Accounting for Budgeting Accounts

Section 29 (1), Article VI of the Constitution provides, “No money shall be paid out of the Treasury except in
pursuance of an appropriation by law.”
Accordingly, it may be said that accounting for budgetary accounts formally commences upon
enactment of the General Appropriations Act (GAA), which contains the legal authorization to use public
money for the various programs, activities and projects of the national government. The approved
appropriations are, in turn, the bases of the Department of Budget and Management (DBM) for issuing
allotments or the authority of government agencies to incur obligations or enter into commitments to spend
government funds. The level of allotments, on the other hand, defines the amount of cash allocations which
shall be released by the DBM.

Accounting Systems
The General Accounting Plan (GAP) shows the overall accounting system of a government agency/unit. It
includes the source documents, the flow of transactions and its accumulation in the books of accounts and
finally the conversion into financial information/data presented in the financial reports. The following
accounting systems are:
1. Budgetary Accounts System
2. Receipt/Income and Deposit System
3. Disbursement System
4. Financial Reporting System

Budgetary Accounting System

Accounting for Nation Budget Circular (NBC) no. 561- The allotment release program ( ARP) shall serve as the
ceiling for the aggregate allotment releases during the year from all sources.
 New Appropriations- such as agency specific budget and allocation, additional releases from
Special Purpose Funds (SPFs)
 Automatic appropriatons- such as for Retirement and life Insurance Premiums. Special
accounts in the General Fund (SAGFs), and other names classified in such
 Continuing Appropriations- allottments chargable against unreleased appropriations for
MOOE and Co
Budgetary Accounts- A method of accounting in which the planned amounts and actual amounts spent and
received are both included in the accounts, so that you can see at any time how much of the planned amount
remains
 Budgetary accounts consist of the ff:
1. Appropriation- an authorized made by law or other legislative reactment,
directing payments of goods and services out of government funds under specific
conditions or for special purpose.
2. Allotment- an authorization issued by the Department of Budget and
Management to the government agency, which allows it to incur obligations, form
specificied amount, within the legislative appropriation.
3. Obligation – a commitment by the government agency arising from the act of
duty authorized official which binds the government to the immediate or eventual
payment of a sum of money.

The National Budget- The National (Government) Budget is a plan for financing the government activities for
a fiscal year prepared and submitted by responsible executive to a representative body whose approval and
authorization are necessary before the plan can be executed.

Fundamental Principles of Fiscal Operations

Budget activities are governed by legal provisions/fundamental principle relating to financial transactions and
operations of the government. The principles, as provided for by the law, are:
1. No money shall be paid out of the public treasury or depository except in pursuance of an
appropriation law or other specific statutory authority;
2. Government funds or property 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;
4. Fiscal responsibility shall, to he greatest extent, be shared by all those exercising authority over the
financial affairs, transactions, and operations of the government agency;
5. Disbursements or disposition of government funds or property shall invariably bear the approval of
the proper officials;
6. Claims against government funds shall be supported with complete documentation;
7. All laws and regulations applicable to financial transaction shall be faithfully adhered to; and
8. Generally accepted principles and practices of accounting, as well as, of sound management and
fiscal administration shall be observed, provided they do not contravene existing laws and
regulations.
Form and Content
Section 22, Article VII of the Constitution of the Philippines provides that “The President of the Philippines
shall submit to Congress within 30 days from opening of every regular session, as the basis of the general
appropriation bill, a budget of expenditures and sources of financing, including receipts from existing and
proposed revenue measures.”

Form and Content as may be approved by the President and may include the following:

1. A budget message setting forth in brief the government’s budgetary thrust for the budget year
2. Summary financial statements setting forth:
A. Estimated expenditures and proposed appropriation necessary for the support of the
government for the ensuing fiscal year, including those financed from operating
revenues and from domestic and foreign borrowings;
B. Estimated receipts during the ensuing fiscal year under the laws existing at the time
the budget is transmitted and under the revenue proposals, if any, forming part of the year’s financing
program;
C. Actual appropriations, expenditures and receipts during the last completed fiscal year;
D. Estimated expenditures and receipts and actual or proposed appropriations during the
fiscal year in progress;
E. Statements of the condition of the National Treasury at the end of the last completed
fiscal year, the estimated condition of the Treasury at the end of ensuing fiscal year.

Kinds of Budget:
1. As to Nature
a. Annual Budget- a budget which covers a period of one year. It is the basis of an annual
appropriation.
b. Supplemental Budget- a budget which supplement or adjust a previous budget which is deemed
inadequate for the purpose it is intended. It is the basis for a supplemental appropriation.
c. Special Budget- a budget of special nature and generally submitted in special forms on account that
itemizations are not adequately provided in the Appropriation act or that the amounts are not at all included in
the Appropriation Act.
2. As to Basis
a. Performance Budget- a budget emphasizing the program or services conducted and based on
functions, activities, and projects, which focus attention upon the general character and nature of work to be
done, or upon the services to be rendered.
 b. Line-Item Budget- a budget the basis of which is the objects of expenditures such as: salaries and
wages, traveling expenses, freight, supplies and materials, equipment, etc.
3. As to Approach and Technique
a. Zero-Based Budgeting - a process which requires ssystematic consideration of all programs, projects
and activities with the use of define ranking procedures. In this approach, activities are analyzed and presented
in “decision packages” or key budgetary inclusions.
b.Incremental Approach - a budget where only additional requirements need justifications. It focuses
analysis of incremental changes in the budget and maybe done within the context of performance and program
budgeting.

Types of Budget:
Balance Budget- it is a budget where the proposed expenditures are equal to or less than the estimated
revenues. Currently, the government is operating with a budget deficiency. As such, it is serving government
priorities to achieve a balanced budget by increasing revenues and cutting on expenditures.
Performance-Informed Budgeting (PIB)- it is a budgeting approach that uses performance information to
assist in deciding where the funds will go. Performance information, both financial and non-financial
information, is presented in the appropriations document, which provides the contextfor the programs, activities
and projects pursued by the different agencies of government. Performance information typically includes the
following:
1. The purpose for the funds required
2. The outputs that would be produced or the services that would be rendered.
3. The outcomes that would be achieved by the outputs and/or services.
4. The cost of the programs and activities proposed to achieve the objectives

The Budget Cycle

1. Budget Preparation
This covers eatimation of government revenues, the determination of budgetary priorities and activities
within the constraints imposed by available revenues and by borrowing limits, and the translation of approved
priorities into expenditure levels.
A. The Budget Call
It contains budget parameters as set beforehand by the Development Budget Coordination Committee
(DBCC); and policy guidelines and procedures in the preparation and submission of agency budget proposals.
To ensure that the National Budget is enacted on time, the DBM, under the Aquino Administration, established
a new tradition of beginning the budget preparation phase earlier. Under the new Budget Preparation Calendar,
the budget call is issued in December, unlike in the past it was issued in April; and the submission of the
President's Budget a day after the State of the Nation Address, in contrast to earlier practice where it is
submitted to Congress within 30 days from the opening of every regular session.
B. Stakeholder Engagement
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 proposals.
Bottom Up Budgeting
This Bottom Up Budgeting will focus on rural development programs and the conditional cash transfer
program of the poorest municipalities, and will involve DA, DAR, DENR, DSWD. DepEd, DOH.
These agencies will then include the community plans in their proposed budget.

C. Technical Budget Hearings

After submitting their respective Agency Budget Proposals to the DBM, government agencies will
defend their proposed budgets before the technical panel of DBM, which will review the agency proposals and
prepare recommendations based on performance indicators on output targets and absorptive capacity.

D. Executive Review
The recommendations are presented before an Executive Review Board composed of the DBM
Secretary and senior officials.
Deliberations entail a careful prioritization of programs and corresponding support, vis-à-vis the priority
agenda of the national government.

E. Consolidation, Validation, and Confirmation

The DBM then consolidates the recommended agency budgets and recommendations into a National
Expenditure Program and a Budget of Expenditures and Sources of Financing (BESF).

F. Presentation to the President and Cabinet

The proposed budget is presented by DBM, together with the Development Budget Coordination
Committee (DBCC), to the President and Cabinet for further refinements or reprioritization.
G. The President's Budget
The budget preparation phase ends with the submission of the proposed National budget- the
"President's Budget"- to Congress.
2. Budget Legislation
It is the second phase of the budget process relative to the enactment of the general Appropriation Bill
(GAB) based on the budget receipts and expenditures submitted by the president.
A. House Deliberations
The House of Representatives, in plenary, assigns the President's Budget to the House Appropriations
Committee, which conduct hearing and scrutinize their respective programs and projects. If then crafts the
General Appropriation Bill (GAB).

B. Senate Deliberations
As in the House process, the Senate conducts its own committee hearings and plenary deliberations on
the GAB. Budget deliberations in the Senate formally start after the House of Representative transmit the GAB.
C. Bicameral Deliberations
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.
D. Ratification and Enrollment
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.
E. Veto Message
The President and DBM then review the GAB and prepare a Veto Message, where budget items
subjected to direct veto or conditional implementation are identified, and where general observations are made.
F. Enactment
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 that have already been
terminated is realigned for other expenditures.

3. Budget Execution and Operation

This is where the people’s money is actually spent. As soon as the GAA is enacted, the government can
implement its priority programs and projects.

A. Release Guidelines and Programs

The budget execution phase begins with DBM’s issuance of guidelines on the release and utilization of funds.
B. Budget Execution Reports (BEDs)
Agencies are required to submit their BEDs at the start of budget execution. These documents outline agency
plans and performance targets. These BEDs include the physical and financial plan, monthly cash program,
estimate of monthly income, and list of obligations that are not yet due and demandable.
C. Allotment and Cash Release Program
To ensure that releases fit the approved Fiscal Program, the DBM prepares an Allotment Release Program
(ARP) to set a limit for allotments issued to an agency and on the aggregate. • The ARP of each agency
corresponds to the total amount of the agency- specific budget under the GAA, as well as Automatic
Appropriations. A Cash Release Program (CRP) is also formulated alongside that to set a guide for
disbursement levels for the year and for every month.
D. Allotment Release
Allotments, which authorize an agency to enter into an obligation, are either released by DBM to all agencies
comprehensively through the Agency Budget Matrix (ABM) and individually via Special Allotment Release
Orders (SAROs).
E. Incurring Obligation
In implementing programs, activities and projects, agencies incur liabilities on behalf of the government.
Obligations are liabilities legally incurred, which the government will pay for. There are various ways that an
agency “obligates:” for example, when it hires staff (an obligation to pay salaries), receives billings for the use
of utilities, or enters into a contract with an entity for the supply of goods or services.
F. Cash Allocation
To authorize an agency to pay the obligations it incurs, DBM issues a disbursement authority. Most of the time,
it takes the form of a Notice of Cash Allocation (NCA); and in special cases, the Non-Cash Availment
Authority (NCAA) and Cash Disbursement Ceiling (CDC).
G. Disbursement
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.

4. Budget Accountability
The budget process, of course, does not end when government agencies spend public funds: each and
every peso must be accounted for to ensure that is used properly, contributing to the achievement of socio-
economic goals.
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.
 A. Performance and Target Outcomes
Agencies are held accountable not only for how these use public funds ethically, but also on how these attain
performance targets and outcomes using available resources. These performance measures are set alongside the
preparation of the National Budget; and these are indicated in the OPIF Book of Outputs. Prior to the execution
of the enacted National Budget, these performance targets are firmed up during the preparation of BEDs.
B. Budget Accountability Reports (BARs)
Submitted by agencies on a monthly and quarterly basis, BARs are required reports that show how agencies
used their funds and identify their corresponding physical accomplishments. These include quarterly physical
and financial reports of operations; quarterly income reports, a monthly statement of allotments, obligations and
balances; and monthly report of disbursements.
C. 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 targets as identified
via OPIF and in the agencies’ BEDs. Agency Performance Reviews (APRs) are conducted quarterly or every
semester, as the case may be. An annual Budget Performance Assessment Review (BPAR) is conducted to
determine each agency’s accomplishments and performance by the year-end. The DBM regularly reports results
to the President.
D. 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.
E. Performance-Based Incentive System
The Department of Budget and Management (DBM) implemented a performance-based incentive system —
which will recognize and reward good performance among government employees — to help improve the
efficiency of service delivery across all government institutions.

Fund Release Doicuments

1. Obligational Authority or Allotment – the following are the documents which authorize the entity to incur
obligations:
a) General Appropriation Act Release Document (GAARD)
-This will abolish the lengthy process of releasing allotments to departments and agencies;
thereby, enhancing the operational efficiency of all agencies across the bureaucracy. Allowing the DBM
to speed up government disbursements and fast track the implementation of programs and projects set
for a year.
 b) Special Allotment Release Order (SARO)
-This covers budgetary items under For Later Release (FLR) (negative list) in the entity
submitted Budget Execution Documents/Clearances.
c) General allotment Release Order (GARO)
-This is a comprehensive authority issued to all national government agencies, in general, to
incur obligations not exceeding an authorized therein. It covers automatically appropriated expenditures
common to most, if not all, agencies without the need of special clearance or approval from the
competent authority.
2. Disbursement Authority – the following documents authorize the entity to pay obligations and payables:
a) Notice of Cash Allocation (NCA)
-This is the authority issued by the DBM to central, regional, and provincial offices and
operating units to pay operating expenses, purchases of supply and materials, acquisition of PPE,
accounts payable, and other authorized disbursements through the issue of Modified Disbursements
System (MDS) checks, Authority to Debit Account (ADA) or other modes of disbursements.
b) Non-Cash Availment Authority (NCAA)
-This is the authority issued by DBM to agencies to cover the liquidation of their actual
obligations incurred against available allotments for availment of proceeds from loans/grants through
supplier’s credit/constructive cash.

c) Cash Disbursements Ceiling

-This is the authority issued by the DBM to the Department of Foreign Affairs (DFA) and
Department of Labor and Employment (DOLE)to utilize their income collected/retained by their Foreign
Service Posts (FSPs) to cover their operating requirements, nut not to exceed the released allotment to
the said post.
d) Notice of Transfer of Allocation (NTA)
-This is the authority issued by the central office to its regional and operating units to pay their
operating expenses, purchases of supplies and materials, acquisition of ppe, accounts payable, and other
authorized disbursements through the issue of mds checks, ADA or other modes of disbursements.
General Guidelines on the Release of Funds
 Pending the effective date of the new General Appropriation Act (GAA), national government agencies
are authorized to incur overdraft in allotment for obligations corresponding to the actual requirement of
their regular operations chargeable against the GAA, as re-enacted.
 A re-enacted budget pertains to the budget of the preceding year which, by operation of laws, becomes
re-enacted and shall remain in force in effect until the general appropriation bill for the current year is
passed by Congress.
  All unutilized allotments of agencies immediately before the effective date of the new GAA out of the
SAROs issued chargeable against the re-enacted GAA shall no longer be available for obligation.

The Allotment Release Program (ARP), which determines the level of allotment releases for a given fiscal year:
1. Obligation incurred
2. Obligation authorized as overdraft,
3. Special allotment release order (SAROs) issued from the beginning of current fiscal year to the
effectivity date of the current General Appropriation Act, and
4. Releases from the unprogrammed fund (UF), Allotment releases from the multi-user Special Purpose
Fund (SPFs).