FIFTE S OF THE REPUBLIC OF THE PHILIPPINES

ENTH CONGRE

HOUSE OF REPRESENTATIVES

HB. No. _ 3382

ELO PALMONI

INTRODUCED BY THE HONORABLE ANG

EMENT REFORMS FOR
ATIONS AND FOR

AN ACT TO ESTABLISH FINANCIAL MANAG
VERNMENT RESEACH AND DEVELOPMENT OP!
OTHER PURPOSES

EXPLANATORY NOTE

Research & Development (R & D) are drivers of economic growth: Many studies here
and abroad have shown that over the long.term economic growth is determined by
population and technological changes (Solow' 1956, and Swan? 1956). It has also been
shown that the positive impacts of technological change can be enhanced and maintained
over time through deliberate and systematic investments in R & D and putting in place
appropriate policies and programs (Paderanga’).

In the Philippines the contribution to the economy of the use of technology in the
production system is about 40% while in developed economies it is about 70% showing
that the Philippines is lagging behind in the application of technology in the production
systems and that there is therefore much room for improving the economy through R &
D

‘The conduct of R & D in the country is hampered among other things by the bureaucratic
procedures in financial management that are regulatory rather that facilitative thus st
initiatives and creativity in research and development activities". A dramatic example is

lation where the funds for the implementation of a research project have already
been transferred to the implementing agency but these funds could not spent to acquire
needed equipment because of constraining procurement procedures.

A long-sought solution to this situation are administrative reforms and a system of
incentives that will encourage and stimulate researchers to undertake more relevant and
quality R & D programs and activities vital to national development’. More supportive

' Solow, R. 1956. A contribution to the theory of growth. Quarterfy Journal of Economics 70:65-94.
* Swan, T. 1956. Economie growth and capital accumulation Econ
* Paderanga, C. 2009). R & D and Innovation in the Philippines: Iss
* Sto. Tomas, P. A. 1992. Message. Accounting and Auditing Manual for Research Operations (Book 1).
Phitippine Council for Agriculture, Forestry and Natural Resources Research and Development,

* Perez, C. B. 1992, Foreword. Accounting and Auditing Manual for Research Operations (Book I).
Philippine Councit for Agriculture, and Natural Resources Research and Development.



ive guidelines in financial management will encourage fruitful endeavors and
bear significant breakthroughs in the field of R & D*.

One researcher from the University of the Philippines Los Bafios states that “the primary
problem that slowed down the implementation of the project was the bureaucratic system
of disbursing funds including issuance of appointments to project staff. ... Researchers
have to spend considerable time [to administrative activities] which could otherwise be
channeled to the research.” Another researcher complained that “the funds have already
been transferred to our agency but could not be used to purchase the needed equipment
because of the many and difficult procurement requirements”

This Act seeks to make the financial management of research and development more
supportive and facilitative for government R & D and extension activities in the country.

ANGELO B. PALMONES

nriquez, S. Jr, 1992. Message. Accounting and Auditing Manual for Research Operations (Book 1).
Philippine Council for Agriculture, Forestry and Natural Resources Research and Development.

Tolentino, D. Jr. 2010. Community-based Production System for Selected Trees and Vines in Support of
the Furniture and Handicraft Industries. University of the Philippine Los Baiios. PCARRD-funded project.



FIFTEENTH CONGRESS OF
THE REPUBLIC OF THE PHILIPPIN
HOUSE OF REPRESENTATIVES

1LB.No.__ 3382

INTRODUCED BY THE HONORABLE ANGELO PALMONES,

. MANAGEMENT REFORMS FOR
EACH AND DEVELOPMENT OPERATIONS AND FOR
OTHER PURPOSE:

GOVERNMENT RE

Be enacted by the Senate and the House of Representatives of the Philippines in
Congress Assembled:

ART
TITLE, DECLARATION O1

CLE
POLICY AND OBJEC

VES:

SECTION 1. Title - The act shall be known as the 2010 Financial Management Reforms
Act for R & D.

‘TION 2. Statement of Policy and Objectives - ‘The Phil s firmly believes that

science and technology enhance the economy's potential and competitiveness and are

essential to national development. It is the declared policy of the state as enshrined in the
ion that “the shall give priority to research and development,
innovation and their utilization”. Furthermore, the same Constitution d.
that it shall “support indigenous, appropriate and self-reliant scientific and technologi
capabilities, and their application to the country’s productive system and national life”.

For this purpose a financial management system supportive and facilitative to research
and development system of the Philippines shall be pursued to attain the maximum return
of the country’s investments. Financial management reforms to improve systems of fund
disbursements, R & D supplies and equipment procurement, personnel management shall
be established for a more effective and efficient systems suited to the needs of the
scientific communities.

SECTION 3. Objective ~ This Act shall provide financial management and R & D

operational guidelines relevant and supportive to the peculiar requirements and concerns
of the research and development communities.


ARTICLE IT ’
DEFINITION OF TERMS

SECTION 4, Definition of Terms - For the purpose of this Act the following terms will
have these corresponding definitions:

Accreditation ~ refers to the process by which the Department of Science and
Technology (DOST) recognizes an organization as an agency undertaking research and
development and related activities such as but not limited to extension activities

Accredited agencies ~ are research agencies of government, whether undertaking
research, development and extension wholly or in part, full-time of part time such as the
academic institutions that have been recognized by DOST and are permitted to use the
Manual of Procedures for Financial Management.

Grants-in-Aid ~ ave funds provided by funding institutions to R & D implementing
agencies for the conduct of research, development and extension activities.

Incomes ~ are monies received by R & D agencies for services rendered such as technical
services laboratory tests and analyses, licensing fees, training fees, the sale of developed 4
technologies, fabricated equipment and publications and for other similar services

Research and development ~ refers to the conduct of research, whether in natural,
physical or social sciences (including economics) including extension activities by
government agencies.

Research and development agencies ~ are agencies of government or academic
institutions conducting research, development or extension whether such activities are
done only by a sector, division or segment of the agency

Research equipment ~ refers to but not limited to tools, machineries (including fabricated
ones), laboratory tables and chairs, computers, cameras, calculating machines, and other
that are needed in the conduct of research, development and extension activities

Research supplies and materials - includes but not limited to chemical, reagents, plants,
animals, minerals, office supplies that are necessary in the conduct of research,
development and extension activities or R & D institutions.

ARTICLE IT
FINANCIAL MANAGEMENT AND PROCEDURES

SECTION 5. Financial Management Reforms ~ The Department of Science and
Technology (DOST) in consultation with the Department of Budget and Management
(DBM) and the Commission on Audit (COA) and other concerned agencies of


government shall formulate the rules, regulations and operational procedures on
accounting and budgeting systems for the research and development communities
Within 180 days from the approval of this Act the DOST shall issue a Manual of
Procedures for Financial Management for use by accredited science and technology
institutions of the country. This manual shall be revised or updated to meet changing
needs and requirements of the scientific communities.

For agencies where research, development and extension are done by a sector or division
or other segment, the Manual for Financial Management shall only apply to those sectors,
divisions or segments of the agencies. The other sectors, divisions or segments that are
not conducting research, development or extension shall not be covered by the Manual of
Financial Management

SECTION 6. Uniformity of Accounting Procedures for the Scientific Communities — All
government agencies conducting research and development including extension activities
shall have a uniform financial management procedures by adopting the Manual of
Procedures for Financial Management issued by the DOST. These government agencies
conducting research, development and extension activities shall first be accredited by the
DOST as part of the R & D Financial Management System. The DOST shall establish the
procedures for accreditation.

SECTION 7. Fund Releases for R & D by the Department of Budget and Management
(DBM) ~The appropriations for research, development and extension in the natural,
agricultural (including fisheries and forestry), technological and engineering sciences
including social sciences (including economic research, development and extension) for
department and bureaus, offices or agencies of government shall be released only upon
the recommendation of the Secretary of DOST. The DOST shall issue the necessary
guidelines for the implementation of this provision.

SECTION 8. Disbursement of Funds ~ Grants-in-Aid as well as other local funds shall be
disbursed by the source agencies as ouitright expenses. They shall be released to the R &
D implementing agencies who shall deposit said funds in a government depository bank
as Trust Accounts. The provisions of EO 338 (Directing the Deposit of Cash Balances to

the National Treasury) on the prohibition in the establishment of trast funds are hereby
revoked

Funds regardless of sources intended for the conduct of research, development and
extension including the establishment of
equipment for R & D can be realige

frastructures and purchase of supplies and
ed to meet the requirements of the projects

Unexpended fund balances at the termination/conclusion of research, development,
extension and R & D infrastructure projects shall not revert back to the National Treasury
for three years and can be utilized (o fund priority science and technology projects with
proper recording and reporting. The Head of the agency is hereby given the authority to
realign the unexpended balances but must inform (not fo obtain permission) DOST for



the use of such balances. If after three years there are still balances from a specific project
such balances shall revert back to the National Treasury.

SECTION 9. Use of Income ~ Incomes derived by a research and development agency.
accredited by DOST, from fees from technical services such as but not limited to
laboratory tests and analyses, licensing fees, training fees, the sale of developed
technologies, fabricated equipment and publications can be used to defray expenses
fabrication, repair, maintenance and upgrading of research equipment and facilities,
testing and calibration facilities, printing of publications, purchase of specialized
equipment, technical books, supplies and materials and for such other purposes that may
be deemed necessary by the head of agency, Provided, however that such incomes shall
not be used for payment of salaries and wages and for repair of vehicles.

Incomes can likewise be deposited in a government depository bank as a Trust Account.

ARTICLE IV
IMPORTATION OF R & D EQUIPMENT AND SPECIALIZED SUPPLIES AND
MATERIALS

SECTION 9. Exemption from Customs Duties and Other Taxes — All items equipment,
supplies and materials, including vehicles for research, development and extension and
related activities imported by DOST and accredited agencies, or by local or international
agencies accredited by DOST shall be exempt from payment of custom duties or other
taxes.

Likewise, specialized equipment for science and technology educat
from payment of custom duties.

shall be exempted

SECTION 10. Customs Procedures on Importation of R & D Equipment and Other
Supplies and Materials ~The DOST and the Department of Finance (DOF) shall
establish the rules and regulations on the exemption of taxes on the importation of R & D

equipment and supplies and materials including vehicles as well as educational
equipment

ARTICLE V
MISCELLANEOUS PROVISIONS,

SECTION 11. Implementing Rules and Regulations ~The DOSY in consultation with
concerned agencies of government shall formulate the implementing rules and
regulations within 180 day of approval of this Act.

SECTION 12. Separabitity cia
declared invalid or unconstitutic
provision of this Act.

ise — If any section or provision of this Act shall be
1, such shall not invalidate any other section or


SECTION 13. Repealing Clause ~ All laws, decrees, executive orders, rules and
regulations or parts thereof which are in conflict with the provisions of this Act are
hereby repealed or modified accordingly.

SECTION 14. Effectivity — This Act shall take effect thirty (30) days following its full
publication in the Official Gazette or two(2) major daily newspaper of general
circulation

Approved