Aragones, Jamie Rose Accounting for Gov’t & Non-Profit Organizations

BSA 3A Prof. Margie Oficial

Assignment 1:

1. Know the budget cycle in the government

In Government Accounting not only provides information based from past events but
also from budget information that accords with Philippine Public Sector Accounting
Standards (PPSAS 24). It is required that national budget must be utilized according
to and approved by duly legislation. Government Accounting also assess and
provide useful information that conforms to utilizations of government funds with
approved budgets.

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.

National Budget or also known as government budget is the government’s estimated

sources and uses of government funds within the fiscal year.

The Budget Cycle

I. Budget Preparation

In our country in preparing budget plan in which it aligns with the concept of bottom-
up approach. Government agency like Department of Budget and Management
make drafts of the budget plan considering previous and next year’s budget. There
are three specific processes made such as Budget Call, Budget Hearings,
Presentation to the Office of the President.

1.) Budget Call starts when Department of Budget and Management (DBM) issues a Budget
call to all government agencies. This contains next year’s fiscal year’s targets, the
agency budget ceiling and other guidelines in the completion and submission of agency
budget proposals together with line items budget for current year’s expenditure.
2.) Budget Hearing, this part of budget preparation is where there will submission of budget
proposals which DBM deliberates, make recommendations, and consolidates this are
deliberated proposals to National Expenditure Program (NEP), and Budget of
Expenditures and Sources of Financing (BSEF). DBM also then submits the proposed
budget to the president.
3.) Presentation to the Office of the President, this where the President and Cabinet
members review the proposed budget, when approved by the President, DBM finalizes
the budget documents to be submitted to the Congress, which is now referred to as the
President’s Budget. President’s budget includes President’s Budget Message or
explanation of the President regarding the budget, National Expenditure Program (NEP)
composing details of all government agencies expenditure in the current year, Budget of
Expenditures and Sources of Financing, and other documents applicable.

II. Budget Legislation

It is important to clarify that government funds should also be appropriate to the law
or due process that the budget indicates to be legal. There would a House
Deliberations meaning the House of Representatives conducts hearing to scrutinize
the various agencies’ respective proposed programs and expenditures, therefore,
House of Representatives prepares the General Appropriations Bill (GAB). Next, is
the Senate Deliberations where senates conduct its own deliberations on GAB.
While in Bicameral Deliberations, after both houses are done, the Bicameral
Conference Committee harmonize any conflicts between the Representatives and
Senate versions of GAB. Lastly, the President enact the budget which also termed
as General Appropriations Act (GAA). The President can also exercise his veto
power as conferred to him under the Philippines Constitution.

III. Budget Execution

This part of the cycle where government funds are spent according to release
guidelines and Budget Execution Documents (BEDS). BED summarizes an agency’s
fiscal year plans and performances namely Physical and Financial Plans, Monthly
Cash Program, Estimate of Monthly income, and list of the obligations that are not
yet due and demandable.

In budget execution major recipients and some time used as an order for releasing
government funds such as National Government Agencies (NGAs), Local
Government Units (LGUs), Government owned and Controlled Corporations
(GOCCs). This government units are also considered major recipients or government
funds.

This part of the budget cycle also indicates incurrence of obligations and
disbursement authority where there are obligation and allotment authority to secure
the said funds.

IV. Budget Accountability

This is connected to budget execution where government agencies are regularly
monitored and required to submit reports to determine if that agency conform to the
said budget plan and meet their planned targets.

The budget reports, together with other budget records, provide information in
preparing the Statement of Comparison of Budget and Actual Amounts, which one of
the components of a complete set of financial statements of government entity.

Budget Cycle can be summarized as PLEA. Budget Preparation, Legislation,

Execution, and Accountability.
2. Differentiate the following: Bottom-up budgeting and Zero-based budgeting

 Under “bottom-up” budgeting, several parties participate in the budget preparation,

starting from the lowest to the highest levels of the government. While, “zero-based”
budgeting, the current year’s budget formulated without regard to the previous year’s
budget. Government agencies are required to justify their current year’s proposed
programs and expenditures, irrespective of whether these are new or carried over the
previous year.

BASIS FOR BOTTOM UP BUDGETING ZERO-BASED BUDGETING

COMPARISON
Meaning Bottom Up Budgeting alludes to a Zero-based budgeting means a
technique of preparing budget, that budgeting method, whereby
takes immediately preceding year's whenever the budget is set, the
budget as a base. activities are re-evaluated.
Focuses on Previous level of Expenditure New economic appraisal
Orientation Accounting oriented Decision or project oriented
Justification Justification of current project is not Justification of current and
required. proposed projects is required,
considering benefits and costs.
Justification Justification is given by top Justification is given by the
Authority management for the particular manager for the particular decision
decision unit unit.
Priority Mainly to past level of spending, Decision unit is divided into
then to demand for inflation and comprehensive decision packages,
new programs. and ranked as per their relevance.
Clarity and Lower Comparatively higher
Responsiveness
Approach Routine Approach Straight forward Approach

3. Know the meaning of the following: Appropriation, Allotment, and Obligation

 Appropriation is the authorization made by a legislative body to allocate funds for purposes
specified by the legislative or similar authority.

An appropriation account is used by a government to store the funds allocated to an

agency or project. When funds are used for the designated purpose, the amount stated
in this account is reduced. If the funds stored in an appropriation account are unused
as of the end of a budget period, the funds are typically reallocated elsewhere.
 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. Also known as Obligation Authority.
 An allotment commonly refers to the allocation of shares granted to a participating
underwriting firm during an initial public offering (IPO). Remaining surpluses go to other
firms that have won the bid for the right to sell the remaining IPO shares. There are several
types of allotment that arise when new shares are issued and allocated to either new or
existing shareholders.

 Obligation is an act of a duly authorized official which binds the government to the
immediate or eventual payment of sum of money.

References:
https://www.bing.com/images/search?
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%3d22144&exph=748&expw=1090&q=Budget+Cycle+Diagram&simid=6080531489977156
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xhist=0
https://www.investopedia.com/terms/a/allotment.asp
https://www.accountingtools.com/articles/2017/5/7/appropriation-account#:~:text=An
%20appropriation%20account%20is%20used%20by%20a%20government,budget
%20period%2C%20the%20funds%20are%20typically%20reallocated%20elsewhere.
https://keydifferences.com/difference-between-traditional-and-zero-based-budgeting.html