REFORMING THE PHILIPPINE BUDGETING SYSTEM

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1 REFORMING THE PHILIPPINE BUDGETING SYSTEM THE 2019 NATIONAL BUDGET A Modern and Open Cash-Based Budget for Disciplined, Accountable, and Faster Service Delivery

2 P BRIEFER ON THE FY 2019 PROPOSED NATIONAL BUDGET 1 P Annual Cash-Based Budgeting: A First in Philippine Budgeting FY 2019 marks the shift to the first annual cash-based budget of the Philippine government. Under this system, all government programs and projects budgeted for the fiscal year should be implemented and delivered within the same fiscal year. Goods and services delivered, inspected, and accepted until the end of the fiscal year will be settled within the same year, up to the 3-month period following the end of the fiscal year, or the Extended Payment Period (EPP).?? Why is the shift to annual cash-based budgeting necessary? 1 It promotes discipline among agencies because only the programs and projects which are shovel-ready, or those ready for implementation, are included in the budget. Hence, it requires better planning, early procurement, and greater coordination among agencies. It spurs action from the agencies and more active management of budgetary resources. 2 It raises the credibility of the government with its suppliers and contractors by ensuring that the payment of contractual obligations which are scheduled to be delivered in the fiscal year are reflected in the Budget and that the payments of those deliverables accepted are settled within the year up to the EPP. 3 4 It supports the government s expansionary policy by addressing underspending, enabling it to double expenditures for infrastructure services and expand social services from 30% to 40% of the Budget from 2017 to These will support the government s growth target of 7-8% during this period. It modernizes our budgeting system and raises it to international standards.

3 2 DEPARTMENT OF BUDGET AND MANAGEMENT How did the shift to an annual cash-based budget affect the 2019 Proposed National Budget? It made the 2019 Proposed Budget Disciplined Accountable Because bigger is not always better! Agency performance will not be based on the contracts awarded or obligated (but which cannot always be delivered), but on programs and projects implemented and outputs delivered and paid for during the fiscal year. Obligations are intentions, cash disbursements mean outputs. The graph below, which illustrates the budget utilization rates of 3 major departments for the period , shows that appropriated budgets have not been fully utilized by these agencies. Thus, under the 2019 cash-based budget, agency budgets were based on the agency s absorptive capacity, and the readiness of their targetted programs/ projects to be implemented within the fiscal year. The 2019 Budget is consistent with the Administration s goal of becoming an upper middle-income and globally competitive economy by 2022 and reducing the national poverty incidence from 21.6% in 2015 to 14.0% by An Instrument for Faster Service Delivery The confusing pile up of undelivered obligations under the current system will stop, as agencies will be pushed to deliver their programs and projects within the oneyear horizon. Otherwise, their cash appropriations will revert to the Treasury and will need to be reappropriated. P Budget Utilization Rates of 3 Major Departments, Obligation Rate: ratio of obligations to appropriations Disbursement Rate: ratio of disbursements to appropriations DepEd DPWH DOH 2013 DepEd DPWH DOH DepEd DPWH DOH DepEd DPWH DOH DepEd DPWH DOH 2017

4 BRIEFER ON THE FY 2019 PROPOSED NATIONAL BUDGET 3 How is the annual cash-based budgeting system different from the previously used obligation-based budgeting system? OBLIGATION-BASED BUDGETING ANNUAL CASH-BASED BUDGETING Time Horizon / Period of Implementation Contracts awarded within the fiscal year can be delivered even after the end of the year. Contracts intended to be implemented for the fiscal year should be fully delivered, inspected, and accepted by the end of the fiscal year. Obligation-based Appropriations (24 months & beyond) Jan 1 FY FY + 1 Dec 31 / Jan 1 Dec 31 Cash-based Appropriations (12 months) Jan 1 FY Dec 31 Period of Payment Inspection, verification, and payment is done within and beyond the end of the fiscal year. Payment is done within the fiscal year and up to a three-month Extended Payment Period (EPP) after the fiscal year for goods and services accepted by December 31 of the fiscal year. Obligation-based Appropriations (24 months & beyond) Jan 1 FY FY + 1 Dec 31 / Jan 1 Dec 31 Jan 1 Cash-based Appropriations (15 months) FY Dec 31 Mar 31 Extended Payment Period (EPP)

5 4 DEPARTMENT OF BUDGET AND MANAGEMENT Given these major differences, is the 2019 cash-based budget comparable with the 2018 obligation-based budget? Comparing the 2019 cash-based budget with the 2018 obligation-based budget is like comparing apples with oranges. To have an apple-to-apple comparison, the 2019 Budget should be compared with the cash-based equivalent of the 2018 Budget. = 2018 CASH-BASED EQUIVALENT BUDGET 2019 CASH-BASED BUDGET = 2018 OBLIGATION-BASED BUDGET 2019 CASH-BASED BUDGET The cash-basedw equivalent of the 2018 obligation-based budget is derived from the Monthly Disbursement Program (MDP) submitted by agencies and removing the prior years payments for accounts payable from these. This leaves the cash disbursements estimated to be made by the agency for the current year s budget. P P The succeeding figures and tables show the apple-to-apple comparison of the 2018 and 2019 Budgets. PhP3.324 Trillion P 2018 Adjusted MDP 13.0% PhP3.757 Trillion P 2019 Proposed Budget

6 Annex 5 BRIEFER ON THE FY 2019 PROPOSED NATIONAL BUDGET Top Ten Departments/Recipients in billion Pesos 2018 MDP (Cash-based equivalent) DEPARTMENT/ RECIPIENT Rank INCREASE/ DECREASE (Cash-based) Rank % Education (DepEd, SUCs, CHED, TESDA) DPWH / DILG DND DSWD3/ DOH4/ DOTr DA Judiciary ARMM / Includes projected Current Year s Accounts Payable to be paid in / Includes provision for Unconditional Cash Transfer lodged under the Land Bank of the Philippines 4/ Includes budget of the Philippine Health Insurance Corporation Budget of Departments/Agencies, in million Pesos Department/Agency % CONGRESS 18, , , Senate 5, , , SET CA HOR 11, , HET , , , , OP The President s Offices OVP 2018 MDP

7 6 DEPARTMENT OF BUDGET AND MANAGEMENT (in million Pesos) Department/Agency % DAR 9, , DA 50, , , , , ACPC 1, , , BFAR 5, , NMIS PCC Philmech PFIDA PCAF , , , , , , DBM GPPB-TSO DepEd 470, , , , , , NBDB NCCT NM PHSA ECCDC , , , SUCs DOE 2, , DENR 23, , , , , , EMB 2, , MGB 1, , NAMRIA 1, , NWRB PCSDS , , , , BOC 3, , BIR 8, , DOF BLGF 2018 MDP

8 Department/Agency 2018 MDP BRIEFER ON THE FY 2019 PROPOSED NATIONAL BUDGET (in million Pesos) % BTR 1, , , CBAA IC NTRC PMO SEC DFA 14, , , , , , FSI TCCP UNESCO DOH 99, , , , , , POPCOM NNC DICT 4, , , , CICC NPC NTC DILG 172, , , , , , BFP 15, , , BJMP 14, , , LGA NAPOLCOM 1, , PNP 132, , , PPSC 1, , DOJ 19, , , , , BC 2, , BI , LRA 1, , NBI 1, , OGCC

9 8 DEPARTMENT OF BUDGET AND MANAGEMENT (in million Pesos) Department/Agency 2018 MDP % OSG 1, , PPA PCGG , , , , , , , , , NLRC 1, , NMP NWPC OWWA , POEA PRC , , , , , , PAO DOLE ILS NCMB DND DND-Level Central Adm. & Support GA NDCP OCD PVAO PVAO-Proper VMMC , , , , , , , , AFP 99, , , PA 61, , , PAF 16, , , PN 21, , , Joint Level Central Adm. & Support 31, , , GHQ DPWH DOST 31, , , ,829.7* 555, , , , , , *includes projected Current Year Accounts Payable to be paid in 2019

10 BRIEFER ON THE FY 2019 PROPOSED NATIONAL BUDGET (in million Pesos) 9 Department/Agency 2018 MDP % ASTI FNRI FPRDI ITDI MIRDC NAST NRCP PAGASA , PCAANRRD (PCAMRD + PCAFNRRD) 1, , PCHRD PCIEETRD (PCIERD + PCAS- TRD) PIVS PNRI PSHS 3, , PTRI SEI 3, , STII TAPI DSWD 139, , , , , , CWC ICAB NCDA JJWC DOT 3, , , , IA NPDC DTI 6, , , , BOI PTTC

11 10 DEPARTMENT OF BUDGET AND MANAGEMENT (in million Pesos) Department/Agency DCP CIAP DOTr CAB MARINA OTC % , , , , , , , OTS 1, , PCG 13, , , TRB , , , , , PPPCP PSRTI TARIFF , , , NEDA ODG PNVSCA PSA PCOO 1, , PCOO-Proper BBS BCS NPO NIB PIA PBS-RTVM , , , CCC CFO CDA OEOs AMLC CHED 2018 MDP 48, , , CFL DDB ERC

12 Department/Agency 2018 MDP BRIEFER ON THE FY 2019 PROPOSED NATIONAL BUDGET (in million Pesos) % FPA FDCP GAB GCGOCC HLURB HUDCC MDA MTRCB NAPC NCCA 1, , NCCA Proper NHCP (NHI) NLP NAP (RMAO) NCIP 1, , NCMF (OMA) NICA NSC NYC OPAPP OMB (VRB) PRRC PCW (NCRFW) PCC PDEA 2, , PHILRACOM PSC PCUP PLLO PMS TESDA 4, , , ARMM 24, , , JLEC

13 12 DEPARTMENT OF BUDGET AND MANAGEMENT (in million Pesos) Department/Agency JUDICIARY % 35, , , , , , PET SB CA 2, , SCPLC CTA , , , , COA 12, , COMELEC 16, , , , , CSC CSC-Proper CESB OMBUDSMAN CHR TOTAL 2018 MDP ,942, ,260, , Note: Figures may not add up due to rounding off.

14 Produced by Printed by An agency under the supervision and control of the Presidential Communications Operations Office

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