BUDGETING | 10 Things DBM Wants You to Know About the Cash-Based Budgeting

1. Annual cash-based budgeting, as opposed to multi-year obligations-based budgeting, “limits incurring obligations and disbursing payments for goods delivered and services rendered, inspected, and accepted within the fiscal year” – meaning, the extent of budget implementation is just one year, with an “Extended Payment Period” of three months after the fiscal year.

2. Starting FY 2019, the cash-based budgeting will be in full implementation, 2018 being a transition period.

3. “Extended Payment Period” (EPP) means payment can only be done within a 15-month period (12 months of the current year + 3 months of the succeeding year); contracts awarded at the end of the FY can be paid during the 3-month EPP, or contracts awarded in December of the current year can be settled until March 31 of the succeeding year.

4. Starting FY 2019, the validity of appropriations, regardless of allotment class (i.e., PS, MOOE, FINEX, CO), is limited to one year unlike in previous years where the validity of MOOE and CO is two years.

5. The shift to annual cash-based budgeting is a major component of the Budget Reform Bill being pushed by the Department of Budget and Management (DBM). The bill aims to modernize the national government’s budget process, eliminate underspending, and institutionalize many of the reforms introduced and currently being implemented by the Executive branch.

6. The shift to annual cash-based budgeting are especially significant in the context of the Duterte administration’s expansionary fiscal policy, where spending for social services and infrastructure is intended to increase significantly.

7. Shifting to annual cash-based budgeting is expected to speed up the government’s budget utilization and promote disciplined management of the budget. Also, as it shows disbursements rather than obligations or commitments, a cash-based budget tends to reflect more accurately the annual outputs and actions of the government.

8. Through the cash-based budget agencies are compelled to expedite the implementation of their projects and programs. Agencies will be required to include only projects that are shovel-ready or projects that are readily implementable and can be fully implemented within the year.

9. Under the Cash-based Budgeting all obligations incurred during the year shall be settled within the year unless the obligation was incurred in December to which payment can be settled until March 31 of the succeeding year.

Update: The implementation of, and payment for, infrastructure projects are extended until December 31, 2020, provided that the funds for the purposes are obligated not later than December 31, 2019, in view of the delay in the implementation of programs and projects as a result of the delay in the passage and approval of the FY 2019 national budget. (based on President Duterte’s veto message)

1. All unpaid obligations as of end of 2018 will be paid and issued NCAs subject to validation by DBM even after FY 2018.

Source: DBM

Download: BRIEFER ON THE ANNUAL CASH BASED BUDGETING