3. Resource Allocation, Budgeting and Public Expenditure
x x x x
The Government budgeting process consists of four major
phases:
1. Budget preparation.
The first step is essentially tasked upon the Executive Branch
and covers the estimation of government revenues, the
determination of budgetary priorities and activities within the
constraints imposed by available revenues and by borrowing
limits, and the translation of desired priorities and activities into
expenditure levels.
Budget preparation starts with the budget call issued by the
Department of Budget and Management. Each agency is
required to
submit agency budget estimates in line with the requirements
consistent with the general ceilings set by the Development
Budget Coordinating Council (DBCC).
[[Government budgeting is the critical exercise of allocating
revenues and borrowed funds to attain the economic and
social goals of the country
2. Legislative authorization. –– At this stage, Congress
enters the picture and deliberates or acts on the budget
proposals of the President, and Congress in the exercise of its
own judgment and wisdom formulates an appropriation act
precisely following the process established by the Constitution,
which specifies that no money may be paid from the Treasury
except in accordance with an appropriation made by law.
3. Budget Execution. Tasked on the Executive, the third
phase of the budget process covers the various operational
aspects of budgeting. The establishment of obligation authority
ceilings, the evaluation of work and financial plans for
individual activities, the continuing review of government fiscal
position, the regulation of funds releases, the implementation
of cash payment schedules, and other related activities
comprise this phase of the budget cycle.
4. Budget accountability. The fourth phase refers to the
evaluation of actual performance and initially approved work
targets, obligations incurred, personnel hired and work
accomplished are compared with the targets set at the time the
agency budgets were approved.
The resource allocation and budgeting process is one of
the most powerful stages of planning. Resource allocation
refers to the distribution of resources, and in particular finance,
from the centre to peripheral levels. Budgeting implies the
more detailed determination of precisely how these funds are
to be used. This chapter first outlines the major types of
budget. It then looks at the main approaches to budgeting and
resource allocation, and lastly discusses financial management
issues relevant to the planner
The Internal Revenue Allotment (IRA) is a local government
unit's (LGU) share of revenues from the Philippine national
government.
A prime example of a constitutional check and balance would
be the President’s power to veto an item written into an
appropriation, revenue or tariff bill submitted to him by
Congress for approval through a process known as "bill
presentment." The President‘s item-veto power is found in
Section 27(2), Article VI of the 1987 Constitution which reads
as follows:
ARTICLE 6 Sec. 27. x x x.
(2) The President shall have the power to veto any particular
item or items in an appropriation, revenue, or tariff bill, but the
veto shall not affect the item or items to which he does not
object.
Four Phases in Managing the National Budget:
The Budget Cycle
• Budget Preparation
• Budget Legislation
• Budget Execution
• Budget Accountability
BudgetAccountability.COA
Budget
Process
Budget
During the preparation phase, the Executive prepares tne
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.
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).
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
ORIGINAL SET (Piloted in 2012)
 NEW SET (Starting 2013) clearer and program monitoring and evaluation can provide
evidence-based assessments
" PREXC will be implemented in the proposed Budget for 2018.
Department of Health Department of
Department of Transportation and 3. Technical Budget Hearing
Education Communication " These are conducted after departments and agencies submit
Department of Social Department of Interior and their Agency Budget Proposal to the DBM. Here, agencies
Welfare and Local Govemment defend their proposal budget before a technical panel of DBM,
Development Department of Justice based on performance indicators on output targets and
Department of Public Department of Labor and absorptive capacity. DBM bureaus then review the agency
Works and Highways Employment proposals and prepare recommendations.
Department of Departmentof Environment
Agriculture and Natural Resources 4. Executive Review
Department of Agrarian Light Rail Transit Authority The recommendations are presented before an Executive
Reform National Electrification Review Board which is composed of the DBM Secretary and
National Food Authority Administration senior officials.
National Housing National Irrigation
Authority Administration  Deliberations here entails a careful prioritization of
National Home programs and corresponding support, vis-a vis the
Mortgage and Finance priority agenda of the national government.
Corp.  Implementation issues are also discussed and
Department of Tourism resolved.

5. Consolidation, Validation and Confirmation

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.
"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.
BUB BOTTOM-UP BUDGETING
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
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.
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.
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:
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).
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).
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 plenarv onlv after it has been formally transmitted by the
House.
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.
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.
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)
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 proiects 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.
1. RELEASE GUIDELINES & PROGRAM
"The budget execution phase begins with DBM's issuance of
guidelines on the release and utilization of funds.
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.
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.
 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).
 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.
 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.
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.
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.
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).
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.
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.
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 socioeconomic 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.
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.
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.
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.
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
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.
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.