DBM issues rules to implement delayed 2019 national budget

MANILA, Philippines — After over four months of delay, the government is now spending the P3.7-trillion 2019 national budget as the Department of Budget and Management (DBM) now issued the implementing guidelines for the release of funds.

National Budget Circular No. 577 issued by DBM Officer-in-Charge Janet B. Abuel on May 2 contained the procedural guidelines on how funds released and utilized under the reenacted 2018 budget during the first four and a half months will be treated now that the fiscal year 2019 General Appropriations Act (GAA) under Republic Act (RA) No. 11260 had taken effect.

After squabbles among legislators for “pork” funds delayed the approval of the 2019 GAA, President Rodrigo Duterte finally signed on April 15 the national spending measure for this year – even as he vetoed P95.3 billion in projects that were not included in his administration’s priorities.

Under the circular, DBM said that “all unutilized allotments of agencies as of April 30 chargeable against the fiscal year 2018 GAA (RA 10964) as reenacted, shall no longer be available for obligation.”

DBM earlier reported that it released only P1.323 trillion from the reenacted budget between January and April, less than half of the P3.265 trillion in allotment releases during the first four months of last year.

As for all appropriations under the 2019 budget and other programmed automatic appropriations, DBM said these “shall be valid for release and obligation for the purpose specified until Dec. 31, 2019.”

“This validity shall be subject to the pertinent special and general provisions of said GAA, the President’s veto message on the implementation of cash budgeting, as well as other pertinent laws,” it added.

This, even as the state planning agency National Economic and Development Authority (Neda) had asked DBM to extend the validity of the 2019 budget as agencies were unable to spend programmed appropriations on time.

Socioeconomic Planning Secretary Ernesto M. Pernia had said: “While we support the implementation of the cash-based budget system, the supervening circumstances – such as the delayed budget and the election season – warrant an urgent review of the cash-based budgeting rules.”

“If the payment period and budget validity are not extended, government agencies may decide to forgo implementing new programs and projects that are expected to take longer than seven months to complete, inclusive of the procurement process,” he also said.

Pernia had recently reported that gross domestic product (GDP) growth slowed to a four-year low of 5.6 percent during the first quarter mainly due to government underspending on public goods and services as a result of the budget impasse.

Neda had computed a faster GDP expansion of 6.6 percent had the 2019 budget been implemented on time.

DBM said the allotment release program that will cover government operations this year will be capped at P3.662 trillion, which included agencies’ respective budgets under the 2019 national budget as well as automatic appropriations covering retirement and life insurance premiums.

Releases from unprogrammed appropriations and other automatic appropriations, meanwhile, will still be accommodated within agencies’ allotment release programs but offset against the earlier identified priority programs and projects under their respective budgets.

With respect to releases and obligation made from January to April under the reenacted budget, DBM said these “shall not be considered as ‘add-ons’ to the fiscal year 2019 expenditure program.”

“These include special allotment release orders (Saros) issued from Jan. 3 to April 30, 2019 for agency specific budgets charged against RA 10964 as reenacted,” DBM said.

To recall, DBM had said the following items cannot be covered by obligational authority, hence had been issued Saro based on agencies’ special budget request: centrally-managed items chargeable against the reenacted budget; charges against pension and gratuity fund; as well as charges against other special purpose funds such as budgetary support to government corporations, miscellaneous personnel benefits fund, and contingent fund, among others.

According to DBM, “the consolidated list of obligations incurred (actual obligations for Jan. 1 to April 30, 2019) shall serve as the obligational authority covering the overdraft in allotments prior to the effectivity of the fiscal year 2019 GAA.”

“Said overdraft in allotments shall be considered as advance releases to be offset against the corresponding appropriations under the fiscal year 2019 GAA,” it added.

As such, “the balance of available programmed appropriations, as authorized under the fiscal year 2019 GAA, for the period May 1 to Dec. 31, 2019, is determined by deducting from the agency allotment release program the amounts obligated for regular operating requirements for the period Jan. 3 to April 30, 2019,” DBM explained.

Included in the net program chargeable against the 2019 budget were obligations to be incurred by agencies starting May 1; automatic appropriations under the fiscal year 2019 Budget of Expenditures and Sources of Financing (BESF); unprogrammed appropriations under the 2019 GAA, when applicable; as well as unreleased appropriations for maintenance and other operating expenses (MOOE) and capital outlays (CO) under the reenacted budget through Saros, which were still available for release and obligation until Dec. 31 under Congress Joint Resolution No. 3 issued on December 28, 2018.

In this regard, Saros issued under the reenacted budget will no longer be valid for obligation beginning May 1.

When agencies’ appropriations are found deficient, DBM said agencies can augment funds from their savings – defined as “portions or balances of any released appropriations which have not been obligated due to completion, final discontinuance, or abandonment of a program, activity or project for which the appropriation is authorized, [as well as] implementation of measures resulting in improved systems and efficiencies that enabled an agency to meet and deliver the required or planned targets, programs and services approved in the 2019 GAA at a lesser cost.”

“In the use of savings, priority shall be given to the payment of compensation, yearend bonus and cash gift, retirement gratuity, terminal leave benefits, old-age pension of veterans, and other personnel benefits authorized by law and in the fiscal year 2019 GAA, as well as the implementation of priority project or activity covered in the fiscal year 2019 GAA,” DBM said.