THE BUDGET

PROCESS
Group 3
The National Budget
Government Accounting is primarily Budgetary accounting . It does not only
aim to provide information on past events and transactions but also budget
information in accordance with PPSAS 24.
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.
 The Budget
Cycle
Budget cycle has four
phases, namely:
1)Budget Preparation
2)Budget Legislation
3)Budget Execution
4)Budget Accountability
Budget Preparation
• The budget preparation in the Philippines uses a “bottom-up” approach.
• Under “bottom-up” budgeting, several parties participate in the budget
preparation, starting from the lowest to the highest levels of the
government.
• In 2011, the Philippines Government attempted to start a new tradition
by shifting from the old “incremental” system of budgeting to the “zero-
based budgeting” approach.
 Incremental budgeting vs. Zero-based budgeting
• The current year’s budget is formulated based on the • The current year’s budget is formulated without regard

previous year’s budget, which is just adjusted for any to the previous year’s budget. Government agencies are

variances experienced in the past. Presumably, the required to justify their current year’s proposed

proposed programs and expenditures in the previous programs and expenditures, irrespective of whether these

year are automatically approved in the current year. are new or carried over from the previous year.

• Uses a “roll-over” approach. • Uses a “back-to-zero” or “clean slate” approach.

• Prone to abuse. • Promotes efficient and effective utilization of funds.

Budget Preparation

1 BUDGET CALL - the budget preparation starts when the Department of Budget and Management

(DBM) issues a Budget Call to all government agencies.

Relevant terms:
• Balanced budget
• Annual budget
• Special budget
• Line item budget
• Performance budget
• Obligations budget
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BUDGET HEARINGS - Budget hearing are conducted after the agencies submit their budget

proposals. Each agency defends its budget proposals before DBM. The DBM deliberates on the

budget proposals, makes recommendations, and consolidates the deliberated proposals into the

National Expenditure Program (NEP) and Budget of Expenditures and Sources of Financing (BESF).

The DBM then submits the proposed budget to the President.

 PRESENTATION TO THE OFFICE OF THE PRESIDENT - The President

3 and Cabinet members review the proposed budget. After the President approves the

proposed budget, the DBM finalizes the budget documents to be submitted to the

Congress. At this point, the proposed budget is referred to as the “President’s

Budget”, which contains the following documents:

a. President’s Budget Message

b. National Expenditure Program (NEP)

c. Budget of Expenditures and Sources of Financing (BESF)

d. Other documents
Budget Legislation

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HOUSE DELIBERATIONS - Upon receipt of the President’s Budget, the House of

Representatives conducts hearings to scrutinize the various agencies’ respective proposed

programs and expenditures. Thereafter, the House of Representatives prepares the General

Appropriations Bill (GAB).

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SENATE DELIBERATIONS - The Senate conducts its own deliberations on the GAB. These

normally start after the Senate receives the GAB from the House of Representatives.
 BICAMERAL DELIBERATIONS - After deliberations in both houses are finished, a

6 committee called the “Bicameral Conference Committee” is formed to harmonize any

conflicts between the Representatives and Senate versions of the GAB. The harmonized GAB

(‘Bicam’ version) is submitted back to both Houses for ratification. After ratification, the final

GAB is submitted to the President for enactment.

PRESIDENT’S ENACTMENT - The President enacts the budget which is now known as the

7 General Appropriations Act (GAA). Before enactment though, the President may exercise his

veto power as conferred to him under the Philippine Constitution.

 The Approved Budget - is the expenditure authority derived from appropriation laws, government

ordinances, and other decisions related to the anticipated revenue or receipts for the budgetary

period.

 Appropriations – is the authorization made by a legislative body to allocate funds for purposes

specified by the legislative or similar authority.

The approved budget consists of the following:

1. New General Appropriations 5. Unprogrammed Funds

2. Continuing Appropriations 6. Retained Income/Funds
3. Supplemental Appropriations 7. Revolving Funds
4. Automatic Appropriations 8. Trust Receipts
Budget Execution
RELEASE GUIDELINES AND BEDs - The DBM issues and guidelines on

8 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.

The following are the major recipients of the budget:

• National Government Agencies (NGAs)

• Local Government Units (LGUs)

• Government Owned and Controlled Corporations (GOCCs)

 ALLOTMENT - The DBM formulates the Allotment Release Program (ARP) and Cash

9 Release Program (CRP) to set the limit for allotment releases during the upcoming year.

The following are the documents used in releasing allotments to government agencies:

1. General Appropriations Act Release Document (GAARD) – categorized as For

Comprehensive Release
2. Special Allotment Release Order (SARO) – covers budgetary items under For Later
Release (negative list)
3. General Allotment Release Order (GARO) – without need of special clearance
 INCURRENCE OF OBLIGATIONS - Government agencies incur obligations which

10 will be paid by the government, for example, entering into contracts, hiring of personnel,

purchase of supplies, etc.

DISBURSEMENT AUTHORITY - The DBM issues disbursement authority to the

11 government agencies. This is the point where government agencies obtain access to the

government funds.
The following are the documents used in releasing disbursement authority to government
agencies.

1. Notice of Cash Allocation (NCA)

2. Notice of Transfer of Allocation
3. Non-Cash Availment Authority
4. Cash Disbursement Ceiling

 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.”

Budget Accountability
BUDGET ACCOUNTABILITY REPORT - Government agencies are required to submit the

12 following accountability reports:

a) Monthly Report of Disbursements

b) Quarterly Physical Report of Operation
c) Statement of Appropriations, Allotments, Obligations, Disbursements and Balances
d) Summary of Appropriations, Allotments, Obligations, Disbursements and Balances by Object of
Expenditures
e) List of Allotments and Sub-allotments
f) Statement of Approved Budget, Utilizations, Disbursements, and Balances
g) Summary of Approved Budget, Utilizations, Disbursements, and Balances by Object of
Expenditures
h) Quarterly Report of Revenue and Other Receipts
i) Aging of Due and Demandable Obligations
 PERFORMANCE REVIEWS - The DBM and COA perform periodic reviews of

13 the agencies’ performance and budget accountability and report to the President.

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AUDIT - The COA audits the agencies.
The Budget
Cycle
Responsibility Accounting is a system of providing cost and revenue information over

which a manager has direct control of. This enables the evaluation of a manager’s

performance based only on matters that are directly under his control. Therefore, budget

deviations can be readily attributed to the managers accountable therefor.

• Responsibility accounting requires the identification of responsibility centers and

the distinction between controllable and non-controllable costs.

• Each government agency is assigned a responsibility center code.

THANK YOU