BUDGET PREPARATION Budget Operations Manual for Local Government Units, 2016 Edition
Potatoes, Eggs, and Coffee Beans
Once upon a time a daughter complained to her father that her life was miserable and that she didn’t know how she was going to make it. She was tired of fighting and struggling all the time. It seemed just as one problem was solved, another one soon followed.
Her father, a chef, took her to the kitchen. He filled three pots with water and placed each on a high fire. Once the three pots began to boil, he placed potatoes in one pot, eggs in the second pot, and ground coffee beans in the third pot.
He then let them sit and boil, without saying a word to his daughter. The daughter, moaned and impatiently waited, wondering what he was doing.
After twenty minutes he turned off the burners. He took the potatoes out of the pot and placed them in a bowl. He pulled the eggs out and placed them in a bowl. He then ladled the coffee out and placed it in a cup. Turning to her he asked. “Daughter, what do you see?”
“Potatoes, eggs, and coffee,” she hastily replied. “Look closer,” he said, “and touch the potatoes.” She did and noted that they were soft. He then asked her to take an egg and break it. After pulling off the shell, she observed the hard-boiled egg. Finally, he asked her to sip the coffee. Its rich aroma brought a smile to her face.
“Father, what does this mean?” she asked. He then explained that the potatoes, the eggs and coffee beans had each faced the same adversity– the boiling water. However, each one reacted differently.
The potato went in strong, hard, and unrelenting, but in boiling water, it became soft and weak. The egg was fragile, with the thin outer shell protecting its liquid interior until it was put in the boiling water. Then the inside of the egg became hard.
However, the ground coffee beans were unique. After they were exposed to the boiling water, they changed the water and created something new.
“Which are you,” he asked his daughter. “When adversity knocks on your door, how do you respond? Are you a potato, an egg, or a coffee bean? “
Moral: In life, things happen around us, things happen to us, but the only thing that truly matters is what happens within us.
Legal Basis The local chief executive shall prepare the executive budget for the ensuing fiscal year (Section 318, R.A. No. 7160). Budget Operations Manual for Local Government Units, 2016 Edition
Key Players 1.Local Chief Executive (LCE) 2.Local Finance Committee (LFC) 3.Local Treasurer 4.Local Budget Officer (LBO) 5.Local Planning and Development Coordinator (LPDC) 6.Local Accountant 7.Heads of Departments and Offices/Heads of LEEs/PUs 8.CSO and Private Sector Group Budget Operations Manual for Local Government Units, 2016 Edition
Budget Preparation Flow Chart INDICATIVE OFFICIALS ACTIVITY SCHEDULE RESPONSIBLE ISSUE THE BUDGET CALL June 16 LCE CONDUCT BUDGET June 16 LCE/LFC FORUM Department Heads PREPARE AND SUBMIT July 15 Department Heads BUDGET PROPOSALS CONDUCT BUDGET August 15 LCE/LFC HEARING PREPARE THE LEP October 10 LCE/LFC PREPARE BUDGET October 10 LCE/LFC MESSAGE SUBMIT LEP TO THE October 16 LCE SANGGUNIAN
Steps in Budget Preparation Phase 1.Issue the Budget Call 2.Prepare and Submit Budget Proposals 3.Conduct Budget Hearings and Evaluate Budget Proposals 4.Prepare the Local Expenditure Program (LEP) 5.Prepare the Budget Message 6.Submit the Local Expenditure Program Budget Operations Manual for Local Government Units, 2016 Edition
Step 1 – Issue the Budget Call Budget Call - signals the start of the budget preparation period. - it is a directive from the LCE specifying the objectives, policy decisions, strategies, financing requirements and prioritized PPAs by sector/office as reflected in the AIP Budget Operations Manual for Local Government Units, 2016 Edition
Step 2 – Prepare and Submit Budget Proposals A. Firm up MFOs, Identify Performance Indicators (PIs) and Set Targets B. Estimate Costs for the Budget Year C. Prepare the Project Procurement Management Plan (PPMP) for the Budget Year D. Consolidate PPMPs into APP E. Review and Consolidate Budget Proposals Budget Operations Manual for Local Government Units, 2016 Edition
Three (3) types of costs that may be reflected in the budget 1. Current Operating Expenditures (COE) - Personal Services (PS) - Maintenance and Other Operating Expenses (MOOE) 2. Financial Expenses 3. Capital Outlay Budget Operations Manual for Local Government Units, 2016 Edition
Step 3 - Conduct Budget hearing and Evaluate Budget proposals 1. Conduct technical budget hearings Purposes: Review the rationale of the Department /Office Review the PPAs by Department/office Validate output projections Review costs estimates Budget Operations Manual for Local Government Units, 2016 Edition
Step 3 - Conduct Budget Hearing and Evaluate Budget Proposals 2. Evaluate budget proposals Members of the LFC to use the following criteria: Rationale of the PPA Major output and performance indicators criteria, targets Cost criterion Budget Operations Manual for Local Government Units, 2016 Edition
Step 4 – Prepare Local Expenditure Program (LEP) Two (2) parts of LEP 1. Receipts Program 2. Expenditure Program Budget Operations Manual for Local Government Units, 2016 Edition
Guidelines in the Preparation of LEP 1. The receipts structure shall cover the immediately past year, the current year and the budget year. - Beginning cash balance shall be net of amounts earmarked for specific purposes - Receipts sources are generated from accomplished Local Budget Preparation (LBP) Form No. 1 [ a. Local (Internal Sources), b. External Sources, c. Non-Income Receipts] Budget Operations Manual for Local Government Units, 2016 Edition
Guidelines in the Preparation of LEP 2. Details of Expenditure Program shall include: - Performance Information - Proposed New Appropriations by Object of Expenditures - Special Purpose Appropriations - Special Provisions - General Provisions Budget Operations Manual for Local Government Units, 2016 Edition
Step 5 – Prepare the Budget Message Legal Basis The budget document shall contain “A budget message of the local chief executive set forth in brief the significance of the executive budget, particularly in relation to the approved local development plan.” (Section 314 [b], RA No. 7160) Budget Operations Manual for Local Government Units, 2016 Edition
Budget Message - is a summary of proposed executive budget prepared by the LCE highlighting the following: » Previous years’ Fiscal Performance » Development Goals and Objectives » Policy Thrusts » Priority PPAs » Estimates of Income and Sources Thereof » Major Items in the Expenditure Program » Major Final Outputs/Performance Indicators/Targets Budget Operations Manual for Local Government Units, 2016 Edition
Step 6 – Submit Local Expenditure Program (LEP) Submit LEP not later than October 16 of the current year, together with: Budget Message Plantilla of Personnel Statement of Indebtedness Annual Operating Budget of Local Economic Enterprise/s (if any) Budget Operations Manual for Local Government Units, 2016 Edition
Step 6 – Submit Local Expenditure Program (LEP) Annual Investment Program (AIP), duly supported by: DILG-endorsed GAD Plan and Budget; Local Risk Reduction Management Plan; Peace and Order Plan; List of PPAs for the Local Council for the Protection of Children; List of PPAs for Senior Citizens and Persons with Disabilities; and List of PPAs to combat AIDS Budget Operations Manual for Local Government Units, 2016 Edition
EMERGING ROLES OF CSOs in the BUDGET PREPARATION PHASE Budget Operations Manual for Local Government Units, 2016 Edition
ACTIVITY LGU ROLES CSO ROLES I. ISSUE THE Provide a copy of the Check that AIP BUDGET CALL Budget Call to the priorities are accredited CSOs. highlighted in the Include in the Budget Call. Budget Call a requirement for Department Heads to consult with accredited CSOs. Budget Operations Manual for Local Government Units, 2016 Edition
ACTIVITY LGU ROLES CSO ROLES 2. CONDUCT Invite accredited CSOs Participate in the THE BUDGET to the Budget Forum. Budget Forum to FORUM Ideally, the Budget gain an overall Forum may provide appreciation of the information on why thrusts and priorities recommended priorities of the LGU for the of accredited CSOs were budget year as not included in the contained in the identified PPAs. budget call. Budget Operations Manual for Local Government Units, 2016 Edition
ACTIVITY LGU ROLES CSO ROLES 3. PREPARE LCE to ensure The accredited CSOs sectoral AND SUBMIT that the representative may partner with BUDGET Department the Department Heads concerned PROPOSALS Heads consulted in determining the target with accredited beneficiaries and funding CSOs. The requirements for the particular sector. The CSOs may also Budget Call may propose projects for consideration already by the Department Heads prescribe such concerned. In cases where CSOs’ requirement. proposed PPAs not included in the budget, CSOs can request information from the LGU on the reasons for non-inclusion Budget Operations Manual for Local Government Units, 2016 Edition
ACTIVITY LGU ROLES CSO ROLES 4. CONDUCT Invite accredited Participate in the BUDGET CSOs to the budget budget hearings to HEARINGS hearings in relation provide inputs on to sectoral concerns. sectoral concerns. Budget Operations Manual for Local Government Units, 2016 Edition
ACTIVITY LGU ROLES CSO ROLES 5. EVALUATE May replicate the May replicate the BUDGET best practices of best practices of PROPOSALS other LGUs in other LGUs in engaging CSOs in engaging CSOs in LFC. LFC. Budget Operations Manual for Local Government Units, 2016 Edition
ACTIVITY LGU ROLES CSO ROLES 6. SUBMIT Invite accredited Attend the EXECUTIVE CSOs to the SOPA/SOCA/SOMA. BUDGET TO SOPA/SOCA/SOMA. SANGGUNIAN Budget Operations Manual for Local Government Units, 2016 Edition
BUDGET PREPARATION FORMS Budget Operations Manual for Local Government Units, 2016 Edition
LBP FORM 1 Previous LBP Forms Nos. 1 and 2 were merged to streamline the forms and comply with the requirement of the law to submit a detailed statement of income and expenditures Indicate the receipts by major source. The Indicate the Account Code per COA beginning cash balance shall be net of Revised Chart of Accounts (COA amounts earmarked for specific purposes 2015-009 dated December 1, 2015) (e.g. continuing appropriations, 20% Development Fund) Budget Operations Manual for Local Government Units, 2016 Edition
LBP FORM 1 Signed by Local Finance Committee as well as by the Local Accountant Budget Operations Manual for Local Government Units, 2016 Edition
LBP FORM 2 Indicate under Financial Expenditures the amounts representing bank charges, interest expense, commitment charges, The totals of columns 4 and 5 for DST, losses incurred relative to foreign should Departments/Offices All exchange transactions and debt service of the with tally amount subsidy to GOCCs expenditures per column 5 and 6 of Prepared by concerned Department LBP Form No. 1. Head and reviewed by the Local Budget Officer (LBO). The LBO shall prepare a summary for all offices using LBP Form No. 1.
LBP FORM 2A This form is intended to reflect the details of Special Purpose Appropriations lodged under each Department/Office. Budget Operations Manual for Local Government Units, 2016 Edition
LBP FORM 3 Indicate the old and new item numbers of the plantilla position. If the position is unfilled, indicate the word “vacant” under column 4. If the position is proposed for abolition, place the position title inside a bracket. If the position is proposed for reclassification, place the previous position title in a bracket and indicate the proposed position title below it. Budget Operations Manual for Local Government Units, 2016 Edition
LBP FORM 4 Mandate: Quote the provision of RA 7160 on the Mandate Vision: Indicate the future role of the department/office in Organizational Outcome: The specific short-term benefits of the Department/Office. the significant role of the Indicate Mission: the LGU’s development. to clients and the community as a result of the LGU’s department/office. delivery of MFOs as defined in the organization’s results framework. Budget Operations Manual for Local Government Units, 2016 Edition
AIP Reference Code 0000-000-0-0-00-000-000-000 Activity Project/Activity Program Office Office Type ( 1 – Mandatory, 2 – Optional) LGU level ( 1 – Province, 2 – City, 3 – Municipality)) Sub-Sector (if any) Sector (1000-General Public Services Sector, 3000-Social Services Sector, 8000 – Economic Sector, 9000 – Other Services Sector
LBP FORM 5 Budget Operations Manual for Local Government Units, 2016 Edition
LBP FORM 6 Budget Operations Manual for Local Government Units, 2016 Edition
LBP FORM 7 A summary of appropriations covering the proposed expenditures of the budget year Executive Budget Operations Manual for Local Government Units, 2016 Edition
LBP FORM 8 Funding Source of the Supplemental Budget Account classification using the Revised Chart of Accounts for LGUs, per COA Circular 2015- 009 dated December 1, 2015 Budget Operations Manual for Local Government Units, 2016 Edition
LBP FORM 9 AIP Reference Code of the related PPAs Budget Operations Manual for Local Government Units, 2016 Edition
LOCAL BUDGET PREPARATION FORMS • LBP Form No. 1 – Budget of Expenditures and Sources of Financing • LBP Form No. 2 – Programmed Appropriation and Obligation by Object of Expenditure • LBP Form No. 2A – Programmed Appropriation and Obligation for Special Purpose Appropriations • LBP Form No. 3 – Personnel Schedule • LBP Form No. 4 – Mandate, Vision/Mission, Major Final Output, Performance Indicators and Targets • LBP Form No. 5 – Statement of Indebtedness • LBP Form No. 6 – Statement of Statutory and Contractual Obligations and Budgetary Requirements • LBP Form No. 7 – Statement of Fund Allocation by Sector • LBP Form No. 8 – Statement of Funding Sources (Supplemental Budget) • LBP Form No. 9 – Statement of Supplemental Appropriation Budget Operations Manual for Local Government Units, 2016 Edition
FREQUENTLY ASKED QUESTIONS Budget Operations Manual for Local Government Units, 2016 Edition
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