Core
Business World, 5 February 2014

 

Budget rules do affect fiscal outcomes. The abuses and misuses of public funds arise when fiscal authorities and administrators try to circumvent the strict budget rules.

A well-prepared national budget starts with good budget preparation. When the budget is prepared well, there is no compelling need for the Executive Department to slice, dice and reorder the Congress-approved budget during budget implementation. After all, the budget that Congress approved is based on the budget submitted by the President and prepared by the Department of Budget and Management (DBM).

I remember that Budget Secretary Abad proudly announced that the 2011 budget was prepared based on zero-based budgeting. That means that every single item or activity contained in the 2011 budget had gone through close scrutiny by the DBM staff.

Why rearrange the Congress-authorized budget in the middle of the year if the budget is well prepared? The so-called “spend-it-or-lose-it” policy, where the authorized budget of an agency is impounded by the DBM and then used to fund existing and new budget items, is ridiculous.

This policy gives a woefully wrong signal, and that is not to take budgeting seriously. Why prepare a budget carefully, when the DBM can impound, confiscate, and hoard the budget in the middle of the year? And to think that capital outlays and some maintenance appropriations have a lifetime of two years!

The budget may be seen as a contract between the Executive Department and Congress that it would deliver some levels of government services for a given amount of appropriation. When the budget of an agency is impounded (a negative special release allotment order [SARO] is issued) in the middle of the year because the agency is not able to spend the authorized budget, it limits the agency’s ability to deliver services it committed to Congress.

Assume that for X appropriation, Department XYZ promises to provide Y level of output. By impounding part of the budget, say by half, so that the effective budget of the Department XYZ becomes X/2, then the likely output will be reduced by half. In the next budget season, how will XYZ Secretary explain to Congress his failure to deliver on his commitment?

Put differently, when the Executive implements its “spend-it-or-lose-it” policy, does it mean that its contract with Congress is off? That’s disrespecting a co-equal branch of government.

BUDGET RULES PROHIBIT IMPOUNDMENT OF APPROPRIATIONS

Additionally, existing budget rules specifically prohibit impoundment. Section 66 of the 2011 General Appropriations Act reads: “No appropriations authorized under this Act shall be impounded through retention or deduction, unless in accordance with the rules and regulations to be issued by the DBM: PROVIDED, That all the funds appropriated for the purposes, programs, projects and activities authorized under this Act, except those covered under the Unprogrammed Fund, shall be released pursuant to Section 33 (3), Chapter 5, Book VI of E.O. No. 292.”

Existing budget rules prohibit the transfer of funds. What is allowed is augmentation of an existing item in the general appropriations law from savings. Article VI, Section 25 (5) of the Constitution provides: “The President, the President of the Senate, the Speaker of the House of Representatives, the Chief Justice of the Supreme Court, and the heads of Constitutional Commissions may by law, be authorized to augment any item in the general appropriations law for their respective offices from savings in other items of their respective appropriations.”

The rule is crystal clear: savings have to be generated from their respective appropriations and applied only to items of their respective appropriations.

Hence, the augmentation of items in the budgets of the Commission on Audit, Congress, and the Commission on Elections from savings in the Executive Department, which were admitted by Mr. Abad during his oral defense in the Supreme Court, is unconstitutional.

Also unconstitutional is the use of savings from the Executive Office to finance a new budget item in the same office. The GAA is very clear: “Augmentation implies the existence in this Act of a program, activity, or project with an appropriation, which upon implementation or subsequent evaluation of needed resources is determined to be deficient. In no case shall a non-existent program, activity, or project, be funded by augmentation from savings or by the use of appropriations otherwise authorized in this Act.”

The implication is that the Disbursement Acceleration Program (DAP) cannot be used to fund any program, activity or project that does not exist in the GAA.

LEGISLATORS TO REIMBURSE THE PDAF?

As an aftermath of the Priority Development Assistance Fund (PDAF) controversy, there is a proposal coming from the Commission on Audit to ask legislators to reimburse the PDAF. Seriously? That’s ridiculous.

In the first place, no SARO and Notice of Cash Allocation (NCA) were released to senators and congressmen. DBM authorities will attest to this reality. The SARO and the NCA are released to heads of implementing agencies, government corporations, or local governments, and never to congressmen and senators.

In addition, the SARO is very explicit. It carries a provision that the utilization of the fund shall be in accordance with existing budget, accounting, and audit rules and regulations.

If there are any irregularities in the use of the fund, it becomes the responsibility of the head of the agency or the government corporation. If the desire is to grant the project to a non-governmental organization (NGO), the agency head is supposed to bid projects among qualified NGOs, as prescribed by the new procurement rules. The project is paid in phases and based on the completion of key milestones of the project.

The agency head is responsible for verifying the legitimacy of existing NGOs, using data from the Securities and Exchange Commission and the Bureau of Internal Revenue. He is expected to deal only with legitimate NGOs.

The agency head is expected to defy unlawful orders. If he is ordered by higher authorities — a senator, a congressman, a governor, or a high executive official — to do an illegal act, he should steadfastly disobey the order. Otherwise, he becomes guilty of misusing public funds.

An honest department secretary or agency head or chief executive officer of a government corporation should have the backbone to say no to an illegal or corrupt act. That’s the real test of righteousness.

Interestingly, there are proposals to have some of these graft-ridden government corporations abolished. I hope these are not sinister ways to sweep the sorded PDAF mess under the rug. Erring executive officials who willingly participated in the PDAF controversy should not go unpunished.