* Budgeting is basically planning and control * Planning involves the development of future objectives and the preparation of various budgets to achieve these goals * Controlling involves the steps taken by management to ensure that the objectives set down at the planning stage are attained, and to ensure that all parts of the organization function are in a manner consistent with organizational policies
A government budget is a plan for financing its activities for a fiscal year prepared and submitted by responsible executive * The budget is an estimate of the proposed expenditures for specified purposes and periods, and embodies the means of financing them during the same time frames * FORMS AND CONTENTS OF THE NATIONAL BUDGET * A budget message setting forth in brief the government’s budgetary thrust for the budget year, including their impact on development goals, monetary and fiscal objectives, and generally on the implications of the revenue, expenditure and debt proposals and: * Summary financial statements setting forth: * Estimated expenditures and proposed appropriations necessary for the support of government including those financed from operating revenues and from domestic and foreign borrowings * Estimated receipts during the ensuing fiscal year under the laws existing at the time the budget is transmitted and under revenue proposals, if any * FORMS AND CONTENTS OF THE NATIONAL BUDGET * Actual appropriations, expenditures and receipts during the last completed year * Estimated expenditures and receipts and actual or proposed appropriations during the fiscal year in progress
Statements of the condition of the National Treasury at the end of last year completed, the estimated condition of the Treasury at the end of the fiscal year in progress and the estimated condition of the Treasury at the end of the ensuing fiscal year * No money shall be paid out of the public treasury or depository except in pursuance of an appropriation law or other specific statutory authority * Government funds or property shall be spent or used solely for public purposes * Trust funds shall be available and may spent only for the specific purpose for which it was created * Fiscal responsibility shall, to the greatest extent, be shared by all those exercising authority over the financial affairs, transactions, and operations of the government agency
Disbursements or disposition of government funds or property shall invariably bear the approval of the proper officials * FUNDAMENTAL PRINCIPLES OF FISCAL OPERATIONS * Claims against government funds shall be supported with complete documentation * All laws and regulations, applicable to financial transaction shall be faithfully adhered to; and * Generally accepted principles and practices of accounting, as well as, of sound management and fiscal administration shall be observed, provided they do not contravene existing laws and regulations * KINDS OF BUDGET * As to nature * Annual – budget which covers one year period, annual appropriation * Supplemental – budget which supplement or adjust a previous budget deemed inadequate , supplemental appropriation * Special – budget of special nature and generally submitted in special forms on account that itemizations are not adequately provided or amounts not included in the Appropriation Act * As to basis * Performance – budget emphasizing the program or services conducted and based on functions, activities, projects , which focus attention upon the general character and nature of work to be done or services to be rendered * Line-item – budget the basis of which are the objects of expenditures such as : salaries and wages, traveling expenses, freight, supplies and materials, equipment etc. * Balanced budget = Revenues= Expenditures * Deficit budget = Revenues < Expenditures * Surplus budget = Revenues > Expenditures * The Budget Process * Budget Preparation * Covers estimation of revenues, the determination of budgetary priorities and activities within the constraints imposed by available revenues and by borrowing limits, and the translation of approved priorities into expenditure levels * Estimates are prepared by various government agencies, reviewed and finalized by the President of the Philippines, and then submitted to the Legislative Department as basis for the preparation of the annual Appropriations Act * Begins with the budget call * Budget call –outlines the priority areas of government activity applicable to the budget year, which begins a year and a month hence * Reiterates the fiscal limits and the approximate rate of increase in government ceilings applicable to the budget year and developing plan, as updated in the long –term fiscal projection in the Budget Message * Budget proposals shall be reviewed on the basis of their own merits * The DBM summarizes the proposals and submits an analysis and recommendation on the proposals, which are submitted to the President before finalization and submission to Congress. * Legislative Authorization -2nd phase of the process relative to the enactment of the General Appropriations bill. * The General appropriations bill presents the proposals of the President for new general appropriations in the coming year. * Proposals are listed by agency or lump sum fund and are detailed by budgetary functions/activities/projects * Each function is briefly described in appropriation language * Any conditions governing agency expenditures are presented as special provisions * General provisions are also provided applicable to all agencies or to groups of agencies * Budget Execution and Operation – 3rd phase of the process * Covers the various operational aspects of budgeting, thus making budgeting as one of the principal tools of management control * Includes the development of operating budget, which indicates the program of work to be done or undertaken, the time it should be done, the manpower and resources needed to carry out the work * Thus, this phase serve as the medium through which plans for operation can be implemented using available resources and funds * Budget Execution and Operation – 3rd phase of the process is comprised of the following: a. Establishment of authority ceilings on obligations b. Evaluation of work and financial plans c. Continuing review of government fiscal position d. Regulation of fund releases e. Implementation of cash payment schedules f. Other related activities such as planning and scheduling of activities * Budget Accountability – last phase of the process consists of : * Periodic reporting by the government agencies of performances under their approved budget * Top management review of government activities and the fiscal policy implementations thereof: and * The actions of Commission on Audit in assuring the fidelity of officials and employees by carrying out the intent of the legislative regarding the handling of receipts and expenditures * Budgetary Accounts consists of : * Appropriation – authorization made by law or other legislative enactment, directing payment of goods and services out of government funds under specific conditions or special purpose * Allotment – authorization issued by the DBM to the government agency , which allows it to incur obligations, for specified amounts, within the legislative appropriation * Obligation – commitment by a government agency arising from an act of duly authorized official which binds the government to the immediate or eventual payment of a sum of money. * Budgetary Accounts System – encompasses the processes of : a. Preparing the Agency Budget Matrix (ABM) b. Monitoring and recording of allotments received by the agency from the DBM c. Releasing of sub-allotment advices (SAAs ) to Regional Offices (RO) by the Central Office (CO), d. Issuance of SAAs/LAAs to Operating Units (OU) by the Regional Office e. Recording and monitoring of obligations * The Allotment Release Order (ARO) is a formal document issued by the DBM to the agency containing the authorization, conditions and amount of agency allocation * The document may be the ABM, which effectively releases the amount indicated is not needing clearance, or * The Special Allotment Release Order (SARO) , which is issued subject to compliance with specific laws or regulations or is subject to a separate approval or clearance by competent authority. * In case of agencies with decentralized accounting procedures, Sub-allotment advices/Letters of Advice of allotments are issued/released