Government Budgeting

Is the critical exercise of allocating revenues and borrowed funds to attain the economic and social goals of the country. It also entails the management of government expenditures in such a way that will create the most economic impact from the production and delivery of goods and services while supporting a healthy fiscal position.

Important of Government Budgeting

Government budgeting is important because it enables the government to plan and manage its financial resources to support the implementation of various programs and projects that best promote the development of the country.

Major Processes involved in National Government Budgeting

Budget preparation Budget authorization Budget execution Accountability

Budgetary Process
Function

Participants
Budget Division Departments and Agencies

Schedule
July-September

Planning and Estimation Planning and Estimation Legisltive Deliberation

Budget Division General Assembly

October-January January-May

Budget Division Legislative Committees Departments and Agencies June-July

Budget Execution

Planning and Estimation

During this preparation period, the staff of the Division of Budget continually meets with the agencies' fiscal and program personnel to answer questions and provide assistance in developing their budget requests.

Preparation of the Budget

Following analysis of the requests by the Division of Budget, detailed recommendations are made to the Commissioner of Finance and Administration. Meetings are convened with commissioners and directors of the departments and agencies by the Commissioner of Finance and Administration. A consensus is sought with the agencies as to the appropriate funding level for the upcoming year.

Preparation of the Budget

The Governor and the Commissioner of Finance and Administration review the recommendations resulting from these hearings and consider necessary alterations to fit within the scope of the Administration's initiatives.

Legislative Deliberation
After the Budget Document and Budget Message have been presented, the appropriation process is initiated. The Appropriations Bill, prepared by the Department of Finance and Administration, is introduced and referred to the Finance, Ways, and Means Committees of both houses of the Legislature. The Senate and House of Representatives must ultimately pass the exact version of the Appropriations Bill for it to be enacted into law.

Budget Execution
Budget execution is a process that continues throughout the fiscal year. In addition to the daily review of numerous operational and personnel transaction requests, the budget analysts must assure that legislative intentions of the Appropriations Act are being complied with and carried out by the various departments and agencies.

Annual National Budget

The preparation of the annual budget involves a series of steps that begins with the determination of the overall economic targets, expenditure levels, revenue projection and the financing plan by the Development Budget Coordinating Committee (DBCC).

Annual National Budget

The DBCC is an inter-agency body composed of the DBM Secretary as Chairman and the Bangko Sentral Governor, the Secretary of the Department of Finance, the Director General of the National Economic and Development Authority and a representative of the Office of the President as members.

Department of Budget and Management (DBM)

Filipino: Kagawaran ng Pagbabadyet at Pamamahala Is an executive body under the Office of the President of the Philippines. It is responsible for the sound and efficient use of government resources for national development and also as an instrument for the meeting of national socio-economic and political development goals.

 The current Secretary of Budget and Management appointed by President Benigno Aquino III is Florencio Abad.

Six Characteristics in the Philippine Budget Process

A commitment to fiscal discipline. Tax compliance and corruption. Subsidies: government-owned and controlled corporations. The Development Budget Coordinating Committee. The national planning function. Unprogrammed funds and special purpose funds.

Key Constitutional Restrictions

The President has exclusive right to propose a budget. Congress can only reduce or reallocate appropriations in the proposed budget. The President can use a line-item veto. The previous years budget is automatically re-enacted if the budget is not passed prior to the start of the fiscal year.

Key Constitutional Restrictions

The President can impose restrictions on the disbursement of funds appropriated by Congress. The President can augment any appropriations from savings in other appropriations.

Congressional Budget Approval Process

The Congressional budget approval process can be divided into three phases: Deliberation and approval by the House of Representatives. Deliberation and approval by the Senate. Deliberation and approval by a Bicameral Conference Committee to reconcile the House and Senate versions of the budget.

Congressional Budget Approval Process

The President opens each session of the Philippine Congress with a State of the Nation address in late July/early August each year. This takes place in a joint session of the House and Senate and is a very high-profile event. This address highlights the key policy priorities and initiatives of the President and foreshadows the main contents of the budget.

LGUs Budget Process

1. Budget Preparation 2. Budget Authorization 3. Budget Review 4. Budget Execution 5. Budget Accountability

A.Budget Preparation
The budget preparation proper starts with the issuance of the local government call, cost estimation, preparation of budget proposals, executive review of budget proposals and finally the preparation of the budget message, local expenditure program and budget of expenditures and sources of financing. These 3 documents shall consist the Executive Budget to be submitted to the Local Sanggunian.

Step 1. Issue the budget call

A local budget call is the issuance of a directive from the LCE to mark the beginning of the budget preparation period for the local government. It shall contain the general objectives, specific sectoral objectives, policy decisions, strategies and prioritized P/A/Ps by sector/office as reflected in the AIP.

 It shall provide specific guidelines in the preparation of individual budget proposals. This directive shall be issued between June 15 to June 30 to allow more time for the department heads to formulate reasonable proposals for the budget year. The period for the budget preparation process starts July 1 and winds up on October 16 for each fiscal year.

The budget guidelines shall include the following: Expenditure ceiling by office/sector Allocation scheme by major final out and P/P/A Budget calendar and budget preparation forms Other administrative guidelines

Importance of Budget Call

It provides venue for aligning the budget with the approved AIP It describes guidelines to be observed in the preparation of budget proposals It gives meaning & focus to the objective that will be attained through the budget It firms up policy decisions on how the budget shall be financed It provides information on budget preparation schedule, forms and target dates for submission

Step 2. Prepare the executive budget a. The Budget Message A budget message is a brief but comprehensive presentation of the proposed executive budget that is addressed to the local sanggunian and the general public of the LGU. It gives emphasis to the development goals and objectives, policies, strategies and priority programs, projects and activities for the budget year.

 It also reflects income statements, sources of funds that will finance the budget and how such income is allocated by sector, office and by expenditure class to the various P/A/Ps. It provides the basis and justification for the policy decisions contained in the proposed executive budget.

b. Guidelines in Preparing the Budget Message. Present the objectives, policies, strategies and priority programs/activities/projects of the LGU for the budget year and relate their consistency with the proposed revenue and expenditure structure. Identify the flagship projects by sector and by program and relate how they are envisioned to carry out the development goals for the next 3 to 5 years.

 Review past 5 years revenue and expenditure pattern and disclose what basic services and facilities were provided. Discuss the current years income and expenditure performance and disclose any improvements in the production of results compare with the past 5 years.

c. The Local Expenditure Program (LEP) The first part of the LEP is the estimates of income. The income structure that is composed of 3 components shall have information on the immediate past year, current year and budget year estimates. The second part of the LEP is the expenditure program. The details of the expenditure program shall be presented by sector, office or department, special purpose appropriations, by program/activity/project, and by expense class for a 3-year period, namely, the past year, current year and budget year.

 The fourth part of the LEP is the general provisions for receipts, income and expenditure policies of the local government. The last part of the LEP is a summary of the FY-New Appropriation by Office/Department and Special Purpose Appropriations. It reflects the total proposed budget for the budget year.

d. The Budget of Expenditures and Sources of Financing (BESF) The BESF is a detailed and graphical presentation of the expenditure program of an LGU covering actual obligations for the past year, actual and estimated expenditure for the current year and the proposed budget program for the ensuing year.

Step 3. Consult with multi-stakeholders.

The consultation with civil society, accredited NGOs in the community and the private sector is a new approach in budget making. The main objective of consultation and participation of multi-stakeholders in the budget process is to ensure that the fiscal policies, programs, projects and activities approved and adapted by the LDC during AIP formulation are integrated into the budget.

B. Budget Authorization
The second phase in the local government budget process, it starts from the time the LCE submits the budget to the sanggunian for legislative deliberation and ends with the corresponding enactment of the appropriations ordinance.

Step 4. Present the executive budget to the local sanggunian.

a. State of the LGU Address.
On the first day of the session of the local sanggunian, the LCE shall address and present to the members of the sanggunian and the general public the highlights, thrusts, programs and priorities of the budget under consideration on the basis of the past and current situation of the LGU. The LCE shall likewise brief the sanggunian on the level of the proposed expenditures, how these are allocated among the 3 mandated sectoral services, namely: economic, social, and general services and the sources of financing that will support the budget.

b. Role of the Committee on Appropriations.

Created as one of the standing committees within the sanggunian, it shall be responsible for conducting a preliminary review and evaluation of the executive budget.

c. Role of the Local Finance Committee.

It shall assist the sanggunian in the analysis and review of the budget for the purpose of ensuring compliance with statutory and administrative requirements.

d. Role of the Heads of Offices/Departments.

During the conduct of committee hearings and en-banc deliberations, the different heads of department or chiefs of offices whose budget proposals are being considered, shall make themselves available and appear before that body to explain or justify their proposals.

Step 5. Deliberate on the executive budget.

The deliberation on the budget shall be within the current fiscal year, which may commence on October 16, or upon receipt of the sanggunian, of the executive budget. The sanggunian shall see to it that the executive budget is development or results-oriented, povertyfocused and promotes economic growth. The sanggunian shall be guided by fiscal requirements and administrative regulations

Step 6. Enact the appropriations ordinance.

On or before the end of the current fiscal year, the sanggunian shall approve through the enactment of an ordinance the annual budget of the LGU for the ensuing fiscal year on the basis of the estimates of income and expenditures submitted by the LCE. The legislative instrument authorizing the budget is known as an Appropriation Ordinance.

Step 7. Veto and override the budget.

The LCE shall have the power to veto any particular item/s of the appropriation ordinance or resolution directing the payment of money or creating liability, on the ground that it is ultra vires or prejudicial to the public welfare. Changes in the annual budget may be authorized by way of supplemental budgets and the appropriation ordinance authorizing it shall be enacted by the sanggunian in the same manner as that of the annual budget.

C. Budget Review
Its primary purpose is to determine the compliance of the enacted appropriation ordinance with the requirements set forth in the Local Government Code. The DBM reviews the appropriation ordinance. The Sangguniang Panlungsod reviews the appropriation ordinances of their respective barangays.

Step 8. Prepare the Budget Review Matrix (BRM). The BRM will allow the reviewing agency or body to go over, in a single document, the whole budget submitted by the local government for review.

Step 9. Check provision for budgetary requirements.

The aggregate amount appropriated shall not exceed the estimates of income. Full provision shall be made for all statutory and contractual obligations of the LGU concerned, provided however, that the amount of appropriation for debt servicing shall not exceed 20% of the regular income of the LGU concerned,

Step 10. Check consistency of Annual/Supplemental Budget with AIP and ELA. The reviewing authority shall ascertain/check, in addition to the Codes compliance, the consistency of Annual/Supplemental Budget with the approved AIP and the ELA which is subsumed in the approved AIP.

Step 11. Issue the review action.

The review action may be in the form of a review letter and all the findings must be disclosed. - Before the appropriation ordinance is officially returned to the concerned LGU, the stamp of review of the reviewing agency or body must be stamped in every page of the reviewed appropriation ordinance and duly signed by the Regional Director of DBM or attested to by the Secretary of the Sanggunian, as the case may be.

C. Budget Execution
It is the fourth phase of the local government budget process. It involves the release and actual disbursements of funds appropriated for the performance of functions and undertaking of projects and activities. The critical aspect of this phase is the collection of funds such that disbursements do not exceed appropriation.

 Actual funding requirements of programs/ projects/ activities can only be determined through budget execution. Accounting for local government funds has also been simplified and made more understandable with the institution of the New Government Accounting System (NGAS).

Step 12. Prepare the Local Budget Matrix (LBM), Cash Program and performance targets.
The LBM is the yearly overall financial plan of the LGU equivalent to its approved appropriation disaggregated into components or categories.

Budgetary item are categorized in the LBM into the following:

1. 2. 3. 4. 5. By source of appropriation By fund By program/project or by department/office By allotment class By need for clearance

Step 13. Obligate and disburse funds.

Obligations shall be limited to the available allotment for the purpose. The requesting department/office shall:
(1) prepare the (Allotment and Obligation Slip/ALOBS) Obligation Request (ObR) based on disbursement vouchers/purchase requests and other supporting documents; (2) have the ObR signed by its respective head as requesting official; and (3) forward the same to the Budget Officer, together with the supporting documents.

Step 14. Procure goods and services under the New Government Procurement System. It is the policy of the Government that procurement of infrastructure projects, goods and consulting services through public bidding, except as otherwise provided by law.

E. Budget Accountability
It involves the accurate recording and reporting of LGUs income and expenditures and the evaluation of LGUs physical and financial performance.

Step 15. Submit accountability reports.

All departments and offices are required to submit accountability reports to the Local Finance Committee through the Budget Officer in order to effectively monitor the efficiency of the LGUs fund utilization as well as assess performance in attaining prescribed goals and objectives.

Step 16. Evaluate the physical, financial and income performance.

A mid-year or semi-annual review and examination of cost and accomplishments against performance standards shall be conducted.

Step 17. Evaluate the LGU performance.

The Local Finance Committee shall conduct a semi-annual review and general examination of cost and accomplishments against performance standard applied in undertaking development project.

CALENDAR OF ACTIVITIES FY2012 BUDGET PREPARATION

DATE On or Before 15 July 2011 21 22 July 2011 15 August 2011 ACTIVITIES Budget Call Budget Orientation RESPONSIBLE UNITS The Mayor TWG & Admin Officers of All Budget Units All Budget Units

Deadline of Submission of Budget Proposals Review and Evaluation of Budget Proposals Preliminary Budget Hearing
Finalization of Budget Proposals Submission/Presentation to the Mayor for Approval Printing, Reproduction & Binding Submission to the City Council

16 Aug 16 Sep 2011 20 27 Sep 2011

28 30 Sep 2011 03 04 October 2011 05 07 October 2011 10 October 2011

Technical Working Group

City Finance Committee & All Budget Units City Finance Committee City Finance Committee City Budget Department City Finance Committee

QUEZON CITY GOVERNMENT BUDGET FOR 5 YEARS

2008 Php 8.60 Billion 2009 Php 8.8 Billion 2010 Php 9.420 Billion 2011 Php 10.250 Billion 2012 Php 11.060 Billion

Proprietary Equations

BUDGETARY ACCOUNTS
APPROPRIATION Authorization made by ordinance, directing the payment of goods and services from local government funds under specified conditions or for specific purposes Authorization issued by the Local Chief Executive (LCE) to a department/office of the LGU, which allows it to incur obligations, for specified amounts, within the appropriation ordinance Amounts committed to be paid by the LGU for any lawful act made by an accountable officer for and in behalf of the local government unit concerned

ALLOTMENT

OBLIGATIONS

PROPRIETARY ACCOUNTS
ASSETS Economic resources of an agency that are recognized and measured in conformity with generally accepted accounting principles. Economic obligations of an agency that are recognized and measured in conformity with generally accepted accounting principles. EQUITY Interest of the government in an agency which is the excess of an agencys assets over its liabilities

LIABILITIES

PROPRIETARY ACCOUNTS
REVENUE/INCOME Increase in economic benefits during the accounting period in the form of inflows or enhancements of assets or decreases of liabilities that results in increases in equity EXPENSES Decrease in economic benefits during an accounting period in the form of outflow or depletions of assets or incurrence of liabilities that results in decrease in equity

PROPRIETARY ACCOUNTS
Types of Proprietary Funds Enterprise Funds account for and report businesstype activities that serve the public at large

Internal Service Funds account for and report goods and services provided to departments of the same government

BUDGETARY AND PROPRIETARY ACCOUNTING RELATIONSHIP

THANK YOU!