Open Budget Survey 2012

PH budget transparency score
slips 7 pts; oversight improves

IT’S election campaign season again and candidates have started to harangue voters with a barrage of promises of reforms. When he came to power in June 2010, President Benigno Simeon C. Aquino III himself had pledged to install a transparent government, one that would reverse the opaque ways of the scandal–ridden administration of Gloria Macapagal Arroyo.

On the upside, the Aquino government has indeed followed through with transparency reforms specific to how public funds are being managed. The downside: These have been proved wanting as a global report now reveals that Filipinos continue to be denied full access to budget information and documents.

The Open Budget Survey is produced every two years by the U.S.-based International Budget Partnership (IBP).

In the 2012 Survey, the Philippines’ score in the Open Budget Index (OBI) dropped to 48 or 7 points down from 55 (out of the possible 100) in 2010.

The latest figure is a throwback to the Philippines’ score in 2008: exactly 48. This indicates that the Aquino government, just like the Arroyo administration, has made it harder for citizens to get information on how public officials and agencies are spending taxpayers’ money.

RP's OBI score over four surveys

A score of 48 remains above the global average of 43 and the average of 39 in the East Asia and Pacific region. But 48 is still not good news: It has dragged the Philippines into the roster of 77 countries – out of the 100 countries surveyed that are home to half the world’s population – that fail to meet basic standards of budget transparency.

Despite the Philippines’ low score, however, the Survey cites some improvement and promising practices in the country in terms of budget oversight and citizen engagement. (See sidebar: Progress in public participation)

IBP also notes that with a score of 48 out of 100, the Philippine government has the potential to greatly expand transparency by introducing a number of short-term and medium-term measures, some of which can be achieved at almost no cost on public coffers.

Yet worries stemming from the country’s sliding score prevail.

According to IBP, the lack of information and opportunities to participate in the budget process means that citizens can neither understand the budget nor hold their governments accountable.

IBP director Warren Krafchik says budget decisions and processes are critical to addressing many of the world’s most pressing problems. “This is more than an abstract governance issue,” he says. “It’s about the quality of life for millions of people around the world.”

125 questions in all

The Open Budget Survey measures three aspects: state of budget transparency, public participation in the budget process, and oversight, in countries around the world. It consists of 125 questions, 95 of which rate the availability and comprehensiveness of the eight key budget documents that governments should publish at certain points in the budget cycle. The remaining 30 questions, meanwhile, focus on opportunities for public participation and the roles played by the legislature and the supreme audit institution.

The Survey uses international standards developed by the International Monetary Fund, the Organization for Economic Co-operation and Development, and the International Organization of Supreme Audit Institutions to assess the level of budget transparency in each country.

The IBP calculates the OBI by deriving the simple average of the quantified responses to the 95 questions that are related to the availability and comprehensiveness of each of the eight key budget documents. The IBP assigns a separate grading on the country’s legislative and supreme audit institution strength and public engagement based on the other 30 questions.

An OBI score of 81 to 100 indicates that the government provides the public with “extensive” information on the government’s budget and financial activities during the budget year. Scores of 61-80 correspond to “significant,” 41-60, “some,” 21-40, “minimal,” and 0-20, “scant or no” information is provided by the government.

How RP compares with other countries in Southeast Asia

PCIJ role, peer reviewers

Since 2006, the Philippine Center for Investigative Journalism (PCIJ) has served as the Survey’s country researcher for the Philippines. PCIJ conducted research for the 2012 Survey from June to December 2011, covering the latest documents available during the formulation and enactment of the 2012 budget, the implementation of the 2011 budget, and the audit reports for 2010.

Two unnamed in-country experts (peer reviewers) who are not affiliated with the government and the IBP reviewed the completed questionnaire. Comments from two Philippine government representatives – one each from the Department of Finance (DOF) and Department of Budget and Management (DBM) – were also included in the questionnaire.

The Philippines’ score of 48 – seven points below its 2010 score – falls on the “some” category along with 35 other countries. This was also the same category where the Philippines landed in the past three rounds of the Survey in 2006, 2008, and 2010.

The decrease in the Philippines’ OBI score, however, is significant since it was due largely to the late publication and unavailability of documents that used to be available in the previous round. In fact, the 2012 Survey found that the country had published only four of the eight key budget documents during the research period.

At the budget preparation stage, international standards maintain that governments should publish the Pre-Budget Statement, which includes the assumptions used to develop the budget, such as total expected revenue, expenditure, and debt levels; broad sector allocations; and the Executive’s Budget Proposal, which presents the government’s detailed plans in terms of policy priorities and budgets for each department for the coming budget year.

Internal use only

Since the 2006 round, the Philippines has earned a subscore of zero on the Pre-Budget Statement because this document remains for internal use of the government.

For the past three rounds of the Survey, the DBM had produced the Paper on Budget Strategy (PBS) as its pre-budget statement. This document contains the recommended expenditure policy and fiscal framework upon which the preparation of the budget can be anchored.

In the 2012 round, however, DBM officials, in an interview during the research period, said that the contents of the PBS were channeled into a different document called the Zero-Based Budgeting studies or the ZBB studies. The Aquino administration had introduced the zero-based budgeting approach in a supposed attempt to weed out waste and redundancies in allocating resources.

DBM Fiscal Planning Bureau OIC-Director Rolando U. Toledo said the ZBB studies were envisioned to be internal “for policy initiatives for the implementation of the budget.” But he added that there is a possibility for the studies to be published given the budgeting reforms being made.

Repeated requests made by PCIJ to secure copies of the ZBB studies have been denied to this day by DBM.

Asked to comment on the completed questionnaire on behalf of the Philippine government, DBM clarified that the National Budget Call should be considered as the country’s Pre-Budget Statement. According to DBM, the ZBB studies cannot be considered as the Pre-Budget Statement because they evaluate the operations, effectiveness, and impact of specific current programs and projects as inputs to budget preparation. “We did not envision the ZBB Studies to produce the broad framework of parameters for the formulation of the 2012 Budget,” it further said.

But IBP in its final review did not consider the Budget Call as the Pre-Budget Statement, using all the inputs provided on the questionnaire.

Subscores of Budget Documents

Policy- budget link

As for the Executive’s Budget Proposal, the Philippines’ subscore fell from 62 to 57 due to the late publication of the Organizational Performance Indicator Framework (OPIF) Book, one of proposed budget’s supporting documents.

The Survey guidelines state that the budget proposal should include a clear description of the link between policy goals and the budget, i.e., an explicit explanation of how the government’s policy goals are reflected in its budget choices, including both a narrative discussion and quantitative estimates.

While some of the required information are enrolled in the President’s Budget Message, the OPIF Book provides a breakdown of expenditures per department or agency by major final output or the targets and performance indicators needed to monitor and measure results.

The OPIF Book was considered as “publicly available” in the 2010 round and contributed significantly to the improvement of the score for that year. The OPIF Book for the 2012 budget, however, was published on Dec. 22, 2011, or a week after the enactment of the 2012 budget on Dec. 15, 2011.

Congress didn’t get it

Dr. Romulo Emmanuel M. Miral Jr., director general of the Congressional Policy and Budget Research Department at the House of Representatives, also said that the OPIF Book for both the 2011 and 2012 budget years were not distributed along with the other budget documents, which is why "it was not used in the budget review and approval of Congress."

In addition, Gabriela Women's Party-List Rep. Luzviminda C. Ilagan said that while the OPIF provides valuable data that can be used in Congress's deliberations of the annual budget, the process affords legislators very little time to actually study the OPIF and the proposed budget carefully. For the deliberations on the 2012 budget, the budget documents (Budget of Expenditures and Sources of Funds, National Expenditure Program, etc.) arrived just a few days before the first committee hearing was conducted, Ilagan pointed out.

"In the conduct of the hearings, we were given but a few minutes to raise objections or clarificatory questions on the proposed budget," she said.

Miral and Ilagan were both interviewed during the research period in 2011. The congresswoman is a member of the Committee on Appropriations of the House of Representatives.

According to DBM’s Toledo, the OPIF’s 2012 edition was published late because more time was needed to consolidate data from the agencies.

Good and bad

The Philippines, however, performed better in providing a needed document at the budget approval stage: the Enacted Budget, which authorizes the executive to implement the policy measures that the budget contains.

As in the 2010 round, the Philippines earned a perfect subscore of 100 on the Enacted Budget due to the program-level detail provided in the Philippines’ General Appropriations Act. According to the Survey, detailed information in the Enacted Budget can help bolster the legislature’s ability to hold the executive accountable for achieving the priorities implicit in the budget.

Then again, the Survey also looks for the publication of a Citizens Budget or a simplified version of a budget document that uses nontechnical language and accessible formats in order to facilitate citizens’ understanding of the government’s plans for the budget year. The Survey requires the Citizens Budget, if it is a simplified version of the Enacted Budget, to be released at the same time or within three months after the publication of the Enacted Budget.

In 2011, the DBM did publish a 53-page document titled “2011 People’s Budget,” which contains information on spending priorities, sector specific data and targeted programs, and revenues of the 2011 approved budget. The document, however, was published in July 2011 or seven months into the budget year.

Mixed picture

Meanwhile, the country’s scores in relation to the provision of needed documents at budget implementation stage were mixed, to say the least.

The Survey looks at three documents that governments should publish while the budget is being implemented: In-Year Reports, a Mid-Year Review, and a Year-End Report. Of these three reports, the Philippines publishes only the In-Year Reports, which are produced by the Bureau of the Treasury, DBM, and DOF.

International standards maintain that In-Year Reports should be issued on a monthly basis. To ensure that departments or agencies are held accountable for their expenditure, these reports should show revenues collected, expenditures made, and debt incurred.

The Philippines subscore for its In-Year Reports is up from 92 in 2010 to 96 in 2012 due to the scope and timeliness of the published reports.

But the Philippines got a zero again for the Mid-Year Review because the documents produced by the Investor Relations Office (IRO) for an economic briefing and the DBM for a Senate hearing in 2012 did not fully satisfy the criteria set in the Survey.

According to the Survey, a Mid-Year Review should summarize the actual budget data for the first six months of the year (revenues, expenditures, and debt), reassess the economic assumptions upon which the budget was initially drafted, and adjust the budget figures for the remaining six months accordingly.

No year-end report

The Philippines also received a zero subscore for the Year-End Report in this round, compared to the 23 it earned in 2010.

The Survey guidelines state that a Year-End Report should show the situation of the government’s accounts at the end of the budget year and include an evaluation of the progress made toward achieving the policy goals spelled out in the Enacted Budget.

In the previous rounds, the Philippines had cited sectoral reports as its Year-End Report. This time around, the supposed Year-End Report was consolidated into one file titled “Daylight in the Philippines: Accelerating Progress.” This was presented at the Year-End Philippine Economic Briefing in Makati City and Cagayan de Oro during the first quarter of 2011. But since the document lacked information on the differences between the original estimates and actual outcomes, it did not meet the Survey criteria.

During the research period, Ivy Cabanlig-De Hitta of the IRO had said that her office prepared a presentation covering all sectors that made up the country’s storyboard of growth and the Aquino administration’s goals and policies of moving forward. “Thus,” she said, “there were no sectoral presentations prepared as the ROP (Republic of the Philippines) presentation was comprehensive enough, containing more essential information that investors prefer to see.”

Audit report okay

The Survey found the Philippines doing a bit better during the audit phase of the budget process. At this stage, governments should publish an Audit Report wherein the supreme audit institution evaluates the financial performance of the government in the previous budget year. An audit report is considered as publicly available if it is released within two years of the end of the fiscal year in question.

The Philippines garnered a four-point increase in its Audit Report – from 48 in 2010 to 52 in 2012 – because it had covered the annual expenditures that need to be published in an audit report two years after the end of a fiscal year.

IBP recommends that the Philippines undertake the following steps to improve budget transparency: publish a Pre-Budget Statement, produce and publish a Mid-Year Review, a Year-End Report, and a Citizens Budget; and increase the comprehensiveness of the Executive’s Budget Proposal and Audit Reports.

Says IBP’s Krafchik: “Good budget practices have been identified and standards have been set, substantial technical assistance is available, and reforms can be accomplished at minimal costs. The incentives to improve are there – all that is typically missing, in many individual governments, is the political will to act. That must change.” – With additional research by Jessa Mae B. Jarilla, PCIJ, January 2013

(The IBP collaborates with civil society around the world to use budget analysis and advocacy as a tool to improve effective governance and reduce poverty. The Ford Foundation, the Open Society Institute, the Flora and William Hewlett Foundation, and the U.K. Department for International Development [DfID] provide funding for the Open Budget Initiative at the IBP. The IBP is not affiliated with and does not receive funding from the U.S. government.)