*BUDGET PREPARATION*

This starts with the Budget Call and ends with the President’s submission of the proposed budget to
Congress.

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 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 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).

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 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 Conduct CSO Consultations
ORIGINAL SET (Piloted in 2012)
NEW SET (Starting 2013)
Department of Health
Department of Education
Department of Tourism
Department of Transportation and Communication
Department of Social Welfare and Development
Department of Public Works and Highways
Department of Agriculture
Department of Agrarian Reform
National Food Authority
National Housing Authority
National Home Mortgage and Finance Corp.
Department of Interior and Local Government
Department of Justice
Department of Labor and Employment
Department 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.

“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.

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-à-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 Expenditures and 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.

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 President’s Budget

The budget preparation phase ends with the submission of the proposed national budget—the
“PRESIDENT’S BUDGET”—to Congress. The President’s Budget consists of the following documents,
which help legislators analyze the contents of the proposed budget:
 President’s 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, 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.
*BUDGET LEGISLATION*
Alternatively 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.

1. House Deliberations
The House of Representatives, in plenary, assigns the President’s 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 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.)

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.

4. Ratification and Enrollment

The 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 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).

6. Enactment
When the GAA is not enacted before the fiscal year starts, the previous year’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, the Aquino Administration—with the support
of Congress—has 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 year’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, the Aquino Administration—with the support of
Congress—has committed to ensure the timely enactment of a new GAA every year.
*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.

1. Release Guidelines and Program

The budget execution phase begins with DBM’s issuance of guidelines on the release and utilization of
funds.

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 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 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.

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 a Special Budget Request to the DBM with supporting
documents. Once approved, a SARO is issued.

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.

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 Cash Disbursement 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 agency’s submission
of its Monthly Cash Program and other required documents.
 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 the Philippines.

Note: 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.

*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.

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 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 (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.

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 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 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.

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 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.

4. 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.
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 government employees — to help improve the
efficiency of service delivery across all government institutions.