PETERWILLE T.

CHUA, CPA, MAM

 What is Government Budgeting?
Government budgeting is the critical exercise of
allocating revenues and borrowed funds to
attain the economic and social goals of the
country.
It also entails the management of government
expenditures in such a way that will create the
most economic impact from the production and
delivery of goods and services while supporting
a healthy fiscal position.
 What is Zero-Based Budgeting?
A budgeting approach which involves a
review/evaluation of major on-going programs and
projects implemented by different
departments/agencies, in order to : (a) establish the
continued relevance of program objectives given the
current developments/directions; (b) assess whether the
program objectives/outcomes are being achieved; (c)
ascertain alternative or more effective and efficient ways
of achieving the objectives, and ultimately; (d) guide
decision makers on whether the resources for the
program/project should continue at its present level, or
be increased, reduced or discontinued.
 IMPORTANCE OF BUDGETS
 Instrument for development
• political tool: a tool for exercising power and
for decision making (Budget Politics)
• socio-economic tool: raising resources and
allocating them to achieve socio-economic
goals (Budget and Economy)
• human development tool: financing public
goods and services that enhance human
development (Budget and Human
Development)
 IMPORTANCE OF BUDGETS
 Instrument for good governance
• administrative tool: assignment of authorities
and responsibilities to government units to
perform budgeted tasks
• performance measurement tool: exacting
desired results from authorized expenditures
 Kinds of Budget:
a. As to nature
• Annual budget – budget which covers a period of 1 year. It is the
basis of an annual appropriation.
• Supplemental budget – supplement /adjust previous budget
deemed inadequate for the purpose it is intended.
• Special budget – budget of special nature and are adequately
provided or not included in the annual appropriation.
b. As to basis
• Performance budget – budget emphasizing the program/services
conducted and based on functions, activities, and projects, which
focus attention upon the general character and nature of work to
be done, or upon the services to be rendered.
• Line-item budget – basis of which are the objects of expenditures,
such as: salaries and wages, travelling exp., etc.
 Why does the government prepare a
new budget every year?
It is in accordance with the Constitution, to justify
government spending which requires the President
to submit budget expenditures and sources of
financing within 30 days from the opening of every
regular session of the Congress.
Likewise, this ensures that government
continuously evaluates and reviews the allocation
of resources for cost efficiency and effectiveness.
The Major Processes in National
Government Budgeting
Distinct Features:
• 4-Stage Budget Cycle
• Generally consistent with international standards
and practice in democracies
• Designed in accordance with law (Constitution,
Administrative Code, Jurisprudence)
• DBCC as highest cabinet-level fiscal policy maker
While distinctly separate, these processes overlap in
implementation during a budget year.
Budget preparation for the next budget year
proceeds while govt. agencies are still executing
the budget for the current year. At the same time,
the state is engaged in budget accountability as it
reviews the past year's budget.
Detailed Overview of the Budget Process
What is the DBCC?
The Development Budget
Coordination Council (DBCC)
is headed by the DBM
Secretary with the
Department of Finance
secretary, Banko Sentral
Governor, and NEDA Director
General as members, with the
general oversight of the Office
of the President.
They determine the overall
economic targets, expenditure
levels, the revenue projection,
deficit levels and the financing
plan. The ff. are then
submitted to the President
and the Cabinet for approval.
 Roles of DBCC Members
DBM NEDA and BSP DOF
The DBM The NEDA provides the The Department of
Secretary heads over-all macro-economic Finance (DOF), the
the DBCC. assumptions with which Bureau of the
budgetary levels are Treasury, the BIR,
determined. They involve and the Bureau of
projected GNP real growth Customs determine
rates, inflation rates, 91- sources of financing.
day Treasury Bill rates, They project the
London Interbank Offered revenues that will be
Rates (LIBOR) rates, FOREX generated for the
rates, population growth, budget year as well
and other economic as the borrowings
parameters. that may have to be
tapped.
Is the role of the DBM limited to NGAs?
NO. It coordinates all levels of government -- national
government departments/agencies, GOCCs, and LGUs--
in the preparation, execution and control of
expenditures.
For GOCCs, DBM reviews the corporate operating budgets
and ensures the proper allocation of cash. Likewise, it
recommends the budget policy covering the allowable
deficits. It sets the criteria for determining the
appropriate subsidy, equity and net lending.
For LGUs, DBM reviews the annual and supplemental
budgets of provinces and highly urbanized cities. It also
manages the proper allocation and release of the
Internal Revenue Allotment (IRA) and their share in the
utilization of national wealth.
 What is the BUDGET CALL?
After approval by the President and the cabinet
of the overall economic targets, expenditure
levels, revenue projection, deficit levels and the
financing plan; the DBM issues the Budget Call.
This requires agencies to prepare their budgets
in accordance with the said guidelines, macro-
economic assumptions, and ceilings. The DBM
spells out guidelines, procedures, and
timetables.
 BUDGET PREPARATION
Agencies conduct internal consultations where they rank
programs, projects and activities using the capital budgeting
approach. Then they submit their budget estimates, taking
into account their own priorities and those of the national
government under the Medium-term Public Investment
Program (MTPIP).
The DBM then conducts technical budget hearings where
agencies defend and justify their proposals. Organizational
and budgetary issues are clarified. The proposed expenditure
programs are confirmed by the agency heads.
The DBM consolidates the budget proposals and then submits
them to the Cabinet where the budget is discussed with the
President for approval before the latter submits the Budget to
the Congress no more than 30 days after the opening of its
regular session as required under the Constitution.
 Major Activities in Budget Preparation:
• Determination of overall economic targets, expenditure levels and
budget framework by the DBCC.
• Issuance by DBM of Budget Call which defines the budget framework;
sets economic and fiscal targets; prescribe priority thrusts and budget
levels; and spells out the guidelines and procedures, technical
instructions and timetable for budget preparation.
• Preparation by various govt. agencies of detailed budget estimates
ranking programs, projects and activities using the capital budgeting
approach and submission of the same to DBM.
• Conduct budget hearings were agencies are called to justify their
proposed budgets before DBM technical panels.
• Submission of proposed expenditure program of
dept./agencies/special for confirmation by dept./agency heads.
• Presentation of the proposed budget levels of dept./agencies/special
purpose funds to the DBCC for approval.
• Review and approval of the proposed budget by the President and the
Cabinet;
• Submission by the President of proposed budget to Congress.
Composition of Budget Proposal:
• Budget of Expenditures and Sources of Financing
(BESF)
The document which reflects the annual budget and the
estimates and sources of financing. This is the initial form
of the annual budget.
• National Expenditure Program (NEP)
This enumerates the details of proposed expenditures.
National Expenditure is the total output level and total
income level equivalent to the total national economy's 
expenditure level.
• President’s Budget Message
It summarizes the budget policy thrusts and priorities for
the year.
Classification of Government Expenditures:
The major current operating expenditures of the
national government are:
•Personal services, like salaries and wages, social
security contributions, OT pay, etc.;
•Maintenance and other operating expenditures,
such as travel expenses, supplies and materials,
water, illumination and power services, rent, etc.;
•Interest payments;
•Allotments to LGUs; and
•Subsidies to GOCCs.
Classification of Government Expenditures:
The capital outlay may be broadly classified as:
• Infrastructure outlays;
• Equity contributions to government
corporations;
• Capital transfers to LGUs (not less 20% of IRA) ;
• Other capital outlays
 Sectoral Allocation of National Govt. Budget
Social Services a) education, culture and manpower devt.; b) health
services; c) social security; d) housing and community
devt.; and, e) land distribution.

Economic Services a) communication, roads and transportation facilities;

b) agriculture, agrarian reform and natural resources;
c) water resources devt. And flood control; d) trade and
industry: e) power and energy; and, f) tourism.

Defense Expenditures that support the general effort to ensure

national security, stability and peace which are
indispensable to economic growth and development.

General Public a) General administration; andb) public order and

Services safety

Debt Burden Expenditures that go into servicing govt.’s regular and

assumed debts from foreign and domestic sources
including interest payments.
 Govt. expenditures categorized by cost structure:
GENERAL Expenditures for general
ADMINISTRATI administration represent those that
ON AND are normally considered as agency
SUPPORT
overhead which the agency will incur
to exist as a unit.
SUPPORT TO Refers to those activities that
OPERATIONS facilitate the performance of the
agency’s mandated function and
services.
PROJECTS are those that fund activities which
result in the accomplishment of
identifiable outputs within a
 How do we account for govt.
transactions?
The 1987 Philippine Constitution under
Section 2 (2), Article IX-D, granted COA to
prescribe the New Government
Accounting System (NGAS).
 Why use NGAS?
The shift to NGAS was made to respond to the ff:
 Adoption of a system in accordance with International
Accounting Standards (IAS);
 Pursuit of eventual computerization, which will include
responsibility accounting, ensuring the generation of
various reports useful to management, lawmakers and
the general public;
 Generation of relevant and periodic financial
statements;
 Effective tool for managers and executives in effective
and efficient monitoring of agency performance.
 BUDGET AUTHORIZATION
In Congress, the proposed budget goes first to the House of Representatives,
which assigns the task of initial budget review to its Committee on Appropriations.
The Committee on Appropriations with other House Sub-Committee conduct
hearings on the budgets of depts./agencies and scrutinize their respective
programs/projects. The amended budget proposal is presented to the House body
as the General Appropriations Bill.
While budget hearings are on-going in the House of Representatives, the Senate
Finance Committee, thru its different subcommittees also starts to conduct its
own review and scrutiny of the proposed budget and proposes amendments to
the House Budget Bill to the Senate body for approval.
To thresh out differences and arrive at a common version of the General
Appropriations Bill, the House and the Senate creates a Bicameral Conference
Committee that finalizes the General Appropriations Bill to be submitted to the
President.
The President may sign the bill immediately becomes a law as the General
Appropriations Act, or he/she may exercise line-item veto power.
 What is the General Appropriations Act (GAA)?
The General Appropriations Act (GAA) is the
legislative authorization that contains the new
appropriations in terms of specific amounts for
salaries, wages and other personnel benefits;
maintenance and other operating expenses; and
capital outlays authorized to be spent for the
implementation of various programs/projects and
activities of all departments, bureaus and offices of
the government for a given year.
This is the law setting the operating budget of the
republic of the Philippines for a particular year.
 What is an Appropriation?
An authorization made by law or other
legislative enactment, directing payment of
goods and services out of govt. funds under
specific conditions or for special purpose.
 Forms of Appropriation:
• General Appropriation Law which covers most of the
expenditures of the govt.
• Supplemental Appropriations are passed from time
to time to augment or correct an already existing
appropriation.
• Automatic Appropriations intended for fixed and
specific purposes.
• Continuing Appropriations pertain to authorized
amounts for MOOE and Capital Outlays, the validity
of which extend to one year following the year they
were appropriated.
 BUDGET EXECUTION/IMPLEMENTATION
The approved budget becomes effective on the first
day of the budget year concerned, or when it is
signed by the President, whichever comes later.
It is at the budget execution stage that the
expenditure program is implemented. Allotments
are issued, chargeable against the regular agency
budgets. It is also at this stage where agencies may
submit requests for availment from Special Purpose
Fund (SPFs). Agencies are often required to submit
additional reports and documents to support their
requests.
 What is an Allotment?
Authorization issued by DBM to an agency,
through Agency Budget Matrix (ABM) or Special
Allotment Release Order (SARO), which allows
the latter to incur obligation for specified
amounts contained in a legislative
appropriation.
 What is an Obligation?
It is a commitment by a govt. agency arising
from an act of duly authorized official which
binds the govt. to the immediate or eventual
payment of sum of money.
The Budget Implementation Process I:
Budget Implementation starts with the release of funds
applying the Simplified Fund Release System (SFRS).
*SFRS is a policy-driven system which standardized the
release of funds across agencies which are similarly
situated in line with specific policy initiatives of the
government.
Incompliance with SFRS, the DBM prepares the Agency
Budget Matrix (ABM) in consultation with agencies at the
beginning of each budget year, upon approval of GAA.
*ABM is the blueprint which provides the basis for
determining the timing, composition and magnitude of
the release of the budget.
The Budget Implementation Process II:
Allotment Release Program (ARP) which is the basis for
the issuance of either a General Allotment Release Order
(GARO) or a Special Allotment Release Order (SARO)
authorizing agencies to incur obligations, is prepared
pursuant to the updated resources and economic
development thrusts and consistent with the cash budget
program.
Subsequently, the DBM releases the Notice of Cash
Allocation (NCA) on a monthly or quarterly basis. The NCA
specifies the maximum amount of withdrawal that an
agency can make from a government bank for the period.
The Bureau of the Treasury (BTr), replenishes daily the
government servicing banks with funds equivalent to the
amount of negotiated checks presented to the latter by
implementing agencies
What is the bases for release of NCAs?
• the financial requirements of agencies as
indicated in their ABMs, cash plans and reports
such as the Summary List of Checks Issued (SLCI);
and
• the cash budget program of government and
updates on projected resources.
Agencies utilize the released NCAs following the
"Common Fund" concept. Under this concept of
fund release, agencies are given a maximum
flexibility in the use of their cash allocations
provided that the authorized allotment for a
specific purpose is not exceeded.
 Why are adjustments made in the
Budget Program?
Adjustments are made because of the ff:
 Enactment of new laws
 Adjustments in macroeconomic parameters
 Change in resources availabilities
Budget Execution Documents:
• Physical and Financial Plan (PFP) indicates the major final
outputs to be delivered by the agency as well as the
corresponding funds required to accomplish them.
(Quarterly)
• Monthly Cash Program reflect the monthly disbursement
requirements of the NGAs.
• Estimate of Monthly Income reflect the estimated income of
the NGAs for the current year by source, as contained under
the Budget of Expenditures and Sources of Financing (BESF).
• List of Not Yet Due and Demandable Obligations represent
claims against the govt. for goods which were already
delivered or services already rendered in favor of the govt.
 BUDGET ACCOUNTABILITY
Systems and procedures are set in place to monitor
the performance and cost effectiveness of agencies.
At the agency level, there is Agency Performance
Review (APR) which is management's review of
actual work accomplished compared to work
targets, vis-a-vis the financial resources made
available.
Likewise, detailed examinations of each agency's
books of accounts are undertaken by a resident
Commission on Audit (COA) auditor. They ensure
that all expenses have been disbursed in
accordance with accounting regulations and
authorized funding purposes.
Budget Accountability consists of the ff.:
• Periodic reporting by the govt. agencies of
performances under their approved budget;
• Top management review of govt. activities
and the fiscal policy implementations thereof;
and
• The actions of the COA in assuring the fidelity
of officials and employees by carrying out the
intent of the legislative regarding the handling
of receipts and expenditures.
Budget Accountability Reports are:
• Quarterly Physical Report of Operations reflect the NGA’s actual
physical accomplishments for a given quarter, as indicated in
PFP.
• Quarterly Financial Report of Operations reflect NGA’s actual
obligations/expenditures incurred by programs/activities/project
and allotment class for a given quarter, corresponding to
reported physical accomplishments for the same period.
• Quarterly Report of Annual Income reflect the NGA’s actual
income collections from all sources for a given quarter broken
down by month.
• Statement of Allotment, Obligations and Balances serve as the
NGA’s summary report of allotments received and corresponding
obligations/expenditure incurred during the month from all
sources by object of expenditures.
What is the Role of COA?
Under Article IX-D, Section 2 (1) of the 1987
Philippine Constitution:
“The Commission on Audit shall have the power,
authority, and duty to examine, audit, and settle
all accounts pertaining to the revenue and receipts
of, and expenditures or uses of funds and property,
owned or held in trust by, or pertaining to, the
Government, or any of its subdivisions, agencies,
or instrumentalities, including government-owned
or controlled corporations xxx xxx xxx.”
• Examine, audit and settle all accounts pertaining to the revenue and receipts
of, and expenditures or uses of funds and property owned or held in trust by,
or pertaining to, the government.
• Promulgate accounting and auditing rules and regulations including those for
the prevention and disallowance of irregular, unnecessary, excessive,
extravagant or unconscionable expenditures, or uses of government funds and
properties.
• Submit annual reports to the President and the Congress on the financial
condition and operation of the government.
• Recommend measures to improve the efficiency and effectiveness of
government operations.
• Keep the general accounts of government and preserve the vouchers and
supporting papers pertaining thereto.
• Decide any case brought before it within 60 days.
• Performs such other duties and functions as may be provided by law.
 List of COA Reports
• Annual Audit Reports
• Annual Financial Reports
• Audit Performance Summary Reports
• Citizen Participatory Audit Reports
• Disaster Risk Reduction and Management Reports
• Special Audit Reports
• Official Development Assistance (ODA) Projects
Reports
• Reports on Salaries and Allowances (GOCCs)
 What is the RBPMS?
The Results Based Performance Management System (RBPMS)
represents a major governance reform that not only links budget
with outcomes, but also puts premium on the improvement of
the performance management and monitoring system in the
govt. It has significantly contributed to the govt.’s goal of
strengthening public accountability and ensuring the effective
delivery of services to the Filipino people.
It simplified but integrated scheme of rewarding exemplary
performance in the government through the grant of
performance-based bonuses thru its incentive component — the
Performance-Based Incentive System (PBIS) consisting of
Productivity Enhancement Incentive (PEI) and the Performance-
Based Bonus (PBB) which were authorized under EO No. 80, s.
2012.
The BUDGET PROCESS dictates to a great extent
the effectiveness of governance thru:
• Ensuring plans are consistent with targets
• Citizens enjoy desired results from budgeted amounts
• Funds are made available on time to ensure timely
implementation of programs
• Funds are adequate to pursue priority programs
• Government accomplishment reports (work and financial)
are reliable and used as basis for performance evaluation
• Performance-based sanctions and incentive systems are
consistently applied
• Proper assignment and observance of government funding
responsibilities are complied with
References:
• Government Accounting by Angelito R. Punzalan
• Case Study: The Influence of the Budget Process on Governance Effectiveness by
Emilia T. Boncodin
• http://www.dbm.gov.ph/wp-content/uploads/2012/03/PGB-B2.pdf
• http://www.pfmp.org.ph/index.php?
option=com_content&view=article&id=134:philippine-budget-
clock&catid=7:events&Itemid=24
• http://sc.judiciary.gov.ph/jurisprudence/2008/december2008/175527.htm
• http://www.dbm.gov.ph/wp-content/uploads/Issuances/2015/National
%20Budget%20Circular/NBC559.pdf
• http://www.dbm.gov.ph/wp-content/uploads/BESF/BESF2012/GLOSSARY.pdf
• http://www.ombudsman.gov.ph/UNDP4/wp-
content/uploads/2012/12/Chap4_FAQ.pdf
• http://www.coa.gov.ph/index.php/2013-06-19-13-06-03/constitutional-mandate
• http://www.teacherph.com/guidelines-grant-performance-based-bonus-fiscal-
year-2016/