PHILIPINE PUBLIC FISCAL ADMINISTRATION

1.

OVERVIEW
Fiscal administration zeros in on the management of financial resources and
those activities and operations to generate revenue, make those available, and
see to it that funds are wisefully, lawfully, effectively and efficiently spent.
The administration of finances is an intrinsic component of management
responsibility. There is an intimate linkage between administering and funding.
An administrative act has financial implications.
A decision to increase taxes increases revenue of government;
To implement social amelioration program creates a charge on revenue earned
while at the same time distributes and disperses social benefits.
Because administrative activity is principally dependent upon availability of
allocable financial resources, the management of finances becomes a very
important administrative responsibility.

2.

ORGANIZING FOR FISCAL ADMINISTRATION

Fiscal activity is present in all levels of the organization, whether line or staff;
top management level through middle management; the rank and file.
Top management is most interested in it;
middle management is deeply involved in it;
the rank and file is affected by whatever results from it.
The principal agencies tasked with fiscal functions:
Congress, especially the Lower House,
Department of Finance
Department of Budget and Management
Commission on Audit
Functions of the Finance Department:
Revenue generation and collection,
Fund custody
Disbursements
Keeping of accounts
Review of estimates and fiscal policy studies are done by the Department of
Budget and Management in close consultation with the National Economic
Development Authority;

The Central Bank and other economic planning entities of the state to see to it
that fiscal plans and programs are geared towards national development
The Commission on Audit conducts fund and performance audit to see to it that
expenditures are in accordance with the Appropriation Law approved
Congress is responsible for revenue and expenditure policies.
3.

FISCAL CONTROL MECHANISMS

FOUR JUSTIFICATIONS FOR EXPENDITURE CONTROL THROUGH THE BUDGET:
Prevent Misappropriation of Funds
requires review and approval by the administrative official of the line or
operating agency, of all requests for money releases and budgetary
allotments, vouchers and similar papers before payments are made so that
expenditures are in accordance with policy and law and not irregular,
unnecessary, excessive, extravagant and unconscionable.
Control to Implement Prospective Policy
proactive administration inhibits governmental units from directly
transacting and negotiating money matters since such kind of transaction is
officially channeled through the Department of Budget and Management in
the form of budget estimates as endorsed by the President.
Ensure the Wisdom and Propriety of Expenditure
claims for payment from public funds, legality, prudence, reasonableness,
the morality of the claim or charge should be established.
A review of existing contracts and transactions should be made.
Prevent Deficits
Fiscal supervision and control may be useful but should not unduly interfere
with agency prerogative to carry out programs mandated by the constitution
and the laws.

4.

BUDGETING CONCEPTS
Budgeting may be of the:
(1) Planning-Programming Budget System (PPBS) type
- gives assurance that the budget will help achieve desired agency results
- unit head defends the budget, explains its contribution to the realization of
agency goals, develops a cost projection for each program
- submits this to top management which reviews the program and decides
on the final budget allocation.

(2) Zero-Base Budgeting (ZBB) type

- the agency justifies the entire appropriation request for the fiscal year
as if the programs are entirely new, instead of justifying only the increase
requested above the previous years appropriation.
- The agency is obligated to defend all programs every year and rank
these in terms of priority using the ratio between cost and benefit
criterion
- provides opportunity for top management to re-evaluate the need for ongoing programs, compare these with the proposed and the prioritized for
implementation.
*** Both are special budgeting types to minimize drawbacks of traditional
method wherein budget requires are based on current projects continuing year
after year and where requests for new programs are made without a clear idea
of how it will contribute to the achievement of overall agency goals ***
5.

LINE ITEM versus PERFORMANCE BUDGETING

Budgeting may also be:
(1) Line-Item
- object of the expenditure type
- consists of a detailed listing of every position to be filled
- gives the legislative body tremendous discretion to strike out or to
approve individual items
- funds appropriated may not be transferred from one category of
expense to another.
- Also known as rule of thumb budgeting where figures of past years are
reflected but without income indicators
Three columns of figures appear in each budget sheet:
(a) actual expenditure for each object during the previous fiscal year
(b) estimated amounts to be spent for the same objects for the current
fiscal year.
(c) amount desired for the same objects for the incoming or future fiscal
year
(2) Performance Budgetingis lump-sum budgeting
- is program budgeting which spells out functions, activities and projects
- allow transfer of funds from one organizational unit to another, between
work activities and objects to be spent for.
- There is a difficulty in identifying what work units perform or not
perform, since its most important concern is the overall performance of
the agency

6.

NEW POLICY GUIDELINES FOR BUDGETING

- Based on this agenda: the formulation of the national budget must be in the
context of a three-year planning framework
- expenditures must achieve program targets and support development
strategy.
Agency programs will be supportive of the identified priority areas which include
the following:
a) modernization of the agricultural sector to augment farmer income, bolster
production and attain food security
b) improvement of the quality of basic social services like health and
sanitation, nutrition, education, social welfare and housing
c) acceleration of countryside infrastructure development
d) enhancement of global competitiveness through liberalization, deregulation,
and privatization
e) provision for macroeconomic stability by instilling fiscal discipline, prudent
government spending and efficient revenue generation
f) reform in governance to make it responsive to the current domestic and
global environment

7.

PRINCIPLES FOR AGENCY GUIDANCE

(1) Prudent Spending
- calls for rational fund allocation
- scaling down or phasing out devolved or non-essential activities
- doing away with duplicating functions; moratorium on increasing personnel
and setting up new units
- adopting a system for reasonable use of supplies, materials and facilities.
(2) Entrepreneurial Budgeting
- this involves mobilization of government resources for development
programs
- improving front-line public services
- requiring the agencies to study their fee structure in order to recover
expenditure for specific services rendered.
(3) Performance-Based Budgeting
- key results areas (KRAs) and commitment for specific programs are
indentified to optimize effective use of resources.
(4) Wholistic Budgeting
- expenditure levels of regional units are provided by the agency as guide for
preparing the regional budget.
(5) Consistency with Sub-Sectoral Development Objectives

- like that of the Technical Education and Skills Act of 1994 (TESDA)
- Research and Development (R&D) in the material, technological and
engineering sciences, implementation of the Systems Designated
Statistics pursuant to Executive Order 352.
8.

INCOME SOURCES
Two general sources of government income :
(1) Tax Revenue
-

income tax
property tax
domestic goods and services tax
international trade and transactions tax , sales
value added tax (VAT).

(2) Non-Tax Revenue

a. operating and service income revenue from the operations of
national and local government and government corporations
b. income from public enterprises and investments income received
for the use of financial assets dividends; net rent for the use of
government land and royalty for the use of copyrights and patents
owned by the government.
c. miscellaneous income revenues not classified under other
categories such as sale of goods and merchandise confiscated,
waste materials; inventory adjustments and gains on exchange rate.
d. capital revenue income derived from the sale of capital assets like
buildings, equipment, machines, land and intangible assets like
patent, copyright and trademark
e. grants non-repayable transfers received from other levels of the
government, private sector or international institutions.
f. borrowings includes domestic and foreign debts, regardless of
source, whether in cash or in kind.
9. APPROPRIATIONS AND OBLIGATIONS
APPROPRIATIONS AND OBLIGATIONS
These are estimates and projections of what the departments and agencies
incur or expect to incur. These include:

a) New General Appropriations as provided for in the General Fund,

Fiduciary Fund or Special Account in the General Fund
b) Supplemental Appropriations these are stand-by appropriations
authorized by Congress apart from the programmed appropriations for a
given fiscal year.
c) Automatic Appropriations expenditures authorized by specific laws like
Commonwealth Act 186 and Republic Act 660 for retirement and
insurance premiums of government employees; Presidential Decree 1234
and other laws for special accounts and funds; grant proceeds; custom
duties and taxes; proceeds from the sale of non-serviceable, obsolete and
unnecessary equipment ; net lending; interest payment for national debt;
amortization for domestic and foreign debts as per Presidential Decree
1967 and Republic Acts 4860 and 245.
d) Continuing Appropriations obligations provided under Executive Order
No. 182 known as Public Works Act for Multiyear infrastructure Projects;
agrarian reform; unobligated allotments for maintenance and other
operating expenses and unreleased appropriations for maintenance and
other operating expenses and capital outlays as provided by RA 8250 and
RA 8522.
e) Budgetary Adjustments transfers to the reserve fund; transfer from the
agrarian reform fund; organizational adjustment fund; general fund
adjustment; miscellaneous personnel benefits; contingency fund; sale of
military camps; countrywide development; Pinatubo assistance
resettlement and development and unprogrammed projects.
10. THE BUDGET
The budget is a management tool
- to account for what has been received
- how this will be spent at a given period of time.
How a government forecasts and allocates its income and expenditures is
illustrated in the budget document.
11. THE PHILIPPINE NATIONAL BUDGET
The National Budget represents the estimate of expected income and
projected expenditures over a period of time referred to as the fiscal year.
It is what government plans: (1) to spend for its programs and projects (2)
where the money will come from
PROCESS

Section 22, Article VII of the 1987 Constitution sets the tone for the budgetary
process. Under this Article, the President submits to Congress within thirty days
from the opening of every regular session, a financial plan of expenditures and
sources of financing, including receipts from existing and proposed revenue
measures as basis for a general appropriations bill.
12.

THE PHILIPPINE BUDGETARY PROCESS

The Philippine Budget undergoes four stages:

(1) Budget Preparation - the determination of budgetary priorities and
activities guided by the overall national development plan with the
ceilings and constraints imposed by available revenues and borrowing
limits.
(2) Budget Authorization the President submits the overall budget to
Congress in the form of detailed Expenditure Program accompanied by
the Budget of Expenditures and Sources of Financing; the Budget
Message of the President, and the Regional Allocation of the Expenditure
Program.
(3) Budget Implementation after the President signs the General
Appropriations Act into law, the Department of Budget and Management
requires the different agencies of government to submit their respective
work and financial work plans.
(4) Budget Accountability evaluation of actual performance and initiallyapproved work targets, obligations incurred,
Personnel hired and work accomplished by comparing all these with the targets
set at the time agency budgets were approved.
Performance and cost effectiveness of agencies are evaluated since no results
can be obtained if agency efficiency is slow and funds are wastefully spent
Detailed examination of the agencys book of account is undertaken to ensure
that all expenses have been disbursed for the purpose for which the funds
have been authorized
13.

LOCAL FISCAL MANAGEMENT

FUNDAMENTAL PRINCIPLES
The Local Government Code of 1991 requires local governments to
formulate sound financial plans.
Local budget plans and goals must harmonize with national development
plans, strategies and goals to optimize utilization of resources, fiscal or
physical.

Local government units should incorporate the needs and requirements of

their component units and equitably allocate resources among said units.
The most basic limitation is the requirement that all local government units
should endeavor to have balanced budget for every fiscal year of its
operation.
14.

BUDGET FORM AND CONTENT

Two parts Of Local government budget
a) estimate of income
b) total appropriations covering the current operating expenditures and
capital outlays

15. BUDGETARY REQUIREMENTS

The budget of local government units for any fiscal year shall comply with
the following:(a) the aggregate amount appropriated shall not exceed the
estimates of income(b) full provisions shall be made for all statutory and
contractual obligations of the local government unit concerned, provided
the amount of appropriations for debt servicing shall not exceed twenty
percent (20%) of the regular income of the local government unit
concerned.
The budget of local government units for an yfiscal year shall comply with
the following:(c) aid to component barangays shall be provided in
amounts of not less than one thousand pesos (P1,000.00) per barangay.
(d) five percent (5%) of the estimated revenue from regular resources
shall be set aside as an annual lump-sum appropriation for unforeseen
expenditures arising form the occurrence of calamities
16.

BUDGETARY PROCESS AT THE LOCAL GOVT LEVEL

The stages of are analogous to that of the national level of government.
Four basic steps are also observed.
(1) Budget Preparation
(2) Budget Authorization
(3) Budget Implementation
(4) Budget Review

17.

AUDIT OF FUNDS

Accounting of Funds as a management tool is best ensured by the audit

function.
It is a component of the budgetary process since it is a mechanism for
determining whether the expenditures are legal and desirable.

TWO TYPES OF AUDIT:

a) Pre-Audit
b) Post-Audit
Pre-Audit This is audit performed before money is actually spent and takes
place before payment of an obligation or before the expense is incurred.
Post-Audit This is audit after money has been spent in order to find out
whether funds are spent in accordance with the approved appropriation.
Reference: AvelinoP. Tendero

LOCAL FISCAL ADMINISTRATION

1. Local government units, by virtue of the 1987 Constitution and the Local Government
Code of 1991, otherwise known as Republic Act 7160 have been given the power to
raise certain taxes.
2. The taxes, fees and charges shall accrue exclusively to the LGU. Power to Create
Sources of Revenue (Sec. 129)The grant of power to create sources of revenue is
consistent with the basic policy of local autonomy Each local government unit (LGU)
has the power to create its own sources of revenue and to levy taxes, fees, and charges

3. 1.) Province - It is the largest unit in the political structure of the Philippines. It consists
in varying numbers of municipalities and, in some cases, of component cities. 2.) City
-There are three classes of cities in the Philippines: the highly-urbanized, the
independent component cities which are independent of the province, and the
component cities which are part of the provinces where they are located and subject to
their administrative supervision. Following political subdivisions have the power to tax:
3.) Municipality- It is a political corporate body which is endowed with the facilities of a
municipal corporation, exercised by and through the municipal government in
conformity with law. It is a subsidiary of the province which consists of a number of
barangays within its territorial boundaries, one of which is the seat of government found
at the town proper. 4.) Barangay- The smallest political unit into which cities and
municipalities in the Philippines are divided. It is the basic unit of the Philippine political
system. It consists of less than 1,000 inhabitants residing within the territorial limit of a
city or municipality and administered by a set of elective officials, headed by a barangay
chairman.

4.

CONSTITUTION AUTHORIZES CREATION OF SOURCES OF REVENUE AND

LEVY TAXES Section 5. Each local government unit shall have the power to create its
own sources of revenues and to levy taxes, fees and charges subject to such guidelines
and limitations as the Congress may provide, consistent with the basic policy of local
autonomy. Such taxes, fees, and charges shall accrue exclusively to the local
governments.
SEC. 130. Fundamental Principles the following fundamental principles shall govern
the exercise of the taxing and other revenue-raising powers of local government
units:a. Taxation shall be uniform in each local government unit; b. Taxes, fees,
charges and other impositions shall: 1. Be equitable and based as far as practicable on
the taxpayers ability to pay; 2. Be levied and collected only for public purposes; 3. Not
be unjust, excessive, oppressive, or confiscatory; 4. Not be contrary to law, public
policy, national economic policy, or in restraint of trade; c. The collection of local taxes,
fees, charges and other impositions shall in no case be let to any private person; d. The
revenue collected pursuant to the provisions of this Code shall inure solely to the benefit
of, and be subjected to disposition by, the local government until levying the tax, fee,
charge or other imposition unless otherwise specifically provided herein; and e. Each
local government unit shall, as far as practicable, evolve a progressive system of
taxation.

5. THE CONDUCT AND MANAGEMENT OF FINANCIAL AFFAIRS, TRANSACTIONS,

AND OPERATIONS OF PROVINCES, CITIES, MUNICIPALITIES, AND
BARANGAYS.
SEC. 305. Fundamental Principles. The financial affairs, transactions, and operations
of local government units shall be governed by the following fundamental principles:
(a) No money shall be paid out of the local treasury except in pursuance of an
appropriations ordinance or law;
(b) Local government funds and monies shall be spent solely for public purposes;
(c) Local revenue is generated only from sources expressly authorized by law or
ordinance, and collection thereof shall at all times be acknowledged properly;

(d) All monies officially received by a local government officer in any capacity or on any
occasion shall be accounted for as local funds, unless otherwise provided by law;
(e) Trust funds in the local treasury shall not be paid out except in fulfillment of the
purpose for which the trust was created or the funds received;
(f) Every officer of the local government unit whose duties permit or require the
possession or custody of local funds shall be properly bonded, and such officer shall be
accountable and responsible for said funds and for the safekeeping thereof in
conformity with the provisions of law;
(g) Local governments shall formulate sound financial plans, and the local budgets shall
be based on functions, activities, and projects, in terms of expected results;
(h) development plans, goals, and strategies in order to optimize the utilization of
resources and to avoid duplication in the use of fiscal and physical resources;
(i) Local budgets shall operationalize approved local development plans;
(j) Local government units shall ensure that their respective budgets incorporate the
requirements of their component units and provide for equitable allocation of resources
among these component units;
(k) National planning shall be based on local planning to ensure that the needs and
aspirations of the people as articulated by the local government units in their respective
local development plans are considered in the formulation of budgets of national line
agencies or offices;
(l) Fiscal responsibility shall be shared by all those exercising authority over the
financial affairs, transactions, and operations of the local government units; and
(m) The local government unit shall endeavor to have a balanced budget in each fiscal
year of operation.