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COUNTRY REPORT
(Republic of the Philippines)
Presented during the
Performance Based Budgeting Training Program
Civil Service College, Singapore
25 February to 7 March, 2008
By:
Ms. Luz M. Cantor
Ms. Jocelyn Cuaresma
Mr. Julian D. Pacificador,Jr.
Ms. Vicitacion A. Ugalino
Ms. Marlene R. Vinluan
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I.
II.
Introduction
A.
Geography and Demography
B.
History
C.
Economy
Background of Public Financial Management (PFM) in the
Philippines
A.
The Legal Framework for PFM
B.
The Institutional Framework
1. Four Phases of the Budget Process or Budget
Cycle
a. Budget Preparation
b. Budget Legislation
c. Budget Execution
d. Budget Accountability
2. Salient Features of Appropriations
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III. Successes Achieved in the Area of Performance Based
Budgeting (PBB)
A. Public Expenditure Management (PEM)
B. Organizational Performance Indicator Framework (OPIF)
1. Advantages of OPIF
2. The OPIF Process
C. Little “Victories” in OPIF
IV. An Analysis of Gaps in the PFM and Areas of Potential Reform
A. Weaknesses of the PEM
V.
1.
2.
3.
4.
Weak revenue administration,
Unpredictability of funding,
Inadequate management information system, and
Weak internal control system in spending agencies
Challenge and Issues
A. Sustaining and Enhancing the OPIF Process
B. Prospects for Reform Planning and Implementation
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Republic of the Philippines
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Republic of the Philippines
Capital: Manila
Population : approaching 87 million (12th)
Government: Unitary presidential constitutional republic
Total Land Area: 300,000 km / 115,831 sq mi
Religion: Predominantly Roman Catholic
Official Language: Filipino and English
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Republic of the Philippines
Economy
GDP (nominal) : Total - $117.562 billion
2006
Per capita - $1,351.718
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II. Background of Public
Financial Management
(PFM)
in the Philippines
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A. The Legal Framework for PFM
Article VI, Section 29 of the Philippine
Constitution sets the basic rule for the
use of government funds where it
states: “ No money shall be paid by the
Treasury except in pursuance of an
appropriation made by law”.
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B. THE INSTITUTIONAL
FRAMEWORK FOR PFM
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Four Phases of the Budget
Process or the Budget Cycle
a) Budget Preparation
b) Budget Legislation
c) Budget Execution
d) Budget Accountability
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a) Budget Preparation
Executive branch consolidates the annual
budget proposal of the executive,
legislative, and judicial branch of the
government.
 estimation of revenues
 determination of budgetary priorities
consistent within the MTPDP
 translation of approved priorities into
expenditure levels
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Submission of the Budget
The President shall submit within thirty (30) days from
the opening of each regular session of the Congress as
the basis for the preparation of the General
Appropriation Act, a national government budget,
consisting of estimated receipts based on the existing
and proposed revenue measures, and of estimated
expenditures.
Article VII, Section 22 (1)
Philippine Constitution
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Development Budget Coordinating
Committee
A top level inter agency
committee that sets the budget
parameters - framework
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resource
allocation
and
management
DBCC Composition
resource
overall
generation
economic
and debt
policy
management
monetary
measures
and
policies
Presidential
oversight
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Major Functions of the DBCC
 Establishes the level of annual government
expenditure programs
 Determines the proper allocation of expenditure
 Allocates the amount set for each development
activity
 Assesses the reliability of revenue estimates
 Recommends appropriate tax or other revenues
measures and the extent and type of borrowings
 Conducts periodic review and general examination of
costs, accomplishments and performance standards
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Budget Preparation Flow Chart
Budget
Call
DBCC
approves
budget
parameters
Budget
Consolidation
Budget
Hearings
Cut-off for
Inclusion of
Items in Budget
Proposal
President Submits
Budget Proposal to
Congress
Approval by
President and
Cabinet
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b) Budget Legislation
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The legislature (Congress) approves the
appropriations bill and the President signs it
into law.
Several forms of appropriations:




General Appropriations Law
Public Works Acts
Supplemental Appropriations Law
Automatic Appropriations
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Budget Legislation Flow Chart
House
Hearings/
Debate
Senate
Hearings/
Debate
House Approval
& Submission
to Senate
Bicameral
Conference
Committee
Senate
Approval
President
Signs
into Law
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c) Budget Execution Flow
Chart
Agency/DBM
prepares ABM
Agency
implements
DBM releases
SARO & NCA
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d) Budget Accountability
 Monitoring of agency budgetary
performance
 Comparison and evaluation of actual
performance with initially-approved
work targets in terms of:
financial
Physical
Revenue Collected (for agencies
mandated to collect taxes and fees)
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Rationale/Purpose
 Monitor the efficiency of government’s
fund utilization
 Assess agency performance
 Provide a vital basis for sound
decision and policy making for rational
allocation of scarce resources
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The Commission on Audit (COA)
Article IX-D of the Philippine Constitution
provides the following functions of COA:
a.
Examine, audit and settle all accounts pertaining to
the revenue and receipts of, and expenditures or
uses of funds and property owned or held in trust by,
or pertaining to the government;
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b.
c.
d.
e.
The Commission on Audit (COA)
Promulgate accounting and auditing rules and
regulations including those for the prevention and
disallowance or irregular, unnecessary, excessive,
extravagant or unconscionable expenditures, or
uses of government funds and properties;
Submit annual reports to the President and the
Congress on the financial condition and operation of
the government,
Recommend measures to improve the efficiency and
effectiveness of government operations; and
Keep general accounts of government and preserve
the vouchers and supporting papers pertaining
thereto.
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Salient Features of Appropriations
1. Once an appropriation is released in the
form of an allotment covered by either an
Agency Budget Matrix (ABM) or a
Special Allotment Release Order
(SARO), it becomes available for
incurrence of an obligation.
2. Appropriation for personal services are
valid only for the year, while those for
MOOE and CO are treated as continuing
appropriations for 2 years: unused
portions of appropriation for MOOE & CO
are carried forward for another year.
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3.
Salient Features of Appropriations (cont.)
Automatic appropriations are those appropriations
authorized under existing laws other than the
General Appropriations Act which are programmed
annually in accordance with Section 26, Book VI of
EO 292. Examples of these are:
•
•
•
•
•
•
Internal revenue taxes and import duties associated with
foreign loans and grants,
Tax expenditure subsidies,
Debt servicing,
Retirement and life insurance premium of government
employees,
Drawdown on guaranteed lending to government
corporations, and
Various special accounts and funds.
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III. Successes Achieved in
the Area of Performance
Based Budgeting
PUBLIC EXPENDITURE MANAGEMENT:
OBJECTIVES
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
Aggregate Fiscal Discipline


Allocative Efficiency


living within our means
spending on the “right things” or “right
priorities”
Operational/Technical Efficiency

obtaining the best value for money
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PUBLIC EXPENDITURE MANAGEMENT:
Key components in the Philippines
THREE MAJOR COMPONENTS - mutually
supportive
 Medium-Term Expenditure Framework (MTEF)
 Organizational Performance Indicator Framework
(OPIF)
 Procurement Reform
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ORGANIZATIONAL PERFORMANCE
INDICATOR FRAMEWORK (OPIF)
OPIF is an accountability framework based on:




Explicit recognition by agencies of the Government’s expenditure
priorities (sector goals and organizational outcomes)
Identification of Major Final Outputs (MFOs) and PAPs to
achieve those priorities
Identification of performance indicators by agencies that show
how well they are delivering services (outputs) to achieve
Government outcomes/objectives
Monitoring performance and publicly reporting results (both
successes and failures) to ensure transparency and
accountability of government operations
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OPIF OBJECTIVES
 To shift emphasis from ‘input’ to ‘output’ focused budgeting

Inputs still important in costing MFOs & assessing efficiency
 To Encourage departments & agencies to focus on the delivery of outputs
(goods & services) to achieve Government goals (outcomes/objectives)
 To specify and document expected performance of each agency and hold
them accountable for its achievement
 To report to the President, Congress and the public on the efficiency of
output delivery by agencies
 To provide the Government with a better basis for assessing the
effectiveness of agency outputs in meeting intended outcomes
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ANALYTICAL FRAMEWORK
Logical Framework (Logframe) Approach in OPIF
(Impact)
SOCIETAL GOALS
SECTOR GOALS
(Outcome) ORGANIZATIONAL OUTCOME Performance
(Outputs)
MAJOR FINAL OUTPUTS
Indicator/s
for MFOs
P/A/Ps
(Inputs)
Budget
Targets
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Attributes of Good
Performance Indicators
S – Specific
M – Measurable
A – Achievable
R – Relevant
T – Time-bound
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Attributes of Good
Performance Indicators
C – Clear
R – Relevant
E – Economic
A – Adequate
M – Monitorable
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OPIF Successes
1. Publication of 2007 OPIF book
2. Publication of 2008 OPIF book
* Available at DBM website (www.dbm.gov.ph)
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IV. An Analysis of Gaps in
PFM and Areas of
Potential Reforms
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An Analysis of Gaps in PFM and Areas of
Potential Reforms
A. Weaknesses in the present PFM:
1) Weak revenue administration,
2) Unpredictability of funding,
3) Inadequate management information system,
and
4) Weak internal control system in spending
agencies
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V. Challenges and Issues in
the Way Forward
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A. Sustaining and enhancing the OPIF
process
1. Mainstreaming of OPIF to all agencies of government including the
legislative, judiciary, constitutional offices and SUCS;
2. Establishment of unit costs for a more realistic targeting and budget
estimate exercise;
3. Enhancement of the cascading process at the agency and department
levels;
4. Calibration/adjustments in the budget preparation, budget execution,
and budget accountability systems to make them OPIF compliant;
5. Selection of “key” performance indicators and measures at the major
organizations level (department) which shall be the focus of
monitoring and evaluation at oversight level;
6. Development of an enhanced performance monitoring and evaluation
system along with an agency performance review and rating
structure;
7. Harmonization of the OPIF reporting system with those adopted by
other oversight and monitoring authorities; and
8. Conduct of continued capacity building and advocacy activities for
better understanding, appreciation, and adoption of the OPIF in other
national government agencies and instrumentalities;
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B. Prospects for Reform Planning
and Implementation
Challenges:


Systematic improvement would require
concerted and coordinated efforts on
multiple fronts.
Certain features of the Philippine PFM
system are inconsistent with the notion
of international “standard” behind the
PEFA framework due to the country’s
constitutional design and other long-held
practices.
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B. Prospects for Reform Planning
and Implementation
Challenges (cont.)
3) The political reality in the country.