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BUDGET PROCESS IN LOCAL GOVERNMENT UNITS

I. BUDGET PREPARATION

Budget Preparation is divided into two (2) sub-stages:

A. Pre-Budget Preparation

B. Budget Preparation Proper

A. The Pre-Budget Preparation

Preparing the AIP for the Budget Year

B. The Budget Preparation Proper

Issuing the Budget Call

Local Budget Call

1. The issuance of a directive from the LCE to mark the beginning of the budget preparation period for the local
government is the Local Budget Call .

The budget guidelines includes the following:

Expenditure ceiling by office/sector categorized into PS, MOOE and Capital Outlays
Allocation Scheme
Budget calendar and budget preparation forms
Other administrative guidelines
2. As the policy-making body of the LGU, the Local Sanggunian shall fully endorse the general/specific objectives,
fiscal policies, strategies and priorities for the budget year as envisioned in the AIP.

3. Budget Call is important because of the following:


3.1 It provides a venue for aligning the budget process with the approved AIP;
3.2 It describes guidelines to be observed in the preparation of budget proposals;
3.3 It gives meaning and focus to the objectives that will be attained through the budget;
3.4 It firms-up policy decisions on how the budget shall be financed; and
3.5 It provides information on budget preparation schedule, forms and targets dates for submission.

PREPARING THE EXECUTIVE BUDGET

A. The Budget Message

B. The Local Expenditure Program (LEP)

C. Budget of Expenditures and Sources of Financing (BESF)

A. BUDGET MESSAGE

Section 314(b)1) of LGC prescribes that the budget document shall contain a Budget Message of the Local Chief
Executives setting forth the significance of the Executive Budget particularly in relation to the approved development
plan.

B. LOCAL BUDGET EXPENDITURE PROGRAM (LEP)

Two (2) parts of Local Budget Expenditures Program (LEP)

1. The estimates of income; and


2. The total appropriations covering the current operating expenditures and outlays.

C. BUDGET OF EXPENDITURE and SOURCES OF FINANCING (BESF)

II. BUDGET AUTHORIZATION

SUBMISSION OF THE BUDGET FOR AUTHORIZATION

Under Section 318 of the Code, the Local Chief Executive (LCE) shall submit the said Executive Budget to the
Sanggunian concerned not later than the sixteenth (16 th) of October of the Current Fiscal Year. Failure to submit
such budget on the date prescribed herein shall subject the LCE to such criminal and administrative penalties as
provided for under this Code and other applicable laws.

The Sanggunian shall consider the executive budget as a priority measure which shall take precedence over all
other pending and proposed measures. Immediately upon receipt of the budget, the Secretary to the Sanggunian
shall refer the said budget to the Committee on Appropriations and calendar the same for deliberation by the
legislative body.

PRESENTING THE EXECUTIVE BUDGET TO THE LOCAL SANGGUNIAN

ROLE OF THE COMMITTEE ON APPROPRIATIONS

ROLE OF THE LOCAL FINANCE COMMITTEE

ROLE OF THE HEADS OF OFFICES/DEPARTMENTS

DELIBERATING ON THE EXECUTIVE BUDGET

Budgetary Requirements: (Section 324, RA 7160)

1. The aggregate amount appropriated shall not exceed the estimates of income;
2. Full provisions shall be made for all statutory and contractual obligations. Amount appropriated for debt servicing
shall not exceed twenty percent (20%) of the regular income;
3. In the case of provinces, cities and municipalities, aid to component barangays shall be provided in amounts of
not less than P1,000.00 per barangay; and
4. Five percent (5%) of the estimated revenue from regular sources shall be set aside as an annual lump-sum
appropriation for unforeseen expenditures arising the occurrence of calamities.

General Limitations: (Sec. 325, RA 7160)

1. Total appropriations whether annual or supplemental, for Personal Services of LGU for one Fiscal Year shall not
exceed forty-five percent (45%) in the case of first to third class provinces, cities, and municipalities, and fifty five
percent in the case of fourth class or lower, of the total annual income from regular sources realized in the next
preceding Fiscal Year;
2. No official or employee shall be entitled to a salary rate higher than the maximum fixed for his position or other
positions of equivalent rank by applicable laws or rules and regulations issued thereunder;
3. No local funds shall be appropriated to increase or adjust salaries or wages of officials and employees of the
national government, except as may be expressly authorized by law;
4. In cases of abolition of position and the creation of new ones resulting from the abolition of existing positions in
the career service, such abolition or creation shall be made in accordance with pertinent provisions of the code and
the civil service law, rules and regulations;
5. Positions in the official plantilla for career positions which are occupied by incumbents holding permanent
appointments shall be covered by adequate appropriations;

6. No change in designation or nomenclature of positions resulting in a promotion or demotion in rank or increase or


decrease in compensation shall be allowed, except when the position is actually vacant, and the filling of such
positions shall be strictly made in accordance with the civil service law, rules and regulations;

7. The creation of new positions and salary increase or adjustments shall in no case be made retroactive; and

8. The annual appropriations for discretionary purposes of the Local Chief Executive shall not exceed two percent
(2%) of the actual receipts derived from basic real property tax in the next preceding calendar year.
ENACTING THE APPROPRIATION ORDINANCE/ EXECUTIVE BUDGET

The Legislative instrument authorizing the budget is known as an Appropriation Ordinance.

EFFECTS OF FAILURE TO ENACT THE BUDGET

THE RE-ENACTED BUDGET

VETOING/OVERRIDING THE BUDGET

EFFECTIVITY OF THE BUDGET

CHANGES IN THE ANNUAL BUDGET

Conditions for passage of Supplemental Budget

1. When there is fund available. (Over and above the funds that was previously certified by the Local Treasurer);
2. When there is new revenue sources. (Enacted by the Sanggunian);and
3. In time of public calamity. (Budgetary realignment).

III. BUDGET REVIEW

The DBM Regional Office shall review the appropriation ordinance of provinces, highly -urbanized cities,
independent component cities, and municipalities within Metropolitan Manila area. (Sec. 326).
The Sangguniang Panlalawigan shall review the Appropriation Ordinance of component cities and municipalities
(Sec. 327).
The Sangguniang Panlungsod or the Sangguniang Bayan, as the case may be shall review Appropriation
Ordinance of their respective barangays (Sec. 333).

The Reglementary Period for the review of Appropriation Ordinance.


Ninety (90) days - Provinces, cities, independent component cities, component cities and municipalities. (Sec. 327) Sixty
(60) days Barangays. (Sec.333).

Following Courses of Action:


Declare the Appropriation Ordinance operative in toto;
Declare the Appropriation Ordinance Inoperative in its entirety; and
Declare the Appropriation Ordinance Inoperative in part.

THE PROCESS OF BUDGET REVIEW


- starts when the appropriation ordinance is submitted to the reviewing agency o r body.

IV. BUDGET EXECUTION

V. BUDGET ACCOUNTABILITY

PRINCIPLES, POLICIES AND PROCEDURES IN BUDGET ACCOUNTABILITY

Disbursement of Local Funds and Statement of Accounts

Rendition of Accounts

Auditorial Visitation

SUBMISSION OF ACCOUNTABILITY REPORTS

All department and offices in the LGU are required to submit accountability reports to the Local Finance Committee thru
the Local budget officer in order to effectively monitor the efficiency of the LGUs fund utilization as well as assess
performance in attaining prescribed goals and objectives.