PH Performance in the 2017 OBI: Good Enough

Despite a tough political transition, the Philippines maintained substantial levels of fiscal transparency: a good enough performance. Still, the government could have done much better. Fundamental gaps persist, limiting the ability of citizens to know where their taxes really went. For my first blog post (in a decade I think), I dive deep into the Philippines’ performance in the 2017 Open Budget Index (OBI).


Last Tuesday, the 2017 Open Budget Survey (OBS)—the only regular and comparative metric of the state of global budget openness that is sponsored by the International Budge Partnership (IBP)—was launched in the Philippines. The La Salle Institute of Governance (LSIG), IBP’s local partner, put together a cast of top players in Philippine public finance—no less than the Budget and Management Secretary, the Chairman of the House Committee on Appropriations, and the Chairman of the Commission on Audit—to talk about how the country fared in the OBS and to give a sense of where budget reforms are headed.

We’ve kept the momentum despite a tough transition.

IBP reported last week that the Philippines’ score in the OBI (the component of the OBS which rates the availability of budget information) improved from 64 (of 100) in 2015 to 67 in 2017. With a 3-point climb, the country neatly keeps within the elite group of countries with adequate levels of budget transparency: this, while the global average modestly declined by two points. As expected, the government celebrated this result as a testament to Dutertean governance; while some in civil society cautioned against such breast-beating.

The beauty of the Philippines’ 2017 OBI score of 67 is that it reflects the shared performance of the Aquino and Duterte administrations.

Screenshot from IBP website.

So how did the Philippines fare? Good enough, I think, because at least the Philippines didn’t suffer the fate of other countries whose scores plummeted during change in administrations, like former Asian topnotchers India and South Korea(on that note, check out Paolo de Renzio’s piece on the volatility of fiscal transparency). Bear in mind that the covered period—documents published and actions taken from July 2015 to December 2016—is a political transition. A tough political transition at that.

The beauty of the Philippines’ 2017 OBI score of 67 is that it reflects the shared performance of the Aquino and Duterte administrations. “We are thrilled that the IBP has recognized our efforts in sustaining and improving on past reforms, as well as introducing new reforms,” said Budget Secretary Benjamin E. Diokno.

It’s a good enough reason to celebrate. In summary, here’s how the Philippines’ OBI score improved by +3 points:

2015 2017 Impact to OBI Score
PH Open Budget Index Score 64 67 +2.8
Pre-Budget Statement (PBS) 61 83 +1.2
Executive Budget Proposal (EBP) 64 77 +6.4
Enacted Budget (EB) 45 50 +0.3
In-Year Reports (IYR) 74 81 +0.6
Mid-Year Review (MYR) 63 0 -5.2
Year-End Report (YER) 64 62 -0.3
Audit Report (AR) 67 53 -0.9
Citizens’ Budget (CB) 67 84 +0.6
Source of data: survey.internationalbudget.org; impact to OBI score are the authors’ computations. See the IBP library and the DBM website for the budget documents.

Good enough, but we could’ve done better.

The political transition, however, still put a dampener on fiscal transparency. After publishing all eight essential budget documents in 2015, it missed the deadline for publishing the Mid-Year Review. The Philippines could have scored 72 in the 2017 OBI had this report been produced on time.

Secretary Diokno acknowledged the “missed opportunity” in 2017 and assured that the government is targeting a higher score in the next two rounds. It is also rolling out policy reforms–most notably, the Budget Reform Bill–to lock in the improved state of fiscal transparency.

Bringing the citizen to the center of the Budget process is still a work in progress.

LSIG’s Kiko Magno presents the OBS results

In a case study that I wrote for IBP on budget transparency in the Philippines, I pointed out that fundamental gaps in the availability of budget information remain after the Philippines’ breakthrough performance in 2015. In particular, the Budget does not yet clearly show the link between medium-term policy goals and annual financial allocations. The government’s reporting of actual spending outturns not only lacks detail but is also disjointed from the approved Budget. And while the government’s efforts to bring budget information closer to citizens is laudable, bringing the citizen to the center of the Budget process itself is still a work in progress to say the least.

Unfortunately, some of these gaps persist in 2017.

A comprehensive Budget that reflects continuity of reforms. The proposed Budget, or the executive budget proposal in OBS parlance, has the most weight in the OBS with half of the total OBS questions on transparency. Adding the pre-budget statement and the enacted budget, the budget information published in the budget preparation and legislation phases account for 66 of the 109 survey questions that feed into the OBI.

The good news is that the Philippines’ transparency score in upstream PFM improved dramatically by +13 points to 75 in 2017.

Transitioning from a Budget that presents the mumbo-jumbo of thousands of line items that don’t make sense at first glance, to a leaner but more intuitive structure of programs linked to results will help strengthen budget integrity.

2015 2017
Budget Information in Upstream PFM 62 75
PBS: 2017 Budget Priorities Framework 61 83
EBP: 2017 Budget of Expenditures and Sources of Financing and Supporting Documents 64 77
EB: 2016 General Appropriations Act 45 50
By Information Category
Expenditure 61 85
Revenues 72 79
Debt 78 83
Policy & Performance 61 86
Beyond the Core 36 36
Others 100 100
Source of data: survey.internationalbudget.org and author’s computations. Information categories used are based on the rubric of Friedman and Sarr (2016), with some modifications (See Capistrano, 2017).

The improved comprehensiveness of the proposed Budget contributed +6 points to the overall OBI score. In particular, additional tables in the Budget of Expenditures and Sources of Financing (BESF) gave more detail on fiscal estimates, proposed expenditures, and their macroeconomic assumptions; , to an extent, the National Expenditure Program (NEP) sustained presentation of performance information; and the relatively new Technical Notes to the Proposed Budget, first introduced in 2015, provided the much-needed narrative explanations behind the numbers in the BESF and the NEP.

An additional point came from the 2017 Budget Priorities Framework (Philippines’ pre-budget statement), published before the transition in 2016, which guides the budget preparation process. This document’s comprehensiveness massively improved mainly due to the (finally!) inclusion of medium-term expenditure estimates. The enacted budget continues to under-perform, although this is mainly a function of our legal framework on PFM where the budget law only contains appropriations for spending, not congressional authorities for revenue and debt levels which are subject to other laws.

The improved quality of information in the Budget only shows how fundamental PFM reforms like the Two-Tier Budgeting Approach and Performance Informed Budgeting (which are rooted in earlier reforms) have been sustained across administrations. Perfecting the upstream OBI score may not be necessary for now (though eventually, we’ll need to confront these nosebleed-inducing stuff: off-budget accounts, contingent liabilities, tax expenditures, etc.), but improving the way the existing information is presented is much more urgent. Transitioning from a Budget that presents the mumbo-jumbo of thousands of line items that don’t make sense at first glance to a leaner but more intuitive structure of programs linked to results will, in my view, lay the foundations for addressing the budget integrity gap that is discussed below.

But weak reporting on spending and their results also continues. The 2016 transition had a clear casualty: the 2016 Mid-Year Report, which was published a month too late to make the cutoff. What I heard is that the production of the report was unfortunately given less priority during the very busy transition period, when the first Dutertean Budget was being deliberated in Congress and everyone was too busy to pay attention. The comprehensiveness of the 2015 Year-End Report—published in very late 2016—and the 2015 Audit Reports also suffered declines. The improvement in the timeliness of the monthly and quarterly fiscal reports, as well as the additional information they present, were not enough to offset the losses.

As a result, the level of transparency during the budget execution and accountability phases—during which public funds are actually collected or borrowed, spent, and accounted for—deteriorated severely by -17 points to 50.

The data contained in budget reports should easily be comparable to the Budget as enacted: down to the programs and the agencies’ performance targets. Improving budget integrity should be prioritized.

2015 2017
Budget Information in Downstream PFM 67 50
IYRs: various monthly & quarterly reports by the DBM, Department of Finance, & Bureau of Treasury 74 81
MYR: 2016 Mid-Year Report of the Development Budget Coordination Committee 63 0
YER: 2015 YER of the Development Budget Coordination Committee 64 62
AR: various 2015 reports of the Commission on Audit 67 53
By Information Category
Expenditure 60 43
Revenues 85 56
Debt 75 75
Policy & Performance 60 40
Beyond the Core 56 56
Others 58 46
Source of data: survey.internationalbudget.org and author’s computations. Information categories used are based on the rubric of Friedman and Sarr (2016), with some modifications (See Capistrano, 2017).

The comprehensiveness of reporting on actual spending suffered, particularly of expenditures at the level of programs compared against how much was appropriated for these in the Budget. Equally weakened are the reporting on revenue collections and on how fiscal resources helped achieve policy goals and performance targets. Although the timeliness of in-year reports improved, the Year-End Report is still published too late to matter during the Congressional budget deliberations. And yes, the Mid-Year Report—which should be published early enough to forewarn policymakers, investors, and other users of any change in fiscal targets—was published too late to even matter.

The performance of the audit reports of the Commission on Audit (CoA) is a curious case. For one, its score declined only because CoA supposedly does not anymore publish executive summaries for its audit reports (I don’t agree with this finding though). Moreover, the coverage of audited expenditures has continued to be less than 100 percent, which is reasonable given the broad mandate of CoA to audit up to the barangay level. But one key weakness of the audit reports is not the CoA’s responsibility: the lack of reporting by the executive of the actions it intends to take and other comments in response to the audit findings. That, I think, is a practice worth adopting.

The silver lining is that this isn’t the worst performance of transparency of downstream PFM since the 2006 OBI. All four reports were still published though one was late (it used to be just two before—the in-year and audit reports). But a few important steps need to be taken. First, the Mid-Year and Year-End Reports need to be mainstreamed: their publication should be mandated by law and enough staffing (from DBM and the other fiscal agencies) should be assigned to produce these. Second, perhaps they Mid-Year and Year-End Reports (and also the Audit Reports) should be redesigned or repackaged to be suited to the intended users—the legislators, who are mostly as layman as their constituents are. And to achieve that, the data contained in these reports should easily be comparable to the Budget as enacted: down to the programs and the agencies’ performance targets. Improving budget integrity should be prioritized.

The People’s Budget has arrived (although it might be too glossy). The result that I have been most giddy about is the improvement of the score of the Philippines’ citizens budget by +17 points to 84. This brings the Philippines to 3rd in the world: tied with the Dominican Republic, and after Mexico (1st) and Sweden and Morocco (tied at 2nd). So, after my crack team called #teamwonderful and I left the DBM (that story’s for another day), the People’s Budget finally arrived. And I’m equally happy that the folks we left at DBM continue to publish it.

The true purpose of the People’s Budget is to reach the ordinary citizen. What kind of budget information does s/he need?

2016 and 2017 PBs.png

The People’s Budgets during the transition; with sample pages on macroeconomic assumptions (!!!) and priority programs.

Even so, I quite disagree with the score: it should be higher at 92 (and we should be tied at 2nd too). The OBS suggests that the comprehensiveness of the information presented by the People’s Budget was reduced due to the lack of presentation of macroeconomic assumptions. See infographic above as exhibit A. Apart from that, what’s keeping us from matching Mexico’s 100 points is that we’ve yet to publish citizens’ budgets in the downstream phases. I’m hoping that my former colleagues at DBM finally make our vision for a People’s Budget Report a reality. I also hope that CoA heeds the clamor for a counterpart citizens’ budget for its audit reports (apart from making sure that they always have executive summaries).

But there are more things that keep us away from the Mexican gold standard, which I’ll write about in detail in the future. Suffice it to say for now that the true purpose of the People’s Budget is to reach the ordinary citizen. What kind of budget information does s/he need? What are her/his issues or advocacies? What does s/he read or watch? How does s/he spend her/his time online? Will a glossy magazine-style publication really appeal to her/him, or reach her/him in the first place? Some serious thought should be put into this, of course in close consultation and feedback with the citizens themselves.

Shoot for greater accessibility, ‘actionability,’ and accountability.

Achieving a score of 67 and maintaining “substantial” levels of budget transparency is good enough, but we know that we could do much, much better. Mexico and Georgia, who were were roughly at par with the Philippines in the 2015 OBI with 66 and 67, respectively, sped away to 79 and 82. It behooves the Philippines to look at how they achieved it in a short span of time. The good news is we were able to pull off a 16-point sprint before. But pulling that off now to 81 (the minimum score for the “extensive” transparency category) is trickier.

The OBI rates the availability of budget information. Whether such information is accessible and actionable is something else. Only when citizens are empowered by such information can public accountability happen.

Budget Sec. Ben Diokno, House Rep. Karlo Nograles and Audit Chairman Mike Aguinaldo tackle the way forward.

More than trying to best other countries in the OBI, greater transparency should lead to more robust citizen participation in and stronger institutional oversight on the use of public funds. The OBI, after all, rates the availability of budget information through the eight budget documents. Whether such information is accessible (i.e., understandable, comparable, and manipulable) and actionable to the citizen is something else (see Paolo de Renzio and Massimo Mastruzzi’s paper on the supply-demand gap).

Only when citizens—directly and through their representatives—are empowered by such information can public accountability happen.

-30-

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s