This study examines the utilization of barangay funds and their impact on promoting effective local governance in the Municipality of Numancia, Province of Aklan. Anchored in the Input-Process-Output (IPO) model, it assesses the effectiveness of fund utilization, the problems encountered by barangay officials, and the significant relationship between these problems and the effectiveness of fund management. Employing a descriptive-correlational research design, data were gathered from barangay officials, including the punong barangay, barangay treasurer, chairman of the committee on appropriations, and NGO representatives, through a structured survey instrument. Findings indicate that the majority of respondents are middle-aged, predominantly female, and have served for a considerable number of years in barangay governance. The study also found that while the overall utilization of barangay funds is moderately effective, several challenges impede optimal fund management, such as limited budget resources, complex requisition procedures, and low community participation. The problems encountered were found to significantly influence the effectiveness of fund utilization. The results underscore the importance of addressing these challenges through enhanced training programs, streamlining approval and requisition processes, and fostering greater community engagement in budget allocation and fund management. By improving these areas, barangays can more effectively utilize their resources to support local development initiatives and enhance public service delivery. This research contributes to the discourse on local governance by emphasizing the role of transparent and efficient fund utilization in improving governance quality at the grassroots level.