Organic Law of the Budget

OBJECT OF THE LAW. This Law is intended to regulate and harmonize the Financial Administration of the Public Sector. The Financial Administration of the Public Sector is defined as the set of principles, norms, systems, subsystems, processes and procedures used to achieve the fulfillment of the goals and objectives of the State, through the efficient management of public resources, by means of their acquisition, preservation, use, and optimal control. For the purposes of this Law, the Public Sector is understood to comprise: 1) The Non-Financial Public Sector composed of the entities of the General Government and Public Enterprises, whether of a national level or from autonomous municipal governments; and, 2) The Financial Public Sector composed of the Central Bank and other public financial institutions. The General Government is understood to be composed of the Central Government and Local Governments.

SCOPE OF APPLICATION OF THE LAW. This Law shall be applied:

• 1)

  In the Central Government, composed of the subsector of the central administration of the Executive Branch and non-business decentralized institutions: Legislative Branch and constitutional bodies dependent thereof, Judicial Branch and constitutional bodies without specific assignment such as the Public Ministry, the Supreme Electoral Tribunal (TSE), the Superior Court of Accounts (TSC), the General Attorney's Office of the Republic (PGR) and other public entities of similar legal status. The Legislative, Executive and Judicial Branches shall be absolutely responsible and independent in the formulation, execution and liquidation of their budgets, complying with the provisions emanating from this Law.

• 2)

  In decentralized business institutions: non-financial entities of the State: All of the provisions of this Law shall be applied, with the specifications indicated in each of the subsystems.

• 3)

  In decentralized financial institutions of the State, the provisions of this Law shall be applied with the exceptions noted in each subsystem.

• 4)

  In local governments, in order to safeguard the coordination of public finances and the integrity of the State's financial information, the provisions of this Law shall be applied as mandatory regulatory reference for the development of specific norms within their autonomy and the law governing municipalities; and,

• 5)

  To any person not included in the preceding items, whatever their legal nature, who receives resources from the State for their administration, operation or to manage fiscal assets, the provisions of this Law shall be applied in compliance with specific technical norms issued for this purpose by the Rector.

OBJECTIVES OF THE LAW. The objectives of this Law are:

• 1)

  To guarantee the fulfillment of the Principle of Legality, as well as the criteria of efficiency and effectiveness in the obtaining and financial and economic application of public resources;

• 2)

  To systematize the operations of programming, administration, evaluation and control of the State's financial resources, without prejudice to the actions corresponding to its Auditing Entities;

• 3)

  To develop systems that provide timely and reliable information on the financial behavior of the Public Sector, which is useful for the corresponding Bodies or Agencies and for evaluating the management of responsible officials;

• 4)

  To establish as a responsibility of the Executive Branch, through competent Bodies, as provided in this Law, the maintenance and operation of:

  • a)

    An accounting system appropriate to the needs for recording and reporting all acts with patrimonial, financial and economic impact, in accordance with their legal nature and operational characteristics;

  • b)

    An efficient and effective internal control, prior, simultaneous or subsequent, as the case may be, of the operations of the different subsystems that make up the Financial Administration of the Public Sector;

  • c)

    Adequate procedures that ensure the efficient and effective conduct of the activities of the different Bodies or Agencies that intervene in financial administration and the evaluation of the results of the corresponding programs, projects or activities; and, d) Operating norms that must be mandatorily complied with by the Bodies or Agencies of the Public Sector insofar as they execute activities inherent to financial administration.

COMPOSITION OF THE PUBLIC SECTOR FINANCIAL ADMINISTRATION SYSTEM. The Financial Administration of the Public Sector comprises the subsystems of budget, public credit, treasury and accounting, as well as the mechanisms and elements of the internal control system incorporated therein. The public sector financial administration system shall function in an articulated manner with the systems and subsystems of Public Investment, Administrative Contracting and Human Resources Administration, as well as with any other horizontal administration system that affects the financial management of public entities, all with the purpose of achieving systemic integration of public finance management. The State Secretary in the Finance Department shall exercise the rectorship of the Public Sector Financial Administration System and the coordination of each subsystem shall be the responsibility of the dependency of that Secretary that is determined, in each case, in this Law.

GOVERNING BODY OF THE SYSTEM. As the Governing Body of the System, it is the responsibility of the State Secretary in the Finance Department:

• 1)

  To direct, supervise and coordinate the implementation and development of the subsystems referred to in this Law;

• 2)

  To propose to the President of the Republic, for his approval, the medium-term financial policy and the annual budgetary policy and to direct its execution once approved, issuing the necessary provisions for such purpose;

COMPOSITION OF THE PUBLIC SECTOR FINANCIAL ADMINISTRATION SYSTEM. The Financial Administration of the Public Sector comprises the subsystems of budget, public credit, treasury and accounting, as well as the mechanisms and elements of the internal control system incorporated therein. The public sector financial administration system shall function in an articulated manner with the systems and subsystems of Public Investment, Administrative Contracting and Human Resources Administration, as well as with any other horizontal administration system that affects the financial management of public entities, all with the purpose of achieving systemic integration of public finance management. The State Secretary in the Finance Department shall exercise the rectorship of the Public Sector Financial Administration System and the coordination of each subsystem shall be the responsibility of the dependency of that Secretary that is determined, in each case, in this Law.

GOVERNING BODY OF THE SYSTEM. As the Governing Body of the System, it is the responsibility of the State Secretary in the Finance Department:

• 1)

  To direct, supervise and coordinate the implementation and development of the subsystems referred to in this Law;

• 2)

  To propose to the President of the Republic, for his approval, the medium-term financial policy and the annual budgetary policy and to direct its execution once approved, issuing the necessary provisions for such purpose;

• 3)

  To ensure the transparency of financial management information.

• 4)

  To maintain within the scope of Financial Administration the competencies of the Executive Revenue Bureau (DEI).

• 5)

  To supervise, control and evaluate the execution of the General Budget of Income and Expenditure of the Republic and of Decentralized Institutions;

• 6)

  To ensure the balance of public finances;

• 7)

  To ensure compliance with the provisions of this Law and its regulatory norms, as well as other norms of a financial nature;

• 8)

  To implement, gradually and progressively, the Integrated Financial Administration System in all Departments that comprise the Public Sector;

• 9)

  To integrate the information contained in the different budgets in order to obtain the Consolidated Budget of the Public Sector; and,

• 10)

  To comply with the other attributions provided in the current legal system.

RELATIONS WITH ADMINISTRATIVE MANAGEMENT. The Administrative Management of the State Secretaries or equivalent Dependencies in each of the Bodies of the Public Sector shall exercise the work and directions that the State Secretary in the Finance Department establishes, as well as the norms and procedures dictated by the Technical Coordinating Bodies of the subsystems that form part of the Financial Administration System within the framework of their attributions and shall be responsible for the guidance and economic-financial and patrimonial operations in their respective scope of competence.

ORIGIN OF FINANCIAL OBLIGATIONS. The financial obligations of the State institutions arise from the laws, contracts, acts or facts that, in accordance with law, generate them. If such obligations have as their object the supply of goods or the provision of services to the Public Administration, it shall be necessary for the issuance of the Payment Order that the creditor has complied with or guaranteed its corresponding commitment.

DURATION OF THE FISCAL YEAR. The Fiscal Year of the Public Sector shall begin on January 1st and shall conclude on December 31st of each year.

STAGES OF THE BUDGETARY PROCESS. BASIS OF THE BUDGET SUBSYSTEM. This Title establishes the principles, norms and procedures that shall govern the budgetary process of the Public Sector. This process comprises the stages of formulation, presentation and approval, execution, monitoring, evaluation and liquidation of the Budget. The budget subsystem shall be sustained by the National Development Plan; the Medium-Term Financial Program and the Multi-Year Budget. These instruments must be interrelated with the Macroeconomic Framework, the Annual Operating Plans, and reflecting the priorities and goals of the Government and for this purpose shall consider the following concepts: NATIONAL DEVELOPMENT PLAN. It is the instrument formulated by the President of the Republic, discussed in the Council of Ministers and approved by the National Congress where the strategic objectives and action strategies for the general administration of the Public Sector are established during a minimum period of five (5) years. MEDIUM-TERM FINANCIAL PROGRAM AND MULTI-YEAR BUDGET. They are the instruments that in accordance with the National Development Plan and for a minimum period of three (3) years, replaceable annually, project both the real macroeconomic variables and the corresponding financial flows in such a way that the basic balances can be made compatible: fiscal, balance of payments and monetary or, in the case of the Multi-Year Budget, articulate such projections with the income and expenditure situations of each one of the entities that make up the Public Sector. MACROECONOMIC FRAMEWORK. It is the set of estimates that in an integrated manner sustain the projections of the Medium-Term Financial Plan for the specific definition of the budgeting object and that serve to set directives without affecting the execution of the multi-year budget in the annual formulation of the budgets of the entities of the Public Sector. ANNUAL OPERATING PLAN. It is the expression, for a fiscal year, of the strategic planning of public entities, agreed upon with the National Development Plan, with specific objectives to be achieved and activities and projects to be executed in relation to goals and results, including the estimation of required resources, all compatible with the directives and guidance emanating from the macroeconomic framework and budgetary policies. ANNUAL BUDGET. It is the expression of the annual operating plan in terms of income, expenditure and financing under a budgetary methodology that facilitates the analysis, discussion, approval and political recognition of the financial management of the institutions of the State.

TYPES OF BUDGET. For the purposes provided in this Law, the following are understood to be: GENERAL BUDGET OF INCOME AND EXPENDITURE OF THE REPUBLIC. It is the one that is composed of the Budgets of the Central Administration of the Executive Branch, of the Legislative Branch and of constitutional bodies dependent thereof, of the Judicial Branch and of other constitutional bodies without specific assignment such as the Public Ministry, the Supreme Electoral Tribunal (TSE), the Superior Court of Accounts (TSC), the General Attorney's Office of the Republic (PGR) and other public entities of similar legal status. BUDGETS OF DECENTRALIZED INSTITUTIONS. It is composed of the Budgets of the Decentralized Institutions of the Executive Branch: created in accordance with Article 260 of the Constitution of the Republic of Honduras, being added according to the business or non-business nature of such institutions, the latter distinguishing between those of a non-financial nature and those of a financial nature. MUNICIPAL BUDGETS. They are the budgets of autonomous Municipal Governments regulated by the Law of Municipalities and the budgets of municipal non-business entities with their own budget approved by the Municipal Corporation. BUDGETS OF MUNICIPAL ENTERPRISES. They are the budgets of enterprises created by municipalities with their own budget approved by the Municipal Corporation. CONSOLIDATED BUDGET OF THE PUBLIC SECTOR. It is the consolidated budget of all the above types of budgets in order to identify the net impact of the Public Sector on the economy.

CONTENT OF THE BUDGETS. The Budgets integrate all the resources and expenditures foreseen for the fiscal year, which shall appear separately and in their full amounts without any compensation among themselves and shall amortize the economic result in their current accounts of capital, the sources and financial applications and the production of goods and services generated by the programmed actions for their execution during the period. The Budget shall contain the estimate of the income to be collected in the fiscal year and the allocation of credits for expenses in a determined order, seeking a triple balance among themselves and shall amortize the economic balance in the years and programmed objectives.

CONTENT OF THE INCOME BUDGETS. The Income Budgets shall contain the various items of resources, whatever their source of origin, and as such, they are income and constitute financial resources of the State:

• 1)

  The resources generated by taxes, fees, contributions, charges and royalties;

• 2)

  The returns proceeding from the management of heritage, including those from the sale or leasing of assets, services and the participation or profits from eventual investments;

• 3)

  The resources proceeding from public credit;

• 4)

  The transfers proceeding from other public entities;

• 5)

  The resources proceeding from donations, including donations in kind duly valued.

• 6)

  The resources proceeding from concession and privatization processes;

• 7)

  The income from the Poverty Reduction Strategy Fund; and,

• 8)

  Any other income produced by any other concept or source.

CONTENT OF THE EXPENDITURE BUDGETS. The Expenditure Budgets shall be comprehensive in nature, structuring the allocation of funds, whatever their source of financing, into current expenses, acquisitions of non-financial assets and transactions in financial assets and liabilities, in such a way as to facilitate information for public knowledge and the exercise of the corresponding internal and external controls.

BUDGETARY TECHNIQUES. In the formulation, execution, monitoring, evaluation, and liquidation of Budgets, appropriate techniques shall be used that guarantee the fulfillment of policies, action or development plans, and the production of goods and services of the Public Sector Organisms, as well as the economic and financial impact of the execution of expenditures and the linkage with their sources of financing. The Regulation of this Law shall establish the budgetary techniques to be applied and the classifiers of resources and expenditures for such purposes; among others, they shall consist of institutional, economic, and functional classifications prepared in accordance with international standards. Likewise, the classifiers shall allow identifying the action programs of the entities and the objectives and goals pursued in such a way that they may be linked with the costs associated with the activities and projects to be executed.

COMMITMENTS FOR SUBSEQUENT FISCAL YEARS. Expenditure commitments may be acquired to be executed in periods subsequent to the one to be closed hereinafter, provided that their execution begins in the same fiscal year and that they correspond to one of the following cases:

• 1)

  Contracts for works of investment programs or projects;

• 2)

  Supply contracts, technical assistance contracts, and lease contracts, when it would be uneconomical to limit their periods to the fiscal year;

• 3)

  Financial charges originating from public credit operations. In these cases, information shall be included on the resources invested in previous years, if any, those that will be invested in the future, and on the total amount of expenditure, as well as, where applicable, the respective schedules of physical execution. Approval by the National Congress of Budgets containing this information implies express authorization to contract the works or leases, or to acquire goods or services up to the total amount, in accordance with the contracting modalities in effect, with the amount for each of the fiscal years being determined.

ORGANS EMPOWERED TO CARRY OUT THE ADMINISTRATION OF PUBLIC RESOURCES. The administration of public resources corresponds, according to their ownership, to the Executive Power through the State Secretariat of the Ministry of Finance, to the respective decentralized institutions or to other public Organisms to which this power has been attributed by law.

ATTRIBUTIONS OF THE GENERAL DIRECTORATE OF BUDGET. The following are attributions of the General Directorate of Budget, in its capacity as the Technical Coordinating Organ of the budget subsystem:

• 1)

  To issue the technical standards necessary for the formulation, programming of execution, budget modifications, and evaluation and monitoring of annual operating plans and budgets of the Centralized Public Administration of the State and to propose the necessary adjustments;

• 2)

  To analyze and integrate the Annual Operating Plans and Budget Preliminary Drafts of the Organisms of the Centralized Public Administration of the State and to propose the necessary adjustments, informing the President of the Republic about the actions taken so that, where appropriate, the corresponding responsibilities are established.

• 3)

  To prepare the Preliminary Draft of the General Budget of Income and Expenditures of the Republic;

• 4)

  To prepare Opinions on the budget preliminary drafts formulated by Decentralized Institutions;

• 5)

  To advise on matters of operational planning and budgeting to the Organs of Public Administration and to disseminate basic criteria for the functioning of an integrated budget subsystem, as well as to resolve doubts that arise in the development of the budgetary process;

• 6)

  To coordinate the execution process of the Budget of the Centralized Public Administration;

• 7)

  To evaluate the fulfillment of annual operating plans and budget execution of the Organisms of Public Administration;

• 8)

  To participate in the formulation of budgetary aspects of medium-term financial programming and the annual budgetary policy designed by the State Secretariat of the Ministry of Finance; and,

• 9)

  Other functions conferred on it by this Law and its Regulation. CHAPTER II OF THE FORMULATION OF THE GENERAL BUDGET OF INCOME AND EXPENDITURES

APPROVAL OF ANNUAL BUDGETARY POLICY. Based on the Macroeconomic Framework and the Medium-Term Financial Program referred to in Article 9 of this Law, the President of the Republic shall annually approve the budgetary policy to which the Organs and Organisms of the Public Sector shall be subject. This approval shall be made with sufficient anticipation to the formulation of the Project of the General Budget of Income and Expenditures of the Republic. The budgetary policy shall establish annually the general guidelines for the formulation of the Budget Preliminary Draft, including the objectives, goals, priorities, orientations, and estimates of the maximum amounts of credits assignable, in global form, to each Organ or Organism.

PREPARATION OF THE CALENDAR FOR BUDGET FORMULATION. It corresponds to the State Secretariat of the Ministry of Finance, through the General Directorate of Budget, to prepare the calendar for Budget formulation, in order to coordinate the actions of the different Organs and Organisms of the Public Sector.

TECHNICAL EVALUATION OF RESOURCE SOURCES AND EXPENDITURE CLASSIFIERS. The Project of the General Budget of Income and Expenditures of the Republic shall be prepared on the basis of technical evaluation of the different sources of resources, considering the economic perspectives and other circumstances that may influence their collection, as well as the returns during the years immediately prior to the corresponding fiscal year. Resources and Expenditures shall be presented grouped according to the established classifiers.

RELATIONS WITH PLANNING AND MANAGEMENT EVALUATION UNITS. The Planning and Management Evaluation Units of the State Secretariat or of the dependencies performing their functions in other Organisms of the Public Sector shall evaluate the fulfillment of the development plans and policies in charge of the corresponding Organism. On these bases and in accordance with the directives of the annual budgetary policy, they shall prepare a proposal of budgetary priorities and the programs and activities to be developed in the fiscal year, highlighting particularly the investments to be considered in the formulation of the corresponding Budget Preliminary Draft.

PRESENTATION OF BUDGET PRELIMINARY DRAFTS. The State Secretariat of the Ministry of Finance, as the coordinating Organ of the budgetary process, shall issue the necessary measures and shall make timely follow-up so that the Budget Preliminary Drafts of all Entities of the Public Sector are presented in time and form. In case of non-compliance with the established date for their presentation, the State Secretariat of the Ministry of Finance shall consider the current budget as such, to which it may make the adjustments it deems necessary, informing the President of the Republic about the actions taken so that, where appropriate, the corresponding responsibilities are established.

SUPPORTING DOCUMENTATION OF THE GENERAL BUDGET OF INCOME AND EXPENDITURES OF THE REPUBLIC. On the basis of the Preliminary Drafts prepared by the State Secretariats and other Organisms previously indicated, and with the adjustments that may be necessary, the State Secretariat of the Ministry of Finance shall prepare the supporting documentation for the Project of the General Budget of Income and Expenditures of the Republic, which shall contain relevant information in the following aspects:

• 1)

  Statement of Reasons;

• 2)

  Evolution and projection of the Medium-Term Financial Program and the Multi-Year Budget including the macroeconomic context of the year being budgeted;

• 3)

  Estimation of tax revenues not explicitly shown in budgetary allocations as well as other quasi-fiscal activities;

• 4)

  Annual Operating Plan;

• 5)

  Income Budget;

• 6)

  Expenditure Budget;

• 7)

  The financial account showing current savings, investment, net result, and financing;

• 8)

  Comparative table with fiscal aggregates of at least the two (2) previous fiscal years;

• 9)

  Analytical explanatory document of the calculation of income; and,

• 10)

  General Provisions.

CONCEPT, VALIDITY, AND SCOPE OF GENERAL PROVISIONS OF THE BUDGET. The General Provisions of the Budget constitute supplementary standards to this Law, which shall govern for the fiscal year to which the General Budget of Income and Expenditures of the Republic containing them refers. Said standards are related directly and exclusively with the approval, execution, monitoring, evaluation, and liquidation of the Budget of which they form part. CHAPTER III OF THE PRESENTATION AND PROMULGATION OF THE GENERAL BUDGET OF INCOME AND EXPENDITURES

LEGAL PRESENTATION OF THE BUDGET. The Project of the General Budget of Income and Expenditures of the Republic and that of Decentralized Institutions, with the components established in Article 23 of this Law, shall be presented by the Executive Power to the National Congress through the State Secretariat of the Ministry of Finance, during the first half of the month of September of the year prior to the one it governs, for its corresponding discussion and approval. In order to ensure comprehensive appreciation of public financial management, the legal approvals of the General Budget of Income and Expenditures of the Republic and of Decentralized Institutions shall be contained in a single Legislative Decree.

ORGAN OF COMMUNICATION WITH THE NATIONAL CONGRESS. For all purposes, the State Secretariat of the Ministry of Finance shall be the Organ of communication of the Executive Power with the National Congress; only through it may increases or decreases to the allocations provided in the Budget Projects be requested or the inclusion of new items.

CONDITION FOR INCREASE OF EXPENDITURES AND MODIFICATIONS. Any increase in total expenditure provided for in the Budget Projects reserved by the Executive Power must have the respective financing based on prior substantiated opinion of the State Secretariat of the Ministry of Finance. In modifications to the budget projects presented by the Executive Power, the following conditions shall apply:

• 1)

  Projects of public investment that have not complied with the institutions of evaluation and prior approval in the national system of public investment may not be included;

• 2)

  Once the budget projects have been approved and their execution has begun, any initiative to increase or modify the expenditure budget shall be the responsibility of the Executive Power.

PROMULGATION OF THE LAW OF THE GENERAL BUDGET OF INCOME AND EXPENDITURES OF THE REPUBLIC. Once the General Budget of Income and Expenditures of the Republic and of Decentralized Institutions have been approved by the National Congress, they shall be sent to the Executive Power no later than three (3) days for its promulgation.

CONTINUED VALIDITY OF BUDGETS. When the total budget of the State referred to in Article 10 of this Law has not been approved at the start of the Fiscal Year, the budget corresponding to the previous year shall continue in force. CHAPTER IV EXECUTION OF BUDGETS

ACCRUAL AND COLLECTION OF RESOURCES. Budgetary resources are estimated and are accrued when, in accordance with the respective laws, a right of credit arises in favor of the State and correspondingly an obligation to pay is incurred by a duly identified natural or legal person and for a certain amount. Resources are considered collected when they are deposited, as appropriate, in the Accounts of the General Treasury of the Republic or of decentralized institutions.

BUDGETARY COMMITMENT. MAXIMUM LIMIT OF BUDGETARY CREDITS. A budgetary commitment shall be considered when its origin is a legal relationship with third parties, which creates the legitimate expectation of the outflow of funds to settle a debt or provide a good or service that must be provided by such third parties. This operation implies the preventive affectation of the budgetary credit, reducing its amount from the available balance, the identification of the natural or legal person with whom the relationship is established, the specification and quantity of goods or services to be received and, where applicable, the nature of non-reciprocal expenditures. When in matters of defense and internal security it becomes impracticable for the pertinent agencies to identify the natural or legal person with whom the spending relationship is established, the technical budgetary norms shall establish the specific data to be used for such cases both in budgetary formulation and in the execution stage. The person responsible for the execution of spending shall report exclusively to the highest authority of the Superior Audit Court (TSC). The credits of the Budget of Expenditures approved by the National Congress constitute the maximum limit of authorizations to spend, without prejudice to the competencies to effect transfers between budgetary allocations established in this Law. No spending commitments may be acquired for an amount greater than the amount of authorized limiting credits or the available balance in the execution programming quotas in effect. Actions that contravene what is provided herein shall be null and void by operation of law, without prejudice to the administrative, civil, or criminal liability that may correspond.

ACCRUAL OF EXPENDITURES. DEFINITIVE AFFECTATION OF BUDGETARY CREDIT. Expenditure is considered accrued when the proper receipt of the requested goods or services occurs or when the administrative requirements established by current norms for non-reciprocal expenditures are fulfilled, implying the definitive affectation of the budgetary credit and the arising of a payment obligation in immediate or deferred form.

PROGRAMMING OF BUDGETARY EXECUTION. Once the Budget Law is enacted, the Secretariat of State in the Office of Finance shall proceed to regularize the modifications introduced to the Project presented and shall coordinate the programming of budgetary execution. Such programming shall adjust spending commitments and their payment to the cash availability of the General Treasury of the Republic, according to the provisions in the Regulation of this Law. The General Treasury of the Republic shall assume responsibility for the Programming of Budgetary Execution in coordination with the General Directorate of Budget, the General Directorate of Public Credit, and the Executive Directorate of Income (DEI). Likewise, Decentralized Institutions shall make the modifications introduced to the Project presented and shall submit to the Secretariat of State in the Office of Finance the programming of the corresponding budgetary execution, with a maximum period of thirty (30) calendar days or from the date of budget approval.

DESTINATION AND LIMIT OF CREDITS FOR EXPENDITURES. Credits for expenditures are intended exclusively for the attention of the purposes included in the Budget or in its modifications approved in accordance with this Law. No spending commitments may be acquired for an amount greater than the amount of authorized limiting credits or the available balance in the execution programming quotas in effect. Actions that contravene what is provided herein shall be null and void by operation of law, without prejudice to the administrative, civil, or criminal liability that may correspond. Credits for expenditures do not obligate their execution except to the extent required by the need to satisfy them. CHAPTER V MODIFICATIONS TO THE GENERAL BUDGET OF INCOME AND EXPENDITURES

CONCEPT OF BUDGETARY MODIFICATIONS. Modifications to the General Budget of Income and Expenditures of the Republic are understood to mean any creation, reduction, increase, or transfer of the budgetary allocations voted by the Legislative Power for a fiscal period.

COMPETENCE TO MODIFY THE TOTAL AMOUNT OF THE GENERAL BUDGET OF INCOME AND EXPENDITURES. INCORPORATION OF EXTERNAL RESOURCES. The exclusive competence of the National Congress shall be the approval of modifications that affect the total amount of the General Budget of Income and Expenditures of the Republic initially approved and the amount of internal debt provided for, subject to the opinion of the Secretariat of State in the Office of Finance. The Secretariat of State in the Office of Finance is authorized as an exception, so that by Internal Resolution, it may incorporate into the current Budget external resources from donations by lending governments approved by the Legislative Power, in the months projected for use during the corresponding fiscal period.

COMPETENCE TO AUTHORIZE TRANSFERS BETWEEN BUDGETARY ALLOCATIONS. Transfers between budgetary allocations approved for each Fiscal Year shall be made as follows:

• 1)

  It is the competence of the National Congress to authorize transfers of budgetary funds between the Powers of the State;

• 2)

  It is the competence of the President of the Republic to authorize transfers of budgetary funds between Secretariats of State, Decentralized Institutions, and others;

• 3)

  It is the competence of the Secretariats of State, through their Heads or their Legal Substitutes, to authorize transfers of budgetary funds between specific institutes of use or between categories of the same program, following the procedure established for this purpose by the Secretariat of State in the Office of Finance; and,

• 4)

  It is the competence of the Secretariat of State in the Office of Finance to authorize by Internal Resolution the transfer of funds from the Financial Allocations for Contingencies, as well as those made between Secretariats of State and the National Congress.

MAINTENANCE OF BUDGETARY EQUILIBRIUM. To maintain the equilibrium of the General Budget of Income and Expenditures of the Republic during its execution, neither the Legislative Power nor the Executive Power may create new expenditure allocations without incorporating into it, in the corresponding legal instrument, the precise determination of the source of resources to be used for its financing, requiring in all cases the opinion of the Secretariat of State in the Office of Finance. In the event that the source of resources is internal credit, the procedure established in Article 76 of this law shall be followed.

BUDGETARY DISCIPLINE. In cases in which the economic and financial situation of the country requires it, when the estimate of income collection is less than projected expenditures to be paid with such income or in case of emergency, the President of the Republic, in Council of Ministers, shall issue a Decree ordering the reduction or supplementation of the various budgetary allocations in the budgets approved for the different bodies or agencies of public administration. When this measure affects only the allocations of the Executive Power, it requires only an Agreement of the Executive Power issued through the Secretariat of State in the Office of Finance. When it concerns the allocations of the Judicial Branch, as well as constitutional organs without specific assignment such as the Public Prosecutor's Office, the Supreme Electoral Court (TSE), the Superior Audit Court (TSC), the Office of the Attorney General of the Republic (PGR), and other public entities of similar legal status, a respective Legislative Decree shall be required. The Executive Power shall have to inform the National Congress when budget reduction decisions are made for Decentralized Institutions.

ALLOCATION FOR CONTINGENCIES. The Allocation for Contingencies shall be administered by the Secretariat of State in the Office of Finance, and shall be constituted by a maximum amount equivalent to two percent (2%) of the Budgeted Current Income for the corresponding fiscal period to cover in a timely manner those commitments derived from:

• 1)

  Counterparts of loan agreements;

• 2)

  Obligations from the granting of endorsements;

• 3)

  The application of laws in the process of formation during the period of Budget approval; and,

• 4)

  Immediate, urgent, or unforeseen needs caused by natural disasters, internal upheaval, or public calamity. Once these expenditures are defined, they shall be placed in the budgetary structure of the respective institution or program, sending the corresponding report to the National Congress.

AUTOMATIC EXPANSION OF BUDGETARY CREDITS. The dependencies of the Centralized Public Administration authorized to expand their budgetary credits automatically shall be subject to the procedure established for this purpose in the General Provisions of the Budget. CHAPTER VI LIQUIDATION OF THE GENERAL BUDGET OF INCOME AND EXPENDITURES

CLOSING OF THE FISCAL YEAR. The budget for each Fiscal Year shall be closed on December thirty-first of the year in which it was in force and shall serve as the basis for carrying out its liquidation. After that date, resources that are collected shall be considered as execution of the Budget of the Fiscal Year in force, whatever the date of the payment obligation or liquidation, and no commitments nor accrued expenditures may be assumed charged to the year that is closing.

EXPENDITURES COMMITTED AND NOT ACCRUED AT THE CLOSING OF THE FISCAL YEAR. Expenditures committed and not accrued at the end and closing of each year may be charged to the credits available for such purpose in the fiscal year in force, in duly justified cases and previously approved by the Secretariat of State in the Office of Finance. This operation must be carried out in a coordinated manner between the General Directorate of Budget and the Special Directorates responsible.

BUDGET LIQUIDATION. The liquidation of the General Budget of Revenue and Expenditure of the Republic shall be effected only during the Fiscal Year. For this purpose, the General Accounting Office of the Republic shall require information from the organs responsible for the liquidation and valuation of resources, to proceed with the closing of the Revenue Budget. In the same manner, it shall proceed with the Secretaries of State and other organisms responsible for the ordering of expenditures and payments with the Expenditure Budget. The analysis of correspondence between expenditures and the production of goods and services shall serve to prepare the Budget Liquidation Report and for the preparation of the Financial Statement Rendering of Accounts of the Public Sector, which it must send annually to the Executive Branch to the National Congress, in accordance with what is established in article 100 of this law. CHAPTER VII ON MONITORING AND EVALUATION OF BUDGET EXECUTION

EVALUATION OF BUDGET EXECUTION. The General Budget Office shall evaluate the execution of the General Budget of Revenue and Expenditure of the Republic and of Decentralized Institutions, with the frequency established in the Regulation of this Law, during the closing and at the close of the same. For this purpose, the corresponding Organisms shall:

• 1)

  Maintain records of information on the financial and physical management of the execution of their Budgets, in accordance with the technical standards that shall be issued;

• 2)

  Submit the results of the execution of the goals of the Annual Operating Plan to the General Budget Office; and,

• 3)

  Prepare evaluation reports of the programs under their responsibility, formulate corrective measures for the alignment and send to the General Budget Office said reports, the detail of the measures adopted and the results achieved or expected from them.

REPORT OF PHYSICAL AND FINANCIAL RESULTS. In accordance with the information indicated in article 48 and such as may be considered pertinent, the General Budget Office shall conduct a global analysis of the physical and financial results obtained and of the effects produced by them; furthermore, it shall interpret the variations that have occurred with respect to what was planned, shall endeavor to determine their causes and shall prepare reports with recommendations for the superior authorities and the responsible parties of the evaluated organisms. With respect to public investment, the General Budget Office shall coordinate with the General Public Investment Office the corresponding analysis. The reports resulting from this process shall be presented to the President of the Republic, through the Secretary of State in the Ministry of Finance, for its knowledge and evaluation in the Council of Ministers.

ATTRIBUTIONS OF THE GENERAL OFFICE OF DECENTRALIZED INSTITUTIONS. The General Office of Decentralized Institutions, a dependency of the Secretary of State in the Ministry of Finance, shall have the following attributions:

• 1)

  To ensure compliance with the policies defined by the Government of the Republic, as well as the implementation of pertinent measures, in accordance with the approved macroeconomic framework;

• 2)

  To prepare and maintain updated a Manual of Performance Indicators that encompasses the universe of institutions, considering in its structure the characteristics peculiar to each entity;

• 3)

  To analyze the management of institutions and present periodically to the superior authorities the reports for decision-making;

• 4)

  To issue an opinion on technical standards, manuals and instructions applicable in matters of management to institutions;

• 5)

  To promote and coordinate technical assistance for the operation of the Financial Administration System;

• 6)

  To supervise economic and financial activity, periodically evaluating the degree of efficiency in institutional management;

• 7)

  To attend meetings of the governing bodies; and,

• 8)

  Other attributions that this Law and its Regulation may confer and those established by the Executive Branch through other legal provisions.

PRELIMINARY BUDGET DRAFTS OF DECENTRALIZED INSTITUTIONS. The preliminary budget drafts of Decentralized Institutions shall respond to the Macroeconomic Framework and Medium-Term Financial Program that the Government of the Republic defines, as well as to the general policies and specific guidelines that the Secretary of State in the Ministry of Finance establishes in budgetary matters. They shall contain, in addition, the action plans, the performance indicators, the expenditure estimates and their financing, the cash budget and the human resources to be used, in such a way as to allow the establishment of the operational, economic and financial results expected for the management.

INCORPORATION OF MODIFICATIONS TO PRELIMINARY BUDGET DRAFTS OF DECENTRALIZED INSTITUTIONS. Once the President of the Republic has approved the opinions on the corresponding Preliminary Budget Drafts, the Secretary of State in the Ministry of Finance shall remit to the governing body of the respective institutions, in order to incorporate the modifications that shall have been proposed in the opinion.

APPROVAL AND PRESENTATION OF BUDGET PROJECTS OF DECENTRALIZED INSTITUTIONS. The governing bodies of decentralized institutions shall approve their annual preliminary budget and shall present it to the National Congress for legislative approval, through the Secretary of State in the Ministry of Finance. This presentation shall be made together with the project of the General Budget of Revenue and Expenditure of the Republic.

APPROVAL OF MODIFICATIONS TO BUDGETS OF DECENTRALIZED INSTITUTIONS. Modifications of the budgets of decentralized institutions that do not imply a variation in the amount thereof shall be approved by their governing bodies observing the institutional norms that for this purpose the Secretary of State in the Ministry of Finance issues. Any modification that exceeds two percent (2%) of the amount of approved current revenue shall require an opinion from the Secretary of State in the Ministry of Finance, and if said limit is exceeded, legislative approval shall also be required.

ATTENTION TO PUBLIC DEBT SERVICE OF DECENTRALIZED INSTITUTIONS. Decentralized institutions shall indicate in their Annual Budget Projects of Resources and Expenditures the necessary allocations to meet the obligations of the public debt service that corresponds to them. When the Budget Projects do not observe what is established in the preceding paragraph, the Secretary of State in the Ministry of Finance shall indicate what is appropriate in the corresponding opinion.

ANNUAL CLOSING OF THE BUDGET OF DECENTRALIZED INSTITUTIONS. At the end of each Fiscal Year the Decentralized Institutions shall proceed to the closing of accounts of their Budget of Resources and Expenditures, likewise, they shall present to the Secretary of State in the Ministry of Finance, through the General Budget Office, before the last day of the month of February of each year, a report of the results of financial activity and economic management.

PROHIBITION ON MAKING TRANSFERS TO DECENTRALIZED INSTITUTIONS. It is prohibited for organisms of the Public Sector to make contributions or transfers to Decentralized Institutions whose Budgets have not been presented to the National Congress in the terms of this Law, a requirement that is also indispensable for them to carry out public credit operations. TITLE III ON PUBLIC INVESTMENT CHAPTER I ON COMMON NORMS

CONCEPT OF PUBLIC INVESTMENT. Public Investment is constituted by the resources allocated to activities and projects that have as their object or result the increase of non-financial assets of the entities that make up the Public Sector and goods of public domain, in order to expand, improve, modernize or reconstruct the productive capacity of goods and service provision. The norms of the governmental accounting subsystem, in harmony with the generally accepted principles and international accounting standards applicable to the public sector, shall detail the concepts that shall be included in the accounting accounts corresponding to non-financial assets.

COMPOSITION OF THE PUBLIC INVESTMENT PROGRAM. The Public Investment Program shall have a multi-year character, updatable annually, with a time framework compatible with the Medium-Term Financial Program and shall be composed of the set of sectoral and institutional programs and projects proposed by the entities of the Public Sector, previously analyzed and evaluated for their economic and social viability and with the allocation of resources determined in accordance with the execution period. This Program shall comply with the investment policy guidelines established by the Government of the Republic, in relation to the definition of priority areas and sectors and with the criteria for the allocation of financial resources.

COMPOSITION OF THE ANNUAL PUBLIC INVESTMENT PROGRAM. The Annual Public Investment Program shall be composed of the Programs and Projects of the Multi-Year Public Investment Program that the institutions of the Public Sector have implemented in their respective budgets within the framework of the guidelines that govern the process of formulation, approval and programming of budget execution. CHAPTER II ON ORGANIZATION AND COMPETENCE

ATTRIBUTIONS OF THE GENERAL PUBLIC INVESTMENT OFFICE. The attributions of the General Public Investment Office, in its capacity as the Technical Coordinating Organ of the Public Investment Program, are the following:

• 1)

  To issue technical standards and directives for the formulation of public investment programs and projects;

• 2)

  To maintain updated the Integrated Bank of Public Investment Projects, with the information supplied by the entities of the Public Sector;

• 3)

  To evaluate the public investment programs and projects formulated by the entities of the Public Sector, prior to their incorporation in the Multi-Year Public Investment Program;

• 4)

  To prepare the Multi-Year Public Investment Program and maintain it updated;

• 5)

  To validate, at the request of the General Budget Office, the annual public investment programs contained in the annual operating plans of the institutions for the purposes of their incorporation in the budget of the corresponding fiscal year;

• 6)

  To advise the Secretaries of State and other Organisms of the Public Sector, on the methodologies and basic criteria for the definition and formulation of public investment programs and projects; and,

• 7)

  To conduct monitoring of the physical execution of the Annual Public Investment Program, with the frequency that according to the characteristics of the programs and projects be pertinent; and,

• 8)

  Others that this Law and its Regulation may confer.

FORMULATION OF THE ANNUAL PUBLIC INVESTMENT PROGRAM. The Annual Public Investment Program, which includes the objectives, goals, priorities and orientations of the budgetary allocations of the State Organisms, shall be formulated based on the public investment policy issued by the Executive Branch.

FORMULATION OF THE INSTITUTIONAL ANNUAL PUBLIC INVESTMENT PROGRAM. The Planning and Evaluation Units of the Management of the Secretaries of State and the Dependencies that perform said functions in the other Organisms of the Public Sector, shall prepare the institutional annual public investment program as an integral part of their Annual Operating Plan. Likewise, they shall perform the evaluation of compliance with the objectives and goals of the Annual Operating Plan.

REPORTS ON PHYSICAL AND FINANCIAL PROGRESS OF PROJECTS UNDER EXECUTION. For purposes of monitoring and evaluation of the Annual Public Investment Program, the institutions of the Public Sector shall comply with the obligation to present to the Secretary of State in the Office of Finance, with the periodicity that is established, information on the physical and financial progress of projects under execution. Based on the information provided by the institutions, the General Budget Directorate in coordination with the General Directorate of Public Investments shall prepare the report that the Secretary of State in the Office of Finance must present to the corresponding instances.

PRIORITY NOTE FOR NEW PROJECTS. In the formation of the Public Investment Program, the entities of the State that propose new projects, based on the investment priorities issued by the Executive Branch, must present them to the General Directorate of Public Investments, accompanied by the information that permits a technical, economic, and social impact analysis for the granting of the Priority Note, which shall be a requirement for managing external and national resources, through the General Directorate of Public Credit and the General Budget Directorate, respectively.

REGISTRATION IN THE INTEGRATED PROJECT BANK. The projects of the institutions of the Public Sector, which require national or external resources, whether from credits or donations, must be duly registered and provided with updated information in the Integrated Project Bank of the General Directorate of Public Investments. TITLE IV OF THE PUBLIC CREDIT SUBSYSTEM CHAPTER I OF COMMON NORMS

OBJECT OF THE PUBLIC CREDIT SUBSYSTEM. CONCEPT OF PUBLIC CREDIT. DESTINATION OF PUBLIC CREDIT RESOURCES. The Public Credit subsystem shall have as its object the management of internal and external financial resources with a reimbursable character, within the capacity of the State to obtain extraordinary financial resources with a reimbursable character, originating from abroad or from the internal market. Resources originating from public credit shall be destined to:

• 1)

  Carry out productive investments of justified economic and social benefit;

• 2)

  Address cases of evident national necessity;

• 3)

  Support of sectoral policies; and,

• 4)

  Refinance its liabilities.

DENOMINATION OF PUBLIC DEBT. Public Debt is denominated as the financial commitments of a reimbursable character contracted or assumed by the State through the competent Institutions, by virtue of public credit operations. The operations mentioned in the preceding paragraph may originate from:

• 1)

  The issuance and placement of titles, bonds or other obligations, intended to cover seasonal cash insufficiencies within the fiscal year;

• 2)

  The contracting of loans with national or foreign financial institutions, duly recognized in the financial sphere, or with other governments and multilateral organisms, through the execution of agreements or contracts;

• 3)

  The contracting of works, services or acquisitions whose total or partial payment shall be made in the future, and the passage of more than one fiscal year after the current one, provided that the concepts previously financed are in accordance;

• 4)

  The issuance and placement of Titles and Securities whose maturity exceeds the fiscal year; and,

• 5)

  The payable liabilities derived from the granting of guarantees, sureties and security guarantees of obligations contracted by the entities of the Public Sector, whose formalization has been previously authorized by the Secretary of State in the Office of Finance and the other requirements established in this Law have been complied with.

FORMULATION OF PUBLIC DEBT POLICY. The formulation of the Public Debt Policy corresponds to the Executive Branch and for such purpose a Public Credit Commission shall be constituted, which shall be integrated by the Secretary of State in the Office of Finance who shall preside over it, and by the Central Bank of Honduras. The number of representatives to be designated by these Institutions before said Commission, its internal organization and functions shall be regulated by the Regulations of this Law. The public debt policy shall determine the global levels of external and internal indebtedness of the entities of the Public Sector, the minimum degree of conditionality acceptable for external loans to be contracted, the limits of internal indebtedness at institutional level based on their payment capacity and the prioritization of public credit operations based on the investment goals and the restrictions of the monetary and financial program. In matters of indebtedness, all entities of the Public Sector, when formulating their annual budgets, must be governed by the Public Debt Policy authorized by the Public Credit Commission.

READJUSTMENT OF PUBLIC DEBT. INSTITUTIONAL POWER. Public Debt may be subject to consolidation, conversion, renegotiation or any other readjustment mechanism whose effect would be convenient to national interest, when it signifies more favorable financial conditions. The renegotiation of loans and other public credit operations shall be the exclusive power of the Secretary of State in the Office of Finance and of the Central Bank of Honduras, as applicable, and may only be carried out based on the prior recommendation of the Public Credit Commission and must be reported to the National Congress.

FLOATING DEBT. Floating or administrative debt, consisting of obligations accrued pending payment at the close of the Fiscal Year, shall not be considered public debt.

PUBLIC CREDIT OPERATIONS EXCLUDED FROM THE SCOPE OF THIS LAW. Public credit operations excluded from the scope of the present Law, and which must be governed by special norms, are the following public credit operations:

• 1)

  Transactions related to the investment of international monetary reserves;

• 2)

  Credits that the Central Bank of Honduras contracts for support of the balance of payments;

• 3)

  Those linked to the execution of monetary, credit and exchange policies, in charge of the Central Bank of Honduras; and,

• 4)

  The contracting of loans and other financial operations carried out by municipalities or any national institution.

CLASSIFICATION OF PUBLIC DEBT. For the purposes of this Law, public debt is classified as internal and external and as direct and indirect. Internal public debt is that which the Public Sector and municipalities contract or assume, with natural or legal persons who have the status of residents in the national territory. External public debt is that constituted by obligations contracted with another State or International Organism or with any natural or legal person who have the status of non-residents in the national territory. Public debt is direct, when it corresponds to obligations contracted by the Central Government, in the capacity of principal debtor. Public debt is indirect, when it has been contracted by an Organism of the Public Sector, with the guarantee or endorsement of the Central Government.

AUTHORIZATION TO CONDUCT PROCEDURES FOR EXTERNAL PUBLIC CREDIT OPERATIONS. No Entity of the Public Sector may initiate procedures to conduct external public credit operations without the prior authorization of the Secretary of State in the Office of Finance. The provisions of this article also apply to municipalities and commercial enterprises in which the State, through Decentralized Institutions, municipalities or municipal corporations, possesses a shareholding participation greater than fifty percent (50%).

COUNTERPARTY FOR NON-REIMBURSABLE EXTERNAL COOPERATION. In the case of non-reimbursable external cooperation requiring counterparty funds, the requesting entity must previously request the favorable opinion of the Secretary of State in the Office of Finance. Resources originating from Non-reimbursable External Cooperation must be incorporated into the General Budget of Income and Expenditures of the Republic or into the Budget of the corresponding Entity when it is Decentralized Institutions, municipalities, municipal corporations and commercial companies in which the State, through Decentralized Institutions, municipalities or municipal corporations, possesses a shareholding participation greater than fifty percent (50%). CHAPTER II PUBLIC CREDIT OPERATIONS

NEGOTIATION OF LOANS. The negotiation of loans of the Public Sector corresponds to the Secretary of State in the Office of Finance, through the General Directorate of Public Credit, in accordance with the guidelines contained in this Law and other applicable laws. In the negotiation, the contractual conditions shall be defined, such as: purpose of the financing, amortization schedules, grace period, maximum interest rates and currency for payment, without prejudice to other conditions that are proper in this type of negotiation. This negotiation and the subsequent formalization shall be determined by the priorities of the Public Investment Program, in consonance with the Macroeconomic Framework and Medium and Long-Term Financial Program defined by the Government of the Republic. Any draft contract resulting from the negotiation requires for its formalization a Decree of approval by the Secretary of State in the Office of Finance. When it comes to external public debt operations, before formalization the Central Bank of Honduras must issue an opinion on the impact of the operation on monetary, credit and exchange policy. Likewise, these contracts shall be subject to the approval of the President of the Republic and their execution must be authorized by the National Congress. The approval and authorization referred to in the preceding paragraph are excluded for the contracting of loans with maturity within the same fiscal period, conducted by Decentralized Institutions, originating from financial intermediation operations and foreign trade transactions, intended to cover seasonal financial needs or those inherent to institutional functioning. These transactions shall be authorized by the respective Higher Governing Bodies, after the opinion of the Secretary of State in the Office of Finance.

SUBSCRIPTION AND RATIFICATION OF LOANS. Once the requirements set forth in the preceding article have been met, loans financed with external resources shall be subscribed by the Secretary of State in the Ministry of Finance. When loans are contracted by Decentralized Institutions, municipalities, or municipal corporations, the officials who hold legal representation of each institution or the Municipal Mayor, with authorization from the corresponding Superior Body, shall be competent to subscribe the respective contracts. In both cases, the contracts shall be presented to the National Congress for ratification.

CONTRACTING OF LOANS IN CASES OF EMERGENCY. When the National Congress is not in session, the Executive Branch, under its responsibility, may contract loans or agreements to address urgent or justified needs, in cases of war, natural disaster, internal unrest, or public calamity, or to meet international commitments, and shall immediately report all of this to the National Congress on a permanent basis.

ISSUANCE OF BONDS, SECURITIES, OR OBLIGATIONS OF PUBLIC DEBT. The Executive Branch is authorized to issue bonds, securities, or obligations of Public Debt, in accordance with the amount authorized by the National Congress when approving the General Budget of Revenue and Expenditure of the Republic. To carry out an issuance additional to that approved in said Budget, authorization from the National Congress is required, following a favorable opinion issued by the Secretary of State in the Ministry of Finance and the Central Bank of Honduras with respect to the conditions, including its effect on the money supply and, where applicable, on monetary policy. In all cases, the following characteristics must be included at a minimum: minimum amount to be authorized, period of validity, amortization period, intended use of financing, and interest to be paid. Its issuance shall be formalized by means of an Act subscribed by the Secretary of State in the Ministry of Finance and the President of the Central Bank of Honduras.

PLACEMENT OF PUBLIC DEBT SECURITIES. The Secretary of State in the Ministry of Finance may place public debt securities in the capital market directly or through the Central Bank of Honduras.

GRANTING OF ENDORSEMENTS, SURETIES, OR GUARANTEES. The granting of endorsements, sureties, or guarantees requires in the first instance the authorization of the President of the Republic and subsequently the approval of the National Congress. These operations shall proceed with respect to the obligations contracted by Entities of the Public Sector, and the provisions of Article 71 of this Law must be observed. The Secretary of State in the Ministry of Finance shall be competent for its formalization. The granting of sureties, endorsements, or guarantees to private natural or legal persons is prohibited, except in cases of guarantees that must be granted by State financial institutions as part of their commercial operations. The Secretary of State in the Ministry of Finance, through the General Directorate of Public Credit, shall conduct a risk evaluation that implies the endorsement, guarantee, or surety. The cost of this evaluation and the granting of the public guarantee, if considered necessary, implies the establishment of a guarantee account in favor of the Secretary of State in the Ministry of Finance.

SUPERVISION OF RESOURCES FROM PUBLIC CREDIT. The Secretary of State in the Ministry of Finance shall supervise the proper utilization of resources from public credit and shall have the authority to rescind or cancel credits, provided that this is permitted by the conditions of the respective operation and of the special authorization that authorizes it.

CONSTITUTION OF DEBT SERVICE. Debt service shall be composed of the amortization of principal and interest, commissions, and other charges that may have been agreed upon in public credit operations. The Budgets of each of the Entities of the Public Sector must be formulated with provision for the credits necessary to meet debt service. The Secretary of State in the Ministry of Finance may order the debit of the bank accounts of Entities that do not comply in a timely manner with debt service, and make payments directly, or prevent such payments directly.

EARLY REDEMPTION OF PUBLIC DEBT SECURITIES. When it is convenient to the interests of the State, the Secretary of State in the Ministry of Finance may redeem directly, through the General Treasury of the Republic, in an anticipated manner the public debt securities that it has issued.

ATTRIBUTIONS OF THE GENERAL DIRECTORATE OF PUBLIC CREDIT. The General Directorate of Public Credit is the Technical Coordinating Body of the Public Credit subsystem. In order to ensure efficient management, programming, and supervision of the resources obtained through public credit operations, its attributions shall be:

• 1)

  To propose financial criteria for the formulation of the Public Indebtedness Policy in accordance with the guidelines set forth by the Public Credit Commission;

• 2)

  To organize an information system on the capital market;

• 3)

  To coordinate financing offers received from the Public Sector;

• 4)

  To process requests for authorization to initiate public credit operations;

• 5)

  To standardize the procedures for issuance, placement, and redemption of securities, bonds, or obligations of public debt, as well as those for negotiation, contracting, and amortization of loans, throughout the scope of the Public Sector;

• 6)

  To direct the public indebtedness negotiation process, support, and guide the entities participating in the process;

• 7)

  To supervise that financing obtained through public credit operations is applied to its specific purposes;

• 8)

  To maintain an updated registry and control over public indebtedness, properly integrated into the governmental accounting system, being able to request information from Public Sector entities;

• 9)

  To establish the estimates and budget projections of public debt service, coordinating the pertinent matters with the General Directorate of Budget and the General Treasury of the Republic; and,

• 10)

  The other duties conferred upon it by this Law and its Regulations and those established by the Executive Branch.

OBJECT OF THE TREASURY SUBSYSTEM. The Treasury subsystem shall have as its object the administration of financial resources, including their collection and handling, as well as their subsequent distribution and control to meet the payment of financial obligations, in order to fulfill the programmed objectives. The functions inherent to this subsystem correspond to the General Treasury of the Republic, being responsible for issuing the necessary standards for this purpose. Entities that are authorized by Law to collect revenue in direct form. The General Treasury of the Republic shall also be in charge of providing the necessary funds to make payments in a timely and proper manner. For these purposes, it shall operate on the basis of collections that enter the Unique Treasury Account System opened at the Central Bank of Honduras, and the allocation of payment quotas, programmed periodically for the purposes of the corresponding operations, in accordance with what was approved in the General Budget of Revenue and Expenditure of the Republic. The setting of quotas shall be made jointly between the Technical Coordinating Bodies of the Budget and Treasury subsystems, in coordination with the Technical Coordinating Body of the Public Credit subsystem.

DEPOSIT OF PUBLIC FUNDS. OBJECTIVE OF THE UNIQUE ACCOUNT SYSTEM. OPENING OF SPECIAL ACCOUNTS. The Unique Account System that for this purpose the General Treasury of the Republic shall open at the Central Bank of Honduras. The Unique Account System has as its objective the orderly handling of public funds; therefore, the Secretary of State in the Ministry of Finance shall establish the operational mechanisms that guarantee efficient and timely functioning, both with respect to the collection of revenue and the execution of the corresponding internal and external controls.

COLLECTION OF REVENUE. The Secretary of State in the Ministry of Finance shall organize the collection of Revenue in the manner it deems most convenient, facilitating the subscription of agreements with institutions of the national financial system for its implementation, and the mechanisms must be established in the regulations by which such institutions shall transfer the collected funds to the General Treasury of the Republic.

OPERATION OF SPECIAL PAYROLL OFFICES. The Legislative and Judicial Branches and the other Bodies without specific assignment in Article 2 of this Law shall have their own Payroll Offices, through which the administrative actions shall be channeled to make effective the transfer of resources that the Secretary of State in the Ministry of Finance must make in accordance with the allocations provided in the General Budget of Revenue and Expenditure of the Republic. Without prejudice to the guidelines of their Institution, for the purposes of what is established in the preceding paragraph, the Payroll Offices must adjust their procedures in accordance with the provisions that the General Treasury of the Republic establishes in general form for the Public Sector within its scope of competence. These Payroll Offices shall also collect the revenue that is authorized by Law for its direct collection and shall make effective the payments authorized by the respective administrative service.

ISSUANCE OF THE PAYMENT ORDER. The document corresponding to the Payment Order shall be issued and subscribed, as appropriate, by the Administrative Management Departments of the Secretaries of State or by the officials to whom such functions have been delegated or decentralized. In the other Entities of the Public Sector committed in Article 2 of this Law it shall be issued or subscribed by those responsible for the administrative or financial management according to their respective internal organizations. Only Payment Orders whose commitments have been previously and duly approved by the authorities responsible for the administration and management of the corresponding Bodies shall be processed. The Administrative Management Departments, signatories of the Payment Order, shall be responsible for the expenditures before the State Oversight Bodies. In the Regulation for the Execution of this Law, the basic criteria that the institutions must apply in relation to the degree of administrative delegation shall be established. Payment Orders that refer to obligations that must be settled abroad shall be issued in favor of the Central Bank of Honduras.

COLLECTING AND PAYING FUNCTION OF THE EMBASSIES AND CONSULATES OF HONDURAS ABROAD. For the purposes of this Law, the Embassies and Consulates of Honduras shall act as agents for receiving funds and paying agents of the General Treasury of the Republic abroad, in accordance with the procedures that this Branch establishes.

FUNCTIONING OF ROTATING FUNDS. The Secretariat of State in the Office of Finance shall authorize the functioning of rotating funds in any of the Dependencies of the Central Administration or Executive Power, with the limits that shall be established in the specific rules that regulate them. The Directive Bodies of the entities of the Decentralized Administration, the Higher Administration of the other Powers of the State, and the Heads of constitutional Bodies with specific attribution shall have equal authority. For these purposes, the General Treasury of the Republic and the corresponding Payroll Offices shall deliver the necessary funds as an advance, forming corresponding documents to their recipients, which shall be subject to accounting rendering in accordance with applicable law. Said funds shall constitute an exceptional payment system and may be used for those expenses that due to their amount or urgency cannot follow the normal payment procedure. The regulation shall establish the class of expenses that may be paid through this means and their maximum amount.

ISSUANCE OF SECURITIES TO ADDRESS SEASONAL CASH SHORTFALLS. The General Treasury of the Republic may issue securities to address seasonal cash shortfalls, and these must be reimbursed during the same fiscal year in which they are issued. Should these be opened in reimbursement, they shall be transformed into public debt, with the General Directorate of Public Credit being responsible for their formalization. The issuance of short-term securities to address seasonal cash shortfalls shall be coordinated with the Central Bank of Honduras for purposes of monetary policy.

FORMS FOR COLLECTING INCOME AND MAKING PAYMENTS. The income collected or payments made by the General Treasury of the Republic may be effectuated by check, bank transfer, or any other legally authorized means. CHAPTER II ORGANIZATION AND COMPETENCIES

COORDINATION OF TREASURY UNITS FUNCTIONING IN THE PUBLIC SECTOR. The General Treasury of the Republic is the Technical Coordinating Body of the Treasury subsystem and as such shall coordinate the functioning of all treasury units or services that operate in the Public Sector, distinct from the norms and procedures for the fulfillment of their duties.

INSTITUTIONAL COORDINATION FOR PURPOSES OF COLLECTION AND REGISTRATION OF INCOME. For the purposes of collection and registration of income, the General Treasury of the Republic shall act in coordination with the Executive Directorate of Income (DEI). The latter shall adapt its control systems to the information requirements of the Financial Administration System of the Public Sector, in such a way as to show the movements that affect the taxpayers of the Public Treasury by concept of payments, credits, refunds, compensations, collections, cancellation or prescription of debts.

ATTRIBUTIONS OF THE GENERAL TREASURY OF THE REPUBLIC. The attributions of the General Treasury of the Republic, in its capacity as Technical Coordinating Body of the Treasury subsystem, are the following:

• 1)

  Participate in the formulation of the financial policy that the Secretariat of State in the Office of Finance prepares for the Public Sector, as the Governing Body of the Financial Administration System of the Public Sector;

• 2)

  Elaborate in coordination with the General Directorate of Budget, the General Directorate of Public Credit, the Directorate of Decentralized Institutions, and the Executive Directorate of Income (DEI), the programming of the execution of the Budget of Income and Expenses of the Republic and to pay its expense commitments and the payment thereof according to the cash availability of the General Treasury of the Republic;

• 3)

  Centralize the collection of income provided for in the General Budget of Income and Expenses of the Republic;

• 4)

  Elaborate, based on the programming of the Budget execution, the Annual Cash Budget corresponding to the General Budget of Income and Expenses of the Republic;

• 5)

  Administer the Single Account System and Special Accounts that are authorized;

• 6)

  Issue Securities in accordance with the amount authorized in the General Budget of Income and Expenses of the Republic;

• 7)

  Exercise technical supervision of all Payroll Offices and Treasuries that operate in the scope of the Public Sector;

• 8)

  Analyze the liquidity of the Public Sector in each economic situation, proposing the corresponding measures, in accordance with the analysis;

• 9)

  Safeguard securities owned by the State, Public Organisms, and third parties that are placed in its custody;

• 10)

  Issue the opinions that correspond to the exercise of its functions;

• 11)

  Participate in contractual negotiations with public or private banking institutions and other financial institutions on matters of its competence;

• 12)

  Establish the standards conducive to the collection of amounts that due to improper payments must be reintegrated to the General Treasury of the Republic;

• 13)

  Conduct bank reconciliations of the Treasury Accounts, as a prior step to those that must be performed by the General Accounting Office of the Republic; and,

• 14)

  Authorize payments for amortization of Principal and Interest on internal and external debts, based on the requirements of the Public Credit Directorate; and,

• 15)

  The others conferred by this Law and its Regulation. TITLE VI OF THE GOVERNMENTAL ACCOUNTING SUBSYSTEM CHAPTER I OF COMMON RULES

FUNCTION OF THE GOVERNMENTAL ACCOUNTING SUBSYSTEM. This Title establishes the principles, norms, and technical procedures that integrate the Governmental Accounting subsystem that must be applied throughout the Public Sector, carrying with it the obligation to Register accounts of its respective operations, whatever their nature. The Governmental Accounting subsystem shall record the economic-financial and patrimonial operations of the Public Sector, thereby facilitating the general information necessary for the development of its duties. For these purposes, the accounting period is established as the one comprised between January 1 and December 31 of each year. The global information shall be integrated in the respective financial statements, but the registration of the different operations shall be made in a decentralized manner by the different Bodies or Organisms, using the most appropriate technical means.

OBJECT OF THE GOVERNMENTAL ACCOUNTING SUBSYSTEM. It shall be the object of the Governmental Accounting subsystem to:

• 1)

  Establish and maintain accounting plans and manuals that respond to a single model of accounting and information that shall be used by all Organisms of the Public Sector, using the double-entry method;

• 2)

  Systematically register all transactions that produce and affect the economic, financial, and patrimonial situation of the entities of the Public Sector;

• 3)

  Produce accounting and financial reports of public financial management;

• 4)

  Present the accounting information and the respective supporting documentation, organized in such a way as to facilitate the tasks of control and audit, whether these are internal or external; and,

• 5)

  Provide the information required in the process of elaborating the system of national accounts.

CHARACTERISTICS OF THE GOVERNMENTAL ACCOUNTING SUBSYSTEM. The Governmental Accounting subsystem shall have the following characteristics:

• 1)

  It shall be common, homogeneous, uniform, and applicable to all Organisms of the Public Sector, using the double-entry method;

• 2)

  It shall allow the integration of budgetary, treasury, public credit, and patrimonial information of the Public Sector and of each Entity among themselves and in turn, with national accounts;

• 3)

  It shall expand budgetary execution, movements and Treasury situation, and variations, composition, and situation of the patrimony of public entities; and,

• 4)

  It shall be oriented toward determining the costs of public operations.

REGISTRATION OF BUDGETARY EXECUTION. The Bodies and Organisms included in this Law shall conduct, within their scope of competence, budgetary execution, observing the regulatory provisions and the norms and technical procedures established by the Secretariat of State in the Office of Finance, in its capacity as Governing Body of the Financial Administration System of the Public Sector.

ELABORATION OF NORMS FOR THE ACCOUNTING CLOSING OF THE FISCAL YEAR. Annually, the General Accounting Office of the Republic, before October 31, shall elaborate and remit to all Public Organisms and Entities the norms for the accounting closing of the current fiscal year, indicating dates, formats, instructions, and other requirements that were necessary.

RENDERING OF ACCOUNTS ON THE MANAGEMENT OF PUBLIC TREASURY. The General Accounting Office of the Republic shall centralize information for the elaboration of the Rendering of Accounts on the management of the Public Treasury to the Executive Power, through the Secretariat of State in the Office of Finance, which must be submitted to the Legislative Power, which must include:

• 1)

  Settlement of the General Budget of Income and Expenses of the Republic;

• 2)

  General Balance Sheet of the Central Administration of Government that incorporates in its assets the net patrimonies of Decentralized Institutions;

• 3)

  Report on the Consolidated Financial Situation of the Public Sector. Said rendering of accounts shall comprise all budgetary, patrimonial, and treasury operations carried out during the fiscal year and must be presented to the National Congress, through the Secretariat of State in the Office of Finance, no later than April 30 of each year.

DECLARATION REGARDING UNCOLLECTIBLE ACCOUNTS. The sums that should be collected but cannot be made effective because they are uncollectible may be declared as such by the Secretariat of State in the Office of Finance, prior to legal opinion from its Legal Advisory Office, once all means for collection have been exhausted. The declaration of uncollectibility shall have only accounting effects; consequently, it shall not imply the extinction of the rights of the State and the continuation of procedures for collection, except in cases of prescription. CHAPTER II ORGANIZATION AND COMPETENCIES

TECHNICAL COORDINATING BODY OF THE GOVERNMENTAL ACCOUNTING SUBSYSTEM. The General Accounting Office of the Republic is the technical coordinating body of the Governmental Accounting subsystem and as such is responsible for issuing norms and technical procedures that are mandatory for the Bodies that are responsible for the registration of economic-financial and patrimonial operations of each one of the Dependencies of the Public Sector.

INSTITUTIONAL RESPONSIBILITY WITH RESPECT TO THE ACCOUNTING SUBSYSTEM. The Administrative Managements or dependencies that serve in their place and that perform functions of registration, analysis, evaluation, and financial and patrimonial monitoring in each one of the Organisms that integrate the Public Sector shall integrate the accounting subsystem and shall be responsible for complying with this Law, its regulations, and the norms and technical procedures issued by the General Accounting Office of the Republic.

POWERS AND DUTIES OF THE GENERAL ACCOUNTING OFFICE OF THE REPUBLIC. The powers and duties of the General Accounting Office of the Republic are the following:

• 1)

  To issue government accounting standards for the entire Public Sector. Within this framework, it shall establish the accounting methodology to be applied, the characteristics of the accounting and financial statements to be produced by public entities;

• 2)

  To verify that the accounting systems that are established can be developed and implemented by the Entities, in accordance with legal uniformity, operational characteristics and information requirements;

• 3)

  To provide technical advice to all Entities of the Public Sector in the implementation of the standards and methodologies that it establishes;

• 4)

  To issue the necessary standards for the primary accounting registration of activities developed by the Bodies and Organisms of the Public Sector;

• 5)

  To maintain the general accounting of the Centralized Public Administration, consolidating data from the Bodies and performing necessary adjustment and closing operations and to produce annually the accounting and financial statements;

• 6)

  To keep updated the records of the values of the permanent inventory of movable and immovable property. The regulation shall establish the information procedures that the different Organisms that are part of the Public Sector must submit for such purpose.

• 7)

  To maintain financial information in a permanent and updated manner, that allows knowing the budgetary, cash and patrimonial management, as well as the operational, economic and financial results of the Centralized Public Administration, of each of the Organisms of the Decentralized Public Administration and of the Public Sector as a whole;

• 8)

  To prepare, in coordination with the General Directorate of Budget, the report on Liquidation of the General Budget of Income and Expenditures of the Republic;

• 9)

  To prepare the other periodic financial reports that the Constitution of the Republic and the Laws order to the Executive Branch;

• 10)

  To prepare annually the economic accounts of the Public Sector in accordance with the System of National Accounts;

• 11)

  To issue the standards for the management of archives of financial documentation of the Public Sector;

• 12)

  To conduct the final reconciliation of the accounts that have previously been subject to this operation by the General Treasury of the Republic; and,

• 13)

  Such other powers as are conferred upon it by this Law and its Regulation. TITLE VII ON INTERNAL CONTROL OF FINANCIAL ADMINISTRATION OF THE PUBLIC SECTOR SOLE CHAPTER CONCEPT, OBJECTIVES AND RESPONSIBILITIES

CONCEPT OF INTERNAL CONTROL. For purposes of this Law, Internal Control comprises the instruments of prior, concurrent and subsequent control incorporated in the organization, regulations and procedures of each entity of the public sector and the internal audit thereof, in coordination with the operation of the subsystems of financial administration as a whole and complemented with the scope of internal control of the horizontal systems and subsystems of administration. The requirements for exercising the head of the Internal Audit as well as the corresponding position manuals of the human resources management system pertinent.

OBJECTIVES OF INTERNAL CONTROL. Complementing the control objectives established in the Organic Law of the Superior Court of Accounts, the specific objectives of Internal Control of public financial administration are:

• 1)

  To ensure the quality of institutional services;

• 2)

  To improve the decision-making capacity and initiative in those responsible for institutional management;

• 3)

  To conserve and protect efficiently and effectively public patrimony;

• 4)

  To prevent any situation of risk or acts that may result or could result in prejudice to institutional management;

• 5)

  To promote that the information that is generated and disclosed is timely and reliable; and,

• 6)

  To ensure that operations are carried out in strict adherence to the legal and technical framework.

RESPONSIBILITY OF THE GOVERNANCE OF INTERNAL FINANCIAL ADMINISTRATION. The State Secretariat of the Treasury Office as the governing body of public financial administration and the divisions of that Secretariat that shall exercise coordination of the subsystems shall be responsible for incorporating or approving the incorporation of internal control mechanisms at the time of issuing technical standards and instructions or implementing computerized processes in relation to the functioning of the subsystems under its direction.

PRINCIPLES AND STANDARDS OF INTERNAL CONTROL. For the design and implementation of internal control instruments in public financial administration, in addition to the general standards issued by the Superior Court of Accounts (TSC), the Governing Body shall follow the following basic principles:

• 1)

  In order to promote responsibility for fiscal management, the spirit of independent preventive controls responsible independent of the executing unit of financial administration operations and transactions. Consequently, the preventive inspection of the execution of the General Budget of Income and Expenditures of the Republic that the State Secretariat of the Treasury Office exercises, shall only be applied after prior verification of internal or external audit on the misuse of prior control by those responsible for the executing units;

• 2)

  Verifications and controls of a numerical nature and repetitive character shall be incorporated into automated financial management systems, seeking the pursuit of perfection in the work and greater qualification and productivity of public servants;

• 3)

  Government accounting, as a fundamental element of internal control, shall operate in real time with budgetary and financial transactions; and,

• 4)

  Adequate mechanisms of subsequent control shall be developed based on independent audit techniques practiced by Institutional Internal Audit Offices, competent bodies in the matter or firms contracted for such purpose.

JOINT AND SEVERAL LIABILITY. When the result of audits conducted reveals signs of administrative, civil or criminal liability, they must be communicated to the highest authority of the institution and to the Superior Court of Accounts (TSC) so that it may adopt appropriate measures. The failure to comply with the above obligation of the inspector requirement of the measures adopted shall imply solidarity with the presumed responsible parties.

DATA EXCHANGE BETWEEN INFORMATION SYSTEMS IN THE INSTITUTIONAL SCOPE. The information systems used in the institutions of the Public Sector for the processing, registration and control of the different activities related to the Financial Administration System of the Public Sector shall have computer applications that allow data exchange, whether in electronic, magnetic or other applicable technological modality. Based on the foregoing, whenever the data or information supplied by these means is for strictly institutional use or when its preparation is carried out for purposes of disclosure in the electronic sites of public institutions, such information shall have official character. When documentary support of the information is required or when it is requested before entities other than those established in the preceding paragraph, the supply shall be made through the competent authority. The formats and documents generated through the Integrated Financial Administration System, with their corresponding seals and authorization signatures, shall have official character in the legal acts of the different administrative processes contemplated within the scope of the system, under the parameters established in the Regulation of this Law.

LIABILITY FOR FRAUD, FAULT OR NEGLIGENCE. Officials or employees of any rank who with fraud, fault or negligence adopt resolutions or carry out acts in violation of the provisions of this Law shall be subject to the criminal, civil or administrative liability that may correspond.

INFRACTIONS OF THE LAW. The following constitute infractions for purposes of the preceding article:

• 1)

  To have incurred in embezzlement in the administration of public funds;

• 2)

  To administer the resources and other rights of the Public Treasury without adhering to the provisions that regulate their liquidation, collection or deposit in the General Treasury of the Republic or in the special Paymaster Offices provided for in the Law;

• 3)

  To commit expenditures and order payments without sufficient credit to cover what is provided in this Law or in the corresponding Budget;

• 4)

  To cause improper payments upon liquidating obligations or upon issuing documents, by virtue of assigned functions;

• 5)

  To fail to render the required accounts or to present them with serious defects;

• 6)

  To fail to justify the investment of assigned funds; and,

• 7)

  Any other act or resolution that violates this Law or its Regulation. For purposes of the administrative sanctions regime, the above infractions are subject to those established in the Organic Law of the Superior Court of Accounts.

SUMMARY PROCEEDINGS AND SPECIAL INVESTIGATIONS. The State Secretariat of the Treasury Office as the governing body of public financial administration, the authorities of the entities of the Public Sector and the Internal Audit Offices of such institutions, as well as that Court on behalf of public servants or private parties shall be responsible for requiring the Superior Court of Accounts (TSC) to conduct special investigations and initiate administrative summary proceedings that are appropriate, without prejudice to filing complaints before the judicial authorities for the eventual criminal and civil liability that may apply.

COMPLIANCE WITH THE STANDARDS OF THE FINANCIAL ADMINISTRATION SYSTEM OF THE PUBLIC SECTOR. The Officials of the different systems that make up the Financial Administration of the Public Sector shall operate in compliance with the standards that govern internal control and external control. The information that is produced by this Financial Administration System, as well as the supporting documentation, shall be classified in such a way that it facilitates the tasks of control and audit performed by the respective Bodies.

DOCUMENTARY SUPPORT. The operations that are registered in the Financial Administration System of the Public Sector shall be supported by the documents that give rise to them, which shall be properly safeguarded by the executing unit of the transactions supporting the documentation and shall be maintained available for verification purposes by the internal or external control Bodies. The Regulation shall develop these provisions by establishing the conditions for enabling electronic documents as support for transactions. The documents that support the transactions referred to in this article shall be kept in custody for five (5) years after which, upon review, they may be discarded.

PROGRAM FOR PURGING OF ACCOUNTING BALANCES. In order to update the implementation of the government accounting model and the audit practice established in this Law, the State Secretariat of the Treasury Office shall design, implement and direct the execution of a program for purging historical accounting balances in all entities of the Public Sector. The program shall have an execution period not exceeding three (3) years to achieve the total purging sought.

UNATTACHABILITY OF THE REVENUES AND RESOURCES OF THE PUBLIC TREASURY. No court may serve execution orders nor issue a provision for attachment against the revenues and resources of the Public Treasury.

DEADLINE FOR ISSUING THE REGULATION OF THIS LAW. The General Regulation of Execution of this Law shall be issued by the Executive Branch through the State Secretariat of the Treasury Office, within a period not exceeding one hundred eighty (180) days counted from the publication of this Law.

ADJUSTMENTS TO STRUCTURE OF COORDINATING TECHNICAL BODIES OF THE FINANCIAL ADMINISTRATION SYSTEM OF THE PUBLIC SECTOR. The Ministry of State in the Office of Finance shall make internal adjustments to the organizational-functional and administrative structure of the Coordinating Technical Bodies responsible for the management of the Financial Administration System of the Public Sector. Likewise, this Ministry shall be responsible for establishing mechanisms for the dissemination of information deemed to be of public interest.

CHANGE OF DENOMINATION. In all laws, regulations, and other provisions in which the Organic Law of the General Accounting Office of the Republic or the Public Credit Law are mentioned, it shall be understood that they refer to this Law.

FORMULATION AND PRESENTATION OF ANNUAL BUDGETS. The formulation and presentation of the General Budget of Income and Expenditures of the Republic and of the Decentralized Institutions shall be prepared, as of Fiscal Year 2005, in accordance with what is established in this Decree.

REPEAL. The following are hereby repealed:

• 1)

  Articles 87, 88, 89, 90, 91, 92, 93, 94, 95, 96 and 97 of the General Law of Public Administration, contained in Decree No. 146-86 of October 26, 1986;

• 2)

  The Organic Law of the Budget of December thirteenth, nineteen hundred seventy-six, contained in Decree No. 407 and its amendments;

• 3)

  The Public Credit Law of September twentieth, nineteen hundred ninety, contained in Decree No. 111-90 and its amendments;

• 4)

  The Organic Law of the General Accounting Office of the Republic of July fourteenth, nineteen hundred eighty, contained in Decree No. 1001 and its amendments; and,

• 5)

  Any other legal provisions that conflict with this Law.

EFFECTIVE DATE. This Law shall become effective as of January first, two thousand five and shall be published in the Official Gazette La Gaceta. Given in the city of Tegucigalpa, municipality of the Central District, in the Chamber of Sessions of the National Congress, on the twenty-eighth day of the month of May, two thousand four. PORFIRIO LOBO SOSA President JUAN ORLANDO HERNÁNDEZ A. Secretary ÁNGEL ALFONSO PAZ LÓPEZ Secretary To the Executive Branch. For This Reason, Let It Be Executed. Tegucigalpa, M. D. C., June 14, 2004. RICARDO MADURO President of the Republic ARTURO ALVARADO SÁNCHEZ Secretary of State in the Office of Finance