THE BUDGET PROCESS
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THE NATIONAL BUDGET
Government Accounting is primarily budgetary accounting. It does not only aim to
provide information on past events and transactions but also budget information in
accordance with PPSAS.
The Philippine Constitution and other laws require government funds to be
utilized in accordance with a national budget that is duly approved by
legislation.
National Budget (Government Budget) – is the governments estimate of the
sources and uses of government funds within a fiscal year.
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THE BUDGET CYCLE
THE BUDGET CYCLE HAS 4 PHASES
Budget Preparation
Budget Legislation
Budget Execution
Budget Accountability
Budget Preparation – the Philippines uses a bottom up
approach wherein several parties participate in the
budget preparation starting from the lowest to the
highest levels of the government.
Bottom Up Approach - is a participatory budgeting
initiative in the Philippines that aimed to involve local
communities in the decision making process for the
allocation of government funds.
Process of Bottom up Budgeting approach
• Participatory Planning – local communities, through Civil Society Organizations (CSO)
and Local Government Units (LGU), participated in identifying projects that would be
funded.
• Project Proposals – LGUs together with CSOs, submitted project proposals based on
the priorities identified during the participatory planning process.
• Funding and Implementation – approved projects were funded through the
national budget and LGUs were responsible for implementing these projects,
with oversight from both local stakeholders and national agencies.
INCREMENTAL BUDGETING VS ZERO-BASED BUDGETING
Prior to 2011, the Philippines adopted the Incremental type of budgeting. However starting
2011, the Philippines shifted to Zero-Based budgeting approach.
STEPS IN BUDGET PREPARATION
[Link] CALL – The budget preparation starts when the Department of
Budget and Management (DBM) issues a budget call to all Government
Agencies. The 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.
National Budget Memorandum No. 155 dated July 2, 2025
RELEVANT TERMS
2. Budget Hearings – Budget hearings are conducted after the agencies submit
their budget proposals. Each agency defends its budget proposal before the DBM.
The DBM deliberates on the budget proposals, makes recommendations, and
consolidates the deliberated proposals into the National Expenditure Program
(NEP) and Budget of Expenditures and Sources of Financing (BESF). The DBM
then submits the proposed budget to the President.
3. Presentation to the Office of the President – The President and Cabinet
Members review the proposed budge. After the President approves the
proposed budget, the DBM finalizes the budget documents to be submitted
to the Congress. At this point, the proposed budget is referred to as the
“President’s Budget”
3. Budget Legislation – Government should 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 House of Representatives
conducts hearings to scrutinize the various agencies respective proposed programs and
expenditures. Thereafter, the House of Representatives, prepares the General Appropriations
Bill (GAB)
Senate Deliberations – The Senate conducts its own deliberations on the GAB. These
normally start after the Senate receives the GAB from the House of Representatives. However,
for expediency, hearings in the Senate start even as Representatives deliberations are
ongoing.
Bicameral Deliberations – after deliberations in both houses are finished, a committee
called the Bicameral Conference Committee is formed to harmonize any conflicts between the
Representatives and Senate Versions of the GAB
President’s Enactment – The Presidents enacts the budget, which is now known as the
General Appropriations Act (GAA). Before enactment though, the President may exercise his
veto power as conferred to him under the Philippine Constitution.
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. It consists of the
following:
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 for 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 economical, 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:
a. revenue collections exceed original revenue targets in the Budget of
Expenditures and Sources of Financing (BESF) submitted by the President to
the Congress
b. new revenues are collected or realized from sources not originally
considered in the BESF; or
c. newly-approved loans for foreign assisted projects are secured
when
conditions are triggered for other sources of funds such as perfected loan
agreements for foreign assisted projects.
Retained Income/Funds – collections which are authorized by law to be used
directly by agencies concerned for their operation or specific purpose
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. 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 conditions.
3. Budget Execution – this is the phase where government funds are
spend.
Steps in Budget Execution
1. Release guidelines and Budget Execution Documents
The DBM issues guidelines on the release and utilization of funds while
the various agencies submit their Budget Execution Documents (BEDs). A BED
summarizes the an agency’s fiscal year plans and performance targets. It
includes the following:
Physical and Financial Plan, Monthly cash program, Estimate of Monthly
Income, List of obligations that are not yet due and demandable.
3. Budget Execution – this is the phase where government funds are
spend.
Steps in Budget Execution
1. Release guidelines and Budget Execution Documents
The DBM issues guidelines on the release and utilization of funds
while the various agencies submit their Budget Execution Documents
(BEDs). A BED summarizes the an agency’s fiscal year plans and performance
targets. It includes the following:
Physical and Financial Plan, Monthly cash program, Estimate of Monthly
Income, List of obligations that are not yet due and demandable.
The following are the major recipients of the budget:
a. National Government Agencies b. Local Government
Units c. Government Owned and Controlled
Corporations
2. Allotment – The DBM formulates the Allotment Release
Program (ARP) to set the limit for allotment releases
during the upcoming year. This is used as a control
device to ensure that releases conform to the national
budget. Alongside, is a Cash Release Program (CRP)
which sets the limits for the year, for each quarter and
for each month.
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. It is also
referred to as Obligational Authority.
It is illegal for a government entity to incur obligations without having first
received the “Allotment” Moreover, the type and amount of obligations to be
incurred must conform to those that are specified in the “Allotment”
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 maybe referred to as a commitment that encompasses
possible future liabilities based on current contractual agreement.
The following are the documents used in releasing allotments to government
agencies:
a. 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” a fund
release document that serves as the obligational authority for the
comprehensive release of budgetary items appropriated in the General Appropriations
Act
b. Special Allotment Release Order (SARO) – covers budgetary items under “For
Later Release” in the entity’s submitted Budget Execution Documents, subject to
compliance of required documents/clearances.
c. General Allotment Release Order (GARO) – is a comprehensive authority
issued to all national government agencies, in general , to incur obligations not
exceeding an authorized amount during a specified period for the purpose
indicated therein. It covers automatically appropriated expenditures common to
most agencies without need of special clearance or approval such as the
Retirement and Life Insurance Premium
DIFFERENCE BETWEEN GAARD, SARO AND GARO
GAARD:
This document releases funds for all categories of the agency's budget,
including personnel services (salaries), maintenance and other operating
expenses (MOOE), and capital outlays (major purchases). It ensures the timely
implementation of projects and programs.
SARO:
This is used when an agency needs to access funds for a specific project or purpose that
is not covered by the standard budget. Examples include disaster relief, hiring temporary
staff, or implementing a unique program. A SARO essentially creates a specific allocation
for a particular need.
GARO:
This document authorizes an agency to incur obligations (spend) within a specified
amount and period. It's essentially a general release of funds for the agency's day-to-
day operations, subject to the limits set in the budget.
In essence, GAARD is the overarching document for the entire budget, while SARO
and GARO are more specific in their application.
SAMPLE GENERAL APPROPRIATIONS ACT RELEASE DOCUMENT
SAMPLE ALLOTMENT RELEASE ORDER
SAMPLE GENERAL ALLOTMENT RELEASE ORDER
[Link] of Obligations – government agencies incur obligations which will be
paid by the government e.g. entering into contracts, hiing of personnel, purchase of
supplies etc.
[Link] Authority – the DBM issues disbursement authority to the
government agencies. This is the point where government agencies obtain access
to government funds.
The following are the documents used in releasing disbursement authority to
government agencies:
a) Notice of Cash Allocation
b) Notice of Transfer Allocation
c) Non-cash availment Authority
d) Cash disbursement ceiling
4. Budget Accountability – this phase occurs concurrently with the Budget Execution
phase. As the budget is being executed, it is regularly monitored to determine the
conformance of actual results with planned targets.
Budget Accountability Reports – government agencies are required to submit the following
accountability reports:
a. Monthly Report of Disbursements
b. Quarterly Physical Report of Operation
c. Statement of Appropriations, Allotments, Obligations Disbursements and Balances
d. Summary of Appropriations, Allotments, Obligations, Disbursements and Balances
by
Object of Expenditures
e. List of Allotments and Sub Allotments
f. Statement of Approved Budget, Utilization, Disbursements and Balances
g. Summary of Approved Budget, Utilizations, Disbursements and Balances by Object
of
Expenditures
h. Quarterly Report of Revenue and Other Receipts
i. Aging of Due and Demandable Obligations
j. Consolidated Statement of Allotments, Obligations and Balances per Summary of
Appropriations
Performance Reviews – The DBM and COA perform periodic reviews
of the agencies performance and budget accountability and report to
the President
Audit – the COA audits the agencies
The budget reports, together with other budget records, provide
information in preparing the Statement of Comparison of Budget and
Actual Amounts, which is one of the components of a complete set of
financial statements of a government entity.
BUDGET CYCLE STORY