BUDGETING

Budget Process

1. THE BUDGET CYCLE Four Phases in Managing the National Budget:

Budget Preparation
Budget Legislation
Budget Execution
Budget Accountability During the preparation phase, the Executive prepares the
proposed National Budget. This is followed by the legislation phase where the Congress
authorize the General Appropriations Act. In the execution phase, agencies utilize their
approved budgets and during the accountability phase the executive phase, agencies
utilize their approved, the executive monitor and evaluate the use of the budget.

2. BUDGET PREPARATION This starts with the Budget Call and ends with the President’s
submission of the proposed budget to Congress. DBCC sets parameters Budget Call
Stakeholders Consultation Agency Budget Proposals Technical Budget Hearings
Executive Review Consolidation, Validation & Confirmation Presentation To President &
Cabinet The President’s Budget

3. The Budget Call

At the beginning of the budget preparation year, the Department of Budget and
Management (DBM) issues the National Budget Call to all agencies (including state
universities and colleges) and a separate Corporate Budget Call to all GOCCs and GFIs.
The budget Call contains budget parameters (including macroeconomic and fiscal
and agency budget ceilings) as set beforehand by the Development Budget
Coordination Committee (DBCC); and policy guidelines and procedures in the
preparation and submission of agency budget proposals.

4. BUDGET PREPARATION Under the Aquino Administration the DBM has established a
new tradition of beginning the Budget Preparation phase earlier, to ensure that the
National Budget is enacted on time. Under the new Budget Preparation Calendar, the
Budget Call is issued in December (versus around April in the past); 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 during the late in the 30- day window that the
Constitution prescribes).
5. BUDGET PREPARATION Stakeholder Engagement

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 A new feature in budget preparation 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.
This new process, which was piloted in the preparations of the 2012 National Budget,
is now being expanded towards institutionalizations.

6. BUDGET PREPARATION Department and GOCCs Mandated to Conduct CSO

Consultation

7. BUDGET PREPARATION “Bottom-Up” Budgeting

The Bottom-up Budgeting program was set-up in 2013 to help the Philippines to help
the Philippines attain its Millennium Development Goals of inclusive growth and poverty
reduction. Now, two years later, the Department of Budget and Management is holding
a two-day summit to show how far the project has come.
The Aquino government, through the Cabinet Cluster on Human Development and
Poverty Reduction.
Two years after Bottom-up Budgeting (BuB) was first implemented in the 2013
National Budget, the Aquino Administration plans to extend the program’s reach and
ensure the sustainability of BuB-enabled gains, beginning with a two- day summit to
assess and reaffirm the program’s progress. Under the 2015 budget, BuB covers 1,590
municipalities and cities across the country, and is amply supported with a budget of
P20.9 billion. For 2016, the Administration is proposing a budget of P24.7 billion to
support the implementation of more than 14,300 BuB projects nationwide.

8. BUDGET PREPARATION “The BuB is meant to empower our grassroots communities and
their respective local governments. That’s why we’ve made improvements to the
program by allowing LGUs to directly implement projects instead of coursing them
through the agencies. This also strengthens the link of accountability between our LGUs
and their constituents,” the budget chief said. The BuB approach was set up to help the
Philippines attain its Millennium Development Goals of inclusive growth and poverty
reduction, all while promoting good governance at the local level. This is done by
increasing citizens’ access to local service delivery via a demand-driven budget planning
process.

9. Program Expenditure Classification (PREXC):

This approached is adopt by President Duterte Administration.

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 a reform that restructures the current Budget by grouping activities and projects
under major programs or key strategies. Through this innovation, the government will
be able to assign performance targets—both outputs and outcomes—at the level of
programs. This way, the direct link between strategies, budgets and intended results will
be clearer and program monitoring and evaluation can provide evidence-based
assessments PREXC will be implemented in the proposed Budget for 2018.

10. BUDGET PREPARATION 3. Technical Budget Hearing

These are conducted after departments and agencies submit their Agency Budget
Proposal to the DBM. Here, agencies defend their proposal budget before a technical
panel of DBM, based on performance indicators on output targets and absorptive
capacity. DBM bureaus then review the agency proposals and prepare
recommendations.

11. BUDGET PREPARATION 4. Executive Review

The recommendations are presented before an Executive Review Board which is
composed of the DBM Secretary and senior officials. Deliberations here entails a
careful prioritization of programs and corresponding support, vis-a vis the priority
agenda of the national government.
Implementation issues are also discussed and resolved.
12. BUDGET PREPARATION 5. Consolidation, Validation and Confirmation
DBM then consolidate the recommended agency budgets and recommendations
into a National Expenditure Program and a Budget of Expenditures and Sources of
Financing (BESF).
As part of the consolidating process, the deliberations by the DBCC determine the
agency and sectoral allocation of the approved total expenditure ceiling, in line with the
macroeconomic and fiscal program. Heads of major departments are invited to this
meeting.

13. BUDGET PREPARATION 6. Presentation to President and Cabinet

The proposed budget is presented by DBM, together with the DBCC, to the President
and Cabinet for further refinements of prioritization. After the President and Cabinet
approve the proposed National Expenditure Plan, the DBM prepares and finalizes the
budget documents to be submitted to Congress.

14. BUDGET PREPARATION 7. The President’s Budget

The budget preparations phase ends with the submission of the proposed national
budget –the “President’s Budget”-to Congress.

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 The President’s Budget consist of the following documents, which help legislators
analyze the contents of the proposed budget:

15. BUDGET PREPARATION8. The President’s Budget President’s Budget Message (PBM)
This is the President explains the policy framework and priorities in the budget
Budget of Expenditures and Sources of Financing (BESF) Mandated by the
Constitution, this contains the macroeconomic assumptions, public sector context
(including overviews of LGU and GOCC financial positions), breakdown of the
expenditures and funding sources for fiscal year and the two previous year. National
Expenditure Program (NEP) This contain the details of spending for each department
and agency by program, activity or project and is submitted in the form of a proposed
General Appropriations Act.
Details of Selected Programs and Projects This contains a more detailed
disaggregation of key programs, projects and activities in the NEP, especially those in
line with the national government’s development plan.
Staffing Summary This contains a summary of the staffing complement of each
department and agency, including number of positions and amounts allocated for the
same.
16. BUDGET LEGISLATION - also 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 (GAA).

17. BUDGET LEGISLATION The House of Representative, in plenary, assigns the

President’s Budget to the House Appropriations Committee. The Committee and its
Sub-Committee then schedule and conduct hearing on the budgets of the departments
and agencies and scrutinize their respective programs and projects. It then crafts the
General Appropriations Bill (GAB). In plenary session, the GAB is sponsored,
presented and defended by the Appropriations Committee and Sub-Committee
Chairmen. As in all other laws, the GAB is approved on Second and Third Reading before
transmission to the Senate. (Note: In the First Reading, the President’s Budget is assigned
to the Appropriations Committee).
18. BUDGET LEGISLATION 1. House Deliberations •As in the House process, the Senate
conducts its own committee hearing and plenary deliberations on the GAB. Budget
deliberations in the Senate formally start after the House of Representatives transmits
the GAB. For expediency, however, the Senate Financing Committee and Sub-
Committees usually start hearings on the GAB even House deliberations are ongoing.
•The Committee submits its proposed amendments to the GAB to plenary only after it
has been formally transmitted by the House.

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19. BUDGET LEGISLATION 2. Senate Deliberations As in the House process, the Senate
conducts its own committee hearing and plenary deliberations on the GAB. Budget
deliberations in the Senate formally start after the House of Representatives transmits
the GAB. For expediency, however, the Senate Finance Committee and usually start
hearings on the GAB even as House deliberations are ongoing. The Committee
submits its proposed amendments to the GAB to plenary only after it has been formally
transmitted by the House.
20. BUDGET LEGISLATION 3. Bicameral Deliberations Once both House 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.
21. BUDGET LEGISLATION 4. Ratification and Enrollment The Harmonized or “Bicam”
Version is then submitted to both Houses, which will the vote to ratify the final GAB for
submission to the President. Once submitted to the President for his approval, the GAB
is considered enrolled.
22. BUDGET LEGISLATION 5. The 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.
Under the Constitution, the GAB is the only legislative measure where the President can
impose a line-veto (in all other cases, a law is either approved or vetoed in full).
23. BUDGET LEGISLATION 6. Reenactment When the GAA is not enacted before fiscal
year starts, the previous years’s GAA is automatically reenacted. This means that agency
budgets for programs, activities and projects remain the same. Funding for programs
or projects that have already been terminated is realigned for other expenditures.
Because reenactments are tedious and prone to abuse
24. BUDGET EXECUTION 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.
25. BUDGET EXECUTION 1. RELEASE GUIDELINES & PROGRAM The budget execution
phase begins with DBM’s issuance of guidelines on the release and utilization of funds.
26. BUDGET EXECUTION 2. BUDGET EXECUTION DOCUMENTS (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.
27. BUDGET EXECUTION 3. ALLOTMENT & CASH RELEASE PROGRAMMING 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

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 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.
28. BUDGET EXECUTION 4. a. 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).
29. BUDGET EXECUTION 4. b. ALLOTMENT RELEASE Agency Budget Matrix (ABM) This
document disaggregates all programmed appropriations for each agency into two main
expenditure categories: “not needing clearance” and “needing clearance.” The ABM
is the comprehensive allotment release document for appropriations which do not need
clearance, or those which have already been itemized and fleshed out in the GAA.
30. BUDGET EXECUTION 4. c. ALLOTMENT RELEASE Allotment Release Orders (SAROs)
Items identified as “needing clearance” are those which require the approval of the
DBM or the President, as the case may be (for instance, lump sum funds and confidential
and intelligence funds). For such items, an agency needs to submit a Special Budget
Request to the DBM with supporting documents. Once approved, a SARO is issued.
31. BUDGET EXECUTION 5. INCURRING OBLIGATIONS 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.
32. BUDGET EXECUTION 6. The GAA as Allotment Release The FY 2017 budget aims to
facilitate the achievement of meaningful national development goals as emphasized by
the Duterte Administration. The implementation of real change is anchored on the timely
and appropriate execution of this budget. In particular, the policy of using the General
Appropriations Act as an Allotment Order (GAAAO) shall continue to be adopted to
ensure the immediate implementation of programs, projects and activities. In so doing,
resource unpredictability and delays in project/program implementation are reduced.
Likewise, credibility and transparency in the budget process is expected to be further
enhanced.
Source:http://www.dbm.gov.ph/wp-content/uploads/Issuances/2017/National%20Budget%20Circular/NBC-567.pdf
33. BUDGET EXECUTION 7. a. 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).
34. BUDGET EXECUTION 7. b. CASH ALLOCATION Notice of Cash Allocation (NCA) This
is a cash authority issued periodically by the DBM to the operating units of agencies to

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 cover their cash requirements. The NCA specifies the maximum amount of cash that
can be withdrawn from a government servicing bank for the period indicated. The
release of NCAs by DBM is based on an agency’s submission of its Monthly Cash
Program and other required documents.
35. BUDGET EXECUTION 7. c. CASH ALLOCATION Others Disbursement Authorities. In
contrast to NCAs, Non-Cash Availment Authority (NCAA) are issued to authorize non-
cash disbursements. Cash Disbursement Ceiling (CDC) are meanwhile issued to
departments with overseas operations, allowing them to use income collected by their
foreign posts for their operating requirements.
36. BUDGET EXECUTION 8. 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. 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.
37. BUDGET ACCOUNTABILITY 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
38. BUDGET ACCOUNTABILITY 1. PERFORMANCE & 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.
39. BUDGET ACCOUNTABILITY 2. 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.
40. BUDGET ACCOUNTABILITY 3. NO REPORT , NO RELEASE • Starting 2012, the DBM will
be withholding certain fund releases to agencies if these fail to submit their Budget
Accountability Reports. In particular, these will be funds from the Miscellaneous
Personnel Benefits Fund (MPBF) for compensation adjustments under the Salary
Standardization Law, provisions for unfilled positions and employee clothing allowances.
• These funds to be withheld are only limited to agencies’ MPBF allotments so that only

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 the agencies are penalized and that the implementation of critical programs and
projects will not be disrupted. Errant and compliant agencies will also be posted online
for public scrutiny.
41. BUDGET ACCOUNTABILITY 4. 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
42. BUDGET ACCOUNTABILITY 5. 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.
43. BUDGET ACCOUNTABILITY 6. Performance-Based Incentive System The Department
of Budget and Management (DBM) is also in the process of establishing 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. References: http://www.gov.ph/2015/08/25/bottom-up-budgeting-
summit-shows-programs-progress/ Bottom-up Budgeting summit shows program’s progress August 25,
2015 http://www.rappler.com/move-ph/issues/budget-watch/145988-proposed-2017-national-budget
What's in the proposed 2017 national budget? Aika Rey Published 10:00 AM, September 17, 2016
http://www.businessmirror.com.ph/duterte-admin-drops-aquinos-grassroots-budgeting-strategy/
http://business.inquirer.net/225157/govt-adopts-new-system-budget-setting Gov’t adopts new system in
budget setting Philippine Daily Inquirer / 12:22 AM February 25, 2017 http://www.dbm.gov.ph/wp-
content/uploads/2016/PREXC/PREXC.pdf https://jfvambrosio.wordpress.com/2010/05/17/government-
budgeting-experience-in-the-
philippines/http://www.dbm.gov.ph/wpcontent/uploads/Issuances/2017/National%20Budget%20Circular
/NBC- 567.pdf

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