Accounting for Budgetary Accounts

ACCOUNTING FOR BUDGETARY ACCOUNTS Article VI of the 1987 Constitution Section 29 (1). “No money shall be paid out of the Treasury except in pursuance of an appropriation by law.”

ACCOUNTING SYSTEMS General Accounting Plan (GAP) – the overall accounting system of a government agency or unit. The following are accounting systems:    

objective-specific

Budgetary Accounts Systems Receipt/Income and Deposit System Disbursement System Financial Reporting System

THE NATIONAL BUDGET -a government document presenting the government's proposed revenues and spending for a financial year that is often passed by the legislature, approved by the chief executive or president and presented by the Finance Minister to the nation.

KINDS OF BUDGET 1. As to a. b. c. 2. As to a. b. 3. As to

Nature Annual Supplemental Special Basis Performance Line-item approach and technique

a. Zero-based b. Incremental

THE BUDGET PROCESS 1. Budget Preparation – this covers estimation of government 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 and activities into expenditure levels. Budget proposals shall not be based on the following: a. A given percentage or peso increase or decrease from a prior year’s budget level b. A given percentage of the aggregate budget level c. A similar rule of thumb that is not based on specific justification 2. Legislative Authorization – budget process relative to the enactment of the General Appropriation Bills based on the budget of receipts and expenditures submitted by the President of the Philippines. General Appropriation Bills presents the proposals of the President for new general appropriations in the coming year. Appropriations are approved by the legislative body in the form of:

a. A general appropriation law which covers most of the expenditures of government b. Supplemental appropriations laws that are passed from time to time to augment or correct an already existing appropriation c. Certain automatic appropriations intended for fixed and specific purposes 3. Budget Execution and Operation – covers the various operational aspects of budgeting. It comprise, among others, of the following: a. Establishment of authority ceilings on obligations b. Evaluation of work and financial plans for individual activities c. Continuing review of government fiscal position d. Regulation of fund releases e. Implementation of cash payment schedules f. Updating planning and scheduling activities 4. Budget Accountability – phase consist of the following:

this

a. Periodic reporting by the government agencies of performances under their approved budget b. Top management review of government activities and the fiscal policy implementation c. The actions of Commission on Audit (CoA) 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 1. Appropriation – an authorization made by law or other legislative enactment, directing payment of goods and services out of government funds under specific conditions or for special purpose 2. Allotment – an authorization issued by the Department of Budget and Management (DBM) to the government agency, which allows it to incur obligations, for specified amounts, within the legislative appropriation 3. Obligation – a 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

The Budgetary Accounts System encompasses the processes of preparing Agency Budget Matrix (ABM), monitoring and recording of allotments received by the agency from the DBM, releasing of SubAllotment Release Order (Sub-SARO) to Regional Offices (RO) by the Central Office (CO); issuance of Sub-SARO to Operating Units (OU) by the RO; and recording and monitoring of obligations.

BUDGETARY ACCOUNTS Budgetary accounts consist of the appropriations, allotments and obligations. Appropriations refer to authorizations made by law or other legislative enactment for payments to be made with funds of the government under specified conditions and/or for specified purposes. Appropriations shall be monitored and controlled through registries and control worksheets by the DBM and COA, respectively. Budgetary accounts allotments and obligations are discussed in the succeeding sections.

THE ALLOTMENT RELEASE ORDER (ARO) -is a formal document issued by the DBM to the agency containing the authorization, conditions and amount of an agency allocation

agencies’ targets and plans for the current year, and Budget Accountability Reports (BARs), which contain information on the agencies’ accomplishments and performance for a given period. The BEDs include: 1. 2. 3. 4.

Physical and Financial Plan (PFP) Monthly Cash Program (MCP) Estimate of Monthly Income List of Not Yet Due and Demandable Obligations

The BARs include: 1. Quarterly Physical Reports of Operations 2. Quarterly Financial Reports of Operations 3. Quarterly Report of Actual Income 4. Statement of Allotment, Obligations and Balances 5. Monthly Report of Disbursements

The document may be the: 1. Agency Budget Matrix – effectively releases the amount indicated as not needing clearance; or 2. Special Allotment Release Order (SARO) – issued subject to compliance with laws or regulations or is subject to separate approval or clearance by competent authority.

GENERAL GUIDELINES ON THE RELEAE OF FUNDS Pending the effective date of the new General Appropriation Act (GAA), national government agencies are authorized to incur overdraft in allotment for obligations corresponding to the actual requirement of their regular operations chargeable against the GAA, as re-enacted.

REPORTING REQUIREMENTS Per Nation Budget Circular No. 507, dated January 31, 2007, the DBM requires national government agencies to submit, on a regular basis, Budget Execution Documents (BEDs), which contain the

AGENCY BUDGET MATRIX (ABM) The ABM refers to a document showing the disaggregation of agency expenditures into components like, among others, by source

of appropriations, by allotment class and by need of clearance.

1. Needing Clearance – portion of the ABM consisting budgetary items in the agency specific budgets that shall be released upon compliance of certain documentary requirements 2. Not Needing Clearance – portion of the ABM referring to budgetary items of agency budgets under the GAA not included under Needing Clearances portion and categorized as such in the submitted financial plan of the agency.

KEY TERMS ON RELEASE OF DISBURSEMENT AUTHORITIES 1. Release of Notice of Cash Allocation (NCA) 2. Release of non-cash Availment Authority (NCAA) 3. Release of Cash Disbursement Ceiling

CONDUCT OF THE AGENCY PERFORMANCE REVIEW Consistent with performance-based budgeting, a quarterly evaluation of the agency performance shall be conducted by comparing agency plans and targets per BEDs vis-à-vis actual accomplishments per BARs.

COMMON FUND SYSTEM The common fund system policy (for use of personal services, maintenance and other operating expenses, capital outlays, and financial expenses without realignment) shall continue to be used. However, it will not apply to current year Accounts Payable to external creditors of the five departments covered by the Direct Payment Scheme. These departments are: 1. Department of Public Works and Highways 2. Department of Education 3. Department of Health 4. Commission on Higher Education 5. State Universities and Colleges