és
3 RECEIVED

2 qe SUL 25 2ais

EIGHTEENTH CONGRESS )
REPUBLIC OF THE PHILIPPINES )
First Regular Session )

HOUSE OF REPRESENTATIVES

‘introduced by Representative Rufus B. Rodriguez

House Bill No. 2775
EXPLANATORY NOTE

Promises to reduce poverty always feature prominently in Philippine presidential
campaigns, and every administration since 1986 has prioritized poverty reduction in its
Govelopment plans. Institutional reforms have taken place that significantly changed the
‘scope and breadth of poverty policy making in the country. As the concept of poverty
SCelved in the literature, the treatment of poverty by various Philippine governments also
saw dynamic changes. Some innovative program interventions were introduced in the
process. Each president has had specific poverty reduction project: The Tulong sa Tao
Program of the Aquino Administration; the Social Reform Agenda (SRA) of the Ramos
progratation. the Lingap para sa Mabihirap program of President Estrada, and the Kapit
Bisig Laban sa Kahirapan (KALAH)) Program of the Arroyo Government Overall, however,
the implementation of government poverty programs has been weak and politicized.

A considerable number of cases of broken homes are found in our society. Since the
mothers often have the custody of their offspring, they find great difficulty in making 2
ro fortable living. ‘They struggle to live from hand to mouth. They may be surviving on the
meager funds from our welfare department, but the amounts they receive are usually quite
insufficient to meet their basic needs.

With the advent of modernization that we are going through, the number of such
disadvantaged groups may be increasing. They live in squatter areas around cities, not
because they are attracted to the bright lights of cities, but rather because they find it easier
to get some income out of the odd jobs they may find.

We cannot say at this juncture that our social security system is able to capture each
and every such case. Our social security system is currently confined to the ‘employed. But
os we know it, we do not have the financial ability to capture all these unfortunate cases,
eee soe not imply that we have done nothing to take care of them. The extent of
development commitment that our government has continuously demonstrated in the
poverty eradication programs, since independence is highly commendable. We are still
pursuing these policies with more vigor and enthusiasm as reflected in our government
poverty reduction program

The current undertaking by the government in building low-cost dwellings is yet
another evidence of the existence of those unfortunate families who just cannot afford to
another basic needs otherwise. The fact is that we have so far put a lot of emphasis on
Theurkan areas. The rural dwellers have received relatively less attention. There are also
those who are completely ignorant of the availabilty of welfare aids. There are also cases of
those Who have some pride in themselves not to approach the appropriate authorities. The
pertinent question is how do we enlarge the social security net to capture everyone in this
situation

For our Muslim brothers, they believe that life on earth is a test for humans. All their
actions will be judged and rewarded accordingly in the hereafter. This test, among others,


aims to know how people deal with differences in income and wealth put under their
disposal. In this respect, both the poor and the rich are expected to behave in accordance
with certain principles laid down by Islam.

The Islamic concept of social security system rests on the principle of social justice
which demands that everyone has the right to live. Life itself is sacred and that suicide is
completely abhorred. Wealth is considered a basic necessity along with religion, education
or intellect, progeny and the physical self. The term physical self implies all the basic human
needs, such as minimal food, drink, clothing and shelter which are required to maintain one’s
life. The concept of basic needs in Islam clearly covers a wider spectrum of necessities
which are aimed at fulfiling both the physical and spiritual needs. Social justice demands
equitable income and wealth distribution. It is based on this principle that the Islamic social
security system ensures annual stipend to every individual in need.

The social security system of Islam is Divine in character and based entirely on the
Qur'an and Sunnah. It is a system to accomplish the high standard of morality expressed
under the term righteousness. Keeping in view the obligations enjoined in the above verse,
which man has to fulfill in life, the Qur'an affixes enormous significance to offer material help
to the needy and the poor. Islam discourages extreme income inequality and poverty.

In Islam, right from the beginning, fulfilment of basic needs of everyone who is
unable to meet his/her needs was conceived to be the concern of the State. Zakat is the first
institution of social security in Islam. Payment of 2.5 percent of his/her savings for the zakat
fund is one of the fundamental duties of a Muslim. The State is responsible to collect zakat
‘and make arrangements for its distribution.

This bill proposes to institutionalize the payment of zakat by Muslims in the
Philippines and proposes the creation of the Philippine Bait-ul-Mal. The Bait-ul-Mal would be
‘a new form of public organization with corporate like features that increase managerial
flexibility but strengthen performance requirements and accountabi

The establishment of the Philippine Bait-ul-Mal and allowing it to exercise the powers
and have the characteristics of government corporate entities may help contain, and
possibly, eliminate the prevailing poverty in Muslim communities throughout the country.

Finally, pursuant to the spirit of the provision of the Constitution of the Philippines
that, in order to promote the advancement and effective participation of the Filipino Muslims
to alleviate poverty and promote socio-economic development in the country in general and
the Autonomous Region in Muslim Mindanao in particular, the State shall consider their
customs, traditions, beliefs and interests in the formulation and implementation of its policies.
The Islamic law and its principles of equity and justice, to which the Filipino Muslim
communities adhere, provide an essential basis for the enforcement, with the full sanction of
the State of the zakat and sadaqah system among Filipino Muslims that shall redound to the
attainment of a more ordered life amongst them.

Itis in this light that the immediate approval of this measure is earnestly sought.

RUFUS B. RODRIGUBZ

/


EIGHTEENTH CONGRESS )
REPUBLIC OF THE PHILIPPINES )
First Regular Session )

HOUSE OF REPRESENTATIVES
i Introduced by Representative Rufus B. Rodriguez
2775,

House Bill No.

AN ACT
INSTITUTIONALIZING THE PAYMENT OF ZAKAT BY MUSLIMS IN THE PHILIPPINES,
CREATING THE PHILIPPINE BAIT-UL-MAL, APPROPRIATING FUNDS THEREFORE,
AND FOR OTHER PURPOSES

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

SECTION 1. Short Title. - This Act shall be known and cited as the ‘Philippine Bait-
ul-Mal Act’.

SEC. 2. Declaration of Policy.- It is the policy of the State to provide for basic
necessities of life such as food, clothing, housing, education and medical relief for all
citizens, irrespective of their sex, caste, creed or race, who are permanently or temporarily
unable to earn their livelihood on account of sickness or unemployment or circumstances
beyond their control. Towards this end, the State shall create a Bait-ul-Mal Fund for Filipino
Muslims, provide assistance to the destitute and needy, widows, orphans, invalid, infirm and
such other persons, and thereby save them from hardship and suffering and to enable them
to lead an honorable life in the society, that operates based on the basic principles and
rulings of Islamic Shari'a within the purview of the Philippine Constitution that shall be
‘endowed with fiscal and administrative powers necessary to discharge its mandate with
excellence.

SEC. 3. Definition. - When used in this Title:

(A) The term “Bait-ul-Mal” means the welfare fund, established under Section
4 of this Act;

(8) The term “Board” means the Bait-ul-Mal Board constituted under
Section of this Act for the administration of Bait-ul-Mal;

(C) The term “Chairperson” means the Chairperson of the Board;

{D) The term “Employee” means an employee who is holding neither
managerial nor supervisory position as defined under existing provisions
of the Labor Code of the Philippines, as amended;

(E) The term “Chief Executive Officer’ means the chief executive officer
(CEO) of the Bait-ul-Mal;

(F) The term “Member” means a member of the Board;

(G) The term “Shari'ah” means the Islamic laws derived from the Al-Qur'an
and As-Sunnah;

(H) The term “As-Sunnah’ means the acts or sayings of Prophet Muhammad;

(1) The term “Zakat” means tithe or obligatory contribution assessed based
on certain assets owned by a Muslim that satisfy certain conditions and is
to be distributed to specified categories of beneficiaries; and

(J) The term “Sadawah” means voluntary contribution.


SEC. 4. Creation of the Philippine Bait-ul-Mal; Corporate Powers. — There is hereby
established a public organization to be known as the Philippine Bait-ul-Mal, herein after
foferred to as the Bait-ul-Mal, which shall be responsible for the implementation of zakat and
Sadaqah system among Muslims in the Philippines and shall be attached to the Department
of Social Welfare and Development (DSWD). It shall be organized within 180 days from the
effectivity of this Act.

The Bait-ul-Mal shall have its principal place of business in Metro Manila and may
‘establish branches and offices in such other places as may be deemed necessary for the
performance of its mandate.

SEC. 5. Responsibility and Primary Objective. - The primary responsibility and
objective of the Bait-ul-Mal is to alleviate poverty, promote and accelerate the socio-
‘economic development of the Autonomous Region in Muslim Mindanao by institutionalizing,
centralizing and coordinating the center of collection of zakat and sadagah, and the
distribution thereof; and to carry out charitable, humanitarian, and other social services
based on the Islamic concept of social welfare system as ascertained by the Sharia
Advisory Council consistent with fiscal policy and zakat/sadaqah collection targets.

SEC. 6. Shari'a Advisory Council. - There is hereby created a Sharia Advisory
Council of the Bait-ul-Mal which shall be composed of not more than five (5) members,
selected from among Islamic scholars and jurists of comparative law. The members shall be
elected at an annual Board meeting of the Bait-ul-Mal. The Board is hereby authorized to
select the members of the first Shari'a Advisory Council and to determine their
remunerations.

SEC. 7. Functions of the Shari'a Advisory Council. - The functions of the Shari'a
Advisory Council shall be to offer advice and undertake reviews pertaining to the application
of the principles and rulings of the Islamic Shari'a on zakat and sadaqah transactions, but it
shall not directly involve itself in the operations of the Bait-ul-Mal

‘Any member of the Shari'a Advisory Council may be invited to sit in the regular or
special meeting of the Board of the Bait-ul-Mal to expound his views on matters of Islamic
Shari'a affecting a particular transaction but he shall not be entitled to vote on the question
presented before the board meetings.

SEC. 8. Powers and Functions of the Board. - The Bait-ul-Mal shall exercise the
powers and duties heretofore provided. Such powers and duties shall include the
‘assessment and collection of zakat from Muslim zakat payers, receive sadaqah and the
enforcement of all forfeitures, penalties and fines connected therewith, including the
‘execution of judgments in all cases decided in its favor by the regular courts and the Shari'a
Court. The mechanics of the assessment and collection of zakat and receiving of sadaqah
shall be provided for in the Implementing Rules and Regulations (IRR) for this Act. The said
IRR shall prescribe, among others, the persons liable to zakat, rates of zakat, items or
assets/properties subject to zakat, zakat base, time, venue and manner of payment of zakat,
etc.

The Bait-ul-Mal shall give effect to and administer its poverty alleviation program to
Filipino Muslims, and perform the following services connected therewith:

a. Provide financial assistance to the destitute and the needy, widows,
orphans, invalid, infirm and other needy persons;

b. Render help for rehabilitation of the persons specified in clause (a) in
various professions or vocations;

c. Provide assistance to children of the persons specified in clause (a) for
educational pursuits;

4 Provide residential accommodation and necessary facilities to the persons

specified in clause (a);


e. Provide free medical treatment for indigent sick persons and to sel up free
hospitals, poor houses and rehabilitation centers and to give financial aid
to charitable institutions, including industrial homes and other educational
institutions established specially for the poor and needy;

f Provide stipends to educated youth during their training before their
‘employment;
9. Provide stipends and financial assistance to brilliant but poor students who

cannot afford to acquire higher technical or medical education abroad due
to financial constraints;

h. ‘Sponsor and promote a ‘self-employment scheme;

i Establish an Ummah credit union that would extend micro loans and
assistance to poor Muslim entrepreneurs; and

i. Any other purpose approved by the Board having regard to the aims and
objectives of the Bait-ul-Mal.

In addition, the Bait-ul-Mal shall have the following corporate powers:

Prescribe its operating policies;

‘Adopt, alter and use an official seal which shall be judicially noticed;

Enter into contacts;

Lease or own real and personal property;

Sell or otherwise dispose of the same;

‘Accept grants, donations, endowments and subsidies, or funds and/or property

offered by individuals and organizations, who may earmark such grants for a

specific purpose or for such other purposes beneficial to the Muslim communities,

without prejudice to the general objectives of the Bait-ul-Mal;

g. Seek financing from governments, organizations, individuals or banks based on
the Islamic concept of financing;

h. Incur obligations necessary in the conduct of its operations;

i. Employ such officers and personnel, preferably qualified Muslims, as may be
necessary to carry-out Bait-ul-Mal business;

j. Establish such branches and agencies in provinces and cities in the Philippines,
particularly where Muslims are predominantly located, and such correspondent
offices in other areas in the country or abroad as may be necessary to carry on its
business; and

k. Perform any and alll acts necessary or proper to carry out the purposes of this
Act.

reaoge

The Bait-ul-Mal may acquire and hold such assets and incur such liabilities in
connection with its operations authorized by the provisions of this Act and other laws, or as
are essential to the proper conduct of such operations.

SEC. 9. Capitalization - The Bait-ulMal shall have an authorized capital of Five
Hundred Million Pesos (P500,000,000) which shall be fully subscribed by the Republic of the
Philippines and shall be paid up by the transfer to the Bait-ul-Mal of cash | such amount.
Initially, the national government shall transfer to the Bait-ul-Mal fifty percent (50%) of the
aforesaid authorized capital within 180 days after the effectivity of this Act to finance the first
three years operating and capital expenditures of the Balt-ul-Mal and the remaining fity
percent (50%) shall be transferred within 180 days from the lapse of the third year operation
of the Bait-ul-Mal.

SEC. 10. Sources of Finance. — The Bait-ul-Mal shall be financed from the following
sources namely:
a. Authorized capital of Five Hundred Million Pesos (P500,000,000) fully
‘subscribed by the Republic of the Philippines as provided under Section 9
of this Act;


b. Receipts from zakat levied for this purpose;

°. Receipts from sadaqah or voluntary donations from individuals, societies,
bodies, institutions or organizations;

4. Grants from the Philippine Government;

e. Grants from the international agencies and/or organizations; and

Sale of property of the Bait-ul-Mal, whether movable or immovable, and
income from such property, investments and other assets.

Provided however, that not less eighty seven point five percent (87.5%) of the total
zakat collected in the immediately preceding year shall be exclusively used for the poverty
alleviation program fro which the Bait-ul-Mal was created.

In determining the income tax liability of an assessee for an assessment year under
the National Internal Revenue Code of 1997, as amended, his/her income tax liabilities shall
be reduced by the amount paid by him/her as zakat.

SEC. 11. Composition of the Bait-ul-Mal Board; Qualifications of Members. — (a)
There is hereby created a Bait-ul-Mal Board, hereinafter referred to as the Board, composed
of the Secretary of Social Welfare and Development or his duly designated Undersecretary,
the Executive Director of the Office of Muslim Affairs or his duly designated Senior Director,
the Regional Governor of the Autonomous Region in Muslim Mindanao or his duly
designated Regional Secretary, and the President of the AlAmanah Islamic Investment
Bank of the Philippines or his duly designated Senior Vice-President, all of whom shall serve
in an ex officio capacity and without any compensation; and five (5) representatives from
non-government sector to be appointed by the President, who shall serve full-time for a term
of three (3) years, and may be reappointed once: Provided, however, that reappointment of
representatives from the non-government sector shall follow the nomination process outlined
in this Section. The Chairman of the Board shall be designated by the President of the
Philippines from among its members.

(b) The five (5) members from the non-government sector shall include an ulama,
Islamic accountant, an economist, an engineer, and a lawyer, each of whom shall be a
natural born citizen of the Philippines, at least forty (40) years of age, and of good moral
character. Each shall be selected and appointed by the President from a poo! of candidates
to be nominated by peak professional organizations of ulamas, Islamic accountants,
economists, engineers, and lawyers respectively, which nominees must have a good
reputation for their honesty, integrity and devotion to Islamic ideology and who genuinely
believe in, and practice, moral values and well-versed in Islamic law and jurisprudence, and
‘a recognized expert in the field of zakat system, taxation, fiscal policy, public finance, fiscal
‘administration, Islamic economy, Islamic accounting, Islamic management, or law. A “peak
professional organization” refers to an organization duly recognized by members as
Tepresentative of, and having the largest active membership in, their profession. The
mechanics of the nomination process shall be provided for in the IRR for this Act.

(c) Of the initial members appointed from the non-government sector, the first two
appointees shall serve for three (3) years, the second two appointees for two (2) years, and
the last for one (1) year: Provided, however, that they shall continue to hold office until their
successors shall have been appointed and duly qualified. All vacancies, prior to the
expiration of the term, shall be filled for the unexpired term only.

(d) During the absence of the Chairperson, he may nominate a member to convene
and preside over the meetings of the Board to dispose of urgent business.

(e) The President of the Philippines shall initially fix the compensation of the
members from the non-government sector based on an objective classification system, to be
specified in the IRR of this Act, at a sum commensurate to the importance and
responsibilities attached to the position. The Board may increase such compensation:
Provided however, That the increase shall not affect the compensation of a member during
whose incumbency the increase was approves for the duration of such member's term,



SEC. 12. Powers of the Bait-u!-Mal Board. ~ The Bait-ul-Mal Board shall

(a) Adopt and promulgate policies and rules fro the effective ‘enforcement of
the provisions of this Act;

(b) Upon the recommendation of the CEO, approve the annual and
supplemental budget of receipts and expenditures of the Bait-ul-Mal,
and authorize such operating and capital expenditures of the Balt-u-Mal
‘as may be necessary or proper for the effective management, operation
and administration of the Bait-ul-Mal;

(c) Upon the recommendation of the CEO, appoint such other personnel as
may be deemed necessary; fix reasonable compensation, allowances
and other benefits; prescribe their duties and establish such methods
and procedures as may be necessary to ensure the efficient, honest and
economical administration of the provisions and purposes of this Act:
Provided, however, That the personnel of the Bait-ul-Mal below the rank
‘of CEO shall be appointed by the Bait-ulMal CEO subject to the
confirmation by the Board: Provided further, That the personnel of the
Bait-ul-Mal shall be selected only from civil service eligibles and be
subject to civil service rules and regulations;

(4) Form committees, including an executive committee, which shall assist
the Board in the performance of its functions: Provided, however, That
no person shall be appointed to the executive committee who has been
employed within the past ten (10) years by the Bait-ul-Mal created under
this Act; and

(e) Exercise such powers and perform such other acts as may be
necessary, useful, incidental or auxiliary to carry out the provisions of
this Act, of to perform the purposes and objectives of this Act.

SEC. 13. Administrative Control over the Board. — The Board shall be under the
direct administrative control of the Department of Social Welfare and Development.

SEC. 14. Conflict of Interest. - In addition to the requirements of Republic Act No.
6713, otherwise known as the Code of Ethical Standards, any member of the Board with
personal or pecuniary interest in any matter in the agenda of the Board shall disclose such
interest to the Board and shall inhibit himself during the deliberations when such matter is
taken up. The decision taken on the matter shall be made public and the minutes of the
meeting shall reflect the disclosure made and the inhibition of the member concerned.

SEC. 15. Disqualifications. — In addition to the disqualification imposed by RA 6713,
a member of the Board from the non-government sector shall not hold any other public office
or employment during his tenure, unless such office or employment is with a state university
or collage or is connected with the performance of their duties as members of the Board.

SEC. 16. Removal of Members from the Non-Government Sector. ~ The President,
upon recommendation by majority of all the members of the Board, may remove any
member of the Board from the non-government sector for any of the following reasons:

(a) The member suffers from physical or mental incapacity that renders him
or her incapable of properly discharging he duties and responsibilities of
membership in the Board and such incapacity has lasted for more than
six (6) month:

(b) The member has committed acts or operations that are shown prima facie
to be fraudulent or illegal or manifestly opposed to the aims and interests
of the Bait-ulMal;

©) The member no longer possesses the qualifications specified in Section
114 of this Act; or



() The member is subsequently disqualified under the provisions of existing
laws.

SEC. 17. Meetings. — The Board shall meet once a month. The Board may be called
to a meeting by the Chairperson or by three (3) other members of the Board. The presence
of five (5) shall constitute a quorum: Provided, That in all cases the Chairperson or the
Chairperson's duly designated alternate shall be among the five (5).

SEC. 18. The Chief Executive Officer; Qualifications; Appointment; Term of Office. -
The Bait-ul-Mal shall be headed by a Chief Executive Officer, hereinafter referred to as CEO,
who shall be a natural-born citizen of the Philippines, at least forty (40) years of age, of good
moral character, known for good reputation for honesty, integrity and devotion to Islamic
ideology, and who genuinely believes in, and practices, the moral values and well-versed in
Islamic law and their jurisprudence, and a recognized expert in the field of zakat system,
taxation, fiscal policy, public finance, fiscal administration, Islamic economy, Islamic
accounting, Islamic management or law.

The CEO of the Bait-ul-Mal shall be appointed by the Board for a term of three (3)
years. The CEO shall enter into a performance contract with the Board and may be re-
appointed depending on the CEO's performance: Provided, however, That no person may
be appointed as CEO for more than three (3) terms. In addition to other grounds for removal
‘as may be provided for by law, the CEO may be removed by a majority vote of all members
of the Board prior to the end of the CEO's 3-year term for failure to meet commitments in the
performance contract, unless such failure is attributable to a cause or causes beyond the
CEO's control.

SEC. 19. Powers and Functions of the CEO. — The general conduct of the operations
and management functions of the Bait-ul-Mal shall be vested in the CEO, who is immediately
responsible for carrying out the mandate of the Bait-ul-Mal.

In addition, the CEO shall:

a. Execute, administer and implement the policies and measures approved
by the Board;

b. Direct and supervise the operations and administration of the Bait-ul-Mal;

ic Represent the Bait-u-Mal in all dealing with offices, agencies and

instrumentalities of the Government and with all persons and entities,
public or private, domestic or foreign;

da Direct and supervise the preparation of the agenda for the meeting of the
Board, and to submit for the consideration of the Board such policies and
measures as he or she believes necessary to carry out the purposes and
objectives of this Act;

e Determine the organizational structure, including the geographical location
of the branches and offices, of the Bait-ul-Mal; reorganize its personnel
and issue such rules and regulations as he or she may deem necessary
or convenient for these purposes;

f Establish a performance-based management system which shall govern
the selection, hiring, appointment, transfer, promotion or dismissal of all
personnel. Such system shall aim to attract and retain Islamically and
professionally competent, well-trained, honest, courteous and efficient
personnel and to establish professionalism and excellence at all levels of
the Bait-ul-Mal;

9 All positions in the Bait-ul-Mal shall be governed by a compensation and
position classification system and qualification standards approved by the
Board based on a comprehensive job analysis and audit of actual duties
and responsibilities. The Board shall have the authority to establish a
compensation plan for the Bait-ul-Mal: Provided, however, That the total


personal services budget of the Bait-ul-Mal shall not be more than sixty
percent (60%) of its total operating budget;

h. Remove personnel of the Bait-ul-Mal: Provided, That the Board shall have
final appellate authority in cases involving promotion, transfer, assignment
or re-assignment of personnel of the Bait-ul-Mal and these personnel
actions are deemed made in the interest of the service and not
disciplinary;

i Provide for the continuing education and training of Bait-ul-Mal officials
and employees. For this purpose, the Bait-ul-Mal may establish a training
institute or enter into agreements with institutions of higher learning in the
country for the establishment of training programs for its technical
personnel in the field of zakat system, Bait-ul-Mal administration and
Telated fields, The Bait-ul-Mal is likewise authorized to defray the costs of
study, at home or abroad, of qualified employees of the Bait-ul-Mal, of
promising university graduates or of any other qualified persons who shall
be determined by proper competitive examinations;

i Promulgate, with the approval of the Board, all necessary rules and
regulations for the effective enforcement of the provisions of this Act
specially on the power and authority of the CEO to interpret the zakat
system based on the basic principles and rulings of Islamic Shari'a and to
decide zakat cases; to obtain information, and to summon, examine, and
take testimony of persons; to make assessments and prescribe additional
requirements for zakat administration and enforcement; and the duty of
the CEO to ensure the provision and distribution of forms, receipts,
certificates and the acknowledgement of payment of zakat and sadaqah;
and

k To exercise such other powers and functions as may be vested in the
CEO by the Board.

The CEO shall have the authority to delegate any of the foregoing powers in such

official or officials of the Bait-ul-Mal as he or she deems necessary.

SEC. 20. Salary of the CEO. - The Board shall fix the salary of the CEO based on an
objective classification system to be specified in the IRR of this Act at a sum commensurate
to the importance and responsibilities attached to the position.

SEC. 21. Indemnification for Legal Defense Costs and Expenses. — The Bait-ul-Mal
shall indemnify members of the Board and other officials of the Bait-ul-Mal, including
personnel of the units performing assessment, audit, collection, and distribution functions,
against all costs and expenses reasonably incurred by such persons in connection with any
civil or criminal action, suit or proceeding to which they may be or are made a party by
reason of their performance of their functions or duties, unless they are finally adjudged in
such action or proceeding to be liable for gross negligence or misconduct.

In the event of settlement or compromise, indemnification shall be provided only in
connection with such matters covered by the settlement as to which the Bait-ul-Mal is
advised by external counsel that the persons to be indemnified did not commit any gross
negligence or misconduct.

The costs and expenses incurred in defending the aforementioned action, suit or
proceeding may be paid by the Bait-ul-Mal in advance of the final disposition of such action,
suit or proceeding upon receipt of an undertaking by or on behalf of the member of the
Board, official, or employee to repay the amount advanced should it ultimately be
determined by the Bait-ul-Mal that said member of the Board, official or employee is not
entitled to be indemnified as provided in this Sections.

SEC.22. Implementing Details. - The Bait-ul-Mal shall be made operational by the
performance of the following acts:


a. The President shall constitute the Bait-ul-Mal Board by appointing the
members thereof within one hundred eighty (180) days from the effectivity
of this Act; and

b. The completion of the
Section 9 of this Act.

ial transfer of such cash or assets as provided in

SEC. 23. Mandate to Organize. - (a) The Bait-ul-Mal shall be organized by the
Board, by adopting an organizational structure or staffing pattern to suit the operations of the
Bait-ul-Mal under this Act. Selection shall be based strictly on merit and fitness to ensure
their suitability for appointment to the Bait-ul-Mal, The formulation of the program of
organization shall be completed within six (6) months after the effectivity of this Act, and
shall be fully implemented within a period of six (6) months thereafter.

SEC. 24. Administrative Complaints. — For purposes of administrative complaints
against officers and employees of the Bait-ul-Mal, an internal audit to be created by and
reporting directly to the Board shall conduct the investigations on such complaints. For this
purpose, such internal audit unit shall be deemed deputized by the Office of the
‘Ombudsman under Republic Act No. 6770.

SEC. 25. Tax Exemption. — The Bait-ul-Mal assets, revenues, distributions and all
contracts, deeds, documents and transactions related to the conduct of business of the Bait-
ul-Mal shall be exempt from all local and national taxes.

SEC. 26. Exemption from Customs Duties. — All importations by the Bait-ul-Mal of
machinery, equipment, calculators and computers and the accompanying spare parts, as
may be necessary for its operation, shall be exempt from customs duties and compensating
taxes payable thereon: Provided, however, That the same shall not be disposed of
domestically unless payment is made of all duties thereof at the tariff rates and according to
their condition at the time of disposal and upon compliance with all import and exchange
procedures,

SEC. 27. Maintenance of Accounts. - The Board shall maintain complete and
accurate books of accounts in connection with the discharge of its responsibilities and those
delegated by it to its officers and staff, as may be prescribed.

SEC. 28. Accounting Period. - The financial year of the Bait-ul-Mal shall be based on
the Gregorian calendar, but the corresponding Islamic Hijra date shall be mentioned on all
correspondence, contracts, printed materials, forms and records of the Bait-ul-Mal. The
accounting period shall commence from the first day of January and close at the end of
December each year.

SEC 29. Annual Statement of Accounts. - in the month of January each year, the
Board shall submit to the Secretary of Social Welfare and Development, for approval, a
statement of estimated receipts and expenditures in respect of the next financial year.

‘SEC. 30. Submission of Annual Reports and Statements, etc. - As soon as possible,
the Board shall submit to the Department of Social Welfare and Development, after the end
of every financial year but before the last day of September next following, an annual report
on the conduct of its affairs during the year.

SEC. 31. Audit. - The accounts of Bait-ul-Mal shall be audited every year by the
‘Commission on Audit in such manner as may be prescribed by the Board. A copy of the
Audit report shall be sent to the Board for comments and remedial action.


SEC. 32. Confidential information. — Bait-ul-Mal transactions relating to all zakat
payers and sadaqah givers of whatever nature are confidential. It shall be unlawful for any
official or employee of the Bait-ul-Mal or any person as may be designated by the Board of
Directors to examine or audit the books of the Bait-ul-Mal, or to disclose or reveal to any
person any confidential information except under the circumstances to be provided in the
IRR for this Act.

SEC. 33. Disposition of Bait-ul-Mal Revenue. ~ Zakat, sadaqah and grants collected
and/or received shall accrue to the Bait-ul-Mal Fund and shall be treated as automatically
appropriated. The said fund shall be available to finance the poverty alleviation program fro
which the Bait-ul-Mal was created: Provided, That an amount equivalent to twelve point five
percent (12.5%) of the total receipts from zakat shall be utilized to finance the operating and
capital expenditures of the Bait-ul-Mal.

SEC. 34. initial Appropriation for the Bait-ul-Mal. — The Secretary of Budget and
Management is hereby authorized to transfer from the Treasury an amount equivalent to fifty
percent (50%) of the authorized capital as provided for under Section 9 of this Act and to
remit the same directly to the Bait-ul-Mal within 180 days after the effectivity of this Act under
such rules and regulations as may be promulgated by the Secretary of Social Welfare and
Development. The said amount shall be exclusively utilized to subsidize the operating and
capital expenditures for the first three year operation of the Bait-ul-Mal.

SEC. 35. Separability Clause. If any provision or part hereof is held invalid or
unconstitutional, the remainder of the law or the provision not otherwise affected shall
remain valid and subsisting.

SEC. 36. Repealing Clause. Any law, presidential decree or issuance, executive
order, letter of instruction, administrative order, rule or regulation contrary to or inconsistent
with the provisions of this Act are hereby repealed, modified or amended accordingly.

SEC. 37. Effectivity Clause. This Act shall take effect fifteen (15) days after its
publication in at least two (2) newspapers of general circulation.

Approved,