Pondo ng Bayan, Sa Tama Ilaan:

An Assessment about the Misallocation of the

National Budget

By: CABRAL, Alyanna Angelina M.

Submitted to: Prof. Lourdes E. Abadingo

Date of Submission: October 16, 2013

 The National Budget comes from the taxes paid by the people. Therefore, it is the money

of the people. The National Budget is handled by the government. This fact creates an obligation

for the government to supply the needs of the citizens. Nowadays, there had been controversies

involving the National Budget allocation and these include the PDAF scam, the overpriced Rizal

Park flagpole, and the budget cut in SUCs. These issues indicate the misallocation of funds,

depriving citizens of the social services they deserve. Instead of spending money on social

services, the government decides to spend it on trivial things like PDAF and expensive flagpoles.

This paper will discuss the processes and methods of National Budget allocation. This

paper will also question the reports indicating high GDP rates and annual increases in budget

allocation for social services despite the consistent existence of poor social services in the

country. This paper will also discuss several ways of improving the system of National Budget

allocation in order to address current problems which involve the National Budget.

First, this paper will discuss the basics of national budget allocation. This process of

budget allocation flows through the National Budget Cycle. This National Budget Cycle has 4

stages—preparation, legislation, execution, and accountability.

The first stage of the National Budget Cycle is Preparation. In this stage, the first step is

that all agencies, including state universities and colleges (SUCs) and government-owned and -

controlled corporations (GOCCs) and government financial institutions (GFIs), will be issued

budget calls, which informs the agencies about the parameters and guidelines in the preparation

of the national budget allocation (Department of Budget and Management, 2012). Moreover,

government agencies are now required to collaborate with civil society organizations (CSOs) in

the preparation of their respective budget allocations. In fact, this early 2011, “the government
invited CSOs to participate in planning budgets for six government departments and plans in

2012” (Dressel, 2012). This collaboration is said to “increase citizen participation in the budget

process” (Department of Budget and Management, 2012).

After the agencies have prepared their respective budget allocation proposals, these

proposals will be reviewed and will be given recommendations by the DBM (Department of

Budget and Management, 2012). These agency budget proposals will then be further reviewed

by the executive board of DBM (Department of Budget and Management, 2012). In the said

review by the executive board, the priority agenda of the national government will be taken into

consideration.

The next step after the review of agency budget proposals is the consolidation and

confirmation of these proposals (Department of Budget and Management, 2012). The budget

proposals, together with their respective recommendations, will be consolidated into a National

Expenditure Program and Budget of Expenditures and Sources of Financing (BESF)

(Department of Budget and Management, 2012). After consolidation, budget proposal will be

presented to the President and Cabinet for approval and further refinements. This approved and

refined budget proposal will be now called the “President’s Budget.” The last step for the

Preparation stage is the submission of the President’s Budget to the Congress.

The next stage of the National Budget Cycle is Legislation. The first step in this stage is

the submission of the President’s Budget to the House of Representatives wherein the said

budget proposal will be under the deliberations of the House Appropriations Committee and its

sub-committees (Department of Budget and Management, 2012). After the deliberations, this

budget proposal will be transformed into a General Appropriations Bill (GAB). After being
approved in the second and third hearings, the GAB is now ready to be submitted to the Senate

for further deliberations. Moreover, it is only after the submission of the GAB to the Senate that

the Senate can propose amendments to the said bill (Department of Budget and Management,

2012). As a result of the deliberations in the Senate, GAB is now called Senate GAB. After the

deliberations in both houses of the Congress, the two houses form a Bicameral Conference

Committee in order to discuss and harmonize the conflicts between the GAB and Senate GAB

(Department of Budget and Management, 2012). After that, the Harmonized GAB will be

presented to both houses of the Congress for ratification. The ratified GAB will then be

presented to the President for “enrollment.” Moreover, the President and DBM will issue a veto

message which contains the items in the enrolled GAB that are subjected to direct veto or

conditional implementation. The General Appropriations Act should be implemented before the

fiscal year starts.

The third stage in the National Budget Cycle is Execution. In this stage, the DBM will

first release guidelines regarding the utilization of funds to the government agencies. Next, each

agency has to submit their Budget Execution Documents (BEDs) which is an outline of their

planned projects, their target expenses and income, monthly cash program, and the list of

obligations that are not yet due and demandable (Department of Budget and Management, 2012).

Moreover, the DBM created the Allotment Release Program (ARP) which monitors the

declarations of each agency in their BEDs and makes sure that the proposed plans are in

accordance with the allocations in the GAA.

It is also in this stage wherein DBM issues allotment release documents which authorize

the appropriations declared by agencies on their BEDs (Department of Budget and Management,

2012). There are two types of allotment release documents: the Agency Budget Matrix (ABM)
and Special Allotment Release Orders (SAROs). ABM is the document which authorizes the

agencies’ spending on programs, activities and projects that do not need clearance or are in

accordance with the GAA. Meanwhile, SAROS are documents which authorize the agencies’

spending on programs, activities and projects that are not in the GAA.

After the authorization of the agencies’ appropriations, these agencies will now be

allotted cash for their spending on programs and projects. Regarding cash allocation, the DBM

created disbursement authorities that will authorize the agencies’ withdrawal of money from

government servicing banks (Department of Budget and Management, 2012). One of the

disbursement authorities created by DBM is the Notice of Cash Allocation (NCA). This NCA

issued to the agencies uses the agencies’ monthly cash program as basis in specifying the

maximum amount of money that an agency can acquire from government servicing banks over s

specific period of time. On the other hand, other disbursement authorities such as Non-Cash

Availment Authority (NCAA) and Cash Disbursement Ceiling (CDC) are issued to agencies for

the authorization of non-cash expenses and acquisition of foreign income. The final step in the

execution stage is disbursement in which money allotted to agencies is actually spent.

Fourth stage in the National Budget Cycle is Accountability. In this stage, the DBM

monitors the ethical and efficient use of the national budget. This stage also involves the

agencies’ monthly and quarterly submission of Budget Accountability Reports (BARs) which

indicates how these agencies utilize funds and meet their performance targets (Department of

Budget and Management, 2012). These BARs include “quarterly physical and financial reports

of operations; quarterly income reports, a monthly statement of allotments, obligations and

balances; and monthly report of disbursements” (Department of Budget and Management, 2012).

After submitting the agencies’ BARs, these reports will then undergo reviews for the evaluation
of the agencies’ compliance with their respective performance targets. These reviews include

Agency Performance Reviews (APRs), which are conducted quarterly, and Budget Performance

Assessment Review (BPAR), which are conducted annually (Department of Budget and

Management, 2012). The last step is the issuance under the Commission on Audit (COA) of

audit reports that confirm the performance and fund utilization of agencies.

Those are the stages of the business cycle which shows how the national budget is

prepared, legislated, executed, and reviewed. Aside from the knowing the budget cycle, it is also

important to know how the national budget is divided and allocated. Our national budget is

divided and allocated among sectors, expense class, regions, and departments and Special Purpose

Fund (SPF). This paper will discuss how much funds are allocated for sectors, expenses, regions, and

departments and SPFs in the current fiscal year and compare these allocations with the allocations in the

previous years.

First is the national budget allocation by sector. This sectoral allocation refers to the allocation of

funds devoted to social services, economic services, general public services, defense, and debt burden.

According to DBM (2012), in 2012, the sectoral budget allocation was P1.816 Trillion and was said to be

10.4% higher than the 2011’s sectoral budget allocation. Moreover, the amount of funds devoted for

social services is the highest, with 31.3% (P567.9 B) of the National Budget (Department of Budget

and Management, 2012). These social services include education, public health, etc. This goes the same

with the 2013 sectoral budget allocation. The social services in the 2013 sectoral allocation have the

highest percentage of funds with 34.8% (P698.8 B) of the National Budget (Department of Budget and

Management, 2012).

Next to social services are the economic services with the second to the highest amount of

sectoral fund allocations in 2013, having 25.5% (P511.1 B) of the national budget. Compared to the
allocation for economic services in 2012 which is 24.2% (P439.5 B) of the national budget, it can be

observed that the 2013 allocation for economic services also increased. According to DBM (2012),

considering the increase of the social and economic services allocations, the government focused on these

sectors in order to alleviate poverty in our country.

Aside from the different sectors of the community, another destination of the National Budget is

the expense class. This expense class refers to the different expenses that the government has to pay. This

covers Capital Outlays, Current Operating Expenditures, and also Debt Burden. Capital Outlays in the

2013 National Budget is P380 B, which is greater by 15.7% compared to the P328.3 B amount of Capital

Outlays in the 2012 National Budget (Department of Budget and Management, 2012). When it comes

to Current Operating Expenditures, there was an increase of 9.2% from the 2012’s Current Operating

Expenditures (Department of Budget and Management, 2012). The 2013 allocation for Current

Operating Expenditures amounts to P1.6 trillion while 2012 allocations only amount to P1.465 trillion.

Another part of the National budget is distributed to the different regions of the country.

For the 2013 National Budget, 49.4% (P990.4 B) is devoted to regional budget allocations, while

only P770.5 B was allocated to regions in the 2012 National Budget (Department of Budget and

Management, 2012). The specific regions with the greatest increase in fund allocation are those

in Visayas and Mindanao because according to DBM (2012), these regions have a higher number

of poor families.

Lastly, some of the National Budget goes to the different departments and Special

Purpose Funds (SPFs). The total amount of allocation for the different departments is P1025 B.

According to DBM (2012), the top ten departments with the highest fund allocation are as

follows: Department of Education (DepEd) with P292.7 B, Department of Public Works and

Highways (DPWH) with P152.9 B, Department of National Defense (DND) with P121.6 B,
Department of Interior and Local Government (DILG) with P121.1 B, Department of Agriculture

(DA) with P74.1 B, Department of Health (DOH) with P56.8 B, Department of Social Welfare

and Development (DSWD) with P56.2 B, Department of Transportation and Communications

(DOTC) with P37.1 B, Department of Finance (DOF) with P33.2 B, and Department of

Environment and Natural Resources (DENR) with P23.7 B.

State Universities and Colleges (SUCs) are also included in this part of the National

Budget. According to Budget Secretary Florencio Abad, the SUC fund allocation for 2013

increased by 44%, having an amount of P37.1 B (Domingo, 2013). The SUC allocation for 2014

is also said to increase from 2013’s P37.1 B to P39.3 B (Boncocan, 2013). However, there are

protests emerging due to the P1.43 budget cut. According to Chiu (2013), 79 SUCs will still face

budget cuts despite the said increase in the 2014 SUC allocation because there will be “a lower

allotment for maintenance and other operating expenses and capital outlay.” Aside from the

departments and SUCs, SPFs also take their share on the National Budget and in these SPFs, the

Priority Development Assistance Fund (PDAF) or also known as Pork Barrel is included.

In the contemporary times, the country is facing several issues regarding the allocation

and utilization of the National Budget and PDAF is one of the manifestations of the

inappropriate use of National Budget. The PDAF has been a cause of controversies recently due

to the 10 Billion Peso Scam in which Janet Lim Napoles is involved. In the PDAF scam, Napoles

created fake non-governmental organizations (NGOs) to which the PDAF of several senators and

congressmen are “allocated” but in reality, these funds end up on the pockets of the greedy

senators and congressmen. That is why recently, there had been consistent protest against Pork

Barrel. In these protests, people from various sectors gather in an attempt to abolish the Pork

Barrel. Like what was said in the earlier part of this paper, the National Budget, including the
PDAF comes from the taxes paid by the people. Therefore, as taxpayers, people have the right to

demand social services from the government.

Aside from PDAF, another manifestation of the inappropriate use of the National Budget

is the overpriced repair of the Rizal Park flagpole. In this repair, the Department of Public Works

and Highway is in charge. The repair of the flagpole was said to cost about P7 Million

(Esplanada & Santos, 2013). When people questioned the price of the flagpole, DPWH replied

that the material to be used for the repair will come from China. That is why it is so expensive

according to them. From this, it can be seen how the people’s money are put into waste.

If PDAF and the Rizal Park flagpole are the manifestations of the inappropriate

utilization of National Budget in a national aspect, there is also a manifestation in the local

aspect. This paper will use the city of Manila as an example. Mayor Joseph “Erap” Estrada, who

is the incumbent mayor of Manila, recently built Wi-Fi hotspots in the waiting sheds around

Manila. This action by Mayor Erap can also be classified as a waste of effort and money since

there are other problems in the city of Manila which are more important to be addressed. Instead

of wasting money on such trivial projects, the local government of Manila should have addressed

the high number of crimes, severe air pollution, and improper waste management in Manila.

This goes the same with the national government. That is why the Pork Barrel should be

abolished—so that instead of allotting the large amount of money to the senators and

congressmen, that money can be allocated to the needs of the people. That P10 B in the PDAF

scam can be used to build many housing units for homeless families. Also, that P7 M to be spent

on the Rizal Park flagpole can feed thousands of families.

 However, despite the protests against Pork Barrel, the national government still

maintained the inclusion of PDAF in the GAA. It is this consistency in the inappropriate use of

National Budget that causes the inadequacy of the public services delivered to people. Observing

the reported growth in GDP rates in President Aquino’s SONAs, it seems that the country is

really prospering and poverty is being lessened. In SONA 2012, Aquino reported that the GDP

for that year had a 6.4% growth and Aquino also added that this growth was the highest in

Southeast Asia (Official Gazette, 2012). Meanwhile, in this year’s SONA, Aquino reported a

7.8% GDP Growth, much higher than last year’s GDP rate (ABS-CBN News, 2013).

It is also observable how the budget allocation on education, health services, housing units, and

other social services is annually increasing. In the 2012 National Budget, social services were allotted

31.3% (DBM, 2012). Meanwhile, in the 2013 National Budget, the allocation for social services increased

in percentage, having 34.8% of the National Budget (DBM, 2012). However, if the surroundings will

be observed, there could be seen no trace of the said increase in social services allocation. In fact,

there were about 170,000 illegal settlers during 2002 and this increased up to more than 223,000

in 2010 (Lagman, 2010). Also, there are still deficits in the public education of the Philippines.

In fact, in the first quarter of 2012, there was a shortage of 10,466 teachers and 7,232 classrooms

in Central Luzon (Cervantes, 2012). Moreover, it was also reported that, about 4.6 million youths

were not able to enroll for the 2013 school year due to the lack of classrooms (Romero, 2013).

Lack of educational services can also be reflected in the budget cuts faced by SUCs.

The existence of poor social services exists due to the inappropriate allocation and

utilization of National Budget. Instead of having the people receive the social services they

deserve, the public money always ends up on the pockets of corrupt politicians. This paper

implies that there should be transparency and participation of citizens in the preparation of the
National Budget. In the present times, citizen engagement in the preparation of National Budget

is slowly put into operation through CSOs which collaborate with governmental agencies in

preparing allocation proposals (Department of Budget and Management, 2012). However, it is

also important for the people to be able to monitor how their money is spent in order to prevent

the improper utilization of National Budget and corruption. Aside from engagement in

preparation and transparency, the people’s approval should be required whenever the

government will implement programs, projects, and other activities that involve the nation’s

money.

Also, processes in the budget cycle should be improved in a way that the National

Budget’s proneness to abuse will be lessened. One way of doing this is through the strict

enactment of the GAA before the start of fiscal year because if the GAA is not enacted before the

fiscal year, then the previous GAA would be reenacted for the present fiscal year instead of the

present GAA (Department of Budget and Management, 2012). If reenactments occur, some

programs which are included in the present GAA would be terminated. Therefore, the allotted

money for these terminated programs will now be allotted to other programs or expenditures

which are present in the re-enacted GAA (Department of Budget and Management, 2012). These

reenactments are prone to abuse since there is uncertainty of having the government allot money

from terminated programs to other programs in the re-enacted GAA. It may be the case that the

money from terminated programs will go to the pockets of government officials instead of

programs and projects. Therefore, strict enactment before the fiscal year is necessary.

Another way of improving the processes in the budget cycle is the strict implementation of the No

Report, No Release order which started to be effective in 2012 (Department of Budget and

Management, 2012). In this order, the agencies who fail to submit Budget Accountability Reports will
not be given funds from the Miscellaneous Personnel Benefits Fund (MPBF). This is in order to penalize

only the agencies and not interrupt the programs of these agencies. This process will improve the

transparency and accountability of agencies. Aside from that, a Performance-Based Incentive System

should be implemented for the improvement of agencies in terms of meeting their performance targets

(Department of Budget and Management, 2012). In this way, the efficient use of the budget allocated

to agencies can be assured.

In this paper, I emphasized the consistent existence of poor social services despite the emergence

of reports showing the increase in budget allocation for social services. First, the basics of budget

allocation were explained. This was done by enumerating the various steps in the stages of the National

Budget Cycle. Second, the distribution of the National Budget by sector, expense class, region, and

department and SPFs were discussed, also showing the comparison between the 2012 and 2013 National

Budget allocations. Third, issues regarding the allocation of National Budget were discussed. These issues

include the inappropriate utilization of National Budget and the consistent existence of poor social

services. Lastly, ways of how to address these problems were enumerated and these include transparency

and citizen participation in National Budget allocation and the improvement of the processes in the

National Budget Cycle in order to prevent abuse of national funds and improve accountability of

agencies.
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