TOPIC 4 BUDGET
TOPIC 4: BUDGET
Presented by: Abanto, Macaurao, Lumakang, Pelonio, Sardido, Jurado, Tomada, Resueno
LEARNING OBJECTIVES
Discuss Budgeting Terminologies: Understanding the key terms used in budgeting.
Illustrate Basic Concepts of Budgeting: Overview of essential budgeting principles.
Examine Basic Laws Regarding Government Funds: Understand legal frameworks governing budget allocations.
Explain Effects of National Budget on Country's Life: Insights into how national budgeting impacts various aspects of society.
Critique Current State of Budgeting in the Country: Evaluate the effectiveness and transparency of the present budgeting system.
LO1: BUDGETING TERMINOLOGIES
Appropriation
Authorization by law for payment from government funds for specific purposes.
Example: Congress approves a 50M budget for public schools.
Allotment
Limit set on spending by the Department of Budget and Management (DBM).
Example: Budget set for educational expenditures.
Budget
Total appropriations planned for the budget year based on available resources.
Example: Education budget categorizing salaries, infrastructure, etc.
Obligation
Legal commitments to pay for services rendered or goods delivered.
Example: Contracting a company for construction services.
Disbursement
Actual withdrawal of cash to settle obligations.
Example: Payment to construction companies upon project completion.
Expenditures Program
Ceiling on obligations for the budget year, based on estimated resources.
Example: Infrastructure projects capped at 500B.
Financial Program
Projected revenues and expenditures for financing budget activities.
Example: Revenue projections of P300B from taxes.
Obligation Budget
Proposed commitments by the government for goods and services.
Example: Planned expenditures of P10B in healthcare.
Cash Budget
Summary of governmental deposit and withdrawal activities.
Example: Record of released and utilized budgets.
Capital Expenditures
Spending on long-term assets contributing to productive activities.
Example: Purchase of durable vehicles.
Infrastructure Expenditures
Subcomponent covering spending on basic public works.
Example: Constructing highways and bridges.
National Budget
Encompasses total budgets of government departments and local entities.
Example: Budget allocated to the Department of Health.
Public Sector Budget
Consolidated budget of all governmental units and corporations.
Example: Combined budget across national and local governments.
LO2: ILLUSTRATE BASIC CONCEPTS IN BUDGETING
Definition of a Fund
In government budgeting, a 'fund' could refer to:
An appropriation (legal spending authorization).
An allotment (authorization from DBM for obligations).
Actual cash available for expenditures.
Law Governing Government Funds
The Philippine Constitution (Article VI, Section 29) ensures that any government expenditure must be authorized by law, mandating a structured budgeting process.
Budgeting Process
Agencies submit budget proposals to DBM.
DBM reviews proposals based on guidelines.
Consolidated budgets are submitted to Congress.
Congress conducts hearings before finalizing General Appropriations Bill (GAB).
The signed GAB becomes law (General Appropriations Act or GAA).
KEY COMPONENTS OF A GOVERNMENT BUDGET
Income (Revenues): Comprises taxes, fees, and earnings.
Expenditures: Funding for government services and operations.
Borrowing Sources: Loans or bonds to manage deficits.
NATIONAL GOVERNMENT BUDGET
Represents total financial plan for operations and programs across agencies, local units, and state-owned enterprises.
Funds are allocated for operational expenses, public debt, and essential programs.
ANNUAL BUDGET FORMULATION
Annual preparation mandated to ensure justification for spending and efficiency in resource allocation. Agencies reassess previous program impacts for continued funding.
SOURCES OF THE ANNUAL BUDGET
New general appropriations from the GAA and pre-existing appropriations are utilized.
Example: New health program funding through GAA allocation.
CONCEPT OF EXISTING AND CONTINUING APPROPRIATIONS
Funds from previous laws can remain valid:
Continuing Appropriations: Long-term projects.
Automatic Appropriations: Annual mandated funding (e.g., debt service).
APPROPRIATIONS AND ALLOCATION
Not all appropriations guarantee resources during the budget year.
Programmed Appropriations: Defined funding sources.
Unprogrammed Appropriations: Non-immediate funding contingent on additional revenue.
ONE-FUND CONCEPT
All state revenues funnel into a General Fund for allocation.
Promotes efficient resource use and fiscal discipline.
BALANCED BUDGET
A budget is balanced when revenues equal expenditures. Imbalances create deficits leading to borrowing which impacts future fiscal obligations.
GOVERNMENT FISCAL POLICY
Historically, the government has faced deficits, aiming for fiscal stability post-1994 through privatization and improved revenue collection.
IMPORTANCE OF SURPLUS BUDGETING
Encourages economic stability and growth, reducing dependence on debt and facilitating investments in public goods.
TOTAL RESOURCE BUDGETING
A comprehensive approach that includes all government entities in assessing impact on the economy, ensuring aligned objectives between budgets.
CONSOLIDATED PUBLIC SECTOR FISCAL POSITION
Measures total government net deficit/surplus, aiding in evaluating fiscal health per macroeconomic goals.
PLANNING-PROGRAMMING-BUDGETING SYSTEM (PPBS)
Connects national development goals to budget, ensuring resource allocation aligns with objectives.
LO3: IMPACT OF NATIONAL BUDGET ON COUNTRY'S LIFE
Public Debt and Interest Rates: Deficits can elevate borrowing costs.
Environmental Sustainability: Budgeting for green initiatives supports development.
National Security: Adequate funding for defense ensures safety.
Regional Inequality: Redistribution through taxation and funding programs for marginalized groups.
Economic Growth: Infrastructure investment boosts employment and economic activity.
Employment Opportunities: Public projects create direct and indirect jobs.
Social Services: Budget allocations to healthcare and education enhance quality of life.
Inflation Effects: Government spending impacts demand and cost of living.
EXAMINATION OF LAWS GOVERNING USE OF FUNDS
Overview of government funding sources: primarily through taxation and borrowing.
GENERAL PROVISIONS AND STANDARDS
Sec. 5. Fundamental Principles for Disbursement of Public Funds per P.D. No. 1445:
Money can only be paid out per appropriation law.
Funds must serve public purposes.
Trust funds for specific purposes only.
Shared fiscal responsibility across authorities.
MECHANISMS FOR GOVERNMENT FUND MANAGEMENT
Commission on Audit (COA): Oversees and audits expenditures for compliance.
Department of Budget and Management (DBM): Manages the overall budget process.
ISSUES AND CHALLENGES IN GOVERNMENT FUNDS
Lack of Accountability: Persistence of corruption and mismanagement.
Bureaucratic Red Tape: Slowdowns in fund use due to inefficiencies within the government.
CURRENT STATE OF BUDGETING IN THE COUNTRY
Critiquing budgeting practices reveals inefficiencies and lack of transparency.
FORMULATION OF BUDGET
Government agencies propose budgets requiring coordination and alignment with national priorities. Congress reviews and approves the proposed executive budget.
BUDGET EXECUTION AND ACCOUNTABILITY
Agencies manage fund disbursement and procurement throughout project implementation. COA audits are essential to ensure proper use and hold agencies accountable.