FISCAL

MANAGEMENT
 OVERVIEW
Government needs to collect sufficient revenues and
ensure the sustainability of its borrowings and debts in order
to have enough resources for development spending. On the
other hand, each peso must be spent properly and with
maximum impact.

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WHAT IS FISCAL MANAGEMENT?
Fiscal Management is the process of keeping an
organization running efficiently within its allotted
budget.

Goals:
▪ To improve the way the department operates by
properly planning, recording, and performing
procedures that relate to the budget.
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AREAS OF FISCAL MANAGEMENT
1. Procurement of funds
2. Allocation of funds
3. Monitoring their use in the interest of accountability
4. Producing financial reports for the relevant
stakeholders

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AGENCIES
1. Procurement of funds
2. Allocation of funds
3. Monitoring their use in the interest of accountability
4. Producing financial reports for the relevant
stakeholders

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 “ Government Budget is an itemized
accounting of the payments received by
THE government (taxes and other fees) and the
payments made by government (purchases
GOVERNMENT and transfer payments). A budget deficit
occurs when an government spends more
BUDGET money than it takes in. The opposite of a
budget deficit is a budget surplus.

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WHY IS GOVERNMENT
BUDGETING IMPORTANT?

Government budgeting is important because it enables the government

to plan and manage its financial resources to support the
implementation of various programs and projects that best promote the
development of the country. Through the budget, the government can
prioritize and put into action its plants, programs and policies within
the constraints of its financial capability as dictated by economic
conditions.

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Five major phases in the budget process

1. Budget 2. Budget 3. Budget

Preparation Authorization Review

4. Budget 5. Budget
Execution Accountability
“ • BUDGET PREPARATION
The executive prepares the National Budget

• BUDGET LEGISLATION
The congress authorize the General Appropriations Act

• BUDGET EXECUTION
Agencies utilized their approved budgets

• BUDGET ACCOUNTABILITY
The executives monitor and evaluate the use of budget

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How is the annual national budget prepared?

The preparation of the annual budget involves a series of steps that begins with
the determination of the overall economic targets, expenditure levels, revenue
projection and the financing plan by the Development Budget Coordinating
Committee (DBCC). The DBCC is an inter-agency body composed of the DBM
Secretary as Chairman and the Bangko Sentral Governor, the Secretary of the
Department of Finance, the Director General of the National Economic and
Development Authority and a representative of the Office of the President as
members. .

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Philippine Budgetary Process

▪ Sec. 22, article vii of the 1987 constitution sets the tone
for the budgetary process. Under this article, the
president submits to congress within 30 days from the
opening of every regular session, a financial plan of
expenditures and sources of financing, including receipts
from existing and proposed revenue measures as basis
for a general appropriations bill.
Major activities involved in the preparation of the
annual national budget

a. Determination of overall economic targets, expenditure levels and

budget framework by the DBCC;

b. Issuance by the DBM of the Budget Call which defines the budget
framework; sets economic and fiscal targets; prescribe the priority thrusts
and budget levels; and spells out the guidelines and procedures, technical
instructions and the timetable for budget preparation;

c. Preparation by various government agencies of their detailed budget

estimates ranking programs, projects and activities using the capital
budgeting approach and submission of the same to DBM; 12
d. Conduct a budget hearings were agencies are called to justify their
proposed budgets before DBM technical panels;

e. Submission of the proposed expenditure program of

department/agencies/special for confirmation by department/agency
heads.

f. Presentation of the proposed budget levels of

department/agencies/special purpose funds to the DBCC for approval.

g. Review and approval of the proposed budget by the President and the
Cabinet;

h. Submission by the President of proposed budget to Congress.

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HOW DOES THE BUDGET BECOME A LAW?

In accordance with the requirements of the Constitution, the President

submits his/her proposed annual budget in the form of Budget of
Expenditure and Sources of Financing (BESF) supported by details of
proposed expenditures in the form of a National Expenditure Program
(NEP) and the President's Budget Message which summarizes the budget
policy thrusts and priorities for the year.

In Congress, the proposed budget goes first to the House of

Representatives, which assigns the task of initial budget review to its
Appropriation Committee.

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The Appropriation Committee together with the other House Sub-
Committee conduct hearings on the budgets of departments/agencies and
scrutinize their respective programs/projects. Consequently, the amended
budget proposal is presented to the House body as the General
Appropriations Bill.

While budget hearings are on-going in the House of Representatives, the

Senate Finance Committee, through its different subcommittees also starts
to conduct its own review and scrutiny of the proposed budget and
proposes amendments to the House Budget Bill to the Senate body for
approval.

To thresh out differences and arrive at a common version of the General

Appropriations Bill, the House and the Senate creates a Bicameral
Conference Committee that finalizes the General Appropriations Bill. 15
General Appropriations Act

The General Appropriations Act (GAA) is the legislative authorization that

contains the new appropriations in terms of specific amounts for salaries,
wages and other personnel benefits; maintenance and other operating
expenses; and capital outlays authorized to be spent for the
implementation of various programs/projects and activities of all
departments, bureaus and offices of the government for a given year.

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How is the budget implemented?

Budget implementation starts with the release of funds to the agencies. To

accelerate the implementation of government programs and projects and
ensure the judicious use of budgeted government funds, the government
adopted the Simplified Fund Release System (SFRS) beginning 1995.

In contrast to the previous system of releasing funds based on individual

agency requests, the SFRS is a policy-driven system which standardized
the release of funds across agencies which are similarly situated in line
with specific policy initiatives of the government.

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Following the SFRS, the agency budget matrix (ABM) is prepared by the
DBM in consultation with the agencies at the beginning of each budget
year, upon approval of the annual General Appropriations Act. The ABM is
a disaggregation of all the programmed appropriations for each agency
into various expenditure categories. As such, the ABM serves as a
blueprint which provides the basis for determining the timing, composition
and magnitude of the release of the budget.

Based on updated resources and economic development thrusts and

consistent with the cash budget program, the Allotment Release Program
(ARP) which prescribes the guidelines in the prioritization of fund releases
is prepared.

The ARP serves as basis for the issuance of either a General Allotment
Release Order (GARO) or a Special Allotment Release Order (SARO), as
the case maybe, to authorize agencies to incur obligations. 18
Subsequently, the DBM releases the Notice of Cash Allocation (NCA) on a
monthly or quarterly basis. The NCA specifies the maximum amount of
withdrawal that an agency can make from a government bank for the
period indicated. The Bureau of the Treasury (BTr), replenishes daily the
government servicing banks with funds equivalent to the amount of
negotiated checks presented to the government servicing banks by
implementing agencies.

The release of NCAs by the DBM is based on:

1) the financial requirements of agencies as indicated in their ABMs, cash

plans and reports such as the Summary List of Checks Issued (SLCI);

2) the cash budget program of government and updates on projected

resources.
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Why are adjustments made on the budget
program?

• Enactment of new laws - Within the fiscal year, new legislations with
corresponding identified new revenue sources are passed which
necessitate adjustments in the budget program.

• Adjustments in macroeconomic parameters - The macroeconomic

targets considered in the budget are periodically reviewed and updated to
reflect the impact of recent developments in the projected performance of
the national economy and on the set fiscal program for the year.

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The relevant indicators affecting the budget aggregates include the
following: the Gross National Product (GNP), inflation rate, interest
rate, foreign exchange rate, oil prices, and the level of imports.
Thus, a sensitivity measure on the impact of these parameters on the
budget will determine whether recent macroeconomic developments
have a negative or favorable effect on the budget.

• Change in resources availabilities - Budget adjustments are

undertaken when additional resources becomes available such as new
grants, proceeds from newly negotiated loans and grants.
Corresponding budget adjustments are also made when resources
generation falls below the targets.

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MONITORING OF FUND UTILIZATION

Cognizant of the fact that no propitious results can be obtained, even with
maximum funding, if agency efficiency is low and funds are wastefully
spent, systems and procedures are set in place to monitor and evaluate
the performance and cost effectiveness of agencies. These activities are
subsumed within the fourth and the last phase of the budget process-the
budget accountability phase. At the agency level, budget accountability
takes the form of management's review of actual performance or work
accomplishment in relation to the work targets of the agency vis-à-vis the
financial resources made available.

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Also, detailed examinations of each agency's book of accounts are
undertaken by a resident representative of the Commission on Audit
(COA) to ensure that all expenses have been disbursed in accordance
with accounting regulations and the purpose(s) for which the funds
have been authorized.

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THE ROLE OF DBM IN THE
BUDGETING PROCESS
The role of the DBM in the budgeting process is not limited to national
government agencies. It coordinates all three levels of government-
national government department/agencies, government-owned and
controlled corporations (GOCCs) and local government units (LGUs) -
in the preparation, execution and control of expenditures of their
corresponding components entities.

The DBM reviews the corporate operating budgets of GOCCs and

ensures the proper allocation of cash. The DBM likewise formulates and
recommends the budget policy covering the allowable deficit and the
criteria for the determination of the appropriate subsidy and equity of
GOCCs. 24
For LGUs, the DBM reviews the annual and supplemental budgets of
provinces, and highly urbanized cities and manages the proper
allocation and release of the Internal Revenue Allotment (IRA) of LGUs
and their share in the utilization of national wealth.

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Functions of local officials in fiscal administration

Local Chief Executive

- Executive Direction and Control

Composition of Local Finance Cluster

Local Sanggunian - Assessor
-Taxing Authority - Accountant
- Enactment of Policies, Implementing Rules -Budget Officer
and Regulations - Treasurer
- Planning and Development Officer
Historical background
 March 17, 1897 – Department of finance was established and the revolutionary
government was founded in naic, cavite
 1901 – the department of finance and justice was formally organized by virtue of an
act passed by the civil service commission which was headed by william howard taft
 1916 – through the reorganization act no. 2666 of the Philippine legislature, the
department of finance and justice was split into two independent departments
 1936 – DOF functions relative to the formulation and preparation of the
government’s budget were transferred to the newly created budget commission
Historical background

 1949 – central bank of the Philippines was established, secretary,

secretary of finance Miguel cuaderno relinquished the finance
portfolio Pio Pedrosa to enable him to serve as governor of the
central bank
 1987 – ministry of finance was reverted to a department following
the ratification of the 1987 constitution
 1988 – the value added tax was introduced and replaced a
complicated tax structure
Fiscal Policy of the Philippines

 Fiscal policy refers to the measures employed by

governments to stabilize the economy, specifically by
manipulating the levels and allocations of taxes and
government expenditures. Fiscal Measures are
frequently used in tandem with monetary policy to
achieve certain goals.
 Principal agencies tasked with fiscal functions

1. Congress (lower House)

 responsible for revenue and expenditure policies.
 Aside from having its concurrence on every bill in order to be passed
for the President’s signature to become a law, the House of
Representatives has the power to impeach certain officials, and all
money bills must originate from the lower house
 House of representatives officials

1. Speaker is the fourth highest official in the Philippines government.

He:
 Presides over the sessions;
 Decides on all questions of order, subject to appeal by any Member;
 Signs all acts, resolutions, memorials, writs, warrants and subpoenas issued by or
upon order of the House;
 Appoints, suspends, dismisses or disciplines House personnel; and
 Exercises administrative functions.
House of representatives officials
2. Deputy Speakers Assumes the duties and powers of the Speaker when he is absent or incapacitated.

3. Majority leader The Majority Leader is elected in a party caucus of the majority ruling party. His primary function, aside from being the
spokesman of the majority party, is to direct the deliberations on the floor.

4. Minority Leader
The Minority Leader is the acknowledged spokesman of the minority party in the House. But it does not necessarily follow that he is also
the leader of the party because the minority party in the House may be composed of one or more political groupings.

5. Secretary General
 Carries out and enforces orders and decisions of the House;
 Keeps the Journal of each session;
 Notes all questions of order together with the decisions thereon;
 Completes the printing and distribution of the Records of the House;
 Submits to the Speaker all contracts and agreements for his approval;
 Acts as the custodian of the property and records of the House and all other government property in its premises;
 Subject to the supervision and control of the Speaker, the Secretary General is the immediate chief of the personnel of the House
and is responsible for the faithful and proper performance of their official duties.

6. Sergeant-at-Arms
 Maintains order in the House of Representatives Building Complex;
 Enforces House Rules;
 Protects the lives of Officers and Members of the House, its personnel and guests as well as properties found therein.
2. Department of Finance

 Revenue generation and collection

 Fund custody
 Disbursements
 Keeping of accounts
2.1 Bureau of Internal Revenue

Mandate
 Comprehend the assessment and collection of all national internal
revenue taxes, fees and charges and the enforcement of all
forfeitures, penalties, and fines connected therewith, including the
execution of judgments in all cases decided in its favor by the court
of tax appeals and the ordinary courts
 2.2

Functions
 The prevention and suppression of smuggling and other frauds upon the customs
 The supervision and control over the entrance and clearance of vessels and aircraft
engaged in foreign commerce
 The enforcement of the tariff and customs laws and all other laws, rules and
regulations relating to the tariff and customs administration
 The supervision and control over the handling of foreign mails arriving in the
Philippines, for the purpose of the collection of the lawful duty on the dutiable
articles thus imported and the prevention of smuggling through the medium of such
mails;
 2.3 Bureau of the treasury

 Treasurer of the Philippines

Mandate (Under executive order no. 449)
 assist in the formulation of policies in borrowing, investment and capital market
development
 Formulate adequate operation guidelines for fiscal and financial policies
 Assist in the preparation of by the government agencies concerned of an annual program
for revenue and expenditure targets, borrowing levels and cash balances of the national
government
 Act as principal custodian of financial assets of the national government, its agencies and
instrumentalities
 3. Department of budget and management

 Review of estimates and fiscal policy studies in close consultation

with the national economic development authority
 Accountable for carrying out the president’s responsibility of
preparing the budget
 Formulate and implement the national budget and ensuring the
efficient and sound utilization of government resources to achieve the
country’s development objectives
 4. Commission on audit

 Conducts fund and performance audit to see it that expenditures are in accordance
with the appropriation law approved.
 Promulgate accounting and auditing rules and regulations including those for the
prevention and disallowance of irregular, unnecessary, excessive, extravagant or
unconscionable expenditures, or uses of government funds and properties
 Submit annual reports to the President and the Congress on the financial
condition and operation of the government
5. National economic and development authority

 Provides high-level advice to policymakers in congress and executive branch

 Review, evaluation, and monitoring of infrastructure projects identified under
the comprehensive and integrated infrastructure program (CIIP) consistent with
the government’s thrust of increasing investment spending for the growing
demand on quality infrastructure facilities
 Undertaking of short-term policy reviews to provide critical analyses of
development issues and policy alternatives to decision-makers
 6. Bangko Sentral ng Pilipinas

Responsibilities
 the BSP provides policy directions in the areas of money, banking and credit. It
supervises operations of banks and exercises regulatory powers over non-bank financial
institutions with quasi-banking functions.
 The bsp formulates and implements monetary policy aimed at influencing money supply
consistent with its primary objective to maintain price stability
 The BSP has the exclusive power to issue the national currency. All notes and coins
issued by the BSP are fully guaranteed by the Government and are considered legal
tender for all private and public debts.
BSP’S ORGANIZATIONAL STRUCTURE
7. External forces

A. international monetary fund

 Ensure the stability of the international monetary system

 Provide loans to member countries experiencing actual or potential
balance of payments problems
 Seeks to build on synergies between the technical assistance and
training to maximize their effectiveness
 B.

 Strengthens public financial management, improves fiscal transparency and

financial accountability, and supports greater citizen demand for government
accountability
 The most recent project approved by the world bank board of executive directors
is the metro manila bus rapid transit project. The bank is working with the new
government in the preparation of projects in the areas of climate change (Metro
Manila Flood Management), governance (E-Government Transformation and
Customs and Trade Modernization), agriculture (Inclusive Partnership for
Agricultural Competitiveness), and policy-based lending (Fiscal Transparency
DPL).
C. Asian development bank

 ADB aims to focus support in the areas of sustainable and climate resilient infrastructure,
good governance and finance, employment and education, and regional integration.
 Future ADB assistance to the Philippines will be closely aligned with the Long-Term
Vision of the Philippines towards 2040 (Ambisyon Natin 2040) as well as the Philippine
Development Plan for 2017–2022 by the National Economic and Development Authority.
 ADB is one of the country’s larget sources of official development assistance, with
average annual lending of $745 million in the past 10 years.
 8. Development budget coordination committee

 The DBCC was created on May 14, 1970 through the executive order no.
232 creating the presidential development budget committee (Pdbc).
 Later, on march 1, 1972, the integrated reorganization plan renamed the
pdbc to its current appellation and attached it to the NEDA. In the same year
on September 22, presidential decree (PD) no. 136 was issued to reorganize
the NEDA including the dbcc to its composition today.
Functions of the DBCC
 Recommend for the presidential approval the level of the annual government
expenditure program and the ceiling of government spending for economic
and social development, national defense, general government and debt
service
 Recommend to the president the proper allocation of expenditures for each
development activity between current operating expenditures and capital
outlay
 Recommend to the president the amount set to be allocated for capital outlay
under each development activity for various capital or infrastructure projects
 Bureau of local government finance

 Provide consultative services and technical assistance to the local governments and the
general public on local taxation, real property assessment and other related matters
 Administer the dof components of foreign-assisted projects involving local governments
and the municipal development fund established under PD 1914
 Administer the internal affairs of the Bureau and exercise direct supervision over its
officials and personnel.
 Review/approve pursuant to existing Department Orders work outputs on the offices,
services and divisions comprising the Bureau.
 Represent the Department in Inter-Agency Policy and Technical Committees concerning
local governments or local finance matters.
 
 Created on December 6, 2000 by virtue of executive order no. 323
 responsible for formulating policies and general guidelines on
privatization issues, identifying disposable assets, monitoring the
progress of privatization activities and approving the sale or
divestment of assets with respect to price and buyer
 I

Mandate
 To regulate and supervise the insurance, pre-need, and hmo industries in accordance with the
provisions of the insurance code, as amended, pre-need code of the Philippines, executive
order no. 192 (s. 2015)
 Licensing of insurance, reinsurance companies, its intermediaries, mutual benefit associations,
trusts for charitable uses, pre-need companies, pre-need intermediaries, and hmo companies
 Review of premium rates imposed by life and non-life companies, mutual benefit associations;
statistical reports of adjusters to determine compliance with established standards
 Bureau of local government finance

 conduct continuing research in taxation “to restructure the tax system and raise the level of
tax consciousness among our people to achieve a faster rate of economic growth and to bring
about a more equitable distribution of wealth an income
 Undertake a comprehensive study of the need for additional revenue for accelerated national
development and the sources from which this might most equitably derived
 To re-examine the existing tax system and tax policy structure
 To pass upon all measures and revenue proposals
 To recommend such reforms and revisions as may be necessary to improve revenue collection
and to formulate sound tax policy and a more efficient tax structure
 Any owner or person having legal interest in the property who is not
satisfied with the action of the provincial, city or municipal assessor
in the assessment of his property may, within sixty (60) days from the
date of receipt of the written notice of assessment, appeal to the
Board of Assessment appeals of the province or city by filing a
petition under oath in the form prescribed for the purpose, together
with copies of the tax declarations and such affidavits or documents
submitted in support of the appeal
 PDIC is a government instrumentality created in 1963 by republic act 3591,
as amended to insure the deposits of all banks. PDIC exists to protect
depositors by providing deposit insurance coverage for the depositing public
and help promote financial stability
 PDIC is tasked to strengthen the mandatory deposit insurance coverage
system to generate, preserve, maintain faith and confidence in the country’s
banking system; and protect it from illegal schemes and machinations
GSIS

Mandate
 Created by commonwealth act no. 186 and republic act no. 8291 (gSIS act of 1997), gsis is a social
insurance institution that provides a defined benefit scheme under the law. It insures its members
against the occurrence of certain contingencies in exchange for their monthly premium
contributions
 Gsis members are entitled to an array of social security benefits, such as life insurance benefits,
separation or retirement benefits, and disability benefits
 Gsis is also the administrator of the general insurance fund by virtue of ra 656 (Property insurance
law). It provides insurance coverage to government assets and properties that have government
insurable interests.
 Formerly known as Public estates authority
 The Authority is hereby created for the following purposes:
(a) To reclaim land, including foreshore and submerged areas, by dredging, filling or other
means, or to acquire reclaimed land;
(b) To develop, improve, acquire. administer, deal in, subdivide, dispose, lease and sell any
and all kinds of lands, buildings, estates and other forms of real property, owned, managed,
controlled and/or operated by the government.
(c) To provide for, operate or administer such services as may be necessary for the efficient,
economical and beneficial utilization of the above properties.
Powers, functions and responsibilities
 Formulate, adopt and implement integrated and comprehensive plans and programs on cooperative
development consistent with the national policy on cooperatives and the overall socioeconomic
development plans of the Government;
 Register all cooperatives and their federations and unions, including their division, merger, consolidation,
dissolution or liquidation. It shall also register the transfer of all or substantially all of their assets and
liabilities and such other matters as may be required by the Authority;
 Require all cooperatives, their federations and unions to submit their annual financial statements, duly
audited by certified public accountants, and general information sheets;
 Order the cancellation after due notice and hearing of the cooperative's certificate of registration for non-
compliance with administrative requirements and in cases of voluntary dissolution;
TRADITIONAL
MANAGEMENT
TRADITIONAL BUDGETING

Traditional budgeting is a method of preparation of the

budget in which last year’s budget is taken as the base.
Current year’s budget is prepared by making changes to
previous year’s budget by adjusting the expenses based on
the inflation rate, consumer demand, market situation, etc.
Past year’s revenues and costs form an integral part of
current year’s budget.

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TRADITIONAL BUDGETING

1. Traditional Budgeting alludes to a technique of preparing budget, that takes

immediately preceding year's budget as a base. It incorporates the previous year
expenditure in the new budget proposal and only increments are a matter of debate. This
budgeting approach takes last year’s actual figures and adds or subtracts a percentage to
obtain the current year’s budget.
2. Justification of current project is not required.
3. Justification is given by top management for the particular decision unit
4. The only benefit of going for this sort of budgeting is simplicity. If a company follows
this type of budgeting, they don’t need to rethink over every item on the list. Rather they
can simply look at the spending of the previous year and then add/deduct inflation rate,
market situation, consumer demand etc.

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BOTTOM UP BUDGETING

- Bottom Up Budgeting is meant to empower the grassroots

communities and their respective local governments.
Improvements to the program were made by allowing
LGUs to directly implement projects instead of coursing
them through agencies This approach promotes the link of
accountability between the LGUs and their constituents.

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BUB Approach

The BUB approach was set up to

help the Philippines attain its
MDGs of inclusive growth and
poverty reduction, all while
promoting good governance and
local service delivery via a demand-
driven budget planning process.

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