Public Accounting and Budgeting PDF

PREFACE This instructional material is intended for students of Public Accounting and Budget- ing of the Government Affairs Department of the College of Business of Bukidnon State University. Classroom instruction is a challenged especial...

PREFACE This instructional material is intended for students of Public Accounting and Budget- ing of the Government Affairs Department of the College of Business of Bukidnon State University. Classroom instruction is a challenged especially if there is no instructional material to be used that contains topics to be covered by the subject. It is taxing to collect topics from one book to another or from different web sites, pamphlets, flyers and issuances from gov- ernment oversight bodies on accounting and budgeting. This prompted the author to make her instructional material that is composite of the many resources that covers all the topics of this specific subject for the convenience of the students. This Public Accounting and Budgeting: A Self-Instructional Approach material provides the information on government accounting and budgeting with the updated Circulars from both Commission on Audit and Department of Budget and Management that contains the latest financial management reforms on government accounting and budgeting through the Government Accounting Manual (GAM) featuring the Budget and Financial Accountability Reports (BFAR) and the Electronic New Government Accounting System (eNGAS). With this, the author is hoping that students taking up Public Accounting and Budgeting subject will be given the latest information on government accounting and budgeting thus making them equipped with the expected skill on public administration. While the students are learning from this instructional material on the intricacies of government accounting and budgeting, they are as well earnestly encouraged to live by heart the responsibilities, accountabilities and liabilities over government funds and proper- ties. The author is grateful for the motivation and support of Dr. Lorenzo B. Dinlayan, III, Chairperson, faculty and students of the Government Affairs Department for affording her with good experiences that helps her to complete this book. “May this be for Thy greater Glory” GLORIA B. SILVIDAD-TUBAN, MPA 1 2  CONTENTS CONTENTS PAGE Preface Welcome Note 2 Table of Contents 3 LESSON 1: NATURE AND SCOPE OF ACCOUNTING RESPONSIBILITY 4 Government Accounting and Legal Bases 5 Commission on Audit 6 Government Accounting Manual (GAM) 7 Standards Found in GAM: BFAR and eNGAS 8 Activity 1 9 LESSON 2: ACCOUNTING FOR TYPICAL GOVERNMENT TRANSACTIONS 10 Appropriations 12 Allotments 13 Obligations 14 Disbursements 15 Activity 2 17 LESSON 3: GOVERNMENT ‘S BUDGET AND BUDGETING 18 Government Budget 18 Government Budgeting 19 Budget Cycle 20 Budget Preparation 21 Budget Legislation 22 Budget Execution 23 Budget Accountability 24 Activity 3 25 LESSON 4: RESPONSIBILITY, ACCOUNTABILITY AND LIABILITY OVER GOVERNMENT FUNDS AND PROPERTY 26 Fundamental Principles over Government Funds and Resources 28 Responsibility over Government Funds and Property 29 Liability over government funds and property 30 Main Task: Position Paper 31 REFERENCES 32 3  LESSON 1 NATURE AND SCOPE OF ACCOUNTING RESPOSIBILITY CO 1  Articulate the basic concepts and prin- ciples underlying Government Ac- counting. Specific Learning Objectives: At the end of the lesson, you will be able to :  Describe the meaning of Government Ac- counting;  Examine COA’s Mandate and other Legal Ba- sis;  Define Government Accounting Manual; and  Appreciate the contents of the GAM between BFAR and eNGAS. Instruction: Do the KWL Chart for the topic Government Accounting. Write your answer on the template provided. Financing. The means by which a govern- ment provides financial resources to cover TOPIC: GOVERNMENT ACCOUNTING a budget deficit or allocates financial re- sources arising from a budget surplus. Fiscal responsibility. The means by which the government pursues the appropriate K What I al- W What I WANT to L What I LEARNED ready KNOW know about the topic about the topic level of government spending and tax to about the topic maintain sustainable public finances. General Fund. Fund which is available for any purpose to which the Congress may choose to apply, and is composed of all receipts or revenues which are not other- wise accruing to other funds. Revenue. Refer to projected cash inflows like collections from taxes by BIR/BOC and other tax agencies and fees and charges imposed by the government agencies as well as proceeds from grants. Transparency. In government accounting, this means ensuring that funds, or mean- ingful accounting data, pass through government books of accounts on a timely basis and is accessible by the pub- lic. Transparency Seal. A legal requirement for all government agencies including Consti- tutional Offices enjoying fiscal autonomy, SUCs, GOCCs and LGUs to disclose relevant budget information from approved budg- ets and targets, to procurement plans and contracts awarded, among others through their respective websites. 4  MEANING AND NATURE OF GOVERNMENT ACCOUNTING What is Government Account- Basic Principles of Government Accounting ing? Keeping of accounts Government Accounting The accounts of an agency shall be kept in such detail as is necessary to meet the needs of the agency encompasses the processes of and at the same time be adequate to furnish the infor- analyzing, recording, classifying, mation needed by fiscal or control agencies of the gov- summarizing and communicating ernment. all transactions involving the re- ceipt and disposition of govern- The highest standard of honesty, objectivity and consistency shall be observed in the keeping of account ment funds and properties, and to safeguard against inaccurate or misleading infor- interpreting the results. mation. Objectives of Government Ac- Recording of financial transactions counting Each government agency shall record its finan- cial transactions and operations conformably with gen- Government Accounting shall erally accepted accounting principles and in accordance aim to: with pertinent laws and regulations. To produce relevant financial Financial reports information about past and present transactions of gov- The financial reports prepared by the agencies ernment. shall comply with the specific requirements of applica- ble laws and regulations as to nature, accounting basis, To serve as a basis for decision content, frequency, and distribution as well as with all making for future opera- applicable restrictions pertaining to information that is tions. classified for national security purposes. To serve as the control mecha- Financial statements nism for the receipt, disposi- tion and utilization of gov- The financial statements shall be based on official ac- ernment funds and proper- counting records kept in accordance with the law and ties. the generally accounting principles and standards. To come up with financial re- Submission of reports ports pertaining to the re- The COA requires regular submission of reports in the exigencies of the service and to exercise func- tions. Failure on the part of the officials concerned to submit the required documents and reports shall auto- matically cause the suspension of payment of their sala- ries until they have complied with the requirements of Accounting is the process of classifiying, recording, analyzing and summarizing financial information in a useful way. It is an effective tool of management in evaluating the performance of the different agencies of government. Difference between Public and Private Accounting: This is an important difference between private sector accounting and governmental accounting. The main reasons for this difference is the environment of the accounting system. For better presentation, the difference is presented in a matrix below: Public Accounting Private Accounting Goals and Objectives Compliance with the legal mandate of Monitor/track the business’ profit and law gain Standard Policies Fixed as mandated by law Flexible as dictated by international market price Focus of measure Flow of financial resources Flow of economic resources Source: Sanderson, I. Worldwide Credit Crisis and Stimulus Packages in Accountancy SA 5  THE COMMISSION ON AUDIT: Government Accounting Oversight Agency Legal Basis: 1987 Constitution Article IX-D, Sec 2: The Commission On Audit shall have the exclusive authority to do audit and exam- ination, establish audit techniques, implement accounting rules and regulations, that in- cludes disallowances on the use of govern- ment funds and properties. COA’s Mandate on Government Accounting: 1. Auditing and Custodial Services 2. Rule-making Services 3. Reportorial Services 4. Adjudicatory and Quasi-judicial Services 5. Professional Development and other services COA: Scope 1. constitutional bodies, commissions and offic- es that have been granted fiscal autonomy under the Constitution; 2. autonomous state colleges and universities; 3. other government-owned or controlled cor- History of Auditing in the Philippines porations and their subsidiaries; and 4. non-governmental entities receiving subsidy Executive Order by the President of the United or equity, directly or indirectly, from or States (May 5, 1899) created the Commis- through the Government, which are required sion on Audit as the Office of the Auditor of by law or the granting institution to submit the Philippine Islands. to such audit as a condition of subsidy or eq- The Philippine Constitution of 1935 renamed uity. the Bureau of Audit as the General Auditing Office (GAO) under the direction and con- trol of an Auditor General. COA: Powers and Duties The Philippine Constitution of 1973 re- 1. Examine, audit, and settle all accounts per- established the GAO which became the pre- taining to the revenue and receipts of, and sent Commission on Audit under the colle- expenditures or uses of funds and property, gial leadership of a Chairman and two Com- owned or held in trust by, or pertaining to, missioners. the Government, or any of its subdivisions, The Philippine Constitution of 1987 reaffirmed agencies, or instrumentalities, including gov- the Commission on Audit as the Supreme ernment-owned or controlled corporations Audit Institution with original charters, and on a post-audit composed of a Chair- basis; man and two Com- 2. It shall keep the general accounts of the Gov- missioners appointed ernment and, for such period as may be pro- by the President, de- vided by law, preserve vouchers and other claring its independ- supporting papers pertaining thereto. ence as a constitu- tional office. 6  GOVERNMENT ACCOUNTING MANUAL (GAM) Introduction: Recent developments brought about by the Philippine Public Finan- cial management Reforms and significant changes in the field of ac- counting prompted the harmonization of the existing accounting stand- ards with the international accounting standards. This Commission re- vised the New Government Accounting System (NGAS) Manual pre- scribed under Commission on Audit (COA) to make it responsive to dy- namic changes and modern technology. What is Government Accounting Manual (GAM)? 1. A Public Financial Management Reform 2. An activity of the Accounting and Auditing Reforms Project under the Public Fiscal Management Reform Roadmap 3. Prepared by a committee supervised by COA’s Philippine Public Sec- tor Accounting Standards Board. GAM Legal Basis The Government Accounting Manual (GAM) is prescribed by COA pursuant to: 1987 Constitution Article IX-D Sec 2: “The Commission on Audit shall have exclusive authority to define the scope of its audit and examination, establish the techniques and methods required and promulgate ac- counting and auditing rules and regulations, including those for the prevention and disallowance of irregular, unnecessary, excessive, extravagant, or unconscionable expenditures, or uses of gov- ernment funds and properties”. GAM Functions This Manual presents the basic ac- counting policies and principles in accordance with the Philippine Pub- lic Sector Accounting Standards GAM Objectives (PPSAS) adopted thru COA Resolu- tion No. 2014-003 dated January 24, The Government Accounting Manual aims to 2014 and other pertinent laws, rules and regulations. It update the following: includes the Revised Chart of Accounts (RCA) pre- scribed under COA Circular No. 2013-002 dated Janu- 1. standards, policies, guidelines and proce- ary 30, 2013, as amended; the accounting procedures, dures in accordance in accounting for gov- books, registries, records, forms, reports, and financial ernment funds and property; statements; illustrative accounting entries. 2. coding structure and accounts; It shall be used by all National Government Agen- 3. accounting books, registries, records, forms, cies (NGAs) in the: reports and financial statements; and 1. Preparation of the general purpose financial 4. accounting journal entries. statements in accordance with the PPSAS and other financial reports as may be required by laws, rules and regulations; 2. Reporting of budget, revenue and expenditure in accordance with laws, rules and regulations. 7  STANDARDS FOUND IN THE GAM: BFAR & eNGAS What is Budget and Financial Accountability Report (BFAR)?  It is a master plan for modernizing the financial management system of the govern- ment;  Design to improve efficiency, accountability and transparency of public fund use; and  Contribute to good governance and fiscal discipline as a strategy for inclusive growth and poverty reduction. Component of BFARs: Budget and Financial Accountability Reports FAR includes the following: 1. Quarterly Physical Report of Operation (QPRO)-BFAR No. 1 2. Statement of Appropriations, Allotments, Obligations, Disbursements and Bal- ances 3. Summary of Appropriations, Allotments, Obligations, Disbursements and Bal- ances 4. List of Allotments and Sub-Allotments (LASA) 5. Statement of Approved Budget, Utilizations, Disbursements and Balances 6. Summary of Approved Budget, Utilizations, Disbursements and Balances 7. Aging of Due and Demandable Obligations 8. Monthly Report of Revenue and Other receipts 9. Quarterly Report of Revenue and Other Receipts What is Electronic New Government Accounting System (eNGAS)? Electronic New Government Accounting System (eNGAS) is an accounting soft- ware developed by COA to promote correctness, reliability, completeness and timeli- ness in recording government financial transactions and to generate financial reports in accordance with the policies and procedures of the New Government Accounting System (NGAS). eNGAS Major Beneficiaries: 1. Agency Management Ensures more efficient operations and effective control Serves as tool for sound management decision making Pinpoints responsibility and accountability Ensures compliance with regulatory requirements 2. Agency Personnel Ensures speedy processing and recording of voluminous government fi- nancial transactions Generates prompt and accurate output or results 3. Government Oversight and Regulatory Agencies Affords up-to-date monitoring of agency operations Facilitates responsive exercise of regulatory functions 4. General Public Basic Features of eNGAS: 1. Display of user friendly screens 2. Provision of accounting journal entry templates for common transactions to facili- tate recording in the books of accounts 3. Automatic checking of the equality of debit and credit totals of the journal entry 4. Data validation to avoid duplication and redundancy 5. Electronic processing and approval of Journal Entry Voucher (JEV), recording of transactions in the Gen- eral Journal and posting to the General Ledger. 6. Property, Plant and Equipment (PPE)Monitoring 8  ACTIVITY 1: GOVERNMENT ACCOUNTING BROCHURE Instruction: Make a brochure or pamphlet of the learning you have in Lesson 1, emphasizing the following: Government Accounting, COA, Government Accounting Manual highlighting BFAR and eNGAS. You can consider the sample of Flyer below and the Rubrics as your. Rubric: Criteria Equivalent Points Actual Points Earned Concept Arrangement: uses pictures and lines that are relevant to the concept 20 presented. Content: Reflects factual information 20 relevant to the topic Creativity : presentation, authenticity 10 TOTAL POINTS 50 HOW TO MAKE A BROCHURE: 1. Include the basics Make sure your brochure states the who, what, where, and when of what you're trying to communicate. 2. Go for eye-catching imagery Brochure design is important, and images speak for themselves and can go a long way to communicating tone and fee. 3. Keep it brief When it comes to text, less is more. Be brief. Be concise. Be powerful with your words. 4. Take theme into account Think about what feeling you want to evoke with your brochure. Be mindful of the thematic elements of what you’re trying to promote 5. Let readers know what to do next Include links, contact information, or a strong call-to-action to let readers know how to learn more. Source: https://spark.adobe.com/make/flyer-maker/ 9  LESSON 2 ACCOUNTING FOR TYPICAL GOVERNMENT TRANSACTIONS CO 2  Demonstrate working knowledge on the accounting process for typical government transactions. Specific Learning Objectives: At the end of the lesson, you will be able to :  Describe the meaning of Govern- ment Exhibit mastery on the ac- counting for typical government transactions: -Appropriations; -Allotments; -Obligations; and -Disbursements. The following words below are of great help in un- derstanding the topic for Lesson2. 1. Appropriations. Appropriation is an authorization made by law or other legislative enactment for pay- ments to be made with funds of the government un- der specified conditions and/or for specified purpose. 2. Allotment. Allotment is an authorization issued by the DBM to an agency, which allows it to incur obligations within a specified amount, that is, within a legislative appropriation. 3. Obligations. Obligations are commitments by a government agency arising from an act of a duly authorized administrative officer binding the government to incur expenses, pur- chases and other operational requirements of the agency and the immediate or eventual payment of a sum of money. 4. Disbursements. Disbursement refer to the settlement of government pay- ables/obligations by cash, check, ADA or TRA. 10 LETS’ DO THIS! Instruction: Choose one word from the Vocabulary Words in page 9 and do the Word Play below. Write your answer on the template provided. WORD PLAY My Word What I think my word means What my word actually means Word Illustration/Picture that best describe my word Values of my word 11  ACCOUNTING FOR BUDGET: Appropriations What is an Appropriation? Appropriation is the act of setting aside money for a specific purpose. In accounting, it refers to a breakdown of how a firm's profits are divided up, or for the government, an account that shows the funds a government department has been credited with. Appropriation is an authorization made by law or other legislative enactment for payments to be made with funds of the government under specified conditions and/or for specified purpos- es. (PDD1445) What are the sources of appropriations that make up the annual budget? The sources of appropriations of the annual budget are: 1) new general appropriations legislated by Con- gress for every budget year under the General Appropriations Act (GAA); and 2) existing appropriations previously authorized by Congress. LEGAL BASIS OF BUDGET APPROPRIATIONS: The reason why there is a need for an appropriation law is because the Constitution restricts the use of public funds without a legislative enactment. Sec 29, 1987 Constitution: “ No money shall be paid out in the Treasury except in pursuance of an appropriation made by law”. In summary, appropriation represents the level of authority given by the government to its agencies, specified in certain amount and purpose, usually corresponding to what has been proposed by the agen- cy as its annual budget, while allotment represents the amount already released by the DBM to the agen- cy out of the agency’s appropriation. Whatever amount of approriatuon that has not been released at the end of the year will be reported in the Agency’s books and registries as unreleased approriations. 12  ACCOUNTING FOR BUDGET: Allotment What Is an Allotment? Allotment is an authorization issued by the DBM to an agency, which allows it to incur obligations within a specified amount, that is, within a legislative appropriation. In simple terms, an allotment is a chunk of an appropriation. If appropriation is a whole pizza, an allotment represents a slice or share of a government agency from the pizza. In technical terms, allotment is an authorization issued by the Department of Budget and Manage- ment (DBM) to an agency, through authority contained in the General Appropriations Act (GAA) or the release of Special Allotment Release Order (SARO), permitting the agency to commit/incur obligation and/or pay out funds within a specified period of time within the amount specified for the purpose indicated therein. Agency allotments are often referred to as the agency's "spending plan". They are the agency's plans for what to spend their limited recourses on and when to incur these expenses. Good allot- ment planning allows management to make confident decisions, knowing that resources will be available when needed to support these decisions. Additionally, allotments serve as a measuring stick upon which to compare actual expenditures and revenues. What are allotment classes? There are four (4) allotment classes. They are: 1) Personnel Services (formerly called Personal Services); 2) Maintenance and Other Operat- ing Expenses (MOOE); 3) Financial Expenses (FE); and 4) Capital Outlay. Personnel Services (PS) is the budget set aside by the government for the payment of salaries, wages and other compensation of government officials and employees. Maintenance and Other Operating Expenses (MOOE) on the other hand is the budget of the gov- ernment to cover its day to day operations. These are expenses for supplies and materials; trans- portation and travel; utilities (water, power, etc.) and the repairs, etc. Financial Expenses (FE) is a new expense category. These expenses refer to management supervi- sion/trusteeship fees, interest expenses, gurantee fees, bank charges, commitment fees and other financial charges incurred in owning or borrowing an asset property. Capital Outlays (CO) or Capital Expenditures is commonly known as the budget for the construc- tion and rehabilitation of roads, bridges, ports, airports, dams, public facilities, etc. It also includes budget for the purchase of motor vehicles, certain office equipment, information and communication technology equipment, and the like. What is Notice of Cash Allocation (NCA)? NCA is an authorization issued by the DBM to an agency to withdraw cash from the Bureau of Treasury to pay expenses incurred, purchases of materials and fixed assets, payment of payables, and other authorized disbursements thru the issuance of MDS Checks, ADA or other modes of disbursements. 13  ACCOUNTING FOR BUDGET: Obligations What is an Obligations? Obligations are commitments by a government agency arising from an act of a duly authorized administrative officer binding the government to incur expenses, purchases and other operational requirements of the agency and the immediate or eventual payment of a sum of money. Obligations is an act of a duly authorized official which binds the government to the immediate or eventual payment of a sum of money. Obligation maybe referred to as a commitment that encom- passes possible future liabilities based on current contractual agreement. ACCOUNTING FLOW CHART FOR APPROPRIATIONS, ALLOTMENT, OBLIGATIONS AND DISBURSEMENTS Principles Appropriation GAA/GAARD No money shall be paid out in the Treasury except in pursuance of an Legislative Process appropriation by law Allotment GARO/SARO/NCA “specific amount for DBM specified purpose” DV/PO/Contract Obligation “law must be faithfully Agency/Admin Officer adhered” BFAR DBM/COA Disbursement Cash/Check, “Sufficient & relevant Disbursing Officer ADA/TRA document to establish validity of claims” Obligations Release Documents: GAARD-General Appropriation Act Release Document GARO- General Allotment Release Order SARO- Special Allotment Release Order NCA- Notice of Cash Allocation 14  ACCOUNTING FOR BUDGET: Disbursement What is Disbursements? Disbursements refer to the settlement of gov- ernment payables/ obligations by cash, check, ADA or TRA. It al- so constitute all cash Basic Principles on Government Expenditures: paid out during a given period. It represent the 1. Disbursements or disposition of government funds or property movement of cash either shall variably bear the approval of the proper officials; form the BTr of AGDB or 2. Claims against government funds shall be supported with com- from an authorized dis- plete documentation; bursing officer to the fi- 3. All laws and regulations applicable to all financial transactions shall be faithfully adhered to; and nal recipient. 4. Generally accepted accounting principles and practices as well as sound management and fiscal administration shall be ob- served. Modes of Disbursements: 1. MDS checks for disbursements covered by NCA MDS Checks issued by national government agencies chargeable against the account of the Treasurer of the Philippines maintained with different MDS-Government Ser- vicing Banks (GSBs). 2. Commercial checks for disbursements covered by income/receipt authorized to be deposit- ed with AGDBs. 3. By Cash (thru Disbursing Officers) Cash- disbursements out of cash advances of regular and special disbursing officers for personal services, petty expenses and MOOE for field operating requirements. 4. NCAA Disbursements- Non-cash disbursements through JEV by availing/implementing agen- cy. Non-Cash Availment Authority Disbursements- adopted to account for the cash equiva- lent of the loan proceeds availed of through supplier’s credit/constructive cash. 5. By Advice to Debit the Account (ADA)- issued by national government agencies which serves as notice to the bank to debit the agency’s MDS account for payments made for accounts payable and retirement gratuity/terminal leave. 6. By Tax Remittance Advice (TRA)- refers to the accountable document issued by NGA to rec- ord the remittance of all taxes withheld to the BIR. The same document shall be the basis for the BIR and the BTr to record the tax collection and deposit in their respective books of accounts. 7. Notice of Cash Allocation (NCA) may be used for payment of any expense classification and for miscellaneous transactions, as follows: Personnel Services (PS) Maintenance and Other Operating Expenses (MOOE) Financial Expenses (FS) Capital Outlay(CO) 15  ACCOUNTING FOR BUDGET: Disbursement General Requirements for All Types of Disburse- ment: 1. Certificate of availability of funds issued by the Chief Accountant. 2. Existence of lawful and sufficient allotment duly obligated as certified by authorized officials (except for GOCC/GFIs). 3. Legality of transactions and conformity with laws, rules and regulations. 4. Approval of expenditure by Head of Office or his authorized representative. 5. Sufficient and relevant documents to establish va- lidity of claim. Fundamental Principles for Disbursement of Public Funds (PD 1445 Sec. 4) Government Auditing Code of the Philippines, provides that all financial transactions and operations of any government entity shall be governed by the following fundamental principles: a. No money shall be paid out of any public treasury or depository except in pursuance of an appropria- tion law or other specific statutory authority. b. Government funds or property shall be spent or used solely for public purposes. c. Trust funds shall be available and may be spent only for the specific purpose for which the trust was created or the funds received. d. Fiscal responsibility shall, to the greatest extent, be shared by all those exercising authority over the financial affairs, transactions, and operations of the government agency. e. Disbursement or disposition of government funds or property shall invariably bear the approval of the proper officials. f. Claims against government funds shall be supported with complete documentation. g. All laws and regulations applicable to financial transactions shall be faithfully adhered to. h. Generally accepted principles and practices of accounting as well as of sound management and fiscal administration shall be observed, provided that they do not contravene existing laws and regula- tions. 16 ACTIVITY 2: VENN DIAGRAM Instruction: Make a Venn Diagram comparing the accounting process of appropriation, allotment, obliga- tions and disbursements. Follow the sample format below for your reference. Rubrics is also provided. Criteria Equivalent Points Actual Points Earned Concept Arrangement: uses pictures and lines that are relevant to the concept 20 presented. Content: Reflects factual information 20 relevant to the topic Creativity : presentation, authenticity 10 TOTAL POINTS 50 WHAT IS A VENN DIAGRAM? A Venn diagram is a visual tool for brainstorming and creating a comparison between two or more objects, events, or people. 17  LESSON 3 GOVERNMENT’S BUDGET & BUDGETING CO 3  Illustrate the processes and proce- dures of the Budget Cycle. Specific Learning Objectives At the end of the lesson, you will be able to :  Explain government budgeting and public expenditure management; and  Exhibit mastery of the Budget Cycle process. ACTIVITY: TWO TEXT RESEARCH BASIC GOVERNMENT BUDGETING CONCEPTS: Choose one concept from the Vocabulary list from the left. Expound the concept from a two different sources. What is a fund? Do not forget to cite the sources of the word you have The word "fund" in government has taken research. Use the template below for your reference. several meanings or connotations. It is some- times used to refer an appropriation which is a CONCEPT: legislative authorization to spend or an allot- _______________________________________ ment which is an authorization by the Depart- ment of Budget and Management (DBM) to Text 1 : obligate, or as actual cash available. _______________________________________________ _______________________________________________ What is the "one-fund" concept? _______________________________________________ The "one-fund" concept is the policy enunciat- _______________________________________________ ed through PD 1177 which requires that all in- _______________________________________________ come and revenues of the government must _______________________________________________ accrue to the General Fund and thus can be freely allocated to fund programs and projects Source: of government as prioritized. __________________________________________ What is the planning-programming-budgeting system (PPBS)? Text 2: _______________________________________________ The planning-programming-budgeting system _______________________________________________ (PPBS) is a concept that stresses the im- _______________________________________________ portance of establishing a strong linkage be- _______________________________________________ tween planning and budgeting. It emanates _______________________________________________ from the policy of the government to formu- _______________________________________________ late and implement a national budget that is an instrument of national development, re- Source: flective of national objectives, strategies and __________________________________________ plans. 18  GOVERNMENT BUDGETING WHAT IS GOVERNMENT BUDGET: The government budget is an annual financial statement showing item wise estimates of expected revenue and anticipat- ed expenditure during a fiscal year. Just as your household budg- et is all about what you earn and spend, in the same way the gov- ernment budget is a statement of its income and expenditure. In the beginning of every year the government presents before the legislative an estimate of its receipts and expenditure for the coming financial year. It plans its expenditure according to its ob- jectives and then tries to raise the resources to meet the pro- posed expenditure. Government budget is the financial blueprint of the country’s development plan. In general, a government budget is the financial plan of a government for a given period, usually for a fiscal year, which shows what its resources are, and how they will be generated and used over the fiscal period. The budget is the government's key instrument for promoting its so- cio-economic objectives. The government budget also refers to the income, expenditures and sources of borrow- ings of the National Government (NG) that are used to achieve national objectives, strategies and programs. Section 22, Article VII of the Constitution states that: "The President shall submit to the Congress within 30 days from the opening of every regular session, as the basis of the general appropriation bill (GAB), a budget of expenditures and sources of financing includ- ing receipts from existing and proposed revenue measures." THE MAIN OBJECTIVES OF A GOVERNMENT BUDGET: 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 promotes the development of the country. Through the budget, the government can prioritize and put into action its plans, programs and poli- cies within the constraints of its financial capability as dictated by economic conditions.  Economic growth: to promote rapid and balanced economic growth so as to improve living standard of the people.  Reduction of poverty and unemployment: to eradicate mass poverty and unemployment by creating employment opportunities and providing maximum social benefits to the poor.  Reduction of inequalities: inequalities of income and wealth are reduced through levying taxes and granting subsidies.  Reallocation of resources: the reallocation of resources is neces- sary in order to achieve social and economic objectives. The gov- ernment allocate resources into areas where private initiative is absent such as public sanitation, education, health etc.  Price stability: to maintain price stability and correct business cy- cles involving depression characterized by falling output, prices and increasing unemployment.  Management of public enterprises: to manage public enterprises which are of nature of national monopolies like railways, electrici- ty etc. Source: https://www.vskills.in/certification/blog/meaning-of-government-budget-and-its- objectives/ 19  NATIONAL GOVERNMENT BUDGETING PROCESS What is government budgeting? 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 deliv- ery of goods and services while supporting a healthy fiscal position. Why is government budgeting important? 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 plants, programs and policies within the con- straints 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. Source: https://www.dbm.gov.ph/wp-content/uploads/2012/03/PGB-B2.pdf How is the annual national budget prepared? The preparation of the annual budget involves a series of steps that begins with the determination of the overall eco- nomic targets, expenditure levels, revenue projection and the financing plan by the Development Budget Coordinat- ing Committee (DBCC). The DBCC is an inter-agency body composed of the DBM Secretary as Chairman and the Bang- ko Sentral Governor, the Secretary of the Department of Finance, the Director General of the National Economic and Development Authority and a representative of the Office of the President as members. The major activities involved in the preparation of the annual national budget include the following: a. Determination of overall economic targets, expenditure levels and budget framework by the DBCC; b. Issuance by the DBM of the Budget Call which defines the budget framework; sets economic and fiscal targets; prescribe the priority thrusts and budget levels; and spells out the guidelines and procedures, technical instruc- tions and the timetable for budget preparation; c. Preparation by various government agencies of their detailed budget estimates ranking programs, projects and activities using the capital budgeting approach and submission of the same to DBM; d. Conduct a budget hearings were agencies are called to justify their proposed budgets before DBM technical pan- els; e. Submission of the proposed expenditure program of department/agencies/special for confirmation by depart- ment/agency heads. f. Presentation of the proposed budget levels of department/agencies/special purpose funds to the DBCC for ap- proval. g. Review and approval of the proposed budget by the President and the Cabinet; h. Submission by the President of proposed budget to Congress. To meet the Constitutional requirement for the submission of the President's budget with 30 days from the opening of each regular session of Congress, the budget preparation phase is guided by a budget calendar. 20  THE BUDGET CYCLE BUDGET PREPARATION PHASE This starts with the Budget Call and ends with the President’s submission of the proposed budget to Congress. BUDGET LEGISLATION PHASE: Alternatively 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. 21  THE BUDGET CYCLE: Legislation Phase How does the budget become a law? In accordance with the requirements of the Constitution, the President submits his/ her proposed annual budget in the form of Budget of Expenditure and Sources of Financing (BESF) supported by details of proposed expenditures in the form of a National Expenditure Program (NEP) and the President's Budget Message which summarizes the budget policy thrusts and priorities for the year. In Congress, the proposed budget goes first to the House of Representatives, which assigns the task of initial budget review to its Appropriation Committee. The Appropriation Committee together with the other House Sub-Committee conduct hearings on the budgets of departments/agencies and scrutinize their respective programs/projects. Consequently, the amended budget proposal is presented to the House body as the General Appropria- tions Bill. While budget hearings are on-going in the House of Representatives, the Senate Finance Com- mittee, through its different subcommittees also starts to conduct its own review and scrutiny of the pro- posed budget and proposes amendments to the House Budget Bill to the Senate body for approval. To thresh out differences and arrive at a common version of the General Appropriations Bill, the House and the Senate creates a Bicameral Conference Committee that finalizes the General Appropriations Bill. What is the General Appropriations Act? Veto and Enactment of GAA: The General Ap- The President and DBM then review the GAB propriations Act and prepare a Veto Message, where budget items (GAA) is the leg- subjected to direct veto or conditional implemen- islative authori- tation are identified, and where general observa- zation that con- tions are made. Under the Constitution, the GAB is tains the new appropriations the only legislative measure where the President in terms of spe- can impose a line-veto (in all other cases, a law is cific amounts for either approved or vetoed in full). salaries, wages and other per- Re-enactment of GAA: sonnel benefits; maintenance When the GAA is not enacted before the fiscal and other oper- year starts, the previous year’s GAA is automatical- ating expenses; ly reenacted. This means that agency budgets for and capital out- programs, activities and projects remain the same. lays authorized to be spent for the implementation of various pro- Funding for pro- grams/projects and activities of all departments, bu- grams or projects that reaus and offices of the government for a given year. have already been ter- minated is realigned GAA AS A RELASE ORDER: for other expendi- tures. Because reen- General Appropriations Act is a comprehensive actments are tedious allotment release document itself. This is being and prone to abuse, pursued in order to significantly speed-up the the Aquino Administra- tion—with the support process of releasing the Budget and implement- of Congress—has com- ing the programs and projects that it funds. mitted to ensure the timely enactment of a new GAA every year. 22  THE BUDGET CYCLE: Execution Phase How is the budget implemented? Budget implementation starts with the release of funds to the agencies. To accelerate the implementation of government pro- grams and projects and ensure the judicious use of budgeted gov- ernment funds, the government adopted the Simplified Fund Re- lease System (SFRS) beginning 1995. In contrast to the previous system of releasing funds based on in- dividual agency requests, the SFRS is a policy-driven system which standardized the release of funds across agencies which are simi- larly situated in line with specific policy initiatives of the govern- ment. Following the SFRS, the agency budget matrix (ABM) is prepared by the DBM in consultation with the agencies at the beginning of each budget year, upon approval of the annual General Appropria- tions Act. The ABM is a disaggregation of all the programmed appropriations for each agency into various expenditure categories. As such, the ABM serves as a blueprint which provides the basis for determining the timing, composition and magnitude of the release of the budget. Based on updated resources and economic development thrusts and consistent with the cash budget pro- gram, the Allotment Release Program (ARP) which prescribes the guidelines in the prioritization of fund releases is prepared. The ARP serves as basis for the issuance of either a General Allotment Release Order (GARO) or a Special Allotment Release Order (SARO), as the case maybe, to authorize agencies to incur obligations. Subsequently, the DBM releases the Notice of Cash Allocation (NCA) on a monthly or quarterly basis. The NCA specifies the maximum amount of withdrawal that an agency can make from a government bank for the period indicated. The Bureau of the Treasury (BTr), replenishes daily the government servicing banks with funds equivalent to the amount of negotiated checks presented to the government servicing banks by implementing agencies. The release of NCAs by the DBM is based on: 1) the financial requirements of agencies as indicated in their ABMs, cash plans and reports such as the Summary List of Checks Issued (SLCI); and 2) the cash budget Why are adjustments made on the budget program? Adjustments are made on the budget even during implementation primarily because of the following:  Enactment of new laws - Within the fiscal year, new legislations with corresponding identified new rev- enue sources are passed which necessitate adjustments in the budget program.  Adjustments in macroeconomic parameters - The macroeconomic targets considered in the budget are periodically reviewed and updated to reflect the impact of recent developments in the projected per- formance of the national economy and on the set fiscal program for the year. The relevant indicators affecting the budget aggregates include the following: the Gross National Product (GNP), inflation rate, interest rate, foreign exchange rate, oil prices, and the level of imports. Thus, a sensitivity measure on the impact of these parameters on the budget will determine whether recent macroeconomic develop- ments have a negative or favorable effect on the budget.  Change in resources availabilities - Budget adjustments are undertaken when additional resources be- comes available such as new grants, proceeds from newly negotiated loans and grants. Corresponding budget adjustments are also made when resources generation falls below the target. 23  THE BUDGET CYCLE: Accountability Phase 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. Purposes of Budget Accountability:  Performance and Target Outcomes: Agencies are held accountable not only for how these public funds use ethically, but also on how these attain performance targets and out- comes using available resources.  Budget Accountability Reports (BARS): Submitted by agencies on a monthly and quarterly basis, BARs are re- quired reports that show how agencies used their funds and identify their corresponding physical accomplishments.  “NO REPORT, NO RELEASE POLICY” Starting 2012, the DBM will be withholding certain fund releases to agen- cies if these fail to submit their Budget Accountability Reports. In particu- lar, 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.  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 tar- gets as identified via OPIF and in the agencies’ BEDs. Agency Performance Reviews (APRs) are conducted quarterly or every semester, as the case may be.  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. What mechanism ensure that funds have been properly allocated and spent? Cognizant of the fact that no propitious results can be obtained, even with maximum funding, if agency efficiency is low and funds are wastefully spent, systems and procedures are set in place to monitor and evaluate the performance and cost effectiveness of agencies. These activities are subsumed within the fourth and the last phase of the budget process-the budget accountability phase. At the agency level, budget accountability takes the form of management's re- view of actual performance or work accomplishment in relation to the work targets of the agency vis-à-vis the financial resources made available. Also, detailed examinations of each agency's book of accounts are undertaken by a resident representative of the Commission on Audit (COA) to ensure that all expenses have been disbursed in accordance with accounting regulations 24 ACTIVITY 3: INFOGRAPHIC Make an infographic of the Government Budgeting process emphasizing the Budget Cycle. Refer to the rubrics, sample and guide below for your reference. RUBRICS: Criteria Equivalent Points Actual Points Earned Concept Arrangement: uses pictures and lines that are relevant to the concept 20 presented. Content: Reflects factual information 20 relevant to the topic Creativity : presentation, authenticity 10 TOTAL POINTS 50 HOW TO MAKE AN INFOGRAPHIC: INFOGRAPHIC SAMPLE: 1. Outline your goals for creating your infographic. 2. Collect data for your infographic. 3. Make data visualizations for your infographic. 4. Create your layout using an infographic template. 5. Add style to your infographic de- sign to make it stand out. Source: https://spark.adobe.com/ make/infographic-maker/ 25  ACCOUNTABILITY OVER GOVERNMENT LESSON 4 FUNDS AND RESURCES CO 4  Develop an Action Plan to address is- sues in Public Accounting and Budget- ing in the local government context. Specific Learning Objectives: At the end of the lesson, you will be able to :  Identify accountability over government funds and property;  Assess the responsibility over government funds and property; and  Examine the liability over Government Funds and Property.  Present an Action Plan addressing issues in public accounting and budgeting. Responsibility accounting involves the inter- nal accounting and budgeting for each responsibility center within a company. Responsibility is the obligation of an individual to perform the duty or task assigned to him. In ethics and governance, accountability is answera- bility, blameworthiness, liability, and the expecta- A responsibility is something you are expected to tion of account-giving. In governance, accountabil- do. Being responsible means doing the things you ity has expanded beyond the basic definition of are supposed to do. "being called to account for one's actions". Accepting responsibility Budgetary accountability is the linkage between is taking the praise or the numbers in an approved budget and the manag- the blame for something ers who are responsible for ensuring that you have done. the budget is achieved. Liability refers to the state of being responsible for something, and this term can refer to any money or service owed to another party. Liabilities are settled over time through the transfer of economic benefits including money, goods, or services. 26  Source: https://www.internationalbudget.org/2018/03/cartooning-for-change/ ACTIVITY: PICTURE ANALYSIS Instruction: Analyse the picture presented above following the guide questions below:  Looks like (what is depicted in the picture? ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________  Sounds like (why it is happening?) ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________  Feels like (how can you be of help on the issue in the picture? ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ 27  FUNDAMENTAL PRINCIPLES OVER GOVERNMENT FUNDS AND PROPERTY FUNDAMENTAL PRINCIPLES OVER GOVERNMENT FUNDS AND PROPERTY (PD1445) Financial transactions and operations of any government agency shall be governed by the fundamental principles set forth hereunder, to wit: 1. No money shall be paid out of any public treasury of depository except in pursu- ance of an appropriation law or other specific statutory authority. 2. Government funds or proper- ty shall be spent or used solely for public purposes. 3. Trust funds shall be available and may be spent only for the specific purpose for which the trust was created or the funds received. 4. Fiscal responsibility shall, to the greatest extent, be shared by all those exercising authority over the financial affairs, trans- actions, and operations of the government agency. 5. Disbursements or disposition of government funds or property shall invariably bear the ap- proval of the proper officials. 6. Claims against government funds shall be sup- ported with complete documentation. 7. All laws and regulations applicable to financial transactions shall be faithfully adhered to. 8. Generally accepted principles and practices of accounting as well as of sound management and fiscal administration shall be observed, provided that they do not contravene existing laws and regulations. 28  ACCOUNTABILITY & RESPONSIBILITY OVER GOVERNMENT FUNDS AND PROPERTY Responsibility over Government Funds and Proper- ty 1. All government resources must be managed, ex- pended or utilized in accordance with law and safeguarded against loss or wastage through ille- gal and improper disposition to ensure efficiency, economy and effectiveness in the government operations. 2. Fiscal responsibility shall be shared by all those exercising authority over the financial, affairs, transactions and operations of the government agency. 3. The head of any agency of the government is im- mediately and primarily responsible for all gov- ernment funds and property pertaining to his agency. Accountability over Government Funds and Property 1. Every officer of any government agency whose duties permit or require the posses- sion or custody of government funds or property shall be accountable therefor and for the safekeeping thereof in conformity with law. 2. Transfer of government funds from one officer to another shall, except as allowed by law or regulation, be made only upon prior direction or authorization of the Commis- sion or its representative. 3. When government funds or property are transferred from one AO to another, or from an outgoing officer to his successor, it shall be done upon properly itemized invoice and receipt which shall invariably support the clearance to be issued to the relieved or out- going officer, subject to regulations of the Commission. 29  LIABILITY OVER GOVERNMENT FUNDS AND PROPERTY Liability over Government Funds and Property 1. Expenditures of government funds or uses of government property in violation of law or regulations shall be a personal liability of the official or employee found to be directly re- sponsible therefor. 2. Every officer accountable for gov- ernment funds shall be liable for all losses resulting from the unlawful deposit, use, or application thereof and for all losses attributable to neg- ligence in the keeping of the funds. 3. No AO shall be relieved from liability by reason of his having acted under the direction of a superior officer in paying out, applying, or disposing of the funds or property with which he is chargeable, unless prior to that act, he notified the superior officer in writing of the illegality of the payment, application, or disposition. 4. When a loss of government funds or property occurs while they are in transit or the loss is caused by fire, theft, or other casualty or force majeure, the officer accountable therefor or having custody thereof shall immediately notify the Commission or the auditor concerned and, within 30 days or such longer period as the Commission or auditor may in the particular case allow, shall present his application for relief, with the available supporting evidence. Whenever warranted by the evidence, credit for the loss shall be allowed. An officer who fails to comply with this requirement shall not be relieved of liability or allowed credit for any loss in the settlement of his accounts. DUTIES AND RESPONSIBILTIES OF PUBLIC OFFICIALS AND EMPLOYEES (RA 6713)  Submit annual performance reports. — All heads or other responsible officers of offices and agencies of the government and of government-owned or controlled corporations shall, within forty-five (45) working days from the end of the year, render a performance report of the agency or office or corporation concerned. Such report shall be open and available to the public within regular office hours. 30 MAIN TASK: POSITION PAPER Instruction: Identify one program/project in your LGU (own barangay) and assess how it has been implemented based on the principles of responsibility, accountability and liability over government funds and property. Develop then a Position Paper based on your identified issue. Follow the template provided below on Writing a Position Paper. Rubrics also is provided. RUBRICS: Mechanics: Criteria: Point to Earned Total Points  5-10 Pages only  Use Candara Font Content 20 style # 12  Margin: left 1.5 Organization 20 right 1.0  Short Bond paper Grammar/Fluency 5 Supporting Documents 5 Total What is a Position Parts of Position Paper: Paper? 1. Introduction Begin with a few opening sentences that cap- A Position Paper is written after reading about ture their attention. Most importantly, the and discussing a particular issue. The readings introduction paragraph should inform your cover more than one issue, and as a writer you reader about the issue you have identified. must choose a particular area of focus. The cen- 2. Body tral goal of writing a position paper is not only to state and defend your position on the issue but The body of a position paper has three parts: also to show how your stance relates to other background information, evidence to support positions. your opinion, and a discussion of both sides of How do I write a good position paper? the matter. You need to conduct thorough research and have enough facts to back up 1. Pick an issue/concern related to topic on your claims. Lesson 4. 2. Conduct a preliminary research on the is- 3. Conclusion sue. A good conclusion provides a summary of 3. Develop a strong argument on the issue your key points and lets the reader know with legal basis (based on mandate of the where you stand. You can restate your thesis law). at the beginning of the conclusion, then go on 4. Write with clarity and integrity. to summarise the key points. Your stand must always come out clearly before you wrap up. Source: https://writemypaper4me.org/blog/position- paper-sample 31