DBM-Effectiveness of The Budget Allocation System of The Government PDF

Management Services
Report No. 2005 – 05

Special Study
Effectiveness of the Budget

Allocation System of the Government
Department of Budget and Management

Republic of the Philippines
COMMISSION ON AUDIT
Commonwealth Avenue, Quezon City, Philippines
Guillermo N. Carague
Chairman
July 5, 2006
HON. ROLANDO G. ANDAYA, JR.

Secretary
Department of Budget and Management
San Miguel, Manila
Sir:
We are pleased to transmit the report on the special study on the budget
allocation effectiveness of the national government. The study was conducted by a
team from the Management Services created under MS/TS Office Order No. 2005-
032 dated June 29, 2005.The results of the study were forwarded to that Department
for comments which were incorporated in the report, where appropriate.
The study was undertaken to assess the effectiveness of the budget

allocation system of the national government in ensuring the funding of priority
programs and projects and the attainment of a balanced budget by 2010 taking into
consideration the following:
• criteria for fund allocation;

• feedback and monitoring mechanism; and
• linkage with Medium-Term Philippine Development Plan.
The study revealed that existing budget allocation system needs

improvement in order to attain the above objective.
We are glad to note that programs to expedite expenditure management

including the conduct of performance review to determine the over-all performance
of the government are on-going. We hope that the results of the study will be
considered in your future resource allocation decisions.
Very truly yours,
Telephone Nos.: (063) 931-9232 / Telefax Nos.: (063) 931-9223

Email: gemcarague@coa.gov.ph / COA Website: http://www.coa.gov.ph
Republic of the Philippines
Commission on Audit
OFFICE OF THE ASST. COMMISSIONER
Management & Technical Services
Commonwealth Avenue, Quezon City, Philippines
Telephone Nos.: 931-92-35, 931-74-55
MEMORANDUM
FOR : The Honorable Chairman
SUBJECT : Report on the special study on budget allocation

effectiveness of the national government
DATE : July 5, 2006
Submitted herewith is the report on the special study on the budget

allocation effectiveness of the national government. The study was conducted by a
team from the Management Services created under MS/TS Office Order No. 2005-
032 dated June 29, 2005. The study was undertaken to assess the effectiveness of
the budget allocation system of the national government in ensuring the funding of
priority programs and projects and the attainment of a balanced budget by 2010.
The audit concluded that improvement in the existing budget system

allocation is necessary to meet the above objective.
The DBM officials were requested to comment on the results of the audit.
In reply, the team was informed that several programs to expedite expenditure
management are on-going and the DBM is presently undertaking performance
review as basis for future resource allocation decisions. Their comments were
incorporated in the report, where appropriate.
ARCADIO B. CUENCO, JR
Assistant Commissioner
Contents Page
Part I Executive Summary 1
Introduction 2
Study Objective 2
Evaluation Criteria 3
Rationale of the Study 3
Scope and Methodology 3
Conclusion 4
Management’s Comments 5
Recommendations 5
Part II The Budget Allocation Process 7
Introduction 8
Governing Laws, Rules and Regulations 9
Other Considerations in Budgeting 12
The Budgeting Approach 16
Components of the Annual Budget 17
The Budget Process in the National Government 18
Approved Budgets for FYs 2001-2005 21
Part III Results of the Study 25
Chapter 1 – Adequate, Well-defined,

And Appropriate Criteria for Fund Allocation 26
Introduction 27
Observation No. 1 28
Management’s Comment and Team’s Rejoinder 32
Contents Page
Chapter 2 – Effective Feedback

And Monitoring Mechanism 61
Introduction 62
Observation 62
Chapter 3 – Compliance with Existing

Laws and Regulations 64
Introduction 65
Observation 65
Chapter 4 – Budget Linkages with the MTPDP 68
Introduction 69
Observation 69
Part IV Recommendations 82
Part I
Executive Summary
1
EXECUTIVE SUMMARY
INTRODUCTION
The national government budget is a vital

instrument for development. It serves as a
potent fiscal tool in directing the economy
towards optimal growth and stability and in
delivering goods and services which are
primarily the responsibility of the national
government to provide.
The national budget is an estimate of expected income and projected expenditures

over a period of time generally referred to as the fiscal year. It lays down the
government’s plans, activities, programs, projects and activities for implementation
within the period and the manner of funding the same. It is formulated within the
context of the Medium-Term Philippine Development Plan (MTPDP) and the
identified priority areas in the Medium-Term Public Investment Program (MTPIP)
of the present administration.
The budgetary allocations for each Department, Office or program are categorized
into personal services, maintenance and operating expenditure and capital
expenditure. The national budget also sets aside a certain amount for debt servicing.
STUDY OBJECTIVE
The study was undertaken to assess the effectiveness of the budget allocation
system of the government in ensuring the funding of priority programs and projects
and the attainment of a balanced budget by 2010 taking into consideration the
following:
• Criteria for fund allocation;

• Feedback and monitoring mechanism; and
• Linkage with MTPDP.
2
EXECUTIVE SUMMARY
EVALUATION CRITERIA
The effectiveness of the budget allocation system of the government was assessed
using these criteria:
• Adequate, well-defined and appropriate criteria for fund allocation;
• Effective feedback and monitoring mechanism;
• Compliance with existing laws and regulations; and
• Budget linkages with the MTPDP.
RATIONALE FOR THE STUDY
For many years now, the government is operating under deficit budgets. To
augment government revenues, it is continuously resorting to borrowings.
Considering the magnitude of our public debt coupled with a number of priority
needs that could not be addressed by the government, there is a felt need to conduct
a study on the effectiveness of the budget allocation system of the government.
SCOPE AND METHODOLOGY
The study covered an evaluation of the allocation of resources to the different

programs and projects of the government during CYs 2001 to 2005, and the manner
of monitoring its implementation.
To attain the objective, the team performed the following activities:

• Reviewed and evaluated the existing policies and procedures on fund allocation;
• Interviewed concerned personnel of agencies involved in annual budget
preparation;
• Obtained and reviewed the MTPDP, MTPIP, General Appropriations Acts and
other budget documents covering CYs 2001 to 2005;
• Reviewed and evaluated the roles and responsibilities of agencies involved in
annual budget preparation;
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EXECUTIVE SUMMARY
• Assessed the monitoring mechanism in the implementation of programs/projects

by the implementing agencies; and
• Issued queries on matters needing clarification.
CONCLUSION
The existing budget allocation system needs improvement in order to ensure the
implementation of priority programs and projects identified in the MTPDP for CYs
2004 to 2010 and the attainment of a balanced budget by 2010.
The study revealed that the criteria for fund allocation are neither clear nor well-
defined as manifested in the following:
• Ceiling for capital outlay is based on prior year’s appropriation or National

Expenditure Program (NEP) in case of reenacted budget when these expenditures
are not regular and non-recurring.
• Despite unmanageable budget deficits from CYs 2001 to 2005, the national
government did not reduce allocations on the following expenditure items:
¾ Internal Revenue Allotment (IRA) representing 16.81%
to 25.37% of the total annual new appropriation.
¾ Priority Development Assistance Fund (PDAF) ranging
from P3.33 billion to P8.33 billion annually.
¾ Budgetary Support to Government Corporations ranging
from P3.91 billion to P10.19 billion annually.
¾ Low priority projects.
• The President’s proposed budget and the approved budget consistently exceeded
the desired expenditure levels defined in the 2001-2010 MTPDP. This would
hinder the attainment of the government’s goal of balancing the budget by 2010.
• Programs and projects not included in the MTPDP were nevertheless funded at the
expense of identified priority projects.
• Sectoral programs adequately funded under the programs and projects of the
respective implementing agencies are still included in the projects authorized to be
funded from PDAF. Thus, other programs and projects were not adequately
funded.
• The national government continuously provides budgetary support to losing
government corporations. Such subsidies/budgetary support did not attain the
purpose of enhancing the efficiency and effectiveness of said corporations.
4
EXECUTIVE SUMMARY
The study also revealed several other deficiencies such as:
• The proposed current operating expenditures for CYs 2001 to 2005 far exceeded
the national government’s revenue for the same period. The approval of current
operating expenditures budget in excess of the proposed revenue collection
contributed to the increasing national government budget deficit.
• The President’s proposed budget and the GAAs for CYs 2001-2004 were not
aligned with the MTPDP sectoral fund allocations. The failure of the DBM to
align BESF sectoral allocations with the MTPDP would affect the implementation
of the government’s priority programs defined in the MTPDP. On the other hand,
the 2004-2010 MTPDP did not provide sectoral allocation of resources. Thus,
assessment on the effectiveness of allocations could not be undertaken.
• The DBM has no feedback mechanism to assess the effectiveness of the previously
adopted Baseline Budgeting and the present Indicative Budget Ceiling Approach.
MANAGEMENT’S COMMENT
The Department of Budget and Management (DBM) informed the team that
programs to expedite expenditure management are on-going and that they are
conducting performance review to determine the overall performance of the
government in terms of fund utilization, revenue generation and output
accomplishment. The results of such review will be used as basis for future
revenue allotment decisions.
RECOMMENDATIONS
In view of the noted observations, the team recommends the following measures:
¾ Fasttrack the establishment of appropriate and relevant criteria for allocating

funds taking into consideration the results of the on-going studies and the
observations noted by the team. It is specifically suggested that in developing
criteria, the following concerns be considered:
• reassessing the practice of prescribing ceilings for capital outlay based
on prior year’s budget as this could not be considered as a valid basis
for allocation;
• setting expenditure levels consistent with the Deficit Reduction
Program of the government;
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EXECUTIVE SUMMARY
• the possibility of adjusting allocations for IRA, PDAF, budgetary

support to government corporations and low priority projects. The
DBM could also move for the revision of Section 285 of RA 7160 to
consider the financial capability of the LGUs in allocating IRA;
• the irrational practice of providing budgetary support to losing
government corporations;
• the proposed expenditure level in the MTPDP and the priority projects
and programs defined in the MTPIP;
• utilizing PDAF only for priority projects and programs not adequately
funded in the regular appropriation.
¾ Limit the proposed current operating expenditures to the level of the expected
national government revenue to reduce budget deficits; and
¾ Coordinate with the Government Accounting and Financial Management
Information Systems (GAFMIS) of the Commission on Audit for the generation
of accounting reports that would provide information needed for the evaluation
of the budget approaches and expenditure management reforms such as the
Organizational Performance Indicator Framework (OPIF) and Agency
Performance Review (APR).
6
Part II
The Budget Allocation Process
7
THE BUDGET ALLOCATION PROCESS
INTRODUCTION
Raising funds, allocating and spending public resources are considered major
activities and the foundation of any government. The achievement of public policy
objectives is dependent on the availability of resources for the implementation of
programs/projects.
Through proper budgeting, the government is able to maximize the use of scarce
resources to meet the needs of the people as well as sustain economic growth.
Budgets are fundamental for meeting the three important policy objectives which
are interrelated:
Aggregate Fiscal
Discipline Allocation of resources
consistent with strategic
The government considered decisions on total policy priorities
revenues, expenditures and financing
arrangements vital in shaping the size and form
of government intervention sustainable over a Expenditure should be directly
period of time in ensuring economic growth. linked with government policies
Accommodating all spending demands also and strategic priorities and
posed economic risks. Thus, aggregate should take into consideration
expenditure ceilings are set before decisions effectiveness and equity of each
on the individual components of the program and project.
budget are finalized.
Efficiency and effectiveness

in implementing activities
Budget should take into consideration

adequate resources to ensure attainment of
tangible outputs and outcome of each
project.
8
GOVERNING RULES AND REGULATIONS
Laws, Rules and

Particulars
Regulations
Philippine Constitution
Sec. 29, Article VI No money shall be paid by the Treasury except in pursuance of an
appropriation.
Sec. 22, Article VII The President shall submit to Congress within 30 days from the
opening of every regular session, as the basis of the general
appropriation bill (GAB), a budget of expenditures and resources of
financing including receipts from existing and proposed revenue
measures.
Sec. 5, Article XIV The state shall assign the highest budgetary priority to education and
ensure that teaching will attract and retain its rightful share of the best
available talents through adequate remuneration and other means of job
satisfaction and fulfillment.
Revised Administrative Code
Section 1, Chapter 1 Constitutional Policies on the Budget -
All appropriations, revenue or tariff bills, bills authorizing increase of
the public debt, bills of local application, and private bills shall
originate exclusively in the House of Representatives but the Senate
may propose or concur with amendments.
The Congress may not increase the appropriations recommended by
the President for the operation of the Government as specified in the
budget. The form, content and manner of preparation of the budget
shall be prescribed by law.
No provision or enactment shall be embraced in the general
appropriations bill unless it relates specifically to some particular
appropriation for other departments and agencies.
If, by the end of any fiscal year, the Congress shall have failed to pass
the general appropriations bill for the ensuing fiscal year, the general
appropriations law for the preceding fiscal year shall be deemed
reenacted and shall remain in force and effect until the general
appropriations bill is passed by the Congress.
Section 12, Chapter 3 Form and Content of the Budget - The budget proposal of the President
shall include current operating expenditures and capital outlays. It
shall comprise such funds as may be necessary for the operation of the
programs, projects and activities of various departments and agencies.
The proposed General Appropriations Act (GAA) and other
Appropriations Acts necessary to cover the budget proposals shall be
submitted to Congress to accompany the President’s budget
submission.
9
Laws, Rules and

Particulars
Regulations
Section 13, Chapter 3 Budget Levels – The ordinary income of government shall be used
primarily to provide appropriations for current operations, except in
case of a national emergency or serious financial stress, the existence
of which has been duly proclaimed by the President.
The Level of aggregate revenue expenditure and debt shall be jointly
recommended to the President by the Department of Budget and
Management (DBM), the Department of Finance (DOF), the National
Economic Development Authority (NEDA) and the Central Bank of
the Philippines now the Bangko Sentral ng Pilipinas (BSP), acting
within the Development Budget Coordination Committee of the
National Economic Development Authority.
Section 14, Chapter 3 Budget Estimates – Each head of department, office or agency of the
National Government, including the Legislative and Judicial Branches,
and including government owned or controlled corporations, shall
submit his request for appropriations to the Department of Budget and
Management in accordance with the budget calendar, format, and such
rules and regulations as may be issued in implementation of this
Decree.
Section 16, Chapter 3 Budget Evaluation – Agency proposals shall be reviewed on the basis
of their own merits and not on the basis of a given percentage or peso
increase or decrease from a prior year’s budget level, or other similar
rule of thumb that is not based on specific justification. Proposed
activities, whether new or on-going, shall be evaluated using a zero-
base approach and on the basis of (1) relationship with the approved
development plan, (2) agency capability as demonstrated by past
performance, (3) complemental role with related activities of other
agencies, and (4) other similar criteria. The realization of savings in a
given budget year and the consequent non-utilization of funds
appropriated or released to a given agency shall not be a negative
factor in the budget evaluation for the subsequent year.
Section 26, Chapter 4 Automatic Appropriations – All expenditures for (1) personnel
retirement premiums, government services insurance, and other similar
fixed expenditures, (2) principal and interest on public debt, (3)
national government guarantees of obligations which are drawn upon,
are automatically appropriated: provided, that no obligations shall be
incurred or payments made from funds thus automatically appropriated
except as issued in form of regular budgetary allotments.
Section 51, Chapter 6 Evaluation of Agency Performance – The President, through the
Secretary shall evaluate on a continuing basis the quantitative and
qualitative measures of agency performances reflected in the units of
work measurement and other indicators of agency performance,
including the standard and actual costs per unit of work.
Section 52, Chapter 6 Budget Monitoring and Information System – The Secretary of Budget
shall determine accounting and other information, financial or
otherwise, needed to monitor budget performance and to assess
effectiveness of agencies’ operations and shall prescribe the forms,
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Laws, Rules and

Particulars
Regulations
schedule of submission, and other components of reporting systems,
including the maintenance of subsidiary and other records which shall
enable agencies to accomplish and submit said information
requirements: provided, the Commission on Audit shall, in
coordination with the Secretary of Budget, issue rules and regulations
that may be applicable when the reporting requirements affect
accounting functions of agencies: provided, further, that the applicable
rules and regulations shall be issued by the Commission on Audit
within a period of thirty (30) days after the Department of Budget and
Management prescribes the reporting requirements.
Section 55, Chapter 6 Review of Budgetary Programs – The Secretary of Budget shall
conduct a continuing review of the budgetary program and project
structure of each department, office or agency, the results of which
shall be the basis for modifying or amending such structure for
incorporation in the President’s budget proposals to the Congress.
Section 53, Chapter 6 Monitoring of Expenditures – Expenditures of national government

agencies shall be classified into such categories as may be determined
by the DBM, including but not limited to the following: (1) agency
incurring the obligation, (2) program, project and activity, (3) object of
expenditure, including personal services, operating and maintenance
expenditures, equipment, and capital outlays, (4) region or locality of
use, (5) economic or functional classification of the expenditure, (6)
obligational authority and cash transactions arising from fund releases,
and such other classifications as may be necessary for the budget
process. The Secretary of Budget shall determine the data and
information requirements thus needed and the COA shall formulate the
accounting records, as may be necessary to generate the desired data
and information. The Chief Accountant of Agencies and where
necessary, accountants of regional offices, shall submit the data needed
by the Department of Budget and Management in accordance with
such rules and regulations as it may formulate.
Section 56, Chapter 6 Semi-Annual Report on Accomplishments of Government Agencies –

The heads of departments, bureaus, offices or agencies of the
government shall submit a semi-annual report of their
accomplishments, both work and financial results, in accordance with
such content and format as may be prescribed by the Secretary. These
reports shall be designed and used for the purpose of monitoring the
efficiency and effectiveness with which budgeted funds are being
utilized, and generally for verifying the attainment of goals established
in the budget process.
Other Regulations
National Budget Call Sets economic and fiscal targets; prescribes the priority thrusts and
budget levels; and spells out the guidelines and procedures, technical
instructions and timetable for budget preparation.
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OTHER CONSIDERATIONS IN BUDGETING
In addition to existing rules and regulations, the budget process also considers the
following:
• The MTPDP and MTPIP
The MTPDP contains the socio-economic development agenda of the

government for the six-year period which coincides with the term of an
administration. It spells out the macro or overall development policies, sectoral
strategies, targets, goals, objectives, priority programs and projects, and priority
legislative agenda for the period.
The MTPDP is supported with Medium-Term Public Investment Plan (MTPIP).

It defines the public investment priorities of the present Administration
programmed to be accomplished within the first three-year period. The
concerned government agencies then develop their programs and projects in
line with the investment plan.
The MTPDP for 1999 to 2004 intends to cover the administration of former
President Joseph Estrada. Due to the sudden change in administration and the
assumption to Presidency of then Vice President Gloria Macapagal-Arroyo in
January 2001, another MTPDP was formulated covering 2001 to 2004.
The MTPDPs for 2001 to 2004 and 2004 to 2010 embodies the antipoverty and
overall development framework of the present administration. It aimed to
expand and equalize access to economic and social opportunities, inculcate
receptivity to change, and promote personal responsibility. Specifically, it
focused on the following:
2001 to 2004
Macroeconomic stability with equitable growth based on free enterprise

Agriculture and fisheries modernization with social equity
Comprehensive human development and protecting the vulnerable
Good governance and the rule of law
12
2004 to 2010
Economic growth and job creation

Energy
Social justice and basic needs
Education and youth opportunity
Anti-corruption and good governance
• The President’s 10-Point Agenda for 2004 to 2010
Six to ten million jobs

Education for all
Balance the national budget
Develop transportation networks and digital infrastructure
Provision of power and water to all barangays
Decongestion of Metro Manila
Development of Clark and Subic as logistics centers in Asia
Automation of the electoral process
Just completion of the peace process
Closure of wound caused by division due to EDSA 1, 2 and 3
• The Millennium Development Goals
By 2015, all 189 United Nations Member States have pledged to address the
following:
Goals Specific Objectives/Strategies
Eradicate extreme o Reduce by half the proportion of people living on

poverty and hunger less than a dollar a day
o Reduce by half the proportion of people who suffer
from hunger
Achieve universal o Ensure that all boys and girls complete a full course
primary education of primary schooling
Promote gender o Eliminate gender disparity in primary and secondary

equality and education preferably by 2005, and at all levels by
empower women 2015
Ensure environmental o Integrate the principles of sustainable development

sustainability into country policies and programmes; reverse loss
of environmental resources
13
Goals Specific Objectives/Strategies
o Reduce by half the proportion of people without

sustainable access to safe drinking water
o Achieve significant improvement in lives of at least
100 million slum-dwellers by 2020
Reduce child o Reduce by two thirds the mortality rate among

mortality children under five
Combat HIV/AIDS, o Halt and begin to reverse the spread of HIV/AIDS

malaria and other o Halt and begin to reverse the incidence of malaria
diseases and other major diseases
Improve maternal o Reduce by three quarters the maternal mortality ratio

health
Develop a global o Further develop an open trading and financial system

partnership for that is rule-based, predictable and nondiscriminatory.
development Includes a commitment to good governance,
development and poverty reduction – nationally and
internationally
o Address the special needs of least developed
countries. This includes tariff- and quota-free access
for their exports; enhanced debt relief for heavily
indebted poor countries; cancellation of official and
bilateral debt; and more generous official
development assistance for countries committed to
poverty reduction
o Address the special needs of landlocked and small
island developing States
o Deal comprehensively with developing countries’
debt problems through national and international
measures to make debt sustainable in the long term
o In cooperation with the developing countries,
develop decent and productive work for youth
o In cooperation with pharmaceutical companies,
provide access to affordable essential drugs in
developing countries
o In cooperation with the private sector, make
available the benefits of new technologies –
especially information and communications
technologies
14
• Fiscal Reduction Program of the National Government
Under the 2001-2004 MTPDP, the government shall engage in a deficit

reduction strategy over the medium term to keep the debt burden to a
manageable level. It targeted to improve the public sector position from a deficit
of 4.3 percent of GNP in 2001 to a surplus of 0.4 percent by 2006.
To achieve this target, the NG, which is the largest contributor to the total
public sector position will progressively reduce its deficit from P145 billion in
2001 or equivalent to 3.8 percent of GNP to balance the budget by 2006.
These projections were, however, revised under the 2004-2010 MTPDP. Under
the new projections, the NG budget would be balanced by 2010. The
assumptions under these plans are as follows:
Fiscal Reduction Program, 2001-2006 & 2004-2010

1800
1600
1400
1200
1000
In Billion Pesos
800
600
400
200
0
01
02
03
04
05
06
07
08
09
10
-200
20
20
20
20
20
20
20
20
20
20
-400
Calendar Year
To ta l R e ve nue s , 2001-2006 To ta l R e ve nue s , 2004-2010

To ta l Dis burs e m e nts , 2001-2006 To ta l Dis burs e m e nts , 2004-2010
F is c a l De fic it, 2001-2006 F is c a l De fic it, 2004-2010
% o f GNP , 2001-2006 % o f GDP , 2004-2010
Source: 2001-2004 and 2004-2010 MTPDPs
15
• Proposed Consolidated Public Sector Financial Position per Budget of

Expenditure Sources of Financing (BESF)
The budget process was also affected by the consolidated public sector financial
position reflecting an increasing adjusted cash deficit from P81,700 million in
2001 to P253,636 million in 2005 as tabulated below.
Adjusted Cash Surplus / (Deficit)

Particulars (In Million Pesos)
2001 2002 2003 2004 2005 2006
National
(85,000) (130,000) (142,133) (197,815) (184,526) (124,880)
Government
Major Government
(17,261) (26,257) (64,683) (45,080) (91,860) (47,800)
Corporations
Other Non-Finan-
2,846 (397) - - - -
cial Corporations
Local Government
4,200 4,700 4,860 5,820 17,071 7,181
Units
Impact of CB
(20,595) (24,031) 20,644 (17,094) (18,378) (19,242)
Restructuring
Adjustments 34,110 39,885 25,600 37,679 (24,057) 56,611
Total (81,700) (136,100) (197,000) (216,490) (253,636) (128,130)
Source: 2004-2010 MTPDP
THE BUDGETING APPROACH
Basically, the DBM follows the performance budgeting approach. This is the result
of innovations introduced under Presidential Decree (PD) 1177, otherwise known as
the Budget Reform Decree of 1977, such as zero-based budget analysis, long-term
and medium-term budgets and national resource budget, among others.
Performance budgeting is a management-oriented system of budgeting which

measures actual or estimated results in terms of benefits accruing to the public and
their unit costs. Zero-Base Budgeting, on the other hand, is a process which
requires the budget estimates to be evaluated on a zero-base approach rather than on
the incremental approach, as was customarily done, where only new activities and
additional outlays have to be justified.
16
Although performance budgeting was introduced in the Philippines as early as 1957,

the government was not able to fully implement this. Past years’ budgets adopted
the features of the line budget system. It was in 1978 budget when the national
government adopted the performance budget system.
From 1946 to 1976, the national government operated on a fiscal year basis
beginning July 1 and ending June 30. The change in the budget year to coincide
with the calendar year beginning January 1 and ending December 31 was effected in
1977 upon issuance of PD No. 777 enacted on August 24, 1975.
COMPONENTS OF THE ANNUAL BUDGET
The annual budget is composed of the following:
New General Legislated by Congress for every budget year under the General
Appropriations Appropriations Act (GAA)
Previous authorizations by Congress may be broken down into continuing and

Existing
automatic.
Appropriations
• Continuing
Appropriations available to support obligations for a specified purpose or
project, such as multi-year construction projects which require the
incurrence of obligations even beyond the budget year. Examples of
continuing appropriations are those from existing laws such as: Republic
Act (RA) 8150, otherwise known as Public Works Act of 1995; and RA
6657 and RA 8532 which set funds specifically for the Agrarian Reform
Program (ARP). Currently, appropriations for Capital Outlays (COs)
and Maintenance and Other Operating Expenses (MOOEs) are
considered as continuing appropriations but only for a period of two
years
• Automatic
Appropriations programmed annually or for some other period prescribed
by law, by virtue of outstanding legislation which does not require
periodic action by Congress. It includes expenditures authorized under
the following laws:
- PD 1967, RA 4860 and RA 245, as amended, for the servicing
of domestic and foreign debts;
- Commonwealth Act 186 and RA 660, for the retirement and
insurance premiums of government employees;
- PD 1177 and EO 292, for net lending to government
corporations; and
- PD 1234, for various special accounts and funds.
17
THE BUDGET PROCESS IN THE NATIONAL GOVERNMENT
The budget process is a continuous THE BUDGET PROCESS

activity and is composed of four major
stages as shown here:
Budget
Preparation
Budget Preparation
Budget Legislation
The preparation of the annual budget

involves a series of steps that begins Budget Accountability
with the determination of the overall

economic targets, expenditure levels,
revenue projection and financing plan
Budget
by the Development Budget Execution
Coordinating Committee (DBCC).
The DBCC is an inter-agency body composed of the heads of the following offices
responsible in the generation and allocation of funds:
Offices/Position Designation Responsibility

DBM Secretary Chairman Resource allocation and debt management
BSP Governor Member Monetary measures and policies
DOF Secretary Member Resource generation and debt management
NEDA Director General Member Overall economic policy
OP Representative Member Oversight role
The major activities involved in the preparation of the annual national budget
include the following:
Determination of overall economic targets, expenditure levels and

budget framework by the DBCC
Issuance by the DBM of the Budget Call which defines the budget
framework; sets economic and fiscal targets; prescribe the priority
thrusts and budget levels; and spells out the guidelines and
procedures, technical instructions and the timetable for budget
preparation
18
Preparation by various government agencies of their detailed budget

estimates by ranking programs, projects and activities using the
capital budgeting approach and submission of the same to DBM
Justification of the agencies’ proposed budgets before DBM
technical panels.
Submission by DBM to the government agencies of the proposed
expenditure program of departments/agencies/ special purpose funds
for confirmation by department/agency heads.
Presentation of the proposed budget levels of department/agencies/
special purpose funds to the DBCC for approval
Review and approval of the proposed budget by the President and the
Cabinet.
Submission by the President of proposed budget to Congress.
Budget Authorization
Budget authorization is the legislative authorization of the budget. The legislative

consideration in appropriating funds is governed by Sec. 22 of Article VII of the
Philippine Constitution. The authorization process is as follows:
House of Bicameral
Senate
Representatives Committee
Receives copy of the proposed Receives copy of the proposed Threshes out differences
budget from the Office of the budget from the Office of the to arrive at a common
President President version of the General
Appropriations Bill
Appropriation Committee Senate Finance Committee,
through its different sub-
• conducts initial budget review Finalizes the General
committees: Appropriations Bill
• in coordination with other
• conducts review of the
House sub-committees, conduct
proposed budget Submits the General
budget hearings
Appropriations Bill to the
• proposes amendments to the
• presents the amended budget President for approval
General Appropriation Bill
proposal to the House Body as
submitted by the House.
the General Appropriations Bill Approval by the
• presents amendments to the President of the GAA
The General Appropriations Bill is Senate Body for approval
submitted to the Senate for review.
19
The agency appropriation may still be adjusted within the fiscal year on account of
enactment of new laws and changes in resources availabilities, among others.
Budget Execution
The operational phase of budgeting is concerned with the following activities:
Preparation by DBM of agency budget matrix (ABM)

in consultation with the agencies at the beginning of
Control of Releases each budget year upon approval of the General
Appropriations Act
Allotment of The issuance of Special Allotment Release Order

Appropriations (SARO) and release of Notice of Cash Allocation by
the DBM
Incurrence of Utilization by government agencies of the released

Obligations NCAs following the “Common Fund” concept
Budget Accountability
This phase concerns the reporting of actual performance against planned

performance. More specifically, it consists of the preparation and submission of:
• financial and physical reports of operations;

• actual cash disbursement and unpaid obligations; and
• actions of the Commission on Audit.
20
At the agency level, budget accountability takes the form of management’s review
of actual performance or work accomplishment in relation to the work targets of the
agency vis-à-vis the financial resources made available.
Examination of each agency’s book of accounts are undertaken by the Commission

on Audit to ensure that all expenses have been disbursed in accordance with
accounting/auditing regulations and the purpose(s) for which the funds have been
authorized.
Budget accountability provides the President, the Members of the Cabinet, and the
members of the Congress, a means of evaluating progress and determining the
future directions of government activities.
APPROVED BUDGETS FOR CYs 2001-2005
The General Appropriations Act (GAA) is the legislative authorization that contains
the new appropriations in terms of specific amounts for salaries, wages and other
personnel benefits; maintenance and other operating expenses; and capital outlays
authorized to be spent for the implementation of various programs/projects and
activities of all departments, bureaus and offices of the government for a given year.
From CYs 2001 to 2005, the annual appropriations ranged from P957.03 billion to
P1.09 trillion or a total of P4.77 trillion. The yearly allocation is tabulated below:
Approved Budgets, CYs 2001-2005
700
600
500
In Billion Pesos
400 New Appropriation

300 Automatic
200
100
0
Reenacted RA 9162 RA 9206 Reenacted RA 9336
2001 2002 2003 2004 2005
Cale ndar Ye ar
21
Budget Allocation by Agencies and Special Purpose Funds
Of the P3.06 trillion new appropriations for CYs 2001 to 2005, a total of P1.72
trillion or 56% was allocated to the different national government agencies while
the remaining balance of P1.34 trillion or 44% was allocated to various Special
Purpose Funds.
Total
Agency/Fund
(In Thousand Pesos)
Allocation to National Government Agencies
1. Department of Education (DepEd) 473,277,971
2. Department of Public Works and Highways (DPWH) 248,828,066
3. Department of National Defense (DND) 244,852,350
4. Department of Interior and Local Government (DILG) 212,074,743
5. State Universities and Colleges (SUCs) 76,826,384
6. Department of Health (DOH) 51,969,479
7. Department of Transportation and Communications (DOTC) 48,894,812
8. The Judiciary 35,221,968
9. Department of Environment and Natural Resources (DENR) 29,134,754
10. Autonomous Regions 26,681,252
11. Department of Finance (DOF) 26,130,799
12. Department of Justice (DOJ) 23,179,781
13. Department of Foreign Affairs (DFA) 22,686,149
14. Department of Labor and Employment (DOLE) 22,179,799
15. Other Executive Offices 21,742,835
16. Congress of the Philippines 21,490,456
17. Commission on Audit (COA) 18,020,820
18. Department of Agriculture (DA) 16,513,040
19. Office of the President (OP) 14,307,000
20. Department of Science and Technology (DOST) 13,257,805
21. Department of Agrarian Reform (DAR) 11,115,401
22. Commission on Elections (COMELEC) 10,510,325
23. Department of Social Welfare and Development (DSWD) 10,446,669
24. National Economic Development Authority (NEDA) 8,859,165
25. Department of Trade and Industry (DTI) 9,347,275
26. Department of Tourism (DOT) 4,919,667
27. Office of the Press Secretary (OPP) 3,974,140
28. Office of the Ombudsman 2,442,634
29. Civil Service Commission (CSC) 2,358,639
30. Department of Energy (DOE) 2,149,820
31. Department of Budget and Management (DBM) 2,054,393
32. Commission on Human Rights (CHR) 956,084
33. Office of the Vice-President (OVP) 403,757
34. Joint Legislative-Executive Councils 17,710
Sub-Total 1,716,825,942
22
Total
Agency/Fund
(In Thousand Pesos)
Allocation to Special Purpose Funds

1. Allocations to Local Government Units 705,698,811
2. Unprogrammed Fund 213,203,088
3. Debt Service-Interest Payment 109,314,000
4. Pension and Gratuity Fund 91,947,101
5. Agriculture and Fisheries Modernization Program (AFMA) 81,734,329
Countrywide Development Fund (CDF)/ Priority
6. 31,761,500
Development Assistance Fund (PDAF)
7. Budgetary Support to Govt. Corporations 27,603,277
8. Agrarian Reform Fund (ARF) 20,814,206
9. Miscellaneous Personnel Benefits Fund 14,267,689
10. Compensation/Salary Adjustment Fund 13,200,000
11. DECS-School Building Program / DepEd-SBP 7,000,000
12. AFP Modernization Program 5,000,000
13. International Commitments Fund 4,979,373
14. Contingent Fund 4,000,000
15. Calamity Fund 3,898,500
16. DECS-Basic Education Facilities Program 2,000,000
17. Foreign Assisted Project Support fund 1,200,000
18. E-Government Fund 1,000,000
19. Organizational Adjustment Fund 426,151
20. National Unification Fund 402,116
21. Motor Vehicle User's Charge Fund 364,342
22. General Fund Adjustments 250,000
23. Area Development Assistance Fund 108,304
24. Property Replacement Fund 62,000
25. RPWEB Support Fund 50,000
Sub-Total 1,340,284,787
Total 3,057,110,729
Unprogrammed fund, also called standby appropriation, is not yet supported by

corresponding resources but nevertheless included by Congress in the GAA. As
standby appropriation, it authorizes additional agency expenditures for priority
programs and projects in excess of the agency’s budget when actual revenue
collections exceeded the revenue targeted or when additional foreign project loan
proceeds are realized.
23
Budget Allocation by Expense Classification
Allocation for Personal Services (PS) comprise the biggest chunk of the national
government budget at P1.15 trillion or at least 56% of the total budget allocation for
the period 2001-2005. This leaves P297.98 billion or 14% for Maintenance and
Other Operating Expenses (MOOE) and P271.32 billion or 13% for Capital Outlay
(CO), and P340 billion or 17% for Special Purpose Fund as illustrated in the pie
chart below:
SP
17%
CO
13%
PS
56%
MOOE
14%
PS MOOE CO SP
The Special Purpose Funds were likewise broken down into PS (11%), MOOE (73%) and
CO (16%) as graphically presented below:
CO PS
16% 11%
MOOE
73% PS MOOE CO
24
Part III
Results of the Study
25
Chapter I
Adequate, Well-defined and Appropriate

Criteria for Fund Allocation
26
ADEQUATE, WELL-DEFINED AND
APPROPRIATE CRITERIA FOR FUND ALLOCATION
INTRODUCTION
As government’s priority programs and projects could not be funded at the same
time, there is a need to establish adequate, clear and appropriate criteria for
allocating funds and determining the level of expenditures of each agency. These
criteria should be disseminated to all agencies responsible for budget formulation.
Between April and May of each year, a National Budget Call is issued by the DBM
through a National Budget Memorandum. This Memorandum embodies the overall
macroeconomic and fiscal policy framework and priority thrusts for a three-year
period within the context of the Medium-Term Fiscal Plan. It also outlines the
policy guidelines and procedures on the preparation of budget proposals for the
ensuing year, and the schedule of budget preparation activities.
The policy guidelines included the approach to be used in the determination of the
agency budgets. Prior to 2003, the Baseline Budgeting Approach was used. The
baseline budget refers to the minimum level of expenditures needed by the agency
to operate and perform its basic mandate and functions and continue the
implementation of major multi-year foreign-assisted and locally-funded projects.
Beginning budget year 2003 to present, the DBM sets the indicative budget ceiling
of each agency for the covered budget year. This ceiling may be adjusted based on
the demonstrated absorptive capacity of the agency in relation to its major final
outputs and sectoral priorities as finally determined by the President and the
Cabinet.
From CYs 2001 to 2005, the levels of expenditures are consistent with or
correspond to the following:
Budget Year Limit of Expenditure
2001 Baseline Budget
2002 Baseline Budget
2003 Appropriation levels in CY 2002 under RA 9162
2004 Appropriation levels in CY 2003 under RA 9206
2004 budget level as reflected in the National Expenditure

2005
Program (NEP) proposed to Congress
27
The study, however, revealed that the criteria for allocating funds were neither clear
nor well-defined as manifested in the following cases:
• Ceiling for capital outlay is based on prior year’s appropriation or NEP

in case of reenacted budget when these are not regular and non-
recurring.
• The IRA of LGUs remained at 40%. In addition, LGUs are also given
other financial assistance despite unmanageable budget deficit;
• The proposed expenditures exceeded the expenditure levels defined in
the MTPDP;
• The MTPDP from CYs 2001-2004 was not accompanied by MTPIP.
On the other hand, the MTPIP for 2004-2010 was not apparently
considered in approving budget for CYs 2004-2005;
• Sectoral programs with adequate funding under the GAA are still
authorized to be funded under the PDAF; and
• The continuous provision of budgetary support to losing government
corporations.
OBSERVATIONS
1. Ceiling for capital outlay is based on the prior year’s appropriation or

National Expenditure Program in the case of a reenacted budget when these
expenditures are not regular and non-recurring.
The DBM adopted the Budget Ceiling Approach in the preparation of agency
budgets since CY 2003. Under this approach, the DBM sets the budget ceiling
per agency. The agencies were informed of the ceiling through the budget call
memorandum. The budget ceiling, in most cases, is equivalent to the agency’s
appropriation for the past year including appropriation for capital outlay or the
proposed expenditures in the NEP if the budget was reenacted.
The team noted that the practice of setting ceiling for capital outlay based on
prior year’s appropriation or the National Expenditure Program may not be
considered appropriate as capital expenditures is not regular and non-recurring.
It would have been more prudent, if indeed it is necessary for DBM to prescribe
ceiling for capital outlay, to use the MTPDP/MTPIP or any validated agency
needs in determining the ceiling for capital expenditures. That way the funds
are directed for the implementation of priority programs and projects.
28
Analysis of the appropriations of 35 agencies covering CYs 2003 to 2005

disclosed that these agencies actually maximized their budget ceilings for
capital outlay. There were even cases where the proposed budget ceiling were
exceeded or reduced only upon review by the Appropriations Committee of
Congress as shown below:
( In Thousand Pesos )
Reenacted
Agency Particulars 2005 2004 2003 Remarks
Furniture, Fixtures, Equipt. & Book Outlay 44,422 29,746 29,746 Budget ceiling
Information Tech. (IT) Equipment - 14,676 14,676 maximized and
Senate Total Appropriations – GAA 44,422 44,422 44,422 appropriations for CY
- NEP 44,422 44,422 39,834 2003 even exceed the
Budget Ceiling 44,422 44,422 39,834 budget ceiling.
Transportation Equipment 2,000 - - maximized.
Commission
Machineries and Equipment 3,725 - -
on Appoint-
ments Total Appropriations - GAA 12,007 12,007 10,000
- NEP 12,007 10,000 10,000
Budget Ceiling 12,007 10,000 10,000
Buildings and Structures 27,520 29,694 29,694 Budget ceiling
Furniture, Fixtures, Equipt. & Book Outlay 2,399 - - maximized except in
Bureau of CY 2003.
Information Tech. (IT) Equipment - - -
Internal
Revenue Total Appropriations - GAA 29,919 29,694 29,694
- NEP 29,919 29,919 29,694
Budget Ceiling 29,919 29,694 180,588
Buildings and Structures 5,000 Budget ceiling
Furniture, Fixtures, Equipt. & Book Outlay 24,932 maximized and even
Transportation Equipment 27,500 No break- No break- exceeded in CY 2003.
House of down down
Machineries and Equipment 36,687
Represen-
tatives Information Tech. (IT) Equipment -
Total Appropriations - GAA 94,119 94,119 94,119
- NEP 94,119 94,119 57,894
Budget Ceiling 94,119 94,119 57,894
Furniture, Fixtures, Equipt. & Book Outlay 300 - - maximized.
Sandigan- Information Tech. (IT) Equipment - - -
bayan Total Appropriations - GAA 82,793 82,493 82,493
- NEP 82,793 82,793 82,493
Budget Ceiling 82,793 82,493 82,593
Office Equipment, Furniture and Fixtures 29,000 - - Budget ceiling
Information Tech. (IT) Equipment - 35,000 35,000 maximized except in
COA Total Appropriations - GAA 29,000 35,000 35,000 CY 2003.
- NEP 29,000 29,000 35,000
Budget Ceiling 29,000 35,000 60,400
Buildings and Structures 83,198 83,198 83,198 Appropriations for CY
Equipment Outlay 7,150 - - 2005 even exceeded
Office of the the budget ceiling.
Information Tech. (IT) Equipment - - -
Ombuds-
man Total Appropriations - GAA 90,348 83,198 83,198
- NEP 83,198 83,198 83,198
Budget Ceiling 83,198 83,198 88,198
Acquisition of Fire Trucks - 192,583 192,583 Budget ceiling
Bureau of Furniture, Fixtures, Equipt. & Book Outlay 9,200 54,000 54,000 maximized and even
Fire Total Appropriations - GAA 9,200 246,583 246,583 exceeded in CY 2003.
Protection - NEP 9,200 9,200 246,583
Budget Ceiling 9,200 246,583 87,000
Buildings and Structures - 20,000 20,000 Budget ceiling
Bureau of maximized.
Furniture Fixtures, Equipt. & Book Outlay 36,000 - -
Jail Manage-
ment and
Penology - NEP 36,000 36,000 20,000
Budget Ceiling 36,000 20,000 -
29
Reenacted
Land & Land Improvements 32,161 - - Appropriations for CYs

Buildings and Structures & Outlay 2,250,293 1,030,630 1,030,630 2003 and 2005 even
Department Furniture, Fixtures, Equipt. & Book Outlay 1,306,872 260,125 260,125 exceeded the budget
of Education IT Equipment Outlay - 100,000 100,000 ceiling.
(OSEC) Total Appropriations - GAA 3,589,326 1,390,755 1,390,755
- NEP 3,589,326 2,334,083 1,390,755
Budget Ceiling 2,334,083 1,390,000 957,000
Department of Land & Land Improvements 240,428 No No Budget ceiling
Environment Furniture, Fixtures, Equipt. & Book Outlay 56,371 breakdown breakdown maximized only in CY
& Natural Total Appropriations - GAA 296,799 369,730 369,730 2004. Appropriation for
Resources - NEP 432,836 420,181 538,739 CY 2003 reduced by
(OSEC) Budget Ceiling 420,181 369,730 766,798 Congress.
Buildings and Structures 500 3,000 3,000 Budget ceiling
Furniture, Fixtures, Equipt. & Book Outlay 4,910 500 500 maximized and even
Department exceeded budget
Information Technology Equipt. Outlay - 500 500
of Finance ceiling in CY 2003.
(OSEC) Total Appropriations - GAA 5,410 4,000 4,000
- NEP 5,410 5,410 4,000
Budget Ceiling 5,410 4,000 3,664
Furniture, Fixtures, Office Equipt. 14,890 - - maximized and
Machineries & Equipment 110 - - appropriation for CY
Bureau of 2003 even exceeded
IT Equipment - 65,000 65,000
Customs the budget ceiling.
- NEP 15,000 15,000 100,000
Budget Ceiling 15,000 100,000 1,500
Buildings and Structures 75,000 - - Budget ceiling maxi-
Furniture, Fixtures, Equipt. & Book Outlay 16,149 340,264 340,264 mized except in CY
University of IT Equipment Outlay - - - 2005 where budget was
the Medical Equipt (EMS Complex- FY 2002) - - - reduced by Congress.
Philippines Total Appropriations - GAA 91,149 340,264 340,264 Appropriation for CY
2003 exceeded the
- NEP 182,298 219,806 326,264
budget ceiling.
Budget Ceiling 219,806 340,264 199,058
Department Furniture, Fixtures, Equipt. & Book Outlay 5,000 688,000 688,000 maximized only in CY
of Machineries &Equipment 357,122 - - 2004.
Health Total Appropriations - GAA 384,986 730,000 730,000
(OSEC) - NEP 384,986 550,775 725,000
Budget Ceiling 550,775 730,000 899,000
Dept of Interior Total Appropriations - GAA - 394,436 394,346 Budget ceiling
& Local Gov’t - NEP - 10,000 492,936 maximized only in CYs
(OSEC) Budget Ceiling 10,000 394,436 955,614 2003 and 2005.
Department maximized and even
Furniture, Fixtures, Equipt. & Book Outlay 40,000 1,000 1,000
of exceeded in CY 2003.
Justice
(OSEC) - NEP 40,000 40,000 400,000
Budget Ceiling 40,000 401,000 365,300
Furniture, Fixtures, Equipt. & Book Outlay 14,500 - - Budget ceiling
IT Equipment - 17,801 17,801 maximized and even
Bureau of exceeded in CY 2003.
Treasury
- NEP 14,500 14,500 17,801
Budget Ceiling 14,500 17,801 6,000
IT Equipment - 23,000 23,000 exceeded in CY 2003
Bureau of and maximized in CY
Immigration 2004.
- NEP 45,000 70,000 5,000
Budget Ceiling 70,000 25,000 100
National Furniture, Fixtures, Equipt. & Book Outlay 25,000 30,000 30,000 Budget ceiling even
Bureau Total Appropriations - GAA 25,000 30,000 30,000 exceeded in 2003.
of Inves- - NEP 25,000 30,000 30,000
tigation Budget Ceiling 30,000 30,000 25,320
30
Reenacted
IT Equipment Outlay - 2,000 2,000 Budget ceiling

Dept of maximized except in
Furniture, Fixtures, Equipt. & Book Outlay 17,000 - -
Labor and CY 2003.
Employment
(OSEC) - NEP 17,000 17,000 2,000
Budget Ceiling 17,000 2,000 5,425
Furniture, Fixtures, Equipt. & Book Outlay 13,000 No breakdown No breakdown Budget ceiling
Office of the maximized except in
Solicitor CY 2003.
General - NEP 13,000 13,000 -
Budget Ceiling 13,000 2,000 8,646
Buildings and Structures 50,000 - - Budget ceiling
Philippine Furniture, Fixtures, Equipt. & Book Outlay - 100,000 100,000 maximized except in
National Total Appropriations - GAA 50,000 100,000 100,000 CY 2003.
Police - NEP 50,000 50,000 100,000
Budget Ceiling 50,000 100,000 639,000
Furniture, Fixtures, Equipt. & Book Outlay 10,000 10,000 10,000 Budget ceiling even
Armed exceeded in CY 2003.
IT Equipment - 5,000 5,000
Forces of the
Philippines
(GHQ) - NEP 10,000 10,000 10,000
Budget Ceiling 10,000 15,000 10,000
Buildings and Structures 30,000 - - Budget ceiling
Philippine maximized.
Total Appropriations - GAA 30,000 - -
Sports
Commission - NEP 30,000 30,000 -
Budget Ceiling 30,000 - -
Machineries & Equipment 33,000 - - Budget ceiling
Presidential maximized.
Broadcast
Staff - NEP 33,000 33,000 -
Budget Ceiling 33,000 - -
Machineries & Equipment 12,000 - - Budget ceiling not used
Bureau of in CY 2003.
Broadcast
Services - NEP 12,000 12,000 -
Budget Ceiling 12,000 - 21,506
Land & Land Improvements 1,494,413 Budget ceiling
Department Buildings Structures Outlay 24,500 No break- No break- maximized except in
of Tran- Furniture, Fixtures, Equipt. & Book Outlay 986,699 down down CY 2003.
sportation IT Equipment Outlay -
and Commu- Total Appropriations - GAA 2,505,612 3,457,425 3,457,425
nications - NEP 2,505,612 2,261,512 3,688,625
Budget Ceiling 2,261,512 3,457,425 6,035,000
Buildings and Structures - 1,000 1,000 Budget ceiling not
Furniture, Fixtures, Equipt. & Book Outlay 12,373 - - maximized in CYs 2003
National IT Equipment - 2,000 2,000 and 2005.
Library Total Appropriations - GAA 12,373 3,000 3,000
- NEP 12,373 13,000 3,000
Budget Ceiling 13,000 3,000 15,000
Land & Land Improvements Outlay 222,154 222,134 222,134 Budget ceiling
Metro Manila exceeded in CY 2003
Furniture, Fixtures, Equipt. & Book Outlay - 88,310 88,310
Develop- but not maximized in
ment CY 2005.
Authority - NEP 222,154 373,581 260,444
Budget Ceiling 373,581 310,444 187,334
Land & land Improvements - 6,500 6,500 exceeded in CY 2003
Court of Tax Furniture Fixtures, Equipt. & Book Outlay 2,527 - - but nor fully availed of
Appeals Total Appropriations - GAA 2,527 11,500 11,500 in CY 2004.
- NEP 11,600 11,600 11,500
Budget Ceiling 11,600 11,500 1,000
Department of Buildings and Structures 30,876 Budget ceiling for CYs
Agrarian Livestock & Crops Outlay 60,000 2003 and 2005 even
Reform Land & Land Improvements Outlay 447,610 No break- No break- exceeded.
(CARP) Public Infrastructures 2,134,493 down down
Furniture, Fixtures, Equipt. & Book Outlay 42,800
31
Reenacted
Total Appropriations-GAA 2,715,779 2,663,864 2,663,864

- NEP 2,715,779 2,124,871 2,163,864
Budget Ceiling 2,124,871 2,663,864 2,278,244
Land & Land Improvements Outlay 439,371 962,570 962,570 Budget ceiling reduced
Pasig River by Congress in CY
Furniture, Fixtures, Equipt. & Book Outlay - 1,672 1,672
Rehabili- 2003 and not
Total Appropriations-GAA 439,371 964,242 964,242
tation maximized in CY 2005.
Commission - NEP 439,371 971,171 1,298,242
Budget Ceiling 971,171 964,242 1,298,242
Investment Outlay 1,125 Budget ceiling reduced
Loans Outlay 4,100 by Congress in CY
Livestock & Crops Outlay 11,631 2003 and exceeded in
Land & Land Improvements Outlay 96,066 No break- No break- CY 2005.
Buildings & Structures Outlay 45,122 down down
Department Furniture, Fixtures, Equipt. & Book Outlay 97,059
of Agriculture Transportation Equipment 4,257
(AFMA) Work Animals Outlay 2,315
Machineries & Equipment 144,640
Public Infrastructures 5,074,317
Total Appropriations - GAA 5,480,632 5,790,167 5,790,167
- NEP 5,480,632 5,102,516 8,243,576
Budget Ceiling 5,102,516 5,790,167 8,767,930
Land & Land Improvements 40,229 Budget ceiling not
Bureau of No break- No break-
Buildings & Structures Outlay 101,880 maximized in CYs 2003
Fisheries down down
Furniture, Fixtures, Equipt. & Book Outlay 59,331 and 2005.
and Aquatic
Resources Total Appropriations - GAA 201,440 952,483 952,483
(AFMA) - NEP 201,440 262,087 978,483
Budget Ceiling 262,087 952,483 1,085,569
This practice would adversely affect the government’s ability to balance the
budget by 2010.
Management’s Comments Team’s Rejoinder
Consistent with the policy of stream- The use of the Budget Ceiling
lining government operations, the setting Approach in allocating funds was not
of budget ceilings initially provides for considered appropriate for capital ex-
the past year’s level of capital spending, penditures as the budget level was not
after providing for current operations dictated by necessity but used as an
(personal services and maintenance). The effective tool in imprudent spending.
agency, with its intimate knowledge of its As it is, the agencies used to maxi-
programs/projects as well as its imple-
mize the budget ceiling defined in the
menting capacity, is given the flexibility budget call. It would have been
to re-align allocations within such ceiling, prudent, if it is indeed necessary for
to signify the agency’s priority activities.
the DBM to prescribe ceiling for
Hence, if the agency is targeting to capital outlay, to use the MTPDP/
implement capital projects or expand on MTPIP or any validated need in
existing ones, the option is to realign
setting the budget level for capital
MOOE allocation for capital outlays. The expenditures. That way, available
centerpiece programs/projects are also resources are directed for the imple-
considered in the setting of ceilings.
mentation of priority programs.
32
2. Despite unmanageable budget deficits, the national government did not resort
to reduction of Internal Revenue Allotment of LGUs which is allowed under
Section 284 of RA 7160 to be reduced from 40% to not less than 30%. In
addition to IRA allocation, LGUs received assistance in various forms during
CYs 2001-2005 and are continuously being provided funding requirements by
DA and DOH for certain activities already devolved to the LGUs.
Under Section 284 of RA 7160, LGUs shall share in the national internal
revenue taxes equivalent to forty percent (40%) of collection of the third fiscal
year preceding the current fiscal year starting the third year of implementation
of RA 7160. This share maybe reduced only to not less than thirty percent
(30%) in the event the national government incurs unmanageable public sector
deficit. In such case, the President of the Philippines is authorized, upon the
recommendation of Secretary of Finance, Secretary of Interior and Local
Government and Secretary of Budget and Management, and subject to
consultation with the presiding officers of both Houses of Congress and the
presidents of the liga, to make the necessary adjustments in the internal revenue
allotment of LGUs.
Under the general provisions of the GAA, unmanageable national government

budget deficit has been construed to mean as:
• the actual national government budget deficit has exceeded the quarterly budget
deficit targets consistent
with the full-year target
deficit as indicated in the Budget Deficits Based on MTPDP, SER and BESF
BESF submitted by the
250
President and approved by
Congress pursuant to Sec. 200
22, Article VII of the Amount
Constitution; or (In Billion 150
Pesos)
• there are clear economic 100
indications of an impen-
50
ding occurrence of such
condition, as determined 0
by the Development 2001 2002 2003 2004
Budget Coordinating MTPDP (Target) SER (Actual) BESF Target BESF Actual
Committee and approved

by the President.
Evaluation of the Socio-Economic Report (SER) and BESF revealed that during
CYs 2001 to 2003, the national government consistently exceeded the targeted
budget deficit as illustrated in the chart above.
33
While the CY 2004 BESF

deficit target was not
exceeded, the target set was BESF Proposed and Actual Budget Deficits
actually 139% of CY 2003 250
deficit target. It may even be
noted that the DBM sets Amount
200
(In Billion
increasing deficit target in the Pesos) 150 Proposed
Actual
BESF from CYs 2001 to CY
2004. This is inconsistent 100
with the government’s goal of 50

a balanced budget to be
0
attained, initially in 2006 and 2001 2002 2003 2004
extended to 2010.
This is also true in the

Consolidated Public Sector Financial Position for FY 2001-2004. The targeted
consolidated deficit levels were likewise exceeded with the actual deficits
demonstrating an upward trend as shown above.
Despite unmanageable budget deficit, the DBM did not resort to Section 284 of
RA 7160. The LGUs’ shares remained at 40% of the total collection of the
third year preceeding the current fiscal year. These shares, representing 16.81%
to 25.37% of the total GAA, could have been reduced by P169.96 billion had
the DBM considered reducing the LGUs’ share to 30% as computed below:
(In Thousand Pesos)

Fiscal Year Total GAA IRA (40%) Percentage IRA (30%) Difference
2001-Reenacted 665,094,141 111,778,000 16.81% 83,833,500 27,944,500
2002 (RA 9162) 575,123,728 134,422,365 23.37% 100,816,774 33,605,591
2003 (RA 9206) 609,614,730 141,000,000 23.13% 105,750,000 35,250,000
2004-Reenacted 609,614,730 141,000,000 23.13% 105,750,000 35,250,000
2005 (RA 9336) 597,663,400 151,623,054 25.37% 113,717,290 37,905,764
TOTAL 679,823,419 509,867,564 169,955,855
34
In addition to IRA, the national government is also providing assistance to

LGUs in various forms such as:
(In Thousand Pesos)

2001 2004
Nature (Reenacted) 2002 2003 (Reenacted) 2005 Total
AFMA - LGEF 321,445 114,118 62,655 62,655 0 560,873
- MDF 905,695 1,516,997 0 0 0 2,422,692
Special shares of LGUs in the
3,087,000 2,622,470 1,550,150 1,550,150 1,907,158 10,716,928
proceeds of national taxes
LGEF 657,859 303,261 231,336 231,336 15,000 1,438,792
Brgy Officials Death Benefits Fund 0 0 37,000 37,000 37,000 111,000
MMDA 639,535 913,575 1,087,132 1,087,132 1,084,506 4,811,880
PRRC 984,419 984,419 449,840 2,418,678
Local Officials Insurance Premium
37,000 37,000 0 0 0 74,000
Fund
MDF 2,437,162 580,000 518,476 518,476 0 4,054,114
Premium Subsidy for Indigents
under the National Health Insurance 0 500,000 500,000 500,000 750,000 4,054,114
Program
Total 8,085,696 6,587,421 4,971,168 4,971,168 4,243,504 28,858,957
Legend: LGEF – Local Government Empowerment Fund MMDA –Metro Manila Development Authority
MDF – Municipal Development Fund PRRC – Pasig River Rehabilitation Commission
The team further noted that under Section 285 of RA 7160, the fiscal capability
of the LGUs is not considered in the determination of their corresponding share
in the national internal revenue. Only the population and land area of the LGUs
are considered.
The IRA is provided to enable LGUs to discharge responsibilities of national

offices and agencies that have been devolved to LGUs such as but not limited to
the responsibilities enumerated hereafter.
Ö
Research services, water and soil conservation, seeding services,
Agriculture marketing services, setting-up of demonstration farms and
incentives for livestock and poultry and fishing activities, etc.
Health
Services Ö Control of diseases, treatment thereof, maintenance of health and
day care centers, etc.
Ö
Protection for the elderly and disabled, rehabilitation of beggars,
Social juvenile delinquents, drug addicts, etc., observing proper nutrition,
Services family planning, undertaking livelihood projects, etc.
Ö
Municipal or local roads and bridges, irrigation systems, school
Infrastructure buildings, artesian wells, water supply systems, flood control,
Facilities drainage and sewerage, etc.
Ö
Information on job placement, investments, tax matters, marketing
Information systems and maintenance of public library which may cover books,
Services magazines or periodical on general information, law, etc.
35
Review of the appropriations of the Department of Agriculture and Department of

Health for CYs 2001-2004, however, still showed allocations for programs and
activities which were already devolved to the LGUs such as:
Agency/Programs/Activities (In Thousand Pesos)

2001 2002 2003 2004
Dept. of Agriculture (OSEC)
- Coordination of Agricultural Research 8,184 10,605 9,502 9,270
Personal Services 5,194 5,330 5,530 6,263
MOOE 2,990 5,275 3,972 3,007
- Water Mgt.& Soil Conservation & Development 8,174 10,090 8,064 8,064
MOOE 3,160 2,313 1,751 1,751
- Agribusiness & Marketing Services 10,139 10,519 10,367 9,925
MOOE 2,736 2,462 1,886 1,295
Dept. of Health(OSEC)
- Disease prevention and control 732,737 810,504 708,351 706,349
MOOE 701,411 792,203 679,959 579,959
These instances likewise contributed to the increasing budget deficit being

experienced by the national government.

The declaration of an unmanageable deficit was As has been observed and as
not resorted to since the prospects were such that discussed in the report, the national
excesses if any vis-à-vis quarter targets were just government consistently exceeded
a matter of timing rather than an overall the targeted budget deficit for the
indication of the full year level. past four years. To consider the
quarterly excesses as a matter of
Also, with the Supreme Court ruling that the
internal revenue allocations as mandated by the timing rather than an overall
indicator of the full-year level
Local Government Code should be without lien,
the IRA allocation has been treated as “non- deficit is therefore not justifiable.
discretionary” to avoid legal tangles later. At the least, the DBM should have
considered totally cutting all other
The provision of financial assistance to LGUs
assistance to LGUs other than IRA
other than IRA and Special Shares from National
and special shares from the Natio-
Wealth may perhaps be viewed as the national
nal Wealth. These financial assis-
government tapping the LGUs to implement
tance were actually not intended to
projects which can best be done by the LGUs
implement the national govern-
rather than the national government agencies.
ment’s programs and projects but
These transfers are not assistance to LGUs but in
to support LGUs operations as may
aid of implementing national government
be noted on the nature or purpose
programs.
of such assistance.
On the national government funding of devolved We commend management’s plan
activities, a review of the status of the devolution of reviewing the status of
is in the offing with the objective that such devolution to address this issue.
practice should be eliminated as far as feasible.
36
3. The plan under 2001-2004 MTPDP to balance the budget by 2006 was not
attained as the President and the Congress were not able to limit the total
expenditures to the desired expenditure level. The new goal to achieve a
balanced budget by 2010 was likewise questionable as the approved
expenditures exceeded the desired expenditure level for CY 2004.
The national government’s aim to achieve a balanced budget by 2006 was

clearly established in the 2001-2004 MTPDP. Under the plan, the government
intends to gradually reduce the budget deficit from CY 2001 until the goal of a
balanced budget is attained in CY 2006. The goal was intended to be attained by
controlling the expenditure level at P703.2 billion in CY 2001 to P835.4 billion
in CY 2004.
Comparison of the total appropriations for CYs 2001 to 2005 with the targeted
level of expenditures in the MTPDP, however, revealed that the government
was not able to limit expenditures to the desired expenditure levels. The
President’s proposed budget exceeded the targeted level of expenditures. Thus,
the total appropriations consisting of the new and the automatic appropriations
exceeded the targeted level of expenditures as shown below:
Proposed and Actual Appropriations
1000
Amount (In Thousand Pesos)
900
800
700
600
500
400
300
200
100
0
2001 2002 2003 2004 2005
Year
MTPDP Proposed (NEP/BESF) New and Automatic Appropriations
Note: For CYs 2001 and 2004, the President's proposed budgets were lower
than the reenacted budgets.
37
This condition then Targeted and Actual Deficits Targeted

affected the Actual
government’s goal of 25
balancing the budget
Amount (In Billion Pesos)

by 2006 by gradually 20
reducing the deficits. 15

From CYs 2001 to
2004, the targeted 10
deficit level was 5

surpassed by P2.02
billion to P143.257 0
200 200 200 200
billion.
As the goal set under the 2001 to 2004 MTPDP was unlikely to be attained, the
national government then revised its goal under the 2004-2010 MTPDP. The
newly set goal was, however, likewise unlikely to be achieved as the total
appropriations for CY 2004 again exceeded the proposed expenditure level
under the revised goal as shown below:
MTPDP Targets and Actual Deficit
1600
Amount (In Billion Pesos)
1400
1200
1000
800
600
400
200
0
2004 2005 2006 2007 2008 2009 2010
Year
Targeted Revenue Targeted Dis burs ements Appro ved Appro priatio ns Targeted Deficit Actual Deficit
The excessive expenditures may have been due, among others, to the practice of
setting a capital expenditures ceiling based on prior years appropriation or NEP
in case of reenacted budget. The budget ceilings of a number of government
agencies were even exceeded in some cases.
38
2005 2004 2003

Budget Increase/ Budget Increase/ Budget Increase/
Agency Ceiling NEP (Decrease) Ceiling NEP (Decrease) Ceiling NEP (Decrease)
Comm. on
Appointment 224,192 208,429 (15,763) 219,328 224,192 4,864 219,230 219,328 98
DepED 99,241,755 102,583,978 3,3,42,223 96,278,545 99,241,755 2,963,210 95,259,442 96,206,672 947,230
UP 4,291,454 8,903,680 4,612,226 4,340,096 4,580,497 240,401 4,338,955 5,601,289 1,262,334
DENR-OSEC 4,515,792 4,556,535 40,743 4,688,590 4,515,792 (172,798) 5,433,225 4,982,579 (450,646)
DOF-OSEC 195,278 204,723 9,445 195,096 195,278 182 195,503 195,096 (407)
Bur. of Customs 1,191,423 1,214,988 23,565 1,218,786 1,191,423 (27,363) 1,211,170 1,218,786 7,616
Bur. of Fire
Protection 3,528,092 3,712,892 184,800 3,341,947 3,528,092 (161,170) 3,434,921 3,641,830 206,909
Bureau of Jail
Mgt. & Penology 2,205,681 2,370,946 165,265 1,929,992 2,205,681 203,880 1,862,472 1,997,368 134,896
DOJ-OSEC 1,272,272 1,413,608 141,336 1,697,341 1,272,272 (425,069) 1,719,363 1,692,341 (27,022)
Ofc of the SolGen 154,066 155,729 1,663 145,735 154,066 8,331 144,449 139,735 (4,714)
DOLE 1,235,437 1,252,886 17,449 1,185,971 1,235,437 49,466 1,250,809 1,185,971 (64,838)
Presidential Broad-
cast Staff 89,308 91,802 2,494 55,487 89,362 33,875 56,540 55,487 (56,540)
Phil. Sports
Commission 103,527 104,540 1,013 100,288 103,527 3,239 105,227 74,288 (30,939)
Court of
Tax Appeals 42,561 59,541 16,980 36,840 42,561 (29) 50,064 42,590 (7,474)
On the national government deficit increasing The deficit-to-GDP outturn

despite the adoption of a deficit-reduction path for the period 2001-2004
towards a balanced budget, the deficit targets may be in the downtrend,
are based on percentage-to-GDP as per but this did not in any way
international practice, not in terms of absolute help in minimizing the gap
magnitudes. The deficit-to-GDP outturn for between the target level and
the period 2001-2004 was generally on a the actual budget deficit.
downtrend, even as absolute levels may
increase given the increasing GDP levels. As will be discussed in the
As in all rolling programs, the deficit path for succeeding chapters, the
the period 2001-2004 was adjusted to consider increase in operating
the available outturns. The overshooting of the expenses alone could not be
deficit target in 2002 (vis-à-vis plan levels) covered by the increase in
resulted to the raising of the 2003-2004 targets. revenue projection. As it is,
Admittedly, the 2006 target balancing of the there are newly created
budget was no longer feasible, and the expenditures for every
emerging target is 2008. Such prospect is projected increase in
largely made possible by revenue projections collection. Since the
by the Department of Finance. projected collection was not
realized in most cases, the
Additional revenues enabled the incremental budget deficit gap keeps on
spending without unduly breaching the deficit increasing.
targets.
39
4. The revised MTPDP covering CYs 2001 to 2004 was not accompanied by an
implementation plan defining the specific programs and projects needed to be
implemented to achieve the objectives of the plan. On the other hand, while
MTPDP for CYs 2004-2010 was accompanied by MTPIP, the same was
apparently not considered in the allocation of funds contrary to the provisions
of Section 16, Chapter 3, Book VI of the Revised Administrative Code. These
conditions contributed to the failure of the government to meet targets set in
the MTPDP to attain the development objective.
In view of the assumption to office of President Gloria Macapagal-Arroyo in

2001, the MTPDP covering CYs 1999 to 2004 of then President Joseph E.
Estrada was revised to reflect the priorities of the new administration for CYs
2001-2004.
The MTPDP was, however, not accompanied by an MTPIP. The MTPIP

defines the specific programs and projects to be implemented by certain
government agency to ensure the attainment of the sectoral objectives defined in
the MTPDP. In view of this deficiency, there is difficulty in assessing whether
all programs and projects funded under the GAA are the very programs and
projects needed to achieve the objectives of the plan.
In the absence of the MTPIP, the team considered the MTPDP targets in
evaluating the realization of selected programs. Apparently, considering the
NEDA’s SERs for CYs 2001-2004, some government programs were not at all
implemented as illustrated below:
Imple-
Accomplishment/Existing Conditions
Sector menting MTPDP 2001-2004 Targets
As Reflected In SER
Agency
Automated Commis- The Electoral System will be The COMELEC continued to underperform in
Elections sion on fully computerized by 2004 all 3 components of its Electoral Modernization
Elections Program. The 3 components of COMELEC’s
Electoral Modernization program are the
following:
• Completion and cleansing of the voter
registration database;
• Automation of counting and canvassing;
• Electronic data transfer of results
As of 2004, only 40% of total voters or about
17 million out of 43 million voters in May
2004, both local and overseas, have been
captured/ validated by the system. Out of this
number, only 7.3 million voter registration
records/IDs were printed and distributed.
40
Imple-
As Reflected In SER
Agency
Peace BJMP, Provision of quality jail Overcrowding of jails and jailbreaks due to
and order DILG management and services financial constraints.
and the BuCor, through efficient and human
Rule of DOJ safekeeping and rehabili-
Law tation of inmates
Education DepEd Everyone of school age will There is still a classroom backlog of 10,436
and be in school, in an uncrow- by end of SY 2004. On the other hand,
Culture ded classroom, in surround- textbook backlog remains high at 24.22
dings conducive to learning. million in CY 2003 and 34.7 million in 2004.
Three thousand school With the adoption of double shift classes and
buildings a year shall have a 1:50 classroom-student ratio, the backlog in
been built and a computer teacher items was reduced to 20,113 in 2004
put in every high school. from 46,356 in 2003.
Agri- DA - An average of 3.12 to 4.02 Overall agricultural production slightly exceeds

business AFMA percent stable annual growth expectations. Following are the agricultural
in gross value added in products that did not meet the target due to several
agriculture and fisheries factors such as disastrous effects of typhoons,
- One million new jobs gene- fiscal constraints and the rising costs of inputs as a
rated in agriculture & fisheries result of series of crude oil price increases.
thru the implementation of Agricultural Growth Rates
AFMA and Fisheries Code. Crops Target Actual
Coconut 1.9-2.0 0.4
- Program targets Pineapple 4.5-6.5 3.6
Coffee 1.5-2.4 -5.2
• Irrigation and water Mango 6.0-6.5 -3.8
management – for the Tobacco 1.9-2.4 -9.6
period 2001-2004, 473,752 Abaca 1.8-2.7 -0.2
hectares will be irrigated. Of Livestock 4.5-5.1 -0.4
Cattle 4.7-4.9 -1
this total, 301,361 hectares Hog 4.8-5.4 -0.5
will be irrigated from the Goat 3.0-3.6 1.2
rehabilitation of existing but Poultry 4.7-5.8 4.3
degraded systems and Chicken 4.7-6.0 3.6
Duck 4.7-5.3 -1.3
172,391 hectares from the Commercial 4.6 1.9
construction of new irri-
gation systems. This effort Meanwhile, the Department of Agriculture did not
will raise the country’s total seem to substantially accomplish its plan under the
service area from 1.4 million Agriculture and Fisheries Modernization Plan as
to 1.6 million hectares. shown below.
• Farm-to-market roads and Commitments %age
related infrastructure – Rehabilitate 19 municipal fish ports 79
Continue the rehabilitation of two regional fish
About 1,597 km. in new ports
350
farm-to-market roads will be Generate 172,391 has. from the construction of
51
constructed and 601 km of new irrigation systems
Establish 14 seaweed village eco-zones and
existing farm-to-market 280 seaweed nurseries
160
roads will be rehabilitated, Construct/improve 14,810 assorted postharvest-
12
repaired and upgraded. related infrastructures
Rehabilitation of 2 regional Rehabilitate 301,361 has. from existing but
degraded irrigation systems 204
fishports and 19 municipal Distribute 21,863 assorted post-harvest
4
fishports will be continued. machinery and equipment
Sixteen mariculture parks; Raise the country’s total irrigation service area
0.9
from 1.4 million to 1.6 million hectares
14 seaweed village eco- Construct 1,597 kms. and rehabilita-tion, repair
zones; and 280 seaweed 52
and improvement of 601 km. of FMRs
nurseries will be established. Establish 16 mariculture parks 56
41
Imple-
As Reflected In SER
Agency
• Postharvest facilities-Within The Department appeared to have focused more on
the plan period, 21,863 the rehabilitation of regional and municipal fish
assorted postharvest ports rather than on productivity-enhancing
machinery and equipment investments. These efforts were undertaken by the
will be distributed while Department despite having met its target for the
14,810 assorted postharvest rehabilitation of municipal fish ports already being a
related infrastructures will be devolved activity under the LGC. The DA did not
constructed to benefit seem to have given much attention to raising the
3,136,643 farmers. This country’s total irrigation service area, the
increase in density of distribution of postharvest equipment, and the
postharvest facilities is construction and improvement of postharvest
expected to reduce current facilities. Moreover, no inroads were made in
postharvest losses from 15 the construction, rehabilitation/repair and
percent to 11 percent in improvement of FMRs, as well as in the
grains. establishment of mariculture parks.
Environ- DENR Forestry Sector The DENR committed to attain 16 targets as shown
ment and • Develop and manage 5.5 below:
Natural million has., of which 2.9 Program//Project %age
Resources million has. will cover Mangrove areas rehabilitated 605
Community Based Forest PAMBS managed 362
Management (CBFM) areas LGUs adopting coastal manage-
137
and 2.6 million hectares will ment - Coastline covered (km)
cover certificate of ancestral Patents issued (has.) 107
domain claim (CADC) areas; CBFM areas developed and
100
• Characterize/profile 154 managed (has.)
priority watershed areas; Livelihood projects established 99
• Rehabilitate 115,777 has. of Regional Coastal Resource
93
Information System formulated
degraded forestland;
LGUs adopting coastal mgt.-
• Establish 752 miniforests in plans drawn up
85
urban centers; and Priority watershed areas
• Establish 414 livelihood projects 82
characterized/profiled
for enterprise development Coral Reef managed (has.) 81
established in CBFM. Degraded forestland
80
Lands Sector rehabilitated (has.)
Miniforests established (no.) 25
Cadastral survey of 65 muni- PA established (no.) 20
cipalities and 286 partially Municipalities implementing
surveyed municipalities inclu- 17
Users Pay Principle
ding resurvey of 115 municipa- Cadastral survey of unsurveyed
lities with defective survey. -
municipalities conducted (has.)
Issue 100 titles, covering CADTs and CALTs issued 54 CADTs
approximately one million has. 6 CALTs
of which, 50 are with
Certificate of Ancestral Only 5 targets committed for the period were
Domain Titles (CADTs) and 50 achieved: (1) development and management of
are with Certificate of Ances- Community-Based Forestry Management (CBFM)
tral Land Titles (CALTs); and areas; (2) issuance of patents; (3) management of
Issue an estimated 274,460 Protected Areas Management Boards (PAMBs);
patents covering 329,356 has. (4) mangrove areas rehabilitation; and (5) coastline
to farmer beneficiaries. management. Among these, the target of
rehabilitating mangrove areas had the most
notable accomplishment with a 605% attainment.
This was attributed to the successful
implementation of the mangrove rehabilitation
component of the Forestry Sector Project 1.
42
Imple-
As Reflected In SER
Agency
Protected Areas (PAs) and A number of targets were not achieved due to
Wildlife Sector various reasons. The cadastral survey of
Establish 80 PAs under unsurveyed municipalities targets were not met
the National Integrated because budget was not allocated for the activity.
Protected Area system Non-attainment of targets on mini-forest
(NIPAs) Act; establishment and the implementation of user’s pay
Manage 50 PAs by Protected principle was due to the absence of specific
Area Management Boards guidelines by LGUs on standard fees and charges.
(PAMBs) The establishment / proclamation of protected
Coastal and Marine Sector areas, on the other hand, continued to be
hampered by the tedious process prescribed by the
Establish/rehabilitate 2,000 National Integrated Protected Areas System
hectares of coral reef;
(NIPAS) as its amendment has yet to be enacted.
Develop a national databank
and management information
for coastal & marine ecosys-
tems and 15 regional coastal
resources information system;
Adopt integrated coastal
management covering municipal
waters of 250 LGUs and 3,000
kilometers coastline; and
Implement user’s pay principle
in 250 municipalities.
Housing HUDCC The housing sector targets the Based on the 2004-2010 MTPDP, against a target
NHA provision of shelter security to of 1.2 million units of housing assistance or shelter
NHMFC 1,200,000 households for the plan security for CYs 2001 to 2004, the housing sector
HDMF period 2001-2004 with P215.16 provided 882,823 shelter security units or an
billion funding requirements. The accomplishment of 73.6% of June 2004 as follows:
target adopts a 73% to 27% ratio
Housing Package %age Accomp.
in favor of socialized housing,
Socialized 56.10
principally for the bottom 40% of
Low-Cost 121.66
households as follows:
For CY 2004 alone, the SER showed an average of
Housing Household 57.5% accomplishment in the delivery of security
Package Levels units among other targeted activities as shown
Socialized 880,000 below.
Economic 231,872
Open 88,128 Activities %age
Total 1,200,000 Direct Housing Provision:
Land Tenure for Urban Poor 38.2
Socialized Housing 46.3
Low-Cost Housing 103.4
57.5
Indirect housing Provision:
Retail Guaranty 18.3
Development Guaranty -
Issuance of License to Sell 125.4
Provision of employment in
housing construction 54.2
Non-attainment of the targets can be attributed to

resource constraints due to fiscal crisis, institutional
refocusing and stream-lining.
43
Imple-
As Reflected In SER
Agency
Labor DA In the medium term, domestic Labor market conditions improved in 2004
AFMA employment is expected to grow compared to 2003, but performance generally fell
DOT by 3.2 to 3.5%. From a level of below Plan target. The labor market fell short of the
27.4 million employed in 2000, the target employment creation for 2004, employing an
number of employed will increase additional 977,000 workers, vis-à-vis the targeted
to 31.2 to 31.5 million by 2004. 1.4-1.6 million workers. Unemployment rate rose to
Average yearly net addition to 11.8% from 11.4% the previous year. As to
employment is projected to reach overseas employment, 934,000 Filipinos were
one million. In addition, about one deployed in 2004 but this fell short of the target of 1
million workers per year will be million per year.
deployed overseas.
Protection of OFWs - The fight against illegal
The unemployment rate will recruitment remains a challenge as the number of
steadily improve in the medium cases filed edged up in 2004 (2.8%) and the
term. From 11.2% in 2000, the number of erring agencies increased by 37.9%.
unemployment rate will further go
down to 7.6% to 8.6% by 2004.
Energy DOE Key Measurable Targets – Among the targets that were not met included
energy savings, transmission line construction and
Improve energy self- system loss reduction. The new transmission line
sufficiency from 45% in 2000 constructed in 2004 was 157.1 ckt-kms, way below
to 52% by 2004; the target of 6,885 ckt-kms. A total of 38,763
Increase aggregate installed barangays or 92.41% have been electrified, slightly
generating capacity from below the 2004 target.
13,196 mw in 2000 to
15,479 mw by 2004 to
support anticipated growth
electricity;
Construct additional 6,885
circuit km. of transmission
lines, of which 2,787 circuit
km. are ongoing and 4,098
circuit km. are for implement-
tation;
• Increase the number of
barangays served from
33,647 or 80.1% in 2000 to
39,900 or 95% by 2004.
On the other hand, while the MTPDP covering CYs 2004-2010 was
accompanied by an MTPIP, the same was apparently not considered by the
DBM in the budget allocation. Under Section 16, Chapter 3, Book VI of the
Revised Administrative Code, the budget proposals should be consistent with
the proposed programs and projects identified in the MTPIP. This is also
emphasized in the budget call for 2005 which requires the agencies to allocate
resources to priority projects.
44
The formulation of the MTPIP is necessary for the following reasons:
• To tighten the planning, programming, and budgeting linkages

within the government as it links the MTPDP and the budget of the
national government.
• It is a basis for public sector resource allocation and for pipelining
participation and other financing source.
• It monitors public investments’ performance in terms of achieving
the goals and targets of the MTPDP.
The team noted, however, that there were programs and projects identified in
the MTPIP for CYs 2005 which were not provided budget allocation and
programs and projects not included in the MTPIP which were included in the
GAA.
Not
Included Included
Theme/Sector/ Program/
in in
Implementing Project Program/Project
Amount MTPIP MTPIP
Agency Category
But Not But
Funded Funded
I. Economic Growth and Job Creation

Sector: Trade and Investment
Sulong Kabuhayan (former name-Balikbayan, Balikkabuhayan
DTI Cont Program) 10,000,000 3
DTI Cont One Town One Product 75,000,000 3
NYC Cont Youth Entrepreneurship Program 100,000 3
DTI NPAP Philippine Business Registry 175,000,000 3
DTI NPAP Central Luzon Trade and Investment Assistance Center 20,000,000 3
DTI NPAP Integrated SME Development 4,360,000 3
DTI NPAP R&D, Product Clinic and Local Designers Program 15,000,000 3
DTI IN-NPAP Brand Management Program 225,000,000 3
Integrated Program on Trade Promotions and Market Development
DTI IN-NPAP (Trade missions, commercial intelligence, international and local
fairs participation) 10,000,000 3
IPO NPAP Disseminate information on lapsed, expired or off patents to SMEs 75,000 3
IPO NPAP Technology Info Matching Brokering (TIBM) Program 300,000 3
IPO NPAP Program for SMEs using IP as a business strategy 175,000 3
DOLE NPAP Katulong at Gabay sa Manggagawang May Kapansanan 250,000 3
CHED IN-Cont Development and Upgrading of Standards for Higher Education
Programs and Institutions 114,875,000 3
Implementation of Upscale Bayanihan Savings Replication Project
DILG/LGU Cont (BSRP) 2,824,000 3
DILG/LGU Cont One Cluster-One Vision for Development Project 2,000,000 3
Sector: Agribusiness
Access Facilitation and Access-Enhancement Services-Other CARP
Infrastructure Development Projects
DAR-LF Cont. (Irrigation) 424,321,000 3
SARED - Development and Management of Rural Enterprises in
DAR-LF Cont. ARCs/KALAHI Zone 25,220,000 3
DAR-LF Cont. SARED - Operations of KALAHI Farmers Center (KFCs) 24,780,000 3
DAR-LF Cont. SARED - Other CARP Rural Enterprise Development Activities 9,560,000 3
Belgian Integrated Agrarian Reform Support Project (BIARSP)
DAR-FAP Cont. Phase III 39,000,000 3
DAR-FAP Cont. Support to Agrarian Reform in Central Mindanao (STARCM) 18,380,000 3
Philippine Australia Technical Support for Agrarian Reform and
DAR-FAP Cont. Rural Development(PATSARRD) 4,320,000 3
BAI NLF Production of Genetically Superior Animals 38,000,000 3
FIDA NLF Fabrication & Development of Fiber Extraction Machines 950,000 3
Provision of Cost-Effective & Appropriate Technologies to Increase
FIDA NLF Fiber Crop Production 500,000 3
Lanao Integrated Area Development Program for the 2nd District of
RFU NLF Lanao del Sur 23,050,000 3
45
Not
Included Included
in in
Amount MTPIP MTPIP
Agency Category
But Not But
Funded Funded
RFU NLF Transforming Marinduque into a Major Mango Producing Province 70,653,000 3
Citrus Processing and Development Program for the Mangyans of
RFU NLF Or.iental Mindoro 12,008,000 3
RFU NLF Romblon Rice Sufficiency Program 20,194,000 3
RFU NLF Lubang Island Integrated Agricultural Development 09,050,000 3
RFU NLF Malarayat Coco-based Development Program 712,360,000 3
RFU NLF Urban Agriculture Program 3,240,000 3
Mindoro Food Basket Development Program (Commercial/ Bulk
RFU NLF Storage and Handling Grains 3
Production) – RICE 67,189,000 3
RFU NLF Eradication of Mango Pulp Weevil in Palawan 5,312,000 3
RFU NLF Philippine Pig Production and Development 3,500,000 3
RFU NLF MIMAROPA Regional Agricultural Integrated Research Center 79,675,000 3
RFU NLF Regional Animal Disease Diagnostic Laboratory 8,000,000 3
RFU NLF Regional Animal Feed Laboratory 15,600,000 3
RFU NLF Veterinary Quarantine Center 5,400,000 3
RFU NLF Marketing Information, Communication and Trading Centers 11,011,200 3
RFU NLF Support Program for Indigenous People 2,000,000 3
RFU NLF Biological Control Agent Production Laboratory 22,500,000 3
RFU NLF Livestock and Poultry Research & Development Program 190,600,000 3
RFU NLF Marketing Development and Intelligence System 12,250,000 3
RFU NLF Parawakan Breeding and Conservation 6,500,000 3
Establishment of Regional Information Technology Unit for Region
RFU NLF 4-B 10,600,000 3
Cordillera Integrated Research Development and Extension Center
RFU NFAP (CIARDEC) Complex 10,000,000 3
BAI NFAP Rabies Elimination Project 10,490,000 3
Strengthening RDE Through Community- Based Participatory
BAR NFAP Action Research Program 10,300,000 3
Increasing Fisheries Aquaculture Production in the Philippines thru
BAR NFAP the Application of Advanced
Aquaculture Technologies 16,320,000 3
BPI NFAP Enhancing the Competitiveness of Fresh Philippine Super Mango 7,470,000 3
BPRE NFAP Postharvest Facility Master Plan for Agricultural Dev’t. 2,700,000 3
Support to the Implementation of the Long-term Agriculture and
BPRE NFAP Fisheries Modernization Program 12,400,000 3
Updating the Land Cover Using Remote Sensing for Agricultural
BSWM NFAP Development 6,000,000 3
Village-level Agriculture and Food Systems Development in
BSWM NFAP Selected Degraded Poverty-Stricken Areas of the Philippines
(AgFoodSys) 4,360,000 3
The Integrated Agricultural Modernization Project in Selected
DA-OSEC NFAP Irrigated Areas 5,000,000 3
Establishment of a Rational Public Investment Programming System
DA-OSEC NFAP for the Agriculture
and Fisheries Sector 500,000 3
DAR NFAP Philippine-Israel Center for Agricultural Training (PICAT) 3,100,000 3
DAR NFAP SARRD II 1,000,000 3
DENR NFAP Land Administration Management II Program 50,000,000 3
Livecor NFAP Establishment of Integrated Corn Service Facility Centers 125,000,000 3
Support to Private Sector for Agricultural Modernization Through
Livecor NFAP the Establishment of Support Facilities for 3
Agrifood Supply Chain 60,000,000 3
Livecor NFAP Establishment of Rice Reprocessing Center 25,000,000 3
Livecor NFAP Establishment of Cold Chain Facility 5,000,000 3
Construction/Establishment of Modern Greenhouses with Drip
Livecor NFAP Irrigation for Vegetable Production 10,000,000 3
Livecor NFAP Expansion of the Agribusiness Equipment Leasing Program (AELP) 600,000,000 3
Establishment of the Food Standards Development and Research
NFA NFAP Center in the Visayas Region for the
Food Security Program of the Philippine Government 31,820,000 3
NFC NFAP Expansion of Tomato Paste Plant 355,000,000 3
PFDA NFAP Rehabilitation/Improvement of the Navotas Fish Port Complex 22,000,000 3
Preparation of Master Plan for the Establishment of Municipal
PFDA NFAP Fishery Post Harvest Facilities and
Infrastructures 3,471,000 3
Feasibility Study on the Proposed Rehabilitation/ Upgrading of Five
PFDA NFAP (5) Regional Fish Port Complexes 1,000,000 3
46
Not
Included Included
in in
Amount MTPIP MTPIP
Agency Category
But Not But
Funded Funded
Sector: Environment
Visayan Sea Coastal Resources and Fisheries Management Project
DENR Cont (VISEA) DENR Component 600,000 3
DENR Cont Samar Island Biodiversity Project 6,000,000 3
DENR Cont Land Classification 3,014,000 3
DENR Cont Forest Land Use Evaluation and Mapping (Sub-classification) 1,782,000 3
DENR Cont GEO Hazard Survey Assessment 28,000,000 3
Laguna de Bay Institutional Strengthening and Community
DENR Cont Participation 10,000,000 3
Partnership in Environmental Management for the Seas of South
DENR Cont East Asia 2,625,000 3
DENR Cont Coastal and Marine Biodiversity Conservation - MRDP 5,000,000 3
DENR Cont ASEAN Regional Center for Biodiversity Conservation (ARCBC) 2,000,000 3
Leyte Island Program for Sustainable Management of Natural
DENR Cont Resources 212,000 3
DENR Cont ASEAN Centers for Biodiversity (ACB) a successor organization of
ASEAN Regional Center for Biodiversity Conservation (ARCBC) 8,210,000 3
DENR Cont Integrated Coastal Resources Management Program 5,000,000 3
DENR Cont Management of Coastal and Marine Resources 30,223,000 3
DENR Cont Phil-Canada Environmental and Economic Management Project 2,000,000 3
DOST Cont GEO Hazard Mapping 8,231,000 3
Water Program Towards and Integrated Water Resource
DILG Cont Management (DILG-GTZ) German Gov’t. Grant 263,000 3
DILG LF Community-based Law Enforcement Public Safety Program 12,500,000 3
NAPC Cont Water Management Project 200,000 3
Sector: Tourism
Implementation of marketing plans for China, Japan, Korea and
DOT Cont Balikbayans/other major markets 711,588,000 3
DOT Cont "Byahe Tayo" Program 7,790,000 3
DOT Cont Pilot implementation of tour programs focusing on the country's
culture, history, heritage, sports, health, culinary and others 10,120,000 3
Monitoring of the tourism related infrastructure components of the
DOT Cont Regional Tourism Master Plans, Phil. Tourism Action Plan and Area
Specific Master Plans 1,100,000 3
DOT Cont Establish tourism economic zones (TEZs) 5,075,000 3
Safe "T" Philippines Program (Public Utility Taxi Transport System
DOT Cont Tourism Codes and Circulars) 3,393,000 3
Promotion of tour packages through telemarketing and other forms
DOT Cont of communication through the establishment 3
of the DOT Call Center 5,000,000 3
DOT LF DOT Information Systems Plan 10,456,000 3
DOT LF GP2 (Ganda ng Pilipinas, Galing ng Pilipino) Marketing Campaign 86,054,000 3
DOT LF Expo 2005 30,000,000 3
DFA LF Philippine Participation in the 2005 World Expo in Aichi, Japan 6,000,000 3
Sector: Digital Infrastructure
Philippine Research, Education and Government Information
DOST Cont Network (PREGINET) 50,000,000 3
Sector : Fiscal Strength
DBM-BISS Cont Electronic Budget System 132,140,000 3
DOF Cont LOGOFIND 808,800,000 3
BTr Cont Enhancement of ADAPS 1,700,000 3
BTr Cont Automation of TAP Facility 2,200,000 3
BTr Cont Establishment of off-site backup servers for ADAPS-RoSS 3,200,000 3
BTr Cont Enhancement of DMFAS 1,400,000 3
Purchase of Container X-rays for POM, MICP, Cebu, Subic and
BOC Cont Batangas 1,600,000,000 3
BOC Cont BOC Asycuda World (ECustoms) Project 500,000,000 3
BOC Cont Strengthening of the Post Entry Audit Group 1,000,000 3
Development of an inter-sectoral budget allocation model
NEDA Cont (WBASEM) 11,800 3
Implementation of the ADB assisted project" Technical Assistance
NEDA NPAP on Strengthening Provincial/Local and Expenditure Management"
(12 months) 8,400,000 3
NEDA LF Communication and Advocacy Program (CAP) Support Project 4,944,000 3
NEDA LF Implementation of the Management Information System Network 12,557,000 3
NEDA-NSO LF Conduct of Family Income and Expenditure Survey (FIES) 3,000,000 3
DOF NPAP Debt and Risk Management Office 2,500,000 3
47
Not
Included Included
in in
Amount MTPIP MTPIP
Agency Category
But Not But
Funded Funded
Sector: Labor
DOLE-POEA Cont Overseas Employment Program 123,569,000 3
DOLE-NCMB Cont Conciliation-Mediation Program 32,526,000 3
Conciliation-Mediation Program- NLRC Case Management System
DOLE-NLRC Cont (NLRCCMS) 41,463,000 3
(Supplemental) Source: E-Government Fund 3
DOLE-OSEC Cont Standards Setting & Enforcement Program Implementation of the
New Labor Standards Enforcement Framework 127,048,000 3
DOLE-OSEC Cont Social Protection and Welfare Program- 397,930,000 3
DOLE-OSEC Cont DOLE Social Protection Project 565,000,000 3
DOLE-NMP Cont Maritime Training Program 56,380,000 3
DOLE-MTC Cont Maritime Training Program 1,280,000 3
Promotion of Local Employment Facilitation, Employment
DOLE-OSEC NPAP Guidance and Regulatory Program 77,680,000 3
DOLE-OSEC NPAP Social Protection and Enhancement Program 3,000,000 3
DOLE-OSEC NPAP Wage Determination and Productivity Improvement Program 83,000 3
DOLE LF Computerization Program 2,300,000 3
II-Energy
Sector: Energy Independence and Power Sector Reforms
DOE Cont The Phil. Efficient Lighting Market Transformation Project (GEF) 48,632,300 3
Institutional Strengthening of DOE in Managing the Development of
DOE Cont the Natural Gas Industry 11,550,000 3
DOE Cont Barangay Electrification Program 75,000,000 3
DOE Cont Barangay Electrification Program (GAA/5% Reinvestment Fund) 276,000,000 3
DOE Cont Rural Power Project 560,000,000 3
DOE NPAP Master Plan on Regional Energy Planning (KOICAGrant) 435,200 3
DOE NPAP PRES Project DOE (French Protocol) 1,299,360,000 3
III-Social Justice and Basic Needs
Sector: Responding to Basic Needs of the Poor
DOH Cont Upgrading the Facilities and Capabilities of the Antimicrobial
Resistance Surveillance Program (KOICA Grant) 120,528,000 3
DOH Cont Women's Health & Safe Motherhood Project(World Bank) 70,000,000 3
Family Planning and HIV/AIDS Prevention Social Marketing
DOH Cont Project Phase III (KIW Grant) 53,340,000 3
NCIP/DLR Cont Issuance of CADTs/CALTS 2,200,000 3
UNDP Cont Issuance of CADTs/CALTS 15,600,000 3
NCIP Cont Issuance of CADTs/CALTS 4,950,000 3
NCIP Cont Facilitation of FPIC Compliance 1,610,000 3
NCIP/DLR Cont Facilitation of ADSDPP formulation 84,700,000 3
NCIP Cont Facilitation of ADSDPP formulation 2,200,000 3
UNDP Cont Facilitation of ADSDPP formulation 1,000,000 3
NCIP Cont Health Programs and Services 862,500 3
NCIP Cont Indigenous Health Knowledge and Protected Program 431,200 3
Strengthening local government capacity for poverty assessment,
DILG Cont plan formulation and monitoring 376,782,000 3
DSWD-E Govt
Fund Cont DSWD On Line Transaction System for Frontline Services 54,600,000 3
DSWD-E Govt
Fund Cont Advance Program on Adoptation and Foster case 100,000 3
DSWD-E Govt
Fund Cont Surveillance System to Prevent Prostitution in Siargao 100,000 3
DSWD-E Govt Prevention and Management of Sexually Exploited I the Tourism
Fund Cont Industry 100,000 3
DSWD-E Govt
Fund Cont Haven for Street Children 200,000 3
DSWD-E Govt
Fund Cont Child Friendly Investigation Studio 200,000 3
DSWD-E Govt
Fund Cont Aruga at Kalinga 100,000 3
DSWD-E Govt
Fund Cont Child Molding Program 100,000 3
DSWD-E Govt
Fund Cont Character Building for Children 300,000 3
DSWD-E Govt
Fund Cont Halfway Home for Children/Youth in Conflict with the Law 300,000 3
DSWD-E Govt
Fund Cont SCALA Program 300,000 3
48
Not
Included Included
in in
Amount MTPIP MTPIP
Agency Category
But Not But
Funded Funded
DSWD-E Govt
Fund Cont Operationalization of Rape Crisis Center 300,000 3
DSWD-E Govt
Fund Cont Group Home for Older Persons and PWDS 100,000 3
DSWD-E Govt
Fund Cont Shelltered Workshop for Older Persons and PWDS 200,000 3
DSWD-E Govt
Fund Cont Social Lab for Children and Youth with Disabilities 200,000 3
DSWD-E Govt
Fund Cont Aizheimer's Project 100,000 3
DSWD-E Govt Pilot Testing of Liberating the IP from indignity for the Badjau
Fund Cont families 300,000 3
DSWD-E Govt
Fund Cont Program for Srandness 100,000 3
DSWD-E Govt
Fund Cont Alliance Network for Strandness 100,000 3
DSWD-E Govt
Fund Cont Project Luke 100,000 3
DSWD-E Govt
Fund Cont Recovery and Reintegration for Trafficked Persons 300,000 3
DSWD-E Govt
Fund Cont Family Life Resource Center 200,000 3
DSWD-E Govt
Fund Cont Comprehensie Program for Internally Displaced Families 300,000 3
DSWD-E Govt Capability Building or Disaster Management for DSWD Internal
Fund Cont Staff (group training proposed for JICA endorsed already by NEDA) 20,000,000 3
DSWD in
Partnership
with NAPC Cont Food for Work Program 60,000,000 3
DSWD
(Belgium) Cont KALAHI-CIDSS (proposed for Belgium Assistance) 121,000,000 3
Sector: Automated Elections
Cleansing and completion of database of registered voters (CCDRV)
COMELEC Cont - Continuing registration of voters 65,721,000 3
COMELEC Cont CCDRV-Voters' Validation System 350,129,000 3
CCDRV-Automated Fingerprint Identification System (AFIS) Note:
COMELEC Cont not included/approved in the 2005 budget 1,894,598,300 3
COMELEC Cont CCDRV-Information Campaign Drive 51,146,200 3
COMELEC Cont CCDRV-Training 15,000,000 3
COMELEC Cont Automation of counting and canvassing-Operations 134,470,900 3
Automation of counting and canvassing-Information Campaign
COMELEC Cont Drive 16,111,600 3
Electronic Data Transfer of Election Results-Information Campaign
COMELEC Cont Drive 4,446,800 3
COMELEC IN-Cont Continuing education/training for COMELEC personnel 13,129,800 3
Conduct of continuing citizens and voters education through
COMELEC IN-Cont partnership with civil
society groups and other government institutions 9,814,000 3
COMELEC IN-NPAP Consultation/ coordination with DepEd and CHED 1,000,000 3
Sector: National Harmony: The Peace Process
OPAPP Cont Rehabilitation and reintegration program for former rebels 218,000,000 3
Capability Building for Local Poverty Reduction Action Team in
LGA-ARMM Cont ARMM (British Council-CLRG)/1 370,000,000 3
DPWH Cont ADB-assisted Bridge Program 351,002,000 3
ADB-assisted 6th Road Project- Zamboanga City-Pagadian City
DPWH Cont Road 375,505,000 3
DPWH Cont Austrian Bridge Assisted Projects 91,286,000 3
DPWH Cont Surigao-Davao Coastal Road (Impvt. 155.7 Km) (IBRD) 562,141,000 3
DPWH Cont Zamboanga-Pagadian Road (Buug- Kabasalan Section) (IBRD) 10,001,000 3
Cotabato (Jct. Awang)-Upi-Lebak- Kalamansig Road (87.62 km)
DPWH Cont (JBIC) 47,000,000 3
DPWH Cont 20th YEN JBIC Rural Roads Development Project, Phase II -
Compostela Valley-New Bataan- Libolon Road, Compostela Valley 23,399,000 3
20th YEN JBIC Rural Roads Development Project, Phase II -
DPWH Cont Liboton-Tupaz Road, Compostela Valley
(Imprv't. - 5.00 kms) 76,423,000 3
DPWH Cont Compostela-New Bataan-Liboton Road, Compostela
Valley (Imprv't. - 31.59 kms) 23,399,000 3
49
Not
Included Included
in in
Amount MTPIP MTPIP
Agency Category
But Not But
Funded Funded
DPWH Cont Tigaon-Mayon Road 33,669,000 3
DPWH Cont Special YEN Loan Package-2nd Magsaysay Bridge Proj. 500,000,000 3
24th YEN Rural Road Network Development Project, PIII (24th Yen
DPWH Cont RRNDP III) Properidad-Lianga Road, Agusan del Sur 35,626,000 3
24th Yen RRNDP III-Butuan City-Las Nieves- Esperanza- Bayugan
DPWH Cont Road, Agusan 71,398,000 3
Dobliston-Sultan Gumander (Pagadian-Cotabato Road) (Impvt.- 25.2
DPWH Cont kms) 224,464,000 3
Sultan Gumander-Malabang (Pagadian-Cotabato Road) (Impvt.-
DPWH Cont 33.1 kms) 124,725,000 3
Aurora-Monte Alegre-Molave Section, Aurora-Dipolog Road
DPWH Cont (Impvt.-25.2 kms) 112,130,000 3
Kapatagan-Dobliston Road (Pagadian-Cotabato Road) (Impvt.- 15.6
DPWH Cont kms) 82,822,000 3
Tukuran-Dobliston Road Zamboanga del Sur & Lanao del Norte,
DPWH Cont (Impvt.-16.0 kms) 105,859,000 3
Saudi Fund Development-Lake Lanao Circumferential Road,
DPWH Cont Project, Phase I (91.80 km 10,000,000 3
DPWH Cont Ligao-Pio Duran Road, Albay (Const./impv't. - 21.80 km) 94,628,000 3
DPWH Cont 23rd YEN OECF, Arterial Road Links, Development Project, Phase
IV -Himayangan-Silago Road, Southern Leyte, Leyte 79,730,000 3
IV -Silago-Abuyog Road, Southern Leyte, Leyte 109,893,000 3
IV - Liloan-San Ricardo Road, Southern Leyte 110,871,000 3
DepEd Cont Madrash Education Program 70,000,000 3
OMA Cont Coordination and supervision of Shari'ah training education program
and strengthening of the local Sharia'ah system 300,000 3
Support and assistance to government-recognized Muslim holidays
OMA Cont and festivities 21,000 3
Documentation of indigenous peoples' (IP) children caught in armed
NCIP Cont conflict and coordination of DDRR (disarmament, demolition,
rehabilitation and reintegration) 539,100 3
DILG Cont Support for peace and development in Mindanao (AusAID) 4,052,000 3
DILG Cont Local Government Support Programme for ARMM (CIDA) 98,448,100 3
DILG-PNP LF Construction of police stations 50,000,000 3
DOF Cont Mindanao Trust Fund (WB)/ 550,000,000 3
DPWH Cont Surigao-Davao Coastal Road 562,141,000 3
DOLE Cont Community Sala'am (Peace) Corp Project II (ILO) 2,400,000 3
OPAPP, NGAs NPAP Showcase convergence areas for peace and development 500,000,000 3
DOLE-POEA IN-NPAP Setting up Tripartite Consultative Council to institutionalize OFW
and private sector participation in overseas employment 43,318,000 3
ARMM LF Infrastructure Projects for the Implementation of RDPWH-ARMM 650,000,000 3
ARG, ARMM-
DTI NPAP Establishment of the Regional Economic Zone Authority 29,816,000 3
IV- Education and Youth Opportunity
Sector: Education
DepEd Cont Textbook Program 1,404,799,000 3
DepEd Cont Connectivity For Public Elementary/High School With Computers 50,000,000 3
DepEd Cont Expansion of ESC Coverage of the Gastpe Program 1,515,692,000 3
DepEd NPAP Madrash Education 958,425,000 3
DepEd IN-Cont Institutionalization of Early Childhood Education 279,875,000 3
DepEd IN-Cont Enhancement of Math and Science Education 1,068,000 3
DepEd IN-Cont School-based Training Program 4,179,400 3
DepEd IN-Cont Classroom Seats 185,550,000 3
DepEd IN-Cont Teacher Requirement at the Beginning of the School year 1,691,290,000 3
DepEd IN-Cont School MOOE 3,135,829,000 3
DepEd IN-Cont Scholarships 34,578,000 3
DepEd IN-Cont Training and Development 9,518,000 3
DepEd IN-Cont School Feeding Program 6,076,000 3
DepEd IN-Cont Drug Abuse Prevention Program 1,860,000 3
DepEd IN-Cont Family Basic Literacy Program (FBLP) 340,000 3
DepEd IN-Cont Balik-Paaralan Para sa Out-of-School Adult (BPOSA) 17,490,000 3
DepEd IN-NPAP Professional Enhancement Program (PEP) 715,000 3
DepEd IN-NPAP School First Initiative 100,000,000 3
DepEd IN-NPAP Teacher Induction Program 4,000,000 3
DepEd IN-NPAP Teacher Education Development Program 182,469,000 3
50
Not
Included Included
in in
Amount MTPIP MTPIP
Agency Category
But Not But
Funded Funded
DepEd IN-NPAP Upgrading of Values Education 240,000 3
DepEd IN-NPAP Distance Education for Public Elementary School (DEPES) 4,039,000 3
PPTA- Minadano Basic Education Development Project (MBEDP) -
DepEd IN-NPAP ADB 7,990,000 3
Comprehensive School and Community-Based Deworming Control
DepEd IN-NPAP Project (JICA) 2,151,000 3
Strengthening the Implementation of Visayas Basic Education
DepEd IN-NPAP (STRIVE) -AusAid 4,784,000 3
DepEd FAP Strengthening Basic Education in Bohol and Nothern Samar 3,167,000 3
Construction of Elem & Secondary Sch. Bldgs. in areas
DepEd LF Experiencing Acute Classroom shortage 1,000,000,000 3
DepEd-NSTIC IN-Cont National Science And Technology Instrumentation Center (NSTIC) 127,864,000 3
DepEd-NETRC IN-Cont Accreditation & National Achievement Test (All Grade 6, 4th Year) 32,699,000 3
DepEd- National Achievement Test (Year 1 & Year 4) 1st yr achievement to
NETRC IN-Cont be administered to bridge and 1st yr. Regular 22,400,000 3
Accreditation Program for Public Elementary Schools (APPES)
DepEd-BEE IN-Cont Program 1,010,000 3
DepEd-BSE IN-Cont High School Bridge Program 1,382,371,000 3
DepEd-SHNC IN-Cont Teacher-Child-Parent Program 5,000,000 3
DepEd-ARMM NPAP ADTA-Development of Basic Education in Mindanao -ADB Grant 9,011,000 3
CHED Cont Student Financial Assistance Programs 374,000,000 3
CHED IN-Cont Higher Education Development Program 7,342,500 3
CHED IN-NPAP College Bridging Programs 2,000,000 3
DOLE NPAP Community Sala'am (Peace) Corp Project II (ILO) 2,400,000 3
NCIP IN-Cont Indigenous People's Education 270,000 3
NCIP IN-Cont Assistance to Community Schools 431,000 3
TESDA Cont Student Financial Assistance Programs 288,485,000 3
TESDA IN-Cont Job-Skill Matching System 54,080,000 3
TESDA IN-Cont Tendering Program 373,367,000 3
TESDA IN-Cont “Kasanayan at Hanapbuhay” (Apprenticeship Program 15,934,000 3
TESDA IN-Cont Learnership Program 15,333,000 3
TESDA IN-Cont Co-management / Devolution of TESDA Institutions 2,400,000 3
TESDA IN-Cont Community-based Programs & Entrepreneurship Dev’t Programs 74,222,000 3
PMMA IN-Cont Upgrading of the PMMA 345,023,000 3
Sector: Science and Technology
DOST Cont Small Enterprises and Technology Upgrading Program (SETUP) 100,000,000 3
DOST Cont Calibration and Testing Program 25,000,000 3
DOST Cont Priority/strategic R&D programs 435,000,000 3
Contract research program and other R&D cost sharing schemes
DOST Cont with the private sector 43,500,000 3
CICT Cont Wireless In Education Initiative (WEIn) 5,000,000 3
Sector: Culture
NCIP IN-Cont Customary Laws and Practices Documentation 323,000 3
NCIP IN-Cont Traditional Crafts Production 647,000 3
NCIP IN-Cont Support to Cultural Community Festivals/Tribal Congresses 215,000 3
NCCA IN-Cont Cultural Tourism Projects (NEFCA funded) 665,000 3
NCCA IN-Cont Sining Panglahat (NEFCA funded) ,255,000 3
Conservation of Built Heritage and Archeological Sites Projects
NCCA IN-Cont (NEFCA funded) 59,945,000 3
Preservation and Protection of Cultural Treasures of Cultural
NCCA IN-Cont Communities (NEFCA funded) 2,357,000 3
NCCA IN-Cont National Education & Cultural Enrichment Program (NEFCA funded) 8,896,000 3
Strengthening Social Infrastructure and Culture and Governance
NCCA IN-Cont Projects (NEFCA funded) 4,385,000 3
NCCA IN-Cont Philippine Cultural Index Project (NEFCA funded) 665,000 3
NCCA IN-Cont Philippine Cultural Education Plan (PCEP) Projects (NEFCA funded) 5,687,000 3
NCCA IN-Cont Projects on Advocacy for Peace (NEFCA funded) 8,450,000 3
NCCA IN-Cont Media, Culture, and Values Enhancement Projects (NEFCA funded) 3,343,000 3
NCCA IN-Cont Research and Documentation Grant Projects(NEFCA funded) 2,048,000 3
NCCA IN-Cont Publication Projects (NEFCA funded) 2,000,000 3
NCCA IN-Cont Cultural Events and Festivals Projects (NEFCA funded) 15,227,000 3
NCCA IN-Cont Support for Young Artists Projects (NEFCA funded) 7,109,000 3
NCCA IN-Cont Artistic Creation Projects (NEFCA funded) 7,464,000 3
NCCA IN-Cont International Projects (NEFCA funded) 2,870,000 3
Mainstreaming Indigenous Knowledge Systems in Local
DILG NPAP Governance (IKSG) 200,000 3
NCIP NPAP Indigenous Knowledge System and Practices (IKSP) Documentation 270,000 3
51
Not
Included Included
in in
Amount MTPIP MTPIP
Agency Category
But Not But
Funded Funded
V- Anti-Corruption and Good Governance

Sector: Anti-Corruption
BIR IN-Cont Internal Audit Program of the BIR 230,000 3
BIR IN-Cont Audit of Cash and Non- Cash accountabilities of revenue
collection officers (RCO) 2,720,000 3
BIR IN-Cont Implementation of the BIR Personnel Integrity Program 1,390,000 3
BOC IN-Cont Implementation of the BoC Personnel Integrity Program 20,000,000 3
Fully operationalize the Government Electronic Procurement System
DBM IN-Cont (E-govt funded) 54,446,000 3
DBM LF Budget Improvement Project 25,429,000 3
DILG IN-Cont Preparation and submission of project status report 400,000 3
DILG IN-Cont Simplification of the LGU Civil Registry System 250,000 3
PAGC IN-Cont Anti-Corruption Advocacy 100,000 3
CESB IN-Cont Executive Leadership Programs 4,200,000 3
CESB NPAP Senior Executive Development Program 4,200,000 3
CESB NPAP Values formation seminars for career executive service officials 500,000 3
Reengineering the Administrative Structure, Staffing and Operating
Ombudsman NPAP Systems of the OMB 12,978,400 3
Ombudsman NPAP Creation of Surveillance Units (EU) 191,400 3
Ombudsman NPAP Design of Mobilization System including Legislation (EU) 657,500 3
Ombudsman NPAP Design and Implementation of an OMB Witness Protection Program 1,787,400 3
Ombudsman NPAP More aggressive and effective enforcement of anti-corruption laws 1,786,100 3
Development and Implementation of Public Sector Integrity
Ombudsman NPAP Standards (EU) 14,539,400 3
Conduct of study and development of conceptual framework and
Ombudsman NPAP design of local integrity and accountability mechanisms in urban
governance 5,802,300 3
Ombudsman NPAP Dev’t and Implementation of Public Sector Integrity Standards 1,693,800 3
Ombudsman NPAP Anti-Corruption Surveys of Citizens and Business (EU) 150,000 3
Ombudsman NPAP Review , Modification and Codification of Anti-Corruption Laws 1,630,800 3
Design and Implementation of Integrity Standards and Review
Ombudsman NPAP Mechanisms in the Preparation of Laws 1,182,200 3
Ombudsman NPAP Widening and synchronizing collaboration with partner stakeholders 2,490,000 3
Sector: Bureaucratic Reforms
CHED IN-Cont Upgrade CHEDLINK components 4,000,000 3
DILG IN-Cont Good Practices for Local Government Facility for Adaptation and 1,150,000
Replication (GO-FAR) (UNDP and MEDCO) 3
DOLE-OSEC IN-Cont DOLE's Information Systems Plan (ISP) Project 10,000,000 3
Development of the National Statistical Information Center (NSIC)
NSCB IN-Cont Project, Phase III (SIDA) 10,309,600 3
NEDA IN-Cont NEDA Information Network Project Phase III 26,000,000 3
DILG IN-NPAP Local Government Unit Information Portal (EGF) 74,000,000 3
DILG IN-NPAP Public Safety Information Network (PSIN) (EGF) 133,670,000 3
CSC IN-NPAP Portal for e-Governance in the Civil Service Corps (EGF) 90,971,000 3
Establishment of Video conferencing Facilities for central office and
NEDA IN-NPAP regional offices 5,000,000 3
CSC IN-NPAP Establishment of Civil Service Academy (JICA) 420,000 3
Formulation of Policy on enjoining LGUs for digital connectivity for
DILG FN-Cont investment promotion 250,000 3
Monitoring policy compliance of LGUs for digital connectivity for
DILG FN-Cont investment promotion 251,000 3
DAP FN-NPAP Institutionalize Performance Excellence Awards 1,500,000 3
DAP LF Repairs and rehabilitation of DAP's facilities 4,400,000 3
Sector: Responsive Foreign Policy
Upgrading of the capability and utilization of Interpol National
PCTC IN-Cont Central Buerau (NCB) Manila for information exchange on 800,000
transnational organized crime 3
Counter-Terrorism Capacity Building Project sponsored by the
PCTC IN-Cont Australian Federal Police and AusAID 3,000,000 3
RP-United Kingdom Counter-Terrorism Crisis Management
PCTC IN-Cont Assistance Programme 8,500,000 3
Philippines Enhanced Border Management Project sponsored by the
PCTC IN-Cont European Commission (EC) and International Organization for
Migration (IOM) 3,000,000 3
DOLE-OWWA IN-Cont Oversees Workers Welfare Program 79,816,500 3
DOLE-POEA IN-Cont Electronic linking of the 12 government agencies under the eLink
Project to cut down on OFW documentation time and cost by 50% 123,569,000 3
52
Not
Included Included
in in
Amount MTPIP MTPIP
Agency Category
But Not But
Funded Funded
Sustaining the fight against illegal recruitment thru the Presidential
DOLE-POEA IN-Cont Anti-Illegal Recruitment Task Force 38,693,000 3
Implementing the performance appraisal system of all licensed
recruitment agencies(Anti-Illegal Recruitment Program) to weed out
DOLE-POEA IN-Cont those with high incidence of runaways 38,693,000 3
DFA IN-Cont Full implementation of the MRP/V system 61,500,000 3
DFA IN-Cont Completion of Construction of Buildings and Structures 188,000,500 3
HUDCC LF National Govt Center Housing Project (HGCHP) 10,435,000 3
HUDCC LF Subdivision Survey of Proclaimed Lands for Socialized Housing 7,491,000 3
HUDCC LF Estate Management of Phil. Centennial Village 2,700,000 3
HUDCC LF BCDA-Bonifacio Housing & Information Technology (BHIT) Zone 2,500,000 3
HUDCC LF National Drive Against Professional Squatting &Squatting Syndicate 550,000 3
Construction, Rehabilitation & Improvement of Transportation and
DOTC Communications Infrastructure Projects including Acquisition of
LF Equipment 818,077,000 3
DOTC LF DOTC- Executive Mgt. Info. Systems 5,000,000 3
Metro Manila Strategic Mass Rail Transit Development (Line 2)
DOTC FAP Project (Civil works, etc. including Right-of-way) (JBIC) 303,900,000 3
DOTC FAP Follow-On Search and Rescue Vessels Acquisition Project 649,999,000 3
Operational Requirements or the Congressional Commission on
Senate LF Agricultural Modernization 21,149,000 3
Senate LF Congressional Oversight Committee on Labor and Employment 23,179,000 3
Operational Requirements of the Joint Congressional Power
Senate LF Commission 25,000,000 3
Operational Requirements of the Congressional Oversight
Senate LF Committee on E-Commerce 1,000,000 3
Operational Requirements of the Legislative Oversight Committee to
Senate Monitor and Oversee the Implementation of the RP-US Visiting
LF Forces Agreement 7,000,000 3
Operational Requirements of the Joint Congressional Oversight
Senate LF Committee on Clean Air Act 4,250,000 3
Operational Requirements of the Joint Congressional Oversight
Senate LF Committee on Ecological Solid Waste Mgt. 4,250,000 3
Senate Operational Requirements of the Comprehensive oversight
LF Committee on the Comprehensive Tax Reform Program 10,000,000 3
Senate LF Congressional Committee on Absentee Voting Act 10,000,000 3
Senate LF Congressional Committee on Anti-Money Laundering 5,000,000 3
OP LF Repair/Lease of Air Transportation Equipment 300,000,000 3
OP LF Mindanao Economic Development Council 25,579,000 3
OP LF North Luzon Growth Commission 15,034,000 3
OP LF Office of the Presidential Adviser on the Peace Process 99,025,000 3
OP LF Office of the Presidential Adviser for Regional Development 64,429,000 3
OP LF Presidential Anti-Graft Commission 18,521,000 3
OP LF Presidential Anti-Organized Crime Commission 580,369,000 3
Presidential Anti-Organized Crime Commission Proper, including
OP P500,000,000 for confidential and intelligence expenses to be
LF released upon approval f the President 545,654,000 3
OP LF Philippine Center on Transnational Crime 34,715,000 3
OP LF Presidential Visiting Forces Agreement Commission 2,000,000 3
OP LF Commission on Information and Communications Technology 1,040,549,000 3
DND LF Operational requirement of Ad-Hoc Veterans Ofc, Washington, DC 4,657,000 3
PSC LF Hosting of South East Asian Games 30,000,000 3
CHR LF Establishment of Human Rights Center 1,417,000 3
CHR LF IT-Based Monitoring of Human Rights Condition 200,000 3
Development of Indicators of Human Rights Monitoring of Gov’t
CHR LF Compliance with International Human Rights Instruments 200,000 3
LCP LF Rehabilitation of Lung Center of the Phils. (LCP) Building 60,000,000 3
MMDA LF Pasig River Rehabilitation Project (information and advocacy) 1,024,000 3
Acquisition/Expropriation of Titled Lands within the 10-meter
Environmental Areas (EPAs) along the Pasig River under the Pasig
PRRC LF Rehabilitation Plan 11,648,000 3
Pasig River Environment Management and Rehabilitation Project
PRRC FAP (ADB) 427,723,000 3
53
As cited in the draft paper, it is The team used the SER as basis for
difficult to assess whether the funded evaluating the attainment of
items in the GAA are the same development objectives under
programs needed to achieve the MTPDP 2001-2004.
objectives of the plan. So it would be
inappropriate to cite “failure of the As clearly illustrated in the report,
government to attain the objectives of the targets set to be accomplished
the MTPDP” during this period were not attained.
In the case of MTPDP 2004-2010,
the team used the MTPIP and the
approved budget of the selected
agencies as the basis for evaluation.
5. Sectoral projects adequately funded under the programs and projects of the
respective implementing agencies are still among the projects authorized to be
funded under PDAF. This special purpose fund was likewise not reduced
despite unmanageable budget deficit.
As provided in the GAA, PDAF is used to fund priority programs and projects
or the required counterpart for foreign assisted programs and projects. The
appropriations for this fund are released directly to the implementing agency or
concerned LGUs.
To provide guidelines on the release and utilization of PDAF funds, the DBM
issued National Budget Circulars (NBCs). The NBCs issued and applicable for
CYs 2001 to 2004 are shown below.
Number Date Issued Subject
476 September 20, 2001 Guidelines on the release of funds chargeable against
the PDAF for the second semester of CY 2001 and
thereafter.
479 March 1, 2002 List of programs and projects chargeable against CY
2002 PDAF and lump-sum appropriations under the
DPWH budget.
493 March 16, 2004 Clarification of certain provision of NBC No. 479
dated March 1, 2002.
54
These circulars were issued only after the passage of the GAAs. Before any
fund is released, the House Committee on Appropriations and the Senate
President must endorse the programs/projects to the DBM. The DBM, through
the Regional Operations and Coordination Service (ROCS), review the prepared
programs/projects to determine conformity with the prescribed NBCs. The
results of review would be the basis for the issuance of Special Allotment
Release Order (SARO) and Notice of Cash Allocation (NCA).
The team, however, noted that the DBM was not considering the adequacy of
budgets appropriated for each sector defined in the MTPDP in determining the
projects to be funded from PDAF. While some programs and projects were
already allocated funds in excess of the requirements defined in the MTPDP,
these are still included in the list of projects qualified to be funded under PDAF.
This condition would deprive funding requirements of other programs and
projects not adequately funded.
The projects authorized to be funded from PDAF and their respective budget
allocations per BESF in relation to their funding requirements as established in
the MTPDP follow:
% of Budget Allocation
Period of
Implementing
Program/Project/Activity Implemen-
Agencies Excess /
tation MTPDP BESF
(Deficiency)
SUCS, TESDA,
• Financial Assistance CHED, National 2001-2004
¾ Education Commission on
Indigenous People
Purchase of IT DepEd, TESDA, 2001-2005 31.11 29.57 (1.54)
Equipment CHED, SUCs,
LGUs
Scholarship TESDA, CHED, 2005
SUCs, LGUs
¾ Health
- Indigent patients DOH 2001-2005
of Regional /
Specialty
Hospitals and
Medical Centers
3.44 3.21 (0.23)
under DOH
- Indigent patients LGUs and RHUs 2005
at the hospital
devolved to LGUs
and RHUs
- Insurance Premium Philhealth 2005
¾ Social Welfare
6.54 7.30 0.76
- CIDSS DSWD 2001-2005
- Small and medium DSWD 2005
enterprises/
livelihood
55
% of Budget Allocation
Period of
Implementing
Program/Project/Activity Implemen-
Agencies Excess /
tation MTPDP BESF
(Deficiency)
- Social protect- DSWD 2001-2004

tion and promo-
tion of rights and
welfare of the
poor and the
disadvantaged
- Rolling/sari-sari NFA 2001-2004
stores (subject to
NFA guidelines)
¾ Agriculture and DA and 2001-2004 9.26 8.90 (0.36)
Fisheries corporations
Modernization implementing
(AFMA) AFMA
¾ (no specific
program/project) DILG 2002-2004 8.73 9.28 0.55
• Livelihood and
Employment
Generation
¾ Livelihood Program TLRC, 2002-2005 6.54 7.30 0.76
NCIP, OMA DTI, 2002-2004
DA, CDA 2005
¾ Emergency DOLE 2001-2004
Employment
• Science Technology DOST, DOTC 2002-2004 31.11 29.57 (1.54)
and Information/
Communications
Equipment
• Programs falling under
the following sector:
¾ Communications, 14.14 12.91 (1.23)
roads and other
transportation
¾ Water resources 1.28 1.53 0.25
development and
flood control
¾ Education, culture 31.11 29.57 (1.54)
and manpower
development
¾ Agriculture, 9.26 8.90 (0.36)
agrarian reform and
natural resources
¾ Public order and 8.73 9.28 0.55
safety
¾ Health 3.44 3.21 (0.23)
¾ Power and energy 0.28 0.41 0.13
¾ Training and 1.12 0.54 0.58
communication
development
It may be noted that some programs were already adequately funded and yet
still authorized to be funded under PDAF allocation.
56
The team likewise noted that PDAF allocation in relation to the total GAA is on
increasing trend despite unmanageable budget deficit.
In thousand pesos
PDAF
Year Allocation GAA % Allocation
2001 3,330,000 665,094,141 0.50%
2002 5,677,500 575,123,728 0.99%
2003 8,327,000 609,614,730 1.36%
2004 8,327,000 609,614,730 1.36%
2005 6,100,000 597,663,400 1.02%
Total 31,761,500 3,057,110,729 1.04%
The President’s Budget proposal In such case, the DBM should ensure that
incorporated a lower allocation for PDAF the projects to be funded out of PDAF are
but this was increased by Congress. the projects most needed by the
constituents. As discussed above, even
those projects well funded are included in
the list of projects to be funded out of
PDAF
6. Despite increasing budget deficits, the national government continuously

provides budgetary support to losing government corporations. Under the
special provisions of the GAAs, subsidies/budgetary support to government
corporations were provided in order to enhance the efficiency and
effectiveness of the said corporations.
Under Section 19, Chapter 3, Book VI of EO No. 292, where national

government budgetary support is needed by the government corporations, the
budgets of the said corporations shall be subject to review and approval as part
of the budget process in terms of:
(a) capital or equity inputs;

(b) operating contributions to support specific activities undertaken
by the institution as part of its regular functions; and
(c) guarantee of the national government for obligations or contracts
entered into by the corporations.
57
The said subsidies will then be included in the GAAs. Under the special
provisions of the GAAs, subsidies/budgetary support to government
corporations were provided in order to enhance the efficiency and effectiveness
of the said corporations. Review of the GAAs revealed that subsidies for
MOOE and CO to government corporations during CYs 2001-2005 ranged
from P3.91 billion to P10.19 billion as shown below:
AGENCIES ( In Thousand Pesos)

2005 2004 2003 2002 2001 Total
Department of Agriculture
National Dairy Authority 52,200 52,200 52,200 58,000 60,596 275,196
National Food Authority 900,000 928,000 928,000 902,000 1,241,993 4,899,993
National Tobacco
Administration 80,000 81,000 81,000 100,000 228,278 570,278
Philippine Coconut Authority 170,000 180,000 180,000 210,000 256,113 996,113
Philippine Crop Insurance 30,500 40,500 40,500 45,000 100,000 256,500
Philippine Rice Research
Institute 90,000 90,000 90,000 100,000 129,382 499,382
Sugar Administration Authority 35,000 45,000 45,000 90,000 126,824 341,824
Philippine Fisheries Dev.
Authority 16,500 16,500
Quedan and Rural Credit
Guarantee Corporation 80,000 80,000
Department of Energy
Nat'l Electrification
Administration 260,000 450,000 450,000 620,000 530,000 2,310,000
Department of Health
Lung Center of the Philippines 207,560 185,500 185,500 205,000 151,540 935,100
National Kidney & Transplant 185,000 185,000 185,000 184,000 194,036 933,036
Phil. Children’s Medical Center 226,000 211,500 211,500 211,000 191,914 1,051,914
Philippine Heart Center 155,000 155,000 155,000 154,000 173,503 792,503
Philippine Institute for Traditional
& Alternative Health Care 40,000 80,000 80,000 96,000 296,000
Phil. Health Insurance Corp. 500,000 500,000
Department of Public Works &
Highways
Local Water Utilities 260,000 260,000
Department of Tourism
Phil. Convention and Visitors
Corp. 64,800 64,800 64,800 72,000 81,009 347,409
Nayong Pilipino Foundation 15,000 10,000 25,000
Department of Trade &
Industry
Cottage Industry Technology 13,000 11,700 11,700 13,000 15,016 64,416
Center For Int'l Trade
Expositions & Missions 93,000 93,000 93,000 95,000 76,588 450,588
Department of Transportation
& Communications
Philippine National Railways 135,000 135,000 135,000 250,000 135,834 790,834
Light Rail Transit Authority 865 865
Mactan-Cebu International
Airport Authority 253,700 253,700
National Economic &
Development Authority
Philippine Institute for
Development Studies 24,300 24,300 24,300 30,000 39,734 142,634
Phil APEC Study Center
Network 3,000 3,863 6,863
Office of the Press Secretary
People's Television
Network, Inc. 50,000 30,000 30,000 20,000 130,000
58
AGENCIES ( In Thousand Pesos)

2005 2004 2003 2002 2001 Total
Other Executive Offices
Asset Privatization Trust 27,600 27,600
Cagayan Economic Zone
Authority 90,000 117,000 117,000 130,000 153,374 607,374
Cultural Center of the
Philippines 120,000 142,000 142,000 100,000 263,000 767,000
Dev’t. Academy of the
Philippines 70,000 70,000
Home Insurance & Guaranty
Corp. 232,500 232,500
National Housing Authority 1,000,000 460,000 460,000 500,000 2,457,240 4,877,240
Zamboanga. City Special
Economic Zone Authority 90,000 117,000 117,000 130,000 141,985 595,985
Southern Phils. Dev't.
Authority 0 5,000 5,000 183,000 182,746 375,746
Subic Bay Metropolitan
Authority 25,000 25,000
Technology and Livelihood
Resource Center 36,000 36,000
Budgetary Support to Govern-
ment Corporation– Others 4,310 26,500 26,500 90,000 36,108 183,418
Total 4,685,670 3,910,000 3,910,000 4,906,000 10,191,607 27,603,277
The team, however, noted that in most cases, these subsidies did not attain the
purpose of enhancing the efficiency and effectiveness of said corporations. A
number of corporations continuously incurred losses from CY 2001 to 2004
despite provision of assistance as tabulated below:
(In Thousand Pesos)

Agency
2004 2003 2002 2001
Department of Agriculture
National Dairy Authority 49,475 59,317 57,545 59,154
Subsidy from NG 52,200 52,200 58,000 41,727
National Tobacco Administration 147,638 292,108 197,420 226,987
Subsidy from NG 109,682 100,018 168,447 185,594
Philippine Coconut Authority 195,960 207,969 231,616 190,693
Subsidy from NG 216,200 205,630 190,000 154,041
Philippine Rice Research Institute 200,456 393,714 233,051 142,943
Subsidy from NG 240,000 362,768 117,778 143,896
Sugar Regulatory Administration 122,850 74,078 55,035 106,137
Subsidy from NG 40,000 45,000 50,000 102,491
Department of Energy
National Electrification Adm. 480,693 6,422,932 1,368,171 1,037,456
Subsidy from NG 439,668 424,550 786,773 284,585
Department of Health
Lung Center of the Philippines 145,693 135,457 141,716 153,529
Subsidy from NG 186,367 185,500 205,000 141,724
National Kidney Transplant
Institute 124,745 163,675 118,301 86,965
Subsidy from NG 184,000 188,067 180,000 183,442
59
(In Thousand Pesos)

Agency
2004 2003 2002 2001
Philippine Children’s Medical
Center 186,479 207,840 215,132 185,835
Subsidy from NG 211,345 211,000 211,000 169,802
Philippine Heart Center 14,274 143,679 216,971 231,867
Subsidy from NG 161,145 161,725 164,552 139,330
Cagayan Economic Zone Authority 23,640 32,741 28,562 22,845
Subsidy from NG 21,666 40,000 40,000 31,104
Cultural Center of the Philippines 198,132 201,581 184,704 172,804
Subsidy from NG 148,525 146,962 154,591 111,678
In effect, therefore, through these subsidies, the national government absorbed

losses incurred by these corporations.
Due to the nature of the services An assessment and evaluation of

being made available by some physical and financial accom-
losing corporations, specially in plishments of losing corporations
the health and agriculture sectors, should be undertaken to ensure
the government extends budgetary that losses were incurred as a
support to ensure that basic result of providing basic services
services/needs of the people are at the least cost to target
provided at reasonable costs beneficiaries.
60
Chapter 2
Effective Feedback and Monitoring

Mechanism
61
EFFECTIVE FEEDBACK AND MONITORING MECHANISM
INTRODUCTION
To assess the impact of the criteria/approach used in fund allocation, the DBM a
sound monitoring mechanism of gathering information on the relevance,
appropriateness and adequacy of the criteria in ensuring that only priority and
necessary projects are funded.
One way of monitoring progress is by requiring the submission of periodic reports.

For reports to be considered useful for decision-making and for taking appropriate
corrective measures, they should contain accurate, complete and reliable
information.
However, the study showed that the DBM at present is not gathering data on the
validity of the criteria used for fund allocation.
OBSERVATION
As of December 2005, the DBM has yet to formulate a feedback mechanism to

assess the effectiveness of the budget ceiling approach in ensuring the funding of
priority and necessary programs and projects and to attain a balanced budget by
2010.
Under Section 55, Chapter 6 of the Revised Administrative Code, the Secretary of
the DBM is required to conduct a continuing review of the budgetary program and
project structure of each department, office or agency. The results of such review
would then be used as basis for modifying or amending existing structure.
During CYs 2001 and 2002, the DBM used the Baseline Budgeting Approach in
preparing the national budget. Since CY 2003, the DBM shifted to indicative
Budget Ceiling Approach.
It was claimed that the approach is better than the Baseline Budgeting Approach for
the following reasons:
• It facilitates the budget preparation process.
• It is easier and a better approach in determining the
agency budget level.
62
EFFECTIVE FEEDBACK AND MONITORING MECHANISM
It was noted, however, that the shift was not a result of a study conducted by the
DBM nor from feedback reports received from various agencies on the advantages
and disadvantages of the Baseline Budgeting Approach but a policy approach to
facilitate the budget preparation process.
Inquiry from the DBM and selected agencies revealed that the agencies were not
required to submit feedback reports to the DBM to ensure the effectiveness/
responsiveness of the budget allocation approach being adopted. Likewise, at the
agency level, the agencies was not ascertaining the soundness of the system of
allocating the budget ceiling set by DBM to the different programs and projects.
The absence of a feedback mechanism would not provide the DBM the assurance
that the budget approach being applied at present would ensure that only priority
and necessary programs and projects were funded and that funds were efficiently
allocated to ensure the attainment of a balanced budget by 2010.
There is an ongoing technical We are glad that an ongoing review

assistance for the review of the is being undertaken.
system at the DBM
63
Chapter 3
Compliance with Existing

Laws and Regulations
64
COMPLIANCE WITH EXISTING LAWS AND REGULATIONS
INTRODUCTION
Under the Constitution, the President is required to submit a budget of expenditures

and sources of financing within 30 days from the opening of every regular session
of Congress.
The preparation of budget is guided by certain laws, rules and regulations. The
implementation of rules and regulations become more relevant in the present
situation where the government experienced unmanageable budget deficit.
The study, however, revealed that the President’s proposed budgets for current
operating expenses exceeded the proposed national government revenues for the
same period which is not in consonance with Section 13, Chapter 3, Book VI of the
Revised Administrative Code.
OBSERVATION
The proposed current operating expenditures for CYs 2001 to 2005 could no
longer be covered by the national government revenue for the same period. The
approval of current operating expenditure budgets in excess of the proposed
revenue collection contributed in the increasing national government budget
deficit.
To ensure macroeconomic stability, the government is implementing a deficit

reduction program towards a balanced budget by 2010. A balanced budget occurs
when revenues collected equal cash disbursements (excluding debt repayments and
payments on non-budgetary accounts) of the NG during a given year.
Large fiscal deficits are inconsistent with macroeconomic stability as they result in
higher domestic interest rates and inflationary pressures. Deficits are intended to be
reduced through tax reforms and expenditure management. The key instrument in
pushing for reforms in public expenditure management is the budget which reflects
the government’s estimate of its income and expenditures.
65
The growth in budget deficit may be attributed to the government’s inability to

restrain expenditures within the level of revenue collection. As provided under
Section 13, Chapter 3, Book VI of the Revised Administrative Code, the ordinary
income of government shall be used primarily to provide appropriations for current
operations, except in case of a national emergency or serious financial stress, the
existence of which has been duly proclaimed by the President.
Analysis of proposed income and expenditures, however, revealed that the DBM
proposed budgets for current operating expenditures in amounts exceeding the
proposed national government revenues for the same period.
Amount (In Million Pesos)

Particulars
2001 2002 2003 2004 2005
Expected Revenue- NG 607,200 624,307 640,650 671,194 758,473

Proposed Budget- Current
Operating Expenditures
Personal Services (PS) 257,034 264,389 275,577 286,420 289,250
Maintenance and Other 374,838 426,721 449,471 508,285 546,277
Operating Expenses (MOOE)
Sub-total 631,872 691,110 725,048 794,705 835,527
Less: FAP-PS (746) (676) (412) (202) (133)
MOOE (6,795) (6,070) (5,694) (4,902) (3,948)
w/o details - - (1,607) (888) (1,337)
Total – Current Operating
Expenditures 624,331 684,364 717,335 788,713 830,109
Surplus/(Deficit) (17,131) (60,057) (76,685) (117,519) (71,636)
It maybe noted that, except for CY 2005, increases in expected revenue are not
enough to meet the increasing budgets for current expenditures as graphically
illustrated below:
Annual Increase in Revenue and Current Operating

Expenditures
100,000
A m oun t (In M illion Pesos)
80,000
Ann ual Increase in
60,000 Revenue
40,000 Ann ual Increase in
Expenditures
20,000
-
2002 2003 2004 2005
Year
66
As the expected revenues did not materialize, the national government budget
deficit continued to rise as illustrated below:
NG Proposed Revenue, Current Operatimg

Expenditures and Deficit
1,000,000
Amount (In Million Pesos)
800,000
600,000
400,000
200,000
0
-200,000
-400,000
2001 2002 2003 2004
Year
Revenue T otal Current Expenditures Deficit
67
Chapter 4
Budget Linkages with the MTPDP
68
BUDGET LINKAGES WITH THE MTPDP
INTRODUCTION
Public financial management begins with planning and programming. Under this
phase, the NEDA coordinates the preparation of the MTPDP which is a 6-year
development plan that coincides with the term of each president. The MTPDP is
approved by NEDA’s board and the Cabinet in a joint session chaired by the
President.
The MTPDP is accompanied by a MTPIP, a rolling 3-year public investment plan.

The MTPIP contains the specific sectoral priority programs and projects. It forms
part of the Medium-term Expenditure Plan and is used as input in the annual
budgeting process of the national government.
The team noted that GAAs for CYs 2001 to 2004 were not aligned with the MTPDP
sectoral allocations while the 2004 to 2010 MTPDP did not provide sectoral
allocation of resources. Thus, assessment on the effectiveness of allocations could
not be undertaken.
OBSERVATION
The President’s proposed budget and the GAA sectoral allocations for CYs 2001
to 2004 were not aligned with the MTPDP sectoral allocations. The failure of the
DBM to align BESF and GAAs sectoral allocations with the MTPDP would affect
the implementation of the government’s priority programs defined in the MTPDP.
On the other hand, the 2004-2010 MTPDP did not provide sectoral allocation of
resources. Thus, assessment on the effectiveness of allocations could not be
undertaken.
The MTPDP embodied the government plans for a certain period and identifies
areas where other sectors of the society can contribute in the overall development
process. It also maps out the policy framework and strategy for the attainment of the
developmental goals and objectives. The plan is also claimed to be the basis for
formulating the national budget.
69
The preparation of budget proposals and resource allocation of the national

government for CYs 2001-2005 were governed by Budget Calls embodied under
the National Budget Memorandum issued by the DBM annually. As provided in the
Budget Calls for the preparation of CYs 2001 to 2005 budgets, the resource
allocation shall be consistent with government priorities reflected in the MTPDP
and guided by the thrust of the administration which includes, among others, deficit
reduction, agricultural modernization, agrarian reform, provision of social services
(education; housing and community development; health; social security, welfare
and employment; land distribution; allocation to local government units; and other
social services) information and communication technology, tourism, peace and
order, good governance, and small and medium enterprises.
CYs 2001-2004 Resource Allocation
For CYs 2001-2004, the MTPDP and the Budget Call, consistently aimed to engage
in deficit reduction strategy and balancing the budget through tax reforms and
expenditure management. In line with this thrust, the 2001-2004 MTPDP
specifically stated that allocation for expenditures that will directly benefit the poor
will continue to be protected. As such, government spending on social services will
get a bigger share in the budget allocation. Accordingly, the national government
will implement an expenditure program that preserves a bias for education, health,
agriculture and other services for the poor.
It was also emphasized in the MTPDP that Agriculture shall be a priority in the
allocation of budgetary resources primarily to expand the construction of irrigation
and post-harvest facilities, farm-to-market roads and other infrastructure projects,
credit facilities, and research and development.
To realize these plans, it was projected in the 2001-2004 MTPDP that sectoral
allocation for 2001-2006 budget should be as follows:
Sectoral Allocation ( In Percentage To Total Budget ) Average

Sector Rank
2001-06
2001 2002 2003 2004 2005 2006
Agriculture, Agrarian Reform

and Natural Resources 7.20 8.78 10.28 10.79 10.79 10.79 9.77 4
Trade & Industry 0.72 0.69 0.66 0.66 0.66 0.66 0.68 14
Tourism 0.26 0.27 0.29 0.29 0.29 0.29 0.28 15
70
Sectoral Allocation ( In Percentage To Total Budget ) Average

Sector Rank
2001-06
2001 2002 2003 2004 2005 2006
Power and Energy 0.33 0.28 0.26 0.26 0.26 0.26 0.27 16
Water Resources
1.06 1.55 1.25 1.25 1.25 1.25 1.27 11
Development & Flood Control
Communication, Roads &
13.64 12.17 15.16 15.61 15.61 15.61 14.63 2
Other Transport
Other Economic Services 2.11 1.64 0.79 0.58 0.58 0.58 1.05 12
Total Economic Services 25.32 25.37 28.69 29.44 29.44 29.44 27.95
Education, Culture &
31.20 29.74 31.25 32.26 32.26 32.26 31.50 1
Manpower Development
Health 3.50 3.33 3.60 3.31 3.31 3.31 3.40 8
Social Security, Welfare &
7.10 6.96 5.82 6.27 6.27 6.27 6.45 7
Employment
Housing and Community
0.64 0.51 1.57 1.74 1.74 1.74 1.32 10
Development
Land Distribution 1.07 1.04 1.66 1.72 1.72 1.72 1.49 9
Other Social Services 0.70 0.44 0.80 0.80 0.80 0.80 0.72 13
Total Social Services 44.20 42.03 44.69 46.11 46.11 46.11 44.87
Defense 8.42 10.58 7.35 7.04 7.04 7.04 7.91
Domestic Security 8.42 10.58 7.35 7.04 7.04 7.04 7.91 5
General Administration 9.81 12.97 11.80 11.28 11.28 11.28 7.86 6
Public Order and Safety 12.25 9.05 7.48 6.13 6.13 6.13 11.40 3
Total General Public Services 22.06 22.02 19.28 17.41 17.41 17.41 19.27
Total Expenditures 100 100 100 100 100 100 100
As shown above, on the average, the provision of social services were allocated the
highest budget ranging from 42.03% to 46.11% for the period 2001-2006 with the
education sector consistently on top of the rank.
Comparison of the percentage sectoral allocation under 2001-2004 MTPDP and

the proposed budget per BESF showed that, except during CY 2002, the BESF
deviated from the MTPDP’s proposed resource allocation. There were sectors with
excessive appropriations and sectors with lesser appropriations for the
implementation of plans in the MTPDP as illustrated in the next page:
71
Y Economic Services Social Services Defense General Public Services

E
Excess/ Excess/ Excess/ Excess/
A
MTPDP BESF (Defi- MTPDP BESF (Defi- MTPDP BESF (Defi- MTPDP BESF (Defi-
R
ciency) ciency) ciency) ciency)
2001 25.32 30.48 5.16 44.20 40.02 (4.18) 8.42 7.82 (0.60) 22.06 21.69 (0.37)
2002 25.37 25.37 0 42.03 42.03 0 10.58 10.58 0 22.02 22.02 0
2003 28.69 26.01 (2.68) 44.69 42.81 (1.88) 7.35 9.37 2.68 19.28 21.81 2.53
2004 29.44 23.79 (5.65) 46.11 43.93 (2.18) 7.04 9.72 2.68 17.41 22.56 5.35
In view of such deviations, the priorities established in the MTPDP were changed
considering the amount of appropriations approved for each sector, as illustrated
below:
Increase/
MTPDP BESF Rank
Sector (Decrease)
%age %age %age MTPDP BESF
Economic Services
Agriculture, Agrarian Reform
9.26 8.90 (0.36) 4 6
and Natural Resources
Tourism 0.28 0.29 0.01 13 17
Power and Energy 0.28 0.41 0.13 13 16
Other Economic Services 1.28 1.65 0.37 10 9
Social Services
Housing and Community
1.12 0.54 (0.58) 11 15
Development
Land Distribution 1.37 0.94 (0.43) 9 11
Other Social Services 0.68 0.64 (0.04) 13 14
Defense 8.35 9.37 1.02 6 5
General Public Services
Public Order and Safety 8.73 9.28 0.55 5 4
Other General Public Services 0.00 0.65 0.65 - 13
CY 2005 Resource Allocation
Under the 2004-2010 MTPDP, the administration was committed to pursue

expenditure reforms which includes, among others, improving budget allocation to
focus expenditure towards those areas with the greatest impact and benefit to the
greatest number. The MTPDP for that period spells out the President’s 10-point
agenda which shall be the focus of planning and operation of the government for the
next six years. It was noted, however, that the MTPDP did not provide sectoral
allocation of expenditures to guide the DBM in allocating the budget to the different
programs, activities and projects.
72
The Plan was, however, supported by a 2005-2010 MTPIP translating the goals and
policy thrust drawn in that Plan into a set of priority programs and projects. On the
aggregate, the MTPIP for 2005-2010 requires P2.13 trillion to implement the
following programs.
(In Million Pesos)

Chapter
GOCCs/
NG PSP/LGU Others Total
GFIs
Trade & Investment 4,682.1 75,187.4 0 2,901.8 82,771.3

Agribusiness 140,178.5 117,840.2 80,809.0 18,257.8 357,085.5
Environment & Natural Resources 73,165.9 26,938.2 94,456.0 3,954.0 198,514.1
Housing Construction 271.1 166,117.6 98,168.7 7.0 264,564.4
Tourism 1,615.0 0 0 41.6 1,656.6
Infrastructure 341,334.6 182,179.4 44,184.0 3,979.9 571,677.9
Fiscal Strength 7,266.1 0 0 1,128.8 8,394.9
Financial 284.0 0 0 0 284
Labor 6,314.4 0 0 1,500 7,814.4
575,111.7 568,262.8 317,617.7 31,770.9 1,492,763.1
Energy Independence & Power
3,525.4 91,691.8 147,737.1 19,522.1 262,476.4
Sector Reforms
Responding to Basic Needs of the Poor 142,421.0 1,100 12,364.4 5,388.4 161,273.8
Automated Elections 14,787.0 0 0 0 14,787
Peace Process 7,008.3 0 0 4,511.9 11,520.2
Healing the Wounds of EDSA
Peace & Order 26,754.5 0 0 0 26,754.5
Rule of Law 1.5 0 0 0.3 1.8
190,972.3 1,100 12,364.4 9,900.6 214,337.3
Education 118,131.5 56.0 693.0 3,566.8 122,447.3
Science & Technology 6,231.8 512.0 200.4 2,220.6 9,164.8
Culture 1,576.7 15.0 0 99.7 1,691.4
125,940.0 583 893.4 5,887.1 133,303.5
Anti-Corruption 1,010.8 0 0 1,746.6 2,757.4
Bureaucratic Reforms 3,599.0 0 0 12,939.3 16,538.3
Defense Reforms (No MTPIP estimates for security reasons)
Responsive Foreign Policy 2,023.6 0 0 0 2,023.6
Constitutional Reforms 6,393.8 0 0 0 6,393.8
13,027.2 0 0 14,685.9 27,713.1
Grand Total 908,576.6 661,637.6 478,612.6 81,766.6 2,130,593.4
Source: MTPIP 2005-2010
Of the P 2.13 trillion MTPIP requirements, P 908.58 billion would be sourced from
the national government. It also proposed about P1,607 billion or 75 percent of the
total MTPIP requirements to support the Administration’s 10-Point Agenda of
which P596.1 billion will be financed by the national government as shown on the
next page:
73
2005-2010 (In Billion Pesos)

10-Point Agenda
GOCCs/ PSP/
NG GFIs LGU Others Total
Six to ten million jobs 188.5 329.9 56.7 15.8 591.9

Education for all 42.6 0 0.7 1.6 44.9
Balance the national budget 7.6 0 0 1.1 8.7
Develop transportation networks and digital infra 279.1 62.8 0 3.8 345.9
Provision of power and water to all barangays 9.0 107.3 242.2 19.7 378.2
Decongestion of Metro Manila 62.2 28.2 44.2 0 134.6
Development of Clark & Subic as logistics centers in Asia 0 91.2 0 0 91.2
Automation of the electoral process 0.1 0 0 0 0.1
Just completion of the peace process 7.0 0 0 4.5 11.5
Closure of wounds caused
by division due to EDSA 1, 2 and 3
596.1 619.4 343.8 46.5 1,607.0
The team, however, noted that the approved appropriations for CY 2005 did not
support the MTPIP as illustrated below:
( In Percentage To Total Budget )

Sector
MTPIP BESF Difference
Agriculture, Agrarian Reform and Natural Resources 23.48 7.33 16.15

Trade & Industry .52 .68 0.16
Tourism .17 .32 0.15
Power and Energy .39 .40 .01
Education, Culture & Manpower Development 13.86 29.72 15.86
It may also be noted that while it is provided under the constitution that the
education sector should be accorded the highest priority, this was not observed in
the preparation of MTPIP. The projects proposed to address agricultural concerns
were given priority with allocation of around 23.48% as against the education sector
with only 13.86%.
Agriculture, agrarian and natural resources are under one sector. There are
substantive allocation for AFMA, ARF and DENR.
74
UPDATES ON THE PHILIPPINES’ PROGRESS ON We appreciate management’s

THE STRUCTURAL REFORM AGENDA action towards improving
1. IMPROVE EXPENDITURE MANAGEMENT expenditure management in
conformity with Section 78 of
a. The Organizational Performance Indicator Frame- the General Provisions of the
work (OPIF) is being implemented as a mechanism National Expenditure Program
to enable agencies to focus on strategic programs which provides that:
and projects and establish the linkage of their
programs and projects with their major final Sec. 78. Results-based
outputs (MFOs) and the sectorsubsector and/or Budgeting. Within the context
national objectives. A series of workshops was of the Public Management
conducted in 2004 to formulate the 2005 OPIF- Expenditure Framework, all
based budgets of 11 departments enabling these departments, bureaus, offices
departments to finalize their MFOs, align their and agencies, including
programs and projects and formulate outcome- GOCCs, shall identify their
based performance indicators for these MFOs. Major Final Outputs (MFOs),
UPDATE: The OPIF as a component of the Public or specific outputs and
Expenditure Management Reform is designed to outcomes to be produced by
direct resources towards results and account for their programs and services
agency and eventually, sectoral performance. Its which are aligned with strategic
three basic elements are: strategic allocation of goals of the government, and
resources, development of performance systems shall harmonize them with
(formulation of major final outputs, performance those identified by the DBM
indicators, and performance measures and targets) and NEDA. National Govern-
and conduct of agency performance review. ment agencies who have
A series of workshops were conducted in 2004 and identified and harmonized their
2005 covering 13 major departments and two MFOs, and who have restruc-
agencies. Major outputs of the workshops included tured their programs to be more
formulation and harmonization of MFOs, consistent with their MFOs, are
development of a logical framework/logic model hereby authorized to restructure
for agency mandates and objectives (i.e., lining of their budgets, and realign their
MFOs to organizational outcome, sector goals, programs, projects and
societal goals) and identification of performance activities as may be necessary,
indicators. An initial application of the OPIF was subject to the approval of DBM.
made for these 15 institutions in support of the
2006 budget. The applications shall be expanded to All performance indicators
cover the other major departments and agencies in and corresponding targets shall
the 2007 budget preparation. then be set by national govern-
ment agencies and GOCCs in
b. The mid-year Agency Performance Review (APR) accordance with the Organi-
for FY 2004 was conducted on October 11-22, zation Performance Indicator
2004. The results of the APR will determine the Framework, and finalized in
overall performance of the national government in coordination with DBM, NEDA
terms of fund utilization, revenue generation, and and COA.
output accomplishments. The results will be used
as a basis for future resource allocation decisions.
75
i. Starting March 2004, agencies with Main- With the agreed upon
tenance and Other Operating Expenditures performance indicators and
(MOOE) budgets of P50 million and below corresponding targets, national
have been authorized to undertake the government agencies and
following without need of DBM approval: GOCCs shall conduct and
1. staffing modifications implement a monitoring and
2. use of savings; and evaluation system, including
ii. Realignment of savings from personal data collection and reporting
services to MOOE capital outlays (CO) and system, to monitor performance
MOOE to CO only to augment an existing and improve the results of
item, project, activity or purpose in the government programs. For this
agency’s budget. purpose, the agencies concerned,
in coordination with the DBM,
iii These changes are intended to give these shall be responsible for the
agencies more budget flexibility. For development and installation of
monitoring purposes, agencies have been an integrated program and
required to submit quarterly reports of project monitoring evaluation
budgetary actions taken. system, which shall report
UPDATE: The APR was undertaken in 2005. program results regularly and
Even as not all agencies could be fully reviewed publicly.
due to various reasons including the occurrence
of a fire at the building housing 3 of the 5 budget
operations bureaus. Nonetheless, the results
obtained validated the agency’s utilization of
funds through their reported physical accomplish-
ments. A significant finding from the exercise
was the delay in cascading the funds to the direct
implementer, from the central offices to the
region/province/municipal level. The non-
finalization of the MFOs of certain agencies
contributed to the confusion regarding the targets
to be used to assess agency performance.
Presently, a review of the systems and policies is
being considered to address the issues identified
in the exercise.
c. The e-Budget and other new data base systems
are being rolled-out in the Department of Budget
and Management’s (DBM) central offices
starting December 15, 2004. The system
automates the budget execution phase of the
government’s budget process, i.e., the processing
of budget releases, transmittal to agencies, and
preparation of accountability reports.
76
UPDATE: As of December 30, 2005, all operations

bureaus at the DBM are using the Web-enabled e-
Budget System to release budget documents. The
roll-out for DBM regional offices is on-going, with
the training of trainors for users at the regional
offices completed last July 29, 2005. The acqui-
sition of hardware and software for the network has
been completed and presently, 96 percent of the
Nationwide Data and Voice Network Integration for
the central office and 13 regional offices of the
DBM have likewise been completed with at least 3
regional sites remaining to be hooked up to the
Central Facility.
d. On the implementation of the Government Procure-
ment Reform Act (GPRA), the following measures
are being undertaken:
i. Provision of training for different agencies to
fully disseminate procurement reforms embo-
died in the GPRA. As of end of December 2004,
58.4% of national government agencies (NGAs);
40.1% of GOCCs; 87.7% of LGUs; and 100%
of SUCs were already trained on the GPRA.
ii. Development of a generic procurement manual
and a set of standard bidding documents for the
use of government procurement officials and
employees. A first draft of the Procurement
Manual for Goods, Civil Works and Consulting
Services has been completed. It is due for a
final review prior to its release to procuring
entities and to pilot testing for further
enhancements.
iii. Full operationalization of the Government
Electronic Procurement System (G-EPS) as
the central portal providing information on
various government procurement opportu-
nities and information. Presently, the G-EPS is
operating all three features in its “pilot
phase.” The Electronic Bulletin Board, the
Supplier Registry, and the Electronic Cata-
logue Enhancement of the Pilot G-EPS is on-
going, including data migration and is
targeted for implementation in the third
quarter of 2005. The full implementation of the
G-EPS, which includes features such as
77

Virtual Store, Electronic Bidding and
Electronic Payment is being targeted for
implementation in third quarter of 2006.
UPDATE: As of December 31, 2005, 87 percent
of local government units have been trained as
follows: 72 out of 74 provinces; 205 out of 214
cities; and 1,141 out of 1,337 municipalities with
14,850 total trainees from provinces/cities/
municipalities and 16,068 from barangays.
On the use of standard Procurement Bidding
Documents (PBDs), 88% of LGUs have been
trained with 12,121 trainees from provinces/
cities/municipalities and 50,274 barangays. In the
case of NGAs/GFIs and SUCs, 20% have been
trained on the use of PBDs with the following
breakdown: 251 out of 973 NGAs, 90 out of 996
GOCCs/GFIs and 70 out of 115 SUCs.
The Philippine Government Electronic Procure-
ment System (PHILGEPS) is presently undergoing
data migration from the Pilot G-EPS and is
expected to be completed by 1 May 2006. Full
implementation of the PHILGEPS, which includes
features such as Virtual Store, Electronic Bidding
and Electronic Payment, is expected in 2007. The
Pilot G-EPS, which operates an Electronic Bulletin
Board, Supplier Registry and Electronic Catalogue,
is still in use and has in its database a total of 4,085
registered agencies, 14,900 registered suppliers,
and 167,993 posted notices from 2000 until 30
January 2006.
e. Multiyear Budgeting System
A re-introduction of a multi-year budgeting system
is being initiated. As in any other Medium Term
Expenditures Framework or MTEF, the term
adopted by developed and developing countries, it
is envisaged to integrate policy with resource
allocation decisions in a multi-year horizon to
focus spending and policy on Plan objectives.
Government will improve the decision making
process by involving the President and the Cabinet
in the strategic allocation of resources towards
government priorities at the onset of the budget
preparation stage. In particular, the Development
78

Budget Coordination Committee (DBCC) shall
recommend to the President and Cabinet policy
options together with the multi-year view of
allocable resources. This will assist the President
and Cabinet in setting specific policy directions for
the government for the annual budget and over the
medium term and better inform strategic planning
and budgeting of departments/agencies.
2. MOVE FORWARD THE GOVERNMENT

RATIONALIZATION AND RE-ENGINEERING
PROGRAM including reduction in staff, abolition of
agencies, and devolution of activities to local
governments.
a. Two bills were filed in the 13th Congress to
seek authority for the President to reorganize
the Executive Branch, subject to defined prin-
ciples and parameters. The proposed bills also
offer appropriate incentives for personnel who
may be affected by the reengineering effort.
The DBM is currently working on a refined
version of the Reengineering Bill that would
authorize the President to re-engineer the
Executive Branch and implement massive and
transformational reforms in the bureaucracy.
UPDATE: House Bill Nos. 193 and 1532 both
entitled “An Act to Reengineer the
Government Bureaucracy by Authorizing the
President to Implement the Re-engineering
and Providing Fund Therefor” have been
deliberated by the Committee on
Reorganization. Last January 25, 2006, the
Committee approved with amendments the
consolidated bill.
b. While awaiting the passage of the Re-
engineering Bill, the DBM together with the
Civil Service Commission (CSC) is pursuing a
rationalization program that aims to have an
immediate impact on the government’s
objective of improving public service delivery
and institutional capacity through the
rationalization of the functions and agencies of
the Executive Branch.
79
i. Executive Order (EO) No. 366 dated 04

October 2004 has been issued directing all
departments to conduct a strategic review
of the operations and organiza-tion of all
their component units, including agencies
and GOCCs/GFIs attached to or under
their administrative supervision. The
strategic review would enable them to
identify the functions, programs, activities
and projects which:
1. can either be scaled down, phased out
or abolished; or
2. where more resources need to be
channeled
ii. Each department is required to prepare a
Rationalization Plan.
iii. Personnel who may be affected by the
program will be given two options:
1. remain in government service and be
placed in other agencies needing
additional personnel, or
2. avail of the retirement separation
benefits, if qualified, plus the applicable
incentive. Those with temporary
appointment attested by the CSC may
opt to remain but are guaranteed tenure
up to expiration of their appointments
only. The DBM is currently finalizing
the implementing regulations of EO 366
to guide department/agencies in the
implementation of said directive. The
regulations would be issued by the
DBM upon finalization of the
program’s communication plan.
UPDATE: EO 366 dated October 4, 2004 and its
implementing Rules and Regulations issued on
May 11, 2005 took effect June 4, 2005. Four
rationalization teams composed of selected
technical personnel from the DBM have been
organized to, among others, provide technical
assistance to departments/agencies as necessary
and evaluate the submitted rationalization plans.
80
To date, two Rationalization Plans (CSC, a national

government agency, and Technology Livelihood
and Resource Center [TLRC], a GOCC) have been
approved. 743 employees have been separated and
P143.3M savings were generated by the two
institutions.
Nineteen (19) national government agencies
including the Department of Trade and Industry, as
well as six (6) GOCCs have submitted their
Rationalization Plans to DBM. These include the
National Tobacco Administration and the Philippine
Health Insurance Corporation.
Relative to the safety nets and impact mitigation
measures for personnel who may be affected by the
effort, the DBM has engaged the services of the
Action for Social Progress, Inc. (ASPI), a public
relations and development communication firm, to
support the implementation of various activities
related to the Sills/Livelihood and Investment
Program (SLIP) implementation, as well as the
conduct of public information/advocacy campaigns
on the effort. Through the SLIP, affected personnel
will be helped to make better use of the
benefits/incentives they would receive under the
Rationalization Program. The ASPI together with
SLIP partner-agencies has organized two roadshows
in February 2006 to apprise participants on the
various skills/livelihood and investment opportu-
nities that they could avail of after leaving the
government service.
81
Part IV
Recommendations
82
RECOMMENDATIONS
RECOMMENDATIONS
To address these concerns, it is recommended that the DBM should:
¾ Fasttrack the establishment of appropriate and relevant criteria allocating

funds taking into consideration the results of the on-going studies and the
observations noted by the team. It is specifically suggested that in developing
criteria, the following concerns be considered:
• reassessing the practice of prescribing ceilings for capital

outlay based on prior year’s budget as this could not be
considered as a valid basis for allocation;
• setting expenditure levels consistent with the Deficit

Reduction Program of the government;
• the possibility of adjusting allocations for IRA, PDAF,

budgetary support to government corporations and low priority
projects. The DBM could also move for the revision of
Section 285 of RA 7160 to consider the financial capability of
the LGUs in allocating IRA;
• the irrational practice of providing budgetary support to losing

government corporations;
• the proposed expenditure level in the MTPDP and the priority

projects and programs defined in the MTPIP;
• utilizing PDAF only for priority projects and programs not

adequately funded in the regular appropriation.
¾ Limit the proposed current operating expenditures to the level of the expected
national government revenue to reduce budget deficits; and
¾ Coordinate with the Government Accounting and Financial Management

Information Systems (GAFMIS) of the Commission on Audit for the
generation of accounting reports that would provide information needed for
the evaluation of the budget approaches and expenditure management
reforms such as the OPIF and APR.
83
Submitted in compliance with COA Management Services and Technical Services
Sector Office Order No. 2005-032 dated June 29, 2005.
84

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Management Services

Report No. 2005 – 05

Effectiveness of the Budget

Department of Budget and Management

HON. ROLANDO G. ANDAYA, JR.

The study was undertaken to assess the effectiveness of the budget

• criteria for fund allocation;

The study revealed that existing budget allocation system needs

We are glad to note that programs to expedite expenditure management

Very truly yours,

Telephone Nos.: (063) 931-9232 / Telefax Nos.: (063) 931-9223

FOR : The Honorable Chairman

SUBJECT : Report on the special study on budget allocation

DATE : July 5, 2006

Submitted herewith is the report on the special study on the budget

The audit concluded that improvement in the existing budget system

Part I Executive Summary 1

Part II The Budget Allocation Process 7

Part III Results of the Study 25

Chapter 1 – Adequate, Well-defined,

Chapter 2 – Effective Feedback

Chapter 3 – Compliance with Existing

Chapter 4 – Budget Linkages with the MTPDP 68

The national government budget is a vital

The national budget is an estimate of expected income and projected expenditures

• Criteria for fund allocation;

RATIONALE FOR THE STUDY

SCOPE AND METHODOLOGY

The study covered an evaluation of the allocation of resources to the different

To attain the objective, the team performed the following activities:

• Assessed the monitoring mechanism in the implementation of programs/projects

• Ceiling for capital outlay is based on prior year’s appropriation or National

The study also revealed several other deficiencies such as:

¾ Fasttrack the establishment of appropriate and relevant criteria for allocating

• the possibility of adjusting allocations for IRA, PDAF, budgetary

The Budget Allocation Process

Efficiency and effectiveness

Budget should take into consideration

GOVERNING RULES AND REGULATIONS

Laws, Rules and

Laws, Rules and

Laws, Rules and

Section 53, Chapter 6 Monitoring of Expenditures – Expenditures of national government

Section 56, Chapter 6 Semi-Annual Report on Accomplishments of Government Agencies –

OTHER CONSIDERATIONS IN BUDGETING

• The MTPDP and MTPIP

The MTPDP contains the socio-economic development agenda of the

The MTPDP is supported with Medium-Term Public Investment Plan (MTPIP).

Macroeconomic stability with equitable growth based on free enterprise

Economic growth and job creation

• The President’s 10-Point Agenda for 2004 to 2010

Six to ten million jobs

• The Millennium Development Goals

Goals Specific Objectives/Strategies

Eradicate extreme o Reduce by half the proportion of people living on

Promote gender o Eliminate gender disparity in primary and secondary

Ensure environmental o Integrate the principles of sustainable development

Goals Specific Objectives/Strategies

o Reduce by half the proportion of people without

Reduce child o Reduce by two thirds the mortality rate among

Combat HIV/AIDS, o Halt and begin to reverse the spread of HIV/AIDS

Improve maternal o Reduce by three quarters the maternal mortality ratio

Develop a global o Further develop an open trading and financial system

Determination of overall economic targets, expenditure levels and

Preparation by various government agencies of their detailed budget