The Philippines-Australia Public Financial Management Program (PFMP) is assisting the Philippine government to start shifting from obligation-based appropriations to annual cash based appropriations as a disciplined measure to better manage public resources and deliver on its promise to double infrastructure spending and ramp up social sector spending.

The PFM principals comprised of the Department of Budget and Management (DBM), Bureau of the Treasury (BTr) and the Commission on Audit (COA), have endorsed the new reform strategy of introducing cash appropriations.

The foundation of this reform is to shift the focus of the budget system away from incurring obligations to spending cash.

Obligations are intentions, not expenditures. The current system of obligation-based appropriations does not promote disciplined execution of the annual budget,” said DBM Secretary Benjamin Diokno. This is the essence of a sound public financial management or PFM system: an annual budget that is promptly funded, implemented and accounted for.

The Government has committed to spend 7% of the country’s GDP on infrastructure following its aggressive mandate to “Build, Build, Build”—a program aimed at ushering in the “Golden Age of Infrastructure” for the Philippines.

“The political priority of the infrastructure agenda gives this PFM reform a hard edge. It is about making the PFM system fit for purpose,” said Gary Ellem, PFMP Team Leader. “We think this is a sound reform that is timely and will help the Government of the Philippines deliver. DBM, BTr and COA are right behind this. Although this reform is a significant change, it builds on key reforms that PFMP has supported in recent years like the TSA, BTMS and PREXC,” he added.

The Treasury Single Account (TSA) is a cash management system that consolidates government accounts and optimizes utilization of the government’s cash resources. The Budget and Treasury Management System (BTMS) is an integrated, web-based financial management information system that covers budget execution and reporting. Meanwhile, the PREXC restructures an agency’s budget around programs to promote a better focus on policy and performance. The move to annual cash based appropriations builds on all three reforms as the basis for a sound, transparent and efficient use of public funds. (contributed by the Public Financial Management Program)