Ena Josel F. Portillo 1 enaportillo13@yahoo.

com

What is Budget? A budget is a detailed financial program in which anticipated expenditures and anticipated revenues, including receipts from borrowings, are itemized and exactly balanced.
- P.A.: The Business of Government Jose P. Leveriza

The budgeting system includes all comprehensive process as well as the laws, rules and practices observed by government in planning and carrying out
2

assisting in planning expenditure to meet policy requirements policy implementation and control measuring and monitoring performance to determine the total expenditure of the organization and ensure that it is consistent with total revenues provide the basis for authorizing expenditure and collection of fees and

The Concepts of National Budgeting System In The Country

Concept of Balance Concept of Fiscal Control Concept of Obligation Concept of Appropriation

Approaches to Budgeting
1. The traditional budgeting approach 2. The new management/managerial budgeting approach

Top down budgeting Bottom up budgeting Line-item budgeting

Zero-based budgeting (ZBB) Program based budgeting Priority-based budgeting Performance-based

Understanding The Budget Process

CSO

(its four stages)

DBM

Congress

COA

Office of the President

7

This starts with the Budget Call and ends with the Presidents submission of the proposed budget to Congress.

1.

The Budget Call

At the beginning of the budget preparation year, the Department of Budget and Management (DBM) issues the National Budget Call to all agencies (including state universities and colleges) and a separate Corporate Budget Call to all GOCCs and GFIs. The Budget Call contains budget parameters (including macroeconomic and fiscal targets and agency budget ceilings) as set beforehand by

Early Preparation
Under the Aquino Administration, the DBM has established a new tradition of beginning the Budget Preparation phase earlier, to ensure that the National Budget is enacted on time. Under the new Budget Preparation Calendar, the Budget Call is issued in December (versus around April in the past); and the submission of the Presidents budget a day after the State of the Nation Address (in contrast to earlier practice where it is submitted during the
10

2. Stakeholder

Engagement
A new feature in budget preparations which seeks to increase citizen participation in the budget process, departments and agencies are tasked to partner with civil society organizations (CSOs) and other citizen-stakeholders as they prepare their agency budget proposals. This new

11

ORIGINAL SET (Piloted in 2012) Department of Health Department of Education Department of Social Welfare and Development Department of Public Works and Highways Department of Agriculture Department of Agrarian Reform National Food Authority National Housing Authority National Home Mortgage and Finance Corp.

NEW SET (Starting 2013) Department of Tourism Department of Transportation and Communication Department of Interior and Local Government Department of Justice Department of Labor and Employment Department of Environment and Natural Resources Light Rail Transit Authority National Electrification Administration National Irrigation Administration

Note: All other departments and agencies are highly encouraged to undertake the process.
12

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. The Aquino government, through the Cabinet Cluster on Human Development and Poverty Reduction, has identified 300 to 400 of the poorest municipalities and will engage these in crafting community-level poverty reduction and empowerment plans. This initial salvo of bottom-up budgeting

13

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

14

4.

Executive Review
The recommendations are presented before an Executive Review Board which is composed of the DBM Secretary and senior officials. Deliberations here entail a careful prioritization of programs and corresponding support, vis--vis the priority agenda of the national government. Implementation
15

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

16

6.

Presentation to President and 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
17

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

18

 Budget

of Expenditures and Sources of Financing (BESF) Mandated by the Constitution, this contains the macroeconomic assumptions, public sector context (including overviews of LGU and GOCC financial positions), breakdown of the expenditures and funding sources for the fiscal year and the two previous years. Expenditure Program (NEP) This contains the details of spending for each department and agency by program,
19

National

 Details

of Selected Programs and Projects This contains a more detailed disaggregation of key programs, projects and activities in the NEP, especially those in line with the national governments development plan.
Summary This contains a summary of the

Staffing

20

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.
21

1. House Deliberations
The House of Representatives, in plenary, assigns the Presidents Budget to the House Appropriations Committee. The Committee and its Sub-Committees then schedule and conduct hearings on the budgets of the departments and agencies and scrutinize their respective programs and projects. It then crafts the General Appropriations Bill (GAB).

In plenary session, the GAB is sponsored, presented and defended by the Appropriations 22

2. Senate Deliberations
As in the House process, the Senate conducts its own committee hearings and plenary deliberations on the GAB. Budget deliberations in the Senate formally start after the House of Representatives transmits the GAB. For expediency, however, the Senate Finance Committee and Sub-Committees usually start hearings on the GAB even as House deliberations are ongoing.

23

3. 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 GAB. A Harmonized Version of the GAB is thus produced.

24

4. Ratification and Enrollment

The Harmonized or Bicam Version is then submitted to both Houses, which will then vote to ratify the final GAB for submission to the President. Once submitted to the President for his approval, the
25

5. The Veto Message

The President and DBM then review the GAB 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 GAB 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).

26

6. 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.

27

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.
28

1. Release Guidelines and Program The budget execution phase begins with DBMs issuance of guidelines on the release and utilization of funds.

29

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.

30

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.
31

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).
This document disaggregates all programmed appropriations for each agency into two main expenditure categories: not needing clearance and needing clearance. ABM. 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 32 President, as the case may be (for instance, lump

33

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
34

6. Cash Allocation
To authorize an agency to pay the obligations it incurs, DBM issues a disbursement authority. Most of the time, it takes the form of a Notice of Cash Allocation (NCA); and in special cases, the Non-Cash Availment
35

 NCA. This is a cash authority issued periodically by the DBM to the operating units of agencies to cover their cash requirements. The NCA specifies the maximum amount of cash that can be withdrawn from a government servicing bank for the period indicated. The release of NCAs by DBM is based on an agencys submission of its Monthly Cash Program and other required documents. Others

Disbursement Authorities. In contrast to NCAs,

NCAAs are issued to authorize non-cash disbursements. CDCs are meanwhile
36

7. Disbursement
This is the final step of the budget execution phase, where government monies are actually spent. The Modified Disbursement Scheme is mostly used, where disbursements of national government agencies chargeable against the Treasury are made through government servicing banks, such as the Land Bank of the Philippines. The budget process, of course, does not end when government agencies spend public funds: each and every peso must be
37

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.
38

1.

Performance and Target Outcomes

Agencies are held accountable not only for how these use public funds ethically, but also on how these attain performance targets and outcomes using available resources.
39

2. Budget Accountability Reports (BARs)

Submitted by agencies on a monthly and quarterly basis, BARs are required reports that show how agencies used their funds and identify their corresponding physical accomplishments. These include quarterly physical and financial reports of operations; quarterly income

40

No Report, No Release
Starting 2012, the DBM will be withholding certain fund releases to agencies if these fail to submit their Budget Accountability Reports. In particular, these will be funds from the Miscellaneous Personnel Benefits Fund (MPBF) for compensation adjustments under the Salary Standardization Law, provisions for unfilled positions and employee clothing allowances. These funds to be withheld are only limited to agencies MPBF allotments so that only the agencies are penalized and
41

3. Review of Agency Performance

The DBM regularly reviews the financial and physical performance of agencies. Actual utilization of funds and physical accomplishments, as indicated in the agencies BARs, are evaluated against their targets. Agency Performance Reviews (APRs) are conducted quarterly or every semester, as the case may be. An annual Budget Performance Assessment Review (BPAR)

42

4. Audit
Auditing is not within the DBMs jurisdiction, and is instead lodged under the Commission on Audit (COA). Nonetheless, auditing is critical in ensuring agency accountability in the use of public funds. The DBM uses COAs audit reports in confirming agency performance,

43

5. Performance-Based Incentive System

The DBM is also in the process of establishing a performance-based incentive system which will recognize and reward good performance among government employees to help improve the efficiency of service delivery across all government institutions.
44

The Philippine budget is considered the most complicated in the world, incorporating multiple approaches in one single budget system: line-item (budget execution), performance (budget accountability), and bottom-up (budget preparation). The Department of Budget and Management prepares the National Expenditure Program and forwards it to the Committee on Appropriations of the House of Representative to come up with a General Appropriations Bill (GAB). The GAB will go through budget deliberations and voting; the same process occurs when the GAB is transmitted to the Philippine Senate. After both houses of Congress approves the GAB, 45

http://www.budgetngbayan.com http://www.reports.dbm.gov.ph http://www.termpaperwarehouse.com Leveriza, Jose P.,PA:The Business of Government, 2nd Edition. National Bookstore, Mandaluyong, City;1990.

46

47