PUBLIC

FINANCIAL
MANAGEMENT
National Government

Maria Denalynn Nunez

MBA2
 Public Financial Management (PFM)
System of rules, procedures and practices for government to manage public finances in
the areas of:
• Budgeting
• Accounting
• Auditing
• Cash management
• Management of public debt
• Revenue generation
• Public reporting on public sector financial operations
Basic Principles of Public Finance Management
Importance of Public Financial Management
PFM is an essential part of the government’s plans to improve
transparency, accountability, public institutions and
particularly governance in pursuit of more inclusive growth
and poverty alleviation.
A sound PFM system helps reduce the opportunity for
misuse of funds, aids decision-makers in the government as
they perform their functions and decide where to allocate
funds to achieve the greatest good, and provides
transparency regarding where and how the public funds are
actually being spent.
Basic Laws and Regulations
Executive Order 55
Directing the Integration and Automation of Government Financial Management System
(signed by President Benigno S. Aquino on 6 September 2011)
1. Installation of PFM systems:
• Government Integrated Financial Management Information System (GIFMIS)
• Treasury Single Account (TSA)
• Efficient Budget Release System
• Systematic Financial and Physical Reporting and Auditing
2. Created the PFM Committee
• Devise a 5-year plan for the development and installation of GIFMIS
• Oversee the implementation of the PFM Reform Roadmap
PFM GOVERNANCE STRUCTURE
PFM GOVERNANCE STRUCTURE
Roles and Responsibilities
➢ Principals include the Chairman of the Commission on Audit, the Secretary of
the Department of Budget and Management, and the Secretary of the
Department of Finance. These individuals are mandated to promote fiscal
responsibility and good governance through greater transparency and
accountability in the management of government funds.
➢ PFM Committee (formerly the GIFMIS Committee) is composed of authorized
alternates or representatives of the Principals who hold senior management
level positions. They have the authority to make immediate decisions during
critical meetings, or on other pressing concerns, and serve as focal persons for
cooperation. The Committee oversees, coordinates, and develops the integration
and harmonization of the government’s financial management information
systems.
➢ Project Implementation Units are responsible for the implementation of the
key projects within the PFM reform agenda.
Government’s Strategy
1. Philippine Development Plan
The Philippine Development Plan (PDP) 2017–2022 is the government’s
blueprint. The PDP 2017–2022 aspires to upgrade the Philippines economy
into an upper middle income country by 2022. The plan adopts three major
pillars:
➢ enhancing the social fabric, (government is committed to ensuring
people-centered, clean and efficient governance)
➢ reducing inequality, and
➢ increasing growth potential, as well as cross-cutting strategies to support
economic development.
Government’s Strategy
2. PFM Reform Roadmap
The PFM roadmap is a comprehensive reform agenda, overseen by a PFM
Committee, which seeks to clarify, simplify, improve and harmonize the financial
management processes and information systems of the public sector. The desired
result is that the national government will be able to maintain fiscal discipline,
allocate funds efficiently, and effectively deliver public services.
3. LGU PFM Reform
A PFM Reform roadmap for the local government units (LGU PFM Reform
Roadmap) has been developed under an EU-funded project, and provides the
platform for instituting PFM reforms at the LGU level. The road map is
complemented by an implementation strategy that details the activities and
timeframe to strengthen LGU revenue generation and expenditure management. In
February 2015, the LGU PFM Reform Roadmap and Implementation Strategy was
adopted and a PFM Assessment Tool (PFMAT) was launched.
Initial PFM Projects
1. GIFMIS Development Project
Objective
➢ Facilitate the physical development of a GIFMIS solution that can collect and
organize financial information in a central database
➢ GIFMIS is an integrated web-based application to enable agencies to generate real-
time, reliable and accurate financial
Ongoing Key Activities
➢ National Payroll System (NPS) and payroll-related Government Human Resource
Information System (GHRIS
➢ Development of the Online Submission of Budget
Initial PFM Projects
2. Improvement of Treasury Cash Management Operations Project
Objectives
➢ Increase operational efficiency of implementing agencies while minimizing
cost of treasury operations
➢ Develop a system of cash management that can keep daily cash balances of
government at appropriate levels
➢ Set up a Treasury Single Account (TSA) by 2014

Ongoing Key Activities

➢ Inventory of bank accounts
➢ TSA Conceptual Design
Initial PFM Projects
3. Budget Reporting and Performance Standards Project
Objectives
➢ Harmonize and consolidate data structures and apply consistent set of budget and
accounting rules for reporting
➢ Generate real-time reports on budget utilization and financial performance through GIFMIS
(long term)
➢ Consolidated and agency level budget execution and budget utilization reports published in
COA and DBM websites
Ongoing Key Activities
➢ Formulation of Unified Account Code Structure by Dec 2012
➢ Harmonized budgetary classifications and chart of accounts
➢ Harmonized DBM and COA financial reporting forms
PFM Gaps and Strategies
THE BUDGETING PROCESS
What is Government Budgeting?
Government budgeting is the critical exercise of allocating
revenues and borrowed funds to attain the economic and
social goals of the country. It also entails the management
of government expenditures in such a way that will create
the most economic impact from the production and
delivery of goods and services while supporting a healthy
fiscal position.
Why is Government Budgeting Important?
Government budgeting is important because it enables
the government to plan and manage its financial resources
to support the implementation of various programs and
projects that best promote the development of the country.
Through the budget, the government can prioritize and put
into action its plants, programs and policies within the
constraints of its financial capability as dictated by
economic conditions.
The National Budget

The national budget is the main policy document of any government

administration.
The Department of Budget and Management
The DBM is the lead public expenditure manager of the Philippines
Mandate:
➢ To promote the sound, efficient and effective management and utilization of
government resources (i.e. technological, manpower, physical and financial) as
instrument in the achievement of national socioeconomic & political development
goals.
Functions include:
➢ Evaluating budget proposals
➢ Preparing the national budget
➢ Releasing authorities for agencies to spend their budget

➢ Monitoring expenditures and accomplishment of targets

The Budget Cycle
1.Budget Preparation
2. Budget Authorization(Legislation)
3. Budget Execution
4. Accountability
How is the Annual National Budget prepared?
The preparation of the annual budget involves a series of steps. The major
activities involved in the preparation of the annual national budget include the
following:
➢ Determination of overall economic targets, expenditure levels and budget
framework by the DBCC;
➢ Issuance by the DBM of the Budget Call which defines the budget
framework; sets economic and fiscal targets; prescribe the priority thrusts
and budget levels; and spells out the guidelines and procedures, technical
instructions and the timetable for budget preparation
➢ Preparation by various government agencies of their detailed budget
estimates ranking programs, projects and activities using the capital
budgeting approach and submission of the same to DBM
How is the Annual National Budget prepared?
➢ Conduct a budget hearings were agencies are called to justify their proposed
budgets before DBM technical panels;
➢ Submission of the proposed expenditure program of department/agencies/special
for confirmation by department/agency heads.
➢ Presentation of the proposed budget levels of department/agencies/special
purpose funds to the DBCC for approval.
➢ Review and approval of the proposed budget by the President and the Cabinet;

➢ Submission by the President of proposed budget to Congress.

To meet the Constitutional requirement for the submission of the President's budget with 30
days from the opening of each regular session of Congress, the budget preparation phase is
guided by a budget calendar.
How does the Budget become a Law?

➢ Inaccordance with the requirements of the Constitution, the

President submits his/her proposed annual budget in the form of
Budget of Expenditure and Sources of Financing (BESF) supported by
details of proposed expenditures in the form of a National
Expenditure Program (NEP) and the President's Budget Message
which summarizes the budget policy thrusts and priorities for the
year.
➢ InCongress, the proposed budget goes first to the House of
Representatives, which assigns the task of initial budget review to its
Appropriation Committee.
How does the Budget become a Law?

➢ The Appropriation Committee together with the other House Sub-Committee

conduct hearings on the budgets of departments/agencies and scrutinize
their respective programs/projects. Consequently, the amended budget
proposal is presented to the House body as the General Appropriations Bill.
➢ Whilebudget 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.
➢ Tothresh out differences and arrive at a common version of the General
Appropriations Bill, the House and the Senate creates a Bicameral Conference
Committee that finalizes the General Appropriations Bill.
Why are adjustments made on the Budget Program?

Adjustments are made on the budget even during implementation primarily

because of the following:
1. Enactment of new laws - Within the fiscal year, new legislations with
corresponding identified new revenue sources are passed which
necessitate adjustments in the budget program.
2. Adjustments in macroeconomic parameters - The macroeconomic targets
considered in the budget are periodically reviewed and updated to reflect
the impact of recent developments in the projected performance of the
national economy and on the set fiscal program for the year. The relevant
indicators affecting the budget aggregates include the following: the Gross
National Product (GNP), inflation rate, interest rate, foreign exchange rate,
oil prices, and the level of imports. Thus, a sensitivity measure on the
impact of these parameters on the budget will determine whether recent
macroeconomic developments have a negative or favorable effect on the
budget.
Why are adjustments made on the Budget Program?

3. Change in resources availabilities - Budget adjustments are

undertaken when additional resources becomes available such as
new grants, proceeds from newly negotiated loans and grants.
Corresponding budget adjustments are also made when resources
generation falls below the targets.
How does Government actually spend the Budget?

What happens after the President prepares the National

Budget and the Congress approves the same? Government
agencies must now spend their budgets through what is
known in government parlance as the Budget Execution
process.
Actual execution follows a rigorous process to ensure that
agencies spend only what is allowed by Congress.
“Honest and effective governance –
truly transparent, disciplined and
serving the interest of the country
and its people” Philippine PFM Vision

END OF REPORT