Question & AnswerQ&A (PRESIDENTIAL DECREE NO. 477)
Presidential Decree No. 477 governs the conduct and management of the financial affairs, transactions, and operations of provinces, cities, municipalities, and barrios in the Philippines, and provides the organization for local fiscal administration in local governments.
Key principles include: no disbursement from the treasury without lawful appropriation; public funds must be used for public purposes only; revenue must come from legally authorized sources; all monies received by public officers are government funds except as otherwise provided; trust funds are paid only for their intended purpose; and financial plans and budgets must be sound and based on expected results.
The Department of Finance exercises general supervision over the financial affairs of local governments, including all funds whose investment is authorized by law. The Secretary of Finance exercises direct executive supervision over all local treasury officials and personnel.
A fund is a sum of money or other resources set aside for carrying out specific activities or achieving certain objectives under special regulations, restrictions, or limitations, constituting an independent fiscal and accounting entity.
Local government units shall maintain only two local funds: (1) The General Fund, for monies not otherwise accruing to other funds and used for general expenditures; and (2) The Infrastructure Fund, consisting of monies raised or earmarked by law, used exclusively for infrastructure-related public works and improvement projects.
The Special Education Fund is a separate fund maintained in local treasuries, consisting of the share of provinces, cities, and municipalities from the additional one percent real property tax levied and appropriated for educational purposes under Republic Act No. 5447, as amended.
The annual budget consists of two parts: (1) estimates of income certified as reasonably collectible by the treasurer; and (2) total appropriations covering (a) current operating expenditures and (b) capital outlays.
Qualifications include being a Filipino citizen, of good moral character, holding a college degree preferably in law, commerce, or public administration, having a first-grade civil service eligibility or equivalent, having served at least three years as assistant provincial or city treasurer, and meeting other qualifications set by the Secretary of Finance.
Annual appropriations for salaries and wages shall not exceed 45% of total annual income from regular sources in first and second class provinces, cities, and municipalities, and 55% in lower classes. Exclusions apply to public schools, hospitals, utilities, and other economic enterprises. The Secretary of Finance may authorize a maximum excess of 25%, but not in cases of overdraft.
Disbursements must be made pursuant to lawful appropriations, funds must be used only for their specific appropriated purposes, no disbursement shall exceed authorized limits, and cash advances require commission on audit rules. Public money cannot be used for religious or private purposes or unauthorized entertainment and receptions.