Senate finance panel OKs proposed budget reform bill

The Senate committee on finance has approved the proposed Budget Reform Act, which seeks to institutionalize changes that will cure a number of weaknesses in the public financial management (PFM) system and propel mechanisms to help the country achieve its economic goals.

Senator Loren Legarda presented to the plenary on Wednesday Senate Bill 1761 that will address the weak linkage of the plan with the budget, slow budget execution, weak budget reliability, delays in the submission of reports due to manual recording of transactions, and ambiguity in the definition and use of savings.

She said the biggest change the proposed measure will have on the budgeting landscape is the shift from a two-year obligation-based budget to an annual cash-based budget.

She said the Philippines is the only country in the world that has a two-year obligation based budget system.

CASH-BASED BUDGET

Under an annual cash-based budget system, contractual obligations incurred by the government for a particular year may not go beyond that fiscal year. Payments should be made for goods and services delivered, inspected and accepted within the fiscal year, with up to a three-month Extended Payment Period.

“This new system will result in better planning of programs and projects by government agencies, reduced underspending, greater focus on implementation, and will foster a better business environment,” she said.

She said the bill also clarified the use of savings and ensured that the new definition of savings is consistent with the Supreme Court ruling on the Disbursement Acceleration Program (DAP) to prevent possible abuse by executive action.

“Savings will now be limited to released but unobligated appropriations that result from (1) completion, final discontinuance, or abandonment of an activity or project; and (2) implementation of efficiency measures resulting in the delivery of the required or planned targets at a lesser cost,” she said.

She said the Miscellaneous Personnel Benefits Fund (MPBF) cannot be declared as savings as it pertains to unreleased appropriations and composed purely of personal services items.

“With this reform, the controversial Dengvaxia deal will never happen again,” she said.

VOICE OF THE PEOPLE

Legarda also said the Budget Reform Act “will give importance to the voice of the people” through the establishment and implementation of participatory budget mechanisms in all phases of the budget cycle for wider citizen engagement.

She said the public will also have greater access to public financial information, as the bill would require posting of all documents and reports in the government website.

She said the DBM will be mandated to publish the “People’s Budget,” a citizen-friendly summary of the government’s fiscal policies and expenditure priorities.

The senator said the Budget Reform Act intends to strengthen Congress’ power of the purse so it can review and approve proposed appropriations based on the targeted and actual performance of agencies.

“This is to ensure that we give enough budget to all agencies—no overspilling, no underspending. Congress will have the authority to limit the use of savings and strengthen accountability and transparency of our budget. Savings can only be used for the right purposes and reasonable situations. Congress will also have a stronger power to prevent abuses of a re-enacted budget. Only in extraordinary times, should we resort to the re-enactment of the budget,” she added.

MODERNIZE BUDGET SYSTEM

She said the main goal of the proposed measure is to modernize the Philippine budgeting system “to make it advanced, credible, and compliant with international best practices.”

She said the need for innovations and technology-supported systems gave birth to, among others, the Budget and Treasury Management System (BTMS) which will later lead to the Integrated Financial Management Information System (IFMIS), Unified Accounts Code Structure (UACS), and the Treasury Single Account (TSA) for better cash management.

The IFMIS, once developed, will fully automate the country’s financial management information system, and will be the single portal for all financial operations by all government agencies.

She said this will enable timely and more transparent reports on government transactions, which can be used for management decision-making.

The UACS fortifies the use of an important accounts coding system for all appropriations in the General Appropriations Act (GAA), as well as all government transactions. This will facilitate and harmonize the budgeting, accounting, auditing, and reporting of all government financial transactions.

She said the TSA, a tool for consolidating and managing the government’s cash resources, will also be institutionalized.

She said the initiative has been crucial in lessening borrowings, and progressively bringing down the share of the budget allocated for interest payments, and give way to more spending for infrastructure and social services.

“Having a TSA will be a real test of our resolve to have a timely, transparent, and efficient budget system. With the TSA, the National Treasurer (or the President, or the Secretary of Finance, or the Secretary of DBM) would have at his or her smart phone, information on the cash position of the Republic in real time,” she said.

She said, at the moment, with more than a thousand different accounts, such information are not readily available in real time.

“The prospect of a modern, efficient and open budget system is not an empty dream. It is within our grasp. The Executive Department has adopted reform measures that have catapulted the Philippines to be one of the best performing budget institutions in the world,” she said.

“But these reforms are not permanent. This bill seeks to set these reforms into law, so that the next President will be constrained from slipping back into the slow, weak and opaque budget system,” she added.

The House of Representatives approved on Tuesday on second reading, on third and final reading its version of the proposed Budget Reform Act. The Senate will have to deliberate on its version first before it can be sent to the Lower House for the bicameral conference committee hearing. — BAP, GMA News