The Budgeting Process

1. What is government budgeting? Government budgeting is important because it enables

the government to plan and manage its financial resources
allocating revenues and borrowed funds to support the implementation of various programs and
2. Why is government budgeting important? projects that best promote the development of the country.
Through the budget, the government can prioritize and put
into action its plans, programs and policies within the
prioritise plans and program constraints of its financial capability.
Budgeting for the national government involves four (4)
distinct phases: budget preparation, budget legislation or
3. What are the major processes involved in national authorization, budget execution or implementation and
government budgeting? budget accountability.

budget cycle While distinctly separate, these processes overlap in

Government budgeting is the allocation of public funds to implementation during a budget year.
attain the economic and social goals of the country. It also
entails the management of government expenditures to Budget preparation for the next budget year proceeds
create the most impact from the production and delivery of while government agencies are executing the budget for
goods and services. the current year. At the same time, the state is engaged in
budget accountability as it reviews the past year's budget.

4. What is budget The budget preparation phase starts with the Development
preparation? NEDA
DOF The Department of Finance (DOF), the Bureau of the
Treasury, the Bureau of Internal Revenue and the Bureau
of Customs help the DBCC in determining the sources of
financing. They project the revenues that will be generated
DBCC for the budget year as well as the borrowings that may
have to be tapped.
Budget Call
The DBCC determines the overall economic targets,
expenditure levels, the revenue projection, deficit levels
and the financing plan. It submits them to the President
and the Cabinet for approval.
Agencies
Once these are approved, 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.

Agencies undertake their own internal consultations. They

rank programs, projects and activities using the capital
budgeting approach. Then they submit their budget
DBM 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.
submission to Congress
Budget Coordination Committee (DBCC). It is headed by
the DBM Secretary and its members are the Secretary of The proposed expenditure programs are confirmed by the
Finance, the NEDA Director-General, and the Bangko agency heads.
Sentral Governor, with the Office of the President for
general oversight. The DBM consolidates the budget proposals and then
submits them to the Cabinet where the budget is
The NEDA provides the over-all macro-economic discussed with the President.
assumptions with which budgetary levels are to be
determined. They involve the projected Gross National Once the budget is approved by the President and the
Product (GNP) real growth rates, inflation rates, 91-day Cabinet, the President submits it to Congress. This must
treasury bill rates, the London Interbank Offered Rates be done no more than thirty days after the opening of its
(LIBOR) rates, foreign exchange rates, population growth, regular session, as required under the Constitution.
and other economic parameters.

The budget preparation phase is guided by budget calendar.

BUDGET PREPARATION CALENDAR FY 2002 April 6, 2001

v Issuance of the Budget Call

v Budget Forum on the FY 2002 National Budget April 17,

1. DBM 2001 April

2. GOCCs/GFIs 17, 2001

April 18,
3. National Government Agency Representatives
2001 April
v Issuance of the Baseline Budget
18, 2001
v DBM-RO/Agency ROs Budget Forum on the FY 2002 National Budget
April 20,
v Deadline of Submission of Past Year s Actual Obligation and Current
2001
Year Appropriations (FY 2000-2001)

v Deadline of Submission of Budget Proposals

April 20,
v Technical Budget Hearings on Department/Agency GOCCs/GFIs Budget
2001 May
Proposals
2, 2001
v FAPs Consultation Meetings with Donors and Oversight/Implementing

Agencies
May 15-18,
v DBM Budget Review
2001

v Presentation to the Cabinet of the FY 2002 Proposed

v Budget Levels of Department/Agency/Special Purpose Funds

May 21-25,
2001
v Finalizing of National Expenditure Program (NEP), BESF Tables,
May 25-
Staffing Summary, Budget Message
June 22,
2001
v Printing of FY 2002 Budget Documents

Submission of the FY 2002 Budget Documents to the President

June 25,
v Submission of the President s Budget to Congress 2001

June 25 -
July 5,
 2001

July 5-19,

2001 July

20, 2001

July 24,

2001

execution?

issuance of allotment releases

5. What is budget
legislation? The President submits to Congress the National
Expenditure Program (NEP), the Budget of Expenditures
and Sources of Financing (BESF), and the President's
House of the Representatives Senate of the Philippines
Budget Message. The BESF is the document which
reflects the annual budget and the estimates and sources
Bicameral Conference of financing. The document is presented by the Executive
Committee branch to the Legislative branch.

GAA The proposed budget is first reviewed by the Committee

on Appropriations of the House of Representatives. The
Committee summons the agencies to justify their budgets,
with the DBM assisting and providing technical inputs. The
Appropriations Committee then presents to the House
body the proposed budget and passes it at the Third
Reading.

This then goes to the Senate Finance Committee for

another round of hearings and deliberations. The
Committee presents the proposed amendments to the
House Budget Bill to the Senate for approval.

Then a Bicameral Conference Committee, composed of

members of both Houses, is convened to resolve
differences. The committee arrives at a common version,
and it is then submitted to the President. If there are items
which he/she disagrees with, then the
President can exercise line-item veto power. The
President then signs it into law as the General
Appropriations Act.

The law contains the new appropriations in terms of

specific amounts: for salaries, wages and other personnel
benefits; for maintenance and other operating expenses;
6. What is budget for capital outlays, all authorized to be spent by the
government for a given year. program is implemented. Allotments are issued,
chargeable against the regular agency budgets. It is also
The approved budget becomes effective on the first day of at this stage where agencies may submit requests for
the budget year concerned, or when it is signed by the availment from SPFs. Agencies are often required to
President, whichever comes later. submit additional reports and documents to support their
It is at the budget execution stage that the expenditure requests.
In 2001, the Congress failed to pass the FY 2001 budget, thus the FY 2000 GAA
was automatically reenacted.

cash release program Cash releases are made to agencies to cover obligations that are current or
carried over from the previous year.

However, not all allotment releases require the issuance of Notice

of Cash Allocation releases or NCAs. Examples of these are debt
service, customs duties and taxes, the conversion of liability to
equity, or the subsidy to government corporations. The Cash

7. What is budget Release Program is also based on actual obligations of an

agency, as reported in the quarterly trial balance submitted
accountability?
to DBM. Hence, it will not issue NCAs for unobligated
balances of allotments.
performance indicators
The accountability phase is the final phase of the budget
process. This is when the agencies report their actual
assessment of agency
physical and financial performance.
performance

The assessment of the physical achievements of an

agency is aided by performance indicators. These are
yardsticks for determining how well an agency has
accomplished its objectives. They measure outcome,
output, process efficiency and client satisfaction. They may
be quantitative or qualitative in nature.

At this phase, the Commission on Audit (COA) figures

prominently in the assessment of agency performance.
The COA is the government body tasked with looking at
the legality, propriety and accuracy of government financial
transactions. The COA has
auditors assigned to each government agency and it has
regional offices to review these transactions. Those that
are considered excessive, inappropriate or illegal are not
passed in audit. COA can recommend means for setting
them right, if such is still
8. Why does the
possible.
government prepare a new budget every year?
Trial balances of agencies, which are submitted to DBM
ensures continuous evaluation and review
and COA on a quarterly and annual basis, report how
agencies use up their allotments and cash allocations.
The preparation of the government's budget every year is
in accordance with the Constitution. The Charter requires
the President to submit a budget of expenditures and
9. How does the budget become a law? sources of financing within 30 days from the opening of
every regular session of Congress. effectiveness. In accordance with the requirements of the
Constitution, the President submits his/her proposed
The yearly preparation of the budget also follows the annual budget in the form of a Budget of Expenditures
principle that all government spending be justified anew and Sources of Financing (BESF) supported by details of
each year. This ensures that government continuously proposed expenditures in the form of a National
evaluates and reviews the Expenditure Program (NEP) and the President's Budget
allocation of resources for cost efficiency and Message which summarizes the budget policy thrusts and
priorities for the year.

In Congress, the proposed budget goes first to the House of Representatives, which assigns the
task of initial budget review to
its Appropriations Committee.
 The Appropriations Committee together with the other House
SubCommittees conduct hearings on the budgets of
departments/agencies and scrutinizes their respective
programs/projects. Consequently, 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, through its
different subcommittees also starts to conduct its own review and
scrutiny of the proposed budget and proposes amendments to the

10. What is the General Appropriations Act? law, at which time it becomes the General Appropriations
House Budget Bill to the Senate body for approval. Act.
The General Appropriations Act (GAA) is the legislative
To thresh out differences and arrive at a common version authorization that contains the new appropriations in terms
of the General Appropriations Bill, the House and the of specific amounts for salaries, wages and other
Senate creates a Bicameral Conference Committee that personnel benefits; maintenance and other operating
finalizes the General Appropriations Bill. 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
Once a common budget bill has been approved by both government for a given year.
Houses, it is submitted to the President for signing into

11. How is the budget implemented? agency budget matrix allotment release program GARO/SARO

Simplified Fund Release System notice of cash allocation

Summary Lists of Check Issued

Budget implementation starts with the release of funds to are similarly situated in line with specific policy initiatives.
the agencies. To accelerate the implementation of
government programs and projects, and to ensure the Following the SFRS, DBM requires the submission of
judicious use of budgeted government funds, the individual agency budget matrix (ABM) at the beginning of
government adopted the Simplified Fund Release System each budget year, upon approval of the annual General
(SFRS) beginning 1995. Appropriations Act. The ABM is a disaggregation of all the
programmed appropriations for each agency into various
In contrast to the previous system of releasing funds expenditure categories. As such, the ABM serves as a
based on individual agency requests, the SFRS blueprint which provides the basis for determining the
standardized the release of funds across agencies which timing, composition and magnitude of the release of the
budget.
Based on updated resources and economic development thrusts,
and consistent with the cash budget program, the Allotment
Release Program (ARP) is prepared. It prescribes the guidelines in
the prioritization of fund releases.

In previous years, the ARP serves as basis for the issuance of

either a General Allotment Release Order (GARO), or a Special
Allotment Release Order (SARO). Both authorize agencies to incur
obligations. The GARO was subsequently replaced by the what
you see is what you get policy or WYSIWYG. Currently, DBM no
longer adopts the WYSIWYG instead authorizes the incurrence of
obligations through the approval of the different ABM.

Subsequently, 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 indicated. The Bureau of the Treasury
replenishes daily the government servicing banks. The
replenished funds are equivalent to the amount of negotiated
checks presented to the said banks by implementing agencies.

The release of NCAs by DBM is based on:

1) the financial requirements of agencies as indicated in their

ABMs, cash plans, and reports, such as the Summary List of
Checks Issued (SLCI); and

2) the cash budget program of government and updates on

projected resources.

Common Fund
Agencies utilize the released NCAs following the Common Fund concept. Under
this, agencies are given maximum flexibility
in the use of their cash allocations. The proviso is that the
authorized allotment for a specific purpose is not exceeded.
Projects thus run faster.
12. Why are adjustments made on the budget program? ③ Change in resource availabilities -- Budget
adjustments are undertaken when additional resources
revisions in macroeconomic targets become available such as new grants, or proceeds from
newly negotiated foreign loans and grants. Corresponding
budgetary adjustments budget adjustments are also needed when resource
Adjustments are made on the budget even during
implementation primarily because of the following:
13. What mechanisms ensure that funds have been
③ Enactment of new laws -- Within the fiscal year, new properly allocated and spent?
legislation with corresponding identified new revenue
COA s audit
sources are passed.
③ Adjustments in macroeconomic parameters -- The
macroeconomic targets considered in the budget are
periodically reviewed and updated to reflect the impact of
recent economic developments. The relevant indicators
affecting the budget include the following: the Gross
National Product (GNP), inflation rates, interest rates,
foreign exchange rates, oil prices, and the level of imports.
Sensitivity measures will determine whether recent 14. Is the role of the DBM in the budgeting process limited
macroeconomic developments have a negative or to national government agencies?
favorable effect on the budget.
corporate operating budgets and ensures the proper allocation of cash. DBM likewise
recommends the budget policy covering the allowable
local annual/supplemental budgets deficits. It sets the criteria for determining the appropriate
subsidy, equity and net lending of GOCCs.

For LGUs, DBM reviews the annual and supplemental

budgets of provinces and highly urbanized cities. It also
manages the proper allocation and release of the Internal
Revenue Allotment (IRA) of LGUs and their share in the
utilization of national wealth.

generation falls below target.

Systems and procedures are set in place to monitor the

performance and cost effectiveness of agencies. These
activities belong to the fourth and last step of the budget
process: the budget accountability phase. At the agency
level, this takes the form of management's review of
actual work accomplished compared to work targets, vis-a-
vis the financial resources made available.

Also, detailed examinations of each agency's books of

accounts are undertaken by a resident representative of
the Commission on Audit (COA). They ensure that all
expenses have been disbursed in accordance with
accounting regulations and authorized funding purposes.
No, the role of DBM here is not limited to national
government agencies. It coordinates all levels of
government

-- national government departments/agencies,

government-owned and controlled corporations, and local
government units -- in the preparation, execution and
control of expenditures.

DBM reviews the corporate operating budgets of GOCCs