BUDGETARY SYSTEM:

BUDGET PROCESS of the

PHILIPPINE
GOVERNMENT

Public Fiscal Policy & Class Reporter:

Maria Amelia T. Taway
Administration and Private Marcia B. Blazado
Mary Joy S. Flores
Corporate Finance Policy Glenda L. Buid
Jocelyn A. Reyes
Jomer Epondo
MASTER in BUSINESS ADMINISTRATION Engr. Dan Jenard Penamora
Rolando Acobado Jr.
UNIVERSITY OF RIZAL SYSTEM-RODRIGUEZ Benjamin M. Bernaldez III
 THE BUDGET CYCLE
Four Phases in Managing the National Budget:

Budget Preparation
Budget Legislation
Budget Execution
Budget Accountability

During the preparation phase, the Executive prepares the

proposed National Budget. This is followed by the legislation
phase where the Congress authorize the General
Appropriations Act. In the execution phase, agencies utilize
their approved budgets and during the accountability phase
the executive phase, agencies utilize their approved, the
executive monitor and evaluate the use of the budget.
1.BUDGET PREPARATION
This starts with the Budget Call and ends with the President’s
submission of the proposed budget to Congress.

DBCC sets
Budget Stakeholders
parameters Call Consultation

Agency
Technical Budget
Executive Budget Proposal
Review Hearings s

Consolidation, Presentation The

Validation & To President President’s
Confirmation & Cabinet
Budget
BUDGET PREPARATION
1. The Budget Call
 At the beginning of the budget preparation year, the
Department of Budget and Management (DBM) issues the
National Budget Call to all agencies (including state
universities and colleges) and a separate Corporate Budget
Call to all GOCCs and GFIs.

 The budget Call contains budget parameters (including

macroeconomic and fiscal and agency budget ceilings) as set
beforehand by the Development Budget Coordination
Committee (DBCC); and policy guidelines and procedures in
the preparation and submission of agency budget proposals.
BUDGET PREPARATION
 Under the Aquino Administration the DBM has
established a new tradition of beginning the Budget
Preparation phase earlier, to ensure that the National
Budget is enacted on time. Under the new Budget
Preparation Calendar, the Budget Call is issued in
December (versus around April in the past); and the
submission of the President’s budget a day after the
State of the Nation Address (in contrast to earlier
practice where it is submitted during the late in the 30-
day window that the Constitution prescribes).
BUDGET PREPARATION
2. Stakeholder Engagement
 A new feature in budget preparation which seeks to increase
citizen participation in the budget process, departments and
agencies are tasked to partner with civil society organizations
(CSOs) and other citizen-stakeholders as they prepare their
agency budget proposals.

 This new process, which was piloted in the preparations of

the 2012 National Budget, is now being expanded towards
institutionalizations.
BUDGET PREPARATION

Department and GOCCs Mandated to Conduct CSO Consultation

BUDGET PREPARATION
 “Bottom-Up” Budgeting
 The Bottom-up Budgeting program was set-up in 2013 to help
the Philippines to help the Philippines attain its Millennium
Development Goals of inclusive growth and poverty reduction.
Now, two years later, the Department of Budget and
Management is holding a two-day summit to show how far the
project has come.
 The Aquino government, through the Cabinet Cluster on Human
Development and Poverty Reduction.
 Two years after Bottom-up Budgeting (BuB) was first
implemented in the 2013 National Budget, the Aquino
Administration plans to extend the program’s reach and ensure
the sustainability of BuB-enabled gains, beginning with a two-
day summit to assess and reaffirm the program’s progress.
Under the 2015 budget, BuB covers 1,590 municipalities and
cities across the country, and is amply supported with a budget
of P20.9 billion. For 2016, the Administration is proposing a
budget of P24.7 billion to support the implementation of more
than 14,300 BuB projects nationwide.
BUDGET PREPARATION
“The BuB is meant to empower our grassroots communities
and their respective local governments. That’s why we’ve
made improvements to the program by allowing LGUs to
directly implement projects instead of coursing them through
the agencies. This also strengthens the link of accountability
between our LGUs and their constituents,” the budget chief
said.
The BuB approach was set up to help the Philippines attain
its Millennium Development Goals of inclusive growth and
poverty reduction, all while promoting good governance at
the local level. This is done by increasing citizens’ access to
local service delivery via a demand-driven budget planning
process.
Program Expenditure Classification (PREXC):
 This approached is adopt by President Duterte
Administration.
 a reform that restructures the current Budget by grouping
activities and projects under major programs or key
strategies. Through this innovation, the government will be
able to assign performance targets—both outputs and
outcomes—at the level of programs. This way, the direct link
between strategies, budgets and intended results will be
clearer and program monitoring and evaluation can provide
evidence-based assessments
 PREXC will be implemented in the proposed Budget for
2018.
BUDGET PREPARATION
3. Technical Budget Hearing
 These are conducted after departments and
agencies submit their Agency Budget Proposal to
the DBM. Here, agencies defend their proposal
budget before a technical panel of DBM, based on
performance indicators on output targets and
absorptive capacity. DBM bureaus then review the
agency proposals and prepare recommendations.
BUDGET PREPARATION
4. Executive Review
 The recommendations are presented before an
Executive Review Board which is composed of the
DBM Secretary and senior officials.
 Deliberations here entails a careful prioritization of
programs and corresponding support, vis-a vis the
priority agenda of the national government.
 Implementation issues are also discussed and
resolved.
BUDGET PREPARATION
5. Consolidation, Validation and
Confirmation
 DBM then consolidate the recommended agency
budgets and recommendations into a National
Expenditure Program and a Budget of Expenditures
and Sources of Financing (BESF).
 As part of the consolidating process, the deliberations
by the DBCC determine the agency and sectoral
allocation of the approved total expenditure ceiling, in
line with the macroeconomic and fiscal program. Heads
of major departments are invited to this meeting.
BUDGET PREPARATION
6. Presentation to President and Cabinet

 The proposed budget is presented by DBM,

together with the DBCC, to the President and
Cabinet for further refinements of prioritization.
After the President and Cabinet approve the
proposed National Expenditure Plan, the DBM
prepares and finalizes the budget documents to be
submitted to Congress.
BUDGET PREPARATION
7. The President’s Budget

 The budget preparations phase ends with the

submission of the proposed national budget –the
“President’s Budget”-to Congress.

 The President’s Budget consist of the following

documents, which help legislators analyze the contents
of the proposed budget:
 BUDGET PREPARATION
8. The President’s Budget
 President’s Budget Message (PBM)
This is the President explains the policy framework and priorities in the budget

 Budget of Expenditures and Sources of Financing (BESF)

Mandated by the Constitution, this contains the macroeconomic assumptions, public
sector context (including overviews of LGU and GOCC financial positions), breakdown of
the expenditures and funding sources for fiscal year and the two previous year.

 National Expenditure Program (NEP)

This contain the details of spending for each department and agency by program, activity
or project and is submitted in the form of a proposed General Appropriations Act.

 Details of Selected Programs and Projects

This contains a more detailed disaggregation of key programs, projects and activities in
the NEP, especially those in line with the national government’s development plan.

 Staffing Summary
This contains a summary of the staffing complement of each department and agency,
including number of positions and amounts allocated for the same.
2.BUDGET LEGISLATION
- also called the “ Budget Authorization phase,” this starts
upon the House speaker’s Receipt of the President’s Budget
and ends with the President’s enactment of the General
Appropriations Act (GAA).
BUDGET LEGISLATION
 The House of Representative, in plenary, assigns the
President’s Budget to the House Appropriations
Committee. The Committee and its Sub-Committee
then schedule and conduct hearing on the budgets of
the departments and agencies and scrutinize their
respective programs and projects. It then crafts the
General Appropriations Bill (GAB).

 In plenary session, the GAB is sponsored, presented

and defended by the Appropriations Committee and
Sub-Committee Chairmen. As in all other laws, the GAB
is approved on Second and Third Reading before
transmission to the Senate. (Note: In the First Reading,
the President’s Budget is assigned to the Appropriations
Committee).
BUDGET LEGISLATION
1. House Deliberations
• As in the House process, the Senate conducts its
own committee hearing and plenary deliberations
on the GAB. Budget deliberations in the Senate
formally start after the House of Representatives
transmits the GAB. For expediency, however, the
Senate Financing Committee and Sub-Committees
usually start hearings on the GAB even House
deliberations are ongoing.
• The Committee submits its proposed amendments
to the GAB to plenary only after it has been
formally transmitted by the House.
BUDGET LEGISLATION
2. Senate Deliberations
 As in the House process, the Senate conducts its own
committee hearing and plenary deliberations on the
GAB. Budget deliberations in the Senate formally start
after the House of Representatives transmits the GAB.
For expediency, however, the Senate Finance
Committee and usually start hearings on the GAB even
as House deliberations are ongoing.

 The Committee submits its proposed amendments to

the GAB to plenary only after it has been formally
transmitted by the House.
BUDGET LEGISLATION
3. Bicameral Deliberations

 Once both House of Congress have finished their

deliberations, they will each constitute a panel to the
Bicameral Conference Committee. This committee will then
discuss and harmonize the conflicting provisions of the
House and Senate Versions of the GAB. A Harmonized
Version of the GAB is thus produced.
BUDGET LEGISLATION
4. Ratification and Enrollment

 The Harmonized or “Bicam” Version is then submitted

to both Houses, which will the vote to ratify the final
GAB for submission to the President. Once submitted
to the President for his approval, the GAB is considered
enrolled.
BUDGET LEGISLATION
5. The Veto Message

 The President and DBM then review the GAB and prepare a
Veto Message, where budget items subjected to direct veto
or conditional implementation are identified, and where
general observations are made. Under the Constitution, the
GAB is the only legislative measure where the President can
impose a line-veto (in all other cases, a law is either
approved or vetoed in full).
BUDGET LEGISLATION
6. Reenactment

 When the GAA is not enacted before fiscal year starts, the
previous years’s GAA is automatically reenacted. This means
that agency budgets for programs, activities and projects
remain the same.

 Funding for programs or projects that have already been

terminated is realigned for other expenditures. Because
reenactments are tedious and prone to abuse
3.BUDGET EXECUTION
This is where the people’s money is
actually spent. As soon as the GAA is
enacted, the government can implement its
priority programs and projects.
BUDGET EXECUTION

1. RELEASE GUIDELINES & PROGRAM

 The budget execution phase begins with DBM’s

issuance of guidelines on the release and utilization of
funds.
BUDGET EXECUTION
2. BUDGET EXECUTION DOCUMENTS (BEDs)

 Agencies are required to submit their BEDs at the start of

budget execution. These documents outline agency plans
and performance targets. These BEDs include the physical
and financial plan, monthly cash program, estimate of
monthly income, and list of obligations that are not yet due
and demandable.
BUDGET EXECUTION
3. ALLOTMENT & CASH RELEASE
PROGRAMMING
 To ensure that releases fit the approved Fiscal Program, the
DBM prepares an Allotment Release Program (ARP) to set a
limit for allotments issued to an agency and on the aggregate.

 The ARP of each agency corresponds to the total amount of

the agency-specific budget under the GAA, as well as
Automatic Appropriations. A Cash Release Program (CRP) is
also formulated alongside that to set a guide for
disbursement levels for the year and for every month.
BUDGET EXECUTION
4. a. ALLOTMENT RELEASE

 Allotments, which authorize an agency to enter into

an obligation, are either released by DBM to all
agencies comprehensively through the Agency
Budget Matrix (ABM) and individually via Special
Allotment Release Orders (SAROs).
BUDGET EXECUTION
4. b. ALLOTMENT RELEASE

Agency Budget Matrix (ABM)

This document disaggregates all programmed appropriations

for each agency into two main expenditure categories: “not
needing clearance” and “needing clearance.”

The ABM is the comprehensive allotment release document

for appropriations which do not need clearance, or those which
have already been itemized and fleshed out in the GAA.
BUDGET EXECUTION
4. c. ALLOTMENT RELEASE
Allotment Release Orders (SAROs)
Items identified as “needing clearance” are those which
require the approval of the DBM or the President, as the case
may be (for instance, lump sum funds and confidential and
intelligence funds).
For such items, an agency needs to submit a Special Budget
Request to the DBM with supporting documents. Once
approved, a SARO is issued.
BUDGET EXECUTION
5. INCURRING OBLIGATIONS

 In implementing programs, activities and projects, agencies

incur liabilities on behalf of the government. Obligations are
liabilities legally incurred, which the government will pay
for.

 There are various ways that an agency “obligates:” for

example, when it hires staff (an obligation to pay salaries),
receives billings for the use of utilities, or enters into a
contract with an entity for the supply of goods or services.
BUDGET EXECUTION
6. The GAA as Allotment Release
 The FY 2017 budget aims to facilitate the achievement of
meaningful national development goals as emphasized by
the Duterte Administration. The implementation of real
change is anchored on the timely and appropriate execution
of this budget. In particular, the policy of using the General
Appropriations Act as an Allotment Order (GAAAO) shall
continue to be adopted to ensure the immediate
implementation of programs, projects and activities. In so
doing, resource unpredictability and delays in project/program
implementation are reduced. Likewise, credibility and
transparency in the budget process is expected to be further
enhanced.

 Source:
http://www.dbm.gov.ph/wp-content/uploads/Issuances/2017/National%20Budget%20Circular/NBC-567.pdf
BUDGET EXECUTION
7. a. CASH ALLOCATION
To authorize an agency to pay the obligations it
incurs, DBM issues a disbursement authority.

Most of the time, it takes the form of a Notice of

Cash Allocation (NCA); and in special cases, the
Non-Cash Availment Authority (NCAA) and Cash
Disbursement Ceiling (CDC).
BUDGET EXECUTION
7. b. CASH ALLOCATION
Notice of Cash Allocation (NCA)
This is a cash authority issued periodically by the DBM to the
operating units of agencies to cover their cash requirements.
The NCA specifies the maximum amount of cash that can be
withdrawn from a government servicing bank for the period
indicated.
The release of NCAs by DBM is based on an agency’s
submission of its Monthly Cash Program and other required
documents.
BUDGET EXECUTION
7. c. CASH ALLOCATION
Others Disbursement Authorities.

In contrast to NCAs, Non-Cash Availment Authority (NCAA)

are issued to authorize non-cash disbursements.

Cash Disbursement Ceiling (CDC) are meanwhile issued to

departments with overseas operations, allowing them to use
income collected by their foreign posts for their operating
requirements.
BUDGET EXECUTION
8. DISBURSEMENT
 This is the final step of the budget execution phase,
where government monies are actually spent. The
Modified Disbursement Scheme is mostly used,
where disbursements of national government agencies
chargeable against the Treasury are made through
government servicing banks, such as the Land Bank of
the Philippines.

 The budget process, of course, does not end when

government agencies spend public funds: each and
every peso must be accounted for to ensure that is
used properly, contributing to the achievement of socio-
economic goals.
4.BUDGET ACCOUNTABILITY
 This phase happens alongside the Budget
Execution phase.

 Through Budget Accountability, the DBM

monitors the efficiency of fund utilization,
assesses agency performance and provides a
vital basis for reforms and new policies.
BUDGET ACCOUNTABILITY
1. PERFORMANCE & TARGET OUTCOMES

 Agencies are held accountable not only for how these use
public funds ethically, but also on how these attain
performance targets and outcomes using available
resources.
 These performance measures are set alongside the
preparation of the National Budget; and these are indicated in
the OPIF Book of Outputs.

 Prior to the execution of the enacted National Budget, these

performance targets are firmed up during the preparation of
BEDs.
BUDGET ACCOUNTABILITY
2. BUDGET ACCOUNTABILITY REPORTS
(BARs)
 Submitted by agencies on a monthly and quarterly basis,
BARs are required reports that show how agencies used their
funds and identify their corresponding physical
accomplishments.

 These include quarterly physical and financial reports of

operations; quarterly income reports, a monthly statement of
allotments, obligations and balances; and monthly report of
disbursements.
BUDGET ACCOUNTABILITY
3. NO REPORT , NO RELEASE
• Starting 2012, the DBM will be withholding certain fund
releases to agencies if these fail to submit their Budget
Accountability Reports. In particular, these will be funds from
the Miscellaneous Personnel Benefits Fund (MPBF) for
compensation adjustments under the Salary Standardization
Law, provisions for unfilled positions and employee clothing
allowances.
• These funds to be withheld are only limited to agencies’
MPBF allotments so that only the agencies are penalized and
that the implementation of critical programs and projects will
not be disrupted. Errant and compliant agencies will also be
posted online for public scrutiny.
BUDGET ACCOUNTABILITY
4. REVIEW OF AGENCY PERFORMANCE
 The DBM regularly reviews the financial and physical
performance of agencies. Actual utilization of funds and
physical accomplishments, as indicated in the agencies’
BARs, are evaluated against their targets as identified via
OPIF and in the agencies’ BEDs. Agency Performance
Reviews (APRs) are conducted quarterly or every semester,
as the case may be.

 An annual Budget Performance Assessment Review (BPAR)

is conducted to determine each agency’s accomplishments
and performance by the year-end. The DBM regularly reports
results to the President
BUDGET ACCOUNTABILITY
5. AUDIT
 Auditing is not within the DBM’s jurisdiction, and is instead
lodged under the Commission on Audit (COA).
Nonetheless, auditing is critical in ensuring agency
accountability in the use of public funds.

 The DBM uses COA’s audit reports in confirming agency

performance, determining budgetary levels for agencies and
addressing issues in fund usage.
BUDGET ACCOUNTABILITY
6. Performance-Based Incentive System

 The Department of Budget and Management (DBM) is

also in the process of establishing a performance-
based incentive system- which will recognize and
reward good performance among government
employees- to help improve the efficiency of service
delivery across all government institutions.
References:
http://www.gov.ph/2015/08/25/bottom-up-budgeting-summit-shows-programs-progress/ Bottom-up
Budgeting summit shows program’s progress August 25, 2015

http://www.rappler.com/move-ph/issues/budget-watch/145988-proposed-2017-national-budget What's in
the proposed 2017 national budget? Aika Rey Published 10:00 AM, September 17, 2016

http://www.businessmirror.com.ph/duterte-admin-drops-aquinos-grassroots-budgeting-strategy/

http://business.inquirer.net/225157/govt-adopts-new-system-budget-setting Gov’t adopts new system

in budget setting Philippine Daily Inquirer / 12:22 AM February 25, 2017

http://www.dbm.gov.ph/wp-content/uploads/2016/PREXC/PREXC.pdf

https://jfvambrosio.wordpress.com/2010/05/17/government-budgeting-experience-in-the-philippines/

http://www.dbm.gov.ph/wp-content/uploads/Issuances/2017/National%20Budget%20Circular/NBC-
567.pdf