Legarda: Better Services for the People Thru Budget Reform Act

Senator Loren Legarda today said that Filipinos can expect a more efficient and effective delivery of services by the government through the proposed Budget Reform Act.

In her sponsorship speech of Senate Bill No. 1761, Legarda, Chair of the Senate Committee on Finance, said that aside from institutionalizing reforms that are meant to cure a number of weaknesses in our public financial management (PFM) system, the proposed measure will also provide the necessary mechanisms to help achieve higher economic growth and reduce poverty incidence in the country.

“The Budget Reform Act will help achieve the Administration’s goals of propelling the economy to grow at 7% to 8% from 2018 to 2022, putting the country into upper-middle income status by 2022, and reducing the poverty incidence from 21.6% in 2015 to 14% by 2022,” Legarda said.

To achieve these goals, the Administration has adopted an expansionary fiscal policy, investing heavily in infrastructure development via its “Build, Build, Build” Program, targeting total infrastructure spending to reach 7.3% of GDP by 2022.

Legarda said that the “Build, Build, Build” Program does not only refer to physical structures but also a tool to transform people’s lives by ensuring that their development needs are met so that they become more productive and rightly share in the overall progress of the country.

“This Budget Reform Act, if enacted, can be a powerful tool to bring these goals to fruition as it incorporates globally-recognized PFM principles and practices that could ensure that funds are carefully managed and used, and that the right goods and services are delivered to their potential beneficiaries at the right place and at the right time,” she stressed.

Legarda added that the “exponential rise in the planned infrastructure spending would need a modern, efficient and transparent budget system.

She explained that the Budget Reform Act will address the country’s PFM weaknesses, such as weak linkage of the plan with the budget, slow budget execution, weak budget reliability, delays in the submission of reports due to manual recording of transactions, and ambiguity in the definition and use of savings.

“The biggest change that this proposed measure will effect on the budgeting landscape is the shift from a two-year obligation-based budget to an annual cash-based budget,” Legarda said, noting that the Philippines is the only country in the world that has a two-year obligation based budget system.

Under an annual cash-based budget system, contractual obligations incurred by the government for a particular year may not go beyond that fiscal year. Payments should be made for goods and services delivered, inspected and accepted within the fiscal year, with up to a three-month Extended Payment Period.

“This new system will result in better planning of programs and projects by government agencies, reduced underspending, greater focus on implementation, and will foster a better business environment,” Legarda explained.

The bill also clarifies the use of savings. The new definition of savings is made consistent with the Supreme Court ruling on the Disbursement Acceleration Program (DAP).

Savings will now be limited to released but unobligated appropriations that result from (1) completion, final discontinuance, or abandonment of an activity or project; and (2) implementation of efficiency measures resulting in the delivery of the required or planned targets at a lesser cost.

Moreover, the Miscellaneous Personnel Benefits Fund (MPBF) cannot be declared as savings as it pertains to unreleased appropriations and composed purely of personal services items. With this reform, the controversial Dengvaxia deal will never happen again.

Legarda also said that the Budget Reform Act “will give importance to the voice of the people” through the establishment and implementation of participatory budget mechanisms in all phases of the budget cycle for wider citizen engagement.

The public will also have greater access to public financial information, as the bill would require posting of all documents and reports in the government website. The DBM will be mandated to publish the “People’s Budget,” a citizen-friendly summary of the government’s fiscal policies and expenditure priorities.

Legarda also said that the Budget Reform Act intends to strengthen Congress’ power of the purse so it can review and approve proposed appropriations based on the targeted and actual performance of agencies.

“This is to ensure that we give enough budget to all agencies—no overspilling, no underspending. Congress will have the authority to limit the use of savings and strengthen accountability and transparency of our budget. Savings can only be used for the right purposes and reasonable situations. Congress will also have a stronger power to prevent abuses of a re-enacted budget. Only in extraordinary times, should we resort to the re-enactment of the budget,” she added.

Legarda said that the main goal of the proposed measure is to modernize the Philippine budgeting system “to make it advanced, credible, and compliant with international best practices.”

Such need for innovations and technology-supported systems gave birth to, among others, the Budget and Treasury Management System (BTMS) which will later lead to the Integrated Financial Management Information System (IFMIS), Unified Accounts Code Structure (UACS), and the Treasury Single Account (TSA) for better cash management.

The IFMIS, once developed, will fully automate the country’s financial management information system, and will be the single portal for all financial operations by all government agencies. This will enable timely and more transparent reports on government transactions, which can be used for management decision-making.

The UACS fortifies the use of an important accounts coding system for all appropriations in the General Appropriations Act (GAA), as well as all government transactions. This will facilitate and harmonize the budgeting, accounting, auditing, and reporting of all government financial transactions.

The TSA, a tool for consolidating and managing the government’s cash resources, will also be institutionalized. This initiative has been crucial in lessening borrowings, and progressively bringing down the share of the budget allocated for interest payments, and give way to more spending for infrastructure and social services.

“The prospect of a modern, efficient and open budget system is not an empty dream. It is within our grasp. The Executive Department has adopted reform measures that have catapulted the Philippines to be one of the best performing budget institutions in the world. But these reforms are not permanent. This bill seeks to set these reforms into law, so that the next President will be constrained from slipping back into the slow, weak and opaque budget system,” Legarda concluded.