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FISCAL PLANNING

BUDGETTING
Reported by: Go, Sarah G.
DEFINITION OF TERMS
FISCAL PLANNING
it is a continous process which involves decisions or choices about alternate
ways of using available resources with the aim of achieving particular goals
FISCAL POLICY
is the means by which government adjusts its spending levels and tax rates
to monitor and influence a nation’s economy
FISCAL YEAR
a year reckoned for taxing or accounting purposes; it is used in government
accounting, which varies between countries and for budget purposes.
CHIEF EXECUTIVE
highest ranking executive in the government. In a national level is the
president. In the local level is the city mayor.
LEGISLATIVE BODY
composed of the lawmaking body of the state. In the Philippines, the
congress is the country’s highest lawmaking body.
AUDIT
an official inspection of an individual’s or organization’s accountants,
typically by an independent body. (ex. Commision on Audit of the Philippines)
DEFINITION OF TERMS
REVENUES
items or amounts constituting a state’s income. A state’s
annual income from which public expenses are met
RESOLUTION
is a written motion adopted by a legislative body
ORDINANCE
a piece of legislation enacted by a municipal authority
BUDGETING
 is an integral part of fiscal planning process after the basic economic research,
fiscal policy analysis, long-range fiscal planning, and programming have been
completed.
 is often used to refer to the overall process of allocating resources as well
as to the preparation of specific documents
 is the central element of public fiscal management as well as major
element in the overall process of local government
 it is both a document and a complex, collective decision process
 it can be defined as the financial articulation of the activities of a
governmental unit; at the local level it takes the form of an ordinance or
resolution that recognizes anticipated revenues, authorizes activities, and
appropriates expenditures for a one-year time period
 Is an accounting process whereby revenue and expenditure information
are structures to facilitate continuous inspection, evaluation and
management control; it largely works at the local level of government but
varies depending on a governments specific needs and situation
BUDGET FORMULATION
 is a complex process containing elements of
planning, politics, economics and accounting.
 It is a planning process because it involves
making decisions that have consequences
for future time periods.
 Goals and objectives must be formulated,
policies analyzed and comprehensive plans
and programs delineated before budget can
be formulated.
TYPICAL STEPS IN BUDGET PROCESSING
 1. Executive Preparation
 2. Legislative review, modification and
enactment
 3. Executive implementation
 4. Post audit
TYPICAL STEPS IN BUDGET PROCESSING

1. Executive preparation
The chief executive often is responsible
for preparing budget estimates and a
preliminary budget document.
Depending on the size of the city, the
executive alone may prepare the budget
or he or she may rely on a budget officer,
the finance department and the planning
department
TYPICAL STEPS IN BUDGET PROCESSING
2. Legislative review, modification and
enactment
The executive budget is presented to the
legislature and to the public before the fiscal
year begins. The legislative body reviews the
proposed budget, holds public hearings and
makes changes if necessary. The final budget
is adopted with a resolution or ordinance that
authorizes activities, appropriates monies and
sets tax rates.
TYPICAL STEPS IN BUDGET PROCESSING

3. Executive implementation
The chief executive then administers the
final budget. Changes maybe necessary
during budget year because of
differences between estimated and actual
revenues, expenditures, emergencies,
and shifting priorities. Typically, these are
effected through amendments to the
budget ordinance.
TYPICAL STEPS IN BUDGET PROCESSING

4. Post audit
is an external accounting of the actual
financial activities for a budget year,
which is presented to the legislative
body. Each of these general activities can
be broken down into a number of specific
activities and set in a time sequence of a
budget calendar.
BUDGET CALENDAR

The local government budget authority


(and sometimes procedure) is set by
state law or local government characters
or both. Detailed budget procedure is
usually presented in an administrative
document. This budget manual normally
outlines several budget activities and a
budget calendar or cycle.
BUDGETING
 Picture sample of budget calendar
BUDGETING

1. Departmental Estimates
The chief executive issues a budget
memorandum to all department heads
and to others with expenditure
responsibilities. This communication lays
the groundwork for the detailed budget
requests of each department.
BUDGETING
It includes the following;
1.A. Anticipated fiscal policy
 A summary of the overall fiscal situation with policies that will affect specific

departments such as changes in total or particular revenues and


expenditures or changes in personnel policies and salaries
1.B. Capital and service programs
 A summary of anticipated activities over a five or six year period; including

continued discontinued, and/or new programs with expenditure and revenue


estimates.
1.3. Departmental activity inventory
 An activity inventory for each department organized by budget category,

including projected service volumes, service standards, methods of operation


and cost factors.
1.4. Request for departmental budget
 A standardized set of forms, designed to facilitate executive review, which is

consistent with budget and accounting format.


BUDGETING
2. Executive Review
Every local government operated in a
situation of limites resources and many operate
under severe fiscal constraints; therefore one
of the major budgeting tasks for the chief
executive is to balance total required
expenditures with total expected revenues.
The executive must fit these request into the
general budget ; thus the process at this stage
becomes one of cost – cutting.
BUDGETING

Budget request from department heads


depends on the constraints imposed by
the budget memorandum;
a. The extend of the overall fiscal
crunch
b. Working relationship between
department heads and the chief
executive and other budget officer
BUDGETING
3. Document preparation
Once the executive budget has been formulated, it is submitted
to the legislative body and the general public.

Budget documents includes:


a. Budget message and summary
Presents a clear explanation of the important features of the
budget. It covers past, present, and estimated future economic
limits (growth/income), financial conditions, revenue and
expenditure levels; needed change in fiscal policy; and a brief
description of the operating and capital programs.
This document is made available to the public
BUDGETING
b. Detailed operating budget
The budget package generally includes the ordinances needed top adopt the
budget, including appropriations, authorizations and resolutions.
2 variety forms
a. Typical line – item budget
Organizes expenditures amounts by departments, funds and category of
expenditure; for example, personnel, supplies and materials and contractual
services
b. Capital item - budget
Items requiring expenditures that are generally nonrecurring, large, of a fixed
investment nature and long term ( water and sewer lines, new buildings,
purchase of land and new major equipment).
They are organized into separate budget because they can effect planning
periods of more than one year.
The first year of the five-year estimate is the capital budget for the coming
fiscal year.
BUDGETING
4. Legislative Review
The chief executive submits the budget documents to the
legislative body with a verbal presentation of the budget
message . Copies are made available to the press, libraries,
organizations and interested groups and individuals. Public
hearing is scheduled and advertised so the council may
review the budget as a complete body or committee. Public
hearings are conducted so citizens have the opportunity to
provide additional information and criticism.
After the public hearings and review , the legislative body
may make changes in any part of the budget (within normal
legal constraints)
BUDGETING
5. Adoption
Once the final budget is formulated the
legislative body adopts it by resolution or
ordinance. If changes have been extensive the
entire adopted budget is reprinted. If not, only the
changes are reprinted and attached.
The complexity, the politics involved and delays
in bureaucratic processes may postpone adoption.
Legislation is adopted following expenditures at
the previous year’s level until the budget is
adopted. It is then sent to the chief executive for
implementation.
BUDGETING
6. Budget management, amendments and
audit.
The chief executive has the responsibility for
administering the adopted budget.
Three (3) basic mechanism:
a. Allotment system
b. Budgeting/ accounting system
c. Audit
BUDGETING
A. Allotment system
 provide a basic spending control by
releasing funds to departments on a
quarterly or monthly basis.
 periodic financial reports developed from

accounting information are submitted to the


chief executive so that he or she can
periodically assess financial conditions
(including the comparison of budget
estimates with actual expenditures and
revenue)
BUDGETING
B. Budgeting/ accounting system
 flexible enough to allow for routine
adjustments. This flexibility is sometimes
achieved by appropriating monies to a
contingency and/or an executive emergency
fund. Major adjustments generally require
an amendment to the budget, however in a
form of legislation that must be passed by
the council.
C. Audit
 formal examination and verification of the

accounts.
BUDGETING
Two (2) types of audit
1. Internal audit
Conducted quarterly or semiannually by city staff
or consultants to produce reports for internal
management purposes.
2. External audit
Normally required by the state law is conducted by
external certified public accountants after the fiscal
year has ended. Submitted to the legislative body and
the regulating state agency. The legislative body
reviews the audit to ensure that revenue and
expenditure activities were conducted according to
the intentions of the budget.