operations of public hospitals given that these facilities are the most
important cost center in provincial government units.
Resource Utilization. On the other hand, the "resource utilization" result package is
measured by two performance indicators: per capita social service expenditures and the ratio of
LGU expenditures on social services to total LGU expenditures.
Actual LGU support to the attainment of human development concerns is best measured
by per capita LGU expenditures on the social sectors. However, this indicator may have some
bias in favor of LGUs which have high per capita IRA. That is, it is possible that some LGUs
have low per capita social service expenditures not for lack of commitment to the human
development goal but due to lack of resources as a result of the amount of IRA allotted to them.
In view of this fact, this study includes the LGU social service expenditure ratio as one of the
performance indicators for resource utilization so that greater LGU effort is given equal
importance. In other words, the LGU social expenditure ratio may be viewed as a measure of
effort on the part of LGUs given their capacities, while per capita social spending may be
understood as a measure of the adequacy of effort in meeting absolute needs.
Lastly, it is proposed that the result package for "adoption of systems for revenue
generation and utilization@ be measured in terms of the following performance indicators:
regularity in the conduct of the general revision of the schedule of market values and the
approval of the Annual Development Plan by the Local Sanggunian.
Strategic Objective II. Effectiveness/Efficiency in Social Service Delivery. In general,

service delivery at the local level is still perceived as a primary function of government. Despite
the devolution of services that calls for the heightened participation of the private sector and civil
society, government continues to be the main provider of services and facilities. Given this
condition, good local governance could be manifested through enhanced effectiveness and
efficiency in the delivery of social services.
It should be emphasized that while Strategic Objective I aims to ensure that adequate
financial resources flow into social service sectors, Strategic Objective II helps ensure that LGUs
use these financial resources wisely so that they are able to maximize program impact for each
peso spent.
25

In principle, effectiveness/efficiency in the delivery of social services is best measured by
outcome indicators like the human development index (HDI) itself. However, social outcomes
(like life expectancy or literacy) are the result not only of LGU actions but also of central
government actions making attribution truly problematic. This point assumes greater importance
in cases like the Philippines where social services are typically delivered along two parallel tracks
(an LGU track and a national government track) or where national government agencies and
LGUs provide complementary inputs. It should be stressed that since the primary concern in this
study is the measurement of good governance at the LGU level, it is essential that the indicators
chosen are those that pertain to LGU performance only.
Given these considerations, LGU effectiveness/efficiency in service delivery may be

appropriately gauged by using any one of the following approaches: (1) use of efficiency
measures; (2) use of measures of client satisfaction, and (2) use of effectiveness measures.
Efficiency indicators usually involve the computation of output-input efficiency ratios

where output is typically measured in terms of work load units a la Hatry et al. (1992). There are
two difficulties in implementing this approach.
As already noted, public sector output is not easy to define. Moreover, administrative
data relating to LGU output in service delivery are not uniformly available at the local level. In
the pilot tests, an attempt was made to simplify the exercise by defining output in terms of number
of beneficiaries/clients served by type of service (health, social welfare, day care centers).
It was found that not all LGUs gather and record this kind of information. For instance,
data on number of clients served per type of social service were not easily accessible in Trece
Martirez City, Davao City, Antique Province, and Davao del Norte Province. Moreover, for
LGUs that do maintain records, there is a great deal of unevenness in the coverage of
beneficiary/client information that LGUs monitor. This is particularly true for health services
which range from prenatal care, to medical attendance in child birth, to post natal care, to
immunization, to micronutrient supplementation, and the like which are at times delivered to the
same individual at the same time. Because of these difficulties, this study opted not to use
efficiency measures of LGU service delivery.
Beneficiaries Satisfaction Rate. Undoubtedly, measuring the extent of beneficiaries=

satisfaction with specified social services provided by LGUs is one of the more accurate ways to
assess the effectiveness of LGU performance in service delivery. The present study pilot tested
this approach using a questionnaire developed for the purpose (Appendix 1). Specifically,
residents (household heads) were asked about their awareness of, utilization of and satisfaction
with hospital services provided by the provincial government; disaster management and social
welfare services given to street children and abused/battered women provided by the provincial
government; health services provided by the rural health units and barangay health stations of
city/municipal governments; and services of daycare centers operated by city/municipal
governments. Residents were also asked about their satisfaction/dis-satisfaction with overall LGU
management. It should be pointed out that the cost of gathering data using attitudinal/perception
surveys is considerably higher compared with other approaches which make use of administrative
data.
26

Service Adequacy. Alternatively, Strategic Objective II may be measured by evaluating
the effectiveness of basic social services delivered. As such, it may be broken down into two
result packages. One, effectiveness in service delivery may be measured in terms of the adequacy
of services provided. Two, LGU performance in service delivery may also be gauged by the
presence of systems which allow LGUs to access increased resources through stronger linkages
with national government agencies.
On the one hand, service adequacy may be measured by the extent to which LGUs have
been able to comply with standards/benchmarks in the programming of service delivery inputs for
social services. In general, such standards may be set in terms of the ratio of the number of target
clientele (or LGU population) to the number of government personnel. In particular, this study
compared the actual population-to-doctor ratio with the national benchmark of 20,000 population
per government physician; the actual population-to-nurse ratio with the national benchmark of
20,000 per government nurse; the actual population-to-midwife ratio with the national benchmark
of 5,000 population per government midwife; and the actual number of children aged 3-5 per day
care worker with national standard of 150 children per government day care worker.
Strong linkages with national government agencies, on the other hand, can help reduce
fiscal imbalances and, in the process, can release more resources for increased local effort in social
development. National-local coordination is also needed to avoid piecemeal approaches and
minimize regional and local differences in the quality of services (e.g., education, health). Since
many social services are public goods (the benefits of which are largely non-excludable), local
governments hardly have any incentive to increase their social budgets.
Matching grants and cost-sharing schemes between various levels of government are,
thus, crucial in influencing local priorities in sectors of high national but low local priority (e.g.,
public health, environment). Sound intergovernmental mechanisms, if in place, can help enhance
the availability and accessibility of social services at the LGU level.
In practice, a strong vertical linkage with national government agencies may be indicated
by the presence of agreements for central-local cooperation in service delivery.9 These
agreements are mostly in the form of cost-sharing schemes that address the following weaknesses:
limited LGU tax base, inappropriate expenditure and tax assignments, the collapse of common
standards (e.g., in health), inefficiencies arising from interjurisdictional spillovers, economic
instability, and regional variations in net fiscal benefits.
International donors are implicitly included in this index. Note that the central
government always has to step in as guarantor and project manager of donor-funded
undertakings, even if the donor has specifically targeted an LGU as loan or grant beneficiary. This
stems from the lack of sovereign character of LGUs, making them ineligible to negotiate loans
directly with bilateral or multilateral agencies.
9
Because the measurement of this indicator is limited to a presence/absence tally (i.e., an LGU is given a score
of 1 if it has entered into any LGU-NGA arrangement and a score of 0 otherwise), it does not capture the size, diversity,
quality nor the extent of progress in collaboration. For instance, Cavite's cost share in its Comprehensive Health Care
Agreement with DOH has been declining and the question is whether it still merits a score of 1. Size and diversity is another
contentious problem: is a water supply project equivalent to a daycare center project? A good alternative would be an index
wherein local residents are presented with a list of programs and asked to indicate their priorities and see how the LGU-NGA
collaborative agreements are congruent with these priorities. But that is another story.
27

In sum, two alternative ways of delineating the result package/s for Strategic Objective
II are suggested. The first one makes use of public opinion surveys and defines Strategic
Objective II in terms of the beneficiaries' net satisfaction with specified social services delivered
by LGUs (Figure 1).
In contrast, the second one makes use of administrative data and defines Strategic
Objective II in terms of (1) the adequacy of services provided and (2) the presence of a strong
vertical linkage with national government agencies (Figure 2).
Strategic Objective III. Accountability. Following the framework on accountability

provided by the World Bank 1992 and Paul (1991), this study breaks down overall accountability
into macro-level accountability and micro-level accountability.
Macro-level accountability. There is no such thing as an invisible hand in local

governance. Institutional checks and balances are required to optimize the range of opportunities
open to local businesses, NGOs, and the LGUs themselves.
On one side of the equation is the need for restraint. LGUs must have the capacity to
enforce rules and regulations that govern both market and civil society transactions. Such rules
prevent the abuse of power, keep LGUs honest by reducing transactions costs, establish credible
controls over the LGUs= use of inputs, and hold local managers accountable for the attainment
of measurable outcomes. As such, macro-level accountability relies on formal instruments of
constraints, which are anchored in key institutions, like accounting and auditing. Disclosure
requirements add to the transparency process.
On the other side of the equation is the need for flexibility. It may be that auditing
standards are outdated and put too much restraint on discretionary authority. Or, oversight from
national agencies, such as the Commission on Audit (COA), may rely too much on rule-based
compliance at the expense of the ability to be flexible. Sometimes, innovations that lead to high-
quality service at less costs to citizens may come at the expense of COA violations.
While there is a need to reduce opportunities for corruption, dysfunctional rules that
impede the wise exercise of discretionary authority may actually backfire. A continuing challenge
is to set rules that allow LGUs to utilize a toolkit of innovative and flexible measures, but embed
their decisionmaking in processes that allow for auditing and oversight from the community and
from national agencies.
Having said this, however, it still remains that the presence of a strong external audit
system system is critical in ensuring macro-level accountability. For purposes of this study,
financial accountability is indicated by the results of the COA=s financial and compliance audit of
LGU accounts and operations.10
Initially, it was thought that the summary result of the COA audit (which indicates
whether the auditor assigned to the LGU renders a favorable, adverse qualified or no opinion as
10
The focus of the financial and compliance audit is on the validity and the propriety of transactions and fairness
of accounts presentation.
28

to the fairness of LGU accounts) may be used to reflect LGU performance relative to the external
audit. However, a closer scrutiny of the COA audit reports for the pilot LGUs revealed that there
are inconsistencies among the auditors= over-all evaluation and their significant findings and
recommendations. Thus, what one auditor would rate as fair another auditor would just as likely
grade unfavorably.
The inconsistencies refer not only to the presence/absence of documentary evidence but
also to the magnitude of exposure to Ainappropriate transactions.@ For instance, the auditor of
Hamtic, Antique rendered a favorable opinion of the financial statements of the municipality for
1996 despite the absence of a year-end trial balance and physical inventory of assets whereas the
auditor of Noveleta, Cavite rendered a qualified opinion on the fairness of the presentation of the
financial statements due to the lack of physical inventory of its properties even if the said LGU
submitted a year-end trial balance.
Similarly, the auditor of Davao Oriental rendered a qualified opinion of its financial
statements since it had disallowances amounting to P1.65 million and unliquidated cash advances
amounting to P0.9 million. On the other hand, the auditor of Antique gave an adverse opinion
of its financial statements given that its unliquidated cash advances amounted to P3.4 million and
the LGU had no disallowances. Given these considerations, this study proposes to measure audit
accountability by comparing the magnitude of current year=s disallowances with LGU total
income.
Micro-level accountability. Paul (1991) posited that micro-level accountability results

from (1) the ability and willingness of the public to exert pressure on service providers to perform
well (i.e., the use of Avoice@) and (2) the ability and willingness of the public to Aexit@ in favor of
alternative suppliers when dissatisfied with a public service.
Participatory mechanisms allow local governments to get wide consensus on local issues
and the necessary commitment to intervene quickly and flexibly. They also permit those outside
the local government to restrain its actions while making the LGU more responsive to people=s
needs and preferences. For local managers, the central challenge is finding ways to combine
technical expertise with political legitimacy, which requires making decisions with deep regard
for community concerns.
Yet, even if the LGU has the people=s interest at heart, it is unlikely to understand what
the people=s needs are in the absence of a functioning feedback mechanism. If the LGU is not
equipped to listen, it will not be responsive to the diffused interests of the community, especially
those of the minorities (urban poor, farmers, fisherfolk, indigenous cultural communities and
women) who usually do not have a strong voice to articulate their demands.
Consultative processes offer civil society opportunities to provide inputs, and to take the
burden off the LGU by involving communities in the oversight functions. True, getting feedback
tends to slow down decisionmaking, but the lack of it can be destabilizing as it decreases trust and
confidence in the local government and weakens its ability to gain broad agreements on
expenditure priorities, social development programs, and environmental management.
The extent of citizen participation in LGU affairs may be measured in two alternative
ways. One way is through the use of experiential surveys whereby residents are asked about (1)
29

their participation in NGOs and barangay affairs; and (2) their perception of NGO/barangay
influence in LGU affairs. The other way is by evaluating the extent of participation of NGO or
private sector representatives in local special bodies through the use of administrative data.
Both of these alternatives were considered in this study.
In the first instance, the indicators selected are perception measures: samples of citizens
were asked the extent to which they participated in NGOs and barangays, or the extent to which
they (through the barangays or NGOs) are able to influence local decisionmaking (Appendix 1).
NGOs are civil society structures that interface with LGUs on a diversity of issues. On
the other hand, barangays are the lowest-level governmental structures under the jurisdiction of
municipal-/city-level local governments. It is through the barangays that citizens are able to make
direct contact with their local governments. NGOs and barangays are the key links that could
ensure that LGUs arrive at accountable decisions in a transparent manner.
Citizens' participation and citizens' empowerment indices are complementary indices.

Participation alone does that guarantee political efficacy. A weak civil society, and a barangay
system quite beholden to local authorities only transform participation into co-optation. To gauge
whether barangays and NGOs act as political pressure groups, the extent of their influence over
LGU affairs must be taken into consideration.
Together, participation and empowerment would adequately portray the effectiveness of

citizen oversight. These two sets of indicators provide crucial feedback to guide government
response to the demand and complaints of its clients. In this sense, NGOs and barangays help to
hold LGUs fully accountable to the public they serve.
In the second instance, the extent of participation of civil society institutions in LGU
affairs may be measured by comparing the actual number of NGOs represented in the various local
special bodies (namely: the Local Development Council, the Local Health Board, the Local
School Board, and the Pre-qualification Bids and Awards Committee) with the number prescribed
under the Local Government Code. While this set of indicators is relatively easy to measure, it
should be emphasized that they may be misleading indicators of participation to the extent that
NGOs may have been captured by political leaders and/or government bureaucrats.
Exit mechanisms are just as important as voice mechanisms in ensuring micro-level

accountability. Exit mechanisms are those that promote a more competitive environment in
service delivery. In this study, the presence of exit mechanisms in LGU delivery of social services
is indicated by the presence of any one of the following innovative service delivery mechanisms
at the LGU level: management contract, BOT, engagement of NGO/PO in service delivery.
Defined as such, this indicator does not explicitly consider the relative significance of innovative
social service delivery mechanisms that are in place or the quality of the service involved.
To summarize, Strategic Objective III is supported by two result packages:

macroeconomic accountability and micro-level accountability. Macro-level accountability is
measured by the relative size of COA disallowances. On the other hand, micro-level
accountability is defined in terms of the presence of voice and exit mechanisms. The presence of
exit mechanisms is indicated by the use of any one of various market-oriented/innovative
mechanisms in service delivery in the LGU. On the other hand, the presence of voice
30

mechanisms is measured by two alternative indicators. The first one makes use of public opinion
surveys and refers to (1) citizens' participation in NGOs and barangays and (2) citizens'
perceptions of the empowerment of NGOs and barangays (Figure 1). The second one makes use
of administrative data and refers to the participation of NGO representative in local special
bodies (Figure 2).
4.3. Quantification and Measurement
Overall, the performance indicators that chosen are broad enough to be adaptable and
thus can be Aapplied@ in most local settings. The tradeoff is loss of specificity, since LGUs differ
markedly in terms of both their institutional capabilities and their structures. The indices may not
be able to reflect these differences although some of the indicators chosen have been defined
relative to specific functions that are unique to the relevant level of government. For instance,
the net satisfaction rate for health services is defined with reference to hospital services in the case
of provincial governments and with reference to primary health services delivered by rural health
units (RHUs) and barangany health stations (BHSs) in the case of city/municipal governments.
The indicators are straightforward and user-friendly (understandable to users). They also
readily yield to measurement. This is particularly true of the indicators presented in Figure 2.
The indicators are not intensive in their requirements for information and can be easily monitored.
For the indicators presented in Figure 1 which makes use of perception surveys, the costs
of data collection although much higher is still reasonable. Multistage sampling provides a way
to cut costs.
Before constructing the overall governance index as well as the composite indices for each
of the three Strategic Objectives, the indices of each of the performance indicators were first
modified in two ways. One, all indices were defined in such a way that higher numbers represent
better governance. Two, all indices were re-scaled such that they all range from 0 to 1. For the
revenue effort index, the cost recovery index, per capita social service expenditure index, and
social service expenditure ratio, the re-scaling was achieved by dividing the actual figures by 2
times the relevant national average. This implies that LGUs whose performance with respect to
these indicators are equal to the national average get a score of 0.5. To illustrate, local revenue
effort index is defined as:
total loc revi / popni

loc rev eff indexi = min ( 1, )
2 * natl ave per pax loc rev
where total loc revi refers to total local source revenue of LGU I;
popni refers to population of LGUi;
natl ave per pax loc rev refers to the national average per capita local source revenue.
31

On the other hand, the index for the adequacy of service inputs is defined as:
natl stnd
serv inp adeq indexi = min (1, )
(no trgt clnt i )/(act no persnl i )
where natl stnd refers to the national benchmark;

no trgt clnti refers to the actual number of target clientele in LGU i;
act no persnli refers to the actual number of relevant personnel in LGU i.
amt disallow i
COA audit indexi = 1 - ( )
tot expd i
Similarly, the COA audit index is defined as:
if amt disallowi < tot expdi and
COA audit indexi = 1
if amt disallowi > tot expdi and

where tot expdi refers to total expenditure of LGU i in the current year;
amt disallowi refers to amount of current year disallowances of LGU i.
Also, the NGO participation index is defined as:
act no NGO rep i

NGO part indexi = min ( 1, )
prescr noi
where act no NGO repi refers to actual number of NGO representative in specified local special
body of LGU i; and
prescr noi refers to prescribed number of NGO representative in specified local special
body of LGU i.
The formula for each of the indices are summarized in Appendix 3.
The overall governance quality index (GQI) constructed for this study was derived by
consolidating the composite indices for each of the 3 Strategic Objectives which in turn were
obtained by creating a composite index for each of the Result Packages. The overall governance
quality index as well as the composite indices for the Strategic Objectives and the Result Packages
were aggregated by assigning equal weights for each of their respective components. AEqual
weighting means that potential biases or errors do not unduly influence the composite index@
(Huther and Shah 1998).
32

4.4. Results of Pilot Tests
Two sets of indices were computed for the 9 pilot LGUs. The first set made use of a
combination of administrative data and information from public opinion surveys following the
framework provided in Figure 1 (Table 1). In contrast, the second set relied exclusively on
administrative data following the framework outlined in Figure 2 (Table 2).
In principle, version 1 of the indices provide a more accurate measure of the various
performance indicators since good governance is dependent on beneficiaries= satisfaction with
LGU services and their perception of how well they are able to influence LGU policies and
actions. However, the data requirements for version 2 indices are relatively more accessible and,
therefore, cheaper to collect.11
On the whole, the ranking of the governance quality index derived in this study appears
to be consistent with the ranking of the HDI. LGUs which register higher HDIs tend to perform
better, too, in terms of the overall governance index. This is particularly true at the provincial
level (Figure 3).12 The same finding holds whether one is looking at version 1 or version 2 of
the GQI. However, version 2 of the GQI tends to be higher compared with the version 1
although the ranking of LGUs remain the same (Figure 4).
At the same time, the beneficiaries= net satisfaction rate with social services (SOII1) is
largely consistent with the social service delivery effectiveness index when it is measured using
administrative data or SOII2 (i.e., in terms of service input adequacy and LGU-NGA cooperation
index). The fit is not be perfect but the relationship between the alternative performance
indicators for Strategic Objective II appears to be fairly strong (Figure 5).
In contrast, the beneficiaries= participation in NGOs/barangays and their perception of the
empowerment of NGOs/barangays do not correlate well with NGO representation in local special
bodies (Figure 6). Moreover, there is very little variability in version 2 of the participation index
compared with its counterpart in version 1. Note that version of the participation index tends to
cluster in the 0.95-1.0 range regardless of level of government. These findings lend some
credence to anecdotal evidence that the spirit of NGO participation in local special bodies has not
been upheld in many instances. In essence, it appears that version 2 of the participation index is
not able to adequately capture its quality of citizens' participation although it is able to provide
some indication of its quantity.
11
It is estimated that at least P30 million is needed for a fairly credible public opinion survey (with 400
respondent per LGU) if the governance index is to be measured for all provinces and cities. On the other hand, the cost
of the version 2 index for the same coverage is in the P1-2 million range only.
12
Note that the HDI estimates are available at the provincial level only.
33

Table 1
Governance Index, Version 1
Cavite Antique DavaoNrte 13 Martirez Davao Noveleta San Jose Hamtic Mabini
Province Province Province City City Cavite Antique Antique Davao Nrte
OVERALL GOVERNANCE INDEX -- GQI1 0.718 0.585 0.604 0.789 0.717 0.763 0.694 0.543 0.533
I. Optimized Resource Support Index -- SOI1 0.688 0.519 0.587 0.838 0.352 0.578 0.509 0.393 0.407
I.1. Revenue Generation Index 0.491 0.362 0.489 0.815 0.347 0.825 0.553 0.195 0.233
I.1.1. Local Revenue Effort Index 0.889 0.353 0.607 0.722 0.263 0.649 0.562 0.149 0.445
I.1.1. Cost Recovery Index 0.093 0.371 0.371 0.909 0.431 1.000 0.544 0.240 0.021
I.2. Resource Utilization Index 0.573 0.696 0.273 0.698 0.208 0.410 0.475 0.483 0.487
I.2.1. Social Service Expenditure Index 0.545 0.745 0.259 1.000 0.200 0.373 0.413 0.408 0.482
I.2.2. Social Service Expenciture Ratio Index 0.601 0.646 0.286 0.396 0.216 0.447 0.536 0.559 0.492
I.3. Sustainable Resource Generation/Utilization Index 1.000 0.500 1.000 1.000 0.500 0.500 0.500 0.500 0.500
I.3.1. Regularity of conduct of general revision index 1.000 0.000 1.000 1.000 0.000
I.3.2. Presence of Annual Development Plan 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000
II. Effectiveness/Efficiency in Social Service Delivery Index -- SOII1 0.595 0.315 0.565 0.880 0.920 0.890 0.645 0.570 0.535
II.1. Beneficiaries' Net Satisfaction Rate with Specified Social Service 0.595 0.315 0.565 0.880 0.920 0.890 0.645 0.570 0.535
II.1.1. Net Satisfaction Rate with Hospital Service 0.400 -0.030 0.490
II.1.2. Net Satisfaction Rate with Disaster Management/Other Social Welfare Service 0.790 0.660 0.640
II.1.3. Net Satisfaction Rate with RHU/BHS 0.850 0.960 0.820 0.640 0.330 0.570
II.1.4. Net Satisfaction Rate with Daycare Center 0.910 0.880 0.960 0.650 0.810 0.500
III. Overall Accountability Index -- SOIII1 0.873 0.921 0.660 0.650 0.879 0.820 0.926 0.666 0.659
III.1. Macro-level Accountability Index 1.000 1.000 1.000 0.991 0.963 1.000 1.000 1.000 0.991
III.2. Micro-level Accountability Index 0.745 0.841 0.321 0.310 0.794 0.640 0.853 0.331 0.326
III.2.1. Voice Index 0.490 0.683 0.643 0.620 0.588 0.280 0.705 0.663 0.653
III.2.1.a. Citizens's Participation Index 0.490 0.665 0.650 0.620 0.345 0.280 0.630 0.700 0.700
III.2.1.a.i. Citizens' Participation Rate in NGOs 0.490 0.420 0.520 0.620 0.120 0.280 0.390 0.450 0.620
III.2.1.b.ii. Citizens' Participation Rate in Barangays 0.490 0.910 0.780 0.620 0.570 0.280 0.870 0.950 0.780
III.2.1.b. Citizens' Empowerment Index 0.490 0.700 0.635 0.620 0.830 0.280 0.780 0.625 0.605
III.2.1.a.i. Citizens' Perception of Empowerment of NGOs 0.490 0.590 0.660 0.620 0.830 0.280 0.710 0.480 0.650
III.2.1.b.ii. Citizens' Perception of Empowerment of Barangays 0.490 0.810 0.610 0.620 0.830 0.280 0.850 0.770 0.560
III.2.2. Exit Index 1.000 1.000 0.000 0.000 1.000 1.000 1.000 0.000 0.000
34

Table 2
II.1. Adequacy of Service Inputs Index 0.566 1.000 0.860 1.000 0.490 0.772 0.728 0.887 0.725
II.1.1. Population to Doctor Ratio 0.350 1.000 0.719 1.000 0.327 0.694 0.456 0.548 0.653
II.1.2. Population to Nurse Ratio 0.782 1.000 1.000 1.000 0.693 0.694 0.456 1.000 0.653
II.1.3. Population to Midwife Ratio 1.000 0.284 1.000 1.000 1.000 0.980
II.1.4. Children Aged 3-5 to Daycare Worker Ratio 1.000 0.658 0.701 1.000 1.000 0.612
II.2. LGU-NGA Cooperation Index 1.000 0.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000
III.2.1. Voice Index 1.000 0.970 1.000 0.950 1.000 0.920 0.960 1.000 0.970
III.2.1.a. NGO representation in Local Development Council 1.000 0.880 1.000 0.800 1.000 0.680 0.840 1.000 0.880
III.2.1.b. NGO representation in Local Health Board 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000
III.2.1.c. NGO representation in Local School Board 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000
III.2.1.d. NGO representation in PBAC 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000
III.2.2. Exit Index 1.000 1.000 0.000 0.000 1.000 1.000 1.000 0.000 0.000
35

Table 2
II.1. Adequacy of Service Inputs Index 0.566 1.000 0.860 1.000 0.490 0.772 0.728 0.887 0.725
II.1.1. Population to Doctor Ratio 0.350 1.000 0.719 1.000 0.327 0.694 0.456 0.548 0.653
II.1.2. Population to Nurse Ratio 0.782 1.000 1.000 1.000 0.693 0.694 0.456 1.000 0.653
II.1.3. Population to Midwife Ratio 1.000 0.284 1.000 1.000 1.000 0.980
II.1.4. Children Aged 3-5 to Daycare Worker Ratio 1.000 0.658 0.701 1.000 1.000 0.612
II.2. LGU-NGA Cooperation Index 1.000 0.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000
III.2.1. Voice Index 1.000 0.970 1.000 0.950 1.000 0.920 0.960 1.000 0.970
III.2.1.a. NGO representation in Local Development Council 1.000 0.880 1.000 0.800 1.000 0.680 0.840 1.000 0.880
III.2.1.b. NGO representation in Local Health Board 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000
III.2.1.c. NGO representation in Local School Board 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000
III.2.1.d. NGO representation in PBAC 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000
III.2.2. Exit Index 1.000 1.000 0.000 0.000 1.000 1.000 1.000 0.000 0.000
36

FIGURE 3
GOVERNANCE QUALITY INDEX AND HDI
0.900 0.9
0.800 0.8
0.700 CAVITE 0.7 CAVITE
0.600 0.6
DAVAO DAVAO
0.500 0.5
0.400 ANTIQUE 0.4 ANTIQUE
0.300 0.3
HDI GQI1 HDI GQI2
FIGURE 4
COMPARISON OF GQI1 AND GQI2
0.85 0.9 0.9

0.8 0.85 0.85
NOVELETA TRECE MARTIREZ
0.75 CAVITE 0.8 0.8
0.75 0.75
0.7
0.7 0.7
0.65 DAVAO
0.65 SAN JOSE 0.65 DAVAO CITY
0.6 0.6 HAMTIC 0.6
0.55 0.55 0.55
ANTIQUE
0.5 0.5 MABINI 0.5
GQI1 GQI2 GQI1 GQI2 GQI1 GQI2
PLGUs MLGUs CLGUs
37

FIGURE 5
COMPARISON OF SOII1 AND SOII2
1.2 1
1.1
1 0.9 TRECE MARTIREZ
DAVAO
NOVELETA
0.8 0.8 0.9
0.6 CAVITE 0.7 SAN JOSE
0.7 DAVAO CITY
0.4 0.6 HAMTIC
ANTIQUE
0.2 0.5 MABINI 0.5
SOII1 SOII2 SOII1 SOII2 SOII1 SOII2
PLGUs MLGUs CLGUs
FIGURE 6
COMPARISON OF PART I1 AND PARTI2
1 1.2
1.1 0.9 1.1
0.8 SAN JOSE
0.9 1
0.7
0.9
0.6 HAMTIC
0.7 ANTIQUE MABINI 0.8 TRECE MARTIREZ
0.5
0.4 0.7
0.5 DAVAO
0.3 NOVELETA 0.6
0.3 CAVITE 0.2 0.5 DAVAO CITY
PART1 PART2 PART1 PART2 PART1 PART2
PLGUs MLGUs CLGUs
38

5. INSTITUTIONALIZATION ISSUES
Indicators of good governance serve as an important yardstick in evaluating the

performance of governments, in general, and LGUs, in particular, as they pursue the goals of
sustainable human development. They form part of the development framework for charting the
progress of the government's human development efforts at the local level, taking into
consideration the limitations facing LGUs as well as the opportunities available to them.
Through these indicators, LGU performance can be reviewed and compared with one
another in any given time period to identify both problem areas and best practice. The
performance measures may also be compared with performance targets or standards. At the same
time, the performance of a specific LGU or group of LGUs may likewise be compared from
period to period to track progress and, possibly, establish trends. Implicit in this statement is the
need to have periodic measurement of progress towards the attainment of explicit objectives and
goals.
The indicators of good governance proposed in this study can be used in a variety of
ways. In very broad terms, indicators of good governance may be used to clarify LGU goals and
objectives. The measurement of these indicators may focus greater attention in specifying the
critical components of good governance (Cook et al. 1993). They can be used to guide the local
budget process, to improve service delivery (either in terms of modes of delivery or in terms of
functions), to enhance accountability by easing access to information on the part of local
communities, to "introduce the discipline of relevant benchmarking," and to improve the morale
of LGU officials and personnel.
LGU governance indicators will be helpful to LGU officials themselves to the extent that
the indicators can be used to call attention to potential implementation problems as well as the
need for new policy directions. On the other hand, these indicators will be valuable to the national
government agencies in providing information that will enable them to better target their technical
assistance activities in terms of both content and target clientele.13 More importantly,
performance indicators will be useful to civil society by providing information that may better
guide collective choice and action.
There is no doubt, therefore, that there is a need to measure the governance index on a
periodic basis. In the regional and national consultations conducted in the course of this study,
there was a consensus that the governance quality index should be measured regularly, possibly
once every three years. Being able to gauge the performance of the LGU during the term of
incumbent officials (as differentiated from previous officials) appears to be a major concern.
Given this perspective, most of the participants in the consultations agreed that the best time to
measure the governance index is at the middle of each term of LGU officials.
The next question is who should take on the task of measuring the governance quality
index? This is a sensitive matter that hinges on several factors. First, the chosen institution
should be credible to the various stakeholders: LGU officials, central government bureaucrats,
NGOs/POs, and local constituents. In this regard, it is important to guard against the rating
institution introducing some systematic bias in the measurement process. Second, the designated
institution should have the capability to undertake the measurement of the index. In this case,
local presence would be a major component of capability.
39

The likely candidate institutions include the League of Provinces/Cities, oversight national
government agencies, a confederation of NGOs, or consortium of academic institutions. The
League of LGUs has the advantage of being broad-based in the sense that they have local
chapters. However, the Leagues, at this point in time, are not adequately staffed to engage in an
exercise of this nature. Moreover, the Leagues can easily be accused, fairly or unfairly, of being
partisan.
The Department of Interior and Local Government (DILG), the National Economic and
Development Authority (NEDA) or the Commission on Audit (COA) are possible institutional
homes for the measurement of the governance quality index. However, LGUs may not take
kindly to having any national government agency rate their performance since such arrangement
may be perceived as running counter to the spirit of greater local autonomy. Moreover, these
institutions may be seen by some of the stakeholders as either being too rules-oriented or under-
staffed at the regional level to be credible in undertaking such an innovative exercise.
Local NGOs and local academic institutions appear to have the advantage of not only
being credible but also of having enough local presence to make the effort less costly. Between
these two groups, the latter has the additional advantage of possessing some of the technical
preparation and discipline required for this activity. However, the former has the advantage of
having the missionary zeal and commitment that may be necessary in making the undertaking a
success.
In the final analysis, a four-cornered collaborative agreement involving key national

government agencies, the Leagues of LGUs, NGOs, and local academic institutions may be the
most appropriate institutional arrangement for the measurement of the governance quality index.
Such an arrangement will allow these institutions to capitalize on each other's strengths and
compensate for each other's weaknesses.
6. SUGGESTED FUTURE REFINEMENTS
The following suggestions have been raised for consideration in future efforts to refine the
governance quality index as it is defined in the present study.13
* Inclusion of some measure of the quality of the electoral process/participation at the local
level in the governance quality index.
* Introduce output indicators which may be available from in the MBN indicator system
(like the number of fully immunized children, number of pregnant women given tetanus
toxoid vaccine, number of deliveries attended by medical personnel, number of
13
These suggestions were generated when the preliminary output of this study was presented in four
seminars/workshops attended by HDN members, representatives from key national government agencies, representatives from
the Leagues of LGUs, and members of the Regional Development Councils in Region VI and XI.
40

moderately/severely malnourished children, and number of children aged 3-5 attending day
care centers) in lieu of the service input indicators that are now part of SOII214
* Review of the specific social services that LGUs deliver on a regular basis so that the
indicators be defined in terms of the same.
* Inclusion of indicators of LGU performance in the conduct of its regulatory functions as

well as in the delivery of services other than social services (like agricultural services, and
infrastructure services).
* Give more weight to SOII in the computation of the overall governance quality index.
* Revisit the primary reason for the measurement of the governance quality index. It was
noted that the governance quality index may take different forms depending on the end-
use that it is meant to address. For instance, if the index is intended principally for HDN
advocacy then the indicators should focus on the delivery of priority human development
concerns. In contrast, if it is meant as part of the development administration toolkit then
it should encompass all LGU functions including local financial administration, local
development planning, organization and management, local legislation, local service
delivery and regulatory functions.
14
If, indeed, these indicators are uniformly measurable across all LGUs, then these will yield a significant
improvement in the measurement of the governance quality index. The problem with most MBN indicators stem from the
fact that they are measured with reference to a subset of barangays in the municipality (as opposed to all barangays) raising
doubts as to their representativeness.
41

REFERENCES
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Cook, Thomas, Jerry VanSant, Leslie Stewart, and Jamie Adrian. "Performance Measurements:
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Gaffud, Romualdo. "A Concept Paper for the Formulation of Performance Indicators to Monitor
and Evaluate the Pursuit of Sustained Local Autonomy." Prepared for the NEDA-DAP
Project on the Formulation of Performance Indicators and Standards for Development
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Hatry, Harry P., et al. "Measuring Local Government Efficiency: A Preliminary Examination.
"How Effective Are Your Community Services: Procedures for Measuring their Quality.
The Urban Institute, 1992.
Human Development Network/UNDP. Philippine Human Development Report 1997. Manila:

UNDP, 1997.
Huther, Jeff and Answar Shah. AApplying a Simple Measure of Good Governance to the Debate
on Fiscal Decentralization.@ Policy Research Working Paper 1894. Washington, D.C.:
World Bank, 1998.
Jurado, Elsa P. "Indicators of Political Opportunity and Political Welfare." Measuring Philippine
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Landell-Mills, Pierre and Ismail Serageldin. AGovernance and the External Factor.@ In
Proceedings of the World Bank Annual Conference on Development Economics 1991.
Washington, D.C.: World Bank, 1992.
Mangahas, Mahar (ed.). "The Measurement of Philippine National Welfare." Measuring

Philippine Development: Report of the Social Indicators Project. Development Academy
of the Philippines, 1976.
Oates, Wallace. Fiscal Federalism. New York: Harcourt Brace Jovanovich, 1972.
Osborne, David and Ted Gaebler. Reinventing Government. How the Entrepreneurial Spirit is
Transforming the Public Sector. New York: Addison-Wesley Publishing Co., Inc., 1992.
Oslon, Mancur. "The Principles of Fiscal Equivalence: The Division of Responsibility Among
Different Level of Government." American Economic Review 59(2):479-487, 1969.
42

Paderanga, Cayetano, Jr. "Building Bureaucratic Capability." Paper prepared for the Workshop
on Building Capacity for Sound Development Management--Public Sector at the Asian
Development Bank, January 16. 1996.
Paqueo, Vicente. "Social Indicators for Health and Nutrition." Measuring Philippine
Development: Report of the Social Indicators Project. Development Academy of the
Philippines, 1976.
Paul, Samuel. AStrengthening of Public Service Accountability: A Conceptual Framework.@

World Bank Discussion Paper 136. Washington, D.C.:, World Bank, 1991.
Reyes, Celia M. and Isabelita Z. Alba. "Assessment of Community-Based Systems Monitoring

Household Welfare." Presented at the First Technical Workshop of the Micro Impacts of
Macroeconomic Adjustment Policies (MIMAP) Project Phase III in Ternate, Cavite by
the Philippine Institute for Development Studies, February 17-18, 1994.
Root, Hilton L. Managing Development through Institution Building. Economics and

Development Resource Center, Asian Development Bank. Occasional Papers No. 12,
October 1995.
Shah, Anwar. The Reform of Intergovernmental Fiscal Relations in Developing and Emerging
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United Nations Development Programme. Human Development Report. New York, Oxford
University Press, 1996.
World Bank. Governance and Development. The World Bank: Washington, D.C., 1992.
FN: revisedgoodtxt.doc
02-18-99/rgm
46
47
Appendix 1. Questtionnaire/Survey Instruments
BARANGAY_______________________
BARANGAY_______________________
PROVINCE/CITY/MUNICIPALITY:_______________________ PROVINCE/CITY/MUNICIPALITY:_______________________
Date:__________________ Date:__________________
ENGLISH TAGALOG
I. SATISFACTION WITH OVER-ALL MANAGEMENT I. SATISFACTION WITH OVER-ALL MANAGEMENT
1. Are you satisfied with the improvements for the community 1. Nasiyahan ka ba sa mga pagbabagong ginawa ni GOB/
undertaken by the present (GOV/MAYOR's) administration? MAYOR para sa buong probinsiya/bayan?
a. GOVERNOR? a. GOBERNOR
b. MAYOR b. MAYOR
II. AWARENESS/UTILIZATION/SATISFACTION WITH SERVICES II. AWARENESS/UTILIZATION/SATISFACTION WITH SERVICES
FOR CITY/MUNICIPALITY: FOR CITY/MUNICIPALITY:
2. Are you aware that the CITY/MUN is operating a health 2. Mayroon bang health center/barangay health unit
center/RHU/BHS? sa inyong lugar?
3. Have you or any member of your family availed of 3. Ikaw ba o' isa sa mga kasama mo sa bahay ay naka-
the services of the health center/RHU/BHS? pagpagamot na sa health center/barangay health unit?
4. If the answer in #3 is YES, Are you satisfied with the 4. Kung ang sagot sa #3 ay OO, nasiyahan ka ba sa
service you received? serbisyo ng health center/barangay health unit?
5. Are you aware that the CITY/MUN is providing 5. May day care center o' feeding center sa inyong
social welfare services (day care centers/feeding centers)? lugar?
6. Have you or any member of your family availed of 6. Ikaw ba o' isa sa mga kasama mo sa bahay ay nakapasok
the said social welfare services? sa day care center o' nakapunta sa feeding center?
service you received? serbisyo ng day care center/feeding center?
8. Are you aware that the CITY/MUN is providing 8. Mayroon ba dito sa CITY/MUN na mga tulong na pang
agricultural extension services? (farm technician's agrikultura tulad ng indyekson para sa hayop/tulong ng
assistance, livestock vaccination) teknisyan.
9. Have you or any member of your family availed of 9. Ikaw ba o' isa sa mga kasama mo sa bahay ay
the said agricultural services? nakatanggap na ng tulong katulad nito?
service you received? tulong na iyong natanggap?
FOR PROVINCE: FOR PROVINCE:

11. Are you aware that the PROV is operating a hospital? 11. Mayroon bang hospital na pampubliko dito sa Probinsiya?
12. Have you or any member of your family availed of 12. Ikaw ba o' isan sa mga kasama mo sa bahay ay
its services? nakapagpagamot dito?
service you received? serbisyo ng hospital?
14. Are you aware that the PROV is providing social 14. Mayroon bang social services na ibinibigay ang pamahalann ng
welfare services? (disaster control: aid to typhoon/flood Probinsiya tulad ng disaster relief para sa mga nasalanta ng bagyo/
victims/street children/abused women/battered women) bahay para sa mga bata sa lansangan at inabusong kababaihan?
these services? nakatanggap ng ganitong uri ng tulong?
service you received? tulong ng aiyong natanggap?
17. Are you aware that the PROV is providing agricultural 17. Mayroon ba dito sa CITY/MUN na mga tulong na
services? (demo farm/research breeding stations). pang-agrikultura katulad ng demo farm, farm breeding
station?
the said agricultural services? nakatanggap na ng tulong katulad nito?
service you received? tulong na iyong natanggap?
III. EMPOWERMENT III. EMPOWERMENT
FOR PROVINCE/CITY/MUNICIPALITY: 48 FOR PROVINCE/CITY/MUNICIPALITY:

49
PROVINCE/CITY/MUNICIPALITY:_______________________ PROVINCE/CITY/MUNICIPALITY:_______________________
Distributed by Prof Shafaat
Date:__________________ Yar Khan for CSS Aspirants Date:__________________
ILONGO DAVAO
I. SATISFACTION WITH OVER-ALL MANAGEMENT I. SATISFACTION WITH OVER-ALL MANAGEMENT
1. Nakontento ka man sa mga pagbag-o nga gihimo ni Gob/Mayor 1. Nalipay ka ba sa mga bag-ong gihimo ni Gobernor/Mayor para
para sa bug-os nga probinsiya/banwa? sa tibuok probinsiyal lungsod?
a. GOBERNOR a. GOBERNOR
b. MAYOR b. MAYOR
II. AWARENESS/UTILIZATION/SATISFACTION WITH SERVICES II. AWARENESS/UTILIZATION/SATISFACTION WITH SERVICES
FOR CITY/MUNICIPALITY: FOR CITY/MUNICIPALITY:
2. May-aral bala kamo nga health center/barangay health unit 2. Nakahibalo ba mo nga naay health center/barangay health unit
sa inyo nga lugar? sa inyong lugar?
3. Ikaw bala o isa sa mga upod mo sa panimalay nakaagi ng 3. Ikaw ba o usa sa imong mga kapamilya o kauban sa balay
pabulong sa amo nga health center/barangay health unit? nakapatambal na sa health center/barangay health unit?
4. Kon ang sabat sa #3 ay HU-O, nalipay o nakuntento ka man 4. Kung ang tubag OO, nakontento o nalipay ba mo sa ilang
bala sa ila serbisyo? serbisyo?
5. May day care center balao feeding center sa inyong nga lugar? 5. Nakahibalo ba mo nga naay day care center of feeding center
sa inyong lugar?
6. Ikaw bala o isa sa mga upod mo sa panimalay nakasulod 6. Ikaw ba o usa sa imong mga kapamilya o kauban sa balay
na sa day care center o nakakadto sa feeding center? nakapahimulos sa maong serbisyo?
7. Kon ang sabat sa #6 ay HU-O, nalipya o nakuntento ka man 7. Kung ang tuba OO, nakontento o nalipay ba mo sa ilang
bala sa serbisyo sang inyo day care center/feeding? serbisyo?
8. May ara bala din sa inyo siyudad/banwa sang bulig pang- 8. Nakahibalo ba mo nga ang inyong lungsod o munisipyo
agrikultura tulad sang indyeksiyon para sa mga hayop/ nagahatag ng tabang sa pang-uma o agricultural extension
bulig sang teknisyan? services sama sa farm technician's assistance ng injection para
sa mga hayop?
9. Ikaw bala o isa sa mga upod mo sa panimalay nakabaton 9. Ikaw ba o usa sa imong mga kapamilya o kauban sa balay
na sang sini nga bulig? nakapahimulos sa maong tabang pang-uma?
10. Kon ang sabat sa #9 ay HU-O, nalipay o nakuntento ka man 10. Kung ang tubag OO, nalipya o nakuntento ba mo sa ilang
bala sa bulig nga mo nabaton? serbisyo?
FOR PROVINCE: FOR PROVINCE:

11. May-ara bala nga hospital pampubliko diri sa probinsya? 11. Nakahibalo ba mo nga naay hospital sa inyong probinsiya?
12. Ikaw bala o isa sa mga upod mo sa panimalay nakaagi na 12. Ikaw ba o usa sa imong mga kapmilya o kauban sa balay
pabulong didto? nakapagtamabal na maong hospital?
13. Kon ang sabat sa #12 ay HU-O, nalipay o nakuntento ka man 13. Kung ang tubag OO, nakontento o nalipay ba mo sa ilang
bala sa ila serbisyo? serbisyo?
14. May ara bala social services nga ginhatag ang gobyerno sang 14. Nakahibalo ba mo nga ang inyong probinsiya na gahatag ng
Probinsya katulad sang bulig para sa mga nahalitan sang bagyo/ social welfare services sama sa tabang para sa mga biktima ng
balay para sa mga palabuy-laboy ukon wala sang maistaran bagyo o baha, sa mga batang kalsad, mga naabusong babae, etc.?
nga kabataan ukon para sa mga inabuso nga kababaihan?
15. Ikaw bala o isa sa mga upod mo sa panimalay nakabaton na sa 15. Ikaw ba o isa sa imong mga kapamilya o kauban sa balay
amo nga klase sang balig? nakapahimulas na sa maong mga serbisyo?
16. Kon ang sabat #15 ay HU-O, nalipay on nakuntento ka man bala 16. Kung ang tubag OO, nakontento ba mo sa ilang serbisyo?
sa bulig nga imo nabaton?
17. May-ara bala diri sa inyo siyudad/banwa sang mga bulig 17. Nakahibalo ba mo nga ang inyong probinsya nagahatag ng
pang-agrikulta katulad sang demo farm, farm breeding station? agricultural services o tabang pang-uma sama sa pag-demo
sa umahan o research breeding stations?
18. Ikaw bala o isa sa mga upod mo sa panimalay, nakabaton 18. Ikaw ba o usa sa imong mga kapamilya nakapahimulos sa
na sang amo sini nga klase sang bulig? maong agricultural services?
19. Kon ang sabat#18 ay HU-O, nalipay o nakuntento ka man 19. Kung ang tubag OO, nakontento ba mo sa ilang serbisyo?
bala sa imo nabaton nga bulig?
III. EMPOWERMENT III. EMPOWERMENT
FOR PROVINCE/CITY/MUNICIPALITY: FOR PROVINCE/CITY/MUNICIPALITY:
50
Appendix 2. Preliminary List of Performance Indicators
Development Goal
Improved LGU
Performance

I.1 REVENUE GENERATION II.1 OUTPUTS AND INPUT- III.1 OPERATING AND FINAN-
I.1.1 Tax Effort OUTPUT RATIOS FOR CIAL ACCOUNTABILITY
I.1.2 Growth in Tax Collection BASIC SERVICES SYSTEMS DEVELOPED
Rates in Relation to Growth II.1.1 Number of Target Clientele AND IMPLEMENTED
in Tax Base Per Facility III.1.1 Accounting System Properly
I.1.3 Ratio of Internally Generated II.1.1.1 Health Functioning
Revenue to Total LGU Population/RHU or BHS III.1.2 Integrity of External Audit
Income Population/Hospital Beds System Upheld
I.1.4 Ratio of Local Taxes to Total II.1.1.2 Social Welfare III.1.3 Conduct of Public Hearings
LGU Income Children Aged 3-5/Dare Before Passage of Local
I.1.5 Collection Efficiency of RPT Care Centers Budget Ordinance
I.1.6 Ratio of RPT to Total Local III.1.4 Ratio of NGO Member to
Revenue II.1.2 Number of Target Clientele Required Number of
I.1.7 Ratio of Business Taxes to per Technical Personnel Member in PBAC
Total Local Revenue II.1.2.1 Health III.1.5 Frequency of Meetings of
I.1.8 Ratio of Non-Tax Revenues Population/Doctor PBAC
to Total LGU Income Population/Nurse
I.1.9 Ratio of IRA to Total LGU Population/Midwife III.2 POLICY AND LEGAL
Income II.1.2.2 Social Welfare FRAMEWORK FOR
I.1.10 Ratio of Other National Population/DSWD Worker INNOVATIVE
Allotments (e.g. Share in Children Aged 3-5/Day RESOURCE MANAGE-
National Wealth, Tobacco Care Worker MENT AND SERVICES
Tax, and PAGCOR II.1.2.3 Agriculture DELIVERY DEFINED
Revenues to Total LGU Population/Agricultural AND ENFORCED
Income) Technician III.2.1 Adoption of Systems for
I.1.11 Per Capita Local Source Inter-Local Government
Revenue II.1.3 Beneficiaries/Technical Collaboration
I.1.12 Ratio of Local Source Personnel III.2.2 Adoption of Systems for
Revenue to Total LGU II.1.3.1 Health LGU-NGA Cooperation
Expenditure Clients Served/Doctor in Service Delivery
I.1.13 Regularity in the conduct of Clients Served/Nurse
51
the General Revision of Clients Served/Midwife III.3 MICRO-LEVEL

Schedule of Market Values II.1.3.2 Social Welfare ACCOUNTABILITY AND
Client Served/DSWD TRANSPARENCY
I.2 REVENUE UTILIZATION Technical Personnel MEASURES IN PLACE
I.2.1 Ratio of Total Social Expen- Enrollees/Day Care III.3.1 Citizen=s Perception of LGU
ditures to Total LGU Worker Management (net Satisfac-
Expenditures tion Rate)
I.2.2 Ratio of Human Priority

II.2 AWARENESS, UTILIZA- III.3.2 Citizen=s Participation Rate
Expenditures to Total LGU
TION, AND LEVEL OF a) Participation in NGOs
Expenditures
SATISFACTION OF b) Participation in Barangay
I.2.3 Ratio of Social Expenditure
BENEFICIARIES WITH Affairs
to total LGU Income
SERVICE DELIVERED III.3.3 Citizen=s Empowerment Rate
I.2.4 Ratio of Human Priority
(From the survey) a) Perception of NGO
Expenditure to Total LGU
II.2.1 Awareness of the: (% to Total) Influence on LGU Affairs
Income
Health Centers/RHUs b) Perception of Barangay
I.2.5 Per Capita LGU Social
Hospital Influence on LGU Affairs
Expenditure
Day Care
I.2.6 Per Capita LGU Human
Other Welfare Services
Priority Expenditure
Agriculture/Fishery Related .
I.2.7 Per Capita Total LGU
Services
Expenditure
II.2.2 Availment of the following
I.2.8 Updated Annual Development
Services/Facilities (% to
Plan Approved by
Total)
Sanggunian
Health Centers/RHUs
I.2.9 Improved Budget System in
Hospital
Place
Day Care
I.3 REVENUE AND SUPPORT
Agriculture/Fishery Related
SYSTEM DIVERSIFI-
Services
CATION
II.2.3 Satisfaction of the following
I.3.1 Cost Recovery Measures:
Services/Facilities (% Net
a) Hospital Revenue to
Satisfied)
Hospital Budget
Health Centers/RHUs
b) Revenue from Public
Hospital
Market to Public Enter-
Day Care
prise Expenditures
c) Revenue from Waterworks
Agriculture/Fishery Related
to Public Enterprise
Services
Expenditure
d) Revenue from Public
II.3 USE OF NON-TRADITIO
Cemetery to Public Enter-
NAL MODES OF SERVI-
prise Revenue
CES DELIVERY LIKE
e) User Charges Collected by
FRANCHISING AND
LGUs Compared with
OTHER CONTRACTING
Rates Charged by Compa-
ARRANGEMENTS
rable Private Enterprise
f) Revenue from Slaughter-
II.4 EXTENT OF PARTICIPA-
house to Public Enterprise
TION OF CIVIL SOCIETY
52
Expenditure INSTITUTIONS IN
g) Revenue from Public Utili- SERVICE DELIVERY
ties to Public Enterprise II.4.1 Number of NGOs, POs, and
Expenditure Business Firms Engaged by
I.3.2 Community-Based Service an LGU in Service Delivery
Support System such as: II.4.2 Number of NGOs, POs, and
a) Health Insurance Business Firms Engaged in
b) Provident Fund Monitoring and Evaluation
c) Cooperative of LGU Basic Services
I.3.3 Use of Market-Oriented II.5 EXTENT OF PARTICIPA-

Mechanisms like BOT, Fran- TION OF CIVIL SOCIETY
chising, Service Contract INSTITUTIONS IN LOCAL
Arrangements, Vouchers, and SPECIAL BODIES
Bond Floatations II.5.1 Proportion of NGO Member-
a) BOT ship to Total Composition
b) Bond Floatation of Local Development
c) Privatization/Management Councils (LDCs)
Contract II.5.2 Frequency of Meeting of
d) Bank Loan Local Development Council
e) Others II.5.3 Ratio of NGO Member to
Required Number of
Member in Local School
Board (LSB)
II.5.4 Frequency of Meetings of LSB
II.5.5 Ratio of NGO Member to
Required Number of
Member in Local Health
Board (LHB)
II.5.6 Frequency of Meetings of
LHB
53
Revised as 10 August 1998
Appendix 3. Formulae Used to Compute the Different Indices
1. Local Revenue Effort
total loc revi / popni

Loc rev eff indexi = min ( 1, )
2 * natl ave per pax loc rev
where total loc revi refers to total local source revenue of LGU i;
popni refers to population of LGU i;
natl ave per pax loc rev refers to the national average per capita local source revenue.
2. Cost Recovery Index
act ent revi /act ent expd i

Cost reco indexi = min ( 1, )
2 * natl ave cost reco
where act ent revi refers to actual revenue from specified enterprise/activity in LGU i;
act ent expdi refers to actual expenditure in specified enterprise/activity in LGU i;
natl ave cost reco refers to national average cost recovery ratio in specified economic
enterprise.
3. Per Capita Social Service Expenditure Index
act socserv expd i / popni

Soc serv expd indexi = min ( 1, )
2 * natlavesocservexpd
where act soc serv expdi refers to actual social service expenditure of LGU i; and,
natl ave soc serv expenditure refers to the national average per capital social service
expenditure.
4. Social Service Expenditure Ratio
act soc serv expd i /tot LGU expd i

Soc serv expd ratioi = min ( 1, )
2 * natl ave soc serv expd ratio
where tot LGU expdi refers to total expenditure of LGU i.
54
5. General Revision in Schedule of Market Values Index
Gen rev indexi = 1, if general revision of schedule of market values was approved by
Sanggunian in 1996;
= 0, otherwise.
6. Annual Development Plan Index
Ann dev pln indexi = 1, if Annual Development Plan for 1996 was approved by Sanggunian;
= 0, otherwise.
7. Net Satisfaction Rate with Specified Services Provided
Net satisfaction rate = (1/N) (ns - nns) * 100
where ns is the number of respondents who are satisfied with specified social service
delivered;
nns is the number of respondents who are not satisfied with specified social service
delivered; and
N is the total number of respondents.
8. Macro-accountability Index
amt disallow i
COA audit indexi = 1 - ( )
tot expd i
if amt disallowi < tot expdi and
COA audit indexi = 1
if amt disallowi > tot expdi and

where tot expdi refers to total expenditure of LGU i;
amt disallowi refers to amount of current year disallowances of LGU i.
9. Index of Citizens' Participation in NGOs
n pNGO
Citi part rate ∈ NGO =
N
where npNGO refers to the number of respondents who are members of NGOs; and
N refers to total number of respondents.
55
10. Index of Citizens' Participation in Barangay
n pbrgy
Citi part rate ∈ brgy =
N
where npbrgy refers to the number of respondents who are participating in barangay affairs.
11. Index of Citizens' Perception of NGO Empowerment
n
iNGO
Index of NGO influence on LGU affairs =

N
where niNGO is the number of respondents who perceived NGOs are able to influence LGU
policies and actions.
12. Index of Citizens' Perception of Barangay Empowerment
nibrgy
Index of barangay influence =
N
where nibrgy is the number of respondents who perceived barangays are able to influence LGU
policies and actions.
13. Exit Index
Exit index = 1, if LGU is engaged in any one of the various innovative service delivery schemes
like management contract, BOT, etc.
= 0, otherwise.
14. Service Inputs Adequacy Index
natl stnd
serv inp adeq indexi = min (1, )
(no trgt clnt i )/(act no persnl i )
where natl stnd refers to the national benchmark;

no trgt clnti refers to the number of target clientele in LGU i;
act no persnli refers to the actual number of relevant personnel in LGU i.
56
15. Index of Vertical Linkage with NGA
LGU-NGA cooperation index = 1, if LGU has existing cost-sharing agreement/s with

national government agencies; and
0, otherwise
16. Index of NGO Participation in Local Special Bodies
act no NGO rep i

NGO part indexi = min ( 1, )
prescr noi
where act no NGO repi refers to actual number of NGO representative in specified local special
body of LGU i;
prescr noi refers to prescribed number of NGO representative in specified local special
body of LGU i.
57
Appendix 4a
HIGHLIGHTS OF THE
NATIONAL WORKSHOP ON GOVERNANCE INDICATORS
Carlos P Romulo Hall, NEDA sa Makati
30 October 1998
OBJECTIVES
The objectives of the national workshop were:
• To elicit comments/recommendations regarding the proposed governance indicator system;

and
• To generate a consensus on the specific action points for government agencies and other
sectors to institutionalize the good govemance indicator system.
PLENARY I
Clarificatory questions on the objectives and methodologies of the study were taken up in the
plenary.
1. On the query as to what services were included in the survey, Dr. Manasan informed the body
that the questionnaire contained specific questions for the services that were identified as
primary responsibilities of LGUs.
2. It was suggested that the alternative delivery system be subsumed under Strategic Objective
2, to fall under enhancement of the delivery of basic services, rather than in Strategic
Objective 3.
In response, Dr. Manasan explained that the study group vacillated on whether the study
should include altemative delivery systems either under Objective 3 or Objective 2. She
informed the body that the main reason for including it in Objective 3 is based on the literature
on accountability where the civil society exercises "voice" and other exit mechanisms. She also
agreed, however that one can be put over the other.
3. Regarding the proposition that the survey be made region-wide, it was noted that there is
really no concept of governance for a region as a whole, despite the presence of the Regional
Development Councils (RDCS). It was also pointed out that the RDCs cannot be made
accountable for the management of resources for a whole region.
Dr. Manasan explained that a region-wide measurement of the indicators is intended to track
these indicators in all the provinces and cities of the region in order to get a region-wide
perspective. This will enable the LGUs to compare themselves with one another.
Dr. Gonzalez assured the body that they did a review of literature to find out which features
of govemance would suit the Philippine situation, specifically the local government. He noted
that a log-frame type of framework was used in the study. He also clarified that the hierarchy
of the indicators was fashioned out of a logical sequencing of the indices.

50
4. Dir. Esguerra pointed out the need for a common concept of social services. She cited the
necessity of providing basic health services at the best quality for all.
In response, Dr. Manasan justified the inclusion of the services based on the functions
identified in the Local Government Code. Given that mandate, the next question addressed
was the concept of effectiveness. She further explained that the analysis took off from a
survey asking people what they think the LGU priorities should be.
Dir. Esguerra noted that the HDN has determined the important services which should be
used for policy advocacy.
Dr. Gonzalez clarified that it is the curative rather than preventive services that were
delegated to the provincial LGUs. The preventive services were lodged at the municipal
LGUs. Therefore, their group focused at the municipal level because that is where most of the
results in preventive services can be obtained.
WORKSHOP OUTPUTS
GROUP A
Group A was tasked to:
1. Provide the operational definition of ACCEPTABILITY of the Govemance Quality Index

(GQI) at the local level
2. Discuss the acceptability of the indicators; and
3. Identify the advantages and disadvantages of adopting the weight system in measuring
governance
ISSUES AND POINTS RAISED
A. Definition of Acceptability of the GQI
• The acceptability of the GQI should cater to four dimensions: 1)social; 2) political; 3) financial;
and 4) technical. The social dimension would refer to acceptability of the index by majority of
the citizenry. Political acceptability on the other hand, would refer to acceptability of the index
by the powerholders or the public off,cials. The third dimension would require the system to
be acceptable to resource allocators and/or funders. Finally, technical acceptability is equated
with acceptability to the academe. Hence, the acceptability of the GQI will hinge on all
stakeholders in local governance.
B. Acceptability of the Set of Governance Indicators
• It was observed that the Governance Quality Index (GQI) can be correlated with the Human
Development Index (HDI).
• Comments on the set of indicators (having integrated the four dimensions of

acceptability):

51
• Social - all indices vvere deemed to be socially acceptable

• Political - with regard to Revenue Generation, it was suggested that 1.1.2 (cost recovery
effort) be deleted and instead, use the revenue to cost ratio. To elevate the purpose of the
study, it was suggested that outcome indicators be used. Timeliness of Commission on
Audit reports must also be requested.
• Technical - the present govemance indices can be correlated with other indices (e.g., HDI).
It should be validated whether this set of indicators actually reflects what the study intends
to measure.
C. Use of a Weight System
• The use of principal component analysis to discover weights was suggested.

• The data gathered must be used to determine appropriate cluster of variables.
• It was proposed that the study develop individual sub-indices for each strategic objective.
GROUP B
Group B was tasked to:

1. Validate the usefulness of the set of indicators;
2. Comment on the proposed institutional arrangements; and
3. Identify the means for generating financial support
ISSUES AND POINTS RAISED
A. Usefulness of the Indicators
• Some indicators may not be fair given that some functions are not yet fully devolved to LGUs.
• It may be too early to judge LGUs by these indicators. The national government is still too
involved in setting up priorities. Also, the priorities of the national government may not
conform to the priorities of the local government.
• Timing should not be a major problem. It can serve as a challenge to LGUs to catch up. With
these indicators, the civil society can concretely determine the local government's vveak points
and areas for improvement. This issue can be used as well in gap analysis.
• It must be noted that LGUs have the authority and capability to mobilize resources intemally.
These indicators can then monitor accountability of service delivery.
• The purpose of the indicators is manifold: 1) for performance assessment; 2)to aid gap analysis
which can be used in decision-making; and 3) civil society advocacy as incentive for behavior
change.
• As a monitoring tool, it is advantageous to extend the use of these indicators to monitor the
performance of the national government.

52
• These indicators can be incorporated in the determination of the Intemal Revenue Allotment.
Local government performance should be added to the present criteria of land area,
population, etc.
But this may not be advisable since LGU behavior could then be oriented tov~ards
influencing national government decision. (on the IRA)
It must be clear that these indicators should promote good politics.
• The study may contribute changes/additions to the functions of LGUs. The final assessment
can provide inputs to the ongoing amendment of the Local Government Code.
• DILG has a similar study, undertaken in cooperation with the Local Govemment Center of
the UP CPA: The LGU Capability Classification Scheme. USAID and DILG will provide
copies of their studies which are relevant to this project.
B. Proposed Institutional Arrangement
• In choosing the best institution/s where the system is to be lodged, the following criteria
must be considered: 1 )credibility, 2)sustainabilit,v, 3)technical capability, 4)10cal presence,
and 5)mandate.
• If the actual implementation of the system is to be lodged at the national and/or local
government, a problem regarding public perception may arise. It should be noted that the
system also aims to improve LGU behavior and performance. And for behavior to be
influenced, the database must be credible.
• It is advisable to have as many players as possible to best reflect local reality.
• Other institutions such as the SWS, NGOs, and the academe can be contracted for quality
control functions and training.
• PSSC is a possible implementing institution since it can mobilize affiliates in the academe.
As a consortium of academic institutions, this can be a part of their mission area/e.
C. Financing Sustainability
• It was suggested that a multi-party type of arrangement be formed where the academe,
NGOs, NG/LGs and other coordinating agencies are represented.

53
• Marketing of the system to universities and/or other institutions which may benefit from
this set of measures of LGU performance was proposed.
• Piloting the mechanism could help achieve the above suggestions.
D. Recommendations
• Ensure consistency and comparability of indicators by having multi-sectoral consensus on

weights and priorities. Furthermore, the set of indicators must undergo national
standardization.
• Lodge the implementation of the system with help of the academe.
• Operate using multi-sourced funding for sustainability.
• Pilot test for continuous advocacy to see if present arrangement will work. Pilot the new
system (factoring in all issues).
• Version 1 of the study is preferred.
Plenary 11
• The workshop outputs were presented. The body adopted the recommendations of the
workshop groups as presented.
• Dir. Esguerra recommended that institutions like Land Bank which stand to benefit from an
LGU Performance Indicator System can be tapped for funding.
• Following the recommendations of Group B, a project proposal for the pilot case of the
Indicator system would have to be drafted.
• Ms. Ricasio suggested that the outputs of the workshop be annexed to the final revision of
the paper.
Next Steps
• NEDA proposed to convene a meeting with potential donors (UNDP,ADB, USAID), the
Sustainable Human Development project personnel and other stakeholders to discuss the
feasibility of piloting the governance indicator system in selected regions.
• Dr. Cynthia Rose Banzon-Bautista committed to continuously advocate for the adoption of
the governance indicator system within the HDN

54
Annex A
PROGRAMME
8:00 Registration
8:30 The Philippine National Anthem
8:35 Welcome Remarks
Dr. Cynthian Roze Banzon-Bautista
Vice-President, HDN
8:40 Presentation of the Study
Dr. Eduardo Gonzalez
President, DAP
Dr. Rosario G. Manasan
Research Fellow, PIDS
9:30 Coffee Break
9:45 Workshop Mechanics
Ms. Marie Antoinette Guillermo
Ms. Maria Herminia Soriano
DAP
10:00 Workshop Proper
12:00 Lunch
1:00 Presentation of Workshop Outputs
Group Rapporteur
1:30 Open Furom
Dir. Erlinda M. Capones
NEDA-SDS
2:00 Closing Remarks
Dr. Cynthia Roze Banzon-Bautista

55
Annex B
PARTICIPANTS
There were a total of 43 participants from the government, academe, nongovernment,

and international organizations distributed as follows:
Academe
Ms. Henedina Razon-Abad AdMU
Ms. Susan Concordo DLSU
National Government
Ms. Charmaine Caido DILG-BLGD
Ms. Ma. Fe Cabral NAPC
Dir. Eriito Pardo DOF-BLGF
Dr. Imelda Ben DOH
Ms. Erlinda Reyes COA
Ms. Villaflor Fernandez COA
Dir. Josefina Esguerra NEDA-PIS
OIC Dir. Virgilio Sallentes NEDA-MS
OIC AD Venusto Briones NEDA-MS
Ms. Amy Canarejo NEDA-PIS
Ms. Eredulyn Lucero NEDA-SDS
Mr. Lore Aguilar NEDA-SDS
Mr. Romulo Miral CPBO
Dr. Gonzalo Jurado PIDS
Dr. Eduardo Gonzalez DAP
Ms. Marie Antoinette Guillermo DAP
Ms. Maria Herminia Soriano DAP
Local Govemment
Mr. Rollie Fabi Leage of Provinces
Mr. Jomar Olegario Leage of Vice Governors
Non-governmenVlntemational Organizations
Dr. Cynthia Rose Banzon-Bautista HDN
Mr. Isagani Serrano PRRM
Dr. Eduardo Campos ADB
Ms. Jana Grace Ricasio UNDP
Mr. Clark Soriano UNDP
Ms. Belle Evidente UNDP
Ms. Brigida Jayme UNDP
Mr. Philip Schwehm UNFPA
Ms. Diane Repall USAID-ARD/GOLD
Ms. Ramona Jimenez PSSC

56
Secretariat
Dr. Rosario Manasan PIDS
Mr. Ross Quisao PIDS
Ms. Lucy Melendez PIDS
Ms. Eden Villanueva PIDS
Ms. Analyn Manuel PIDS
Dir. Erlinda M. Capones NEDA-SDS
AD Felizardo Virtucio NEDA-SDS
Mr. Napoleon Imperial NEDA-SDS
Ms. Aleli Rosario NEDA-SDS
Ms. Susan Carandang NEDA-SDS
Ms. Joan Santiago NEDA-SDS

57
Annex C
GROUP A PARTICIPANTS
1. Dina Razon-Abad AdMU

2. Cynthia Banzon-Bautista HDN
3. Venusto Briones NEDA-MS
4. Eduardo Campos ADB (Group Rapporteur)
5. Susan Carandang NEDA-SDS
6. Pinky Esguerra NEDA-PIS
7. Napoleon Imperial NEDA-SDS
8. Gonzalo Jurado PIDS
9. Lyn Lucero NEDA-SDS
10. Rosario Manasan PIDS
11. Diane Respali ILO
12. Aleli Rosario NEDA-SDS
GROUP B PARTICIPANTS
1. Lore Aguilar NEDA-SDS

2. Imelda Ben DOH
3. Fe Cabral NAPC
4. Charmaine Caido DILG
5. Amy Canarejo NEDA-PIS
6. Lynn Capones NEDA-SDS
7. Susan Concordo DLSU
8. Rollie Fabi League of V-Governors
9. Eduardo Gonzalez DAP
10. Brigida Jayme UNFPA
11. Jun Miral CPBO (Group Rapporteur)
12. Ross Quisao PIDS
13. Jana Ricasio UNDP
14. Philip Schwehm USAID
15. Felizardo Virtucio, Jr. NEDA-SDS

58
Appendix 4b
WORKSHOP ON GOVERNANCE INDICATORS
RDC Conference Hall, NEDA, Iloilo City
September 18, 1998
OBJECTIVES
The NEDA Central Office, in coordination with NEDA Region VI, conducted the
Workshop on Governance Indicators on September 18, 1998 at the RDC Conference Hall,
NEDA, Iloilo City. The objective of the workshop were:
1. To introduce the participants to the results of the study on the development of LGU
governance indicators;
2. To get the feedback/reaction of the participants regarding the

acceptability/credibility of the governance indicator system and the weights used in
arriving at the composite index of good governance; and
3. To solicit comments on the possibility of institutionalizing the regular measurement

of said indicators on a nationwide basis.
SCHEDULE OF ACTIVITIES
8:00 Registration
9:00 Invocation
Ms. Lourdes Villa
Civil Commission
National Anthem
Ms. Erlinda Ortiz
NEDA VI
9:15 Welcome Remarks
Mr. Arturo G. Valero
Assistant Regional Director, NEDA VI
9:30 Presentation of Results of the Study on the Development of LGU
Governance Indicators
Dr. Rosario Manasan
NEDA Consultant
10:00 Open Forum (for classificatory questions only)
10:30 Coffee Break
10:45 Workshop Mechanics
11:00 Group Discussion aimed at achieving workshop objective 2 and 3
12:00 Lunch
12:30 Presentation of group reports in a plenary session
1:00 Wrapping up

59
PARTICIPANTS
A total of 52 participants from the local government units, regional line agencies and
non-government organizations attended the workshop. (The list of participants is attached as
Annex A).
CLARIFICATORY QUESTIONS
1. Mr. Mario Nillos of PPDO-Iloilo asked the baseline year for Human Development
Index
Dr. Manasan informed that the baseline year for HDI was 1994 and its
components are: a) per capita income; b) life expectancy; and c) literacy rate.
2. Mr. Nillos also asked if poverty incidence is a part of HDI.
Dr. Manasan replied that poverty incidence is not included in HDI but in Human
Deprivation Index
3. Mr. Roque Hotilena of PPDO-Negros inquired about the estimated time frame of
the study for a specific LGU.
Dr. Manasan informed that in the pilot testing they conducted, they stayed one week in
Antique (for 2 municipalities only with respondents of only 50). She said for public opinion
survey, 400 respondents are needed per LGU. For Version 2 or using administrative data only,
4 days are needed per LGU – 2 days for gathering data and 2 days for processing the data.
4. Ms. Evelyn Trompeta of DILG informed that they have also come up with a Local
Government Performance Measurement wherein some of the areas mentioned in the
Governance Indicators were also covered. However, the DILG measurement were
more on specific areas of the legislative and executive aspects.
Dr. Manasan said if anybody is interested in the study, NEDA VI has a complete copy.
5. Mr. Rey Dusaran of CPU asked if some factor analysis were done to see if the
indicators come together.
Dr. Manasan said no formal factor analysis was done.
6. Ms. Daisy Magbanua of CHED inquired if the socio-economic status of the

respondents were considered in the multistage random sampling.
Dr. Manasan explained that they use the purposive approach at the provincial level.
They utilize the random approach for the barangays.

60
7. Mr. Zaldy Barotil of Merciphil Foundation asked why the Academe was deleted in
the list of institutions which should take on the job of measuring and compiling
governance indicators.
Dr. Manasan replied that this was unintentional and that the academe should
be in the list.
8. Mr. Barotil inquired how often must the index be measured. He asked if it was
assumed that a baseline study was already established such that a more meaningful
analysis of the data will be done on the third year.
Dr. Manasan informed that the assumption is that when you measure at the
start of the third year, you are using the data of the incumbent in their second year.
Third year is not yet available.
9. Dr. Venancio Ardales of the University of Iloilo said that since Dr. Manasan is
asking the participants’ opinion if the study is political or apolitical, may he know
whether the researchers have determined if their work is political or apolitical in
nature. He said there will be a lot of implications particularly for the LGUs which
will be evaluated by the instrument.
Assistant Director Virtucio replied that it is not so much as self-assessment

but the perception of the body. He defined apolitical as that where there is no
perception of any bias or perception of leaning towards any party.
10. Dr. Ardales referred to Mr. Hofilena’s comment about manipulation of data for
certain LGUs. He remarked that if the instrument is constructed in a way that is
inherently political, the data that will come out will be biased.
Dr. Manasan informed that the data were carefully validated and that the
researchers took pains that the data will not be manipulable.
WOKSHOP MECHANICS
The participants were divided into two groups, as follows:
1. Group A discussed Acceptability of the Governance Indicator System and the Index of
Governance. The participants were asked to identify parameters for operationally
defining “acceptability of the indicators and given comments/reaction on the
acceptability of the governance indicator system, and the weight used in composite
index of good governance.
2. Group B tackled Institutionalization of the Governance Indicator System. The

participants were asked validate the need to periodically undertake the measurement of
the governance indicator system and made recommendations on how to institutionalize
the governance indicator system in terms of:
• Recommendations on how to generate support for the system

61
• Identifying the criteria for selecting the institution/s most appropriate to undertake
the measurement
• Mobilizing resources to implement the system
PRESENTATION OF THE WORKSHOP OUTPUTS
Group A
1. Operational Definition of “Acceptability”
Validity – measures what it really wants to measure
Reliability – if used several times will give the same result
Verifiability
Measurability
Consistency with the development goals which should be within the mandate of the Local
Government Code
Universability/Adaptability
Credibility – no systematic bias
Availability
• Statistical data are available

• Target beneficiaries are in a position to give an objective response or “informed
response” or informed respondents
• Data must be verified/counterchecked with their units; e.g., DILG
• Data is customized to suit particular place
2. Reactions/Comments on the Acceptability of Governance Indicators System
Sampling Procedures
• Different respondents for different services

• Consider direct beneficiaries – right person
• Consider different sectors; e.g., mothers, fathers
On Indicators for Service Delivery
• Indicators should include all services expected from LGUs as mandated in the Local
Government Code

62
• Indicators should include other aspects of development such as infrastructure, economic,

water, agriculture, environment, etc.
• Indicators protected from political manipulation
• Consider adoption of MBN indicators – it include areas to be covered, indicators and
standards
Identify areas to be Indicators Standard

covered
On Revenue Generation
• Instead of local revenue efforts, use “fund sourcing”/generation efforts to include non-
traditional fund sourcing activities
Reaction: This is inherently biased against low income LGUs
• Measure collection efficiency; i.e., rate of actual collection vs. projected collection
• Preference for relative indicators rather than absolute indicators
• Look at degree of development intended during term of governance
• Why not look at indicators for bad governance – This was already considered since
objective tree came from problem tree
Appropriate of Weights
• Give more weights to SO2 because:

1. Bottomline of service
2. Impact indicators
3. MBN may used as indicator
4. Adapt the Integrated Rural Accessibility Planning Survey – this, however, is limited
to pilot provinces/municipality only
Why not have a second of study using the MBN indicators to measure IMPACT
On Data Gathering Methodology
• Secondary data must be verified/counter checked with other National Government

Agencies
• Adopt “customized sampling” – for informed respondents

63
Group A participants are listed in Annex B.
Group B
Group B’s output was presented by Mr. Leonardo Jamora of Panay State Polytechnic
College, as follows:
1. Need Periodic Assessment
A. Frequency/Timing
1. Before the next administration, but not to be used for political purposes
2. First Year – provide baseline information on the situation of the LGU,
as input to planning
3. Second Year – for next term’s corrections
B. Other Issues
1. Cannot separate the indicators as reflection of performance of the LCE

and the LGU
2. Should be comparable among LGUs and administrations
3. How to relate the indicator system with the other M & E systems for
LGUs (DILG)
II. Institutionalization
A. Criteria for Selection of Institution
- non-political
- technically capable
- credible
B. Generating Resources
Sharing of resources:
Academic Institution - expertise of Faculty and Staff

NEDA/DILG - funds
LGU - share from IRA
NGOs - technical capability/familiarity
with local development issues
- package as research proposal
C. Supervision
a. Regional
Interagency: DILG, NEDA, CHED, NGOs, SCUs, Private Sector

64
b. National
Top Level Planning – Concerned Agencies
C. Accreditation of Participating Institutions
- Capability
- Credibility
Group B participants are listed in Annex C
COMMENTS/ REACTIONS
1. Mr. Gullergan of CPDO-ILOILO asked for clarification on the provision of baseline

information on the situation of the LGU as input to planning in the first year of
implementation of the study.
Mr. Jamora replied that in their group's discussion, the implementation must start at the
baseline. After that, it will be on a case-to-case basis if the LGU can afford or those who
are participating in the annual evaluation or survey. ARD Valero clarified that the
recommendation of the group is that evaluation will be conducted every year. The first year
will be the baseline, the second year will be for the mid-term correction and the third year,
which is before the next administration, will be the annual reporting of the performance or
the measurement of the indicator.
2. Mr. Nillos of PPDO-Iloilo said that they have no indicators at the local level. Their basis
is the mandate as provided in the Local Government Code. He said one of Group A's
suggestions is to put more weight on the basic service delivery of LGUs.
3. Ms. Cecilia Ortiz of PPDO-Guimaras said Group B's suggestion, if the study will be
implemented is to conduct a consultation with all the leagues so that the indicators will be
acceptable to them. She said this will serve as one of the basis of measuring their
performance.
4. On Mr. Gullergan's query as to who will conduct the evaluation, Mr. Jamora said the
participation of private state colleges or universities will be solicited as they have their own
institutionalized graduate program.
5. ARD Valero asked if the conduct of the study would not be affected if Group B's suggestion
to tap the Internal Revenue Allotment will be followed. He also asked if the IRA will not
distort the priorities and the LGU can expect a favorable assessment if it is generous.
Another question he posed is if the IRA would affect the objectivity of the study.
6. Mr. Nillos disagreed as regards getting the funds from IRA. He said that if there will be an
adverse evaluation, there will be no allocation for the study in the succeeding year.

65
7. Mr. Ortiz said there are development-oriented local chief executives who may be willing to
accept favorable or unfavorable results. She suggested not to generalize everyone else does
not want to.
ANNEX A
List of Participants
Name Office
1. Rodnel de los Reyes CPDO-Sagay City

2. Lourdes Villa Civil Service Commission
3. Ma. Jovita Santillana CPDO-La Carlota City
4. Rose Mamaril Local Government Support Project
5. Venancio Ardales University of Iloilo
6. Aida Liza Bureau of Internal Revenue
7. David Conadera Bureau of Local Government Finance
8. Lourdes Diocson Department of Budget and Management
9. Ma. Laline Lapu-os CPDO-Silay City
10. Filipina Espinosa Philippine Information Agency
11. Sylvia Bustamante Negro Council for Peace & Dev- Bacolod
City
12. Leda Celi National Congress of the Unions in the
Sugar Industry of the Phils.
13. Nathaniel Gallergan CPDO-Iloilo City
14. Roque Hofilena PPDO-Negros Occidental
15. Mario Nillos PPDO-Iloilo
16. Gilbert Alparito CPDO-Cadiz City
17. Simeon Leal PPDO-Iloilo
18. Remedios Bayot Parole and Probation Administration
19. Ofelia Pacete UP in the Visayas
20. Agapito Abong. Jr. Bureau of Jail Management & Penology
21. Melchor Teves Bureau of Jail Management & Penology
22. Daisy Magbanua Commission on higher Education
23. Cecilia Ortiz PPDO-Guimaras
24. Lilibeth Bedonis Iloilo State College of fisheries
25. Ma. Jade Catalan Iloilo State College of fisheries
26. Evelyn Trompeta Dept. of Interior & Local Government
27. Salome Siaton Dept. of Labor & Employment
28. Christine Espanola Nat'l Intelligence & Coordination Board
29. Ramon Hechanova Chamber of Real Estate & Builders
Association
30. Rey Dusaran Central Philippine University
31. Zaldy Barotil Merciphil Foundation, Inc.
32. Leonardo Jamora Panay State Polytechnic College
33. Rosario Manasan Phil. Institute for Development Studies

66
34. Ross Quisao Phil. Institute for Development Studies

35. Eden Villanueva Phil. Institute for Development Studies
36. Tonette Guillermo Development Academy of the Phils.
37. Development Academy of the Phils.
38. Felizardo Virtucio NEDA-CO
39. Napoleon Imperial NEDA-CO
40. Aleli Rosario NEDA-CO
41. Arturo Valero NEDA-VI
42. Raul Anlocotan NEDA-VI
43. Ma. Isabel Blancia NEDA-VI
44. Ma. Nesza Aleligay NEDA-VI
45. Ma. Lourdes Miado NEDA-VI
46. Juanita Sanchez NEDA-VI
47. Manuel Luis Dionio NEDA-VI
48. Corazon Porquez NEDA-VI
49. Elizabeth Bugna NEDA-VI
50. Erlinda Ortiz NEDA-VI
51. Estela Paredes NEDA-VI
52. Cynthia Lumampao NEDA-VI

67
ANNEX B
Group A Participants
Name Office
1. Dr. Venencio Ardales University of Iloilo

2. Daisy Magbanua Commission on Higher Education
3. Leda Celis NACUSIP-TUCP- Negros occ.
4. Rose Mamaril Local Government Support Program
5. Zaldy Barotil Merciphil Foundation, Inc.
6. Mario Nillos PPDO-Iloilo
7. Salome Siaton Dept. of Labor & Employment
8. Ma. Isabel Blancia NEDA-VI
9. Lourdes Diocson Dept. of Budget and Management
10. Filipina Espinosa Public Information Agency
11. Ma. Jade Catalan Iloilo State College of Fisheries
12. Ofelia Pacete UP in the Visayas
13. Ma. Laline Lapuas CPDO-Silay City
14. Ma. Jovita Santillana CPDO-La Carlota City
ANNEX C
Group B Participants
1. Lourdes Villa Civil Service Commission

2. Lilibeth Bedonia Iloilo State College of Fisheries
3. Agapito Abang, Jr. Bu. Of Jail Management & Penalogy
4. Melchor Teves Bu. Of Jail Management & Penalogy
5. Rey Dusaran Central Philippine University
6. Evelyn Trompeta Dept. of Interior & Local Government
7. Christine Espanola Nat. Intelligence & Coord. Agency
8. Gilbert Alparito CPDO-Cadiz City
9. Rodnel del los Reyes CPDO-Sagay City
10. Remedios Bayot Parole & Probation Administration
11. Sylvia Bustamante Negros Council for Peace & Dev.-Bacolod
City
12. Cecilia Ortiz PPDO-Guimaras
13. Leonardo Jamora Panay State Polytechnic College - Capiz

68
Appendix 4c
HIGHLIGHTS OF THE PRESENTATION OF THE UNDP-FUNDED STUDY ON
INDICATORS OF GOOD GOVERNANCE: DEVELOPING AN INDEX OF
GOVERNANCE AT THE LOCAL LEVEL
Apo View Hotel, Davao City
August 14, 1999
Dr. Eduardo Gonzalez and Dr. Rosario Manasan delivered a 5O-minute presentation on the
highlights of the Study entitled: Indicators of Good Governance: Developing an Index of
Governance at the Local Level. The presentation consisted of two parts: an overview of the
Study focusing on the objectives and rnethodologies used; and a discussion of the results of the
pilot testing of indices In nine local government units (LGUs) In the country An open forum
followed the presentation.
After the presentation, the following issues and concerns were raised:
1. Improvement in the Survey Questionnaire
1915. Asuncion J. Chin, outgoing PSR co RVC Xl, called the attention of the UNDP
team to the questionnaire used in their public opinion surveys. Specifically, she cited that
the questions on social welfare services referred mostly to disaster relief, which is not a
usual day to day activity. In addition, she stated that some of the social welfare activities
indicated in the questionnaire, like the operation of municipal feeding centers, are no
longer being encouraged. She suggested that the questionnaire be reviewed for possible
amendment to put emphasis on the regular social welfare services being provided by the
LGUs.
Ms. Amelita Atillo, outgoing PSR to RDC Xl, echoed Ms. Chin's concern, adding that the
questionnaire should also encompass sectoral specificity. This will give the local government
executives an idea if social services have truly benefited the urban poor and tribal Filipinos.
(Dr. Manasan clarified that the survey questions were formulated based on the devolved
functions of different government agencies. However, the team agreed to take note of
the suggestions.)
2. Integration of the MBN Survey with the Public Opinion Survey
ARD Salvador Estrera of DOH Xl inquired about the possibility of incorporating the MBN
indicators into the Governance survey.
(Dr. Manasan and Dr. Gonzales remarked that though MBN indicators would make a
good basis for the Governance survey, the constraint is that the MBN has not been in
place yet in all LGUs of the country, hence, there would be a problem on comparability
of data.)

69
3. Ensuring Objectivity in the Assessment Process
Engr. Milagros Rabanes, PPDC of Davao Oriental, inquired how neutrality and objectivity
in the evaluation process could be assured.
(Dr. Gonzales responded that objectivity can be assured if the evaluation and monitoring
process are conducted by a tripartite group or a four-cornered arrangement to be
participated in by the NGOs, academe, LGUs and league of mayors in order to provide
checks and balance. He further added that to safeguard neutrality, indicators have to
be housed in a non-political body like the institutions which must have the privilege of
collecting, storing and archiving data.)
4. Timetable of Index Measurement
Mr. Tommy Nograles, representative of Mayor Adelbert W. Antonino of General Santos

City viewed the evaluation process from the perspective of a local chief executive. He
pointed out that upon assumption of office the new mayor usually inherits the budget and
development thrust of the previous administration. Thus, he can only implement his own
development thrusts in the following year. In this regard, Mr. Nograles wanted to know
if this situation hen been considered In framing the indices and in timing the conduct of
the study.
(Dr. Manasan stated that the team previously recommended that the study be conducted
in the second year of the term of the LGU official. At this point, she suggested that they
look at the possibility of doing it at the staff of the third year.)
5. Basis of LGU Classification
Mr. Danilo Supe, PPDC of South Cotabato, asked the ream co consider classifying LGUs
according co income, population or area because the presentation has shown that richer
LGUs tend to show better performance than the poorer LGUs.
(Dr. Manasan remarked that based on their studies, it is not a/ways true that richer
LGUs perform better than their poorer counterparts. She cited the time when they
compared the per capita revenue from local and property taxes collected by different
LGUs. Upon ranking, they found out that there was no correlation between Income class
and efficiency in collecting taxes. An example was Trece Martirez, a 4th income class
municipality with P1,200 per capita local revenue collection; and Davao City, a Ist
income class city which had only P500 per capita local revenue collection.)
6. Lack of NGO Participation in LGU Affairs
Mr. Renato Tejano, PSR of Davao del Norte aired his sentiments regarding the lack of
Importance given to NGOs during their participation in public hearings and other forums.
He observed that when the NGOs are invited, their ideas and suggestions are not usually
adopted. Because of this, he believes that NGOs have become passive and less receptive
during the meetings. He appealed to local government executives to be more responsive
to the ideas of the NGOs.

70
He also appealed to legislators co review the business taxes being collected in some
municipalities which are too high because they deter the entry of local investors.
7. D1LG's Performance and Productivity Measurement (LPPM)
In behalf of DILG Xl, Mr. Felix Sanchez expressed appreciation to the UNDP team for
coming up with the study on governance measurement. He, likewise, Informed the body
that DILG has a similar project that started In 1984 which is presently viewed with
renewed interest. According to him, DILG is willing to collaborate with UNDP and other
sectors in order to come up with a very acceptable scheme of governance measurement.
However, he suggested that indicators relative to local financial administration,
development planning, organization and management, legislation and service delivery, as
well as, indicators on the capability of the government to exercise regulatory functions be
also considered in measuring local governance.
8. NGO Accreditation at the Local Level
Ms. Vilma Amon of NEDA XI remarked that she was struck by the statement that the
accreditation of NGOs in the local bodies is not very ideal.
(Dr. Manasan replied that when they surveyed some LGUs as to who among the NGOs
was accredited in local special bodies, the people would answer that it was "the NGO of
the Mayor's spouse". Hence the team deduced that this was probably the explanation why
the scores on NGO participation in the local bodies do not correlate with the scores on
people's participation in the NGOs and their perception of the empowerment of the
NGOs.)
9. Submission or Additional Comments
Director Pelayo acknowledged the importance of the study and on behalf of RDC Xl,
thanked the UNDP team for an excellent presentation. She encouraged the participants
to submit any additional comment or suggestion to the NEDA Secretariat.

71

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Distributed by Prof Shafaat Yar Khan for CSS Aspirants

Philippine Institute for Development Studies

Indicators of Good Governance:

The PIDS Discussion Paper Series

For comments, suggestions or further inquiries please contact:

Centre of Academic Solutions & Training, Lahore. 0332-4191070

INDICATORS OF GOOD GOVERNANCE:

Centre of Academic Solutions & Training, Lahore. 0332-4191070

1.1. Objective of the Study 1

2.1. Elements of Good Governance 3

3. APPROACH AND METHODOLOGY 15

3.1. Overall Framework 15

4. CONSTRUCTION OF A GOVERNANCE INDEX 19

4.1. Choosing the Key Dimensions of Governance 19

6. SUGGESTED FUTURE REFINEMENTS 37

Table 1 Governance Index, Version 1 31

Table 2 Governance Index, Version 2 32

Figure 1 Objective Tree for Good Governance Indicators, Version 1 17

Figure 2 Objective Tree for Good Governance Indicators, Version 2 18

Figure 3 Governance Quality Index and HDI 34

Figure 4 Comparison of GQI1 and GQI2 34

Figure 5 Comparison of SOII1 and SOII2 35

Figure 6 Comparison of Part I1 and PartI2 35

Appendix 1 Questionnaire/Survey Instruments 41

Appendix 2 Preliminary List of Performance Indicators 43

Appendix 3 Formulae Used to Compute the Different Indices 46

Appendix 4a Highlights of the National Workshop on 50

Appendix 4b Highlights of the Workshop on Governace Indicators 58

Appendix 4c Highlights of the Presentation of the UNDP-Funded 69

INDICATORS OF GOOD GOVERNANCE:

Rosario G. Manasan, Eduardo T. Gonzalez and Romualdo B. Gaffud

True, it may be all these but there=s more.

Governance is a complex concept. It includes the state=s institutions and structures,

1.1. Objectives of the Study

In particular, this study attempts to develop a composite index of the quality of

Centre of Academic Solutions & Training, Lahore. 0332-4191070

Accountability, Participation. Accountability holds public officials responsible for

Accountability may be obtained at two levels: macro-level accountability and micro-level

Macro-level accountability may be promoted by: making comprehensive and timely

Centre of Academic Solutions & Training, Lahore. 0332-4191070

Lander-Mills and Serageldin (1992) adds a third dimension to public accountability:

Transparency and Information. Transparency implies the provision of relevant and

Predictability, Presence of Legal Framework. Predictability refers to the fair and

Centre of Academic Solutions & Training, Lahore. 0332-4191070

Competitive, enterprising, anticipatory, results-oriented governance. Local

Centre of Academic Solutions & Training, Lahore. 0332-4191070

Good governance, moreover, translates to effective structuring of the market place or

A results-oriented local government gives more attention to funding, monitoring and

Decentralized decisionmaking and fiscal responsibility. Shah (1994) argues that

Moreover, the greater responsiveness of local governments to local demands encourages

Centre of Academic Solutions & Training, Lahore. 0332-4191070

According to Paderanga (1996), government has become more responsive to local

2.2 Measuring the Performance of Governments

Output-input efficiency measures. According to Hatry et. al., (1992), efficiency

Fire Protection--Measures of Efficiency

Type 1: Output in units of work load over input

Type 2: Output in units of effectiveness over input

Centre of Academic Solutions & Training, Lahore. 0332-4191070