Putting PFM Reforms into Action in the Budgeting System
DBM Showcase on PFM:
The National Budget: The financial expression of approved government plans, programs & projects for the fiscal year.
Consists of government’s estimated income and planned expenditures.
A tool to enable government to achieve its development agenda & committed performance.
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The Budget refers to a financial plan required to be prepared pursuant to the Constitution, reflective of national objectives, strategies and programs. It lists down all the Programs, Activities and Projects it will undertake in a Fiscal Year, as authorized by Congress via appropriations. It consists of the government’s projected revenues and expenditures for the fiscal year. Ultimately, it is a tool that enables government to achieve its development agenda.
The National Budget
2014 APPROPRIATIONS
New Appropriations- 2014 GAA
Automatic Appropriations
Programmed Funds (Total)
Unprogrammed Funds
1,468.6
796.0
2,264.6
139.9
(In Billion Pesos)
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This is how the 2014 Appropriations for the Philippine Government look like: The New Appropriations correspond to the portions of the National Budget that is legislated by the Congress for a fiscal year. Automatic Appropriations are those that do not require periodic action by the Congress of the Philippines because they have been covered by previous authorizations. Programmed funds are appropriations available for release during the year. A portion of the National Budget is set aside as standby funds for release to fund various programs in case generated revenues exceed targeted levels, or other sources of receipts like grant/loan proceeds become available.
Aquino Budget Transformation Agenda
Spending within means
Spending on the right priorities
Spending with measurable results
In an empowering regime of transparency, accountability & citizen’s engagement
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From the beginning of the current administration (President’s Benigno Aquino’s term), we have been installing major reforms to transform Philippine budgeting—to achieve spending within our means, on the right priorities and with measurable results, in an empowering regime of transparency, accountability and greater citizen engagement.
We have been rolling out our Public Financial Management Reform program to achieve better transparency, accountability and efficiency in our budgeting systems. This year, we are putting key reforms into action in our budgeting system, such as: the UACS for the 2014 budget, in order to harmonize all account codes throughout government the Performance Informed Budget structure, to reflect all government agencies’ performance indicators as an integral part of the National Budget GAA-as-Release Document scheme, implemented starting with the 2014 Budget Expanded Modified Disbursement Payment System to enable checkless payments – in its pilot stage in 2 Departments (DBM and DND) All of these reforms that we are now rolling out will prepare us for our upcoming adoption of two game-changing PFM reforms, most notably the Government Integrated Financial Management Information System, as well as the Treasury Single Account. As these “technical” reforms are happening, we are also further broadening and improving avenues for citizen’s engagement in the budget process. Through the years, we have been expanding the participatory mechanisms that we have earlier piloted together: the Agency-CSO Budget Partnership Agreements, as well as the Bottom-up Budgeting.
The Philippine Budget Cycle
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There are four phases in managing our National Budget: preparation, legislation, execution, and accountability. During the preparation phase, the Executive Department prepares the proposed National Budget. This is followed by the legislation phase where the Congress authorizes the National Budget and enacts the General Appropriations Act. In the execution phase, appropriations and cash requirements are released; agencies utilize their approved budgets/implement their programs, projects and activities. In the accountability phase, the executive monitors and evaluates the use of the budget (to check efficient utilization of the budget and will serve as input to the next budget cycle – holding agencies to account). In the next slides, I will walk you through how our reforms have significantly changed the budget cycle.
The Budget Process Before
Budget Call Released Late
April
Late Submission of Agency Proposals
(w/ much lump sums!) May
Deliberations & Finalization
June-July
Budget Submitted Just Before Deadline
August
Budget Legislation Also Delayed September-February
GAA Enacted Late March
Allotment Release a Bottleneck
April
Bidding Takes A Lot of Time
3-4 Months
Delayed Implementation Rainy season leads to delays, cost overruns & poor quality
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In summary, this is how the budget process operated in the past: Budgets were frequently enacted late, if enacted at all, which led to delays in implementation. The process was also clogged with a lot of bottlenecks—tedious budget release processes; too many lump sums; and lengthy procurement processes. What our people saw on the ground: projects implemented late, during the rainy season, leading to poor quality, added costs and waste.
The Budget Process Now
Early Budget Call January
Agencies have more time to flesh out proposals, align with priorities & engage stakeholders
January-April
Deliberations & Finalization May-June
Budget Submitted Right After SONA
July
Budget Legislation On Schedule August-December
Early Bidding October-December
GAA Enacted On Time & Serves as Release Doc
Before End-December Implementation as
Early as January
Citizens are more & more empowered throughout the process
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This is how the Philippine Budget Process looks like now: a regime of speed, efficiency and accountability. A proposed budget that is not only enacted early but also formulated with clear parameters on what to fund in terms of priorities and performance targets. A budget execution process that enables the timely and efficient implementation of priority programs and projects. Moreover, the people now have access to performance information that they can use to hold agencies to account.
Budget Preparation
Budget Call Before: April Now: January
Stakeholder Engagement
Before: None Now: Jan-Apr
Presentation to the President &
Cabinet Before: Jul Now: Jun
President’s Budget
Before: Aug Now: after SONA
Agency Proposals Before: May Now: April
Budget Hearings & Review
Before: Jun-Jul Now: May-Jun
Program Budgeting Before: None Now: Jan-Apr
Consolidation, Validation &
Confirmation Before: Jul Now: Jun
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Let’s go phase by phase. First, Budget Preparation: The preparation of the Budget starts with the Budget Call. The budget call is a document that prescribes the timetables and budget ceilings, policies and priority programs that should guide agencies in crafting their respective budgets. Before, the Budget Call was released really late. Now, not only are we releasing the Budget Call early, we have also been releasing the Budget Priorities Framework since last year. The BPF zeroes in on the strategies that will generate quality employment and livelihood for the Filipino workforce particularly the poor and unemployed Before, there were no mechanisms for stakeholder engagement. Now, we have the Budget Partnership Agreements (BPAs) and the Bottom-up Budgeting (BUB). Before, there were no mechanisms for inter-agency collaboration in budgeting. Now with program budgeting, we have mandated agencies to synergize their plans and budgets along priority program areas. The other steps—from Agency submission of their proposals to the President’s approval—have been there since the beginning, but I note that since these roll out late and there’s not enough time, the tendency is to have a lot of lump sum funds in the Budget. Now, because we do the process early, there is ample time to flesh budgets out into greater detail. If before, the President’s Budget is submitted towards the end of August, just right in time for the Constitutional deadline; now we submit the Budget to Congress the day after the President’s SONA. The Constitution provides that the budget for the ensuing year must be submitted not later than 30 days after the opening of Congress which is on the 4th Monday of July.
On Budget Legislation: First, because we’ve been submitting the Proposed Budget early, this has enabled Congress to enact the Budget on time, before the start of the fiscal year. Before, budgets get enacted in March, necessitating partial re-enactment of the previous year’s budget. Second and more fundamentally, because of Performance Informed Budgeting, we are including agency performance indicators together with the proposed budgets. This, as our Secretary claims, is in fact the Executiveceding power back to Congress—through these performance information, we are enabling them to better evaluate agency budgets vis-à-vis their committed results, and to hold agencies to account for these results.
Budget Execution
Enacted GAA Before: March
Now: December
Allotment Release Before: March
Now: Jan w/ GAA- as-Release Doc
Bidding Before: 3-4 Mo After
Now: w/ Early Bidding in Oct-Dec
Award Before: Jun-Jul
Now: As Early as January
Cash Allocation Before: Monthly
Now: w/ 1st Sem. Comprehensive
Disbursement Presently: Mostly Check
Goal: Mostly Checkless and/or cashless
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There are a lot of changes in the way we implement the Budget. First, of course, we have eliminated the practice of late or re-enacted GAAs. Before, agencies will have to wait for allotment release documents from us before they start implementation. Now, the GAA serves as the Release Document—about 86 percent of agency budgets are ready for implementation without the need for SAROs. Procurement, then and now, takes a lot of time. But we introduced an innovation: agencies implementing infrastructure projects like DPWH have been authorized to bid their projects early, before the GAA is enacted, so that these can be awarded and mobilized as early as day 1 of the new year. Before, cash allocation (disbursement authorities) are released monthly (because they lapse monthly). Now, we issue comprehensive NCAs for the first semester to facilitate disbursements. Presently, most government disbursements are made through checks. Now, our aim is to have checkless and/or cashless disbursements as much as possible.
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Let me concretize the changes in the Budget Execution phase a little more, using the case of infrastructure projects: In the past, because budgets were passed late, say, in March; allotments are also released at best in April; bidding then takes months; and then projects only begin implementation during the rainy season. Now, aside from ensuring early budget enactment, we also allowed the bidding of projects, short of award, before the fiscal year; so that projects are commenced as early as January. But even if we do not go through early procurement in January, we can start projects during the summer, where conditions are still more conducive.
Budget Accountability
Agency Performance Targets
Before: separate documents
Now: In the GAA itself due to PIB
Periodic DBM Performance Review
Before: via BMBs Now: w/ AMTs
Financial & Physical Acc’t Reports
Before: different reports Now: Unified FARs of
COA & DBM
Mid-Year & Year-End Budget Reports Before: non-existent Now: Published
Citizen Engagement Before: non-existent
Now: via BPA & BUB
Public Budget Disclosures
Before: weak / none Now: Transparency Seal
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The last step in the Budget process is the accountability phase, which happens alongside budget execution. It must be emphasized that this phase is not exclusively the domain of accountants—we believe that citizens should be empowered to engage this phase. First, because of PIB, performance targets are in the Budget itself—not in separate documents (e.g. OPIF book, BEDs). Before, COA, DBM and Treasury had separate and sometimes conflicting account codes and reporting formats. Now, COA and DBM have harmonized the financial accountability reports that agencies must submit Before, there’s no institutionalized public disclosure mechanism. Now, we have the transparency seal—which is mandated by the GAA itself. Before, we only had desk reviews of agency performance. Now, on top of these, we have Account Management Teams Finally, before, we have no Mid-Year and Year-End Budget Reports. Now, the DBCC has begun publishing these Reports. You can find these in the DBM website. Of course, as I said earlier, Citizen Engagement is important in this phase. Before, mechanisms for this were non-existent. Now, we have used the BPAs and BUB processes to open spaces for citizen engagement during budget execution and accountability. Yes, we know that these are not yet fully-developed processes. Many of these reforms are a work in progress. But we are moving towards the full implementation of these reforms for the benefit of the citizenry.
In conclusion, allow me to point out that because of the major changes in the Philippine Budget Process, we have also been able to publish essential budget documents consistent with global fiscal transparency standards, most notably the Open Budget Index: Aside from the Budget Call, we also now have the Budget Priorities Framework Our Proposed and Enacted Budgets now have more detail as well as performance information Aside from the In-Year (monthly reports) that we have been publishing as well as the Audit Report that COA produces, the DBCC has begun publishing the Mid-Year and Year-End Budget Reports Finally, we have been publishing the People’s Budget since 2011. Not only that, this is undergoing a process of constant improvement and expansion. We believe that ultimately, the National Budget should become the People’s Budget. Through our reforms and our partnership with the in civil society and other stakeholders, we are confident that we can make this dream a reality. Thank you and good afternoon.
Putting PFM Reforms into Action in the Budgeting System
DBM Showcase on PFM:
The Transparency Seal
Transparency Seal
Agency functions and mandates Contact information of key officials and
their positions Physical and Financial Accountability
Reports Approved Budget and Targets Major Programs under the Key Results
Areas Project and Program Beneficiaries Status of the implementation of projects Annual procurement plan and list of
awarded projects
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One of our components for transparency is the posting of the transparency seal in all government websites. The compliance for this provision comprises of posting of: Agency functions and mandates Contact information of key officials and their positions Physical and Financial Accountability Reports Approved Budget and Targets Major Programs under the Key Results Areas Project and Program Beneficiaries Status of the implementation of projects Annual procurement plan and list of awarded projects
