The Budget Cycle

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The Budget Cycle

These four phases of the budget cycle overlap in continuing cycles every year. Forinstance, while the Executive implements the budget for the current year, it also

prepare the budget for the next fiscal year or defends it before Congress. Meanwhile,

the execution and accountability phases are implemented simultaneously year-round.

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Budget Preparation

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Budget Preparation

This starts with the Budget Call and endswith the Presidents submissionof the proposed budget to Congress.

What is the Budget Call?

What is Early Preparation?

What is Stakeholder Engagement?

What is Bottom-Up Budgeting?

What are Technical Budget Hearings?

What is the Executive Review?

What is Consolidation, Validation, and Confirmation?

What is a Presentation to President and Cabinet?

What is the Presidents Budget?

1. 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

targets and agency budget ceilings) as set beforehand by the Development Budget

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Coordination Committee (DBCC); and policy guidelines and procedures in the

preparation and submission of agency budget proposals.

Early 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 Presidents 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).

2. 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

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prepare their agency budget proposals. This new process, which was piloted in the

preparation of the 2012 National Budget, is now being expanded towards

institutionalization.

Departments and GOCCs Mandated to ConductCSO Consultations

ORIGINAL SET (Piloted in 2012) NEW SET (Starting 2013)

Department of Health

Department of Education

Department of Social Welfare and

Development

Department of Public Works and

Highways

Department of AgricultureDepartment of Agrarian Reform

National Food Authority

National Housing Authority

National Home Mortgage and Finance

Corp.

Department of Tourism

Department of Transportation and

Communication

Department of Interior and Local

Government

Department of Justice

Department of Labor and EmploymentDepartment of Environment and Natural

Resources

Light Rail Transit Authority

National Electrification Administration

National Irrigation Administration

Note: All other departments and agencies are highly encouraged to undertake the

process.

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Bottom-Up Budgeting

For the first time in history, the National Budget for 2013 will be prepared

using a breakthrough bottom-up approach. As opposed to the conventional way of allocating

resources from top to bottom, grassroots communities will be engaged in designing the National

Budget.

The Aquino government, through the Cabinet Cluster on Human Development and Poverty

Reduction, has identified 300 to 400 of the poorest municipalities and will engage these in

crafting community-level poverty reduction and empowerment plans. This initial salvo of

bottom-up budgeting will focus on rural development programs and the conditional cash

transfer program, and will thus involve DA, DAR, DENR, DSWD, DepEd and DoH. These

agencies will then include the community plans in their proposed budgets.

3. Technical Budget Hearings

These are conducted after departments and agencies submit their

Agency Budget Proposals to the DBM. Here, agencies defend their proposed budgets

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.

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4. Executive Review

The recommendations are presented before an Executive Review

Board which is composed of the DBM Secretary and senior officials. Deliberations here

entail a careful prioritization of programs and corresponding support, vis--vis the

priority agenda of the national government. Implementation issues are also discussed

and resolved.

5. Consolidation, Validation and Confirmation

DBM then consolidates the recommended agency budgets and

recommendations into a National Expenditure Program and a Budget of Expendituresand Sources of Financing (BESF). As part of the consolidating process, the deliberations

by the DBCC will 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.

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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 or

reprioritization. After the President and Cabinet approve the proposed National

Expenditure Plan, the DBM prepares and finalizes the budget documents to be

submitted to Congress.

7. The Presidents Budget

The budget preparation phase ends with the submission of the

proposed national budgetthe Presidents Budgetto Congress. The Presidents

Budget consists of the following documents, which help legislators analyze the contents

of the proposed budget:

Presidents Budget Message (PBM)

This is where 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 the fiscal year and the two previous years.

National Expenditure Program (NEP)

This contains the details of spending for each department and agency by program,

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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 governments 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.

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Budget Legislation

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Budget Legislation

Alternatively called the budget authorization phase, this starts uponthe House Speakers receipt of the Presidents Budget and ends with the

Presidents enactment of the GeneralAppropriations Act.

What are House Deliberations?

What are Senate Deliberations?

What are Bicameral Deliberations?

What is Ratification and Enrollment?

What is the Veto Message?

What is Enactment?

What are Reenacted Budgets?

1. House Deliberations

The House of Representatives, in plenary, assigns the Presidents Budget to the

House Appropriations Committee. The Committee and its Sub-Committees then

schedule and conduct hearings 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

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GAB is approved on Second and Third Reading before transmission to the Senate.

(Note: In the First Reading, the Presidents Budget is assigned to the Appropriations

Committee.)

2. 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 Representatives transmits the GAB. For expediency, however, the

Senate Finance Committee and Sub-Committees 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.

3. 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.

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4. Ratification and EnrollmentThe 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.

5. The Veto MessageThe President and DBM then review the GAB and prepare a Veto Message, wherebudget 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).

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6. Enactment

When the GAA is not enacted before the fiscal year starts, the previous years GAA is

automatically reenacted. This means that agency budgets for programs, activitiesand 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, the Aquino Administrationwith the support of

Congresshas committed to ensure the timely enactment of a new GAA every year.

Reenacted Budgets

When the GAA is not enacted before the fiscal year starts, the previous years 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, the Aquino Administrationwith the support of Congresshas committed to

ensure the timely enactment of a new GAA every year.

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Budget Execution

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Budget Execution

This is where the peoples money is actually spent. As soon as the GAA is

enacted, the government can implement its priority programs and

projects.

What are the Release Guidelines and Program?

What are Budget Execution Documents?

What is Allotment and Cash Release Programming?

What is Allotment Release?

What are Incurring Obligations?

What does the GAA as Allotment Release mean?

What are Cash Allocations?

What is Disbursement?

1. Release Guildelines and Program

Thebudget execution phase begins with DBMs issuance of guidelines on the release

and utilization of funds.

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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.

3. Allotment and Cash Release Programming

To ensure that releases fit the approved Fiscal Program, the DBMprepares 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 and quarter.

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4. 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).

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.

SARO.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 aSpecial Budget Request to the DBM with supporting documents. Once approved, a

SARO is issued.

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5. Incurring Obligations

In implementing programs, activities and projects, agencies incur liabilities on

behalf of the government. Obligations are liabilities legally incurred, which thegovernment 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.

The GAA as Allotment Release

The Aquino Administration plans to design the annual General Appropriations Act as the

comprehensive allotment release document itself. This is being pursued in order to

significantly speed-up the process of releasing the Budget and implementing the programs

and projects that it funds.The 2013 National Budget, currently being prepared, is being

designed in such way. This entails the disaggregation of all budget items into full detail, as

well as the elimination of all lump-sum funds, save for a few exceptions such as the

Calamity Fund. In other words, this reform significantly reduces the need for SAROs.

6. 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 CashDisbursement Ceiling (CDC).

NCA.This is a cash authority issued periodically by the DBM to the operating units

of agencies to 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 agencys submission of

its Monthly Cash Program and other required documents.

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Others Disbursement Authorities.In contrast to NCAs, NCAAs are issued to

authorize non-cash disbursements. CDCs are meanwhile issued to departments with

overseas operations, allowing them to use income collected by their foreign posts for

their operating requirements.

7. 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 thePhilippines.

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.

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Budget Accountability

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Budget Accountability

This phase happens alongside theBudget Executionphase. ThroughBudget Accountability, the DBM monitors the efficiency of fund

utilization, assesses agency performance and provides a vital basis for

reforms and new policies.

What are Performance Targets and Outcomes?

What are Budget Accountability Reports (BARs)?

What does No Report, No Release mean?

What does Review of Agency Performance mean?

What is an Audit?

What is the Performance-Based Incentive System?

1. 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 outcomesusing available resources. These performance measures are set alongside the

preparation of the National Budget; and these are indicated in the OPIF Book of

Outputs (See previous section on Public Expenditure Management). Prior to the

execution of the enacted National Budget, these performance targets are firmed up

during the preparation of BEDs.

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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.

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 theSalary 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 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.

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3. 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 BudgetPerformance Assessment Review (BPAR) is conducted to determine each agencys

accomplishments and performance by the year-end. The DBM regularly reports

results to the President.

4. Audit

Auditing is not within the DBMs 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 COAsaudit reports in confirming agency performance, determining budgetary levels for

agencies and addressing issues in fund usage.

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5. Performance-Based Incentive System

The DBM is also in the process of establishing a performance-based incentive

system which will recognize and reward good performance among governmentemployees to help improve the efficiency of service delivery across all government

institutions.

You may view the infographic and download a printer-friendly versionhere.

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Performance-Based Bonus

Posted byContent Manageron November 27, 2012 inInfographics|0 comments

The Performance-Based Bonus (PBB) system is a merit-based incentive program

that recognizes and rewards exemplary performance in government. Launched by

the Aquino administration in 2012, the PBB ultimately aims to improve the delivery

of goods and services to all Filipinos, as well as institute a culture of excellence and

public service across the bureaucracy.

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