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CHAPTER 2 - “top-down” budgeting (opposite of
THE BUDGET PROCESS bottom-up) the budget preparation starts
from agency heads.
THE NATIONAL BUDGET
- Government Agencies (tasked to
- Also known as government budget
increase the participation of citizen-
- The government’s estimate of the
stakeholders in the budget preparation.
sources and uses of government funds
- 2011 (old incremental system of
within a fiscal year.
budgeting to “zero-based budgeting”
- It is the basis for expenditures and is the
approach.
government’s key instrument for
promoting its socio-economic objectives. Incremental Zero-based
Budgeting Budgeting
NOTE: The formulation and eventual utilization - Current year’s budget - Current year’s budget
of the national budget are summarized in the (formulated based on (formulated without
budget cycle. the previous year’s regard to the previous
Government accounting budget) which is year’s budget).
- Budgetary accounting adjusted for any - Government agencies
- Not only aim to provide information on variances experienced (required to justify their
past events and transactions but also in the past. current year’s
budget information in accordance with - Proposed programs proposed programs
PPSAS 24. and expenditures in the and expenditures,
- Concerned with providing information previous year are irrespective of whether
useful in assessing the conformance of automatically approved these are new or
utilization of government funds with the in the current year. carried over from the
approved budget. previous year).
Philippine Constitution - “Roll-over” approach - “Back-to-Zero” or
- Government funds should be utilized in “Clean Slate” approach
accordance with the national budget - Prone to abuse - Promotes efficient
(approved by legislation). and effective utilization
of funds.
THE BUDGET CYCLE (FOUR PHASES)
1. Budget Preparation 1. Budget Call – Budget preparation starts
2. Budget Legislation when the Department of Budget and
3. Budget Execution Management (DBM) issues a Budget Call to
4. Budget Accountability all government agencies. It contains:
a. Next fiscal year’s targets
BUDGET PREPARATION b. Agency’s budget ceiling
- “bottom-up” approach (several parties c. Other guidelines in the completion
participate; from lowest to the highest and submission of agency budget
levels of the government). proposals.
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Relevant Terms: 3. Presentation to the Office of the
• Balanced Budget – estimated President – The President and Cabinet
revenues exceed estimated members review the proposed budget.
expenditures. (Surplus – actual - Approved by the President (the DBM
revenues exceed actual expenditures finalizes the budget documents to be
while, Deficit – expenditures exceed submitted to the Congress). The
revenues). proposed budget will be referred as
• Annual Budget – covers a period of “President’s Budget”
one year and forms the basis for the President Budget – contains the following
annual appropriation. documents which are intended to assist the
• Special Budget – provides for items Congress in their review and deliberation of the
not adequately covered or not proposed national budget:
included in the general appropriations a. President’s Budget Message –
act. President’s explanation of the

• Line Item Budget – focuses on country’s fiscal policy and budget

specific expenditures (Salaries and priorities.

wages, travel expenses, freight, b. National Expenditure Program (NEP)

supplies, materials, and equipment). – details of all the government

• Performance Budget – plan of entities’ proposed expenditures in the

activities to be undertaken (related coming year.

costs, emphasis on meeting targets c. Budget of Expenditures and Sources

and desired results.) Main focus is on of Financing (BESF) – estimated

the work to be done or services to be expenditures accompanied by

rendered. estimates of expected sources of

• Obligations Budget – focuses on financing.

expenditures incurred in the current d. Other documents – aimed to provide

year which are to be paid either in the further explanation of selected items

same year or in the following year. in the NEP (details of key programs
and projects and staffing summary)

2. Budget Hearings – conducted after the

agencies submit their budget proposals. NOTE: The President shall submit the proposed

(Agencies defend its budget proposal before budget to the Congress within 30 days from

the DBM) the opening of every regular session.

- The DBM deliberates on the budget

proposals, make recommendations, and BUDGET LEGISLATION

consolidate the deliberated proposals - Government funds (spent in pursuance

into the National Expenditure Program of an appropriation made by law).

(NEP) and Budget of Expenditures and - Due Process must be undertaken to

Sources of Financing (BESF). legalize the proposed budget.

- DBM submits the proposed budget to the

President.
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4. House Deliberations – House of THE APPROVED BUDGET
Representatives conducts hearings to - It is the expenditure authority derived
scrutinize the various agencies’ respective from appropriation laws, government
proposed programs and expenditures (upon ordinances, and other decisions related
the receipt of the Presidents’ Budget). to the anticipated revenue or receipts for
- General Appropriations Bill (GAB) will be the budgetary period.
prepared by the House of - The approved budget consists the
Representatives thereafter. following: (NCSAURRT)
5. Senate Deliberations – The senate • New General Appropriations (01)
conducts its own deliberations on the GAB. • Continuing Appropriations (02)
- Normally starts its deliberations after the • Supplemental Appropriations (03)
Senate receives the Gab from HoR. • Automatic Appropriations (04)
However, it sometimes starts even if • Unprogrammed Funds (05)
Representative’s deliberations are • Retained Income/Funds (06)
ongoing. • Revolving Funds (07)
6. Bicameral Deliberations – Also called as
• Trust Receipts (08)
Bicameral Conference Committee (BCC).
NOTE: The Unified Accounts Code Structure
This is formed after the deliberations in both
(UACS) refers to the standard coding system
houses.
used in financial reporting of the National
- It is to harmonize any conflicts between
Government.
the Representatives and Senate versions
Appropriation – the authorization made by the
of the GAB.
legislative body to allocate funds for purpose
- The Harmonized GAB is submitted back
specified by the legislative or similar authority.
to both Houses for ratification. After
1. New General Appropriations – annual
ratification, the final GAB is submitted to
authorizations for incurring obligations
the President for enactment.
during a specified budget year, as listed
7. President’s Enactment – The president
in the GAA.
enacts the budget, which is known as the
2. Continuing Appropriations – the
General Appropriations Act (GAA).
authorizations to support obligations for a
- Before enactment though, the President
specific purpose or project, such as multi-
may exercise his veto power as
year construction projects which require
conferred to him under the Philippine
the incurrence of obligations even
Constitutions.
beyond the budget year.
3. Supplemental Appropriations –
NOTE: When the proposed budget is not
additional appropriations authorized by
enacted before the fiscal year starts, the last
law to augment the original
year’s GAA is automatically reenacted. The
appropriations which proved to be
last year’s GAA shall be used in the current year
insufficient for their intended purposed
until a new general appropriations bill is passed
due to economic, political, or social
by the Congress.
conditions supported by a Certification of
Availability of Funds from the BTr.

4. Automatic Appropriations – are the
authorizations programmed annually or
for some other period prescribed by law
which do not require periodic action by
Congress.
5. Unprogrammed Funds – are standby
appropriations authorized by Congress in
the annual GAA which may be availed
only when any of the following instances
occur:
a. Revenue collects exceed the original
revenue targets in the Budget of
Expenditures and Sources of
Financing (BESF) submitted by the
President to the Congress
b. New revenues are collected or
realized from sources not originally
considered in the BESF; or
c. Newly approved loans for foreign-
assisted projects are secured or when
conditions are triggered for other
sources of funds such as perfected
loan agreements for foreign assisted
projects.
6. Retained Income/Funds – collections
which are authorized by law to be used
directly by agencies concerned for their
operation or specific purposes.
7. Revolving Funds – receipts derived from
business-type activities of
departments/agencies which are
authorized by law to be constituted as
such and deposited in an authorized
government depository bank. These
funds shall be self-liquidating, and all
obligations and expenditures incurred by
virtue of said business-type activity shall
be charged against said fund.
8. Trust Receipts – receipts by any
government agency acting as trustee,
agent, or administrator for the fulfillment
of some obligations or conditions.
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BUDGET EXECUTION
- The phase where government funds are
spent.
8. Release guidelines and BEDs – DBM
issued guidelines on the release and utilization
of funds while the various agencies submit their
Budget Execution Documents (BEDs).
- A BED summarizes an agency’s fiscal year
plans and performance targets. It includes the
following:
a. Physical and Financial Plan
b. Monthly cash program
c. Estimate of monthly income
d. List of obligations that are not yet due
and demandable.
Major Recipients of the Budget:
1. National Government Agencies (NGAs) –
all agencies within the executive,
legislative, and judicial branches of
government (commissions, departments,
land bank of the Philippines, SSS, etc).
2. Local Government Units (LGUs) –
include (a) autonomous regions, (b)
provinces and cities independent from a
province, (c) component cities, and (d)
barangays.
3. Government Owned and Controlled
Corporations (GOCCs) – corporations
that are owned or controlled, directly or
indirectly, by the government and vested
with functions relating to public needs.
PDAF – Priority Development Assistance Fund
DAP – Disbursement Acceleration Program
9. Allotment – DBM formulate the Allotment
Release Program (ARP) to set the limit for
allotment release during the upcoming year.
- Used as a control device to ensure that
releases conform to the national budget.
- Cash Release Program (CRP) sets the
disbursement limits for the year, for each quarter
and for each month.

- 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. It is also referred to as Obligational
Authority.
Obligation – amount contracted by an
authorized officer for which the government is
held liable.
- An act of a duly authorize official which binds
the government to the immediate or eventual
payment of a sum of money.
Documents used in releasing allotments to
government agencies:
1. General Appropriations Act Release
Document (GAARD) – serves as the
obligational authority for the
comprehensive release of budgetary
items appropriated in the GAA,
categorized as For Comprehensive
Release (FCR).
2. Special Allotment Release Order
(SARO) – covers budgetary items
under For Later Release (FLR) a
negative list in the entity’s submitted
Budget Execution Documents
(BEDs), subject to compliance of
required documents/clearances.
- Releases of allotments for Special
Purpose Funds are also covered by
SAROs (Calamity Fund, contingent
Fund, E-Government Fund,
Feasibility Studies Fund, International
Commitments Fund, Miscellaneous
Personnel Benefits Fund and Pension
and Gratuity Fund).
3. General Allotment Release Order
(GARO) – a comprehensive authority
issued at all national government
agencies, to incur obligations not
exceeding an authorized amount
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during a specified period for the
purpose indicated.
- It covers automatically appropriated
expenditures common to most,
agencies without need of special
clearance or approval from
competent authority.
10. Incurrence of Obligations – Government
agencies incur obligations which will be paid by
the government (entering contracts, hiring of
personnel, purchase of supplies, etc.)
11. Disbursement Authority – DBM issues
disbursement authority to the government
agencies. This is the point where government
agencies obtain access to the government
funds.
Documents used in releasing disbursement
authority to government agencies:
1. Notice of Cash Allocation (NCA) –
authority issued by the DBM to central,
regional, and provincial offices and
operating units to cover their cash
requirements.
- specifies the maximum amount of cash
that can be withdrawn from a government
servicing bank in a certain period.
- based on the agency’s submitted
Monthly Cash Program.
2. Notice of Transfer of Allocation –
authority issued by an agency’s Central
Office to its regional and operating units
to cover the latter’s cash requirements.
3. Non-Cash Availment Authority –
authority issued by the DBM to agencies
to cover the liquidation of their actual
obligations incurred against available
allotments for availments of proceeds
from loans/grants through suppliers’
credit/constructive cash.
4. Cash Disbursement Ceiling – authority
issued by the DBM to agencies with
foreign operations (Department of
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Foreign Affairs, DFA) allowing them to d. Summary of Appropriations,
use the income collected by their Foreign Allotments, Obligations, Disbursements and
Service Posts to cover their operating Balances by Object of Expenditures – similar to
requirements. ‘c’ but provide details of expenditures (salaries
Disbursements – actual amount paid out of the and wages, traveling expenses, etc.)
budgeted amount. e. List of Allotments and Sub-Allotments
- commonly made through checks (chargeable – shows the allotments received by the agency
against the Treasurer of the Philippines from the DBM and the sub-allotments issued by
account) which is called “Modified the agency’s Central office or Regional Office to
Disbursement Systems” (MDS) checks. lower operating units.
- other modes: cash, commercial check, bank f. Statement of Approved Budget,
transfer/bank debit, or credit card. Utilizations, Disbursements and Balances – this
report is prepared by agencies that have
BUDGET ACCOUNTABILITY authority to use their revenue. It shows the
- The phase occurs concurrently with the budgeted revenue, the utilizations, and
Budget execution phase. disbursements thereof, and the unutilized
- As the budget is being executed, it is amount.
regularly monitored to determine the g. Summary of Approved Budget,
conformance of actual results with Utilizations, Disbursements and Balances by
planned targets. Object of Expenditures – similar to ‘f’ but provide
12. Budget Accountability Reports – details of expenditures.
government agencies are required to submit the h. Quarterly Report of Revenue and
following accountability reports: Other Receipts – shows the actual revenues
a. Monthly Report of Disbursement – and other receipts remitted to the BTr and
shows the disbursements of the entity during the deposited in authorized government depository
month, classified according to the type of banks un a given quarter.
disbursement authority.
- The report is submitted to the COA and NOTE: Reports ‘b’ to ‘h’ are prepared on
DBM within 30 days after the end of each quarterly basis and are submitted to the COA
month. and DBM within 30 days after the end of each
b. Quarterly Physical Report of Operation quarter.
– shows the agency’s physical NOTE: A Consolidated Statements of
accomplishments in a given quarter vis-à-vis its Allotments, Obligations, and Balances per
physical targets. summary of appropriations (‘c’ and ‘d’) shall be
c. Statement of Appropriations, submitted on or before February 14 of the
Allotments, Obligation, Disbursements and following year.
Balances - shows the agency’s authorized
appropriations, allotments received, obligations i. Aging of Due and Demandable
incurred, disbursements made and the balances Obligations – shows the names of creditors, the
of unreleased appropriations, unobligated amount owed to them, and the number of days
allotments, and unpaid obligations. these obligations are outstanding. This report is
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submitted to the COA and DBM within 30 days incur it within a given period of
after the end of the year. time.
• Non-controllable costs – are costs
13. Performance reviews – DBM and COA
incurred indirectly and allocated to
performs periodic reviews of the agencies’
a responsibility level.
performance and budget accountability and
report to the President.
Cost Centers – primary purpose is to render
14. Audit – the COA audits the agencies.
service to the public at the lowest possible cost
(income derived from collection of taxes and
NOTE: The budget reports, together with other
fees).
budget records, provide information in preparing
- Managers (evaluated based on his ability to
the Statement of Comparison of Budget and
meet budgeted goals for controllable costs.)
Actual Amounts, which is one of the
- All costs are controllable by top management
components of a complete set of financial
because of high extent of its authority.
statements of a government entity.
- Fewer costs are controllable in lower
NOTE: Releasing of fund will be based on the
management levels because of the decreased
timing of need (Budget Execution Documents)
scope of authority.
to prevent the incurrence of overdraft.
- Each government agency is assigned a
responsibility center code.
RESPONISBILITY ACCOUNTING
- To better evaluate the budget
accountability.
- A system of providing cost and revenue
information over which a manager has
direct control of.
- Enables the evaluation of a manager’s
performances based only on matters of
the costs that are direct under his control.
- It requires the identification of
responsibility centers and the distinction
between controllable and non-
controllable costs.
• Responsibility center – is a part,
segment, unit or function of a
government agency, headed by a
manager, who is accountable for a
specified set of activities.
• Controllable costs – a cost is
considered controllable at a given
level of managerial responsibility if
the manager has the power to