REVISING THE BUDGET PROCESS IN ORDER TO INSTITUTIONALIZE THE BUDGETARY INNOVATIONS OF THE NEW SOCIETY.

• Number: Presidential Decree No. 1177
• Sections: 93

Preamble

WHEREAS, the national budget is a major instrument for development, requiring careful design of the preparation, legislation, execution, and accountability phases of budgeting;

WHEREAS, the experience of the years has been reflected in various improvements in the budget process, and embodied in C.A. No. 246, R. A. No. 992, and P. D. No. 999;

WHEREAS, the budget process as implemented prior September 21, 1972 was not able to fully support national objectives and plans;

WHEREAS, national interest calls for the institutionalization of budgetary innovation realized during the New Society and developed within the context of the Constitution of 1973.

NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the Philippines, by virtue of the powers vested in me by the Constitution, do hereby order and decree:

Section 1

SECTION 1. Title.-This Decree shall be known as Budget Reform Decree of 1977".

Section 2

SEC.2. Definition of Terms.-When used in this Decree:

a "Budget" refers to the budgetrequired to be prepared pursuant to Section Sixteen (1), Article VIII of the Constitution, and which is repeated in Section 13 of this Decree.

b. "Government" means the National Government, including the Executive, the Legislative and the Judicial Branches, and the Constitutional Commissions.

c. "Department and agency" and "department or agency" mean all departments, bureaus, offices, boards, commission, courts, tribunals, councils, authorities, administrations, centers, institutes, state colleges and universities, and all other establishment and instrumentalities of the National Government as defined in the preceding paragraph.

d. "Current operating expenditures" refer to appropriations for the purchase of goods and services for current consumption or within the fiscal year, including the acquisition of furniture and equipment normally used in the conduct of government operations, and for temporary construction for promotional, research and similar purposes.

e. "Capital outlays" or "capital expenditures" refer to appropriations for the purchase of goods and services, the benefits of which extend beyond the fiscal year and which add to the assets of Government, including investments in the capital of government-owned or controlled corporations and their subsidiaries.

f. "Expected results" mean services, products, or benefits that will accrue to the public, estimated in terms of performance measures or targets.

g. "Government-owned or controlled corporations" are corporations created by law as agencies of the State for narrow and limited purposes, either owned wholly by the State or wherein the Government is a majority stockholder, in cases of stock corporations, or otherwise, agencies so created where no stocks are issued but whose affairs are conducted by a duly constituted board and which perform proprietary functions.

h. "Continuing appropriations" refer to apppropriations available to support obligations for a specified purpose or project even when these obligations are incurred beyond the budget year.

i. "Appropriation" is an authorization under past Acts of Congress, Presidential Decrees or other legislative enactment, for payments to be made with funds of the government, under specified conditions and/or for specified purposes.

j. "Allotments" are authorizations issued by the Budget Commission to an agency, which allows it to incur obligations within a specified amount that is within a legislative appropriation.

k. "Obligations" are amounts which are committed to be paid by government which arise from an act of a duly authorized administrative officer which binds the government to the immediate or eventual payment of a sum of money.

l. "Program" refers to the functions and activities necessary for the performance of a major purpose for which a government entity is established.

m. "Project" means a component of a program covering a homogenous group of activities that result in the accomplishment of an identifiable output.

n. "Commissioner" refers to the Commissioner of the Budget,

BUDGET POLICY AND APPROACH

Section 3

SEC. 3 Declaration of Policy.-It is hereby declared the policy of the State to formulate and implement a National Budget that is an instrument of national development, reflective of national objectives, strategies and plans. The budget shall be supportive of and consistent with the socio-economic development plan and shall be oriented towards the achievement of explicit objectives and expected results, to ensure that funds are utilized and operations are conducted effectively, economically and efficiently. The national budget shall be formulated within the context of a regionalized government structure and of the totality of revenues and other receipts, expenditures and borrowings of all levels of government and of government-owned or controlled corporations. The budget shall likewise be prepared within the context of the national long-term plan of a long-term budget program.

Section 4

SEC. 4. Planning and Budgeting Linkage.-The Budget shall be formulated as an instrument for the attainment of national development goals and as part of the planning-programming-budgetting continuum. Levels of revenue, expenditure and debt shall be established in relation to macro-economic targets of growth, employment levels, and price level change, and shall be developed consistent with domestic and foreign debt, domestic credit and Balance of Payments objectives for the budget period. The aggregate magnitudes of the budget shall be determined in close consultation among the planning and fiscal agencies of government. Budgetary priorities shall be those specified in the approved national plans, keeping in mind the capability and performance of the implementing agencies concerned. Agency budget proposals shall explicity state linkages to approved agecy plans.

Section 5

SEC. 5. National Resource Budget.-The finances of government shall be analyzed and determine as the aggregate of revenue, expenditure and debt of all units of government, including the national government and its agencies and instrumentalities, local government units and government-owned or controlled corporations. The national government budget shall be evolved within the framework of the total impact of government activity on the national economy. The budgets of government corporations and local governments shall be consistent in form and timing with that of the national government, to facilitate comprehensive evaluation.

Section 6

SEC. 6. Regional Budgeting.-The budgets of national government agencies shall take into full and explicit consideration the goals, plans and requirements of their respective regional offices, in the interest of full government response to local thinking and initiative. The budget preparation process shall originate at regional and local levels, and shall be consolidated and reviewed by the central offices of the various national agencies. The regional development strategies and plans, including physical framework and resource0use plans, shall be considered in the preparation of the budget.

Section 7

SEC. 7. Long-Term Budgeting.-The annual budgets of the national government shall be prepared as an integral part of a long-term budget picture. The long-term economic and physical framework plans of government, multi-year requirements of approved development strategies, and other commitments entered into or otherwise assumed by government shall be specified in the budget process.

Section 8

SEC. 8. Development Projects.-The development process requyires the implementation of major development projects of such size as to significantly affect the infrastucture program, debt ceilings, the Balance of Payments, domestic credits, and government expenditure levels. The budget process shall formally consider the timing of major national projects, in order to ensure the observance of established fiscal, monetary, international payments, and other constraints.

Section 9

SEC. 9. Performance and Financial Review.-The analysis of agency operating performance, the evaluation of performance relative to costs incurred and the review of agency operating systems and procedures are inherent parts of the budget process. Agencies shall therefore design and implement (a) management information systems yielding both performance and financial information which will adequately monitor and control budget implementation, and (b) improvements in operating systems, procedures and practices, so as to ensure that the targets approved in budget authorization are in fact attained at minimum cost.

Section 10

SEC. 10. Compensation and Position Classification.-The size of personnel services expenditure relative to the total budget and the number of agencies and personnel in government call for an effective national compensation and position classification policy. The constitutional principle of a single compensation scheme for the government and its instrumentalities is one of the bases of the government budget process.

Section 11

SEC. 11. Contingent Liabilities.-The contingent liabilities of government shall be evaluated as part of the budget process, subject to such limits and guidelines as may be approved by the President.

BUDGET PREPARATION

Section 12

SEC. 12. Fiscal Year.-The fiscal year for all branches, subdivisions, instrumentalities, departments, bureaus, offices and agencies of the Government of the Republic of the Philippines, including government-owned or controlled corporations and local governments shall be the period beginning with the first day of January and ending with the thirsty-first day of December of each calendar year.

Section 13

SEC. 13 Submission of the Budget.-The President shall , in accordance with section sixteen (1), Article VIII of the Constitution, submit within thirty days from the opening of each regular session of the National Assembly as the basis for the preparation of the General Appropriations Act, a national government budget of estimated receipts based on existing and proposed revenue measures, and of estimated expenditures.

The President shall include in his budget submission the proposed expenditure level of the Legislative and Juridical Branches and of Constitutional bodies, which shall have undergone the same process of evaluation and which shall have been subject to the same budgetary policies and standards applicable to agencies in the Executive Branch.

The President may transmit to the National Assembly, from time to time, such proposed suplemental or deficiency appropriations as are, in his judgement, (a) necessary on account of laws enacted after the transmission of the Budget, or (b) otherwise needed in the public interest.

Section 14

SEc. 14 Form and Content of the Budget.-The budget proposal of the President shall include current operating expenditures and capital outlays. It shall comprise such funds as may be necessary for the operation of the programs, projects and activities of the various departments and agencies. The proposed General Appropriations Act and other Applications Acts necessary to cover the budget proposals shall be submitted to the National Assembly to accompany the President's budget submission.

The budget shall be presented to the National Assembly in such form and content as may be approved by the President and may include the following:

a. a budget message setting forth in brief the government's budgetary thrusts for the budget year, including their impact on development goals, monetary and fiscal objective, and generally on the implications of the revenue, expenditure and debt proposals; and

b. summary financial statements setting forth:

(1) estimated expenditures and proposed appropriations necessary for the support of the Government for the ensuing fiscal year, including those financed from operating revenues from domestic and foreign borrowings;

(2) estimated receipts during the ensuing fiscal year under laws existing at the time the budget is transmitted and under the revenue proposals, if any, forming part of the year's financing program;

(3) actual appropriations, expenditures, and receipts during the last completed fiscal year;

(4) estimated expenditures and receipts and actual or proposed appropriations during the fiscal year in progress;

(5) statements of the condition of the National Treasury at the end of the last completed fiscal year, the estimated condition of the Treasury at the end of the fiscal year in progress and the estimated condition of the Treasury at the end of the ensuing fiscal year, taking into account the adoption of financial proposals contained in the budget and showing, at the same time, the unencumbered and unobligated cash resources;

(6) essential facts regarding the bonded and other long-term obligations and indebtedness of the Government, both domestic and foreign, including identification of recipients of loan proceeds; and

(7) Such other financial statements and data as are deemed necessary or desirable in order to make known in reasonable detail the financial condition of the government.

Section 15

SEC. 15. Budget Levels.-The ordinary income of government shall be used primarily to provide appropriations for current operations, except in cases of a national emergency or serious financial stress, the existence of which has been duly proclaimed by the President.

The level of aggregate revenue, expenditure and debt shall be jointly recommended to the President by the Budget Commission, the Department of Finance, the National Economic and Development Authority and the Central Bank of the Philippines, acting within the Development Budget Coordination Committee of the National Economic and Development Authority.

No. appropriations for current operations and capital outlays of the Government shall be proposed unless the amount involved is covered by the ordinary income, or unless it is supported by a proposal creating additional sources of funds or revenue, including those generated from domestic and foreign borrowings, sufficient to cover the same. Likewise, no appropriation for any expenditure, the amount of which is not covered by the estimated income from the existing sources of revenue or available current surplus, may be proposed unless it is supported by a proposal creating an additional source of funds sufficient to cover the same.

Proposal creating additional sources of funds shall be prepared in the form of revenue bills.

The provisions of this section shall not be construed as imparing in any way the power of the National Assembly to enact revenue and appropriation bills, nor the authority of the President to propose special revenue and appropriation bills, nor the authority of the President to propose special revenue and appropriation bills after the submission of the budget.

Section 16

SEC. 16. Budget Estimates.-Each head of department, office or agency of the National Government, including the Legislative and Judicial Branches, and including government-owned or controlled corporations, shall submit his request for appropriations to the Budget Commission in accordance with the budget calendar, format, and such rules and regulations as may be issued in implementation of this Decree.

The budget estimates of agencies shall include the following information:

a. Objectives, functions, activities, programs and projects showing the general character and relative importance of the work to be accomplished or the services to be rendered, and the principal elements of cost involved;

b. Linkage of the work and financial proposals to approved development plans;

c. Estimated current operating expenditures and capital outlays, with comparative data for the preceding and current budget years;

d. Identification by region, pursuant to policies on the regionalization of government operations;

e. Financial sources, reflecting all revenues, proceeds of foreign and domestics borrowings, and other sources, particularly those which accrue to the General Fund;

f. Contingent liabilities, including national government guarantees of obligations of government-owned or controlled corporations and their subsidiaries;

g. Brief description of the major thrusts and priority programs and projects for the budget year, results expected for each budgetary program and project, the nature of work to be performed, estimated cost per unit of work measurement, including the various objects of expenditure for each project;

h. Organization charts and staffing patterns indicating the list of existing and proposed positions with corresponding salaries, and proposals for position classification and salary changes, duly supported by adequate justification.

Consistent with the provisions of Article VIII, Section 16(3) of the Constitution, the Commissioner shall review the budget estimates as herein provided, including those of the Legislative and Judicial Branches and of the Legislative and Judicial Branches and of the Constitutional bodies and shall submit his recommendations to the President.

Section 17

SEC. 17. Regional Budget.-The budgets of national government agencies shall be prepared taking into full and careful consideration the opportunities and requirements specific to the various regions of the country. Where they are organized, regional offices shall originate agency budget proposals, in accordance with approved priorities and guidelines.

Agencies which are not regionalized shall nonetheless estimate the amounts planned to be spent for each region of the country.

The Commissioner shall identify by region the expenditure programs of the national government agencies in the national government budget, and release funds to the national government agencies in accordance with the approved regional distribution of expenditures, specifying the region of destination.

Department and agencies shall sub-allot in full and without the imposition of reserves, the approved budget allocation of their various regional offices, except as may be authorized by the Commissioner, in case realignment of expenditures prove to be necessary in the course of budget execution. The Commissioner shall issue the rules and regulations needed to implement the provisions of this section.

Section 18

SEC. 18. Budget Evaluation.-Agency proposals shall be reviewed on the basis of their own merits and not on the basis of a given percentage or peso increase or decrease from a prior year's budget level, a given percentage of the aggregate budget level, or other similar rule of thumb that is not based on specific justification. Proposed activities, whether new or ongoing, shall be evaluated using a zero-base approach and on the basis of (a) relationship with the approved development plan, (b) agency capability as demonstrated by past performance, (c) complementaruty with related activities of other agencies, and (d) other similar criteria. The realization of savings in given budget year and the consequent non utilization of funds appropriated or released to a given agency shall not be a negative factor in the budget evaluation for a subsequent year.

Section 19

SEC. 19. Foreign-Assisted Projects.-The budgetary implications of foreign-assisted projects shall be explicity considered at the time of project design and financing negotiation. The project study shall specify the cash flow requirements of the project, among others, for (a) payment of principal and interest, (b) peso component of capital cost and project preparation, (c) infrastructure and support facilities needed to be directly financed by government, (d) operating and other expenditures which will be ultimately required for General Fund support when the project is implemented, and (e) peso requirements needed as counterpart. The concurrence of the Budget Commission shall be obtained with respect to peso requirements and implication on expenditure ceilings.

Section 20 Organizational Changes.

SEC. 20. Organizational Changes.- The budget may refelect reorganization proposals, including the rearrangement, reassignment and consolidation of organizational units as are approved by the President, which will simplify government procedure, localize decision-making and implementation, and otherwise facilitate government service to the public.

Section 21

SEC. 21. Coordinating Bodies.-The budgets of coordinating agencies, councils, task forces, authorities, committees, or other similar bodies shall be limited to and used to fund only such planning, coordinating and monitoring functions as are assigned to it. Funds for implementation shall be budgeted and released to the line implementing agencies concerned: Provided, That the budgets of coordinating bodies may include a lumpsum for purposes related to their assigned functions, which lumpsum shall be sub-alloted to implementing agencies and not used by the agency for its own operations: Provided, further, That funds budgeted for a given agency falling with in the jurisdiction of a coordinating body, may be subject to release upon approval by the coordinating agency of such release or of the agency's work program.

Section 22

SEC. 22. Budgetary Requirements of Government-Owned or Controlled Corporations.-The internal operating budgets of government-owned or controlled corporations and of chartered institutions shall be approved by their respective governing boards in accordance with a budget calendar and format as may be approved by the President: Provided, That such budgets shall be subject to review and approval as part of the budget process in cases where national government budgetary support is needed, in terms of (a) capital or equity inputs, (b) operating contributions to support specific activities undertaken by the institution as part of its regular functions, and (c) guarantee of the national government for obligations or contracts entered into by the corporations: Provided, further, That the submission of interim financial statements may be required by the Commissioner.

Section 23

SEC. 23. Tax and Duty Exemptions.-All units of government, including government-owned or controlled corporations shall pay income taxes, customs duties and other taxes and fees as are imposed under revenue laws: Provided, That organizations otherwise exempted by law from the payment of such taxes/duties may ask for a subsidy from the General Fund in the exact amount of taxes/duties due:Provided, further, That a procedure shall be established by the Secretary of Finance and the Commissioner of the Budget, whereby such subsidies shall automatically be considered as both revenue and expenditure of the General Fund.

Section 24

SEC. 24. Appropriation for Personal Services-Appropriations for personal services shall be considered as included in the amount specified for each budgetary program and project of each department, bureau, office or agency, and shall not be itemized. The itemization of personal services shall be prepared by the Commissioner for consideration and approval of the President as provided in Section 30 hereof: Provided,That the itemization of personal services shall be prepared for all agencies of the Legislative, Executive and Judicial Branches and the Constitutional bodies, except as ,maybe otherwise approved by the President for positions concerned with national security matters.

Section 25

SEC. 25. Department Approval of Proposed Appropriations.-No legislative proposal which, if enacted, would authorize subsequent appropriations, shall be transmitted to the President by any bureau or agency, without the prior approval of the Head of the Department concerned or by the Chairman or Chief Executive Officer of a Cabinet level body which coordinates the multi-sectoral formulation and implementation of a particular program of expenditure involving one or more departments. No legislative proposal involving the appropriation of funds shall be transmitted to the National Assembly without the approval of the President.

BUDGET AUTHORIZATION

Section 26

SEC. 26. Focus on Budget Policy.-The National Assembly shall, during the discussion of the budget, focus on policy, budgetary levels, thrusts and strategy. Details of agency expenditures shall be considered as proper concerns of Executive Branch decision and action.

Section 27

SEC. 27. Limitation of Budget Debate.-Within seven budget, the National Assembly shall, in plenary session, start the discussion of the budget, including both expenditure and revenue proposals. Devate shall be terminated on or before the eighteenth consecutive session day from the beginning of the discussions and final action shall be taken within three (3) consecutive session days thereafter.

Section 28

SEC. 28. Prohibition Against the Increase of Appropriations.-The National Assembly shall in no case increase the appropriation of any project or program of any department, bureau, agency or office of the Government over the amount submitted by the President in his budget proposal. In case of any reduction in the proposed appropriation for a project or program, a corresponding reduction shall be made in the total appropriation for a project or program, a corresponding reduction shall be made in the total appropriation of the department, office or agency concerned and in the total of the General Appropriation Bill.

Section 29

SEC. 29. Prohibition Against Enactment of Additional Special Provisions.-The National Assembly shall not add special provisions in the budget earmaking the use of appropriations for specific programs or activities nor shall it increase the amounts specified in special provisions, beyond those proposed by the President.

Section 30

SEC. 30. Content of the General Appropriations Act.-The General Appropriations Act shall be presented in the form of budgetary programs and projects for each agency of the government, with the corresponding appropriations for each program and project, including statutory provisions of specific agency or general applicability. The General Appropriations Act shall not contain any itemization of personal services, which shall be prepared by the Commissioner after enactment of the General Appropriation Act, for consideration and approval of the President.

Section 31

SEC. 31. Automatic Appropriations.-All expenditures for (a) personel retirement premiums, government service insurance, and other similar fixed expenditures, (b) principal and interest on public debt, (c) national governmentguarantees of obligations which are drawn upon, are automatically appropriated: Provided; That no obligations shall be incurred or payments made from funds thus automatically appropriated except as issued in the form of regular budgetary allotments.

Section 32

SEC. 32. Supplemental Appropriations.-All appropriation proposals shall be included and considered in the budget preparation process. After the President shall have submitted the Budget, no supplemental appropriation measure supported from existing revenue measures shall be passed by the National Assembly. However, supplemental or deficiency appropriations involving the creation of new offices, programs or activitities may be enacted if accompanied and supported by new revenue sources.

Section 33

SEC. 33. Reversion of Unexpended Balances of Appropriations, Continuing Appropriations.-Unexpended balances of appropriations authorized in the General Appropriations Act shall revert to the unappropriated surplus of the General Fund at the end of the fiscal year and shall not thereafter be available for expenditure except by subsequent legislative enactment: Provided, That apropriations for capital outlays shall remain valid until fully spent or reverted: Provided, further, That continuing apprpriations for current operating expenditures may be specifically recommended and approved as such in support of projects whose effective implementation calls for multi year expenditure commitments: Provided, finally,That the President may authorize the use of savings realized by an agency during a given year to meet non-recurring expenditures in a subsequent year.

The balances of continuing appropriations shall be reviewed as part of the annual budget preparation process and the President may approve upon recommendation of the Commissioner, the reversion of funds no longer needed in connection withthe activities funded by said continuing appropriations.

Section 34

SEC. 34. Loan Proceeds.-Expenditures funded by foreign and domestic borrowings shall be included within the expenditure program of the agency concerned. Loan proceeds, whether in cash or in kind, shall not be used without the corresponding release of funds through a Special Budget as herein provided.

Section 35

SEC. 35 Contingent Liabilities.-Government agencies, particularly government-owned or controlled corporations, shall periodically report to the Secretary of Finance and to the Commissioner of the Budget on the status of obligations they have entered into and which are the subject of government guarantees.

Section 36

SEC. 36. Liability for Unauthorized Printing Press Revisions.-It shall be unlawful for any person to make any authorized revision of any figure, text or provision in the General Appropriations Act and in the other budget documents during or in the process of the printing. Any documents during or in the process of the printing. Any unauthorized change made either by addition, modification or deletion, shall be null and void.

Persons who, in violation of this section, make any un-authorized revision in the budget documents, shall be criminally liable for falsification of legislative documents under the Revised Penal Code. When the offender is a government official or employee, he shall, in addition to criminal prosecution, be dismissed from the service.

BUDGET EXECUTION

Section 37

SEC. 37. Use of Appropriated Funds.-All moneys appropriated for functions, activities, projects and programs shall be available solely for the specific purposes for which these are appropriated.

Section 38

SEC. 38. Allotment of Appropriations.-Authorized appropriations shall be allotted in accordance with the procedure outlined hereunder.

a. Appropriations authorized dfor any department, office or agency of the Government may be made available for expenditure when the head of each department, office or agency submits to the Commissioner or request for allotment of funds showing the estimated amounts needed for each function, activity, or purpose for which the funds are to be expended, during the applicable allotment period. The form and the time of submission of the request for allotment showing the proposed quartlerly allotments of the whole authorized appropriation for the department, office, or agency shall be prescribed by the Commissioner.

b. In the administration of the allotment system herein provided, each fiscal year shall be divided into four quarterly allotment periods beginning, respectively, on the first day of January, April, July, and October; Provided, That in any case where the quarterly allotment period is found to be impractical or otherwise undesirable, the Commissioner may prescribe a different period suited to the circumstances.

c. Request for allotment shall be approved by the Commissioner who shall ensure that expenditures are covered by appropriations both as to amount and purpose and who shall consider the probable needs of the department, office, or agency for the remainder of the fiscal year or period for which the appropriation was made. Acting under guidelines as may be issued by the President, the Commissioner is authorized to approve amounts different from agency estimates where necessary in order to conform with the terms of the appropriation and the prospective needs of the department, office or agency. The Commissioner shall act promptly upon all requests for allotment and shall notify every department, office or agency of its allotments at least five days before the beginning of each allotment period. The notification, which will be sufficient authority for the Chief Accountant to enter the allotment in the books, shall include an explanation for any change or modification in the request of the head of the department, office or agency.

d. At the end of every quarter, each department, office or agency shall report to the Commissioner the current status of its appropriations, the cumulative allotments, obligations incurred/liquidated, total disbursements, and unliquidated obligations, unobligated and unexpended balances, and the results of expended appropriiations. Such department office, or agency may initiate or request for a change in allotments in order to adjust to altered conditions, subject to such rules and regulations as may be issued by the Commissioner.

e. Releases of funds appropriated for a given agency may be made to its Regional Offices wheere dictated by the need and urgency of regional activities.

f. The Commisioner shall have authority to modify or amend any allotment previously issued. In case he shall find at any time that the probable receipts from taxes or other sources of any fund will be less than anticipated and that as a consequence the amount available for the remainder of the term of the appropriations or for any allotment period will be less than the amount estimated or alloted therefor, he shall, with the approval of the President and after notice to the department or agency concerned, reduce the amount or amounts alloted so as to conform with targeted budgetary goals.

g. The Commissioner shall maintain control records showing quarterly by funds, accounts, and other suitable classifications as he may find necessary, the amounts appropriated, the estimated revenues, the actual revenues or receipts, the amounts alloted and available for expenditures, the unliquidated obligations, actual balances on hand, and the unencumbered balances of the allotments for each department, office or agency of the Government.

Section 39

SEC. 39. Program of Expenditure.-The Commissioner shall recommend to the President the year's program of expenditure for each agency of the government on the basis of authorized appropriations. The approved expenditure program shall constitute the basis for fund releases during the fiscal period, subject to such policies, rules and regulations as may be approved by the President.

Section 40

SEC. 40. Special Budgets for Lump-Sum Appropriations.-Expenditures from lump-sum appropriations authorized for any purpose or for any department, office or agency in any annual General Appropriations Act or other Act and from any fund of the National Government, shall be made in accordance with a special budget to be approved by the President, which shall include but shall not be limited to the number of each kind of position, the designations, and the annual salary proposed for which an appopriation is intended. This provision shall be applicable to all revolving funds, receipts which are automatically made available for expenditure for certain specific purposes, aids and donations for carrying out certain activities, or deposits made to cover the cost of special services to be rendered to private parties. Unless otherwise expressly provided by law, when any Board, head of department, chief of bureau or office, or any other official, is authorized to appropriate, allot, distribute or spend any lump-sum appropriation or special, bond, trust, and other funds, such authority shall be subject to the provisions of this section.

In case of any lump-sum appropriation for salaries and wages of temporary and emergency laborers and employees, including contractual personnel, provided in any General Appropriation Act or other Acts, the expenditure of such appropriation shall be limited to the employment of persons paid by month, by the day, or by the hour.

Section 41

SEC. 41. Cash Budgets.-An operational cash resources for priority development projects and to established a sound basis for determining the level, type and timing of public borrowings. The procedure, formal, accounts, and contol aspects of the system shall be determined jointly by the Secretary of Finance, the Commissioner of the budget and the Chairman, Commission on Audit.

Section 42

SEC. 42. Creation of Appropriation Reserves.-The commissioner may establish reserves against appropriations to provide for contingencies and emergencies which may arise later in the fiscal year and which would otherwise require a deficiency appropriations.

The establishment of appropriation reserves shall not necessarily mean that such portion of the appropriation will not be made available for expenditure. Should conditions change during the fiscal year justifying the use of the reserve, necessary adjustments may be made by the Commissioner when requested by the department, office or agency concerned.

Section 43

SEC. 43. Suspension of Expenditure of Appropriations.-Except as otherwise provided in the General Appropriations Act and whenever in his judgement the public interest so requires, the President, upon notice to the head of office concerned, is authorized to suspend or otherwise stop further expenditure of funds alloted for any agency, or any other expenditure authorized in the General Appropriations Act, except for personal services appropriations used for permanent officials and employees.

Section 44

SEC. 44. Authority to Approve Fund Transfers.-The President shall have the authority to transfer any fund appropriated for the different departments, bureaus, offices and agencies of the Executive Department which are included in the General Appropriations Act, to any program, project, or activity of any department, bureau or office included in the General Appropriations Act or approved after its enatment.

The President shall, likewise have the authority to augment any appropriation of the Executive Department in the General Appropriations Act, from savings in the appropriations of another department, bureau, office or agency within the Executive Branch, pursuant to the provisions of Article VIII, Section 16 (5) of the Constitution.

Section 45

SEC. 45. Authority to Use Savings in Appropriations to Cover Deficits.-Except as otherwise provided in the General Appropriations Act, any savings in the regular appropriations authorized in the General Appropriations Act for programs and projects of any department, office or agency, may, with the approval of the President, be used to cover a deficit in any other item of the regular appropriations: Provided, That the creation of new positions or increase of salaries shall not be allowed to be funded from budgetary savings except when specifically authorized by law: Provided, further, That whenever authorized positions are transferred from one program or project to another within the same department, office or agency, the corresponding amounts appropriated for personal services are also deemed transferred, without, however increasing the total outlay for personal services of the depatment, office or agency concerned.

Section 46

SEC. 46. Certification of availability of Funds.-No funds shall be disbursed, and no expenditures or obligations chargeable against any auhorized allotment shall be incurred or authorized in any department, office or agency without first securing the certification of its Chief Accountant or head of accounting unit as to the availabilty of funds and the allotment to which the expenditure or obligation may be properly charged.

No obligation shall be certified to accounts payable unless the obligation is founded on a valid claim that is properly supported by sufficient evidence and unless there is proper authority for its incurrence. Any certification for a non-existent or fictitious obligation and/or creditor shall be considered void. The certifying official shall be dusmissed from the service, without prejudice to criminal prosecution under the provisions of the Revised Penal Code. Any payment made under such certification shall be illegal and every official authorizing or making such payment, or taking part therein or receiving such payment, shall be jointly and severally liable to the government for the full amount so paid or received.

Section 47

SEC. 47. Prohibition against the Incurrence of Overdraft.-Heads of department, bureaus, offices and agencies shall not icur nor authorize the incurrence of expenditures or obligations in excess of allotments released by the Commissioner for their respective departments, offices and agencies. Parties responsible for the incurrence of overdrafts shall be held personally liable therefor.

Section 48

SEC. 48. Adjustment of Appropriations for Reorganization.-When under authority of law, a function or an activity is transferred or assigned from one agency to another, the balances of appropriations which are determined by the head of such department to be available and necessary to finance or discharge the function or activity so transferred or assigned may, with the approval of the President, be transferred to and be made available for use by the agency, to which said function or activity is transferred or assigned for the purpose for which said funds were originally available. Balances so transferred shall be credited to any applicable existing appropriation account or to new appropriation accounts which are hereby authorized to be estyablished, and shall be merged with any fund already in the applicable existing or newly established appropriation account or accounts and thereafter accounted for as one fund.

The funding requirements of agencies reorganized in accordance with approved reorganization plans or reorganized pursuant to law enacted after the approval of the General Appropriations Act, are deemed appropriated and shall be available for expenditure as soon as the reorganization plans are approved. The Commissioner is hereby authorized to make necessary adjustments in the appropriation to carry out the provisions of this section. The department head concerned, with the approval of the commissioner, is hereby authorized to make necessary salary adjustments resulting from final selection of personnel to fill the positions in the staffing patterns of reorganized agencies, to make necessary salary adjustments resulting from new appointments, promotions or salary increases, subject to the provisions of P.D. No. 985.

Section 49

SEC. 49. Liability fo Illegal Expenditures.-Every expenditure or obligation authorized or incurred in violation of the provisions contained in the annual General or other Appropriations Act shall be void. Every payment made in violation of said provisions shall be illegal and every official or employee authorizing or making such payment shall be jointly and severally liable to the Government for the full amount so paid or received.

Any official or employee of the Government knowingly incurring any obligation, or authorizing any expenditure in violation of the provisions herein, or taking part therein, shall be dismissed from the service, after due notice and hearing by the duly authorized appointing official. If the appointing official is other than the President and should he fail to remove such official or employee, the President may exercise the power of removal.