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PRESIDENT'SVETO MESSAGE

PRESIDENT'S VETO MESSAGE

MALACANANGMANILA

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08 February 2010

THE HONORABLE SPEAKERLADIES AND GENTLEMEN OFTHE.HOUSE OF REPRESENTATIVES

Today marks another historic event, as I sign into law the final budget of myAdministration, Republic Act No. 9970, the General Appropriations Act (GAA) for FY 2010,entitled "AN ACT APPROPRIATING FUNDS FOR THE OPERATION OF THEGOVERNMENT OF THE REPUBLIC OF THE PHILIPPINES FROM JANUARY ONE TODECEMBER THIRTY-ONE, TWO THOUSAND AND TEN, AND FOR OTHER PURPOSES."

I. GENERAL COMMENTS

I begin with a sincere recognition of the commitment and hard work shown by theleadership and members of both Houses of Congress in the passage of this year's GAA. Bythis singular act, Congress has not only extended its hand of partnership with the executivebut shown confidence in the hope and promise of this year's budget for the Filipino people.

The FY 2010 GAA is the culmination of this Administration's steadfast commitment toreform and responsible development. It embodies the fiscal reforms we have painstakinglyinstituted over the years. It supports the refocused social agenda crucial in the developmentof any nation. It seeks to protect and sustain the economic gains we fought hard to nurturein the midst of domestic and global financial difficulties. It is the fruition of the dreams weshared and now seek to achiev~.

The challenge is now before us, for the executive to implement and transform thisyear's budget from one of hope into a reality. But this enormous task calls for a resolutecommitment to execute the GAA with faithful observance of the policies of fiscalresponsibility which were embodied in my proposed Budget. With this in mind, I herebyexpress the following comments to the changes made in the Budget I originally submitted toCongress.

II. ITEMS FOR DIRECT VETO

Consistent with the powers vested in me by the Constitution, I am obliged to directlyveto some special and general provisions including provisos in the FY 2010 GAA for beingcontrary to the provisions of the Constitution and those of existing laws, rules andregulations:

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GENERAL APPROPRIATIONS ACT, FY 2010

A. PRIOR LEGISLATIVEAUTHORIZATIONFOR BORROWINGS IN EXCESSOF THE DEBT CEILING

Indeed, fiscal responsibility coupled with strong economicfundamentals has helped build a sound macroeconomic environment for ourcountry, one that has allowed us to weather well the global economic crisis.But while I agree that imposing a debt ceiling is an effective tool in managingour fiscal stance and public expenditures, the same has to be pragmaticallydone over a number of years to provide flexibilityand room to maneuver, soimportant in an "opportunistic" capital market. In fact, as a sign of.our owncommitment to responsible fiscal management, we have managed to bringdown publicsector non-financialdebt from 88.1% of GrossDomesticProduct(GDP) in 2000 to 59.7% by the end of first quarter of 2009. On the otherhand,NationalGovernment(NG)debthas beenreducedfrom 59.7% of GDPin 2000 to 56.2% by the end of 2009. Throughconcertedefforts at revenuemobilizationand decliningdeficits,the nextadministrationcan bringthis downfurtherto 51.95%at the endof threeyears.

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Thus, I find the general provision requiring prior legislative approval forany borrowings that will increase the Government's total indebtedness beyond55% of the latest GDP to be unduly restrictive and consequently prevents theGovernment from taking advantage of favourable market conditions. This isespecially true when borrowings are needed for the Government to financeexisting mandatory items or provide budgetary support for programs andprojects designed to accelerate economic activities, narrow the budget deficit,refinance existing obligations, and extend the maturity or retire expensiveloans.

Accordingly, I veto General Provisions, Section 16, "GovernmentIndebtedness and Guararity", page 1205.

B. AVAILABILITY OF APPROPRIATIONS

I cannot overstress the importance of protecting the fiscal program ofthe NG. Our economic resiliency is significantly anchored on the finebalancing of spending and revenue collecting we have implemented over thepast years. For said reason, I am constrained to veto General Provisions,Section 66, "Availability of Appropriations", page 1213, which extends thevalidity of appropriations for Maintenance and Other Operating Expenses ofthe Education, Health, and Agriculture sector and all appropriations for CapitalOutlays in the FYs 2008, 2009 and 2010 GAA from two (2) years to three (3)years. Said extension will inevitably result in the unmanageable accrual andadministrative tracking of unexpended balances from previous appropriationsacts which would greatly impact on the succeeding years' fiscal program.

With this, the nation is assured that the next President will build on asound fiscal framework and not be fraught by the difficult task of managing the"accumulation of huge balances from past GAAs.

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C. AUTOMATIC APPROPRIATIONS

Time and again, I have emphasized that the automatic appropriation ofexpenditure items requires the passage of a separate substantive law andcannot validly be done tnrough the GAA. Additionally, treating certainexpenditure items in the GAA as automatically appropriated will undulyincrease the expenditure progra.mof the NG.

Thus, I hereby veto the below-quoted provisos under the followingspecial provisions:

1. Department of Agrarian Reform (DAR)-Office of the Secretary(PSEC), Special Provision No.6, "Landowner's Compensation", page19, "PROVIDED, That the actual requirements fo~ the redemption of thematuring bonds and interest on bonds of landowner's compensation; andother payables that may arise, including execution of judgments, shall bechargeable against the debt service program of the National Governmentor any unprogrammed item inthe GAA.".

However, let me note that despite the foregoing veto, the amount forthe redemption of maturing Agrarian Reform (AR) bonds and its interestsare still considered automatically appropriated pursuant to Section 1 ofExecutive Order (E.O.) No. 659, s. 2007 (Improving the Negotiability andAcceptability of Agrarian Reform Bonds), which treats AR bonds as issuedby the NG thereby making the same a direct, unconditional and generalobligation of the Republic of the Philippines.

2. Department of Foreign Affairs (DFA)-OSEC, Special Provision No.1,"Receipts and Income", page 453, ":PROVIDED, FURTHER, That amaximum of fifty percent (50%) of the income collected by honoraryconsulates which shall be automatically appropriated may be retained tocover their administrative expenses". .

Notwithstanding this veto, a maximum of 50% of the income collectedby . honorary consulates may be retained consistent with the NG'sexpenditure program for the year.

D. USE OF INCOME

I am likewise duty bound to veto the inclusion of the following specialprovisions which allow agencies to directly use income. Existing budgetinglaws rT1andatethat all income of agencies shall accrue to the General Fund ofthe NG; unless otherwise authorized by a separate substantive law.

By virtue thereof, all income of agencies already constitute an integralpart of the revenue and financing sources of the NG budget, which is madethe basis of the general appropriations bill. Consequently, the insertion ofthese new use of income special provisions will. result in the doubleprogramming of said income. In fine, permitting the use of agency incomeover and above its authorized appropriations will reduce the financing sources.~111111111111111111111111111111111

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of this year's GAA and, at the same time, unjustifiablyincrease theappropriationsof said agencies.

Instead, I encourage these agencies to take on the challenge ofgenerating more income and surpassing their collection targets as reflected inthe Budget of Expenditures and Sources of Financing. This alternative willenable them, as with other agencies, to utilize such excess income on top oftheir authorized appropriations in accordance with Special Provision No.9 ofthe Unprogrammed Fund.

Thus, Idirectly veto the followingspecial provisions:t

1. Department of Environment and Natural Resources (DENR)-OSEC,Special Provision No.2, "Wildlife Management Fund", page 394;

2. DENR-Mines and Geo-Sciences Bureau, Special Provision No.1,"Royalty Share on Mineral Resources", page 417;

3. Department of Justice (DOJ)-Officeof the Government CorporateCounsel (OGCC), Special Provision No.2, "Attorney's Fees andSpecial Assessments", page 520; and

4. Department of National Defense (DND)-Philippine Veterans AffairsOffice (PVAO)-PVAO Proper, Special Provision No.1, "Use ofIncome", page 568.

E. INAPPROPRIATE PROVISIONS

I note with great concern the inclusion of special and generalprovisions as well as provisos within a provision which are inconsistent withexisting laws, rules and regulations, and should have been made the subjectof a separate substantive law. Under' Section 25 (2), Article VI of the 1987Constitution, no' provision or enactment shall be embraced in the generalappropriations billunless it relates specificallyto some particular appropriationtherein. Needless to say, the GAAis not the appropriate legislative medium toamend or provide the implementing rules and regulations of existing laws.

Accordingly, I directlyveto the following:

1. The second paragraph of DND-Government Arsenal (GA), SpecialPr~)VisionNo; 2, "Authority to Barter and Sell Scrap", page 564, to wit:"However, in' case of sale' of scrap' items, it shall be sold through publicauction and the money value of the scrap items shall be recorded asincome of the Government ArsenaL".

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The above-quoted proviso runs c~ntrary to Section 11 (e) of RepublicAct (R.A.) No, 7898 (Armed Forces of the Philippines Modernization Act)which provides that proceeds from the disposal of excess and/oruneconomically repairable equipment and other movable assets of the GA

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shall accrue to the Armed Forces of the Philippines (AFP) ModernizationAct Trust Fund:

2. The provisos under Department of Social Welfare and Development-OSEC, Special Provision No.1, "Use of Proceeds from Sale ofWelfareville.Property", page 757, which read: (i) first paragraph, ":PROVIDED, That ttie amount of One Billion Five Hundred Million Pesos(PHP 1,500,000,000.00) out of the proceeds of the aforementioned saleshall be allotted and turned over to the Local Government Unit concernedto be utilized for the cost of the site development and construction ofhousing facilities resulting from the on-site relocation of the informalsettlers"; and (ii) ~econd paragraph, ", and with reference to therelocation of qualified informal settlers therein, in coordination/consultationwith the Local Government Unit concerned".

Similarly, the foregoing provisos contravene Section 2 of R.A. No.5260 (An Act Authorizing a Committee Composed of the At;fministrator ofthe Social Welfare Administration, the Auditor General and the Secretaryof the Department of General Services to Sell the Welfareville Propertylocated in the Municipality of Mandaluyong, Province of Rizal, And forOther Purposes) which mandates the exclusive use of the proceeds fromthe sale of the Welfareville Property for the establishment of nationalchildren's home institutions, and community services for children invarious parts of the Philippines.

Moreover, the needs of qualified informal settlers may be sufficientlyaddressed by the National Housing Authority (NHA), the PresidentialCommission for the Urban Poor and' the local government unit (LGU)concerned.

3. DFA-OSEC, Special Provision No.3, "E-Passport Service Fee", page454.

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It bears stressing that the authority provided to DFA under this specialprovision to charge a service fee in an amount equivalent to 50% but notto exceed 100% of the E-Passport fee for the processing of E-Passports inspecial cases violates Section 17 R.A. No. 8239 (Philippine Passport Actof 1996). It unduly allows the DFA to charge a service fee beyond thethreshold provided in Section 17 of not more than Two Hundred FiftyPesos (P250.00) in the processing of passports in special cases. .

4. DFA-OSEC,Special Provision No. 10, "Medical Allowance", page 454.

On the other hand, the authority given to the DFA Secretary tocontinually enter into a comprehensive global medical insurance contractby virtue of this special provision is rather misplaced. I note that Section73 of R.A. No. 7157 (Philippine Foreign Service Act of 1991) simplyprovides that foreign service personnel may be required to subscribe to amedical insurance scheme available in the host country. It does not,

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however, require the DFA Secretary to subscribe to a comprehensiveglobal medical insurance. The provision for medical insurance of foreignservice personnel should, therefore, be implemented in accordance withthe intent of the aforementioned law.

Moreover, I wish to note that since foreign service personnel remainactive members of the Government's National Health Insurance Program(NHIP), the DFA should inste~d take advantage of NHIP's universal healthcoverage. This way, the Government is able to efficiently use all of itsavailable.resources.

5. The Judiciary-Supreme Court of the Philippines and the LowerCourts, Special Provision No.3, "Honoraria for Special Projects",page 890.

In the interest of ensuring the equal treatment of all governmentemployees, the total honoraria to be received by the Judiciary for specialprojects should not exceed 25% of their annual basic salary pursuant toexisting guidelines. The qualifications in the grant of honoraria for specialprojects, including the allowable rates thereof, should be equally appliedacross the bureaucracy to prevent undue preference to a specified branchof the government.

6. Allocations to Local Government Units (ALGU)-Premium Subsidy forIndigents under the NHIP, Special Provision No.2, "Use of Fund",page 959.

This special provision which earmarks a portion of the appropriationsfor the NG's share in the health insurance premium of indigents to be usedas LGU counterpart is contrary to Section 29 of R.A. No. 7875 (NationalHealth Insurance Act of 1995), as amended by R.A. No. 9241 (An ActAmending R.A. No. 7875). Said section expressly mandates LGUs toprovide their own counterpart contribution in the premium payment ofindigents in their respective localities. Accordingly, the appropriations

referred to in this special provision should be used exclusivelK as NGcounterpart in the premium contribution of indigents in the 3rd,4' , 5thand6th class municipalities including those urban poor in highly urbanizedtowns and cities.

7. General Provisions, Section 12, "Proceeds from the Sale of BidDocuments", page 1203.

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I also find the inclusion of this general provision which authorizes theuse of proceeds from the sale of bid documents for the purchase ofsupplies, equipment, and related facilities to enhance the functions of theBids.--and Awards Committee (BAC) to be improper. The foregoingproceeds are to be used exclusively for the payment of honoraria andovertime services pursuant to pertinent issuances. Any excess thereof

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should be remitted .to the National Treasury in accordance with budgetinglaws, rules and regulations.

Besides, the supplies, equipment, and related facilities needed toenhance the functionsof the BACshould have been considered in theformulationpi the respectivebudgetsof agencies.

F. LEGISLATIVECONSULTATIONIN THE CONSTRUCTION OF FARM-TO-MARKETROADS '

As in the previous year, I hereby veto the proviso. under Departmentof Agriculture (DA)-OSEC, Special, Provision N,o. 3, "Implementation ofFarm-to-Market Roads Projects", page 30, which reads: "in consultationwith the Representative of the affected district, and". I believe that theidentification of sites for the construction of farm-to-market roads (FMRs)should be left to the DA, in coordination with the LGUs and r~sident-farmersand fisherfolks. The Executive Branch, who, under the Constitution, remainsresponsible and accountable for the implementation of programs under thisAct should be afforded adequate discretion in the manner and procedure ofproject implementation.

G. DELEGATION OF PROJECTS TO LGUs BY CONTRACT

Allow me to underscore that, as a rule, projects under the Departmentof Public Works and Highways (DPWH) are to be implemented by sai9 agencyas the engineering and construction arm of the Government. For said reason,delegation of project implementation are restricted to those implemented bythe AFP Corps of Engineers, inter-department projects to be undertaken byother -agencies, and to LGUs by administration or those with demonstratedcapability to implement projects, in view of their technical knowledge andcompetence in the field of project implementation.

The inclusion, therefore, of project implementation of LGUs by contractinfringes upon the fundamental policy on the permissible delegation of aDPWH function. As head of the Executive Branch, I hereby affirm the policyto limit delegation of project implementation to LGUs to those undertaken byadministration. Thus, Lam co'nstrainedto veto.the.proviso "Upon consultationwith the representative of the legislative district concerned, Local GovernmentUnits (LGUs) may also be allowed to implement the projects either byadministration or by contract: PROVIDED, That if implemented byadministration, the LGUs should have the demonstrated capability toimplement the project." in the second paragraph of DPWH-OSEC, SpecialProvision No. 1, "Restriction on Delegation of Pr.oject Implementation",page 708.

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H. PAYMENT OF TOTAL ADMINISTRATIVE DISABILITY PENSION UNDERTHE UNPROGRAMMED FUND

At the outset, let me emphasize that the Unprogrammed Fund merelyprovides standby appropriations for programs and projects not included underthe programmed items in the budget. Thus, the inclusion of One HundredSeventy Million Pesos (P170,OOO,OOO.OO)under the Pension and GratuityFund (PGF) for the payment of total administrative disability (TAD) pension ofWorld War II (WWII) veterans in this year's GAA warrants the veto ofUnprogrammed Fund, Special Provision No. 10, "Payment of TotalAdministrative Disability Pension", page 994. In view thereof, the paymentof TAD pension of WWII veterans should be governed by the pertinent specialprovision under the PGF.

III. ITEMS FOR CONDITIONAL IMPLEMENTATION

. I equally note the inclusionof new specialprovisionsas well as revisionsmade inexisting provisions that require the issuance of guidelines for their proper implementation.While I am certain of Congress' well meaning intentions in espousing these provisions, theirimplementation should nonetheless be subject to certain conditions for consistency withexisting' policies and uniformity in their execution with similar or related provisions.Consequently, I hereby subject the application and operation of the following special andgeneral provisions to the issuance of guidelines by the appropriate agency of the ExecutiveBranch pursuant to Sections 1 and 17, Article VII of the 1987 Constitution.

A. PROHIBITION ON IMPOUNDMENT OF APPROPRIATIONS

At the outset, allow me to underscore that increases in appropriationsintroduced by Congress in the .GAA were taken from reductions made in theappropriations for interest payment to the tune of P64.6 Billion. Since by law, Iam duty bound to honour the sovereign obligations of our Government, I amconstrained to provide' cash support for interest payments despite reduction inappropriations made by Congress. .

In view thereof, implementation of General Provision, Section 67,"Prohibition Against Impoundment of Appropriations", page 1214, whichprohibits the impoundment or temporary deferral of appropriations in the GAAexcept by virtue of a legislative authority, should be subject to certainconditions. Accordingly, release of the increased items of appropriations issubject to the identification by Congress of new revenue measures in supportthereof. Indeed, without such new revenue measures, the executive will haveno cash support for these items of expenditures introduced by Congress andwill not be able to release said appropriations in accordance with this generalprovision. .

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PRESIVENrs VETU MESSAGE

INCREASES IN APPROPRIATIONS

As a result of the aforementioned reduction by Congress in theappropriations for interest payments, the following increases in appropriationsin the budgets of agencies were made, thereby affecting the NG's cashprogram for the year. Thus, in keeping with my avowed policy to observeprudent and responsible fiscal management, release of the increased items ofappropriations is subject to the identification by Congress of new revenue.measures in support thereof. Moreover, all allowable increase inappropriations should carry with it a corresponding increase in the respectiveoutputs and improved outcomes of the agencies concerned.

1. DAR-OSEC, Special Provision No.3, "Agriculture and FisheriesModernization Program", page 19.

2. DA-OSEC, Special Provision No.1, "Agriculture and FisheriesModernization Program", page 30.

3. Other Executive Offices-Commission on Higher Education, SpecialProvision No.1, "Agriculture and Fisheries Modernization Program",page 833.

4. Budgetary Support to Government Corporations (BSGC), SpecialProvision No. 13, "Subsidy to the Philippine Crop InsuranceCorporation", page 947.

5. BSGC, Special Provision No. 14, "SUpport for the Agriculture andFisheries Modernization Program", page 947.

6. DENR-OSEC, Special Provision No.3, "Hiring of Forest ProtectionOfficers", page 394.

Additionally, the hiring of forest protection officers by the DENR mayonly be undertaken with due consideration to their ongoing rationalizationprogram.

7. Department of the Interior and Local Government (DILG)-OSEC,Special Provision No.1, "Ahon sa Kahirapan Support Program forBarangay-Based Development", page 485.

8. DILG-OSEC, Special Provision No.2, "Performance-Based GrantProgram to Local Government Units", page 485.

9. Department of Transportation and Communications (DOTC)-OSEC,Special Provision No.4, "Civil Aviation Authority of the PhilippinesProjects", page 788.

Likewise, I must stress that pursuant to the provisions of R.A. No. 9497(Civil Aviation Authority Act of 2008), all the powers, duties and rights of

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the former Air Transportation Office is now vested on and exercised by theCivil Aviation Authority of the Philippines (CAAP), including its assets,funds and revenues. As an earning government-owned and/or controlledcorporation (GOCC) mandated to promote and develop civil aviation in thecountry, the CAAP should utilize its income for projects in support ofairport and navigational facilities and not rely on any subsidy from the NG.

10. BSGC, Special Provision No. 10, "Budgetary Support to the NationalHousing Authority", pages 946-947.

I similarly note that the increase in subsidy of. the NHA, due to theinclusion of disaster preparedness projects under its ResettlementProgram, apparently resulted from the decrease in equity investment forits Local Housing Program (LHP). So as not to unduly hamper theimplementation of ongoing projects under the LHP and allow NHA to focuson its priority resettlement projects, execution of this special provision issubject to guidelines to be jointly issued by the DBM and NHA.

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USE OF INCOME

While certain agencies are authorized to use their income based onprovisions of existing laws, revisions made in the following special provisionsmake the same inconsistent with said legal basis.

In particular, I observe that these changes now authorize agencies toretain their income and maintain the same outside of the National Treasury. Itis, thus, imperative for me to stress that all income accruing to agencies byvirtue of the provisions of existing laws should be deposited with the NationalTreasury pursuant to Section 44, Chapter 5, Book VI of EO. No. 292, s. 1987(Administrative Code of 1987).

Accordingly, I hereby subject the implementation of these specialprovisions to, among others, the submission of a Special Budget in therelease of said income, and the issuance of guidelines by the agenciesconcerned.

1. DENR-OSEC, Special Provision No.1, "Use of Income", page 394.

2. Department of Health (DOH)-OSEC,Special Provision No.9, "Use ofIncome by the Food and Drugs Administration (FDA)", page 468.

Additionally, the FDA is required to submit its five-year program,detailing its financial plan, target activities, and physical goals to ensure itsself-sufficiency within said period of time pursuant to the pertinentprovisions of R.A. No. 9502 (Universally Accessible Cheaper and QualityMedicines Act of 2008). . ...

3. DOH-OSEC, Special Provision No.1 0, "Use of Income by the Bureauof Quarantine and International Health Surveillance (BQIHS)", page468.


4. DOTC-Maritime Industry Authority, Special Provision No.1, "Use ofIncome", page 794.

D. VERIFICATION FEES

I note. that the increase in the amount of the working fund underDepartment of Labor and Employment (DOLE)-OSEC, Special ProvisionNo.1, "Verification Fees", page 530, is an additional programming for theDOLE. Said increase should, therefore,be supported bya correspondingincreasein their collectionsfromverificationfees.

E. ASSESSMENTS FROM GOCCs..-

Considering that all income accruing to agencies is required by law tobe deposited with the National Treasury, I hereby declare that the incomereferred to under DOJ-OGCC, Special Provision No.1, "RegularAssessments of the Office of the Government Corporate Counsel", page520, shall pertain to all assessments collected by the OGCC from their clientGOCCs.

F. PROVISIONS UNDER THE DFA

1. DFA-OSEC, Special Provision No.1, "Receipts and Income", page453.

In light of my veto of the proviso automatically appropriating 50% of theincome collected by honorary consulates for their administrative expensesunder this special provision, I accordingly place the remaining provisionstherein under conditional implementation.

I must emphasize that a maximum of 50% of the consular incomecollected may be retained for reimbursement of administrative expenses. But,in all cases, the' total amount of income retained and the subsequentallotments to be released to foreign missions and honorary consulates shouldnot exceed the appropriations authorized in this Act for the purpose.Otherwise, the financing sources of this year's budget will be reduced sincesaid income was already considered in the NG's revenue program for theyear.

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Accordingly, implementation of this special provision is subject to theforegoing conditions and the issuance of guidelines jointly by the DBM and0 FA.

2. DFA-OSEC,Special Provision No.2, "Building Fund", pages 453-454.

I wish to emphasize that the changes introdu<;:edin this special provisioncompel me to subject the use of the Building Fund to the following conditions:(i) full utilization of appropriations for rental expense authorized to be used as

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amortization payments in the case of lease-purchase agreements; and (ii) useof this Fund in accordance with its annual disbursement program, and withinits available balance.

. In view thereof, the DBM and DFA are hereby directed to jointly issue theimplementing guidelines for this special provision.

G. CONSTRUCTION OF FARM-TO-MARKET ROADS

Similar to last year, changes were made under DA-OSEC, SpecialProvision No.3, "Implementation of Farm-to-Market Roads Projects",page 30, so that LGUs are no longer required to provide their share in thecost of the construction of FMRs. Likewise, the requisite masterlist of projectsto be submitted by the DA to the DBM and DPWH was deleted.

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I, thus, place this special provision under conditional implementation toensure that LGUs shall provide a counterpart of not less than 10% of theproject cost pursuant to Section 52 of R.A. No. 8435 (Agriculture andFisheries Modernization Act of 1997). At the same time, the construction ofFMRs should still be based on the aforesaid masterlist to ensure efficient andsynchronized implementation, and easy monitoring of projects.

H. ADVANCE PAYMENT FOR DRUGS AND VACCINES

I observe that revisions made under DOH-OSEC, Special ProvisionNo.3, "Advance Payment for Vaccines and Drugs", page 468, expandedDOH's privilege to make advance payments outside of my original grant ofauthority pursuant to Section 88 of Presidential Decree No. 1445 (GovernmentAuditing Code of the Philippines). Such expanded authority opens thepossibility for abuse in its implementation. I, therefore, reiterate the need forthe DOH to issue the appropriate guidelines that is consistent with my originalgrant of authority.

I. DELEGATION OF PROJECT IMPLEMENTATION

In line with my veto. of the proviso on the delegation of projects toLGUs by contract, I hereby place the remaining provisions in DPWH-OSEC,Special Provision No.1, "Restriction on Delegation of ProjectImplementation", page 708, under conditional implementation. Thus,implementation of DPWH projects may only be delegated to LGUs withdemonstrated capability to undertake the same, and upon consultation withthe representative of the legislative district concerned. The DPWH is herebytasked to issue the necessary guidelines for the purpose.

J. MULTI-YEAR CONTRACTFOR THI: AFPMODER~IZATION PROGRAM

To ensure the proper implementation of AFP ModernizationProgram, Special Provision No.2, "Multi-year Contracts", page 961, Ihereby direct the DBM and AFP to jointly craft the necessary guidelines in the

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issuance of a multi-year obligational authority relative to the multi-yearcontracts for the AFP Modernization Program.

K. USE AND RELEASE OF FUNDS

1. Department -of Education {DepEd)-OSEC, Special Provision No.7,"Newly Established High Schools", page 64.

The release of funds for the operational requirements of newlylegislated/established high schools, as defined under this specialprovision, is subject to the condition that the establishment thereof is inaccordance with the standards and criteria laid down in Department ofEducation Culture and Sports Order No.5, s. 1989, and DepEd Order No:71, s. 2003. In addition, the amount to be provided to newlylegislated/established high schools. should be based on the factorsconsidered in determining the budgetary allocations of existing highschools in this Act.

The DepEd is accordingly tasked to provide the necessary guidelinesfor this purpose.

2. DOH-OSEC, Special Provision No. 12, "Appropriations for PotableWater Supply", page 468.

To properly carry out an integrated program for the provision of potablewater supply to waterless municipalities, I hereby subject theimplementation of this provision to guidelines to be jointly issued by theDBM, DOH and Local Water Utilities Administration.

3. DOJ-Bureau of Corrections, Special Provision No.4, "Subsistenceand Medicine Allowance of Prisoners", page 514.

The release of the amounts appropriated as subsistence and medici(Jeallowance should be based on the actual number of prisoners under themanagement of the Bureau of Corrections.

4. Autonomous Region in Muslim Mindanao {ARMM)-AutonomousRegional Government in Muslim Mindanao (ARGMM), SpecialProvision No.2, "Release of Funds", page 881.

Of particular interest are the revisions made under this specialprovision which now requires the audit of all prior releases to ARGMM asa condition precedent to the subsequent releases of funds by the DBM. Ialso note that the construction of buildings is now included among theauthorized purposes of the lump-sum appropriation for various publicworks program under the ARGMM.

To avoid confusion in the implementation of this special provision, thefollowing clarifications are in order: (i) the subject of the audit requirement

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is ~helump-sum appropriation for various public works program under theARGMM; (ii) the DBM is authorized to release allotments for the purposesince the audit requirement pertains only to the disbursements ofappropriations to the ARGMM; and (iii) the construction of buildings shouldbe excluded from the authorized purposes of this lump-sum appropriationsince the same is included in the appropriations of the agenciesconcerned within the ARGMM.

The DBM and ARGMM should accordingly issue the appropriateguidelines for this purpose.

5. E-Government Fund, Special Provision No.1, "Use and Release ofFund", page 969.

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As in previous years, I hereby declare that despite the earmarking ofOne. Hundred Million (P100,OOO,OOO.OO)for the National BroadbandCommunications and Services Deployment for E-Governance, Education,Health and Agriculture, and Seventy Five Million (P75,OOO,OOO.OO)for theE-District project of the House of Representatives from the E-GovernmentFund, said priority projects should still satisfy all the criteria enumeratedunder this special provision and comply with the guidelines issued by theCommission on Information and Communications Technology in the use ofthis Fund.

6. PGF, Special Provision No.1, "Payment of Pension", pages 986-987.

With the objective of protecting. the greater interest of our belovedveterans, I hereby declare that the payment of TAD pension under thisspecial provision should be prospective and limited to surviving veterans.The DBM and Philippine Veterans Affairs Office should accordingly issuethe joint guidelines for this purpose.

7. Unprogrammed Fund, Special Provision No.6, "Support for theInfrastructure Projects and Social Programs", page 993.

. To ensure uniformity in the implementation of this special provision, Ihereby task the DBM to coordinate with the various agencies concernedand come up with a set of rules and criteria in lining up the proposedprojects to be funded under Purpose 5, Support for Infrastructure Projectsand Social Programs under the Unprogrammed Fund.

L. PRINTING OF ACCOUNTABLE FORMQUALlTYNOLUME REQUIREMENTS

AND SENSITIVE HIGH

While I agree with giving. preference to recognized governme.ntprinters, namely, the Bangko Sentral ng Pilipinas, National Printing Office andAPO Production Unit, Inc., in the printing of accountable forms as well assensitive high quality/volume printing requirements as espoused underGeneral Provisions, Section 29, "Printing and Publication Expenditures",

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page 1207, the same should, nonetheless be subject to the governing policyof competition and outsourcing of works and services to the private sector.

The Government Procurement Policy Board (GPPB), as theprocurement policy arm of the Government, should first define or at least setthe criteria or. .:~tandards in determining what constitutes sensitive highquality/volume printing requirements which may be undertaken by the namedgovernment printers without the need for public bidding. Consequently,implementation of this provision should be subject to guidelines to be issuedby the GPPB.

IV. GENERAL OBSERVATIONS

I likewise note the changes made in some special and general provisions whichcompel me to express my interpretations thereon.

A. Congress of the Philippines, Special Provision No.2, "OrganizationalStructure of the Senate, the House of Representatives, the Senate andHouse of Representatives Electoral Tribunals and the Commission 01'1Appointments", page 9.

As in previous years, allow me to express my complete confidence in.the leadership of both Houses of Congress and the institutions covered by thisspecial provision, that they will faithfully adhere to the constitutional principleof salary standardization enshrined as a state policy in R.A. No. 6758(Compensation and Position Classification Act of 19a9), as amended by theSenate and House of Representatives Joint Resolution No.1, s. 1994 andJoint Resolution No.4, s. 2009, and R.A. No. 6688 (An Act Authorizing AnnualChristmas Bonus); as amended by R.A. No. 8441 (An Act Increasing CashGift).

Moreover, I wish to stress that any adjustment and modification in tileorganizational structure of these institutions should follow the scrap and buildpolicy and other existing organization, staffing, compensation and positionclassification standards. Additionally, the creation of new positions as well asthe grant of retirement benefits and separation pay, as the case may be,under this special provision should be funded from the appropriations oravailable savings of said institutions.

I trust that Congress will remain steadfast in its commitment to thefundamental policy. set forth under Section 8, Article IX-B of the 1987Constitution, which prohibits the payment of additional compensation, as wellas the requirements of other relevant laws.

B. State Universities and Colleges (SUCs), Special Provision No. 13,"Release of Appropriations for Branches of SUCs", page 380.

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In order to avoid any confusion, let me explain that the use of the word"appropriations" in the title of this special provision should not be construed asauthorizing the direct release of appropriations under this Act to the branchesof SUCs.

C. ARMM-ARGMM,Special Provision N~. 4, "Release of Funds for Salariesand Wages", page 881.

It appears that this special provision, was included by Congress toensure the release of the salaries and wages of employees in the variousoffices of the ARGMM without delay. Accordingly, allow to me emphasize thatthe responsibility of the Office of the Regional Governor under this provision isnot only to timely sub-allot the funds released by the DBM, but moreimportantly, to immediately distribute its corresponding cash allocations to thevarious offices in the ARGMM.

D.

,ALGU-Municipal Development Fund, Special Provision No.2, "Supportfor the Agriculture and Fisheries Modernization Program", page 957.

I wish to clarify that the amount appropriated for the Mindanao RuralDevelopment Program APL-II shall be in support of the Agriculture andFisheries Modernization Program.

E. Priority Development Assistance Fund~ Special provision No.1, "Useand Release of the Fund", page 990.

The second paragraph of this general provision which requiresimplementing agencies to adhere to the price list and the rules and regulationsto be issued by the GPPB in the procurement of common-use supplies mustbe understood to pertain to the mandate under Section 52 of RA. No. 9184(Government Procurement Reform Act), and Sections 52.1 and 53.5 of itsRevised Implementing Rules and Regulations, for all implementing agenciesto procure their common-use supplies from the Procurement Service.

F. General Provision, Section 59, "Special Compensation and OtherBenefits", page 1213.

In the interest of clarity, allow me to elucidate that under this generalprovision, GOCCs and Government Financial Institutions which are exemptfrom, or are legally enjoying special compensation and other benefits superiorto those provided under RA. No. 6758, as amended, shall be governed bytheir special compensation laws. Accordingly, they shall not be entitled to thecompensation and other benefits provided under or granted by virtue of RA.No. 6758, as amended.

, ,

v. INCREASES IN APPROPRIATIONS AND NEW BUDGETARY ITEMS

Finally, allow me to underscore that there were changes, increases, reductions andnew budgetary items introduced by Congress in the FY 2010 GAA. I hereby declare that

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such changes, increases, realignments and new items shall be subject to the NG's cashprogram and prudent observance of responsible fiscal management, and to applicable rulesand procedures during budget implementation, including Presidential approval pursuant toSection 25 (5), ArticleVI of the 1987 Constitution, and in accordance with the requirementsof Section 35, Chapter V, Book VIof E.O. No. 292. Moreover, release of the increased itemsof appropriations is subject to the identification by Congress of new revenue measures insupport thereof. Further, all allowable increase in appropriations should carry with it acorresponding increase in the respective outputs and improved outcomes of the agenciesconcerned.

VI. pLOSING STATEMENT

As I near the end of my term as your President, I stand proud of what we haveaccomplishedfor our great nationgiventhe resources that were availableto us. Withpridein the gainswe have achieved, Isee thisyear's budgetas boththe end and the beginning.

The end, as it is the culminating piece of work that embodies the nine years of ourjourney together as a nation. It contains the programs and projects that will complete thestrategic investments we sought to enable our Ship of State reach its destination. Over theyears, we have kept inflationat bay. Our GDP in peso terms and per capita measureincreased.Morejobs were generated.Almostall barangaysare nowprovidedwith electricity.More houses were built for the poor. We have provided better access to secondaryeducation.We havemadeaffordablemedicinesaccessibleto poorfamilies.

These and much more achievements were made possible because we dared toimplement difficult but necessary fiscal reforms.

It is also very much the beginning from which the next President can build on theaccomplishments laid down by this Administration. Accomplishments realized through yearsof hard work, fiscal reforms and effective budget restructuring.

Indeed, the FY2010 GM aims to leave a LEGACY of hope and promise ofl8 betterfuture for every Filipino of this and the next generation. With these and my enduring faith inthe Filipino people, we can face the future with renewed hope and confidence.

Hand in hand, let us march forward for a better 2010 and onwards.

Mabuhay tayong lahatt

Very truly yours,

Copy furnished: ~l#.~THE HONORABLE SENATE PRESIDENTSenate of the PhilippinesPasay City

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