PRESIDENTIAL

DECREE NO. 1177

Arnie Rodriguez
Marjun Palma
Ruby Lynn Vallespin
What is a fund?
The word "fund" in government has taken several
meanings or connotations. It is sometimes used to refer
an appropriation which is a legislative authorization to
spend or an allotment which is an authorization by the
Department of Budget and Management (DBM) to
obligate, or as actual cash available.
What is a government budget?
In general, a government budget is the financial
plan of a government for a given period, usually
for a fiscal year, which shows what its resources
are, and how they will be generated and used
over the fiscal period. The budget is the
government's key instrument for promoting its
socio-economic objectives.
The government budget also refers to the
income, expenditures and sources of borrowings
of the National Government (NG) that are used to
achieve national objectives, strategies and
programs.
Why does the government prepare a new
budget every year?
The preparation of the government's budget every year is
in accordance with the provision of the Constitution which
requires the President to submit a budget of expenditure
and sources of financing within 30 days from the opening
of every regular session of Congress.
The yearly preparation of the budget is also in
consonance with the principle which requires all
government spending to be justified anew each year. This
principle ensures that government entities continuously
evaluate and review the allocation of resources to
project/activities for cost efficiency and effectiveness.
What is the "one-fund" concept?
The "one-fund" concept is the policy enunciated through
PD 1177 which requires that all income and revenues of
the government must accrue to the General Fund and
thus can be freely allocated to fund programs and projects
of government as prioritized.
Why is the "one-fund" concept important?
The "one-fund" concept is a fiscal management policy
requiring that as much as possible, all revenues and other
receipts of the government must enter the General Fund and
their utilization and disbursement subject to the budgeting
process. The one-fund concept is significant in that it serves
as an avenue through which fiscal authorities may properly
allocate scarce government resources in accordance with the
priorities in the over-all program of economic development.
It likewise provides a mechanism to control drawdown on
pooled resources. Regularly, the level of funds disbursed is
monitored against the level of revenues generated. This way,
we are able to stick to the targeted level of disbursement for
a given period and avoid incurring a deficit. It also alerts us of
possible revenue shortfalls.
Florencio Abad

Amendments to PD No. 1177
1. AN ACT FURTHER AMENDING CERTAIN SECTIONS
OF P.D. NO. 1177, AS AMENDED, ENTITLED "REVISING
THE BUDGET PROCESS IN ORDER TO
INSTITUTIONALIZE THE BUDGETARY INNOVATIONS OF
THE NEW SOCIETY"
Effective January 14, 1981

2. REPUBLIC ACT NO. 6670 - AN ACT FURTHER
AMENDING CERTAIN SECTIONS AND TERMS USED IN
PRESIDENTIAL DECREE NO. 1177, AS AMENDED, IN
ORDER TO INSTITUTE A MODIFIED PERFORMANCE
BUDGET SYSTEM
Effective August 4, 1988

Presidential Decree No. 1177
REVISING THE BUDGET PROCESS IN ORDER TO
INSTITUTIONALIZE THE BUDGETARY INNOVATIONS OF
THE NEW SOCIETY

Budget Reform Decree of 1977

BUDGET POLICY AND
APPROACH
Section 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 the government-owned or
controlled corporations. The budget shall likewise be
prepared within the context of the national long-term plan
and of a long-term budget program.
Section 5. National Resource Budget. The finances of
government shall be analyzed and determined 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.
The budget calendar, format and procedure for the
preparation and approval of the operating budgets of local
government units and government-owned or controlled
corporations shall be governed by such rules and
regulations as may be issued by the President in order to
implement the declared policy on national resource budget
enunciated in this section.



Section 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 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 13. Submission of the Budget. - The President
shall, in accordance with Section 22, Article VII of the
Constitution, submit to the Congress within thirty (30) days
from the opening of every regular session, as the basis of
the General Appropriations Bill, a budget of expenditures
and sources of financing, including receipts from existing
and proposed revenue measures.
Additional appropriations proposals may be submitted
which correspond to part of the expenditure estimates
submitted as part of the budget proposal: provided, that
continuing appropriations may be enacted for public works,
highways and other infrastructure projects which require
more than one year for construction. []
[] In such cases, revenue estimates for the future years
shall be used in the evaluation of funding availability.
The President may transmit to Congress, from time to time,
such proposed supplemental or deficiency appropriations
as are, in his judgment, (a) necessary on account of laws
enacted after the transmission of the Budget, or (b)
otherwise needed in the public interest.
Section 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 Appropriations 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 in brief the government's
budgetary thrusts for the budget year, including their impact
on developing goals, monetary and fiscal objectives, and
generally on the implications of the revenue, expenditures
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
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. Budget Levels. The ordinary income of
government shall be primarily to provide appropriations for
current operations, except in case 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. Proposals creating additional sources of
funds shall be prepared in the form of revenue bills. The
provisions of this section shall not be construed as
impairing 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 after the submission of the budget.
Section 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, 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) complementarity
with related activities of other agencies, and (d) other
similar criteria. The realization of savings in a 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. Foreign-Assisted Projects. The budgetary
implications of foreign-assisted projects shall be explicitly
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 costs
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 22. Budgetary Requirement 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. 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 subsidiaries
shall automatically be considered as both revenue and
expenditure of the General fund.
Section 24. Appropriations 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 be itemized. The itemization of personal
services shall be prepared by the Secretary 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 down to the division chief level and in
the case of the Armed Forces of the Philippines and the
Integrated National Police down to the rank of second
lieutenant, except as may be otherwise approved by the
President for positions concerned with national security
matters: provided, further, that appropriations for casual
and/ or temporary employees shall be in lump-sum based
on the number of man-hours to be rendered.
Section 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
Budget Authorization
Alternatively called the Budget
Legislation, this starts upon the House
Speakers receipt of the Presidents Budget
and ends with the Presidents enactment of
the General Appropriations Act.

Sections 26-36
Process of Budget
Authorization
1. House Deliberations
2. Senate Deliberations
3. Bicameral Deliberations
4. Ratification and Enrollment
5. The Veto Message
6. Enactment
Section 26
The Congress shall concentrate on policy, budgetary levels,
thrusts and strategy.
Specific details of expenditures of the different agencies
shall be of the concern of the Executive Branch.
Section 27
The Committee on Appropriations shall report the general
appropriations bill to the National Assembly within seven
consecutive session days after the bill has been referred to it.
Debate shall be terminated on or before the eighteenth
consecutive session day from the beginning of the
discussions.
Sections 28
Alterations especially those that increase the
appropriation of any project and program are not allowed
to be made by the Congress.
Special provisions as to the use and increase of the
amounts specified in the budget shall not be added by the
Congress.
Section 30
The GAA shall be in the form of budgetary programs and
projects for each agency of the government.
It shall contain itemization of personal services and these
services shall be prepared by the Secretary before
enactment of the GAA.

Section 31
The following expenditures are automatically
appropriated:
(a) personnel retirement premiums, government service
insurance, and other similar fixed expenditures,
(b) principal and interest on public debt,
(c) national government guarantees of obligations
Section 32
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.
Section 34
Borrowings whether foreign or domestic shall be included
in the appropriation of each agency.
Proceeds of these borrowings can not be used unless a
Special Budget is prepared and approved.
Section 36
Unauthorized revision of any figure, text or provision in
the GAA and other budget-related documents shall be
considered unlawful.
Persons altering these documents shall be criminally
liable for falsification of legislative documents.
The changes made whether addition, modification or
deletion shall be considered null and void.
BUDGET EXECUTION
Budget Execution
This is where the peoples money is actually
spent. As soon as the GAA is enacted, the
government can implement its priority programs
and projects.

Sections 37 56
Section 37
All moneys appropriated for functions, activities,
projects and programs shall be available solely
for the specific purposes for which these are
appropriated.
Section 38
Authorized appropriations shall be allotted in
accordance with the following procedures:
a. Appropriations authorized for 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 a request for allotment of
funds.
b. Allotment system is divided into four quarterly
allotment periods beginning on the first day of
January, April, July and October respectively.

c. Request for allotments shall be approved by the
Commissioner who shall ensure that expenditures
are covered by appropriations both as to amount
and purpose.
d. At the end of every quarter, each department, office
or agency shall report to the Commissioner the
current status of its appropriations.
e. Releases of funds appropriated for a given agency
may be made to its Regional Offices.
f. The Commissioner shall have authority to modify or
amend any allotment previously issued.
g. The Commissioner shall maintain control records
showing quarterly by funds, accounts, and other
suitable classifications
Section 41
An operational cash budget shall be implemented
to ensure the availability of cash resources for
priority development projects and to establish a
sound basis for determining the level, type and
timing of public borrowings.
Secretary of Finance
Commissioner of the Budget
Chairman of the Commission on Audit.
Section 42
The Commissioner may establish reserves against
appropriations to provide for contingencies and
emergencies which may arise later in the fiscal year.
Section 44
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.
Section 46
No funds shall be disbursed, and no expenditures or
obligations chargeable against any authorized 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.
Section 47
Heads of departments, bureaus, offices and agencies
shall not incur nor authorize the incurrence of
expenditures or obligations in excess of allotments
released by the Commissioner for their respective
departments, offices and agencies.
Section 48
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.
Section 49
Every expenditure or obligation authorized or incurred in
violation of the provisions of this Decree or of the general
and special provisions contained in the annual General or
other Appropriations Act shall be void.
Section 50
All income accruing to the departments, offices and
agencies by virtue of the provisions of existing laws shall
be deposited in the National Treasury or in and duly
authorized depository of the Government and shall accrue
to the unappropriated surplus of the General Fund of the
Government.
Section 52
Agencies are authorized to charge fees, including
honoraria and other reasonable allowances, as
compensation for consultation, seminars or training
programs, or technical services rendered to other
government agencies or private parties.
Section 54
Each head of department, bureau, office or agency shall
implement a cost reduction program for his department,
bureau, office or agency for the purpose of reducing cost
of operations
Section 55
Savings in the appropriations provided in the General
Appropriations Act may be used for the settlement of the
following obligations:
a) Claims of officials, employees and laborers who died or
were injured in line of duty
b) Commutation of terminal leaves of employees due to
retirement, resignation or separation from the service
through no fault of their own
c) Payment of retirement gratuities or separation pay of
employees separated from the service due to government
reorganization
d) Payment of salaries of employees who have been
suspended or dismissed as a result of administrative or
disciplinary action through no fault of their own and who
have been subsequently reinstated by virtue of decisions of
competent authority
e) Cash awards to deserving officials and employees in
accordance with the civil service law
f) Salary adjustments of officials and employees
g) Peso support to any undertaking that may be entered into
by the government with international organizations,
including administrative and other incidental expenses
h) Covering any deficiency in peso counterpart fund
commitments for foreign-assisted projects, as may be
approved by the President
i) Priority activities that will promote the economic well-
being of the nation
j) Repair, improvement and provision of government
buildings and infrastructure and other capital assets
damaged by natural calamities
k) Expenses in connection with official participation in trade
fairs, civic parades, celebrations, athletic competitions and
cultural activities, and payment of expenses for the
celebration of regular or special official holidays
l) Payment of obligations of the government or any of its
departments or agencies as a result of final judgment of the
Courts
m) Payment of valid prior year's obligations of government
agencies with any other government office or agency,
including government-owned or controlled corporations.

Section 56
No person shall be appointed as budget officer in
any department, bureau, office or agency unless
he meets qualification and/or training
requirements established by the Budget
Commission
BUDGET
ACCOUNTABILITY
Sections 57 - 63
Evaluation of Agency Performance
- qualitative & quantitative
Budget Monitoring and Information Systems


Monitoring of Expenditures
(a) agency incurring the obligation
(b) program, project and activity
(c) object of expenditure, including
personal services, operating and
maintenance expenditures, equipment, and
capital outlays


Monitoring of Expenditures
(d) region or locality of use,
(e) economic or functional classification
of the expenditure,
(f) obligational authority and cash
transactions arising from fund releases,
and such other classifications as may
be necessary for the budget process.


Standard Cost
Review of Budgetary Programs
Semi-Annual Report on Accomplishments
of Government Agencies

PD 1177, sec. 64 88


Authority to Receive Additional
Compensation



Restriction on Salary Increases
Merit Increases
Salary for Substitutionary Services




Prohibition Against Payment of Salaries or
Wages of Officials and Employees on
Strike Against the Government
Additional Compensation for Overtime
Services
Compensations of Persons receiving
Pension
Prohibition of Voluntary Services

Additional Compensation for School
Faculty Members
Laundry
Hazard Pay
Subsistence
Furnished Quarters

Per Diems of Government Officials and
Employees
Transportation of Members of Family of an
Employee Transferred from one Station to
Another
Purchase, Use, Operation and
Maintenance of Motor Transport
Equipment.


Limitation of Rental or Motor Vehicles.
Limitation of Purchase of Supplies,
Materials, and Equipment Spare Parts.
Purchase of Locally Manufactured
Products.
PD 1177, sec. 89-92

Rules and Regulations
-The Budget Commission
Repealing Clause
Separability Clause
Effectivity

Office of the Ombudsman Budget
2014