DBM says no irregularities in P588-B unprogrammed funds

The Department of Budget and Management (DBM) on Wednesday stood firm that there are no irregularities in allocating P588.1 billion worth of unprogrammed appropriations in the proposed P5.268-trillion national budget for 2023.

In a statement, the DBM said that “it is ready to defend the proposed budget with the start of the marathon  budget deliberations” and the “details of these unprogrammed appropriations (UA) are available for public and Congress scrutiny.”

During a Palace briefing, Budget Secretary Amenah Pangandaman said the “unprogrammed funds are actually itemized for transparency of everyone.”

Under the proposed National Expenditure Program (NEP) for Fiscal Year 2023, the P588.16 billion are broken down as follows:

•     Support for Infrastructure Projects and Social Programs (inclusive of P22 billion for Procurement of Vaccines) - P149.6 billion
•     Armed Forces of the Philippines Modernization Program - P5 billion
•     Budgetary Support to Government-Owned and/or Controlled Corporations - P20.6 billion
•     Support to Foreign-Assisted Projects - P380 billion (including  P2.2 billion for the Department of Social Welfare and Development and P378.2 billion for the Department of Transportation)
•     Risk Management Program - P1 billion
•     Payment of Arrears of Land Transportation Office-IT Service - P2 billion
•     Refund of the Service Development Fee for the Right to Develop the Nampeidai Property in Tokyo, Japan - P210.5 million
•     Bangko Sentral ng Pilipinas (BSP) Equity Infusion pursuant to Republic Act No. 11211 or Central Bank Act - P10 billion
•     Public Health Emergency Benefits and Allowances for Health and Non-Health Care Workers - P18.9 billion
•     Prior years' local government units shares - P14 million

House Deputy Speaker and Batangas 6th District Representative Ralph Recto earlier questioned the more than half-a-trillion pesos unprogrammed funds, which must be itemized and render in “black and white.”

He cited the Support to Foreign Assisted Projects with a proposed P380.6 billion.

Pangandaman explained that projects included in the unprogrammed funds or appropriations are “those projects we do not know yet when will happen.”

The DBM said that the P588.1 billion of unprogrammed funds - 11.2% of the proposed 2023 budget - already includes the estimated P378.2 billion for loan proceeds requirements of the DOTr.

If the loan proceeds requirements of the DOTr would be removed, the unprogrammed funds will only be 4% of the total proposed budget, according to the DBM.

“The approach that the DBM has adopted is consistent with what occurred in 2022, when, subject to the collective wisdom of the legislature, all loan proceeds under the DOTr were transferred to the unprogrammed appropriation, due to their history of low absorptive capacity insofar as loan proceeds is concerned,” it said.

“The same measure has been adopted so far as the 2023 levels are concerned,” it added.

The Budget Department said that loan proceeds under the DOTr were transferred to the unprogrammed funds “so that other expenditure items may be accommodated.”

In a news release, House Deputy Speaker and Davao City 3rd District Representative Isidro Ungab said that the P588.1 billion in unprogrammed funds “represents a sharp turn from the historical records of 2% to 5% in previous years.”

“I believe clarifications on these UAs must be made, considering its impact on the fiscal discipline or fiscal program of the national government,  since the unprogrammed appropriations are also considered revenue-based expenditure. Thus, it would be best if we will be able to include these unpro in the budget, with sufficient guidelines and proper limitations,” he said.

The Davao City lawmaker also raised the possibility that a “big amount” of unprogrammed funds may hinder support for future supplemental budgets, as excess or new revenue sources may be used first to fund the unprogrammed appropriations in the General Appropriations Act (GAA), even if the new programs or projects are of equal or more importance.

The DBM said unprogrammed funds are a form of standby appropriations, “meaning if at any given point when excess revenues are not generated, and an item of appropriations is found to be deficient or even non-existent, then unprogrammed appropriation will be triggered.”

“Unprogrammed appropriations are standby appropriations, and as such it has provided appropriations cover for some unexpected expenses; additional support for infrastructure projects and social programs; support to FAPs (foreign-assisted projects), etc. [last mile schools program, procurement of vaccines and risk- management program, among others],” the Budget Department said.

“If funded by excess revenue collections, then expenditure for UA items would be deficit-neutral,” it added.

The DBM said that going by historical experience, the percentage share of the unprogrammed funds in the budget could be 2% to 8.4%.

"As in the experience of 2022 when risks and uncertainties abound, the unprogrammed funds has been a quick source of resources to address uncertainties due to both domestic and external developments that require government attention and implementable measures and solutions," it said.

“This is especially true for measures requiring subsidies for its amelioration programs,” it added.

The DBM said that there were certain instances when we did not have unprogrammed appropriation.

“This is due to the logic that when the budget is effectively increasing, there should not be an unprogrammed appropriation. But in our country where we have calamities we do not expect or activities we do not even anticipate but necessitates us to provide services to our people, the unprogrammed appropriation is an available resource cover that will trigger additional amounts for the national government,” it said.

The unprogrammed funds can be tapped when the following conditions are met:

•     Excess revenue in any one of the identified non-tax revenue sources from its corresponding revenue collection target
•     New revenue collections or those arising from new tax or non-tax sources
•     Approved loans for foreign assisted projects.

“In light of all these, we subject ourselves to the collective wisdom of the honorable members of Congress to scrutinize the budget and make adjustments as appropriate, as a result of the technical budget hearings and debates,” the DBM said.—AOL, GMA News