QuestionsQuestions (DFA)
EO No. 518 declares that GOCC budgets must be supportive of national objectives and development plans and consistent with the budgets of national government ministries, bureaus, offices, and agencies. They must also observe budget, organization, and compensation policies applicable to national government agencies, and follow the concept of flexible budgeting for adjustments to economic and business conditions.
It defines GOCCs as corporations created by law for narrow and limited purposes, wholly owned by the State or where the Government is a majority stockholder (for stock corporations), or agencies created with no stocks issued but administered by a board and performing proprietary functions. It includes government financial institutions performing government and/or proprietary functions, but excludes state universities and colleges.
Each GOCC must prepare an operating budget consisting of (1) estimates of revenues, (2) estimates of expenditure (covering current operating and capital expenditures), and (3) estimates of borrowings.
The operating budget is prepared prior to the beginning of the fiscal year, recommended by the Governing Board of the Corporation, and then considered for final approval by the President/Prime Minister.
The operating budget must be accompanied by a projected Balance Sheet, Profit and Loss Statement, Cash Flow Statement, and other required financial projections, including underlying assumptions. For GOCCs (including financial institutions), additional required attachments include projected sources and uses of funds for the budget year, estimated sources and uses of funds for the current year, and an actual statement of sources and uses of funds for the preceding year, with comparative data.
The operating budget proposal must include an assessment of the economic and business conditions that will have a bearing on the corporation’s operations.
EO No. 518 provides that rediscounting, lending, and borrowing transactions of financial institutions are not considered part of their operating budgets for purposes of the Order. It also clarifies which capital outlays are included (e.g., permanent investments like equity investments in subsidiaries, land acquisition, building construction, and improvements) and provides a special rule on loans that effectively increase compensation or allow implementation of capital projects for the institution.
The Governing Board must prepare a long term budget consisting of estimates of income, expenditure, and debt for the budget year and the subsequent four-year period. For capital outlays, estimates must cover the cost of capital projects scheduled over the five-year period beginning with the budget year.
Supplemental budgets may be proposed only when supported by adequate funding sources. Their approval must follow the same procedures as those for the principal operating budget of the corporation, unless a flexible budget system has been approved by the President/Prime Minister for certain automatic adjustments.
Changes in approved principal or supplemental budgets may be made only with the approval of the President/Prime Minister, subject to the flexibility rules under Section 10.
The operating budget must include specification of estimates of expenditure by object and must include an organization chart and itemization of personal services. Positions may be created or reclassified and reorganization affected only when approved by the Governing Board within guidelines and/or procedures issued by the President/Prime Minister, and within approved budget levels, consistent with position classification and compensation laws.
Yes, a GOCC may grant donations (in kind or cash) within limitations of its approved budget, but only if the corporation’s operating revenues, net of expenses, are sufficient to cover these donations.
Each corporation must submit budget estimates covering income and expenses associated with funds administered, managed, or held in trust by the GOCC. However, transactions relating to the receipts, disbursements, or disposition of the principal and accumulated net income of such trust funds are not considered part of the corporation’s operating budget.
A GOCC shall not incur obligations or make payments for current operating or capital expenditures after the beginning of each calendar year without a budget approved under the Order.
Each corporation must declare at least five percent of net earnings as cash dividends. Cash dividends accruing to the National Government must be received by the Treasury and recorded as income of the General Fund. The President/Prime Minister may change the dividend fraction upon recommendation of the Minister of Finance. The rule does not apply to the GSIS, SSS, and GOCCs whose profit distribution is governed by their charters or special law.
GOCCs may propose capital stock subscriptions of the National Government and subsidy allocations as budgetary requests responding to the annual budget call issued by the Ministry of the Budget. Requests must be within the authorized capital stock of the requesting corporation, follow the format and timetable set by the Minister of the Budget, and be accompanied by projected financial statements and details of the projects for which the requested equity investment is intended.
Funds for equity investments and subsidies are released upon submission of Special Budgets as provided under Section 40 of P.D. No. 1177. The usage must be specified, including the projects to be implemented or undertaken with equity investments.
The Minister of the Budget must submit a summary of approved GOCC operating budgets to the Batasang Pambansa on or before the last day of March each year. GOCCs must submit separate annual financial performance reports comparing actual performance with approved budgets by June 30 of the following year through the Ministry of the Budget and the President/Prime Minister to the Batasang Pambansa, together with comparative data for the preceding year and the approved budget for the current year; reports also cover subsidiaries and affiliates.