CHAPTER 3.

- BUDGETING

Article One. - Local Government Budgets

SECTION 314. Form and Content. - (a) Local government budgets shall
primarily consist of two (2) parts:

(1) The estimates of income; and

(2) The total appropriations covering the current operating

expenditures and capital outlays.

(b) The budget document shall contain:

(1) A budget message of the local chief executive setting forth in

brief the significance of the executive budget, particularly in
relation to the approved local development plan;

(2) A brief summary of the functions, projects, and activities to

be accomplished in of the goals and objectives of the local
government unit for the ensuing fiscal year, specifically the
delivery of basic services or facilities enumerated under
Section 17 of this Code;

(3) Summary of financial statements setting forth:

(i) The actual income and expenditures during the

immediately preceding year;
(ii) The actual income and expenditures of the first two
(2) quarters and the estimates of income and
expenditures for the last two (2) quarters of the
current fiscal year;
(iii) The estimates of 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;
(iv) The estimated expenditures necessary to carry out
the functions, projects, and activities of the local
government unit for the ensuing fiscal year;
(v) All essential facts regarding the bonded and other
long-term obligations and indebtedness of the local
government unit, if any;

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 (vi) Summary statement of all statutory and contractual
obligations due; and
(vii) Such other financial statements and data as are
deemed necessary or desirable in order to disclose in
all practicable detail the financial condition of the local
government unit.

SECTION 315. Submission of Detailed Statements of Income and

Expenditures. - (a) On or before the fifteenth (15th) day of July of each
year, local treasurers shall submit to their respective local chief executives
a certified statement covering the income and expenditures of the
preceding fiscal year, the actual income and expenditures of the first two
(2) quarters of the current year, and the estimated income and
expenditures for the last two (2) quarters of the current year.

SECTION 316. Local Finance Committee. - There is hereby created in every

province, city, or municipality a local finance committee to be composed of
the local planning and development officer, the local budget officer, and
the local treasurer. It shall exercise the following functions:

(a) Determine the income reasonably projected as collectible for the

ensuing fiscal year;

(b) Recommend the appropriate tax and other revenue measures or

borrowings, which may be appropriate to support the budget;

(c) Recommend to the local chief executive concerned the level of the
annual expenditures and the ceilings of spending for economic,
social, and general services based on the approved local
development plans;

(d) Recommend to the local chief executive concerned the proper

allocation of expenditures for each development activity between
current operating expenditures and capital outlays;

(e) Recommend to the local chief executive concerned the amount to

be allocated for capital under each development activity or
infrastructure project;

(f) Assist the Sangguniang Panlalawigan in the review and evaluation

of budget of component cities and municipalities in the case of
provincial finance committee, the Barangay budgets in the case of
city or municipal finance committee, and recommend the
appropriate action thereon;

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 (g) Assist the Sanggunian concerned in the analysis and review of
annual regular and budgets of the respective local government unit
to determine compliance with statutory and administrative
requirements; and

(h) Conduct semi-annual review and general examination of cost and

accomplishments against performance standards applied in
undertaking development projects. A copy of this report shall be
furnished the local chief executive and the Sanggunian concerned,
and shall be posted in conspicuous and publicly accessible places
in the provinces, cities, municipalities and Barangays.

SECTION 317. Submission of Budget Proposals by Heads of Departments

or Offices. - (a) Each head of department or office shall submit a budget
proposal for his department or office to the local chief executive on or
before the fifteenth (15th) of July of each year: Provided, That the budget
proposal of each department or office shall be categorized under either
economic, social or general services: Provided, further, That each service
shall be covered by the budget of at least one (1) department or office of
the local government unit concerned.

The said budget proposal shall be prepared in accordance with such

policy and program as the local chief executive concerned may issue in
conformity with the local development plan, the budgetary ceilings
prescribed by the local finance committee, and the general requirements
prescribed in this Title.

(b) Budget proposals of departments or offices shall be divided into two

(2) primary categories, namely: the current operating expenditures
and the capital outlays. Such budget proposals shall contain the
following information:

(1) Objectives, functions, and projects showing the general

character and relative importance of the work to be
accomplished or the services to be rendered, and the cost
thereof;

(2) Organizational charts and staffing patterns indicating the list

of plantilla positions with their corresponding salaries, and
proposals for reclassification of positions and salary
changes, as well as the creation of new positions with their
proposed salary grade, duly supported by proper
justification;

(3) Brief description of the functions, projects and activities for

the ensuing fiscal year, expected results for each function,

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 project and activity, and the nature of work to be performed,
including the objects of expenditure for each function, project
and activity;

(4) Relation of the work and financial proposals to approved

local development plans;

(5) Estimated current operating expenditures and capital outlays

with comparative data for the last two (2) preceding, current,
and ensuing fiscal years; and

(6) Accomplishment reports for the last two (2) proceeding and
current fiscal years.

SECTION 318. Preparation of the Budget by the Local Chief Executive. -

Upon receipt of the statements of income and expenditures from the
treasurer, the budget proposals of the heads of departments and offices,
and the estimates of income and budgetary ceilings from the local finance
committee, the local chief executive shall prepare the executive budget for
the ensuing fiscal year in accordance with the provisions of this Title.

The local chief executive shall submit the said executive budget to the
Sanggunian concerned not later than the sixteenth (16th) of October of the
current fiscal year. Failure to submit such budget on the date prescribed
herein shall subject the local chief executive to such criminal and
administrative penalties as provided for under this Code and other
applicable laws.

SECTION 319. Legislative Authorization of the Budget. - On or before the end

of the current fiscal year, the Sanggunian concerned shall enact, through
an ordinance, the annual budget of the local government unit for the
ensuing fiscal year on the basis of the estimates of income and
expenditures submitted by the local chief executive.

SECTION 320. Effectivity of Budgets. - The ordinance enacting the annual

budget shall take effect at the beginning of the ensuing calendar year. An
ordinance enacting a supplemental budget, however, shall take effect
upon its approval or on the date fixed therein.

The responsibility for the execution of the annual and supplemental

budgets and the accountability therefore shall be vested primarily in the
local chief executive concerned.

SECTION 321. Changes in the Annual Budget. - All budgetary proposals shall
be included and in the budget preparation process. After the local chief
executive concerned shall have submitted the executive budget to the

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 Sanggunian, no ordinance providing for a supplemental budget shall be
enacted, except when supported by funds actually available as certified by
the local treasurer or by new revenue sources.

A supplemental budget may also be enacted in times of public calamity by

way of budgetary realignment to set aside appropriations for the purchase
of supplies and materials or the payment of services which are
exceptionally urgent or absolutely indispensable to prevent imminent
danger to, or loss of, life or property, in the jurisdiction of the local
government unit or in other areas declared by the President in a state of
calamity. Such ordinance shall clearly indicate the sources of funds
available for appropriations, as certified under oath by the local treasurer
and local accountant and attested by the local chief executive, and the
various items of appropriations affected and the reasons for the change.

SECTION 322. Reversion of Unexpended Balances of Appropriations,

Continuing Appropriations. - balances of appropriations authorized in
the annual appropriations ordinance shall revert to the surplus of the
general fund at the end of the fiscal year and shall not thereafter be
available for expenditure except by subsequent enactment. However,
appropriations for capital outlays shall continue and remain valid until fully
spent, reverted or the project is completed. Reversions of continuing
appropriations shall not be allowed unless obligations therefor have been
fully paid or otherwise settled.

The balances of continuing appropriations shall be reviewed as part of the

annual budget preparation and the Sanggunian concerned may approve,
upon recommendation of the local chief executive, the reversion of funds
no longer needed in connection with the activities funded by said
continuing appropriations subject to the provisions of this Section.

SECTION 323. Failure to Enact the Annual Appropriations. - In case the

Sanggunian concerned fails to pass the ordinance authorizing the annual
appropriations at the beginning of the ensuing fiscal year, it shall continue
to hold sessions, without additional remuneration for its members, until
such ordinance is approved, and no other business may be taken up
during such sessions. If the Sanggunian still fails to enact such ordinance
after ninety (90) days from the beginning of the fiscal year, the ordinance
authorizing the appropriations of the preceding year shall be deemed
reenacted and shall remain in force and effect until the ordinance
authorizing the proposed appropriations is passed by the Sanggunian
concerned. However, only 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 year shall be deemed reenacted and
disbursement of funds shall be in accordance therewith.

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 In the implementation of such reenacted ordinance, the local treasurer
concerned shall exclude from the estimates of income for the preceding
fiscal year those realized from nonrecurring sources, like national aids,
proceeds from loans, sale of assets, prior year adjustments, and other
analogous sources of income. No ordinance authorizing supplemental
appropriations shall be passed in place of the annual appropriations. In
case the revised income estimates be less than the aggregate reenacted
appropriations, the local treasurer concerned shall accordingly advise the
Sanggunian concerned which shall, within ten (10) days from the receipt
of such advice, make the necessary adjustments or reductions. The
revised appropriations authorized by the Sanggunian concerned shall then
be the basis for disbursements.

SECTION 324. Budgetary Requirements. - The budgets of local government

units for any fiscal year shall comply with the following requirements: (a)
The aggregate amount appropriated shall not exceed the estimates of
income;

(b) Full provision shall be made for all statutory and contractual
obligations of the local government unit concerned: Provided,
however, That the amount of appropriations for debt servicing shall
not exceed twenty percent (20%) of the regular income of the local
government unit concerned;

(c) In the case of provinces, cities, and municipalities, aid to

component Barangays shall be in amounts of not less than One
thousand pesos (P=1,000.00) per Barangay; and

(d) Five percent (5%) of the estimated revenue from regular sources
shall be set aside as an annual lump sum appropriation for
unforeseen expenditures arising from the occurrence of calamities:
Provided, however, That such appropriation shall be used only in
the area, or a portion thereof, of the local government unit or other
areas declared by the President in a state of calamity.

SECTION 325. General Limitations. - The use of the provincial, city, and
municipal funds shall be subject to the following limitations:

(a) The total appropriations, whether annual or supplemental, for

personal services of a local government unit for one (1) fiscal year
shall not exceed forty-five percent (45%) in the case of first to third
class provinces, cities, and municipalities, and fifty-five percent
(55%) in the case of fourth class or lower, of the total annual
income from regular sources realized in the next preceding fiscal
year. The appropriations for salaries, wages, representation

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 and transportation allowances of officials and employees of the
public utilities and economic enterprises owned, operated, and
maintained by the local government unit concerned shall not be
included in the annual budget or in the computation of the
maximum amount for personal services. The appropriations for the
personal services of such economic enterprises shall be charged to
their respective budgets;

(b) No official or employee shall be entitled to a salary rate higher than

the maximum fixed for his position or other positions of equivalent
rank by applicable laws or rules and regulations issued thereunder;

(c) No local fund shall be appropriated to increase or adjust salaries or

wages of officials and employees of the national government,
except as may be expressly authorized by law; (d) In cases of
abolition of positions and the creation of new ones resulting from
the abolition of existing positions in the career service, such
abolition or creation shall be made in accordance with pertinent
provisions of this code and the civil service law, rules and
regulations;

(e) Positions in the official plantilla for career positions which are
occupied by incumbents holding permanent appointments shall be
covered by adequate appropriations;

(f) No changes in designation or nomenclature of positions resulting in

a promotion or demotion in rank or increase or decrease in
compensation shall be allowed, except when the position is actually
vacant, and the filling of such positions shall be strictly made in
accordance with the civil service law, rules and regulations; (g) The
creation of new positions and salary increases or adjustments shall
in no case be made retroactive; and

(h) The annual appropriations for discretionary purposes of the local

chief executive shall not exceed two percent (2%) of the actual
receipts derived from basic real property tax in the next preceding
calendar year. Discretionary funds shall be disbursed only for public
purposes to be supported by appropriate vouchers and subject to
such guidelines as may be prescribed by law. No amount shall be
appropriated for the same purpose except as authorized under this
Section.

SECTION 326. Review of Appropriation Ordinances of provinces, Highly-

Urbanized Cities, Independent Component Cities, and Municipalities
within the Metropolitan Manila Area. - The Department of Budget and
Management shall review ordinances authorizing the annual or

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 supplemental appropriations of provinces, highly-urbanized cities,
independent component cities, and municipalities within the Metropolitan
Manila Area in accordance with the immediately succeeding Section.

SECTION 327. Review of Appropriation Ordinances of Component Cities

and Municipalities. - The Sangguniang Panlalawigan shall review the
ordinance authorizing annual or supplemental appropriations of
component cities and municipalities in the same manner and within the
same period prescribed for the review of other ordinances.

If within ninety (90) days from receipt of copies of such ordinance, the
Sangguniang Panlalawigan takes no action thereon, the same shall be
deemed to have been reviewed in accordance with law and shall continue
to be in full force and effect. If within the same period, the Sangguniang
Panlalawigan shall have ascertained that the ordinance authorizing annual
or supplemental appropriations has not complied with the requirements
set forth in this Title, the Sangguniang Panlalawigan shall, within the
ninety-day period hereinabove prescribed, declare such ordinance
inoperative in its entirety or in part. Items of appropriation contrary to
limitations prescribed in this Title or in excess of the amounts prescribed
herein shall be disallowed or reduced accordingly.

The Sangguniang Panlalawigan shall within the same period advise the
Sangguniang panlungsod or Sangguniang bayan concerned through the
local chief executive of any action on the ordinance under review. Upon
receipt of such advice, the city or municipal treasurer concerned shall not
make further disbursements of funds from any of the items of
appropriation declared inoperative, disallowed or reduced.

SECTION 328. Duration of Appropriation. - Appropriations for ordinary

administrative purposes not duly obligated shall terminate with the fiscal
year and all unexpended balances thereof shall be automatically reverted
on the thirty-first (31st) day of December of each year to the general fund
of the local government unit.

Article Two. - Barangay Budgets

SECTION 329. Barangay Funds. - Unless otherwise provided in this Title, all the
income of the Barangay from whatever source shall accrue to its general
fund and shall, at the option of the Barangay concerned, be kept as trust
fund in the custody of the city or municipal treasurer or be deposited in a
bank, preferably government-owned, situated in or nearest to its area of
jurisdiction. Such funds shall be disbursed in accordance with the
provisions of this Title. Ten percent (10%) of the general fund of the
Barangay shall be set aside for the Sangguniang kabataan.

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