BUDGET PROCESS

(Local Government Budget Administration)

Submitted by: Aigene Pineda

PA207A-Public Fiscal Administration

 THE LOCAL BUDGET PROCESS

The budget process in LGUs is divided into five (5) phases: (1) Budget Preparation; (2) Budget
Authorization; (3) Budget Review; (4) Budget Execution and (5) Budget Accountability. These phases
are interrelated and sequential, as can be seen from below:
  Budget preparation
- is the first phase of the local budget process. It involves cost estimation per PPA, preparation of
budget proposals, executive review of budget proposals, and preparation of the LEP and the Budget
Message. This phase starts with the issuance of the Budget Call, and ends with submission of the
Executive Budget to the Sanggunian on or before October 16 of each year.
- Starts when the local treasurer submits the statement of Income and Expenditures to the local chief
executive (LCE).

The Budget Preparation Flow Chart The budget preparation flow chart below is the sequence of
activities in preparing the LEP should be synchronized with the mandated deadline for its
submission to the Local Sanggunian.

Budget Preparation Flowchart

  Why is the Budget Call Important?
- It emphasizes the policy objectives of the budget. It emphasizes the guidelines to be observed in the
preparation of budget proposals. It focuses on the outputs aimed to be produced during the budget
year. It firms up policy decisions on how the budget shall be financed; and l it prescribes the budget
preparation schedule and forms.

 What is a Budget Message?

A Budget Message is a summary of the proposed executive budget prepared by the LCE highlighting the
following:

 Previous Years’ Fiscal Performance

 Development Goals and Objectives
 Policy Thrusts
 Priority PPAs
 Estimates of Income and Sources Thereof
 Major Items in the Expenditure Program
 Major Final Outputs/Performance Indicators/Targets

 Budget Authorization
- is the second phase in the local budget process. This phase starts from the time the Sanggunian
receives the Local Expenditure Program (LEP) submitted by the LCE, and ends with the enactment
of the Appropriation Ordinance and approval thereof by the LCE.
- Authorization of the budget is done through an Appropriation Ordinance enacted by the Local
Sanggunian in accordance with the fundamental principle that, “No money shall be paid out of the
local treasury except in pursuance of an Appropriation Ordinance or law” (Section 305 (a), RA No.
7160).
- Sanggunian reviews the budget if it is in accordance with the law, especially the Local Government
Code.
The Budget Authorization Flow Chart

The flow chart below clearly describes the sequence of activities in budget authorization.
  Budget Review
- is the third phase in the local budget process. Its primary purpose is to determine whether the
Appropriation Ordinance has complied with the budgetary requirements and general limitations set
forth in the Local Government Code of 1991, as well as provisions of other applicable laws. It
starts from the time the reviewing authority receives the Appropriation Ordinance for review and
ends with the issuance of the review action.
- Reviewing authority checks if the Appropriation Ordinance complies with the law, especially with
the Local Government Code.
 DBM Regional Office
(Provinces and Highly Urbanized Cities)

 Sangguniang Panlalawigan
(Component Cities and Municipalities)
The Budget Review Flow Chart The budget review flow chart below shows the sequence of
activities from the time the Secretary to the Sanggunian submits the approved Appropriation
Ordinance to the reviewing body/office until the same is returned together with the budget review
action to the Sanggunian concerned through the LCE.

 Budget Execution
- it is in accordance with existing rules, laws and regulations is the fourth phase of the budget process
in local governments. After the usual recording of appropriations in the proper registries, the
execution of the budget involves the release of allotments, the certification of available
appropriations and cash, the recording of actual obligations and disbursements of funds for
approved PPAs and the delivery of goods and services to target clients in the most efficient,
effective, economical and ethical way.
- A critical aspect of this phase is the collection of funds to ensure that cash is available for payment
of obligations and further ensuring that disbursements do not exceed appropriations. While
seemingly a separate activity, the collection and/or receipt of revenues are considered an integral
part of Budget Execution.

The Budget Execution Flow Chart

Budgetary Accounts in Budget Execution

The budgetary accounts to be maintained during the budget execution process include the following:

 Appropriations
 Allotments
 Obligations

Appropriation: an authorization made by ordinance, directing the payment of goods and services from
local government funds under specified conditions or purposes.

Allotment: an authorization issued by the Local Chief Executive (LCE) to a Department/Office of the
LGU which authorizes it to incur obligations for a specific amount within its appropriation.

Obligation: the specific amount within the allotment which is committed to be paid by the LGU for any
lawful expenditure made by an accountable officer for and in behalf of the LGU concerned.

Budget accountability

- is the last and final phase of the budget process. Budget Accountability, in simple terms, is
accounting for the budget. It involves the use of a management control techniques to assist in
tracking receipts of income/revenues and controlling expenditures.
- The five (5) phases of the budget is incomplete without accountability. This mechanism provides a
venue for the LCE, Local Sanggunian and stakeholders to be continuously informed of the status of
implementation of PPAs being funded by public funds.
- It covers the monitoring and analysis of all financial transactions, the recording of budgetary
accounts in the registries, recording in the books of accounts of all receipts and expenditures and
financial reporting of their current status. An integral part of accountability is the evaluation of the
financial and physical performance of the LGU. This review and assessment of performance is
necessary to introduce improvements and reforms to make the budget more transparent to the
people and stakeholders.
- Evaluates the LGU’s performance in terms of generating Income/revenue, implementing PPA’s and
spending funds includes:

 Monitoring
 Evaluation (outputs vs. targets)

Budget Monitoring and Evaluation Framework

The Budget Accountability Flow Chart
  What happens when the Sanggunian fails to pass the budget?

- The Sangunian should continue to hold sessions without pay until the budget is approved.
- If LGU still fails to pass it within 90 days of the year, the previous year’s budget automatically takes
effect.

Solutions:

 Monitoring and participate in all phases of the budget

 Engage LGU through dialogues and forums
 Report irregularities