Chapter 02 Budget Process PDF

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Summary

CHAPTER 2THE BUDGET PROCESSThe national budget (government budget) is the government’s estimate of the sources and uses of government funds within a fiscal year.The formulation and eventual utilization of the national budget are summarized in the budget cycle.Budget Cycle Budget Process P - Budget P...

Description

CHAPTER 2 THE BUDGET PROCESS

The national budget (government budget) is the government’s estimate of the sources and uses of government funds within a fiscal year.

The formulation and eventual utilization of the national budget are summarized in the budget cycle.

Budget Cycle

Budget Process

P - Budget Preparation

1. Budget Call 2. Budget Hearing 3. Presentation of the Office of the President

L - Budget Legislation

4. House Deliberations 5. Senate Deliberations 6. Bicameral Deliberations 7. President’s Enactment

E - Budget Execution

8. Release Guidelines and BEDs 9. Allotment 10. Incurrence of Obligations 11. Disbursement Authority

A - Budget Accountability

12. Budget Accountability Reports 13. Performance Reviews 14. Audit

****************************************************************************************************

BUDGET PREPARATION The budget preparation in the Philippines uses a “bottom-up” approach”.

Under “bottom-up” budgeting, several parties participate in the budget preparation, starting from the lowest to the highest levels of the government.

In 2011, the Philippines Government attempted to start a new tradition by shifting from the old “incremental” system of budgeting to the “zero-based budgeting” approach.

Incremental budgeting vs. Zero-based budgeting * The current year’s budget is formulated * The current year’s budget is formulated based on the previous year’s budget, without regard to the previous year’s which is just adjusted for any variances budget. experienced in the past. * Government agencies are required to * Uses a “roll-over” approach.

justify

their

current

year’s

proposed

programs and expenditures, irrespective * Prone to abuse.

of whether these are new or carried over from the previous year. * Uses a “back-to-zero” or “clean slate” approach.

*

Promotes

efficient

utilization of funds.

1. Budget Call

and

effective

The budget preparation starts when the Department of Budget and Management (DBM) issues a Budget Call to all government Agencies.

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. Special budget – provides for items not adequately covered or not included in the general appropriation act. Line item budget – focuses on specific expenditures such as salaries and wages, travel expenses, freight, supplies, 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.

2. Budget hearing  Budget hearing are conducted after the agencies submit their budget proposals.

 Each agency defends its budget proposal before the DBM.  The DBM deliberates on the budget proposals, makes recommendations, and consolidates the deliberated proposals

 The DBM then submits the proposed budget to the President.

3. Presentation to the Office of the 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”.

Relevant provision of law: The President shall submit the proposed budget to the Congress within 30 days from the opening of every regular session. **************************************************************************************************** BUDGET LEGISLATION 4. House Deliberations Upon receipt of the President’s Budget, the House of Representatives conduct 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 version of the GAB.  The harmonized GAB is submitted back to both Houses for ratification.  After ratification, the final GAB is submitted to the President for enactment.

7. President’s enactment The President enacts the budget which is now known as the General Appropriations Act (GAA).

The Approved Budget – is the expenditure authority derived from appropriation laws, government ordinances, and other decisions related to the anticipated revenue or receipts for the budgetary period.

The approved budget consists of the following: 1. New General Appropriations – are annual authorizations for incurring obligations during a specified budget year. 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 insufficient for the intended purpose. 4. Automatic Appropriations - are the authorizations programmed annually or for some other period prescribed by law which do not require action by Congress. 5. Unprogrammed Funds – are standby appropriations authorized by Congress in the annual GAA. 6. Retained Income / Funds – collection which are authorized by law to be used directly by agencies concerned for their operation or specific purposes. 7. Revolving Funds – receipts derived from business-type activities of departments/agencies which are authorized by law to be constituted as such. 8. Trust Receipts – receipts by any government agency acting as trustee, agent, or administrator for the fulfilment of some obligations or conditions.

**************************************************************************************************** BUDGET EXECUTION This is the phase where government funds are spent.

8. Release guidelines and BEDs

The DBM issues and guidelines on the release and utilization of funds while the various agencies submit their Budget Execution Documents (BEDs). Budget Execution Documents – summarizes an agency’s fiscal year plans and performance targets.

The following are the major recipients of the budget: 1. National Government Agencies (NGAs) – include all agencies within the executive, legislative, and judicial branches

of

government,

for

example,

commissions,

departments, Land Bank of the Philippines, SSS, etc. 2. Local Government Units (LGUs) – include  autonomous regions  provinces and cities independent from a province  component cities (cities which are part of a province)  municipalities  barangays 3. 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.

9. Allotment The DBM formulates the Allotment Release Program (ARP) and Cash Release Program (CRP) to set the limit for allotment releases during the upcoming year.

Allotment Release Program – is used as control device to ensure that releases conform to the national budget. Cash Release Program - sets the disbursement limits for the year, for each quarter and for each month.

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. Obligation – is an act of a duly authorized official which binds the government to the immediate or eventual payment of a sum money.

10. Incurrence of Obligations Government agencies incur obligations which will be paid by the government, for example, 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.

The

following

are

the

documents

used

in

releasing

disbursement authority to government agencies: 1. Notice of Cash Allocation (NCA) - issued by the DBM to central/ regional/ provincial offices and operating units to cover their cash requirements. - specifies the maximum amount of cash that can be withdrawn from a government servicing bank in a certain period. 2. Notice of Transfer of Allocation - issued by an agency’s Central Office to its regional

and operating units to cover the latter’s cash requirements. 3. Non-Cash Availment Authority - issued by the DBM to agencies to cover the liquidation of their actual obligations incurred against available allotments for availment of proceeds from loans/grants through supplier’s credit/constructive cash. 4. Cash Disbursement Ceiling - issued by the DBM to agencies with foreign operation (for example, DFA) allowing them to use the income collected by their Foreign Service Posts to cover their operating requirements. ***************************************************************** Remember the following Appropriation – authorization by a legislative body to allocate funds for specified purposes. Allotment – authorization to agencies to incur obligation/ obligation authority Obligation – amount contracted by an authorized officer for which the government is held liable. Disbursement – actual amount paid out of the budgeted amount.

**************************************************************************************************** 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.

12. Budget Accountability Report Government agencies are required to submit the following accountability reports: 1. Monthly Report of Disbursements – shows the disbursements of the entity during the month. 2. Quarterly Physical Report of Operation – shows the agency’s physical accomplishments in a given quarter vis-àvis its physical targets. 3. Statement of Appropriations, Allotments, Obligations, Disbursements and Balances – shows the agency’s authorized appropriations, allotments received, obligations incurred, unreleased

disbursements

made

appropriations,

and

unobligated

the

balances

allotments,

of and

unpaid obligations. 4. List of Allotments and Sub-allotments – shows the allotments received by the agency from the DBM and the suballotments issued by the agency’s Central Office or Regional Office to lower operating units. 5.

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. 6. Quarterly Report of Revenue and Other Receipts – shows the actual revenues and other receipts remitted to the BTr and deposited in authorized government depository banks in a given quarter.

13. Performance Reviews The DBM and COA perform periodic reviews of the agencies’ performance and budget accountability and report to the President.

14. Audit The COA audits the agencies....