2010 annual financial report of the national government ...€¦ · the budget data consisting of...

2010

Annual Financial Report

National Government

Volume I-A

TABLE OF CONTENTS

Page

I. INTRODUCTION 1

II. REPORT HIGHLIGHTS 5

III. KEEPING THE GENERAL ACCOUNTS OF THE NATIONAL GOVERNMENT 17

Legal FrameworkHistorical PerspectiveOperational DefinitionAppropriations, Allotments, Obligations and Balances

IV. FINANCIAL STATEMENTS

Condensed Balance Sheet 43Condensed Statement of Income and Expenses 44Condensed Statement of Government Equity 45Condensed Statement of Cash Flows 46Notes to Financial Statements 47

V. FINANCIAL ANALYSES

Balance Sheet 57 Assets Liabilities Equity

Statement of Income and Expenses 89 Revenue/Income Expenses Net Loss

Statement of Cash Flows 120 Cash Inflows Cash Outflows Net Cash Provided By (Used) Cash Balances

VI. NATIONAL GOVERNMENT DEBT 129

VII. SPECIAL ACCOUNTS IN THE GENERAL FUND 150

VIII. COMPREHENSIVE AGRARIAN REFORM PROGRAM 155

IX. COMMON AND SIGNIFICANT AUDIT OBSERVATIONSAND RECOMMENDATIONS 166

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List of Tables and Charts Table No. Particulars Report Highlights II-1 Allotments by Source of Appropriations and Allotment Class II-2 Obligations by Source of Appropriations and Expenditure Class II-3 Unalloted/Unrelased Appropriations, by Source II-4 Unobligated Allotments, by Source II-5 Comparative Composition of Liabilities Keeping the General Accounts of the National Government III-1 Appropriations, Allotments, Obligations and Balances III-2 Comparative Details of Appropriations for FYs 2010 and 2009 III-3 Comparative Regular Appropriations By Department III-4 Appropriations for Special Purpose Fund III-5 Appropriations for Unprogrammed Fund III-6 Comparative Details of Allocations to LGUs III-7 Budgetary Support to Government Corporations III-8 Sources of Automatic Appropriations III-9 Continuing Appropriations by Department/Office and Source III-10 Sources and Nature of Allotments III-11 Regular Allotments, by Department/ Office and Allotment Class III-12 Allotment from Special Purpose Fund III-13 GOCCs with Budgetary Support from the National Government III-14 Allotments from Allocations to LGUs III-15 Allotment from Priority Development Assistance Fund III-16 Allotments from Automatic Appropriations III-17 FY 2010 Internal Revenue Allotment Distribution III-18 Summary of Unreleased Appropriations III-19 Summary of Allotments, Obligations and Balances III-20 Obligations Covered by Allotments, by Department/Office and Allotment Class

III-24 Obligations Not Covered by Allotments, by Department/Office and Allotment Class Financial Analyses V.1-1 Assets, Liabilities and Equity V.1-2 Annual Growth in Assets V.1-3 Comparative Composition of Cash V.1-4 Agencies with more than P1.5 billion Cash in Bank- Local Currency Deposits V.1-5 Top Ten Agencies with Highest Balances of Cash in Bank- Foreign Currency Deposit

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V.1-6 Details of Receivables by Account V.1-7 Due from GOCCs Reported by the Bureau of the Treasury V.1-8 Composition of Investments V.1-9 Major Classification of Property, Plant and Equipment V.1-10 Components of Land and Land Improvements V.1-11 Components of Buildings V.1-12 Components of Construction in Progress V.1-13 Components of Other Assets Group V.1-14 Comparative Components of Current Liabilities V.1-15 Accounts Payable by Department/Office V.1-16 Departments With Other Liabilities V.1-17 Comparative Components Long-term Liabilities V.1-18 Departments/Offices with Completed Public Infrastructures and Reforestation Projects V.2-1 Revenue/Income, Expenses, Subsidies and Net Loss V.2-2 Comparative Income Taxes, By Source V.2-3 Comparative Taxes on Goods and Services, By Source V.2-4 Comparative Components of Property Taxes V.2-5 Departments/Offices Which Reported Service Income V.2-6 Components of Other Income V.2-7 Departments /Offices which Reported Interest Income V.2-8 GOCCs/GFIs with Dividend Remitted to the DOF-BTr V.2-9 Departments with Amount of Income from Grants and Donations V.2-10 Departments/Offices which Reported Amount of Miscellaneous Income V.2-11 Components of Business Income V.2-12 Departments/Offices Which Reported Business Income V.2-13 Components of Permits and Licenses V.2-14 Breakdown of Income, by Department/Office and by Book V.2-15 Regional Breakdown of Income by Source V.2-16 Comparative Details of Current Operating Expenses V.2-17 Comparative Components of Personal Services V.2-18 Departments/Offices that Reported Expenses for Salaries and Wages V.2-19 Comparative Details of Other Compensation V.2-20 Departments/Offices that Reported Payments for Other Compensation V.2-21 Comparative Details of Personnel Benefits Contributions V.2-22 Departments/Offices that Reported Expenses for Personnel Benefit Contribution V.2-23 Comparative Details of Other Personnel Benefits V.2-24 Comparative Details of Maintenance and Other Operating Expenses V.2-25 Comparative Components of Supplies and Materials Expenses V.2-26 Comparative Components of Repairs and Maintenance Expenses V.2-27 Departments/Offices that Reported Expenses for Other MOE V.2-28 Comparative Details of Subsidies To LGUs, GOCCs and NGOs/POs V.2-29 Breakdown of Subsidy to LGUs as Reported by DBM CO and ROs V.2-30 Comparative Breakdown of Subsidy To GOCCs as Reported by DOF-BTr V.2-31 Comparative Components of Financial Expenses V.2-32 Regional Breakdown of Expenses and Subsidies V.2-33 Comparative Details of Subsidies From/(To) NGAs

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V.2-34 Comparative Details of Subsidy to NGAs as Reported by BTr NG Books V.2-35 Comparative Details of Gains/(Losses) V.2-36 Comparative Condensed Statement of Income and Expenses V.3-1 Revenue Generated, by Agency V.3-2 Receipt of NCA, By Department V.3-3 Breakdown of Other Receipts V.3-4 Breakdown of Inflows from Investing V.3-5 Breakdown of Borrowings V.3-6 Remittances to NT, by Agency V.3-7 Payment of Operating Expenses, by Department V.3-8 Subsidies and Donations to Other NGAs/LGUs, NGOs/POs V.3-9 Composition of Financing Outflows National Government Debt VI-1 National Government Financing VI-2 Status of NG Debt VI-3 Composition of Outstanding Bonds Payable VI-4 NG Debt Growth VI-5 Comparative Outstanding NG Debt VI-6 Comparative Outstanding Domestic Debt VI-7 Composition of Domestic Availments VI-8 Comparative Outstanding Foreign Debt VI-9 Comparative Outstanding NG Direct and Relent Loan VI-10 Foreign Availments VI-11 Repayments by Creditor VI-12 Comparative Principal Repayments of the NG VI-13 Comparative Interest Payments of the NG VI-14 Comparative Financial Charges of the NG VI-15 Appropriations for Foreign-Assisted Projects VI-16 Allotments for Foreign-Assisted Projects Special Account in the General Fund VII-1 Appropriations, Allotments, Obligations and Balances VII-2 Total Income by Department/Office VII-3 Expenses by Department/Office Comprehensive Agrarian Reform Program VIII-1 Appropriation of CARP VIII-2 Appropriations, Allotments, Obligations and Balances VIII-3 Assets, Liabilities and Equity VIII-4 Subsidy, Income and Expenses VIII-5 Approved Budget, Allotments, Obligations and Balances

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Chart No. Particulars Report Highlights II-1 Appropriations, Allotments and Obligations II-2 Allotment by Class II-3 Assets, Liabilities and Equity II-4 Comparative Composition of Assets II-5 Results of Operations II-6 Cash Flows, by Activities Keeping the General Accounts of the National Government III-1 NG Budgets for FYs 2007 to 2010 III-2 Sources of Automatic Appropriations III-3 Congress PDAF Availments Financial Analyses V.1-1 Categories of Assets V.1-2 Trend of Cash V.1-3 Classification of Property, Plant and Equipment V.1-4 Trend of Total Liabilities V.2-1 Comparison of Actual and Programmed Revenue V.2-2 Regional Breakdown of Income (excluding NCR) V.2-3 Expenses of the National Government V.2-4 Sectoral Classification of Expenses V.3-1 Segment of Cash Flows V.3-2 Components of Cash Inflows V.3-3 Trend Analysis of Net Cash Provided by (Used in) Operating, Investing and Financing Activities National Government Debt VI-1 NG Debt by Source VI-2 NG Debt Growth VI-3 Domestic Debt by Legal Source VI-4 Foreign Debt by Legal Source VI-5 Actual Debt Service Expenditures of the NG Special Account in the General Fund VII-1 Total Assets as of December 31, 2010 Significant Audit Observations and Recommendations IX-1 Summary of Audit Opinions for Fiscal Years 2006-2010

I. INTRODUCTION

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INTRODUCTION

1.1 Legal Bases

Section 4, Article IX-D of the 1987 Philippine Constitution provides that “The Commission shall submit to the President and the Congress, within the time fixed by law, an annual report covering the financial condition and operation of the Government, its subdivisions, agencies, and instrumentalities, including government- owned or controlled corporations, and non-governmental entities subject to its audit, and recommend measures necessary to improve their effectiveness an efficiency”. Section 41(1) of Presidential Decree No. 1445, the Auditing Code of the Philippines quotes that “The Commission shall submit to the President, xxx, and the National Assembly not later than the last day of September of each year an annual report on the financial condition and results of operation of all agencies of the government which shall include recommendations and measures necessary to improve their efficiency and effectiveness”.

In compliance therefore, to the abovementioned provisions, the COA, through the Government Accountancy Sector (GAS), submits to the President and the Congress the Annual Financial Report (AFR) for the National Government (NG) for calendar year 2010.

1.2 Objectives

The objectives of the AFR are to present the over-all picture of the total approved budget/authorized appropriations, releases of allotments, utilizations/obligations incurred and Notice of Cash Allocations (NCA) received by national government agencies (NGAs) and the financial condition of the NG and results of operations as shown in the consolidated financial statements of NGAs. The budget data serve as useful tools for the Congress in the enactment of appropriations and other laws. Other financial information presented in the AFR aims to guide the President, legislators, economic planners and other government executives in the formulation of economic policies, development of budget plans and execution of programs and projects.

1.3 Contents/Features

The AFR highlights the chapter on Keeping the General Accounts (KGA) of the NG, one of the mandated functions of the Commission whereby the appropriations authorized in the General Appropriations Act, Supplemental Appropriations, Special and Automatic Appropriations Acts are monitored/controlled, analyzed and verified to ensure that releases made by the Department of Budget and Management (DBM) to NGAs are within the authorized ceiling and to account for overall budget of the NG. It presents the Statement of Appropriations, Allotments, Obligations and Balances (SAAOB) by source and by department/office. The financial statements of the NG, namely: the Balance Sheet (BS), the Statement of Income Expenses (SIE), Statement of Cash Flows (SCF) and Statement of Government Equity (SGE) are featured with complete details and analyses.

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The AFR for NG consists of two (2) Volumes as follows:

Volume 1-A – contains the Report Highlights; Condensed Financial Statements and Financial Analyses; and write-ups on the Keeping the General Accounts, NG Debt, Special Accounts in the General Fund (SAGF), Comprehensive Agrarian Reform Program (CARP); and Common and Significant Audit Observations and Recommendations including audit opinions on the presentation of the financial statements.

Volume 1-B – presents the detailed Financial Statements by Department/Office,

Schedules and Annexes.

1.4 Methodologies

1.4.1 Keeping the General Accounts

The budget data consisting of current year’s appropriations, prior year’s appropriation balances or continuing appropriations set by law to be available until the end of the year and automatic appropriations and allotments released by the DBM during the year are recorded in the Registry of Appropriations and Allotments (RAPAL) maintained by the COA-GAS. These information are summarized together with the obligations incurred as reported in the Statement of Allotments, Obligations and Balances (SAOB) of NGAs. Reconciliation with the DBM and NGAs pertaining to appropriations and allotments were conducted and necessary corrections and adjustments were communicated and effected accordingly. Likewise, obligations incurred by agencies were verified to ascertain that such commitments were duly covered by allotments and overdraft in allotments, if any, was properly communicated with concerned agency.

1.4.2 Financial Statements

For calendar year 2010 AFR, the financial statements were prepared by agency accountants in accordance with the rules and regulations under the New Government Accounting System (NGAS). The accounts in the trial balances were uploaded into the AFR System from which the individual department/agency’s BS, SIE as well as the SGE were generated and proofread with the audited financial statements in case the advance copies of the trial balances were uploaded first. The system also generated the overall consolidated financial statements by department/office.

Based on the overall BS, inter-agency receivables were eliminated with the

inter-agency payables to reflect the amount of cash expected to be realized from the receivables and the actual payables subsisting between NGAs, Local Government Units and Government-Owned and/or Controlled Corporations. On the other hand, the intra-agency receivables were also eliminated with intra-agency payables to reflect the balances of reciprocal accounts subsisting between Central Offices (COs), Regional Offices (ROs)/Staff Bureaus, and Operating

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Units (OUs). After the elimination, however, there are still balances of the cited inter-agency and intra-agency accounts since these are not reconciled at the agency level.

The total income of NG was based on the consolidated SIE generated from the system presented by Regular Agency (RA) Books and National Government (NG) Books. Under the NG Book, the various tax revenue accounts are classified to Other National Taxes and some other accounts reported by the Bureau of the Treasury (BTr). The breakdown of the total income presented in this report was based on the consolidated Report of Income (ROI) submitted by the NGAs.

During the year, the AFR System being adopted by the GAS was enhanced to include the automation of the SCF. The soft copies of the SCF submitted by NGAs were analyzed and converted into the prescribed format to facilitate inputting and processing of data into the system. In the absence of a module to offset collections of income/revenue against remittance to the National Treasury, manual computation was done. The offsetting, however, was done on the overall SCF due to lack of information as to the nature of remittances made. The intra-agency and inter-agency transfers were also not eliminated in the absence of data as to the transferor/donor and transferee/recipient. The SCF by book and by department/agency as well as relevant schedules were generated but no comparative data for two years is presented since this is the first implementation of the automation of the SCF.

1.4.3 National Government Debt

The data on NG debt were sourced from the 2010 audited FS, Actual Debt Service Expenditures and Cash Operations Report (COR) provided by the Department of Finance-BTr. Budget information were taken from the 2011 Budget of Expenditures and Sources of Financing (BESF) and the 2010 General Appropriations Act, R.A. No. 9970 furnished by the DBM. The COA-GAS requested the BTr-National Government Debt Accounting Division (NGDAD), to submit a report on the analyses of loans and bonds payable, both foreign and domestic. Based on the analyses, the data on beginning balances of outstanding NG debt is reconciled with the ending balances reflected in the 2009 report. Current year’s availments and repayments were also based in the report of the NGDAD. The ending balance of NG debt is reconciled with the Loans and Bonds Payable, foreign and domestic appearing in the BS of the BTr-NG Book. The appropriations by department/agency for foreign assisted projects were taken from the 2010 GAA while releases of allotments were based on the individual Special Allotment Release Orders (SAROs) and Agency Budget Matrices (ABMs) of the particular agencies. Comparative data between programmed and actual budget for NG debt were based on the BESF and the COR.

1.4.4 Special Account in the General Fund (SAGF)

The financial data for SAGF as of December 31, 2010 were derived after the consolidation of the trial balances submitted by NGAs except the CARP Fund 158 which is presented in Part VIII of this report. Transactions pertaining to

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SAGF which were recorded in the General Fund 101 of the departments/agencies since no separate books were maintained, were not included in this chapter. However, the income collected by various NGAs and remitted to the National Treasury were included based on the actual income recorded in the books of the BTr either as Grants and Donations or Other Service Income.

1.4.5 Comprehensive Agrarian Reform Program (CARP)

The data on budget/appropriations, allotments and obligations for CARP Fund 158 were culled from the reports and materials gathered from the Presidential Agrarian Reform Council (PARC) and from the COA Auditing Unit in-charge of the consolidation of the CARP financial statements and reports.

Comparison of the 2010 data on appropriations, allotments and obligations submitted by the seven implementing agencies (IAs) to PARC with that of the SAOB submitted by IAs to COA-GAS was done to reconcile the figures. However, discrepancies were noted and for the purpose of this report, data gathered by COA-GAS for calendar year 2010 are presented.

Consolidation of the 2010 BS and SIE of all IAs pertaining to CARP accounts of CARP-LBP was done to come up with the over-all data on assets, liabilities, equity, income and expenses for CARP.

1.4.6 Common and Significant Audit Observations and Recommendations

The common audit observations and the corresponding recommendations were culled from the Annual Audit Reports of agencies and summarized according to major accounts. The significant audit observations were taken from the summarized reports on significant observations with recommendations submitted by the National Government Sector and the Regional Offices of the COA.

1.5 Coverage The AFR is prepared based on the audited and advanced copies of the financial

statements and reports of 329 NGAs. Of the total NGAs, 325 or 98.78 percent have their audited financial statements included in the AFR while four (4) departments, namely: the Department of Public Works and Highways, Department of Agrarian Reform, Department of Trade and Industry, and the National Economic and Development Authority were included based on the advance copies submitted by their accounting units. The audited financial statements of these departments/office were submitted to GAS after the cut-off.

As part of the common and significant audit observations and recommendations, a

summary of audit opinions on the presentation of the financial statements of audited NGAs for five years (2006 – 2010) is also included in the report. The audit opinions may be unqualified, qualified, adverse or disclaimer of opinion.

II. REPORT HIGHLIGHTS

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REPORT HIGHLIGHTS 2.1 Budget Information

The total available appropriations for the year reached P2.497 trillion for the NG operations, financial subsidy to LGUs, budgetary support to GOCCs, repayment of loan principal and payment of interest and for other purposes.

Of the total appropriations, P1.977 trillion or 79.15 percent was released/allotted to

fund the programs, projects and of various NGAs, including repayment of loan principal, payment of interest, commitments fees and other charges and to cover overdrafts incurred in prior years of P32.79 million. Of the amount of allotments released in calendar year 2010, P1.868 trillion or 94.57 percent was obligated while P35.57 million was incurred without covering allotments. The graphical presentation of appropriations, allotments and obligations is shown in Chart II-1.

Chart II-1 Appropriations, Allotments and Obligations

(in billion pesos)

2.1.1 Appropriations – P2.497 trillion

The aggregate appropriations of P2.497 trillion was sourced from the General Appropriations Act (GAA) under Republic Act (RA) No. 9970 – P1.295 trillion, Automatic Appropriations – P1.061 trillion and beginning balance of continuing appropriations – P141.20 billion.

The appropriations of P1.295 trillion from RA No. 9970 consisted of regular

appropriations – P665.75 billion and Special Purpose Funds (SPF) – P629.62 billion. Included in SPF appropriations is P276.21 billion for interest payment which was not vetoed by the President of the Philippines.

Automatic Appropriations of P1.061 trillion included the following:

2,497.48

1,976.711,868.44

Appropriations Allotments Obligations

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Amount (in million pesos)

1. Debt Service 699,399.56 Principal Repayment 402,395.12 Interest Payment 297,004.44

2. Internal Revenue Allotment (IRA) 265,802.38 3. Customs Duties 46,917.34 4. Retirement and Life Insurance Premium (RLIP) 22,463.11 5. Special Account in the General Fund (SAGF) 25,141.61 6. Grants and Donations 1,038.48 7. Tax Subsidy 126.97 8. National Integrated Protected Areas System (NIPAS) 15.51 9. Sale of Assets 3.49

Total 1,060,908.45

The beginning balance of continuing appropriations under RA No. 9524, previous year’s GAA and other laws, amounting to P141.20 billion authorized to be used in the current year comprised of the following:


1. Unobligated Allotments 101,594.54 Regular Appropriations 59,632.99 Special Purpose Fund 17,755.97 Automatic Appropriations – Others 24,205.59

2. Unreleased Appropriations 39,610.11 Regular Appropriations 20,668.86 Special Purpose Fund 15,027.68 Automatic Appropriations 3,913.57

Special Account in the General Fund 3,812.18 Grants and Donations 56.38 Sale of Assets 45.00

Total 141,204.66 Note: Difference between totals and sum of components is due to rounding off.

Chart II-2 Allotments by Class

(in billion pesos) 2.1.2

460.26

562.66

656.79

297.01

PS MOOE CO FE

2.1.1 Allotments – P1.977 trillion

This year’s aggregate allotments, released by the Department of Budget and Management (DBM) to various NGAs, including subsidies to LGUs and GOCCs and repayment of loan principal and payment of interests, reached P1.977 trillion. By allotment class, the amount is broken down as follows: Personal Services (PS) – P460.26 billion or 23.28 percent; Maintenance

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(MOOE) – P562.69 billion or 28.46 percent; Capital Outlay (CO) – P656.79 billion or 33.23 percent; and Financial Expenses (FE) – P297.01 billion or 15.03 percent as shown in Chart II-2.

The bulk or 61.27 percent of allotments for Capital Outlay or P402.40 billion was

intended for loan principal repayments.

The allotments releases for the year were sourced from RA No. 9970 – P785.69 billion, Automatic Appropriations - P1.060 trillion and forwarding balances of continuing appropriations – P130.79 billion.

Current year’s allotments from RA No. 9970 consist of: Regular Appropriations –

P604.95 billion and SPFs – P180.74 billion. Table II-1 presents the details of allotments by source and allotment class.

Table II-1 Allotments by Source of Appropriations and Allotment Class

(in million pesos)

Source Allotment Class Total PS MOOE CO FE

RA No. 9970 785,693.45 434,045.61 187,929.54 163,714.41 3.90 Regular 604,953.44 309,701.06 145,126.67 150,121.81 3.90SPF 180,740.01 124,344.55 42,802.87 13,592.60 - Automatic 1,060,260.81 24,823.07 330,555.75 407,877.56 297,004.44

Debt Service 699,399.56 - - 402,395.12 297,004.44 Principal 402,395.12 - - 402,395.12 - Interest 297,004.44 297,004.44

IRA 265,802.38 - 265,802.38 - - RLIP 22,433.88 22,433.88 - - - SAGF 24,523.20 2,386.44 17,055.21 5,081.55 - Customs Duties 46,917.34 - 46,917.34 - - Grants and

Donations 1,038.48 2.75 640.07 395.66 - Tax Subsidy 126.97 - 126.52 0.45 - NIPAS 15.51 - 14.23 1.28 - Sale of Assets 3.49 - - 3.49 -

Continuing 130,791.28 1,391.88 44,202.58 85,196.82 - Unobligated 100,825.98 1,390.60 37,233.87 62,201.51 -

Regular 59,606.15 1,356.99 21,775.29 36,473.86 - SPF 17,014.24 1.36 6,067.01 10,945.87 - Automatic -

Others 24,205.59 32.25 9,391.57 14,781.77 Unreleased 29,965.31 1.28 6,968.71 22,995.32 -

Regular 19,946.49 1.28 2,023.36 17,921.85 - SPF 9,960.82 - 4,900.35 5,060.47 - Automatic 58.00 - 45.00 13.00 -

Sale of Assets 45.00 - 45.00 - -

SAGF 13.00 - - 13.00

Grand Total 1,976,745.55 460,260.56 562,687.86 656,788.79 297,008.34 Difference between totals and sum of components is due to rounding off.

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The amount of P699.40 billion or 65.97 percent of the total allotments from automatic appropriations was intended for payments of NG loan principal – P402.40 billion, interest – P292.45 billion and commitment fees, bank charges and other financial charges – P4.56 billion. On the other hand, as subsidy to LGUs, P265.80 billion or 25.07 percent was released representing their share in Internal Revenue collections of the NG.

2.1.3 Obligations – P1.868 trillion

The total obligations incurred by NGAs for the year was reported at P1.868 trillion which is equivalent to 94.52 percent of the aggregate allotment. Of the amount, P35.57 million was not covered by allotment. Table II-2 shows the details of obligations by source of appropriations and expenditure class.

Table II-2 Obligations by Source of Appropriations and Expenditure Class

(in million pesos)

Source Expenditure Class Total PS MOOE CO FE

RA No. 9970 707,226.27 432,105.53 154,988.96 120,127.88 3.90 Regular 539,085.50 308,136.33 119,010.70 111,934.57 3.90 SPF 168,140.77 123,969.19 35,978.26 8,193.31 - Automatic 1,051,529.82 24,535.59 325,613.56 404,377.06 297,003.61 Debt Service 699,354.38 - - 402,350.77 297,003.61

Principal 402,350.77 - - 402,350.77 - Interest 297,003.61 - - - 297,003.61

IRA 265,801.26 - 265,801.26 - - Customs Duties 46,721.54 - 46,721.54 - - RLIP 22,164.40 22,164.40 - - - SAGF 16,693.56 2,368.87 12,594.79 1,729.90 - Grants and

Donations 773.29 2.32 478.35 292.62 - Tax Subsidy 6.32 - 5.87 0.45 - NIPAS 12.83 - 11.74 1.09 - Sale of Assets 2.24 - - 2.24 -

Continuing 109,723.65 921.38 36,138.66 72,663.61 - Unobligated 83,658.18 920.10 29,264.41 53,473.68 -

Regular 51,466.81 915.91 16,897.44 33,653.47 - SPF 14,850.36 1.36 5,438.19 9,410.81 - Automatic -

Others 17,341.00 2.82 6,928.78 10,409.40 - Unreleased 26,065.46 1.28 6,874.25 19,189.93 -

Regular 19,865.53 1.28 1,968.80 17,895.45 - SPF 6,141.93 - 4,860.45 1,281.48 - Automatic 58.00 - 45.00 13.00 - Sale of Assets 45.00 - 45.00 - - SAGF 13.00 - - 13.00 -

Grand Total 1,868,479.74 457,562.50 516,741.18 597,168.56 297,007.50 Difference between totals and sum of components is due to rounding off.

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2.1.4 Unused/Balance of Appropriations – P629.03 billion

At the end of the year, the unused appropriations stood at P629.03 billion consisting of unalloted/unreleased appropriations – P520.73 billion and unobligated allotments – P108.27 billion.

The unalloted/unreleased appropriations represent the difference between the

total appropriations for the year of P2.497 trillion and total allotments released to various national government agencies of P1.977 trillion. Table II-3 shows the balance of unreleased appropriations by source.

Table II-3 Unalloted/Unreleased Appropriations, by Source

(in million pesos) Source Appropriations Allotments Unreleased

Current Year 2,356,273.73 1,845,954.27 510,319.46 RA 9970 1,295,365.29 785,693.46 509,671.83

Regular 665,749.25 604,953.45 60,795.80 SPF 629,616.04 180,740.01 448,876.03

Automatic 1,060,908.45 1,060,260.81 647.63 Debt Service 699,399.56 699,399.56 - IRA 265,802.38 265,802.38 - Customs Duties 46,917.34 46,917.34 - SAGF 25,141.61 24,523.20 618.40 RLIP 22,463.11 22,433.88 29.23 Grants and Donations 1,038.48 1,038.48 - Tax Subsidy 126.97 126.97 - NIPAS 15.51 15.51 - Sale of Assets 3.49 3.49 -

Continuing Appropriations 141,204.66 130,791.28 10,413.37 Alloted 101,594.54 100,825.98 768.57

Regular 59,632.99 59,606.15 26.84 SPF 17,755.97 17,014.24 741.73 Automatic 24,205.59 24,205.59 -

Unalloted 39,610.11 29,965.31 9,644.80 Regular 20,668.87 19,946.49 722.37 SPF 15,027.68 9,960.82 5,066.86 Automatic 3,913.57 58.00 3,855.57

Total 2,497,478.39 1,976,745.55 520,732.84 Difference between totals and sum of components is due to rounding off.

The unobligated balance of allotments amounting to P108.27 billion refers to

the difference between total allotments of P1.977 trillion and obligations covered by allotments of P1.868 trillion. The unobligated balance of allotments by source is presented in Table II-4.

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Table II-4 Unobligated Allotments, by Source (in million pesos)

Source Allotments Obligations Balance Current Year 1,845,921.48 1,758,720.52 87,200.96

RA 9970 785,692.69 707,193.03 78,499.66 Regular 604,952.68 539,053.23 65,899.46 SPF 180,740.01 168,139.80 12,600.21

Automatic 1,060,228.79 1,051,527.49 8,701.30 Debt Service 699,399.57 699,354.38 45.19 IRA 265,802.38 265,801.26 1.12 Customs Duties 46,917.34 46,721.54 195.80 SAGF 24,491.17 16,692.24 7,798.93 RLIP 22,433.88 22,163.39 270.49 Grants and Donations 1,038.48 773.29 265.19 Tax Subsidy 126.97 6.32 120.65 NIPAS 15.51 12.83 2.68 Sale of Assets 3.49 2.24 1.25

Continuing Appropriations 130,791.28 109,723.65 21,067.64 Alloted 100,825.98 83,658.18 17,167.80

Regular 59,606.15 51,466.81 8,139.33 SPF 17,014.24 14,850.36 2,163.88 Automatic 24,205.59 17,341.00 6,864.58

Unalloted 29,965.31 26,065.46 3,899.84 Regular 19,946.49 19,865.53 80.96 SPF 9,960.82 6,141.93 3,818.89 Automatic 58.00 58.00 -

Total 1,976,712.76 1,868,444.16 108,268.60

Difference between totals and sum of components is due to rounding off.

Of the total unobligated allotments for the current year, P2.25 billion pertains to PS, P37.86 billion to MOOE billion and P47.09 billion to CO. The balance for MOOE and CO were retained as continuing allotments which are authorized to be used in the following year while those for PS were reverted in accordance with the existing laws.

2.2 Financial Condition

Chart II-3 Assets, Liabilities and Equity (in trillion pesos)

3.139

2.880

5.018

4.648

(1.880)

(1.769)

Assets Liabilities Equity

2010 2009

As of the end of calendar year 2010, the NG had aggregate assets of P3.139 trillion and total liabilities of P5.018 trillion resulting to a negative government equity of P1.880 trillion. Compared to last year, all components of Balance Sheet increased as shown in Chart II-3.

11

2.2.1 Assets – P3.139 trillion

Total assets of P3.139 trillion increased by P259.34 billion or 9.01 percent more than last year’s P2.880 trillion which was the result of the combined growth of all its components. The graphical presentation of comparative composition of assets is shown in Chart II-4.

Chart II-4 Comparative Composition of Assets

(in billion pesos)

Current Assets increased by P21.35 billion due to increases in Prepayments and Inventories amounting to P36.22 billion and P2.53 billion, respectively. It was partially offset by the combined decrease in Cash, Receivables and Other Current Assets of P17.41 billion.

Investments’ growth of P106.69 billion this year was brought about by the

increments in Sinking Fund contributions – P104.93 billion or 98.35 percent and in Investment in Securities – P1.76 billion or 1.65 percent

The increase in Property, Plant and Equipment of P129.03 billion was

contributed mainly by Construction in Progress with P122.63 billion increment.

2.2.2 Liabilities – P5.018 trillion

Total liabilities increased by P370.23 billion or 7.96 percent from P4.648 trillion in last year to P5.018 trillion primarily due to growth in Long Term Liabilities of P476.88 billion offset by the decreases in Current Liabilities and Deferred Credits by P99.84 billion and P6.81 billion, respectively as shown in Table II-5.

1,203.32

842.10985.8

107.64

1,181.98

735.41856.77

105.37

Current Assets Investments Property, Plantand Equipment

Other Assets

2009

2010

12

Table II-5 Comparative Composition of Liabilities

Particulars Amount (in billion pesos)

Percent2010 2009 Increase (Decrease)

Long Term Liabilities 4,178.79 3,701.91 476.88 12.88 Bonds Payable 3,345.79 2,924.77 421.01 14.39

Domestic 2,174.70 1,823.76 350.94 19.24 Foreign 1,171.08 1,101.01 70.07 6.36

Loans Payable 832.97 777.01 55.96 7.20 Foreign 829.45 766.68 62.78 8.19 Domestic 3.52 10.34 (6.82) (65.93)

Mortgage Payable 0.01 0.01 00.00 (6.00) Other Long-Term

Liabilities 0.01 0.10 (0.09)

(87.89) Current Liabilities 813.02 912.86 (99.84) (10.94)

Loans Payable, Domestic, Current

553.22

648.07

(94.85)

(14.64)

Payable Accounts 122.37 112.87 9.50 8.42 Other Liability Accounts 80.40 78.63 1.78 2.26 Inter-Agency Payables 49.82 67.29 (17.48) (25.97) Intra-Agency Payables 7.21 6.00 1.21 20.14

Deferred Credits Other Deferred Credits 26.63 33.45 (6.81) (20.37)

Total 5,018.44 4,648.21 370.23 7.96


Of the total Long Term Liabilities, P4.179 trillion or 99.95 percent was

reported by the BTr-GOP – DOF, being the agency tasked to control and service NG’s public debt, both domestic or foreign.

2.2.3 Government Equity – (P1.880 trillion)

As in previous years, liabilities of the NG exceeded its assets resulting to

negative balance of P1.880 trillion in government equity. This year’s level posted an increase of P110.89 billion or 6.27 per cent compared to negative P1.769 trillion reported in 2009.

The increase in the negative balance was brought about by net loss from

current operations – P24.08 billion, adjustments related to prior years’ transactions – P47.31 billion, completed public infrastructures – P41.51 billion and reforestation projects – P748.90 million which were transferred to Registry of Public Infrastructures and Registry of Reforestation Projects, respectively, and remittance to National Treasury for disposal of assets – P3.86 million.

2.3 Results of Operations

For the year ended, the NG managed to generate a total income/revenue of P1.244

trillion from operations and incurred current operating expenses amounting to P637.46

13

billion attaining a net operating income of P606.22 billion. However, after deducting the subsidies to LGUs, GOCCs and NGOs/POs of P340.10 billion, financial expenses of P304.52 billion and net subsidy to NGAs of P35.47 billion and adding other gains of P49.78 billion, the government suffered a net loss of P24.08 billion as shown in Chart II-5.

Chart II-5 Results of Current Operations

(in billion pesos)

2.3.1 Income/Revenue – P 1.244 trillion

This year’s income/revenue of P1.244 trillion generated from taxes – P1.091 trillion and non-taxes – P152.77 billion grew by P88.59 billion or 7.67 percent compared to previous year’s P1.155 trillion. However, notwithstanding the increase posted over the year, actual income/revenue suffered a set back as it fell short by P50.74 billion compared to the projected amount of P1.294 trillion1.

The NG failed to realize its projected tax revenue of P1.153 trillion2 by P62.30

billion or 5.40 percent while general income of P152.77 billion exhibited a favorable variance of P11.57 billion or 8.19 percent over the estimated amount of P141.20 billion3.

Tax revenue of P1.091 trillion posted an increase of P111.28 billion compared

to last year’s figure of P979.63 billion. This year’s tax revenue came from the following sources:

Amount (in million pesos) Import Duties 215,812.05 Income Tax - Corporations 215,052.31

1 Table C.1, Revenue Program, by Source, 2009-2011, page 217, 2011 Budget of Expenditures and Sources of

Financing, DBM. 2 Ibid 3 Ibid

1,243.681,155.08

637.46583.99 606.22

571.09

Income/Revenue Current OperatingExpenses

Income fromCurrent Operations

2010 2009

14

Income Tax - Individuals 152,252.69 Value Added Tax 133,759.81 Final Tax 109,144.28 Excise Tax on Articles 67,593.99 Value Added Tax - Expanded 46,705.87 Business Tax 43,803.19 Documentary Stamp Tax 42,501.60 Other National Taxes 36,752.47 Capital Gains Tax 12,998.05 Motor Vehicles Users Charge 9,295.98 Fines and Penalties - National Taxes 2,084.35 Estate Tax 1,346.99 Others 1,805.68

Total 1,090,909.32 Note: Difference between totals and sum of components is due to rounding off.

On the other hand, general income decreased by P22.69 billion or 12.93

percent from P175.46 billion in 2009 to P152.77 billion this year. It is composed of Service Income – P74.16 billion, Other Income – P67.17 billion, Business Income – P10.98 billion and Permits and Licenses – P459.62 million.

2.3.2 Current Operating Expenses – P637.46 billion

During the year, the NG reported total current operating expenses of P637.46

billion, or an increase of P53.47 billion or 9.16 percent over last year’s P583.99 billion. The breakdown of current operating expenses is as follows: PS – P464.22 billion or 72.82 percent and MOOE – P173.24 billion or 27.18 percent.

Expenses for PS increased by P58.27 billion primarily due to the

implementation of the first and second tranches of modified Salary Schedule for civilian personnel and the modified Base Pay Schedule for military and uniformed personnel both provided under the Senate and House of Representatives Joint Resolution No. 4 approved on June 17, 2009 and as mandated under Executive Order No. 900 dated June 23, 2010.

Despite increase over the past year, actual current operating expenses were

lower by P678.72 billion or 51.57 percent than the estimated amount of P1.316 trillion4.

2.3.3 Income from Operations – P606.22 billion

The current operation of the government for calendar year 2010 resulted to a

net income of P606.22 billion exhibiting 6.15 percent growth or P35.13 billion from last year’s P571.09 billion.

4 Table B.1, Expenditure Program, by Object, CY 2009-2011, pp. 12-15, 2011Budget of Expenditures and

Sources of Financing, DBM.

15

2.3.4 Subsidy to LGUs, GOCCs and NGOs/POs – P340.10 billion

The breakdown of the Subsidy to LGUs, GOCCs and NGOs/POs are as follows: LGUs (net) – P281.55 billion or 82.78 percent, GOCCs – P57.10 billion or 16.79 percent, and NGOs/POs – P1.44 billion or 0.42 percent.

2.3.5 Financial Expenses – P304.52 billion

The total Financial Expenses for the year includes Interest Expenses – P292.74

billion, Documentary Stamp Expenses – P7.06 billion and Other Financial Charges, Commitment Fees and Bank Charges – P4.71 billion

2.3.6 Net Subsidy to National Government Agencies – P35.47 billion

Net subsidy to NGAs of P35.47 billion is the difference between total Subsidy

from National Government of P1.128 trillion and total Subsidy to National Government Agencies of P1.164 trillion. The account Subsidy from National Government Agencies is credited for the receipt of NCA, Non-Cash Availment Authority (NCAA), Working Fund and constructive receipt of Cash Disbursement Ceiling (CDC) by Foreign Service Posts of the DFA. It is also credited for the Tax Remittance Advice Issued by the BIR and for tax subsidies by NG to GOCCS.

Account Subsidy to National Government Agencies is debited, among others,

replenishments to AGSBS for negotiated MDS checks and other payments of accounts of NGAs, constructive issuance of NCAA for advanced payments made to foreign creditors and donors; and constructive issuance of CDC to Foreign Service Posts based on their submitted Report of Income.

2.3.7 Net Income (Loss) – (P24.08 billion)

The NG’s operations for the year ended, resulted to a net loss of P24.08

billion. Despite the increases in aggregate expenses of P82.27 billion and subsidy to NGAs of P30.62 billion, the impact was cushioned by this year’s growth of P88.59 billion in revenue and higher net gain of P84.65 billion which resulted to a lower Net Loss of P24.08 billion.

2.4 Cash Flows

The NG ended the year with cash balance of P381.27 billion, out of which P278.38 billion was reported under the NG Books while P102.89 billion was under the RA Books. The cash flows were classified by operating, investing and financing activities as shown in Chart II-6.

16

Chart II-6 Cash Flows, by Activities (in billion pesos)

2.4.1 Cash Inflows – P4.524 trillion

The total inflows of P4.524 trillion came from operating activities – P2.533 trillion, investing activities – P386.27 billion and financing activities – P1.604 trillion. These were consisted mainly of proceeds from domestic and foreign loans – P1.604 trillion, collections of revenue/income – P1.130 trillion, receipt of NCA – P1.111 trillion and proceeds from matured investments – P333.02 billion.

2.4.2 Cash Outflows – P4.481 trillion

The aggregate cash outflows reached P4.481 trillion, of which 92.23 percent

was composed of replenishment of negotiated MDS checks – P1.069 trillion, payment of long term liabilities – P1.332 trillion, payment of operating expenses – P505.31 billion, investment – P431.65 billion, grant of subsidies and donations – P306.87 billion, payment of interest expense – P236.61 billion, purchase/construction of PPE/Infrastructure – P132.21 billion and remittance of personnel benefits contributions and mandatory deductions to BIR, GSIS, PAGIBIG, etc. – P119.39 billion.

2.5 National Government Debt

The outstanding debt balance of NG rose from P4.344 trillion in 2009 to P4.730 trillion at the end of the year. Of the total, P2.730 trillion was from domestic sources and P2 trillion from foreign sources.

Borrowings from domestic sources representing 57.72 percent of the total debt of

the NG, increased by P249.40 billion while foreign debt grew by P136.55 billion.

For the last nine years, NG debt showed an average growth rate of 7.26 percent or P233.65 million per year.

2,53

3.20

2,

348

.24

184.96

386.

27

564.

33

(178.06)

1,60

4.44

1,

568.

78

35.66

Operating Activities Investing Activities Financing Activities

Inflows Outflows Cash Provided(Used)

III. KEEPING THE GENERAL

ACCOUNTS OF THE NATIONAL GOVERNMENT

17

KEEPING OF THE GENERAL ACCOUNTS OF THE NATIONAL GOVERNMENT

3.1 Legal Framework

Article XII-D, Section 2 (1) of the 1973 Philippine Constitution and Article IX-D, Section 2 of the 1987 Philippine Constitution state:

“The Commission on Audit shall have the power, xxxxx. It shall keep the general accounts of the Government and, for such period as may be provided by law, preserve the vouchers and other supporting papers pertaining thereto.”

Subsidiary to this constitutional mandate are the following relevant provisions in PD No.1445, State Audit Code of the Philippines:

Section 12 (2) states one of the functions of COA Accountancy Office

(now Government Accountancy Office) as “Verify appropriations of national agencies and control fund releases thereto;”

Section 25 (4) of the Statements of Objectives under Jurisdiction,

Powers and Functions of the Commission provides: “To promulgate auditing and accounting rules and regulations so as to facilitate the keeping, and enhance the information value, of the accounts of the government.”

Said function of the Commission was further strengthened under COA Resolution No. 2008-012 dated October 10, 2008, COA Restructuring, where the Government Accountancy Sector was tasked to keep the general accounts of the government.

3.2 Historical Perspective

Traditionally, the constitutional mandate of the COA to keep the general accounts

of the government was construed to mean the recording and preserving of the documents supporting the financial transactions affecting the control accounts of the government such as those pertaining to the Treasury and Surplus accounts. Under this interpretation, the Commission shall continue to be responsible for recording the budget transactions of the NG to keep track of the status of appropriations authorized by the Congress of the Philippines. The same was also referred as COA’s limited accounting function provided under the Philippine Constitution.

The General Accounts were referred as the: 1) Appropriations

Allotted/Expenditures, 2) Current Surplus Unappropriated/Earned Surplus and Reserves, 3) Current Surplus Appropriated and 4) National Clearing Accounts. The transactions were recorded in interlocking accounts with responding journal entries in the books of accounts of various NGAs and the BTr.

18

3.3 Operational Definition In the year 2002, in an attempt to simplify the old government accounting

system, the COA invoked its constitutional mandate of exclusive authority to promulgate accounting and auditing rules and regulations and issued COA Circular No. 2001-004 dated October 30, 2001 prescribing the NGAS for all NGAs. The NGAS aims to 1) simplify government accounting; 2) conform with applicable laws, COA accounting policies, rules and regulations and to international accounting standards; and 3) generate periodic and relevant financial reports for better monitoring of performance.

Pursuant to the objectives of NGAS, the keeping of the general accounts was

simplified by eliminating the recording and journalization of budgetary transactions from the books of accounts of agencies and the COA. The following procedures were instead initiated:

a. Tracking of the NG budget and its utilization through the maintenance by the

COA-GAS of the RAPAL and RASPF where all appropriations per General Appropriation Acts (GAA) and Special Laws and allotment releases based on budget documents (ABMs and SAROs) issued by the DBM are recorded;

b. Recording and monitoring of allotment releases to and obligations incurred by

NGAs through the maintenance of the Registry of Allotments and Obligations by allotment class, by program, project and activity;

c. Preparation of the Statement of Appropriations, Allotments and Balances

(SAAB) by COA-GAS and SAOB by NGAs based on respective registries maintained;

d. Periodic reconciliation of allotments per COA SAAB, NGAs’ SAOB and DBM

records, and coordination for discrepancies and other concerns;

e. Preparation of yearend SAAOB, by department/office and the Consolidated SAAOB of the NG which form part of the AFR; and

f. Monitoring of balances of unreleased appropriations and unobligated allotments

for Regular and SPF, for retention and utilization in the succeeding year. Keeping the General Accounts is similar to auditing the overall budget of the

NG. The outputs coming from the above procedures are reflected in the statements and schedules to account for the National Budget which are presented in the AFR.

3.4 Appropriations, Allotments, Obligations and Balances

An appropriation is an authorization under past Acts of Congress, PDs or other legislative enactments, for payments to be made with funds of the government under specified condition and/or for specified purpose. The GAA contains the total new appropriations for a particular year consisting of regular appropriations intended to finance the programmed activities of various agencies of the NG and SPFs to support special projects and programs under the discretion of the President.

19

In any given year, there are two budgets being put into operations namely: the GAA for the current year and the balances of prior year’s appropriations which are set by law to be available as continuing appropriations until the end of the following year. In addition to these, standing appropriation laws which provide automatic appropriations also form part of the total NG budget for the year.

In a letter dated November 25, 2010, the Office of the President granted the DBM

authority to consolidate the calendar year 2010 savings/unutilized balances and its realignment to: a) provide funding for activities that were not anticipated during budget preparation; b) augment additional requirements of on-going projects; and c) provide funding for deficiencies under SPFs (e.g. PDAF, Calamity Fund, Contingent Fund).

Table III-1 shows the summary of appropriations, allotments, obligations incurred

and balances for the year which are separately discussed in details in the succeeding pages of this report. The details are presented by appropriation source in Schedules 1 and 2, and by department/agency in Schedules 3, and 4, Volume I-B.

Table III-1 Appropriations, Allotments, Obligations and Balances

(in million pesos)

Particulars Appropria-tions* Allotments**

Unreleased Appropria-

tions Obligations Unobligated

Allotments

General Appropriations Act * (R.A. 9970) 1,295,365.29 785,693.46 509,671.83 707,193.03

78,500.43

Regular Appropriations 665,749.25 604,953.45 60,795.80 539,053.23 65,900.22 Personal Services** 309,858.26 309,701.06 157.20 308,110.86 1,590.20 Maintenance and Other Operating Expenses 165,859.68 145,126.67 20,733.01 119,003.90 26,122.77 Financial Expenses 3.90 3.90 - 3.90 - Capital Outlays 193,493.89 150,121.81 43,372.08 111,934.57 38,187.24 Overall Savings (3,466.48) - (3,466.48) - - Special Purpose Funds 629,616.04 180,740.01 448,876.03 168,139.80 12,600.21

Debt Service- Interest 276,212.00 - 276,212.00 - - Unprogrammed Fund 118,913.95 5,862.02 113,051.93 2,193.00 3,669.01 Miscellaneous Personnel Benefits Fund 62,511.83 62,511.83 - 62,173.59 338.24 Pension and Gratuity Fund 61,802.24 61,802.24 - 61,764.42 37.81

Allocations to LGUs 29,686.62 18,837.24 10,849.37 15,831.64 3,005.60 Budgetary Support to GOCCs 20,533.36 16,798.27 3,735.10 16,798.27 - Priority Development Assistance Fund 15,261.21 8,593.49 6,667.72 5,188.19 3,405.30 AFP Modernization

Program 5,000.00 - 5,000.00 - - Calamity Fund 3,750.00 1,669.30 2,080.70 986.75 682.55

DepEd School Building Program

2,000.00 1,853.87 146.13 1,160.56 693.31

International Commitments Fund 1,677.22 1,508.40 168.81 1,128.54 379.86 E-Government Fund 1,000.00 393.95 606.05 55.74 338.22 Contingent Fund 1,000.00 909.40 90.60 859.10 50.30 National Unification Fund 50.00 - 50.00 - -

20

(Table III-1 continued)

Particulars Appropria-tions* Allotments**

Unreleased Appropria-

tions Obligations Unobligated

Allotments

Overall Savings 30,217.62 - 30,217.62 - - Automatic Appropriations 1,060,908.45 1,060,260.81 647.63 1,051,527.49 8,733.33 Debt Service – Principal 402,395.12 402,395.12 - 402,350.77 44.35 Debt Service – Interest 297,004.44 297,004.44 - 297,003.61 0.84 IRA 265,802.38 265,802.38 - 265,801.26 1.12

Other Automatic Appropriations** 95,706.51 95,058.87 647.63 86,371.85 8,687.02

Total Current Year’s Appropriations 2,356,273.73 1,845,954.27 510,319.46 1,758,720.52 87,233.75Continuing Appropriations (R.A. 9524) Unobligated Allotments 101,594.54 100,825.98 768.57 83,658.18 17,167.80 Personal Services 1,390.60 1,390.60 - 920.10 470.50

Maintenance and Other Operating Expenses 37,262.27 37,233.87 28.41 29,264.41 7,969.46 Capital Outlays 62,941.67 62,201.51 740.16 53,473.68 8,727.83Unreleased Appropriations 39,610.11 29,965.31 9,644.80 26,065.46 3,899.84 Personal Services 1.28 1.28 - 1.28 -

Maintenance and Other Operating Expenses 13,312.25 6,968.71 6,343.55 6,874.25 94.46 Capital Outlays 26,296.58 22,995.32 3,301.26 19,189.93 3,805.38

Total Continuing Appropriations 141,204.66 130,791.28 10,413.37 109,723.65 21,067.64Total Appropriations 2,497,478.39 1,976,745.55 520,732.84 1,868,444.16 108,301.39* Net of P9.04 billion transferred to Automatic Appropriations. ** Includes allotments to cover prior year’s overdraft of P0 .76 million in regular appropriations and P32.03 million in automatic appropriations. Difference between totals and sum of components is due to rounding off.

3.4.1 Appropriations – P2.497 trillion For the year, the total NG

appropriations stood at P2.497 trillion higher by P162.00 billion or 6.94 percent over last year’s total of P2.335 trillion. Regular Appropriations for programmed activities of departments/agencies dropped by P123.11 billion or 15.61 percent from P788.86 billion in the previous period, while allocations for Special Purpose Funds increased by P306.58 billion or 94.91 percent from last year’s P323.03 billion. The significant increase in this year’s appropriations for SPF was due to Debt Service – Interest of P276.21 billion

1,066.18

830.35

1,304.41

1,170.33

800

900

1,000

1,100

1,200

1,300

1,400

FY 2010 FY 2009 FY 2008 FY 2007

Chart III-1 NG Budgets for FYs 2007 to 2010 (in billion pesos)

21

which in previous years was directly vetoed by the President. Chart III-1 presents the NG budget based on GAA for the years 2007 to 2010 and Table III-2 shows the details and comparison of the appropriations in the last two years.

Table III-2 Comparative Details of Appropriations

Particulars Amount (in million pesos)

Percent 2010* 2009** Increase / (Decrease)

General Appropriations Act * 1,295,365.29 1,111,899.88 183,465.41 16.50 Regular 665,749.25 788,864.67 (123,115.42) (15.61) SPFs 629,616.04 323,035.21 306,580.83 94.91 Supplemental Appropriations - 11,301.79 (11,301.79) (100.00)Automatic Appropriations 1,060,908.45 994,280.33 66,628.12 6.70 Debt Service – Principal 402,395.12 342,099.31 60,295.81 17.63 Debt Service – Interest 297,004.44 278,867.04 18,137.41 6.50 IRA 265,802.38 249,988.87 15,813.51 6.33 Other Automatic Appropriations 95,706.51 123,325.11 (27,618.60) (22.39)

Total Current Year’s Appropriations 2,356,273.73 2,117,482.00 238,791.73 11.28Continuing Appropriations Unobligated Allotments 101,594.54 84,250.14 17,344.40 20.59 Unreleased Appropriations 39,610.11 133,743.12 (94,133.01) (70.38)

Total Continuing Appropriations 141,204.66 217,993.26 (76,788.60) (35.23)Total 2,497,478.39 2,335,475.26 162,003.13 6.94

* Net of P9.04 billion transferred to Automatic Appropriations **Includes R.A. 9498, as Re-enacted and Supplemental Budget Difference between totals and sum of components is due to rounding off.

3.4.1.1 General Appropriations Act (R.A. No. 9970) – P1.295 trillion

The year 2010 is historical as it was when the nation elected a new set of leaders in

the first nationwide automated elections. In the middle of the year, peaceful transitions of political powers from the previous administration to the newly elected leadership was seen and as the year ended, fiscal reforms through priority programs that have direct bearing on social development were launched by the Aquino Administration.

The GAA of the year 2010, R.A. 9970 was the last appropriations bill signed into law by then President Gloria M. Arroyo. In her Veto Message, she described the GAA as the culmination of her Administration’s steadfast commitment to reform and responsible development. It was set and allocated in a bid to stir economic activity in the midst of a global financial crisis. To be operative, it was published in the Official Gazette in February 12 of the same year as required under Section 2 of the New Civil Code of the Philippines. Section 98, General Provisions of R.A. 9970 states that it shall take effect on January 1, 2010.

Originally, the GAA was approved with total new appropriations for the calendar

year 2010 at P1.304 trillion including P276.21 billion or 21.17 percent allocated for Debt Service – Interest Payments which was not vetoed by the President. Of the total amount, P8.91 billion or 0.68 percent was transferred to the CARP, SAGF, from the regular appropriations of the DAR-OSEC as provided in Special Provision No. 2 for DAR under

22

the GAA. The remaining P131.50 million represents transfers from regular appropriations of various departments to automatic appropriations. Thus, the adjusted appropriations of P1.295 trillion is broken down as follows: regular appropriations – P665.75 billion or 51.39 percent for programmed activities of various departments/offices of the NG and SPFs – P629.62 billion or 48.61 percent.

Regular Appropriations – P665.75 billion

Adjusted appropriations of P665.75 billion for programmed activities of various agencies is lower by P123.11 billion or 15.61 percent than last year’s P788.86 billion.

The total regular appropriations of 27 departments/offices decreased by

P168.12 billion or 22.17 percent while those for the seven departments/offices increased by P48.47 billion or 157.88 percent. The appropriations of the DA increased by P34.85 billion, almost eight times higher than last year’s P4.40 billion while the DAR had an increase of P5.08 billion or 185.11 percent from last year’s regular budget of P2.74 billion. The rise in appropriations of these two departments was due to the inclusion of the Agriculture and Fisheries Modernization Program, and CARP, respectively, in the regular budget of the DA and the DAR as provided under GAA Special Provision No. 3 for the DAR and Special Provision No.1 for DA-OSEC. In previous years, both programs were budgeted under SPFs.

The DepEd got the biggest budget amounting to P157.41 billion or 23.64

percent, followed by DPWH with P141.68 billion or 21.28 percent and DILG at P65.74 billion or 9.87 percent. Comparative details of regular appropriations by department/office are shown in Table III-3.

Table III-3 Comparative Regular Appropriations By Department/Office

Department/Office Amount (in million pesos)

Percent 2010 2009* Increase / (Decrease)

Education 157,409.15 196,221.75 (38,812.60) (19.78)Public Works and Highways 141,681.93 194,098.97 (52,417.04) (27.01)Interior and Local Government 65,744.85 78,246.37 (12,501.52) (15.98)National Defense 57,682.20 70,431.27 (12,749.07) (18.10)Agriculture 39,241.61 4,393.83 34,847.78 793.11Health 25,703.11 31,337.41 (5,634.30) (17.98)State Universities and Colleges 21,761.47 27,308.43 (5,546.96) (20.31)Transportation and Communications 16,547.04 32,067.86 (15,520.82) (48.40)Social Welfare and Development 15,313.52 12,838.89 2,474.63 19.27The Judiciary 12,711.16 15,333.30 (2,622.14) (17.10)Foreign Affairs 12,443.26 14,491.09 (2,047.83) (14.13)Environment and Natural Resources 12,221.08 14,687.57 (2,466.49) (16.79)Commission on Elections 10,432.68 5,784.25 4,648.43 80.36Finance 9,261.87 14,231.76 (4,969.89) (34.92)Autonomous Region in Muslim Mindanao

9,178.36

11,610.91

(2,432.55) (20.95)

23




Congress of the Philippines 8,880.01 8,939.21 (59.20) (0.66)Agrarian Reform 7,820.23 2,742.92 5,077.31 185.11Justice 6,424.48 7,942.84 (1,518.36) (19.12)Labor and Employment 6,143.83 9,163.38 (3,019.55) (32.95)Other Executive Offices 5,456.31 6,020.34 (564.03) (9.37)Science and Technology 5,313.94 6,675.29 (1,361.35) (20.39)Office of the President 4,827.38 5,219.31 (391.93) (7.51)National Economic and Development Authority 4,021.80

2,650.74 1,371.06 51.72

Commission on Audit 3,825.29 4,799.87 (974.58) (20.30)Trade and Industry 2,443.73 3,429.52 (985.79) (28.74)Tourism 1,578.09 2,368.41 (790.32) (33.37)Budget and Management 1,215.17 1,174.14 41.03 3.49Office of the Press Secretary 1,119.49 1,113.57 5.92 0.53Office of the Ombudsman 1,064.27 1,568.30 (504.03) (32.14)Energy 665.71 694.62 (28.92) (4.16)Civil Service Commission 610.51 742.95 (132.44) (17.83)Commission on Human Rights 285.89 314.36 (28.47) (9.06)Office of the Vice-President 185.02 219.45 (34.43) (15.69)Joint Legislative-Executive Councils 1.30 1.77 (0.47) (26.55)Total Regular Appropriations before Overall Savings 669,215.73 788,864.65 (119,648.92) (15.17)Overall Savings (3,466.48) - (3,466.48) Total Regular Appropriations including Overall Savings 665,749.25 788,864.65 (123,115.40) (15.61) *Includes R.A. 9524, as Re-enacted Difference between totals and sum of components is due to rounding off.

Special Purpose Funds – P629.62 billion

The SPFs are funds appropriated in pursuit of specific plans and activities of the NG. Unlike other funds in the budget that are allocated for specific government agencies which are expected to show clear accountability over their use, SPFs are not under the accountability of any particular government agency/office or unit. Instead, said funds form part of the national budget that the President allocates for special programs and projects. In recent years and especially during the nine-year term of the Arroyo administration, allocations for SPFs have risen despite the World Bank urging that they be substantially reduced. Based on COA records, SPFs comprised about 35.08 percent of the P1.066 trillion national budget for 2008, then down to about 28.75 percent of the P1.170 trillion budget for 2009, and for 2010, it represents 48.27 percent or P629.62 billion of the total new appropriations of P1.304 trillion. The significant increase in this year’s appropriations for SPFs was due to inclusion of Debt Service – Interest of P276.21 billion which in previous years was directly vetoed by the President. For this year, however, it was not vetoed, hence, accounted for as part of total SPF appropriations.

24

As presented in Table III-4, total appropriations for SPFs amounted to P629.62 billion, comprising of P599.40 billion for individual components of the SPFs and P30.22 billion overall savings for year 2010 which came from unutilized balances of agency appropriations consolidated by the DBM pursuant to OP authority dated November 25, 2010.

Table III-4 Appropriations for Special Purpose Funds



Debt Service- Interest 276,212.00 - 276,212.00 Unprogrammed Fund 118,913.95 77,521.21 41,392.73 53.40Miscellaneous Personnel Benefits

Fund

62,511.83

27,541.56

34,970.27 126.97Pension and Gratuity Fund 61,802.24 84,144.18 (22,341.94) (26.55)Allocations to Local Government

Units

29,686.62

25,827.26

3,859.36 14.94Budgetary Support to GOCCs 20,533.36 22,137.82 (1,604.46) (7.25)Priority Development Assistance

Fund

15,261.21

10,354.12

4,907.09 47.39AFP Modernization Program 5,000.00 5,000.00 - - Calamity Fund 3,750.00 2,227.86 1,522.14 68.32DepEd School Building Program 2,000.00 2,000.00 - - International Commitments Fund 1,677.22 2,854.62 (1,177.41) (41.25)General Fund Adjustments - 1,000.00 (1,000.00) (100.00) E-Government Fund 1,000.00 1,226.83 (226.83) (18.49)Contingent Fund 1,000.00 1,042.48 (42.48) (4.07)National Unification Fund 50.00 50.00 - - Agriculture and Fisheries Program - 50,037.27 (50,037.27) (100.00)Economic Stimulus Fund - 10,070.00 (10,070.00) (100.00) Total SPF before Overall Savings 599,398.42 323,035.21 276,363.21 85.55Overall Savings 30,217.62 - 30,217.62 100.00Total SPF including Overall

Savings for FY 2010 629,616.04 323,035.21

306,580.83 94.91*Includes R.A. 9524, as Re-enacted Difference between totals and sum of components is due to rounding off.

Unprogrammed Fund – P118.91 billion

Unprogrammed Fund is a standby appropriation authorizing additional agency

expenditures for priority programs and projects on top of the original budget. Subject to Presidential discretion, this fund shall be released only when the revenue collections exceed the original revenue targets submitted by the President pursuant to Section 22, Article VII of the 1987 Philippine Constitution, including savings generated from programmed appropriations for the year.

This year’s Unprogrammed Fund accounted for 9.12 percent or P118.91

billion of the total new appropriations for the year of P1.304 trillion, exhibiting an increase of 53.40 percent from P77.52 billion in 2009. Presented in Table III-5 are the details of Unprogrammed Fund.

25

Table III-5 Appropriations for Unprogrammed Fund


Percent2010 2009* Increase / (Decrease)

Support to Calamity Related Programs and Projects

50,000.00

-

50,000.00

Support for the Infrastructure Projects and Social Programs

27,500.00

23,500.00

4,000.00

17.02

Budgetary Support to Government-Owned and/or Controlled Corporations

19,431.30

31,387.81

(11,956.51)

(38.09)

General Fund Adjustments 6,500.00 5,500.00 1,000.00 18.18 Collective Negotiation Agreement 8,487.81 - 8,487.81 Payment of Total Administrative

Disability Pension

3,000.00

3,000.00

- -Strategic Government Reforms 2,000.00 2,000.00 - -Support to Foreign-Assisted Projects 1,994.84 12,133.40 (10,138.56) (83.56)

Total 118,913.95 77,521.21 41,392.74 53.40 *Includes R.A. 9524, as Reenacted Difference between totals and sum of components is due to rounding off.

New appropriations of P50 billion for Support to Calamity Related Programs

and Projects was included in this year’s Unprogrammed Fund to support the repair, rehabilitation and reconstruction programs and projects in areas affected by natural calamities. Collective Negotiation Agreement of P8.49 billion was also integrated in this year’s Unprogrammed Fund.

Miscellaneous Personnel Benefits Fund (MPBF) – P62.51 billion

The original appropriations for MPBF was P74.17 billion higher by P46.63

billion or 169.29 percent over last year’s P27.54 billion. The increase was attributed to the funding requirement for the implementation of the second tranche salary increase authorized under Senate and House of Representatives Joint Resolution No. 4, s. 2009, as implemented by E.O. No. 811, s. 2009 for the full year for those covered by the salary increase effective July 1, 2009 and for the salary increase of the newly-elected President, Vice-President and Members of the Congress effective July 1, 2010. However, pursuant to OP authority dated November 25, 2010 to consolidate the calendar year 2010 savings/unutilized balances and its realignment, P11.65 billion was transferred to overall savings to fund new activities that were not anticipated during budget preparation, augment additional requirements of on-going priority projects and fund deficiencies under SPFs.

Pension and Gratuity Fund – P61.80 billion

Pension and Gratuity Fund is used for the payment of pension, retirement and terminal leave benefits, incentive package for employees availing of the Rationalization Program per E.O. No. 366, s. 2004, and payment of monetization of leave credits. Of the original appropriations of P79.96 billion which represents 12.70 percent of the total SPFs, P18.16 billion was transferred to overall savings pursuant to earlier cited OP authority.

26

Allocations to Local Government Units (ALGU) – P29.69 billion

The ALGU represents 2.43 percent of the current operating budget for the

year, of which P14.16 billion was allocated for Special Shares of Local Government Units in the Proceeds of National Taxes defined under Chapter 1, Section 285 of R.A. 7160, otherwise known as the Local Government Code of 1991.

Appropriations for ALGU was originally approved at P31.69 billion, however,

the budgeted amount for Kalayaan Barangay Program Fund and Kilos Asenso Support Fund totaling P2 billion was transferred to the overall savings.

Among the components of ALGU, the Municipal Development Fund got the

highest percentage increase in appropriations at P820.66 million or 148.33 percent over last year’s allocation of P553.26 million. Administered by the Municipal Development Fund Office (MDFO) under the DOF pursuant to PD No. 1914, COA-DOF-DBM Joint Circular No. 6-87 dated August 17, 1987 and E.O. No. 41, s. 1998, this Fund including principal and interest payments, shall be used for the peso counterpart requirements of foreign-assisted projects intended for relending and loaning operations of LGUs. Other budgeted components of the ALGU for 2010 are shown in Table III-6.

Table III-6 Comparative Details of Allocations to LGUs


Percent2010 2009 Increase/ (Decrease)

Special Shares of LGUs in the Proceeds of National Taxes

14,163.46 11,061.27

3,102.19 28.05

Financial Subsidy to LGUs 5,674.70 4,186.50 1,488.20 35.55Premium Subsidy for Indigents under the

National Health Insurance Program 5,170.00 5,000.00 170.00 3.40Metropolitan Manila Development

Authority

2,074.67 2,190.77

(116.10) (5.30)Municipal Development Fund 1,373.92 553.26 820.66 148.33Pasig River Rehabilitation Commission 1,179.86 785.46 394.40 50.21Kalayaan Barangay Program Fund - 1,000.00 (1,000.00) (100.00)Kilos Asenso Support Fund - 1,000.00 (1,000.00) (100.00)Barangay Officials Death Benefits Fund 50.00 50.00 - -

Total 29,686.62 25,827.26 3,859.36 14.94Difference between totals and sum of components is due to rounding off.

Budgetary Support to Government Corporations – P20.53 billion

Special Provision No. 1 of the GAA on Budgetary Support to Government

Corporations (BSGC) states that all income and revenue collected by GOCCs from all sources shall be used to cover all of its operating requirements. Any deficiency may be augmented by the budgetary support from the NG, which may be either subsidy or equity investments to GOCCs.

27

The BSGC was originally allocated with P24.28 billion, however, P3.75 billion was transferred to the overall savings of the NG. This year’s BSGC is higher by P1.58 billion or 8.34 percent compared to last year’s P18.95 billion. Table III-7 shows the comparative details of budgetary support to GOCCs.

Table III-7 Budgetary Support to Government Corporations


Percent2010 2009* Increase/ (Decrease)

Agriculture 9,672.41 4,777.70 4,894.71 102.45National Food Authority 8,000.00 4,000.00 4,000.00 100.00Philippine Coconut Authority 645.69 230.00 415.69 180.73Philippine Rice Research Institute 435.00 95.00 340.00 357.89Philippine Crop Insurance Corporation

214.27

30.50

183.77 602.52

Quedan and Rural Credit Guarantee Corporation

190.25

200.00

(9.75) (4.88)

National Tobacco Administration 115.00 140.00 (25.00) (17.86)National Dairy Authority 72.20 82.20 (10.00) (12.17)Energy 644.19 790.00 (145.81) (18.46)National Electrification

Administration 644.19 790.00 (145.81) (18.46)Health 1,767.96 1,718.56 49.40 2.87Philippine Heart Center 531.05 469.00 62.05 13.23National Kidney and Transplant Institute 529.05 326.50 202.55 62.04Philippine Children’s Medical Center 366.30 314.50 51.80 16.47Lung Center of the Philippines 301.56 168.56 133.00 78.90Philippine Institute of Traditional and Alternative Health Care

40.00

40.00

- -

Local Water Utilities Administration - 400.00 (400.00) (100.00)Tourism 425.00 135.00 290.00 214.81Philippine Tourism Authority 360.00 70.00 290.00 414.29Philippine Convention and Visitors Corporation

65.00

65.00

- -

Trade and Industry 883.75 477.83 405.92 84.95Aurora Special Economic Zone Authority 800.00 400.00 400.00 100.00Center for International Trade Expositions and Missions

73.75

67.83

5.92 8.73

Cottage Industry Technology Center 10.00 10.00 - -Transportation and

Communications

285.00

100.00

185.00 185.00 Philippine National Railways 285.00 100.00 185.00 185.00

28



Percent2010 2009* Increase / (Decrease)

National Economic and Development Authority 17.00 67.00

(50.00) (74.63)

Philippine Institute for Development Studies

17.00

67.00

(50.00) (74.63)

Office of the Press Secretary 200.00 110.00 90.00 81.82People’s Television Network, Incorporated

200.00

110.00

90.00 81.82

Other Executive Offices 6,624.45 10,763.44 (4,138.99) (38.45)Bangko Sentral ng Pilipinas - 4,000.00 (4,000.00) (100.00)National Housing Authority 3,600.00 3,500.00 100.00 2.86Cagayan Economic Zone Authority 1,114.45 1,129.00 (14.55) (1.29)National Home Mortgage Finance Corporation

900.00

900.00

- -

Home Guaranty Corporation 600.00 600.00 - -Cultural Center of the Philippines 140.00 241.79 (101.79) (42.10)Authority of the Free Port Area of Bataan

100.00

-

100.00

Development Academy of the Philippines

70.00

70.00

- -

Zamboanga City Special Economic Zone Authority

70.00

70.70

(0.70) (0.99)

Southern Philippines Development Authority

30.00

251.94

(221.94) (88.09)

Others 13.61 13.61 - -Total 20,533.36 18,953.14 1,580.22 8.34

*Excludes R.A. 9498, as Reenacted Difference between totals and sum of components is due to rounding off.

Priority Development Assistance Fund – P15.26 billion

The PDAF is one category under SPFs with hefty allocation. It aims to fund

the priority development programs and projects of the government. Those commonly referred to as "soft" are identified and implemented under this fund following a shortlist or menu as provided for in the GAA such as scholarship programs, medical assistance to indigent patients, livelihood support programs, purchase of IT equipment, rural electrification, water supply, peace and order and financial assistance to LGUs for their priority programs and projects. It also includes infrastructures like roads and bridges, flood control, school buildings, hospitals, health facilities, public markets, multi-purpose buildings, and multi-purpose pavements.

The annual Congressional Allocation of Legislators shall not exceed the

amount of P70 million for each Congressional District and Partylist Representative; and P200 million for each Senator.

29

Under the 2010 GAA, the PDAF was originally allocated with P10.86 billion and was augmented by P4.40 billion from overall savings resulting to adjusted appropriations of P15.26 billion or an increase of P4.91 billion or 47.39 percent over last year’s P10.35 billion.

3.4.1.2 Automatic Appropriations – P1.061 trillion

Automatic appropriations refer to

appropriations programmed annually or for some other period prescribed by law, by virtue of outstanding legislation which does not require periodic action by Congress. Falling under this category are expenditures authorized under PD No. 1967, R.A. No. 4860 and R.A. No. 245, as amended, for the servicing of domestic and foreign debts, Commonwealth Act 186 and R.A. No. 660, for the retirement and insurance premiums of government employees, PD No. 1177 and E.O. No. 292, for net lending to government corporations, and PD No. 1234, for various special accounts and funds. Automatic appropriations totaling P1.061 trillion represents 45.02 percent of this year’s budget.

Shown in Chart III-2 and Table III-8 are the sources of automatic appropriations for

the year.

Table III-8 Sources of Automatic Appropriations (in million pesos)

Particulars R.A. 9970 R.A. 9524,

as Re-enacted

Other Acts Total

Debt Service – Principal - - 402,395.12 402,395.12Debt Service - Interest - - 297,004.44 297,004.44IRA 265,802.38 - - 265,802.38Customs Duties 46,891.15 26.19 46,917.34SAGF 15,789.90 - 9,351.71 25,141.61RLIP 22,463.11 - - 22,463.11Grants and Donations 1,035.29 3.19 - 1,038.48Tax Subsidy 126.97 - - 126.97NIPAS 15.51 - - 15.51Sale of Assets 3.49 - - 3.49

Total 352,127,80 29.38 708,751,28 1,060,908.45Difference between totals and sum of components is due to rounding off.

Chart III-2 Sources of Automatic Appropriations

Other A cts

66.81%

R .A . 9970

33.19%

30

Debt Service - Principal Amortization was appropriated at P402.40 billion representing 17.08 percent of the aggregate current year’s appropriations of P2.356 trillion. Compared to last year’s level of P342.10 billion, an increment of P60.30 billion or 17.63 percent was noted. On the other hand, Interest Payment of P297 billion accounted for 12.60 percent of this year’s budget, higher by P18.14 billion or 6.50 percent. Appropriations for Interest Payment include commitment fees, bank charges and other financial charges amounting to P4.56 billion.

3.4.1.3 Continuing Appropriations – P141.20 billion

Continuing appropriations refer to appropriations available to support obligations for a specified purpose or project, such as multi-year construction projects which require the incurrence of obligations even beyond the budget year.

As shown in Table III-9, the departments/offices have P141.20 billion balances of

continuing appropriations. Of this amount, P39.61 billion pertains to unreleased appropriations under R.A. 9524 which were made available as sources of government’s budget for the year and P101.59 billion unobligated allotments at the end of 2009 which were valid for obligations up to December 31, 2010.

Table III-9 Continuing Appropriations by Department/Office and Source

(in million pesos)

Department/Office Total Regular Appropriations

Special Purpose Funds

Automatic Appropriations

Public Works and Highways 51,194.99 36,990.55 6,996.18 7,208.25National Defense 14,338.42 1,037.61 5,264.94 8,035.87Education 7,910.58 7,897.08 13.50 -Commission on Elections 7,364.79 3,389.49 - 3,975.30Health 7,355.87 6,459.66 150.27 745.94Agriculture 7,087.69 959.62 4,724.45 1,403.62Finance 6,726.69 1,909.09 4,664.36 153.24Energy 4,713.17 93.03 101.85 4,518.29Transportation and

Communications 4,065.04 3,349.52 25.43 690.09Interior and Local

Government 4,053.65 3,670.78 148.83 234.04Social Welfare and

Development 4,007.35 3,486.90 518.84 1.61State Universities and

Colleges 2,217.94 2,141.36 76.57 -Environment and Natural

Resources 1,941.39 1,737.48 16.08 187.84Agrarian Reform 1,780.47 20.68 1,596.88 162.91Budget and Management 1,667.63 266.62 1,394.76 6.25The Judiciary 1,460.13 1,459.78 0.36 -Office of the President 1,348.14 458.19 800.12 89.83Foreign Affairs 1,029.34 653.28 376.06 -Science and Technology 913.80 911.33 1.00 1.47

31


Department/Office Total Regular Appropriations

Special Purpose Funds

Automatic Appropriations

Labor and Employment 913.76 616.35 297.41 -Other Executive Offices 739.65 267.11 50.72 421.82Congress of the Philippines 706.97 681.97 25.00 -Office of the Ombudsman 653.93 622.85 - 31.08Trade and Industry 635.91 317.68 142.91 175.32 Justice 462.98 233.84 156.26 72.88National Economic and

Development Authority 399.47 399.47 - -Autonomous Region in

Muslim Mindanao

112.91

112.91 - -Metropolitan Manila

Development Authority 100.00 - 100.00 -Office of the Press Secretary 67.21 50.66 16.55 -Tourism 66.95 66.95 - -Pasig River Rehabilitation

Commission 57.45 - 57.45 -Office of the Vice-President 20.46 20.46 - -Commission on Human

Rights 13.15 13.15 - -Commission on Audit 9.32 5.81 - 3.50Civil Service Commission 0.55 0.55 - -Joint Legislative -Executive

Councils 0.05 0.05 - -SPF – Unreleased

Appropriations 5,066.86 - 5,066.86 -

Total 141,204.66 80,301.85 32,783.65 28,119.15Difference between totals and sum of components is due to rounding off. 3.4.2 ALLOTMENTS – P1.977 trillion

Allotments are the authorizations issued by the DBM to NGAs to incur obligations

for implementation of programs, projects and other expenditure items. For calendar year 2010, allotments aggregated at P1.977 trillion or 79.15 percent of the total NG budget of P2.497 trillion for the year. Of the amount, P1.846 trillion or 93.38 percent which includes P32.79 million released to cover prior year’s overdraft was sourced from current year’s appropriations under R.A. No. 9970 and P130.79 billion or 6.62 percent was from continuing appropriations under R.A. No. 9524.

Allotments from current year’s appropriations consist of Regular Appropriations –

P604.95 billion, SPFs - P180.74 billion, Automatic Appropriations – P1.060 trillion and P32.79 million to cover prior year’s overdraft.

32

About 38 percent or P402.40 billion of allotments under Automatic Appropriations pertain to Debt Service – Principal Amortization while 28 percent or P297 billion was for Debt Service – Interest Payment and 25 percent or P265.80 billion was for IRA. Allotments under other Automatic Appropriations accounted for P95.06 million or 8.96 percent. Table III-10 shows the detailed sources and nature of allotments released for 2010.

Table III-10 Sources and Nature of Allotments

(in million pesos) Particulars Total PS MOOE FE CO

General Appropriations Act 785,692.69 434,044.85 187,929.54 3.90 163,714.41 Regular 604,952.68 309,700.30 145,126.67 3.90 150,121.81 SPFs 180,740.01 124,344.55 42,802.87 - 13,592.60Automatic Appropriations 1,060,228.79 24,823.07 330,523.72 297,004.44 407,877.55 Debt Service – Principal 402,395.12 - - - 402,395.12 Debt Service - Interest 297,004.44 - - 297,004.44 - IRA 265,802.38 - 265,802.38 - - Customs Duties 46,917.34 - 46,917.34 - - SAGF 24,491.17 2,386.44 17,023.18 - 5,081.55 RLIP 22,433.88 22,433.88 - - - Grants and Donations 1,038.48 2.75 640.07 - 395.66 Tax Subsidy 126.97 - 126.52 - 0.45 NIPAS 15.51 - 14.23 - 1.28 Sale of Assets 3.49 - - - 3.49 Allotments to Cover Prior Year’s

Overdraft 32.79 0.76 32.03

- - Regular Appropriations 0.76 0.76 - - - SAGF 32.03 - 32.03 - -Total Current Year’s Allotments 1,845,954.27 458,868.68 518,485.29 - - Continuing Appropriations 130,791.28 1,391.88 44,202.58 - 85,196.82 Unobligated Allotments 100,825.98 1,390.60 37,233.87 - 62,201.51 Unreleased Appropriations 29,965.31 1.28 6,968.71 - 22,995.32

Total Allotments 1,976,745.55 460,260.56 562,687.86 297,008.34 656,788.79Difference between totals and sum of components is due to rounding off.

Allotments under Capital Outlays totaling P656.79 billion or 33.23 percent include P402.40 billion for loan principal repayments and P253.83 billion for infrastructure and other capital expenditures. Releases for MOOE aggregated at P562.69 billion or 28.46 percent while Personal Services and Financial Expenses accounted for P460.26 billion or 23.29 percent and P297.01 billion or 15.03 percent, respectively.

3.4.2.1 Allotments from Regular Appropriations – P604.95 billion Total allotments for programmed activities of various agencies of the NG stood

at P604.95 billion, higher by P1.22 billion or 0.20 percent than last year’s level of P603.73 billion. The DepEd got the largest regular allotments of P153.64 billion, affirming the NG’s commitments for education. The DPWH was alloted with P109.54 billion and DILG received P63.81 billion. Table III-11 shows the regular allotments released to various departments/offices by allotment class.

33

Table III-11 Regular Allotments, by Department/Office and Allotment Class (in million pesos)

Department/Office Total PS MOOE FE CO Education 153,639.52 125,393.94 20,476.42 1.87 7,767.28 Public Works and Highways 109,541.13 3,522.79 5,120.14 - 100,898.20Interior and Local Government 63,808.58 51,970.26 10,212.83 1,625.49National Defense 57,329.95 40,948.77 16,256.41 124.77Agriculture 35,513.73 2,671.31 9,569.14 23,273.28Health 23,229.70 6,796.56 11,401.15 5,031.99State Universities and Colleges 19,216.00 16,059.25 3,027.35 129.40Social Welfare and

Development

14,224.61

656.94

13,514.87

52.80Transportation and

Communications 14,114.22 2,454.42 8,016.60 3,643.20

The Judiciary 12,711.16 8,954.17 3,389.45 367.55Environment and Natural

Resources

10,590.83

5,188.55

3,379.19

2,023.09Commission on Elections 10,432.68 5,382.76 5,049.92 - -Autonomous Region in Muslim

Mindanao

8,926.22

6,161.08

1,831.40

- 933.74Congress of the Philippines 8,880.01 2,641.30 5,792.78 445.93Finance 8,551.44 4,450.34 3,219.04 882.05Foreign Affairs 8,400.53 5,181.16 3,100.38 118.99Justice 5,956.76 4,020.97 1,845.00 90.79Labor and Employment 5,857.58 2,481.92 3,250.13 125.53Office of the President 4,768.01 1,574.10 3,045.88 148.03Science and Technology 4,683.65 1,284.18 3,321.77 77.70Agrarian Reform 4,296.58 1,763.95 903.76 1,628.87Other Executive Offices 4,027.92 1,816.94 2,074.12 136.86National Economic and

Development Authority 3,962.07

994.07

2,846.89

121.11

Commission on Audit 3,825.29 3,471.50 303.79 50.00Trade and Industry 2,232.23 882.87 1,348.11 1.25Tourism 1,440.09 281.09 1,156.98 2.03 Budget and Management 1,116.19 603.76 279.37 - 233.07Office of the Ombudsman 1,064.27 772.60 204.87 - 86.80Office of the Press Secretary 919.31 448.79 457.64 - 12.88Civil Service Commission 610.51 473.60 135.91 - 1.00Energy 609.81 178.58 351.07 - 80.16Commission on Human Rights 285.89 183.44 92.45 - 10.00Office of the Vice-President 185.02 33.54 151.48 - -Joint Legislative – Executive Councils

1.18

0.80

0.38

- -

Total 604,952.68 309,700.30 145,126.67 3.90 150,121.81Difference between totals and sum of components is due to rounding off.

34

3.4.2.2 Allotments from Special Purpose Funds – P180.74 billion

Out of the SPF appropriations of P629.62 billion, SPFs allotment releases for NGAs’ operations and other expenditure items reached P180.74 billion. Almost 35 percent or P62.51 billion came from MPBF to cover the second tranche of salary increase of government officials and employees effective July 1, 2010. Pension and Gratuity Fund shared P61.80 billion or 34.19 percent and Allocations to LGUs constituted P18.84 billion or 10.42 percent of the total allotments charged to SPFs. Table III-12 show the comparison of SPFs for the last two years.

Table III-12 Allotments from Special Purpose Funds


Percent2010 2009 Increase / Decrease

Miscellaneous Personnel Benefits Fund

62,511.83

26,600.17

35,911.66 135.01

Pension and Gratuity Fund 61,802.23 57,278.83 4,523.40 7.90Allocations to LGUs 18,837.24 15,688.88 3,148.36 20.07Budgetary Support to GOCCs 16,798.27 15,479.73 1,318.54 8.52Priority Development

Assistance Fund

8,593.49

7,015.16

1,578.33 22.50Unprogrammed Fund 5,862.02 10,750.93 (4,888.91) (45.47)DepEd School Building

Program

1,853.87

1,844.75

9.12 0.49Calamity Fund 1,669.30 4,303.52 (2,634.22) (61.21)International Commitments

Fund

1,508.40

1,500.30

8.10 0.54Contingent Fund 909.40 1,789.33 (879.93) (49.18)E-Government Fund 393.95 967.62 (573.67) (59.29)National Unification Fund 50.00 (50.00) (100.00)Agriculture and Fisheries

Modernization Program - 37,719.84 (37,719.84) (100.00)Economic Stimulus - 700.00 (700.00) (100.00)

Total 180,740.01 181,689.06 (949.05) (0.52)Difference between totals and sum of components is due to rounding off.

Details of allotments from SPFs are presented in Schedule 5, Volume I-B.

Budgetary Support to Government Corporations – P16.80 billion

Allotments for budgetary support representing equity investments and subsidies by the NG to GOCCs increased to P16.80 billion from last year’s level of P15.48 billion, posting an increment of 1.32 billion or 8.52 percent. It was allocated as subsidies under MOOE at P14.54 billion and as equity investments under CO at P2.25 billion. Almost half of the aggregate amount of P16.80 billion or P8 billion went to National Food Authority; P3.33 billion or 19.82 percent to National Housing Authority and P5.47 billion or 32.56 percent to other GOCCs as shown in Table III-13.

35

Table III-13 GOCCs with Budgetary Support from the National Government

(in million pesos)

Particulars Total Subsidies Equity Investments

National Food Authority 8,000.00 8,000.00 -National Housing Authority 3,330.00 3,330.00 -Cagayan Economic Zone Authority 1,114.45 - 1,114.45National Home Mortgage Finance

Corporation 900.00 500.00 400.00Home Guaranty Corporation 600.00 - 600.00Philippine Coconut Authority 585.00 585.00 -Philippine Rice Research Institute 418.00 418.00 -Philippine National Railways 285.00 285.00 -Philippine Children's Medical Center 237.00 237.00 -Philippine Heart Center 200.00 200.00 -National Kidney and Transplant

Institute 185.00 185.00 -Lung Center of the Philippines 157.56 157.56 -Philippine Crop Insurance

Corporation 144.27 113.77 30.50Aurora Special Economic Zone

Authority 122.50 22.50 100.00Cultural Center of the Philippines 100.00 100.00 -Center for International Trade

Expositions and Missions 73.75 73.75 -National Tobacco Administration 70.00 70.00 -Philippine Convention and Visitors

Corporation 65.00 65.00 -National Dairy Authority 52.20 52.20 -Philippine Institute of Traditional

and Alternative Health Care 40.00 40.00 -Southern Philippines Development

Authority 30.00 30.00 -Zamboanga City Special Economic

Zone Authority

30.00 30.00 -Development Academy of the

Philippines 20.00 20.00 -Credit Information Corporation 11.54 4.04 7.50Philippine Institute for Development

Studies 17.00 17.00 -Cottage Industry Technology Center 10.00 10.00 -

Total 16,798.27 14,545.82 2,252.45Difference between totals and sum of components is due to rounding off.

36

Allocations to Local Government Units – P18.84 billion

Total allotments from ALGU of P18.84 billion exhibited an increment of P3.15 billion or 20.07 percent from last year’s P15.69 billion. Special Shares of LGUs in the Proceeds of National Taxes at P11.43 billion constituted 60.65 percent of the aggregate ALGU. It primarily consists of P4.95 billion Shares of LGUs in Tobacco Excise Tax provided under R.A. No. 7171 and Section 289 of R.A. No. 8424 as implemented by Memorandum Circular No. 61-A dated November 28, 1993 and releases for prior year’s obligations of the NG of P4.30 billion for IRA Monetization Program provided under Special Provisions of the GAA for ALGU. Table III-14 shows the details of allotments released to LGUs.

Table III-14 Allotments from Allocations to LGUs


Percentage Distribution

Special Shares of LGUs in the Proceeds of National Taxes

11,425.55 60.65

Financial Subsidy to LGUs 3,893.81 20.67Metropolitan Manila Development Authority

1,344.67 7.14

Pasig River Rehabilitation Commission 1,115.65 5.92Municipal Development Fund 1,030.44 5.47Barangay Officials Death Benefits Fund 27.12 0.14

Total 18,837.24 100.00Difference between totals and sum of components is due to rounding off.

Priority Development Assistance Fund – P8.60 billion

For calendar year 2010, allotments from PDAF amounted to P8.60 billion

posting an increment of P1.58 billion or 22.5 percent from last year’s allotments of P7.02 billion. Table III-15 shows the comparative allotments by departments/offices for calendar years 2010 and 2009.

Table III-15 Allotments from Priority Development Assistance Fund


Percent 2010 2009 Increase / Decrease

Budget and Management 3,120.35 2,600.62 519.73 19.98Finance 2,308.18 1,348.58 959.60 71.16Social Welfare and Development 997.15 1,009.31 (12.16) (1.20)Public Works and Highways 598.43 399.21 199.22 49.90Health 439.76 285.77 153.99 53.89State Universities and Colleges 411.61 383.63 27.98 7.29Agriculture 211.11 466.91 (255.79) (54.78)Labor and Employment 184.65 155.36 29.29 18.85Other Executive Offices 163.53 162.20 1.33 0.82Education 110.78 80.20 30.58 38.13Environment and Natural Resources

16.05

23.00

(6.95) (30.22)

Trade and Industry 13.15 11.60 1.55 13.36

37



Percent 2010 2009 Increase / Decrease

Autonomous Region in Muslim Mindanao 9.00 45.40 (36.40) (80.18)Energy 5.00 - 5.00 -Interior and Local Government 4.75 43.37 (38.62) (89.05)


The highest PDAF allotment of P3.12 billion was released to DBM as financial assistance for the implementation of priority programs and projects of various LGUs nationwide. The DOF received P2.31 billion as budgetary support to GOCCs for medical assistance to indigent patients in hospitals while DSWD got P1 billion for the implementation of the comprehensive integrated delivery of social services. Chart III-3 shows Legislator’s availments of PDAF as reported by the DBM in its website.

3.4.2.3 Allotments from Automatic Appropriations – P1.060 trillion

Allotments charged to Automatic Appropriations reached P1.060 trillion, representing 53.64 percent of the total allotments of P1.977 trillion. Debt Service – Principal Amortization at P402.40 billion constituted 37.95 percent while Debt Service – Interest Payment at P297 billion accounted for 28.01 percent and IRA at P265.80 billion shared 25.07 percent. Table III-16 shows the comparative figures of allotments for the last two years.

Details of allotments from Automatic Appropriations are presented in

Schedule 6, Volume I-B.

Table III-16 Allotments from Automatic Appropriations


Percent 2010 2009 Increase (Decrease)

Debt Service – Principal 402,395.12 342,099.31 60,295.81 17.63Debt Service – Interest 297,004.44 278,867.04 18,137.41 6.50IRA 265,802.38 249,988.87 15,813.51 6.33Customs Duties 46,917.34 49,382.84 (2,465.50) (4.99)

Senators 1,593.05 Congressmen

5,145.97

Party Lists 1,172.56

Chart III-3 Congress PDAF Availments (in million pesos)

38




SAGF 24,491.17 50,483.06 (25,991.89) (51.49) RLIP 22,433.88 17,465.46 4,968.42 28.45 Grants and Donations 1,038.48 729.48 309.00 42.36 Tax Subsidy 126.97 213.33 (86.36) (40.48) NIPAS 15.51 12.59 2.92 23.19 Sale of Assets 3.49 22.58 (19.09) (84.54)

Total 1,060,228.79 989,264.56 70,964.23 7.17 Difference between totals and sum of components is due to rounding off.

Internal Revenue Allotments – P265.80 billion

Sections 284 and 285 of R.A. No. 7160 also known as the Local

Government Code provide that LGUs shall have a share in the national internal revenue taxes. For this year, IRA amounted to P265.80 billion, higher by P15.81 billion or 6.33 percent than last year’s P249.99 billion. Table III-17 presents the regional distribution of IRA with Regions IV-A, III and VI as topped recipients.

Table III-17 2010 Internal Revenue Allotments Distribution

Region Amount (in million pesos)


Region IV-A 28,186.39 10.60 Region III 25,343.23 9.53 Region VI 22,344.41 8.41 Region VII 18,490.50 6.96 National Capital Region 18,289.03 6.88 Region V 16,504.11 6.21 Region VIII 15,975.19 6.01 Region I 14,661.47 5.52 Region X 14,405.37 5.42 ARMM 13,795.28 5.19 Region II 13,215.21 4.97 Region XI 12,607.84 4.74 Region XII 11,833.56 4.45 Region IV-B 11,602.99 4.37 Region IX 10,870.86 4.09 CARAGA 9,849.87 3.71 Cordillera Administrative Region 7,827.06 2.94

Total 265,802.38 100.00 Source: DBM Local Budget Memorandum No. 63 dated June 23, 2010. Difference between totals and sum of components is due to rounding off.

39

3.4.3 Unreleased/Unallotted Appropriations – P510.32 billion

Section 66, General Provisions of R.A. No. 9970 provides that appropriations for MOOE and CO authorized under this Act shall be available for release and obligation for a period extending to one calendar year after the end of the year. Section 28, Chapter IV, Book VI of E.O. No. 292, also states that infrastructure/CO shall remain valid until fully spent or reverted.

At yearend, the unreleased appropriations stood at P510.32 billion or 21.66 percent of

the aggregate current year’s appropriations, details of which are shown in Table III-18.

Table III-18 Summary of Unreleased Appropriations (in million pesos)

Particulars Appropriations Allotments* Unreleased Appropria-

tions Percent

General Appropriations Act 1,295,365.29 785,693.46 509,671.83 39.34 Regular * 665,749.25 604,953.45 60,795.80 9.13 SPFs 629,616.04 180,740.01 448,876.03 71.29 Automatic Appropriations 1,060,908.45 1,060,260.81 647.63 0.06 Debt Service – Principal 402,395.12 402,395.12 - - Debt Service – Interest 297,004.44 297,004.44 - IRA 265,802.38 265,802.38 - - Other Automatic

Appropriations *

95,706.51 95,058.87 647.63 0.68 Total Current Year’s Unreleased Appropriations

2,356,273.73 1,845,954.27 510,319.46 21.66

* includes allotments to cover prior year’s overdraft of P32.79 million Difference between totals and sum of components is due to rounding off.

The balance of unreleased appropriations for Regular Appropriations and SPFs

totaling to P509.67 billion consist of: PS – P11.82 billion; MOOE – P329.99 billion of which P276.21 billion represent unreleased appropriations for Debt Service – Interest Payment; CO – P141.11 billion and Overall Savings of P26.75 billion. On the other hand, unreleased Automatic Appropriations of P647.63 million are for PS – P29.23 million, MOOE – P35.70 million and CO – P582.70 million.

The total unreleased appropriation for PS of P11.85 billion including RLIP of

P29.23 million, is for reversion. The balances for MOOE and CO of P330.02 billion and P141.69 billion, respectively, are to be retained as continuing appropriations. Of the amount to be retained, MOOE includes P35.71 million and CO with P582.70 million for SAGF.

3.4.4 Obligations – P1.868 trillion

Obligations for the year aggregated at P1.868 trillion or 94.52 percent of the total allotment releases including amount incurred in excess of allotments or overdraft of P35.57 million. Table III-19 shows the Summary of Allotments, Obligations and Unobligated Allotments.

40

Table III-19 Summary of Allotments, Obligations and Balances (in million pesos)

Particulars Allotments Obligations Unobligated Allotments

General Appropriations Act 785,692.69 707,193.03 78,499.66 Regular* 604,952.68 539,053.23 65,899.46 SPFs 180,740.01 168,139.80 12,600.21 Automatic Appropriations 1,060,228.79 1,051,527.49 8,701.30 Debt Service – Principal 402,395.12 402,350.77 44.35 Debt Service – Interest 297,004.44 297,003.61 0.84 IRA 265,802.38 265,801.26 1.12 Other Automatic

Appropriations* 95,026.85

86,371.85 8,654.99 Total Current Year’s Appropriations

1,845,921.48 1,758,720.52

87,200.96

Continuing Appropriations Unobligated Allotments 100,825.98 83,658.18 17,167.80 Unreleased Appropriations 29,965.31 26,065.46 3,899.84

Total Continuing Appropriations 130,791.28 109,723.65 21,067.64

Total 1,976,712.76 1,868,444.16 108,268.60 *Does not include allotments to cover prior year’s overdraft of P32.79 million Difference between total and sum of components is due to rounding off.

Table III-20 reflects the Obligations Covered by Allotments, by Department/Office,

and by Allotment Class.

Table III-20 Obligations Covered by Allotments, by Department/ Office and Allotment Class

(in million pesos) Department/Office Total PS MOOE FE CO

Finance 783,561.75 5,759.09 73,640.54 297,003.61 407,158.51Budget and Management 283,502.57 1,923.30 280,986.83 - 592.44Education 191,105.00 168,755.51 18,175.39 1.87 4,172.23Public Works and Highways 141,755.43 4,564.70 8,873.49 - 128,317.24National Defense 110,616.75 87,038.64 17,614.73 - 5,963.38Interior and Local Government 95,313.10 80,795.72 13,114.32 - 1,403.06 Agriculture 34,803.13 3,558.94 10,538.23 - 20,705.95Health 29,027.64 8,638.33 11,777.18 - 8,612.13State Universities and Colleges 26,670.37 21,299.39 3,516.72 - 1,854.26Transportation and

Communications 20,266.63 3,871.30 10,380.96 - 6,014.36Social Welfare and

Development 15,955.71 847.84 14,653.90 - 453.97The Judiciary 15,311.58 11,398.61 3,564.49 - 348.48Environment and Natural

Resources 13,578.11 6,859.26 4,614.82 - 2,104.02Commission on Elections 12,841.16 5,640.06 6,882.17 - 318.93Autonomous Region in Muslim

Mindanao 10,673.72 7,724.76 1,943.09 - 1,005.87Agrarian Reform 10,398.24 4,735.56 3,841.62 - 1,821.05

41


Department/Office Total PS MOOE FE CO Foreign Affairs 9,773.96 5,485.22 3,677.52 - 611.23Congress of the Philippines 8,751.30 3,339.41 5,030.01 - 381.88Justice 8,223.28 5,936.27 2,045.17 - 241.84Labor and Employment 7,494.46 3,266.26 3,808.27 - 419.93Other Executive Offices 6,109.19 2,447.03 3,319.37 - 342.79Science and Technology 5,595.11 1,699.30 3,224.03 - 671.78Office of the President 5,078.97 1,901.61 2,865.07 - 312.29Commission on Audit 4,864.58 4,539.86 311.91 - 12.82National Economic and

Development Authority 4,130.39 1,284.49 2,656.65 - 189.25Trade and Industry 3,048.00 1,187.36 1,612.06 - 248.58Pasig River Rehabilitation

Commission 2,441.14 8.45 105.81 - 2,326.88Tourism 1,508.76 351.74 1,134.63 2.03 20.36Metropolitan Manila

Development Authority 1,441.66 52.40 1,081.28 - 307.97Office of the Ombudsman 1,191.60 890.78 197.48 - 103.33Office of the Press Secretary 1,153.67 607.86 501.90 - 43.91Energy 988.01 237.59 686.91 - 63.51Civil Service Commission 754.41 617.37 136.03 - 1.00Commission on Human Rights 337.20 231.19 82.97 - 23.04Office of the Vice-President 176.70 38.26 138.44 - -Joint Legislative – Executive

Councils 0.90 0.54 0.36 - -Total 1,868,444.16 457,533.99 516,734.38 297,007.50 597,168.29


As in the previous years, DOF incurred the highest obligations at P783.56 billion

due mainly to debt servicing requirements of the NG amounting to P699.35 billion. Of the amount, P402.35 billion was obligated for principal amortization and P297 billion was incurred for interest payments including commitment fees, bank charges and other financial charges amounting to P4.56 billion.

The DBM, as fund administrator, reported obligations of P283.50 billion, consisting

of IRA – P265.80 billion; ALGU – P12.47 billion and various funds – P5.23 billion. At yearend, eight departments/offices reported overdrafts or obligations not covered

by allotment totaling P35.57 million. The CSC incurred overdraft of P20.40 million for PS.

The DOLE’s overdraft of P5.73 million for PS pertains to National Labor Relations

Commission (NLRC) – P4.55 million, OSEC – P0.94 million, and Institute for Labor Studies (ILS) – P0.24 million. The DOLE requested authority from the DBM to use agencies’ savings on allotments to cover said overdraft. The DBM in its letter dated April 26, 2011 authorized the ILS to use its savings from MOOE and CO to cover the overdraft of P0.24 million. The OSEC and NLRC have pending request with the DBM.

42

The DOTC with an overdraft of P2.01 million, requested authority to use savings to cover the overdraft but the request has not yet been granted by the DBM.

The ARMM incurred an overdraft of P4.86 million which was not yet paid as of

December 31, 2010. Coordination and verification with the agency concerned resulted to the cancellation of these obligations in 2011.

For DOF, the overdraft was incurred by the Project Management Office (PMO)

under MOOE at P1.67 million. Its request for covering allotment has been submitted to DBM.

The DILG’s overdraft of P0.28 million was for the non-release portion of the ABM

of NAPOLCOM. The overdraft incurred by DOT and DENR were for RLIP and PGF which were

charged to regular appropriations for PS. Shown in Table III-21 are the details of Obligations Not Covered by Allotments, by

Department/Office and Allotment Class.

Table III-21 Obligations Not Covered by Allotments, by Department/ Office and Allotment Class

(in million pesos) Department/Office Total PS MOOE CO

Civil Service Commission 20.40 20.40 - - Labor and Employment 5.73 5.73 - - Autonomous Region in Muslim

Mindanao 4.86 - 4.86 - Transportation and Communications 2.01 2.01 - - Finance 1.93 1.66 0.27 Tourism 0.35 0.35 - - Interior and Local Government 0.28 - 0.28 - Environment and Natural Resources 0.01 0.01 - -

Total 35.57 28.50 6.80 0.27 Difference between totals and sum of components is due to rounding off.

3.4.5 Unobligated Allotments – P108.27 billion

At the close of calendar year 2010, unobligated allotments of NGAs reached P108.27 billion, which is the difference between allotments of P1.977 trillion and the sum of P1.868 trillion obligations and P32.79 million prior years’ overdraft covered by current year’s allotments. Pursuant to Section 3.9.1.2 of DBM NBC No. 523 dated February 16, 2010 appropriations under R.A. No. 9970 shall be available for obligation up to December 31, 2010. However, by virtue of E.O. No. 901 dated June 28, 2010 signed by then President Gloria M. Arroyo, the availability of 2010 appropriations for MOOE and CO was extended up to December 31, 2011.

IV. FINANCIAL STATEMENTS

2010 2009 Increase Percent(Decrease)

Current Assets 1,203,322,845.47 1,181,975,802.64 21,347,042.83 1.81

Cash (Note 4.6) 324,176,711.12 334,394,497.34 (10,217,786.23) (3.06) Receivables (Note 4.7) 743,355,998.48 750,543,299.89 (7,187,301.41) (0.96) Inventories 25,199,509.94 22,668,120.41 2,531,389.53 11.17 Prepayments 99,162,010.94 62,938,441.17 36,223,569.77 57.55 Other Current Assets 11,428,614.99 11,431,443.83 (2,828.84) (0.02)

Investments (Note 4.8) 842,102,100.81 735,407,924.85 106,694,175.97 14.51

Property, Plant and Equipment (Note 4.9) 985,800,170.65 856,766,375.20 129,033,795.45 15.06

Land and Land Improvements 203,622,074.14 204,562,877.63 (940,803.48) (0.46) Buildings 133,866,279.27 123,002,199.80 10,864,079.47 8.83 Leasehold Improvements 282,225.90 94,322.39 187,903.51 199.21 Office Equipment, Furniture and Fixtures 31,961,281.09 30,536,861.01 1,424,420.09 4.66 Machineries and Equipment 46,275,957.84 42,802,171.54 3,473,786.30 8.12 Transportation Equipment 24,322,119.38 22,928,499.58 1,393,619.79 6.08 Other Property, Plant and Equipment 6,175,588.81 16,173,057.67 (9,997,468.86) (61.82) Construction in Progress 539,294,644.21 416,666,385.59 122,628,258.63 29.43

Other Assets 107,636,700.19 105,373,154.02 2,263,546.17 2.15

TOTAL ASSETS 3,138,861,817.12 2,879,523,256.71 259,338,560.41 9.01

Current Liabilities (Note 4.10.1) 813,020,739.71 912,858,305.03 (99,837,565.33) (10.94) Payable Accounts 122,372,756.85 112,873,385.36 9,499,371.49 8.42 Inter - Agency Payables 49,816,032.41 67,293,645.02 (17,477,612.61) (25.97) Intra - Agency Payables 7,208,543.22 5,999,910.72 1,208,632.50 20.14 Other Liability Accounts 80,403,915.35 78,625,522.07 1,778,393.28 2.26 Loans Payable- Domestic, Current 553,219,491.87 648,065,841.87 (94,846,350.00) (14.64)

Long Term Liabilities (Note 4.10.2) 4,178,785,583.30 3,701,906,732.19 476,878,851.11 12.88

Deferred Credits 26,632,575.49 33,447,247.35 (6,814,671.86) (20.37)

TOTAL LIABILITIES 5,018,438,898.50 4,648,212,284.58 370,226,613.92 7.96

EQUITYGovernment Equity (Note 4.11) (1,879,577,081.37) (1,768,689,027.87) (110,888,053.50) 6.27

TOTAL LIABILITIES AND EQUITY 3,138,861,817.12 2,879,523,256.71 259,338,560.41 9.01

Difference between totals and sum of components is due to rounding off

LIABILITIES

ASSETS

National Government of the Republic of the PhilippinesCondensed Balance SheetAs of December 31, 2010

Amount (In thousand pesos)

43

2009 (Restated)

INCOME/REVENUE (Note 4.12) 1,243,676,540.12 1,155,083,897.44 88,592,642.67 7.67 Tax Revenue (Note 4.13) 1,090,909,324.92 979,625,460.38 111,283,864.54 11.36

General Income 152,767,215.19 175,458,437.06 (22,691,221.87) (12.93) Permits and Licenses 459,620.01 1,136,230.49 (676,610.48) (59.55) Service Income 74,163,616.53 89,101,548.52 (14,937,931.98) (16.77) Business Income 10,977,870.88 9,671,211.46 1,306,659.42 13.51 Other Income 67,166,107.77 75,549,446.59 (8,383,338.82) (11.10)

LESS : CURRENT OPERATING EXPENSES 637,457,265.94 583,989,813.75 53,467,452.18 9.16 Personal Services 464,219,664.38 405,951,435.77 58,268,228.62 14.35 Maintenance and Other Operating Expenses 173,237,601.55 178,038,377.99 (4,800,776.43) (2.70)

Income from Current Operations 606,219,274.18 571,094,083.69 35,125,190.49 6.15

Subsidy to LGUs, GOCCs, NGOs/Pos (Note 4.14.1) (340,097,090.75) (327,095,095.14) (13,001,995.61) 3.97

Local Government Units, net (281,547,018.17) (269,533,310.65) (12,013,707.52) 4.46 Government Owned and Controlled Corporation (57,104,688.60) (56,896,158.46) (208,530.14) 0.37 NGOs/POs (1,445,383.98) (665,626.03) (779,757.95) 117.15

Income after Subsidies 266,122,183.43 243,998,988.55 22,123,194.88 9.07

Less: Financial Expenses 304,516,600.13 288,719,929.05 15,796,671.08 5.47

Income/(Loss) before Other Income/Expense Items (38,394,416.70) (44,720,940.50) 6,326,523.80 (14.15)

Net Subsidy To National Government Agencies (Note 4.14.2) (35,470,663.04) (4,847,295.21) (30,623,367.83) 631.76

Net Gain/(Loss) 49,781,956.44 (34,870,598.94) 84,652,555.38 (242.76) Loss of Assets (61,127.75) (84,473.40) 23,345.65 (27.64) Loss on Guaranty (4,571,077.81) (7,508,542.87) 2,937,465.06 (39.12) Gain/Loss on Foreign Exchange 54,214,718.51 (27,439,487.64) 81,654,206.15 (297.58) Gain/Loss on Sale of Disposed Assets (48,263.11) (18,291.23) (29,971.88) 163.86 Gain/Loss on Sale of Securities 247,706.60 180,196.20 67,510.40 37.46

NET LOSS (24,083,123.30) (84,438,834.64) 60,355,711.34 (71.48)


2010 Increase

(Decrease) Percent

National Government of the Republic of the PhilippinesCondensed Statement of Income and Expenses

For the Year Ended December 31, 2010

Amount (in thousand pesos)

44

Increase(Decrease)

Government Equity, Beginning Balance (1,765,922,839.20) (1,552,222,653.10) (213,700,186.09) 13.77

Retained Operating Surplus (71,395,106.95) (86,600,372.60) 15,205,265.65 (17.56)Current Operations (24,083,123.30) (84,438,834.64) 60,355,711.34 (71.48)Prior Years' Adjustments (47,311,983.66) (2,161,537.96) (45,150,445.70) 2,088.81

Transfer to Registry of Public Infrastructures (41,506,369.73) (129,251,542.36) 87,745,172.63 (67.89)Transfer to Registry of Reforestation Projects (748,900.58) (607,413.06) (141,487.52) 23.29Remittance to National Treasury from Assets Disposal (3,864.92) (7,046.75) 3,181.83 (45.15)

Government Equity, Ending Balance (Note 4.11) (1,879,577,081.37) (1,768,689,027.87) (110,888,053.50) 6.27


Percent

National Government of the Republic of the PhilippinesCondensed Statement of Government Equity

As of December 31. 2010

Amount (In thousand pesos)

2010 2009

45

Total

National Government

Books Regular Agency

Books Cash Flows from Operating Activities

Cash InflowsCollection of Income/Revenues 1,130,306,160.54 1,095,797,912.67 34,508,247.87 Receipt of Notice of Cash Allocation (Note 4.15) 1,111,167,881.79 - 1,111,167,881.79 Receipt of inter-agency fund transfers 117,861,212.77 24,520,730.66 93,340,482.11 Receipt of intra-agency fund transfers 34,916,691.91 - 34,916,691.91 Collection of Receivables 10,044,868.41 4,431,673.64 5,613,194.77 Receipt of subsidy from Other NGAs, LGUs, GOCCs 1,694,368.46 - 1,694,368.46 Other Receipts 24,813,911.26 82,487.86 24,731,423.40 Adjustments 102,395,410.52 95,787,873.44 6,607,537.08

Total Cash Inflows 2,533,200,505.66 1,220,620,678.27 1,312,579,827.39

Cash OutflowsReplenishment of negotiated MDS checks 1,069,063,857.95 1,069,063,857.95 - Payment of operating expenses 505,313,283.58 4,751,459.48 500,561,824.10 Grant of subsidies and donations 306,872,959.77 20,542,637.43 286,330,322.34 Remittance of Personnel Benefit Contributions and

Mandatory Deductions 119,388,983.58 2,614.87 119,386,368.71 Release of intra-agency fund transfers 98,195,858.84 - 98,195,858.84 Release of inter-agency fund transfers 70,119,491.07 5,808,579.22 64,310,911.84 Payment of Accounts Payable 63,533,626.13 31,571,747.57 31,961,878.56 Grant of Cash Advances for travel and for special

purpose or time bound undertaking 25,332,460.72 - 25,332,460.72 Purchase of Inventories 16,107,936.31 - 16,107,936.31 Other Disbursements 25,666,997.38 67,992.23 25,599,005.15 Remittance to National Treasury 1,103,048.59 1,103,048.59 - Adjustments 47,541,157.89 40,641,992.25 6,899,165.63

Total Cash Outflows 2,348,239,661.80 1,173,553,929.60 1,174,685,732.20

Cash Provided By (Used In) Operating Activities 184,960,843.86 47,066,748.68 137,894,095.19

Cash Flows from Investing ActivitiesCash Inflows

Proceeds from matured investments 333,017,072.85 321,132,483.34 11,884,589.51 Sale of investments 49,756,350.90 49,730,706.53 25,644.37 Collection of long-term loans 2,955,312.14 2,184,427.27 770,884.87 Sale of property, plant and equipment 546,244.32 55,835.37 490,408.95

Total Cash Inflows 386,274,980.21 373,103,452.51 13,171,527.70

Cash OutflowsInvestments 431,654,930.23 417,828,825.91 13,826,104.32 Purchase/Construction of Property, Plant and

Equipment, Public Infrastructures and Other Assets 132,211,215.13 - 132,211,215.13 Grant of loans 468,344.98 - 468,344.98

Total Cash Outflows 564,334,490.33 417,828,825.91 146,505,664.42

Cash Provided By (Used In) Investing Activities (178,059,510.12) (44,725,373.40) (133,334,136.72)

Cash Flows from Financing ActivitiesCash Inflows

Proceeds from Domestic and Foreign Loans 1,604,444,390.42 1,604,391,576.55 52,813.87

Cash OutflowsPayment of Long-Term Liabilities 1,332,051,048.30 1,331,700,514.91 350,533.38 Payment of Interest Expense 236,607,356.00 236,605,331.84 2,024.17 Transfer to Local Loans Account 123,845.40 - 123,845.40

Total Cash Outflows 1,568,782,249.69 1,568,305,846.75 476,402.95

Cash Provided By (Used In) Financing Activities 35,662,140.73 36,085,729.80 (423,589.08)

Total Cash Provided by Operating, Investing and

Financing Activities 42,563,474.47 38,427,105.08 4,136,369.39

Add: Cash Balance, Beginning January 1, 2010 (Note 4.6.2) 338,706,144.54 239,957,240.05 98,748,904.49

Cash Balance, Ending December 31, 2010 (Note 4.6.3) 381,269,619.02 278,384,345.14 102,885,273.88


Statement of Cash FlowsThe National Government of the Republic of the Philippines

For the Year Ended December 31, 2010(in thousand pesos)

46

47

NOTES TO FINANCIAL STATEMENTS

4.5 Summary of Significant Accounting Policies

4.5.1 Funds and Books Maintained

The New Government Accounting System (NGAS) which took effect on January 2002, authorized the national government agencies (NGAs) to maintain two (2) sets of books of accounts, namely:

Regular Agency (RA) Books – used to record the receipt and utilization of Notice of Cash Allocation and other income/receipts which the agencies are authorized to use and to deposit with the National Treasury and with the Authorized Government Depository Banks (AGDB).

National Government (NG) Books – used to record the income which the agencies are not authorized to use and are required to be remitted to the National Treasury.

The accounting system of the NG adopts the one fund concept in recording

the financial transactions and in the preparation of the financial statements. However, separate fund accounting is done when specifically required by law, or by a donor agency, or when necessitated by circumstances subject to prior approval of the Commission on Audit.

4.5.2 Use of NGAS Chart of Accounts

The accounts used are in conformity with the NGAS Chart of Accounts

prescribed under COA Circular No. 2004-008 dated September 20, 2004, the Updated Description of Accounts.

4.5.3 Control of Appropriations, Allotments and Monitoring of Obligations

Following the NGAS policy, separate registries are maintained by COA to record the appropriations and allotments, by agency/source/allotment class, and by NGAs to record the allotments and obligations by allotments class and by program/project/activity.

4.5.4 Maintenance of Petty Cash Fund and Payroll Fund

Petty Cash Fund is maintained under the Imprest System. All replenishments are directly charged to the expense account.

Payroll Fund pertains to cash advances for salaries and wages and other

personnel benefits in accordance with COA Circular No. 2006-001 dated November 9, 2006.

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4.5.5 Foreign Assisted Projects

Government agencies implementing Foreign Assisted Projects used the Working Fund/Imprest Account Availment whereby the lending/donor institution provides the implementing agency with seed money from the loan/grant for the payment of eligible expenditures, subject to replenishment.

4.5.6 Inventory Valuation The perpetual inventory system is used in accounting for inventories where

regular purchases are recorded as inventory account and issuances from stock as expenses. However, purchases out of Petty Cash Fund for immediate use are charged outright to appropriate expense accounts.

The cost of ending inventory of office supplies and materials and other

inventory items are computed using the Moving Average Method.

4.5.7 Property, Plant and Equipment Property, Plant and Equipment used in government operations are carried at

cost less accumulated depreciation. For assets under construction, the Construction Period Theory is followed where billings for on-going projects are recorded under the Construction in Progress account.

The Straight-Line Method of depreciation is used in depreciating the

Property, Plant and Equipment with estimated useful lives ranging from 5 to 40 years as set in COA Circular No. 2003-007 dated December 11, 2003. A residual value computed at ten percent of the cost of the asset is set and depreciation starts on the following month after the purchase.

4.5.8 Completed Public Infrastructures

Public Infrastructures such as roads, highways, bridges, public parks and

plazas, as well as those for environmental purposes like reforestations, canals, irrigations, etc. were classified upon completion of Public Infrastructures and Reforestation Projects. These are assets of the government for use by the general public and not owned by the implementing agencies. At the end of the year, the completed Public Infrastructures and Reforestation Projects are transferred to the Registry of Public Infrastructures and Registry of Reforestation Projects, respectively, maintained by the agency and the corresponding amounts are shown as deductions in the Statement of Government Equity. Public Infrastructures are not subject to depreciation.

4.5.9 Recognition of Payable

Payable accounts are recognized and recorded in the books of accounts

only upon acceptance of the goods/inventory/other assets and when services are rendered to the agency.

49

Commitments or obligations incurred by agencies which are not yet due and demandable (services not rendered and/or goods not yet delivered) are recorded in the registries, hence, excluded in the payable account.

4.5.10 Revenue and Expense Recognition

Modified accrual basis of accounting is used where:

Income is on accrual basis except for revenues such as taxes, duties, fees, fines and penalties, including user charges which are recognized when collected.

Collections of income due for remittance to the National Treasury are

recorded in the NG books of the NGAs as credit to account Due to National Treasury with subsidiary ledger of the specific income account. Upon remittance to the National Treasury, the collections are recorded crediting the specific income account in the NG books of the BTr-NG.

The income authorized to be used by the agencies is recorded in the RA

books, which upon remittance to the National Treasury is recorded in the BTr-NG books as credit to account Due to NGAs.

Expenses were recognized when incurred and reported in the financial

statements in the period to which they relate.

4.5.11 Accounting for Discounts, Premiums and Interests on Borrowings

Premiums and discounts on NG Bond Sinking Fund and managed funds’ investments in Bonds are recorded as deferred charges and other deferred credits, respectively. These are being amortized over the life of the securities as adjustment to interest income or Due to GOCCs in the case of managed funds.

Interest expenses are recorded upon payment of domestic and foreign

liabilities. Moreover, bond discounts, premiums, and accrued interests on issuance of regular domestic bonds are directly charged or adjusted to interest expense on transaction dates. Cash basis of accounting is used in recording interest for domestic bond issuance, as it is difficult and impractical to accrue, it being a regular NG transactions and voluminous.

On the other hand, bond discounts, premiums and accrued interests on the

issuance of domestic Zero-Coupon Treasury Bonds, Bond exchanges and global or foreign bonds are taken up as Deferred Charges, Other Deferred Credits and Interest Payable, respectively, depending on the amount if material per transaction since issuances of the same are not as frequent as compared with the regular domestic treasury bonds. Bond discounts and premiums taken up as Deferred Charges and Other Deferred Credits, respectively, are amortized over the life of the bonds.

50

4.5.12 Foreign Currency Translation

Transactions in foreign currencies are recorded in Philippine Peso based on Bangko Sentral ng Pilipinas (BSP) exchange rate prevailing at the date of transactions. At the end of the year, foreign currency denominated monetary assets and liabilities at balance sheet date are restated based on BSP Weighted Average Rate published on the 1st working day of the following month in the BSP Reference Rate Bulletin. Any difference in the revaluation of assets and liabilities are recognized as a gain or loss on foreign exchange.

4.5.13 Fundamental Errors or Prior Year’s Adjustment Account

Fundamental errors on income and expenses of previous years were corrected using the Prior Years’ Adjustments account. Errors affecting current year’s operation were adjusted to the appropriate accounts.

4.6 Cash

4.6.1 The cash balance of the NG aggregating P324,176,711,117.86 consists of the following:

Accounts Total NG Book RA Book

Cash on Hand 3,966,953,383.39* 559,606,710.55 3,407,346,672.84Cash-National

Treasury, MDS

6,287,708,011.87*

4,042,691,975.34

2,245,016,036.53Cash in Bank – Local Currency

197,355,006,359.14*

106,531,038,761.23

90,823,967,597.91

Cash in Bank –Foreign Currency

116,567,043,363.46*

110,157,859,971.54

6,409,183,391.92

Total 324,176,711,117.86* 221,291,197,418.66 102,885,513,699.20

* Includes Cash-Bangko Sentral ng Pilipinas deposits of P46,579,591,955.03 and P87,894,407,633.38 in local and foreign currency, respectively.

Cash on Hand consists of undeposited/unremitted collections of

P1,763,857,211.64; unliquidated cash advances by Cash Disbursing Officers of P597,220,452.38; Payroll Fund of P1,522,441,602.53; balance of Petty Cash Fund of P81,242,410.05; and Cash in Vault – P2,191,706.79.

The Cash-National Treasury, Modified Disbursement System (MDS) pertains to unclaimed/unreleased MDS checks of agencies at the end of the year which was adjusted to the cash account in compliance with COA Circular Letter No. 2002-001 dated December 16, 2002. On the first working day of January, 2011, a reversal journal entry should be made by the agencies by debiting the appropriate liability account and crediting the Cash-National Treasury, MDS. Under the NG books, the amount of P4,035,009,435.00 represents the unreleased checks of the DOF-BTr-NG pertaining to NG subsidy to various GOCCs – P4,024,509,435.00 and NG equity to Philippine Crop Insurance

51

Corporation – P10,500,000.00, the reversal journal entry of which was made per BTr JEV No. 11-01-001 dated January 3, 2011.

The Cash in Bank, Local and Foreign Currency Deposits in the NG books totaled P216,688,898,732.77, of which the BTr-NG accounted P210,709,383,491.22 or 97.24 percent. This includes free balances accounts that are available for NG operations – P94,662,988,805.64; project loan/grant proceeds earmarked to be utilized by various implementing agencies – P6,970,581,639.18; restricted accounts for special/sinking fund, BTr managed funds and escrow accounts – P105,690,132,239.36; and MDS Seed Money – P792,916,020.05.

The Cash in Bank, Local and Foreign Currency Deposits in the RA books totaled P97,233,150,989.83. This includes P22,104,964,761.12 for SUCs which are authorized under RA No. 8292, the Higher Education Modernization Act of 1997, to deposit in AGDB and treat as Special Trust Fund collections of income from tuition fees and other school charges. Also included are deposits of agencies authorized to maintain Special Account in the General Funds (SAGF) totaling P4,987,977,095.24 and the cash balances of agencies under the Comprehensive Agrarian Reform Program (CARP) Fund – P869,347,405.43.

4.6.2 The Statement of Cash Flows shows cash balance beginning as of January 1, 2010

of P338,706,144,542.95, higher by P1,432,132,766.73 compared with the ending balance of cash as of December 31, 2009 of P337,274,011,776.22. The difference is accounted as follows:

Particulars Total RA Book NG Book

Cash Balance, Dec. 31, 2009 337,274,011,776.22 97,318,733,598.41 239,955,278,177.81

Add (Deduct): 1.Inclusion of reports which were excluded/not submitted in 2009

Metro Manila Development Authority - Trust Funds 721,696,871.87 721,696,871.87

Film Academy of the Philippines 15,539,289.56 15,240,248.17 299,041.39

Land Registration Authority - Fund 158 695,304.24 695,304.24

Bureau of Fisheries and Aquatic Resources 647,426.75 647,426.75

National Parks Development Authority 266,939.70 266,939.70

DTI-OSEC - Fund 102 3,371,252.40 3,371,252.40 DTI-OSEC - Fund 103 1,950,954.73 1,950,954.73 DTI- OSEC - Fund 152 802,755.09 802,755.09

2. Adjustments not taken up in 2009 DOH-OSEC 7,147,694.52 7,147,694.52 DAR- OSEC 2,250,398.40 2,250,398.40 DA- OSEC 10,020.88 10,020.88 Philippine Carabao Center 93,808.79 93,808.79 University of the Philippines 685,111,585.11 685,111,585.11

52

Particulars Total RA Book NG Book DOLE 29,141,842.81 28,369,096.48 772,746.33 DPWH- OSEC 2,262,676.60 2,262,676.60 Road Board (3,767,864.06) (3,767,864.06) DTI-OSEC (887,802.46 (887,802.46)

3. Exclusion of Reports of Agencies Minerals Development

Council (50,000.00)

(50,000.00) DA-PhilCoA (1,138,216.90) (1,138,216.90) DTI-OSEC (24,277.50) (24,277.50)Intellectual Property Office (32,987,893.80) (32,987,893.80) ________________

Cash Balance, Jan. 1, 2010 338,706,144,542.95 98,748,904,488.47 239,957,240,054.48

4.6.3 The difference in cash, ending balance per Balance Sheet and SCF amounting to P57,092,907,898.97 represents Sinking Fund cash accounts lodged under Investments in BTr-NG amounting to P57,093,148,716.77 and cash accounts of DOLE and other departments not included in its SCF ending balance amounting to P239,818.20 and P999.60, respectively

.

4.7 Receivables

Receivables of the NG totaling P743,355,998,482.36 is net of Allowance for Doubtful Accounts amounting to P524,745,434.30 and the eliminated amounts for Inter-Agency Receivables of P42,036,668,341.92 and Intra-Agency Receivables of P26,364,955,870.30.

In the overall consolidation of the balance sheet accounts, the inter-agency

receivables were eliminated with the inter-agency payables. This is to reflect the amount of cash expected to be realized from the receivables and the actual payables subsisting between NGAs. Likewise, intra-agency receivables were eliminated with intra-agency payables to reflect the balances of reciprocal accounts subsisting between COs, ROs/Staff Bureaus and OUs. The elimination was based on the consolidated total balances of RA and NG books as follows:

Account Title Amount Assets Inter-Agency Receivables 42,036,668,341.92

Due from National Treasury 14,427,106,161.78 Due from NGA 27,609,562,180.14

Intra-Agency Receivables 26,364,955,870.30 Due from Central Office 758,400,001.43 Due from Regional Office/Staff Bureaus 2,231,621,752.42 Due from Operating Units 2,721,574,693.35 Due from Other Funds 20,653,359,423.10 Total Assets 68,401,624,212.22 Liabilities Inter-Agency Payables 42,036,668,341.92

Due to Other NGAs 42,036,668,341.92 Intra-Agency Payables 26,364,955,870.30 Due to Central Office 2,384,330,720.31 Due to Regional Office/Staff Bureaus 1,095,643,974.47

53

Account Title Amount Due to Operating Units 2,231,621,752.42 Due to Other Funds 20,653,359,423.10 Total Liabilities 68,401,624,212.22

4.8 Investments

Investments of the NG include the following:

Particulars Amount Percent Sinking Fund 615,605,815,433.85 73.10 Investments in Stocks 126,510,262,867.04 15.02 Other Investments and

Marketable Securities

78,899,694,787.08

9.37 Investments in Treasury Bills 13,389,720,582.24 1.59 Investments in Bonds 7,696,607,143.96 0.92

Total 842,102,100,814.17 100.00 Sinking Fund pertains to amounts set aside for the liquidation of long-term debt.

BTr-NG balance of P615,591,880,343.77 includes Sinking Fund accounts of NG issued and NG Guaranteed bonds issued by GOCCs such as: LBP, MWSS, HGC, NFA, NPC, PPA and HDMF.

4.9 Property, Plant and Equipment

The Property, Plant and Equipment (PPE) aggregating P985,800,170,650.76 was net of Accumulated Depreciation totaling P121,670,916,495.06 and the completed Public Infrastructures (PIs) and Reforestation Projects (RPs) amounting to P41,506,369,728.99 and P748,900,576.22, respectively. These completed PIs and RPs were reported in the respective trial balances of the concerned departments/agencies. However, following the NGAS policy that completed PIs/RP shall be transferred to the respective Registry of Public Infrastructures and Registry of Reforestation Projects, the AFR system automatically closed the completed PIs/RPs and deducted it from the total Government Equity for purposes of consolidated financial statement presentation.

The major classification of PPE is as follows:

Particulars Gross Amount Accumulated Depreciation

Net Book Value

Land and Land Improvements 205,866,964,618.62 2,244,890,473.69 203,622,074,144.93Buildings 172,795,416,450.36 38,929,137,184.64 133,866,279,265.72Leasehold Improvements 391,965,972.41 109,740,068.42 282,225,903.99Office Equipment, Furniture

and Fixtures

58,855,571,018.72

26,894,289,923.82

31,961,281,094.90Machineries and Equipment 78,202,102,696.78 31,926,144,855.99 46,275,957,840.79Transportation Equipment 43,788,463,387.92 19,466,344,012.24 24,322,119,375.68Other Property, Plant and Equipment

8,275,958,788.94

2,100,369,976.26

6,175,588,812.68

Construction in Progress 539,294,644,212.06 ________-_______ 539,294,644,212.06Total 1,107,471,087,145.81 121,670,916,495.06 985,800,170,650.76

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4.10 Liabilities

4.10.1 Current Liabilities

Current liabilities of the NG totaled P813,020,739,707.36, of which P553,219,491,872.07 or 68.04 percent pertains to outstanding government Treasury Bills reported by the BTr-NG under account Loans Payable-Domestic.

4.10.2 Long-Term Liabilities

Long-Term Liabilities of the NG totaled P4,178,785,583,299.81, majority of which was reported by the BTr-NG pertaining to Bonds Payable-Domestic amounting of P2,174,701,887,235.63 or 52.04 percent; Bonds Payable-Foreign of P1,171,071,269,592.00 or 28.02 percent and Loans Payable-Foreign of P828,533,275,399.40 or 19.83 percent. The Bonds Payable-Foreign refers to offshore bond flotation of the ROP consisting of:

Particulars Currency Original Amount Peso Equivalent

Euro Bonds EUR 500,000,000 29,313,940,100US Bonds US$ 23,206,472,000 1,016,698,744,792Japanese Yen Bonds JPY 150,000,000,000 80,949,584,700PHPeso Bonds PHP 44,109,000,000 44,109,000,000 Total P1,171,071,269,592

4.10.3 Deferred Credits

Deferred Credits of P26,632,575,488.28 include P7,145,810,601.07 or 26.83 percent reported by the BTr-NG consisting of the following:

Particulars Amount

Premium on issuance of bonds offshore 5,067,257,226.27 Discount on Investments in Treasury Bonds and ROP Bonds

held by BSF, SGF, SSF, MWSS-SRF and NG which are being amortized over the life of the bonds

453,138,305.57 Converted balance under Fund 105 which had remained

dormant for over 30 years and was already requested for write-off

565,952.85

Balance of advance dividend remittance ( 80,762,963.78) Contra account in setting up receivable from DBP and PMO 44,612,225.83 Withholding tax for 7-year Zero coupon bonds 189,414,541.83 Proceeds from ROP’s issuance of Debt Exchange Warrants

which entitles the holders during exercise period to tender dollar/euro bonds and receive in exchange a peso denominated treasury bonds

1,471,585,312.50 Total 7,145,810,601.07

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4.10.4 Contingent Liabilities

Contingent liabilities of the NG in the aggregate amount of P549,808,271,642.66 represent the NG’s direct guarantee on GOCC loans and GFI guarantees assumed by the NG. These are not included in the reported NG liabilities but disclosed by the BTr-Debt Monitoring and Analysis Division. These liabilities are broken down as follows:

Particulars Foreign

Domestic US Dollar Currency

Equivalent Peso Currency

NG direct Guarantee on GOCC Loans

$10,161,797,647.20

P445,594,826,829.58

P100,312,226,886.00GFI Guarantee Assumed by NG per Proclamation No. 50

85,864,277.13

3,765,148,552.29

136,069,374.78 Total $10,247,661,924.33 P449,359,975,381.87 P100,448,296,260.78

Contingent liabilities of the NG under the build-operate-transfer and/or

build-lease-transfer for the guarantees extended by projects and the guarantees extended by GFIs are excluded in the above data.

4.11 Government Equity

The equity of the NG amounting to a negative P1,879,577,081,372.07 is the

difference between the assets and the liabilities accounted as follows: for the NG books – negative P2,967,767,482,048.51 and for the RA books – P1,088,190,400,676.44.

The total NG equity increased by a negative amount of P110,888,053,503.77

computed as follows:

Results of Current Operations: NG books (231,281,411,900.33) RA books 207,198,288,603.41 (24,083,123,296.92)Prior Years’ Adjustments (47,311,983,656.36)Completed Public Infrastructures and Reforestation Projects transferred to Registries (42,255,270,305.21)Remittance to National Treasury from Assets disposal (3,864,918.22)Total (113,654,242,176.71)Difference in equity beginning balance as of January 2010 with ending balance as of December 31, 2009 2,766,188,672.94Total negative increase in Government Equity (P110,888,053,503.77)

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4.12 Income/Revenue

Under the NGAS, income of the NG is recorded in the BTr-NG Books. The Bureau of Internal Revenue (BIR) and the Bureau of Customs (BOC), the two main tax revenue generating agencies and other NGAs, being collection agents do not record the income/revenue collected in their books of accounts.

4.13 Tax Revenue

Tax Revenue of P1,090,909,324,920.61 includes Motor Vehicles Users Charge of P9,295,977,987.86 which was reclassified in 2010 from Permits and Licenses to Tax Revenue. For comparability, the 2009 revenue in the SIE was restated to be in conformity with the 2010 presentation.

4.14 Expenses

4.14.1 Accounts Subsidy to LGUs (net), Subsidy to GOCCs and Subsidy to NGOs/POs totaling P340,097,090,745.28 were presented this calendar year as part of the total expenses of P1,282,070,956,813.35. In the previous years, they were shown under Other Income/Expenses. Thus, the Statement of Income and Expenses for the year ended 2009 was restated to conform to this year’s presentation.

4.14.2 Net Subsidy to National Government Agencies of negative P35,470,663,037.67

consists of the following:

Total Subsidy from National Government P1,128,090,020,364.52 Total Subsidy to National Government Agencies (1,163,560,683,402.19)Net Subsidy To National Government Agencies (P 35,470,663,037.67)

The major components of net Subsidy are Subsidy Income from National

Government reported by NGAs – P1,092,863,470,543.14; and Subsidy to National Government Agencies – P1,127,784,960,885.32. BTr-NG reported net Subsidy to NGAs amounting to P1,127,418,610,411.72 of which P1,092,266,116,012.28 pertains to replenishments to Authorized Government Servicing Banks of negotiated MDS checks.

4.15 Notice of Cash Allocation (NCA)

The NCA received by the NGAs for their operating and capital expenditures

requirements, net of reversion of unused/lapsed NCA, amounted to P1,111,167,881,790.52 as shown in the SCF computed as follows:

Gross receipts of NCA P1,146,921,393,168.98Less: Reversion of unused/lapsed NCA __35,753,511,378.46Net NCA P1,111,167,881,790.52

V. FINANCIAL ANALYSES

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FINANCIAL ANALYSES

5.1 Balance Sheet

The total assets of the National Government as of December 31, 2010 rose to P3.139

trillion. Compared to 2009 level of P2.880 trillion, a growth of P259.34 billion or 9.01 percent was noted.

For the same period, the total liabilities of NG also grew to P5.018 trillion from

P4.648 trillion in 2009, exhibiting an increase of P370.23 billion or 7.96 percent. The total liabilities of the government exceeded the total assets by P1.880 trillion, posting a negative increase in the equity by P110.89 billion or 6.27 percent from P1.768 trillion in 2009. Table V.1-1 shows the comparative assets, liabilities and equity for CY 2010 and 2009.

Table V.1-1 Assets, Liabilities and Equity

Particulars

Amount (in million pesos) Percent 2010 2009 Increase

(Decrease) Assets 3,138,861.82 2,879,523.26 259,338.56 9.01 Current Assets 1,203,322.84 1,181,975.80 21,347.04 1.81 Investments 842,102.10 735,407.92 106,694.18 14.51 Property, Plant and Equipment

985,800.17

856,766.38

129,033.79

15.06

Other Assets 107,636.70 105,373.15 2,263.55 2.15Liabilities 5,018,438.90 4,648,212.28 370,226.61 7.96 Current Liabilities 813,020.74 912,858.30 (99,837.56) (10.94) Long-Term Liabilities 4,178,785.58 3,701,906.73 476,878.85 12.88 Deferred Credits 26,632.58 33,447.25 (6,814.67) (20.37)Equity (1,879,577.08) (1,768,689.03) (110,888.05) 6.27Difference between totals and sum of components is due to rounding off

5.1.1 Assets – P3.139 trillion

For the last five years, aggregate assets of the National Government continuously grow at an average of 4.85 percent as shown in Table V.1-2. The increase of 9.01 percent in 2010 was the second highest growth realized by the government since 2006. The first highest increase was exhibited in 2008 at 9.02 percent and the least was in 2009 with less than one percent growth.

Total assets of P3.139 trillion

consists of Current Assets – P1.203 trillion, Investments – P842.10 billion, Property, Plant and Equipment – P985.80 billion and Other Assets – P107.64 billion. All the components of assets showed growth rates of 1.81 percent, 14.51 percent, 15.06 percent and 2.15 percent, respectively. Chart V.1-1 presents the percentage distribution of the major categories of assets for 2010.

Table V.1-2 Annual Growth in Assets CYs 2006-2010

Year Amount (in million pesos) Per-

cent Assets Growth 2010 3,138,861.82 259,338.56 9.012009 2,879,523.26 9,249.78 0.322008 2,870,273.48 237,572.33 9.022007 2,632,701.15 102,020.55 4.032006 2,530,680.60 46,272.24 1.862005 2,484,408.36 - -

Average Growth 130,890.69 4.85

58

Other Assets3.43%

Property, Plant and

Equipment31.41%

Investments26.83%

Current Assets38.34%

Chart V.1-1 Categories of Assets

Cash – P 324.18 billion

At year-end, cash of the NG decreased to P324.18 billion from P334.39 billion in 2009, exhibiting a reduction of P10.22 billion or 3.06 percent. This was due to the decline in the Cash in Bank by P10.46 billion and in Cash on Hand by P1.54 billion which was partially offset by the increase of P1.78 billion in Cash - National Treasury, MDS.

Chart V.1-2 Trend of Cash

(in billion pesos)

5.1.1.1 Current Assets – P1.203 trillion

Current Assets of P1.203

trillion constituted 38.34 percent of the total assets. It showed a slight increase of P21.35 billion or 1.81 percent from the 2009 level of P1.182 trillion. The minimal growth was due to the increase in Prepayments and Inventories in the amount of P36.22 billion, and P2.53 billion, respectively which was partially offset by a combined decrease of P17.41 billion in Cash, Receivables and Other Assets.

0

50

100

150

200

250

300

350

Cash on Hand 6.76 10.27 6.14 4.98 5.51 3.97

Cash, NT-MDS 3.13 7.41 4.71 5.72 4.51 6.29

Cash in Bank 184.37 174.55 205.10 295.25 324.38 313.92

2005 2006 2007 2008 2009 2010

59

The major classifications of cash are: Cash on Hand P3.97 billion; Cash-National Treasury, MDS – P6.29 billion; and Cash in Bank – P313.92 billion. Chart V.1-2 shows the trend of cash for CYs 2005 – 2010 while Table V.1-3 shows the comparative composition of cash. For the last five years, Cash in Bank and Cash-National Treasury, MDS showed average increases of 12.55 percent and 28 percent a year, respectively while Cash on Hand decreased by an average of 4.89 percent.

Table V.1-3 Comparative Composition of Cash


Percent 2010 2009 Increase/

(Decrease) Cash on Hand 3,966.95 5,506.86 (1,539.91) (27.96) Cash in Vault 2.19 2.16 0.03 1.56 Cash – Collecting Officers 1,763.85 2,590.45 (826.60) (31.91) Cash – Disbursing Officers 597.22 681.55 (84.33) (12.37) Petty Cash Fund 81.24 102.74 (21.50) (20.93) Payroll Fund 1,522.44 2,129.95 (607.51) (28.52)Cash- National Treasury MDS 6,287.71 4,507.31 1,780.40 39.50Cash in Bank 313,922.05 324,380.32 (10,458.27) (3.22) Bangko Sentral ng Pilipinas 134,474.00 114,907.53 19.566.47 17.03

Cash in Bank – Local Currency 150,775.41 184,055.44 (33,280.03) (18.08) Current Account 71,378.03 67,665.58 3,712.44 5.49 Savings Account 47,344.07 59,622.74 (12,278.67) (20.59) Time Deposit 32,053.31 56,767.12 (24,713.80) (43.54)

Cash in Bank – Foreign Currency 28,672.64 25,417.35 3,255.29 12.81 Current Account 2,447.04 2,152.55 294.49 13.68 Savings Account 9,711.76 9,264.84 446.92 4.82 Time Deposit 16,513.84 13,999.96 2,513.88 17.96

Total 324,176.71 334,394.49 (10,217.79) (3.06)Difference between totals and sum of components is due to rounding off

Cash in Vault balance was P2.19 million, of which P2.16 million was reported by the

DOF – BTr- NG. Cash – Collecting Officers account balance of P1.76 billion pertains to various

collections which are not yet remitted/deposited with the National Treasury/AGDB as of year-end. The departments/offices with the balance of unremitted/undeposited collections to the National Treasury are as follows:

Departments/Offices Amount (in million pesos) Percent

The Judiciary 933.40 52.92 Finance 351.48 19.93 Environment and Natural Resources 94.54 5.36 State Universities and Colleges 74.70 4.24 Transportation and Communications 57.46 3.26 Office of the President 55.96 3.17 Justice 40.01 2.27 Health 35.77 2.03 Public Works and Highways 21.75 1.23 Labor and Employment 17.22 0.98 Other departments/offices 81.56 4.62

Total 1,763.85 100.00

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Under the Judiciary, the Supreme Court and Lower Courts reported P933.36 million comprising 52.92 percent of the total unremitted collections. This pertains to the collections of the Regional Trial Courts – P732.19 million; Other Lower Courts – P149.15 million; Central Office – P51.11 million; and Philippine Judicial Academy and Office of Court Administrator – P0.90 million.

The Bureau of Customs (BOC) and the BIR, both under the DOF, reported

balances of P245.89 million and P105.19 million, respectively. BOC collections include trust accounts, refund of cash advances, sale of accountable forms, 25 percent container security fees and super green lane fees.

The Land Registration Authority reported P91.97 million comprising 97.28

percent of the P94.54 million totals for the DENR.

Cash – Disbursing Officers balance of P597.22 million represents unliquidated cash advances of authorized disbursing officers at year-end. It exhibited a reduction of P84.33 million or 12.37 percent from P681.55 million in 2009. The DFA-OSEC reported the highest unliquidated cash advances with P131.02 million representing prior year’s working funds of the Regional Consular Offices and Foreign Service Posts, followed by the BOC with P113.31 million cash advances for Port Operations. The DSWD-OSEC reported P51.46 million, including P3.37 million dormant accounts. The agencies that reported more than P10 million unliquidated cash advances are:

Agency Amount

(in million pesos)

Percent

DFA – Office of the Secretary 131.02 21.94 DOF – Bureau of Customs 113.31 18.97 DSWD – Office of the Secretary 51.46 8.62 DILG – Office of the Secretary 47.42 7.94 DOTC – Office of the Secretary 40.21 6.73 DPWH – Office of the Secretary 39.63 6.64 Telecommunication Office 32.69 5.47 Technical Education and Skills

Development Authority

19.42

3.25 DOE – Office of the Secretary 17.79 2.98 National Intelligence Coordinating

Agency 11.53 1.93

Other Agencies 92.74 15.53 Total 597.22 100.00

Petty Cash Fund granted to duly designated custodian to cover petty expenses

amounted to P81.24 million, a reduction of P21.50 million or 20.93 percent from previous year’s level of P102.74 million.

Payroll Fund balance of P1.52 billion exhibited a decline of P607.51 million or 28.52

percent compared to last year’s balance of P2.13 billion. This fund represents cash advances for payment of salaries, allowances and other emoluments which remained unliquidated at year-end. The DepED-OSEC had the highest unliquidated balance of P604.86 million or 39.73 percent of the total Payroll Fund representing payroll for the deficiencies in 2009 and 2010 performance bonus and other personnel benefits granted in December 2010. The BOC showed a balance of P366.29 million or 24.06 percent,

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followed by the DPWH-OSEC with P72.12 million, the liquidation of which was recorded in January 2011.

The list of department/agencies with Cash on Hand presented by account is in

Schedule 7, Volume I-B.

Cash - National Treasury, MDS account refers to NCA received from the DBM and it is credited for the amount of MDS checks issued by agencies. The balance of P6.29 billion represents the unreleased/unclaimed MDS checks at the end of the year for payment of obligations/liabilities which was restored back to cash account by agencies in compliance with COA Circular Letter No. 2002-001 dated December 16, 2002. BTr-NG reported P4.02 billion or 64 percent of the total unreleased checks which pertains to subsidy to GOCCs, as presented in the list below.

GOCCs Amount (in million pesos)

PHIC 3,460.95 NHMFC 462.14 PNR 67.07 PHC 15.00 PITAHC 10.00 ZCSEZA 5.00 NDA 4.35

Total 4,024.51 The list of department/agencies with unclaimed/unreleased MDS checks at the

end of year is shown in Schedule 8, Volume I-B.

Cash, Bangko Sentral ng Pilipinas balance of P134.47 billion comprised of deposits in local currency of P46.58 billion and in foreign currency of P87.89 billion. It increased by P19.57 billion or 17.03 percent from last year’s balance of P114.91 billion. Of the total, P134.43 billion represents deposits of the BTr-NG for the account of the Treasurer of the Philippines and the remaining was reported by the Anti-Money Laundering Council – P46.67 million.

Cash in Bank, Local Currency Deposits totaling P150.78 billion decreased by P33.28

billion or 18.08 percent compared to 2009 level of P184.06 billion. It consists of: Current Account – P71.38 billion, Savings Account – P47.34 billion and Time Deposits – P32.05 billion. Under Executive Order No. 449, the BTr is the custodian of government funds for all receipts and disbursements of NG. However, some agencies have authority to use their income pursuant to specific law or under contracts and agreements to deposits their income in AGDB, such as those agencies with Special Account in the General Fund, Revolving Fund and Trust Fund. Table V.1-4 shows the agencies with Cash in Bank in Local Currency deposits of more than P1.50 billion balance while Schedule 9, Volume I-B shows the departments/offices/agencies with Cash in Bank, Local Currency deposits by account.

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Table V.1-4 Agencies with more than P1.50 billion Cash in Bank-Local Currency Deposits

(in million pesos) Agencies Current Savings Time Total

DOF-BTr – GOP 4,407.30 33,805.08 15,806.35 54,018.73University of the Philippines System

1,689.15

86.63

12,145.03

13,920.81DSWD – OSEC 7,790.56 1.44 7,792.00Supreme Court of the Philippines 503.42 7,093.77 7,597.19DepEd – OSEC 6,465.65 15.76 6,481.41Bureau of Internal Revenue 5,889.73 453.05 6,342.78DA – OSEC 5,398.46 47.00 10.63 5,456.09Procurement Service 2,164.74 146.06 2,005.35 4,316.15DOH – OSEC 3,887.69 12.81 3,900.50Philippine Veterans Affairs Office 3,899.13 3,899.13General Headquarters – AFP 1,192.59 2,363.01 14.92 3,570.52DPWH – OSEC 2,560.53 54.26 2,614.79Municipal Development Fund Office

1,939.55

1,939.55Presidential Management Staff 1,871.63 1,871.63DAR – OSEC 1,826.68 0.63 1,827.31National Commission for Culture

and Arts

6.61

1,592.85

1,599.46Other Departments/Agencies 19,884.61 1,671.72 2,071.03 23,627.36

Total 71,378.03 47,344.07 32,053.31 150,775.41


Bureau of the Treasury (BTr) - NG topped the list with P54.02 billion local currency deposits which includes the amount of P6.97 billion pertaining to various project loan/grants proceeds earmarked to be utilized by various implementing agencies and MDS seed money of P792.92 million,

University of the Philippines System reported P13.92 billion deposits of UP

Proper and seven campuses. SUCs are authorized under RA No. 8292, the Higher Education Modernization Act of 1997, to deposit in AGDB as Special Trust Fund collections of income from tuition fees and other school charges.

DSWD reported a total of P7.79 billion deposits of which the Central Office

shared P7.58 billion or 97.30 percent pertaining to the following programs/projects:

Programs/Projects Amount

(in million pesos)

Pantawid Pamilyang Pilipino Program under the Over the Counter and other modes of payment, a total of P3.59 billion already disbursed by the LBP Regional branches for payment of cash grants are awaiting liquidation reports

6,659.76 Trust Accounts/Fund Transfers from other NGAs 368.53 Pantawid Kuryente: Katas ng VAT program 251.98 For Socialized Housing Project 11.68 Miscellaneous 104.87

63

Programs/Projects Amount

(in million pesos)

Livelihood Revolving Fund 249.33 Tindahan Natin Project 175.57 SEA-K Revolving Fund authorized under RA No. 5146 and

AO No. 75 series of 1988

42.24 PGMA Micro-financing and enterprise Development Program 29.32 National Livelihood Support Fund 2.20Grants and Donation from various donors for disasters/ calamities

and other programs/activities

161.79Various Foreign Assisted Projects 130.41 KALAHI CIDSS books 2.37Suspense account ____4.94

Total 7,577.14Data Source: DSWD 2010 Notes to FS Difference between totals and sum of components is due to rounding off

Supreme Court accounted for P7.60 billion of which P5.73 billion or 75.45 percent pertains to Fiduciary Fund and the balance is shared by the following: Judiciary Development Fund (JDF) – P1.04 billion, Fiscal Autonomy Fund – P587.24 million and Special Allowance for the Judiciary (SAJ) – P564.36 million.

DepEd reported P6.48 billion cash in bank balance, of which P5.91 billion

includes remittances of deductions of implementing units transferred to Regional Office to cover the RPSU payrolls for the month of December and the disbursements were not yet effected during the reporting period; fund transfers to DepEd Central Office and Regional Officers for teachers’ deductions and government share which are to be remitted to GOCCs and private institutions on the 10th day of the following month; inter-agency fund transfers from Central Office to cover funding requirements of the operating units. Also included are the fund transfers by Division Offices for payment of Step increment and trust collections of secondary schools intended for student related activities.

BIR reported P6.34 billion, of which P5.95 billion under BIR-NG books consists

of unremitted collections to the National Treasury by Authorized Agent Banks – P5.50 billion and collections from Large Taxpayers – P452.62 million, both thru Over the Counter and thru Electronic Filing and Payment System (EFPS) as of December 2010, net of prior years’ balances and over remittances subject to reconciliation and refund amounting to P268.85 million.

DA-OSEC – The deposits of P5.46 billion belong to the following: National

Irrigation Administration – P3.22 billion; 14 Regional Field Units – P1.06 billion, six Staff Bureaus – P958.58 million, CARP – P162.23 million; Office of the Secretary – P34.55 million and two Foreign Assisted Projects – P22.14 million.

Procurement Service – The reported amount of P4.32 billion pertains to

advances by client agencies for goods under bidding process including accumulated income earned from prior years.

64

DOH-OSEC – The deposits of P3.90 billion consist of payroll fund for payment of salaries and other benefits, Revolving Fund from sale of medicines and medical supplies in the DOH Botika, grants and donations received from various institutions for specific purpose and collections of hospital income and retention, performance security and bid security.

PVAO – The balance of P3.90 billion is for payment of veterans’ pensions and

other benefits.

GHQ-AFP - The P3.57 billion deposits include the amount of P2.48 billion of the AFP-Modernization Act Trust Fund which was created pursuant to RA No. 7898 dated February 23, 1995, the implementation of which was approved by Congress under Joint Resolution No. 28 dated December 19, 1996.

DPWH-OSEC – The balance of P2.61 billion includes those reported by the

Central Office – P1.41 billion, expropriations deposits including interest earned from deposits of Region VII and NCR – P54.26 million; Project Management Office, Infrastructure Right of Way and Resettlement (IROWR) – P18.58 million and RWS-CARP PMO P4.01 million. It also includes dormant accounts of Regional Office No. X – P50.45 million and Regional Office No. XI – P12.82 million.

The deposit accounts of other DPWH Regional Offices consist of

collections from payment of bid documents, material testing fees, letter of intents, bonds and other income; funding checks and Notice of Transfer Allocation received from Central Office; deposits for cash received from other agencies such as DAR for ARISP projects, NWRB, DSWD, Manpower Development and Training and other government agencies with accounts held in trust by DPWH for the implementation of their projects; and deposits for road right-of way and interest from bank deposits.

DOF-MDFO – The deposits of P1.94 billion pertain to the following: Revolving

Fund – P676.22 million mainly representing the Peso Counterpart funds transferred from the MDFO Fund 102 and the peso equivalent of Loan Proceeds treated as MDF Revolving Fund authorized under PD 1914 for releases to LGUs; Local Loan Account – P200.35 million; Program Support Fund – P992.59 million; and MDFO Operations – P70.39 million. The unutilized amount of P187.56 million from completed MCDP projects were reserved for payment of Right of Way.

. Presidential Management Staff – The balance of P1.87 billion consists mainly

of the President’s Social Fund (PSF) share from PAGCOR and collections from PSF project One-Town-One Product (OTOP) beneficiaries repayments of loan assistance.

DAR-OSEC – The balance of P1.83 billion consists of deposits pertaining to

Foreign Assisted Projects – P1.07 billion, Comprehensive Agrarian Reform Program – P670.21 million and General Fund – P89.69 million.

National Commission for Culture and the Arts – the deposit of P1.60 billion

pertains to National Endowment Fund for Culture and the Arts.

65

Cash in Bank – Foreign Currency deposits of the government escalated to P28.67 billion, consisting of current account – P2.45 billion, savings account – P9.71 billion and time deposit – P16.51 billion. Compared to P25.42 billion in 2009, an increase of P3.26 billion or 12.81 percent was noted. Table V.1-5 shows the ten agencies with highest balances in foreign currency deposits while Schedule 9, Volume I-B presents the complete list of departments/agencies with foreign currency deposits by account.

Table V.1-5 Top Ten Agencies with Highest Balances of

Cash in Bank- Foreign Currency Deposit (in million pesos)

Agencies Current Savings Time Total DOF – BTr- GOP 6,345.49 15,917.88 22,263.37DFA – OSEC 1,920.73 428.16 466.15 2,815.04DSWD – OSEC 636.60 636.60DOT – OSEC 296.09 186.06 482.15DOE – OSEC 452.82 452.82Municipal Development Fund Office 225.24 225.24DENR – OSEC 205.43 205.43University of the Philippines System 3.78 60.26 117.94 181.98DPWH – OSEC 168.55 168.55Office of the Solicitor General 166.20 166.20

BTr-NG reported P22.26 billion which includes part of the free balances and

managed funds placed in LBP, DBP, PVB and UCPB totaling P12.01 billion; Forfeited Swiss deposits – P7.01 billion; Collateral bonds at Federal Reserve Bank – P728.46 million; and Escrow account – P147.39 million

DFA-OSEC deposits of P2.81 billion pertain to cash in bank maintained by

Foreign Posts, of which P1.92 billion or 68.33 percent represents their working funds.

DSWD-OSEC reported P636.60 million which includes P636.13 million

proceeds of foreign loans and grants and donations received for the following programs/projects:

Particulars Amount

(in million pesos)

Social Welfare and Development Reform Project 534.73 Poder Y Prosperidad del Communidad in support of the KC Program and

4Ps 58.13

Foreign Donations 35.51Comprehensive Pilot Intervention Plan Against Gender and Violence

(COPIPAGV) in CARAGA and Phases 2 and 3 6.87

New Zealand Aid-2nd Level ASEAN Training on Domestic Violence 0.76 Southeast Asia Regional Cooperation In Human Development 0.13

Total P636.13Source: DSWD Notes to FS

DOT-OSEC reported P482.15 million representing balances of the fund transfers

made to the 15 Philippine Tourism Offices for their operations. The amount does not reflect the actual balance since the disbursements/liquidation reports are not yet recorded in the Head Office pending the receipt of such reports.

66

DOE-OSEC deposits of P452.82 million pertains to the following: ADB Funded Project amounting to P92.37 million and SAGF-World Bank Funded Projects: Electric Cooperative System Loss Reduction Project, Rural Power Project’s Account Balance and Private Sector Development Support Guarantee for Power Reform Project’s Account Balance totaling P360.45 million.

Municipal Development Fund Office reported P225.24 million for its Revolving

Fund 161 operations.

DENR-OSEC – the balance of P205.43 million pertains to foreign loan/grant assisted projects reported under General Fund – P159.95 million and SAGF – P45.48 million.

University of the Philippines – the balance of P181.98 million includes P45.84

million time deposits of Endowment Fund of the UP Visayas. The UP Diliman reported P3.24 million (US$58,395.93 at exchange rate of P55.52 to a dollar) representing unrecorded withdrawals from 1984 to 1994 due to lack of supporting documents with Notice of Suspension No. 203-044 dated December 2003 issued by COA-Legal Adjudication Office (LAO).

DPWH-OSEC had a balance of P168.55 million representing the Working Fund

of the department to finance the ongoing foreign assisted projects.

Office of the Solicitor General (OSG) accounted P166.20 million which represents cash advances granted by the Manila International Airport Authority (MIAA) for the operating expenses of OSG Legal Task Force created for arbitration cases filed by the Philippine International Air Terminal Co. (PIATCO) and Fraport AG against the Republic of the Philippines authorized to be deposited under the Memorandum of Agreement signed by and between the MIAA and OSG.

Receivables – P743.35 billion

Outstanding Receivables of the government at P743.35 billion, net of Allowance for

Doubtful Accounts of P524.75 million, represents 61.78 percent of the total current assets of P1.203 trillion. A drop of P7.19 billion from P750.54 billion in 2009 was noted. Except for the Receivable Accounts that showed a minute increase of 0.11 percent, all the other components registered a decline. Details of the Receivable accounts are shown in Table V.1-6.

Table V.1-6 Details of Receivables by Account

Particulars


(Decrease) Receivable Accounts 247,267.56 247,008.18 259.38 0.11 Accounts Receivable, Net 7,648.37 7,834.73 (186.36) (2.38) Notes Receivable 137,085.36 137,113.30 (27.94) (0.02) Due from Officers and Employees

716.57

1,102.48

(385.92)

(35.00)

Loans Receivable - GOCCs 81,429.12 85,830.98 (4,401.86) (5.13) Loans Receivable - LGUs 3,425.68 3,332.26 93.43 2.80 Loans Receivable - Others 8,062.81 5,550.16 2,512.65 45.27 Interest Receivable 1,337.29 1,425.75 (88.46) (6.20)

67

Table V.1-6 continued

Particulars


(Decrease) Advances to Officers and Employees

7,562.36

4,818.52

2,743.83

56.94

Inter-Agency Receivables 469,946.71 475,296.40 (5,349.69) (1.13) Due from National Treasury 14,018.74 20,909.64 (6,890.90) (32.96) Due from GOCCs 433,547.29 433,383.16 164.13 0.04 Due from LGUs 14,355.71 13,590.85 764.86 5.63 Due from NGOs/POs 8,024.97 7,412.76 612.22 8.26Intra-Agency Receivables 448.76 2,373.27 (1,924.51) (81.09) Due from Regional Offices/ Staff Bureaus

0.00

1,107.51

(1,107.51)

(100.00)

Due from Operating Units 448.76 1,265.75 (816.99) (64.55)Other Receivables 25,692.97 25,865.45 (172.48) (0.67) Receivables-Disallowances/

Charges

4,861.79

4,723.75

138.04

2.92 Other Receivables 20,831.17 21,141.71 (310.53) (1.47)

Total 743,356.00 750,543.30 (7,187.30) (0.96)Difference between totals and sum of components is due to rounding off.

Accounts Receivables (Net) balance of P7.65 billion constituted one percent of the

total receivables, exhibiting a drop by P186.36 million or 2.38 percent compared to P7.83 billion reported in previous year. Among the agencies that reported huge balances with combined total of P5.10 billion or 66.64 percent are: DOTC-OSEC – P2.20 billion; DOE-OSEC – P1.05 billion; DOH-OSEC – P984.06 million; National Water Resources Board – P507.52 million; and University of the Philippines – P362.85 million. Schedule 10, Volume I-B presents the departments/offices/ agencies with balances to Accounts Receivables (net).

Notes Receivables stood at P137.08 billion, of which P137.02 billion or 99.95 percent

was reported by the BTr-NG pertaining to the Promissory Note issued by the Central Bank-Board of Liquidators (CB-BOL) in favor of the Treasurer of the Philippines in substitution for the frozen/retained deposits of NG in the CB-BOL. Other agencies with balances of this account totaling P65.34 million are: National Agricultural and Fishery Council – P37.92 million, DOH-OSEC– P13.15 million, Cotton Development Administration – P6.97 million, Visayas State University – P5 million and Environmental Management Bureau – P2.30 million.

Due from Officers and Employees at P716.56 million decreased by P385.92 million

or 35 percent from P1.10 billion in 2009. The amount consists of billings for overpayment of salaries, allowances/entitlements, honoraria and cash shortages. The ten agencies which reported the highest amounts are: DFA-OSEC – P145.39 million; DOF-BIR – P126.95 million; DA-OSEC – P52.61 million; Supreme Court and Lower Courts – P37.78 million; DepED-OSEC – P36.96 million; DOTC-OSEC – P29.86 million; Philippine Army – P29.11 million; DOH-OSEC – P28.02 million; DAR-OSEC – P21.80 million; and GHQ-AFP – P20.17 million. Schedule 11, Volume I-B presents the complete list of departments/offices/agencies with balances to this account.

Loan Receivables – GOCCs totalling P81.43 billion decreased by P4.40 billion or 5.13

percent compared to previous year’s balance of P85.83 billion. Of the total, the BTr-NG reported P78.32 billion or 96.18 percent consisting of cash and constructive cash loan outlays to GOCCs of which P6.15 billion is due and demandable for CY 2011. Details

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of this Loans Receivables by GOCCs are presented in Schedule 12, Volume I-B. The BTr-NG account also includes balances of accounts Investments-Interest Bearing Loans to GOCCs and Other Interest Bearing Loans amounting to P73.17 million and P37.59 million, respectively, which remained dormant for 12 to 30 years and were already requested to COA for write-off.

The DA-OSEC reported P1.66 million which includes P1.0 billion fund transfers

to PhilRice and Quedan and Rural Credit Guarantee Corporation (QUEDANCOR) to cover the implementation of the Financing Program for Small Farmers and Fisherfolk using the Self-Reliance Team (SRT) Model and Other Schemes under the Agricultural Competitiveness Enhancement Fund (ACEF) - Fund 183 created under RA No. 8178 entitled “An Act Replacing Quantitative Import Restriction on Agricultural Products, Except Rice with Tariffs Creating the Agricultural Competitiveness’ Enhancement Fund and for other Purposes.” The Agricultural Credit Policy Council also reported P1.32 million loan receivable from GOCCs.

Loan Receivables – LGUs reached P3.43 billion, posting an increase of P93.42 million

or 2.80 percent over last year’s P3.33 billion. The MDFO reported P3.14 billion loan receivables from LGUs comprising 91.61 percent of the aggregate. The other two agencies with this account are the DA-OSEC with P281.18 million composed of loans to LGUs in the form of 4 Wheel Tractors, Irrigation Pumps and warehouses with repayment period of 5-10 years; and the Bureau of Local Government Finance with P6.38 million.

Loans Receivable – Others amounted to P8.06 billion showing an increment of P2.51

billion or 45.27 percent from P5.55 billion in previous year. The DA-OSEC reported the highest balance at P6.23 billion which includes P4.07 billion loans granted to various beneficiaries for implementation of ACEF and P7.04 million loans granted by RFU Region VI to farmers in the form of Shallow Tube Wells (STW) and Farm Equipment payable in 10 equal installments or in 5 years and loans granted under the WV “in life” Program in the form of 10 heads of swine per recipient payable in 36 months from delivery.

Other department/agencies that reported more than P100 million loan

receivables aggregating P1.53 billion are shown below.

Agency Amount

(in million pesos)

DTI-OSEC 346.72 Agricultural Credit Policy Council 252.07 Commission on Higher Education 247.31 DAR-OSEC 157.94 DOLE-OSEC 153.84 Cooperative Development Authority 140.24 National Agricultural and Fishery

Council 125.44

DSWD-OSEC Total

110.37 1,533.93

Interests Receivable on various investments and loans granted dropped to P1.34 billion

from P1.42 billion in previous year, exhibiting a reduction of P88.46 million or 6.20

69

percent. MDFO reported the highest at P501.96 million interest receivable from loans released to LGUs. DOTC-OSEC followed with P491.24 million representing unpaid interest on MRTDC and Greenfield Development Corporation developmental rights payments as of December 31, 2010. The BTr-NG reported P226.45 million accrued interest on investments in Treasury Bonds from the Special and Sinking Funds.

Advances to Officers and Employees rose to P7.56 billion from prior year’s balance

of P4.82 billion, posting a substantial increase of P2.74 billion or 56.94 percent. The amount represents unliquidated cash advances granted for local and foreign travels and for special purpose/time-bound undertakings. For this year, the COMELEC topped the list with P3.10 billion corresponding to 40.99 percent of the total, followed by DepEd with P1.70 billion or 22.47 percent. Other agencies with substantial balances of unliquidated cash advances were: Office of the President – P311.76 million, DTI-OSEC – P271.25 million, Presidential Anti-Organized Crime Commission – P250 million, DA-OSEC – P214.19 million, Philippine National Police – P117 million, DOLE-OSEC – P93.08 million, DFA-OSEC – P93.06 million and DOJ-OSEC – P81.54 million. Schedule 11, Volume I-B presents the complete list of departments/offices/agencies with unliquidated advances to officers and employees.

Inter-agency Receivables dropped to P469.95 billion from P475.30 billion in prior

year or a reduction of P5.35 billion or 1.13 percent. It includes the followings accounts:

Due from National Treasury was reduced to P14.02 billion after the elimination with the reciprocal account Due to Other NGAs amounting to P14.43 billion. Compared to last year’s balance of P20.91 billion, it registered a decrease of P6.89 billion or 32.96 percent. The account pertains to collections of income which some government agencies are authorized to use but are required to remit to the National Treasury pursuant to Executive Order No. 338 and other non-income receipts such as performance/bail/bidders bond in cash. The BIR reported the highest amount at P8.17 billion which includes Tax Credit Certificates (TCC) and Tax Debit Memo (TDM) by various BIR issuing offices and DOF-One Stop Shop from August 2006 to December 2010 under the Special Revalidation Program.

The CHED followed with P3.62 billion representing share in the income of

Government Financial Institutions, such as PAGCOR, PRC and PTA which was deposited to the BTr for eventual release to HEDF.

Due from GOCCs of P433.55 billion slightly grew by P164.13 million from

P433.38 billion last year. The BTr-NG reported P401.41 billion or 92 percent, details of which are shown in Table V.1.7. Schedule 13, Volume I-B presents the list of GOCCs with balances under this account.

70

Table V.1-7 Due from GOCCs Reported by the Bureau of the Treasury

Nature Amount

(in million pesos)

NGs advances in behalf of GOCCs/GFIs for their foreign and domestic obligations (principal, interest and other charges)

238,837.00

NG’s refinancing of BSP advances/payments on liabilities retained with CB-BOL

136,781.50

Guarantee fee receivables 8,442.65NG advances to GOCCs/GFIs for transferred liabilities 7,976.05Dormant accounts 7,783.18Balance of loans outlay released to LBP under the Agrarian Reform Loans 1,275.91Balance of DBP’s outstanding obligations to NG involving the transfer of

DBP’s receivable from DAR/LBP pursuant to EO No. 407 dated June 14, 1990

272.25Others 44.61

Total Source: BTr-NG Notes to FS

401,413.15

The DOE-OSEC also reported P15.66 billion which includes P13.90 billion

due from NPC representing cost of banked gas from Shell Philippines Exploration B.V. and Occidental Philippines Inc. (SC-38-Malampaya Natural Gas) which is non-existent because it has been sold to the Philippine National Oil Company (PNOC); and P1.56 billion due from PNOC-Energy Development Corporations (EDC) arising from the royalties and Tax Exemption Certificates.

Due from LGUs balance of P14.36 billion increased by P764.86 million or 5.63

percent from 2009 level of P13.59 billion. The account pertains to unliquidated fund transfers to various LGUs for implementation of specific agencies’ projects in the locality. The DA-OSEC reported the highest balance at P4.41 billion including funds transfer for implementation of various infrastructures projects and post harvest facilities such as Farm to Market Roads, Small Water Impounding Projects, farm inputs and repair/rehabilitation oF existing irrigation. Other agencies with more than P1 billion balance under this account are: DAR-OSEC – P2.14 billion, DOH-OSEC – P1.34 billion, DPWH-OSEC – P1.26 billion and Metro Manila Development Authority – P1.10 billion.

Due from NGOs/POs of P8.02 billion registered an increase of P612.22 million

or 8.26 percent from the previous year’s balance of P7.41 billion. The accounts pertains to funds entrusted by NGAs to various NGOs/POs for implementation of specific government projects which require submission of periodic/final Fund Utilization Report and Physical Status Report pursuant to COA Circular No. 2007-001 dated October 25, 2007.

The DA-OSEC reported P1.45 billion for the procurement of farm inputs

and farm implements for the implementation of livelihood and other DA programs/projects.

The DOH-OSEC accounted for P1.37 billion which includes funds

transferred to UNICEF and World Health Organization for the procurement of various drugs and medicines and other inventory supplies.

71

DSWD-OSEC reported P1.00 billion, of which P113.13 million was released by the DSWD Central Office in 2010 and P369.98 million were transferred in 2009 and prior years. The funds transferred to NGOs/POs were sourced from the Congressional Initiative, Congressional Development Funds (CDF) and PDAF of various solons

Schedule 14, Volume I-B presents the departments/agencies with balances of accounts Due from GOCCs, LGUs, and NGOs/POs.

Other Receivables at P25.69 billion declined by P172.49 million from P25.86 billion

in 2009. The components are accounts Other Receivables – P20.83 billion or 81.08 percent and Receivables - Disallowances/Charges – P4.86 billion or 18.92 percent. Receivables-Disallowances/Charges of P4.86 billion pertains to unsettled audit

disallowances that have become final and executory. Compared with the previous year’s balance of P4.72 billion, a minimal increase of P138 million or 2.92 percent was noted. The agencies which reported substantial amounts are: Bureau of Customs – P1.84 billion, DPWH-OSEC – P1.05 billion; DA-OSEC – P193.44 million; Bureau of Fire Protection – P191.05 million; DOH-OSEC – P174.98 million; ARMM-Office of the Regional Governor – P171.75 million; DepEd-OSEC – P152.40 million; and COMELEC – P140.79 million.

Other Receivables dropped to P20.83 billion from P21.14 billion in 2009,

showing a decrease of P310.53 million or 1.47 percent. The BTr-NG reported P15.09 billion comprising 72.43 percent of the total, of which P14.60 billion pertains to the receivables of the Treasurer of the Philippines from AABs for BIR collections per Department Order No. 73-02 dated September 20, 2002 and Memorandum of Agreement between banks, BTr and BIR. The COMELEC reported P1.30 billion, which mainly came from the nullified contract of Mega Pacific eSolutions, Inc. amounting to P1.05 billion and the rest from unliquidated cash advances of officials and employees who have retired, resigned or have been separated from the service.

Schedule 15, Volume I-B shows the departments/agencies with balances of

accounts Other Receivables.

Inventories – P25.20 billion

Inventories of supplies, materials and agricultural and forestry products rose to P25.20 billion, posting an increment of P2.53 billion or 11.17 percent compared to last year’s level of P22.67 billion. The components of this category of assets are: Supplies Inventory – P23.18 billion or 92 percent; Materials – P1.29 billion or 5.11 percent; and Agricultural, Fishery and Forestry Products – P725.34 million or 2.89 percent.

Among the agencies, the DOH-OSEC reported the highest balance of P5.70 billion

which includes Drugs and Medicines – P3.32 billion, Medical and Dental Laboratory – P1.09 billion, Office Supplies – P549.66 million, and Merchandise Inventory – P403.65 million.

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The agencies which reported more than P1.00 billion inventory at year-end are shown in table at right while Schedule 16, Volume I-B presents the complete list of departments/offices/ agencies.

Prepayments – P99.16 billion

Total Prepayments of P99.16 billion

increased by P36.22 billion or 57.55 percent over last year’s figure of P62.94 billion. This was brought mainly by the increase in Deferred Charges amounting to P38.46 billion. The components of this group of assets are: Deferred Charges – P74.46 billion; Deposit on Letters of Credits – P10.57 billion; Advances to Contractors – P9.61 billion; Other Prepaid Expenses – P3.48 billion; Prepaid Rent – P670.56 million; Prepaid Interest – P202.78 million; and Prepaid Insurance – P170.56 million. Schedule 17, Volume I-B shows the components of Prepayment accounts by department/office.

Deferred Charges of P74.46 billion comprised 75.10 percent of the aggregate

prepayments. BTr-NG reported P74.44 billion pertaining to discounts on Bond Exchange, the issuance by NG of Zero-coupon Bonds and Global bonds abroad and premiums on investments in bonds held by Bond Sinking Fund, Special Guaranty Fund, Security Stabilization Fund and Manila Waterworks Sewerage System which are being amortized over the life of the bond.

Deposit on Letters of Credits amounted to P10.57 billion, of which DND-GHQ-AFP

accounted P7.15 billion or 67.61 percent of the total. This account represents marginal deposits made to various government and private banks in favor of foreign suppliers thru their local representatives for the procurement of imported motor vehicles, equipment and ammunitions to support the logistical requirements. Other agencies which reported substantial balances are: Philippine Army – P679.64 million, Philippine National Police – P649.54 million, and COMELEC – P530.10 million.

The balance of COMELEC pertains to retention money of Smartmatic-SAHI

Technologies for the automation contract of the 2008 ARMM elections, Smartmatic-TIM Corp and Smartmatic International for the automation of the 2010 national and local elections.

Advances to Contractors accounted for P9.61 billion which represents 15 percent

advance payment in the implementation of the foreign assisted and locally funded infrastructures and other projects. The amount is supposed to be recouped from succeeding progress payments as required by the Procurement Law. The DPWH-OSEC reported P6.23 billion or 64.82 percent of the total and DA-OSEC P1.11 billion or 11.57 percent.

Other Current Assets group at P11.43 billion consists mostly of Guaranty Deposits of

P11.04 billion or 96.59 percent and Other Current Assets account of P389.09 million. Guaranty Deposits of P11.04 billion represents cash deposits with government banks

and other and private institutions mainly for the procurement of goods, equipment and

Agencies Amount

(in million pesos)

DOH-OSEC 5,697.21 DepEd-OSEC 2,894.53 Philippine Air Force 2,112.59 Philippine Army 1,305.58 GHQ-AFP 1,175.55 DOTC-OSEC 1,140.42 COMELEC 1,116.55 DA-OSEC 1,056.22

73

ammunitions locally and from abroad subject to refund. The GHQ-AFP reported P6.22 billion while DA-OSEC shared P4.01 billion representing 56.33 percent and 36.29 percent of the total, respectively.

The account of DA-OSEC pertains to deposits with LBP representing

contribution/augmentation to the Agricultural Guarantee Pool Fund (AGPF) for Rice Self-Sufficiency Program of the Government per Administrative Order No. 244 dated October 23, 2008. The AGPF is intended for five years subject to review for extension as agreed upon by DA and LBP.

The departments/offices with balances of Other Current Assets by account are

presented in Schedule 18, Volume I-B.

5.1.1.1 Investments – P842.10 billion

Investments of the NG worth P842.10 billion comprised 26.83 percent of the total assets, higher by P106.69 billion or 14.51 percent than the previous year’s level of P735.41 billion. The increase is attributed to Sinking Fund which grew by P104.93 billion or 20.55 percent from P510.67 billion in 2009. Investments in Securities consisting of Treasury Bills, Stocks and Other Marketable Securities also contributed to the increase of P1.73 billion, P610.50 million and P275.95 million, respectively, but partly offset by a reduction in Investments in Bonds by P857.95 million as shown in Table V.1-8.

Table V.1-8 Composition of Investments


Percent 2010 2009 Increase/ (Decrease)

Investments in Securities 226,496.28 224,733.46 1,762.82 0.78 Investments in Treasury Bills 13,389.72 11,655.40 1,734.32 14.88 Investments in Stocks 126,510.26 125,899.76 610.50 0.48 Investments in Bonds 7,696.61 8,554.56 (857.95) (10.03) Other Investments and Marketable Securities

78,899.69

78,623.75

275.95

0.35

Sinking Fund 615,605.81 51,674.46 104,931.35 20.55Total 842,102.10 735,407.92 106,694.18 14.51


Investment in Treasury Bills increased to P13.39 billion from P11.65 billion in previous

year. MDFO had the highest investment at P10.26 billion or 76 percent of the total representing MDFO Local Loans Account Fund 162 Second Generation Fund which was temporarily placed in Treasury Bills. Other agencies with large amount of investments in Treasury bills are: DOE-OSEC – P2.34 billion, Bureau of Rural Workers – P274.65 million, BTr-GOP P146.19 million from its managed funds, Supreme Court – P100 million.

Investments in Stocks at P126.51 billion slightly increased by P610.50 million from P125.90 billion in 2009. The BTR-NG reported P123.95 billion or 97.98 percent consisting of NG equity contributions to GOCCs – P96.32 billion; capital stocks to international financial organizations – P24.55 billion; equity in the Philippine National Construction Corporation (PNCC) transferred by GFIs to NG – P1.26 billion and NG holdings in the capital stock of the Philippine Airlines pursuant to Administrative Order No. 242 dated October 21, 1991 and Proclamation No. 50 dated December 8, 1986 – P1.82 billion. The

74

schedule of Investments in Stocks of the NG as reported by the BTr-NG is presented in Schedule 19, Volume I-B.

Investments in Bonds dropped to P7.70 billion, exhibiting a reduction of P857.95 million or 10.03 percent from P8.55 billion in the previous year. The BTr-NG reported P7.52 billion or 97.75 percent of the total, which consists of NG investments in NIA Bonds – P4.25 billion and ROP Bonds – P131.43 million and in BTr managed/administered funds – P3.14 billion.

Other Investments and Marketable Securities at P78.90 billion slightly increased by P275.95 million. Bulk of this account’s balance amounting to P76.38 billion or 96.80 percent was reported by the BTr-NG, with the following details.


NG-equity in non-stock GOCCs 74,850.06 NG equity in non-stock GOCCs which were already defunct

and unidentified GOCCs/Accounts

1,431.54 DBP – Agro-Industry Technology Transfer Program (AITTP) 40.12 LBP Bonds transferred by DBP, NDC and BIR/BOL 43.88 Balance of special fund under RA 5517 turned over by PDIC in

1994 in the form or T/Notes and T/bills

6.59 Converted accounts which had remained dormant for almost 20

years and no available documents to verify the accounts

4.03 Total 76,376.23


Other agencies that reported substantial balance are: UP – P745.27 million, DAR-

OSEC – P687.61 million, OP – P275.62 million, CHED – P272.85 million, DA-OSEC – P155.21 million, DepEd-OSEC – P100.68 million, Presidential Management Staff – P74.10 million and Office of the Presidential Adviser on the Peace Process – P73.05 million. The schedule of Other Investments and Marketable Securities by department/ office is shown in Schedule 20 Volume I-B.

Sinking Fund of P615.61 billion registered an increase of P104.93 billion or 20.55 percent. This includes Sinking Fund of NG-issued and NG Guaranteed LBP, MWSS, HGC, NFA, NPC, PPA and PAG-IBIG Bonds being administered by the BTr-NG totaling P615.59 billion.

5.1.1.2 Property, Plant and Equipment – P985.80 billion

The aggregate book value of PPE rose to P985.80 billion, net of accumulated depreciation of P121.67 billion .This group of asset constituted 31.41 percent of the total assets. Compared to 2009 balance of P856.76 billion, an increase of P129.03 billion or 15.06 percent was posted. The major classification of PPE with the corresponding accumulated depreciation is shown in Table V.1-9.

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Land and LandImprovements

Buildings

LeaseholdImprovements

Office Equipment,Furniture and Fixtures

Machineries andEquipment

TransportationEquipment

Other Property, Plantand Equipment

Construction inProgress

Table V.1-9 Major Classification of Property, Plant and Equipment

Particulars

Amount (in million pesos) Percent Gross

AmountAccumulated Depreciation

Net Book Value

Land and Land Improvements 205,866.96 2,244.89 203,622.07 20.66 Buildings 172,795.42 38,929.14 133,866.28 13.58 Leasehold Improvements 391.96 109.74 282.22 0.03 Office Equipment, Furniture

and Fixtures 58,855.57 26,894.29 31,961.28 3.24

Machineries and Equipment 78,202.10 31,926.14 46,275.96 4.69 Transportation Equipment 43,788.46 19,466.34 24,322.12 2.47 Other Property, Plant and Equipment

8,275.96

2,100.37

6,175.59

0.63

Construction in Progress 539,294.64 ______-.__ 539,294.64 54.71 Total 1,107,471.07 121,670.91 985,800.17 100.00


Chart V.1-3 Classification of Property, Plant and Equipment

Among the components, the Construction in Progress (CIP) worth P539.29 billion accounted for 54.71 percent followed by Land and Land Improvements of P203.62 billion or 20.66 percent. Chart V.1-3 shows the classification of PPE by percentage distribution. while Schedule 21, Volume I-B presents the PPE by department/agency and by account.

Land and Land Improvements valued at P203.62 billion exhibited a reduction of

P940.80 million from P204.56 billion last year. Among the components, Land worth P159.92 billion decreased in value by P4.68 billion or 2.84 percent from P164.59 billion in the previous year; while Runways/Taxiways with net book value of P1.34 billion increased by P882.11 million or 192.27 percent from P458.79 million in 2009. The significant increase in Runways/Taxiways was due to the reclassification of account Construction in Progress of various completed ports and airports projects to its proper account as reported by the DOTC-OSEC. Table V.1-10 shows the comparative components of Land and Land Improvement accounts

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Table V.1-10 Components of Land and Land Improvements

Particulars

Amount (in million pesos) Percent 2010 2009 Increase/

(Decrease) Land 159,915.78 164,593.51 (4,677.73) (2.84) Land Improvements 39,919.85 37,090.93 2,828.92 7.63 Runways/Taxiways 1,340.90 458.79 882.11 192.27 Railways 1,851.91 1,851.91 - - Electrification, Power and

Energy Structures

593.63 567.74

25.89

4.56

Total 203,622.07 204,562.88 (940.80) (0.46) Difference between totals and sum of components is due to rounding off.

The five agencies that reported more than P10 billion worth of property

recorded under the Land and Land Improvement accounts are: DSWD-OSEC – P40.25billion, DPWH-OSEC – P32.95 billion, DA-OSEC – P20.69 billion, Philippine Air Force – P17.63 billion and Presidential Commission on Good Government – P16.02 billion.

Buildings with accumulated net book value of P133.87 billion comprised 13.58 percent

of the total PPE. It exhibited an increase of P10.86 billion or 8.83 percent over the 2009 level of P123 billion. Table V.1-11 shows the components of Buildings account. School Buildings worth P57.02 billion which is 42.60 percent of the total Buildings account, exhibited the highest increase of P9.64 billion or 20.34 percent.

Table V.1-11 Components of Buildings


Percent

2010

2009

Increase/ (Decrease)

Office Buildings 43,147.45 42,637.50 509.95 1.20 School Buildings 57,024.96 47,385.98 9,638.98 20.34 Hospitals and Health Centers 7,189.15 6,786.22 402.92 5.94 Markets and Slaughterhouses 109.65 102.64 7.01 6.83 Other Structures 26,395.07 26,089.85 305.22 1.17

Total 133,866.28 123,002.20 10,864.08 8.83 Difference between totals and sum of components is due to rounding off.

Among the agencies, DepEd OSEC reported the highest net book value of

Buildings worth P40.72 billion, P38.15 billion or 93.7 percent of which pertains to School buildings. This amount excludes school building projects implemented by DPWH due to non-availability of documents such as certificate of final completion, certificate of acceptance by end-user and journal entry voucher. The DPWH-OSEC reported P25.74 billion worth of buildings which include completed school building projects of P6.00 billion that were already transferred to the end-user agencies but not yet dropped from the books of DPWH.

Construction in Progress valued at P539.29 billion comprised 54.71 percent of the

total PPE. This amount is higher by P122.63 billion or 29.43 percent than the 2009 balance of P416.67 billion. The account consists of CIP-Agency Assets - P33.57 billion, Public Infrastructures – P503.64 billion and Reforestation Projects – P2.08 billion, exhibiting an increment of 25.70 percent, 29.77 percent and 12.51 percent, respectively. Table V.1-12 shows the components of CIP-Agency Assets group of PPE account.

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CIP – Agency Assets amounting to P33.57 billion posted an increment of P6.86 billion from P26.71 billion in 2009. The agencies that reported the highest amount of CIP-agency assets worth P1.50 billion above are: DOTC-OSEC – P6.07 billion; DepEd-OSEC – P5.02 billion; UP – P3.19 billion; DOH-OSEC – P3.15 billion; Philippine Army – P1.64 billion; DA-OSEC – P1.56 billion; and DPWH-OSEC – P1.51 billion. Schedule 22 Volume I-B shows the CIP by department/agency.

Table V.1-12 Components of Construction in Progress

Particulars


(Decrease) Agency Assets 33,571.28 26,707.18 6,864.10 25.70Public Infrastructure 503,643.56 388,110.65 115,532.91 29.77Roads, Highways and Bridges 326,691.53 247,675.89 79,015.64 31.90Parks, Plazas and Monuments 838.46 748.98 89.48 11.95Ports, Lighthouses and Harbors 6,014.21 6,686.61 (672.40) (10.06) Artesian Wells, Reservoirs, Pumping Stations and Conduits

3,354.51

3,138.98

215.53

6.87 Irrigation, Canals and Laterals 60,712.76 43,225.88 17,486.88 40.45 Flood Controls 52,796.04 41,923.11 10,872.93 25.94 Waterways, Aqueducts,

Seawalls, Riverwalls

2,270.15

1,284.38

985.77

76.75 Other Public Infrastructures 50,965.90 43,426.82 7,539.09 17.36Reforestation Projects 2,079.79 1,848.57 231.22 12.51 Upland 2,043.15 1,826.32 216.84 11.87 Marchland/Swampland 36.64 22.25 14.39 64.68


Public Infrastructures aggregated P503.64 billion exhibiting an increase of P115.53

billion or 29.77 percent compared with the 2009 level of P388.11 billion. The components of this group are as follows: Roads, Highways and Bridges – P326.69 billion or 64.87 percent, Irrigation, Canals and Laterals – P60.71 billion or 12.05 percent, Flood Control – P52.80 billion or 10.48 percent; and Other Public Infrastructures – P50.96 billion or 10.12 percent, Ports, Lighthouses and Harbors – P6.01 billion, Artesian Wells, Reservoirs, Pumping Stations and Conduits – P3.35 billion, Waterways, Aqueducts, Seawalls – P2.27 billion and Parks, Plazas and Monuments – P838.46 million.

Table at right shows the

reported balances of the top ten agencies. The DPWH accounted for P408.41 billion or 81.09 percent, consisting of Roads, Highways and Bridges – P322 billion and Flood Controls – P47.98 billion.. DA-OSEC reported P57.39 billion, P54.54 billion of which pertains to Irrigation, Canals and Laterals.

Agencies

Amount (in million

pesos)

Percen- tage

DPWH - OSEC 408,413.09 81.09 DA-OSEC 57,392.20 11.40 DOTC-OSEC 27,324.15 5.43 PRRC 6,602.73 1.31 DAR-OSEC 1803.95 0.36 DENR-OSEC 773.88 0.15 MMDA 465.12 0.09 Philippine Army 406.37 0.08 DOH-OSEC 265.40 0.05 ARMM 73.11 0.01 Other Agencies 123.67 0.02

Total 503,643.57 100.00

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Reforestation Projects of P2.08 billion was reported by DENR-OSEC consisting of P2.04 billion for Upland and P36.64 million for Marshland/Swampland.

Schedule 23, Volume I-B presents CIP-Public Infrastructure and

Reforestation Projects by department/agency.

5.1.1.3 Other Assets – P107.64 billion

The aggregate Other Assets of the NG stood at P107.64 billion and accounted for 3.43 percent of the total assets. This group of account went up by 2.15 percent or P2.26 billion from last year’s balance of P105.37 billion. Among the components of this group, Breeding Stocks had the highest growth rate at 94.79 percent. Table V.1-13 shows the components of Other Assets Group.

Table V.1-13 Components of Other Assets Group

Particulars


(Decrease) Other Assets 96,022.43 94,989.48 1,032.95 1.09 Items in Transit 10,385.98 9,526.53 859.45 9.02 Breeding Stocks 735.53 377.60 357.92 94.79 Arts, Archeological Specimen and Other Exhibit

394.55

381.51

13.04

3.42

Work/Other Animals 98.20 98.03 0.17 0.18 Total 107,636.69 105,373.15 2,263.55 2.15


Other Assets account is used to record the value of serviceable assets not used in

operation and those waiting for disposal. At year-end, this account amounted to P96.02 billion or 89.21 percent of the total. The BTr-NG reported P72.75 billion balance consists mostly of transferred assets under Proclamation No. 50 wherein disposition and sale are being handled by Privatization and Management Office and PNPP/NPC, and financial assets transferred from DBP, PNB and Philguarantee amounting to P68.17 billion and P4.58 billion, respectively. It also includes the P2.17 million appraised value of diamonds in the Treasury Vault deposited by various government agencies which were escheated in favor of the Republic of the Philippines per court order dated May 5, 1997.

5.1.2 LIABILITES – P5.018 trillion

This year’s reported liabilities of P5.018 trillion posted an increment of P370.23 billion or 7.96 percent compared to last year’s amount of P4.648 trillion. Of the total, P4.179 trillion or 83.27 percent pertains to Long-term Liabilities, P813.02 billion or 16.20 percent represents Current Liabilities; and P26.63 billion or 0.53 percent refers to Deferred Credits.

Chart V.1-4 shows the trend of the liabilities of the NG for the last nine (9)

years since 2002 when the NGAS was implemented.

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Chart V.1-4 - Trend of Total Liabilities (in billion pesos)

The chart discloses that except in 2007 where there was a slight decline, total

liabilities continued to grow. The decline was attributed to the decrease in Long-term Liabilities during that year. The chart also reveals that though Long-term Liabilities dropped in 2009, this was offset by a greater increase in Current Liabilities. The minor drop in Current Liabilities this year was recompensed by a bigger increase in Long-term Liabilities. Deferred Credits, though forming part of the total liabilities, was not included in the graphical presentation because of its insignificant amount.

5.1.2.1 Current Liabilities – P813.02 billion

This year’s Current Liabilities posted a decrease of P99.84 billion or 10.94 percent from last year’s balance of P912.86 billion brought about by the decline in Loans Payables, Domestic, Current of P94.85 billion or 14.64 percent and Inter-Agency Payables of P17.48 billion or 25.97 percent. There were, however, increases in Payable Accounts of P9.50 billion or 8.42 percent and Other Liability Accounts of P1.78 billion or 2.26 percent.

Table V.1-14 shows the components of Current Liabilities with comparative

figures of year 2009.

0

1,000

2,000

3,000

4,000

5,000

6,000

Current Liabilities 672.87 204.10 225.90 212.80 239.74 250.12 271.77 912.86 813.02

Long-term Liabilities 2,356.45 3,321.56 3,706.28 3,885.69 3,887.98 3,784.15 4,139.97 3,701.91 4,178.79

Total Liabilities 3,031.51 3,537.45 3,989.48 4,148.77 4,167.12 4,055.68 4,440.24 4,648.21 5,018.44

2002 2003 2004 2005 2006 2007 2008 2009 2010

80

Table V.1-14 - Comparative Components of Current Liabilities

Particulars

2010 2009 Increase/(Decrease) Amount

(in million pesos)

Percent Distribu-

tion

Amount (in million

pesos)

Amount (in million

pesos) Percent

Payable Accounts 122,372.76 15.05 112,873.39 9,499.37 8.42 Inter-Agency Payables 49,816.03 6.13 67,293.64 (17,477.61) (25.97)Intra-Agency Payables 7,208.54 0.89 5,999.91 1,208.63 20.14 Other Liability Accounts 80,403.92 9.89 78,625.52 1,778.39 2.26 Loans Payables, Domestic,

Current 553,219.49

68.04

648,065.84

(94,846.35)

(14.64)

Total 813,020.74 100.00 912,858.30 (99,837.57) (10.94) Difference between totals and sum of components is due to rounding off

Payable Accounts – P122.37 billion

Payable Accounts exhibited an increase of P9.50 billion or 8.42 percent from

P112.87 billion in 2009. This was due to the increase in Accounts Payable by P9.05 billion and Due to Officers and Employees by P997.27 million partly offset by a decrease in Interest Payable by P538.75 million.

Accounts Payable of P105.15 billion accounted for 85.92 percent of the total

Payable Accounts, exhibiting an increase of P9.05 billion or 9.41 percent from P96.10 billion in 2009. Table V.1-15 shows the comparative Accounts Payable by department/office.

Table V.1-15 - Accounts Payable by Department/Office


Percent2010 2009 Increase/

(Decrease) Public Works and Highways 52,171.83 48,948.97 3,222.86 6.58 Pasig River Rehabilitation Commission

6,662.77

4,455.85

2,206.92

49.53

Finance 6,338.80 2,231.27 4,107.53 184.09 Health 5,945.69 4,487.98 1,457.71 32.48 State Universities and Colleges 5,384.12 4,828.42 555.70 11.51 Agriculture 4,611.48 3,041.15 1,570.33 51.64 Transportation and

Communications

3,630.53

6,336.14

(2,705.61) (42.70) Education 2,962.49 5,359.02 (2,396.53) (44.72) Social Welfare and Development 2,930.22 1,177.50 1,752.72 148.85 National Defense 2,494.18 2,121.15 373.03 17.59 Other Departments/Offices 12,012.99 13,111.01 (1,098.02) (8.37) Total 105,145.10 96,098.46 9,046.64 9.41


The table discloses that the increment in Accounts Payable was mainly due to the increase in the accounts of the DOF – P4.11 billion, DPWH – P3.22 billion, Pasig River Rehabilitation Commission – P2.21 billion, DSWD – P1.75 billion, DA

81

– P1.57 billion, and DOH – P1.46 billion. The increase was however partly offset by the decrease in the DOTC – P2.71 billion, DepED – P2.40 billion, and net decrease in other departments – P1.10 billion.

DPWH reported the biggest Accounts Payable of P52.17 billion, of which

P52.11 billion was accounted for by the OSEC. This pertains to unpaid accounts on contractors’ progress billings and suppliers’ goods posting an increase of P3.46 billion from last year’s balance of P48.64 billion due to net transactions arising from payment of contract progress billings, payment to expropriation accounts, payment to suppliers and various adjustments. The remaining P64.90 million was recorded by the Road Board.

The Pasig River Rehabilitation Commission followed with P6.66 billion,

representing payables for various infrastructure projects which were paid under the direct payment scheme charged against the ADB loan and Belgian Super Subsidy Facility loan but were not yet recorded due to non-release of the NCAA from the DBM.

Under the DOF, the BTr accounted for P4.08 billion, of which P4.04 billion

or 99.02 percent represents subsidies to GOCCs already covered by MDS checks but were unreleased as of yearend and P48.94 million pertains to outstanding obligations to international organizations.

The DOH-OSEC reported an outstanding amount of P5.91 billion pertaining

to purchases of inventories and PPE on account and unpaid contracts for services. The DA-OSEC reported P4.52 billion representing due and demandable

obligations to creditors, and amount equivalent to unreleased MDS checks. This also includes P267.27 million paid under the direct payment scheme which remained outstanding due to the non-issuance of the NCAA by the DBM.

The amount of P12.01 billion or 11.42 percent of the total Accounts Payable

was shared by other departments/offices. Details of Accounts Payable by department/office/agency are presented in Schedule 24, Volume I-B.

Notes Payable with a balance of P7.15 billion denotes 5.84 percent of the payable

accounts. Of this amount, P7.14 billion refers primarily to promissory notes issued by the BTr-NG to Multilateral Investment Guaranty Agency (MIGA), Asian Development Bank (ADB), International Monetary Fund (IMF), and International Bank for Reconstruction and Development (IBRD) for payment of subscription to the capital stock.

Due to Officers and Employees of P9.89 billion shared 8.09 percent of the total

payables which increased by P997.27 million or 11.21 percent from P8.90 billion in 2009. It represents unpaid salaries, fringe benefits and other emoluments, and other unpaid obligations due to officers and employees of NGAs. The DND-Philippine Army reported the biggest amount of P3.28 billion, followed by DepEd-OSEC with P2.13 billion and DILG-PNP with P1.63 billion.

82

Interest Payable totaling P186.39 million registered a decline of P538.75 million or 74.30 percent from last year’s P725.15 million. The total of P183.20 million pertains to accrued interest on over-the-counter sale of domestic bonds.

Inter-Agency Payables – P49.82 billion

Inter-agency payables pertain to liabilities that subsisted within NGAs, LGUs and

GOCCs, including taxes and mandatory contributions deducted from salaries of officials and employees which remained unremitted as of the end of the year.

This group of liability accounts showed a decrease of P17.48 billion or 25.97

percent from last year’s P67.29 billion. This was due to the drop in three accounts: Due to National Treasury – P14.60 billion, Due to Other GOCCs – P3.60 billion and Due to LGUs P544.03 million. However, the combined increase of P1.27 billion in these accounts: Due to GSIS – P1.07 billion, Due to PAG-IBIG – P84.43 million and Due to Philhealth – P61.71 million and Due to BIR – P49.47 million partly offset the overall decrease.

Due to National Treasury amounting to P19.61 billion represents 39.36 percent of

the total inter-agency payables. This account pertains to unremitted income collected by NGAs that accrued to the General Fund of the NG. Of this amount, P9.27 billion was reported by the DOE pertaining to government share/royalties from service and operating contracts and other fees/charges/penalties.

Of the sum of P6.93 billion reported by the BIR, P6.57 billion mainly

represents prior years’ (2002-2009) internal revenue collections which are still being reconciled with the BTr.

Due to BIR of P2.73 billion constitutes 5.49 percent of the total inter-agency

payables. This account refers to unremitted withholding taxes from salaries of officers and employees and from claims of suppliers/creditors.

Due to GSIS, PAG-IBIG and PHILHEALTH amounted to P4.82 billion, P432.34

million and P500.26 million, respectively. These accounts which correspond to 11.54 percent of the inter-agency payables pertain to unremitted salary deductions from government officials and employee’s mandatory contributions to GSIS for life and retirement insurance premiums, PAG-IBIG and PHILHEALTH premiums, including government shares and other loan deductions.

Due to Other GOCCs with an outstanding balance of P16.17 billion accounted for

32.46 percent of inter-agency payables. It registered a decrease of P3.60 billion or 18.20 percent from P19.77 billion in 2009. The DOF-BTr reported P11.37 billion or 70.34 percent composed of the following:

83

Particulars

Amount (in million

pesos) 1. Managed funds and escrow account held by the NG for Bond

Sinking Fund, DRF and other GOCCs 7,296.98

2. Balance of proceeds from the drawing of the US$120.0 million Performance Bond/Irrevocable Standby Letter of Credit put up by the Maynilad Water Services, Inc. to secures its Concession Fee liabilities with MWSS

3,016.87

3. Collateral deposit of GOCCs under the 1992 Philippine Financing Plan

979.92

4. NG liability to the SSS relative to the accrued interest due to delayed payment of dividends to PNB shares

43.06

5. PCA collections 37.76 Total 11,374.59

The DFA also reported P3.43 billion which includes amount due to the

Bangko Sentral ng Pilipinas for currency remittances (Fiscal Agency Service) to various Foreign Service Posts.

Due to LGUs of P5.55 billion constitutes 11.15 percent of the total inter-agency

payables. This consists of P3.88 billion funds administered by the DOE under the Energy Regulatory 1-94 which was remitted by generation companies and/or energy resource developers. These companies are mandated to set aside one centavo per kilowatt-hour of the electricity sales as financial benefit of the host local government unit to be used for the latter’s electrification, development and livelihood, reforestation, watershed management, health and environment enhancement projects.

The DBM-OSEC also reported a sizeable balance of P1.03 billion,

representing the outstanding funding requirements for the implementation of priority programs of various LGUs obligated for CYs 1999 to 2008.

The schedule of Inter-Agency Payable accounts by department/office/agency

and by account is shown in Schedule 25, Volume I-B.

Intra-Agency Payables – P7.21 billion

Intra-agency payables are reciprocal accounts that subsist between the Central Office, Regional Offices/Staff Bureaus and Operating Units which were not eliminated at yearend. After the overall elimination process, Intra-Agency Payables of P7.21 billion showed an increase by P1.21 billion or 20.14 percent from last year’s level of P6.00 billion. Due to Operating Units and Due to Other Funds had balances of P3.92 billion and P3.29 billion, respectively, as of end of the year.

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Other Liability Accounts – P80.40 billion

Other Liability Accounts of the NG comprised: Other Payables – P48.69 billion or 60.56 percent, Tax Refund Payables – P16.23 billion or 20.18 percent. Performance/Bidders/ Bail Bonds Payable – P9.64 billion or 11.99 percent and Guaranty Deposits Payable – P5.85 billion or 7.27 percent. Table V.1-16 shows the departments/offices with Other Liability Accounts.

Table V.1-16 – Departments/Offices With Other Liabilities

Department/Office Amount

(in million pesos)

Percent Distribution

Finance 32,269.36 40.13 State Universities and Colleges 10,691.45 13.30 The Judiciary 7,949.58 9.89 Public Works and Highways 4,920.27 6.12 Transportation and Communications 4,471.08 5.56 Education 3,947.37 4.91 National Defense 3,083.99 3.84 Justice 2,241.17 2.79 Health 2,123.89 2.64 Labor and Employment 1,948.44 2.42 Other Departments/Offices 6,757.32 8.40

Total 80,403.92 100.00 Difference between totals and sum of components is due to rounding off

Of the DOF balance of P32.27 billion, the BTr-NG accounted for P11.05 billion

composed of the following:


1. Forfeited Swiss Deposits 10,531.97 2. Payments of GOCCs for servicing of their foreign loans 407.12 3. Emergency Guerilla Currency Notes (RA369) 31.71 4. Accounts Held in Escrow 30.77 5. Contributions to FFIs 25.54 6. Backpay Rights Sinking Fund (RA897) 22.44 7. Backpay Rights Sinking Fund (RA304) 1.12 8. Others 0.65

Total 11,051.32

Account Held in Escrow of P30.77 million corresponds to 20 percent withholding

tax on coupon payments for the investments in government securities of private companies and other institutions which are invested in fixed term deposits awaiting determination of whether or not they are tax exempt.

Also under the DOF, the BOC, the BIR and the PMO reported other liabilities of

P10.24 billion, P8.11 billion, and P1.79 billion, respectively.

85

BIR’s other liability accounts include Other Payables for miscellaneous trust liabilities to various taxpayers amounting to P93.39 million which pertain to the balance of refund in excess of tax withheld on individual income for the period 1983-1992 deposited or held in trust at PNB. Due to the absence of pertinent documents both from BIR and PNB, this account is still subject to further verification, analysis and reconciliation.

The SUCs shared P10.69 billion or 13.30 percent of Other Liabilities. Of this

amount, the UP contributed P8.65 billion. Diliman campus reported Other Payables of P2.02 billion representing collections from trust accounts which were created for specific purposes, including tuition fee increment and housing loan from HDMF and other miscellaneous payables of the campus. Other UP campuses which have substantial balances are: Los Baños – P3.08 billion, Manila – P1.80 billion, and UP System Administration – P1.13 billion.

Other Liabilities of the Judiciary totaled P7.95 billion or 9.89 percent. The

Supreme Court of the Philippines and Lower Courts reported P6.78 billion for cash bond received to guarantee faithful performance of contracts with the government, bidders bonds, bail bonds, rental deposits, consignation and other fiduciary fees collected.

The DPWH balance for this liability group summed up P4.92 billion or 6.12

percent. The OSEC reported P4.87 billion consisting mainly of Guaranty Deposits Payable of P3.58 billion and Other Payables of P1.10 billion. The latter includes claims of employees for reserved leaves and terminal pay, and allowable deductions in the compensation of employees payable to private companies.

Under the DND, PVAO reported Other Payables amounting to P2.24 billion for pension payments where the liquidation of actual remittances are not yet submitted by the bank to PVAO. During the year, the pensions disbursed intended to be remitted to pensioners accounts are not deducted from Other Payables unless the bank certifies that it already remitted the pensions to the pensioners. Other Payables also comprise cash deducted from the salaries of the employees to pay the amortizations of loan to the KMB Cooperative, AFPSLAI, AMWSLAI, AVACC and PVAO- Employees Association

Other Liabilities of the DOH of P2.12 billion comprises mainly of Other Payables

in the amount of P1.41 billion and Performance/Bidders/Bail Bonds of P502.74 million. Other Payables include amounts deducted from salaries of employees for payment of bank loans and loans to cooperatives, unpaid obligations to suppliers funded out of income collections and other funds and trust liabilities.

The NLRC attached to the DOLE, reported Other Payables of P1.05 billion for cash bonds posted by respondents as the losing party and the garnishments for the satisfaction of money awards in labor cases held in trust for proper disposition to parties upon finality of the decisions of Labor Arbiters.

Other departments/offices contributed P6.76 billion or 8.40 percent, of which the PNP under the DILG shared P1.04 billion representing trust liabilities for remittance to various lending institutions and retirement gratuity representing unpaid claims of retired PNP officers and employees.

86

Loans Payable – Domestic, Current- P 553.22 billion

This account as reflected in the books of the BTr-NG pertains to the current portion of outstanding Treasury Bills totaling P553.22 billion, representing 68.04 percent of the aggregate Current Liabilities.

5.1.2.2 Long-Term Liabilities – P4.179 trillion

Total Long-term Liabilities of P4.179 trillion increased by P476.88 billion or

12.88 percent compared to 2009 level of P3.702 trillion. The increment was registered mainly in Bonds Payable, Domestic – P350.94 billion, and Bonds Payable, Foreign – P70.07 billion, and Loans Payable, Foreign – P62.78 billion. The combined increase, however, was slightly diminished by the decrease of P6.82 billion in Loans Payable, Domestic.

Table V.1-17 shows the components of Long-term Liabilities with comparative

figures of 2009.

Table V.1-17 Comparative Components Long-term Liabilities

Particulars

2010 2009 Increase/(Decrease)Amount

(in million pesos)

Percent Distribu-

tion

Amount (in million

pesos)

Amount (in million

pesos)

Per-cent

Mortgage Payable 12.46 a 13.26 (0.80) (6.00)Bonds Payable - Domestic 2,174,701.89 52.04 1,823,759.68 350,942.21 19.24Bonds Payable - Foreign 1,171,084.20 28.02 1,101,014.98 70,069.23 6.36Loans Payable - Domestic 3,522.16 0.08 10,339.40 (6,817.23) (65.93)Loans Payable - Foreign 829,452.51 19.85 766,677.45 62,775.06 8.19Other Long-term Liabilities 12.35 a 101.96 (89.62) (87.89) Total 4,178,785.58 100.00 3,701,906.73 476,878.85 12.88Difference between totals and sum of components is due to rounding off a – percent is below.0001

Long-term Payables were mostly reported by the BTr-NG. It fully

accounted for Bonds Payables – Domestic and Foreign, and shared P2.30 billion for Loans Payable – Domestic, and P828.53 million for Loans Payable – Foreign.

A detailed discussion on National Government Debt reported by the DOF-BTr is presented on pages 138 to 158.

5.1.2.3 Deferred Credits – P26.63 billion

At the close of the year, Deferred Credits amounted to P26.63 billion,

showing a decrease of P6.81 billion or 20.37 percent from last year’s balance of P33.45 billion. The departments/offices which reported substantial balances are: DOF – P21.47 billion, OEO – P3.58 billion, SUCs – P1.08 billion, DA – P170.58 million, and DOH – P140.43 million.

87

Among the agencies under the DOF, PMO reported P14.28 billion pertaining to the installment sale of transferred assets. The BTr also reported P7.14 billion, details of which are as follows:

Nature Amount (in million pesos)

1. Premiums of issuance of bonds offshore 5,067.26 2. Proceeds from ROP’s issuance of Debt Exchange Warrants

which entitles the holders during exercise period to tender dollar/euro bonds

1,471.58 3. Discounts on investments in Treasury Bonds and ROP Bonds 453.14 4. Withholding tax for 7-year Zero coupon bonds 189.41 5. Contra account in setting up receivable account from DBP and

PMO 44.61

6. Converted balance under Fund 105 which had remained dormant for over 30 years which was already requested for write-off

0.57 7. Balance of advance dividend remittance (80.76)

Total 7,145.81 The CHED accounted for P3.55 billion, mostly pertaining to the HEDF –

Central Office for contributions from PTA, PRC, PAGCOR and unexpended balances of programs/projects implemented by the HEDF. The amount of P19.12 million reported by Region V is the credit counterpart of loans receivable from Study Now Pay Later Program.

For the SUCs, the main contributors to this account are: UP – P435.54

million; CSTST – P61.58 million; VSU – P48.40 million; and CavSU – P 38.94 million.

The DA-OSEC accounted for P95.61 million which includes P85.10 million

for the Bureau of Animal Industry for the reclassification from income account of loss of assets due to closure of conduit rural banks and P65.49 million for the Bureau of Fisheries and Aquatic Resources.

5.1.3 EQUITY - (P1.880 trillion)

The equity of the NG as of December 31, 2010 is a negative balance of P1.880

trillion reflecting an increase of negative P110.89 billion from the negative balance of P1.769 trillion in the previous year. The increase in the negative balance was brought about by several factors, namely: Net Loss in operation of P24.08 billion, adjustments related to prior year’s transactions of P47.31 billion, completed public infrastructure and reforestation projects of P41.51 billion and P748.90 million, respectively, and remittance to the National Treasury from asset disposal of P3.86 million.

Under the NGAS, upon completion of Public infrastructure and reforestation

projects which are intended for public use, these projects shall be transferred to the Registry of Public Infrastructures and Registry of Reforestation Projects as these are no longer considered assets of the IAs. Following this policy, the corresponding costs of the completed projects and Government Equity were dropped from the books. Table

88

V.1-18 shows the amount of completed public infrastructure and reforestation projects by department/office during the year.

Table V.1-18 - Departments/Offices with Completed Public

Infrastructures and Reforestation Projects (in million pesos)

Department/Office Public Infrastructures

ReforestationProjects

Public Works and Highways 34,797.37 Agriculture 3,220.44 Transportation and Communications 1,643.02 Pasig River Rehabilitation Commission 908.65 Environment and Natural Resources 46.13 719.06 Agrarian Reform 286.15 Metro Manila Development Authority 186.60 National Defense 123.28 Autonomous Region in Muslim

Mindanao 121.71 State Universities and Colleges 57.80 29.84 Interior and Local Government 55.28 Other Executive Offices 28.83 Health 16.34 Tourism 5.91 National Economic and Development

Authority 4.92 Science and Technology 2.13 Labor an Employment 1.41 Social Welfare and Development 0.41 ______

Total 41,506.37 748.90 Difference between totals and sum of components is due to rounding off

Like in the previous year, the DPWH, being the implementing arm of

infrastructure projects, accounted for the highest value of P34.80 billion or 83.84 percent of the completed public infrastructures. The DA and the DOTC reported P3.22 billion or 7.76 percent and P1.64 billion or 3.96 percent, respectively.

This year’s completed Public Infrastructures of P41.51 billion decreased by

P87.75 billion or 67.88 percent from CY 2009 of P129.25 billion.

The DENR, the agency responsible for the care and protection of vast forest lands, conservation of natural resources, and maintenance of ecological balance, reported P719.06 million or 96.02 percent of the completed reforestation projects. An SUC, the Central Mindanao University likewise reported P29.84 million or 3.98 percent of completed reforestation projects.

Current year’s completed Reforestation Projects of P748.90 million, showed an

increase of P141.49 million or 23.29 percent from the previous year’s balance of P607.41 million.

89

5.2 Statement of Income and Expenses

The improved economic environment in 2010, the declaration of better tax administration and close monitoring of revenue collection by the previous dispensation in the first half of the year, and the commitment to clean and honest governance by the popularly elected new administration, translated to a revenue collections higher by 7.67 percent than last year. The national elections held during the year and the confidence on its results spurred economic growth and activities, thus increasing government operating expenses by 9.16 percent.

The total revenue/income generated by the NG amounted to P1.244 trillion while

total expenses incurred reached P1.282 trillion. The incurrence of total COE of P637.46 billion resulted to income from operations of P606.22 billion while income after subsidies of P266.12 billion was arrived at after deducting the total financial support to local government units, government owned and/or controlled corporations and non-government/peoples’ organizations of P340.10 billion. Despite the incurrence of increased financial burden of P304.52 billion, the government managed to reduce its net loss to P24.08 billion after considering net subsidy to NGAs of P35.47 billion and net gains of P49.78 billion. The comparison of the 2010 revenue/income and expenses with 2009 data is shown in Table V.2-1.

Table V.2-1 Income/Revenue, Expenses, Subsidies and Net Loss


Percent 2010 2009 (restated)

Increase (Decrease)

Income/Revenue 1,243,676.54 1,155,083.90 88,592.64 7.67 Tax Revenue 1,090,909.32 979,625.46 111,283.86 11.36 Non-Tax Revenue/General Income 152,767.22 175,458.44 (22,691.22) (12.93)Less: Current Operating Expenses 637,457.27 583,989.81 53,467.45 9.16 Personal Services 464,219.66 405,951.44 58,268.23 14.35 Maintenance and Other

Operating Expenses

173,237.60

178,038.38 (4,800.78) (2.70)Income from Current Operations 606,219.27 571,094.08 35,125.19 6.15Subsidies to (340,097.09) (327,095.10) (13,002.00) 3.97 Local Government Units (net) (281,547.02) (269,533.31) (12,013.71) 4.46 Government Owned/Controlled Corporations

(57,104.69)

(56,896.16)

(208.53)

0.37

Non-Government Organizations/ Peoples’ Organizations

(1,445.38)

(665.63)

(779.76)

117.15

Income after Subsidies 266,122.18 243,998.99 22,123.19 9.07Less: Financial Expenses 304,516.60 288,719.93 15,796.67 5.47Loss before Other Income/Expenses

Items (38,394.42) (44,720.94)

6,326.52

(14.15)Net Subsidy To NGAs (35,470.66) (4,847.30) (30,623.37) 631.76Net Gain/(Loss) 49,781.96 (34,870.60) 84,652.56 (242.76)Net Income/(Loss) (24,083.12) (84,438.83) 60,355.71 (71.48)Difference between totals and sum of components is due to rounding off.

90

Chart V.2-1 Comparison of Actual and Programmed Revenue

(in billion pesos)

5.2.1 Revenue/Income – P1.244 trillion

This year’s total revenue/income of P1.244 trillion represents 7.67 percent growth

compared to last year’s P1.155 trillion. Increase in the total revenue for the year of P88.59 billion was attributed mainly to improved tax revenue collections. The composition of the total revenue/income is tax revenue collections of P1.091 trillion or 87.72 percent and non-tax revenue of P152.77 billion or 12.28 percent.

The collective effort of the main tax revenue agencies, the BIR and the Bureau of Customs (BOC) resulted to improvement of total tax revenue collections by 11.36 percent. The endeavor however was not enough to surpass or even equal the total programmed tax revenue for all tax collecting agencies of P1.153 trillion for a shortfall of P62.30 billion or 5.40 percent. The target for non-tax revenue was slid down by the inter-agency body tasked to set the country’s fiscal and macroeconomic assumptions from P143.61 billion in 2009 to P141.20 billion in 2010 or a decrease of P2.41 billion or 1.68 percent, thus contributing to the hefty excess of the actual non-tax revenue collections of

P152.77 billion as against the projected level for a surplus of P11.57 billion or 8.19 percent. Chart V.2-1 presents the actual and projected revenue/income. (Source of data on projected revenue/income: 2011 Budget of Expenditures and Sources of Financing)

5.2.1.1 Tax Revenue – P1.091 trillion

The total tax revenue of P1.091 trillion was shared mostly by the BIR for P822.70 billion or 75.41 percent and the BOC for P256.86 billion or 23.55 percent including non-cash revenue from the Tax Expenditure Fund (TEF) of P31.74 billion and the rest by other tax collecting agencies, namely: the DOTC-LTO, Motor Vehicle Users’ Charge (MVUC); DILG-BFP, Fire Code Tax; DOJ-BI, Immigration Tax; DENR-OSEC, Forest Charges; and OEO-CHED & NCCA, Other Taxes. This year, tax revenue represents 87.72 percent of the aggregate consisting of Income Taxes – P367.40 billion or 33.68 per cent; Taxes on Goods and Services – P302.10 billion or 27.69 percent; Final Taxes– P109.14 billion or 10.00 percent; Import Duties – P215.81 billion or 19.78 percent; Property Tax – P14.84 billion or 1.36 percent; Other Taxes – P79.53 billion or 7.29 percent; and Fines and Penalties – P2.08 billion or 0.19 percent.

Current year’s tax collections of the BIR surpassed last year’s collection of P747.49

billion by P75.21 billion or 10.06 percent, while the BOC reported an increase of P36.55 billion or 16.59 percent over last year’s collection of P220.31 billion.

1,090.91

1,153.21

152.77 141.20

Tax Non-Tax

ActualProgrammed

91

Taxes on Net Income and Profits – P476.54 billion

Of the total tax revenue collections, taxes on net income and profits contributed the lion share at P476.54 billion or 43.68 percent. The increase of P62.70 billion was mainly due to the increase of income tax on corporations and individuals of P35.18 billion and P24.36 billion, respectively. The final tax imposed on interest incomes earned by individuals or entities on bank deposits and temporary investments previously categorized under Other Taxes was properly classified under this tax category in 2010. The slight increase in Final Tax contributed P3.19 billion. However, the total increase for the year under this tax category was not adequate for the tax collecting agencies to meet the set target at P493.70 billion. (Source of set target: BESF for FY 2011) Table V.2-2 shows the comparative Income Taxes for calendar years 2010 and 2009.

Table V.2-2 Comparative Income Taxes, By Source

Particulars


(Decrease) Corporations 215,052.31 179,872.02 35,180.30 19.56 Individuals 152,252.69 127,895.98 24,356.71 19.04 Final tax 109,144.28 105,956.74 3,187.54 3.01 Partnerships 94.51 114.21 (19.70) (17.25) Total 476,543.79 413,838.94 62,704.85 15.15 Difference between totals and sum of components is due to rounding off.

Taxes on Goods and Services – P302.10 billion

Second highest provider is tax collections on goods and services at P302.10 billion

or 27.69 percent of the total tax revenue. This is higher by P14.96 billion or 5.21 percent than last year’s P287.14 billion. This category consists of tax collections on General Sales, Turnover or VAT; Excises on Goods; Taxes on Services and Taxes on the Use of Goods or Property or Permission to Perform Activities. Table V.2-3 shows the comparative Taxes on Goods and Services for calendar years 2010 and 2009.

Table V.2-3 Comparative Taxes on Goods and Services, By Source

Particulars

Amount (in million pesos) Percent2010 2009 Increase

(Decrease) General Sales, Turnover or VAT 224,332.70 220,412.68 3,920.02 1.78Excise Tax on Articles 67,593.99 56,976.75 10,617.25 18.63 Taxes on the Use of Goods,

Property, Permission to Perform Activities

10,169.84

9,748.92

420.92 4.32Total 302,096.53 287,138.35 14,958.19 5.21


Taxes on International Trade and Transactions – P215.81 billion

There is further slowdown on the collection of Import Duties from last year’s

P220.31 billion to this year’s P215.81 billion or a decrease of P4.49 billion or 2.04 percent. This is indicative of lower importations during the year as declared by the

92

government agencies responsible in the importation of rice and other agricultural products.

Other Taxes – P79.53 billion

Other Taxes consist of Documentary Stamp Tax of P42.50 billion or 53.44

percent as reported by both BIR and BOC; Tax on Forest Products – P220.49 million or 0.28 percent as reported by DENR-OSEC; Immigration Tax – P59.56 million or 0.07 percent as reported by DOJ-Bureau of Immigration. Also included in this category in the amount of P36.75 billion is Other National Taxes which represent the undistributed amount lumped in this account by the BTr.

Property Taxes – P14.84 billion

Property taxes collected alone by the BIR on property transfers amounted to

P14.84 billion for the year. This is 13.68 percent higher than last year’s collection of P13.05 billion. In this tax category, Capital Gains Tax contributed the highest at P13.00 billion or 87.60 percent. Table V.2-4 shows the comparative components of Property Taxes.

Table V.2-4 Comparative Components of Property Taxes



Capital Gains Tax 12,998.05 11,668.11 1,329.94 11.40 Estate Tax 1,346.99 950.59 396.40 41.70 Donors Tax 493.44 433.97 59.48 13.71


.

Fines and Penalties, National Taxes – P2.08 billion

Fines and penalties on late payment of national taxes swelled by P591.11 million or 39.60 percent from last year’s P1.49 billion. BIR collected P1.94 billion or 93.10 percent while BOC reported P135.94 million or 6.52 percent.

5.2.1.2 Non-Tax Revenue (General Income) – P152.77 billion

Non-Tax Revenue otherwise called General Income under the NGAS Chart of Accounts went down to P152.77 billion from last year’s P175.46 billion or a decrease of P22.69 billion or 12.93 percent. General Income consists of Service Income – P74.16 billion constituting 48.55 percent of Non Tax Revenue; Business Income – P10.98 billion or 7.19 percent; Permits and Licenses – P459.62 million or 0.30 percent; and Other Income of P67.17 billion or 43.97 percent.

93

Service Income – P74.16 billion Service Income registered a negative

growth of 16.77 percent or P14.94 billion below last year’s collections of P89.10 billion. Other Services Income of P62.46 billion or 84.23 percent is the biggest component of the generated service income. Of this amount, P43.70 billion pertains to the undistributed amount lumped by the BTr in this account. The other components that contributed most are: Passport and Visa Fees – P3.70 billion; Medical, Dental and Laboratory Fees – P1.82 billion; Clearance and Certification Fees – P1.72 billion; and Processing Fees – P1.61 billion.

Table V.2-5 shows the departments/

offices with substantial amount of Service Income.

Other Income – P67.17 billion

Other Income earned during the year declined by P8.38 billion or11.10 percent, compared to the decrease of P22.05 billion or 22.59 percent reported in previous year. Half of the aggregate Other Income of P67.17 billion came from Interest Income and the other components shared the balance of P33.21 billion as shown in Table V.2-6.

Table V.2-6 Components of Other Income

Particulars Amount

(in million pesos)


Interest Income 33,959.81 50.56 Share from PAGCOR/PCSO 13,151.17 19.58 Dividend Income 12,014.61 17.89 Income from Grants and Donations 5,067.23 7.54 Miscellaneous Income 2,078.80 3.09 Insurance Income 522.23 0.78 Internal Revenue Allotment 216.85 0.32 Other Fines and Penalties 87.32 0.13 Sale of Confiscated/Abandoned/

Seized Goods and Properties

67.78 0.10 Share from National Wealth 0.32 .01

Total 67,166.11 100.00 Difference between totals and sum of components is due to rounding off.

Table V.2-5 Departments/Offices Which Reported Service Income

(in million pesos) Department/Office Amount

Finance 64,516.48State Universities and Colleges 3,005.58The Judiciary 1,874.67Health 1,782.80Interior and Local

Government 1,303.97Labor and Employment 320.12Foreign Affairs 315.46Office of the Press Secretary 236.40

Education 188.98Civil Service Commission 142.57Other Departments/ Offices 476.59

Total 74,163.62

94

Interest Income – P33.96 billion Interest income earned by

departments/offices on loans receivables, investments, bank deposits and NG advances for GFIs and GOCCs’ debt service payments plunged from P41.44 billion last year to P33.96 billion which resulted to a decline of P7.48 billion or 18.04 percent. The decrease in interest income can be attributed mainly to the drop of interest income earned by the following departments/offices: DOF – P7.41 billion; DND – P41.85 million; and SUCs – P14.19 million.

Interest income of the DOF-BTr

of P32.29 billion constitutes 95.07 percent of the total Interest Income. The departments/offices which reported Interest Income are shown in Table V.2-7.

Share from PAGCOR/PCSO – P13.15 billion

This represents share of government agencies from receipts of Philippine

Amusement and Gaming Corporation (PAGCOR) and Philippine Charity Sweepstakes Office (PCSO). It registered a slight increase of P785.06 million or 6.35 percent compared with last year’s P12.37 billion.

The DOF-BTr, one of the recipients received the highest at P10.34 billion or

78.65 percent, followed by OEO-Presidential Management Staff at P1.96 billion or 14.91 percent, OEO-Philippine Sports Commission at P525.17 million or 3.99 percent and the OP at P322.00 million or 2.45 percent.

Dividend Income – P12.01 billion

Dividend Income of P12.01 billion earned by the NG pertains to dividends from

equity investments in GFIs and GOCCs. Dividends remitted by the GFIs and GOCCs to the BTr was short by P1.80 billion or 13.03 percent compared to last year’s P13.82 billion.

Table V.2-8 GOCCs/GFIs with Dividend Remitted to the DOF-BTr

GOCC/GFI Amount

(in million pesos)


Bangko Sentral ng Pilipinas 5,170.34 43.04 Development Bank of the Philippines 2,276.59 18.95 Land Bank of the Philippines 1,573.71 13.11 Philippine Ports Authority 880.51 7.33 PNOC Exploration Corporation 499.45 4.16

Table V.2-7 Departments/OfficesWhich Reported Interest Income


Finance 33,287.93 State Universities and

Colleges 343.24National Defense 102.85Other Executive Offices 74.58Budget and Management 46.88Agriculture 28.96The Judiciary 18.50Energy 10.07Metropolitan Manila

Development Authority 9.35Other Departments/Offices 37.45

Total 33,959.81

95


GOCC/GFI Amount

(in million pesos)


Mactan Cebu International Airport Authority

411.49 3.42

Metropolitan Waterworks and Sewerage System 368.14 3.06 Public Estates Authority 199.62 1.66 Philippine Economic Zone Authority 189.06 1.57 Clark Development Corporation 159.92 1.33 Other GOCCs 284.64 2.37


Table V.2-8 shows the top ten corporations and other GOCCs which remitted

dividends to the National Treasury totaling P12.01 billion as reported by the DOF-BTr. The Bangko Sentral ng Pilipinas remitted the biggest amount of dividends at P5.17 billion or 43.04 percent, while Development Bank of the Philippines and the Land Bank of the Philippines contributed P2.28 billion and P1.57 billion, respectively.

Income from Grants and Donations – P5.07 billion

Income from Grants and Donations received in cash and in kind from foreign

and domestic sources accounted for P5.07 billion, slightly lower by P277.45 million or 5.19 percent than last year’s P5.34 billion.

Table V.2-9 shows the departments/offices which received grants and

donations during the year. DOF-BTr NG topped the list with P1.76 billion or 34.81 percent of the aggregate amount.

Table V.2-9 Departments with

Income from Grants and Donations


(in million pesos)


Finance 1,763.81 34.81 Education 1,172.18 23.13 Health 780.44 15.40 Justice 257.71 5.09 Social Welfare and Development 255.26 5.04 State Universities and Colleges 176.24 3.48 Environment and Natural Resources 115.42 2.28 Tourism 102.71 2.03 Budget and Management 100.96 1.99 Interior and Local Government 99.86 1.97 Other Departments/Offices 242.65 4.79


96

Miscellaneous Income – P2.08

billion

The account reflected an improvement of P372.94 million or 21.86 percent from previous year’s P1.71 billion. Table V.2-10 presents the departments and offices which reported Miscellaneous Income in calendar year 2010.

Business Income – P10.98 billion

Business Income improved by P1.31 billion or 13.51 percent of past year’s P9.67

billion. The main components of the account are Tuition Fees and Hospital Fees collected by SUCs and hospitals, respectively. Tuition Fees of P5.00 billion which accounted for 45.56 percent of the total business income posted an increase of P537.35 million or 12.04 percent compared to last year’s P4.46 billion. On the other hand, Hospital Fees of P2.82 billion which presented an increment of P295.96 million or 11.74 percent from last year’s P2.52 billion was 25.67 percent of the total Business Income. Table V.2-11 shows the components of Business Income.

Table V.2-11 Components of Business Income

Particulars Amount

(in million pesos)


Tuition Fees 5,001.04 45.56 Hospital Fees 2,817.70 25.67 Other Business Income 1,717.37 15.64 Sales Revenue (Net) 573.99 5.23 Rent Income 358.77 3.27 Fines and Penalties – Business Income 226.89 2.07 Income from Dormitory Operations 121.49 1.11 Income from Canteen Operations 108.42 0.99 Printing and Publication Income 36.02 0.33 Income from Communication Facilities 6.92 0.06 Income from Markets 4.04 0.04 Income from Waterworks System 2.92 0.03 Landing and Parking Fees 2.04 0.02 Income from Transportation System 0.26 0.00


Table V.2-10 Departments/Offices which Reported Miscellaneous Income


Finance 938.61 State Universities and Colleges 451.54 Public Works and Highways 256.16 Labor and Employment 134.85 Health 125.75 National Defense 41.42 Education 35.42 Commission on Audit 19.10 Other Executive Office 16.37 Other Departments/Offices 59.56

Total 2,078.80

97

SUCs reported the highest

amount of business income, reflecting P7.02 billion or 63.99 percent, substantial part of which was from tuition fees of P5.00 billion. On the other hand, DOH presented the second highest collection at P3.01 billion or 27.41 percent mostly in the form of hospital fees, sales revenue on pharmaceuticals and other business income.

The departments/offices which

reported business income are shown in Table V.2-12.

Permits and Licenses – P459.62

million

Permits and Licenses decreased by P676.61 million or 59.55 percent from last year’s P1.14 billion after reclassifying the account MVUC to a Tax Revenue account. The biggest component of the account pertained to Registration Fees amounting to P362.36 million or 78.84 percent. The highest contributors of Registration Fees among the departments are: SUCs – P134.90 million; DOH – P104.73 million; OEO – P91.54 million; and DA – P19.05 million. Table V.2-13 shows the components of Permits and Licenses.

Table V.2-13 Components of Permits and Licenses

Particulars Amount

(in million pesos)


Registration Fees 362.36 78.84 Permit Fees 70.00 15.23 Franchising and Licensing Fees 15.29 3.33 Fines and Penalties 11.77 2.56 Other Permits and Licenses 0.20 0.04

Total 459.62 100.00 Difference between totals and sum of components is due to rounding off.

5.2.1.3 Breakdown of Income, By Department, By Region and By Source

Under the NGAS, NGAs act as collecting agents of the NG, thus income collections are remitted to the National Treasury. For calendar year 2010, of the total revenue of P1.244 trillion, 97.56 percent or P1.213 trillion was recorded in the BTr books representing remittances of various NGAs. The remaining P30.32 billion or 2.44 percent was reported under RA Books pertaining to collections of various NGAs with authority to

Table V.2-12 Departments/Offices Which Reported Business Income


State Universities and Colleges 7,024.49

Health 3,009.56 National Defense 236.35 Budget and Management 142.80Metropolitan Manila

Development Authority 121.78 Labor and Employment 106.17 Agriculture 100.31 Justice 71.62 Tourism 56.19 Education 43.74 Other Departments/Offices 64.86

Total 10,977.87

98

use their income. Table V.2-14 below shows the breakdown of income by department/office and by book (NG and RA).

Table V.2-14 Breakdown of Income, by Department/Office and by Book

Department/Office Amount (in million pesos) Total NG Books RA Books

Legislative Branch Congress of the Philippines 0.93 - 0.93Executive Branch Office of the President 348.56 3.51 345.05 Office of the Vice-President 0.28 - 0.28 Agrarian Reform 29.08 - 29.08 Agriculture 253.74 - 253.74 Budget and Management 299.38 - 299.38 Education 1,451.93 - 1,451.93 State Universities and Colleges 11,141.81 - 11,141.81 Energy 10.07 - 10.07 Environment and Natural Resources 178.99 - 178.99 Finance 1,214,399.74 1,213,359.89 1,039.85 Foreign Affairs 315.55 - 315.55 Health 5,885.57 - 5,885.57 Interior and Local Government 1,411.52 - 1,411.52 Justice 330.96 - 330.96 Labor and Employment 587.22 - 587.22 National Defense 467.03 - 467.03 Public Works and Highways 325.35 - 325.35 Science and Technology 34.54 - 34.54 Social Welfare and Development 258.23 - 258.23 Tourism 169.51 - 169.51 Trade and Industry 13.82 - 13.82 Transportation and Communications 27.83 - 27.83

National Economic and Development Authority 18.29 - 18.29

Office of the Press Secretary 236.44 - 236.44 Other Executive Offices 2,871.17 - 2,871.17

Metropolitan Manila Development

Authority 353.14 - 353.14

Pasig River Rehabilitation

Commission 5.83 - 5.83Judicial Branch The Judiciary 1,902.65 - 1,902.65Constitutional Offices Civil Service Commission 160.53 - 160.53 Commission on Audit 67.44 - 67.44 Commission on Elections 71.96 - 71.96Other Independent Offices Commission on Human Rights 0.06 - 0.06 Autonomous Regions 47.40 - 47.40

Total 1,243,676.54 1,213,363.40 30,313.14 Difference between totals and sum of components is due to rounding off.

99

The largest part of the generated income was reported by departments/offices in the National Capital Region (NCR) where majority of these agencies are located.

Chart V.2-2 Regional Breakdown of Income (excluding NCR)

(in billion pesos)

Of the total income of the NG, NCR reported a total of P1.186 trillion or 95.38 percent, followed by Region IV with P10.30 billion and Region III with P7.04 billion as shown in Chart V.2-2 and Table V.2-15. Table V.2-15 also shows the details of income by region and by source and the total revenue generated by all regions.

Table V.2-15 Regional Breakdown of Income by Source

Region Amount (in million pesos)

Total Tax Revenue

Non-Tax Revenue

National Capital Region 1,186,161.39 1,046,230.96 139,930.43I 4,872.52 4,384.31 488.21

Cordillera Administrative Region 1,414.30 1,086.36 327.95

II 2,322.51 1,823.97 498.54III 7,040.36 5,302.62 1,737.74IV 10,304.20 8,349.32 1,954.88V 3,068.76 2,410.36 658.40VI 5,519.38 4,269.44 1,249.94VII 4,037.47 3,199.19 838.68VIII 3,603.27 2,793.23 810.04IX 1,914.80 1,458.71 456.09X 3,373.48 2,509.81 863.68XI 4,018.24 3,603.74 414.51XII 1,938.77 1,577.91 360.86XIII 2,195.34 1,909.42 285.93

Autonomous Region in Muslim Mindanao 179.13 - 179.13

Foreign Service Posts 1,712.61 - 1,712.61Total 1,243,676.54 1,090,909.32 152,767.22


1.710.18

2.191.94

4.023.37

1.91

3.604.04

5.52

3.07

10.30

7.04

2.321.41

4.87I

CA

R II III IV V VI

VII

VIII IX X X

I

XII

XIII

AR

MM

FS

P

100

Chart V.2-3 Expenses of the National Government

(in billion pesos)

Figures presented in the table are taken from the agencies’ Report of Income. Details of income/revenue by department, by account and by region are presented in Schedules 26 – 28, Volume I-B.

5.2.2 Expenses

For the calendar year, the NG reported total expenses of P1.282 trillion, composed of: Current Operating Expenses (COE) of P637.46 billion or 49.72 percent, FE – P304.52 billion or 23.75 percent and Subsidy to LGUs, GOCCs and NGOs/POs – P340.10 billion or 26.53 percent. This year’s amount is higher by P82.27 billion or 6.86 percent over last year’s P1.200 trillion. Among the departments, the DOF reported the highest amount of P376.86 billion or 29.39 percent, of which P304.29 billion or 80.74 percent pertains to FE and P57.02 billion or 15.13 percent to Subsidies. The DBM followed with P283.33 billion or 22.10 percent, of which P281.55 billion or 99.37 percent relates to Subsidy to LGUs.

5.2.2.1 Current Operating Expenses – P637.46 billion

Total COE of P637.46 billion consisting of PS – P464.22 billion or 72.82

percent, and MOOE – P173.24 billion or 27.18 percent, registered an increase of P53.47 billion or 9.16 percent from previous year’s level of P583.99 billion. The increase exhibited in PS – P58.27 billion or 14.35 percent was due to the implementation of the 1st and 2nd tranches of modified Salary Schedule for civilian personnel and the modified Base Pay Schedule for military and uniformed personnel both provided under the Senate and House of Representatives Joint Resolution No. 4, series of 2009, approved on June 17, 2009, and as mandated under Executive Order No. 900, issued on June 23, 2010, was partly offset by P4.80 billion decline in MOOE.

Table V.2-16 shows the comparative details of COE for calendar years 2010 and

2009.

Table V.2-16 Comparative Details of Current Operating Expenses



Personal Services 464,219.66 405,951.44 58,268.23 14.35 Maintenance and Other Operating Expenses

173,237.60

178,038.38 (4,800.78) (2.70)


Subsidies340.10

Current Operating Expenses 637.46

FinancialExpenses

304.52

101

Personal Services – P464.22 billion

Total PS of P464.22 billion is greater by P58.27 billion or 14.35 percent than P405.95 billion of last year. As shown in Table V.2-17, all components of PS contributed to the increase.

Salaries and Wages – P240.50 billion

Total Salaries and Wages of

P240.50 billion constitutes 51.81 percent of the total Personal Services. Of the aggregate, P181.48 billion or 75.46 percent was paid to regular civilian employees, P52.04 billion or 21.64 percent to military/uniformed personnel and the remaining P6.98 billion or 2.90 percent, to casual, contractual, substitute, part-time, and emergency personnel.

The departments/offices that

reported expenses for Salaries and Wages are shown in Table V.2-18.

Other Compensation – P115.53 billion

Total Other Compensation of P115.53 billion accounted for the 24.89 percent

of the total Personal Services. Of the amount, P27.71 billion or 23.99 percent pertains to Personnel Economic Relief Allowance (PERA). Under RA No. 9970, the GAA for CY 2010, PERA and Additional Compensation (ADCOM) of P22.26 billion and P5.45 billion, respectively are to be collectively referred to as PERA pursuant to Section 4(f) (i) of Senate and House of Representatives Joint Resolution No. 4, Series of 2009. Other components with substantial amounts are the following: Year End Bonus – P20.88 billion or 18.07 percent, Longevity Pay – P14.40 billion or 12.46 percent, Subsistence, Laundry and Quarters Allowances – P14.20 billion or 12.29 percent and Other Bonuses and Allowances – P 9.35 billion or 8.09 percent.

Table V.2-17 Comparative Components of Personal Services Particulars


(Decrease) Salaries and Wages 240,504.94 209,761.48 30,743.45 14.66Other Compensation 115,534.62 99,831.92 15,702.70 15.73Personnel Benefit

Contributions 27,884.33 23,929.97 3,954.36 16.52Other Personnel Benefits 80,295.78 72,428.06 7,867.72 10.86


Table V.2-18 Departments/Offices that Reported Expenses for Salaries and Wages


Education 113,548.42Interior and Local Government 33,066.07National Defense 22,589.28State Universities and Colleges 14,210.68The Judiciary 6,077.13Health 5,465.93Autonomous Region in Muslim Mindanao 5,031.66

Public Works and Highways 4,432.44Environment and Natural Resources

4,315.94

Finance Other Departments/Offices Total

3,630.21 28,137.18 240,504.94


102

The comparative details of Other Compensation for calendar years 2010 and 2009 are shown in Table V.2-19.

Table V.2-19 Comparative Details of Other Compensation



Personnel Economic Relief Allowance 22,258.16 10,622.92 11,635.24 109.53Additional Compensation 5,453.98 15,684.92 (10,230.94) (65.23) Total PERA 27,712.14 26,307.84 1,404.30 5.34Year End Bonus 20,876.27 18,632.55 2,243.72 12.04Longevity Pay 14,398.66 10,246.24 4,152.43 40.53Subsistence, Laundry and Quarters Allowances 14,203.63 13,216.42 987.21 7.47Other Bonuses and Allowances 9,348.39 5,411.56 3,936.83 72.75Clothing/Uniform Allowance 6,733.39 6,681.23 52.16 0.78Cash Gift 5,399.37 4,631.24 768.12 16.59Overseas Allowance 4,076.24 4,252.64 (176.40) (4.15)Honoraria 3,317.93 2,068.56 1,249.37 60.40Productivity Incentive Allowance 2,639.49 2,447.99 191.49 7.82Hazard Pay 2,661.93 2,364.45 297.48 12.58Representation Allowance (RA) 1,498.37 1,484.80 13.56 0.91Overtime and Night Pay 1,345.23 799.18 546.05 68.33Transportation Allowance (TA) 1,323.59 1,287.22 36.37 2.83


Of the aggregate, the DepEd spent

P35.42 billion or 30.65 percent, DILG – P25.57 billion or 22.13 percent and DND – P22.19 billion or 19.21 percent. The departments/offices that reported payments for Other Compensation are shown in Table V.2-20.

Of the P25.57 billion reported by

DILG, P21.56 billion or 84.32 percent and P2.22 billion or 8.70 percent were for PNP and BFP, respectively.

On the other hand, more than half of

the P22.19 billion spent by DND was shared by: Philippine Army – P14.47 billion or 65.22 percent, Philippine Navy – P4.10 billion or 18.49 percent, and Philippine Air Force – P2.65 billion or 11.95 percent.

Furthermore, for the total Other

Compensation spent by DFA, P3.48 billion or 93.40 percent pertains to payment of Overseas Allowances to all personnel assigned in 94

Table V.2-20 Departments/Offices that Reported Payments for Other

Compensation (in million pesos)

Department/Office Amount Education 35,415.73Interior and Local

Government 25,572.01National Defense 22,194.48State Universities and

Colleges 5,953.82Foreign Affairs 3,721.89Health 3,044.39Commission on Elections 2,119.73The Judiciary 2,072.23Justice 1,542.94Public Works and Highways 1,466.80Other Departments/Offices 12,430.60

Total 115,534.62Difference between totals and sum of components is due to rounding off.

103

Foreign Service Posts, while the P1.13 billion or 53.32 percent and P686.19 million or 32.37 percent reported by COMELEC, were for payment of Honoraria and Overtime and Night Pay in connection with the 2010 National and Local Elections.

Personnel Benefit Contributions – P27.88 billion

Relative to the growth in Salaries and Wages as a result of the implementation

of the 1st and 2nd Tranches of Salary Standardization Law III, total expenses for government’s share in Personnel Benefit Contributions reached P27.88 billion, registering an increment of P3.95 billion or 16.52 percent over the previous year’s level of P23.93 billion.

Government’s share for premium contributions covering retirement and life

insurance, and employees compensation totaled P22.52 billion and P1.39 billion, respectively. Life and Retirement Insurance Contributions rose by P3.28 billion or 17.07 percent while ECC Contributions by P93.22 million or 7.20 percent.

Likewise, compared to last year’s level, contributions to Philippine Health

Insurance Corporation (PHIC) of P2.55 billion and to Home Development Mutual Fund (HDMF) of P1.42 billion for PAG-IBIG, recorded increases as reflected in Table V.2-21.

Table V.2-21 Comparative Details of Personnel Benefit Contributions



Life and Retirement Insurance Contributions 22,522.51 19,238.66 3,283.85 17.07 PAG-IBIG Contributions 1,421.65 1,365.50 56.16 4.11 PHILHEALTH

Contributions 2,551.81 2,030.68 521.13 25.66 ECC Contributions 1,388.36 1,295.14 93.22 7.20


The DepEd, SUCs and DILG, topped the departments/offices with considerable

amounts of expenses for Personnel Benefit Contributions, P16.09 billion or 57.69 percent, P1.90 billion or 6.80 percent and P1.09 billion or 3.92 percent, respectively. Ranking fourth is the DBM – P786.27 million or 2.82 percent, for it includes the ARMM-DepEd remittance to the GSIS covering the 9 percent and 12 percent employees and employer’s compulsory contributions requirements in accordance with GSIS-ARMM-DepEd Memorandum of Agreement dated March 18, 2004. The departments/offices that reported expenses for Personnel Benefit Contributions are shown in Table V.2-22.

104

Other Personnel Benefits – P80.30 billion

Other Personnel Benefits of

P80.30 billion accounted for 17.30 percent of the total Personal Services. Of the total, P46.46 billion or 57.86 percent was paid for pension benefits of military/ uniformed personnel. From the P31.41 billion level in 2009, it posted an increment of P15.04 billion or 47.89 percent. The following departments specifically their agencies reported payments to retired military/uniformed personnel: DND – GHQ-AFP and PVAO, P20.45 billion and P13.13 billion, respectively; DILG – PNP, NAPOLCOM, BFP and BJMP – P10.95 billion, P830.53 million, P509.60 million and P330.49 million, respectively; DOTC – OSEC-PCG – P244.77 million; and, DENR – NAMRIA – P9.78 million.

Other components and the Comparative Details of Other Personnel Benefits are

shown in Table V.2-23.

Table V.2-23 Comparative Details of Other Personnel Benefits



Pension Benefits – Military/ Uniformed 46,456.72 31,412.91 15,043.82 47.89

Other Personnel Benefits 14,839.22 16,419.60 (1,580.38) (9.63) Terminal Leave Benefits 11,065.66 9,715.23 1,350.44 13.90 Retirement Benefits – Military/Uniformed

5,699.97

12,771.75

(7,071.78)

(55.37)

Retirement Benefits - Civilian 1,232.73 989.62 243.12 24.57 Health Workers Benefits 584.29 543.18 41.10 7.57 Pension Benefits - Civilian 417.17 575.77 (158.59) (27.54)


The second component under this classification is Other Personnel Benefits

totaling P14.84 billion or 18.48 percent. Compared to P16.42 billion in 2009, it was lower by P1.58 billion or 9.63 percent. For spending P3.52 billion or 23.71 percent, the Judiciary topped the other departments/offices in the payment of Other Personnel Benefits, mostly for the Supreme Court of the Philippines and the Lower Courts. The DND, DILG and DepEd followed with P2.04 billion or 13.74 percent, P1.76 billion or 11.87 percent, and P1.53 billion or 10.28 percent, respectively.

Table V.2-22 Departments/Offices that Reported Expenses for Personnel Benefit

Contributions (in million pesos)

Department/Office Amount Education 16,085.17 State Universities and Colleges 1,895.65 Interior and Local Government 1,092.15 Budget and Management 786.27 Health 765.42 The Judiciary 762.15 National Defense 673.90 Autonomous Region in Muslim

Mindanao 639.55 Environment and Natural Resources 597.51 Public Works and Highways 510.86 Other Departments/Offices 4,075.69 Total 27,884.33 Difference between totals and sum of components is due to rounding off.

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Another component is Terminal Leave which rose to P11.07 billion or 13.78 percent of the aggregate Other Personnel Benefits, higher by P1.35 billion or 13.90 percent over the previous year’s level of P9.72 billion. Among the departments/offices, the DND and DILG incurred the highest expenses of P4.07 billion or 36.79 percent, and P4.02 billion or 36.34 percent, respectively.

Retirement benefits of military/uniformed personnel of P5.70 billion accounted

for 7.10 percent, showing a remarkable decrease by P7.07 billion or 55.37 percent from the P12.77 billion in the previous year.

Maintenance and Other Operating Expenses – P173.24 billion

Total MOOE of P173.24 billion this year showed a decline of P4.80 billion or 2.70 percent compared to last year’s P178.04 billion. As shown in Table V.2-24, except for the non-cash expenses consisting of Depreciation, Bad Debts and Obsolescence which have an ascending trend, majority of the components registered decreases, the highest were for: Training and Scholarship Expenses – P4.47 billion or 38.33 percent, Supplies and Materials Expenses – P4.42 billion or 11.10 percent, Professional Services – P1.63 billion or 10.42 percent, Subscription Expenses – P1.42 billion or 86.30 percent, and Taxes, Insurance Premiums and Other Fees – P1.30 billion or 11.24 percent.

Table V.2-24 Comparative Details of Maintenance and Other Operating Expenses



Supplies and Materials Expenses 35,425.74 39,848.27 (4,422.53) (11.10) Other Maintenance and Operating Expenses 20,634.77 13,807.81 6,826.96 49.44 Donations 19,963.44 20,251.89 (288.45) (1.42) Repairs and Maintenance 19,113.22 19,158.07 (44.85) (0.23) Professional Services 14,048.96 15,683.39 (1,634.43) (10.42) Taxes, Insurance Premiums and Other Fees 10,228.05 11,523.64 (1,295.59) (11.24) Utility Expenses 9,345.73 7,766.69 1,579.04 20.33 Traveling Expenses 7,268.23 7,699.89 (431.66) (5.61) Training and Scholarship Expenses 7,198.50 11,671.78 (4,473.29) (38.33) Rent Expenses 4,233.61 4,564.51 (330.90) (7.25) Confidential, Intelligence, Extraordinary and Miscellaneous

Expenses 2,790.82 3,485.62 (694.80) (19.93) Communication Expenses 2,633.36 2,663.48 (30.13) (1.13) Representation Expenses 1,685.90 1,816.89 (130.98) (7.21) Transportation and Delivery

Expenses 1,451.31 245.52 1,205.79 491.11 Printing and Binding Expenses 1,235.85 1,335.00 (99.15) (7.43) Membership Dues and Contributions to Organizations 1,042.15 1,082.14 (39.99) (3.70)

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Advertising Expenses 744.89 1,070.32 (325.43) (30.41) Survey Expenses 611.42 701.61 (90.19) (12.85) Tax Exemption and Refunds 449.79 501.56 (51.77) (10.32) Subscriptions Expenses 225.85 1,648.05 (1,422.20) (86.30) Awards and Indemnities 163.20 166.93 (3.73) (2.23) Rewards and Other Claims 125.28 148.38 (23.10) (15.57) Storage Expenses 3.38 2.75 0.64 23.16 Non-Cash Expenses 12,614.17 11,194.19 1,419.99 12.69

Depreciation 12,565.60 11,144.72 1,420.88 12.75 Bad Debts 43.01 39.36 3.65 9.28 Obsolescence 5.56 10.11 (4.54) (44.96)

Total 173,237.60 178.038.38 (4,800.78) (2.70) Difference between totals and sum of components is due to rounding off.

Supplies and Materials Expenses – P35.43 billion

Supplies and Materials Expenses of P35.43 billion accounted for 20.45

percent of the total MOOE. It declined by P4.42 billion or 11.10 percent compared to last year’s P39.85 billion. The biggest consumptions were for: Office Supplies - P10.24 billion or 28.90 percent, Other Supplies – P6.47 billion or 18.25 percent, Gasoline, Oil and Lubricants – P4.67 billion or 13.18 percent and Food Supplies Expenses – P3.63 billion or 10.26 percent.

Table V.2-25 Comparative Components of Supplies and Materials Expenses



Office Supplies Expenses 10,239.11 9,958.14 280.98 2.82Other Supplies Expenses 6,466.64 8,177.96 (1,711.31) (20.93)Gasoline, Oil and Lubricants

Expenses 4,669.16 4,575.10 94.05 2.06Food Supplies Expenses 3,634.37 5,875.82 (2,241.45) (38.15)Agricultural Supplies Expenses 2,444.66 2,308.58 136.08 5.89Medical, Dental and Laboratory

Supplies Expenses 2,429.00 2,378.06 50.94 2.14Textbooks and Instructional

Material Expenses 1,814.08 2,928.22 (1,114.14) (38.05)Drugs and Medicines Expenses 1,591.88 1,507.90 83.98 5.57Accountable Forms Expenses 1,472.85 1,009.31 463.53 45.93Military and Police Supplies

Expenses 568.35 1,052.30 (483.96) (45.99)Animal/Zoological Supplies

Expenses 95.63 76.87 18.76 24.41

Total 35,425.74 39,848.27 (4,422.53) (11.10)Difference between totals and sum of components is due to rounding off.

107

The leading consumers are the following departments/offices: DILG – P8.76 billion or 24.73 percent, DND – P5.19 billion or 14.66 percent, DepEd – P4.71 billion or 13.30 percent, DOH – P3.84 billion or 10.85 percent, DA – P2.96 billion or 8.37 percent, SUCs – P1.88 billion or 5.30 percent, and DFA – P1.25 billion or 3.52 percent.

The major components of the Supplies and Materials Expenses of DILG, are

as follows: Office Supplies - P4.01 billion or 45.76 percent, Other Supplies - P1.72 billion or 19.64 percent, Food Supplies - P1.60 billion or 18.28 percent, Gasoline, Oil and Lubricants – P985.21 million or 11.24 percent, and, Military and Police Supplies – P267.13 million or 3.05 percent. Moreover, of the total amount of P8.76 billion, P6.72 billion or 76.68 percent and P1.36 billion or 15.50 percent were for PNP and BJMP, respectively.

For DND, Supplies and Material Expenses were mainly for the following:

Gasoline, Oil and Lubricants – P1.77 billion or 34.12 percent, Other Supplies – P1.28 billion or 24.64 percent, Office Supplies – P994.75 million or 19.15 percent, Food Supplies – P399.80 million or 7.70 percent, Military and Police Supplies – P292.88 million or 5.64 percent, and Drugs and Medicines – P286.08 million or 5.51 percent. The highest amounts were reported by the three major services of the AFP: PA – P1.78 billion or 34.15 percent, Philippine Navy – P1.15 billion or 22.07 percent, and PAF – P828.49 million or 15.95 percent.

For DepEd, Supplies and Materials Expenses were mostly for: Textbooks

and Instructional Materials – P1.69 billion or 35.93 percent, Office Supplies – P1.54 billion or 32.72 percent, and Other Supplies – P1.24 billion or 26.33 percent.

For DOH, DA and DFA, it is principally for Medical, Dental and Laboratory

Supplies – P1.78 billion or 46.18 percent, Agricultural Supplies – P2.30 billion or 77.65 percent, and Accountable Forms – P1.09 billion or 87.72 percent, respectively.

Donations – P19.96 billion

Total donations of P19.96 billion granted to various government agencies,

private institutions, cooperatives, foundations, associations and individuals accounted for the 11.52 percent of the total MOOE. It fell short by P288.45 million or 1.42 percent compared with the previous year’s P20.25 billion. DSWD reported P8.25 billion or 41.33 percent principally for the implementation of Pantawid Pamilyang Pilipino Program (4Ps), livelihood programs as well as financial assistance and goods given to victims of typhoons and calamities.

Other departments that reported considerable amount of donations are as

follows: DepED – P4.37 billion or 21.91 percent, DA – P2.73 billion or 13.69 percent, and OP – P1.40 billion or 7.02 percent.

Repairs and Maintenance – P19.11 billion

To ensure the usefulness of the existing structures, the government spent a

sizeable amount for Repairs and Maintenance of P19.11 billion which accounted for the 11.03 percent of the total MOOE for the year. Compared to P19.16 billion in

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2009, this year’s figure is lesser by P44.85 million or 0.23 percent. Table V.2-26 shows the comparative components of Repairs and Maintenance Expenses.

Table V.2-26 Comparative Components of Repairs and Maintenance

Expenses



Public Infrastructures 10,714.89 10,266.36 448.53 4.37Buildings 4,062.47 4,089.02 (26.55) (0.65)Transportation Equipment 2,400.51 2,699.66 (299.15) (11.08)Office Equipment, Furniture and Fixtures 864.54 1,017.10 (152.55) (15.00)Machineries and

Equipment 777.08 868.23 (91.15) (10.50)Land Improvements 145.14 92.29 52.84 57.26 Reforestation Projects 70.51 49.99 20.52 41.04 Other Property, Plant and Equipment 56.22 51.42 4.81 9.35 Leasehold Improvements 21.85 24.01 (2.15) (8.97)

Total 19,113.22 19,158.07 (44.85) (0.23)Difference between totals and sum of components is due to rounding off.

Of the components, P10.71 billion or 56.06 percent was expended for the

Repairs and Maintenance of Public Infrastructures which is slightly higher by P448.53 million or 4.37 percent over last year’s P10.27 billion. Repairs and Maintenance of Roads, Highways and Bridges accounted for P10.58 billion or 98.77 percent while other projects shared P132.30 million or 1.23 percent.

Repairs and Maintenance of Buildings reached P4.06 billion or 21.25 percent,

particularly for: Office Buildings – P1.55 billion or 38.11 percent, School Buildings – P1.34 billion or 32.97 percent, Other Structures – P976.15 million or 24.03 percent and Hospital and Health Centers – P198.74 million or 4.89 percent.

Repairs and Maintenance of Transportation Equipment totaled P2.40 billion or

12.56 percent, lower by P299.15 million or 11.08 percent compared to P2.70 billion spent in 2009. The details of the expenses for repairs of the transportation equipment are as follows: Motor Vehicles – P1.14 billion or 47.38 percent, Aircrafts and Aircraft Ground Equipment – P1.00 billion or 41.80 percent, Watercrafts – P257.82 million or 10.74 percent, and Other Transportation Equipment – P1.94 million.

Professional Services – P14.05 billion

Total Professional Services of P14.05 billion accounted for 8.11 percent of the

total MOOE. Compared to P15.68 billion in 2009, this year’s expenses is lower by P1.63 billion or 10.42 percent. The highest percentage decrease is registered in Other Professional Services. From P7.35 billion in the previous year, it was

109

reduced to P4.44 billion or a decrease of P2.91 billion or 39.64 percent this calendar year.

The following departments/offices reported the biggest expenses for

Professional Services: SUCs – P1.64 billion or 11.67 percent, MMDA – P1.24 billion or 8.85 percent, DOH – P1.15 billion or 8.16 percent, DepEd – P1.09 billion or 7.79 percent, and DSWD – P801.63 million or 5.71 percent.

Taxes, Insurance Premiums and Other Fees – P10.23 billion

Total Taxes, Insurance Premiums and Other Fees of P10.23 billion accounted

for 5.90 percent of the total MOOE. This year’s level declined by P1.30 billion or 11.24 percent over last year’s P11.52 billion. Of the total, P9.30 billion or 90.95 percent was expended for Taxes, Duties and Licenses. Compared to P10.55 billion in 2009, a decrease of P1.24 billion or 11.80 percent was noted. Other components are Insurance Expenses – P753.44 million or 7.37 percent and Fidelity Bond Premiums – P172.56 million or 1.69 percent.

The DOF and DOTC paid the largest taxes, insurance premiums and other fees

amounting to P6.07 billion or 59.35 percent and P2.28 billion or 22.26 percent, respectively.

Other Maintenance and Operating Expenses – P20.63 billion

Other MOE of P20.63 billion accounted for 11.91 percent of the total MOOE. Compared to the previous year’s figure of P13.81 billion, it exhibited an increase of P6.83 billion or 49.44 percent.

The DOTC reported the biggest

amount at P4.57 billion or 22.15 percent, followed by Congress of the Philippines – P2.35 billion or 11.40 percent, DepED – P1.98 billion or 9.59 percent, and COMELEC –P1.88 billion or 9.13 percent. Shown in Table V.2-27 are the departments/offices that reported expenses for Other MOE.

Non-Cash Expenses – P12.61 billion

This year’s Non-Cash Expenses of

P12.61 billion exceeded the previous level of P11.19 billion by P1.42 billion or 12.69 percent. The components are: Depreciation – P12.57 billion or 99.61 percent, Bad Debts Expenses – P43.01 million or 0.34 percent, and Obsolescence – P5.56 million.

Table V.2-27 Departments/Offices that Reported Expenses for

Other MOE


(in million pesos)


Transportation and Communications 4,570.78 22.15

Congress of the Philippines 2,352.10 11.40

Education 1,979.37 9.59Commission on

Election 1,884.92 9.13Agriculture 1,634.37 7.92The Judiciary 964.41 4.67National Economic

and Development Authority 932.56 4.52

State Universities and Colleges 911.26 4.42Health 887.17 4.30National Defense 880.42 4.27Others 3,637.41 17.63

Total 20,634.77 100.00Difference between totals and sum of components is due to rounding off.

110

Depreciation Expenses– P12.57 billion

Depreciation Expenses for the period posted an increase of P1.42 billion or

12.75 percent. Total amount of P12.57 was accounted for in the following PPE: Office Equipment, Furniture and Fixtures – P3.49 billion or 27.76 percent, Machineries and Equipment – P3.43 billion or 27.26 percent, Buildings – P3.23 billion or 25.67 percent, and, Transportation Equipment – P2.01 billion or 16.01 percent.

The departments/offices with big amounts of Depreciation Expenses are:

DND – P2.07 billion or 16.48 percent, DepEd – P1.99 billion or 15.81 percent, SUCs – P1.48 billion or 11.79 percent, DILG – P1.42 billion or 11.29 percent, DOH – P849.26 million or 6.76 percent, and DA – P720.16 million or 5.73 percent.

Bad Debts Expenses– P43.01 million

The following departments/offices accounted for the P43.01 million Bad

Debts Expenses this year: DA – P15.43 million or 35.88 percent, SUCs – P14.21 million or 33.04 percent, DOH – P8.11 million or 18.85 percent, Office of the President – P2.31 million or 5.37 percent, DOT – P866.77 thousand or 2.01 percent, DENR – P858.48 thousand or 2.00 percent, Others – P1.22 million or 2.84 percent.

Of the total Bad Debts reported by DA, P11.12 million or 72.05 percent and

P4.31 million or 27.94 percent were reported by the National Agricultural and Fishery Council and Cotton Development Administration, respectively.

Obsolescence – P5.56 million

Total Obsolescence of P5.56 million pertains to Obsolescence of IT

Software. Securities and Exchange Commission reported the highest amount of obsolescence - P5.20 million or 93.53 percent.

5.2.2.2 Subsidy to LGUs, GOCCs and NGOs/POs - P340.10 billion

Subsidy to LGUs, GOCCs and NGOs/POs totaling P340.10 billion is higher by P13.00 billion or 3.97 percent over the previous year’s level of P327.10 billion. The breakdown with comparative details shown in Table V.2-28 is as follows: LGUs (net) – P281.55 billion or 82.78 percent, GOCCs – P57.10 billion or 16.79 percent, and NGOs/POs – P1.44 billion or 0.42 percent.

111

Table V.2-28 Comparative Details of Subsidy To

LGUs, GOCCs and NGOs/POs



Subsidy to LGUs (283,614.73) (269,639.78) (13,974.94) 5.18Subsidy from Other LGUs 2,067.71 106.47 1,961.24 1,841.99 Net Subsidy From (To) LGUs (281,547.02) (269,533.31) (12,013.71) 4.46Subsidy to GOCCs (57,104.69) (56,896.16) (208.53) 0.37Subsidy to NGOs/POs (1,445.38) (665.63) (779.76) 117.15

Total (340,097.09) (327,095.09) (13,002.00) 3.97


Net Subsidy to LGUs – P281.55 billion

Net subsidy to LGUs of P281.55 billion is the excess of NG’s subsidy to and

subsidy from LGUs of P283.61 billion and P2.07 billion, respectively. Compared to the previous year’s level of P269.53 billion, an increase of P 12.01 billion or 4.46 percent was noted.

Subsidy to LGUs – P283.61 billion

Compared to previous year’s P269.64 billion, Subsidy to LGUs went up by

P13.97 billion or 5.18 percent. Of the amount, P281.51 billion or 99.26 was reported by the DBM, being the Administrator of the Funds for LGUs.

Of the total Subsidy to LGUs reported by DBM, P270.07 billion or 95.92

percent was funded from IRA. Others were from Special Purpose Funds’ Assistance to Local Government Units (ALGU) – P8.37 billion or 2.97 percent and PDAF – P2.13 billion or 0.76 percent. The balance was sourced from: Calamity Fund – P350.08 million, Pension and Gratuity Fund – P92.12 million, Contingent Fund – P26.00 million, and Others – P475.03 million.

Table V.2-29 Breakdown of Subsidy to LGUs as Reported by DBM CO and ROs

CO/RO Amount

(in million pesos)

Percent Distribution RO

Amount (in million

pesos)


CO 6,388.93 2.27 VI 22,934.81 8.15 NCR 17,424.47 6.19 VII 19,126.95 6.79

I 17,160.41 6.1 VIII 16,548.90 5.88 CAR 8,404.93 2.99 IX 16,883.53 6.00

II 13,640.36 4.85 X 14,816.85 5.26 III 26,393.40 9.38 XI 12,821.52 4.55

IV-A 28,859.35 10.25 XII 20,562.03 7.30 IV-B 11,842.27 4.21 XIII 10,348.45 3.68

V 17,352.10 6.16 Total 281,509.25 100.00

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Table V.2-29 shows the breakdown of releases made by the Central and Regional Offices of the DBM. The Regional Offices released the funds to the LGUs under their jurisdiction through the issuance of funding check directly to their respective current account maintained at the LBP, DBP and PVB. On the other hand, the amount deducted from the IRA shares of LGUs is released to the DBM Central Office which remits them to the DOF-MDFO and MMDA to cover loan amortization and contribution of Metro Manila Mayors, respectively.

The subsidies reported by the Regional Offices IX and XII include subsidy

for ARMM.

Among the regions, the highest amount of subsidy were released to: CALABARZON – P28.86 billion or 10.25 percent, Region III – P26.39 billion or 9.38 percent, Region VI – P22.93 billion or 8.15 percent, Region XII – P20.56 billion or 7.30 percent, Region VII – P19.13 billion or 6.79 percent, NCR – P17.42 billion or 6.19 percent and Region V – P17.35 billion or 6.16 percent.

Subsidy from Other LGUs – P2.07 billion

Subsidy from Other LGUs posted an increase of more than eighteen times or

P1.96 billion over P106.47 million in 2009 due to the inclusion this year of the Local Fund of MMDA. Of the total, MMDA, DepEd and DOLE reported receipts of P1.77 billion or 85.59 percent, P209.47 million or 10.13 percent, and P55.14 million or 2.67 percent, respectively.

Subsidy To GOCCs – P57.10 billion

Tax subsidy, equity contributions and other subsidies to GOCCs given by NG during the year reached P57.10 billion, showing an increment of P208.53 million or a mere 0.37 percent compared to the previous year’s level of P56.90 billion. Of the total, P57.00 billion or 99.83 percent was reported by the DOF-BTr, of which P36.46 billion was for tax subsidy. Table V.2-30 shows the Comparative Breakdown of Subsidy to GOCCs Reported by DOF-BTr.

Table V.2-30 Comparative Breakdown of Subsidy to GOCCs as Reported by DOF-BTr



National Food Authority 38,420.09 24,471.12 13,948.97 57.00 Philippine Deposit Insurance Corporation 4,403.27 4,150.78 252.49 6.08 Philippine Health Insurance Corporation 3,506.10 103.10

3,403.00 3,300.67

National Housing Authority 3,500.00 3,857.90 (357.90) (9.28) National Livelihood Development Corporation 1,299.18 880.35

418.83 47.58

National Transmission Corporation 1,024.56 - 1,024.56 Bases Conversion Development Authority 781.19 2,919.91

(2,138.72) (73.25)

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Philippine Coconut Authority 585.00 585.00 0.00 0.00 North Luzon Railways Corporation 499.06 587.61 (88.55) (15.07) Philippine Rice Research Institute 418.00 351.75 66.25 18.83 National Kidney and Transplant Institute 297.59 275.86 21.73 7.88 Philippine Heart Center 294.79 264.13 30.66 11.61 Philippine Postal Corporation 281.28 277.65 3.63 1.31 Philippine Children’s Medical Center 259.65 245.60 14.05 5.72 AFP Commissary Exchange System 248.58 235.90 12.68 5.37 Lung Center of the Philippines 180.38 160.98 19.40 12.05 Philippine National Railways 163.97 - 163.97 Philippine Crop Insurance Corporation 113.77 113.77 0.00 0.00 Cultural Center of the Philippines 100.00 210.62 (110.62) (52.52) National Resources Development Corporation 80.00 45.00 35.00 7.78 Center for International Trade Expo and Missions 73.75 67.83

5.92 8.73

National Tobacco Administration 70.00 116.48 (46.48) (39.90) Philippine Convention and Visitors

Corporation 65.00 65.00 0.00 0.00 National Dairy Authority 52.20 52.20 0.00 0.00 Philippine Institute of Traditional and Alternative Health Care 50.00 30.00 20.00 66.67 Food Terminal Incorporated 40.90 - 40.90 Southern Philippines Development Authority 30.00 121.94 (91.94) (75.40) Zamboanga City Special Economic

Zone Authority 30.00 30.00 0.00 0.00 Philippine Center for Economic

Development 29.75 - 29.75 Aurora Special Economic Zone Authority 22.50 - 22.50 Development Academy of the

Philippines 20.00 79.00

(59.00) (74.68) National Agribusiness Corporation 20.00 - 20.00 Philippine Institute for Development

Studies 19.20 67.50 (48.30) (71.56) Cottage Industry Technology Center 12.52 7.48 5.04 67.38 National Electrification Administration 10.14 525.15 (515.01) (98.07) People’s Televisions Network Inc. 4.04 100.00 (95.96) (95.96) National Power Corporation 8,915.74 (8,915.74) (100.00) Local Water Utilities Administration 1,950.20 (1,950.20) (100.00) Home Development Mutual Fund 1,697.00 (1,697.00) (100.00) Philippine National Railways 1,227.77 (1,227.77) (100.00) National Home Mortgage Finance Corporation 900.00

(900.00) (100.00)

National Irrigation Administration 892.17 (892.17) (100.00)

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Cagayan Economic Zone Authority 100.00 (100.00) (100.00) Light Rail Transit Authority 57.51 (57.51) (100.00) Technology Resource Center 25.00 (25.00) (100.00) Philippine Fisheries Development Authority 12.50 (12.50) (100.00) Philippine Tourism Authority . 5.00 (5.00) (100.00)

Total 57,006.45 56,782.50 223.95 0.39 Difference between totals and sum of components is due to rounding off.

Subsidy to NGOs/POs – P1.44 billion

Financial assistance extended to NGOs/POs for the implementation of various

projects grew by P779.78 million or 117.15 percent from last year’s P665.63 million. The following departments/offices extended the largest subsidy to NGOs/POs:

DAR – P449.48 million or 31.10 percent, ARMM – P378.42 million or 26.18 percent, DSWD – P245.84 million or 17.01 percent and DOLE – P166.83 million or 11.54 percent.

5.2.2.3 Financial Expenses – P304.52 billion

Total Financial Expenses for the calendar year grew by P15.80 billion or 5.47 percent compared to P288.72 billion of the previous year. As shown in Table V.2-31, with the exception of Bank Charges, Interest Expenses and other financial charges for our foreign and domestic borrowings reflected increases. The highest percentage increase was exhibited in Other Financial Charges with 269.37 percent or twice higher than the previous year’s level.

The DOF accounted for P304.29 billion or 99.93 percent. The SUCs and DFA

also reported minimal amounts at P67.69 million and P65.75 million, respectively.

Table V.2-31 Comparative Components of Financial Expenses



Interest Expenses 292,742.50 280,515.52 12,226.98 4.36 Documentary Stamp Expenses 7,061.08 6,654.59 406.48 6.11 Other Financial Charges 4,226.70 1,144.31 3,082.39 269.37 Commitment Fees 397.93 270.64 127.29 47.03 Bank Charges 88.39 134.87 (46.48) (34.46)


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Chart V.2-4 Sectoral Classification of Expenses

(in billion pesos)

Total Interest Expenses of P292.74 billion accounted for the 96.13 percent of the total Financial Expenses. Compared with the P280.52 billion in CY 2009, it posted an increase of P12.23 billion or 4.36 percent. Of the amount, P292.42 billion or 99.89 percent was reported by the BTr NG Books in the payment of foreign and domestic loans and bonds and notes payable.

Total Documentary Stamp Expenses grew by P406.48 million or 6.11 percent

from P6.65 billion in previous year. Of the total, P7.06 billion or 99.98 percent was reported by the BTr NG Books.

5.2.2.4 Sectoral Classification of Expenses

To establish proper allocation of funds to various sectors ensuring revenue generation, employment opportunities, price stability, economic growth and financial control, the expenses of the government are classified into five (5) sectors, namely: Economic Services, Social Services, Defense, General Public Services, and Debt Service.

For Calendar Year 2010, the

breakdown of total expenses of P1.282 trillion by Sector are as follows: Social Services – P294.68 billion or 22.99 percent, General Public Services – P467.47 billion or 36.46 percent, Defense – P90.98 billion or 7.10 percent, Economic Services – P118.80 billion or 9.27 percent and Debt Service – P310.14 billion or 24.19 percent as shown in Chart V.2-4.

General Public Services – P467.47 billion

The expenses for this sector were distributed among the following sub-sectors: Improvement of Public Order and Safety – P115.72 billion or 24.75 percent, General Administration – P66.72 billion or 14.27 percent, and Other General Public Services – P285.03 billion or 60.97 percent.

Social Services – P294.68 billion

Under this sector, the NG spent P229.55 billion or 77.90 percent for Education, Culture and Manpower Development, P29.50 billion or 10.01 percent for Social Security, Welfare and Employment, P23.72 billion or 8.05 percent for Health, P11.53 billion or 3.91 percent for Other Social Services and P386.58 million or 0.13 percent for Housing and Community Services.

Economic Services – P118.80 billion

The expenses for this sector were used in the following sub-sectors: Communications, Roads and Other Transport – P35.20 billion or 29.63 percent, Agriculture and Agrarian Reform – P22.17 billion or 18.66 percent, Natural Resources and Environment – P10.39 billion or 8.74 percent, Trade and Industry – P3.52 billion or 2.96 percent, Tourism – P1.70 billion or 1.43 percent, Power and

Debt Service, 310.14

Social Services 294.68

General Public

Services 467.47

Economic Services

118.80

Defense Services

90.98

116

Energy – P1.26 billion or 1.99 percent, Water Resources Development and Flood Control of P43.55 million or 0.04 percent, and Other Economic Services – P44.27 billion or 37.27 percent.

Defense – P90.98 billion

Of the total, P86.92 billion or 95.54 percent was reported by the four major services of the AFP, namely: Philippine Army – P36.87 billion or 42.42 percent, General Headquarters – P27.91 billion or 32.11 percent, Philippine Navy – P11.86 billion or 13.65 percent, and Philippine Air Force – P10.28 billion or 11.83 percent.

Debt Service – P310.14 billion

Current year’s expenses for Debt Service, posted an increment of P21.74

billion or 7.54 percent compared to the P288.40 billion in CY 2009. 5.2.2.5 Regional Breakdown of Expenses

Since almost all of the Central Offices are situated in Metro Manila, the NCR

continued to account for the highest amount of expenses totaling P719.65 billion or 56.13 percent. Regions IV, III and VI followed with P84.63 billion or 6.60 percent, P59.33 billion or 4.63 percent and P49.59 billion or 3.87 percent, respectively. On the other hand, the Foreign Service Posts of DFA reported total expenses of P5.11 billion as presented in Table V.2-32.

The breakdown of expenses by department/office and by region is shown in

Schedule 29, Volume I-B, while the details of expenses, by account and by region are presented in Schedule 30, Volume I-B.

Table V.2-32 Regional Breakdown of Expenses and Subsidies

Region Amount (in million pesos) Percentage DistributionPS MOOE FE Subsidies Total

NCR 237,944.05 97,279.74 304,408.06 80,017.30 719,649.16 56.13 I 15,189.03 5,115.92 0.41 17,301.77 37,607.12 2.93 CAR 7,513.94 3,037.02 0.28 8,514.67 19,065.90 1.49 II 11,470.97 4,460.72 0.11 13,741.73 29,673.53 2.31 III 23,433.17 9,074.48 11.17 26,814.59 59,333.41 4.63 IV 31,750.29 11,835.30 10.81 41,030.42 84,626.82 6.60 V 16,981.61 5,617.62 0.95 17,378.12 39,978.30 3.12 VI 21,062.85 5,471.57 5.37 23,051.07 49,590.87 3.87 VII 15,915.15 5,422.68 0.22 19,304.10 40,642.15 3.17 VIII 15,433.82 3,984.06 1.61 16,696.38 36,115.87 2.82 IX 11,390.85 3,968.61 1.43 16,972.88 32,333.76 2.52 X 13,116.35 4,343.64 1.23 14,952.67 32,413.89 2.53 XI 11,282.94 4,506.05 6.23 12,827.02 28,622.24 2.23 XII 10,485.20 3,613.65 1.41 20,716.56 34,816.82 2.72 XIII 7,643.21 2,782.11 2.13 10,399.38 20,826.83 1.62 ARMM 9,680.83 1,604.02 1.72 378.43 11,664.99 0.91 FSPs 3,925.43 1,120.41 63.44 - 5,109.28 0.40

Total 464,219.66 173,237.60 304,516.60 340,097.09 1,282,070.96 100.00Difference between totals and sum of components is due to rounding off.

117

5.2.3 Other Income/Expense Items

5.2.3.1 Net Subsidy to National Government Agencies - P35.47 billion

Net Subsidy to NGAs of P35.47 billion is the difference between total Subsidy from NG of P1.128 trillion and total Subsidy to NGAs of P1.164 trillion. This year, it registered a net increase of P30.62 billion or more than six times compared to the previous year’s level of P4.85 billion. As shown in Table V.2-33, total Subsidy from NG exhibited decrease of P9.19 billion or 0.81 percent while total Subsidy to NGAs showed an increment of P21.43 billion or 1.88 percent.

Table V.2-33 Comparative Details of Subsidy From/(To) National Government Agencies

Particulars


(Decrease) Subsidy Income from National

Government 1,092,863.47 1,112,245.27 (19,381.80) (1.74)

Subsidy from Central Office 29,276.51 20,421.35 8,855.16 43.36 Subsidy from Regional Offices/Staff Bureau

4,022.94

2,517.87

1,505.06

59.78

Subsidy from Operating Unit 588.33 775.39 (187.06) (24.13) Subsidy from Other Funds 814.97 758.44 56.53 7.45 Subsidy Income from Other NGAs 523.80 564.12 (40.32) (7.15)

Total Subsidy from NG 1,128,090.02 1,137,282.45 (9,192.43) (0.81) Less: Subsidy to National Government

Agencies

1,127,784.96

1,116,615.56

11,169.40

1.00 Subsidy to Regional Offices/Staff

Bureau

22,107.46

13,890.36

8,217.11

59.16 Subsidy to Operating Unit 13,406.69 11,566.70 1,839.99 15.91 Subsidy to Other Funds 261.57 57.13 204.44 357.85 Total Subsidy to NGAs 1,163,560.68 1,142,129.75 21,430.94 1.88

Net Subsidy From (To) NGAs (35,470.66) (4,847.30) (30,623.37) 631.76 Difference between totals and sum of components is due to rounding off.

Subsidy from National Government – P1.128 trillion

The major component of Subsidy from NG is the Subsidy Income from National Government, which reached P1.093 trillion or 96.88 percent. This account is credited for receipt of NCA, NCAA, Working Fund and constructive receipt of CDC by Foreign Service Posts of DFA. Likewise, it is also credited for Tax Remittance Advices (TRAs) issued to BIR and for tax subsidies by NG to GOCCs. On the other hand, it is debited for remittances to National Treasury of collections from refunds of current year’s excess of cash advances and working fund, and refunds of current year’s overpayments of expenses and disallowances; reversion of unused/lapsed NCAs; and closing at year-end to Income and Expense Summary account.

Compared to P1.112 trillion in calendar year 2009, there was a decline of

P19.38 billion or 1.74 percent. As the administrator of funds for NGs subsidies to LGUs, the DBM reported the highest amount of P283.52 billion, accounting for 25.94 percent of the total. The DepEd, DPWH and DND followed with P197.09 billion or 18.03 percent, P152.63 billion or 13.97 percent, and P107.83 billion or 9.87 billion, respectively.

118

Other components of Subsidy from NG are the following: Subsidy from Central Office/Home Office – P29.28 billion, Subsidy from Regional Office/Staff Bureau – P4.02 billion, Subsidy from Operating Units – P588.33 million, Subsidy from Other Funds – P814.97 million, and, Subsidy from Other NGAs – P523.80 million.

Subsidy to National Government Agencies – P1.164 trillion

The main component of this category is the account Subsidy to NGAs as

reported by BTr NG Books totaling P1.128 trillion. This account is debited for: replenishments to AGSBs for negotiated MDS checks and other payments on accounts of NGAs; constructive issuance of NCAA for advanced payments made by foreign creditors and donors; constructive issuance of CDC to Foreign Service Posts based on their submitted Report of Income; Working Fund deposited to the foreign currency accounts of implementing NGAs for FAPs; and TRAs issued to BIR and for tax subsidies by NG to GOCCs. It is credited at year-end for closing to Income and Expense Summary account.

Table V.2-34 Comparative Details of Subsidy to NGAs as Reported by BTr NG Books


Percent 2010 2009 Increase

(Decrease) Replenishment of negotiated MDS account

1,092,266.12

1,004,680.08

87,586.04

8.72

Customs Duties/Other Taxes per JC 2-91

39,693.73

5,886.32

33,807.41

574.34

Tax Remittance Advices 31,945.75 25,943.49 6,002.26 23.14Constructive Cash (NCAA) 16,199.41 15,844.23 355.19 2.24Working Fund 5,766.45 4,168.33 1,598.11 38.34Contributions to

International Organizations

1,155.92

1,185.15

(29.23)

(2.47)

Non-Cash Availment Authority – Grant

9.74

7.62

2.12

27.82

Total 1,187,037.12 1,057,715.22 129,321.90 12.44Difference between totals and sum of components is due to rounding off.

The principal component of Subsidy to NGAs as shown in Table V.2-34 is

replenishment by BTr to AGSBs for negotiated MDS checks – P1.092 trillion, higher by P87.59 billion or 8.72 percent over the previous year’s P1.005 trillion. The second biggest component is Customs Duties/Other Taxes of P39.69 billion which represents tax subsidies of NG to GOCCs. It ballooned by P33.81 billion or five times bigger than the previous year’s level of P5.89 billion. The TRAs issued by other NGAs to BIR shared P31.94 billion, registering an increment of P6.00 billion or 23.14 percent compared to P25.94 billion in 2009.

In addition to the Subsidy to NGAs of P1.187 trillion accounted for by BTr,

other departments/offices reported total subsidy of P366.35 million, the biggest was from ARMM, P163.41 million.

119

Other components of Subsidy to NGAs are the following: Subsidy to Regional Office/Staff Bureau – P22.11 billion, Subsidy to Operating Units – P13.41 billion and Subsidy to Other Funds – P261.57 million.

5.2.3.2 Net Gain (Loss) – P49.78 billion

From a Net Loss of P34.87 billion in the previous year, a remarkable Net Gain of P49.78 billion was reported for the year ended 2010. This was attributed mainly to the Net Gain of P54.21 billion in foreign exchange resulting from the appreciation of the peso as against the other currencies, as compared to the FOREX Loss of P27.44 billion in 2009.

Lower Loss on Guaranty of P4.57 billion from P7.51 billion in the previous

period also contributed to the Net Gain this year. Table V.2-35 show the Comparative Details of Gains (Losses) for calendar

years 2010 and 2009.

Table V.2-35 Comparative Details of Gains (Losses)



Gain (Loss) on Foreign Exchange 54,214.72 (27,439.49) 81,654.21 (297.58)Loss on Guaranty (4,571.08) (7,508.54) 2,937.46 (39.12) Loss of Assets (61.13) (84.47) 23.35 (27.64) Gain (Loss) on Sale of Disposed

Assets

(48.26)

(18.29) (29.97)

163.86Gain (Loss) on Sale of Securities 247.71 180.20 67.51 37.46Net Gain(Loss) 49,781.96 (34,870.60) 84,652.56 (242.76)Difference between totals and sum of components is due to rounding off.

5.2.4 Net Income (Loss) – (P24.08 billion)

The NG’s operations for the year ended, resulted to a Net Loss of P24.08 billion. Despite the increases in aggregate expenses of P82.27 billion and subsidy to NGAs of P30.62 billion, the impact was cushioned by this year’s growth of P88.59 billion in revenue and higher net gain of P84.65 billion which resulted to a lower Net Loss of P24.08 billion as presented in Table V.2–36.

Table V.2-36 Comparative Condensed Statement of Income and Expenses



Revenue/Income 1,243,676.54 1,155,083.90 88,592.64 7.67 Less: Expenses 1,282,070.96 1,199,804.84 82,266.12 6.86 Income (Loss) Before Other

Income/Expense Items (38,394.42) (44,720.94) 6,326.52 14.15 Net Subsidy From (To) NGAs (35,470.66) (4,847.30) (30,623.37) 631.76 Net Gain (Loss) 49,781.96 (34,870.60) 84,652.56 (242.76) Net Income (Loss) (24,083.12) (84,438.83) 60,355.71 (71.48)

120

5.3 Statement of Cash Flows

The consolidated SCF summarizes the real money flowing into, or out of the NG’s cash account which is classified into operating, investing and financing activities. It was prepared using the Direct Method approach which provides information on the cash receipts and cash payments during the year.

All income collected by the agencies which are not authorized to be used and are

required to be remitted to the National Treasury (NT) are presented in the SCF for NG Books while the receipt and utilization of NCA and other income/receipts which the agencies are authorized to be used and to be deposited with AGDB and the NT are presented in the SCF for RA Books.

The SCF on page 46 of this report shows how much cash went in and out of the NG

for CY 2010, while Chart V.3-1 shows the segments of cash flows by activity.

Chart V.3-1 Segments of Cash Flows (in billion pesos)

Difference between totals and sum of components is due to rounding off. Operating activities are those relating to the generation of cash from revenues and

the cost associated excluding those associated with long-term investment on capital items or investment in securities.

Investing activities are those relating to the acquisition and disposal of non-cash current and non-current securities and advances and any other non-current assets.

Financing activities are those relating to changes in equity and debt capital structure and those activities relating to the cost of servicing the NG’s equity capital.

-1,000

0

1,000

2,000

3,000

4,000

5,000

Inflows 2,533.20 386.27 1,604.44 4,523.92

Outflows 2,348.24 564.33 1,568.78 4,481.36

Net Cash Providedby (Used in)

184.96 (178.06) 35.66 42.56

Operating Investing Financing Total

121

5.3.1 Cash Inflows – P4.524 trillion

Cash inflows summed up to P4.524 trillion, P2.533 trillion or 55.99 percent of which is sourced from Operating Activities, P1.604 trillion or 35.47 percent from Financing Activities and P386.27 billion or 8.54 percent from Investing Activities. Chart V.3-2 shows that this year’s cash generation came mostly from operating transactions.

Chart V.3-2 - Components of Cash Inflows

5.3.1.1 Operating Activities – P2.533 trillion

Total cash inflows derived from Operating Activities for the year reached P2.533 trillion. The key source of the NG’s cash generation is attributed to collection of revenue/income of P1.130 trillion. Of the total collections, P746.76 billion was reported by the BIR as remittance from various taxes, P71.99 billion or 10.67 percent higher than last year’s P674.77 billion. Table V.3-1 shows the collections generated by the agencies.

Table V.3-1 - Revenue Generated, by Agency

(in million pesos)

Department/Agency Total NG Books

RA Books

Bureau of Internal Revenue 746,764.30 746,703.36 60.94 Bureau of Customs 226,852.42 226,852.40 0.02 DOE-OSEC 23,346.45 22,488.28 858.18 DOTC-OSEC 13,955.61 13,955.30 0.31 DOH-OSEC 5,774.12 19.70 5,754.41 DFA-OSEC 4,832.60 1,737.58 3,095.03 Procurement Service 3,813.67 - 3,813.67 National Telecommunications

Commission 3,681.73 3,681.72 0.01 Land Registration Authority 3,397.84 3,397.84 - University of the Philippines 2,573.69 - 2,573.69 Other Agencies 95,313.73 76,961.74 18,351.99

Total* 1,130,306.15 1,095,797.91 34,508.25*Total amount is net of remittance to NT Difference between totals and sum of components is due to rounding off.

55.99%

35.47%

8.54%

Operating

Investing

Financing

1,130.31

291.73

1,111.17

Collection ofIncome

Receipt of NCA

Other Receipts

Main Sources of Operating Inflows (in billion pesos)

122

The second largest source of operating inflows totaling P1.111 trillion are receipt of NCA for regular operations – P1.079 trillion, receipt of NTCA – P30.59 billion and receipt of NCA for trust and other receipts – P983.95 million. Among the departments/offices, the DBM accounted for the highest receipt of P283.55 billion or 25.52 percent of the total. Of this amount, P282.77 billion pertains to DBM administered funds which was allocated as financial subsidies to LGUs. The receipt of NCA, by department/office is listed in Table V.3-2.

Table V.3-2 Receipt of NCA, by Department


(in million pesos)

Percent to Total

Budget and Management 283,547.11 25.52 Education 197,086.65 17.74 Public Works and Highways 147,069.08 13.24 National Defense 129,421.26 11.65 Interior and Local Government 95,806.81 8.62 Agriculture 38,013.82 3.42 State Universities and Colleges 24,375.13 2.19 Health 20,700.64 1.86 Transportation and Communications 18,045.12 1.62 Social Welfare and Development 14,765.61 1.33 Other Departments 142,336.66 12.81

Total 1,111,167.88 100.00 Difference between totals and sum of components is due to rounding off.

Contributing to the sources of funds of NGAs are inter-agency and intra-agency fund transfers which amounted to P117.86 billion and P34.92 billion, respectively. This comprises cash for the account of NGAs/LGUs/GOCCs, working fund including funds for foreign-assisted projects, funds transferred from one government agency to another for implementation of projects and operating funds received by Regional Offices from the Central Offices, and by Operating Units from the Regional Offices.

Collection of receivables such as accounts receivables, inter-agency and intra-agency receivables, receivables from audit disallowances and other receivables amounted to P10.04 billion, P4.16 billion or 41.39 percent of which was reported by various agencies under the DOF.

Other receipts falling under Operating Activities are shown in Table V.3-3.

123

Table V.3-3 Breakdown of Other Receipts (in million pesos)

Particulars Amount Receipt of Performance/Bidders/Bail Bonds and Security

Deposits 4,480.72 Funds from NGOs/POs for the implementation of projects 4,051.45 Collection of trust receipts from entities other than

NGAs/LGUs/GOCCs 3,846.65 Collection of trust receipts from NGAs/LGUs 2,024.78 Receipt of refund of cash advances, fund transfers and

overpayments of expenses 1,639.17 Other miscellaneous receipts 8,771.13

Total 24,813.91 Difference between totals and sum of components is due to rounding off.

Adjustments which resulted to the increase in cash balance include gain

on foreign exchange – P91.75 billion, restoration of cash for unreleased checks – P9.58 billion, restoration of cash for cancelled/lost/stale checks – P830.19 million, receipt of return of cash equivalent to unexpended balance of allotment – P73.40 million and other adjustments – P160.68 million.

5.3.1.2 Investing Activities – P386.27 billion

Inflows of NG from this activity came from proceeds from matured investments – P333.02 billion, sale of investment securities – P49.76 billion, collection or repayment of long-term loans – P2.96 billion and sale of assets – P546.24 million.

Of the aggregate cash generated from investing transactions of P386.27

billion, 96.59 percent was recorded by the BTr-GOP at P373.10 billion, the breakdown of which is shown in Table V.3-4.

Table V.3-4 Breakdown of Inflows from Investing

(in million pesos) Particulars Amount

Redemption of Investments Sinking Fund - Securities 320,738.31 Investments in Bonds 280.80 Investments in T-bills 109.90 Other Investments and Marketable Securities 3.47

Proceeds from sale of T-bills, stocks and bonds 49,730.71 Repayment of long-term loans by GOCCs/GFIs 2,182.22 Sale of property, plant and equipment 55.83

Total 373,101.24 Source: SCF – BTr-GOP

124

5.3.1.3 Financing Activities – P1.604 trillion

Activities which had impact on the long-term liabilities and equity of the NG are listed in the financing activities section of the SCF. For CY 2010, domestic and foreign borrowings reached P1.604 trillion. This amount was mainly accounted for by the BTr-GOP which is engaged in financing activities. This figure is net of discount, other financial charges and documentary stamp expenses but inclusive of premium on bonds, accrued interests and withholding tax discounts, as shown in Table V.3-5. A minimal amount of P88.11 million was reported by other departments/offices.

5.3.2 Cash Outflows – P4.481 trillion

This year’s disbursements at P4.481 trillion is comprised of Operating Activities – P2.348 trillion or 52.40 percent, Financing Activities – P1.569 trillion or 35.01 percent and Investing Activities – P564.33 billion or 12.59 percent.

5.3.2.1 Operating Activities – P2.348 trillion

Replenishment of negotiated MDS checks amounting to P1.069 trillion

took the most part of operating cash outflows. This amount is higher by P64.42 billion or 6.41 percent, compared to last year’s P1.004 trillion.

Total remittances to the NT was posted at P1,040 trillion, of which

P1,031 trillion and P9.05 billion, pertain to collections recorded in the NG Books and RA Books, respectively. Table V.3-6 shows the remittances to the NT by agency.

Table V.3-6 Remittances to NT, by Agency

(in million pesos)

Department/Agency Total NG Books RA Books

Bureau of Internal Revenue 747,416.08 747,325.90 90.18 Bureau of Customs 226,941.82 226,941.82 - DOE-OSEC 22,590.63 22,578.08 12.55 DOTC-OSEC 14,096.73 13,954.64 142.09 Land Registration Authority 4,300.45 3,391.95 908.50

Table V.3-5 - Breakdown of Borrowings (in million pesos)

Particulars Amount Bonds Payable - Domestic 556,636.33 Bonds Payable - Foreign 166,922.98 Loans Payable - Domestic 826,282.16 Loans Payable - Foreign 40,821.73 Interest Payable 3,798.62 Withholding Tax Payable 4,291.89 Premium on T-Bonds 3,656.31 Other Deferred Credits 1,855.51 Bond Exchange 126.07

Total 1,604,391.58 Difference between total and sum of components is

due to rounding off. Source: SCF – BTr-GOP

125


Department/Agency Total NG Books RA Books

National Telecommunications Commission 3,677.14 3,677.07

0.07

Bureau of Immigration 2,270.92 2,238.23 32.68 DFA-OSEC 1,742.46 1,728.39 14.06 Securities and Exchange

Commission 1,218.67 1,204.03 14.64 National Statistics Office 1,065.61 535.59 530.02 Other Agencies 14,734.65 7,431.16 7,303.47

Total 1,040,055.15 1,031,006.87 9,048.28 Difference between total and sum of components is due to rounding off.

This year’s payment of operating expenses reached P505.31 billion.

Among the departments/offices, the DepEd incurred the highest disbursement on operating expenses at P162.72 billion or 32.20 percent of the total. Payment of operating expenses, by department is shown in Table V.3-7.

Table V.3-7 Payment of Operating Expenses,

by Department


(in million pesos)

Percent to total

Education 162,720.97 32.20 National Defense 83,284.98 16.48 Interior and Local Government 69,831.19 13.82 State Universities and Colleges 23,210.15 4.59 Public Works and Highways 17,290.97 3.42 Health 13,518.51 2.68 The Judiciary 12,658.85 2.51 Agriculture 12,021.77 2.38 Finance 10,930.45 2.16 Social Welfare and Development 9,470.27 1.87 Other Departments 90,375.17 17.88

Total 505,313.28 100.00

Cash disbursements on subsidies and donations of P306.87 billion is another component of cash outflows under Operating Activities. Subsidy to LGUs amounting to P281.86 billion was released through the DBM while Subsidy to GOCCs amounting to P20.54 billion was released through the BTr-GOP. Table V.3-8 shows subsidies amounting to P4.48 billion which were granted by departments to other NGAs, LGUs, NGOs/POs and other levels of government/institutions to implement their programs and projects.

126

Table V.3-8 Subsidies and Donations to Other NGAs/LGUs, NGOs/POs


Office of the President 1,509.10 Other Executive Offices 1,015.87 Agrarian Reform 763.32 Science and Technology 392.10 Autonomous Region in Muslim Mindanao 254.98 State Universities and Colleges 214.26 Social Welfare and Development 119.47 Interior and Local Government 54.33 The Judiciary 39.15 National Defense 30.92 Other Departments/Offices 81.66

Total 4,475.17 Difference between totals and sum of components is due to rounding off.

Release of intra-agency and inter-agency fund transfers amounted to

P98.20 billion and P70.12 billion, respectively. Other major transactions under operating cash outflow include –

remittance of personnel benefit contributions and mandatory deductions – P119.39 billion, settlement of accounts payable – P63.53 billion, purchase of inventories P16.11 billion, grant of cash advances for travel and for special purpose or time-bound undertaking – P25.33 billion and other disbursements – P25.67 billion.

Transactions which reduced the cash balance at year end pertains to loss

on foreign exchange – P40.75 billion, reversion of unreleased checks in previous year – P6.70 billion, adjustment for cash shortage – P34.29 million, adjustment for dishonored checks – P19.17 million and other adjustments – P38.67 million.

5.3.2.2 Investing Activities – P564.33 billion

Investing transactions generated cash outflows amounting to P564.33 billion. Investment in securities of P431.65 billion accounted for 76.49 percent of this activity, the most part of which are Investments in Stocks/Bonds and Bills of P415.68 billion and P9.05 billion, recorded in the books of the BTr-GOP and MDFO, respectively.

An aggregate of P132.21 billion was disbursed on capital expenditures for

property, plant and equipment. This use of cash is a prime necessity for ensuring the proper maintenance of, and additions to, the NG’s physical assets to support

127

its efficient operation. The DPWH, tasked to provide and manage quality infrastructure facilities and services, topped the list of departments with disbursement on capital expenditures at P109.56 billion or 82.78 percent of the total.

5.3.2.3 Financing Activities – P1.569 trillion

Debt and equity transactions dominated this category. Payment of

domestic and foreign loans amounted to P1.569 trillion, P1.332 trillion or 84.89 percent of which represents BTr-GOP’s loan repayments and redemptions. The components of financing outflows are presented in Table V.3-9.

Table V.3-9 Composition of Financing Outflows

(in million pesos) Particulars Amount

Loan Repayments and Redemptions 1,327,094.33 DOF-BTr-GOP 1,326,619.95

Bonds Payable - Domestic 235,137.51 Bonds Payable - Foreign 69,305.42 Loans Payable - Domestic 950,438.30 Loans Payable - Foreign 59,182.65 Due from GOCCs/Loans Receivables-GOCC 12,556.07

Other departments/offices 474.38 Interest Payments 236,607.35

DOF-BTr-GOP 236,605.33 Other departments/offices 2.02

Loss on Guaranty 4,571.08 Commitment Charges 370.76 Other Financial Charges 138.73

Total 1,568,782.25 Source: SCF-BTr-GOP, except for data on other departments/offices

5.3.3 Net Cash Provided by (Used in) Operating, Investing and Financing Activities –

P42.56 billion

During the year, the net cash provided by the three activities amounted to P42.56 billion. This is a marked improvement from last year’s negative cash inflow or deficit amounting to P56.89 billion. This year’s increment in NG’s net cash is due to the combined increase in net inflows in operating activities caused by increase in income collection of P184.96 billion and financing activities of P35.66 billion less net outflows in investing activities of P178.06 billion.

Chart V.3-3 shows the net cash provided by (used in) operations by the NG for

the last nine years. Net inflows were registered except in 2009 and 2004 where heavy use of cash resulted to net outflows.

128

Chart V.3-3 Trend of Net Cash Provided by (Used in) Operating, Investing and Financing Activities

CY 2002-2010 (in billion pesos)

5.3.4 Cash Balances

5.3.4.1 Beginning Balance, January 1, 2010

The consolidated beginning balance of cash as of January 1, 2010 of

P338.71 billion shown in the 2009 AFR has been adjusted by P1.43 billion to include the beginning cash balances of agencies which did not submit SCF last year and other adjustments.

5.3.4.2 Ending Balance, December 31, 2010

The SCF at the end of the year shows total cash balance of P381.27

billion, higher by P57.09 billion against the cash balance reflected in the Balance Sheet. The difference represents sinking fund cash accounts lodged under Investments in the books of the BTR-GOP and cash accounts of DOLE and other departments/offices not included in its SCF ending balance.

A detailed discussion of the cash and cash equivalents is presented

in the narrative report on Balance Sheet.

(33.28)

63.39

29.31

(56.89)

95.08

27.16

9.14

42.56

66.95

-70

-50

-30

-10

10

30

50

70

90

2002 2003 2004 2005 2006 2007 2008 2009 2010

VI. NATIONAL GOVERNMENT DEBT

129

NATIONAL GOVERNMENT DEBT

6.1 Introduction

One of the essential strategies to operationalize the government’s thrust of stabilizing the economy is the implementation of various capital development projects and programs which are either self-financed or debt-financed. While national revenue has increased over the last five years, it is not sufficient to finance the capital programs and projects. Thus, the government has resorted to, and relied heavily on borrowings to finance its development programs.

This section of the AFR focuses on the total indebtedness of the National

Government (NG) including those relent to Government-Owned and/or Controlled Corporations (GOCCs). National debt is contracted either from local sources (domestic borrowings) or from external sources (foreign borrowings). Domestic borrowings consists of certificates of indebtedness consisting of treasury bonds, bills and notes issued by the DOF, Bureau of the Treasury (BTr). Foreign borrowings are funds sourced from multilateral, bilateral and commercial creditors which include bonds and loans directly contracted by the NG.

6.2 Legal Bases

The incurrence of debt by the government is governed by the following constitutional authority and pertinent laws:

a. 1987 Philippine Constitution, Section 20, Article 7 which provides:

“The President may contract or guarantee foreign loans on behalf of the Philippines with the prior concurrence of the Monetary Board, and subject to such limitations as may be provided by law. The Monetary board shall, within thirty days from the end of every quarter of every calendar year, submit to the Congress a complete report of its decision on applications for loans to be contracted or guaranteed by the Government or government-owned and/or controlled corporations which would have the effect of increasing the foreign debt, and containing other matters as may be provided by law.”

b. R.A. No. 4860 dated August 8, 1966 entitled:

“An Act Authorizing the President to Obtain such Foreign Loans and Credits or to incur such Foreign Indebtedness, as may be Necessary to Finance Approved Economic Development Purposes or Projects, and to Guarantee, in behalf of the Republic of the Philippines, Foreign Loans Obtained by the Government of the Philippines, Foreign Loans Obtained or Bonds Issued by Corporations Owned or Controlled by the Government of the Philippines for Economic Development Purposes Including those Incurred for Purposes of Re-lending to the Private Sector, Appropriating the Necessary Funds Therefore, and for Other Purposes”, as amended.

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Section 1 of this Act states that the President is hereby authorized, in

behalf of the Republic of the Philippines, to contract such loans, credits or indebtedness as may be necessary and upon such terms as may be agreed upon, not inconsistent with this Act, with governments of foreign countries with whom the Philippines has diplomatic or trade relations or which are members of the United nations, their agencies, instrumentalities or financial institutions or with reputable international organizations.

Section 5, limits the amount of foreign debt that may be contracted to

US$1 billion or its equivalent in other foreign currencies at the exchange rate prevailing at the time the loans, credits and indebtedness are incurred.

c. P.D. No. 139 issued on June 27, 1984 amended R.A. No. 4860, increasing

foreign debt limit to an amount not exceeding US$10 billion or its equivalent in other foreign currencies at the exchange rate prevailing at the time the loans, credits or indebtedness are incurred at terms of payment of not less than ten (10) years except those contracted in the interest of national security and rehabilitation resulting from natural calamities.

d. R.A. No. 8182 approved by Congress on June 11, 1996 entitled:

“An Act Excluding the Official Development Assistance (ODA) from the Foreign Debt Limit in order to facilitate the Absorption and Optimize the Utilization of ODA Resources, Amending for the Purpose Paragraph 1, Section 2 of R.A. No. 4860, as amended by R.A. No. 8555. This ODA law continued to be the favored source of financing for the priority development projects of the country due to its lower interest rate and longer maturity periods compared to other foreign loans.”

e. Presidential Proclamation No. 50 dated December 8, 1986 entitled:

“Proclaiming and Launching a Program for the Expeditious Disposition and Privatization of Certain Government Corporations and/or the Assets Thereof, and Creating the Committee on Privatization and the Asset Privatization Trust.”

This was issued with immediate implementation of Article IV, Section 22, paragraph 2 which provides that the Committee created shall arrange for the transfer to, and eventual disposition by, the NG of certain non-performing assets of Government Financial Institutions, as may be determined under terms mutually acceptable to all the parties concerned, and for the disposition of certain GOCCs which have been approved for divestment by the President of the Philippines; Provided, that the matter of appropriate valuation procedures for such transfers of assets shall be determined by the Committee. The terms of transfer of asset may include appropriate arrangements for the consideration thereof, including but not limited to the assumption by the NG of such liabilities of the GFIs and/or other government corporations, whether real or contingent.

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Under this PD, the NG, through the President, is hereby authorized to assume the obligations of government institutions including those due to the NG on terms and to the extent determined by the President, on the recommendation of the Minister of Finance, to be warranted by the transfer of assets from such institution pursuant to this Proclamation.

f. R.A. No. 245 issued on June 12, 1948 entitled:

“An Act Authorizing the Secretary of Finance to Borrow to Meet Public Expenditures Authorized by law and for Other Purposes.”

Under the said Act, the Secretary of Finance, with the approval of the

President, after consultation with the Monetary Board, is authorized to borrow from time to time on the credit of the Republic of the Philippines such sum as in his judgment may be necessary, and to issue therefore evidences of indebtedness of the Philippine Government xxxxx... in order to meet public expenditures authorized by law or to provide for the purchase, redemption, or refunding of any obligations, either direct or guaranteed, of the Philippine Government.

g. P.D. No. 142, approved on March 2, 1973 amending R.A. No. 245 entitled:

“An Act Authorizing the Secretary of Finance to Borrow to Meet Public Expenditures Authorized by Law and For Other Purposes”

Section 1 provides that in order to meet public expenditures authorized by law or to provide for the purchase, redemption, or refunding of any obligations, either direct or guaranteed of the Philippine Government, the Secretary of Finance, with the approval of the President of the Philippines, after consultation with the Monetary Board, is authorized to borrow from time to time on the credit of the Republic of the Philippines such sum or sums as in his judgment may be necessary, and to issue therefore evidences of indebtedness of the Philippine Government.

Such evidence of indebtedness may be of the following types:

Treasury bills issued on a discount basis or at par and payable at maturity

without interests. Treasury bills may be offered for sale either on a competitive basis or at a fixed rate of discount or at par and may be made payable at any date not later than one year from the date of issue;

Certificate of indebtedness having maturities not exceeding eighteen

months from the date of issue; and Treasury bonds, notes securities or other evidences of indebtedness

having maturities of one year or more but not exceeding twenty-five years from the date of issue.

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The Secretary of Finance, in consultation with the Monetary Board, shall prescribe the form or forms, the interest and discount is exempted from taxation or not, the denominations, maturities, negotiability, convertibility, call and redemption features, and all other terms and conditions of issuance, placement, sale, servicing, redemption and payment of all evidences of indebtedness issued under the authority of this Act: Provided, however, That with respect to treasury bills, certificates of indebtedness, and bonds, notes, securities and other evidences of indebtedness, such terms and conditions shall be within the limitations prescribed in subsection (a) through (c) of the preceding paragraph: and provided further, That actual issue, placement, servicing and redemption of such securities shall be done through the central Bank of the Philippines, as provided in Sections 122, 123 and 124 of Central Bank Act.

h. R.A. No. 1000 approved on June 12, 1954 entitled:

“An Act Authorizing the President of the Philippines to Issue Bonds to Finance Public Works and Projects for Economic Development Authorized by law and for Other Purposes”.

Section 1 provides that upon the recommendation of the Secretary of

Finance, after consultation with the Monetary Board xxx.., the President of the Philippines is authorized to issue, preferably in the Philippines, or abroad if necessary, in the name and behalf of the Republic of the Philippines, bonds in an amount not exceeding one billion pesos to finance public works and self liquidating projects for economic development, which may be authorized by law, including expropriation of lands for subdivisions and resale to individuals, or to repay or service bonded obligations of the Government incurred for such projects: Provided, however, that no single issue shall exceed two hundred million pesos and that no further issue shall be made if eighty per centum of the immediately preceding issue has not been sold. And provided, further, that no more than twenty per centum of any issue is spent for non self-liquidating and non-revenue producing projects. Investments in the self-liquidating projects, cities and municipalities shall be limited by the paying capacity of the province, city or municipality to be certified by the Secretary of Finance xxx... Provided finally, That not more than ten per centum of this bond issue shall be used to pay unserved government obligations, loans and advances, secured or unsecured, guaranteed by the NG, made by government owned and/or controlled financial institutions, other than the Central bank, guaranteed by the Government xxx…to the minimum.

The Secretary of Finance, in consultation with the Monetary Board, shall

prescribe the form, the rate of interests, the denominations, maturities, negotiability, convertibility, call and redemption features, and all other terms and conditions of issuance, placement, sale, servicing, redemption, and payment of all bonds issued under the authority of this act. The bonds issued under the authority of this section may be made payable both as to principal and interest, in Philippine currency or any readily convertible foreign currency xxx...execution or seizure.

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6.3 Borrowing Program

6.3.1 Approved Program – P754.60 billion

The approved level of gross borrowing for 2010 was pegged at P754.60 billion consisting of Domestic – P495.49 billion and Foreign – P259.11 billion. Of this amount, P415.80 billion is intended for principal amortization pertaining to Domestic – P286.71 billion and Foreign – P129.09 billion leaving a net financing of P338.80 billion.

The approved foreign borrowings will be sourced as follows: program

loans – P42.54 billion; project loans – P22.93 billion and flotation of bonds and other inflows – P193.64 billion.

Gross domestic borrowings of P1.008 trillion, on the other hand, will be

obtained through the flotation of the following securities: Treasury bills – P561.80 billion; Fixed Rate Treasury bonds – P423.47 billion and Retail Treasury bonds (OFW) – P22.30 billion. Of these amounts, P512.09 billion will be used to pay maturing obligations during the year resulting to a balance of P495.49 billion. Table VI-1 presents the NG financing for calendar year 2010.

Table VI-1 National Government Financing


Percent Approved Actual 2 Variance Program 1

Gross Foreign Borrowings 259,107.00 257,357.00 (1,750.00) (0.68) Program Loans Project Loans

42,535.00 31,753.00 (10,782.00) (33.96) 22,932.00 28,956.00 6,024.00 20.80

Bonds and Other Inflows 193,640.00 196,648.00 3,008.00 1.53 Less: Amortization 129,096.00 124,309.00 (4,787.00) (3.85)Net Foreign Borrowings 130,011.00 133,048.00 3,037.00 2.28 Gross Domestic Borrowings 495,494.00 489,844.00 (5,650.00) (1.15)Treasury Bills 49,718.00 (94,981.00) (144,699.00) 152.35 Gross Flotation 561,809.00 419,324.00 (142,485.00) (33.98) Maturities 512,091.00 514,305.00 2,214.00 0.43 Fixed Rate Treasury Bonds 423,473.00 437,472.00 13,999.00 3.20 Gross Flotation 423,473.00 437,472.00 13,999.00 3.20 Maturities - - - - Domestic Bond Exchange - 27,550.00 27,550.00 100.00 Gross Flotation - 199,463.00 199,463.00 100.00 Maturities - 171,913.00 171,913.00 100.00 Retail Treasury Bonds (OFW) 22,303.00 22,303.00 - - Retail Treasury Bonds 0.00 97,500.00 97,500.00 100.00 Less: Amortization 286,709.00 271,246.00 (15,463.00) (5.70)Net Domestic Borrowings 208,785.00 218,598.00 9,813.00 4.49 Net Financing 338,796.00 351,646.00 12,850.00 3.65 Difference between totals and sum of components is due to rounding off. 1 Based on 2011 BESF, DBM, p245 2 Based on 2010 Cash Operations Report, BTr

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6.3.2 Actual Borrowings – P747.20 billion

The actual amount of borrowings totaled P747.20 billion coming from Domestic – P489.84 billion and Foreign – P257.36 billion.

Foreign borrowings of P257.36 billion did not surpass the program level

of P259.10 billion in the aggregate while project loans contracted of P28.96 billion and bonds floated of P196.65 billion totaling P225.60 billion exceeded the program level of P216.57 billion by P9.03 billion or 4.17 percent which was partly offset by lesser amount of program loans of P10.78 billion. Actual repayments of P124.30 billion during the year is lesser by P4.79 billion than the programmed amount of P129.10 billion.

Domestic borrowings of P489.84 billion are lower by P5.65 billion than

approved programmed of P495.49 billion. Treasury bills floated dramatically decreased by P144.70 billion or 152.35 percent because the BTr prioritized the issuance of Retail Treasury Bonds due to its lower interest rate and with long-term maturities. Retail Treasury Bonds issued amounted to P97.5 billion. Domestic bond exchange was made for maturing bond securities worth P171.91 billion through the flotation of new bonds of P199.46 billion.

6.4 Status of NG Debt

6.4.1 Outstanding balance – P4.730 trillion

From the 2009 balance of P4.344 trillion, NG debt went up to P4.730 trillion in 2010, posting an increase of P385.94 billion or 8.88 percent. It consists of Domestic – P2.730 trillion or 57.72 percent and Foreign – P2 trillion or 42.28 percent. The status of NG Debt is shown in Table VI-2.

Table VI-2 Status of NG Debt

(in million pesos)

Particulars Outstanding

as of 12/31/20091

Current Year

Availments Repayments

Outstanding as of

12/31/20102 Total Public Debt 4,343,876.69 2,028,605.04 1,648,312.25 4,729,825.99 Domestic 2,480,825.26 1,667,266.08 1,419,127.63 2,730,221.45 Treasury Bonds 1,823,759.20 818,374.28 468,689.33 2,174,701.89 Treasury Bills 657,066.06 848,891.80 950,438.30 555,519.56 -

Foreign 1,863,051.42 361,338.96 229,184.63 1,999,604.54 Bonds 1,098,197.86 296,701.45 166,541.26 1,171,071.27 Loans 764,853.56 64,637.51 62,643.37 828,533.28 Direct and Relent 764,779.24 64,637.51 62,607.23 828,495.09 Assumed 74.32 - 36.14 38.18


Source: National Government Debt Accounting Division, BTr

1 Net of adjustments in Prior years amounting to (P4,199.51 million).

2 Net of CY adjustments on gain/loss on revaluation amounting to P5,656.52 million

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Domestic debt of P2.730 trillion includes Bonds Payable and Loans Payable amounting to P2.174 trillion or 79.65 percent and P555.52 billion or 20.35 percent, respectively. Shown in Table VI-3 is the composition of outstanding Bonds Payable of P2.175 trillion:

Table VI-3 Composition of Outstanding Bonds Payable



Benchmark Bonds 872,140.39 40.10 Fixed Rate Treasury Bonds 867,635.25 39.90 Retail Treasury Bonds 292,150.04 13.43 Zero Coupon Treasury Bonds 54,679.60 2.51 Treasury Bonds (CB-BOL) 50,000.00 2.30 Multi-Retail Treasury Bonds 21,921.49 1.00 Special Purpose Treasury Bonds 16,157.62 0.74 Certificated Bonds 16.28 - Tulong sa Bayan Bonds 1.23 -

Total 2,174,701.89 100.00



The Multi-Retail Treasury Bonds are EURO denominated bonds of P4.31 billion and US$ denominated bonds amounting to P17.61 billion both having maturity period of three and five years. The Fixed-Rate Treasury Bonds’ maturity period range from three to 28.5 years. Of the amount, P161.51 billion or 18.61 percent will mature in three to five years; P429.02 billion or 49.45 percent in seven to ten years and P277.11 billion or 31.94 percent in 20 to 28.5 years. Benchmark bonds maturity period is from five to 25 years. The balance of P327.81 billion or 37.59 percent has maturity of five years while P544.33 billion or 62.41 percent will mature in seven to 25 years. The Retail Treasury bonds have maturity period of three to ten years.

Outstanding loans payable consists of Treasury Bills of P553.21 billion or

99.59 percent, DBP Assumed loans of P2.29 billion or 0.41 percent and Treasury Notes of P5.89 thousand. Treasury bills include the amount of P174.57 billion pertaining to CB-BOL. The DBP assumed loans exist by virtue of Proclamation No. 50 issued in 1986.

Foreign debt of P2.000 trillion consists of Bonds Payable – P1.171 trillion

or 58.57 percent and Loans Payable – P828.53 billion or 41.43 percent. Bonds Payable includes Global Bonds such as US Bonds – P1.060 trillion; Japanese Yen Bonds – P80.94 billion and Euro Bonds – P29.31 billion. Loans Payable includes NG Direct loans of P828.50 billion and NG Assumed loans of P38.18 million pursuant to Proclamation No. 50. Shown in Chart VI-1 is the NG Debt by Source.

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Outstanding balance of NG debt went up to P4.730 trillion or an increase

of P385.95 billion or 8.88 percent from P4.344 trillion in 2009. Domestic debt increased by P249.40 billion or 10.05 percent while foreign debt grew by P136.55 billion or 7.33 percent. Shown in Table VI-4 is the comparative outstanding NG debt for 2009 and 2010.

Table VI-4 Comparative Outstanding NG Debt



Total 4,729,825.99 4,343,876.69 1 385,949.31 8.88 Domestic 2,730,221.45 2,480,825.26 249,396.19 10.05 Loans Payable 555,519.56 657,066.06 (101,546.50) (15.45) Treasury Bills 378,638.16 473,484.51 (94,846.35) (20.03) Treasury Bills - CB-BOL 174,568.30 174,568.30 - - Fixed Rate Promissory Notes - 6,700.00 (6,700.00) (100.00) DBP Assumed Loans 2,294.17 2,294.17 - - Treasury Bills-Certificated 13.03 13.03 - - Treasury Notes 5.89 6.04 (0.15) (2.48)Bonds Payable 2,174,701.89 1,823,759.20 350,942.69 19.24 Benchmark Bonds 872,140.39 744,821.56 127,318.83 17.09 Fixed Rate Treasury Bonds 867,635.25 661,313.11 206,322.13 31.20 Retail Treasury Bonds 292,150.04 291,123.54 1,026.50 0.35 Zero Coupon Treasury Bonds 54,679.60 60,325.50 (5,645.90) (9.36) Treasury Bonds - CB-BOL 50,000.00 50,000.00 - - Multi Currency RTB (OFW) 21,921.49 - 21,921.49 -

555.52 2,174.70

Treasury Bonds

Treasury Bills 828.53

1,171.07

Bonds Loans

1,999.60 2,730.22

Domestic Foreign

Chart ___ - Borrowings By SourceFiscal Year 2010(in billion peso)

Chart I Chart VI-1 NG Debt By Source Calendar Year 2010 (in billion pesos)

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(Table VI-4 continued)



Special Purpose Treasury Bonds (CARP) 16,157.62 16,157.62 - - Certificated Treasury Bonds 16.28 16.65 (0.37) (2.22) Tulong sa Bayan Bonds 1.23 1.23 - - Foreign 1,999,604.54 1,863,051.42 136,553.12 7.33 Loans Payable 828,533.28 764,853.56 63,679.71 8.33 NG Direct/Relent 828,495.09 764,779.24 63,715.85 8.33 NG-assumed (Proc. 50) 38.18 74.32 (36.14) (48.62)Bonds Payable 1,171,071.27 1,098,197.86 72,873.41 6.64 US Bonds 1,060,807.74 999,133.30 61,674.45 6.17 Euro Bonds 29,313.94 74,104.16 (44,790.22) (60.44) Japanese Yen Bonds 80,949.58 24,960.40 55,989.18 224.31 Difference between totals and sum of components is due to rounding off.


1 Net of prior year’s adjustments o f( P4,199.51 million)

6.4.2 NG Debt Growth

For the year 2001-2010, the NG debt has grown by an average of P233.65

billion or 7.26 percent as shown in Table VI-5. The biggest growth is in 2003 with P503.02 billion or 17.97 percent. From 2004 to 2006, NG debt decreased and in 2007 a negative amount of P99.39 billion or 2.56 percent was noted. This was brought about by the decrease in foreign debt of P145.48 billion or 8.52 percent which was partially offset by an increase in domestic debt of P46.09 billion or 2.12 percent. In 2005, foreign debt also decreased by P2.50 billion or 0.15 percent while in 2006, domestic debt decreased by P10.85 billion or 0.50 percent.

Table VI-5 NG Debt Outstanding According to Source

Calendar Year 2001 to 2010 (in million pesos)

Year

NG Domestic Foreign

Amount Annual Growth

Annual Growth

Rate Amount Annual

Growth

Annual Growth

Rate Amount Annual

Growth

Annual Growth

Rate 2001 2,393.28 - - 1,314.47 - - 1,078.81 - - 2002 2,798.50 405.22 16.93 1,531.90 217.43 16.54 1,266.60 187.79 17.41 2003 3,301.52 503.02 17.97 1,739.95 208.05 13.58 1,561.57 294.97 23.29 2004 3,699.81 398.29 12.06 2,002.19 262.24 15.07 1,697.62 136.05 8.71 2005 3,878.70 178.89 4.84 2,183.58 181.39 9.06 1,695.12 (2.50) (0.15) 2006 3,880.87 2.17 0.06 2,172.73 (10.85) (0.50) 1,708.14 13.02 0.77 2007 3,781.48 (99.39) (2.56) 2,218.82 46.09 2.12 1,562.66 (145.48) (8.52) 2008 4,138.00 356.52 9.43 2,440.90 222.08 10.01 1,697.10 134.44 8.60 2009 4,348.08 210.08 5.08 2,480.83 39.93 1.64 1,867.25 170.15 10.03 2010 4,729.82 381.74 8.78 2,730.22 249.39 10.05 1,999.60 132.35 7.09 Ave. 3,695.01 233.65 7.26 2,081.56 141.58 7.76 1,613.45 92.08 6.72

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Domestic debt grew by an average of P141.58 billion or 7.76 percent during the nine-year period. The biggest growth was in 2004 with P262.24 billion or 15.07 percent. On the other hand, the average growth of foreign debt is P92.08 billion or 6.72 percent with the highest growth of P294.97 billion or 23.29 percent in 2003. Chart VI-2 shows the growth of domestic and foreign debt from 2001-2010.

Chart VI-2 NG Debt Growth (in billion pesos)

-

500

1,000

1,500

2,000

2,500

3,000

D o mestic 1314.47 1531.9 1739.95 2002.19 2183.58 2172.73 2218.82 2440.9 2480.83 2730.22

F o reign 1078.81 1266.6 1561.57 1697.62 1695.12 1708.14 1562.66 1697.1 1867.25 1999.6

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

6.4.2.1 Domestic Debt – P2.730 trillion

Outstanding domestic debt as of the end of 2010 amounted to P2.730 trillion consisting of Treasury Bills and Notes – P555.52 billion or 20.35 percent and Bonds – P2.175 trillion or 79.65 percent. The aggregate domestic debt increased by P249.40 billion or 10.05 percent compared to last year’s P2.481 trillion. Treasury Bills consist of Regular – P378.64 billion or 68.44 percent and CB BOL – P174.57 billion or 31.56 percent. Table VI-6 shows the comparative outstanding domestic debt for 2009 and 2010.

Table VI-6 Comparative Outstanding Domestic Debt



(Decrease) Total 2,730,221.45 2,480,825.26 249,396.19 10.05 Loans Payable 555,519.56 657,066.06 (101,546.50) (15.45) Treasury Bills 378,638.16 473,484.51 (94,846.35) (20.03) Treasury Bills - CB-BOL 174,568.30 174,568.30 - - Fixed Rate Promissory Notes - 6,700.00 (6,700.00) (100.00) DBP Assumed Loans 2,294.17 2,294.17 - - Treasury Bills-Certificated 13.03 13.03 - - Treasury Notes 5.89 6.04 (0.15) (2.48) Bonds Payable 2,174,701.89 1,823,759.20 350,942.69 19.24 Benchmark Bonds 872,140.39 744,821.56 127,318.83 17.09 Fixed Rate Treasury Bonds 867,635.25 661,313.11 206,322.13 31.20 Retail Treasury Bonds 292,150.04 291,123.54 1,026.50 0.35 Zero Coupon Treasury Bonds 54,679.60 60,325.50 (5,645.90) (9.36)

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2,711.67

0.10 2.29 16.16

-

1,000

2,000

3,000

R.A. No.245

R.A. No.1000

Proc No.50

R.A. No.6657

Chart VI-3 Domestic Debt by Legal Source (in billion pesos)




(Decrease) Treasury Bonds - CB-BOL 50,000.00 50,000.00 - - Multi Currency RTB (OFW) 21,921.49 - 21,921.49 - Special Purpose Treasury Bonds (CARP)

16,157.62

16,157.62

-

-

Certificated Treasury Bonds 16.28 16.65 (0.37) (2.22) Tulong sa Bayan Bonds 1.23 1.23 - - Difference between totals and sum of components is due to rounding off. Source: National Government Debt Accounting Division, BTr

As shown in the table, the balance of Treasury Bills and Notes of P555.52 billion decreased by P101.55 billion or 15.45 percent compared to last year’s P657.07 billion which could be attributed to the decline in Treasury bills issuance during the year in favor of flotation of bonds.

On the other hand, outstanding Bonds Payable of P2.175 trillion increased by

P350.94 billion or 19.24 percent as against the 2009 level of P1.824 trillion. This is attributed to the increase in Benchmark Bonds – P127.32 billion or 17.09 percent, Fixed Rate Treasury Bonds – P206.32 billion or 31.20 percent, Multi-Currency Retail Treasury Bonds – P21.92 billion and Retail Treasury Bonds – P1.03 billion or 0.35 percent. However, the increase was partly reduced by the decrease in Zero Coupon Treasury Bonds – P5.64 billion or 9.36 percent and Certificated Treasury Bonds – P0.37 million or 2.22 percent.

The legal sources of Domestic debt

of P2.730 trillion are as follows: R.A. No. 245 – P2.712 trillion or 99.34 percent; R.A. No. 6657 – P16.16 billion or 0.59 percent Proclamation No. 50 – P2.29 billion or 0.08 percent and R.A. No. 1000 – P97.05 million. Shown in Chart VI-3 is the domestic debt by legal source:

Availments/Issuances – P1.667 trillion

Domestic debt issuances consist of Treasury Bills – P848.89 billion and Treasury Bonds – P818.37 billion. Treasury bills include the amount of P429.57 billion intended for the rehabilitation of the then Central Bank of the Philippines. The Treasury bills issued by the BTr were purchased by the BSP and the proceeds are deposited with the BSP for the account of the TOP to be used by the BTr for the redemption of maturing securities issued and this forms part of the advances made by the NG to the BSP.

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Bonds floated during the year of P818.37 billion consist of Fixed Rate Treasury Bonds – P404.46 billion or 49.42 percent; Benchmark Bonds – P294.11 billion or 35.94 percent; Retail Treasury Bonds – P97.50 billion or 11.91 percent and MRTBs of foreign denominations – P22.30 billion or 2.73 percent. Table VI-7 shows the amount of domestic issuances with maturity period.

Table VI-7 Composition of Domestic Availments

(in million pesos)

Particulars Totals 1-91 days 92-181 days

182-364 days

Treasury Bills 848,891.80 293,400.00 1,500.00 553,991.80 CB-BOL 429,568.30 260,000.00 - 169,568.30 Regular 419,323.50 33,400.00 1,500.00 384,423.50

3-10 years 11-20 years 21-25 years Treasury Bonds 818,374.28 541,741.04 23,081.50 253,551.74 Fixed Rate Treasury Bonds 404,462.17 313,068.47 5,655.00 85,738.70 Benchmark Bonds 294,109.47 108,869.93 17,426.50 167,813.04 Retail Treasury Bonds 97,500.00 97,500.00 - - MRTB 22,302.64 22,302.64 - -

Total 1,667,266.08 Source: National Government Debt Accounting Division, BTr Difference between totals and sum of components is due to rounding off.

Treasury bills worth P293.40 billion with maturity period of 1-91 days

correspond to 34.56 percent of the total issuances. Those issued with maturity period of 92-181 days amounting to P1.5 billion shared 0.18 percent while the 182-364 days issuances of P553.99 billion was equivalent to 65.26 percent. For the amount of Treasury bonds floated, maturity period follows: P541.74 billion or 66.2 percent – 3-10 years; P23.08 billion or 2.82 percent – 11-20 years and P253.55 billion or 30.98 percent – 21-25 years.

Current Redemptions – P1.419 trillion

Redemptions during the year of P1.419 trillion include Bonds – P468.69

billion or 33.03 percent and Treasury Bills and Notes – P950.38 billion or 66.97 percent, including those for the CB-BOL of P429.57 billion.

Bonds redeemed of P468.69 billion consist of Fixed Rate Treasury

Bonds – P189.30 billion or 40.39 percent; Benchmark Bonds – P175.63 billion or 37.47 percent; Retail Treasury Bonds – P96.47 billion or 20.58 percent; Zero Coupon Bonds – P5.65 billion or 1.20 percent; and Agrarian Reform Bonds – P1.64 billion or 0.35 percent.

141

6.4.2.2 Foreign Debt – P 2.000 trillion

The balance of foreign debt at yearend reached P 2.000 trillion, higher by P136.55 billion or 7.33 percent from the 2009 amount of P1.863 trillion. This is due to net increase in amount of loans contracted and flotation of bonds worth P63.68 billion or 8.33 percent and P72.87 billion or 6.64 percent, respectively. Table VI-8 shows the comparative outstanding foreign debt for 2010 and 2009.

Table VI-8 Comparative Outstanding Foreign Debt Amount (in million pesos)

Particulars 2010 2009 Increase (Decrease) Percent

Total 1,999,604.54 1,863,051.42 1 136,553.12 7.33 Loans Payable 828,533.28 764,853.56 63,679.71 8.33 NG Direct/Relent 828,495.09 764,779.24 63,715.85 8.33 NG-assumed (Proc. 50) 38.18 74.32 (36.14) (48.62)Bonds Payable 1,171,071.27 1,098,197.86 72,873.41 6.64 US Bonds 1,060,807.74 999,133.30 61,674.45 6.17 Euro Bonds 29,313.94 74,104.16 (44,790.22) (60.44) Japanese Yen Bonds 80,949.58 24,960.40 55,989.18 224.31 Difference between totals and sum of components is due to rounding off. Source: National Government Debt Accounting Division, BTr 1 Net of prior year’s adjustments of (P4,199.51 million)

The NG Direct and Relent loans of P828.50 billion consist of loans sourced

from the following types of creditors: Bilateral – P475.32 billion, Multilateral – P320.93 billion and Commercial – P32.24 billion. It increased by P63.71 billion during the year with the bulk of P65.56 billion coming from JBIC, a bilateral creditor. The increase was partly offset by the decrease in loans from some creditors like ADB – P19.73 billion; Japan Export Import Bank – P2.15 billion; Deutsche Bank – P1.75 billion and International Development Association – P1.08 billion, among others. Table VI-9 shows the comparative NG Direct and Relent loans by creditor for 2010 and 2009.

Table VI-9 Comparative Outstanding NG Direct and Relent Loan



(Decrease) Total 828,495.09 764,779.24 1 63,715.85 8.33 Japan Bank for International Cooperation 376,797.87 311,233.16 65,564.71 21.07 Asian Development Bank 222,160.32 241,890.24 (19,729.92) (8.16) International Bank for Reconstruction and Development 86,447.06 80,385.24 6,061.82 7.54 Japan Export Import Bank 32,711.66 34,858.60 (2,146.94) (6.16) Deutsche Bank 12,299.84 14,047.25 (1,747.41) (12.44) US Public Law 11,378.39 10,525.36 853.04 8.10 Bank of Austria 7,958.18 8,690.50 (732.32) (8.43)

142

1,171.07

590.17

238.320.04

-

500

1,000

1,500

R. A.No.245

R.A.No.

8182

R.A.No.

4860

ProcNo. 50

Chart VI-4 Foreign Debt by Legal Source (in billion pesos)


Particulars



(Decrease) International Development

Association

7,595.71

8,675.21

(1,079.50) (12.44) United States Agency International Development 3,400.68 4,090.21 (689.53) (16.86) International Fund for Agricultural Development 3,254.94 2,513.86 741.08 29.48 Organization of Petroleum

Exporting Countries 312.45 425.74 (113.29) (26.61) Others Creditors 64,177.99 47,443.87 16,734.12 35.27 Difference between totals and sum of components is due to rounding off. Source: National Government Debt Accounting Division, BTr 1 Net of prior year’s adjustmenst of (P1,382.40 million)

NG assumed loans of P38.18 million also dropped by P36.14 million. This pertains to foreign loans of DBP and NDC assumed by the NG pursuant to Proclamation No. 50.

Bonds Payable increased by P72.87 billion or 6.64 percent resulting from

increase in issuance of US bonds of P61.67 billion or 6.17 percent and Japanese Yen bonds of P55.99 billion or 224.31 percent and decrease in issuance of Euro bonds of P44.79 billion or 60.44 percent.

Outstanding foreign debt of

P2.000 trillion were sourced from the following laws: R.A. No. 245 – P1.171 trillion or 58.57 percent; R.A. No. 8182 – P590.17 billion or 29.51 percent; R.A. No. 4860 – P238.32 billion or 11.92 percent and Proclamation No. 50 – P0.04 billion. Shown in Chart VI-4 is the foreign debt by legal source.

Availments/Issuances – P361.34 billion

The availments during the year of P361.34 billion were made through

flotation of bonds amounting to P296.70 billion or 82.11 percent and contracting by the NG of direct and relent loans of P64.64 billion or 17.89 percent. The bonds consist of: Global Bonds – P109.96 billion, denominated in foreign currency issued to foreign investors; Global Bond Exchange – P90.89 billion, which is a bond swap transaction of old bonds to new bonds; Samurai bonds –

143

P51.74 billion, issued to Japanese investors and Philippine Global bonds – P44.10 billion, issued to foreign investors in Philippine currency. Table VI-10 shows the availments made during the year of the NG.

Direct and relent loans contracted by the NG include cash availments of P40.85 billion while the amount of P23.79 billion was received in kind. Out of the cash availed, IBRD provided P17.20 billion while JBIC and ADB lent P13.30 billion and P861 million, respectively. For availments received in kind, the JBIC accounted for P6.62 billion and Overseas Economic Cooperation Fund shared P5.32 billion.

Repayments/Redemptions – P229.18 billion

Repayments for the year pertaining to direct and relent loans reached P62.60 billion. Table VI-11 shows the creditors where repayments were made.

Table VI-10 Foreign Availments

Particulars Amount

(in million pesos)

Percent to Total

Total 361,338.96 100.00 Bonds 296,701.45 82.11 Global Bonds 109,964.10 30.43 Global Bond Exchange 90,885.83 25.15 Samurai Bonds 51,742.52 14.32 Philippines Global Bonds 44,109.00 12.21

Direct/Relent Loans 64,637.51 17.89 Cash Availment 40,852.37 11.31 International Bank and Reconstruction and

Development

17,197.26

4.76 Japan Bank for International Cooperation 13,297.71 3.68 Asian Development Bank 860.92 0.24 International Fund for Agricultural Development 847.38 0.23 Others 8,649.10 2.39 -

Constructive Receipts of Cash 23,785.14 6.58 Japan Bank for International Cooperation 6,624.97 1.83 Overseas Economic Cooperation Fund 5,327.00 1.47 International Bank and Reconstruction and

Development

1,399.26 0.39 Asian Development Bank 313.28 0.09 Others 10,120.62 2.80

Difference between totals and sum of components is due to rounding off. Source: National Government Debt Accounting Division, BTr

144

111.97

180.46229.18

1,419.13

5.98 5.72

-

200.00

400.00

600.00800.00

1,000.00

1,200.001,400.00

1,600.00

Interest PrincipalRepayments

FinancialCharges

Chart V-5 Actual Debt Service Expenditures of the NG (in billion pesos)

Foreign Domestic

Of the amount paid, P26.62 billion or 42.52 percent went to JBIC, a bilateral creditor. The ADB and IBRD, both multilateral creditors accounted for P10.12 billion or 16.17 percent and P8.38 billion or 13.39 percent, respectively.

Repayments made for

assumed loans totaled P36.14 million during the year.

Payments made for matured/pre-terminated bonds reached P166.54 billion.

Of this amount, P100.05 billion pertains to bonds exchange transactions.

6.4.2.3 Debt Service Expenditures

The amount paid for

servicing domestic and foreign debt totaled P1.952 trillion consisting of Principal Repayment – P1.648 trillion or 84.42 percent; Interest – P292.43 billion or 14.98 percent and financial charges – P11.70 billion or 0.60 percent. Chart VI-5 shows the composition of debt service expenditure for 2010.

Principal – P1.648 trillion

Principal repayments of P1.648 trillion consist of Domestic – P1.419 trillion or 86.10 percent and Foreign – P229.18 billion or 13.90 percent. Compared to last year’s level of P1.594 trillion, it increased by P54.11 billion or three percent. Table VI-12 shows the comparative principal repayment of the NG for 2009 and 2010.

Table VI-11 Repayments by Creditor (in million pesos)

Creditor Direct Relent Total JBIC 21,446.66 5,176.30 26,622.96 ADB 10,085.32 39.73 10,125.05 IBRD 8,376.94 5.72 8,382.66 IDA 259.87 26.48 286.35 IFAD 83.30 34.70 118.00 OPEC 37.84 8.06 45.90 Others 15,804.83 1,221.48 17,026.31 Total 56,094.76 6,512.47 62,607.23 Difference between totals and sum of components is due to rounding off.

145

Table VI-12 Comparative Principal Repayments of the NG



Total 1,648,312.26 1,594,197.17 54,115.09 3.39 Foreign 229,184.63 103,514.70 125,669.93 121.40 Direct/Relent 62,607.23 58,203.53 4,403.70 7.57 Assumed 36.14 16.23 19.91 122.67 Global Bond 166,541.26 45,294.94 121,246.32 267.68 Domestic 1,419,127.63 1,490,682.47 (71,554.84) (4.80) Bonds 468,689.33 396,482.11 72,207.22 18.21 T-Bills, Notes and Loans 950,438.30 1,094,200.36 (143,762.06) (13.14)Difference between totals and sum of components is due to rounding off. Source: 2010 Audited Financial Statements, BTr

Repayments made on foreign debt of P229.18 billion increased by P125.67

billion or 121.4 percent more than the 2009 figure of P103.51 billion. Redemption for matured Global bonds of P166.54 billion increased by P121.25 billion or 268 percent during the year while payments made for Direct and Relent Loans of P62.61 billion increased by P4.4 billion or 7.57 percent.

For the domestic debt, the amount of matured bonds and treasury bills

redeemed during the year of P1.419 trillion decreased by P71.55 billion or 4.8 percent in the aggregate. A decrease in Treasury Bills, Notes and Loans amounted to P143.76 billion or 13.14 percent while Bonds increased by P72.2 billion or 18.21 percent.

Interest – P292.43 billion

Compared to the 2009 amount of P278.87 billion, Interest went up by P13.56 billion or five percent. Interest for foreign loans of P111.97 billion showed a decrease of P2.19 billion compared to the previous year’s amount of P114.16 billion. Payments made for Direct and Relent foreign loans amounting to P16.84 billion also showed a decrease of P97.32 billion or 85.25 percent compared to last year’s amount of P114.16 billion. On the other hand, interest paid for Global bonds flotation reached P95.13 billion. Table VI-13 shows the comparative amount of interest paid by the NG for domestic and foreign loans.

Table VI-13 Comparative Interest Payments of the NG

Particulars Amount (in million pesos) Increase (Decrease) Percent 2010 2009

Total 292,425.36 278,866.00 13,559.36 4.86 Foreign 111,969.08 114,163.00 (2,193.92) (1.92) Direct/Relent 16,842.20 114,161.00 (97,318.80) (85.25) Assumed 0.68 2.00 (1.32) (66.00) Global Bond 95,126.20 - 95,126.20 - Domestic 180,456.28 164,703.00 15,753.28 9.56 Bonds 158,653.17 143,576.00 15,077.17 10.50 T-Bills, Notes and Loans 21,803.11 21,127.00 676.11 3.20 Difference between totals and sum of components is due to rounding off. Source: 2010 Audited Financial Statements, BTr

146

Payment made on Interest for Domestic debt of P180.46 billion went up

by P15.75 billion or 9.56 percent compared to last year’s P164.70 billion. The share of the Treasury bonds and Treasury bills, Notes and Loans for the increment is P15.08 billion and P0.68 billion, respectively.

Other Financial Expenses – P11.70 billion

Other Financial Expenses of P11.70 billion were incurred for domestic

debt – P5.72 billion or 48.89 percent and foreign debt – P5.98 billion or 51.11 percent. These expenses consist of Commitment Fees – P394.50 million; Documentary Stamp Tax – P7.06 billion; and Other Financial Charges – P4.25 billion. Table VI-14 shows the comparative other financial expenses paid by the NG.

Table VI-14 Comparative Other Financial Expenses of the NG


Percent 2010 2009 (Increase (Decrease)

Total 11,704.68 8,099.81 3,604.87 44.51 Foreign 5,981.99 1,043.36 4,938.63 473.34 Commitment Fees 394.50 270.64 123.86 45.77 Documentary Stamp Tax 1,483.51 772.72 710.79 91.99 Other Financial Charges 4,077.25 - 4,077.25 - Bank Charges 26.73 - 26.73 - Domestic 5,722.69 7,056.45 (1,333.76) (18.90) Documentary Stamp Tax 5,576.09 5,879.73 (303.64) (5.16) Bank Charges - 48.97 (48.97) (100.00) Other Financial Charges 146.60 1,127.75 (981.15) (87.00)

Difference between totals and sum of components is due to rounding off. Source: 2010 Audited Financial Statements, BTr

Financial expenses paid for foreign debt of P5.98 billion grew by 473.34

percent compared to last year’s amount of P1.04 billion. Commitment fees of P394.50 million paid by the NG for the undrawn foreign loans increased by P123.86 million or 45.77 percent during the year. Documentary Stamp Tax of P1.48 billion related to the issuance of global bonds increased by P710.79 million or 91.99 percent. Other Financial charges of P4.08 billion include the capitalized service charge of P9.12 million imposed by JBIC and ADB; front-end fee of P49.90 million paid to IBRD and those related to the issuance of foreign currency denominated bonds of P3.88 billion.

The financial expenses of P5.72 billion incurred for domestic debt

transactions declined by P1.33 billion or 18.90 percent. Payment for documentary stamp tax of P5.58 billion decreased by P303.64 million or 5.16 percent while other financial charges of P146.60 million also dropped by P981.15 million or 87 percent. No bank charges related to domestic debt transactions was reported for the year.

147

6.5 Appropriations, Allotments and Balances

6.5.1 For Implementation of Foreign-Assisted Projects

6.5.1.1 Appropriations – P34.84 billion

Appropriations provided in the 2010 GAA, R.A. No.9970, that were intended for the implementation of various projects funded by foreign loans totaled P34.84 billion, broken down into Personal Services – P0.02 billion, MOOE – P3.03 billion and CO – P31.79 billion. Of the total, P24.96 billion was funded out of loan proceeds while the balance of P9.88 billion was financed by a counterpart fund to be provided by the NG.

The appropriations are provided in the GAA under the regular or built-

in appropriations of the implementing agencies concerned and in the Special Purpose Funds such as Unprogrammed Fund, Allocation to Local Government Units (ALGU) and Agriculture and Fisheries Modernization Program (AFMP). Table VI-15 shows the Summary of Appropriations for Foreign-Assisted Projects by department/agency:

Table VI-15 Appropriations for Foreign-Assisted Projects (in million pesos)

Department/ Agency

Regular Special Purpose Fund Grand Total UF ALGU AFMP Total

DPWH 17,469.58 - - - - 17,469.58 DA - - - 4,609.72 4,609.72 4,609.72 DOTC 3,263.14 - - - - 3,263.14 DAR - - - 3,147.15 3,147.15 3,147.15 DOF (MDFO) - - 1,373.92 - 1,373.92 1,373.92 PRRC - - 1,010.18 - 1,010.18 1,010.18 DENR 420.00 - - - - 420.00 DOH 418.54 - - - - 418.54 NAFC - - - 270.75 270.75 270.75 DOE 201.29 - - - - 201.29 BFP 135.20 - - - - 135.20 OPS-BBS 106.34 - - - - 106.34 OPS-PIA 106.34 - - - - 106.34 ARMM 78.36 - - - - 78.36 DILG 63.00 - - - - 63.00 PAG-ASA 52.91 - - - - 52.91 DTI 35.74 - - - - 35.74 BFAR - - - 27.49 27.49 27.49 BLGF 22.69 - - - - 22.69 DepEd 20.30 - - - - 20.30 MMDA - - 15.00 - 15.00 15.00 UF - 1,994.84 - - 1,994.84 1,994.84 Total 22,393.43 1,994.84 2,399.10 8,055.11 12,449.05 34,842.48


148

The Appropriations by department/agency/project are shown under

Schedule 31, Volume I-B of this report.

6.5.1.2 Allotments – P28.14 billion

Of the amount appropriated, P28.14 billion or 80.76 percent was released as follows: PS – P0.02 billion, MOOE – P2.09 billion and CO – P26.03 billion. The release of allotments by department/agency is shown in Table VI-16.

Table VI-16 Allotments for Foreign-Assisted Projects

(in million pesos) Department/

Agency Allotments

PS MOOE CO Total DPWH - 261.80 13,061.50 13,323.30 DA - 191.22 4,218.62 4,409.85 DOTC - - 2,874.26 2,874.26 DAR 10.88 819.89 1,628.87 2,459.64 UF - 10.10 1,979.11 1,989.21 MDF - 12.64 1,017.80 1,030.44 PRRC - - 1,010.18 1,010.18 DENR - 271.43 79.00 350.43 DOH - 258.03 71.71 329.73 DOE - 122.55 37.89 160.44 ARMM - 54.62 23.74 78.36 DTI - 35.74 - 35.74 BLGF - 21.19 1.50 22.69 DepEd 12.24 6.04 - 18.28 OPS - BBS - 13.41 2.84 16.25 OPS - PIA - 13.41 2.84 16.25 MMDA - - 15.00 15.00 Total 23.12 2,092.07 26,024.86 28,140.05


The Appropriations, Allotments and Balances for Foreign-Assisted

Projects are presented in Schedule 32, Volume I-B of this report.

6.5.1.3 Unreleased Appropriations – P6.70 billion

At yearend, the unreleased balance of appropriations reached P6.70 billion, broken down as: PS – P0.82 million, MOOE – P0.94 billion and CO – P5.76 billion. Of this balance, the DPWH accounted for P4.14 billion or 61.86 percent. The following agencies did not receive any allotments for the release of their appropriations, thus, forming part of the balance of unreleased appropriations: Bureau of Fire Protection – P135.20 million; DILG – P63.00 million; PAGASA – P52.90 million; BFAR – P27.49 million and NAFC – P270.75 million.

149

6.5.2 For Debt Service

Appropriations for servicing domestic and foreign debts are automatically appropriated pursuant to Section 26, Chapter IV, Book VI of E.O. No. 292 entitled Instituting the “Administrative Code of 1987,” Section 31 of Presidential Decree No. 1177 (Budget Reform Decree), and R.A. No. 4860, as amended (Foreign Borrowings Act). During the year, the GAA, R.A. 9970, also provided an automatic appropriation to cover the 20th semi-annual installment of EDSA MRT Line 3 Project. Pursuant to those enabling laws, the amount of P699.40 billion was automatically appropriated broken down as follows:

Particulars Appropriations (in million pesos)

Domestic Foreign Total RA 4860 451,986.16 246,197.35 698,183.51 Principal - NG Direct and Relent 271,383.28 129,817.24 401,200.52 Interest - NG Direct and Relent 180,456.28 111,969.09 292,425.36 Bank Charges - 26.73 26.73 Other Financial Charges 146.60 3,989.79 4,136.39 Commitment Fess - 394.50 394.50 RA 9970 - 1,216.06 1,216.06 Principal-GOCC-MRT Line 3 - 1,194.60 1,194.60 Interest-GOCC-MRT Line 3 - 21.46 21.46 Total 451,986.16 247,413.41 699,399.57

Of the appropriated amount of P699.40 billion, more than half or P402.40

billion was for principal repayment, P292.44 billion or 41.81 percent was for interest and the balance of P4.56 billion or 0.65 percent for payment of commitment fees and other charges. The appropriation is also intended to service domestic debt of P451.99 billion or 64.62 percent and foreign debt of P247.41 billion or 35.38 percent.

The appropriation was fully released by the DBM to the BTr to settle debt

service expenditures.

VII. SPECIAL ACCOUNTS IN THE GENERAL FUND

150

SPECIAL ACCOUNT IN THE GENERAL FUND

7.1 Introduction

The GAA includes general and specific provisions on SAGF intended for various specific purposes which are sourced from grants and donations, collections of specific fees, charges, premiums, among others. Exempted from these are donations for specific purposes with a term not exceeding one (1) year and which shall be treated as trust receipts pursuant to Section 13 of the 2010 GAA.

7.1.1 Legal Basis/Purpose

Presidential Decree No. 1234 dated November 8, 1977 provides that the

establishment of Special and Fiduciary Funds has been authorized from time to time in order to facilitate the funding of priority activities of Government including those undertaken by GOCCs. This decree contains the following provisions quoted as follows:

“Section 1. All income and collections for Special or Fiduciary Funds

authorized by law shall be remitted to the Treasury and treated as SAGF;

Section 2. The amounts collected and accruing to Special or Fiduciary Funds shall be considered as being automatically appropriated for the purposes authorized by law creating the said Funds, except as may be otherwise provided in the General Appropriations decree.

Section 3. The amounts collected under Special or Fiduciary Funds shall be released to the implementing agencies subject to the approval of the President and to Special Budget under Section 40 of P.D. No. 1177: PROVIDED, That funds needed for regular operations or other duly authorized purposes may be automatically released under such conditions as may be approved by the President.”

Section 4. The funds once released shall be administered by the government agency or corporations concerned and shall be utilized only for the purposes authorized in the law creating the said Special or Fiduciary Funds. “

7.1.2 Existing Accounting Procedures

The NGAS adopts the one fund concept and provides that separate

accounting shall be done only when specifically required by law or by a donor agency or when otherwise necessitated by circumstances subject to prior approval of the Commission.

PD No. 1234 authorized the creation of the SAGF, thus, departments and

agencies maintain separate books of accounts for these funds. However, upon implementation of the NGAS, some departments/agencies integrated the SAGF transactions with the General Fund 101. The list of departments/agencies with SAGF is presented in Annex A of Volume I-B of this Report.

151

EO No. 338 required agencies to immediately transfer all public moneys

deposited with depository banks and other institutions to the National Treasury, regardless of income source. The income remitted to the National Treasury which are constituted as SAGF are disbursed by means of separate MDS check series and subject to the issuance of SAROs and NCA by DBM.

7.2 Financial Data

To arrive at a consolidated financial data for SAGF, the balances of accounts of 75 trial balances as of December 31, 2010 submitted by 20 departments/agencies were combined except those pertaining to CARP Fund 158 which is presented in a separate chapter of this report. Transactions pertaining to utilization of receipt and utilization of the SAGF which were recorded by NGAs in the General Fund 101, since no books of accounts were separately maintained, were not included herein. However, the income accruing to SAGF which were collected by authorized NGAs and remitted to the National Treasury was included in the report based on the actual income recorded by the BTr either as Grants and Donation or Other Service Income. The utilization of which is based on a special budget released through SAROs with the corresponding NCAs.

7.2.1 Appropriations, Allotments and Obligations

For the calendar year 2010, the total appropriation for SAGF, net of

CARP, totalled P20.90 billion, of which P20.25 billion is released, leaving a balance of P0.65 billion. The total obligations incurred amounted to P7.89 billion. Table VII-1 shows the details of appropriations, allotments, obligations and balances of unreleased appropriations and unobligated allotments.

Table VII-1 Appropriations, Allotments, Obligations

and Balances

Department/Office

Amounts (in million pesos)

Appro-priations Allotments Obligations

Unreleased Appro-

priations

Unobligated Allotments

Public Works and Highways 5,887.93 5,887.93 3,114.12 - 2,773.80

Agrarian Reform 5,146.74 5,146.74 4,727.44 - 419.30 National Defense 3,463.78 3,463.78 740.86 - 2,722.92 Other Executive

Offices 1,460.98 1,460.67 1,075.08 0.31 385.59 Finance 921.90 921.90 850.13 - 71.77 Budget and

Management 914.24 914.24 402.69 - 511.55 Environment and

Natural Resources 664.72 664.72 380.17 - 284.55 Interior and Local

Government 590.13 2.44 0.54 587.70 1.90

152

Chart VII-1 Total Assets as of December 31, 2010

PPE, 18,366.75

50.2%

Receivables,

20,777.91

56.8%

Prepayments,

6,103.86

16.7%

Cash,

5,105.62

14.0%

Other Current

Assets,

854.85

Investments,

258.21

0.7%

OtherAssets,

166.65

0.5%

Inventories,

189.24

0.5%

Others

614.09

1.7%

Table VII-1 continued

Department/Office

Amounts (in million pesos)

Appro-priations Allotments Obligations

Unreleased Appro-

priations

Unobligated Allotments

Transportation and Communications 472.55 472.55 353.22 - 119.33

Agriculture 376.96 376.96 358.06 - 18.90 Trade and Industry 375.89 375.89 20.41 - 355.48 Justice 171.95 171.95 164.22 - 7.73 Office of the

President 137.60 137.60 50.95 - 86.65 Energy 118.48 118.48 23.88 - 94.60 Labor and

Employment 113.63 51.20 51.20 62.43 - Health 48.45 48.45 26.52 - 21.92 National Economic

and Development Authority 23.79 23.79 11.03 - 12.77

Science and Technology 6.42 6.42 6.29 - 0.13

Commission on Audit 4.24 4.24 1.21 - 3.04

Social Welfare and Development 3.44 3.44 2.80 - 0.65

Total

20,903.82 20,253.39 12,360.82 650.43 7,892.58

Difference between total and sum of components is due to rounding off.

7.2.2 Assets, Liabilities and Equity

As of December 31, 2010, the total assets, liabilities and equity of the SAGF excluding CARP Fund 158 amounted to P51.82, P5.84 and P45.99 billion, respectively. Details of the total assets are shown in Chart VII-1.

Topping the

departments/agencies which reported substantial cash balances are the DND-General Headquarters – P2.48 billion, National Commission for Culture and the Arts – P1.61 billion, and Department of Energy – P558.43 million.

153

7.2.3 Income and Expenses

For the calendar year 2010, the aggregate income earned for SAGF is P5.75 billion consisting of income recorded in the BTr as Other Service Income and Income from Grants and Donations amounting to P5.04 billion and P292.72 million, respectively. The amount of P412.55 million was retained by the departments/agencies, details of which are shown in the table below.

Table VII-2 Total Income by Department/Office

Department/Office


Total Other Service Income (BTr)

Income from Grants and Donations

(BTr)

Income by Department/

Agencies

Energy 2,162.31 1,931.89 220.35 10.07 National Defense 863.85 764.36 - 99.49 Public Works and

Highways 789.84 789.82 - 0.02 Finance 452.43 414.52 37.91 - Environment and Natural

Resources 402.56 388.73 12.22 1.62 Interior and Local

Government 238.23 233.44 0.79 4.00 Other Executive Offices 195.08 107.47 13.51 74.09 Labor and Employment 191.28 12.02 - 179.26 Transportation and

Communications 165.56 165.52 - 0.04 Agriculture 122.45 108.85 4.42 9.17 Justice 104.16 104.16 - - Social Welfare and

Development 26.90 0.09 - 26.81 Agrarian Reform 16.41 12.69 - 3.73 Commission on Audit 4.59 - 0.34 4.25 National Economic and

Development Authority 3.38 3.38 - -

Health 2.76 0.87 1.89 - State Universities and

Colleges 1.69 1.69 - - Budget and Management 0.68 - 0.68 - Office of the President 0.66 0.66 - - Foreign Affairs 0.63 0.63 - - Science and Technology 0.61 0.01 0.60 - Judiciary 0.23 0.21 - 0.01 Trade and Industry 0.19 0.19 - -

Total

5,746.47 5,041.20 292.72 412.55 Difference between total and sum of components is due to rounding off.

The P412.55 million income retained by the departments/offices consists

of income from a) interest income – P181.88 million, processing fees and fines and penalties on service income – P177.92 million, income from grants and

154

donations – P41.22 million, miscellaneous income – P10.12 million, other fines and penalties – P1.39 million and permits and licenses – P36 thousand.

Based on the total income remitted to the National Treasury,

departments/agencies received NCAs which were recorded as SING amounting to P18.49 billion.

The SING and the total income retained by the NGAs were used to fund,

among others, operational expenses amounting to P8.48 billion. Shown in the table below is the composition of the expenses incurred by department/office.

Table VII-3 Expenses by Department/Office

Department Amount (in million pesos) Total PS MOOE FE

Public Works and Highways 5,528.88 68.35 5,460.38 0.15 Other Executive Offices 814.04 9.74 804.30 0.01 Energy 579.01 0.01 578.98 0.01 National Defense 558.38 0.01 558.37 0.00 Environment and Natural

Resources 378.60

0.01 378.58

0.02 Finance 238.87 - 238.75 0.11 Justice 166.93 152.71 14.22 - Judiciary 71.46 - 71.46 - Labor and Employment 62.16 - 61.59 0.57 Social Welfare and

Development 33.25 - 33.25 - Agriculture 25.60 - 25.60 - Science and Technology 7.38 - 7.38 - National Economic and

Development Authority 6.19

0.07 6.12 Agrarian Reform 4.93 - 4.93 - Commission on Audit 4.71 - 4.71 - Interior and Local Government 2.43 - 2.43 -

Totals 8,482.82 230.88 8,251.05 0.89 Difference between total and sum of components is due to rounding off.

VIII. COMPREHENSIVE AGRARIAN REFORM PROGRAM

155

COMPREHENSIVE AGRARIAN REFORM PROGRAM 8.1 Introduction

The creation of the CARP was mandated in the 1987 Philippine Constitution under Article XIII which provides that:

“Section 4. The State shall, by law, undertake an agrarian reform program founded on the right of farmers and regular farmworkers, who are landless, to own directly or collectively the lands they till or in the case of other farmworkers, to receive a just share of the fruits thereof. To this end, the State shall encourage and undertake the just distribution of all agricultural lands, subject to such priorities and reasonable retention limits as the Congress may prescribe, taking into account ecological, developmental, or equity considerations and subject to the payment of just compensation. In determining retention limits, the State shall respect the right of small landowners. The State shall further provide incentives for voluntary land-sharing; Section 5. The State shall recognize the right of farmers, farmworkers, and landowners, as well as cooperatives, and other independent farmers’ organizations to participate in the planning, organization, and management of the program, and shall provide support to agriculture through appropriate technology and research, and adequate financial, production, marketing, and other support services.; Section 6. The State shall apply the principles of agrarian reform or stewardship, whenever applicable in accordance with law, in the disposition or utilization of other natural resources, including lands of the public domain under lease or concession suitable to agriculture, subject to prior rights, homestead rights of small settlers, and the rights of indigenous communities to their ancestral lands. The State may resettle landless farmers and farmworkers in its own agricultural estates which shall be distributed to them in the manner provided by law”; Section 8. The State shall provide incentives to landowners to invest the proceeds of the agrarian reform program to promote industrialization, employment creation, and privatization of public sector enterprises. Financial instruments used as payment for their lands shall be honored as equity in enterprises of their choice.”

The CARP was instituted as the major program of the government under Proclamation No. 131 signed in July 1987. On June 15, 1988, the Congress enacted the Comprehensive Agrarian Reform Law or R.A. No. 6657. Pursuant to Section 18 of E.O. 229 and Section 41 of R.A. No. 6657, the Presidential Agrarian Reform Council (PARC) is mandated to manage and direct the CARP at the national level to guarantee the timely and effective delivery of services. The Council is chaired by the President and supported by the Secretaries/Heads of the following departments/offices:

156

1. DAR 6. DOF 11. DOLE 2. DENR 7. DOJ 12. LBP 3. DA 8. DTI 13. NEDA 4. DPWH 9. DILG 14. PCGG 5. DBM 10. DOTC 15. OP-Executive Secretary

The PARC Secretariat, which was established pursuant to Section 43 of R.A. No 6657, is tasked to organize and harmonize inter-agency linkages and evaluate CARP projects. At the grassroots level, the Provincial Reform Coordinating Committee coordinates the delivery of agrarian reform activities to the people. The Agrarian Reform Fund (ARF), which serves as the funding source of the program and committees is utilized under the supervision of the PARC Executive Committee.

8.2 Role of Implementing Agencies

The departments/agencies which act as the IAs of the CARP have the following roles and responsibilities:

1. DAR Primarily responsible for the implementation of CARP

2. DENR In-charge of land surveys and distribution of free patents and stewardship contracts to beneficiaries of public and alienable and disposable lands suitable to agriculture and agro-forestry areas

3. DA Responsible for agricultural extension services 4. LBP Tasked with the land evaluation, collection of land amortization

from farmer-beneficiaries and provision of credit facilities and other technical assistance to both farmer-beneficiaries and landowners

4. LRA In-charge of the registration of land titles 5. NIA Tasked in the mobilization and development of vital farm-related

infrastructures, such as irrigation systems, small impounding dam, access trails, rural roads, ports and other basic facilities

6. DPWH Responsible for the construction of farm-related infrastructure facilities, including roads

7. DTI Take charge of the rural industrialization 8. DOLE In-charge of farm workers’ organization

8.3 Major Components

The Program consists of three major components, namely: 1) Land Tenure Improvement (LTI) – to address the inequality of resources by providing access to agricultural lands and security of tenure to the Agrarian Reform Beneficiaries (ARBs) through the land acquisition and distribution activity, 2) Agrarian Justice Delivery (AJD) – to provide agrarian legal assistance and the adjudication of cases to ensure appropriate and timely resolution of agrarian reform issues and 3) Program Beneficiaries Development (PBD) – to provide for trainings, credit access and construction of infrastructure projects, specifically farm-to-market-roads and communal irrigation projects. The PBD will ensure that ARBs will have the capability to make their newly-awarded lands productive.

157

8.4 Funding Sources and CARP Extension Laws

The proceeds from sale of acquired assets by the APT/PMO and the Forfeited Swiss Deposits of the Marcoses with an initial amount of P50 billion are among the funding sources of the CARP. The amount was augmented by another P50 billion with the passage of R.A. No. 8532 in February 1998 which extended the implementation of CARP for a period of ten years from June 1998 to December 2008. By virtue of R.A. No. 9700, CARP Extension Law, the program was extended for another five years starting July 2009 until June 30, 2014 with an allocation of P150 billion to cover the cost of land acquisition and distribution, support services, agrarian justice delivery and other funding requirements during the extension period. Further, the CARP law provides for the creation of a joint Congressional Oversight Committee composed of three members each from the Senate and the House. To implement R.A. No. 9700, Proclamation Order No. 131 and E.O. No. 229 were issued covering all public and private agricultural lands including other land of the public domain suitable for agriculture in the CARP.

8.5 Appropriations, Allotments and Obligations For the calendar year 2010, the NG has appropriated in the GAA, R.A. No. 9970,

the amount of P8.91 billion for the implementation of CARP by the IAs shown in Table VIII-1.

The utilization of the amount appropriated shall be approved by the PARC and endorsed by the PARC Executive Committee to the DBM for fund release. For requirements of the CARP, fund shall be sourced from the net proceeds/revenues from the sale or administration of assets by the PCGG; disposition of GOCCs,

assets and idle properties of the PMO; disposition of properties of abolished government corporations and former enemy-owned entities of the Board of Liquidators; and such other sources as may be required by law. During the year, the CARP implementing agencies reported the financial data in Table VIII-2 showing the Appropriations, Allotments, Obligations and Balances. Allotments received for this purpose amounted to P11.38 billion while obligations incurred reached P10.77 billion. The details of total obligations are as follows: PS – P2.75 billion, MOOE – P7.30 billion and CO – P720.16 million.

Table VIII-1 Appropriations of CARPImplementing

Agency/Department Amount

(in million pesos)Agrarian Reform 4,376.85 Environment and Natural Resources

461.10

Land Registration Authority 106.00 Land Bank of the Philippines-BTr

3,966.11

Total 8,910.06

158

Table VIII-2 Appropriations, Allotments, Obligations and Balances (in million pesos)

Implementing Agency/Department Appropriations Allotments Obligations

UnobligatedBalance

Agrarian Reform 6,185.60 6,185.60 5,752.34 433.25Land Bank of the Philippines-BTr 3,966.11 3,966.11 3,966.11 -Environment and Natural Resources 669.25 669.25 574.66 94.58Land Registration Authority 106.00 106.00 101.15 4.86Public Works and Highways 100.00 100.00 70.67 29.33Trade and Industry 72.53 72.53 71.41 1.12National Irrigation Administration 276.64 276.64 231.78 44.86

Total 11,376.12 11,376.12 10,768.12 608.00Difference between totals and sum of components is due to rounding off

Of the total allotments of P11.38 billion and obligations of P10.77 billion, the DAR reported allotments and obligations of P6.19 billion or 54.37 percent and P5.75 billion or 53.42 percent, respectively. The DOF-BTr shared allotments and obligations both amounting P3.97 billion intended for the release of subsidy to LBP to cover payment of ARF bonds issued to the farmers.

8.6 Financial Highlights

8.6.1 Assets, Liabilities and Equity

As of December 31, 2010, the total assets of the CARP reached P86.85 billion comprising of Current Assets of P17.22 billion and Non-Current Assets of P69.63 billion as shown in Table VIII-3. Of the total Current Assets, P14.42 billion or 83.75 percent consists of Receivables the bulk of which pertains to Accounts Receivables (Net) – P6.94 billion, Due from GOCCs – P2.90 billion and Due from LGUs – P1.66 billion.

On the other hand, the Non Current Assets of P69.63 billion consist of Land – P60.96 billion or 87.55 percent and Land Improvements – P1.03 billion or 1.47 percent which were reported mainly by the LBP, PCGG and DAR.

Table VIII-3 Assets, Liabilities and Equity (in million pesos)

Implementing Agency/

Department

Current Assets

Non-Current Assets

Total Assets

Total

Liabilities

Equity

Total Liabilities and Equity

Agrarian Reform 3,673.48 1,827.91 5,501.39 935.90 4,565.50 5,501.39 National Irrigation Administration

634.83

2,167.20

2,802.03

510.06

2,291.97

2,802.03

Environment and Natural Resources

127.97

185.04

313.01

153.10

159.91

313.01

Land Registration Authority

3.83

18.95

22.78

10.16

12.62

22.78

Public Works and Highways

115.27

1,919.44

2,034.71

38.00

1,996.71

2,034.71

Trade and Industry 26.17 3.95 30.12 4.38 25.74 30.12 Presidential Commission on Good Government

170.95

18,452.58

18,623.53

33.45

18,590.08

18,623.53

159

Implementing Agency/

Department

Current Assets

Non-Current Assets

Total Assets

Total

Liabilities

Equity

Total Liabilities and Equity

Land Bank of the Philippines

12,467.39

45,055.33

57,522.72

21,027.35

36,495.38

57,522.72

Total 17,219.90 69,630.39 86,850.29 22,712.39 64,137.89 86,850.29 Difference between totals and sum of components is due to rounding off.

Component-wise, the total liabilities of P22.71 billion comprise mainly of the following: Bonds Payable-Domestic – P8.85 billion, Accounts Payable – P7.61 billion, Guaranty Deposits Payable – P2.65 billion, Performance/Bidders/Bail Bonds Payable – P332.78 million, and Other Payables – P291.46 million.

8.6.2 Subsidy, Income and Expenses

To finance the nationwide implementation of the CARP, the DBM released NCA of P6.95 billion broken down as follows: DAR – P5.88 billion, DENR – P546.21 million, NIA – P241.79 million, DPWH – P102.65 million, LRA – P102.04 million and DTI – P72.58 million.

Total expenses incurred during the year amounted to P6.06 billion, the largest of which was reported by DAR totaling P4.86 billion or 80.19 percent as presented in Table VIII-4. The bulk of the total expenses was mostly spent for the following: Salaries and Wages – P1.64 billion, Subsidies and Donations – P435.72 million, Travelling Expenses – P410.28 million, Survey Expenses – P324.15 million, Professional Services – P295.98 million, Supplies Expenses – P241.43 million, Repairs and Maintenance Expenses – P113.81 million.

Table VIII-4 Subsidy, Income and Expenses

(in million pesos) Implementing

Agency/Department Net

Subsidy Income Total Expenses Net Income /(Loss)

Agrarian Reform 5,783.78 23.41 5,807.20 4,856.38 950.82National Irrigation Administration

241.79

0.18

241.97

85.57

156.40

Environment and Natural Resources

546.21

1.84

548.05

523.90

24.15

Land Registration Authority

102.04

-

102.04

109.20

(7.16)

Public Works and Highways

102.65

-

102.65

1.76

100.89

Trade and Industry 73.00 - 73.00 72.91 0.09Presidential Commission on Good Government

0.00

-

0.00

2.89

(2.89)

Land Bank of the Philippines 0.00 144.23 144.23 403.17 (258.95) Total 6,849.48 169.66 7,019.13 6,055.79 963.34Difference between totals and sum of components is due to rounding off

8.7 OPERATIONAL HIGHLIGHTS

The reported accomplishments of the CARP by the IAs for the calendar year 2010 are as follows:

160

8.7.1 DAR

Program/Project/Activity Target Accomplish-ments Percent

A. Land Tenure Improvement (LTI) 1. Land Acquisition and Distribution 1.1 Land Survey (in hectares) 197,857 102,645 52 1.2 Claimfolders (CFs) Processing for Landowners’ Compensation

1,152

1.3 Land Distribution 200,000 107,180 54 1.3.1 Private Agricultural Lands (PAL) 45,018 1.3.2 Non-PAL 62,162 1.4 Number of ARBs 63,298 2. Leasehold Operations 2.1 Number of hectares 17,312 12,933 75

2.2 Number of tenants-tillers benefited or ARBs 7,948 6,152 77 3. Other LTI Services

3.1 Redocumentation of distributed but not yet paid/documented lands (in hectares)

26,125

2,978

11

3.2 Subdivision of Collective Land Ownership Award (CLOA) in hectares

62,420

15.260

24

3.3 Installation of Uninstalled ARBs 3.3.1 Number of ARBs 6,301 3,678 58 3.3.2 Number of hectares 8,702 4,582 53 B. Delivery of Agrarian Justice 1. Adjudication of Agrarian Cases 17,000 19,409 114 2. Agrarian Legal Assistance 50,698 67,894 134 C. Program Beneficiaries Development (PBD)

1. Development of Agrarian Reform Communities (ARCs)

1.1 Number of ARCs 75 36 48 1.2 Number of ARBs 50,286 21,494 43

2. Gender Response Capacity Development of ARBs/ARB Organization (ARBO)

2.1 Gender Responsive Training 2.1.1 Number of ARBs trained 101,378 136,260 134

2.2 ARB Membership in Organizations 2.2.1 Number of ARBOs 6,317 2.2.2 Number of members 482,302

3. Sustainable Agribusiness and Rural Enterprise Development (SARED)

3.1 Number of hectares of new lands developed for agribusiness

18,443

26,799

145

3.2 Number of products and services developed 303 502 166 3.3 Number of marketing contracts facilitated with agribusiness firms/buyers

706

1,304

185

3.4 Number of jobs generated out of various projects implemented

61,855

95,000

154

8.7.2 LRA

Program/Project/Activity Target Accomplishments Percent A. Registration and Titling 1. Emancipation Patent (EP) 1.1 Number of Titles 4,395 4,119 94 1.2 Number of Areas (has.) 4,340 4,461 103

161

Program/Project/Activity Target Accomplishments Percent 2. Certificate of Land Ownership 2.1 Number of Titles 35,071 33,442 95 2.2 Number of Areas (has.) 96,340 93,362 97 3. Free Patent Registration 3.1 Number of Titles 78,528 78,528 100 3.2 Number of Areas (has.) 67,947 4. Free Patent Distribution 4.1 Number of Titles 81,000 71,707 89 4.2 Number of Areas (has.) 78,834 Note: LRA-CARP registration is entirely dependent on the total number of received titles and its corresponding

areas of EP/CLOAs that will be submitted by DAR to the RDs for registration. Target was based on the received areas of EP/CLOAs excluding the beginning balances of CY 2010.

8.7.3 DTI Program/Project/Activity Target Accomplishments Percent

A. Micro, Small and Medium Enterprises (MSMEs)

1. Investments generated P812.11 M P785.17 M 97 2. Sales generated P1,553.51 M P1,680.11 M 109 3. Jobs generated 45,568 51,015 112 4. ARCs assisted 719 751 104 5. Non-ARCs assisted 141 183 130 6. Development of new MSMEs 6.1 MSMEs developed 6.2 FBs served 6.3 LOs served 6.4 ARCs served

611 11,446 141 128

791 15,632 511 145

129 137 362 113

7. Generation of Sales P57.04 M P38.71 M 68 8. Assistance to MSMEs 8.1 MSMEs assisted 8.2 FBs served 8.3 LOs served 8.4 ARCs served 8.5 Monitored Sales Impact

1,764 45,590 190 597

P1,078.50 M

1,604 45,948 524 723

P1,157.22 M

91 101 276 121 107

9. Entrepreneurs developed 1,329 1,990 150

B. Trainings and Seminars Conducted

1. Entrepreneurial Training 1.1 Trainings conducted 1.2 FBs served 1.3 LOs served 1.4 ARCs served

597 11,696 162 221

724 14,780 337

254

121 126 208 115

2. Skills Training 2.1 Trainings conducted 2.2 FBs served 2.3 LOs served

2.4 ARCs served

644

13,419 205 208

634

15,159 286 197

98

113 140 95

3. Productivity Improvement 3.1 Trainings conducted

3.2 FBs served 3.3 LOs served

3.4 ARCs served

256 4,858 86 121

233

4,881 111 124

91 100 129 102

C. Project Feasibility Studies

1. Number of Studies 1.1 Studies completed 383 423 110

162

Program/Project/Activity Target Accomplishments Percent 1.2 FBs served 1.3 LOs served

1.4 ARCs served

15,060 158 126

24,425 152 138

162 96

110 2. Technology Missions

2.1 Missions conducted 113 113 100 2.2 FBs served 1,264 1,578 125

2.3 LOs served 15 26 173 2.4 ARCs served 58 61 105 D. Market and Development Activities

1. Market Matching 1.1 Matching conducted 1.2 FBs served 1.3 LOs served 1.4 ARCs served

2,321 41,131 1,472

348

3,064 47,607

681 369

132 116 46

106 1.5 Sales (cash and booked) P336.34 M P417.95 M 124

2. Selling Missions 2.1 Missions conducted

2.2 FBs served 2.3 LOs served

2.4 ARCs served 2.5 Sales (cash and booked)

33

1,456 9 39

P1.77 M

27 921 5 23

P1.01 M

82 63 56 59 57

3. Trade Fairs 3.1 Fairs conducted 3.2 FBs served 3.3 LOs served 3.4 ARCs served 3.5 Sales (cash and booked)

4. Promo collaterals 4.1 Promo conducted

4.2 FBs served 4.3 LOs served 4.4 ARCs served

461

35,452 67

325 P79.85 M

331

15,746 249 181

484

29,326 141 309

P74.21 M

339 14,402

92 161

105 83

210 95 93

102 91 37 89

E. Product Development Activities

1. Development activities done 379 504 133 2. Products design developed 3. Prototype executed 4. Packaging and Labels developed

5. FBs served 6. LOs served 7. ARCs served

547 628 373

17,409 120 196

1,123 1,194

422 16,432

132 151

205 190 113 94

110 77

F. Consultancy Services

1. Man-months extended 2 FBs served 3. LOs served

4. ARCs served

189 47,776

323 172

206 50,679

301 215

109 106 93

125 G. Number of CARP Personnel 158 135 85 H. Number of Staff Development Activities

127

176

139

163

8.7.4 DOLE Program/Project /Activity Accomplishments

A. Identification of New Projects for the next two and a half years

1. Conduct of Project Orientation to generate support in the implementation of the project in the identified ARCs

Conducted project orientation with concerned LGUs (both municipal and barangay)

2. Identification, evaluation and selection of new project sites in the following regions

Region 6 Region 10 Region 11

CARAGA

2 project sites 1 project site 1 project site 1 project site

3. Conduct of Project Orientation in 5 project sites 5 Orientation Seminars 4. ARC profiling and baseline surveys Surveys conducted in 5 sites

5. Conduct of a 3-day SRO-CARP Project Planning Workshop

Held last June 8-10, 2010 at Mambukal Resort in Murcia, Negros Occidental

B. Organizational Strengthening and Consolidation

1. Conduct of Project Orientation Conducted the project orientation with concerned LGU

2. Presentation and validation of the results of survey

Discussed the surveys with the concerned members in all project sites

3. Conduct of Organizational Diagnosis and Training Needs Assessment (OD/TNA)

Conducted with the members and officers of cooperatives

4. Review/updating and re-formulation of the respective Agrarian Reform Community Development Plans (ARCDP)

5. Conduct of trainings/seminars on Coop Orientation and Trainers’ Training on Techniques and Methodology

6. Provision of advisory services to BOD 6.1 on issues, problems and concerns of the coop

All regions

6.2 on-the-job coaching of the financial management and bookkeeping

Conducted in Region 6

7. Technical Assistance and advisory services in the conduct of coop’s BOD General Assembly/ Ownership meetings in all project sites

Conducted meetings in all project sites

C. Agribusiness Development and Management

1. Review/evaluation of coop’s existing or on- going agribusiness enterprises including their farm

development/land plans

Conducted in all project sites

2. Conduct of preparatory activities for training on agribusiness development and production skills seminar

3. Follow-up of resolution on fruit trees production projects with DA

4. Construction of irrigation canal and operation of rice mill at CARAGA Region

5 Conduct of Integrated Area Development Conducted in Region 6

164

Program/Project /Activity Accomplishments Planning Workshop

6. Completion and submission of documentary requirements for the approved project

Palmavera Small Coconut Farmers Beneficiaries Cooperative

8.7.5 NIA

Particulars Target Accomplishments Percent

A. Engineering Activities (January 1999 – December 2010)

1. Total No. of Projects 372 372 100 2. Total Area (hectares) 90,719 81,438 90 2.1 New 21,223 13,610 64 2.2 Rehabilitated 69,496 67,828 98 3.Total No. of Farmer Beneficiaries 62,999 57,979 92 4. No. of Projects for Feasibility Study 86 86 100 5. No. of Project for Pre-Engineering 67 67 100 6. No. of Projects for Civil Works 372 313 84

B. Institutional Development Program (September 1999 – December 31, 2010)

1. No. of Irrigators Associations 1.1 IA Organized 112 1.2 IA Strengthening 175 1.3 No. of IA Members 36,643 2. No. of IA Training (Batches) 443 3. No. of IA Members Trained 12,478 4. No of Staff Training (Batches) 369 5. No. of Staff Trained 7,134

8.7.6 DENR

Program/Activity Target Accomplish-ments Percent

A. Land Management 1. Inspection, Verification and Approval of

Survey (has.)

130,841

145,763

111 B. Public Land Survey (has.) 84,468 77,003 91 C. Land disposition

1. Patent, Processing and Issuance 1.1 No. of Patents 1.2 Areas Covered (has.)

113,636 100,000

107,618 94,905

95 95

8.7.7 LBP

Program Type Accomplishments PD27/EO 228 RA 6657/EO 229 Total

Beginning Inventory No. of Claims Area (Has.) Recipients from DAR No. of Claims Area (Has.)

19

226.35

119 510.73

5,687

82,420.24

889 9,089.67

5,706

82,646.59

1,008 9,600.41

Total Claims on Hand No. of Claims Area (Has.)

138

737.08

6,576

91,509.92

6,714

92,247.00 Returns to DAR

165

Program Type Accomplishments PD27/EO 228 RA 6657/EO 229 Total

No. of Claims Area (Has.)

49 245.12

1,293 13,651.18

1,342 13,896.29

Excluded Portion Area (Has.) 3 39 42 Suspended ARMM Claims No. of Claims Area (Has.)

7

113.64

4,345

68,573.89

4,352

68,687.53

Net Processable Claims No. of Claims Area (Has.)

82

374.92

938

9,246.10

1,020

9,621.03

Approved for Payment with COD No. of Claims Area (Has.) No. of LOs No. of FBs Land Value

73

292.63 40

277 1.22

827

7,182.84 520

5,441 657.10

900

7,475.47 560

5,718 658.32

Ending Inventory No. of Claims Area (Has.)

9

82.30

111

2,063.26

120

2,145.56 Source: Reports submitted by COA Auditing Units

8.0 CARP FUND UTILIZATION

To address the socio and economic inequities, the NG has released sizeable

amounts to implement the CARP during the last two decades. Shown in Table VIII-5 is the ten-year data on approved budget, allotments released, obligations incurred and unobligated balances from calendar years 2001-2010.

Table VIII-5 Approved Budget, Allotments, Obligations and Balances CYs 2001-2010

(in million pesos)

Year Approved Budget Allotments Obligations Unobligated

Balance 2010 21,060.15 17,669.24 9,418.65 8,250.59 2009 13,157.13 15,602.44 11,897.06 3,705.38 2008 13,105.88 14,968.22 10,305.56 4,662.66 2007 14,539.94 15,931.65 10,397.33 5,534.32 2006 15,223.31 10,684.40 9,459.96 1,224.44 2005 14,608.00 13,095.59 8,951.29 4,144.29 2004 14,626.21 17,676.09 17,668.33 7.78 2003 7,431.75 7,403.70 8,045.20 (641.50) 2002 9,488.22 9,050.33 6,895.41 2,154.92 2001 8,604.46 8,932.16 7,737.16 1,195.00 Total 131,845.04 131,013.82 100,775.95 30,237.87

Source: Presidential Agrarian Reform Council ( PARC)

Of the total allotments of P131.01 billion and obligations of P100.78 billion, the

DAR reported the biggest amount of P87.36 billion or 66.67 percent and P46.94 billion or 46.58 percent, respectively

IX. COMMON AND SIGNIFICANT

AUDIT OBSERVATIONS AND RECOMMENDATIONS

166

COMMON AND SIGNIFICANT AUDIT OBSERVATIONS AND RECOMMENDATIONS

9.1 Overview

Pursuant to Section 2, Article IX-D of the Philippine Constitution, the Commission Audit regularly conducts audit of the accounts of all NGAs. The audit is conducted in accordance with the generally accepted state auditing standards and the results are communicated and discussed in the Annual Audit Report (AAR) submitted to the audited agency, the Office of the President, the Congress and other stakeholders.

9.2 Audit Opinions

The AAR sets forth the audit opinion regarding the entity's financial statements.

The auditor's opinion, depending on the result of the audit, reflects only one of the following opinions:

9.2.1 Unqualified Opinion. It states that the financial statements present fairly, in all

material respects, the financial position, results of operations, and cash flows of the entity in conformity with generally accepted accounting principles (GAAP). This is also known as Clean opinion.

9.2.2 Qualified Opinion. It states that the financial statements present fairly the

entity's financial position, results of operations, and cash flows in conformity with the GAAP except for the matter of the qualification. Normally qualified opinions are issued when there are: (1) limitations on the scope of the auditor’s examination on one or more areas of the financial statements, and although they could not be verified, the rest of the financial statements were audited and complied with GAAP or (2) single deviation/departure from GAAP exists.

9.2.3 Adverse Opinion. When issuing this opinion, the auditor concludes that the

financial statements do not present fairly the entity's financial position, results of operations and cash flows in conformity with generally accepted state accounting principles. This type of opinion is issued when the financial statements contain very material departures from GAAP.

9.2.4 Disclaimer of Opinion. A disclaimer of opinion is issued when the auditor is

unable to form an opinion (no opinion) on an entity's financial statements. A disclaimer is issued in cases when: (1) a material scope limitation exists, or (2) a significant uncertainty exists.

9.3 Results of Audit

As reflected on the transmitted AARs for the years 2006 to 2010 of 332, 333, 332, 329 and 345 NGAs, respectively, the average opinions are 54 unqualified/clean or 16.22 percent, 237 qualified or 70.92 percent, 25.4 adverse or 7.6 percent and 4 disclaimer or 1.26 percent. Approximately 20 NGAs or four percent have no opinions since the respective AARs were not yet transmitted and/or only management letters

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were issued. Presented in Chart No. IX-1 below is the Summary of Audit Opinions for the calendar years 2006-2010.

Twelve agencies were consistently given unqualified or clean audit opinions on

the financial statements for the past five years starting 2006, namely:

1. DND - Military Shrines Service 2. DOLE - Institute for Labor Studies 3. DOTC - Office of the Transport Cooperatives 4. House of Representatives Electoral Tribunal 5. Senate Electoral Tribunal 6. Presidential Legislative Liaison Office 7. Central Luzon State University 8. Don Honorio Ventura Technological State University 9. Occidental Mindoro State College 10. Cebu Normal University 11. OP - Mindanao Development Authority formerly Mindanao Economic

Development Council 12. Caraga State University (Northern Mindanao State Institute of Science and

Technology) Majority of the NGAs were given qualified audit opinions or an average of 70.92

percent, consisting of 250, 237, 225, 242 and 231 NGAs in calendar years 2010, 2009, 2008, 2007 and 2006, respectively.

Adverse audit opinions were issued for the audit of seven (7) NGAs from 2006-

2010 such as: DPWH-OSEC, DA-OSEC, DAR-OSEC, DOTC-OSEC, MMDA, DND-PVAO and DA-NAFC. There were 28, 19, 25, 24 and 31 NGAs given adverse opinions in the same period.

0%

20%

40%

60%

80%

100%

2010 2009 2008 2007 2006

Chart IX-1 Summary of Audit OpinionsCalendar Years 2006-2010

Unqualified Opinion

Qualified Opinion

Adverse Opinion

Disclaimer of Opinion

Annual Audit Report Not YetTransmittedManagement Letter

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The common reasons for the qualified and adverse opinions are the following audit observations:

1. Material overstatement/understatement of cash balances and unreconciled

discrepancies in book and bank balances which render the amount reflected in the balance sheet unreliable;

2. Huge amounts of long outstanding receivables without complete supporting documents;

3. Material overstatement/understatement of inventory accounts due to errors/omissions in recording;

4. Material overstatement/understatement of PPE due to deviations from accounting policies and procedures such as non-transfer of completed projects to registry, non-recognition of depreciation, failure to conduct annual physical count and errors/omissions in recording transactions;

5. Material overstatement/understatement of payable accounts caused by unrecorded direct payments made to the contractors, existence of liability accounts which have no existing or valid claimants, undelivered purchases and invalid payments/ settlements made; and

6. Dormant/non-moving accounts being carried in the books for several years although their correctness could not be ascertained due to lack of documents/records.

For five consecutive years (2006 to 2010), disclaimer of opinion was issued to

only one agency, the Bureau of the Treasury-NG due to material scope limitation on the audit of its cash collection for non-access of computerized collection system and inability of management to provide the required documents and reconcile the discrepancies which prevented the audit group to determine the correctness and validity of the financial data.

Details of the summary of auditors’ opinions rendered on the financial statements

of the NGAs for the period 2006-2010 are shown in Annex B, Volume I-B of this report.

9.4 Common Audit Observations and Recommendations from Consolidated Annual

Audit Reports for National Government Agencies for Calendar Year 2010

9.4.1 Cash

The audit of cash accounts in the books of NGAs unveiled some deviations from the prescribed accounting procedures, and non-compliance to existing laws, rules and regulations as follows:

9.4.1.1 Unreconciled differences between the book and bank balances figures

were reported from 20 audited agencies amounting to P8.63 billion affecting the reliability of the cash account figure. Contributing to this, is the failure of 32 agencies to prepare bank reconciliation statements or failure to do so on a timely basis.

9.4.1.2 Cash collected by collecting/accountable officers totaling to P55.97

million was not remitted/deposited intact and on time.

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9.4.1.3 Reconciling items per bank reconciliation statements amounting to P3.98 billion were not taken up in the agency books.

9.4.1.4 Non-recording, erroneous recording of cash transactions and failure to

take up adjustments in Cash account resulted to P146.50 million understatement in cash balance.

9.4.1.5 General ledger and subsidiary ledger balances of the Cash in Bank

account showed unreconciled amount of P42.74 million.

9.4.1.6 Unused and/or dormant cash balances amounting to P1.27 billion were not remitted to the National Treasury resulting in huge balances of idle and unutilized funds in AGDBs which should have been used by the NG. Comprising this unused and/or dormant cash balances are unexpended cash balances of completed projects, funding checks to cover current operating expenses, various collections, rental income, interest income, etc.

9.4.1.7 The cash in bank accounts include balances which agencies have no

authority to use amounting to P181.81 million. These represent unused funds from completed/ discontinued projects which were not returned to the source agency.

Recommendations

9.4.1.8 Prepare monthly reconciliation statements of all bank accounts every end of the month in accordance with Section 74 of P.D. No. 1445, take up reconciling items and adjust the books to correct errors, if any, to reflect the correct balance of the cash account in the financial statements.

9.4.1.9 Analyze/Verify cash transactions and come up with a reconciled general

ledger and subsidiary ledger balances to ascertain the correctness of the balance of Cash in Bank – Local Currency, Current Account as appearing in the books.

9.4.1.10 Remit to the National Treasury all existing balances of trust receipts and

all collections from whatever source not allowed to be used by the agency, in compliance to E.O. 338 dated May 17, 1996, COA-DBM-DOF Joint Circular No. 9-81 dated October 19, 1981 and COA-DBM-DOF Joint Circular No. 1-97 dated January 2, 1997. In the case of Revenue District Offices of the BIR, they should monitor compliance of their Collecting Officers on remitting their collections intact and regularly as required under Section 21, Volume II of the NGAS for National Government Agencies.

9.4.1.11 Return to the source agency the unused funds for the completed projects,

pursuant to COA Circular No. 94-013 dated December 13, 1994 or as agreed in the Memorandum of Agreement.

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9.4.2 Receivables

9.4.2.1 Receivable accounts of some agencies consisting of cash advances for travel, cash advances for special time bound undertakings and other receivables totaling P1.47 billion were not collected within the specified period.

9.4.2.2 Funds transferred by various NGAs to other NGAs, LGUs, GOCCs and

NGOs/POs for the implementation of projects with an aggregate amount of P6.37 billion, remained unliquidated for several years due to the following deficiencies:

a. Failure of the source agencies to monitor transferred funds and to

enforce submission of liquidation reports after completion of the project;

b. Failure of the implementing/recipient agencies to regularly submit liquidation reports and refund unused balances to the source agencies after completion of the projects; and

c. Lack of` periodic reconciliation of accounting records between the source agencies and implementing agencies.

9.4.2.3 There is a remote possibility to collect receivables totaling P13.85 billion

reported in three agencies as a result of questionable sales and deficiency in collection efforts.

9.4.2.4 Erroneous recording and unrecorded receivables resulted to a net

understatement in the receivable accounts amounting to P76.22 million in 15 agencies.

Recommendations 9.4.2.5 To ensure collection of receivables and liquidation of cash advances, the

following measures are recommended:

a. Prepare and maintain a complete and up-to-date subsidiary records and aging schedule that are reconciled with General Ledger balances.

b. Adhere strictly to pertinent regulations on the granting, utilization

and liquidation of cash advances which include, among others:

Full liquidation of outstanding cash advances of accountable officers before new cash advances are granted as provided in Section 89 of P.D. 1445; and

Full settlement of all cash advances at yearend so that appropriate

expense accounts will be recognized in the books, and instruct the concerned accountable officers and employees to deposit or return immediately to the cashier/collecting officer any unused portion of their cash advances.

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c. Strict implementation of the provision of Section 5.8 of COA

Circular No. 97-002 which requires the settlement/liquidation of cash advances within the prescribed period.

9.4.2.6 All possible legal measures/remedies should be enforced in collecting

receivables, which include, among others: a) sending out demand letters to debtors/officers and employees, b) withholding of salaries or any claim due them after sufficient notice have been served and c) other legal means.

9.4.2.7 Verify the status of long outstanding accounts and assess accounts

receivables which are no longer collectible. Consider the possible write-off of these accounts after exerting diligent efforts to collect, instituting appropriate action and exhausting all the remedies available.

9.4.2.8 To prevent the accumulation of long outstanding unliquidated fund

transfers, the following are recommended:

a. Transfer the fund directly to the implementing agency of a project/program instead of having it coursed thru an intermediary agency by indicating this provision in the LA/Memorandum of Agreement (MOA). Require the timeliness of the project implementation in the LA/MOA;

b. Strictly implement the provisions of COA Circular Nos. 94-013, 96-

003 and 2007-001 and the provisions of the MOA by requiring the implementing agency to immediately submit the required liquidation reports and refund any unutilized balances including interest, if any; and

c. Refrain from granting additional fund releases to

NGAs/LGUs/GOCCs/ NGOs/POs with unliquidated balances to prevent accumulation of amounts.

9.4.3 Inventories

9.4.3.1 Delayed delivery of items procured by five (5) agencies from the DBM

Procurement Service (PS) and Philippine International Trading Center (PITC) defeated the good intention to facilitate the procurement process and resulted to the accumulation of undelivered items totaling P1.43 billion and P1.78 billion, respectively, as shown below.

Department/Agency Amount (in million pesos) PS-DBM PITC

Philippine Army 879.66 1,526.64Department of National Defense 500.02 73.28Philippine Air Force 36.13 153.29Philippine Navy - 24.02Bureau of Fire Protection 10.12 - Total 1,425.93 1,777.23

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9.4.3.2 Unreconciled difference totaling P791.65 million between the Accounting and Property records/ inventory reports of 20 agencies brought about mainly by:

a. Non-submission of Report of Supplies and Materials Issued

(RSMI) and other inventory reports as bases in recording the expenses to the Accounting Unit;

b. Non-submission of required inventory reports to facilitate the

recording of birth/production and mortality of animal livestock;

c. Inventories which were already issued and/or consumed but were still reflected in the financial statements;

d. Failure of accounting and supply and property offices to conduct

regular reconciliation of their respective records as required in Section 43, Volume I of the Manual on NGAS (MNGAS); and

e. Erroneous entries in the recording of inventory transactions.

9.4.3.3 Unreconciled difference between GL and SLs amounting to P338.46

million of DND, PAF and PVAO.

9.4.3.4 Overstatement of P59.62 million of nine (9) agencies mainly due to the non-submission of the RSMI by the supply officer to the Accounting Unit and understatement of P246.62 million of seven (7) agencies, which were brought about by the direct recording of deliveries of gasoline, oil and lubricants as expense amounting to P23.37 million by PAF, recording of P68.88 million unissued supplies which were already recorded as expense by the DOH-CO and unrecorded acquisition of spare parts by PCG in 2009 amounting to P149.97 million.

9.4.3.5 Non-submission of the RSMI with undisclosed amount by 24 agencies.

9.4.3.6 Failure to conduct physical inventory of supplies and materials by 16

agencies and non-preparation of the Report on the Physical Count of Inventories by six (6) agencies.

9.4.3.7 Non-reconciliation of Accounting and Property records of seven (7)

agencies.

Recommendations

9.4.3.8 Coordinate with the DBM-PS and PITC regarding the settlement of undelivered supplies.

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9.4.3.9 Require the concerned personnel/employee to reconcile the difference between the Accounting and Property records/ inventory report as required in Section 43, Volume I of the MNGAS for NGAs.

9.4.3.10 Require the Supply Officer to submit regularly the RSMI and other

required inventory reports to the Accounting Unit to support the recording of consumption/issuances of supplies and materials or mortality in case of livestock. Likewise, prepare the necessary adjustment to record expenses, unrecorded deliveries and various accounting errors.

9.4.3.11 Oblige the Supply Officer and other concerned personnel to adhere

strictly to the established rules and regulations prescribed in Section 65, Volume II of the MNGAS relative to the conduct of physical count of inventory items and maintain updated inventory records in accordance with Section 41, Volume II of the MNGAS.

9.4.3.12 Require the concerned personnel of the Accounting Unit to maintain

the Supplies Ledger Card (SLC) in accordance with Sections 12, Volume II of the MNGAS. Conduct regular reconciliation of the SLC with the GL and any discrepancy/ies be immediately verified and adjusted.

9.4.4 Property, Plant and Equipment

9.4.4.1 Unrecorded PPE totaling P2.45 billion was reported by 29

departments/agencies due to lack of appropriate supporting documents and/or basis of the cost in violation of Section 63 of Presidential Decree (PD) 1445 requiring that government property shall be taken up in the books of the agency concerned at acquisition cost or at appraised value, thereby understating the affected PPE accounts.

9.4.4.2 Unserviceable/Disposed properties amounting to P312.72 million

remained in the books of 38 departments/offices in violation of Section 79 of PD 1445 requiring the disposal of unserviceable properties.

Some of these PPE have remained in the custody of various NGAs for more than five years but management failed to take the necessary measure for their disposal which resulted to non-realization of income that could have been generated from their sale.

9.4.4.3 There were properties and equipment from 14 departments/agencies

that were left idle/unutilized thereby defeating the purpose for which these properties were acquired and exposing the government to the possibility of incurring losses due to deterioration/destruction or misuse of properties.

9.4.4.4 Records of Accounting and Property Units of 12 departments/agencies

are reported not reconciled at yearend, 12 failed to maintain PPE ledger and property cards, 31 agencies failed to conduct physical count and 23 failed to provide depreciation. These deviations increased

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disparity between accounting and property records/physical inventory reports/physical count, contrary to Sec. 43, paragraphs 3 and 4 of New Government Accounting System Manual, Volume 1 and Section 490 (a and b) of GAAM, Volume 1.

9.4.4.5 Equipment, buildings and other structures amounting to P614.82

million of eight (8) agencies and one agency which did not report the amount were not insured with the GSIS contrary to R.A. No. 656 and Administrative Order No. 141 dated August 12, 1994 and Section 5 of R.A. No. 656, otherwise known as the Property Insurance Law, thereby exposing their assets to unnecessary losses in the event of damage to or losses of properties due to fortuitous events.

Recommendations

9.4.4.6 Require the Property Officer/Personnel to submit to the Accounting Unit the necessary documents for the recording of assets in the books of accounts.

9.4.4.7 Instruct the Property Unit to prepare the necessary documents for the

disposal of properties through public bidding or other modes of disposal to prevent their further deterioration; and/or for the preparation of the accounting entries to drop the disposed properties from the books of accounts by the Accounting Unit.

9.4.4.8 Conduct a complete physical inventory of all assets at least once a year

pursuant to Section 490, Vol. I of the GAAM and prepare the Report of the Physical Count of PPE (RPCPPE). Any discrepancies between physical count and inventories per books must be analyzed, investigated and a corresponding course of action be taken up immediately.

9.4.4.9 Require the Accountant to prepare and maintain PPE Ledger Card

(PPELC) and reconcile it with the property records/inventory reports on a regular basis. He/She shall ensure that the PPELC is always reconciled with the GL to comply with Sec. 43, paragraphs 3 and 4 of MNGAS, Volume 1 and Section 490 (a and b) of GAAM, Volume 1.

9.4.4.10 The Accountant should ensure that Depreciation Expenses for all PPE

accounts are recorded at the end of each month. Further, a review of the PPELC should be done to correct errors posted in the estimated useful life of the asset to coincide with the prescribed estimated useful life under COA Circular No. 2003-007. Record the recommended audit adjustments to correct accumulated depreciation as of December 31, 2010.

9.4.4.11 Require the Management to insure all its insurable physical assets with

the General Insurance Fund of the GSIS in accordance with Section 5 of R. A. No. 656 and Administrative Order No. 141 dated August 12, 1994 to protect its interests in case of fortuitous events.

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9.4.5 Liabilities

9.4.5.1 The recorded liabilities totaling P1.15 billion of ten agencies were

without valid claims and/or not supported by records or documents to establish their validity and existence.

9.4.5.2 Dormant liabilities of six agencies totaled P312.77 million

9.4.5.3 Unrecorded payables of P38.18 million were reported, while various

errors in recording liabilities resulted to a net overstatement of P1.13 billion.

Recommendations

To establish the validity and accuracy of current year’s balances and to present a more reliable figure of payables in the succeeding years’ financial statements, the following procedures are recommended:

9.4.5.4 Review all outstanding payables and revert those which are

undocumented/not supported with valid claims and those aged two years or more.

9.4.5.5 Strictly enforce the submission of supporting documents prior to the

recording of transactions to minimize payables with no claimants.

9.4.5.6 Prepare journal entries to correct the unrecorded payables and adjust errors in recording the fund transferred to reflect the correct balances.

9.4.5.7 Maintain and update SLs for each payable account to support their

existence and validate accuracy of records. Amounts that have no breakdown, not supported with complete documentation and not reconciled with SLs cast further doubt on the reliability of the account balances.

9.4.5.8 Comply with laws, rules and regulations governing prompt and regular

remittance of salary deductions for taxes and contributions to BIR, GSIS, PAG-IBIG and other authorized agencies.

9.4.6 Revenues

9.4.6.1 Understatement of the reported income of the National Government for

the calendar year 2010 was estimated at P88.94 million resulting from failure to accrue/record income by eight (8) agencies and in the erroneous recording of income to other accounts by two (2) agencies.

9.4.6.2 Three government agencies and at least 12 SUCs were remiss in the collection of income of at least P465.47 million, thus, depriving the government of much needed cash to finance various programs/activities. Such remissions include failure to collect fishpond lease rentals by BFAR amounting to P312.36 million, none imposition

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of fees and penalties by the DOE in the approximate amount of P17.74 million, and non-collection of stall rentals and tuition fees of SUCs particularly on the Student Financial Assistance Program (STUFAP).

9.4.6.3 Collections estimated to reach P22.61 million were not remitted or

deposited intact daily to either the National Treasury, to authorized depository banks or to the Head Cashier in violation of Section 69 of PD 1445 and Section 21, Vol. I, NGAS Manual, thus exposing funds of the government to risks of loss or misuse.

9.4.6.4 The absence of internal control and the flaws in financial reporting and

monitoring of Income Generating Projects (IGPs) of SUCs resulted to losses in the approximate amount of P2.09 million, defeating the income generating purposes of the programs. The Multi-Vegetable and Strawberry Production Projects of the Benguet University incurred P0.89 million in losses; University of Eastern Philippines, P0.80 million and Mt. Province State Polytechnic College, P0.40 million.

Recommendations

9.4.6.5 Instruct the Accountants to: 1) effect the recording of unrecorded

collections, particularly Samar State University amounting P14.92 million, 2) prepare reclassification entries on accounts erroneously credited instead of the income account and 3) adopt/use the accrual method of accounting for income already earned.

9.4.6.6 Management should formulate strategies to intensify the collection of

rent and other income prioritizing the schemes to be considered in order to encourage payments from debtors with long overdue accounts. The ERC should impose collection of fees due from Self-Generating Facilities for renewal of their expired Certificate of Compliance including the penalties thereon.

9.4.6.7 Require the STUFAP management committee in every SUC to

intensify efforts to locate student borrowers and their co-signatories and send demand letters on a periodic basis. In future releases of STUFAP funds, care must be exercised to ensure that addresses of all signatories are secured.

9.4.6.8 Management should closely monitor and supervise the prompt

remittance of collections in consonance with Section 69 of P.D. 1445 to safeguard government funds from misappropriation, loss or misuse. Collecting Officers should be adequately bonded.

9.4.6.9 Management should formulate and put in place a mechanism that

details the operating procedures, responsibilities, financial reporting requirements and monitoring of IGPs. All project directors should be required to prepare and submit Monthly Sales and Expenditures Report to have a timely evaluation of the profitability of IGPs.

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9.4.7 Expenses

9.4.7.1 Unauthorized/Illegal/Irregular expenses of about P246.28 million were

incurred for Collective Negotiation Agreement (CNA), incentives, additional bonuses, RATA and other allowances.

a. CNA estimated at P86.54 million were granted to agency officials

and employees including contractual employees in three SUCs and in one agency. The Land Registration Administration registered the highest amount in CNA given out in the amount of P30.14 million covering calendar year 2009. Such granting of CNA was not in accordance with the: a) Special provisions in the Appropriations of the LRA for 2010; b) DBM Budget Circular No. 2006-1; c) AO No. 135; d) PSLMC Resolution No. 04; e) LRA-CNA; and f) Government Accounting and Auditing Manual. This constitutes irregular transaction as defined under COA Circular No. 85-55A and also tantamount to misuse of government funds as provided under Section 80, Chapter 7, Book VI of E.O. 292.

b. Among those who benefited from the CNA given by SUCs aside

from the officers and employees were contractual employees. Also, some disbursements for CNA were not supported with documents contrary to Administrative Order No. 135 dated December 27, 2005 and DBM Circular No. 2006-001 dated February 1, 2006, giving undue disadvantage on the part of the government. Some SUCs charged the CNA incentives to the Special Trust Fund in violation of the above cited directives.

c. Other unauthorized/illegal/irregular expenditures incurred by

agencies and/or SUCS were: a) payment for Productivity Enhancement Incentives estimated at P24.68 million b) additional bonuses approximately P5.99 million, and c) transfer of fund without basis by Negros Oriental State University (NORSU) from the General Fund to Fund 163 (Miscellaneous Trust Fund) in the amount of P6.42 million and utilized for payment of infrastructure contracts contrary to Sections 37 and 51 of PD No. 1177.

9.4.7.2 Expenses amounting to approximately P169.75 million were incurred

without approved budget while expenditures considered as excessive registered roughly at P27.13 million. Included therein are the following: a. The Science Education Institute had awarded scholarship contracts

to 2,842 scholars valued at P164.86 million without available funds which gave rise to the incurrence of expenditures or obligations in excess of allotments contrary to Section 41 of EO 292 (Administrative Code of the Philippines), Section 47 of PD 1177 and Section 158 of Volume I, GAAM. Also, Bicol University (BU)-Polangui Campus and Research Services exceeded the CY 2010 appropriation resulting to overdraft totaling P1.90 million for

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PS and P495,000.00 for RLIP, contrary to Section 20 of RA No. 992.

b. Due to operational inefficiency and non-conduct of actual flight

trainings for students taking up Bachelor of Science in Air Transportation, PHILSCA incurred a total of P14.05 million for repairs and maintenance of two Tampico aircrafts, resulting to the non-attainment of its purpose.

c. Officers and staff of five bureaus of the DepEd, including their

contractual personnel were paid honoraria/professional fees in the aggregate amount of P7.66 million for services rendered during orientation/training, seminar-workshops and other activities conducted in line with the performance of the respective agencies’ primary mandated functions, contrary to DBM Budget Circular No. 2007-1 dated February 1, 2006.

9.4.7.3 Government fund amounting to P142.78 million was used for

activities/programs different from the fund’s intended purpose.

a. Malampaya Funds (PD 910) were utilized by DepEd-RFUs totaling P136.87 million for purposes other than for which they were appropriated contrary to Section 37 of P.D. 1177 resulting in the misuse of government funds as defined under Section 87 of PD 1445.

b. The Cebu Technological University spent P3.24 million intended

for professional development under Fund 164, but was used for activities/expenses which were not for public purposes but merely for rest and relaxation. These included: a) group tour to Hongkong Disneyland and other places in Hongkong; b) dinner paid by one CTU employee for 200 persons in Ozamiz City; and c) purchase of personal and “pasalubong” items.

9.4.7.4 Reported expenditures were overstated by at least P71.43 million and

unrecorded expenses of P24.52 million were noted.

a. Overstatement of expenses was the result of: a) purchases of office supplies, medical, dental and laboratory supplies directly charged to expenses not passing through the inventory account although not all the items were utilized during the year; b) error in the provision of depreciation expenses due to deviation from the straight line method; and c) expenses incurred in 2009 charged to 2010. The understatement or unrecorded expenses were the resultant effect of unliquidated cash advances which were due for liquidation at yearend.

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9.4.7.5 Expenses amounting to approximately P92.43 million were incurred even without complete documentation.

a. The types of expenditures incurred were the following: a)

undocumented purchases of gasoline, oil and lubricants; b) absence of information as to the time of arrival/departure in the itinerary of travel as required under E. O. No. 298 dated March 23, 2004; c) payments to consultants which were not supported with proofs of actual service rendered; d) grants of CNA not supported with documentations as required under DBM Budget Circular No. 2006-001 dated February 1, 2006; and d) documents not signed by authorized officials.

Recommendations

To preclude incurrence of unauthorized/illegal/excessive expenditures

and the misuse of government funds including erroneous recording thereof, we recommend the following: 9.4.7.6 Require the agency heads to explain in writing and submit legal basis

that would justify the granting of CNA, incentives, RATA, additional bonuses and other allowances, otherwise the amount should be refunded. Henceforth, management should strictly adhere to the provisions of Administrative Order No. 135 dated December 27, 2005, DBM Budget Circular No. 2006-001dated February 1, 2006, PD 1597, Section 4 of PD 1445 and other issuances relevant to said transactions.

9.4.7.7 Direct the Budget Officers to exercise due diligence and proper control

over the disposition of government funds and remind them of the personal liability of the persons responsible for the incurrence of overdrafts as provided under Section 41, Book VI of the Revised Administrative Code of 1987, Section 47 of PD 1177, Section 20 of R.A. No. 992, and other related issuances.

9.4.7.8 Ensure that overspending of allocated funds is avoided through

realistic planning/programming; otherwise realignment should be properly made, if warranted. Make representations with the DBM for the issuance of the Special Allotment Release Order, for authorized overdrafts, to adjust the same.

9.4.7.9 Secure the operational efficiency of agency’s assets in order to attain

the desired goals/outputs of each program or project. 9.4.7.10 Stop the payment of professional fees/honoraria/incentives to officers

and employees involved in regular activities which are in line with their officially mandated functions. Determination of individual liability shall be done upon receipt of Notice of Disallowance, without prejudice to the provisions of Section 7 of DBM Circular No. 2007-01 on the responsibility and personal liability of agency heads. Require the refund of the amounts illegally received.

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9.4.7.11 Ensure that funds are used in accordance with the purpose for which these are intended. To avert misuse of funds, install policies and controls on the proper use of funds; prepare a program of expenditures or a Work and Financial Plan and require submission of audited Statement of Utilization or report on the completion of the project or trip with accompanying details of transaction.

9.4.7.12 Analyze the transactions resulting to understatements and

overstatements of expenditures and prepare the correcting entries. PPE and inventories should be recorded using the appropriate asset accounts. Depreciation should be computed using the Straight Line Method.

9.4.7.13 Direct the Accountant to adhere strictly to the provisions of Section 4

(6) of PD 1445, the Omnibus Rules Implementing Book V of E.O. No. 292 and other Civil Service Laws, Executive Order No. 298 dated March 23, 2004, DBM Budget Circular No. 2006-001 dated February 1, 2006, DBM Circular No. 2010-3, and other directives, requiring completeness of supporting documents to claims before payments.

9.4.8 Compliance

Submission of reports/documents 9.4.8.1 Yearend/monthly reports, disbursements vouchers (DVs) and

supporting documents (SDs) and other reports of 17 agencies/post were submitted beyond the reglementary period as required under Section 7.2.1(a) of COA Circular No. 2009-006 dated September 15, 2009, causing delay in the analysis and review of the accounts and delay in informing management of the deficiencies noted therein;

9.4.8.2 Copies of the contracts with supporting documents of 29

agencies/campuses were not submitted to the COA Auditor within the prescribed period as required under COA Circular No. 96-010 dated August 15, 1996;

9.4.8.3 DVs amounting to P15.58 million of seven (7) agencies and two (2)

agencies with undisclosed amount were paid even without complete SDs and and/or approval/certifications by proper officials contrary to the provisions of Section 4 of PD 1445.

Recommendations

9.4.8.4 Require the submission of reports by the concerned personnel within

the prescribed period to facilitate the recording of transactions in the agency books of accounts so as to provide timely and accurate information for management decision-making and for eventual post-audit of the agency’s financial transactions by COA as required under Sections 100 and 122 of PD 1445 and Section 7.2.1(a) of COA Circular No. 2009-006 dated September 15, 2009. Enjoin the

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accountable officers to submit on time accountable reports for recording in the books of accounts;

9.4.8.5 Require the concerned personnel to submit the contracts/purchase

orders and the SDs to COA within the prescribed period in accordance with COA Circular No. 87-278 and COA Memorandum No. 2005-027, restated with amendments under COA Circular No. 2009-001 dated February 12, 2009; and

9.4.8.6 Require the Accounting Unit to evaluate the transactions as to

completeness of SDs and such are properly accomplished particularly the signatures of authorized officials and employees on each and every document attached to the claim.

Procurement

9.4.8.7 Procurement of various goods and services totaling P422.03 million reported by eight (8) agencies and 12 agencies which did not disclose the amount was made without complying to the applicable provisions of RA 9184, otherwise known as the "Government Procurement Reform Act". These violations include the following:

a. Failure of the concerned personnel to diligently and

conscientiously perform their duties and responsibilities particularly in gathering the baseline prices as Approved Budget for the Contract (ABC) of the bid items, for guidance and comparison;

b. Procurement were done without public bidding; and c. Procurement of supplies and materials and property, plant and

equipment were made without Annual Procurement Program (APP) resulting in uneconomical and inefficient procurement.

Recommendations

9.4.8.8 Require the Bids and Award Committee (BAC), BAC Secretariat and

Technical Working Group to establish criteria/standards for the establishment of the baseline prices as ABC of items offered for public bidding; and

9.4.8.9 Comply with the APP and observe Competitive Bidding and/or Alternative Modes of Procurement in accordance with the provisions of RA 9184 and its implementing rules and regulations (IRR).

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9.5 Significant Audit Observations and Recommendations

Presented below are the significant audit observations and recommendations on the audit of national government departments/agencies submitted by auditors of the National Government Sector and Regional Offices of this Commission.

AUDIT OBSERVATIONS

RECOMMENDATIONS

9.5.1 Office of the President

Cash Advances/Fund Transfers/Receivables

Funds transferred to four (4) other NGAs as financial assistance in the total amount of P26.08 million remained unliquidated at year-end contrary to COA Circular No. 94-013 dated December 14, 1994. (Presidential Anti-Graft Commission)

Require the Accountant of the Office of the Deputy Executive Secretary for Legal Affairs to continue to follow up the status of funds transferred to NBI, PNP, OMB and BIR and to require the submission of liquidation reports upon completion of the project and refund the unexpended/unused funds, if any.

Outstanding cash advances granted to

employees of the agency amounting to P856,095.46 remained unliquidated as of December 31, 2010 which is not in accordance to the provisions of Section 89 of Presidential Decree No. 1445 and COA Circular No. 97-002 dated February 10, 1997. (Northern Luzon Growth Quadrangle Area)

Require the accountable officers concerned to immediately liquidate their cash advances pursuant to Section 89 of PD 1445 and COA Circular No. 97-002 dated February 10, 1997. Exert more efforts to collect from the former employees of the agency.

Others

Management does not maintain books of accounts, in violation of Section 4.d of MNGAS, Volume I, and Section 121 of PD 1445. (Philippine Visiting Forces Agreement Commission)

Maintain books of accounts pursuant to Section 4.d of MNGAS, Volume I, and Section 121 of PD 1445.

9.5.2 Department of Agriculture

Of the 2,301 Farm to Market Road (FMR) projects with a length of 2,382.05 kilometers (kms) costing P6.44 billion allotted for implementation in CY 2010, only 1,225.11 kms or 51.43% amounting to P2.36 billion were completed; 613.85 kms or 25.77% were still on-going; and 543.09 kms or 22.80% were not yet implemented as of

We recommend that DA management: a. direct the implementing agencies

(IAs) to complete the construction/ rehabilitation of FMRs within the time frame as stipulated in the MOA so that benefits from the project will be

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December 31, 2010. Of the P6.44 billion FMR allotment, P346.85 million were not programmed for FMR projects; P766.40 million were released to regional field units (RFUs) for projects with no identified site location; P26.45 million were programmed for other purposes; and various other deficiencies were noted in the actual implementation of FMRs in the RFUs .

immediately enjoyed by the target beneficiaries;

b. coordinate with the concerned

LGUs/DPWH during the pre-implementation phase of the project so that required documents and other activities are properly done and/or implemented on time;

c. require the IAs to strictly adhere

to the provisions of the MOA particularly on the liquidation of fund transfers to ensure that the remaining balance will be immediately released to them for the timely completion of the project, and to refund any unutilized amount;

d. ensure that only expenditures

which are directly related to the project or which are necessary for the implementation of the FMR are charged against the project funds to avoid improper charges and/or possible misappropriation of funds by the implementing agency;

e. proper planning be made to

ensure that only prioritized FMR projects with complete documentation and site location be programmed for the project; and

f. direct the RFUs to conduct a

closer supervision and regular monitoring of the project implementation to be able to immediately address problems causing delay in the completion of projects.

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RECOMMENDATIONS

The program’s objective to provide a stable, healthy and quality supply of affordable agri-fishery products through establishment of 398 Barangay Food Terminal (BFT) projects costing P320 million was not fully attained due to (a) improper selection of recipients/operators; (b) lack of training on the project management; (c) unsuitability of some BFT locations; (d) laxity in monitoring the BFT operations; and (e) lack of cooperation and support by the LGUs and the farmers/ fisherfolks.

We recommend that management: a. revisit the guidelines in the

implementation of the project and/or conduct feasibility studies before continuing with the project;

b. establish close coordination with

the LGUs and strengthen linkages between the farmers and fisherfolks and the Barangay Bagsakan/ Barangay Center (BB/BC) operators to ensure success of the project;

c. evaluate and assess the

capabilities of future BB/BC operators to ensure that only qualified beneficiaries can avail of the project and conduct site inspection before the establishment of the BB/BC;

d. retrieve all unutilized facilities

and equipment and transfer them to other qualified and interested BBs in case the BB did not fully operate within the prescribed period; and

e. monitor closely the

implementation of the project to ensure that they are operating in accordance with the guidelines of the project.

Of the 439,503 Certified Seeds (CS)

bags targeted for distribution during RaSSFiP- Extension Phase from 16 September to 31 December 2010 in ten regions, only 198,922 or 45.26% were procured, of which 185,694 or 93% were distributed to farmer beneficiaries representing 42.25% of the targeted volume.

We recommend that the management of DA RFUs: a. conduct re-evaluation of the seed

requirements per area in terms of variety and the volume in consultation with the farmer beneficiaries;

b. continue the information

dissemination to inform farmers

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RECOMMENDATIONS

about the program and the new farming technologies so that more farmers will avail of the CS in order to attain the distribution targets;

c. coordinate closely with the DA

representatives and remind them of their roles or responsibilities and get their full cooperation and commitment in the implementation of RaSSFiP-Extension Phase; and

d. advise the management of DA-

RFU V that in cases where the supply of certified seeds is inadequate, sourcing, movement/ transfer of CS from provinces within and outside the region, be considered.

The objective for the transfer of the P55

million Malampaya funds to BFAR from the DA which is intended to rehabilitate areas affected by typhoon Ondoy and Pepeng was not attained due to the non-utilization of these funds. (Bureau of Fisheries and Aquatic Resources (BFAR))

Return the amount of P55 million to the Department of Agriculture to fund other government priority projects.

The funds deposited with the Philippine National Bank (PNB) for the implementation of the Special Vehicle Loan Program (SVLP) amounting to P387.17 million is in excess of the amount required to secure the outstanding loans of P6.59 million as of December 31, 2010, which represent a mere 2% of the balance. The excess amount could have been deposited with the National Treasury to fund the priority projects of the government. (National Agricultural and Fishery Council (NAFC))

Reduce the guarantee fund to an amount appropriate to secure the outstanding loans and remit the excess guarantee fund to the National Treasury to finance the projects of the government.

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RECOMMENDATIONS

Weak monitoring of the projects funded out of PL-480 and 2KR and late releases of funds caused either delay, low or non-implementation of the various activities targeted for CY 2009 and 2010. (NAFC)

a. Provide sanctions in the MOA and enforce the same for any delay/non-implementation/non compliance to the implementation plan as set in the Work and Financial Plan (WFP) of the project by the IAs;

b. Conduct frequent validation/

monitoring of the projects in order to ensure efficient project implementation; and

c. Enforce/encourage proper

coordination between and among IAs to sort/correct deficiencies/ problems in.

Unrecorded fund transfer from

Philippine Carabao Center (PCC)-Main Office Credit memos amounting to P600,085 representing funds transferred from PCC-Main Office to PCC-CSU were not taken up in the Center’s book of accounts, thereby understating the Cash-in-Bank and Subsidy from Central Office accounts. (PCC)

Take up in the books all reconciling items in the bank reconciliation statements at year-end to reflect the correct balances of the accounts. Also, follow up financial transactions, which may affect the accounts of the Center be made with the PCC-Main Office.

Unliquidated releases of Funds to National Government Agencies – P 7.09 million The Due from National Government Agencies account balance of P7.09 million remained outstanding for more than 365 days because the recipient agencies had not refunded and/or submitted their liquidation reports. (PCC)

We recommend that management consider the following remedial measures:

a. Follow up constantly with the

DBM-Procurement Service whenever there are delays in the delivery of their requisitions, obtain a statement of account, reconcile the balance with that of the PCC’s records and investigate discrepancies, if any.

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AUDIT OBSERVATIONS

RECOMMENDATIONS b. Follow up with the National

Dairy Authority the refund of remaining balance of P249,547.78.

Overdue balance of fund transfers to

various centers – P 1.97 million Unliquidated fund transfers amounted to P3.77 million to various centers, and P1.97 million or 52 percent of the total amount remained outstanding for more than one year to six years, contrary to COA Circular 97-002, affecting the fair presentation of the account. (PCC)

Require the centers to liquidate the fund transferred for their operations and submit the status report on the implementation of the AI and GMA/Makamasa fund.

Completed projects still in Construction in Progress account – P88.90 million Completed projects costing P88.90 million remained recorded in the Construction in Progress account, thereby overstating the Property, Plant and Equipment account and understating depreciation expense. (PCC)

Instruct the accountant to take up the appropriate adjustments in the books.

Unrecorded acquisition and disposal of breeding stocks – P1.14 million Breeding stocks acquired and disposed of during the year were not recorded in the books, casting doubt on the accuracy of the year-end balance of P420.19 million. (PCC)

We recommend that management ensure the following corrective measures shall be undertaken; to wit: a. Submit promptly the report on the

acquisition and disposal of breeding stocks during the year to the Accounting Section for proper recording.

b. Conduct the inventory of breeding

stocks on an earlier date to give ample time for reconciliation and adjustment in the books.

c. Submit the Report on the Physical

Count of Property, Plant and Equipment to COA within the prescribed time in Section 66 of

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RECOMMENDATIONS

the NGAS Manual, Volume II as basis for reconciliation by the Accounting Office.

Unreconciled balance of Breeding

Stocks at PCC-Central Mindanao University (CMU) – P7.59 million The balance of Breeding Stocks amounting to P13.68 million reflected in the books of PCC-CMU, Bukidnon did not tally with the physical inventory report as of December 31, 2010.

Conduct a reconciliation of the discrepancy between the accounting and property inventory reports and effect the necessary correcting entries to accurately show the balance of the Breeding Stocks Account in the financial statements. Follow-up should be made to PCC Central Office regarding the status of the request made.

Benefits that could be derived from the program were not efficiently and effectively attained due to the existence of 411 underutilized and 91 unutilized flatbed dryers. (Philippine Center for Postharvest Development and Mechanization (PCPDM))

We recommend that management: a. Comply with the conditions set in

the Deed of Donation for the repossession of the unutilized flatbed dryers to avert deterioration due to atmospheric elements;

b. Investigate the causes of not

utilizing fully the flatbed dryers; and

c. continue the coaching and

mentoring on the proper utilization of the dryers.

The failure of the partner-agencies of

PHilMech on the implementation of the various programs/projects of the Department of Agriculture to submit liquidation reports such as their quarterly progress and financial reports resulted to the accumulation of unliquidated receivables considered past due for more than one to three years in the total amount of P776.14 million. (PCPDM)

We recommend that management: a. Relentlessly make representations

with the officials of the implementing agencies for the periodic submission of audited liquidation reports.

b. Require the Finance Division to

continue the regular monitoring of the fund transfers.

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RECOMMENDATIONS

9.5.3 Department of Budget and Management

Payables/Trust Receipts

Interest income earned from bank deposits for CY 2010 of P46.88 million and CY 2009 of P16,680.14 or a total of P46.90 million required to be remitted to the BTr under Sec. 44, Chapter 5, Book VI of EO 292 was treated as income rather than payable to the BTr resulting in the overstatement of Government Equity and understatement of Due to National Treasury accounts by the same amount as of December 31, 2010. (Procurement Service)

Deposit the interest income of P46.90 million to the BTr and record interest income as payable to BTr under account Due to National Treasury. Henceforth, remit quarterly to the BTr the interest on bank deposits as required.

9.5.4 Department of Education

The provisions in the utilization of savings to pay prior years’ Over and above allowances amounting to P101.80 million and unpaid GSIS contributions of teachers in NCR of P411.21 million were not met, hence, not in accordance with Sections 21 and 58 of the General Provisions of Republic Act 9970 and DBM letter dated July 15, 2008.

We recommend that the Head of the Budget and Finance Division submit the following:

a. DBM Authority as supporting

document to book up prior years’ unpaid GSIS contributions amounting to P411.21 million in accordance with the General Provisions of Republic Act 9970; and

b. Summary of Claims certified by

the Chief Accountant and verified by the Auditor as supporting document to record the payable of the over and above allowances amounting to P101.80 million in accordance with DBM letter dated July 15, 2008.

Due from NGAS

The validity and accuracy of the year-end balance of Due from NGAs account of the DepEd-OSEC in the amount of P3.05 billion cannot be ascertained due to insufficient/incomplete records to support the same. Nevertheless, the

a. Instruct the Accountant of OSEC

to reconcile Agency’s record with the DBM-PS to arrive at an accurate balance of the account Due from NGAs. Request for the delivery of the remaining paid

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RECOMMENDATIONS

balance includes the P1.24 billion advance payments/ prepayments made to DBM-PS for the years 2002-2009. While the reported balance of Regional Office No. 9 of P8.99 million represents cash advances granted to Western Mindanao State University (WMSU) that remained unliquidated, thus, understating training expenses during the year.

items not yet served or to remit to the Bureau of Treasury the remaining balance;

b. Require the Accountant in

coordination with the Property Officer of OSEC to submit the documents to establish the difference of P1.8 billion; and

c. Send demand letters to WSMU of

RO IX for the immediate submission of financial and disbursement reports.

Reciprocal Accounts The reciprocal accounts were not reconciled at year-end having a net difference of P1.6 billion, thus, affecting the fair presentation of the accounts in the financial statements.

a. Prepare schedules of the

reciprocal accounts, maintain subsidiary ledgers for the unused/unliquidated downloaded MOOE funds to schools without complete set of books and reconcile the difference of the reciprocal accounts. Undertake quarterly reconciliation to immediately correct any discrepancies noted.

b. Draw a Journal Entry Voucher to

correct the balances of accounts affected after reconciliation and record the adjustment of unused subsidy of the Division Office of Apayao to account Due from Operating Units.

c. Submit to the concerned NCR

division offices, particularly Parañaque and Muntinlupa, the Cash in Bank Register in order to record the appropriate expenses of the downloaded MOOE funds.

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AUDIT OBSERVATIONS

RECOMMENDATIONS

Other Investments and Marketable Securities The accuracy and validity of the account Other Investments and Marketable Securities with a balance of P14.91 million as of December 31, 2010 cannot be ascertained since it was not duly supported with pertinent documents and the balance remained dormant since CY 2004. Further, 137 original certificates of LBP bonds found in the custody of the Chief Cashier at face amount of P7.03 million were not booked up. Likewise, the corresponding interest earned were neither determined nor recorded.

a. Direct the Accountant and Chief

Cashier to exert utmost efforts in identifying the details or breakdown of the balance of the investments appearing in the general ledger.

b. Discuss with Land Bank the

status of the original bond certificates in the custody of the Cashier.

c. Direct the Accountant to prepare

the necessary entries to record the same including the interests earned.

Payroll System

The preparation, processing, and payment of payroll at Division Offices (DO) and Autonomous High Schools through the Regional Payroll Services Unit (RPSU) in six regions revealed several deficiencies in funds flow or other operating activities that resulted in the excess fund unremitted to BTr of P162 million, excess remittance to GSIS of P61.30 million, and overpayment of salaries and allowances of DepEd personnel due to inefficient or ineffective streamlining of the payroll system, contrary to Section 2 of PD 1445, DBM-DepEd Joint Circular No. 2004-1 dated January 1,2004, and DepEd Order No. 24 dated March 18, 2009.

a. Exert more efforts for the

decentralization of the payroll system to the DOs and Implementing Units for efficient and effective streamlining of the payroll system to minimize the complications brought by the continued preparation of the payrolls in the RPSU; enhance the present operations of the agency thru improved funds flow, and ensure the timely payment of personnel benefits and the implementation of projects and activities of DepEd Regional Offices, Schools Division Offices and Secondary Schools.

b. Require the DO and the

Autonomous High School (AHS) to adhere strictly to Section III of the Guidelines for the Implementation of a Uniform Supplementary Payroll System per DepEd Order No. 24 dated March 18, 2009. The DO/ AHS

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RECOMMENDATIONS

should provide the RPSU payroll data files (soft copy) or all of the necessary information pertaining to the payments they made for consolidation of records for computation of annual taxes and other reporting purposes, as well as to avoid double payment of salaries.

c. Require the DO to set time frame

in the submission of supporting documents by payees in the payment of salaries and allowances of DepEd personnel to avoid delays in the payment of claims and other benefits, in the meantime that the RPSU still handles the payroll preparation.

d. Issue a memorandum/order

addressed to all teachers and employees on the prioritization of the authorized deductions from the monthly payroll pursuant to Sec. 43 of the General Appropriations Act for FY 2010, otherwise known as RA 9970.

e. Require the concerned principal

to immediately stop deducting from the monthly payrolls unauthorized deductions, otherwise, the disbursement vouchers effecting its remittances will be disallowed in post-audit. The principal should also see to it that each employee’s monthly take home pay shall not be reduced to an amount lower than Three Thousand Pesos (P3,000.00) after deducting all authorized deductions.

f. Ensure the collection of overpaid

salaries due to unreported LWOPs by requiring the teachers concerned to refund in cash, instead of requesting the RPSU to

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RECOMMENDATIONS

deduct the unreported LWOPs from the Salaries and ADCOM, because of the possibility that these may not be deducted in full or may not be deducted at all, if the net take home pay of concerned teachers is not adequate.

Budget Accountability The Zamboanga City Division Office, Zamboanga del Norte, Vitali, and Culianan National High Schools did not maintain and properly monitor the Registries of Allotment and Obligations (RAOs), thus, resulting to an overdraft in allotment amounting to P14.97 million, contrary to provisions of the General Appropriations Act (GAA) FY 2010, RA No. 9970 and National Budget Circular (NBC) No. 523 dated February 16, 2010.

a. Refrain from incurring overdraft

in allotments. No disbursements should be made if these are not covered by an allotment even if Notice of Cash Allocations (NCAs) are available.

b. Prepare the Registries of

Allotments and Obligations and record/post all ObR prepared/issued and approved to its appropriate registry.

Trainings The conduct of regular orientation seminar-workshop preparatory to the administration of NAT, PEPT and NCAE in Luzon, Visayas and Mindanao that entails a yearly budget of more or less P9 million, is not necessary since the respective standard rules and procedures of test administration have already been established, and any revisions thereof can be disseminated through the provision of updated manuals, and through the use of available internet access, which is one of the fastest means of transmitting information/instructions nationwide.

a. Stop or conduct only on a case-to-

case basis, if extremely necessary and urgent, the regular orientation seminar-workshop preparatory to the scheduled test/examination;

b. Come up with an updated manual

on the rules, procedures, and policies of test administration, and to disseminate the same to the different regional offices, and/or utilize the available internet access to transmit information or instructions to concerned offices; and

c. Require personnel assigned to

administer/ monitor examinations in different division offices to submit reports on problems/issues encountered to the concerned officials for consolidation or for

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RECOMMENDATIONS

use as basis for issuing appropriate guidelines, or to introduce revisions to improve the implementation of NAT, PEPT and NCAE nationwide.

9.5.5 State Universities and Colleges National Capital Region

The absence of an approved standard

rate of income apportionment in the revenue-sharing scheme among the Hospital, the End-user Department and the Equipment Distributors/Providers as a mode of payment for use of equipment together with other conditions of the MOAs failed to express the reasonableness of the terms of lease and rental rates used, thus, unable to establish the advantage that the government derives therefrom. (UP-Manila/Philippine General Hospital)

Develop a standard revenue-sharing formula that will depict the reasonable advantage that the Hospital may gain from such payment scheme. Obtain approval of the rates to be adopted from proper authorities.

Region I

Had the University diligently complied with the provisions of the Memorandum of Agreement regarding the assumed loan of P18 million from La Union United Swine Raisers Association, Inc., (LUUSRAI), unpaid interests could not have accumulated to P45.50 million and penalties in the aggregate amount of P44.40 million to date could have been avoided. (Don Mariano Marcos Memorial State University)

Request from NLSF for the restructuring of the loan and condonation of interest and penalties and intensify collection of past due accounts of P7.03 million so as to provide the agency the much needed cash.

The existence of dormant and unsupported balances not reconciled with Subsidiary Ledgers totaling P1.39 million and P2 million of various accounts and lack/unavailable supporting documents thereof cast doubts on the validity of the balances in the financial statements of Asingan and Sta. Maria Campuses, respectively. (Pangasinan State University (PSU))

Require the accountant to initiate the review, verification and validation of the aforementioned accounts. If the analysis/review of the accounts/funds is not possible due to absence of records and documents, the head of the agency concerned should request for write-off and/or adjustment of account balances from the Commission on Audit in accordance

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RECOMMENDATIONS

with COA Circular duly supported by:

a. List of available records and

extent of validation made of the accounts and;

b. Certification and reasons why the books of accounts/records financial statements/schedules and supporting vouchers/documents cannot be located

The low passing percentage of Asingan

and Sta. Maria Campuses in 2010 Licensure Examination for Teachers, Elementary and Secondary is indicative of poor performance of the University in meeting its academic objectives. (PSU)

We recommend that the Campus Dean require the faculty members to give more emphasis on the subject areas covered in the Board Examination for Teachers and improve instructional delivery.

Conduct review classes for the course, if needed, in order to improve performance of the examinees in the board examination.

Cordillera Administrative Region

Fund received amounting to P5.79 million for the implementation of projects under the Angara-Funded Integrated Research and Development Program were not utilized for the purpose intended. (Benguet State University)

Utilize funds received for the specific project and for the purpose intended to ensure the attainment of the objectives of the program.

Region III

Scholarship Programs

The implementation of the cost recovery mechanism for the contractual obligations of reneging faculty scholars is deficient/ineffective due to weak enforcement of reimbursement of all expenses from the reneging scholars as provided for in the Scholarship Agreement resulting in uncollected

We recommend that management – a. Strictly enforce the

reimbursement of expenses to the College amounting to P1.98 million by the faculty scholars who reneged from their contractual obligations.; and

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RECOMMENDATIONS

refunds/ receivables amounting to P1.98 million. (Pampanga Agricultural College (PAC))

b. Enforce the liability of the

guarantor pursuant to the Scholarship Agreement should the scholars fail to reimburse the scholarship expenses.

Accounting Deficiencies

The Subsidy Income from National Government (SING) account was overstated by P300,000.00 due to omission in recording NCA No. 3851783 for P900,000 and omission in recording of NCA reversal amounting to P1.20 million which in effect overstated the Government Equity (GE) account by P300,000. Such overstatement was reduced by the understatement in that account pertaining to the omission in recording of some Tax Remittance Advice of P82,784.12. Thus, giving an overall effect of overstatement in Government Equity account by P217,215.88. (Central Luzon State University (CLSU))

Require the accountant to record all NCAs received by the agency in the books of accounts. Likewise, oblige the accountant to prepare the necessary adjusting entry to correct the omitted NCA recording, thus correct the status of government equity account.

Other Deficiencies

Prompt remittance of withholding taxes due to the BIR was not made thereby leaving an unremitted balance of P3.05 million as of year end. (Nueva Ecija University of Science and Technology (NEUST))

Require the Accountant to determine the unremitted prior years’ obligation to the BIR and remit the same as soon as it is established.

Remit promptly all collections due to the BIR. Follow strictly the provisions of BIR Regulations No. 2-98 regarding withholding and remittance of taxes.

Region IV-B

Out of the twenty (20) motor vehicles owned by the University, only three (3) were issued with corresponding Acknowledgement Receipt for Equipment (ARE) as assigned to University officials/personnel which is

For each government vehicle, an Acknowledgement Receipt for Equipment (ARE) should be issued the end-user for proper recording and accountability in compliance with the Section 56 of Chapter 2, Volume II of

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RECOMMENDATIONS

inconsistent with Section 56 of Chapter 2, Volume II of the MNGAS for National Government Agencies, requiring the issuance of Acknowledgement Receipt for Equipment (ARE) to the end-user to acknowledge the receipt of property and equipment for official use from the Property Officer. (Palawan State University)

the MNGAS for National Government Agencies. In addition, to ensure strict compliance with the prohibition against the use of government motor vehicles by those who are already enjoying transportation allowance benefits, the management is enjoined to observe existing regulations involving the marking of government vehicles, the use of RP plates, and the proper filling-up of the corresponding trip tickets.

Region V

Of the total Due to BIR account balance of P11.72 million, the amount of P5.21 million remained unremitted as of December 31, 2010, contrary to BIR Revenue Memorandum Circular No. 5-2006 dated Nov. 2, 2006, thus depriving the government of said revenue that could have been used to augment its finances. (Bicol University)

Cause the immediate remittance of taxes withheld in prior and current years to the Bureau of Internal Revenue pursuant to the withholding tax regulation.

The correctness of the balance of the account “Due to Other National Government Agency” as of December 31, 2010 totaling P30.72 million cannot be ascertained due to the variances between the books, the bank and the Grantors’ records; inadequate information affecting the transactions of several fund transfers; and the flawed aging schedules of the account, contrary to Sections 74, 111 and 112 of PD 1445. Moreover, the unutilized balance of P3.93 million which had been dormant for over two (2) years remained unremitted to the source agency/s although the purpose of the transfers may have already been completed/terminated contrary to COA Circular No. 94-013 dated December 13, 1994. (Bicol University)

a. Direct the accountant/ bookkeeper to prepare the breakdown/details of the fund balance for the completed/terminated projects in order to determine the amount to be refunded/returned to the source agencies.

b. Instruct the Cashier to remit to

the concerned agencies/ establishments the amount due them representing the unutilized balances of the funds which the latter transferred to the Bicol University.

c. Reconcile the accounting reports

(SL for Due to Other NGAs with the corresponding Cash-in-Bank ledgers) with the bank balances in order to show the correct account balances per Grantor.

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RECOMMENDATIONS d. Proper adjustment in the books

be made specifically on the negative balances and unreconciled amount as confirmed from grantor upon review of individual balances of grantor per books and be cautious on encoding data in the eNGAS to reflect the accurate Due to Other NGAs balance.

e. Rectify the Aging Schedule in

order to present inaccurate information on the status of the account so as not to mislead the reader of the financial reports of the University.

The erroneous recording in the transfer

of the P1.50 million subsequent endowment fund from Fund 164 to the Bicol University Provident Fund of employees overstated the Other Maintenance and Operating Expenses account. (Bicol University)

Require the Accounting Unit to make the necessary adjustment in the University’s books of accounts in accordance with COA Circular No. 2008-001 as shown below: Other Investments P 1,500,000.00 Other Maintenance and Other Operating Expenses P1,500,000.00

The Registries of Allotments and Obligations for Personal Services (PS) and Maintenance and Other Operating Expenses (MOOE) were not properly maintained by some units/colleges; hence the allotment was not correctly recorded in the respective registries by at least P6.53 million. (Bicol University (BU))

a. Require concerned Budget Officers to see to it that all the allotments received are properly and correctly recorded in the respective RAOs.

b. Require concerned Budget

Officers whose RAOs were not properly maintained to record the unrecorded allotments and correct the erroneous recording of allotments.

c. Further, require them to reconcile

the Sub-Allotment Advice with the Registry of Allotments to avoid the incurrence of unrecorded allotments.

Several sub-allocations of the

allotments received for the period a. Follow strictly the National

Budget Circular No. 523 dated

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RECOMMENDATIONS

January to September 2010 among the units/colleges of the University were not in accordance with the CY 2010 Agency Budget Matrix (ABM) and Special Allotment Release Order resulting to under(over) sub-allotment, in violation of Sec. 4.3.2.4 of NBC No. 523 dated February 16, 2010. (BU)

February 16, 2010 in the release of the funds for CY 2010.

b. Stop the practice of sub-allocating

the allotments received to the different units more than what is authorized in the ABM and SARO.

c. Request for realignment from the

DBM should be made for any adjustments between the Not Needing Clearance (NNC) and Needing Clearance (NC) portions of the approved ABM so that SARO will be issued by the DBM for such adjustment.

The total Obligations Incurred as

reflected in the Consolidated Statement of Allotment, Obligations and Balances (SAOB) of the University for Fund 101 as of September 2010 did not tally with its attached individual SAOB for each function/unit, with a difference of P6.01 million, thus, casting doubts on its accuracy and reliability. (BU)

Require the concerned Budget Officer in the preparation/ consolidation of the Statement of Allotments, Obligations and Balances (SAOB) of the University:

a. to properly check/verify and

prepare a schedule consolidating the individual SAOBs to ensure the accuracy and reliability of the said reports in compliance with the abovementioned provisions of P.D. 1445 and COA Circular No. 92-89E.

b. to verify and check the

individual SAOBs with the Consolidated SAOB as of September 30, 2010 and reconcile the difference of P6.01 million to have an accurate and reliable report on the total obligations incurred of the University in compliance with the abovementioned provisions of P.D. 1445 and COA Circular No. 92-89E.

c. Instruct the concerned personnel

consolidating the abovementioned

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reports to prepare a schedule summarizing the individual SAOBs to be attached to the Consolidated SAOB to facilitate its review and verification and to ensure the accuracy and reliability of the said report.

Cash Advances for travels were not

liquidated in accordance with Executive Order No. 298 and pertinent provisions in the Government Accounting and Auditing Manual which resulted to a significant balance of P1.10 million as of December 31, 2010. (Camarines Norte State Colleges (CNSC))

To correct the foregoing observations, we recommend the following: a. Require all officials and

employees who are still in service to refund in full, unused and excess cash advance;

b. Communicate with employees

who are no longer in service to settle their respective accounts;

c. See to it that officials and

employees who seek transfer to other offices or file for claims of terminal leave are not given certificate of clearance until their balances are paid; and

d. Ensure that rules and regulations

on the grant of traveling expenses are strictly observed pursuant to executive Order No. 298 and pertinent provisions of the Government Accounting and Auditing Manual Vol. 1.

The validity and propriety of land

account in the amount of P6.96 million could not be ascertained due to the absence of documents supporting its legal ownership. (CNSC)

Since the management failed to fully implement our prior year’s audit recommendation regarding this matter, we therefore reiterate this observation to remind them of their responsibility.

a. To prove and safeguard the

ownership of real properties of the agency, titles should be acquired.

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RECOMMENDATIONS b. Exert extra effort to facilitate the

acquisition of land title to safeguard the real properties of the College and to document its ownership.

Due to the absence of allotment or its

equivalent, the collectibility of the accumulated accounts receivable amounting to P8.39 million from barangay scholars is doubtful, thus affected the fair presentation of this account in the financial statements as of December 31, 2010. (CNSC)

Make proper representation with the concerned agencies for the collection of the amount of P8.39 million. If found to be uncertain of collection, request for authority from the Commission on Audit to write-off the Accounts Receivable pursuant to Section 36 PD 1445 and COA Resolution No. 2003-002 dated January 30, 2003.

Region VI

Analysis of the year-end consolidated trial balance affecting intra-agency accounts for Fund Transfer of Special Trust Fund between Aklan State University (ASU)-Banga Main Campus and the three (3) satellite campuses revealed an unreconciled balance of P8.36 million booked as Due to Operating Units (423), contrary to Section 112 of PD 1445. (Aklan State University (ASU))

Reconciliation should be made to pinpoint the discrepancy of P8.36 million. Henceforth, conduct a regular reconciliation of intra-agency transactions in compliance with a sound accounting practice. The university Cashier should ensure that the advice/transmittal of fund transfer be furnished the campus accountants/ bookkeepers, as basis for the drawing of journal entry vouchers for cash received.

Lapses in systems and procedures in the recording and collection of Receivables from Officers and Employees (F161-121 account) from various Income Generating Projects (IGPs), and the unsupported year-end adjusting entry for P1.85 million to close the account resulted in the unreliability of the balance per book of the Government Equity Account. (ASU)

The Finance Unit should submit a corresponding schedule/breakdown of the individual accounts settled with relevant info to support the entry.

a. Henceforth, the Accounting Unit should properly recognize the receivable and stop the practice of directly crediting to Income Accounts the collection of the Cafeteria.

b. The Accounting Unit should maintain subsidiary ledger for

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each receivable account per project based on the Monthly Report of Receivables and Collection submitted by the IGP managers, to be reconciled with the individual creditor ledger card maintained by the latter.

c. The IGP managers should be required to maintain a ledger card for each creditor with data showing the name and address and with columns for the date, particulars, OR No. (Issued by the Cashier), Date of OR, amount paid and the balance.

The Cashier’s collections should be classified whether as settlement/ payment for purchases on account or cash as basis for the correct accounting entry.

Region VII

The 28,981 square meters lot presently occupied by the University valued at P16.19 million per books were not covered by Original Certificate of Title, thus its possession and ownership were not protected from the risk of any form of claims of ownership by unscrupulous individual or entity. Likewise the assessed value way back in year 1928 used in the valuation of the land per books was no longer reflective of the current assessed value of subject lot. (Cebu Technological University)

Exert effort to follow up the request for issuance of Special Patent pending with DENR in order to secure the possession and ownership over the land presently occupied by the main campus of the University. Likewise, re-assess the valuation of the land recorded in the books and reconcile disclosure stated in the Notes to Financial Statement to ensure consistent and reliable information affecting the account.

Remittances to Calape Polytechnic College (CPC) Cooperative for CBU contributions and loan amortizations for the period January to December 2010 amounting to P1.01 million were in the name of Raymundo F. Miñoza and not in the name of the Cooperative

We recommend that management:

Require the cooperative to register with the Cooperative Development Authority or any regulating body suitable to their line of business.

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and no official receipts have been issued to establish that the funds disbursed have actually been received by the payee so that any liability arising for the claim has indeed been extinguished or reduced in the amount received by the payee in violation of COA Circular No. 2004-006 dated September 9, 2004. (Central Visayas State College of Agriculture, Forestry and Technology (formerly BISU))

Not to release checks for the cooperative unless official receipts are issued.

To have the check made payable to the name of the cooperative and not to the name of individual person.

Failure of the University Accountant to comply with the regulations on the grant of cash advances and to demand liquidation thereof or to impose the sanctions provided under COA Circular No. 97-002 dated February 10, 1997 have caused the balance of outstanding cash advances to reach the sum of P5.70 million of which P148,825.00 were due from employees who were already separated from the service and P2.27 million could not be accounted or attributed to any officers and thus omitted from the aging schedule as of December 31, 2010, which could result to possible loss of funds while rendering the balance of the account Due From Officers and Employees unreliable. (Negros Oriental State University (NORSU))

Demand immediate settlement of all cash advances which have already served their purpose, require the University accountant to issue such demand letters regularly, such as every two months, to withhold from payments due the employees the amount of unliquidated cash advance, to refrain from granting additional cash advances, or issuing clearance, unless all cash advances have been settled, to improve efficiency in the recording of liquidations, to ensure that all cash advances are settled at the end of the year, and to determine the persons accountable for the cash advances amounting to P2.27 million.

A payment of P978,860.00 to Asian Mari-Tech Development Corporation for training fees of 160 cadets was not acknowledged by an official receipt of the corporation but was received by the Acting Dean of the College of Maritime Education of NORSU without the requisite authorization from the payee, was not supported by a contract nor was a certificate of training submitted, thus rendering the validity of the payment questionable. (NORSU)

Require the Cashier to release check payments only to the payee of the voucher, and to ensure that all payments are acknowledged by official receipts. In addition, submit the following documents to support the payment in order that the voucher may be allowed in audit:

a. Official Receipt issued by Asian

Mari-Tech Development Corporation for the payment of P978,860.00.

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RECOMMENDATIONS b. Letter from Asian Mari-Tech

Development Corporation authorizing the Dean of the College of Maritime Education of NORSU to receive payment in its behalf

c. Contract between the training

center and the NORSU d. Certificates of Training for the

160 cadets of NORSU

Region VIII

Land donated by the Province of Leyte was booked at P2.0 billion despite the absence of supporting documents as basis of valuation, contrary to the provisions of Section 75 of the Manual on the NGAS, Volume III (for NGAs). (Leyte Normal University)

We recommend that the head of the agency obtain from the Bureau of Internal Revenue the zonal valuation or from commercial banks for the current market value of the land, or an appraisal by a professionally qualified appraiser (IAS 16, par. 32) as bases in coming up with a reasonable and fair valuation of the donated lands. Require the Accountant to prepare the necessary adjusting entries as soon as the fair value of the land shall be determined.

Region IX – Zamboanga Peninsula

Cash advances were not liquidated as of December 31, 2010 in violation of Section 89, Presidential Decree No. 1445, thereby, advances to officers and employees accumulated to P1.14 million. (J. H. Cerilles State College)

Require the accountable officers concerned to liquidate their cash advances so that proper accounting could be made thereof to ensure fairness of accounts presentation in the financial statements or require the refund, or apply the provision of Section 128 of PD 1445. The Accountant as an internal auditor should strictly implement the rules and regulations on cash advances to avoid accumulation of huge amount of unliquidated cash advances.

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RECOMMENDATIONS Apply other remedial measures as follows:

a. Require immediate salary payroll deduction the of full amount. Installment payment not being resorted to considering that the obligation does not arise from loan or contractual obligation but from the violation of law.

b. Apply or withhold payment of all

benefits such as the year-end bonus, cash gift and monetization of leave

c. File civil suit and recover from

the property of the officials or employees if warranted.

Payment of honoraria to various

officials and employees of the Jose Rizal Memorial State College (JRMSC), Main Campus, out of tuition fees, totaling to P1.36 million is irregular and violated pertinent provisions of National Budget Circular (NBC) No. 2003-5, National Budget Circular No. 2007-510 and Commission on Audit Circular No. 2000-002. (JRMSC)

Ensure that payments of honoraria should not be taken from the Special Trust Fund. It should be charged against the amount appropriated for the purpose in the General Appropriations Act.

Strictly follow the accounting guidelines and procedures provided in COA Circular 2000-002 in the utilization of Special Trust Fund.

Due to BIR of JRMSC, Main Campus in the total amount of P1.04 million remained unremitted at year-end, in violation of Revenue Regulation No. 2-98 dated April 17, 1998, thus depriving the national government of the use of the funds and possible imposition of penalty of the agency’s late remittance. (JRMSC)

Require the Accountant to immediately remit the taxes withheld to avoid misuse and imposition of charges, otherwise any penalty for late remittance shall be charged to his personal account.

Salaries and Wages, Honoraria and Other Personal Benefits totaling, P3.26 million were charged against the Special Trust Fund (STF) of the College in violation of Item 2.1.4 of COA Circular No. 2000-002, Item 2.1 of DBM Circular Letter No. 2003-10

Refrain from charging Salaries and Wages, Honoraria and Other Personal Benefits against the STF to avoid accumulation of disallowance. It must comply with regulations set under Item 2.1.4 of COA Circular No. 2000-002, Item 2.1 of DBM

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and DBM Budget Circular No. 2003-5, as amended. (Zamboanga City State Polytechnic College)

Circular Letter No. 2003-10, DBM Budget Circular No. 2003-5 as amended, respectively, to bring about propriety in the disbursement of funds.

The Due to Other NGAS account balance amounting to P17.1 million was not accurately presented in the books of accounts of the College due to errors and omissions in recording transactions affecting the account. (Zamboanga State College of Marine Sciences and Technology)

We recommend that management: a. Direct the Accountant to rectify

the erroneous entries made to the account;

b. reconcile the account with the

cash in bank for completed projects; and,

c. reclassify to the proper account

transactions not related to the Due to Other NGAS account.

Region X

At Central Mindanao University (CMU), perpetual inventory system was not observed thus agricultural supplies of P4.76 million was not certain. While their Raw Materials Inventory of P4.98 million was understated because of lack of policy guidelines on how to account for raw materials. Finished Goods Inventory of P992,880 was also downgraded into Raw Materials Inventory without proper documentation and approval. (Central Mindanao University (CMU))

Adopt the perpetual system of inventory, stop the practice of downgrading seeds to commercial palay without approval and formulate policy guidelines in recording transactions on raw materials inventory.

Region XI

The lack of monitoring on the CHED financial assistance program granted to qualified students of the University resulted in uncollected loan balance amounting to P2.62 million as of year-end, thereby depriving other qualified students to avail of the program’s benefits. (University of Southeastern Philippines)

Require the Committee on Scholarship closely monitor the actual status of the long outstanding accounts and strategize recovery measures to increase collection efficiency. Assess those accounts which are no longer collectible. After exhausting all the remedies available and exerting diligent efforts, consider the write-off of these accounts subject to existing rules and regulations.

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Region XII

Cash advances of various officials and employees totaling P9.11 million remained unliquidated contrary Section 89 of PD 1445 and COA Circular No. 97-002. (Sultan Kudarat State University

Enforce the accounting rules and regulations pertaining to granting and liquidation of cash advance.

Region XIII

Expenses on travels and various school’s affairs aggregating P2.18 million were treated as outright expense account instead to cash advance which is not inline with Section 88 of PD 1445 and Sec. 3.1, 3.1.1 and 4.1.1 of COA Circular 2009-002, thus, P808,040.05 may be disallowed in audit. (Caraga State University (CSU))

Adhere to the provision as stated in Section 88 of PD 1445 and Sections 3.11 and 4.11 of COA Circular 2009-02;

Traveling expense incurred by the personnel of Caraga State University totaled to P1.65 million for the period January to August 2010 were not based from the provision of Section 88 of PD 1445 and COA circular no. 96 – 004, thus, P438,465.00 amount of travel maybe disallowed. (CSU)

Require the accountant to treat every Travel expense as cash advance so that Itinerary of Travel can be required to show correct place of travel and the cost of travel to avoid error and disallowance in the future. The traveling expense with deficiencies in the total amount of P438,465.00 should be refunded by the personnel concerned.

9.5.6 Department of Energy

Analysis of the fund releases from Special Account in the General Fund (SAGF)-Malampaya Funds revealed that out of the P19.64 billion released to national government agencies, only P250 million or 1.27% represented release to DOE for electrification of 211 barangays while P19.39 billion or 98.73% was released to other national government agencies for various purposes other than exploration, development and exploitation of energy resources. Further, huge increasing balances of the fund with year end

Coordinate with the Department of Finance and Congress of the Philippines, to revisit the provisions of PD 910 dated 22 March 1976. An amendment to the provision thereof, specially on the treatment of income collected by the DOE from Service Contractors, may be initiated with the recommendation that it be taken up as income of the General Fund and shall accrue to the unappropriated surplus of the General Fund of the Government pursuant to Section 44 Chapter 5, Book VI of EO. No. 292,

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balance amounting to P77.19 billion for Malampaya alone remained idle for the past eight years.

s. 1987 and Section 65 of PD 1445, respectively.

The distribution of the 5.05 million Compact Fluorescent Lamps (CFLs) and its exchange with equivalent number of incandescent bulbs (IBs), contracted to GRM International Inc. (GRM) for a contract price of P17.51 million, was not completed within the programmed period of three months with a remaining undistributed 1,610,792 CFLs in Metro Manila and Mindanao. Further, the status of distribution in Mindanao disclosed a low distribution rate of 29.45%.

a. Revisit the policies, procedures and future plans for the Project to asses its viability for the remaining period of the project;

b. Instruct the project personnel to

follow up submission of duly accomplished Distribution Monitoring Forms.

9.5.7 Department of Environment and Natural Resources The agency failed to produce the most

requested and saleable maps, contrary to Section 22 (a) of EO 192 and resulted in the failure of the agency to realize their estimated targeted income of P1.61 million from the sale thereof. (National Mapping and Resource Information Authority ( NAMRIA))

Solve the problems/causes of the non-production of the most requested and salable maps so that all requisitions could be served to untimely realize and increase the income from sale of maps

9.5.8 Department of Finance

Investments

The GL balance of Investments in Treasury Bills account amounting to P10.26 billion did not reconcile with the Schedule of Investment in Government Securities (SIGS) totaling P11.41 billion or a difference of P1.15 billion, thus validity and accuracy of the account cannot be ascertained. (Municipal Development Fund Office)

Reconcile its GL and the SIGS in order to establish the existence of the investments as well as reflect the correct balance of the Investments in Treasury Bills account in the Financial Statements.


The existence, accuracy and reliability of Other Deferred Credits account amounting to P 14.28 billion cannot be

Review the negative balance of P61.24 million and adjust it accordingly in order to reflect its

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ascertained due to inclusion of certain transactions with a net total of P61.24 million which were unverifiable due to absence of records/documents. (Privatization and Management Office (PMO))

accurate amount in the books of accounts.

Net overstatement by approximately P426.71 million or six percent (6%) of the balance of account Tax Refunds Payable (429) totaling P7.71 billion due to expired Tax Credit Certificates (TCCs) of P354.93 million; unrecorded cash conversions of P96.50 million; unrecorded issuance of TCCs of P303.83 million and TDM of P279.12 million. (Bureau of Internal Revenue –NG Books)

We recommend that management require: (a) the issuing offices to regularly monitor and provide reports to the RAD on the expiring TCCs; (b) RAD to also monitor and analyze same and based on the expiration indicated on the face of the TCC close and drop them from the book of accounts of the Bureau to fairly present the accounts Tax Refund Payable (429) and Due from Treasury (131) as of any given point in time; and (c) all BIR Issuing Offices and the TRG OSS-DOF to observe regular and timely submission of reports of issuances of TCCs and TDMs and provide information of non-issuance of the same for a given month to RAD for proper and complete recording within the cut-off date of the year (December 31, 2010), and to the COA Resident Office for the full verification and review of TCC and TDM issuances during a given year. We also recommend that for transparency and clear instructions, the timely submission of reports on TCC/TDMs issuances with the forms to the Resident Auditor’s Office are reiterated/included in the proposed RMC.

Revenue/Income

The proceeds from sale of assets and corresponding interest income earned on bank deposits totaling P13.18 million was not remitted to the BTr as of December 31, 2010 contrary to Section 65.1 of PD 1445. (PMO)

Remit the amount of P13.18 million to the BTr in compliance with Section 65 (1) of PD 1445.

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Sale of assets for P361.91 million was

perfected without the prior appraisal of the properties by the COA, contrary to Section 79 of PD 1445, COA Memorandum No. 88-569 and payments of the sale was not submitted to COA for pre-audit, contrary to COA Circular No. 2009-002 dated May 18, 2009. (PMO)

Ensure that management gets the most competitive and advantageous price in the sale of government assets and strictly comply with the provisions of Section 79 of PD 1445 and COA Memorandum No. 88-569. Also, faithfully submit to COA, transactions which are subject to pre-audit pursuant to COA Circular No. 2009-002.

9.5.9 Department of Health

Loans and Grants - KFW The inclusion of unnecessary training component totaling €490,625 or P31.40 million in the Program cost resulted in the additional loan of the same amount, incurrence of commitment fees estimated at P565,000, and interest expenses estimated at P1.18 million for a five-year period, the duration of the loan, for non-productive purposes. Further, of the said amount, €250,000 or P16 million, which were already withdrawn for the purpose in August 2010, remained unutilized in the bank account of the Program Consultant as of year-end. (DOH- CENTRAL OFFICE)

We recommend that the DOH, through the Director of BIHC:

a. Initiate the cancellation of the

unutilized loan amount of €490,625 or P31.40 million permitted under Article 5 of the Loan Agreement;

b. Require the Consultant to remit

the €250,000 or P16 million to the Bureau of Treasury to form part of the cancelled loan amount; and

c. For future similar undertaking/

funding, the DOH, in determining the component of a project or program and prior to acceptance of funds, determine beforehand the availability of the component/activity from other existing programs/projects to avoid this observation and incurrence of unnecessary/ avoidable expenses.

Delayed utilization of the loan and

implementation of the project by two years resulted in the incurrence of commitment fees of at least P19 million from CYs 2008 to 2010. Of the P273.89 million planned disbursements for the LGU re-lending as of CY 2010, only P37.26 million or 14% was disbursed hence, of the targeted 24 health

We recommend that the Director BIHC consider the creation of an Ad Hoc Committee to serve as the PMO for the Program to (a) prepare and implement the Catch –Up Plan as suggested by the Consultants; (b) assist the LGUs and coordinate with the MDFO to facilitate the submission of the required

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RECOMMENDATIONS

facilities, only two were completed which can be attributed to the absence of BIHC Project Management Office (PMO) to closely supervise, oversee and monitor the Programme performance. (DOH- Central Office)

documentation for the sub-loans availment and early completion of the projects; (c) supervise the Consultants in the delivery of their contracted services and expected outputs; and (d) be responsible for the effective and efficient implementation of the Program.

DOH- Central Office Fund 101

The reported account balance of Due from National Government Agencies (NGAs) - Procurement Service-Department of Budget and Management (PS-DBM) of P98.51 million was unreliable due to the non-recording of P1.04 million delivered items, inclusion of the P2.20 million obligation for advance payment to PS-DBM and the disparity of P51.66 million between the records of DOH-CO and PS-DBM for the balance of the account as of CY 2010 contrary to the provisions of Sections 4.s and 14 of the Manual on the NGAS, Volume I and Sections 29 and 144 of the same Manual, Volume III.

We recommend that:

The Materials and Management Division (MMD):

a. Forward immediately the

documents for the delivery of P1.04 million to the Accountant for recording in the books of accounts;

b. Ensure that all delivery documents are forwarded on time to the Accountant for immediate recording; and

c. Coordinate with the Accounting Division on the advances made to the said agency and to make follow-ups with the PS-DBM for the delivery of items covered by the paid Agency Procurement Requests.

The accounting personnel in-charge d. Facilitate and prioritize the

reconciliation of the records of DOH-CO with those of PS-DBM on the balance of the advance payments made to the latter;

The Accounting Division:

e. Prepare an adjustment on the

erroneous recording of the P2.20 million recorded obligation;

f. Verify/trace the cause/s of the

negative balance of P4.87 million

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so that the appropriate adjusting entries can be made;

g. Stop the practice of making

advance payment without any liquidation of the previous advances; and

h. Discontinue the recognition of a

receivable from PS-DBM and a payable based on obligation.

The Accounting Division and the MMD i. Conduct periodic reconciliation of

their records on deliveries made by PS-DBM to ensure that the balance of advances made to that office is updated and accurate.

Loans and Grants – HLK

The Supply Contract for hospital equipment and related services amounting to €22,459,824 or P1.55 billion for the DOH –retained and other government hospitals attached to the DOH was entered into by the DOH and Philips Medical Systems Nederland six (6) months before the loan and grant agreements between and by the Government of the Philippines, represented by the Department of Finance, and the ING Bank N.V., the creditor, and the De Nederlandse Investeringsbank voor Ontwikkelingslanden NV (NIO Bank), the grantor. As such, the contract was entered into without the corresponding funds which were not in consonance with Section 86 of P.D. No. 1445. Further, the process of selection of the supplier of the equipment and the lender of the loan could not be determined in the absence of any available documents. (DOH- Central Office)

We recommend that the Office of the Secretary of the DOH: a. explain why the Supply Contract

date was ahead by six (6) months of the loan and grant dates; and

b. submit pertinent documents to

show the selection/identification of both the lender and supplier.

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RECOMMENDATIONS

Loans and Grants – HSDP The balance of Accounts Payables account was overstated by P16.53 million while those of Subsidy Income from National Government and Prior Years Adjustments accounts are both understated by P6.31 million and P10.22 million, respectively, for CY 2010 attributed to the non-issuance of the Notices of Non-Cash Availment Authority (NCAA) by the Department of Budget and Management (DBM) due to incomplete documentation. (DOH- Central Office)

a. Complete the documentation

required by DBM for the P16.53 million loan availment; and

b. Henceforth, ensure that all the

necessary and required documentation for the request for NCAA from the DBM are complied with/submitted to facilitate issuance of NCAA so that the recording of loan transactions are made on time.

Inadequate planning on the implementation of the following three (3) components for the Health Sector Development Project (HSDP) resulted in delayed implementation of planned activities, ultimately the non-attainment of its objectives within the set time frame, and incurrence of commitment fees in the amount of $26,785.84 or P1.20 million for the non-availment and disbursement of loan proceeds as scheduled:

a. Civil Works - The non-availment of the loan proceeds for re-lending to the LGUs to finance the civil works components of two Provinces, namely Romblon and Nueva Vizcaya, and failure of the Ifugao Province to submit the required documents for the re-lending of the loan resulted in the re-allocation/alignment of this component to the DOH-retained hospitals thereby distorting the sustainability of the re-lending component.

b. Consultancy – Slow process in

the selection of consultants. (DOH- Central Office)

We recommend that the Project Coordinator:

a. Civil works – Ensure that before

finalizing the list of selected beneficiaries, the identified recipients are capable and willing to avail of the benefits of the Project. In the selection of intended beneficiaries, include in the list other possible recipient, as substitutes/replacement, in case of non-availment of the project by those selected to ensure the attainment of the objectives of the project and pass on the financial burden of the national government.

b. Consultancy – Since the

procurement of consultancy services for the Project was through international public bidding, allot sufficient time for the publication of the invitation to bid to obtain the required number of bidders; and before issuance of TOR which is an integral part of the contract, ensure that the contents/instructions thereof are complete and conclusive and that all considerations relative thereto

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RECOMMENDATIONS

are taken into account before these are finalized and issued.

Loans and Grants – EC-Grants

Withdrawal Applications from the grant amounting to P340.53 million have not been issued Notice of Non-Cash Availment Authority (NCAA) by the Department of Budget and Management (DBM) due to failure of DOH to request and complete the documentary requirements for the issuance of the NCAA resulting in the understatement of the Subsidy Income from National Government by P131.85 million and Prior Year’s Adjustment by P208.68 million for CY 2010. (DOH- Central Office)

We recommend that the Accounting Service:

a. Comply with the required

documents of DBM for the issuance of NCAA for the unrecorded direct payments totaling P340.53 million as required by DBM, COA and DOF Joint Circular No. 2-97 and FI Operations Manual for Convergence Provinces as of June 2010; and

b. Record the approved withdrawal

applications as issued to World Bank on a timely basis to set up and record Accounts Payable

Of the allotted cost of P60.34 million for Part B of the Project as of December 31, 2010, the closing date of the Project, only P2.64 million or 4% was utilized for the full/partial completion of the four out of the nine (9) planned activities. Further, the training expenses incurred exceeded the budget of P2.39 million by P116,088 and two courses attended were not among the approved trainings which can be attributed to inadequate monitoring and control of activities which resulting in the non-attainment of the intended objectives of the planned trainings. (DOH- Central Office)

We recommend that the Project Coordinator:

a. Ensure that all planned trainings

are attended by the target beneficiaries to achieve their intended purposes. All perceived issues/hindrances be addressed on time to avoid non-accomplishment of the planned activities in the Workplan; and

b. Closely monitor the training

expenses and their nature thereof to make sure that these are the within the budget and among those allowed in the Workplan. Any deviation/variance therefrom be justified to ensure that the Project goals are attained. For material deviations, seek the approval of the donor.

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RECOMMENDATIONS

Loans and Grants – 2WHSMP Non-implementation/delay of the Project activities for the 2WHSMP resulted in low fund utilization. As of CY 2010, the targeted amount to be disbursed was P560.45 million equivalent to 66.83% of total project fund while the actual disbursements amounted only to P130.51 million equivalent to 23.28% of the total target disbursements which resulted in charging of commitment fees amounting to P11.15 million for the undisbursed loan amount from CYs 2007 to 2010. Further, since the allotted funds for five activities totaling P60.96 million out of the 11 planned undertakings were not utilized, the targeted activities were replaced by other activities which distorted the intended outcomes of the Project. (DOH- Central Office)

We recommend that the Project Management:

a. Ensure that the activities

contained in the Annual Work and Financial Plan are implemented with minimal changes thereon, if warranted. Any necessary and unavoidable changes in the activities be satisfactorily explained, be undertaken on time and ensure that the new activities are aligned and contributory to the desired/expected outcomes of the project; and

b. Strengthen coordination/ assistance to project partners for the immediate resolution of implementation issues.

The required outputs of Isla Lipana &

Co., the consultancy firm in the Development of a Sustainability Model amounting to P10 million for 2WHSMP were not submitted within the agreed time line of the Project the cited causes of which were not justifiable/acceptable but were considered by the DOH. The BIHC even endorsed favorably the request for extension of the consultant. This resulted in the non-delivery of the planned workshops and trainings, non-disbursement of loan amount on schedule and incurrence of commitments fees estimated at P132,911.00 for CY 2010. (DOH- Central Office)

We recommend that the Project Management:

a. Require the Consultant to pay the

P132,911.00 commitment fees corresponding to the undisbursed loan amount as liquidated damages as a result of the delayed submission of contracted deliverables;

b. Evaluate with circumspect (i) the

causes of any delay in the rendition of contracted deliverables to ensure that only valid and justifiable reasons are accepted; and (ii) request for extension to make certain that the reasons therefor are justifiable, made on time and would not distort/adversely affect the timetable and attainment of deliverables; and

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RECOMMENDATIONS c. To ensure the interest of the

government/DOH, include a penalty clause in the contract in the event of delayed submission of deliverables.

Other Observations

The propriety and legality of the provisions of the Revenue Sharing Memorandum of Agreement (MOA) entered into by and between JRRMMC and Philippine Oncology Cancer Center (POCC) for the complete package of radiation therapy equipment totaling P212 million as well as the reasonableness of the profit sharing and contract duration could not be ascertained as the required supporting documents and information relative thereto were not submitted/provided to the Audit Team despite repeated requests. (DJRMMC)

a. Submit immediately the requested information and supporting documents relative to the MOA with POCC to enable the Audit Team to conduct an in-depth review and refer the results thereof to the proper authorities of the Commission on Audit for final technical and legal evaluation; and

b. Submit the MOA to the DOH

Legal Office for the review of the legal aspects of the contract to ensure that the same does not violate any existing laws, rules and regulations most especially RA No. 3019 or the Anti-Graft and Other Corrupt Practices Act.

The reasonableness of costs of the five

radiological and diagnostic medical equipment amounting to P88 million which are the subject of the joint venture agreement could not be established as the importation documents, official receipts or other pertinent documents to support the acquisition costs were not required by JRRMMC to be submitted by Himex Corp. As such, the basis of the computation of the amount of cost of services/depreciation cost being deducted from gross receipts could not be determined. (DJRMMC)

Require Himex Corp. to submit importation documents, ORs and/or any pertinent documents to support/validate the total cost of the subject medical equipment amounting to P88 million.

The transfer of the P24.37 million unutilized amount of Notices of Cash Allocation (NCA) to the Payroll Fund account without any specific immediate

We recommend that the Accountant: a. Remit immediately to the

National Treasury the balance of

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purpose every end of the month for eight months in CY 2010 to prevent the same from automatic reversion to the National Treasury was in violation of DBM Circular Letter No. 2008-11. The amount transferred was utilized to pay the salaries for the subsequent months as well as for the personnel benefits of the personnel of the NCH in CYs 2009 and 2010. (National Children’s Hospital (NCH))

the Payroll Fund account after deducting the required maintenance balance and amount of outstanding checks;

b. Stop the practice of transferring

the balances of the unutilized NCAs to the Payroll Fund account or to any fund for the purpose of preventing them from automatic reversion to the National Treasury; and

c. Ensure that transfer of funds to

the Payroll Fund account are made only for specific immediate purposes and based on existing obligations to be paid to the officials and employees of the Hospital.

We also recommend that the Officer-in-Charge of the Hospital direct the Accountant d. to refrain from the said practice

otherwise, commission of the same act be dealt with accordingly.

The unpaid claims from the Philippine

Health Insurance Corporation (PHIC) accumulated to P7.17 million due to lack of concrete steps by the NCH for the collection thereof. On the other hand, the disallowances of P874,322.50 by the PHIC on the claims of NCH were the result of lack of close/sufficient coordination with the PHIC on the nature and type of claims that are not allowed; the maximum allowable amount of PHIC benefit per patient totally availed of; as well as the appropriate information on the medical services undertaken on the patients by the medical personnel as guide in the computation of the amount of PHIC benefit of the patients. (NCH)

We recommend that the Officer-in-Charge of the Hospital: a. Require the NCH Billing Section

to (i) make periodic follow-ups on the payment of unpaid bills from PHIC; (ii) coordinate closely with the PHIC to ascertain the nature and type of claims disallowed by the Corporation; and (iii) find ways on how to determine whether the maximum amount allowed PHIC benefit per patient was totally availed of to ensure that bills of the Hospital to be charged against this benefit will not be disallowed by the Corporation; and

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b. Direct the medical personnel and the Billing Section to closely coordinate with the PHIC to determine the benefits and medical services to be undertaken for the patients.

The cash/funds transferred from the

Cash – National Treasury, Modified Disbursement System (MDS) to the ATM Payroll Fund were not based on the actual payroll totals which resulted in excess funds transferred ranging from P1.40 million to P6.27 million which is not in consonance with Section 4(6) of P.D. No. 1445. As of December 31, 2010, the accumulated unused balance of the ATM Payroll Fund aggregated to P2.95 million. (Philippine Orthopedic Hospital (POC))

We recommend that Management: a. Require the Cashier to remit to

the National Treasury the amount of P2.95 million representing the unutilized cash balance/NCA deposited in the ATM Payroll Fund Account; and

b. Direct the Accountant stop the

practice of transferring funds/cash to the ATM Payroll Account without the corresponding approved payrolls the amount of which should correspond to the actual amount to be paid to POC personnel.

The lease contract with Mrs. Laura Edos, Canteen Concessionaire, was entered into without the required feasibility study, cost-benefit analysis and public bidding to determine the income to be realized and expenses to be incurred relative thereto. Moreover, the rate of lease rental amounting to P3 million, terms of payment and contract duration appear to be disadvantageous to the interest of the hospital. (Rizal Medical Center (RMC))

We recommend that Management: a. Submit the following documents/

justification/explanation:

Why no public bidding was conducted on the leased premises.

Basis of the contract amount and duration of 15 years.

b. Amend/revise the new lease

contract on the following:

Increase the monthly rental fee to be paid by the lessee or reduce the contract period of 15 years with due consideration of the computation by the Audit Team.

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Non-waiving of the payment of monthly rental fees for five years by the lessee.

Availability and affordability of regular foods to be offered in the food stalls.

The officials and employees of the

Bureau were both paid the Longevity Pay amounting to P1.95 million and Step Increment amounting to P109,105.63 in CY 2010 instead of requiring the concerned personnel to choose which of the two benefits they will avail of contrary to Department of Budget and Management Circular Letter No. 2004-4 dated February 26, 2004. (Bureau of Quarantine) (BOQ))

We recommend that the Personnel Officer of BOQ:

a. Disseminate and explain to the

officials and employees of the Bureau on the restriction of the regulation on the payment of the said benefits;

b. Request the concerned personnel

to inform their office which of the two benefits they will avail of;

c. After the affected personnel had

chosen the benefit they will avail, require them to refund the other benefit for the period covering January to December, 2010 otherwise, any double payments/claims shall be disallowed in audit; and

d. Thereafter, comply strictly with

the prohibition of the DBM Circular Letter on the payment of longevity pay and step increment.

The accounts pertaining to the project

funded out of the grant program of the Bloomberg Initiative to Reduce Tobacco Use and the trust fund on collected fees and bids and award transactions remained unreported in the financial statements as at year end of CHD-MM, thereby understating the asset, liability and government equity accounts by an aggregate amount of P6.99 million, P3.57 million and P3.42 million, respectively. Moreover, the outstanding performance, bidders and bail bonds balances amounting to P3.09 million of the trust fund are still deposited with the

We recommend that Management: a. Incorporate or consolidate the

accounts of Trust Fund and the Bloomberg Initiative Project with the General Fund of the CHD-MM to comply with the One Fund Concept of accounting; and

b. Prepare disbursement voucher for

the remittance/deposit to the Bureau of the Treasury of the outstanding performance bond, bidders bond, bail bonds supported with appropriate

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depository bank of the Center instead of remitting the same with the National Treasury as required under RA No. 9970, the GAA for FY 2010. (Center for Health Development (CHD-MM))

schedule for purposes of monitoring subsequent claims thereof.

The provisions of the lease contract entered into by the Hospital with Heaven Indulge Food House Inc. (HIFHI), a canteen concessionaire, in CYs 2005 and 2006 were onerous to the government/EAMC as the contracted space rental rate to the lessee ranged only from P10.00 to P12.00 per square meter while for rates for other tenants at the same period was from P316.00 to P484.12 and was granted with privilege of free utilities from six to 15 months charged to the account of Hospital in violation of Section 3(g) of R.A. No. 3019, Anti Graft and Corrupt Practices, Act and constitute grave offenses in civil service as stated under Section 52 of Civil Service Commission (CSC) Memorandum Circular No. 19,s. 1999. For space rental alone, the hospital lost an income ranging from P2.75 million to P4.27 million for the three year period, the duration of the contract with HIFHI. (East Avenue Medical Center (EAMC))

We recommend that: a. The following satisfactory

explain:

Former members of the HBAC–

the basis of the rental rate

granted to HIFHI which was not at par with that imposed to other lessees at the date of contract execution with the lesee; and

the rationale for the free

use of electricity and water to the lessee.

Medical Center Chief for –

signing the MOA with

HIFHI with onerous and disadvantageous provisos;

not requiring the lessee to submit documents to support the leased improvements of P2.75 million;

leniency/laxity in

protecting the interest of the Hospital through:

allowing the lessee to

continue its operation without the benefit of a lease contract;

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non-institution of appropriate legal action such as ejection of the lessee from the leased premises and initiating civil action for the collection of the amount due from the concessionaire; and

allowing the lessee to

vacate the leased premises without settlement of its outstanding accounts with the EAMC.

b. In the event that no satisfactory

explanation can be rendered by the concerned officials, a Notice of Charge shall be issued for the total amount lost of lost income by EAMC in the onerous contract provisions with the lessee without prejudice to the following:

The Medical Center Chief

initiate the filing of appropriate criminal and administrative actions against the former member of the HBAC; and

The Assistant Secretary for

Office of Special Concerns, DOH initiate the filing of appropriate criminal and administrative actions against the Medical Center Chief for signing the MOA with arduous/onerous terms and conditions and for his leniency/laxity in protecting the interest of the Hospital for committing acts violative of Section 3(g) of R.A. No. 3019, Anti Graft and Corrupt Practices Act, and for the

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conduct prejudicial to the best interest of the service and gross neglect of duty which constitute grave offenses under Section 52 of Civil Service Commission (CSC) Memorandum Circular No. 19,s. 1999.

c. We further recommend that

henceforth, the Medical Center Chief ensure that:

Space rental rates be

standardized and uniformly imposed to all tenants of the Hospital;

Any gratis to tenants be

anchored/founded with legal basis;

The period within which to pay the rental fee be stipulated in the agreement;

Space occupancy be duly

covered by a valid lease contract; and

In the event of continuous non-

payment and unreasonable delay in the settlement of the obligations/accounts of lessees, rescind the contract and/or institute appropriate legal action for the collection of the amount due from the defaulting tenants.

The Memorandum of Agreement on the

Revenue Sharing Scheme entered into by and between East Avenue Medical Center with Philips Electronics and Lighting Incorporated, through its authorized Philippine Distributor Medicotek Inc., appears to be disadvantageous to the EAMC/ government Hospital which is in

We recommend the following: The Medical Center Chief:

Require the supplier to submit

documentary proofs on the actual costs of the radiology Machines installed/to be installed covered by the RSS to

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violation of Section 3(g) of Republic Act No. 3015, the Anti Graft and Corrupt Practices Act, and constitute grave offenses in civil service under Section 52 of Civil Service Commission (CSC) Memorandum Circular No. 19,s. 1999. The EAMC incurred expenditures for the scheme for capital outlays expenses of P30.71 million, costs of consumables totaling P2.36 million, personnel expenses of P5.09 million and of utilities (water and electric) of undetermined amount for the operation of the machines under the RSS, loss/reduction of income from radiology machines of at least P7.79 million, and shouldered cost of space rental occupied by the RSS radiology machines estimated at least P27.32 million. (EAMC)

be used in the amendment of the share of the EAMC and the supplier in the scheme.

Initiate and negotiate for the amendment/inclusion in the MOA of the following:

The complete and full specifications the fluoroscopy and general x-ray system machines supplied by the supplier;

Specify the quantity and

complete/full specifications “Other Radiological Equipment that the Hospital may need in the future”. This amended provision would be the basis of EAMC in determining compliance of the supplier with the provisos of the MOA on the specific equipment to be supplied by the supplier/covered by the agreement;

The amount to be remitted to the supplier be net of the 10% share of the supplier on the discounts granted to senior citizens pursuant to R.A. No. 9257;

The remittance of the charges to/income from PHIC member-patients be made after the collections or disallowance of the same from the Corporation;

Provision for replacement of the equipment supplied by the supplier in case the same malfunctioned or

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bogged down to avoid disrupt of radiology procedures; and

The revenue share of the Hospital with due consideration of the investment for capital outlay, space rentals, expenses both for personal services, maintenance and other operating costs for the operation of the radiology machines and that of the supplier based on the costs of the machines provided.

Initiate/Cause the filing of appropriate criminal and administrative actions against the following officials for committing acts violative of Section 3(g) of R.A. No. 3019, the Anti Graft and Corrupt Practices Act, as well as for conduct prejudicial to the best interest of the service and gross neglect of duty which constitute grave offenses under Section 52 of Civil Service Commission (CSC) Memorandum Circular No. 19,s. 1999:

Members of the HBAC for

recommending the approval of the financial proposal of Philips Electronic and Lighting Inc. and Medicotek, Inc.; and

Head of Legal Section of EAMC for preparing the stipulations in the MOA with arduous/onerous terms and conditions.

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RECOMMENDATIONS The Assistant Secretary, Office for Special Concerns, Department of Health initiate the filing of appropriate criminal and administrative action against the Medical Chief for entering, on behalf of the Government, the RSS agreement the provisions of which are manifestly and grossly disadvantageous to the government/EAMC which is in violation of Section 3(g) of R.A. No. 3019, Anti Graft and Corrupt Practices Act, and COA Circular No. 85-55A as well as for his conduct prejudicial to the best interest of the service and gross neglect of duty which constitute grave offenses under Section 52 of Civil Service Commission (CSC) Memorandum Circular No. 19,s. 1999.

The hospital suffered losses in terms of

costs of expired, unnecessary and overpriced laboratory reagents totaling a net amount of P6.84 million due to lack of prudence in the procurement and management of laboratory supplies by the concerned Hospital officials which is in violation of 3(g) of the Republic Act No. 3019, the Anti Graft and Corrupt and Practices Act, COA Circular No. 85-55A and constitute grave offenses in civil service as stated under Section 52 of Civil Service Commission (CSC) Memorandum Circular No. 19,s. 1999. (EAMC)

We recommend the following courses of action to avoid the recurrence of the said observations:

a. The Chief Medical Technologist:

Monitor on a regular basis the

stocks on reagents to ascertain the stock levels as well as determine those that are about to expire for appropriate action; and

On a periodic basis or

whenever warranted, prepare and submit reports on reagents about to expire as basis of the Chief of the Laboratory Department in requesting the concerned supplier for replacement of the reagents.

b. The Chief of the Laboratory Department:

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Require all Sections Chiefs under the Laboratory Department to prepare monthly Consumption Report for reagents and the Stock Position Sheet (SPS) per reagent showing their stocks levels as basis of determining the fast or slow moving items and for the request for reagents; and

Stop the practice of

transferring the custody of procured reagents to the Laboratory Department instead, request reagents from the MMS of quantity sufficient enough for the needs of each Section.

c. The HBAC:

Obtain awarded prices of goods and services from other DOH-retained Hospitals and develop and maintain a database of suppliers by category/type/line of goods and services with their corresponding price offers to widen competition among suppliers and for price monitoring; and

Use as references the prices

gathered from other DOH-retained Hospitals in evaluating the bids of participating bidders and in bargaining prices.

d. The Medical Center Chief require

the concerned end-users to:

Prepare the ABC for the reagents taking into consideration the requirements

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of Section 4 of the Government Procurement Policy Board (GPPB) Guidelines to come up with fair and reasonable prices of reagents; and

As circumstances warrant,

update the prices of reagents in the ABC before the conduct of actual bidding/procurement.

9.5.10 Department of Interior and Local Government Funds amounting to P170 million

released in 2009 for the procurement of SCBA was not utilized, the validity of which had already expired as of December 31, 2010 due to the various revisions on the technical specification causing undue delay in the conduct of procurement process. Likewise, Notice of Cash Allocations (NCAs) amounting to P522.91 million for various activities was reverted back to the National Treasury for various reasons, thus the purpose of which were not attained. (Bureau of Fire Protection)

Exert extra effort and endeavor in procuring the much needed firefighting equipment and facilitate speedy utilization of the funds released in order not to be reverted back to the National Treasury so that the vision of the bureau can be attained in the near future. Likewise, the collected fire code fees should be utilized and used for the procurement of its modern fire fighting equipment and that management had to work extra hard in modernizing its antiquated equipment that are bought way back the 1980’s.

Despite the completion of the initial phase of the PNP Housing Project wherein the amount of P95.93 million was spent for site development of the 26.2 hectare lot in San Miguel, Bulacan, the award of residential lots could not be made to the target PNP beneficiaries due to pending transfer of ownership of the property from the Manila Banking Corporation to the national government and the issuance of guidelines/policies governing the selection of applicants and awarding of lots to the qualified beneficiaries as required under Executive Order No. 840. (Philippine National Police (PNP))

Continuously follow-up and coordinate with the concerned agencies such as the HUDCC and NHA for the speedy transfer of ownership of the entire 300 hectare property allocated to the PNP. Likewise, proper coordination should be made with the other agencies like the DSWD, AFP, and the DepEd for the creation of the Executive Committee that will issue the written policies for the immediate disposition of the residential lots to the target PNP beneficiaries.

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The lack of sufficient control

mechanism in monitoring the status of PNP pensioners caused the cancellation of checks totaling P29.43 million for pensioners who are already ineligible, thus, overstating the affected accounts in the financial statements. (PNP)

a. Exert extra effort to formulate and implement the policies concerning the administration of pension benefits particularly in monitoring the status of pensioners;

b. Prioritized the creation of an

inventory committee who will actively conduct the proposed home visitation; and

c. Coordinate with the NSO in order

to promptly identify deceased retirees, remarried spouses and over age dependents.

9.5.11 Department of Justice

All deposits totaling P15.12 million for financial grants and donation received and withdrawals totaling P12.92 million for expenses paid pertaining to the Inter Agency Council Against Trafficking (IACAT) have not been recorded in the books of the agency from the time it was opened in September 2008, resulting in the net understatement of the Cash in Bank – Local Currency, Current Account and the related affected accounts both by P2.20 million.

Direct the Accountant to analyze the transactions of the DOJ – IACAT as of December 31, 2010 and prepare the necessary adjustment in the books for fair presentation of the affected accounts in the financial statements.

Swiss deposits in escrow at the Philippine National Bank (PNB) in favor of the government with a balance of US$50.48 million as of October 31, 2010 remained unbooked in the PCGG books of accounts in violation of Section 63 of Presidential Decree (PD) 1445, thus, disbursements made from the funds were not subjected to audit by COA. (Presidential Commission on Good Government (PCGG)

Transfer the remaining funds with PNB to any government depository bank such as Land Bank of the Philippines, record the same in the PCGG books of account and submit to COA all the disbursements from January 31, 2004 to the present for post-audit.

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9.5.12 Department of Labor and Employment

Representation allowances totaling P6.28 million of Labor Attaches posted abroad were commuted in advance contrary to the provisions of Section 70 of the Regulations that expenses charged thereto are reimbursable and must be supported by proper receipts or vouchers such that the propriety, validity and reliability of the payments made cannot be immediately established.

Stop the practice of authorizing the commutation of the representation allowances of foreign service personnel and comply strictly with required documentation.

Personnel emergency Relief Allowance (PERA) totaling P1.05 million was paid in CY 2010 to DOLE officials posted abroad in violation of the provisions of Section 128.d of the Regulations governing compensation of foreign scheme for foreign service personnel.

Require the refund of the PERA received by the foreign service personnel, comply with the prohibition and stop authorizing the payment of PERA to DOLE officials posted abroad.

Utilization of the verification fee collections amounting to P88.59 million was not covered by a DBM approved Special Budget showing the specific objective for the period contrary to Section 4.3.1 of DOLE/DFA/DBM/ DOF/COA Joint Circular 3-99. Instead, the annual appropriation provided in the General Appropriations Act (GAA) was utilized solely for the quarters allowance of DOLE employees assigned as administrative staff, service fees of local hires, augmentation of the MOOE budget and for the purchase of motor vehicles of the different Philippine Overseas Labor Offices (POLOs). Absence of the approved Special Budget by DBM resulted to uncontrolled spending which may result in the depletion of the scarce resources of the government.

Require the preparation of Special Budget for the POLOs incorporating not only the MOOE for its operation but also the objective of the creation of POLOs, workers protection and welfare services to overseas Filipino workers.

Allotments released for MOOE were misappropriated for the payment of living quarters allowance of DOLE employees assigned as Administrative

Reclassify the payments of living quarter allowance of foreign service personnel and charged them against the allotment for personnel services

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Staff of the different POLOs in violation of Section 41 of the General Provisions of RA 9970 (GAA of FY 2010). Moreover, the classification is not in accordance with the description of the Other Professional Services accounts provided in COA Circular No. 2003-001 dated June 17, 2003 and 2004-002 dated April 29, 2994 or the NGAS Chart of Accounts and inconsistent with the classification of the initial payment of said entitlement charged under Fund 101 which is classified as overseas allowance charged against the allotment for personal services.

for their fair presentation of the financial statements.

The actual and final disposition of the funds totaling P7.51 million released to 33 POLOs for the conduct of information dissemination campaign regarding DOLE’s reintegration programs and services to OFWs cannot be ascertained due to non-liquidation as at year-end in violation of Section 89 of PD 1445 as implemented under Section 4.1.3 of COA Circular No. 2009-002. Review of subsequent transactions revealed that as of March 31, 2011, only 8 of the 33 POLOs submitted liquidations totaling P1.31 million, 14.63% of which P204,005.62 represents refund of 89.70% of one Labor Attaches cash advances thereby casting doubt on the necessity of the activity.

Require the immediate liquidation of the cash advances. Any unutilized amount should be required to be refunded simultaneous with the liquidation.

Indiscriminate granting of cash advances to a LABATT resulted to accumulation of his accountability to P13.8 million as at year-end, inclusive of the P10 million for the repatriation program classified as urgent but which was not immediately liquidated as of date in violation of Section 89 of P.D. 1445, non-submission for pre-audit of said cash advance contrary to Section 4.1.1, 4.1.3 and Section 6.1 and 6.4 and disregard of the bond requirement

Require the concerned LABATT to submit promptly necessary documents for proper perusal and hold fast to the guidelines and procedures in reportorial requirements for cash advances.

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pursuant to Section 4.1.3(iv) all of COA Circular No. 2009-002 posing the risk of loss or misuse of funds also understating the expense accounts in the financial statement.

The objectives of the TESDA Development Fund (TDF) to award grants and provide assistance to training institutions, industries, and local government unit to upgrading their capabilities and to develop and implement training- related activities have not yet been realized for nine years now because P5 billion seed capital needed to make the fund sustainable has not yet been achieved. The slow receipt of annual collections and income being set aside for the said fund would render the TDF an idle fund and expose the same to possible misuse if not well managed. Further, disparity of P25.98 million representing unrecorded deposit was noted between confirmed bank balance as against book balance of Cash in Bank – Local Currency – TDF account, casting doubt as to its reliability. (Technical Education and Skills Development Authority-Main (TESDA-Main))

Revisit the implementing guidelines set forth for the management of the fund to reach the required seed capital; and explain the disparity of P25.98 million between the confirmed bank balance as against the book balance.

The poor monitoring and reconciliation system adopted by the agency on the funding of the PGS project resulted to unrecorded/unaccounted payables of P8.91 million and unrecorded/ unreconciled difference of payments made to BPAP per PGS and accounting reports of P1.30 million; hence the accuracy and reliability of the recorded payable to BPAP of P738,184.00 could not be ascertained. (TESDA-Main)

a. Together with BPAP and the PGS Program Office reconcile their respective records to ensure the accuracy and reliability of the data being reported;

b. Re-evaluate the procedures

undertaken on the recording of events, from the submission of documents to the payment of liquidation, to determine the factors that may have caused the inaccurate recording of transactions; and

c. Account for the discrepancies

noted in the recording of

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payments and payables to BPAP.

Weak internal control system on the management of the TESDA canteen operations pose great risk to the proper use of government funds and resources due to the failure of management to prescribe the implementing rules, guidelines, and policy requirements over its operation and management. (TESDA-Main)

a. Immediately draft the implementing guidelines, and policy requirements for the operation and management of canteen funds, on the following aspects, among others:

Administration – to clearly

delineate responsibilities for overseeing the management/daily operations of the canteen, including levels of responsibility and lines of authority; and

Financial – to include

procedures for recording of income/collections and disbursements; recording of transactions in the books of accounts; reporting financial statements; etc .

b. Direct the Canteen Manager to –

Undergo training on

collecting and disbursing systems, government accounting and other appropriate courses; and

Ensure that all requests for

catering services for official occasions charged against TESDA funds should bear the Director General’s signature/approval.

c. Provide separate sub meters for

water and power supply to the canteen area to determine canteen expenditures on utilities for proper charging and identification of cost center.

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The ten percent guaranty deposit amounting to P2.93 million deducted from payment on the purchase of additional various IT equipment for e-TESDA Centers Project was recorded twice in the books of accounts of TESDA, one under Fund 101 and the other under Fund 102, thereby overstating the accounts Guaranty Deposit Payable and understating the accounts Prior Years Adjustment by the same amount. Relative thereto, payment for the reorder of such IT equipment worth P24.94 million net of taxes and the 10% retention fee which was taken from Fund 101 with an allotment of P13.50 million resulted to an unauthorized payment of P11.44 million which is contrary to Section 86 of PD 1445. (TESDA-Main)

a. Explain the payment made under Fund 101 in the amount of P24.94 million while it was only obligated in the same Fund for only P13.50 million;

b. Explain why the payment for the

eTESDA was made under Fund 102 in the amount of P2.93 million instead of the eGov Funds; and

c. Make the necessary adjusting

entry to correct the overstatement of account Guaranty Deposit Payables and understatement of account Prior Years’ Adjustment.

Training funds amounting to P5.32 million remained idle in the banks of the agency due to absence of corresponding Sub-Allotment Release Orders (Sub-ARO) from the Regional Office thereby preventing the Provincial Office of Pangasinan from obligating and expending said amount. (TESDA-Region I)

Consider time and absorptive capacity of Tek-Bok Providers (TBP)/ Technical Vocational Institution’s (TVI) in the allocation of scholarship vouchers. This is to ensure that training programs are implemented as programmed as well as the timely and maximum utilization of scarce government resources.

Cash disbursements of TESDA Region II-Maddela Institute of Technology (MIT) totaling P1.10 million were taken out directly from collections of the Income Generating Projects (IGP) contrary to COA Circular No. 97-002, dated February 10, 1997. (TESDA- Region II)

TESDA MIT to stop paying expenses out from its collections and where payment thru check is inconvenient or immediate payments are necessary in the exigency of their service, petty cash fund or working must be set up in accordance to prevailing rules and regulations to pay for such expenses.

Transfer of funds to Tagipusuon

Cooperative and Tagipusuon Foundation, Inc. consisting of P20 million from TESDA Central Office in 2005 and P38.12 million from TESDA Region VI in 2008 and 2009, respectively are intended for the

In TESDA – Central Office –

a. Justify the inclusion of the overhead, administrative and other expenses of the Tagipusuon Cooperative which should had been part of their operating expenses;

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implementation of the “Education for All Projects of the Second Congressional District of Iloilo” which are not within TESDA’s mandated function contrary to NBC No. 476 dated September 20, 2001 rendering the said transaction highly irregular. Out of the P20 million fund from TESDA Central Office, P5.30 million remained unliquidated as of December 31, 2010. (TESDA-MAIN, REGION VI)

b. Require the Tagipusuon Cooperative the return of the unexpended balances; and

c. Require TESDA Region VI to

submit liquidation reports with supporting documents with regard to the P5 million transfer as required under Section 3.10 of COA Circular No. 96-003.

In TESDA – Region VI

Justification for two MOAs

amounting to P5 million and P3.120 million stating therein that TESDA was represented by Deputy Director General for Field Operation, Rogelio C. Peyuan, however, these two MOAs were signed by Secretary General Augusto L. Syjuco and not by Rogelio C. Peyuan who represents TESDA.

Justification for splitting into two

MOAs, the funds released to Tagipusuon Foundation, Inc. totaling P8.120 million contrary to Section 54.1 of Republic Act No. 9184 and its Implementing Rules and Regulations.

Systems and procedures to

implement the project and the required periodic financial and physical status reports, signed by the parties.

Interim Fund Utilization Report

certified by its Accountant and approved by the President/ Chairman; and

Justification on the granting of

additional releases to Tagipusuon Foundation despite its failure to submit Interim Fund Utilization

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Report pertaining to the previous release.

Projects amounting to P2.60 million

funded from PDAF allocation were not in accordance with the Memorandum of Agreement, thus resulting to irregular expenditures. (TESDA Region XI – Davao)

Require the Provincial Director to comply with the provision of the MOA and spend public funds only on its intended specific purpose.

Various tools and equipment worth P6.62 million received by Carmelo delos Cientos National Trade School (CCNTS) from TESDA Central Office without the detailed information as to its suppliers or origin had deprived the institution of its immediate recourse to warranty against manufacturing defects assured under the Government Procurement Reform Act in case of the tools’ and equipment’s imperfection. (TESDA Region XI – Davao)

Request relevant detailed information from the responsible officer/person to whom CCNTS shall proceed for the warranty in case of the tools’ and equipment’s imperfection.

TESDA –MAIN, Region I-II,IV-A, IV-B, VI,VIII,X,XI, CAR,NCR, and CARAGA The “Pangulong Gloria Scholarship’s” (PGS)objectives of ensuring that at least 60% of the graduates of the said project are immediately employed after graduation or within twelve months after the completion of training, was not attained due to :

a. weak implementation of set

standards of the program specifically in the programming, training and training evaluation stage ;

b. The monitoring/control and

reporting system strategy were not strictly enforced by the agency;

c. Violation of Section 8 of the

Memorandum of Agreement entered into by and between

a. Identify the officials concerned

and their involvement in the weak implementation of set standards and take appropriate actions against them.

b. Explain the reason why the TBPs were able to continue their undertaking, despite violation of Section 8 of MOA entered into by and between TESDA and TBPs including BPAP, considering that the MOA by and between them were done on a quarterly basis.

c. Create an investigating team to probe on the authenticity of the existence of scholars considering the fact that majority of them provided invalid/fictitious contact numbers as submitted by the training providers.

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TESDA and TekBok Providers (TBPs) which states that the latter shall provide TESDA with monthly progress reports on the utilization of scholarship, disbursement of funds and other required data for monitoring and evaluation purposes;

d. Failure of the TBPs to establish purposive tracking system to ensure that the employment rate target is attained;

e. Absence of penalty clause in the

agreement between TESDA and TBPs in case the latter failed to attain the targeted 60% employment rate;

f. Lack of evaluation procedure as

whether to continue or discontinue the courses with less enrollees;

g. Laxity in the selection process of

TBPs and screening of the would be scholars;

h. Fictitious conduct of training of

some TBPs by submitting names of scholars with incorrect address and contact numbers as well as similar strokes of signatures.

d. Include in the Memorandum of Agreement for future similar programs, not only the responsibilities of both parties but also the appropriate sanctions for non-compliance by the training providers.

e. Plan viable or alternative

solutions to meet the objectives of the project, if at the initial or during the implementation stage difficulties are encountered in attaining its objective/s.

f. Devise an effective and

continuous monitoring scheme for both the agency and TBPs that would be essential in bringing together data/reports that will gauge the achievement of the project’s goal.

TESDA Main, CAR, Regions I, II VI, IX , X, XI, XII and CARAGA

The correctness of the balance of account Property, Plant and Equipment (PPE) amounting to P5.73 billion as of December 31, 2010 is doubtful due to the following deficiencies:

a. unreconciled difference of P1.51

billion between the Report on the Physical Count of PPE and accounting records;

In TESDA – Central Office, CAR, Regions II, X, XI , XII and CARAGA a. Direct the concerned officers to

account for the difference of P1.51 billion between the physical count and the accounting records;

b. Adopt a systematic updating on

the backlog of PPE reconciliation; and

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b. unrecorded equipment from TESDA Central and from other regional offices or vis-à-vis worth P150.36 million and P137.30 million, respectively;

c. non adjustment of completed

buildings to proper PPE account totaling P1.68 million;

d. non capitalization of major repairs of

PPE account amounting to P4.92 million;

e. non-classification of PPE accounts to

Other Assets account which are no longer serviceable amounting to P2.97 million;

f. non maintenance nor updated

property ledger cards for PPE account amounting to P6.28 million;

g. double recording of vehicle

amounting to P1.18 million; h. failure to report missing properties –`

P40,631.09; i. purchase of equipment treated as an

outright expense amounting to P518,654.94; and

j. non submission of Report on the

Physical Count of Property nor inventory taking conducted by some regional offices with PPE worth P124.60 million.

In TESDA – Central Office, CAR, Regions I, II, VI, IX, X and XI

a. Require the Property Supply

Division to have a complete and proper documentation for PPE transfers pursuant to Section 77 of PD 1445

9.5.13 Department of National Defense

The delayed and/or non-submission of liquidation reports due to multiple funds transfers and non-provision of timelines for project implementation resulted in the outstanding balances for one to more than five years of funds transferred to implementing

a. Transfer the fund directly to the implementer of a project/program instead of having it coursed thru an intermediary agency by indicating this provision in the LA/MOA to be signed by the DND Secretary and Heads of

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NGAs/LGUs of P219.60 million and for three to more than five years of funds received from source NGAs of P36.66 million, equivalent to 44 percent and 59 percent, respectively, of the accounts’ balances. Also, the non-reconciliation of the DND book balances with those of the source and implementing agencies resulted in the doubtful balance of the accounts Due from NGAs, Due from LGUs and Due to Other NGAs, in the amount of P500.02 million; P2.16 million and P64.38 million, respectively.

intermediary agency and implementing major services/commands;

b. Require the timelines of the

project implementation in the LA or MOA;

c. Closely monitor the liquidation of

fund transfers and institute stringent measures to demand the IAs (NGAs and LGUs) to immediately submit the liquidation reports within the prescribed period per COA Circular No. 94-013 and refund the unutilized fund transfers for completed projects, if any; and

d. Require the Accounting Division

to reconcile the DND book balances with those of the IAs and the SAs and consolidate the SLs so that only one SL shall be maintained for each IA.

The delay in the procurement through

public bidding resulted in the non-utilization of the funds released in 2008 and 2009 totaling P19.47 million for the procurement of security and armored vehicles and communication equipment. Of the said amount only P1.26 million was utilized thereby, making the balance of P18.21 million idle and consequently had compromised the delivery of effective service to agency operation. (PA, 51st Engineering Brigade)

Maximize the utilization of fund releases by making representations with the Headquarters Philippine Army to speed up the procurement process/delivery of items for the use of the agency operation.

Funds transferred by the Philippine Navy Housing Board (PNHB) to Base Naval Station amounting to P3.19 million for the repair of the military quarters remained unutilized depriving the base/quarters occupants of the optimum use of the housing facilities. (Headquarters, Philippine Navy)

Direct the concerned officers to fast track the implementation of the project. Also, management should evaluate and assess existing policies governing the PNHB to facilitate/improve the performance of its mandated duties and function.

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RECOMMENDATIONS

The completion of the three Special Housing Projects totaling P42.62 million incurred delays ranging from 481 – 486 days, equivalent to P10.56 million in liquidated damages due to lack of stringent monitoring of project implementation by the Naval Construction Brigade. (Philippine Navy, Naval Construction Brigade)

Closely monitor the implementation of projects to ensure timely completion in order for the agency and the intended beneficiaries to avail the immediate benefits from said projects. Demand from the erring contractor the liquidated damages estimated at P10.57 million as well as the costs that may be incurred to complete the projects in excess of the remaining funds available.

The lax enforcement of Air Force Management and Fiscal Letter No. 2005-01 relative to the collection of current and back accounts on the electric consumption of concessionaires and HPAF tenants resulted in the accumulation of uncollected electric consumption amounting to P39.95 million as of December 31, 2010, recorded under the Other Receivables account of which 70.48 percent or P28.16 million represents back accounts of the Villamor Golf Club. Moreover, receivable from rental of base facilities and electric and water consumption of the 600th ABW, Air Education and Training Command (AETC) and Air defense Wing amounting to P6.18 million, P1.16 million and P2.08 million respectively remained uncollected as of year end, thus depleting the allotment of the PAF. (Philippine Air Force)

a. Revisit the payment scheme adopted by the Villamor Golf Club such that collection of its back accounts/arrears will be done within a shorter period;

b. Undertake necessary measures to

enforce collection of current and back accounts from PAF tenants; and

c. Require the Wing commander of

the 520th ABW to strictly enforce the provision of the regulations and recommend termination and cancellation of contract of delinquent tenants as may be necessary.

Out of the total aircraft inventory of 393 units of the Philippine Air Force, only 91 units or 23.66 percent are full mission capable, while 81 units or 20.61 percent are partial mission capable (inactive) and the remaining 221 units or 56.23 percent are for disposal. Considering this abject state of its air assets, which are mostly ageing, the Philippine Air Force is ill equipped to be operationally responsive

Study all doable short-term solutions to raise funds badly needed to finance the limited acquisition of military hardware to increase, upgrade and modernize air assets while finding long term solutions to address the current situation. Consider also the following: (a) strongly appeal to higher authority and to Congress the extension of the AFP Modernization Law to attain its full realization;

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to national security and development and is hard pressed to efficiently and effectively serve the economic interest and welfare of the nation. (Philippine Air Force)

(b) recommend to Headquarters AFP and DND the immediate formation of a committee composed preferably of experienced AFP lawyers, BAC members and Logisticians from the PAF, Navy and Army as core members, to draft a special procurement law, applicable only and tailor-fit for the procurement needs of the PAF and the whole AFP and have this draft bill approved and certified as urgent by the President as an amendment to the present procurement law or RA 9184; and (c) form an Ad-hoc Office or Group that will be responsible mainly for the acquisition of PAF’s air defense capability in furtherance to Section 5 paragraph (b) of the Modernization Law and will be in charge in the design of a comprehensive system that will encompass not only acquisition but also development and integration of air defense systems and facilities among other areas.

Based on the recommendations of the

Commission on Audit (COA) contained in the 2007 and 2009 Annual Audit Report, the Philippine Air Force has established after completing the reconciliation of prepayments and deliveries made by PETRON from 1999 to 2008, the amount of unutilized prepayments of P130 million, to which PETRON agreed to use-up the said amount to augment the gasoline requirement of PAF in 2011. (Philippine Air Force)

Continue the periodic reconciliation of prepayments and liquidations in order to immediately identify unused portion of prepayments or purchase orders/delivery advices not yet served by PETRON and demand for immediate delivery thereof to be able to augment operational capability of PAF Units; and require Logistics Office to observe sensible monitoring of deliveries based on delivery advices, and require each Unit to forward delivery receipts to the Accounting Unit to ensure that deliveries are properly taken up in the books.

The repeated failure of the 420th Supply Wing to submit the Certificate of Acceptance and related documents which will serve as basis of the Accounting Center for recording

Direct the Commanding Officer of the 420th SW, the accepting unit, to immediately submit to the Accounting Center the Certificate of Acceptance for all deliveries

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RECOMMENDATIONS

drawdown/utilization of the Deposits on Letters of Credit maintained with the Land Bank of the Philippines and United Coconut Planters Bank, resulted in the P68 million overstatement of the account which also remained dormant for more than four years, affecting the reliability of the P271.70 million balance presented in the books as of December 31, 2010. (Philippine Air Force)

including pertinent supporting documents for recording purposes, henceforth, 420th SW submits regularly the required documents for all deliveries accepted so that proper/immediate recording could be made; and require the Chief Accountant, Air Force Accounting Center to analyze the dormant balances of the Deposit on Letters of Credit and to coordinate with concerned offices for the submission of the necessary documents of the drawdown/utilization made for proper recording in the books and reconcile the difference between the book and the bank balances.

9.5.14 Department of Public Works and Highways

Due to lack of structured monitoring mechanism, the OYSTER program jointly implemented by DPWH-NCR and the PNP-NCRPO from January 1 to June 30, 2010, with a total expenditure of P167.24 million had not been fully evaluated to determine whether the program had effectively attained its objectives, and whether the total amount spent fully justified the implementation of the project. The total amount of P6.02 billion approved by the Board for issuance of SARO and NTAs by DBM, is more than the amount proposed per 2010

Improve the institutional capability of the DPWH-NCR in the implementation of projects conducted jointly with other government offices through the institution of a structured monitoring mechanism to ensure that the objectives of the project is attained and that it is being recorded.

Establish appropriate and effective accountability mechanism to ensure that District Offices perform their duties and responsibilities as provided in the contract or as directed.

Should the same projects be undertaken in the future, DPWH – NCR management may request the ROAD Board to restrict the grant of authority to use the MVUC funds to those agencies only that are mandated by law or provided in their charters the undertaking of roadside maintenance and cleanliness.

The Honorable DPWH Secretary, who seats as Ex-officio Chairperson of the Road Board, should ensure that Board Resolutions adopted and funds

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RECOMMENDATIONS

Annual Wok Plan (AWP) of P2.02 billion by P4.0 billion or 200% over the amount programmed for use during the year, while funds sub-allotted to the regional and district offices in the total amount of P3.73 billion were not in accordance with the programmed amount as per AWP, with two regional offices receiving less than its programmed amount and 15 regional offices receiving more than its intended amount.

The various projects implemented by the local government units which were funded by the Special Local Road Fund (SLRF) transferred by DPWH-NCR, had not been regularly or periodically assessed by the latter pursuant to Article IV of the Memorandum of Agreement (MOA) between DPWH-NCR and the concerned local government units. Moreover, fund transferred by DPWH-OSEC and NCR to the MMDA, DOTC and Local Government Units (LGUs) aging over two years totaling P136.03 million remained unliquidated at the end of the year resulting in the failure to report expenses in the period they were incurred.

Source Agency Recipient Amount of Unliquidate

Cash Advance DPWH-OSEC

MMDA P 111,616,452.19

DOTC 12,333,676.77 DPWH-NCR

LGUs 12,076,551.13

Total P 136,026,680.09

requested from the DBM are aligned with the Annual Work Plan. Revisions of the AWP which will entail substantial changes in the amount of budget and project activities should necessitate prior consultation with and approval of the Road Board. The Director/Head of the DPWH-RPO should prepare the accomplishment report based on the actual releases to the regional and district offices as per actual Sub-Allotment Advices from DPWH-Central Office.

Refrain from transferring funds to the MMDA, DOTC and LGUs until all previous funds have been liquidated as required under COA Circular 94-013 dated December 13, 1994;

Require the MMDA, DOTC and LGUs to submit the liquidation reports together with the Credit Notice (CN) issued by its Resident Auditor and to refund any unutilized balance

Revisit the MOA to include provisions that will solve the issue on liquidation of fund transfers taking into consideration the roles of the implementing agencies and the DPWH in implementing the projects including the constraints encountered by both parties;

Improve the monitoring of the project progress by instituting structured monitoring mechanism that will facilitate the evaluation of project progress and conduct project evaluation to determine the merits and flaws of the method or scheme used in transferring and reporting of the funds to come up with policies

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RECOMMENDATIONS that will strengthen project monitoring, evaluation and liquidation of funds.

9.5.15 Department of Science and Technology

The failure of management to strictly require project leaders of Implementing Agencies (IAs) and NGOs/POs to submit Financial Reports or Annual Financial Reports of Grants-in- Aid (GIA) completed projects and to record in the books of accounts Financial/Liquidation Reports submitted by IAs resulted to accumulation of unliquidated GIA funds receivables totaling P487.46 million. (DOST- Office of the Secretary (OSEC))

a. Strictly enforce the provision of DOST AO No. 006 regarding the liquidation of transferred funds;

b. Require the Special Project

Division (SPD) and Accounting Units to coordinate closely to avoid delay or non recording of the liquidation in the books;

c. Study the possibility of requiring

proponents to submit two copies of financial reports or liquidation reports. The original copy for the accounting unit as basis of recording the liquidation in the books and certified true copy for the SPD, inasmuch as the later needs the report for monitoring purposes only.

The outstanding balance of some

accounts under the Due from NGAs/NGOs/POs in the books of the DOST-CO totaling P127.33 million disclosed reporting difference of P78.71 million resulting from confirmation reply received from project proponents. (DOST- OSEC)

Reconcile the reporting difference between the books of DOST-CO and books of beneficiaries/agencies based on the confirmation replies and to make adjustments, as necessary, to correct the balances of the accounts.

The hazard benefits paid to the DOST employees from CY 2005 to 2010 at the DOST-Central Office and three other regional offices were not subjected to withholding tax despite the decision of the BIR that the benefits are subject to tax as per Decision No. DA (ECB) 175-2009 dated March 31, 2009 totaling P38.54 million. (DOST-OSEC)

a. Determine the taxes due on the hazard benefits paid and require its refund from the officials and employees concerned;

b. Remit the same to the Bureau of

Internal Revenue; and c. Subsequent payments of hazard

pay should be subjected to tax in compliance with BIR memorandum No. 049-05 dated November 24, 2005.

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RECOMMENDATIONS

9.5.16 Department of Social Welfare and Development

Unliquidated 4Ps Fund Transfers Funds transfers in the amount of P6.64 billion to the Land Bank of the Philippines (LBP) for the payment of the conditional cash transfers under the Pantawid Pamilyang Pilipino (4Ps) remained unliquidated at year-end due to the failure of the management to compel the LBP to submit the required liquidation reports, resulting in the accumulation of idle funds in the bank, casting doubts on the propriety and regularity of the disbursements of the 4Ps grants as well as the reliability of the balance of the Cash in Bank, Local Currency Current Account (various 4Ps LCCA accounts)

As a consequence of LBP’s failure to submit regularly the liquidation reports, the propriety and regularity of the disbursements could not be immediately established and the following deficiencies noted have not been immediately recorded/adjusted, such as: a) discrepancies in the names of the grantees; b) transfer of funds with no actual grantees; and c) some names that had been entered twice in the payroll list and were likewise funded twice. Idle funds in the LBP also accumulate as the latter does not return to DSWD the undisbursed funds. The huge amount of unliquidated fund transfers to LBP likewise casts doubts on the validity of the balance of the account Cash in Bank, LCCA (various 4Ps OTC disbursements). Due to unliquidated fund transfers, Cash in Bank show a book balance of P6.09 billion as compared with the bank balance of P2.44 billion or a difference of P3.65 billion. Verification of said discrepancy could not be made as the

a. Exert extra effort to compel LBP

to submit regular and timely liquidation of the 4Ps disbursements; and

b. Require LBP to return funds

which are not disbursed.

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bank reconciliation statements are not updated as discussed in the succeeding audit findings.

Unliquidated Cash Advances Management failed to implement strict controls on the grant and utilization of cash advances, contrary to Section 89 of PD No. 1445, Executive Order (EO) No. 298 dated March 23, 2004 and COA Circular No. 97-002 dated February 10, 1997 thus, resulting in unliquidated balances of Cash-Disbursing Officers (103), Due from Officers and Employees (123) and Advances to Officers and Employees (148) accounts in the aggregate amount of P33.82 million, and likewise rendered doubtful the validity of the receivable and government equity accounts as cash advances must have been already expended but still reported as receivable as at year end. The failure of the recipients to account the fund transfers on time could be attributed to the agency’s weak administrative controls on the monitoring of the grant and liquidation of cash advances which resulted to an understatement of the corresponding expense account and prevented the Auditors from establishing the propriety and validity of the expenses incurred.

a. Strictly comply with the

provisions of Section 89 of PD 1445, EO 298 and COA Circular No. 97-002 regarding the grant, utilization and liquidation of cash advances. Send demand letters to those who continuously fail to render an accounting of their outstanding CAs.

b. The following were also

recommended:

For the CO -

c. Confirm and intensify collections from concerned officials/ employees/ recipients with dormant accounts to establish propriety and validity of the accounts. Reiterate request for COA’s authority for the writing-off of the dormant accounts; and

d. Require concerned officials and

employees to immediately settle personal PLDT/Smart calls. Henceforth, officials and employees should not be allowed to use government phones for personal calls.

For the FOs, the following additional courses of actions are recommended:

e. Make representations with the

concerned legislators regarding the proper scheduling of distribution of cash assistance in order to give sufficient time to liquidate CAs;

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RECOMMENDATIONS f. Immediately refund unutilized

CAs in order to safeguard the same from possible loss, misuse, misappropriation and theft; and

g. Discontinue the practice of

granting additional CAs to officials and employees who still have outstanding advances.

Dormant cash advances and receivables

Dormant cash advances and receivables of P31.03 million, representing fund transfers to NGOs/POs, NGAs, GOCCs, LGUs and DSWD Regional Offices of which P16.95 million were not acknowledged upon confirmation, continued to exist in the books of accounts for five years or more, thus cast doubts on the existence and validity of the receivable balances.

a. Exhaust all means for the

settlement of the outstanding receivable accounts from concerned employees and recipients;

b. If no settlement is made despite

the demand, request from the Commission on Audit, authority to write-off said accounts taking into consideration the efforts exerted, pursuant to COA Circular No. 97-001 dated February 5, 1997 in order to clear the books of long outstanding inactive balances; and

c. Conduct investigation of accounts

of which no replies or negative replies were received from the NGOs, NGAs, GOCCs and LGUs concerned.

Lapses in the delivery and issuance of

NFA rice The inadequate documentation, monitoring and controls as well as the inconsistent accounting treatment on the delivery and issuance of NFA rice to end-users contributed to the accumulation of long outstanding unliquidated fund transfers and the significant balance of the account Food Supplies Inventory of P394.60 million.

a. Make representations with NFA

officials and concerned legislators for the immediate submission of liquidation documents, such as distribution lists duly signed by the beneficiaries, warehouse stock issue receipts and statements of rice deliveries. The distribution lists should be properly labelled as to the name of project to facilitate liquidation;

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RECOMMENDATIONS b. Require NFA to inform the

DSWD-NCR in advance of the delivery dates so that it will be able to send its own representatives to the place of delivery;

c. Direct the Property Officer to

prepare and accomplish the Request and Issue Slip for every delivery made in order to substantiate issuance to end-users; and

d. Require the Chief Accountant to

be consistent in the accounting treatment of each delivery and issuance of NFA rice in order to ensure correctness of reported balances. Inasmuch as the rice purchased are directly delivered to the end-users, it is only proper that these should be expenses right after receipt of the RIS. However, the end-users should still be required to submit distribution lists to substantiate issuances made to the beneficiaries.

Unutilized Cash Donations

Donations of P5.64 million, out of the P314.78 million received from various donors for victims of typhoons from CYs 2004 to 2010, were used for purposes not directly benefiting the calamity victims while P193.67 million thereof, remained deposited in an Authorized Government Depository Bank (AGDB) at year-end instead of fully utilizing the same for purposes intended by the donors, thereby defeating the objective for which the assistance was provided and resulting further to the accumulation of huge balance of idle funds.

a. Maximize the utilization of

donations intended for specific purposes. The expenses that should be incurred should be those that will directly benefit the beneficiaries. Said donations are not intended to remain idle in the AGDB awaiting for another calamity; and

b. Explain why expenses that should

have been more appropriately charged to regular funds were charged to the said donations.

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RECOMMENDATIONS

The donors may have thought that all their donations had provided relief to the beneficiaries and were used to rehabilitate the damage done by the calamities which struck the country in the past years. Although the government had earned corresponding interests from such deposits, totalling P2.51 million and P57,688.66, for Local and Foreign Currency accounts, respectively, as of year-end, it defeated the objectives for which the assistance was provided. Moreover, management’s failure to utilize foreign currency donations amounting to P36.32 million also for victims of typhoons, resulted in foreign currency loss of P757,326.07.

Unaccounted Donations Concerned officials of DSWD failed to strictly observe the guidelines of Administrative Order (AO) No. 53, Series of 2003 and revised under AO No. 06, Series of 2010 regarding management and processing of donations resulting in unaccounted and missing industrial sugar totalling 4,500 Lkg-bags or 145,080 kilograms with a monetized value of P3.99 million, tiles worth P9.79 million and various goods costing P2.24 million.

a. Strictly comply with the

provisions of the above cited AOs;

b. Conduct an investigation and

institute appropriate action, administrative or criminal action against officials and employees found liable and remiss in their responsibilities;

c. Strengthen internal control

measures regarding receipt and acceptance of donations from the BOC by:

Authorizing DSWD

representative to witness the unloading and releasing of the donated goods or creating a Committee that will take charge of all the donations coming from the BOC.

Ensuring that the ARDR is

fully accomplished as to

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RECOMMENDATIONS

quantity and as to other relevant information by the NROC Administrative Officer.

Informing the BOC regarding

the noted discrepancies in the number of kilos per Notice of Sale and per Gate Pass to account for the missing container van.

Submitting duly signed

Summary of Received Tiles from BOC duly signed by the NROC Administrative Officer to support the ARDRs. This will ensure that all the donated tiles are completely delivered and duly received by concerned officials.

d. Require the concerned officials to

take full responsibility on donated goods by ensuring that all are accounted for before signing the Gate Pass and that the deliveries in the NROC complete; and

e. Require that the FO III, observe

prudence in giving assignments to its personnel especially those pertaining to sensitive functions.

Pantawid Pamilyang Pilipino Program

(4Ps) Some 4Ps beneficiaries were not extremely poor as envisioned by the agency as it included income-earning beneficiaries which cast doubts on the accuracy of the procedures/ methodology used during the selection of poor households. The objectives of the program may not be fully achieved if the benefits will not be received by the intended beneficiaries.

a. Furnish the team information/

justification for the inclusion of beneficiaries who were not extremely poor in the 4Ps based on the PMT methodology;

b. Delist beneficiaries who engage

in illegal or gambling activities for they are not perceived to be poor; and

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Results of the validation revealed that 96 out of 1,400 sampled households (excluding Regions V, VIII and ARMM which did not submit report) have other sources of income but were enrolled to the program.

We noted in the validation that some of the beneficiaries were earning income ranging from P200.00-P350.00 a day, which indicates that they are not the extremely poor who are supposed to be covered by the program. Validation also disclosed that some beneficiaries were openly engaged in vices and illegal activities such as gambling and illegal connection of electricity. People who engage in gambling and other illegal activities may mean that they have extra money or maybe tempted to use the grants for their vices instead of using the same for their health and educational needs.

4Ps does not disqualify poor people who are already receiving assistance from the government, however, there are other poor people who do not receive any form of assistance from the government but should be considered in order to have a fair distribution of the government’s various social protection programs.

c. Revisit the guidelines regarding qualification of beneficiaries who are already receiving other forms of government assistance to accommodate other equally poor and more qualified beneficiaries.

Failure to validate household data as required under Step 4.6 c, Operations Manual on 4Ps resulted to:

a. Occurrence of discrepancies in

the names of 91 4Ps grantees from sampled payroll, database, cleanlist and LBP’s liquidation report in Regions II, III and IV-A, thus, casts doubts on the

a. Ensure that before releasing the succeeding grants, the database of all 4Ps beneficiaries was already verified/validated and the corresponding changes corrected and updated. This guarantees that only bona-fide and deserving poor household members are recipients of the social protection programs and the 4Ps of the government

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RECOMMENDATIONS

reliability and accuracy which will affect not only the proper implementation of the 4 Ps of the Department but, as well as, the other social protection programs of other national government agencies (NGAs), Non-Governmental Organizations (NGOs) and civil society groups which will make use of these data pursuant to Executive Order No. 867, dated March 9, 2010 and NSCB Resolution No. 18, series of 2009, dated November 11, 2009;

b. Double entries of grantees’

names in the payroll which further led to accumulation of idle funds in LBP amounting to P19.47 million for OTC payments covering the period May 25, 2010 and P340,700.00 for cash card payments. This likewise exposes government funds/WB loan proceeds to risks of possible losses or misuse.

c. Transfer of funds to LBP

amounting to P363.31 million remained unclaimed due to deficiencies, such as: 1) beneficiaries who are not legitimate 4Ps grantees; and 2) double entries of grantees’ names in the payrolls, thus affecting the regularity of the transfers and accumulating huge balance of idle cash in the LBP.

and also for the maximum and proper utilization of loan proceeds from WB. This will likewise facilitate verification of the liquidation reports submitted by LBP and prevent the accumulation of idle funds in LBP.

For cash grants, the following were recommended:

b. Coordinate with LBP regarding

beneficiaries with duplicate names to determine if such beneficiaries have been paid twice or thrice; and

c. Immediately delete from the

database and the payroll the duplicate and triplicate names of beneficiaries.

Educational benefits covering the period November to December 2009 and CY 2010 for NCR, Regions III and IV-A were overpaid by P9.93 million due to payment to unqualified beneficiaries, thus affecting the

a. Revisit the guidelines on the educational grant to ensure that only qualified beneficiaries are entitled to the benefits; and

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RECOMMENDATIONS

regularity of the disbursements.

b. Require the beneficiaries thereof to refund benefits received or hold liable the concerned officials who approved said payments.

Cash grants totaling P313.12 million

were released to 60,433 sampled beneficiaries despite non-compliance with the conditionalities required under the Compliance Verification System (CVS).

a. Require the officials concerned to explain why the second and succeeding payments of the cash grants were made despite non-compliance with the conditionalities specified in the CVS; and

b. Facilitate the implementation of

the CVS in all 4Ps areas;

KALAHI CIDSS Failure to reach the 80 percent performance indicator target due to (a) non-compliance with the provisions of the MOA and the Loan Agreement by the concerned Municipality and Provincial officials regarding the 30 percent LGU Counterpart Commitment (LCC), and (b) non-implementation of sanctions as stated in the MOA by DSWD officials, thus affecting the sustainability of the 2,440 sub-projects with an estimated total cost of P2.90 billion and the attainment of the goals of the KC project. The non-presentation of the actual and detailed status of the project costs for the 1st Quarter, 2010 Accomplishment casts doubts on the accuracy and completeness of the reports.

a. Verify and intensify efforts to

enforce compliance by the concerned municipalities with the provisions of the MOA regarding the 30 percent LCC share in the payment of the costs to ensure the sustainability and success of the KC projects;

b. Impose the appropriate sanctions

on municipalities which continuously fail to comply with the above-mentioned provisions of the said MOA; and

c. Improve on the reporting system

by including not only the committed sub-project costs but likewise the actual and detailed costs to effectively monitor the efficiency of the project in attaining its goals.

The concerned officials of DSWD,

particularly the Regional Project Management Office (RPMO) failed to adequately supervise and monitor the implementation/evaluation of the actual accomplishment of the sub-projects and

We recommend that the respective Regional Project Management Offices (RPMO):

a. Coordinate with the Barangay

Sub-project Management

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non-compliance with the requirements for the release of 2nd and 3rd tranches of the grant, which contributed to the non-completion/non-utilization of projects worth P4.21 million in CAR and FO VIII. Further, their inaction on the allegations of mismanagement of funds among the officials/ stakeholders and local officials in CAR likewise contributed to the non-completion of the sub-projects.

Committees (BSPMC) for the correction of the defects of the projects and delivery of the equipment needed; and

b. Request for the release of 2nd and

3rd tranches of the grants based on the actual physical accomplishments.

Failure of concerned officials of DSWD to adequately review project proposals for sub-projects worth P7.23 million in CAR, FOs VI, VIII, IX and CARAGA, resulted in their non-utilization/inappropriate utilization and wastage of government funds. This likewise deprives other communities, with more responsive projects, access to the KC funds.

We recommend that concerned FOs implement the following courses of action:

a. Review carefully project

proposals before approving the same to avoid the occurrence of problems during operation and to prevent wastage of funds; and

b. Require the CAR RPMO to

coordinate with the Municipal Coordination Team (MCT) to consider developing the road leading to the Kullangan Junction market and to convince the vendors to transfer to the new market.

Non-compliance by concerned LGUs

with the provision of Section II.2 General Policies and Principles of the Mutual Partnership Agreement on the allocation of funds for the operations and maintenance of sub-projects, affected the functionality and utilization of sub-projects worth P26.56 million in FOs VII, VIII, IX and CARAGA.

We recommend that concerned FOs: a. Require the Regional Project

Management Office (RPMO) to make the necessary representations with LGUs, to oblige the latter to monitor/look into the operation of turned-over projects; and

b. Require the Regional Project

Management Team (RPMT) to look into the projects with noted defects and make representations with proper authorities, including Central Office Project Management Office and/or LGUs

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concerned towards possible remedial measures.

The delayed release of LGU

counterpart, delayed submission of requirements for release of tranches, weather condition, among others, resulted in the non-completion within the target dates of the 29 out of 51 validated sub-projects in Northern Samar and incurrence of additional costs in terms of man hours and materials. It also prevented the beneficiaries from the immediate use of the projects.

We recommend that the RPMT: a. Require the project officials to

adopt measures to strengthen the monitoring of all on-going projects to fast track their completion before the end of the project cycles;

b. Enhance coordination with parties

involved in the project implementation, particularly those agencies who had not delivered their commitments;

c. Strengthen the preparatory stages

of projects, to minimize and/or avoid changes in the program of work during project implementation, which usually entails increased costs. Ensure actual and adequate site inspection and evaluation before preparation of programs of work and cost estimates for a particular project; and

d. Institute feed-back system

mechanism to address the issues and concerns affecting the completion of the sub-projects.

The sustainability of some income

generating sub-projects worth P2.74 million in FOs VII and VIII, are uncertain due to the failure of the barangay communities to comply with the requirements pertaining to the completed sub-projects as stated in the KC Manual of Operations and to settle among themselves conflict in management of the sub-project.

We recommend that concerned FOs require the RPMO to assist the barangay communities in complying with the requirements pertaining to income generating sub-projects to guarantee their sustainability.

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Utilization of PDAF The utilization of PDAF in the NCR were not made in accordance with DSWD Memorandum Circular No. 15, Regional Memorandum Order No. 002 and not supported with sufficient and proper documentations which cast doubts on the propriety and regularity of payments made and provides no assurance that the poor and the disadvantaged beneficiaries actually benefited from it.

a. Require concerned and

responsible persons to submit all documents needed for each type of disbursements to ensure propriety and regularity.

b. Make representations with the

following:

Concerned NGO/LGU/GOCC and legislators regarding the strict observation of the guidelines, rules and regulations on the utilization of PDAF funds.

DSWD officials regarding formulation of policies on releases of PDAF to cooperatives in order to protect the rights of the poor and the underprivileged.

Strictly implement Memorandum Circulars on the management and utilization of PDAF.

Self-Employment Assistance –

Kaunlaran/Kabayan (SEA-K)/Tindahan Natin Project (TNP) Weaknesses in the evaluation/ assessment of SEA-Ks/TNPs and inadequate monitoring of the loan balances status as reported in DSWD-NCR, CAR, FO IX and XI, hindered the attainment of the program’s goal towards an improved socio-economic skills of poor families and rendered low the collection rate of the overdue capital assistance aggregating P68.40 million. In the NCR alone, the prevalence of inactive members consisting of 73% of all the SEA-K organizations in this region, rendered doubtful the sustainability of the program and

a. Strengthen the monitoring scheme

and conduct regular evaluation/ assessment of the programs;

b. Adopt stricter measures in the

review of the proposals made by the applicants, as well as, their capability to repay the loans;

c. Intensify collection efforts,

especially those pertaining to prior years’ unpaid obligations;

d. Issue demand letters to delinquent

SKAs/TNOs, incorporating therein sanctions for delays in or

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rendered improbable the rollback in full of the P82.61 million seed capital assistance.

non- payment of the capital assistance;

e. Hold accountable the DSWD

officials and employees found remiss in the discharge of their duties and responsibilities.

9.5.17 Department of Tourism

Financial assistance/donations were granted (a) for activities/ undertakings outside the DOT mandate, objectives and missions and with insignificant or no impact on tourism totaling P5.55 million; (b) for activities/projects already completed/concluded amounting to P.324 million; (c) as seed money for Tourism Congress in the amount of P1.5 million without legal basis; and (d) without the approval of the Secretary in the amount of for P.550 million. Moreover Trust Liability Account (TLA) funds totaling P3.65 million were temporarily used to pay for regular disbursements; and recipient/ donees of financial assistance of P25.73 million from OSEC and RO Nos. 1,3 and 11 failed to submit terminal reports and there were invalid MOAs in RO Nos. 3 and 10 totaling P1.11 million. (Office of the Secretary)

a. Hold the agency officials personally liable and responsible for the grant of financial assistance for activities/ undertakings that are outside the mandate, objectives and mission of the DOT and with insignificant or no impact on tourism and henceforth, ensure that grants are only given for activities/ undertakings with tourism impact and which meet the DOT mandate, objective and mission.

b. Stop the grant of financial

assistance for funding completed/ concluded projects in conformity with conformity with DOT Office Order No. 91-133 dated June 27, 1991.

c. Require the Tourism Congress to

return to the DOT the grant of P1.5 million for lack of legal basis

d. Payment of financial assistance

for activities/ undertakings with PEC recommendation and approval by authorized DOT be allowed, otherwise hold liable the officials/employees responsible for the payment of disbursements without proper authority.

e. Comply with the requirements

prescribed by DOT issuances on the delineation of authorities such

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as signing of MOA, approval of request for financial assistance as prescribed under the Department Order No. 2008-01

f. Discontinue the practice of using

the Trust Funds for payment of expenditures that should be funded from the general appropriations.

g. Require the submission of

terminal reports, Fund Utilization Report and Certification from an authorized DOT representative attesting to the completion of the activity/ undertaking in compliance with COA Circular No. 2007-001.

Nonconforming buildings or structures,

such as lean-to, barong-barong or similar indigenous dwelling made of light and hazardous materials, are still existing inside Intramuros contrary to Section 1 and 5 of Rule IX and Section 3, Rule IV of PD 1616; thus, the preservation of the character and quality of Intramuros is affected, and it attractiveness as a tourist destination is diminished. (Intramuros Administration)

Enforce strictly the provisions of Section 1 and 5, Rule IX and Section 3, Rule IV of PD 1616 pertaining to nonconforming buildings and structures and the prohibited uses of lands inside Intramuros and file appropriate criminal action against the violators and have all illegal structures demolished after all the steps provided under Sec. 2-6, Rule X of PD 1616 have been followed.

Non-implementation of prior year’s audit recommendation to undertake measures to correct lease agreements with the (a) Joint Venture of Datemform Construction Corporation, Datem, Inc., Belares Food Corporation and Belarson Food Express Corporation, the Operators of Jollibee Rizal Park; (b) Philippine Tourism Authority; and (c) Luneta Seafarers Welfare Foundation, which are grossly disadvantageous to the government and resulted in the non-collection of accurate earnings from the lease of the park spaces. (National Parks and Development Committee)

a. Conduct a comprehensive review of the leasing operation of the NPDC to ensure that the interest of the Government is the prime consideration and to negotiate the amendment of the lease agreement with the Joint Venture to conform to the new set of guidelines for entering into lease agreements;

b. Negotiate for the amendment of

the lease agreement with the Lessee to increase the rental rate from P108.67 per sq.m. to the prevailing rate of P352.00 or a

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total monthly rental of P664,950.88;

c. Work for contract modification

with the Joint Venture to recover the rental deficiency of P51.12 million which is the difference between the contracted rental rate and the prevailing rental rate form the start of rental payment on September 9, 1999 to December 31, 2010;

d. Require the Joint Venture to

transform the Jollibee into a tourism-oriental restaurant to comply with the DOT and lease requirements; and

e. Require the Joint Venture and the

sub-lessees to submit their articles of Incorporation

9.5.18 Department of Trade and Industry

BOI officials and employees were granted CNA incentives contrary to the provisions of Budget Circular No. 2006-1 dated February 1, 2006. (Board of Investments) CNA incentives were paid not only to the rank-and-file employees but also to those occupying managerial positions. (Board of Investments) CNA incentives were paid before the end of the year and before savings from the cost cutting measures identified in the Collective Negotiation Agreement was determined. Likewise, the total amount of CNA incentives given was excessive. (Board of Investments) CNA incentives given to the employees of the BOI included non-monetary benefits in the total amount of P3.52 million. The kind of the non-monetary

Strictly follow the guidelines set forth under Budget Circular 2006-1 on the grant of CNA incentives to its employees taking note of the following: (a) limiting the recipients to its rank-and-file employees; (b) right computation of savings at year-end from cost cutting measures identified in the CNA agreement; and (c) proper identification of the non-monetary benefits to be given to the rank-and-file employees. Likewise, refund the excessive CNA benefits and those given to top level management.

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benefits were not clear since the payment was made to the BOI Employees Association for Health and Wellness Program. - (Board of Investments)

9.5.19 Department of Transportation and Communication

Allotment released for the implementation of Special Vehicle Pollution Control (SVPC) programs, activities and projects (PAPs) in CY 2010 totaling P536.10 million or 77.22% of the total SAROs received were unutilized and automatically expired on December 31, 2010 and Cash Allocations totaling P11.86 million or 31% of the total NCAs received were reverted back to the National Treasury resulting to delayed or non-implementation of approved PAPs for the benefit of intended users/stakeholders. (Office of the Secretary- Motor Vehicles User’s Charge (OSEC- MVUC)) The Special Vehicle Pollution Control Fund has no criteria for prioritizing projects to be funded at the onset of project implementation, thus no assurance that fund allocations and releases are equitable and the benefits to be derived from the funds are maximized. (OSEC- MVUC) Special Road Safety Fund totaling P4.37 million or 21.96% of the total fund transfers made by the DOTC to various government agencies were unliquidated for more than 2 years as of December 31, 2010. (OSEC - MVUC)

The Road Board should defer the release of additional funds until such time that previous PAPs are fully accomplished and tangible results are in place, availed of or used by the intended beneficiaries, so that other agencies/offices that are in more need of funds can avail of the scarce government resources. Prepare and submit the criteria to provide a basis for evaluating which programs, activities and projects that are believed to give the greatest impact with highest significance and exceedingly urgent will be prioritized in the succeeding years of implementation.

Monitor completion of National Remote Sensing Center (NRSC) road safety projects to enforce the timely submission of corresponding liquidation reports and require the concerned agencies to refund any unexpected amounts.

Instruct the Accounting Unit to prepare Journal Entry Voucher (JEV) to transfer the accounts from Fund 101 to Fund 151 (MVUC) after ensuring that the outstanding balances are correct.

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Deposits on Letters of Credit (LC)

account of P18.71 million remained in the books for more than a year after they had expired and despite partial delivery of equipment, thus overstating said account. On the other hand, Watercrafts and Other Property, Plant and Equipment accounts were understated by the same amount representing cost of delivered items paid out of LC. Moreover, the procured equipment remained idle resulting in wastage of millions of pesos. (Philippine Coast Guard -PCG)

Resolve the issue on the Deposits on LC so that appropriate adjusting entries can be made to record the procurement and delivery of items and submit to the Office of the Auditor documents relative to the procurement.

Utilize the equipment when the issue of LC has been resolved.

The government, thru the LTO, could have earned /realized additional income from the P1.25 billion collections from IT fees for Miscellaneous Motor Vehicle Registration Transactions and Miscellaneous License and Permit Transactions from November 2005 to December 2010 had the long proposed supplemental agreement on revenue sharing with Stradcom Corporation (STRADCOM) been approved by the DOTC. Land Transportation Office - (LTO)

a. Make strong representation with the DOTC for the immediate approval of the Amended Supplemental Agreement so that the government/LTO can start collecting its share in the IT revenue generated thru the implementation of the LTO-IT Project with STRADCOM; and

b. Compel STRADCOM to set up a

trust liability account to ensure payment of the government /LTO share in the IT fees. We further recommend that appropriate administrative charges be instituted against erring DOTC/LTO officials for committing nonfeasance in the performance of their duties to the prejudice of the government.

The LTO allowed STRADCOM as its

IT Provider, the use of the agency’s database for the latter’s interconnectivity projects it contracted with government agencies and private entities which are not part of the Build-Own-Operate (BOO) Agreement and without the benefit of a contract; thus, precluding the government to benefit from the interconnectivity fees,

a. Review and evaluate the Memorandum of Agreement (MOA) executed between STRADCOM and other parties like the MMDA, LTFRB, PETCs and insurance companies relative to the interconnectivity fees, since the LTO was not included as a party to the said agreement. LTO’s consent was not obtained

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estimated to be at least P2.015 billion, collected by STRADCOM since 2006. (LTO)

prior to its execution, considering that LTO has the beneficial interest over the database used;

b. Institute appropriate legal actions

in the proper forum to determine the propriety of the MOAs on interconnectivity, and to establish the legal basis for the imposition of interconnectivity fees since both were not included in provisions of the original BOO contract and in the Amendment Agreement; and

c. Institute appropriate legal actions

against DOTC/LTO officials who allowed the use of LTO database without its consent and without compensation, to the prejudice of the government resulting in huge loss of income to the government.

The LTO IT Provider collected

computer service fees totaling P340.72 million from 2003 up to 2007 from license applicants and vehicle registrants which were not actually and directly rendered for manually processed transactions. Of said amount, which should have been remitted to the Bureau of Treasury, P266.09 million was already paid to STRADCOM while the balance of P74.63 million remained deposited in the Escrow account. (LTO)

Cause the remittance to the Bureau of Treasury of the aforesaid remainder of P74.63 million in the Escrow Account and seek legal assistance from the Solicitor General for the recovery from STRADCOM the amount of P266.10 million it had collected earlier. Considering that under the present circumstances, LTO and STRADCOM are creditors and debtors to each other legal compensation could be availed of pursuant to Article 1278 of the Civil Code.

The agency does not have adequate

monitoring system for its vehicle plate production, nor does it have clear cut policies/guidelines in the disposal of plates spoiled in the process thus, posing an auxiliary risk that the unaccounted and/or spoiled plates may have been used for illegitimate purpose/s. (LTO)

Establish policies/guidelines on the monitoring and validation of plate production reports to ensure that all the plates produced and spoilage are all accounted for thus, preventing the use of the same for illegal purpose.

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Management does not have a system that addresses the issue on unclaimed vehicle plates and driver’s licenses which were confiscated for various violations. As a result, the agency failed to realize the possible revenues from fines and penalties for unclaimed confiscated vehicle plates and driver’s licenses totaling 12,267 and 19,038, respectively, as of year-end, and also overlooked the possibility that some of these vehicles and/or drivers are still plying the roads posing threat to public safety. (LTO)

a. Strictly enforce the suspension and revocation of driver’s license and registration of motor vehicle for non-settlement of cases within 15 days from the date of apprehension pursuant to Section 29 of RA 4136 and Section B-24 and Section E-61 of Department Order No. 2010-39;

b. Exhaust all possible means to

determine from the agency data base whether the erring drivers and/or motor vehicle owners were allowed to renew their licenses or have continued to use the subject vehicles, and impose appropriate sanctions and in the event that the above data could not be obtained, dispose/destroy unclaimed motor vehicles/motorcycle plates apprehended in 2006 and below to prevent unscrupulous individuals the opportunity to use them illegally; and

c. Direct the prompt uploading

(within 24 hours) in the system all apprehensions to ensure that the same are settled before the licenses are renewed or the vehicles are registered.

9.5.20 Other Executive Offices Out of the 3,500 targeted scholarship

slots per CMO No. 43 s. 2005, only 1757 actual faculty scholars/grantees of the 2004-2010 Faculty Development Program-Higher Education Development Fund (FDP-HEDF) for a total obligated expenditures of P583.66 million, of which only 636 have graduated, 981 on going, and the rest were not successful; thus CHED failed to considerably realize its objective of upgrading the academic qualifications of tertiary faculty to masters and doctorate

a. Srictly enforce its requirement that faculty at the higher education level must have at least a master’s degree in the field in which they teach to compel the HEIs to send their faculty and the latter to pursue and complete the masteral programs;

b. Adopt stricter criteria in allowing

extension of the scholarship in order not to delay the expected benefits from the Program; and

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degree levels to improve the teaching methods. (CHED-Main)

c. Extend the maximum benefits of

the Program to the SUCs considering that they are operating on limited budget per General Appropriations Act, which needs augmentation for faculty development to improve their teaching methods for the advantage of their students who are mostly from middle and lower classes.

The failure of CHED to fully enforce

COA Circular No. 94-013 dated December 13, 1994 and the provisions of the Memoranda of Agreement (MOA) resulted in the non-liquidation of overdue fund transfers of P408.35 million to State Universities and Colleges (SUCs)/national government agencies (NGAs), thereby misstating Due from NGAs and Government Equity accounts. (CHED-Main)

a. Demand for the immediate submission of liquidation reports by the concerned NGAs to ascertain if funds were disburse accordingly and reconcile respective accounting records to present the accurate balances of accounts affected;

b. Discontinue granting additional

funds for those with outstanding overdue fund transfers to prevent the accumulation thereof; and

c. Monitor regularly the utilization

of fund transfers and compliance by the concerned NGAs with the reporting requirements.

Cash Advances/ Fund Transfers/

Receivables

The balances of the inter-agency fund transfers had accumulated to P147.05 million as of December 31, 2010 because management did not maximize its effort in requiring the grantees to submit liquidation reports contrary to COA Circular Nos. 94-013 dated December 13, 1994 and 2007-001 dated Oct. 25, 2007. (National Commission on Culture and the Arts)

Strictly implement the provisions of COA Circular Nos. 94-013 and 2007-001 and exert extra effort to compel various grantees especially those with long outstanding accounts to submit the required reports needed in liquidation.

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Donations totalling P42.08 million falling under the classification of trust receipts, P19.50 million of which were received in 2010 by the Agency, were not deposited with the National Treasury, contrary to Section 13 of the General Provisions of the 2010 General Appropriations Act. Said donated funds were also utilized without a Special Budget required under the provisions of EO 292. (Commission on Filipino Overseas)

Ensure that all donated funds still maintained with LBP and without the written consent from donors to be deposited with any AGDB, be deposited instead with the Bureau of Treasury and accounted for as trust receipts in accordance with the requirements of the general provisions of the GAA, the provisions of EO 292 and COA GAFMIS Circular Letter 2003-005. No disbursements from these donations and trust receipts should be made without a special budget as guide for disbursement. Further, submit to the appropriate oversight agencies the required quarterly reporting of donated funds received including the corresponding expenditures in compliance with the same Sections of the GAA.

Revenue/Income

The agency has not collected from the Philippine Charity Sweepstakes Office (PCSO) the amount of at least P24 million which represents the Board’s share on unclaimed and forfeited sweepstakes and lotto prizes for its operation as mandated by RA 9165. (Dangerous Drugs Board)

Make a representation with the PCSO management for the collection of the Board’s share on unclaimed and forfeited sweepstakes and lotto prizes as required by law.

The Due from National Treasury (NT) account balance of P79.33 million as of December 31, 2010 could not be relied upon because of the unreconciled difference of P78.81 million with the balance appearing in the BTr books of accounts since CY 2007. (Security and Exchange Commission) (SEC))

Require the SEC Accounting Office to keep on monitoring the reconciliation of the Due from National Treasury account balance of P79.32 million with the BTr and, thereafter make the necessary adjusting entries.

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9.5.21 Metro Manila Development Authority

The Operation of Metropolitan Manila Development Authority (MMDA) Workers’ Inn I and II for the period from CY 2007 to December 31, 2010 posted an aggregate loss of P21.09 million due to the low occupancy rate in Workers’ Inn II, thereby depleting the budgetary requirements of other projects of the agency.

a. Close the Workers’ Inn II located at Jose Abad Santos Avenue, Tondo, Manila as it has a very low occupancy rate and contributed to higher losses in the operation of the Workers’ Inns, despite the possibility that the Lessor might forfeit the amount paid prior to termination including the one month deposit and one month advance amounting to P427,800.00 if the Contract of Lease is terminated before the end of the lease period.

b. Workers’ Inn I maybe

continuously operated as it appeared to comply with the objective of the operation of the Workers’ Inn. Moreover, it is showing income for this year which can be duplicated in the future, with proper management and keeping track/monitoring of the expenses.

On-going public infrastructure projects

amounting to P465.61 million were erroneously taken up as Public Infrastructures instead of Construction-in-Progress, resulting to overstatement of account Public Infrastructures and understatement of Construction-in-Progress by the same amount. Likewise, Public Infrastructure accounts transferred to the Registry of Public Infrastructure at the end of the year totaling P304.50 million was erroneously debited to Prior Year’s Adjustments (PYA) account instead of Government Equity, of which the amount of P288.65 million represents projects not yet completed.

a. Record the payments of progress billings and not yet completed projects under the account, Construction-in-Progress;

b. Record only completed projects

with all the supporting documents in the Registry of Public Infrastructure; and

c. Close the Public Infrastructure

account to Government Equity and not to Prior Year’s Adjustment account.

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The balance of the account Due from LGUs is misstated due to the adjustments made in the amount of P2.06 billion which was not supported by sufficient, appropriate, reliable and valid documents; and the offsetting of the share of three LGUs from the traffic fines and penalties amounting to P18.37 million from the payable accounts of the LGUs to MMDA without proper notification. Further, MMDA failed to collect the amount of P55.28 million from the LGUs representing their mandatory five percent contribution.

a. Submit valid and sufficient documents to support the adjustments made on the account to justify the reliability and correctness of the adjustments made; otherwise, the previous entries made to adjust the accounts should be reversed;

b. Coordinate/notify the concerned

LGUs on the offsetting of their share from collections of traffic fines and penalties;

c. Send collection letters to LGUs

who acknowledged/responded in the confirmation letters to remit their previous years unremitted contributions to MMDA; and

d. Make representations with the

DBM for the release to MMDA of the amount of contributions from the previous years which were not remitted by the LGUs.

9.5.22 Pasig River Rehabilitation Commission

The operating expenses totaling P101.40

million of the Pasig River Ferry Service Project (PRFSP) since the start of its operation on March 9, 2007 exceeded the income from the operation of the Ferry Service amounting to P7.33 million disclosing a deficit of P94.07 million which shows that the PRFSP has been operating at the loss, thus entailing a big amount of appropriation which otherwise the government could have used to finance other government priority projects. (Pasig River Rehabilitation Commission (PRRC))

Evaluate the reasonableness of the present sharing scheme and consider the possibility of increasing the share of PRRC from the collections and analyze and evaluate the operating expenditures of the Ferry Service and consider adopting cost-cutting measures

The objective of the Pasig River Ferry Service Project (PRSFP) was not fully achieved because out of 14 ferry stations targeted for construction, only 10 were constructed and are operational.

Hasten the construction of the remaining ferry stations and require the operator to provide 50-seater capacity vessel pursuant to the provision of Section 5.1 of the

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Moreover, the Riverbanks Ferry Station and three satellites stations which were not included in the project’s target were constructed for total cost of P19.59 million but were not utilized because the areas along the river are not navigable, thus, resulting in the wastage of government funds. (PRRC)

aforementioned contract in order to service the passenger at the Riverbanks and at the three satellites stations and enforce the provision of Section 15 of the contract on penalty clause.

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