By A. L. Balinbin and Beatrice M. Laforga, September 13 2019; Business World

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MALACAÑANG has moved to ensure that government offices spend within the fiscal year what they are given under the national budget, by formally adopting the cash budgeting system (CBS) starting this year through Executive Order No. 91.

Signed by President Rodrigo R. Duterte on Sept. 9 and distributed to journalists on Thursday, EO 91 noted that “significant gaps” between what the annual budget provides and what state offices actually spend “translate to billions of pesos in delayed and foregone services, which should have been delivered to the general public.”

Hence, it added, the need to set “deadlines for obligation of funds and execution of projects during the fiscal year, in order to speed up the implementation of programs and to promptly deliver goods and services…”

“All authorized appropriations shall be available only until the end of each fiscal year,” the EO read, with procurement to be implemented, as well as goods and services corresponding to such obligations “delivered or rendered, inspected and accepted by the end of each fiscal year.”

Payments for such obligations will have a grace period of three months after the end of each fiscal year “unless another period has been determined by the Department of Budget and Management (DBM), upon consultation with relevant agencies.”

“Any unreleased appropriations and unobligated allotments at the end of the fiscal year, as well as unpaid obligations and undisbursed funds at the end of the extended payment period shall revert to the National Treasury and shall not thereafter be available for expenditure, except by subsequent legislative enactment,” the order read further.

Projects whose procurement requirements run for more than a year will require a multi-year contractual authority to be issued by the DBM.

The same EO formalizes an early procurement scheme by authorizing state offices “to undertake procurement activities, short of award” that “cover goods to be delivered, infrastructure projects to be implemented and/or consulting services to be rendered in the following fiscal year, pending approval of the corresponding general appropriations act.”

The government of President Rodrigo R. Duterte has moved since it assumed office in mid-2016 to spur expenditures after years of chronic underspending that has capped overall economic growth.

But a shift to CBS late last year for the 2019 national budget led to a tiff between the DBM and the House of Representatives, since the new scheme slightly reduced appropriations from 2018. Then Budget Secretary Benjamin E. Diokno, now central bank chief, had explained that the new system bases appropriations on state offices’ track record in spending. That, plus subsequent accusations by the House and the Senate that the other had illegally inserted funds in the 2019 budget resulted in late enactment of the spending plan.

The government operated on a reenacted 2018 budget from January to April 15, when Mr. Duterte signed this year’s national budget into law but vetoed P95.3 billion in funds that were not in sync with state priorities, slashing the total to P3.662 trillion.

Delayed enactment has been blamed for the muted 5.5% economic growth last semester, which compared to an already-reduced official 6-7% full-year target.

The DBM on Thursday said it had already released P3.345 trillion, or 91.4%, of this year’s national budget as of Aug. 31.

“It follows the normal pattern we have been seeing… where at least 85% of department budgets are considered released during the first day of budget effectivity,” DBM Undersecretary Laura B. Pascua said in an e-mail when sought for comment. “On the average, the NG (national government) obligates about 95% of the budget. We end allotment releases in November.”

Allotment releases to line departments totaled some P1.971 trillion, while releases from special purpose funds (SPFs) amounted to about P244.642 billion. SPFs are budget allocations for support of state firms, local governments, the Miscellaneous Personnel Benefits Fund and Contingent Fund, among others.

Allotment releases for automatic appropriations — like local governments’ annual share from national tax collections, interest payments for government debt and subsidies to cover duties and taxes on state transactions — totaled P1.069 trillion.

The DBM also released P29.072 billion for unprogrammed appropriations, consisting of authorized additional expenditures for priority programs and projects. — A. L. Balinbin and Beatrice M. Laforga