Public Financial Management and Budget Execution
Budget execution chain
Appropriation (sanggunian ordinance) → allotment (budget officer) → obligation (contract or purchase) → disbursement (voucher and check). The treasurer certifies funds available; the accountant records; the mayor approves. No obligation without appropriation and allotment; no disbursement without obligation and certification. The cash program must support the timing.
PFM principles
The PFM reform agenda stresses budget transparency, procurement linkage, cash management and accountability. For LGUs, the annual budget must be based on actual revenue estimates; supplemental budgets require sanggunian approval; realignment is limited; savings have a legal meaning and cannot be used to create new positions or increase salaries without authority. Trust funds are spent only for their purpose.
Worked example
A department has appropriation P1,000,000, allotment P600,000 and existing obligations P200,000. It requests a P500,000 purchase. Available allotment is P400,000, so the request exceeds it by P100,000. The budget officer cannot allot beyond the approved allotment without a valid supplemental or realignment; the department must reduce the purchase or wait for additional allotment.
Traps
- Treating appropriation as cash.
- Obligating before allotment.
- Using savings for unauthorized purposes.
- Spending trust funds on general operations.