BUDGETARY SYSTEM

Budget Process of the Philippine Government

1. THE BUDGET CYCLE Four Phases in Managing the National Budget:

Budget Preparation
Budget Legislation
Budget Execution
Budget Accountability During the preparation phase, the Executive
prepares the proposed National Budget. This is followed by the
legislation phase where the Congress authorize the General
Appropriations Act. In the execution phase, agencies utilize their
approved budgets and during the accountability phase the executive
phase, agencies utilize their approved, the executive monitor and
evaluate the use of the budget.

2. BUDGET PREPARATION This starts with the Budget Call and ends with
the President’s submission of the proposed budget to Congress. DBCC
sets parameters Budget Call Stakeholders Consultation Agency Budget
Proposals Technical Budget Hearings Executive Review Consolidation,
Validation & Confirmation Presentation To President & Cabinet The
President’s Budget

3. 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 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.

4. BUDGET 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).
5. BUDGET PREPARATION Stakeholder Engagement
 A new feature in budget preparation which seeks to increase citizen
participation in the budget process, departments and agencies are

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 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 preparations of the 2012
National Budget, is now being expanded towards institutionalizations.

6. BUDGET PREPARATION Department and GOCCs Mandated to Conduct

CSO Consultation

7. BUDGET PREPARATION  “Bottom-Up” Budgeting

 The Bottom-up Budgeting program was set-up in 2013 to help the
Philippines to help the Philippines attain its Millennium Development
Goals of inclusive growth and poverty reduction. Now, two years later,
the Department of Budget and Management is holding a two-day
summit to show how far the project has come.
 The Aquino government, through the Cabinet Cluster on Human
Development and Poverty Reduction.
 Two years after Bottom-up Budgeting (BuB) was first implemented in
the 2013 National Budget, the Aquino Administration plans to extend
the program’s reach and ensure the sustainability of BuB-enabled
gains, beginning with a two- day summit to assess and reaffirm the
program’s progress. Under the 2015 budget, BuB covers 1,590
municipalities and cities across the country, and is amply supported
with a budget of P20.9 billion. For 2016, the Administration is proposing
a budget of P24.7 billion to support the implementation of more than
14,300 BuB projects nationwide.

8. BUDGET PREPARATION “The BuB is meant to empower our grassroots

communities and their respective local governments. That’s why we’ve
made improvements to the program by allowing LGUs to directly
implement projects instead of coursing them through the agencies. This
also strengthens the link of accountability between our LGUs and their
constituents,” the budget chief said. The BuB approach was set up to
help the Philippines attain its Millennium Development Goals of
inclusive growth and poverty reduction, all while promoting good
governance at the local level. This is done by increasing citizens’ access
to local service delivery via a demand-driven budget planning process.

9. Program Expenditure Classification (PREXC):

 This approached is adopt by President Duterte Administration.

 a reform that restructures the current Budget by grouping activities
and projects under major programs or key strategies. Through this
innovation, the government will be able to assign performance targets
—both outputs and outcomes—at the level of programs. This way, the
direct link between strategies, budgets and intended results will be
clearer and program monitoring and evaluation can provide evidence-
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 based assessments  PREXC will be implemented in the proposed
Budget for 2018.

10. BUDGET PREPARATION 3. Technical Budget Hearing

 These are conducted after departments and agencies submit their
Agency Budget Proposal to the DBM. Here, agencies defend their
proposal budget 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.

11. BUDGET PREPARATION 4. Executive Review

 The recommendations are presented before an Executive Review
Board which is composed of the DBM Secretary and senior officials. 
Deliberations here entails a careful prioritization of programs and
corresponding support, vis-a vis the priority agenda of the national
government.
 Implementation issues are also discussed and resolved.
12. BUDGET PREPARATION 5. Consolidation, Validation and
Confirmation
 DBM then consolidate 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
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.

13. BUDGET PREPARATION 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 of prioritization.
After the President and Cabinet approve the proposed National
Expenditure Plan, the DBM prepares and finalizes the budget
documents to be submitted to Congress.

14. BUDGET PREPARATION 7. The President’s Budget

 The budget preparations phase ends with the submission of the
proposed national budget –the “President’s Budget”-to Congress.
 The President’s Budget consist of the following documents, which
help legislators analyze the contents of the proposed budget:

15. BUDGET PREPARATION8. The President’s Budget President’s

Budget Message (PBM) This is 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

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 sector context (including overviews of LGU and GOCC financial
positions), breakdown of the expenditures and funding sources for fiscal
year and the two previous year.  National Expenditure Program (NEP)
This contain 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.
16. BUDGET LEGISLATION - also 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 (GAA).

17. BUDGET LEGISLATION  The House of Representative, in plenary,

assigns the President’s Budget to the House Appropriations Committee.
The Committee and its Sub-Committee then schedule and conduct
hearing 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).
18. BUDGET LEGISLATION 1. House Deliberations •As in the House
process, the Senate conducts its own committee hearing 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 Financing Committee and Sub-
Committees usually start hearings on the GAB even 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.
19. BUDGET LEGISLATION 2. Senate Deliberations  As in the House
process, the Senate conducts its own committee hearing 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 usually start
hearings on the GAB even as House deliberations are ongoing.  The

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 Committee submits its proposed amendments to the GAB to plenary
only after it has been formally transmitted by the House.
20. BUDGET LEGISLATION 3. Bicameral Deliberations  Once both
House 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.
21. BUDGET LEGISLATION 4. Ratification and Enrollment  The
Harmonized or “Bicam” Version is then submitted to both Houses,
which will the vote to ratify the final GAB for submission to the
President. Once submitted to the President for his approval, the GAB is
considered enrolled.
22. BUDGET LEGISLATION 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).
23. BUDGET LEGISLATION 6. Reenactment  When the GAA is not
enacted before fiscal year starts, the previous years’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
24. 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.
25. BUDGET EXECUTION 1. RELEASE GUIDELINES & PROGRAM  The
budget execution phase begins with DBM’s issuance of guidelines on
the release and utilization of funds.
26. BUDGET EXECUTION 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.
27. BUDGET EXECUTION 3. ALLOTMENT & 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

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 Cash Release Program (CRP) is also formulated alongside that to set a
guide for disbursement levels for the year and for every month.
28. BUDGET EXECUTION 4. a. 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).
29. BUDGET EXECUTION 4. b. ALLOTMENT RELEASE Agency Budget
Matrix (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.
30. BUDGET EXECUTION 4. c. ALLOTMENT RELEASE Allotment
Release Orders (SAROs) 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.
31. BUDGET EXECUTION 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.
32. BUDGET EXECUTION 6. The GAA as Allotment Release  The FY
2017 budget aims to facilitate the achievement of meaningful national
development goals as emphasized by the Duterte Administration. The
implementation of real change is anchored on the timely and
appropriate execution of this budget. In particular, the policy of using
the General Appropriations Act as an Allotment Order (GAAAO) shall
continue to be adopted to ensure the immediate implementation of
programs, projects and activities. In so doing, resource unpredictability
and delays in project/program implementation are reduced. Likewise,
credibility and transparency in the budget process is expected to be
further enhanced.
Source:http://www.dbm.gov.ph/wp-content/uploads/Issuances/2017/National%20Budget
%20Circular/NBC-567.pdf
33. BUDGET EXECUTION 7. a. 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

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 Allocation (NCA); and in special cases, the Non-Cash Availment
Authority (NCAA) and Cash Disbursement Ceiling (CDC).
34. BUDGET EXECUTION 7. b. CASH ALLOCATION Notice of Cash
Allocation (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.
35. BUDGET EXECUTION 7. c. CASH ALLOCATION Others
Disbursement Authorities. In contrast to NCAs, Non-Cash Availment
Authority (NCAA) are issued to authorize non-cash disbursements.
Cash Disbursement Ceiling (CDC) are meanwhile issued to
departments with overseas operations, allowing them to use income
collected by their foreign posts for their operating requirements.
36. BUDGET EXECUTION 8. 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.  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.
37. 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
38. BUDGET ACCOUNTABILITY 1. PERFORMANCE & 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.  Prior to the execution
of the enacted National Budget, these performance targets are firmed
up during the preparation of BEDs.
39. BUDGET ACCOUNTABILITY 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.
40. BUDGET ACCOUNTABILITY 3. NO REPORT , NO RELEASE • Starting
2012, the DBM will be withholding certain fund releases to agencies if

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 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.
41. BUDGET ACCOUNTABILITY 4. 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
42. BUDGET ACCOUNTABILITY 5. 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.
43. BUDGET ACCOUNTABILITY 6. Performance-Based Incentive System 
The Department of Budget and Management (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. References: http://www.gov.ph/2015/08/25/bottom-up-
budgeting-summit-shows-programs-progress/ Bottom-up Budgeting summit shows
program’s progress August 25, 2015 http://www.rappler.com/move-ph/issues/budget-
watch/145988-proposed-2017-national-budget What's in the proposed 2017 national
budget? Aika Rey Published 10:00 AM, September 17, 2016
http://www.businessmirror.com.ph/duterte-admin-drops-aquinos-grassroots-budgeting-
strategy/ http://business.inquirer.net/225157/govt-adopts-new-system-budget-setting
Gov’t adopts new system in budget setting Philippine Daily Inquirer / 12:22 AM
February 25, 2017 http://www.dbm.gov.ph/wp-content/uploads/2016/PREXC/PREXC.pdf
https://jfvambrosio.wordpress.com/2010/05/17/government-budgeting-experience-in-
the-philippines/http://www.dbm.gov.ph/wpcontent/uploads/Issuances/2017/National
%20Budget%20Circular/NBC- 567.pdf

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