Off-budget accounts (OBAs) are defined as “accounts and funds that are not subject to annual appropriations by Congress and are accounted for separately under a different set of books.”
The President’s Social Fund (PSF) is one such account. It is funded by fixed percentage contributions from the income of the Philippine Amusement and Gaming Corp. (Pagcor) and the Philippine Charity Sweepstakes Office (PCSO). The PSF is used as a discretionary purse for various social advocacies of the President, including direct assistance to the poor.
The amount disbursed annually depends on actual receipts. Previously, more than P600 million was disbursed but at present it is higher.
Malacañang has been criticized for the PSF, which is considered as one of the funds lumped together under the Special Purpose Fund (SPF), or President Benigno Aquino 3rd’s pork barrel.
The PSF cannot be scrapped because it is not part of the annual national budget, officials said.
The other lump sum funds under the SPF are the calamity fund, the contingency fund and miscellaneous personnel benefits fund.
Palace officials said the amount that goes into the PSF varies because, unlike other programs in the budget, it is not sourced from revenues of the Bureau of Internal Revenue or the Bureau of Customs but is essentially a Trust Fund.
As of December 2012, funds from Pagcor alone amounted to P5.256 billion. The Commission on Audit (COA) describes these as PSF’s “net income share from Pagcor.”
In separate interviews with The Manila Times, Budget Secretary Florencio Abad and Presidential Communications Secretary Herminio Coloma Jr. said all funds, including OBAs, are being accounted for.
“During this administration’s watch, all financial transactions are being subjected to regular auditing to ensure that these conform with good governance norms,” Coloma added.
“Let there be a specific Bill of Particulars of any allegations of irregularities so these can be addressed properly,” he stressed.
Abad, meanwhile, maintained that public funds, be they in-budget or off-budget, are scrutinized by COA.
“I don’t know how you can conclude that they’re not properly accounted for. These are public funds so COA audits them. Try Pagcor as example. Please check if their funds are not properly accounted for,” he said.
The Times had sent queries to Abad’s office beginning mid-July on the issue of OBA but got no response.
For the National Agri-Business Corp. (Nabcor), the use of OBAs went under a cloud of suspicion following the agency’s involvement in the pork barrel scam. Many of its former officials are facing charges at the Sandiganbayan.
Nabcor was created during the Marcos administration as the business arm of the Department of Agriculture (DA). Subsequently, it was used as a conduit for various appropriations of the DA to implement various projects.
The Municipal Development Fund (MDF), meanwhile, is a loan revolving fund set up to provide credit to local government units (LGU) nationwide. Every year, the national government appropriates additional money to the equity of the fund, and this added equity is properly reflected as expenditure of the national government and income of the fund. Loan repayments, however, are retained as fund balance and used as credit assistance to LGUs without being included in the national budget. The average amount disbursed out of loan repayments was around P500 million.
A study funded by the United States Agency for International Development (USAID) said the bulk of OBAs are earmarked revenues, i.e., revenue receipts where the specific uses are already predetermined by law such as in the case of Pagcor and PCSO. Sound budgeting principles discourage revenue earmarking inasmuch as it hampers resource allocation decisions based on current economic need. Still, public sector budgeting is replete with examples of earmarking of revenues for various reasons.
“The work involved in generating a full accounting of OBAs in the government remains tremendous. The initial list provided in this study, however, is expected to serve as an eye-opener to the otherwise ‘hidden’ accounts in the national government. Subsequent work will require a more intensive analysis of the exact nature of the accounts, their sustainability, their usefulness and the quality of their financial management,” the paper noted.
It classified government financial accounts into two: budgetary accounts and OBAs.
Budgetary accounts represent transactions reflected in the annual national budget proposal that include those annually appropriated through the General Appropriations Act; those automatically appropriated and are, therefore, outside the GAA but are part of the annual budget program of the government; and those automatically appropriated, are not part of the annual budget program, but are generally reported in the annual budget documents.
On the other hand, OBAs represent authorized transactions that are not reported in the annual budget documents but are covered by the regular audit of the Commission on Audit.
“Clearly, therefore, government agencies have bigger financial accountabilities than what is implied in the regular budget documents submitted to Congress. Specifically, extra-budgetary and off-budget accounts effectively increase agency resources without much public scrutiny,” the paper explained.