After reading an English-translated transcript of President Benigno “P.Noy” Aquino III’s recent State of the Nation Address (SONA), it started to bug me that there was no easy way to verify the true financial position of the Government on the basis of what P.Noy said in his speech until this question is answered: What exactly is meant by a “depleted” national budget?
In accounting there are many concepts that describe outgoing funds, and just as many words to articulate these concepts: spent, disbursed, appropriated, accrued, allocated, provisioned, etc. Choosing the right word to use among those examples basically comes down to deciding whether funds referred to were set aside or moved to or from one account to another. A “budget” does not necessarily imply the existence of actual money. A budget is planned expenditure, and as such, the concept of a depleted budget does not make sense. We may exceed a budget, but to say it’s been “depleted” is to state an oxymoron; which is exactly the way P.Noy stated it in his SONA…
Our budget for 2010 is PhP1.54 trillion. Of this, only PhP100 billion – or 6.5% of the total budget – can be used for the remaining six months of the current year. Roughly 1% of the total budget is left for each of the remaining month.
Where did the funds go?
The amount of funds, say cash, in an account, say a bank account, on the other hand, represents something that could be depleted — both in principle and in practice. Perhaps if P.Noy made specific reference to an actual statement of account and made use of more precise accounting terms, then his speech would have made better sense. Albay Representative Edcel Lagman does exactly that in a statement challenging P.Noy’s accounting acumen (or that of his handlers). Lagman makes use of precise words on the matter, in the way that a more informed person would:
Quoting the Bureau of Treasury, Lagman said the total cash disbursement or the national government expenditures as of June 30, 20010 amounted to close to P789 billion. This means that close the P752 billion pesos or 48 percent of the budget remains unspent, he said.
“The problem in the President’s accounting must have been caused by a lack of understanding of the difference between allocation as covered by a Special Allotment Release Order and actual disbursement to pay accrued or matured obligations,” Lagman said.
The general principles of what Lagman says seem consistent (in the way that it raises the right issues to discuss and debate) with Arroyo’s stated position on the matter as evident in how “Former Presidential Management Staff (PMS) chief Elena Bautista-Horn, who is now Arroyo’s spokeswoman, told Mr. Aquino to ‘please get your numbers right’.” in this Philippine Star report…
Horn, who also served in various capacities under the Arroyo administration, pointed out that Mr. Aquino might have been misled into believing that Arroyo overspent by P1 trillion in the first half of 2010, thereby leaving his administration with only P600 billion to spend.
Horn pointed out that P300 billion of the total amount was “automatically appropriated for debt service.”
“First of all, the President should also realize that 100 percent of the annual budget for government salaries or personnel services, and 75 percent of other operating expenses are automatically deemed disbursed on the very first working day,” she said.
As such, the present administration would, in fact, have the convenience of having already paid for future salaries of government personnel and other operating expenses, Horn explained.
She said, “This is a budget practice that Budget Secretary Florencio Abad would have become aware of if he spends less time churning out anti-Arroyo press releases.”
“Come to think of it, it’s probably worth checking with Secretary Abad as well if, by the word ‘releases,’ is he referring to actual cash disbursements or just allocations or SAROs (Special Allocation Release Order) to the different government agencies which they may have not spent yet,” Horn said.
Note the precise terminology used in both Lagman’s and Horn’s/Arroyo’s statements. Their take on the matter may be wrong or may be right. For that matter, so could P.Noy’s take. But then, that is beside the point. The point is more around the clarity of the assertions they make which, in turn, makes an effort to either debunk them or verify them more straight forward.
Then again, it may be a reasonable bet that Lagman and Horn are pretty confident about the validity of their assertions considering they did not shy away from being precise in the way they articulated said assertions. The same thing could not be said about the way P.Noy articulated his own claims in his SONA. In at least a thousand words, he tried to tell us that his government is broke. But he did it in a way that would make anyone with even the most basic understanding of accounting principles cringe. Bottom line is that the concept of budget is not logically compatible with the concept of depletion. Whoever supplied the President with the fodder for yesterday’s SONA should step up and clarify. Plez.