THE BUDGET PROCESS OF THE NATIONAL GOVERNMENT

NATIONAL BUDGET
Instrument of national development
Reflects
- National objectives
- National strategies
- National plans
Supports national socio-economic development program
Hence, it should be utilized effectively, economically, efficiently
Consistent with foreign and domestic credit and balance of
payments objectives
Considerations:
- Economic and physical framework plans
- Organization and personnel development strategies
- Multi-year requirements of approved plans and commitments
- Contingent liabilities
To evaluate the operate performance relative to costs, all agencies
design and implement:
1. Management Information Systems (MIS)
2. Improvements in operating systems

THE GOVERNMENT BUDGET CYCLE


I. BUDGET PREPARATION
This process is undertaken in the executive branch of the
government
This starts with the budget call and ends with the presidents
submission of the proposed budget to the congress.

THE GOVERNMENT BUDGET
Section 22, Article VII of the Philippine Constitution requires the
President to submit to Congress, within 30 days from the opening
of every regular session as the general appropriations bill, a budget
of expenditures and sources of financing, including receipts from
existing and proposed revenue measures.

The annual preparation of the National Budget also ensures that all
government spending is reviewed and justified anew each year. This
ensures that the National Government remains strategic in
managing its resources.









A vibrant domestic economy, with more people getting employed
and businesses earning more, generates higher revenues from
taxes. On the other hand, in times of economic crises or when the
economy slows down, government income is affected

Steps in Budget Preparation
1. The Budget Call
At the beginning of the budget preparation year, the DBM issues the
National Budget Call to all government agencies (including state
universities and colleges) and a separate Corporate Budget Call to
all GOCCs and GFIs.

It contains the budget parameters and policy guidelines and
procedures in the preparation and submission of agency budget
proposals.

2. Budget Priority Framework

The Cabinet will define and agree on government priorities that should be
funded for 2014 to 2016. Along these priorities, Cabinet members will make
commitments on programs and projects that they will deliver. These
decisions and commitments are then summarized in a Budget Priority
Framework that will guide all agencies in crafting their respective Budget
Proposals.


Stakeholder Engagement
A new feature in budget preparations which seeks to increase citizen
participation in the budget process.
This new process, which was piloted in the preparation of the 2012
National Budget, is now being expanded towards institutionalization.

BOTTOM-UP BUDGETING
For the first time in history, the National Budget for 2013 will be
prepared using a breakthrough bottom-up approach. As opposed
to the conventional way of allocating resources from top to bottom,
grassroots communities will be engaged in designing the National
Budget.

3. Technical Budget Hearings
These are conducted after departments and agencies submit their Agency
Budget Proposals to the DBM. Here, agencies defend their proposed
budgets before a technical panel of DBM, based on performance indicators
on output targets and absorptive capacity. DBM bureaus then review the
agency proposals and prepare recommendations.

4. Executive Review
The recommendations are presented before an Executive Review Board.
Deliberations here entail a careful prioritization of programs and
corresponding support, vis--vis the priority agenda of the national
government.

5. Consolidation, Validation and Confirmation
DBM then consolidates the recommended agency budgets and
recommendations into a National Expenditure Program and a Budget of
Expenditures and Sources of Financing (BESF). As part of the consolidating
process, the deliberations by the DBCC will determine the agency and
sectoral allocation of the approved total expenditure ceiling, in line with the
macroeconomic and fiscal program. Heads of major departments are invited
to this meeting.

6. Presentation to President and the Cabinet
The proposed budget is presented by DBM, together with the DBCC, to the
President and Cabinet for further refinements or reprioritization. After the
President and Cabinet approve the proposed National Expenditure Plan, the
DBM prepares and finalizes the budget documents to be submitted to
Congress.

7. The Presidents Budget
The budget preparation phase ends with the submission of the proposed
national budgetthe Presidents Budgetto Congress. The Presidents
Budget consists of the following documents, which help legislators analyze
the contents of the proposed budget:
Presidents Budget Message (PBM)
Budget of Expenditures and Sources of Financing (BESF)
National Expenditure Program (NEP)
Details of Selected Programs and Projects
Staffing Summary

THE BUDGET PROPOSAL
The budget proposal covers current operating expenditures and outlays,
including the following, as approved by the President:
a) The Budget Message
b) Summary financial statements
i) Estimated expenditures and proposed appropriations necessary
for the support of the Government for the following fiscal year
ii) Estimated receipts during the ensuing fiscal year under laws
existing at the time the budget is transmitted and under the
revenue proposals, if any, forming part of the years financing
program.
iii) Actual appropriations, expenditures and receipts during the last
completed fiscal year
iv) Estimated expenditures and receipts and actual or proposed
appropriations during the fiscal in progress
v) Statement of the condition of the National Treasury at the end
of the last completed fiscal year, the estimated condition at the
end of the year in progress and at the end of the following fiscal
year.
vi) Essential facts regarding the bonded and other long-term
obligations and indebtedness of the Government, both
domestic and foreign.
vii) Other financial statements and data as are deemed necessary or
desirable in order to make known in reasonable detail the
financial condition of the government
BUDGET ESTIMATES
Heads of departments, offices and agencies of the national
government including the GOCCs submit their request of
appropriations to the DBM following the budget calendar, format
and other pertinent guidelines.
The DBM Secretary reviews the budget estimates and submits his
recommendations to the President.
The budget estimate starts on the regional level

The budget estimates covering the requests for appropriations
include:
(a) Objectives, functions, activities, programs and projects showing the
general character and relative importance of the work to be
accomplished or the services to be rendered, and the principal
elements of cost involved.
(b) Linkage of the work and financial proposals to approved
development plans
(c) Estimated current operating expenditures and capital outlays, with
comparative data for the preceding and current budget years
(d) Identification by region, pursuant to the policies on the
regionalization
(e) Financial sources, reflecting all revenues, proceeds of foreign and
domestic borrowings and other sources particularly those which
accrue to the General Fund
(f) Contingent liabilities, including natl government guarantees of
obligations of GOCCs and their subsidiaries
(g) Brief descriptions of major thrusts and priority programs and
projects for the budget year, results expected, the nature of work to
be performed, estimated costs per unit of work measurement, inc.
the various objects of expenditure for each project.
(h) Organization charts and staffing patterns indicating the list of
existing and proposed positions with corresponding salaries and
proposals for position classification and salary changes, duly
supported by adequate justification.

II. THE BUDGET LEGISLATION
Alternatively called the budget authorization phase, this starts upon the
House Speakers receipt of the Presidents Budget and ends with the
Presidents enactment of the General Appropriations Act.

GENERAL APPROPRIATIONS ACT
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.

BUDGETARY PROGRAMS
Personnel retirement premiums, government insurance, and other
similar fixed expenditures;
Principal and interest on public debt; and
National government guarantees of obligations, provided within the
form of regular budgetary allotments and supplementary
appropriations involving the creation of new offices, programs, or
activities, accompanied and supported by new revenue sources.

UNEXPENDED BALANCES
Revert to the unappropriated surplus of the general fund and
become available for expenditure only after subsequent legislative
enactment, provided that:
1. Appropriations for capital outlay remain valid until fully spent or
reverted;
2. Continuing appropriation for current operating expenditures are
specifically recommended and approved in support of activities
calling for multi-year expenditure; and
3. The President authorizes the use of savings by an agency for a
given year for non-recurring expenditures for a subsequent year.
The President may also approve, on recommendation of the DBM
Secretary, reversion of funds no longer needed for activities funded
by continuing appropriation, balances of which are reviewed as part
of the annual budget preparation process

THE LEGISLATURE
Can reduce any proposed appropriations provided such reduction is
made correspondingly on the total appropriation of the agency and
in the subsequent General Appropriations Act.


Cannot increase the appropriation of any project or program of any
agency of the government.
Neither add special provisions in the budget or increase amounts
specified in special provisions beyond the proposals of the President.
(executive branch)

THE BUDGET LEGISLATION PROCESS
House Deliberations
Senate Deliberations
Bicameral Deliberations
Ratification and Enrollment
Veto Message
Enactment

I. HOUSE DELIBERATIONS
The President submits the following to the House of Appropriations
Committee:
a) Budget of Expenditure and Sources of Financing (BESF)
- proposed budget
b) National Expenditure Program (NEP)
- proposed expenditures
c) President's Budget Message
- summarizes the budget policy thrusts and priorities for the year.

The Appropriation Committee together with the other House Sub-
Committee conduct hearings on the budgets of agencies and
scrutinize their respective programs. Consequently, the amended
budget proposal is presented to the House body as the General
Appropriations Bill.

II. SENATE DELIBERATIONS
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 House Budget Bill to the Senate body for
approval.


III. BICAMERAL DELIBERATIONS
Once both Houses of Congress have finished their deliberations, they will
each constitute a panel to the Bicameral Conference Committee. This
committee will then discuss and harmonize the conflicting provisions of the
House and Senate Versions of the GAA. A Harmonized Version of the GAA is
thus produced.

IV. RATIFICATION AND ENROLLMENT
The Harmonized or Bicam Version is then submitted to both
Houses, which will then vote to ratify the final GAA for submission
to the President. Once submitted to the President for his approval,
the GAA is considered enrolled.
In the final printing of the GAA, any authorized change made by
addition, modification, or deletion is unlawful and null and void. Any
person responsible for such act is criminally liable for falsification of
legislative documents. If the offender is a government official or
employee, he is dismissed from service, in addition to criminal
prosecution.

V. VETO MESSAGE
Veto - Latin for "I forbid" is the power (used by an officer of the
state, for example) to unilaterally stop an official action, especially
the enactment of legislation.
The President and Department of Budget and Management (DBM)
then review the GAA and prepare a Veto Message, where budget
items subjected to direct veto or conditional implementation are
identified, and where general observations are made. Under the
Constitution, the GAA is the only legislative measure where the
President can impose a line-veto (in all other cases, a law is either
approved or vetoed in full).

VI. ENACTMENT
When the GAA is not enacted before the fiscal year starts, the previous
years GAA is automatically reenacted. This means that agency budgets for
programs, activities and projects remain the same. Funding for programs or
projects that have already been terminated is realigned for other
expenditures. Because reenactments are tedious and prone to abuse, the
Aquino Administrationwith the support of Congresshas committed to
ensure the timely enactment of a new GAA every year.

III. THE BUDGET EXECUTION
This is where the peoples money is actually spent. As soon as the GAA is
enacted, the government can implement its priority programs and projects.

Starts with the administration of the allotment system described by Section
38 of P.D. 1177 Revised Budget Act

Section 38. Allotment of Appropriations. Authorized appropriations shall be
allotted in accordance with the procedure outline hereunder:

(a) Appropriations authorized for any department, office or agency of the
Government may be made available for expenditure when the head of
each department, office or agency submits to the Commissioner a
request for allotment of funds showing the estimated amounts
needed for each function, activity, or purpose for which the funds are
to be expended, during the applicable allotment period. The form and
the time of submission of the request for allotment showing the
proposed quarterly allotments of the whole authorized appropriation
for the department, office, or agency, shall be prescribed by the
Commissioner.

(b) In the administration of the allotment system herein provided, each
fiscal year shall be divided into four quarterly allotment periods
beginning, respectively, on the first day of January, April, July, and
October: provided, that in any case where the quarterly allotment
period is found to be impractical or otherwise undesirable, the
Commissioner may prescribe a different period suited to the
circumstances.

(c) Request for allotments shall be approved by the Commissioner who
shall ensure that expenditures are covered by appropriations both as to
amount and purpose and who shall consider the probable needs of the
department, office or agency for the remainder of the fiscal year or
period for which the appropriation was made. Acting under guidelines
as may be issued by the President, the Commissioner is authorized to
approve amounts different from agency estimates where necessary in
order to conform with the terms of the appropriation and the
prospective needs of the department, office or agency. The
Commissioner shall act promptly upon all request for allotment and
shall notify every department, office, or agency of its allotments at
least five days before the beginning of each allotment period. The
notification, which will be sufficient authority for the Chief Accountant
to enter the allotment in the books, shall include an explanation for
any change or modification in the request of the head of the
department, office or agency.

(d) At the end of every quarter, each department, office or agency shall
report to the Commissioner the current status of its appropriations,
the cumulative allotments, obligations incurred/liquidated, total
disbursements, and unliquidated obligations, unobligated and
unexpected balances, and the results of expanded appropriations. Such
department, office, or agency may initiate or request for a change in
allotments in order to adjust to altered conditions, subject to such rules
and regulations as may be issued by the Commissioner.

(e) Releases of funds appropriated for a given agency may be made to its
Regional Offices where dictated by the need and urgency of regional
activities.

(f) The Commissioner shall have authority to modify or amend any
allotment previously issued. In case he shall find at any time that the
probable receipts from taxes or other sources of any fund will be less
than anticipated and that as a consequence the amount available for
the remainder of the term of the appropriations or for any allotment
period will be less than the amount estimated or allotted therefore, he
shall, with the approval of the President and after notice to the
department or agency concerned, reduce the amount or amounts
allotted so as to conform with targeted budgetary goals.

(g) The Commissioner shall maintain control records showing quarterly by
funds, accounts, and other suitable classifications as he may find
necessary, the amounts appropriated, the estimated revenues, the
actual revenues or receipts, the amounts allotted and available for
expenditures, the unliquidated obligations, actual balances on hand,
and the unencumbered balances of the allotments for each
department, office or agency of the Government.

Section 42. Creation of Appropriation Reserves
The Commissioner may establish reserves against appropriations to
provide for contingencies and emergencies which may arise later in
the fiscal year and which would otherwise require a deficiency
appropriations.

The establishment of appropriation reserves shall not necessarily
mean that such portion of the appropriation will change during the
fiscal year justifying the use of the reserve, necessary adjustments
may be made by the Commissioner when requested by the
department, office or agency concerned.

STEPS IN BUDGET EXECUTION

1. RELEASE GUIDELINES AND PROGRAM
The budget execution phase begins with DBMs issuance of guidelines on
the release and utilization of funds

2. BUDGET EXECUTION DOCUMENTS (BEDs)
Agencies are required to submit their BEDs at the start of budget execution.
These documents outline agency plans and performance targets. These
BEDs include the physical and financial plan, monthly cash program,
estimate of monthly income and list of obligations that are not yet due and
demandable.

3. ALLOTMENT AND CASH RELEASE PROGRAMMING
To ensure that releases fit the approved Fiscal program, the DBM prepares
an Allotment Release Program (ARP) to set a limit for allotments issued to
an agency and on the aggregate. The ARP of each agency corresponds to the
total amount of the agency-specific budget under the GAA, as well as
Automatic Appropriations. A Cash Release Program (CRP) is also formulated
alongside that to set a guide for disbursement levels for the year and for
every month and quarter

4. ALLOTMENT RELEASE
Allotments, which authorize an agency to enter into an obligation, are either
released by DBM to all agencies comprehensively through the Agency
Budget Matrix (ABM) and individually via Special Allotment Release Orders
(SAROs).

ABM. This document disaggregates all programmed appropriations
for each agency into two main expenditure categories: not needing
clearance and needing clearance. The ABM is the comprehensive
allotment release document for appropriations which do not need
clearance, or those which have already been itemized and fleshed
out in the GAA.

SARO. Items identified as needing clearance are those which
require the approval of the DBM or the President, as the case may
be (for instance, lump sum funds and confidential and intelligence
funds). For such items, an agency needs to submit a Special Budget
Request to the DBM with supporting documents. Once approved, a
SARO is issued.

5. INCURRING OBLIGATIONS
In implementing programs, activities and projects, agencies incur liabilities
on behalf of the government. Obligations are liabilities legally incurred,
which the government will pay for. There are various ways that an agency
obligates: for example, when it hires staff (an obligation to pay salaries),
receives billings for the use of utilities, or enters into a contract with an
entity for the supply of goods or services.

Section 37. Use of Appropriated Funds

All moneys appropriated for functions, activities, projects and programs
shall be available solely for the specific purposes for which these are
appropriated.

IV. THE BUDGET ACCOUNTABILITY
This phase happens alongside the Budget Execution phase. Through Budget
Accountability, the DBM monitors the efficiency of fund utilization, assesses
agency performance and provides a vital basis for reforms and new policies.

Presidential Decree 1177
Section 57 Evaluation of Agency Performance
Section 58 Budget Monitoring and Information System
Section 59 Monitoring of Expenditures
Section 60 Standard Costs
Section 61 Review of Budgetary Programs
Section 62 Semi-Annual Report on Accomplishments of Government
Agencies
Section 63 Failure to Submit Reports

The agency office submits to DBM or COA:









the current status of its appropriations
cumulative allotments, obligations incurred or liquidated, total
disbursements, and unliquidated obligations
obligated and unexpended balances
results of expended appropriations

Evaluation of Agency Performance
Section 57 The President, through the Commissioner, shall evaluate on a
continuing basis the quantitative and qualitative measures of agency
performance as reflected in the units of work measurement and other
indicators of agency performance, including the standard and actual costs
per unit of work.

Budget Monitoring and Information System
Determine accounting and other items of information, financial or
otherwise, needed to monitor budget performance and to assess
effectiveness of agencies' operations
Prescribe the forms, schedule of submission, and other components
of reporting system, including the maintenance of subsidiary and
other records which will enable agencies to accomplish and submit
said information requirements
Issue rules and regulations that may be applicable when the
reporting requirements affect accounting functions of agencies

- the applicable rules and regulations shall be thus issued by the
Commission on Audit within a period of thirty (30) days after the
Budget Commission prescribes the reporting requirements.

Monitoring of Expenditures
Categories of Expenditures
agency incurring the obligation
program, project and activity
object of expenditure
- including personal services, operating and maintenance
expenditures, equipment, and capital outlays,
region or locality of use
economic or functional classification of the expenditure
obligational authority and cash transactions arising from fund
releases, and such other classifications as may be necessary for the
budget process

Budget Commission:
Determine the data and information requirements thus needed

COA
Formulate the accounting rules and regulations
- including changes in the Chart of Accounts and the general or
subsidiary accounting records, as may be necessary to generate the
desired data and information.

Review of Budgetary Programs
Conduct a continuing review of the budgetary program and project
structure of each department, office or agency,
Basis for modifying or amending such structure for incorporation in
the President's budget proposal to the legislative body.

Government Expenditures Classification
CURRENT OPERATING
Appropriations for the purchase of goods and services for current
consumption or within the fiscal year

CAPITAL OUTLAYS
Appropriations for the purchase of goods and services, the benefits of which
extend beyond the fiscal year and which add to the assets of the
government

ACCOUNTING FOR BUDGETARY REQUIREMENTS
Ways of recording appropriations, allotments and obligation, the
forms used and who are responsible for their maintenance as
prescribed in the NGAS

APPROPRIATION, ALLOTMENT AND THE NOTICE OF CASH ALLOCATION
(NCA)

ARTICLE VI OF THE 1987 CONSTITUTION
Section 29 (1) No money shall be paid out of the Treasury except in
pursuance of an appropriation by law.
(2) No public money or property shall be appropriated, applied,
paid or employees, directly or indirectly, for the use, benefit or
support of any sect, church denomination, sectarian, institution, or
system of religion, or of any priest, preacher, minister, or other
religious teacher or dignitary as such, except when such priest,
preacher, minister, or dignitary is assigned to the armed forces, or
to any penal institution, or government orphanage or leprosarium.

APPROPRIATION
Authorization made by law or other legislative enactment, direct the
payment of goods and services out of government funds under
specified conditions or for special purposes.

ALLOTMENT
Authorization issued by the DBM to the Agency, which allows it to
incur obligations, for specified amounts, within the legislative
appropriation


AGENCY BUDGET MATRIX (ABM)
The official document used as the basis in the release of the
obligation authority
Prepared by the Agency in consultation with DBM
Requirement for the appropriation to be released
Classified into Needing Clearance and Not Needing Clearance
*For automatic appropriations, a separate ABM is prepared and
submitted

ANNUAL CASH PROGRAM
Provides cash to finance the programs reflected in the ABM and the
prior years accounts payable
Submitted with the ABM

NEEDING CLEARANCE
Special Allotment Release Order (SARO) is issued by DBM
Notice of Cash Allocation is released upon request

NOT NEEDING CLEARANCE
Notice of Cash Allocation is issued as requested

In accordance with National Budget Circular No. 440 Adoption of the
Simplified Fund Release System in the Government

CONTROL AND RECORDING OF APPROPRIATIONS, ALLOTMENTS,
OBLIGATIONS AND THE NCA

THE OLD GOVERNMENT SYSTEM
journalized appropriations and released allotments in the books of
the COA maintained by the Accountancy Office.agencies journalized
allotments upon receipt of the approved Agency Budget Matrix
(ABM) and/or Special Allotment Release Order (SARO) and the
obligations they occur.
The Agency Accountant and Cashier maintain the Allocation and
Utilization Control Sheet (AUCS) to monitor and control the
utilization of the Notice of Cash Allocation (NCA).



THE NEW GOVERNMENT SYSTEM - NGAS
Does not journalize the appropriations
The control of the release of allotments and the NCA shall be made
by the DBM and the Bureau of Treasury (BTr), through the registries
that they maintain.
The agency shall also monitor the allotments and the obligations it
incurs in the registry.

RECORDS OF THE DBM
The DBM records the releases for each government agency in the
Registry of Appropriations and Allotments (RAPAL).
Registry for Special Funds Appropriation (RESPFA) - a separate
registry for releases from the Special Purpose Fund.
Registry of Allotments and Notice of Cash Allocation (RANCA) -
maintained for the allotments and the NCA issued to the agency.

RECORDS OF THE BTr
The BTr will enter the data from the NCA as well as the transfer of
cash from its bank account(s) to the appropriate Modified
Disbursement System (MDS) account, in the Registry of NCA and
Replenishments (RENREP).

RECORDS OF THE AGENCY




OBLIGATION











Recognized
Entered in
RAO
Evidenced by
approved
Allotment and
Obligations Slip
(ALOBS)