PFM Reform Roadmap and Developments A Presentation for

PFM Reform Roadmap and Developments (A Presentation for the 27 th Dep. Ed National Seminar/Workshop on the Preparation and Reconciliation of the CY 2012 Mid-Year Financial Reports) July 23, 2012, Tagaytay City By: Assistant Secretary Luz M. Cantor Philippine PFM Reform Roadmap

Presentation Outline PART I: PFM System Gaps/Weaknesses A. What is PFM? B. What ails the Philippine PFM system? PART II: PFM Roadmap and Developments C. Executive Order No. 55 D. PFM Reform Roadmap E. PFM Governance Structure F. PFM Reform Projects Philippine PFM Reform Roadmap 2

PART I PFM GAPS Philippine PFM Reform Roadmap 3

What is PFM? Public Financial Management (PFM) is a system of rules, procedures and practices for government to manage public finances in the areas of: q budgeting q accounting q auditing q cash management q management of public debt q revenue generation q public reporting on public sector financial operations Philippine PFM Reform Roadmap 4 4

Benchmarks of a Good PFM • Credibility of the budget • Comprehensiveness and transparency • Policy-based budgeting • Predictability and control in budget execution • Accounting, recording and reporting • External scrutiny and audit Philippine PFM Reform Roadmap 5

PFM Gaps in the Budget Process messy traffic of documents lack of budget credibility budget not results based lack of funding predictability weak oversight of Congress and public lack of efficient cash management weak monitoring of contingent liabilities Philippine PFM Reform Roadmap 6

Messy Traffic of Documents This is now… In the long run, Philippine PFM needs this kind of information system Philippine PFM Reform Roadmap 7

GAP/WEAKNESS Lack of credibility of the budget Budget supports targets in the Plan More efficient, transparent and accountable budget execution Real time reporting on budget utilization by agencies and the Government. Pro-active CSO support for budget transparency Philippine PFM Reform Roadmap 8

GAP/WEAKNESS Budget not yet resultsbased Budget decisions based more and more on physical and financial performance Philippine PFM Reform Roadmap 9

GAP/WEAKNESS Lack of a common classification system for budgeting, accounting, auditing and cash management Harmonize budgetary and accounting classifications and reporting Codify PFM rules and complete PFM Rules Manual for capacity building Identify common reporting requirements of oversight agencies and line departments Consolidated FM reporting requirements based on harmonized classification of all accounts Revise New Government Accounting System (NGAS) Manual and chart of accounts Real-time reports, access to financial data and control of obligations and disbursements for more effective financial control and accountability Philippine PFM Reform Roadmap 10

GAP/WEAKNESS Lack of funding predictability DBM and DBCC to approve allotment and cash release program at start of year and update midyear Predictable and streamlined allotment and cash release programs throughout the year to support agency operations based on DOFs reliable revenue forecasting and programming. Philippine PFM Reform Roadmap 11

GAP/WEAKNESS Weak oversight role of Congress and the public over the budget process Oversight Committees in Congress and the public use DBM and COA reports more extensively Philippine PFM Reform Roadmap 12

GAP/WEAKNESS Lack of efficient cash management Improved Cash Programming by BTr and DBM Predictable and stable revenue inflows and cash disbursements Philippine PFM Reform Roadmap 13

GAP/WEAKNESS Lack of accurate database on contingent liability Compel agencies to disclose their contingent liabilities Make DOF the authority on issuance of policy on contingent liabilities (for GOCCs and NGAs) Monitor and report regularly contingent liabilities Improved system for capturing and reporting all liabilities of government entities; real and contingent Develop database on contingent liabilities National Government able to manage all its financial exposure Philippine PFM Reform Roadmap 14

Where are we now? (PFM Gaps and weaknesses) Where are we going? How are we going to achieve the reforms? Philippine PFM Reform Roadmap 15

PART II PFM ROADMAP AND DEVELOPMENTS Philippine PFM Reform Roadmap 16

PFM Reform Roadmap ® Master plan for improving the financial management system of the government ® Jointly formulated and approved by fiscal oversight agencies (COA, DBM, DOF, BTr) from 2009 to 2011 Philippine PFM Reform Roadmap 17

PFM reforms support Aquino Administration priorities 5 Priority Areas Societal Goal Sector Goal PFM Goal Inclusive Growth and Poverty Reduction Good Governance Fiscal Discipline Improve efficiency, accountability and transparency of public fund use to ensure direct, immediate and substantial delivery of public services specially to the poor. Philippine PFM Reform Roadmap 18

Executive Order 55 Directing the Integration and Automation of Government Financial Management System (signed by President Benigno S. Aquino on 6 September 2011) 1. Installation of PFM systems: § Government Integrated Financial Management Information System (GIFMIS) § Treasury Single Account (TSA) § Efficient Budget Release System § Systematic Financial and Physical Reporting and Auditing Philippine PFM Reform Roadmap 19

EO 55 2. Created the PFM Committee (formerly the GIFMIS Committee) § § Devise a 5 -year plan for the development and installation of GIFMIS Oversee the implementation of the PFM Reform Roadmap Shepherd and champion the passage of supporting legislation needed in Congress Coordinate budgetary and donor funding Philippine PFM Reform Roadmap 20

PFM Governance Structure PRINCIPALS (COA Chair, DBM and DOF Secretary) PFM COMMITTEE PROJECT MANAGEMENT OFFICE PROCUREMENT UNIT PIU GIFMIS DEVT PROJECT TRACK 1 PIU BUDGET REPORTING & PERFORMANCE STANDARDS PROJECT PIU IMPROVEMENT OF TREASURY CASH MANAGEMENT PROJECT PIU ACCOUNTING AND AUDITING REFORMS PROJECT PIU LIABILITY MANAGEMENT PROJECT PIU CAPACITY BUILDING PROJECT TRACK 2 Philippine PFM Reform Roadmap 21

Funding Support Aus. AID A$30 M (P 1. 2 B) Facility Grant GOP WB-IDF Intl Devt Fund P 978. 5 (2012 Budget e. Gov Fund) EU LGU PFM ADB Philippine PFM Reform Roadmap 22

Outputs and Results PFM REFORMS ROADMAP Outputs Major Strategies Philippine PFM Reform Roadmap

Initial PFM Reform Projects Project Lead Agency 1. Improvement of Treasury Cash Management Operations BTr 2. Budget Reporting and Performance Standards DBM 3. GIFMIS Development DBM, Do. F/BTr, COA 4. Liability Management Do. F 5. Capacity Building DBM, Do. F/BTr, COA 6. Accounting and Auditing Reforms COA Philippine PFM Reform Roadmap 24

Improvement of Treasury Cash Management Operations Project Objective • to increase operational efficiency of implementing agencies while minimizing cost of treasury operations Output and Timeframe • a system of cash management that can keep daily cash balances of government at appropriate levels • Treasury Single Account (TSA) in place by 2014 Philippine PFM Reform Roadmap 25

Budget Reporting and Performance Standards Project Objective • to produce quarterly reports within 2 weeks of next quarter (short term) • to generate real-time reports on budget utilization and financial performance through GIFMIS (long term) Output and Timeframe • Consolidated and agency level budget execution and budget utilization reports published in COA and DBM website • Harmonized forms by Dec 2012 • Unified Account Code Structure • Framework on Performance Standards implemented by March 2014 Philippine PFM Reform Roadmap 26

GIFMIS Development Project Objective • to facilitate physical development of a working GIFMIS that can collect and organize financial information in a central database Output and Timeframe • Web-based GIFMIS Version 1 – initially for national government agencies (for completion in 8 months) • Web-based GIFMIS Version 2 – for all government agencies (operational by 2016) Philippine PFM Reform Roadmap 27

Liability Management Project Objective • to put in place a system for managing government's exposure to contingent and other liabilities Output and Timeframe • a complete list of liabilities of the national government, real and contingent (immediate) • LM system established by 2013 Philippine PFM Reform Roadmap 28

Accounting and Auditing Reform Project Objective • continue to enhance government accounting systems and strengthen external audit capacity Outputs and Timeframe • Harmonized PGAS with IFRS and IPSAS by June 2012 • Enhanced NGAS for GIFMIS Track 2 by Dec 2012 • Guidelines on the audit of multi-sectoral programs/projects • Revised guidelines on participatory audit • Intensified conduct of IT/ information systems audit (201215) Philippine PFM Reform Roadmap 29

Capacity Building Project Objective • develop skills of personnel of oversight and implementing agencies on PFM competencies • build stakeholder support for the reforms Target Participants • personnel of the oversight and implementing agencies • legislators • civil society organizations • other stakeholders Philippine PFM Reform Roadmap 30

PFM Reform Roadmap Leading the way to the right path Improved Public Service Improved efficiency, accountability and transparency of public fund use • Direct • Immediate • Substantial Beneficiary The Filipino People especially the poor Philippine PFM Reform Roadmap 31

‘…it is incumbent on all of us to confidently assert that governments that do things right should have no problem keeping our fellow citizens informed and engaged, and are thus, partners of government in its fundamental task of addressing the needs of the people. The result is an empowered citizenry, which is the essential aspiration at the heart of the digital revolution sweeping the globe. . . ’ President Benigno S. Aquino III Speech at "The Power of Open: A Global Discussion" Google New York, 75 th Ave. , New York 19 September 2011 Philippine PFM Reform Roadmap