Reforming the legal framework for the budget process

Abstract

The literature on public financial management (PFM) suggests that countries introduce a new law or amend existing legislation on budget systems for any one or a combination of the following reasons: (1) to correct specific problems related to budget preparation, authorization, and execution, as well as legislative review of the outcome/output of budget implementation and independent external audit of government financial accounts; (2) to clarify the powers of the legislative and executive branches of government in various stages of government budget process; and (3) to ensure that budgetary institutions promote fiscal stability and sustainability, improve budget outcomes in terms of both the allocation and spending of budget resources, and enhance transparency and accountability in the budget system (Lienert and Jung 2004; Lienert and Fainboim 2010). In this light, this Policy Note examines Senate Bill (SB) 1450 or the Budget Reform Bill using two perspectives. Through the problem-solving perspective, it assesses the extent the bill addresses the perceived weaknesses of the existing legal framework that governs the Philippine budgeting and PFM system, which include: (1) the provisions of the 1987 Constitution1; (2) the Administrative Code of 1987, particularly Book VI thereof which is, in turn, largely based on Presidential Decree 1177 (or the Budget Reform Decree of 1997); (3) the Government Auditing Code of the Philippines, which defines the policies and guidelines on government auditing and the accounting of public funds; (4) the Government Procurement Reform Act of 2003 envisioned to make public procurement more competitive and transparent; and (5) the Local Government Code of 1991 which mandates that 40 percent of the internal revenue taxes of the national government should be distributed to the local government units (LGUs) as internal revenue allotment, and which defines the policies and guidelines on fiscal administration at the LGU level.