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SOURCES OF FUNDS for theSOURCES OF FUNDS for the
National GovernmentNational Government
Sources of Funds:Sources of Funds:
1. Tax Revenues
2. Non-Tax Revenues such as
fees to be collected
2) borrowings from both domestic
and foreign sources; and
3) withdrawals from available cash
balances
TaXTaX
A tax is a compulsory contribution mandated
by law and exacted by the government for
a public purpose.
The major tax collecting agencies of the
national government are the Bureau of
Internal Revenue and the Bureau of
Customs.
Tax revenues include the following:Tax revenues include the following:
 Income taxes -
Individuals
Corporations
Miscellaneous
 Property taxes -
Real property
Property transfers
Special assessments
Special education tax
Stock transfers
Miscellaneous
 Taxes on goods and services -
Excises on imports
Excises on domestic articles
Business taxes and licenses
Franchise tax
Motor vehicle taxes
Miscellaneous
 Taxes on international trade and transactions -
Import duties
Export and premium duties
Foreign exchange
Miscellaneous
 Other taxes -
Documentary stamp taxes
Charges on forest products
Wharfage fees and charges
Immigration tax
Mining tax
Community tax
Miscellaneous - Local Government Shares on
on Internal Revenue Collections
Miscellaneous - Local Government Shares in the Proceeds from
the Development and Utilization of the National Wealth
Miscellaneous
non-tax revenues are the following:non-tax revenues are the following:
 Operating and service income -
Government services
Government business operations
Interests
Commissions
Insurance/fiduciary bond premiums
Rents
Trading/production
Miscellaneous
Income from public enterprises/investments -
Interest on loans
Dividends on stocks
Interest on bonds
Interest on treasury notes/bills
Interest on promissory notes
Interest on receivables, acceptances and discounted
notes
Gain on sale of acquired assets/stocks/bonds
Royalties
Government share from toll fees and casino earnings
Miscellaneous
 Miscellaneous income -
Sale of goods/merchandise confiscated
Sale of scrap construction materials
Gain on foreign exchange
Contributions
Inventory adjustments
Sweepstakes
Sale of waste materials
Miscellaneous
Sale of Assets -
Public domain
Fixed assets
Gain on sale of fixed assets
Scrap of fixed assets
Intangible assets
Investments/stocks/bonds
Gain on sale of investments/stocks/bonds
Grants and aids -
From foreign countries
From other levels of governments
Domestic
What are the desirable features of aWhat are the desirable features of a
tax system?tax system?
A tax system should be revenue-
productive;
simple and easy to administer,
equitable, and
progressive.
What are the government's current efforts toWhat are the government's current efforts to
improve tax collections?improve tax collections?
The national government has continuously expended
an all-out effort to strengthen its revenue-generating
capability through legislative and administrative
reforms.
Recently, the government came up with a
comprehensive measure to overhaul the tax system
to bring in badly needed revenues for the
government.
Called the Comprehensive Tax Reform Program
(CTRP), the new tax measure has three principal
components, namely, a) income tax reform; b) excise
tax reform; and, c) fiscal incentives reform.
The CTRP aims to widen the tax base, simplify the
tax structure to minimize leakages, undeclared
revenues, overstated deductions and corruption to
make the system more elastic and easier to
administer.
BorrowingsBorrowings
Borrowings refer to funds obtained from repayable
sources, such as loans secured by the government
from financial institutions and other sources, both
domestic and foreign, to finance various
government projects and activities.
The government borrows to provide for the
requirements of capital projects and to support
priority programs and projects. Relying solely on
domestic resources will limit government’s
capability to provide the needed support.
Domestic resources is insufficient to finance
priority programs and projects.
domestic borrowings & foreigndomestic borrowings & foreign
borrowingsborrowings
Domestic borrowings are funds obtained from sources
within the country.
Domestic borrowings of the national government
are usually made through the auction of treasury
bills, notes and bonds to the public. Foreign
borrowings, on the other hand, are funds obtained
from sources outside the country, such as Asian
Development Bank (ADB), International Bank for
Reconstruction Development (IBRD), Overseas
Economic Cooperation Fund (OECF), etc.
Foreign borrowings can be obtained through loans
secured from foreign financial institutions or
through the flotation of government securities in
the international market.
Why does the government borrow?Why does the government borrow?
The government borrows from any of
the following reasons:
to finance national government deficits;
to obtain foreign exchange;
to secure financing at more favorable terms
than the opportunity cost of revenues;
to take advantage of benefits attached to the
funds, e.g. technology; and,
to balance the timing of resources with the
project gestation and repayment of benefit
What are constructive cashWhat are constructive cash
receipts?receipts?
Constructive cash receipts are foreign
loan proceeds in the form of goods and
services for which no cash is remitted to
the national treasury. Such goods or
services have been paid directly by the
lender to the supplier.
DIMENSIONS OF THEDIMENSIONS OF THE
BUDGETBUDGET
The budget possesses various dimensions.
It can be classified according to the
following: By Sector, By Cost Structure,
By Expense Class and By Object, By
Region, By Type of Appropriation.
A. By SectorA. By Sector
The budget contains various type of
expenditures. They are for:
1. Social Services Expenditure;
2. Economic Services Expenditure;
3. Defense Expenditure;
4. General Public Services; and
5. Debt Burden
B. By Cost StructureB. By Cost Structure
1. For General Administration & Support Services
or Overhead Expenses
2. As Support to Operations for the facilitative
functions and services, staff and technical
support
3. For Operations of regular activities addressing
agency mandate
Example: Production of goods, delivery of pubic
services, and regulation, etc.
4. For Projects such as homogenous group of
activities that result in the accomplishment of
identifiable output within a designated period,
whether foreign or locally funded
C. By Expense Class & By ObjectC. By Expense Class & By Object
1. Current Operating Expenditures for
personal services, maintenance and
other operative expenses (MOOE)
2. Capital Outlays for investments, loans,
livestock and crops, land/land
improvements, buildings/structures,
furniture/fixtures
D. By Major Recipient ofD. By Major Recipient of
GovernmentGovernment
The major recipients of the budget are:
1. The NGAs (National Government Agencies)
– they include all agencies with the Executive,
Legislative and Judicial Branches of
government
2. The LGUs (Local Government Units) –
funding is released in the form of IRAs
(Internal Revenue Allotments), special shares
in national proceeds, credit thru the MDF
(municipal development fund), and premium
subsidies for local insurance
3. The GOCCs (Government Owned
and Controlled Corporations) – funding
is through subsidies, equity and net
lending
E. By Regional AllocationE. By Regional Allocation
The Budget is apportioned for each of
the various regions of the country.
F. By Type of AppropriationF. By Type of Appropriation
The budget is further classified into
different types, namely:
1. General Appropriations
2. Supplemental Appropriations
3. Continuing Appropriations
◦ refer to appropriations available to support obligations for a specified
purpose or project, such as multi-year construction projects which
require the incurrence of obligations even beyond the budget year.
Examples of continuing appropriations are those from existing laws
such as : RA 8150, otherwise known as the Public Works Act of
1995; and Republic Act No. 6657 and Republic Act 8532 which set
funds specifically for the Agrarian Reform Program (ARP). Currently,
appropriations for capital outlays and maintenance and other
operating expenses are considered as continuing appropriations but
only for a period of 2 years.
4. Automatic Appropriations
◦ debt service-interest payments, the Internal Revenue Allotment or
IRA which is the share of local government units (LGUs) from national
government revenue and the Retirement and Life Insurance
Premiums (RLIP) which is the share of the national government in the
premium payments to GSIS for the life insurance and retirement
benefit fund of government employees.
The budget may increase or decrease
depending on the government’s policy of
how much it will infuse into the economy.
Maturing of a country’s debt determines
the size of the budget.
Obligations Budget vs. Cash BudgetObligations Budget vs. Cash Budget
Obligations budget are for expenditures
incurred for the year and is to be paid in
said year. This can also be for expenditures
incurred for the year to be paid next year.
Aside from this, it is also allocated for
interest payments.
Cash budgets are for expenditures incurred
for next year. It can also be allocated for
expenditures in previous years, and is also
allocated for interest payments.
Priority Development Priority Development 
Assistance Fund (PDAF)Assistance Fund (PDAF)
PDAFPDAF
The Priority Development Assistance Fund 
is a lump-sum appropriation
in the annual General Appropriations Act
to fund the priority development
programs and projects of the government
.
PDAFPDAF
is used to finance priority development
programs and projects identified by the
Members of Congress
For the LGU, the amount is released to
the Department of Budget and
Management as the fund administrator,
which in turn releases the corresponding
amount to the LGU beneficiary of the
programs and projects chosen by the
legislator
How Pork Barrel is createdHow Pork Barrel is created
How Pork Barrel is createdHow Pork Barrel is created
Step 1: PREPARATION
Budget Call Out
◦ The Executive calls out all government agencies and
departments to submit a budget for the next year
◦ Departments and their line agencies submits their
budget
◦ Setting of overall budget policy
◦ Agency-level budget formulation
◦ Executive review, deliberation and approval
◦ Preparation of budget documents and submission to
Congress
Step 2: Authorization:
◦ Prepared budget is transmitted to Legislative
Department for review and approval
◦ A Bicameral Committee Conference will be
held
At this point, Members of the House of
Representatives insert some PDAF line items and
intelligence funds to some departments and
agencies
Approval of the Budget (General Appropriations
Act)
Step 3: BUDGET EXECUTION
◦ The GAA serves as the legal basis which allows
for the use of funds from the national treasury
for specified expenditure items provided therein.
However, the existence of a GAA alone does not
imply that agencies can start utilizing and drawing
funds to finance their programs and activities.
Agencies need to secure an allotment to be able
to obligate amounts specified in their budgets;
cash allocation should also be secured before
disbursements can be made to settle these
obligations. The budget execution phase is
concerned with these operational aspects of
budgeting which facilitates the translation of
appropriations to disbursements, or more
specifically the release of funds through
allotments and Notice of Cash Allocation (NCA).

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Sources of funds for the national government

  • 1. SOURCES OF FUNDS for theSOURCES OF FUNDS for the National GovernmentNational Government
  • 2. Sources of Funds:Sources of Funds: 1. Tax Revenues 2. Non-Tax Revenues such as fees to be collected
  • 3. 2) borrowings from both domestic and foreign sources; and 3) withdrawals from available cash balances
  • 4. TaXTaX A tax is a compulsory contribution mandated by law and exacted by the government for a public purpose. The major tax collecting agencies of the national government are the Bureau of Internal Revenue and the Bureau of Customs.
  • 5. Tax revenues include the following:Tax revenues include the following:  Income taxes - Individuals Corporations Miscellaneous  Property taxes - Real property Property transfers Special assessments Special education tax Stock transfers Miscellaneous  Taxes on goods and services - Excises on imports Excises on domestic articles Business taxes and licenses Franchise tax Motor vehicle taxes Miscellaneous
  • 6.  Taxes on international trade and transactions - Import duties Export and premium duties Foreign exchange Miscellaneous  Other taxes - Documentary stamp taxes Charges on forest products Wharfage fees and charges Immigration tax Mining tax Community tax Miscellaneous - Local Government Shares on on Internal Revenue Collections Miscellaneous - Local Government Shares in the Proceeds from the Development and Utilization of the National Wealth Miscellaneous
  • 7. non-tax revenues are the following:non-tax revenues are the following:  Operating and service income - Government services Government business operations Interests Commissions Insurance/fiduciary bond premiums Rents Trading/production Miscellaneous
  • 8. Income from public enterprises/investments - Interest on loans Dividends on stocks Interest on bonds Interest on treasury notes/bills Interest on promissory notes Interest on receivables, acceptances and discounted notes Gain on sale of acquired assets/stocks/bonds Royalties Government share from toll fees and casino earnings Miscellaneous
  • 9.  Miscellaneous income - Sale of goods/merchandise confiscated Sale of scrap construction materials Gain on foreign exchange Contributions Inventory adjustments Sweepstakes Sale of waste materials Miscellaneous
  • 10. Sale of Assets - Public domain Fixed assets Gain on sale of fixed assets Scrap of fixed assets Intangible assets Investments/stocks/bonds Gain on sale of investments/stocks/bonds Grants and aids - From foreign countries From other levels of governments Domestic
  • 11. What are the desirable features of aWhat are the desirable features of a tax system?tax system? A tax system should be revenue- productive; simple and easy to administer, equitable, and progressive.
  • 12. What are the government's current efforts toWhat are the government's current efforts to improve tax collections?improve tax collections? The national government has continuously expended an all-out effort to strengthen its revenue-generating capability through legislative and administrative reforms. Recently, the government came up with a comprehensive measure to overhaul the tax system to bring in badly needed revenues for the government. Called the Comprehensive Tax Reform Program (CTRP), the new tax measure has three principal components, namely, a) income tax reform; b) excise tax reform; and, c) fiscal incentives reform. The CTRP aims to widen the tax base, simplify the tax structure to minimize leakages, undeclared revenues, overstated deductions and corruption to make the system more elastic and easier to administer.
  • 13. BorrowingsBorrowings Borrowings refer to funds obtained from repayable sources, such as loans secured by the government from financial institutions and other sources, both domestic and foreign, to finance various government projects and activities. The government borrows to provide for the requirements of capital projects and to support priority programs and projects. Relying solely on domestic resources will limit government’s capability to provide the needed support. Domestic resources is insufficient to finance priority programs and projects.
  • 14. domestic borrowings & foreigndomestic borrowings & foreign borrowingsborrowings Domestic borrowings are funds obtained from sources within the country. Domestic borrowings of the national government are usually made through the auction of treasury bills, notes and bonds to the public. Foreign borrowings, on the other hand, are funds obtained from sources outside the country, such as Asian Development Bank (ADB), International Bank for Reconstruction Development (IBRD), Overseas Economic Cooperation Fund (OECF), etc. Foreign borrowings can be obtained through loans secured from foreign financial institutions or through the flotation of government securities in the international market.
  • 15. Why does the government borrow?Why does the government borrow? The government borrows from any of the following reasons: to finance national government deficits; to obtain foreign exchange; to secure financing at more favorable terms than the opportunity cost of revenues; to take advantage of benefits attached to the funds, e.g. technology; and, to balance the timing of resources with the project gestation and repayment of benefit
  • 16. What are constructive cashWhat are constructive cash receipts?receipts? Constructive cash receipts are foreign loan proceeds in the form of goods and services for which no cash is remitted to the national treasury. Such goods or services have been paid directly by the lender to the supplier.
  • 17. DIMENSIONS OF THEDIMENSIONS OF THE BUDGETBUDGET
  • 18. The budget possesses various dimensions. It can be classified according to the following: By Sector, By Cost Structure, By Expense Class and By Object, By Region, By Type of Appropriation.
  • 19. A. By SectorA. By Sector The budget contains various type of expenditures. They are for: 1. Social Services Expenditure; 2. Economic Services Expenditure; 3. Defense Expenditure; 4. General Public Services; and 5. Debt Burden
  • 20. B. By Cost StructureB. By Cost Structure 1. For General Administration & Support Services or Overhead Expenses 2. As Support to Operations for the facilitative functions and services, staff and technical support 3. For Operations of regular activities addressing agency mandate Example: Production of goods, delivery of pubic services, and regulation, etc. 4. For Projects such as homogenous group of activities that result in the accomplishment of identifiable output within a designated period, whether foreign or locally funded
  • 21. C. By Expense Class & By ObjectC. By Expense Class & By Object 1. Current Operating Expenditures for personal services, maintenance and other operative expenses (MOOE) 2. Capital Outlays for investments, loans, livestock and crops, land/land improvements, buildings/structures, furniture/fixtures
  • 22. D. By Major Recipient ofD. By Major Recipient of GovernmentGovernment The major recipients of the budget are:
  • 23. 1. The NGAs (National Government Agencies) – they include all agencies with the Executive, Legislative and Judicial Branches of government 2. The LGUs (Local Government Units) – funding is released in the form of IRAs (Internal Revenue Allotments), special shares in national proceeds, credit thru the MDF (municipal development fund), and premium subsidies for local insurance
  • 24. 3. The GOCCs (Government Owned and Controlled Corporations) – funding is through subsidies, equity and net lending
  • 25. E. By Regional AllocationE. By Regional Allocation The Budget is apportioned for each of the various regions of the country.
  • 26. F. By Type of AppropriationF. By Type of Appropriation The budget is further classified into different types, namely: 1. General Appropriations 2. Supplemental Appropriations
  • 27. 3. Continuing Appropriations ◦ refer to appropriations available to support obligations for a specified purpose or project, such as multi-year construction projects which require the incurrence of obligations even beyond the budget year. Examples of continuing appropriations are those from existing laws such as : RA 8150, otherwise known as the Public Works Act of 1995; and Republic Act No. 6657 and Republic Act 8532 which set funds specifically for the Agrarian Reform Program (ARP). Currently, appropriations for capital outlays and maintenance and other operating expenses are considered as continuing appropriations but only for a period of 2 years. 4. Automatic Appropriations ◦ debt service-interest payments, the Internal Revenue Allotment or IRA which is the share of local government units (LGUs) from national government revenue and the Retirement and Life Insurance Premiums (RLIP) which is the share of the national government in the premium payments to GSIS for the life insurance and retirement benefit fund of government employees.
  • 28. The budget may increase or decrease depending on the government’s policy of how much it will infuse into the economy. Maturing of a country’s debt determines the size of the budget.
  • 29. Obligations Budget vs. Cash BudgetObligations Budget vs. Cash Budget Obligations budget are for expenditures incurred for the year and is to be paid in said year. This can also be for expenditures incurred for the year to be paid next year. Aside from this, it is also allocated for interest payments. Cash budgets are for expenditures incurred for next year. It can also be allocated for expenditures in previous years, and is also allocated for interest payments.
  • 32. PDAFPDAF is used to finance priority development programs and projects identified by the Members of Congress
  • 33. For the LGU, the amount is released to the Department of Budget and Management as the fund administrator, which in turn releases the corresponding amount to the LGU beneficiary of the programs and projects chosen by the legislator
  • 34.
  • 35. How Pork Barrel is createdHow Pork Barrel is created
  • 36. How Pork Barrel is createdHow Pork Barrel is created Step 1: PREPARATION Budget Call Out ◦ The Executive calls out all government agencies and departments to submit a budget for the next year ◦ Departments and their line agencies submits their budget ◦ Setting of overall budget policy ◦ Agency-level budget formulation ◦ Executive review, deliberation and approval ◦ Preparation of budget documents and submission to Congress
  • 37. Step 2: Authorization: ◦ Prepared budget is transmitted to Legislative Department for review and approval ◦ A Bicameral Committee Conference will be held At this point, Members of the House of Representatives insert some PDAF line items and intelligence funds to some departments and agencies Approval of the Budget (General Appropriations Act)
  • 38. Step 3: BUDGET EXECUTION ◦ The GAA serves as the legal basis which allows for the use of funds from the national treasury for specified expenditure items provided therein. However, the existence of a GAA alone does not imply that agencies can start utilizing and drawing funds to finance their programs and activities. Agencies need to secure an allotment to be able to obligate amounts specified in their budgets; cash allocation should also be secured before disbursements can be made to settle these obligations. The budget execution phase is concerned with these operational aspects of budgeting which facilitates the translation of appropriations to disbursements, or more specifically the release of funds through allotments and Notice of Cash Allocation (NCA).