Friday, January 14, 2011

DBM Will Not Entertain U.P., other Agency Lump Sum Funds in 2012 Budget Proposal; 2012 Budget Preparation to be More Consultative, Emphasize Output-based Spending

The Department of Budget and Management (DBM) will not entertain lump sum funds that departments and agencies will submit as part of their proposed agency budgets, Secretary Florencio B. Abad said yesterday, according to a press release issued by the DBM..

“The Aquino government wants to move towards budgeting that enables the people to inspect each and every detail of how the government intends to spend their money. For this reason, we will gradually move away from the often-shadowy practice of lump sum budgeting,” Budget and Management Secretary Florencio B. Abad said.

“We started the process of preparing the 2012 National Budget early. This should give ample time to all departments and agencies to flesh-out their proposed budgets into programs and projects to be funded, location of projects and amounts allocated. This promotes transparency and allows agencies to measure outcomes of their spending,” he added.

The DBM has already issued the 2012 National Budget Call that fleshes-out the budget preparation framework and process. National Budget Fora within the DBM and with departments, agencies, government-owned or controlled corporations and government financial institutions have also been conducted to brief them on these processes.

The 2012 National Budget Call, or “first budget call,” fleshes-out the budget preparation framework and process, including the budget preparation calendar. A “second budget call” to be issued next month will set the indicative budget ceilings and macroeconomic assumptions.

According to item 4.1 (General Procedures) of the 2012 National Budget Call, “For the furtherance of transparency, lump sum funds within agency proposals as a policy will not be allowed in the FY (fiscal year) 2012 Budget.”

It further states in item 6.5.2 (Guide to Department/Agency Budget Formulation and Resource Allocation, Department Ceilings for FY 2012) that “Consistent with the performance-based budgeting approach, the indicative budget ceiling may be adjusted based on demonstrated absorptive capacity in relation to the agency MFOs (major final outputs). It shall be fully disaggregated into specific projects according to geographic coverage/location/beneficiaries, in the spirit of transparency and for better monitoring.”

The Case of the University of the Philippines System

Meantime, the Diliman Diary received a tag from the Philippine Collegian which contained excerpts from a critical interview made by its staff with Secretary Abad last January 14 (

"Abad: The approved 2011 budget of the University of the Philippines System, amounting to P5.751 billion, is actually an increase from last year’s appropriation by roughly 8%. This is a real increase, considering that some P1.96 billion in Congressional Initiatives (CIs) in the 2010 budget of the UP System—of which, P678 million is for maintenance and other operating expenditures and 1.28 is for capital outlay—was vetoed by the previous President, Gloria Macapagal-Arroyo, since Congress inserted them without an accompanying revenue measure to fund them. So, it is as if this P1.96 billion never existed. Thus, the proper basis for comparison is from 2010 GAA budget less CIs.

I would also note that aside from its 2011 appropriation, the UP System still has a cash balance of P7.2 billion as of June 30, 2010. Furthermore, as of November 2010, the UP still has an unobligated (i.e. unused) 2010 appropriation for MOOE worth P101.35 million. All of these are available for the UP System’s use this year. With these, I invite you to ask this question: How come UP says urgently need funds, if it still has unobligated funds and a huge cash balance?"

But even for State Universities and Colleges (SUCs), including the University of the Philippines administration, which need to open up to the changes in the times requiring greater transparency as demanded by DBM; it is not clear if DBM itself has put all of its cards on the table as well.

Until the public can get its hands on the detailed budget for 2011 for the U.P. System, including the detailed schedule of disbursements over the year, as well as the official beginning balance of 2011 for the U.P. System (i.e., actual cash in bank) from U.P. itself, official it will be unclear whether the "savings" referred to by Secretary Abad of P 7.3 billion (cash balance and 2010 appropriation for MOOE) are actually "savings" or money that is possibly being held on to for yet unspecified reasons by Malacañang itself.

In the past, DBM has claimed that U.P. had "savings," when in reality, Malacañang has ordered DBM not to release the funds, and realigned the funds for other non-U.P. expenditures.

In 2007, Senator Teofisto "TG" Guingona III, then a congressman (2nd District, Bukidnon), held a public hearing where U.P. Professor Joselito Florendo, then OIC-VP for Finance for UP (Professor Florendo is now U.P.'s Assistant Vice-President for Planning and Finance and Director of the Budget Office) said, "...we were shocked when we were informed that we had 1.3 Billion in savings. For the record, we have no savings in that amount..."

How was this possible? According to then-Congressman Guigona that money never reached the University of the Philippines. Yet, it was reported as savings for UP. The term for this is called, "impoundment" (

On the other hand, Abad may have failed to account for the fact that a portion of the existing surplus cash balances of U.P. are tied to donations by private companies and individuals to university-affiliated foundations which have specific legal or donor's restrictions on the use of the money.

The latest 2009 Consolidated Audited Annual Report (CAAR) of COA is also highly critical of the outgoing administration of U.P. President Emerlinda R. Roman for its failure to allow COA access to information on the extent of the declared and undeclared donations to university affiliated foundations with components of the U.P. System as the ultimate beneficiaries (see:

Additionally, U.P.'s credibility for an expanded budget in the eyes of eagle-eyed DBM officials will continue to be suspect until U.P. comes clean on the sources and uses of its funds, and this example of leadership will need to be set at the level of the U.P. President. Last June June 20, 2010 the Diliman Diary wrote about how the revenue raising University of the Philippines Foundation had the U.P. President as its Chairman and President ( see:

COA said in its 2009 CAAR that it was able to get a commitment for the U.P. Administration to require that the heads of these foundations not be headed by U.P. officials. The implication of this is that as a matter of policy the U.P. President also cannot head any foundation, including the U.P. Foundation and would need to resign as the head of the foundation, for DBM to look at U.P. with more objective eyes.

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