Open Budget Index and Budget Reform Bill (PH0051)

What is the public problem that the commitment will address?: Significant gains have been made in the Philippines with regard to fiscal openness but there are still gaps on transparency, accountability, and citizen engagement in the budget process which should be addressed. In order to fortify the budget process, there has always been a need to introduce budget reforms that will enforce greater accountability in public financial management (PFM).; What is the commitment?: This commitment aims to reform the budget process by enforcing greater accountability in public financial management, strengthening Congress’ power of the purse, instituting an integrated PFM system, and increasing budget transparency and participation. This will be done by improving the Philippines’ performance in the Open Budget Survey and shepherding the passage of the Budget Reform Bill (BRB) in Congress. The BRB aims to strengthen Congress’ power of the purse by enforcing the Constitutional policy that all expenditures must be approved by Congress; and by enabling Congress to review and approve proposed appropriations based clearly defined performance information and regular reports on actual performance. The Bill also secures the irreversibility of PFM reforms so far established by COA, DBM, DOF, NEDA.; How will the commitment contribute to solve the public problem?: The increase in the country’s OBS performance will address identified fiscal openness gaps with concrete actions from government. While the establishment of a legal framework for the Public Financial Management will strengthen accountability and integrity in the use of public resources. It will: (1) enforce transparency, fiscal responsibility, resultsorientation, efficiency & effectiveness thru an integrated PFM system; (2) enforce power of purse of Congress to authorize appropriations, & responsibility of all agencies to propose, execute and deliver results committed in the Budget; (3) promote citizen empowerment via fiscal transparency & participation; (4) integrate planning, budgeting, and performance management & ensure ample safeguards in managing public finances through the creation of an Office of Comptroller General; (5) Enhance transparency & participation through the reporting to, and monitoring by Congress, and the public.; Why is this commitment relevant to OGP values?: Transparency The bill seeks to provide mechanism for better people’s access to Public Financial Information through publication of a Calendar of Disclosures. Likewise, it shall institutionalize the publication of citizen-friendly summaries of the following: Statement of Fiscal Policy, Proposed national Budget, General Appropriations Law, and the Annual Fiscal Report Civic participation The bill also seeks to increase People’s Participation in the Budget Process by establishing and implementing suitable participatory budget mechanisms to facilitate the open, inclusive, and meaningful engagement of citizens throughout the budget process—from budget preparation, to legislation, to execution, and to accountability and audit. Such participatory mechanisms may include consultations and partnerships with civil society organizations (CSOs), academics and experts, and other individual and organized stakeholders throughout the annual budget process. Public Accountability The Bill shall ensure Financial Management and Internal Control by establishing the Office of the Comptroller General to oversee the operation of an integrated internal control framework across Government Technology and innovation for openness and accountability All documents and reports required to be published shall automatically be made available electronically in a government website. Current and historical data on government revenues, expenditures, and borrowings, shall be made more comprehensive, available electronically, in open data format, on a government website. The development of an Integrated Financial Management Information System will automate the financial transactions of all government agencies and assure the timely availability of accurate reports on these to the President, Congress, and the public.; Additional information: This commitment is in line with Chapter 5 of the Philippine Development Plan 2017-2022 on Ensuring People-Centered, Clean, and Efficient Governance.

7. Increase public integrity and more effectively manage public resources through budget reforms

Commitment text from action plan:

“This commitment aims to reform the budget process by enforcing greater accountability in public financial management, strengthening Congress’ power of the purse, instituting an integrated PFM system, and increasing budget transparency and participation. This will be done through the improvement of the Philippines’ performance in the Open Budget Survey and the passage of the Budget Reform Bill. The Budget reform bill aims to strengthen Congress’ power of the purse by enforcing the Constitutional policy that all expenditures must be approved by Congress; and to enable Congress to review and approve proposed appropriations against clearly defined performance information and actual reported performance. The bill also secures the irreversibility of PFM reforms so far established by COA, DBM, DOF, NEDA.”

Milestones:

1. "Increase OBI score from 64 to 67 by 2019 leading to the target OBI score of 71 by 2022 - Timely publication of 7 essential budget documents
2. Create an interagency Fiscal Openness Working Group
3. Submission of the Budget Reform Bill to HoR and Senate
4. Passage of the Budget Reform Bill both from the House of Representatives and the Senate
5. Conduct 2 stakeholder consultations for the drafting of the IRR, especially on the citizen engagement provisions of the Act, and Transition Plan
6. Budget Reform Bill IRR and Transition Plan drafted
7. Conduct of two (2) public consultations among CSOs in relation to various provisions of the bill especially on section 74 and 77"

Editorial Note: For the complete text of this commitment, please see Philippines’ action plan at https://www.opengovpartnership.org/wp-content/uploads/2018/06/Philippines_-Action-Plan_2017-2019_updated.pdf

Context and Objectives (Commitment Design)

The aim of this commitment was to strengthen transparency and accountability in the budget process. Specifically, the commitment aimed to achieve this by improving the country’s standing in the Open Budget Survey (OBS), through timely releases of key budget documents ^[101] and by passing a Budget Reform bill that would strengthen congressional “power of the purse.”

While there have been numerous budget reforms in recent years, ^[102] several problems persist. These include ensuring that reforms are sustainable over time and concerns around low budget credibility, reliability, accounting, and reporting. ^[103] Budget reforms are the key to sustaining growth and ensuring a responsive government. Another core challenge is the weak legislature in comparison with the executive. ^[104] Congress’s power of the purse is sometimes overridden by the executive through the latter’s control over the release of the budget. ^[105]

The budget reform envisioned by this commitment would have ensured that all expenditures are “approved by Congress…” and sought “to enable Congress to review and approve proposed appropriations against clearly defined performance information and actual reported performance.”

The milestones have some specific measures that would allow verification. For instance, to improve the country’s OBS’ standing, the commitment specifically targeted timely releases of eight budget documents assessed by the OBS. ^[106] For the goal of passing the Budget Reform bill, the commitment identified milestones in the crucial stages in the law-making process, including public consultations on specific provisions (Sections 74 and 77), making this commitment relevant to access to information and civic participation.

If fully implemented as written, this commitment was expected to have a transformative potential impact on increasing public access to information and civic participation. It could change business as usual on the transparency of the budget process with the potential to improve accountability and prevent abuse of the executive over the budget. If passed and successfully implemented, the Budget Reform bill’s mandate to strengthen the power of the purse of Congress was expected to enhance the legislature’s oversight to approve appropriations, enforce a public finance management system, and hold the government to account for results committed in the budget. According to the Open Budget Survey, while the legislature enforces adequate oversight during the planning stage of the budget cycle, the legislature is limited during budget implementation.

Commitment Implementation

The commitment had two major components: a) to improve Philippines’ position in the Open Budget Survey (for which an important amount of new information would be released to the public) and b) to approve the Budget Reform bill in Philippines Congress after participatory consultations.

This commitment’s implementation was substantial at the end of the implementation period. In terms of milestone 1, Philippines exceeded its transparency target score in the Open Budget Survey (OBS), rising from 67/100 in 2017 to 76/100 in 2019. Among the improvements, all main public documents assessed by the OBS were made available to the public. The OBS recognized Philippines’ advances, particularly “publishing the Mid-Year Review online in a timely manner” and “increasing the information provided in the Enacted Budget and adding an executive summary to the Audit Report.” ^[107]

However, the proposed Budget Reform bill had not been approved by Congress by the end of the implementation period. Though consultations were held with key CSO groups and HOR passed the bill, it did not pass the Senate. ^[108] This bill was blocked due to some legislators’ opposition to shifting from the obligation-based budgeting system to a new cash-based budgeting system. ^[109] Through a 2019 executive order, the government commenced a transition period to a cash-based system despite the absence of the bill. ^[110] In regard to civic participation, the government points out that “76 consultations have been conducted from 2017 to November 2018 on the new budgeting and disbursement procedures to input in the IRR (Implementing Rules and Regulations).” ^[111] However, the government did not provide details about the nature or scope of these consultations, which makes it difficult for the IRM to assess the quality of CSO involvement throughout the process. Additionally, in regard to milestone 7, the two public consultations among CSOs in relation to the bill were not held.

This commitment marginally improved access to budget information. Philippines’ improved position in the OBS ranking to a score of 76 out of 100 reflects a positive change in the area of budget transparency. This improved score primarily reflects greater comprehensiveness of essential budget documents. Additionally, all budget documents were published on time. Consequently, the Philippines moved from the 19th to the 10th most fiscally transparent country out of the 117 countries OBS surveyed. ^[112] However, the ranking is consistent with previous performance and an overall trajectory of improvement since 2012. ^[113] Under this particular commitment, the Philippines published all main documents related to budget approval and implementation. This reform would have resulted in major open government changes had it extended beyond the foundational step of publishing budget documents in a timely manner, for example, through the introduction of an open budget portal with easily accessible information for the general public. Regarding civic participation, the government did not provide any evidence on how CSOs or citizens helped shape the Budget Reform bill proposal, beyond formal participation in the consultations rounds for the IRR—implying that civic participation also advanced marginally.

Next steps

The IRM shared the following recommendations with stakeholders during the prepublication review period for the design section of this report. They are included below for public record. ^[114]

The IRM recommends that future action plans consider moving forward with commitments in this policy area. Future commitments can include actions to follow up on recommendations from the Open Budget Survey to increase oversight by formal independent agencies. For example, future commitments may consider strengthening the role of independent fiscal institutions (IFIs), ^[115] known in the Philippines as the Congressional Policy and Budget Research Department (CPBRD), whose independence is not set in the law. Commitments can also bring in the legislative branch by encouraging reports on in-year implementation of the budget and making reports or hearings publicly available. ^[116]