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DBM to push through with cash-based budgeting in 2019

The Department of Budget and Management (DBM) will push through with the cash budgeting system this year despite Congress' scrapping of provisions on cash-based budgeting in the ratified version of the P3.757-trillion budget for 2019.

"The Philippine government would still be pushing through with the adoption of cash-based budgeting despite the deletion of proposed provisions on cash budgeting in the bicam version of the General Appropriations bill," Budget Secretary Benjamin Diokno said at a news forum on Wednesday.

The Budget chief made the statement after the bicameral conference committee led by House Appropriations panel chair Representative Rolando Andaya Jr. and Senate Appropriations committee chair Senator Loren Legarda agreed not to adopt the cash-based budgeting system for this year 2019 and revert to the obligations-based system as they ratify the P3.757-trillion GAB. 

To recall, the approval of the proposed 2019 budget got stalled due to opposition on the shift to cash-based budgeting system as well as on the allegations of anomalies in the budget of the Department of Public Works and Highways.

Diokno, however, insisted that the "content and form of the budget is an executive decision."

The Cabinet official cited the Administrative Code of 1987 as the enabling law for such an action.

"According to the Section 36, Chapter 5, Book IV of Executive Order No. 292 or the Administrative Code of 1987, 'an operational cash budget shall be implemented to ensure the availability of cash resources for priority development projects and to establish a sound basis for determining the level, type and timing of public borrowings'," the Budget chief said.

Under a cash-based budgeting, the validity of budget appropriations are reduced to one year with no carry-over provision except for a three-month extended payment period within the following fiscal year to allow agencies to settle payments for goods and services delivered.

Currently, the Philippines follows an obligations-based budgeting in which appropriation are valid for two years.

Funds are disbursed as commitments or obligations, meaning implementing agencies are not obliged to complete projects within the same fiscal year.

Despite operating on an obligations-based budgeting system, Diokno said the Duterte administration has already adopted a one-year validity of appropriations since 2017, instead of the usual two years to push the agencies to speed up the execution of projects.

This is to prepare agencies for the shift to annual cash-based budgeting in 2019.

"We included cash budgeting as a general provision in the proposed budget because we want this to be the usual practice hereon in," Diokno said.

Despite the removal of provisions institutionalizing the cash-based budgeting, the DBM will still continue adopting the one-year validity of appropriations this year.

"If they want to challenge us to the Supreme Court... we are prepared," Diokno said.

The Budget chief also noted that President Rodrigo Duterte supports the adoption of cash-based budgeting.

"He knows that it is an Executive function," Diokno said.

The Cabinet official emphasized the urgency to institutionalize cash-based budgeting as to catch-up with the rest of the world.

"Some governments are even moving towards accrual-based systems, which is the next step after cash budgeting. We will fall far behind if we do not implement this now," he said.

"Cash budgeting is the most widely-used budgeting system, with 73 percent of the Organization for Economic Cooperation and Development countries around the world, as well as the private sector, implementing its," he added.

Diokno said lawmakers were "possibly misinformed" on cash budgeting, when he was asked why the House and Senate proceeded to delete the general provision on cash appropriations.

"One prevalent misconception on cash budgeting that has been making the rounds in Congressional hearings until recently is that cash budgeting limits agencies to projects that can only be implemented within the year," he said.

"This is absolutely not true. In fact, the current Procurement Law perfectly allows procuring for multi-year projects," he added.

The Budget chief noted that agencies can still enter multi-year contracts under the cash budgeting system.

"All you need to secure is a Multi-Year Contracting Authority from the DBM," Diokno said.

Under cash budgeting, the Cabinet official said, multi-year projects may still be awarded as multi-year contracts but they have to be budgeted annually based on what the contractors are expected to deliver by the end of a fiscal year.

"In other words, projects have to be included in the budget for every year of implementation to ensure payment for deliverables by the end of the year," Diokno said.

"Should the contractors fail to deliver the goods or services expected by end of the year, payment for the same will have to be budgeted in the next fiscal year. This applies to both single-year and multi-year projects," he said.

The Budget chief said that while multi-year projects will be in multiple GAAs, there will be just one contract and one procurement. — RSJ, GMA News