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The New Government Accounting System in the Philippines (NGAs): On Budget Authorization and Allocation

Updated on April 9, 2015
The country's premiere financial district in Makati in Ayala was among the core recipients of NGAS and Budget Allotments .
The country's premiere financial district in Makati in Ayala was among the core recipients of NGAS and Budget Allotments . | Source

The Concept Behind NGAs and Government Budgets

The New Government Accounting System (NGAs) was introduced in January 1, 2002 to simplify the recording of government transactions and generate financial statements that are reflective of the government’s true state of affairs.

The old system was done manually and was prone to material errors in recording and journalizing. In addition, the manual system was ineffective in providing financial information in a timely manner, and therefore, more difficult to use for decision making.

With computerization and the adoption of NGAs, recording of transactions became easier, and updates to financial reports --- faster. What comes out are relevant financial statements that are easy to understand and more reflective of the agency’s operation.

Budget Authorization and Allocation

Under the 1987 Constitution, it was indicated that, “No money shall be paid out of the National Treasury except in pursuance of an appropriation mandated by law.” What this means is that, government funds shall only be paid if there is a law authorizing payment, or a purpose that is indicated as to the manner of use.

The accounting for budgetary funds starts at the commencement of the General Appropriation Act. The act gives the legal authorization to fund the government projects and to finance government activities for a certain time frame. A detailed rundown of expenses and revenues accruing for each agency is prepared to state --- the character, purpose, and the detailed cost of each program of government

The budget serves as a framework to allocate funds for each project; hence, a proper accounting of all sources of income and expenses should be reflected in the financial statements to support the budget for the year. Upon the enactment of the General Appropriation Act (GAA), accounting for the budgetary accounts starts by listing down the legal authorization in the use of public funds. These authorizations, or Approved Appropriations, shall serve as the basis for the Department of Budget and Management (DBM) to come up with government funding allocation for each government agencies to incur obligations, and enter into 3rd party arrangements to commit funds for government projects.

President Benigno Aquino Jr., 2nd State of the Nation Address on the Joint Session of Congress, 2011

by Robert Viñas (Presidential Communications Operations Office, Office of the President)
by Robert Viñas (Presidential Communications Operations Office, Office of the President) | Source

Composition of the National Budget

The national budget is composed of the funding requirements of all agencies, operations, and activities that are needed to run the government. The budget is submitted by the President of the Philippines to the House of Congress for deliberation and approval on the basis of the GAA, within 30 days upon the opening of the regular session. It shall be presented to the house in a form approved by the President and may contain the following features:

·A brief budget message stating the programs of government for the year, the national economic goals, impact of expenditures to economic activity, funding proposals and debt ceiling, and Financial Statements that show:

  1. Appropriations for expenditures to support government programs and the funding sources of revenues generated and borrowings;
  2. Estimated receipts/revenues in the coming year;
  3. Prior years’ actual expenditure, receipts, and appropriations;
  4. Estimated expenditures and receipts for projects that are work in progress during the fiscal year;
  5. Financial condition of the National Treasury during the current and the ensuing fiscal year.

Department of Budget and Management

A markerDepartment of Budget and Management, Manila -
Department of Budget and Management, Manila
get directions

Government agency tasked to prepare the national budget.

Which department prepares the national budget for the enactment of the General Appropriation Act?

See results

Principles behind Budget Operations

The preparations of budget are governed by the fundamental laws of the land :

  • The National Treasury shall not pay out any claims for monies unless provided for by law;
  • Government funds shall be used solely for government purposes;
  • Trust funds that are created for specific projects, shall only be used for the said project;
  • Fiscal responsibility shall accrue to all those exercising authority on the use of funds;
  • Disbursement of government funds shall be signed and approved by authorized officers;
  • Claims for payment from the government shall be supported and authenticated by valid documents;
  • All governing laws on financial transactions shall be applied on all fund disbursements;
  • Adherence to Generally Accepted Accounting Principles (GAAP) and sound fiscal management policies shall be observed unless contrary to existing laws and regulations.

Composition of Budget Accounts in Accordance to NGAS

  • Appropriations - legal authorization directing payment of government funds for a special purpose. This serves as a check and balance measure so government funds are only used for intended projects.
  • Allotment - authorization issued by the Department of Budget and Management (DBM) to allow disbursements within a specified appropriation. The DBM is tasked to give the go signal for agencies to disburse funds for projects that has been given funding by the national government. Without the later, monies could not be disburse from other sources.
  • Obligation - an act which binds an agency for the immediate payment of a sum of money from the National Treasury. Once an obligation is issued, the government agency and 3rd parties are assured of funds coming from the national coffers.

The Preparation of the National Budget

What is a Balanced Budget?

It is a situation wherein the budget is equal or less than expected revenues. At present, the Philippine National government operates on a deficiency. The optimal situation would be policies of government that would increase revenues and decrease expenses.However, the national coffer is run by incurring government deficits that entails borrowing of funds by the national government from outside sources. Additional fundings are from local and foreign borrowings.

Types of Budgets

  • As to Nature

Consists of three types of budget: Annual – covers the budget for one year; Supplemental – adjustment to previous budgets, and; Special – budget that is not included in the Appropriations Act.

  • As to Basis

Consists of two types of budget: Performance – emphasis is on the program or services of government, and; Line-Item - are routine expenses like salaries, freight, equipment, supplies, and other miscellaneous expenses.

Composition of Budgetary Accounts

  • Appropriations - legal authorization directing payment of government funds for a special purpose. This serves as a check and balance measure so government funds are only used for intended projects.
  • Allotment - authorization issued by the Department of Budget and Management (DBM) to allow disbursements within a specified appropriation. The DBM is tasked to give the go signal for agencies to disburse funds for projects that has been given funding by the national government. Without the later, monies could not be disburse from other sources.
  • Obligation - an act which binds an agency for the immediate payment of a sum of money from the National Treasury. Once an obligation is issued, the government agency and 3rd parties are assured of funds coming from the national coffers.

The DBM is the government agency that is tasked with budgetary functions of government. It is responsible for the efficient use of government funds for the country's socio and economic development.
The DBM is the government agency that is tasked with budgetary functions of government. It is responsible for the efficient use of government funds for the country's socio and economic development. | Source

Bottomline

The Department of Budget and Management has been badly hit by its having released the Priority Development Assistance Fund (PDAP) to various members of the Senate and the House of Congress. Known as the Pork Barrel Fund, millions of funds were diverted to the different non-governmental agencies (NGO's) of Janet Lim Napoles, who is the alleged perpetrator of the scam. As a result, three senators and several government officials, are facing trial for crimes of plunder at the Office of the Ombudsman.

The mechanism for the preparation of budgets and allotments have been deftly included in the New Government Accounting Systems of Government. It is up to the different agencies of government to work together in a manner befitting their stature as honorable government officials, and as public servants who are in service to the great majority of Filipinos.

References

  • New Government Accounting System, Angelito Punzalan and Milagros Cardona
  • 2014 General Appropriations Act


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