05 - Philippine Government Budgeting Process

The Budget Process

It is both a rigorous technical procedure and a dynamic (and sometimes controversial) political process. It reflects the close interplay of political and economic factors and pressures.

Article VII, Sec. 22

A key constitutional and legal provision on budgeting which states that the President has exclusive right to propose a budget.

Article VI, Sec. 25

A key constitutional and legal provision on budgeting which states that congress can only reduce or reallocate appropriations in the proposed budget

Article VI, Sec. 27

A key constitutional and legal provision on budgeting which states that the President can use a line-item veto.

Article VI, Sec. 25

A key constitutional and legal provision on budgeting which states that the previous year’s budget is automatically “re-enacted” if the budget is not passed prior to the start of the fiscal year.

Sec. 35, Ch. 5, Book VI of EO 292

A key constitutional and legal provision on budgeting which states that the President can impose restrictions on the disbursement of funds appropriated by Congress

Article VI, Sec. 25

A key constitutional and legal provision on budgeting which states that the President can augment any appropriations from savings in other appropriations

Article VIII, Sec. 3

A key constitutional and legal provision on budgeting which states that there is fiscal autonomy in the judiciary.

Article IX, Sec. 5

A key constitutional and legal provision on budgeting which states that there is fiscal autonomy in the Constitutional Commissions.

Article XI, Sec. 14

A key constitutional and legal provision on budgeting which states that there is fiscal autonomy in the Office of the Ombudsman

Budget Preparation

It is the first phase of the budget process wherein the main actors are the DBCC, government offices, DBM, and President. It determines the overall economic targets, expenditure levels, revenue projection and financing plan (Paper on Budget Strategy). It involves:

• Issuance of Budget Call by DBM (as early as January)

• Budget hearings (DBM technical panels)

• Presentation of proposed budget levels of agencies to DBCC for approval

• Review and approval by President and the Cabinet

• Submission to Congress by the President of proposed budget within 30 days from the opening of the regular session

Budget Authorization

It is the second phase of the budget process wherein: the president submits Budget of Expenditure and Sources of Financing (BESF) supported by National Expenditure Program (NEP) and President’s Budget Message to Congress. It involves:

• Amended budget proposal is presented to the HOR body as the General Appropriations Bill

• Senate Finance Committee conducts review while budget hearings are ongoing at the HOR

• SFC proposes amendments to the House Budget Bill for approval

• Bicameral Conference Committee finalizes the General Appropriations Bill

• GA Bill passed in both Houses is submitted to the President

• Presidential Review and Veto within 30 days, if vetoed congress may override it by gathering 2/3 votes in each house

Budget Execution

It is the third phase of the budget process wherein its elements include:

• Submission and evaluation of agency annual Work and Financial Plans which will be the basis of issuances of quarterly Advice of Allotments and funding requirements

• Continuing monitoring and review of government’s fiscal position

• Making sure that funds are available to support agency functions and projects

Simplified Fund Release System (SFRS)

It is part of the previous efforts in budget execution to ensure the regular release of funds. There is a standardized release of funds across agencies which are similarly situated.

Agency Budget Matrix

It is part of the previous efforts in budget execution to ensure the regular release of funds. It is prepared by the DBM in consultation with agencies at the beginning of each budget year. This matrix provides the basis for determining the timing, composition and magnitude of the release of the budget.

Allotment Release Program

It is part of the previous efforts in budget execution to ensure the regular release of funds. It considers updated resources and economic development thrust. It serves as basis for the issuance of either a General Allotment Release Order (GARO) or a Special Allotment Release Order (SARO).

Notice of Cash Allocation (NCA)

It is part of the previous efforts in budget execution to ensure the regular release of funds. It is released on a monthly or quarterly basis. It specifies the maximum amount of withdrawal that an agency can make from a government bank for the period indicated.

Reasons for Adjustments during Budget Execution

• Enactment of new laws

• Adjustments in macroeconomic parameters

• Changes in resources available

Slow implementation of projects and programs

An issue in budget execution that involves:

• Low absorptive capacity of departments and agencies

• Long and meticulous procurement process

• Results in underspending

Substandard infrastructure projects

An issue in budget execution that involves:

• lack of funds and very possibly corruption

• the result in wastage as these infrastructures deteriorate almost immediately. (esp. due to calamities)

Disbursement Acceleration Program (DAP)

This program was implemented in order to address the problem of underspending. Its fund was pooled from:

• Unreleased appropriations under personnel services

• Unprogrammed funds

• Carry-over appropriations unreleased during the previous fiscal year

• Unobligated allotments from slow-moving items or projects

Gaming the System

An issue in budget execution that involves using the rules and procedures meant to protect a system in order, instead, to manipulate the system for a desired outcome (also true in the case of budget reenactments)

Shift from obligations-based to cash-based budgeting

It entails:

• Disbursements should be made within the year

• Unused allotments after the end of the fiscal year will revert back to the General Fund/National Treasury

• Infrastructure/Research Projects straddling more than one (1) fiscal year may request for a Multi-Year Contract Authority with the DBM

Budget Accountability

It is the fourth phase of the budget process that 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. 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.

• Accountability to citizens and civil society

• Congressional Oversight

• Annual Budget Cycle