Corruption as an issue of Welfare and Social Justice
“Corruption denies the poor their fair share, and reinforces the gender and social gaps, because corrupt payments are made in exchange for breaking rules of fairness in employment, justice, and procurement." Renaud Meyer, Country Director United Nations Development Programme (UNDP)
Last week I listened to a series of lectures about Budget Reform Advocacy. On the surface, and just from its title and the fact that it took place in the College of Law at the University of the Philippines (where I teach and graduated from), it did not really seem like the lectures held much promise in terms of generating popular interest. This is not to say the forum was in any way lacking in high caliber guests and speakers. On the contrary, the panelists were all luminaries and experts in their field led by Prof. Leonor Briones of the College of Public Administration, Dean Marvic leonen of the College of Law and Rep. Teofisto Guingona III, sponsor of several bills on budget reform.
When I read the UNDP's statement today about the worsening corruption in Philippine government, I realized what the Budget Reform Advocacy forum lacked: a popular medium. At the forum they graciously handed out a half an inch thick packet of handouts from the lecture presentations.
Rep Guingona's lecture revealed how gaps in the Budget process are actually being used to facilitate the Executive's corrupt practices - legally. These three processes are simple, straightforward and standard parts of the budgetary process. Under the Arroyo administration, however, they became the means to exercise (and abuse) the power of the purse.
The first process is impoundment which refers to the Executive's power to defer or altogether restrict the release or expenditure of an otherwise approved budget item. Unspent amounts in the approved budget become savings and when they turn into savings, the executive has the power to re-align the same amount for other purposes in its power to augment the budget.
As Dean Leonen pointed out, unlike the Judiciary which is retrospective in its exercise of its mandate of adjudicating justice, Congress is farsighted because its acts require it to envision rules which can apply for a long period of time. The Executive, however, has to be both for it has to prepare for every contingency.
The point is, impoundment is not necessarily a bad thing and while enacting limits to this power can address key issues such as preventing abuse, we have to be careful about basing our proposals for legislative reform on the performance of one administration.
Rep Guingona did know how to catch the attention of the predominantly UP crowd. One of his examples of how the Arroyo administration abused the power to impound concerned the UP's alleged 1.3 billion savings in 2007. Then Vice President for Finance Florendo was even quoted as saying that he did not know such an amount existed. Apparently available in the 2007 budget, the Department of Budget and Management never gave the UP notice about the same budget and unspent, it turned into savings available to the Executive to spend for whatever purposes it determined.
Guingona's bill introduces a limit to the Executive's powers by requiring Congressional permission for using the budget for other than its intended and original purpose. He pointed out that the "non-impoundment provision" in the general Appropriations Act subjects the President to the rules and regulations of the DBM, an agency under her control.
Another part of the budgetary process Guingona claims the administration has abused and benefited from is the re-enactment of a budget. By their character, re-enacted budgets are supposed to address any failure or delay in the process of passing a budget by automatically adopting the previous year's budget in order to prevent government services and offices coming to a grinding halt.
Here, Guingona pointed out two ways the administration has abused the process, 1) jacking up "savings" by taking advantage of fully paid allocations from the previous year's budget (e.g. infrastructure that has already been paid for) and 2) exercising power over two budgets. And this is where it got even sleazier. As it turns out, there were re-enacted budgets in 2001, 2004 and 2006, years preceding elections.
In 2005 and 2007, the savings corresponded to 17.36 and 16.31 percent respectively of the total budget. Any accountant or auditor will tell you that when it comes to budgeting and planning, unspent amounts or savings are not a "good thing" because they reflect ineptness in the planning and utilization process. Savings here take on a whole other set of meanings because they do not arise out of wise spending or belt tightening measures that eliminate extravagance or unnecessary expenses.
In fact, Guingona pointed out that in 2007, the Philippine Institute for development noted that the government was underfunding the Philippine commitments to the Millennium Development Goals (MDGs) by as much as 95 billion pesos. In the same year, because it preceded a re-enacted budget, the government had 106 billion in "savings." But of course, it gets worse.
While re-enacted budgets are supposed to be temporary, Guingona revealed how the administration has, over the last few years managed to spend the entire re-enacted budget within the first few months of the year before the incoming budget kicked in and was spent all over again. (I know. She did what and how?)
According to former DBM Secretary Emy Boncodin, between January to March 2006, the Executive (through the President) had already spent 37 billion above the legally authorized amount having spent the entire re-enacted budget before the new one kicked in by April. When the new budget kicked in, the amount was spent (without off-setting the previous amounts) all over again.
In his bill, Guingona proposes measures such as limiting re-enacted budgets to essential items, off-setting already released funds and controlling the release of the re-enacted budget on a monthly basis or only 1/12th of the amount.
Needless to say, the the best (or worst) example of how a re-enacted budget was literally plundered is no joke. This is how, Guingona noted, Joc-Joc Bolante was able to take out 1.83 billion in one week in February, within 90 days of the 2004 elections. The amount released to Bolante (in 2 tranches over a week in the second month of 2004) represented over 76% of the total budgetary item it was taken from.
Of course Guingona's revelations would not have been as damning (even if they already established the pattern) of the Arroyo administration's corruption if it did not get corroborated by no less than those who served in the Executive. Former Dep Ed Budget Undersecretary, Luz added that "re-enacted budgets hurt the Dep Ed the most" because the first quarter of the year is also the last quarter of the academic year. He pointed out that while the DBM practice of only releasing 75% of maintenance and operation expenditures is premised on leaving the remaining 25% for later release (at year end) the same has actually been used an excuse to generate "savings." He noted that in the case of re-enacted budgets, the DBM usually refuses to release the remaining 75% to the Dep Ed because the amount pertains to the first quarter which is over anyway.
Luz also pointed out how both the fiscal year and academic year of Dep Ed differs and necessitates multi-year planning. He added that one negative effect of decentralization has been to merely transfer the locus of "corruption" to Division offices which are "awash with cash" because the direct release system only applies to high schools and not elementary schools. Talk about stealing candy from babies.
Unfortunately I could not stay long enough to listen to the rest of the panelists including a representative from the Department of Health (DOH), my favorite department to pick on.
Prof. Briones(who also convenes Social watch Philippines) characterized the budget as "the most powerful public articulation of the fiscal policy of a country." She added that the budget process cannot (and should not) be isolated from the political process of citizens' participation and that "the formulation of fiscal policy is at the dead center of democratic government." (Herring)
I would add, however, that as far as political processes go, engaging the fiscal process (the budget) remains at the top of the list of perhaps the most technical, making it the least accessible to the public for participation. On the other hand, it is not really impossible to study and to engage the budget process (or popularize), given that experts from the academe and other professions can actually unite with basic sectors to do this. Unlike the "vote" which often reduces us into individual ballots and voting blocs, effective budget advocacy has to be multi-sectoral and interdisciplinary.
I have my own continuing issues with traditional economics and the tendency to reduce concepts like "public goods" and "welfare" into monetary or economic distributive terms but such differences are expected in the realm of politics where citizens contribute to shape a vision (and hopefully a real plan to reach) their "common good."
Last week I listened to a series of lectures about Budget Reform Advocacy. On the surface, and just from its title and the fact that it took place in the College of Law at the University of the Philippines (where I teach and graduated from), it did not really seem like the lectures held much promise in terms of generating popular interest. This is not to say the forum was in any way lacking in high caliber guests and speakers. On the contrary, the panelists were all luminaries and experts in their field led by Prof. Leonor Briones of the College of Public Administration, Dean Marvic leonen of the College of Law and Rep. Teofisto Guingona III, sponsor of several bills on budget reform.
When I read the UNDP's statement today about the worsening corruption in Philippine government, I realized what the Budget Reform Advocacy forum lacked: a popular medium. At the forum they graciously handed out a half an inch thick packet of handouts from the lecture presentations.
Rep Guingona's lecture revealed how gaps in the Budget process are actually being used to facilitate the Executive's corrupt practices - legally. These three processes are simple, straightforward and standard parts of the budgetary process. Under the Arroyo administration, however, they became the means to exercise (and abuse) the power of the purse.
The first process is impoundment which refers to the Executive's power to defer or altogether restrict the release or expenditure of an otherwise approved budget item. Unspent amounts in the approved budget become savings and when they turn into savings, the executive has the power to re-align the same amount for other purposes in its power to augment the budget.
As Dean Leonen pointed out, unlike the Judiciary which is retrospective in its exercise of its mandate of adjudicating justice, Congress is farsighted because its acts require it to envision rules which can apply for a long period of time. The Executive, however, has to be both for it has to prepare for every contingency.
The point is, impoundment is not necessarily a bad thing and while enacting limits to this power can address key issues such as preventing abuse, we have to be careful about basing our proposals for legislative reform on the performance of one administration.
Rep Guingona did know how to catch the attention of the predominantly UP crowd. One of his examples of how the Arroyo administration abused the power to impound concerned the UP's alleged 1.3 billion savings in 2007. Then Vice President for Finance Florendo was even quoted as saying that he did not know such an amount existed. Apparently available in the 2007 budget, the Department of Budget and Management never gave the UP notice about the same budget and unspent, it turned into savings available to the Executive to spend for whatever purposes it determined.
Guingona's bill introduces a limit to the Executive's powers by requiring Congressional permission for using the budget for other than its intended and original purpose. He pointed out that the "non-impoundment provision" in the general Appropriations Act subjects the President to the rules and regulations of the DBM, an agency under her control.
Another part of the budgetary process Guingona claims the administration has abused and benefited from is the re-enactment of a budget. By their character, re-enacted budgets are supposed to address any failure or delay in the process of passing a budget by automatically adopting the previous year's budget in order to prevent government services and offices coming to a grinding halt.
Here, Guingona pointed out two ways the administration has abused the process, 1) jacking up "savings" by taking advantage of fully paid allocations from the previous year's budget (e.g. infrastructure that has already been paid for) and 2) exercising power over two budgets. And this is where it got even sleazier. As it turns out, there were re-enacted budgets in 2001, 2004 and 2006, years preceding elections.
In 2005 and 2007, the savings corresponded to 17.36 and 16.31 percent respectively of the total budget. Any accountant or auditor will tell you that when it comes to budgeting and planning, unspent amounts or savings are not a "good thing" because they reflect ineptness in the planning and utilization process. Savings here take on a whole other set of meanings because they do not arise out of wise spending or belt tightening measures that eliminate extravagance or unnecessary expenses.
In fact, Guingona pointed out that in 2007, the Philippine Institute for development noted that the government was underfunding the Philippine commitments to the Millennium Development Goals (MDGs) by as much as 95 billion pesos. In the same year, because it preceded a re-enacted budget, the government had 106 billion in "savings." But of course, it gets worse.
While re-enacted budgets are supposed to be temporary, Guingona revealed how the administration has, over the last few years managed to spend the entire re-enacted budget within the first few months of the year before the incoming budget kicked in and was spent all over again. (I know. She did what and how?)
According to former DBM Secretary Emy Boncodin, between January to March 2006, the Executive (through the President) had already spent 37 billion above the legally authorized amount having spent the entire re-enacted budget before the new one kicked in by April. When the new budget kicked in, the amount was spent (without off-setting the previous amounts) all over again.
In his bill, Guingona proposes measures such as limiting re-enacted budgets to essential items, off-setting already released funds and controlling the release of the re-enacted budget on a monthly basis or only 1/12th of the amount.
Needless to say, the the best (or worst) example of how a re-enacted budget was literally plundered is no joke. This is how, Guingona noted, Joc-Joc Bolante was able to take out 1.83 billion in one week in February, within 90 days of the 2004 elections. The amount released to Bolante (in 2 tranches over a week in the second month of 2004) represented over 76% of the total budgetary item it was taken from.
Of course Guingona's revelations would not have been as damning (even if they already established the pattern) of the Arroyo administration's corruption if it did not get corroborated by no less than those who served in the Executive. Former Dep Ed Budget Undersecretary, Luz added that "re-enacted budgets hurt the Dep Ed the most" because the first quarter of the year is also the last quarter of the academic year. He pointed out that while the DBM practice of only releasing 75% of maintenance and operation expenditures is premised on leaving the remaining 25% for later release (at year end) the same has actually been used an excuse to generate "savings." He noted that in the case of re-enacted budgets, the DBM usually refuses to release the remaining 75% to the Dep Ed because the amount pertains to the first quarter which is over anyway.
Luz also pointed out how both the fiscal year and academic year of Dep Ed differs and necessitates multi-year planning. He added that one negative effect of decentralization has been to merely transfer the locus of "corruption" to Division offices which are "awash with cash" because the direct release system only applies to high schools and not elementary schools. Talk about stealing candy from babies.
Unfortunately I could not stay long enough to listen to the rest of the panelists including a representative from the Department of Health (DOH), my favorite department to pick on.
Prof. Briones(who also convenes Social watch Philippines) characterized the budget as "the most powerful public articulation of the fiscal policy of a country." She added that the budget process cannot (and should not) be isolated from the political process of citizens' participation and that "the formulation of fiscal policy is at the dead center of democratic government." (Herring)
I would add, however, that as far as political processes go, engaging the fiscal process (the budget) remains at the top of the list of perhaps the most technical, making it the least accessible to the public for participation. On the other hand, it is not really impossible to study and to engage the budget process (or popularize), given that experts from the academe and other professions can actually unite with basic sectors to do this. Unlike the "vote" which often reduces us into individual ballots and voting blocs, effective budget advocacy has to be multi-sectoral and interdisciplinary.
I have my own continuing issues with traditional economics and the tendency to reduce concepts like "public goods" and "welfare" into monetary or economic distributive terms but such differences are expected in the realm of politics where citizens contribute to shape a vision (and hopefully a real plan to reach) their "common good."
posted by Carolina S. Ruiz Austria | 5:47 PM
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