FISCAL POLICY

Chapter 1: Basic Concepts in Budgeting

1. Fund
- In government, an appropriation which
is a legislative authorization to spend or an
allotment or an authorization by the
Department of Budget and Management
(DBM) to obligate.
- In legality, sum of money or other
resources set aside for the purpose of
carrying out activities or attaining certain
objectives in accordance with:
a. regulations,
b. restrictions,
c. limitations
2. Basic rule for the use of funds
Article IV, Sec. 29. No money shall be
paid out of the Treasury except in pursuance
of an appropriation made by law.
3. How government funds are appropriated
1. Government agencies prepare their
estimates of expenditures and
proposed budget and submit these
estimates to the DBM following:
a. baseline figures,
b. guidelines, and
c. timetables earlier set
2. Agencies justify details of their
proposed budget before DBM technical
review panels.
3. DBM reviews and consolidates
proposed budgets of all agencies.
4. Agencies explain their details of
proposed budget in separate hearings
by the House of Representatives and
the Senate for inclusion in the General
Appropriations Bill.

5. The President signs the General

Appropriations Bill into law (General
Appropriations Act)
4. Government Budget
- financial plan of the government for a
given period.
- refers to the income, expenditures, and
sources of borrowings of the National
Government (NG) that are used to achieve
national objectives, strategies and programs.
Article VII, Sec. 22. of the Philippine
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 appropriations bill (GAB), a budget
of expenditures and sources of financing
including receipts from existing and
proposed revenue measures.
5. Expenditure Program
- Portion of the National Budget that
refers to the
a. current operating expenditures
b. capital outlays
necessary for the operation of the
programs, projects and activities of the
various government department and
agencies.
6. Financing Program
- Includes the
a. projected revenues from both
existing and new measures,
b. planned borrowings to finance
budgetary transactions and
c. payment of debt principal falling
due.

7. National Government Budget

- Also known as the budget,
- refers to the totality of the budgets of
various departments of the national
government.
- This is what the national government
plans to spend for its programs and
projects.
8. On what the national government budget
is spent
a. Implementation
of
various
government programs and project
b. Operation of government offices
c. Payment of salaries of government
employees
d. Payment of public debts.
These expenditures are classified by:
a. expense class
b. sector and
c. implementing unit of government
9. Why does the government prepare a new
budget?
a. It is in accordance with the provision of
the Constitution which requires the
president to submit a budget of
expenditure and sources of financing
within 30 days from the opening of every
regular session of the Congress.
b. It is in consonance with the principle
which requires all government spending
to be justified a new each year.
10. Sources of appropriations that make up
the annual budget
a. New general appropriations legislated by
Congress for every budget year under
the General Appropriations Act (GAA)
b. Existing
appropriations
previously
authorized by Congress.

11. Existing or Continuing Appropriations

- Are those which have been previously
enacted by Congress and which
continue to remain valid as an
appropriation authority.
Two types of existing appropriations
1. Continuing appropriations
- Refer to appropriations available to
support obligations for a specified
purpose or project.
- Examples:
a. Public Works Act 1995
b. For Agrarian Reform Program
c. For
capital
outlays
and
maintenance
d. Operating expenses
2. Automatic appropriation
- Programmed annually or for some
other period prescribed by law, by
virtue of a standing legislation which
does not require periodic action of the
Congress.
a. PD 1967 for servicing of domestic
and foreign debts
b. RA 660 For retirement of
government employees
c. PD 1177 for net lending to
government corporations
d. PD 1234 for various special
accounts and funds
12. Are all appropriations supported by
resources and allocable during the budget
year?
- only programmed appropriations.
Programmed appropriations
- Supported by corresponding resources,
that is, they already have definite
funding sources and are readily
implementable.

Unprogrammed appropriations
- Not yet supported by corresponding
resources and not yet included by the
Congress in the General Appropriations
Act.
- Called standby appropriations.
13. one-fund concept
- Policy enunciated through PD 1177
which requires that all income and
revenues of the government must
accrue to the General Fund and can be
freely allocated to fund programs and
projects of government as prioritized.
14. Importance of one-fund concept
a. Serves as an avenue for the proper
allocation of scarce resources.
b. Provides a mechanism to control
drawdowns on pooled resources.
c. Alerts us of possible revenue
shortfalls.
15. Balanced Budget
- Revenues equal expenditures
disbursements.
- Expenditures > revenues = deficit

or

Deficit results when the government:

a. borrows money from foreign source
or domestic capital market
b. borrows money from the Bangko
Sentral ng Pilipinas
c. withdraws funds from its cash
balances in the Treasury.
16. Surplus Budget Policy
- an aggressive privatization and revenue
generation program and a prudent
expenditure program

17. Importance of Surplus Budget Policy

a. To encourage economic growth.
b. To repay the huge debt it has
accumulated over the years.
18. Total Resource Budget
- Concept adopted by the present
budgeting system which requires the
preparation
of
the
national
government budget within the
framework of the total impact of all
government entities on the national
economy.
19. Consolidated Public Sector Fiscal
Position (CPSFP)
- Net deficit or surplus calculated after
summing up the budget balances of all
government entities.
20. Planning Programming - Budgeting
System (PPBS)
- Concept that stresses the importance
of establishing a strong linkage
between planning and budgeting.
- Under this concept, the budget is
anchored on the degree by which the
accomplishment of economic plans and
the attainment of targets contained in
the (1) Medium-Term Philippine
Development Plan (MTPDP) and the (2)
Medium-Term
Public
Investment
Program (MTPIP) are supported.

Chapter 2: The Budgeting Process

1. Government Budgeting
- Critical exercise of allocating revenues
and borrowed funds to attain the
economic and social goals of the
country.
2. Importance of Government Budgeting
a. Enables the government to plan and
manage its financial resources to
support the implementation of various
programs and projects.
b. Can prioritize and put into action its
plans, programs and policies within the
constraints of its financial capability as
dictated by economic conditions.
3. Major processes involved in national
government budgeting
a. Budget preparation
b. Budget authorization
c. Budget execution
d. Budget accountability
*budget preparation for the next budget
year proceeds while the government
agencies are executing the budget for the
current year and at the same time engaged
in budget accountability and review of the
past years budget.
4. How annual national budget is prepared
a. Determination of overall economic
targets, expenditure levels and budget
framework by the Development Budget
Coordinating Committee (DBCC).
b. Issuance by the DBM of the Budget Call
which (1) defines the budget
framework; (2) sets economic and
fiscal targets; (3) prescribe the priority
thrusts and budget levels and; (4) spells
out the guidelines and procedures,
technical
instructions
and
the
timetable for budget operation.

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 of budget hearings where
agencies are called to justify their
proposed budgets before DBM
technical panels.
e. Submission
of
the
proposed
expenditure program of departmental/
agencies
for
confirmation
by
department/agency heads.
f. Presentation of the proposed budget
levels of department/ agencies/ special
purpose funds to the DBCC for
approval.
g. Review and approval of the proposed
budget by the President and the
Cabinet.
h. Submission by the President of
proposed budget to Congress.
5. How budget becomes a law
a. President submits his proposed annual
budget in the form of Budget
Expenditures and Sources of Financing
(BESF) supported by details of
proposed expenditures in the form of a
National Expenditure Program (NEP)
and the Presidents Budget Message
which summarizes the budget policy
thrusts and priorities for the year.
b. The proposed goes first to the House of
Representatives, which assigns the task
of initial budget review to its
Appropriations Committee.
c. Appropriations Committee with other
House
Sub-Committees
conduct
hearings
on
the
budgets
of
departments/agencies and scrutinizes
programs/projects. The proposal is

then presented to the House body as

the General Appropriations Bill.
d. While hearings are on-going in the
House of Representatives, the Senate
Finance Committee also starts to
conduct its own review and scrutiny of
the proposed budget and proposes
amendments to the House Budget Bill
to the Senate body for approval.
e. The House and the Senate creates a
Bicameral Conference Committee that
finalizes the General Appropriations
Bill.
f. Bill is submitted to the President for
signing
into
law,
General
Appropriations Act.
6. General Appropriations Act
- Legislative authorization that contains
the (1) new appropriations in terms of
specific amounts for salaries, wages
and other personnel benefits; and (2)
capital outlays authorized to be spent
for the implementation of various
programs/projects for a given year.
7. How budget is implemented
a. Releasing of funds to the agencies.
*Simplified Fund Release System (SFRS)
- Adopted in 1995 to accelerate the
implementation of program/projects
and ensure the judicious use of
budgeted government funds.
- A policy-driven system which
standardized the release of funds.
b. Agency Budget Matrix (ABM) is
prepared by the DBM, at the beginning
of each budget year, upon approval of
the General Appropriations Act.
- ABM serves as blueprint which
provides the basis for determining
the timing, composition, and
magnitude of the release of the
budget.

c. Allotment Release Program (ARP),

which prescribes the guidelines in the
priotization of fund releases, is
prepared.
d. ARP serves as basis for the issuance of
either a General Allotment Release
Order (GARO) or a Special Allotment
Release Order (SARO) to authorize
agencies to incur obligations.
e. DBM releases the Notice of Cash
Allocation (NCA) on a monthly or
quarterly basis. NCA specifies the
maximum amount of withdrawal that
an agency can make from a
government bank for the period
indicated.
The release of NCA is based on:
1. Financial
requirements
of
agencies as indicated in their
ABMs, cash plans and reports.
2. Cash budget program of the
government and updates on
projected resources.
f. Agencies utilize the released NCAs
following the Common Fund concept.
Under this concept, agencies are given
a maximum flexibility in the use of their
cash allocations.
8. Why are adjustments made on the
budget program?
a. Enactment of new laws
- New legislations with corresponding
new revenue sources are passed
which necessitate adjustment in the
budget program.
b. Adjustments
in
macroeconomic
parameters
- Macroeconomic
targets
are
periodically reviewed and updated to
reflect the impact of recent
developments in the performance of
the national economy.

- Indicators affecting the budget:

1. GNP
2. inflation rate
3. interest rate
4. foreign exchange rate
5. oil prices
6. level of imports
c. Change in resource availabilities
- Budget adjustments are undertaken
when additional resources become
available such as (1) new grants, (2)
proceeds from newly negotiated
foreign loans and grants.
- Also when resource generation falls
below the target.
9. Mechanisms that ensure proper
allocation and spending of funds
a. Budget accountability takes the form of
managements review of actual
performance or wok accomplishments
in relation to the work targets of the
agency vis--vis the financial resources
made available.
b. Detailed examinations of each agencys
books of accounts are undertaken by a
representative of Commission on Audit
(COA) to ensure that all expenses have
been disbursed in accordance with
accounting regulations and purposes.
10. Is the role of the DBM in the budgeting
process limited to national government
agencies?
- No. it coordinates three levels of
government (1) national government
department/agencies, (2) governmentowned and controlled corporations,
and (3) local government units in the
preparation, execution and control of
expenditures of their corresponding
component entities.
- In GOCC, DBM reviews its corporate
operating budgets and ensure the

proper allocation of cash. DBM also

formulates and recommends the
budget policy covering the allowable
deficit and the criteria for the
determination of the appropriate
subsidy and equity of GOCCs.
- For LGUs, DBM reviews annual and
supplemental budgets of provinces and
cities and manages proper allocation
and release of the Internal Revenue
Allotment (IRA) and their share in the
utilization of national wealth.