Budget Process General Accounting Plan 1. Budgetary Accounts System 2. Receipt/Income and Deposit System 3. Disbursement System 4. Financial System The National Budget The national budget (government budget) is the government's estimate of the sources and uses of government funds within a fiscal year. This forms the basis for expenditures and is the government's key instrument for promoting its socio- economic objectives. Types of Government Budget According to the law created the budget:a. Annual/General Budget Budget Law - General Appropriation Act b. Supplemental Budget Budget Law - Supplemental Appropriation Act c. Special Budget Budget Law - Special Appropriation Act According to basis: a. Line - item Budget b. Performance Budget According to Approach and Technique: a. Incremental Budgeting b. Zero-based Budget Balanced BudgetPreparation Legislation The Philippine Budget Cycle 1.BUDGET PREPARATION This starts with the Budget Call and ends with the President's submission of the proposed budget to Congress. DBCC sets PY ETT TTS » aaoooe rie Call eel s Peary an Technical Budget Budget Review « Hearings Bs ee eae Perret s Ce > Meco » Eos eer) xed Budgete 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 GFls. 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. e 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. "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 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. 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. 4. Executive Review e The recommendations are presented before an Executive Review Board which is composed of the DBM Secretary and senior officials. e Deliberations here entails a careful prioritization of programs and corresponding support, vis-a vis the priority agenda of the national government. e Implementation issues are also discussed and resolved. 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. 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 e The budget preparations phase ends with the submission of the proposed national budget -the "President's Budget" -to Congress. e 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. e 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. e 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. e 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 >a 2 > President's House Senate Budget Deliberations Deliberations Before:Aug Before: Sept-Nov Before: Oct-Dec eae ne rene Net i a é > * 7 5 Enactment of Ratification & Bicameral the GAA Enrolment Deliberations Before: March Before: Jan-Feb Before: Dec-Jan 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 plenary only 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. 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. 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 projects that have already been terminated is realigned for other expenditures. Because reenactments are tedious and prone to abuseBudget Execution eRe ® Enacted GAA Allotment Release Bidding Before: March Before: March Before: 3-4 Mo After Now: December Now: Jan wi GAA- Now: wi Early Bidding in as-Release Doc Oct-Dec « « 1 1 | Disbursement Cash Allocation rad Presently: Mostly Check Before: Monthly Before: Jun-Jul Goal: Mostly Checkless Now: wi I** Sem. Now:As Early and/or cashless Comprehensive as January 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. e Physical and Financial Plan e¢ Monthly Cash Program e Estimate of Monthly Income e 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. Allotment Release Order Documents: 1. General Appropriations Act Release Order (GAARD) 2. Special Allotment Release Order (SARO) 3. General Allotment Release Order (GARO) 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. 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. Disbursement Authorities: 1. Notice of Cash Allocation (NCA) 2. Non-Cash Availment Authority (NCAA) 3. Cash Disbursement Ceiling (CDC) 4. Notice of Transfer of Allocation (NTA) 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. 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. Notice of Cash Allocation (NCA) authority issued by the DBM to central, regional andprovincial offices and operating units to cover the cash requirements of the agencies; Non-Cash Availment Authority (NCAA) 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; Cash Disbursement Ceiling (CDC) authority issued by DBM to the Department of Foreign Affairs (DFA) and Department of Labor and Employment (DOLE) to utilize their income collected/retained by thefir Foreign Service Posts (FSPs) to cover their operating requirements, but not to exceed the released allotment to the said post; and Notice of Transfer of Allocation authority issued by the Central Office to its regionaland operating units to cover the latter's cash requirements. Receipt of NCA. The NCA specifies the maximum amount of withdrawal that an entity can make from a government bank for the period indicated. The Collecting Officer shall not issue an OR for the receipt of NCA. The accounting entries to recognize receipt of NCA are as follows: Account Title Account Code Debit Credit Regular Cash-Modified Disbursement System (MDS), Regular 10104040 B100,000 ‘Subsidy from National Government 40301010 P100,000 To recognize receipt of NCA for Regular Agency Fund AccountCode Debit Agency Books Communication Equipment 10608070 —_BS00,000 Accounts Payable 20101010 2 500,000 To recognize receipt of PPE procured through the direct payment scheme Accounts Payable 20101010 500,000 ‘Subsidy from National Government 40301010 500,000 To recognize receipt of NCAA and payment of payables based on the WA/advice of payment or any proof of disbursement received from the FLUDP BIR Books Subsidy to NGAs 0214010 8 $00,000 Loans Payable-Foreign 20102050 500,000 To recognize the replenishments made to AGSB negotiated MDS- checks and payments on account of the NGA Cash Disbursement Ceiling. The accounting entries for the collection of revenne of. and the constructive receipt of disbursement authority to, Foreign Service Posts (FSPs) of DFA and DOLE are as follows: 1, DFA and DOLE’s Books Account Title Account Code Debit Credit8. 100,000 10104080 80,000 2. BTr Books: Account Title Account Code Debit Credit Subsidy to NGAs 50214010 P80,000 Cash-Constructive Income Remittance 10104080 BS0,000 To recognize constructive receipt of remitted collections by FSPs and disbursements charged to the issued CDCs to FSPs 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cow a> tx. Agency Pp Budget Lerereee ee Fir ul & Physical Disclosures Befo Acc’t Reports Before: weak / none Before: different reports Now:Transparency Seal Now: In the GAA itself Now: Unified FARs of due to PIB. COA & DBM sy SHe a P| Citizen Engagement — Mid-Year & Year-End Periodic DBM re: non-existent Budest Reports _ Performance Review Now:via BPA&BUB = Before: non-existent Before: via BMBs 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. 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. The Transparency Seal e Agency functions and mandates e Contact information of key officials and their positionse Physical and Financial Accountability e Reports Approved Budget and Targets e Major Programs under the Key Results Areas e Project and Program Beneficiaries e Status of the implementation of projects e Annual procurement plan and list of awarded projects Responsibility Accounting Responsibility accounting is a system of providing cost and revenue information over which a manager has direct control of. It requires the identification of responsibility centers and the distinction between controllable and non-controllable costs. : The Budget Process Before —»2@ CG Call Late Submission of Deliberations & Budget Submitted Released Late Agency Proposals Finalization Just Before Deadline Apeil (w! much lump sums!) poejuly August May === HB Budget Legistation Also Delayed —— Rainy season leads to delays, Lot of Time a Bottleneck GAA Enacted Late cost overruns & poor quality 3-4 Months April Theoret detand iagement ae] Ey | ie Budget Submitted Agencies have more time Deliberations & : Early Budget Call to flesh out proposals, Finalization Right After SONA January align with priorities & May,June engage stakeholders = =§ January-April rw Budget Legislation On Schedule “| December obae GAA Enacted On Time Implementation as & Serves as Release Doc al te Early as January Before End-December October-December