TO BE KNOWN AS THE DECREE ON LOCAL FISCAL ADMINISTRATION

• Number: Presidential Decree No. 477
• Sections: 81

Preamble

WHEREAS, the recent enactment of the Local Tax Code, the

Real Property Tax Code and other revenue measures has provided the local

governments with additional sources of income that will stabilize and

bolster their financial capacity to contribute to the collective efforts

for national growth;

WHEREAS, in the past, local government funds have been

either wasted or dissipated for lack of sound financial plans and

adequate fiscal controls;

WHEREAS, the proper and efficient utilization of available

local resources is crucial to the early realization of primary

developmental goals and objectives;

WHEREAS, there is a pressing need to strengthen the

administrative machinery for local treasury operations in order to

induce the judicious conservation and management the judicious

conservation and management of local government resources;

NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the

Philippines, by virtue of the powers vested in me by the Constitution do

hereby adopt, promulgate and decree as part of the law of the land,

this Decree, the full text of which follows:

Composition and Safekeeping

City and Municipal Budgets

Accounting and Accountability

ADMINISTRATION

SEC.

80. Implementing rules and regulations.—The Secretary of

Finance shall promulgate the rules and regulations to be followed in

carrying out the provisions of this Decree for the proper and effective

implementation hereof.

The Chairman of the Commission on Audit

shall prescribe the accounting and auditing rules and regulations

necessary in the proper implementation of the pertinent provisions of

this Decree.

Section 1 Scope.

SECTION 1. Scope.—This Decree shall govern the

conduct and management of the financial affairs, transactions, and

operations of provinces, cities, municipalities and barrios, and shall

provide the organization for local fiscal administration in the local

governments.

Section 2 Fundamental Principles.

SEC. 2. Fundamental Principles.—Local government

financial affairs, transactions, and operations shall be governed by the

fundamental principles set forth hereunder.

No money shall be paid out of the treasury except in pursuance of

a lawful appropriation or other specific statutory authority.

Public funds and monies shall be spent solely for public

purposes.

Revenue is obtainable only from sources expressly authorized by

law and collection thereof shall at all times be acknowledged properly.

All monies officially received by a public officer in any

capacity or upon any occasion shall be accounted for as government

funds, except as may otherwise be specifically provided by law or

competent authority.

Trust funds shall not be paid out of the treasury except in

fulfillment of the purpose for which the trust was created or fund

received.

Every officer of the government whose duties permit or require

the possession or custody of government funds shall be properly bonded

and such officer shall be accountable and responsible for said funds and

for the safekeeping thereof in conformity with the provisions of law.

Local governments shall formulate sound financial plans and the

local budgets shall, by and large, be based on functions, activities,

and projects, in terms of expected results.

Fiscal responsibility shall, to the greatest extent, be shared

by all those exercising authority over the financial affairs,

transactions and operations of the local governments.

Section 3 Supervisory authority of the Department of Finance.

SEC. 3. Supervisory authority of the Department of Finance.—The

Department of Finance shall exercise general supervision over the

financial affairs of the local governments and, except as otherwise

specifically provided by law, over all funds the investment of which is

authorized by law. For the purpose, and along with the powers, duties

and functions vested upon it by law, it shall be the responsibility of

the Department to:

Formulate and execute fiscal policies that will promote the

financial stability and growth of the local governments;

Provide the local governments with policy guidelines in the

preparation and adoption of sound financial plans and review the local

budgets in order to enhance the maximum utilization of local funds and

resources;

Adopt and enforce the necessary measures that will improve local

treasury operations and foster effective financial management at the

local levels; and

Ensure the proper use, custody and safekeeping of public funds

in the local governments. In order to attain the foregoing objectives,

the Secretary of Finance shall exercise direct executive supervision

over all treasury officials and personnel in the local governments.

Section 4

SEC. 4. Definition of "Fund."—A fund is a sum of

money or other resources set aside for the purpose of carrying out

specific activities or attaining certain objectives in accordance with

special regulations, restrictions, or limitations and constituting an

independent fiscal and accounting entity.

Section 5 Accounting for Monies Received by Public Officers.

SEC. 5. Accounting for Monies Received by Public

Officers.—Except as otherwise specifically provided, all monies

received by a public officer shall be accounted for as Government Funds.

Section 6 Payment of Government Monies into the Treasury.

SEC. 6. Payment of Government Monies into the Treasury.—Officers

of the government authorized to receive and collect monies arising from

taxes, revenues, or receipts of any land shall remit the full amounts

as received and collected by them into the treasury of the branch of the

Government to which such officers in their collecting capacity

respectively pertain, to the credit of the particular account or

accounts to which the monies in question initially belong. The amount of

such collections ultimately payable to other branches of the

Government, shall thereafter be transferred to the respective treasuries

of those branches, under regulations which the Commission on Audit

shall prescribe.

Section 7 The Local Funds.

SEC. 7. The Local Funds.—Provincial, city and

municipal governments shall maintain only two local funds, namely, the general

fund and the infrastructure fund and they shall be used

to account for such monies and resources as may be received in and

disbursed from the local treasury.

The General Fund, shall consist of monies and

resources not otherwise accruing to any other fund and shall be

available for the payment of expenditures, obligations or purposes not

specially declared by law as chargeable to, or payable from, any other

fund, through transfers of monies or resources therefrom to other funds

of the local government for their augmentation and use may be made by

proper appropriation.

The Infrastructure Fund, shall consist of monies

and resources raised or earmarked by law, including those which under

existing laws accrue to the road and bridge fund, allotments under

Republic Act No. 917, as amended, and transfers from the General

Fund, which shall be available exclusively for the following

purposes:

The repair, maintenance, improvement, and construction

of roads, bridges, and highways. However, in applying this fund to

such uses, adequate provision shall be made for the maintenance of

existing unabandoned roads and bridges before any new construction is

undertaken.

The providing and maintaining of wharves, piers, and

docks, in accordance with plans and specifications furnished by

the proper national office, and for removing obstructions to navigation.

Subsidizing or for acquiring, operating, and maintaining

means of water transportation within the province or city or between the

province or city and neighboring provinces and city or islands or to

dredge rivers and provide facilities for communication and

transportation by river, as well as for establishing and operating

telephone systems.

The construction, improvement, maintenance and

repair of wharves, piers and docks; plazas, parks, monuments and

playgrounds; street lighting; artesian wells; irrigation system;

flood control systems; sewerage and drainage systems; and other

permanent public improvements.

The acquisition of lands and buildings for public use.

Construction of roads and bridges shall include preliminary

investigation and surveys besides actual construction.

Subject to

the approval of the Secretary of Finance, the local board or council

may, upon proper justification, transfer any unappropriated balance of

this fund to cover exceptionally urgent needs of the province, city, or

municipality.

Section 8 Special Education Fund.

SEC. 8. Special Education Fund.—There

shall be maintained in the local treasuries a separate fund to be known

as the Special Education Fund which shall consist of the respective

shares of provinces, cities and municipalities in the proceeds of the

additional one per cent real property tax levied and appropriated for

educational purposes under Republic Act No. 5447, as amended by Sections

41 and 87 (b) of Presidential Decree No. 464, otherwise known as the

Real Property Tax Code.

Section 9 Trust Funds.

SEC. 9. Trust Funds.—Trust funds are private and

public monies which have officially come into the possession of the

Government or of a government officer as trustee, agent, or

administrator, or which have been received as a guaranty for the

fulfillment of some obligation. A trust fund is available only for the

specific purpose for which it was created or for which it came into the

possession of the Government.

Section 10 Separation of Books and Depository Accounts.

SEC. 10. Separation of Books and Depository Accounts.—

Local treasurers shall maintain separate books and depository accounts

for each fund in their custody or administration under such rules and

regulations as the Commission on Audit may prescribe.

Section 11 Depository Accounts.

SEC. 11. Depository Accounts.—Local treasurers

shall maintain their depository accounts with Banks duly designated as

government depositories by the Central Bank of the Philippines.

Municipal treasurers shall deposit their funds with the

provincial treasurer who, in turn, shall deposit the same with the duly

designated banks. Provincial, city and municipal treasurers may directly

deposit with duly designated banks excess local funds under time

deposit accounts, upon resolution of the local legislative body and upon

approval by the provincial treasurer and the provincial auditor, in the

case of municipal funds.

Earnings of such deposits shall accrue

to the proper funds.

Section 12 Separation of Personal Money from Public Funds.

SEC. 12. Separation of Personal

Money from Public Funds.—Local treasurers and other accountable

officers shall keep personal monies separate and distinct from

government funds in their custody and shall not make profit out of

public money or otherwise apply the same to any use not authorized by

law.

Section 13 Special Accounts to he Maintained in the General Fund.

SEC. 13. Special Accounts to he Maintained in the

General Fund.—There shall be maintained in the general fund of the

local government concerned special accounts for the following:

Public utilities and other economic enterprises.

Barrio Development Fund.—There is hereby created a barrio

development fund to be constituted from the annual contribution from

each province, city, or municipality in amounts not exceeding five

hundred pesos per barrio. This fund shall be spent solely for

community development projects which meet the requirements set

forth by the Secretary of Local Government and Community Development.

The provincial or city treasurer, who shall be the custodian of this

fund, shall maintain in his books a special account therefor. The

provincial treasurer shall make releases from this fund thru the

municipal treasurer concerned who shall be responsible for the proper

disbursement and accounting of the same.

Loans, interests, bond issues and other contributions for

specific purposes.

Receipts and expenditures involving the above-mentioned special

accounts shall be properly taken up thereunder.

Not profits

derived from the operation of public utilities and other economic

enterprises, when not needed for the return of the advances made

therefor, shall be spent solely for the improvement of the public

utility or the economic enterprises concerned.

Section 14 Definition of Terms.

SEC. 14. Definition of

Terms.—When used in this Chapter:

The term "annual budget" means a financial plan embodying the

estimates of income certified as reasonably collectible by the

provincial treasurer in the case of provinces and their respective

municipalities and by the city treasurer in the case of cities, and

appropriations covering the proposed expenditures for the ensuing fiscal

year.

The term "supplemental budget" is a supplementary financial

plan embodying changes during the fiscal year in the annual estimates of

income and appropriations.

The term "income" covers all revenues and receipts collected

or received, forming the gross accretions of funds of the

Government.

The term "revenue" refers to income derived from the regular

system of taxation enforced under authority of law or ordinance, and, as

such, accrue more or less regularly every year.

The term "receipts" refers to income realized from operations

and activities of the Government or are received by the Government

in the exercise of its corporate functions, consisting of charges

for services rendered, or for conveniences furnished, or the price

of a commodity sold as well as authorized contributions or aids

from other entities, except provisional advances for budgetary purposes.

Loans for specific projects or activities shall be considered as

"receipts".

The term "appropriations" refers to the estimates of

expenditures in a budget when finally approved by the appropriate

authorities concerned.

The term "continuing appropriations" refers to

appropriations for specific projects, such as those for construction of

physical structures, or for the acquisition of real property or

equipment, which shall continue to be available until the

project is completed or abandoned. Reversions shall not be made or

appropriations obligated by contract. Appropriations not obligated by

contract may not be continued if the same would result in a negative

balance in the unappropriated account of the fund concerned.

The term "current operating expenditures" refers to

"appropriations for the purchase of goods and services for current

consumption within the fiscal year, including the acquisition of

furniture and equipment of nominal value usually used in the conduct of

normal government operations.

The term "capital outlays" or "capital expenditures" refers to

the purchase of goods and services of a life-expectancy extending beyond

the fiscal year and which add to the assets of the local government

concerned, except furniture and equipment of nominal value usually used

in the conduct of normal government operations.

The term "budget document" refers to the instrument used by the

budget-making authority to present a comprehensive financial program to

the appropriating body.

Section 15 Form and Content.

SEC. 15. Form and Content.—The provincial, city and

municipal budget shall primarily consist of two parts: (1) the estimates

of income certified collectible by the treasurer concerned; and (2) the

total appropriations covering (a) the current operating expenditures;

and (b) capital outlays.

The budget document shall contain:

a budgetary message of the local chief executive setting

forth in brief the significance of the appropriations proposed:

a brief summary of the functions and activities in relation to

the goals and objectives of the local government for the fiscal period;

and

summary financial statements setting forth:

the actual income and expenditures during

the last completed year;

the actual income and expenditures of the first three

quarters and the estimated income and expenditures for the fourth

quarter of the fiscal year in progress;

the estimated income for the ensuing fiscal year from

ordinances and laws existing at the time the proposed budget is

transmitted, together with other revenue-raising proposals, if any;

the estimated expenditures necessary to carry out the

functions and activities of the local government for the ensuing fiscal

year;

all essential facts regarding the bonded and other long-term

obligations and indebtedness of the local government, of any;

summary statement of all statutory and contractual obligations

due; and

such other financial statements and data as are deemed

necessary or desirable in order to make known in all practicable detail

the financial condition of the local government.

Section 16 Submission of Detailed Statements of Income and Expenditures.

SEC. 16. Submission of Detailed Statements of Income and

Expenditures.—On or before the fifteenth day of April of each year,

the local treasurers shall submit to their respective local chief

executives a certified statement covering the income and expenditures

pertaining to the preceding fiscal year; the actual income and

expenditures of the first three quarters and the estimated income and

expenditures for the fourth quarter of the current year; and the

estimates of income for the ensuing fiscal year. The local treasurer

shall also certify to the reasonable probability of realizing the

estimates of income for the ensuing fiscal year.

Section 17 Submission of Budget Proposals by Heads of Offices.

SEC. 17. Submission of Budget Proposals by Heads of

Offices.—Each head of office shall submit a statement of the

proposed expenditures recommended by him for his office to the local

chief executive on or before the date the said local chief executive may

determine, but not later than April fifteen of each year and in

accordance with such policy guidelines as the latter may issue in

conformity with the general requirements of this Chapter.

Budget proposals for all offices, departments, or projects,

shall be divided into two primary categories, namely—the current

operating expenditures and the capital outlays. Such

budget proposals shall be supported by:

Personnel schedules containing the following information:

A detailed plantilla of personnel indicating position titles, names

of incumbents, and present and proposed rates of salaries and wages,

excluding those hired on the daily basis;

Proposed new positions and corresponding salary rates;

and

Positions proposed for abolition and the aggregate

amount involved.

Brief narrative description of the nature of the work to be

performed and explanation of the significance and scope of each program.

Section 18 Preparation of the budget by the local chief executive.

SEC. 18. Preparation of the budget by the local chief

executive.—Upon receipt of the statements of income and expenditures

from the treasurer and the budget proposals of the head of offices as

provided for in the preceding sections, the local chief executives shall

prepare the budget for the ensuing fiscal year in accordance with

Section 19 Legislative authorization of the budget.

SEC. 19. Legislative authorization of the budget.—On

or before the end of the fiscal year, the local board or council shall

approve through the enactment of an appropriation ordinance the annual

budgets for each fund of the local government unit for the ensuing

fiscal year on the basis of the statement unit of the certified

estimated income and budget proposals submitted by the local chief

executive. In the case of cities, the budgets thus enacted by the local

board or council shall be subject to further approval by the City Mayor.

Section 20 Majority vote required in the approval of budgets.

SEC. 20. Majority vote required in the approval of

budgets.—Approval by the board or council of the budgets of the

local government shall require the affirmative votes of a majority of

all the members thereof.

Section 21 Veto power of the city mayor.

SEC. 21. Veto power of the city mayor.—Within ten

days after receipt of the appropriation ordinance, or any resolution or

motion directing the payment of money or creating liability, the city

mayor shall return it with his approval or veto. If he takes no action

within the time prescribed, it shall be deemed to have been approved.

If he returns it with his veto, his reasons therefor must be

stated in writing. The ordinance, resolution, or motion may then be

re-enacted by the affirmation votes of at least two-thirds of all the

members of the board or council, in which case the same shall again be

forwarded to the city mayor for his approval. If within ten days after

receipt of the re-enacted ordinance, resolution, or motion, the city

mayor takes no action, it shall be deemed to have been approved, but if

within said time the city mayor again returns it with his veto, stating

writing his reasons therefor, the ordinance, resolution, or motion, if

re-enacted by a two-thirds vote, shall be forwarded forthwith by the

board or council to the Secretary of Finance for his approval or

disapproval within thirty days after receipt thereof. The decision of

the Secretary shall be final.

Section 22 Sealing, recording and distribution of appropriation ordinances.

SEC. 22. Sealing,

recording and distribution of appropriation ordinances.—Each

approved ordinance, resolution or motion hereinabove referred to shall

bear the official seal of the local government concerned, signed by the

presiding officer of the board or council and attested to by the board

or council secretary, and recorded in a book kept for the purpose. It

shall be the duty of the board or council secretary to furnish the local

treasurer concerned with a least three copies of the approved

appropriation ordinance within ten days from the approval thereof. In

the case of provinces and cities, the local auditor shall likewise be

furn shed with copies thereof.

Section 23 Effectivity of budgets.

SEC. 23. Effectivity of budgets.—The

approved annual budget shall be deemed to be operative and in full

force and effect as of the beginning of the fiscal year. A supplemental

budget, however, shall take effect upon its approval or on the date

fixed in the appropriation ordinance for its effectivity.

Section 24 The role of the treasurer in the budget process.

SEC. 24. The role of the treasurer in the budget

process.— The provincial, city and municipal treasurer shall be the

chief financial officer of their respective local governments and in

such capacity shall provide technical and staff services to the chief

executive and other local officials in budget preparation,

authorization, execution and accountability.

Section 25 Changes in the annual budget.

SEC. 25. Changes in the annual budget.—Changes in

the annual budget may be made within the fiscal year by way of

supplemental budgets which shall be enacted in the same manner as the

annual budget but not oftener than once a month. Additional supplemental

budgets, however, may in times of emergency be enacted in the manner

herein provided to set aside appropriations for the purchase of supplies

and materials and/or the payment of services which are exceptionally

urgent or absolutely indispensable to prevent imminent danger to, or

loss of, life or property.

Whenever any change is made in the budget, the supplemental

appropriation ordinance shall clearly indicate the various items of

appropriations affected and the reasons for the change.

SEC.

26. Failure to enact an annual budget.—If the local

legislative body shall fail to pass the annual budget before the

beginning of the ensuing fiscal year, or when the budget which has been

enacted is declared inoperative in its entirety by the reviewing

officer, the annual appropriations for salaries and wages of existing

positions, statutory and contractual obligations, and essential

operating expenses authorized in the annual and supplemental budgets for

the preceding fiscal year shall be deemed re-enacted and disbursements

of funds shall be in accordance therewith until a new budget or a

revised budget meeting the objections of the reviewing officer is

approved.

In the implementation of a re-enacted budget, the local

treasurer concerned shall exclude from the estimates of income for the

preceding fiscal year those realized from non-recurring sources, like

national aids, proceeds from loans, sale of assets, prior year

adjustments, and other analogous sources of income.

Should the

revised income estimates be less than the aggregate re-enacted

appropriations, the treasurer shall accordingly advise the local board

or council which shall, within ten days from receipt of such advice,

make the necessary adjustments or reductions. The revised appropriations

authorized by the board or council shall then be the basis for

disbursements.

Section 27 Budgetary Requirements.

SEC. 27. Budgetary Requirements.—The

budgets of provinces, cities and municipalities for any fiscal year

shall comply with the following requirements:

The aggregate amount appropriated shall not exceed the

estimated income certified collectible by the local treasurer;

Full provisions shall be made for all statutory and contractual

obligations of the local government concerned;

Twenty per cent of the national internal revenue allotment

accruing to the general fund of the local government shall be

appropriated for developmental projects or activities;

Aids to legally constituted barrios shall be provided in amounts

not exceeding P500.00 per barrio; and

Two per cent of the estimated revenue from regular sources,

shall be set up as a yearly unappropriated reserve to cover unforeseen

expenditures arising from the occurrence of natural calamities or

financial dislocation on account thereof.

Section 28 General limitations.

SEC. 28. General limitations.—

The total annual appropriations for salaries and wages of

provincial, city and municipal officials and employee for one fiscal

year shall not exceed forty-five per cent (45%), in the case of all

first and second class provinces, cities and municipalities and

fifty-five per cent (55%), in the case of those lower than second class,

of the total annual income actually realized from regular sources

during the next preceding fiscal year or the current fiscal year

estimates from the same sources certified as collectible by the

provincial or city treasurer concerned, whichever is lower. The

appropriations for salaries and wages of officials and employees in the

public schools, hospitals, health and agricultural services, public

utilities, markets and slaughter-houses, and other economic enterprises

owned, operated and maintained by the province, city or municipality, as

well as representation and emergency cost-of-living allowances, shall

not be included in the computation of the maximum amount expendable for

salaries and wages.

The Secretary of Finance, however, may authorize appropriations in

excess of the percentages hereinabove fixed subject to such conditions

as he may impose, but in no case shall the excess in appropriations for

salaries and wages be more than twenty-five per cent (25%) of the

maximum expendable amounts nor shall such exemption be granted in case

of overdraft or imminence thereof.

No official or employee shall receive a salary rate higher than

the maximum fixed by law or regulation for his position or other

positions of equivalent rank.

No local fund shall be appropriated to increase or adjust

salaries or wages of officials and employees of the national

government assigned in the local government, except as may

hereafter be expressly authorized by law.

In case a reduction of salaries and wages becomes necessary,

such reduction shall be general in character and the percentage thereof

shall be uniform for similar rates of salaries and wages. In cases of

abolition of positions in the competitive or career service, such

abolition shall be made in accordance with pertinent provisions of the

Civil Service Law and Rules, and in the case of officials or employees

appointed at the national level such reduction in that portion of their

salary paid out of local funds as authorized by law or abolition of

position shall not be given effect unless approved by the Head of the

National Department or Commission concerned.

Non-funding of existing positions in the competitive or

non-competitive services which are occupied by incumbents holding

permanent appointments shall be unlawful.

Changes in designation or nomenclature of positions resulting

in a promotion or demotion in rank and/or increase or decrease in

compensation shall not be authorized, except when the position is

actually vacant, and the filling of such positions shall be strictly

made in accordance with the Civil Service Law and Rules.

Except as may be expressly authorized by law, creation of new

positions and salary increases or adjustments shall not be retroactive

but, rather, invariably prospective in effect.

The annual appropriations for discretionary purposes of the local

chief executive shall not exceed one per cent of the real property tax

collections actually realized during the next preceding fiscal year or

P100,000.00, whichever amount is lower.

Section 29 Review of Provincial and City Budgets.

SEC. 29. Review of Provincial and City Budgets.—Within

ten days from receipt by the provincial or city treasurer of copies of

the provincial or city budget approved by the local board or council, he

shall furnish copies thereof to the Secretary of Finance who shall have

the power to review the same in order to ascertain compliance with the

foregoing requirements and general limitations. If within ninety days

after receipt of his copies of the provincial or city budgets, the

Secretary of Finance takes no action thereon, the same shall be deemed

to have been passed in accordance with law and shall continue to be in

full force and effect. If within the same period the Secretary of

Finance shall have ascertained that a provincial or city budget has not

complied with the budgetary requirements set forth in Section 27 hereof,

the budget shall be declared inoperative in its entirety. Items of

appropriations contrary to, or in excess of, any of the general

limitations prescribed in Section 28 hereof shall be disallowed or

reduced accordingly and any violation of any of the aforesaid general

limitations shall constitute sufficient ground for declaring the budget

inoperative either in part or in its entirety.

The Secretary of

Finance shall, within the ninety-day period hereinabove fixed, advise

the provincial governor or the city mayor concerned thru the local

treasurer or any action taken on the budget under review. Following

receipt of such advice, it shall be unlawful for the local treasurer to

make further disbursement of funds from any of the items of

appropriation declared inoperative, disallowed or reduced.

SEC.

30. Review of Municipal Budgets.—Municipal budgets shall be

reviewed by the provincial treasurer in the same manner and within the

same period as prescribed in the preceding section. The budgetary

requirements and general limitations prescribed for provincial and city

budgets shall likewise be applicable to municipal budgets.

If

within ninety days from receipt of his copies of the municipal budget

from the municipal treasurer concerned, the provincial treasurer takes

no action thereon, the same shall be deemed to have been passed in

accordance with law and shall continue to be in full force and effect.

If within the ninety days the provincial treasurer shall have

ascertained that a municipal budget has not complied with the budgetary

requirements set forth in Section 27 hereof or when the income estimates

certified by the municipal treasurer are found to be unrealistic and

improbable of collection, the provincial treasurer shall, within the

ninety-day period hereinabove fixed declare the budget inoperative in

its entirety. Items of appropriation contrary to, or in excess of, any

of the general limitations prescribed in Section 28 hereof shall be

disallowed or reduced accordingly and any other violation of any of the

aforesaid general limitations shall constitute sufficient ground for

declaring the budget inoperative either in part or in its entirety.

The provincial treasurer shall within the ninety-day period advise the

municipal mayor thru the municipal treasurer of any action taken on the

budget under review. Following receipt of such advice, it shall be

unlawful for the municipal treasurer to make further disbursement of

funds from any of the items of appropriation declared inoperative,

disallowed, or reduced.

Section 31 Duration of appropriations; closing special budgets.

SEC. 31. Duration of

appropriations; closing special budgets.—Appropriations for ordinary

administrative purposes shall terminate with the fiscal year and all

unexpended balances thereof shall be reverted on the thirtieth day of

June of each year to the unappropriated account by way of a special

budget which shall serve as a supporting document to the corresponding

journal voucher. Similarly, thru the special budget, all income accounts

shall be brought into balance before closing the books, reducing the

classes of income that have been over-estimated and increasing those

that have been underestimated to the amounts actually realized.

Such special budgets reverting unexpended appropriations for ordinary

administrative purposes and of income receivable and actual income

adjustments shall not require any action by the local legislative body.

However, legislative action by the local board or council is necessary

in the following cases: (1) where overdrafts in any of the appropriation

accounts have been incurred; and (2) reversions of continuing

appropriation or appropriations obligated by the contract as may be

authorized by law.

Section 32 The annual barrio budget.

SEC. 32. The annual barrio budget.—The

annual barrio budget shall primarily consist of two parts: (a) the

estimates of income certified collectible by the municipal treasurer on

the basis of estimates prepared by the barrio treasurer from local

sources; and (2) the total appropriations covering current operating

expenditures and capital outlays, if any.

Section 33 Submission of detailed statements of income and expenditures for the barrio budget.

SEC. 33. Submission of detailed statements of income

and expenditures for the barrio budget.—On or before the fifteenth

day of April of each year, the municipal treasurer shall furnish the

barrio captain with a certified statement covering the estimates of

income from local sources and expenditures pertaining to the ensuing

fiscal year and thereby certify to the reasonable probability or

realizing the estimates of income prepared and submitted by the barrio

treasurer.

Section 34 Preparation of the barrio budget the barrio captain.

SEC. 34. Preparation of the barrio budget the barrio

captain.—Upon receipt of the foregoing statements, the barrio

captain shall prepare the budget for the ensuing fiscal year. The said

budget shall contain the estimate of income as certified by the

municipal treasurer and the proposed expenditures for the ensuing fiscal

year.

The barrio captain shall submit the budget to the barrio

council not later than May sixteen of the year.

Section 35 Action of the barrio council.

SEC. 35. Action

of the barrio council.—On or before the end of the fiscal year, the

barrio council may enact through an appropriation ordinance the annual

barrio budget for the local fund for the ensuing fiscal year on the

basis of the statement of the certified estimated income and budget

proposals submitted by the barrio captain.

Section 36 Effectivity of barrio budgets.

SEC. 36. Effectivity of barrio budgets.—Any

provision of law to the contrary notwithstanding, the barrio budget

approved by the barrio council shall be deemed operative and in full

force and effect at the beginning of the fiscal year. A barrio

supplemental budget shall take effect upon its approval or on the date

fixed in the appropriation ordinance for its effectivity.

Section 37 Changes in the barrio budget.

SEC. 37. Changes in the barrio budget.—Changes in

the budget in the case of appropriations for ordinary administrative

purposes may be made within the fiscal year by way of supplemental

budgets which shall be adopted in the game manner as the annual budget.

Section 38 Review of the barrio budget.

SEC. 38. Review of the barrio budget.—Within ten

days from its approval, copies of the barrio budget shall be submitted

by the barrio council to the municipal treasurer concerned who shall

have the power to review such budget in order to see to it that the

aggregate amount appropriated has not exceeded the estimated income

cerified collectible; that full provisions have been made for all

statutory and contractual obligations; that no officials or employee

shall receive per diems, wages or salaries an excess of existing laws or

executive orders. If within ninety days after receipt of his copies of

the budget the municipal treasurer takes no action thereon, the same

shall be deemed to have been passed in accordance with law and shall

continue to be in full force and effect. If within the same period the

municipal treasurer concerned shall have ascertained that a barrio

budget has approved appropriations excess of the estimates of income

duly certified collectible or that the same has not fully provided for

statutory or contractual obligations, the budget shall be declared

inoperative in its entirety. Items of appropriation in excess of

existing salary laws and executive orders shall be disallowed or reduced

accordingly. The municipal treasurer shall, within the ninety-day

period hereinabove fixed, advise the barrio captain concerned, thru the

barrio treasurer, of any action taken on the budget under review.

Following receipt of such advice, it shall be unlawful for the barrio

treasurer or the municipal treasurer who has custody of the funds to

make further disbursement of funds from any of the items of

appropriation declared inoperative, disallowed or reduced.

Section 39 Disbursement of appropriations for development projects.

SEC. 39. Disbursement of appropriations for development

projects.—Appropriations for development projects funded from the

twenty per cent of the annual internal revenue allotment of the local

government and from the barrio development fund shall not be disbursed

until after the corresponding work programs shall have been reviewed by

the Secretary of Local Government and Community Development or his duly

authorized representative. The Secretary shall issue the guidelines

necessary in the proper implementation of this Section.

Section 40 Administrative issuances; Budget operations manual.

SEC. 40. Administrative issuances; Budget operations

manual.—The Secretary of Finance shall have rules and regulations as

may be necessary to facilitate effective implementation of the

provisions of this Chapter and shall within one year from the

effectivity hereof, promulgate a Budget Operations Manual for local

governments to improve and systematize methods, techniques and

procedures employed in budget preparation, authorization, execution and

accountability.

Section 41 Disbursement of Local Government Funds in General.

SEC. 41. Disbursement

of Local Government Funds in General.—Revenue funds shall not be

paid out of any-local treasury except in pursuance of lawful

appropriation or other specific statutory authority. Trust funds shall

not be paid out of any local treasury except in fulfillment of the

purpose for which the trust was created or fund received.

Section 42 Prohibition against expenditures for religious or private purposes.

SEC. 42. Prohibition against expenditures for

religious or private purposes.—No public money or property shall be

appropriated or applied for the benefit of any religious sect or

activity nor any other undertaking or purpose of a private character.

Section 43 Use of appropriated funds.

SEC. 43. Use of appropriated funds.—Funds shall be

available exclusively for the specific purposes for which they have been

appropriated. No transfers or reversions of appropriations from one

item to another shall be made except by the local legislative body.

Section 44 Restriction upon limit of disbursements.

SEC. 44. Restriction upon limit of disbursements.—Disbursements

in accordance with appropriations in the approved local budget may be

made from any local funds in the custody of the treasurer but the total

disbursements from any local fund shall in no case exceed the actual

collections plus fifty per cent in the case of provinces and cities and

twenty-five per cent in the case of municipalities, of the uncollected

estimated revenue accruing to such fund: Provided, however, That no cash

overdraft in any local fund shall be incurred at the end of fiscal

year.

In case of emergency caused by typhoon, earthquake, or any other

public calamity, the Secretary of Finance in the case of provinces and

cities and the provincial treasurer in the case of municipalities, may

authorize the treasurer to continue making disbursements from any local

fund in his possession in excess of the limitation herein provided, but

only for such purposes and amounts included in the approved local

budgets as the said officials shall determine, after consultation with

the local board or council.

Any overdraft which may incurred at

the end of the year in any local fund by virtue of the provisions hereof

shall be covered with the first collections of the following fiscal

year accruing to such local fund.

Section 45 Prohibition against advance payments.

SEC. 45. Prohibition

against advance payments.—No money shall be paid on account of any

contract for which no services have as yet been rendered or no

deliveries have as yet been made except with the prior approval of the

President upon recommendation of the Secretary of Finance and the

Commission on Audit.

Section 46 Cash Advances.

SEC. 46. Cash Advances.—No cash advance shall be

granted to any local official or employee, appointive or elective,

unless in accordance with the rules and regulations as the Commission on

Audit may prescribe.

Section 47 Persons accountable for government funds property.

SEC. 47. Persons accountable for government funds

property.—Every officer of the local government whose duties permit

or require the possession or custody of the government funds shall be

accountable and responsible therefor and for the safekeeping thereof in

conformity with the provisions of this law. Other officers who, though

not accountable by the nature of their duties, may likewise be similarly

held accountable and responsible for the government funds through their

participation in the use or application thereof.

Section 48 Prohibition against pecuniary interest.

SEC. 48. Prohibition against pecuniary interest.—It

shall be unlawful for any local treasurer or other accountable officer

to have any pecuniary interest, direct or indirect, in any contract,

work or other business of the local government unit of which he is the

treasurer or accountable officer.

Section 49

SEC. 49. Liability for acts done upon direction of

superior officer, or upon participation of other department heads or

officers of equivalent rank.—The local treasurer or other

accountable officer shall not be relieved of liability for illegal or

improper use or application or deposit of government funds or property

by reason of his having acted upon the direction of a superior officer,

elective or appointive, or upon participation of other department heads

or officers of equivalent, rank. The superior officer directing, or the

other department head participating in such illegal or improper use or

application or deposit of government funds or property, shall be jointly

and severally liable with the local treasurer or other accountable

officer for the sum or property so improperly used, applied or

deposited.

Section 50 Prohibition against expenses for receptions and entertainment.

SEC. 50. Prohibition against expenses for

receptions and entertainment.—No money shall be appropriated, used or

supplied for entertainment or receptions except to the extent of

representation allowances authorized by law or executive order or for

the reception of visiting dignitaries of foreign governments or foreign

missions, or when expressly authorized by the President in specific

cases.

Section 51 Certification on, and approval of, vouchers.

SEC. 51. Certification on, and approval of, vouchers.—

Monies shall not be disbursed unless the treasurer concerned certifies

that appropriations and funds are available for the purpose. Vouchers

and payrolls shall be certified to and approved by the head of the

department or office who has administrative control of the fund

concerned, as to validity, propriety and legality of the claim involved.

In the case of municipalities, the approval of the local chief

executive shall be required when local funds are involved.

In case of temporary absence or incapacity of the department

head or chief of office, the officer next-in-rank shall automatically

perform this function and he shall be fully responsible therefor.