Diokno cash-based budgeting system abets graft -- Andaya

February 17, 2019
Rolando Andaya Jr.

THE chairman of the House Committee on Appropriations yesterday warned of an alleged institutionalized corruption and poor quality of national infrastructure projects should Budget Secretary Benjamin Diokno insist on cash-based budgeting system.

Camarines Sur Rep. Rolando “Nonoy” Andaya, Jr., who chairs the panel, said Diokno should abandon his cash-based budgeting system under the proposed 2019 P3.757-trillion national budget as it limits appropriations, bidding, completion of projects and payments within a single year.

“Sa halip na labanan ang korupsiyon, lalong titindi at lalaganap ito dahil sa cash-based budgeting system ni Sec. Diokno. This will institutionalize corruption in the DPWH (Department of Public Works and Highways). And who will benefit? Small ill-equipped suppliers and contractors," said Andaya, a former secretary of the Department of Budget and Management (DBM), stressing Congress’ decision to  instead adopt the present obligation-based budgeting system should be respected by Diokno.

Andaya lamented that concerned DBM and DPWH employees have intimated to him that the total amount of unpaid contracts for 2018 infrastructure projects have risen from P44 billion last November to more than P100 billion at the end of the year, which allegedly led to corruption in the payment of DPWH contracts for 2018 projects.

In the case of present obligation-based budgeting, the government can spread out the appropriations across two years to enable projects’ completion.

Diokno vehemently denied all the allegations against him by Andaya.

Andaya said even former Public Works and Highways Secretary Rogelio “Babes” Singson told the House investigating panel in a letter dated January 25, 2019 that he is strongly against the implementation of one-year cash budgeting for capital outlay as this will only encourage corruption in government contracts.

He said Singson pointed out that a cash-based system would limit the projects to smaller amounts to ensure payment and completion within one year, jeopardizing the quality of the projects because of the absence of big and qualified contractors.

"During my term, I purposely package construction contracts above P150 million so that DPWH could attract qualified contractors who would be required to provide proper equipment considering that their contracts are big enough to warrant investing in good equipment. That is why we now see many of the contractors with concrete or asphalt pavers and investment in appropriate construction equipment," said Singson.

"However, because of the one-year cash budgeting, contracts will again tend to be less that P50 million contracts which will not entice the qualified well-equipped contractors because of the small contracts. I believe this policy of one-year cash budgeting will only be more prone to corruption, result in poor quality national infra projects, engaging small ill-equipped suppliers/contractors, or just end up being subcontracted and will increase the cost of doing infra projects," Singson added.

Had Congress been duped into adopting the one-year cash-based system, Andaya said the Philippines would have been part of a failed experiment similar to one experienced in the United Kingdom.

“I suggest that the DBM Secretary get a copy of the 2017 PIDS discussion paper of Rene Santiago, a fellow at the Foundation for Economic Freedom. Mr. Santiago's study on planning and programming of capital projects at the agency level cites the bad example UK had with cash-based budgeting. To meet its one year time constraint, agencies were forced to cluster expenditures in the last few months of the year,” said Andaya.

From the standpoint of the UK Finance Ministry, Andaya said funds uptake improved, but the quality of projects on the ground deteriorated.