Legal basis and administrative framework
- The circular is issued pursuant to Section 56, General Provisions of Republic Act No. 7845 (FY 1995 General Appropriations Act).
- It is also issued in relation to Sections 2 and 3, Chapter I, Title XVII, Book IV of Executive Order No. 292 (Administrative Code of 1987).
- The circular’s procedures align with the Modified Disbursement System as amended by National Budget Circular No. 437, for actual payments under Section 6.7.
- The rules on use of savings/augmentation reference Sections 15, 49, 50 and 52 of the General Provisions of RA 7845 under Section 7.2.
- The treatment of continuing appropriations for validity is anchored on Section 28, Chapter 4, Book VI of E.O. No. 292 under Section 6.5.
Policy purpose and system design
- The circular establishes a Simplified Fund Release System (SFRS) to simplify and rationalize procedures in releasing appropriated funds.
- The SFRS is designed to accelerate implementation of government programs and projects while ensuring judicious utilization of government funds.
- The SFRS is policy-driven, with releases made primarily based on government policy initiatives rather than individual agency requests under Section 3.3.
- The system standardizes releases across similarly situated agencies, while reducing paperwork and facilitating monitoring under Section 3.3.
Coverage and who receives releases
- The SFRS covers all government agencies, including government owned or controlled corporations and local government units, that receive budgetary support from the national government under appropriations measures.
- Releases under the system are supported through Advices of Allotment (AAs) issued by the Department of Budget and Management (DBM) under Section 2, but the circular discontinues AA releases to incur obligations starting January 1, 1995 under Section 4.1.
- Coverage applies when funding is provided through the General Appropriations Act (GAA) or other duly enacted appropriations measures under Section 2.
Simplified Fund Release System structure
- The SFRS is a standardized system of releasing allotments based on predetermined categorization/disaggregation of agency budgets under Section 3.1.
- Release timing and magnitudes depend on the category of the expenditures item under Section 3.1.
- Releases follow a prioritization scheme consistent with government’s overall development policy under Section 3.1.
- The system uses three main elements under Section 3.2:
- the Agency Budget Matrix (ABM), disaggregating agency programs into eight (8) categories under Section 4.2;
- the Allotment Release Order notifying agencies of authorized allotments and conditions under Section 4.3; and
- the Allotment Release Program prescribing prioritization guidelines based on policy directives under Section 3.2.3.
Allotment release orders: GARO and SARO
- Starting January 1, 1995, AA releases to authorized agencies to incur obligations are discontinued under Section 4.1.
- In lieu of AAs, agencies receive allotment release orders under Section 4.3 under the SFRS.
- A General Allotment Release Order (GARO) is a comprehensive authority issued to agencies in general to incur obligations not exceeding an authorized amount during a specified period for the indicated purpose under Section 4.3.1.
- A GARO covers expenditures common to most agencies without need of special clearance or approval from a competent authority under Section 4.3.1.
- A Special Allotment Release Order (SARO) is a specific authority issued to one or more identified agencies to incur obligations not exceeding a given amount during a specified period for the indicated purpose under Section 4.3.2.
- A SARO covers expenditures whose release is subject to compliance with specific laws/regulations or to separate approval or clearance by a competent authority under Section 4.3.2.
- Each GARO/SARO identifies which budgetary items in the Agency Budget Matrix are authorized and the conditions under which release is made under Section 4.4.
Budget categorization in the Agency Budget Matrix
- The Agency Budget Matrix (ABM) disaggregates agency expenditures into eight (8) categories under Section 4.2.
- Disaggregation is done:
- by agency (specific bureau, office, or unit implementing the expenditure item) under Section 4.2.1;
- by locality (Central Office, a region, district, or other locational subdivision) under Section 4.2.2;
- by program/activity/project (functional grouping authorized in the GAA) under Section 4.2.3, divided into:
- General administration and support services;
- Support to operations;
- Operations;
- Locally-funded projects;
- Foreign-Assisted projects;
- by source of appropriation (whether under the GAA or other appropriation enacted by law) under Section 4.2.4;
- by fund (fund classifications under the standard coding system, e.g., Fund 101, Fund 102) under Section 4.2.5;
- by allotment class/object of expenditure (three allotment classes: personal services, maintenance and other operating expenses, and capital outlays, with objects of expenditures under COA Chart of Accounts) under Section 4.2.6;
- by need for clearance (needs clearance vs no clearance, e.g., motor vehicle acquisition requiring Office of the President approval) under Section 4.2.7; and
- by specificity of appropriation (specific purpose/project vs lump-sum amount) under Section 4.2.8.
Release rules: when SARO is required
- Appropriations items falling under any listed category are released through a SARO under Section 5.1.
- SARO applies to:
- Lump-sum appropriations under Special Purpose Funds except Internal Revenue Allotment (IRA) under Section 5.1.1;
- Lump-sum items within agency appropriations subject to special budgets, including lump-sum for compensation of personnel, grants, subsidies and contributions, and unallocated infrastructure projects under Section 5.1.2;
- Appropriations for new projects (locally-funded or foreign-assisted) and appropriations for projects whose implementation is proposed to be extended under Section 5.1.3;
- Agency and congressional initiatives and other appropriation adjustments not previously submitted by the President in the budget proposal to Congress under Section 5.1.4;
- Intelligence/Confidential Funds under Section 5.1.5;
- Funds for acquisition of motor vehicles, computers, communications equipment and firearms under Section 5.1.6;
- Appropriations for science and technology research under Section 5.1.7;
- The national government share in mandatory premium contributions for retirement and life insurance, employees compensation insurance, health insurance, and HDMF contribution under Section 5.1.8;
- Expenditures deemed automatically appropriated, including those covered by special accounts under Section 5.1.9;
- Expenditures chargeable against continuing appropriations, including unreleased prior years’ appropriations valid during the current year under Section 5.1.10;
- Such other items of expenditures as may later be determined by the DBM under Section 5.1.11.
- All appropriations items not covered by SARO are covered by a GARO under Section 5.2.
- The use of savings, realignments, reallocations, and other modifications in appropriations other than those already delegated to agencies under Sections 7.1 and 7.2 must be authorized by the DBM through a SARO under Section 5.3.
Procedures and implementation mechanics
- DBM prepares the Agency Budget Matrix (ABM) at the beginning of each budget year upon approval of the annual General Appropriations Act, in the format in Annex “A” under Section 6.1.
- DBM consolidates individual ABMs and uses the consolidated ABMs as a basis for preparation of the allotment release program under Section 6.1.
- Agencies prepare their respective ABMs in consultation with DBM under Section 6.1.
- After consolidation and considering the approved spending program, DBM issues either a GARO or SARO to authorize agencies to incur obligations, subject to the orders’ terms and conditions under Section 6.2.
- GARO and SARO are issued in the formats in Annexes “B” and “C” respectively under Section 6.2.
- DBM may issue GARO/SARO at any time during the budget year under Section 6.3.
- Upon receipt of a GARO/SARO, agencies may enter into contracts or bind the government into obligations to pay under existing accounting rules and regulations under Section 6.4.
- GARO/SARO validity extends up to the end of the budget year, except that GARO/SARO covering all allotments for capital outlays or items treated as continuing appropriations under Section 28, Chapter 4, Book VI of E.O. No. 292 remain valid up to the end of the immediately succeeding year under Section 6.5.
- GARO/SARO are accountable forms, and amounts are recorded in agency books of accounts in the same manner as before under AAs, unless later modified by COA under Section 6.6.
- Actual payment of obligations incurred follows procedures under the Modified Disbursement System, as amended by National Budget Circular No. 437 under Section 6.7.
Allowable savings, augmentation, and realignments
- Agencies must observe the breakdown of expenditures by program/activity/project, allotment class, and object authorized in the GAA or similar appropriations measures for a given agency under Section 7.1.
- Agencies may use allotment savings through augmentation in accordance with Sections 15, 49, 50 and 52 of the General Provisions of RA 7845, provided the augmentation is within the same program/project, allotment class, and total object of expenditure appearing in the GAA under Section 7.2.
- Except for agencies enjoying fiscal autonomy, using savings outside the Section 7.2 restrictions requires prior approval by DBM under Section 7.3.
- Realignments/re-allocations for capital outlays and public works projects are subject to the pertinent General Provisions in the GAA under Section 7.4.
Allocation to regional and operating units
- Appropriations specifically earmarked for Regional Offices/Oper