Circular Letter No. 2012-14 — "Instruction to Affirm the President's Budget as Submitted to Congress" and Memorandum Circular No. 2012-01 — "Guidelines on the Cascading of Department Performance Targets in Line with Executive Order (EO) No. 80

August 22, 2012 BLGF MEMORANDUM CIRCULAR NO. 057-12 TO : All BLGF Central and Regional Directors and Other Offices Concerned SUBJECT : Circular Letter No. 2012-14 "Instruction to Affirm the President's Budget as Submitted to Congress" and Memorandum Circular No. 2012-01 "Guidelines on the Cascading of Department Performance Targets in Line with Executive Order (EO) No. 80 For the information and guidance of all concerned, attached is a copy of Circular Letter No. 2012-14 dated August 13, 2012 from the Office of the Department of Budget and Management (DBM) and Memorandum Circular No. 2012-01 from the Inter-Agency Task Force on the Harmonization of National Government Performance Monitoring, Information and Reporting Systems regarding the above-captioned subjects. The Central and Regional Directors of this Bureau are hereby instructed to take note of the above and disseminate the contents to all Bureau Staff. Please be guided accordingly. (SGD.) SALVADOR M. DEL CASTILLO OIC-Executive Director ATTACHMENT August 13, 2012 DBM CIRCULAR LETTER NO. 014-12 FOR : Heads of Departments, Bureaus, Offices, and Agencies of the National Government, Including State Universities and Colleges (SUCs); Government-Owned or Controlled Corporations (GOCCs) and Government Financial Institutions (GFIs); and All Others Concerned SUBJECT : Instruction to Affirm the President's Budget as Submitted to Congress 1.0 Following the submission of the FY 2013 proposed national budget by the President, Congress will begin deliberations with the presentation on the macroeconomic assumptions by the Development Budget Coordinating Committee (DBCC) scheduled on August 1, 2011. HCEcAa 2.0 Thereafter, the budgets of the various departments, bureaus, offices and instrumentalities of the National Government, Legislature, Judiciary and Constitutional Commissions, as well as the budgetary support given to government owned or controlled corporations (GOCCs), and subsidy to local government units (LGUs), shall be deliberated. 3.0 Upon instructions of the President, all members of the Cabinet are tasked to affirm the President's budget as submitted when presenting to Congress, as it consolidates the agreements and priorities of this Administration. 4.0 All agencies are expected to refrain from further presenting proposed budgets as submitted to DBM and from lobbying before Congress for (a) increase in the appropriations for existing items of expenditures in their respective budgets or (b) the inclusion of new expenditure items in the proposed budget submitted by the President. 5.0 Please note that under Section 25 (1), Article VI of the 1987 Constitution, Congress is prohibited from increasing the appropriations recommended by the President as specified in the proposed national budget. 6.0 Accordingly, any increase in the appropriations of existing items of expenditure as well as any inclusion of new expenditure items in the proposed national budget will inevitably result to (a) an equivalent decrease in the appropriations for the other existing items of expenditure thereby deviating from the focused and planned program set by the government as reflected in the proposed national budget, or (b) bloating the deficit, if such increases are to' be accommodated without suppressing other items in the budget. 7.0 We anticipate the full cooperation of all concerned in this process as we aim to have the FY 2013 budget ratified and signed by mid-December. The timely passage of the FY 2013 budget would facilitate the efficient and effective release of agency allotments by January of next year. SacTAC (SGD.) FLORENCIO B. ABAD Published in The Philippine Star on August 15, 2012. INTER-AGENCY TASK FORCE ON THE HARMONIZATION OF NATIONAL GOVERNMENT PERFORMANCE MONITORING, INFORMATION AND REPORTING SYSTEMS (Administrative Order No. 25 S. 2011) MEMORANDUM CIRCULAR NO. 2012-1 August 13, 2012 TO : All Heads of Departments, Bureaus, Offices and Other Agencies of the National Government, Including State Universities and Colleges, and Government-Owned or -Controlled Corporations SUBJECT : Guidelines on the Cascading of Department Performance Targets in Line with Executive Order (EO) No. 80 1.0 Background and Rationale 1.1 In accordance with the Government's commitment to accountability and effective governance, President Benigno S. Aquino III issued EO No. 80 dated July 20, 2012, "Directing the Adoption of a Performance-Based Incentive System for Government Employees," to motivate higher performance and greater accountability in the public sector and ensure the accomplishment of commitments and targets under the five (5) Key Result Areas of the Administration as laid out in EO No. 43 and the Philippine Development Plan, 2011-2016. CDaTAI 1.2 Beginning 2012, such incentive system shall consist of an across-the-board incentive in the form of the existing Productivity Enhancement Incentive (PEI), and a top up bonus to be known as Performance-Based Bonus or PBB. The PEI in the amount of P5,000 shall continually be granted in accordance with the guidelines to be issued by the Department of Budget and Management (DBM). The PBB shall be given to the personnel of bureaus or delivery units in accordance with their contribution to the accomplishment of their Department's overall targets and commitments subject to the criteria and conditions set forth herein. 1.3 The grant of the PBB seeks to: a. Recognize and reward exemplary performance in the public sector to enhance service delivery by the bureaucracy; b. Rationalize the distribution of incentives across performance categories of groups and individuals and thereby move away from across-the-board incentives over time; c. Nurture team spirit towards the effective execution of operational plans by linking personnel incentives to the bureau or delivery unit's performance; and d. Strengthen performance monitoring and appraisal systems based on existing systems like the Organizational Performance Indicator Framework which is used by the DBM to measure agency performance, the Strategic Performance Management System of the Civil Service Commission (CSC) which links individual performance to organizational performance, and the Results Based Performance Management System provided for under AO No. 25, issued on December 11, 2011. ETCcSa 1.4 Section 11 of EO No. 80 provides that the role of the Inter-Agency Task Force under AO No. 25 are as follows: a. Formulate and issue the implementing guidelines for the said EO; and b. Assist agencies in the identification of the performance indicators and targets, and implement a validation system for agency reports and accomplishments. 2.0 Purpose 2.1 To provide guidelines on the cascading of the department performance targets to the component bureau (second level) or pertinent delivery unit targets. 2.2 To define the roles and responsibilities of the departments and component bureaus/units, the Department of Budget and Management (DBM), and other oversight agencies in the cascading of performance indicators and targets. 2.3 To set the timetable for submission, review and approval. 3.0 Coverage 3.1 This circular covers all Departments, Agencies, and State Universities and Colleges (SUCs) which are mandated to implement the PBB by virtue of Section 7 of EO No. 80. 3.2 For Government-Owned or -Controlled Corporations (GOCCs) under the jurisdiction of the DBM as enumerated under Annex B , additional guidelines shall be issued to guide the cascading exercise and their coverage by Section 7 of EO No. 80. In the case of the Local Water Districts (LWDs), the Local Water Utilities Administration (LWUA) shall assist in preparing these supplemental guidelines. 3.3 For GOCCs and GFIs under the jurisdiction of the Governance Commission for GOCCs (GCG) which are encouraged to adopt the performance based incentive system, separate guidelines shall be issued by the GCG for the purpose as provided for under Section 8 of EO No. 80. DASCIc 3.4 For SUCs, the implementation shall be coordinated with the Commission on Higher Education (CHED). 3.5 The Congress, Judiciary, Constitutional Commissions and the Office of the Ombudsman are encouraged to adopt the provisions of EO No. 80 to be eligible to the Performance-Based Bonus. 4.0 Definition of Terms 4.1 Major Final Output (MFO) a good or service that a department is mandated to deliver to external clients through the implementation of programs, activities and projects. It may be a single output or group of outputs that are similar in nature, targeted at the same organizational/sector outcome and capable of being summarized by a common performance indicator. 4.2 MFO Performance Indicator (PI) a characteristic of performance (quantity, quality, timeliness or cost) that is to be measured and will illustrate the standard by which a department is expected to deliver its MFO. As specified in EO No. 80, the MFO PIs should be verifiable, observable, credible, and sustainable, especially for front line functions of departments/agencies. 4.3 Performance Target (PT) a predetermined numerical target level of performance (quantity, quality, timeliness and cost of an output) against which actual performance can be compared and for which a mean, deviation and trend line can be calculated over time. 4.4 Department a primary sub-division of the Executive Branch responsible for the overall management of a sector or a national concern with nationwide impact. It is headed by a Department Secretary with Salary Grade (SG)-31. For purposes of this circular, this term includes department-level entities such as the Constitutional Commissions. 4.5 Bureau a primary sub-division of a department or department-level entity responsible for a major functional concern of the latter. A bureau or equivalent office performs either line or staff functions, and is usually headed by a Director position at SG-27 or SG-28. For purposes of this circular, this term includes the department's regional offices. IcCATD 4.6 Delivery unit a lower sub-division of a department or department-level entity which is a major implementing arm of the department where it has set up a) performance targets/commitments in the form of MFOs or reform milestones, and b) a monitoring or reporting system to regularly track said targets/commitments within the year and have these verified by a higher level office within the department. In most cases, these performance targets are covered by an agreement between the head of the delivery unit and the head of the higher level office and noted in a form of performance contract which is reviewed and updated quarterly or semi annually. Hence, for DPWH, this delivery unit can pertain to a District Engineering Office whose performance is verified by the regional offices. For DOH, this can be a regional hospital whose performance is supervised/guided by the Center of Health Development. 5.0 Policy Guidelines To motivate higher levels of performance and promote accountability in the bureaucracy, the PBB shall: 5.1 Be based on verifiable, observable, credible, and sustainable indicators of performance along three pillars, namely: (i) the department's Major Final Outputs (MFOs); (ii) the department's priority commitments to the President; and (iii) good governance conditions to be determined by the Inter-Agency Task Force under AO No. 25; 5.2 Be based on a system of ranking organizational units and personnel within an organization according to their performance along the pillars stated above; 5.3 Provide some flexibility to the heads of departments and agencies to suit the PBB system to the nature of their operations and to drive peak performers, in terms of the determination of the appropriate delivery units to be rewarded and the performance indicators to be used; and THESAD 5.4 Ensure transparency and accountability in the implementation of the PBB system in the department and bureau or delivery unit through the conduct of an appropriate communications strategy, including the publication in the department/agency website and the website of the RBPMS when this is completed. 6.0 Criteria and Conditions to Qualify for the PBB To qualify for the PBB, a department/agency must comply with the following conditions: 6.1 Achieve at least 90% of: a. Their MFO targets submitted to Congress; and b. Their priority program/project targets agreed with the President under the five Key Result Areas of EO No. 43. 6.2 Meet the good governance conditions/requirements set by the AO No. 25 Task Force annually under the performance drivers of the RBPMS. For the first year of implementation, the specific conditions are as follows: a. Under the financial stewardship area, 1) mandatory posting of budget reports (Agency Transparency Seal); 2) posting of all invitations to bid and awarded contracts in the Philippine Government Electronic Procurement System (PHILGEPS); and 3) liquidation within the reglementary period of all cash advances granted to officials/employees for the year; and b. Under internal process efficiency, establishment of a Citizen's Charter or its equivalent. aCTHDA 7.0 Procedural Guidelines 7.1 The departments shall start by reviewing the MFOs, performance indicators, and targets as declared in the OPIF Book of Outputs for FY 2012, and the key program/project targets agreed with the President, especially those related to the 5 Key Result Areas under EO No. 43. Annex A presents a running list of these commitments with the President which are being monitored by the Presidential Management Staff (PMS). 7.2 The departments shall select, prioritize or name the 3 most significant performance indicators of output and outcome under each MFO to capture the dimensions of quantity, quality, and timeliness. Departments/agencies which have key programs/projects with performance targets for FY 2012 agreed with the President shall also prioritize and feature those performance targets ( e.g. , 4.6 million international tourist arrivals for the Department of Tourism; 40,000 classrooms constructed for the Department of Education, etc.) in addition to the MFO PIs and PTs in the OPIF Book of Outputs for FY 2012. Frontline departments/agencies shall also prioritize the compliance to process standards for the delivery of services declared under the Anti-red Tape Act (ARTA) among their MFO targets and reflect them in Form A or in Form B if these are committed to the President. All agencies shall feature outputs and outcomes among their MFO targets and not internal/intermediate outputs or "throughputs." 7.3 The resulting targets corresponding to the MFOs and key programs/projects shall be deemed the baseline commitment of the department for CY 2012 to be cascaded to lower level units. It is understood that departments shall adopt MFO targets which have been adjusted as a result of the budgetary revisions made by Congress in finalizing the FY 2012 General Appropriations Act. These should have been submitted to DBM in the Budget Execution Documents (BEDS). However, in no case will these MFO targets be lower than those achieved by the Department and the bureaus/offices in FY 2011. 7.4 The component bureaus/offices/units chosen by the department to be responsible for the delivery of the MFOs and key programs/projects shall be identified. The departments shall allocate among the responsible bureaus/offices/units the FY 2012 targets corresponding to the few selected or prioritized PIs which are strategic to organizational goals and which will define the performance of the department. These cascaded bureau/office/unit targets shall be set on a quarterly basis to ensure the timeliness of service delivery. aTEAHc 7.5 A department may choose various levels of delivery units to include in its performance based incentive system depending on the complexity of its operations and the readiness of its performance monitoring system. Hence, while a typical department may choose to rate the performance of its line and staff bureaus and regional offices, a more decentralized department may choose to rate its bureaus and also its provincial or district offices if it has a more established performance monitoring or rating system. 7.6 Offices under "Support to Operations" and "General Administration and Support Services" which provide administrative and technical support to the bureaus responsible for the delivery of the MFOs and the key programs/projects shall be given two (2) PIs each, capturing the dimensions of quality and timeliness of services specified by the department head for these offices. These PIs can be in addition to the good governance conditions to be set by the AO No. 25 Inter-Agency Task Force. 7.7 In cascading the targets, consideration should be given to the department's strategic plan, budgetary allocation and number of existing employees in the bureaus for FY 2012. Performance targets identified for bureaus/offices should be measurable and quantifiable to allow verification. 7.8 Departments shall adopt a participative and consultative process in cascading the targets. It is important that these targets should be agreed upon between the department secretary and those heading the bureaus/offices/units. 7.9 Refer to Forms A, A-1, and B for the templates on Cascading of Department Performance Targets. The departments shall include the MFOs, PIs and PTs of attached agencies and line and staff bureaus in their submissions of these forms. 7.10 If in the process of cascading targets, the department realizes that there are adjustments needed in the specification of MFOs, PIs and PTs, they may submit to DBM the revised MFOs, PIs and PTs together with the original ones and the explanation for the change. If there is also a need to restructure the agency Programs/Activities/Projects (PAPs) to better align them to MFOs ( i.e. , as a rule, one PAP attributed to one MFO) and the 5 Key Result Areas to make the cascading process manageable, the department may also submit the revised PAP structure following the guidelines under National Budget Circular (NBC) No. 532. HTASIa 7.11 Because the departments have already submitted their respective targets to DBM and to the Congress, they are only permitted to make upward adjustment in their performance targets that can be supported by the approved budget and consistent with the agency's work and financial plan as submitted under NBC No. 534. Reduction of targets shall not be allowed. Further, as mentioned in 5.3 above, in no case will these MFO targets be lower than those achieved by the Department and the bureaus/offices in FY 2011. 7.12 For additional guidance on the specification of performance indicators and the cascading of MFOs, departments can refer to Chapters 4 and 5 of the OPIF Reference Guide posted in the DBM website www.dbm.gov.ph . 7.13 Departments may also consult or ask assistance from the DBM bureaus/offices concerned in the cascading of MFOs, PIs and PTs. 8.0 Timeline and Other Related Activities 8.1 The departments shall submit to the DBM (Budget and Management Bureau in charge of the agency) both electronic and printed copies of the accomplished templates in Forms A, A-1, and B not later than August 30, 2012 . SUCs and GOCCs shall submit to CHED and GCG, respectively, on or before the said date. Departments and agencies which are not able to submit on or before said date shall be assessed as not being ready to implement the PBB and hence shall not be eligible to the bonus. 8.2 Likewise, the DBM and the other members of the Inter-Agency Task Force under AO No. 25 ( i.e. , NEDA, COA and CSC) shall review these submissions as to the consistency of identified bureau/office targets with the department's FY 2012 performance targets as reflected in the OPIF Book of Outputs and the pertinent BEDS, their consistency with the Results Matrices under the PDP, the Anti Red Tape Act (ARTA), as well as to the quality of the performance measures and targets. Departments and agencies whose PIs and PTs do not comply with the criteria shall also be assessed as not being ready to implement the PBB and hence shall not be eligible to the bonus. The same process shall apply to SUCs, GOCCs, and GFIs, and the pertinent oversight agency. DTAaCE 8.3 Departments shall publish their approved cascaded MFOs, PIs and PTs and quarterly accomplishments in their respective websites or official publications for transparency. These shall also be published in the RBPMS when said system is completed. 8.4 Departments shall establish or enhance their performance monitoring and evaluation systems to strengthen the implementation of the PBB scheme. The DBM and other oversight agencies shall validate accomplishment reports and conduct spot checks of actual performance. 8.5 A series of circulars will be issued by the AO No. 25 Inter-Agency Task Force to provide additional guidelines on the grant of the Performance-Based Bonus. 9.0 Effect of Non-Compliance Non-compliance with this Memorandum Circular and subsequent pertinent circulars to be issued by the AO No. 25 Task Force shall render the government entity ineligible for the Performance-Based Bonus for FY 2012. 10.0 Applicability to the Legislative and Judicial Branches, and Other Offices Vested with Fiscal Autonomy The Congress, Judiciary, Constitutional Commissions and the Office of the Ombudsman are encouraged to follow the provisions of EO No. 80 and this Memorandum Circular to be eligible to the Performance-Based Bonus. 11.0 Effectivity This Memorandum Circular shall take effect immediately. (SGD.) FLORENCIO B. ABAD Secretary, Department of Budget and Management and Chairman, AO 25 Inter-Agency Task Force ANNEX A Running List of Priority Programs and Projects Monitored by PMS Priority Programs and Projects Responsible Agency 1. Anti-Red Tape Measures (Anti-Red Tape Act of 2007) CSC/DILG 2. Run After Tax Evaders (RATE) DOF/BIR 3. Run After The Smugglers (RATS) DOF/BOC 4. Revenue Integrity Protection Service (RIPS) DOF 5. Conditional Cash Transfer (CCT) DSWD 6. Community-Based Employment Program (CBEP) DOLE 7. Education Backlog (Construction of Classrooms and DepEd Hiring of Teachers) 8. AFP/PNP Housing NHA/HUDCC 9. Informal Settler Families (ISF) Housing HUDCC 10. Universal Health Care (Philhealth Enrolment) DOH 11. Employment Generation DOLE 12. Priority Infrastructure Projects DPWH/DOTC/PPP 13. Tourism Clusters DOT 14. Food Self-Sufficiency (Rice Production and Importation DA Levels/Irrigation Facilities/Farm-to-Market Roads) 15. Upgrading of Philippine Civil Aviation from Category 2 to DOTC Category 1 16. AFP Modernization DND 17. Payapa at Masaganang Pamayanan (PAMANA)/Peace OPAPP Process 18. Peace and Order Situation (Crime Incidence/Solution/ DILG/DND Conviction Rate) 19. Training for Work Scholarship Program (TWSP) TESDA 20. Trafficking in Persons DOJ 21. ARMM Roadmap DILG/MINDA 22. National Greening Program DENR 23. National Renewable Energy Program DOE 24. Geo-hazard Mapping DENR 25. Business Permit and Licensing System (BPLS) DILG 26. Sitio Electrification DOE/NEA ANNEX B List of GOCCS Under the Jurisdiction of DBM A. Bangko Sentral 1. Bangko Sentral ng Pilipinas 2. Central Bank Board of Liquidators aSTcCE B. Research Institutions 3. Lung Center of the Philippines 4. National Kidney and Transplant Institute 5. Philippine Center for Economic Development 6. Philippine Children's Medical Center 7. Philippine Heart Center 8. Philippine Institute for Development Studies 9. Philippine Rice Research Institute C. Economic Zone Authorities 1. Aurora Pacific Economic and Freeport Zone Authority 2. Authority of Freeport Area of Bataan 3. Cagayan Economic Zone Authority 4. Philippine Economic Zone Authority 5. Subic Bay Metropolitan Authority 6. Zamboanga City Special Economic Zone Authority D. Local Water Districts FORM A Cascading of Department Performance Targets Cascading of Department Performance Targets Instructions (Form A) Based on the Organizational Performance Indicator Framework (OPIF), departments shall specify their Major Final Outputs (MFOs), appropriate performance indicators, targets, and corresponding budgetary allocation. This form shall be accomplished as follows: Column (1) MFO and Performance Indicators (Qualitative and/or Quantitative) Indicate the MFOs and PIs that have been agreed upon, harmonized and formally confirmed amongst the agency head, NEDA and the DBM. Support to Operations (STO) Indicators Select and prioritize indicators of activities that provide technical and substantive support to the operations and projects of the department/agency. These are activities which contribute to or enhance the delivery of services but which by themselves do not produce the MFOs. HTacDS General Administration and Support Services (GASS) Indicators Select indicators of activities dealing with the provision of overall administrative management and housekeeping support to the entire agency operation. From the existing indicators, the agency shall identify at least 3 performance indicators for each MFO, capturing the dimensions of quantity, quality and timeliness; and at least 2 performance indicators each for GASS and STO, capturing quality and timeliness. The agency should only place indicators that are most critical to the performance of the core functions of the department and those that contribute to the attainment of the President's Social Contract, as embodied in the Cluster Action Plans under EO 43. Ideally, indicators should be stable and remain relevant year after year and can be easily measured and reported in a timely manner, making it useful for decision makers. Column (2) Department FY 2012 Budget Specific numerical amount pertaining to the budget of the departments. This can be sourced from the General Appropriations Act. Column (3) Department FY 2011 Actual Accomplishment Specific numerical performance measurement of the agency accomplishment for FY 2011. Column (4) Department FY 2012 Target The targets of the department for the entire year, which could be sourced from the OPIF, agency's accomplished "Form B" or the Agency Performance Measures. Column (5) Responsible Bureaus/Delivery Units Indicate the bureaus/delivery units that are responsible for the delivery of the MFOs indicated in column 1. Column (6) FY 2012 Quarterly Targets Indicate the numerical targets on a quarterly basis. This could be sourced from the submitted agency budget. FORM A-1 Details of Bureau/Delivery Unit Performance Indicators and Targets FORM B Department Targets on Key Programs and Projects Cascading of Department/Agency Performance Targets Instructions (Form B) This form shall be accomplished as follows: Column (1) Key Programs/Projects programs and projects of a department supporting any of the five (5) Key Result Areas under EO 43, with performance targets for FY 2012 agreed upon with President Aquino. Column (2) Program/Project Description of Objectives a brief description of objectives/goals of the program/project under column (1). Column (3) Department FY 2011 Actual Accomplishment specific actual performance measurement of the department for FY 2011. Column (4) Department Targets/Milestones department targets or milestones for the program/projects under column (1) for FY 2012. The targets assigned to each bureau shall be listed for clarity. HaTISE Column (5) Total Program/Project Budget total budget for the priority program/project from start to completion. Column (6) Program/Project Budget for FY 2012 the specific budget for each program/project for FY 2012 Budget. Column (7) Responsible Bureaus/Delivery Units bureaus/offices/units in the department responsible for the delivery of the performance targets for the programs/projects under column (1). Column (8) FY 2012 Bureau/Delivery Unit Targets/Milestones FY 2012 quarterly targets/milestones of performance of the bureaus/office/units in column (7). The targets assigned to each bureau/unit shall be listed for clarity.