APPROPRIATION, ALLOTMENT, OBLIGATION AND DISBURSEMENTS

The reason why there is a need for an appropriation law is because the Constitution
restricts the use of public funds without a legislative enactment.
The Constitution provides that no money shall be paid out of any public treasury or
depository except in pursuance of an appropriation law or other specific statutory authority.
An example of an appropriation law is a General Appropriations Act (GAA) which is
commonly known as the National Budget. The National Budget contains, among others, the
budget of national government agencies for the payment of salaries, allowances and benefits of
government officials and employees, the budget of the government for its day to day
operations, and the budget of the government for its programs such as social and health
services, and projects like roads, bridges, airports, dams, etc.
In the local government units (LGUs), appropriation law is in the form of an
Appropriation Ordinance. Just like in the national government, LGUs also spend their budget in
almost the same manner.
What are common types of Appropriation?
There are several types of appropriations. The most common is the New General
Appropriation. This appropriation is an authorization for incurring obligations during a specified
budget year as contained in the GAA.
Another type of appropriation is an Automatic Appropriation. This type of appropriation
is a one-time legislative authorization to provide funds for a specified purpose, for which the
amount may or may not be fixed by law, and is made automatically available and set aside as
needed. Since it is already covered by a separate law, it does not require periodic action by
Congress, and need not be included in the legislation of annual appropriations.
Examples of Automatic Appropriation, includes, among others: a) Interest payments for
foreign and domestic debt which is commonly known as Debt Service (per P.D. No. 1967, R.A.
4860, and R.A. 245 as amended); b) Net Lending to GOCCs (per P.D. 1177 and E.O. 292); c)
Special Accounts – per specific laws, e.g., Wildlife Management Fund (DENR-R.A. 9147) sourced
from fines etc. relating to the implementation of the Wildlife Act; and d) government share in
the Retirement and Life Insurance Premium (RLIP) of government employees and officials.
Again, automatic appropriations need no periodic action (i.e., yearly enactment), as
compared to the general appropriations which are usually enacted on a yearly basis, since they
are already covered by specific special laws.
One more type of appropriation, although starting FY 2018, the government
discontinued the use of the same, is a Continuing Appropriation.
 Continuing Appropriation is an authorization that supports obligations (expenditures
incurred and committed to be paid by the government) for a specific purpose or project, even
when these obligations are incurred beyond the budget year. The reason why it is called
Continuing Appropriation is because the validity of certain part of the appropriation extends
beyond the year the appropriation was enacted. For instance, the budgets for Maintenance and
Other Operating Expenses and Capital Outlay are valid for two years which means any unspent
amount during the first year may still be used in the succeeding year. Again, there are no more
continuing appropriations in FY 2018, and maybe in the succeeding years, depending on what
the Congress provides.
What is an Allotment?
In simple terms, an allotment is a chunk of an appropriation. If appropriation is a whole
pizza, an allotment represents a slice or share of a government agency from the pizza.
In technical terms, allotment is an authorization issued by the Department of Budget
and Management (DBM) to an agency, through authority contained in the General
Appropriations Act (GAA) or the release of Special Allotment Release Order (SARO), permitting
the agency to commit/incur obligation and/or pay out funds within a specified period of time
within the amount specified for the purpose indicated therein.
Unlike in previous years, where agencies can only enter into contract or incur obligation
when the DBM issued their respective Agency Budget Matrix (ABM), now the GAA already
serves as the authority of government agencies to incur obligations, except for certain items in
the GAA that requires fulfillment of certain conditions before it can be released.
What are allotment classes?
There are four (4) allotment classes.

 Personnel Services (PS) is the budget set aside by the government for the payment of
salaries, wages and other compensation of government officials and employees.
 Maintenance and Other Operating Expenses (MOOE) on the other hand is the budget
of the government to cover its day to day operations. These are expenses for supplies
and materials; transportation and travel; utilities (water, power, etc.) and the repairs, etc.
 Financial Expenses (FE) is a new expense category. These expenses refer to management
supervision/trusteeship fees, interest expenses, guarantee fees, bank charges,
commitment fees and other financial charges incurred in owning or borrowing an asset
property.
 Capital Outlays (CO) or Capital Expenditures is commonly known as the budget for the
construction and rehabilitation of roads, bridges, ports, airports, dams, public facilities,
etc. It also includes budget for the purchase of motor vehicles, certain office equipment,
information and communication technology equipment, and the like.
 In summary, appropriation represents the level of authority given by the government to
its agencies, specified in certain amount and purpose, usually corresponding to what has been
proposed by the agency as its annual budget, while allotment represents the amount already
released by the DBM to the agency out of the agency’s appropriation. Whatever amount of
appropriation that has not been released at the end of the year will be reported in the Agency’s
books and registries as unreleased appropriations.
OFTEN MISCONSTRUED BUDGET TERMINOLOGIES
1. What is the difference between appropriation and allotment?
Appropriation refers to an authorization made by law or legislative enactment directing
payment out of government funds under specified conditions or for specific purposes.
On the other hand, allotment is an authorization issued by the DBM to an implementing
agency to incur obligations for specified amounts contained in a legislative appropriation.
2. How is an appropriation distinguishing from the budget?

An appropriation refers to an authorization made by law or legislative enactment

directing payment out of government funds under specified conditions or for specific
purposes.

On the other hand, the budget may be construed as the total amount of appropriations
programmed to be spent during the budget year and that can be supported by available
resources in accordance with the fiscal program to enable the national government to enter
into contract for the delivery of goods and services to the public.

3. How do distinguish obligation from disbursements?

Obligations are liabilities legally incurred and committed to be paid for by the government
either immediately or in the future.

Disbursements refer to the actual withdrawal of cash from the Bureau of the Treasury due
to the encashment of checks issued by agencies and payment of budgetary obligations.

4. What is the difference between the expenditure program and the financing program?

The expenditure program refers to the ceiling on the obligation that can be incurred by
the government in a given budget year. Said ceiling is supported by estimated financial
resources.
 The financing program pertains to the projected revenues from both existing and new
measures, the payment of debt principal due, as well as the planned borrowings to finance
budgetary transactions.

5. How do we distinguish the obligation budget from the cash budget?

The obligation budget is the proposed amount of commitments that the government may
incur or enter into for the delivery of goods and services in a fiscal year.

On the other hand, cash budget is the aggregate of revenues, borrowings and
disbursements of the National Government. It shows the actual deposits and withdrawals of
cash of national government agencies from the BTR for payment of current and previous
year's obligations.

6. How do we differentiate between programmed appropriations and unprogrammed

appropriations?

Programmed appropriations are appropriations with definite/identified funding as of

the time the budget is prepared while unprogrammed appropriations are those which
provide standby authority to incur additional agency obligations for priority programs or
projects when revenue collection exceed targets, and when additional grants or foreign
funds are generated.

7. What is the difference between expenditure authorized by the annual general

appropriations and the obligation program?
The obligation program refers to a portion of total appropriations programmed for the fiscal
year, unutilized prior years accounts, payments for automatic and continuing accounts that can
be supported by available resources in accordance with the fiscal program.
The annual general appropriations refer to the appropriations authorized under the
General Appropriations Act or the new legislative authorizations enacted and approved by
Congress. This appropriation level includes Programmed and Unprogrammed Appropriations.
8. What is the difference between the disbursement program and the cash release program?
The disbursement program refers to the actual withdrawal of cash from the Treasury
due to the encashment of checks issued by agencies and from payment of other obligations.
The cash release program refers to the program of Notice of Cash Allocation (NCA)
releases to be made by the DBM based on the Agency Work and Financial Plan and the cash
available in the Bureau of the Treasury. The NCA provides the authority for the maximum
amount of withdrawals that an agency can make from government servicing banks for the
month indicated.
9. How do we distinguish capital expenditures from infrastructure expenditures?
Capital expenditures refer to expenditures for capital goods or durable goods which are
used for productive purposes such as the construction of roads and bridges, dams, power and
irrigation works, schools and hospitals. It is also known as capital outlays, referring to the
purchase of equipment and fixed assets, the benefits of which extend beyond the budget year
and which add to the assets of the government.
Infrastructure expenditures, however, is a subcomponent of capital outlays which refer to
spending for the construction of various basic public works, such as roads, ports, airports, water
supply, irrigation and other capital investments particularly of the Department of Public Works
and Highways, the Department of Transportation and Communication, the school building
program of DECS and the national irrigation projects of the Department of Agriculture.
10. How do we differentiate the national budget from the public sector budget?
The national budget refers to the totality of the budget of the various departments of the
national government including support to LGUs and GOCCs.
The public sector budget or the consolidated public sector budget is the aggregate of
revenues, expenditures and indebtedness of all units of government, including the national
government and its agencies and instrumentalities, local government units, and government-
owned and/or controlled corporations.