Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

Seventeenth Congress
First Regular Session 5590

Introduced by
REPS. KARLO A. B. NOGRALES and JERICHO JONAS B. NOGRALES

EXPLANATORY NOTE

The annual budget is the most important legislation that should be timely enacted by
Government. It is through this tool that the government delivers basic services and provides
public goods to the people. In order to fortify the budget process, there is a need to introduce
budget reforms as stated in this proposed bill that will enforce greater accountability in public
financial management (PFM).

This proposed bill seeks to modernize the Philippine Budgetary system by establishing
holistic, and internationally-established principles encompassing the whole PFM process, the
whole public sector, and all PFM institutions.

Significantly, the bill strengthens Congress’ power of the purse by enforcing the
Constitutional policy that all appropriations must be approved by Congress; and to enable
Congress to review and approve proposed appropriations against clearly defined
performance information and actual reported performance. It includes the following: (1)
tightened rules on the declaration of, and setting limits on the use of, savings; (2)
rationalization of Special Purpose Funds, lump sum funds, Special Funds, and Special
‘Accounts in the General Fund; (3) mandatory fiscal, financial, and performance reports by
the national government and individual agencies for the examination of Congress; and (4)
clearer rules on the re-enactment of prior years’ appropriations as well as the preparation
and approval of special appropriations.

The passage of this bill will ultimately improve the ability of government to deliver direct,
immediate, and substantial services to the people, especially the poor, as well as strengthen
government's accountability to the people for its use of public funds. It will likewise establish
a comprehensive legal framework on the allocation, use and accounting of public funds.

In view of the foregoing, | hereby urge my fellow legislators to support the immediate
passage of this bill

KARLO A. B, NOGRALES JERICHO VOWAS B. NOGRALES


Republic of the Philippines
House of Representatives
Quezon City

Seventeenth Congress
First Regular Session

5590

HOUSE BILL NO.

Introduced by
REPS. KARLO A. B. NOGRALES and JERICHO JONAS B. NOGRALES

“AN ACT TO REFORM THE BUDGET PROCESS BY ENFORCING GREATER
ACCOUNTABILITY IN PUBLIC FINANCIAL MANAGEMENT (PFM), PROMOTING
FISCAL SUSTAINABILITY, STRENGTHENING CONGRESS’ POWER OF THE
PURSE, INSTITUTING AN INTEGRATED PFM SYSTEM, AND INCREASING
BUDGET TRANSPARENCY AND PARTICIPATION, AND FOR OTHER
PURPOSES.”

PARTI
PRELIMINARY PROVISIONS

Section 1. Short Title. - This Act shall be known as the "Budget Reform Act of 2017."

Section 2. Declaration of Policy and Objectives. - It is hereby declared the policy of the
State to ensure accountability and integrity in the use of public resources by ensuring
transparency, fiscal responsibilty, results-orientation, efficiency, and effectiveness. This shall
be upheld through the establishment of an integrated system of planning, budgeting,
management, internal control, accounting, reporting and review of public finances. In light of
these requirements, the State shall pursue the following specific objectives:

(a) To enforce the power of Congress to authorize all appropriations and hold
government accountable in the use of public resources, as well as the responsibility
of all government agencies to propose, execute and deliver committed results in the
appropriations acts in a timely, predictable, and economic manner;

(b) To promote people's empowerment in the management of public resources by
enforcing their right to access information on, and to contribute in the formulation and
implementation of, the financial affairs of the government; and


(©) To strengthen the integration of planning, budgeting, and performance management
and ensure ample safeguards in managing public finances, including through internal
controls, accounting, reporting, and risk management.

Section 3. Scope and Coverage. - The provisions of this Act shall apply to the
management of revenues, expenditures, financing arrangements, and assets and liabilities
‘of national government agencies (NGAs), government-owned or -controlled corporations
(GOCCs), and local government units (LGUs) to the extent provided herein

Section 4. Definition of Terms. - The following terms when used in this Act and the
implementing rules and regulations (IRR) shall be understood, as follows:

(a) Allotment refers to the authorization issued by the Department of Budget and
Management (DBM) for releases needing clearance in order for NGAs, GOCCs, or
LGUs to incur contractual commitments and disburse funds up to a certain amount,
for a specified public purpose, and within a specified period of time, in accordance
with the Appropriations Law;

(v) Appropriations Law refers to the legislative authorization for the contractual
commitments incurred by NGAs, GOCCs, or LGUs and actual disbursement of Public
Funds for specific public purposes covering a specified period of time. This may refer
to either a general or special appropriations law;

(c) Cabinet refers to the Executive Secretary and the Secretaries of the Departments
under the Executive Branch;

(d) Extended Payment Period refers to the three month period in the following fiscal
year when payments can be processed and disbursed for goods and services
received by the end of the previous year and such payment shall be chargeable
against the Appropriations Law of the previous fiscal year,

(e) Fiscal Year refers to a period of twelve months commencing on January 1 until
December 31;

(f) Government Agencies collectively refer to NGAs, GOCCs and LGUs;

(g) Government-Owned or -Controlled Corporations refer to agencies with corporate
powers, whether or not organized as a stock or non-stock corporation, vested with
functions relating to public needs whether governmental or proprietary in nature, and
owned by the Government of the Republic of the Philippines either wholly or, where
applicable as in the case of stock corporations, to the extent of at least a majority of
its outstanding capital stock. This includes Government Financial Institutions,
government corporate instrumentalities and related corporations;

(h) Government Financial Institutions refer to financial institutions in which the
government directly or indirectly owns the majority of the capital stock and which are
either: (i) registered with, or directly supervised by, the Bangko Sentral ng Pilipinas
(BSP); or (iijauthorized to collect or transact funds or contributions from the public
and place them in financial instruments or assets such as deposits, loans, bonds and
equity;

(i) Head of Agency refers to the head of the department or agency in the case of
NGAs, the Board of Directors or Trustees in the case of GOCCs as well as certain
agencies which are structured as such, and the local chief executive in the case of
LGUs;


() Internal Audit is an independent and objective assurance in NGAs, GOCCs and
LGUs which is designed to add value, improve operations and accomplish objectives
by bringing in a systematic and disciplined approach to evaluate the effectiveness of
risk management, control and governance processes;

(k) Local Government Units refer to provinces, cities, municipalities, and barangays, as
well as autonomous regions authorized to be created in the Constitution;

() National Government Agencies refer to units of the national government, as
distinguished from GOCCs and LGUs, which include any of the departments,
bureaus, offices or instrumentalities of the Executive, Judicial and Legislative
branches of government, as well as the Constitutional Commissions, and the Office
of the Ombudsman;

(m) Program/Activity/Project refers to an item of appropriation in the GAA which refer
to any of the following:

Program — an integrated group of activities that contributes to an agency's continuing
objective. These are grouped under 3 main cost structures: General Administration
and

‘Support, Support to Operations, and Operations.

Activity — is a work process that contributes to the fulfilment of a program, sub-
program or project.

Project — is a special agency undertaking within a definite timeframe and which is
designed to produce pre-determined goods or services;

(n) Proposed National Budget refers to a financial plan of annual revenue and
expenditures to be submitted by the President to Congress that reflect national
policies;

(0) Public Officials refer to elective and appointive officials and employees, in a
permanent or temporary capacity, whether in the career or non-career service,
including military and uniformed personnel, regardless of the rank, form or amount of
compensation;

(p) Public Funds refer to the monies of all Government Agencies received, collected,
receivable from taxes, fees, charges, penalties, income, dividends, interest earnings,
domestic loan proceeds, external loans and grants, proceeds from the sale of assets,
that the Government has a legal right to retain and use and shall not include any
money received in error;

(q) Subsidiary refers to a corporation where at least a majority of the outstanding capital
stock is owned or controlled, directly or indirectly and through one or more
intermediaries, by a GOCC; and

() Treasury Single Account (TSA) refers to the account maintained by the Bureau of
the Treasury with the BSP or agent bank for a unified structure of government bank
accounts to enable consolidation and optimum utilization of government cash
resources.


In this Act, the singular may be read as the plural and the plural may be read as the
singular, as the context requires.

PART Il
ADDITIONAL ROLES AND RESPONSIBILITIES

Section 5. Congress. - The Congress shall, in addition to its powers under the Constitution
and existing laws, perform the following:

(a) Monitor and review government performance against the requirements of
appropriations and related laws, and hold Government Agencies accountable for
their financial and non-financial performance;

(b) Review reports on planned and actual performance, including the Statement of Fiscal
Policy, the Medium Term Fiscal Strategy, fiscal reports, annual plans of government
agencies, periodic and annual reports on government performance and performance
of government agencies; and

(c) Consider the consolidated annual financial statements of government prepared by
the Office of the Comptroller General (OCG) and the audited government agency
reports by the COA

Congress shall undertake the foregoing through any of its existing committees, support
offices or one created for the purpose to strengthen the oversight role of Congress.

Section 6. President. - The President shall, in addition to his/her powers under the
Constitution and existing laws, perform the following

(a) Approve the Statement of Fiscal Policy, and the Medium-term Fiscal Strategy for
submission to Congress;

(b) Approve the Budget Priorities Framework to identify the priority areas for
government spending and guide the budget preparation exercise; and

(c) Authorize changes in the functional, operational and organizational structure within
‘and among the DBM, Department of Finance (DOF), and National Economic and
Development Authority (NEDA), as may be necessary, to ensure the effective
implementation of this Act.

Section 7. Office of the Comptroller General. - To enhance the management of public
finances, there is hereby created an OCG under the supervision and control of the Office of
the President (OP) which shall perform the following functions:

(a) Monitor the performance of the annual cash appropriations of NGAs in terms of in-
year and end-of-year appropriation reports that compare disbursements to
appropriation:

(b) Formulate measures on effective internal controls including internal audit, for the
implementation by Heads of Government Agencies, to ensure the integrity, accuracy,
completeness, and reliability of government financial and management systems;

(©) Oversee the operation of an integrated internal control framework across
Government Agencies;


COYAMARWNE

(d) Oversee the implementation of, and Government Agencies’ compliance with,
accounting and auditing rules and regulations promulgated by the COA;

(e) Oversee and manage the financial reporting of Government Agencies, including (1)
to monitor the periodic and annual management and financial accounts with regard to
accuracy, timeliness, completeness, and compliance with this Act, standards, rules
and regulations; and (2) to consolidate the financial reports for submission to the
President, Congress, and COA;

() Oversee the operationalization of an integrated financial management information
system;

(g) Formulate competency-based human resource policies for positions in PFM and
oversee the capacity development requirements on PFM formulated by the OCG and
other agencies;

(h) Coordinate with counterpart agency officials to ensure compliance with the foregoing
functions; and

()) Perform such other functions as may be necessary to properly implement the
provisions under this Section.

The OCG shall be headed by the Comptroller General who shall be of the same rank as
a Secretary, and with the structure and staff complement as may be approved by the DBM.
The Heads of Government Agencies shall designate a Comptroller in their respective offices
to oversee the implementation of the above-mentioned functions at the agency level in
coordination with the Comptroller General.

Section 8. Commission on Audit. - The COA shall, in addition to its powers under the
Constitution and existing laws, coordinate with the OCG for the proper enforcement of timely
accounting and reporting of public finances.

Section 9. Department of Budget and Management. — The DBM shall, in addition to its
mandates and functions under existing laws, perform the following.

(a) Prepare, in coordination with the agencies concerned, DOF, NEDA and OP in the
Development Budget Coordination Committee (DBCC), the Statement of Fiscal
Policy, the Medium-term Fiscal Strategy, the Budget Priorities Framework, and the
Mid-year and Annual Fiscal Reports as required in this Act,

(b) Monitor and evaluate the financial and non-financial performance of NGAs;

(c) Evaluate and review the financial and non-financial performance of GOCCs with
special laws and charters, in coordination with the DOF and the Governance
Commission for GOCCs (GCG), and approve the annual corporate operating
budgets (COBs) of the GOCCs;

(a) Monitor and review, together with the Bureau of Local Government Finance (BLGF)
under the DOF and Department of the Interior and Local Government (DILG), the
financial and non-financial performance of LGUs; and

(e) Assess, together with the BLGF under the DOF and DILG, the PFM systems of LGUs
and assist them in designing and implementing PFM improvement measures.


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53

To ensure the effective formulation and execution of fiscal policies, the Secretary of
Budget and Management shall lead the DBCC, with the Secretary of Finance, the Director
General of the NEDA Secretariat and a representative from the OP as members, and the
Governor of the BSP as resource person.

Section 10. Department of Finance. - The DOF shall, in addition to its mandates and
functions under existing laws, perform the following:

(a) Monitor and manage fiscal risks to the government, including those from public-
private partnerships:

(b) Compile and publish government fiscal statistics in accordance with international
standards; and

(c) Formulate policies and standards for the acquisition and management of fixed assets
by NGAs.

The Bureau of the Treasury (BTr) shall, in addition to its mandates and functions under
existing laws, perform the following:

(a) Manage the TSA maintained at the BSP or an agent bank, with the prior approval of
the Secretary of Finance;

(b) Put in place arrangements for the execution of duly authorized payments from the
TSA, which may include the appointment of banks to operate as agents of the
National Government with the prior approval of the Secretary of Finance;

(c) Manage the financial assets and liabilities of the government, including: (i) banking
arrangements for, and bank accounts of, the government; (ii) hedging and other risk
management activities associated with debt management, cash management and
financial investment; (ii) appointment of dealers, assets managers and other agents
to support debt, cash and investment management activities; (iv) maintenance of an
accurate record of the stock and flow of financial assets and liabilities; (v) tracking
and reporting on fiscal risks related to the management of financial assets and
liabilities; and (vi) preparation of in-year disbursement reports based on the TSA for
submission to the OCG.

(d) Issue instructions on the management and recording of financial assets and liabilities
of the government;

(e) Authorize the opening and closing of bank accounts of NGAs;

(f) Assist the NGAs in providing credible cash forecast for timely and accurate cash
programming;

(g) Administer the release of cash requirements covering all types of transfers to LGUs;
and

(h) Establish and maintain a consolidated registry of fixed assets of the National
Government.

Section 11. National Economic and Development Authority. - The NEDA shall, in
addition to its mandates and functions under existing laws, perform the following


(a) Coordinate with the Regional Development Councils (RDCs), on the formulation of
regional development plans and policies that are consistent with the established
national priorities;

(b) Coordinate the formulation and implementation of an annual and medium-term public
investment program consistent with the approved Medium-term Fiscal Strategy and
in the context of the preparation of the National Budget;

(©) Set standards for Government Agencies in proposing, assessing, monitoring and
evaluating development policies, plans and projects including those financed by
grants and concessional loans; and

(d) Assist and support the capacity building of RDCs and LGUs in development planning
and investment programming

Section 12. Heads of Government Agencies. — The heads of NGAs, GOCCs and LGUs
shall, in addition to responsibilities provided under existing laws, be responsible for the
following:

(a) Keep the DBM and DOF informed of significant changes, issues, and risks that could
impact on the finances of the government;

(b) Participate in the processes to develop the Medium-term Fiscal Strategy, the Budget
Priorities Framework, and the Proposed National Budget as required by the DBM;

(c) Manage their respective agencies, including GOCCs, and other resources placed
under their supervision, in an efficient, effective and economic manner in order to
deliver the outputs and attain the outcomes set in their respective budgets;

(d) Monitor the physical and financial implementation of their programs, activities and
projects;

(e) Take appropriate measures to ensure that cash disbursements and contractual
commitments do not exceed the amounts appropriated in their respective budgets;

(f) Ensure that their respective agencies settles all contractual commitments or
approves payment thereon within the time prescribed by law;

(g) Institute effective and efficient management systems, procedure and practices for
assets, liabilities, and personnel, including internal controls, risk management, and
performance review;

(h) Demonstrate that due regard has been taken on the recommendations provided in
internal and external audit evaluation reports, to the extent authorized in their
respective budgets;

(i) Provide credible cash forecast for timely and accurate cash programming; and

() Provide accounting and reporting of public finances through the integrated financial
management information system and/or other preparatory online information systems
as required in this Act.

Section 13. Capacity Development Requirements on Public Financial Management.
The foregoing agencies shall continue to formulate capacity development requirements on
PFM and conduct trainings on the same. In this regard, the OCG shall oversee the


formulation of the said capacity development requirements to ensure alignment of the
objectives.

PARTIIL
FISCAL RESPONSIBILITY

Section 14. Fiscal Responsibility Principles. - The State shall pursue its policy objectives
in accordance with the following Fiscal Responsibility Principles

(a) Implement fiscal policies and strategies consistent with the achievement of
macroeconomic stability and inclusive economic development;

(b) Manage resources in a fiscally and environmentally sustainable way;
(c) Maintain prudent levels of public debt;

(d) Maintain an appropriate balance between government revenues and expenditures;
and

(e) Manage fiscal risks in a prudent manner.

Section 15. Statement of Fiscal Policy. - The DBM, in coordination with DOF, NEDA and
OP in the DBCC, shall prepare, subject to the approval of the President, the Statement of
Fiscal Policy which shall contain measurable medium-term macroeconomic and fiscal
objectives and forecasts consistent with the Fiscal Responsibility Principles and the Long-
Term Vision Report

The President shall submit for information of Congress, the Statement of Fiscal Policy not
later than ninety (90) days upon commencement of his/her term of office and update the
measurable fiscal objectives set forth therein three (3) years thereafter.

Section 16. Medium-term Fiscal Strategy. The DBM, in coordination with the DOF,
NEDA, and OP in the DBCC, shall prepare, subject to approval of the President, a Medium-
term Fiscal Strategy and its annual updates. The Strategy and its updates shall be
consistent with the approved Statement of Fiscal Policy and Long-Term Vision Report. It
shall include a summary of the fiscal policies for revenue, debt, deficit, expenditure, and
fiscal risk management, supported by a medium-term fiscal sustainability analysis,
consistent with the measurable fiscal objectives established in the approved Statement of
Fiscal Policy. The IRR of this Act shall detail the other specifications for the Medium-term
Fiscal Strategy and its updates.

The President shall submit for the information of Congress, the Medium-term Fiscal
Strategy for the following fiscal year not later than March 15 of the current year and shall
publish the said report on a government website not later than seven (7) days after it is
submitted to Congress.


Section 17. Fiscal Reports. - The DBM, in coordination with the DOF, NEDA, and OP in
the DBCC, shall produce a Mid-year Fiscal Report (MFR), covering the first half of the
current fiscal year and an Annual Fiscal Report (AFR) on the government's macroeconomic
and fiscal performance covering the preceding fiscal year.

The MFR and AFR shall include information on macroeconomic and fiscal outturns for
the period covered as compared against forecasts and objectives stated in the Medium-term
Fiscal Strategy; as well as reporting on budget execution, at least in the aggregate and by
agency level, compared against approved appropriations and other spending authorities.
The IRR of this Act shall detail the other specifications for the contents of the MFR and AFR.

The President shall submit the MFR to Congress not later than September 30 of each
year while the AFR shall be submitted together with the Proposed National Budget. Said
Teports shall be published on @ government website not later than seven (7) days after they are
submitted to Congress.

Section 18. Long-term Vision Report. ~ The NEDA, in coordination with the DOF, DBM
and OP in the DBCC, shall submit a Long-term Vision Report to the President and Cabinet,
and Congress not later than October 31 and November 30, respectively. Said Report shall
assess the long-term sustainability of existing government policies over the next twenty-five
(25) years, taking into account demographic, environmental, and other changes.

The first Long-term Vision Report shall be submitted to the President and Cabinet, and
Congress within two (2) years from the effectivity of this Act, to be updated every six (6)
years thereafter.

The NEDA shall cause the publication of the Long-term Vision Report on a government
website not later than seven (7) days upon submission to Congress.

Section 19. Deviations from Fiscal Objectives. - The government may deviate from the
medium-term fiscal objectives in the approved Statement of Fiscal Policy on a temporary
basis, where such deviation is due to a major natural disaster, unanticipated severe
economic shock, or other significant unforeseeable event that cannot be accommodated
through accessing the Contingent Fund and/or the National Disaster Risk Reduction and
Management Fund, as may be applicable or prudent fiscal policy adjustments, or the use of
other flexibilities provided in this Act.

The President shall submit a report to the Congress, stating the reasons for any such
deviations, the plans and the expected time to address such deviations, as part of the
succeeding Medium-term Fiscal Strategy or its annual update, or in the Mid-year or Annual
Fiscal Report, whichever is the next report due and within the prescribed period under this
Act.

Section 20. Shared Fiscal Discipline. - All proposed revenue eroding and expenditure bills
shall include a Financial and Budgetary Information Sheet upon filing of the bill containing an
estimate of the financial and budgetary implications of said proposal for the initial year of
implementation and the next five (5) years. Expenditure bills refer to those which will result in
a reduction of revenue collections or an increase in national government expenditures,
including those mandating the creation of recurring expenditures.

Each House of Congress shall provide guidelines prescribing the form, content of
the Financial and Budgetary Information Sheet, as well as the appropriate offices from which
such information shall be acquired, and the implications of non-compliance with said
submission.


PARTIV
BUDGET PREPARATION, EXECUTION, AND ADJUSTMENT

Section 21. Governing Principles in Budget Preparation. — There is hereby established a
set of governing principles to be observed by the NGAs, GOCCs, and LGUs in the
preparation of their annual budget proposals, and by the DBM in the preparation, and the
presentation to Congress, of the Proposed National Budget:

(a) Cash-based estimates shall be adopted in the proposed general and special
appropriations bills to promote faster and more effective delivery of services;

(b) The overall expenditure program of the government for a given fiscal year shall be
included, identifying those requiring approval by Congress and those authorized
under existing laws;

(c) All sources of funds and authorized uses available to the agency shall be considered
in the evaluation of agency proposals and determination of agency budget levels,
and shall likewise be disclosed in the Proposed National Budget and reports;

(d) Evaluation of agency proposals may include the analysis of a development plan,
master plan or road map, agency capability as demonstrated by previous years’
performance, its contribution to projects and activities of other agencies, utilization of
funds appropriated or released, and such other criteria as may be determined by the
DBM. The performance shall be evaluated based on the actual disbursements and
contractual commitments as compared to the appropriations;

(e) All appropriations shall be valid for one fiscal year i.e., from the effectivity of the
appropriations act until the end of the fiscal year concerned with no provision for
carryover, except for a three month Extended Payment Period in the following fiscal
year to allow agencies to settle payments for goods and services delivered during the
previous fiscal year;

(f) Items of appropriations shall be presented in such a way as to identify both the entity
responsible for the expenditure and the intended results from the use of the
appropriation in order to evaluate the performance of the agency;

(g) Both the financial and non-financial performance of agenciesshall be presented in the
Proposed National Budget and the General Appropriations Act to ensure @
performance-informed budget; and

(h) Items of appropriations shall be reflected by department, agencies, bureaus, and
offices, and shall be presented for information purposes, by region and province, and
eventually, by city or municipality.

Section 22. Planning-Budgeting Linkage. - Development strategies identified in the
Philippine Development Plan (PDP) shall be a primary consideration in the formulation of the
budget priorities framework. These shall also be the basis for drawing up strategic and
prioritized programs and projects in the multi-year public investment program, which in turn
will be considered in the formulation of the annual agency budgets that conform to the
annual budget ceilings approved by the President.

The implementation of programs and projects funded under the annual agency budgets
shall be monitored to ensure economy, efficiency, and effectiveness in the use of public
funds. Monitoring and evaluation of these projects shall cover, among others, the planned


COrauawNe

‘and actual performance of agencies, citing reasons for deviation and/or poor absorptive
capacities. The results of the project evaluation shall inform the assessment of subsequent
plans and budget proposals of agencies.

Section 23. Budget Priorities Framework. — The DBM, in coordination with the DOF,
NEDA and OP in the DBCC, shall present to the President and Cabinet, on or before April of
each year, a Budget Priorities Framework which shall guide the formulation of the Budget for
the following year by containing the medium-term fiscal strategy and targets underlying the
budget; the priority areas for government spending reflected in the PDP, estimated amount
and planned allocation of the fiscal space; and other requirements laid down in the IRR.

Section 24. The Budget Preparation Process. - The DBM shall determine the budget
preparation process and calendar. The budget preparation process shall cover: (i) NGAS; (ii)
GOCCs with respect to their impact on revenues, expenditures, assets, and liabilities and
risks of the government; and (iii) LGUs as to their impact on revenues and expenditures of
the government.

Section 25. The Proposed National Budget. - The President shall submit to Congress, not
later than thirty (30) days from the fourth Monday of July of every year, the Proposed
National Budget, which shall be the basis of the General Appropriations Bill

The President shall determine the form and content of the Proposed National Budget
which shall include, but not limited, to the following:

(a) President's Budget Message -provides a preview of the Proposed National Budget,
explaining the principles, objectives and policy framework adopted and the spending
priorities for the fiscal year;

(b) Budget of Expenditures and Sources of Financing (BESF) -contains the
macroeconomic parameters; dimensions of three-year (3-year) expenditure program,
revenues, financing, and outstanding debt; overview of the financial positions of
GOCCs, LGUs, and public-private partnership projects, as well as the other items
listed in the IRR;

(©) National Expenditure Program (NEP) — includes the strategic objectives, details of
the three-year (3-year) expenditure program, performance information, such as key
strategies, outputs and outcomes for agencies in relation to their budgets, and
staffing summary;

(d) Fiscal Risk Statement — presents a consolidated statement of the fiscal risks that the
national government faces, including those from the contingent liabilities of
Government Agencies and other items listed in the IRR.

As required under Section 17 of this Act, the President shall likewise submit for
consideration of Congress, the Annual Fiscal Report for the preceding fiscal year not later
than the abovementioned date, and the Mid-year Fiscal Report for the current year not later
than September 30 of every year.

Congress may not increase the appropriations recommended by the President for the
operations of government as specified in the Proposed National Budget.


COVAMEwWNH

The President shall publish the Proposed National Budget on a Government website on
the same day as it is presented to Congress.

Section 26. Program Classification. - The Proposed National Budget shall adopt a
structure based on a program classification that groups line items under the objectives or
outcomes to which they contribute to. Performance information shall be provided for each
program to facilitate the evaluation of the cost effectiveness of the programs and provide
better information for analysis and feedback for planning and prioritization of expenditures.

Section 27. Lump Sum Appropriations. — To promote the transparent and detailed
disclosure of all proposed government spending, lump sum appropriations and special
purpose funds (SPFs) in the Proposed National Budget shall be limited to: (1) the National
Disaster Risk Reduction and Management Fund (NDRRMF); (2) the Contingent Fund; (3)
Statutory Shares of LGUs; and (4) other SPFs not falling under any of the preceding
purposes and the details of which could not be determined during the budget preparation
stage.

Section 28. National Disaster Risk Reduction and Management Fund. ~ The NORRMF
shall be used for: (1) disaster risk reduction or mitigation, prevention and preparedness
activities, such as, but not limited to, training of personnel, procurement of equipment, and
capital expenditures; and (2) relief, recovery, reconstruction and other work or services in
connection with natural or human induced calamities which may occur during the budget
year or those that occurred in the preceding two (2) years.

The NDRRMF may include the Quick Response Fund (QRF) of agencies, which shall be
used as a standby fund in order that the situation and living conditions of people in
communities or areas stricken by calamities, epidemics, crises, and catastrophes may be
normalized as quickly as possible. The QRF shall be released directly to the agencies
concerned upon approval of the DBM.

Releases from the NDRRMF, other than the QRF, shall be subject to the prior approval of
the President, who may take into consideration the recommendation of the National Disaster
Risk Reduction and Management Council and the appropriate agency for local and
international disasters and calamities,

Section 29. Contingent Fund. ~ The Contingent Fund shall cover the funding requirements
of new and/or urgent projects and activities of national government agencies and GOCCs
that need to be implemented or paid during the year, such as, legal obligation of the
government arising from final and executory decisions by competent authority, including
arbitration awards, mediation settlement, or compromise agreements, requirements of newly
created offices, or deficiencies in the appropriations for local and external travels of the
President of the Philippines.

Releases from the Contingent Fund shall be subject to approval by the President of the
Philippines, other than payment resulting from final and executory decisions promulgated by
‘competent authorities, which shall be subject to approval by the DBM

The DBM shall inform Congress of all releases from the Contingent Fund in the quarterly
and annual fiscal reports including information on the date of release, the amount covered,
corresponding purpose/s and recipient agency.


Section 30. Statutory Shares of Local Government Units. - The shares of LGUs in the
proceeds from national taxes and other transfers to LGUs authorized by law shall be
released to the LGUs in accordance with the provisions on the use, allocation, and release
of the funds as may be provided in pertinent laws, rules and regulations.

Section 31. Unprogrammed Appropriations. - Congress may authorize standby
appropriations to cover the funding requirements of other priority projects and activities or
contingencies, as well as provide appropriations cover for foreign-assisted projects (FAPs)
not specifically included in the programmed component of the Appropriations Law. The
Unprogrammed Appropriations shall have the same level of details as in the programmed
component of the Appropriations Law. The amount authorized under the Unprogrammed
Appropriations shall not exceed two percent (2%) of the total proposed expenditure in the
programmed component of the Appropriations Law.

The Unprogrammed Appropriations shall take effect only when supported by excess
collections generated in any one of the particular tax or non-tax revenue source from its
corresponding revenue collections target in the BESF as certified by the BTr, or when there
are new loan agreements for FAPs. In no case shall the Unprogrammed Appropriations be
activated or released when there is a risk of breaching the measurable fiscal objectives for
the budget balance (including a deficit) or debt for the financial year or future years as
provided in the Statement of Fiscal Policy and Medium-term Fiscal Strategy or if there is a
risk of breaching any of the Fiscal Responsibility Principles.

Priority projects and activities or contingencies shall pertain to expenditures, the payment
of which are not covered under the Contingent Fund and could not be delayed until the
succeeding budget years without harming public interest or arising from the government's
legal obligation such as compliance with a government guarantee or settlement of final ang
executory decisions by competent authorities.

Releases from the Unprogrammed Appropriations shall be subject to the prior approval
of the President of the Philippines, other than final and executory decisions, which shall be
subject to approval of the DBM.

The DBM shall inform Congress of all releases from the Unprogrammed Appropriations
in the quarterly and annual reports including information on the date of release, the amount
covered, corresponding purpose/s and recipient agency.

Section 32. Budget with Account Codes. - All items of appropriations in the
Appropriations Law shall be given account codes pursuant to the Unified Account Code
Structure that applies to all the assets, liabilities, equities, income, and expenses of the
government. This account code structure shall be used in the release of the appropriations in
the Appropriations Law for a unified accounting, auditing and reporting of all the financial
transactions of the government.

Section 33. Re-enacted Budget. — If, by the end of any fiscal year, Congress shall have
failed to enact the Genera’. Appropriations Bill for the ensuing fiscal year, the General
Appropriations Law for the preceding fiscal year shall be deemed re-enacted and shall
remain in force and effect until the said General Appropriations Bill is passed by the
Congress.

Consistent with the Fiscal Responsibility Principles, the Re-enacted Budget shall be
enforced as follows:


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(a) The aggregate level of the Re-enacted Budget shall be limited to the total amount
appropriated in the preceding year's Appropriations Law, but shall in no case exceed
the level of thesources of financing under the BESF ofthe Proposed National
Budget;

(b) The appropriations for the following shall be limited to the amount authorized under
the Re-enacted Budget, but in no case exceed the amount proposed by the President
in the Proposed National Budget:

Ongoing programs, projects and activities;

Personnel benefits, including retirement gratuities, pensions, terminal leave
pays and related expenses;

3. NORRMF, Contingent Fund, Statutory Shares of LGUs, and other SPFs; and
4, Budgetary support to GOCCs for their operational requirements.

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(c) In no case shalll the following be considered part of the Re-enacted Budget:

1. Completed programs, projects and activities funded in the General
Appropriation Law for the preceding fiscal year;

2. Budgetary support for GOCCs for support to programs, activities or projects;
and

3. Equity contribution of the National Government to GOCCs.

The items and/or amount of appropriations not covered under the Re-enacted Budget as
provided above shall not be released, disbursed, orutilizedfor the purpose previously
authorized.

The DBM shall issue guidelines on the aggregate and agency levels of appropriations
authorized under the Re-enacted Budget in accordance with the foregoing, supporting
requirements to determine actual needs, and other pertinent rules in the implementation of
the Re-enacted Budget.

Upon enactment of the General Appropriations Law anytime during the current fiscal
year, all releases under a Re-enacted Budget consistent with this Section shall be deemed to
have been implemented pursuant to, and charged against, for account recording purposes,
the General Appropriations Law for the current fiscal year.

Section 34. Special Appropriations Bill. - A Special Appropriations Bill is a proposal
submitted by the President, as recommended by the DBM, before Congress to provide
authorization for expenditures for a specific purpose not included or not covered under the
annual appropriations laws. It shall specify the purpose/s for which it is intended and be
valid until the end of the fiscal year of its enactment.

A Special Appropriations Bill shall be supported by funds actually available or those
which are not included in the fiscal year’s sources of financing under the BESF as certified
by the National Treasurer, or to be raised by a corresponding revenue measure proposed
therein. The amount to be authorized by Congress in a Special Appropriations Bill may be
more than that originally proposed for as long as the same is supported by any or a
combination of the above sources and is consistent with the Fiscal Responsibility Principles
and the Medium-term Fiscal Strategy. A Special Appropriations Bill may only be proposed
after the passage of the General Appropriations Law, except for the following: (1) disaster-
related purposes; (2) urgent projects and/or activities; and (2) unforeseen requirements of
the government.


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YASSSRSSPSSRSSSSRRRSRASSSVRAGPONASSOUADE ENE SODNAMEwNE

‘A Special Appropriations Bill may likewise refer to a proposal submitted by the President,
as recommended by the DBM, before Congress for additional appropriations for existing or
new programs, activities or projects of an NGA or GOCC with fast in-year disbursement rate.
In this case, the bill may be supported by the current fiscal year's sources of financing as
certified by the National Treasurer due to reversion of funds of NGAs or GOCCs resulting
from slow implementation of programs, activities or projects.

Section 35. Release and Expenditure of Public Funds. - The government shall
commence releases of Public Funds covered by an Appropriations Law as soon as such
Law comes into force to ensure timely and efficient disbursement by the appropriate
implementing agencies, subject to pertinent budgeting and auditing rules and regulations.
Upon the implementation of cash-based appropriations, the Appropriations Law shall be
considered the authority of the agencies to contract out and disburse funds, except for
instances provided in the IRR.

Section 36. Availability of Cash-Based Appropriations. — All appropriations shall be
available for release, contractual commitment and disbursement until the end of the fiscal
year. However, Government Agencies may still disburse funds not later than the three (3)
months Extended Payment Period from the end of the fiscal year for goods or services which
have already been delivered or rendered within the fiscal year. Said payments shall be
chargeable against the authorized appropriations of the said preceding fiscal year.

Section 37. Multi-year Contracts.-The DBM shall identify the requirements and/or
prescribe guidelines before agencies may enter into multi-year contracts such as the
issuance of a Multi-year Contractual Authority (MYCA).

In the case of GOCCs, they shall secure prior authority from their respective governing
boards before entering into multi-year contracts.

For solicited multi-year Public-Private Partnership projects approved under Republic Act
(R.A) No. 6957, as amended by R.A. No. 7718, the National Government responsibility shall
be covered by a letter of commitment issued in accordance with the guidelines issued by the
DBM.

In all instances, the disbursements to be incurred for multi-year contracts shall in no case
exceed the cash appropriations for the purpose during the year. Procurement of multi-year
projects shall be subject to the provisions of R.A. No. 9184 and its IRR and the guidelines
issued by the Government Procurement Policy Board (GPPB)

Section 38. Early Procurement Activities. - To ensure full budget utilization, timely
contract implementation and efficient delivery of services, agencies are authorized to
undertake procurement activities from pre-procurement conference until post-qualification of
bids based on their proposed budget in the NEP, COBs or Appropriations Ordinance, in
accordance with the guidelines issued by the GPPB.

For multi-year projects, the issuance of a MYCA by the DBM is required prior to
commencement of any procurement activity. All existing Multi-Year Obligational Authority
shall be understood to refer to MYCA.

‘Agencies may only proceed with the awarding of contract upon approval or enactment of
their respective appropriations or budget authorization document, as the case may be, and
based on the amount authorized therein


Section 39. Impoundment of Appropriations. - The President of the Philippines, upon
recommendation of the DBM may propose the rescission of appropriations from both houses
of Congress, under any of the following:

(a) If the appropriations are no longer required to fulfill the objectives originally sought to
be achieved by the programs, activities and projects covering the same; or

(b) In case of an unmanageable National Government budget deficit.

Unmanageable National Government budget deficit as used in this section shall be
construed to mean that: (i) the actual National Government budget deficit has exceeded the
quarterly budget deficit targets consistent with the full-year target deficit as indicated in the
BESF submitted by the President to Congress pursuant to Section 22, Article Vil of the
Constitution; or (ii) there are clear economic indications of an impending occurrence of such
condition, as determined by the DBCC and approved by the President.

Both Houses of Congress shall act on the proposed rescission within forty-five (45) days
after the receipt of the impoundment proposal from the President by issuing a joint
impoundment Resolution. Within the same period of forty-five (45) calendar days, the
appropriations covered by the Impoundment Proposal shall not, in any way, be rescinded in
relation to the purposes and objectives for which it was appropriated. Congressional inaction
after the 45-day period, is equivalent to an approval of the impoundment proposal.

Impounded funds shall revert to the National Treasury and shall not thereafter be
available for expenditure except by subsequent legislative enactment.

Section 40. Authority to Declare and Use Savings. - The President of the Philippines, the
President of the Senate of the Philippines, the Speaker of the House of Representatives, the
Chief Justice of the Supreme Court, the Ombudsman, the ‘Heads of the Civil Service
Commission, the Commission on Elections, and the COA are hereby authorized to declare
and use savings in their respective appropriations to augment actual deficiencies incurred for
the current year in any item of their respective appropriations. An item of appropriation shall
pertain to the amount appropriated for a program, activity or project in the Appropriations
Law. In the case of programs with several activities and/or projects, each activity and/or
project shall be considered an item of appropriation.

The foregoing constitutional officers authorized to use savings shall be responsible for
ensuring that a semestral and annual report on their respective use of savings shall be
submitted to the President of the Senate of the Philippines and.the Speaker of the House of
the Representatives, copy furnished the DBM. The report shall indicate among others, the
amount of savings generated, the sources and grounds used therefor, and the existing
program, activity or project in their respective appropriations augmented. They shall likewise
ensure that said reports are posted on their respective websites.

The DBM shall determine the procedure, as well as the supporting documents needed in
the declaration and use of savings authorized in this Act.

Section 41. Meaning of Savings. - Savings refer to portions or balances of any released
appropriations in this Act which have not been obligated as a result of any of the following:

(a) Completion, final discontinuance, or abandonment of a program, activity or project for
which the appropriation is authorized; or

(b) Implementation of measures resulting in improved systems and efficiencies and thus
enabled an agency to meet and deliver the required or planned targets, programs
and services approved in this Act at a lesser cost


WOU T.HVeWNe

In case final discontinuance or abandonment is used as basis in the declaration of
savings, such discontinued or abandoned program, activity or project shall no longer be
proposed for funding in the next two (2) fiscal years.

Allotments that were not obligated due to the fault of the agency concerned shall not be
considered savings.

Section 42. Rules on Augmentation. - Augmentation is the act of the constitutional officers
authorized to use savings in their respective appropriations to cover a deficiency in any
existing program, activity or project within their respective offices. A deficiency in a program,
activity or project may result from

(a) Unforeseen modifications or adjustments in the program, activity or project; or
(b) Re-assessment in the use, prioritization and/or distribution of resources.

The particulars of the expenditures to be funded from savings should be within the scope
of, or covered by an existing program, activity or project. The existence of a program, activity
or project regardless of the availability of allotment class/es is sufficient for the purpose of
augmentation,

In no case shall a non-existent program, activity or project be funded by augmentation
from savings or by the use of an appropriations otherwise in this Act.

Section 43. Rules on Modification in the Allotment. - Modification in the allotment is the
limited flexibility given to NGAs to modify or change the allotment within an existing program,
activity or project which shall not entail any augmentation of the amount appropriated for the
said program, activity or project during budget execution. In the case of programs with
several activities and/or projects, modification may only be undertaken within each activity
and/or project.

Modification in the allotment may be undertaken in any of the cases specified in the rules
and regulations issued by the DBM to ensure the uniform implementation among the various
branches of government, the proper recording of modifications, and the timely submission of
reports by all the offices concerned.

PART V
FINANCIAL MANAGEMENT

Section 44. General Fund. — All monies received by NGAs, whether coming from taxes,
fees, charges, penalties, income, dividends, interest earnings, loan proceeds, grants,
donations, asset sale proceeds and such other receivables, shall accrue to the General
Fund and be remitted to the National Treasury, unless otherwise provided by law or
stipulated by covering loan or grant agreements. Monies under the General Fund shall be
made available to support the requirements of the National Government authorized in an
Appropriations Law.

A Special Account in the General Fund (SAGF) shall be established by law only under
exceptional circumstances to record taxes, fees, charges, penalties, income, dividend,
interest earnings, grants, and donations collected, earned or received by NGAs for specified
purposes. All laws authorizing the establishment of SAGFs shall specify the period of use
thereof which shall not exceed three (3) years, or if no period is specified, shall be deemed
to be until the fulfilment of the purpose for which the SAGF was authorized or for three


years, whichever comes earlier. All interests earned by SAGFs shall accrue to the General
Fund. The balance of SAGFs upon their termination shall form part of the General Fund.

All earmarked revenues with significant inflows, a large portion of which are not or not
‘expected to be programmed for disbursement during the year shall be treated as Trust
Funds and recorded as trust receipts. Proceeds from these Trust Funds shall be recorded
only as revenue inflow in the General Fund when programmed to be spent for the year.

The Permanent Committee created under Executive Order No. 292, s. 1987 shall
recommend for approval of the President the change in the treatment of existing SAGFs that
shall be converted into Trust Funds by virtue of the foregoing. The recording of revenue
inflows from these SAGFs shall be governed by the guidelines to be issued by the
Permanent Committee.

Section 45. Special Funds. - In exceptional cases when a SAGF is not suitable for the
‘operations of a fund, Special Funds shall be authorized by law and limited to the following:

(a) Trust Fund — constituted from identified revenue sources and other receipts by NGAs
or public officials acting as trustees, agents, or administrators for the fulfillment of
commitments or accomplishment of specified purposes. Trust Funds shall be
deposited in the TSA;

(b) Revolving Fund — constituted from receipts derived from business-type activities of
NGAs to be used for the operating requirements of said business-type activities and
as such are considered self-liquidating. Revolving Funds shall be deposited in the
TSA or in an Authorized Government Depository Bank (AGDB) upon authority of the
National Treasurer; and

(c) Retained Fund — constituted from taxes, fees, charges, penalties, income, dividends,
or interest earnings collected, earned or received by NGAs which are expressly
authorized by law to be retained by NGAs and utilized for specified purposes.
Retained Funds shall be deposited in the TSA or in an AGDB upon authority of the
National Treasurer.

Notwithstanding the provisions of laws to the contrary, Special Funds may only be
established after evaluation by the Permanent Committee, as to their proper category and
compliance with the foregoing conditions. Any interest earned by Special Funds shall accrue
to said Funds.

Section 46. Review by the Permanent Committee. - The Permanent Committee shall
review all existing SAGFs and Special Funds to validate their compliance with the foregoing
requirements. Upon evaluation, the Permanent Committee shall recommend for approval of
the President the modification and/or termination of said funds as may be necessary.

It shall likewise review all SAGFs created upon the passage of this Act and may
recommend to extend their validity period, but in no case shall the extension exceed three
(3) years at any one time, subject to approval of the President.

The Permanent Committee shall jointly issue guidelines for the establishment, review and
evaluation, accounting and reporting, and termination of SAGFs and Special Funds.

Section 47. Escrow Fund. - Escrow Funds are constituted from funds for which the
government's legal right to use is contingent upon a future event which may or may not
occur. Escrow Funds shall be deposited in the TSA or an AGDB upon authority of the
National Treasurer, and shall subsequently be part of the General Fund upon the occurrence


of the future contingent event. Any interest earned by an Escrow Fund shall accrue to the
said Fund. The amounts under escrow, including interest earned shall form part of the
General Fund upon the occurrence of the future contingent event.

Section 48. Waiver, Abatement, Refund and Compromise Agreements. — No public
official shall waive, abate, refund, or enter into a compromise agreement on a tax liability or
the payment of fees or charges except in accordance with law. All waivers, abatements,
refunds or compromise agreements made by an NGA shall be properly accounted for and
reported. Refund of taxes and other revenues shall be treated as a reduction in revenue
collections.

Section 49. Grants. - NGAs may accept, with prior coordination with DOF, grants, in cash
or in kind, from domestic or foreign sources, for purposes relevant to their functions. In the
case of grants, in cash or in kind, from governments of foreign countries, their agencies and
instrumentalities and international or multilateral institutions or organizations, acceptance
thereof shall be subject to the prior clearance and approval by the President or his
authorized representative based on the recommendation of the Secretary of Finance.

The provisions of this Section shall not apply to: (1) any grant received by LGUs or
GOCCs, except where the grant is received by them on behalf of the NG; or (2) any grant
authorized or covered in accordance with existing law.

Grants received in kind shall be valued and registered in the proper registry of the
National Government.

Section 50. Treasury Single Account. — The TSA refers to the banking arrangement
managed by the BTr wherein the government transacts all monies collected, received or
paid by NGAs in one bank account or a set of linked bank accounts and gets a consolidated
view of its cash position on at least, a daily basis

The TSA shall cover remittances, releases or disbursements from the General Fund,
SAGFs, Special Funds, and any other fund managed by the BTr, except in any of the
following instances:

(a) When monies under the General Fund are placed under investments;
(b) When the BTr is required to hold foreign currency accounts; or
() When authorized by the Secretary of Finance.

The BTr, in coordination with NGAs authorized by law to undertake revenue collection
and administration, shall make the necessary arrangements with authorized agent banks
(AABs) to facilitate the collection and transfer of said revenues to the TSA. AABs shall
deposit said collections to TSA within the period and in the manner prescribed by laws, rules
and regulations.

Section 51.Oversight on Gavernment Bank Accounts. -Notwithstanding any provision of
law to the contrary, the BTr shall undertake any of the following in case of violation of a
provision in this Act and guidelines issued on the implementation of the TSA:


(a) Transfer balances of NGA bank accounts to the TSA;
(b) Close any NGA bank account; and/or
(c) Revoke the authority to open any NGA bank account.

The NGA or GOCC which has opened a bank account, as well as the bank concerned
shall promptly disclose information regarding such account to the BTr.

Section 52. Treasury Cash Management. — The BTr shall issue orders for the conduct of
cash management including the requirement to provide projections on the timing of future
transactions of NGAs taking into consideration that the appropriations law is considered the
authority of the agencies to contract out and disburse funds, except for instances provided in
the IRR.

Section 53. Investments. - The BTr may invest portions of the funds held in the TSA for
‘such periods as the BTr may deem prudent considering cash management requirements
and based on terms and conditions as may be set by the IRR of this Act. Investments are
authorized to be made in any of the following

(a) Deposit with any highly reputable bank following a selection criteria to be issued by
the Secretary of Finance in consultation with the BSP;

(b) Sovereign-issued securities with an investment grade rating; or

(c) Other fixed income securities with an AAA credit rating issued by at least two (2)
reputable international credit rating agencies acceptable to the Secretary of Finance.

The BTr may appoint a fund manager as an agent of the National Government to
undertake the investment of the funds.

Interest earned and other income from investments shall accrue to the General Fund,
unless otherwise provided by law.

Section 54, Management of National Government Borrowings. ~ Borrowings by the
National Government shall be for any of the following purposes:

Financing budget deficits and liquidity shortfalls;

Refinancing and pre-financing maturing debts;

Obtaining foreign currency on behaff of the BSP;

On-lending to an approved entity;

Financing all sums of money paid to fulfill guarantees;

Regulating internal monetary conditions should the necessity arise;
Providing financing to remedy the effects of natural calamities; or
Defraying expenditures covered by appropriations.

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Borrowing under this Act should adhere to the Fiscal Responsibility Principles and
measurable fiscal objectives in the Statement of Fiscal Policy.


Section 55. Borrowings by Government -Owned or -Controlled Corporations. ~ Before
the end of each fiscal year, the Head of a GOCC shall prepare a borrowing program for the
following fiscal year which shall support the COB and for the medium term, both of which
shall include a full financial plan with the details of the loans, refinancing and repayment that
the GOCC intends to take. Said borrowing program, including changes thereon, shall be
subject to the approval of the Head of the NGA overseeing the GOCC, and shall be
submitted to DOF for information, and shall be published in the concerned GOCC website.

GOCCs shall seek approval of DOF for their borrowing activities as defined in the IRR.

Nothing in this Section shall be construed as creating a government guarantee on any
borrowing, loans or refinancing and repayment that the GOCC intends to take.

Section 56. Local Government Borrowings. - An LGU may borrow funds from domestic
and foreign sources in accordance with the Local Government Code of 1991 or any other
applicable law. The financial plan including borrowing program shall be published in the
appropriate government website within seven (7) days after the borrowing program has been
approved.

Section 57. Debt Reporting. - The DOF, through the BTr, shall ensure that the records
include information on the principal, terms of repayment, amounts drawn, interests and
service charges accrued, principal and interests paid, and the balance outstanding, and shall
make the records available in a timely way to the President, Congress and COA when
requested and in accordance with the reporting requirements in this Act.

Each LGU and GOCC shall maintain records and provide reports to the DOF on loans as
required by relevant laws, rules and regulations.

Section 58. Guarantees. - Guarantee, indemnity or security shall be provided to an NGA or
a GOCC as provided by law, and subject to the annual guarantee ceiling prescribed in the
General Appropriations Law, and upon such terms and conditions as the Secretary of
Finance may recommend consistent with relevant laws, rules and regulations. The overall
level of guarantee, indemnity or security shall adhere to the Fiscal Responsibility Principles
laid down in this Act and the fiscal objectives in the Statement of Fiscal Policy.

The DOF shall charge a risk-based fee for any guarantee, indemnity, security, relending
or similar financial accommodation it may extend to a GOCC.

In no case shall the National Government be liable for any borrowings by any agency of
the government except for explicit guarantees as provided by law.

Section 59. Limitation on the Liability of the National Government For Debts of Other
Entities. - The National Government shall not be liable for any implied guarantees asserted
by any person or entity, but only for explicit guarantees extended in accordance with existing
laws, and guarantees in favor of the Government Service Insurance System, Home
Development Mutual Fund, Philippine Health Insurance Corporation, and the Social Security
System in their respective charters.

Section 60. Payments Made for Contingent Liabilities. - Any money paid by the DOF
pursuant to any guarantee, indemnity, or security authorized by law and the expenses
associated with the same shall constitute a debt due the National Government from the
entity for whose benefit the payment on the guarantee, indemnity, or security was made.


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Section 61. Information on Contingent Liabilities. - The DOF shall keep a complete and
updated registry of all contingent liabilities of the National Government, and provide the OCG
with a report on contingent liabilities as of the fiscal year.

PART VI
ACCOUNTABILITY AND REPORTING

Section 62. Financial Management and Internal Control. - The Head of Agency shall be
responsible and accountable for the financial management of the agency which shall include
meeting performance targets, controlling costs, mitigating adverse risks to agency
operations, and ensuring that budgets are managed with integrity and in compliance with
applicable laws. Adequate internal controls shall be ensured and an internal audit function
shall be maintained.

Section 63. Integrated Financial Management Information System. — There shall be an
integrated financial management information system, which shall be the single portal of all
financial transactions and reports to be used by NGAs, GOCCs and LGUs to integrate
budgeting, cash management, accounting and auditing processes.

Section 64. NGA Annual Plans and Proposed Budgets. - The Head of each NGA shall
produce an Annual Plan which shall have a medium term scope, with details for the following
fiscal year, and shall include: information on the strategic priorities for the medium-term,
consistent with the Philippine Development Plan; performance information; summary
proposed budget including financial forecasts assumptions and highlighting significant
capital projects; and other information as required in the IRR, as well as the Budget Call and
other related orders from the DBM. The Annual Plan shall be submitted to DBM during the
budget preparation process consistent with the timetable and other guidelines in the Budget
Call

The Annual Plan of a Department shall incorporate the Annual Plans of its attached
NGAs and GOCCs subject to guidelines prescribed in the IRR.

Section 65. NGA Reporting Requirements. - For greater transparency and accountability,
each Head of an NGA shall:

(a) Submit monthly and quarterly reports on the agency's financial and non-financial
performance to the DBM and OCG, not later than thirty (30) days after the end of
every month and quarter in the format specified by the DBM and shall publish the
same on a government website within the same reglementary period;

(b) Prepare an Annual Report which shall include year-end financial statements,
reporting on non-financial performance compared against the Annual Plan, and other
information as required in the IRR; submit the said Report to the DBM, OCG, and
Congress no later than six (6) months after the end of the fiscal year, and publish the
said Report in a government website no later than seven (7) days after its submission
to Congress.

The monthly, quarterly, and annual reports of a Department shall incorporate the reports
of its attached NGAs and GOCCs subject to guidelines prescribed in the IRR.

Section 66. Service Agreements. - The Head of an NGA may enter into a service and/or
performance agreement with another agency for the latter to provide services charged
against the budget of said principal agency.


Section 67. Corporate Operating Budget. - The Board of Directors or Trustees of a GOCC
shall prepare and submit a COB to the Head of the NGA overseeing said GOCC, the DBM,
and the DOF, not later than ninety (90) days prior to the commencement of the fiscal year,
which shall include, the objectives of the GOCCs and its subsidiaries, the activities to be
undertaken, performance targets and risks; forecasts of financial statements for the next
three (3) years; and other information as may be required in the IRR.

The Head of the NGA overseeing said GOCC shall endorse the Board-approved COB to
the DBM, for the latter's approval. The Head of a GOCC shall publish the DBM-approved
COB of the GOCC on the official website of the Corporation not later than fourteen (14) days
after the approval of the COB.

Section 68. GOCC Reporting Requirements. - For greater transparency and
accountability, each Head of GOCCs shall:

(a) Provide quarterly reports on financial and non-financial performance to the DOF,
GCG and the DBM, no later than thirty (30) days after the end of the quarter, in the
format and time specified by the DOF, GCG and DBM and shall publish it on their
official website within the same period; and

(b) Prepare an Annual Report, which shall include year-end financial statements,
reporting on non-financial performance compared against the COB, and other
information as required in the IRR; submit the same to the overseeing NGA, DBM,
GCG, DOF and Congress no later than six (6) months after the end of the fiscal year.
and publish the said Report in a government website no later than seven (7) days
after its submission to Congress.

GOCCs with subsidiaries shall reflect in its quarterly and annual reports the
aforementioned required information for the whole corporate group, consistent with
guidelines prescribed in the IRR.

Section 69. Service Agreement for a GOCC. - Where GOCCs implement government
non-commercial programs, such as housing provision, irrigation and electrification, and
receive government funding, a service agreement with the NGA overseeing said GOCC shall
specify the terms of delivery of goods or services that the GOCC must provide, and the
funds that the government will pay. Program funds shall be under the budget of the NGA
overseeing said GOCC.

Section 70. Local Government Units. — The Local Chief Executives (LCEs) shall ensure
that adequate internal controls and an internal audit function are maintained.

The LCEs shall provide financial and non-financial performance information of their
respective LGUs to the OCG, DILG, and the BLGF under the DOF, subject to the guidelines
to be issued thereon.

Section 71. Application of Accounting and Auditing Requirements. — Any expenditure
of public money, including government assets or liabilities incurred by and for the
Government regardless of the source of funding, shall be subject to accounting and auditing
rules and regulations promulgated by the COA.

Section 72. Accounting Standards. - The OCG shall specify the basis, standards and
guidelines for appropriations reporting while the COA shall continue to set the basis,
‘standards and guidelines for financial accounting for use by the NGAs, GOCCs and LGUs.


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The Heads of Agencies shall ensure that full, accurate and proper records are kept for
their respective agencies on financial matters and for performance in the production of
goods and services.

The DBM, OCG and COA shall ensure that complete, accurate and appropriate records
of the government are kept on both financial and non-financial performances.

Section 73. Government Consolidated Reporting. - The OCG shall submit a quarterly
report on the consolidated financial performance of the government to the President, which
includes information showing performance against the Appropriations Law, not later than
sixty (60) days after the end of each quarter. This report shall be published in a government
website within seven (7) days after the report is submitted to the President.

The OCG shall prepare the consolidated annual financial statements, not later than six
(6) months after the end of the fiscal year, for submission to the President, Congress and
COA.

Section 74. Internal Audit Standards. — The OCG, in coordination with COA, shall specify
the standards for internal audit in the NGAs, GOCCs, and LGUs.

PART Vil
TRANSPARENCY AND PARTICIPATION

Section 75. People’s Access to Public Financial Information. — Before the start of each
fiscal year, the DBM shall promulgate a Calendar of Disclosures, and shall publish this on
the government website and such calendar shall contain the schedule of release of all
budget documents and information required by this Act and its IRR. The DBM shall monitor
and periodically report to Congress and the public on the compliance of agencies with the
Calendar of Disclosures and other fiscal transparency requirements under this Act and its
IRR,

‘All documents and reports required to be published by this Act and its IRR shall
automatically be made available electronically in a government website. Current and
historical data on government revenues, expenditures, and borrowings, shall be made
available electronically, in open data format, on a government website, subject to guidelines
in the IRR.

Section 76.The People's Budget. - The DBM shall, for every fiscal year, publish citizen-
friendly summaries of the following, subject to guidelines and other specifications in the
IRR:

(a) The Statement of Fiscal Policy in the year of the President's election and any
updates thereafter within thirty (30) days from submission to Congress;

(b) The Proposed National Budget, to be published in electronic format within thirty (30)
days from submission to Congress of the Proposed National Budget;

(c) The General Appropriations Law, to be published in electronic format in a government
website within thirty (30) days from its effectivity; and


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(d) The Annual Fiscal Report, to be published in electronic format in a government
website within thirty (30) days from submission to Congress;

Section 77. People’s Participation in the Budget Process. - The government shall
establish and implement suitable participatory budget mechanisms to facilitate the open,
inclusive, and meaningful engagement of citizens throughout the budget process—from
budget preparation, to legislation, to execution, and to accountability and audit. Such
participatory mechanisms may include consultations and partnerships with civil society
organizations (CSOs), academics and experts, and other individual and organized
stakeholders throughout the annual budget process.

To aid the empowerment of grassroots organizations and communities in the national
budget process, the DBM, DILG, and other relevant agencies shall facilitate a process
wherein CSOs, community organizations and LGUs can jointly identify local priority poverty
reduction and development needs which will serve as input to the formulation of the
Proposed National Budget. Such process shall consider the pursuit of meaningful local
devolution and local accountability, as well as the strengthening of regional and local
development councils’ roles in the national budget process.

Policies and regulations for the establishment of participatory budgeting mechanisms
established by laws shall be formulated and enforced by:

(a) The DBM, together with other relevant agencies of the executive, when it comes to
participation in budget preparation, execution, and accountability;

(b) The House of Representatives and the Senate, through their relevant committees,
when it comes to participation in budget legislation; and

(c) The COA, when it comes to participation in the conduct of audit.

PART VIII
ENFORCEMENT

Section 78. Sanctions and Penalties. - Without prejudice to the provisions of other laws,
the following sanctions and liabilities in case of failure to comply with the reporting and
posting requirements under this Act, shall be imposed:

(a) The DBM shall not approve any request for release of allotments for items of
appropriations covered in the negative list or modification in the allotment nor
recommend the use of savings by the President until such time as the non-compliant
agency has submitted the report/s required under this Act;

(b) The COA may disallow any expenditure charged against augmentation using
savings, and any expenditure due to modification in the allotment, which were made
within the period succeeding the reporting period when the agency failed to comply
with the reporting requirements under this Act;

(c) Failure to report on the income and/or funds retained at the end of a reporting period
shall render all disbursements against such income or funds in subsequent reporting
periods as void, and will render the responsible official liable under existing laws; and


(d) The Congress may motu proprio or upon the request of COA and/or DBM through its
appropriate oversight committee compel the head of the non-compliant agency,
under pain of contempt, to produce the required report/s and to explain reasons for
failure to submit and disclose said report/s.

Without prejudice to the provisions of other laws:

(a) Every contractual commitment, expenditure or payment authorized or incurred in
violation of the provisions of this Act shall be void and shall render the public official
and/or employee authorizing or making such payment and every person in collusion
with said official or employee shall jointly and severally be held liable to the
government for the full amount so paid or received. The public official or employee
who knowingly incurs any contractual commitment or authorizes any expenditure in
violation of the provisions of this Act or takes part therein shall likewise be removed
or dismissed from office, after due notice and hearing, even if no criminal charge is
instituted against him;

(b) Any public official or employee, holding office or employment in a casual, temporary,
holdover, permanent or regular capacity, who shall cause the inclusion of fraudulent
information in any accountability report, shall be penalized with imprisonment not
exceeding five (5) years, or a fine not exceeding One Million Pesos (P1,000,000.00),
or both, without prejudice to disallowances that may be made by COA against
expenditures related to such fraudulent information, provided, that this fine is
reviewed and adjusted periodically to be reasonable;

(c) A conviction under this Act shall carry with it civil liability, which may either consist of
restitution for the damage done or forfeiture in favor of the government of any
unwarranted benefit derived from the act or acts in question, or both, at the discretion
of the courts, in addition to possible administrative liability; and

(d) Private individuals who shall conspire with the erring Public Officials or Employees,
whether as co-principals, accomplices or accessories, in the commission of any
violation of this Act shall be subject to the same penalties as the Public Officials or
Employees and shall be tried jointly with them

Section 79. Jurisdiction. - Actions under this Act shall be cognizable by the courts,
tribunals, bodies, agencies or authorities with appropriate jurisdiction under existing laws.

PART IX
FINAL PROVISIONS

Section 80. Implementing Rules and Regulations. - The DBM in consultation with the
DOF, BTr, NEDA and COA, and in coordination with agencies concerned, shall issue the IRR
necessary for the proper implementation of this Act, within ninety (90) days from the
effectivity of this Act. The IRR may be amended by the DBM, in coordination with the
agencies concerned, as the need arises.


COI AH AWNE

Section 81. Transitory Provisions. - The DBM, DOF, BTr, NEDA and COA shall produce
and submit within thirty (30) days from promulgation of the IRR, a Transitory Plan for
information, to the Joint Congressional Oversight Committee on Public Expenditures to
‘ensure the proper implementation of the provisions of this Act, presenting the Sections that
will not be implemented on the passing of this Act and those requiring compliance with
certain conditions or the happening of events before the provisions herein may be
implemented.

Section 82. Repealing Clause. - Any law, presidential decree or issuance, executive order,
letter of instruction, administrative order, proclamation, charter, rule or regulation and/or parts
thereof contrary to or inconsistent with the provisions of this Act is hereby repealed, modified
or amended accordingly.

Section 83.Separability Clause. - If for any reason, any section or provision of this Act is
declared unconstitutional or invalid, other sections or provisions which are not affected
thereby shall continue to be in full force and effect.

Section 84. Effectivity Clause. - This Act shall take effect fifteen (15) days following its
publication in the Official Gazette or in two (2) newspapers of general circulation.

Approved,