Government

Funding 1. The Fiscal System

2. The Budget Process
PHILIPPINES
ㅡ
PHILIPPINE FISCAL SYSTEM
 
Major Functions
- To transfer funds of the proper magnitude from the private sector to the
government for use in financing expenditures for economic
development the efficiency of which its draws resources from
consumption and makes them available for well-conceived
investments;
- to transfer savings from the private to the government sectors, and vice
versa, to assure their most productive utilization; and
- to influence the size and direction of private investment expenditures
through incentives and disincentives.
 
 
REVENUE SYSTEM
- Collection of taxes and other revenues of the
- Bureau of Internal Revenue
- Income Taxes
- E-VAT
- Bureau of Customs in the Philippines
- Tariffs & Duties
- Non-Tax Revenues
The government’s Privatization - Bureau of Treasury - revenue by issuing, servicing and
Program is handled by the redeeming government securities and controlling the
inter-agency Privatization Council Securities Stabilization Fund through the purchase and sales
and the Privatization and of government bills and bonds
Management Office, a sub-branch - Privatization proceeds
of the Department of Finance - Other state enterprises - ex. PAGCOR

FINANCING & DEBT

- External Sources Financing
- Program and Project Loans - the government offers project
loans to external bodies and uses the proceeds to fund
The Philippines reduced domestic projects like infrastructure, agriculture, and other
dependency on external sources government projects.
to minimize the risks caused by - Credit Facility Loans
changes in the global exchange - Zero-coupon Treasury Bills
rates. - Global Bonds
- Foreign Currencies

- Domestic Sources
- Treasury Bonds
- Facility loans
- Treasury Bills
- Bond Exchanges
- Promissory Notes
- Term Deposits

The proposed Budgets for 2012 to
2016 had been consistently
submitted one working day after
the opening of the regular
session.
DEPARTMENT OF BUDGET & MANAGEMENT
General function::
- Formulates the overall resource application strategy to match the
government’s macro-economic policy;
- Prepares the medium-term expenditure plan, indicating the
programming, prioritization, and financing of capital investment and
current operating expenditure requirements of medium-term sectoral
development plans;
- Undertakes the formulation of the annual national budget in a way that
ensures the appropriate prioritization and allocation of funds to support
the annual program of government;
- Develops and administers a national accounting system essential to
fiscal management and control;
- Conducts a continuing study of the bureaucracy and assesses as well
as makes policy recommendation on its role, size, composition,
structure and functions to establish a government bureaucracy imbued
with a spirit of public service;
- Establishes the rules and procedures for the management of
government organization resources i.e., physical, manpower and other
resources, formulates standards of organizational program
performance; and undertakes or provides services in work
simplification or streamlining of systems and procedures to improve
efficiency and effectiveness in government operations;
- Conceptualizes and administers the government’s compensation and
position classification plan; and
- Monitors and assesses the physical as well as the financial operations
of local government units and Government-Owned and/or Controlled
Corporations.
THE BUDGET PROCESS
Our Constitution States:
The President shall submit a budget to Congress within 15 days of the opening of each
regular session. The general appropriation bill shall be based on this budget. Congress
may not increase the appropriations recommended by the President for government
operations except those for Congress and the Judicial Department.
The general appropriations bill shall not include any provision unless related specifically
to some particular appropriation in it, and any such provision shall be limited in its
operation to such appropriation.
The Treasury shall not release any money unless appropriated by law.
Principal objective of the budget system
1. To carry on all fiscal plan developed, authorized and executed in
accordance with the Constitution, prevailing statutes and the principles
of sound public management
2. To provide for periodic review and disclosure of the budgetary status of
the Government in such details that person entrusted by law with the
responsibility as well as an enlightened citizenry can determine the
adequacy of budget actions taken, authorized or proposed and the
true financial position of the Government.
 The Budget Document is divided in five main parts.
THE BUDGET CYCLE
BUDGET PREPARATION ​ (7 months)
- Budget Call
CIVIL SOCIETY
ORGANIZATIONS (CSOS)
Non-State, not-for-profit, voluntary
entities formed by people in the
social sphere that are separate
from the State and the market.
CSOs represent a wide range of
interests and ties. They can
include community-based
organizations as well as
non-governmental organizations
(NGOs).
1. President’s Budget Message (PBM) This is where 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 the fiscal year and the two previous years.
3. National Expenditure Program (NEP) This contains 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.
1. Budget Preparation
2. Budget Legislation (Authorization)
3. Budget Execution
4. Budget Accountability
Jan of Prior FY
- at the beginning of the budget preparation year, the 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 Budget call contains budget parameters (including
macroeconomic and fiscal targets and agency budget ceilings)
as set beforehand by the Development Budget Coordination
Committee (DBCC); policy guidelines and procedures in the
preparation and submission of agency budget proposal.
- Budget Call is issued in ​December ​(versus April in the past);
and the submission of the President’s budget day after the
State of the Nation Address (in contrast to earlier practice
where it is submitted during the late 30-day window that the
Constitution prescribes)
- Citizen Engagement
Before Tier 1 & 2 Proposals (before Feb)
- A new feature in budget preparations 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 proposal
- Program Budgeting
- Lead and contributing agencies for each program priority of the
government (for example, tourism) meet and synergize their
proposed budgets to meet target outcomes

Bottom-Up Budgeting (BUB)
is a program that allows local
groups, usually led by civic
society organizations, to
consult with communities and
pick from a list of projects to
implement. (2017-P35B)
Bottom-up Budgeting will focus
on rural development
programs and the conditional
cash transfer program, and will
thus involve DA, DAR, DENR,
DSWD, DepEd and DoH.
The President’s Budget consists
of the following documents, which
helps legislators analyze the
contents of the proposed budget.
BUDGET LEGISLATION​ (less than 5 months)
- House Deliberation
- Agency Proposal
- TIER 1: Agencies prepare the forward estimates (FEs) or
current costs of their ongoing programs and projects
- TIER 2: After undertaking further consultations with CSOs,
RDCs, and other agencies, agencies prepare their proposals
for new programs and projects or the expansion of existing
ones. Agencies submit their proposed budget.
- Agency Hearing & Review
- After departments and agencies submit their Agency Budget
Proposal to the DBM, agencies defend their proposed budgets
before a technical panel of DBM, based on the performance
indicators on output targets and absorptive capacity. DBM
bureaus then review the agency proposals and prepare
recommendations
- The recommendations are presented before an Executive
Review which 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
- Presentation to the President and Cabinet
July of Prior FY
- the proposed budget with the DBCC, to the President and
Cabinet for further refinement or reprioritization. After the
President and Cabinet approve the proposed National
Executive Plan, the DBM prepares and finalizes the budget
documents to be submitted to Congress.
- Consolidation, Validation, and Confirmation
July of Prior FY
- DBM then consolidates the recommended agency budgets
and recommendations into National Expenditure Program and
a Budget of Expenditures and Source of Financing (BESF)
- The President’s Budget
July to August of Prior FY
- the preparation phase ends with the submission of the
proposed national budget (The President’s Budget) to
Congress.
Aug to Oct of Prior FY
- The Budget bill is tackled by Congress like any
legislation.Thus, the Committee on Appropriations of the
House of Representatives holds public hearings on the
proposed Budget.
- The Committee then sponsors the recommended General
Appropriations Bill (GAB) before the House in plenary.
- Once approved, the House transmits the GAB to the Senate.
- Senate Deliberation
Sep to Nov of Prior FY
- Unlike normal legislation, the Constitution first requires the
House to approve the GAB before the Senate considers the
same. However, to expedite the process, the Senate

When the GAA is not enacted
before the fiscal year starts, the
previous year’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
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​)
BUDGET EXECUTION
- Early Procurement Activities
Committee on Finance usually starts hearings on the
President’s Budget well before the House formally transmits
the GAB.
- Like in the House, the Committee on Finance sponsors the
GAB in plenary, which then approves the Senate version of the
GAB.
- Bicameral Deliberation
Nov-Dec of Prior FY
- Once both Houses 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.
- Ratification & Enrollment
Dec of Prior FY
- The Harmonized or “Bicam” Version is then submitted to both
Houses, which will then vote to ratify the final GAB for
submission to the President. Once submitted to the President
for his approval, the GAB is considered enrolled.
- Enactment
Dec of Prior FY
- Budget legislation ends when the President signs the GAA into
law. Prior to this, the President may veto or set conditions for
implementation of certain items in the GAA, which are then
specified in the President’s Veto Message. Unlike other
legislation, the President may effect a “line item veto” of
specific provisions of the GAB.
- If in case Congress fails to pass the GAB on time, the
President may re-enact the previous year’s GAA until such
time that the fresh Budget is passed. The Budgets from 2011
to 2016 have all been enacted on time.
Oct to Dec of Prior FY
- Agencies are required to prepare their Annual Procurement
Plans and other bid documents before the new fiscal year
starts.
- Moreover, the government adopted a policy of allowing
agencies—such as the DPWH and others which implement
infrastructure projects—to bid their projects before the GAA is
enacted.
- Early bidding allows agencies to award their approved projects
as soon as the new GAA takes effect.
- Budget Program
Oct to Dec of Prior FY
- Agencies submit Budget Execution Documents (BEDs) to
outline their financial plans and performance targets for the
year. The DBM consolidates these plans into the budget
program, which breaks down the allotment and cash releases
for each month of the year.
- Allotment Release
Jan (Comprehensive) and Throughout FY
 - The DBM issues allotments to agencies to authorize the latter
to incur obligations.
- With the GAA-as-Release Document, the enacted Budget itself
Allotment Release Orders
serves as the allotment release for all budget items except
(SAROs) Items identified as
“needing clearance” are those those contained in a negative list that are issued the Special
which require the approval of the Allotment Release Orders (SAROs) after agencies comply with
DBM or the President, as the case the documentary requirements.
may be (for instance, lump sum - THE GAA as Allotment Release (started in 2013
funds and confidential and budget)
intelligence funds). For such - The annual General Appropriations Act as the
items, an agency needs to submit
comprehensive allotment release document
a Special Budget Request to the
DBM with supporting documents. itself. This is to significantly speed-up the
Once approved, a SARO is process of releasing the Budget and
issued. implementing the programs and projects that it
funds.
- This entails the disaggregation of all budget
items into full detail, as well as the elimination
of all lump-sum funds, save for a few
exceptions such as the Calamity Fund. In
other words, this reform significantly reduces
the need for SAROs.
- Old ways: Allotment Release Program (ARP) to set a
limit for allotments issued to an agency and on the
aggregate and Cash Release Program (CRP) is also
formulated alongside that to set a guide for
disbursement levels for the year and for every month.
- Obligations
Throughout FY
- Agencies incur liabilities that the national government will pay
for, as they implement programs, activities, and projects.
- Agencies incur obligations when they hire new staff or enter
into a contract with suppliers of goods and services that are
subject to a transparent and competitive procurement process.

- Cash Allocation
Throughout FY
- The DBM issues disbursement authorities, such as the Notice
of Cash Allocation (NCA), to authorize an agency to pay the
obligations it incurs.
- To ease budget execution, the DBM issues comprehensive
NCAs to cover the cash requirements of agencies for the first
semester.
- In special cases, the Non-Cash Availment Authority (NCAA)
and Cash Disbursement Ceiling (CDC).
- 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.
- Other 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.

- Disbursements
Throughout FY
- 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.
- To ease the payments process, the DBM introduced checkless
and cashless disbursement schemes. The DoF-BTr also
implemented the TSA to improve the management of the
government’s cash resources.

BUDGET ACCOUNTABILITY
- Performance Target
Jan of FY
- Budget accountability starts with the setting of targets that
agencies are to be held accountable for.
- With the Performance-Informed Budget, the GAA now
contains the targeted outcomes, outputs and performance
indicators of each agency.
- These targets are also reflected in agencies’ BEDs (see
“Budget Program” under Budget Execution), which effectively
serve as the agencies’ plans for the year.

- Citizen Engagement
Throughout FY
- To empower citizens during Budget Accountability, the
government ensures transparency--agencies disclose their
budgets, reports, and other relevant information through the
Transparency Seal; and make available data in open format.
- In addition, the government also publishes the People’s Budget
along with other technical documents and reports.
- Citizens participate formally in the monitoring of programs and
projects through BPAs, BUB, and other mechanisms. In
addition, CSOs participate in the audit process through the
COA’s Citizens’ Participatory Audit

- Monitoring and Evaluation

Throughout FY
- Agencies must set-up and implement monitoring and
evaluation mechanisms to ascertain the effectiveness of the
programs and projects on which they spend.
- Agencies must have internal control mechanisms to ensure
that public funds Are spent and accounted for properly
-
- Agencies Accountability Report
Monthly and Quarterly
- Agencies submit Financial Accountability Reports on a monthly
or quarterly basis, as required by the DBM and the COA.
These reports are submitted online through the Unified
Reporting System.
-

Zero-based budgeting (ZBB)
is a method of budgeting in which
all expenses must be justified for
each new period. The process of
zero-based budgeting starts from
a "zero base," and every function
within an organization is analyzed
for its needs and costs
- Performance Review
Throughout FY
- The DBM reviews the financial and physical performance of
agencies against their targets. Review mechanisms include:
- the Zero-Based Budget (ZBB), to evaluate the
efficiency and effectiveness of programs;and
- the FTDUs, to closely monitor agencies’ performance
and address bottlenecks proactively
- In-year Report
Monthly & Quarterly
- The DoF and the DBM regularly publish snapshots of the
government’s fiscal performance, revenue collections, debt,
and expenditures.

- DBCC Mid-Year Report

By Sep of FY
- The DBCC publishes a comprehensive report on
macroeconomic developments, the fiscal situation of the
national government, and the performance of key programs
and projects.
- The Mid-Year Report also discusses any adjustments that the
DBCC makes to the government’s economic projections and
fiscal targets for the rest of the year.

- DBCC Year-End Report

Within the Following Year
- The DBCC publishes another comprehensive report covering
the full year.
- Compared to the Mid-Year Report, the Year-End Report
provides more discussions and details about actual revenue
and expenditure outturns against program, and the financial
and physical performance of priority programs.

- Audit
Within the Following Year
- The COA reviews the accounts of each agency to ascertain if
public funds are used properly, according to the law and
standards, and with value-for-money.
- The COA produces audit reports for each agency; a
whole-of-government Annual Financial Report; as well as
Special Audit Reports. The DBM uses COA’s Audit Reports in
confirming agency performance, determining budgetary levels
for agencies, and addressing issues in fund usage.

Additional Notes:  

Securities Stabilization Fund

- The operations of the Securities Stabilization Fund shall consist of
purchases and sales, in the open market, of bonds and other
evidences of indebtedness issued or fully guaranteed by the
Government. The purpose of these operations shall be to increase the
liquidity and stabilize the value of said securities in order thereby to
promote investment in government obligations. (RA 7653 Sec. 120)

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.

References:

- Fernandez, F. (1973). The Budget Process and Economic

Development: The Philippines Experience. College of Public
Administration University of the Philippines Manila
- Dimarucot, O. (July 2013). Budget Process of the Philippines (PPT
version). Retrieved from
https://www.slideshare.net/ZERODELTA/budget-process-of-the-philippi
ne-national-government
- DBM Budget Cycle. Retrieved from official website of the Department
of Budget and Management at
https://www.dbm.gov.ph/wp-content/uploads/Executive%20Summary/2
016/Budget%20Cycle.pdf