PA 109

PUBLIC FISCAL
ADMINISTRATION
LECTURE NOTES

JUNELEN G. INTING, MBA

Compiler
SLSU-MAASIN CITY CAMPUS
Maasin City, Southern Leyte
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 UNIT I
INTRODUCTION TO PUBLIC FISCAL ADMINISTRATION

LESSON I
Course: PA 109: Public Fiscal Administration

Title of the Topic: PFA: An Introduction

Objectives: At the end of the lesson, the students must be able to:

 Discuss the definition of Public Fiscal Administration

INTRODUCTION
Public Fiscal Administration refers to the management of a government's financial resources to achieve
economic stability, equitable distribution of wealth, and efficient delivery of public services. It encompasses
processes such as budgeting, revenue generation (e.g., taxes and fees), public expenditure, and financial
accountability. The primary goal of public fiscal administration is to ensure that resources are allocated and
utilized effectively to meet the needs of citizens while maintaining fiscal discipline and promoting sustainable
economic growth.

MIND-MAPPING ACTIVITY 1
Title of Activity: Exploring the Basics of Public Fiscal Administration

Objective: To introduce students the concepts of Public Fiscal Administration by creating a collaborative
mind map that outlines its key elements and real-world examples.

**The activity is detailed in the annex.

CONTENT OF THE LESSON

What is Public Fiscal Administration?

Public - the whole of Government sector: National Government Agencies (NGAs); Government-Owned or
Controlled Corporations (GOCCs); Government Financial Institutions (GFIs); Local Government Units (LGUs).
It also means the people whom the government serves: voters, taxpayers, beneficiaries, youth, farmers, urban
poor.

Fiscal– refers to the fiscal policies. Fiscal policies are instruments used by the government to achieve its
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objectives and goals. It provides directions to government activities, serves to encourage and promote
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 private economic activities. Fiscal policies are closely linked with other policy instruments of government
such as monetary and price policy, trade, investment and wage.

Administration – refers to the formulation, implementation, and evaluation of Government Fiscal Policies.
The administration aspects involve the fiscal processes of planning what government wants to achieve,
collecting taxes and raising revenues, borrowing, allocating revenues to meet the needs and demands of the
people and others.

Fiscal administration is the act of managing incoming and outgoing monetary transactions and budgets for
governments, educational institutions, nonprofit organizations, and other public service entities. For example,
local fiscal administration for a town or municipality involves receiving, budgeting, and dispersing monies to
support local infrastructure. In terms of governmental administration, fiscal responsibility necessitates
numerous departments or divisions to manage the large task of funding government operations. Each division
or department carries responsibility for different aspects such as budgeting, reporting, collecting revenues in
the form of fees and taxes or purchasing.

Public Fiscal Administration is about the finances of the public sector, how these are administered and how
these affects or promote the general wellbeing of citizens. It refers to 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 can be viewed as a system:
its parts work in harmony with each other towards the achievement of common goals. As a system, PFA is
composed of environment, structures and systems, processes and personalities involved in formulating,
implementing and evaluating Fiscal Policy.

Public Fiscal Administration is the act of managing incoming and outgoing monetary transactions and
budgets for governments, educational institutions, non-profit organizations, and other public services entities.
It refers to the systems, processes, resources and the policy, environment, government, the inter-governmental
and inter-local fiscal relations, affecting among others.

Scope of PFA

1. Fiscal Policy Formulation

2. Taxation and Revenue Administration
3. Budgeting and Expenditure
4. Public Borrowing and Debt Management
5. State Accounting
6. State Auditing

Importance of PFA

Public fiscal administration plays a crucial role in the functioning of a government and has significant
importance for several reasons:
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 1.Resource Allocation: Public fiscal administration involves the management of government revenues and
expenditures. It helps allocate resources efficiently to meet the needs of society, such as education,
healthcare, infrastructure, and other public services.

2. Stability and Economic Growth: Effective fiscal administration contributes to economic stability and
growth. Governments can use fiscal policy tools, such as taxation and public spending, to stimulate or
restrain economic activity based on prevailing economic conditions.

3. Public Services: Fiscal administration is essential for the delivery of public services. It ensures that there
is a sustainable source of funding for services like education, healthcare, public safety, and infrastructure
development, which are critical for the well-being and progress of a society.

4. Redistribution of Wealth: Through taxation and social spending, fiscal administration helps in
redistributing wealth and reducing income inequality. Governments can design tax policies and social
programs to ensure a fair distribution of resources and promote social justice.

5. Debt Management: Governments often need to borrow to fund projects or address budget deficits.
Effective fiscal administration involves prudent debt management to ensure that borrowing is sustainable and
does not lead to a debt crisis.

6. Macroeconomic Stability: Fiscal policies, when properly designed and implemented, can contribute to
macroeconomic stability. For example, counter-cyclical fiscal policies can help dampen economic
fluctuations by adjusting government spending and taxation in response to economic cycles.

7. Public Accountability and Transparency: Transparent fiscal administration fosters public trust by
providing clear information on how public funds are raised and spent. This accountability is essential for
democratic governance, as citizens have the right to know how their taxes are being utilized.

8. Investor Confidence: Sound fiscal management can enhance investor confidence in a country's
economy. Investors are more likely to invest in a stable fiscal environment where they can predict tax
policies and economic conditions.

9. Incentivizing Economic Activities: Through tax incentives and subsidies, fiscal administration can
influence economic behavior. Governments can use these tools to encourage certain activities, such as
research and development or environmental conservation.

10. Crisis Management: During economic crises or emergencies, fiscal policies can be used to stabilize the
economy and provide support to affected individuals and businesses. This flexibility is crucial for addressing
unexpected challenges.

SYNTHESIS
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Public Fiscal Administration is the management of government finances to ensure the effective allocation
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and utilization of resources for the benefit of society. It encompasses key processes such as budgeting,
 revenue generation, public expenditure, and fiscal accountability. Through these components, governments
aim to promote economic stability, deliver essential public services, and address societal needs. Effective
public fiscal administration fosters transparency, accountability, and equity, ensuring that resources are
managed sustainably to support national development and improve citizens' quality of life.

REFERENCE

Johnson, S. (2024). HistorialIndex.org. https://www.historicalindex.org/what-is-fiscal-administration.htm

Shafritz, J., et. Al (2017). Introducing Public Administration. chrome-

extension://efaidnbmnnnibpcajpcglclefindmkaj/https://students.aiu.edu/submissions/profiles/resources/online
Book/N2v3w3_Introducing%20Public%20Administration-2016.pdf
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 UNIT I
INTRODUCTION TO PUBLIC FISCAL ADMINISTRATION

LESSON 2
Course: PA 109: Public Fiscal Administration

Title of the Topic: Politics and Fiscal Administration

Objectives: At the end of the lesson, the students must be able to:

 Understand the relationship of politics and fiscal administration.

INTRODUCTION
Politics and Fiscal Administration are deeply interconnected in the governance of a nation. Politics refers
to the process of decision-making and the exercise of power to allocate resources and implement policies.
Fiscal administration, on the other hand, focuses on the management of public finances, including revenue
generation, budgeting, expenditure, and accountability.

MIND-MAPPING ACTIVITY 2
Title of Activity: Exploring the Relationship Between Politics and Fiscal Administration

Objective: To help students understand how politics and fiscal administration are interconnected and how
political decisions influence fiscal policies and resource allocation.

**The activity is detailed in the annex.

CONTENT OF THE LESSON

Politics and fiscal administration are interconnected fields that involve the study and management of
government policies, budgeting, and financial activities.

Politics - refers to the activities, actions, and policies used to gain and hold power in a government or to
influence the government. It involves the process of decision-making within a society, often through the
competition and cooperation of individuals, groups, and political parties.

Concepts:

 Political Ideologies- Different belief systems and values that shape political thought, such as
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liberalism, conservatism, socialism, and more.

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  Political Systems- Different forms of governance, including democracies, authoritarian regimes,
monarchies, and others.
 Political Institutions- Structures like legislatures, executives, and judiciaries that make and
implement laws.
 International Relations- The study of interactions between countries, including diplomacy, conflict,
and cooperation.

Definition of terms:
Liberalism a political and economic philosophy that emphasizes individual liberties, equality,
and the protection of individual rights.
Conservatism a political and social philosophy that emphasizes the preservation of established
traditions, institutions, and practices.
Socialism a political and economic ideology that advocates for collective or government
ownership and control of the means of production, distribution, and exchange.
Democracy a political system in which the power to govern is vested in the hands of the people,
either directly or through elected representatives.
Authoritarian a form of government characterized by strong central power and limited political
freedoms.
Monarchy a political system in which a single person, known as a monarch, serves as the head
of state for life or until abdication.

Fiscal Administration - involves the management of government finances, including the collection of revenue
through taxation, budgeting, and the allocation of funds to various programs and services.

Concepts:

 Public Finance- The study of how the government raises and spends money, addressing issues like
taxation, public expenditure, and public debt.
 Budgeting- The process of creating and managing a government budget, which outlines planned
spending and revenue for a specific period.
 Taxation- The methods and systems by which governments collect revenue from individuals and
businesses to fund public services.
 Public Expenditure- The allocation of funds for government programs, projects, and services.
 Fiscal policy- The use of government revenue and expenditure to influence the economy.

Intersection of Politics and Fiscal Administration

 Policy Choices- Political decisions often drive fiscal policies. Governments choose how to allocate
resources and address societal needs based on their political priorities.
 Political Economy- Examining how political institutions and processes impact economic policies and
outcomes, including fiscal policies.
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 Political Will and Fiscal Reform- The success of fiscal reforms often depends on political will and
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support from policymakers.

 Understanding the interplay between politics and fiscal administration is crucial for comprehending how
government decisions impact economic stability, social welfare, and overall governance. Students studying
these fields gain insights into the complexities of policymaking, financial management, and the role of
government in society.

Politics and Fiscal Administration

Politics and fiscal administration are closely related because political decisions influence fiscal policies, and
fiscal policies, in turn, have a significant impact on the political landscape. Here are several ways in which
these two fields are interconnected:

1. Policy Priority and Budget Allocation

Political ideologies and priorities shape the government's fiscal policies. For example, a government inclined
toward social welfare might allocate a significant portion of the budget to education, healthcare, and social
programs. In contrast, a government with a focus on economic development might prioritize infrastructure and
industry.

2. Taxation and Revenue Policies

Political leaders and policymakers decide on tax policies, such as tax rates, exemptions, and deductions.
These decisions have direct implications for government revenue. The choice of tax policies is often influenced
by political philosophies, such as the desire to promote economic equality or encourage investment.

3. Budget Approval and Political Negotiations

The budgeting process involves negotiations and decisions among political actors. Legislators and executives
must agree on how to allocate resources, leading to compromises and trade-offs based on political priorities.
The approval of the budget is a political decision that reflects the government's fiscal stance.

4. Economic Stabilization Policies

During economic downturns or crises, fiscal policies are often used to stabilize the economy. Political leaders
may decide to implement stimulus packages, tax cuts, or increased public spending to address economic
challenges. These decisions are influenced by both economic considerations and political imperatives.

5. Public Debt and Political Accountability

Political leaders make decisions regarding borrowing and public debt. The level of public debt and how it is
managed can become a political issue, with debates over fiscal responsibility, government accountability, and
the impact on future generations.
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 6. Government Size and Role

Political ideologies often influence the size and role of government in the economy. Some political
perspectives advocate for limited government intervention, leading to lower taxes and reduced public
spending. Others may support a more active role for the government in addressing social and economic issues,
resulting in larger budgets.

7. Political Economy

The study of political economy explores the relationship between political and economic institutions. It
examines how political decisions affect economic policies and outcomes, including fiscal policies.

8. Public Perception and Political Popularity

The success or failure of fiscal policies can have significant implications for the popularity of political leaders
and parties. Voters often assess government performance based on economic indicators and the perceived
effectiveness of fiscal policies.

Understanding the intersection of politics and fiscal administration is crucial for policymakers, economists, and
citizens alike. It highlights the complexities involved in making decisions that impact both the economic well-
being of a society and the political fortunes of its leaders.

SYNTHESIS

Politics and Fiscal Administration are intrinsically linked, as political decisions directly shape the management
of public finances. Politics influences fiscal policies such as taxation, government spending, and budgeting,
with political leaders and ideologies playing a key role in determining economic priorities. Fiscal administration,
in turn, ensures that these political decisions are implemented effectively, with a focus on transparency,
efficiency, and accountability. The balance between political interests and sound fiscal management is crucial
for achieving sustainable economic growth, ensuring public welfare, and maintaining trust in governmental
institutions. Proper alignment between politics and fiscal administration is essential for the success of public
policies and the long-term financial stability of a nation.

REFERENCE
Gaspar, V., et. Al (n.d). Fiscal Politics. file:///D:/9781475547900-ch001.pdf
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 UNIT II
PUBLIC FISCAL ACTIVITIES

LESSON 3
Course: PA 109: Public Fiscal Administration

Title of the Topic: Fiscal Policy Formulation

Objectives: At the end of the lesson, the students must be able to:

 Explain the fiscal policy formulation process.

 Identify the different principal agencies tasked with fiscal functions.

INTRODUCTION
Fiscal policy formulation refers to the process through which governments design and implement strategies
to manage public revenue, expenditure, and debt to achieve economic stability and growth. It involves setting
policies on taxation, government spending, and borrowing to influence a country's economic performance.
Fiscal policy formulation considers factors such as economic goals, social needs, and political priorities. It
plays a crucial role in addressing issues like inflation, unemployment, and income inequality, ensuring that
resources are allocated efficiently and sustainably to meet national objectives.

PICTURE ASSOCIATION ACTIVITY 3

Title of Activity: Fiscal Activities Through Images

Objective: To inspire creative thinking about fiscal policy concepts by associating abstract ideas with visual
stimuli.

**The activity is detailed in the annex.

CONTENT OF THE LESSON

Policy formulation - is the process by which governments and other organizations develop policies that guide
decision-making and action. Effective policy formulation is essential to addressing social and economic
challenges and achieving positive outcomes for individuals and society.

The Importance of Policy Formulation

Policy formulation plays a critical role in shaping society and addressing important issues. Policies guide
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decision-making and action, and they can have a significant impact on individuals and communities. Effective
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 policies can promote economic growth, protect public health and safety, and advance social justice and
equality.

Poorly formulated policies, on the other hand, can have negative consequences. They can exacerbate social
and economic disparities, erode public trust in government, and contribute to social unrest and instability.

The Policy Formulation Process

The policy formulation process typically involves several stages, including agenda-setting, policy development,
adoption, and implementation.

1. Agenda-Setting: The first stage of policy formulation involves identifying issues that require attention
and setting priorities. This may involve conducting research, consulting with stakeholders, and
assessing public opinion.
2. Policy Development: The second stage involves developing policy proposals that address the issues
identified during agenda-setting. This may involve drafting legislation, developing regulations, or
creating programmatic interventions.
3. Adoption: Once policy proposals have been developed, they must be adopted by the appropriate
decision-making bodies. This may involve legislative or executive action, depending on the nature of
the proposal.
4. Implementation: The final stage of policy formulation involves implementing policies and monitoring
their impact. This may involve developing operational plans, allocating resources, and establishing
monitoring and evaluation frameworks.

Challenges of Policy Formulation

Policy formulation can be a complex and challenging process, particularly when dealing with issues that are
contentious or require difficult trade-offs. Some of the challenges of policy formulation include:

1. Lack of Data: Policy formulation requires accurate and reliable data to inform decision-making. In
some cases, data may be lacking or incomplete, making it difficult to develop evidence-based policies.
2. Political Pressures: Policymakers may face pressure from interest groups, political parties, or other
stakeholders to adopt policies that may not be in the public interest.
3. Limited Resources: Policymakers may be constrained by limited resources, making it difficult to
address all of the issues that require attention.
4. Limited Expertise: Policymakers may not have the expertise or resources necessary to develop
effective policies. In such cases, it may be necessary to engage with experts, stakeholders, and other
decision-makers to develop effective policies.

Policy formulation is a critical component of social and economic development. Effective policies can
promote economic growth, protect public health and safety, and advance social justice and equality. The policy
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formulation process involves several stages, including agenda-setting, policy development, adoption, and
implementation.
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 Effective policy formulation requires accurate and reliable data, engagement with stakeholders and decision-
makers, and a commitment to evidence-based decision-making. Policymakers must be prepared to address
challenges and trade-offs, and they must be responsive to the needs of the communities they serve. By working
together, policymakers, stakeholders, and experts can develop policies that promote positive change and
advance the well-being of individuals and society.

Principal Agencies tasked with fiscal functions:

Congress of the Philippines, especially the House of

Representatives

Commission on Audit (COA)

Department of Finance (DOF)

Functions of Department of Finance

1. Revenue generation and collection

2. Fund custody
3. Disbursement
4. Keeping of accounts

There are three attached agencies:

A. Bureau of Internal Revenue

B. Bureau of Custom Implementation of policies on Taxation and Tariff

C. Bureau of Treasury – custodian of Government Funds.

1. Department of Budget and Management (DBM) – leads the government formulation of expenditure
policy as well as borrowing.
2. National Economic Development Authority (NEDA) – the government is central planning body. It
formulates, reviews, and assesses fiscal policy. It prepares and prescribes the programs, projects and
activities of the government and how these are prioritized and financed.
3. BangkoSentral ng Pilipinas (BSP) - major actor in the fiscal policy process to ensure that monetary
policies are in consonance with fiscal policy decisions. It promotes and maintains monetary stability
and convertibility of the peso and controls any expansion or contraction in the monetary aggregates
which is prejudicial to the attainment or maintenance of price stability.
4. External Forces – includes Government Giving Institutions/International Lending Institutions e.g.
International Monetary Fund IMF, World Bank WB, Asian Development Bank ADB – give advice on
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the fiscal and other policies of the government.

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 5. Development Budget and Coordination Council (DBCC) – formulates the policy framework for the
national budget. It determines the level of deficit, establishes the priorities and the amount of allocation
for the sectors.

Functions of Fiscal Policy

1. 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.
2. 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.
3. 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 expenditure 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 a chronic balance of
payments deficit, severe inflation, high levels of unemployment and underemployment and the like.
4. Development (in developing countries) - Development is an expensive endeavor. For it to be
achieved by developing countries, a radical shift in revenue and expenditure priorities is called for.
Human development – process of enlarging the range of people’s choices; increasing their
opportunities for education, health care, income and employment, and covering the full range of human
choices from a sound physical environment and political freedom.

Sustainable development – is a process of change in which the exploitation of resources, the direction of
investments, the orientation of technological development, and institutional change are made consistently with
future as well as present needs.
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 Main Objectives of Fiscal Policy

increase savings encourange achieve equal control reduce regional

investment distribution of inflations disparity
wealth

stabilization of increase in achieve attain maximum check rapid

price level agricultural & economic welfare of the increase of
industrial output stability people consumption

Instruments of Fiscal Policy

A. Automatic (built-in) Stabilizers – these expenditures automatically increase when the economy is
going into a recession. Conversely, they automatically fall when the economy booms. Automatic
stabilizers include:

Progressive income tax

Unemployment insurance
Subsidies to agricultural products
Government purchase of excessive agricultural products.

B. Active Discretion Fiscal Policy – the deliberate manipulation of the government spending and taxes
to influence the economy.

Crowding-out effect – negative effect of the fiscal policy, when money from private
sector of the economy is crowded out to the public sector. Therefor, amount of money
in private sector decreases and interest rates increase will result to less investment in
private sector.
Expansive (inflationary) Fiscal Policy – policy encouraging increase in aggregate
demand.
Restrictive (deflationary) fiscal policy – policy restricting the aggregate demand.

Monetary Policy – is the attempt by government or a central bank to manipulate the money supply, the supply
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of credit, interest rate, or any other monetary variables, to achieve the fulfilment of policy goals such as price
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stability.
 Instruments of Monetary Policy

1. Direct – regulation of loans by the government institutions, regulation of the credit on consumer goods.
2. Indirect – there are 3 instruments:

Reserve ratio – determined by the central bank. It is a percentage of total deposits of a

bank that must be kept in the form of cash. If the central bank alters the value of the
reserve ratio, it will influence the size of money supply. The higher the reserve ratio, the
lower the size of money supplies.
Discount rate – is the rate at which the central bank lends money to the commercial
banks in need. It directly influences the interest rate of commercial banks. If it increases,
the interest rates also increase.
Open Market Operations – selling the bonds or treasury bills decreases the amount of
money in the circular flow and buying them increases the size of money.

SYNTHESIS

Fiscal policy formulation is the process by which governments design and implement strategies for managing
a country’s economy through taxation, public spending, and borrowing. The primary goals of fiscal policy are
to stabilize the economy, stimulate growth, and reduce inequality. Policymakers must balance the need for
sufficient revenue generation with the responsibility of managing public expenditure. They also consider long-
term sustainability, ensuring that borrowing and debt levels remain manageable.

The formulation of fiscal policy involves key decisions on how much the government should spend on
infrastructure, healthcare, education, defense, and other critical sectors, as well as how to raise revenue,
primarily through taxation. It also requires understanding the trade-offs between immediate economic needs
and future obligations. Effective fiscal policy can mitigate economic downturns, promote employment, and
address societal disparities, but it must be flexible enough to adapt to changing economic conditions and
political pressures.

In summary, fiscal policy formulation is a dynamic and multifaceted process that requires careful consideration
of economic goals, available resources, and the broader political landscape to ensure long-term economic
stability and growth.

REFERENCES

Auerbach, A. J., & Gale, W. G. (2019). Fiscal Policy: A New Era. Brookings Institution Press. chrome-
extension://efaidnbmnnnibpcajpcglclefindmkaj/https://www.nber.org/system/files/working_papers/w29352/w2
9352.pdf
Mankiw, N. G. (2016). Principles of Economics (7th ed.). Cengage Learning.
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https://faculty.cengage.com/works/9780357038314
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 UNIT II
PUBLIC FISCAL ACTIVITIES

LESSON 4
Course: PA 109: Public Fiscal Administration

Title of the Topic: Taxation and Revenue Administration

Objectives: At the end of the lesson, the students must be able to:

 Define taxation, its limitations and legal processes.

 Identify and explain the four R’s of taxation.
 Explain Revenue Administration.

INTRODUCTION
Taxation and revenue administration are critical components of public finance, essential for the functioning of
governments. Taxation refers to the process by which governments collect financial contributions from
individuals and businesses to fund public services, such as healthcare, education, infrastructure, and defense.
It is a key tool for redistributing wealth and promoting social equity.

Revenue administration, on the other hand, involves the mechanisms and processes through which taxes and
other revenues are assessed, collected, and managed. An efficient revenue administration system ensures
compliance with tax laws, minimizes evasion, and maximizes resource mobilization to support national
development goals. Together, taxation and revenue administration form the backbone of a nation's financial
stability and economic growth.

PICTURE ASSOCIATION ACTIVITY 4

Title of Activity: Fiscal Activities Through Images

Objective: To inspire creative thinking about fiscal policy concepts by associating abstract ideas with visual
stimuli.

**The activity is detailed in the annex.

CONTENT OF THE LESSON

Taxation - is the process by which governments impose charges on individuals, businesses, or other entities
to fund public expenditures and services. These charges, called taxes, are levied on various forms of income,
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wealth, consumption, or transactions. Taxation serves several purposes:

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 1. Revenue Generation: The primary purpose of taxation is to raise revenue to fund government
expenditures such as infrastructure, education, healthcare, defense, and social welfare programs.
2. Redistribution of Wealth: Taxation can be used to redistribute wealth from higher-income individuals
or entities to lower-income individuals or entities through progressive tax systems, where those who
earn more pay a higher percentage of their income in taxes.
3. Economic Regulation: Taxes can be used to influence economic behavior by incentivizing or
disincentivizing certain activities. For example, governments may impose taxes on cigarettes or
alcohol to discourage consumption or offer tax incentives for investments in certain industries or
regions to stimulate economic growth.
4. Social Policy: Taxation can be used to support social policies such as providing tax credits for families
with children, deductions for charitable donations, or subsidies for renewable energy initiatives.

Taxation is a fundamental aspect of modern societies and plays a crucial role in shaping economic policies
and social welfare programs. However, taxation policies can vary significantly between countries and may be
subject to debate and controversy over issues such as tax rates, tax loopholes, and the distribution of tax
burdens.

In the Philippines, there are several types of taxes imposed by the government, including:

1. Income Tax: Individuals and corporations are subject to income tax on their earnings. Individual
income tax rates are progressive, with higher-income earners taxed at higher rates. Corporations are
taxed at a flat rate on their net taxable income.
2. Value Added Tax (VAT): VAT is imposed on the sale of goods and services and is collected at each
stage of the supply chain. The standard rate is 12%, but certain goods and services may be subject
to a reduced rate or exempt from VAT.
3. Excise Tax: Excise tax is levied on specific goods such as alcohol, tobacco, petroleum products,
automobiles, and sugary beverages. The rates vary depending on the product.
4. Real Property Tax: This tax is imposed on real property such as land, buildings, and other
improvements. Local government units (LGUs) assess and collect real property tax based on the
property's assessed value.
5. Documentary Stamp Tax: This tax is imposed on various documents, instruments, and transactions
such as contracts, deeds, leases, and loans. The rate varies depending on the type of document or
transaction.
6. Estate Tax: Estate tax is levied on the transfer of the net estate of a deceased person to their heirs or
beneficiaries. The tax is based on the net value of the estate and is subject to certain exemptions and
deductions.
7. Donor's Tax: Donor's tax is imposed on gifts, whether made during the donor's lifetime or as part of
an estate transfer. The tax rate varies depending on the relationship between the donor and the
recipient and the value of the gift.
8. Percentage Tax: This tax is imposed on certain businesses and professionals based on their gross
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receipts or sales. The tax rates vary depending on the nature of the business or profession.
9. Capital Gains Tax: a tax levied on profit from the sale of property or an investment.
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 Revenue administration - refers to the management and oversight of the processes and systems involved in
collecting, assessing, and enforcing taxes and other government revenues. Effective revenue administration
is essential for governments to finance public services, implement fiscal policies, and ensure compliance with
tax laws.

Effective revenue administration requires strong institutional capacity, transparent governance practices,
skilled personnel, robust legal frameworks, and adequate resources to carry out revenue collection and
enforcement activities. Revenue authorities continuously strive to modernize and improve revenue
administration processes to adapt to changing economic, technological, and regulatory environments.

The Legal Process of Taxation

Under the present system of government, the Head or the Chief Executive is the President of the Philippines.
The legislative function is vested in the Congress of the Philippines.

The Department of Finance is the principal office charged with the formulation and implementation of tax
policies. The Secretary of Finance recommends to the President the tax policy measures which are submitted
to the Congress. Once passed by Congress, the laws are implemented by the DOF through its major operating
bureaus: the Bureau of Internal Revenue and the Bureau of Customs.

In the local government level, the taxes are levied by the respective Sanggunian of the province, cities,
municipalities, and barangays, pursuant to the provisions of the Local Government Code of 1991.

The Four R’s of Taxation

1. Revenue – taxes raise money to spend on armies, roads, school and hospital and on more
indirect government functions like market regulations or justice system.
2. Redistribution – refers to transferring wealth from the richer section of society to the poorer
sections.
3. Re-pricing – taxes are levied to address externalities; for example tobacco is taxed to
discourage smoking and a carbon tax discourage the use of carbon-based fuels.
4. Representation – the government tax the citizens and the citizens demand accountability
from the government as the other part of the bargain.

Exempted in Paying Income Taxes

1.Charitable Institutions, churches, parsonages, or convent appurtenant thereto, mosques, non-profit

cemeteries, and all lands, building and improvement, directly, and exclusively used for religious, charitable, or
educational purposes.

2.Non-stock Non-profit educational institution used, directly, and exclusively for educational purposes.
20

Extended to be exempt from tax as stated in 283 of the rules and regulations implementing Local Government
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Code are the following:

 1. Local water districts
2. Cooperative duly registered and created under the cooperative code of the Philippines.
3. Non-stock and non-profit hospitals and educational institutions
4. Printer and/or publisher of books or other reading materials prescribed by DepEd as school
texts or references insofar as receipts from the printer and/or publishing thereof is concerned.

SYNTHESIS

Taxation and revenue administration are integral to the financial health and governance of a nation. Taxation
serves as the primary source of government revenue, enabling the funding of essential public services such
as education, healthcare, infrastructure, and social welfare. It also plays a role in wealth redistribution, fostering
economic equality and social stability.

Revenue administration complements taxation by ensuring the efficient and fair collection of taxes and other
government revenues. Effective administration systems promote compliance, reduce tax evasion, and
optimize resource mobilization. Together, taxation and revenue administration are essential for achieving fiscal
sustainability, supporting economic growth, and addressing the developmental needs of society. A well-
designed and efficiently managed system benefits both the government and its citizens by fostering trust,
transparency, and equitable development.

REFERENCES

Junquera-Varela, R.F., et. Al (n.d).Revenue Administration Handbook. chrome-

extension://efaidnbmnnnibpcajpcglclefindmkaj/https://openknowledge.worldbank.org/server/api/core/bitstrea
ms/2ad56651-e6d6-4063-8bf5-f3cfdd2db2e6/content
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 UNIT II
PUBLIC FISCAL ACTIVITIES

LESSON 5
Course: PA 109: Public Fiscal Administration

Title of the Topic: Budgeting and Expenditure

Objectives: At the end of the lesson, the students must be able to:

 Understand the budget process in the Philippines.

INTRODUCTION
Budgeting and expenditure are core components of public financial management, guiding how governments
plan and allocate their financial resources to meet national priorities. Budgeting involves creating a detailed
plan that outlines expected revenues and allocates funds to various sectors, such as healthcare, education,
infrastructure, and defense, ensuring that resources are used effectively and efficiently.

Expenditure refers to the actual spending of these allocated funds to implement policies and deliver public
services. It encompasses recurrent costs like salaries and operational expenses, as well as capital investments
in long-term projects. Together, budgeting and expenditure play a crucial role in achieving economic stability,
promoting development, and addressing societal needs. A transparent and accountable system ensures public
trust and supports sustainable growth.

PICTURE ASSOCIATION ACTIVITY 5

Title of Activity: Fiscal Activities Through Images

Objective: To inspire creative thinking about fiscal policy concepts by associating abstract ideas with visual
stimuli.

**The activity is detailed in the annex.

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 CONTENT OF THE LESSON
The Budget Cycle has 4 phases, namely:

The Budget Preparation

The budget preparation in the Philippines uses a "bottom-up" approach. Under "bottom-up" budgeting, several
parties participate in the budget preparation, starting from the lowest to the highest levels of the government,
Government agencies are also tasked to increase the participation of citizen-stakeholders in the budget
preparation. The opposite of "bottom-up" budgeting is "top-down" budgeting - wherein the budget preparation
starts from the agency heads. In 2011, the Philippine Government attempted to a start a new tradition by
shifting from the old "incremental" system of budgeting to the "zero-based budgeting" approach. (The
Philippine Public Transparency Reporting Project, January 11, 2011)

A. Budget Call - budget preparation starts when the Department of Budget and Management (DBM) issues a
budget call to all gov’t agencies. Budget contains the next fiscal year’s targets, the agency’s budget ceiling
and other guidelines in the completion and submission of agency budget proposal.

B. Budget Hearing - Conducted after the agencies submit their budget proposals. Each agency defends its
budget proposal before DBM. DBM deliberates the budget proposals, makes recommendations, and
consolidates the deliberated proposals into the National Expenditure Program (NEP) and Budget Expenditures
and Sources of Financing (BESF). DBM submits the proposed budget to the President.

C. Presentation to the Office of the President - President and cabinet members review the proposed budget.
If approved, the DBM finalizes the budget documents to be submitted to the Congress. At this point, the
proposed budget is referred to as the “President’s Budget”. President’s Budget consists of the following
which are intended to assist the Congress in their review and deliberation:
a. President’s Budget Message – contains the President’s explanation of the country’s fiscal policy
and budget priorities.
b. National E x p e n d i t u r e Program (NEP) – contains details of all gov’t entities’ proposed
23

expenditure in the coming year.

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c. Budget of Expenditures and Sources of Financing (BESF) – contains the estimated

 expenditures accompanied by estimates of expected sources of financing
d. Other documents aimed to provide further explanation of selected items in the NEP (e.g., details
of key programs and projects and staffing summary)

Here’s an example of a President’s Budget Message

RELEVANT PROVISION OF LAW:

• The president shall submit the proposed budget to the Congress within 30 days from the opening
if every regular session. (Art. VII, Sec. 22. Philippine Constitution)

The Budget Legislation

Government Funds shall only be spent in pursuance of an appropriation made by law. Therefore, due process
must be undertaken to legalize the proposed budget.

D. House Deliberations - House of Representatives conducts hearings to scrutinize the various agencies’
respective proposed programs and expenditures. Thereafter prepares the General Appropriations Bill (GAB).

E. Senate Deliberations - Senate conducts its own deliberations on the GAB. For expediency, hearings in the
Senate start even as Representative’s deliberations are ongoing.

F. Bicameral Deliberations - when both deliberations are finished, a committee called the Bicameral
Conference Committee is formed to harmonize any conflicts between the Representatives and Senate
versions of the GAB. The harmonized GAB is submitted back to both Houses for ratification. After ratification,
the final GAB is submitted to the President for enactment.

G. President’s Enactment - the President enacts the budget, which is known as the General Appropriations
Act (GAA). Before enactment, the President may veto power as conferred to him under the Philippine
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Constitution.
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 RELEVANT PROVISION OF LAW

• When the proposed budget is not enacted before the fiscal year starts, the last year's GAA is
automatically reenacted. The last year's GAA shall be used in the current year until a new general
appropriations bill is passed by the Congress. (Art. VI, Sec. 25(7), Philippine Constitution)

The Approved Budget

Approved Budget - is the expenditure authority derived from appropriation laws,
government ordinances, and other decisions related to the anticipated revenue or receipts
for the budgetary period. The approved budget consists of the following:
UACS CODE
New General Appropriations 01
Continuing Appropriations 02
Supplemental Appropriations 03
Automatic Appropriations 04
Unprogrammed Funds 05
Retained Income/Funds 06
Revolving Funds 07
Trust Receipts 08
* The Unified Accounts Code Structure (UACS)- refers to the standard coding
system used in financial reporting of National Government.

Definition of Terms

Appropriation - is the authorization made by a legislative body to allocate funds for purposes specified by the
legislative or similar authority.

1. New General Appropriations - are annual authorizations for incurring obligations during a specified budget
year, as listed in the GAA.

2. Continuing Appropriations - are the authorizations to support obligations for a specific purpose or project,
such as multi-year construction projects which require the incurrence of obligations even beyond the budget
year.

3. Supplemental Appropriations - are additional appropriations authorized by law to augment the original
appropriations which proved to be insufficient for their intended purpose due to economic, political or social
conditions supported by a Certification of Availability of Funds from the Bureau of Treasury (BTr).

4. Automatic Appropriations - are the authorizations programmed annually or for some other period
25

prescribed by law which do not require periodic action by Congress.

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 5. Unprogrammed Funds - are standby appropriations authorized by Congress in the annual GAA which may
be available only when any of the following instances occur:

a) revenue collections exceed the original revenue targets in the Budget of Expenditures and
Sources of Financing (BESF) submitted by the President to the Congress;
b) new revenues are collected or realized from sources not originally considered in the BESF;
c) newly approved loans for foreign-assisted projects are secured or when conditions are
triggered for other sources of funds such as perfected loan agreements for foreign assisted
projects.

6. Retained Income/Funds - collections which are authorized by law to be used directly by agencies
concerned for their operation or specific purposes.

7. Revolving Funds - receipts derived from business-type activities of departments/agencies which are
authorized by law to be constituted as such and deposited in an authorized government depository bank.
These funds shall be self- liquidating and all obligations and expenditures incurred by virtue of said business-
type activity shall be charged against said fund.

8. Trust Receipts - receipts by any government agency acting as trustee, agent or administrator for the
fulfilment of some obligations or conditions.

RELEVANT PROVISION OF LAW:

• A special appropriations bill shall specify the purpose for which it is intended and shall be supported
by funds available as certified by the National Treasurer, or to be raised by a corresponding revenue
proposal therein. (Art. VI, Sec. 25(4), Philippine Constitution)
• No law shall be passed authorizing any transfer of appropriations; however, the President, the
President of the Senate, the Speaker of the House of Representatives, the Chief Justice of the
Supreme Court, and the heads of Constitutional Commissions may, by law, be authorized to augment
any item in the general appropriations law for their respective offices from savings in other items of
their respective appropriations. (Art. VI, Sec. 25(5), Philippine Constitution)

The Budget Execution

This is the phase where government funds are spent.

H. Release guidelines and BEDs – DBM issues guidelines on the release and utilization of funds while the
various agencies submit their Budget Execution Documents (BEDs). A BED summarizes an agency’s fiscal
year plans and performance targets. It includes the following:

 Physical and financial plan

 Monthly cash program
26

 Estimate of monthly income

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 List of obligations that are not yet due and demandable.

 The following are the major recipients of the budget:

1. National Government Agencies (NGAs) – include all agencies within the executive, legislative and
judicial branches of government, e.g., commissions, departments, Land Bank of the Philippines,
Social Security System, etc.
2. Local Government Units (LGUs) - include (a) autonomous regions, (b) provinces and cities
independent from a province, (c) component cities (cities which are part of province) and
municipalities, and (d) barangays.
3. Government Owned and Controlled Corporations (GOCCs) - corporations that are owned or
controlled, directly or indirectly, by the government and gested with functions relating to public
needs.
I. Allotment - The DBM formulates the Allotment Release Program (ARP) to set the limit for allotment
releases during the upcoming year. This is used as a control device to ensure that releases conform to the
national budget. Alongside, is a Cash Release Program (CRP), which sets the disbursement limits for the
year, for each quarter and for each month.

Allotment - is an authorization issued by the DBM to government agencies to incur obligations for specified
amounts contained in a legislative appropriation in the form of budget release documents. It is also referred to
as Obligational Authority.
It is illegal for a government entity to incur obligations without having first received the "Allotment." Moreover,
the type and number of obligations to be incurred must conform to those that are specified in the "Allotment."
Obligation - is an act of a duly authorized official which binds the government to the immediate or eventual
payment of a sum of money. Obligation maybe referred to a commitment that encompasses possible future
liabilities based on the current contractual agreement. as
The following are the documents used in releasing allotments to government agencies:
1. General Appropriations Act Release Document (GAARD) serves as the obligational authority for
the comprehensive release of budgetary items appropriated in the GAA, categorized as For
Comprehensive Release.
2. Special Allotment Release Order (SARO) - covers budgetary items under For Later Release
(negative list) in the entity's submitted Budget Execution Documents (BEDs), subject to compliance
of required documents/clearances. Releases of allotments for Special Purpose Funds (e.g.,
Calamity Fund, Contingent Fund, E-Government Fund, Feasibility Studies Fund, International
Commitments Fund, Miscellaneous Personnel Benefits Fund and Pension and Gratuity Fund) are
also covered by SAROS.
3. General Allotment Release Order (GARO) is comprehensive authority issued to all national
government agencies, in general, to incur obligations not exceeding an authorized amount during a
specified period for the purpose indicated therein. It covers automatically appropriate expenditures
common to most, if not all, agencies without need of special clearance or approval from competent
authority, i.e. Retirement and Life Insurance Premium.
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 J. Incurrence of Obligations - Gov’t agencies incur obligations which will be paid by the gov’t agencies. E.g.,
entering contracts, hiring of personnel, purchase of supplies, etc.

K. Disbursement Authority - Disbursement Authority the DBM issues disbursement authority to the
government agencies. This is the point where government agencies obtain access to government funds. The
following are the documents used in releasing disbursement authority to government agencies:

1. Notice of Cash Allocation (NCA) - authority issued by the DBM to central, regional and provincial
offices and operating units to cover their cash requirements. The NCA specifies the maximum
amount of cash that can be withdrawn from a government servicing bank in a certain period. The
NCA is based on the agency's submitted Monthly Cash Program.
2. Notice of Transfer of Allocation - authority issued by an agency's Central Office to its regional and
operating units to cover the latter's cash requirements.
3. Non-Cash Availment Authority - authority issued by the DBM to agencies to cover the liquidation
of their actual obligations incurred against available allotments for availment of proceeds from
loans/grants through supplier's credit/constructive cash.
4. Cash Disbursement Ceiling - authority, issued by the DBM to agencies with foreign operations
(e.g., Department of Foreign Affairs 'DFA') allowing them to use the income collected by their Foreign
Service Posts to cover their operating requirements.

Disbursements are most made through checks that are chargeable against the account of the Treasurer of the
Philippines (i.e., Treasury Single Account). Checks issued under this scheme are called "Modified
Disbursement Syste (MDS) Checks." Other modes of disbursement include payments through cash,
commercial check, bank transfer/bank debit, or credit card.

To summarize:
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 The Budget Accountability

This phase occurs concurrently with the Budget Execution phase. As the budget is being executed, it is
regularly monitored to determine the conformance of actual results with planned targets.

L. Budget Accountability Reports - government agencies are required to submit the following accountability
reports:

a. Monthly Report of Disbursements - shows the disbursements of the entity during the month,
classified according to the type of disbursement authority. This report is submitted to the COA
and DBM within 30 days after the end of each month.
b. Quarterly Physical Report of Operation - shows the agency's physical accomplishments in
a given quarter vis-à-vis its physical targets.
c. Statement of Appropriations, Allotments, Obligations, Disbursements and Balances -
shows the agency's authorized appropriations, allotments received, obligations incurred,
disbursements made and the balances of unreleased appropriations, unobligated allotments,
and unpaid obligations.
d. Summary of Appropriations, Allotments, Obligations, Disbursements and Balances by
Object of Expenditures - like above but provides details of expenditures (e.g., salaries and
wages, traveling expenses, etc.).
e. List of Allotments and Sub-Allotments - shows the allotments received by the agency from
the DBM and the sub- allotments issued by the agency's Central Office or Regional Office to
lower operating units.
f. Statement of Approved Budget, utilizations, Disbursements and Balances - this repo is
prepared by agencies that have authority to use their revenue. It shows the budgeted revenue,
the utilizations and disbursements thereof, and the unutilized amount.
g. Summary of Approved Budget, Utilizations, Disbursements and Balances by Object of
Expenditures - like above provides details of expenditures.
h. Quarterly Report of Revenue and Other Receipts - shows the actual revenues and other
receipts remitted to the BTr and deposited in authorized government depository banks in each
quarter.
i. Aging of Due and Demandable Obligations - shows the names of creditors, the amounts
owed to them, and the number of days these obligations are outstanding. This report is
submitted to the COA and DBM within 30 days after the end of the year.

Reports b' to 'h' above are prepared on a quarterly basis and are submitted to the COA and DBM
within 30 days after the end of each quarter.
A Consolidated Statement of Allotments, Obligations, and Balances per Summary of
Appropriations (based on reports 'c' and 'd' above) shall be submitted on or before February 14 of
the following year. 13. Performance reviews - The DBM and COA perform periodic reviews of the
agencies' performance and budget accountability and report to the President 14. Audit - the COA
29

audits the agencies.

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 M. Performance reviews - The DBM and COA perform periodic reviews of the agencies' performance and
budget accountability and report to the President

N. Audit - the COA audits the agencies.

The budget reports, together with other budget records, provide information in preparing the Statement of
Comparison of Budget and Actual Amounts, which is one of the components of a complete set of financial
statements of a government entity.

The Budget Cycle Story

I. Budget Preparation
Papa and Mama are leaving for a 1-month trip so they asked you and your little sister to make
an estimate of the money you will need while they are gone (Budget Call). You started your estimate
by asking first Little Sister of her needs ("bottom-up" budgeting). Same time last year, Papa and
Mama also went for a 1-month trip, and they had you made a similar estimate. However, instead of
giving them that old estimate, you decided to make a new one to better reflect current circumstances
('zero-based budgeting).
You defended your estimate with Mama (Budget hearings). Mama submitted the estimate to
Papa for approval (Presentation to the Office of the President).

II. Budget Legislation

Papa consulted Lolo (a retired Lawyer) to review your estimate (House Deliberations). After
reviewing the estimate, Lolo gave the estimate to Lola (a retired CPA) for further study (Senate
Deliberations). Lolo and Lola had some disagreements, so they asked Umpong, your dog, to
harmonize the conflicts (Bicameral Deliberations). After harmonizing the conflicts, Umpong submitted
the "Bicam" version of the estimate back to both Lolo and Lola for ratification. Lolo and Lola submitted
the ratified estimate to Papa for enactment (President's enactment). Your approved budget for the
month is $100 (Appropriation).

III. Budget Execution

Papa left the money to Uncle. Uncle gave you guidelines on how the money will be released
to you, based on your estimates of the timing of disbursements (Release guidelines and BEDs).
Uncle told you that you can now incur obligations up to a maximum of 280 (Allotment). You then went
to Aling Masing's Store to purchase groceries, good for 1 month, worth P50, on credit (Incurrence of
Obligations). Uncle gave you P25 cash to cover your cash disbursement needs for the 1st week
(Disbursement Authority Notice of Cash Allocation). You gave Little Sister her share of P5 (Notice
of Transfer of Allocation).
30

Your disbursements in the 1st week were as follows:

• P5 installment payment to Aling Masing and P12 on personal needs.
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• Little Sister: P5 on personal needs.

• Total disbursements in 1st week P22.
 IV. Budget Accountability
Your budget accountability reports after the 1st week will show the following information (Budget
Accountability Reports):
• Appropriation: P100
• Allotment received: P80
• Unreleased appropriation: (P100 - P80) = P20
• Obligations incurred: (150 to Aling Masing + P12 on your personal needs + $5 on Little Sister's
personal needs) = P67
• Unobligated allotment: (P80 allotment - P67) = P13
• Disbursements: 22
• Unpaid Obligations: (P67 obligations incurred 22 disbursements) P45 (payable to Aling Masing)
• Unused NCA = (P25 NCA - P22 disbursements) P3
Uncle periodically updates Papa and Mama regarding your budget execution through call and text
(Performance Review). Papa and Mama will audit you when they return (Audit).
-The End-

Notice that appropriation, allotments and disbursement authorities are systems of budgetary controls. Instead
of releasing the allocated funds of ™100 to you all at once, it is released on a piecemeal basis, based on your
estimate of the timing of needs (Budget Execution Documents 'BEDs'). This is to prevent the incurrence of
overdraft (i.e., obligations exceeding the appropriated funds).

SYNTHESIS

Budgeting and expenditure are essential tools for effective governance and public financial management.
Budgeting provides a structured framework for governments to allocate resources in line with national priorities,
balancing available revenues with public needs. It ensures that funds are directed toward critical areas such
as infrastructure, education, healthcare, and social welfare, promoting development and economic stability.

Expenditure represents the implementation phase, where allocated resources are utilized to deliver public
services and achieve policy objectives. Efficient and accountable expenditure management is vital to avoid
wastage, ensure transparency, and foster public trust. Together, budgeting and expenditure form a continuous
cycle that connects planning, resource allocation, and execution, serving as the backbone of a nation’s
financial and developmental goals.

REFERENCES

The Philippine Public Transparency Reporting Project, January 11, 2011

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http://www.dbm.gov.ph/?page_id=7366
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http://www.dbm.gov.ph/wp-content/uploads/BESF/BESF2016/GLOSSARY.pdf
 UNIT II
PUBLIC FISCAL ACTIVITIES

LESSON 6
Course: PA 109: Public Fiscal Administration

Title of the Topic: Public Borrowing and Debt Management

Objectives: At the end of the lesson, the students must be able to:

 Explain public borrowing and debt management.

 Identify the risks and drawbacks of public borrowing.
 Understand the importance of public borrowing and debt management.

INTRODUCTION
Public borrowing and debt management are crucial aspects of public finance, enabling governments to meet
funding requirements beyond their current revenues. Public borrowing involves raising funds through loans or
issuing bonds to finance infrastructure projects, public services, or budget deficits. It is a tool for stimulating
economic growth, particularly during periods of low revenue or economic downturns.

Debt management focuses on ensuring that borrowed funds are used efficiently and that repayment obligations
are sustainable over time. This involves strategies to minimize borrowing costs, manage risks, and maintain a
balance between short-term and long-term debt. Effective public borrowing and debt management are
essential for maintaining fiscal stability and protecting a nation’s economic health.

PICTURE ASSOCIATION ACTIVITY 6

Title of Activity: Fiscal Activities Through Images

Objective: To inspire creative thinking about fiscal policy concepts by associating abstract ideas with visual
stimuli.

**The activity is detailed in the annex.

CONTENT OF THE LESSON

Public borrowing, also known as government borrowing or public debt, refers to the process through which
a government raises funds from various sources to finance its expenditures when its revenue is insufficient to
32

cover its expenses. Governments borrow money by issuing bonds or other debt instruments to investors,
financial institutions, or other governments.
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 Public borrowing serves various purposes, including funding infrastructure projects, social welfare programs,
defense spending, and other government initiatives. Governments may resort to borrowing when taxation
revenue is insufficient or during times of economic downturn when tax revenues decrease, and expenditure
needs increase.

Public borrowing typically involves the issuance of bonds with predetermined interest rates and maturity dates.
Investors purchase these bonds, effectively lending money to the government. The government then repays
the borrowed funds along with interest over the specified period.

However, excessive public borrowing can lead to concerns about fiscal sustainability, as it may result
in a higher debt burden for future generations. Therefore, governments must carefully manage their
borrowing activities to ensure fiscal stability and avoid potential negative consequences, such as higher
interest payments, inflationary pressures, or sovereign debt crises.

Advantages of Public Borrowing

Public borrowing, when managed effectively, can offer several advantages for governments and economies:

1. Financing Public Investments: Public borrowing allows governments to finance large-scale

infrastructure projects, such as roads, bridges, schools, and hospitals, which contribute to economic
growth and development. These investments can enhance productivity, create jobs, and improve the
quality of life for citizens.
2. Smoothing Out Economic Cycles: During economic downturns or recessions, tax revenues tend to
decline while government spending on social welfare programs may increase. Public borrowing can
provide a counter-cyclical fiscal policy tool, allowing governments to maintain essential services and
stimulate economic activity during challenging times.
3. Low-Interest Rates: Governments, particularly those with strong credit ratings, can often borrow at
lower interest rates than private entities. This allows them to access capital at relatively low costs,
making public borrowing an attractive option for financing long-term investments.
4. Spreading Costs Across Generations: Public borrowing enables the distribution of the costs of
investments and public services across current and future generations. By spreading the financial
burden over time, borrowing can ensure that both current and future citizens contribute to the costs of
projects that benefit society.
5. Enhancing Financial Markets: Government bonds issued through public borrowing provide safe and
reliable investment options for individuals, institutional investors, and financial institutions. These
bonds play a crucial role in providing liquidity and stability to financial markets, contributing to overall
economic stability.
6. Monetary Policy Independence: Public borrowing can provide governments with greater flexibility in
conducting monetary policy. By financing expenditures through borrowing rather than solely relying on
tax revenues, governments may have more room to maneuver interest rates and implement other
monetary policy measures to achieve macroeconomic objectives, such as controlling inflation or
33

stimulating economic growth.

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 7. Investor Confidence and Sovereign Reputation: Responsible borrowing practices can enhance
investor confidence and maintain a government's reputation in international financial markets. Sound
fiscal management, transparent budgeting, and timely debt servicing can help sustain a positive
perception of a country's creditworthiness, thereby reducing borrowing costs and attracting
investment.

Overall, public borrowing, when used judiciously and in line with sound fiscal principles, can be a valuable tool
for governments to finance essential investments, stabilize economies, and promote long-term prosperity.
However, it is essential to manage borrowing levels prudently to avoid excessive debt accumulation and
maintain fiscal sustainability.

Drawbacks and Risks of Public Borrowing

While public borrowing can offer several advantages, it also comes with certain drawbacks and risks:

1. Debt Servicing Costs: One of the primary concerns of public borrowing is the obligation to repay
borrowed funds with interest. High levels of debt can lead to significant debt servicing costs, diverting
resources away from essential government services such as healthcare, education, and infrastructure.
Excessive debt servicing can also strain government budgets and limit fiscal flexibility.
2. Crowding Out Private Investment: When governments borrow extensively from financial markets,
they compete with the private sector for available funds. This increased demand for borrowing can
lead to higher interest rates, making it more expensive for businesses and individuals to borrow money
for investment purposes. This phenomenon, known as "crowding out," can potentially dampen private
sector investment and economic growth.
3. Fiscal Vulnerability: High levels of public debt can leave governments vulnerable to economic shocks
or changes in investor sentiment. In times of economic downturns or financial crises, governments
with elevated debt levels may face difficulties accessing credit markets or refinancing existing debt,
leading to potential fiscal crises or sovereign debt defaults.
4. Reduced Fiscal Space: Excessive public borrowing can limit a government's ability to respond to
future economic challenges or emergencies. High debt levels may constrain policymakers' options for
implementing fiscal stimulus measures or providing financial assistance during crises, potentially
exacerbating economic downturns or social disruptions.
5. Inter-generational Equity Concerns: While spreading the costs of public investments across
generations can be considered an advantage, it also raises concerns about inter-generational equity.
Excessive borrowing can saddle future generations with the burden of repaying debts incurred for
current expenditures or investments, potentially leading to inter-generational tensions and inequities.
6. Creditworthiness and Market Perception: Persistent reliance on public borrowing, particularly
without credible plans for debt reduction or fiscal consolidation, can undermine a government's
creditworthiness and credibility in financial markets. This could lead to credit rating downgrades, higher
borrowing costs, and reduced investor confidence, further exacerbating fiscal challenges.
7. Inflationary Pressures: In some cases, excessive public borrowing can contribute to inflationary
34

pressures within an economy, especially if the government resorts to monetary financing (i.e.,
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 borrowing directly from the central bank). This can erode the purchasing power of currency, reduce
real incomes, and distort resource allocation within the economy.

Overall, while public borrowing can be a necessary tool for financing essential investments and stabilizing
economies, it must be carefully managed to mitigate the risks associated with high levels of debt accumulation
and ensure long-term fiscal sustainability. Effective debt management strategies, transparent fiscal policies,
and prudent borrowing practices are essential to minimize the cons of public borrowing.

Debt management refers to the strategic planning and implementation of policies and practices aimed
at effectively managing a government's or an organization's debt portfolio. It involves decisions
regarding borrowing, repayment, and overall debt levels to ensure fiscal sustainability and minimize
financial risks. Debt management encompasses various activities, including:

1. Borrowing Strategy: Determining the appropriate sources and terms of borrowing to finance
government expenditures or organizational operations. This involves assessing market conditions,
interest rate trends, and the availability of funding options to secure debt at favorable terms.
2. Debt Issuance: Issuing debt instruments, such as bonds, treasury bills, or notes, in the financial
markets to raise capital. Debt issuance involves structuring the terms of the debt, including maturity
dates, interest rates, and repayment schedules, to meet the organization's financing needs while
balancing cost and risk considerations.
3. Debt Service Planning: Planning for the repayment of principal and interest on outstanding debt
obligations. This includes budgeting for debt service payments within the organization's overall
financial plan and ensuring timely payment of debt obligations to maintain creditor confidence and
avoid default.
4. Debt Refinancing: Evaluating opportunities to refinance existing debt to take advantage of favorable
market conditions or lower interest rates. Debt refinancing can help reduce debt servicing costs,
extend debt maturity, or improve debt profile management.
5. Risk Management: Assessing and managing risks associated with debt, including interest rate risk,
currency risk, and refinancing risk. Implementing hedging strategies, diversifying debt instruments,
and maintaining liquidity reserves can help mitigate these risks and enhance financial stability.
6. Debt Sustainability Analysis: Conducting comprehensive assessments of the organization's debt
sustainability to ensure that borrowing levels remain within manageable limits over the long term. This
involves analyzing debt-to-GDP ratios, debt service ratios, and other indicators to evaluate the
organization's ability to service its debt obligations without jeopardizing fiscal stability.
7. Transparency and Reporting: Providing transparent and accurate information on debt levels, terms,
and management practices to stakeholders, including investors, creditors, and the public. Regular
reporting and disclosure of debt-related information help build trust and credibility, fostering investor
confidence and market stability.

Effective debt management is essential for maintaining financial health, preserving creditworthiness, and
supporting sustainable economic growth. By adopting prudent borrowing practices, implementing sound debt
35

management strategies, and adhering to fiscal discipline, governments and organizations can mitigate
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financial risks, optimize debt financing costs, and achieve long-term fiscal sustainability.
 Importance of Public Borrowing and Debt Management

The importance of public borrowing and debt management lies in their significant roles in shaping fiscal policy,
economic stability, and sustainable development. Here's why they are crucial:

1. Financing Essential Expenditures

2. Economic Stabilization
3. Inter-generational Equity
4. Access to Capital
5. Investment in Growth
6. Maintaining Fiscal Sustainability
7. Preserving Market Confidence

In summary, public borrowing and debt management are essential tools for governments to finance essential
expenditures, stabilize economies, promote equitable development, and ensure fiscal sustainability. However,
prudent management practices, transparency, and accountability are crucial to harness the benefits of
borrowing while minimizing risks and vulnerabilities associated with excessive debt accumulation.

SYNTHESIS

Public borrowing and debt management are integral to a government’s ability to finance development and
address budgetary needs. Borrowing allows governments to bridge revenue gaps, invest in critical
infrastructure, and stimulate economic growth, especially during times of fiscal shortfall or economic downturn.
However, reliance on borrowing necessitates careful planning and management to avoid excessive debt
accumulation.

Debt management ensures that borrowed funds are utilized effectively and repayment obligations remain
sustainable. It involves strategies to reduce borrowing costs, diversify funding sources, and mitigate financial
risks. When implemented efficiently, public borrowing and debt management support economic stability,
protect national creditworthiness, and promote long-term fiscal health.

REFERENCES

World Bank (2009). Managing Public Debt: Formulating Strategies and Strengthening Institutional Capacity.
chrome-
extension://efaidnbmnnnibpcajpcglclefindmkaj/https://thedocs.worldbank.org/en/doc/907001520529023453-
0340022018/original/PDMPublicationsGovernanceManagingPublicDebt.pdf

World Bank (2014). Revised Guidelines for Public Debt Management. chrome-
extension://efaidnbmnnnibpcajpcglclefindmkaj/https://www.worldbank.org/content/dam/Worldbank/document/
36

Debt/Revised%20Guidelines%20for%20Public%20Debt%20Management%202014_v2.pdf
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 UNIT II
PUBLIC FISCAL ACTIVITIES

LESSON 7
Course: PA 109: Public Fiscal Administration

Title of the Topic: State Accounting

Objectives: At the end of the lesson, the students must be able to:

 Explain the nature of state accounting, its objectives and features.

INTRODUCTION
State accounting is a specialized branch of accounting focused on managing, recording, and reporting the
financial activities of government entities. It ensures transparency and accountability in how public funds are
collected, allocated, and spent. State accounting involves maintaining accurate records of revenues, such as
taxes and grants, as well as expenditures on public services like education, healthcare, and infrastructure.

The primary goal of state accounting is to provide reliable financial information that supports decision-making,
budget preparation, and compliance with legal and regulatory requirements. By ensuring fiscal discipline and
effective resource management, state accounting plays a crucial role in promoting good governance and public
trust.

PICTURE ASSOCIATION ACTIVITY 7

Title of Activity: Fiscal Activities Through Images

Objective: To inspire creative thinking about fiscal policy concepts by associating abstract ideas with visual
stimuli.

**The activity is detailed in the annex.

CONTENT OF THE LESSON

State accounting typically refers to the financial management and reporting practices carried out by
government entities at the state level. This involves recording, tracking, and reporting financial transactions,
budgets, and expenditures of state government organizations. State accounting systems are designed to
ensure transparency, accountability, and compliance with regulations and laws governing the use of public
37

funds. State accountants are responsible for managing budgets, processing payments, maintaining financial
records, preparing financial reports, and ensuring that funds are allocated and spent in accordance with legal
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 requirements. Overall, state accounting plays a crucial role in ensuring that state governments operate
efficiently, effectively, and in a financially responsible manner.

Nature of Accounting

The nature of state accounting is characterized by several key aspects that distinguish it from accounting in
the private sector. Some of the key features of state accounting include:

1. Public Accountability: State accounting is inherently tied to the concept of public accountability.
Government entities are accountable to the citizens they serve, and state accounting practices are designed
to ensure transparency and accountability in the use of public funds.

2. Legal and Regulatory Framework: State accounting operates within a complex framework of laws,
regulations, and accounting standards that govern how public funds are managed, accounted for, and
reported. Compliance with these regulations is essential in state accounting.

3. Budgetary Control: State accounting is closely linked to the budgeting process in government. State
accountants are responsible for managing budgets, monitoring expenditure, and ensuring that funds are
allocated and used in accordance with budgetary allocations.

4. Fund Accounting: State accounting often involves fund accounting, where funds are segregated based
on their sources and purposes. This helps ensure that restricted funds are used for their intended purposes
and that financial reporting accurately reflects the use of these funds.

5. Reporting and Transparency: State accounting involves the preparation of financial reports that provide
information on the financial position and performance of government entities. These reports are typically
made available to the public to ensure transparency and accountability.

6. Government Accounting Standards: State accounting follows governmental accounting standards,

which are specifically tailored to the unique needs and characteristics of government entities. These
standards provide guidance on accounting for taxes, grants, and other government transactions.

7. Interplay with Politics: State accounting may also be influenced by political considerations, as
government decisions on budgeting, spending, and reporting can be influenced by political priorities and
agendas.

Overall, the nature of state accounting reflects the unique role of government entities in managing public
funds and serving the interests of the public.

Objectives of State Accounting

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 State accounting is a service-oriented activity with the basic objective of providing quantitative information
about a government entity.
1. Assessing the stewardship and other aspects of the performance of public officials for which they are
accountable.
2. Planning, program selection and budgeting
3. Making decisions involving effective and efficient allocation and control of government resources.

Elements of Financial Statement

1. Balance sheet – which shows the assets, liabilities, and residual equity of a government agency.
2. Statement of operation – which shows the elements entering the computation of the net income/loss.
3. Statement of changes in residual equity – shows the balance of residual equity at the beginning of the
year, allotments received, expenditures incurred, income for the year, and the various items that increase or
decrease residual equity that are neither income nor expenses, to arrive at the balance of residual equity at
the end of the year.

Common terms used in accounting:

Books of Accounts – accounts are the records kept for each type of asset, liability or the residual
equity/surplus and capital.

Two major types of books of accounts:

1. Books of original entry – journals or records for classifying and recording transactions in chronological
order
2. Books of final entry – ledgers or records for classifying and summarizing the effects of transactions on
individual accounts.

Documentation – state accounting rules and regulations require that all transactions are to be supported by
sufficient, formal written documents, with complete and accurate description of the transactions, its peso
amount, authorization, and other substantiating information.
Financial Report – prepared by the agencies are based on trial balances and financial statements.
Internal control – state accounting also provides a system to ensure that funds are utilized only for legal
purposes and are expended in compliance with rules and regulations. The system is called internal control
system which is the plan of organization and all the coordinate methods and measures adopted within an
organization to safeguard its assets, check the accuracy and reliability of its accounting data, promote
operational efficiency, and encourage compliance with prescribed policies and regulations.
Electronic New Government Accounting System (e-NGAS) – a computerized program of the New
39

Government Accounting System wherein budget transaction, allotments and obligations are recorded and
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monitored electronically.
 SYNTHESIS

State accounting is essential for ensuring transparency and accountability in the financial operations of
government entities. By maintaining accurate records of public revenues and expenditures, state accounting
provides critical information for budgeting, financial decision-making, and policy implementation. It ensures
that government funds are used effectively and in accordance with legal requirements, helping to prevent
misuse or mismanagement of resources.

Through detailed financial reporting, state accounting supports good governance by allowing for better
oversight and accountability. It provides stakeholders, including lawmakers, citizens, and financial institutions,
with the information necessary to assess the government's financial health and performance. In this way, state
accounting contributes to efficient public sector management, fostering public trust and ensuring that resources
are directed toward achieving national development goals.

REFERENCE

Liberato, D., (2024). Chart of Accounts (COA). https://www.investopedia.com/terms/c/chart-accounts.asp

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 UNIT II
PUBLIC FISCAL ACTIVITIES

LESSON 8
Course: PA 109: Public Fiscal Administration

Title of the Topic: State Auditing

Objectives: At the end of the lesson, the students must be able to:

 Define auditing and its natures.

 Identify the kinds of audit and audit opinion.

INTRODUCTION
State auditing is the process by which government financial activities and operations are independently
examined to ensure accuracy, transparency, and compliance with laws and regulations. Conducted by state
auditors or audit agencies, this process evaluates the management of public funds, the effectiveness of
government programs, and the overall financial health of state institutions.

State auditing aims to detect inefficiencies, fraud, or mismanagement, ensuring that taxpayer money is used
responsibly and for its intended purposes. It plays a critical role in promoting accountability, improving
governance, and enhancing public trust in government operations. Through thorough audits, state auditing
helps to ensure that public funds are allocated efficiently and that government actions align with legal and
ethical standards.

PICTURE ASSOCIATION ACTIVITY 8

Title of Activity: Fiscal Activities Through Images

Objective: To inspire creative thinking about fiscal policy concepts by associating abstract ideas with visual
stimuli.

**The activity is detailed in the annex.

CONTENT OF THE LESSON

Nature of State Auditing

State audit is an ancient and respected branch of state administration. In time, state audit developed
41

from the need for good government. It evolved from a simple device to prevent ruin in public finances and
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 chaos in public bookkeeping to an instrument for ensuring open, regular, efficient, and responsive government.
State audit thus became closely intertwined with modern government and public accountability.

Auditing Define –

As a systematic process of obtaining and evaluating evidence regarding assertions about economic
actions and events to ascertain the degree of correspondence between those assertions and established
criteria and communicating the results to interested user.

In the Philippines, State Audit is defined by the Government Auditing Code PD 1445:

“the analytical and systematic examination and verification of financial transactions, operations,
accounts, and reports of any government agency for the purpose of determining their accuracy, integrity, and
authenticity, and satisfying the requirements of law, rules, and regulations.”

Auditing in Public Administration

The concept and raison d’etre are inherent in public fiscal administration as the management of public
funds is a trust. State audit is not an end but an indispensable part of a control and accountability system
whose aim is to reveal and correct deviations from accepted standards and principles as prescribed by law
and tradition. Thus, in public administration, state audit occupies a critical role as a component of the fiscal
administration cycle.

Auditing and Accounting

Auditing is closely intertwined and thus oftentimes confused with accounting. In fact, auditing evolved from
accounting. In modern times, however, auditing has become a separate field of theory and practice. It is an
independent discipline which relies upon the results of accounting data.

Accounting concerned with constructing from a mass of transactions entered by a firm or agency during a
certain period, financial statements, results of transactions (in terms of profit and loss), and current financial
position, through interpretation, summarization, and compilation of information.

Auditing is primarily concerned with analyzing whether the financial statements reasonably represent the
results of the agency’s operations.

Accounting is constructive; auditing is analytical. While accounting involves the creative generation of financial
and other data, auditing is a critical generation of judgmental information.

Kinds of Audit

1. Financial Auditing – financial transactions and accounts are checked to ensure the submitting
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government agency has complied with the rules and regulations specially the pre-agreed government
accounting system.
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 2. Performance Auditing – one is looking at the system of the agency to assess if it has delivered its
constitutional purpose and mandate by linking the budgets with the results.
3. Internal Audit – an internal check on agency’s system and processes.
4. External Auditing – an outside audit body being brought in to look at the agency.
5. Pre-Auditing – auditing by agencies before approval of transactions.
6. Post-Auditing – auditing by an independent body after the transaction has been done.

Four Types of Audit Opinion

1. Unqualified Opinion – also known as clear opinion, this means that the financial statement present
fairly. The best opinion that COA can give to an agency.
2. Qualified Opinion – this is a notch lower than the unqualified opinion. It means certain material
transaction or accounts have been found to be improper.
3. Adverse Opinion – the opposite of an unqualified opinion. This means the financial statement of the
government entity do not fairly present its results of operations and financial condition.
4. Disclaimer – a No Opinion means that the auditor of the subject government entity does not have
sufficient basis to form any opinion on the financial statement. Disclaimer is worse than an adverse
opinion.

COA Report

1. Regular Annual Audit Report of each NGA, LGU and GOCC

2. Consolidated Annual Financial Report for NGA, LGU and GOCC
3. Special Audit Report
4. Circulars and other issuances

Limitations on COA Report

1. Timeliness
2. Completeness
3. Availability
4. Contestability of findings
5. Feasibility of recommendations
6. Conflict of interest

Issues on COAs mandate

1. Auditing is not based on the budget.

2. Reporting of GOCCs entire budget
3. Lax in penalizing of violators because of COA’s limitation. Recommendatory functions only.
4. Pre-audit vs Post audit.
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 Government Accountability Agencies

1. Office of the Ombudsman – protector of the people who shall act promptly on complaints filed
against officers/employees of the government and private individuals who have participated or in
conspiracy with the government officials/employees in the filed complaint.
2. Sandiganbayan – the government’s anti-graft court. Mandated by the 1987 Constitution, it covers
both criminal and civil cases against anti-graft and corrupt practices acts or offenses committed
by public officers and employees with salary grade 27 and above.
3. Philippine Anti-Graft Commission – mandated under Executive Order 12, assist the president
in the campaign against graft and corruption.
4. Civil Service Commission – the central personnel agency of the government and is tested in the
recruitment, maintenance, and retention of a highly-competent and professional workplace.

SYNTHESIS

State auditing is a critical function in ensuring transparency, accountability, and integrity in the use of public
funds. Through independent assessments, state auditors evaluate the financial operations and performance
of government entities, identifying areas of inefficiency, fraud, or mismanagement. State auditing helps ensure
that government funds are spent according to laws and regulations, providing the public with confidence in the
financial stewardship of their tax dollars.

By highlighting financial risks and recommending improvements, state auditing enhances the effectiveness of
government programs and policies. It plays an essential role in promoting good governance, strengthening
public sector management, and safeguarding public trust in governmental institutions. Through rigorous and
objective audits, state auditing fosters a culture of accountability and contributes to the sustainable
development of a country.

REFERENCE

Commission on Audit (n.d). https://www.coa.gov.ph/issuances/2009-revised-rules-of-procedures-of-the-

commission-on-audit/
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 UNIT III
GOVERNMENT OWNED AND CONTROLLED CORPORATION

LESSON 9
Course: PA 109: Public Fiscal Administration

Title of the Topic: GOCCs: Its Nature and RA 10149

Objectives: At the end of the lesson, the students must be able to:

 Understand GOCCs nature and characteristics.

 Identify the different GOCCs in the Philippines.
 Understand RA 10149.

INTRODUCTION
Government-Owned and Controlled Corporations (GOCCs) in the Philippines are entities established by the
government to engage in commercial activities, often in sectors where the private sector is unable or unwilling
to invest. These corporations are owned or controlled by the government, with the aim of promoting economic
development, providing public services, and ensuring national welfare.

GOCCs play a crucial role in the Philippine economy by operating in key sectors such as energy,
transportation, finance, and infrastructure. They contribute to public revenue through their operations, and their
profits often fund government programs. However, the governance and financial management of GOCCs are
closely monitored to ensure efficiency, accountability, and alignment with national development goals. The
management of GOCCs is guided by laws such as the Government Corporate Monitoring and Coordination
Committee (GCMCC) and the Governance Commission for GOCCs (GCG), which promote transparency and
regulate their operations.

INTERACTIVE GAME ACTIVITY 9

Title of Activity: Identifying Logos

Objective: To help students develop critical thinking and visual literacy skills by analyzing and identifying
various logos. This activity aims to enhance their ability to recognize symbols, understand their meanings,
and make connections between a logo and the underlying brand or message it represents.

**The activity is detailed in the annex.

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 CONTENT OF THE LESSON
A government-owned and controlled corporation (GOCC) is a type of entity that is established and wholly
or partly owned by a government. These corporations operate with a degree of autonomy, but they are
ultimately accountable to the government. They can be involved in various sectors such as infrastructure,
utilities, transportation, finance, and healthcare.
The purposes of Government-Owned and Controlled Corporations (GOCCs) can vary depending on the
objectives of the government and the specific needs of the country. However, some common purposes of
GOCCs include:
1. Provision of Essential Services: Many GOCCs are established to provide essential services to the
public, such as transportation, healthcare, education, utilities (such as electricity, water, and
telecommunications), and postal services.
2. Economic Development: GOCCs can be utilized as instruments for economic development. They
may invest in infrastructure projects, stimulate economic activity in certain regions, support industries
deemed strategic or essential for national development, and promote employment generation.
3. Regulatory Functions: Some GOCCs are tasked with regulatory functions within specific industries.
They may oversee compliance with industry standards, ensure fair competition, and protect consumer
rights.
4. Revenue Generation: GOCCs can generate revenue for the government through various means,
including the provision of services, sale of goods, and investments. This revenue can be used to fund
public expenditures, finance development projects, or reduce budget deficits.
5. Social Welfare: Certain GOCCs may have a mandate to address social welfare concerns, such as
providing affordable housing, extending microfinance services to underserved communities, or
supporting small and medium-sized enterprises (SMEs).
6. Stabilization of Markets: In some cases, GOCCs may be involved in stabilizing markets during
economic downturns or crises. They may intervene to prevent excessive volatility, ensure the
availability of essential goods and services, or provide financial support to struggling industries.

Overall, GOCCs are established to serve the public interest and advance the goals of the government, whether
they be economic, social, or regulatory in nature.

The GOVERNANCE COMMISSION FOR GOCCS (GCG) was created under Republic Act No. 10149 (RA
No. 10149), otherwise known as the “GOCC Governance Act of 2011”, as the central policy-making and
regulatory body mandated to safeguard the State’s ownership rights and ensure that the operations of GOCCs
are transparent and responsive to the needs of the public. Towards this end, it empowered the Governance
Commission to:
 oversee the selection and nomination of directors/trustees and maintain the quality of Board
Governance;
 institutionalize transparency, accountability, financial viability and responsiveness in corporate
performance by monitoring and evaluating GOCCs’ performance;
46

 rationalize the Sector through streamlining, reorganization, merger, as well as recommending to the
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President of the Philippines the privatization or abolition of a GOCC; and

  establish compensation standards to ensure reasonable and competitive remuneration schemes that
attract and retain the right talent.

The GCG has three (3) appointive members of the Commission, and two (2) ex-officio members: the DOF
Secretary and the DBM Secretary.

Since its first meeting on 20 October 2011, the Governance Commission has introduced major policy reforms
such as the Fit and Proper Rule for Appointive Directors and CEOs of GOCCs, the Ownership and Operations
Manual Governing the GOCC Sector, and the Code of Corporate Governance for GOCCs.

Lists of GOCCs in the Philippines

1. Cebu Port Authority
2. Clark International Airport Corporation
3. Government Service Insurance System
4. Home Development Mutual Fund
5. Mactan-Cebu International Airport Authority
6. Manila International Airport Authority
7. National Housing Authority
8. National Power Corporation
9. Philippine Charity Sweepstakes Office
10. Philippine Crop Insurance Corporation
11. Philippine Deposit Insurance Corporation
12. Philippine Ports Authority
13. Social Security System
14. Landbank of the Philippines
15. Development Bank of the Philippines
16. Philippine Health Insurance Corporation
17. National Food Authority
18. Boy Scouts of the Philippines
19. Girl Scouts of the Philippines
20. Philippine Amusement and Gaming Corporation

Summary of RA 10149
(June 6, 2011)

RA 10149 creates a Governance Commission for better oversight and accountability in state-owned
corporations.
Purpose and Scope of the Law
The law aims to promote financial viability and fiscal discipline in government-owned or -controlled corporations
(GOCCs) in the Philippines. It seeks to enhance the governance and management of these entities to ensure
47

they are more responsive to public interest and aligned with national development policies. The law establishes
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 a framework for the effective oversight of GOCCs, ensuring that they operate transparently, responsibly, and
accountably while maximizing the use of government resources.
Key Definitions and Terms
 GOCC: Government-Owned or -Controlled Corporation, an agency organized as a stock or non-stock
corporation, owned by the government either wholly or through its instrumentalities.
 GCG: Governance Commission for Government-Owned or -Controlled Corporations, the central body
responsible for overseeing GOCCs.
 Appointive Director: A member of the Board of Directors/Trustees of a GOCC who is not an ex officio
member and is appointed by the President from a shortlist prepared by the GCG.
 Fit and Proper Rule: Standards for determining the qualifications of members of the Board and the
CEO, including integrity, experience, education, and competence.
 Performance Scorecard: A governance tool that includes measures and targets to evaluate the
performance of GOCCs.
Main Provisions and Their Explanations
General Provisions
 Declaration of Policy: The state recognizes the importance of GOCCs in economic development and
commits to exercising ownership rights to ensure their operations align with national policies.
 Coverage: The law applies to all GOCCs, government instrumentalities with corporate powers, and
government financial institutions, excluding certain entities like the Bangko Sentral ng Pilipinas.
Governance Commission (GCG)
 Creation and Functions: The GCG is established as an advisory and oversight body to formulate and
implement policies for GOCCs. It evaluates GOCC performance, recommends reorganization or
privatization, and develops governance standards.
 Composition: The GCG consists of five members, including a Chairman appointed by the President
and representatives from the Departments of Budget and Management and Finance.
Compensation and Position Classification
 Compensation System: The GCG is tasked with developing a compensation and position classification
system for GOCC personnel, ensuring equitable wages and alignment with private sector standards.
 Non-diminution of Salaries: Existing salaries as of December 31, 2010, cannot be reduced upon the
implementation of the new compensation system.
Board of Directors/Trustees
 Appointment and Term: Appointive Directors are appointed by the President from a shortlist by the
GCG, with a term of one year, subject to performance evaluations.
 Fiduciary Duties: Board members and officers must act in the best interest of the GOCC, exercise due
diligence, and avoid conflicts of interest.
Disclosure Requirements
 Transparency: GOCCs must maintain a website to provide public access to financial reports,
performance scorecards, and other relevant information to ensure accountability.
Creation and Acquisition of GOCCs
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 Approval Process: Any proposal to create a new GOCC or acquire controlling interest in another
corporation must be reviewed and approved by the GCG before proceeding.
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 Significant Legal Principles or Doctrines Established
 Fiduciary Duty: The law emphasizes the fiduciary responsibilities of the Board and officers of GOCCs,
mandating that they act with loyalty and care in managing public resources.
 Performance Accountability: The establishment of performance evaluation systems and scorecards
reinforces the accountability of GOCCs to the government and the public.
Potential Implications or Impacts of the Law
The law is expected to enhance the efficiency and effectiveness of GOCCs, leading to better governance and
management of public resources. By instituting rigorous standards for accountability and transparency, it aims
to reduce corruption and mismanagement within these entities. The GCG's oversight role will likely lead to
more informed decision-making regarding the operations and restructuring of GOCCs, ultimately benefiting
the public interest.

The copy of the entire provisions of RA 10149 can be opened through this link:
https://lawphil.net/statutes/repacts/ra2011/ra_10149_2011.html

SYNTHESIS

Government-Owned and Controlled Corporations (GOCCs) are integral to the Philippine economy, as they
enable the government to directly participate in sectors critical to national development, such as energy,
transportation, and finance. These corporations aim to bridge the gap in services that the private sector cannot
fully address, while also generating revenue for the government.

GOCCs help drive economic growth by providing essential public services and infrastructure, creating jobs,
and contributing to the country’s fiscal stability. However, their operations are subject to strict governance
frameworks to ensure efficiency, accountability, and alignment with public policy objectives. Oversight bodies
like the Governance Commission for GOCCs (GCG) play a pivotal role in regulating and monitoring the
performance of these corporations, ensuring that they operate in public interest while maximizing their
contribution to the nation’s development.

REFERENCES

https://signal.ph/summary/republic_acts-37480
https://lawphil.net/statutes/repacts/ra2011/ra_10149_2011.html
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 ANNEX:
MIND-MAPPING ACTIVITY 1

Title of Activity: Exploring the Basics of Public Fiscal Administration

Objective: To introduce students the concepts of Public Fiscal Administration by creating a collaborative
mind map that outlines its key elements and real-world examples.

Materials Needed:

 Large whiteboard or poster paper (for in-class activity) or a digital mind mapping tool (e.g.,
MindMeister, Canva, or Google Jamboard)
 Markers or pens (if using paper)
 Laptops or tablets (if using digital tools)
 Handouts with key concepts of Public Fiscal Administration (optional)

Activity Steps:

1. Introduction to Public Fiscal Administration

Begin by introducing the topic of Public Fiscal Administration, emphasizing its role in the
management of government finances, including budgeting, revenue generation, expenditure control,
and public debt management.
2. Key Concepts to Include in the Mind Map
Provide a brief explanation of the following core components of Public Fiscal Administration:
o Public Budgeting: The process of creating a financial plan for government spending.
o Revenue Generation: The methods by which governments collect money, such as taxes,
fees, and grants.
o Public Expenditure: The allocation and management of funds for public services like
healthcare, education, and infrastructure.
o Debt Management: How governments borrow and manage debt to meet fiscal needs.
o Fiscal Policy: The government’s use of taxation and spending to influence the economy.
o Public Accountability and Transparency: Ensuring that public funds are used responsibly
and efficiently.
3. Collaborative Group Work
o Divide the students into small groups (3–5 people per group).
o Each group will work on one aspect of Public Fiscal Administration (e.g., one group may
focus on budgeting, another on revenue generation).
o Ask each group to brainstorm and list down ideas, definitions, examples, and connections
related to their assigned topic. For example, the budgeting group could write about the
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different types of budgets (e.g., annual budget, performance-based budget).

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4. Create the Mind Map

 o Instruct each group to contribute their information to the central mind map. If you're using a
digital tool, each group can add their information in different colors or sections for easy
identification.
o The groups should link their concepts to the central idea of "Public Fiscal Administration"
using arrows or lines, showing how each component connects with the others.
o Encourage students to include real-world examples for each concept. For example, under
"Public Budgeting," they might add "Philippine National Budget" as an example.
5. Discussion and Reflection
Once all groups have contributed to the mind map, lead a class-wide discussion to go over the mind
map, clarifying any points and ensuring a complete understanding of how the concepts interconnect.
Use this time to highlight any areas that need further elaboration.
6. Wrap-Up
Conclude the activity by reviewing the key elements of Public Fiscal Administration covered in the
mind map. You can also assign a short reflection or research assignment where students elaborate
on one of the components they worked on.

Learning Outcomes:

 Understanding Key Concepts: Students will understand the basic concepts of Public Fiscal
Administration, such as budgeting, revenue generation, and expenditure management.
 Collaborative Learning: Through group work, students will learn to collaborate, share knowledge,
and apply concepts to real-world examples.
 Visualization of Connections: The mind map will help students visualize how various components
of Public Fiscal Administration are interconnected.

Real-World Examples:

 Budgeting: Example of the Philippine National Budget, detailing how funds are allocated to sectors
like healthcare, education, and infrastructure.
 Revenue Generation: Examples include taxes (income tax, VAT) and government enterprises (like
tollways or government-run utilities).
 Public Debt Management: How the Philippines borrows money through bonds and manages its
debt repayments.

Assessment:

 Active Participation: Evaluate students based on their involvement in the mind mapping process
and the quality of their contributions.
 Completeness of Mind Map: Ensure the mind map covers all the major components of Public
Fiscal Administration and includes relevant real-world examples.
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This activity fosters a hands-on, collaborative learning experience that introduces students to the essential
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aspects of Public Fiscal Administration in a fun and interactive way.

 MIND-MAPPING ACTIVITY 2

Title of Activity: Exploring the Relationship Between Politics and Fiscal Administration

Objective: To help students understand how politics and fiscal administration are interconnected and how
political decisions influence fiscal policies and resource allocation.

Materials Needed:

 Large whiteboard or poster paper (for in-class activity) or digital mind mapping tools (e.g.,
MindMeister, Canva, or Google Jamboard)
 Markers or pens (if using paper)
 Laptops or tablets (if using digital tools)
 Handouts with definitions or key concepts related to politics, fiscal administration, and their
relationship (optional)

\Activity Steps:

1. Introduction to Politics and Fiscal Administration

Start by providing a brief overview of the key concepts:
o Politics: The activities, actions, and policies used to gain and hold power in a government. It
often includes elected officials, political parties, and public policies that influence
governance.
o Fiscal Administration: The management of government revenues, expenditures,
budgeting, and public debt. It involves the allocation and utilization of financial resources by
the government to meet its development goals.
2. Understanding the Interconnection
Discuss how politics and fiscal administration are interrelated. Some key points to highlight:
o Political Decisions Influence Fiscal Policies: Political ideologies, government priorities,
and elected officials' decisions shape fiscal policies, such as taxation and government
spending.
o Budget Allocation as a Political Tool: The allocation of government funds is often a
politically-driven process, with different sectors and regions lobbying for more resources.
Political parties may prioritize certain programs or projects to align with their political agenda.
o Economic and Social Policies: Political leaders’ decisions on issues like welfare,
education, health, and defense often have direct fiscal implications, such as increasing
public spending or adjusting tax rates.
o Public Debt and Borrowing: Political decisions regarding borrowing and the management
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of public debt also have significant fiscal consequences.

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 3. Collaborative Group Work
Divide the students into small groups (3–5 students per group). Each group will focus on one aspect
of the relationship between politics and fiscal administration. Here are some possible topics for each
group:
o Group 1: Political Influence on Budgeting Processes (e.g., how political leaders and parties
influence public budgeting decisions)
o Group 2: Politics of Taxation and Revenue Generation (e.g., political debates on tax policies
and their impact on fiscal sustainability)
o Group 3: Resource Allocation and Political Priorities (e.g., how political interests shape
resource distribution across sectors)
o Group 4: Political Decisions on Public Debt and Borrowing (e.g., political pressures in
borrowing and debt management)
o Group 5: The Impact of Political Stability on Fiscal Administration (e.g., how changes in
political leadership or instability affect fiscal policies and government spending)
4. Create the Mind Map
Instruct each group to brainstorm and gather their ideas, definitions, examples, and connections
related to their assigned topic. They should include real-world examples, such as:
o Budgeting: Example of how government spending decisions are influenced by political
campaigns or election promises.
o Taxation: Example of how political ideologies (e.g., progressive taxation vs. flat tax) impact
fiscal policies.
o Public Debt: Example of how political decisions on borrowing affect a country's debt
management strategy.

Each group will contribute their findings to a central mind map, organized by main branches representing
different aspects of the political and fiscal relationship. Ensure that arrows, lines, and connections are drawn
between political decisions and fiscal outcomes.

5. Class-Wide Discussion
After all groups have added their information to the mind map, bring the class together for a
discussion. Go over each branch, allowing students to explain their ideas and add any additional
insights. Focus on how the topics interconnect, emphasizing the dynamic relationship between
politics and fiscal administration. Address any misunderstandings and clarify complex concepts.
6. Wrap-Up and Reflection
Conclude the activity by summarizing the key points discussed in the mind map. Encourage students
to reflect on how political decision-making influences fiscal policies and how fiscal administration
can, in turn, affect political outcomes. Optionally, assign students a reflection essay or group
discussion on the topic.

Learning Outcomes:
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 Understanding the Relationship: Students will gain a deeper understanding of how politics and
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fiscal administration are intertwined and influence each other.

  Application of Knowledge: Through collaborative brainstorming and group work, students will
apply their understanding of real-world examples of political influence on fiscal decisions.
 Critical Thinking: Students will develop critical thinking skills by examining the political dynamics
that shape fiscal policies and resource allocation.

Real-World Examples:

 Philippine National Budget: Discuss how political priorities, such as the funding of infrastructure
projects, healthcare, or education, are determined during the budgetary process.
 Tax Reforms: Examine the political debates and compromises involved in implementing tax reforms
in the Philippines, such as the Tax Reform for Acceleration and Inclusion (TRAIN) law.
 Public Debt: Explore how political decisions during election periods or government transitions
influence borrowing and the management of national debt.

Assessment:

 Active Participation: Evaluate each student’s involvement in the creation of the mind map, ensuring
they contribute ideas and help in developing connections.
 Completeness of Mind Map: Assess the comprehensiveness of the mind map, making sure all key
concepts are included and logically connected.
 Quality of Examples: Review the real-world examples provided by students to ensure they are
relevant, accurate, and demonstrate an understanding of the concepts discussed.

This activity fosters an interactive and collaborative learning environment, helping students understand the
critical role of politics in shaping fiscal policies and the practical implications of political decisions on fiscal
administration.

PICTURE ASSOCIATION ACTIVITY 3-8

Title of Activity: Fiscal Activities Through Images

Objective: To inspire creative thinking about fiscal policy concepts by associating abstract ideas with visual
stimuli.

Materials Needed:

 A set of images (printed or displayed digitally) representing various fiscal policy concepts. These can
include:
o Images related to government spending (e.g., infrastructure projects, schools, hospitals)
o Images related to taxation (e.g., tax forms, people paying taxes)
o Images representing public debt (e.g., government bonds, debt accumulation)
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o Images illustrating government revenue generation (e.g., tax collection, tariffs)

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o Symbols of economic stability (e.g., graphs, inflation rates)

  Markers or pens (if using paper for written analysis)
 Laptops or tablets (if using digital tools for creating presentations)
 Whiteboard or poster paper for group brainstorming (optional)

Activity Steps:

1. Introduction to Fiscal Policy Concepts

Begin by providing a brief explanation of fiscal policy, including its primary components:
o Government Spending: Public investments and expenditures in sectors like education,
healthcare, infrastructure, and defense.
o Taxation: The collection of taxes to fund government spending and influence the economy.
o Public Debt: The borrowing of funds by the government, typically through bonds, to meet
fiscal needs.
o Fiscal Stimulus/Contraction: Government actions aimed at stimulating or slowing down
the economy, such as increasing spending during recessions or cutting back in times of
inflation.
2. Image Selection and Presentation
Select 5–7 images that symbolize different fiscal policy concepts. These images could be
metaphorical or literal representations of the concepts. For example:
o A construction site could represent government spending on infrastructure.
o A tax form might represent taxation.
o Stacks of coins or money could symbolize revenue generation or public debt.
o An inflation graph could symbolize the government’s role in controlling inflation through
fiscal policy.

Show or display the images to the students one by one.

3. Group Work or Individual Analysis

o Option 1: Group Activity: Divide students into small groups (3–5 students per group). Each
group will be given one or two images to analyze. Students should discuss how the image
relates to fiscal policy and then brainstorm key fiscal policy concepts it represents.
o Option 2: Individual Analysis: If individual work is preferred, each student will choose an
image from the displayed set (or be assigned an image) and write a brief reflection or
explanation of how the image connects to fiscal policy. They should address what the image
symbolizes and how it helps them understand the abstract concept of fiscal policy.
4. Creative Interpretation
Encourage students to think creatively about how the image represents fiscal policy. Ask them to
make connections to:
o Real-world examples: For instance, if the image is about government spending (like a school
being built), students might relate it to the government's investment in education.
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o The broader impact: How does the concept depicted in the image affect the economy,
citizens, or government operations?
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 o Fiscal policy goals: How do the images illustrate goals such as economic stability, growth, or
the reduction of inequality?
5. Sharing and Discussion
After the group or individual work, invite students to present their interpretations of the images. Have
them explain:
o What fiscal policy concept the image represents.
o The real-world implications of the concept (e.g., how government spending on infrastructure
can stimulate economic growth).
o Any creative connections they made to understand fiscal policy better.

After each presentation, the open floor for questions or further discussion on the concept, encouraging
students to engage with each other's interpretations.

6. Reflection and Wrap-Up

Conclude the activity by summarizing the connections between the images and the fiscal policy
concepts they represent. Emphasize how using images can make abstract concepts like fiscal policy
more tangible and understandable.

Optionally, ask students to reflect on how this exercise helped them understand the role of fiscal policy in
shaping a nation's economy.

Learning Outcomes:

 Creative Thinking: Students will engage in creative thinking to link abstract fiscal policy concepts
with tangible images, helping to solidify their understanding.
 Conceptual Understanding: By interpreting and discussing the images, students will gain a clearer
understanding of fiscal policy elements such as government spending, taxation, public debt, and
fiscal stimulus.
 Collaborative Learning: The group-based approach encourages collaboration and the sharing of
ideas, fostering a deeper exploration of the topic.
 Real-World Connections: Students will develop the ability to connect fiscal policy concepts to real-
world situations and examples.

Example Images and Concepts:

1. Government Spending on Infrastructure (e.g., a highway under construction)

Represents government spending and fiscal stimulus in times of economic slowdown.
2. Tax Collection Forms
Represents taxation, the process through which the government collects revenue to fund public
services.
3. Public Debt (Government Bonds)
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Represents public borrowing and how governments manage national debt to finance fiscal deficits.
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 4. Inflation Graph
Represents the government's role in managing inflation through fiscal and monetary policies.
5. Welfare Services (e.g., a healthcare facility)
Represents the allocation of government resources to social services and the impact of fiscal
policy on social welfare.

Assessment:

 Active Participation: Evaluate how well students engage in interpreting the images and making
connections to fiscal policy concepts.
 Quality of Analysis: Assess the depth of students' explanations and their ability to connect abstract
ideas to concrete examples.
 Creativity: Consider the creativity of the connections students make between images and fiscal
policy principles.

This picture association activity helps students understand fiscal policy concepts in a fun, interactive, and
visually stimulating way, promoting deeper learning and engagement with the material.

INTERACTIVE GAME ACTIVITY 9

Title of Activity: Identifying Logos

Objective: To help students develop critical thinking and visual literacy skills by analyzing and identifying
various logos. This activity aims to enhance their ability to recognize symbols, understand their meanings, and
make connections between a logo and the underlying brand or message it represents.

Materials Needed:

 A collection of logos (printed or digital). These can include logos from various sectors such as
technology, food, sports, government, education, etc.
 Projector or screen (for digital display).
 Whiteboard or poster paper (for group activities).
 Markers or pens.
 Timer (optional, for adding a competitive element).

Game Setup:

1. Logo Collection:
Collect a range of logos to display. You can use logos from different GOCCs in the Philippines that
students are likely to recognize. Choose logos that vary in difficulty to make the game more
engaging.
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 2. Instructions:
Explain to the students that the goal of the game is to identify as many logos as possible within a
certain time frame. For each logo, students must also provide the name of corporation it represents.
3. Game Formats: There are several ways to run this activity, depending on your group dynamics and
the level of competition desired:
o Individual Play: Students are given a set of logos to identify and analyze on their own. They
write down their answers, and then the class compares responses.
o Team Play: Divide students into teams. Each team is shown a set of logos and has to identify
them within a time limit. Teams can earn points for correctly identifying logos and explaining
what the logo represents.
o Competitive Play: For a more competitive element, set up a buzzer system (or a hand-raising
method) where the first team or individual to answer gets the point. Keep track of scores to
see which team or person correctly identifies the most logos.
4. Round Structure:
o Round 1: Logo Identification: Display logos and ask students to quickly write down the name
of the corporation. Students will have a limited time (e.g., 30 seconds per logo) to write their
answers.
5. Scoring:
o For each correct logo identification, award a point.
6. Discussion: After each round, engage the students in a brief discussion about the organization, how
it belonged to GOCC and not NGA.

Variations and Adaptations:

 Interactive Digital Game: Use online tools such as Kahoot! or Quizlet, where students can participate
in the logo identification game digitally. This allows for quick feedback and easier management of
larger groups.

Learning Outcomes:

 Logo Recognition: Students will become better at recognizing popular logos from a wide range of
industries.
 Critical Thinking: Students will develop the ability to critically analyze logos and their symbolism,
understanding how visual elements convey meaning.
 Brand Awareness: Students will understand the role of logos in branding and marketing, learning
how a logo can shape public perception and represent company values.
 Creative Thinking: By discussing the symbolism and meaning behind logos, students will foster
creative thinking and deeper understanding of how brands use logos strategically.

Assessment:
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 Participation: Evaluate how actively students engage in the game and contribute to identifying and
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analyzing logos.
  Accuracy: Assess students' ability to correctly identify logos and explain the meaning or symbolism
behind them.
 Creativity: Assess how students apply critical thinking and creativity in discussing the significance of
logos, including their real-world applications and associations.
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 About the Compiler
Junelen G. Inting is from Maasin City, Southern
Leyte. She earned her Bachelor of Science in Business
Administration major in Financial Management at Saint Joseph
College. At the same institution, she also finished her Master’s
Degree in Business Administration. Currently, she is an Instructor
II at the Faculty of Governance and Development Studies at
Southern Leyte State University.
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