Duterte orders cash-based budgeting for 2019

Aika Rey
The President vetoes 12 line items in the 2019 national budget, as well as the P95.3 billion worth of infrastructure funds. He also places several items under conditional implementation.

VETO. President Rodrigo Duterte vetoes and places some line items in the budget under conditional implementation. Malacañang file photo

MANILA, Philippines – President Rodrigo Duterte has ordered the implementation of a cash-based budgeting system for 2019 despite Congress’ rejection of the policy.

In his veto message for the 2019 national budget, Duterte said that dismal government spending is “unacceptable” in his administration.

“Let me emphasize that pursuant to the Administrative Code of 1987, I shall mandate the implementation of a cash budget for fiscal year 2019 to ensure the availability of cash resources for priority development projects, and speed up delivery of services,” Duterte said in his veto message released Tuesday, April 16.

Duterte signed the 2019 budget bill into law on Monday, April 15, after more than 3 months of operating with a reenacted budget. The full copy of the 2019 General Appropriations Act has yet to be made available to the media.

The shift to a cash-based budget supposedly would limit contractual obligations and disbursing payments to goods delivered and services rendered within the fiscal year. (READ: What is cash-based budgeting?)

But because of the budget delay and the midterm elections scheduled in May, Duterte said the implementation of and payment for infrastructure projects will be extended until the end of 2020.

“We will allow the implementation of, and payment for, infrastructure projects to extend until December 31, 2020, provided that the funds for the purposes are obligated not later than December 31, 2019,” the President said.

The same rule will also cover subsidies to government-owned or government-controlled corporations for infrastructure projects.

The President said that prior releases made under the reenacted budget shall be considered as “advance releases,” to be offset against their corresponding appropriations in the recently-signed budget law.

For the longest time, agencies’ budgets have followed two-year, obligation-based budgeting, which disburses payments as obligations or commitments that may not necessarily be delivered within the same year. 

Direct veto

Duterte has vetoed the controversial P95.3 billion worth of infrastructure funds, saying that these items “are not within programmed priorities.”

This caused the recent budget impasse when senators accused congressmen of realigning the said funds post-bicameral conference committee, calling the move “unconstitutional.”

Aside from this, the President has also vetoed 12 other items in the national budget:

  • Use of income under the National Labor Relations Commission 
  • Implementation of projects by national government agencies using the allocations for local government units (ALGU) special provisions 3 and 4 which specify shares in excise taxes for tobacco products
  • ALGU special provisions 1, 2, and 5 which authorizes local government support funds (LGSF) for maternal and child health projects, as these were supposed to be the responsibility of the Department of Health
  • Cost of devolved health services to LGUs, as it will reduce the allocation of internal revenue allotment
  • Collection of fees when retaining or reacquiring Philippine citizenship, as it removes the authority of agencies to assess reasonable fees
  • Special work permit under the Bureau of Immigration, citing the influx of foreign workers in the country
  • The National Disaster Risk Reduction and Management Program which allows the use of calamity fund for relief, recovery, and reconstruction among others for more than two years
  • The Coconut Farmers and Industry Development Fund, citing lack of legal basis
  • Road funds under the Department of Public Works and Highways and Department of Transportation, given the abolition of the Road Board
  • Prohibitions against the use of unprogrammed appropriations which will “limit” the power of the President to enter into loan agreements
  • Item (g), Section 52, General Provisions, entitled “Authorized Deductions” which include obligations to financing companies to engage in lending and mutual benefits by government regulating bodies, for the lack of legal basis
  • Inaction of Congress on impoundment proposals within 30 days, for its inconsistency with authority granted to the President to suspend expenditure of funds

Conditional implementation

The President has also ordered “conditional implementation” of some items in the budget, pending the compliance to certain laws:

  • Allowance benefits of teachers, teaching positions:
    • Medical examination for public school teachers shall be subject to Republic Act No. 11223
    • Transportation and teaching aid allowance for alternative learning school (ALS) mobile teachers, district ALS coordinators, and literacy volunteers will be subject to rules on the grant of special hardship allowance and cash allowance
    • Special hardship allowance to be subject to Department of Budget and Management (DBM) guidelines
    • Creation of teaching positions, subject to approval of DBM
    • Implementation of miscellaneous personnel benefits fund shall be subject to guidelines to be issued by DBM and the Commission on Higher Education
  • Construction of “green” evacuation centers must conform to standards and requirements of the National Building Code
  • Funding for foreign-assisted projects under unprogrammed appropriations
  • Bureau of Corrections’ revolving fund for agro-industrial products, to ensure compliance with the general provisions of the fund
  • Lump sum appropriations for capital outlays 

Meanwhile, some items have also been placed under conditional implementation to avoid duplication of funding sources:

  • Financial assistance to local governments
    • Under ALGU-LGSF special provision 5, financial assistance shall be used only for priority development programs
    • Aid for repair, rehabilitation, and improvement of bridges under ALGU-LGSF special provision 3 shall be limited to the part of a road network, consistent with the upgrading of provincial roads
  • Funding requirements of the Philippine Foreign Service
    • Retention of foreign currency earning for foreign service posts
    • Authorizing the Department of Foreign Affairs secretary to use proceeds of tax refunds to cover payment for operating expenses
    • Lease agreements shall comply with rules on advance payment for rentals, as well as appropriate use of living quarters allowance
  • Salaries of personnel under “Assistance to indigent patients” are already covered under the Department of Health Office of the Secretary, and there must be no double compensation
  • Double programming of funding source under the Dangerous Drugs Board with the collection of drug rehabilitation activities
  • Maintenance and other operating expenses (MOOE) of lower courts shall be under conditional implementation, with the Supreme Court supposedly releasing automatically and fully lower courts’ MOOE
  • The Government Internship Program shall be subject to guidelines of the Department of Labor and Employment
  • The special tertiary subsidy shall be subject to guidelines to be issued by DBM and CHED

The House of Representatives’ disapproval of a cash-based budgeting system started the budget deadlock, with the House failing to meet its target deadline to pass 2019 budget.

There were other issues that had prevented the Senate and House from agreeing on a single version of the budget – from allegations of pork-like insertions to accusations of corruption lobbed at former budget chief Benjamin Diokno, which he categorically denied. – Rappler.com

Aika Rey

Aika Rey is a business reporter for Rappler. She covered the Senate of the Philippines before fully diving into numbers and companies. Got tips? Find her on Twitter at @reyaika or shoot her an email at aika.rey@rappler.com.