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 Government accounting is primarily budgetary accounting. It does not only aim to provide
information on past events and transactions, but also budget information in accordance with
 The Philippine Constitution and other laws require government funds to be utilized in
accordance with a national budget that is duly approved by legislation.

The National Budget (Government Budget)

 Is the government’s estimate of the sources and uses of government funds within a fiscal year.
 Forms the basis for expenditures and is the government’s key instrument for promoting its
socio-economic objectives.

Budget cycle – summarizes the formulation of the national budget

The Budget Cycle

Four Phases:
1. Budget Preparation
2. Budget Legislation
3. Budget Execution
4. Budget Accountability

Budget Preparation
 The budget preparation in the Philippines uses a “bottom-up” approach. Under this approach,
several parties participate in the budget preparation, starting from the lowest to the highest
levels of the government. Government agencies are also tasked to increase the participation of
citizen-stakeholders in the budget preparation.
 “Top-down” budgeting – is the opposite of bottom-up budgeting, wherein the budget
preparation starts from the agency heads.
 In 2011, the Philippine Government attempted to start a new tradition by shifting from the old
incremental system of budgeting to the zero-based budgeting approach. (The Philippine Public
Transparency Reporting Project, January 11, 2011)

Incremental budgeting Zero-based budgeting

 The current year’s budget is formulated  The current year’s budget is formulated
based on the previous year’s budget, which is without regard to the previous year’s budget.
adjusted for any variances experienced in the Government agencies are required to justify
past. Presumably, the proposed programs their current year’s proposed programs and
and expenditures in the previous year are expenditures, irrespective of whether these
automatically approved in the current year. are new or carried over from the previous
 Uses a “roll-over” approach.  Uses a “back-to-zero” or “clean slate”
 Prone to abuse.  Promotes efficient and effective utilization of

1. Budget call
The budget preparation starts when the Department of Budget and Management (DBM) issues a
Budget Call to all government agencies. The budget call, among other things, the next fiscal year’s
targets, the agency’s budget ceiling, and other guidelines in the completion and submission of agency
budget proposals.

Relevant terms:
 Balanced budget – prepared in such a way that estimated revenues exceed estimated
expenditures. If actual revenues exceed actual expenditures, the government earns a surplus. If
expenditures exceed revenues, the government incurs a deficit.
 Annual budget – covers a period of one year and forms the basis for the annual appropriation.
 Special budget – provides for items not adequately covered or not included in the general
appropriations act.
 Line item budget – focuses on specific expenditures such as salaries and wages, travel expenses,
freight, supplies, materials and equipment.
 Performance budget – a plan of activities to be undertaken, including their related costs, with the
emphasis on meeting targets and desired results. The main focus is on the work to be done or
services to be rendered.
 Obligations budget – focuses on expenditures incurred in the current year which are to be paid
either in the same year or in the following year.

2. Budget hearings
– are conducted after the agencies submit their budget proposals. Each agency defends its budget
proposal before the DBM.
The DBM: (1) deliberates on the budget proposals, (2) makes recommendations, and (3) consolidates
the deliberated proposals into the National Expenditure Program (NEP) and Budget of Expenditures and
Sources of Financing (BESF). The DBM then submits the proposed budget to the President.

3. Presentation to the Office of the President

The President and Cabinet members review the proposed budget. After the President approves the
proposed budget, the DBM finalizes the budget documents to be submitted to the Congress. At this
point, the proposed budget is referred to as the “President’s Budget.”

The President’s Budget contains the following documents which are intended to assist the Congress
in their review and deliberation of the proposed national budget:

a. President’s Budget Message – contains the President’s explanation of the country’s fiscal policy
and budget priorities.
b. National Expenditure Program (NEP) – contains the details of all the government entities’
proposed expenditures in the coming year.
c. Budget of Expenditures and Sources of Financing (BESF) – contains the estimated expenditures
accompanied by estimates of expected sources of financing.
d. Other documents aimed to provide further explanation of selected items in the NEP (e.g., details
of key programs and projects and staffing summary).

Government funds shall only be spent in pursuance of an appropriation made by law. Therefore, due
process must be undertaken to legalize the proposed budget.

4. House Deliberations
Upon receipt of the President’s Budget, the House of Representatives conducts hearings to
scrutinize the various agencies’ respective proposed programs and expenditures. Thereafter, the House
of Representatives prepares the General Appropriations Bill (GAB).

5. Senate Deliberations
The Senate conducts its own deliberations on the GAB. These normally start after the Senate
receives the GAB from the House of Representatives. However, for expediency, hearings in the Senate
start even as Representatives deliberations are ongoing.

6. Bicameral Deliberations
After deliberations in both houses are finished, a committee called the Bicameral Conference
Committee is formed to harmonize any conflicts between the Representatives and Senate versions of
the GAB.

The harmonized GAB (“Bicam” version is submitted back to both Houses for ratification. After
ratification, the final GAB is submitted to the President for enactment.

7. President’s enactment
The president enacts the budget, which is now known as the General Appropriations Act (GAA).
Before enactment though, the President may exercise his veto power as conferred to him under the
Philippine Constitution.

Relevant provision of law:

 When the proposed budget is not enacted before the fiscal year starts, the last year’s
GAA is automatically reenacted. The last year’s GAA shall be used in the current year until
a new general appropriations bill is passed by the Congress. (Art. VI, Sec. 25 (7), Philippine

The Approved Budget

Approved Budget – is the expenditure authority derived from appropriation laws, government
ordinances, and other decisions related to the anticipated revenue or receipts for the budgetary period.
The approved budget consists of the following:

New General Appropriations 01
Continuing Appropriations 02
Supplemental Appropriations 03
Automatic Appropriations 04
Unprogrammed Funds 05
Retained Income/Funds 06
Revolving Funds 07
Trust Receipts 08

*The Unified Accounts Code Structure (UACS) refers to the standard coding system used in
financial reporting of the National Government.

 Appropriation – is the authorization made by a legislative body to allocate funds for purposes
specified by the legislative or similar authority.

1. New General Appropriations – are annual authorizations for incurring obligations during a specified
budget year, as listed in the GAA.

2. Continuing Appropriations – are the authorizations to support obligations for a specific purpose or
project, such as multi-year construction projects which require the incurrence of obligations even
beyond the budget year.

3. Supplemental appropriations – are additional appropriations authorized by law to augment the

original appropriations which proved to be insufficient for their intended purpose due to economic,
political or social conditions supported by a Certification of Availability of Funds from the BTr.

4. Automatic appropriations – are the authorizations programmed annually or for some other period
prescribed by law which do not require periodic action by Congress.

5. Unprogrammed funds – are standby appropriations authorized by Congress in the annual GAA which
may be availed only when any of the following instances occur.
a. Revenue collections exceed the original revenue targets in the Budget of
Expenditures and Sources of Financing (BESF) submitted by the President to the
b. New revenues are collected or realized from sources not originally considered in the
BESF; or
c. Newly-approved loans for foreign-assisted projects are secured or when conditions
are triggered for other sources of funds such as perfected loan agreements for
foreign assisted projects.

6. Retained Income/Funds – collections which are authorized by law to be used directly by agencies
concerned for their operation or specific purposes.

7. Revolving funds – receipts derived from business-type activities of departments/agencies which are
authorized by law to be constituted as such and deposited in an authorized government depository
bank. These funds shall be self-liquidating and all obligations and expenditures incurred by virtue of
said business-type activity shall be charged against said fund.
8. Trust receipts – receipts by any government agency acting as trustee, agent, or administrator for the
fulfillment of some obligations or conditions.

Relevant provision of law:

 A special appropriations bill shall specify the purpose for which it is intended, and shall be
supported by funds actually available as certified by the National Treasurer, or to be
raised by a corresponding revenue proposal therein. (Art. VI, Sec. 25(4), Philippine
 No law shall be passed authorizing any transfer of appropriations; however, the
President, the President of the Senate, the Speaker of the House of Representatives, the
Chief Justice of the Supreme Court, and the heads of Constitutional Commissions may, by
law, be authorized to augment any item in the general appropriations law for their
respective offices from savings in other items of their respective appropriations. (Art VI,
Sec. 25(5). Philippine Constitution)

This is the phase where government funds are spent.

8. Release guidelines and BEDs – The DBM issues guidelines on the release and utilization of funds while
the various agencies submit their Budget Execution Documents (BEDs). A BED summarizes an agency’s
fiscal year plans and performance targets. It includes the following:
a. physical and financial plan,
b. monthly cash program,
c. estimate of monthly income, and
d. list of obligations that are not yet due and demandable.

The following are the major recipients of the budget:

1. National Government Agencies (NGAs) – include all agencies within the executive,
legislative, and judicial branches of government, e.g., commissions, departments, Land Bank
of the Philippines, Social Security System, etc.
2. Local Government Units (LGUs)
3. Government Owned and Controlled Corporations

9. Allotment – The DBM formulates the Allotment Release Program (ARP) to set the limit for allotment
releases during the upcoming year. This is used as a control device to ensure that releases conform
to the national budget. Alongside, is a Cash Release Program (CRP), which sets the disbursement
limits for the year, for each quarter, and for each month.

 Allotment – is an authorization issued by the DBM to government agencies to incur obligations

for specified amounts contained in a legislative appropriation in the form of budget release
documents. It is also referred to as Obligational Authority.

It is illegal for a government entity to incur obligations without having first received the
“Allotment.” Moreover, the type and amount of obligations to be incurred must conform to
those that are specified in the “Allotment.”
 Obligation – is an act of a duly authorized official which binds the government to the immediate
or eventual payment of a sum of money. Obligation may be referred to as a commitment that
encompasses possible future liabilities based on current contractual agreement.

The following are the documents used in releasing allotments to government agencies: