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Introduction

The National Budget is the nancial blueprint of a countrys development plan. Cognizant of its vital role in national development, the Department of Budget and Management (DBM) under the Aquino Administration has sought to ensure that public resources are managed more efficiently and with the greatest degree of discipline. The Aquino Administrations commitment to promote inclusive development necessitated reforms in the way that the DBM must carry out its mandate. It is crucial not only to channel resources on programs that accelerate economic growth, but more importantly, to re-direct funds to programs that would be responsive to the needs of the people especially those in regions beset by poverty. Thus, in the preparation of the proposed National Budget for scal year 2014, the DBM pushed for the adoption of a new approach to budgeting. Through National Budget Memorandum (NBM) No. 117, the DBM introduced performance-informed budgeting (PIB) which required government agencies to strengthen the link between planning and budgeting and to simplify the presentation of the budget. As the administration pledges to promote peoplecentred growth, the DBM likewise seeks to bring the budget closer to the people. With the adoption of the PIB as a budgeting scheme, the government is changing the face of the budget. Previously a mass of numbers and line items without a clear story on where funds are going, the National Expenditure Plan and the General Appropriations Act beginning in FY2014 will show the link between the funds allocated for government programs and the projected results and outcomes of these. The new face of the Budget therefore represents the continuing shift away from the dominance of patronage politics and clientelistic relationships towards a more responsive, transparent and accountable public expenditure management system.

What is the Performance-Informed Budgeting?


Performance-informed budgeting (PIB)1 is a budgeting approach that uses performance information to assist in deciding where the funds will go. Performance informationboth nancial and non-nancial informationare presented in the appropriations document, which provides the context for the programs, activities and projects pursued by the different agencies of government. Performance information typically include the following: The purpose for the funds required The outputs that would be produced or the services that would be rendered The outcomes that would be achieved by the outputs and/or services The cost of the programs and activities proposed to achieve the objectives Performance information can be used as a signalling device. Low performance or a decline in performance can serve as an alarm bell that ought to trigger a closer look into the reasons behind low performance. According to the Organisation for Economic Cooperation and Development (OECD), the most common response to low performance is holding constant the level of future funding and/or subjecting future allocations conditional to improved performance. Performance-informed budgeting differs from the traditional line item-based budgeting in that it focuses more on outputs and outcomes and places less emphasis on the inputs. It links funding to results, and provides a framework for more informed resource allocation and management. 2
Inputs amount of resources used to produce outputs; usually expressed in terms of money or people Outputs products or services delivered by a program or an organizational entity; usually expressed in terms of quantity, quality and cost Outcomes events, occurrences or changes in conditions related to the achievement of policy objectives, usually expressed in general society terms or at a level more immediate to the organization in question

TYPES OF PERFORMANCE BUDGETING


Link Between Performance Indicators and Funding Main Purpose in Budgeting Process

Type

PRESENTATIONAL No Link DIRECT OR FORMULA PERFORMANCE BUDGETING Tight, direct link

Accountability

Resource allocation and accountability

PERFORMANCE-INFORMED BUDGETING

Loose, indirect link

Planning and/or accountabilty; Resource allocation

1 Robinson, Marc and Duncan Last, A Basic Model of Performance-Based Budgeting. 2 Saxena, Sandeep, Bruce Stacey and Martin Bowen. The Philippines: A Strengthening Performance Budgeting. International Monetary Fund Fiscal Affairs Department. April 2013.

Changing the Face of the Budget The GAA then:

Focus on numbers, nancial data Long line description of activities, inputs

The new face of the National Budget will no longer contain an excessively detailed line item document, but a budget that presents performance information aligned to planned resources that promises to be understandable and accessible to the people. Traditionally, the GAA contains all the appropriation assigned to different components, projects, programs

and activities of the National Government. These are divided into New Appropriations3 and Current Operating Expenditures4 of the various agencies and units. The appropriations are further divided into three components: Personnel Services; Maintenance and Other Operating Expenses; and Capital Outlays.

3An appropriation is an authorization made by law or other legislative enactment, directing the payment of goods and services out of government funds under specied conditions or for specied purposes. COA-DBM Joint Circular No. 2013-1 4The major current operating expenditures a) Personal Services (PS) like salaries and wages, social security contributions, overtime pay, etc. b) Maintenance and Other Operating Expenditures (MOOE) such as traveling expenses, supplies and materials, water, illumination and power services, rent, etc.; c) Interest payments; d) Allotments to Local Government Units (ALGU); e) Subsidies to government-owned and controlled corporations (GOCCs)

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THE NEW FACE OF THE NATIONAL BUDGET

The GAA after adopting the PIB Structure:


Each agencys strategic objectives dened upfront

Summary of nancials presented in the GAA

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A BRIEFER ON THE PERFORMANCE-INFORMED BUDGET STRUCTURE

Budget for operations by Major Final Output presented

Performance information presented with the nancials

Clarication: The sample DSWD budget used in this brochure is not yet the nal budget entry in the National Expenditure Program (NEP) submitted to Congress. In the nal NEP, the targets of the Pantawid Pamilyang Pilipino Program have been updated as follows: Regular CCT: 4.3 M Households Modified CCT: 131,963 Households Expanded CCT: 4.3 M Children

Additional program/ project details in a separate volume

The new, revamped GAA will present non-nancial performance information together with the allocated resources for the different programs, activities and projects (PAPs). These information were used by the DBM to evaluate department and agency proposals during the budget preparation process.

Instead of being immediately confronted with line-item after line-item, PAPs will be grouped according to the Major Final Outputs (MFOs) that department/agencies seek to achieve. This way the budget that goes into a particular PAP is linked directly to the output it intends to achieve.

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THE NEW FACE OF THE NATIONAL BUDGET

The New Structure of the National Expenditure Program


For each department and agency:

OVERVIEW: Strategic Objectives


Department or Agency Mandate, Vision and Mission Staffing Summary
Total authorized and lled positions for scal years 2012, 2013 and 2014

As set by law or executive at and by the respective agencies Citizens Charters.

Key Result Areas

Operations by MFO for 2014

Identification of the Key Result Areas (KRAs) of the Aquino Social Contract (as defined by Executive Order No. 43) that the department or agency contributes to.

Divided into allotment classes (PS, MOOE, FE and CO)

Projects

Sector Outcome

Longer-term benets for the sector from the initiatives or the department or agency. These have been dened through the Philippine Development Plan and the Organizational Performance Indicator Framework (OPIF).

Aggregate presentation of locally-funded and foreign assisted projects Divided into allotment classes (PS, MOOE, FE and CO) Note: The detailed listing of PAPs is still presented but in a separate volume.

Organizational Outcome

Short- to medium-term benefits to clients and community as a result of the departments or agencys delivery of MFOs. These have been dened through the OPIF.

SECTION 2: Expenditure Program by Central and Regional Allocation


Divided into allotment classes (PS, MOOE, FE and CO)

SECTION 1: Expenditure Program


Presentation of Agency Budget According to:

SECTION 3: Special Provisions SECTION 4: Performance Information

Identication of Performance Indicators under each MFO, with corresponding Targets for 2014

General Administration and Support Support to Operations Operations Projects Presented for fiscal years 2012, 2013 and 2014; and disaggregated into allotment classes (PS, MOOE, FE, CO).

Denitions of Expense Categories (PS, MOOE, FinEX & CO) Personnel Services (PS) for the payment of salaries, wages and other compensation of permanent, temporary, contractual and casual employees of the government. Maintenance & Other Operating Expenditures (MOOE) expenditures to support the operations of government agencies such as expenses for supplies, utilities, etc. Financial Expenses (FinEx) a new expense category, this is for management supervision/trusteeship fees, interest expenses, bank charges, and other nancial charges. Capital Outlays (CO) for the purchase of goods and services, the benets of which extend beyond the scal year and which add to the assets of the government.

A BRIEFER ON THE PERFORMANCE-INFORMED BUDGET STRUCTURE

The new PIB structure follows the Results Framework or Logical Framework (LogFrame) established for each department and agency through the OPIF.

What is an MFO? A Major Final Output or MFO is a good or service that a department or agency is mandated to deliver to external clients through the implementation of programs, activities and projects.

What is a Performance Indicator? A performance indicator is a characteristic of performance such as quality, quantity, timeliness and cost that measures how efciently a department or agency has delivered its MFOs.

PUBLIC EXPENDITURE MANAGEMENT REFORM Public expenditure management (PEM) should achieve aggregate scal discipline, or spending within governments means; allocative efciency, or spending on the right priorities; and operational efciency, or spending with maximum impact. The ongoing PEM reforms led by DBM aims to strengthen the links between planning,budgeting and implementation. Aside from performance informed budgeting (PIB), the following budgeting schemes served as the tools for crafting the new National Budget. Organizational Performance Indicator Framework (OPIF) Defines the outputs and outcomes that departments and agencies are supposed to achieve for the budgets they get. Sets the appropriate indicators and targets to measure performance. Medium-Term Expenditure Framework (MTEF) Facilitates the determination of available funds for allocation to the key programs of government. Zero-based Budgeting (ZBB) Involves the periodic review/evaluation of agencies major ongoing programs and projects in order to assess the relevance of these programs and projects and to determine whether the level of resources allocated should be kept, adjusted or discontinued. Program Budgeting (PB) Focuses the allocation of the fiscal space or uncommitted resources on the keyprograms of the Aquino administration for a coordinated and holistic approach in programming of funds across departments and agencies. Bottom-Up Budgeting (BuB) Local poverty reduction plans are formulated with strong participation of basic sector organizations and other civil society organizations to ensure that the services of departments/agencies/GOCCs are responsive to the needs of LGUs and communities.

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Integrating PIB and Strategic Planning: The Budget Priorities Framework


In a performance-informed budgeting system, there is a need to integrate performance information with strategic planning. As such, together with NBM 117, the DBM issued NBM 118 which sets the budget priorities for FY 2014 in line with the five Priority Areas (PAs) of President Aquinos Social Contract with the Filipino People5.

The continued expansion of the Philippine economy comes with the challenge of achieving inclusive growth: to create more job opportunities and deliver direct, immediate and substantial benets to the people, especially to the poor and marginalized. Effective public expenditure management should help address this challenge by ensuring that government spends within its means , with maximum impact , and lastly, on the right priorities. In line with our commitment to further optimize the allocation of public resources, the DBM adopted the Budget Priorities Framework (BPF) to identify key priority programs and areas that should guide departments and agencies in strategically planning their respective activities for the year 2014.
5Executive Order No. 43, issued by President Aquino on May 13, 2011, denes the ve KRAs of his Social Contract with the Filipino People. In this issuance, he also organized his Cabinet into ve Cabinet Clusters along these KRAs.

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The New Face of the Budget: Transforming the Face and Character of the Government
It is the hope of the DBM under the current administration that the ongoing public expenditure management reformsspecically, the implementation of the Performance Informed Budget (PIB) structure would bring about positive change through greater transparency, accountability and citizens participation in budgeting. By introducing the PIB, the Aquino Government seeks to reinforce the meaning of accountability as a commitment to perform. In striving to identify direct connections between the resources allocated to a government agency and the outputs and outcomes they intend on delivering, the DBM seeks to enable the public to hold the government accountable for how they spend public funds. The new face of the Budget allows the Executive to ensure that each peso to be spent is tightly linked with its priority outcomes. It enables individual agencies to see more clearly how their activities t in the broader development plan, and how they can collaborate with other agencies in achieving common goals. It likewise enables the Executive to reduce overlaps and eliminate duplicative or inefficient spending. With the new face of the Budget, Congress can now exercise its oversight function over the Budget more effectively. Legislators can now have better information that they can use in evaluating the proposals of each department and agency. And after the Budget is approved, it is our hope that the PIB enables them to check each department and agency if these are delivering the results that they had committed to. Ultimately, the new face of the Budget seeks to empower the peopledirectly and through civil society organizations, grassroots communities, business groups, the media, and other citizens groups. Now with the information available to them, the people can be in a better position to demand a Budget that truly serves their needs. With the PIB, we seek to strengthen the voice of the people in the allocation and use of scarce government resources. With the new face of the Budget and with other public nancial management reforms, DBM hopes to help transform the face and character of the government itself: towards a government that accurately reects and truly serves the peoples interests.

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The New Face of the National Budget: A Briefer on the Performance-Informed Budget Structure Produced by the Philippine Department of Budget and Management Some Rights Reserved under Creative Commons BY-NC-SA 3.0 License 23 July 2013 Production Team: Office of the Secretary Technical Staff and Public Information Unit Zy-za Nadine Suzara Nicholas Price Kurt Dale Tordesillas Francis Capistrano Design and Layout: Gianne Karla Gaoiran (OSEC) Lance Andrew Viado (OSEC) Infographics by Flux Design Labs With Support From: Public Financial Management (PFM) Project Management Unit Training and Information Service Budget Technical Service Fiscal Planning Bureau A Peoples Budget Publication Paggugol na Matuwid sa Budget ng Bayan: Daan Tungo sa Kasaganaan Para sa Lahat