The Budget Process PDF

Chapter 2 Budget Call The Budget Process the budget preparation starts when the DBM issues a budget call to all government agencies The National Budget...

Chapter 2 Budget Call The Budget Process the budget preparation starts when the DBM issues a budget call to all government agencies The National Budget contains, among other things, the next fiscal year’s the Philippine Constitution and other laws require targets, the agency’s budget ceiling, and other government funds to be utilized in accordance with guidelines in the completion and submission of a national budget that is duly approved by agency budget proposals legislation ○ government accounting, therefore, is Budget Hearings concerned with providing information useful in conducted after the agencies submit their budget assessing the conformance of utilizations of proposals government funds with the approved budget each agency defends its budget proposal before the national budget (government budget) is the the DBM government’s estimate of the sources and uses the DBM deliberates on the budget proposals, of government funds within a fiscal year makes recommendations, and consolidates the ○ this forms the basis for expenditures and is the deliberated proposals into the National government’s key instrument for promoting its Expenditure Program (NEP) and Budget of socio-economic objectives Expenditures and Sources of Financing (BESF) the DBM then submits the proposed budget to the The Budget Cycle (PLEA) President 1. Budget Preparation 2. Budget Legislation Presentation to the Office of the President 3. Budget Execution the President and Cabinet members review the 4. Budget Accountability proposed budget after the President approves the proposed budget, Budget Preparation the DBM finalizes the budget documents to be the Philippines uses a “bottom-up” approach submitted to the Congress ○ several parties participate in the budget ○ at this point, the proposed budget is referred to preparation, starting from the lowest to the as the “President’s Budget” highest levels of the government the “President’s Budget” contains the following ○ government agencies are also tasked to documents which are intended to assist the increase the participation of citizen- Congress in their review and deliberation of the stakeholders in the budget preparation proposed national budget: “top-down” budgeting — opposite of “bottom-up” a. President’s Budget Message – President’s budgeting wherein the budget preparation starts explanation of the country’s fiscal policy and from the agency heads budget priorities in 2011, the Philippine government attempted to b. NEP – details of all the government entities’ start a new tradition by shifting from the old proposed expenditures in the coming year “incremental” system of budgeting to the “zero- c. BESF – the estimated expenditures based budgeting” approach accompanies by estimates of expected sources of financing Incremental Budgeting Zero-Based Budgeting d. other documents aimed to provide further explanation of selected items in the NEP (e.g., the current year’s budget the current year’s budget details of key programs and projects and is formulated based on is formulated without the previous year’s regard to the previous staffing summary) budget, which is just year’s budget — the President shall submit the proposed budget to adjusted for any government agencies are the Congress within 30 days from the opening of variances experienced in required to justify their every regular session the past — presumably, current year’s proposed the proposed programs programs and Budget Legislation and expenditures in the expenditures, irrespective government funds shall only be spent in pursuance previous year are of whether these are new automatically approved in or carried over from the of an appropriation made by law the current year previous year due process must be undertaken to legalize the proposed budget uses a “roll-over” uses a “back-to-zero” or approach “clean slate” approach House Deliberations prone to abuse promotes efficient and upon receipt of the President’s Budget, the House effective utilization of of Representatives conducts hearings to scrutinize funds the various agencies’ respective proposed programs and expenditures  thereafter, the House of Representatives prepares ○ used as a control device to ensure that the General Appropriations Bill (GAB) releases conform to the national budget ○ alongside, is a Cash Release Program (CRP), Senate Deliberations which sets the disbursement limits for the year, the Senate conducts its own deliberations on the for each quarter and for each month GAB allotment normally starts after the Senate receives the GAB ○ an authorization issued by the DBM to from the House of Representatives government agencies to incur obligations for for expediency, hearings in the Senate start even specified amounts contained in a legislative as Representatives deliberations are ongoing appropriation in the form of budget release documents Bicameral Deliberations ○ also referred to as Obligational Authority after deliberations in both houses are finished, a ○ it is illegal for a government entity to incur committee called the Bicameral Conference obligations without having first received the Committee is formed to harmonize any conflicts allotment between the Representatives and Senate versions ○ the type and amount of obligations to be of the GAB incurred must conform to those that are the harmonized GAB (“Bicam” version) is specified in the allotment submitted back to both Houses for ratification obligation after ratification, the final GAB is submitted to the ○ an act of a duly authorized official which binds President for enactment the government to the immediate or eventual payment of a sum of money President’s Enactment ○ may be referred to as a commitment that the President enacts the budget, which is now encompasses possible future liabilities based knowns as the General Appropriations Act on current contractual agreement (GAA) documents used in releasing allotments to before enactment though, the President may government agencies: exercise his veto power as conferred to him under 1. General Appropriations Act Release Document the Philippine Constitution (GAARD) when the proposed budget is not enacted before 2. Special Allotment Release Order (SARO) the fiscal year starts, the last year’s GAA is 3. General Allotment Release Order (GARO) automatically reenacted ○ last year’s GAA shall be used in the current Incurrence of Obligations year until a new general appropriations bill is government agencies incur obligations which will passed by the Congress be paid by the government, e.g., entering into contracts, hiring of personnel, purchase of Budget Execution supplies, etc. the phase where government funds are spent Disbursement Authority Release Guidelines and BEDs the DBM issues disbursement authority to the the DBM issues guidelines on the release and government agencies utilization of funds while the various agencies this is the point where government agencies submit their Budget Execution Documents (BEDs) obtain access to the government funds ○ a BED summarizes an agency’s fiscal year disbursements are most commonly made plans and performance targets through checks that are chargeable against the ○ includes the following: account of the Treasurer of the Philippines (i.e., a. physical and financial plan Treasury Single Account) b. monthly cash program ○ checks issued under this scheme are called c. estimate of monthly income “Modified Disbursement System (MDS) d. list of obligations that are not yet due and Checks” demandable documents used in releasing disbursement major recipients of the budget: authority to government agencies: a. National Government Agencies (NGAs) 1. Notice of Cash Allocation (NCA) b. Local Government Units (LGUs) ○ authority issued by the DBM to central, c. Government Owned and Controlled regional and provincial offices and Corporations (GOCCs) operating units to cover their cash requirements Allotment ○ specifies the maximum amount of cash that the DBM formulates the Allotment Release can be withdrawn from a government Program (ARP) to set the limit for allotment during servicing bank in a certain period the upcoming year  ○ based on the agency’s submitted Monthly The Approved Budget Cash Program the expenditure authority derived from 2. Notice of Transfer of Allocation (NTA) appropriation laws, government ordinances, and ○ authority issued by an agency’s Central other decisions related to the anticipated revenue Office to its regional and operating units to or receipts for the budgetary period cover the latter’s cash requirements consists of the following: 3. Non-Cash Availment Authority (NCAA) UACS Code ○ authority issued by the DBM to agencies to cover the liquidation of their actual New General Appropriations 01 obligations incurred against available Continuing Appropriations 02 allotments for availment of proceeds from Supplemental Appropriations 03 loans/grants through supplier’s credit/constructive cash Automatic Appropriations 04 4. Cash Disbursement Ceiling (CDC) Unprogrammed Funds 05 ○ authority issued by the DBM to agencies Retained Income/Funds 06 with foreign operations (e.g., Department of Foreign Affairs) allowing them to use the Revolving Funds 07 income collected by their Foreign Service Trust Receipts 08 Posts to cover their operating requirements The Unified Accounts Code Structure (UACS) refers to the standard coding system used in financial reporting of Budget Accountability the National Government occurs concurrently with the Budget Execution phase Appropriations as the budget is being executed, it is regularly authorization made by a legislative body to allocate monitored to determine the conformance of actual funds for purposes specified by the legislative or results with planned targets similar authority Budget Accountability Reports New General Appropriations a. Monthly Report of Disbursements annual authorizations for incurring obligations b. Quarterly Physical Report of Operation during a specified budget year, as listed in the GAA c. Statement of Appropriations, Allotments, Obligations, Disbursements and Balances Continuing Appropriations d. Summary of Appropriations, Allotments, authorizations to support obligations for a Obligations, Disbursements and Balances by specific purpose or project, such as multi-year Object of Expenditures construction projects which require the incurrence e. List of Allotments and Sub-Allotments of obligations even beyond the budget year f. Statement of Approved Budget, Utilizations, Disbursements and Balances Supplemental Appropriations g. Summary of Approved Budget, Utilizations, additional appropriations authorized by law to Disbursements and Balances by Object of augment the original appropriations which Expenditures proved to be insufficient for their intended purpose h. Quarterly Report of Revenue and Other Receipts due to economic, political or social conditions supported by a Certification of Availability of Funds Aging of Due and Demandable Obligations from the BTr Consolidated Statement of Allotments, Obligations, and Balances per Summary of Automatic Appropriations Appropriations authorizations programmed annually or for some other period prescribed by law which do not require Performance Reviews periodic action by Congress the DBM and COA perform periodic reviews of the agencies’ performance and budget accountability Unprogrammed Funds and report to the President standby appropriations authorized by Congress in the annual GAA which may be availed only when Audit any of the following instances occur: the COA audits the agencies a. revenue collections exceed the original revenue targets in the BESF submitted by the The budget reports, together with other budget President to the Congress records, provide information in preparing the b. new revenues are collected or realized from Statement of Comparison of Budget and Actual sources not originally considered in the BESF Amounts c. newly-approved loans for foreign-assisted projects are secured or when conditions are  triggered for other sources of funds such as perfected loan agreements for foreign assisted projects Retained Income/Funds collections which are authorized by law to be used directly by agencies concerned for their operation or specific purposes Revolving Funds receipts derived from business-type activities of departments/agencies which are authorized by law to be constituted as such and deposited in an authorized government depository bank these funds shall be self-liquidating and all obligations and expenditures incurred by virtue of said business-type activity shall be charged against said fund Trust Receipts receipts by any government agency acting as trustee, agent or administrator for the fulfillment of some obligations or conditions Responsibility Accounting to better evaluate the budget accountability of an entity, government accounting adheres to the concept of responsibility accounting a system of providing cost and revenue information over which a manager has direct control of enables the evaluation of a manager’s performance based only on matters that are directly under his control ○ therefore, budget deviations can be readily attributed to the managers accountable therefor requires the identification of responsibility centers and the distinction between controllable and non- controllable costs ○ responsibility center – a part, segment, unit or function of a government agency, headed by a manager, who is accountable for a specified set of activities ○ controllable costs – a cost is considered controllable at a given level of managerial responsibility if the manager has the power to incur it within a given period of time ○ non-controllable costs – costs incurred indirectly and allocated to a responsibility level