ACCOUNTING FOR GOVERNMENT

NATIONAL BUDGET PROCESS

BY PROF. CESAR V. RAMIREZ, CPA. MBA, CESO IV,

FRIACC, BSA PROGRAM CHAIR
 NATIONAL BUDGET
• National budget contains the approved budget and allotment
of the government agencies covering their respective
programs, project and activities for a particular year. It is the
government estimate of the sources and uses of government
funds.
• Government accounting is primarily budgetary accounting.
• Government accounting provides information useful about the
conformance of the use of government funds in accordance
with the approved budget.
 BUDGET CYCLE
• The formulation and eventual utilization of the national budget
consisting of:
– Budget preparation
– Budget legislation
– Budget execution
– Budget accountability
 BUDGET PREPARATION
• Policy Guidelines and Budget Call issued by DBM
• Budget preparation and proposals of government agencies
• Review and technical hearings by DBM
• Consolidation of various agencies proposals into NATIONAL
BUDGET
• Discussed with the Cabinet before approval of the President
• Submission of the National Budget to Congress of the
Philippines during the SONA of the President
 BUDGET LEGISLATION AND APPROVAL
• “ When the proposed budget is not enacted before the fiscal
year starts, the last year’s GAA is automatically reenacted. The
last year’s GAA shall be used in the current year until a new
general appropriations bill is passed by the Congress.” Art.VI,
Sec. 25(7), 1987 Philippine Constitution.
 BUDGET LEGISLATION-APPROVAL
• House of Representatives starts committees’ hearings on the National
Budget
• Different agencies represented by their heads and officials are called to
defend their respective budget proposals by clusters by sub-committees.
• Plenary deliberation will ensue for the final consideration of the National
Budget and endorsement to the House of Senate.
• House of Senate also conduct sub-committees and plenary sessions and
calls all government officials concerned to justify their respective budget
proposals.
• Bicameral Committee Conference between both Houses of Congress to
enact the Annual General Appropriation Act.
• Approval of the AGAA by the President of the Philippines.
 BUDGET PREPARATION
• Bottom-up Approach- participates lowest to highest levels of
government.
• Incremental budgeting vs. zero-based budgeting
• The President’s Budget includes:
– President’s Budget Message
– National Expenditure Program (NEP)
– Budget Expenditures and Sources of Financing (BESF)
– Other Documents and Details of Items in NEP
• “ The President shall submit the proposed budget to the
Congress within 30 days from the opening of every regular
session.” Art VII, Sec.22, 1987 Philippine Constitution.
 BUDGET IMPLEMENTATION
• This is the phase where government funds are spent.
• Budget Execution Documents
– Physical and Financial Plan
– Monthly Cash Program
– Estimate of Monthly Income
– List of Obligations that are not yet due and demandable
• Allotment- obligational authority
• Obligations -commitment
• Disbursements- cash allocation
 BUDGET IMPLEMENTATION
• DBM issues Notice/Advise of Allotment to various government
agencies based on the AGAA.
• Government agencies receive and register their allotments in
the respective registries of appropriations and allotments:
RAOPS, RAOMO, RAOCO, RAOFE.
• Government agencies can already incur obligations and pay
expenses based on the allotments received.
• Government agencies must comply with all the basic legal
requirement for the obligations and disbursements of
government funds to avoid COA Suspensions/Disallowances.
 BUDGET ACCOUNTABILITY
• Submission of official receipts and disbursement vouchers with
complete supporting documents to COA for post audit.
• Comply with the reportorial requirements by COA, DBM and
other oversight bodies of government
• Prepare and submit the annual Financial Statements to COA
for independent audit and opinion.
• Report accomplishment reports on
programs/projects/activities.
• Settle suspensions/disallowances issued by COA.
• Adhere to responsibility accounting
 BUDGET ACCOUNTABILITY
• Budget Accountability Reports
– Monthly Report of Disbursements
– Quarterly Physical Report of Operations
– Statement of Appropriations, Allotments, Obligations, Disbursements and
Balances –By Object of Expenditures
– List of Allotments and Sub-Allotments
– Statement of Approved Budget, Utilizations, Disbursements and Balances
– Summary of Approved Budget, Utilizations, Disbursements and Balances by
Object of Expenditures
– Quarterly Report of Revenue and Other Receipts
– Aging of Due and Demandable Obligations
– Consolidated Statement of Allotments, Obligations, and Balances Per
Summary of Appropriations.
 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.
IMPORTANCE OF GOVERNMENT BUDGETING
Government budgeting is important because it
enables the government to plan and manage its
financial resources to support the
implementation of various programs and
projects that best promote the development of
the country. Through the budget, the
government can prioritize and put into action
its plants, programs and policies within the
constraints of its financial capability as dictated
by economic conditions.
MAJOR PROCESSES INVOLVED IN NATIONAL
BUDGET
Budgeting for the national government
involves four (4) distinct processes or phases :
budget preparation, budget authorization, budget
execution and accountability. While distinctly
separate, these processes overlap in the
implementation during the budget year. Budget
preparation for the next budget year proceeds
while government agencies are executing the
budget for the current year and at the same time
engaged in budget accountability and review of
the past year's budget.
 BUDGET PREPARATION
The preparation of the annual budget involves a
series of steps that begins with the determination of
the overall economic targets, expenditure levels,
revenue projection and the financing plan by the
Development Budget Coordinating Committee
(DBCC). The DBCC is an inter-agency body composed
of the DBM Secretary as Chairman and the Bangko
Sentral Governor, the Secretary of the Department of
Finance, the Director General of the National
Economic and Development Authority and a
representative of the Office of the President as
members.
 STEPS IN BUDGET PREPARATION
a. Determination of overall economic targets, expenditure levels
and budget framework by the DBCC;
b. Issuance by the DBM of the Budget Call which defines the
budget framework; sets economic and fiscal targets; prescribe
the priority thrusts and budget levels; and spells out the
guidelines and procedures, technical instructions and the
timetable for budget preparation;
c. Preparation by various government agencies of their detailed
budget estimates ranking programs, projects and activities using
the capital budgeting approach and submission of the same to
DBM;
 STEPS IN BUDGET PREPARATION
Conduct a budget hearings were agencies are called to
justify their proposed budgets before DBM technical panels;
d. Submission of the proposed expenditure program
of department/agencies/special for confirmation by
department/agency heads.
e. Presentation of the proposed budget levels of
department/agencies/special purpose funds to the DBCC for
approval.
f. Review and approval of the proposed budget by
the President and the Cabinet;
g. Submission by the President of proposed budget
to Congress.
 STEPS IN BUDGET PREPARATION
To meet the Constitutional
requirement for the submission of the
President's budget with 30 days from the
opening of each regular session of
Congress, the budget preparation phase
is guided by a budget calendar.
 BUDGET LEGISLATION
• In accordance with the requirements of the
Constitution, the President submits his/her proposed
annual budget in the form of Budget of Expenditure
and Sources of Financing (BESF) supported by details
of proposed expenditures in the form of a National
Expenditure Program (NEP) and the President's Budget
Message which summarizes the budget policy thrusts
and priorities for the year.
• In Congress, the proposed budget goes first to the
House of Representatives, which assigns the task of
initial budget review to its Appropriation
Committee.
 BUDGET LEGISLATION
The Appropriation Committee together with the other House Sub-
Committee conduct hearings on the budgets of
departments/agencies and scrutinize their respective programs/projects.
Consequently, 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, through 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.
 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.
 BUDGET IMPLEMENTATION
•Budget implementation starts with the release of funds to the
agencies.
•To accelerate the implementation of the government,
programs, projects and activities and ensure the judicious use
of budgeted government funds, the government adopted the
Simplified Fund Release System (SFRS) beginning 1995.
•In contrast to the previous system of releasing funds based
on individual agency requests, the 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.
 BUDGET IMPLEMENTATION
Following the SFRS, the agency budget matrix
(ABM) is prepared by the DBM in consultation with
the agencies at the beginning of each budget year,
upon approval of the annual General Appropriations
Act. The ABM is a disaggregation of all the
programmed appropriations for each agency into
various expenditure categories. As such, the ABM
serves as a blueprint which provides the basis for
determining the timing, composition and magnitude
of the release of the budget.
 BUDGET IMPLEMENTATION
Based on updated resources and economic
development thrusts and consistent with the
cash budget program, the Allotment Release
Program (ARP) which prescribes the guidelines
in the prioritization of fund releases is prepared.

The ARP serves as basis for the issuance

of either a General Allotment Release Order
(GARO) or a Special Allotment Release Order
(SARO), as the case maybe, to authorize
agencies to incur obligations.
 BUDGET IMPLEMENTATION
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 indicated.
The Bureau of the Treasury (BTr), replenishes daily the
government servicing banks with funds equivalent to the
amount of negotiated checks presented to the government
servicing banks by implementing agencies.

The release of NCAs by the DBM is based on: 1) the

financial requirements of agencies as indicated in their ABMs,
cash plans and reports such as the Summary List of Checks
Issued (SLCI); and 2) the cash budget program of government
and updates on projected resources.
 BUDGET IMPLEMENTATION
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. Project implementation is
thus made faster.
 BUDGET ADJUSTMENTS
Adjustments are made on the budget even during implementation primarily
because of the following:

• Enactment of new laws - Within the fiscal year, new legislations with corresponding identified new
revenue sources are passed which necessitate adjustments in the budget program.
• Adjustments in macroeconomic parameters - The macroeconomic targets
• considered in the budget are periodically reviewed and updated to reflect the
impact of recent developments in the projected performance of the national
economy and on the set fiscal program for the year. The relevant indicators
affecting the budget aggregates include the following: the Gross National
Product (GNP), inflation rate, interest rate, foreign exchange rate, oil prices,
and the level of imports. Thus, a sensitivity measure on the impact of these
parameters on the budget will determine whether recent macroeconomic
developments have a negative or favorable effect on the budget.
• Change in resources availabilities - Budget adjustments are undertaken when additional
resources becomes available such as new grants, proceeds from newly negotiated loans and
grants. Corresponding budget adjustments are also made when resources generation falls below
the targets.
MECHANISM TO ENSURE PROPER USE OF
BUDGET
• Cognizant of the fact that no propitious results can be obtained,
even with maximum funding, if agency efficiency is low and funds
are wastefully spent, systems and procedures are set in place to
monitor and evaluate the performance and cost effectiveness of
agencies. These activities are subsumed within the fourth and the
last phase of the budget process-the budget accountability phase.
At the agency level, budget accountability takes the form of
management's review of actual performance or work
accomplishment in relation to the work targets of the agency vis-à-
vis the financial resources made available.

• Also, detailed examinations of each agency's book of accounts are

undertaken by a resident representative of the Commission on
Audit (COA) to ensure that all expenses have been disbursed in
accordance with accounting regulations and the purpose(s) for
which the funds have been authorized.
 ROLE OF THE DBM
The role of the DBM in the budgeting process is
not limited to national government agencies. It
coordinates all three levels of government-national
government department/agencies, government-owned
and controlled corporations (GOCCs) and local
government units (LGUs) - in the preparation,
execution and control of expenditures of their
corresponding components entities.
 ROLE OF DBM
The DBM reviews the corporate operating budgets of
GOCCs and ensures the proper allocation of cash. The
DBM likewise formulates and recommends the budget
policy covering the allowable
and the criteria for the determination of the appropriate
subsidy and equity of GOCCs.
•For LGUs, the DBM reviews the annual and
supplemental budgets of provinces, and highly urbanized
cities and manages the proper allocation and release of
the Internal Revenue Allotment (IRA) of LGUs and their
share in the utilization of national wealth.
 REFERENCES
1. DBM BUDGET CALL FOR 2022
– https://www.dbm.gov.ph/wp-content/uploads/Issuances/2021/Nati
onal-Budget-Memorandum/NATIONAL-BUDGET-MEMORANDUM-NO
-138.pdf
2. DBM Philippines- The National Budget Process
– https://www.youtube.com/watch?v=OUbUC94oa6s
END OF PRESENTATION
• THANK YOU