CHAPTER 2

The Budget Process

Learning Objectives:
1. Enumerate the steps in the budget process.
2. Describe briefly the principles of responsibility accounting.
The National Budget
• Government accounting is primarily budgetary
accounting.
• Government accounting does not only aim to provide
information on past events and transactions but also
budget information in accordance with PPSAS 24.

Philippine Public Sector Accounting Standards (PPSAS)

PPSAS 24 - Presentation of Budget Information in Financial
Statements
The National Budget (government budget)

• is the government's estimate of the sources and

uses of government funds within a fiscal year.
• This forms the basis for expenditures and is the
government's key instrument for promoting its socio-
economic objectives.
The Budget Cycle

1. Budget Preparation
2. Budget Legislation
3. Budget Execution
4. Budget Accountability
Budget Preparation
The budget preparation in the Philippines uses a "bottom-up"
approach.

"bottom-up" budgeting - starting from the lowest to the highest

levels of the government.

Opposite:
top-down budgeting - wherein the budget preparation starts from the
agency heads.
 Incremental budgeting VS. Zero-based budgeting
 The current year's budget is  The current year's budget is
formulated based on the previous formulated without regard to the
year's budget, which is just adjusted previous year's budget. Government
for any variances experienced in the agencies are required to justify their
past. Presumably, the proposed current year's proposed programs and
programs and expenditures in the expenditures, irrespective of whether
previous year are automatically these are new or carried over from the
approved in the current year. previous year.

 Uses a "roll-over" approach.  Uses a "back-to-zero" or "clean

slate" approach.
 Prone to abuse.
 Promotes efficient and effective
utilization of funds.
1.
Budget Call
• The budget preparation starts when the Department of Budget and
Management (DBM) issues a Budget Call to all government agencies.

• The budget call contains, among other things, the next fiscal year's
targets, the agency's budget ceiling, and other guidelines in the
completion and submission of agency budget proposals.
Relevant terms:
• Balanced budget - prepared in such a way that estimated revenues exceed estimated
expenditures. If actual revenues exceed actual expenditures, the government earns a surplus. If
expenditures exceed revenues, the government incurs a deficit.

• Annual budget - covers a period of one year and forms the basis for the annual appropriation.

• Line item budget - focuses on specific expenditures such as salaries and wages, travel
expenses, freight, suppliers, materials and equipment.

• Performance budget - a plan of activities to be undertaken, including their related costs, with
the emphasis on meeting targets and desired results. The main focus is on the work to be done or
services to be rendered.

• Obligation budget - focuses on expenditures incurred in the current year which are to be paid
either in the same year or in the following year.
3. Presentation to the office of president
• The President and Cabinet members review the proposed budget.

• After the President approves the proposed budget, the DBM finalizes the
budget documents to be submitted to the Congress. At this point, the proposed
budget is referred to as the "President's Budget."
The "President's Budget" contains the following documents which are
intended to assist the Congress in their review and deliberation of the
proposed national budget:
a. President's Budget Message this contains the President's explanation of the country's fiscal
policy and budget priorities.
b. National Expenditure Program (NEP) - this contains the details of all the government entities'
proposed expenditures in the coming year.
c. Budget of Expenditures and Sources of Financing (BESF) - this contains the estimated
expenditures accompanied by estimates of expected sources of financing.
d. Other documents aimed to provide further explanation of selected items in the NEP (e.g.,
details of key programs and projects and staffing summary).

Relevant provision of law

 The president shall submit the proposed budget to the congress within 30 days
from the opening of every regular session. (Art. Vll, Sec. 22. Philippine
Constitution)
Illustration: Excepts from President’s Budget Message
Excerpt 1:

Fiscal Year 2017

Message of President Rodrigo Roa Duterte

to the Seventeenth Congress of the Philippines on the National

August 15, 2016 Budget for Fiscal Year 2017

Ladies and Gentlemen of the

17th Congress of the Philippines:

I have the honor to submit to you, through the President of the Senate and the Speaker of the House of Representatives, the

Proposed National Budget for Fiscal Year (FY) 2017.

Excerpt 2:

Fiscal Year 2017

BUDGET PHILOPSOPHY

Ladies and gentlemen, my commitment to implement real change lies at the core of the P3.35 trillion proposed Budget
for FY 2017.

This is my Administration's first Budget. It is a Budget that gives flesh and bone to the promise by which I
won as President: to fight for social justice. It was designed to realize change in the here and now.

This Budget is for the people and by the people. In the last one and a half months since we assumed office, we
designed this Budget around the following principles:
 Budget Legislation
• Government funds shall only be spent in pursuance of an
appropriation made by law. Therefore, due process must be
undertaken to legalize the proposed budget .
4.
House Deliberations
• Upon receipt of the President's Budget, the House of Representatives
conducts hearings to scrutinize the various agencies respective
proposed programs and expenditures.
• Thereafter, the House of Representatives prepares the General
Appropriations Bill (GAB).
5.
Senate Deliberations
• The Senate conducts its own deliberations on the GAB. These
normally start after the Senate receives the GAB from the House of
Representatives.
• However, for expediency, hearings in the Senate start even as
Representatives deliberations are ongoing.
6.
Bicameral Deliberations
• After deliberations in both houses are finished, a committee called the
Bicameral Conference Committee is formed to harmonize any
conflicts between the Representatives and Senate versions of the
GAB.
• The harmonized GAB ('Bicam' version) is submitted back to both
Houses for ratification. After ratification, the final GAB is submitted
to the President for enactment.
6.
President's enactment
• The President enacts the budget, which is now known as the General
Appropriations Act (GAA).
• Before enactment though, the President may exercise his veto power
as conferred to him under the Philippine Constitution.
The Approved Budget
 Is the expenditure authority derived from appropriation laws, government
Approved Budget - ordinances, and other decisions related to the anticipated revenue or receipts for
the budgetary period.

UACS Code
New General Appropriations 01
Continuing Appropriations 02
Supplemental Appropriations 03
Automatic Appropriations 04
Unprogrammed Funds 05
Retained Income/Funds 06
Revolving Funds 07
Trust Receipts 08
Appropriation - Is the authorization made by a legislative body to allocate funds
for purposes specified by the legislative or similar authority.

New General Appropriations

1
- Are annual authorizations for incurring obligations during a specified budget year,
as listed in GAA.
2 Continuing Appropriations
- Are the authorizations to support obligations for
a specific purpose or project, such as multi-year
construction projects which require the
incurrence of obligations even beyond the budget
year.
3 Supplemental Appropriations
- Are additional appropriations authorized by law to augment the original
appropriations which proved to be insufficient for their intended purpose due to
economic, political or social conditions supported by a Certification of Availability
of Funds from the BTr.
4 Automatic Appropriations

- Are the authorizations programmed annually or for some other period prescribed by
law which do not require periodic action by Congress.
 Unprogrammed Funds
5are standby appropriations authorized by Congress in the annual GAA which may
be availed only when any of the following instances occur:

a. revenue collections exceed the original revenue targets in the Budget of

Expenditures and Sources of Financing (BESF) submitted by the President to the
Congress;

b. new revenues are collected or realized from sources not originally considered in
the BESF; or

c. newly-approved loans for foreign-assisted projects are secured or when

conditions are triggered for other sources of funds such as perfected loan
agreements for foreign assisted projects.

(source: http://www.dbm.gov.ph/?page_id=7366)
 Retained Income/Funds - collections which are authorized by law to be
6
used directly by agencies concerned for their operation or specific purposes.
(http://www.dbm.gov.ph/wp-content/uploads/BESF/BESF2016/GLOSSARY.pdf)

Revolving Funds receipts derived from business-type activities of

7 departments/agencies which are authorized by law to be constituted as such
and deposited in an authorized government depository bank. These funds
shall be self- liquidating and all obligations and expenditures incurred by
virtue of said business-type activity shall be charged against said fund.

(http://www.dbm.gov.ph/wp-content/uploads/BESF/BESF2016/GLOSSARY.pdf)
 Trust Receipts - receipts by any government agency acting as
8
trustee, agent or administrator for the fulfilment of some obligations
or conditions.

(Adapted from the definition of "Trust Fund" in http://www.dbm.gov.ph/wp-content/uploads/BESF/BESF2016/GLOSSARY.pdf)

Relevant Provision Of Law:

 A special appropriations bill shall specify the purpose for which it is

intended, and shall be supported by funds which available as certified by
the National Treasurer, or to be raised by a corresponding revenue
proposal therein. (Art. VI, Sec. 25(4), (Philippine constitution)

 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. (Art.
VI. Sec. 25(5), Philippine Constitution)
Budget Execution
the phase where government funds
are spent.

Allysa Marie C. Alonde

BSA - 3rd Year
 08 Release guidelines and
BEDs
DBM issues guidelines on the release
and utilization of funds while the
various agencies submit their BEDs.

Allysa Marie C. Alonde

BSA - 3rd Year
Budget Execution Documents (BEDs)
summarizes an agency's fiscal year plans and performance targets.

a. Physical and financial plan,

b. Monthly cash program,
c. Estimate of monthly income, and
d. List of obligations that are not yet due and demandable.

Allysa Marie C. Alonde

BSA - 3rd Year
 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.

Allysa Marie C. Alonde

BSA - 3rd Year
 Local Government Units (LGUs)

(a) autonomous regions,

(b) provinces and cities independent from a
province,
(c) component cities (cities which are part of a
province) and municipalities, and
(d) barangays.

Allysa Marie C. Alonde

BSA - 3rd Year
 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.

Allysa Marie C. Alonde

BSA - 3rd Year
THANK YOU!