What is Public Financial Management (PFM) Reform Program?

The PFM Reform Roadmap is a comprehensive reform agenda, overseen by a

PFM Committee consisting of a four-level governance set-up and membership
of four oversight agencies (DBM, DOF, BTr and COA) with implementation
support provided by Dept. of Foreign Affairs and Trade (DFAT)/Australian Aid.

The PFM Reform Program aims to improve efficiency, accountability and

transparency in public fund use in order to ensure the direct, immediate,
substantial and economical delivery of public services especially to the poor.

The Program implements the key strategies of the Philippine PFM Reform
Roadmap: Towards Improved Accountability and Transparency (2011-2016), a
comprehensive reform agenda that seeks to clarify, simplify, improve and
harmonize the government’s financial management processes and information
systems. The integrated systems will cover all transactions of government and
apply uniformly to all government agencies.
1. Funding Source Codes
 2. Organization Codes

a. Department Codes
b. Agency Codes
c. Operating Unit Classification Codes
d. Lower Level Operating Units
3. Location Codes

Region Codes
Province Codes
Municipality
Barangay
 Transitory Measure
NBC No. 554 dated March 14, 2014,
“Conversion of Codes to Conform to the UACS”

A transition measure to allow Government

Agencies/Operating Units sufficient time in the
familiarization of the UACS codes, the DBM shall still
reflect the previous codes alongside the UACS codes
in the release documents.

In any discrepancy noted in the UACS Codes per

SARO/NCA vis-à-vis the UACS Manual, UACS codes
shall be adopted by the agency.
 Asset with Contra Account
1 03 01 01 1

Asset
Receivables

Loans and Receivable Accounts

Accounts Receivable

Allowance for Impairment –

Accounts Receivable
Reason why a chart of account is prescribed in
the New Accounting System

To enable the agencies to properly recognize

and present their financial transactions.
(COA Circular No. 2013-002 dated
January 30, 2013)
“No money shall be paid out of the Treasury
except in pursuance of an appropriation law.” –
(Section 29 (1) Article VI of the 1987 Constitution)

No public fund may be spent if there is no law

authorizing the payment of money and
specifying the purpose for which the same will
be spent. (GAA)
What are the budgetary accounts?

Appropriations
Allotments
Cash Allocations
 Accounting Systems

Budgetary Accounts System

Receipt/Income and Deposit System
Disbursement System
Financial Reporting System
 Fundamental Principles of Fiscal Operations as
provided for by law:
1) No money shall be paid out of the public treasury or depository
except in pursuance of an appropriation law or other specific
statutory authority.

2) Government funds or property shall be spent or used solely for

public purposes.

3) Trust funds shall be available and may be spent only for the
specific purpose for which the trust was created.

4) Fiscal responsibility shall, to the greatest extent, be shared by all

those exercising authority over the financial affairs, transactions,
and operations of the government agency;
 Fundamental Principles of Fiscal Operations as
provided for by law:
5) Disbursement or disposition of government funds or property
shall invariably bear the approval of the proper officials;

6) Claims against government funds shall be supported with

complete documentation;

7) All laws and regulations applicable to financial transactions

shall be faithfully adhered to; and

8) Generally accepted principles and practices of accounting, as

well as, of sound management and fiscal administration shall be
observed provided they do not contravene existing laws and
regulations;
 The National Budget

A plan for financing the government

activities for a fiscal year prepared and
submitted by responsible executive to a
representative body whose approval and
authorization are necessary before the plan
can be executed.
 Performance – Informed Budgeting (PIB)
NBM No. 117, introduced by DBM which required
government agencies to strengthen the link between
planning and budgeting and to simplify the
presentation of the budget.

The new face of the budget represents the continuing

shift away from the dominance of patronage politics
and clientelistic relationships towards a more
responsive, transparent and accountable public
expenditure management system.
 Performance – Informed Budgeting (PIB)
Performance information includes the following:
1) The purpose for the funds required.
2) The outputs that would be produced or the
services that would be rendered.
3) The outcomes that would be achieved by the
outputs and/or services.
4) The cost of the programs and activities proposed
to achieve the objectives.
 Performance – Informed Budgeting (PIB)
Performance information can be used as a signaling
device. Low performance or a decline in
performance can serve as an alarm to consider
closer look in determining the cause.

According to the Organization for Economic

Cooperation and Development (OECD), the most
common response to low performance is holding
constant the level of future funding and/or subjecting
future allocations conditional to improve in
conditions related to performance.
 Balanced Budget

It is a budget where the proposed

expenditures are equal to or less than the
estimated revenues or increasing revenues
and cutting on expenditures.
 KINDS OF BUDGET
AS TO APPROACH &
AS TO NATURE AS TO BASIS
TECHNIQUE
Annual Budget Performance Budget Zero-Based Budgeting
Supplemental Budget Line-Item Budget Incremental Approach
Special Budget
 THE BUDGET CYCLE
1) BUDGET PREPARATION – 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 Call (by DBM) – contains budget
parameters and policy guidelines and procedures in
the preparation and submission of agency budget
proposals.
 THE BUDGET CYCLE
> Bottom-Up Budgeting Approach – will focus in rural
development programs and the conditional cash
transfer program of the poorest municipalities, and
will involve: DA, DAR, DENR, DSWD, DepEd and DOH.
This government agencies will then include the
community plans in their proposed budgets.
 THE BUDGET CYCLE
2) BUDGET LEGISLATION – Legislative authorization

When the GAA is not enacted before the fiscal year

starts, the previous year’s GAA is automatically
reenacted.

Appropriations are approved in the form of:

1) General Appropriations Law
2) Supplemental Appropriations Law
3) Certain Automatic Appropriations
 THE BUDGET CYCLE
3) BUDGET EXECUTION & OPERATION – serve as the
medium through which plans for operation can be
implemented using available resources and funds
and begins with the issuance of guidelines on the
release and utilization of funds.

Agencies are required to submit their BUDGET

EXECUTION DOCUMENTS (BEDs) at the start of budget
execution. These documents outline agency plans
and performance targets.
 THE BUDGET CYCLE
4) BUDGET ACCOUNTABILITY – the DBM monitors the
efficiency of fund utilization, assesses agency
performance and provides a vital basis for reforms
and new policies.

Agencies are held accountable:

 On how they use public funds ethically; and
 How it attained performance targets and outcomes
using available resources.
 Budget and Financial Accountability
Reports (BFAR)
A required report that show how agencies
used their funds and identify their
corresponding physical accomplishments
submitted by agencies on a monthly and
quarterly basis. Failure to submit, DBM will
penalize the agency by withholding certain
fund releases to them, specifically the
Miscellaneous Personnel Benefits Fund (MPBF)
and both errant & compliant agencies will be
posted online.
 Budgetary Accounts System
The Allotment Release Program (ARP) serves as
the ceiling for the aggregate allotment releases
during the year from all sources. The ARP of
each NGA shall be an amount equal to its
appropriations from the following:
1) Agency specific budget and allocations or
additional releases from special purpose
funds;
2) 2) Automatic appropriations; and
3) 3) Continuing appropriations.
 The 3 Budgetary Accounts
1) Appropriation – an authorization directing
payment of goods and services out of
government funds;
2) Allotment – an authorization to incur
obligations within the legislative
appropriation;
3) Obligation – a commitment to the immediate
or eventual payment of a sum of money.
 Fund Release Documents
1) Obligational Authority or Allotment – documents
which authorize the entity to incur obligations:

a. General Appropriations Act Release Documents

(GAARD) – for comprehensive release (FCR) of
budgetary items.
b. Special Allotment Release Order (SARO) – For
later release (FLR) for Special Program Fund (SPF)
c. General Allotment Release Order (GARO) –
covers automatically appropriated expenditures
w/o need of special clearance/approval
 Fund Release Documents
2) Disbursement Authority – documents which authorize
the entity to pay obligations and payables:

a. Notice of Cash Allocation (NCA) – an authority to pay

b. Non-Cash Availment Authority (NCAA) – Authority to
cover the liquidation of actual obligations incurred
against available allotments for availment of proceeds
from loans/grants
c. Cash Disbursement Ceiling (CDC) – Authority to utilize
their income by their foreign service posts but not to
exceed the released allotment to the said post.
d. Notice of Transfer of Allocation (NTA) – Authority issued
by the Central Office to its regional and operating units
to pay
 What is a re-enacted Budget?

The budget of the preceding year which, by

operation of laws, becomes re-enacted and
shall remain in force and effect until the
general appropriation bill for the current year
is passed by Congress.
 Allotment Release Program (ARP)
Determines the level of allotment releases for
a given fiscal year, composed of the ff:
1. Obligations incurred,
2. Obligations authorized as overdraft,
3. Special allotment release order,
4. Releases from unprogrammed fund,
Allotment releases from the multi-user
special purpose funds
 Budget Execution Documents
1.Financial Plan – includes the comparative
obligation levels for the budget year and
current year.
2.Physical Plan – shall consist the performance
indicators and target of department/agency.
3.Monthly Disbursement Program – shall reflect
the total cash and non-cash program for the
budget year.
4.Annual Procurement Plan – shall reflect the
quantity and cash requirements.
 Tax Remittance Advice (TRA)

The Notice of Cash Allocation (NCA) released

to the government agency is reduced by the
amount of the estimated taxes expected to
be remitted by the agency through the TRA.

The NCA received by the government agency

from DBM is net of applicable percentage of
TRA.
 To record NCA net of TRA

Cash – MDS, Regular xx

Subsidy from National Government xx

Note: TRA is not recognized

 Common Fund System (CFS)
For use of PS, MOOE, CO and Financial
Expenses without realignment. However, the
CFS will not apply to current year Accounts
Payable to external creditors of the five
departments (DPWH, DepEd, DOH, CHED, and
SUCs) covered by the Direct Payment
Scheme.
 To GOD
Be The Glory!