CHAPTER 2

ACCOUNTING FOR BUDGETARY

generally on the implications of the revenue,

ACCOUNTS
expenditure and debt proposals; and
2. Summary financial statements setting forth:
Section 29 (1), Article VI of the 1987 FUNDAMENTAL PRINCIPLES OF FISCAL
Constitution provides, “No money shall be paid out of OPERATIONS
the treasury except in pursuance of an appropriation by Budget activities are governed by legal
law.” The aforecited lays down the legal bedrock for provisions/fundamental principles relating to financial
government accounting, particularly for budgetary transactions and operations of the government. The
accounts. It simply means that no public fund may be principles, as provided for by the law, are ;
spent if there is no law authorizing the payment of money 1. No money shall be paid out of the public treasury
and specifying the purpose for which the same will be or depository except in pursuance of an
spent. Accordingly it may be said that accounting for appropriation law or other specific statutory
budgetary accounts formally commences upon enacted of authority;
the General Appropriations Act (GAA), which 2. Government funds or property shall be spent or
contains the legal authorization to use public money for used solely for public purpose;
the various programs, activities and project of the 3. Trust funds shall be available and may be spent
national government. only for the specific purpose for which the trust
ACCOUNTING SYSTEMS was created;
The General Accounting Plan (GAP) shows the overall 4. Fiscal responsibility shall, to he greatest extent,
accounting system of a government agency/unit. It be shared by all those exercising authority over
includes the source documents, flow of transactions and the financial affairs, transactions, and operations
its accumulation in the books of accountants and finally of the government agency;
the conversion into financial information/data presented 5. Disbursements or disposition of government
in the financial reports. The following accounting funds or property shall invariably bear the
systems are: approval of the proper officials;
1. Budgetary Accounts System 6. Claims against government funds shall be
2. Receipt/Income and Deposit System supported with complete documentation;
3. Disbursement System 7. All laws and regulations applicable to financial
4. Financial Reporting System transaction shall be faithfully adhered to; and
THE NATIONAL BUDGET 8. Generally accepted principles and practices of
Budgeting is basically planning and control. accounting, as well as, of sound management
Planning involves the development of future objectives and fiscal administration shall be observed,
and preparation of various budgets to achieve these provided they do not contravene existing laws
objectives. Control involves the steps taken by and regulations.
management to ensure that all parts of the organization KINDS OF BUDGET
function are in a manner consistent with organizational 1. As to Nature
policies. A government budget is a plan for financing a) Annual Budget- basis of an annual
the government activities for a fiscal year prepared and appropriation, budget which covers a
submitted by responsible executive to a representative period of 1 year.
body whose approval and authorization are necessary b) Supplemental Budget-supplements or
before the plan can be executed. Budget is an estimate of adjust a previous budget which is
the proposed expenditures for the specified purposes and deemed inadequate for the purpose it is
periods, and embodies the means of financing them intended. It is the basis for a
during the same timeframes. supplemental appropriation.
c) Special Budget- budget of special nature
FORMS AND CONTENTS OF THE NATIONAL and generally submitted in special forms
BUDGET on account that itemizations are not
Section 22, Article VII of the Constitution of the adequately provided in the appropriation
Philippines provides that “The President of the act or that the amounts are not at all
Philippines shall submit to congress within 30 days from included in the appropriation Act.
the opening of every regular session, as the basis of the 2. As to Basis
general appropriation bill, a budget of expenditures and a) Performance Budget- budget
sources of financing, including receipts from existing and emphasizing the program or services
proposed revenue measures.” Budget shall be presented conducted and based on functions,
to congress in such form and content as may be approved activities and projects which focus
by the president and may include the following: attention upon the general character and
1. A budget message setting forth in brief the nature of work to be done, or upon the
government’s budgetary thrust for the budget services to be rendered.
year, including their impact on development b) Line-Item Budget- budget the basis of
goals, monetary and fiscal objectives, and which are the objects of expenditures
 such as: salaries and wages, traveling and conditions applicable to all agencies or to groups of
expenses, freight, supplies and materials, agencies.
equipment, etc.
3. As to approach and technique Appropriations are approved by the legislative body in
a) Zero-Based Budgeting- process which the form of;
requires systematic consideration of all  A General Appropriation Law which covers most of
programs, projects and activities with the the expenditures of government;
use of defines ranking procedures. It is  Supplemental Appropriations laws that are passed
analyzed and presented in ‘’ decision from time to time, to augment or correct an already
packages’’ or key budgetary inclusions. existing appropriation; and
b) Incremental Approach- budget where  Certain automatic appropriations intended for fixed
only additional requirements need and specific purposes.
justifications. Focuses analysis of
incremental changes in the budget and 3..Budget Execution and Operation
maybe done within the context of The third phase of the budget process covers the
performance and program budgeting. various operational aspects of budgeting, thus making
BALANCED BUDGET budgeting as one of the principal tools of management
Budget where the proposed expenditures are control to ensure that public funds are spent only for the
equal to or less than the estimated revenues. Currently, specific purposes for which they are intended. It includes
the government priorities to achieve a balanced budget the development of the specific purposes for which
by increasing revenues and cutting on expenditures. indicates the program of work to be done or undertaken,
the time within which it should be done, the manpower
THE BUDGET PROCESS and other resources needed to carry out the work, and
finally, the peso amounts required to accomplish the
1.Budget Preparation propose program. Thus, budget execution and operation
Initial Phase -This covers estimation of government serve as the medium through which plans for operation
revenue, the determination of budgetary priorities and can be implemented using available resources and funds.
activities within the constraints imposed by available
revenues and by borrowing limits, and the translation of Budget Execution and operation is comprised, among
approved priorities and activities into expenditure levels. others, of the following:
Estimates are prepared by the various agencies, reviewed  the establishment of authority ceilings on
and finalized by the president of the Philippines, and obligations,
submitted to the Legislative Department as basis for the  the evaluation of work and financial plans for
preparation of the annual appropriation Act. individual activities, the continuing review of
-begins with the issuance of a “Budget Call” by the gevernment fiscal position,
Department of Budget and Management. This document  the regulation of fund releases,
outlines the priority areas of government activity  the implementation of cash payment schedules and
applicable to the budget year, which begins a year and other related activities such as updating of planning
one month hence. and scheduling of activities. The responsibility for
monitoring budget execution and operation rests
The department of Budget and Management summarizes primarily with the Department of Budget and
the proposals and submits an analysis and Management and secondarily with the National
recommendation on the agencies budget proposals, which Treasury.
are submitted to the president of the Philippines before Budget execution and operation is concerned
finalization and submission to congress. with the released of funds in the form of allotments and
corresponding cash allocations,

2.Legislative Authorization 4. Budget Accountability

The last phase of budget process consists of the
The General Appropriation Bill presents the proposals of following:
the President of the Philippines for new general  Periodic reporting by the government agencies of
appropriations in the coming year. The proposals are performances under their approved budget;
listed by agency or lump sum fund and are detailed by  Top management review of government activities
budgetary function activities/projects. Each function is and the fiscal policy implementation thereof; and
briefly described in “appropriation language”. Any  The actions of Commission on Audit in assuring the
conditions governing agency expenditures are presented fidelity of officials and employees by carrying out
as Special Provisions applicable to the agency, which the intent of the legislative regarding the handling of
also identify the amount intended for the most significant, receipts and expenditures.
activities of the agency. General Provisions are also
provided in the Bill, representing the expenditure rules,
 Date on uses of funds evidences the Budget and management to the Agency containing the
implementation of the legislative and appropriation authorization, conditions and amount of an agency
intention and is major basis of next year’s budget allocation. The document may be the agency Budget
preparation and evaluation. Under Sec. 63, P.D 1177, Matrix, which effectively releases the amount indicated
agency officials are held liable for failure to submit as not needing clearance, or the Special Allotment
reports (I.e trial balances, work and financial plans, Release Order (SARO). which is issued subject to
special budgets, reports of operations and income, and compliance with specific laws or regulations or is
other reports as may be necessary and required by the subject to separate approval or clearance by competent
department of Budget and Management) authority. In case of agencies with decentralized
No appropriation authorized in the General accounting procedures, Sub- allotment Advices /letters
Appropriation Act shall be made available to pay the of Advice of Allotments are issued or released
salary of any officials or employee, who violates the
provision of said section, in addition to any disciplinary H.Mohaimen, Najmah M.
action that may be instituted against such erring official
or employee. Reporting Requirements
Per National. Budget Circular No. 507, dated January
BUDGETARY ACCOUNTS 31, 2007, the Department of Budget and Management
Budgetary accounts consist of the following: requires national government agencies to submit, on a
1. Appropriation- an authorization made by law or regular basis, Budget Execution Documents (BEDs),
other legislative enactment, directing payments of which contain the agencies’ targets and plans for the
goods and services out of government funds under current year, and Budget Accountability Reports
specific conditions or for special purpose. i.e Taxes (BARs), which contain information on the agencies’’
2. Allotment- an authorization issues by the actual accomplishments and performance for a given
Department of Budget and Management to the period.
government agency, which allows it to incur
obligations, for specified amounts, within the The Budget Execution Documents include the
legislative appropriation. following:
3. Obligation- a commitment by a government
1. Physical and Financial Plan (PFP)
agency arising from an act of duly authorized official
This document serves as overall plan of the
which binds the government to the immediate or
national government agencies encompassing
eventual payment of a sum of money.
the physical (targeted outputs) and financial
(estimated obligations/expenditures) aspects,
The Revised Chart of accounts as provided by
consistent with their approved budget level for
COA Circular No. 2012-002 dated January 30 2013,
the year, broken down by quarter.
does not include classification and codes for budgetary
2. Monthly Cash Program (MCP)
accounts. Thus the information system will need to
This document shall reflect the monthly
provide- in response to the required input of any
disbursement requirements of the national
expenditure accounts code- an amount with respect to
government agencies.
Appropriation, adjustment to Appropriations, Adjusted
3. Estimate of Monthly Income
Appropriations, Allotments, transfers, Adjusted
This document shall reflect the estimated
Allotments, Unreleased Appropriations, Obligations,
income of the national governments agencies
Unobligated Allotments, disbursements and unpaid
for the current year by source, as contained
obligations.
under the Budget of Expenditures and Sources
of Financing (BESF) of the given year, broken
Budgetary Accounts System.
down by month.
The budgetary accounts system encompasses
4. List of Not Yet Due and Demandable Obligations
the processes of preparing the Agency Budget Matrix
This document shall reflect the level of the
(ABM), monitoring and recording of allotments
national government agencies’
received by the agency from Department of Budget
obligations/expenditures charged against prior
and Management, releasing of Sub-allotments advices
years’ budget, for which,
(SAAs) to regional officers (R0) by the regional office,
goods/services/projects are not yet
and recording and monitoring of obligations.
delivered/rendered/completed and accepted as
of the end of the preceding year.
The Allotment Release Order (ARO) is a
formal document issued by the the Department of
The Budgetary Accountability Reports include the status of fund utilization to be submitted to the
following: President, the list of erring agencies.
1. Quarterly Physical Report of Operations The Agency Budget Matrix
This report shall reflect the national The Agency Budget Matrix for the agency specific
government agencies’ actual physical budget under the CY 2012 GAA, R.A. 10155 shall be
accomplishments for a given quarter, in term of segregated into Needing Clearance (NC) and Not
performance measures indicated in their Needing Clearance (NNC) as follows:
Physical and Financial Plan.
2. Quarterly Financial Report of Operations Needing Clearance
This report shall reflect the national
government agencies’ actual The Need Clearance portion of the ABM shall consist
obligations/expenditures incurred by of the following budgetary items in the agency specific
programs/activities/projects and allotment class budgets that shall be released upon compliance of
for a given quarter, corresponding to the certain documentary requirements.
reporting physical accomplishments for the Not Needing Clearance
same period.
3. Quarterly Report of Actual Income The Not Need Clearance of the portion of the ABM
This report shall reflect the national refers to budgetary items of agency budgets under Need
government agencies/ actual income collections Clearance portion and categorized as such in the
from all sources for a given quarter broken submitted financial plan of the agency.
down by month.
4. Statement of Allotment, Obligations and Balances
This report shall serve as the national
government agencies’ summary report of
allotments received and corresponding
obligations/expenditures incurred during the
month from all the sources by object of
expenditures.
5. Monthly Report of Disbursements
This report, in lieu of the summary of List of Checks
Issued and Cancelled, shall reflect all the disbursements
of the national’s government agencies during the month.
Failure to submit the required BEDs/BARs on the
set deadline, the DBM shall send call up letters by
applying the following procedures:
 First Call up letter signed by the DBM director
concerned shall be addressed to the head of the
national government agency to remind them of
non-compliance.
 Second Call up letter to be signed by the DBM
Assistant secretary/Undersecretary shall be
addressed to the official of equivalent rank of the
department where the agency is attached citing the
“non-action” to date despite the first call up letter,
which shall also be cited.
 Third Call up letter to be signed by the BDM
Secretary shall be sent to the Secretary of the
department where the agency is attached citing the
two previous call up letter sent.
 In case of non-compliance with the reporting
requirements despite the three call up letters, the
DBM shall strictly enforce the “non-report, no-
release” policy, and include in the report on the