Effectiveness of The Budget Allocation of The Government by DBM

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. 2005032 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. 2005032 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
Part I
Page
Executive Summary
Introduction 2
Study Objective 2
Evaluation Criteria 3
Rationale of the Study 3
Scope and Methodology 3
Conclusion 4
Managements Comments 5
Recommendations 5
Part II
The Budget Allocation Process
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
Managements Comment and Teams Rejoinder
32
36
39
54
57
60
Contents
Page
Chapter 2 Effective Feedback
And Monitoring Mechanism
61
Introduction 62
Observation 62
Managements Comment and Teams Rejoinder 63
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
Managements Comment and Teams Rejoinder 75
Part IV
Recommendations
82
Part I
Executive Summary
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
governments 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.
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;
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 welldefined as manifested in the following:
Ceiling for capital outlay is based on prior years 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:
Internal Revenue Allotment (IRA) representing 16.81%

to 25.37% of the total annual new appropriation.
Priority Development Assistance Fund (PDAF) ranging

from P3.33 billion to P8.33 billion annually.
Budgetary Support to Government Corporations ranging

from P3.91 billion to P10.19 billion annually.
Low priority projects.
The Presidents 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 governments 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.
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 governments 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 Presidents 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 governments 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.
MANAGEMENTS 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:
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 years 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;
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.
Limit the proposed current operating expenditures to the level of the expected
national government revenue to reduce budget deficits; and
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).
Part II
The Budget Allocation Process
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
The government considered decisions on total
revenues, expenditures and financing
arrangements vital in shaping the size and form
of government intervention sustainable over a
period of time in ensuring economic growth.
Accommodating all spending demands also
posed economic risks. Thus, aggregate
expenditure ceilings are set before decisions
on the individual components of the
budget are finalized.
Allocation of resources
consistent with strategic
policy priorities
Expenditure should be directly
linked with government policies
and strategic priorities and
should take into consideration
effectiveness and equity of each
program and project.
Efficiency and effectiveness

in implementing activities
Budget should take into consideration
adequate resources to ensure attainment of
tangible outputs and outcome of each
project.
GOVERNING RULES AND REGULATIONS
Laws, Rules and

Regulations
Particulars
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.
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 Presidents budget
submission.

Laws, Rules and
Regulations
Particulars
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.
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.
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 years 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 zerobase 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.
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.
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.
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,
10

Laws, Rules and
Regulations
Particulars
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.
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 Presidents budget proposals to the Congress.
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.
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
11
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.
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 Presidents 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
Eradicate extreme
poverty and hunger
Specific Objectives/Strategies
o
o
13
Reduce by half the proportion of people living on

less than a dollar a day
Reduce by half the proportion of people who suffer
from hunger
Achieve universal
primary education
Ensure that all boys and girls complete a full course

of primary schooling
Promote gender
equality and
empower women
Eliminate gender disparity in primary and secondary

education preferably by 2005, and at all levels by
2015
Ensure environmental
sustainability
Integrate the principles of sustainable development

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

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

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

Halt and begin to reverse the incidence of malaria
and other major diseases
Improve maternal
health
Reduce by three quarters the maternal mortality ratio
Develop a global
partnership for
development
Further develop an open trading and financial system

that is rule-based, predictable and nondiscriminatory.
Includes a commitment to good governance,
development and poverty reduction nationally and
internationally
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
Address the special needs of landlocked and small
island developing States
Deal comprehensively with developing countries
debt problems through national and international
measures to make debt sustainable in the long term
In cooperation with the developing countries,
develop decent and productive work for youth
In cooperation with pharmaceutical companies,
provide access to affordable essential drugs in
developing countries
In cooperation with the private sector, make
available the benefits of new technologies
especially
information and communications
technologies
o
o
o
o
o
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
In Billion Pesos
1200
1000
800
600
400
200
-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
20
10
20
09
20
08
20
07
20
06
20
05
20
04
20
03
20
02
-200
20
01
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)
(In Million Pesos)
Particulars
2001
2002
2003
2004
2005
2006
National
Government
(85,000)
(130,000)
(142,133)
(197,815)
(184,526)
(124,880)
Major Government
Corporations
(17,261)
(26,257)
(64,683)
(45,080)
(91,860)
(47,800)
Other Non-Financial Corporations
2,846
(397)
Local Government
Units
4,200
4,700
4,860
5,820
17,071
7,181
Impact of CB
Restructuring
(20,595)
(24,031)
20,644
(17,094)
(18,378)
(19,242)
Adjustments
34,110
39,885
25,600
37,679
(24,057)
56,611
(81,700)
(136,100)
(197,000)
(216,490)
(253,636)
(128,130)
Total
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
Appropriations
Existing
Appropriations
Legislated by Congress for every budget year under the General

Appropriations Act (GAA)
Previous authorizations by Congress may be broken down into continuing and
automatic.
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

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

involves a series of steps that begins
with the determination of the overall
economic targets, expenditure levels,
revenue projection and financing plan
by
the
Development
Budget
Coordinating Committee (DBCC).
Budget Accountability
Budget
Execution
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
DBM Secretary
BSP Governor
DOF Secretary
NEDA Director General
OP Representative
Designation
Responsibility
Chairman
Member
Member
Member
Member
Resource allocation and debt management

Monetary measures and policies
Resource generation and debt management
Overall economic policy
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
Representatives
Senate
Receives copy of the proposed

budget from the Office of the
President
Receives copy of the proposed

budget from the Office of the
President
Appropriation Committee
Senate Finance Committee,

through its different subcommittees:
conducts initial budget review

in coordination with other
House sub-committees, conduct
budget hearings
presents the amended budget
proposal to the House Body as
the General Appropriations Bill
The General Appropriations Bill is
submitted to the Senate for review.
19
conducts review of the

proposed budget
proposes amendments to the
General Appropriation Bill
submitted by the House.
presents amendments to the
Senate Body for approval
Bicameral
Committee
Threshes out differences
to arrive at a common
version of the General
Appropriations Bill
Finalizes the General
Appropriations Bill
Submits the General
Appropriations Bill to the
President for approval
Approval by the
President of the GAA
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:
Control of Releases
Preparation by DBM of agency budget matrix (ABM)

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

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

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 managements review
of actual performance or work accomplishment in relation to the work targets of the
agency vis--vis the financial resources made available.
Examination of each agencys 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
In Billion Pesos
600
500
400
New Appropriation
300
Automatic
200
100
0
Reenacted
2001
RA 9162
2002
RA 9206
2003
Reenacted
2004
Cale ndar Ye ar
21
RA 9336
2005
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.
Agency/Fund
Allocation to National Government Agencies
1.
Department of Education (DepEd)
2.
Department of Public Works and Highways (DPWH)
3.
Department of National Defense (DND)
4.
Department of Interior and Local Government (DILG)
5.
State Universities and Colleges (SUCs)
6.
Department of Health (DOH)
7.
Department of Transportation and Communications (DOTC)
8.
The Judiciary
9.
Department of Environment and Natural Resources (DENR)
10.
Autonomous Regions
11.
Department of Finance (DOF)
12.
Department of Justice (DOJ)
13.
Department of Foreign Affairs (DFA)
14.
Department of Labor and Employment (DOLE)
15.
Other Executive Offices
16.
Congress of the Philippines
17.
Commission on Audit (COA)
18.
Department of Agriculture (DA)
19.
Office of the President (OP)
20.
Department of Science and Technology (DOST)
21.
Department of Agrarian Reform (DAR)
22.
Commission on Elections (COMELEC)
23.
Department of Social Welfare and Development (DSWD)
24.
National Economic Development Authority (NEDA)
25.
Department of Trade and Industry (DTI)
26.
Department of Tourism (DOT)
27.
Office of the Press Secretary (OPP)
28.
Office of the Ombudsman
29.
Civil Service Commission (CSC)
30.
Department of Energy (DOE)
31.
Department of Budget and Management (DBM)
32.
Commission on Human Rights (CHR)
33.
Office of the Vice-President (OVP)
34.
Joint Legislative-Executive Councils
Sub-Total
Total
(In Thousand Pesos)
473,277,971
248,828,066
244,852,350
212,074,743
76,826,384
51,969,479
48,894,812
35,221,968
29,134,754
26,681,252
26,130,799
23,179,781
22,686,149
22,179,799
21,742,835
21,490,456
18,020,820
16,513,040
14,307,000
13,257,805
11,115,401
10,510,325
10,446,669
8,859,165
9,347,275
4,919,667
3,974,140
2,442,634
2,358,639
2,149,820
2,054,393
956,084
403,757
17,710
1,716,825,942
22
Agency/Fund
Total
(In Thousand Pesos)
Allocation to Special Purpose Funds

1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
21.
22.
23.
24.
25.
Allocations to Local Government Units

Unprogrammed Fund
Debt Service-Interest Payment
Pension and Gratuity Fund
Agriculture and Fisheries Modernization Program (AFMA)
Countrywide Development Fund (CDF)/ Priority
Development Assistance Fund (PDAF)
Budgetary Support to Govt. Corporations
Agrarian Reform Fund (ARF)
Miscellaneous Personnel Benefits Fund
Compensation/Salary Adjustment Fund
DECS-School Building Program / DepEd-SBP
AFP Modernization Program
International Commitments Fund
Contingent Fund
Calamity Fund
DECS-Basic Education Facilities Program
Foreign Assisted Project Support fund
E-Government Fund
Organizational Adjustment Fund
National Unification Fund
Motor Vehicle User's Charge Fund
General Fund Adjustments
Area Development Assistance Fund
Property Replacement Fund
RPWEB Support Fund
Sub-Total
Total
705,698,811
213,203,088
109,314,000
91,947,101
81,734,329
31,761,500
27,603,277
20,814,206
14,267,689
13,200,000
7,000,000
5,000,000
4,979,373
4,000,000
3,898,500
2,000,000
1,200,000
1,000,000
426,151
402,116
364,342
250,000
108,304
62,000
50,000
1,340,284,787
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 agencys 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
16%
PS
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 governments 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
2005
2004 budget level as reflected in the National Expenditure

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 years appropriation or NEP

in case of reenacted budget when these are not regular and nonrecurring.
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 years 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 agencys
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 years 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:
Agency
Senate
Commission
on Appointments
Bureau of
Internal
Revenue
House of
Representatives
Sandiganbayan
COA
Office of the
Ombudsman
Bureau of
Fire
Protection
Bureau of
Jail Management and
Penology
Particulars
Furniture, Fixtures, Equipt. & Book Outlay
Information Tech. (IT) Equipment
Total Appropriations GAA
- NEP
Budget Ceiling
Transportation Equipment
Machineries and Equipment
Total Appropriations - GAA
- NEP
Budget Ceiling
Buildings and Structures
- NEP
Budget Ceiling
Machineries and Equipment
- NEP
Budget Ceiling
- NEP
Budget Ceiling
Office Equipment, Furniture and Fixtures
- NEP
Budget Ceiling
Equipment Outlay
- NEP
Budget Ceiling
Acquisition of Fire Trucks
- NEP
Budget Ceiling
Furniture Fixtures, Equipt. & Book Outlay
- NEP
Budget Ceiling
( In Thousand Pesos )
Reenacted
2005
2004
44,422
44,422
44,422
44,422
6,282
2,000
3,725
12,007
12,007
12,007
27,520
2,399
29,919
29,919
29,919
5,000
24,932
27,500
36,687
94,119
94,119
94,119
82,493
300
82,793
82,793
82,793
29,000
29,000
29,000
29,000
83,198
7,150
90,348
83,198
83,198
9,200
9,200
9,200
9,200
36,000
36,000
36,000
36,000
29,746
14,676
44,422
44,422
44,422
10,000
12,007
10,000
10,000
29,694
29,694
29,919
29,694
No breakdown
94,119
94,119
94,119
82,493
82,493
82,793
82,493
35,000
35,000
29,000
35,000
83,198
83,198
83,198
83,198
192,583
54,000
246,583
9,200
246,583
20,000
20,000
36,000
20,000
2003
29,746
14,676
44,422
39,834
39,834
10,000
10,000
10,000
10,000
29,694
29,694
29,694
180,588
No breakdown
94,119
57,894
57,894
82,493
82,493
82,493
82,593
35,000
35,000
35,000
60,400
83,198
83,198
83,198
88,198
192,583
54,000
246,583
246,583
87,000
20,000
20,000
20,000
-
Remarks
Budget ceiling
maximized and
appropriations for CY
2003 even exceed the
budget ceiling.
Budget ceiling
maximized.
Budget ceiling
maximized except in
CY 2003.
Budget ceiling
maximized and even
exceeded in CY 2003.
Budget ceiling
maximized.
Budget ceiling
maximized except in
CY 2003.
Appropriations for CY
2005 even exceeded
the budget ceiling.
Budget ceiling
maximized and even
Budget ceiling
maximized.
29

Agency
Department
of Education
(OSEC)
Department of
Environment
& Natural
Resources
(OSEC)
Department
of Finance
(OSEC)
Bureau of
Customs
University of
the
Philippines
Department
of
Health
(OSEC)
Dept of Interior
& Local Govt
(OSEC)
Department
of
Justice
(OSEC)
Bureau of
Treasury
Bureau of
Immigration
National
Bureau
of Investigation
30
Particulars
Land & Land Improvements
Buildings and Structures & Outlay
IT Equipment Outlay
- NEP
Budget Ceiling
- NEP
Budget Ceiling
Information Technology Equipt. Outlay
- NEP
Budget Ceiling
Furniture, Fixtures, Office Equipt.
Machineries & Equipment
IT Equipment
- NEP
Budget Ceiling
IT Equipment Outlay
Medical Equipt (EMS Complex- FY 2002)
- NEP
Budget Ceiling
Machineries &Equipment
- NEP
Budget Ceiling
- NEP
Budget Ceiling
- NEP
Budget Ceiling
IT Equipment
- NEP
Budget Ceiling
IT Equipment
- NEP
Budget Ceiling
- NEP
Budget Ceiling
Reenacted
2005
2004
32,161
2,250,293
1,306,872
3,589,326
3,589,326
2,334,083
240,428
56,371
296,799
432,836
420,181
500
4,910
5,410
5,410
5,410
14,890
110
15,000
15,000
15,000
75,000
16,149
91,149
182,298
219,806
22,864
5,000
357,122
384,986
384,986
550,775
10,000
40,000
40,000
40,000
40,000
14,500
14,500
14,500
14,500
45,000
45,000
45,000
70,000
25,000
25,000
25,000
30,000
1,030,630
260,125
100,000
1,390,755
2,334,083
1,390,000
No
breakdown
369,730
420,181
369,730
3,000
500
500
4,000
5,410
4,000
35,000
65,000
100,000
15,000
100,000
340,264
340,264
219,806
340,264
42,000
688,000
730,000
550,775
730,000
394,436
10,000
394,436
400,000
1,000
401,000
40,000
401,000
17,801
17,801
14,500
17,801
2,000
23,000
25,000
70,000
25,000
30,000
30,000
30,000
30,000
2003
Remarks
1,030,630
260,125
100,000
1,390,755
1,390,755
957,000
No
breakdown
369,730
538,739
766,798
3,000
500
500
4,000
4,000
3,664
35,000
65,000
100,000
100,000
1,500
340,264
340,264
326,264
199,058
42,000
688,000
730,000
725,000
899,000
394,346
492,936
955,614
400,000
1,000
401,000
400,000
365,300
17,801
17,801
17,801
6,000
2,000
23,000
25,000
5,000
100
30,000
30,000
30,000
25,320
Appropriations for CYs

2003 and 2005 even
exceeded the budget
ceiling.
Budget ceiling
maximized only in CY
2004. Appropriation for
CY 2003 reduced by
Congress.
Budget ceiling
maximized and even
exceeded budget
ceiling in CY 2003.
Budget ceiling
maximized and
appropriation for CY
2003 even exceeded
the budget ceiling.
Budget ceiling maximized except in CY

2005 where budget was
reduced by Congress.
Appropriation for CY
2003 exceeded the
budget ceiling.
Budget ceiling
maximized only in CY
2004.
Budget ceiling
maximized only in CYs
2003 and 2005.
Budget ceiling
maximized and even
Budget ceiling
maximized and even
Budget ceiling
exceeded in CY 2003
and maximized in CY
2004.
Budget ceiling even
exceeded in 2003.

Agency
Dept of
Labor and
Employment
(OSEC)
Office of the
Solicitor
General
Philippine
National
Police
Armed
Forces of the
Philippines
(GHQ)
Philippine
Sports
Commission
Presidential
Broadcast
Staff
Bureau of
Broadcast
Services
Department
of Transportation
and Communications
National
Library
Metro Manila
Development
Authority
Court of Tax
Appeals
Department of
Agrarian
Reform
(CARP)
Particulars
IT Equipment Outlay
- NEP
Budget Ceiling
- NEP
Budget Ceiling
- NEP
Budget Ceiling
IT Equipment
- NEP
Budget Ceiling
- NEP
Budget Ceiling
- NEP
Budget Ceiling
- NEP
Budget Ceiling
Buildings Structures Outlay
IT Equipment Outlay
- NEP
Budget Ceiling
IT Equipment
- NEP
Budget Ceiling
Land & Land Improvements Outlay
- NEP
Budget Ceiling
Land & land Improvements
Furniture Fixtures, Equipt. & Book Outlay
- NEP
Budget Ceiling
Livestock & Crops Outlay
Public Infrastructures
Reenacted
2005
2004
17,000
17,000
17,000
17,000
13,000
13,000
13,000
13,000
50,000
50,000
50,000
50,000
10,000
10,000
10,000
10,000
30,000
30,000
30,000
30,000
33,000
33,000
33,000
33,000
12,000
12,000
12,000
12,000
1,494,413
24,500
986,699
2,505,612
2,505,612
2,261,512
12,373
12,373
12,373
13,000
222,154
222,154
222,154
373,581
2,527
2,527
11,600
11,600
30,876
60,000
447,610
2,134,493
42,800
2003
Remarks
2,000
2,000
17,000
2,000
2,000
2,000
2,000
5,425
Budget ceiling
maximized except in
CY 2003.
No breakdown
No breakdown
2,000
13,000
2,000
100,000
100,000
50,000
100,000
10,000
5,000
15,000
10,000
15,000
30,000
33,000
12,000
-
2,000
8,646
100,000
100,000
100,000
639,000
10,000
5,000
15,000
10,000
10,000
21,506
Budget ceiling
maximized except in
CY 2003.
No breakdown
3,457,425
2,261,512
3,457,425
1,000
2,000
3,000
13,000
3,000
222,134
88,310
310,444
373,581
310,444
5,000
6,500
11,500
11,600
11,500
No breakdown
No breakdown
3,457,425
3,688,625
6,035,000
1,000
2,000
3,000
3,000
15,000
222,134
88,310
310,444
260,444
187,334
5,000
6,500
11,500
11,500
1,000
No breakdown
Budget ceiling
maximized except in
CY 2003.
Budget ceiling even

Budget ceiling
maximized.
Budget ceiling
maximized.
Budget ceiling not used

in CY 2003.
Budget ceiling
maximized except in
CY 2003.
Budget ceiling not

maximized in CYs 2003
and 2005.
Budget ceiling
exceeded in CY 2003
but not maximized in
CY 2005.
Budget ceiling
exceeded in CY 2003
but nor fully availed of
in CY 2004.
Budget ceiling for CYs

2003 and 2005 even
exceeded.
31

Agency
Particulars
Pasig River
Rehabilitation
Commission
Department
of Agriculture
(AFMA)
Bureau of
Fisheries
and Aquatic
Resources
(AFMA)
Total Appropriations-GAA
- NEP
Budget Ceiling
Total Appropriations-GAA
- NEP
Budget Ceiling
Investment Outlay
Loans Outlay
Livestock & Crops Outlay
Buildings & Structures Outlay
Work Animals Outlay
Public Infrastructures
- NEP
Budget Ceiling
Buildings & Structures Outlay
- NEP
Budget Ceiling
Reenacted
2005
2004
2,715,779
2,715,779
2,124,871
439,371
439,371
439,371
971,171
1,125
4,100
11,631
96,066
45,122
97,059
4,257
2,315
144,640
5,074,317
5,480,632
5,480,632
5,102,516
40,229
101,880
59,331
201,440
201,440
262,087
2,663,864
2,124,871
2,663,864
962,570
1,672
964,242
971,171
964,242
No breakdown
5,790,167
5,102,516
5,790,167
No breakdown
952,483
262,087
952,483
2003
2,663,864
2,163,864
2,278,244
962,570
1,672
964,242
1,298,242
1,298,242
No breakdown
Remarks
Budget ceiling reduced

by Congress in CY
2003 and not
maximized in CY 2005.
Budget ceiling reduced
by Congress in CY
2003 and exceeded in
CY 2005.
5,790,167
8,243,576
8,767,930
No breakdown
Budget ceiling not

maximized in CYs 2003
and 2005.
952,483
978,483
1,085,569
This practice would adversely affect the governments ability to balance the
budget by 2010.
32
Managements Comments
Teams Rejoinder
Consistent with the policy of streamlining government operations, the setting

of budget ceilings initially provides for
the past years level of capital spending,
after providing for current operations
(personal services and maintenance). The
agency, with its intimate knowledge of its
programs/projects as well as its implementing capacity, is given the flexibility
to re-align allocations within such ceiling,
to signify the agencys priority activities.
Hence, if the agency is targeting to
implement capital projects or expand on
existing ones, the option is to realign
MOOE allocation for capital outlays. The
centerpiece programs/projects are also
considered in the setting of ceilings.
The use of the Budget Ceiling

Approach in allocating funds was not
considered appropriate for capital expenditures as the budget level was not
dictated by necessity but used as an
effective tool in imprudent spending.
As it is, the agencies used to maximize the budget ceiling defined in the
budget call. It would have been
prudent, if it is indeed necessary for
the DBM to prescribe ceiling for
capital outlay, to use the MTPDP/
MTPIP or any validated need in
setting the budget level for capital
expenditures. That way, available
resources are directed for the implementation of priority programs.

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

indications of an impending occurrence of such
condition, as determined
by
the
Development
Budget
Coordinating
Committee and approved
by the President.
100
50
0
2001
MTPDP (Target)
2002
SER (Actual)
2003
BESF Target
2004
BESF Actual
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
actually 139% of CY 2003
deficit target. It may even be
noted that the DBM sets
increasing deficit target in the
BESF from CYs 2001 to CY
2004. This is inconsistent
with the governments goal of
a balanced budget to be
attained, initially in 2006 and
extended to 2010.
BESF Proposed and Actual Budget Deficits

250
200
Amount
(In Billion
Pesos) 150
Proposed
Actual
100
50
0
2001
2002
2003
2004
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
509,867,564
169,955,855
TOTAL
34
679,823,419

In addition to IRA, the national government is also providing assistance to

LGUs in various forms such as:
2001
(Reenacted)
Nature
AFMA - LGEF
- MDF
Special shares of LGUs in the
proceeds of national taxes
LGEF
Brgy Officials Death Benefits Fund
MMDA
PRRC
Local Officials Insurance Premium
Fund
MDF
Premium Subsidy for Indigents
under the National Health Insurance
Program
Total
2002
(In Thousand Pesos)

2004
2003
(Reenacted)
2005
Total
321,445
905,695
114,118
1,516,997
62,655
0
62,655
0
0
0
560,873
2,422,692
3,087,000
2,622,470
1,550,150
1,550,150
1,907,158
10,716,928
657,859
0
639,535
303,261
0
913,575
231,336
37,000
1,087,132
984,419
231,336
37,000
1,087,132
984,419
15,000
37,000
1,084,506
449,840
1,438,792
111,000
4,811,880
2,418,678
37,000
37,000
74,000
2,437,162
580,000
518,476
518,476
4,054,114
500,000
500,000
500,000
750,000
4,054,114
6,587,421
4,971,168
4,971,168
4,243,504
28,858,957
8,085,696
Legend: LGEF Local Government Empowerment Fund

MDF Municipal Development Fund
MMDA Metro Manila Development Authority

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.
Agriculture
Health
Services
Social
Services
Infrastructure
Facilities
Information
Services
Research services, water and soil conservation, seeding services,

marketing services, setting-up of demonstration farms and
incentives for livestock and poultry and fishing activities, etc.
Control of diseases, treatment thereof, maintenance of health and
day care centers, etc.
Protection for the elderly and disabled, rehabilitation of beggars,
juvenile delinquents, drug addicts, etc., observing proper nutrition,
family planning, undertaking livelihood projects, etc.
Municipal or local roads and bridges, irrigation systems, school
buildings, artesian wells, water supply systems, flood control,
drainage and sewerage, etc.
Information on job placement, investments, tax matters, marketing
systems and maintenance of public library which may cover books,
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)

2002
2003
2001
Dept. of Agriculture (OSEC)

- Coordination of Agricultural Research
Personal Services
MOOE
- Water Mgt.& Soil Conservation & Development
Personal Services
MOOE
- Agribusiness & Marketing Services
Personal Services
MOOE
Dept. of Health(OSEC)
- Disease prevention and control
Personal Services
MOOE
2004
8,184
5,194
2,990
8,174
5,014
3,160
10,139
7,403
2,736
10,605
5,330
5,275
10,090
7,777
2,313
10,519
8,057
2,462
9,502
5,530
3,972
8,064
6,313
1,751
10,367
8,481
1,886
9,270
6,263
3,007
8,064
6,313
1,751
9,925
8,630
1,295
732,737
31,326
701,411
810,504
18,101
792,203
708,351
28,392
679,959
706,349
26,390
579,959
These instances likewise contributed to the increasing budget deficit being

experienced by the national government.
Teams Rejoinder
The declaration of an unmanageable deficit was

not resorted to since the prospects were such that
excesses if any vis--vis quarter targets were just
a matter of timing rather than an overall
indication of the full year level.
As has been observed and as

discussed in the report, the national
government consistently exceeded
the targeted budget deficit for the
past four years. To consider the
quarterly excesses as a matter of
timing rather than an overall
indicator of the full-year level
deficit is therefore not justifiable.
At the least, the DBM should have
considered totally cutting all other
assistance to LGUs other than IRA
and special shares from the National Wealth. These financial assistance were actually not intended to
implement the national governments programs and projects but
to support LGUs operations as may
be noted on the nature or purpose
of such assistance.
We commend managements plan
of reviewing the status of
devolution to address this issue.
Also, with the Supreme Court ruling that the

internal revenue allocations as mandated by the
Local Government Code should be without lien,
the IRA allocation has been treated as nondiscretionary to avoid legal tangles later.
The provision of financial assistance to LGUs
other than IRA and Special Shares from National
Wealth may perhaps be viewed as the national
government tapping the LGUs to implement
projects which can best be done by the LGUs
rather than the national government agencies.
These transfers are not assistance to LGUs but in
aid of implementing national government
programs.
On the national government funding of devolved
activities, a review of the status of the devolution
is in the offing with the objective that such
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 governments 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
Presidents 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:
Amount (In Thousand Pesos)
Proposed and Actual Appropriations

1000
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

Targeted and Actual Deficits
Targeted
Actual
25
Amount (In Billion Pesos)
This condition then

affected
the
governments goal of
balancing the budget
by 2006 by gradually
reducing the deficits.
From CYs 2001 to
2004, the targeted
deficit level was
surpassed by P2.02
billion to P143.257
billion.
20
15
10
5
0
200
200
200
200
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:
Amount (In Billion Pesos)
MTPDP Targets and Actual Deficit

1600
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
Agency
Comm. on
Appointment
DepED
UP
DENR-OSEC
DOF-OSEC
Bur. of Customs
Bur. of Fire
Protection
Bureau of Jail
Mgt. & Penology
DOJ-OSEC
Ofc of the SolGen
DOLE
Presidential Broadcast Staff
Phil. Sports
Commission
Court of
Tax Appeals
Budget
Ceiling
NEP
2004
Increase/
(Decrease)
Budget
Ceiling
NEP
2003
Increase/
(Decrease)
Budget
Ceiling
NEP
Increase/
(Decrease)
224,192
99,241,755
4,291,454
4,515,792
195,278
1,191,423
208,429
102,583,978
8,903,680
4,556,535
204,723
1,214,988
(15,763)
3,3,42,223
4,612,226
40,743
9,445
23,565
219,328
96,278,545
4,340,096
4,688,590
195,096
1,218,786
224,192
99,241,755
4,580,497
4,515,792
195,278
1,191,423
4,864
2,963,210
240,401
(172,798)
182
(27,363)
219,230
95,259,442
4,338,955
5,433,225
195,503
1,211,170
219,328
96,206,672
5,601,289
4,982,579
195,096
1,218,786
98
947,230
1,262,334
(450,646)
(407)
7,616
3,528,092
3,712,892
184,800
3,341,947
3,528,092
(161,170)
3,434,921
3,641,830
206,909
2,205,681
1,272,272
154,066
1,235,437
2,370,946
1,413,608
155,729
1,252,886
165,265
141,336
1,663
17,449
1,929,992
1,697,341
145,735
1,185,971
2,205,681
1,272,272
154,066
1,235,437
203,880
(425,069)
8,331
49,466
1,862,472
1,719,363
144,449
1,250,809
1,997,368
1,692,341
139,735
1,185,971
134,896
(27,022)
(4,714)
(64,838)
89,308
91,802
2,494
55,487
89,362
33,875
56,540
55,487
(56,540)
103,527
104,540
1,013
100,288
103,527
3,239
105,227
74,288
(30,939)
42,561
59,541
16,980
36,840
42,561
(29)
50,064
42,590
(7,474)
Teams Rejoinder
On the national government deficit increasing

despite the adoption of a deficit-reduction path
towards a balanced budget, the deficit targets
are based on percentage-to-GDP as per
international practice, not in terms of absolute
magnitudes. The deficit-to-GDP outturn for
the period 2001-2004 was generally on a
downtrend, even as absolute levels may
increase given the increasing GDP levels.
The deficit-to-GDP outturn

for the period 2001-2004
may be in the downtrend,
but this did not in any way
help in minimizing the gap
between the target level and
the actual budget deficit.
As in all rolling programs, the deficit path for

the period 2001-2004 was adjusted to consider
the available outturns. The overshooting of the
deficit target in 2002 (vis--vis plan levels)
resulted to the raising of the 2003-2004 targets.
Admittedly, the 2006 target balancing of the
budget was no longer feasible, and the
emerging target is 2008. Such prospect is
largely made possible by revenue projections
by the Department of Finance.
Additional revenues enabled the incremental
spending without unduly breaching the deficit
targets.
As will be discussed in the

succeeding chapters, the
increase
in
operating
expenses alone could not be
covered by the increase in
revenue projection. As it is,
there are newly created
expenditures for every
projected
increase
in
collection.
Since
the
projected collection was not
realized in most cases, the
budget deficit gap keeps on
increasing.
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
NEDAs SERs for CYs 2001-2004, some government programs were not at all
implemented as illustrated below:
Sector
Automated
Elections
40
Implementing
Agency
Commission on
Elections
MTPDP 2001-2004 Targets

The Electoral System will be
fully computerized by 2004
Accomplishment/Existing Conditions
As Reflected In SER
The COMELEC continued to underperform in
all 3 components of its Electoral Modernization
Program. The 3 components of COMELECs
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.

Sector
Implementing
Agency
As Reflected In SER
Peace
and order
and the
Rule of
Law
BJMP,
DILG
BuCor,
DOJ
Provision of quality jail

management and services
through efficient and human
safekeeping and rehabilitation of inmates
Overcrowding of jails and jailbreaks due to

financial constraints.
Education
and
Culture
DepEd
Everyone of school age will

be in school, in an uncrowded classroom, in surrounddings conducive to learning.
Three thousand school
buildings a year shall have
been built and a computer
put in every high school.
There is still a classroom backlog of 10,436

by end of SY 2004. On the other hand,
textbook backlog remains high at 24.22
million in CY 2003 and 34.7 million in 2004.
With the adoption of double shift classes and
a 1:50 classroom-student ratio, the backlog in
teacher items was reduced to 20,113 in 2004
from 46,356 in 2003.
Agribusiness
DA
AFMA
- An average of 3.12 to 4.02

percent stable annual growth
in gross value added in
agriculture and fisheries
Overall agricultural production slightly exceeds

expectations. Following are the agricultural
products that did not meet the target due to several
factors such as disastrous effects of typhoons,
fiscal constraints and the rising costs of inputs as a
result of series of crude oil price increases.
- One million new jobs generated in agriculture & fisheries

thru the implementation of
AFMA and Fisheries Code.
- Program targets
Irrigation
and
water
management for the
period 2001-2004, 473,752
hectares will be irrigated. Of
this total, 301,361 hectares
will be irrigated from the
rehabilitation of existing but
degraded systems and
172,391 hectares from the
construction of new irrigation systems. This effort
will raise the countrys total
service area from 1.4 million
to 1.6 million hectares.
Farm-to-market roads and
related infrastructure
About 1,597 km. in new
farm-to-market roads will be
constructed and 601 km of
existing
farm-to-market
roads will be rehabilitated,
repaired and upgraded.
Rehabilitation of 2 regional
fishports and 19 municipal
fishports will be continued.
Sixteen mariculture parks;
14 seaweed village ecozones; and 280 seaweed
nurseries will be established.
Agricultural
Crops
Coconut
Pineapple
Coffee
Mango
Tobacco
Abaca
Livestock
Cattle
Hog
Goat
Poultry
Chicken
Duck
Commercial
Growth Rates
Target
Actual
1.9-2.0
0.4
4.5-6.5
3.6
1.5-2.4
-5.2
6.0-6.5
-3.8
1.9-2.4
-9.6
1.8-2.7
-0.2
4.5-5.1
-0.4
4.7-4.9
-1
4.8-5.4
-0.5
3.0-3.6
1.2
4.7-5.8
4.3
4.7-6.0
3.6
4.7-5.3
-1.3
4.6
1.9
Meanwhile, the Department of Agriculture did not

seem to substantially accomplish its plan under the
Agriculture and Fisheries Modernization Plan as
shown below.
Commitments
Rehabilitate 19 municipal fish ports
Continue the rehabilitation of two regional fish
ports
Generate 172,391 has. from the construction of
new irrigation systems
Establish 14 seaweed village eco-zones and
280 seaweed nurseries
Construct/improve 14,810 assorted postharvestrelated infrastructures
Rehabilitate 301,361 has. from existing but
degraded irrigation systems
Distribute 21,863 assorted post-harvest
machinery and equipment
Raise the countrys total irrigation service area
from 1.4 million to 1.6 million hectares
Construct 1,597 kms. and rehabilita-tion, repair
and improvement of 601 km. of FMRs
Establish 16 mariculture parks
%age
79
350
51
160
12
204
4
0.9
52
56
41

Sector
Implementing
Agency

Postharvest facilities-Within
the plan period, 21,863
assorted
postharvest
machinery and equipment
will be distributed while
14,810 assorted postharvest
related infrastructures will be
constructed
to
benefit
3,136,643 farmers. This
increase in density of
postharvest facilities is
expected to reduce current
postharvest losses from 15
percent to 11 percent in
grains.
Environment and
Natural
Resources
DENR
Forestry Sector
Develop and manage 5.5
million has., of which 2.9

million has. will cover
Community Based Forest
Management (CBFM) areas
and 2.6 million hectares will
cover certificate of ancestral
domain claim (CADC) areas;
Characterize/profile 154
priority watershed areas;
Rehabilitate 115,777 has. of
degraded forestland;
Establish 752 miniforests in
urban centers; and
Establish 414 livelihood projects
for enterprise development
established in CBFM.
Lands Sector
Cadastral survey of 65 municipalities and 286 partially
surveyed municipalities including resurvey of 115 municipalities with defective survey.
Issue 100 titles, covering
approximately one million has.
of which, 50 are with
Certificate of Ancestral
Domain Titles (CADTs) and 50
are with Certificate of Ancestral Land Titles (CALTs); and
Issue an estimated 274,460
patents covering 329,356 has.
to farmer beneficiaries.
42
As Reflected In SER
The Department appeared to have focused more on
the rehabilitation of regional and municipal fish
ports rather than on productivity-enhancing
investments. These efforts were undertaken by the
Department despite having met its target for the
rehabilitation of municipal fish ports already being a
devolved activity under the LGC. The DA did not
seem to have given much attention to raising the
countrys total irrigation service area, the
distribution of postharvest equipment, and the
construction and improvement of postharvest
facilities. Moreover, no inroads were made in
the
construction,
rehabilitation/repair
and
improvement of FMRs, as well as in the
establishment of mariculture parks.
The DENR committed to attain 16 targets as shown
below:
Program//Project
Mangrove areas rehabilitated
PAMBS managed
LGUs adopting coastal management - Coastline covered (km)
Patents issued (has.)
CBFM areas developed and
managed (has.)
Livelihood projects established
Regional Coastal Resource
Information System formulated
LGUs adopting coastal mgt.plans drawn up
Priority watershed areas
characterized/profiled
Coral Reef managed (has.)
Degraded forestland
rehabilitated (has.)
Miniforests established (no.)
PA established (no.)
Municipalities implementing
Users Pay Principle
Cadastral survey of unsurveyed
municipalities conducted (has.)
CADTs and CALTs issued
%age
605
362
137
107
100
99
93
85
82
81
80
25
20
17
54 CADTs
6 CALTs
Only 5 targets committed for the period were

achieved: (1) development and management of
Community-Based Forestry Management (CBFM)
areas; (2) issuance of patents; (3) management of
Protected Areas Management Boards (PAMBs);
(4) mangrove areas rehabilitation; and (5) coastline
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.

Sector
Implementing
Agency

Protected Areas (PAs) and
Wildlife Sector
Establish 80 PAs under
the National Integrated
Protected Area system
(NIPAs) Act;
Manage 50 PAs by Protected
Area Management Boards
(PAMBs)
Coastal and Marine Sector

Establish/rehabilitate 2,000
hectares of coral reef;
Develop a national databank
and management information
for coastal & marine ecosystems and 15 regional coastal
resources information system;
Adopt integrated coastal
management covering municipal
waters of 250 LGUs and 3,000
kilometers coastline; and
Implement users pay principle
in 250 municipalities.
Housing
HUDCC
NHA
NHMFC
HDMF
The housing sector targets the

provision of shelter security to
1,200,000 households for the plan
period 2001-2004 with P215.16
billion funding requirements. The
target adopts a 73% to 27% ratio
in favor of socialized housing,
principally for the bottom 40% of
households as follows:
Housing
Package
Socialized
Economic
Open
Total
Household
Levels
880,000
231,872
88,128
1,200,000
As Reflected In SER
A number of targets were not achieved due to
various reasons. The cadastral survey of
unsurveyed municipalities targets were not met
because budget was not allocated for the activity.
Non-attainment of targets on mini-forest
establishment and the implementation of users pay
principle was due to the absence of specific
guidelines by LGUs on standard fees and charges.
The establishment / proclamation of protected
areas, on the other hand, continued to be
hampered by the tedious process prescribed by the
National Integrated Protected Areas System
(NIPAS) as its amendment has yet to be enacted.
Based on the 2004-2010 MTPDP, against a target

of 1.2 million units of housing assistance or shelter
security for CYs 2001 to 2004, the housing sector
provided 882,823 shelter security units or an
accomplishment of 73.6% of June 2004 as follows:
Housing Package
Socialized
Low-Cost
%age Accomp.
56.10
121.66
For CY 2004 alone, the SER showed an average of

57.5% accomplishment in the delivery of security
units among other targeted activities as shown
below.
Activities
Direct Housing Provision:
Land Tenure for Urban Poor
Socialized Housing
Low-Cost Housing
Indirect housing Provision:
Retail Guaranty
Development Guaranty
Issuance of License to Sell
Provision of employment in
housing construction
%age
38.2
46.3
103.4
57.5
18.3
125.4
54.2
Non-attainment of the targets can be attributed to

resource constraints due to fiscal crisis, institutional
refocusing and stream-lining.
43

Sector
Labor
Implementing
Agency
DA
AFMA
DOT

In the medium term, domestic
employment is expected to grow
by 3.2 to 3.5%. From a level of
27.4 million employed in 2000, the
number of employed will increase
to 31.2 to 31.5 million by 2004.
Average yearly net addition to
employment is projected to reach
one million. In addition, about one
million workers per year will be
deployed overseas.
The unemployment rate will
steadily improve in the medium
term. From 11.2% in 2000, the
unemployment rate will further go
down to 7.6% to 8.6% by 2004.
Energy
DOE
Key Measurable Targets

Improve energy selfsufficiency from 45% in 2000
to 52% by 2004;
Increase aggregate installed
generating capacity from
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 implementtation;
Increase the number of
barangays served from
33,647 or 80.1% in 2000 to
39,900 or 95% by 2004.
As Reflected In SER
Labor market conditions improved in 2004
compared to 2003, but performance generally fell
below Plan target. The labor market fell short of the
target employment creation for 2004, employing an
additional 977,000 workers, vis--vis the targeted
1.4-1.6 million workers. Unemployment rate rose to
11.8% from 11.4% the previous year. As to
overseas employment, 934,000 Filipinos were
deployed in 2004 but this fell short of the target of 1
million per year.
Protection of OFWs - The fight against illegal
recruitment remains a challenge as the number of
cases filed edged up in 2004 (2.8%) and the
number of erring agencies increased by 37.9%.
Among the targets that were not met included

energy savings, transmission line construction and
system loss reduction. The new transmission line
constructed in 2004 was 157.1 ckt-kms, way below
the target of 6,885 ckt-kms. A total of 38,763
barangays or 92.41% have been electrified, slightly
below the 2004 target.
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.
Theme/Sector/
Implementing
Agency
Program/
Project
Category
Program/Project
Amount
Included
in
MTPIP
But Not
Funded
Not
Included
in
MTPIP
But
Funded
I. Economic Growth and Job Creation

Sector: Trade and Investment
DTI
DTI
NYC
DTI
DTI
DTI
DTI
DTI
Cont
Cont
Cont
NPAP
NPAP
NPAP
NPAP
IN-NPAP
DTI
IN-NPAP
IPO
IPO
IPO
DOLE
CHED
NPAP
NPAP
NPAP
NPAP
IN-Cont
DILG/LGU
DILG/LGU
Cont
Cont
Sulong Kabuhayan (former name-Balikbayan, Balikkabuhayan

Program)
One Town One Product
Youth Entrepreneurship Program
Philippine Business Registry
Central Luzon Trade and Investment Assistance Center
Integrated SME Development
R&D, Product Clinic and Local Designers Program
Brand Management Program
Integrated Program on Trade Promotions and Market Development
(Trade missions, commercial intelligence, international and local
fairs participation)
Disseminate information on lapsed, expired or off patents to SMEs
Technology Info Matching Brokering (TIBM) Program
Program for SMEs using IP as a business strategy
Katulong at Gabay sa Manggagawang May Kapansanan
Development and Upgrading of Standards for Higher Education
Programs and Institutions
Implementation of Upscale Bayanihan Savings Replication Project
(BSRP)
One Cluster-One Vision for Development Project
10,000,000
75,000,000
100,000
175,000,000
20,000,000
4,360,000
15,000,000
225,000,000
3
3
3
3
3
3
3
3
10,000,000
75,000
300,000
175,000
250,000
3
3
3
3
3
114,875,000
2,824,000
2,000,000
3
3
424,321,000
25,220,000
24,780,000
9,560,000
3
3
3
39,000,000
18,380,000
3
3
4,320,000
38,000,000
950,000
3
3
3
500,000
23,050,000
Sector: Agribusiness
DAR-LF
Cont.
DAR-LF
DAR-LF
DAR-LF
Cont.
Cont.
Cont.
DAR-FAP
DAR-FAP
Cont.
Cont.
DAR-FAP
BAI
FIDA
Cont.
NLF
NLF
FIDA
NLF
RFU
NLF
Access Facilitation and Access-Enhancement Services-Other CARP

Infrastructure Development Projects
(Irrigation)
SARED - Development and Management of Rural Enterprises in
ARCs/KALAHI Zone
SARED - Operations of KALAHI Farmers Center (KFCs)
SARED - Other CARP Rural Enterprise Development Activities
Belgian Integrated Agrarian Reform Support Project (BIARSP)
Phase III
Support to Agrarian Reform in Central Mindanao (STARCM)
Philippine Australia Technical Support for Agrarian Reform and
Rural Development(PATSARRD)
Production of Genetically Superior Animals
Fabrication & Development of Fiber Extraction Machines
Provision of Cost-Effective & Appropriate Technologies to Increase
Fiber Crop Production
Lanao Integrated Area Development Program for the 2nd District of
Lanao del Sur
45

Theme/Sector/
Implementing
Agency
Program/
Project
Category
RFU
NLF
RFU
RFU
RFU
RFU
RFU
NLF
NLF
NLF
NLF
NLF
RFU
NLF
RFU
RFU
RFU
RFU
RFU
RFU
RFU
RFU
RFU
RFU
RFU
RFU
NLF
NLF
NLF
NLF
NLF
NLF
NLF
NLF
NLF
NLF
NLF
NLF
RFU
NLF
RFU
BAI
NFAP
NFAP
BAR
NFAP
BAR
NFAP
BPI
BPRE
NFAP
NFAP
BPRE
NFAP
BSWM
NFAP
BSWM
NFAP
DA-OSEC
NFAP
DA-OSEC
NFAP
DAR
DAR
DENR
Livecor
NFAP
NFAP
NFAP
NFAP
Livecor
NFAP
Livecor
Livecor
NFAP
NFAP
Livecor
Livecor
NFAP
NFAP
NFA
NFAP
NFC
PFDA
NFAP
NFAP
PFDA
NFAP
PFDA
46
NFAP
Program/Project
Transforming Marinduque into a Major Mango Producing Province

Citrus Processing and Development Program for the Mangyans of
Or.iental Mindoro
Romblon Rice Sufficiency Program
Lubang Island Integrated Agricultural Development
Malarayat Coco-based Development Program
Urban Agriculture Program
Mindoro Food Basket Development Program (Commercial/ Bulk
Storage and Handling Grains
Production) RICE
Eradication of Mango Pulp Weevil in Palawan
Philippine Pig Production and Development
MIMAROPA Regional Agricultural Integrated Research Center
Regional Animal Disease Diagnostic Laboratory
Regional Animal Feed Laboratory
Veterinary Quarantine Center
Marketing Information, Communication and Trading Centers
Support Program for Indigenous People
Biological Control Agent Production Laboratory
Livestock and Poultry Research & Development Program
Marketing Development and Intelligence System
Parawakan Breeding and Conservation
Establishment of Regional Information Technology Unit for Region
4-B
Cordillera Integrated Research Development and Extension Center
(CIARDEC) Complex
Rabies Elimination Project
Strengthening RDE Through Community- Based Participatory
Action Research Program
Increasing Fisheries Aquaculture Production in the Philippines thru
the Application of Advanced
Aquaculture Technologies
Enhancing the Competitiveness of Fresh Philippine Super Mango
Postharvest Facility Master Plan for Agricultural Devt.
Support to the Implementation of the Long-term Agriculture and
Fisheries Modernization Program
Updating the Land Cover Using Remote Sensing for Agricultural
Development
Village-level Agriculture and Food Systems Development in
Selected Degraded Poverty-Stricken Areas of the Philippines
(AgFoodSys)
The Integrated Agricultural Modernization Project in Selected
Irrigated Areas
Establishment of a Rational Public Investment Programming System
for the Agriculture
and Fisheries Sector
Philippine-Israel Center for Agricultural Training (PICAT)
SARRD II
Land Administration Management II Program
Establishment of Integrated Corn Service Facility Centers
Support to Private Sector for Agricultural Modernization Through
the Establishment of Support Facilities for
Agrifood Supply Chain
Establishment of Rice Reprocessing Center
Establishment of Cold Chain Facility
Construction/Establishment of Modern Greenhouses with Drip
Irrigation for Vegetable Production
Expansion of the Agribusiness Equipment Leasing Program (AELP)
Establishment of the Food Standards Development and Research
Center in the Visayas Region for the
Food Security Program of the Philippine Government
Expansion of Tomato Paste Plant
Rehabilitation/Improvement of the Navotas Fish Port Complex
Preparation of Master Plan for the Establishment of Municipal
Fishery Post Harvest Facilities and
Infrastructures
Feasibility Study on the Proposed Rehabilitation/ Upgrading of Five
(5) Regional Fish Port Complexes
Amount
Included
in
MTPIP
But Not
Funded
70,653,000
12,008,000
20,194,000
09,050,000
712,360,000
3,240,000
3
3
3
3
3
67,189,000
5,312,000
3,500,000
79,675,000
8,000,000
15,600,000
5,400,000
11,011,200
2,000,000
22,500,000
190,600,000
12,250,000
6,500,000
3
3
3
3
3
3
3
3
3
3
3
3
3
3
10,600,000
10,000,000
10,490,000
3
3
10,300,000
16,320,000
7,470,000
2,700,000
3
3
3
12,400,000
6,000,000
4,360,000
5,000,000
500,000
3,100,000
1,000,000
50,000,000
125,000,000
3
3
3
3
3
60,000,000
25,000,000
5,000,000
3
3
3
3
10,000,000
600,000,000
3
3
31,820,000
355,000,000
22,000,000
3
3
3
3,471,000
1,000,000
Not
Included
in
MTPIP
But
Funded

Theme/Sector/
Implementing
Agency
Program/
Project
Category
Program/Project
Amount
Included
in
MTPIP
But Not
Funded
Not
Included
in
MTPIP
But
Funded
Sector: Environment
DENR
DENR
DENR
DENR
DENR
Cont
Cont
Cont
Cont
Cont
DENR
Cont
DENR
DENR
DENR
Cont
Cont
Cont
DENR
DENR
Cont
Cont
DENR
DENR
DENR
DOST
Cont
Cont
Cont
Cont
DILG
DILG
NAPC
Cont
LF
Cont
Visayan Sea Coastal Resources and Fisheries Management Project

(VISEA) DENR Component
Samar Island Biodiversity Project
Land Classification
Forest Land Use Evaluation and Mapping (Sub-classification)
GEO Hazard Survey Assessment
Laguna de Bay Institutional Strengthening and Community
Participation
Partnership in Environmental Management for the Seas of South
East Asia
Coastal and Marine Biodiversity Conservation - MRDP
ASEAN Regional Center for Biodiversity Conservation (ARCBC)
Leyte Island Program for Sustainable Management of Natural
Resources
ASEAN Centers for Biodiversity (ACB) a successor organization of
ASEAN Regional Center for Biodiversity Conservation (ARCBC)
Integrated Coastal Resources Management Program
Management of Coastal and Marine Resources
Phil-Canada Environmental and Economic Management Project
GEO Hazard Mapping
Water Program Towards and Integrated Water Resource
Management (DILG-GTZ) German Govt. Grant
Community-based Law Enforcement Public Safety Program
Water Management Project
600,000
6,000,000
3,014,000
1,782,000
28,000,000
3
3
3
3
3
10,000,000
2,625,000
5,000,000
2,000,000
3
3
3
212,000
8,210,000
5,000,000
30,223,000
2,000,000
8,231,000
3
3
3
3
3
263,000
12,500,000
200,000
711,588,000
7,790,000
3
3
10,120,000
1,100,000
5,075,000
3
3
3,393,000
3
3
Sector: Tourism
DOT
DOT
DOT
Cont
Cont
Cont
DOT
Cont
DOT
Cont
DOT
Cont
DOT
Cont
DOT
DOT
DOT
DFA
LF
LF
LF
LF
Implementation of marketing plans for China, Japan, Korea and

Balikbayans/other major markets
"Byahe Tayo" Program
Pilot implementation of tour programs focusing on the country's
culture, history, heritage, sports, health, culinary and others
Monitoring of the tourism related infrastructure components of the
Regional Tourism Master Plans, Phil. Tourism Action Plan and Area
Specific Master Plans
Establish tourism economic zones (TEZs)
Safe "T" Philippines Program (Public Utility Taxi Transport System
Tourism Codes and Circulars)
Promotion of tour packages through telemarketing and other forms
of communication through the establishment
of the DOT Call Center
DOT Information Systems Plan
GP2 (Ganda ng Pilipinas, Galing ng Pilipino) Marketing Campaign
Expo 2005
Philippine Participation in the 2005 World Expo in Aichi, Japan
5,000,000
10,456,000
86,054,000
30,000,000
6,000,000
3
3
3
3
3
3
Sector: Digital Infrastructure

DOST
Cont
Philippine Research, Education and Government Information

Network (PREGINET)
50,000,000
132,140,000
808,800,000
1,700,000
2,200,000
3,200,000
1,400,000
3
3
3
3
3
3
1,600,000,000
500,000,000
1,000,000
3
3
3
11,800
8,400,000
4,944,000
12,557,000
3,000,000
2,500,000
Sector : Fiscal Strength

DBM-BISS
DOF
BTr
BTr
BTr
BTr
Cont
Cont
Cont
Cont
Cont
Cont
BOC
BOC
BOC
Cont
Cont
Cont
NEDA
Cont
NEDA
NPAP
NEDA
NEDA
NEDA-NSO
DOF
LF
LF
LF
NPAP
Electronic Budget System

LOGOFIND
Enhancement of ADAPS
Automation of TAP Facility
Establishment of off-site backup servers for ADAPS-RoSS
Enhancement of DMFAS
Purchase of Container X-rays for POM, MICP, Cebu, Subic and
Batangas
BOC Asycuda World (ECustoms) Project
Strengthening of the Post Entry Audit Group
Development of an inter-sectoral budget allocation model
(WBASEM)
Implementation of the ADB assisted project" Technical Assistance
on Strengthening Provincial/Local and Expenditure Management"
(12 months)
Communication and Advocacy Program (CAP) Support Project
Implementation of the Management Information System Network
Conduct of Family Income and Expenditure Survey (FIES)
Debt and Risk Management Office
3
3
3
3
47

Theme/Sector/
Implementing
Agency
Program/
Project
Category
Program/Project
Amount
Included
in
MTPIP
But Not
Funded
Not
Included
in
MTPIP
But
Funded
Sector: Labor
DOLE-POEA
DOLE-NCMB
Cont
Cont
DOLE-NLRC
Cont
DOLE-OSEC
Cont
DOLE-OSEC
DOLE-OSEC
DOLE-NMP
DOLE-MTC
Cont
Cont
Cont
Cont
DOLE-OSEC
DOLE-OSEC
DOLE-OSEC
DOLE
NPAP
NPAP
NPAP
LF
Overseas Employment Program

Conciliation-Mediation Program
Conciliation-Mediation Program- NLRC Case Management System
(NLRCCMS)
(Supplemental) Source: E-Government Fund
Standards Setting & Enforcement Program Implementation of the
New Labor Standards Enforcement Framework
Social Protection and Welfare ProgramDOLE Social Protection Project
Maritime Training Program
Maritime Training Program
Promotion of Local Employment Facilitation, Employment
Guidance and Regulatory Program
Social Protection and Enhancement Program
Wage Determination and Productivity Improvement Program
Computerization Program
123,569,000
32,526,000
3
3
41,463,000
3
3
127,048,000
397,930,000
565,000,000
56,380,000
1,280,000
3
3
3
3
3
77,680,000
3,000,000
83,000
2,300,000
3
3
3
48,632,300
11,550,000
75,000,000
276,000,000
560,000,000
435,200
1,299,360,000
3
3
3
3
3
3
120,528,000
70,000,000
3
3
53,340,000
2,200,000
15,600,000
4,950,000
1,610,000
84,700,000
2,200,000
1,000,000
862,500
431,200
3
3
3
3
3
3
3
3
3
3
376,782,000
54,600,000
II-Energy
Sector: Energy Independence and Power Sector Reforms
DOE
Cont
DOE
DOE
DOE
DOE
DOE
DOE
Cont
Cont
Cont
Cont
NPAP
NPAP
The Phil. Efficient Lighting Market Transformation Project (GEF)

Institutional Strengthening of DOE in Managing the Development of
the Natural Gas Industry
Barangay Electrification Program
Barangay Electrification Program (GAA/5% Reinvestment Fund)
Rural Power Project
Master Plan on Regional Energy Planning (KOICAGrant)
PRES Project DOE (French Protocol)
III-Social Justice and Basic Needs

Sector: Responding to Basic Needs of the Poor
DOH
Cont
DOH
Cont
DOH
NCIP/DLR
UNDP
NCIP
NCIP
NCIP/DLR
NCIP
UNDP
NCIP
NCIP
Cont
Cont
Cont
Cont
Cont
Cont
Cont
Cont
Cont
Cont
DILG
DSWD-E Govt
Fund
DSWD-E Govt
Fund
DSWD-E Govt
Fund
DSWD-E Govt
Fund
DSWD-E Govt
Fund
DSWD-E Govt
Fund
DSWD-E Govt
Fund
DSWD-E Govt
Fund
DSWD-E Govt
Fund
DSWD-E Govt
Fund
DSWD-E Govt
Fund
Cont
Upgrading the Facilities and Capabilities of the Antimicrobial

Resistance Surveillance Program (KOICA Grant)
Women's Health & Safe Motherhood Project(World Bank)
Family Planning and HIV/AIDS Prevention Social Marketing
Project Phase III (KIW Grant)
Issuance of CADTs/CALTS
Facilitation of FPIC Compliance
Facilitation of ADSDPP formulation
Health Programs and Services
Indigenous Health Knowledge and Protected Program
Strengthening local government capacity for poverty assessment,
plan formulation and monitoring
Cont
DSWD On Line Transaction System for Frontline Services
Cont
Advance Program on Adoptation and Foster case
100,000
Cont
Surveillance System to Prevent Prostitution in Siargao

Prevention and Management of Sexually Exploited I the Tourism
Industry
100,000
Cont
100,000
Cont
Haven for Street Children
200,000
Cont
Child Friendly Investigation Studio
200,000
Cont
Aruga at Kalinga
100,000
Cont
Child Molding Program
100,000
Cont
Character Building for Children
300,000
Cont
Halfway Home for Children/Youth in Conflict with the Law
300,000
Cont
SCALA Program
300,000
48

Theme/Sector/
Implementing
Agency
DSWD-E Govt
Fund
DSWD-E Govt
Fund
DSWD-E Govt
Fund
DSWD-E Govt
Fund
DSWD-E Govt
Fund
DSWD-E Govt
Fund
DSWD-E Govt
Fund
DSWD-E Govt
Fund
DSWD-E Govt
Fund
DSWD-E Govt
Fund
DSWD-E Govt
Fund
DSWD-E Govt
Fund
DSWD-E Govt
Fund
DSWD in
Partnership
with NAPC
DSWD
(Belgium)
Program/
Project
Category
Program/Project
Amount
Included
in
MTPIP
But Not
Funded
Cont
Operationalization of Rape Crisis Center
300,000
Cont
Group Home for Older Persons and PWDS
100,000
Cont
Shelltered Workshop for Older Persons and PWDS
200,000
Cont
Social Lab for Children and Youth with Disabilities
200,000
Cont
Aizheimer's Project
Pilot Testing of Liberating the IP from indignity for the Badjau
families
100,000
Cont
300,000
Cont
Program for Srandness
100,000
Cont
Alliance Network for Strandness
100,000
Cont
Project Luke
100,000
Cont
Recovery and Reintegration for Trafficked Persons
300,000
Cont
Family Life Resource Center
200,000
Cont
300,000
Cont
Comprehensie Program for Internally Displaced Families

Capability Building or Disaster Management for DSWD Internal
Staff (group training proposed for JICA endorsed already by NEDA)
20,000,000
Cont
Food for Work Program
60,000,000
Cont
KALAHI-CIDSS (proposed for Belgium Assistance)
121,000,000
65,721,000
350,129,000
3
3
1,894,598,300
51,146,200
15,000,000
134,470,900
3
3
3
3
16,111,600
4,446,800
13,129,800
3
3
9,814,000
1,000,000
3
3
Not
Included
in
MTPIP
But
Funded
Sector: Automated Elections

COMELEC
COMELEC
Cont
Cont
COMELEC
COMELEC
COMELEC
COMELEC
Cont
Cont
Cont
Cont
COMELEC
Cont
COMELEC
COMELEC
Cont
IN-Cont
COMELEC
IN-Cont
COMELEC
IN-NPAP
Cleansing and completion of database of registered voters (CCDRV)

- Continuing registration of voters
CCDRV-Voters' Validation System
CCDRV-Automated Fingerprint Identification System (AFIS) Note:
not included/approved in the 2005 budget
CCDRV-Information Campaign Drive
CCDRV-Training
Automation of counting and canvassing-Operations
Automation of counting and canvassing-Information Campaign
Drive
Electronic Data Transfer of Election Results-Information Campaign
Drive
Continuing education/training for COMELEC personnel
Conduct of continuing citizens and voters education through
partnership with civil
society groups and other government institutions
Consultation/ coordination with DepEd and CHED
Sector: National Harmony: The Peace Process

OPAPP
Cont
LGA-ARMM
DPWH
Cont
Cont
DPWH
DPWH
DPWH
DPWH
Cont
Cont
Cont
Cont
DPWH
DPWH
Cont
Cont
DPWH
DPWH
Cont
Cont
Rehabilitation and reintegration program for former rebels

Capability Building for Local Poverty Reduction Action Team in
ARMM (British Council-CLRG)/1
ADB-assisted Bridge Program
ADB-assisted 6th Road Project- Zamboanga City-Pagadian City
Road
Austrian Bridge Assisted Projects
Surigao-Davao Coastal Road (Impvt. 155.7 Km) (IBRD)
Zamboanga-Pagadian Road (Buug- Kabasalan Section) (IBRD)
Cotabato (Jct. Awang)-Upi-Lebak- Kalamansig Road (87.62 km)
(JBIC)
20th YEN JBIC Rural Roads Development Project, Phase II Compostela Valley-New Bataan- Libolon Road, Compostela Valley
20th YEN JBIC Rural Roads Development Project, Phase II Liboton-Tupaz Road, Compostela Valley
(Imprv't. - 5.00 kms)
20th YEN JBIC Rural Roads Development Project, Phase II Compostela-New Bataan-Liboton Road, Compostela
Valley (Imprv't. - 31.59 kms)
218,000,000
370,000,000
351,002,000
3
3
375,505,000
91,286,000
562,141,000
10,001,000
3
3
3
3
47,000,000
23,399,000
76,423,000
23,399,000
49

Theme/Sector/
Implementing
Agency
Program/
Project
Category
DPWH
DPWH
Cont
Cont
DPWH
Cont
DPWH
Cont
DPWH
Cont
DPWH
Cont
DPWH
Cont
DPWH
Cont
DPWH
Cont
DPWH
DPWH
DPWH
Cont
Cont
Cont
DPWH
Cont
Program/Project
NCIP
Cont
DILG
DILG
DILG-PNP
DOF
DPWH
DOLE
OPAPP, NGAs
DOLE-POEA
Cont
Cont
LF
Cont
Cont
Cont
NPAP
IN-NPAP
ARMM
ARG, ARMMDTI
LF
20th YEN JBIC Rural Roads Development Project, Phase II Tigaon-Mayon Road
Special YEN Loan Package-2nd Magsaysay Bridge Proj.
24th YEN Rural Road Network Development Project, PIII (24th Yen
RRNDP III) Properidad-Lianga Road, Agusan del Sur
24th Yen RRNDP III-Butuan City-Las Nieves- Esperanza- Bayugan
Road, Agusan
Dobliston-Sultan Gumander (Pagadian-Cotabato Road) (Impvt.- 25.2
kms)
Sultan Gumander-Malabang (Pagadian-Cotabato Road) (Impvt.33.1 kms)
Aurora-Monte Alegre-Molave Section, Aurora-Dipolog Road
(Impvt.-25.2 kms)
Kapatagan-Dobliston Road (Pagadian-Cotabato Road) (Impvt.- 15.6
kms)
Tukuran-Dobliston Road Zamboanga del Sur & Lanao del Norte,
(Impvt.-16.0 kms)
Saudi Fund Development-Lake Lanao Circumferential Road,
Project, Phase I (91.80 km
Ligao-Pio Duran Road, Albay (Const./impv't. - 21.80 km)
23rd YEN OECF, Arterial Road Links, Development Project, Phase
IV -Himayangan-Silago Road, Southern Leyte, Leyte
IV -Silago-Abuyog Road, Southern Leyte, Leyte
IV - Liloan-San Ricardo Road, Southern Leyte
Madrash Education Program
Coordination and supervision of Shari'ah training education program
and strengthening of the local Sharia'ah system
Support and assistance to government-recognized Muslim holidays
and festivities
Documentation of indigenous peoples' (IP) children caught in armed
conflict and coordination of DDRR (disarmament, demolition,
rehabilitation and reintegration)
Support for peace and development in Mindanao (AusAID)
Local Government Support Programme for ARMM (CIDA)
Construction of police stations
Mindanao Trust Fund (WB)/
Surigao-Davao Coastal Road
Community Sala'am (Peace) Corp Project II (ILO)
Showcase convergence areas for peace and development
Setting up Tripartite Consultative Council to institutionalize OFW
and private sector participation in overseas employment
Infrastructure Projects for the Implementation of RDPWH-ARMM
NPAP
Establishment of the Regional Economic Zone Authority
DPWH
Cont
DepEd
OMA
Cont
Cont
OMA
Cont
Amount
33,669,000
500,000,000
35,626,000
Included
in
MTPIP
But Not
Funded
3
3
3
71,398,000
224,464,000
124,725,000
112,130,000
82,822,000
105,859,000
10,000,000
94,628,000
3
3
79,730,000
109,893,000
110,871,000
70,000,000
3
3
300,000
21,000
539,100
4,052,000
98,448,100
50,000,000
550,000,000
562,141,000
2,400,000
500,000,000
3
3
3
43,318,000
650,000,000
29,816,000
1,404,799,000
50,000,000
1,515,692,000
958,425,000
279,875,000
1,068,000
4,179,400
185,550,000
1,691,290,000
3,135,829,000
34,578,000
9,518,000
6,076,000
1,860,000
340,000
17,490,000
715,000
100,000,000
4,000,000
182,469,000
3
3
3
3
3
3
3
3
3
3
3
3
3
3
3
3
3
3
3
3
3
3
3
3
3
IV- Education and Youth Opportunity

Sector: Education
DepEd
DepEd
DepEd
DepEd
DepEd
DepEd
DepEd
DepEd
DepEd
DepEd
DepEd
DepEd
DepEd
DepEd
DepEd
DepEd
DepEd
DepEd
DepEd
DepEd
50
Cont
Cont
Cont
NPAP
IN-Cont
IN-Cont
IN-Cont
IN-Cont
IN-Cont
IN-Cont
IN-Cont
IN-Cont
IN-Cont
IN-Cont
IN-Cont
IN-Cont
IN-NPAP
IN-NPAP
IN-NPAP
IN-NPAP
Textbook Program
Connectivity For Public Elementary/High School With Computers
Expansion of ESC Coverage of the Gastpe Program
Madrash Education
Institutionalization of Early Childhood Education
Enhancement of Math and Science Education
School-based Training Program
Classroom Seats
Teacher Requirement at the Beginning of the School year
School MOOE
Scholarships
Training and Development
School Feeding Program
Drug Abuse Prevention Program
Family Basic Literacy Program (FBLP)
Balik-Paaralan Para sa Out-of-School Adult (BPOSA)
Professional Enhancement Program (PEP)
School First Initiative
Teacher Induction Program
Teacher Education Development Program
Not
Included
in
MTPIP
But
Funded

Theme/Sector/
Implementing
Agency
Program/
Project
Category
DepEd
DepEd
IN-NPAP
IN-NPAP
DepEd
IN-NPAP
DepEd
IN-NPAP
DepEd
DepEd
IN-NPAP
FAP
DepEd
DepEd-NSTIC
LF
IN-Cont
DepEd-NETRC
DepEdNETRC
IN-Cont
IN-Cont
DepEd-BEE
DepEd-BSE
DepEd-SHNC
DepEd-ARMM
CHED
CHED
CHED
DOLE
NCIP
NCIP
TESDA
TESDA
TESDA
TESDA
TESDA
TESDA
TESDA
PMMA
IN-Cont
IN-Cont
IN-Cont
NPAP
Cont
IN-Cont
IN-NPAP
NPAP
IN-Cont
IN-Cont
Cont
IN-Cont
IN-Cont
IN-Cont
IN-Cont
IN-Cont
IN-Cont
IN-Cont
Program/Project
Upgrading of Values Education

Distance Education for Public Elementary School (DEPES)
PPTA- Minadano Basic Education Development Project (MBEDP) ADB
Comprehensive School and Community-Based Deworming Control
Project (JICA)
Strengthening the Implementation of Visayas Basic Education
(STRIVE) -AusAid
Strengthening Basic Education in Bohol and Nothern Samar
Construction of Elem & Secondary Sch. Bldgs. in areas
Experiencing Acute Classroom shortage
National Science And Technology Instrumentation Center (NSTIC)
Accreditation & National Achievement Test (All Grade 6, 4th Year)
National Achievement Test (Year 1 & Year 4) 1st yr achievement to
be administered to bridge and 1st yr. Regular
Accreditation Program for Public Elementary Schools (APPES)
Program
High School Bridge Program
Teacher-Child-Parent Program
ADTA-Development of Basic Education in Mindanao -ADB Grant
Student Financial Assistance Programs
Higher Education Development Program
College Bridging Programs
Community Sala'am (Peace) Corp Project II (ILO)
Indigenous People's Education
Assistance to Community Schools
Student Financial Assistance Programs
Job-Skill Matching System
Tendering Program
Kasanayan at Hanapbuhay (Apprenticeship Program
Learnership Program
Co-management / Devolution of TESDA Institutions
Community-based Programs & Entrepreneurship Devt Programs
Upgrading of the PMMA
Amount
Included
in
MTPIP
But Not
Funded
240,000
4,039,000
3
3
7,990,000
2,151,000
4,784,000
3,167,000
Not
Included
in
MTPIP
But
Funded
1,000,000,000
127,864,000
32,699,000
22,400,000
1,010,000
1,382,371,000
5,000,000
9,011,000
374,000,000
7,342,500
2,000,000
2,400,000
270,000
431,000
288,485,000
54,080,000
373,367,000
15,934,000
15,333,000
2,400,000
74,222,000
345,023,000
3
3
3
3
3
3
3
3
3
3
3
3
3
3
3
3
3
3
100,000,000
25,000,000
435,000,000
3
3
3
43,500,000
5,000,000
3
3
323,000
647,000
215,000
665,000
,255,000
3
3
3
3
3
59,945,000
2,357,000
8,896,000
3
3
4,385,000
665,000
5,687,000
8,450,000
3,343,000
2,048,000
2,000,000
15,227,000
7,109,000
7,464,000
2,870,000
3
3
3
3
3
3
3
3
3
3
3
200,000
270,000
3
3
Sector: Science and Technology

DOST
DOST
DOST
Cont
Cont
Cont
DOST
CICT
Cont
Cont
Small Enterprises and Technology Upgrading Program (SETUP)

Calibration and Testing Program
Priority/strategic R&D programs
Contract research program and other R&D cost sharing schemes
with the private sector
Wireless In Education Initiative (WEIn)
Sector: Culture
NCIP
NCIP
NCIP
NCCA
NCCA
IN-Cont
IN-Cont
IN-Cont
IN-Cont
IN-Cont
NCCA
IN-Cont
NCCA
NCCA
IN-Cont
IN-Cont
NCCA
NCCA
NCCA
NCCA
NCCA
NCCA
NCCA
NCCA
NCCA
NCCA
NCCA
IN-Cont
IN-Cont
IN-Cont
IN-Cont
IN-Cont
IN-Cont
IN-Cont
IN-Cont
IN-Cont
IN-Cont
IN-Cont
DILG
NCIP
NPAP
NPAP
Customary Laws and Practices Documentation

Traditional Crafts Production
Support to Cultural Community Festivals/Tribal Congresses
Cultural Tourism Projects (NEFCA funded)
Sining Panglahat (NEFCA funded)
Conservation of Built Heritage and Archeological Sites Projects
(NEFCA funded)
Preservation and Protection of Cultural Treasures of Cultural
Communities (NEFCA funded)
National Education & Cultural Enrichment Program (NEFCA funded)
Strengthening Social Infrastructure and Culture and Governance
Projects (NEFCA funded)
Philippine Cultural Index Project (NEFCA funded)
Philippine Cultural Education Plan (PCEP) Projects (NEFCA funded)
Projects on Advocacy for Peace (NEFCA funded)
Media, Culture, and Values Enhancement Projects (NEFCA funded)
Research and Documentation Grant Projects(NEFCA funded)
Publication Projects (NEFCA funded)
Cultural Events and Festivals Projects (NEFCA funded)
Support for Young Artists Projects (NEFCA funded)
Artistic Creation Projects (NEFCA funded)
International Projects (NEFCA funded)
Mainstreaming Indigenous Knowledge Systems in Local
Governance (IKSG)
Indigenous Knowledge System and Practices (IKSP) Documentation
51

Theme/Sector/
Implementing
Agency
Program/
Project
Category
Program/Project
Amount
Included
in
MTPIP
But Not
Funded
Not
Included
in
MTPIP
But
Funded
V- Anti-Corruption and Good Governance

Sector: Anti-Corruption
BIR
BIR
IN-Cont
IN-Cont
BIR
BOC
IN-Cont
IN-Cont
DBM
DBM
DILG
DILG
PAGC
CESB
CESB
CESB
IN-Cont
LF
IN-Cont
IN-Cont
IN-Cont
IN-Cont
NPAP
NPAP
Ombudsman
Ombudsman
Ombudsman
Ombudsman
Ombudsman
NPAP
NPAP
NPAP
NPAP
NPAP
Ombudsman
NPAP
Ombudsman
NPAP
Ombudsman
Ombudsman
Ombudsman
NPAP
NPAP
NPAP
Ombudsman
Ombudsman
NPAP
NPAP
Internal Audit Program of the BIR

Audit of Cash and Non- Cash accountabilities of revenue
collection officers (RCO)
Implementation of the BIR Personnel Integrity Program
Implementation of the BoC Personnel Integrity Program
Fully operationalize the Government Electronic Procurement System
(E-govt funded)
Budget Improvement Project
Preparation and submission of project status report
Simplification of the LGU Civil Registry System
Anti-Corruption Advocacy
Executive Leadership Programs
Senior Executive Development Program
Values formation seminars for career executive service officials
Reengineering the Administrative Structure, Staffing and Operating
Systems of the OMB
Creation of Surveillance Units (EU)
Design of Mobilization System including Legislation (EU)
Design and Implementation of an OMB Witness Protection Program
More aggressive and effective enforcement of anti-corruption laws
Development and Implementation of Public Sector Integrity
Standards (EU)
Conduct of study and development of conceptual framework and
design of local integrity and accountability mechanisms in urban
governance
Devt and Implementation of Public Sector Integrity Standards
Anti-Corruption Surveys of Citizens and Business (EU)
Review , Modification and Codification of Anti-Corruption Laws
Design and Implementation of Integrity Standards and Review
Mechanisms in the Preparation of Laws
Widening and synchronizing collaboration with partner stakeholders
230,000
2,720,000
1,390,000
20,000,000
3
3
3
54,446,000
25,429,000
400,000
250,000
100,000
4,200,000
4,200,000
500,000
12,978,400
191,400
657,500
1,787,400
1,786,100
3
3
3
3
3
14,539,400
5,802,300
1,693,800
150,000
1,630,800
3
3
3
3
1,182,200
2,490,000
3
3
4,000,000
1,150,000
3
3
3
3
3
3
3
Sector: Bureaucratic Reforms

CHED
DILG
IN-Cont
IN-Cont
DOLE-OSEC
IN-Cont
NSCB
NEDA
DILG
DILG
CSC
IN-Cont
IN-Cont
IN-NPAP
IN-NPAP
IN-NPAP
NEDA
CSC
IN-NPAP
IN-NPAP
DILG
FN-Cont
DILG
DAP
DAP
FN-Cont
FN-NPAP
LF
Upgrade CHEDLINK components

Good Practices for Local Government Facility for Adaptation and
Replication (GO-FAR) (UNDP and MEDCO)
DOLE's Information Systems Plan (ISP) Project
Development of the National Statistical Information Center (NSIC)
Project, Phase III (SIDA)
NEDA Information Network Project Phase III
Local Government Unit Information Portal (EGF)
Public Safety Information Network (PSIN) (EGF)
Portal for e-Governance in the Civil Service Corps (EGF)
Establishment of Video conferencing Facilities for central office and
regional offices
Establishment of Civil Service Academy (JICA)
Formulation of Policy on enjoining LGUs for digital connectivity for
investment promotion
Monitoring policy compliance of LGUs for digital connectivity for
investment promotion
Institutionalize Performance Excellence Awards
Repairs and rehabilitation of DAP's facilities
10,000,000
3
3
10,309,600
26,000,000
74,000,000
133,670,000
90,971,000
3
3
3
3
3
5,000,000
420,000
3
3
250,000
251,000
1,500,000
4,400,000
3
3
3
Sector: Responsive Foreign Policy

PCTC
IN-Cont
PCTC
IN-Cont
PCTC
IN-Cont
PCTC
IN-Cont
DOLE-OWWA
DOLE-POEA
IN-Cont
IN-Cont
52
Upgrading of the capability and utilization of Interpol National

Central Buerau (NCB) Manila for information exchange on
transnational organized crime
Counter-Terrorism Capacity Building Project sponsored by the
Australian Federal Police and AusAID
RP-United Kingdom Counter-Terrorism Crisis Management
Assistance Programme
Philippines Enhanced Border Management Project sponsored by the
European Commission (EC) and International Organization for
Migration (IOM)
Oversees Workers Welfare Program
Electronic linking of the 12 government agencies under the eLink
Project to cut down on OFW documentation time and cost by 50%
800,000
3
3,000,000
8,500,000
3,000,000
79,816,500
3
3
123,569,000

Theme/Sector/
Implementing
Agency
Program/
Project
Category
DOLE-POEA
IN-Cont
DOLE-POEA
DFA
DFA
HUDCC
HUDCC
HUDCC
HUDCC
HUDCC
IN-Cont
IN-Cont
IN-Cont
LF
LF
LF
LF
LF
DOTC
DOTC
LF
LF
DOTC
DOTC
FAP
FAP
Senate
Senate
LF
LF
Senate
LF
Senate
LF
Senate
LF
Senate
LF
Senate
Senate
LF
Senate
Senate
OP
OP
OP
OP
OP
OP
OP
LF
LF
LF
LF
LF
LF
LF
LF
LF
LF
OP
OP
OP
OP
DND
PSC
CHR
CHR
LF
LF
LF
LF
LF
LF
LF
LF
CHR
LCP
MMDA
LF
LF
LF
PRRC
LF
PRRC
FAP
Program/Project
Sustaining the fight against illegal recruitment thru the Presidential

Anti-Illegal Recruitment Task Force
Implementing the performance appraisal system of all licensed
recruitment agencies(Anti-Illegal Recruitment Program) to weed out
those with high incidence of runaways
Full implementation of the MRP/V system
Completion of Construction of Buildings and Structures
National Govt Center Housing Project (HGCHP)
Subdivision Survey of Proclaimed Lands for Socialized Housing
Estate Management of Phil. Centennial Village
BCDA-Bonifacio Housing & Information Technology (BHIT) Zone
National Drive Against Professional Squatting &Squatting Syndicate
Construction, Rehabilitation & Improvement of Transportation and
Communications Infrastructure Projects including Acquisition of
Equipment
DOTC- Executive Mgt. Info. Systems
Metro Manila Strategic Mass Rail Transit Development (Line 2)
Project (Civil works, etc. including Right-of-way) (JBIC)
Follow-On Search and Rescue Vessels Acquisition Project
Operational Requirements or the Congressional Commission on
Agricultural Modernization
Congressional Oversight Committee on Labor and Employment
Operational Requirements of the Joint Congressional Power
Commission
Operational Requirements of the Congressional Oversight
Committee on E-Commerce
Operational Requirements of the Legislative Oversight Committee to
Monitor and Oversee the Implementation of the RP-US Visiting
Forces Agreement
Operational Requirements of the Joint Congressional Oversight
Committee on Clean Air Act
Operational Requirements of the Joint Congressional Oversight
Committee on Ecological Solid Waste Mgt.
Operational Requirements of the Comprehensive oversight
Committee on the Comprehensive Tax Reform Program
Congressional Committee on Absentee Voting Act
Congressional Committee on Anti-Money Laundering
Repair/Lease of Air Transportation Equipment
Mindanao Economic Development Council
North Luzon Growth Commission
Office of the Presidential Adviser on the Peace Process
Office of the Presidential Adviser for Regional Development
Presidential Anti-Graft Commission
Presidential Anti-Organized Crime Commission
Presidential Anti-Organized Crime Commission Proper, including
P500,000,000 for confidential and intelligence expenses to be
released upon approval f the President
Philippine Center on Transnational Crime
Presidential Visiting Forces Agreement Commission
Commission on Information and Communications Technology
Operational requirement of Ad-Hoc Veterans Ofc, Washington, DC
Hosting of South East Asian Games
Establishment of Human Rights Center
IT-Based Monitoring of Human Rights Condition
Development of Indicators of Human Rights Monitoring of Govt
Compliance with International Human Rights Instruments
Rehabilitation of Lung Center of the Phils. (LCP) Building
Pasig River Rehabilitation Project (information and advocacy)
Acquisition/Expropriation of Titled Lands within the 10-meter
Environmental Areas (EPAs) along the Pasig River under the Pasig
Rehabilitation Plan
Pasig River Environment Management and Rehabilitation Project
(ADB)
Amount
Included
in
MTPIP
But Not
Funded
38,693,000
38,693,000
61,500,000
188,000,500
10,435,000
7,491,000
2,700,000
2,500,000
550,000
3
3
3
Not
Included
in
MTPIP
But
Funded
3
3
3
3
3
818,077,000
5,000,000
3
3
303,900,000
649,999,000
3
3
21,149,000
23,179,000
3
3
25,000,000
1,000,000
7,000,000
4,250,000
4,250,000
10,000,000
10,000,000
5,000,000
300,000,000
25,579,000
15,034,000
99,025,000
64,429,000
18,521,000
580,369,000
3
3
3
3
3
3
3
3
3
3
545,654,000
34,715,000
2,000,000
1,040,549,000
4,657,000
30,000,000
1,417,000
200,000
3
3
3
3
3
3
3
3
200,000
60,000,000
1,024,000
3
3
3
11,648,000
427,723,000
53

Teams Rejoinder
As cited in the draft paper, it is

difficult to assess whether the funded
items in the GAA are the same
programs needed to achieve the
objectives of the plan. So it would be
inappropriate to cite failure of the
government to attain the objectives of
the MTPDP
The team used the SER as basis for

evaluating
the
attainment
of
development
objectives
under
MTPDP 2001-2004.
As clearly illustrated in the report,
the targets set to be accomplished
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
54
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.

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:
Program/Project/Activity
Financial Assistance
Education
Purchase of IT
Equipment
Scholarship
Health
- Indigent patients
of Regional /
Specialty
Hospitals and
Medical Centers
under DOH
- Indigent patients
at the hospital
devolved to LGUs
and RHUs
- Insurance Premium
Social Welfare
- CIDSS
- Small and medium
enterprises/
livelihood
Implementing
Agencies
SUCS, TESDA,
CHED, National
Commission on
Indigenous People
DepEd, TESDA,
CHED, SUCs,
LGUs
TESDA, CHED,
SUCs, LGUs
Period of
Implementation
% of Budget Allocation
MTPDP
BESF
Excess /
(Deficiency)
31.11
29.57
(1.54)
3.44
3.21
(0.23)
6.54
7.30
0.76
2001-2004
2001-2005
2005
DOH
2001-2005
LGUs and RHUs
2005
Philhealth
2005
DSWD
DSWD
2001-2005
2005
55

Program/Project/Activity
- Social protecttion and promotion of rights and

welfare of the
poor and the
disadvantaged
- Rolling/sari-sari
stores (subject to
NFA guidelines)
Agriculture and
Fisheries
Modernization
(AFMA)
(no specific
program/project)
Livelihood and
Employment
Generation
Livelihood Program
Emergency
Employment
Science Technology
and Information/
Communications
Equipment
Programs falling under
the following sector:
Communications,
roads and other
transportation
Water resources
development and
flood control
Education, culture
and manpower
development
Agriculture,
agrarian reform and
natural resources
Public order and
safety
Health
Power and energy
Training and
communication
development
Implementing
Agencies
Period of
Implementation
% of Budget Allocation
MTPDP
BESF
Excess /
(Deficiency)
DSWD
2001-2004
NFA
2001-2004
DA and
corporations
implementing
AFMA
2001-2004
9.26
8.90
(0.36)
DILG
2002-2004
8.73
9.28
0.55
TLRC,
NCIP, OMA DTI,
DA, CDA
DOLE
2002-2005
2002-2004
2005
2001-2004
6.54
7.30
0.76
DOST, DOTC
2002-2004
31.11
29.57
(1.54)
14.14
12.91
(1.23)
1.28
1.53
0.25
31.11
29.57
(1.54)
9.26
8.90
(0.36)
8.73
9.28
0.55
3.44
0.28
1.12
3.21
0.41
0.54
(0.23)
0.13
0.58
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
Year
PDAF
Allocation
GAA
% Allocation
2001
2002
2003
2004
2005
Total
3,330,000
5,677,500
8,327,000
8,327,000
6,100,000
31,761,500
665,094,141
575,123,728
609,614,730
609,614,730
597,663,400
3,057,110,729
0.50%
0.99%
1.36%
1.36%
1.02%
1.04%
Teams Rejoinder
The
Presidents
Budget
proposal
incorporated a lower allocation for PDAF
but this was increased by Congress.
In such case, the DBM should ensure that

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

AGENCIES
Other Executive Offices
Asset Privatization Trust
Cagayan Economic Zone
Authority
Cultural Center of the
Philippines
Devt. Academy of the
Philippines
Home Insurance & Guaranty
Corp.
National Housing Authority
Zamboanga. City Special
Economic Zone Authority
Southern Phils. Dev't.
Authority
Subic Bay Metropolitan
Authority
Technology and Livelihood
Resource Center
Budgetary Support to Government Corporation Others
Total
2005
2004
( In Thousand Pesos)
2003
2002
2001
Total
27,600
27,600
90,000
117,000
117,000
130,000
153,374
607,374
120,000
142,000
142,000
100,000
263,000
767,000
70,000
70,000
1,000,000
460,000
460,000
500,000
232,500
2,457,240
232,500
4,877,240
90,000
117,000
117,000
130,000
141,985
595,985
5,000
5,000
183,000
182,746
375,746
25,000
25,000
36,000
36,000
36,108
10,191,607
183,418
27,603,277
4,310
4,685,670
26,500
3,910,000
26,500
3,910,000
90,000
4,906,000
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
Department of Agriculture
National Dairy Authority
Subsidy from NG
National Tobacco Administration
Subsidy from NG
Philippine Coconut Authority
Subsidy from NG
Philippine Rice Research Institute
Subsidy from NG
Sugar Regulatory Administration
Subsidy from NG
Department of Energy
National Electrification Adm.
Subsidy from NG
Department of Health
Lung Center of the Philippines
Subsidy from NG
National Kidney Transplant
Institute
Subsidy from NG
2004
2003
2002
2001
49,475
52,200
147,638
109,682
195,960
216,200
200,456
240,000
122,850
40,000
59,317
52,200
292,108
100,018
207,969
205,630
393,714
362,768
74,078
45,000
57,545
58,000
197,420
168,447
231,616
190,000
233,051
117,778
55,035
50,000
59,154
41,727
226,987
185,594
190,693
154,041
142,943
143,896
106,137
102,491
480,693
439,668
6,422,932
424,550
1,368,171
786,773
1,037,456
284,585
145,693
186,367
135,457
185,500
141,716
205,000
153,529
141,724
124,745
184,000
163,675
188,067
118,301
180,000
86,965
183,442
59

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

losses incurred by these corporations.
Due to the nature of the services
being made available by some
losing corporations, specially in
the health and agriculture sectors,
the government extends budgetary
support to ensure that basic
services/needs of the people are
provided at reasonable costs
60
Teams Rejoinder
An assessment and evaluation of
physical and financial accomplishments of losing corporations
should be undertaken to ensure
that losses were incurred as a
result of providing basic services
at the least cost to target
beneficiaries.
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.
63
Teams Rejoinder
There is an ongoing technical

assistance for the review of the
system at the DBM
We are glad that an ongoing review

is being undertaken.
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 Presidents 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 governments estimate of its income and expenditures.
65
The growth in budget deficit may be attributed to the governments 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
Expected Revenue- NG
Proposed Budget- Current
Operating Expenditures
Personal Services (PS)
Maintenance and Other
Operating Expenses (MOOE)
Sub-total
Less: FAP-PS
MOOE
w/o details
Total Current Operating
Expenditures
Surplus/(Deficit)
2001
2002
2003
2004
2005
607,200
624,307
640,650
671,194
758,473
257,034
374,838
264,389
426,721
275,577
449,471
286,420
508,285
289,250
546,277
631,872
(746)
(6,795)
-
691,110
(676)
(6,070)
-
725,048
(412)
(5,694)
(1,607)
794,705
(202)
(4,902)
(888)
835,527
(133)
(3,948)
(1,337)
624,331
(17,131)
684,364
(60,057)
717,335
(76,685)
788,713
(117,519)
830,109
(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:
A m oun t (In M illion Pesos)
Annual Increase in Revenue and Current Operating

Expenditures
100,000
80,000
60,000
Ann ual Increase in

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
Amount (In Million Pesos)
1,000,000
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 NEDAs 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 Presidents 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 governments 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:
Sector
Sectoral Allocation ( In Percentage To Total Budget )

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

and Natural Resources
7.20
8.78
10.28
10.79
10.79
10.79
9.77
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
Sector
Sectoral Allocation ( In Percentage To Total Budget )

2001
Power and Energy
2002
2003
2004
2005
Average
2001-06
Rank
2006
0.33
0.28
0.26
0.26
0.26
0.26
0.27
16
1.06
1.55
1.25
1.25
1.25
1.25
1.27
11
13.64
12.17
15.16
15.61
15.61
15.61
14.63
2.11
1.64
0.79
0.58
0.58
0.58
1.05
12
25.32
25.37
28.69
29.44
29.44
29.44
27.95
31.20
29.74
31.25
32.26
32.26
32.26
31.50
3.50
3.33
3.60
3.31
3.31
3.31
3.40
7.10
6.96
5.82
6.27
6.27
6.27
6.45
0.64
0.51
1.57
1.74
1.74
1.74
1.32
10
Land Distribution
1.07
1.04
1.66
1.72
1.72
1.72
1.49
Other Social Services
0.70
0.44
0.80
0.80
0.80
0.80
0.72
13
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
General Administration
9.81
12.97
11.80
11.28
11.28
11.28
7.86
Public Order and Safety
12.25
9.05
7.48
6.13
6.13
6.13
11.40
Total General Public Services
22.06
22.02
19.28
17.41
17.41
17.41
19.27
100
100
100
100
100
100
100
Water Resources
Development & Flood Control
Communication, Roads &
Other Transport
Other Economic Services
Total Economic Services
Education, Culture &
Manpower Development
Health
Social Security, Welfare &
Employment
Housing and Community
Development
Total Social Services
Total Expenditures
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 MTPDPs 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
E
A
R
Economic Services
Social Services
Excess/
(Defi- MTPDP
ciency)
Defense
Excess/
(Defi- MTPDP
ciency)
BESF
General Public Services
BESF
Excess/
(Deficiency)
MTPDP
BESF
Excess/
(Deficiency)
MTPDP
BESF
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
42.03
42.03
10.58
10.58
22.02
22.02
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:
Sector
Economic Services
Agriculture, Agrarian Reform
and Natural Resources
Tourism
Power and Energy
Other Economic Services
Social Services
Housing and Community
Development
Land Distribution
Other Social Services
Defense
General Public Services
Public Order and Safety
Other General Public Services
MTPDP
BESF
Increase/
(Decrease)
%age
%age
%age
MTPDP
BESF
9.26
8.90
(0.36)
0.28
0.28
1.28
0.29
0.41
1.65
0.01
0.13
0.37
13
13
10
17
16
9
1.12
0.54
(0.58)
11
15
1.37
0.68
8.35
0.94
0.64
9.37
(0.43)
(0.04)
1.02
9
13
6
11
14
5
8.73
0.00
9.28
0.65
0.55
0.65
5
-
4
13
Rank
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 Presidents 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/
GFIs
PSP/LGU
Others
4,682.1
140,178.5
73,165.9
271.1
1,615.0
341,334.6
7,266.1
284.0
6,314.4
575,111.7
75,187.4
117,840.2
26,938.2
166,117.6
0
182,179.4
0
0
0
568,262.8
0
80,809.0
94,456.0
98,168.7
0
44,184.0
0
0
0
317,617.7
2,901.8
18,257.8
3,954.0
7.0
41.6
3,979.9
1,128.8
0
1,500
31,770.9
82,771.3
357,085.5
198,514.1
264,564.4
1,656.6
571,677.9
8,394.9
284
7,814.4
1,492,763.1
NG
Trade & Investment
Agribusiness
Environment & Natural Resources
Housing Construction
Tourism
Infrastructure
Fiscal Strength
Financial
Labor
Energy Independence & Power
Sector Reforms
Responding to Basic Needs of the Poor
Automated Elections
Peace Process
Healing the Wounds of EDSA
Peace & Order
Rule of Law
Education
Science & Technology
Culture
Anti-Corruption
Bureaucratic Reforms
Defense Reforms
Responsive Foreign Policy
Constitutional Reforms
Grand Total
Total
3,525.4
91,691.8
147,737.1
19,522.1
262,476.4
142,421.0
14,787.0
7,008.3
1,100
0
0
12,364.4
0
0
5,388.4
0
4,511.9
161,273.8
14,787
11,520.2
26,754.5
1.5
190,972.3
118,131.5
6,231.8
1,576.7
125,940.0
1,010.8
3,599.0
0
0
1,100
56.0
512.0
15.0
583
0
0
2,023.6
6,393.8
13,027.2
908,576.6
0
0
0
661,637.6
0
0
26,754.5
0
0.3
1.8
12,364.4
9,900.6
214,337.3
693.0
3,566.8
122,447.3
200.4
2,220.6
9,164.8
0
99.7
1,691.4
893.4
5,887.1
133,303.5
0
1,746.6
2,757.4
0
12,939.3
16,538.3
(No MTPIP estimates for security reasons)
0
0
2,023.6
0
0
6,393.8
0
14,685.9
27,713.1
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 Administrations 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/
GFIs
NG
Six to ten million jobs
Education for all
Balance the national budget
PSP/
LGU
Others
Total
188.5
329.9
56.7
15.8
591.9
42.6
0.7
1.6
44.9
7.6
1.1
8.7
279.1
62.8
3.8
345.9
9.0
107.3
242.2
19.7
378.2
62.2
28.2
44.2
134.6
91.2
91.2
Automation of the electoral process
0.1
0.1
Just completion of the peace process

Closure of wounds caused
by division due to EDSA 1, 2 and 3
7.0
4.5
11.5
596.1
619.4
343.8
46.5
1,607.0
Develop transportation networks and digital infra

Provision of power and water to all barangays
Decongestion of Metro Manila
Development of Clark & Subic as logistics centers in Asia
The team, however, noted that the approved appropriations for CY 2005 did not
support the MTPIP as illustrated below:
Sector
( In Percentage To Total Budget )

MTPIP
Agriculture, Agrarian Reform and Natural Resources

Trade & Industry
BESF
Difference
23.48
7.33
16.15
.52
.68
0.16
Tourism
.17
.32
0.15
Power and Energy
.39
.40
.01
13.86
29.72
15.86
Education, Culture & Manpower Development
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
Teams Rejoinder
UPDATES ON THE PHILIPPINES PROGRESS ON

THE STRUCTURAL REFORM AGENDA
We appreciate managements
action
towards
improving
expenditure management in
conformity with Section 78 of
the General Provisions of the
National Expenditure Program
which provides that:
1. IMPROVE EXPENDITURE MANAGEMENT
a. The Organizational Performance Indicator Framework (OPIF) is being implemented as a mechanism

to enable agencies to focus on strategic programs
and projects and establish the linkage of their
programs and projects with their major final
outputs (MFOs) and the sectorsubsector and/or
national objectives. A series of workshops was
conducted in 2004 to formulate the 2005 OPIFbased budgets of 11 departments enabling these
departments to finalize their MFOs, align their
programs and projects and formulate outcomebased performance indicators for these MFOs.
UPDATE: The OPIF as a component of the Public
Expenditure Management Reform is designed to
direct resources towards results and account for
agency and eventually, sectoral performance. Its
three basic elements are: strategic allocation of
resources, development of performance systems
(formulation of major final outputs, performance
indicators, and performance measures and targets)
and conduct of agency performance review.
A series of workshops were conducted in 2004 and
2005 covering 13 major departments and two
agencies. Major outputs of the workshops included
formulation and harmonization of MFOs,
development of a logical framework/logic model
for agency mandates and objectives (i.e., lining of
MFOs to organizational outcome, sector goals,
societal goals) and identification of performance
indicators. An initial application of the OPIF was
made for these 15 institutions in support of the
2006 budget. The applications shall be expanded to
cover the other major departments and agencies in
the 2007 budget preparation.
b. The mid-year Agency Performance Review (APR)
for FY 2004 was conducted on October 11-22,
2004. The results of the APR will determine the
overall performance of the national government in
terms of fund utilization, revenue generation, and
output accomplishments. The results will be used
as a basis for future resource allocation decisions.
Sec.
78.
Results-based
Budgeting. Within the context
of the Public Management
Expenditure Framework, all
departments, bureaus, offices
and
agencies,
including
GOCCs, shall identify their
Major Final Outputs (MFOs),
or
specific
outputs
and
outcomes to be produced by
their programs and services
which are aligned with strategic
goals of the government, and
shall harmonize them with
those identified by the DBM
and NEDA. National Government agencies who have
identified and harmonized their
MFOs, and who have restructured their programs to be more
consistent with their MFOs, are
hereby authorized to restructure
their budgets, and realign their
programs,
projects
and
activities as may be necessary,
subject to the approval of DBM.
All performance indicators
and corresponding targets shall
then be set by national government agencies and GOCCs in
accordance with the Organization Performance Indicator
Framework, and finalized in
coordination with DBM, NEDA
and COA.
75
i.
Starting March 2004, agencies with Maintenance and Other Operating Expenditures
(MOOE) budgets of P50 million and below
have been authorized to undertake the
following without need of DBM approval:
1. staffing modifications
2. use of savings; and
ii. Realignment of savings from personal

services to MOOE capital outlays (CO) and
MOOE to CO only to augment an existing
item, project, activity or purpose in the
agencys budget.
iii These changes are intended to give these
agencies more budget flexibility. For
monitoring purposes, agencies have been
required to submit quarterly reports of
budgetary actions taken.
UPDATE: The APR was undertaken in 2005.
Even as not all agencies could be fully reviewed
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 agencys utilization of
funds through their reported physical accomplishments. 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 nonfinalization 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 Managements (DBM) central offices
starting December 15, 2004. The system
automates the budget execution phase of the
governments budget process, i.e., the processing
of budget releases, transmittal to agencies, and
preparation of accountability reports.
76
Teams Rejoinder
With the agreed upon
performance indicators and
corresponding targets, national
government
agencies
and
GOCCs shall conduct and
implement a monitoring and
evaluation system, including
data collection and reporting
system, to monitor performance
and improve the results of
government programs. For this
purpose, the agencies concerned,
in coordination with the DBM,
shall be responsible for the
development and installation of
an integrated program and
project monitoring evaluation
system, which shall report
program results regularly and
publicly.
Teams Rejoinder
UPDATE: As of December 30, 2005, all operations

bureaus at the DBM are using the Web-enabled eBudget 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 acquisition 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 Procurement Reform Act (GPRA), the following measures
are being undertaken:
i.
Provision of training for different agencies to

fully disseminate procurement reforms embodied 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 opportunities 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 Catalogue Enhancement of the Pilot G-EPS is ongoing, 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 Procurement 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
Teams Rejoinder
Teams Rejoinder
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 principles 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 Reengineering Bill, the DBM together with the
Civil Service Commission (CSC) is pursuing a
rationalization program that aims to have an
immediate impact on the governments
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.
2.
can either be scaled down, phased out

or abolished; or
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
programs 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
Teams Rejoinder
Teams Rejoinder
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 opportunities 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:
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 years 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.
Limit the proposed current operating expenditures to the level of the expected
national government revenue to reduce budget deficits; and
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

Effectiveness of The Budget Allocation of The Government by DBM

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Management Services

Report No. 2005 05

Effectiveness of the Budget

Republic of the Philippines

criteria for fund allocation;

The study revealed that existing budget allocation system needs

Very truly yours,

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

Republic of the Philippines

OFFICE OF THE ASST. COMMISSIONER

The Honorable Chairman

Report on the special study on budget allocation

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

The Budget Allocation Process

Results of the Study

Chapter 1 Adequate, Well-defined,

Chapter 3 Compliance with Existing

Chapter 4 Budget Linkages with the MTPDP

The national government budget is a vital

Criteria for fund allocation;

Adequate, well-defined and appropriate criteria for fund allocation;

RATIONALE FOR THE STUDY

SCOPE AND METHODOLOGY

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

Interviewed concerned personnel of agencies involved in annual budget

Reviewed and evaluated the roles and responsibilities of agencies involved in

Assessed the monitoring mechanism in the implementation of programs/projects

Issued queries on matters needing clarification.

Ceiling for capital outlay is based on prior years appropriation or National

Internal Revenue Allotment (IRA) representing 16.81%

Priority Development Assistance Fund (PDAF) ranging

Budgetary Support to Government Corporations ranging

Low priority projects.

The national government continuously provides budgetary support to losing

The study also revealed several other deficiencies such as:

Fasttrack the establishment of appropriate and relevant criteria for allocating

reassessing the practice of prescribing ceilings for capital outlay based

setting expenditure levels consistent with the Deficit Reduction

the possibility of adjusting allocations for IRA, PDAF, budgetary

the irrational practice of providing budgetary support to losing

Coordinate with the Government Accounting and Financial Management

The Budget Allocation Process

THE BUDGET ALLOCATION PROCESS

Efficiency and effectiveness

THE BUDGET ALLOCATION PROCESS

GOVERNING RULES AND REGULATIONS

Laws, Rules and

No money shall be paid by the Treasury except in pursuance of an

Sec. 22, Article VII

The President shall submit to Congress within 30 days from the

Sec. 5, Article XIV

Revised Administrative Code

Section 12, Chapter 3

THE BUDGET ALLOCATION PROCESS

Section 14, Chapter 3

Budget Estimates Each head of department, office or agency of the

Section 16, Chapter 3

Budget Evaluation Agency proposals shall be reviewed on the basis

Section 26, Chapter 4

Automatic Appropriations All expenditures for (1) personnel

Section 51, Chapter 6

Evaluation of Agency Performance The President, through the