BUDGETING

The budgeting phase of the planning process resolves the question: How much money or
fund is available for each program, project or activity?
ll decision ma!ers and planners are faced with the dilemma of harmoni"ing what they
want with what their organi"ation can afford# $very organi"ation is faced with problem of
adjusting needs against available resources# %ut a problem arises when resources are
scarce but needs are great#
Definition of Budgeting and Budgeting Orientations
%udgeting is the process of allocating financial resources for intended programs, projects,
services, and activities to empower the organi"ation to carry out stated goals and
objectives &%riones, '(()*# The product of this process is the financial or budget plan of
the institution#
%udgeting concepts mostly originate from government# %udgeting approaches or modes
and techniques used in the +hilippine government are characteri"ed into three major
orientations, namely: '* control, ,* management, and -* planning#
.ontrol/orientation in budgeting is the process of enforcing or applying limitations and
conditions that are set in the budget and in appropriation and at the same time securing
compliance with the spending restrictions imposed by central authorities# 0anagement/
oriented budgeting involves the use of budgetary authority at both agency levels to ensure
the efficient use of resources in the conduct of authori"ed activities# The focus is on the
agency outputs 1 what is being done and produced and what cost and how performance
compare with the budget goal# Thus, it is more concerned with operations and results that
control, that is, with the efficiency rather than the legality of e2penditures#
3inally, planning/orientation in budgeting is the process of determining public objectives
and the evaluation of alternative programs# To use the budget for planning, authorities
must have the information concerning the purpose and effectiveness to the program# They
should also be informed of multi/year spending plans and of the lin!age between
planning, spending, and public benefits &4chic!, ,55'*#
Approaches in Budgeting
There are four budgeting methods used in the +hilippines since '(-6# %riones &'(()*
enumerates these as follows: '* line/item budgeting7 ,* performance budgeting7 and -*
planning, programming and budgeting system &++%4*7 and 8* "ero/based budgeting
&9%%*#
'# :ine/;tem %udgeting
The line/item budgeting approach emphasi"es listing of objects for itemi"ed e2penditure
such as personnel, supplies, and equipment without much regard for the purpose of
programs or projects for which such items are proposed# ;t also controls e2penditures at
the department or agency level giving emphasis on the accounting aspect of the
government operations in terms of items bought or paid &0iclat, ,55<*#
,# +erformance %udgeting
;n performance budgeting, objects of e2penditures are grouped into categories related to
the specific services or products an institution produces, as against objects it purchases,
and the development of product cost measurements of activities or services so that
managers can measure the efficiency or productivity of spending agencies &;bid#*#
-# +lanning, +rogramming and %udgeting 4ystem
++%4 is an answer to the need for an economic allocation of resources and the
underta!ing of government policy, program analysis, and cost utility analysis to improve
the policy decision process of government# The scheme requires agency managers to
identify program objectives, develop measuring program output, calculate total program
costs over the long/run, prepare detailed multi/year program and financial plans, and
analy"e the costs and benefits of alternative program designs# The system provides a
strong lin!age between planning and budgeting &;bid#*#
8# 9ero/%ased %udgeting
9%% is an operating, planning, and budgeting method which requires every agency
manager to justify his entire budget systems in detail and transfers the burden of proof to
each manager why he should spend any money# ;t underscores the analysis of all
budgetary e2penditures to answer effectiveness in achieving organi"ational goals# The
term "ero/based refers to the yearly analysis, evaluation, and justification of each
program=project=activity starting form "ero performance level#
The idea is to "ero/in on only the most important activities in the program or project for
inclusion in the budget or on the least important or lowest priority activities which may
be removed in the event that resources are not sufficient# ;n this way, the most important
programs and projects are allocated enough funding rather than distribute the resources
thinly among the many activities and achieve nothing in the end &;bid#*#
The Budget Cycle
budget is a financial plan# ;t is an estimate of institution>s income and e2penditures for
a definite future, e#g# fiscal year# ;t is what the institution plans to spend for its priority
programs and projects# Thus the national budget is the financial translation of approved
national government plans and programs which are supposed to be supported by the
resources of the government &;bid#*#
The national government budget cycle consists of four phases, namely: '* budget
preparation, ,* budget legislation or authori"ation, -* budget e2ecution or
implementation, and 8* budget accountability &%riones, '(()*:
'# %udget +reparation
This involves the formulation or devisement of a national budget based on budgetary
priorities and activities given available revenues and borrowing limits#
The ?evelopment %udget .oordination .ommittee &?%..*, an interagency body,
conducts consultations and studies on fiscal and financial issues with the objective of
determining overall e2penditure levels, revenue projection, deficit levels, and the
financing plan# These are then forwarded to the cabinet and the +resident for approval#
fter approval by the +resident, the ?epartment of %udget and 0anagement &?%0*
issues a %udget .all# The call usually issued in @ovember directs the different agencies
to prepare their respective budget proposals in accordance with approved budget ceilings#
,# %udget uthori"ation or :egislation
;n this phase of the budget cycle, the budget is reviewed by the House of Aepresentatives
and followed by the 4enate through consultation and justification by department and
agency heads of their budget proposals# .onflicting provisions are wor!ed out and
harmoni"ed by a conference committee# Bnce a common budget bill has been approved
by both chambers, it is submitted to the +resident for approval# The product of the
+resident>s approval of the proposed budget legislation is the Ceneral ppropriations ct
&C*#
-# %udget $2ecution
This phase of budget cycle is the implementation of the Ceneral ppropriations ct# The
?epartment of %udget and 0anagement &?%0* implements the national budget through
the administrative supervision of the +resident# The %ureau of Treasury of the
?epartment of 3inance &?B3* coordinates with the ?%0 so that cash releases by the
latter are based on collected revenues by ?B3#
8# %udget ccountability
%udget accountability is the analysis and review of the agency operating performance,
systems and procedures, and the evaluation of agency accomplishments relative to cost
incurred# ;t compares actual e2penditures and performance with the planned e2penditures
and predetermined targets of the organi"ation#
Expenditures by Class and Obect
The national budget is allocated and earmar!ed for the implementation of various
government programs and projects, the operation of government offices and payments of
salaries of government officials and employees, maintenance and operations, and
payment of public debts# These e2penditures may be in terms of e2pense class, budgetary
object, sector, and implementing unit of national government and in the region#
%riones &'()(* enumerates two different e2pense classes and several budgetary objects
under each class# These are:
'# .urrent Bperating $2penses &.B$*
.B$s are appropriations for the purchase of goods and services for the conduct of normal
operations within a budget year# The different budgetary objects are:
@ature of $2penditures Bbject @umber
+ersonal 4ervices &+4* '55
4alaries of permanent positions ''5
.ontractual, casual, and emergency personnel ''<
4ubstitute teachers ''<%
:ump sum for new positions ',5.
Terminal leave benefits '-5
+C/;%;C contributions -,5
0edicare premiums --5
$mployee compensation insurance program -85
AT <55
Honoraria <55%
Training and personnel improvement )55
Dear/end bonus and cash gift E55
4tep increment for length of service (55
+ersonnel $conomic Aelief llowance &+$A* (55?
dditional +<55 allowance (55$
.lothing uniform allowance (55F
4tudent labor (55A
+roductivity incentive bonus (55G
0agna .arta of +ublic Health Hor!ers (55I
Bthers (55H
0aintenance and Bther
Bperating $2penses &0BB$* ,55
Traveling $2penses 5,
.ommunication services 5-
Aepair and maintenance of other facilities 58
Aepair and maintenance of motor vehicles 5<
Transportation services 5)
Bther supplies and materials 56$
Aents 5E
Bther grants, subsidies and contributions '5.
Hater, illumination, power services '8
Training and 4eminar e2penses '6
$2traordinary and miscellaneous e2penses 'E
:ibrary boo!s and materials ,6
Bther services ,(
,# .apital Butlays &.B*
.Bs are appropriations for the purchase of goods and services the benefits of which go
beyond the budget year which add to the government physical assets# These include
infrastructure projects such as construction of roads, school buildings, laboratories,
gymnasiums, sports facilities and others# The acquisition of equipment li!e laboratory
apparatuses, computer units and peripherals, duplicating machines, motor vehicles, and
others falls under .B# The budgetary objects under .B are:
@ature of $2penditures Bbject @umber
:ands and :and ;mprovement -8
%uildings and 4tructures -<
3urniture, 3i2tures, $quipment and %oo!s -)
Budgeting !tructure and "rocesses
;n a college or university, the budgeting process is as important as planning# %ut
budgeting can only proceed with a strategic plan# There has got to be a budget council to
underta!e budgeting activity# %ut the more logical thing to do is to integrate the +lanning
.ouncil and the %udget .ouncil into one#
ctual costing of programs, projects, and activities for annual action plans, on one hand,
and short/ or long/term plans, on the other, differ# 3or the former, certain traditional
indicators and rules and regulations should be determined and observed, li!e enrolment,
class si"e, cost per student by educational level, and number of faculty members and
support staff#
The more radical indicators are the output/ or outcome/oriented ones, such as number of
graduates who passed the licensure e2aminations, number of employed graduates or
trainees and others# $2amples of rules and regulations are set e2penditure ceilings,
moratorium on some e2pense class and budgetary objects, and austerity policies#
Gndoubtedly, these indicators and regulations dictate the amount of budgetary
e2penditures a university or college is allocated in a given year &0iclat, ,55<*#
3or two/year and beyond plans, the more practical way of budgeting is ma!ing
projections by e2pense class and budgetary objects# The results of such projections would
indicate which e2pense classes and objects are used more often and those used sparingly
by the agency#
+rojections can be made if previous data and statistics preferably during the last five
years are made available#
There are several ways of ma!ing projections# The more popular ones are geometric rate
of growth, e2ponential growth rate, average annual percent increase, and 4prague
formula# ?epending on which type of projections one adopts or uses, rates of increases
are arrived at# +rojections made under each e2pense class and budgetary objects as well
as on the total budget estimates for each operating year should be e2plained# 4aid reasons
should include various parameters on such areas as social, economic, political, natural
and technological# Hith these parameters, more realistic rates of projections can be set
and adopted &;bid#*#