Budget/Finance - National Agricultural and Fishery Council ...

4.6. BUDGET/FINANCE
Rationale and Objectives
4.6.1 The budget/financial evaluation of the AFMA implementation looked at
the major policy, regulatory, institutional, management and operational factors
affecting the flow and utilization of funds for the implementation of the law.
This report focused on the fund requirements mandated under the AFMA as
translated in the Philippine Agriculture and Fisheries Modernization Plan 2001
– 2004 (AFMP) versus the recorded stream of budgetary support from the
national government to the agriculture and fishery sector. In addition, it
identified and analyzed factors impinging on the implementation efficiency and
effectiveness of the law. The report likewise presented findings on matters
impinging on the improvements of the planning and budgeting system for
improved delivery of services. All of these were carried out within the overall
context of providing workable policy and program recommendations to
enhance the realization of the vision and goal of a modernized Philippine
agriculture and fishery sector as enunciated in the AFMP.
Methodology
Financial / Budget Data Review
4.6.2. The budget and financial review approach made use of the comparison
between the legal provisions contained in the AFMA and the actual budgets
provided as reflected in the General Appropriations Act (GAA), actual
allotment releases as well as actual fund utilization by the concerned
implementing agencies. Geographic allocation or distribution of budgets by
regions were presented and analyzed. The timing of allotment releases and
the level of obligations were likewise looked into. To the extent possible,
depending on the availability and quality of reliable data, linkages between the
financial resources made available through the planning and budgeting
process with actual performance and accomplishments were be established.
Data from the DA, DBM, and Congressional Oversight Committee on
Agricultural and Fisheries Modernization (COCAFM) were extensively used
for this report. Financial and operational reports from other AFMP
stakeholders like the DAR, DENR, DOST, etc. were also obtained.
4.6.3 For a better understanding of the “funds flow” for AFMA implementation,
both new appropriations contained in the General Appropriations Act (GAA)
and the actual expenditures/obligations reflected in the National Budget
Expenditures and Sources of Funds (BESF) report of the Department of
Budget and Management’s (DBM) were analyzed and presented in this report.
New appropriations under the GAA, as the title describes, are “new”
expenditures or budgetary items authorized by law for the current budgetyear.
Their totals do not include some major budget expenditure items that are
automatically appropriated under specific laws and those that are released as
lump sum appropriations the utilization of which (and the corresponding
recording and classification) shall be determined during the budget
4.6 - 1

implementation phase. A good example is the Priority Development
Assistance Fund (PDAF), a lump sum fund whose disbursements are under
Congressional prerogative. The bulk of PDAF go to the construction and
repairs of farm-to-market roads, post-harvest facilities and other AFMArelated
activities or projects. However, the estimated amounts are not
reflected as part of the AFMA budget appropriations in the GAA. Recordings
of expenditures are done after the fact in the BESF as obligations incurred
under the AFMA. In this connection, the expenditures budget was used in this
study. A table showing the comparisons of the budget shortfalls/excesses
using the new appropriations and the expenditures figures over the amount
prescribed under the law was presented in this study.
Financial Data Gathering Limitations
No regular reports submissions
4.6.4 At this juncture it is important to note that the DA is mandated to
“submit to the Senate Committee on Finance, the House Committee on
Appropriations and the COCAFM a consolidated quarterly financial and
narrative report on the implementation of the AFMA”. 1 However, findings
showed the lack of compliance to this in so far as regular quarterly reporting
to the COCAFM is concerned. Copies of the DA Annual Reports are
submitted to COCAFM.
Differences in budget data reported by DBM vs. DA and DAR
4.6.5 The Consultant also discovered that the records of DBM did not tally
with those of the DA and DAR in terms of the reported appropriations,
obligations and actual cash disbursements over time. And, there are no efforts
to date to reconcile the reported figures.
4.6.6 GAA version of DA for AFMA vary with that of the DBM because DBM
includes all items which DA claims are not within its concern. For example,
the DA AFMA budget computations exclude most items recorded under the
2005 General Appropriations Act Section XXXVI-B (State Universities &
Colleges); C (PCAFNRRD); D (Budgetary Support to GOCCs except PCA)
and E (Allocations to Local Government Units) except for the Southern
Philippines Irrigation Sector Project, Mindanao Rural Development Program
under the MDF, and the Cordillera Highland Agricultural Resource
Management Project under the LGEF. According to DA, reconciliation of
figures will only be possible through analysis of each individual special
allotment release orders (SARO) issued by DBM against those received by
DA, which is a long and tedious process. On the other hand, according to
DAR there is no special Agrarian Reform Fund particularly intended for AFMA
1 General Appropriations Act. Special provisions for the establishment and utilization of the
AFMP Special Purpose Fund.
4.6 - 2

implementation only fund attributions from the CARP Budget for Program
Beneficiaries Development. DAR and DBM totals do not likewise tally.
4.6.7 As a result, in view of the fact that the DBM is the official government
agency tasked to officially report on the overall government budget, the
Consultant decided to use the DBM figures for purposes of this study.
Regional Consultations
4.6.8 Regional consultations were conducted with the following objectives,
among others: first, gathering information, from stakeholders’ viewpoint, on
actual budget releases for specific industries and if these were translated to
specific output; and, second, drawing out proposals for improvement -
knowing that funds are scarce and all needs cannot be addressed.
4.6.9 The workshop made use of plenary and focus group discussions
(FGDs). Participants were requested to assess whether the budget for AFMA
was adequate or inadequate and why. The reason/s included perceptions on
budget releases, which were translated to specific outputs. In addition, they
were likewise asked for their suggestions on where the limited AFMA
budgetary resources should be focused. Given the present budget
constraints, the workshop participants prioritized the following components for
modernization by ranking them from highest to lowest with 1 being the
highest: irrigation; post harvest facilities; other infrastructure like farm-tomarket-roads,
etc.; credit; trade; marketing assistance; information support;
product standardization and consumer safety; education; research and
development (R&D); extension; and others. They selected and ranked,
through frequency count of FGD participants, five priority areas for
intervention where a limited budget can be focused.
Agriculture and Fisheries Performance
4.6.10 The DA has over the years, been ever-present in all aspects of
agriculture operations: production, procurement, financing, credit, marketing
and distribution. Such practice exerts tremendous pressure on its limited
resources, financial, manpower and other logistics. Oftentimes, the DA had
been criticized to have had spread itself too thinly resulting in mediocre
delivery of services and a lot of unmet expectations and at times dampening
private sector initiatives. The AFMA is a serious attempt to give the much
needed direction, convergence strategy as well as resources for the DA to
spearhead the realization of a modernized Philippine agriculture and fishery
sector.
4.6 - 3

The AFMP and the Budget
4.6.11 The AFMP was prepared in accordance with the Medium-Term
Philippine Development Plan (MTPDP) for 2001 to 2004. The MTPDP
contained the blueprint for the planned achievement of the broad-based and
sustainable development for the country. It sought to operationalize the
AFMA-defined principles in modernizing the agriculture and fisheries sector
and specified in detailed the mandated programs and stream of public
investments necessary.
4.6.12 The AFMP provided the strategic context for the annual budget. It
presented the strategic framework to harmonize and unify the various
agriculture and fishery development programs, projects and activities in the
country. It likewise afforded the Congress and DBM the sound bases for the
review and support of the annual budget proposals in support of agriculture
and fisheries sector modernization. Past accomplishments, constraints faced
and the long-term vision and short- to medium-range plans that will assure the
continued support for farmers and fisherfolks regardless of changes in the
political arena, set the stage for the crafting of the AFMP budget for 2001 –
2004.
4.6.13 The AFMP rationalized and translated the AFMA’s provisions for
increased budgetary support to modernize the agriculture and fisheries sector.
It had been pointed out that the “historically inadequate government support
to agriculture is one major cause of the under-performance of the sector”. 2
AFMA is an attempt to remedy the situation.
AFMA Funding Provisions
4.6.14 AFMA provides for an initial year (1999) funding of P20 billion in
addition to the 1998 DA budget. Under Rule 112, the DBM was mandated to
include in the President’s budget program, and correspondingly release, P20
billion for the period 2000 to 2004 (at least P17 billion per year in addition to
the DA’s 1998 appropriation of P2.771 billion). The P20 billion a year will
provide for the needed steady flow of public investment support to the
agriculture and fisheries sector. The planned allocation is enumerated in
Table 4.6.1.
2 Department of Agriculture, The Philippine Agriculture and Fisheries Modernization Plan
2001-2004.
4.6 - 4

Table 4.6.1 Planned Annual Budget Allocation of PhP20 Billion Funds for
AFMA For FY 2000 – 2004 Implementation
Particulars % of
Amount
In PhP
Total Billion
1. Irrigation 30.00 6.00
2. Post-harvest Facilities 10.00 2.00
3. Agro-Industry Modernization Credit and
Financing
10.00 2.00
4. Other Infrastructure 10.00 2.00
5. Research and Development (R&D) 10.00 2.00
6. Marketing Assistance 8.00 1.60
7. Salary Supplement of Extension
Workers / Extension Services
6.00 1.20
8. Capability Building 5.00 1.00
9. National Agriculture and Fisheries
Education System
5.00 1.00
10.National Information Network 4.00 0.80
11.Rural Non-Farm Employment Training 1.75 0.35
12.Identification of Strategic Agriculture
and Fisheries Development Zones
0.25 0.05
Total 100.00 20.00
4.6.15 Starting the year 2001 R&D well as agriculture and fisheries extension
shall each have annual budget allocation of not be less than 1% of agriculture
Gross Value Added or GVA (including livestock and fisheries) reported by the
National Statistics Coordinating Board (NSCB) 2 years before the current
budget year. For example, for 2001, 1% shall be based on the 1999 GVA. For
each, these should translate to not less than the following (in billion pesos):
2001, P5.06; 2002, P5.22; 2003, P5.47; 2004, P5.97; 2005, P6.29; and 2006,
P7.31. These computations were based on 1% of the nominal values of GVA
excluding forestry for each year.
Planning and Financial Management Organization for AFMA
4.6.16 Rule 111.1 of AFMA required the DA to “identify all of its offices,
agencies, functions, programs, projects and activities whether regular or
related to GATT adjustments, including the corresponding appropriations, and
classify these according to the specific items/categories provided in items (1)
through (12) of Section 111” (as shown in Table 4.6.2). As such, the
corresponding planning and financial management systems of the DA and
other AFMA implementing agencies should have been restructured and
rationalized along the lines of the AFMP. They should have included the
monitoring and evaluation of physical accomplishments vis-à-vis
budget/financial performance in the implementation of the AFMA.
4.6 - 5

4.6.17 The DA had taken positive steps to implement the called for reforms in
the planning and financial/budgeting systems and processes within the
agriculture bureaucracy. With the end in view of reorienting and even
restructuring the DA agencies and operations towards functional lines in
accordance with the AFMA and the public expenditure management reforms
of the government, several organizational studies were conducted and
detailed implementation plans prepared. These include the following:
Improving Governance for Agricultural Bureaucracy (IGAB); Capacity Building
for Policy Formulation, Planning; Monitoring and Evaluation for the Agriculture
Sector (CBAPP); Public Resource Allocation System (PRAS) Study; Plan,
Performance Monitoring Indicator System (PPMIS); and a comprehensive
training needs assessment under the Grains Sector Development Project
(GSDP). 3 However, despite these initiatives, the DA still finds itself grappling
with the same problems as before and with its operations not quite attuned
with the principles and priorities laid down by the AFMA.
4.6.18 The obvious disconnect between the DA’s planning and budgeting
systems had resulted in the incongruence between what it needs to do and
what it actually does. The much needed changes and improvements in the
planning and financial systems, particularly in developing close linkages
between its operational plans/targets and its financial and other resources are
yet to be put into place/implemented and institutionalized.
4.6.19 At present, the DA and the whole national government bureaucracy is
undertaking a rationalization program that will hopefully address the above
concerns.
Total Funding Support to Agriculture: 1993 – 2005
4.6.20 As shown in Table 4.6.2, for the 13 year period 1993 – 2005 the
national government provided a total of PhP226.59 billion new appropriations
under the DA regular budget and GATT-related adjustment measures/AFMA
funds. Of these, expenditures or obligations amounted to PhP210.81 billion,
equivalent to 88.67% fund utilization. Disbursement during 1999 to 2005
showed an improvement of about 8% compared with the 1993 to 1998 period.
Appropriations and obligations were only slightly higher during the1999 to
2005 AFMA years at 53% and 55.28%, respectively compared with the 1993
to 1998 pre-AFMA years.
3 DA, Diversified Farm Income and Market Development Project (DFIMDP) document.
4.6 - 6

Table 4.6.2. DA + GATT + AFMA Appropriations & Obligations, 1993 –
2005 (In Million Pesos)
PARTICULARS Total
Budget Program By
Appropriation Source
Department of Agriculture 57,194
GATT-related Adjustment
Measures / AFMA Fund 169,395
TOTAL 226,589
Budget Expenditures, Obligation
Basis
Department of Agriculture 59,706
GATT-related Adjustment
Measures / AFMA Fund 34,732
TOTAL 210,806
% Obligations to
Appropriations 88.67%
4.6.21 Budget expenditures growth rate over the 13 year period was
recorded at 24.73%. The growth was much higher at 57.25% during the pre-
AFMA years compared with only 1.15% during the 1999 to 2005 AFMA
period. Among the regions, Regions 3 and 8 received the largest budget of a
little over P5.0 billion each, while CARAGA, ARMM and CAR received the
lowest totals at PhP795 million, PhP878 million and PhP894 million,
respectively over the 13-year period. Table 4.6.3.
4.6 - 7

Table 4.6.3. Budget Expenditures: DA + GATT + AFMA, 1993 to 2005 (In Million Pesos)
1993-2005 PRE AFMA (1993-1998) AFMA PERIOD (1999-2005)
Particulars
Total
(Million P)
Growth
Rate (%)
% Share Total
(Million P)
Growth
Rate (%)
% Share Total
(Million P)
Growth
Rate (%)
% Share
Total 210,807.91 24.73 100.00 94,438.71 57.25 100.00 116,369.20 1.15 100.00 23.22
Nationwide 94,112.41 43.80 44.64 51,871.67 52.43 54.93 42,240.74 (0.10) 36.30 (18.57)
Central Office 85,978.71 826.05 40.79 34,127.09 1,464.06 36.14 51,851.62 3.02 44.56 51.94
NCR - - - - - - - - - -
CAR 1,224.82 30.10 0.58 407.62 57.34 0.43 817.19 2.83 0.70 100.48
Region1 894.75 20.18 0.42 230.64 23.14 0.24 664.11 (1.04) 0.57 187.94
Region 2 1,759.46 21.01 0.83 415.22 23.48 0.44 1,344.23 0.83 1.16 223.74
Region 3 5,027.07 167.75 2.38 662.09 104.11 0.70 4,364.99 0.88 3.75 559.28
Region 4 3,254.46 29.15 1.54 1,328.51 60.52 1.41 1,925.96 1.15 1.66 44.97
Region 5 1,475.68 17.77 0.70 417.10 26.42 0.44 1,058.58 1.08 0.91 153.80
Region 6 1,645.83 87.01 0.78 731.05 197.18 0.77 914.78 2.33 0.79 25.13
Region 7 2,015.10 41.70 0.96 710.43 82.46 0.75 1,304.67 0.82 1.12 83.65
Region 8 5,043.98 145.90 2.39 829.17 192.74 0.88 4,214.81 4.97 3.62 408.32
Region 9 1,887.60 83.33 0.90 799.19 169.82 0.85 1,088.42 0.32 0.94 36.19
Region 10 1,460.77 45.04 0.69 528.44 81.69 0.56 932.34 1.48 0.80 76.43
Region 11 1,611.94 14.29 0.76 438.20 15.83 0.46 1,173.74 0.45 1.01 167.86
Region 12 1,762.09 65.55 0.84 314.76 17.95 0.33 1,447.33 1.46 1.24 359.82
CARAGA 794.99 273.55 0.38 20.52 814.59 0.02 774.47 1.15 0.67 3,675.15
ARMM 878.25 - 0.42 607.03 - 271.22 - 0.23 -
B/A
Inc./
(Dec.)
4.6 - 8

Pre-AFMA Years: 1993 - 1998
4.6.22 Table 4.6.4 shows the budget program by appropriations and expenditures
of the DA under the regular fund and the special fund allocations for GATT-related
adjustment measures for the period 1993 to 1998. Total appropriations amounted
to PhP106.50 billion of which PhP23.935 billion was for DA regular programs and
the bulk of PhP82.565 billion was for the implementation of the intended safety
nets. Fund utilization over the period was registered at 88.67% of appropriations.
The highest utilization in terms of peso value was in 1995 when a total of
PhP28.998 billion was spent. This is equivalent to 85.43% of appropriations.
1994 and 1997 both registered utilization rate of 104.04% and 103.98%,
respectively. This was possible because of the continuing nature of the additional
appropriations under the GATT-related measures special funds.
Table 4.6.4. DA + GATT-Related Measures Appropriations & Obligations,
1993 – 1998 (In Million Pesos)
PARTICULARS Total 1993 1994 1995 1996 1997 1998
Budget Program By
Appropriation Source
Department of
Agriculture 23,935 8,226 6,430 1,913 2,342 2,252 2,772
GATT-related
Adjustment
Measures Fund 82,565 32,030 16,895 17,728 15,912
TOTAL 106,500 8,226 6,430 33,943 19,237 19,980 18,684
Budget Expenditures,
Obligation Basis
Department of
Agriculture 59,706 6,174 6,690 4,730 7,466 20,775 13,871
GATT-related
Adjustment
Measures Fund 34,732 24,268 10,464
AFMA
TOTAL 94,438 6,174 6,690 28,998 17,930 20,775 13,871
% Obligations to
Appropriations 88.67% 75.05% 104.04% 85.43% 93.21% 103.98% 74.24%
4.6.23 It appeared that at least 90% of total budget was controlled at the DA
Central Office (DACO) with only 10% or less going to the regions. As shown in
Table 4.6.5, 42.44% of regular budget expenditures was under the DACO
operations while the 47. 64% was for the implementation of the nationally funded
production programs for rice, corn, livestock, high value commercial crops, etc.
The amounts were sub-allotted to the DA Regional Field Units (DARFU). In terms
of expenditures of the GATT-related measures special funds 67.45% went to
nationwide operations while only 25.30% went to the DACO support to operations.
It is important to note that all the DARFUs were highly dependent on the DACO
for actual releases of sub-allotments and the corresponding cash for the use of
nationally-funded production programs. Regions 4, 6, 8 and 9 received the highest
4.6 - 9

udget allocations – from around PhP800 million to PhP1.30 billion, for the period
1993 to 1998. Region 4 received the highest total amount for the period.
4.6.24 Following the DA’s contention that budget for nationwide program
implementation went to the field offices, DACO’s overall share of total budgets
(excluding the amount set aside for national programs) was equivalent to more
than one third or 36% of total. Data on the actual breakdown of expenditures to
each region contained a lot of cost attributions with the accounting reports not
attuned to a more effective AFMA program monitoring.
Table 4.6.5. Regional Allocation of DA and GATT-Related Measures
Expenditures Budget, 1993 – 1998 (In Million Pesos)
Department of Agriculture GATT-Related Adj. Measures
Particulars
Total
1993-
Growth
Rate (%) % Share
Total
1993-
Growth
Rate (%) % Share
1998
1998
Total 59,706.39 36.39 100 34,732.32 - 100.00
Nationwide 28,443.16 179.29 47.64 23,428.52 - 67.45
Central Office 25,339.57 262.49 42.44 8,787.56 - 25.30
NCR - - - - - -
CAR 388.591 54.27 0.65 19.03 - 0.05
Region1 93.72 4.95 0.32 36.92 - 0.11
Region 2 403.79 20.78 0.68 11.43 - 0.03
Region 3 372.46 14.87 0.62 289.62 - 0.83
Region 4 1,077.66 28.12 1.81 250.65 - 0.72
Region 5 354.85 11.42 0.59 62.24 - 0.18
Region 6 707.09 194.44 1.18 23.96 - 0.07
Region 7 456.05 17.24 0.76 254.38 - 0.73
Region 8 573.19 115.04 0.96 255.98 - 0.74
Region 9 354.93 15.29 0.59 444.25 - 1.28
Region 10 342.04 25.51 0.57 186.39 - 0.54
Region 11 376.52 3.13 0.63 61.67 - 0.18
Region 12 302.08 16.23 0.51 12.68 - 0.04
CARAGA 20.52 814.59 0.03 - - -
ARMM - - - 607.03 - 1.75
Source of Basic Data: DBM
4.6 - 10

AFMA Years: 1999 - 2005
4.6.25 It was noted that inflows of financial resources to the agriculture sector did
not increase as expected with the passage of AFMA.
Actual Budget vs AFMA Prescribed Budget 1999 – 2005
4.6.26 Total actual budget fell below what were prescribed by the law both in
terms of new appropriations and obligations. As shown in Table 4.6.6 new
appropriations totaled PhP120.089 billion from 1999 to 2005. This is PhP61 billion
(34%) less than the P181.438 billion set by the law 4 . The biggest budget shortfalls
were experienced in 2004 and 2005 when total new appropriations amounted to
only PhP12.25 billion and PhP13.18 billion, respectively. These were equivalent
to a measly 43% and 45% of the requirements for 2004 and 2005, respectively,
despite the law’s intent and unequivocal provisions.
4.6.27 Total obligations of PhP116.37 billion, (as reported by the DBM based on
expenditures attribution to the AFMA implementation), was incurred over 1999 to
2005. Except for the year 2000, when actual obligations exceeded by a measly
2% of the AFMA recommended amount as computed (by the Consultant), annual
obligations always fell way below the prescribed budget for each corresponding
year. Shortfalls were always around 50% during the last 3 years at 50%, 53% and
50% in 2003, 2004 and 2005, respectively. Table 4.6.7.
Fund Utilization Efficiency, 1999 - 2005
4.6.28 Fund utilization efficiency as evidenced by the amount of obligations
incurred vis-à-vis the available new appropriations was registered at 96.90% for
the period 1999 to 2005 Table 4.6.8. This showed an improvement of about 8%
over the six-year disbursement efficiency of 88.67% over the period 1993 to 1998.
Nevertheless, actual expenditures still fell short by a total of PhP3.72 billion (3%)
during the AFMA years. As such, this put to question the DA’s absorptive capacity
to manage and disburse the tremendous increase in financial resources. For the
years 2000, 2002 and 2003 DBM recorded unutilized appropriations at 10%, 23%
and 29%, respectively.
4.6.29 As mentioned earlier, AFMA provided for a continuing appropriations and
comprehensive releases of allotments. As such, a shortfall in fund utilization for
one year can be offset by increases in the succeeding year/years’ spending.
4 Based on computations made by the Consultant: budgets for R&D and extension each at 1% of
GVA at current prices two years before the budget year (i.e, 1999 GVA to compute for 2001
budget) minus the current allocation of PhP2 billion and PhP1.2 billion, respectively.
4.6 - 11

Table 4.6.6. New Appropriations vs. AFMA Prescribed Budget, 1999-2005
(In Million Pesos)
PARTICULARS TOTAL 1999 2000 2001 2002 2003 2004 2005
New Appropriations
Department of Agriculture
AFMA (a)
TOTAL -DA+AFMA
33,2
59
86,
830
120,
089
14,06
2 3,167
19,3
-
85
14,06 22,5
2 52
Computed at AFMA prescribed minimum of 1% of GVA for research and another 1% of GVA for extension minus P3.2 billion allocation.:
2,91
3
12,03
5
14,94
8
4,19
4 3,118 2,889 2,916
19,48 16,30 9,36
7
1
1 10,261
23,68 19,41 12,25
1
9
0 13,177
AFMA Prescribed Budget
1988 DA Budget level 19,404 2,772 2,772 2,772 2,772 2,772 2,772 2,772
Additional Budget 122,000 20,000 17,000 17,000 17,000 17,000 17,000 17,000
2% of GVA for research
and extension (b) 40,034 6,928 7,250 7,734 8,740 9,382
Total Prescribed Budget 181,438 22,772 19,772 26,700 27,022 27,506 28,512 29,154
Budget Excess/(Shortfall) -61,349 -8,710 2,780 -11,752 -3,341 -8,087 -16,262 -15,977
% Approp to Prescribed 66.19% 61.75% 114.06% 55.99% 87.64% 70.60% 42.96% 45.20%
% Excess/ (Shortfall) -33.81% -38.25% 14.06% -44.01% -12.36% -29.40% -57.04% -54.80%
Source of Basic Data: DBM and NCSB
(a) Includes new appropriations under the Agrarian Reform Fund, Department of Agriculture, SUCs, DOST,
Budgetary support to GOCCs and Allocation to LGUs attributable to AFMA implementation.
(b) GVA Excluding Forestry in Current Prices. Source of data, NCSB
4.6 - 12

Table 4.6.7. Actual Obligations vs. AFMA Prescribed Budget, 1999 - 2005
(In Million Pesos)
PARTICULARS TOTAL 1999 2000 2001 2002 2003 2004 2005
Expenditures, Obligation Basis
Department of Agriculture 38,405 16,302 3,407 3,796 4,963 3,733 3,088 3,116
AFMA 77,963 - 16,783 15,872 13,378 10,064 10,429 11,437
Total DA+AFMA 116,368 16,302 20,190 19,668 18,341 13,797 13,517 14,553
AFMA Prescribed Budget
1988 DA Budget level 19,404 2,772 2,772 2,772 2,772 2,772 2,772 2,772
Additional Budget 122,000 20,000 17,000 17,000 17,000 17,000 17,000 17,000
2% of GVA¹ for research &
Extension 40,034 6,928 7,250 7,734 8,740 9,382
Total Prescribed Budget 181,438 22,772 19,772 26,700 27,022 27,506 28,512 29,154
Budget Excess/(Shortfall) -65,070 -6,470 418 -7,032 -8,681 -13,709 -14,995 -14,601
% Obligations to Prescribed Budget 64.14% 71.59% 102.11% 73.66% 67.87% 50.16% 47.41% 49.92%
% Excess/ (Shortfall) -35.86% -28.41% 2.11% -26.34% -32.13% -49.84% -52.59% -50.08%
Source of Basic Data: DBM and NCSB
1 1998-2003 GVA for Agriculture Excluding Forestry at Current Prices.
4.6 - 13

Table 4.6.8. New Appropriations vs. Obligations, 1999-2005
(In Million Pesos)
PARTICULARS TOTAL 1999 2000 2001 2002 2003 2004 2005
New
1 1
1 2 1 1 13,
Appropriations 20,089 4,062 22,552 4,948 3,681 9,419 2,250 177
116,36 16,30 20,19 19,66
13,51 14,55
Obligations
Excess /
8 2 0 8 18,341 13,797 7 3
(Shortage) 3,721 -2,240 2,362 -4,720 5,340 5,622 -1,267 -1,376
% Utilization 96.90% 115.93% 89.53% 131.58% 77.45% 71.05% 110.34% 110.44%
% Excess /
(Shortage) 3.10% -15.93% 10.47% -31.58% 22.55% 28.95% -10.34% -10.44%
Source of Basic Data: DBM and NCSB
Fund Distribution: DACO and DARFUs
4.6.30 In terms of geographic distribution of funds, DACO remained in control of
total funds with at least 80% of total allocated to nationwide programs and Central
Office operations. Only about 20% went to the regions of which Regions 3 and 8
received the highest amount of funds with a total of a little over PhP4 billion each
over the last 7 years. ARMM received the least followed by Region 1 at PhP271
million and PhP664.11 million, respectively for the same period as shown in Table
4.6.9.
4.6.31 In one of its reports, the DA pointed out that “majority of the releases to
DARFUs, in the form of ASA (Advise of Sub-allotment), are unfunded (no cash)”. 5
The latter reported of difficulties encountered requesting for cash releases from
the DACO to cover the ASAs. Allegations of favoritisms to downright
incompetence within DACO were aired. On the other hand, information from the
DBM showed that cash releases to a national agency are done automatically if
and when the latter’s cash balances with the Land Bank of the Philippines (LBP)
fall below the set minimum levels. The DBM has direct online access to LBP’s real
time records of transactions with national government agencies that enables it to
closely monitor the government’s daily cash balances. As a result, no cash
releases are made to agencies with outstanding cash balances more than the set
minimum.
5 DA Planning Service, “Review of the Agriculture and Fisheries Modernization Plan, 2001-2004
draft report”. 2005
4.6 - 14

Table 4.6.9. DA and AFMA Expenditures Budget, 1999 – 2005 (In Million
Pesos)
Department of Agriculture AFMA
Particulars
Total
1999-
2005
Growth
Rate
(%)
% Share
Total
1999-
2005
Growth
Rate
(%)
% Share
Total 38,406.44 (0.64) 100 77,962.77 1.51 100.00
Nationwide 21,238.25 (1.49) 55.30 21,002.49 0.64 26.94
Central Office 5,167.79 443.97 13.46 46,683.83 2.88 59.88
NCR - - - - - -
CAR 570.49 0.48 1.49 246.70 9.40 0.32
Region1 366.50 1.03 0.95 297.61 (4.94) 0.38
Region 2 766.19 0.29 1.99 578.05 0.83 0.74
Region 3 1,847.57 0.30 4.81 2,517.42 2.36 3.23
Region 4 1,401.90 0.13 3.65 524.06 3.62 0.67
Region 5 691.67 0.26 1.80 366.91 1.92 0.47
Region 6 602.95 2.20 1.57 311.83 1.58 0.40
Region 7 925.37 0.46 2.41 379.30 1.22 0.49
Region 8 1,000.44 (0.62) 2.60 3,214.37 (0.49) 4.12
Region 9 755.17 (0.06) 1.97 333.25 1.24 0.43
Region 10 589.49 1.16 1.53 342.85 1.80 0.44
Region 11 681.835 (0.45) 1.78 491.91 0.51 0.63
Region 12 1,088.60 1.22 2.83 358.74 3.23 0.46
CARAGA 461.00 1.55 1.20 313.47 1.88 0.40
ARRM 271.22 - 0.71 - - -
Source of Basic Data: DBM
Compliance with AFMA Prescribed Budgetary Allocations
4.6.32 An analysis of compliance with the budgetary allocations prescribed under
the law was not possible. The DA and other AFMA implementing agencies’
budget and accounting systems are not structured to generate the required
monitoring reports and the corresponding level of details needed. Efforts at
preparing the AFMA prescribed reports of fund allocation monitoring had been
observed to be tedious and at the same time very subjective. Question on the
integrity of available data was raised mainly due to the process of arbitrary
attribution being employed in determining allocations of funds utilization.
4.6 - 15

Finance-Related Factors Hindering AFMA Implementation
4.6.33 The DA Planning Service conducted its own evaluation of the AFMA
progress during the 2001 to 2004 period 6 . The report identified the following
factors that slowed down program implementation: political intervention, delayed
releases of cash allocation and institutional problems. These were consistent with
the Consultant’s findings.
4.6.34 Political interventions resulted in having a substantial portion of AFMA
funds to be utilized for activities/projects that were not within the AFMP’s identified
strategies and activities. On the other hand, the much delayed payment of
calendar year 2003 accounts payable resulted in the DA’s tremendous problems
with the seed production industry. Related to this were the experiences with
unfunded sub-allotments to DARFUs discussed above.
The institutional problems are as follows:
6 Ibid.
a. The bulk of AFMA budget for extension/training went to pay for
incentive allowances of LGU agriculture technicians instead of
going to actual production program interventions. For example,
approximately PhP200 million under the GMA-Rice program were
used to pay incentive allowances.
b. The LGU counter-parting scheme did not materialize as expected.
The planned cost-sharing with LGUs was not well accepted by
majority of local chief executives (LCE) who remained heavily
reliant on the DA as provider of funds. This despite the passage of
the Local Government Code devolving the provision of extension
services from the national government to the LGUs.
c. In some DARFUs, good working relationships between and among
DARFUs, LGU-provinces/municipalities did not exist. The
devolution brought about by the passage of the Local Government
Code presented problems to the DA as it can no longer fully tap the
LGU agriculture staff to fully support DA program implementation.
This became more evident in areas where the LCE had his/her own
agenda, or even the lack of it, for agriculture or a different set of
priorities in the use of the LGU resources. Also, some LGU
extension workers lacked the commitment to implement national
programs.
d. Related to the above, the lack of LGU support in terms of traveling
allowances, supplies and materials to its agriculture extension
workers hindered the implementation/ monitoring of DA programs;
and,
e. The COA ruling that suspended the utilization by the DA of the seed
collection under the DA-NFA Seed Subsidy Component of the GMA
4.6 - 16

Rice program and the remittance of collections to the National
Treasury adversely affected the cash flow of DA and consequently
caused tremendous delays in program implementation.
4.6.35 Lastly, the lack of appreciation or understanding of the fact that AFMA
implementation should be a concerted effort among the national government,
LGUs, and the private sector (corporations and individual farmers) seemed to
have lodged the financial burden of program implementation on the national
government or the DA in particular. The LGUs active role in the agriculture sector
modernization had been overshadowed by the DA’s initiatives and implementation
of nationally-managed crop production programs.
Proposed Budgetary Allocation by AFMA Components/Activities
4.6.37 Participants in the consultation workshops conducted by the AFMA Review
Team were clustered into major commodity groups. Each group was asked to
prioritize the various components and correspondingly allocate the budget for
AFMA to each of the component in accordance with the participants’ perceived
needs and the apparent effects of these budgetary allocations in terms of
increasing crop production and yield, improving the quality and quantity of
produce, increasing incomes of stakeholders, generating more jobs and the
overall modernization of the agriculture sector.
Proposed Allocation by AFMA Component by Commodity
4.6.39 As shown in Table 4.6.10, for all commodity groups, the overall results
showed that provision of post harvest facilities was identified as the most
important intervention, and as such, an average of 17.3% of the annual budget
should be devoted to it. This was followed by credit assistance with an 11.3%
allocation. Third priority was for irrigation with 10.7%. A close fourth was for the
provision of other infrastructure including farm-to-market roads, foot bridges, cold
storage, abattoirs, etc. It was given 10.2% share. The grains sector, however,
particularly rice, identified irrigation as the most important intervention allocating
almost one-fourth (24.6%) of the annual budget. All other commodity sectors, on
the other hand, considered postharvest facilities particularly mechanical dryers,
low-cost processing/treatment facilities (for HVCCs), etc., as vital in improving the
quality of their produce.
4.6 - 17

Table 4.6.10. Proposed Budget Allocation by AFMA Component and Major
Commodity
4.6 - 18

Commodity/
AFMA
Component
Postharvest
Facilities
Budget Allocation (%)
Grains Rice Corn HVCC
Coconut/
Abaca
Livestoc
k &
Poultry
Fisheries Total
Overall
Average
14.5 14.8 19.4 15.2 18.6 18.3 17.4 103.7 17.28
Proposed Budget Allocation
by AFMA Component By
Region
4.6.36 At the regional
perspective, provision of
post harvest facilities
likewise emerged as the
most important support,
allocating 16.9% of the
annual budget, followed by
the other infrastructure
facilities (11.5%). Table
4.6.11.
Credit 10.8 7.6 7.3 9.5 19.0 11.9 12.5 67.9 11.32
Irrigation 22.8 24.6 8.4 12.2 13.0 2.7 3.5 64.4 10.73
Other
Infrastructure
Research &
20.6 11.3 11.4 11.9 6.2 9.9 10.4 61.2 10.20
Development 5.5 8.2 6.3 9.6 10.4 10.9 13.0 58.4 9.74
Extension
Services
5.8 8.2 8.7 8.2 11.6 7.4 6.8 50.9 8.49
Marketing 7.9 9.3 6.6 10.9 10.1 7.6 44.5 7.42
Assistance
Education 3.3 5.0 2.8 4.9 5.2 8.2 9.7 35.8 5.96
Table 4.6.11. Proposed
Regional Budget
Product
Allocation by AFMA
Standardization 3.0 2.8 3.7 7.0 5.0 7.6 7.2 33.4 5.57 Component and Region
Region/AFMA
Information 3.0 3.7 3.0 6.6 4.4 Budget Allocation 7.2 (%) 6.3 31.2 5.20
Component Support CAR R1 R2 R3 R4a R4b R5 R6 R7 R8 R9 R10 R11 R12 R13 ARM Total
Postharvest Trade - 3.0 - 3.3 11.7 0.9 - 16.53.817.4 15.5 6.6 17.0 24.0 5.8 15.0 17.9 5.4 17.8 25.8 16.5 4.30 13.0 12.6 20.3 16.9
Facilities Other Services 1.1 21.4 22.5 3.76
Other Total
Infrastructure
100.0 - - 100.0 7.6 100.0 - 17.4 100.09.8 11.9 100.0 11.6 100.0 8.8 7.0 100.0 10.3 600.0 17.3 8.3100.00 7.2 19.0 12.9 11.5
Irrigation - - 9.6 - 9.6 10.0 7.5 7.4 5.4 18.0 9.6 11.3 15.3 9.3 10.0 16.0 10.3
Credit - - 6.4 - 3.2 12.5 7.6 11.8 14.0 15.0 7.9 8.5 17.0 18.0 6.6 9.4 10.2
Research &
Development
- - 9.5 - 8.2 10.7 11.9 9.8 10.4 10.0 9.7 9.3 7.1 9.7 10.5 6.7 9.5
Marketing
Assistance
- - 8.4 - 12.2 15.2 4.1 7.6 7.0 5.5 10.5 7.3 14.0 8.8 6.3 5.7 8.9
4.6 - 19

Region/AFMA
Budget Allocation (%)
Component CAR R1 R2 R3 R4a R4b R5 R6 R7 R8 R9 R10 R11 R12 R13 ARM Total
Postharvest
Facilities
- - 11.7 - 16.5 17.4 15.5 17.0 24.0 15.0 17.9 17.8 16.5 13.0 12.6 20.3 16.9
Extension
Services
- - 11.3 - 5.6 8.1 10.2 10.2 6.0 10.5 5.3 6.3 5.1 7.7 7.7 6.7 7.7
Education - - 3.0 - 8.0 3.9 5.4 6.0 7.6 6.5 7.2 4.0 4.3 10.3 11.9 5.6 6.1
Product
Standardization
- - 4.0 - 6.3 4.4 5.2 7.4 6.4 4.5 6.4 6.3 4.3 5.0 5.8 6.9 5.7
Information
Support
- - 2.9 - 6.3 4.9 5.6 5.8 3.0 5.0 9.2 4.8 5.1 5.3 5.8 5.7 5.3
Trade - - 2.3 - 4.7 2.8 3.8 4.8 3.4 3.0 3.9 7.5 3.1 5.7 3.8 4.2 4.0
Other Services - - 23.5 - 2.0 0.3 11.3 0.6 4.0 - 2.4 - - - - - 4.0
Total - - 100 - 100 100 100 100 100 100 100 100 100 100 100 100 100
4.6 - 20

Focus Area by AFMA Component By Commodity
4.6.37 It then follows that majority of the commodity sector selected post harvest
facilities as their priority focus area specially the corn, coconut/abaca, livestock
and poultry and fisheries sectors. Consequently, only the rice sector ranked
irrigation as its main priority area, while the grains sector in general, identified
marketing assistance as the primary focus area. Table 4.6.12.
Table 4.6.12. Priority Ranking of Focus Areas by AFMA Component and
Major Commodity
Commodity/AFMA
Component
Recommendations
Ranking of Focus Areas
Grains Rice Corn HVCC
Coconut/
Abaca
Livestock &
Poultry Fisheries
DA to Define its Strategic Priorities Consistent with Its Core Functions Under the
AFMA
4.6.40 For a more efficient use of its limited resources for the delivery of effective
support services and other interventions, the DA needs to clearly define its
strategic priorities and make them consistent with its core functions under the
AFMA. It should be able to direct its resources in the performance of its mandated
functions through a transparent financial budget. The ongoing and about to be
concluded rationalization program of the national government is a major enabling
milestone for the DA to fine tune the agriculture bureaucracy to meet the
challenges posed by the AFMA towards a modernized and dynamic agriculture
sector.
Overall
Ranking
Postharvest Facilities 3 5 1 4 1 1 1 1
Credit 4 3 3 3 2 4 3 2
Irrigation 3 1 2 9 5 3
Marketing Assistance 1 4 6 5 2 7 4 4
Education 2 4 1 5 6 5
Extension 1 2 7 6 3 6 7 6
Other Infrastructure 7 5 9 2 8 7
Research &
Development 5 6 8 2 3 8 2 8
Information Support 2 7 3 9 9
Product
Standardization 8 9 8 10 10 10
Trade 9 10 9 10 11
Other Services 4 12
4.6 - 21

DA to Implement Budget Reform Measures
4.6.41 DA has started instituting measures in accordance with the principles of
public expenditures management reforms espoused by the DBM. New budget
formats that will enable the DA to structure its budgetary allocation in accordance
with its Major Final Outputs (MFO) as the basic unit of performance and
budgetary allocation had been started. These new formats should facilitate the
reconciliation of authorized expenditures with their MFOs, and consequently their
priority areas for spending. Table 4.6.12 shows the DA’s MFOs. The performance
indicators identified are: 1) increase in the volume, quality and value of agriculture
and fisheries production for domestic consumption and for exports; 2) reduction in
post-harvest losses; 3) increase in the number/types and quality of processed
agricultural and fishery products; 4) increase in the number of international trading
partners in agriculture and fishery products; 5) increase in the number of
sustainable agriculture and fisheries firms engaged in domestic production,
processing, marketing and export activities; 6) increase in and wider level of
entrepreneurship among farmers and fisherfolks in the area; 7) increase in the
number of farms engaged in diversified farming; and 8) reduced use of agrochemicals
that are harmful to health and the environment.
Table 4.6.13. Major Final Outputs of the Department of Agriculture
Major Final Outputs AFMA-Mandated Functions
A. Agriculture and fishery support
services for increased productivity and
income
B. Dynamic, client-responsive and
rationalized applied and basic
research and development
C. Dynamic, client-responsive and
rationalized applied and basic
research and development
D. Comprehensive Regulatory
Services
E. Plans, policy, programs and
product formulation, coordination,
advocacy, monitoring and
evaluation
F. Human Resources Development
G. Program Management
1. Production Support Services
2. Market Development Services
3. Credit Facilitation Services
4. Irrigation Development Services
5. Other Infrastructure and Post-
Harvest Development Services
6. Extension Support, Education and
Training Services
7. Research and Development Services
8. Regulatory Services
9. Information / Data Base System
10. Policy Formulation, Planning and
Advocacy Services
4.6 - 22

DA to Institutionalize Agency-wide Reforms
4.3.42 The implementation of the World Bank-assisted Diversified Farm Income
and Market Development will provide the much needed boost to the
institutionalization of reforms. This project will implement five interlinked
components designed to underpin an agency-wide change and development
process. The first three components have to do with investing in assets that are
needed to improve delivery of essential public services in support of competitive
business operations and strategic decision-making of the private sector, namely
market development, regulatory and research and development services. The
fourth component pertains to the planning and budgeting system of the agency
and innovations that are needed to ensure that the allocation of budgetary
resources supports the desire of the DA to enhance its effectiveness in the
delivery of these services. The fifth component deals with rural infrastructure
investments and technical support for DA’s clients to enhance market
competitiveness of farmer groups in selected focus areas. 7
Budget Allocation Priorities to Take Into Account Results of Regional
Consultations
4.6.43 The priorities defined and shown above should be given serious
consideration in the decisions on future resources allocations.
DA to Enjoin More Active Participation By the Private Sector and LGUs
4.6.44 As the DARFU Executive Director Joel Rudinas of Region 10 so aptly put
during the regional workshop - “It is true that the additional resources did not
come as envisioned, but agriculture and fishery modernization is not just driven by
public investment, but largely by private sector investment”. Therefore, the DA’s
major role should be to encourage private sector investments that would
dynamically induce agricultural development and modernization. It should
concentrate on providing a more conducive policy environment for the private
sector initiatives to thrive. Also, concentration on major infrastructure
development, outside the ambit and financial reach of the private sector, would
result in improved symbiotic relationship between government and private sector.
4.6.45 Relationships with the LGUs should be fostered by more consultations
between the DARFUs and the LCEs and other LGU staff. To the extent possible,
the latter should be involved starting the planning phase of any national programs
to be implemented within the LGU concerned. Detailed terms of reference for
program/project implementations with particular focus on the financial
arrangements and cost-sharing schemes should be clarified with the LCE and
his/her staff and commitments made prior to any implementation of programs or
projects in the locality.
7 DA, Diversified Farm Income and Market Development Project TE Team Report. May 2004
4.6 - 23

DA to Reconcile its Records with the DBM
4.6.46 In addition, it is important that efforts be made by the DA to reconcile its
records with that of the DBM. This should include all the other records pertaining
to fund attributions to the AFMA special funds. The effect of not using the same
set of data when requesting (on the part of the DA) and analyzing and deciding on
the budget approvals and fund releases (on the part of the DBM) cannot be
overemphasized.
4.6 - 24