THE

PHILIPPINE
BUDGET
PROCESS
The Legal Basis

Article VI, Section 29 of the

Philippine Constitution sets the
basic rule for the use of
government funds where it
states: “ No money shall be
paid by the Treasury except in
pursuance of an appropriation
made by law”.
 The President shall submit within thirty (30)
days from the opening of each regular session
of the Congress as the basis for the
preparation of the General Appropriation Act,
a national government budget, consisting of
estimated receipts based on the existing and
proposed revenue measures, and of estimated
expenditures.

Article VII, Section 22 (1)

Philippine Constitution
What is Government Budgeting?

➢ 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.
What is Zero-Based Budgeting?
A budgeting approach which involves a
review/evaluation of major on-going programs
and projects implemented by different
departments/agencies, in order to :
a. establish the continued relevance of program
objectives given the current
developments/directions;
b. assess whether the program
objectives/outcomes are being achieved
c. ascertain alternative or more effective
and efficient ways of achieving the
objectives, and ultimately

d. guide decision makers on whether the

resources for the program/project should
continue at its present level, or be
increased, reduced or discontinued.
IMPORTANCE OF BUDGETS
1. Instrument for development
• political tool: a tool for exercising power
and for decision making (Budget Politics)
• socio-economic tool: raising resources and
allocating them to achieve socio-economic
goals (Budget and Economy)
• human development tool: financing public
goods and services that enhance human
development (Budget and Human
Development)
IMPORTANCE OF BUDGETS
2. Instrument for good governance
• administrative tool: assignment of
authorities and responsibilities to
government units to perform budgeted
tasks

• performance measurement tool: exacting

desired results from authorized
expenditures
 Kinds of Budget:
a. As to nature
• Annual budget – budget which covers a
period of 1 year. It is the basis of an annual
appropriation.
• Supplemental budget – supplement /adjust
previous budget deemed inadequate for the
purpose it is intended.
• Special budget – budget of special nature
and are adequately provided or not included
in the annual appropriation.
 Kinds of Budget:
b. As to basis
• Performance budget – budget emphasizing
the program/services conducted and
based on functions, activities, and
projects, which focus attention upon the
general character and nature of work to be
done, or upon the services to be rendered.
• Line-item budget – basis of which are the
objects of expenditures, such as: salaries
and wages, travelling exp., etc.
Overview of the Budget Process
 BUDGET
PREPARATION
 Budget Preparation Flow Chart
President Submits
Budget Proposal to
Budget Budget Congress
Call Consolidation

DBCC
approves Budget Approval by
budget Hearings President and
parameters Cut-off for Cabinet
Inclusion of
Items in Budget
Proposal
 What is the DBCC?
➢ A top level inter agency committee that sets the
budget parameters - framework

➢ The Development Budget Coordination Council

(DBCC) is headed by the DBM Secretary with the
Department of Finance secretary, Banko Sentral
Governor, and NEDA Director General as
members, with the general oversight of the Office
of the President.
➢ They determine the overall economic targets,
expenditure levels, the revenue projection, deficit
levels and the financing plan. The ff. are then
submitted to the President and the Cabinet for
approval.
 Major Functions of the DBCC
▪ Establishes the level of annual government
expenditure programs
▪ Determines the proper allocation of expenditure
▪ Allocates the amount set for each development
activity
▪ Assesses the reliability of revenue estimates
▪ Recommends appropriate tax or other revenues
measures and the extent and type of borrowings
▪ Conducts periodic review and general examination of
costs, accomplishments and performance standards
Roles of DBCC Members
 DBCC Composition

resource resource overall monetary Presidential

allocation generation economic measures oversight
and and debt policy and
management management policies
 What is the BUDGET CALL?
➢ After approval by the President and the
cabinet of the overall economic targets,
expenditure levels, revenue projection,
deficit levels and the financing plan; the
DBM issues the Budget Call.
➢ This requires agencies to prepare their
budgets in accordance with the said
guidelines, macro-economic assumptions,
and ceilings. The DBM spells out
guidelines, procedures, and timetables.
 BUDGET PREPARATION
➢ Agencies conduct internal consultations where
they rank programs, projects and activities
using the capital budgeting approach. Then
they submit their budget estimates, taking
into account their own priorities and those of
the national government under the Medium-
term Public Investment Program (MTPIP).
➢ The DBM then conducts technical budget
hearings where agencies defend and justify
their proposals. Organizational and budgetary
issues are clarified. The proposed expenditure
programs are confirmed by the agency heads.
 BUDGET PREPARATION

• The DBM consolidates the budget

proposals and then submits them to the
Cabinet where the budget is discussed with
the President for approval before the latter
submits the Budget to the Congress no
more than 30 days after the opening of its
regular session as required under the
Constitution.
Major Activities in Budget Preparation:
• Determination of overall economic targets,
expenditure levels and budget
framework by the DBCC.
• Issuance by DBM of Budget Call which
defines the budget framework; sets economic
and fiscal targets; prescribe priority thrusts
and budget levels; and spells out the
guidelines and procedures, technical
instructions and timetable for budget
preparation.
• Preparation by various govt. agencies of
detailed budget estimates ranking
programs, projects and activities using the
capital budgeting approach and submission
of the same to DBM.
• Conduct budget hearings were agencies
are called to justify their proposed budgets
before DBM technical panels.
• Submission of proposed expenditure
program of dept./agencies/special for
confirmation by dept./agency heads.
• Presentation of the proposed budget
levels of dept./agencies/special purpose
funds to the DBCC for approval.
• Review and approval of the proposed
budget by the President and the Cabinet;
• Submission by the President of proposed
budget to Congress
Composition of Budget Proposal:
• Budget of Expenditures and Sources of
Financing (BESF)
The document which reflects the annual budget and the
estimates and sources of financing. This is the initial form
of the annual budget.
• National Expenditure Program (NEP)
This enumerates the details of proposed
expenditures.
National Expenditure is the total output level and
total income level equivalent to the total national
economy's expenditure level.
• President’s Budget Message
It summarizes the budget policy thrusts and priorities
for the year.
Classification of Government Expenditures:

The major current operating expenditures of

the national government are:
• Personnel services, like salaries and wages,
social security contributions, OT pay, etc.;
• Maintenance and other operating
expenditures, such as travel expenses,
supplies and materials, water, illumination
and power services, rent, etc.;
• Interest payments;
• Allotments to LGUs; and
• Subsidies to GOCCs.
Classification of Government
Expenditures:
The capital outlay may be broadly classified
as:
• Infrastructure outlays;
• Equity contributions to government
corporations;
• Capital transfers to LGUs (not less 20% of
IRA) ;
• Other capital outlays
 Sectoral Allocation of National Govt.
Budget
Social a) education, culture and manpower devt.; b)
Services health services; c) social security; d) housing
and community devt.; and, e) land distribution.
Economic a) communication, roads and transportation
Services facilities; b) agriculture, agrarian reform and
natural resources; c) water resources devt. And
flood control; d) trade and industry: e) power
and energy; and, f) tourism.
Defense Expenditures that support the general effort to
ensure national security, stability and peace
which are indispensable to economic growth and
development.
General a) General administration; andb) public order
Public and safety
Services
Debt Burden Expenditures that go into servicing govt.’s regular
and assumed debts from foreign and domestic
sources including interest payments.
Govt. expenditures categorized by cost
structure:
GENERAL Expenditures for general
ADMINISTRA administration represent those that
TION AND are normally considered as agency
SUPPORT overhead which the agency will incur
to exist as a unit.
SUPPORT TO Refers to those activities that
OPERATIONS facilitate the performance of the
agency’s mandated function and
services.
PROJECTS are those that fund activities which
result in the accomplishment of
identifiable outputs within a
designated period.
 BUDGET
LEGISLATION/
AUTHORIZATION
 Budget Legislation Flow Chart

House Senate Bicameral

Hearings/ Hearings/ Conference
Debate Debate Committee

House Approval
President
& Submission Senate
Signs
to Senate Approval
into Law
 BUDGET AUTHORIZATION
➢ In Congress, the proposed budget goes first
to the House of Representatives, which
assigns the task of initial budget review to its
Committee on Appropriations.

➢ The Committee on Appropriations with

other House Sub-Committee conduct
hearings on the budgets of
departments/agencies and scrutinize their
respective programs/projects. 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, thru
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 to be submitted
to the President.
➢ The President may sign the bill immediately becomes a law
as the General Appropriations Act, or he/she may
exercise line-item veto power.
What is the 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.
➢ This is the law setting the operating budget of
the republic of the Philippines for a particular
year.
 What is an Appropriation?

An authorization made by law or other

legislative enactment, directing
payment of goods and services out of
govt. funds under specific conditions
or for special purpose.
 Forms of Appropriation:
1. General Appropriation Law which covers
most of the expenditures of the govt.
2. Supplemental Appropriations are passed
from time to time to augment or correct an
already existing appropriation.
3. Automatic Appropriations intended for
fixed and specific purposes.
4. Continuing Appropriations pertain to
authorized amounts for MOOE and Capital
Outlays, the validity of which extend to one
year following the year they were
appropriated.
 BUDGET
EXECUTION/
IMPLEMENTATION
 c) Budget Execution Flow
Chart

Agency/DBM Agency
prepares ABM implements

DBM releases
SARO & NCA
 Salient Features of Appropriations

➢ Once an appropriation is released in the

form of an allotment covered by either an
Agency Budget Matrix (ABM) or a Special
Allotment Release Order (SARO), it
becomes available for incurrence of an
obligation.

➢ Appropriation for personal services are

valid only for the year, while those for
MOOE and CO are treated as continuing
appropriations for 2 years: unused
portions of appropriation for MOOE & CO
are carried forward for another year.
 Salient Features of Appropriations (cont.)

3. Automatic appropriations are those

appropriations authorized under existing laws
other than the General Appropriations Act
which are programmed annually in
accordance with Section 26, Book VI of EO
292. Examples of these are:
• Internal revenue taxes and import duties
associated with foreign loans and grants,
• Tax expenditure subsidies,
• Debt servicing,
• Retirement and life insurance premium of
government employees,
• Drawdown on guaranteed lending to government
corporations, and
• Various special accounts and funds.
BUDGET
EXECUTION/IMPLEMENTATION
➢ The approved budget becomes effective on
the first day of the budget year concerned, or
when it is signed by the President, whichever
comes later.
➢ It is at the budget execution stage that the
expenditure program is implemented.
Allotments are issued, chargeable against
the regular agency budgets. It is also at this
stage where agencies may submit requests
for availment from Special Purpose Fund
(SPFs). Agencies are often required to submit
additional reports and documents to support
their requests.
 What is an Allotment?

Authorization issued by DBM to an

agency, through Agency Budget
Matrix (ABM) or Special Allotment
Release Order (SARO), which allows
the latter to incur obligation for
specified amounts contained in a
legislative appropriation.
 What is an Obligation?

It is a commitment by a government
agency arising from an act of duly
authorized official which binds the
government to the immediate or eventual
payment of sum of money.
The Budget Implementation Process I:
➢ Budget Implementation starts with the
release of funds applying the Simplified Fund
Release System (SFRS).
*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.
➢ Incompliance with SFRS, the DBM prepares
the Agency Budget Matrix (ABM) in
consultation with agencies at the beginning of
each budget year, upon approval of GAA.
*ABM is the blueprint which provides the basis for
determining the timing, composition and magnitude
of the release of the budget.
 The Budget Implementation
Process II:

➢ Allotment Release Program (ARP) which is

the basis for the issuance of either a
General Allotment Release Order (GARO)
or a Special Allotment Release Order
(SARO) authorizing agencies to incur
obligations, is prepared pursuant to the
updated resources and economic
development thrusts and consistent with
the cash budget program.
➢ 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.

➢ The Bureau of the Treasury (BTr),

replenishes daily the government servicing
banks with funds equivalent to the amount
of negotiated checks presented to the
latter by implementing agencies
What is the bases for release of
NCAs?
• the financial requirements of agencies as
indicated in their ABMs, cash plans and
reports such as the Summary List of Checks
Issued (SLCI); and
• the cash budget program of government and
updates on projected resources.
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.
 Why are adjustments made in
the Budget Program?
Adjustments are made because of the
following:
➢ Enactment of new laws
➢ Adjustments in macroeconomic
parameters
➢ Change in resources availabilities
 Budget Execution Documents:
• Physical and Financial Plan (PFP) indicates the
major final outputs to be delivered by the agency
as well as the corresponding funds required to
accomplish them. (Quarterly)
• Monthly Cash Program reflect the monthly
disbursement requirements of the NGAs.
• Estimate of Monthly Income reflect the estimated
income of the NGAs for the current year by
source, as contained under the Budget of
Expenditures and Sources of Financing (BESF).
• List of Not Yet Due and Demandable Obligations
represent claims against the govt. for goods
which were already delivered or services already
rendered in favor of the govt.
 BUDGET
ACCOUNTABILITY
 Budget Accountability
▪ Monitoring of agency budgetary
performance
▪ Comparison and evaluation of actual
performance with initially-approved
work targets in terms of:
➢Financial
➢Physical
➢Revenue Collected (for agencies
mandated to collect taxes and fees)
 Rationale/Purpose

➢Monitor the efficiency of government’s

fund utilization
➢Assess agency performance
➢Provide a vital basis for sound
decision and policy making for rational
allocation of scarce resources
 BUDGET ACCOUNTABILITY
➢ Systems and procedures are set in place
to monitor the performance and cost
effectiveness of agencies.
➢ At the agency level, there is Agency
Performance Review (APR) which is
management's review of actual work
accomplished compared to work targets,
vis-a-vis the financial resources made
available.
BUDGET ACCOUNTABILITY

➢ Likewise, detailed examinations of each

agency's books of accounts are
undertaken by a resident Commission on
Audit (COA) auditor. They ensure that all
expenses have been disbursed in
accordance with accounting regulations
and authorized funding purposes.
Budget Accountability consists of
the following:
• Periodic reporting by the government
agencies of performances under their
approved budget;
• Top management review of government
activities and the fiscal policy
implementations thereof; and
• The actions of the COA in assuring the
fidelity of officials and employees by
carrying out the intent of the legislative
regarding the handling of receipts and
expenditures.
Budget Accountability Reports are:
➢ Quarterly Physical Report of Operations
reflect the NGA’s actual physical
accomplishments for a given quarter, as
indicated in PFP.
➢ Quarterly Financial Report of Operations
reflect NGA’s actual
obligations/expenditures incurred by
programs/activities/project and allotment
class for a given quarter, corresponding to
reported physical accomplishments for the
same period.
➢ Quarterly Report of Annual Income reflect
the NGA’s actual income collections from all
sources for a given quarter broken down by
month.

➢ Statement of Allotment, Obligations and

Balances serve as the NGA’s summary
report of allotments received and
corresponding obligations/expenditure
incurred during the month from all sources
by object of expenditures.
What is the Role of COA?
Under Article IX-D, Section 2 (1) of the
1987 Philippine Constitution:
“The Commission on Audit shall have the
power, authority, and duty to examine,
audit, and settle all accounts pertaining to
the revenue and receipts of, and
expenditures or uses of funds and property,
owned or held in trust by, or pertaining to,
the Government, or any of its subdivisions,
agencies, or instrumentalities, including
government-owned or controlled
corporations xxx xxx xxx.”
The BUDGET PROCESS dictates to a
great extent the effectiveness of
governance thru:
• Ensuring plans are consistent with targets
• Citizens enjoy desired results from budgeted
amounts
• Funds are made available on time to ensure
timely implementation of programs
• Funds are adequate to pursue priority programs
• Government accomplishment reports (work and
financial) are reliable and used as basis for
performance evaluation
• Performance-based sanctions and incentive
systems are consistently applied
• Proper assignment and observance of government
funding responsibilities are complied with