Module 8

APPROACHES AND TECHNIQUES IN PHILIPPINE BUDGETING

ORIENTATION IN BUDGETING - The lawmakers were able to pinpoint

“objects of future choice” especially
The stages in the evolution of the United States
those referring to new positions.
federal government budget are characterized,
according to Alen Schick ,by three major Advantages
orientation: control orientation, management
orientation, and planning orientation. • Offers simplicity; easily budget for the
agency based on historical expenditures
• Control Orientation required in previous years.
• Easy to justify the expenditures.
It is the process of enforcing limitations and
conditions set in the budget and in Disadvantages
appropriations, and of securing compliance
with the spending restrictions imposed by • The laundry-list formal of the system
central authorities. provides no method of determining the
amount of a particular city service
• Management Orientation produces by a given level of spending.
• The broad expenditures categories used
It involves the use of budgetary authority at
in a line-item budget make it difficult to
both agency and central levels to ensure the
set service priorities.
efficient use of staff and other budgeting, the
focus is on agency activities
PERFORMANCE BUDGETING
• Planning Orientation
- Activity” or “functional” budgeting
It is the process of determining public
- Objects of expenditures are deemed as
objectives and the evaluation of alternative
significant factors in relation to what they
programs. To use the budget for planning,
used for and not in relation to their
central authorities must have information
specific character
concerning the purposes and effectiveness of
- The Budget, accounting and auditing
programs. They must also be informed of multi-
modernization project was launched in
year spending plans and of the linkage
July 1954 in collaboration with US
between planning, spending, and public
management;
benefits.
- Reforms to help government cope with
social, economic problems.
LINE-ITEM BUDGETING Advantages
- “Item of Expenditures Approach” • Gives comprehensive and reliable
- Manifestation of process budgetary, information
incremental fragmented, non- • Permits effective performance in
programmatic and sequential reporting on budgeting and
- During its Legislation or authorization management.
phase, the legislature wielded so much • Enables the legislative financial
influence on agencies of their choice committees to decide more easily the
basic expenditure issues
Disadvantages • “forward estimates” – to show the
baseline cost of continuing existing
• Lack or absence of performance
policies
measures, personnel processing
• 1999 then reintroduces in 2006 as
technical skills and competencies.
analytical tool
• Executive agencies pointed out that
there’s indifference in the execution of Paper on Budget Strategy
programs, and lack of understanding on
• New initiative originated in 2006
the part of key operation officials.
• Internal document used as a basis for
discussion within the Development
Budget Coordinating Committee (DBCC)
BUDGETING IN THE PHILIPPINES for deciding on priority sectors for the
use of new resources.
❖ ARROYO ADMINISTRATION
- Major turning point for budget policy • Three priority sectors have been
consistently identified: education, health
- Primary expenditure declined by two
and infrastructure development. In 2008,
percentage points of GDP
agriculture and welfare were added
- Declared that the country was on the
because of this the global rice crisis.
verge of a “fiscal crisis” and identified
the budget deficit as the “most urgent
problem.
❖ AQUINO ADMINISTRATION
- Philippines suffers from rampant tax
- “Daang Matuwid” – Ituloy and
evasion and complicit corruption in
Paggugol ng Matuwid.
the revenue collection agencies
- A Budget of Inclusive Development –
Public Expenditure Management No one should be left behind as the
country progresses.
“The programme of restoring fiscal
- Passed the Budget on time for six
strength is premised on the painful fact that the
executive years.
government could, very soon, no longer afford
- To link budgets to agency
to subsist on borrowed funds.”
performance through Performance-
Promotes 3 outcomes informed Budgeting and enable
citizens to hold agencies
1. Aggregate Fiscal Discipline – Spending
accountable for delivering their
with means
targets through the use of the
2. Allocative Efficiency – Spending on the
budgets.
right priorities
3. Operational Efficiency – Spending with [Link]-Informed Budgeting
Value money (System)
Medium-Term Expenditure Framework a) Publication of performance information
in the budget documents submitted to
• Known as “activity” or “functional”
Congress
budgeting, the Hoover Commission
b) Strengthens the accountability of
succeeded in creating a feeling of
government for spending with
novelty and excitement for the post-war
measurable results
generation of public administrators.
c) A set of output and outcome indicators
• 6 year fiscal plan of projected revenues and targets are presented in the NEP
and deficit tragets and GAA for each MFO
Advantages - Supporting the Philippine
Development Plan 2017-2022
• Adoption of the PIB has made the
budget more understandable to the Key Principles
layman because it simplified budget
• Credible and Disciplined Fiscal Policy
presentation
• Fiscal space focused on equitable and
• Easier to gauge the performance of an
social order
Agency. Compared to traditional line-
item based budgeting, it links funding to • Budget Reflecting Our Policies
results • Strengthening transparency,
participation and accountability
• Strengthens the direct relationship
between planning, budgeting, and Key Expenditure Priorities
outcomes, and enhances transparency
and accountability in the allocation of 1. Promoting an enabling and Supportive
limited resources Economy
2. Reducing Inequality in Economic
2. Bottom-Up Budgeting Development Opportunities
“Pagbabago”
a) A demand-driven budget-planning
3. Increasing potential for Growth
process
“Kaunlaran”
b) Institutionalizes people’s participation in
the budget process to gain a better 4. Enhancing the Social Fabric “Malasakit”
understanding of their needs and 5. Foundations for Inclusive and
requirements and ensure that these are Sustainable Development
met Program Convergence Budgeting
c) Open government partnership in 2015
has recognized the BuB program as one • An approach to facilitate and incentivize
of the three Best Practices in Fiscal coordination between agencies on
Transparency from around the world priority inter-Agency programs
• National Budget Memorandum No. 114
Advantages in 2012 sets out guidelines for building
• Final output to be produced by the Local and sustaining cooperation in the
Communities Produced by Local development and implementation of
Poverty Action Team per priority programs
municipality/city composed of equal • The lead Agency for each program has
representation from LGUs and CSOs the responsibility to ensure collaboration
• Local Poverty Reduction Action Plan and coordination among all the agencies
(LPRAP) will come from the budgets of participating in the program
participating agencies understanding on the part of key
operation officials.

❖ DUTERTE ADMINISTRATION PLANNING, PROGRAMMING AND

- “Budget for Real Change” BUDGETING SYSTEM
- A Budget for and by the people the
2017 Budget invests in programs PPBS is a strategic framework designed to
and projects that will help realize the address the economic allocation of resources
collective aspirations of Filipinos and improve government policy decision-
making
Key Components of PPBS • Encourages companies to evaluate
every department's funding, and their
• Identification of Program Objectives:
current needs
Agency managers define clear program
objectives aligned with government Disadvantage
policies.
• It is time consuming and complicated to
• Measuring Program Output: Establish
execute
metrics to measure program
• Making an entire budget from scratch
performance and effectiveness.
may require large number of employees
• Preparation of Multi-year Plans: Develop
detailed multi-year program and
financial plans to ensure sustainable
resource allocation. References:
• Analysis of Costs and Benefits: Conduct [Link]
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Historical Context of PPBS
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• Implemented during Martial Law in W3aYLMPvIvjDHTlhYLkLzs2oDrhyI3YzS2vezt
September 1972 through PD No. 1 for cULV8eckTc-
government reorganization. SG7pZhhoTJF6xA6NZmk9ULx3kDLRbwr-
• Establishment of NEDA (National O8i8fs5NhJEk1mN7IAyevlD-1qDuJCk_O7uw
Economic and Development Authority)
to oversee development plans and
monitoring.
• Navy attempted to apply the PPBS
model to national defense in 1976.

ZERO BASE BUDGETING

• It was developed by Peter Pyhrr in the
1970s
• An operating, planning and budgeting
method which requires every agency
manager to justify his entire budget
systems in detail and transfers the
burden of proof to each manager why he
should spend any money.
• The process of zero-based budgeting
starts from a "zero base," and every
function within an organization is
analyzed for its needs and costs.
Advantage
• Important programs and projects are
allocated enough funding