General Principles of

Public
Fiscal Administration

Submitted By:
YANKEE N. MENDIOLA
Overview of Public Fiscal Administration
Public Fiscal Administration - refers to the formulation, implementation, and
evaluation of the Policies and Decisions on taxation, revenue administration, resource
allocation, budgeting, public expenditure, borrowing, debt management, accounting,
and auditing.

It is also defined as the act of managing incoming and outgoing monetary transactions
and budgets for governments, educational institutions, nonprofit organizations, and
other public service entities.

Public administration has to do with the practical management and direction of the
various organs of the state and the execution of state policies by the executive and
administrative officers entrusted with such functions.

Public - mean the whole government sector the NGAs (National Government
Agencies), GOCCs (Government owned and Controlled Corporations), GFIs
(Government Financial Institutions), and LGUs (Local Government Units). It also mean,
the people whom the government serve the beneficiaries, voters, taxpayers, youth,
farmers, and the urban poor.

Fiscal – refers to fiscal policies closely linked with other policy instruments of the
government such as monetary, price and trade policy, investment and wage

Administration – refers to the Formulation, Implementation, and Evaluation of

Government fiscal policies.

The principal agencies tasked with fiscal functions:

1. Congress, especially the Lower House,
2. Department of Finance
3. Department of Budget and management
4. Commission on Audit
Other agencies tasked with fiscal functions:

CONGRESS Agencies and Corporations

DEPARTMENT OF FINANCE (DOF) Insurance Commission (IC)
DEPARTMENT OF BUDGET AND National Tax Research Center
MANAGEMENT (NTRC)
COMMISSION ON AUDIT Central Board of Assessment Appeal
DEPARTMENT OF INTERIOR AND (CBAA)
LOCAL GOV’T Philippine Deposit Insurance
OFFICE OF THE PRESIDENT (OP Corporation (PDIC)
Bureaus: Philippine Export-Import Credit
Bureau of Internal Revenue (BIR) Agency (PHILEXIM)
Bureau of Customs (BOC) Government Service Insurance
Bureau of the Treasury (BTR) System (GSIS)
Bureau of Local Government Social Security System (SSS)
Finance Public Estates Authority (PEA)
(BLGF) Cooperative Development Authority
Offices: (CDA)
Privatization and Management Office Regional Offices
(PMO)

Meaning of Administrative Agency.

Administrative Agency - is the term used generally to describe an agency

exercising some significant combination of executive, legislative and judicial
powers. It is a government body charged with administering and
implementing particular legislation.
Under the Administrative Code of 1987, the term agency of the
government is used to refer to any of the various units of the government,
including a department, bureau, office, instrumentalities, or GOCCs, or LGUs.

PUBLIC FISCAL ADMINISTRATION AT A GLANCE

 Also talks about government revenues and expenditures and their
impact in the economy
 Concerned with the implementation and practicalities of these
concepts
 Encompasses the practical aspects of fiscal governance such as:
> revenue collection
> preparation of budgets
> budget allocation and spending
> management of debt
> auditing of account
 Deals with, but is not restricted to the more limited issues covered by
public fiscal
 In recent times, however, with the emergence of the field of public
administration, much interest has been directed towards the political
administrative and management aspects of formulating, implementing and
evaluating fiscal policy-hence, the term public fiscal administration
 Is centered on the determination and analysis of fiscal policies starting
from their formulation to their implementation and evaluation.

Fiscal Policy Functions

Allocation  It is the process by which total resource use is divided between
private and social goods and which the mix of social goods is chosen.
 In the performance of allocation function, fiscal policy is expected to
regulate the balance in making available both private goods, merit goods,
and social goods. The government intervenes through subsidies, price
regulation, and direct provision of social goods.
Distribution
 The distribution of income and wealth is shaped by the distribution of the
factors of production.
 Fiscal policy is directed toward correcting this income and wealth. ex. high
tax for rich, and low tax for poor; favorable public policies on agrarian
reform, wages, labor and employment, among others
Stabilization
 instability may be due to changes in prices of major imports, cost of foreign
borrowings, and the availability of foreign borrowings which lead to huge
deficits in the budget and balance of payments and trade.
 Using expenditure and tax policies for stabilization in developing countries
may be more difficult. An increase in expenditures may entail either
additional taxes or more borrowing. The low tax base and inefficient tax
administration makes a case of public borrowing.
 A country aspiring to achieve growth and development may have to
experience instabilities and suffer chronic balance of payments deficit,
severe inflation, high levels of unemployment and underemployment and the
like.

Definition of Administrative Relationship.

1. Supervision and Control – shall include authority to:
a. Act directly whenever a specific function is entrusted by law or regulation
to a subordinate;
b. Direct the performance of duty; restrain the commission of acts;
c. Review, approve, reverse or modify acts and decisions of subordinate
officials and units;
d. Determine priorities in the execution of plans and programs; and
e. Prescribe standards, guidelines, plans and programs.
2. Administrative Supervision – It shall govern the administrative relationship
between a department or its equivalent and regulatory agencies or other
agencies.
a. To generally oversee the operations of such agencies and to ensure that
they are managed effectively, efficiently and economically but without
interference with day-to-day activities;
b. To require the submission of reports and cause of conduct of
management audit, performance evaluation and inspection to determine
compliance with policies, standards and guidelines of the department;
c. To take such action as may be necessary for the proper performance of
official function, including rectification of violations, abuses and other form of
maladministration; and
d. To review and pass upon budget proposal of such agencies but may not
increase or add to them.

Scope of Powers of Administrative Agencies.

1. Express and Implied Powers – The Jurisdiction and powers of
administrative agencies are measured and limited by the Constitution or law
creating them or granting their powers.

2. Inherent powers – An administrative agency has no inherent powers,

although implied powers may sometimes be spoken of as inherent. Thus, in
the absence of any provision of law, administrative agencies do not possess
the inherent power to punish or contempt which has always been regarded
as a necessary incident and attribute of courts.

3. Quasi-Judicial Powers – Official powers cannot be merely assumed by

administrative officers, nor they can be created by the courts in the exercise
of their judicial functions.

Powers of Administrative Agencies Classified

1. As to Nature. – The powers of administrative agencies may be
classified into:
a. Investigatory power
b. Quasi-legislative or Rule-making powers; and
c. Quasi-judicial or adjudicatory powers.
2. As to the degree of subjective choice. – According to the degree of
subjective choice involved in their exercise, the powers of administrative
agencies are, in general, classified either as discretional or ministerial.

Fiscal Control Mechanisms

 Prevent Misappropriation of Funds requires review and approval by the
administrative official of the line or operating agency, of all requests for
money releases and budgetary allotments, vouchers and similar papers
before payments are made so that expenditures are in accordance with
policy and law and not irregular, unnecessary, excessive, extravagant and
unconscionable
 Control to Implement Prospective Policy proactive administration inhibits
governmental units from directly transacting and negotiating money matters
since such kind of transaction is officially channeled through the Department
of Budget and Management in the form of budget estimates as endorsed by
the President

 Ensure the Wisdom and Propriety of Expenditure claims for payment from
public funds, legality, prudence, reasonableness, the morality of the claim or
charge should be established. A review of existing contracts and transactions
should be made.
 Prevent Deficits Fiscal supervision and control may be useful but should not
unduly interfere with agency prerogative to carry out programs mandated by
the constitution and the laws.

Philippine Budgetary Process.

I. Budgetary Overview
First, we shall define the national budget which is the government’s estimate
of its income and expenditures. It is what the government plans to spend for
its programs and projects, as well as the sources of funds. The budget
process involves budgeting and the budget. Budgeting refers to methods and
practices of government planning, adopting and executing financial policies
and programs. The budget refers to a plan of expressing in monetary terms
the operating program and means of financing of a government for a definite
period of time. The national budget is spent for the implementation of
various government programs and projects, the operations of government
offices such as the payment of salaries, construction of buildings.

II. The Budget Process

This involves four major steps namely:
1. Budget Preparation
Budget Preparation involves the formulation of estimates of revenues and
expenditures by the Executive Departments and Agencies. In preparing the
annual budget proposal, the said department makes an estimation of
government revenues. It then determines the budget priorities within
available revenues and borrowing limits. Finally, it translates these approved
priorities into expenditures. The main agency involved is the Development
Budget Coordination
Committee (DBCC) composed of the following agencies:
a. The Department of Budget and Management, the agency responsible for
resource allocation and management;
b. The Department of Finance, the agency responsible for resource
generation and debt management;
c. The National Economic and Development Authority, the agency
responsible for overall economic activity;
d. The Bangko Sentral ng Pilipinas (Central Bank of the Philippines), the
agency responsible for monetary measures and policies;
e. The Office of the President of the Philippines, the agency responsible for
the approval and oversight of the budget In the preparation of the budget,
the DBCC approves the parameters, makes a budget call, conducts budget
hearings, makes a budget review then consolidates the budget. It then
validates and confirms the budget, which is finally approved by the President
of the Philippines and his Cabinet. thereby submits the budget to Congress
for approval.

2.Budget Legislation/Authorization
a. Overview
This pertains to the whole range of legislative action on the budget, leading
to the enactment of a General Appropriations Law for the year. The
Philippine House of Representatives first conducts hearings/debates on the
budget. The House then approves the budget, for submission to the Senate
of the Philippines. Senate hearings and debates are conducted on the
budget, which is finally approved. A Bicameral Conference Committee
composed of representatives of the Philippine House of Representatives and
the Senate is convened. After approval by the Bicameral Conference
Committee, the President enacts the budget which is known as the General
Appropriations Act.

b. The Legislative Budget Process

The main unit of the Philippine House of Representatives involved in the
budget process is the Committee Affairs Department (CAD) composed of the
Standing Committees and Sub-Committees. The CAD’s activities during
budget legislation are:

i. Committee Budget Hearings

Standing Committees (sometimes referred to as the Mother
Committee/Committee Proper) are responsible for conducting budget
hearings. During these hearings, macroeconomic assumptions/plans are
presented during the Committee budget hearings on a department wide
level. All the heads of the Executive Departments are invited to these
hearings. Sub-Committees are also responsible for conducting these budget
hearings. Budget hearings are conducted by the Sub-Committees on an
agency by agency level. Bureaus and other offices under the various
departments of the national government are invited to these hearings.

ii. Printing of General Appropriations Bill (GAB) on 1st Reading

A National Expenditure Program is formulated, and a copy of the GAB on 1 st
Reading is printed by the Committee Technical Staff, based on the National
Expenditure Program. The GAB is filed in the plenary session for 1st Reading.

iii. Executive Meeting of the Committee

The Committee meets in executive session to discuss and approve proposed
committee amendments to the GAB. Committee Reports are prepared and
filed to the Bills and Index Division.

iv. Sponsorship and Plenary Deliberations

General principles and macroeconomic assumptions are sponsored and
debated in the plenary session. Deliberations on the budgets of each
department, agency, office, including Government Owned and Controlled
Corporations.

v. Approval on 2nd Reading of the GAB

Turno en contra speeches are delivered on the Floor. The turno en contra is a
legislative tradition allowing opponents of a bill an opportunity to explain at
length their position, in the same manner that a bill’s sponsor delivers a
sponsorship speech. After the Turno en Contra, the Philippine House
Members vote on the approval of the GAB on 2nd Reading.

vi.Amendments, Finalization & Printing of the GAB for 3rd Reading

Inclusion of possible amendments to the GAB for 3rd Reading are submitted
to the Floor. Amendments are approved for inclusion in the proposed copy of
the GAB on 3rd Reading, which is subsequently printed for deliberation.

vii. Approval of the GAB on 3rd Reading

The GAB is distributed to the Philippine House Members who vote on the
approval of the bill on 3rd Reading. The GAB is then approved on 3 rd Reading.

viii. Transmittal of the 3rd Reading Copy of the GAB to the

Philippine Senate
The GAB, as approved on 3rd Reading, is transmitted to the Senate for
consideration in a similar manner as deliberated upon by the House.

ix.Bicameral (Bicam for short) Conference Committee

The Conferees or representatives from both the Philippine House and Senate
convene as a Conference Committee in order to settle and reconcile differing
provisions of each Chamber’s version of the bill.

x. Approval of the Bicam Report

During this stage of the budget process, the Conference Committee Report is
ratified by each Chamber.

xi. Finalization and Printing of the Enrolled Copy of the GAB

All amendments as approved in the Committee Report is incorporated into
the enrolled copy of the GAB. The enrolled copy is finally printed.

xii. Signing of the Enrolled Copy of the GAB

The enrolled copy of the GAB is forwarded to the President for signing. Veto
powers of the President are exercised in the enactment of the GAB. The
signed appropriations bill is finally enacted into a law which is termed as the
General Appropriations Act.

3. Budget Execution/Implementation
Budget execution covers the allotment of appropriations by the central
budget authority to, and the incurrence of obligations by, the spending
departments and agencies of government. The steps in the execution of the
budget are:

a. Release of the funds by the Department of Budget and Management

(DBM)
b. Implementation of the various programs and activities by the different
government agencies
i. Involves the formulation of allotment and cash programs
ii. An Agency Budget Matrix (ABM) is prepared
iii. The ABM is validated/Confirmed for correctness and accuracy
iv. The General Allotment Release Order (GARO)/Special Allotment Release
Order (SARO)/Notice of Cash Allotment is Released (NCA)
v. Government Programs/Projects/Activities can now be implemented due to
fund release

4. Budget Accountability & Review

This involved the reporting of actual performance against plans or targets,
and it involves the following process:
a. Monitoring of agency budgetary performance
b. Comparison and evaluation of actual performance with the initially
approved work targets
c. A summary list of checks issued is submitted on a monthly basis
d. Physical & Financial Report of Operations is submitted on a quarterly basis
in the form of a trial balance
History of Philippine Public Administration: A Revisit A) Pre-Colonial
Period (before 1521)
Like the other island groups of southeast Asia, the Philippines have
very early human inhabitants - perhaps even as long as 60,000 years ago. In
more recent history the main outside influences are Chinese, Hindu and -
from the 15th century - Muslim. But no external power tries to dominate or
unify the scattered islands (more than 7000 in the archipelago) until the
arrival of the Spanish in the 16th century.

It is somewhat difficult today to account for the influences of the pre-colonial

period but it cannot however be denied that some of the political, economic,
cultural, social or communal organization existed and served to regulate
conduct of the people in the loose sense of the term.

The Philippines did not exist as a single entity but rather lived as self
governing groups called Barangays , each ruled by a datu who assumed the
position of a territorial chief, administrator of community life, and was the
galvanizing center of various spheres of activities in the community.

Barangays in the earlier days were not governed with hard and fast rules but
in all friendly relations. Cohesion among barangay members was part and
parcel of a common tradition of a settler group. This pattern of familial
relationships of personalized loyalties and leadership-centered community
activities would persist even today and would find itself reflected in the
dynamics of contemporary administrative organizations in the Philippines.

A) Spanish Colonial Period (Mid-16th Century -1902)

Much of what Philippine bureaucracy is today can be traced to the Spanish
colonization which span more than three hundred years beginning 1521
when the Portuguese explorer, Ferdinand Magellan, in the employ of the
Spanish king, Charles I, landed in Homonhon Island, south of province of
Samar.

Characteristics/ features of the Spanish colonial period:

Began the tradition of Centralization
- The administrative system introduced by Spain when it colonized the
Philippine archipelago began the tradition of centralization for purposes of
consolidating its empire. The institutions and rules which had evolved in
Spain and other colonized territories were exported to the country.

Jurisdictional boundaries between the state and religion were never clearly
defined

- The colonization of the Philippines under Spain is carried out as much by

Roman Catholic friars as by any state administration. Members of the clergy
claimed much influence on the civilian and military authorities on secular
affairs which perhaps, regarded as one of the outstanding features of the
Spanish colonial bureaucracy.

Introduced the system of public revenue and public expenditure

- It was established to consolidate the islands and strengthen the

government against pockets of rebellion of which there had been many.
Public offices were regarded as a grant or favor

- A special and privileged class of bureaucrats, predominantly Spanish, were

maintained to administer the affairs of the colonial population. These public
offices were then regarded as grant or favor, called Merced from the king
who disposed of them as he pleased and based on those who participated in
the conquest and pacification of the colonies including their descendants.
Belonging to this group were usually those that assumed judicial functions.

Practice of filling up positions by appointment or purchase

- A remarkable feature of the civil service system designed by the Spanish
colonial administration was the practice of filling appointments on the basis
of purchase where offices were sold to the highest bidders. The practice was
adopted to help augment the repository of the royal treasury. Due to the
distance, monitoring and supervision by the central government
was almost impossible.

Major reforms under the Spanish Colonial Period:

Creation of three (3) distinct branches of government
- In response to the rampant graft and corruption, financial administration
was separated from that of the government proper and centralized under
one superior office resulting in the official organization where the Governor
General exercised political, governmental and military powers, the Audiencia
for judicial matters and the Royal officials for the management of resources.
Introduced merit and fitness, careerism and principles of accountability in
the civilian bureaucracy
- In 1866, the need for technical knowledge in the various phases of work
such as accounting and auditing led to the promulgation of system of
examination and promotion, establishing conditions for the
professionalization of the civil service. Although reforms were either not
implemented or unsuccessful in the face of engrained traditions, they set the
grounds for the acceptance among the learned elites of the need for merit
rather than patronage in entering and moving up the bureaucracy.

B) American Colonial Period (1900-1946)

The American colonial period shattered the early aspirations of nationhood,
and instead introduced a superior and systematic system of colonial
administration in the country. It retained the centralized features of the
Spanish era, but installed a political system of governance that sought to
approximate the republican and democratic character of the American
government within the bounds of a colonial set up.

Characteristics of the American colonial period:

■ All high officials of the central government with exception of the Filipino
delegates elected to the Philippine assembly was appointed by the Pres. of
the US with the consent of the American Senate
■ The Phil. Assembly and local governments were under close supervision of
the Philippine Commission which until 1901 was entirely composed of
Americans
■ Graft and corruption remained a big problem Reforms/ Significant
Developments under the American colonial period:
■ Establishment of the Philippine Civil Service system under the Schurman
Commission

- The administration of the colony was placed under a nonpolitical civil

service constituted in 1900 under Act No. 5 of the First Philippine
Commission which provided for the establishment and maintenance of an
efficient and honest civil service in the Philippines. The administrative
system that emerged under this enactment provided for a setup “whose
philosophy and principles represented a compllete change from that of the
Spanish period."

■ Filipinization of the civil service became a basic administrative policy

- Filipinization was clearly embodied in President McKinley's instructions

made as early as 1900, where the Philippine Commission was directed to
devote itself to the “establishment of an educational system and an efficient
civil service system,” where natives of the islands are to be preferred, and if
they can be found competent and willing to perform the duties shall be
preferred over others.

C) Commonwealth Period (1935-1945)

By the time Philippine Commonwealth was established in 1935, the civil
service had been completely Filipinized. The Commonwealth government,
conceived under the Tydings-McDuffie Law of the American Congress, is a
10- year transitory government which gave Filipinos a chance to prove to the
Americans their capability readiness in handling their own government. It
adopted a government " republican in form, Filipino in personnel, and
autonomy in domestic affairs.” In fact, the assumption of Filipino political
leaders did not disrupt the civil service system built by Americans, instead,
the momentum was continued and even to some extent, strengthened or
reinforced.

With the adoption of the 1935 Constitution, a full blown provision on the civil
service (Article XI) was adopted which embraced all branches of the
government and emphasized careerism, political neutrality and security of
tenure.

Under this Constitution, the Civil Service Bureau was also elevated to a
Commission status and was given increased powers, full and exclusive
authority to conduct formal investigations against civil service personnel.

When President Manuel L. Quezon assumed office, he repealed Section 683

of the Administrative Code through Executive Order No. 8 and made all
branches and subdivisions of the government covered by the civil service
precisely in pursuit of the constitutional provision. He also took steps in
fighting nepotism, issuing an executive order prohibiting appointing
authorities from making appointments of their relatives. President Quezon's
social justice program was also conceived as the chief implementer of
economic development and the promotion of the well-being and the
economic security of the people. He laid out that “state leadership, as
against private dominance in the economy, was to be the keynote of
governmental activities."
D) Japanese Occupation (1941-1945)

Just about the time when policies of the Commonwealth government were to
be put to test, the Pacific War started with Japanese bombing of American
Military installations in Pearl Harbor in Hawaii. On December 8, 1941, ten
hours after the attach in Hawaii, Japanese invaded the Philippines.

As such, preparatory period towards independence was abruptly shorten.

Meanwhile, the Japanese military organized a new government in the
Philippines known as the Second Philippine Republic, which was headed by
President Jose P. Laurel . It attempted to secure Filipino cooperation by
setting up a facade of a Filipino civil administration but this government
ended up being very unpopular.

The Philippines suffered destruction, dislocation and demoralization. While it

is true that the Japanese administration did not entirely change the existing
civil service structure, it also created a trauma to the extent that
behaviorally, it eroded the very foundations of merit and fitness built during
the American and Commonwealth Period.

References:
De Leon, H & De Leon Jr., H. (2010) Administrative Law: Text and
Cases. Rex Book store. Manila Philippines.
Public Administration in the Philippines Running a Bureaucracy
retrieved on August 18, 2016 retrieved from
http://www.scribd.com/doc/37770745/Local-Fiscal-Administration
Department of Budget and Management Retrieved on August 18,
2016 from http://www.dbm.gov.ph/?page_id=8959.
Pilar, Nestor N., “Philippine Public Administration: From Classical
to New Public Administration to New Public Management',
Philippine Journal of Public Administration, Vol. LII
The House of Representatives House of Librarian retrieved on
August 20, 2016 from
https://hrepreflibrarian.wordpress.com/2013/03/07/the-budgetprocess-
the-philippine-congress/
The Philippine Star., (2016). Duterte magic': 10-point
socioeconomic agenda retrieved on August 20, 2016 From
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10-point-socioeconomic-agenda