VZCZCXRO5290
OO RUEHCHI RUEHFK RUEHHM RUEHKSO RUEHNAG RUEHPB
DE RUEHML #0549/01 0650141
ZNR UUUUU ZZH
O 050141Z MAR 08
FM AMEMBASSY MANILA
TO RUEHC/SECSTATE WASHDC IMMEDIATE 9986
RUEATRS/DEPT OF TREASURY WASHDC IMMEDIATE
INFO RUCPDOC/USDOC WASHDC IMMEDIATE
RUEHZU/ASIAN PACIFIC ECONOMIC COOPERATION IMMEDIATE
RHHMUNA/CDR USPACOM HONOLULU HI//FPA//
UNCLAS SECTION 01 OF 02 MANILA 000549
SIPDIS
SIPDIS
SENSITIVE
STATE FOR EEB/IFD/OMA Andrew Snow and Richard Figueroa
STATE ALSO PASS USAID FOR AA/ANE, AA/EGAT, DAA/ANE
STATE ALSO PASS EXIM, OPIC, AND USTR
TREASURY FOR OASIA
USDOC FOR 4430/ITA/MAC/ASIA & PAC/KOREA & SE ASIA/ASEAN
E.O. 12958: N/A
TAGS: ECON EAID PGOV RP
SUBJECT: PHILIPPINES - 2008 FISCAL TRANSPARENCY UPDATE
Ref: State 16737
Sensitive but Unclassified
1. (U) In response to reftel request, following is an updated
narrative on fiscal transparency for the Philippines.
2. (SBU) Begin text:
The current legal and regulatory framework for fiscal transparency
and accountability is generally adequate although inconsistently
applied, especially at the sub-national levels of government.
National government budget data is available in a timely manner and
in significant detail during the planning stage but transparency
during budget execution and monitoring of project performance is
still lacking. Compliance with transparency requirements regarding
lump sum budget allocations (such as congressional funds and
legally-mandated national government transfers to local government
units) is weak and inconsistent. The International Monetary Fund
reports on Philippine observance of fiscal transparency standards
are available on its website.
Relevant laws and regulations governing the public disclosure of
revenues and expenditures in national budgets are:
-- The Philippine Constitution: Subject to reasonable conditions
prescribed by law, Article II, Sec. 28 requires public disclosure of
all transactions involving the public interest. Article III, Sec. 7
recognizes the people's right to information on matters of public
concern and their right to access official records, documents
pertaining to official acts, transactions and decisions, as well as
government research data. Article VII, Sec. 22 of the Constitution,
as well as Executive Book VI, Chap. 3, Sec. 11 of Executive Order
292 (the Administrative Code), requires the President of the
Philippines to submit to the Philippine Congress, within thirty days
from the opening of every regular session, a detailed Budget of
Expenditures and Sources of Financing (BESF). The BESF is published
in book form and is accessible through the Department of Budget and
Management web site (www.dbm.gov.ph) in accordance with the
constitutional provisions on public disclosure and access to
information.
-- The Administrative Code (Book II, Chap.5, Sec. 18): Unless
otherwise specified, a law shall take effect 15 days after
publication in the Official Gazette or in a paper of general
circulation. In accordance with this provision, the national budget
bill approved by the Philippine Congress and subsequently signed
into law by the President of the Philippines is published as a
special edition of the Official Gazette.
-- Presidential Decree 1445 (Government Auditing Code, Sec. 41):
Not later than September 30 annually, the Commission on Audit must
submit to the President and to the Philippine Congress an annual
report on the financial condition and the results of operation of
all government agencies (national government, local governments, and
government-owned and controlled corporations). The annual reports
are available in book form and are accessible through the Commission
on Audit web sire (www.coa.gov.ph) in accordance with the
constitutional provisions on public disclosure and access to
information.
The BESF also summarizes the national government's proposed budget
by sector and by expenditure class, as well as outlines the national
government's fiscal program (revenues, expenditures, and deficit).
Budgetary support (subsidy, equity, lending) to government firms and
transfers to local government units are specified in the national
budget.
The Department of Finance (www.dof.gov.ph) and its attached agency,
the Bureau of the Treasury (www.treasury.gov.ph), report the
National Government's revenues, expenditures, and deficit monthly
(with a three-week lag) through press releases and also post the
information on their websites. Assessments regarding fiscal targets
are released on a quarterly basis. Although generally reliable,
these in-year cash operation reports lack detail, making it
difficult to monitor and assess whether expenditure goals and
priorities set forth in the approved national budget are being met
during budget implementation. Lack of capacity, inconsistent
political will, and vested interests have combined to limit the
degree to which budget data is transparent, timely, and widely
available, particularly during budget execution. In-year reports to
summarize and monitor the financial/fiscal performance of
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sub-national government units are not always publicly available and
sub-national agencies generally suffer from weak internal audit and
financial controls.
National government debt statistics on contingent liabilities are
limited to loans incurred by government-owned and controlled
enterprises that the national government guarantees. The
information does not reflect the potential fiscal risks posed by
contingent liabilities arising from performance undertakings under
various Build-Operate-Transfer contracts, although new rules limit
the extent to which the government can guarantee obligations made
under these arrangements.
The Philippine government has initiated, and is working to
implement, a number of important measures to improve fiscal
transparency, expenditure management, and accountability. These
include the development of a multi-year, performance-based budgeting
framework (Organizational Performance Indicators Framework); a
Sectoral Effectiveness and Efficiency Review for program evaluation;
and an IT-based budget execution and accountability system. Given
the substantial share of national government revenues allotted to
local government units under the Local Government Code, the
Government is also working to improve the financial database for
local governments to better measure their performance. To
strengthen coordination, improve efficiency, and promote consistency
with development goals, local and national government oversight
agencies (i.e., the Department of Finance, Department of Budget and
Management, the National Economic and Development Authority, and the
Department of Interior and Local Government) signed a joint
memorandum circular in March 2007 towards harmonizing procedures for
local planning, investment programming, revenue administration, and
budgeting.
President Gloria Macapagal-Arroy signed the Government Procurement
Reform Act in January 2003 to rationalize and standardize a myriad
of confusing procurement laws and regulations and to stem
significant procurement-related losses. The privatization framework
(including Build-Operate-Transfer arrangements and related schemes)
is also set out in considerable detail in legislation and
implementing rules and regulations. However, controversies surround
a number of privatization deals and businesses continue to raise
concerns about irregularities in government procurement, indicating
gaps between laws/regulations and their implementation and
enforcement.
Recent and/or ongoing U.S. government-assisted programs that promote
accurate disclosure of revenues and expenditures in the national
budgets of the Philippines include:
-- Working with civil society groups to promote transparency in
government by launching a website to provide the public and the
media information on the national budget and to enable monitoring of
budget formulation and the expenditure process.
-- Training for government procurement officials on the
implementation of the Government Procurement Reform Act.
-- Assisting in revenue enhancement and reorganization of the
internal revenue agency, focusing on developing benchmarks to track
and monitor tax payments.
-- Training local government units on public resource management
and on administrative review, and audit procedures, as well as
supporting the Local Government Guaranty Corporation in implementing
an internal credit screening and rating system specializing in
credit and management evaluation.
The Australian Agency for International Development, the World Bank,
and the Asian Development Bank also have assisted efforts on
improving transparency, working with the Department of Budget and
Management of the Philippines and other development partners.
End text.
Kenney