PUBLIC FISCAL ADMINISTRATION

Submitted to:
PROF. CRESENCIA VIRI

Submitted by:
RUBY ANNE MAE V. RUIZ

PHILIPPINE PUBLIC FISCAL ADMINISTRATION

Leonor Magtolis Briones

BUDGETING

The Budgetary Process and Significant Budgetary Innovations

I. THE BUDGET CYCLE

The budget process consists of 4 phases: budget preparation, budget legislation or

authorization, budget execution and budget accountability or review. This process is referred to as
a cycle because after budget accountability or review of the current year ends, budget preparation
for the following year’s budget begins. It is a continuous cycle with certain stages in a given year’s
cycle overlapping with stages of another cycle.

Budget Budget
Execution Accountability
Phase Phase

Budget Budget
Legislation/
Preparation
Authorization
Phase Phase
A. BUDGET PREPARATION

The budget preparation phase covers the stages from determination of budget
priorities to submission by the President of Budget of Expenditures and Sources of Funds
(BESF) to Congress.

1. The Budget Call

The DBM or the Department of Budget and Management begins the budget
preparation yearly by the issuance of the National Budget Call to all agencies, bureaus and
offices of the national government and a separate Corporate Budget Call to all GOCCs and
GFIs. Issued in the form of a National Budget Circular, the Budget Call contains the
following as set beforehand by the DBCC or Development Budget Coordination
Committee:
 Outline of policy guidelines and procedures in the preparation and submission of
agency budget proposals
 Fiscal Limits or Expenditure Levels
 Coverage of Budget Estimates
 Government Commitments
 Information and Requirements on Regional and long-term Budgeting, Schedule of
budget hearings, Timetable and Evaluation Process

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. In the new Budget Preparation Calendar, the Budget Call is issued in
December (versus around April in the past) while the submission of the President’s Budget
a day after the State of the Nation Address in contrast to earlier practice where it is
submitted during the 30-day window as prescribed in the Constitution.

2. Stakeholder Engagement

In order to increase citizen participation in the budget process, departments and

agencies are tasked to partner with civil society organizations (CSO) and other citizen
stakeholders as they prepare their agency budget proposals. This new process piloted
during the preparation of the 2012 National Budget and is now being expanded towards
institutionalization.
 Departments and GOCCs Mandated to Conduct CSO Consultations:

“Bottom-Up” Budgeting

The “Bottom-Up” approach was done for the first time in the preparation of the
2013 National Budget in opposition to the conventional way of allocating resources
from top to bottom. In this approach, grassroot communities will be engaged in
designing the National Budget.

The Aquino Administration, 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 the “bottom-up” budgeting will focus on rural development
programs and the conditional cash transfer program and will thus involve DA, DAR,
DENR, DSWD, DepEd and DOH. These agencies will include community plans in their
proposed budgets.

3. Technical Budget Hearings

Hearings are conducted after departments and agencies submit the Agency Budget
Proposals to the DBM. Agencies defend their proposed budgets before a technical panel
of DBM, based on performance indicators on output targets and absorptive capacity.
DBM then reviews these proposals to prepare recommendations.
4. Executive Review

 Recommendations of DBM are presented before an Executive Review Board

composed of the DBM Secretary and senior officials
 Deliberations here entail a careful prioritization of programs and corresponding
support, vis-a-vis the priority agenda of the national government
 Implementation issues discussed and resolved

5. Consolidation, Validation and Confirmation

 DBM consolidates agency budgets and recommendations into National

Expenditure Program and Budget of Expenditures and Sources of Financing
(BESF)
 As part of the consolidation process the deliberations by the DBCC will
determine the agency and sectoral allocation of the approved total expenditure
ceiling in line with the macroeconomic and fiscal program. Heads of major
departments are invited to this meeting.

6. Presentation to President and Cabinet

The proposed budget is presented by DBM and DBCC to the President and Cabinet
for further refinements or reprioritization. After the President and the Cabinet approve
the proposed National Expenditure Plan, the DBM prepares and finalizes the budget
documents to be submitted to Congress.

7. The President’s Budget

 The budget preparation phase ends with the submission of the proposed National
Budget to the “President’s Budget” to Congress
 The President’s Budget consists of the following documents which help
legislators analyze the contents of the proposed budget:
a. President’s Budget Message (PBM)- policy framework and priorities in the
budget
b. Budget of Expenditures and Sources of Financing (BESF)- breakdown of
expenditures and funding sources for the fiscal year and 2 previous years
c. National Expenditure Program- details of spending for each department and
submitted in the form of a proposed GAA (General Appropriations Act)
d. Details of Selected Programs and Projects- more detailed disaggregation of
key programs, projects and activities
 e. Staffing Summary- Staffing complement summary per department or agency
including number of positions and amounts allocated for these

B. BUDGET LEGISLATION/ AUTHORIZATION

Budget Authorization pertains to the legislative consideration and approval of the

Appropriations Bill. After the President reviews the draft of the Appropriations Bill, he
discusses it with the Cabinet then submits it to Congress. In general, the legislature acts on
the budget proposal of the President and formulates an Appropriations Act following the
process established by the Constitution. It specifies that no money may be paid from the
Treasury except in accordance with an appropriation made by law.

1. House Deliberations

The House Representatives in plenary assigns the President’s 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).

The following options are recommended by the Appropriations Committee:

a. Approval without Amendments, it becomes a bill

b. Approval with Amendments, it also becomes a bill
c. Substitution with another bill
d. Disapproval

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

Appropriations Committee and Sub-Committee Chairmen. As in all other laws, the
GAB is approved on Second and Third Reading before transmission to the Senate.

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. However, the Senate
Finance Committee and Sub-committees usually start hearings on the GAB even
as the House deliberations are going for expediency.
 The Committee submits its proposed amendments to the GAB to plenary only
after it has been formally transmitted by the House.
 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 then produced.

4. Ratification and Enrolment

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 for his approval, the
GAB is considered enrolled.

5. The Veto Message

The President and DBM will 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
General Appropriations Bill is the only legislative measure where the President can
impose a line-veto. All other cases are either approved or vetoed in full.

6. Enactment

When the GAA or General Appropriations Act is not enacted before the fiscal
year starts, the previous year’s GAA is automatically re-enacted. This means that
agency budgets for programs or projects remain the same. Funding for programs or
projects that have already been terminated is realigned for other expenditures. Because
re-enactments are tedious and prone to abuse, the Aquino Administration with the
support of the Congress has committed to ensure the timely enactment of a new GAA
every year.

C. BUDGET EXECUTION
As soon as the GAA is enacted, the government can implement its priority
programs and projects. The budget execution phase compromises the operational aspects
of budgeting. It is where the people’s money is actually spent and it consists of the
following components:
1. Release Guidelines and Program

 Budget execution begins with DBM’s issuance of guidelines on the release and
utilization of funds

2. Budget Execution Documents (BEDs)

Agencies are required to submit their BEDs. These documents outline agency
plans and performance targets. These include the physical and financial plan, monthly
cash program, estimate of monthly income and list of obligations that are not yet due
and demandable.

3. Allotment and Cash Release Programming

 To ensure that releases fit the approved Fiscal Program, the DBM prepares an
Allotment Release Program to set a limit for allotments issued to an agency and
on 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.

4. Allotment Release

 Allotments which authorize an agency to enter into an obligation are either

release by DBM to all agencies comprehensively through the ABM or Agency
Budget Matrix. This is where the people’s money is actually spent and
individually via Special Allotment Release Orders (SAROs)

Agency Budget Matrix

 This document disaggregates all programmed appropriations for each agency

into two main expenditure categories: “not needing clearance” and “needing
clearance”
 It 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.

Special Allotment Release Orders (SAROs)

 Items identified as “needing clearance” are those which require the approval
of DBM or the President ex. lump sum funds or intelligence funds
  For such items, the agency needs to submit a Special Budget Request to DBM
with supporting documents. Once approved, a SARO is issued.

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.
 These are various ways that an agency “obligates”: for example, when it hires
staff, receives billings for the use of utilities or enters into a contract with an
entity for the supply of goods or services.

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 Notice of Cash Allocation (NCA) and in
special cases, Non-Cash Availment Authority (NCAA) and Cash
Disbursement Ceiling (CDC)

Notice of Cash Allocation

 This is issued periodically by DBM to the operating units of agencies to

cover their cash requirements
 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 agency’s submission of its
Monthly Cash Program and other required documents

Non-Cash Availment Authority NCAA

 Issued to authorize non-cash disbursements

Cash Disbursement Ceiling (CDC)

 Issued to departments with overseas operations allowing them to use

income collected by their foreign posts for their operating requirements
7. Disbursement

 The final step of the budget execution phase where government cash are actually
spent. The Modified Disbursement Scheme is mostly used where disbursements of
national government agencies chargeable against Treasury are made through
government servicing banks such as the Land Bank of the Philippines.
  The budget process does not end when government agencies spend public funds.
Each and every peso must be accounted for to ensure that it is properly used,
contributing to the achievement of socio-economic goals.

D. BUDGET ACCOUNTABILITY PHASE

The last phase in the budget process involves submission of accountability reports
to fiscal agencies and to Congress. This is preparation of financial and physical reports of
operations which basically provide information on the actual physical accomplishment of
agencies in relation to actual expenses accrued. There are also Performance Reviews and
Audits. Auditing is detailed in examination of the accounting books to ensure that all
expenses have been disbursed in accordance with accounting regulations and purpose for
which funds have been authorized.

1. Performance and Target Outcomes

 Agencies are accountable not only for how they use public funds but also on
how they attain performance targets and outcomes using available resources
 Performance measures are set alongside the preparation of the National Budget
and are firmed up during the preparation of Budget Execution Documents

2. Budget Accountability Reports

 Submitted by agencies monthly and quarterly

 BARs are required reports that show how agencies use their funds and identify
physical accomplishments
 No Report, No Release. Starting 2012, DBM will be withholding certain fund
releases to agencies that fail to submit their BARs. This would be the MPBF or
Miscellaneous Personnel Benefits Fund for compensation adjustments under
the SSL, provisions for unfilled positions and employee clothing allowances

3. Review of Agency Performance

 DBM regularly reviews financial and physical performance of agencies through

the BARs, OPIFs (Organizational Performance Indicator Framework) and
BEDs (Budget Execution Documents)
 Agency Performance reviews are conducted quarterly or every semester as the
case may be.
  An annual Budget Performance Assessment Review (BPAR) is conducted to
determine agency’s accomplishments and performance by the year-end. DBM
regularly reports results to the President

4. Audit

 Auditing is not within DBMs jurisdiction, it is lodged under COA (Commission

on Audit). It is very critical in ensuring agency accountability in the use of
public funds.
 DBM uses COA’s audit reports in confirming agency performance, determining
budgetary levels for agencies and addressing issues in fund usage.

5. Performance-Based Incentive System

 DBM is also in the process of establishing a performance-based incentive system

which will recognize and reward good performance among government
employees. This will help improve the efficiency of service delivery across all
government institutions.

II. REFORMS AND INNOVATIONS IN THE BUDGET PROCESS

A. Developments Under P.D. No. 1177

According to former Budget Minister Laya, budgetary innovations in the New Society
and the New Republic started with the Constitution of 1973 recognizing the deficiencies of the
old budget process. The delegates to the Constitutional Convention formulated provisions
which would remove the bases of the abuses that plagued pre-martial law government. They
recognized those sources of abuses and malpractices of old and proceeded to evolve provisions
to prevent these practices.

The provisions in the Constitution of 1973 changed the philosophy and structure of
the old budget process and guided the enactment of P.D. 1177 on July 30, 1972 and this decree
institutionalized budget reforms. Section 3 of P.D. 1177 summarizes the major thrusts of the
budgetary reforms:
“a stronger linkage in the planning, programing and budgeting sequence , the close
operating relationship between budgeting and internal agency management, a
regionalized budget that is supportive of a region based government structure, the
recognition that the national budget is only part of the integrated whole of a total national
 resource budget and the need to prepare annual budgetsas one step in implementing the
national long-term plan and budget program”

Reforms and Innovations in the Philippine Budget System

in terms of the changes in each of the stages of the Budget Cycle:

1) Budget Preparation

 From Fiscal Year to Calendar Year to harmonize planning and budget cycles
among the government and the private sector
 Simplification of budget documents
 Reorganizing regional offices as the basic budgeting unit
 Increased attention to foreign assisted projects
 Organizational changes and strengthening of the role of coordinating bodies
 National resource budget development

2) Budget Authorization

 Greater emphasis on project results not on detailed items of expenditures

 Legislature: focuses on budget policy
 Executive: focuses on details of expenditure
 GAA or General Appropriations Act shall not contain any itemization of
personal services which limits the past fondness of lawmakers with positions
and not with the programs of agencies
 Expenditures should be backed up by existing proposed revenue measures to
avoid unplanned or injudicious spending. In the past, expenditure measures are
passed even without revenue backup
 No additional appropriation measures supported with existing revenue measures
shall be enacted except those involving creation of new offices or undertaking
new programs or activities
 Prohibition against increase of appropriations, additional special provisions and
transfer of funds among various branches
 Delegation of authority to regional budget offices to save time and effort
 Streamlined procedures to facilitate approval of appropriations, limitations on
budget, enactment of appropriations law, unauthorized revisions during printing
of budget etc.
 Faster fund release for purchase of equipment amounting to Php 25,000 or less,
no DBM analysis needed
 3) Budget Execution

 Comprehensive Fund Release System: from quarterly to automatic release at the

beginning of each year
 Appropriations must equal programmed funds unless a reserve is imposed
 Partially computerized monitoring and reporting aspects to facilitate
administration of budget allotment system
 Tighter monitoring of local counterpart support to foreign assisted projects to
avoid danger of agency commitments without coordination with DBM
 Integrated funds programming, better information system, emphasis on inter-
agency coordination

4) Budget Accountability

 Expanded budget accountability with a more reliable and authoritative analysis

of stewardship of public funds
 Continuous evaluation of DBM
 Enhancement of budget monitoring and information system. National
Accounting and Finance Office of DBM now evaluates and analyze accounts
and overall financial performance of government

B. Development Since 1986

1) Budget Procedure
a. Major determinants of funding levels are the Program Objectives and Intended
Outputs compared in the past, doing program budget is done only after budgetary
decisions have been made.
b. Use of spatial and demographic impact of fund allocation is progressing through the
application of physical and socioeconomic criteria in regional fund distribution
c. Submission of 3 budget documents to legislature to improve decision-making
d. Budgetary decision making extended to budget execution stage through preparation of
WFPs or Work and Financial Plans which connects utilization of funds to scheduled
accomplishment of agency outputs

2) Budget Structure
 Improved greatly in the provision of social services and employment generating
programs
3) Budget Process

a. Enhancement of RDCs or Regional Development Councils as a development and

resource planning arm which strengthens linkages at the national and regional phase
b. Participation of local officials, private sector and agency officials in the deliberation
and decision-making at RDC level (Stakeholder Engagement in the Budget
Preparation phase)
c. Transparency in all phases of budget process
d. Streamlining and simplification of budget process and strengthening of control and
accountability mechanisms
REFERENCES:

 Leonor Magtolis Briones, “Philippine Public Fiscal Administration”

 DBM,”Budget Process and Lecture Guide”
 DBM Lecture Notes on Government Budgeting
 Gerardo F. Concecpion, Jr. “Budgeting: The Development Perspective” In Budget
Management Bulletin, Vol 1 No. 5 pp 13-14
 Aaron Wildavsky’s discussion on the “Politic of Budget Reform” in his book The Politics of
the Budget Process, p 131-133
 Art. VI, Sec 25 (7) Constitution
 Art. VI, Sec 24 Constitution
 Art. VII, Sec 22 Constitution
 Sec 4 and 14 Book VI Revised Administrative Code of 1987
 Dimarucot, Omar N., Tarlac State University, Budgetary System: “Budget Process in the
National Government”