REPUBLIC ACT NO. 7160
AN ACT PROVIDING FOR A LOCAL GOVERNMENT CODE OF 1991

Table of Contents
BOOK II
LOCAL TAXATION AND FISCAL MATTERS

TITLE FIVE
LOCAL FISCAL ADMINISTRATION

CHAPTER 1
GENERAL PROVISIONS

SEC. 304. Scope. – This Title shall govern the conduct and management of financial affairs, transactions, and operations of provinces, cities, municipalities, and barangays.

SEC. 305. Fundamental Principles. – The financial affairs, transactions, and operations of local government units shall be governed by the following fundamental principles:
(a) No money shall be paid out of the local treasury except in pursuance of an appropriations ordinance or law;

(b) Local government funds and monies shall be spent solely for public purposes;

(c) Local revenue is generated only from sources expressly authorized by law or ordinance, and collection thereof shall at all times be acknowledged properly;

(d) All monies officially received by a local government officer in any capacity or on any occasion shall be accounted for as local funds, unless otherwise provided by law;

(e) Trust funds in the local treasury shall not be paid out except in fulfillment of the purpose for which the trust was created or the funds received;

(f) Every officer of the local government unit whose duties permit or require the possession or custody of local 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;

(g) Local governments shall formulate sound financial plans, and the local budgets shall be based on functions, activities, and projects, in terms of expected results; development plans, goals, and strategies in order to optimize the utilization of resources and to avoid duplication in the use of fiscal and physical resources;

(i) Local budgets shall operationalize approved local development plans;

(j) Local government units shall ensure that their respective budgets incorporate the requirements of their component units and provide for equitable allocation of resources among these component units;

(k) National planning shall be based on local planning to ensure that the needs and aspirations of the people as articulated by the local government units in their respective local development plans are considered in the formulation of budgets of national line agencies or offices;

(l) Fiscal responsibility shall be shared by all those exercising authority over the financial affairs, transactions, and operations of the local government units; and

(m) The local government unit shall endeavor to have a balanced budget in each fiscal year of operation.

SEC. 306. Definitions. – When used in this Title, the term – (a) “Annual Budget” refers to a financial plan embodying the estimates of income and expenditures for one (1) fiscal year;

(b) “Appropriation” refers to an authorization made by ordinance, directing the payment of goods and services from local government funds under specified conditions or for specific purposes;

(c) “Budget Document” refers to the instrument used by the local chief executive to present a comprehensive financial plan to the sanggunian concerned;

(d) “Capital Outlays” refers 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 the local government unit concerned, including investments in public utilities such as public markets and slaughterhouses;

(e) “Continuing Appropriation” refers to an appropriation available to support obligations for a specified purpose or projects, such as those for the construction of physical structures or for the acquisition of real property or equipment, even when these obligations are incurred beyond the budget year;

(f) “Current Operating Expenditures” refers to appropriations for the purchase of goods and services for the conduct of normal local government operations within the fiscal year, including goods and services that will be used or consumed during the budget year;

(g) “Expected Results” refers to the services, products, or benefits that will accrue to the public, estimated in terms of performance measures or physical targets;

(h) “Fund” refers to a sum of money, or other assets convertible to cash, set aside for the purpose of carrying out specific activities or attaining certain objectives in accordance with special regulations, restrictions, or limitations, and constitutes an independent fiscal and accounting entity;

(i) “Income” refers to all revenues and receipts collected or received forming the gross accretions of funds of the local government unit;

(j) “Obligations” refers to an amount committed to be paid by the local government unit for any lawful act made by an accountable officer for and in behalf of the local unit concerned;

(k) “Personal Services” refers to appropriations for the payment of salaries, wages and other compensation of permanent, temporary, contractual, and casual employees of the local government unit;

(l) “Receipts” refers to income realized from operations and activities of the local government or are received by it in the exercise of its corporate functions, consisting of charges for services rendered, conveniences furnished, or the price of a commodity sold, as well as loans, contributions or aids from other entities, except provisional advances for budgetary purposes; and

(m) “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.

CHAPTER 2
LOCAL AND OTHER SPECIAL FUNDS

Article One
Receipts, Safekeeping and Disposition of Local Funds

SEC. 307. Remittance of Government Monies to the Local Treasury. – Officers of the local government authorized to receive and collect monies arising from taxes, revenues, or receipts of any kind shall remit the full amount received and collected to the treasury of such local government unit which shall be credited to the particular account or accounts to which the monies in question properly belong.

SEC. 308. Local Funds. – Every local government unit shall maintain a General Fund which shall be used to account for such monies and resources as may be received by and disbursed from the local treasury. The General Fund shall consist of monies and resources of the local government which are available for the payment of expenditures, obligations or purposes not specifically declared by law as accruing and chargeable to, or payable from, any other fund.

SEC. 309. Special Funds. – There shall be maintained in every provincial, city, or municipal treasury the following special funds:
(a) Special Education Fund (SEF) shall consist of the respective shares of provinces, cities, municipalities and barangays in the proceeds of the additional tax on real property to be appropriated for purposes prescribed in Section 272 of this Code; and

(b) Trust Funds shall consist of private and public monies which have officially come into the possession of the local government or of a local government official as trustee, agent or administrator, or which have been received as a guaranty for the fulfillment of some obligation. A trust fund shall only be used for the specific purpose for which it was created or for which it came into the possession of the local government unit.

SEC. 310. Separation of Books and Depository Accounts. – Local accountants and treasurers shall maintain separate books and depository accounts, respectively, for each fund in their custody or administration under such rules and regulations as the Commission on Audit may prescribe.

SEC. 311. Depository Accounts. – Local treasurers shall maintain depository accounts in the name of their respective local government units with banks, preferably government-owned, located in or nearest to their respective areas of jurisdiction. Earnings of each depository account shall accrue exclusively thereto.

SEC. 312. Separation of Personal Money from Public Funds. – Local treasurers and other accountable officers shall keep personal monies separate and distinct from local public 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 or ordinance.

Article Two
Special Accounts

SEC. 313. Special Accounts to be Maintained in the General Fund. – Local government units shall maintain special accounts in the general fund for the following:
(a) Public utilities and other economic enterprises;

(b) Loans, interests, bond issues, and other contributions for specific purposes; and

(c) Development projects funded from the share of the local government unit concerned in the internal revenue allotment and such other special accounts which may be created by law or ordinance. Receipts, transfers, and expenditures involving the foregoing special accounts shall be properly taken up thereunder. Profits or income derived from the operation of public utilities and other economic enterprises, after deduction for the cost of improvement, repair and other related expenses of the public utility or economic enterprise concerned, shall first be applied for the return of the advances or loans made therefor. Any excess shall form part of the general fund of the local government unit concerned.

CHAPTER 3
BUDGETING

Article One
Local Government Budgets

SEC. 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 pursuit 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;
(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.
SEC. 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.

SEC. 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 outlay 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;

(g) Assist the sanggunian concerned in the analysis and review of annual regular and supplemental 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.

SEC. 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 guidelines 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, 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) preceding and current fiscal years.

SEC. 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.

SEC. 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.

SEC. 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 therefor shall be vested primarily in the local chief executive concerned.

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

SEC. 322. Reversion of Unexpended Balances of Appropriations, Continuing Appropriations. – Unexpended balances of appropriations authorized in the annual appropriations ordinance 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 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.

SEC. 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. 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.

SEC. 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 provided in amounts of not less than One thousand pesos (P1,000.00) 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.

SEC. 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 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.

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

SEC. 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.

SEC. 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

SEC. 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.

SEC. 330. Submission of Detailed Statements of Income and Expenditures for the Barangay Budgets. – On or before the fifteenth (15th) day of September of each year, the barangay treasurer shall submit to the punong barangay a statement covering the estimates of income and expenditures for the ensuing fiscal year, based on a certified statement issued by the city or municipal treasurer covering the estimates of income from local sources for the barangay concerned.

SEC. 331. Preparation of the Barangay Budget. – (a) Upon receipt of the statement of income and expenditures from the barangay treasurer, the punong barangay shall prepare the barangay budget for the ensuing fiscal year in the manner and within the period prescribed in this Title and submit the annual barangay budget to the sangguniang barangay for legislative enactment.

(b) The total annual appropriations for personal services of a barangay for one (1) fiscal year shall not exceed fifty-five percent (55%) of the total annual income actually realized from local sources during the next preceding fiscal year.

(c) The barangay budget shall likewise be subject to the same budgetary requirements and limitations hereinabove prescribed.

SEC. 332. Effectivity of Barangay 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 therefor shall be vested primarily in the punong barangay concerned.

SEC. 333. Review of the Barangay Budget. – (a) Within ten (10) days from its approval, copies of the barangay ordinance authorizing the annual appropriations shall be furnished the sangguniang panlungsod or the sangguniang bayan, as the case may be, through the city or municipal budget officer. The sanggunian concerned shall have the power to review such ordinance in order to ensure that the provisions of this Title are complied with. If within sixty (60) days after the receipt of the ordinance, the sanggunian concerned takes no action thereon, the same shall continue to be in full force and effect. If within the same period, the sanggunian concerned shall have ascertained that the ordinance contains appropriations in excess of the estimates of the income duly certified as collectible, or that the same has not complied with the budgetary requirements set forth in this Title, the said ordinance shall be declared inoperative in its entirety or in part. Items of appropriation contrary to, or in excess of, any of the general limitations or the maximum amount prescribed in this Title shall be disallowed or reduced accordingly.

(b) Within the period hereinabove fixed, the sangguniang panlungsod or sangguniang bayan concerned shall return the barangay ordinance, through the city or municipal budget officer, to the punong barangay with the advice of action thereon for proper adjustments, in which event, the barangay shall operate on the ordinance authorizing annual appropriations of the preceding fiscal year until such time that the new ordinance authorizing annual appropriations shall have met the objections raised. Upon receipt of such advice, the barangay treasurer or the city or municipal treasurer who has custody of the funds shall not make further disbursement from any item of appropriation declared inoperative, disallowed, or reduced.

SEC. 334. Barangay Financial Procedures. – (a) The barangay treasurer shall collect all taxes, fees, and other charges due and contributions accruing to the barangay for which he shall issue official receipts, and shall deposit all collections with the city or municipal treasury or in the depository account maintained in the name of the barangay within five (5) days after receipt thereof. He may collect real property taxes and such other taxes as may be imposed by a province, city or municipality that are due in his barangay only after being deputized by the local treasurer concerned for the purpose.

(b) The barangay treasurer may be authorized by the sangguniang barangay to make direct purchases amounting to not more than One thousand pesos (P1,000.00) at any time for the ordinary and essential needs of the barangay. The petty cash that the barangay treasurer may be authorized to hold for the purpose shall not exceed twenty percent (20%) of the funds available and to the credit of the barangay treasury.

(c) The financial records of the barangay shall be kept in the office of the city or municipal accountant in simplified manner as prescribed by the Commission on Audit. Representatives of the Commission on Audit shall audit such accounts annually or as often as may be necessary and make a report of the audit to the sangguniang panlungsod or sangguniang bayan, as the case may be. The Commission on Audit shall prescribe and put into effect simplified procedures for barangay finances within six (6) months following the effectivity of this Code.

CHAPTER 4
EXPENDITURES, DISBURSEMENTS, ACCOUNTING AND ACCOUNTABILITY

SEC. 335. Prohibitions Against Expenditures for Religious or Private Purposes. – No public money or property shall be appropriated or applied for religious or private purposes.

SEC. 336. Use of Appropriated Funds and Savings. – Funds shall be available exclusively for the specific purpose for which they have been appropriated. No ordinance shall be passed authorizing any transfer of appropriations from one item to another. However, the local chief executive or the presiding officer of the sanggunian concerned may, by ordinance, be authorized to augment any item in the approved annual budget for their respective offices from savings in other items within the same expense class of their respective appropriations.

SEC. 337. Restriction Upon Limit of Disbursements. – Disbursements in accordance with appropriations in the approved annual budget may be made from any local fund in the custody of the treasurer, but the total disbursements from any local fund shall in no case exceed fifty percent (50%) of the uncollected estimated revenue accruing to such local fund in addition to the actual collections: Provided, however, That no cash overdraft in any local fund shall be incurred at the end of the fiscal year. In case of emergency arising from a typhoon, earthquake, or any other calamity, the sanggunian concerned may authorize the local treasurer to continue making disbursements from any local fund in his possession in excess of the limitations herein provided, but only for such purposes and amounts included in the approved annual budgets. Any overdraft which may be 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 immediately succeeding fiscal year accruing to such local fund.

SEC. 338. Prohibitions Against Advance Payments. – No money shall be paid on account of any contract under which no services have been rendered or goods delivered.

SEC. 339. Cash Advances. – No cash advance shall be granted to any local official or employee, elective or appointive, unless made in accordance with the rules and regulations as the Commission on Audit may prescribe.

SEC. 340. Persons Accountable for Local Government Funds. – Any officer of the local government unit whose duty permits or requires the possession or custody of local government funds shall be accountable and responsible for the safekeeping thereof in conformity with the provisions of this Title. Other local officers who, though not accountable by the nature of their duties, may likewise be similarly held accountable and responsible for local government funds through their participation in the use or application thereof.

SEC. 341. Prohibitions Against Pecuniary Interest. – Without prejudice to criminal prosecution under applicable laws, any local treasurer, accountant, budget officer, or other accountable local officer having any pecuniary interest, direct or indirect, in any contract, work or other business of the local government unit of which he is an accountable officer shall be administratively liable therefor.

SEC. 342. Liability for Acts Done Upon Direction of Superior Officer, or Upon Participation of Other Department Heads or Officers of Equivalent Rank. – Unless he registers his objection in writing, the local treasurer, accountant, budget officer, 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 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, accountant, budget officer, or other accountable officer for the sum or property so illegally or improperly used, applied or deposited.

SEC. 343. Prohibition Against Expenses for Reception and Entertainment. – No money shall be appropriated, used, or paid for entertainment or reception except to the extent of the representation allowances authorized by law or for the reception of visiting dignitaries of foreign governments or foreign missions, or when expressly authorized by the President in specific cases.

SEC. 344. Certification on, and Approval of, Vouchers. – No money shall be disbursed unless the local budget officer certifies to the existence of appropriation that has been legally made for the purpose, the local accountant has obligated said appropriation, and the local treasurer certifies to the availability of funds 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. Except in cases of disbursements involving regularly recurring administrative expenses such as payrolls for regular or permanent employees, expenses for light, water, telephone and telegraph services, remittances to government creditor agencies such as the GSIS, SSS, LBP, DBP, National Printing Office, Procurement Service of the DBM and others, approval of the disbursement voucher by the local chief executive himself shall be required whenever local funds are disbursed. In cases of special or trust funds, disbursements shall be approved by the administrator of the fund. In case of temporary absence or incapacity of the department head or chief of office, the officer next-in-rank shall automatically perform his function and he shall be fully responsible therefor.

SEC. 345. Officials Authorized to Draw Checks in Settlement of Obligations. – Checks in settlement of obligations shall be drawn by the local treasurer and countersigned by the local administrator. In case of temporary absence or incapacity of the foregoing officials, these duties shall devolve upon their immediate assistants.

SEC. 346. Disbursements of Local Funds and Statement of Accounts. – Disbursements shall be made in accordance with the ordinance authorizing the annual or supplemental appropriations without the prior approval of the sanggunian concerned. Within thirty (30) days after the close of each month, the local accountant shall furnish the sanggunian with such financial statements as may be prescribed by the Commission on Audit . In the case of the year-end statement of accounts, the period shall be sixty (60) days after the thirty-first (31st) of December.

SEC. 347. Rendition of Accounts. – Local treasurers, accountants and other local accountable officers shall render their accounts within such time, in such form, style, and content and under such regulations as the Commission on Audit may prescribe. Provincial, city, and municipal auditors shall certify the balances arising in the accounts settled by them to the Chairman of the Commission on Audit and to the local treasurer, accountant, and other accountable officers. Copies of the certification shall be prepared and furnished other local officers who may be held jointly and severally liable for any loss or illegal, improper or unauthorized use or misappropriation of local funds or property.

SEC. 348. Auditorial Visitation. – The books, accounts, papers, and cash of local treasurer, accountant, budget officer, or other accountable officers shall at all times be open for inspection of the Commission on Audit or its duly authorized representative. In case an examination of the accounts of a local treasurer discloses a shortage in cash which should be on hand, it shall be the duty of the examining officer to seize the office and its contents, notify the Commission on Audit, the local chief executive concerned, and the local accountant. Thereupon, the examining officer shall immediately turn over to the accountable officer next-in- rank in the local treasury service, unless the said officer is likewise under investigation, the office of the treasurer and its contents, and close and render his accounts on the date of turnover. In case the accountable officer next in rank is under investigation, the auditor shall take full possession of the office and its contents, close and render his accounts on the date of taking possession, and temporarily continue the public business of such office until such time that the local treasurer is restored or a successor has been duly designated. The local treasurer or accountable officer found with such shortage shall be automatically suspended from office.

SEC. 349. Accounting for Revenues. – Estimated revenues which remain unrealized at the close of the fiscal year shall not be booked or credited to the unappropriated surplus or any other account.

SEC. 350. Accounting for Obligations. – All lawful expenditures and obligations incurred during a fiscal year shall be taken up in the accounts of that year.

SEC. 351. General Liability for Unlawful Expenditures. – Expenditures of funds or use of property in violation of this Title and other laws shall be a personal liability of the official or employee responsible therefor.

SEC. 352. Posting of the Summary of Income and Expenditures. – Local treasurers, accountants, budget officers and other accountable officers shall, within thirty (30) days from the end of each fiscal year, post in at least three (3) publicly accessible and conspicuous places in the local government unit a summary of all revenues collected and funds received including the appropriations and disbursements of such funds during the preceding fiscal year.

SEC. 353. The Official Fiscal Year. – The official fiscal year of local government units shall be the period beginning with the first day of January and ending with the thirty-first day of December of the same year.

SEC. 354. Administrative Issuances; Budget Operations Manual. – The Secretary of Budget and Management jointly with the Chairman of the Commission on Audit shall, within one (1) year from the effectivity of this Code, promulgate a Budget Operations Manual for local government units to improve and systematize methods, techniques, and procedures employed in budget preparation, authorization, execution, and accountability.