Citizen Participation Strengthening Public Fiscal Management 18 September 2015 Marco Polo Hotel, Pasig, Metro Manila MAXINE TANYA M. HAMADA Assistant Secretary Department of Budget and Management 1

Source: http://www. bloomberg

The Budget and the Economy How does the Budget interact with the Economy? For one, government spending boosts the domestic economy. Government spending supports economic growth—in fact, government spending is measured as a component of gross domestic product (i.e. government final consumption expenditure, public construction). But beyond spending per se, government investments in social and economic programs enable industries and people to be more productive. Conversely, the state of the economy affects the National Budget. For one, a vibrant domestic economy, with more people getting employed and businesses earning more, generates higher government revenues. Certain macroeconomic indicators—like interest rates and foreign exchange rates—also affect the cost of government debt. (you may find more information on pages 17 to 19 of the 2014 People’s Budget)

The Budget Process Before Budget Call Released Late April Late Submission of Agency Proposals (w/ much lump sums!) May Deliberations & Finalization June-July Budget Submitted Just Before Deadline August Budget Legislation Also Delayed September-February In summary, this is how the Budget Process worked in the past: Budgets were frequently enacted late, if enacted at all, which led to delays in implementation, as well as unbridled discretion to the Executive. The process was also clogged with a lot of bottlenecks—tedious budget release processes; too many lump sums; and lengthy procurement processes. What our people saw on the ground: projects implemented late, during the rainy season, leading to poor quality, added costs and waste. And to top these, there were scant spaces for citizen’s engagement in the process. Bidding Takes A Lot of Time 3-4 Months Allotment Release a Bottleneck April Delayed Implementation Rainy season leads to delays, cost overruns & poor quality GAA Enacted Late March

Citizens are more & more empowered throughout the process The Budget Process Now Budget Submitted Right After SONA July Agencies have more time to flesh out proposals, align with priorities & engage stakeholders January-April Deliberations & Finalization May-June Early Budget Call January Budget Legislation On Schedule August-December Citizens are more & more empowered throughout the process This is how the Philippine Budget Process looks like now: a regime of speed, efficiency and accountability. A proposed budget that is not only enacted early (wala nang budget reenactment under the Aquino Administration) but also formulated with clear parameters on what to fund in terms of priorities and performance targets. A budget execution process that enables the timely and efficient implementation of priority programs and projects. Moreover, the people now have access to performance information of that they can use to hold agencies to account, as well as mechanisms for their participation in the preparation and implementation of the Budget. GAA Enacted On Time & Serves as Release Doc Before End-December Implementation as Early as January Early Bidding October-December

BUT CAN WE ABSORB FURTHER GROWTH?

AND WITH GROWTH, CAN WE BUILD GREATER TRUST?

Our task It is institutions that determine the fate of nations - Why Nations Fail by Daron Acemoğlu and James A. Robinson Nations fail when institutions are “extractive,” protecting the political and economic power of only a small elite that takes income from everyone else. Success comes when political and economic institutions are inclusive and pluralistic, creating incentives for everyone to invest in the future.

Our goal put the country onto a new trajectory, away from patronage politics and corruption, and towards good governance and inclusive growth

Our Trajectory Values-Based Entitlement Meaningful Devolution Meritocracy Voice & Vote Transparency Entitlement Dependency Poverty Institutional Capture Opacity

Our pillars Transformation and setting a new trajectory does not only mean the creation of an effective and efficient state which can deliver public services. It implies taking on a larger agenda for creating an institutional framework that delivers good governance.

Transforming the Budget Spending within means Spending on the right priorities Spending with measurable results In an empowering regime of transparency, accountability & citizen’s engagement Pursuit of difficult reforms in budgeting (plugging leakages, minimizing wastages, untangling bottlenecks, and improving government efficiency) 7

The “Technical Deficit” FUNDAMENTAL REASONS: Poor planning and linkage with budgeting Poor capacity for program & project design Complicated budget release process Long & tedious procurement process Poor delivery, monitoring & evaluation

Poor Procurement Total APP vs Poor Procurement Total APP vs. Awarded Contract (in terms of amount, NGAs) 2011 APP = PhP 137.91 B Awarded = PhP 30.19 B 2012 APP = PhP 131.17 B Awarded = PhP 31.74 B

NG Disbursements Performance, 2014 Poor Execution NG Disbursements Performance, 2014 (in PhP billion)

15.57% of the 2016 estimated disbursements Php468 Billion carry-over budget 15.57% of the 2016 estimated disbursements

Meaningful Devolution

Inclusive Development and Meaningful Devolution INCLUSIVE DEVELOPMENT IS HINGED ON: Ability of LGUs to implement programs & projects Greater LGU accountability for the results of use of public funds Increased voice & vote of grassroots communities & local civil society

Delivering Measurable Results Alternative Delivery Modes Performance-Based Downloading to LGUs to support service delivery thru meaningful devolution & community empowerment We also recognize that we can maximize the ability of agencies to absorb more funds and deliver more services only to an extent. Thus, this Budget enables us to leverage alternative modes of service delivery, in partnership with local governments, local communities, and the private sector. We have implemented reforms that strengthen LGUs’ delivery capacity and accountability—such as the LGU Public Financial Management Program, the Seal of Good Local Governance, the Performance Challenge Fund, and Bottom-Up Budgeting. The 2016 Budget builds on these by enabling the performance-based downloading of funds to LGUs, where the latter will be empowered to implement key national programs for their constituents while making them more accountable for the proper use of funds and the results delivered. Some P18.2 billion has been allocated for this: P11.7 billion for BUB projects and P6.5 billion for the rehabilitation and upgrading of provincial roads. Eventually, we should come to a point in time where communities themselves are capable of implementing programs and projects that benefit them—and we know we can get there based on the experience of the National Community-Driven Development Program and Bottom-Up Budgeting. This Budget also leverages Public-Private Partnerships to boost the implementation of big-ticket infrastructure projects—not only those needed for economic expansion, such as the construction of strategic railways, airports, and highways (P21.3 billion for PPP strategic support for DPWH & DoTC* for 2016); but also those which are essential to social service delivery, such as the closure of the classroom gap as well as the Government Assistance to Students and Teachers in Private Education (GASTPE) program (P21.2 billion for 2016). We should expand PPPs to other areas where we need to catch up, such as in the construction of irrigation systems, if feasible. Notes: PPP Strategic Support Funds—the government share or counterpart for PPP projects—in the 2016 Budget are as follows : DOJ OSec (Modernization of BuCor: P200 million DPWH: P21.128 billion DOTC: 200 million NEDA (PPP Capacity Building Program): P4 million Also: Unprogrammed Appropriations include P 30 billion for the Risk Management Program (i.e. contingent liabilities arising from PPPs) Public-Private Partnerships to boost implementation of big ticket infrastructure

LGU-Public Financial Management (PFM)

General Provision (GP) on Fund Transfers to CSOs Salient Points General Provision (GP) on Fund Transfers to CSOs GAA 2014 and 2015 National Funds transfer to CSOs and Beneficiaries Accredited by DSWD Guidelines by COA-DSWD-DBM In consultation with agencies JR 2014-001 on Accreditation Covers Implementing entities Principles, criteria, and application for accreditation of CSOs Coverage and validity Reporting mechanism JR 2015-001 on Accreditation Covers implementing entities Adopts JR 2014-001 GAA

Principles behind Accreditation Requirements (Beneficiary CSOs) Application Forms and Basic Documents Strengthening CSO Existence to tag Public Funds (location sketch/photo of office, data sheet, Org Chart) Documents Establishing Corporate Existence and Regulatory Compliance Strengthening CSO Governance to Decide on Public Funds (Roster of members, Social Preparation, Organization Policies) Documents Establishing Track Record and Good Standing Strengthening CSO Accountability for Public Funds (List of programs/projects, no derogatory record, affiliation and good standing if part of an umbrella organization)

“We have only remained true to what we promised our Bosses: no one will be left behind, as we tread the straight path to progress.” President Aquino's speech on the signing of the FY 2015 GAA December 23, 2014 Rizal Hall, Malacañan Palace

Performance-Based Downloading LGU Performance Requirements Bottom-Up Budgeting P11.7 B Engage local CSOs via BUB Meet Good Financial Housekeeping standards (SGLG) Submit quarterly reports to DBM & Congress Updating of project status through Open BUB Portal Provincial Roads P6.5 B Provincial road network plan & other reports at start of the FY LGU PFM assessment report Submit quarterly reports to DBM & Congress Updating of project status through Open Roads Portal

1,514 cities and municipalities (ARMM not included) P24.714 B budget FY 2016 QUICK OVERVIEW PROJECTS 14,326 projects 1,514 cities and municipalities (ARMM not included) P24.714 B budget 18% increase from 2015 budget of P20.905B ADMINISTRATIVE COST AND M&E 3% M&E: P741 M PMO Budget (DILG): P350 M *Two LGUs did not submit their LPRAP: Pagadian City and Pantar, Lanao del Sur

DISTRIBUTION BY AGENCY Less than 1% DOE NEA NCIP

P8 B P20 B P20.9 B 595 1,225 1,599 Bottom-up-Budgeting 2013 Budget (Enacted) 2014 Budget (Enacted) 2015 Budget (Enacted) Budget Year 6062 projects 17398 projects 14300 projects P8 B P20 B P20.9 B Amount of Locally- Developed Projects 595 Cities & Municipalities 1,225 Cities & Municipalities 1,599 Cities & Municipalities Participating Local Govts 25

The Many but Small Be faithful in small things because it is in them that your strength lies. Mother Teresa You've got to think about big things while you're doing small things, so that all the small things go in the right direction. Alvin Toffler

P953 Huge NG Budget for Social Services Should this be LGUs’ in the first place? P953 billion P390 billion National Government Budget for SOCIAL SERVICES, 2015 Internal Revenue Allotment (IRA), 2015

Inclusive Development and Meaningful Devolution INCLUSIVE DEVELOPMENT IS HINGED ON: Ability of LGUs to implement programs & projects Greater LGU accountability for the results of use of public funds Increased voice & vote of grassroots communities & local civil society

Online Reporting, Monitoring and Evaluation on openbub.gov.ph National Executive enabled to deeply align spending, priorities and measurable performance and focus on expanding inclusive growth Local Executives strengthened to deliver frontline governance based on performance & accountability

Better Target Planning usung the RSBSA Coconut farmers (% of crop farmers) on middle, lower east side of Batangas (Specific Trend) Batangas (Region IV-A) Population: 2,377,395 Household: 511,530 Farmers: 90,256 Coconut Farmers: 12,292

Better Monitoring and Reporting with Open Roads platform

We are perfecting the reforms. We must perform as we reform. More Work? We are perfecting the reforms. We must perform as we reform.

AWARDED 3rd Place (Gold) OPEN GOVERNMENT AWARDS Open Government Partnership September 24, 2014 New York City

NOMINATED as Philippine Entry ? OPEN GOVERNMENT AWARDS 2015 Local Governments Seal of Good Housekeeping and Performance Challenge Fund ?

Citizen Participation Strengthening Public Fiscal Management 18 September 2015 Marco Polo Hotel, Pasig, Metro Manila MAXINE TANYA M. HAMADA Assistant Secretary Department of Budget and Management 41

Extra Slides

RESHAPING BUDGET PRIORITIES Basic Ed 9

Reshaping Budget Priorities 777 k households 1 M households 2.3 M households 3.1 M households 3.8 M households 4.3 M households 4.3 M households 16

RESHAPING BUDGET PRIORITIES Public Health 10

RESHAPING BUDGET PRIORITIES Infrastructure 11

Budgeting not linked to Planning Philippine , Regional & Local Dev’t Plans LGUs LGUs LGUs

Revenues lower than target, Actual spending higher

Budget accountability, reporting, and controls need to be strengthened

Indication of weak fund stewardship in LGUs Dependence on IRA: Indication of weak fund stewardship in LGUs