Before the COA Audit: How Taxpayers' Money Becomes the National Budget

The Philippine budget process, explained.
Photo/s: Ted Aljibe, Agence France-Presse

The Department of Budget and Management has submitted to Congress the proposed P5.02 trillion national budget for 2022, signaling the start of four month-long deliberations on a law that will decide how taxpayers' money will be spent, down to the last centavo.

This year's budget will be crafted under closer public scrutiny, after the Commission on Audit raised red flags in how past allocations were spent, from a P10-million infinity pool, to sanitary napkins bought from a hardware store, to "deficiencies" in the Department of Health's P67 billion pandemic-finghting budget.

For congressmen and senators, it's a race to pass the national budget, technically known as the General Appropriations Act, before the end of the calendar year and have it signed by the President so that on January 1 of the next year, there will be money to keep the bureaucracy moving and pay its workers.

It's a rigorous process because the budget law dictates how the government will operate for an entire year, Budget Undersecretary Rolando Toledo told reportr.

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“When you don't pass a budget, wala tayong gagastusin na pondo ng gobyerno. Walang dapat magastos na pera unless that is approved by Congress,” said Toledo, the DBM spokesman.

Nakasaad din dito yung pag-implement ng ating mga priorities. Ang priorities naman natin given this 2022 budget is focused on responding to the COVID-19 pandemic. Really, it's a very critical one,” he added.

Here's how the budget process works

Crafting the begins as early as January of the year before, when the DBM issues a budget call containing the guidelines for budget preparation. Individual agencies would then prepare budget estimates for their projects and programs, which will then be assessed by the DBM.

How exactly? Toledo said the DBM sets various criteria contained in the budget priority framework which they use to decide which items to approve.

The DBM considers the absorptive capacity of the agency, or how well it is able to spend its budget, Toledo said. It also looks at the implementation readiness of new projects, whether they already have the necessary permits and their locations and beneficiaries have been identified.

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Since the government implements a cash-based budgeting approach, agencies should also make sure that the programs and projects they are proposing can be implemented within the fiscal year.

Once the DBM validates the budget proposals, it will then prepare the annual National Expenditure Program which it would submit to Congress for legislation. During congressional deliberations, which start at the House, agencies defend their budgets before lawmakers, and lawmakers can probe agencies over governance issues they are involved in.

After both chambers approve the budget bill, it will be transmitted to the President for signature. Once the budget is signed and enacted into law, agencies will have the authority to spend for their programs, but the actual implementation depends on the availability of funds.

For 2022, the proposed P5.02 trillion budget is 11% higher than this year’s P4.51 trillion and make up 22.8% of the country’s gross domestic product.

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Delays happen, and they're costly

Although the DBM always strives to submit the annual budget to Congress on time, meeting the schedule can be a challenge. Politics and divergent priorities of lawmakers often get in the way of a timely budget approval.

For instance, congressmen ask agencies about small-scale projects in their districts such roads, bridges, and other structures which eats up much of the time during budget hearings and cause delays.

To address this, House appropriations panel chair Eric Yap said parochial concerns of lawmakers will be discussed in a separate venue with the agencies involved.

Hindi rin talaga maiiwasan na talagang ilalabas pa nila yan sa plenary o sa committee level kasi ang congressman importante yung distrito nila. Kaya yung mga ganung tanong ay welcome but we have to set the time limit,” he said.

Sometimes, the Senate and the House also fail to reconcile their versions of the budget bill and have it approved by the President before the new fiscal year begins. This results in a reenacted budget wherein the government runs on the preceding year’s appropriations.

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In 2019, the government operated on a reenacted 2018 budget for four months as disagreements between lawmakers caused a delay in the approval of the budget for that year. This slowed economic growth to 5.6%, lower than the expected 6.6% to 7.2%.

Ang peril niyan, wala doon yung mga bagong projects to be implemented kasi reenacted lang. Yung mga proposed new projects, mahihirapan kang mag-implement because you don't have a basis for you to implement that project,” Toledo said. “Who will suffer? The Filipino people.”

The 2022 budget needs to be passed on time

The proposed 2022 national budget is the highest so far, and the first to breach P5 trillion. It also funds critical health and education-related programs providing social services to Filipinos amounting to P1.92 trillion.

Some P1.47 trillion will also go to the economic services sector supporting key infrastructure projects, while around P862 billion will be for the general public services sector.

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If a budget of that size will not be passed before year-end and the 2021 budget will only be reenacted for 2022, the country’s road to pandemic recovery will be hampered, Yap said.

Toledo said the DBM did its best to submit the budget on time. In the end, it’s up to Congress to ensure that this year’s budget will not be reenacted in 2022.

Alam ko naman na alam nila na ito ay priority, so there's a need for them to really deliberate the budget as soon as possible,” he said.

As the House holds its first budget hearing on Aug. 26, Yap said he scrutinize next year’s appropriations closely and swiftly.

Hindi naman para sa amin sa Congress ito, hindi rin para sa executive ito, kundi para sa mga Pilipino ito,” he added.

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