PFM Reform Roadmap and Developments

1. PFM Reform Roadmap and Developments (A Presentation for the 27thDepEd National Seminar/Workshop on the Preparation and Reconciliation of the CY 2012 Mid-Year Financial Reports) July 23, 2012, Tagaytay City By: Assistant Secretary Luz M. Cantor 1

2. Presentation Outline PART I: PFM System Gaps/Weaknesses • What is PFM? • What ails the Philippine PFM system? PART II: PFM Roadmap and Developments • Executive Order No. 55 • PFM Reform Roadmap • PFM Governance Structure • PFM Reform Projects

3. PART I PFM GAPS

4. What is PFM? Public Financial Management (PFM) is a system of rules, procedures and practices for government to manage public finances in the areas of: budgeting accounting auditing cash management management of public debt revenue generation public reporting on public sector financial operations 4

5. Benchmarks of a Good PFM • Credibility of the budget • Comprehensiveness and transparency • Policy-based budgeting • Predictability and control in budget execution • Accounting, recording and reporting • External scrutiny and audit

6. PFM Gaps in the Budget Process PREPARATION ACCOUNTABILITY AUTHORIZATION messy traffic of documents lack of budget credibility budget not results based EXECUTION lack of funding predictability weak oversight of Congress and public lack of efficient cash management weak monitoring of contingent liabilities

7. Messy Traffic of Documents In the long run, Philippine PFM needs this kind of information system This is now…

8. Avoid re-enacted budgets, tighten savings concept, flesh out lump sum funds Development of a Government Integrated Financial Management Information System (GIFMIS) Engage CSOs in the budget process STRATEGIES Budget supports targets in the Plan More efficient, transparent and accountable budget execution DESIRED RESULTS Real time reporting on budget utilization by agencies and the Government. Pro-active CSO support for budget transparency

9. Make agency accountability reports performance based; improve costing methodology for outputs Strengthen results orientation of Agency Performance Reviews (APRs) Institutionalize results based budgeting framework through the OPIF Institutionalize Zero Based Budgeting (ZBB) STRATEGIES DESIRED RESULTS Budget decisions based more and more on physical and financial performance

10. Harmonize budgetary and accounting classifications and reporting Codify PFM rules and complete PFM Rules Manual for capacity building Identify common reporting requirements of oversight agencies and line departments STRATEGIES Consolidated FM reporting requirements based on harmonized classification of all accounts Revise New Government Accounting System (NGAS) Manual and chart of accounts DESIRED RESULTS Real-time reports, access to financial data and control of obligations and disbursements for more effective financial control and accountability

11. Study feasibility of using GAA as budget release document and eliminate releases thru SAROs BTr and DBCC to improve cash management practices Review validity of SAROs and NCAs DBM and DBCC to approve allotment and cash release program at start of year and update midyear STRATEGIES DESIRED RESULTS Predictable and streamlined allotment and cash release programs throughout the year to support agency operations based on DOFs reliable revenue forecasting and programming.

12. Capacity building for Congress and CSOs STRATEGIES DESIRED RESULTS Oversight Committees in Congress and the public use DBM and COA reports more extensively

13. Complete inventory of agency bank accounts and rationalize their number Shift to transaction-based fees for government banking arrangement Improve Treasury Cash Management operations STRATEGIES Improved Cash Programming by BTr and DBM DESIRED RESULTS Predictable and stable revenue inflows and cash disbursements

14. Compel agencies to disclose their contingent liabilities Make DOF the authority on issuance of policy on contingent liabilities (for GOCCs and NGAs) STRATEGIES Monitor and report regularly contingent liabilities Improved system for capturing and reporting all liabilities of government entities; real and contingent Develop database on contingent liabilities DESIRED RESULTS National Government able to manage all its financial exposure

15. Where are we now? (PFM Gaps and weaknesses) Where are we going? How are we going to achieve the reforms?

16. PART II PFM rOADMAP AND DEVELOPMENTS

17. PFM Reform Roadmap • Master plan for improving the financial management system of the government • Jointly formulated and approved by fiscal oversight agencies (COA, DBM, DOF, BTr) from 2009 to 2011

18. PFM reforms support Aquino Administration priorities “Kung walang corrupt, walang mahirap” Anti-corruption/ Transparent, Accountable & Participatory Governance Poverty Reduction & Empowerment of the Poor Rapid, Equitable& Sustained Economic Growth Integrity of the Environment/ Climate Change Mitigation & Adaptation Just, Inclusive & Lasting Peace & the Rule of Law 5 Priority Areas Inclusive Growth and Poverty Reduction Societal Goal Sector Goal Good Governance Fiscal Discipline Improve efficiency, accountability and transparency of public fund use to ensure direct, immediate and substantial delivery of public services specially to the poor. PFM Goal

19. Executive Order 55 Directing the Integration and Automation of Government Financial Management System (signed by President Benigno S. Aquino on 6 September 2011) 1. Installation of PFM systems: • Government Integrated Financial Management Information System (GIFMIS) • Treasury Single Account (TSA) • Efficient Budget Release System • Systematic Financial and Physical Reporting and Auditing

20. EO 55 2. Created the PFM Committee (formerly the GIFMIS Committee) • Devise a 5-year plan for the development and installation of GIFMIS • Oversee the implementation of the PFM Reform Roadmap • Shepherd and champion the passage of supporting legislation needed in Congress • Coordinate budgetary and donor funding

21. PFM Governance Structure PRINCIPALS (COA Chair, DBM and DOF Secretary) PFM COMMITTEE PROJECT MANAGEMENT OFFICE PROCUREMENT UNIT PIU LIABILITY MANAGEMENT PROJECT PIU ACCOUNTING AND AUDITING REFORMS PROJECT PIU IMPROVEMENT OF TREASURY CASH MANAGEMENT PROJECT PIU BUDGET REPORTING & PERFORMANCE STANDARDS PROJECT PIU GIFMIS DEVT PROJECT PIU CAPACITY BUILDING PROJECT TRACK 1 TRACK 2

22. Funding Support AusAID A$30M (P1.2B) Facility Grant GOP P978.5 (2012 Budget eGov Fund) WB-IDF Intl Devt Fund EU LGU PFM ADB

23. Outputs and Results 3. Capacity Building for Congress and CSOs GIFMIS Real Time Financial Information 4. Improve Treasury Cash Management Operations Contingent Liabilities Treasury Single Account 5. Develop & Implement GIFMIS Results Based Budgeting 2. Review Fund Release Procedures 1. Build up Credibility of PFM PFM REFORMS ROADMAP Outputs Better Mgt of Contingent Liabilities Major Strategies

24. Initial PFM Reform Projects

25. Improvement of Treasury Cash Management Operations Project Objective • to increase operational efficiency of implementing agencies while minimizing cost of treasury operations Output and Timeframe • a system of cash management that can keep daily cash balances of government at appropriate levels • Treasury Single Account (TSA) in place by 2014

26. Budget Reporting and Performance Standards Project Objective • to produce quarterly reports within 2 weeks of next quarter (short term) • to generate real-time reports on budget utilization and financial performance through GIFMIS (long term) Output and Timeframe • Consolidated and agency level budget execution and budget utilization reports published in COA and DBM website • Harmonized forms by Dec 2012 • Unified Account Code Structure • Framework on Performance Standards implemented by March 2014

27. GIFMIS Development Project Objective • to facilitate physical development of a working GIFMIS that can collect and organize financial information in a central database Output and Timeframe • Web-based GIFMIS Version 1 – initially for national government agencies (for completion in 8 months) • Web-based GIFMIS Version 2 – for all government agencies (operational by 2016)

28. Liability Management Project Objective • to put in place a system for managing government's exposure to contingent and other liabilities Output and Timeframe • a complete list of liabilities of the national government, real and contingent (immediate) • LM system established by 2013

29. Accounting and Auditing Reform Project Objective • continue to enhance government accounting systems and strengthen external audit capacity Outputs and Timeframe • Harmonized PGAS with IFRS and IPSAS by June 2012 • Enhanced NGAS for GIFMIS Track 2 by Dec 2012 • Guidelines on the audit of multi-sectoral programs/projects • Revised guidelines on participatory audit • Intensified conduct of IT/ information systems audit (2012-15)

30. Capacity Building Project Objective • develop skills of personnel of oversight and implementing agencies on PFM competencies • build stakeholder support for the reforms Target Participants • personnel of the oversight and implementing agencies • legislators • civil society organizations • other stakeholders

31. PFM Reform Roadmap Leading the way to the right path Improved Public Service Beneficiary • Direct • Immediate • Substantial Improved efficiency, accountability and transparency of public fund use The Filipino People especially the poor

32. ‘…it is incumbent on all of us to confidently assert that governments that do things right should have no problem keeping our fellow citizens informed and engaged, and are thus, partners of government in its fundamental task of addressing the needs of the people. The result is an empowered citizenry, which is the essential aspiration at the heart of the digital revolution sweeping the globe...’ President Benigno S. Aquino III Speech at "The Power of Open: A Global Discussion"Google New York, 75th Ave., New York 19 September 2011