Diokno says PHL bureaucracy is now ready for cash-based budgeting

Line agencies of the bureaucracy are now in the position to operate under cash-based budgeting, Budget Secretary Benjamin Diokno said on Wednesday.

The shift cash based operations from multi-year budgeting will be in place in fiscal year 2019.

“Starting January, the DBM has began conducting executive briefings with major spending agencies—Department of Education (DepEd), Department of Health (DOH), Department of Transportation (DoTR), Department of Public Works and Highways (DPWH) for the shift to annual cash-based budgeting,” Diokno said during a breakfast forum in Manila.

The briefings to introduce the Budget Reform Bill and annual cash-based appropriations with “major spending” agencies were apart from the briefings with all other agencies in July and August 2017.

“Through the briefings, agency heads obtained a deeper understanding of the operational implications of annual cash-based appropriations and the transition process for the current year, where agencies were requested to implement the 2018 budget as if it were a cash-based budget,” Diokno noted.

In 2017, the Department of Budget and Management (DBM) implemented a one-year validity of appropriations instead of the usual two years to push the agencies to speed up the execution of projects and prepare them for cash-based budgeting.
 
Annual cash-based budgeting, as opposed to multi-year obligations-based budgeting, “limits incurring obligations and disbursing payments for goods delivered and services rendered, inspected, and accepted within the fiscal year,” Diokno noted.

This means that the extent of budget implementation is one year, with an extended payment period of three months after the fiscal year.

“The shift to annual cash-based budgeting is a major component of the Budget Reform Bill being pushed by DBM, together with Department of Finance, Bureau of the Treasury, National Economic and Development Authority, and Commission on Audit,” Diokno said.

The bill aims to modernize the national government’s budget process, eliminate underspending, and institutionalize many of the reforms introduced and are currently being implemented by the Executive branch.

 The bill was filed in both chambers of Congress as House Bill 5590 by Representatives Karlo and Jericho Nograles and as Senate Bill 1450 by Senator Loren Legarda.

On February 27, the bill was approved by the House Committee on Appropriations. It will be discussed in the House plenary during the first week of March.
 
The shift to cash-based budgeting is expected to speed up the government’s budget utilization and promote a disciplined management of the budget.

As it shows actual disbursements rather than obligations or commitments, a cash-based would reflect more accurately the annual outputs and actions of the government, Diokno said.
 
In January, DBM was able to release 78.8 percent or P2.97 trillion of the P3.78 trillion national budget for 2018.

The shift to one-year validity of appropriations has trimmed government underspending to 2.9 percent in 2017 from 3.6 percent.

“Underspending was as high as 13.3 percent in 2014 and 12.8 percent in 2015,” Diokno said.
 
“The lower underspending rate is a result of what we started last year, which was to shorten the validity of appropriations to one year. Because of this, agencies were compelled to expedite the implementation of their projects and programs. They were also required to include only projects that are shovel-ready,” he said. —VDS, GMA News