THIRTEENTH CONGRESS OF THE 
REPUBLIC OF THE PHILIPPINES 
First Regular Session 
INTRODUCED BY HON. MANUEL B. VILLAR, JR. 
Our country is currently enmeshed in the conundrum of solving the financial 
slump that has beset our economy. With the widening gape of budget deficit and the 
declining performance of revenue-generating agencies such as the Bureau of Internal 
Revenue, Bureau of Customs and Bureau of Treasury, there is a need to craft a realistic 
and effective fiscal management strategy. 
Management, as a science suggests two ways by which we can address the losses 
a business sustains. One is to raise the revenues and another is to reduce the costs. 
Raising the level of revenues requires motivation on the part of revenue-generating 
agencies. This is addressed by the bill by setting aside a reasonable portion of the 
savings and income of agencies: (a) to augment the budget for maintenance and other 
operating expenses (MOOE) of the agency, and (b) to grant commissions to collecting 
officers, in the case of the Bureau of Internal Revenue and the Bureau of Customs. 
Increasing the MOOE from the savings and income of the agency promotes self- 
sufficiency among agencies, which reduces their dependence to the national subsidies. 
This is also a sound fiscal strategy because there is a proper matching of marginal 
revenues and profits. As an incentive to collecting officers of the BIR, BoC and BTr and 
other revenue-operating agencies, a percentage of revenues also goes to their 
commissions thus, encouraging them to improve their collection performance and 
eliminating the possibility of graft and corruption. 
Another feature of the bill is the classification of income into primary and 
incidental income. “Primary Income” means the income generated in the discharge of a 
Government department, bureau, agency or office’s primary functions, including but not 
limited to the revenues, taxes, duties, customs, tariffs, import quotas, generated or 
collected by the Bureau of Internal Revenue (BIR), Bureau of Customs (BoC), Bureau of 
Treasury (BOT), Land Transportation Franchising Regulatory Board (LTFRB), Land 
Transportation Office (LTO) and other revenue-generating agencies. On the other hand, 
“incidental income ” means the income generated by the discharge of Government 
department, bureau, agency or office’s incidental Eunctions including but not limited to 
user’s charges, regulatory revenues, fines, rents, legal fees, filing fees, permit fees, 
publication fees, The rationale in classifying the income is to pave way to a better and a 
more rationalized grant of incentives to agencies. For example, a bigger share goes to the 
agency f?om incidental income than in primary income because the latter serves as the 
lifeblood of the National Government. 
The prompt and immediate passage of this bill deserves utmost attention. 
n 
MANUEL B. 
Senato 


‘ 
THIRTEENTH CONGRESS OF THE 
REPUBLIC OF THE PHILIPPINES 
First Regular Session 
INTRODUCED BY HON. MANUEL B. VILLAR, JR. 
AN ACT GRANTING TO GOVERNMENT DEPARTMENTS, ATTACHED 
AGENCIES, OFFICES 
OTHER INST 
MENTALITIES OF THE 
GOVERNMENT THE RIGHT TO USE THEIR INCOME AND SAVINGS AS AN 
INCENTIVE TO BOOST THEIR PERFORMANCE IN THE COLLECTION OF 
REVENUES AND TO PROMOTE SELF-SUFFICIENCY AMONG THEM 
Be it enacted by the Senate and House of Representatives of the Philippines in Congress 
assem bled: 
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SECTION. 1. Short Title. -- This Act shall be cited as “Government Agencies ’ Right Tu 
Use Their Savings and Income Act of 2004.” 
SEC. 2. Declaration of Policy. - It is the policy of the State to encourage savings and 
boost the generation of revenues among Government offices with the end goal of 
increasing the Government revenues. It is also the policy of the State to provide quality 
services to the people, which can be attained by the upgrading of Government equipment 
and facilities using the funds realized by respective Government Offices. Thus, it is also 
the policy of the state to promote self-sufficiency among Government offices and the 
proper matching of marginal revenues and marginal costs. 
SEC. 3. Definition of terms. - For purposes of this Act, the following terms shall be 
understood as follows: 
(a) “Savings ” means the portions or balances of any programmed appropriation 
free of any obligation or encumbrance still available (1) after the completion or final 
discontinuance or abandonment of work, activity or purpose for which the appropriation 
is authorized; (2) from balances of appropriation arising from unpaid compensation and 
related costs pertaining to vacant positions and leaves of absence without pay; and (3) 
from remaining balance of appropriation realized from the implementation of the 
collective negotiation agreement which resulted to improved systems and efficiencies and 
thus enabled an agency to meet and deliver the required or planned targets, programs and 
services approved at a lesser cost. 
(b) ‘‘Income ” means the revenue realized by a government office either primary 
or incidental. 
(c) “Primary Income” means the income generated in the discharge of a 
Government department, bureau, agency or office’s primary functions including but not 
limited to the revenues, taxes, duties, customs, tariffs, import quotas, generated or 
collected by the Bureau of Internal Revenue (BIR), Bureau of Customs (BoC), Bureau of 
Treasury (BOT), Land Transportation Franchising Regulatory Board (LTFRB), Land 
Transportation Office (LTO) and other revenue-generating agencies. 
(d) “Incidental Income” means the income generated by the discharge of 
Government department, bureau, agency or office’s incidental functions including but 
not limited to user’s charges, regulatory revenues, fines, rents, legal fees, filing fees, 
permit fees, publication fees. 
(e) “Primary functions ” means the functions of the government office, which are 
expressly conferred upon it by a statute as the principal purpose for its creation. 
(f) “Incidental functions” means the functions of the government office, which 
are impliedly conferred upon it by a statute as necessary to the execution of its primary 


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functions. Incidental functions may also be expressly conferred upon by a statute but 
only exist to carry out the details of primary functions. 
(g) “Maintenance and other operating expenses” means the cost of Government’s 
operational requirements, including supplies, materials and equipment, including 
expenses incurred in the repair and installation. 
SEC. 4. Coverage. -- The provisions of this Act shall apply to Government departments, 
attached agencies, offices and other instrumentalities of the Government. 
SEC. 5. Re-alignment of savings. - In order to provide incentives to government offices 
to increase their savings from their appropriated budget, the department secretary or the 
bureau or agency head, upon the recommendation of the Secretary, shall be authorized to 
re-align not more than fifty percent (50%) of its savings, for its maintenance and 
operating expenditure provided that the President shall approve the same. The Senate 
President, House Speaker, Chief Justice and Heads of Constitutional Commissions may 
also approve the re-alignment of savings as referred to in this Section in their respective 
jurisdiction. 
SEC. 6. Use of Income. - The department secretary or the bureau or agency head, upon 
the reoommendation of the secretary, is authorized to use their income realized in 
accordance with the following: 
(a) Primary Income. -- The Bureau of Internal Revenue (BIR), Bureau of Customs 
(BoC), Bureau of Treasury (BOT), Land Transportation Franchising Regulatory 
Board (LTFRB), Land Transportation Office (LTO) and other revenue-generating 
agencies may utilize not more than four (4%) percent of its primary income for its 
maintenance and operating expenditure, and one (1%) percent thereof for the 
commissions and allowances of collecting officers. 
(b) Incidental Income. -- Any government office not otherwise provided for in 
Section 7 of this Act may utilize not more than forty percent (50%) of its 
incidental income for its maintenance and operating expenditure. Provided that 
the Bureau of Internal Revenue (BIR), Bureau of Customs (BoC), Bureau of 
Treasury (BOT), Land Transportation and Franchise Regulatory Board (LTFRB), 
Land Transportation Office (LTO) and other revenue-generating agencies may 
still be covered under this sub-section in relation to their incidental income. 
SEC. 7. Special Provision for Hospitals and Schools Owned and Controlled by the 
Government. - (a) All income of special hospitals, medical centers, institute for disease 
and prevention and control, and other national government hospitals of the Department of 
Health shall be retained and constituted as a trust fund for the use of the said hospitals, 
medical centers, institute for disease prevention and control and the other “DOH- 
retained” national hospitals. Provided, that, at least twenty-five percent (25%) of the said 
income shall be used to purchase and upgrade hospital equipment used directly in the 
delivery of health services. Provided, fkrther, that no amount of the said income shall be 
used for the payment of salaries and other allowances. 
(b) Schools owned by the government are also authorized to use all their income realized 
for maintenance and operating expenses and for the upgrading of school facilities, 
equipment and laboratories. 
SEC. 8. Approval of Budget. - Re-alignment of savings and use of income as referred to 
in Sections 5, 6, and 7 of this Act shall require the submission by the department, bureau, 
agency or office of a special budget to the Department of Budget and Management 
(DBM) and the approval of the President except in the case of the legislative department, 
judiciary department, office of the Ombudsman and constitutional commissions. 
The Senate President, House Speaker, Chief Justice, Ombudsman and Heads of 
Constitutional Commissions may also approve the use of income as referred to in this 
Section in their respective jurisdiction. 


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SEC. 9. Reversion of Unused Savings and Realized Income. -- Savings and income not 
otherwise authorized for use as provided for in this Act shall be remitted to the National 
Treasury. 
SEC. 10. Applicability of theprovisions. - It shall be understood that no provision of this 
law shall impair the power of the President, Senate President, House Speaker, Chief 
Justice, Ombudsman, and Heads of the Constitutional Commission to exercise fiscal 
autonomy. 
SEC. 11. Joint Legislative-Executive Oversight Committee-There is hereby created a 
joint Legislative-Executive Oversight Committee to monitor and review the effective 
implementation of the provisions of this Act. 
a) The Committee shall be composed of three (3) members from the Senate and three (3) 
members from the House of Representatives. The other three members shall be the 
Secretary of the Department of Budget and Management, the Secretary of the Department 
of Finance and the Treasurer of the Philippines. 
b) The Oversight Committee shall be headed by the Chairman of the Senate Committee 
on Finance and the Chairman of the House Appropriations Committee. 
c) The members from the Senate, one from the majority and the other from the 
minority shall be appointed by the Senate President. The members fi-om the House of 
Representative, one from the majority and the other from the minority, shall be appointed 
by Speaker. 
SEC. 12. Implementation. - The Secretary of the Department of Budget and Management 
jointly with the department secretaries concerned shall promulgate the implementing 
rules and regulations thirty (30) days after the approval of this Act. 
SEC. 13. Repealing Clause. Boak V of the Revised Administrative Code and all other 
laws, decrees, executive orders, rules, and issuances inconsistent with this Act are hereby 
repealed, amended or modified accordingly. 
SEC. 14. Separability Clause. If any portion or provision of this Act is declared 
unconstitutional or invalid, the other portions or provisions hereof which are not affected 
thereby shall continue in full force anh effect. 
SEC. 15. EJtjcectivity Clause. This Act shall take effect fifteen days following its 
publications in the Official Gazette or in any two newspapers of general circulation. 
Approved.