So special: The pork barrel, considered as special purpose funds, are supposedly intended for development and welfare of Congressmen's constituents but are often used for political patronage. Results include ghost projects and unfinished roads like this one in Sultan Kudarat. JES AZNAR

Huge allocations in the government's annual budget for so-called special purpose funds (SPFs) have been questioned and criticized time and again, although not enough it seems to put an end to the practice or at the very least inject some much-needed transparency into their use.

Nonetheless, the Aquino administration, which has just celebrated its first 100 days, has claimed it will address the issue of SPFs as part of its key reforms in the budget process.

What are SPFs?

Unlike other funds in the budget that are allocated for specific government agencies which are expected to show clear accountability over their use, SPFs are not the liability of any particular government group or unit. Instead they form part of the national budget that the executive allots for "special" projects and programs. The disbursement and utilization of SPFs are directly under the discretion of the President.

One of the things that make critics uncomfortable about SPFs is the absence of specific people or government entities that are held responsible over their use. Another is the absence of a body delegated to monitor how they are actually spent.

In recent years and especially during the nine-year term of the Arroyo administration, allocations for SPFs have risen consistently despite the World Bank urging they be substantially reduced. According to data from the Department of Budget and Management, SPFs comprised about 45 per cent of the 1.3-trillion national budget for 2008. The figure rose to about 50 percent of the P1.43-trillion budget for 2009, and to about 57 percent of the supposed P1.54 trillion budget for 2010.

Some SPFs, which account for nearly 20 of the items in the national budget, include funds for calamities, for the public school building program, for so-called “national unification” and for pension and gratuity of state employees, for tax expenses of certain government agencies. They also include allocations for miscellaneous expenses and contingent expenditure requirements of the government, among others.

The highly controversial Priority Development Assistance Fund (PDAF), also known as "pork barrel," is one category under SPFs that is given a hefty allocation year after year. It is in the news again –if it is ever actually out – because of a reported increase in allocation which is currently being contested by some party-list representatives who are being denied them because they do not represent a local district.

PDAF are said to be intended for development projects and social services to be implemented in jurisdictions of legislators, but lack of transparency in their utilization has elicited the common notion that they encourage political patronage and are a recurring source of corruption in the public sector.

Questions

The problem with SPFs, critics say, is that their utilization has typically escaped any kind of real independent scrutiny because no specific agency is audited for its use. Moreover, the President can freely move money from the budget of a particular government agency and to an SPF. Once money is put in an SPF, it can be easily allocated and disbursed quietly well beyond the eyes of the public.

Because of the nature of SPFs and the proportion of the national budget they regularly comprise, their use is believed to account for a large part of revenues lost due to corruption. Estimates, such as that by the United Nations Development Programme (UNDP), in its report titled "Country Program for the Philippines for 2001 to 2004," said foregone revenues due to corruption hover around 20 per cent of the government's annual budget.

"SPFs as they stand in the current budget setup are undesirable because they include huge lump sum appropriations barely subject to scrutiny during budget deliberations – whereas the various department and agency budgets are often examined closely – and their releases are generally subject to the President’s approval," Sonny Africa, research head of the non-government research organization IBON Foundation, wrote to the Philippine Public Transparency Reporting Project (PPTRP).

Africa, criticizing the consistent increase in the allocations for SPFs during the term of President Gloria Macapagal-Arroyo, lamented that there has so far not been a concrete action implementing budget reforms. Although the Aquino administration has vowed to improve the budget process, Africa said, the commitment has yet to materialize.

He said that politicians continue to enjoy substantial pork barrel allocations.

"At its most basic, the misuse of the special purpose funds is because of the deep-seated and systemic corruption in government and the inexorable tendency for government officials and politicians, high and low and big and small, to misuse funds."

He however acknowledged the fight against corruption is a very daunting one that requires strong political will.

Meanwhile, the new administration said it acknowledges the dire need for reforms in the budget process. Budget secretary Florencio Abad testifies to the difficulty of monitoring SPFs, agreeing that something needs to be done about them.

He says that SPF spending in the past administration was reported without sufficient detail.

"We could not really check the details of how SPFs were used because there is no one [supposedly government agencies or bodies] on top of them. There is really an issue of lack of transparency and accountability," Abad told the PPTRP in an ambush interview. In earlier media reports, Abad cited the problems his office encountered in reviewing the use of the calamity fund, which is also part of SPFs and is supposedly intended to help victims of disasters and fund rebuilding efforts following emergencies, by the previous administration.

He claimed that upon taking office at the end of June, the new administration found PhP 1.4 billion (USD 32 million) or 70 per cent of the PhP 2-billion (USD 45 million) calamity fund for 2010 had already been spent. This was despite the fact that there had been no major calamity in the first half of the year.

Reforms committed to by the new administration

To correct the "sins of the past," the Aquino administration has vowed to implement major reforms in the budget process. The budget secretary has said one of the reforms will involve the SPFs.

In particular, Abad says, the Department of Budget and Management intends to integrate some of the SPFs into budget allocations for concerned government agencies. For instance, the Armed Forces of the Philippine (AFP) modernization fund –currently classified as an SPF– will be integrated into the budget of the Department of National Defense.

"That way, government agencies will have the accountability," Abad said. "We have done it with a few SPFs and more will follow."

Abad added the DBM is promoting transparency in government expenditure and will make public its disbursements, especially on projects and programs that require huge expenditures. This is consistent with statements from other members of the Aquino administration's economic team who say details of expenditures will be transparent through the creation of government websites detailing such disbursements.

Recommendations from civil society

But for the IBON Foundation, integrating SPFs into the budget of line agencies will not solve the problem of lack of accountability by itself.

Africa says enhancing accountability requires much more including detailed reporting of such expenditure.

"Each SPF should be extensively justified, their purposes, programs and project specified, and their line items spelled out; there should also be a significant, if not full, audit and itemization of funds use in time for the budget season the following year," Africa says.

He added that any President should have less authority and independence in spending government funds, noting that in the current setup, the power of the chief executive to disburse funds makes corruption easy to do.

Africa added the challenge remains for the Aquino administration to “walk the talk.”

"The new Aquino administration [has yet] to show that it has conviction and a real reform agenda. Given reports on increases in the pork barrel of congressmen, it appears that the old patronage and corruption-ridden scheme for Executive control over Congress remains intact," he told the PPTRP.

For its part, the Affiliated Network for Social Accountability in East Asia and the Pacific (ANSA-EAP) says the move of the DBM to integrate SPFs to the respective budgets of line agencies will help enhance accountability.

"It will spell out who is or which agencies are accountable for the funds used," Adelfo Briones, research and knowledge management coordinator of the ANSA-EAP, said in an interview with the PPTRP.

But he added that what will curb corruption more is constant engagement of non-government organizations and civil society organizations in the budget process.

ANSA-EAP is a regional network promoting the practice of social accountability by providing a common platform for exchange of information and experience, and by providing capacity building opportunities and technical assistance to citizen groups and governments.

As such, Briones said, his group is encouraging the government to follow a strict budget process and that stages of the process -- planning, budgeting, expenditure management, and performance monitoring -- should be very carefully implemented and highly transparent.

Briones argues that the budget process should be open to the public by allowing non-government organizations and civil society organization to have an active role in monitoring.

He acknowledges the desire of the new administration to implement reforms in the budget process, although their actual and successful implementation are needed before any positive assessment could be made.

Still, he was glad to hear that the DBM has started a budget process reform program by tapping the assistance of ANSA-EAP in drafting a plan on improving the budget process. Under the program, everything from planning projects and programs to be spent on to reporting of how the funds were used is to be determined, he says.

Views from a foreign lender

For the World Bank -- one of the country's biggest sources of grants and developmental loans -- efficiency, transparency and accountability in the utilization of funds, whether SPFs or those allotted for government agencies, are key to maintaining and improving confidence of creditors and the international financial community.

"Efficiency and transparency in spending are very important. These make it easier for us to support the government," Bert Hofman, country representative of the World Bank to the Philippines, said in an ambush interview earlier this month at the sidelines of a forum on two of the bank's loan programs for the Philippines.

Hofman also said the government should continue to strive to rationalize its spending, particularly by shifting funds from programs and projects that are deemed less important to those that will create a bigger dent on economic development.

He said the World Bank lauds the new administration for considering transparency in government spending as one of its reform initiatives, and added that improving that the budget process should be a constant effort.

"So far there seems to be efforts toward improving efficiency and transparency in spending, and we hope those will produce positive results and be sustained," he explained. Philippine Public Transparency Reporting Project