PHL journey to reforming budget process slow, but remains on track

CHANGE is coming, indeed. But this has been slow in the democratization of the budgeting process of the country.

Quantitatively, the 2020 national budget has surpassed the P3 trillion of the Aquino administration. However, in terms of qualitative change, there are still steps policymakers and government officials must undertake, according to experts, to ensure that every peso counts.

Even after the controversies on the Priority Development Assistance Fund and the Development Assistance Fund that hounded the administration of Benigno S. Aquino III, allegations of pork barrel being infused into the national budget still surface every year up to the present.

Bangko Sentral ng Pilipinas Governor Benjamin E. Diokno

Still, Ateneo de Manila University School of Government Dean Ronald U. Mendoza told the BusinessMirror the budgeting system remains strong in some aspects.

“It has begun to improve overtime but obviously there is still work to be done. And what is the present situation of the budget right now? I think there has been some slippage in past progress and it is showing in a process that appears to be quite divisive and at times quite abrasive,” Mendoza said in an interview with BusinessMirror.

“What we would like to see is a restoration of stronger mechanisms of governance in the budget process,” he added.

Nonetheless, Mendoza emphasized there is now some degree of transparency in the budget process. He explained there is now more engagement from journalists and by some leaders in both the Senate and the Lower House.

Budget transparency

In the 2017 Open Budget Survey (OBS) conducted by the International Budget Partnership (IBP), the Philippines ranked first in Asia for budget transparency and 19th worldwide in the Open Budget Index (OBI).

With an OBI score of 67 out of 100, the Philippines is said to be providing “substantial” budget information, making it the top country in Asia to be so. The archipelago is followed by Indonesia, which scored an OBI score of 64 out of 100, Jordan (63), Japan (60) and South Korea (60). The country’s latest score is also three points higher than its mark in 2015.

This, even as the same survey results showed a modest decline from 45 in 2015 to 43 in 2017 (out of a possible 100) in average global budget transparency scores after a decade of steady progress by countries.

According to the Washington, DC-based IBP, this means that many governments around the world are making less information available about how they raise and spend public money.

The nonprofit group said it is basing the countries’ budget transparency scores on the availability and comprehensiveness of the budget documents. These documents include the following: pre-budget statement, Executive branch’s budget proposal, enacted budget, citizen’s budget, in-year reports, mid-year review, year-end report and audit report.

The OBS is a biennial survey assessing budget transparency based on the amount and timeliness of the budget information that a government makes available to the public. The OBS uses 109 equally weighted indicators to measure budget transparency.

In this sixth round of this biennial assessment, the 2017 survey evaluated 115 countries across six continents. Thirteen new countries were added to the survey since the last round in 2015.

Although transparency is vital in the budgeting system, the IBP also evaluates the degree of public participation and the extent of oversight in the budget process of each country.

Actual system

MENDOZA said the Philippines’s showing in the OBS shows the government’s budgeting system has strong points. However, he said there is still room for improvement to make the process more efficient and to make sure that the budget goes to the right priorities of the government.

Mendoza laments the shelving of the Government Integrated Financial Management Information System (Gifmis) given the concerns on the scale and limited time-frame for its rollout across the bureaucracy. He emphasized that, with the shelving of the Gifmis, the country has yet to have a fully integrated information system that can provide real-time and online data to monitor the budget usage as well as project implementation.

“There is another reform but it was not really continued,” Mendoza explained. “It’s the effort to actually create an information system around the budget, which would allow us to have faster data capture of the process so you get much more effectively exercise the oversight role over the budget.”

Based on the 2016 Public Expenditure and Financial Accountability Assessment (Pefa), the government has for years been dealing with processing financial transactions manually. On the other hand, fiscal agencies utilize numerous stand-alone systems to generate financial information. The Pefa revealed this resulted in lack of budget credibility, lack of funding predictability, weak cash management system and the absence of a common budgetary and accounting classification.

According to Mendoza, the country is “not yet there [efficient budgeting system] because we still manually get data.”

So, he added, “the reality is, even if some of our fiscalizers are doing a good job, it could be much much more effective with this information system.”

He continued: “And, of course, with the information system, you have a bureaucracy that functions better because you are now talking of things that you can monitor.”

DBM efforts

AFTER the Gifmis was discontinued, the government decided to proceed with the Budget and Treasury Management System (BTMS), which is said to be a “scaled-down” financial management information system (FMIS). The BTMS is seen to evolve into a broader FMIS in the future.

According to Undersecretary Laura B. Pascua of the Department of Budget and Management’s (DBM) Budget Policy and Strategy Group, the department still continues to implement the BTMS, which will pave the way for an integrated FMIS.

Pascua said the BTMS will help provide a more accurate and transparent picture of government financial performance as well as improve the management of public funds.

To steer the rollout of the BTMS, Pascua said the DBM had issued a circular in January 2019 institutionalizing the adoption and use of the BTMS for budget utilization by July of the same year.

The DBM also launched in May 2019 an electronic-learning system to aid the training of 15,000 BTMS users in a very short period of time. Pascua said it would have taken six years if the training used conventional classroom teaching methods.

The DBM has also been conducting capacity-building activities to prepare the national government agencies to adopt and utilize the BTMS. These include the following: briefing sessions, “deep dive” workshops, security access matrix workshops, hands-on training and data migration.

As of November last year, the DBM also reported that 11 national government agencies are already implementing the “Budget Utilization Module,” or BUM, of the BTMS while the other agencies are seen to follow suit in implementing the said system until early 2020.

Enabling tools

TO complement the BUM, the DBM will also be fully rolling out a “Budget Management Module,” or BMM, to establish budgetary control levels and additional higher controls as appropriate to the government budget and management module.

The BMM went live last November 4, 2019. Under this parallel go-live run, all budget management oversight transactions from November 4, 2019, onward should have been entered into the BTMS, in parallel with entries in the eBudget system.

Aside from BTMS, the DBM also embarked on a project together with the Department of Science and Technology (DOST) which the agencies dubbed Project DIME, to stand for “Digital Imaging for Monitoring and Evaluation.” This project was meant to strengthen monitoring and evaluation of the big-ticket infrastructure projects through the use of data and images.

This comes at a time that the government is rolling out the “golden age of infrastructure” through its “Build, Build, Build” program.

Project DIME was used to monitor big-ticket programs and projects through generating data and images.

Project DIME was also committed as one of the “Open Government Partnership” programs of the country in the 2019 to 2021 National Action Plan agreed upon by both government and nongovernment stakeholders.

In line with this, key infrastructure programs will soon be subjected to public monitoring and feedback through an online platform that the DBM calls the “Dime Transparency Website.”

According to documents provided by the DBM, datasets like satellite images and geotagged photos will also be uploaded to this website.

With up-to-date infographics that will be made available on the website, citizens will be able to make informed decisions.

Moreover, a rating system will also be introduced to capture the general performance of the programs being monitored.

The rating system will be based on a set of criteria like fund utilization rate, physical completion of projects and timeliness of project execution.

No go

AMONG the many reforms that the Philippine budgeting system has gone through, Mendoza said he would like to see the revival of the Bottom-Up Budgeting (BuB) system that was undertaken by the Aquino administration.

The BuB tack aimed to take into account inputs from government units from local government units, barangays, municipalities and civil-society organizations when crafting the overall budget for the fiscal year.

“What you are trying to build is the [political] muscle of our citizens to engage their leaders and hold them accountable. That’s what [BuB] was supposed to do,” Mendoza said. “It’s [BuB] actually a very, very small fraction of the budget, right? But it is still very important because it opened up spaces to grow [a] citizen’s arm that will now engage [government in the budgeting process].”

While the Philippines scored higher than the global average of 12 out of 100 for public participation in the 2017 survey, its score of 41 out of 100 meant that the country still provides “limited opportunities” for public engagement, according to the IBP.

Thus, the IBP recommended that the Philippines prioritize active engagement with individuals or civil society organizations representing vulnerable and underrepresented communities during the formulation and monitoring of the implementation of the national budget. It also suggested that government hold legislative hearings on the formulation of the annual budget during which members of the public or civil society organizations can testify.

Infra lack

HOWEVER, while the survey results showed that the Philippine government got a lower score in the public participation category compared to its 2015 mark of 67 out of 100, the stand of two-time DBM chief and now Bangko Sentral ng Pilipinas Governor Benjamin E. Diokno on the BuB remains unchanged.

The BuB was dropped as a system since Diokno took over DBM’s reins in 2016, because he believed it was just being used as a “political tool” by the previous administration.

In an interview with the BusinessMirror, Diokno explained he decided not to implement BuB anymore during his term because he saw no benefits from it at all. Diokno added he doesn’t see the need to give additional money to local government units when they already have their share from the Internal Revenue Allotment.

He also argued that the country’s performance in the public participation category is still better compared to other countries.

“You will only waste your money there because, number one, we still lack infrastructure. For the projects, when you do [BuB], you fritter away resources to small projects,” Diokno said. “You build barangay roads here or some projects there. But we need large-scale projects that would interconnect the country.”

Congressional oversight

IN terms of budget oversight, the IBP gave a score of 65 over 100 for the Philippines as the IBP said the legislature and supreme audit institution in the country generally provide “adequate” oversight.

Still, the IBP also pointed that it is during the implementation stage of the budget cycle that the legislature provides “limited oversight.”

Mendoza noted that, currently, there are only few lawmakers who fulfill their oversight function.

“Yes [oversight is still being exercised right now] but one would hope it becomes a little stronger also,” he said. “Oversight, I think, is coming now from the Senate.”

He said the Senate usually has a “greater degree of independence” compared to the House of Representatives since senators “are like leaders-at-large unlike congressmen who are tied to their local jurisdiction.”

Asked for his assessment on the country’s budget oversight, Diokno said the oversight committee in Congress has always been there but it is not being convened.

“The budget process is when we submit the budget; they can actually scrutinize that for the next six months, approve the budget,” he explained. “And then the oversight means the whole round of activity of their involvement in the budget process. They can call the Executive to explain what is happening. But Congress has no stamina to [do it]. Will they spend so much time? They have a lot of hearings, right?”

OBI scores

TO further improve the country’s budget oversight performance, Diokno said the oversight committee in Congress must have a strong independent staff equipped with resources to fully exercise its oversight function just like the one in the United States.

“It should not be dependent on who the speaker is. For example in the US, there is a Congressional Budget Office, or CBO, headed by an economist,” he said. “And [this CBO] is consulted by both [the Lower] House and the Senate. So the resources are focused on the CBO.”

For its part, the IBP recommended ensuring the legislature holds a debate on budget policy prior to the tabling of the Executive branch’s budget proposal and approval of recommendations for the upcoming budget. In addition, the IBP suggested making sure that the legislative committee examines reports on in-year budget implementation and publishes its recommendations online; and ensuring that audit processes are reviewed by an independent agency.

And since the IBP is just a few months away from publishing the results of the 2019 OBS, Pascua said the DBM is still optimistic that it would be able to achieve its “fearless forecast” for the Philippines to get an OBI score of at least 70.

That is higher than the score of 67 in the 2017 round and higher than the 2019 target of 67 under the “Philippine Development Plan 2017 to 2022.”

By 2021, the government is also hoping to get a higher OBI score than 71.

Legislative push

IN a bid to institutionalize budget reforms and to achieve the ambition of being one of the top 10 budget institutions in the world, the DBM under Diokno pushed for the passage of the Budget Reform Bill (BRB).

The BRB seeks to institutionalize the country’s shift to cash-based budgeting system, among other reforms.

As opposed to the obligation-based budgeting system, which allows the delivery of contracts beyond the fiscal year, the “revolutionary” shift to cash-based budgeting system is meant to shorten the time it takes for the implementation and disbursement of the national budget to just one year. Doing so would hasten the delivery of services to the public, the BRB advocates believe.

Diokno has since said that quicker implementation of programs and projects actively promotes growth and development in the economy and the country.

However, the BRB failed to hurdle the 17th Congress, as the shift to the new cash-based budgeting system from the old obligation-based budgeting system faced strong opposition from lawmakers. The opposition to the shift to cash-based budgeting, along with other issues on alleged budget insertions, also caused the delay in the passage of the 2019 national budget. The delay led to the country clocking slower economic growth rates in the first quarter and second quarter of 2019.

Even with a new secretary at its helm, the DBM is still determined to push for the modernization of the Philippine Financial Management System through the passage of BRB.

According to Pascua, the bill has been refiled by Rep. Rufus B. Rodriguez (Cagayan de Oro City, 2nd District) under House Bill 2807.

She said the DBM intends to refile a more streamlined version of the bill this year “to facilitate enactment.”

Nonetheless, Pascua said that while the government is still in a transition stage to cash-based budgeting system until 2022, she remains optimistic.

“The cash-based budgeting system is aimed to reduce underspending by setting a deadline for obligations and implementation of programs by departments,” she said.

Addressing weaknesses

PASCUA said they have seen a significant improvement in the budget utilization rate of agencies due to the shift to one-year obligation validity of appropriations in 2017 and 2018.  From 85 percent in 2015 to 2016, the agencies’ budget utilization rate improved to 93 percent to 96 percent in 2017 and 2018, she said.

Should the cash-based budgeting system be institutionalized, Pascua said this will address weak strategic and operational planning in agencies, including procurement planning which accounted for 50 percent of underspending in 2014.

Agencies will also now be focused on implementing one budget at a time compared to the previous system wherein they are implementing two budgets given the continuing appropriations.

“This also produces complications in our still manual accounting for expenditures, not to mention unpredictability in budget and cash management,” she said.

Pascua admits, though, that there are still agencies that need to adjust their systems on planning, procurement and budget execution in line with the cash-based budgeting system. Still, she said the DBM has been relentless in conducting training, including regional consultations on the new budgeting system since 2017.

Despite some politicians and contractors expressing concern about the repercussions of the shift to cash-based budgeting system such as being pressured to implement and complete the projects faster, Mendoza still supports the Executive’s move.

“[It’s a] good idea with some risks and some benefits, but it needs to be properly executed to bring out what we really want,” he said. “The main challenge with cash-based budgeting is really that some of the politicians who are used to [the old] method, they really want the present method. They don’t want to be pressured into [really delivering on the project].”

Sustaining reforms

REFORMS in the Philippine budgeting system have been applied through the years. However, changes appear to have been inconsistent, even for Diokno.

As the budget chief for two administrations, Diokno admitted that reforms, including some of those he spearheaded, were either forgotten or were not continued.

Recalling several personal experiences that he had in the past, he said it is not easy to push for reforms as there will always be some form of resistance.

“You have to be persistent. You have to persevere. It’s difficult to reform,” he said.

“Many will resist the reform you are pushing but you also need a champion. You need a president because if not, your reform would not push through,” he added.

For Mendoza, the budget system is a multi-administration reform project, noting that the political cycle in the country is only six years—which leads to technically three years to four years of reform.

“The best way to do is, to look at it from a continuous reform perspective,” he said. “So it’s better to build a constituency around it because politicians come and go but their constituency around a particular reform, they’re the ones who are supposed to understand.”

Image credits: Ognjen Stevanovic | Dreamstime.com


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