SEVENTEENTH CONGRESS OF THE REPUBLIC )
OF THE PHILIPPINES ) os .
Second Regular Session ) 18 AR 20 P729

SENATE

Committee Report No. 304

Prepared and submitted by the Committee on Finance on MAR 2.0 2018
Re: Senate Bill No. _1761

Recommending its approval in substitution of Senate Bill No. 1450

Sponsor: Senator Loren Legarda

MR. PRESIDENT:

The Committee on Finance, to which was referred Senate Bill No. 1450,
introduced by Senators Legarda and Joel Villanueva, entitled:

“AN ACT
TO REFORM THE BUDGET PROCESS BY ENFORCING GREATER
ACCOUNTABILITY IN PUBLIC FINANCIAL MANAGEMENT (PFM),
PROMOTING FISCAL SUSTAINABILITY, INSTITUTING AN
INTEGRATED PFM SYSTEM, INCREASING BUDGET

TRANSPARENCY AND PARTICIPATION, AND FOR OTHER
PURPOSES”

has considered the same and has the honor to report it back to the Senate, with the

recommendation that the attached bill, Senate Bill No. 1'76]. prepared by the
Committee entitled:

“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”

be approved in substitution of Senate Bill No. 1450, with Senators Legarda and
Villanueva as authors thereof.



RESPECTFULLY SUBMITTED

LORENEEGARDA

Chairperson, Committee on Finance

Vice-Chairpersons:
Boe PAOLO BENIGNO “Bam” AQUINO IV
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wil Jo
JOSEPH VICTOR G. EJERCITO PANFI . LACSON ome
(

CYNTHIA A. VILLAR

Members:
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VP, . l ga U tytan
MARIA LOURDES NANCY S. BINAY FR, “Chiz” G. ESCUDERO
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7

WIN GATCHALIAN IARD J. GORDON

GREGORIO B. HONASAN II RISA HONTIVEROS t

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a 7 a a

ae me ssi
FRANCIS “Kiko” PANGILINAN heer POE
ms « Sinpllals

ANTONIO “Sonny” F. TRILLANES IV

JOEL YVALLANUEVA

IGUEL “Migz” F. ZUBIRI



lth Manvliine /
FRANI

\ VICENTE £. SOTTO
Minority Leader Majority LBag S

RALPH G. RECTO
President Pro-Tempore

HON. AQUILINO “Koko” PIMENTEL III
Senate President



SEVENTEENTH CONGRESS OF THE REPUBLIC )
OF THE PHILIPPINES )

Second Regular Congress ) 18 "R20 P729

SENATE
Senate Bill No.1'761. me A

Prepared by the Committee on Finance in substitution of SB No. 1450

with Senators Legarda and Villanueva as authors thereof

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

5e it enacted by the Senate and House of Representatives of the Philippines in Congress

assembled:
PARTI
PRELIMINARY PROVISIONS
1 Section 1. Short Title. — This Act shall be known as the “Budget Reform Act.”
2
3 Sec. 2. Declaration of Policy and Objectives. It is hereby declared the policy of the

4 State to ensure accountability and integrity in the use of public resources by ensuring
5 transparency, fiscal responsibilty, results-orientation, efficiency, and effectiveness. This shall be
© upheld through the establishment of an integrated system of planning, programming, budgeting,
7 management, internal control, accounting, reporting and review of public finances. In light of these

8 requirements, the State shall pursue the following specific objectives:

10 (a) To enforce the power of Congress to authorize all appropriations and hold government

1 accountable in the use of public resources, as well as to ensure the responsibility of all



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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 involvement 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

(c) To strengthen the integration of planning, programming, budgeting, accounting,
disbursement, reporting and performance management and ensure ample safeguards in

managing public finances through internal controls, and risk management.

Sec. 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.

Sec. 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) Activity refers to a recurring work progress that contributes to the implementation of a

program or sub-program:

(b) Allotment refers to the authorization issued by the Department of Budget and
Management (DBM) 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;

(c) Annual Cash-Based Appropriations refer to the annual appropriations that limit
incurring obligations and disbursing payments to goods delivered and services rendered,
inspected and accepted within the current fiscal year. Payments, of which, may be settled

within the Extended Payment Period;



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(4) Appropriations Law refers to the legislative authorization used as basis to incur
contractual commitments 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;

(e) Cabinet refers to the Executive Secretary and the Secretaries of the Departments under

the Executive Branch;

(0) Development Budget Coordination Committee (DBC) refers to the body primarily
responsible for the review and approval of the macroeconomic targets, revenue
Projections, borrowing level, aggregate budget level and expenditure priorities and the
recommendation to the Cabinet and the President of the consolidated public sector
financial position and the national government fiscal program. The Secretary of Budget
and Management leads the DBCC, with the Secretary of Finance, the Director General
Of the National Economic and Development Authority (NEDA) Secretariat and a
Tepresentative from the Office of the President as members, and the Governor of the

Bangko Sentral ng Pilipinas (BSP) as resource person;

(9) Extended Payment Period refers to the three-month period in the following fiscal year
when payments, chargeable against the Appropriations Law of the previous fiscal year,
can be processed and disbursed for goods received and services rendered, inspected

and accepted by the end of the previous fiscal year,

(h) Fiscal Year refers to a period of twelve months commencing on January 1 until

December 31;

(i) Fund Manager refers to person(s) responsible for implementing a fund's investing

Strategy and managing its portfolio trading activities;

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



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(k) Government-Owned or -Controlled Corporations refer to agencies with corporate
Powers, 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 directly or through its instrumentalities
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 instrumentalities with corporate powersigovernment corporate

entities and related corporations;

(!) Government Financial institutions refer to financial institutions or corporations in which
the government directly or indirectly owns the majority of the capital stock and which are
either: ()) registered with or directly supervised by the Bangko Sentral ng Pilipinas; or (i)
authorized 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;

(m) Head of Agency refers to the head of the department or agency in the case of NGAs,
the Board of Directors or Trustees or its duly authorized officials 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;

(1) Item of Appropriation refers to the amount appropriated for an activity or project in the

Appropriations Law;

(0) Local Government Units refer to provinces, cities, municipalities, and barangays, as well

as autonomous regions created by law pursuant to the Constitution;

(p) Multi-Year Contracting Authority (MYCA) refers to the authority issued by DBM to

agencies, covering the full contract cost, for the procurement of multi-year projects;



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(q) Multi-year Projects refer to projects undertaken by agencies covering a period of more

than one fiscal year and exceeding twelve months;

(9) 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;

(8) Program refers to a group of activities and projects that contribute to a common particular

outcome;

(8) Project refers to a special undertaking carried out within a definite time frame and

intended to result in some pre-determined measure of goods and services;

(u) 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, pursuant to

Section 22 of Article VII of the Constitution;

(\) Public Officials and Employees refer to elective and appointive officials and employees,
in @ 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;

(w) 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

erroneously received;



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(%) 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

(y) Treasury Single Account (TSA) refers to the account maintained by the Bureau of the
Treasury (BTr) with the BSP or agent bank for a unified structure of government bank

accounts to enable consolidation and optimum utilization of government cash resources,

{mn this Act, the singular may be read as the plural and the plural may be read as the singular, as

the context requires.

PART II
ADDITIONAL ROLES AND RESPONSIBLITIES

Sec. 5. Congress. - The Congress shall, in addition to its powers under the Constitution

and existing laws, perform the following roles and responsibilities:

(2) 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

(©) Consider the consolidated annual financial statements and the audited government

agency reports by the Commission on Audit (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.



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Sec. 6. President. - The president shall, in addition to his/her powers under the

Constitution and existing laws, perform the following roles and responsibilities:

(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

(©) Authorize changes in the functional, operational and organizational structure within and
among the DBM, Department of Finance (DOF), and NEDA, as may be necessary, to
ensure the effective implementation of this Act and the additional roles of the foregoing

agencies.

Sec. 7. Commission on Audit. - The COA, in coordination with the DBM, shall ensure
the proper enforcement of timely accounting and reporting of public finances and shall prescribe

harmonized financial reports.

Sec. 8. Department of Budget and Management. ~ The DBM shall perform the following

roles and responsibilities:
(a) Formulate policies and develop standards and guidelines to enhance effectiveness and
efficiency of methods, management systems, procedures and processes, organizational
structure and staffing complement of agencies;

(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



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GOCCs (GCG), and approve the annual corporate operating budgets (COBs) of the
GOCCs;

(4) 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;

(e) Assess, together with the BLGF under the DOF and the DILG, the PFM systems of LGUs

and assist them in designing and implementing PFM improvement measures;

(f) 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 appropriations for

‘management purposes;

(9) Oversee the financial reporting of Government Agencies for fund management purposes,
including the (1) monitoring of 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) consolidation and provision of financial

reports and necessary data required by the President, Congress and COA:

(h) Lead, in collaboration with the DOF, BTr and COA, the integration of the government's

financial management information system;

(i) Formulate, in coordination with the Civil Service Commission (CSC), a competency-
based human resource policies for positions in PFM and oversee the capacity

development requirements on PFM; and

() Develop, together with NGAs and GOCCs, a mechanism for a multi-year allocation of
budget in the proposed National Budget for approved multi-year projects until completion

of said projects.



Nan ae

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Sec. 9. Department of Finance. - The DOF shall perform the following roles and

responsibilities:

(2) 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

(©) Formulate policies and standards for the acquisition and management of non-financial

assets by NGAs,

Sec. 10. Bureau of the Treasury. - The BTr shall perform the following roles and
responsibilities:

(2) 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;

(©) 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

DBM and the COA;



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(2) Issue instructions on the management 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 and realistic cash forecast for timely and accurate

cash programming:

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

(h) Establish and maintain, in coordination with DBM, a consolidated registry of non-financial

assets of the National Government

‘Sec. 11. National Economic and Development Authority. — The NEDA shail perform

the following roles and responsibilities:

(@) Coordinate with ‘the Regional Development Councils (RDCs), through the NEDA
Regional Offices, 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;

(6) 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

(4) Assist and support the capacity building of RDCs and LGUs in development planning and

investment programming,



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Sec. 12. Heads of Government Agencies. - The heads of NGAs, GOCCs and LGUs

shall perform the following roles and responsibilities:

(a)

(b)

(c)

Inform the DBM and DOF of significant changes, issues, and risks that could impact on

the finances of government;

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:

Manage their respective agencies 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

(e)

(fy

(9)

(h)

Projects using appropriate software and technology for timely reporting:

Take appropriate measures to ensure that cash disbursements and contractual

commitments do not exceed the amounts appropriated in their respective budgets;

Ensure that their respective agencies settle all contractual commitments or approve

Payment thereon within the time prescribed by law;

Institute effective and efficient management systems, procedure and practices for
assets, liabilities, and personnel, including intemal controls, risk management, and

performance review to safeguard the agency resources;

Implement the external audit recommendations and demonstrate that due regard has

been taken on the recommendations provided in internal audit evaluation reports;

Provide credible and realistic cash forecast for timely and accurate cash programming;

and



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@) 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.
Sec. 13. Capacity Development Requirements on Public Financial Management. —
The NGAs concerned shall continue to formulate capacity development requirements on PFM,
Including the use of appropriate technology and software to facilitate timely reporting and
monitoring, and conduct trainings programs on the same to Government Agencies. In this regard,

the DBM shall oversee the formulation of the said capacity development requirements to ensure

alignment of the objectives.

PART II
FISCAL RESPONSIBILITY

Sec. 14. Fiscal Responsibility Principles. ~ The State shall pursue its policy objectives

'n accordance with the following Fiscal Responsibility Principles:

(a) Implement fiscal policies and strategies consistent with the achievement of

Macroeconomic stability and inclusive economic development:

(©) 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.

Sec. 15. Statement of Fiscal Policy. - The DBCC shall prepare, subject to the approval

of the President, the Statement of Fiscal Policy which shall contain measurable medium-term



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macroeconomic and fiscal objectives and forecasts consistent with the Fiscal Responsibility

Principles and the Inter-Generational Report.

The President shall submit for information of Congress, the Statement of Fiscal Policy not later
than ninety (90) days upon commencement of the President's term of office and update the

measurable fiscal objectives set forth therein three (3) years thereafter.

Sec. 16. Medium-term Fiscal Strategy. ~The DBCC shall prepare, subject to approval
of the President, a Medium-term Fiscal Strategy and its annual updates. The Strategy and its
updates shalll be consistent with the approved Statement of Fiscal Policy and Inter-Generational
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
'RR 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.

Sec. 17. Fiseal Reports. - The DBC 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

Severnment's macroeconomic and fiscal performance covering the preceding fiscal year.

The MER 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;
25 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.



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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 reports shall be

Published on a government website not later than seven (7) days from submission to Congress.

Sec. 18. Inter-generational Report. ~ The DBCC shall submit an Inter-generational
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 Inter-generational 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 Inter-generational Report on a government website

not later than seven (7) days upon submission to Congress.

Sec. 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 or human-induced disaster, unanticipated severe
economic shock, or other significant unforeseeable event that cannot be accommodated through
accessing Contingent Fund and/or the National Disaster Risk Reduction and Management Fund
(NDRRMF), 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

Sec. 20. Shared Fiscal Discipline. - All proposed revenue eroding and expenditure bills

shall include a Financial and Budgetary Information Sheet upon filing of the bill. The said



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information sheet shall contain an estimate of the financial and budgetary implications of said
Proposal for the initial year of implementation. Expenditure bills refer to those which will increase
national government expenditures, including those mandating the creation of recurring
expenditures; while revenue eroding bills refer to those which will result in a reduction of revenue

collections.

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

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

of the Proposed Annual National Budget:

(@) Cash-based estimates shall be adopted in the proposed general 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;

(4) 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,



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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;

(¢) All appropriations in the General Appropriations Act shall be valid for one fiscal year
reckoned from the effectivity thereof until the end of the fiscal year concerned. When
necessary or appropriate, a three month Extended Payment Period in the following fiscal
year may be availed of to allow agencies to settle payments for goods and services

delivered, inspected and accepted during the previous fiscal year;

() For evaluating the performance of an agency, the programs, activities and projects 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;

(9) Both the financial and non-financial performance of agencies shall be presented in the

Proposed National Budget to ensure a performance-informed budget; and

(h) Programs, activities and projects 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

Sec. 22. Planning-Programming-Budgeting Linkage. ~ Development strategies
‘dentified in the Philippine Development Pian (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 (PIP),
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



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and evaluation of these projects shall cover, among others, the planned 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.

Sec. 23. Budget Priorities Framework. - The DBCC shall present to the President and
Cabinet, on or before April of each year, a Budget Priorities Framework, which shall be approved
by the president, to guide the formulation of the Budget for the following year. It shall contain the
medium-term fiscal strategy and targets underlying the budget; the priority areas for government
Spending reflected in the PDP and PIP, estimated amount and planned allocation of the fiscal

‘Space; and other requirements laid down in the IRR.

Sec. 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 revenue, expenditure, assets, and liabilities and risks of

‘he government; and (ii) LGUs as to their impact on revenue and expenditure of the government.

Sec. 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 (GAB).

The President shall determine the form and content of the Proposed National Budget which shall

include, but not limited to, the following:

(2) 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



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Partnership projects; list of new multi-year projects, including the project duration, the total

Project cost, and contractual authorities issued, as well as the other items listed in the IRR:

(c) 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;

(4) 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 thirty days from
the Fourth (4th) Monday of July 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.

‘The President shall publish the Proposed National Budget on a Government website on the same

day as it is presented to Congress.

Sec. 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.

'n addition, the performance information and targets contained in the proposed national budget

Shall be updated after the passage of the general appropriations act, taking into consideration the



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amount appropriated for each program. For this purpose, the government agencies shall propose

adjustments in its outputs and outcomes for the consideration and approval of the DBM.

Sec. 27. Special Purpose Funds. - To promote the transparent and detailed disclosure
of all proposed government spending, Special Purpose Funds (SPFs) in the Proposed National
Budget shall be limited to: (1) the NDRRMF; (2) the Contingent Fund; (3) Statutory Shares of
LGUs; and (4) other SPFs not falling under any of the preceding purposes, the details of which
could not be determined during the budget preparation stage, and based on the parameters to be
set in the IRR,

Sec. 28. National Disaster Risk Reduction and Management Fund. ~ The NDRRMF
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.

Thirty percent (30%) of the amount appropriated for the NDRRMF shall be allocated as Quick
Response Fund (QRF), 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 included in the budget

of the agencies concerned and shall be automatically released.

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 for local disasters and calamities and the appropriate agency

for international crises.

Sec. 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 obligations of the government



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arising from final and executory decisions of competent authorities, 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 of competent

authorities, which shall be released by the DBM subject to availability of funds.

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

Sec. 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.

Sec. 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 be presented in accordance to the purpose of the
appropriations. 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.

Expenditures to be funded under the Unprogrammed Appropriations may be authorized only
when supported by: (i) excess revenue collections in any one of the particular non-tax revenue
Sources from its corresponding revenue collections target in the BESF as certified by the BTr; (i)
new revenue collections or those arising from new tax or non-tax revenues which are not part of

the original revenue sources in the BESF; or (li) when there are approved loan proceeds for FAP.



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|n 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 as
determined by the DBCC.

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 @ government guarantee or settlement of final and executory decisions of

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 released by

the DBM subject to availability of funds.

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.

'n no case shall the Unprogrammed Appropriations be released for purposes not specified in the

annual or special appropriations law.

Sec. 32, Budget with Accounts Codes. ~ All items of appropriations in the
Appropriations Law shall be given accounts codes by the DBM pursuant to the Unified Accounts
Code Structure that applies to all the assets, liabilities, equities, income, and expenses of the

government.

Sec. 33. Re-enacted Budget. ~ If, by the end of any fiscal year, Congress shall have
failed to enact the General Appropriations Act for the ensuing fiscal year, the General

Appropriations Act of the preceding fiscal year shall be deemed re-enacted and shall remain in



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force and effect unti the said General Appropriations Act for the ensuing fiscal year is passed by

the Congress

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

follows:

(a) The aggregate level of the Re-enacted Budget shall be limited to the total amount
appropriated in the preceding year’s General Appropriations Act, but in no case shall
expenditures exceed the level of the sources of financing under the BESF of the

Proposed National Budget;

(©) 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:

1. Ongoing programs, projects and activities;

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

3. NDRRMF, Contingent Fund, Statutory Shares of LGUs, and other SPFs; and

4. Budgetary support to GOCCs for their operational requirements

(C) Inno case shall the following items of the Re-enacted Budget be considered for release,

disbursement and utilization:

1. Completed programs, projects and activities funded in the General Appropriations
Act 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 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



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determine actual needs, and other pertinent rules in the implementation of the Re-enacted
Budget.

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

recording purposes, the General Appropriations Act for the current fiscal year.

The enacted General Appropriations Act shall be valid until the end of the current fiscal year.

Sec. 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 the validity period

which shall not exceed one (1) year from its enactment

Cash-based estimates shall be adopted in the proposed special appropriations bills to promote

faster and more effective delivery of services.

Special Appropriations Bill shall be supported by funds actually available as certified by the
National Treasurer, or to be raised by a corresponding revenue measure Proposed therein. It may
only be proposed after the passage of the General Appropriations Act, except for the following:
(1) disaster-related Purposes; (2) urgent projects and/or activities; and (2) unforeseen

requirements of the government

Sec. 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, accounting 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



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Appropriation Law or those appropriations which have requirements before release, such as Work
and Financial Plan, Feasibility Study, Pre-Feasibility Study, and Preliminary and Detailed

Engineering.

Sec. 36. Availability of Annual Cash-Based Appropriations. — All annual
appropriations, including the GOCCs’ program subsidies, 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 Preceding fiscal year for goods or services which have already been delivered
or rendered, inspected and accepted within the fiscal year. Said payments shall be chargeable

against the authorized appropriations of the said preceding fiscal year.

LGUs receiving budgetary support and/or assistance from the National Government shall utilize
the funds released to them for the purpose/s specified until the end of the following fiscal year
reckoned from the year of receipt from the National Government. The LGUs’ Statutory shares
shall be valid until fully expended, while funds downloaded to LGUs from NGA program

components shalll be valid until the end of the fiscal year of receipt.

After the end of validity period, any unspent appropriations shall lapse, while unexpended

balances of funds shall revert to the unappropriated surplus of the General Fund.

Sec. 37. Government Funding Commitment. - in accordance with the Constitution, no

money shall be paid out of the Treasury except in pursuance of an appropriation made by law.

Accordingly, a Certification of Availability of Funds (CAF) shall be required prior to entering into
Contract. The CAF shall be issued by the chief accountant or the highest accounting officer in the
agency. In the case of multi-year Projects, the CAF shall be issued annually based on the annual
budget for the purpose. The CAF shall be ‘stamped or appended to the contract and shall become

an integral part thereof.



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Sec. 38. Multi-year Projects. — All multi-year projects, other than those undertaken
Pursuant to RA No. 6957 as amended by RA No. 7718 or Public-Private Partnership (PPP)

Projects, shall be covered by a MYCA or an equivalent authority as issued by the following:

(a) The DBM, in case of NGAs and qualified GOCCs;
(©) The governing board for GOCCs, except those covered above; and

(c) The Sanggunian for LGUs.

The MYCA and equivalent authorities shall cover the full cost of the multi-year project. It shall be

‘secured prior to the procurement of the ‘multi-year project and shall be the basis of the Approved
Budget for the Contract

Multi-year PPP projects shall require the issuance by the DBM of a letter of commitment to cover

the National Government funding commitment.

Unless for ajustfiable reason, the implementing agency and the DBM shall ensure that the annual
{unding requirements for the multi-year projects shall be included in its budget proposals and the
Proposed National Budget for the covered years, consistent with the funding schedule in the
MYCA and equivalent authorities, and letter of commitment. Said proposals shall be given due
Consideration by Congress in the case of NGAs and qualified GOCCs, the governing board for

GOCCs, or the Sanggunian for LGUs.

Disbursement to be incurred for all multi-year contracts projects shall in no case exceed the cash-

based appropriations for the purpose during the fiscal year.

Sec. 39. 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 recommendation to the head of the
Procuring entity as to the award of contract, based on their proposed budget in the NEP, COBs
°F Appropriations Ordinance, in accordance with the guidelines issued by the Government

Procurement Policy Board (GPPB).



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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 Obligation Authority shall be understood to
refer to MYCA.

Agencies may only proceed with the issuance of the notice of award 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.

Sec. 40. 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 circumstances:

(2) If the appropriations are no longer required to fulfil 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 (i) there are clear
economic indications of an impending occurrence of such conditions, as determined by the DBCC

and approved by the President.

Both Houses of Congress shall act on the proposed rescission within thirty (30) session days after
the receipt of an impoundment proposal from the President by issuing a Joint Impoundment
Resolution. Within the same period of thirty (30) session 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 30-day period, is

equivalent to a disapproval of the impoundment proposal.



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Funds intended for the impounded appropriations shalll not thereafter be available for ‘expenditure

except by subsequent legislative enactment.

Sec. 41. 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 CSC, the Commission on
Elections, and the COA are hereby authorized to declare and use savings in their respective
appropriations in the current year to augment actual deficiencies incurred for the same year in

any item of their respective appropriations.

Sec. 42. Meaning of Savings. ~ Savings refer to portions or balances of any released

appropriations in the Appropriations Law which have not been obligated as a result of any of the

following:

(a) Completion, final discontinuance, or abandonment of an 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 at a lesser cost.

'n case final discontinuance or abandonment is used as basis in the declaration of savings, such
discontinued or abandoned 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 or negligence of the agency concerned shall

not be considered savings.

Sec. 43. Rules on Augmentation. — Augmentation is the act of the constitutional officers
authorized to use current savings in their respective appropriations to cover a deficiency in any
existing item of appropriation in the same appropriation law for their respective offices. A

deficiency in an item of appropriation may result from:



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(a) Unforeseen modifications or adjustments in the item of appropriation; 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 item of appropriation. The existence of an item of appropriation regardless

of the availability of allotment class/es is sufficient for the purpose of augmentation.

'n'no case shall a non-existent item of appropriation be funded by augmentation from savings or
by the use of an appropriations authorized in the General Appropriations Act or Special

Appropriations Laws.

Sec. 44. Rules on Modification in the Allotment Class. — Limited flexibility shall be
given to NGAs to modify or change the allotment class within an existing item of appropriation.
Such modification shall not entail any augmentation of the amount appropriated for the said item

of appropriation during budget execution.

‘The DBM shall issue rules and procedures to govern allotment class modifications, specifying the
cases or circumstances when such modifications maybe undertaken 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.

PARTV

FINANCIAL MANAGEMENT

Sec. 45. 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
Sgreements. Monies under the General Fund shall be made available to support the requirements

Of the National Government authorized in an Appropriations Law.



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Special Account in the General Fund (SAGF) shall be established by law only under exceptional
Circumstances to recognize 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, or if no period is
Specified, it shall be deemed to be until the fulfilment of the purpose for which the SAGF was
authorized. 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 recognized 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, composed of the
Secretary of Finance as Chairperson, the Secretary of Budget and Management and the
Chairperson of the COA as members, shall identify SAGFs that shall be converted into trust funds.
The recognition of revenue inflows from these SAGFs converted into trust funds shall be governed
by the guidelines to be issued by the Permanent Committee. In all cases, the authorized uses or

Purposes shall continue to be those specified in the law creating the SAGFs.

Sec. 46. 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:

(2) Trust Fund ~ constituted from identified revenue sources and other receipts by NGAS or
Public Officials or Employees acting as trustees, agents, or administrators for the
fuffilment 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



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considered self-perpetuating and 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.

Any interest earned by Special Funds shall accrue to the General Fund unless otherwise

authorized by law.

Sec. 47. Review by the Permanent Committee. — Upon the effectivity of this Act and
every three years thereafter, the Permanent Committee shall review all existing SAGFs and
Special Funds to validate their compliance with the requirements under Sections 45 and 46 and
to determine whether these funds should be modified, terminated, or continued. Upon evaluation,
the Permanent Committee shall recommend for approval of the President the modification or
termination of any of the said funds based on any of the following grounds: (i) when there is no
legal basis for its creation; (ii) when their terms have expired: (il) when the purpose for its creation
has been attained or no longer exist, (iv) when it is no longer necessary for the attainment of the
Purposes for which said Funds were established; (v) when needed by the General Fund in times
of calamities and emergencies; (vi) when used in violation of the rules and regulations issued by

the Committee; and (vii) when they have remained dormant for an unreasonable length of time.

The Permanent Committee shall issue guidelines for the establishment, review and evaluation,

accounting and reporting, and termination of SAGFs and Special Funds.

Sec. 48. 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.

Any interest earned by an Escrow Fund shall accrue to the said Fund, The amounts under: escrow,



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including interest earned, shall form part of the General Fund upon the occurrence of the future

contingent event.

Sec. 49. 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 current year’s revenue collections

for budgeting and fiscal reporting purposes.

Sec. 50. Grants. - NGAs may accept, with prior coordination with DOF, grants, in cash
Orin 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 the President's 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 National Government (NG); or (2)

any grant authorized or covered in accordance with existing law

Grants received shall be valued, in the case of grants received in kind, and recognized on the

books of the recipient agency of the National Government.

Sec. 51. 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.



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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
(c) 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.
Sec. 52. Oversight on Government Bank Accounts. ~ Notwithstanding any provision of
‘aw 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 bank accounts to the TSA;
(b) Close any bank account; and/or

(c) Revoke the authority to open any bank account.

The government agency which has opened a bank account, as well as the bank concerned shall

Promptly disclose information regarding such account to the BTr.

Sec. 53. 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



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authority of the agencies to contract out and disburse funds, except for those instances stated in

Section 35 of this Act.

Sec. 54. 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
Pased on terms and conditions as may be determined by the DOF. Investments are authorized to

be made in any of the following,

() Bank deposit with any highly reputable bank following a selection criteria to be issued by
the Secretary of Finance and money market instruments with well recognized and

established financial institution;

(©) 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 eared and other income from investments shall accrue to the General Fund, unless

otherwise provided by law.

Sec. 55. Management of National Government Borrowings. - Borrowings by the

National Government shall be for: Purposes provided by law including any of the following:

1. Financing budget deficits and liquidity shortfalls;

2. Refinancing and pre-financing maturing debts;

3. Undertaking liability and risk management transactions;

4 Supporting the BSP in maintaining external and monetary stability;
5. On-ending to an approved entity;



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6. Financing all sums of money paid to fulfill guarantees;

7. Increasing liquidity and promoting stability of the government securities market;

8. Financing developmental activities and projects of the national government;

9. Providing financing to address or remedy the effects or impacts of natural or human-
induced disasters; or

10. Defraying expenditures covered by appropriations.

Borrowing under this Act should adhere to the Fiscal Responsibility Principles and measurable

fiscal objectives in the Statement of Fiscal Policy.

Sec. 56. 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 borrowing
Programs 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 DOF approval and monetary board concurrence for foreign borrowings or the

latter's opinion for domestic borrowing activities as provided 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.

Sec. 57. 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.



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Sec. 58. Debt Reporting. - The DOF, through the BTr, shall ensure that the records
include information on the principal, terms of repayment, amounts drawn, interests, penalties, 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 and in

‘accordance with the reporting requirements in this Act.

Each LGU and GOCC shalll maintain records and provide reports to the DOF on loans as required

by relevant laws, rules and regulations.

Sec. 59. Debt Audit. - Upon the effectivity of this Act, the NEDA shall conduct a debt
audit of all loans contracted or guaranteed by the National Government. For those loans
contracted or guaranteed after the passage of this Act, the NEDA shall review the said loans five

(5) years from the date of consummation or guarantee.

Sec. 60. Guarantees. ~ Guarantee, indemnity or security shall be provided to an NGA or
@ GOCC as provided by law, and subject to the annual guarantee ceiling prescribed in the General
Appropriations Act, 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 toa GOCC.

'n 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.

Sec. 61. 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



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Mutual Fund, Philippine Health Insurance Corporation, and the Social Security System in their

respective charters.

Sec. 62. 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.

Sec. 63. Information on Contingent Liabilities. - The DOF shall keep a complete and
updated registry of all contingent liabilities of the National Government, and provide the DBM and

Congress with a report on contingent liabilities.

PART VI

ACCOUNTABILITY AND REPORTING

Sec. 64. 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.

Sec. 65. 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 and accounting processes.

Sec. 66. 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



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information as required in the IRR, as well as the Budget Call and other related issuances 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.

Sec. 67. NGA Reporting Requirements. - For greater transparency and accountability,
each Head of an NGA shall:

(@) Submit monthly and quarterly reports on the agency's financial and non-financial
Performance to the DBM, 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; and

(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
8 required in the IRR; submit the said Report to the DBM, and Congress no later than
Four (4) months after the end of the fiscal year; and to COA within the reglementary
Period 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.

Sec. 68. Service Agreements. - The Head of an NGA may enter into a service or
Performance agreement with another agency for the latter to provide services charged against

the budget of said principal agency.

Sec. 69. 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 GCG, the



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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 shalll endorse the Board-approved COB to the DBM
for the latter's approval. The COBs of the National Electrification Administration, National Power
Corporation and Philippine National Oil Company shall be subject to further approval of Congress
in accordance with RA No. 7638. The Head of a GOCC shall publish the DBM or Congress-
approved COB, as the case may be, of the GOCC on the official website of the Corporation not

later than fourteen (14) days after the approval of the COB.

Sec. 70. GOCC Reporting Requirements. - For greater transparency and accountability,
each Head of GOCCs shall:

(2) Provide quarterly reports on financial and non-financial performance to the DOF, GCG,
DBM and COA, no later than thirty (30) days after the end of the quarter, in the format
and time to be prescribed jointly by the DOF, GCG, DBM and COA, and shall publish it

on their official website within the same period; and

(©) 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 to COA within
the reglementary period; 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

Fequired information for the whole corporate group, consistent with guidelines prescribed in the

IRR,



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Sec. 71. Service Agreement for a GOCC. - Where GOCCs implement government non-
commercial programs, such as provision of housing, irrigation and electrification, and receive
Severnment 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.

Sec. 72. 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 DBM, COA, DILG, and the BLGF under the DOF, subject to the guidelines to be

issued thereon.

See. 73. 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.

Sec. 74. Accounting Standards. - The DBM shall specify the basis, standards and
Suidelines 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.

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 and COA shall ensure that complete, accurate and appropriate records of the

government are kept on both financial and non-financial performances.

Sec. 75. Government Consolidated Reporting. - The DBM shall submit to the

President and the COA a quarterly report on the consolidated financial performance of the



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government which shall include information showing the performance of Government Agencies:
against the respective programs, activities, and projects mandated under 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 and COA.

PART VII
TRANSPARENCY AND PARTICIPATION

Sec. 76. 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
Severnment website. 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.

Sec. 77. 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;



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(c) The annual General Appropriations Act and Special Appropriations Laws, to be
Published in electronic format in a government website within thirty (30) days from its

effectivity; and

(d) The Annual Fiscal Report, to be published in electronic format in a government website

within thirty (30) days from submission to Congress;

Sec. 78. Participatory 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 the DBM, together with other relevant
agencies, shall formulate policies and regulations towards the implementation of a participatory
budget process. Such Participatory mechanisms may include consultations and partnerships with
civil society organizations (CSOs), academics and experts, and other individuals and organized
Stakeholders in the budget process - including collaboration with LGUs to jointly identify local
Priority poverty reduction and development needs which will ‘serve as input to the formulation of

the Proposed National Budget.

PART VIII
ENFORCEMENT

Sec. 79. Sanctions and Penalties. — (i) 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;



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(b)

(c)

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The COA may suspend or disallow 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;

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

The Congress may motu proprio, through its appropriate oversight committee, compel
the head of the non-compliant agency, under pain of contempt, to produce the required

Feport/s and to explain reasons for failure to submit and disclose said report/s.

(ii) Without prejudice to the provisions of other laws:

(a)

(b)

Every contractual commitment, expenditure or payment authorized or incurred in
violation of the provisions of this Act shall be void and shalll render the public official 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 delays
the implementation of any contractual agreement shall be liable and imposed the
appropriate administrative sanctions based on existing laws and civil service rules. A
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 such public official or employee;

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



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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

(4) 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 shalll be subject to the same penalties as the public officials or employees and

shall be tried jointly with them.

‘Sec. 80. 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

Sec. 81. Implementing Rules and Regulations. - The DBM in consultation with the
DOF, BTr, NEDA and COA, and in coordination with agencies concerned, shall issue the rules
and regulations 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 consultation with the DOF,

BTr, NEDA and COA and in coordination with the agencies concerned, as the need arises.

Sec. 82. Transitory Provisions. - The DBM, DOF, BTr, NEDA and COA shall prepare and
submit to the Joint Congressional Oversight Committee on Public Expenditures within thirty (30)
days from promulgation of the IRR, a Transitory Plan to ensure the proper implementation of the

Provisions of this Act. It shall include the following:



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(1) The DBM shall implement interim measures in order to ensure a smooth transition into a

regime of annual cash-based appropriations;

(2) The Budget and Treasury Management System (BTMS) and Integrated Financial

Management Information System (IFMIS) shall be completed within five (5) years;

(3) The provision under Section 35, which states that the General Appropriations Act as
allotment order includes the authority to disburse, i.e. phasing out of Notices of Cash
Allocations (NCAs), will not be applied until agencies are capable of realistic and credible
forecasting as determined by the DBM and BTr, and until the agencies’ proper execution
of the BTMS;

(4) Pending the completion of the BTMS and IFMIS, the sanctions regarding the failure to
Post and submit reports shall be suspended for a period of two (2) years from enactment
of this Act as strict compliance will be hard for agencies and the DBM without at least

Partial automation of the system;

(5) The requirement of agencies to prepare an Annual Plan in support of their budget

proposals shall be fully implemented in three (3) years; and

(6) The General Appropriations Act for fiscal years 2020 to 2022 shall contain a special
Purpose fund (SPF) that will be used to cover spill-over obligations from the previous
fiscal year due to the implementation of the cash-based appropriations. The amount of
the SPF and its corresponding utilization shall be assessed annually and should be kept
manageable. The amount of the SPF shall be reduced annually during its three-year

lifespan

This Act shall be fully implemented within five (5) years from its effectivity.

Sec. 83. Repealing Clause. ~ Any law, presidential decree or issuance, executive order,

letter of instruction, administrative order, proclamation, charter, rule or regulation and/or parts



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thereof contrary to or inconsistent with the provisions of this Act is hereby repealed, modified or

amended accordingly.

Sec. 84. Separability Clause. — If for any reason, any section or provisions 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.

Sec. 85. Effectivity Clause. — This Act shall take effective fifteen (15) days following its

Publication in the Official Gazette or in two (2) newspapers of general circulation.

Approved,