Legarda Hopes Cash-Based Budget Will Address Underspending

August 7, 2018

Senator Loren Legarda today said she hopes that the shift from obligation-based to annual cash-based appropriations starting with the 2019 national budget will result in improved delivery of basic services to the people and address underspending.

“We only want to ensure that goods and services reach the people, especially those who are most in need. But for years, underspending has plagued the government. Agencies cite several reasons like failure of bidding, unreleased funds, and low absorptive capacity, among others. We hope that this cash-based budget would indeed address underspending,” said Legarda, Chair of the Senate Committee on Finance.

According to the Department of Budget and Management (DBM), underspending in 2014 and 2015 was at 13% in both years, with combined amount of Php631 Billion.

Although government spending improved in 2016 when underspending rate was reduced to 4% and in 2017 at 3%, Legarda said that these still translate to billions of unspent funds—Php96.3 Billion for 2016 and Php85.2 Billion for 2017.

During the Development Budget Coordination Committee (DBCC) briefing on the proposed Php3.757 Trillion 2019 National Budget held at the Senate today, DBM Secretary Benjamin Diokno, together with Department of Finance (DOF) Secretary Carlos Dominguez, National Economic and Development Authority (NEDA) Secretary Ernesto Pernia, and Bangko Sentral ng Pilipinas (BSP) Governor Nestor Espenilla, presented the highlights of the country’s first cash-based budget.

Secretary Diokno explained that shifting to annual cash-based appropriations aims to minimize and gradually eliminate underspending, which actually means the inability of agencies to translate funds to beneficial public goods and services.

An annual cash-based budget system means that agencies do not only obligate or award contracts for programs, activities and projects, but also ensure actual and full delivery of goods and services within the fiscal year.

“Every year, we tell agencies to examine their budget proposals vis-à-vis their absorptive capacity and to submit a more realistic budget. With the implementation of an annual cash-based budget for 2019, we expect that agencies would now present only programs that they can fully implement within the one-year time frame,” said Legarda.

“As we review the proposed 2019 national budget, our aim is to further help government efficiently spend public funds and deliver basic services to the Filipino people,” Legarda concluded.