THE BUDGET

ROBERTO A. BIATO, MPA

Jail Chief Inspector
Deputy Chief, FSO-NHQ
 Lesson Goal

The lesson aims to provide the participants

with an understanding of the budget process
of the Philippines, particularly National
Government Agencies (NGAs) of the
Executive department like the Bureau of Jail
Management and Penology (BJMP).
 Lesson Objectives
1. Familiarize on the common terms used in Government
Budgeting;
2. Define and explain Government Budget and
Government Budgeting;
3. Explain how the budget becomes a law;
4. Discuss the four (4) Phases of the National Budget
Process;
5. Explain the importance of the National Budget; and
6. Differentiate Cash Based vs. Obligation Based budget.
 IMPORTANT TERMS

1. Appropriation – An authorization pursuant to

law or other legislative enactment directing the
spending of public funds for a specific purpose,
up to a specified amount under specified
conditions.
a) General Appropriation – An authorization for
incurring obligations during a specified budget
year.

b) Automatic Appropriation - One-time legislative

authorization to provide funds for a specified
purpose, for which the amount may or may not be
fixed by law, and is made automatically available.
It does not require periodic Congressional action.
(debt servicing, retirement and insurance
premiums)
c) Unprogrammed Appropriations – Appropriations
under the annual GAA which provide standby
authority to incur additional agency obligations for
priority programs or projects when revenue
collections exceed targets, or when additional foreign
funds are generated.

d) Supplemental Appropriations – Additional

appropriation authorized by law to augment the
original appropriations which proved to be
inadequate or insufficient for the particular purpose
intended due to current economic, political or social
conditions.
 IMPORTANT TERMS

2. Allotment – Authorization issued by the

Department of Budget and Management
(DBM) to an agency to incur obligation and/or
pay out funds within a specified period of time
within the amount specified through the:
a) General Appropriations Act as an
Allotment Order (GAAAO) (starting FY
2017), for specific appropriation items
deemed released upon effectivity of the
GAA;
b)General Allotment Release Order (GARO)
for the full year requirement for the
automatically appropriated Retirement and
Life Insurance Premium (RLIP)
contributions; and
c) Special Allotment Release Order (SARO)
for budget items requiring compliance with
certain conditions.
 IMPORTANT TERMS
3. Obligations – A commitment by a
government agency arising from an act of a duly
authorized official which binds the government
to the immediate or eventual payment of a sum
of money.
The agency is authorized to incur obligations
only in the performance of activities which are in
pursuit of its functions and programs authorized
in appropriations acts/laws within the limit of the
allotment released by the DBM.
 IMPORTANT TERMS
4. Obligational Authority – Document issued
to an agency authorizing the agency to incur
obligations or enter into a contract. These
documents include the following:

a) GAA-as-Allotment-Order (GAAAO)
Serves as an authority wherein appropriations
in the GAA are considered released, excluding
those identified in the pertinent issuance as
“For Later Release”.
b) General Allotment Release Order
(GARO).
A comprehensive authority issued to all
national government agencies, in general, to
incur obligations, i.e. Retirement and Life
Insurance Premium (RLIP), except RLIP for
the departments/agencies chargeable against
Special Accounts in the General Funds
(SAGFs) and those covered by special
arrangements.
c) Special Allotment Release Order (SARO)
A specific authority issued by DBM to identified
agencies to incur obligations not exceeding a
given amount during a specified period for the
purpose indicated. It shall cover expenditures
the release of which is subject to compliance
with specific laws or regulations, or is subject
to separate approval or clearance by
competent authority.
 IMPORTANT TERMS
5. DISBURSEMENT– Refers to the settlement/
liquidation/ payment of an obligation incurred in the
current or prior years, involving cash or non-cash
transactions and covered by disbursement authorities.
• Disbursements constitute all cash paid out during a
given period either in currency (cash) or by check. It
may also mean the settlement of government
payables/obligations by cash or by check. It shall be
covered by Disbursement Voucher (DV)/Petty Cash
Voucher (PVC) or payroll. (Sec. 27, Vol. 1, NGAS
Manual)
 IMPORTANT TERMS
 
6. Disbursement System – involves the
preparation and processing of disbursement
voucher (DV); preparation and issuance of
check; payment by cash; granting, utilization,
and liquidation/replenishment of cash
advances. 
 IMPORTANT TERMS

7. Expense Class – refers to the general

classification of expenditures, specifically
based on economic classification or the
process/inputs involved in the government’s
fulfillment of its responsibilities, including but
not limited to the delivery of goods/services.
These are:
1. Personnel Services (PS),
2. Maintenance and Other Operating
Expenses (MOOE),
3. Financial Expenses (FinEx),
4. Capital Outlays (CO) and
5. Net Lending (NL).
 IMPORTANT TERMS

8. Personnel Services (PS)- refers to an

expenditure category/expense class for the
payment of salary allowances and other
remunerations of government employees.
 IMPORTANT TERMS

9. Maintenance and Other Operating

Expenses (MOOE) – refers to an expenditure
category/expense class for support to the
operations of government agencies such as
expenses for supplies and materials;
transportation and travel; utilities (water, power,
etc.) and the repairs, etc.
 IMPORTANT TERMS

10. Capital Outlays or Capital Expenditures –

refers to an expenditure category/expense class
for the purchase of goods and services, the
benefits of which extend beyond the fiscal year
and which add to the assets of the Government,
including investments in the capital stock of
GOCCs and their subsidiaries.
NATIONAL GOVERNMENT BUDGET
(BUDGET)

• Financial plan of the government for a specific

period, usually one year beginning January
until December of every year.
• Generally shows the sources of funds, when it
is available, and how it will be utilized.
 GOVERNMENT BUDGETING

Is the critical exercise of allocating revenues

and borrowed funds to attain the economic and
social goals of the country.
 IMPORTANCE OF GOV’T
BUDGETING

It enables the government to plan and

manage its financial resources to support the
implementation of programs and projects that
best promote the development of the country
RA 11464
4.1 TRILLION
 GOVERNING LAW
• Article VI, Section 29 of the Philippine Constitution

“No money shall be paid by the

Treasury except in pursuance of an
appropriation made by law.”
WHY DO WE NEED TO LEGISLATE A
BUDGET EVERY YEAR?
• Article VII, Section 22 of the Constitution:
“The President shall submit to the Congress
within 30 Days from the opening of every
regular session, as a basis of the General
Appropriation Bill (GAB), a budget of
expenditures and sources of financing
including receipts from existing and
proposed revenue measures”
• 4th Monday of July
 Budget Process
4 Phases
PREPARATION

AUTHORIZATION
ACCOUNTABILITY
LEGISLATION

EXECUTION
IMPLEMENTATIO
N
 BUDGET PREPARATION

1. Determination of the overall economic

targets, expenditure levels, and budget
framework by the DBCC;
2. Issuance by the DBM of the Budget Call;
3. Preparation and submission of proposed
budget by various government agancies;
4. Conduct of technical budget hearings;
 BUDGET PREPARATION

5. Presentation of the consolidated budget

proposals to the DBCC;
6. Review and approval of the proposed
budget by the President;
7. Submission of the National Expenditure
Program to Congress.
 BUDGET
AUTHORIZATION/LEGISLATION

“No money shall be paid out of the Treasury

except in pursuance of an appropriation made by
law”

Article VI,Section 29 (1), Philippine Constitution

 BUDGET
AUTHORIZATION/LEGISLATION

• Both Houses of Congress conducts review

to the propose budget.
• Bicameral Conference Committee
harmonizes the 2 versions.
• Presentation to and signing of the General
Appropriations Bill by the President.
• Publication of the General Appropriations
Act.
 BUDGET
EXECUTION/IMPLEMENTATION
DEPT. OF BUDGET IMPLEMENTING BUREAU OF THE
& MGT. AGENCY TREASURY

Implements Programs, Transfers funds to

Releases obligational Projects and Activities governemnt servicing
authority (GARO/SARO) (PAPs) banks

Pays obligations
Issues disbursement incurred (salary of
authority (Notice of personnel, suppliers of
Cash Allocation) goods and services
rendered)
 BUDGET ACCOUNTABILITY
IMPLEMENTING COMMISION ON GENERAL
AGENCY AUDIT PUBLIC

Inspection and Evaluation of

monitoring of Report misdeeds
accountable officers in submitted observed
accountability reports
the field

Management reviews Inspection of projects

Submission of
accountability reports
Annual Cash-Based Appropriation
/ Cash-Based Budgeting
a) Shifting to a one-year implementation horizon
b) Limits incurring obligations, goods delivered
and services rendered and inspected, within
the fiscal year.
c) Payments of these obligations should be
settled within the fiscal year.
 Obligation-based vs. Cash-based
■ When can goods and services be delivered and rendered?

Obligation-based Appropriations – 24 months & beyond

Jan 1 FY Dec 31 / Jan 1 FY + 1 Dec 31

 In an obligation-based budget, contracts awarded before the end
of the FY can be delivered even after the FY; government has a
running balance of not-yet-due-and-demandable obligations
(NYDDO)

Cash-based Appropriations – 12 months

Jan 1
FY Dec 31

■ In a cash-based budget, 12-month contracts should be fully delivered

by the end of the FY.
 Obligation-based vs. Cash-based
■ When can obligations be paid?

Obligation-based Appropriations – 24 months & beyond

FY FY + 1
Jan 1 Dec 31 / Jan 1 Dec 31
 In an obligation-based budget, inspection, verification, and
payment can be done even after the FY; government has a
running balance of due-and-demandable accounts payables
(DDAP)

Cash-based Appropriations – 15 months

Extended
Payment Period
FY (EPP)
Jan 1 Dec 31 Mar 31

■ In a cash-based budget, payment can only be done within a 15-month

period; contracts delivered at the end of the FY can be paid during the 3-
month EPP
Important Points to Remember in the
Cash-Based Budgeting
• THE BUDGET CYCLE (Preparation, Legislation,
Execution and Accountability) overlap in a continuing
cycle.
• While the Executive implements the Budget for the
current year, it also prepares the Budget for the next
fiscal year or defends it before Congress.
• At the same time, the government monitors,
evaluates, and reports on actual performance year-
round.
 BUDGET EXECUTION
1. Budget Program
October to December 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.
 BUDGET EXECUTION
2. Early Procurement Activities
October to December 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 EXECUTION
3. Allotment Release
January (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 serves as the allotment release for all
budget items except those contained in a negative
list that are issued the Special Allotment Release
Orders (SAROs) after agencies comply with the
documentary requirements.
 BUDGET EXECUTION
4. Obligation
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.
 BUDGET EXECUTION
5. Cash Allocation
January (Comprehensive) and 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.
 BUDGET EXECUTION
6. Disbursement
Throughout FY
• Monies are paid out from the Treasury to settle
obligations that government incurred for the delivery of
services to citizens.
• To ease the payments process, the DBM introduced
checkless and cashless disbursement schemes.
• The DoF-BTr (Department of Finance and Bureau of
the Treasury) also implemented the TSA (Treasury
Single Account) to improve the management of the
government’s cash resources.
BUDGET REVIEW/ACCOUNTABILITY
1. Performance Targets
January 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
(“Budget Program” under Budget Execution), which
effectively serve as the agencies’ plans for the year.
BUDGET REVIEW/ACCOUNTABILITY
2. Monitoring and Evaluation
January of 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.
BUDGET REVIEW/ACCOUNTABILITY
3. Agencies’ Accountability Reports
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.
BUDGET REVIEW/ACCOUNTABILITY
4. Performance Review
Throughout FY
• The agency and DBM reviews the financial
and physical performance of agencies against
their targets.
• Review mechanisms include he conduct of
PRA and the ZBB (Zero-Based Budgeting), to
evaluate the efficiency and effectiveness of
programs.
• 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.
BUDGET REVIEW/ACCOUNTABILITY
5. In -Year Reports
Monthly and Quarterly
• The DoF and the DBM regularly publish
snapshots of the government’s fiscal
performance, revenue collections, debt, and
expenditures.
BUDGET REVIEW/ACCOUNTABILITY
6. DBCC Mid-Year Report
By September 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.
BUDGET REVIEW/ACCOUNTABILITY
7. DBCC Year-End Report
Within the Following FY
• 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.
BUDGET REVIEW/ACCOUNTABILITY
8. Audit
Within the Following FY
• 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.
BUDGET REVIEW/ACCOUNTABILITY
9. 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
(Budget Partnership Agreement), BUB
(Bottom-Up Budgeting), and other
mechanisms.
 In addition, CSOs participate in the audit
process through the COA’s Citizens’
Participatory Audit.
Salary of New Jail Inspectors
Salary Matrix of the BJMP
 Questions,
Clarifications and Reactions
 Summary
L.O.1 Enumerate and discuss the common terms used in
Government Budgeting
L.O.2 Define and explain Government Budget and
Government Budgeting.
L.O.3 Explain how the budget becomes a law.
L.O.4 Discuss the 4 phases of national budget
process.
L.O.5 Explain the importance of the national budget.
L.O.6 Differentiate Cash-based vs. Obligation-based
budget.
THANK YOU