TRANSPARENCY in government is a cornerstone policy that President Benigno C. Aquino III has promised to uphold. It has been put in doubt because of his perceived reluctance to divulge the report of the commission that investigated the hostage-taking tragedy last August 23 but he could still make good on his pledge by widening public access to government documents, starting with those on the budget.
As it is, the Philippines has a long way to go when it comes to having open budget books. Indeed, while a report released today by the U.S.-based International Budget Partnership (IBP) says that the Philippines has raised its budget transparency score by a full seven points from what it posted in 2008, it needs to open up some more. It remains one of the 74 out of the 94 countries that the IBP says failed to meet basic standards of transparency and accountability with national budgets.
The Philippines was able to provide significant information on only three out of eight key budget documents that international good practice says governments should publish. It had “some” or no information at all for the rest – the audit and year-end reports, pre-budget statement, mid-year review, and the citizens’ budget, adds the IBP.
The IBP conducts an Open Budget Survey every two years using internationally recognized criteria to give each country a transparency score on a 100-point scale called the Open Budget Index (OBI). The OBI scores are determined by averaging the response to 123 questions related to information contained in the eight key budget documents, public participation and the strength of formal oversight institutions.
Budget transparency empowers citizens and enables them to have a buy-in on decisions being made by the government, says Open Budget Initiative manager Vivek Ramkumar.
Transparency along with public participation can enhance the credibility of policy choices and the effectiveness of policy interventions, he points out. The lack thereof, meanwhile, can lead to the selection of unpopular and inappropriate programs, and corrupt and wasteful spending.
According to Ramkumar, countries with more transparent budgets also tend to have better access to international financial markets and lower borrowing costs.
Gloria’s last 9
Research for the 2010 Open Budget Survey was conducted from June 2009 to March 2010, or during the last nine months of the nine-year Arroyo administration. For the Philippines, the Survey focused on documents provided during the formulation, legislative approval, and implementation of the 2009 budget, and the audit reports for 2007, which were the latest available during the research period.
For the Philippine report, the Philippine Center for Investigative Journalism (PCIJ) completed the Survey questionnaire, and the results were independently reviewed by two anonymous in-country experts. A Philippine government representative also commented on the questionnaire. This is the third OBI Survey conducted in the Philippines with the PCIJ serving as country researcher for IBP since 2006.
In the 2010 Survey, the Philippines scored 55 out of a perfect score of 100, up from its score of 48 in 2008. The increase in score points was due largely to the government’s publication of more comprehensive information in the executive’s budget proposal, which is the government’s most important policy instrument. The executive budget proposal, after all, shows how the government plans to raise revenues and where these funds are allocated, thus transforming policy goals into action.
The 2010 Survey saw some improvement in the country’s budget narrative and performance monitoring. This part of the Survey explored additional information that should be provided in the budget to help legislators and the public better understand the proposals in the budget and their touted impact.
In 2009, the DBM published the Organizational Performance Indicator Framework (OPIF) that presented a matrix of performance measures and targets covering fiscal years 2007-2009. The OPIF is an approach that tries to define where the government should direct its development efforts and what priorities should resources focus on.
The OPIF was first implemented in 2007 and piloted in 20 departments. It is now being implemented in all national government agencies (63 departments and agencies, including other executive offices) and in state universities and colleges.
Executive’s grade: B
Yet despite the executive’s budget proposal having more information compared to the last time the Survey was done in 2008, the country still received a grade of B for big data gaps.
This is because information was found wanting in terms of the possible effects of different macroeconomic assumptions in the budget. Data on certain fiscal activities that can have a major impact on the government’s ability to meet its fiscal and policy goals, financial and other assets held by the government, and tax expenditures were also found to be inadequate.
Just as bad, the Survey noted that the executive’s budget had insufficient data on transfers to public corporations, quasi-fiscal activities, expenditure arrears, and contingent and future liabilities. Absent this information, the Survey notes that the public will not have sufficient information about the government’s complete fiscal position.
The OBI grades for the comprehensiveness and accessibility of the information provided in each document are calculated from the average scores received on a subset of questions from the Survey.
An average score between 0-20 (scant information) is graded as E; 21-40 (minimal) is graded as D; 41-60 (some) is graded as C; 61-80 (significant) is graded as B; and 81-100 (extensive) is graded as A.
A’s and E’s for RP
The Philippines did receive two As: for publishing a comprehensive enacted budget, as well as for its in-year reports.
The enacted budget becomes a country’s law and provides the baseline information for all budget analyses conducted during the budget year. The in-year reports, meanwhile, provide a snapshot of the budget’s effects during the budget year. They allow for comparisons with the enacted budget figures and thus facilitate adjustments.
But the country’s overall score was pulled down by its E grades on its pre-budget statement and mid-year review, both of which were not published, as well as on its citizens’ budget, which was not produced in 2009.
The dismal subscore it got for its audit report had a great impact as well on its total score, even though it received a C for this. In 2008, the Philippine audit report garnered a subscore of 67. This year, the figure slid to 48.
An audit report is supposed to be an evaluation of the government’s accounts by the country’s supreme audit institution. It discloses whether the government has raised revenues and spent these in line with the authorized budget, whether the government’s bookkeeping is balanced and accurate, and whether there were problems in the management of public funds.
The audit report studied by the Survey was apparently not comprehensive enough; it did not cover audits of all expenditures and extra-budgetary funds. It is also published more than six months after the end of the fiscal year.
The Philippines also received a D for the low level of information provided in its year-end report.
Executed vs enacted
This report is supposed to have data comparing the actual budget execution to the enacted budget. This can inform policymakers on tax policies, debt requirements, and major expenditure priorities, facilitating modifications for upcoming budget years.
To be fair, the Survey notes that across the world, the public availability of the pre-budget statement, citizens’ budget, and mid-year review in particular is poor. Two of every three countries do not issue a pre-budget statement and a mid-year review while five in six countries do not publish a citizens’ budget.
The pre-budget statement or pre-budget report should provide information that links government policies and the budget. It typically sets forth the broad parameters that will define the government’s forthcoming budget.
In 2009, the Philippines produced the “Paper on Budget Strategy” (Pre-Budget Statement or PBS) but it was not released to the public.
According to Gisela C. Lopez, former director of the Fiscal Planning Bureau of the Department of Budget Management (DBM), the PBS is part of the government’s efforts to improve its policy focus in the allocation of resources.
The PBS also presents an analysis of the fiscal plan, implementation status of the Medium-Term Philippine Development Plan (MTPDP), budgetary trends, and options and choices on sector priorities.
But Lopez says that the PBS is “an internal document of the Development Budget Coordination Committee (DBCC) which contains the recommended expenditure policy and fiscal framework upon which the preparation of the budget can be anchored.”
“In principle, I am agreeable to disclosing the Paper on Budget Strategy (PBS) to the public… This document’s disclosure in the future is something that DBCC will have to decide upon,” says Budget and Management Secretary Florencio B. Abad.
Abad notes though that in the next Open Budget Survey (2012), which would cover the 2011 budget, the Paper on Budget Strategy will not be available yet. “Its crafting did not push through (for 2011 budget) given the changes in policy directions with the transition into the new government, and given that we had to prioritize the Zero-Based Budgeting approach,” he says.
Once the budget is enacted, a government is supposed to publish a nontechnical presentation of its budget that is intended to enable the public – including those who are not familiar with public finance – to understand a government’s plans for raising revenues and spending public funds.
In 2009, the DBM was not able to prepare a citizens’ budget “due to lack of time” and because it was “overtaken by priorities,” explains Lopez.
Just last September, though, the DBM published a “Budget in Brief” (Citizens’ Budget) for the 2010 budget. Unlike the 2008 version that was published in the English language, the 2010 version is in Filipino.
Also titled “2010 Badyet: Maikling Ulat,” the document provides information on sources of funds, budget priorities, and the status of the 2010 budget. A copy of this 22-page document is the newly added downloadable item on the DBM web site under “DBM Publications.”
Abad says that the DBM is committed to “having a ‘Citizens’ Budget’ every year, whether in print or online, starting 2011 after the proposed Reform Budget is passed.”
“This stems from our commitment to involve civil society and sectoral organizations in the budget preparation process,” he adds.
As for the mid-year review, DBM Undersecretary Laura B. Pascua says this document is not yet for public consumption. “These are internal documents at the DBM level and for the Development Budget Coordination Committee (DBCC) finalization based on the Bureau of the Treasury’s report on the fiscal position,” she says.
Mid-year reviews are supposed to provide an overview of the budget’s effects in the middle of the budget year. Using the information provided in this document, a government’s fiscal performance can be assessed against the plan laid out in the original budget.
Lopez says that the mid-year review would be published when the availability of data becomes stable and timely.
Secretary Abad points to having a Government Financial Management Information System (GFMIS) as key for the mid-year review to be published. But he says that “it will take a while to put this in place.”
Currently, Abad says DBM is trying to come up with a computerized system that can capture and consolidate agency reports on obligations and disbursements.
Beyond improving access to key budget documents, the Survey also points to other ways in which the Philippine budget process can be made more open. These include ensuring the existence of a strong legislature (Congress) and a supreme audit institution (Commission on Audit), as well as providing greater opportunities for the public to participate in the budget process.
Stresses IBP director Warren Krafchik: “Greater transparency enables better oversight, better access to credit, better policy choices, and better service delivery.”
Poor Congress oversight
According to the Survey, budget oversight provided by Congress is inadequate because it does not have full power to approve any changes made to the budget over the course of the fiscal year and it does not fully scrutinize audit reports. Neither is the budget oversight provided by COA adequate since, says the Survey, it does not have sufficient resources to exercise its mandate “meaningfully.”
Senator Teofisto Guingona III comments that COA reports are released “too late.” By the time these are made available, he says, events have transpired, “accountable” officials are no longer in office, and the issues themselves are no longer relevant.
But the former Bukidnon representative also admits that members of the legislature do not regularly scrutinize audit reports. While the House Committee on Appropriations has the oversight function, he says that a thorough study of audit reports has not really been done although this was brought up in 2008.
Access to Info law
Yet another drawback to budget transparency is the absence of an Access to Information law. Even if the public’s right to information is expressly guaranteed by the 1987 Constitution and affirmed by the judiciary, access to data held by government agencies remains limited.
Still, while meaningful participation in the discussion of the budget remains limited in the Philippines, the Survey notes some significant headway.
Since 2007, for instance, the Alternative Budget Initiative (ABI), a group of nongovernmental organizations led by Social Watch Philippines, has been advocating for an “alternative budget” that pushes for better funding to achieve the Millennium Development Goals.
Last year, alternative budget proposals made by the ABI were also adopted in the 2009 General Appropriations Act (Enacted Budget).
Too, a bill institutionalizing the participation of bona fide civil society organizations in budget hearings and deliberations in Congress, as well as in national government agencies and local government units, is now pending before the House of Representatives.
Abad notes that special provisions to institute transparency and accountability have been enshrined in the proposed P1.645-trillion General Appropriations Act for 2011 that the House of Representatives passed on second reading last week . For instance, Section 94 of the draft 2011 budget requires all departments and agencies, including those enjoying fiscal autonomy, to post approved budgets and the status of programs on their web sites.
The DBM has also conducted a soft-launch of an information web page that contains lump-sum fund releases made in 2009 from Congressional allocations.
In addition, Abad says the DBM has created the Civil Society Organizations Desk within the Office of the Secretary. “We are actually looking forward to instituting mechanisms to involve CSOs as early as the preparation of the budget.”
With President Aquino at the helm, Abad says he sees a great opportunity in making the budget more open to the public.
Says Abad: “(W)e are confident that even as we rank highest in budget transparency in the Southeast Asian Region, we can push the envelope and revise the standards even further… we want good governance dividends to translate into greater investments in social services for poverty reduction.”
(An initiative of the Center on Budget and Policy Priorities [CBPP], IBP collaborates with civil society around the world to use budget analysis and advocacy as a tool to improve effective governance and reduce poverty. The Ford Foundation, the Open Society Institute, the Flora and William Hewlett Foundation, and the U.K. Department for International Development [UKaid] provide funding for the Open Budget Initiative at the International Budget Partnership. IBP and CBPP are not affiliated with and do not receive funding from the U.S. government.) – PCIJ, October 2010