Budget preparation processes and transparency in the Philippines have improved in the past six years but more must be done to sustain the trend, an assessment report revealed over the weekend.
According to the Public Expenditure and Financial Accountability (PEFA) performance assessment report, the country scored a satisfactory performance in 19 out of 31 indicators this year from scoring a good performance in eight indicators in 2010.
PEFA is a partnership between seven donor agencies and international financial institutions to assess the condition of public expenditure and procurement and financial accountability systems, as well as develop a practical sequence for reform and capacity-building measures.
These donor agencies and international financial institutions are the European Commission, French Ministry of Foreign Affairs, International Monetary Fund, Norwegian Ministry of Foreign Affairs, Swiss State Secretariat for Economic Affairs, UK’s Department for International Development, and the World Bank. The Australian Department of Foreign Affairs and Trade provided assistance to the Philippines for the country assessment.
PEFA indicators are based on the seven public financial management (PFM) pillars, in three of which—transparency, policy-based budgeting, and asset and liability management— the country scored high in the latest report.
“We performed very well in Transparency of Public Finances. This pertains to our budget preparation and budget management processes, which the PEFA rated highly in public policy and transparency,” outgoing Budget and Management Secretary Florencio Abad said in a statement released over the weekend.
“We also rated well in Policy-based Fiscal Strategy and Budgeting. We displayed satisfactory or good performance in all areas under this pillar, which reflects the many efforts such as performance-informed budgeting, zero-based budgeting, and the budget priorities framework, we made in the recent years to improve the budget formulation process,” he also explained.
The report also showed that there have been some improvements in budget execution contributed by the General Appropriations Act-as-Release Document policy, which provided predictability and helped agencies to spend their budgets immediately.
Improvements still needed
However, substantial scope for improvement in this area was identified by the report, particularly in monitoring and operational processes.
It noted that the country needs to improve in terms of budget information reliability, legislative oversight, internal controls, and accounting and financial reporting.
Abad agreed that the Philippines needs to improve further in these indicators in order to increase the ability of the budget to track and promote fiscal discipline, proper agency planning, and proper internal controls in the agencies.
“It is clear from the results of this PEFA assessment that the reforms associated with technology need expansion in scope to enable oversight and line agencies to manage financial transactions in accord with regulations and budget intentions. Moreover, this will help in real-time financial reporting to maintain budget execution in line with service delivery requirements,” Abad said.
He said the improved accounting systems must enable agencies to produce annual accounts that are timely and free from audit qualifications.
The performance of Electronic New Government Accounting System (eNGAS) developed by the Commission on Audit (COA) and current integrated financial IT development projects being pursued by the Department of Budget and Management and the Bureau of the Treasury need to be benchmarked against international practices and in relation with the PEFA results to provide the PFM information and management systems needed.
Lastly, the report recommended the development of an integrated management information system, the revision of the PFM legal framework to ensure clarity, control and comprehensiveness and the strengthening of congressional scrutiny or setting up of an independent scrutiny mechanism within the executive.