I. Powers relative to appropriation measures

Atty. Jericho Del Puerto

Atty. Jericho Del Puerto

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1. Principles on appropriation

It is the President who proposes the budget but it is Congress that has the final say on matters of appropriations. For this purpose, appropriation involves two governing principles:

Governing principles on appropriation:
1) A Principle of the Public Fisc, asserting that all monies received from whatever source by any part of the government are public funds; and
2) A Principle of Appropriations Control, prohibiting expenditure of any public money without legislative authorization. (Araullo v. Aquino III, En Banc, G.R. No. 209287, 01 July 2014)

Limitations on the Executive. To conform with the governing principles, the Executive cannot circumvent the prohibition by Congress of an expenditure for a program, activity, or project (“PAP”) by resorting to either public or private funds. Nor could the Executive transfer appropriated funds resulting in an increase in the budget for one PAP, for by so doing the appropriation for another PAP is necessarily decreased. The terms of both appropriations will thereby be violated. (Ibid.)

2. Budget

Budget of expenditures and sources of financing. The President shall submit to the Congress within thirty (30) days from the opening of every regular session, as the basis of the general appropriations bill, a budget of expenditures and sources of financing, including receipts from existing and proposed revenue measures. (Section 22, Article VII, 1987 Constitution)

Budget. For a forthright definition, budget should simply be identified as the financial plan of the Government, or “the master plan of government.” (Araullo v. Aquino III, En Banc, G.R. No. 209287, 01 July 2014)

a. Budgeting process

4 phases comprise the Philippine budget process:
1) Budget Preparation;
2) Budget Legislation;
3) Budget Execution; and
4) Accountability. (Ibid.)

1) Budget preparation. The budget preparation phase is commenced through the issuance of a Budget Call by the DBM. The Budget Call contains budget parameters earlier set by the Development Budget Coordination Committee (DBCC) as well as policy guidelines and procedures to aid government agencies in the preparation and submission of their budget proposals. The Budget Call is of two kinds, namely: (1) a National Budget Call, which is addressed to all agencies, including state universities and colleges; and (2) a Corporate Budget Call, which is addressed to all government-owned and -controlled corporations (GOCCs) and government financial institutions (GFIs). (Ibid.)

Following the issuance of the Budget Call, the various departments and agencies submit their respective Agency Budget Proposals to the DBM. To boost citizen participation, the current administration has tasked the various departments and agencies to partner with civil society organizations and other citizen-stakeholders in the preparation of the Agency Budget Proposals, which proposals are then presented before a technical panel of the DBM in scheduled budget hearings wherein the various departments and agencies are given the opportunity to defend their budget proposals. DBM bureaus thereafter review the Agency Budget Proposals and come up with recommendations for the Executive Review Board, comprised by the DBM Secretary and the DBM’s senior officials. The discussions of the Executive Review Board cover the prioritization of programs and their corresponding support vis-à-vis the priority agenda of the National Government, and their implementation. (Ibid.)

The DBM next consolidates the recommended agency budgets into the National Expenditure Program (NEP)and a Budget of Expenditures and Sources of Financing (BESF). The NEP provides the details of spending for each department and agency by program, activity or project (PAP), and is submitted in the form of a proposed GAA. The Details of Selected Programs and Projects is the more detailed disaggregation of key PAPs in the NEP, especially those in line with the National Government’s development plan. The Staffing Summary provides the staffing complement of each department and agency, including the number of positions and amounts allocated. (Ibid.)

The NEP and BESF are thereafter presented by the DBM and the DBCC to the President and the Cabinet for further refinements or reprioritization. Once the NEP and the BESF are approved by the President and the Cabinet, the DBM prepares the budget documents for submission to Congress. The budget documents consist of: (1) the President’s Budget Message, through which the President explains the policy framework and budget priorities; (2) the BESF, mandated by Section 22, Article VII of the Constitution, which contains the macroeconomic assumptions, public sector context, breakdown of the expenditures and funding sources for the fiscal year and the two previous years; and (3) the NEP. (Ibid.)

2) Legislative authorization. The Budget Legislation Phase covers the period commencing from the time Congress receives the President’s Budget, which is inclusive of the NEPand the BESF, up to the President’s approval of the GAA. This phase is also known as the Budget Authorization Phase, and involves the significant participation of the Legislative through its deliberations. (Ibid.)

Initially, the President’s Budget is assigned to the House of Representatives’ Appropriations Committee on First Reading. The Appropriations Committee and its various Sub-Committees schedule and conduct budget hearings to examine the PAPs of the departments and agencies. Thereafter, the House of Representatives drafts the General Appropriations Bill (GAB). (Ibid.)

The GAB is sponsored, presented and defended by the House of Representatives’ Appropriations Committee and Sub-Committees in plenary session. As with other laws, the GAB is approved on Third Reading before the House of Representatives’ version is transmitted to the Senate. (Ibid.)

After transmission, the Senate conducts its own committee hearings on the GAB. To expedite proceedings, the Senate may conduct its committee hearings simultaneously with the House of Representatives’ deliberations. The Senate’s Finance Committee and its Sub-Committees may submit the proposed amendments to the GAB to the plenary of the Senate only after the House of Representatives has formally transmitted its version to the Senate. The Senate version of the GAB is likewise approved on Third Reading. (Ibid.)

The House of Representatives and the Senate then constitute a panel each to sit in the Bicameral Conference Committee for the purpose of discussing and harmonizing the conflicting provisions of their versions of the GAB. The “harmonized” version of the GAB is next presented to the President for approval.90 The President reviews the GAB, and prepares the Veto Message where budget items are subjected to direct veto,91 or are identified for conditional implementation. (Ibid.)

If, by the end of any fiscal year, the Congress shall have failed to pass the GAB for the ensuing fiscal year, the GAA for the preceding fiscal year shall be deemed re-enacted and shall remain in force and effect until the GAB is passed by the Congress. (Ibid.)

3) Budget Execution. With the GAA now in full force and effect, the next step is the implementation of the budget. The Budget Execution Phase is primarily the function of the DBM, which is tasked to perform the following procedures, namely: (1) to issue the programs and guidelines for the release of funds; (2) to prepare an Allotment and Cash Release Program; (3) to release allotments; and (4) to issue disbursement authorities. (Ibid.)

The implementation of the GAA is directed by the guidelines issued by the DBM. Prior to this, the various departments and agencies are required to submit Budget Execution Documents (BED) to outline their plans and performance targets by laying down the physical and financial plan, the monthly cash program, the estimate of monthly income, and the list of obligations that are not yet due and demandable. (Ibid.)

Thereafter, the DBM prepares an Allotment Release Program (ARP)and a Cash Release Program (CRP).The ARP sets a limit for allotments issued in general and to a specific agency. The CRP fixes the monthly, quarterly and annual disbursement levels. (Ibid.)

Allotments, which authorize an agency to enter into obligations, are issued by the DBM. Allotments are lesser in scope than appropriations, in that the latter embrace the general legislative authority to spend. Allotments may be released in two forms – through a comprehensive Agency Budget Matrix (ABM), or, individually, by SARO. (Ibid.)

Armed with either the ABM or the SARO, agencies become authorized to incur obligations on behalf of the Government in order to implement their PAPs. Obligations may be incurred in various ways, like hiring of personnel, entering into contracts for the supply of goods and services, and using utilities. (Ibid.)

In order to settle the obligations incurred by the agencies, the DBM issues a disbursement authority so that cash may be allocated in payment of the obligations. A cash or disbursement authority that is periodically issued is referred to as a Notice of Cash Allocation (NCA), which issuance is based upon an agency’s submission of its Monthly Cash Program and other required documents. The NCA specifies the maximum amount of cash that can be withdrawn from a government servicing bank for the period indicated. Apart from the NCA, the DBM may issue a Non-Cash Availment Authority (NCAA) to authorize non-cash disbursements, or a Cash Disbursement Ceiling (CDC) for departments with overseas operations to allow the use of income collected by their foreign posts for their operating requirements. (Ibid.)

Actual disbursement or spending of government funds terminates the Budget Execution Phase and is usually accomplished through the Modified Disbursement Scheme under which disbursements chargeable against the National Treasury are coursed through the government servicing banks. (Ibid.)

4) Budget accountability. Accountability is a significant phase of the budget cycle because it ensures that the government funds have been effectively and efficiently utilized to achieve the State’s socio-economic goals. It also allows the DBM to assess the performance of agencies during the fiscal year for the purpose of implementing reforms and establishing new policies. (Ibid.)

An agency’s accountability may be examined and evaluated through (1) performance targets and outcomes; (2) budget accountability reports; (3) review of agency performance; and (4) audit conducted by the Commission on Audit(COA). (Ibid.)

Araullo v. Aquino III (2014)
Re: Legality of the Disbursement Allocation Program (DAP)
On September 25, 2013, Sen. Jinggoy Ejercito Estrada delivered a privilege speech in the Senate of the Philippines to reveal that some Senators, including himself, had been allotted an additional ₱50 Million each as “incentive” for voting in favor of the impeachment of Chief Justice Renato C. Corona.
Responding to Sen. Estrada’s revelation, Secretary Florencio Abad of the DBM issued a public statement entitled Abad: Releases to Senators Part of Spending Acceleration Program,1 explaining that the funds released to the Senators had been part of the DAP, a program designed by the DBM to ramp up spending to accelerate economic expansion. He clarified that the funds had been released to the Senators based on their letters of request for funding; and that it was not the first time that releases from the DAP had been made because the DAP had already been instituted in 2011 to ramp up spending after sluggish disbursements had caused the growth of the gross domestic product (GDP) to slow down. He explained that the funds under the DAP were usually taken from (1) unreleased appropriations under Personnel Services;2 (2) unprogrammed funds; (3) carry-over appropriations unreleased from the previous year; and (4) budgets for slow-moving items or projects that had been realigned to support faster-disbursing projects.
The DBM soon came out to claim in its websitee that the DAP releases had been sourced from savings generated by the Government, and from unprogrammed funds; and that the savings had been derived from (1) the pooling of unreleased appropriations, like unreleased Personnel Services4 appropriations that would lapse at the end of the year, unreleased appropriations of slow-moving projects and discontinued projects per zero based budgeting findings;5 and (2) the withdrawal of unobligated allotments also for slow-moving programs and projects that had been earlier released to the agencies of the National Government.
The following acts and practices under the Disbursement Acceleration Program, National Budget Circular No. 541 and related executive issuances were declared UNCONSTITUTIONAL for being in violation of Section 25(5), Article VI of the 1987 Constitution and the doctrine of separation of powers, namely:
(a) The withdrawal of unobligated allotments from the implementing agencies, and the declaration of the withdrawn unobligated allotments and unreleased appropriations as savings prior to the end of the fiscal year and without complying with the statutory definition of savings contained in the General Appropriations Acts;
(b) The cross-border transfers of the savings of the Executive to augment the appropriations of other offices outside the Executive; and
(c) The funding of projects, activities and programs that were not covered by any appropriation in the General Appropriations Act.
The Court further DECLARES VOID the use of unprogrammed funds despite the absence of a certification by the National Treasurer that the revenue collections exceeded the revenue targets for non-compliance with the conditions provided in the relevant General Appropriations Acts.

b. Savings

Principles on savings:
1) Congress wields the power of the purse. Congress decides how the budget will be spent; what PAPs to fund; and the amounts of money to be spent for each PAP.
2) The Executive, as the department of the Government tasked to enforce the laws, is expected to faithfully execute the GAA and to spend the budget in accordance with the provisions of the GAA. The Executive is expected to faithfully implement the PAPs for which Congress allocated funds, and to limit the expenditures within the allocations, unless exigencies result to deficiencies for which augmentation is authorized, subject to the conditions provided by law.
3) in making the President’s power to augment operative under the GAA, Congress recognizes the need for flexibility in budget execution. In so doing, Congress diminishes its own power of the purse, for it delegates a fraction of its power to the Executive. But Congress does not thereby allow the Executive to override its authority over the purse as to let the Executive exceed its delegated authority.
4) savings should be actual. “Actual” denotes something that is real or substantial, or something that exists presently in fact, as opposed to something that is merely theoretical, possible, potential or hypothetical.
Savings; Per 2011, 2012, 2013 GAAs:
Savings – refer to portions or balances of any programmed appropriation in this Act free from any obligation or encumbrance which are:
1) Still available after the completion or final discontinuance or abandonment of the work, activity or purpose for which the appropriation is authorized;
2) From appropriations balances arising from unpaid compensation and related costs pertaining to vacant positions and leaves of absence without pay; and
3) From appropriations balances realized from the implementation of measures resulting in improved systems and efficiencies and thus enabled agencies to meet and deliver the required or planned targets, programs and services approved in this Act at a lesser cost.

3 instances –  limits definition of savings. The three instances listed in the GAAs’ aforequoted definition were a sure indication that savings could be generated only upon the purpose of the appropriation being fulfilled, or upon the need for the appropriation being no longer existent.

Free from any obligation or encumbrance. The phrase “free from any obligation or encumbrance” in the definition of savings in the GAAs conveyed the notion that the appropriation was at that stage when the appropriation was already obligated and the appropriation was already released.

Unobligated allotments. Unobligated allotments were encompassed by the first part of the definition of “savings” in the GAA, that is, as “portions or balances of any programmed appropriation in this Act free from any obligation or encumbrance.” But the first part of the definition was further qualified by the three enumerated instances of when savings would be realized. As such, unobligated allotments could not be indiscriminately declared as savings without first determining whether any of the three instances existed. This signified that the DBM’s withdrawal of unobligated allotments had disregarded the definition of savings under the GAAs.

Impoundment. Impoundment refers to a refusal by the President, for whatever reason, to spend funds made available by Congress. It is the failure to spend or obligate budget authority of any type.” Impoundment under the GAA is understood to mean the retention or deduction of appropriations.

Same; Withdrawal of unobligated allotments – not impoundment. The withdrawal of unobligated allotments under the DAP should not be regarded as impoundment because it entailed only the transfer of funds, not the retention or deduction of appropriations.



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