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What is Government Budgeting?

1. Government budgeting is the allocation of public funds to attain the

economic and social goals of the country. It also entails the
management of government expenditures to create the most impact
from the production and delivery of goods and services.

2. Government budgeting is the critical exercise of allocating revenues and

borrowed funds to attain the economic and social goals of the country. It also
entails the management of government expenditures in such a way that will
create the most economic impact from the production and delivery of goods
and services while supporting a healthy fiscal position.

Why is Government Budgeting Important?

1. Government budgeting is important because it enables the

government to plan and manage its financial resources to support
the implementation of various programs and projects that best
promote the development of the country. Through the budget, the
government can prioritize and put into action its plans, programs
and policies within the constraints of its financial capability as dictated by
economic conditions.

What are the major processes involved in national government

budgeting?

 Budgeting for the national government involves four (4) distinct processes or phases:
budget preparation, budget authorization, budget execution and accountability.

 While distinctly separate, these processes overlap in the implementation during a

budget year.

 Budget preparation for the next budget year proceeds while government agencies are
executing the budget for the current year and at the same time engaged in budget
accountability and review of the past year's budget.
 Budget Preparation Phase

DBCC (development budget coordinating committee) sets parameter. DBCC Determined the of
overall economic targets, expenditure levels and budget framework
The DBCC is an inter-agency body composed of the:
- DBM Secretary as Chairman
- the Bangko Sentral Governor,
- the Secretary of the Department of Finance,
- the Director General of the National Economic and Development Authority (NEDA)
- and a representative of the Office of the President as members.

1. Budget Call

- At the beginning of the budget preparation year, the

Department of Budget and Management (DBM) issues the
National Budget Call to all agencies (including state
universities and colleges) and a separate Corporate Budget
Call to all GOCCs and GFIs.

- The Issuance by the DBM of the Budget Call defines the budget
framework; sets economic and fiscal targets; prescribe the priority thrusts
and budget levels; and spells out the guidelines and procedures, technical
instructions and the timetable for budget preparation;

2. Stakeholders Consultation

- A new feature in budget preparation which seeks to increase

citizen participation in the budget process, departments and
agencies are tasked to partner with civil society organizations
(CSOs) and other citizen-stakeholders as they prepare their
agency budget proposals.
- This new process, which was piloted in the preparations of
the 2012 National Budget, is now being expanded towards
institutionalizations.

What is “Bottom-Up” Budgeting

The Bottom-Up Budgeting (BuB) program is a demand-driven budget-planning

process. BuB
institutionalizes people’s participation in the budget process to gain a better
understanding of their needs and requirements and ensure that these are met. The
Open Government Partnership in 2015 has recognized the BuB program as one of
three Best Practices in Fiscal Transparency from around the world.

--BuB: Spending agencies link their respective strategic plan with their operational
plan and draft budget proposal accordingly.
BuB link new policy initiatives to government priorities highlighted in the BPF
(Budget Priorities Framework)
 The Bottom-up Budgeting program was set-up in 2013 to help
the Philippines to help the Philippines attain its Millennium
Development Goals of inclusive growth and poverty reduction.
Now, two years later, the Department of Budget and
Management is holding a two-day summit to show how far the
project has come.

Two years after Bottom-up Budgeting (BuB) was first

implemented in the 2013 National Budget, the Aquino
Administration plans to extend the program’s reach and ensure
the sustainability of BuB-enabled gains, beginning with a twoday
summit to assess and reaffirm the program’s progress.
Under the 2015 budget, BuB covers 1,590 municipalities and
cities across the country, and is amply supported with a budget
of P20.9 billion. For 2016, the Administration is proposing a
budget of P24.7 billion to support the implementation of more
than 14,300 BuB projects nationwide.

Program Expenditure Classification (PREXC) approach

This approached is adopt by President Duterte

Administration.
a reform that restructures the current Budget by grouping
activities and projects under major programs or key
strategies. Through this innovation, the government will be
able to assign performance targets—both outputs and
outcomes—at the level of programs. This way, the direct link
between strategies, budgets and intended results will be
clearer and program monitoring and evaluation can provide
evidence-based assessments.

3. Technical Budget Hearing

- These are conducted after departments and

agencies submit their Agency Budget Proposal to
the DBM. Here, agencies defend their proposal
budget before a technical panel of DBM, based on
performance indicators on output targets and
absorptive capacity. DBM bureaus then review the
agency proposals and prepare recommendations.
4. Executive Review
- The recommendations are presented before an
Executive Review Board which is composed of the
DBM Secretary and senior officials.
Deliberations here entails a careful prioritization of
programs and corresponding support, vis-a vis the
priority agenda of the national government.
Implementation issues are also discussed and
resolved.

5. Consolidation, Validation and

Confirmation

DBM then consolidate the recommended agency

budgets and recommendations into a National
Expenditure Program and a Budget of Expenditures
and Sources of Financing (BESF).
As part of the consolidating process, the deliberations
by the DBCC determine the agency and sectoral
allocation of the approved total expenditure ceiling, in
line with the macroeconomic and fiscal program. Heads
of major departments are invited to this meeting.

5. Presentation to President and Cabinet

The proposed budget is presented by DBM,

together with the DBCC, to the President and
Cabinet for further refinements of prioritization.
After the President and Cabinet approve the
proposed National Expenditure Plan, the DBM
prepares and finalizes the budget documents to be
submitted to Congress.

6. The President’s Budget

The budget preparations phase ends with the

submission of the proposed national budget –the
“President’s Budget”-to Congress.
The President’s Budget consist of the following
documents, which help legislators analyze the contents
of the proposed budget:

1. President’s Budget Message (PBM)

This is the President explains the policy framework and priorities in the
budget
 2. Budget of Expenditures and Sources of Financing (BESF)
Mandated by the Constitution, this contains the macroeconomic
assumptions, public sector context (including overviews of LGU and GOCC
financial positions), breakdown of the expenditures and funding sources
for fiscal year and the two previous year.
3. National Expenditure Program (NEP)
This contain the details of spending for each department and agency by
program, activity or project and is submitted in the form of a proposed
General Appropriations Act.
4. Details of Selected Programs and Projects
This contains a more detailed disaggregation of key programs, projects
and activities in the NEP, especially those in line with the national
government’s development plan.
5. Staffing Summary
This contains a summary of the staffing complement of each department
and agency, including number of positions and amounts allocated for the
same

Budget Legislation Phase

- also called the “ Budget Authorization phase,” this starts

upon the House speaker’s Receipt of the President’s Budget
and ends with the President’s enactment of the General
Appropriations Act (GAA).

1. House Deliberations
•As in the House process, the Senate conducts its
own committee hearing and plenary deliberations
on the GAB. Budget deliberations in the Senate
formally start after the House of Representatives
transmits the GAB. For expediency, however, the
Senate Financing Committee and Sub-Committees
usually start hearings on the GAB even House
deliberations are ongoing.
•The Committee submits its proposed amendments
to the GAB to plenary only after it has been
formally transmitted by the House.

2. Senate Deliberations
As in the House process, the Senate conducts its own
committee hearing and plenary deliberations on the
GAB. Budget deliberations in the Senate formally start
after the House of Representatives transmits the GAB.
For expediency, however, the Senate Finance
Committee and usually start hearings on the GAB even
as House deliberations are ongoing.
The Committee submits its proposed amendments to
the GAB to plenary only after it has been formally
transmitted by the House.
3. Bicameral Deliberations
Once both House of Congress have finished their
deliberations, they will each constitute a panel to the
Bicameral Conference Committee. This committee will then
discuss and harmonize the conflicting provisions of the
House and Senate Versions of the GAB. A Harmonized
Version of the GAB is thus produced.

4. Ratification and Enrollment

The Harmonized or “Bicam” Version is then submitted
to both Houses, which will the vote to ratify the final
GAB for submission to the President. Once submitted
to the President for his approval, the GAB is considered
enrolled.

5. The Veto Message

-- veto message or veto power vested in one branch of government to cancel or postpone the
decisions, enactment, etc.
The President and DBM then review the GAB and prepare a
Veto Message, where budget items subjected to direct veto
or conditional implementation are identified, and where
general observations are made. Under the Constitution, the
GAB is the only legislative measure where the President can
impose a line-veto (in all other cases, a law is either
approved or vetoed in full).

6. Reenactment
When the GAA is not enacted before fiscal year starts, the
previous years’s GAA is automatically reenacted. This means
that agency budgets for programs, activities and projects
remain the same.
Funding for programs or projects that have already been
terminated is realigned for other expenditures. Because
reenactments are tedious and prone to abuse

What is the General Appropriations Act?

The General Appropriations Act (GAA) is the legislative authorization that

contains the new appropriations in terms of specific amounts for salaries,
wages and other personnel benefits; maintenance and other operating
expenses; and capital outlays authorized to be spent for the implementation of
various programs/projects and activities of all departments, bureaus and
offices of the government for a given year.
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BUDGET EXECUTION

This is where the people’s money is spent. As soon as the GAA is enacted, the government
can implement its priority programs and projects.

1. RELEASE GUIDELINES & PROGRAM

The budget execution phase begins with DBM’s
issuance of guidelines on the release and utilization of
funds.

2. BUDGET EXECUTION DOCUMENTS (BEDs)

Agencies are required to submit their BEDs at the start of
budget execution. These documents outline agency plans
and performance targets. These BEDs include the physical
and financial plan, monthly cash program, estimate of
monthly income, and list of obligations that are not yet due
and demandable.

3. ALLOTMENT & CASH RELEASE

PROGRAMMING
To ensure that releases fit the approved Fiscal Program, the
DBM prepares an Allotment Release Program (ARP) to set a
limit for allotments issued to an agency and on the aggregate.
The ARP of each agency corresponds to the total amount of
the agency-specific budget under the GAA, as well as
Automatic Appropriations. A Cash Release Program (CRP) is
also formulated alongside that to set a guide for
disbursement levels for the year and for every month.

4. ALLOTMENT RELEASE

--Allotments, which authorize an agency to enter into

an obligation, are either released by DBM to all
agencies comprehensively through the Agency
Budget Matrix (ABM) and individually via Special
Allotment Release Orders (SAROs).

4.a. ALLOTMENT RELEASE

Agency Budget Matrix (ABM)
This document disaggregates all programmed appropriations
for each agency into two main expenditure categories: “not
needing clearance” and “needing clearance.”
The ABM is the comprehensive allotment release document
for appropriations which do not need clearance, or those which
have already been itemized and fleshed out in the GAA.

4.b. Special Allotment Release Orders (SAROs)

 Items identified as “needing clearance” are those which
require the approval of the DBM or the President, as the case
may be (for instance, lump sum funds and confidential and
intelligence funds).
For such items, an agency needs to submit a Special Budget
Request to the DBM with supporting documents. Once
approved, a SARO is issued.

5. INCURRING OBLIGATIONS
In implementing programs, activities and projects, agencies
incur liabilities on behalf of the government. Obligations are
liabilities legally incurred, which the government will pay
for.
There are various ways that an agency “obligates:” for
example, when it hires staff (an obligation to pay salaries),
receives billings for the use of utilities, or enters into a
contract with an entity for the supply of goods or services.

6. The GAA as Allotment Release

The FY 2017 budget aims to facilitate the achievement of
meaningful national development goals as emphasized by
the Duterte Administration. The implementation of real
change is anchored on the timely and appropriate execution
of this budget. In particular, the policy of using the General
Appropriations Act as an Allotment Order (GAAAO) shall
continue to be adopted to ensure the immediate
implementation of programs, projects and activities. In so
doing, resource unpredictability and delays in project/program
implementation are reduced. Likewise, credibility and
transparency in the budget process is expected to be further
enhanced.
7. a. CASH ALLOCATION
To authorize an agency to pay the obligations it
incurs, DBM issues a disbursement authority.
Most of the time, it takes the form of a Notice of
Cash Allocation (NCA); and in special cases, the
Non-Cash Availment Authority (NCAA) and Cash
Disbursement Ceiling (CDC).

7. b. CASH ALLOCATION
Notice of Cash Allocation (NCA)
This is a cash authority issued periodically by the DBM to the
operating units of agencies to cover their cash requirements.
The NCA specifies the maximum amount of cash that can be
withdrawn from a government servicing bank for the period
indicated.
The release of NCAs by DBM is based on an agency’s
submission of its Monthly Cash Program and other required
documents.

7. c. CASH ALLOCATION
Others Disbursement Authorities.
In contrast to NCAs, Non-Cash Availment Authority (NCAA)
are issued to authorize non-cash disbursements.
Cash Disbursement Ceiling (CDC) are meanwhile issued to
departments with overseas operations, allowing them to use
income collected by their foreign posts for their operating
requirements.

8. DISBURSEMENT
This is the final step of the budget execution phase,
where government monies are actually spent. The
Modified Disbursement Scheme is mostly used,
where disbursements of national government agencies
chargeable against the Treasury are made through
government servicing banks, such as the Land Bank of
the Philippines.
The budget process, of course, does not end when
government agencies spend public funds: each and
every peso must be accounted for to ensure that is
used properly, contributing to the achievement of socioeconomic
goals.

BUDGET ACCOUNTABILITY

This phase happens alongside the Budget

Execution phase.
Through Budget Accountability, the DBM
monitors the efficiency of fund utilization,
assesses agency performance and provides a
vital basis for reforms and new policies.

1. PERFORMANCE & TARGET OUTCOMES

Agencies are held accountable not only for how these use
public funds ethically, but also on how these attain
performance targets and outcomes using available
resources.
These performance measures are set alongside the
preparation of the National Budget; and these are indicated in
the OPIF Book of Outputs.
Prior to the execution of the enacted National Budget, these
performance targets are firmed up during the preparation of
BEDs.
2. BUDGET ACCOUNTABILITY REPORTS
(BARs)
Submitted by agencies on a monthly and quarterly basis,
BARs are required reports that show how agencies used their
funds and identify their corresponding physical
accomplishments.
These include quarterly physical and financial reports of
operations; quarterly income reports, a monthly statement of
allotments, obligations and balances; and monthly report of
disbursements.

3. NO REPORT , NO RELEASE
• Starting 2012, the DBM will be withholding certain fund
releases to agencies if these fail to submit their Budget
Accountability Reports. In particular, these will be funds from
the Miscellaneous Personnel Benefits Fund (MPBF) for
compensation adjustments under the Salary Standardization
Law, provisions for unfilled positions and employee clothing
allowances.
• These funds to be withheld are only limited to agencies’
MPBF allotments so that only the agencies are penalized and
that the implementation of critical programs and projects will
not be disrupted. Errant and compliant agencies will also be
posted online for public scrutiny.

4. REVIEW OF AGENCY PERFORMANCE

The DBM regularly reviews the financial and physical
performance of agencies. Actual utilization of funds and
physical accomplishments, as indicated in the agencies’
BARs, are evaluated against their targets as identified via
OPIF and in the agencies’ BEDs. Agency Performance
Reviews (APRs) are conducted quarterly or every semester,
as the case may be.
An annual Budget Performance Assessment Review (BPAR)
is conducted to determine each agency’s accomplishments
and performance by the year-end. The DBM regularly reports
results to the President.

5. AUDIT
Auditing is not within the DBM’s jurisdiction, and is instead
lodged under the Commission on Audit (COA).
Nonetheless, auditing is critical in ensuring agency
accountability in the use of public funds.
The DBM uses COA’s audit reports in confirming agency
performance, determining budgetary levels for agencies and
addressing issues in fund usage.
 6. Performance-Based Incentive System
The Department of Budget and Management (DBM) is
also in the process of establishing a performance based
incentive system- which will recognize and
reward good performance among government
employees- to help improve the efficiency of service
delivery across all government institutions.

3 types of Government Budget

A budget can be of 3 types: Balanced Budget: When government receipts are equal to
the government expenditure, it is called a balanced budget. Deficit Budget: When
government expenditure exceeds government receipts, the budget is said to be deficit.
... Surplus: When government receipts are more than expenditure.

Issues: The struggle for the 2019 national budget

Metro Manila (CNN Philippines) — The executive and the legislative branches are in a bit of a
tiff over the national budget, the spine that holds all of next year's projects together.

For veteran Budget Secretary Benjamin Diokno, a cash-based budget is the way to go. As the
head of the department that proposes next year's spending scheme, the economist believes
that doling out next year's budget in cold, hard cash would minimize underspending and assure
that all government projects would be finished quickly.

But legislators are apprehensive of this proposal, arguing that one year may not be enough to
finish big ticket projects. The House of Representatives had temporarily suspended budget
deliberations in opposition of cash-based disbursements. While House Majority Leader Rolando
Andaya said that they are amenable to a hybrid budget, it seems that for Diokno it's cash-based
or bust.

Budget deliberations are set to resume at the House of Representatives next week

Where would the money for the 2019 national budget come from?

The national budget will be derived from government revenues, including taxes, and borrowing.
In his budget message for the fiscal year of 2019, Duterte said that most of next year's budget
will be funded by taxes.
"Our expected revenue collections of ₱3.208 trillion will help us fund 83.7 percent of
government disbursements for 2019, of which ₱181.43 billion will come from proceeds of
Package 1A and 1B of our tax reform program," Duterte said in the budget message, citing the
Tax Reform for Acceleration and Inclusion (TRAIN) law.

Duterte added that the remaining ₱624.4 billion of the budget will come from local and foreign
borrowing. This will account for the ₱579.2 billion fiscal deficit for the year.

What's the difference between cash-based and obligation-based budgets?

This issue has proven to be the bottleneck in passing the 2019 budget. While the DBM has been
adamant in the need to shift into a cash-based budget system, the House of Representatives
want to stick to the traditional obligation-based system.

The main difference between a cash-based and an obligation-based budget is how money will
be disbursed to government agencies to pay for its projects, operating expenses, and other
needs. In an obligation-based budget, funds are given for projects that agencies promise to
deliver. It takes into consideration how it may take more than one year for these projects to be
implemented.

On the other hand, the cash-based budget system limits the time that a project is funded to one
fiscal year. After that, agencies may file for a three-month extension. Funds are given for
projects that agencies believe can be delivered within the fiscal year. According to the DBM,
this system is meant to establish accountability, discipline and faster government service.

What is a reenacted budget?

A budget is reenacted when Congress fails to pass the budget bill by the end of the fiscal year.
This means that the budget for this year will repeat for next year, including all projects itemized
for that year.

Diokno said that they are already preparing for the eventuality of a reenacted budget if
Congress does not approve of the cash-based system.

"So we're just preparing for that eventually. We're not saying it's going to happen, but like boy
scouts, we're prepared," the Budget Secretary said in an August 15 interview. He added that
the upcoming 2019 elections could be the reason why Congress is seeking a larger budget.

In an interview with CNN Philippines' The Source, Representative Joey Salceda, vice chair for
the House committee on appropriations, said that a reenacted budget would not be able to
fund the Southeast Asian (SEA) Games and the elections.

What is underspending? What happens when a department underspends?

Underspending happens when an agency fails to spend a significant amount of its budget for
the year. Given how budgets are based on a list of projects proposed by the agency for a year,
underspending may imply unfinished projects or irregularities in procurement. Unspent funds
are returned to the government coffers.

The Commission on Audit, on its latest report on the Department of Transportation, found that
the department had underspent in 2017, using only ₱18 billion of its ₱71 billion budget.
Transport Secretary Arthur Tugade defended his agency, and said that the unspent funds will all
be returned to the government.

In 2017, Diokno had flagged underspending as a "major flaw" in government.

What are the budget priorities for 2019?

As with 2018, the proposed 2019 budget will prioritize infrastructure, social services and
national security. The education sector (Department of Education, Commission on Higher
Education, State Universities and Colleges, etc.) combined has the highest proposed budget for
2019 at ₱659 billion. The second largest piece of the pie goes to the Department of Public
Works and Highways, which is in charge of several of the administration's infrastructure
programs. The Department of National Defense and the Department of Interior and Local
Government get the third and fourth largest budgets respectively. Rounding up the top ten
government agencies are the Department of Social Welfare and Development, the Department
of Health, the Department of Transportation, the Department of Agriculture, the judiciary
branch, and the Autonomous Region of Muslim Mindanao.

The legislative branch has a combined proposed budget of ₱17.59 billion. The Office of the
President has a proposed budget of ₱6.82 billion while the Office of the Vice President a mere
₱455.9 million.