2: The Budget Process

Budgetary Accounting

Government accoutning is primarily _________

Budget Information

Government accounting also aim to provide _______ in accordance with PPSAS 24

Legislation

The Philippine Constitution and other laws require government funds to be utilized in accordance with a national budget that is duly approved by ______

National budget

also called as government budget, is the government’s estimate of the sources and uses of government funds within a fiscal year

Budget Cycle

1. Budget Preparation

2. Budget Legislation

3. Budget Execution

4. Budget Accountability

Budget Preparation

This stage uses a “bottom-up” approach

Bottom-Up Budgeting

Several parties participate in the budget preparation, starting from the lowest to the highest levels of the government

Top-Down Budgeting

opposite of “bottom-up”, wherein the budget preparations starts from the agency heads

Zero-based budgeting

In 2011, the Philippine Government attemoted to start a new tradition by shifting from the old “incremental” system of budgeting to the ________ approach

Incremental budgeting

The current year’s budget is formulated based on the previous year’s budget, which is just adjusted for any variances experieced in the past

Incremental budgeting

The proposed programs and expenditures in the previous year are automatically approved in the current year

Incremental budgeting

Uses a “roll-over” approach and is prone to abuse

Zero-based budgeting

The current uear’s budget is formulated without regard to the previous year’s budget

Zero-based budgeting

Government agencies are required to justify their current year’s proposed programs and expenditures, irrespective of whether these are new or carried over from the previous year

Zero-based budgeting

Uses a “back-to-zero” or “clean slate” approach and also promotes efficient and effective utilization of funds

Budget Preparation

1. Budget Call

2. Budget Hearings

3. Presentation to the Office of the President

Budget Call

The budget preparation starts when the Department of Budget and Management (DBM) issues a _____ to all government agencies

Budget Call

contains, among other things, the next fiscal year’s targets, the agency’s budget ceiling, and other guidelines in the completion and submission of agency budget proposals

Balanced budget

prepared in such a way that estimated revenues exceed estimated expenditures

Surplus

Under balanced budget, if actual revenues exceed actual expenditures, the government earns a ____

Deficit

Under balanced budget, if actual expenditures exceed actual evenues, the government incurs a ____

Annual budget

Covers a period of one year and forms the basis for the annual appropriation

Special budget

provides for items not adequately covered or not included in the general appropriations act

Line item budget

focuses on specific expenditures such as salaries and wagesm, travel expenses, freight, supplies, materials and equipment

Performance budget

a plan of activities to be undertaken, including their related costs, with the emphasis on meeting targets and desired results

Performance budget

Its main focus is in the work to be done or services to be rendered

Obligations budget

focuses on expenditures incurred in the current year which are to be paid either in the same year or in the following year

Budget hearings

• are conducted after the agencies submit their budget proposals

• Each agency defends its budget proposals before the DBM

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

In budget hearings, the DBM:

• Delibarates on the budget proposals

• Makes recommendations

• Consolidates the deliberated proposals into the ___________ and ________

• The DBM then submits the proposed budget to the President

Presentation to the Office of the President

• The President and Cabinet members review the proposed budget

• After the President approves it, the DBM finalizes the budget documents to be submitted to the Congress

President’s Budget

contains the following documents which are intended to assist the Congress in their review and deliberation of the proposed national budget:

• President’s Budget Message

• National Expenditure Program (NEP)

• Budget of Expenditures and Sources of Financing (BESF)

• Other documents aimed to provide further explantaion of selected items in the NEP

President’s Budget Message

contains the President’s explanation of the country’s fiscal policy and budget priorities

National Expenditure Program (NEP)

contains the details of all the government entities’ proposed expenditures in the coming year

Budget of Expenditures and Sources of Financing (BESF)

contains the estimated expenditures accompanied by estimates of expected sources of financing

30 days

The President shall submit the proposed budget to the Congress within _____ from the opening of every regular session

Budget Legislation

4. House Deliberations

5. Senate Deliberations

6. Bicameral Deliberations

7. President’s enactment

Budget Legislation

Government funds shall only be spent in pursuance of an appropriation made by law. Therefore, due process must be undertaken to legalize the proposed budget

House Deliberations

Upon receipt of the President’s Budget, the HOR conducts hearings to scrutinize the vrious agencies’ respective proposed programs and expenditures.

General Appropriations Bill (GAB)

On House Deliberations, the HOR prepares the _______________

Senate Deliberations

• The Senate conducts its own deliberations on the GAB

• These normally start after the Senate receives the GAB from the HOR

• However, for expediency, hearings in the Senate start even as Representatives deliberations are ongoing

Bicameral Deliberations

• After deliberations in both houses are finished, Bicameral Conference Committeeis formed

• 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

Bicameral Conference Committee

is formed to harmonize any conflicts between the Representatives and Senate versions of the GAB

President’s enactment

• The President enacts the budget, which is known as the General Appropriations Act (GAA)

• Before enactment though, the President may exercise his verto power as conferred to him under the Philippine Constitution

Last Year’s General Appropriations Act

When the proposed budget is not enacted before the fiscal year starts, the ________________ is automatically reenacted

Congress

The last year’s GAA shall be used in the current year until a new general appropriations bill is passed by 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.

Unified Accounts Code Structure (UACS)

refers to the standard coding system used in financial reporting of the National Government

01

UACS Code for New General Appropriations

02

UACS Code for Continuing Appropriations

03

UACS Code for Supplemental Appropriations

04

UACS Code for Automatic Appropriations

05

UACS Code for Unprogrammed Funds

06

UACS Code for Retained Income/Funds

07

UACS Code for Trust Receipts

Appropriation

is the authorization made by a legislative body to allocate funds for purposes specified by the legislative or similar authority

New General Appropriations

are annual authorizations forr incurring obligations during a specified budget year, as listed in the GAA

Continuing Appropriations

are the authorizations to support obligations for a specific purpose or project, such as multi-year construction projects which require the incurrence of obligations even beyond the budget year

Supplemental Appropriations

are additional appropriations authorized by law to augment the original appropriations which proved to be insufficient for their intended purpose due to economic, political, or social conditions supported by a Certification of Availability of Funds from the BTr

Automatic Appropriations

are the authorizations programmed annually or for some other period prescribed by law which do not require periodic action by Congress

Unprogrammed Funds

are standby appropriations authorized by Congress in the annual GAA which may be availed only when any of the following instances occur:

• revenue collections exceed the original revenue targets in the BESF submitted by the President to the Congress

• new revenues are collected or realized from sources not originally considered in the BESF

• newly-approved loans for foreign-assisted projects are secured or when conditions are triggered for other sources of funds

Retained Income/Funds

conditions which are authorized by law to be used directly by agencies concerned for their operation or specific purposes

Revolving Funds

receipts derived from business-type activities of departments/agencies which are authorized by law to be constituted as such and deposited in an authorized government depository bank

Revolving Funds

These funds shall be self-liquidating and all obligations and expenditures incurred by virtue of said business-type activity shall be charged against said fund

Trust Receipts

receipts by any government agency acting as trustee, agent or administrator for the fulfillment of some obligations or codnitions

Budget Execution

This is the phase where government funds are spent

Budget Execution

8. Release guidelines and BEDs

9. Allotment

10. Incurrence of Obligations

11. Disbursement Authority

Release guidelines and BEDs

The DBM issues guidelines on the release and utilization of funds while the various agencies submit their Budget Execution Documents (BEDs)

Budget Execution Documents (BEDs)

• summarizes an agency’s fiscal year plans and performance targets

• It includes the following:

1. Physical and financial plan

2. Monthly cash program

3. Estimate of monthly income, and

4. List of obligations that are not yet due and demandable

Major Receipients of the Budget

1. National Government Agencies (NGAs)

2. Local Government Units (LGUs)

3. Government owned and Controlled Corporations (GOCCs)

National Government Agencies (NGAs)

include all agencies within the executive, legislative and judicial branches of government, e.g., commissions, departments, Land Bank of the Philippines, Social Security System, etc.

Local Government Units (LGUs)

• Autonomous regions

• Provinces and cities independent from a province

• Component cities (cities which are part of a province) and municipalities

• Barangays

Government Owned and Controlled Corporations (GOCCs)

corporations that are owned or controlled, directly or indirectly, by the government and vested with functions relating to public needs

Congress, Judiciary Branch

The members of the ______ (Senators and Congressmen) and the _____________ are also recipients of a portion of the budget

Priority Development Assistance Funds (PDAF)

• The budget portion received by members of the Congress

• Intended to fund priority development programs of the government

Judiciary Development Fund (JDF)

• The budget protion received by members of Judiciary

• 80% of fund: Cost of living allowances of the members & personnel of the Judiciary

• 20% of fund: for acquisition and maintenance of office equipment and facilities

Disbursement Acceleration Program (DAP)

• introduced by the Aquino administration on 2014

• aims to speed-up public spending.

• is a mechanism of releasing funds, particularly from savings and unprogrammed funds

Savings

are available protions or balances of items under the General Appropriations Act

Allotment

is an authorization issued by the DBM to government agencies to incur obligations for specified amounts contained in a legislative appropriation in the form of budget release documents

Allotment Release Program (ARP)

The DBM formulates the ____________ to set the limit for allotment releases during the upcoming year

Allotment Release Program (ARP)

This is used as a control device to ensure that releases conform to the national budget

Cash Release Program (CRP)

sets the disbursement limits for the year, for each quarter and for each month

Obligation Authority

Allotment is also referred to as ____________

Obligation

is an act of a duly authorized official which binds the government to the immediate or eventual payment of a sum of money

Obligation

referred to as a commitment that encompasses possible future liabilities based on current contractual agreement

Documents used in releasing allotment

• General Appropriations Act Release Document (GAARD)

• Special Allotment Release Order (SARO)

• General Allotment Release Order (GARO)

General Appropriations Act release Document (GAARD)

• serves as the obligational authority for the comprehensive release of budgetary items appropriated in the GAA

• categorized as For Comprehensive Release

Special Allotment Release Order (SARO)

• covers budgetary items under For Later Release (negative list) in the entity’s submitted BEDs, subject to compliance of required documents/clearances

• Examples: Calamity Fund, Contingent Fund, E-Government Fund, Feasibility Studies Fund, International Commitments Fund, Miscellaneous Personnel Benefits Fund and pension and Gratuity Fund

General Allotment Release Order (GARO)

is a comprehensive authority issued to all national government agencies to incur obligations not exceeding an authorized amount during a specified period for the purpose indicated

General Allotment Release Order (GARO)

covers automatically appropriated expenditures common to most agencies without need of special clearance or approval from competent authority, i.e. Retirement and Life Insurance Premium

Incurrence of Obligations

government agencies incur obligations which will be paid by the government, e.g., entering into contracts, hiring of personnel, purchase of supplies, etc.

Disbursement Authority

The DBM issues __________ to the government agencies. This is the point where government agencies obtain access to the government funds

Documents used in releasing disbursement authority

• Notice of Cash Allocation (NCA)

• Notice of Transfer of Allocation

• Non-Cash Availment Authority

• Cash Disbursement Ceiling

Notice of Cash Allocation (NCA)

authority issued by the DBM to central, regional and provincial offices and operating units to cover their cash requirements

Notice of Cash Allocation (NCA)

• specified the maximum amount of cash that can be withdrawn from a government servicing bank in a certain period

• is based on the agency’s submitted Monthly Cash Program

Notice of Transfer of Allocation

authority issued by an agency’s Central Office to its regional and operating units to cover the latter’s cash requirement

Non-Cash Availment Authority

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

authority issued by the DBM to agencies with foreign operations (e.g., Department of Foreign Affairs ‘DFA’) allowing them to use the income collected by their Foreign Service Posts to cover their operating requirements

Treasurer of the Philippines

Disbursements are most commonly made through checks that are chargeable against the account of _________________ (i.e., Treasury Single Account)

Modified Disbursement System (MDS) Checks

Checks issued under that disbursement scheme are called _____________

Appropriation

authorization by a legislative body to allocate funds for specified purposes