PUBLIC FISCAL

ADMINISTRATION

MELBA BEDONIA SULLIVAN, Ph. D.

Professor and Editor

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Public Fiscal Administration is a compilation of instructional materials, book
references and readings published by the Guimaras State College Research and
Extension Services. This was compiled and edited by DR. MELBA B. SULLIVAN,
Iloilo Center Program Coordinator and Professor of the College for classroom
purposes only. Compilation and editing made and/or expressed in the book are
those of the authors and not of the members of the editorial board nor of the
College Administration.

Copyright 2017 by

GUIMARAS STATE COLLEGE

ISSN No. __________

Published by:

Guimaras State College

Mclain, Buenavista, Guimaras
Philippines 2017
Telefax No. (033) 580-82-44

All Rights Reserved. No part of this materials may be reproduced or transmitted

in any forms or by any means, electronic or mechanical, including photocopying,
recording, mimeographing, or by any information and retrieval system, without
written permission from the copyright holder.

Printed in the Philippines by

GUIMARAS STATE COLLEGE
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Editor’s Note:

These instructional materials on Public Fiscal Administration provide

practitioners, students and teachers of the discipline, a ready reference for
updating them on the most recent trends, rules and regulations pertaining to
issues, problems, needs and challenges in Philippine Public Fiscal Administration.
The dearth of reading materials on the topic had propelled this editor to come up
with a compilation of handy materials on the subject, mostly culled from the
write-ups and readings of one of the illuminaries and most illustrious public
figure in Philippine Public Finance, Sec. Leonor Magtolis Briones. Guided by her
wisdom and classic writings, and supplemented with current data, taken from
various articles and materials, this compilation is a practical guide for all users
and would be users.
This handbook covers seven (7) modules. Module 1 is the Overview of
Public Fiscal Administration detailing its definition and discusses the subject in
the context of developing country perspective. The module also discusses briefly
the historical background of public finance. Module 2 covers the Legal Basis of
Public Finance in the Philippines. Module 3 is on Philippine Revenues and
Expenditures, Module 4 discusses the scope and nature of national budgeting
while Module 5 is on Foreign Debts and Government Owned and Controlled
Corporation (GOCCs). Finally, Module 6 and 7 discusses state accounting and
auditing in the Philippines, respectively.
It is hoped that these topics could give each and every reader a wholistic
view about Philippine Public Fiscal trends and practices.

DR. MELBA BEDONIA SULLIVAN

Editor and Iloilo Center Program Coordinator
Graduate School, Guimaras State College

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 CONTENTS

Preface Page
MODULE OUTLINE
Module 1. Public Fiscal Administration: An Overview
1. Public Fiscal Administration
 The Developing Country Perspective
2. The Development of Public Finance Institutions
 Early Public Finance: The Slave Societies
- Ancient Finance
*Expenditures
*Revenues
*Budgeting
* Borrowings
*Auditing
- Medieval Public Finance (395 A.D. to 1500)
*Feudalism
 Beginnings of Capitalism
- The Rise of Central Governments
- Beginnings of Capitalism
*Mercantilism
*Taxation
*Budget and Expenditure
*Cameralism
*Physiocracy
 Capitalism: Public Finance and Free Enterprise
 The Crisis of Capitalism: Keynesian Public Finance
 The Marxist Challenge: Socialist Public Finance
- Marxism
3. Colonial Finance in the Philippines
 Pre Spanish Period
 Spanish Period
 Military Government During the American Period
 Finance of the Philippine Republic
 The Civil Commission
 Reorganization Act No. 26665
 The Japanese Occupation
 Philippine Public Finance Today
Module 2. Legal Basis of Public Finance in the
Philippines
1. Constitutional and Legal Basis of Philippine Public
Finance

iv
bnvng
 Taxation
- Sources of Taxation
- Taxing Power Limitations
*Inherent Limitations
*Public Purpose
*Non-Delegation of Taxing Power
*Exemption of Government Agencies
*Limitations of Territorial Jurisdiction
*International Comity
- Constitutional Limitations on Government
Taxing Power
*Due Process of Law
*Equal Protection of Law
*Non-Infringement of Religious Freedom
*Non-Appropriation for Religious Purposes
*Non-Taxation of Non-Stock, Non-Profit
Educational Institutions
*Non-Taxation of Religious Charitable
Entities and Properties
*Other Constitutional Limitations
- The Legal Process of Taxation
 Budgeting
- Nature of Budgeting
- Budget Formulation
- Constitutional Provisions
*Restrictions of Budgeting
 Accounting and Auditing
- Definitions
- Legal Basis
2. Politics and Fiscal Administration
 Fiscal Administration and the General Welfare
 Relationship
 The System
- The Process
*Voting
*Vote Maximization
- The Interest Groups
 Fiscal Decision
Module 3. Philippine Revenues and Expenditures
1. Scope and Nature of Taxation
 Taxation and Its Characteristics

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  Bases and Goals of Taxation
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 Classification of Taxation
 Requirements for Development
- Capital Formation
- Allocation of Resources
- Redistribution of Income and Wealth
- Stability
 The Philippine Tax System
- The Constitutional Mandate
- The Major Revenue Agencies
- Major Philippine Taxes
*Income Tax
*Business Income Tax
*Corporate Income Tax
*Transfer Taxes
*Value Added Tax
*Custom Duties
*Local Taxes
2. The Philippine Revenue
 Objectives of Government Finance and Revenue
System
 Income Sources of the Philippines
- Tax Revenues
- Capital Revenues
- Extraordinary Incomes
- Public Borrowings
- Grants
3. Philippine Expenditure
 Developing Countries’ Developmental Problems
 Philippine Expenditure Policies
 Philippine Expenditure Classification
 Patterns of Governmental Expenditures
 Expenditure Patterns According to Nature of Expenses
- Current Operating Expenses
- Capital Outlays
 National Government Expenditure Patters
- Economic Development Expenditures
- Social Development Expenditure Patterns
- General Government Expenditure Patterns
 Summary and Conclusion
Module 4. Scope and Nature of National Budgeting
1. Budgeting: Application to Developing Countries

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  Budgeting Principles and Theories
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 Current Trends of Budgeting for National
Development
 Budgeting Theories for Developing Countries
2. Philippine Budgeting Approaches and Techniques
 Budget Orientations
- Control Orientation
- Management Orientation
- Planning Orientation
 Approaches in Budgeting
- Line-item Budget Approach
- Performance Budgeting
*The Philippine Experience in Performance
Budgeting
- Planning, Programming and Budget
System
*Emergence of PBBS and Its Features
*PBBS: The Philippine Experience
- Zero-base Budgeting (ZBB) Approach
*ZBB in the Philippines
 Conclusion
3. Philippine Budgeting Organizations
 The Development Budget Coordination
Committee (DBCC)
 The Department of Budget and Management
- Historical Background
- The Present Department of the Budget
and Management
- The Mission of the DBM
 Linkages of DBM with Other Fiscal Agencies
4. Budget Process
 The Budget Cycle
- Budget Preparation
- Budget Authorization
- Budget Execution
Module 5. Foreign Debts and Government Owned and
Controlled Corporation (GOCCs)
1. Public Borrowings
 The Keynesian Theory of Deficit Financing
 Development Finance
 The Philippine Foreign Debt
2. Government Owned and Controlled Corporation

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  The Philippine GOCCs Defined
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The Legal Framework of GOCCs
Presidential Issuances
- Supervision and Monitoring of GOCCs
 Growth of GOCCs
 GOCCs Financial Status and Performance
 Issues and Problems of GOCCs Issue of Poor
Performance
 The Philippine GOCCs Rationalization and Privatization
 Problems and Issues in Implementation
- Marketing Problems
- Entry of Foreign Investors
- Shortage of Buyers
- The Need for Industrialization
- Procedural Problems
- Labor Problems
- External Pressures
 GOCCs Performance Evaluation
- The Government Corporate Monitoring and
Coordinating Committee (GCMCC)
- Refraining GOCC Policy
*Start from the Consultation
 Reformulate Basis of GOCC Policy Declaration
Module 6. State Accounting in the Philippines
 State Accounting in the Philippines
- State Accounting Defined
1. Nature of State Accounting
2. Objectives of State Accounting
3. Basic Features of State Accounting
- Basis
- Organizational Responsibilities
- Accounting Entity
- Double-Entry System
- Negative Entries
- Time Period
- Basis of Accounting – Cash and Accrual
- Recording Procedures
- Books of Accounts
- Documentation
- Use of Standard Chart of Accounts
- Coding Structure
- Financial Statements

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 - Financial Reports
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- Internal Control
4. Government Accounting Systems
 Three Systems of State Accounting
5. Fund Accounting
6. Accounting for Appropriations, Allotments and
Obligations
- General Principles
- Accounting for Appropriations of NGAs
- Allotment System in the National
Government
- Accounting for Appropriations and
Allotments in LGUs
- Expenditure Classification
7. Accounting for Disbursement
- General Principles
- Certification of Availability of Funds
- Notice of Cash Allocation and Modified
Disbursement System (MDS) in the
National Government
- Other Modes of Disbursement
8. Accounting for Income and Receipts
- General Principles
- Categories of Income in NGAs
9. Decentralized Accounting
- Procedure of National Government
Agencies
 Issues and Problems
- Keeping Pace with Development
Administration Requirements
- State Accounting for Accountability
- Social Responsibility Awareness and Its
Demands
- Cost Accounting
- Timeless of Accounting Information
- Neglect of Agency Accounting Functions
- Overlapping Accounting Rules and
Regulations
- Constraints Due to Budgeting System
- Professional Competence
- Problems of State Accounting Education
- In-house Training

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 - Creation of a Central Accountability Body
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- Growth of Multinational Corporations (MNCs) and
Its Implications
- Regionalization/Internationalization and Its
Challenges
Module 7. State Audit in the Philippines
1. Nature of State Auditing
 Definition
 Auditing in Public Administration
 Auditing and Accounting
 History of Auditing in the Philippines
- Before Political Independence
*Auditing Under Spain
*Auditing Under the Malolos Republic
*Auditing Under the Americans
*Auditing Under the Commonwealth Period
*Some Observations on Auditing Prior to Political
Independence
- The Post Independence Period
*The First Reorganization Effort: Reforms with
Assistance of American Consultants
*Performs Under the Second Reorganization Effort
2. Types of Audit
- As to Organizational Status of Auditor
- As to Audit Scope
*Fiscal Audit: Financial and Compliance
*Performance Audit: Efficiency Economy,
Effectiveness
*Economy and Efficiency Audits Determine
*Special/Other Audits
3. The Audit Process
 The Audit Cycle
 General Objectives, Principles and Standards
- General Objectives
- Specific Objectives
- Audit Principles and Standards
4. The Commission on Audit
 Powers, Authority and Functions
 Organization
5. Issues and Problems
 The Proper Role of the COA
 The COA’s Independence

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  The Case for Performance Auditing
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 Audit Reporting
 Who Will Audit the Auditor?

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 Introduction

Good governance could also be equated to efficient,

effective and judicious use and management of government
funds. It is not only the Republic of the Philippines, but all
governments of the world for that matter, had to operate to
provide public services to its constituents, from funds
generated in the exercise of its inherent power to taxation.
It behooves upon these governments therefore, that public
funds and the financial responsibility that goes with it,
should be properly managed and accounted, using the
framework of spending government funds for the benefit of
many.

This therefore warrants an examination of our existing

revenue generation and fund utilization. The continuing
growth of our GDP, the recent passage of the tax reforms
law, the country’s efforts to strengthen our local
governments as development partners of the natural
government, are positive indications of a growing economy
in this part of the ASEAN communities.

Overall, the realization of these efforts is a strong signal

from both the national and local governments of this country
to assume an enlarged fiscal role and take up the challenge
of… management development in public finance.

The Professor and Editor

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