Introduction to Bottom-up Budgeting in National Government Agencies In line with the current government's aim to ensure transparency and

inclusion in how public finances are handled, the concept of bottom-up budgeting has been introduced in government operations. This deviates from the norm of having the national government directly creating the budget proposals for all concerned agencies and their projects. Instead, input from local communities are expected to be used to build the budget. Starting from the budget preparations for the fiscal year 2013, the government has started to integrate bottom-up budgeting in its social welfare and development programs, with the aim of involving the poorest communities in identifying projects that they believe would be beneficial to them. The strategy is currently being rolled-out in 18 national government agencies and related government owned-and controlled corporations. This paper is concerned in documenting the important aspects of bottom-up budgeting, from its definition, legal framework and how it is currently being implemented. It also aims to inform about the scheme's major processes and identify strengths and pitfalls, as well as current political and social developments that entail for the implementation of the scheme as government policy. Definition of Bottom-up budgeting Bottom-up budgeting is a budgeting system in which the involved budget holders are given the opportunity to participate in the process of settling their own budgets. It is usually defined as an approach to budget-setting in which managers determine how much is needed to achieve each of their planned objectives; these amounts are then combined to establish the total operating budget.1 In contrast to the top-down budgeting, all of the budgets that are prepared before-hand by the department heads are made into one for the needs of the entire company or organization. The idea of bottom-up approach is that the budgeting proposals come from the "people who do the work", or the grassroots. As opposed to the top-down budgeting approach which is based on managerial judgments and historical data from previous
1 Monash Dictionary of Business (2013).

projects with similar actual costs adjusted for the current ones, overheard, project reserves, and profit figures have to be contributed for bottom-up approach. 3 Some of the advantages of bottom-up budgeting is its perceived accuracy since the elements are more detailed. There is also the benefits pitched in with participative management, and the difference in opinions can be resolved since the people outside the officials are involved.2 But it also has its own perceived disadvantages. First, it is time consuming and the initial requests are not realistic. Second, the process has an inherent bias for increasing expenditures as all new programmes, or expansion of existing programmes, are financed by new requests. There is no system for reallocation and there are no preset spending limits. Finally, it is difficult to reflect political priorities as it is a bottom-up exercise with the budget “emerging” at the end of this process. 3 Bottom-up approach in the Philippines In the past, local government units, through their local development councils were required to formulate Public Investment Programs (PIPs) as required by Title Six, Section 109 of the Local Government Code of 1991 (RA 7160). These plans are then submitted to regional development councils for consideration for the national government agencies' budgets. However, in such a system, the PIPs often arrive too late to be integrated in the national budget, most often arriving in July when the President already submitted the General Appropriations Act to Congress by June.4 In his visit to Tacloban City, Secretary Florencio Abad of the Department of Budget and Management announced the adoption a bottom-up budgeting approach for the budget preparation process, as opposed to the conventional top-down process. 5 This application is in line with the goal of the current adminisatration to reduce poverty rate incidence in accordance to some of the United Nation’s Millennium Development Goals (MDGs) by 2015.
2 Organization for Economic Cooperation and Development (2008). Performance Budgeting: A Users’ Guide. Retrieved at: http://www.oecd.org/governance/budgeting/40357919.pdf 3 Blondal, Jon. (2003). Budget Reform in OECD Member Countries: Common Trends. Retrieved at: http://www.oecd.org/gov/budgeting/43505551.pdf 4 Official Gazette (2012). Bottom-up approach defines 2013 process. Retrieved at: http://www.gov.ph/2012/01/19/bottom-up-approach-defines-2013-budget-process/ 5 Philippine Information Agency (2012). Feature: The ‘Bottom-Up’ approach for 2013 budget preparation process. Retrieved at: http://r08.pia.gov.ph/index.php?article=1141329193496

The government has identified 300 to 400 of the poorest municipalities that will be engaged in crafting community-level poverty reduction and empowerment plans. As the bottom-up budgeting will focus on rural development programs and the conditional cash transfer program, the adjustment process would involve the participation of “pilot agencies” that will consider and include each of these involved communities’ plans in their proposed budgets. These have been identified as: a.) Rural Development agencies (Departments of Agriculture, Agrarian Reform, and Environment and Natural Resources) and b.) Conditional Cash Transfer Program agencies (Departments of Social Welfare and Development, Education, and Health).6 Secretary Abad also mentioned that the budget preparations would be driven by and towards the needs identified and reported by the grassroots so as making the 2013 budget more people-centric, with the aim of helping in reducing poverty incidence more than just the usual deciding on the allocation of resources. This will allow the actual communities to communicate their needs and have the proposed budget meet their minimum requirements. In line with these, Secretary Abad added that this will be complemented with the expansion and fortification of the civil service organizations. Legal Framework The bottom-up budgeting scheme could be considered to be ultimately compatible with principles laid down in the country's constitution. Article II, Section 9 of the 1987 Constitution expresses the desire of the state to “promote a just and dynamic social order” that will ensure prosperity and free people from poverty through policies that provide adequate social services. Section 21 advocates rural development and Section 23 mandates the state to encourage non-governmental, community-based, or sectoral organizations that promote the welfare of the nation. In addition, Article X, Section 14 provides powers for the creation of regional development councils for the purpose of decentralization and acceleration of economic and social growth and development. The bottom-up budgeting strategy was implemented in line with the Aquino administration’s goal to reduce poverty and achieve the United Nations Millennium
6 Official Gazette (2012).

Development Goals (MDG). The administration aims to reduce the poverty incidence rate from 26.5% in 2009 to 16.6% by 2015 in accordance with the Philippine Development Plan for 2011-2016.7 Executive Order 43 s. 2011 organized the cabinet thematically into five (5) clusters. Two of these are the Good Governance and Anti Corruption Cluster (GGAC) and the Human Development and Poverty Reduction Cluster (HDPRC). Under this executive order, the GGAC is tasked to promote transparency, accountability, participatory governance, and strengthening of public institutions; and the HDPRC shall focus on improving the overall quality of life of the Filipino and translating the gains of good governance into direct, immediate, and substantial benefits that will empower the poor and marginalized segments of society. The two cabinet clusters, together with the Department of Budget Management (DBM) and the Department of Interior and Local Government (DILG) shall pilot the bottom-up approach in planning and budgeting. Implementation Process In the implementation of bottom-up budgeting, several steps are being conducted, as enumerated below.89 The National Anti-Poverty Commission (NAPC) and the Deparment of Interior and Local Government (DILG) are the lead agencies assigned in organizing the scheme at the local level. 1. Preparation for planning and budgeting

Civil society organizations in an area are assembled. The CSOs must identify and agree on a set of priority poverty reduction projects and measures that reflect the community's needs and demands.

A representative of a CSO is chosen as co-chairperson, as well as 3 other signatories. Relevant economic and social data is validated by the group. Data will come from various sources such as the agencies involved in the BuB.

7 Deparment of Budget and Management (2012). Guidelines for the Implementation and Monitoring of Bottom-up Budgeting (BuB) Projects in FY 2013.Retrieved at: http://www.dbm.gov.ph/wpcontent/uploads/Issuances/2012/Joint%20Memorandum%20Circular/JMC2012-2/JMC2012-2.pdf 8 De Vera, Renato. (2013) Bottom-up Budgeting and Planning Process. [Presentation] Retrieved at: http://prezi.com/o0bsfuddoniw/bottom-up-planning-and-budgeting-process/ 9 Deparment of Budget and Management (2013). Policy Guidelines and Procedures in the Implementation of Bottom-up Budgeting (BuB) for the FY 2014 Budget Preparation. Retrieved at: http://www.dbm.gov.ph/wpcontent/uploads/Issuances/2012/Joint%20Memorandum%20Circular/JMC2012-3/JMC2012-3.pdf

2. Conducting of workshops

The Local Poverty Reduction Action Team (LPRAT) is assembled/re-assembled to establish/review its development policies. Specific poverty reduction strategies should be undertaken, targeting issues such as hunger, job generation, climate change and provision of basic social services. The LPRAT shall also identify priority povery reduction projects through a vote among its members. Good governance, gender and environment principles are expected to be integrated in the plan.

3. Endorsement of the programs to CSOs

The LPRAT designs the proposed projects, which must be approved by the selected signatories of civil society organizations (CSOs).

4. The Local Poverty Reduction Action Plan (LPRAP) is passed to the local Sanggunian for adoption. 5. The approved LPRAP is submitted to the regional action team. • This includes the list of priority projects, project brief for each project and the Sanggunian resolution approving the plan. 6. All local action plans are consolidated by the regional action team. • The DILG-Regional Office in the area is taked to consolidate, which will then submit the consolidated list to the RPRAT and the NAPC. 7. Validation and review by the RPRAT

Proposals that can be accommodated by existing projects is recommended, while those who cannot are recommended to be fulfilled by the creation of a new program under a specific agency.

Rejected projects must be clarified to the LPRAT for it to be clarified, modified or replaced. The final list must be settled/replaced before submission to the NAPC and the Regional Developmet Council (RDC). NAPC shall turn over the list to the BuB oversight agencies for approval.

8. The projects are integrated in the budgets of national government agencies (NGAs). • The agency shall integrate it within the “ceiling budget” proposed by the DBM.

The BuB projects shall be ensured to be not duplicating similar projects of the concerned agency.

9. Provision of counter-part funding from Local Government Units

LGUs must provide cash counterpart for each BuB project, as follows:

Highly Urbanized Cities: 30% of project All other cities: 20% 1st to 3rd class municipalities: 15% 4th to 6th class municipalities: 5%

No counterpart funding, no release of BuB projects. LGU that meet the following requirements can implement a BuB project. ◦ Seal of Good Housekeeping (SGH) receipient ◦ LGU has made significant progress in its Public Financial Management (PFM) Improvement Plan. ◦ LGU has technical capacity to implement the project. ◦ LGU has no unliquidated cash advances.

10. Project implementation10 •

If an LGU is ineligible to implement a BuB project, the project will be implemented by the concerned NGA.

11. Project Evaluation11 • • The LGU shall conduct consultation with the CSOs regarding the status of the BuB project s being implemented. CSOs are expected to submit their analysis and evaluation to the National Government Agency (NGA) concerned regarding the issues related to the project execution. • The NGA and the CSOs may publish final evaluation reports to achieve greater transparency.

10 Department of Budget and Management (2012). Guidelines for the Implementation and Monitoring of Bottomup Budgeting (BuB) Projects in FY 2013. Retrieved at: http://www.dbm.gov.ph/wpcontent/uploads/Issuances/2012/Joint%20Memorandum%20Circular/JMC2012-2/JMC2012-2.pdf 11 Deparment of Budget and Management (2012). Guidelines on Partnership with Civil Society Organizations and Other Stakeholders in the Execution of the Agency Budget. Retrieved at: http://www.dbm.gov.ph/wpcontent/uploads/Issuances/2012/National%20Budget%20Circular/NBC539/NBC539.pdf

Pilot Implementation For the 2013 national budget, the National Government introduced the bottomup Budgeting approach for the first time in 609 local government units (LGUs). These LGUs, being identified to be among the poorest areas in the country, were expected to partner with non-government organizations and civil society groups to draft their list of programs and projects they wish to be included in the national budget. These will ensure that the government's poverty reduction programs will reach those who really need them.12 Out of more than 600 LGUs, 595 submitted their proposals collectively worth collectively worth P8.37 billion.1314 These projects covered those in agriculture and fisheries support, potable water supply, basic education and public healthcare. With the success of the pilot testing, the national government is planning to expand the implementation of the program to more than 1,200 local government units, double the number of those in the first phase. For the 2014 national budget, 1,233 local government units covering 75% of the total number of LGUs in the country were chosen to implement the Bottom-up Budgeting approach. 1516 Issues and Concerns in Bottom-up Budgeting in the Philippines While certain sectors and groups have expressed their interest and support in the new strategy, others have expressed concerns about it. This includes the lack of clear guidelines in conducting consultations among stakeholders at the local and regional levels, and allegations of certain budgets plans being drafted without any consultation at
12 Gonzales, Iris. (2012). Gov’t to implement bottom-up budget process in pilot municipalities. Retrieved at: http://www.philstar.com/business/2012/11/25/872793/gov%E2%80%99t-implement-bottom-budget-processpilot-municipalities 13 Santos, Matikas. (2012). New ‘bottom-up budget’ approach used in 2013 national budget. Retrieved at: http://newsinfo.inquirer.net/274994/new-bottom-up-budget-approach-used-in-2013-national-budget. 14 Department of Budget and Management (2012). JMS 2 Annex A: List of 2013 Projects. Retrieved at: http://www.dbm.gov.ph/wp-content/uploads/Issuances/2012/Joint%20Memorandum%20Circular/JMC20122/JMC%202%20Annex%20A%20List%20of%202013%20Projects.xls 15 Department of Budget and Management (2013). Bottom-up budgeting areas for 2014. Retrieved at: http://www.dbm.gov.ph/wp-content/uploads/Issuances/2013/National%20Budget %20Memorandum/118AnnexA.pdf. 16 Department of Budget and Management (2013). List of Focus Cities and Municipalities for FY 2014 Bottom-up Budgeting. Retrieved at: http://www.dbm.gov.ph/wp-content/uploads/Issuances/2012/Joint%20Memorandum %20Circular/JMC2012-3/JMC2012-3%20Annex%20A.pdf

all.17 There are also issues in the selection of civil society/non-government representatives and whether they are being consulted in the decisions of the concerned government agencies. The lack of a level playing field among CSOs tend to give more chances for those who already had prior experience in transacting with government, with those smallers ones often left behind. 18 The more prominent or more organized CSOs tend to get better chances of having their projects integrated into their respective area's action plan. In addition, one of the cited disadvantages of bottom-up budgeting is how it is perceived to be time-consuming. Due to the need to have all stakeholders consulted, it is not unusual for proposals to be delayed due to the difficulty convening them during the budget preparation. The lack of skills among BuB facilitators also adds up to the delays and confusion in the process. There are also concerns if the budget really reflects the needs of the perceived beneficiaries, as well as fear of setback if ever stakeholders would scrutinize and comment negatively on budget items in the long run due to the rejection of their proposed projects.19 Current Political Developments Regarding Bottom-up Budgeting As the “pork barrel scam” regarding the alleged corruption and mishandling of Priority Development Assistance Fund (PDAF) came into mainstream, several legislators and civil society groups have proposed the bottom-up budgeting approach as an alternative to PDAF in achieving the government's development goals. Senator Teofisto Guingona III has filed a bill seeking to abolish the PDAF and introduce the BuB as a permanent fixture in government policy. Senate Bill 1524, also known as “Bottom-Up Budgeting Act of 2013”20, aims to allocate the amount intended

17 Rappler.com (2013). Bottom-up budgeting needs work. Retrieved at: http://www.rappler.com/moveph/issues/budget-watch/featured/30667-bottom-up-budgeting-needs-work 18 Ong, Ted Alwin. (2013). Bottom-Up-Budgeting: Experience at the grassroots? Retrieved at: http://www.rappler.com/move-ph/issues/budget-watch/featured/34734-bub-experience-grassroots 19 Rappler.com (2013). Bottom-up budgeting. Moving up, but long way to go. Retrieved at: http://www.rappler.com/move-ph/issues/budget-watch/featured/25594-budgetwatch-bottom-up-budgeting 20 Senate of the Philippines (2013). Senate Bill No. 1524: Bottom-Up Budgeting Act of 2013. Retrieved at: http://www.senate.gov.ph/lisdata/1762514859!.pdf

for the pork barrel to national government agencies.21 In the introductory text, the Senator intends the bill to fulfill the current government's goal of tuwid na daan by addressing service delivery, increasing government integrity and effectively management government resources. Several features of the proposed bill are the following:
• • •

the abolition of the PDAF as a matter of policy defining the members of the Poverty Reduction Action Teams at the local and regional level defining the roles and responsibilties of National Government Agencies (NGAs), Local Government Agencies (LGUs) and Civil Society Organizations (CSOs) in the preparation of the budget and related project proposals

requirement of public and timely disclosure of budget documents and other related data At the House of Representatives, Rep. Maria Leonor Robredo of Camarines Sur

has also proposed the abolition of PDAF and its replacement by the BuB process. She proposed her own complementary bill to the BuB called the Full Disclosure Bill.22 This was inspired by similar mechanisms spearheaded by the late Mayor Jesse Robredo in Naga City, in which the local development council identifies priority projects in behalf of the city government.23 Rep. Robredo also added that such measures will ensure that public officials will not abuse their office for personal gain. Summary Bottom-up budgeting is an interesting process due to the promise of better accountability and delivery of social services for those who need them the most. In the Philippines, where corruption cases are often headline in news items and poverty has been a perennial problem that cannot be solved fully, BuB is a welcomed idea that may help government fulfill its mandate better. However, one must exercise caution in declaring the perceived advantages or
21 Reyes, Ernie. (2013). Guingona files bill to abolish PDAF, proposes bottom-up budgeting. Retrieved at: http://www.interaksyon.com/article/70103/guingona-files-bill-to-abolish-pdaf-proposes-bottom-up-budgeting 22 House of Representatives (2013). House Bill 19: Full Disclosure Act of 2013. Retrieved at: http://www.congress.gov.ph/download/basic_16/HB00019.pdf 23 ABS-CBN News. (2013). Leni Robredo wants bottom-up budgeting. Retrieved at: http://www.abscbnnews.com/nation/08/27/13/leni-robredo-wants-bottom-budgeting

results of the implementation of BuB, especially in the local context since it has been only implemented recently. A significant time frame is needed in evaluating the said approach since the necessary framework and processes are not fully in place and still in the process of development. In its current state, the national government and other stakeholders must work in fine-tuning the BuB scheme in order to be more effective in its goals, especially in the implementation and monitoring of BuB projects. It still has to be seen how the government will perform in implementing the bottom-up budgeting approach, more so if the current policy will be turned to a formal law beyong the current administration's term. Ultimately, the success of BuB will be determined by the citizens, most of them poor, who is intended to benefit from the program through the projects they need the most and if ever these will eventually be felt by them.