The The Budget Budget PROCESSPROCESSRizza T. LoquiasRizza T. Loquias

Student, Ph. D. Dev. Ed.Student, Ph. D. Dev. Ed.

Legal BasisLegal Basis The The Philippine Budget ProcessPhilippine Budget Process was was

governed by Commonwealth Act No. 246 governed by Commonwealth Act No. 246 or the Budget Act which was passed into or the Budget Act which was passed into law on December 17, 1937 and revised law on December 17, 1937 and revised through the passage of RA 992 or the through the passage of RA 992 or the Revised Budget Act on June 4, 1954.Revised Budget Act on June 4, 1954.

Revision was made with Revision was made with PD No. 1177PD No. 1177..

THE BUDGET PROCESS IN THE BUDGET PROCESS IN GOVERNMENT AGENCIESGOVERNMENT AGENCIESBudgetingBudgeting is essentially a planning process. It is is essentially a planning process. It is

the determination for a future period of time of the determination for a future period of time of (1) what is to be done (1) what is to be done

(2) what is to be accomplished(2) what is to be accomplished

(3) the manner in which it is to be done and (3) the manner in which it is to be done and

(4) the cost of doing it. (4) the cost of doing it.

The Budget CycleThe Budget CycleThe Government operates under a The Government operates under a fiscal yearfiscal year which commence which commence

on January 1 to December 31 of the calendar year. Each fiscal on January 1 to December 31 of the calendar year. Each fiscal year, is in turn, divided into quarter-years, commonly called year, is in turn, divided into quarter-years, commonly called “quarters” and numbered consecutively from one to four. “quarters” and numbered consecutively from one to four.

With the emphasis given to the term “With the emphasis given to the term “fiscal yearfiscal year”, it is often ”, it is often assumed that the budget cycle takes from three to five years to assumed that the budget cycle takes from three to five years to work itself out from the initial planning phase through the final work itself out from the initial planning phase through the final liquidation of obligations. A new cycle, however, starts each liquidation of obligations. A new cycle, however, starts each year and consequently the average budget officer must during year and consequently the average budget officer must during any given fiscal year be actively concerned with least three any given fiscal year be actively concerned with least three different cycles, each of which in a different phase of the cycle. different cycles, each of which in a different phase of the cycle. The first cycle for example, will be concerned with planning The first cycle for example, will be concerned with planning estimates, the second with preparing estimates and securing estimates, the second with preparing estimates and securing legislative authorization, and the third cycle with budget legislative authorization, and the third cycle with budget execution.execution.

Actions taken during the average Actions taken during the average complete budget cycle consists of the complete budget cycle consists of the following:following:1. Basic planning is completed for the preparation 1. Basic planning is completed for the preparation

of estimates during the next fiscal year. of estimates during the next fiscal year. The The planning covers the development of a specific planning covers the development of a specific budget calendar for the forthcoming estimating budget calendar for the forthcoming estimating period, detailed schedules of what action are to period, detailed schedules of what action are to be taken during the period, and the initiation of be taken during the period, and the initiation of discussion with program and fiscal policy discussion with program and fiscal policy agencies as to the problem scope of the new agencies as to the problem scope of the new budget.budget.

2. 2. DBMDBM standing instruction for budget standing instruction for budget preparation are reviewed and changes preparation are reviewed and changes released to the agencies. released to the agencies. During this review,During this review, problems which arose during the estimating problems which arose during the estimating period just completed are ironed out and period just completed are ironed out and foreseeable new ones arising from changed foreseeable new ones arising from changed condition are studied for their effect oncondition are studied for their effect on estimating procedures.estimating procedures. Standing instructions Standing instructions are studied for their effect on estimating are studied for their effect on estimating procedures. Standing instructions are procedures. Standing instructions are modified as necessary to incorporate agreed modified as necessary to incorporate agreed upon changes.upon changes.

This is followed during the second fiscal year by the actions listed below:This is followed during the second fiscal year by the actions listed below:

(1) (1) Department of Budget and Management policy and program Department of Budget and Management policy and program guides for budget preparation are developed and released to the guides for budget preparation are developed and released to the agencies.agencies.

(2)(2) Agencies supplement the Department of Budget and Agencies supplement the Department of Budget and Management instruction and prepare and submit estimates.Management instruction and prepare and submit estimates.

(3)(3) Department of Budget and Management reviews estimates, Department of Budget and Management reviews estimates, recommends a fiscal plan and detailed estimates to the President.recommends a fiscal plan and detailed estimates to the President.

(4)(4) President adopts a fiscal plan and submits his budget and President adopts a fiscal plan and submits his budget and appropriation request to the Legislative body.appropriation request to the Legislative body.

(5)(5) The legislative body reviews the budget and appropriation bills The legislative body reviews the budget and appropriation bills are enacted.are enacted.

(6)(6) Department of Budget and Management standing instructions for Department of Budget and Management standing instructions for preparation of allotment and work plan request are reviewed and preparation of allotment and work plan request are reviewed and changes released to the agencies.changes released to the agencies.

(7)(7) Agencies supplement Department of Budget and Management Agencies supplement Department of Budget and Management instruction and prepare and submit requests for allotment and instruction and prepare and submit requests for allotment and approval of works plans.approval of works plans.

(8)(8) Department of Budget and Management reviews request and Department of Budget and Management reviews request and released allotments to the agencies for first quarter operations.released allotments to the agencies for first quarter operations.

Analysis of the cycle indicates the Analysis of the cycle indicates the particular interest and concern of budget particular interest and concern of budget personnel in the first three years of each personnel in the first three years of each cycle. Each of these years requires cycle. Each of these years requires positive action by budget personnel to positive action by budget personnel to accomplish the things which must be accomplish the things which must be done. Since any one cycle is active over done. Since any one cycle is active over a three to five year period, then all these a three to five year period, then all these different phases must be handled different phases must be handled annually by the budget personnel.annually by the budget personnel.

The Budget ProcessThe Budget Process

Budget Preparation

Budget Authorization

Budget Execution

Budget Accountability

Revenue systemRevenue system – collection and custody – collection and custody of government fundsof government funds

Appropriation systemAppropriation system – control and – control and ultimate disbursement of funds collectedultimate disbursement of funds collected

BudgetingBudgeting is performed on a basis is performed on a basis consistent with the revenue and consistent with the revenue and appropriation systems.appropriation systems.

The Budget ProcessThe Budget Process

(1)(1)Budget PreparationBudget Preparation(2)(2)Budget AuthorizationBudget Authorization(3)(3)Budget ExecutionBudget Execution(4)(4)Budget AccountabilityBudget Accountability

Budget PreparationBudget Preparation This is the This is the formulation of the estimates of expendituresformulation of the estimates of expenditures and and

involves all departments and agencies. involves all departments and agencies.

Budget formulationBudget formulation is done in accordance with programme and is done in accordance with programme and policy guides set forth by authoritative sources. policy guides set forth by authoritative sources.

The DBM releases the so-called “The DBM releases the so-called “budget callbudget call” that contains the policy ” that contains the policy and programme guides and technical instructions for budgeting to and programme guides and technical instructions for budgeting to the different departments, bureaus, and agencies. Within these the different departments, bureaus, and agencies. Within these limits and other supplementing internal policies or guides, the limits and other supplementing internal policies or guides, the various departments, agencies, and offices prepare their detailed various departments, agencies, and offices prepare their detailed requirements and submit this estimates to DBM which reviews all requirements and submit this estimates to DBM which reviews all estimates in the light of estimated revenues, the soundness of the estimates in the light of estimated revenues, the soundness of the proposals made, and their conformance to government policy. It proposals made, and their conformance to government policy. It then recommends action to the President who reviews decisions.then recommends action to the President who reviews decisions.

The approved estimates, along with The approved estimates, along with appropriate analysis and statements appropriate analysis and statements indicating the budget status of the indicating the budget status of the government and the estimated impact of government and the estimated impact of the budget on various aspects of the budget on various aspects of national life, are then presented by the national life, are then presented by the President to the legislative body as President to the legislative body as appropriation proposalsappropriation proposals..

Budget AuthorizationBudget Authorization

Refers to the legislative consideration Refers to the legislative consideration and approval of the appropriations bill. and approval of the appropriations bill. This involves a detailed review of the bill This involves a detailed review of the bill by the legislative body and eventual by the legislative body and eventual translation into an appropriate bill. translation into an appropriate bill.

The The House of RepresentativesHouse of Representatives, sitting as a , sitting as a Committee of the whole, studies and reviews Committee of the whole, studies and reviews the bill. Following discussions and debate, the the bill. Following discussions and debate, the bill becomes the appropriation bill. The bill becomes the appropriation bill. The Appropriations BillAppropriations Bill is then forwarded to the is then forwarded to the SenateSenate for their further study and review. for their further study and review.

When both houses have finally come up with their final decision, a conference committee is created represented by members of both houses to thresh out their differences and when all the differences have been settled, the bill is sent to the President for final approval.

The The General Appropriation ActGeneral Appropriation Act shall be shall be presented in the form of budgetary presented in the form of budgetary programs and projects for each agency programs and projects for each agency of the government, with the of the government, with the corresponding appropriations for each corresponding appropriations for each program and project, including statutory program and project, including statutory provisions of specific agency or general provisions of specific agency or general applicability. applicability. The General Appropriation The General Appropriation Act shall also contain an itemization of Act shall also contain an itemization of personal services which shall be personal services which shall be prepared before enactment of said Act.prepared before enactment of said Act. (Sec.30, P.D. No. 1177)(Sec.30, P.D. No. 1177)

Budget ExecutionBudget Execution This consists of activities necessary to This consists of activities necessary to

place the approved budget in operation. place the approved budget in operation.

Covers the operational phase ofCovers the operational phase of budgeting.budgeting. It involves the allotment and It involves the allotment and release of appropriations to the operating release of appropriations to the operating departments, bureaus and offices, and departments, bureaus and offices, and the incurrence of expenditures.the incurrence of expenditures.

At this stage, firm plans for the use of appropriates funds At this stage, firm plans for the use of appropriates funds are adopted and budgetary controls put in force to direct are adopted and budgetary controls put in force to direct and limit the spending of funds according to plans. It is at and limit the spending of funds according to plans. It is at this point that the budgeting serves as one of the principal this point that the budgeting serves as one of the principal tools of management. tools of management. Plans and programmesPlans and programmes envisioned envisioned during the preparation step are now in effect.during the preparation step are now in effect. To secure To secure planned performance through sound use of the resource planned performance through sound use of the resource made available, departments, bureaus and offices are made available, departments, bureaus and offices are required to program their expenditures and work in required to program their expenditures and work in quarterly periods. In preparation for the release of such quarterly periods. In preparation for the release of such allotments and incurrence of expenditures, department, allotments and incurrence of expenditures, department, bureaus, offices, as early as the completion of the bureaus, offices, as early as the completion of the appropriations bill, finalize their work and financial plans. appropriations bill, finalize their work and financial plans. Shortly after the issuance of such allotments, agencies Shortly after the issuance of such allotments, agencies submit their work and financial plans to the Department of submit their work and financial plans to the Department of Budget and Management. Budget and Management.

These plans serve as the These plans serve as the operatingoperating budgetbudget of the of the agencies by which expenditures and works performance agencies by which expenditures and works performance are controlled.are controlled.

Under this phase of the budget Under this phase of the budget process, the budget serves as a process, the budget serves as a

tool tool and management controls.and management controls. Fiscal controlFiscal control – in such a way that – in such a way that

expenditures are controlled to adequately expenditures are controlled to adequately result in the optimum performance kept within result in the optimum performance kept within the limits of available resources.the limits of available resources.

Management controlManagement control – in the sense that, it is – in the sense that, it is used in the attainment of the desired goals in used in the attainment of the desired goals in the most economical and efficient utilization of the most economical and efficient utilization of public funds.public funds.

Program of ExpendituresProgram of Expenditures

The first step in the Budget Execution phase The first step in the Budget Execution phase of the Budget Process is the formulation of a of the Budget Process is the formulation of a ““program of expendituresprogram of expenditures” of the national ” of the national government.government.

The DBM Secretary shall recommend to the The DBM Secretary shall recommend to the President the year’s program of President the year’s program of expenditures for each agency of the expenditures for each agency of the government on the basis of the authorized government on the basis of the authorized appropriations. appropriations. The approved The approved expenditure program shall constitute the expenditure program shall constitute the basis for fund releases during the fiscal basis for fund releases during the fiscal period, subject to such policies, rules and period, subject to such policies, rules and regulations as mayregulations as may be approved by the be approved by the President.President. (Sec 39, PD No. 1177)(Sec 39, PD No. 1177)

The The Program of ExpendituresProgram of Expenditures should be should be comprehensive and should reflect:comprehensive and should reflect:

Total personal servicesTotal personal services Total maintenance and other operating Total maintenance and other operating

expensesexpenses Total capital outlays, broken down into Total capital outlays, broken down into

(1) land, land improvements and structures (1) land, land improvements and structures outlays outlays

(2) (2) construction outlays construction outlays (3) equipment outlays(3) equipment outlays(4) (4) investment outlays and investment outlays and (5) loans outlays. (5) loans outlays.

Budget AccountabilityBudget AccountabilityConcerns the reporting of actual performance Concerns the reporting of actual performance

against plans.against plans.Consists of:Consists of: Periodic reportingPeriodic reporting by the departments, bureaus by the departments, bureaus

and offices of their performance under the and offices of their performance under the approved budgetapproved budget

ReviewReview of government activities and the fiscal of government activities and the fiscal and policy implications thereof to management and policy implications thereof to management in all levels andin all levels and

The The actions of the audit officeactions of the audit office in assuring the in assuring the fidelity of officials and employees with regard to fidelity of officials and employees with regard to handling government receipts and handling government receipts and expenditures.expenditures.

While emphasis in audit may be on the legality of While emphasis in audit may be on the legality of actions taken during budget execution. i.e. actions taken during budget execution. i.e. whether funds are spent as authorized by the whether funds are spent as authorized by the legislature, management review is concerned legislature, management review is concerned primarily with programmes and performance. primarily with programmes and performance. Thus the techniques of budget accountability Thus the techniques of budget accountability are those concerned with reporting and are those concerned with reporting and interpreting the meaning or significance of data interpreting the meaning or significance of data as reported. as reported.

FORM AND CONTENT OF THE BUDGETFORM AND CONTENT OF THE BUDGETIn accordance with Section 14 of PD In accordance with Section 14 of PD

1177, the budget proposal of the President 1177, the budget proposal of the President shall include current operating expenditures shall include current operating expenditures and capital outlays. It shall comprise such and capital outlays. It shall comprise such funds as may be necessary for the operation of funds as may be necessary for the operation of the programs, projects and activities of the the programs, projects and activities of the various departments and agencies. various departments and agencies.

The proposed General Appropriations The proposed General Appropriations Act and other Appropriations Acts necessary to Act and other Appropriations Acts necessary to cover the budget proposals shall be submitted cover the budget proposals shall be submitted to the National Assembly to accompany the to the National Assembly to accompany the president’s budget submission.president’s budget submission.

The budget shall be presented to the National Assembly in The budget shall be presented to the National Assembly in such form and content as may be approved by the President such form and content as may be approved by the President and may include the following:and may include the following:

1. a budget message setting forth in brief 1. a budget message setting forth in brief the government’s budgetary thrusts for the government’s budgetary thrusts for the budget year, including their impact the budget year, including their impact on development goals, monetary and on development goals, monetary and fiscal objectives, and generally on the fiscal objectives, and generally on the implications of the revenue, expenditure implications of the revenue, expenditure and debt proposals; andand debt proposals; and

2. summary financial statements setting forth: estimated expenditures and proposed appropriation necessary for the

support of the Government for the ensuing fiscal year, including those financed from operating revenues and from domestic and foreign borrowings;

estimated receipts during the ensuing fiscal year under laws existing at the time the budget is transmitted and under the revenue proposals, if any, forming part of the year’s financing program;

actual appropriations, expenditures, and receipts during the last completed fiscal year;

estimated expenditures and receipts and actual or proposed appropriations during the fiscal year in progress.

Statements of the condition of the National Treasury at the end of the last completed fiscal year, the estimated condition of the Treasury at the end of the fiscal year in progress and the estimated condition of the Treasury at the end of the ensuing fiscal year, taking into account the adoption of financial proposals contained in the budget and showing, at the same time, the unencumbered and unobligated cash resources;

Essential facts regarding the bonded and other long-term obligations and indebtedness of the government both domestic and foreign, including identification of recipients of loan proceeds; and

Such other financial statements and data as are deemed detail the financial condition of the government.

BUDGET ESTIMATESBUDGET ESTIMATES Sec. 16 of PD 1177 provides that each Sec. 16 of PD 1177 provides that each

head of department, office or agency of head of department, office or agency of the National Government, including the the National Government, including the Legislative and Judicial Branches, and Legislative and Judicial Branches, and including government-owned or controlled including government-owned or controlled corporations shall submit his request for corporations shall submit his request for appropriations to the Budget Commission appropriations to the Budget Commission in accordance with the budget calendar, in accordance with the budget calendar, format, and such rules and regulations.format, and such rules and regulations.

The budget estimates of agencies shall include the following The budget estimates of agencies shall include the following information:information:

1.1. objectives, functions, activities, programs and projects objectives, functions, activities, programs and projects showing the general character and relative importance showing the general character and relative importance of the work to be accomplished or the services to be of the work to be accomplished or the services to be rendered, and the principal elements of cost involved;rendered, and the principal elements of cost involved;

2.2. linkage of the work and financial proposals to linkage of the work and financial proposals to approved development plans;approved development plans;

3.3. estimated current operating expenditures and capital estimated current operating expenditures and capital outlays, with comparative data for the preceding and outlays, with comparative data for the preceding and current budget years;current budget years;

4.4. Identification by region, pursuant to policies on the Identification by region, pursuant to policies on the regionalization of government operations;regionalization of government operations;

5.5. Financial sources, reflecting all revenues, proceeds of foreign Financial sources, reflecting all revenues, proceeds of foreign and domestic borrowings, and other sources, particularly and domestic borrowings, and other sources, particularly those which accrue to the general Fund;those which accrue to the general Fund;

6.6. Contingent liabilities, including national government Contingent liabilities, including national government guarantees obligations of government owned or controlled guarantees obligations of government owned or controlled corporation in their subsidiaries; corporation in their subsidiaries;

7.7. Brief description of the major thrusts and propriety programs Brief description of the major thrusts and propriety programs and projects of the budget year, results expected for each and projects of the budget year, results expected for each budgetary program and project, nature of work to be budgetary program and project, nature of work to be performed, estimated cost per unit of work measurement, performed, estimated cost per unit of work measurement, including the various objects of expenditures for each project; including the various objects of expenditures for each project;

8.8. Organization charts and staffing patterns indicating the list of Organization charts and staffing patterns indicating the list of existing and proposed position with corresponding salaries, existing and proposed position with corresponding salaries, and proposals for positions classifications and salary and proposals for positions classifications and salary changes, dully supported by adequate justification.changes, dully supported by adequate justification.