IN THE KNOW: What is cash-based budgeting?

According to the Department of Budget and Management (DBM), cash-based budget means there is a limit of one fiscal year in the implementation of projects.

A cash-based budget limits incurred contractual obligations and disbursement of payments to goods delivered and services rendered and inspected within the fiscal year. Payment of these obligations should be made within the same year.

In an obligation-based budget, according to the DBM, contracts awarded before the end of the fiscal year can be delivered even after the fiscal year and the government has a running balance of not-yet-due-and-demandable obligations.

But in a cash-based budget, contracts should be fully delivered and paid by the end of the fiscal year.

In an obligation-based budget, inspection, verification and payment can be done even after the fiscal year; the government has a running balance of due-and-demandable accounts payables.

But in a cash-based budget, payment can be done only within a 15-month period; contracts awarded at the end of the fiscal year can be paid during the three-month extended payment period.

Agencies should propose only programs, activities and projects that can be fully implemented within the fiscal year.

For multiyear contracts with an implementation period exceeding 12 months, agencies should secure a multiyear obligational authority before entering into deals. —Inquirer Research

SOURCE: DEPARTMENT OF BUDGET AND MANAGEMENT