Government to implement cash-based budgeting

MANILA, Philippines — President Rodrigo Duterte is bent on implementing cash-based budgeting but will allow the implementation of and payment for infrastructure projects until next year because of delays in the passage of the 2019 budget and the election ban. 

Under a cash-based budgeting, cash has to be spent within a year with a grace period of three months at most. The government previously adopted an obligation-based budgeting, where payments are released as commitments or obligations.

Under the previous system, contracts can be delivered even after the year it was awarded. 

Economic managers have claimed the shift to annual cash-based budgeting would speed up the delivery and completion of government programs and projects.

'Significant gaps'

In his veto message for the 2019 budget, Duterte said there were "significant gaps" between the actual expenditure outturns and the annual appropriations from 2014 to 2016. 

"The dismal spending of agencies translated to billions of pesos delayed and foregone public services which should have been delivered to the general public. This is unacceptable given my administration’s commitment to the Filipino people that they will reap, as soon as possible, the benefits of the taxes they have paid," the president said. 

To address the gaps, Duterte said he would implement the cash-based budgeting to hasten the delivery of public services. The system, however, would not be enforced strictly this year because of the delayed approval of this year's national budget and the election ban on public works.

"Concomitantly, let me emphasize that pursuant to the Administrative Code of 1987, I shall mandate the implementation of an operational cash budget for FY (fiscal year) 2019 to ensure the availability of cash resources for priority development projects, and speed up the delivery of basic services," the president said.

"Nevertheless, in view of the delayed passage of the FY 2019 GAA (General Appropriations Act) and the election ban in connection with the conduct of the May 13, 2019 national and local elections, we will allow the implementation of and payment for infrastructure projects until December 31, 2020, provided that the funds for the purpose are obligated not later than December 31, 2019," he added. 

Duterte said the rule would also apply to subsidies given to government-owned and controlled corporations for infrastructure projects. 

Some lawmakers had expressed concerns over the cash-based budgeting, saying it might reduce the budget for their districts and affect multi-year projects. The budget department has insisted that the new budgeting system would reduce underspending. 

Cabinet Secretary Karlo Nograles said the cash-based budgeting would promote fiscal discipline. He said the executive branch would seek to strictly implement the system next year. 

"In its truest sense, this is not the strictest cash-based (budgeting). (Under the system), anything not obligated, that can no longer be spent," Nograles said during the Kapihan Sa Manila Bay media forum on Wednesday. 
 
"What happened was the full implementation of the strict cash-based budgeting was delayed. Obviously we will try again (to implement the) strict cash-based budgeting," he added.  

Vetoed items

The president has vetoed P95.37 billion worth of public works projects that are not part of his administration's priorities. 

Of the projects vetoed, P10.5 billion had were allotted for buildings and other structures, P24.04 billion were allocated for flood control and drainage, P17.16 billion were supposed to fund national roads and bridges, P42.61 billion were allotted for local roads and bridges, P251.25 million were intended for water management, P350 million were supposed to fund provisions for general administration and support and P460 million were allotted for provisions for support to operations.

Duterte also thumbed down 12 general and special provisions in the budget namely:

• Use of income under the Department of Labor and Employment - National Labor Relations Commission (NLRC) Special Provision No. 1 since there is nothing in the law governing NLRC that allows the use of its income. 
• Provisions on the implementation of some projects by the agriculture, public works, trade and other agencies. The provisions were deemed as violative of laws stating that local government units, not national government agencies, should implement those projects
• Provisions that allow the use of the local government support fund for maternal and child health projects
• Provision on the "Cost of Devolved Health Services of Local Government Units" that the president said would effectively reduce the mandated allocation of internal revenue allotment shares of local government units
• Provisions on the "Collection of Fees in Relation to the Retention or Reacquisition of Philippine Citizenship" that would effectively remove the inherent authority of agencies to assess reasonable fees in some services
• Department of Justice - Bureau of Immigration provision on "special work permit." The president said the regulation of alien employment should be a shared responsibility of the Immigration bureau and the Labor department
• Provision allowing the use of the calamity fund for the relief, recovery, reconstruction, and other work or services in connection with natural or human-induced calamities that happened more than two years from the budget year
• Provision on the unprogrammed appropriations of the Coconut Farmers and Industry Development Fund, which the president said lack legal basis
• Various road fund  provisions that are no longer relevant because of the abolition of the Road Board
• "Prohibitions Against the Use of Unprogrammed Appropriations," which Duterte said would effectively hamper the performance of his official duties and limit his power as chief architect of foreign policy to enter into loan agreements
• Provision on authorized deductions, including obligations to financing companies and other similar entities that have authority to engage in lending and mutual benefits or mutual aid system because of lack of legal basis 
• "Impoundment of Appropriations" provision which stated that the inaction of Congress within 30 session days from receipt of an impoundment proposal is considered a disapproval. Duterte said the provision is unacceptable because it is inconsistent with the authority granted to the president to suspend or stop further expenditure of funds

Five items were subjected to conditional implementation namely the allowance and benefits of teachers and creation of teaching positions; construction of evacuation centers; funding for foreign assisted projects; revolving fund; and lump-sum appropriations for capital outlays.