THE DISBURSEMENT ACCELERATION PROGRAM
MELISSA R. MARTIN
MPAD 610 –PUBLIC MANAGEMENT AND SOCIAL CHANGE

CONTENT

* What is DAP? * Why was DAP introduced? * How did the DAP work? * How did DAP benefit the economy? * How did DAP support the budget reform agenda? * DAP Timeline * Constitutional and Legal Bases of DAP * SC Ruling on DAP * Why did the Aquino Administration terminate DAP? * SC modifies ruling on DAP

What is DAP?

The Disbursement Acceleration Program (DAP) is a spending reform measure to speed up public expenditure and catalyze economic growth.

Why was DAP introduced?

* Need to Clean House: Curb Corruption and Leakages * Freeing up operational bottlenecks * Inefficient implementation * Poor planning * Slow procurement * By the third quarter of 2011, it became clear that if we wanted public spending to accelerate enough for economic growth, we had to use idle funds. (Sec. Florencio Abad, DBM ) * The Aquino Administration therefore launched the DAP in 2011 KEY REFORMS (the DAP as Package of Reform Intervention)

* Zero-based budgeting
Implementation of zero-based budgeting to weed out inefficient, ineffective and leakage-ridden programs and projects * Early enactment of the budget
Early preparation, submission and enactment of the annual National Budget including the adoption of the Online Submission of Budget Proposal * Disaggregation of lump sum funds
Disaggregation of lump sum funds into specific programs and projects

How did the DAP work?

* The DAP tapped the power of the president over (a) the use of savings to augment deficient programs and projects; and (b) the use of unprogrammed funds.

a. Savings-available portions or balances of items under the General Appropriations Act, which results from: * The completion or final discontinuance or abandonment of a program * Unpaid compensation for vacant and unfilled positions and leave of absences without pay * The implementation of efficiency measures that enable agencies to deliver services at lower cost

b. Unprogrammed funds – are standby appropriations which are authorized by Congress in the annual GAA, and which may only be used when: * Revenue collections exceed revenue targets * New revenues are collected from sources not included in the program * Newly-approved loans foreign-assisted projects are secured

How much in programs and projects were funded through DAP?

* P167.06 B – in programs and projects have been proposed to the President for funding * P144.38 B – was approved by the President and eventually released * A total of 116 programs and projects were approved to be funded through DAP * Sitio Electrification Program * Training-for-Work- Scholarship Program * To settle unremitted GSIS premium payments of public school teachers since 1997

How did DAP benefit the economy?

With the introduction of DAP, government disbursements in the 4th quarter of 2011 grew by 32.5%. This pulled up full-year public spending to grow by 2.3%. With the sustained application of DAP, spending further grew to 14.1% in 2012 and 5.8% in 2013. The growth of infrastructure spending in particular, improved from -28.7% in 2011, to 27.6% in 2012, and 21.6% in 2013. The improved pace of public spending bolstered the growth of the country’s GDP. The World Bank in 2012 report stated that DAP “was partially successful and contributed 1.3 percentage points to GDP in Q4 [of 2011]. The countries
GDP further improved from 3.6% in 2011, to 6.8% in 2012 and 7.2 % in 2013.

The Administration expanded the 4P’s from about a million indigent household beneficiaries with P10.9 billion budget in 2010 to 4.3 million household beneficiaries with P62.6 billion budget by 2014.

The Administration also massively increased the Education and Health sector budgets to close lingering resource gaps, and boosted spending on infrastructure from P274 B or 2.3% in 2013 to P824 B or 5% by 2016.

How did DAP support the budget reform agenda?

DAP provided the Aquino Administration with a strong platform to pursue major reforms that improve the pace, quality, and accountability of government spending for the long term, including:

* GAA – as –Release Document
Beginning 2014, GAA itself will serve as the release document which means that the budgets of agencies are considered released to them as soon as the GAA takes effect. This will speed up budget implementation as a duplicative budget release process is eliminated.

* Performance Informed Budgeting
Also beginning 2014, the performance targets of all agencies are now included in the recently signed 2014 GAA alongside the budgetary allocations. This reform together with others previously initiated (like PBB) (Performance Based Incentive System) will deepen the accountability of agencies to their committed performance targets.

* Electronic, Cashless and Checkless Regime
The completion of the Government Integrated Financial Information System by 296 will significantly reduce inefficiencies and inject greater transparency in financial transactions, as well as reduce opportunities for human intervention due to manual processes. In line with this government financial transactions will already be at least 80% cashless and 100% checkless by the end of 2014.

* Procurement Innovations
As the procurement process has been a major bottleneck to the budget execution process, the government introduced innovations such as: allowing departments and agencies to bid their projects out even before the enactment of the GAA, so that they can award contracts as early as day one of the new fiscal year; leveraging technology to enable electronic procurement; capacitating procurement staff and hiring permanent ones; among others.

DAP TIMELINE
2011
* September- the DAP was conceptualized. * October 12 -DBM Secretary Florencio Abad presented the first (of several) Memorandum(s) to President Aquino to confirm his approval for the Disbursement Acceleration Fund (DAP) for fiscal year 2011, totalling Php 72.11 billion. The Memorandum contains a list of the sources of funds as well as the projects to be funded. * December 12- 118 (of the 285) members of the House of Representatives voted to transmit to the Senate the Articles of Impeachment against Supreme Court Justice Renato Corona. Another Memorandum was presented to President Aquino for the granting of “omnibus authority” to consolidate the savings and unutilized balances for fiscal year 2011.

2012 * May 29- The Senate, voting 20 – 3, impeached Supreme Court Justice Renato Corona * July 18- National Budget Circular (“NBC”) No. 541 was issued to implement the June 25, 2012 Memorandum. It authorized the withdrawal of the unobligated allotments so the same could be used to fund other priority expenditures of the government.
2013
* September 25- In a privilege speech, Senator Jinggoy Estrada revealed that 20 senators received at least Php 50M each in additional lump-sum allocations after CJ Corona’s impeachment. * September 28- DBM Secretary Abad clarified that the disbursements of the DAP funds were based on letters of request submitted by the Senators to help them in the delivery of goods and services to the public. * September 30- Commission on Audit (“COA”) Chairperson Grace Pulido- Tan said that they had begun an audit of the DAP based on allegations of misuse of the funds. The audit will focus on the implementing agencies and not the individual Senators. * October 1 – Several lawmakers and concerned citizens filed petition(s) before the Supreme Court questioning the constitutionality of the DAP. Malacañang countered by saying that the DAP was constitutional because the President has the power to realign savings under the Constitution. * October 2 - President Aquino defended the legality of the DAP and challenged his critics to impeach him. * October 4 - Malacañang said it was “inclined” to stop releases under the DAP because the country’s economy had already improved. Hence, the purpose for which DAP was created had already been achieved. Malacañang said their decision had nothing to do with the brewing controversy involving the DAP. * October 8 - the Supreme Court did not grant the application for a Temporary Restraining Order
(“TRO”) on the implementation of the DAP. However, it ordered the government to comment on the DAP’s constitutionality within in 10 days. * October 13- Malacañang said it would wait for the result of the COA audit of the DAP before answering any questions on the fund’s constitutionality. * October 14- Senator JV Ejercito filed a resolution to investigate DAP with the aim of recommending and formulating laws, policies and regulations for the proper use of savings from the different departments of government as well as the proper use of budget augmentation * October 16- The Integrated Bar of the Philippines (IBP) joined the petitioners who filed for the issuance of a TRO. * October 17 - Makabayan Party List and leaders of anti-pork barrel groups also filed a petition before the Supreme Court to stop the implementation of the DAP. * October 30 - President Aquino went on national television to defend the DAP, saying that it was being used to distract the people from the PDAF scam. * December 10 - The Supreme Court asked the DBM to submit a list of all sources of funds as well as specific uses of the DAP. * December 28 – OP terminates the DAP

2014 * January 28 -In his defense of the DAP, Solicitor General Francis Jardeleza argued that since the DAP already served its purpose, the issue of its constitutionality was moot and academic. * February 17 -Anti-pork barrel groups called for the COA to look more closely into the DAP projects and where the funds went. * June 10 - The Supreme Court deferred voting on the constitutionality of the DAP. * July 1 - The Supreme Court issued a Decision on the controversial DAP. The Court partially granted the petition(s) and ruled that certain acts and practices under the DAP were unconstitutional. * July 18 –Executive files for Motion for Reconsideration

2015 * February 3- SC modifies ruling on DAP

Constitutional and Legal Bases for the DAP (Department of Budget and Management) I. Savings

A. Philippine Constitution 1987 Section 25 (5), Article VI B. EO 292, s. 1987: The administrative Code Section 49, Chapter 5, Book VI of the 1987 Administrative Code C. General Appropriation Acts General Provisions on the Use of Savings RA 10147 (FY 2011 GAA) General Provisions on the Use of Savings RA 10155 (FY 2012 GAA) General Provisions on the Use of Savings RA 10352 (FY 2013 GAA)

II. The Unprogrammed Fund Unprogrammed Fund RA 10147 (FY 2011 GAA) Unprogrammed Fund RA 10155 (FY 2012 GAA) Unprogrammed Fund RA 10352 (FY 2013 GAA)

Petitioners challenged the constitutionality of DAP. They also questioned the National Budget Circular 541 which, in effect, characterized unreleased appropriations and obligated or unused allotment as savings. The question brought to the Court was whether the Executive exceeded his powers to augment items in the budget within the executive branch of the government.

The SC Ruling on DAP (July 1, 2014 Decision)

The High Tribunal ruled as unconstitutional the ff:

* the creation of savings prior to the end of the fiscal year and the withdrawal of these funds for implementing agencies * The cross-border transfers of the savings from one branch of government to another * The allotment of funds for projects activities, and programs not outlined in the General Appropriations Act.

The court defined savings as funds that remains unspent after the completion or discontinuance of a project. Congress provides that appropriated funds are available for a period of one fiscal year. But in May 20, 2013 memo, Budget Secretary Butch Abad sought omnibus authority to consolidate savings and unused funds to finance the DAP on a quarterly basis. This shortened the period that funds were supposed to be available for, giving rise to questions about the budget department’s own definition of savings.

Cross-border transfers refer to the movements of funds from one branch of government to another. These are allowed only within respective offices-the use of DAP funds to augment funds of the Commission on Audit (for its IT infrastructure programmed the hiring of litigation experts in the amount of P143.7 million, or about $3.2 million) and the House of representatives (for a legislative and archives building/e-library in the amount of P250 M, or about $5.6M) violate the constitution.

The President can transfer funds but with limits. While the power to transfer funds from one item to another within the executive branch existed since 1909, during the time of American Governors-General, this power was reduced to merely augmenting items from savings. The 1987 constitution put limits on the Presidents discretion over appropriations during the budget execution phase (when the budget law is being implemented).

The constitution authorizes the President, the Senate President, the Speaker, the Chief Justice and the heads of Constitutional Commissions to transfer funds “within their respective offices”; when these funds involve savings generated from appropriations also for their respective offices; and when the purpose of the transfer is to augment items in the Appropriation Law for their respective offices.

According to the DBM as of 2013, P144.4B was released to implement programs, activities, projects (PAPs). In 2011, P82.5B was released, while P54.8B was released in 2012. About 9% of the total DAP were identified by lawmakers.

The DBM also said that 116 PAPs were financed by the DAP, each of which had existing appropriations in the budgets. The Office of the Solicitor-General submitted 7 evidence packets in support of this claim, but the Court found that there were projects not covered by existing appropriation- for example, items under the P1.6 B DREAM project under the Department of Science and Technology. DREAM refers to Disaster Risk, Exposure, Assessment and Mitigation.

Why did Aquino Administration terminate DAP?

With the marked improvement in the speed, quality and accountability of government spending, DAP as a policy intervention has clearly achieved its purpose. Moreover, the roll out of major budgeting reforms sustained the improved efficiency and effectiveness of budget execution in the longer-term.

SC modifies ruling on DAP (February 03, 2015)

Partial Reversal

The SC partially granted the MR filed by the Office of the Solicitor General, reversing its ruling on the act under the DAP pertaining to the funding of PAP that were not covered by any appropriation in the GAA, which was declared unconstitutional last July 1, 2014 decision.

SC affirmed the illegality of the ff:

1. The withdrawal of unobligated allotments from implementing agencies and their use as savings before the end of the fiscal year 2. The cross boarder transfer of savings of the Executive to augment funds of agencies outside the department 3. Use of unprogrammed funds despite absence of the National Treasurer’s certification that revenue collections exceeded targets.

The Supreme Court has clarified that only authors of the DAP- and not project proponents (senators, congressmen, governors, university presidents, department heads) and implementors (head of agencies, local government executives, contractors) - may be held liable.