Cebu City told: Slash budget by P2B

CEBU CITY -- The City budgeted too much for its debt payments this year, the Department of Budget and Management (DBM) said after reviewing the 2015 budget and find parts of it inoperative.

In a letter to the Cebu City Government, DBM 7 Director Carmela Fernan pointed out that the City went over the debt cap in its budget appropriations.

She also noted that the vetoed items of the appropriations ordinance were not overridden by the Cebu City Council, so these are also inoperative.

DBM acknowledged that the annual budget under the general fund amounting to P13.4 billion and the P998 million for the special accounts “reveal substantial compliance with the same law and its implementing rules and regulations, except for the excess appropriations for loan repayments/amortization.”

When a budget is declared inoperative, it is returned to the local chief executive to be adjusted, and the treasurer is told not to disburse any funds from that budget, according to a primer on the DBM website.

The two-page letter laid out that the City’s appropriation for debt servicing reached P3.2 billion, when it should only be allowed P974 million.

The amount was computed based on the 2014 income of P4.9 billion. The debt cap is 20 percent of the amount.

An excess of P2.2 billion was found.

City Treasurer Diwa Cuevas said there is no problem with the debt cap since the City cannot disburse the P3.2 billion debt servicing appropriation just yet.

SRP loan

The amount represents the outstanding balance for the South Road Properties (SRP) loan.

Cebu City Mayor Michael Rama wanted to take out another loan to pay off the outstanding balance. Doing so would mean the City would rid itself of the foreign currency conversion since the loan was in yen. The current loan is subject to currency fluctuations.

Cuevas said she is yet to meet with other department heads to discuss how to reply to DBM’s letter.

They will also discuss how to go about the loan conversion so that they will not be hit by DBM’s regulation on debt servicing.

In the end, it will be the mayor’s decision.

DBM also earlier ruled that more than half of the P405.55-million second supplemental budget in 2014 was inoperative.

“In that case, we stopped disbursing immediately,” said Cuevas, albeit, some of the appropriations were already disbursed since the letter was only received last February.

What next?

On the issue of vetoed items, Cuevas said this will need to be hashed out considering that the appropriations ordinance has been implemented for three months.

“If the items vetoed are considered inoperative, we will resort to a reenacted budget (last year’s budget). Taas na (The process is too long). The budget will also be distorted because (the Council) only approved P13 billion. We might go over and we have to find other sources,” said Cuevas.

Mayor Rama originally proposed a budget of P18.9 billion.

Of the P13.4 billion, P8.89 billion will be sourced from tax revenues (P2.98 billion), non-tax revenues (P770 million), external sources (P1.5 billion), sales of disposed assets (P490 million), auction sale of real properties (P50 million), domestic borrowings (P3.1 billion) and sale of South Road Properties (SRP) lots (P4.5 billion).

In his veto message, Rama objected to some provisions in the appropriations ordinance approved by the Council.

One provision that Rama vetoed was the condition that capital outlay expenses amounting to P4.5 billion will only be implemented upon disposal of the SRP lots.


Rama also vetoed the item that states appropriations for maintenance and other operating expenses will not be used for payment of honorarium for job-order personnel, unless authorized by the Council.

DBM also subjected the “operative” parts of the budget to conditions.

One is the issue on unfilled or vacant positions. Fernan said these may be abolished if these are no longer needed by the City, except for mandatory positions.

“Appropriations under the Local Development Fund shall strictly cover development projects,” the letter also read.

DBM also said that appropriations for financial assistance, aids, subsidies, grants should conform with the Local Government Code and the Commission on Audit rules; while the confidential or intelligence fund and the local disaster risk reduction management fund should be in accordance with the guidelines set by the Department of Interior and Local Government.
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