Budgetary and Proprietary Equation-Final

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Government Budgeting

• Is the critical exercise of allocating revenuesand borrowed funds to attain the economicand social goals of the country.

• It also entails the management of

government expenditures in such a way thatwill create the most economic impact fromthe production and delivery of goods andservices while supporting a healthy fiscal

position.



Important of Government Budgeting

• Government budgeting is important becauseit enables the government to plan andmanage its financial resources to support theimplementation of various programs and

projects that best promote the developmentof the country.



Major Processes involved in National

Government Budgeting

• Budget preparation• Budget authorization

• Budget execution

• Accountability



Budgetary Process

Function Participants Schedule Planning andEstimation

Budget Division

Departments and

Agencies

July-September

Planning and

Estimation Budget Division October-January

LegisltiveDeliberation

General Assembly January-May

BudgetExecution

Budget Division

Legislative

Committees

Departments and

Agencies

June-July



Planning and Estimation

• During this preparation period, the staffof the Division of Budget continuallymeets with the agencies' fiscal andprogram personnel to answerquestions and provide assistance indeveloping their budget requests.



Preparation of the Budget

• Following analysis of the requests by theDivision of Budget, detailed recommendationsare made to the Commissioner of Finance andAdministration.

• Meetings are convened with commissioners anddirectors of the departments and agencies bythe Commissioner of Finance andAdministration.

• A consensus is sought with the agencies as tothe appropriate funding level for the upcomingyear.



Preparation of the Budget

• The Governor and the Commissionerof Finance and Administration reviewthe recommendations resulting fromthese hearings and consider necessaryalterations to fit within the scope of theAdministration's initiatives.



Legislative Deliberation

• After the Budget Document and Budget Messagehave been presented, the appropriation process isinitiated.

• The Appropriations Bill, prepared by the Departmentof Finance and Administration, is introduced and

referred to the Finance, Ways, and MeansCommittees of both houses of the Legislature.

• The Senate and House of Representatives mustultimately pass the exact version of the

Appropriations Bill for it to be enacted into law.



Budget Execution

• Budget execution is a process that continuesthroughout the fiscal year. In addition to thedaily review of numerous operational andpersonnel transaction requests, the budgetanalysts must assure that legislative intentionsof the Appropriations Act are being compliedwith and carried out by the various departmentsand agencies.



Annual National Budget

• The preparation of the annual budgetinvolves a series of steps that begins withthe determination of the overall economictargets, expenditure levels, revenue

projection and the financing plan by theDevelopment Budget CoordinatingCommittee (DBCC).



Annual National Budget

• The DBCC is an inter-agency bodycomposed of the DBM Secretary asChairman and the Bangko Sentral Governor,the Secretary of the Department of Finance,

the Director General of the NationalEconomic and Development Authority and arepresentative of the Office of the Presidentas members.



Department of Budget and Management (DBM)

• Filipino: Kagawaran ng Pagbabadyet atPamamahala

• Is an executive body under the Office of thePresident of the Philippines.

• It is responsible for the sound and efficientuse of government resources for nationaldevelopment and also as an instrument forthe meeting of national socio-economic andpolitical development goals.



• The current Secretary of Budget andManagement appointed by PresidentBenigno Aquino III is FlorencioAbad.



Six Characteristics in the Philippine Budget Process

• A commitment to fiscal discipline.

• Tax compliance and corruption.

• Subsidies: government-owned andcontrolled corporations.

• The Development Budget CoordinatingCommittee.

• The national planning function.

• Unprogrammed funds and special purposefunds.



Key Constitutional Restrictions

• The President can impose restrictions on thedisbursement of funds appropriated byCongress.

• The President can augment any

appropriations from savings in otherappropriations.



Step 1. Issue the budget call

• A local budget call is the issuance of adirective from the LCE to mark the beginningof the budget preparation period for the localgovernment.

• It shall contain the general objectives,specific sectoral objectives, policy decisions,strategies and prioritized P/A/Ps bysector/office as reflected in the AIP.



• It shall provide specific guidelines in thepreparation of individual budget proposals.

• This directive shall be issued between June15 to June 30 to allow more time for the

department heads to formulate reasonableproposals for the budget year.

• The period for the budget preparationprocess starts July 1 and winds up on

October 16 for each fiscal year.



The budget guidelines shall include thefollowing:

• Expenditure ceiling by office/sector

• Allocation scheme by major final out and

P/P/A• Budget calendar and budget preparation

forms

• Other administrative guidelines



b. Guidelines in Preparing the Budget Message.

• Present the objectives, policies, strategies and priorityprograms/activities/projects of the LGU for the budgetyear and relate their consistency with the proposedrevenue and expenditure structure.

• Identify the “flagship projects” by sector and by programand relate how they are envisioned to carry out thedevelopment goals for the next 3 to 5 years.



• Review past 5 years revenue and expenditure patternand disclose what basic services and facilities wereprovided.

• Discuss the current year’s income and expenditure

performance and disclose any improvements in the

production of results compare with the past 5 years.



c. The Local Expenditure Program (LEP)

• The first part of the LEP is the estimates of income. The incomestructure that is composed of 3 components shall have informationon the immediate past year, current year and budget year estimates.

• The second part of the LEP is the expenditure program. The detailsof the expenditure program shall be presented by sector, office or

department, special purpose appropriations, byprogram/activity/project, and by expense class for a 3-year period,namely, the past year, current year and budget year.



• The fourth part of the LEP is the general provisions for receipts,income and expenditure policies of the local government.

• The last part of the LEP is a summary of the FY-New Appropriationby Office/Department and Special Purpose Appropriations. It reflectsthe total proposed budget for the budget year.



d. The Budget of Expenditures and Sources of

Financing (BESF) • The BESF is a detailed and graphical presentation of the

expenditure program of an LGU covering actualobligations for the past year, actual and estimated

expenditure for the current year and the proposedbudget program for the ensuing year.



B. Budget Authorization

• The second phase in the local governmentbudget process, it starts from the time theLCE submits the budget to the sanggunianfor legislative deliberation and ends with the

corresponding enactment of theappropriations ordinance.

St 4 P t th ti b d t t th l l



Step 4. Present the executive budget to the local

sanggunian.

a. State of the LGU Address.

• On the first day of the session of the local sanggunian, theLCE shall address and present to the members of thesanggunian and the general public the highlights, thrusts,programs and priorities of the budget under consideration onthe basis of the past and current situation of the LGU.

• The LCE shall likewise brief the sanggunian on the level ofthe proposed expenditures, how these are allocated amongthe 3 mandated sectoral services, namely: economic, social,and general services and the sources of financing that willsupport the budget.



Step 5. Deliberate on the executive budget.

• The deliberation on the budget shall be within the

current fiscal year, which may commence onOctober 16, or upon receipt of the sanggunian, ofthe executive budget.

• The sanggunian shall see to it that the executive

budget is development or results-oriented, poverty-focused and promotes economic growth.

• The sanggunian shall be guided by fiscalrequirements and administrative regulations



Step 6. Enact the appropriations ordinance.

• On or before the end of the current fiscal year, the

sanggunian shall approve through the enactment ofan ordinance the annual budget of the LGU for theensuing fiscal year on the basis of the estimates ofincome and expenditures submitted by the LCE.

• The legislative instrument authorizing the budget isknown as an Appropriation Ordinance.



Step 7. Veto and override the budget.

• The LCE shall have the power to veto any particular

item/s of the appropriation ordinance or resolutiondirecting the payment of money or creating liability,on the ground that it is ultra vires or prejudicial to thepublic welfare.

• Changes in the annual budget may be authorized byway of supplemental budgets and the appropriationordinance authorizing it shall be enacted by thesanggunian in the same manner as that of the

annual budget.



C. Budget Review

• Its primary purpose is to determine the compliance

of the enacted appropriation ordinance with therequirements set forth in the Local GovernmentCode.

• The DBM reviews the appropriation ordinance. The

Sangguniang Panlungsod reviews the appropriationordinances of their respective barangays.



Step 8. Prepare the Budget Review Matrix (BRM).

• The BRM will allow the reviewing agency orbody to go over, in a single document, thewhole budget submitted by the localgovernment for review.



Step 9. Check provision for budgetary requirements.

• The aggregate amount appropriated shall not

exceed the estimates of income.

• Full provision shall be made for all statutory andcontractual obligations of the LGU concerned,provided however, that the amount of appropriation

for debt servicing shall not exceed 20% of theregular income of the LGU concerned,

Step 10 Check consistency of Annual/Supplemental



Step 10. Check consistency of Annual/Supplemental

Budget with AIP and ELA.

• The reviewing authority shallascertain/check, in addition to the Code’s

compliance, the consistency ofAnnual/Supplemental Budget with the

approved AIP and the ELA which issubsumed in the approved AIP.



Step 11. Issue the review action.

• The review action may be in the form of a review

letter and all the findings must be disclosed.

- Before the appropriation ordinance is officiallyreturned to the concerned LGU, the stamp of reviewof the reviewing agency or body must be stamped in

every page of the reviewed appropriation ordinanceand duly signed by the Regional Director of DBM orattested to by the Secretary of the Sanggunian, asthe case may be.



C. Budget Execution

• It is the fourth phase of the local government budget

process. It involves the release and actualdisbursements of funds appropriated for theperformance of functions and undertaking ofprojects and activities.

• The critical aspect of this phase is the collection offunds such that disbursements do not exceedappropriation.



• Actual funding requirements of programs/ projects/

activities can only be determined through budgetexecution.

• Accounting for local government funds has alsobeen simplified and made more understandable with

the institution of the New Government AccountingSystem (NGAS).

Step 12 Prepare the Local Budget Matrix (LBM)



Step 12. Prepare the Local Budget Matrix (LBM),

Cash Program and performance targets.

• The LBM is the yearly overall financial plan of theLGU equivalent to its approved appropriationdisaggregated into components or categories.

Budgetary item are categorized in the LBM



Budgetary item are categorized in the LBM

into the following:

1. By source of appropriation

2. By fund

3. By program/project or by department/office

4. By allotment class

5. By need for clearance



Step 13. Obligate and disburse funds.

• Obligations shall be limited to the available allotment

for the purpose. The requesting department/officeshall:

• (1) prepare the (Allotment and Obligation Slip/ALOBS)Obligation Request (ObR) based on disbursementvouchers/purchase requests and other supportingdocuments;

• (2) have the ObR signed by its respective head asrequesting official; and

• (3) forward the same to the Budget Officer, together withthe supporting documents.

Step 14 Procure goods and services under the New



Step 14. Procure goods and services under the New

Government Procurement System.

• It is the policy of the Government that

procurement of infrastructure projects, goodsand consulting services through publicbidding, except as otherwise provided by

law.

E B d A bili



E. Budget Accountability

• It involves the accurate recording and

reporting of LGU’s income and expenditures

and the evaluation of LGU’s physical and

financial performance.

S S b i bili



Step 15. Submit accountability reports.

• All departments and offices are required to submitaccountability reports to the Local Finance Committeethrough the Budget Officer in order to effectively monitorthe efficiency of the LGU’s fund utilization as well as

assess performance in attaining prescribed goals and

objectives.

Step 16. Evaluate the physical, financial and



Step 16. Evaluate the physical, financial and

income performance.

• A mid-year or semi-annual review and

examination of cost and accomplishmentsagainst performance standards shall beconducted.



CALENDAR OF ACTIVITIES



FY2012 BUDGET PREPARATION

DATE ACTIVITIES RESPONSIBLE UNITS On or Before 15 July 2011 Budget Call The Mayor 21 – 22 July 2011 Budget Orientation TWG & Admin Officers of All

Budget Units 15 August 2011 Deadline of Submission of

Budget Proposals All Budget Units 16 Aug – 16 Sep 2011 Review and Evaluation of

Budget Proposals Technical Working Group 20 – 27 Sep 2011 Preliminary Budget Hearing City Finance Committee & All

Budget Units

28 – 30 Sep 2011 Finalization of Budget

Proposals City Finance Committee 03 – 04 October 2011 Submission/Presentation to

the Mayor for Approval City Finance Committee 05 – 07 October 2011 Printing, Reproduction &

Binding City Budget Department 10 October 2011 Submission to the City

CouncilCity Finance Committee



Proprietary

Equations



BUDGETARY ACCOUNTS

APPROPRIATION

ALLOTMENT

OBLIGATIONS

Authorization made by ordinance, directingthe payment of goods and services from localgovernment funds under specified conditionsor for specific purposes

Authorization issued by the Local ChiefExecutive (LCE) to a department/officeof the LGU, which allows it to incurobligations, for specified amounts,within the appropriation ordinance

Amounts committed to be paid bythe LGU for any lawful act made byan accountable officer for and inbehalf of the local government unit

concerned



EQUITY

Interest of the government in an agency which is theexcess of an agency’s assets over its liabilities

LIABILITIES Economic obligations of an agency that are recognized

and measured in conformity with generally acceptedaccounting principles.

ASSETS Economic resources of an agency that

are recognized and measured inconformity with generally acceptedaccounting principles.

PROPRIETARY ACCOUNTS




Decrease in economic benefitsduring an accounting period in the

form of outflow or depletions ofassets or incurrence of liabilitiesthat results in decrease in equity

REVENUE/INCOME

Increase in economic benefits during theaccounting period in the form of inflows orenhancements of assets or decreases ofliabilities that results in increases in equity

EXPENSES



Types of Proprietary Funds

Enterprise Funds

Internal Service Funds


account for and report business-type activities that serve the publicat large

account for and report goods andservices provided to departments ofthe same government

BUDGETARY AND PROPRIETARY ACCOUNTING RELATIONSHIP



THANK YOU!

Budgetary and Proprietary Equation-Final

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