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ALL HEADS OF DEPARTMENTS, AGENCIES, BUREAUS, OFFICES, COMMISSIONS, STATE UNIVERSITIES AND COLLEGES, OTHER INSTRUMENTALITIES OF THE NATIONAL GOVERNMENT AND ALL OTHERS CONCERNED

FORWARD ESTIMATES (FEs) FOR FYs 2013-2016

This Circular Letter is being issued to inform all Departments/Agencies on the guidelines adopted by the DBM on the updating of the Forward Estimates (FEs) for FYs 2013-2014 and formulation of FEs for FYs 2015-2016. The updated and formulated FEs shall be the basis for the issuance of the FY 2013 Indicative Budget Ceilings which shall guide the departments/agencies in their respective budgeting and planning exercise.

For the FY 2013 Budget Preparation, the DBM shall update the FYs 2013-2014 FEs and formulate FYs 2015-2016 FEs, from December 2011 to January 2012 in time for the issuance of the FY 2012 Indicate Budget Ceiling on the last week of January 2012. The FEs shall be used to determine the magnitude of the annual costs of all on-going budgetary, programs and projects which will be set aside to ensure their continuous funding should the government not change its expenditure policies. Moreover, the Fes shall be used to determine the allocable amount or fiscal headroom for the period 2013-2016 which will allow additional funding to the priority sectors or areas of expenditure.

For the purpose of this Circular Letter, the following terms shall be construed to mean as follows:

3.1

Budgetary Program - A homogenous and recurring group of day-to-day activities of an agency necessary for the performance of its mandate, i.e., General Administration and Support Services (GASS), Support to Operations (STO), and Operations, Key programs are those programs which are, in' general, under Operations and which are the primary vehicles for delivering specific final outputs.

3.2

Budgetary Projects - Agency undertakings which are to be carried out within a specific time frame. Budgetary Projects are classified as Locally-Funded Projects (LFPs), if funded from internally generated funds of the National Government or Foreign-Assisted Projects (FAPs), if financed wholly or partly by foreign loans and/or foreign grants.

3.3

Cost Overrun/s - Any increase in costs over the original projects costs, recommended by the agency/ies concerned and approved by DBM for funding . Cost overruns of ongoing ICC-approved programs/projects costing P500 Million and above require the approval of the ICC, regardless of financing.

3.4

Economic Parameters - The variables expressed as index or ratios applied to a budget estimate to measure the level of service delivery approved by the Government e.g., inflation rate or population growth used to adjust demand-driven budget expenditures for the effect of changes in prices demographic factors.

3.5

Fiscal Headroom - The difference between the Total Expenditure Program for the year as approved by the DBCC and the estimated future costs of on-going budgetary programs/projects, which may be available to fund new and/or expanded budgetary programs/ projects.

3.6

Forward Estimates - Projections or estimation of the future annual costs of on-going budgetary programs and projects. For budgetary projects, the annual requirement shall be consistent with the updated project profile approved by pertinent authorities as submitted by the implementing agency.

3.7

Key Result Areas (KRA) - The five priority areas of focus of the Aquino Social Contract with the Filipino People, as defined by Executive Order (EO) No. 43 issued on May 13, 2011.

3.8

Loan/Grant Closing Date - Refers to the end-date of the availability of loan/grant proceeds as stated in the loan/grant agreement.

3.9

Maintenance and other Operating Expenses (MOOE), indexed items - Expense items which are sensitive to changes in prices and therefore are multiplied with the inflation index for the pertinent years. Examples of these items are communication, repair and maintenance, supplies and materials, utility, printing and binding, advertising, representation expenses, among others. These are applicable to specific expense items under budgetary programs. However, for FAPs/LFPs, the annual maintenance requirement shall be consistent with those in the latest approved project profiles.

3.10

Maintenance and Other Operating Expenses (MOOE), non-indexed items - Expense items with fixed rates under existing laws (such as rate for Extraordinary and Miscellaneous Expenses, rate for Local/Foreign Travels) or subject to existing contract (such as Rents, Professional Services, Subscription Expenses, Membership Dues and Contributions to Organization) MODE items of FAPs/LFPs, culled from the project profile and those items that are dependent on other factors such as Supplies and Materials which vary based on the number of target beneficiaries/applicants/buying price (e.g. no. of students for the textbooks of DepEd, buying price and no. of passport applicants for DFA, no. of inmates for the subsistence allowance of BJMP and BuCor).

3.11

New Proposal - A new budgetary item or project, or a proposal to increase the level of service delivery of on-going budgetary programs which the agency submitted for funding from the fiscal headroom (allocable amount).

3.12

Non-recurring items - One-time expenditure items in a given budget year (e.g., purchase of motor vehicles, one-time acquisition of land and/or building).

3.13

On-going programs and projects - Refers to the budgetary programs and projects approved under the FY 2012 NEP including those approved programs and projects in the National Action Plan of each KRA cluster and those that are periodic in nature (e.g. NSCB designated statistics conducted every three or five years).

3.14

Out-year(s) - Refers to each of the years beyond the current budget (fiscal) year covered  by forward 1 estimates (e.g. 2012 - current budget (fiscal) year, 2013-2016 - out-years for budgetary programs and years up to project completion date per project profile for budgetary projects).

3.15

Project Completion Date - Refers to the date the project was physically completed.

3.16

Project Profile - Form submitted by agencies implementing FAPs or LFPs which contains pertinent facts about the project's name, project description/objectives, project component to be undertaken and approved allocation, cost structure by expense class, implementation period and total project cost (TPC). The funding source for FAPs (name of the lending institution/donor agency financing the project) and the original currency and peso equivalent of the TPC are likewise provided in the form. For LFPs and FAPs, the form is submitted prior to the initial release of funds on the first year of project implementation, and if there are approved revisions (total project cost, loan cancellation, etc.) either by DBM or ICC.

3.17

Public-Private Partnership (PPP) Projects - Build Operate-Transfer (BOT) projects and their variants contained in the Philippine Investment Plan (PIP) and Philippine Development Plan (PDP) priorities that are undertaken by the government with the private sector to deliver public goods/services under a contractual arrangement. Associated costs of PPP projects refer to the government's counterpart to the project (e.g. Right of Way Acquisition (ROWA), feasibility studies, and related required infrastructure access).

3.18

Total Project Cost- Original project cost per project profile. For FAPs, original project cost shall be consistent with the foreign currency amount as reflected in the approved loan/grant document, including the GOP counterpart. Original project cost for LFPs (costing P500M and above) shall be consistent with the amount approved by the JCC.

4.1

General Guidelines

The general guidelines define the coverage of the FEs including the considerations and exclusions of certain conditions/items in the updating and formulation.

4.1.1

The FEs shall cover the estimated annual costs of ongoing budgetary programs and projects supporting the policies and key priorities contained in the Aquino Social Contract with the Filipino People as defined in E.O. No. 43 and as fleshed -out in the Philippine Development Plan, and in the updated Medium Term Expenditure Framework (MTEF) of the departments.

4.1.1.1

For budgetary programs, i.e., GASS, STO and Operations, the FEs shall consider the FY 2012 NEP allocation, changes in economic parameters and the targeted outputs for the out-years. The FEs shall cover the estimated annual requirements for the out-years beyond the current budget (or fiscal) year i.e., 2013-2016.

4.1.1.2

For budgetary project, i.e., LFP and FAPs, the FEs shall cover the annual requirements up to the approved completion date. Annual requirements shall be based on the approved project profile after considering the likely end-of year accomplishments based on reports as of September 30, 2011 and based on the allocation provided in the FY 2012 NEP. The foreign exchange rates of P43.50; $1 (midpoint) shall be used in determining the peso equivalent of the foreign currency.

4.1.2

The FEs formulated last year shall be the base/starting figures for updating the FYs 2013-2014 FEs and formulating the FEs FYs 2015-2016.

4.1.3

The implications of the approved allocations for FY 2012 including the new proposals decided upon during the ERB and included in the NEP, and increase in PS requirements due to the full implementation of SSL III shall be considered in the updating/formulation of the FYs 2013-2016 FEs. Likewise, adjustments have to be made for any changes in the economic parameters used during the FEs formulation last year. For reference, the inflation rate and resulting indexation factor are provided below:

For an agency which was transferred from one department to another as reflected in the FY 2012 NEP, its FEs shall be included in the recipient department.

Incremental costs of PS due to the full implementation of SSL III to pension requirements for uniformed and military personnel shall already be included in the total PS of the department/ agency in coordination with OPCCB.

In the formulation of the FEs for the outyear FYs 2015-2016, the following shall be considered:

4.1.6.1

The financial requirements corresponding to the FYs 2015-2016 targeted outputs per MFO/Performance Indicator of the agency;

4.1.6.2

The associated costs (government counterpart) of PPP projects approved by the ICC including the annual requirements indicated in the Multi-Year Obligational Authority (MYOA) issued as of October 21, 2011;

4.1.6.3

The annual future costs of the ideal level of service to be provided by certain agencies to its target beneficiaries, as follows, among others:

Quality of education
• Teacher to pupil ratio
• Textbooks/Workbooks to students ratio
• Classrooms to students ratio