Topic 2.

2
THE BUDGET PROCESS-
BUDGET EXECUTION &
BUDGET ACCOUNTABILITY
 BUDGET EXECUTION

This is where people’s

money is actually
SPENT.
As soon as the GAA is
enacted, the gov’t.
can implement
priority programs and
projects.
TO REMEMBER IN BUDGET
EXECUTION
 APPROPRIATION
Release guidelines and BEDs – The DBM issues guidelines on the
release and utilization of funds while the various agencies submit their
Budget Execution Documents (BEDs). A BED summarizes an agency’s
fiscal year plans and performance targets. It includes the following:

a. Physical and financial plan,

b. Monthly cash program,
c. Estimate of monthly income, and
d. List of obligations that are not yet due and demandable.
APPROPRIATION
 APPROPRIATION
The following are the major recipients of the budget:

1. National Government Agencies (NGAs) – include all agencies within the executive,
legislative and judicial branches of government, eg., commissions, departments, Land Bank of
the Philippines, Social Security System, etc.

2. Local Government Units (LGUs) – include (a) autonomous regions, (b) provinces and cities
independent from a province, (c) component cities (cities which are part of a province) and
municipalities, and (d) barangays.

3. Government Owned and Controlled Corporations (GOCCs) – corporations that are owned or
controlled, directly or indirectly, by the government and vested with functions relating to public
needs.
A
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 ALLOTMENT & OBLIGATIONS
Allotment – The DBM formulates the Allotment Release Program (ARP) to set the limit for
allotment releases during the upcoming year. This is used as a control device to ensure that
releases conform to the national budget. Alongside, is a Cash Release Program (CRP), which sets
the disbursement limits for the year, for each quarter and for each month.

❑ Allotment – is an authorization issued by the DBM to government agencies to incur obligations

for specified amounts contained in a legislative appropriation in the form of budget release
documents. It is also referred to as Obligational Authority.
It is illegal for a government entity to incur obligations without having first received the
“Allotment.” Moreover, the type and amount of obligations to be incurred must conform
to those that are specified in the “Allotment.”
❑ Obligation – is an act of duly authorized official which binds the government to the immediate
or eventual payment of a sum of money. Obligation maybe referred to as a commitment that
encompasses possible future liabilities based on current contractual agreement.
 ALLOTMENT & OBLIGATIONS
The following are the documents used in releasing allotments to government agencies:
1. General Appropriations Act Release Document (GAARD) – serves as the obligational authority
for the comprehensive release of budgetary items appropriated in the GAA, categorized as For
Comprehensive Release.

2. Special Allotment Release Order (SARO) – covers budgetary items under For Later Release
(negative list) in the entity’s submitted Budget Execution Documents (BEDs), subject
tocompliance of required documents/clearances. Releases of allotments for Special Purpose Funds
(e.g., Calamity Fund, Contingent Fund, E-government Fund, Feasibility Studies Fund, International
Commitments Fund, Miscellaneous Personnel Benefits Fund and Pension and Gratuity Fund) are
also covered by SAROs.

3. General Allotment Release Order (GARO) – is a comprehensive authority issued to all national
government agencies, in general, to incur obligations not exceeding an authorized amount during
a specified period for the purpose indicated therin. It cover4s automatically appropriated
expenditures common to most, if not all, agencies without need of special clearance or approval
from competent authority, i.e. Retirement and Life Insurance Premium.
 ALLOTMENT & OBLIGATIONS

Government agencies incur obligations which will be paid by the

government, e.g., entering into contracts, hiring of personnel, purchase
of supplies, etc.
 DISBURSEMENT
The DBM issues disbursement authority
to the government agencies.

This is the point where government

agencies obtain access to the
government funds.
 DISBURSEMENT
The following are the documents used in releasing disbursement authority to government
agencies:

1. Notice of Cash Allocation (NCA) – authority issued by the DBM to central, regional and
provincial offices and operating units to cover their cash requirements.
The NCA specifies the maximum amount of cash that can be withdrawn from a government
servicing bank in a certain period. The NCA is based on the agency’s submitted Monthly Cash
Program.

2. Notice of Transfer of Allocation – authority issued by an agency’s Central Office to its regional
and operating units to cover the latter’s cash requirements.

3. Non-Cash Availment Authority – authority issued by the DBM to agencies to cover the
liquidation of their actual obligations incurred against available allotments for availment of
proceeds from loans/grants through supplier’s credit/constructive cash.
 DISBURSEMENT

4. Cash Disbursement Ceiling – authority issued by the DBM to agencies with foreign operations
(e.g., Department of Foreign Affairs ‘DFA’) allowing them to use the income collected by their
Foreign Service Posts to cover their operating requirements.

Disbursements are most commonly made through checks that are chargeable against the account
of the Treasurer of the Philippines (i.e., Treasury Single Account). Checks issued under this
scheme are called “Modified Disbursement System (MDS) Checks.”
Other modes of disbursements include payments through cash commercial check, bank
transfer/bank debit or credit card.
 BUDGET ACCOUNTABILITY

This phase occurs

concurrently with the
Budget Execution phase.
As the budget is being
executed, it is regularly
monitored to determine
the conformance of actual
results with planned
targets.
 BUDGET ACCOUNTABILITY
Budget Accountability Reports – government agencies are required to submit the following
accountability reports:
a. Monthly Report of Disbursements – shows the disbursements of the entity during the month,
classified according to the type of disbursement authority. This report is submitted to the COA and
DBM within 30 days after the end of each month.

b. Quarterly Physical Report of Operation – shows the agency’s physical accomplishments in a

given quarter vis-à-vis its physical targets.

c. Statement of appropriations, Allotments, Obligations, Disbursements and Balances – shows

the agency’s authorized appropriations, allotments received, obligations incurred, disbursements
made and the balances of the unreleased appropriations, unobligated allotments, and unpaid
obligations.

d. Summary of Appropriations, Allotments, Obligations, Disbursements and Balances by Object of

Expenditures – similar to ‘c’ above but provides details of expenditures (e.g., salaries and wages,
traveling expenses, etc.).
 BUDGET ACCOUNTABILITY
e. List of Allotments and Sub-Allotments – shows the allotments received by the agency from the
DBM and the sub-allotments issued by the agency’s Central Office or Regional Office to lower
operating units.

f. Statement of Approval Budget, Utilizations, Disbursements and Balances – this report is

prepared by agencies that have authority to use their revenue. It shows the budgeted revenue, the
utilizations and disbursements thereof, and the unutilized amount.

g. Summary of Approved Budget, Utilizations, Disbursements and Balances by Object of

Expenditures – similar to ‘f’ above but provides details of expenditures.

h. Quarterly Report of Revenue and Other Receipts – shows the actual revenues and other receipts
remitted to the BTr and deposited in authorized government depository banks in a given quarter.

i. Aging of Due and Demandable Obligations – shows the names of creditors, the amounts owed to
them, and the number of days these obligations are outstanding. This report is submitted to the
COA and DBM within 30 days after the end of the year.
 BUDGET ACCOUNTABILITY

A Consolidated Statement of Allotments, Obligations, and Balances per Summary of

Appropriations (based on reports ‘c’ and ‘d’ above) shall be submitted on or before February 14 of
the following year.

Performance reviews – The DBM and COA perform periodic reviews of the agencies’ performance
and budget accountability and report to the President.

Audit – the COA audits agencies.

The budget reports, together with the other budget records provide information in preparing the
Statement of Comparison of Budget and Actual Amounts, which is one of the components of a
complete set of financial statements of a government entity. We will discuss this statement later.