1

UNDERSTANDING THE EDUCATION BUDGET

Tracking & monitoring the utilization

of the SMOOE how the same is supplemented in Cabanatuan City & Munoz City

Research collaboration between the

Philippine Business for Education (PBEd)

And the Araullo University

9 February 2012

2

Definition of Terms In the order of the budget process

Expenditure program Refers to the ceiling on obligations that could be

incurred by the government in a given budget year.

The ceiling is supported by estimated financial

resources. It also includes proposed new,

continuing, and automatic appropriations

Appropriations An authorization directing payment to support

obligations. It reflects the parameters of

government spending

New appropriation An authorization made by law or other legislative

enactment, directing payment out of government

funds under specified conditions or for specific

purposes

Continuing appropriation An authorization to support obligations for a

specified purpose or project, even when these

obligations are incurred beyond the budget year.

Appropriations for capital outlay (CO) and

maintenance and other operating expenses

(MOOE) are valid for a total of two succeeding

fiscal years

Automatic appropriation An authorization made annually or for some other

period prescribed by law, by virtue of standing

legislation which does not require periodic action by

Congress (e.g., Retirement and Life Insurance

Premium or RLIP of the government employees)

Allotment Authorization issued by the DBM to an agency,

which allows it to obligate for specified amounts

contained in a legislative appropriation

Obligation A liability legally incurred and committed to be

paid for by the government either immediately or

in the future

3

Disbursement Settlement of government obligations and/or

accounts payable by cash; movement of cash from

the Bureau of Treasury or from an authorized

disbursing officer to the final recipient.

Disbursement is synonymous with

liquidation/settlement/payment of an obligation

Capital outlay Refers to appropriations for the purchase of goods

and services, the benefits of which extend beyond

the fiscal year and which add to the assets of the

government, including investments in the capital

stock of GOCCs and their subsidiaries

Maintenance and other Refers to the expenditures to support the

operating expense operations of government agencies such as

expenses for supplies and materials, transportation

and travel, utilities (water, power etc) and the

repairs etc

Special Education Fund Refers to the fund that comes from 1% special levy

on real property tax collected by local government

units will be used for improving education services

of public schools

4

Table of Contents

Executive summary………………………………………………………….. p. 5

Understanding the education budget

through social accountability………………………………………………. P. 8

Review of literature and extant policies

on education budget reform……………………………………………….. p. 12

Discussion of the research method……………………………………… p. 18

Study results………………………………………………………………… p. 21

Conclusions and recommendations……………………………………… p. 34

Developing a social audit tool on the education budget……………… p. 37

List of tables Table 1: Government spending on basic education………………….. p. 15

Table 2: Summary of FGD and KII participants…………………….. p. 20

Table 3: Cost parameter per pupil……………………………………. p. 25

Table 4: MOOE classified by principal cost drivers ……………... p. 26

Table 5: Budget utilization rate………………………………………. p. 28

Table 6: Budget utilization rate………………………………………. p. 29

Table 7: Total MOOE utilization rate ………………………………. p. 30

Table 8: Total MOOE utilization rate (by fund source)…………. p. 30

Table 9: Region III‟s MOOE utilization rate…………………….. p. 31

Table 10: SEF SIE…………………………………………………….. p. 32

Table 11: Matrix of social audit initiatives………………………. P. 38

5

Executive Summary

Education is widely acknowledged to be crucial for self-improvement and

country development. However, education in the Philippines still faces

important queries: Why is it difficult to attract additional children to school?

Why is it hard to keep them in school? And why, if they have graduated, is it

hard for them to be aptly employed?

While some of the answers rest in other important factors like the quality of

public school education, the competence of teachers, the strategies for

improving learning outcomes, and the measures for addressing the bulging

population, one of the keys is in the budget for public education.

To investigate the Philippine education budget is to understand the interplay

of centralized and decentralized delivery of education. While most of the

basic services were devolved to local government units (LGUs), basic

education is still largely the responsibility of the central government through

the Department of Education. Two of the main reasons for non-devolution of

education were: to depoliticize education particularly the teachers who serve

as election officers during national and mid-term polls and to ensure the

standard or quality of public education.

However, while education was not one of the devolved programs, it was

deconcentrated through laws that transferred decision and policy making to

the field units of the Department of Education and eventually, to school

principals. The principle behind the move to deconcentrate public education

is the premise that principals are in the best position to know how to run

their schools and consequently, how to achieve better education outcomes.

With principals at the helm, improved results particularly on learning

achievements can be expected.

Despite the limited decentralization of education, LGUs utilize resources for

education. They also have a steady source of fund - the Special Education

Fund (SEF) - which corresponds to one percent (1%) of real property taxes.

Imposed and collected by LGUs, SEF was earmarked by the 1991 Local

Government Code for basic education. This sustainable source of financial

resources makes LGUs a substantial source of education budget.

This study investigates the formulation and implementation of the School

Maintenance and Other Operating Expenses (School MOOE). The

Department of Education downloads this budget item through different

offices all the way to public schools. The study looked at how the School

MOOE budget is crafted and if the process involves important stakeholders.

6

The study also looked at the budget execution and gauged if the MOOE is

being used effectively and efficiently.

The study also investigates the formulation and execution of the Special

Education Fund (SEF). The SEF is a percentage of the real property tax

levied by local government units. The SEF is earmarked for education

purposes.

The study consists of a review of related literature on the education budget, a

review and analysis of national level data and a conduct of two separate case

studies in Central Luzon: Cabanatuan City and Munoz. The research is

conducted from September 2011 until January 2012. The preliminary

findings were presented on December 2011. However, by February 2012,

some of the local case data are not yet in. Most of the gaps in the research

are on the SEF.

The study elicited major findings. The implementation of the new allocation

formula for the MOOE, although still partial at present, is a welcome reform.

Instead of pegging the MOOE budget purely school on enrollment rates, the

new formula considers other factors including fund complementation. The

reforms of the Department of Budget and Management on monthly release of

cash allocation (beginning January 2012) and the elimination of Sub-

Allotment Release Orders (SAROs) and Agency Budget Matrices (ABMs)

beginning 2013 are also positive developments. The two reforms are expected

to improve cash management and long-term and short-term programming of

Dep Ed and the schools. These efforts will require agencies to seriously sync

their programs and initiatives with appropriation, allocation, procurement,

and obligation of funds.

The reforms in the Dep Ed to empower schools and principals have led to

reforms in the MOOE budget process. The downloading of the budget is

welcomed by the principals since this allows them to use the funds for their

actual plans and needs.

However, much is still desired. The downloading of the budget suffers from

inconsistencies including delays in the release of funds, varying guidelines on

manner of MOOE (in cash or in kind), and inconsistent policies on the

liquidation of expenses. There is also the need to enhance the capacity of

school heads to effectively and efficiently manage their budget and to record

their financial transactions.

Moreover, despite clamors to increase the budget, national and regional level

data reveal high amounts of unutilized MOOE funds. Interestingly, the

interviews with school heads from Cabanatuan and Munoz reveal that most

7

often, they do not return unused resources to their Division Offices. They

note that, often, they fully utilize the downloaded cash. They grant, however,

that many of them had difficult time liquidating the resources.

This means that the inefficient utilization of the MOOE is a shared problem

of schools as well as the Division, Regional, and Central Office levels. The

audit findings of COA for 2009 validate this when more than PhP 66 Million

for MOOE was not utilized due to delayed downloading, lapse of unused

NCA, and failure to include fiscal management in the submitted school

improvement plans.

The study does not have yet a full picture on how the SEF actually

complements the school MOOE. However, the literature reviewed and data

gathered show interesting findings. The use of the SEF is mostly in the

hands of LGU officials and thus, there are varying experiences on how it is

used. Interestingly, however, the literature and the data on the SEF in the

case sites show it to be a big source of fund for school MOOE needs.

Studying the education budget is a function of social accountability. The

responsibility for understanding and monitoring the budget, especially of

important basic services like education, lies not just with government but

with other stakeholders like civil society and the private sector.

This paper ends with a discussion on social accountability particularly on

developing a social audit tool on the education budget. It explores

possibilities in budget monitoring for the Philippine Business for Education.

8

Understanding the Education Budget

through Social Accountability

This section identifies the approach of the research and locates how it

improves the delivery of public services like education.

Defining social accountability

One of the approaches that captured the interest of a wide range of actors

including civil society, academe, donor agencies, and to an extent government

institutions is the framework of Social Accountability (SA). It is an approach that

places accountability responsibilities on both the government and citizens or citizen

groups. The frame states that while government needs to account for its

performance and actions as representatives entrusted with the people‟s authority

and resources, citizens or their organizations need to hold government offices and

officials accountable.

As an approach, social accountability focuses attention on the actions of

citizen groups or civil society in ensuring or exacting government accountabilities.

It encompasses the broad range of actions and mechanisms that citizens and civil

society organizations (CSOs) use to make public offices and officials accountable.

On the one end, social accountability includes elections, the voting process

considered as the most limited (yet most sovereign) expression of democracy and

accountability. On the other end, social accountability includes the holding of public

demonstrations, protests, investigative journalism, and the filing of public interest

lawsuit.

In recent times, the range of social accountability actions and mechanisms

included new processes that reaped the victories opened by traditional SA efforts.

The new SA initiatives include a) evidence-based efforts (e.g. CSOs‟ impact

assessments and policy think-tanks‟ benefit cost analyses of government programs

and policies) and b) direct engagement efforts (e.g. participatory budgeting, public

expenditure tracking, citizen report cards, and participatory performance

monitoring).

One definition identifies social accountability as “an approach towards

building accountability that relies on civic engagement, i.e., in which it is ordinary

citizens and/or civil society organizations who participate directly or indirectly in

exacting accountability.”1 Another definition captures social accountability as the

“actions initiated by different groups to hold public officials, politicians, and service

providers to account for their conduct and performance in terms of delivering

services, improving people‟s welfare and protecting people‟s rights.2” Defined as

1 Malena, Forster, and Singh, 2004:1. 2 The definition coined and used by ANSA-EAP.

9

such, the accountability being exacted in social accountability is vertical: it exacts

government performance and it responds to people‟s demands and expectations.3

Defining social accountability not just as an approach but as “actions… to

hold public officials, politicians, and service providers to account for their conduct

and performance,” require enabling conditions. ANSA-EAP calls these

requirements the “enabling conditions of social accountability” or the four pillars.

Organized and capable citizens – Social accountability is only as strong

as the citizens holding their governments accountable. Where they

are organized in groups and aware of their rights, they will be in a

better position to monitor and assess the performance of government

programs and policies.

Government openness – Social accountability thrives in situations

where government is open to scrutiny. While this is often dependent

on having organized and capable citizens, there are situations where

government offices and officials “accept” the value of transparency and

accountability. In these latter instances, the openness leads to

common monitoring efforts and joint evaluations.

Access to information – Social accountability also rests on the

availability of information that could be utilized for holding public

offices and officials responsible for their actions (and inactions). In

some instances, despite having organized citizens, open governments,

and vital documents, particularly financial records, are not accessible.

Context and cultural appropriateness – Social accountability also lies

on some level of acceptable cultural behavior. These norms and

behaviors usually define the acceptable kind or type of community-

based accountability tools. Without considering this requisite, an

informative (and costly) social accountability tool might not earn the

participation of citizens.

As the four are requisites for a flourishing social accountability, efforts must

be made to develop or strengthen these pillars. Efforts should also be made to

address weak links among the four. Note that social accountability is only as strong

as its weakest enabling environment.

Finally, it is important to note that the poor and marginalized benefit the

most from initiatives on social accountability since they are the “most reliant on

3 World Bank, 2005: 19. Horizontal accountability is operational in internal accountability

systems such the internal audit of an agency or the legislative inquiry on executive programs or

officials by Congress.

10

government services and least equipped to hold government officials accountable.”4

Numerous experiences show that SA efforts which investigated budgets, programs,

policies, procedures and from there demanded accompanying reforms resulted in

more effective and efficient delivery of public resources.5

Social accountability initiatives focused on education

In the Philippines, one of the public services that significantly improved

because of social accountability initiatives, in particular, the continuous monitoring

and evaluation of the use and results of the budget, is public education. Initiatives

then and now to make education responsive to Filipinos‟ needs contributed to

improved education policies, enhanced implementation procedures, and ownership

of stakeholders.

Among the examples of social accountability initiatives on the delivery of

education are the following:

The Textbook Count monitors the procurement and delivery of textbooks

to school districts. It taps civil society organizations, parent-teachers‟

associations (PTAs) and other community-based organizations to observe

the acquisition of textbooks and teachers‟ manuals and report on the book

delivery (quality and quantity) to local areas;

Bayanihang Eskwela monitors the construction of school buildings

through the use of indicators like adherence to procurement rules, quality

of materials, and building specifications. It likewise taps CSOs, school

organizations, PTAs, village leaders, and other organizations to serve as

monitors or volunteers; and

Bantay Eskwela monitors the procurement, delivery, quantity and quality

of public school furniture. CSOs were tapped to fill-up monitoring forms

including the checking of whether the purchase orders, order forms, and

delivery forms tally.

In regard to the education budget per se, efforts to monitor are very few. The

Budget Network‟s Monitoring and Evaluation of the National Government Budget

and Budgeting System, which was initiated by former Department of Budget and

Management Secretary Emilia Boncodin, tapped CSOs and built their capacity to

review the budget of national agencies and to provide recommendations. Beyond

this, most of the social accountability initiatives on the education budget involved

4 Malena, Forster, and Singh, 2004:5. 5The benefit incidence analyses on housing and health led to reform policies and enhanced public

service delivery. Efforts at assessing and improving local governments‟ delivery of programs and

projects led to better outcomes.

11

budget evaluations rather than monitoring. The studies include the benefit

incidence analyses of the education budget made by the Philippine Institute for

Development Studies or PIDS (details of these were discussed in the review of

literature).

12

Review of related literature and extant reforms

on the Philippine Public Education Budget

This section is divided into two main parts. The first part discusses the

importance placed on education and the major pieces of legislation that were

passed, including the rethinking of the budget process, in order to reach the much-

desired education outcomes. This part also includes an overview of the budget

reforms being implemented at present. The second part is an overview of the

related works on education, particularly the recent studies on the education budget.

Valuing education

In the Philippines, there is always a clamor to continuously improve

Philippine education. Often, this translates to a demand for government to find

ways to improve education outcomes such as learning achievements and school

enrollment. For Filipinos, a good educational background is a means to a better

quality of life. For the Filipino poor, it is a definite pathway out of poverty.

Economists aptly described education as “a major determinant of an individual‟s

future earning stream, it is the key ingredient in breaking the cycle of poverty.6”

This view puts education at par with other important structural platforms

like asset reform (e.g. land redistribution) and economic empowerment. From this

perspective, education is not just a result of or an achievement based on the

implementation of reform policies like land transfer and financial improvement. In

itself, education is a good; it is a key to structural improvements.

The importance placed on education is concretized into two major strategies.

The first is on the education budget and the second is on the decentralization of

education.

The 1987 Constitution puts primacy on education as evidenced by its

provision of the highest budgetary allocation to the sector. The Constitution states

that “The State shall assign the highest budgetary priority to education and ensure

that teaching will attract and retain its rightful share of the best available talents

through adequate remuneration and other means of job satisfaction and

fulfillment.”7 This mandate, among other ways, is operationalized by the

Department of Education being the biggest bureaucracy and the recipient of the

highest budget.

The Constitution also guarantees every Filipino‟s right to education. It

provides that “The State shall protect and promote the right of all citizens to quality

6 Rosario Manasan, Janet Cuenca, and Eden Villanueva, “Benefit Incidence of Public Spending

on Education on the Philippines,” PIDS Discussion Paper Series Number 2007-09, July 2007, p. 1. 7 Article XIV, Section 5 (5) of the 1987 Philippine Constitution.

13

education at all levels and shall take appropriate steps to make education accessible

to all.8” Towards the latter Constitutional mandate, several laws and policies were

passed to implement free elementary and secondary education.

Aside from the budget, another significant move to improve education

outcomes is decentralization. Two efforts, spanning a decade, were made towards

this. In 1991, the Local Government Code deconcentrated education. The whole

sector was not devolved to local government units (LGUs) to maintain standard

quality9 but the Code ordered LGUs to provide education services. The Code also

stipulated the allocation of 1% of the collections from real property taxes for the

Special Education Fund (SEF) and the creation of local school boards (LSBs) that

will decide on, among other functions, the SEF allocation. A decade later, in 2001,

Republic Act 9155 or the Governance of Basic Education Act decentralized

education management to heads of schools for they are more knowledgeable on how

to improve learning outcomes. RA 9155 abolished the Department of Education,

Culture and Sports (DECS) and created a Department of Education (Dep Ed) that

will ensure access to, equity in, and good quality of basic education. It also

“empowered” the principals to supervise school administration and instruction and

to increase the school resources by accepting gifts, donations, bequests, and grants

provided that these are properly recorded.

The decentralization of education also made it easier for citizen groups and

the private sector to contribute to the enhancement of Philippine education. Civil

society organizations like non-government groups and schools crafted programs like

supplemental teaching, conduct of adult and lifelong learning, advocacy for

improved education budget, and monitoring of education inputs and outcomes.

Private businesses, likewise, spearhead efforts to raise funds for the sector. For

these groups, there are countless reasons for working to improve Philippine

education: reducing poverty, improving incomes, enhancing self-confidence, and

increasing the quality of graduates that enter the workforce.

Reforms in the Budget

The efforts at present by the administration of Benigno C. Aquino III on good

governance led to significant reforms in the budget process.

Compared to the past administration where the budget was often reenacted,

the present administration proposes a new General Appropriations Act (GAA)

8 Article XIV, Sec. 1 of the 1987 Philippine Constitution. 9 One of the reasons for not devolving the education sector to the LGUs is the teachers‟ required

involvement in national and local elections. Teachers, who administer the precincts and count votes,

would be made vulnerable to local politics if they are devolved to LGUs. This could compromise not

only the election results but more so, the integrity of the education system. See “Improving Local

Service Delivery for the MDGs in Asia: the Philippine Case,” a joint project of PIDS and UNICEF, 15

June 2009, p. 17.

14

annually. This makes the budget more attuned to the needs and requirements of

agencies and offices.

Beginning January 2012, the Department of Budget and Management (DBM)

is implementing the monthly allocation of cash to agencies. Instead of providing

Sub-Allotment Release Orders (SAROs) and National Cash Allocation after the

agency send their requests, the DBM is proactively seeking the proposed monthly

allocation of cash and provide the resources on a monthly basis. Where these are

not obligated and disbursed within the month, said cash will be reverted back to the

Treasury. This means that government agencies must have better planning and

management of their programs, budget allotment, procurement and fund

utilization.

Beginning 2013, the DBM will no longer use SAROs and Agency Budget

Matrices (ABMs) but instead will rely on the items in the General Appropriations

Act in providing resources to agencies. This means that offices and agencies must

provide detailed budget proposals. This will entail better projection of expenses

based on laid-out plans and programs.

If implemented properly, the reforms on monthly cash allocation and non-

usage of SAROs and ABMs will benefit the schools. The problems on delayed

downloading of school MOOE will be addressed by the reforms.

Review of related studies on the Philippine education budget

The citizens clamor for free but quality education often translates to a

demand for government to increase the budget for education. Unfortunately, this

demand is often met with budget constraints.10

The studies that looked into the Philippine education budget noted striking

findings: (1) spending for basic education is progressive as poorer pupils get a bigger

share of public elementary and secondary education, (2) the budget for education is

insufficient, (3) the budget, lacking as it is, is inefficiently utilized, (4) local

government units fill a huge budget gap through the Special Education Fund or

SEF, and (5) the use of the SEF is at the LGUs‟ discretion and this sometimes leads

to ineffective and inefficient spending.

Benefit incidence analyses – tools that evaluate the distribution of subsidies

among different population groups based on efficiency and equity considerations –

of government expenditures on education show that public elementary and

secondary education are progressive. Based on information about which income

groups utilize public education and how much is the cost of providing education

10 Rosario Manasan, “Basic Education: Improving Quality and Quantity,” PIDS Policy Notes No.

2000-20, December 2000, p. 2.

15

services, benefit incidence results show that government spending on basic

education benefits poorer members of the population. The poor do not just utilize,

they also benefit more, from public education.11

Moreover, the subsidy rate – or the share of total subsidy to the total per

capita income – is considerably higher for poorer income groups at the elementary

than all other levels. These findings “explain why government spending on

elementary education is indeed to the advantage of the poor.”12

In regard to local government expenditures on education, the findings show

regressive spending in that richer regions such as NCR, Southern Luzon and

Central Luzon get higher shares of the education budget compared to poorer regions

like CAR and CARAGA.13 Thus, despite the stated position of Dep Ed to provide

“equitable funding to localities,” the Department seems not to favor poor regions in

its allocations as there is no correlation between national government spending and

regional incomes.14

The actual spending on education is a different matter. Most of the data

reveal a serious financing gap. This insufficiency is striking during times of

financial crises when spending for basic services is reduced. This budget

insufficiency is also expected to escalate with the increase in population.

Table 1: Government Spending on Basic Education (per pupil)

2002 2003 2004 2005 2006 2007 2008

In PhP

current

prices

(Nominal)

NG

spending

6.544 6,598 6,618 6,938 7,499 8,461 9,180

LGU

spending

568 652 655 723 806 870 930

Total

govt.

spending

7,112 7,251 7,273 7,661 8,305 9,331 10,109

In 2002

prices

(real)

NG

spending

6,544 6,432 6,086 5,994 6,156 6,713 6,752

LGU

spending

568 636 602 624 662 691 684

Total

govt.

spending

7,112 7,067 6,688 6,619 6,818 7,403 7,435

Source: BEPER, 2011

11 Rosario Manasan, Janet Cuenca, and Eden Villanueva, “Benefit Incidence of Public Spending

on Education on the Philippines,” PIDS Discussion Paper Series Number 2007-09, July 2007, p. 20. 12 Ibid. 13 Ibid, p. 29. 14 Philippines: Basic Education Public Expenditure Review, World Bank and AusAID, 2011, p.

16

The data on spending shows that there is a declining trend on spending for

education. Spending dipped in 2005 until it went up slowly until 2008. It can also

be seen that local government spending on education is a steady and significant

contributor to the budget.

Studies point to possible reasons for the spending trends. The decline is, to

an extent, due to a reduced government budget. Significant dips in the

government‟s budget occurred during and after the Asian financial crisis in the late

1990s. During the crisis, the tax collection fell from 17% of the gross domestic

product (GDP) in 1997 to 12.3% in 2004. Beginning 2002 until about 2005, the

government needed to create fiscal balance reducing the budget of the social sector

including education. The sharpest fall in the education budget was from 19.1% in

2002 to less than 15% in 2008.15

Aside from the overall reduction in education expenditure, there is also a

decreasing priority given to education because of its inability to fully execute or

utilize the budget. Trends in budget allocation and budget utilization show that

spending for education is inefficient due to the Dep Ed‟s “waste” of available

appropriation. Of the small amount that is allocated for public basic education,

some of the resources are unutilized and thus are reverted back to the Bureau of

Treasury.

The latest work on the education budget, “Philippines: Basic Education

Public Expenditure Review (BEPER),” made jointly by World Bank and AusAID,

reviewed the expenditure on education vis-à-vis the achievement of the goals

stipulated in the EFA or Education for All. One of its sections investigated the

efficiency of the budget by analyzing the budget execution or the extent to which the

authorized amounts are actually obligated. It reviewed the utilization rate of the

Department of Education using the Statement of Allotments, Obligations and

Balances (SAOB) figures from 2004 to 2008.

The review of SAOB across five years shows that the Department of

Education utilizes around 92 to 97 percent of the total budget allotted to it. When it

conducted further disaggregation for MOOE, the BEPER shows that there were big

shares of the obligations which were made against the previous year‟s allocations.

The data reveal the following analyses a) the Department has issues of absorptive

capacity, and b) the MOOE is always on “catch up” mode.

Studies point to the following reasons for the low execution of the budget: an

outdated budget formula, the lack of participation of principals, districts and

divisions in budget preparation, the lack of capacity of most of the divisions and

15 Philippines: Basic Education Public Expenditure Review, World Bank and AusAID, 2011, pp.

56-57.

17

schools to record and manage their finances and the frequent changes in the Dep

Ed‟s policies and guidelines for implementing the budget.

The less efficient use of the education budget coming from the Department of

Education are supplemented, in various ways, by the Special Education Fund or the

SEF. The SEF comes from an additional one percent (1%) tax on real property

which is imposed, collected, and utilized by LGUs for basic education purposes. The

Local Government Code notes that LGUs can use the SEF for building construction

and maintenance.

The research of Manasan, Celestino and Cuenca on the SEF notes that on the

average, the total SEF income of all LGUs combined is equal to 0.23% of the gross

domestic product (GDP) in 2001 to 2008. The total aggregate SEF spending of all

LGUs is 0.19% of the GDP during the same period.

Specific to MOOE, the share of the SEF is at 110%. In 2007, for instance, the

expenditures from the SEF of all the LGUs in the aggregate is estimated to be

about 2.4 times as large as total Dep Ed allocation for school-level MOOE. In 2009,

Manasan and Castel even surmise that “if one assumes that all of the SEF

expenditures of all LGUs are spent on school-level MOOE and if the SEF were

distributed across LGUs in direct proportion to enrollment, then per student SEF

spending could be equal to PhP 692.00. This amount is higher than the average

Dep Ed school-level MOOE allocation of PhP 293.00 per student in both elementary

school and high school.”16

Their research further shows that the aggregate SEF incomes are higher for

cities than for municipalities and provinces. The findings note that cities captured

66% of total SEF income of all LGUs combined in 2004-2008 while provinces and

municipalities collected 16% and 19%, respectively. Moreover, cities contributed

63% of LGUs‟ total SEF expenditures in 2004-2008 while provinces and

municipalities contributed 18% and 19%, respectively. They note that these

disparities could be attributed to factors namely, “first, the proceeds from the

additional SEF 1% tax on real property that accrues exclusively to the City School

Boards in the case of properties located in any given city while it is divided equally

between the Provincial School Board and the Municipal School Boards in the case of

properties located in any given municipality. Second, and more importantly, real

properties in cities tend to have higher market values than those in municipalities

because cities are generally more urbanized than municipalities.”17

16 Rosario Manasan, Alicia Celestino, and Janet Cuenca, “Mobilizing LGU Support for Basic

Education: Focus on the Special Education Fund,” PIDS Discussion Paper Series Number 2011-07,

May 2011, p. 3. 17 Ibid, pp. 12-13.

18

Research Method

This section defines the parameters of the study. It likewise discusses the

research method that was utilized including the method for gathering the data.

Definitions

For the purpose of this research, two budget categories were studied: the

Maintenance and Other Operating Expenses (MOOE) of the Department of

Education, which were downloaded to schools and the Special Education Fund

(SEF).

Parameters and indicators

The assessment of the education budgets was based on three parameters:

participation, effectiveness and efficiency.

Participation measures the involvement of stakeholders (aside from

government) in budget formulation. It assesses how key individuals and groups,

namely the principals, teachers, parents, and the PTA participate in the

identification of priorities.

To measure the expenditure of the education budget, the analysis center on

the effectiveness and efficiency of the budget execution process. Effectiveness

assesses how the budget was utilized and measures the budget‟s usefulness.

Efficiency gauges the rational use of the budget. In simpler terms, where

effectiveness asks if the resources were spent according to the budget proposal and

if it led to actual results, efficiency asks if the budget is spent and if it is spent

where it is needed most.

The indicators for participation in budget formulation are as follows:

The PTCA, or if present and active, the School Governing Councils‟,

priority programs and plans are reflected in the school budget, the

district budget, and the budget considerations of the Local School

Boards (LSB);

The downloaded school budget is according to the stated requirements

of the schools, as submitted by the principals; and

The school budgets are reflected in the budget of the districts and

divisions.

The indicators for measuring the effectiveness of the education budget are

the following:

19

The school budget is used according to the stated purposes, priorities

and plans; and

Stakeholders (principals, parents, teachers, community members)

perceive the budget to be useful.

The indicators for measuring budget efficiency are as follows:

The budget is obligated on time and not returned to the Bureau of

Treasury;

The budget is used appropriately; and

Stakeholders (principals, parents, teachers, community members)

perceive the budget to be rationally allocated.

Methodology

To get a clear picture of the budget flow and decision-making, a national and

local data review was undertaken. Budget effectiveness and efficiency were

analyzed through a study of the appropriation, allotment and obligation of the

DepEd‟s MOOE. Budget effectiveness and the extent of stakeholder participation in

the budget were analyzed through a study of the procured items for MOOE and SEF

and if these corresponded to the needs of public schools.

Aside from conducting national data review, case studies were also

undertaken to concretize the picture of the education budget. In Nueva Ecija,

stand-alone case studies of elementary and secondary public schools in Cabanatuan

City and Munoz City were undertaken. In the analysis, only the obvious

similarities and differences between the two cases were highlighted.

The choice of Cabanatuan City was purposive and interest-based. PBEd, the

institution that commissioned the conduct of the study, wishes to know the public

education dynamics of a city that has a PHINMA-managed school (Araullo

University). PBEd and PHINMA have overlapping board members and a study on

education, with focus on a place with a PHINMA school, is strategic for both

institutions. This interest-based choice of research site lessened the research cost

since competent research assistance and mobilization were generated for lesser fees

by Araullo University. The choice of Munoz City as the other site was a

recommendation of Araullo University. PHINMA has no school in Munoz City.

For the two case studies, Araullo University served as PBEd‟s research

partner. A research team composed of the Dean of Graduate Studies and four

faculty members provided research assistance through data gathering and analysis.

20

Coverage

In regard to the time delimitation of this study, the focus will be for the years

2009 to 2011. The inclusive years constitute almost a full budget cycle. The 2009

education budget was the latest audited budget. The 2010 budget, re-enacted from

or crafted in 2009, was utilized until December 2010. Before that year ended, the

2011 budget was already crafted and forwarded to Congress. Up to the present, the

2011 budget is being executed.

While not in sequential order, the 2009 audit, the crafting and execution of

the 2010 budget, and the crafting and continuous implementation of the 2011

budget, will give a complete picture of how the budget is formulated and utilized.

Data gathering instruments

Three methods were utilized to gather information: (1) secondary data

gathering, (2) key informant interviews (KII) of Dep Ed and DBM officials and the

principals of Cabanatuan City and Munoz City public elementary and secondary

schools, and (3) focus group discussions (FGD) with PTA members and officials of

the Cabanatuan City and Munoz City local government units.

Table 2: Summary of KII and FGD participants

Cabanatuan City Munoz City

KII with the SDS KII with the SDS

KII with 27 Elementary School principals

KII with 3 High School principals

(Base: 57 ES and 7 HS)

KII with 16 Elementary School principals

KII with 1 High School Principal

(Base: 33 ES and 1 HS)

FGD with PTA officials and members:

2 teachers

2 Parents or PTA officers

FGD with PTA officials and members:

1 teacher

1 Accountant

1 PTA officer

5 Parents

A random sampling of all the secondary and elementary school principals was

undertaken to determine who will be interviewed. In regard to the FGDs, the

participants - parents and teachers - were selected from four schools, two schools

each from Cabanatuan City and Munoz City.

21

Study Results

One of the major reforms implemented by the Department of Education is the

empowerment of schools, their communities and stakeholders so they will take more

active roles in achieving learning outcomes. School-based management (SBM), a

strategy towards improving education outcomes, is implemented in all public

schools nationwide.

School-based management a) empowers school heads or principals to lead

their teachers and students, b) puts the resources within the control of schools to

enhance the delivery of educational services, c) strengthens partnership with LGUs

and communities to enhance school learning environment, and d) institutionalizes a

continuous, participatory, and knowledge-based school improvement process. It is

operationalized through the annual provision of two types of funds: 1) School

Maintenance and Other Operating Expenses (School MOOE) and 2) School Grants.

School MOOE is used to finance school operational costs while SBM grants is

provided to schools for the purpose of establishing SBM structures and/or as an

innovation fund for improving the teaching/learning process.

A budget for MOOE is also allocated to Dep Ed Regional Offices and Division

Offices to cover their operating costs. They utilize these to provide support to

schools through technical assistance, quality assurance, monitoring, and evaluation.

Alongside the SBM, Dep Ed is also pursuing the Basic Education Sector

Reform Agenda (BESRA), a set of plans which includes a proposed reformulation of

the Dep Ed resource allocation to achieve improved learning outcomes.

This section discusses the main findings of the study on the Philippine

education budget. The study is conducted at a juncture when Dep Ed is instituting

reforms on its policies and processes on and resource allocation of the MOOE to

achieve enhanced results. Hence, this study is significant on two counts. On the

one hand, it validates the rationale for the reforms. On the other, it points out

possible ways of improving the implementation of the reforms. This part begins

with a discussion of the stakeholders‟ participation in the crafting of the school

MOOE, followed by a discussion of budget effectiveness, and later on, a discussion of

budget efficiency. The process is repeated for the SEF discussion.

Study results on the MOOE

This part of the paper discusses the findings of the research on the MOOE:

how it is crafted, the issues surrounding its formulation, how it is implemented and

whether it is used effectively and efficiently.

22

While the focus of this research is equally on the three aspects of formulation,

effectiveness and efficiency, this paper has more extensive discussions on some of

the portions than on the others. The imbalance in the discussion is not based on

importance but on the availability of data. Moreover, since this research focuses the

discussion of efficiency in the efficiency of the budget execution, this paper felt the

need to expound on the discussion by looking not just at the case study data but on

national data too.

On the stakeholders’ participation in the crafting of the MOOE

According to the Department of Education, the MOOE budget process is as

follows:

At present, the Dep Ed Central Office crafts the budget for personnel

services, MOOE, and capital outlay and submits this consolidated budget to

Congress for approval. When the budget is approved, the Department of Budget

and Management (DBM) Central Office downloads the budget for MOOE to the

DBM Regional Offices. Then the Regional Offices download the budget to the DBM

Division Offices.

DBM Regional Offices perform two things. It issues a Special Allotment

Release Order (SARO) to Implementing Units (IUs) whose budgets need not go

through the Dep Ed Division Offices. The MOOE allocation of IUs does not pass

through the Dep Ed Division Offices since IUs can manage their own accounting,

bookkeeping, and audit of the budget. DBM Regional Offices also issue SAROs to

Dep Ed Division Offices, which are responsible in downloading these to non-IU

elementary and high schools. These schools are also called “Division-managed

schools” and they get a Sub-Allotment Release Order (Sub-ARO) from the Dep Ed

Division Office. Out of the downloaded MOOE, the Dep Ed Division Office cuts a

percentage of the budget for Division level MOOE. They use this for doing

monitoring and supervisory functions over the schools.

This process is validated by the schools covered in this study. Every start of

the school year, principals craft their budget for MOOE and incorporate this in their

school operating budgets (SOB), annual improvement plan (AIP), and annual

23

procurement plan (APP). These yearly budgets are based on their three-year school

improvement plan (SIP). Before they submit their school operating budget, most of

the principals seek the suggestions of the parent-teachers‟ association regarding the

needs of the schools.

The principals submit their budget to the Dep Ed Division Office, which

consolidates the SOBs and submit these to the Dep Ed Regional Office. The

Regional Offices forward the budget to the Central Office, which presents their

overall budget to Congress. The process flow below illustrates the budget process

that emanates from the schools.

Prior to this process of downloading resources through DBM units, the

MOOE was managed at the Dep Ed Central Office. This caused delays and

inefficiencies in budget execution. At that time, when it would seem that cash

would come late, Dep Ed officials needed to delay the execution of existing MOOE to

tide the various offices of the Department. It was only at the time of Secretary

Emilia Boncodin that reforms were introduced. Using the DBM Regional and

District Offices is a step in decentralizing the budget.

Nevertheless, it is evident that the current budget flow still needs

improvement. Despite the School-Based Management (SBM) program, the Dep Ed

Division, Regional, and Central Offices take over the budget process after the time

the principal has crafted the school‟s annual plans. The participation of the

teachers, principals, students, and other community members in the process is also

minimal. It is limited to giving the school heads suggestions on school needs and

resource-raising.

MOOE downloading and liquidation

One factor that is important in determining stakeholders‟ participation in the

MOOE budget process lies in the downloading of funds. From the Dep Ed Division

Office, the schools receive their MOOE in various ways.

Over the years, Dep Ed Division Offices have varied modes and timing for

downloading the budget. Sometimes the school MOOE is in-cash, in-kind, or a

combination of both. In some years, the MOOE is downloaded quarterly, in some,

24

bi-annually, and in other years, monthly. For various reasons, the MOOE suffered

downloading delays.

It appears that there are no patterns for downloading. For 2011, the

principals welcome the monthly downloading in cash since this permits them to

purchase items that they need and allows for better cash flow management. In

previous years, they cannot plan their expenses ahead of time since they were

uncertain about the timing of the next release. They also did not have much elbow

room on their expenditures when the budget is downloaded in-kind. In some of the

covered schools in Cabanatuan and Munoz, the principals shared that they were

given manila papers, yards of plastic cover and numerous bond papers when their

annual improvement plan, which explains and justifies their budget, specifically

states their needs to be whiteboards, markers, chalks, and computer flash drives

(for the teachers). In 2009, in one of the schools, the Division Office downloaded

gardening and cleaning materials at the start and towards the end of the school

year. These materials were unwanted.

Even in-cash MOOE can also pose problems for school heads. In 2011, in one

of the covered areas, the budget for MOOE was in cash but the schools must only

buy from the sellers pointed out by the Division Office. One of the plausible

explanations is that the Division procured the goods at their level. Probably, the

Division Office wanted to do bulk purchasing to lessen cost of goods. Still, this

action does not explain why the budget was downloaded in-cash and not in-kind

(the procured goods). Other possible explanations point to irregularity in

procurement procedures where a private entity was preferred by a government

procuring office.

Principals lament that this unpredictable mode and timing of MOOE release

is accruing to the frequent changes in the Department‟s guidelines. They note that

policies change almost yearly and this causes confusion.18 There are also frequent

changes in the guidelines on MOOE liquidation. In some years, liquidation

required very strict attachments while in some years, a simple recording of

purchased items is acceptable.

A more important concern beyond frequent policy change is the capacity of

school heads to manage the downloaded MOOE funds. The School Division

Superintendents of Cabanatuan City and Munoz City note that most school heads

need capacity development on fund management and financial recording. They also

note that some principals need to enhance their needs analysis and prioritization. 18 A review of Dep Ed‟s Administrative Orders shows only one AO that stipulates the guidelines

on the Direct Release of Funds (Dep Ed Order 37, issued on June 9, 2004). While yearly budget

guidelines are issued, including a portion on the MOOE, the guidelines are not explicit on the mode

and timing of release as well as on the policies for school MOOE liquidation. It could be surmised

that the guidelines may have emanated from either the Dep Ed Regional Office or from the Division

Office.

25

There were cases of school heads who used their MOOE for school beautification

instead of direct expenses for students.

A review of the 2009 audit report of Dep Ed shows that COA raised the

problem of MOOE downloading particularly in terms of the capacity of school heads

to record their finances. The findings reveal that funds for MOOE amounting to

PhP 66,448,068.43 were not fully expended because of three reasons: the MOOE

was not downloaded, lapsed or unused National Cash Allocations were reverted,

and failure of school heads to include fiscal management in their school

improvement plans. Part of the recommendations of COA was the conduct of

trainings for school heads on financial recording including proper liquidation of

expenses.19

MOOE Allocation Formula

Another factor in gauging stakeholders‟ participation in the MOOE budget

process lies in the allocation of funds.

Until recently when efforts were introduced to reform the allocation formula

for schools, the Department of Education used a standard costing based on cost per

student. This cost parameter – PhP 207.00 per elementary school pupil and PhP

509.00 per secondary school student – is based on estimated enrollment for the

preceding year. This is more than 100% from the cost per student in 2002.

Table 3: Dep Ed’s Cost Parameter per Pupil

School type

Year

1995 2002 2011

Elementary 80.00 100.00 207.00

High school – Regular 218.00 250.00 509.00

High school – Trade 527.00 550.00 750.00 Figures are in Philippine Peso

Putting the number of enrollees as the main cost driver for determining the

MOOE budget of elementary and secondary schools leaves little room for

participation of school principals, much less the teachers, parents and students, in

the crafting of the budget. Regardless of the actual needs of schools, the fixed costs

puts a ceiling on the amount that school heads can use for direct expenditures to

students and for other school improvement needs. This limits the achievement of

school-based management (SBM) objectives which are important for achieving

education outcomes.

19 Executive Summary of the 2009 Audit of the Department of Education, Commission on Audit,

p. 37, downloaded from http://www.coa.gov.ph/Audit/AAR.htm, 1 February 2012.

26

Moreover, this allocation formula neglects to consider critical factors affecting

costs at the school level. The team of Emilia Boncodin, former DBM Secretary,

which made a study on the Equitable Allocation of Dep Ed‟s MOOE, notes that

allocation based on school enrollment fails to consider the a) geographical location of

schools, b) funding assistance from local school boards including the SEF, c) special

curriculum needs, and d) overhead costs.20 In Cabanatuan City and Munoz City,

the SDS and principals emphasized that enrollment-based allocation favors schools

which can accommodate big enrollments. These will receive more funds even if the

overhead costs of running schools are the same.

Since 2010, Dep Ed introduced changes in the way MOOE is allocated per

school. This is a partial implementation of the formula proposed by former DBM

Secretary Boncodin to improve the determination of MOOE funds per school. The

proposed formula will be fully adopted when relevant data are already available.

The Department estimates the full implementation by 2012.

For FY 2010, 2011 and 2012, the MOOE for schools and Divisions is

computed based on “cost drivers” or factors that affect the behavior and size of an

MOOE item. The cost drivers include a) number of enrolment, b) classrooms, and c)

teachers. However, aside from the cost drivers, the budget school Level MOOE will

be based on a fixed cost, an automatic and base amount given to all schools

regardless of its size, or circumstances (as there are several variables that should be

considered for the school to operate smoothly). Given the requirements for

secondary-school operations, the fixed amount is doubled for secondary schools:

Table 4: MOOE Classified by Principal Cost Drivers

Factors/Parameters School Levels

Elementary Secondary

Fixed Amount 40,000 80,000

No. of Enrolment 200 400

No. of Teachers 4,000 8,000

No. of Classrooms 3,000 6,000

From the interviews with the SDS and the principals, it seems that they are

still unaware of the partial implementation of the MOOE allocation formula.

However, the reform answers many of their concerns on small amount of MOOE

and its inequitable distribution.

20 Developed by the late former DBM Secretary, Emilia Boncodin and also by Professor Honesto Nuqui under AusAID

fund assistance and from Support for Philippine Basic Education Reform (SPHERE).

27

On the effectiveness of the MOOE

Effectiveness is the extent to which the development intervention‟s objectives

were achieved, or are expected to be achieved. In this study, effectiveness is

measured in terms of the achievement of the objectives of the MOOE budget. In

other words, the budget is analyzed in terms of its use of the resources.

The MOOE is supposedly used for direct spending for students‟ needs. In the

study areas, the school MOOE is often used for supplies and materials, repairs and

maintenance, and payment for utilities. While supplies and materials are for the

direct needs of pupils, the latter two are for other, but equally important, needs.

In both sites, the MOOE is regularly used for payment of overhead costs of

schools like electric and water bills. In the absence of source of funds for these

needs, the principals use the MOOE to pay for these regular costs. In several

instances, the school MOOE was used to fund travelling needs of teachers and

students. In one school, the principal and the teachers were pleased that they were

able to purchase external drives (USBs). In both sites, the LGUs shoulder the

janitorial and security services and so these are not taken from the school MOOE.

The needs of schools could be strategically augmented by LGUs particularly

by the SEF. If LGU resources and the SEF could fund not just the janitorial and

security services but also other overhead needs like electric and water services, the

MOOE could be freed up for direct needs of pupils.

On the efficiency of the MOOE

This study limits the study of MOOE efficiency to the budget execution

process. While giving increased allocation is important for basic services like

education, knowing if the scarce funds are spent and spent well is equally

significant.

The latest work on the education budget, “Philippines: Basic Education

Public Expenditure Review (BEPER),” made jointly by World Bank and AusAID,

reviewed the expenditure on education vis-à-vis the achievement of the goals

stipulated in the EFA or Education for All. One of its sections investigated the

efficiency of the budget by analyzing the budget execution or the extent to which the

authorized amounts are actually obligated from 2004 to 2008.

To account for the allotment release system, this study continued the BEPER

data from 2009 to 2010 and compared actual obligations against the total

allotments released to Dep Ed every year. The data reveals the following:

28

Table 5: Education Budget Utilization Rate

Using Statement of Allotments, Obligations, and Balances (SAOB) Figures:

Total Current and Continuing Allotment Releases

vs. Total Current and Continuing Obligations (in PhP „000)

Particulars 2004 2005 2006 2007 2008 2009 2010

Total available

appropriations

108,090 118,819 133,880 148,164 174,778 165,137

202,614

Annual increase (%) 9.93% 12.68% 10.67% 17.96% -94.48% 22.69%

Total allotment 109,260 116,835 127,459 149,297 169,160 179,910

202,614

Annual increase (%) 6.93% 9.09% 17.13% 13.30% 6.35%

12.62%

Total obligations 105,646 111,893 120,694 139,889 155,522 174,963

191,118

Annual increase (%) 5.91% 7.87% 15.90% 11.18% 12.50% 9.23%

Utilization rate 97% 96% 95% 94% 92% 97% 94%

Balance/unobligated

amount

3,614 4,942 6,765 9,408 13,638 4,946

11,496

% of balance to

allotment

3.31% 4.23% 5.31% 6.30% 8.06% 2.75% 5.67%

Source: SAOBs from the DepED-Budget Division, 2004 - 2011 and BEPER

Prior to analyzing the table, it is important to understand the terms used in

the SAOB. Appropriation is an authorization made by law directing payment out of

government funds. It is the amount provided by Congress through the General

Appropriations Act or GAA and could either be current or continuing. The former

refers to the authorization for the existing year while the latter refers to the

authorization to support obligations even when these obligations are incurred

beyond the budget year. Obligations are payables to suppliers of goods and services

which, at present, are operationalized through having perfected contracts.

Utilization rate is the quotient of obligations over appropriations.

From the foregoing, BEPER notes that “nominal increases in total allotments

have outpaced increases in total obligations, thus reducing execution ratios steadily

from 97% in 2004 to 92% in 2008.” In 2009, budget execution was better since the

onset, the available appropriation was lower than the previous year. The total

budget for 2009 was nearly obligated except for the PhP 5 Million unobligated

amount or balance by the end of the year. In 2010, the first year of the

implementation of the revised allocation scheme or the Boncodin formula, Dep Ed‟s

budget increased by 22%. By the end of 2010, however, Dep Ed registered 5.7%

unobligated amount, which in actual money terms is PhP 11.5 Million.

The BEPER further points out those total available appropriations have

increased faster than total allotments, except in 2007 and 2009 when allocations

were higher than appropriations and in 2010 when the amounts were the same.

29

This trend means that from 2002 till about 2008 (save 2007), Dep Ed has

“absorptive capacity” problems despite its attempt to increase its budget allocations

(at least in nominal terms).21 In 2009 and 2010, Dep Ed‟s absorptive capacity

improved when appropriations were lower than or equal to allotments.

This extant research surmises that the data used by BEPER for years 2004 to

2008 on determining the utilization rate is the sum of both the current and

continuing appropriations for every year. This research followed the pattern of

analysis for 2009 and 2010 and came up with the data included in Table 5.

However, instead of using both the current and continuing appropriation as

basis for analysis, this research preferred to analyze the efficiency of the budget

utilization rate using current appropriations and allocations. Using current

resources shows the management of present resources. A high utilization rate of

current appropriation and allotment shows efficient use, and not catch-up

utilization, of resources.

Using current (regular and automatic) appropriation, the total education

budget shows the following:

Table 6: Education Budget Utilization Rate

Using Statement of Allotments, Obligations, and Balances (SAOB) Figures:

Total (Current) Allotment Releases vs. Total (Current) Obligations (in PhP „000)

Particulars 2004 2005 2006 2007 2008 2009 2010

Total allotment 106,331 113,978 123,993 141,036 160,256 160,926 196,888

Total obligations 103,131 109,284 117,950 131,958 146,405 157,835 186,036

Utilization rate 97% 96% 95% 94% 91% 98% 94%

Balance/unobligated

amount

3,200 4,693 6,043 9,078 13,851 3,091 10,853

% of balance to

allotment

3.00% 4.18% 4.97% 6.44% 8.64% 1.92% 5.51%

Source: SAOBs from the DepED-Budget Division, 2009 – 2010.

From the foregoing, it is clear that the utilization rate of current

appropriation ranges from 91% to 98%. While other analysts may find this still

wanting, this research argues that considering the huge size of the Dep Ed

bureaucracy, this utilization rate would be acceptable. It is worthwhile noting

however that most of the resources of the Department is on personnel services.

Focusing on the MOOE budget execution (by zeroing in on current

appropriations), the table below shows that the Department has limited utilization

rate. Obligations are way lower than the total available resources. However, in

21 Philippines: Basic Education Public Expenditure Review, World Bank and AusAID, 2011, p.

56.

30

2010, there was a huge improvement in the utilization rate. This improvement is

despite the passage of stricter guidelines on obligating funds where only perfected

contracts can be obligated.

Interestingly, it can be seen that despite the partial implementation of the

new allocation formula, a good portion of the budget for MOOE was still

unobligated.

Table 7: Total PhP MOOE Utilization Rate using SAOB Figures

Total (Current) Allotment Releases vs. Total (Current) Obligations (in PhP „000)

Particulars 2004 2005 2006 2007 2008 2009 2010

Total allotment 7,313 8,513 12,703 18,089 20,441 12,591 20,322

Total obligations 5,868 7,068 9,084 11,622 12,601 11,010 14,986

Utilization rate 80% 83% 72% 64% 62% 87% 74%

Balance/unobligated

amount

1,445 1,445 3,619 6,467 7,840 1,581 5,336

% of balance to

allotment

1.98% 1.70% 2.85% 3.58% 3.84% 1.26% 2.63%

Source: SAOBs from the DepED-Budget Division, 2009 – 2010.

The table below shows the source of the obligated amounts. Considering the

continuing appropriation of the Dep Ed budget, the data below shows that sizable

shares of the obligations are made against the previous year‟s budget. From 2006 to

2010, the Department uses its previous budget to pay for its obligations. This

means that Dep Ed‟s MOOE is often operating on a “catch up plan.”22 In 2007,

2008, and 2009, Dep Ed used big amounts of their MOOE budget from previous

year‟s allotment. The trend improved in 2010.

Table 8: Total PhP MOOE Utilization Rate Fund Source:

Total (Current and Continuing) Allotment Releases

vs. Total (Current and Continuing) Obligations, by Object of Expenditure (in PhP „000)

2006 2007 2008 2009 2010

Allotment 14,126 22,654 25,771 21,478

23,880

Obligations 10,148 71.8% 16,286 71.9% 19,044 73.9% 19,000

88.5% 18,150

76.0%

Current 9,094 89.6% 10,851 66.6% 12,313 64.7% 12,803

67.4% 14,986

82.6%

Continuing 1,054 10.4% 5,435 33.4% 6,731 35.3% 6,197

32.6% 3,164

17.4%

Source: SAOBs from the DepED-Budget Division, 2006 – 2010

22 Dep Ed‟s limited capacity to execute the budget is not just true for MOOE, it is also true for

capital outlay.

31

In Region III, which covers Cabanatuan City and the Science City of Munoz,

the SAOB trend on utilization rate shows the utilization rate to be fluctuating from

limited to relatively acceptable execution rates.

Table 9: Region III’s MOOE Utilization Rate using SAOB Figures

Total (Current) Allotment Releases vs. Total (Current) Obligations (in PhP)

Particulars 2004 2005 2006 2007 2008

Total allotment 374,176 394,771 817,521 860,864 1,222,846

Total obligations 344,906 371,925 565,124 799,169 997,471

Utilization rate 92% 94% 69% 93% 82%

Balance/unobligated

amount

29,269 22,846 252,397 61,694 225,375

Source: SAOBs from the DepED-Budget Division, 2006 – 2010

Study results on the SEF

This portion discusses the findings of the research on the budget execution of

the Special Education Fund and how this fund complements the School MOOE

The SEF is a reliable source of funds for schools. It is 1% of the levy on real

property and is given to the Division Offices and schools by the Local School Board.

If utilized effectively and efficiently, the SEF can complement the needs of schools

and augment the downloaded MOOE

In general, data on SEF shows that although small, SEF is a huge

contributor to the Department of Education‟s budget for MOOE. However, it also

suffers from utilization problems which range from 8% to a high of 23%. The table

below shows the SEF income, expenditure, and Percentage to Dep Ed MOOE from

2001 to 2007. Unfortunately, data for 2009 to 2011 are not yet available.23

Unfortunately still, the data on SEF of Cabanatuan and Munoz Cities are not yet

gathered.

23 Discussion with the Bureau of Local Government Financing (BLGF), Department of Finance,

28 November 2011.

32

Table 10: Total SEF Income, Expenditure, Balance

and Percentage to Dep Ed MOOE (In PhP „000)

2001 2002 2003 2004 2005 2006 2007 2008

SEF

Income

8,451 9,537 11,002 10,693 12,381 13,909 13,540 14,956

SEF Expenditure 7,744 7,395 8,826 8,854 10,265 11,451 11,679 11,492 Balance/unobligated

amount 707 2,142 2,176 1,839 2,116 2,458 1,861 3,464

% of balance to

allotment 8.37% 22.46% 19.78% 17.20% 17.09% 17.67% 13.74% 23.16%

SEF % of Dep Ed

MOOE

85.7% 135.0% 142.3% 120.1% 121.7% 112.8% 100.5% 59.4%

Source: DOF‟s Bureau of Local Government Financing (BLGF), SEF Income and Expenditures (SIE),

many years.

How the SEF is spent is the discretion of the Local School Board (LSB). The

LSB is chaired by the Mayor and co-chaired by the School District Supervisor. The

SEF should be used for education purposes. As to how it should be used is variedly

interpreted.

Manasan, Celestino and Cuenca found out that the priorities for the use of

SEF in their study sites were on a) repair and construction of buildings, b)

personnel services, c) sports development / competitions and Dep Ed co-curricular

activities, and d) instructional materials, books, office supplies and school

equipment. The study made by Boncodin and Nuqui notes that the SEF is often

used for a) supplies and materials, b) utilities, c) repairs and maintenance, and d)

others.

The BEPER notes that anecdotal evidence on the SEF shows that LGUs use

the resources to fund teachers particularly in areas where there are shortages on

teachers. At the elementary level, the share of locally-funded teachers was 4% in

2002 and 8% in 2007. At the secondary level, the share increased from 15% in 2002

to 22% in 2007. Further, the study infers that recent improvements in student and

teacher ratio are largely attributed to additional hiring of locally-funded teachers.

However, the BEPER notes that the locally-hired teachers might have lower

qualifications than the ones hired centrally by Dep Ed.24

Interviews with principals from Cabanatuan show that the SEF is used to

pay for a) salary of teaching personnel such as the new teachers who passed the

LET and have passed the Dep Ed requirements and hiring process, b) compensation

24 Philippines: Basic Education Public Expenditure Review, World Bank and AusAID, 2011, p.

42.

33

for the school guards and utility workers, c) utilities such as electricity and water,

d) construction of new school buildings. As to whether the SEF is also used to

purchase supplies and materials did not surface. In Munoz City, the principals are

not aware about the details of the City‟s SEF and they are not familiar on how it is

spent by the Local School Board. The SDS knows that the SEF is used to pay for

LSB teachers.

It is clear from policies and guidelines that the SEF is to be used for MOOE.

From the case study sites, however, the SEF is also used for non-MOOE items

depending mostly on the decision of the city government. Compared to Cabanatuan

City, the principals from Munoz City and more so, the SDS, do not know how the

SEF is spent. There were cases when the SDS and the principals were surprised

with how the SEF was spent. In one instance, LSB teachers were hired - using the

SEF - without informing the SDS.

As to whether the SEF can finance teaching and non-teaching personnel is

variedly interpreted. In some areas, COA officials disallow the use of SEF to pay for

personnel while in some areas, COA officials allow this type of expense.

Stakeholders from the case study sites point to this opacity of SEF policies as one of

the problems that need to be addressed.25

In regard to budget execution, the study made by Manasan, Celestino and

Cuenca reveals that there are SEF balances registered across various years despite

unmet education needs. Table 8 shows that from 2001 to 2008, the unobligated SEF

is around 17 to 18%. These are resources that could have been used to augment the

MOOE of schools.

25 Some Dep Ed officials note, however, the using the SEF to pay for personnel costs and for

building repair and maintenance, is prone to patronage politics.

34

Conclusions and recommendations

This research on the Dep Ed MOOE and SEF reveals several conclusions.

Compared to the past formula on school MOOE allocation which is based

purely on number of enrollees, the new scheme for computing the budget of school

MOOE is a big improvement. Putting a base amount over and above other cost

drivers rationalizes and “equalizes” the distribution of the budget. This new

formula is reflective of the school budgeting realities and responsive to the school

improvement plans.

In essence, the increase in the MOOE budget, as a result of the improved

formula, suits the School-Based Management program which puts primacy on the

empowerment of principals. With increased budget, school heads can better plan

the expenses. In practice, however, the crafting of the budget is still centralized.

Since 2009, there are no new guidelines that improve the budget crafting process to

go along with the new allocation scheme. Up to the present, principals are still

unsure if their MOOE will be in cash, in kind, or a combination of both.

It is important to note that the improvements in the downloading of MOOE

are visible. School heads welcome the monthly downloading in cash. However, in

Cabanatuan, the requirement for schools to purchase goods only from Division

Office approved suppliers clips the authority of the school heads and casts doubts on

the procurement process.

The participation of teachers and parents in the crafting of school MOOE

budget is almost negligible. In the case study sites, they are asked to identify school

needs and the principals considered these needs in three documents: the school

improvement plan, the annual improvement plan, the school operating budget and

the annual procurement plan. In the end, these needs may or may not be

prioritized depending on the budget ceiling. With a more responsive budget, the

participation of teachers, parents, and other stakeholders should be beefed up.

To an extent, the MOOE of the two study sites is effective as these are used

for direct needs of students and for other overhead requirements of schools. In

regard to the efficiency of the budget execution process, the Department-level

MOOE made marked improvements in obligating the budget. These improvements

coincide with the partial implementation of the new allocation scheme. In the

coming years, there is a need to conduct an evaluation of the results of the Boncodin

formula to determine the recommendations for its full implementation.

Despite the improvements in utilizing the budget, there are still significant

balances and there are obligations that were charged against previous budgets.

This means that the Department is still catching up on its budget execution and

35

thus, still has to improve its absorptive capacity. This observation is especially true

in light of requests for improved budget. This observation needs to be validated

with data coming from Cabanatuan City and Munoz City.

The SEF poses more challenges. Recent data on national level SEF are not

yet ready and the data from Cabanatuan and Munoz City are also not yet available.

Meantime, national data states that the SEF hugely contributes to Dep Ed‟s

MOOE. However, the SEF also suffers from inefficient execution considering the

balances vis-à-vis budget.

In Cabanatuan, the SEF is utilized for MOOE and for payment for teaching

and non-teaching personnel. While the SEF can clearly be used for MOOE, using it

for personnel services is not clear in the guidelines and the COA rules.

Overall, the efforts to harmonize the data between the Dep Ed budget and

the SEF are in the right direction. However, a similar level of data harmonization

at the municipal, city, and provincial level are also necessary. Distilling the data is

important in improving the budget sourcing for education needs. Where the Dep Ed

or the school already has budget for certain needs, the SEF can be used to fund

other needs.

The recommendations of this research are clustered to include proposals for

the Department of Education, for other national government agencies, for local

government units, and for civil society organizations or CSOs.

In regard to the Dep Ed, there is a need to set new policies and processes

along with the implementation of the new allocation scheme. These new policies

should further improve and support the SBM program. These must also include

guidelines on how to use the MOOE, how it will be downloaded, and the time frame

or period for downloading. Dep Ed must also have a mechanism for monitoring the

performance of schools, divisions and regions on the use of MOOE.

Beginning 2012, the Department of Budget and Management (DBM) will be

providing cash allocations monthly based on the targets and the proposals of

agencies. This means that Dep Ed must be able to carefully anticipate its budgeting

and procurement so that it can disburse cash monthly. Otherwise, the available

cash for MOOE might be reverted back every month to the Treasury.

Moreover, beginning 2013, the DBM will begin the phase out of Sub-

Allotment Release Orders (SAROs) and Agency Budget Matrices (ABMs) in

authorizing fund releases to government departments and agencies. This means

the use of the approved national budget as a comprehensive release order. This

further means that only a handful of items will need the clearance of the DBM

before releases can be made. The removal of SAROs and ABMs will rely on the full

36

disaggregation of agency lump sum budgets in the 2013 budget preparation. Dep

Ed must carefully plan and disaggregate its budget so that it can effectively and

efficiently use the MOOE.26

These efforts of the DBM seem laudable and thus must be commended and

supported. It is anticipated that with these reforms, the delays in downloading the

budget is addressed. In this case, the Commission on Audit must step up the plate

and harmonize its differing interpretations of guidelines on the use of funds

particularly the SEF.

In the interest of maximizing scarce resources on education, the SEF must be

harmonized with the school MOOE. In particular, a matching mechanism, like a

performance grant program, can be tested. In areas that have high SEF and this

SEF is utilized according to agreed-upon expenses and in a transparent and

accountable manner, the Dep Ed can complement the fund with improved budget

for MOOE. Care must be made not to lessen the national budget counterpart in

areas with big SEF collection. This will signal perverse incentives to the LGUs.

Along with incentive-based solutions, there is a need to compel transparency

and accountability among local government units in their use of the Special

Education Fund. They must be made to clarify vague items on the use of their SEF.

In Munoz City in particular, the utilization of the fund could be enhanced by

improving the transparency in, and participation of, stakeholders in decision

making. The Department of Finance may be the right agency to impose guidelines

on transparency and accountability in the use of the SEF.

CSOs like PBEd must participate in the policy advocacy on the Dep Ed

budget. CSOs must also observe the implementation of the reforms on the new

MOOE budget formula and on the DBM reforms in the budget process.

26 Downloaded from www.dbm.gov.ph., 28 January 2012.

37

Developing a Social Audit tool

On the Education Budget

Social audit is a measure of the institutional responsiveness of a social actor

(government, civil society, church, academe, media, and private sector). It

determines whether the functions, obligations, and commitments of societal

institutions are met from the point of view of peoples‟ needs and expectations.

Social audit, in other words, is a set of tools to enhance social accountability.

Social audit is undertaken through a measurement of gaps. Vis-à-vis

government, social audit provides citizens‟ feedback on whether government

programs are relevant and if these are effective, efficient, and sustainable. As such,

social audit is meant to be independent. To be effective, efforts should be exerted to

ensure that the actor or government office subject to audit does not improperly

influence the processes and results.

Social audit, likewise, is an exercise in peoples‟ empowerment. Its eventual goal

is to “make habitual, routinized, and institutionalized instruments of accountability

in governance.”27 With social audit becoming a norm, it is hoped that the

government will often be accountable for its actions and inactions.

The Philippines has numerous social audit initiatives. While some made

evaluations of existing or recently-finished government program or project, some

have evaluated a certain government function or task (like this education budget

study). Some made monitoring tools and approaches which are regularly conducted

(e.g. Textbook Count, Bantay Eskwela, and Bayanihang Eskwela) while some

checked government performance through measuring the satisfaction of citizens

(e.g. report card tools and citizen surveys). The table below describes some of the

social audit initiatives in the Philippines, which measured the provision or delivery

of social services. This table, however, is not exhaustive but rather a means to

provide a spread of initiatives related to basic services.

27 Segundo Romero, Social Audit Toolbox for Philippine Civil Society Organizations, unpublished

paper for the Transparency and Accountability Network, January 2011.

38

Table 11: Matrix of social audit initiatives

Type of social audit

tool

Name of initiative Description

Evaluation of

government service delivery programs

Performance Evaluation of the

Matching Grants Program (MGP)

The tool evaluates the Matching Grants Program of the

Department of Health. Developed by the Management Sciences for Health (MSH), the tool evaluates the performance

and impacts of the program on fully-immunized children,

Vitamin A supplementation, immunization of women and family planning method propagation

Impact Evaluation of the MGP

Local Service Delivery Survey

The survey provides an understanding of the supply and

demand factors of local services delivery. Developed by the

Philippine Institute for Development Studies (PIDS), three modules were used to determine factors of local services

delivery: information on clients, information on service

providers, and information on government that manages or funds service providers.

Local Enhancement &

Development (LEAD) for Health

Project

Developed by the MSH, the tool was implemented in

partnership with the DOH and various CSOs. It measures the

performance of local government units in meeting health needs including the provision of vitamins, prevention from TB

and HIV-AIDS and understanding family planning

Report Cards

Citizens Governance Report Card (CGRC)

Developed by the Transparency and Accountability Network (TAN), CGRC collects citizen feedback on the quality and

adequacy of public services. The findings were disseminated

and advocacy and networking were conducted to improve the

delivery of surveyed services

Filipino Report Card for Pro-Poor

Services

A national client satisfaction survey undertaken by the Social

Weather Station and the World Bank to measure “client”

satisfaction with public services in the Philippines. The assessment was made using private sector services as

benchmarks.

Report Card Survey on Local

Governance

Developed by the Development Academy of the Philippines to

assess the provision and delivery of 7 city services: garbage collection, traffic management, neighborhood safety, public

market management, permit issuance/marketing, water supply,

and housing. The survey covers 9 cities and gathers the perception of local residents on the quality of services, the

price of services, the possible alternatives, and the residents’

willingness to pay for improved services

Monitoring of public infrastructure

Concerned Citizens of Abra for Good Governance (CCAGG)

infrastructure monitoring efforts

Measures the progress of public works and the appropriation and obligation of the budget for infrastructure projects. Their

discovery of huge leakage contributed to plugging of gaps and

freed up resources.

Bantay Lansangan Road Users’

Satisfaction Survey and

Monitoring Tools

Developed by the multi-sector initiative Bantay Lansangan,

the tools aim to enhance the delivery of quality national road

services. It also intends to increase the transparency and accountability in the road construction and maintenance

operations of the Department of Public Works and Highways

39

Type of social audit

tool

Name of initiative Description

(DPWH)

Evaluation of

procurement tools

Differential Expenditure

Efficiency Measurement

Measures the “actual” cost or the value that the government

actually paid for a certain item, versus the “true” cost or the

value of the item in a fair, open and competitive market. Developed by the Procurement Watch Inc. (PWI), it assesses

if procurement leads to purchase cost that is comparable to

fair, open, and competitive market

Benefit Incidence Analysis (BIA)

Government housing

Developed by PIDS, the tools assess the different government programs or subsidies that affect the distribution of welfare to

the poor. It determines if the government programs on

housing, health or education are progressive or regressive Public health

Public education

Social cost benefit analysis of

government housing

The tool, developed by PIDS, compares the benefit of

government housing to the cost of implementation. It

deducted the social benefits (subsidies, better sanitation, social cohesion) from the social costs (interest subsidy, guarantee

coverage, tax exemption, administrative costs)

Monitoring and Assessment of

government-

commitments

Civil society assessment of the 2004-2010 MTPDP

Developed by CODE-NGO, the approach compares and assesses the accomplishments and planned actions of the

Gloria Macapagal-Arroyo administration vis-à-vis the stated

commitments in the 2004-2010 Medium-Term Philippine

Development Plan

Monitoring of

government

procurement and post-procurement

efforts

Textbook Count

Developed by G-Watch, the tool monitors the procurement

and delivery of textbooks through tapping civil society

organizations, parent-teachers’ associations and other community-based organizations to observe the textbook

procurement and report on the book delivery (quality and

quantity) to local areas.

Bayanihang Eskwela

The tool, developed by G-Watch, monitors the construction of school buildings through the use of indicators like adherence

to procurement rules, quality of materials and building

specifications.

Bantay Eskwela

Developed by PWI, the tool monitors the procurement, delivery, quantity and quality of public school furniture.

CSOs were tapped to fill-up monitoring forms including the

checking of whether the purchase orders, order forms, and delivery forms tally

Medicine Monitoring Tool The Coalition Against Corruption partnered with NAMFREL

to implement the tool to guard against leakages and corruption

in the procurement of goods and services in the DOH. Eight hospitals and three Centers of Health were monitored in terms

of procurement of drugs, medical supplies, laboratory needs,

infrastructure, equipment and supplies

Government Budget

Monitoring

Social Housing Watch The Bantay Pabahay para sa Maralita is a local budget

monitoring approach through the use of a step-by-step manual

(written in Filipino)

Satisfaction Surveys Social Weather Reporting System Developed by the Social Weather Station, the approach,

40

Type of social audit

tool

Name of initiative Description

conducted through national surveys, covers an array of social concerns such as economic well-being, public safety and

quality of governance. It includes indicators on self-rated

poverty, gainers or losers, and optimists and pessimists in respect to quality of life and satisfaction with government

officials’ performance.

Development of

mechanisms

Transparency and accountability

mechanisms in local governance in the Philippines

Developed by the La Salle Institute of Governance, the project

develops a set of mechanisms for transparency and accountability in Philippine local governance. The indicators

will be used in assessing transparency and accountability

systems in 10 cities and municipalities.

In his study on social audit, Segundo Romero provides seven criteria that may be

used in choosing a social audit tool. These are the following: obtrusiveness, partner-

ability, maturity, routinization, replicability, expandability, and cultural

acceptability.

Romero points out that a viable social audit tool is one that is amenable to

partnership with many actors, most especially with its main stakeholders (e.g.

students, road users, health care users). It is one that is tried, tested and re-worked

based on feedback. Moreover, depending on the objectives of the social audit, an

initiative may be obtrusive or non-obtrusive in the operations of a government

office. Romero warns, however, that the more an initiative is intrusive or

disturbing, the more likely that it will be resisted by the office subject to audit.

Recent efforts on social accountability and social audit suggest engaging in

partnerships with the government office/agency being audited. These social audit

efforts, being non-obtrusive, are often welcomed by government offices. Civil society

organizations, for their part, see the advantages in these partnerships provided that

measures and mechanisms are laid out so that the audited office does not exert

undue influence on audit processes and results.

Non-obtrusive social audits are beneficial in three ways. First, the data are

available and accessible and thus are used for the audit initiative. For example,

information on number and quality of books, furniture and building materials for

delivery are made available to members of the Textbook Count, Bantay Eskwela,

and Bayanihang Eskwela initiatives. Second, the results form part of the

monitoring system of government offices and the problem areas are more easily

acted upon. For instance, Bantay Lansangan tools are filled-up by citizen monitors,

submitted to the Department of Public Works and Highways (DPWH), and become

part of the monitoring system of the agency. Out of the monitoring reports, it is

expected that roads with problem areas will be immediately addressed by DPWH

field units. Third, policy initiatives emanating from social audit initiatives become

41

institutionalized. They form part of the guidelines of the offices or part of their

policy initiatives.

If PBEd wishes to undertake a social audit effort on the education budget then it

may consider the following:

What type of social audit tool will it undertake, evaluation (like this study) or

monitoring? If it will undertake another budget evaluation, will it deepen and

replicate this study in other case sites or will it evaluate other budget categories

(capital outlay, personnel services)? If it will undertake a monitoring initiative, will

it monitor the budget of a certain program (e.g. School-Based Management) or an

aspect of the budget process (e.g. procurement)?

What aspect of the education budget will it audit; transparency, participation of

stakeholders, effectiveness, efficiency, or a combination of these aspects? Some of

the prominent monitoring tools observe the transparency of processes and results as

well as the actual delivery of government commitments.

How would other education-sector stakeholders participate in the social audit

process? Will they form part of the tool developers? Will they become evaluators or

citizen volunteers/monitors? What would be the role/s of the Department of

Education? What about other government agencies?

Finally, what would be the source of fund? Evaluation efforts only need one-time

budgets but monitoring activities are routinized and sustained. Usually, citizen

monitoring efforts need a combination of institutional funding support and

volunteer support in order to become sustainable.