The Budget Cycle

Budget Process of the Philippine Government

Four Phases of the Budget Cycle
• Budget Preparation
- Executive prepares the proposed National Budget

• Legislative Authorization (Budget Legislation)

- Congress authorize the Appropriations Act

• Budget Execution and Operation

- Agencies utilize their approved budgets

• Budget Accountability
- The Executive monitor and evaluate the use of the budget
First Phase: Budget Preparation
• Begins with the issuance of a Budget Call by the Department of
Budget and Management (DBM).

• Various departments and agencies submit their respective Agency

Budget Proposals to the DBM.

• These proposals are then presented before a technical panel of the

DBM in scheduled budget hearings wherein the various departments
and agencies are given the opportunity to defend their budget
proposals.

• Thereafter, the DBM will review the proposals and prepare

recommendations to be presented before an Executive Review Board.
• The DBM next consolidates the recommended agency budgets into
the National Expenditure Plan (NEP) and a Budget of Expenditures
and Sources of Financing (BESF).

• The proposed budget is presented by DBM, together with the

Development Budget Coordination Committee (DBCC), to the
President and Cabinet for further refinements.

• The budget preparation phase ends with the submission of the

proposed national budget – the “President’s Budget” – to Congress.
Second Phase: Budget Legislation
This phase covers the period commencing from the time Congress
receives the President’s Budget, which is inclusive of the NEP and BESF,
up to the President’s Approval of the GAA. This phase is also known as
the Budget Authorization Phase, and involves the significant
participation of the Legislative through its deliberations.

• The President’s Budget is assigned to the House of Representatives’

Appropriations Committee on first reading. They will schedule and
conduct budget hearings to examine the program, activity or projects
(PAPs) of the departments and agencies.
• They then craft the General Appropriation Bill (GAB), where in
plenary session, it is sponsored, presented and defended by the
committee. If approved, this is transmitted to the Senate.

• The Senate conducts its own committee hearings and plenary

deliberations on the GAB.

• A Bicameral Conference Committee is formed, composed of panels

from both Houses of Congress, for the purpose of discussing and
harmonizing the conflicting provisions of their versions of the GAB.
• The “harmonized” version of the GAB is next presented to the
President for approval. He will review the GAB, and prepare the veto
message where budget items are subjected to direct veto or are
identified for conditional implementation.

• When the GAA is not enacted by the Congress before the fiscal year
starts, the previous year’s GAA is automatically reenacted.
Third Phase: Budget Execution and Operation
• This phase is primarily the function of the DBM, which is tasked to
perform the following procedures:

1. Issue the programs and guidelines for the release of funds

2. Prepare an Allotment and Cash Release Program

3. To release allotments

4. To issue disbursement authorities

• Agencies are required to submit their Budget Execution Documents (BEDs)
at the start of budget execution. These documents outline agency plans
and performance targets.

• Then, the DBM set a limit for allotments issued to an agency and on the
aggregate by preparing an Allotment Release Program (ARP).

• A Cash Release Program (CRP) is also formulated alongside to set a guide

for disbursement levels for the year and for every month and quarter.

• Actual disbursement or spending of government funds terminates the

Budget Execution Phase.
Fourth Phase: Budget Accountability

Accountability is a significant phase of the budget cycle because it

ensures that the government funds have been effectively and
efficiently utilized to achieve the Socio-economic goals.

It also allows the DBM to assess the performance of agencies during

the fiscal year for the purpose of implementing reforms and
establishing new policies.
• Agencies are required to submit their Budget and Financial
Accountability Reports (BFARs) on a monthly or quarterly basis. These
show how they used their funds and identify their corresponding
physical accomplishments.

• If an agency failed to submit their BFARs, the DBM will penalize them
by withholding certain fund releases to them. These will be funds
from Miscellaneous Personnel Benefits Fund (MPBF) for compensation
adjustments under the Salary Standardization Law.

• The withheld funds are only limited to agencies’ MPBF allotments so

that only the agencies are penalized and the implementation of
critical programs and projects are not disrupted.
• Auditing is critical in ensuring agency accountability in the use of
public funds, which is why, the DBM uses COA’s reports in confirming
agency performance, determining budgetary levels for agencies and
addressing issues in fund usage.

• 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.