CURRENT SOCIETAL CONCERNS
Luz M. Alzate-Peria
28 January 2016
The “Proponent’s Handbook: A Guide on How to Access the People’s Survival Fund (PSF)” was issued by the PSF Secretariat to guide LGUs and local/community organizations (or for our purpose, civil society organizations or CSOs) in accessing the PSF. A scrutiny of the Handbook reveals that there is no clear procedure for local/community organizations to access the Fund. There are questions/issues affecting local/community organizations that need to be addressed and issues pertaining to conflict in auditing and budget policies.
Is There a Deadline for Accessing the Fund?
As provided in RA 9729, as amended by RA 10174, and stated in the Handbook, PSF is a special fund in the National Treasury . Further, the P1 Billion opening fund identified for the PSF will sourced from the General Appropriations Act . The law further states that PSF shall not revert back to the General Fund.
The intention of RA 9729, as amended by RA 10174, is to create a special fund without expiration. However, the actual available fund for PSF is under the National Disaster Risk Reduction and Management Fund which is a Special Purpose Fund in the General Appropriations Act (GAA), valid only up to the end of the year following the year it was appropriated.
For example, in 2015, 1 Billion is appropriated in the GAA or RA 10651 for PSF under the National Disaster Risk Reduction and Management Fund (NDRRMF), Special Provision (SP) 2. The amount is available for release and obligation until December 31, 2016 pursuant to Section 61 of the GAA. Therefore, the appropriation has a life of 2 years only. Any unused appropriation from PSF will revert to the General Fund and will not anymore be made available for expenditure.
Another P1 Billion is appropriated for PSF under the 2016 GAA also under NDRRMF, but as Special Provision (SP) 3. This amount is available for release and obligation until December 31, 2017 pursuant to Section 65 of the General Provisions of 2016 GAA. Total available funds therefore in 2016 is P2 Billion.
However, CSOs need to understand that the 2015 appropriation of P1 Billion will be valid for expenditure until December 31, 2016. Therefore, request for release of funds from 2015 PSF must be made much earlier considering that there are documentary requirements before the release of fund to the fund conduit and the transfer of funds to LGUs and CSOs.
How will the Funds be released?
The Peoples’ Survival Fund shall be released subject to the submission of a Special Budget pursuant to Section 35, Chapter 5, Book VI of EO 292, s. 1987 .
A Special Budget shall include the complete details of the program, activities and projects (p/a/p) covering the lump-sum appropriation, including the sub-programs or activities or sub-projects, with the corresponding cost up to the lowest level, i.e., provincial, city and municipal, as the case may be. The Special Budget shall likewise cover the rationale and objectives of the p/a/p and the targeted results or expected outcomes.
This means that the P2 Billion available funds will not be released in full unless all the details required by law will be complied with. Given the fact that there is so much data required for the release of funds, it is logical to request for release of funds in batches so that the proposals submitted early will not be delayed.
As stated in the Handbook, it is the Municipal Development Fund Office or MDFO that will request from DBM for the release of Special Allotment Release Order (SARO), the basis for obligation or the basis for entering into an agreement/commitment, and Notice of Cash Allocation (NCA), the basis for disbursements or payment of obligations.
Who will hold the money before they are made available to CSOs?
The Municipal Development Fund Office (MDFO) is identified in the Handbook as a “fund conduit” for PSF. Fund conduit is the holder or fund manager of PSF.
As stated in the Handbook, MDFO will establish, open and maintain a Special Account/Code for PSF where the Funds shall be held for disbursement to proponent LGUs in accordance with the applicable special provisions in the GAA . I believe this means that the MDFO will open and maintain an account with any government servicing bank where funds for PSF released by DBM will be deposited and where funds to be transferred to LGUs and CSOs will be charged.
However, MDFO is mandated to operate as a source of credit finance in support of the decentralization of services from the national to the local levels of government; to promote and assist local governments in the selection of well-justified and high-quality investments in infrastructure projects and public facilities; and to provide other services for local governments. The same mandate is reflected on the website of MDFO.
From the mandate of MDFO, it appears that the Office is operating/existing to assist and provide funds to LGUs only. There was no mention about local or community organizations in the mandate. Based therefore on the facts mentioned, it is possible that CSOs may not be able to access PSF through MDFO.
Another thing, the list of functions of MDFO contained in the Handbook made no mention of release of funds to local/community organizations, only to LGUs. While this is in agreement with the mandates of MDFO, this is not in accordance with the intent of RA 10174 to also allow local/community organizations to access the Fund.
Further, there is no illustration or mention in the Handbook on the fund release process for local/community organizations while fund release process for LGUs is reflected on Page 10. If local/community organizations are to access the Fund through MDFO, how will it be done then? Why was not it provided or mentioned in the Handbook? This probably is an oversight of the PSF Board or maybe the Board is still resolving the issue and will come out with an amendment to the Handbook.
Will the MDFO Charge for its Administrative and Supervision Expenses ?
While it was not mentioned in the Handbook that MDFO will be charging any amount for administration and supervision expenses, it is possible that they will do so to defray expenses incurred in managing the Fund. Besides, where will they get the money to pay off the expenses incurred in the exercise of their function as PSF fund conduit, or they may not incur a significant amount of overhead in discharging its functions that its administrative expenses may already be covered by its mother agency, the Department of Finance.
Allowable administrative and supervision expenses of infrastructure projects undertaken by the AFP Corps of Engineers is not more than 3% of the total project cost. This could be used as basis in estimating possible amount that might be charged by MDFO to PSF.
If MDFO will charge 3% administration and supervision fee, how will it be computed? Where will it be charged? Will it be added on top of the cost of the project proposal of the LGUs and CSOs submitted for release of SARO? Meaning, if the LGU or CSO submits proposal amounting to P1,000,000.00, administration and supervision expenses of MDFO is P30,000.00 and the new total project cost is P1,030,000.00.
Or it will be computed at 3% of the total PSF of one billion pesos which will amount to 30 Million Pesos, this is not yet clear.
How Much is the Counterpart Contribution of CSOs?
LGUs and local/community organizations are encouraged to contribute at least 10% of the total project cost, in-kind or in-cash, to ensure commitment of proponents to effective implementation of the project. This provision is a reiteration of the provision under Section 13 of RA 10174.
As an illustration, for a project proposal of P1,000,000.00, P100,000.00 will be the equity of the LGU/CSO which may be in form of cash or in-kind. The LGU/CSO may include as their equity the services they render to the project or the rental cost of the building and equipment they own that will be used in the implementation of the project.
However, one of the Commission on Audit (COA) requirements for release of funds to NGOs/POs is a document showing that the NGO/PO has equity equivalent to 20% of the total project cost which may be in the form of labor, land for project site, facilities, etc., to be used in the project.
The law creating PSF only encourages LGUs and local/community organizations to contribute 10% to the total project cost while COA guidelines require NGOs/POs to have 20% equity. The provision on equity is not a problem as far as LGUs are concerned but it is, as far as local/community organizations are concerned.
The issue now is whether local/community organizations are exempt from the COA guidelines? If a local/community organization is capable and willing to contribute to the project, will the 10% equity be enough?
Assuming that CSOs will put in 10% or 20% contribution to the project to avoid problems later on during audit, it is suggested that the equity be reflected clearly in the proposal so that the proposal itself may be used as proof or evidence of equity required before funds is transferred to CSOs.
So, What Happens Now?
Assuming local/community organizations may not be able access PSF through MDFO, what needs to be done then?
There is a need for the PSF Board to issue additional guidelines on how CSOs may access the Fund. The PSF Board has to name another fund conduit through which the local/community organizations access PSF if it get’s too difficult to resolve the issues surrounding the MDFO as the fund conduit for CSOs.
One possible conduit is the Climate Change Office (CCO). However, this might post a challenge since releases from NDRRMF for local/community organizations will be coursed through a bank account to be opened and maintained by CCO with any government servicing bank for the purpose. But the function might be construed as project implementation, which is prohibited under Section 23 of RA 9729, as amended by RA 10174.
Another possible fund conduit is the DILG. It is the most ideal agency to act as fund conduit since it has staff down to the level of municipality. Coordination and follow-up of submission of reports and other requirements will be easier. In fact, DILG can be tapped as fund conduit for both the LGUs and CSOs since it is a frontline agency that provides services both to communities and LGUs.
Another option that may be explored is for the local/community organizations to access PSF through the LGUs. The CSOs may submit their proposals to the LGU where they may be located and convince the LGU to support them. But, the proposal becomes the proposal of the LGUs and might be subject to the criteria for LGUs and not for local/community organizations. In this case, MDFO will still be the fund conduit since it is the LGU that will be dealing with MDFO for the CSOs.
Meantime, local/community organizations can start preparing their project proposal using the format prescribed by the CCO in the Handbook. It is advised that the local/community organizations put in an equity equivalent to 20% of the total project cost to avoid disallowance later on during audit.
Since the election ban on release of funds for projects will start on March 25, 2016, it is urged that the PSF Board address the issues raised here with dispatch so that the CSOs will know what to expect.