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Business Cycle
Four Phases:
Expansion, B to C and from F
Peak, (Boom) C to D
Contraction D to E (recession),
•
• With increase in entrepreneurial expectations the marginal efficiency of capital
increases
• Hence entrepreneurs make huge investments (upward turning point)
• The multiplier starts its action, bringing an increase in income, which is much
higher than increase in investment, this is the multiplier effect
• Expansion phase
• Abundance of capital goods reduces marginal efficiency of capital, which
discourages further investment.
• Downward turning point
• Reverse action of multiplier
a. Fiscal Policy
In Singapore is guided by the principle that it should support the private sector as
the engine of growth and ensures that the macro environment s stable. The Singapore
government has been prudent and conservative in its budgetary policy. It has balanced
its budget in nearly every year for the last 3 decades.
b. Monetary Policy
is geared towards keeping inflation low and stable for long-term competitiveness
an to ensure that savings are not debase. The government also sets clear and
transparent ground-rules an ensures that markets are competitive.
Inequality
The Philippines has traditionally had a private enterprise economy both in policy
and in practice. The government intervened primarily through fiscal and monetary policy
and in the exercise of its regulatory authority. Although expansion of public sector
enterprises occurred during the Marcos presidency, direct state participation in economic
activity has generally been limited. The Aquino government set a major policy initiative of
consolidating and privatizing government-owned and government-controlled firms.
Economic planning was limited largely to establishing targets for economic growth and
other macroeconomic goals, engaging in project planning and implementation, and
advising the government in the use of capital funds for development projects.
Development Planning
The responsibility for economic planning was vested in the National Economic and
Development Authority. Created in January 1973, the authority assumed the mandate
both for macroeconomic planning that had been undertaken by its predecessor
organization, the National Economic Council, and project planning and implementation,
previously undertaken by the Presidential Economic Staff. National Economic and
Development Authority plans calling for the expansion of employment, maximization of
growth, attainment of fiscal responsibility and monetary stability, provision of social
services, and equitable distribution of income were produced by the Marcos
administration for 1974-77, 1978-82, and 1983-88, and by the Aquino administration for
1987-92. Growth was encouraged largely through the provision of infrastructure and
incentives for investment by private capital. Equity, a derivative goal, was to be achieved
as the result of a dynamic economic expansion within an appropriate policy environment
that emphasized labor-intensive production.
The plan also involved implementing more appropriate, market-oriented fiscal and
monetary polices, achieving a more liberal trade policy based on comparative advantage,
and improving the efficiency and effectiveness of the civil service, as well as better
enforcement of government laws and regulations. Proper management of the country's
external debt to allow an acceptable rate of growth and the establishment of a
"pragmatic," development-oriented foreign policy were extremely important.
Economic performance fell far short of plan targets. For example, the real GNP
growth rate from 1987 to 1990 averaged 25 percent less than the targeted rate, the growth
rate of real exports was one-third less, and the growth rate of real imports was well over
double. The targets, however, did provide a basis for discussion of consistency of official
statements and whether the plan growth rates were compatible with the maintenance of
external debt-repayment obligations. The plan also set priorities. Both Aquino's campaign
pronouncements and the policies embodied in the planning document emphasized
policies that would favorably affect the poor and the rural sector. But, because of
dissension within the cabinet, conflicts with Congress, and presidential indecisiveness,
policies such as land and tax reform either were not implemented or were implemented
in an impaired fashion. In addition, the Philippines curtailed resources available for
The investment incentive system was revised in 1983, and again in 1987, with the
goal of rewarding performance, particularly exporting and labor-intensive production. As
a results of objections made by the United States and other industrial nations to export-
subsidy provisions contained in the 1983 Investment Code, much of the specific
assistance to exporters was removed in the 1987 version. The 1987 Investment Code
delegates considerable discretionary power over foreign investment to the government
Board of Investments when foreign participation in an enterprise exceeds 40 percent.
Legislation under consideration by the Philippine Congress in early 1991 would limit this
authority. Under the new proposal, foreign participation exceeding 40 percent would be
allowed in any area not covered by a specified "negative list."
Fiscal Policy
The Aquino government formulated a tax reform program in 1986 that contained
some thirty new measures. Most export taxes were eliminated; income taxes were
simplified and made more progressive; the investment incentives system was revised;
luxury taxes were imposed; and, beginning in 1988, a variety of sales taxes were replaced
by a 10 percent value-added tax--the central feature of the administration's tax reform
effort. Some administrative improvements also were made. The changes, however, did
not effect an appreciable rise in the tax revenue as a proportion of GNP.
Problems with the Philippine tax system appear to have more to do with collections
than with the rates. Estimates of individual income tax compliance in the late 1980s
ranged between 13 and 27 percent. Assessments of the magnitude of tax evasion by
corporate income tax payers in 1984 and 1985 varied from as low as P1.7 billion to as
high as P13 billion. The latter figure was based on the fact that only 38 percent of
registered firms in the country actually filed a tax return in 1985. Although collections in
Low collection rates also reinforced the regressive structure of the tax system. The
World Bank calculated that effective tax rates (taxes paid as a proportion of income) of
low-income families were about 50 percent greater than those of high-income families in
the mid-1980s. Middle-income families paid the largest percentage. This situation was
caused in part by the government's heavy reliance on indirect taxes. Individual income
taxes accounted for only 8.9 percent of tax collections in 1989, and corporate income
taxes were only 18.5 percent. Taxes on goods and services and duties on international
transactions made up 70 percent of tax revenue in 1989, about the same as in 1960.
Monetary Policy
The Central Bank of the Philippines was established in June 1948 and began
operation the following January. It was charged with maintaining monetary stability;
preserving the value and covertibility of the peso; and fostering monetary, credit, and
exchange conditions conducive to the economic growth of the country. In 1991 the policy-
making body of the Central Bank was the Monetary Board, composed of the governor of
the Central Bank as chairman, the secretary of finance, the director general of the
National Economic and Development Authority, the chairman of the Board of Investment,
and three members from the private sector. In carrying out its functions, the Central Bank
supervised the commercial banking system and managed the country's foreign currency
system.
From the time it began operations until the early 1980s, the Central Bank
intervened extensively in the country's financial life. It set interest rates on both bank
deposits and loans, often at rates that were, when adjusted for inflation, negative. Central
Bank credit was extended to commercial banks through an extensive system of
rediscounting. In the 1970s, the banking system resorted, with the Central Bank's
assistance, to foreign credit on terms that generally ignored foreign-exchange risk. The
combination of these factors mitigated against the development of financial intermediation
in the economy, particularly the growth of long-term saving. The dependence of the
Interest rates were deregulated during the same period, so that by January 1983
all interest rate ceilings had been abolished. Rediscounting privileges were reduced, and
rediscount rates were set in relation to the cost of competing funds. Although the short-
term response seemed favorable, there was little long-term change. The ratio of the
country's money supply, broadly defined to include savings and time deposits, to GNP,
around 0.2 in the 1970s, rose to 0.3 in 1983, but then fell again to just above 0.2 in the
late 1980s. This ratio was among the lowest in Southeast Asia.
Monetary and fiscal policies that were set by the government in the early 1980s,
contributed to large intermediation margins, the difference between lending and
borrowing rates. In 1988, for example, loan rates averaged 16.8 percent, whereas rates
Money supply growth has been highly variable, expanding during economic and
political turmoil and then contracting when the Philippines tried to meet IMF requirements.
Before the 1969, 1984, and 1986 elections, the money supply grew rapidly. The flooding
of the economy with money prior to the 1986 elections was one reason why the newly
installed Aquino administration chose to scrap the existing standby arrangement with the
IMF in early 1986 and negotiate a new agreement. The Central Bank released funds to
stabilize the financial situation following a financial scandal in early 1981, after the onset
of an economic crisis in late 1983, and after a coup attempt in 1989. The money was then
repurchased by the Treasury and the Central Bank--the so-called Jobo bills, named after
then Central Bank Governor Jose Fernandez--at high interest rates, rates that peaked in
Privatization
When Aquino assumed the presidency in 1986, P31 billion, slightly more than 25
percent of the government's budget, was allocated to public sector enterprises--
government-owned or government-controlled corporations--in the form of equity
infusions, subsidies, and loans. Aquino also found it necessary to write off P130 billion in
bad loans granted by the government's two major financial institutions, the Philippine
National Bank and the Development Bank of the Philippines, "to those who held positions
of power and conflicting interest under Marcos." The proliferation of inefficient and
unprofitable public sector enterprises and bad loans held by the Philippine National Bank,
the Development Bank of the Philippines, and other government entities, was a heavy
legacy of the Marcos years.
Burdened with 296 public sector enterprises, plus 399 other nonperforming
assets transferred to the government by the Philippine National Bank and the
Development Bank of the Philippines, the Aquino administration established the Asset
Privatization Trust in 1986 to dispose of government-owned and government-controlled
properties. By early 1991, the Asset Privatization Trust had sold 230 assets with net
proceeds of P14.3 billion. Another seventy-four public sector enterprises that were
created with direct government investment were put up for sale; fifty-seven enterprises
were sold wholly or in part for a total of about P6 billion. The government designated
that about 30 percent of the original public sector enterprises be retained and expected
to abolish another 20 percent. There was widespread controversy over the fairness of
the divestment procedure and its potential to contribute to an even greater
concentration of economic power in the hands of a few wealthy families.
In 1962 the government devalued the peso and abolished import controls and
exchange licensing. The peso fell by half to P3.90 to the dollar. Traditional exports of
agricultural and mineral products increased; however, the growth rate of manufacturing
declined even further. Substantial tariffs had been put in place in the late 1950s, but
they apparently provided insufficient protection. Pressure from industrialists, combined
with renewed balance of payments problems, resulted in the reimposition of exchange
controls in 1968. Manufacturing recovered slightly, growing an average of 6.1 percent
per year in the second half of the decade. However, the sector was no longer the
engine of development that it had been in the early 1950s. Overall real GNP growth was
mediocre, averaging somewhat under 5 percent in the second half of decade; growth of
agriculture was more than a percentage point lower. The limited impact of
manufacturing also affected employment. The sector's share of the employed labor
force, which had risen rapidly during the 1950s to over 12 percent, plateaued. Import
substitution had run its course.
The process of allocating public funds involves the decisions of different fiscal
decision-makers at the various levels of government. Setting the overall allocation of
national government expenditures across programs and projects of departments requires
the enactment of an appropriation which would have to be approved by Congress and the
President. Once an appropriation law is in place, budget authorities from the Department
of Budget Management (DBM) and head of agencies exercise fiscal powers which
determine where public funds and by how much are actually utilized.
Budget Preparation
The overall budget policy for a given year is set by the Development Budget
Coordination Committee or DBCC, an inter-agency body responsible for setting the fiscal
policies of government. The DBCC is chaired by the DBM secretary and the members
include the Department of Finance (DoF) secretary, director general of the National
Economic Development Authority (NEDA), head of the Monetary Board of the Bangko
Sentral ng Pilipinas (BSP) and a representative from the Office of the President.
The composition of the DBCC reflects the different fiscal and socio-economic
development concerns that are taken into consideration and harmonized in the
The DBCC decides on the overall budget policy which will guide the formulation of
the budget. These decisions include the setting of the macroeconomic assumptions.
These assumptions are crucial in the formulation of the budget since the level of revenues
and expenditures are affected by these macroeconomic factors.
After the DBCC deliberates and decides on the overall budget policy, DBM issues
the Budget Call to guide agencies in the preparation of their respective proposed budget.
It defines the budget framework/priorities, the macroeconomic assumptions and fiscal
targets. The Budget Call also prescribes the priority thrusts and spells out the detailed
policies on agency-level budget preparation such as budget ceilings, resource allocation,
required budget preparation documents and formats, and timeline of the budget
preparation phase.
Based on the Budget Call, the agency’s mandate, strategic plans and goals, the
agencies set out formulating their budget. The process involves deciding the allocation of
resources across programs and projects by determining the monetary requirements per
objects of expenditures, i.e., current operating expenditures (personal services and
maintenance and operating expenses) and capital outlay. Agencies also decide on the
allocation of budget across the different bureaus, regional offices and attached agencies.
The head of agency is responsible for the prioritization in the allocation of the agency’s
budget subject to the budget policies prescribed in the Budget Call.
The budgets formulated by agencies are submitted to the DBM and undergo a
series of review and deliberation at the DBM, DBCC and Cabinet levels. The DBM reviews
Staffing Summary
The set of budget documents consolidates the budgets from different agencies of
government. The President’s Budget Message provides information on the overall thrust
of the budget being proposed and an explanation of the sectoral spending priorities and
how it supports development goals.
This constitutes the proposed budget which the President submits to Congress for
approval. The Constitution provides that the President “submits to the Congress within 30
days from the opening of every regular session, as the basis of the general appropriation
bill (GAB), a budget of expenditures and sources of financing including receipts from
existing and proposed revenue measures.”
Budget Legislation
Budget legislation starts once the President transmits the proposed budget to
Congress. Congress plays a central role in this phase. Article VI, Sec. 29 of the
Constitution provides that “No money shall be paid out of the Treasury except in
pursuance of an appropriation made by law.” An appropriation is essentially an
The general appropriations bill goes through roughly the same legislative process
as the passage of any other bills. It undergoes three readings first at the House of
Representatives (HOR) and later at the Senate. Committee-level deliberations are
conducted through public hearings at the Committee of Appropriations at the HOR and
the Committee on Finance at the Senate.
Congress may not increase the appropriations recommended by the President. This
implies that any budget items which Congress wants to increase would have to be
accompanied by concomitant cuts in other items.
The budget of the Judiciary, which enjoys fiscal autonomy, may not be reduced to a
level below the amount appropriated for the previous year.
Education shall be assigned the highest budgetary priority.
The general appropriations bills approved by the two chambers of Congress are
not usually identical. Thus, the two chambers form a bicameral conference committee (or
Approval of the consolidated budget by Congress does not yet complete the
budget authorization phase. Just like any other legislative enactment, the budget bill is
sent to the President for its signature for it to become the General Appropriations Act
(GAA). The President is given thirty (30) days to review and sign the appropriations bill
into law. If the President fails to take action after the said period, the appropriations bill is
deemed approved and enacted.
The President can sign the bill as is or he/she can exercise his/her veto power
before signing. Line-item veto power is granted to the President which allows him/her to
strike out specific budget items or special provisions in the budget bill and thus approve
all other items which he/she does not object to. When veto power is exercised, a
President’s Veto Message is issued wherein the items to be vetoed are identified and the
justification for such a veto is explained.
Reference:
Taxation is the inherent power of the sovereign, exercised through the legislature,
to impose burdens upon subjects and objects within its jurisdiction for the purpose
of raising revenues to carry out the legitimate objects of government.
It is also defined as the act of levying a tax, i.e. the process or means by which
the sovereign, through its law-making body, raises income to defray the necessary
expenses of government. It is a method of apportioning the cost of government
among those who, in some measure, are privileged to enjoy its benefits and must
therefore bear its burdens.
Taxes
Taxes are the enforced proportional contributions from persons and property
levied by the law-making body of the State by virtue of its sovereignty for the
support of the government and all public needs.
1. It is an enforced contribution.
2. It is generally payable in money.
3. It is proportionate in character.
4. It is levied on persons, property, or the exercise of a right or privilege.
5. It is levied by the State which has jurisdiction over the subject or object of taxation.
6. It is levied by the law-making body of the State.
7. It is levied for public purpose or purposes.
Purposes of taxation
1. Revenue or fiscal: The primary purpose of taxation on the part of the government
is to provide funds or property with which to promote the general welfare and the
protection of its citizens and to enable it to finance its multifarious activities.
For example, government may provide tax incentives to protect and promote new
and pioneer industries. The imposition of special duties, like dumping duty,
marking duty, retaliatory duty, and countervailing duty, promote the non-revenue
or sumptuary purpose of taxation.
Theory and basis of taxation
The power of taxation proceeds upon the theory that the existence of government
is a necessity; that it cannot continue without means to pay its expenses; and that
for these means, it has a right to compel all its citizens and property within its limits
to contribute.
The basis of taxation is found in the reciprocal duties of protection and support
between the State and its inhabitants. In return for his contribution, the taxpayer
received benefits and protection from the government. This is the so-
called “benefits received principle.”
The life blood theory constitutes the theory of taxation, which provides that the
existence of government is a necessity; that government cannot continue without
means to pay its expenses; and that for these means it has a right to compel its
citizens and property within its limits to contribute.
In Commissioner v. Algue, the Supreme Court said that taxes are the lifeblood
of the government and should be collected without unnecessary hindrance. They
are what we pay for a civilized society. Without taxes, the government would be
paralyzed for lack of motive power to activate and operate it. The government, for
its part, is expected to respond in the form of tangible and intangible benefits
intended to improve the lives of the people and enhance their moral and material
values.
Benefit-received principle
In return for his contribution, the taxpayer receives the general advantages
and protection which the government affords the taxpayer and his property. One
is compensation or consideration for the other; protection for support and support
for protection.
However, it does not mean that only those who are able to and do pay
taxes can enjoy the privileges and protection given to a citizen by the government.
CLASSIFICATION OF TAXES
2. Property tax - Tax imposed on property, real or personal, in proportion to its value
or in accordance with some other reasonable method of apportionment.
3. Excise tax - A charge imposed upon the performance of an act, the enjoyment of
a privilege, or the engaging in an occupation.
AS TO PURPOSE
1. General/fiscal/revenue tax - imposed for the purpose of raising public funds for
the service of the government.
2. Special/regulatory tax - tax is imposed primarily for the regulation of useful or
non-useful occupation or enterprises and secondarily only for the purpose of raising public
funds.
2. Indirect tax - is demanded from a person in the expectation and intention that he
or she shall indemnify himself or herself at the expense of another, falling finally upon the
ultimate purchaser or consumer. A tax which the taxpayer can shift to another.
1. Specific tax is a tax of a fixed amount imposed by the head or number or by some
other standard of weight or measurement. It requires no assessment other than the listing
or classification of the objects to be taxed.
2. Ad valorem tax is a tax of a fixed proportion of the value of the property with respect
to which the tax is assessed. It requires the intervention of assessors or appraisers to
AS TO GRADATION OR RATE
1. Proportional tax - Tax based on a fixed percentage of the amount of the property
receipts or other basis to be taxed. Example: real estate tax.
2. Progressive or graduated tax - Tax the rate of which increases as the tax base or
bracket increases. Example: income tax.
Digressive tax rate: progressive rate stops at a certain point. Progression halts at
a particular stage.
3. Regressive tax - Tax the rate of which decreases as the tax base or bracket
increases. There is no such tax in the Philippines.
Adam Smith –European economist between 1500 and 1750. One of the greatest
critics of mercantilism. He was strong in emphasizing the disadvantages of borrowing and
expostulated on the advantages of the balanced budget during the years of capitalism.
John Maynard Keynes- Author of “ Keynesian Theory of Deficit Financing”
- The idea of public borrowing was introduce during the
great depression, mainly as a compensatory tool in times
of economic stability.
A. INTERNAL DEBT OR DOMESTIC DEBT is the part of the total government
debt in a country that is owed to lenders within the country.
Types of Internal Debt
Unproductive debt
The government may borrow funds for medium terms needs. These fundds can be
used for development and non development activities. The period of medium term debt
is normally for a period above one year and up to 5 years.
T-Bills are attractive to investors because they offer a very low-risk way to earn a
guaranteed return on invested money.
T-bills can have maturities of just a few days up to the maximum of 52-weeks, but
common maturities are one month, three months or six months. The longer the maturity
date, the higher the interest rate that the T-Bill will pay to the investor
B. EXTERNAL DEBT
The portion of a country’s debt that was borrowed from foreign lenders including
commercial banks, government or international financial institutions.
These loans including interest must usually be paid in the currency, the borrowing
country may sell and export goods to the lender’s country.
A Debt Crisis can occur if a country with weak economy is not able to repay
external Debt due to instability to produce and sell goods and make a profitable return.
Less Credit Worthy Countries usually developing Countries directly borrowed from:
It was formed in 1944 at thye Bretton Woods conference primarily by the Ideas of
Harry Dexter White and John Meynard Keynes.
It is one of the Agencies that keep track of the copuntry’s external debt.
It is composed of 189 MEMBERS and the goal is for the reconstruction of the
international payment system
- Is to end Extreme Poverty , by reducing the share of global population that lives in
extreme poverty to 3 % by 2030.
- To promote shared prosperity by increasing the incomes of the poorest to 40 % of people
in every economy.
Risks of external debt to Philippine economy
References:
1. Wikepedia:
2. Debt http://www.investopedia.com/terms//e/externaldebt.asp#xzz4e0uIEN3G
3. O'Sullivan, Arthur; Sheffrin, Steven M. (2003). Economics: Principles in Action.
Pearson Prentice Hall.p. 264. ISBN 0-13-063085-3
International trade means trade between the two or more countries. International
trade involves different currencies of different countries and is regulated by laws, rules
and regulations of the concerned countries. Thus, International trade is more complex.
International trade is in principle not different from domestic trade as the motivation
and the behaviour of parties involved in a trade do not change fundamentally regardless
of whether trade is across a border or not. The main difference is that international trade
is typically more costly than domestic trade.
1. Import Trade refers to purchase of goods by one country from another country or
inflow of goods from home country to foreign country.
2. Export Trade refers to the sale of goods by one country to another country or
outflow of goods from home country to foreign country
3. Entrepot also known as RE-EXPORT. It refers to purchase of goods (raw) from
one country and then selling them to another country after some processing
operations.
If a nation’s economy were a human body, then its heart would be the central bank.
And just as the heart works to pump life-giving blood throughout the body, the central
bank pumps money into the economy to keep it healthy and growing. Sometimes
economies need less money and sometimes they need more. In this article, we’ll discuss
how central banks control the quantity of money in circulation. (Related reading What Are
Central Banks?)
The methods central banks use to control the quantity of money vary depending
upon the economic situation and power of the central bank. In the United States, the
central bank is the Federal Reserve, often called the Fed. Other prominent central banks
include the European Central Bank, Swiss National Bank, Bank of England, People’s
Bank of China, and Bank of Japan. (Related readingGet To Know The Major Central
Banks)
One of the basic methods used by all central banks to control the quantity of money
in an economy is the reserve requirement. As a rule, central banks
mandate depository institutions to keep a certain amount of funds in reserve against the
amount of net transaction accounts. Thus a certain amount is kept in reserve and this
does not enter circulation. Say the central bank has set the reserve requirement at 9
percent. If a commercial bank has total deposits of $100 million, it must then set aside $9
million to satisfy the reserve requirement. It can put the remaining $91 million into
circulation.
When the central bank wants more money circulating into the economy, it can
reduce the reserve requirement. This means the bank can lend out more money. If it
wants to reduce the amount of money in the economy, it can increase the reserve
requirement. This means that banks have less money to lend out and will thus be pickier
about issuing loans.
In dire economic times, central banks can take open market operations a step
further and institute a program of quantitative easing. Under quantitative easing, central
banks create money and use it to buy up assets and securities such as government
bonds. This money enters into the banking system as it is received as payment for the
assets purchased by the central bank. The bank reserves swell up by that amount, which
encourages banks to give out more loans, it further helps to lower long-term interest rates
and encourage investment. After the financial crisis of 2007-2008, the Bank of England
and the Federal Reserve launched quantitative easing programs. More recently, the
European Central Bank and the Bank of Japan have also announced plans for
quantitative easing.
Central banks work hard to ensure that a nation's economy remains healthy. One way
central banks do this is by controlling the amount of money circulating in the economy.
They can do this by influencing interest rates, setting reserve requirements, and
employing open market operation tactics, among other approaches. Having the right
quantity of money in circulation is crucial to ensuring a healthy and sustainable economy.
Contemporary governments and central banks rarely ever print and distribute
actual physical money to influence the stock of money, instead relying on other controls
such as interest rates for interbank lending. There are several reasons for this, but the
two largest are: 1) new financial instruments, electronic account balances and other
changes in the way individuals hold money make basic monetary controls less
predictable; and 2) history has produced more than a handful of money-printing disasters
that have led to hyperinflation and mass recession.
In short, central banks manipulate interest rates to either increase or decrease the
present demand for goods and services, the levels of economic productivity and the
impact of the banking money multiplier. However, many of the impacts of monetary policy
are delayed and difficult to evaluate. Additionally, economic participants are becoming
increasingly sensitive to monetary policy signals and their expectations about the future.
There are some ways in which the Federal Reserve controls the money stock; it
participates in what is called "open market operations," by which federal banks purchase
and sell government bonds. Buying bonds injects new dollars into the economy, while
selling bonds drains dollars out of circulation. So-called quantitative easing, or QE,
measures are extensions of these operations. Additionally, the Federal Reserve can
change the reserve requirements at other banks, limiting or expanding the impact of
money multipliers. Economists continue to debate the usefulness of monetary policy, but
it remains the most direct tool of central banks to combat or create inflation
Open market operations affect the money supply through buying and selling U.S.
government securities. The Federal Reserve can increase the money supply by buying
securities and decrease the money supply by selling securities.
The required reserve ratio affects the money supply by regulating how much
money banks must hold in reserve. If the Federal Reserve wants to increase the money
supply, it can decrease the amount of reserves required, and if it wants to decrease the
money supply, it can increase the amount of reserves required to be held by banks.
The third way the Federal Reserve's monetary policy regulates the money supply
is through the discount rate, which is the rate at which banks can borrow money from the
Federal Reserve. If the Federal Reserve wants to increase the money supply, it can
decrease the discount rate and encourage banks to borrow more money for lending. If it
wants to decrease the money supply, it can increase the discount rate and discourage
banks from borrowing money.
All of this works to do a few very specific things. Increasing the money supply
through monetary policy can decrease interest rates; increase savings and investments;
and increase consumer spending, therefore expanding the economy. Decreasing the
money supply has the opposite effects.
Provinces – 23 percent
Cities – 23 percent
Municipalities – 34 percent
Barangays – 20 percent
The Code further prescribes that the share of each province, city and municipality shall
be determined on the basis of the following formula:
Population – 50 percent
Land Area – 25 percent
Equal sharing – 25 percent
The Code specifies that these shares of LGUs shall be automatically released.
However, in the event that the national government incurs an unmanageable public sector
deficit, the President, upon the recommendation of the Secretaries of DoF, DILG and
DBM, to make the necessary adjustments in the IRA but cannot lower it further than 30
percent.
A) Level of Government
1. National Government - Department of Agriculture, Department of Health,
Department of Education, etc.
2. Local Government Unit - Provincial LGU, Municipal LGU, Barangay LGU
B) Nature of Expenditure
2. Urbanization, growing population and changing economic needs of the people incur
more expenses in the government.
3. The distribution of public expending in different sectors reflects the priorities of every
administration.
Ibus, Mark Jim(October 13, 2013). Classification and Pattern of Philippine Public
Expenditure. Available from: https://prezi.com/k9m3fx-5wr_b/classification-and-pattern-
of-philippine-public-expenditure/. (Accessed: February 19, 2017)
Great significance has been attached to the 1948 - 1949 recession because it
appeared to be the first post war test of the basic strength of the New Economy equipped
as it was with a whole array of built-in stabilizers. The episode was far more significant as
a test of what might be called the New 'Political Economy, the capacity of government to
fulfil its obligations under the Employment Act of 1946 with respect to the furtherance of
"maximum employment, production and purchasing power."
Recession
It is a significant decline in activity across the economy, lasting longer than a few
months. It is visible in industrial production, employment, real income and wholesale-
retail trade. The technical indicator of a recession is two consecutive quarters of
negative economic growth as measured by a country's gross domestic product (GDP),
although the National Bureau of Economic Research (NBER) does not necessarily need
to see this occur to call a recession.
Inventory Recession
The forces which initiated the downturn had their major impact on the accumulation
of inventories. These initiating factors have been well summarized by. Professor R. A.
Gordon,' as follows:
1.) The increasing availability of goods both at home and abroad exerted increasing
downward pressure on prices, particularly on farm prices.
2.) The postwar abnormal expansion in consumers' demand began to level off. This
resulted from the satisfaction of the most urgent backlogs of demand, the rise in consumer
credit, and increasing price resistance, all leading to a more normal rate of saving.
3.) Private fixed investment failed to maintain its rate of expansion and, on the contrary,
developed a slight declining tendency.
Lessons of Experience
The problem lies deeper than the improvement of scientific method. It is nothing
less than the problem of historical development. The experience of 1948—1949 does not
provide much of a clue to the capacity of the economy and government to handle the
more serious problems of recession. It does indicate, however, that once the problem
was recognized, government proved to be quite flexible in readjusting its policies. The
policies proved to be adequate mainly because of the inherent strength of the economy.
But that raises another question: Had the downturn proved more serious than it actually
was, would the response of government have been adequate? It is to be hoped that it
would have been, but the 1948— 1949 recession throws little light on that question.
References:
http://www.investopedia.com/terms/r/recession.asp
file:///C:/Users/User/Downloads/c2798.pdf
http://www.investopedia.com/articles/pf/09/avoid-five-recession-risks.asp
Budgeting is the process of creating a plan to spend your money. This spending
plan is called a budget. Creating this spending plan allows you to determine in advance
whether you will have enough money to do the things you need to do or would like to do.A
budget is a quantitative expression of a plan for a defined period of time. It may include
planned sales volumes and revenues, resource quantities, costs and expenses, assets,
liabilities and cash flows. It expresses strategic plans of business units, organizations,
activities or events in measurable terms.
According to Fontinelle, “Basically, it's making sure that you're spending less than you're
bringing in and planning for both the short- and long-term.
BUDGET PREPARATION
The budget preparation is e first phase in the local budget process. It involves cost
estimation per PPAs, preparation of budget proposals, executive review of budget
proposals, and preparation of the Budget Message, Local Expenditure Program, and the
Budget of Expenditures and sources of Financing. This phase starts with the issuance of
Budget Call and ends with the submission of executive budget to the Sanggunian on or
before October 16 of each year.
-The LBO explains to Department Heads the major thrusts and policy directions,
sources of income, spending ceilings and budget strategies.
-Each Department Head prepares the budget proposals and submits these to the
LBO for review and consolidation.
-The technical budget hearings are conducted by the LFC to validate the revenue
sources, PPAs, cost estimates and expected outputs for the budget year.
-The LFC evaluates all budget proposals using the output and cost criteria.
-After consolidation of the budget proposal and approval thereof by the LCE, the
LGU shall submit the proposed executive budget not later than October 16 of the current
fiscal year pursuant to Section 318 of RA No. 7160. This is usually done through a State
of the Province/City/Municipality Address, where the LCE presents the proposed Annual
Budget to the Sanggunian and stakeholders.
BUDGET AUTHORIZATION
This is the second phase in the local budget process. This phase starts from the time the
Sanggunian receives the Local Expenditure program submitted by the LCE, and ends
with the enactment of the Appropriation Ordinance and approval thereof by the LCE.
Budget Review
Its primary purpose is to determine whether the ordinance has complied with the
budgetary requirements and general limitations set forth in the Local Government Code
of 1991 as well as provisions of other applicable laws. It starts from the time the reviewing
authority receives the Appropriations Ordinance for the review and ends with the issuance
of the review action.
Step 1. Check the Appropriation Ordinance with the Appended Budget Documents.
A critical aspect of this phase is the collection of funds, such that disbursements
do not exceed appropriations. While seemingly a separate activity, the collection and/or
receipt of revenues are considered an integral part of budget execution.
Budget Accountability
Legal Basis
Any officer of the local government unit whose duty permits or requires the possession or
custody of local government funds shall be accountable and responsible for the
safekeeping thereof in conformity with the accountable by the nature of their duties, may
likewise be held accountable and responsible for the local government funds through their
participation in the use or application thereof. (Section 340, R.A. No. 7160).
Fiscal Responsibility shall be shared by all those exercising authority over the financial
affairs, transactions, and operations of the local government unit. (Section. 305, R.A.
7160).
Distribution of Shares
Section 285 of the Local Government Code as implemented by Article 382 (a), IRR
of RA No.7160, provides the “codal formula” or the manner of allocation of the IRA share
prescribed by Code for the four levels of LGUs as follows:
Sources/References:
Budget Operations Manual for Local Government Units, 2016 Edition (Department of
Budget and Management)
http://www1.worldbank.org/publicsector/LearningProgram/PEAM/DorotinskyBackCh4.pd
f
http://www.mymoneycoach.ca/budgeting/what-is-a-budget-planning-forecasting
Funds for the use of government entities are appropriated or authorized following
a process with the following major steps:
1. Individual agencies prepare their estimates of expenditures or proposed
budgets for the succeeding year and submit these estimates or proposals
contained in required budget forms to the DBM following baseline figures,
guidelines and timetable earlier set;
2. Agencies justify details of their proposed budgets before DBM technical review
panels;
3. DBM reviews and consolidates proposed budgets of all agencies for inclusion
in the President's proposed budget for submission to Congress;
4. Agencies explain the details of their proposed budgets in separate hearings
called by the House of Representatives and the Senate for inclusion in the
General Appropriation Bill;
5. The President signs the General Appropriation Bill into law or what is known
as the General Appropriations Act (GAA).
The topography of the Philippines is by itself a strong reason for a decentralized form of
government. It is composed of more than 7,100 islands. Pre-Spanish history says that the
country was composed of villages called "barangay'. Each barangay was ruled by its own
chieftain, spoke its own dialect, formulated its own laws based on tradition and needs.
There were no alliances between barangay and very little notion of a country. "The people
do not act in concert or obey any ruling body; each man takes care only of himself and of
his slaves."
Centralization came with the invasion of the country by the Spaniards, the
Americans, and the Japanese. A strong central government was needed to control
numerous attempts to regain freedom. When independence was finally restored in 1946,
reconstruction was directed by a strong government. But the innate desire for autonomy
asserted itself through the years. A Local Autonomy Act was passed in 1959 (Republic
Act 2264) to grant fiscal and regulatory powers to local governments. In 1967, a
Decentralization Act (RA 5185) was enacted to increase the financial resources and
powers of local governments. The 1973 Constitution of the Republic mandated that the
state "shall guarantee and promote the autonomy of local governments to ensure their
fullest development as self-reliant communities". These initiatives were stymied by the
martial rule of the country for twenty years. Its end was brought about by the expressed
action of the Filipinos against authoritarianism. Thus, the strengthening of democracy
through people empowerment was on top of the agenda of the Aquino and Ramos
governments. A Local Government Code was enacted in 1991 that institutionalized a
systematic allocation of powers and responsibilities between the national and local
governments. It would be fair to say that the political motive was a strong factor that
influenced devolution. Decentralization was perceived to be an effective means of
diffusing power from the center that would effectively prevent an authoritarian regime,
such as the Marcos regime, from re-emerging in the future. Decentralization was a
1. LEGAL BASIS
Section 284 of RA No. 7160 or the Local Government Code of 1991, which
provides that LGUs shall have a 40% share from the national internal revenue
taxes on collection of the third (3rd) fiscal year preceding the current fiscal year;
and Section 285 which provides the manner of allocation to the LGUs.
Section 286 of RA No. 7160 provides that the share of each local government units
shall be released without need of any further action, directly to the provincial, city,
municipal or barangay treasurer, as the case may be, on a quarterly basis within
five (5) days after the end of each quarter, and which shall not be subject to any
lien or holdback that may be imposed by the national government for whatever
purpose (actually, the allotment for IRA is released comprehensively but cash
allocation is released monthly, 80% of IRA share of LGUs on or before the 8th day
of the month and the remaining 20% on or before the 24th day of every month).
Section 4 of RA No. 9358 or the Supplemental Appropriation for FY 2006 provides
that future local government share in the national internal revenue taxes or IRA
shall henceforth be automatically appropriated.
LGUs % Allocation
Provinces 23%
Cities 23%
Municipalities 34%
Barangays 20%
Total 100%
Lands Official
Management Masterlist of
Land Area 25% Bureau (LMB) Land Area
Equal
Sharing 25%
Total 100%
Php 80,000 for each barangay with a population of not less than one hundred (100)
inhabitants.
Population 60%
Total 100%
5. USES OF FUND
To fund basic services and facilities pursuant to Section 17 of the Local
Government Code of 1991 particularly those which have been devolved by the
National Government.
To fund development projects as identified in the LGUs Annual Investment Plan
(Section 287 of the LGC directs LGUs to set aside not less than 20% of their IRA
for development projects).
6. RELEASE PROCEDURE
BIR submits to DBM certification of collections made and 40% share of LGUs.
DBM verifies with BTr collections remitted and computes the share of LGUs based
on codal formula as provided under Section 285 of RA No. 7160, the Local
Government Code.
DBM Central Office (CO) programs the amount and releases the allotment
comprehensively to the DBM Regional Office (RO) at the start of the year.
DBM CO issues the Notice of Cash Allocation (NCA) monthly for deposit with the
Government Servicing Banks of DBM ROs. Subsequently, the DBM RO issues
the funding check for credit of IRA share to the individual bank account of
the LGUs.
(Source: dbm.gov.ph)
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OBLIGATION
Liabilities legally incurred and committed to be paid for by the government either
immediately or in the future.
In governmental agencies, the basis for accounting for appropriations or contract
authorizations. The obligations are recorded as soon as they are incurred, and
appropriations, allotments, or contract authorizations are reduced accordingly (whether
the expenditures are to be made in the same fiscal period or not).
Financial obligations
Represent any outstanding debts or regular payments that you must make. If you
owe or will owe money to anybody, that is one of your financial obligations. Almost any
form of money represents a financial obligation – coins, bank notes, or bonds are all
promises that you will be credited the accepted value of the item. Most formal financial
obligations, like mortgages, student loans or scheduled service payments, are set down
in written contracts signed by both parties.
The failure to meet obligations is met with punishment, the degree of which
depends on the character of the contract. If an individual fails to make their car payments
regularly, the auto company will repossess the car. Taxes, too, are a form of obligation,
and failing to meet those results in large fines or imprisonment. When large companies
fail and find themselves unable to fulfill their outstanding debts, they can declare
bankruptcy, which initiates the relief of the total debt for the debtor while giving the creditor
an opportunity to recuperate some of their losses in the form of assets held by the debtor.
Obligations
Can be held by any individual or entity that is engaged in any sort of contract with
another party, and broadly speaking, can be written or unwritten. A politician, for example,
has the written obligation to serve all of his constituents within the confines of the law, but
they may also have an unwritten obligation to make decisions that will affect their largest
donors. The existence of these kinds of agreements is nearly impossible to prove and
such obligations cannot be effectively regulated. Justice systems dating back to the
Romans have offered stringent legal enforcement of important contracts.
ACCOUNTING
Is the mechanism used to record activities and transactions that occur within a
business.
The receipt you get when you purchase something at the store.
Interest you earned on your savings account which is documented in your
monthly bank statement.
The monthly electric utility bill that comes in the mail.
Journal
Where these source documents mentioned above are then recorded.
It is also known as a book of first entry.
Records both sides of the transaction recorded by the source document. These
write-ups are known as Journal entries.
Ledger
Financial statements are drawn from the trial balance which may include:
For the purposes of accounting, please forget what you know about credits and
debits. In accounting, debit (Dr.) and credit (Cr.) have nothing to do with plastic cards that
let you buy stuff. In fact, what most beginning accounting students need to know about
Dr/Cr can be boiled down to two sentences.
Debit is on the left. Credit is on the right.
How are debit and credit rules applied to different types of accounts?
DEBIT......NATURE OF A/Cs.......CREDIT
Increase.........ASSETS........Decrease
Decrease......LIABILITIES......Increase
Decrease.........REVENUE.......Increase
Decrease.........EQUITY........Increase
Debits and credits may be derived from the fundamental accounting equation.
They result from the nature of double entry bookkeeping. Two entries are made in each
balanced transaction, a debit and a credit. This allows the accounts to be balanced to
check for entry or transaction recording errors.
200
5 1 account1 350
Feb
account2 350
Owner's Equity = Assets - Liabilities is written from the perspective of the owner. In
accounting this is generally rewritten from the perspective of the business or commercial
entity the books detail:
Entries in the books are in pairs and track the advantage or asset of the company
simultaneously with the disadvantage or liability. In this view the Owner's equity is a claim
of the investor against the company.
Auditing
Is the process of reviewing the financial information prepared by the management
of a company which is the financial statements and the footnotes. These documents are
then to be determined if it conforms to a particular standard that is an applicable financial
reporting framework.
it is also considered as an objective examination and evaluation of the financial
statements of an organization with the purpose to make sure that the records are a fair
and accurate representation of the transactions they prove to represent as.
It is a means of evaluation of the effectiveness of a company’s internal controls. It
is important to maintain an effective system of internal controls in order to achieve:
the goals of the company’s business
• to obtain reliable financial reports on its operations
• to prevent fraud and misappropriation of its assets
• Minimizing its cost of capital.
Audit system
Is both played a part by internal and independent auditors in different but
important manner.
Process of auditing
Can be done the company itself internally or externally by hiring auditors by an
outside firm.
Can also be done by the IRS or Internal Revenue Service, a public sector.
The person or persons who conduct the assessment follows a set of standards
which governs the person or the company being audited.
Audit Evidence
Is the information used by the auditor to determine which audit
opinion to issue.
It includes the information in the
• accounting records, which contains the records of initial entries
• supporting documents such as checks, invoices, and contracts
• the company’s general and subsidiary ledgers.
The evidence gathered by the auditor can be described as one of three types:
• Substantive evidence that describes whether the transactions and balances
listed in the financial statements are presented fairly according
to the applicable financial reporting framework.
• Internal control evidence that determines whether internal controls can be
relied onto detect or prevent misstatements in the financial
statements
1. Audit preparation
Consists of the preparation done ahead by interested parties, such as the auditor, the
lead auditor, the client, and the audit program manager, to ensure that the audit complies
with the client’s objective.
The preparation stage of an audit begins with the decision to conduct the audit.
Preparation ends when the audit itself begins.
2. Audit Performance
Also referred as fieldwork
It is the data-gathering portion of the audit and covers the time period from arrival at
the audit location up to the exit meeting.
It consists of activities including on-site audit management, meeting with the auditee,
understanding the process and system controls and verifying that these controls work,
communicating with team members, and communicating with the auditee.
3. Audit Reporting
It is where the communication begins.
Its purpose is to communicate the results of the investigation. The report should
provide correct and clear data that will be effective as a management aid in addressing
important organizational issues. The audit process may end when the report is issued
by the lead auditor or after follow-up actions are completed.
By following the ISO standards, clause 6.7 of ISO 19011 continues by stating
that verification of follow-up actions may be part of a subsequent audit. “The audit is
completed when all the planned audit activities have been carried out, or otherwise
Types of Auditing
Company law in most jurisdictions requires external audit on annual basis for
companies above a certain size.
3. Forensic Audit
It involves the use of auditing and investigative skills to situations that may involve
legal implications.
it may be required in the following instances:
• Fraud investigations involving misappropriation of funds, money
laundering, tax evasion and insider trading
• Quantification of loss in case of insurance claims
• Determination of the profit share of business partners in case of
a dispute
• Determination of claims of professional negligence relating to the
accountancy profession
5. Tax Audit
Are conducted to assess the accuracy of the tax returns filed by a company and
are therefore used to determine the amount of any over or under assessment of tax
liability towards the tax authorities.
8. Compliance Audit
The company is required to conduct specific audit engagements other than the
statutory audit to comply with the requirements of particular laws and regulations.
Reference:
Accountability
The Glossary of Terms for State auditors defines Accountability as “a person’s
obligations to carry out responsibilities and be answerable for decisions and activities.”
On the other hand, the head of the agency is immediately and primarily responsible
for funds and property pertaining to his agency.
Accountable Officer is any officer or employee of the government who by reason of his
office or duties is required or is permitted to have custody of public funds or property.
The Accountable Officer shall maintain and keep records of his property
accountability and shall render accounts as prescribed by the Commission. The Head of
the Agency may designate such number of property officer or agents as maybe deemed
necessary. Upon appointment or designation he/she must be properly bonded with the
Bureau of Treasury Fidelity Fund.
Responsibility
The acceptance of assigned authority and the obligation prudently to exercise
assigned or imputed authority attaching to the assigned or imputed role of an individual
or group participating in organizational activities or decisions.
Officers covered –
Officers, who by reason of their office or duty, ought to be or are deemed to be in
possession or custody of government funds and property
Persons entrusted with the actual possession or custody of government funds or
property
Head of the agency
Liability
Such obligation generally comes in the nature of penalty but it could be in the form
of a fine, administrative punishment, imprisonment, or a combination of these.
The Accountable Officer is generally liable for the improper or unauthorized use or
misapplication of property, by himself or any person for whose acts he may be
responsible, and for the loss, damage, or deterioration thereof thru negligence,
whether or not it be in his actual custody at the time.
It is therefore the implied duty of the Accountable Officer to carefully choose the person
upon whom to entrust physical custody/possession of property for which he is
accountable.
Measure of Liability – “Money Value” - The Fair market Value of the equipment will be
chargeable to the officer or employee less some allowance for depreciation.
An Accountable officer is secondarily liable and a superior primarily liable for an illegal
act done by the former under the direction of the latter.
An officer whose fidelity is insured in the fidelity fund shall, from the moment he
assumes the duties of office, be considered bonded to the government for the benefit of
whom it may concern for the faithful performance of all duties imposed by law upon him
and for the faithful accounting for all funds and public property coming into his possession,
custody or control by appropriation, collection, transfer or otherwise, as well as for the
lawful payment, disbursement, and expenditures or transfer of all such funds or public
property in his custody or possession under his control as accountable or responsible.
Transfer of Accountability for government property may occur under the following
situations:
When property is no longer serviceable or no longer needed is transferred from one
agency to another without cost or at appraised value.
When property is transferred from one accountable officer to another or from an
outgoing officer to his successor. The former officer shall secure clearance for
property accountability.
The Agency Head has the responsibility to insure government property under the
Property Insurance Fund administered by the GSIS.
Agencies covered are Departments, Commissions, Boards, Bureaus, Officer of the
National and Local Governments, EXCEPT Municipal Governments below 1st class,
Government Owned or Controlled Corporations and their subsidiaries/ affiliates, and
Acquired Assets Corporations.
Properties covered are all insurable assets, contracts, rights of action and other
insurable risks to protect the government against property losses.
Storage
This refers to the scientific and economical receipt, warehousing and issue of materials
for their best safekeeping and rapid availability.
Procedures in Warehousing
Arrangement of Materials
The warehouseman/ storekeeper arranges the materials inside the
warehouse/stockroom in accordance with the storage plan using the right materials
handling equipment.
Recording of Receipts/Deliveries
The warehouseman/storekeeper posts the information taken from the Inspection and
Acceptance Report (IAR) (Appendix 9-3) in the bin card. This information should
reconcile with either the SAI, PR, PO, DR and the stock/property card maintained by the
stock/property clerk with the stocks and the bin card. The receipts, issues and balances
on hand must be properly posted and kept updated.
Reconciliation of entries of bin cards with Stock/property Cards and with Physical
count of stocks on hand.
Inventory Taking
Is an indispensable procedure for checking the integrity of property custodianship.
The physical stock - taking of equipment and supplies serves as a basis for preparing
accounting reports. At the end of each quarter the Accounting and the Supply/ Property
Unit should reconcile their records.
The chief of agencies, are required to take a physical inventory of all the equipment
and supplies of their respective offices at least once a year. Supplies and materials in
stock, including medicines, drugs and medical supplies exclusively for either commissary,
sale, manufacture or relief purposes should be inventoried at least every six (6) months
as of June 30 and December 31 of each year.
Budget Cycle
Budgeting for the national government involves four (4) distinct phases: budget
preparation, budget legislation or authorization, budget execution or implementation and
budget accountability. It is said to be a budget cycle because while distinctly separate,
these processes overlap in implementation during a budget year. Budget preparation for
the next budget year proceeds while government agencies are executing the budget for
the current year. At the same time, the state is engaged in budget accountability as it
reviews the past year's budget.
i. Budget Preparation
The budget preparation phase begins with the Development Budget Coordination
Committee (DBCC). It is headed by the DBM Secretary and its members are the
Secretary of Finance, the NEDA Director-General, and the Bangko Sentral Governor, with
the Office of the President for general oversight.
The Department of Finance (DOF), the Bureau of the Treasury, the Bureau of Internal
Revenue and the Bureau of Customs supportthe DBCC in defining the sources of
financing. They project the revenues that will be generated for the budget year as well as
the borrowings that may have to be tapped.
The DBCC determines the overall economic targets, expenditure levels, the revenue
projection, deficit levels and the financing plan that will be submitted to the President and
the Cabinet for approval.
Once these are approved, the DBM will then issue Budget Call. This requires agencies
to prepare their budgets in accordance with the said guidelines, macro-economic
assumptions, and ceilings. The DBM spells out guidelines, procedures, and timetables.
Then, the DBM will conducttechnical budget hearings whereinagencies defend and
justify their proposals. Organizational and budgetary issues are clarified. The proposed
expenditure programs are confirmed by the agency heads. The DBM consolidates the
budget proposals and then submits them to the Cabinet where the budget is discussed
with the President.
This then goes to the Senate Finance Committee for another round of hearings and
deliberations. The Committee presents the proposed amendments to the House Budget
Bill to the Senate for approval.
The law contains the new appropriations in terms of specific amounts: for salaries,
wages and other personnel benefits; for maintenance and other operating expenses; for
capital outlays, all authorized to be spent by the government for a given year. The
Sample In 2001, the Congress failed to pass the FY 2001 budget, thus the FY 2000
GAA was automatically reenacted.
Cash releases are made to agencies to cover obligations that are current or carried
over from the previous year. However, not all allotment releases require the issuance of
Notice of Cash Allocation releases or NCAs. Examples of these are debt service, customs
duties and taxes, the conversion of liability to equity, or the subsidy to government
corporations. The Cash Release Program is also based on actual obligations of an
agency, as reported in the quarterly trial balance submitted to DBM. Hence, it will not
issue NCAs for unobligated balances of allotments.
Budget implementation
In previous years, the ARP serves as basis for the issuance of either a General
Allotment Release Order (GARO), or a Special Allotment Release Order (SARO). Both
authorize agencies to incur obligations. The GARO was subsequently replaced by the
_what you see is what you get_ policy or WYSIWYG. Currently, DBM no longer adopts
the WYSIWYG instead authorizes the incurrence of obligations through the approval of
the different ABM.
At this phase, the Commission on Audit (COA) figures prominently in the assessment
of agency performance. The COA is the government body tasked with looking at the
legality, propriety and accuracy of government financial transactions. The COA has
auditors assigned to each government agency and it has regional offices to review these
transactions. Those that are considered excessive, inappropriate or illegal are not passed
in audit. COA can recommend means for setting them right, if such is still possible.
Trial balances of agencies, which are submitted to DBM and COA on a quarterly and
annual basis, report how agencies use up their allotments and cash allocations.
The land reform in the Philippines had its beginnings in 1963, when Section 49 of
Republic Act (RA) 3844, or the Agricultural Land Reform Code was enacted, more
specifically on August 8, 1963. This necessitated the creation of the Land Authority. This
was considered to be the most comprehensive piece of agrarian reform legislation ever
enacted in the country that time. The RA No. 3844 was considered as such because this
Act declares share tenancy unlawful in the Philippines. It prescribed a program converting
the tenant farmers to lessees and eventually into owner-cultivators. Moreover, it aimed to
free tenants from the bondage of tenancy and gave hope to poor Filipino farmers to own
the piece of land they are tilling.
On August 23, 2005, President Arroyo signed Executive Order No. 456 and
renamed the Department of Land Reform back to Department of Agrarian Reform, since
“the Comprehensive Agrarian Reform Law goes beyond just land reform but includes the
totality of all factors and support services designed to uplift the economic status of the
beneficiaries”.
The present administration of President Rodrigo R. Duterte, the DAR being the
lead agency for CARP implementation is bent on sustaining the gains of agrarian reform
through its major components- Land Tenure Improvement (LTI), Program Beneficiaries
Development (PBD) and Agrarian Justice Delivery (AJD).
Together with the efforts to fight graft and corruption by the President, it is
imperative to have institutional reforms within DAR structure as a complement to the
above-mentioned DAR components, giving credence, transparency and accountability at
all sectors of the DAR bureaucracy.
At present, DAR Sultan Kudarat continuously strives to work for the remaining 7.33
% of its target, having in mind the administration’s thrust and policy direction, to protect
the rights and welfare of the farmers, ensuring their security of tenure without depriving
the landowners of their right to due process of law and to just compensation.
More than just achieving the numerical target, however, it is also the desire of DAR
Sultan Kudarat to extend quality services to the clients and other stakeholders. To make
sure that same desire is achieved, DAR Sultan Kudarat applied for ISO 9001:2015.
USEC
REGIONAL AGRARIAN
REGIONAL DIRECTOR REFORM ADJUDICATOR
(RARAD)
PROVINCIAL AGRARIAN
REFROM PROGRAM
OFFICER I
(PARPO I)
MARPO MARPO
MARPO MARPO MARPO MARPO MARPO MARPO MARPO MARPO MARPO MARPO MARPO
TACURONG SEN. NINOY
KALAMANSIG COTABATO ISULAN PRES. QUIRINO LAMBAYONG ESPERANZA COLUMBIO BAGUMBAYAN LEBAK LUTAYAN PALIMBANG
AQUINO
PROVINCIAL OFFICE
PERSONNEL
SECTION
GENERAL SERVICES
SECTION
PLANNING
SECTION
BUDGETING
SECTION
ACCOUNTING
SECTION
CASHIRING
SECTION
BUDGET PROCESS
MDS 101 (MODIFIED DISBURSEMENT SYSTEM)
SERVICING OF GOVERNMENT'S MODIFIED DISBURSEMENT SCHEME (MDS)
Sub-accounts maintained by different government agencies the funding for which
comes from the Department of Budget and Management (DBM) in the form of Notice of
Cash Allocation (NCA). Withdrawals there from are government disbursements made by
agencies thru issuance of MDS checks accompanied by Advice of Checks Issued and
Cancelled (ACIC). These are replenished by the Bureau of the Treasury (BTr) on a day
to day basis.
MOOE
PS (MAINTENANCE AND OTHER
(PERSONEL SERVICES) OPERATING EXPENSES)
HRD(HUMAN RESOURCE
DEVELOPMENT)
MFO 1
(AGRARIAN POLICY ADVISORY SERVICES)
MFO 2
(LAND TENURE SERVICES)
MFO 3
(AGRARIAN LEGAL SERVICES)
MFO 4
(TECHNICAL ADVISORY
SERVICES)
- Policy Research
- Formulation and PARCCOM
NATIONAL ASSESSMENT
BUDGET FORMULATION
ENCODED TO URS
(DBM WEBSITE)
GAA (GENERAL
APPROPRIATE ACT)
Geography
Isulan is centrally located and is accessible to all neighboring towns not only within the
province of Sultan Kudarat but also in some municipalities of the province
of Maguindanao, South Cotabato and even that of Davao del Sur. It is bounded on the
north by the municipality of Esperanza, north-east by the municipality of Lambayong; on
the east by Tacurong; on the south by the municipalities of Bagumbayan and Sen. Ninoy
Aquino; on the southeast by the municipality of Norala, South Cotabato, and Santo Niño,
South Cotabato; and on the west by the Municipalities of Lebak and Kalamansig.
Barangays
Economy
Retail stores
Isulan Central Plaza
Novo
MGM Commercial
Valencia Dry Good Store
Sky Commercial
Happy Commercial
CityMall (Under construction)
Banking institutions
Land Band
Philippine National Bank
Metro Bank
One Network Band
BDO
RCBC
Pen Bank
Festival
102 | PA 241 Introduction to Public Administration/ 1 st Year-MPA 2nd Semester
Every month of August 30, the municipality of Isulan is conducting the HAMUNGAYA
FESTIVAL to celebrate its Foundation Anniversary. ISULANONS believe that the wealth
of arts and culture is expressed in many forms and in so many kinds. The HAMUNGAYA
Festival showcases the skills and talents in literary, musical and cultural aspects of the
constituents both the young and the old. It is not only unique but is reflective of a special
talent in the person as well.
The HAMUNGAYA also depicts the thanksgiving festival of its residents who are mostly
engaged in agriculture. This includes rice and corn farming, vegetables and crops
production including the famous African palm which has contributed a lot to the utilization
of its by-products as construction materials – the uniquely woven ”kalakat” known all over
Mindanao.
The festival is divided into two parts: the first part shows the different activities being done
in the farm. After which a thanksgiving is performed for their good harvest. The second
part shows the merrymaking in the form of dance using different properties and materials
that make it very festive.
No doubt, this is a unique form of art, and along with other activities or talent being
displayed during festivities, it is a contribution to the dreams of establishing solidarity
among the peoples in the province of Sultan Kudara
Tourism
Healthcare facilities
Education
Privately run academic schools
Government-run schools
Sultan Kudarat State University (formerly Sultan Kudarat Polytechnic State College)
– Isulan Campus
Mindanao State University - Sultan Kudarat (Graduate School only)
(Based on Department of Finance Department Order No.23-08 Effective July 29, 2008)
Provinces
Sixth Below P 90 M
Cities
Below P 80 M
Sixth
Municipalities
First P 55 M or more
Sixth Below P 15 M
Urban/Rural Classification
1. In their entirety, all municipal jurisdictions which, whether designated chartered cities,
provincial capital or not, have a population density of at least 1,000 persons per square
kilometer: all barangays;
3. Poblaciones or central districts not included in (1) and (2) regardless of the
population size which have the following:
4. Barangays having at least 1,000 inhabitants which meet the conditions set forth in (3)
above and where the occupation of the inhabitants is predominantly non-farming or
fishing.
RURAL AREAS
All poblaciones or central districts and all barrios that do not meet the
requirements for classification of urban.
Cities are classified under the Local Government Code of 1991 (Republic Act No. 7160)
into three categories: highly urbanized cities, independent component cities, and
component cities. Cities are governed by their own municipal charters in addition to the
Local Government Code of 1991, which specifies their administrative structure and
powers. They are given a bigger share of the Internal Revenue Allotment (IRA) compared
to regular municipalities.
As of June 2016, there are 145 cities (35 highly urbanized, 5 independent
component, 105 component) and 1,489 municipalities encompassing the entire nation.
Cities and Municipalities Competitiveness Index
National Competitiveness Council | PhilippinesINDICATORS
Economic Dynamism