The

Budget
PROCESS
Rizza T. Loquias
Student, Ph. D. Dev. Ed.

Legal Basis
The Philippine Budget Process was
governed by Commonwealth Act No. 246
or the Budget Act which was passed into
law on December 17, 1937 and revised
through the passage of RA 992 or the
Revised Budget Act on June 4, 1954.
Revision was made with PD No. 1177.

THE BUDGET PROCESS IN

GOVERNMENT AGENCIES
Budgeting is essentially a planning process. It is
the determination for a future period of time of
(1) what is to be done
(2) what is to be accomplished
(3) the manner in which it is to be done and
(4) the cost of doing it.

The Budget Cycle

The Government operates under a fiscal year which commence on
January 1 to December 31 of the calendar year. Each fiscal
year, is in turn, divided into quarter-years, commonly called
quarters and numbered consecutively from one to four.
With the emphasis given to the term fiscal year, it is often
assumed that the budget cycle takes from three to five years to
work itself out from the initial planning phase through the final
liquidation of obligations. A new cycle, however, starts each
year and consequently the average budget officer must during
any given fiscal year be actively concerned with least three
different cycles, each of which in a different phase of the cycle.
The first cycle for example, will be concerned with planning
estimates, the second with preparing estimates and securing
legislative authorization, and the third cycle with budget
execution.

Actions taken during the average

complete budget cycle consists of the
following:
1. Basic planning is completed for the preparation
of estimates during the next fiscal year. The
planning covers the development of a specific
budget calendar for the forthcoming estimating
period, detailed schedules of what action are to
be taken during the period, and the initiation of
discussion with program and fiscal policy
agencies as to the problem scope of the new
budget.

2.

DBM standing instruction for budget

preparation are reviewed and changes
released to the agencies. During this review,
problems which arose during the estimating
period just completed are ironed out and
foreseeable new ones arising from changed
condition are studied for their effect on
estimating procedures. Standing instructions
are studied for their effect on estimating
procedures.
Standing
instructions
are
modified as necessary to incorporate agreed
upon changes.

This is followed during the second fiscal year by the actions listed below:

(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)

Department of Budget and Management policy and program

guides for budget preparation are developed and released to the
agencies.
Agencies supplement the Department of Budget and
Management instruction and prepare and submit estimates.
Department of Budget and Management reviews estimates,
recommends a fiscal plan and detailed estimates to the President.
President adopts a fiscal plan and submits his budget and
appropriation request to the Legislative body.
The legislative body reviews the budget and appropriation bills
are enacted.
Department of Budget and Management standing instructions for
preparation of allotment and work plan request are reviewed and
changes released to the agencies.
Agencies supplement Department of Budget and Management
instruction and prepare and submit requests for allotment and
approval of works plans.
Department of Budget and Management reviews request and
released allotments to the agencies for first quarter operations.

Analysis of the cycle indicates the

particular interest and concern of budget
personnel in the first three years of each
cycle. Each of these years requires
positive action by budget personnel to
accomplish the things which must be
done. Since any one cycle is active over
a three to five year period, then all these
different phases must be handled
annually by the budget personnel.

The Budget Process

Budget
Preparation

Budget
Accountability

Budget
Authorization

Budget
Execution

Budgeting is performed on a basis

consistent with the revenue and
appropriation systems.
Revenue system collection and
custody of government funds
Appropriation system control and
ultimate disbursement of funds collected

The Budget Process

(1)Budget Preparation
(2)Budget Authorization
(3)Budget Execution
(4)Budget Accountability

Budget Preparation
This is the formulation of the estimates of expenditures and
involves all departments and agencies.
Budget formulation is done in accordance with programme and
policy guides set forth by authoritative sources.
The DBM releases the so-called budget call that contains the policy
and programme guides and technical instructions for budgeting to
the different departments, bureaus, and agencies. Within these
limits and other supplementing internal policies or guides, the
various departments, agencies, and offices prepare their detailed
requirements and submit this estimates to DBM which reviews all
estimates in the light of estimated revenues, the soundness of the
proposals made, and their conformance to government policy. It
then recommends action to the President who reviews decisions.

 The approved estimates, along with

appropriate analysis and statements
indicating the budget status of the
government and the estimated impact of
the budget on various aspects of
national life, are then presented by the
President to the legislative body as
appropriation proposals.

Budget Authorization
Refers to the legislative consideration
and approval of the appropriations bill.
This involves a detailed review of the bill
by the legislative body and eventual
translation into an appropriate bill.

 The House of Representatives, sitting as a

Committee of the whole, studies and reviews
the bill. Following discussions and debate, the
bill becomes the appropriation bill. The
Appropriations Bill is then forwarded to the
Senate for their further study and review.
When both houses have finally come up with
their final decision, a conference committee is
created represented by members of both houses
to thresh out their differences and when all the
differences have been settled, the bill is sent to the
President for final approval.

 The General Appropriation Act shall be

presented in the form of budgetary
programs and projects for each agency
of the government, with the
corresponding appropriations for each
program and project, including statutory
provisions of specific agency or general
applicability. The General Appropriation
Act shall also contain an itemization of
personal services which shall be
prepared before enactment of said Act.
(Sec.30, P.D. No. 1177)

Budget Execution
This consists of activities necessary to
place the approved budget in operation.
Covers the operational phase of
budgeting. It involves the allotment and
release of appropriations to the operating
departments, bureaus and offices, and
the incurrence of expenditures.

 At this stage, firm plans for the use of appropriates funds

are adopted and budgetary controls put in force to direct
and limit the spending of funds according to plans. It is at
this point that the budgeting serves as one of the principal
tools of management. Plans and programmes envisioned
during the preparation step are now in effect. To secure
planned performance through sound use of the resource
made available, departments, bureaus and offices are
required to program their expenditures and work in
quarterly periods. In preparation for the release of such
allotments and incurrence of expenditures, department,
bureaus, offices, as early as the completion of the
appropriations bill, finalize their work and financial plans.
Shortly after the issuance of such allotments, agencies
submit their work and financial plans to the Department of
Budget and Management.
These plans serve as the operating budget of the
agencies by which expenditures and works performance
are controlled.

Under this phase of the budget

process, the budget serves as a tool
and management controls.
Fiscal control in such a way that expenditures
are controlled to adequately result in the
optimum performance kept within the limits of
available resources.
Management control in the sense that, it is
used in the attainment of the desired goals in
the most economical and efficient utilization of
public funds.

Program of Expenditures
The first step in the Budget Execution phase
of the Budget Process is the formulation of a
program of expenditures of the national
government.

The DBM Secretary shall recommend to the

President the years program of
expenditures for each agency of the
government on the basis of the authorized
appropriations. The approved
expenditure program shall constitute the
basis for fund releases during the fiscal
period, subject to such policies, rules and
regulations as may be approved by the
President. (Sec 39, PD No. 1177)

The Program of Expenditures should be

comprehensive and should reflect:
Total personal services
Total maintenance and other operating expenses
Total capital outlays, broken down into
(1) land, land improvements and structures
outlays
(2) construction outlays
(3) equipment outlays
(4) investment outlays and
(5) loans outlays.

Budget Accountability
Concerns the reporting of actual performance
against plans.
Consists of:
Periodic reporting by the departments, bureaus
and offices of their performance under the
approved budget
Review of government activities and the fiscal
and policy implications thereof to management
in all levels and
The actions of the audit office in assuring the
fidelity of officials and employees with regard to
handling government receipts and
expenditures.

While emphasis in audit may be on the legality of

actions taken during budget execution. i.e.
whether funds are spent as authorized by the
legislature, management review is concerned
primarily with programmes and performance.
Thus the techniques of budget accountability
are those concerned with reporting and
interpreting the meaning or significance of data
as reported.

FORM AND CONTENT OF THE BUDGET

In accordance with Section 14 of PD 1177,
the budget proposal of the President shall
include current operating expenditures and
capital outlays. It shall comprise such funds as
may be necessary for the operation of the
programs, projects and activities of the various
departments and agencies.
The proposed General Appropriations Act
and other Appropriations Acts necessary to
cover the budget proposals shall be submitted
to the National Assembly to accompany the
presidents budget submission.

The budget shall be presented to the National Assembly in

such form and content as may be approved by the President
and may include the following:

1. a budget message setting forth in brief

the governments budgetary thrusts for
the budget year, including their impact
on development goals, monetary and
fiscal objectives, and generally on the
implications of the revenue, expenditure
and debt proposals; and

2. summary financial statements setting forth:

estimated expenditures and proposed appropriation necessary for the
support of the Government for the ensuing fiscal year, including those
financed from operating revenues and from domestic and foreign
borrowings;
estimated receipts during the ensuing fiscal year under laws existing at
the time the budget is transmitted and under the revenue proposals, if
any, forming part of the years financing program;
actual appropriations, expenditures, and receipts during the last
completed fiscal year;
estimated expenditures and receipts and actual or proposed
appropriations during the fiscal year in progress.
Statements of the condition of the National Treasury at the end of the
last completed fiscal year, the estimated condition of the Treasury at
the end of the fiscal year in progress and the estimated condition of the
Treasury at the end of the ensuing fiscal year, taking into account the
adoption of financial proposals contained in the budget and showing,
at the same time, the unencumbered and unobligated cash resources;
Essential facts regarding the bonded and other long-term obligations
and indebtedness of the government both domestic and foreign,
including identification of recipients of loan proceeds; and
Such other financial statements and data as are deemed detail the
financial condition of the government.

BUDGET ESTIMATES
Sec. 16 of PD 1177 provides that each
head of department, office or agency of
the National Government, including the
Legislative and Judicial Branches, and
including government-owned or controlled
corporations shall submit his request for
appropriations to the Budget Commission
in accordance with the budget calendar,
format, and such rules and regulations.

The budget estimates of agencies shall include the following

information:
1. objectives, functions, activities, programs and projects
showing the general character and relative importance
of the work to be accomplished or the services to be
rendered, and the principal elements of cost involved;
2.

linkage of the work and financial proposals to

approved development plans;

3.

estimated current operating expenditures and capital

outlays, with comparative data for the preceding and
current budget years;

4.

Identification by region, pursuant to policies on the

regionalization of government operations;

5.

Financial sources, reflecting all revenues, proceeds of foreign

and domestic borrowings, and other sources, particularly
those which accrue to the general Fund;

6.

Contingent liabilities, including national government

guarantees obligations of government owned or controlled
corporation in their subsidiaries;

7.

Brief description of the major thrusts and propriety programs

and projects of the budget year, results expected for each
budgetary program and project, nature of work to be
performed, estimated cost per unit of work measurement,
including the various objects of expenditures for each project;

8.

Organization charts and staffing patterns indicating the list of

existing and proposed position with corresponding salaries,
and proposals for positions classifications and salary
changes, dully supported by adequate justification.