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LOGO

Background of Public
Financial Management
(PFM)
in the Philippines
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LOGO A. The Legal Framework for PFM

Article VI, Section 29 of the Philippine


Constitution sets the basic rule for the
use of government funds where it
states: “ No money shall be paid by the
Treasury except in pursuance of an
appropriation made by law”.
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B. THE INSTITUTIONAL
FRAMEWORK FOR PFM
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LOGO Four Phases of the Budget
Process or the Budget Cycle

a) Budget Preparation
b) Budget Legislation
c) Budget Execution
d) Budget Accountability
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LOGO a) Budget Preparation
Executive branch consolidates the annual
budget proposal of the executive,
legislative, and judicial branch of the
government.
 estimation of revenues
 determination of budgetary priorities
consistent within the MTPDP
 translation of approved priorities into
expenditure levels
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LOGO Submission of the Budget

The President shall submit within thirty (30) days from


the opening of each regular session of the Congress as
the basis for the preparation of the General
Appropriation Act, a national government budget,
consisting of estimated receipts based on the existing
and proposed revenue measures, and of estimated
expenditures.

Article VII, Section 22 (1)


Philippine Constitution
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LOGO Development Budget Coordinating
Committee

A top level inter agency


committee that sets the budget
parameters - framework
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LOGO DBCC Composition

resource resource overall monetary Presidential


allocation generation economic measures oversight
and and debt policy and
management management policies
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LOGO Major Functions of the DBCC

 Establishes the level of annual government


expenditure programs
 Determines the proper allocation of expenditure
 Allocates the amount set for each development
activity
 Assesses the reliability of revenue estimates
 Recommends appropriate tax or other revenues
measures and the extent and type of borrowings
 Conducts periodic review and general examination of
costs, accomplishments and performance standards
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LOGO Budget Preparation Flow Chart

President Submits
Budget Proposal to
Budget
Budget Congress
Call Consolidation

DBCC
approves Budget Approval by
budget Hearings President and
parameters Cut-off for Cabinet
Inclusion of
Items in Budget
Proposal
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LOGO b) Budget Legislation

The legislature (Congress) approves the


appropriations bill and the President signs it
into law.
Several forms of appropriations:
 General Appropriations Law
 Public Works Acts
 Supplemental Appropriations Law
 Automatic Appropriations
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LOGO Budget Legislation Flow Chart

House Senate Bicameral


Hearings/ Hearings/ Conference
Debate Debate Committee

House Approval
President
& Submission Senate
Signs
to Senate Approval
into Law
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LOGO c) Budget Execution Flow
Chart

Agency/DBM Agency
prepares ABM implements

DBM releases
SARO & NCA
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LOGO d) Budget Accountability

 Monitoring of agency budgetary


performance
 Comparison and evaluation of actual
performance with initially-approved
work targets in terms of:
financial
Physical
Revenue Collected (for agencies
mandated to collect taxes and fees)
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LOGO Rationale/Purpose

 Monitor the efficiency of government’s


fund utilization
 Assess agency performance
 Provide a vital basis for sound
decision and policy making for rational
allocation of scarce resources
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LOGO The Commission on Audit (COA)

Article IX-D of the Philippine Constitution


provides the following functions of COA:

a. Examine, audit and settle all accounts pertaining to


the revenue and receipts of, and expenditures or
uses of funds and property owned or held in trust by,
or pertaining to the government;
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LOGO The Commission on Audit (COA)
b. Promulgate accounting and auditing rules and
regulations including those for the prevention and
disallowance or irregular, unnecessary, excessive,
extravagant or unconscionable expenditures, or
uses of government funds and properties;
c. Submit annual reports to the President and the
Congress on the financial condition and operation of
the government,
d. Recommend measures to improve the efficiency and
effectiveness of government operations; and
e. Keep general accounts of government and preserve
the vouchers and supporting papers pertaining
thereto.
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LOGO Salient Features of Appropriations

1. Once an appropriation is released in the


form of an allotment covered by either an
Agency Budget Matrix (ABM) or a
Special Allotment Release Order
(SARO), it becomes available for
incurrence of an obligation.
2. Appropriation for personal services are
valid only for the year, while those for
MOOE and CO are treated as continuing
appropriations for 2 years: unused
portions of appropriation for MOOE & CO
are carried forward for another year.
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LOGO Salient Features of Appropriations (cont.)

3. Automatic appropriations are those appropriations


authorized under existing laws other than the
General Appropriations Act which are programmed
annually in accordance with Section 26, Book VI of
EO 292. Examples of these are:
• Internal revenue taxes and import duties associated with
foreign loans and grants,
• Tax expenditure subsidies,
• Debt servicing,
• Retirement and life insurance premium of government
employees,
• Drawdown on guaranteed lending to government
corporations, and
• Various special accounts and funds.
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III. Successes Achieved in


the Area of Performance
Based Budgeting
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PUBLIC EXPENDITURE MANAGEMENT:
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OBJECTIVES

 Aggregate Fiscal Discipline


 living within our means

 Allocative Efficiency
 spending on the “right things” or “right
priorities”

 Operational/Technical Efficiency
 obtaining the best value for money
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LOGO Attributes of Good
Performance Indicators

S – Specific
M – Measurable
A – Achievable
R – Relevant
T – Time-bound
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LOGO
Attributes of Good
Performance Indicators

C – Clear
R – Relevant
E – Economic
A – Adequate
M – Monitorable
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IV. An Analysis of Gaps in


PFM and Areas of
Potential Reforms
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An Analysis of Gaps in PFM and Areas of
LOGO Potential Reforms

A. Weaknesses in the present PFM:


1) Weak revenue administration,

2) Unpredictability of funding,

3) Inadequate management information system,


and

4) Weak internal control system in spending


agencies