Budget Cycle

• Budget


  Government's estimate of the sources and uses of government funds within a fiscal year
• Budget cycle


  1. Budget preparation

  2. Budget legislation

  3. Budget execution

  4. Budget accountability
• Bottom-up budgeting


  Budget preparation starts from the lowest to the highest levels of the government
• Top-down budgeting


  Budget preparation starts from the agency heads
• Incremental budgeting


  Current year's budget is formulated based on the previous year's budget, which is just adjusted for any variances experienced in the past
• Zero-based budgeting


  Current year's budget is formulated without regard to the previous year's budget, government agencies are required to justify their current year's proposed programs and expenditures
• Budget preparation


  1. Budget call

  2. Budget hearings

  3. Presentation to the Office of the President
• The President shall submit the proposed budget to the Congress within 30 days from the opening of every regular session
• Budget legislation


  1. House deliberations

  2. Senate deliberations

  3. Bicameral deliberations

  4. President's enactment
• When the proposed budget is not enacted before the fiscal year starts, the last year's GAA is automatically reenacted
• Approved budget


  • New general appropriations
  • Continuing appropriations
  • Supplemental appropriations
  • Automatic appropriations
  • Unprogrammed funds
  • Retained income/funds
  • Revolving funds
  • Trust receipts
• Appropriation


  Authorization made by a legislative body to allocate funds for purposes specified by the legislative or similar authority
• A special appropriations bill shall specify the purpose for which it is intended, and shall be supported by funds actually available as certified by the National Treasurer, or to be raised by a corresponding revenue proposal therein
• No law shall be passed authorizing any transfer of appropriations; however, the President, the President of the Senate, the Speaker of the House of Representatives, the Chief Justice of the Supreme Court, and the heads of Constitutional Commissions may, by law, be authorized to augment any item in the general appropriations law for their respective offices from savings in other items of their respective appropriations
• Budget execution


  1. Release guidelines and BEDS

  2. Recipients of the budget (NGAs, LGUs, GOCCs, Congress, Judiciary)
• Government Owned and Controlled Corporations (GOCCs)


  Corporations that are owned or controlled, directly or indirectly, by the government and vested with functions relating to public needs
• Recipients of a portion of the government budget

  • Members of the Congress (Senators and Congressmen)
  • Judiciary Branch
• Priority Development Assistance Fund (PDAF)


  Portion of the budget received by members of the Congress, intended to fund priority development programs of the government
• Judiciary Development Fund (JDF)


  Portion of the budget received by members of the Judiciary, at least 80% is for cost of living allowances, remainder not exceeding 20% is for acquisition and maintenance of office equipment and facilities
• Disbursement Acceleration Program (DAP)

  Mechanism introduced by the Aquino Administration in 2014 to speed-up public spending, using savings and unprogrammed funds
• Savings


  Available portions or balances of items under the General Appropriations Act (GAA) which result from: a) the completion or final discontinuance or abandonment of a program, activity, or project; b) unpaid compensation for vacant or unfilled positions and leaves of absence without pay; or c) the implementation of efficiency measures that enable agencies to deliver services at lower cost
• Unprogrammed funds


  Funds not included in the General Appropriations Act (GAA)
• Allotment


  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"
• Obligation


  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
• Documents used in releasing allotments to government agencies

  • General Appropriations Act Release Document (GAARD)
  • Special Allotment Release Order (SARO)
  • General Allotment Release Order (GARO)
• 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.
• Disbursement Authority


  The DBM issues disbursement authority to the government agencies. This is the point where government agencies obtain access to the government funds
• Documents used in releasing disbursement authority to government agencies

  • Notice of Cash Allocation (NCA)
  • Notice of Transfer of Allocation
  • Non-Cash Availment Authority
  • Cash Disbursement Ceiling
• Disbursements are most commonly made through checks that are chargeable against the account of the Treasurer of the Philippines (i.e., Treasury Single Account). Checks issued under this scheme are called "Modified Disbursement System (MDS) Checks"
• Key budget terms


  • Appropriation
  • Allotment
  • Obligation
  • Disbursement
• Budget Accountability Reports


  • Monthly Report of Disbursements
  • Quarterly Physical Report of Operation
  • Statement of Appropriations, Allotments, Obligations, Disbursements and Balances
  • Summary of Appropriations, Allotments, Obligations, Disbursements and Balances by Object of Expenditures
  • List of Allotments and Sub-Allotments
  • Statement of Approved Budget, Utilizations, Disbursements and Balances
  • Summary of Approved Budget, Utilizations, Disbursements and Balances by Object of Expenditures
  • Quarterly Report of Revenue and Other Receipts
  • Aging of Due and Demandable Obligations
• A Consolidated Statement of Allotments, Obligations, and Balances per Summary of Appropriations shall be submitted on or before February 14 of the following year
• Performance reviews


  The DBM and COA perform periodic reviews of the agencies' performance and budget accountability and report to the President
• Audit


  The COA audits the agencies
• The budget reports, together with other budget records, provide information in preparing the Statement of 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


  A system of providing cost and revenue information over which a manager has direct control of, enabling the evaluation of a manager's performance based only on matters that are directly under his control
• The Budget Cycle


  1. Budget Preparation

  2. Budget Legislation

  3. Budget Execution

  4. Budget Accountability
• Bottom-up budgeting


  Several parties participate in the budget preparation, starting from the lowest to the highest levels of the government
• Zero-based budgeting


  The current year's budget is formulated without regard to the previous year's budget. Government agencies are required to justify their current year's proposed programs and expenditures, irrespective of whether these are new or carried over from the previous year.