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II BUDGET CIRCULAR II No. 2014 - 2

December 2,2014

TO Heads of Departments, Bureaus, Offices, and Agencies of

the National Government, Including State Universities and
Colleges (SUCs), Government-Owned or -Controlled
Corporations (GOCCs), Government Financial Institutions
(GFIs)j Heads of Local Government Units (LGUs); and All
Others Concerned

SUBJECT Guidelineson the Grant of CollectiveNegotiation Agreement

(CNA) Incentive for FY 2014

1.0 Background

1.1 Administrative Order (AO) No. 1351 dated December 27, 2005, directs the
Department of Budget and Management (DBM) to issue the necessary
policy and procedural guidelines to implement the AO which authorized
the grant of the CNA Incentive to government employees.

1.2 Item (4)(h)(ii)(aa) of the Senate and House of Representatives Joint

Resolution (JR) NO.4, s. 20092, approved on June 17, 2009,
institutionalized the grant of the CNA Incentive as one form of reward to
motivate employee efforts toward higher productivity, as follows:

"(aa) Collective Negotiation Agreement (CNA) Incentive - This

may be granted to both management and rank-and-file
employees of agencies with approved and successfully
implemented CNAs in recognition of their efforts in
accomplishing performance targets at lesser cost, in attaining
more efficient and viable operations through cost-cutting
measures and systems improvement xxx."

1 "Authorizing the Grant of Collective Negotiation Agreement (CNA) Incentive to Employees in Government Agendes"

2 "Joint Resolution Authorizing the President of the Philippines to Modify the Compensation and Position
Oassification System of Civilian Personnel and the Base Pay Schedule of Military and Uniformed Personnel in
the Government, and For Other Purposes"
 1.3 Section 71 of the General Provisions of Republic Act (RA) No. 10633, the FY
2014 General Appropriations Act (GAA), reiterates the basic provisions on
the grant of CNA Incentive.

"Savings from allowable MOOE allotments, generated out of

cost-cutting measures undertaken by the agencies of the
government and their respective personnel, which are identified
in their respective Collective Negotiation Agreements (CNAs) and
supplements thereto may be used for the grant of CNA
Incentives by agencies with duly executed CNAs: PROVIDED,
That, the one-time annual payment of CNA Incentive shall be
made through a written resolution signed by agency
representatives from both labor and management, and approved
by the agency head: PROVIDED, FURTHER, That the funding
sources and amount of CNA Incentive shall in all cases be limited
to the allowable MOOE allotments and rates determined by the
DBM, respectively: PROVIDED, RNALLY, That the realignment of
savings from the allowable MOOE allotments shall be subject to
approval by the DBM. Implementation of this provision shall be
subject to guidelines issued by the DBM."

1.4 AO No. 253 dated December 21, 2011, stipulated under Section 3 thereof
that the harmonized Results-Based Perfonmance Monitoring System (RBPMS)
shall be used as basis for determining entitlement to perfonmance-based
allowances, incentives, or compensation of government personnel, which
includes the CNA Incentive.

2.0 Purpose

This Circular is issued to consolidate and update the various policies and guidelines
on the grant of the CNA Incentive and to harmonize the same with the provisions of
AO No. 25 and the Congress-approved Performance-Informed Budget in the General
Appropriations Act for FY 2014.

3.0 Coverage

The Circular covers the following civilian personnel occupying regular, contractual, or
casual positions, rendering services on full-time or part-time basis in National
Government Agencies (NGAs), including SUCS, GOCCs, and GRs, and in LGUs,
whether or not covered by R.A. No. 67584, as amended:

3 "Creabng an Inter-Agency Task Force on the Harmonization of National Government Performance Monitoring,
Information and Reporting Systems"

4 "Compensabon and Position Oassification Act of 1989"

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3.1 Rank-and-file employees who are members of an employees' organization

which is accredited by the Civil Service Commission (CSC) as the sole and
exclusive negotiating agent (hereinafter referred to as "negotiating agent") in
accordance with the rules and regulations issued by the Public Sector Labor-
Management Council (PSLMC);

3.2 Rank-and-file employees who are not members of the esC-accredited sole
and exclusive negotiating agent referred to in item 3.1, but wants to enjoy or
accept benefits under the CNA subject to payment of agency fee to the
"negotiating agent" in accordance with PSLMCResolution No.1, s. 1993; and

3.3 Those who perform managerial functions.

4.0 Policy Guidelines

4.1 Conditions for the Grant of the CNA Incentive

Existence of a CNA

4.1.1 There should be an existing valid CNA (hereinafter referred to as the

"Agreement") executed between the representatives of management
and the employees' organization accredited by the esc as the
"negotiating agent" for the purpose of collective negotiations with the
management of a department, line bureau, attached agency,
GOCC/GFI or LGU.

4.1.2 The grant of the CNA Incentive should be provided for in the
"Agreement" or in supplements thereto.

Accomplishment of Targets

4.1.3 The NGA, SUC, GOCC, or GFI, should have accomplished, by

October 31, 2014, at least an average of 70% of its FY 2014
targets under the Major Final Outputs (MFOs) as specified in Form
A (Annex 1) of Memorandum Circular (Me) No. 2014-01 dated
April 21, 2014, issued by the Inter-Agency Task Force (IATF)
created under AO No. 25.

4.1.4 Similarly, an LGU should have accomplished, as of October 31,

2014, at least an average of 70% of the targets under its
programs/activities/projects approved in the LGU budget for FY
2014.

Submission of Accountability Reports

4.1.5 The NGA or SUC should have submitted to DBM accountability reports
as of October 31, 2014 pursuant to COA-DOF-DBM Joint Circular No.
2014-1 dated July 2,2014.
4.2 Rate of the CNA Incentive

4.2.1 The rate of the CNA Incentive shall not be pre-determined in the
"Agreement" since it is dependent on compliance with the
conditions in item 4.1 above and the availability of the allowable
allotments.

4.2.2 The CNA Incentive may be given equally to qualified employees

or at varying rates in consideration of the employee's or his/her
office's contribution to the accomplishment of performance
targets, efficiency, productivity, or profitability, as determined by
the agency head upon recommendation of the Employees'
Organization-Management Consultative Committee.

4.2.3 In all instances, the CNA Incentive shall not exceed P2S,000.00
per qualified employee. Qualified employees shall pertain to
those covered under item 3.0 hereof whose agencies have
complied with the conditions set forth in item 4.1.

4.3 Fund Sources of the CNA Incentive

4.3.1 For NGAs

The CNA Incentive shall be sourced solely from the allowable MOOE
allotments in FY 2014, provided the same have become available as a
result of cost-cutting and systems improvement measures undertaken by the
agencies and their respective personnel, which are identified in their
respective "Agreements" and supplements thereto. Such fund sources shall
be limited to the following MOOE items:

a. Traveling Expenses;
b. Communication Expenses;
c. Repairs and Maintenance:
d. Transportation and Delivery Expenses;
e. Supplies and Materials; and
f. Utility Expenses.

In no case shall the following be used as fund sources of the CNA

Incentive:

i) balances of allotments for programs/activities/projects which were later

discontinued or deferred; and, iI) released allotments intended for
acquisition of goods and services to be distributed/delivered to, or to be
used by agency clients.

The use of the abovementioned available MOOE allotments for

payment of the CNA Incentive shall be subject to approval of the
Department of Budget and Management.

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 4.3.2 For GOCCs and GFIs

The CNA Incentive shall be sourced solely from savings in the MOOE items
enumerated in sub-items a to f in 4.3.1, under their respective approved
Corporate Operating Budgets (COBs), provided the following additional
conditions are complied with:

a. Actual operating income at least meets the targeted operating income

in the approved COB for the year. For GOCCs/GFIs, which by the
nature of their functions consistently incur operating losses, the
current year's operating loss should have been minimized or reduced
compared to or at most equal that of the prior year's level;

b. Actual operating expenses are less than the DBM-approved level of

operating expenses in the COB as to generate sufficient source of
funds for the payment of the CNA Incentive; and

c. For income generating GOCCs/GFIs, dividends amounting to at least

50% of their annual earnings have been remitted to the National
Treasury in accordance with the provisions of R.A. No. 7656 dated
November 9, 1993.

4.3.3 For LGUs

The CNA Incentive shall be sourced solely from savings in the MOOE items
enumerated in sub-items a to fin 4.3.1, under their respective approved local
government budgets.

4.4 Payment of the CNA Incentive

4.4.1 The CNA Incentive for the year shall be a one-time benefit to be
granted not earlier than December 15, 2014.

4.4.2 It cannot be given immediately upon signing and ratification of the

CNA, as this would transform the CNA Incentive into a CNA Signing
Bonus which the Supreme Court, in the case of the Social Security
System vs. Commission on Audit, 384 SCRA 548, July 11, 2002, has
ruled against for not being a truly reasonable compensation.

4.4.3 The CNA Incentive for the year shall be granted only during the
validity of appropriations for the same year.

4.4.4 The amount paid as CNA Incentive shall be recorded in the agency
books under the account code, "Collective Negotiation Agreement
Incentive-Civilian. "

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5.0 ProceduralGuidelines

5.1 An Employees' Organization-Management Consultative Committee or a

similar body composed of representatives from managem'ent. and the
"negotiating agent" shall determine if the agency is qualified for the grant of
the CNA Incentive based on compliance with the requirements under this
Circular. If qualified, the Committee shall review the agency's financial
records, and submit recommendations on the following, for approval of the
agency head:

5.1.1 The total amount of allowable MOOE allotments in item 4.3 hereof
which has become available as a result of cost-cutting and systems
improvement measures identified in the CNAs and supplements
thereto, and which was the result of the joint efforts of management
and employees;

5.1.2 The apportionment of the available amount identified in item 5.1.1

to cover the following items: '

50% For the CNA Incentive

30% For improvement of working conditions and other

programs, and/or to be added as part of the CNA
Incentive; and

20% For NGAs, to be reverted to the General Fund

For LGUs, to be reverted to their General Funds
For GOCCs and GRs, to be reverted to their
corporate funds.

5.1.3 The internal guidelines to be followed in the grant of the CNA

Incentive, such as: i) the specific criteria for determining who are
entitied, and Ii) the distribution of the arnount available and the rate
of the CNA Incentive in accordance with item 4.2.

5.2 In large departments with regional, provincial, district, and local offices, and
wherein regional unions have been accredited by the esc as the "negotiating
agent," the Department Secretary or his authorized representative should
provide internal guidelines to ensure uniformity and equity in the negotiation
process, monitor the progress of simultaneous negotiations, and ensure
compliance with the provisions of this Circular.

6.0 ReportorialRequirement

Each NGA and SUC shall submit to the DBM's Budget and Management Bureau or
Regional Office concerned, on or before January 31, 2015, the annual report on the
grant of the CNA Incentive by following the template in Annex "A."

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7.0 Responsibility of Agency Heads

Agency heads shall be responsible for the implementation of the provisions of this
Circular in their respective offices. They shall be held administratively, civilly, and/or
criminally liable, as the case may be, for any payment of the CNA Incentive not in
accordance with the provisions of this Circular without prejudice to the refund by the
employees concerned of any unauthorized or excess payment thereof.

8.0 Repealing Clause

All provisions of existing circulars or issuances on the grant of the CNA Incentive
which are inconsistent herewith are repealed or modified accordingly.

1].0 Effectivity

This Circular shall take effect immediately.

rr
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-r
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Fl()RENCIO B. ABAD
Secretary

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Annex "A"

Report on the Payment

of the Collective Negotiation Agreement (CNA) Incentive For
FY _

Department{ Agency :

1. IF CNA Incentive Was Granted

Total Amount Paid for the CNA Incentive:

Number of Qualified Personnel
Regular xxx
Contractual xx
Casual ~
Totai xxxx

Rate of CNA Incentive

Total Amount Paid

Fund Sources:

Object of Expenditure Amount

xxx
xxx
xxx
xxx
xxx
xxx
Total xxx x

Apportionment of:

50% - for the CNA Incentive xxx

30% - for improvement of working conditions xxx
20% - to be reverted to the xxx xxxx
Total xxxx

II. If the CNA Incentive Was Not Granted

Please state reason/s for non-grant:

Submitted by: Certified Correct:

Head, Finance{ Administrative Unit Agency Head