Updating the budget

Media

Part of The Republic

Title: Updating the budget
Language: English
Source: The Republic I (6) 1-31 December 1975
Year: 1975
Subject: Budget -- Philippines
Rights
Fulltext: THE REPUBLIC Isang bansa, Isang diwa__________ Performance is the yardstick THE INCREASED emphasis that is being placed on “performance” for government management and govern ment funds was highlighted by President Marcos in a speech read before the Phil ippine Council of Management in Manila on November 24. Here is an excerpt: IN the Philippines, where the public service has been designated as the cadres for carrying out a peaceful social revolution, we cannot but regard the development of an adequate public man agement as a keystone of our total de velopment strategy. This is now the time to extend to the public sector the catalytic and li berating impact of modern manage ment. In spite of significant reforms, the Career Executive Service of the Govern ment and the Civil Service organization as a whole still remain encrusted with habits of the past, disposed to obstruct rather than facilitate action. This out look must now be cast aside and re placed by a new commitment and reso lution to facilitate action—to release energy and realize performance. This in turn will require the sharp ening of tools of management control, especially measurement of goals and performance, in the public service. In the private sector, the test of economic per formance, or the market test, if you will, normally suffices as a means of manage ment control. In the public service in stitutions, we must resolutei develop tests of performance that will substitute for the economic test. Thus every program area must be governed by a realistic and effective man agement information system. I AM today directing the Budget Com mission in the exercise of its manage ment function to require that every de partment and agency of the Govern ment submit within one month the man agement information system appropriate to each program area as contained in the budget, complete with indicators of goals and performance during the budget year. Such management information sys tems should be monitored by the Bud get Commission and made the basis of a genuine performance budget. QUITE apart from the public service as such, there are about a hundred government corporations in existence, only a minuscule number of which are viable and profitable. I hereby direct the Budget Com mission and the Reorganization Com mission to conduct a management audit of these corporations and recommend the reorganization of those that deserve to be reorganized, re-created’ or abol ished. ANOTHER critical area in public man. agement is the procurement of equipment and supplies for the Govern ment, which is characterized by ram pant red tape, duplicity, and corrup tion. I hereby direct the Budget Com mission to conduct a study of how gov ernment procurement methods can be streamlined, delays eliminated, payments immediately made, overpricing com pletely eliminated and punished, and economies of scale availed of to gen erate savings and efficiency. In this connection, the Budget Com mission shall consult with the Commis sion on Audit on the streamlining of auditing procedures to eliminate red tape and graft, in procurement activi ties. We have dismissed numerous audit ors who have been verified to engage in this kind of red tape. If there are any auditors who are found to obstruct payment to suppliers of the government, in order to create a leverage for self-aggrandizement, such auditors must be reported immediately to the Chairman of the Commission on Audit or to the Office of the President. THE Development Academy of the Philippines is at this time engaged in the training and development of public managers.' It is my desire that they prepare programmed courses that will enable the respective departments and agencies of the Government to conduct their own management development programs simultaneously in addition to the DAPs own direct programs. In this regard, other facilities for management training, such as the Asian Institute of Management and the grad uate schools of the leading universities should be increasingly linked up with the government’s own management de velopment programs, under the direc tion and guidance of the Development Academy of the Philippines. IT is also my hope that managers in the private and public sectors will inter act more closely and more frequently in the interest of advancing the com mon frontier of management knowledge and expertise. The private sector of the economy will continue to be the main engine of economic growth. But the public sector must be an engine of facilitation of growth. The management erf both sectors must therefore merge their respective strengths to be able to realize the real funclicn of management: namely, to convert human strength to productive strength. In the context of Southeast Asia, there is no question in my mind that economic and social development, which is another name for nation-building, will remain the joint responsibility of the private and the public managers. If management is a strategy for the strategic and optimal use of opportuni ties and resources, then there is no alter native to the fullest possible cooperation and coordination of public administra tion and private sector management. It is in the merger of their respec tive excellences and strengths that we shall derive the optimum vigor and wis dom for national development—the abil ity to free our peoples from the scourge of mass poverty and lead them to the threshold of substantial freedom, a bet ter and fuller life. □ ^lf there are any auditors found to obstruct payment to suppliers of the government, in order to create a leverage for self-aggrandizement, such auditors must be reported immediately to the Chairman of the Commission on Audit or to the Office of the President. POSTERS from the Commission on Audit are going up in government offices us part of the President’s drive to improve government management. Updating the budget ASIDE from any cutbacks that might arise from the austerity written into the 1976 budget, a separate longerterm factor is likely to help reorient many government programs in the com ing year. This other factor is the Budgetary Review of Programs and Projects which proceeded quietly through December and is likely to culminate in January or February with recommendations to President Marcos. The seven divisions of the Budget Commission have been constituted into task forces, some of them including technical experts from the private sector. Their task is to review whether the bud get document accurately reflects what each agency is actually doing-or alter natively whether each agency is doing what the budget document says its P.2,3 P. 4,5 P. 6 P. 7, 8, 9 P. 10, 11 P. 12 P. 13 P. 15 funds are for. The Budget Commission set out the following objectives for the intensive series of discussions: Re-examine the Program and Pro ject structure of all agencies of the Na tional Government under Performance Budget and to install a performance type budget for those without the system; Realign and eliminate redundant, duplicating or unecessary Program(s) and establish those which are relevant to the Department and/or agency func tions in pursuit of the National Gov ernment goals; Re-examine the validity and/or use fulness of appropriation language, spe cial and general provisions in terms of their contribution to budgetary effecSee next page The new budgetary emphasis Behind the energy drive Scrutiny of localofficials Looking at the corporations Fresh approaches to auditing Revamp of President's office Presidential decrees Setting standards for jobs 2 1-31 December1975 r THE REPUBLIC Sharpening the budgetary tool HERE are parts of the background briefing which Dr. Jaime Lay a, the acting Commissioner of the Budget, deli vered to budget officers of various agen cies on December 2 to launch the Com mission’s Budgetary Review of Programs and Projects. OUR BUDGET this year is about 24 billion pesos, which is some thing like 15 percent of the gross na tional product. It has been estimated that the current program of governmeht expenditures will result in a deficit of around five billion pesos. In his concern about this financial picture, the President has directed the various government agencies to produce savings that hope fully will reduce this deficit and result in a realignment of government expenditures. This review of projects and pro grams is being done at the time the 1976 budget is being completed. We are trying to ask ourselves: Does the pro gram and project structure need some modification so that the budget for 1977 financial year will be more con sistent with our developmental pro grams? All of us of course have heard about the budget being the tool of de velopment and development being the primary form of government activity, and so on. But apparently wc have not really sat down and figured out exactly how the budget fits into the whole concept and approach to development. This past year, many of you have probably participated in, or at least have been aware of, a series of what was called sectoral planning enterprises c nductett'by NED A, the ^Central Bank, the Budget Commission, the Develop ment Academy of the Philippines and other government agencies. The planning requirements of the following sectors were looked into: food, agriculture, industry, housing, education, health, social welfare, tour ism, foreign trade, and infrastructure in the villages. Representatives of govern ment agencies and of the private sector sat down and tried to assess the nqeds of the population in each of those sectors. The whole idea, of course, is to try to ensure that the more than 100 government agencies are really working From page 1 tiveness; Re-examine the validity, both in terms of actual output/services being delivered and, for purposes of estima tion of future requirements, the units of work measurements for each Program and Project or both ; Establish the new performance standards, the concepts underlying them, their validity as measures of output/ services delivered, and their integrity and internal consistency. During the talks, the Commission is stressing that it is not conducting budget hearings or a reorganization. Exclusive emphasis is on the program/project list ings in the budget document, and how these are consistent with the priorities of the President and the New Society. The task forces will make recom mendations to a Review Board which must take a final stand on all recom mendations. These will be embodied in a terminal report to the Commissioner of the Budget who will report to the President. While the Budget Commission em phasizes it is not engaged in a reorgani zation, agencies have noted that re orientation would have to come if exces sive duplication or redundancy were found among the wide array of govern ment services. together and not at cross purposes in their different activities. Really, the government has just a few tools at its command. The national government budget is only something like 15 percent of the GNP. Therefore the remaining 85 percent is in the hands of the private sector. The whole idea is: What can the government do with this 15 percent that will both adequately satisfy and support the needs of the private sector in the remaining 85 per cent? How can the 15 percent help the 85 percent to do a much better job? We begin by an assessment of the programs and projects which are con tained in the government budget docu ment. It consists of a listing of expendi ture outlets, a listing of programs, some special provisions which sometimes read rather funny. This is what we would like to review-the listing of programs and projects contained in the budget document. Do these make sense in the light of the objectives of the New Society? Do these make sense in the light of what we want to dp in national govern ment as well as sectoral and regional planning? Do these make sense? Are there any redundant, dupljeative or un necessary programs? Are some of these programs already superseded? Is the performance type of budget really in operation? Is the language used in the budget document suitable? Is there any delay in implementation of the budget process? Are there any new performance budgeting standards that we must In the early days of the hearings, the task forces started coming across line items in the budget allocating funds for projects that had obviously ceased or that had changed their nature, such as research into long-solved problems. One result may be to bring the wording of the budget into line with what those particular funds are being used for now. BUT perhaps the greatest long-term impact will come from the renewed emphasis on the long-existing concept of Performance Budget. In ordering the current review, President Marcos said the information thus gathered should be “made the basis of a genuine perform ance budget”. The concept of performance bud geting was introduced in the Philippines in the early 1950s, incorporated in the Revised Budget Act (RA 992) of 1954 and spelled out in great detail in Budget Circular 41 dated August 1, 1956. How ever, almost no government agency is operating fully on a Pefformance Bud get, and high officials are disappointed at how little is understood of the concept. While emphasis on the word per formance is not new in Philippine gov ernment circles, it is clear that it will gain extra prominence in the coming year. □ look at? This is the purpose of the series of meetings conducted between agencies and the Budget Commission throughout the month of December. The different programs and projects in the budget document have been with us for quite some time. I do not know when some of them were first promul gated. However, at the time some of these programs and projects were first designed, they were probably the most appropriate approach possible. However, times of course have changed. Foremost, of course, are the ob jectives of the New Society in terms of uplifting the welfare of the common man. Does the budget in fact result in such a program? A second major approach concerns the reorganization plan. This was one of the first thrusts of the New Society. Is the budget fully consistent with the spirit of the re organization plan? Probably not, be cause one of the major innovations of the reorganization plan is the concept Budget backgrounder UNTIL 1954 the Philippine govern ment’s established financial policy had been to hold expenditures to a min imum, to cover expenditures by current taxation and to retire debt as rapidly as‘ possible. This simple approach re quired little knowledge of the theory of taxation, expenditure policy or debt management. As in most emerging nations, the national government in the Philippines is the only entity large enough to exert any considerable influence on the entire economy. A general awareness of the significance of this fact developed some time prior to the enactment of the Re vised Budget Act in 1954 and is reflect ed in the Act’s progressive budgetary provisions. These in fact recognized that the government can, by means of fiscal pol icy, set the country on the road to eco nomic development much as the more advanced nations utilize this instrument to maintain economic stability and full employment. A high priority was therefore placed on the task of transforming the national budget from a mere list of receipts and expenditures into a major instrument of fiscal policy—to become a basic tool for managing the nation’s economy I^HIS modern thinking was crystallized in the nation’s first five-year fiscal plan, covering 1957 and 1961, based on the following fiscal guidelines: First, the government would main tain a balanced budget for general oper ations and would make every effort to obtain revenues sufficient to meet plan ned obligations. Deficit financing for current operations was not to be resort ed to; instead, commitments were to be reduced accordingly. Second, a policy of judicious pub lic bonowing would be observed in order to finance economic development with out causing price disruptions. Proceeds from borrowing would be used exclusive ly for income-creating or other produc tive capital expenditures having indus trial and agricultural potential. Further, the use of the national credit was to be reduced as rapidly as development needs were met or other resources became available. Third, every proposed expenditure of public funds would be tested against the touchstone of national interest. Fourth, taxation would be geared to the essential financial requirement of government for general operations and development purposes. The tax struc ture would emphasize the progressive factor of ability-to-pay without impair ing legitimate business incentives. Fifth, public debt would not be al lowed to exceed a level consistent with the country’s economic growth. Amor of regionalization. To be honest, the budget document does not dwell much on regional aspects. In November, we in the Budget Commission had limited discussions with some regional directors. The feedback we got is rather disappointing. It seems the needs of the regions are forgotten not only in budget formulations but also in the budget operational process. Perhaps we might look at our structure of programs and projects to ensure the regional component. One measure of development which we may have taken for granted is the expanding role of government corpora tions and the agencies of government wiiich have been outside the civil serv ice. We have at present something like 125 government corporations doing one thing or another. And these affect really the whole range of activities. Things crop up in these corporations that con sistently indicate that there might be some deficiency-some areas that we could look at and improve in the bud getary process. □ tization and interest payments against the public debt were to be kept on sched ule and the necessary sinking funds for their ultimate retirement would continue to be established. Sixth, tariffs would be employed to provide reasonable protection to do mestic producers where such measures appeared economically sound and in the national interest. The primary function of tariffs would, however, continue to be the production of revenue to finance government programs. FISCAL planning was predicated on a careful appraisal of all available re sources in which the sequence of deci sions ran from available revenues and other resources to expenditures, instead of from expenditures to resources. Not only were the usual revenues and public borrowings considered, but also estimated income from reparations and other sources which could be ap plied to the financing of governmentsponsored development projects. After the maximum feasible re sources had been ascertained, they were allocated to the numerous government activities on the basis of a scrupulous application of priority standards. These particularly included a system of indus trial priorities which governed the allo cation of foreign exchange, the adminis tration of the government’s fiscal oper ations and the extension of credit. The entire governmental establish ment was embraced in this planning. It covered not only the usual general bud get, but also public works for all pur poses, subscriptions to capital stock of government corporations, financial in vestments, loans and other obligations of the government. The plans embodied in the five-year fiscal plan were comprehensive both in their expenditures and their financing aspects. The ultimate goal was to achieve broader employment, greater production and higher standards of living for the Filipino people generally. Throughout the attendant planning operation, the fiscal, monetary and eco nomic planning agencies of the national government worked in close collabora tion to produce a plan in which the over all level of government spending and the utilization of financial resources were appropriately balanced in terms of: Effect on money supply; relation to national income; foreign exchange re quirements; programs for capital forma tion; future tax resources; effect on price levels. The first five-year fiscal plan thus not only presented a long-range financial plan but integrated within fiscal plan ning the monetary and economic impli cations of and policies governing au thorized programs and projects. □
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