Advisories and Updates 2014

Advisories and Updates

Budget DivisionBudget Management Service 05 February 2014

Budget Accountability

It is one (and may be the last) among the four phases of the Budget Cycle.

A budget (derived from old French word “bougette”, purse) is a quantified financial plan for a forthcoming accounting period.

The Philippine budget is considered the most complicated in the world, incorporating multiple approaches in one single budget system: line-item (budget execution), performance (budget accountability), and zero-based (budget preparation).

• Line-item Budgeting – is where a mass of numbers are presented in detail without a clear story on where funds are going.

• Performance-Informed Budgeting (PIB) is a budgeting approach that uses performance information to assist in deciding where the funds will go.

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.

Zero-based budgeting is an approach to preparing cash flow budgets and operating plans wherein every line item of the budget must be approved, rather than only the incremental changes from the previous budget.

A budget is a governmental plan stated in monetary terms.

ACCOUNTABILITY

Accountability is the acknowledgment and assumption of responsibility for actions, products, decisions, and policies including the administration, governance, and implementation within the scope of the role or employment position and encompassing the obligation to report, explain and be answerable for resulting consequences.

• In governance, accountability has expanded beyond the basic definition of "being called to account for one's actions”.

It is frequently described as an account-giving relationship between parties.

Example:The PPSC is accountable to The People when PPSC is obliged to inform The People about its (past or future) actions and decisions, to justify them, and to suffer punishment (ridicule) in case of eventual misconduct (failure).

Accountability as defined by theDepartment of Budget Management

It is a review of the activity structure of each PAP and identify which unit is responsible for undertaking the activities in order to establish responsibility and ensure that PAPs are aligned with the operational/functional organization of the department.

Accountability cannot exist without proper accounting practices; in other words, the absence of accounting means the absence of accountability.

Mechanisms to Ensure Budget Accountability

Cognizant of the fact that no propitious results can be obtained, even with maximum funding, if agency efficiency is low and funds are wastefully spent, systems and procedures are set in place to monitor and evaluate the performance and cost effectiveness of agencies. These activities are subsumed within the fourth and the last phase of the budget process-the budget accountability phase.


At the agency level, budget accountability takes the form of management’s review of actual performance or work accomplishment in relation to the work targets of the agency vis-à-vis the financial resources made available.


Also, detailed examinations of each agency’s book of accounts are undertaken by a resident representative of the Commission on Audit (COA) to ensure that all expenses have been disbursed in accordance with accounting regulations and the purpose(s) for which the funds have been authorized.

Legal and Constitutional Provisions on

Budget Accountability

EXECUTIVE ORDER NO. 292INSTITUTING THE "ADMINISTRATIVE CODE OF 1987"

BOOK VINATIONAL GOVERNMENT BUDGETING

CHAPTER 6BUDGET ACCOUNTABILITY

Section 51. Evaluation of Agency Performance. - The President, through the Secretary shall evaluate on a continuing basis the quantitative and qualitative measures of agency performance as reflected in the units of work measurement and other indicators of agency performance, including the standard and actual costs per unit of work.

Section 52. Budget Monitoring and Information System. - The Secretary of Budget shall determine accounting and other items of information, financial or otherwise, needed to monitor budget performance and to assess effectiveness of agencies operations and shall prescribe the forms, schedule of submission, and other components of reporting systems, including the maintenance of subsidiary and other recording which will enable agencies to accomplish and submit said information requirements: provided, that the Commission on Audit shall, in coordination with the Secretary of Budget, issue rules and regulations that may be applicable when the reporting requirements affect accounting functions of agencies: provided, further, that the applicable rules and regulations shall be issued by the Commission on Audit within a period of thirty (30) days after the Department of Budget and Management prescribes the reporting requirements.

Section 53. Monitoring of Expenditures. - Expenditures of national government agencies shall be recorded so as to identify expenditures as classified into such categories as may be determined by the Department of Budget and Management, including but not limited to the following: (1) agency incurring the obligation, (2) program, project and activity, (3) object of expenditure, including personal services, operating and maintenance expenditures, equipment, and capital outlays, (4) region or locality of use, (5) economic or functional classification of the expenditure, (6) obligational authority and cash transactions arising from fund releases, and such other classifications as may be necessary for the budget process. xxx

Section 54. Standard Costs. - The Department of Budget and Management shall develop standard costs for duly approved units of work measurement for each agency's budgetary projects or activities. These standard costs shall be compared with actual unit costs and utilized in the evaluation of agency budgetary performance.

Section 55. Review of Budgetary Programs. The Secretary of Budget shall conduct a continuing review of the budgetary program and project structure of each department, office or agency, the result of which shall be the basis for modifying or amending such structure for incorporation in the President's budget proposals to the Congress.

Section 56. Semi-Annual Report on Accomplishments of Government Agencies. - The heads of departments, bureaus, offices or agencies of the government shall submit a semi-annual report of their accomplishments, both work and financial results, in accordance with such content and format as may be prescribed by the Secretary. These reports shall be designed and use for the purpose of monitoring the efficiency and effectiveness with which budgeted funds are being utilized, and generally for verifying the attainment of goals established in the budget process.

Section 57. Failure to Submit Reports. - Failure on the part of agency heads, chief accountants, budget officers, cashiers, disbursing officers, administrative and personnel officers, and responsible officers of departments, bureaus, offices and agencies to submit trial balances, work and financial plans, special Budgets, reports of operation and income, plans, special budgets, reports of operation and income, current agency plantilla of personnel and such other reports as may be necessary and required by the Department of Budget shall automatically cause the suspension of payment of their salaries until they have complied with the requirements of the Department of Budget.

(continuation)No appropriation authorized in the General Appropriations Act shall be made available to pay the salary of any official or employee who violates the provisions of this section, in addition to any disciplinary action that may be instituted against such erring official or employee.

BOOK VTitle I

CONSTITUTIONAL COMMISSIONSSubtitle B

THE COMMISSION ON AUDITCHAPTER 1

GENERAL PROVISIONS

Section 1. Declaration of Policy. - All resources of the government shall be managed, expended or utilized in accordance with law and regulations and safeguarded against loss or wastage through illegal or improper disposition to ensure efficiency, economy and effectiveness in the operations of government. The responsibility to take care that such policy is faithfully adhered to rests directly with the chief or head of the government agency concerned.

CHAPTER 9ACCOUNTABILITY AND RESPONSIBILITY FOR GOVERNMENT FUNDS

AND PROPERTY

Section 50. Accountable Officers; Board Requirements. -

(1) Every officer of any government agency whose duties permit or require the possession or custody government funds shall be accountable therefor and for safekeeping thereof in conformity with law; and

(2) Every accountable officer shall be properly bonded in accordance with law.

Section 51. Primary and Secondary Responsibility. –(1) The head of any agency of the Government is immediately and primarily responsible for all government funds and property pertaining to his agency;(2) Persons entrusted with the possession or custody of the funds or property under the agency head shall be immediately responsible to him, without prejudice to the liability of either party to the Government.

Section 52. General Liability for Unlawful Expenditures. - Expenditures of government funds or uses of government property in violation of law or regulations shall be a personal liability of the official or employee found to be directly responsible therefor.

Section 53. Prohibition Against Pecuniary Interest. - No accountable or responsible officer shall be pecuniary interested, directly or indirectly, in any contract or transaction of the agency in which he is such an officer.

1987 CONSTITUTION OF THE REPUBLIC OF THE PHILIPPINES

ARTICLE IIDECLARATION OF PRINCIPLES AND STATE POLICIES PRINCIPLES

Section 1. The Philippines is a democratic and republican State. Sovereignty resides in the people and all government authority emanates from them.

Section 27. The State shall maintain honesty and integrity in the public service and take positive and effective measures against graft and corruption.

Section 28. Subject to reasonable conditions prescribed by law, the State adopts and implements a policy of full public disclosure of all its transactions involving public interest.

ARTICLE XIACCOUNTABILITY OF PUBLIC OFFICERS

Section 1. Public office is a public trust. Public officers and employees must, at all times, be accountable to the people, serve them with utmost responsibility, integrity, loyalty, and efficiency; act with patriotism and justice, and lead modest lives.

Section 2. The President, the Vice-President, the Members of the Supreme Court, the Members of the Constitutional Commissions, and the Ombudsman may be removed from office on impeachment for, and conviction of, culpable violation of the Constitution, treason, bribery, graft and corruption, other high crimes, or betrayal of public trust. All other public officers and employees may be removed from office as provided by law, but not by impeachment.

Section 4. The present anti-graft court known as the Sandiganbayan shall continue to function and exercise its jurisdiction as now or hereafter may be provided by law.

Section 5. There is hereby created the independent Office of the Ombudsman, composed of the Ombudsman to be known as Tanodbayan, one overall Deputy and at least one Deputy each for Luzon, Visayas, and Mindanao. A separate Deputy for the military establishment may likewise be appointed.

Section 15. The right of the State to recover properties unlawfully acquired by public officials or employees, from them or from their nominees or transferees, shall not be barred by prescription, laches, or estoppel.

Section 17. A public officer or employee shall, upon assumption of office and as often thereafter as may be required by law, submit a declaration under oath of his assets, liabilities, and net worth. xxx

In a very strict sense, financial and non-financial accountabilities of public officers and employees present itself during the budget execution phase of the budget cycle.

The underlying reason is that the occasion to commit misuse and misappropriation of funds is during the period when programs/activities/projects are implemented by the Agency through the use of government resources.

And in the event that the Agency miserably failed to perform its mandate despite being provided with sufficient resources, its very existence may come to an end…

Conversely, the accountability of the Agency presents itself when its performance is reviewed in relation to its mandate as enjoined by law...

…through legislation or executive fiat, its functions may be transferred to an existing Agency or to a newly-

created Agency

Section 31. Continuing Authority of the President to Reorganize his Office. - The President, subject to the policy in the Executive Office and in order to achieve simplicity, economy and efficiency, shall have continuing authority to reorganize the administrative structure of the Office of the President. For this purpose, he may take any of the following actions:

CHAPTER 10FUNCTIONS OF THE AGENCIES UNDER THE

OFFICE OF THE PRESIDENT

(1) Restructure the internal organization of the Office of the President Proper, including the immediate Offices, the Presidential Special Assistants/Advisers System and the Common staff Support System, by abolishing, consolidating or merging units thereof or transferring functions from one unit to another;

(2) Transfer any function under the Office of the President to any other Department or Agency as well as transfer functions to the Office of the President from other Departments and Agencies; and

(3) Transfer any agency under the Office of the President to any other department or agency as well as transfer agencies to the Office of the President from other departments or agencies.

DISCRETIONARY AND MINISTERIAL DUTIES

Public officers exercise discretionary and/or ministerial duties. A duty is discretionary if the officer is allowed to determine how and when it is to be performed and to decide this matter one way or the other and be right either way. It is not susceptible to delegation because it is imposed by law as such, and the public officer is expected to discharge it directly and not through the intervening mind of another.

DISCRETIONARY AND MINISTERIAL DUTIES

On the other hand, a ministerial duty is one that requires neither the exercise of official discretion nor judgment. It connotes an act wherein nothing is left to the discretion of the person executing it. It is practically a mechanical act; hence, what can be done by the delegate may be sub-delegated by him to others.

DOCTRINE OF COMMAND RESPONSIBILITY

The doctrine of command responsibility traces its roots to the laws of war and armed combat espoused by ancient civilizations. In a 1439 declaration of Charles VII of Orleans, for instance, he proclaimed in his Ordinances for the Armies:


[T]he King orders each captain or lieutenant be held responsible for the abuses, ills, and offences committed by members of his company, and that as soon as he receives any complaint concerning any such misdeed or abuse, he bring the offender to justice so that the said offender be punished in a manner commensurate with his offence, according to these Ordinances. If he fails to do so or covers up the misdeed or delays taking action, or if, because of his negligence or otherwise, the offender escapes and thus evades punishment, the captain shall be deemed responsible for the offence, as if he has committed it x x x .


The doctrine of command responsibility holds military commanders and other persons occupying positions of superior authority criminally responsible for the unlawful conduct of their subordinates.


For the doctrine to apply, the following elements must be shown to exist: (i) the existence of a superior-subordinate relationship; (ii) the superior knew or had reason to know that the criminal act was about to be or had been committed; and (iii) the superior failed to take the necessary and reasonable measures to prevent the criminal act or punish the perpetrator.


Executive Order No. 226, otherwise known as the Institutionalization of the Doctrine of ‘Command Responsibility’ in all Government Offices, particularly at all Levels of Command in the Philippine National Police and other Law Enforcement Agencies.


Under E.O. 226, a government official may be held liable for neglect of duty under the doctrine of command responsibility if he has knowledge that a crime or offense shall be committed, is being committed, or has been committed by his subordinates, or by others within his area of responsibility and despite such knowledge, he did not take preventive or corrective action either before, during, or immediately after its commission.


Knowledge of the commission of irregularities, crimes or offenses is presumed when (a) the acts are widespread within the government official’s area of jurisdiction; (b) the acts have been repeatedly or regularly committed within his area of responsibility; or (c) members of his immediate staff or office personnel are involved.

DEFENSE OF GOOD FAITH

ARNOLD JAMES M. YSIDORO vs. PEOPLE OF THE PHILIPPINES G.R. NO. 192330, November 14, 2012

Arnold James M. Ysidoro, the Leyte Municipal Mayor approved a request and signed the withdrawal slip for four sacks of rice and two boxes of sardines worth P3,396 from the municipality’s Supplemental Feeding Program for malnourished children to provide for the needs of indigent calamity victims.

Before approving the said withdrawal, Mayor Ysidoro consulted the supervising clerk of the Municipal Accountant’s Office, who signed the withdrawal slip based on her view that it was an emergency situation justifying the release of the goods.

After the goods were released to the indigent calamity victims, the same was reported to the municipal auditor as required under the rules.

Based on this transaction, a case for technical malversation was filed by a former member of the Sangguniang Bayan of Leyte against Mayor Ysidoro.

Issue:Whether or not Mayor Ysidoro is guilty for technical malversation?

Ruling:The crime of technical malversation as

penalized under Article 220 of the Revised Penal Code has three elements: a) that the offender is an accountable public officer; b) that he applies public funds or property under his administration to some public use; and c) that the public use for which such funds or property were applied is different from the purpose for which they were originally appropriated by law or ordinance.

All elements were present.

However, Ysidoro insists that he acted in good faith since, first, the idea of using the SFP goods for the calamity victims came, not from him, he only approved a request; and second, he consulted the accounting department if the goods could be distributed to those beneficiaries. Having no criminal intent, he argues that he cannot be convicted of the crime. Ysidoro also claims that, since the municipal auditor found nothing irregular in the diversion of the subject goods, such finding should be respected.

But criminal intent is not an element of technical malversation. The law punishes the act of diverting public property earmarked by law or ordinance for a particular public purpose to another public purpose.

The offense is mala prohibita, meaning that the prohibited act is not inherently immoral but becomes a criminal offense because positive law forbids its commission based on considerations of public policy, order, and convenience. It is the commission of an act as defined by the law, and not the character or effect thereof, that determines whether or not the provision has been violated. Hence, malice or criminal intent is completely irrelevant.

Dura lex sed lex. Ysidoro’s act, no matter how noble or miniscule the amount diverted, constitutes the crime of technical malversation.

Thank you…

Advisories and Updates 2014

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