CHAPTER 2

THE BUDGET
PROCESS
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Budget Execution
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Budget Execution

8. Release guidelines and BEDs – The DBM issues

guidelines on the release of and utilization of funds
while the various agencies submit their Budget
Execution Documents (BEDs). A BED summarizes
agency’s fiscal year plans and performance targets. It
includes the following:
▹ Physical and financial plan;
▹ Monthly cash program;
▹ Estimate of monthly income; and
▹ List of obligations that are not yet due and demandable
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Budget Execution

▸ National Government Agencies (NGAs) –

include all agencies within the executive,
legislative and judicial branches of
government, e.g., commissions, departments,
Land Bank of the Philippines, Social Security
System, etc.
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Budget Execution

▸ Local Government Units (LGUs) – include (a)

autonomous regions, (b) provinces and cities
independent from a province, (c) component cities and
municipalities, and (d) barangays
▸ Government Owned and Controlled Corporations
(GOCCs) – corporations that are owned and
controlled, directly or indirectly, by the government
and vested with functions relating to public needs.
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Budget Execution

9. Allotment –The DBM formulates Allotment Release

Program (ARP) to set the limit for allotment releases
during the upcoming year. This is used as a control
device to ensure that release conform to the national
budget. Alongside, is a Cash Release Program (CRP),
which sets the disbursement limits for the year, for
each quarter and for each month.
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Budget Execution

▸ 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. It
is also referred to as Obligational Authority.
▸ It is illegal for a government entity to incur obligations without
having first received the “Allotment”. Moreover, the type and
amount of obligations to be incurred must conform to those that are
specified in the “Allotment.”
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Budget Execution

▸ Obligation – is an act of a duly authorized official which

binds the government to the immediate or eventual
payment of a sum of money. Obligation maybe referred
to as a commitment that encompasses possible future
liabilities based on current contractual agreement.
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Budget Execution

The following are the documents used in releasing

allotments to government agencies:
a. 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.
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Budget Execution

b. Special Allotment Release Order (SARO) – covers budgetary

items under For Later Release (negative list) in the entity’s
submitted BEDs, subject to compliance of required
documents/clearances. Releases of allotments for Special
Purpose Funds (e.g., Calamity Fund, Contingent Fund, E-
Government Fund, Feasibility Studies Fund, International
Commitments Fund, Miscellaneous Personnel Benefits Fund
and Pension and Gratuity Fund) are also covered by SAROs.
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Budget Execution

b. General Allotment Release Order (GARO) – is a

comprehensive authority issued to all national government
agencies, in general, to incur obligations not exceeding an
authorized amount during a specified period for the purpose
indicated therein. It covers automatically appropriated
expenditures common to most, if not all, agencies without
need of special clearance or approval from competent
authority, i.e. Retirement and Life Insurance Premium.
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Budget Execution

10. Incurrence of Obligations – government agencies incur

obligations which will be paid by the government, e.g.,
entering into contracts, hiring of personnel, purchase of
supplies, etc.
11. Disbursement Authority – the DBM issues disbursement
authority to the government agencies. This is the point where
government agencies obtain access to the government funds.
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Budget Execution

The following are the documents used in releasing disbursement

authority to government agencies:
a. Notice of Cash Allocation (NCA) – authority issued by the
DBM to central, regional and provincial offices and
operating units to cover their cash requirements. The NCA
specifies the maximum amount of cash that can be
withdrawn from a government servicing bank in a certain
period. The NCA is based on the agency’s submitted
Monthly Cash Program.
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Budget Execution

b. 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.
c. Non-Cash Availment Authority – authority issued by the
DBM to agencies to cover the liquidation of their actual
obligations incurred against available allotmens for
availment of proceeds from loans/grants through supplier’s
credit/constructive cash.
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Budget Execution

4) Cash Disbursement Ceiling – authority issued by the DBM

agencies with foreign operations (e.g., Department of
Foreign Affairs) allowing them to use the income collected
by their Foreign Service Posts to cover their operating
requirements.
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Budget Execution

▸ Disbursements are most commonly made through checks that

are chargeable against the account of the Treasury of the
Philippines. Checks issued under this scheme are called
“Modified Disbursement System (MDS) Checks”.
▸ Other modes of disbursement include payment through cash,
commercial check, bank transfer/bank debit, or credit card.
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Budget
Accountability
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Budget Accountability

 This phase occurs concurrently with the Budget

Execution phase. As the budget is being executed, it is
regularly monitored to determine the conformance of
actual results with planned targets.
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Budget Accountability

12. Budget Accountability Reports

a. Monthly Report of Disbursement – shows the
disbursements of the entity during the month, classified
according to the type of disbursement authority. This
report is submitted to the COA and DBM within 30
days after the end of each month.
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Budget Accountability

b. Quarterly Physical Report of Operation – shows the agency’s

physical accomplishments in a given quarter vis-à-vis its physical
targets.
c. Statement of Appropriations, Allotments, Obligations,
Disbursements and Balances – shows the agency’s authorized
appropriations, allotments received, obligations incurred,
disbursements made and the balances of unrealeased
appropriations, unobligated allotments, and unpaid obligations
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Budget Accountability

d. Summary of Appropriations, Allotments, Obligations,

Disbursements and Balances by Object of Expenditures – similar to
“c” above but provides details of expenditures (e.g., salaries and
wages, travelling expenses, etc.)
e. List of Allotment and Sub-Allotments – shows the allotments
received by the agency from the DBM and the sub-allotments
issued by the agency’s Central Office or Regional Office to lower
operating units.
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Budget Accountability

f. Statement of Approved Budget, Utilizations, Disbursements and

Balances – this report is prepared by agencies that have authority
to use their revenue. It shows the budgeted revenue, the utilizations
and disbursements thereof, and the unutilized amount.
g. Summary of Approved Budget, Utilizations, Disbursements and
Balances by Object of Expenditures – similar to ‘f’ above but
provides details of expenditures.
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Budget Accountability

h. Quarterly Report of Revenue and Other Receipts – shows the actail

revenues and other receipts remitted to the BTr and deposited in
authorized government depository banks in a given quarter.
i. Aging of Due and Demandable Obligations – shows names of
creditors, the amounts owed to them, and the number of days these
obligations are outstanding. This report is submitted to the COA
and DBM within 30 days after the end of the year.
Reports b to h are prepared on quarterly basis and are submitted to the
COA and DBM within 30 days after the end of each quarter.
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Budget Accountability

A Consolidated Statement of Allotments, Obligations, and Blanaces per

Summary of Appropriations (based on reports c and d) shall be submitted on or
before February 14 of the following year.
13. Performance reviews – The DBM and COA perform period reviews of the
agencies’ performance and budget accountability and report to the
President.
14. Audit – the COA audits the agencies.
The budget reports, together with other budget records, provide information in
preparing the Statement Comparison of Budget and Actual Amounts, which is
one of the components of a complete set of financial statements of a
government entity.
Responsibility
Accounting
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Responsibility Accounting

▸ To better evaluate the budget accountability of an entity,

government accounting adheres to the concept of responsibility
accounting.
▸ Responsibility accounting is a system of providing cost and
revenue information over which a manger has direct control of.
This enables the evaluation of a manager’s performance based only
on matters that are directly under his control. Therefore, budget
deviations can be readily attributed to the managers accountable
therefor.
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Responsibility Accounting

▸ Responsibility accounting 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 incur it
within a given period of time.
▹ Non-controllable costs – are costs incurred indirectly and allocated to
a responsibility level.
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Responsibility Accounting

▸ Except for some which derive most of their income

from collection of taxes and fees, government agencies
are basically cost centers whose primary purpose is to
render service to the public at the lowest possible.
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Responsibility Accounting

▸ Each government agency is assigned a responsibility

center code as follows:
00 000 0000000 000
00 – Organization Department
000 - Agency
0000000 – Lower Level Operating Unit
000 – Additional code for major office/department
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Responsibility Accounting

▸ Example COA
31 000 0100000 000
31 – Commission on Audit
000 – Agency (none)
0100000 – Central Office
000 – National Government Audit Sector