Distribution and Expenditures of Philippine National Budget

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Philippine National Budget•It is a financial plan to pursue priority

programs & projects of the government in line with its economic growth & human development thrusts.

• It is an instrument for good governance, as government agencies are accountable for the delivery of measurable results through their respective budgets.

The financial blueprint of the country’s development plan.

•To ensure that public resources are managed more efficiently and with the greatest degree of discipline.

•Under the Aquino administration, it seeks to bring the budget closer to the people, by channeling resources on programs that accelerate economic growth, but more importantly, to re-directs funds to programs that would be responsive to the needs of the people especially those in regions beset by poverty.

2011 National Budget•The 2011 Budget introduced reforms such

as ZERO-BASED BUDGETING to ensure that public funds were spent only for public purposes.

•These reforms were essential for restoring a cynical public’s trust in government.

The 2012 National Budget•The 2012 Budget addressed hiccups in

the budget implementation. •The mandate for the Budget was clear – to

ensure the delivery of the results outlined in the Aquino Social Contract.

2013 National Budget 2013 Budget – P 2.006T

•The 2013 budget empowered the Filipino people through tighter prioritization of their needs, faster delivery of results, and a more open budget process.

• It emphasized that the government exists to serve the Filipino people.

The 2014 Budget•All Filipinos must enjoy the prosperity that

comes with sustainable economic development. This is the thrust of the 2014 Budget.

•The 2014 Budget builds on the successes made possible by an honest and trustworthy government.

•It lays the foundation for inclusive development and sustains the momentum of reform.

•P2.268 TRILLION

2015 National Budget•The 2015 Budget for Inclusive and

Sustained Development.•Thus, the P2.606-trillion National Budget

provides more investments in poverty-reducing and job-generating interventions that enable inclusive and sustained growth.

•The government will spend about P25,700 for every Filipino or about P7.1 billion a day to provide services to all.

2016 National Budget

• VOTE. Fourteen senators voted in favor of the proposed P3 trillion national budget for 2016.

• The Senate approved on Thursday, November 26, the proposed P3-trillion ($63.66-billion) national budget for 2016.

• Out of the 15 senators present during the 3rd and final reading of the proposed appropriation bill, 14 voted in favor of it. Only one senator, Aquilino Pimentel III, voted against the proposal.

• The approved Senate budget bill now goes to the bicameral conference committee, where it will be reconciled with the version of the House of Representatives.

• As in the House version, the Department of Education (DepEd) still received the largest allocation in the Senate bill – P 411.89 billion ($8.74 billion), which is a 28% or P90-billion jump from P321 billion ($6.81 billion) in 2015.

• Senator Loren Legarda said the increase in the department's budget is aimed to support "the implementation of the senior high school curriculum under the K-12 program" next year.

• As for the Department of National Defense (DND), Senate approved a P116.2-billion ($2.47-billion) budget for the department. This allocation is higher than the P115.8-billion ($2.46-billion) budget approved by the House of Representatives for the defense department.

•The Senate version of the DND budget includes an additional P250 million ($5.31 million) for its quick response funds (QRF), and P150 million ($3.18 million) allocation for the Philippine Army to enhance the army’s intelligence funds and fund new machinery, equipment, and construction of buildings and other structures.

Section 22, Article VII of the 1987 Constitution sets the tone for the budgetary process.• Section 22, Article VII of the 1987 Constitution sets the tone

for the budgetary process. The procedure in the preparation of the national budget is regulated by law. On or before October 20 of each year, each department secretary submits to Department of Budget the estimated income and expenditures of the bureaus and offices under his department for the next fiscal year.

• Upon receipt of all budget estimates of income and expenditures, the Department of Budget and Management prepares the national budget. Prior to this, however, the Budget secretary can investigate, revise, examine, assemble, coordinate, and reduce or increase the budget estimates of the different departments, bureaus and offices of the government.

• After preparing the budget, the Budget secretary submits it to the President, who in turn submits it to Congress within 30 days before the opening of the regular session.

• The 1987 Constitution specifically provides that the President "shall submit to the Congress within thirty days from the opening of every regular session, as the basis of the general appropriations bill, budget of expenditures and sources of financing, including receipts from existing and proposed revenue measures" ( Sec. 22, Art. VI). Congress uses the budget submitted by the president as the basis for the annual appropriation.

• According to the 1987 Philippine Constitution, Congress "may not increase the appropriation recommended by the President for the operation of the Government as specified in the budget" (Sec. 25(1), Art. VI).

Budget Execution• This is where the people’s money actually spent.

As soon as the GAA is enacted, the government can implement its priority programs and projects. What are the Release Guidelines and Programs? What are the Budget Execution Documents? What is Allotment and Cash Release Programming What is Allotment Release? What are incurring Obligations What does GAA Allotment Release mean? What are Cash Allocation? What is Cash Disbursement?

Budget ExecutionRelease Guidelines and Program

•The budget execution phase begins with DBM’s issuance of guidelines on the release and utilization of funds.

• Agencies are required to submit their BEDs at the start of budget execution. These documents outline agency plans and performance targets. These BEDs include the physical and financial plan, monthly cash program, estimate of monthly income, and list of obligations that are not yet due and demandable.

Budget Execution Documents

• To ensure that releases fit the approved Fiscal Program, the DBM prepares an Allotment Release Program (ARP) to set a limit for allotments issued to an agency and on the aggregate.

• The ARP of each agency corresponds to the total amount of the agency- specific budget under the GAA, as well as Automatic Appropriations. A Cash Release Program (CRP) is also formulated alongside that to set a guide for disbursement levels for the year and for every month.

Allotment Release Programs

• Allotments, which authorize an agency to enter into an obligation, are either released by DBM to all agencies comprehensively through the Agency Budget Matrix (ABM) and individually via Special Allotment Release Orders (SAROs).

Allotment Release

• Agency Budget Matrix (ABM) This document disaggregates all programmed appropriations for each agency into two main expenditure categories: “not needing clearance” and “needing clearance.”

• The ABM is the comprehensive allotment release document for appropriations which do not need clearance, or those which have already been itemized and fleshed out in the GAA.

Allotment Release

• Allotment Release Orders (SAROs) Items identified as “needing clearance” are those which require the approval of the DBM or the President, as the case may be (for instance, lump sum funds and confidential and intelligence funds).

• For such items, an agency needs to submit a Special Budget Request to the DBM with supporting documents. Once approved, a SARO is issued.

Allotment Release

• In implementing programs, activities and projects, agencies incur liabilities on behalf of the government. Obligations are liabilities legally incurred, which the government will pay for.

• There are various ways that an agency “obligates:” for example, when it hires staff (an obligation to pay salaries), receives billings for the use of utilities, or enters into a contract with an entity for the supply of goods or services.

Incurring Obligation

GAA as Allotment Release• The Aquino Administration plans to design the annual

General Appropriations Act as the comprehensive allotment release document itself. This is being pursued in order to significantly speed-up the process of releasing the Budget and implementing the programs and projects that it funds.

• The 2013 National Budget, currently being prepared, is being designed in such way. This entails the disaggregation of all budget items into full detail, as well as the elimination of all lump-sum funds, save for a few exceptions such as the Calamity Fund. In other words, this reform significantly reduces the need for SAROs.

Cash Allocation•To authorize an agency to

pay the obligations it incurs, DBM issues a disbursement authority.

•Most of the time, it takes the form of a Notice of Cash Allocation (NCA); and in special cases, the Non-Cash Availment Authority (NCAA) and Cash Disbursement Ceiling (CDC).

Cash Allocation• This is a cash authority issued

periodically by the DBM to the operating units of agencies to cover their cash requirements.

• The NCA specifies the maximum amount of cash that can be withdrawn from a government servicing bank for the period indicated.

• The release of NCAs by DBM is based on an agency’s submission of its Monthly Cash Program and other required documents.

Cash Allocation• Others Disbursement Authorities.• In contrast to NCAs, Non-Cash

Availment Authority (NCAA) are issued to authorize non- cash disbursements.

• Cash Disbursement Ceiling (CDC) are meanwhile issued to departments with overseas operations, allowing them to use income collected by their foreign posts for their operating requirements.

Disbursement• This is the final step of the budget execution

phase, where government monies are actually spent. The Modified Disbursement Scheme is mostly used, where disbursements of national government agencies chargeable against the Treasury are made through government servicing banks, such as the Land Bank of the Philippines.

• The budget process, of course, does not end when government agencies spend public funds: each and every peso must be accounted for to ensure that is used properly, contributing to the achievement of socio-economic goals.

Budget Expenditure •Budget expenditure refers to the

estimated expenditure of the government during a given fiscal year.

•The budget expenditure can be broadly categorized as: ▫Revenue Expenditure▫ Capital Expenditure

• Revenue Expenditure refers to the expenditure which neither creates any asset nor causes any reduction in any liability of the government. It is recurring in nature.

• It is incurred on normal functioning of the government. Examples: Payment of salaries, pensions, interests, etc. An expenditure is a revenue expenditure,

• if it satisfies the following two essential condition: a. The expenditure must not create an asset of the

government. b. The expenditure must not cause decrease in an liability.

• Capital Expenditure refers to the expenditure which either creates an asset or causes a reduction in the liabilities of the government. It is non-recurring in nature. It adds to capital stock of the economy and increases its productivity through expenditure on long period development programmes.

• Examples: Loan to states and Union Territories, etc. An expenditure is a capital expenditure,

• if it satisfies any one of the following two conditions:1. The expenditure must create an asset for the

government.2. The expenditure must cause a decrease in the

liabilities.

The 2015 Budget for Inclusive and Sustained Development

• The National Budget is the government’s annual plan to achieve the country’s development goals. It spells out:

How much will be collected Borrowed and spent for

• programs, activities, and projects that will be implemented during the year. Aside from the financial allocations, the Budget also identifies the performance targets of government agencies

•Video Presentation – National Budget 2015

The 2015 Budget for Inclusive and Sustained Development• Thus, the P2.606-trillion National Budget

provides more investments in poverty-reducing and job-generating interventions that enable inclusive and sustained growth.

• The government will spend about P25,700 for every Filipino or about P7.1 billion a day to provide services to all

• This Budget, equivalent to 18.4 percent of GDP, provides greater resources for services that empower the poor and marginalized. About P64 in P100 will go to social and economic services such as education, healthcare, and infrastructure.

SECTORAL ALLOCATIONS • Social services are amply supported under the 2015 GAA, with

major social welfare protection and development programs getting sizeable budgets for next year. The Administration’s flagship anti-poverty program, the Pantawid Pamilyang Pilipino Program (4Ps), corners P62.3 billion in next year’s National Budget to address the needs of 4.3 million families in need.

• Other major allocations under the 2015 GAA include P53.9 billion for Basic Education Facilities, which covers the respective construction and repair of 31,728 classrooms and 9,500 classrooms, as well as the development of 13,586 water and sanitation facilities, and the procurement of 1.3 million seats.

• At the same time, Philhealth premium subsidies get P37.1 billion of the total budget to benefit 15.4 million poor and near-poor families, while P11 billion will be directed to socialized housing for in-need families, particularly those living in danger zones or high-risk areas.

• Economic services are still a major driver in the President’s inclusive growth campaign, as the Administration devotes about 4 percent of the total budget to strategic infrastructure programs. Comprising this are P185.8 billion for the development of national roads and bridges, as well as P10.6 billion to improve the country’s railway systems (including the rehabilitation of LRT Lines 1 and 2 and subsidies to MRT 3), among others.

• At the same time, P89.1 billion will go towards boosting agricultural production projects under the Department of Agriculture and its attached agencies and various government-owned or -controlled corporations.

• Various programs and projects for climate change adaptation and mitigation are a major focal point in the Administration’s development strategy. To this end, P14 billion has been devoted to the Calamity Fund—now known as the National Disaster Risk Reduction and Management Fund—while another P6.7 billion has been tagged as Quick Response Funds. Meanwhile, the Aquino administration’s “Build Back Better” program—designed to address the recovery requirements in the aftermath of Super Typhoon Yolanda and other previous calamities—will get 21.7 billion for 2015.

Funding the 2015 BudgetThrough the 2015 Budget, the government plans to increase disbursements by 21.1 percent to support programs and projects that support inclusive development. Revenues will be increased by about 19.2 percent in order to keep the fiscal deficit within 2 percent of GDP.The National Government Fiscal Program, 2009-2015

Overview of the 2015 Expenditure ProgramThe Budget by Sector, 2005 to 2015

• The Budget by Sector, 2005 to 2015• A decade ago, debt servicing took the lion’s share of

total government spending. Today, more than half of the Budget is allocated for social and economic services

• Social Services received the largest share of the Budget at 36.6 percent to provide adequate social protection for the poor and vulnerable, and to increase investments in basic education, universal healthcare, and other social services. Within this sector, Education, Culture, and Manpower Development receive the largest allocation

Social Services (in billion pesos) 952.7

Education, Culture & Manpower Development 453.0

Health 96.3

Education, Culture & Manpower Development 246.7

Housing & Community Development 10.3

Others (incl. Land Distribution & LGU Subsidy) 146.3

•Economic Services grew by 19.2 percent from its allocation in 2014— faster than the year-on-year growth of the total Budget for 2015—to hike investments in public infrastructure and to help boost the productivity of agriculture, manufacturing, tourism, and other job—and livelihood—generating industries.

Economic Services (in billion pesos)

Agriculture & Agrarian Reform 114.5Natural Resources & Environment

Water Resources Development & Flood Control

Communications, Roads, & Other Transport

Others (incl. Trade, Tourism, Energy, LGU Subsidy)

•General Public Services at 16.5 percent of the total Budget will be used for general administration activities, such as fiscal management, foreign affairs, public order and safety, among others.

•Defense spending grew by 29.4 percent from 2014 to pursue the modernization of the Armed Forces and boost its capability to ensure national security, stability, and peace throughout the nation.

Budget by Expense Class, 2013-2015

• Maintenance and Other Operating Expenditures (MOOE) are for the purchase of goods and services (e.g. supplies, maintenance, professional services) needed for the operation of various government programs. The 2015 Budget allocated P465 billion for MOOEs: an increase of 12 percent from 2014 level.

Infrastructure and Other Capital Outlays for roads,bridges, airports, railways, and other public goodsneeded by industries to increase their productivity,reduce costs, and create more jobs. For 2015, P638.7billion will be invested in infrastructure and other capitalspending, an increase of 34.2 percent over that of 2014.

• Government needs people and facilities to put these developmental endeavors into action. As such, the 2015 Budget set aside P746 billion for Personnel Services—the largest share of the Budget at 28.6 percent—for the salaries and benefits of government employee

The national government also provides Allocations for Local Government Units (LGUs), representing their shares from the national government revenues as mandated by law, as well as including allocations for MMDA and Local Government Support Fund. For 2015, this allocation amounts to P423.3 billion or 16 percent of the Budget. Of this amount, P389.9 billion was allotted for the Internal Revenue Allotment.

The national government Provides Budgetary Support to Government Owned or –Controlled Corporations (GOCCs), especially for those implementing priority programs of the national government. Total budgetary support to GOCCs in 2015 amounts to P90.3 billion for subsidies, equity infusion, and net lending to advance the payment of national government-guaranteed GOCC debt.

A significant amount of the Budget was allocated for Interest Payments to service government’s outstanding debt. Through the government’s debt management efforts, the share of interest payments from the Budget has decreased to 14.3 percent or P372.9 billion, from 20 percent in 2010.

Special Purpose Funds (SPFs)

On top of their regular budgets, departments and agencies are also provided additional funds sourced from Special Purpose Funds (SPFs). These are budgetary items in the General Appropriations Act (GAA) for specific purposes, such as disaster response, personnel benefits and pensions, or support to government corporations. Most SPFs are presented in the GAA in detail, such as Budgetary Support to Government Corporations which is disaggregated per recipient and program or project. Meanwhile, some SPFs, like the Calamity Fund, are lump sum in nature as the specific programs or projects to be funded are only identified during budget execution.

Disaggregated SPFs• Miscellaneous Personnel Benefits Fund—payment of

government personnel-related expenditures, such as Performance-Based Bonuses, requirements for the filling up of authorized positions, and for the creation of new positions, etc.

• Pension and Gratuity Fund— payment of pensions of uniformed government personnel (e.g., police and military), which are fully subsidized by the national government; retirement and terminal leave benefits; separation benefits and incentives, etc.

• International Commitments Fund—allocation for government’s commitments and pledges to international organizations, such as the United Nations and Open Government Partnership; and the hosting of conferences such as the 2015 Asia-Pacific Economic Cooperation (APEC) Meeting.

Disaggregated SPFs•Budgetary Support to Government

Corporations—assistance to government-owned and/or controlled corporations (GOCCs) through subsidies and equity infusion.

•E-Government Fund—allocation for strategic information and communications technology projects that enhance transparency and efficiency in the government.

Lump Sum SPFs• National Disaster Risk Reduction and Management Fund—formerly

the Calamity Fund, this is made available to enable government to respond to calamities and other disasters, which are hard to predict. Releases may only be made upon the recommendation of the National Disaster Risk Reduction and Management Council, and the approval of the President. The P14 billion allocation for NDRRMF includes P1 billion for the People’s Survival Fund (PSF)

• Rehabilitation and Reconstruction Fund—allocation for the rehabilitation and reconstruction of areas affected by recent calamities.

• Allocation to Local Government Units (ALGU)—subsidy given to local government units (LGUs) corresponding to their legal shares in national revenue collections. The ALGU also includes the budget of the Metropolitan Manila Development Authority (MMDA).

• Contingent Fund—allocation used for requirements of new and/or urgent projects and activities that need to be implemented during the year. Releases from this fund require prior approval of the President.

• Automatic Appropriations ▫ Automatic appropriations are authorizations made by

law or other legislative enactment that do not require periodic action by Congress. Automatic appropriations comprise 33 percent or P866.2 billion of the 2015 National Budget. SPFs that are automatically appropriated comprise 68 percent or P816 billion, bulk of which are for Internal Revenue Allotment for LGUs and Interest Payments.

• Unprogrammed Appropriations▫ These accounts are standby appropriations that can

only be used when there are windfall revenues in excess of the government’s revenue program for the year.

Priority Programs•The National Budget for 2015 focuses on

these goals: give adequate social protection and basic social services to the poor; support industries that create more jobs and livelihood opportunities; protect vulnerable communities from natural disasters; and bring development and good governance to communities.

A. Social Protection and Social Services• As an inclusive economy is being

created, the government invests in building the capacity of the poor to enable them to participate by expanding social protection and social services, such as universal healthcare, education, and housing.

B. Economic Expansion and Job GenerationTo create an inclusive economy calls for sustaining the country’s high economic growth in a way that creates more jobs and livelihood opportunities. This Budget invests in strategic support to key sectors, such as transportation, manufacturing, tourism, andagriculture.

C. Climate Change and Disaster Risk ReductionThe impact of climate change is a real threat to economic progress. Thus, this Budget invests in building the capability of government to respond to climate change and mitigate the cost of disasters, as well as to build back vulnerable communities better and safer.

D. Enabling Environment for Inclusive DevelopmentDevelopment gravitates to communities when there is peace and rule of law, and where good governance is present. This Budget sustains government policiesand investments in establishing an environment that supports inclusive development.

Priority Development Assistance Fund scam•The Priority Development Assistance Fund

scam, also called the PDAF scam or the pork barrel scam, is a political scandal involving the alleged misuse by several members of the Congress of the Philippines of their Priority Development Assistance Fund (PDAF, popularly called "pork barrel"), a lump-sum discretionary fund granted to each member of Congress for spending on priority development projects of the Philippine government, mostly on the local level.

Priority Development Assistance Fund scam•It is estimated that the Philippine

government was defrauded of some ₱10 billion in the course of the scam,[1] having been diverted to Napoles, participating members of Congress and other government officials. Aside from the PDAF and the fertilizer fund maintained by the Department of Agriculture, around ₱900 million in royalties earned from the Malampaya gas field were also lost to the scam

• the PDAF in its current form was only established during the administration of Corazon Aquino with the creation of the Countrywide Development Fund (CDF) in 1990. With ₱2.3 billion in initial funding, the CDF was designed to allow legislators to fund small-scale infrastructure or community projects which fell outside the scope of the national infrastructure program, which was often restricted to large infrastructure items. The CDF was later renamed the PDAF in 2000, during the administration of Joseph Estrada.

Priority Development Assistance Fund scam• Since 2008, every member of the House of Representatives

usually receives an annual PDAF allocation of ₱70 million, while every senator receives an annual allocation of ₱200 million.[8] The President also benefits from a PDAF-like allocation, the President's Social Fund (PSF), worth around ₱1 billion. Contrary to public belief, however, PDAF allocations are not actually released to members of Congress. Rather, disbursements under the PDAF are coursed via implementing agencies of the Philippine government, and are limited to "soft" and "hard" projects: the former largely referring to non-infrastructure projects (such as scholarships and financial assistance programs, although small infrastructure projects are also considered "soft" projects), and the latter referring to infrastructure projects which would be coursed via the Department of Public Works and Highways

Modus Operandi• The PDAF or Pork Barrel Scam involved the funding of "ghost

projects" that were funded using the PDAF funds of participating lawmakers.[15] These projects were in turn "implemented" through Napoles' companies, with the projects producing no tangible output. According to testimony provided by Benhur Luy's brother, Arthur, funds would be processed through fake foundations and non-governmental organizations (NGOs) established under the wing of the JLN Group of Companies, the holding company of Janet Lim-Napoles, with Napoles' employees—even a nanny—named as incorporators or directors.[16] Each foundation or NGO served as an official recipient of a particular legislator's PDAF funds, and each organization had a number of bank accounts where PDAF funds would be deposited for the implementation of these projects.

Modus Operandi• Napoles, who specialized in trading agricultural products, frequently used

the procurement of agricultural inputs in the propagation of the scam. Either her employees would write to legislators requesting for funds for the implementation of a particular project (e.g. farm inputs), or a legislator would indicate to the DBM a particular recipient agency for his or her PDAF funds that would be pre-selected by Napoles.[17] Once received, this is forwarded to the DBM, which would then issue a Special Allotment Release Order (SARO) indicating the amount deducted from the legislator's PDAF allocation, and later a Notice of Cash Allocation (NCA) given to the recipient agency. The NCA would then be deposited in one of the foundation's accounts, and the funds withdrawn in favor of the JLN Group of Companies.[16] The funds would then be split between Napoles, the lawmaker, the official of the DA responsible for facilitating the transfer of funds and, for good measure, the local mayor or governor.[15] The JLN Group of Companies offered a commission of 10-15% against funds released to local government units and recipient agencies of PDAF funds, while a legislator would receive a commission of between 40-50% against the total value of his/her PDAF.

Accused Parties• In the initial report published by the Philippine Daily

Inquirer, 28 members of Congress (five senators and 23 representatives) were named as participants in the PDAF scam. Twelve of these legislators were identified by the newspaper, and close to ₱3 billion in PDAF funds coming from these legislators alone were exposed to the scam. Notably, the Inquirer named Bong Revilla, Juan Ponce Enrile, Jinggoy Estrada, Ferdinand Marcos, Jr. and Gregorio Honasan as the five senators who participated in the scam. Revilla was the largest contributor among the 28 legislators, with around ₱1.015 billion of his PDAF funds being transferred to organizations identified with the JLN Group of Companies, although the extent to which legislators participated in the scam varied widely

Online Sources•http://www.slideshare.net/kushagraarora9

27/ppt-on-government-budget•http://www.dbm.gov.ph/?page_id=12436•http://www.slideshare.net/ZERODELTA/bu

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