2011 afr natlgovt vol1a

Ma. Gracia M. Pulido Tan Chairperson

27 September 2012

His Excellem:y BENIGNO SIMEON C. AQUINO III President of the Philippines Malacafiang, Manila

Dear Mr. President:

Republic of the Philippines

COMMISSION ON AUDIT OF.FICE OF THE CHAIRPERSON

Commonwealth Avenue, Quezon City, Philippines

I have the honor to submit, pursuant to Section 4, Article IX-0 of the Constitution of the Philippines, the following 2011 reports:

1. Audit Performance Summary Report 2. Annual Financial Repoti:s

• National Governrrtet\t (Volumes 1-A and 1-D) • Government-Owned and/or Controlled Corporations (Volumes II-A and II-B) • Local Governm�nt Units (Volumes III·A and Ill-B)

The Audit Performance Summary Report contains the highlights of the Annual Financial Reports, for quick reference. This is our first Report of this nature, and we trust that you will find it useful.

Very truly yours,

Phone: (632) 952-5700 local I 0 lt/931-9232/931-9220 /951-0936 Fax: (632) 931-9223 Email: [email protected] Wcl>sitc: www.coa.gov.ph


27 September 2012

His Excellency BENIGNO SIMEON C. AQUINO Ill President o f the Philippines Malacaiiang, Manila

Dear Mr. President:

Republic of the Philippines

COMMISSION ON AUDIT

OFFICE OF TilE CHAIRPERSON Commonwealth Avenue, Quezon City, Philippines

I have the honor to submit, pursuant to Section 4, Article IX-0 of the Constitution of the Philippines, the following 2011 reports:

1. Audit Performance Summary Report 2. Annual Financial Reports

• National Govemment (Volumes 1-A and 1-D) • Government-Owned and/or Controlled Corporations (Volumes II-A and 11-D) • Local Government Units (Volumes Ill-A and Ill-B)

The Audit Performance Summary Report contains the highlights of the Annual Financial Reports, for quick reference. This is our first Report of this nature, and we trust that you will

find it useful.

Very truly yours.

. Phohe: (632) 952-5700 local I 0 II /931-9232 /931-9220 /951-0936 Fax: (632) 931-9223 Email: [email protected] Website: www.coa.guv.ph

.Ma. Gracia M. Pulido Tan

Chairperson

27 September 2012

The Honorable

JUAN PONCE ENRILE President, Philippine Senate GS.IS Complex, Pasay City

Dear Mr. President:

I have the honor to submit, pursuant to Section 4, Article IX-D of the Constitution of the Philippines, the following 2011 reports:


• National Government (Volumes 1-A and 1-B) • Government-Owned andfor Controlled Corporations (Volumes II-A and II-B) • Local Government Units (Volumes Ill-A and Ill-B).


Very truly yours,

Phone: (632) 952-5700 localiOII/931-9232/931-9220 /951-0936 Fax: (632) 931-9223 Email: [email protected] Website: www.coa.gov.ph


27 September 2012

The Honorable FELICIANO R. BELMONTE, JR. Speaker, House of Representatives National Government Center Quezon City

Dear Mr. Speaker:



• National Government (Volumes 1-A and 1-B) • Government-Owned and/or Controlled Corporations (Volumes II-A and 11-B) • Local Government Units (Volumes lll·A and Ill-B)


Very truly yours,

If

Phone: (632) 952-5100 locaiiOll/931-9232/931-9220 /951-0936 Fax: (632) 931-9223 Email: [email protected] Website: www.coa.gov.ph

Ma. Gracia M. Pulido Tan

Chairperson

27 September 2012

The Honorable

FRANKLIN M. DRILON

Chairman, Committee on Finance Philippine Senate GSIS Complex, Pasay City

Dear Senator Drllon:

I have the honor to submit, pursuant to Section 4, Article IX·D of the Constitution of the Philippines, the following 2011 reports:


• National Government (Volumes 1-A and l·B) • G9vernment-Owned and/or Controlled Corporations (Volumes 11-A and II-B) • Local Government Units (Volumes 111-A and Ill-B)


Very truly yours,

Phone: (632) 952-5700 local1011 /931-9232 I 931-9220/951-0936 Fax: (632) 931-9223 Email: [email protected] Website: www.coa.gov.ph

Ma. Gracia M. Pulido Tan

Chairperson

27 September 2012

The Honorable

CHAIRMAN, COMMITIEE ON APPROPRIATIONS

House of Representatives National Government Center Quezon City

Dear Mr. Chairman:



• National Government (Volumes 1-A and 1-B) • Government-Owned and/or Controlled Corporations (Volumes II-A and II-B) • Local Government Units (Volumes Ill-A and Ill-B)

The Audit Performance Summary Report contains the highlights of the Annual Financial Reports, for quick reference. This is our first Report of this nature, and we trust that you will find It useful.

Very truly yours,

Phone: (632) 952-5700 local1011/931-9232/931-9220 /951-0936 Fax: (632) 931-9223 Email: [email protected] Website: www.coa.gov.ph

norren

Sticky Note

Unmarked set by norren

2011

Annual Financial Report

National Government

Volume I-A

Page

I. INTRODUCTION 1

II. REPORT HIGHLIGHTS 5

III. APPROPRIATIONS, ALLOTMENTS, OBLIGATIONS AND BALANCES 18

OverviewAppropriations, Allotments, Obligations and Balances

IV. FINANCIAL STATEMENTS

Condensed Balance Sheet 44Condensed Statement of Income and Expenses 45Condensed Statement of Government Equity 46Condensed Statement of Cash Flows 47Notes to Financial Statements 48

V. FINANCIAL ANALYSES

Balance Sheet 59 Assets Liabilities Equity

Statement of Income and Expenses 88 Revenue/Income Expenses Other Income/Expense Items Income/Loss

Statement of Cash Flows 112 Cash Inflows Cash Outflows Net Cash Provided By (Used) Cash Balances

VI. NATIONAL GOVERNMENT DEBT 121

VII. SPECIAL ACCOUNTS IN THE GENERAL FUND 139

VIII. COMPREHENSIVE AGRARIAN REFORM PROGRAM 144

IX. COMMON AND SIGNIFICANT AUDIT OBSERVATIONSAND RECOMMENDATIONS 158

TABLE OF CONTENTS

i

ii

List of Tables and Charts Table No. Particulars Report Highlights II-1 Allotment 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 Appropriations, Allotments, Obligations and Balances III-1 Appropriations, Allotments, Obligations and Balances III-2 Comparative Details of Appropriations III-3 Comparative Regular Appropriations By Department/Agency III-4 Appropriations for Special Purpose Funds III-5 Appropriations for Unprogrammed Fund III-6 Budgetary Support to Government Corporations III-7 Comparative Details of Allocations to LGUs III-8 Automatic Appropriations III-9 Continuing Appropriations by Department/Agency and Source III-10 Sources and Nature of Allotments III-11 Regular Allotments, by Department/Agency and Allotment Class III-12 Allotment from Special Purpose Funds 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 Summary of Unreleased Appropriations III-18 Summary of Allotments, Obligations and Balances III-19 Obligations Covered by Allotments, by Department/Agency and Allotment Class III-20 Obligations Not Covered by Allotments, by Department/Agency and Allotment Class Financial Analyses V.1-1 Assets, Liabilities and Equity V.1-2 Annual Growth in Assets CYs 2007-2011 V.1-3 Comparative Composition of Cash V.1-4 Departments/Offices with more than P2.0 billion Cash in Bank – Local Currency V.1-5 Departments/Offices with more than P100 million Cash in Bank – Foreign Currency 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

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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 Agencies with more than P100 million worth of Public Infrastructures V.1-14 Components of Other Assets Group V.1-15 Comparative Components of Current Liabilities V.1-16 Accounts Payable by Department/Office/Agency V.1-17 Departments/Offices with Other Liabilities V.1-18 Comparative Components of Long-term Liabilities

V.1-19 Departments/Offices with Completed Public Infrastructures and Reforestation Projects

V.2-1 Income/Revenue, 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 Income from Grants and Donations V.2-10 Departments/Offices which Reported Miscellaneous Income V.2-11 Components of Business Income V.2-12 Components of Permits and Licenses V.2-13 Breakdown of Income, by Department/Office and by Book V.2-14 Regional Breakdown of Income by Source V.2-15 Departments/Offices that Reported Highest Amounts for Current Operating Expenses V.2-16 Comparative Components of Personal Services V.2-17 Departments/Offices which Reported Huge Expenses for Personal Services V.2-18 Comparative Details of Maintenance and Other Operating Expenses V.2-19 Departments/Offices which Reported Highest Expenses for Maintenance and Other Operating Expenses V.2-20 Comparative Consumption of Supplies and Materials By Top Departments/Offices

V.2-21 Departments/Offices with Big Amounts of Other Maintenance and Operating Expenses

V.2-22 Comparative Components of Repairs and Maintenance Expenses V.2-23 Comparative Details of Subsidy To LGUs, GOCCs and NGOs/POs V.2-24 Comparative Breakdown of Subsidy to LGUs as Reported by DBM CO and ROs V.2-25 Comparative Breakdown of Subsidy to GOCCs as Reported by DOF-BTr V.2-26 Comparative Components of Financial Expenses V.2-27 Regional Breakdown of Expenses and Subsidies V.2-28 Comparative Details of Subsidy From (To) National Government Agencies V.2-29 Comparative Details of Subsidy To NGAs as Reported by BTr NG Books V.2-30 Comparative Details of Gains/(Losses)

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V.2-31 Comparative Condensed Statement of Income and Expenses V.3-1 Comparative 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 Investments in Stocks, Bonds and Other Securities, by Department/Office V.3-10 Composition of Financing Outflows National Government Debt VI-1 National Government Financing VI-2 Status of NG Debt VI-3 Comparative Outstanding NG Debt VI-4 Composition of Domestic Availments VI-5 Foreign Availments VI-6 Repayments by Creditor VI-7 Growth of Outstanding NG Debt VI-8 Comparative Interest Payments of the NG VI-9 Comparative Other Financial Expenses of the NG VI-10 Appropriations for Foreign-Assisted Projects by Department/Agency VI-11 Allotments for Foreign-Assisted Projects by Department/Agency Special Account in the General Fund VII-1 Appropriations, Allotments and Obligations, Special Account in the General Fund (Net of CARP) Comprehensive Agrarian Reform Program VIII-1 Appropriation of CARP VIII-2 Statement of Appropriations, Allotments, Obligations and Balances VIII-3 Balance Sheet VIII-4 Statement of Income and Expenses

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Chart No. Particulars

Report Highlights

II-1 Appropriations, Allotments and Obligations II-2 Allotments by Class II-3 Assets, Liabilities and Equity II-4 Comparative Composition of Assets II-5 Results of Current Operations II-6 Cash Flows, by Activities

Appropriations, Allotments, Obligations and Balances

III-1 Appropriations per GAA for FYs 2007 to 2011 III-2 Sources of Automatic Appropriations Financial Analyses V.1-1 Percentage Distribution of the Major Categories of Assets V.1-2 Trend of Cash V.1-3 Percentage Distribution of Property, Plant and Equipment by Classification V.1-4 Trend of Liabilities V.2-1 Comparison of Actual and Programmed Revenue V.2-2 Expenses of the National Government V.3-1 Segments of Cash Flows V.3-2 Trend of Net Cash Provided by (Used in) Operating, Investing and Financing Activities CY 2002-2011 National Government Debt VI-1 NG Debt by Source VI-2 Domestic Debt by Legal Source VI-3 Foreign Debt by Legal Source VI-4 NG Debt Growth VI-5 Actual Debt Service Expenditures of the NG VI-6 Principal Repayments of the NG Special Account in the General Fund VII-1 Total Assets, Liabilities and Equity, By Department, Special Account in the General Fund (Net of CARP) VII-2 Income by Department, Special Account in the General Fund (Net of CARP)

Common and Significant Audit Observations and Recommendations IX-1 Summary of Audit Opinions

AAB Authorized Agent Bank CFLs Compact Fluorescent LampsAAR Annual Audit Report CHD Center for Health DevelopmentABC Approved Budget for the Contract CHED Commission on Higher EducationABM Agency Budget Matrix CHR Commission on Human Rights ACEF Agricultural Competitiveness Enhancement Fund CICT Commission on Information and Communications ACPC Agricultural Credit Policy Council TechnologyADB Asian Development Bank CIP Construction in Progress AFMP Agricultural Fisheries and Modernization Program CLSU Central Luzon State UniversityAFP Armed Forces of the Philippines CMU Central Mindanao UniversityAFPSLAI Armed Forces of the Philippines Savings and Loan CNA Collecting Negotiation Agreement

Association, Inc. CNSC Camarines Norte State CollegesAFR Annual Financial Report CO Capital Outlay AGDB Authorized Government Depository Bank CO Central OfficeAGPF Agricultural Guarantee Pool Fund COA Commission on Audit AHS Autonomous High School COMELEC Commission on Elections ALDA ARCs Level of Development Assessment COP Congress of the Philippines ALGU Allocation to Local Government Units COPIPAGV Comprehensive Pilot Intervention Plan Against Gender ALI Agrarian Law Implementation and ViolenceALI Ayala Land, Inc. COR Cash Operations ReportAMWSLAI Air Material Wings Savings and Loan Association, Inc. CPCP Catholic Bishops Conference of the PhilippinesANC Applied Nutrition Council CS Certified SeedsAO Administrative Order CSC Civil Service Commission APP Annual Procurement Program CSU Cagayan State UniversityAPT Asset Privatization Trust CTU Cebu Technological UniversityARBOs Agrarian Reform Beneficiaries Organizations CVLMROS Cagayan Valley Lowland and Marine Research Outreach ARBs Agrarian Reform Beneficiaries CVS Compliance Verification SystemARCMTS ARCs Monitoring and Tracking System CY Calendar YearARCPII ARC Project II DA Department of Agriculture ARCs Agrarian Reform Communities DAP Disbursement Acceleration ProgramARE Acknowledgement Receipt for Equipment DAR Department of Agrarian Reform ARF Agrarian Reform Fund DBM Department of Budget and Management ARISP Agrarian Reform Infrasturture Support Projects DBP Development Bank of the Philippines ARMM Autonomous Region in Muslim Mindanao DENR Department of Environment and Natural Resources ASU Aklan State University DepED Department of Education AVACC Camp Aguinaldo Veterans and Association Credit DFA Department of Foreign Affairs

Cooperative DILG Department of the Interior and Local Government AVAs Agribusiness Entrepreneurship Development Program DMMMSU Don Mariano Marcos Memorial State UniversityBAC Bids and Award Committee DND Department of National Defense BB Barangay Bagsakan DO Division OfficeBC Barangay Center DOE Department of Energy BESF Budget of Expenditures and Sources of Financing DOF Department of Finance BFAD Bureau of Food and Drugs Administration DOH Department of Health BFAR Bureau of Fisheries and Aquatic Resources DOJ Department of Justice BFT Barangay Food Terminal DOLE Department of Labor and Employment BIR Bureau of Internal Revenue DOST Department of Science and Technology BMBE Barangay Micro Business Enterprise DOT Department of Tourism BnB Botika ng Barangay DOTC Department of Transportation and Communications BOC Bureau of Customs DPERF DMMMSU Pig Extension Research FarmBOO Build-Own-Operate DPWH Department of Public Works and Highways BOQ Bureau of Quarantine DREAM Disaster Risk Exposure, Assessment on MitigationBS Balance Sheet DRF Debt Repayment FundBSF Bond Sinking Fund DRPs Development Rights PaymentsBSGC Budgetary Support to Government Corporations DSF Debt Service FundBSP Bangko Sentral ng Pilipinas DSWD Department of Social Welfare and Development BSPMC Barangay Sub-Project Management Committees DTI Department of Trade and Industry BSWM Bureau of Soils and Water Management DVs Disbursement VouchersBTr Bureau of the Treasury E.O. Executive Order BU Bicol University EAMC East Avenue Medical CenterBUPRE Bureau of Post-Harvest Research and Extension ECs Electric CooperativesBWSC Bureau of Workers of Special Concerns EDC Energy Development CorporationC.N.A. Collective Negotiation Agreement EFPS Electronic Filing and Payment SystemCARP Comprehensive Agrarian Reform Program ENP Emergency Network ProjectCB-BOL Central Bank of the Philippines – Board of Liquidators ERC Energy Regulatory CommissionCCCP Climate Change Congress of the Philippines FAO Fisheries Administrative OrderCCNTS Cientos National Trade School FBs Farmer BeneficiairiesCCT Conditional Cash Transfers FDP-HEDF Faculty Development Program-Higher Education CDF Countrywide Development Fund Dev't Fund CENRO Community Environment and Natural Resources Office FE Financial Expenses

ACRONYMS

vi

FLA Fishpond Lease Agreement MRTB Multi Currency Retail Treasury BondFMR Farm-to-Market Roads MRTDC Metro Rail Transit Development CorporationFS Financial Statements MSMEs Micro, Small and Medium EnterprisesFY Fiscal Year MSU Mindanao State UniversityGAA General Appropriations Act MWSS Metropolitan Waterworks and Sewerage System GAAM Government Accounting and Auditing Manual NABCOR National Agribusiness CorporationGAAP Generally Accepted Accounting Principles NAFC National Agricultural and Fishery CouncilGAS Government Accountancy Sector NAIA Ninoy Aquino International AirportGFIs Government Financial Institutions NAPCO National ARCESS Program Coordinating OfficeGHQ General Headquarters NASSA National Secretarial for Social ChangeGL General Ledger NBI National Bureau of InvestigationGMDSS Global Maritime Distress and Safety System NCA Notice of Cash AllocationGOCCs Government-Owned and/or Controlled Corporations NCAA Non-Cash Availment Authority GOP Government of the Philippines NCR National Capital Region GSIS Government Service Insurance System NDA National Dairy AuthorityHBR Held Baggage Receipt NDC National Development CompanyHDMF Home Development Mutual Fund NEDA National Economic and Development AuthorityHEDF Higher Education Development Fund NEUST Nueva Ecija University of Science and TechnologyHEI Higher Education Institutions NFA National Food AuthorityHGC Home Guaranty Corporation NG National Government HIFHI Hospital with Heaven Indulge Food House Inc. NGAs National Government Agencies HILROS Hillyland Research Outreach Station NGAS New Government Accounting SystemHUDCC Housing and Urban Development Coordinating Council NGDAD National Government Debt Accounting DivisionIA Irrigators Association NGLAGU National Government Assistance to LGUsIACAT Inter Agency Council Against Trafficking NGOs Non-Governmental Organizations IAs Implementing Agencies NGP National Greening ProgramIBRD International Bank Reconstruction Development NHA National Housing AuthorityIBs Incandescent Bulbs NHMFC National Home Mortgage Finance CorporationIGP Income Generating Project NIA National Irrigation AdministrationILS Institute for Labor Studies NIPAS National Integrated Protected Areas SystemIMF International Monetary Fund NLRC National Labor Relations CommissionIRA Internal Revenue Allotment NLSF National Livelihood Support FundIROWR Infrastructure Right Way and Resettlement NORSU Negros Oriental State UniversityIRR Implementing Rules and Regulations NPC National Power Corporation ISF Informal Settler Families NSO National Statistics OfficeIT Information Technology NT National TreasuryJBIC Japan Bank for International Cooperation NTCA Notice of Transfer of Cash AllocationJDF Judiciary Development Fund NWRB National Water Resources BoardJORIFA Jose Rizal Famers Association ObR Obligation RequestJRMSC Jose Rizal Memorial State College ODA Official Development AssistanceKGA Keeping the General Accounts OEO Other Executive Offices KMS Kilometres OFW Overseas Filipino WorkerLABATT Labor Attache OMB Optical Media BoardLAD Land Acquisition and Distribution OP Office of the PresidentLAO Legal Adjudication Office OSEC Office of the Secretary LBP Land Bank of the Philippines OSG Office of the Solicitor GeneralLC Letters of Credit OTC Over-the-CounterLCC LGU Counterpart Commitment OTOP One-Town-One ProductLCCA Local Currency Current Account 4Ps Pantawid Pamilyang Pilipino ProgramLGUs Local Government Units PACCU Public Assistance and Complaints Coordinating UnitLRA Land Registration Authority PADCC Philippine Agribusiness Developmen Council CorporationLTFRB Land Transportation Franchising and Regulatory Board PAF Philippine Air Force LTI Land Tenure Improvement PAGASA Philippine Atmospheric, Geophysical and Astronomical LTO Land Transportation Office Services AdministrationLUUSRAI La Union United Swine Raisers Association, Inc. PAGCOR Philippine Amusement and Gaming Corporation LWOP Leave Without Pay PAG-IBIG Pagtutulungan sa Kinabukasan: Ikaw, Bangko Industriya MDFO Municipal Development Fund Office at GobyernoMDS Modified Disbursement System PAL Private Agricultural LandsMIAA Manila International Airport Authority PAPs Programs, Activities and ProjectsMICP Manila International Container Port PARO Provincial Agrarian Reform Office MIGA Multilateral Investment Guaranty Agency PASCOFBEC Palmera Small Coconut Farmers Beneficiaries MLs Management Letters CooperativesMMDA Metropolitan Manila Development Authority PBD Program Beneficiaries DevelopmentMNGAS Manual on NGAS PCA Philippine Coconut AuthorityMOA Memorandum of Agreement PCC Philippine Carabao CenterMOOE Maintenance and Other Operating Expenses PCG Philippine Coast GuardMPBF Miscellaneous Personnel Benefit Fund PCGG Presidential Commission on Good GovernmentMRT Metro Rail Transit PCOO Presidential Communications Operations Office

ACRONYMS

vii

PCSO Philippine Charity Sweeptakes Office ROCO Regional and Overseas Coordinating OfficePD Presidential Decree ROI Report of IncomePDAF Priority Development Assistance Fund ROP Republic of the PhilippinesPDIC Philippine Deposit Insurance Corporation ROW Right of WayPEEP Philippine Energy Efficiency Project RPCPPE Report of the Physical Count of PPEPEI Productivity Enhancement Incentive RPMO Regional Project Management Office PENRO Provincial Environment and Natural Resources Office RPSU Regional Payroll Services UnitPERA Personnel Emergency Relief Allowance RSMI Report of Supplies and Materials IssuedPGF Pension Gratuity Fund RWS Rural Water SupplyPHC Philippine Heart Center SAAOB Statement of Appropriations, Allotments, Obligations PHIC/PHILHEALTH Philippine Health Insurance Corporation & Balances PHILSCA Philippine State College of Aeronautics SAFE Student Assistance Fund for EducationPI Public Infrastructure SAGF Special Account in the General FundPITAHC Philippine Institute of Traditional and Alternative Health SAJ Special Allowance for the Judiciary

Care SAOB Statement of Allotments, Obligations and Balances PITC Philippine International Trading Center SARO Special Allotment Release Order PME Planning, Monitoring and Evaluation SBGFC Small Business Guarantee and Finance CorporationPMO Privatization and Management Office SCBA Self Contained Breathing ApparatusPNB Philippine National Bank SCF Statement of Cash FlowsPNCC Philippine National Construction Corporation SDs Supporting DocumentsPNHB Philippine Navy Housing Board SEA Self-Employment Assistance PNOC Philippine National Oil Company SGF Special Guaranty Fund PNP Philippine National Police SIE Statement of Income and ExpensesPNPP Philippine Nuclear Power Plant SING Subsidy Income from National GovernmentPNR Philippine National Railways SL Subsidiary LedgersPOCC Philippine Oncology Cancer Center SLC Supplies Ledger CardPOE Program of Expenditures SPF Special Purpose Fund POEA Philippine Overseas Employment Administration SPTB Special Purpose Treasury BondsPOLO Philippine Overseas Labor Office SRF Special Reserve Fund POLOs Philippine Overseas Labor Officers SRMS Supplementary Reading and Reference MaterialsPOs Peoples’ Organizations SRTC Statistical Research and Training CenterPPA Philippine Ports Authority SSF Securities Stabilization Fund PPE Property, Plant and Equipment SSS Social Security SystemPPELC Property, Plant and Equipment Ledger Card STF Special Trust FundPRC Professional Racing Commission STII Science and Technology Information InstitutePRRC Pasig River Rehabilitation Commission STUFAP Student Financial Assistance ProgramPS Personal Services STW Shallow Tube WellsPS Procurement Service SUCs State Universities and Colleges PSF President Social Fund SVLP Special Vehicle Loan ProgramPTA Philippine Tourism Authority TBPs TekBok Providers PTAP Public Transport Assistance Program TCC Tax Credit CertificatesPVAO Philippine Veterans Affairs Office TCCP Tariff and Customs Code of the PhilippinesPVB Philippine Veterans Bank TDM Tax Debit MemoPY Prior Year TESDA Technical Education and Skills Development AuthorityR.A. Republic Act TNP Tindahan Natin ProjectRA Regular Agency TOP Treasurer of the PhilippinesRAD Revenue Accounting Division (BIR) UCPB United Coconut Planters BankRAO Registry of Allotments and Obligations UNICEF United Nations Children's FundRAPAL Registry of Appropriations and Allotment UP University of the PhilippinesRASPF Registry of Appropriations for Special Purpose Fund USF Ubay Stock FarmRaSSFIP Rapid Seed Supply Financing Project VMMC Veterans Memorial Medical CenterRATA Representation Allowance and Transportation Allowance WFP Work and Financial PlanRFU Regional Field Unit WMSU Western Mindanao State UniversityRHIBs Rigid Hull Inflatable Boats ZCSECA Zamboanga City Special Economic Zone AuthorityRLIP Retirement and Life Insurance Premium

ACRONYMS

viii

I. INTRODUCTION

1

INTRODUCTION

1.1 Legal Bases

The Commission on Audit (COA) is mandated under Section 4, Article IX-D of the Philippine Constitution to submit to the President and Congress the Annual Financial Report (AFR) of the National Government. On the other hand, Section 41 of Presidential Decree No. 1445, otherwise known as the Auditing Code of the Philippines, requires that an annual report on the financial condition and results of operation of all agencies of the government, which shall include recommendations of measures necessary to improve their effectiveness and efficiency shall be submitted not later than September 30 of each year.

In conformity with this mandated function, the COA, through the Government Accountancy Sector (GAS) submits to the President and the Congress the Annual Financial Report (AFR) of the National Government (NG) for calendar year (CY) 2011.

1.2 Objectives

The AFR aims to provide information on the total approved budget/authorized appropriations, releases of allotments, utilization/obligations incurred and Notice of Cash Allocations (NCA) received by national government agencies (NGAs), cash inflows and outflows and the financial condition and results of operations as shown in the consolidated financial statements of the NGAs. The budget data serve as useful tools for the Congress in the enactment of appropriations and other laws, while the other information presented in the AFR aspires to guide the President, legislators, economic planners and other government executives in the formulation of economic policies, in the development of budget plans, and in aid of legislation.

1.3 Contents/Features

The AFR presents the main financial statements, namely: Balance Sheet (BS), Statement of Income and Expenses (SIE), Statement of Government Equity (SGE) and Statement of Cash Flows (SCF), in condensed and detailed form with comparative figures for CYs 2010 and 2011. It also features the appropriations, allotments, obligations and balances by department/agency and by source, and the common and significant audit observations and recommendations.

The report comprises of the following:

Volume I-A – Contains the Report Highlights, Condensed Financial Statements, and Financial Analyses, and write-ups on the Appropriations, Allotments, Obligations and Balances, NG Debt, Special Accounts in the General Fund, and Comprehensive Agrarian Reform Program

Volume I- B – Includes the Detailed Financial Statements by Department/ Office, Schedules and Annexes

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1.4 Methodologies

1.4.1 Appropriations, Allotments, Obligations and Balances

The budget data shown in this report include the total 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 which do not require periodic action by Congress. The total allotments released by the Department of Budget and Management (DBM) during the year are monitored and recorded in the Registry of Appropriations and Allotments (RAPAL) maintained by COA-GAS. These information are summarized together with the obligations incurred based on the Statement of Allotments, Obligations and Balances submitted by NGAs.

The appropriations and allotments were reconciled with the records of the DBM and the NGAs and necessary corrections and adjustments were communicated and effected accordingly. Similarly, obligations incurred by agencies were verified to ascertain that such commitments were duly covered by allotments and overdraft in allotments, if any, was properly coordinated with the concerned agency.

1.4.2 Financial Statements

The 2011 financial reports of the NG were prepared by agency accountants

in accordance with the rules and regulations under the New Government Accounting System (NGAS). The accounts in the advance copies of trial balances submitted by NGAs were uploaded into the AFR System from which the individual agency BS, SIE as well as the SGE were generated and compared with the audited FS submitted by the COA audit sector. The system also generated the overall consolidated FS by department/office.

The elimination of inter-agency and intra-agency accounts was based on the

overall BS. The 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, LGUs and GOCCs. On the other hand, the intra-agency receivables were also eliminated with intra-agency payables to reflect the balances of reciprocal accounts subsisting between the Central Offices (COs), the Regional Offices (ROs)/Staff Bureaus, and the Operating Units (OUs). After the elimination, however, the inter-agency and intra-agency accounts still have balances since these are not reconciled at the agency level.

The total income of the NG was based on the consolidated SIE generated

from the system presented by Regular Agency (RA) Book and National Government (NG) Book. The breakdown of the total income presented in this report was based on the consolidated Report of Income (ROI) submitted by the NGAs, since under the NG Book maintained by the Bureau of the Treasury (BTr.), the various tax revenue accounts are categorized as Other National Taxes while the non-tax revenue accounts are lumped in Other Service Income.

3

The SCF submitted by NGAs were analyzed and converted into the prescribed format to facilitate inputting and processing of data into the AFR system. Due to lack of a module to offset collections of income/revenue against remittances 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 system generated the overall consolidated SCF by book, by department/office and by agency.

1.4.3 National Government Debt

The data on NG debt were based on the 2011 advance copy of the FS, Actual Debt Service Expenditures provided by the BTr, Department of Finance. Budget information were sourced from the 2012 Budget of Expenditures and Sources of Financing (BESF) and the 2011 General Appropriations Act (GAA), R.A. No. 10147, furnished by the Department of Budget and Management (DBM). The National Government Debt Accounting Division (NGDAD), BTr submits to COA-GAS the analyses of loans and bonds payable, both foreign and domestic. Based on the analyses, the data on beginning balances of outstanding NG debt are reconciled with the ending balances reflected in the 2010 report. The availments and repayments during the year were also based on the NGDAD analyses. 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.

Appropriations for foreign assisted projects by department/agency were taken from the 2011 GAA, while releases of allotments were based on the Agency Budget Matrices (ABMs) and individual Special Allotment Release Orders (SAROs) 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 information for SAGF as of December 31, 2011 were obtained after the consolidation of the trial balances submitted by national government agencies except the CARP (Fund 158) which is presented in Part VIII of this report. Transactions pertaining to SAGF, which were integrated in the General Fund 101 of the departments/agencies since no separate books were maintained, were not included herein. However, the income collected by various NGAs and remitted to the National Treasury was included based on the actual income recorded in the books of the BTr either as Grants and Donations or Other Service Income. The utilization of the amount is subject to the approval of special budget released through SAROs and issuance of NCAs.

1.4.5 Comprehensive Agrarian Reform Fund (CARP)

The data on budget/appropriations, allotments and obligations presented in this portion were gathered from the materials submitted by the Presidential Agrarian Reform Council (PARC) and from the DAR auditing unit in-charge of the consolidation of the CARP.

4

The 2011 data on appropriations, allotments and obligations submitted by the seven (7) implementing agencies (IA) to PARC were compared with that of the SAOB submitted by the IAs to COA-GAS to reconcile the figures. However, discrepancies were noted, thus for purposes of this report, the data gathered by the COA-GAS for fiscal year 2011 are presented.

Consolidation of fiscal year 2011 Balance Sheet and Statement of Income and Expenses of all implementing agencies pertaining to CARP (Fund 158) and the accounts of CARP-Land Bank of the Philippines (LBP) was done in order to come up with the consolidated data on assets, liabilities, equity, income and expenses.

1.5 Coverage

This year’s financial data were obtained from the audited and advance copies of financial statements (FS)/reports of 329 agencies. Of the total number of NGAs, only five have not submitted their financial reports namely, Eastern Visayas State University, Iloilo State College of Fisheries, National Climate Change Commission, Cultural Center of the Philippines and Fiber Industry Development Authority (National Government Book only). Of the 494 targeted number of FS/Preliminary Trial Balances (PTBs) to be included in the AFR, 224 or 45.34 percent are based on the audited FS while the 270 or 54.66 percent are from the advance copies of FS submitted by the NGAs’ accounting units. The unsubmitted audited FS of other departments/offices were received by GAS after the cut-off date.

II. REPORT HIGHLIGHTS

5

REPORT HIGHLIGHTS 2.1 Budget Information

The total appropriations, allotments and obligations for FY 2011 as reported by national government agencies amounted to P2.409 trillion, P2.161 trillion, and P1.997 trillion, respectively. Chart II-1 shows the graphical presentation of appropriations, allotments, and obligations.

Chart II - 1 Appropriations, Allotments and Obligations (in billion pesos)

2.1.1 Appropriations – P2.409 trillion

This year’s total available appropriations amounted to P2.409 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. These were lower by 3.55 percent or P88.69 billion than the 2010 level of P2.497 trillion.

The sources of appropriations for this year were the following: The appropriations authorized under RA No. 10147, otherwise known as the

General Appropriations Act (GAA) of 2011 amounting to P1.327 trillion, comprised of Regular Appropriations – P758.61 billion, Special Account in the General Fund – P12.57 billion, Special Purpose Funds (SPF) – P229.21 billion and Automatic Appropriations – P326.41 billion.

Republic Act (RA) No. 10147 P1,326.79 billion Other Acts 766.93 billion Balance of Previous Year’s

Appropriations

315.06 billion

2,408.792,161.40

1,997.29

Appropriations Allotments Obligations

6

The details of appropriations authorized under Other Acts or laws for the year

totaling P766.93 billion were as follows:

Amount (in million pesos)

1. Debt Service Fund (DSF) 710,264.41 Principal Repayment 444,196.12 Interest Payment 266,068.29

2. Retirement and Life Insurance Premium 25,430.61 3. Special Account in the General Fund (SAGF) 31,231.76

Total 766,926.78

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

The unobligated/unreleased balance of the preceding year’s appropriations authorized to be used in the current year under RA No. 9970, the 2010 GAA, and other laws amounting to P315.07 billion consisted of the following:


1. Unobligated Allotments 91,315.22 RA No. 9970 81,369.65

Regular Appropriations 66,812.53 Special Purpose Fund 12,240.31 Automatic Appropriations 2,316.81

Other Acts 9,945.57 Regular Appropriations 3,256.63 Automatic Appropriations 6,688.94

2. Unreleased Appropriations 223,750.20 RA No. 9970 223,750.20

Regular Appropriations 76,347.57 Special Purpose Fund 147,397.63 Automatic Appropriations 5.00

Special Account in the General Fund 5.00

Total 315,065.42


2.1.2 Allotments – P2.161 trillion

Of the total available appropriations, P2.161 trillion or 89.73 percent was

released/allotted to fund the programs and projects of various NGAs, including repayment of loan principal, and payment of interest, commitments fees and other charges. These were sourced from the following: RA No. 10147 – P 1.258 trillion, Other Acts – P766.93 billion and forwarding balances of continuing appropriations – P136.08 billion. Table II - 1 presents the details of allotments by source and allotment class.

7

Table II - 1 Allotment by Source of Appropriations and Allotment Class (in million pesos)

Source Allotment Class Total PS MOOE CO FE

RA No. 10147 1,258,396.96 _481,797.44 581,698.93 194,898.02 2.57

Regular 758,632.14 399,406.94 184,954.91 174,267.72 2.57SPF 161,804.84 79,700.40 63,222.28 18,882.15 - SAGF 11,554.05 2,372.55 8,956.95 224.55 - Automatic 326,405.92 ____ 317.55 324,564.78 1,523.59 -_

IRA 286,944.24 - 286,944.24 - - Tax Subsidy 18,999.93 - 18,999.93 - - Customs

Duties 14,420.64 - 14,420.64 - - SAGF 3,169.73 311.04 2,269.22 589.46 - Grants and

Donations 2,548.05 6.51

1,620.13 921.42 - Tax Refunds 294.04 - 294.04 - - NIPAS 20.00 - 16.39 3.61 - Sale of Assets 9.29 - 0.19 9.11 -

Other Acts Automatic 766,926.78 __25,435.65 16,761.68 458,661.16 266,068.29

DSF 710,264.41 -_ - 444,196.12 266,068.29Principal 444,196.12 - - 444,196.12 - Interest 266,068.29 - - - 266,068.29

RLIP 25,430.61 25,430.61 - - - SAGF 31,231.76 5.04 16,761.68 14,465.04 -

Continuing 136,077.38 1,083.43 57,594.08 77,399.87 -_Unobligated 91,315.22 1,083.43 39,691.03 50,540.76 -_

RA No. 9970 81,369.65 572.91 34,430.31 46,366.43 -_ Regular 66,812.53 533.04 26,067.66 40,211.82 - SPF 12,240.31 1.27 6,840.82 5,398.22 - Automatic 2,316.81 38.60 1,521.83 756.38

Other Acts 9,945.57 510.52 5,260.72 4,174.33 -_ Regular 3,256.63 481.12 1,322.94 1,452.57 - Automatic 6,688.94 29.40 3,937.78 2,721.76 -

Unreleased 44,762.16 - 17,903.05 26,859.11 -_ Regular 9,830.80 - 1,175.94 8,654.87 - SPF 34,931.35 - 16,727.11 18,204.24 -

Grand Total 2,161,401.12 508,316.51 656,054.69 730,959.05 266,070.86 Difference between totals and sum of components is due to rounding off.

Almost half or P997.21 billion representing 46.14 percent of the total

allotments for the year was released for Debt Service and Internal Revenue Allotments with P710.26 billion and P286.94 billion, respectively. Debt Service was intended for the payments of principal and interest of loans of the NG while the IRA was released as subsidy of the NG to LGUs.

Chart II – 2 presents the allotments by class.

8

Chart II - 2 Allotments by Class

(in billion pesos)

Of the total allotments for CO, P444.20 billion or 60.77 percent was allotted for loan principal repayments.

2.1.3 Obligations – P1.997 trillion

The reported obligations covered by allotments for the year reached P1.997 trillion while P207.43 million was an overdraft. 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. 10147 1,135,778.28 478,391.47 537,674.50 119,709.78 2.54 Regular 657,061.89 396,783.94 149,318.52 110,956.89 2.54 SPF 146,352.63 78,943.68 59,209.39 8,199.55 - SAGF 9,402.61 2,349.67 6,904.53 148.40 - Automatic 322,961.16 314.18 322,242.05 404.93 -

IRA 286,942.56 - 286,942.56 - - Tax Subsidy 18,941.23 - 18,941.23 - - Customs Duties 14,420.64 - 14,420.64 - - SAGF 1,355.66 309.13 1,030.25 16.29 - Grants and

Donations 991.01

5.04 604.17 381.80 - Tax Refunds 292.96 - 292.96 - - NIPAS (Sec. 16

RA 7586) 11.41 - 10.06 1.35 - Sale of Assets 5.68 - 0.19 5.50 -

508.32

656.05730.96

266.07

PS MOOE CO FE

9

Table II-2 continued

Source Expenditure Class Total PS MOOE CO FE

Other Acts 745,975.13 28,811.38 10,238.88 444,856.58 266,068.29 DSF 710,264.41 - - 444,196.12 266,068.29

Principal 444,196.12 - - 444,196.12 - Interest 266,068.29 - - - 266,068.29

RLIP 24,806.94 24,806.94 - - - SAGF 10,903.78 4.44 10,238.88 660.46 -

Continuing 115,539.45 297.63 50,692.42 64,549.39 - Unobligated 76,859.16 297.63 33,039.58 43,521.95 -

RA No. 9970 71,976.81 144.33 29,647.69 42,184.79 - Regular 60,033.65 141.45 22,093.23 37,798.96 - SPF 10,501.99 1.27 6,766.61 3,734.12 - Automatic 1,441.17 1.62 787.85 651.70 -

Other Acts 4,882.34 153.30 3,391.89 1,337.16 - Regular 1,000.03 149.61 514.15 336.27 - Automatic 3,882.31 3.69 2,877.74 1,000.89 -

Unreleased 38,680.29 - 17,652.84 21,027.45 - RA No. 9970

Regular 9,311.07 - 987.54 8,323.53 - SPF 29,369.22 - 16,665.30 12,703.92 -

Grand Total 1,997,292.86 503,500.48 598,605.80 629,115.75 266,070.83


2.1.4 Unused/Balance of Appropriations – P411.7 billion

At year-end, the appropriations had unused balance of P411.70 billion

consisting of unalloted/unreleased appropriations and unobligated allotments with P247.38 billion and P164.32 billion, respectively.

The unalloted/unreleased appropriations represent the balance of the total

appropriations for the year of P2.409 trillion over the total allotments released to various national government agencies of P2.161 trillion. Table II-3 shows the balance of appropriations by source.

Table II - 3 Unalloted/Unreleased Appropriations, by Source

(in million pesos) Source Appropriations Allotments Unreleased

Current Year 2,093,720.46 2,025,323.74 68,396.73 RA 10147 1,326,793.68 1,258,396.96 68,396.73

Regular 758,610.01 758,632.14 (22.13) SAGF 12,566.90 11,554.05 1,012.85SPF 229,210.85 161,804.84 67,406.01

Automatic 326,405.92 326,405.92 -___ IRA 286,944.24 286,944.24 - Tax Subsidy 18,999.93 18,999.93 - Customs Duties 14,420.64 14,420.64

10


Source Appropriations Allotments Unreleased SAGF 3,169.73 3,169.73 - Grants and Donations 2,548.05 2,548.05 - Tax Refunds 294.04 294.04 - NIPAS 20.00 20.00 - Sale of Assets 9.29 9.29 -

Other Acts 766,926.78 766,926.78 -___ DSF 710,264.41 710,264.41 - RLIP 25,430.61 25,430.61 - SAGF 31,231.76 31,231.76 -

Continuing Appropriations 315,065.42 136,077.38 178,988.04 RA 9970 305,119.85 126,131.81 178,988.04

Alloted 81,369.65 81,369.65 -____ Regular 66,812.53 66,812.53 - SPF 12,240.31 12,240.31 - Automatic 2,316.81 2,316.81 -

Unalloted 223,750.20 44,762.16 178,988.04 Regular 76,347.57 9,830.80 66,516.76SPF 147,397.63 34,931.35 112,466.27 Automatic 5.00 - 5.00

Other Acts 9,945.57 9,945.57 -____ Alloted 9,945.57 9,945.57 -____

Regular 3,256.63 3,256.63 - Automatic 6,688.94 6,688.94 -

Total 2,408,785.89 2,161,401.12 247,384.77 Difference between totals and sum of components is due to rounding off.

The unobligated balance of allotments amounting to P164.32 billion refers to

the variance between total allotments of P2.161 trillion and obligations covered by allotments of P1.997 trillion. The unobligated balance of allotments by source is presented in Table II – 4.

Table II-4 Unobligated Allotments, by Source

(in million pesos) Source Allotments Obligations Balance

Current Year 2,025,323.74 1,881,545.98 143,777.75 RA 10147 1,258,396.96 1,135,570.86 122,826.10

Regular 758,632.14 656,855.27 101,776.87 SAGF 11,554.05 9,402.61 2,151.44SPF 161,804.84 146,352.49 15,452.35

Automatic 326,405.92 322,960.48 3,445.44 IRA 286,944.24 286,942.56 1.68 Tax Subsidy 18,999.93 18,941.23 58.70 Customs Duties 14,420.64 14,420.64 - SAGF 3,169.73 1,355.66 1,814.06 Grants and Donations 2,548.05 990.33 1,557.72 Tax Refunds 294.04 292.96 1.08 NIPAS 20.00 11.41 8.59 Sale of Assets 9.29 5.68 3.61

11


Source Allotments Obligations Balance Other Acts 766,926.78 745,975.13 20,951.65

DSF 710,264.41 710,264.41 - RLIP 25,430.61 24,806.94 623.67 SAGF 31,231.76 10,903.78 20,327.98

Continuing Appropriations 136,077.38 115,539.45 20,537.93RA 9970 126,131.81 110,657.10 15,474.71

Alloted 81,369.65 71,976.81 9,392.84Regular 66,812.53 60,033.65 6,778.88SPF 12,240.31 10,501.99 1,738.32Automatic 2,316.81 1,441.17 875.64

Unalloted 44,762.16 38,680.29 6,081.87Regular 9,830.80 9,311.07 519.73SPF 34,931.35 29,369.22 5,562.13

Other Acts 9,945.57 4,882.34 5,063.23Alloted 9,945.57 4,882.34 5,063.23

Regular 3,256.63 1,000.03 2,256.60Automatic 6,688.94 3,882.31 2,806.63

Total 2,161,401.12 1,997,085.43 164,315.69

Difference between totals and sum of components is due to rounding off. The total unobligated allotments for the current year consist of P4.93 billion –

PS, P57.45 billion – MOOE and P101.94 billion – 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

As of December 31, 2011, the NG had total assets of P3.299 trillion and total liabilities of P5.382 trillion resulting to negative government equity of P2.083 trillion. Compared to the previous year, all components of the Balance Sheet increased as shown in Chart II - 3.

Chart II- 3 Assets, Liabilities and Equity

(in trillion pesos)

3.299 3.139

5.382 5.018

(2.083) (1.880)

Assets Liabilities Equity

2011 2010

12

2.2.1 Assets – P3.299 trillion

Total assets of P3.299 trillion increased by P160.58 billion or 5.12 percent

more than last year’s P3.139 trillion which was due to the increases in Investments – P174.14 billion, Property, Plant and Equipment – P1.26 billion and Other Assets – P1.87 billion offset by the decrease in Current Assets of P16.69 billion. 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 reduced by P16.69 billion this year due to decreases in Cash

and Other Current Assets amounting to P61.66 billion and P3.78 billion, respectively, exceeded the increases in Receivables – P16.69 billion, Prepayments – P30.89 billion and Inventories – P1.17 billion.

Investments’ growth of P174.14 billion this year was brought about by the

P161.20 billion or 26.19 percent increments in Sinking Fund contributions and P12.94 billion improvement in Investment in Securities.

Property, Plant and Equipment, net of accumulated depreciation and Other

Assets showed minimal increases of P1.26 billion and P1.87 billion, respectively.

2.2.2 Liabilities – P5.382 trillion

The value of liabilities increased from P5.018 trillion last year to P5.382 trillion or by P363.58 billion this year. The growth was contributed by the following: Long Term Liabilities – P465.98 billion and Deferred Credits – P0.43 billion offset by the drop in Current Liabilities by P102.83 billion as shown in Table II - 5.

109.50107.64

985.80

1,203.32

842.10

987.06

1,016.24

1,186.64

Other Assets

Property, Plant andEquipment

Investments

Current Assets

2010 2011

13

Table II - 5 Comparative Composition of Liabilities (in billion pesos)

Particulars Amount Increase/(Decrease) 2011 2010 Amount Percent

Long Term Liabilities 4,644.76 4,178.79 465.98 11.15 Bonds Payable _3,777.31 3,345.79 431.53 12.90

Domestic 2,563.09 2,174.70 388.39 17.86 Foreign 1,214.22 1,171.08 43.14 3.68

Loans Payable 867.34 832.97 34.37 4.13 Foreign 866.20 829.45 36.75 4.43 Domestic 1.14 3.52 (2.38) (67.60)

Mortgage Payable 0.03 0.01 0.01 114.13 Other 0.03 0.01 0.01 114.13

Other Long Term Liabilities 0.08 0.01 0.07

532.98

Current Liabilities 710.19 813.02 (102.83) (12.65)Loans Payable –

Domestic, Current

297.38

553.22

(255.84)

(46.25)Intra-Agency Payables 147.72 7.21 140.51 1,949.27 Payable Accounts 114.37 122.37 (8.00) (6.54)Other Liability Accounts 85.47 80.40 5.06 6.30 Inter-Agency Payables 65.25 49.82 15.44 30.99

Deferred Credits Other Deferred Credits 27.06 26.63 0.43 1.61

Total 5,382.01 5,018.44 363.58 7.24


Majority or 99.96 percent or P4.643 trillion of the total Long Term Liabilities

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

2.2.3 Government Equity – (P2.083) trillion

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

negative balance of P2.083 trillion in equity. This year’s level posted an increase of P203 billion or 10.80 per cent compared to negative P1.880 trillion reported in 2009.

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

current operation – P13.62 billion, adjustments related to prior years’ transactions – P76.76 billion, completed public infrastructures – P31.60 billion and reforestation projects – P952.19 million, which were transferred to the Registry of Public Infrastructures and Registry of Reforestation Projects, respectively, and the remittance to National Treasury for disposal of assets – P2.59 million.

14

2.3 Results of Current Operations

For the year ended, the NG attained a net operating income of P689.29 billion by

generating a total income/revenue of P1.399 trillion from operations and incurring current operating expenses of P709.72 billion. However, after deducting the financial support to LGUs, GOCCs and NGOs/POs of P391.27 billion, financial expenses of P282.77 billion, other losses of P31.67 billion and adding net subsidy from NG of P2.79 billion, the government suffered a net loss of P13.62 billion. Chart II - 5 shows the graphical presentation of the results of operation.

Chart II - 5 Results of Current Operations

(in billion pesos)

2.3.1 Income/Revenue – P 1.399 trillion

This year’s income/revenue of P1.399 trillion generated from taxes – P1.222 trillion and non-taxes – P177.07 billion grew by P155.34 billion or 12.49 percent compared to previous year’s P1.244 trillion. However, notwithstanding the increase posted over the year, actual income/revenue suffered a setback as it fell short by P12.28 billion compared to the projected amount of P1.411 trillion1.

The NG failed to realize its projected tax revenue of P1.273 trillion2 by 4.03

percent or P51.30 billion while general income of P177.07 billion exhibited a 28.26 percent or P39.01 billion favorable variance over the estimated amount of P138.06 billion3.

1 Table C.1, Revenue Program, by Source, 2010-2012, 2012 Budget of Expenditures and Sources of Financing,

DBM. 2 Ibid 3 Ibid

1,399

.02

1,243

.68

709.7

2

637.4

6 689.2

9

606.2

2

Income/Revenue Current OperatingExpenses

Income fromCurrent Operations

2011 2010

15

Tax revenue of P1.222 trillion registered an increase of P131.03 billion compared to last year’s figure of P1.091 trillion. This year’s tax revenue came from the following sources:

Amount (in million pesos) Value Added Tax 318,066.06 Income Tax - Corporations 269,731.68 Income Tax - Individuals 156,394.74 Final Tax 130,948.46 Excise Tax on Articles 96,937.87 Value Added Tax - Expanded 55,708.49 Documentary Stamp Tax 49,076.51 Import Duties 48,801.65 Business Tax 48,457.57 Other National Taxes 16,089.26 Fines and Penalties - National Taxes 12,979.01 Motor Vehicles Users Charge 9,270.13 Capital Gains Tax 8,027.17 Others 1,455.14

Total 1,221,943.75


On the other hand, the general income increased by P24.31 billion from P152.77 billion in 2010 to P177.07 billion this year. It is composed of Business Income- P45.43 billion, Other Income – P91.87 billion, Service Income – P32.03 billion and Permits and Licenses – P7.74 billion.

2.3.2 Current Operating Expenses – P709.72 billion

The current operating expenses of the NG totaling P709.72 billion surpassed

last year’s amount of P637.46 billion by 11.34 percent or P72.27 billion. The composition of the current operating expenses is as follows: PS – P512.11 billion or 72.16 percent and MOOE – P197.61 billion or 27.84 percent.

Expenses for PS rose by P47.89 billion this year primarily due to the

implementation of the 3rd tranche of the 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.

2.3.3 Income from Current Operations – P689.29 billion

The current operation of the government for fiscal year 2011 resulted to an

income of P689.29 billion, exhibiting 13.70 percent growth or P83.07 billion more than last year’s P606.22 billion.

16

2.4 Cash Flows

The NG ended the year with cash balance of P317.55 billion, out of which P199.13 billion was recorded under the NG Books and P118.43 billion was under the RA Books. The cash flows were classified by operating, investing and financing activities as shown in Chart II - 6.

Chart II - 6 Cash Flows, by Activities

(in billion pesos)

2.4.1 Cash Inflows – P4.549 trillion

The total inflows of P4.549 trillion came from operating activities – P2.830

trillion, investing activities – P353.07 billion and financing activities - P1.365 trillion. Of the total inflows, the bulk or 84.72 percent amounting to P3.854 trillion consisted of proceeds from domestic and foreign loans – P1.365 trillion, collections of revenue/income - P1.338 trillion and receipt of NCA – P1.150 trillion.

2.4.2 Cash Outflows – P4.612 trillion

The aggregate cash outflows reached P4.612 trillion, majority or 84.31 percent

of which was used for the replenishment of negotiated MDS checks – P1.089 trillion, payment of long term liabilities – P1.221 trillion, payment of operating expenses – P658.08 billion, investment – P408.01 billion, grant of subsidies and donations – P379.26 billion and remittance of personnel benefits contributions and mandatory deductions to BIR, GSIS, PAGIBIG, etc. – P133.26 billion.

2.5 National Government Debt

The outstanding debt balance of NG rose from P4.701 trillion in 2010 to P4.940 trillion at the end of the year. Of the total, P2.860 trillion was from domestic sources and P2.080 trillion from foreign sources.

2,83

0.31

2,

658.

91

171.40 353.07491.88

(138.80) 1,36

5.39

1,4

61.69

(96.29)

Operating Activities Investing Activities Financing Activities

Inflows Outflows Cash Provided(Used)

17

Borrowings from domestic sources representing 57.90 percent of the total debt of the NG, increased by P156.02 billion while foreign debt grew by P83.25 billion.

From year 2002 to 2011, domestic debt showed an average growth rate of 6.58

percent or P132.85 billion per year while the annual growth of foreign debt is 5.38 percent or P81.34 billion.

III. APPROPRIATIONS, ALLOTMENTS,

OBLIGATIONS AND BALANCES

18

APPROPRIATIONS, ALLOTMENTS, OBLIGATIONS AND BALANCES

3.1 Overview In his Budget Message, President Benigno S. Aquino III called the 2011 budget, the first financial blueprint of his Administration, a Reform Budget, which promises to “make real the changes needed to revitalize the economy while leaving no sector behind”. The President stated that the 2011 budget was crafted with bias for the poor and vulnerable and stressed that transparency and accountability are important thrusts of this year’s budget which shall be used as strategies to combat corruption and as tools to achieve better public financial management. In fulfillment of the President’s Social Contract with the Filipino People, the Aquino Administration took steps in reducing poverty and providing sustainable development by increasing the appropriations of the DSWD by 142.66 percent, an indication of the Administration’s sincerity in alleviating the conditions and protecting the interests of the poor and marginalized sectors. For the year, the appropriations of the DSWD included the second phase implementation of the KALAHI-CIDSS Project in various LGUs, conditional cash transfers (CCT) to 2.3 million households, rice subsidy, and pension for indigent senior citizens. During the year, the government undertook a painstaking-yet-necessary review and reform of cost assumptions, quality standards and procurement processes that caused delay in the implementation of planned infrastructure projects which resulted to government under spending, and was blamed for the lackluster economic growth in the first three quarters of 2011. To address this, President Aquino approved the Disbursement Acceleration Program (DAP) on October 12, 2011. The P72.11 billion funds for the DAP were taken out of savings from completed or discontinued projects and its release to agencies and GOCCs was fast tracked as 2011 drew to a close. As reported in the Official Gazette, the DAP contributed immensely to the government’s increased spending in the last months of the year, allowing agencies to quickly implement programs and projects aligned with the President’s Social Contract with the Filipino People. Aside from the initial P72.11 billion, additional amount of P13.4 billion was authorized by the President to further boost government spending and strengthen the national economy for fiscal year 2012. The additional funds will also provide for deficiencies under the Special Purpose Funds, including the Calamity Fund and Contingent Fund, and augment the much reduced internal revenue allocations for LGUs. The projects funded by the additional P13.40 billion include the P1.60 billion nationwide Disaster Risk, Exposure, Assessment and Mitigation (DREAM) program of the Department of Science and Technology (DOST); the P4.28 billion additional budget for State Universities and Colleges (SUCs) under the Commission on Higher Education (CHED), the P2.3 billion incentives of personnel affected by the Rationalization Program of the Department of Public Works and Highways (DPWH); and the P450 million Jalaur River Multipurpose Project of the Department of Agriculture (DA).

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Presented in Schedule 7, Volume I-B of this report are the details on allotment releases for DAP and the corresponding obligations incurred during the year, by department/agency.

3.2 Appropriations, Allotments, Obligations and Balances

An appropriation is an authorization under past Acts of Congress, Presidential Decrees or other legislative enactments, for payments to be made with funds of the government under specified condition and/or for specified purpose.

In any given year, there are two budgets being executed namely: the GAA for the

current year which contains new appropriations intended to finance the programmed activities of various agencies and the special projects and programs of the NG; 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, automatic appropriations provided by standing appropriation laws also form part of the total NG budget for the year.

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

and balances for the year which are separately discussed 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 Appropriations Allotments Unreleased Appropria-

tionsObligations* Unobligated

Allotments

General Appropriations Act Regular Appropriations 765,405.33 758,632.14 6,773.19 656,855.27 101,776.87 Personal Services 399,406.94 399,406.94 - 396,674.58 2,732.35 Maintenance and Other Operating Expenses 185,401.47 184,954.91 446.56 149,317.67 35,637.24 Financial Expenses 2.57 2.57 - 2.54 0.03 Capital Outlays 180,594.35 174,267.72 6,326.63 110,860.47 63,407.25

Special Account in the General Fund 12,566.90 11,554.05 1,012.85 9,402.60 2,151.45 Personal Services 2,372.55 2,372.55 - 2,349.67 22.88 Maintenance and Other

Operating Expenses 9,969.80 8,956.95 1,012.85 6,904.53 2,052.42 Capital Outlays 224.55 224.55 - 148.40 76.15

Special Purpose Funds 229,210.85 161,804.84 67,406.01 146,352.49 15,452.35 Unprogrammed Fund 78,252.49 20,448.76 57,803.73 19,263.28 1,185.48

Miscellaneous Personnel Benefits Fund 59,397.93 59,397.93 - 58,846.32 551.61 Retirement Benefits Fund 20,275.94 20,275.94 - 20,070.74 205.20

Allocations to LGUs 15,902.79 14,793.43 1,109.37 14,584.61 208.82 Budgetary Support to GOCCs 19,538.82 16,038.82 3,500.00 16,038.82 - Priority Development Assistance Fund 24,620.00 20,423.24 4,196.76 11,527.73 8,895.51 Calamity Fund 6,000.00 5,708.23 291.78 2,815.43 2,892.80

DepEd School Building Program

1,000.00 824.30 175.70 382.68 441.62

International Commitments Fund

2,964.33 2,964.33 - 2,503.59 460.74

20

(Table III-1 continued)


tions Obligations* Unobligated

Allotments

E-Government Fund 258.54 258.54 - 59.09 199.45 Contingent Fund 1,000.00 671.32 328.68 260.20 411.11

Overall Savings (6,795.32) - (6,795.32) - - Personal Services 35,970.30 - 35,970.30 - - Maintenance and Other Operating Expenses (30,660.92) - (30,660.92) - - Capital Outlays (12,104.70) - (12,104.70) - - Appropriations per GAA 1,000,387.76 931,991.03 68,396.73 812,610.37 119,380.67 Automatic Appropriations 1,093,332.70 1,093,332.70 - 1,068,935.61 24,397.09

Debt Service – Principal 444,196.12 444,196.12 - 444,196.12 - Debt Service – Interest 266,068.29 266,068.29 - 266,068.29 - IRA 286,944.24 286,944.24 - 286,942.56 1.68 Other Automatic Appropriations

96,124.05 96,124.05 - 71,728.64 24,395.41

Total Current Year’s Appropriations 2,093,720.46 2,025,323.74 68,396.73 1,881,545.98 143,777.75 Continuing Appropriations Allotted Continuing Appropriations 91,315.22 91,315.22 - 76,859.16 14,456.07 Regular Appropriations 70,069.16 70,069.16 - 61,033.68 9,035.48 Personal Services 1,014.16 1,014.16 - 291.06 723.10

Maintenance and Other Operating Expenses 27,390.60 27,390.60 - 22,607.38 4,783.22 Capital Outlays 41,664.39 41,664.39 - 38,135.24 3,529.15 Special Purpose Funds 12,240.31 12,240.31 - 10,501.99 1,738.32 Personal Services 1.27 1.27 - 1.27 -

Maintenance and Other Operating Expenses 6,840.82 6,840.82 - 6,766.61 74.21 Capital Outlays 5,398.22 5,398.22 - 3,734.12 1,664.11 Automatic Appropriations 9,005.76 9,005.76 - 5,323.48 3,682.27 Personal Services 68.00 68.00 - 5.31 62.69

Maintenance and Other Operating Expenses 5,459.61 5,459.61 - 3,665.59 1,794.02 Capital Outlays 3,478.15 3,478.15 - 1,652.59 1,825.56

Unallotted Continuing Appropriations 223,750.20 44,762.16 178,988.04 38,680.29 6,081.87 Regular Appropriations 59,734.07 9,830.80 49,903.27 9,311.07 519.73 Maintenance and Other Operating Expenses

11,853.66 1,175.94 10,677.72 987.54 188.39

Capital Outlays 47,880.41 8,654.87 39,225.55 8,323.53 331.34 Special Purpose Fund 147,397.63 34,931.35 112,466.27 29,369.22 5,562.13 Maintenance and Other Operating Expenses 38,799.30 16,727.11 22,072.19 16,665.30 61.81 Capital Outlays 108,598.33 18,204.24 90,394.09 12,703.92 5,500.33 Overall Savings 16,613.50 - 16,613.50 - - Automatic Appropriations 5.00 - 5.00 - -

Maintenance and Other Operating Expenses 5.00 - 5.00 - - Total Continuing Appropriations 315,065.42 136,077.38 178,988.04 115,539.45 20,537.93

Total NG Appropriations 2,408,785.89 2,161,401.12 247,384.77 1,997,085.43 164,315.69 * Does not include obligations not covered by allotments. Difference between totals and sum of components is due to rounding off.

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3.2.1 Appropriations – P2.409 trillion For the second year of the

Aquino Administration, the aggregate NG appropriations accounted at P2.409 trillion lower by P88.69 billion or 3.55 percent than last year’s level of P2.497 trillion. Regular Appropriations went up by P96.19 billion or 14.37 percent from last year’s P669.22 billion, while allocations for Special Purpose Funds dropped by P370.19 billion or 61.76 percent from last year’s P599.40 billion. Decrease in appropriations for SPFs was due to non inclusion of Debt Service – Interest Payments which was included in last year’s SPF total budget. Chart III-1 presents the NG Appropriations per GAA for the years 2007 to 2011 and Table III-2 shows the comparative details of the total appropriations for fiscal years 2011 and 2010.

Table III-2 Comparative Details of Appropriations

Particulars Amount (in million pesos)

Percent 2011 2010 Increase / (Decrease)

Regular Appropriations 765,405.33 669,215.73 96,189.60 14.37 Personal Services 399,406.94 309,858.26 89,548.68 28.90 Maintenance and Other Operating Expenses 185,401.47 165,859.68 19,541.78 11.78 Financial Expenses 2.57 3.90 (1.33) (34.06) Capital Outlays 180,594.35 193,493.89 (12,899.53) (6.67) Special Account in the General Fund 12,566.90 9,041.11 3,525.79 39.00 Personal Services 2,372.55 1,912.40 460.15 24.06 Maintenance and Other Operating Expenses 9,969.80 7,128.71 2,841.09 39.85 Capital Outlays 224.55 - 224.55 - Special Purpose Funds 229,210.85 599,398.42 (370,187.57) (61.76) Personal Services 91,363.21 136,007.36 (44,644.14) (32.82) Maintenance and Other Operating Expenses 75,111.78 352,058.84 (276,947.06) (78.66) Capital Outlays 62,735.86 111,332.22 (48,596.36) (43.65) Overall Savings (6,795.32) 26,751.14 (33,546.46) (125.40)General Appropriations Act 1,000,387.76 1,304,406.40 (304,018.63) (23.31)

Chart III-1 Appropriations per GAA for FYs 2007 to 2011

(in billion pesos)

830.35

1,066.18

1,170.33

1,304.41

1,000.39

800

900

1,000

1,100

1,200

1,300

1,400

2007 2008 2009 2010 2011

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Percent2011 2010 Increase / (Decrease)

Automatic Appropriations 1,093,332.70 1,051,867.33 41,465.37 3.94 Debt Service – Principal 444,196.12 402,395.12 41,801.00 10.39 Debt Service – Interest 266,068.29 297,004.44 (30,936.15) (10.42) IRA 286,944.24 265,802.38 21,141.86 7.95 Other Automatic Appropriations 96,124.05 86,665.39 9,458.66 10.91

Total Current Year’s Appropriations 2,093,720.46 2,356,273.73 (262,553.27) (11.14)

Continuing Appropriations Allotted Continuing Appropriations 91,315.22 101,594.54 (10,279.32) (10.12) Unallotted Continuing Appropriations 223,750.20 39,610.11

184,140.09 464.88

Total Continuing Appropriations 315,065.42 141,204.66 173,860.76 123.13

Total Appropriations 2,408,785.89 2,497,478.39 (88,692.50) (3.55)Difference between totals and sum of components is due to rounding off.

3.2.1.1 General Appropriations Act (R.A. No. 10147) – P1 trillion

The GAA of 2011, R.A. No. 10147 was the first financial blueprint of the Aquino

Administration. In his budget message, the President emphasized that the 2011 budget serves a tool for social reform, transparency and accountability. The GAA was signed on December 27, 2010 and was published in the Official Gazette in the same year as required under Section 2 of the New Civil Code of the Philippines. Section 101 of the General Provisions of R.A. No. 10147 states that it shall take effect on January 1, 2011.

Regular Appropriations – P765.41 billion

Originally, the regular appropriations for the year were approved at P755.72 billion. Of this amount, P4.04 billion was transferred to SPF particularly Budgetary Support to GOCCs. During the year, transfer from Overall Savings of P13.72 billion was made. Thus, the adjusted regular appropriations for the year aggregated at P765.41 billion. The amount is lower by P96.19 billion or 14.37 percent than last year’s P669.22 billion.

Over the years, the Education Department got the biggest chunk with P182.67

billion for 2011 or 23.87 percent of the total regular appropriations, followed by DPWH with P114.63 billion or 14.98 percent, and DND with P104.22 or 13.62 percent of the total.

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The DSWD got the highest increase of 142.66 percent or P21.85 billion from last year’s P15.31 billion. The increase can be attributed to the inclusion of the second phase implementation of the KALAHI-CIDSS Project in various LGUs, conditional cash transfers (CCT) to 2.3 million households, rice subsidy, and pensions for indigent senior citizens. The increase in regular appropriations for the Defense Department of P46.54 billion or 80.68 percent is due to the integration of the AFP Modernization Fund which was originally budgeted under the Special Purpose Funds.

Comparative details of regular appropriations by department/agency are

shown in Table III-3.

Table III-3 Comparative Regular Appropriations By Department/Agency

Department/Agency Amount (in million pesos)


Education 182,674.24 157,409.15 25,265.09 16.05Public Works and Highways 114,625.80 141,681.93 (27,056.13) (19.10)National Defense 104,217.44 57,682.20 46,535.24 80.68Interior and Local Government 87,208.45 65,744.85 21,463.60 32.65Social Welfare and Development 37,159.91 15,313.52 21,846.39 142.66Agriculture 33,389.26 39,241.61 (5,852.88) (14.91)Transportation and Communications 30,858.07 16,547.04 14,311.03 86.49Health 28,659.10 25,703.11 2,955.99 11.50State Universities and Colleges 21,373.93 21,761.47 (387.54) (1.78)Finance 13,735.75 9,261.87 4,473.88 48.30The Judiciary 13,621.52 12,711.16 910.36 7.16Environment and Natural Resources 11,823.26 12,221.08 (397.82) (3.26)Autonomous Region in Muslim Mindanao 11,780.14

9,178.36 2,601.78 28.35

Foreign Affairs 10,550.06 12,443.26 (1,893.20) (15.21)Science and Technology 9,362.29 5,313.94 4,048.35 76.18Congress of the Philippines 8,491.34 8,880.01 (388.67) (4.38)Justice 7,700.50 6,424.48 1,276.02 19.86Labor and Employment 7,277.72 6,143.83 1,133.89 18.46Office of the President 4,605.61 4,827.38 (221.77) (4.59)Other Executive Offices 4,481.74 5,456.31 (974.57) (17.86)Commission on Audit 4,293.33 3,825.29 468.04 12.24Agrarian Reform 3,885.31 7,820.23 (3,934.92) (50.32)Trade and Industry 2,483.98 2,443.73 40.25 1.65Commission on Elections 2,255.44 10,432.68 (8,177.24) (78.38)National Economic and Development Authority 2,122.20 4,021.80 (1,899.60) (47.23)Tourism 1,606.53 1,578.09 28.44 1.80Budget and Management 1,157.81 1,215.17 (57.36) (4.72)Office of the Ombudsman 1,031.90 1,064.27 (32.37) (3.04)Energy 930.06 665.71 264.35 39.71Presidential Communications Operations Office 929.60 1,119.49 (189.89) (16.96)

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Civil Service Commission 666.85 610.51 56.34 9.23Commission on Human Rights 266.90 285.89 (18.99) (6.64)Office of the Vice-President 177.11 185.02 (7.91) (4.28)Joint Legislative-Executive Councils 2.18 1.30 0.88 68.08

Total 765,405.33 669,215.74 96,189.59 14.37Difference between totals and sum of components is due to rounding off.

Special Account in the General Fund – P12.57 billion

For the year, the SAGF included in the total new appropriations amounted to P12.57 billion broken down into PS – P2.37 billion, MOOE – P9.97 billion and CO – P0.22 billion. In the previous year, the data was presented under the automatic appropriations.

Special Purpose Funds – P229.21 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.

This year’s allocations for the SPF was approved at P232.50 billion

representing 23.24 percent of the total appropriations in the GAA. The amount was reduced by P7.32 billion which was transferred to the Overall Savings for the DAP, and was partially offset by a total of P4.04 billion transferred from the regular appropriations for an adjusted balance of P229.21 billion.

The significant decrease of P370.19 billion or 61.76 percent in this year’s

SPFs was due mainly to the inclusion of the Debt Service – Interest Payments of P276.12 billion in last year’s SPF budget.

Presented in Table III-4 are the comparative appropriations for the SPFs.

Table III-4 Appropriations for Special Purpose Funds



Unprogrammed Fund 78,252.49 118,913.95 (40,661.46) (34.19)Miscellaneous Personnel Benefits Fund 59,397.93 62,511.83 (3,113.90) (4.98)Priority Development Assistance Fund 24,620.00 15,261.21 9,358.79 61.32Retirement Benefits Fund 20,275.94 61,802.24 (41,526.30) (67.19)

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Budgetary Support to GOCCs 19,538.82 20,533.36 (994.54) (4.84)Allocations to Local Government Units 15,902.79 29,686.62 (13,783.83) (46.43)Calamity Fund 6,000.00 3,750.00 2,250.00 60.00International Commitments Fund 2,964.33 1,677.22 1,287.11 76.74Contingent Fund 1,000.00 1,000.00 - -DepEd School Building Program 1,000.00 2,000.00 (1,000.00) (50.00)E-Government Fund 258.54 1,000.00 (741.46) (74.15)Debt Service- Interest - 276,212.00 (276,212.00) (100.00)AFP Modernization Program - 5,000.00 (5,000.00) (100.00)National Unification Fund - 50.00 (50.00) (100.00)Adjusted Special Purpose Funds 229,210.85 599,398.43 (370,187.58) (61.76)Transfer from Regular Appropriations (4,035.34) - (4,035.34) Overall Savings 7,322.64 30,217.62 (22,894.98) (75.77)

Total SPF per GAA 232,498.15 629,616.04 (397,117.90) (63.07)Difference between totals and sum of components is due to rounding off.

Unprogrammed Fund – P78.25 billion

Unprogrammed Fund is a standby appropriation for 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.

For 2011, Unprogrammed Fund of P78.25 billion represents 7.82 percent of

the current year’s appropriations. It showed a decrease of P40.66 billion or 34.19 percent from last year’s P118.91 billion. Support to Foreign-Assisted Projects component went up by 441.73 percent or P8.81 billion which can be attributed to the Administration’s effort to attract foreign investors’ involvement in domestic projects.

The Support for Pre-School Education, a new component of the

Unprogrammed Fund with an appropriations of P902 million, was included in support of the preschool education campaign of the Administration. Table III-5 shows the comparative appropriations for Unprogrammed Fund.

Table III-5 Appropriations for Unprogrammed Fund



Support to Infrastructure Projects and Social Programs 37,942.00 27,500.00

10,442.00

37.97

Support to Foreign-Assisted Projects 10,806.66 1,994.84 8,811.82 441.73

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Budgetary Support to Government-Owned and/or Controlled Corporations 8,614.02 19,431.30

(10,817.28)

(55.67)

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

Disability Pension 3,000.00 3,000.00

-

- Strategic Government Reforms 2,000.00 2,000.00 - - Support for Pre-School Education 902.00 - 902.00 100.00Support to Calamity Related Programs

and Projects - 50,000.00

(50,000.00)

(100.00)Total 78,252.49 118,913.95 (40,661.46) (34.19)


Miscellaneous Personnel Benefits Fund – P59.40 billion

Appropriations for MPBF of P59.40 billion, net of the P11.26 billion

transferred to Overall Savings, is lower by P3.11 billion or 4.98 percent than last year’s P62.51 billion. MPBF served as funding source for the implementation of the third tranche salary increase authorized under the Senate and House of Representatives Joint Resolution No. 4, s. 2009, as implemented by E.O. No. 811, s. 2009.

Retirement Benefits Fund – P20.28 billion

Retirement Benefits 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.

For the year, appropriations for Retirement Benefits Fund of P20.28 billion,

net of transferred to Overall Savings amounting to P14.72 billion, exhibited a significant decrease of P41.53 billion or 67.19 percent.

Priority Development Assistance Fund – P24.62 billion

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

fund the priority development programs and projects of the government. Those commonly referred to as "soft projects" of legislators 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.

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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.

For the year, appropriations for PDAF of P24.62 billion is higher by P9.36

billion or 61.32 percent over last year’s P15.26 billion.

Budgetary Support to Government Corporations – P19.54 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. For the year, BSGC was budgeted at P19.54 billion, net of transfers from Regular Appropriations and Overall Savings, lesser by P994.55 million or 4.84 percent. The decrease can be attributed to the policy of the present Administration on self-sufficiency among government corporations. Among the GOCCs with notable decrease in budgetary support are the National Food Authority – P5.50 billion; Cagayan Economic Zone Authority – P820.26 million; Aurora Pacific Economic and Freeport Zone – P663.70 million; National Home Mortgage Finance Corporation – P400.00 million; Philippine Heart Center – P398.05 million; and National Kidney and Transplant Institute – P346.00 million. The Philippine Institute for Development Studies exhibited a remarkable increase of P568.30 million from a mere P17.00 million budget in the previous year. The National Electrification Administration and National Dairy Authority similarly increased by P155.81 million and P242.82 million, respectively. Table III-6 presents the comparative details of appropriations for BSGC.

Table III-6 Budgetary Support to Government Corporations


Percent 2011 2010 Increase/ (Decrease)

Agriculture 3,925.00 9,672.41 (5,747.41) (59.42) National Food Authority 2,500.00 8,000.00 (5,500.00) (68.75) Philippine Coconut Authority 542.70 645.69 (102.99) (15.95) Philippine Rice Research Institute 453.50 435.00 18.50 4.25 National Dairy Authority 315.02 72.20 242.82 336.32 Philippine Crop Insurance Corporation 113.77 214.27 (100.50) (46.90) Quedan and Rural Credit Guarantee Corporation -

190.25 (190.25) (100.00)

National Tobacco Administration - 115.00 (115.00) (100.00)Energy 800.00 644.19 155.81 24.19 National Electrification Administration 800.00 644.19 155.81 24.19Health 939.11 1,767.96 (828.85) (46.88) Philippine Children’s Medical Center 322.80 366.30 (43.50) (11.88)

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Lung Center of the Philippines 263.26 301.56 (38.30) (12.70) National Kidney and Transplant Institute 183.05 529.05 (346.00) (65.40) Philippine Heart Center 133.00 531.05 (398.05) (74.96) Philippine Institute of Traditional and Alternative Health Care 37.00

40.00 (3.00) (7.50)

Tourism 65.00 425.00 (360.00) (84.71) Tourism Promotions Board 65.00 360.00 (295.00) (81.94) Philippine Convention and Visitors Corporation -

65.00 (65.00) (100.00)

Trade and Industry 223.99 883.75 (659.76) (74.66) Aurora Pacific Economic and Freeport Zone 136.30 800.00 (663.70) (82.96) Center for International Trade Expositions and Missions 79.69

73.75 5.94 8.05

Cottage Industry Technology Center 8.00 10.00 (2.00) (20.00)Transportation and

Communications 131.00 285.00 (154.00) (54.04) Philippine National Railways 131.00 285.00 (154.00) (54.04)National Economic and

Development Authority 585.30 17.00 568.30 3,342.94 Philippine Institute for Development Studies 585.30

17.00 568.30 3,342.94

Presidential Communications Operations Office - 200.00 (200.00) (100.00)

People’s Television Network, Incorporated -

200.00 (200.00) (100.00)

Other Executive Offices 6,028.29 6,624.45 (596.16) (9.00) National Housing Authority 4,275.00 3,600.00 675.00 18.75 National Home Mortgage Finance Corporation 500.00

900.00 (400.00) (44.44)

Home Guaranty Corporation 500.00 600.00 (100.00) (16.67) Cagayan Economic Zone Authority 294.19 1,114.45 (820.26) (73.60) Cultural Center of the Philippines 195.00 140.00 55.00 39.29 Authority of the Free Port Area of Bataan 100.00

100.00 - -

Zamboanga City Special Economic Zone Authority 60.10

70.00 (9.90) (14.14)

Southern Philippines Development Authority 59.00

30.00 29.00 96.67

Development Academy of the Philippines 45.00

70.00 (25.00) (35.71)

Budgetary Support to Government Corporations – Others 6,841.14 13.61 6,827.53 50,165.51

Total 19,538.82 20,533.37 (994.55) (4.84)Difference between totals and sum of components is due to rounding off.

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Allocations to Local Government Units – P15.90 billion

An appropriation for ALGU was originally approved at P13.26 billion. It was augmented by P2.64 billion from the Overall Savings for the funding requirements of various development projects in the LGUs and the MMDA.

At P15.90 billion level, the ALGU represents 1.59 percent of the total

appropriations in the GAA for the year. Of the amount, P11.87 billion or 74.65 percent was allocated for the Special Shares of Local Government Units in the Proceeds of National Taxes defined under Chapter 1, Section 285 of R.A. No. 7160, Local Government Code of 1991, and P2.62 billion or 16.45 percent for Financial Subsidy to LGUs. Table III-7 shows the comparative details of ALGU.

Table III-7 Comparative Details of Allocations to LGUs


Percent2011 2010 Increase/ (Decrease)

Special Shares of LGUs in the Proceeds of National Taxes

11,871.13

14,163.46

(2,292.33) (16.18)

Financial Subsidy to LGUs 2,615.40 5,674.70 (3,059.30) (53.91)Metropolitan Manila Development

Authority

1,209.18

2,074.67

(865.49) (41.72)Pasig River Rehabilitation Commission

157.08

1,179.86

(1,022.78) (86.69)

Barangay Officials Death Benefits Fund 50.00 50.00 - -Premium Subsidy for Indigents under

the National Health Insurance Program - 5,170.00 (5,170.00) (100.00)Municipal Development Fund - 1,373.92 (1,373.92) (100.00)

Total 15,902.79 29,686.62 (13,783.82) (46.43)Difference between totals and sum of components is due to rounding off.

3.2.1.2 Automatic Appropriations – P1.093 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.

Chart III-2 Sources of Automatic Appropriations

Other Acts

70.15%

R.A. 10147

29.85%

30

For 2011, Automatic Appropriations totaling P1.093 trillion represents 52.22

percent of current year’s total appropriations. Shown in Chart III-2 and Table III-8 are the sources of automatic appropriations for

the year.

Table III-8 Automatic Appropriations

(in million pesos)

Particulars 2011 2010 Increase / Decrease Percent

Debt Service – Principal 444,196.12 402,395.12 41,801.00 10.39Debt Service – Interest 266,068.29 297,004.44 (30,936.15) (10.42)IRA 286,944.24 265,802.38 21,141.86 7.95SAGF 34,401.48 25,141.61 9,259.87 36.83RLIP 25,430.61 22,463.11 2,967.50 13.21Tax Subsidy 18,999.93 126.97 18,872.96 14,864.11Customs Duties 14,420.64 46,917.34 (32,496.70) (69.26)Grants and Donations 2,548.05 1,038.48 1,509.57 145.36Tax Refunds 294.04 - 294.04 -NIPAS 20.00 15.51 4.49 28.95Sale of Assets 9.29 3.49 5.80 166.29

Total 1,093,332.70 1,060,908.45 32,424.25 3.06Difference between totals and sum of components is due to rounding off.

This year’s appropriations for Debt Service – Principal Amortization amounted to

P444.20 billion representing 21.22 percent of the total current year’s appropriations of P2.094 trillion. The amount is higher by P41.80 billion or 10.39 percent than last year’s level of P402.40 billion. On the other hand, Interest Payments of P266.07 billion accounted for 12.71 percent of this year’s current budget, which is lower by P30.94 billion or 10.42 percent than last year’s P297 billion.

3.2.1.3 Continuing Appropriations – P315.07 billion

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

Presented in Table III-9 are the departments/agencies with P315.07 billion balances

of continuing appropriations. Of this amount, P223.75 billion pertains to unreleased appropriations under R.A. No. 9970 which were made available as sources of the national budget for the year; and P91.32 billion refers to the unobligated allotments at the end of 2010 which were valid for obligations up to December 31, 2011.

31

Table III-9 Continuing Appropriations by Department/Agency and Source (in million pesos)

Department/Agency Total Regular Appropriations

Special Purpose Funds

Automatic Appropriations

Public Works and Highways 69,904.43 60,677.36 6,058.40 3,168.67Finance 22,100.70 1,701.79 20,327.14 71.77Education 12,851.34 12,797.44 53.90 -Budget and Management 12,714.75 341.39 12,324.17 49.19National Defense 9,110.61 1,051.90 5,335.78 2,722.92Agriculture 8,779.10 8,602.62 112.73 63.75Health 7,746.53 7,426.39 298.22 21.92Agrarian Reform 5,711.61 5,235.85 65.65 410.12Social Welfare and Development 5,651.14 4,301.45

1,349.68

0.01

Commission on Elections 5,335.34 4,331.29 10.00 994.04Interior and Local Government 3,512.66 3,380.06

4.78

127.83

Environment and Natural Resources 3,352.09 2,810.65

214.70

326.74

State Universities and Colleges 3,239.37 3,047.23

192.14

-

Transportation and Communications 2,750.40 2,628.93

0.82

120.65

Other Executive Offices 2,207.65 1,762.02 140.85 304.79Congress of the Philippines 1,504.51 1,504.51 - -Office of the President 1,384.37 1,307.98 39.88 36.52Science and Technology 1,254.33 1,245.28 8.89 0.16The Judiciary 1,232.61 1,232.09 0.11 0.41Foreign Affairs 1,054.20 680.52 373.67 - Labor and Employment 712.30 648.54 63.76 - Office of the Ombudsman 693.39 627.01 - 66.38Trade and Industry 664.84 299.77 8.48 356.58Justice 608.42 522.48 33.10 52.84National Economic and Development Authority 570.02 557.30 - 12.72Energy 347.58 242.87 5.00 99.71Presidential Communications Operations Office 271.31 225.78 45.53 -Tourism 266.46 266.46 - -Autonomous Region in Muslim Mindanao 263.88

263.74 0.13 -

Metropolitan Manila Development Authority 87.56 -

87.56 -

Commission on Audit 42.41 39.38 - 3.04Office of the Vice- President 33.50 33.50 - -

32


Department/Agency Total Regular Appropriations

Special Purpose Funds

Automatic Appropriations

Pasig River Rehabilitation Commission 16.58 - 16.58 -Commission on Human Rights 9.58 9.58 - -Joint Legislative- Executive Councils 0.07 0.07 - -SPF – Unreleased Appropriations 112,466.27 112,466.27 Overall Savings 16,613.50 11,689.03 4,924.07 0.40

Total 315,065.42 141,492.25 164,562.01 9,011.16Difference between totals and sum of components is due to rounding off. 3.2.2 ALLOTMENTS – P2.161 trillion

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

for implementation of programs, projects and other expenditure items. For fiscal year 2011, allotments aggregated at P2.161 trillion or 89.73 percent of the total NG budget for the year of P2.409 trillion. Of the total allotments, P2.025 trillion or 93.70 percent was charged to current year’s appropriations under R.A. No. 10147 and P136.08 billion or 6.30 percent was released from the continuing appropriations under R.A. No. 9970.

Current year’s allotments consist of Regular Appropriations – P758.63 billion,

SAGF – P11.55 billion, SPFs – P161.80 billion and Automatic Appropriations – P1.093 trillion.

About 40.63 percent or P444.20 billion of allotments under Automatic

Appropriations pertain to Debt Service – Principal Amortization while 24.34 percent or P266.07 billion was for Debt Service – Interest Payment and 26.24 percent or P286.94 billion was for IRA. Allotments under other Automatic Appropriations accounted for P96.12 million or 8.79 percent. Table III-10 shows the detailed sources and nature of allotments released for 2011 including those for DAP amounting to P53.36 billion as shown in Schedule 7, Volume I-B.

Table III-10 Sources and Nature of Allotments

(in million pesos)Particulars Total PS MOOE FE CO

General Appropriations Act 931,991.03 481,479.89 257,134.15 2.57 193,374.43 Regular 758,632.14 399,406.94 184,954.91 2.57 174,267.72 SAGF 11,554.05 2,372.55 8,956.95 - 224.55 SPFs 161,804.84 79,700.40 63,222.28 - 18,882.15Automatic Appropriations 1,093,332.70 25,753.19 341,326.46 266,068.29 460,184.75 Debt Service – Principal 444,196.12 - - - 444,196.12 Debt Service - Interest 266,068.29 - - 266,068.29 - IRA 286,944.24 - 286,944.24 - - Customs Duties 14,420.64 - 14,420.64 - -

33

(Table III-10 continued) Particulars Total PS MOOE FE CO

SAGF 34,401.48 316.07 19,030.91 - 15,054.50 RLIP 25,430.61 25,430.61 - - - Grants and Donations 2,548.05 6.51 1,620.13 - 921.42 Tax Subsidy 18,999.93 - 18,999.93 - - Tax Refunds 294.04 294.04 NIPAS 20.00 - 16.39 - 3.61Sale of Assets 9.29 - 0.19 - 9.11Total Current Year’s

Allotments 2,025,323.74 507,233.08 598,460.61 266,070.86 653,559.18 Continuing Appropriations 136,077.38 1,083.43 57,594.08 - 77,399.87 Unobligated Allotments 91,315.22 1,083.43 39,691.03 - 50,540.76 Unreleased Appropriations 44,762.16 - 17,903.05 - 26,859.11

Total Allotments 2,161,401.12 508,316.51 656,054.69 266,070.86 730,959.05Difference between totals and sum of components is due to rounding off.

Allotments under Capital Outlays totaling P730.96 billion or 33.82 percent of

the total allotments, include P444.20 billion for loan principal repayments and P286.76 billion for infrastructures and other capital expenditures. Releases for MOOE aggregated at P656.05 billion or 30.35 percent while Personal Services and Financial Expenses accounted for P508.32 billion or 23.52 percent and P266.07 billion or 12.31 percent, respectively.

3.2.2.1 Allotments from Regular Appropriations – P758.63 billion Total allotments for programmed activities of various agencies of the NG

stood at P758.63 billion, higher by P153.68 billion or 25.40 percent than last year’s level of P604.95 billion. The DepEd got the largest regular allotments of P182.11 billion, affirming the NG’s commitments for education. The DPWH was allotted with P109.80 billion and DND received P104.22 billion. Table III-11 shows the regular allotments released to various departments/agencies by allotment class.

Table III-11 Regular Allotments, by Department/Agency and Allotment Class

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

Education 182,109.10 145,806.86 23,884.35 2.57 12,415.31Public Works and Highways 109,801.79 3,822.45 6,014.49 - 99,964.85National Defense 104,217.44 81,749.97 17,081.33 - 5,386.13Interior and Local Government 86,954.53 73,519.60 11,330.33 - 2,104.60Social Welfare and Development 37,159.91 753.12 36,055.03 - 351.76Agriculture 33,402.11 2,846.74 12,341.53 - 18,213.84Transportation and

Communications

30,108.07 3,320.54

10,329.67 - 16,457.86

34


Department/Agency Total PS MOOE FE CO Health 28,342.44 7,234.41 12,139.68 - 8,968.35State Universities and Colleges 21,373.93 18,384.46 2,977.33 - 12.15Finance 13,735.75 4,859.35 6,662.09 - 2,214.31The Judiciary 13,621.52 10,050.14 3,486.26 - 85.12Environment and Natural

Resources 11,823.26 5,216.70 4,120.40 - 2,486.16Autonomous Region in Muslim

Mindanao 11,777.29 7,082.84

2,317.48 - 2,376.98Foreign Affairs 10,550.06 5,200.88 5,221.81 - 127.38Science and Technology 9,358.20 2,343.33 6,406.93 - 607.93Congress of the Philippines 8,491.34 3,584.79 4,879.47 - 27.08Justice 7,631.13 5,435.25 2,059.10 - 136.79Labor and Employment 7,277.72 2,785.13 4,322.80 - 169.79Office of the President 4,605.61 640.41 3,861.95 - 103.25Other Executive Offices 4,481.74 2,075.70 2,301.95 - 104.08Commission on Audit 4,293.33 3,857.23 298.20 - 137.90Agrarian Reform 3,885.31 1,907.60 780.76 - 1,196.95Trade and Industry 2,483.98 952.66 1,250.78 - 280.54Commission on Elections 2,255.45 1,546.11 709.33 - -National Economic and Development Authority 2,122.20 1,101.61 970.30 - 50.29Tourism 1,606.53 291.45 1,140.08 - 175.00Budget and Management 1,157.81 725.65 397.55 - 34.61Office of the Ombudsman 1,031.90 843.55 188.35 - -Energy 930.06 204.95 687.94 - 37.17Presidential Communications Operations Office 929.60 493.75

403.41 - 32.44

Civil Service Commission 666.85 523.97 137.09 - 5.80Commission on Human Rights 266.90 207.55 59.35 - -Office of the Vice-President 177.11 36.57 137.30 - 3.24Joint Legislative- Executive Councils 2.19 1.63

0.50

- 0.06

Total 758,632.14 399,406.94 184,954.91 2.57 174,267.72Difference between totals and sum of components is due to rounding off.

3.2.2.2 Allotments from Special Purpose Funds – P161.80 billion

Out of the total SPF appropriations of P229.21 billion, SPF allotment releases

for NGAs’ operations and other expenditures reached P161.80 billion. Almost 36.71 percent or P59.40 billion came from MPBF to cover the third tranche of salary increase of government officials and employees effective June 1, 2011. Unprogrammed Fund shared P20.45 billion or 12.64 percent and Priority Development Assistance Fund constituted P20.42 billion or 12.62 percent of the total allotments charged to SPFs. Table III-12 shows the comparison of SPFs for the last two years.

35

Table III-12 Allotments from Special Purpose Funds


Percent2011 2010 Increase / Decrease

Miscellaneous Personnel Benefits Fund 59,397.93

62,511.83

(3,113.90) (4.98)

Unprogrammed Fund 20,448.76 5,862.02 14,586.74 248.83Priority Development Assistance Fund 20,423.24

8,593.49

11,829.75 137.66

Retirement Benefits Fund 20,275.94 61,802.23 (41,526.30) (67.19)Budgetary Support to GOCCs 16,038.82 16,798.27 (759.45) (4.52)Allocations to LGUs 14,793.43 18,837.24 (4,043.81) (21.47)Calamity Fund 5,708.23 1,669.30 4,038.93 241.95International Commitments Fund 2,964.33

1,508.40 1,455.93 96.52

DepEd School Building Program 824.30

1,853.87

(1,029.57) (55.54)

Contingent Fund 671.32 909.40 (238.08) (26.18)E-Government Fund 258.54 393.95 (135.41) (34.37)


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

Budgetary Support to Government Corporations – P16.04 billion

Allotments for budgetary support representing equity investments and subsidies by the NG to GOCCs decreased to P16.04 billion from last year’s level of P16.80 billion, showing a decline of P759.45 million or 4.52 percent. It was allocated as subsidies under MOOE at P14.98 billion and as equity investments under CO at P1.05 billion. The National Housing Authority got P4.28 billion or 26.65 percent of the aggregate amount of P16.04 billion for the implementation of the resettlement program of the government. The amount of P2.50 billion or 15.59 percent went to the National Food Authority for stabilization and food security, P1.87 billion or 11.64 percent was released to the Light Rail Transit Authority for the rehabilitation of LRT Lines 1 and 2, and the remaining P7.40 billion or 46.12 percent went to other GOCCs as shown in Table III-13, for various purposes.

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

(in million pesos)

Particulars Total Subsidies Equity Investments

National Housing Authority 4,275.00 4,275.00 -National Food Authority 2,500.00 2,500.00 -Light Rail Transit Authority 1,867.51 1,867.51 -

36


Particulars Total Subsidies Equity Investments

National Electrification Authority 800.00 800.00 -Philippine Institute for Development

Studies 585.30 585.30 -Philippine Coconut Authority 542.70 542.70 -National Home Mortgage Finance Corporation 500.00 500.00 -Home Guaranty Corporation 500.00 - 500.00Philippine Fisheries Development Authority 500.00 500.00 -Philippine Rice Research Institute 453.51 453.51 -National Irrigation Authority 450.00 450.00 -Technology Resource Center 336.00 336.00 -Philippine Children's Medical Center 322.80 322.80 -National Dairy Authority 315.02 315.02 -Cagayan Economic Zone Authority 294.19 - 294.19Lung Center of the Philippines 263.26 263.26 -Cultural Center of the Philippines 195.00 195.00 -National Kidney and Transplant Institute 183.05 183.05 -Aurora Pacific Economic and Freeport

Zone 136.30 45.00 91.30Philippine Heart Center 133.00 133.00 -Philippine National Railways 131.00 131.00 -Philippine Crop Insurance Corporation 113.77 113.77 -Natural Resources Development

Corporation 110.00 110.00 -Authority of the Freeport Area of Bataan 100.00 - 100.00Center for International Trade Expositions and Missions 79.69 79.69 -Credit Information Corporation 75.00 17.50 57.50Tourism Promotion Board 65.00 65.00 -Zamboanga City Special Economic Zone Authority 60.10 49.10 11.00Southern Philippines Development Authority 59.00 59.00 -Development Academy of the Philippines 45.00 45.00 -Philippine Institute of Traditional and Alternative Health Care 37.00 37.00 -Cottage Industry Technology Center 8.00 8.00 -Philippine Health Insurance Corporation 1.50 1.50 -SBSGC 1.12 1.12 -

Total 16,038.82 14,984.83 1,053.99Difference between totals and sum of components is due to rounding off.

37

Allocations to Local Government Units – P14.79 billion

Total allotments from ALGU of P14.79 billion exhibited an increment of P4.04 billion or 21.47 percent from last year’s P18.84 billion. Special Shares of LGUs in the Proceeds of National Taxes at P10.81 billion constituted 73.05 percent of the aggregate ALGU. It primarily consists of P3.84 billion Shares of LGUs in Tobacco Excise Tax provided under R.A. No. 7171 and R.A. No. 8240 and releases for prior year’s obligations of the NG of P6.10 billion for IRA Monetization Program provided under Special Provisions of the GAA. 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

10,806.13 73.05

Financial Subsidy to LGUs 2,595.20 17.54Metropolitan Manila Development Authority

1,209.18 8.17

Pasig River Rehabilitation Commission 157.08 1.06Barangay Officials Death Benefits Fund 25.83 0.17

Total 14,793.43 100.00


Priority Development Assistance Fund – P20.42 billion

For calendar year 2011, allotments from PDAF amounted to P20.42 billion posting an increment of P11.83 billion or 137.66 percent from last year’s allotments of P8.59 billion. Table III-15 shows the comparative allotments by department/agency for the years 2011 and 2010.

Table III-15 Allotments from Priority Development Assistance Fund


Percent 2011 2010 Increase / Decrease

Public Works and Highways 11,352.03 598.43 10,753.60 1,796.97Budget and Management 5,413.93 3,120.35 2,293.58 73.50Finance 716.48 2,308.18 (1,591.70) (68.96)Social Welfare and Development 681.45 997.15 (315.70) (31.66)Agriculture 620.59 211.11 409.48 193.96State Universities and Colleges 516.02 411.61 104.41 25.37Health 390.37 439.76 (49.39) (11.23)Other Executive Offices 324.28 163.53 160.75 98.30Labor and Employment 243.36 184.65 58.71 31.80Education 63.14 110.78 (47.64) (43.00)Interior and Local Government 35.61 4.75 30.86 649.58

38


Department/Agency Amount (in millions pesos)

Percent 2011 2010 Increase / Decrease

Autonomous Region in Muslim Mindanao

30.50

9.00

21.50 238.89

Trade and Industry 21.75 13.15 8.60 65.43Environment and Natural Resources

13.73

16.05

(2.32) (14.45)

Energy - 5.00 (5.00) (100.00)


The highest PDAF allotment of P11.35 billion was released to DPWH for construction, repair and rehabilitation of public infrastructures such as roads, bridges, flood control facilities, water supply systems, school buildings and other educational facilities, hospitals and other health facilities, public markets and multi-purpose buildings. The DBM received P5.41 billion as financial assistance for the implementation of priority programs and projects of various LGUs nationwide while the DOF got P716.48 million as budgetary support to GOCCs for medical assistance to indigent patients in hospitals.

3.2.2.3 Allotments from Automatic Appropriations – P1.093 trillion

Allotments charged to Automatic Appropriations reached P1.093 trillion, representing 50.58 percent of the total allotments of P2.161 trillion. Debt Service –Principal Amortization of P444.20 billion constituted 40.63 percent while Debt Service – Interest Payment at P266.07 billion accounted for 24.34 percent and IRA at P286.94 billion shared 26.24 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 (in million pesos)


Debt Service – Principal 444,196.12 402,395.12 41,801.00 10.39Debt Service – Interest 266,068.29 297,004.44 (30,936.15) (10.42)IRA 286,944.24 265,802.38 21,141.86 7.95SAGF 34,401.48 24,491.17 9,910.31 40.46RLIP 25,430.61 22,433.88 2,996.73 13.36Tax Subsidy 18,999.93 126.97 18,872.96 14,863.71

39



Customs Duties 14,420.64 46,917.34 (32,496.70) (69.26)Grants and Donations 2,548.05 1,038.48 1,509.57 145.36Tax Refunds 294.04 - 294.04 -NIPAS (Sec. 16 RA 7586) 20.00 15.51 4.49 28.95Sale of Assets 9.29 3.49 5.80 165.90

Total 1,093,322.70 1,060,228.79 33,103.91 3.12Difference between totals and sum of components is due to rounding off.

Internal Revenue Allotments – P286.94 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 P286.94 billion, higher by P21.14 billion or 7.95 percent than last year’s data of P265.80 billion.

3.2.3 Unreleased/Unallotted Appropriations – P68.40 billion

Section 65, General Provisions of R.A. No. 10147 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 appropriations for Capital Outlays shall remain valid until fully spent or reverted.

At yearend, the unreleased appropriations stood at P68.40 billion or 3.27 percent of

the aggregate current year’s appropriations. The balance of unreleased appropriations for Regular totaling P6.77 billion consists of MOOE – P0.45 billion and CO – P6.32 billion; SAGF with MOOE – P1.01 billion; and SPFs totaling P67.41 billion consists of PS – P11.66 billion, MOOE – P11.89 billion and CO – P43.86 billion. The total unreleased appropriation for PS is for reversion and those for MOOE and CO are for retention as continuing appropriations. Details are shown in Table III-17.

Table III-17 Summary of Unreleased Appropriations (in million pesos)


tions Percent

General Appropriations Act 1,000,387.76 931,991.03 68,396.73 6.84 Regular 765,405.33 758,632.14 6,773.19 0.88 SAGF 12,566.90 11,554.05 1,012.85 8.06 SPFs 229,210.85 161,804.84 67,406.01 29.41 Overall Savings (6,795.32) - (6,795.32) -

40



tions Percent

Automatic Appropriations 1,093,332.70 1,093,332.70 0.00 0.00 Debt Service – Principal 444,196.12 444,196.12 - - Debt Service – Interest 266,068.29 266,068.29 - - IRA 286,944.24 286,944.24 - -Other Automatic

Appropriations 96,124.05 96,124.05 - -Total Current Year’s Unreleased Appropriations 2,093,720.46 2,025,323.74 68,396.73 3.27Difference between totals and sum of components is due to rounding off.

3.2.4 Obligations – P1.997 trillion

Obligations for the year aggregated at P1.997 trillion or 92.40 percent of the total allotment releases. Table III-18 shows the Summary of Allotments, Obligations and Unobligated Allotments.

Table III-18 Summary of Allotments, Obligations and Balances

(in million pesos)

Particulars Allotments Obligations* Unobligated Allotments

General Appropriations Act 931,991.03 812,610.37 119,380.67

Regular 758,632.14 656,855.27 101,776.87 SAGF 11,554.05 9,402.61 2,151.44 SPF 161,804.84 146,352.49 15,452.35 Automatic Appropriations 1,093,332.70 1,068,935.61 24,397.09 Debt Service – Principal 444,196.12 444,196.12 0.00 Debt Service – Interest 266,068.29 266,068.29 0.00 IRA 286,944.24 286,942.56 1.68 Other Automatic

Appropriations 96,124.05 71,728.64 24,395.41 Total Current Year’s Appropriations 2,025,323.74 1,881,545.98 143,777.75 Continuing Appropriations Unobligated Allotments 91,315.22 76,859.16 14,456.07 Unreleased Appropriations 44,762.16 38,680.29 6,081.87

Total Continuing Appropriations 136,077.38 115,539.45 20,537.93

Total 2,161,401.12 1,997,085.43 164,315.69 *Does not include obligations not covered by allotments. Difference between total and sum of components is due to rounding off.

41

Table III-19 reflects the Obligations Covered by Allotments, by Department/Agency, and by Allotment Class.

Table III-19 Obligations Covered by Allotments, by Department/

Agency and Allotment Class (in million pesos)

Department/Agency Total PS MOOE FE COFinance 817,664.24 6,337.49 85,578.70 266,068.29 459,679.76Budget and Management 320,964.66 2,607.72 317,981.62 - 375.32Education 219,069.24 186,819.66 21,639.06 2.54 10,607.98Public Works and Highways 121,381.69 5,118.89 12,019.08 - 104,243.72National Defense 117,481.84 96,019.70 19,218.93 - 2,243.21Interior and Local Government 102,819.66 90,504.45 10,475.34 - 1,839.87Social Welfare and Development 36,936.08 996.28 35,437.82 501.97 Agriculture 32,737.96 3,782.70 11,491.89 - 17,463.36Transportation and Communications 31,755.04 4,397.74 13,473.52 - 13,883.79Health 30,527.77 9,397.12 13,327.82 - 7,802.83State Universities and Colleges 27,685.61 23,772.90 3,703.59 - 209.12The Judiciary 16,153.47 12,587.80 3,235.18 - 330.49Environment and Natural Resources 13,961.54 6,805.71 4,249.43 - 2,906.40Foreign Affairs 12,965.20 5,517.83 7,230.21 - 217.16Autonomous Region for Muslim Mindanao 12,931.82 8,600.40 2,317.61 - 2,013.82Agrarian Reform 11,580.77 5,181.30 4,664.34 - 1,735.13Science and Technology 10,050.95 3,073.28 6,243.16 - 734.51Justice 9,968.14 7,452.65 2,364.43 - 151.06Congress of the Philippines 9,527.61 3,961.14 5,430.26 - 136.21Labor and Employment 8,096.91 3,752.25 4,126.05 - 218.62Other Executive Offices 5,968.74 2,812.23 2,924.09 - 232.42Commission on Audit 5,429.79 5,100.09 294.20 - 35.50Office of the President 4,289.03 727.41 3,390.02 - 171.60Commission on Elections 3,235.82 1,878.08 1,316.42 - 41.32Trade and Industry 2,981.53 1,274.73 1,324.61 - 382.19National Economic and Development Authority 2,517.57 1,429.20 1,017.92 - 70.45Tourism 1,697.16 366.26 1,155.90 - 175.00Presidential Communications Operations Office 1,387.80 651.08 595.71 - 141.00Metropolitan Manila Development Authority 1,365.83 154.92 965.00 - 245.91Office of the Ombudsman 1,288.68 1,035.24 190.62 - 62.82Energy 1,185.15 277.25 795.15 - 112.74Civil Service Commission 821.99 680.11 136.08 - 5.80Commission on Human Rights 323.34 261.78 61.56 - -

42


Department/Agency Total PS MOOE FE COOffice of the Vice-President 202.83 44.31 157.75 - 0.77Pasig River Rehabilitation Commission 127.82 9.63 71.49 - 46.70Joint Legislative – Executive Councils 2.15 1.66 0.39 - 0.10

Total 1,997,085.43 503,390.99 598,604.95 266,070.83 629,018.66

Difference between totals and sum of components is due to rounding off. As in the previous years, DOF incurred the highest obligations at P817.66 billion

due mainly to debt servicing requirements of the NG amounting to P710.26 billion. Of the amount, P444.20 billion was obligated for principal amortization and P266.27 billion was incurred for interest payments, including commitment fees, bank charges and other financial charges.

The DBM, as fund administrator, ranked second, reported obligations of P320.96

billion, consisting of IRA – P286.94 billion; ALGU – P14.58 billion and various funds –P19.44 billion. The DepED incurred the third highest obligations amounting to P219.07 billion of which P186.82 billion or 85.28 percent was for salaries, allowances and other personnel benefits of teaching and non-teaching personnel of the Department and its attached agencies.

At yearend, some departments/agencies reported overdrafts or obligations not

covered by allotments totaling P207.43 million. The Department of Health incurred an overdraft of P105.56 million for the payment of personnel benefits, including longevity pay, monetization of leave credits and hazard pay authorized under the Magna Carta for Public Health Workers.

The Department of Energy incurred overdraft of P100.02 million of which P96.31

million was for the Philippine Energy Efficiency Project; P0.59 million for Electric Cooperative System Loss Reduction Project; and P3.12 million for regular operating expenses.

The Commission on Filipino Language under Other Executive Offices had an

overdraft of P0.64 million incurred for the payment of terminal leave benefits. Its request for the covering allotment has not yet been granted by the DBM.

The DOJ’s overdraft of P0.62 million was incurred by the Parole and Probation

Administration, for the relief operations and restoration of damages brought about by typhoon Sendong in Region X.

Shown in Table III-20 are the details of Obligations Not Covered by Allotments, by

Department/Agency and Allotment Class.

43

Table III-20 Obligations Not Covered by Allotments, by Department/

Agency and Allotment Class (in million pesos)

Department/Agency Total PS MOOE CO Health 105.56 105.56 - - Energy 100.02 3.12 - 96.89 Other Executive Offices 0.91 0.77 - 0.13 Justice 0.62 - 0.62 - Office of the President 0.26 0.03 0.23 - Tourism 0.07 - - 0.07

Total 207.43 109.49 0.85 97.09 Difference between totals and sum of components is due to rounding off.

3.2.5 Unobligated Allotments – P143.78 billion

At the close of 2011, unobligated allotments of NGAs reached P143.78 billion, the difference between allotments of P2.025 trillion and obligations of P1.882 trillion. The details of the unobligated allotments are: PS – P4.14 billion, MOOE – P50.55 billion and CO – P89.09 billion. Section 65, General Provisions, R.A. No. 10147, provides that appropriations for MOOE and Capital Outlays shall be available for release and obligation for a period extending to one fiscal year after the end of the year in which such items were appropriated. Thus, at yearend, the unobligated allotments of P4.14 billion shall be reverted while the P50.55 billion for MOOE and P89.09 billion for CO shall be retained as allotted continuing appropriations, available for obligation up to December 31, 2012.

IV. FINANCIAL STATEMENTS

2011 2010 Increase Percent(Decrease)

Current Assets 1,186,635,929.99 1,203,322,845.47 (16,686,915.48) (1.39) Cash (Note 4.6) 262,514,417.66 324,176,711.12 (61,662,293.46) (19.02) Receivables (Note 4.7) 760,049,247.00 743,355,998.48 16,693,248.52 2.25 Inventories 26,370,237.42 25,199,509.94 1,170,727.48 4.65 Prepayments (Note 4.8) 130,055,757.04 99,162,010.94 30,893,746.10 31.15 Other Current Assets 7,646,270.87 11,428,614.99 (3,782,344.13) (33.10)

Investments (Note 4.9) 1,016,243,590.62 842,102,100.81 174,141,489.81 20.68

Property, Plant and Equipment (Note 4.10) 987,058,346.31 985,800,170.65 1,258,175.66 0.13 Land and Land Improvements 198,777,358.39 203,622,074.14 (4,844,715.76) (2.38) Buildings 141,098,205.34 133,866,279.27 7,231,926.08 5.40 Leasehold Improvements 350,682.77 282,225.90 68,456.87 24.26 Office Equipment, Furniture and Fixtures 32,879,306.56 31,961,281.09 918,025.47 2.87 Machineries and Equipment 48,382,515.82 46,275,957.84 2,106,557.98 4.55 Transportation Equipment 24,859,590.07 24,322,119.38 537,470.70 2.21 Other Property, Plant and Equipment 7,081,960.80 6,175,588.81 906,371.99 14.68 Construction in Progress 533,628,726.55 539,294,644.21 (5,665,917.67) (1.05)

Other Assets (Note 4.11) 109,501,927.00 107,636,700.19 1,865,226.82 1.73

TOTAL ASSETS 3,299,439,793.92 3,138,861,817.12 160,577,976.80 5.12

Current Liabilities (Note 4.12.1) 710,193,731.92 813,020,739.71 (102,827,007.78) (12.65) Payable Accounts 114,370,525.68 122,372,756.85 (8,002,231.17) (6.54) Inter - Agency Payables 65,253,731.72 49,816,032.41 15,437,699.31 30.99 Intra - Agency Payables 147,722,257.91 7,208,543.22 140,513,714.68 1,949.27 Other Liability Accounts 85,466,695.29 80,403,915.35 5,062,779.94 6.30 Loans Payable- Domestic, Current 297,380,521.32 553,219,491.87 (255,838,970.55) (46.25)

Long Term Liabilities (Note 4.12.2) 4,644,761,074.53 4,178,785,583.30 465,975,491.23 11.15

Deferred Credits (Note 4.12.3) 27,060,301.55 26,632,575.49 427,726.06 1.61

TOTAL LIABILITIES 5,382,015,108.00 5,018,438,898.50 363,576,209.51 7.24

EQUITYGovernment Equity (Note 4.13 ) (2,082,575,314.08) (1,879,577,081.37) (202,998,232.70) 10.80

TOTAL LIABILITIES AND EQUITY 3,299,439,793.92 3,138,861,817.12 160,577,976.80 5.12


LIABILITIES

ASSETS

National Government of the Republic of the PhilippinesCondensed Balance SheetAs of December 31, 2011

Amount (In thousand pesos)

44

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

For the Year Ended December 31, 2011


2011 2010 Increase (Decrease) Percent

INCOME/REVENUE (Note 4.14) 1,399,016,708.69 1,243,676,540.12 155,340,168.58 12.49 Tax Revenue 1,221,943,746.14 1,090,909,324.92 131,034,421.22 12.01

General Income 177,072,962.55 152,767,215.19 24,305,747.35 15.91 Permits and Licenses 7,739,470.97 459,620.01 7,279,850.96 1,583.88 Service Income 32,029,531.38 74,163,616.53 (42,134,085.15) (56.81) Business Income 45,430,648.15 10,977,870.88 34,452,777.26 313.84 Other Income 91,873,312.05 67,166,107.77 24,707,204.28 36.79

LESS: CURRENT OPERATING EXPENSES 709,723,668.65 637,457,265.94 72,266,402.71 11.34 Personal Services 512,110,992.85 464,219,664.38 47,891,328.47 10.32 Maintenance and Other Operating Expenses 197,612,675.80 173,237,601.55 24,375,074.25 14.07

Income from Current Operations 689,293,040.04 606,219,274.18 83,073,765.86 13.70

Subsidy to LGUs, GOCCs, NGOs/POs (391,266,566.73) (340,097,090.75) (51,169,475.99) 15.05 Local Government Units, net (Note 4.15.1) (317,896,685.84) (281,547,018.17) (36,349,667.67) 12.91 Government Owned and/or Controlled Corporations

(Note 4.15.2) (72,842,240.62) (57,104,688.60) (15,737,552.02) 27.56 NGOs/POs (527,640.28) (1,445,383.98) 917,743.70 (63.49)

Income after Subsidies 298,026,473.31 266,122,183.43 31,904,289.87 11.99

Less: Financial Expenses 282,771,722.55 304,516,600.13 (21,744,877.58) (7.14)

Income/(Loss) before Other Income/Expense Items 15,254,750.75 (38,394,416.70) 53,649,167.45 (139.73)

Net Subsidy From/(To) National Government Agencies (Note 4.16.1 and 4.16.2) 2,794,300.81 (35,470,663.04) 38,264,963.85 (107.88)

Net Gain/(Loss) (31,674,006.17) 49,781,956.44 (81,455,962.60) (163.63) Loss of Assets (38,690.85) (61,127.75) 22,436.90 (36.70) Loss on Guaranty (3,157,035.48) (4,571,077.81) 1,414,042.32 (30.93) Gain/Loss on Foreign Exchange (FOREX) (28,471,379.95) 54,214,718.51 (82,686,098.47) (152.52) Gain/Loss on Sale of Disposed Assets (49,962.08) (48,263.11) (1,698.97) 3.52 Gain/Loss on Sale of Securities 43,062.21 247,706.60 (204,644.39) (82.62)

NET INCOME/(LOSS) (13,624,954.60) (24,083,123.30) 10,458,168.69 (43.43)


45

Increase(Decrease)

Government Equity, Beginning Balance (1,959,632,220.07) (1,765,922,839.20) (193,709,380.88) 10.97

Retained Operating Surplus (90,389,381.58) (71,395,106.95) (18,994,274.63) 26.60Current Operations (13,624,954.60) (24,083,123.30) 10,458,168.69 (43.43)Prior Years' Adjustments (76,764,426.98) (47,311,983.66) (29,452,443.32) 62.25

Transfer to Registry of Public Infrastructures (31,598,932.88) (41,506,369.73) 9,907,436.85 (23.87)Transfer to Registry of Reforestation Projects (952,188.85) (748,900.58) (203,288.28) 27.14Remittance to National Treasury from Assets Disposal (2,590.70) (3,864.92) 1,274.22 (32.97)

Government Equity, Ending Balance (Note 4.13) (2,082,575,314.08) (1,879,577,081.37) (202,998,232.70) 10.80


Percent

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

As of December 31. 2011


2011 2010

46

2011 2010Increase

(Decrease) PercentCash Flows from Operating Activities

Cash InflowsCollection of Income/Revenues 1,338,462,288.94 1,130,306,160.54 208,156,128.40 18.42 Receipt of Notice of Cash Allocation 1,150,006,445.40 1,111,167,881.79 38,838,563.61 3.50 Receipt of inter-agency fund transfers 155,830,789.94 117,861,212.77 37,969,577.17 32.22 Receipt of intra-agency fund transfers 32,355,819.38 34,623,891.30 (2,268,071.91) (6.55) Collection of Receivables 12,377,792.86 10,044,868.41 2,332,924.45 23.23 Receipt of subsidy from Other NGAs, LGUs, GOCCs 2,194,063.72 1,694,368.46 499,695.26 29.49 Other Receipts 36,125,355.34 25,106,711.87 11,018,643.47 43.89 Adjustments 102,958,528.11 102,395,410.52 563,117.59 0.55

Total Cash Inflows 2,830,311,083.70 2,533,200,505.66 297,110,578.03 11.73 Cash Outflows

Replenishment of negotiated MDS checks 1,089,043,014.23 1,069,063,857.95 19,979,156.28 1.87 Payment of operating expenses 658,076,578.69 505,313,283.58 152,763,295.11 30.23 Grant of subsidies and donations 379,264,294.42 306,872,959.77 72,391,334.65 23.59 Remittance of Personnel Benefit Contributions and

Mandatory Deductions 133,263,196.08 119,388,983.58 13,874,212.50 11.62 Release of inter-agency fund transfers 94,606,466.16 70,119,491.07 24,486,975.09 34.92 Release of intra-agency fund transfers 69,767,888.65 98,195,858.84 (28,427,970.19) (28.95) Payment of Accounts Payable 69,046,323.79 63,533,626.13 5,512,697.66 8.68 Grant of Cash Advances for travel and for special

purpose or time bound undertaking 20,236,837.32 25,332,460.72 (5,095,623.39) (20.11) Purchase of Inventories 14,733,562.31 16,107,936.31 (1,374,374.00) (8.53) Other Disbursements 27,847,837.98 25,666,997.38 2,180,840.60 8.50 Remittance to National Treasury 324,110.50 1,103,048.59 (778,938.09) (70.62) Adjustments 102,703,129.60 47,541,157.89 55,161,971.71 116.03

Total Cash Outflows 2,658,913,239.73 2,348,239,661.80 310,673,577.94 13.23 Cash Provided By (Used In) Operating Activities 171,397,843.96 184,960,843.86 (13,562,999.90) (7.33) Cash Flows from Investing Activities

Cash InflowsProceeds from matured investments 319,828,070.22 333,017,072.85 (13,189,002.64) (3.96) Sale of investments 30,509,090.79 49,756,350.90 (19,247,260.11) (38.68) Collection of long-term loans 2,644,226.37 2,955,312.14 (311,085.77) (10.53) Sale of property, plant and equipment 91,560.16 546,244.32 (454,684.16) (83.24)

Total Cash Inflows 353,072,947.54 386,274,980.21 (33,202,032.67) (8.60) Cash Outflows

Investments 408,014,366.70 431,654,930.23 (23,640,563.53) (5.48) Purchase/Construction of Property, Plant and -

Equipment, Public Infrastructures and Other Assets 83,333,796.15 132,211,215.13 (48,877,418.97) (36.97) Grant of loans 527,883.22 468,344.98 59,538.25 12.71

Total Cash Outflows 491,876,046.07 564,334,490.33 (72,458,444.26) (12.84) Cash Provided By (Used In) Investing Activities (138,803,098.54) (178,059,510.12) 39,256,411.58 (22.05) Cash Flows from Financing Activities

Cash InflowsProceeds from Domestic and Foreign Loans 1,365,394,131.22 1,604,444,390.42 (239,050,259.20) (14.90)

Cash OutflowsPayment of Long-Term Liabilities 1,221,329,483.19 1,332,051,048.30 (110,721,565.11) (8.31) Payment of Interest Expense 240,292,424.49 236,607,356.00 3,685,068.48 1.56 Transfer to Local Loans Account 65,934.32 123,845.40 (57,911.07) (46.76)

Total Cash Outflows 1,461,687,842.00 1,568,782,249.69 (107,094,407.70) (6.83) Cash Provided By (Used In) Financing Activities (96,293,710.78) 35,662,140.73 (131,955,851.51) (370.02) Total Cash Provided by Operating, Investing and

Financing Activities (63,698,965.35) 42,563,474.47 (106,262,439.82) (249.66) Add: Cash Balance, Beginning January 1 381,252,483.63 338,706,144.54 42,546,339.09 12.56 Cash Balance, Ending December 31 (Note 4.6.2) 317,553,518.28 381,269,619.02 (63,716,100.74) (16.71)

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

Amount (in thousand pesos)

For the Year Ended December 31, 2011

The National Government of the Republic of the PhilippinesStatement of Cash Flows

47

48

NOTES TO FINANCIAL STATEMENTS

4.5 Summary of Significant Accounting Policies/Procedures

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/or 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, and COA Accounting Circular No. 2006-001 dated November 6, 2006.

4.5.3 Control of Appropriations and Allotments and Monitoring of Obligations

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

4.5.4 Notice of Cash Allocation (NCA)

The receipt of NCA by the agency is recorded in the books as debit to

account “Cash-National Treasury, Modified Disbursement System (NT, MDS)” and credit to account “Subsidy Income from National Government (SING)”.

The unused/lapsed/expired cash balance under the Cash-NT, MDS is

reverted by debiting the account SING and crediting Cash-NT, MDS. At the end of the year, an adjustment is prepared for the restoration of cash

equivalent to the unreleased checks and recognition of the appropriate

49

payable/liability accounts. On the first working day of January, a reversal journal entry is made by the agencies by debiting the appropriate liability account and crediting the Cash-National Treasury, MDS.

4.5.5 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 Accounting Circular No. 2006-001 dated November 9, 2006.

4.5.6 Foreign-Assisted Projects

Government agencies implementing Foreign-Assisted Projects used the following methods:

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;

Direct Payment Scheme, where suppliers/contractors/consultants are paid directly by the lending institution and borrowings are recorded based on the withdrawal authorization/advice of payment or any proof of disbursements;

100% Cash Loan Financing Scheme, which requires 100% appropriation and allotment cover and the loan proceeds will provide the cash requirement;

Grants in Cash and In Kind; and Commodity Loan and Grant; among others.

4.5.7 Inventory Valuation The perpetual inventory system is used to account 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 is computed using the Moving Average Method. Small tangible items with estimated useful life of more than one year are

recorded under the appropriate supplies inventory account upon acquisition and as expense upon issuance as prescribed under COA Circular No. 2005-002 dated April 14, 2005. Other tangible assets not included in the list of Annex A of the said Circular are classified as Property, Plant and Equipment, subject to depreciation.

50

4.5.8 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 adopted 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.

4.5.9 Public Infrastructures and Reforestation Projects

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

plazas, canals, irrigations, as well as those for environmental purposes like reforestation projects, etc. are assets of the government for use by the general public and not owned by the implementing agencies. During construction, these are recorded as Construction in Progress, and upon completion, these are reclassified to Public Infrastructures and Reforestation Projects. 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 maintained by the agency, respectively. The corresponding amounts are shown as deductions in the Statement of Government Equity.

4.5.10 Recognition of Liabilities

Liabilities are recognized at the time goods and services are

accepted/rendered and suppliers/creditors bills are received.

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, not recognized as liability.

4.5.11 Revenue and Expense Recognition

The Modified accrual basis of accounting is used. Income is recorded upon delivery of goods and services except for tax revenues, duties, fees, fines and penalties, including user charges, which are recognized upon collection. Expenses are recognized when incurred and reported in the financial statements in the period to which they relate.

Collections of income due for remittance to the National Treasury are

recorded in the NG books of the NGAs as liability, “Due to National Treasury” with subsidiary ledger of the specific income account. Upon receipt of the remittance, these are recorded as income in the NG books of the Bureau of the Treasury. The collections of income authorized to be used by the agencies are recorded in the RA books and are likewise remitted to the National Treasury. Upon receipt of the remittances by the National Treasury, these are recorded in the BTr-NG books as liability, “Due to Other NGAs”.

51

4.5.12 Accounting for Discounts, Premiums and Interests on Borrowings

Premiums on NG Bond Sinking Fund and managed funds’ Investment in

Bonds are recorded as deferred charges while discounts are treated as other deferred credits. These are being amortized over the life of the securities as adjustment to interest income or Due to Other GOCCs in the case of managed funds.

Interest expenses are recorded upon payment of domestic and foreign

liabilities. Bond discounts, premiums, and accrued interests on issuance of regular domestic bonds are directly charged or adjusted to interest expense on transaction dates. The recording of interests for domestic bond issuances is on cash basis as it is impractical to accrue considering the difficulty in monitoring and manual processing of voluminous transactions. However, bond discounts, premiums and accrued interests on the issuance of domestic Zero-Coupon Treasury Bonds, Bond exchanges and global or foreign bonds are accrued and taken up as Deferred Charges, Other Deferred Credits and Interest Payable, respectively. Bond discounts and premiums taken up as Deferred Charges and Other Deferred Credits, respectively, are amortized over the life of the bonds.

4.5.13 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 the 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.

4.5.14 Prior Years’ Adjustments 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 total cash balance aggregating P262,514,417,661.08 consisted of the following:

Accounts Total NG Book RA Book

Cash on Hand P4,622,034,158.74 P807,607,561.45 P3,814,426,597.29

Cash-National Treasury, MDS 4,078,188,981.96 49,912,940.34

4,028,276,041.62

52

Accounts Total NG Book RA Book

Cash in Bank – Local Currency 202,398,575,735.63* 100,531,959,699.99 101,866,616,035.64

Cash in Bank –Foreign Currency 51,415,618,784.75* 42,597,847,475.51 8,817,771,309.24

Total P262,514,417,661.08 P143,987,327,677.29 P118,527,089,983.79

* Includes Cash-Bangko Sentral ng Pilipinas in local and foreign currency amounting to P26,988,151,875.36 and P24,721,257,872.35, respectively.

Cash on Hand consisted of Cash in Vault - P2,224,289.12; undeposited/unremitted collections - P2,351,552,240.27; unliquidated cash advances by Cash Disbursing Officers - P733,459,778.33; Payroll Fund - P1,428,671,099.12 and balance of Petty Cash Fund - P106,126,751.90.

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. Under the NG books, the amount of P49,912,940.34 represents the unreleased checks of the DOF-BTr-GOP pertaining to NG subsidy to various GOCCs – P42,230,400.00 and the amount of P7,682,540.3 which was requested for write-off since it was dormant since 1990.

The Cash in Bank, Local and Foreign Currency in the NG books totaled

P143,129,807,175.50. The amount of P135,910,782,595.27 or 95 percent pertains to BTr-GOP accounts which included free balances that are available for NG operations – P87,800,463,496.98; project loan/grant proceeds earmarked to be utilized by various implementing agencies – P3,603,311,585.68; restricted accounts for special/sinking fund, BTr managed funds and escrow accounts – P44,068,976,193.44; and MDS Seed Money – P438,031,319.17.

The Cash in Bank, Local and Foreign Currency in the RA books totaled

P110,684,387,344.88. This included P15,772,502,572.25 pertaining to collections of income from tuition fees and other school charges authorized to be treated as Special Trust Fund and to be deposited in AGDB by the SUCs under RA No. 8292 and the Higher Education Modernization Act of 1997. Also included are the cash balances of agencies under the Comprehensive Agrarian Reform Program (CARP) Fund – P10,341,120,785.50.

4.6.2 The difference in cash ending balance per Balance Sheet (BS) and Statement of

Cash Flows (SCF) amounting to P55,039,100,618.26 represents Sinking Fund cash accounts lodged under Investments in BTr-GOP amounting to P55,139,592,837.98; cash accounts totaling P3,830.75 not included in the BS of DOTC; and cash accounts of SUCs of P100,099,258.22 and DOLE of P396,792.25 not included in their SCF ending balances.

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4.7 Receivables

The total Receivables in the amount of P760,049,247,002.47 is net of Allowance for Doubtful Accounts amounting to P585,564,103.26 and the eliminated amounts for Inter-Agency Receivables of P53,234,301,495.07 and Intra-Agency Receivables of P27,273,333,399.85.

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

receivables were eliminated with 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 central offices, regional offices/staff bureaus and operating units. The elimination was based on the consolidated total balances of RA and NG books as follows:

Account Title Amount Assets Inter-Agency Receivables P53,234,301,495.07 Due from National Treasury 25,330,373,425.33 Due from NGA 27,903,928,069.74 Intra-Agency Receivables 27,273,333,399.85 Due from Central Office 1,203,524,784.80 Due from Regional Office/Staff Bureaus 2,102,923,670.24 Due from Operating Units 2,645,885,499.76 Due from Other Funds 21,320,999,445.05 Total Assets P80,507,634,894.92 Liabilities Inter-Agency Payables P53,234,301,495.07

Due to Other NGAs 53,234,301,495.07 Intra-Agency Payables 27,273,333,399.85 Due to Central Office 1,195,223,364.98 Due to Regional Office/Staff Bureaus 1,203,524,784.80 Due to Operating Units 3,553,585,805.02 Due to Other Funds 21,320,999,445.05 Total Liabilities P80,507,634,894.92

4.8 Prepayments

The total Prepayments amounted to P130,055,757,041.81. Of the amount,

P104,906,575,185.05 or 80.66 percent was reported by BTr-GOP as Deferred Charges pertaining to discounts on Bond Exchange, issued Zero-Coupon Bonds and global bonds issued abroad, and premium on investments in bonds held by Bond Sinking Fund (BSF), Special Guaranty Fund (SGF), Security Stabilization Fund (SSF) and Metropolitan Waterworks and Sewerage System (MWSS) which are being amortized over the life of the bonds.

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4.9 Investments

The total Investments included the following:

Particulars Amount Percent Sinking Fund P776,808,701,509.75 76.44 Investments in Stocks 126,390,176,595.23 12.44 Other Investments and

Marketable Securities 90,910,268,048.43

8.95 Investments in Treasury Bills 14,196,227,883.14 1.40 Investments in Bonds 7,938,216,587.87 0.78

Total P1,016,243,590,624.42 100.00 Sinking Fund pertains to amounts set aside for the liquidation of long-term debt.

BTr-GOP balance of P776,800,744,940.42 included Sinking Fund accounts of NG issued and NG Guaranteed bonds issued by GOCCs such as: LBP, MWSS, HGC, NFA, NPC, PPA and HDMF.

4.10 Property, Plant and Equipment

The Property, Plant and Equipment (PPE) aggregating P987,058,346,306.88 was net of Accumulated Depreciation totaling P135,331,032,873.33 and the completed Public Infrastructures (PIs) and Reforestation Projects (RPs) amounting to P31,598,932,875.51 and P952,188,853.34, 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, these were automatically closed and the amount deducted from the total Government Equity for purposes of the consolidated financial statement presentation.

The PPE were classified as follows:

Particulars Gross Amount Accumulated Depreciation

Net Book Value

Land and Land Improvements

201,185,885,098.00 (2,408,526,711.27) 198,777,358,386.73

Buildings 184,312,444,782.15 (43,214,239,440.05) 141,098,205,342.10Leasehold Improvements 477,108,465.63 (126,425,696.55) 350,682,769.08Office Equipment, Furniture

and Fixtures 63,226,426,220.50 (30,347,119,656.09) 32,879,306,564.41

Machineries and Equipment 83,964,994,866.27 (35,582,479,046.26) 48,382,515,820.01Transportation Equipment 46,326,448,205.28 (21,466,858,132.04) 24,859,590,073.24Other Property, Plant and Equipment

9,267,344,995.37 (2,185,384,191.07) 7,081,960,804.30

Construction in Progress 533,628,726,547.01 ________-_______ 533,628,726,547.01

Total 1,122,389,379,180.21 (135,331,032,873.33) 987,058,346,306.88

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4.11 Other Assets

The total Other Assets amounting to P109,501,927,004.12 included the P72,751,103,418.65 or 66.44 percent reported by BTr-GOP under the Other Assets account consisting of the following:

Particulars Amount

Part of the transferred assets under Proclamation No. 50 wherein disposition and sale are being handled by Privatization and Management Office (PMO) and PNPP/NPC, which were reclassified from Other Property, Plant and Equipment account

P68,119,164,654.65

Part of the transferred assets from DBP, PNB and PHILGUARANTEE in the form of financial assets

4,629,763,954.00

Appraised value of diamonds in the Treasury Vaultdeposited by various government agencies which areescheated in favor of the ROP per Court Order dated May5, 1997

2,174,810.00

Total P72,751,103,418.65

The DOF-PMO also reported P15,826,104,010.95 or 14.45 percent under the Other Assets account. This included reclassification of accounts transferred from the former Asset Privatization Trust (APT) and Board of Liquidators (BOL) which were recorded based on book balances only. Said accounts were not supported and have remained dormant since its recording in PMO books.

4.12 Liabilities

4.12.1 Current Liabilities

Of the total current liabilities of P710,193,731,923.93, 41.87 percent or P297,380,521,319.79 pertains to the outstanding government Treasury Bills reported by the BTr-GOP under account Loans Payable-Domestic.

4.12.2 Long-Term Liabilities

Long-Term Liabilities totaled P4,644,761,074,531.26, majority of which was reported by the BTr-GOP and pertains to Bonds Payable-Domestic amounting to P2,563,061,590,492.32 or 55.18 percent; Bonds Payable-Foreign of P1,214,221,197,603.00 or 26.14 percent and Loans Payable-Foreign of P865,744,638,057.90 or 18.64 percent. The Bonds Payable-Foreign pertains to offshore bond flotation of the ROP consisting of:

Particulars Currency Original Amount Peso Equivalent

Euro Bonds EUR 500,000,000 P28,422,180,850US Bonds US$ 23,448,587,000 1,029,838,492,453Japanese Yen Bonds JPY 100,000,000,000 57,081,524,300PHPeso Bonds PHP 98,879,000,000 98,879,000,000 Total P1,214,221,197,603

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4.12.3 Deferred Credits

Deferred Credits of P27,060,301,545.54 included P6,808,712,040.86 or 25.16 percent reported by the BTr-GOP consisting of the following:

Particulars Amount

Premium on issuance of bonds offshore P4,961,953,021.37 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

529,017,364.33 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 ( 206,312,444.17) Balance of advance guarantee fee/FXRCF 7,290,608.15 Contra-account in setting up the receivable from DBP and

PMO

44,612,225.83 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 P6,808,712,040.86

4.12.4 Contingent Liabilities

Contingent liabilities aggregating P573,372,065,402.62 represents the

NG’s direct guarantee on GOCC loans and GFI guarantees assumed by the NG. These were not included in the reported NG liabilities but disclosed by the BTr-Debt Monitoring and Analysis Division. These liabilities were broken down as follows:

Particulars

NG direct Guarantee

on GOCC Loans

GFI Guarantee Assumed by NG

per Proclamation No. 50

Total

Foreign: US Dollar

Currency $9,374,774,093.27 $85,649,024.54 $9,460,423,117.81 Equivalent Peso Currency

P412,021,321,399.26 P3,764,274,628.58 P415,785,596,027.84

Domestic 157,450,400,000.00 136,069,374.78 157,586,469,374.78Total P569,471,721,399.26 P3,900,344,003.36 P573,372,065,402.62

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

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

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4.13 Government Equity

The total equity amounting to a negative P2,082,575,314,075.76 is the difference between the total assets and the total liabilities accounted as follows: NG books – negative P3,199,847,231,096.80 and RA books – P1,117,271,917,021.04.

The total equity increased by a negative amount of P202,998,232,703.69

computed as follows:

Results of Current Operations: NG books (188,766,434,474.73) RA books 175,141,479,870.45 (P13,624,954,604.28)Prior Years’ Adjustments (76,764,426,976.31)Completed Public Infrastructures and Reforestation Projects transferred to Registries (32,551,121,728.85)Remittance to National Treasury from Assets disposal (2,590,695.98)Total (122,943,094,005.42)Difference in equity beginning balance as of January 2011 with ending balance as of December 31, 2010 (80,055,138,698.27)Total negative increase in Government Equity (P202,998,232,703.69)

Prior years’ adjustments made by the agencies in CY 2011 totaled to negative

P76,764,426,976.31, majority of which or 86.92 percent was reported by DOF – (P30,118,235,254.38), DOE – (P13,668,985,413.36), DND – (P11,319,270,775.91), DA – (P6,230,153,861.24) and DSWD – (P5,383,640,909.85).

The PYA of DOF included the DOF-GOP adjustments in the beginning balances

of Loans and Bonds Payable in the amount of P25,797,205,722.24. 4.14 Income/Revenue

The total income for CY 2011 comprised of Tax Revenue and General Income consisting of Permits and Licenses, Service Income, Business Income and Other Income. Bulk of the income was sourced from Tax Revenue amounting to P1,221,943,746,142.73 or 87.34 percent. It included Motor Vehicles Users Charge of P9,270,131,188.52.

4.15 Subsidy to LGUs, GOCCs, NGOs/POs

4.15.1 Net Subsidy to LGUs of P317,896,685,835.89 is the difference between Subsidy from Other LGUs of P2,105,291,636.54 and Subsidy to Local Government Units of P320,001,977,472.43.

4.15.2 Subsidy to GOCCs of P72,842,240,621.02 did not include P5,000,000.00

received as subsidy by the Cultural Center of the Philippines from the National Government.

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4.16 Subsidy From/(To) National Government Agencies

4.16.1 Net Subsidy From/(To) National Government Agencies of P2,794,300,808.85 consisted of the following:

Total Subsidy from National Government Agencies P1,184,613,454,825.50Total Subsidy to National Government Agencies (1,181,819,154,016.65)Net Subsidy From/(To) National Government

Agencies

P2,794,300,808.85

4.16.2 Total Subsidy From National Government Agencies of P1,184,613,454,825.50 did not include Subsidy Income from National Government amounting to P5,000,000.00 for receipt of NCA by the Cultural Center of the Philippines.

V. FINANCIAL ANALYSES

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FINANCIAL ANALYSES

5.1 Balance Sheet

The total assets of the National Government as of December 31, 2011 rose to P3.299 trillion. Compared to the 2010 level of P3.139 trillion, a growth of P160.58 billion or 5.12 percent was noted.

For the same period, the total liabilities of the NG also grew to P5.382 trillion from

P5.018 trillion in 2010, exhibiting an increase of P363.58 billion or 7.24 percent. The total liabilities of the government exceeded the total assets by P2.083 trillion, posting a negative increase in the equity by P203 billion or 10.80 percent from a negative equity of P1.880 trillion in 2010. Table V.1-1 shows the comparative assets, liabilities and equity for CY 2011 and 2010.

Table V.1-1 Assets, Liabilities and Equity

Particulars

Amount (in million pesos) Percent 2011 2010 Increase

(Decrease) Assets 3,299,439.79 3,138,861.82 160,577.98 5.12 Current Assets 1,186,635.93 1,203,322.84 (16,686.91) (1.39) Investments 1,016,243.59 842,102.10 174,141.49 20.68 Property, Plant and Equipment

987,058.35

985,800.17

1,258.18

0.13

Other Assets 109,501.93 107,636.70 1,865.23 1.73 Liabilities 5,382,015.11 5,018,438.90 363,576.21 7.24 Current Liabilities 710,193.73 813,020.74 (102,827.01) (12.65) Long-Term Liabilities 4,644,761.07 4,178,785.58 465,975.49 11.15 Deferred Credits 27,060.30 26,632.58 427.73 1.61 Equity (2,082,575.31) (1,879,577.08) (202,998.23) 10.80 Difference between totals and sum of components is due to rounding off

5.1.1 Assets – P3.299 trillion

For the last five years, from 2007 to 2011, aggregate assets of the National Government continuously grow at an average of 5.50 percent as shown in Table V.1-2. The highest growth was realized in 2008 at 9.02 percent, followed by 9.01 percent in 2010. For this year, the increase dropped to 5.12 percent.

Total assets of P3.299 trillion

consists of Current Assets – P1.187 trillion, Investments – P1.016 trillion, Property, Plant and Equipment – P987.06 billion and Other Assets – P109.50 billion. Of the components of assets, Investments showed the highest growth at 20.68 percent, while Current Assets decreased by 1.39 percent. The other components, Other Assets and Property Plant and Equipment showed a slight increase of 1.73 percent and 0.13 percent, respectively. Chart V.1-1 presents the percentage distribution of the major categories of assets for fiscal year 2011.

Table V.1-2 Annual Growth in Assets CYs 2007-2011

Year Amount (in million pesos) Per-

cent Assets Growth 2011 3,299,439.79 160,577.98 5.122010 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

Average Growth 153,751.84 5.50

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Other Assets3.32%

Property, Plant and

Equipment29.92%

Investments 30.80%

Current Assets35.96%

Chart V.1-1 Percentage Distribution of the Major Categories of Assets

The composition of the current assets are as follows: Cash – P262.51 billion,

Receivables – P760.05 billion, Inventories – P26.37 billion, Prepayments – P130.06 billion and Other Current Assets – P7.65 billion.

Cash – P 262.51 billion

At year-end, the cash of the NG decreased to P262.51 billion from P324.18 billion

in 2010, exhibiting a reduction of P61.66 billion or 19.02 percent. This was mainly due to the decreases in the Cash in Bank by P60.11 billion and in the Cash - National Treasury MDS by P2.21 billion, partially offset by an increase of P655.08 million in Cash on Hand. Chart V.1-2 shows the trend of cash for CYs 2006 – 2011 while Table V.1-3 shows the comparative composition of cash.

Chart V.1-2 Trend of Cash

(in billion pesos)

5.1.1.1 Current Assets – P1.187 trillion

Current Assets of P1.187

trillion constituted 35.96 percent of the total assets. It showed a decrease of P16.69 billion or 1.39 percent from the 2010 level of P1.203 trillion. The reduction was due to the decreases in Cash and Other Current Assets in the amount of P61.66 billion and P3.78 billion, respectively, and partially offset by a total increase of P48.76 billion in Prepayments, Receivables, and Inventories.

0

50

100

150

200

250

300

350

Cash on Hand 10.27 6.14 4.98 5.51 3.97 4.62

Cash, NT-MDS 7.41 4.71 5.72 4.51 6.29 4.08

Cash in Bank 174.55 205.10 295.25 324.38 313.92 253.81

2006 2007 2008 2009 2010 2011

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Among the major components of cash, Cash in Bank combined balance of P253.81 billion accounted for 96.69 percent of the total. Cash on Hand and Cash-National Treasury, MDS shared P4.62 billion or 1.76 percent and P4.08 billion or 1.55 percent, respectively. From the years 2007 to 2009, Cash in Bank increased by an average of 23.77 percent, but in the last two years, 2010 to 2011, it significantly dropped to an average of 11.19 percent.

Table V.1-3 Comparative Composition of Cash

Particulars

Amount (in million pesos) Percent

2011 2010 Increase/

(Decrease) Cash on Hand 4,622.03 3,966.95 655.08 16.51 Cash in Vault 2.22 2.19 0.03 1.49 Cash – Collecting Officers 2,351.55 1,763.86 587.70 33.32 Cash – Disbursing Officers 733.46 597.22 136.24 22.81 Petty Cash Fund 106.13 81.24 24.88 30.63 Payroll Fund 1,428.67 1,522.44 (93.77) (6.16)Cash- National Treasury MDS 4,078.19 6,287.71 (2,209.52) (35.14)Cash in Bank 253,814.19 313,922.05 (60,107.86) (19.15) Bangko Sentral ng Pilipinas 51,709.41 134,474.00 (82,764.59) (61.55)

Cash in Bank – Local Currency 175,410.42 150,775.41 24,635.01 16.34 Current Account 83,469.56 71,378.03 12,091.53 16.94 Savings Account 58,666.38 47,344.07 11,322.31 23.91 Time Deposit 33,274.48 32,053.31 1,221.17 3.81

Cash in Bank – Foreign Currency 26,694.36 28,672.64 (1,978.27) (6.90) Current Account 3,658.21 2,447.04 1,211.17 49.50 Savings Account 6,955.36 9,711.76 (2,756.40) (28.38) Time Deposit 16,080.78 16,513.84 (433.06) (2.62)

Total 262,514.42 324,176.71 (61,662.29) (19.02)Difference between totals and sum of components is due to rounding off

Cash in Vault balance was P2.22 million, of which P2.16 million was accounted by the

BTr-GOP and the amount of P66.21 thousand was reported by the Bureau of Fisheries and Aquatic Resources, under the DA.

Cash – Collecting Officers account balance of P2.35 billion pertains to the collections of national government agencies which were not yet remitted/deposited with the National Treasury/Authorized Government Depository Bank (AGDB) as of year-end. The departments/offices with the highest balances to this account were:

Departments/Offices Amount

(in million pesos) Percent

Judiciary 992.71 42.22 Finance 461.29 19.62 Budget and Management 259.80 11.05 Justice 126.50 5.38 Energy 87.57 3.72 State Universities and Colleges 73.25 3.11 Transportation and Communications 67.26 2.86 Foreign Affairs 60.53 2.57 Health 47.16 2.01 Other Executive Offices 34.89 1.48 Other Departments/Offices 140.60 5.98

Total 2,351.55 100.00

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The Supreme Court and Lower Courts of the Judiciary reported P992.65

million unremitted collections, of which the amount of P935.39 million pertains to collections of Fiduciary Fund and Sheriff’s Trust Fund from the Lower Courts. The balance of the Supreme Court Proper amounting to P56.81 million was deposited in January 2012.

The Bureau of Customs (BOC) and the Bureau of Internal Revenue (BIR),

both under the DOF, reported balances of P274.56 million and P166.32 million, respectively.

The DBM balance of P259.80 million pertains to the undeposited collections

of the Procurement Service.

Cash – Disbursing Officers balance of P733.46 million represents unliquidated cash advances of authorized disbursing officers at year-end. Compared to 2010 balance of P597.22 million, it showed an increase of P136.24 million or 22.81 percent. The departments/offices that reported more than P10 million unliquidated cash advances are as follows:

Departments/Offices Amount (in million pesos) Percent

Social Welfare and Development 264.71 36.09 Finance 132.93 18.12 Foreign Affairs 106.47 14.52 State Universities and Colleges 49.33 6.72 Public Works and Highways 42.16 5.75 Science and Technology 33.10 4.51 Health 22.45 3.06 Transportation and Communications 20.77 2.83 Agrarian Reform 13.37 1.82 Labor and Employment 13.24 1.80 Other Executive Offices 12.58 1.72 Other Departments/Offices 22.34 3.05

Total 733.46 100.00

The DSWD-OSEC reported the highest unliquidated cash advances of P264.71 million, including P3.37 million dormant accounts. The bulk of which, amounting to P133.04 million pertains to cash advances for the implementation of the DSWD programs and projects such as the Cash for Work/Rice Subsidy for Small Scale Farmers and Fisherfolks and Social Pension for Indigent Senior Citizens in NCR, CARAGA and Regions II, VII and X.

Of the P132.93 million balance of the DOF, the BOC reported P131.95 million or 99.24 percent representing cash advances for Port Operations consisting of Maintenance and Other Operating Expenses and Capital Outlays.

The reported DFA balance of P106.47 million consists of prior years’

working funds of the Regional Consular Offices and Foreign Service Post - P98.96 million and unliquidated cash advances of the Passport Revolving Fund of P7.51 million.

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

increased to P106.13 million, an increment of P24.88 million or 30.63 percent compared to previous year’s level of P81.24 million was noted. The COMELEC and the DOH – OSEC are the two agencies that reported the highest balances at P15.64 million and P15.33 million, respectively.

Payroll Fund balance of P1.43 billion was reduced by P93.77 million or 6.16 percent compared to the P1.52 billion balance of last year. 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 P499.16 million or 34.94 percent of the total Payroll Fund followed by the DOF-BOC with P289.48 million or 20.26 percent, and by the DILG - Philippine National Police with P100.75 million or 7.05 percent.

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

Schedule 8, Volume I-B.

Cash - National Treasury, MDS account refers to the Notice of Cash Allocation (NCA) received from the DBM and it is credited for the amount of MDS checks issued by agencies. The balance of P4.08 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. The departments/offices which reported more than P100 million worth of unreleased MDS checks as of year-end are the following:

Departments/Offices Amount (in million pesos) Percent

Social Welfare and Development 1,179.55 28.92 Agriculture 725.43 17.79 Science and Technology 489.25 12.00 National Defense 463.52 11.37 Interior and Local Government 242.91 5.96 Education 229.43 5.63 Congress of the Philippines 196.99 4.83 Other Executive Offices 119.69 2.93 Finance 112.81 2.77 Other Departments/Offices 318.61 7.81 Total 4,078.19 100.00

Among the agencies, the DSWD-OSEC reported the highest balance of

unclaimed/unreleased MDS checks totaling P1.18 billion, followed by the DA-OSEC with P617.75 million.

The list of department/agencies with unclaimed/unreleased MDS checks at the

end of year is shown in Schedule 9, Volume I-B.

Cash, Bangko Sentral ng Pilipinas balance of P51.71 billion consisted of deposits in local currency of P26.99 billion and in foreign currency of P24.72 billion. It decreased by P82.76 billion or 61.55 percent from last year’s balance of P134.47 billion. Of the total, P51.67 billion represents deposits of the DOF-BTr-GOP for the account of the

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Treasurer of the Philippines and the remaining P42.83 million was reported by the Anti-Money Laundering Council.

Cash in Bank, Local Currency of P175.41 billion increased by P24.64 billion or 16.34

percent compared to 2010 level of P150.78 billion. It consists of: Current Account – P83.47 billion, Savings Account – P58.67 billion and Time Deposits – P33.27 billion. Pursuant to Executive Order No. 449, the BTr is the custodian of government funds consisting of all the receipts and disbursements of the NG. However, some agencies have the authority to use their income as provided in 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 departments/offices with Cash in Bank in Local Currency deposits of more than P2.0 billion balance. Schedule 10, Volume I-B presents the departments/offices/agencies with Cash in Bank, Local Currency.

Table V.1-4 Departments/Offices with more than P2.0 billion

Cash in Bank-Local Currency (in million pesos)

Departments/Offices Current Savings Time Total Finance 17,650.13 45,169.32 14,269.45 77,088.90State Universities and Colleges 8,554.64 1,093.52 15,184.03 24,832.20Judiciary 914.12 7,694.40 550.06 9,158.57Agriculture 8,867.26 55.80 - 8,923.07National Defense 6,748.58 1,488.19 0.01 8,236.79Education 7,537.12 8.39 30.00 7,575.50Other Executive Offices 4,218.03 1,797.36 - 6,015.38Health 4,929.04 15.36 - 4,944.41Agrarian Reform 4,097.20 0.57 - 4,097.77Budget and Management 1,430.26 1.72 2,500.00 3,931.99Public Works and Highways 3,696.22 46.64 - 3,742.86Transportation and Communications 2,523.06 35.63 516.76 3,075.44Labor and Employment 2,270.66 38.34 - 2,309.00Interior and Local Government 2,069.14 0.27 - 2,069.40Other Departments/Agencies 7,964.09 1,220.88 224.17 9,409.15

Total 83,469.56 58,666.38 33,274.48 175,410.42Difference between totals and sum of components is due to rounding off

The DOF- BTr – GOP reported the highest deposits amounting to P66.37 billion consisting of free balances available for NG operations, restricted accounts of various sinking funds/managed funds and various project loan/grants proceeds earmarked to be utilized by various implementing agencies and MDS seed money. The BIR and the MDFO followed with balances of P7.51 billion and P2.22 billion respectively.

Among the SUCs, the University of the Philippines System (UPS) topped with

P15.77 billion deposits, followed by Batangas State University with P710.34 million and Bulacan State University, ranked 3rd, with P404.57 million. SUCs are authorized under R.A. 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.

65

From the Judiciary, the Supreme Court and Lower Courts accounted for P8.50

billion shared by the Supreme Court Proper – P2.26 billion and Lower Courts, including the Office of the Court Administrator – P6.24 billion.

Cash in Bank – Foreign Currency balance of the government reduced to P26.69

billion, consisting of current account – P3.66 billion, savings account – P6.96 billion and time deposit – P16.08 billion. Compared to P28.67 billion in 2010, a decrease of P1.98 billion or 6.90 percent was noted. Table V.1-5 shows the departments/offices with more than P100 million deposits in foreign currency. Schedule 10, Volume I-B presents the complete list of departments/agencies with Cash in Bank, Foreign Currency.

Table V.1-5 Departments/Offices with More than P100 million

Cash in Bank- Foreign Currency (in million pesos)

Departments/Offices Current Savings Time Total Finance 156.07 2,370.95 15,511.21 18,038.23Foreign Affairs 3,211.48 407.72 436.83 4,056.03Justice 912.49 912.49Energy 831.89 831.89Social Welfare and Development 784.08 784.08Tourism 202.15 99.06 301.21Labor and Employment 74.13 203.24 277.37State Universities and Colleges 10.95 121.36 132.10 264.41ARMM 209.50 209.50Public Works and Highways 194.29 194.29Environment and Natural Resources 189.66 189.66Interior and Local Government 185.02 185.02Agriculture 127.20 0.64 127.84Transportation and Communications 123.48 123.48Other Departments/Offices 3.44 195.42 ________ 198.86Total 3,658.21 6,955.36 16,080.78 26,694.36Difference between totals and sum of components is due to rounding off

Of the P18.04 billion reported by the DOF, the BTr-GOP accounted P17.88 billion balance. This includes free balances and managed funds – P8.55 billion; Forfeited Swiss deposits – P7.45 billion; NY Collateral Bonds Conversion-Federal Reserve Bank – P728.46 million; and Escrow account – P151.30 million.

The DFA-OSEC deposits of P4.06 billion represents cash in bank balances

maintained by Foreign Service Posts, of which P3.2 billion or 79.18 percent was retained as working funds.

Receivables – P760.05 billion

The outstanding Receivables of the NG of P760.05 billion, net of Allowance for Doubtful Accounts of P585.56 million represents 64.05 percent of the total current assets of P1.187 trillion. Compared to P743.36 billion in 2010, it showed an increase of P16.69 billion or 2.25 percent. The major components of Receivables are: Inter-Agency Receivables – P489.03 billion, Receivable Accounts – P245.23 billion and Other

66

Receivables – P25.79 billion. Details of the Receivables by accounts are shown in Table V.1-6.

Table V.1-6 Details of Receivables by Account

Particulars


(Decrease) Receivable Accounts 245,226.42 247,267.56 (2,041.13) (0.83) Accounts Receivable, Net 6,354.55 7,648.37 (1,293.82) (16.92) Notes Receivable 137,106.00 137,085.36 20.64 0.02 Due from Officers and Employees

789.41

716.57

72.85

10.17

Loans Receivable - GOCCs 79,914.80 81,429.12 (1,514.32) (1.86) Loans Receivable - LGUs 3,329.40 3,425.68 (96.29) (2.81) Loans Receivable - Others 8,356.46 8,062.81 293.65 3.64 Interest Receivable 2,925.37 1,337.29 1,588.08 118.75 Advances to Officers and Employees

6,450.43

7,562.36

(1,111.93)

(14.70)

Inter-Agency Receivables 489,030.59 469,946.71 19,083.88 4.06 Due from National Treasury 7,607.01 14,018.74 (6,411.73) (45.74) Due from NGAs 5,427.98 - 5,427.98 Due from GOCCs 447,413.98 433,547.29 13,866.69 3.20 Due from LGUs 19,649.90 14,355.71 5,294.19 36.88 Due from NGOs/POs 8,931.72 8,024.97 906.75 11.30 Intra-Agency Receivables - 448.76 448.76 (100.00) Due from Regional Offices/ Staff Bureaus

-

-

-

Due from Operating Units - 448.76 (448.76) (100.00) Other Receivables 25,792.24 25,692.97 99.27 0.39 Receivables-Disallowances/

Charges

4,981.42

4,861.79

119.62

2.46 Other Receivables 20,810.82 20,831.17 (20.35) (0.10) Total 760,049.25 743,356.00 16,693.25 2.25 Difference between totals and sum of components is due to rounding off.

Accounts Receivables (Net) balance of P6.35 billion representing less than one percent

of the total receivables, exhibited a decline of P1.29 billion or 16.92 percent compared to P7.65 billion reported in previous year. The five agencies that reported huge balances with a combined total of P4.01 billion or 63.26 percent were as follows: DOH-OSEC – P1.03 billion; DOTC-OSEC – P837.22 million; DOE-OSEC – P834.29 million; University of the Philippines – P543.79 million and DENR – National Water Resources Board – P561.40 million. Schedule 11, Volume I-B enumerates the departments/ offices with Net Accounts Receivables.

Notes Receivables of P137.11 billion constituted 18.04 percent of the total receivables

of the NG, of which P137.02 billion or 99.94 percent was reported by the DOF-BTr-GOP. It pertains 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 the NG in the CB-BOL.

Due from Officers and Employees rose to P789.41 million, showing an increase of

P72.85 million or 10.17 percent from P716.57 million in previous year. The amount consisted of billings for overpayment of salaries, allowances/entitlements, honoraria and cash shortages. The five agencies that reported the largest balance to this account

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are: DFA OSEC – P134.54 million, DA-OSEC – P123.46 million; DOF-BIR – P92.63 million; Supreme Court of the Philippines and Lower Courts - P41.42 million; DepED OSEC – P39.03 million. Schedule 12, Volume I-B presents the complete list of departments/offices/agencies with balances to this account.

Loans Receivable – GOCCs totaling P79.91 billion decreased by P1.51 billion or 1.86

percent compared to previous year’s balance of P81.43 billion. Of the total, the DOF-BTr-GOP reported P76.71 billion or 95.99 percent consisting of cash and constructive cash loan outlays to GOCCs. This also included the 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. Details of Loans Receivables by GOCCs, by the Bureau of the Treasury are presented in Schedule 13, Volume I-B.

Loans Receivable – LGUs dropped to P3.33 billion, a decrease of P96.29 million or

2.81 percent was noted over last year’s P3.43 billion. The DOF-MDFO reported P3.04 billion loan receivables from LGUs comprising 91.26 percent of the aggregate. The other three agencies with this account are: DA-OSEC with P281.11 million composed of loans to LGUs in the form of 4 Wheel Tractors, Irrigation Pumps and warehouses with repayment period of 5-10 years; the Bureau of Local Government Finance with P8.53 million; and DOLE-Technical Education and Skills Development Authority (TESDA) – P1.45 million.

Loans Receivable – Others amounted to P8.36 billion, showing an increment of

P293.65 million or 3.64 percent from P8.06 billion in previous year. The DA reported the highest balance at P6.85 billion representing 82.03 percent of the total. This included the P4.07 billion loans granted by OSEC to various beneficiaries for implementation of the Agricultural Competitiveness Enhancement Fund (ACEF) and P11.32 million loans granted by RFU Region VI to farmers in the form of Shallow Tube Wells and Farm Equipment payable in 10 equal installments for 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. The Agricultural Credit and Policy Council shared P531.63 million.

Other departments with loan receivables aggregating P1.50 billion are shown

below.

Departments/Offices Amount (in million pesos)

Trade and Industry 329.53 Other Executive Offices 309.69 Labor and Employment 165.16 State Universities and Colleges 162.41 Agrarian Reform 154.54 Finance 134.55 Social Welfare and Development 126.34 Science and Technology 95.03 Energy 24.63 Environment and Natural Resources 0.06 Total 1,501.94

Interests Receivable on various investments and loans granted significantly increased

to P2.93 billion from P1.34 billion in previous year, exhibiting a growth of P1.59 billion

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or 118.75 percent. This was mainly due to the DOF-BTr-GOP’s P1.74 billion accrued interest on investments in Treasury Bonds from the Special and Sinking Funds; and LBP administered Agrarian Reform Fund (ARF). The DOF–MDFO also reported P478.03 million interest receivable from loans released to LGUs.

Advances to Officers and Employees dropped to P6.45 billion from prior year’s

balance of P7.56 billion, posting a reduction of P1.11 billion or 14.70 percent. The amount represents the unliquidated cash advances granted for local and foreign travels and for special purpose/time-bound undertakings. The DepED – OSEC topped the list with P1.73 billion corresponding to 26.84 percent of the total, followed by the DSWD - OSEC with P848.43 million or 13.15 percent; and the OP-Presidential Anti-Organized Crime Commission – P550 million or 8.53 percent. Schedule 12, Volume I-B presents the complete list of departments/offices/agencies with unliquidated advances to officers and employees.

Inter-agency Receivables rose to P489.03 billion from P469.95 billion in prior year,

posting an increment of P19.08 billion or 4.06 percent. It consisted of the following accounts: Due from National Treasury – P7.61 billion, Due from NGAs – P5.43 billion, Due from GOCCs – P447.41 billion, Due from LGUs – P19.65 billion and Due from NGOs/POs – P8.93 billion.

Due from National Treasury (NT) was reduced to P7.61 billion after the

elimination of the P25.33 billion balances reported in the Regular Agency books of various NGAs with the reciprocal account Due to Other NGAs in the BTR-GOP books. Due from NT 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.

Due from GOCCs balance of P447.41 billion grew by P13.87 billion or 3.20 percent from P433.55 billion in 2010. The DOF-BTr-GOP reported the highest balance of P424.92 billion or 94.97 percent, details of which are shown in Table V.1.7. The DA- OSEC followed, with P6.54 billion representing fund transfer to LBP for ACEF project and to NABCOR, ZREC, PADCC for implementation of PDAF and other DA projects. The DOTC-OSEC, the 3rd highest, reported P5.71 billion balance which include fund transferred to the Light Rail Transit Authority of P4.50 billion and to the Manila International Airport Authority of P1.10 billion for the MRT 3 System Capacity Expansion Project and NAIA Terminal I Rehabilitation Project, respectively. Schedule 14, Volume I-B presents the list of GOCCs with balances under this account in the Bureau of the Treasury.

Due from LGUs balance of P19.65 billion increased by P5.29 billion or 36.88

percent from the 2010 level of P14.36 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 P4.39 billion consisting of funds transferred by OSEC, RFUs and Bureaus to the LGUs for implementation of various infrastructures projects and post-harvest facilities such as Farm to Market Roads, Small Water Impounding Projects, farm inputs/implements and repair/rehabilitation of existing irrigation. The DSWD-OSEC balance of P3.12 billion includes rehabilitation assistance for the victims of calamities and for implementation of various DSWD programs and projects. Other agencies with

69

more than P1.50 billion balances under this account are: DOH-OSEC – P2.48 billion, DPWH-OSEC – P2.10 billion and DAR – OSEC – P1.74 billion.

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)

259,239.90

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

136,781.50

Guarantee fee receivables 11,572.06NG advances for assumed GOCCs/GFIs guaranteed obligations 7,976.05Dormant accounts 7,758.49Balance of loans outlay released to LBP under the Agrarian Reform

Loans 1,272.42

Balance 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-GOP Notes to FS

424,917.29

Due from NGOs/POs of P8.93 billion increased by P906.75 million or 11.30

percent from the previous year’s balance of P8.02 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 DOH-OSEC accounted the highest balance at P2.24 billion, which

included largely the funds transferred to UNICEF and World Health Organization for the procurement of various drugs and medicines and other inventory supplies. The DA-OSEC also reported P1.58 billion balance of fund transferred to NGOs/POs for the procurement of farm inputs and farm implements for the implementation of livelihood and other DA programs/projects, while the DSWD-OSEC had P1.17 billion, of which P436.05 million was released by the DSWD to various NGOs from year 2010 and prior years funded from the Congressional Initiative, CDF and PDAF of various solons.

Schedule 15, Volume I-B presents the departments/agencies with balances of accounts Due from GOCCs, LGUs, and NGOs/POs.

Other Receivables group of accounts aggregated to P25.79 billion slightly declined by

P99.27 million from P25.69 billion in 2010. The components of this category are Receivables - Disallowances/Charges – P4.98 billion or 19.31 percent and Other Receivables – P20.81 billion or 80.69 percent.

Receivables-Disallowances/Charges of P4.98 billion were unsettled audit disallowances that have become final and executory. Compared with the previous year’s balance of P4.86 billion, an increase of P119.62 million or 2.46 percent was noted. The agencies which reported the highest balances were: DOF-BOC – P1.84 billion, and DPWH-OSEC – P1.06 billion.

70

Other Receivables dropped to P20.81 billion from P20.83 billion in 2010, showing a minimal decrease of P20.35 million. The DOF-BTr-GOP reported P12.62 billion comprising 60.65 percent of the total, of which P12.13 billion pertains to the receivables of the Treasurer of the Philippines from Authorized Agent Banks for the BIR collections per Department Order No. 73-02 dated September 20, 2002 and the Memorandum of Agreement between the banks, the BTr and the BIR.

Schedule 16, Volume I-B shows the departments/agencies with balances to

Other Receivables accounts.

Inventories – P26.37 billion

Inventories of NGAs aggregated to P26.37 billion, posting an increment of P1.17 billion or 4.65 percent compared to P25.20 billion last year. The components of this category of assets are: Supplies – P24.16 billion or 91.62 percent; Materials – P1.43 billion or 5.42 percent; and Agricultural, Fishery and Forestry Products – P779.90 million or 2.96 percent.

The DOH-OSEC reported the highest balance of inventories amounting to P7.78

billion which includes Drugs and Medicines – P5.06 billion, Medical and Dental Laboratory – P1.28 billion, Office Supplies – P574.03 million, and Merchandise Inventory – P452.92 million. The other agencies which reported more than P1.00 billion inventory at year-end were: DND-Philippine Army and GHQ-AFP – P3.27 billion and P1.18 billion, respectively; DepED-OSEC – P2.71 billion; and DA-OSEC – P1.04 billion. Schedule 17, Volume I-B presents the complete list of departments/offices/ agencies.

Prepayments – P130.06 billion

Prepayments of P130.06 billion significantly increased by P30.89 billion or 31.15

percent over last year’s level of P99.16 billion. The growth was mainly due to the P30.60 billion or 41.10 percent increase in Deferred Charges. The components of this group of assets were: Deferred Charges – P105.06 billion; Advances to Contractors – P11.17 billion; Deposit on Letters of Credits – P9.09 billion; Other Prepaid Expenses – P3.88 billion; Prepaid Rent – P673.62 million; Prepaid Insurance – P185.98 million; and Prepaid Interest – P1.91 million. Schedule 18, Volume I-B indicates the components of Prepayment accounts by department/office.

Deferred Charges of P105.06 billion comprised 80.78 percent of the aggregate

prepayments. The DOF-BTr-GOP reported P104.91 billion representing 99.85 percent of the total, which pertains to discounts on Bond Exchange, the issuance 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 being are amortized over the life of the bonds.

Advances to Contractors increased to P11.17 billion, an increment of P1.56 billion or

16.21 percent compared to last year’s level of P9.61 billion. These were advance payments for 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 the highest balance of P7.05 billion or 63.14 percent of the total advances followed by DOTC-OSEC and DA-OSEC with P990.79 million and P986.44 million, respectively.

71

Deposit on Letters of Credit of P9.09 billion reduced by P1.49 billion or 14.06 percent from the 2010 balance of P10.57 billion. The DND-GHQ-AFP and the Philippine Army accounted the highest balances at P5.70 billion or 63.14 percent and P1.03 billion or 11.39 percent of the total, respectively. The account represented marginal deposits or prepayments deposited to authorized depository banks for the supplies and delivery of ammunitions, vehicles and communication requirements of the AFP contracted from foreign suppliers and cost of freight forwarding. Other agencies which reported more than P100 million balances were: DBM-Procurement Service – P1.21 billion, DA- OSEC – P214.81 million, COMELEC – P209.74 million, DOTC- OSEC – P187.71 million, and DND – Government Arsenal – P132.37 million.

Other Current Assets group aggregating P7.65 billion consisted mostly of Guaranty

Deposits of P7.27 billion or 95.14 percent and Other Current Assets account of P371.52 million.

Guaranty Deposits at P7.27 billion reduced by P3.76 billion or 34.10 percent from last

year’s balance of P11.04 billion. The account represented the cash deposits with government banks and other private institutions mainly for the procurement of goods, equipment and ammunitions locally and from abroad subject to refund. The DA-OSEC reported P4.01 billion while DND- AFP -GHQ shared P2.41 billion representing 55.08 percent and 33.15 percent of the total, respectively.

The account of the DA-OSEC included the P4.00 billion 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 issued by the Office of the President.

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

presented in Schedule 19, Volume I-B. 5.1.1.2 Investments – P1.016 trillion

Investments of the NG worth P1.016 trillion comprised 30.80 percent of the total assets, higher by P174.14 billion or 20.68 percent than the previous year’s level of P842.10 billion. The growth is attributed to the Sinking Fund which grew to P776.81 billion, showing an increase of P161.20 billion or 26.19 percent from P615.61 billion in 2010. Investments in Securities aggregating P239.43 billion also increased by P12.94 billion or 5.71 percent compared to P226.50 billion in 2010. The composition of Investments is shown in Table V.1-8.

Table V.1-8 Composition of Investments



Investments in Securities 239,434.89 226,496.28 12,938.60 5.71 Investments in Treasury Bills 14,196.23 13,389.72 806.51 6.02 Investments in Stocks 126,390.18 126,510.26 (120.09) (0.09) Investments in Bonds 7,938.22 7,696.61 241.61 3.14 Other Investments and Marketable Securities

90,910.27

78,899.69

12,010,.57

15.22

Sinking Fund 776,808.70 615,605.81 161,202.89 26.19Total 1,016,243.59 842,102.10 174,141.49 20.68Difference between totals and sum of components is due to rounding off.

72

Investments inTreasury Bills of P14.20 billion registered an increase of P806.51 million

or 6.02 percent from P13.39 billion in previous year. The DOF-MDFO had the highest balance to this account at P10.88 billion or 76.63 percent of the total, which represents MDFO Local Loans Account 162 Second Generation Funds temporarily placed in Treasury Bills. Other agencies with huge amount of investments in Treasury bills are: DOE-OSEC – P2.66 billion, Bureau of Rural Workers with Special Concerns – P287.72 million, Supreme Court of the Philippines and Lower Courts– P104 .76 million.

Investments in Stocks of P126.39 billion slightly reduced by P120.09 million from P126.51 billion in 2010. The DOF-BTR-GOP reported P125.12 billion or 99 percent consisting of NG equity contributions to GOCCs – P97.49 billion; subscriptions to the capital stocks of international financial organizations – P24.55 billion; equity in the Philippine National Construction Corporation 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 PCGG, under DOJ, also reported P1.07 billion investments in stocks.

The schedule of Investments in Stocks of the NG as reported by the BTr-GOP is presented in Schedule 20, Volume I-B.

Investments in Bonds of P7.94 billion, exhibited an increase of P241.61 million or 3.14

percent from P7.70 billion in the previous year. The DOF-BTr-GOP reported P7.79 billion or 98.08 percent of the total, which consists of NG investments in NIA Bonds – P4.26 billion and ROP Bonds – P131.78 million and in BTr managed/administered funds – P3.39 billion. Other agencies with huge amount of investment in bonds were: SUC-UPS – P81.99 million, NEDA- SRTC – P63 million and DOF-Privatization and Management Office (PMO) – P7.17 million.

Other Investments and Marketable Securities at P90.91 billion increased by P12.01

billion. The DOF- BTr-GOP reported a balance of P88.09 billion representing 96.90 percent of the total, majority of which pertains to the equity of the NG in non-stock GOCCs amounting to P86.57 billion.

Other agencies that reported more than P150 million balances were: SUC-UPS –

P866.72 million, DAR-OSEC – P689.15 million, OEO-CHED – P340.93 million, Office of the President – P275.62 million, and DA-OSEC – P150.92 million. The schedule of Other Investments and Marketable Securities by department/ office is shown in Schedule 21, Volume I-B.

Sinking Fund of P776.81 billion represents 66.71 percent of the total investments of the

NG. This pertains to Sinking Fund accounts of NG-issued and NG Guaranteed LBP, MWSS, HGC, NFA, NPC, PPA and PAG-IBIG Bonds being administered by the DOF-BTr-GOP.

5.1.1.3 Property, Plant and Equipment – P987.06 billion

The book value of the Property, Plant and Equipment (PPE) of P987.06 billion, net of accumulated depreciation of P135.33 billion, comprised 29.92 percent of the total assets. Compared to P985.80 billion balance in 2010, it posted an increase of P1.26 billion. The major classification of PPE is shown in Table V.1-9.

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

Particulars

Amount (in million pesos) Percent 2011 2010 Increase/

(Decrease) Land and Land Improvements 198,777.36 203,622.07 (4,844.71) (2.38) Buildings 141,098.21 133,866.28 7,231.93 5.40 Leasehold Improvements 350.68 282.23 68.46 24.26 Office Equipment, Furniture

and Fixtures 32,879.31 31,961.28 918.03 2.87

Machineries and Equipment 48,382.52 46,275.96 2,106.56 4.55 Transportation Equipment 24,859.59 24,322.12 537.47 2.21 Other Property, Plant and Equipment

7,081.96

6,175.59

906.37

14.68

Construction in Progress 533,628.73 539,294.64 (5,665.92) (1.05) Total 987,058.35 985,800.17 1,258.18 0.13 Difference between totals and sum of components is due to rounding off.

Among the components, the Construction in Progress account worth P533.63

billion accounted for 54.06 percent of the total PPE. The Land and Land Improvements group and the Buildings shared P198.78 billion or 20.14 percent and P141.10 billion or 14.29 percent, respectively. Chart V.1-3 shows the percentage distribution of PPE by classification. Schedule 22, Volume I-B presents the PPE by department/agency and by account.

Chart V.1-3 Percentage Distribution of Property, Plant and

Equipment by Classification

20.14%

14.29%

0.04%

3.33%4.90%

2.52%

0.72%

54.06%

Land and Land Improvements

Buildings

Leasehold Improvements

Office Equipment, Furniture and Fixtures

Machineries and Equipment

Transportation Equipment

Other Property, Plant and Equipment

Construction in Progress

Land and Land Improvements group accumulated value of P198.78 billion exhibited a reduction of P4.84 billion or 2.38 percent from P203.62 billion in previous year. Of the components, the Land account had the highest balance at P160.66 billion representing 80.82 percent, followed by the Land Improvement account with net book value of P35.44 billion or 17.83 percent. Runways/Taxiways account had the least balance at P210. 48 million, noting a reduction of P1.13 billion or 84.30 percent from last year’s P1.34 billion. The significant reduction was due to the dropping from DOTC books the transfer of completed projects to the recipient agency. Table V.1-10 shows the comparative components of Land and Land Improvement accounts

74

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



Land 160,657.69 159,915.78 741.91 0.46 Land Improvements 35,445.02 39,919.85 (4,474.84) (11.21) Runways/Taxiways 210.48 1,340.90 (1,130.42) (84.30) Railways 1,851.91 1,851.91 - - Electrification, Power and

Energy Structures 612.26

593.63

18.63

3.14

Total 198,777.36 203,622.07 (4,844.72) (2.38) Difference between totals and sum of components is due to rounding off.

The agencies that reported more than P10 billion worth of property under the

Land and Land Improvement category of accounts are: DSWD-OSEC – P40.26 billion, DPWH-OSEC – P30.90 billion, DA-OSEC – P19.22 billion, DND-Philippine Air Force – P17.65 billion and DOJ-PCGG – P16.02 billion.

Buildings accumulated net book value of P141.10 billion comprised 14.29 percent of

the total PPE. It registered an increase of P7.23 billion or 5.40 percent over the 2010 level of P133.87 billion. Among the components of this group of PPE, the School Buildings account shared the biggest portion at P60.85 billion or 43.12 percent, followed by Office Buildings at P44.71 billion or 31.69 percent, and Other Structures at P27.17 billion or 19.26 percent. Table V.1-11 shows the components of Buildings.

Table V.1-11 Components of Buildings

Particulars


(Decrease) Office Buildings 44,707.81 43,147.45 1,560.36 3.62 School Buildings 60,848.55 57,024.96 3,823.59 6.71 Hospitals and Health Centers 8,286.79 7,189.15 1,097.65 15.27 Markets and Slaughterhouses 81.68 109.65 (27.98) (25.51) Other Structures 27,173.38 26,395.07 778.31 2.95

Total 141,098.21 133,866.28 7,231.93 5.40 Difference between totals and sum of components is due to rounding off.

The DepED - OSEC reported the biggest balance valued at P44.08 billion, of

which P42.04 billion or 95.36 percent were School buildings. The amount of buildings booked up does not include the School Building Projects implemented by the DPWH due to non-availability of documents such as the certificate of final completion and certificate of acceptance by the end-users. The other two agencies with huge balances to this PPE group of account were: DPWH-OSEC with P24.42 billion, which included completed school building projects that were already transferred to the end-user agencies but not yet dropped from the books of DPWH; and DOH-OSEC with P6.86 billion net book value of buildings, of which P6.08 billion were hospitals.

Construction in Progress (CIP) group of PPE combined balance of P533.63 billion

showed a reduction of P5.67 billion or 1.05 percent from previous year’s balance of P539.29 billion. This group of PPE consisted of CIP-Agency Assets - P38.85 billion or 7.28 percent, Public Infrastructures – P492.65 billion or 92.32 percent and Reforestation Projects – P2.13 billion or 0.40 percent. Table V.1-12 presents the components of CIP group of PPE account.

75

Table V.1-12 Components of Construction in Progress

Particulars


(Decrease) Agency Assets 38,849.40 33,571.28 5,278.13 15.72 Public Infrastructure 492,649.70 503,643.57 (10,993.87) (2.18)

Roads, Highways and Bridges 309,819.00 326,691.53 (16,872.53) (5.16) Parks, Plazas and Monuments 188.51 838.46 (649.95) (77.52) Ports, Lighthouses and Harbors 4,054.07 6,014.21 (1,960.15) (32.59) Artesian Wells, Reservoirs,

Pumping Stations and Conduits

3,117.76

3,354.51

(236.76)

(7.06) Irrigation, Canals and Laterals 69,324.13 60,712.76 8,611.37 14.18 Flood Controls 49,156.00 52,796.04 (3,640.04) (6.89) Waterways, Aqueducts, Seawalls,

River Walls and Others

2,102.64

2,270.15

(167.51)

(7.38) Other Public Infrastructures 54,887.59 50,965.90 3,921.68 7.69

Reforestation Projects 2,129.63 2,079.80 49.83 2.40 Upland 2,085.62 2,043.15 42.47 2.08 Marshland/Swampland 44.01 36.64 7.36 20.09

Total 533,628.73 539,294.64 (5.665.92) (1.05) Difference between totals and sum of components is due to rounding off.

CIP – Agency Assets account balance of P38.85 billion posted an increment of

P5.28 billion or 15.72 percent from P33.57 billion in 2010. The agencies that reported more than P1.0 billion balances to this account were: DepED-OSEC – P8.42 billion worth of ongoing projects under the School Building Program, repair of Teachers Camp and various buildings implemented by the department and other NGAs; DOTC-OSEC – P7.22 billion; DOH-OSEC – P4.22 billion; SUC-UPS – P3.10 billion; DA-OSEC – P1.56 billion; DPWH-OSEC – P1.46 billion; and DND-Philippine Army – P1.45 billion. Schedule 23, Volume I-B shows the CIP by department/agency.

Public Infrastructures accounts accumulative balance of P492.65 billion exhibited a decrease of P10.99 billion or 2.18 percent compared with P503.64 billion in 2010. This group of CIP constitutes: Roads, Highways and Bridges – P309.82 billion or 58.06 percent, Irrigation, Canals and Laterals – P69.32 billion or 12.99 percent, Other Public Infrastructures – P54.89 billion or 10.29 percent, Flood Controls – P49.16 billion or 9.21 percent; and Ports, Lighthouses and Harbors – P4.05 billion, Artesian Wells, Reservoirs, Pumping Stations and Conduits – P3.12 billion, Waterways, Aqueducts, Seawalls – P2.10 billion and Parks, Plazas and Monuments – P188.51million.

Table V.1-13 shows the agencies that reported more than P100 million

balances. The DPWH-OSEC accounted for P398.56 billion or 80.90 percent, majority of which are Roads, Highways and Bridges – P304.63 billion, Flood Controls – P48.85 billion and Other Public Infrastructures – P34.28 billion. The DA-OSEC reported P66.41 billion, of which P63.26 billion are Irrigation, Canals and Laterals foreign assisted projects, equipment and consultancy implemented by NIA. Schedule 24, Volume I-B presents the Public Infrastructures by department/ agency.

76

Table V.1-13 – Agencies with more than P100 million worth of Public Infrastructures

Reforestation Projects aggregating P2.13 billion showed a slight increase of P49.83 million or 2.40 percent from the previous year’s balance of P2.08 billion. This was reported by the DENR-OSEC consisting of P2.09 billion or 97.93 percent for Upland and P44.00 million or 2.07 percent for Marshland/ Swampland.

5.1.1.4 Other Assets – P109.50 billion

The aggregate Other Assets of the NG stood at P109.50 billion and represented 3.32 percent of the total assets. This group of account went up by 1.73 percent or P1.86 billion from last year’s balance of P107.64 billion. Among the components of this group, Work/Other Animals had the highest growth rate of 34.71 percent but with least balance of P132.29 million, while the Other Assets Account had the least growth rate of 2.14 percent but with the biggest balance of P98.07 billion. Table V.1-14 shows the components of the Other Assets group.

Table V.1-14 Components of Other Assets Group

Particulars


(Decrease) Other Assets 98,074.83 96,022.43 2,052.39 2.14 Items in Transit 10,164.92 10,385.98 (221.06) (2.13) Breeding Stocks 715.63 735.53 (19.90) (2.71) Arts, Archeological Specimen and Other Exhibit

414.26

394.56

19.71

4.99

Work/Other Animals 132.29 98.20 34.09 34.71 Total 109,501.93 107,636.70 1,865.22 1.73


The 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 P98.07 billion or 89.56 percent of the total. The DOF-BTr-GOP reported P72.75 billion balance consisted mostly of transferred assets under Proclamation No. 50 wherein disposition and sale are being handled by the Privatization and Management Office and PNPP/NPC, and financial assets transferred from DBP, PNB and Philguarantee amounting to P68.12 billion and P4.63 billion, respectively. It also included 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.

Agencies

Amount (in million

pesos)

Percen- tage

DPWH - OSEC 398,561.45 80.90 DA-OSEC 66,415.00 13.48 DOTC-OSEC 23,138.80 4.70 DAR-OSEC 1,708.34 0.35 MMDA 850.22 0.17 DENR-OSEC 781.73 0.16 DOH-OSEC 318.38 0.06 Pasig River Rehabilitation Commission

312.07

0.06

DND-Phil Army 195.07 0.04 DOT-OSEC 137.05 0.03 ARMM-Office of the Regional Governor

100.22

0.02

Other Agencies 131.35 0.03 Total 492,649.70 100.00

77

5.1.2 LIABILITES – P5.382 trillion

This year’s reported liabilities of P5.382 trillion posted an increment of P363.58 billion or 7.24 percent compared to last year’s amount of P5.018 trillion. Of the total, P4.645 trillion or 86.30 percent pertains to Long-term Liabilities; P710.19 billion or 13.20 percent represents Current Liabilities; and P27.06 billion or 0.50 percent refers to Deferred Credits.

Chart V.1-4 shows the trend of liabilities of the NG for the last ten (10) years.

Chart V. 1-4 Trend of Liabilities

(in billion pesos)

The chart shows that total liabilities continued to grow, except in 2007 where there was a slight decline brought about by the decrease in Long-term Liabilities. The decrease in Long-term Liabilities and the increase in Current Liabilities in 2009 were due to the reclassification of the current portion of the Loans Payable-Domestic from Long-term Liabilities to Current Liabilities. For FY 2011, total liabilities increased due to the great increment in Long-term Liabilities though there was a slight decrease in Current Liabilities. The 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 – P710.19 billion

This year’s Current Liabilities posted a decrease of P102.83 billion or 12.65 percent from last year’s balance of P813.02 billion. This was due to the decline in Loans Payable - Domestic, Current by P255.84 billion or 46.25 percent and Payable Accounts by P8.00 billion or 6.54 percent. There were, however, increases in Inter-Agency Payables of P15.44 billion or 30.99 percent, Intra-Agency Payables of P140.51 billion or 1,949.27 percent, and Other Liability Accounts of P5.06 billion or 6.30 percent. Table V.1-15 shows the components of Current Liabilities with comparative figures for 2010.

0

1,000

2,000

3,000

4,000

5,000

6,000

C urrent Liabilit ies 672.87 204.10 225.90 212.80 239.74 250.12 271.77 912.86 813.02 710.19

Lo ng-term Liabilit ies 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 4,644.76

T o tal Liabilit ies 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 5,382.02

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

78

Table V.1-15 Comparative Components of Current Liabilities

Particulars

2011 2010 Increase/ (Decrease) Amount (in million

pesos)

Percent Distribu-

tion

Amount (in million

pesos)

Amount (in million

pesos) Percent

Payable Accounts 114,370.53 16.10 122,372.76 (8,002.23) (6.54)Inter-Agency Payables 65,253.73 9.19 49,816.03 15,437.70 30.99Intra-Agency Payables 147,722.26 20.80 7,208.54 140,513.71 1,949.27Other Liability Accounts 85,466.69 12.03 80,403.92 5,062.78 6.30Loans Payables, Domestic, Current 297,380.52 41.87 553,219.49 (255,838.97) (46.25)Total 710,193.73 100.00 813,020.74 (102,827.01) (12.65)Difference between totals and sum of components is due to rounding off

Payable Accounts – P114.37 billion

Payable Accounts exhibited a decrease of P8.00 billion or 6.54 percent from

P122.37 billion in 2010. This was due to the decrease in Accounts Payable by P7.98 billion and Due to Officers and Employees by P362.67 million, which decreases were partly offset by an increase in Interest Payable by P341.28 million.

Accounts Payable of P97.16 billion accounted for 84.96 percent of the total

Payable Accounts. It exhibited a decrease of P7.98 billion or 7.59 percent from P105.14 billion in 2010. Table V.1-16 shows the comparative Accounts Payable by department/office/agency.

Table V.1-16 Accounts Payable by Department/Office/Agency

Department/Office Amount (in million pesos)

2011 2010 Increase/ Percent

(Decrease) Public Works and Highways 46,349.42 52,171.83 (5,822.41) (11.16)Social Welfare and Development 7,391.61 2,930.22 4,461.39 152.25 Pasig River Rehabilitation Commission 6,668.91 6,662.77 6.14 0.09 Health 6,561.99 5,945.69 616.30 10.37 Agriculture 6,496.99 4,611.48 1,885.51 40.89 State Universities and Colleges 4,209.97 5,384.12 (1,174.15) (21.81) Finance 2,737.05 6,338.80 (3,601.75) (56.82) Education 2,563.97 2,962.49 (398.52) (13.45) Transportation and Communications 2,308.35 3,630.53 (1,322.18) (36.42) National Defense 2,066.16 2,494.18 (428.02) (17.16) Other Departments/Offices 9,809.55 12,012.99 (2,203.44) (18.34) Total 97,163.97 105,145.10 (7,981.13) (7.59) Difference between totals and sum of components is due to rounding off

The table discloses that the decrease in Accounts Payable was mainly due to

the decrease in the accounts of the DPWH – P5.82 billion, DOF – P3.60 billion, DOTC – P1.32 billion, SUCs – P1.17 billion, and other departments – P2.20 billion. However, the decrease was partly offset by the increase in the DSWD – P4.46 billion, DA– P1.89 billion, and DOH– P616.30 million.

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The DPWH, particularly the OSEC, reported the biggest Accounts Payable of P46.26 billion which pertains to unpaid accounts on contractors’ progress billings and suppliers’ goods.

The DSWD followed with P7.39 billion. The amount includes P5.39 billion

representing various claims of creditors and unpaid cash grants of the beneficiaries of Pantawid Pamilyang Pilipino Program, and P1.18 billion pertaining to unreleased checks subject for reversion in the ensuing year.

Of the P6.67 billion accounts payables declared by the PRRC, P6.66 billion

pertains to payables for various infrastructure projects which were paid under the direct payment scheme charged against the ADB loan and Belgian Super Subsidy Facility loan awaiting the release of the Notice of NCAA from the DBM.

The DOH has an outstanding amount of P6.56 billion in accounts payable,

P6.52 billion of which was reported by the OSEC pertaining to purchases of inventories and PPE on account and unpaid contracts for services.

The DA has an accumulated balance of P6.50 billion. Of this amount, P5.92

billion was reported by the OSEC representing unreleased checks and due and demandable obligations and P1.41 billion paid by the bank under the direct payment scheme but remained outstanding in the books due to the non-issuance of the NCAA by the DBM.

The SUCs shared a total of P4.21 billion of which P2.94 billion was

accounted by the University of the Philippines.

The DOF reported P2.74 billion, of which P1.89 billion was accounted by the DOF-BOC.

The DepED has an outstanding Accounts Payable of P2.56 billion. Of this

amount, a total of P1.74 billion was reported by the Regional Offices, and P785.48 million was recorded in the books of the OSEC and its bureaus.

The DOTC has an accumulated balance of P2.31 billion as of yearend. The

OSEC reported P1.47 billion which refers to obligations to external creditors for goods delivered and services rendered, P1.01 billion of which are payables aged less than 90 days. Of the payables over one year and above, the amount of P100.76 million shall be reverted in 2012. The LRTA also reported P659.40 million which pertains to obligations to different contractors for various projects.

The amount of P9.81 billion or 10.10 percent of the total Accounts Payable

was shared by other department/office/agency. Details of Accounts Payable by department/office/agency are presented in Schedule V-25, Volume I-B.

Notes Payable with a balance of P7.15 billion represents 6.25 percent of the total

payables. Of this amount, P7.14 billion refers primarily to promissory notes issued by the DOF-BTr-GOP to Multilateral Investment Guaranty Agency (MIGA), Asian Development Bank (ADB), International Monetary Fund (IMF),

80

and International Bank for Reconstruction and Development (IBRD) for payment of subscription to the capital stock.

Due to Officers and Employees of P9.53 billion shared 8.33 percent of the total

payables which decreased by P362.67 million or 3.67 percent from P9.89 billion in 2010. It represents unpaid salaries, fringe benefits and other emoluments, and other unpaid obligations due to officers and employees of NGAs. The DILG reported the biggest amount of P2.59 billion, followed by DND and DepED with P2.43 billion and P2.24 billion, respectively. The remaining balance of P2.27 billion was reported by the other departments/offices.

Interest Payable totaling P527.68 million registered an increase of P341.28

million or 183.10 percent from last year’s P186.39 million. The amount of P515.06 million or 97.61 percent of the total Interest Payable was reported by the DOF-BTR-GOP which pertains to accrued interest on over-the-counter sale of domestic bonds.

Inter-Agency Payables – P65.25 billion

Inter-agency payables pertain to liabilities that subsisted within the NGAs,

LGUs and GOCCs for taxes withheld 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 an increase of P15.44 billion or 30.99

percent from last year’s P49.82 billion. This was due to the increase in five accounts: Due to Other GOCCs – P11.53 billion, Due to National Treasury – P2.67 billion, Due to LGUs – P666.04 million, Due to BIR – P448.04 million, and Due to Philhealth –P383.52 million. The combined decrease in two accounts: Due to GSIS – P144.66 million, and Due to PAG-IBIG – P113.63 million totaled P258.29 million.

Due to National Treasury amounting to P22.28 billion represents 34.14

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, P10.11 billion was reported by the DOF, particularly the BIR – P8.33 billion and the BOC – P1.75 billion.

The DOE also reported P9.27 billion which represents government share/royalties from service/operating contracts and other fees/charges/penalties. The total amount of P2.91 billion was distributed among the other departments/offices.

Due to BIR of P3.18 billion constitutes 4.87 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, contractors, and other creditors.

Due to GSIS, PAG-IBIG and PHILHEALTH had balances of P4.67 billion,

P318.72 million and P883.78 million, respectively. These accounts which totaled

81

P5.88 billion represent 9.01 percent of the total inter-agency payables. They pertain to unremitted deductions from salaries of government officials and employees such as: mandatory contributions to GSIS for life and retirement insurance premiums, PAG-IBIG and PHILHEALTH premiums, including government shares, and various deductions for loan payments.

Due to Other GOCCs with an outstanding balance of P27.70 billion accounted

for 42.45 percent of inter-agency payables. It registered an increase of P11.53 billion or 71.28 percent from P16.17 billion in 2010. The increase was mainly due to the NG subsidy and equity to GOCCs under the Disbursement Acceleration Program for various projects. The DOF-BTR-GOP reported P23.26 billion or 83.99 percent of the total, the details are as follows:

Particulars Amount (in

million pesos) 1. NG Subsidy and Equity to GOCCs under the

Disbursement Acceleration Program

17,075.512. Managed funds and escrow account held by the NG for

Bond Sinking Fund, DRF and other GOCCs

5,035.953. Collateral deposit of GOCCs under the 1992 Philippine

Financing Plan 928.224. 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

133.305. PCA collections 48.216. NG liability to the SSS relative to the accrued interest

due to delayed payment of dividends to PNB shares

43.06 Total 23,264.25

The DFA also reported P2.95 billion while the remaining balance of P1.47

billion was shared by the other departments/offices/agencies.

Due to LGUs of P6.22 billion constitutes 9.53 percent of the total inter-agency payables. This consists of P4.16 billion trust 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 community/local government unit to be used for the latter’s electrification, development and livelihood, reforestation, watershed management, health and environment enhancement projects. The amount also includes interest earned/income from deposits/investments out of the fund which are exempted from the requirement of accrual to the General fund and remittance to the National Treasury.

The DBM also reported a huge balance of P1.57 billion. Of this amount,

P1.53 billion represents the outstanding funding requirements for the implementation of the priority programs of various LGUs obligated for CYs 1999 to 2008.

82

The schedule of Inter-agency Payables by department/office/agency and by account is shown in Schedule V-26, Volume I-B.

Intra-Agency Payables – P 147.72 billion

Intra-agency payables are reciprocal accounts that subsist between the Central

Office, Regional Offices/Staff Bureaus and Operating Units, and other funds within the agency which were not eliminated at yearend. After the overall elimination process, Intra-Agency Payables of P147.72 billion showed an enormous increase of P140.51 billion or 1,949.27 percent from last year’s level of P7.21 billion. The Due to Other Funds, with a balance of P144.67 billion, increased by P141.38 billion, while the Due to Operating Units with a balance of P2.76 billion decreased by P1.16 billion.

The Due to Other Funds reported by the DOF-BTr-GOP in the amount of

P137.36 billion represents NG borrowings from the Bond Sinking Fund.

Other Liability Accounts – P85.47 billion

The Other Liability Accounts of the NG comprised: Other Payables – P56.82 billion or 66.48 percent, Tax Refunds Payable – P12.50 billion or 14.62 percent, Performance/Bidders/Bail Bonds Payable – P10.34 billion or 12.10 percent and Guaranty Deposits Payable – P5.80 billion or 6.79 percent. Table V.1-17 shows the departments/offices with Other Liability Accounts.

Table V.1-17 Departments/Offices With Other Liabilities

Department/Office Amount Percent

Distribution (in million pesos)

Finance 32,805.60 38.38 State Universities and Colleges 12,409.94 14.52 The Judiciary 8,748.37 10.24 Transportation and Communications 5,353.00 6.26 Public Works and Highways 4,157.00 4.86 National Defense 4,110.54 4.81 Education 3,385.78 3.96 Justice 3,336.07 3.90 Health 2,202.64 2.58 Labor and Employment 1,965.77 2.3 Other Departments/Offices 6,991.99 8.18 Total 85,466.70 100.00 Difference between totals and sum of components is due to rounding off

83

The DOF reported the biggest Other Liability Accounts in the amount of P32.81 billion or 38.38 percent of the total. Of this amount, P16.01 billion was reported by the BTr-GOP of which P15.97 billion pertains to the following:

Particulars Amount

(in million pesos)

1. Forfeited Swiss Deposits 10,531.97 2. 20% Final Tax Withheld on Peace Bonds (10 year )-

coupon bonds due Oct. 2011)

4,966.21 3. Payments of GOCCs for servicing of their foreign loans 395.53 4. Emergency Guerilla Currency Notes (RA369) 31.71 5. Contributions to FFIs 26.20 6. Backpay Rights Sinking Fund (RA897) 22.41 7. Backpay Rights Sinking Fund (RA304) 1.11 8. Others 0.20

Total 15,975.35

The BIR, the BOC, and the CDA also reported Other Liabilities of P7.69 billion, P7.90 billion, and P992.99 million, respectively.

The SUCs shared P12.41 billion or 14.52 percent of Other Liabilities. Of this

amount, P 10.26 billion belonged to the UP.

Other Liabilities of the Judiciary totaled P8.75 billion or 10.24 percent. The Supreme Court of the Philippines and Lower Courts reported P7.74 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.

Other Liabilities of the DOTC amounting to P5.35 billion or 6.26 percent

comprises mainly of Other Payables in the amount of P4.49 billion and Guaranty Deposits of P853.03 million. Other Payables of P2.05 billion, reported by the DOTC-OSEC, includes P1.89 billion pertaining to collections from the operation of the EDSA MRT 3 to be used for the payment of rental/equity and maintenance fee and other payments enumerated in the agreement to build, operate and transfer. The LTO also reported P2.43 billion in Other Payables which represents collected computerization fees held in escrow on behalf of the LTO-IT project proponent, STRADCOM Corporation.

The DPWH balance for this liability group summed up to P4.16 billion or 4.86

percent. Of this amount, the Regional Offices reported P2.57 billion consisting mainly of Guaranty Deposits Payable of P2.21 billion. Moreover, of the total Other Liabilities reported by the DPWH, P1.12 billion was classified as Other Payables which includes claims of employees for reserved leaves and terminal pay, and allowable deductions in the compensation of employees payable to private companies, claims of public and private establishments for the refund of cash bonds posted in securing excavation permits and deposits for sub-soil exploration.

Under the DND, PVAO reported Other Payables amounting to P2.78

billion for pension payments where the liquidation of actual remittances are not yet submitted by the bank to PVAO. During the year, disbursements intended for

84

remittance to pensioners’ accounts are not deducted from Other Payables until receipt of the bank certification that such have already been remitted to the pensioners.

Loans Payable – Domestic, Current- P297.38 billion

This account as reported by the DOF-BTr-GOP pertains to the current portion

of outstanding Treasury Bills. It represents 41.87 percent of the total Current Liabilities.

5.1.2.2 Long-Term Liabilities – P4.645 trillion

Total Long-term Liabilities of P4.645 trillion increased by P465.97 billion or

11.15 percent compared to the 2010 level of P4.179 trillion. This was mainly due to the increase in Bonds Payable, Domestic – P388.39 billion, Bonds Payable, Foreign – P43.14 billion, and Loans Payable, Foreign – P36.75 billion. It may be noted however, that there was a decrease in Loans Payable, Domestic – P2.38 billion. Table V.1-18 shows the components of the Long-term Liabilities with comparative figures for 2010.

Table V.1-18 Comparative Components of Long-term Liabilities

Particulars

2011 2010 Increase/(Decrease) Amount

(in million pesos)

Percent Distribu-

tion

Amount (in million

pesos)

Amount (in million

pesos)

Per-cent

Bonds Payable, Domestic

2,563,093.56 55.18 2,174,701.89

388,391.67 17.86

Bonds Payable, Foreign 1,214,221.20 26.14 1,171,084.20 43,136.99 3.68Loans Payable, Foreign 866,200.19 18.65 829,452.51 36,747.68 4.43Loans Payable,

Domestic

1,141.27 0.02 3,522.16

(2,380.90) (67.60)Other Long-term

Liabilities

78.17 0.00 12.35

65.82 532.98Mortgage Payable 26.69 0.00 12.46 14.23 114.13Total 4,644,761.08 100.00 4,178,785.58 465,975.49 Difference between totals and sum of components is due to rounding off

Bonds Payable – Domestic of P2.563 trillion or 55.18 percent of the total Long-term

Liabilities represents Treasury Bonds issued domestically by the National Government.

Bonds Payable – Foreign of P1.214 trillion or 26.14 percent of the total long-term

liabilities corresponds to offshore bond flotation of the Republic of the Philippines.

Long-term Payables were mostly reported by the BTr-GOP. It fully accounted for Bonds Payables – Domestic and Foreign. Likewise, the BTR-GOP shared P865.74 billion or 99.95 percent of the total Loans Payable – Foreign.

85

A detailed discussion on National Government Debt reported by the DOF-BTr-GOP is presented on pages 121 to 138 of this report.

5.1.2.3 Deferred Credits – P27.06 billion

At the close of the year, Deferred Credits amounted to P27.06 billion,

showing an increase of P427.73 million or 1.61 percent from last year’s balance of P26.63 billion. The departments/offices which reported substantial balances are: DOF – P21.10 billion, OEO – P4.23 billion, and SUCs – P1.17 billion.

Among the agencies under the DOF, the PMO reported P14.24 billion

pertaining to the installment sale of transferred assets. The BTr also reported P6.81 billion, details of which are as follows:

Nature Amount (in million pesos)

1. Premiums of issuance of bonds offshore 4,961.95 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 held by BSF, SGF, SSF, MWSS-SRF and NG 529.02 4. Contra account in setting up receivable account from DBP and

PMO 44.61 5. Balance of advance guarantee fee/FXRCF 7.29 6. Converted balance under Fund 105 which had remained

dormant for over 30 years. (This was already requested for write-off)

0.57 7. Balance of advance dividend remittance (206.31)

Total 6,808.71

Other OEO contributed P4.23 billion of Deferred Credits. Among the

agencies, the CHED accounted for P4.22 billion which was booked up in HEDF – Central Office for contributions from PTA, PRC, PAGCOR and unexpended balances of programs/projects implemented by the HEDF. The amount of P21.75 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 – P461.89

million; CSCST – P112.86 million; VSU – P53.75 million; MUST – P42.80 million; CNSC – P39.85 million and CavSU – P30.91 million.

Of the P106.75 million reported by the DA, P85.10 million was accounted by

the OSEC as a reclassification from income account for loss of assets due to closure of conduit rural banks in the books of the Bureau of Animal Industry.

86

5.3 EQUITY - (P 2.083 trillion)

The equity of the NG as of December 31, 2011 is a negative balance of P2.083 trillion reflecting an increase of negative P203.00 billion from the negative balance of P1.880 trillion in the previous year. The increase in the negative balance was brought about by several factors, namely: Net loss in operation of P13.62 billion, adjustments related to prior year’s transactions of negative P76.76 billion, completed public infrastructure and reforestation projects of P31.60 billion and P 952.19 million, respectively, and remittance to the National Treasury from Assets Disposal of P2.59 million.

Under the NGAS, public infrastructures and reforestation projects which are

intended for public use, shall be transferred to the Registry of Public Infrastructures and Registry of Reforestation Projects upon completion, as these are no longer considered assets of the Implementing Agencies. Following this policy, the completed projects are dropped from the books and the corresponding costs are deducted from the Government Equity. Table V.1-19 shows the amount of completed public infrastructures and reforestation projects by department/office/agency during the year.

Table V.1-19 Departments/Offices/Agencies with Completed Public Infrastructures and Reforestation Projects

(in million pesos)

Department/Office Public Reforestation

Infrastructures Projects Public Works and Highways 17,368.21 Pasig River Rehabilitation Commission 6,356.78 Agriculture 5,640.82 Transportation and Communications 1,512.97 National Defense 209.81 Agrarian Reform 138.67 Autonomous Region in Muslim Mindanao 121.85 Interior and Local Government 57.41 Environment and Natural Resources 52.26 923.08State Universities and Colleges 49.16 29.11Other Executive Offices 28.83 Health 22.10 Tourism 17.37 Metro Manila Development Authority 16.95 National Economic and Development Authority 4.92 Social Welfare and Development 0.45 Science and Technology 0.37

Total 31,598.93 952.19Difference between totals and sum of components is due to rounding off

This year’s completed Public Infrastructures of P31.60 billion decreased by

P9.91 billion or 23.87 percent from the CY 2010 of P 41.51 billion.

87

Through the years, the DPWH, being the implementing arm of the NG for infrastructure projects of the country, has always been reporting the highest completed public infrastructures, and for this year it totaled P17.37 billion or 54.96 percent of the completed public infrastructures. The PRRC, DA, and DOTC followed with P6.36 billion or 20.12 percent, and P5.64 billion or 17.85 percent, and P1.51 billion or 4.79 percent, respectively.

Completed Reforestation Projects of P952.19 million, showed an increase of

P203.29 million or 27.14 percent from the previous year’s balance of P748.90 million.

For the last three years, only the DENR and the SUCs have been reporting completed reforestation projects. The DENR, being the agency responsible for the care and protection of forest lands and the conservation of natural resources, reported P923.08 million or 96.94 percent while the SUCs, accounted for P29.11million or 3.06 percent.

88

5.2 Statement of Income and Expenses

The commendable hard work of the major revenue collecting agencies of the National Government and the clear policy directions set by the incumbent President of the Republic turned to an impressive growth in government income and revenues of 12.49 percent compared to last year’s growth of 7.67 percent. Congruently, the effective but prudent management of government resources displayed a slightly lower growth rate in current operating expenses of 11.34 percent.

This year’s robust performance in revenue/income generation by the National

Government resulted to a total income/revenue of P1.399 trillion while total expenses amounted to P1.384 trillion. The total Current Operating Expenses incurred for the year of P709.72 billion brought about income from operations of P689.29 billion. On the other hand, income after subsidies of P298.03 billion ensued after deducting the total financial support to local government units, government owned and/or controlled corporations and non-government/peoples’ organizations of P391.27 billion. The deceleration in financial expenses from last year’s P304.52 billion to current year’s P282.77 billion, contributed to the government’s reduced net loss of P13.62 billion after considering net subsidy to NGAs of P2.79 billion and negative net gains of P31.67 billion. The comparison of the 2011 revenue/income and expenses with 2010 data is shown in Table V.2-1.

Table V.2-1 Income/Revenue, Expenses, Subsidies and Net Loss


Percent 2011 2010 Increase (Decrease)

Income/Revenue 1,399,016.71 1,243,676.54 155,340.17 12.49 Tax Revenue 1,221,943.75 1,090,909.32 131,034.42 12.01 Non-Tax Revenue/General Income 177,072.96 152,767.22 24,305.75 15.91 Less: Current Operating Expenses 709,723.67 637,457.27 72,266.40 11.34 Personal Services 512,110.99 464,219.66 47,891.33 10.32 Maintenance and Other

Operating Expenses

197,612.68

173,237.60 24,375.07 14.07 Income from Current Operations 689,293.04 606,219.27 83,073.77 13.70 Subsidies to (391,266.57) (340,097.09) (51,169.48) 15.05 Local Government Units (net) (317,896.69) (281,547.02) (36,349.67) 12.91 Government Owned/Controlled Corporations

(72,842.24)

(57,104.69)

(15,737.55)

27.56

Non-Government Organizations/ Peoples’ Organizations

(527.64)

(1,445.38)

917.74

(63.49)

Income after Subsidies 298,026.47 266,122.18 31,904.29 11.99 Less: Financial Expenses 282,771.72 304,516.60 21,744.88) (7.14) Income/(Loss) before Other

Income/Expense Items 15,254.75

(38,394.42) 53,649.17

(139.73)

Net Subsidy From/(To) NGAs 2,794.30 (35,470.66) 38,264.96 (107.88)Net Gain/(Loss) (31,674.01) 49,781.96 (81,455.96) (163.63) Net Income/(Loss) (13,624.95) (24,083.12) 10,458.17 (43.43) Difference between totals and sum of components is due to rounding off.

89

Chart V.2-1 Comparison of Actual and Programmed Revenue

(in billion pesos)

5.2.1 Revenue/Income – P1.399 trillion

The total revenue/income of P1.399 trillion for the year increased by 12.49 percent compared to last year’s P1.244 trillion. The progress in the total revenue for the year of P155.34 billion was contributed both by the accelerated tax revenue and non-tax revenue/general income collections with growth rate of 12.01 percent and 15.91 percent, respectively. The composition of the total revenue/income is tax revenue collections of P1.222 trillion or 87.34 percent and non-tax revenue of P177.07 billion or 12.66 percent. The cumulative revenue/income collections is 99.13 percent of the P1.411 trillion projected level for the year. (Source of data on projected revenue/income: 2012 Budget of Expenditures and Sources of Financing)

5.2.1.1 Tax Revenue – P1.222 trillion

The Bureau of Internal Revenue (BIR) and the Bureau of Customs (BOC), the main tax revenue agencies, contributed to the improvement of total tax revenue collections by 12.01 percent. The tax revenue performance of all tax collecting agencies of P1.222 trillion was short by P51.30 billion or 4.03 percent of the programmed total tax revenue of P1.273 trillion. The projected level for non-tax revenue of P138.06 billion in 2011 compared with the actual non-tax revenue collections of P177.07 billion presents a surplus of P39.01 billion or 28.25 percent. Chart V.2-1 presents the actual and projected revenue/income. (Source of data on projected revenue/income: 2012 Budget of Expenditures and Sources of Financing)

Of the total tax revenue, P923.82 billion or 75.60 percent was shared by the BIR

and P264.83 billion or 21.66 percent by the BOC including non-cash revenue from the Tax Expenditure Fund (TEF) of P9.41 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 87.34 percent of the aggregate consisting of: Taxes on Goods and Services – P528.70 billion or 43.27 percent; Income Taxes – P426.28 billion or 34.89 percent; Final Taxes – P130.95 billion or 10.72 percent; Import Duties – P48.80 billion or 3.99 percent; Property Taxes – P8.95 billion or 0.73 percent; Other Taxes – P65.27 billion or 5.34 percent; and Fines and Penalties –P12.98 billion or 1.06 percent.

Based on the financial reports submitted by the main tax revenue collecting

agencies, current year’s tax collections of the BIR exceeded last year’s collection of P822.70 billion by P101.12 billion or 10.95 percent, while the BOC reported an increase of P7.97 billion or 3.10 percent over last year’s collection of P256.86 billion.

.

1,221.94 1,273.24

177.07 138.06

Tax Non-Tax

ActualProgrammed

90

Taxes on Net Income and Profits – P557.23 billion

The total tax revenue collections pertaining to taxes on net income and profits contributed the biggest share at P557.23 billion or 45.60 percent. The increase of P80.69 billion was mainly due to the increase of income tax on corporations and final tax of P54.68 billion and P21.80 billion, respectively. Despite the total increase for the year under this tax category, it was not sufficient for the tax collecting agencies to meet the set target at P569.52 billion or a shortfall of P12.29 billion. (Source of set target: BESF for FY 2012) Table V.2-2 shows the comparative Income Taxes for calendar years 2011 and 2010.

Table V.2-2 Comparative Income Taxes, By Source

Particulars


(Decrease)Corporations 269,731.68 215,052.31 54,679.37 25.43 Individuals 156,394.74 152,252.69 4,142.05 2.72 Final Tax 130,948.46 109,144.28 21,804.18 19.98 Partnerships 156.71 94.51 62.20 65.82 Total 557,231.59 476,543.79 80,687.80 16.93 Difference between totals and sum of components is due to rounding off.

Taxes on Goods and Services – P528.70 billion

This year, tax collections on goods and services remained the second largest

provider at P528.70 billion or 43.27 percent of the total tax revenue. This is higher by P226.61 billion or 75.01 percent than last year’s P302.10 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. The impressive growth was fueled by the increase in Turnover or VAT collections, as reflected in the reports submitted by the BOC. Table V.2-3 shows the comparative Taxes on Goods and Services for calendar years 2011 and 2010.

Table V.2-3 Comparative Taxes on Goods and Services, By Source

Particulars

Amount (in million pesos) Percent2011 2010 Increase

(Decrease) General Sales, Turnover or VAT 422,290.97 224,332.70 197,958.27 88.24Excise Tax on Articles 96,937.87 67,593.99 29,343.88 43.41 Taxes on the Use of Goods, Property,

Permission to Perform Activities

__9,476.14

10,169.84

(693.69) (6.82)


Taxes on International Trade and Transactions – P48.80 billion

As reported by the BOC, there was a sharp decline on the collection of Import

Duties from last year’s P215.81 billion to this year’s P48.80 billion or a decrease of P167.01 billion or 77.39 percent.

91

Other Taxes – P65.27 billion Documentary Stamp Tax, the main component of Other Taxes amounting to P49.08

billion or 75.19 percent was reported mostly by the BIR at P48.41 billion and the BOC at P664.93 million. Other components are: Tax on Forest Products – P45.53 million or 0.07 percent as reported by DENR-OSEC; Immigration Tax – P61.19 million or 0.09 percent as reported by DOJ-Bureau of Immigration. Also included in this category in the amount of P16.09 billion is Other National Taxes which represent the undistributed amount lumped in this account by the BTr.

Property Taxes – P8.95 billion

The BIR, the lone collector of Property Taxes, made a total collection on property

transfers amounting to P8.95 billion for the year. This is 39.66 percent lower than last year’s collection of P14.84 billion. In this tax category, Capital Gains Tax contributed the highest at P8.03 billion or 89.65 percent. Table V.2-4 shows the comparative components of Property Taxes.

Table V.2-4 Comparative Components of Property Taxes

Particulars


(Decrease)Capital Gains Tax 8,027.17 12,998.05 (4,970.87) (38.24) Estate Tax 552.68 1,346.99 (794.31) (58.97) Donors Tax 374.17 493.44 (119.27) (24.17)

Total 8,954.03 14,838.48 (5,884.46) (39.66) Difference between totals and sum of components is due to rounding off.

Fines and Penalties, National Taxes – P12.98 billion

The amount of P12.98 billion, representing fines and penalties on late payment of

national taxes, ballooned by P10.89 billion or more than five times from last year’s P2.08 billion. It was collected mainly by the BOC at P11.79 billion or 90.84 percent. On the other hand, the BIR collected P1.18 billion or 9.09 percent.

5.2.1.2 Non-Tax Revenue (General Income) – P177.07 billion

The collection for Non-Tax Revenue/General Income rose by P24.31 billion or 15.91 percent from last year’s P152.77 billion. General Income consists of: Business Income – P45.43 billion or 25.66 percent; Service Income – P32.03 billion or 18.09 percent; Permits and Licenses – P7.74 billion or 4.37 percent; and Other Income of P91.87 billion or 51.88 percent.

The registered growth of non-tax revenue was contributed mainly by the accelerated

dividend and interest income as reported by the BTr; income from grants and donations and registration fees as reported by various national government agencies; and passport and visa fees as reported by the Department of Foreign Affairs and the Department of Justice (Bureau of Immigration).

92

Service Income – P32.03 billion Service Income posted a decrease of

P42.13 billion or 56.81 percent lower from last year’s collections of P74.16 billion. Other Services Income of P18.13 billion or 56.60 percent is the biggest component of the generated service income. The other components that contributed most are: Passport and Visa Fees – P4.94 billion; Medical, Dental and Laboratory Fees – P2.01 billion; Processing Fees – P1.90 billion; and Clearance and Certification Fees – P1.83 billion.

Table V.2-5 shows the departments/

offices with substantial amount of Service Income.

Other Income – P91.87 billion

During the year, Other Income registered an increase of P24.71 billion or 36.79 percent from last year’s figure of P67.17 billion. The aggregate Other Income includes among others: P36.75 billion – Interest Income; P29.13 billion – Dividend Income; P13.87 billion – Share from PAGCOR/PCSO; and the other components shared the balance of P12.12 billion as shown in Table V.2-6.

Table V.2-6 Components of Other Income

Particulars Amount

(in million pesos)


Interest Income 36,750.81 40.00 Dividend Income 29,133.40 31.71 Share from PAGCOR/PCSO 13,867.32 15.09 Income from Grants and Donations 6,337.99 6.90 Miscellaneous Income 4,798.03 5.22 Insurance Income 535.13 0.58 Internal Revenue Allotment 236.58 0.26 Other Fines and Penalties 134.85 0.15 Sale of Confiscated/Abandoned/Seized Goods

and Properties 78.71 0.09 Share from National Wealth 0.49 a Share from Expanded Value Added Tax (EVAT) b a ________ _ ______

Total 91,873.31 100.00 a - Below 0.005 percent b - Below P5,000 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 21,535.84State Universities and Colleges 3,354.54Health 1,888.36Interior and Local Government 1,795.44The Judiciary 1,769.87 Labor and Employment 341.83Foreign Affairs 295.92 Other Executive Offices 224.45 Civil Service Commission 194.16Education 187.74 Other Departments/Offices 441.39

Total 32,029.53 Difference between totals and sum of components is due to rounding off.

93

Interest Income – P36.75 billion

Various departments/offices’ Interest Income on loans receivables, investments, bank deposits and NG advances for GFIs and GOCCs’ debt service payments rose from P33.96 billion last year to P36.75 billion which resulted to an increase of P2.79 billion or 8.22 percent.

Interest Income of the DOF-BTr of

P35.64 billion constitutes 96.97 percent of the total Interest Income. The departments/offices which reported Interest Income are shown in Table V.2-7.

Share from PAGCOR/PCSO – P13.87 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 P716.15 million or 5.45 percent compared with last year’s P13.15 billion.

The DOF-BTr, one of the recipients, received the highest at P11.44 billion or 82.48

percent, followed by OEO-Presidential Management Staff at P1.86 billion or 13.38 percent and the OEO-Philippine Sports Commission at P574.87 million or 4.15 percent.

Dividend Income – P29.13 billion

The national government earned Dividend Income of P29.13 billion from equity

investments in GFIs and GOCCs. Dividends remitted by the GFIs and GOCCs to the BTr increased by P17.12 billion or 142.48 percent compared to last year’s P12.01 billion.

Table V.2-8 GOCCs/GFIs with Dividend

Remitted to the DOF-BTr

GOCC/GFI Amount

(in million pesos)


Bangko Sentral ng Pilipinas 14,234.92 48.86 Land Bank of the Philippines 4,426.29 15.19 Development Bank of the Philippines 2,844.00 9.76 PNOC Exploration Corporation 2,498.34 8.58 Manila International Airport Authority 1,206.26 4.14 Philippine Ports Authority 961.29 3.30 Philippine Deposit Insurance Corporation 581.26 2.00

Table V.2-7 Departments/Offices Which Reported Interest Income


Finance 36,189.38State Universities and Colleges 324.96Other Executive Offices 63.97National Defense 60.74Agriculture 23.79Trade and Industry 21.14Energy 20.88The Judiciary 16.97Education 8.19Other Departments/Offices 20.79

Total 36,750.81

94

Table V.2-8 continued

GOCC/GFI Amount

(in million pesos)


Public Estate Authority 543.29 1.86 Philippine National Oil Company 480.33 1.65 Mactan Cebu International Airport Authority 233.37 0.80 Philippine Economic Zone Authority 221.01 0.76 Philippine Export-Import Credit Agency 150.00 0.51 Philippine Retirement Authority 140.55 0.48 Manila Gas Corporation 115.94 0.40 National Development Company 100.00 0.34 Clark Development Corporation 100.00 0.34 Philippine National Lines 56.99 0.20 National Livelihood Development Corporation 52.61 0.18 Social Housing and Finance Corporation 47.77 0.16 Cebu Ports Authority 40.00 0.14 Food Terminal Incorporated 26.28 0.09 National Home Mortgage Finance Corporation 18.00 0.06 National Electrification Administration 17.46 0.06 National Housing Authority 9.72 0.03 National Irrigation Administration 6.85 0.02 PHIVIDEC Industrial Authority 6.77 0.02 Laguna Lake Development Authority 2.76 0.01 Pinagkaisa Realty Corporation 2.51 0.01 Philippine Fisheries Development Authority 2.38 0.01 PNOC Shipping and Transport Corporation 1.83 0.01 Other GOCCs/GFIs 3.30 0.01

Total 29,132.10 100.00 Difference between totals and sum of components is due to rounding off.

Table V.2-8 shows the top ten corporations and other GOCCs which remitted

dividends to the National Treasury totaling P29.13 billion as reported by the DOF-BTr. The Bangko Sentral ng Pilipinas remitted the biggest amount of dividends at P14.23 billion or 48.86 percent, while Land Bank of the Philippines and Development Bank of the Philippines contributed P4.43 billion and P2.84 billion, respectively.

Income from Grants and Donations – P6.34 billion

Income from Grants and Donations received in cash and in kind from foreign and domestic sources accounted for P6.34 billion, higher by P1.27 billion or 25.08 percent than last year’s P5.07 billion.

Table V.2-9 shows the departments/offices which received grants and donations

during the year. DOST-Industrial Technology Development Institute topped the list with P1.62 billion or 25.62 percent of the aggregate amount.

95

Table V.2-9 Departments with Income from Grants and Donations

Department/Office Amount(in million pesos)


Science and Technology 1,653.61 26.09 Finance 1,417.72 22.37 Education 1,371.36 21.64 Social Welfare and Development 641.85 10.13 Health 583.64 9.21 State Universities and Colleges 191.46 3.02 National Defense 86.07 1.36 Other Executive Offices 54.63 0.86 Interior and Local Government 51.70 0.82 Justice 51.08 0.81 Other Departments/Offices 234.86 3.71


Miscellaneous Income – P4.80 billion

For this year, the account

displayed an increase of P2.72 billion or 130.81 percent from previous year’s P2.08 billion. The DOF recorded the highest at P3.33 billion or 69.45 percent of the total Miscellaneous Income. Table V.2-10 presents the departments and offices which reported Miscellaneous Income in calendar year 2011.

Business Income – P45.43 billion

The uptrend in Business Income resulted to an increase of P34.45 billion or more

than three times than the past year’s P10.98 billion. Other Business Income recorded by various departments/offices comprises the bulk of this account, registering the amount of P34.48 billion or 75.90 percent of the total Business Income. The other main components of the account are Tuition Fees and Hospital Fees collected by SUCs and hospitals, respectively. Tuition Fees of P5.51 billion, which accounted for 12.13 percent of the total Business Income, posted an increase of P510.65 million or 10.21 percent compared to last year’s P5.00 billion. On the other hand, Hospital Fees of P3.05 billion which presented an increment of P230.59 million or 8.18 percent from last year’s P2.82 billion was 6.71 percent of the total Business Income. Table V.2-11 shows the components of Business Income.

Table V.2-10 Departments/Offices which Reported Miscellaneous Income


Finance 3,332.12State Universities and Colleges 507.54 Public Works and Highways 431.81 Labor and Employment 149.76 Health 135.80 National Defense 121.85 Education 37.17 Civil Service Commission 19.17 Other Executive Offices 13.10 Other Departments/Offices 49.71

Total 4,798.03

96

Table V.2-11 Components of Business Income



Other Business Income 34,483.00 75.90 Tuition Fees 5,511.69 12.13 Hospital Fees 3,048.29 6.71 Sales Revenue (Net) 734.54 1.62 Fines and Penalties – Business Income 703.52 1.55 Rent Income 550.90 1.21 Income from Dormitory Operations 127.65 0.28 Printing and Publication Income 115.90 0.26 Income from Canteen Operations 107.33 0.24 Income from Communication Facilities 38.35 0.08 Income from Waterworks System 6.42 0.01 Income from Markets 1.42 a Landing and Parking Fees 1.03 a Income from Slaughterhouses 0.35 a Income from Transportation System 0.27 a

___________________ ______________

Total 45,430.65 100.00 a – Below 0.005 percent. Difference between totals and sum of components is due to rounding off.

Permits and Licenses – P7.74 billion

Permits and Licenses increased by P7.28 billion or more than fifteen times from last

year’s P459.62 million. The biggest component of the account pertains to Registration Fees amounting to P2.59 billion or 33.47 percent. Based on the Reports of Income of the Departments/Offices, the highest contributors of Registration Fees are: OEO – P1.52 billion; DTI – P437.80 million; DOF – P215.82 million; SUCs – P139.82 million; and DOH – P102.71 million. Table V.2-12 shows the components of Permits and Licenses.

Table V.2-12 Components of Permits and Licenses

Particulars Amount(in million pesos)


Registration Fees 2,590.24 33.47 Fines and Penalties 2,215.31 28.62 Other Permits and Licenses 1,900.71 24.56 Franchising and Licensing Fees 669.54 8.65 Permit Fees 363.20 4.69 Fishery Rental Fees 0.46 0.01


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 2011, of the total revenue of P1.399 trillion, 97.58 percent or P1.365 trillion was recorded in the BTr GOP books representing remittances of various NGAs. The remaining P33.88 billion or 2.42 percent was reported under RA Books pertaining to collections of various NGAs both with and without authority to use their income. Table V.2-13 below shows the breakdown of income by department/office and by book (NG and RA).

97

Table V.2-13 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 1.10 - 1.10

Executive Branch Office of the President 34.02 34.02 Office of the Vice-President 0.01 - 0.01 Agrarian Reform 16.54 - 16.54 Agriculture 275.69 - 275.69 Budget and Management 190.85 - 190.85 Education 1,669.03 - 1,669.03 State Universities and Colleges 12,042.91 - 12,042.91 Energy 22.27 - 22.27 Environment and Natural Resources 99.35 - 99.35 Finance 1,365,692.48 1,365,132.54 559.94 Foreign Affairs 296.09 - 296.09 Health 6,643.57 - 6,643.57 Interior and Local Government 1,855.49 - 1,855.49 Justice 111.91 - 111.91 Labor and Employment 617.69 - 617.69 National Defense 596.46 - 596.46 Public Works and Highways 499.69 - 499.69 Science and Technology 1,670.77 - 1,670.77 Social Welfare and Development 646.67 - 646.67 Tourism 67.56 - 67.56 Trade and Industry 420.55 - 420.55 Transportation and Communications 12.54 - 12.54 National Economic and Development Authority 17.38 - 17.38 Presidential Communications Operations Office 93.04 - 93.04 Other Executive Offices 2,924.11 - 2,924.11 Metropolitan Manila Development Authority 387.45 - 387.45 Pasig River Rehabilitation Commission 0.63 - 0.63

Judicial Branch The Judiciary 1,792.59 - 1,792.59

Constitutional Offices Civil Service Commission 215.34 - 215.34 Commission on Audit 62.97 - 62.97 Commission on Elections 13.69 - 13.69 Office of the Ombudsman 9.78 9.78

Other Independent Offices Commission on Human Rights 8.57 - 8.57 Autonomous Region in Muslim Mindanao 7.89 - 7.89


98

Chart V.2-2 Expenses of the National Government

(in billion pesos)

Of the total income of the NG, NCR reported a total of P1.216 trillion or 86.90 percent, followed by Region IV with P59.23 billion and Region III with P51.32 billion. Table V.2-14 shows the Regional Breakdown of Income by Source.

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 27 to 29, Volume I-B.

5.2.2 Expenses

For the calendar year, the NG reported

total expenses of P1.384 trillion, composed of: Current Operating Expenses (COE) of P709.72 billion or 51.29 percent, Financial Expenses (FE) – P282.77 billion or 20.43 percent and Subsidy to LGUs, GOCCs and NGOs/POs – P391.27 billion or 28.28 percent. This year’s amount is higher by P101.69 billion or 7.93 percent over last year’s P1.282 trillion. Among the departments, the DOF reported the highest amount at P374.61 billion or 27.07 percent, of which P282.42 billion or 75.39 percent pertains to FE and P72.65 billion or 19.39 percent pertains to Subsidy to GOCCs. The DBM followed with P319.73 billion or 23.11 percent, of which P317.22 billion or 99.22 percent pertains to Subsidy to LGUs.

Table V.2-14 Regional Breakdown of Income by Source

Region Amount (in million pesos)

Total Tax Revenue

Non-Tax Revenue

National Capital Region 1,215,782.44 1,062,633.89 153,148.55 Region I 7,098.88 5,614.50 1,484.37 Cordillera Administrative Region 2,140.24 1,387.51 752.73 Region II 3,464.85 2,313.62 1,151.23 Region III 51,317.45 48,616.10 2,701.35 Region IV 59,226.95 56,076.42 3,150.54 Region V 4,128.70 2,824.76 1,303.94 Region VI 5,436.74 3,308.84 2,127.91 Region VII 15,270.44 13,465.20 1,805.24 Region VIII 3,859.55 2,845.77 1,013.78 Region IX 2,672.43 1,794.28 878.16 Region X 9,518.31 7,925.04 1,593.27 Region XI 11,162.84 9,149.05 2,013.79 Region XII 3,708.74 2,046.74 1,662.00 Region XIII 2,486.72 1,940.87 545.85 Autonomous Region in Muslim Mindanao 223.90 1.17 222.73 Foreign Service Posts 1,517.51 - 1,517.51


Subsidies391.27

Current Operating Expenses

709.72

FinancialExpenses

282.77

99

5.2.2.1 Current Operating Expenses – P709.72 billion

Total Current Operating Expenses of P709.72 billion consisting of Personal Services – P512.11 billion or 72.16 percent, and Maintenance and Other Operating Expenses – P197.61 billion or 27.84 percent, registered an increase of P72.27 billion or 11.34 percent from previous year’s level of P637.46 billion.

Of the aggregate, DepEd reported P206.84 billion or 29.14 percent, DND – P112.38

billion or 15.83 percent and DILG – P101.02 billion or 14.23 percent. The departments/offices that reported biggest Current Operating Expenses are shown in Table V.2-15.

5.2.2.1.1 Personal Services – P512.11 billion

Total Personal Services of P512.11 billion posted an increase of P47.89 billion

or 10.32 percent compared to P464.22 billion of last year. This is due primarily to the implementation of the 2nd and 3rd tranches of the 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.

The major components of Personal Services are the following: Salaries and

Wages – P271.37 billion or 52.99 percent, Other Compensation – P116.23 billion or 22.70 percent, Other Personnel Benefits – P93.19 billion or 18.20 percent and Personnel Benefits Contributions – P31.32 billion or 6.12 percent. The comparison of the 2011 expenses for each component with the 2010 expenses is shown in Table V.2-16.

Table V.2-15 Departments/Offices With Big Current Operating Expenses

(in million pesos) Department/Office Amount Percentage

Education 206,835.96 29.14 National Defense 112,384.23 15.83 Interior and Local Government 101,016.14 14.23 State Universities and Colleges 37,250.19 5.25 Social Welfare and Development 33,395.61 4.71 Health 23,486.77 3.31 Finance 19,525.45 2.75 Public Works and Highways 19,209.80 2.71 Transportation and Communications 18,576.47 2.62 The Judiciary 17,858.07 2.52 Other Departments/Offices 120,184.98 16.93 Total 709,723.67 100.00 Difference between sum and totals of components is due to rounding off.

100

Among the departments/offices, DepEd reported the biggest spending for

Personal Services at P186.17 billion or 36.35 percent. The DND and DILG followed with P95.73 billion and P90.35 billion, respectively. Table V.2-17 exhibits the departments/offices with huge expenses for Personal Services.

5.2.2.1.2 Maintenance and Other Operating Expenses – P197.61 billion Total MOOE of P197.61 billion this year recorded an increase of P24.38

billion or 14.07 percent compared to last year’s P173.24 billion. Among the components, the biggest amounts were for: Donations – P38.78 billion or 19.63 percent, Supplies and Materials Expenses – P32.37 billion or 16.38 percent, Other Maintenance and Operating Expenses – P20.50 billion or 10.38 percent, Professional Services – P19.09 billion or 9.66 percent, and Repairs and Maintenance – P16.93 billion or 8.57 percent.

Table V.2-18 shows the comparative details of Maintenance and Other

Operating Expenses.

Table V.2-16 Comparative Components of Personal Services (in million pesos)

Particulars

Amount Percent 2011 2010 Increase

(Decrease) Salaries and Wages 271,370.75 240,504.94 30,865.81 12.83Other Compensation 116,234.46 115,534.62 699.84 0.61 Personnel Benefit Contributions 31,319.26 27,884.33 3,434.93 12.32 Other Personnel Benefits 93,186.52 80,295.78 12,890.75 16.05 Total 512,110.99 464,219.66 47,891.33 10.32


Table V.2-17 Departments/Offices With Big Expenses for Personal Services


Education 186,170.96 36.35 National Defense 95,728.96 18.69 Interior and Local Government 90,351.04 17.64 State Universities and Colleges 26,456.55 5.17 The Judiciary 15,082.39 2.95 Health 10,919.08 2.13 Public Works and Highways 8,173.29 1.60 Autonomous Region in Muslim Mindanao 7,860.55 1.53 Justice 7,499.55 1.46 Environment and Natural Resources 6,803.76 1.33 Other Departments/Offices 57,064.87 11.14 Total 512,110.99 100.00 Difference between sum and totals of components is due to rounding off.

101

Table V.2-18 Comparative Details of Maintenance and Other Operating Expenses (in million pesos)

Particulars Amount


Donations 38,783.01 19,963.44 18,819.58 94.27 Supplies and Materials Expenses 32,367.28 35,425.74 (3,058.46) (8.63)Other Maintenance and Operating Expenses 20,503.60 20,634.77 (131.17) (0.64) Professional Services 19,092.89 14,048.96 5,043.93 35.90 Repairs and Maintenance 16,933.40 19,113.22 (2,179.82) (11.40)Taxes, Insurance Premiums and Other Fees 14,326.55 10,228.05 4,098.50 40.07 Utility Expenses 9,898.36 9,345.73 552.63 5.91 Training and Scholarship Expenses 7,978.96 7,198.50 780.47 10.84 Traveling Expenses 7,381.86 7,268.23 113.63 1.56 Rent Expenses 3,403.14 4,233.61 (830.47) (19.62) Membership Dues and Contributions to Organizations 2,965.09 1,042.15 1,922.93 184.52 Communication Expenses 2,716.50 2,633.36 83.15 3.16 Representation Expenses 1,954.49 1,685.90 268.58 15.93 Confidential, Intelligence, Extraordinary and Miscellaneous Expenses 1,617.85 2,790.82 (1,172.97) (42.03) Printing and Binding Expenses 1,178.62 1,235.85 (57.23) (4.63) Others 2,519.77 3,775.11 (1,255.35) (33.25)

Sub-Total 183,621.36 160,623.43 22,997.93 14.32 Non-Cash Expenses _13,991.31 _12,614.17 _1,377.14 10.92

Depreciation 13,922.69 12,565.60 1,357.09 10.80 Bad Debts 50.27 43.01 7.26 16.88 Obsolescence 18.36 5.56 12.79 229.98

Total 197,612.68 173,237.60 24,375.07 14.07 Difference between totals and sum of components is due to rounding off

Among the departments/offices, the DSWD reported the highest figure for

MOOE at P32.36 billion or 16.38 percent, and is higher by P22.08 billion or more than twice compared to its previous year’s level of P10.28 billion. Table V.2-19 presents the departments/offices with big amounts of MOOE.

102

Donations – P38.78 billion

This year’s total Donations of P38.78 billion granted to various

government agencies, private institutions, cooperatives, foundations, associations and individuals grew outstandingly by P18.82 billion or 94.27 percent compared to last year’s P19.96 billion. Of the total, DSWD reported P28.40 billion or 73.23 percent principally for the implementation of Pantawid Pamilyang Pilipino Program (4Ps), Kapit Bisig Laban sa Kahirapan – Comprehensive and Integrated Delivery of Social Services: Kapangyarihan at Kaunlaran sa Barangay (KALAHI-CIDSS:KKB), Social Pension for Indigent Senior Citizens, other various community driven development projects and livelihood programs as well as financial assistance and goods given to victims of disasters, typhoons and calamities.

Other departments/offices with huge amounts of Donations are: DepEd –

P5.32 billion, DA – P1.59 billion and OEO – P1.08 billion.

Supplies and Materials Expenses - P32.37 billion

Supplies and Materials Expenses which declined by P3.06 billion or 8.63 percent than last year’s P35.43 billion got the second highest share in the total MOOE. The biggest consumptions were for: Office Supplies – P7.48 billion or 23.10 percent, Other Supplies – P5.69 billion or 17.57 percent, Gasoline, Oil and Lubricants – P5.61 billion or 17.32 percent and Food Supplies – P3.47 billion or 10.73 percent.

The leading consumers are the following departments/offices: DND –

P6.18 billion or 19.08 percent, DILG – P5.39 billion or 16.64 percent, DOH – P4.08 billion or 12.62 percent, DepEd – P3.84 billion or 11.86 percent, SUCs – P2.12 billion or 6.56 percent, DFA – P1.94 billion or 6.00 percent, DA – P1.50 billion or 4.62 percent, DOJ – P1.22 billion or 3.75 percent and DPWH – P1.00 billion or 3.10 percent.

Table V.2-19 Departments/Offices With Big Maintenance and Other Operating Expenses


Social Welfare and Development 32,362.08 16.38 Education 20,665.00 10.46 National Defense 16,655.27 8.43 Transportation and Communications 14,089.11 7.13 Finance 13,361.59 6.76 Health 12,567.68 6.36 Public Works and Highways 11,036.51 5.58 State Universities and Colleges 10,793.64 5.46 Interior and Local Government 10,665.10 5.40 Agriculture 8,408.94 4.26 Other Departments/Offices 47,007.73 23.79 Total 197,612.68 100.00 Difference between totals and sum of components is due to rounding off.

103

Table V.2-20 shows the comparative consumption of supplies and materials by top departments/offices for calendar years 2011 and 2010. As presented, there is a reduction in the total expenses for Supplies and Materials by DILG – P3.38 billion or 38.53 percent, DA – P1.47 billion or 49.54 percent and DepEd – P875.25 million or 18.55 percent.

Table V.2-20 Comparative Consumption of Supplies and Materials

By Top Departments/Offices (in million pesos)

Particulars Amount


National Defense 6,176.29 5,194.45 981.84 18.90 Interior and Local Government 5,385.19 8,761.04 (3,375.86) (38.53) Health 4,083.75 3,843.83 239.92 6.24 Education 3,838.57 4,712.82 (874.25) (18.55) State Universities and Colleges 2,122.51 1,876.05 246.46 13.14 Foreign Affairs 1,941.14 1,247.06 694.09 55.66 Agriculture 1,495.49 2,963.81 (1,468.33) (49.54) Justice 1,215.11 935.61 279.50 29.87 Public Works and Highways 1,004.76 801.50 203.26 25.36 Other Departments/Offices 5,104.47 5,089.57 14.90 0.29 Total 32,367.28 35,425.74 (3,058.46) (8.63)


Other Maintenance and Operating Expenses – P20.50 billion

Table V.2-21 Departments/Offices with BigOther Maintenance and Operating Expenses

(in million pesos)

Particulars Amount Percentage Distribution

Transportation and Communications 6,780.12 33.07

Congress of the Philippines 2,536.93 12.37 Education 2,048.59 9.99 Agriculture 1,663.81 8.11 Health 1,431.37 6.98 State Universities and Colleges 993.72 4.85 National Defense 860.38 4.20 The Judiciary 652.43 3.18 Labor and Employment 528.91 2.58 Agrarian Reform 488.48 2.38 Other Departments/

Offices 2,518.86 12.28 TOTAL 20,503.60 100.00


Other Maintenance and Operating Expenses of P20.50 billion accounted for 10.38 percent of the total expenses under MOOE. Compared to the previous year’s figure of P20.63 billion, a decrease of P131.17 million or 0.64 percent was noted for the current year.

The DOTC reported the biggest amount at P6.78 billion or 33.07 percent, followed by Congress of the Philippines – P2.54 billion or 12.37 percent, DepED – P2.05 billion or 9.99 percent, DA – P1.66 billion or 8.11 percent and DOH – P1.43 billion or 6.98 percent. Shown in Table V.2-21 are the departments/offices which reported big amounts of Other MOE.

104

Professional Services – P19.09 billion

Compared to P14.05 billion in 2010, this year’s expenses for Professional Services is higher by P5.04 billion or 35.90 percent. The highest percentage increase is registered in Other Professional Services; from P4.44 billion in the previous year, it rose to P8.95 billion this year. The second and third highest percentage increases were recorded under Environment/Sanitary Services and Consultancy Services, P358.25 million or 29.45 percent and P276.14 million or 17.06 percent, respectively.

The following departments/offices reported the biggest expenses for

Professional Services: DOF – P3.80 billion or 19.92 percent, SUCs – P1.93 billion or 10.13 percent, DOH – P1.90 billion or 9.96 percent, DSWD – P1.69 billion or 8.87 percent, MMDA – P1.58 billion or 8.27 percent and DepEd – P1.35 billion or 7.05 percent.

Repairs and Maintenance – P16.93 billion

Total Repairs and Maintenance for this year decreased by P2.18 billion or

11.40 percent compared to P19.11 billion in 2010. Table V.2-22 shows the comparative components of Repairs and Maintenance.

Table V.2-22 Comparative Components of Repairs and Maintenance Expenses (in million pesos)

Particulars Amount


Public Infrastructures 8,276.44 10,714.89 (2,438.44) (22.76)Buildings 4,536.94 4,062.47 474.46 11.68 Transportation Equipment 2,179.46 2,400.51 (221.05) (9.21) Office Equipment, Furniture and Fixtures 897.53 864.54 32.98 3.82 Machineries and Equipment 786.61 777.08 9.53 1.23 Land Improvements 101.84 145.14 (43.29) (29.83) Reforestation Projects 69.19 70.51 (1.32) (1.87) Other Property, Plant and Equipment 58.90 56.22 2.67 4.75 Leasehold Improvements 26.49 21.85 4.64 21.23 Total 16,933.40 19,113.22 (2,179.82) (11.40)


Of the components, P8.28 billion or 48.88 percent was expended for the

Repairs and Maintenance of Public Infrastructures. This year’s cost of repairs and maintenance is lower by P2.44 billion or 22.76 percent over last year’s level of P10.71 billion. Of the total, P6.79 billion or 82.03 percent was for the Repairs and Maintenance of Roads, Highways and Bridges and P1.08 billion or 13.03 percent was for Flood Control. The remaining P408.77 million or 4.94 percent is shared by all other public infrastructures.

105

The second biggest component is Repairs and Maintenance of Buildings – P4.54 billion or 26.79 percent, the details are as follows: Office Buildings – P1.66 billion or 36.53 percent, School Buildings – P1.56 billion or 34.47 percent, Other Structures – P1.16 billion or 25.48 and Hospital and Health Centers – P159.92 million or 3.52 percent.

The third biggest component is Repairs and Maintenance of Transportation

Equipment – P2.18 billion or 12.87 percent. This year’s cost is lesser by P221.05 million or 9.21 percent compared to P2.40 billion spent in 2010. The details of the expenses for the repairs of transportation equipment are as follows: Motor Vehicles – P1.18 billion or 54.02 percent, Aircrafts and Aircraft Ground Equipment – P738.81 million or 33.90 percent, Watercrafts – P258.18 million or 11.85 percent, and Other Transportation Equipment and Trains – P5.16 million or 0.24 percent.

5.2.2.2 Subsidy to LGUs, GOCCs and NGOs/POs - P391.27 billion

The total Subsidy to LGUs, GOCCs and NGOs/POs this year of P391.27 billion is higher by P51.17 billion or 15.05 percent compared to the previous year’s level of P340.10 billion. As shown in Table V.2-23, the breakdown with comparative details is as follows: LGUs (net) – P317.90 billion or 81.25 percent, GOCCs – P72.84 billion or 18.62 percent, and NGOs/POs – P527.64 million or 0.13 percent.

Table V.2-23 Comparative Details of Subsidy To

LGUs, GOCCs and NGOs/POs



Subsidy to LGUs (320,001.98) (283,614.73) (36,387.25) 12.83 Subsidy from Other LGUs 2,105.29 2,067.71 37.58 1.82 Net Subsidy From/(To) LGUs (317,896.69) (281,547.02) (36,349.67) 12.91 Subsidy to GOCCs (72,842.24) (57,104.69) (15,737.55) 27.56Subsidy to NGOs/POs (527.64) (1,445.38) 917.74 (63.49)

Total (391,266.57) (340,097.09) (51,169.48) 15.05Difference between totals and sum of components is due to rounding off.

5.2.2.2.1 Net Subsidy to LGUs – P317.90 billion

Net Subsidy to LGUs of P317.90 billion is the excess of NG’s subsidy to and

subsidy from LGUs of P320.00 billion and P2.10 billion, respectively. Compared to last year’s level of P281.55 billion, this year’s amount exhibited an increase of P36.35 billion or 12.91 percent.

Of the collective Subsidy from Other LGUs, P1.89 billion or 89.74 and P124.54

million or 5.92 percent were received by MMDA and DepEd, respectively. Compared to previous year’s P283.61 billion, Subsidy to LGUs rose by P36.39

billion or 12.83 percent. The DBM being the Administrator of the Funds for LGUs reported P317.22 billion or 99.13 percent, of which P287.75 billion or 90.71 percent was funded from IRA, while P29.47 billion or 9.29 percent was funded from various Special Purpose Funds of the current and prior years’ appropriations.

106

Table V.2-24 shows the comparative breakdown of releases made by the Central and Regional Offices of the DBM to the LGUs.

Table V.2-24

Comparative Breakdown of Subsidy to LGUs as Reported by DBM CO and ROs (in million pesos)

CO/RO 2011 2010 Increase (Decrease)

Amount

Percent Distribution

Amount

Percent Distribution

Amount Percent

CO 7,055.80 2.22 6,388.93 2.27 666.87 10.44NCR 19,057.54 6.01 17,424.47 6.19 1,633.07 9.37

I 22,386.06 7.06 17,160.41 6.10 5,225.65 30.45 CAR 9,790.92 3.09 8,404.93 2.99 1,385.99 16.49

II 15,433.58 4.87 13,640.36 4.85 1,793.21 13.15 III 29,165.75 9.19 26,393.40 9.38 2,772.35 10.50

IV-A 33,254.17 10.48 28,859.35 10.25 4,394.82 15.23 IV-B 13,377.38 4.22 11,842.27 4.21 1,535.11 12.96

V 19,234.94 6.06 17,352.10 6.16 1,882.84 10.85 VI 25,895.98 8.16 22,934.81 8.15 2,961.17 12.91 VII 21,065.28 6.64 19,126.95 6.79 1,938.33 10.13 VIII 18,239.51 5.75 16,548.90 5.88 1,690.62 10.22 IX 18,499.73 5.83 16,883.53 6.00 1,616.20 9.57 X 16,437.13 5.18 14,816.85 5.26 1,620.28 10.94 XI 14,388.27 4.54 12,821.52 4.55 1,566.75 12.22 XII 22,778.99 7.18 20,562.03 7.30 2,216.96 10.78 XIII 11,160.21 3.52 10,348.45 3.68 811.76 7.84

TOTAL 317,221.23 100.00 281,509.25 100.00 35,711.98 12.69 The subsidy reported by the Regional Offices IX and XII, includes subsidy for LGUs of ARMM.


5.2.2.2.2 Subsidy To GOCCs – P72.84 billion

Tax subsidy, equity contributions and other subsidies to GOCCs given by the NG during the year reached P72.84 billion, registering an increase of P15.74 billion or 27.56 percent compared to the previous year’s level of P57.10 billion. Of the total, P72.65 billion or 99.73 percent was reported by the DOF-BTr, of which P18.94 billion was for tax subsidy. Table V.2-25 shows the Comparative Breakdown of Subsidy to GOCCs Reported by DOF-BTr.

Table V.2-25 Comparative Breakdown of Subsidy to GOCCs as Reported by DOF-BTr



National Housing Authority 16,196.70 3,500.00 12,696.69 362.76 National Power Corporation 14,092.08 - 14,092.08 - National Food Authority 9,214.26 38,420.09 (29,205.83) (76.02) Land Bank of the Philippines 7,932.22 - 7,932.22 - Philippine Health Insurance Corporation 6,639.80 3,506.10 3,133.70 89.38 Philippine Deposit Insurance Corporation 4,183.36 4,403.27 (219.91) (4.99) Light Rail Transit Authority 1,867.51 - 1,867.51 - National Electrification Administration 1,670.33 10.14 1,660.19 16,370.24

107

Table V.2-25 continued



National Livelihood Development Corporation 1,437.36 1,299.18 138.18 10.64 National Home Mortgage Finance Corporation 1,000.00 - 1,000.00 - Philippine National Railways 712.93 163.97 548.96 334.79 Philippine Institute for Development Studies 685.30 19.20 666.10 3,469.27 Philippine Children’s Medical Center 647.03 259.65 387.38 149.19 Philippine Heart Center 640.31 294.79 345.52 117.21 Philippine Coconut Authority 542.70 585.00 (42.30) (7.23) Philippine Fisheries Development Authority 500.00 - 500.00 - Philippine Rice Research Institute 496.00 418.00 78.00 18.66 Philippine Postal Corporation 460.87 281.28 179.59 63.85 National Irrigation Administration 450.00 - 450.00 - National Resources Development Corporation 426.50 80.00 346.50 433.13 Bases Conversion Development Authority 423.99 781.19 (357.20) (45.72) National Kidney and Transplant Institute 346.07 297.59 48.48 16.29Technology Livelihood Resource Center 336.00 - 336.00 - National Dairy Authority 315.02 52.20 262.82 503.49 Lung Center of the Philippines 296.10 180.38 115.72 64.15 Development Academy of the Philippines 216.12 20.00 196.12 980.62 Cultural Center of the Philippines 195.00 100.00 95.00 95.00 Laguna Lake Development Authority 117.00 - 117.00 - Philippine Crop Insurance Corporation 113.77 113.77 0.00 0.00 Center for International Trade Expositions and

Missions

79.69

73.75

5.94 8.05 Aurora Special Economic Zone Authority 67.50 22.50 45.00 200.00 Philippine Convention and Visitors Corporation 65.00 65.00 0.00 0.00 Southern Philippines Development Authority 59.00 30.00 29.00 96.67 Local Water Utilities Administration 55.50 - 55.50 - Zamboanga City Special Economic Zone Authority 49.10 30.00 19.10 63.67 People’s Televisions Network Inc. 41.61 4.04 37.57 930.35 Philippine Institute of Traditional and Alternative

Health Care 37.00 50.00 (13.00)

(26.00) Credit Information Corporation 17.50 - 17.50 -Development Bank of the Philippines 11.83 - 11.83 - Cottage Industry Technology Center 8.00 12.52 (4.52) (36.10) Other GOCCs - 1,932.85 (1,932.85) (100.00)

Total 72,646.08 57,006.45 15,639.62 27.43 Difference between totals and sum of components is due to rounding off.

Other departments that reported Subsidy to GOCCs are the following: NEDA – P99.51 million, DOLE - P46.22 million, DOH – P38.48 million, DOT – P10.43 million and OEO – P1.52 million.

5.2.2.3 Financial Expenses – P282.77 billion

Total Financial Expenses of P282.77 billion for the calendar year declined by P21.74 billion or 7.14 percent compared to P304.52 billion of the previous year. Of the aggregate, the DOF accounted for P282.42 billion or 99.88 percent, of which P282.23 billion or 99.93 percent was reported by the BTr GOP in the payment of foreign and domestic loans and bonds and notes payable.

108

As shown in Table V.2-26, total payments for interest expenses and other financial charges for our foreign and domestic borrowings shrank by P19.54 billion or 6.67 percent and P2.98 billion or 70.44 percent, respectively.

Table V.2-26 Comparative Components of Financial Expenses



Interest Expenses 273,205.27 292,742.50 (19,537.23) (6.67)Documentary Stamp Expenses 7,703.84 7,061.08 642.77 9.10Other Financial Charges 1,249.30 4,226.70 (2,977.40) (70.44)Commitment Fees 332.60 397.93 (65.34) (16.42)Bank Charges 280.72 88.39 192.33 217.60


5.2.2.4 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 P764.53 billion or 55.25 percent. Regions IV, III and VI followed with P93.15 billion or 6.73 percent, P63.63 billion or 4.60 percent and P55.40 billion or 4.00 percent, respectively. On the other hand, the Foreign Service Posts of DFA reported total expenses of P4.84 billion as presented in Table V.2-27

The breakdown of expenses by department/office and by region is shown in

Schedule 30, Volume I-B, while the details of expenses, by account and by region are presented in Schedule 31, Volume I-B.

Table V.2-27 Regional Breakdown of Expenses and Subsidies

(in million pesos)

Region PS MOOE FE Subsidies TOTAL Percentage Distribution

NCR 262,039.88 122,407.44 282,696.68 97,390.15 764,534.16 55.25I 16,870.01 4,800.31 0.15 22,531.25 44,201.72 3.19 CAR 8,234.15 2,939.79 0.49 10,021.66 21,196.09 1.53 II 13,092.83 4,230.37 0.08 15,475.96 32,799.24 2.37III 26,019.91 8,007.59 6.74 29,600.15 63,634.38 4.60 IV 34,645.89 11,461.33 7.92 47,035.79 93,150.93 6.73 V 18,848.69 5,338.31 3.55 19,283.21 43,473.76 3.14 VI 23,703.13 5,515.65 2.94 26,177.95 55,399.66 4.00 VII 17,532.46 5,466.50 0.16 21,378.84 44,377.96 3.21 VIII 16,268.86 3,583.50 0.83 18,308.94 38,162.13 2.76 IX 12,551.72 4,066.59 1.32 18,531.42 35,151.06 2.54 X 14,506.63 4,620.73 0.84 16,650.98 35,779.18 2.59 XI 12,788.24 4,792.10 0.21 14,454.15 32,034.70 2.32 XII 11,452.96 4,605.97 1.67 23,093.98 39,154.57 2.83 XIII 8,505.92 2,889.41 1.73 11,195.42 22,592.49 1.63ARMM 11,444.17 1,702.67 0.38 136.71 13,283.93 0.96 FSPs 3,605.55 1,184.43 46.03 - 4,836.01 0.35 Total 512,110.99 197,612.68 282,771.72 391,266.57 1,383,761.96 100.00 Difference between totals and sum of components is due to rounding off.

109

5.2.3 Other Income/Expense Items

5.2.3.1 Net Subsidy From/(To) National Government Agencies – P2.79 billion

Net Subsidy From NGAs of P2.79 billion is the difference between total Subsidy from NGAs of P1.185 trillion and total Subsidy to NGAs of P1.182 trillion. Compared to the previous year’s Net Subsidy From/(To) NGAs of negative P35.47 billion, this year’s net subsidy increased by P38.26 billion. This is brought about by the excess of the increase in Total Subsidy from NGAs of P56.52 billion over the increase in Total Subsidy to NGAs of P18.26 billion. Table V.2-28 shows the Comparative Details of Subsidy From/(To) National Government Agencies.

Table V.2-28 Comparative Details of Subsidy From/(To) National Government Agencies

Particulars


(Decrease) Subsidy Income from National

Government

1,163,711.09

1,092,863.47

70,847.62

6.48 Subsidy from Central Office/

Home Office

18,800.64

29,276.51

(10,475.87)

(35.78) Subsidy from Regional Offices/

Staff Bureaus

1,288.93

4,022.94

(2,734.01)

(67.96) Subsidy from Operating Units 31.44 588.33 (556.89) (94.66) Subsidy from Other Funds 329.19 814.97 (485.78) (59.61) Subsidy Income from Other

NGAs

452.17

523.80

(71.63)

(13.68) Total Subsidy from NGAs 1,184,613.45 1,128,090.02 56,523.43 5.01

Less: Subsidy to National Government

Agencies

1,161,043.82

1,127,784.96

33,258.86

2.95 Subsidy to Regional Offices/

Staff Bureaus

14,542.85

22,107.46

(7,564.61)

(34.22) Subsidy to Operating Units 5,923.93 13,406.69 (7,482.76) (55.81) Subsidy to Other Funds 308.55 261.57 46.98 17.96 Total Subsidy to NGAs 1,181,819.15 1,163,560.68 18,258.47 1.57

Net Subsidy From/(To) NGAs 2,794.30 (35,470.66) 38,264.96 (107.88) Difference between totals and sum of components is due to rounding off.

5.2.3.1.1 Subsidy from National Government Agencies – P1.185 trillion

The main component of Subsidy from NG is the Subsidy Income from National Government, which accounted for P1.164 trillion or 98.24 percent. This account is credited for receipt of NCA, NCAA, Working Fund and constructive receipt of CDC by Foreign Service Posts of the DFA. Likewise, it is also credited for Tax Remittance Advices (TRAs) issued to BIR and for tax subsidies by the NG to the GOCCs. On the other hand, it is debited for remittances to the 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 of the account at year-end to Income and Expense Summary account.

110

Compared to the P1.093 trillion in calendar year 2010, this year’s level increased by P70.85 billion or 6.48 percent. As the administrator of funds for NGs subsidies to LGUs, the DBM reported the highest amount of P319.69 billion, accounting for 27.47 percent of the total. The DepEd, DND and DPWH followed with P216.19 billion or 18.58 percent, P117.99 billion or 10.14 percent and P106.88 billion or 9.18 percent, respectively.

5.2.3.1.2 Subsidy to National Government Agencies – P1.182 trillion

The main component of this category is the account Subsidy to NGAs as

reported in the DOF-BTr GOP Books totaling P1.16 trillion or accounting for 99.96 percent. 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; TRAs issued to BIR; and for tax subsidies by NG to GOCCs. It is credited at year-end for the closing of the account to the Income and Expense Summary account.

As shown in Table V.2-29, this year’s Subsidy to NGAs reported in the DOF-

BTr GOP Books is lesser by P26.48 billion or 2.23 percent compared to the previous year’s level of P1.187 trillion.

5.2.3.2 Net Gain/(Loss) – (P31.67 billion)

From a Net Gain of P49.78 billion in the previous year, a significant Net Loss of P31.67 billion was reported for the year ended 2011. This was caused mainly by the Net Loss of P28.47 billion in foreign exchange during the year as compared to the FOREX Gain of P54.21 billion in 2010. Other contributor is the Loss on Guaranty of P3.16 billion. The account Loss on Guaranty is used for the payment of foreign exchange risk cover claims for NG guaranteed obligations of GFIs (LBP, DBP and SBGFC). Table V.2-30 shows the Comparative Details of Gains/(Losses) for calendar years 2011 and 2010.

Table V.2-29 Comparative Details of Subsidy to NGAs as Reported by BTr


Percent 2011 2010 Increase

(Decrease) Replenishment of negotiated MDS account

1,070,326.25

1,092,266.12

(21,939.86)

(2.01)

Tax Remittance Advices 33,884.51 31,945.75 1,938.75 6.07 Customs Duties/Other Taxes

per JC 2-91

25,831.39

39,693.73

(13,862.34)

(34.92)Constructive Cash (NCAA) 18,363.49 16,199.41 2,164.08 13.36Working Fund 9,617.00 5,766.45 3,850.56 66.78 Contributions to International

Organizations 2,530.62

1,155.92

1,374.70

118.93 Non-Cash Availment Authority – Grant

4.49

9.74

(5.25)

(53.92)

Total 1,160,557.76 1,187,037.12 (26,479.37) (2.23)Difference between totals and sum of components is due to rounding off.

111

Table V.2-30 Comparative Details of Gains/(Losses)

Particulars Amount (in million pesos) Percent

2011 2010 Increase (Decrease)

Gain/(Loss) on Foreign Exchange (28,471.38) 54,214.72 (82,686.10) (152.52)Loss on Guaranty (3,157.04) (4,571.08) 1,414.04 (30.93) Loss of Assets (38.69) (61.13) 22.44 (36.70) Gain/(Loss) on Sale of Disposed Assets (49.96) (48.26) (1.70) 3.52 Gain/(Loss) on Sale of Securities 43.06 247.71 (204.64) 82.62Net Gain/(Loss) (31,674.01) 49,781.96 (81,455.96) (163.63) Difference between totals and sum of components is due to rounding off.

5.2.4 Net Income/(Loss) – (P13.62 billion)

The NG’s operations for the year ended, resulted to a Net Loss of P13.62 billion inspite of the excess of income over expenses this year of P15.25 billion due to the Net Loss on Foreign Exchange of P28.47 billion. Total Loss on FOREX brought about by the depreciation of the peso against foreign currencies reported by various departments/offices reached P28.82 billion, of which P28.77 billion or 99.84 percent was accounted for by the DOF. This was partially offset by the Gains on FOREX totaling P348.82 million recorded by the following departments/offices: DFA – P295.65 million, DOLE – P51.08 million and SUCs (mainly by the University of the Philippines) – P2.10 million. Table V.2–31 shows the Comparative Condensed Statement of Income and Expenses.

Table V.2-31 Comparative Condensed Statement of Income and Expenses



Revenue/Income 1,399,016.71 1,243,676.54 155,340.17 12.49 Less: Expenses 1,383,761.96 1,282,070.96 101,691.00 7.93 Income/(Loss) Before Other

Income/Expense Items 15,254.75 (38,394.42) 53,649.17 (139.73)Other Income/Expense Items Net Subsidy From/(To) NGAs 2,794.30 (35,470.66) 38,264.96 (107.88)Net Gain/(Loss) (31,674.01) 49,781.96 (81,455.96) (163.63)

Net Income/(Loss) (13,624.95) (24,083.12) 10,458.17 (43.43)Difference between totals and sum of components is due to rounding off.

112

5.3 Statement of Cash Flows

The consolidated SCF, prepared using the Direct Method imparts the sources and uses of cash during the year, which is summarized into operating, investing and financing activities.

Operating activities includes cash generated from revenues and the cost incurred

excluding those associated with long-term investment on capital items or investment in securities. Investing activities include cash paid for acquiring capital assets and cash received from disposals of the same classes of assets, cash invested in stocks, as well as the proceeds from the subsequent sale of the stock. Financing activities include cash received from debt holders and any principal payments made back to those debt holders.

At yearend, the cash balance of the NG as shown in the SCF on page 47 of this

report was recorded at P317.55 billion, which is 16.71 percent or P63.72 billion lower than last year.

Chart V.3-1 shows the segments of cash flows by activity. Total cash inflows

under operating, investing and financing activities was posted at P4.549 trillion, while total cash outflows amounted to P4.612 trillion, resulting to the decrease in cash balance by P63.69 billion.

Chart V.3-1 Segments of Cash Flows (in billion pesos)


-1,000

0

1,000

2,000

3,000

4,000

5,000

Inflows 2,830.31 353.07 1,365.39 4,548.77

Outflows 2,658.91 491.88 1,461.69 4,612.48

Net Cash Provided by(Used in)

171.40 (138.80) (96.29) (63.69)

Operating Investing Financing Total

113

5.3.1 Cash Inflows – P4.549 trillion

This year’s cash generation summed up to P4.549 trillion, P2.830 trillion or 62.22 percent of which is sourced from Operating Activities, P1.365 trillion or 30.02 percent from Financing Activities and P353.07 billion or 7.76 percent from Investing Activities.

5.3.1.1 Operating Activities – P2.830 trillion

Total cash inflows derived from Operating Activities for the year reached

P2.830 trillion. This came mainly from the collection of revenue/income of P1.338 trillion. Of the total collections, P837.79 billion was reported by the BIR as remittance from various taxes, which is P91.02 billion or 12.19 percent higher than last year’s P746.76 billion. Table V.3-1 shows the collection generated by principal revenue collecting agencies for the last two years.

Table V.3-1 - Comparative Revenue Generated, by Agency

(in million pesos)

Department/Agency 2011 2010 Increase (Decrease) Amount Percent

Bureau of Internal Revenue 837,788.42 746,764.30 91,024.12 12.19 Bureau of Customs 253,812.53 226,852.42 26,960.11 11.88 DOE-OSEC 35,425.78 23,346.45 12,079.33 51.74 DOTC-OSEC 14,466.03 13,955.61 510.42 3.66 DA-OSEC 6,954.94 270.85 6,684.08 2,467.79 DOH-OSEC 5,870.95 5,774.12 96.83 1.68 DFA-OSEC 5,244.71 4,832.60 412.11 8.53 Supreme Court of the Philippines

and the Lower Courts

4,627.38 2,324.20 2,303.17 99.10 Land Registration Authority 4,566.89 3,397.84 1,169.05 34.41 National Telecommunications

Office

4,528.26 3,681.73

846.53

22.99 Other Agencies 165,175.09 99,106.04 66,069.05 66.67

Total* 1,338,460.96 1,130,306.16 208,154.80 18.42 *Total amount is net of remittance to NT Difference between totals and sum of components is due to rounding off.

The second largest source of cash flows from operating activities totaling P1.150 trillion are receipt of NCA for regular operations – P1.118 trillion, receipt of NTCA – P31.97 billion and receipt of NCA for trust and other receipts – P432.75 million. Among the departments/offices, the DBM accounted for the highest receipt at P319.63 billion or 27.79 percent of the total. Of this amount, P318.10 billion pertains to DBM administered funds which were allocated as financial subsidies to LGUs. The receipt of NCA, by department/office is listed in Table V.3-2.

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Table V.3-2 Receipt of NCA, by Department*

Department/Office Amount

(in million pesos)

Percent to Total

Budget and Management 319,629.25 27.79 Education 205,106.79 17.84 National Defense 114,886.54 9.99 Public Works and Highways 104,443.94 9.08 Interior and Local Government 98,993.09 8.61 Agriculture 42,997.91 3.74 Social Welfare and Development 33,562.30 2.92 Health 28,840.89 2.51 State Universities and Colleges 26,382.33 2.29 Transportation and Communications 22,099.55 1.92 Other Departments 153,063.86 13.31

Total 1,150,006.45 100.00 * Net of reversion of unused NCA

Contributing to the sources of funds of NGAs are inter-agency and intra-agency fund transfers which amounted to P155.83 billion and P32.36 billion, respectively. These comprises cash for the account of NGAs/LGUs/GOCCs, 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 P12.38 billion. This is higher by P2.33 billion or 23.23 percent over last year’s amount of P10.04 billion.

Other receipts falling under Operating Activities are shown in Table V.3-3.

Table V.3-3 Breakdown of Other Receipts

(in million pesos) Particulars Amount

Receipt of Performance/Bidders/Bail Bonds and Security Deposits 5,021.47

Collection of other receipts from private associations/entities for specific purpose 4,421.02

Collection of trust receipts from entities other than NGAs/ LGUs/GOCCs 3,629.80

Collection of trust receipts from NGAs/LGUs 2,634.05 Receipt of refund of cash advances and overpayments of

expenses 1,441.97 Funds from NGOs/POs for the implementation of projects 1,109.96 Other miscellaneous receipts 17,867.09

Total 36,125.36

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Adjustments which resulted to the increase in cash balance include gain on foreign exchange – P93.46 billion, restoration of cash for unreleased checks – P7.42 billion, restoration of cash for cancelled/lost/stale checks – P774.97 million, receipt of return of cash equivalent to unexpended balance of allotment – P17.87 million and other adjustments – P1.29 billion.

5.3.1.2 Investing Activities – P353.07 billion

Inflows of NG from this activity came from proceeds from matured investments – P319.83 billion, sale of investment securities – P30.51 billion, collection of long-term loans – P2.64 billion and sale of assets – P91.56 million.

Of the aggregate cash generated from investing transactions of P353.07

billion, 97.42 percent was recorded by the BTr-GOP at P343.96 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 311,962.25 Investments in Bonds 167.40 Investments in T-bills 85.30 Other Investments and Marketable Securities 0.07

Proceeds from sale of T-bills, stocks and bonds 30,442.93 Repayment of long-term loans by GOCCs/GFIs 1,306.92

Total 343,964.87 Source: SCF – BTr-GOP

5.3.1.3 Financing Activities – P1.365 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 2011, domestic and foreign borrowings reached P1.365 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

Table V.3-5 - Breakdown of Borrowings (in million pesos)

Particulars Amount Bonds Payable - Domestic 565,120.52Bonds Payable - Foreign 120,053.76Loans Payable - Domestic 605,856.39Loans Payable - Foreign 55,602.18Interest Payable 4,463.06Withholding Tax Payable 1,130.51Premium on T-Bonds 12,686.11

Total 1,364,912.53Source: SCF – BTr-GOP

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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 P63.99 million was reported by State Universities and Colleges.

5.3.2 Cash Outflows – P4.612 trillion

This year’s disbursements at P4.612 trillion comprised of Operating Activities – P2.659 trillion or 57.65 percent, Financing Activities – P1.462 trillion or 31.69 percent and Investing Activities – P491.88 billion or 10.66 percent.

5.3.2.1 Operating Activities – P2.659 trillion

All income collected by the agencies which are not authorized to be

used are required to be remitted to the National Treasury. This year’s total remittances to the NT was posted at P1.173 trillion. Table V.3-6 shows the remittances made by top collecting agencies.

Table V.3-6 Remittances to NT, by Agency

(in million pesos)

Department/Agency Total NG Books RA Books

Bureau of Internal Revenue 836,757.69 836,635.49 122.20 Bureau of Customs 253,793.67 253,793.67 - DOE-OSEC 34,543.36 34,520.65 22.71 DOTC-OSEC 14,722.65 14,465.25 257.40 Land Registration Authority 4,613.13 3,640.23 972.90 DFA-OSEC 4,540.81 4,497.22 43.59 National Telecommunications

Commission 4,528.41 4,528.16 0.25 Bureau of Immigration 2,371.07 2,339.58 31.49 Securities and Exchange

Commission 1,789.11 1,773.06 16.06 National Statistics Office 1,201.27 608.29 592.98 Other Agencies 13,708.20 6,441.13 7,267.07

Total 1,172,569.39 1,163,242.73 9,326.65 Difference between total and sum of components is due to rounding off.

Another cash outflow item that took the most part of operating outflow

activities is DOF-BTr’s replenishment of negotiated MDS checks amounting to P1.089 trillion.

The government also deploys a large portion of its cash on payment of

operating expenses at P658.08 billion, which is P152.76 billion or 30.23 percent higher than last year’s P505.31 billion. Among the departments/offices, the DepEd incurred the highest disbursement on operating expenses at P163.62 billion or 24.86 percent of the total. Payment of operating expenses, by department is shown in Table V.3-7.

117

Table V.3-7 Payment of Operating Expenses,

by Department

Department/Office Amount

(in million pesos)

Percent to total

Education 163,621.78 24.86 Finance 97,721.97 14.85 National Defense 96,892.65 14.72 Interior and Local Government 63,670.64 9.68 Social Welfare and Development 31,537.93 4.79 State Universities and Colleges 26,976.19 4.10 Agriculture 23,863.28 3.63 Public Works and Highways 23,406.05 3.56 Health 21,536.70 3.27 The Judiciary 13,768.85 2.09 Other departments 95,080.54 14.45

Total 658,076.58 100.00

Subsidies and cash donations of P379.26 billion is another component of cash outflows under Operating Activities. Subsidy to LGUs amounting to P317.16 billion was released through the DBM while Subsidy to GOCCs amounting to P53.70 billion was released through the BTr-GOP. Table V.3-8 shows subsidies and donations granted by departments to other NGAs, LGUs, NGOs/POs and other levels of government/institutions to implement their programs and projects.

Table V.3-8 Subsidies and Donations to Other

NGAs/LGUs, NGOs/POs (in million pesos)

Department/Office Amount Budget and Management 317,370.87 Finance 53,714.65 Social Welfare and Development 5,943.80 Other Executive Offices 1,134.73 Science and Technology 545.61 Autonomous Regions in Muslim Mindanao 180.35 State Universities and Colleges 177.01 Labor and Employment 73.00 The Interior and Local Government 54.87 The Judiciary 36.45 Other departments 32.95

Total 379,264.29

Release of inter-agency and intra-agency fund transfers amounted to P94.61 billion and P69.77 billion, respectively.

118

Other key use of cash under operating outflow include – remittance of personnel benefit contributions and mandatory deductions – P133.26 billion, settlement of accounts payable – P69.05 billion, grant of cash advances for travel and for special purpose or time-bound undertaking – P20.24 billion purchase of inventories – P14.73 billion, and other disbursements – P27.85 billion.

Transactions which reduced the cash balance at year end pertains to loss

on foreign exchange – P96.23 billion, reversion of unreleased checks in previous year – P5.71 billion, adjustment for dishonored checks – P162.93 million, adjustment for cash shortage – P4.2 million and other adjustments – P601.65 million.

5.3.2.2 Investing Activities – P491.88 billion

Cash outflow from investing transactions summed up to P491.88 billion. Included in this group of transactions are Investments in securities of P408.01 billion, purchase of capital assets of P83.33 billion and grant of loans of P527.88 million.

Table V.3.9 presents the departments/offices which used their cash on

investments in stocks, bonds and other forms of securities.

Table V.3.9 Investments in Stock, Bonds and Other Securities By Department/Office

Department/Office Total Investments in

Stocks/ Bonds/Marke- table Securities

Investments in GOCCs/

GFIs

Other Long-Term Investments

Finance 403,655.02 390,765.97 12,889.05 Energy 2,819.17 2,819.17 Trade and Industry 807.40 807.40 Agriculture 212.24 212.24 State Universities and Colleges 159.58 33.74 125.84 Other Executive Offices 100.00 100.00 Science and Technology 96.03 96.03 Education 86.94 86.94 Labor and Employment 30.78 30.78 National Economic and

Development Authority 20.00

20.00 Health 16.63 16.63 Office of the Ombudsman 10.57 10.57

Total 408,014.37 393,952.63 13,696.46 365.28 Cash paid for capital expenditures amounted to P83.33 billion. This is a

prime necessity for ensuring the proper maintenance of, and additions to, the NG’s physical assets to support 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 P57.48 billion or 68.98 percent of the total.

119

5.3.2.3 Financing Activities – P1.462 trillion

Debt and equity transactions dominated this category. Payment of long-

term liabilities amounted to P1.221 trillion, of which P1.217 trillion or 99.63 percent represents BTr-GOP’s loan repayments and redemptions.

Interest payment of P240.29 billions is another part of financing

outflow. Of this amount P240.26 billion was paid by the BTr-GOP. The components of financing outflows are presented in Table V.3-10.

Table V.3-10 Composition of Financing Outflows (in million pesos)

Particulars Amount Loan Repayments and Redemptions 1,217,092.50

DOF-BTr-GOP 1,216,851.30 Bonds Payable - Domestic 205,439.62 Bonds Payable - Foreign 82,475.27 Loans Payable - Domestic 843,834.55 Loans Payable - Foreign 62,308.50 Due from GOCCs/Loans Receivables-GOCC 22,793.36

Other departments/offices 241.20 Interest Payments 240,292.42

DOF-BTr-GOP 240,257.83 Other departments/offices 34.60

Loss on Guaranty 3,156.76 Commitment Charges 305.99 Other Financial Charges 840.17

Total 1,461,687.84 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 –

(P63.69 billion)

During the year, the net cash used went down to a negative P63.69 billion. This is due to the heavy use of cash in operating activities which increased by 13.23 percent and the government’s trimming down on loan acquisitions by14.90 percent.

Chart V.3-2 shows the net cash provided by (used in) operations by the NG from

FYs 2002 to 2011. This year’s net result on operating, investing and financing activities is the lowest in ten years.

120

Chart V.3-2 Trend of Net Cash Provided by (Used in)

Operating, Investing and Financing Activities CY 2002-2011

(in billion pesos)

5.3.4 Cash Balances

5.3.4.1 Beginning Balance, January 1, 2011

The consolidated beginning balance of cash as of January 1, 2011 of

P381.25 billion differs with the ending balance reported in the FY 2010 SCF. The difference represents cash balances of reports not submitted either in FYs 2010 or 2011, inadvertent reporting of cash balances and balances which are for verification as of report date.

5.3.4.2 Ending Balance, December 31, 2011

The SCF at the end of the year shows total cash balance of P317.55

billion, higher by P55.04 billion compared to the cash balance reflected in the Balance Sheet. The difference represents sinking fund cash accounts of P55.14 billion lodged under Investments in the books of the BTR-GOP and cash accounts of DOLE, Carlos Hilado Memorial College and Davao Oriental State College of Science and Technology which are not included in the SCF ending balance amounting to P100.49 million.

(63.69)

(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 2011

VI. NATIONAL GOVERNMENT DEBT

121

NATIONAL GOVERNMENT DEBT 6.1 Introduction

The National Government (NG) budget has been formulated to turn our vision for social reform into a tangible reality. This requires the implementation of various infrastructures, socio-economic and capital development projects to be financed by the national revenues. To finance its budget deficit, or the gap between revenues and spending, the NG resorted to borrowings. For CY 2011, the Bureau of the Treasury (BTr) issued Benchmark Bonds, the largest domestic bond swap transaction of the NG. The Bureau also raised funds for the government through the issuance of Retail Treasury Bonds.

This section of the AFR gives us a view on the total indebtedness of the NG

including those relent to the Government-Owned and/or Controlled Corporations (GOCCs). The debt is contracted either from local/internal sources or from foreign/external sources for the implementation of capital development projects.

6.2 Legal Bases

The following constitutional authority and pertinent laws governed the incurrence of public debt by the government:

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.

122

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. ”

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.”

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.”

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”

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”.

123

6.3 Borrowing Program

6.3.1 Approved Program – P738.17 billion

The level of gross borrowing approved for 2011 was fixed at P738.17 billion consisting of Domestic – P546.33 billion and Foreign – P191.84 billion.

The foreign borrowings will be sourced as follows: program loans –

P21.27 billion; project loans – P29.19 billion and bonds and other inflows – P141.38 billion.

The gross domestic borrowings of P990.90 billion, on the other hand, will

be obtained through the flotation of the following securities: Treasury Bills – P520.58 billion and Fixed Rate Treasury Bonds – P470.33 billion. The amount was reduced by redemption of Treasury Bills amounting to P444.58 billion.

Of the amount to be borrowed, P428.87 billion is intended for principal

amortization pertaining to Domestic – P285.13 billion and Foreign – P143.74 billion. Table VI-1 presents the NG financing for calendar year 2011.


Percent Actual 1 Approved Variance Program 2

Gross Foreign Borrowings 194,319.00 191,835.00 2,483.00 1.28 Program Loans Project Loans

48,560.00 21,272.00 27,288.00 56.19 25,549.00 29,189.00 (3,640.00) (14.25)

Bonds and Other Inflows 120,210.00 141,375.00 (21,165.00) (17.61) Less: Amortization 143,159.00 143,737.00 (578.00) (0.40)Net Foreign Borrowings 51,160.00 48,098.00 3,062.00 5.98 Gross Domestic Borrowings 364,698.00 546,329.00 (181,631.00) (49.80)Treasury Bills (232,340.00) 76,000.00 (308,340.00) 132.71 Gross Flotation 181,926.00 520,575.00 (338,649.00) (186.15) Redemption 414,266.00 444,575.00 (30,309.00) (7.32) Fixed Rate Treasury Bonds 351,993.00 470,329.00 (118,336.00 (33.62) Domestic Bond Exchange 30,981.00 - 30,981.00 100.00 Gross Flotation 323,454.00 - 323,454.00 100.00 Redemption 292,473.00 - 292,473.00 100.00 Retail Treasury Bonds 214,064.00 - 214,064.00 100.00 Less: Amortization 300,595.00 285,128.00 15,467.00 5.15 Net Domestic Borrowings 64,103.00 261,201.00 (197,098.00 (307.47) Net Financing 115,263.00 309,299.00 (194,036.00) (168.34)

Difference between totals and sum of components is due to rounding off.1 Based on 2011 Cash Operations Report, BTr 2 Based on 2012 BESF, DBM

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6.3.2 Actual Borrowings – P559.02 billion

The actual amount borrowed was P559.02 billion consisting of Domestic – P364.70 billion and Foreign – P194.32 billion.

The foreign borrowings of P194.32 billion surpass the program level of

P191.84 billion in the aggregate. On the other hand, project loans contracted of P25.55 billion and bonds floated of P120.21 billion did not exceed the program level of P29.19 billion and P141.38 billion, respectively. The foreign payments made during the year of P143.16 billion are lesser by P0.58 billion than the programmed amount of P143.74 billion.

The domestic borrowings of P364.70 billion is lower by P181.63 billion

than the programmed amount of P546.33 billion. Treasury Bills floated dramatically decreased by P338.65 billion or 186.15 percent as the BTr prioritized the issuance of Retail Treasury Bonds due to its lower interest rate and long-term maturities. Retail Treasury Bonds issued amounted to P214.06 billion. Of the domestic bond exchange gross flotation of P323.45 billion, P292.47 billion was applied for maturing bond securities.

6.4 Status of NG Debt

6.4.1 Outstanding balance – P4.940 trillion As of December 31, 2010, the BTr reported the outstanding balance of NG debt amounting to P4.730 trillion consisting of Bonds Payable-Domestic– P2.175 trillion, Loans Payable-Domestic – P555.52 billion, Bonds Payable-Foreign – P1.171 trillion and Loans Payable-Foreign – P828.53 billion. The adjustments to the accounts pertaining to 2010 transactions amounting to negative P28.69 billion were made by that agency in 2011 and such adjustments were only taken up in 2011. In the 2011 Analysis of Loans and Bonds Payable submitted by the BTr, the adjustments made were not effected in the beginning balances of the accounts as of January 1, 2011 and they were neither shown as adjustments affecting the beginning balances of the accounts. The computation of the adjusted outstanding balances of the accounts as of January 1, 2011 after considering the adjustments is presented below:

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Particulars

Amount (in million pesos) Outstanding as

of 12/31/10

Adjustments 2010

Adjusted Outstanding as

of 12/31/10 Domestic 2,730,221.45 (25,797.21) 2,704,424.24 Bonds Payable 2,174,701.89 (1.27) 2,174,700.62 Loans Payables 555,519.56 (25,795.94) 529,723.62 Foreign 1,999,604.54 (2,888.11) 1,996,716.44 Bonds Payable 1,171,071.27 - 1,171,071.27 Loans Payables 828,533.28 (2,888.11) 825,645.17 Total NG Debt 4,729,825.99 (28,685.31) 4,701,140.68 Difference between totals and sum of components is due to rounding off.

As of December 31, 2011, the outstanding balance of NG debt consists of

Domestic – P2.860 trillion or 57.89 percent and Foreign – P2.080 trillion or 42.11 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 01/01/2011

Current Year Outstanding as of

12/31/2011 Availments Repayments

Domestic 2,704,424.24 1,501,004.30 1,346,852.93 2,860,442.11 Treasury Bonds 2,174,700.62 889,510.50 503,016.03 2,563,061.59 Treasury Bills 529,723.62 611,493.80 843,836.90 297,380.52 -

Foreign 1,996,716.44 202,784.84 150,837.97 2,079,965.84 Bonds 1,171,071.27 122,235.05 85,277.51 1,214,221.20 Loans 825,645.17 80,549.79 65,560.46 865,744.64 Direct and Relent 825,606.98 80,549.79 65,545.96 865,733.71 Assumed 38.18 - 14.50 10.93 Total NG Debt 4,701,140.68 1,703,789.15 1,497,690.90 4,940,407.951


Source: National Government Debt Accounting Division, BTr 1 Includes CY adjustments amounting to P33.17 billion

The domestic debt of P2.860 trillion consists of Bonds Payable and Loans Payable amounting to P2.563 trillion or 89.60 percent and P297.38 billion or 10.40 percent, respectively.

The foreign debt of P2.080 trillion consists of Bonds Payable – P1.214

trillion or 58.38 percent and Loans Payable – P865.74 billion or 41.62 percent.

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Shown in Chart VI-1 is the NG Debt by Source.

The bulk of the domestic Bonds Payable consists of Fixed Rate Treasury Bonds–P1.047 trillion; Benchmark Bonds–P990.90 billion; Retail Treasury Bonds–P435.84 billion; Treasury Bonds – Central Bank-Board of Liquidator (CB-BOL) – P50.00 billion; Multi-rate Treasury Bonds – P21.83 billion and Special Purpose Treasury Bonds (CARP) – P9.82 billion. While the domestic Loans Payables include the amount pertaining to CB-BOL of P174.57 billion, Treasury Bills of P120.50 billion, Development Bank of the Philippines (DBP) Assumed loans of P2.29 billion, Treasury Bills-Certificated of P11.65 million and Treasury Notes of P5.89 million. The DBP Assumed loans exist by virtue of Proclamation No. 50 issued in 1986.

The outstanding foreign debt pertains to bonds issued such as US Bonds –

P1.129 trillion; Japanese Yen Bonds – P57.08 billion and Euro Bonds – P28.42 billion. The foreign Loans Payable of P865.74 billion were contracted by the NG from the following types of creditor: Bilateral – P502.83 billion, Multilateral – P357.34 billion and Commercial – P5.57 billion.

The balance of NG debt for 2011 posted an increase of P239.27 billion or

5.09 percent from P4.701 trillion in 2010. Shown in Table VI-3 is the comparative outstanding NG debt for 2010 and 2011.

Table VI-3 Comparative Outstanding NG Debt

(in million pesos)

Particulars 2011 2010 Increase (Decrease) Percent

Domestic 2,860,442.11 2,704,424.24 156,017.87 5.77 Loans Payable 297,380.52 529,723.62 (232,343.10) (43.86) Treasury Bills - CB-BOL 174,568.30 174,568.30 - - Treasury Bills 120,500.50 352,843.60 (232,343.10) (65.85) DBP Assumed Loans 2,294.17 2,294.17 - - Treasury Bills-Certificated 11.65 11.65 - - Treasury Notes 5.89 5.89 - -

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(Table VI-3, continued)

Particulars 2011 2010 Increase (Decrease) Percent

Bonds Payable 2,563,061.59 2,174,700.62 388,360.97 17.86 Fixed Rate Treasury Bonds 1,046,527.54 867,635.25 178,892.30 20.62 Benchmark Bonds 990,896.26 872,140.39 118,755.87 13.62 Retail Treasury Bonds 435,844.23 292,150.04 143,694.19 49.19 Treasury Bonds - CB-BOL 50,000.00 50,000.00 - - Multi Currency RTB (OFW) 21,830.93 21,921.49 (90.56) (0.41) Zero Coupon Treasury Bonds 8,131.60 54,679.60 (46,548.00) (85.13) Special Purpose Treasury Bonds (CARP) 9,815.00 16,157.62 (6,342.62) (39.25) Certificated Treasury Bonds 16.03 16.24 (0.21) (1.29) Foreign 2,079,965.84 1,996,716.43 83,249.41 4.17 Loans Payable 865,744.64 825,645.16 40,099.48 4.86 NG Direct/Relent 865,733.71 825,606.98 40,126.74 4.86 NG-assumed (Proc. 50) 10.93 38.18 (27.25) (71.38) Bonds Payable 1,214,221.20 1,171,071.27 43,149.93 3.68 US Bonds 1,128,717.49 1,060,807.74 67,909.75 6.40 Japanese Yen Bonds 57,081.52 80,949.58 (23,868.06) (29.49) Euro Bonds 28,422.18 29,313.94 (891.76) (3.04) Total 4,940,407.95 4,701,140.67 239,267.28 5.09

Difference between totals and sum of components is due to rounding off. Source: National Government Debt Accounting Division, BTr

The aggregate domestic debt increased by P156.02 billion or 5.77 percent

compared to last year’s P2.704 trillion. As shown in the table, the balance of Treasury Bills and Notes of P297.38 billion comprising Loans Payable – Domestic decreased by P232.34 billion or 43.86 percent compared to last year’s P529.72 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, the outstanding Bonds Payable of P2.563 trillion increased

by P388.36 billion or 17.86 percent. This is attributed to the increase in Benchmark Bonds – P118.76 billion or 13.62 percent, Fixed Rate Treasury Bonds – P178.89 billion or 20.62 percent, and Retail Treasury Bonds – P143.69 billion or 49.19 percent. The increase was partly offset by the decrease in Zero Coupon Treasury Bonds – P46.55 billion or 85.13 percent, Special Purpose Treasury Bonds Comprehensive Agrarian Reform Program (CARP) – P6.34 billion or 39.25 percent and Multi-Currency Retail Treasury Bonds – P0.09 billion or 0.41 percent.

The foreign debt of P2.080 trillion is higher by P83.25 billion or 4.17 percent.

This is brought about by the net increase in amount of loans contracted and flotation of bonds worth P40.10 billion or 4.86 percent and P43.15 billion or 3.68 percent, respectively.

Bonds Payable increased by P43.15 billion or 3.68 percent resulting from the increase in issuance of US bonds of P67.91 billion or 6.40 percent and decrease in the issuance of Japanese Yen bonds of P23.87 billion or 29.49 percent and Euro bonds of P0.89 billion or 3.04 percent.

128

The NG assumed loans of P10.93 million, pertaining to foreign loans of DBP and National Development Company (NDC) assumed by the NG pursuant to Proclamation No. 50, dropped by P27.25 million.

The legal sources of Domestic debt of P2.860 trillion are as follows: R.A. No. 245 – P2.848 trillion or 99.57 percent; R.A. No. 6657 – P9.82 billion or 0.34 percent Proclamation No. 50 – P2.29 billion or 0.08 percent and R.A. No. 1000 – P97.05 million or 0.003 percent. Shown in Chart VI-2 is the domestic debt by legal source.

The outstanding foreign

debt of P2.080 trillion was sourced from the following laws: R.A. No. 245 – P1.214 trillion or 58.38 percent; R.A. No. 8182 – P651.83 billion or 31.34 percent; R.A. No. 4860 – P213.91 billion or 10.28 percent and Proclamation No. 50 – P0.01 billion or 0.001 percent. Shown in Chart VI-3 is the foreign debt by legal source.

Domestic Debt

Availments/Issuances – P1.501 trillion

The domestic debt issuances consist of Treasury Bills – P611.49 billion and Treasury Bonds – P889.51 billion. Treasury Bills include the amount of P429.57 billion intended for the rehabilitation of the then Central Bank of the Philippines. The BSP purchased the Treasury Bills issued by the BTr and the proceeds were deposited with the BSP under the account of the Treasurer of the Philippines (TOP) for used by the BTr in the redemption of maturing securities issued. This amount forms part of the advances made by the NG to the BSP.

Bonds floated during the year of P889.51 billion consist of Fixed Rate

Treasury Bonds – P348.94 billion or 39.23 percent; Benchmark Bonds – P326.50 billion or 36.71 percent and Retail Treasury Bonds – P214.06 billion or 24.07 percent. Table VI-4 shows the amount of domestic issuances with the corresponding maturity period.

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Table VI-4 Composition of Domestic Availments (in million pesos)

Particulars Totals 1-91 days 92-181 days

182-364 days

Treasury Bills 611,493.80 289,025.00 8,500.00 313,968.80 CB-BOL 429,568.30 255,000.00 5,000.00 169,568.30 Regular 181,925.50 34,025.00 3,500.00 144,400.50

Totals 4-10 years 15-20 years 25 years Treasury Bonds 889,510.50 461,054.19 356,495.31 71,961.70 Fixed Rate Treasury Bonds 348,941.70 231,466.50 45,514.20 71,961.70 Benchmark Bonds 326,504.78 70,667.63 255,837.15 - Retail Treasury Bonds 214,064.02 158,920.06 55,143.96 - MRTB - - - -

Grand Total 1,501,004.30


Source: National Government Debt Accounting Division, BTr

Treasury Bills worth P289.02 billion with maturity period of 1-91 days

correspond to 47.27 percent of the total issuances. While those with maturity period of 92-181 days of P8.50 billion and 182-364 days of P313.97 billion are equivalent to 1.39 percent and 51.34 percent of the total issuances, respectively. For the Treasury Bonds floated, the maturity period are as follows: P461.05 billion or 51.83 percent – 4-10 years; P356.50 billion or 40.08 percent – 15-20 years and P71.96 billion or 8.09 percent – 25 years.

Repayments/Redemptions – P1.347 trillion

Redemptions during the year of P1.347 trillion include Bonds – P503.02

billion or 37.35 percent and Treasury Bills and Notes – P843.84 billion (including those for the CB-BOL of P429.57 billion) or 62.65 percent.

Bonds redeemed of P503.02 billion consist of Benchmark Bonds – P207.75 billion or 41.30 percent; Fixed Rate Treasury Bonds – P170.05 billion or 33.81 percent; Retail Treasury Bonds – P70.37 billion or 13.99 percent; Zero Coupon Bonds – P46.55 billion or 9.25 percent; Special Purpose Treasury Bonds (SPTB) –CARP – P6.34 billion or 1.26 percent and Agrarian Reform Bonds – P1.96 billion or 0.39 percent.

Foreign Debt

Availments/Issuances – P202.78 billion

The availments during the year of P202.78 billion were made through flotation

of bonds amounting to P122.24 billion or 60.28 percent and contracting by the NG of direct and relent loans of P80.55 billion or 39.72 percent. Table VI-5 shows the availments made by the NG during the year.

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Table VI-5 Foreign Availments

(in million pesos)

Particulars Amount Percent to Total

Bonds 122,235.05 60.28 Philippine Global Bonds 65,293.50 32.20 Global Bonds 54,770.00 27.01 Global Bond Exchange 2,171.55 1.07 Direct/Relent Loans 80,549.79 39.72 Cash Availment 55,468.23 68.86 International Bank for Reconstruction and

Development

40,751.79

73.46 Asian Development Bank 11,809.28 21.29 Japan Bank for International Cooperation 2,377.75 4.29 International Fund for Agricultural Development 317.04 0.57 Other Creditors 212.37 0.38 Constructive Receipts of Cash 25,081.56 31.14 Japan Bank for International Cooperation 8,681.06 34.61 BNP Paribas 5,332.42 21.26 Eximbank of China 1,563.00 6.23 Saudi Fund for Development 892.16 3.56 Eximbank of Korea 583.16 2.33 International Bank for Reconstruction and

Development

368.64

1.47 Asian Development Bank 247.88 0.99 Other Creditors 7,413.25 29.56 Total 202,784.84 100.00


The bonds consist of: Global Bonds – P54.77 billion or 44.80 percent,

denominated in foreign currency issued to foreign investors; Global Bond Exchange – P2.17 billion or 1.78 percent, which is a bond swap transaction of old bonds to new bonds; and Philippine Global Bonds – P65.29 billion or 53.42 percent, issued to foreign investors in Philippine currency.

The direct and relent loans contracted by the NG include cash availments of

P55.47 billion while the amount of P25.08 billion was received in kind. Of the amount of cash availed, IBRD provided P40.75 billion while JBIC and ADB lent P2.38 billion and P11.81 billion, respectively. For availments received in kind, the JBIC accounted for P8.68 billion and BNP Paribas shared P5.33 billion.

Repayments/Redemptions – P150.84 billion

Repayments for direct, relent and assumed loans reached P65.56 billion. Table VI-6 shows the creditors where repayments were made.

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Table VI-6 Repayments by Creditor (in million pesos)

Creditor Direct Relent Assumed Total JBIC 22,648.51 6,900.53 29,549.04 ADB 11,702.46 344.75 12,047.20 IBRD 6,090.74 6,090.74 JEXIM 5,015.45 5,015.45 Deutsche Bank 4,700.70 4,700.70 BNP Paribas 1,700.29 1,700.29 Other Creditors 6,164.41 278.15 14.50 6,457.06 Total 58,022.55 7,523.43 14.50 65,560.47


Of the amount paid, P29.55 billion or 45.07 percent went to JBIC, a bilateral

creditor. The ADB and IBRD, both multilateral creditors accounted for P12.05 billion or 18.38 percent and P6.09 billion or 9.29 percent, respectively. For the assumed loans, the amount of P14.50 million was paid.

Payments made for matured pre-terminated Global Bonds reached P85.28

billion.

6.5 NG Debt Growth

For the ten year period, 2002 to 2011, NG debt has grown by an average of P214.19 billion or 6.01 percent as shown in Table VI-7. The biggest growth of P503.02 billion or 17.97 percent was in 2003. From 2004 to 2006, NG debt is at decreasing level 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 2008, NG debt grew by P356.52 billion or 9.43 percent and since then, the increases and decreases in amount were noted.

Table VI-7 Growth of Outstanding NG Debt

2002 to 2011 (in billion pesos)

Year

NG Domestic Foreign

Amount Annual Growth

Annual Growth

Rate Amount Annual

Growth

Annual Growth

Rate Amount Annual

Growth

Annual Growth

Rate 2002 2,798.50 - - 1,531.90 - - 1,266.60 - - 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 4,701.14 353.06 8.12 2,704.42 223.59 9.01 1,996.72 129.47 6.93 2011 4,940.41 239.27 5.09 2,860.44 156.02 5.77 2,079.97 83.25 4.17 Ave. 3,946.85 214.19 6.01 2,233.58 132.85 6.58 1,713.28 81.34 5.38

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Domestic debt grew by an average of P132.85 billion or 6.58 percent. 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 P81.34 billion or 5.38 percent, with the highest growth of P294.97 billion or 23.29 percent seen in 2003. Chart VI-4 shows the growth of domestic and foreign debt from 2002-2011.

6.6 Debt Service Expenditures

The amount paid for servicing domestic and foreign debt totaled P1.780 trillion consisting of Principal Repayment – P1.498 trillion or 84.14 percent; Interest – P272.89 billion or 15.33 percent and financial charges – P9.33 billion or 0.52 percent. Chart VI-5 shows the composition of debt service expenditure for 2011.

Chart VI-4 NG Debt Growth (in billion pesos)

Chart VI-5 Actual Debt Service Expenditures of the NG (in billion pesos)

133

Principal – P1.498 trillion

Principal repayments of P1.498 trillion consist of Domestic – P1.347 trillion or 89.93 percent and Foreign – P150.84 billion or 10.07 percent. Chart VI-6 shows the principal repayment of the NG for 2011.

Interest – P272.89 billion

Compared to the 2010 amount of P292.43 billion, interest went down by P19.53 billion or 6.68 percent. Table VI-8 shows the comparative amount of interest paid by the NG for domestic and foreign loans.

Table VI-8 Comparative Interest Payments of the NG

Particulars Amount (in million pesos) Increase (Decrease) Percent 2011 2010

Foreign 102,943.71 111,969.08 (9,025.37) (8.06) Global Bond 86,351.91 95,126.20 (8,774.29) (9.22) Direct/Relent 16,591.34 16,842.20 (250.86) (1.49) Assumed 0.46 0.68 (0.22) (32.35)Domestic 169,951.03 180,456.28 (10,505.25) (5.82) Bonds 164,313.62 158,653.17 5,660.45 3.57 T-Bills, Notes and 5,637.41 21,803.11 (16,165.70) (74.14) Total 272,894.74 292,425.36 (19,530.62) (6.68) Difference between totals and sum of components is due to rounding off. Source: 2011 Financial Statements, BTr

134

Interest for foreign loans of P102.94 billion showed a decrease of P9.03 billion compared to the previous year’s amount of P111.97 billion. Payments made for Direct and Relent foreign loans amounting to P16.59 billion also showed a decrease of P0.25 billion or 1.49 percent. On the other hand, interest paid for Global Bonds flotation reached P86.35 billion.

Payments made on Interest for domestic debt of P169.95 billion went down by

P10.51 billion or 5.82 percent.

Other Financial Expenses – P9.33 billion

Other Financial Expenses of P9.33 billion were incurred, for domestic debt – P7.29 billion or 78.12 percent and for foreign debt – P2.04 billion or 21.88 percent. Domestic expenses consist of Documentary Stamp Tax – P7.09 billion and Other Financial Charges – P0.20 billion. Table VI-9 shows the comparative other financial expenses paid by the NG.

Table VI-9 Comparative Other Financial Expenses of the NG


Percent 2011 2010 (Increase (Decrease)

Foreign 2,042.32 5,981.99 (3,939.67) (65.86) Commitment Fees 330.89 394.50 (63.61) (16.12) Documentary Stamp Tax 611.17 1,483.51 (872.34) (58.80) Other Financial Charges 1,047.26 4,077.25 (3,029.99) (74.31) Bank Charges 53.00 26.73 26.27 98.28 Domestic 7,291.40 5,722.69 1,568.71 27.41 Documentary Stamp Tax 7,091.29 5,576.09 1,515.20 27.17 Other Financial Charges 200.11 146.60 53.51 36.50 Total 9,333.72 11,704.68 (2,370.96) (20.26)

Difference between totals and sum of components is due to rounding off. Source: 2011 Financial Statement, BTr

Financial expenses paid for foreign debt of P2.04 billion decreased by P3.94

billion or 65.86 percent compared to last year’s amount of P5.98 billion. Commitment fees paid by the NG for the undrawn foreign loans decreased during the year. Documentary Stamp Tax related to the issuance of global bonds also decreased. The Other Financial charges of P1.05 billion include the capitalized service charge of P11.55 million imposed by JBIC; front-end fee of P144.41 million paid to IBRD and the amount related to the issuance of foreign currency denominated bonds of P891.30 million.

135

The financial expenses of P7.29 billion incurred for domestic debt transactions

increased by P1.57 billion or 27.41 percent. Payment for documentary stamp tax of P7.09 billion increased by P1.52 billion or 27.17 percent while other financial charges of P200.11 million increased by P53.51 million or 36.5 percent. No bank charges related to domestic debt transactions was reported for the year.

6.7 Appropriations, Allotments and Balances

6.7.1 For Implementation of Foreign-Assisted Projects 6.7.1.1 Appropriations – P55.96 billion

Appropriations provided in the 2011 GAA, R.A. No.10147, intended for the

implementation of various projects funded by foreign loans totaled P55.96 billion, broken down into Personal Services – P0.03 billion, MOOE – P7.40 billion and CO – P48.53 billion. Of the total, P42.13 billion was funded out of the loan proceeds while the balance of P13.83 billion was financed by a counterpart fund 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 Unprogrammed Fund, a Special Purpose Fund. Table VI-10 shows the Summary of Appropriations for Foreign-Assisted Projects by department/agency:

Table VI-10 Appropriations for Foreign-Assisted Projects by Department/Agency

(in million pesos)

Department Appropriations PS MOOE CO Total

Regular 29.15 6,948.88 38,179.88 45,157.91 DPWH - 228.16 22,476.29 22,704.45 DA 1.66 2,106.37 5,886.20 7,994.23 DOTC - - 6,152.16 6,152.16 DAR 14.95 856.74 1,277.51 2,149.21 DSWD - 1,969.22 32.11 2,001.33 DOF - 33.54 1,456.07 1,489.61 ARMM 12.54 450.63 475.65 938.82 DOH - 401.32 148.00 549.33 DOE - 388.13 37.17 425.30 DENR - 213.72 206.28 420.00 DOST - 223.86 - 223.86 PCOO - 33.00 32.44 65.44 DTI - 44.18 - 44.18

136

(Table VI-10, continued)

Department Appropriations PS MOOE CO Total

Unprogrammed Fund - 455.19 10,351.47 10,806.66 Unallocated 149.11 10,289.38 10,438.49 DSWD 300.00 - 300.00 DAR - 59.64 59.64 DA 6.08 2.45 8.53

Total 29.15 7,404.06 48,531.36 55,964.57


The Appropriations by department/agency/project are shown under Schedule

32, Volume I-B of this report.

6.7.1.2 Allotments – P42.55 billion

Of the amount appropriated, P42.55 billion or 76 percent was released as follows: PS – P0.02 billion, MOOE – P6.83 billion and CO – P35.70 billion. The release of allotments by department/agency is shown in Table VI-11.

Table VI-11 Allotments for Foreign-Assisted Projects by

Department/Agency (in million pesos)

Department Allotments PS MOOE CO Total

Regular 23.67 6,524.05 35,639.01 42,186.73 DPWH - 228.16 21,861.13 22,089.30 DA 0.25 1,844.79 5,820.20 7,665.24 DOTC - - 4,591.60 4,591.60 DSWD - 1,969.22 17.04 1,986.25 DAR 10.88 693.50 1,196.95 1,901.33 DOF - 33.54 1,315.55 1,349.09 ARMM 12.54 450.63 475.65 938.82 DOH - 401.32 85.00 486.33 DOE - 388.13 37.17 425.30 DENR - 213.72 206.28 420.00 DOST - 223.86 - 223.86 PCOO - 33.00 32.44 65.44 DTI - 44.18 - 44.18

Unprogrammed Fund - 306.08 62.09 368.17 DSWD - 300.00 - 300.00 DA - 6.08 2.45 8.53 DAR - - 59.64 59.64

Total 23.67 6,830.13 35,701.09 42,554.89


The Appropriations, Allotments and Balances for Foreign-Assisted Projects by

department/agency are presented in Schedule 33, Volume I-B of this report.

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6.7.1.3 Unreleased Appropriations – P13.41 billion

At yearend, the unreleased balance of appropriations reached P13.41 billion broken down as follows: PS – P0.01 billion, MOOE – P0.57 billion and CO – P12.83 billion. Of this balance, the DOTC accounted for P1.56 billion or 11.64 percent while the Unprogrammed Fund amounted to P10.44 billion or 77.84 percent. Other departments with unreleased amount of appropriations are as follows: DPWH – P615.15 million; DA – P328.99 million; DAR – P247.87 million; DOF – P140.52 million; DOH – P63 million and DSWD – P15.08 million.

6.7.2 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 automatic appropriations covered by Special Allotment Release Order released by the DBM to the BTr to settle debt service expenditures are as follows:

Particulars Appropriations (in million pesos)

Domestic Foreign Total Principal 299,289.78 144,906.34 444,196.12 Interest 161,168.08 100,635.93 261,804.01 Documentary Stamps Tax 7,091.28 611.18 7,702.46 Loss on Guaranty - 3,156.76 3,156.76 Other Financial Charges 200.11 548.44 748.54 Commitment Fess - 305.99 305.99 Bank Charges - 52.99 52.99

Total 467,749.25 250,217.63 717,966.87

The appropriation for servicing domestic debt and foreign debt amounted to P467.75 billion or 65.15 percent and P250.22 billion or 34.85 percent, respectively. Of the appropriated amount, P444.20 billion or 61.87 percent was intended for principal repayment; P261.80 billion or 36.46 percent was for interest and the balance of P11.97 billion or 1.67 percent was for documentary stamps tax, foreign exchange risk cover, commitment fees, bank charges and other financial charges.

The released allotments of P717.97 billion is lesser than the amount of debt

service expenditures recorded at the BTr of P1.783 trillion. The following are the explanations given by the BTr on the discrepancies of P 1.065 trillion between the Special Allotment Release Order (SARO) releases and actual debt service expenditures:

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Reconciliation of SARO Releases and Actual Debt Service Expenditures

Particulars


Explanations DBM SARO

Releases BTr – FS Difference

Principal Payment 444,196.12 1,497,690.90 (1,053,494.79) Domestic 299,289.78 1,346,852.93 (1,047,563.16) The amount of SARO releases is the

contribution to the sinking fund for the year. The actual payment/redemption of the government securities, which is bigger than the released SAROs, came from the sinking fund.

Foreign 144,906.34 150,837.97 (5,931.63) The payment made for the relent loans were not included in the request for SARO releases since these were considered receivable of the national government and payments are expected for the amount advanced.

Total Interest and Other Charges

266,068.29 277,682.75 (11,614.46)

Interest 261,804.01 272,894.74 (11,090.73) Non-cash transactions for the capitalized interest and amortization of interest expense for zero coupon bonds, premium/discount for the global bonds and bond exchange transactions.

Bank Charges 52.99 52.99 - Other Financial Charges 748.54 1,247.37 (498.83) Non-cash transactions for the capitalized

other financial charges.

Commitment Fees 305.99 330.89 (24.90) Non-cash transactions for the capitalized commitment fees.

Loss on Guaranty

3,156.76 3,156.76 -

Documentary Stamp Tax __7,702.46 7,702.46 _ __ - Total 717,966.87 1,783,076.12 (1,065,109.25)

VII. SPECIAL ACCOUNTS IN THE GENERAL FUND

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SPECIAL ACCOUNT IN THE GENERAL FUND

7.1 Introduction

The General Appropriations Act (GAA) includes general and specific provisions on Special Account in the General Fund (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 12 of R.A. 10147, the 2011 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 xxx corporations.

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 New Government Accounting System (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

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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.

Income of government agencies which was constituted as SAGF was

remitted to the National Treasury and disbursed by means of separate MDS check series and subject to the issuance of SAROs and NCAs by DBM, except those authorized to maintain bank accounts with government depository banks and/or exempted from the provisions of Executive Order No. 338.

7.2 Financial Data

The financial data contained in this report were derived from the consolidation of the balances of the accounts reflected in 72 SAGF/Special Fund trial balances as of December 31, 2011, which were submitted by 19 departments/agencies, while the budgetary data were based on the consolidated statement of appropriations, allotments and obligations prepared by this Sector. The data also includes income accruing to SAGF which were collected by various NGAs and remitted to the National Treasury. However, balances of accounts pertaining to CARP Fund 158 were excluded as these are presented in a separate chapter of this report. Likewise, those accounts pertaining to the receipt and utilization of the SAGF, for which no books of accounts were separately maintained, were excluded but were instead integrated in the respective agency’s consolidated trial balances.

7.2.1 Appropriations, Allotments and Obligations

For the calendar year 2011, the total appropriations for SAGF, net of

CARP, totalled P37.13 billion, of which P37.12 billion was released, leaving a balance of P0.01 billion. The total obligations incurred amounted to P13.36 billion as shown in Table VII-1 below.

Table VII-1 Appropriations, Allotments and Obligations

Special Account in the General Fund (Net of CARP) (in million pesos)

Department Appropriations Allotments Obligations National Defense 14,445.46 14,445.46 660.61 Public Works and Highways 8,839.61 8,839.61 2,399.54 Finance 7,911.15 7,911.15 7,743.13 Other Executive Offices 1,219.28 1,219.28 376.78 Energy 894.95 894.95 310.67 Education 750.94 750.94 152.86 Agriculture 634.27 634.27 375.30 Interior and Local Government 568.52 568.52 142.21 Environment and Natural Resources 522.29 505.84 123.46 Transportation and Communications 450.38 450.38 349.05 Justice 370.34 370.34 306.55 Budget and Management 235.39 235.39 206.89 Labor and Employment 98.78 98.78 91.94

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Chart VII-1 Total Assets, Liabilities and Equity By Department

Special Account in the General Fund (Net of CARP) (in billion pesos)

Table VII-1 continued

Department Appropriations Allotments Obligations Health 44.81 44.81 41.08 Office of the President 41.24 41.24 35.94 National Economic Development

Authority 40.67 40.67 14.63 Social Welfare and Development 23.75 23.75 8.18 Trade and Industry 22.71 22.71 3.48 Tourism 15.00 15.00 15.00 Science and Technology 4.61 4.61 4.46

Totals 37,134.15 37,117.71 13,361.76 Difference between totals and sum of components is due to rounding off.

7.2.2 Assets, Liabilities and Equity

As of December 31, 2011, the total assets, liabilities and equity of the SAGF

excluding CARP Fund 158 amounted to P73.53 billion, P16.44 billion and P57.10 billion, respectively. Shown in Chart VII-1 are the total SAGF assets, liabilities and equity of all department of the National Government.

The top five departments with the biggest SAGF assets are the DOF-P33.70 billion, DND-P19.95 billion, OEO-P8.23 billion, DOE-P3.72 billion and DPWH- P2.77 billion. The majority of the SAGF asset of DOF arose from the remittances of income of various government agencies accruing to the SAGF, while the SAGF assets of DND, OEO, DPWH, and DOE were mostly from the AFP Modernization Trust Fund, CHED-HEDF, Road Board and Special Fund for energy resource development and exploration programs and projects, respectively.

DOE‐3.72

(10,000.00)

‐

10,000.00

20,000.00

30,000.00

40,000.00

50,000.00

60,000.00

70,000.00

80,000.00

Total Assets TotalLiabilities

Total Equity

PRRCDOSTOPDSWDNEDADOTDTIDENRDOTCDOLEJUDICIARYDILGDOJDADPWHDOEOEODND

16.44

57.10

73.54

DOF‐33.70

DND‐19.95

OEO‐8.23

DPWH‐2.77

DOF‐33.37 DOE‐9.66

OEO‐4.51

DND‐18.94

OEO‐3.72

DOE‐5.94

DOE‐3.72

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The Department of Energy had the biggest SAGF liabilities with P9.66 billion, 96 percent of which are Due to National Treasury consisting of revenue/receivables of the government for its share or royalties from service/operating contracts and other fees, and interest earned from bank deposits. Aside from the DOE, the OEO, DND, DOF, and DPWH have the biggest SAGF liabilities amounting to P4.51 billion, P1.01 billion, P 0.32 billion and P 0.26 billion, respectively.

The departments with the biggest share in SAGF equity are the DOF-P33.37

billion, DND-P18.94 billion, OEO-P3.72 billion, DPWH-P2.49 billion and DA-P1.43 billion. However, the DOE posted a negative equity which was mainly due to the prior year’s adjustment relative to the loss on sale of the subrogated banked gas under Service Contract No. 38 – Malampaya Natural Gas Project amounting to P13.82 billion; and direct payments relative to World Bank and ADB Foreign Assisted Projects awaiting NCAA from the DBM.

7.2.3 Income and Expenses

For the calendar year 2011, the aggregate income recorded accruing to

SAGF amounted to P49.86 billion consisting of Service Income-P39.52 billion, Motor Vehicle Users Charge-P10.10 billion, Permits and Licenses-P16.65, Business Income P0.17 million and Other Income P218.42 million. The top five departments with substantial income constituted as SAGF are the DOE, DPWH, DND, DOF and OEO with P20.07, P9.26, P7.62, P5.60 and P2.44 billion, respectively. Income from Malampaya exploration and motor vehicles users charges are the main sources of income of DOE and DPWH, respectively. Shown in Chart No. VII-2, below is the composition of the total SAGF income, net of CARP.

Chart VII-2 - Income by Department

Special Account in the General Fund (Net of CARP) (in billion pesos)

DOE‐20.07

DPWH‐9.26

DND‐7.62 DOF‐5.60

OEO‐2.44

DOTC‐1.64

DOJ‐1.10

DILG‐0.85

DSWD‐0.45

DA‐0.32

DOLE‐0.24

DENR‐0.15

DOH‐ 0.04

OP‐0.04

NEDA‐0.01

DOT‐0.01 Other‐0.49

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The total SAGF income does not include the net Gain on Foreign Exchange and Sale of Disposed Assets amounting to P50.61 million and income of various agencies which are still for deposit to the National Treasury.

Based on the certified income remitted to the National Treasury, the

departments/agencies request for allotments and NCAs to enable them to utilize the fund for the intended purpose/s of SAGF.

As shown in Table VII-3 below, the Department of Finance has the

biggest expenses, the bulk of which pertain to subsidies to the National Power Corporation, National Electrification Administration and Cultural Center of the Philippines amounting to P6.62 billion, P814.41 million and P5.0 million, respectively. Of the total expenses of the DPWH, 94 percent or P3.78 billion are repairs and maintenance of the Roads and Bridges as accounted by the Road Board.

Table VII-3 Expenses by Department/Office

Special Account in the General Fund (Net of CARP) (in million pesos)

Department Total PS MOOE FE Finance 7,695.15 - 7,695.00 0.15 Public Works and Highways 4,023.51 27.72 3,995.77 0.02 Other Executive Offices 897.87 16.22 881.64 0.01 National Defense 664.67 0.07 664.55 0.04 Justice 377.70 65.33 312.37 - Transportation and Communications 350.84 213.69 137.15 - Energy 228.84 - 228.84 - Trade and Industry 209.92 0.86 209.06 - Judiciary 155.61 - 155.61 - Environment and Natural Resources 120.86 - 120.82 0.03 Agriculture 118.03 5.04 112.80 0.19 Labor and Employment 76.47 - 76.13 0.34 Office of the President 75.03 3.95 71.08 - Interior and Local Government 66.74 - 66.73 0.01 Social Welfare and Development 31.51 - 31.51 - National Economic and Development

Authority 6.89 - 6.89 0.01 Science and Technology 4.63 - 4.63 - Tourism 2.70 - 2.70 - Pasig River Rehabilitation Commission 0.02 - 0.02 -

Totals 15,107.00 332.89 14,773.30 0.81 Difference between totals and sum of components is due to rounding off.

VIII. COMPREHENSIVE AGRARIAN REFORM PROGRAM

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COMPREHENSIVE AGRARIAN REFORM PROGRAM 8.1 Introduction The Comprehensive Agrarian Reform Program (CARP) was created pursuant to

Article XIII of the 1987 Philippine Constitution. The Comprehensive Agrarian Reform Law (CARL) or Republic Act (R.A.) No. 6657 was passed on June 15, 1988 to protect the rights of farmers, farmworkers, and landowners, as well as cooperatives, and other independent farmers. As one of the major social reform programs of the government, it is now on its 23rd year of implementation, having it started upon signing of the CARL. Though the implementation of the law was expected to last for ten years, extensions were made due to the widespread and vast coverage of the program and voluminous activities that has to be undertaken. The first extension was for a period of ten years from June 1998 to December 2008 through the passage of R.A. No. 8532 in February 1998. The program was again extended for another five years from July 2009 to June 30, 2014 by virtue of R.A. No. 9700, the CARP Extension Law.

The Presidential Agrarian Reform Council (PARC) was created under Section

18 of Executive Order No. 229 and Section 41 of R.A. No. 6657 to guarantee the timely and effective delivery of services to the beneficiaries and to manage and direct the CARP at the national level. The Council is chaired by the President and ably assisted by the Secretaries/Heads of implementing agencies. On the other hand, the organization, harmonization of inter-agency linkages and evaluation of CARP projects are handled by the PARC Secretariat pursuant to Section 43 of R.A. No. 6657. At the grassroots level, the delivery of agrarian reform activities to the people is being coordinated by the Provincial Reform Coordinating Committee.

8.2 Major Components of CARP and its Implementing Agencies

The CARP consists of three major components namely: 1) Land Tenure Improvement (LTI) – addresses 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) – aims 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) – comprises the provision for trainings, credit access and construction of infrastructure projects, specifically farm-to-market-roads and communal irrigation projects. The PBD ensures that ARBs possesses the capability to make their newly-awarded lands productive.

The implementation of the CARP is the primary responsibility of the

Department of Agrarian Reform (DAR). Other departments/agencies which act as implementing agencies of the CARP, with their roles and responsibilities, are as follows: a) Department of Environment and Natural Resources (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; b) Department of Agriculture (DA) – responsible for agricultural extension services; c) Land Bank of the Philippines (LBP) – land evaluation, collection of land amortization from farmer-beneficiaries and provision of credit facilities and other

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technical assistance to both farmer-beneficiaries and landowners; d) Land Registration Authority (LRA) – registration of land titles; e) National Irrigation Administration (NIA) – mobilization and development of vital farm-related infrastructures, such as irrigation systems, small impounding dam, access trails, rural roads, ports and other basic facilities; f) Department of Public Works and Highways (DPWH) – construction of farm-related infrastructure facilities, including roads; g) Department of Trade and Industry (DTI) – rural industrialization; and h) Department of Labor and Employment (DOLE) – in-charge of farm workers’ organizations.

8.3 Funding Sources for CARP

Due to the passage of R.A. No. 9700, the NG has to appropriate funds yearly to cover the cost of land acquisition and distribution, support services, agrarian justice delivery and other funding requirements during the extension period. For fiscal year 2011, a total of P11.98 billion was appropriated in the General Appropriations Act, R.A. No. 10147, broken down as follows: Personal Services – P2.36 billion, Maintenance and Other Operating Expenses – P9.47 billion and Capital Outlays – P150 million. Table VIII-1 shows the distribution of appropriations for CARP by IA.

Table VIII-1 Appropriations of CARP

(in million pesos) Implementing

Agency Total PS MOOE CO

DAR 6,971.51 2,093.38 4,878.13 - DOF-LBP 3,966.11 - 3,966.11 - DENR 614.21 83.46 530.75 - DA-NIA 248.18 67.84 30.33 150.00 DOJ-LRA 106.04 73.19 32.85 - DTI 75.18 43.28 31.89 - Total 11,981.23 2,361.15 9,470.07 150.00 Difference between totals and sum of components is due to rounding off.

8.4 Appropriations, Allotments and Obligations During the year, the CARP implementing agencies reported the following

financial data as shown in the Statement of Appropriations, Allotments, Obligations and Balances. In addition to the amount appropriated in the GAA, this year’s CARP appropriations reached P13.81 billion comprising of Current Year’s Appropriations – P13.10 billion, Allotted Continuing Appropriations – P575.35 million and Unreleased Continuing Appropriations – P150.00 million. Total allotments received reached P13.20 billion while obligations incurred amounted to P10.96 billion. This year’s obligations are as follows: Personal Services - P2.99 billion, Maintenance and Operating Expenses – P7.71 billion and Capital Outlays – P258.93 million. Presented in Table VIII-2 is the Statement of Appropriations, Allotments, Obligations and Balances by IAs.

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Table VIII-2 Statement of Appropriations, Allotments, Obligations and Balances ( in million pesos)

Implementing Agency Appropriations Allotments Obligations

Unobligated Balance

Unreleased Appropriations

DAR 8,629.33 8,032.76 5,956.11 2076.65 596.57DOF-LBP 3,966.11 3,966.11 3,966.11 - -DENR 702.64 702.64 589.87 112.77 -DA-NIA 293.03 280.18 251.70 28.48 12.85DOJ-LRA 109.69 109.69 101.51 8.18 -DTI 74.90 74.90 72.35 2.55 -DPWH 29.38 29.38 22.55 6.83 31.89 Total 13,805.08 13,195.66 10,960.20 2,235.46 609.42Difference between totals and sum of components is due to rounding off.

Of the total allotments of P13.20 billion and obligations of P10.96 billion, the DAR reported 60.87 percent or P8.03 billion and 54.34 percent or P5.96 billion, respectively. As in last year, the DOF-LBP ranked second with both allotments and obligations of P3.97 billion which was fully obligated due to the release of subsidy to LBP to cover payment of LBP bonds issued to the farmers.

8.5 Financial Highlights

8.5.1 Balance Sheet

The total Assets of the CARP as of December 31, 2011, reached P93.48 billion comprising of Current Assets of P24.87 billion and Non-Current Assets of P68.61 billion as shown in Table VIII-3. Of the total Current Assets, P14.18 billion or 57.02 percent consists of Receivables, the bulk of which pertains to Accounts Receivables (Net) – P6.77 billion, Due from GOCCs – P3.12 billion and Due from Local Government Units - P1.25 billion.

The Non-Current Assets of P68.61 billion, on the other hand, composed mainly of Property, Plant and Equipment (PPE) – P66.38 billion and Investments – P2.08 billion. The total PPE comprised primarily of Land and Land Improvements of P62.30 billion, the bulk of which was reported by DOF-LBP – P45.15 billion and PCGG – P16.02 billion.

Table VIII-3 Balance Sheet (in million pesos)

Particulars DAR DA-NIA DENR DOJ- LRA DPWH DTI DOJ -

PCGG DOF -LBP Total

Total Assets 6,572.84 2,871.19 270.97 20.14 1,976.04 29.91 17,295.46 64,446.63 93,483.20 Current Assets 4,774.45 752.07 88.42 2.67 123.75 26.11 137.50 18,963.32 24,868.28 Cash 2,253.68 263.29 22.70 0.85 10.08 2.09 - 7,788.41 10,341.12 Receivables 2,444.21 411.48 27.66 0.36 110.99 22.49 - 11,162.69 14,179.86 Inventories 68.68 49.97 22.70 1.46 0.39 1.01 137.50 12.21 293.93 Prepayments 2.12 27.34 14.56 - 2.28 0.51 - - 46.81 Other Current Assets 5.76 - 0.79 - - 0.01 - - 6.56 Non–Current

Assets

1,798.39

2,119.12

182.55

17.48

1,852.30

3.80

17,157.96

45,483.32

68,614.92 Investments 568.92 111.64 - - - - 1,068.72 326.08 2,075.36

Property, Plant and Equipment 1,204.80 1,879.38 176.15 14.12 1,852.28 3.58 16,089.24 45,157.24 66,376.80

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Particulars DAR DA-NIA DENR DOJ- LRA DPWH DTI DOJ -

PCGG DOF -LBP Total

Other Assets 24.66 128.10 6.40 3.36 0.02 0.22 - - 162.76 Total Liabilities 960.31 623.62 113.99 9.23 32.02 3.71 - 20,917.82 22,660.72 Current

Liabilities

956.07

623.62

113.99

9.23 32.02 3.71 - 10,921.22 12,659.86 Long-Term

Liabilities 0.12 - - - - - - 7,793.28 7,793.40 Deferred Credits 4.13 - - - - - - 2,203.32 2,207.45

Equity 5,612.52 2,247.57 156.98 10.91 1,944.03 26.20 17,295.46 43,528.80 70,822.48 Total Liabilities and Equity 6,572.84 2,871.19 270.97 20.14 1,976.04 29.91 17,295.46 64,446.63 93,483.20


The total liabilities of P22.66 billion consisted of the following: Current Liabilities – P12.66 billion; Long-term Liabilities – P7.79 billion; and Deferred Credits – P2.21 billion. The entire amount of Long-term Liabilities pertains to Bonds Payable-Domestic. On the other hand, the bulk of the Current Liabilities of P12.66 billion includes Accounts Payable – P8.30 billion, Guaranty Deposits Payable – P2.92 billion, Other Payables – P304.13 million, Due to Other NGAs – P291.54 million, and Performance/Bidders/Bail Bonds Payable – P285.88 million.

8.5.2 Statement of Income and Expenses

For the fiscal year 2011, the Consolidated Statement of Income and Expenses of

the IAs showed a total Subsidy Income of P8.03 billion reduced by Subsidy to RO/OU of P26.99 million resulting to a Net Subsidy of P8.00 billion.

Of the total Subsidy Income of P8.03 billion, P7.99 billion pertains to Notice of

Cash Allocations released by the Department of Budget and Management to ensure availability of funds to finance the nationwide implementation of the CARP, broken down as follows: DAR – P6.92 billion, DENR – P572.58 million, DA-NIA – P238.72 million, DOJ-LRA – P101.91 million, DPWH – P82.10 million, and DTI – P71.64 million.

The total expenses incurred during the year reached P8.01 billion, the biggest slices of which were reported by DAR and DOF-LBP with P5.00 billion and P2.23 billion, respectively. The bulk of the total expenses was primarily spent for the following: Salaries and Wages – P1.86 billion, Interest Expenses – P1.71 billion, Other Compensation – P566.35 million, Other MOOE – P492.94, Travelling Expenses – P435.29 million, Survey Expenses – P380.40 million, Professional Expenses – P325.98 million, Supplies and Materials Expenses – P304.86 million, and Repairs and Maintenance – P110.43 million. Illustrated in Table VIII-4 is the Statement of Income and Expenses by IAs.

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Table VIII-4 Statement of Income and Expenses (in million pesos)

Implementing Agencies

Net Subsidy Income Total Expenses Net Income/

(Loss) DAR 6,935.50 11.13 6,946.63 5,002.41 1,944.22 DA-NIA 238.72 0.05 238.77 88.92 149.85 DENR 572.58 0.38 572.96 512.60 60.36 DOJ-LRA 101.91 - 101.91 104.05 (2.13) DPWH 81.62 - 81.62 4.03 77.59 DTI 72.03 .02 72.05 69.45 2.60 DOJ-PCGG - - - 2.03 (2.03) DOF-LBP - 166.28 166.28 2,225.80 (2,059.52) Total 8,002.37 177.86 8,180.22 8,009.29 170.93 Difference between totals and sum of components is due to rounding off.

8.6 OPERATIONAL HIGHLIGHTS

The accomplishments of the CARP implementing agencies are presented below: 8.6.1 DAR

Program/Project/Activity Accomplish- ments

A. Land Tenure Improvement (LTI) 1. Land acquisition and distribution 1.1 Land Survey (in hectares) 34,656 1.2 Land Distribution (in hectares) 111,889 2. Leasehold Operations 2.1 Number of hectares 14,880 2.2 Number of tenants-tillers benefited or ARBs 7,488 3. Other LTI Services 3.1 Redocumentation of distributed but not yet paid/documented lands (in has.) 11,095 3.2 Subdivision of Collective Land Ownership Award (CLOA) in hectares

44,544

3.3 Installation of Uninstalled ARBs 3.3.1 Number of ARBs 3,033 3.3.2 Number of hectares 4,046B. Delivery of Agrarian Justice 1. Adjudication of agrarian cases 19,006 2. Agrarian Legal Assistance 2.1 Resolved agrarian law implementation (ALI) cases No. of cases 56,338 No. of ARBs benefited 57,136 No. of hectares 225,401 2.2 Represented ARBs by DAR lawyers before judicial courts No. of cases 1,488 No. of ARBs benefited 3,756 No. of hectares 13,368 2.3 Represented ARBs by DAR lawyers in quasi-judicial courts No. of cases 14,787 No. of ARBs benefited 20,805

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Program/Project/Activity Accomplish-ments

No. of hectares 49,717 2.4 Resolved/disposed conflicts/disputes under mediation/ conciliation process

40,650

2.5 Resolved agrarian cases under the adjudication process 19,006 C. Program Beneficiary Development

1. Confirmation of Agrarian Reform Communities (ARCs) and Strategic ARCs 1.1 Number of ARCs 26 1.2 Number of SARBs 10

2. Trained ARBs on various courses in LTI, Support to Social Infrastructure and Local Capability Building

147,765

3. Provided interventions to organization and its members enabling them to operate and manage their farm, non-farm and off-farm enterprises 3.1 No. of organizations 3.2 No. of members

6,430 849,005

4. Provided complementary support services to ARCs 53,0325. Facilitated preparation of agribusiness plans for agribusiness development

5.1 No. of plans 5.2 No. of hectares

387 44,913

6. Developed products and services and launched in commercial markets 6.1 No. of products developed 6.2 No. products launched

571 291

7. Facilitated signing of marketing contracts between agribusiness firms and farmers organizations

7.1 No. of marketing contracts 7.2 Amount of sales generated (in million pesos)

1,053 P652

8. Provided credit and microfinance assistance 8.1 No. of ARBs assisted 8.2 Amount of credit and microfinance assistance (in billion pesos)

843

P1.316 9. Generated jobs for ARBs from physical infrastructure projects both FAPs and

ARF 9.1 No. of jobs from agri-business enterprises 9.2 No. of jobs from micro, small and medium enterprises 9.3 No. of jobs from development of new lands

23,098 20,353 10,620

10. Facilitated the completion of physical infrastructure projects 10.1 Irrigation systems - 172 with service area in hectares 10.2 Farm-to-market roads - 810 with length in kilometers 10.3 Pre and post-harvest facilities - 72 projects in units 10.4 Bridges - 82 with length in linear meters 10.5 Multi-purpose pavements - 128 with area in square meters

55,136 3,836 643 1,271 45,679

11. Facilitated the provision of the following basic social service facilities 11.1 Potable water supply systems 11.2 Classrooms constructed and rehabilitated 11.3 Health centers constructed and rehabilitated 11.4 Power supply projects completed

1,579 227 205 55

12. Enrolled ARBs/ARB Households in Philhealth and other care providers 138,81613. Implemented capital and technical assistance projects

13.1 No. of projects 13.2 Total Investments (in billion pesos)

62 P79.166

14. Established Women’s Desk and implemented projects for women 14.1 No. of women’s desk 1,15014.2 No. of women served by the women’s desk 27,983

150


14.3 No. of projects implemented 1,09814.4 No. of women served by the project 28,085

15. Established Landowner’s Desk 15.1 No. of landowner’s desk 15.2 No. of landowners served

86 4,414

16. Granted Programang Agraryo Iskolar to deserving dependents of ARBs 16.1 No. of enrollees

3,448

D. Support to Operations 1. Engaged and attended the following summits: 3

1.1 National Summit on Poverty, Inequality and Social Reform organized by the Catholic Bishops Conference of the Philippines (CBCP)

1.2 National Secretariat for Social Change (NASSA) 1.3 Climate Change Congress of the Philippines (CCCP)

2. Conducted in-house study titled “Revisiting the Implementation of the Agribusiness Venture Arrangements (AVAs) between the ARBs and the Investors”

1

3. Completed Commissioned Research Study: An Analysis of the Process of the Design and Implementation of the 2009ARB Profiling under the ARB Carding and Identification (ID) System

1

4. Issued Memorandum Circulars for the smooth implementation of the CARP: 164.1 Joint DAR-DENR-LRA-NCIP Memorandum Circular No. 1, Series of

2011 – Creation of Joint Task Force which shall determine Policy Direction in Order to Address Jurisdictional and Operational Issues between DAR, DENR, LRA and NCIP over Agricultural, Public and/or Ancestral Lands

4.2 Memorandum Circular No. 2, Series of 2011 – Revised Rate of Fees and Charges 4.3 Joint DAR-LBP Memorandum Circular No. 3, Series of 2011 – Micro-

finance Capacity Development Program in Agrarian Reform Areas 4.4 Memorandum Circular No. 4, Series of 2011 – Implementing Guidelines

to Access Funds, Implement and Monitor Projects under the DAR-PBD Partnership-Support Fund

4.5 Joint DAR-DENR-LRA-NCIP Memorandum Circular No. 5, Series of 2011- Extension of Time for the DAR-DENR-LRA-NCIP Task Force to Formulate the Joint Administrative Order on Addressing Conflict Jurisdiction

4.6 Memorandum Circular No. 6, Series of 2011 – Clarificatory Guidelines on the Implementation of the Land Acquisition and Distribution Phasing Under R.A. No. 9700

4.7 Memorandum Circular No. 7, Series of 2011 – Adopting and Implementing the Right to Information with Respect to Quasi-Judicial and Disciplinary Functions of the DAR and Providing Guidelines Therefor

4.8 Memorandum Circular No. 8, Series of 2011 – Revised Guidelines and Procedures in the Delisting of ARCs, ARC Barangays and Organizations

4.9 Memorandum Circular No. 9, Series of 2011 – Creation of Task Force Problematic Lands Addressing Land Acquisition and Distribution (LAD) Concerns and Related Issues on CARP Implementation

151


4.10 Memorandum Circular No. 10, Series of 2011 – Transforming the Agribusiness Entrepreneurship Development Program (AREDP) Office to National ARCCESS Program Coordinating Office (NAPCO) and Installing ARCCESS Implementing Structure at All Levels

4.11 Memorandum Circular No. 11, Series of 2011 – Suspension of Certain Provisions of Administrative Order No. 6, Series of 2011 for the Purpose of Transitioning from the Old Cancellation Rules to the New One

4.12 Memorandum Circular No. 12, Series of 2011 – Case Control Number System on Cancellation of Cases

4.13 Memorandum Circular No. 13, Series of 2011 – Interim Guidelines Governing the Integration of ARCs Monitoring and Tracking System (ARCMTS) and ARC Level of Development Assessment (ALDA) in the DAR’s Planning, Monitoring and Evaluation (PME) System during the Transition Period

4.14 Memorandum Circular No. 14, Series of 2011 – Operating Guidelines on the Grant of National Government Assistance to LGUs (NGALGU) for Rural Infrastructure Development under the ARC Project II (ARCPII)

4.15 Memorandum Circular No. 15, Series of 2011 – Prohibition Against Signing Agrarian Related Contracts

4.16 Memorandum Circular No. 16, Series of 2011 – Amending Memorandum Circular No. 12, Series of 2011 Titled Case Control Number System for Cancellation of Cases

5. Issued Administrative Orders: 95.1 Administrative Order No. 1, Series of 2011 – Guidelines Governing

Gender Equality in the Implementation of Agrarian Reform Laws and Mainstreaming Gender and Development in the DAR

5.2 Administrative Order No. 2, Series of 2011 – Rules on the Conversion of Agricultural Lands for Government Housing Projects Intended for Armed Forces of the Philippines and Philippine National Police Personnel Pursuant to Office of the President Administrative Order No. 9, Series of 2011

5.3 Administrative Order No. 3, Series of 2011 – Revised Rules and Regulations Implementing Section 19 of R.A. No. 9700 (Jurisdiction and Referral Cases that are Agrarian in Nature)

5.4 Administrative Order No. 4, Series of 2011 – Amendment to Administrative Order No. 2, Series of 2009 on the Installation of ARB with Registered Certificate Landownership Award (CLOA)

5.5 Administrative Order No. 5, Series of 2011 – 2011 Rules on the Administration of Oaths in Pursuance of Section 50 of R.A. No. 6657 as Amended

5.6 Administrative Order No. 6, Series of 2011 – The 2011 Revised Rules and Procedures Governing the Cancellation of Emancipation Patents and Certificates of Landownership Awards (CLOAs) and Other Titles Issued Under Any Agrarian Reform Program

5.7 Administrative Order No. 7, Series of 2011 – Revised Rules and Procedures Governing the Acquisition and Distribution of Agricultural Lands under R.A. No. 6657 as Amended

5.8 Administrative Order No. 8, Series of 2011 – Rules for the Coverage of CAR-Covered Lands Subject to Unauthorized Transfers or Conveyances

152


5.9 Administrative Order No. 9, Series of 2011 – Rules for the Survey and/or Field Investigation of Landholdings Where the DAR and Land Bank of the Philippines are Denied Entry Thereto

6. Served walk-in Clients by the Public Assistance and Complaints Coordinating Unit (PACCU)

7,727

7. Facilitated the resolution of cases by the Quick Response Operation Units 7.1 No. of urgent cases 957.2 No. of flashpoints 14

Source: DAR Summary of Accomplishments, January to December 2011 8.6.2 DTI

Program/Project/Activity Target Accomplish-

ments Percent

A. Micro, Small and Medium Enterprises (MSMEs) 1. Investments generated (in million) P826.32 P1,070.87 130 2. Sales generated (in million) P1,564.18 P2,146.12 137 3. Jobs generated 45,828 56,137 122 4. Entrepreneurs developed 1,620 1,617 99.8 5. ARCs assisted 908 794 87 6. Non-ARCs assisted 130 188 145 7. Development of new MSMEs 7.1 MSMEs developed 7.2 FBs served 7.3 LOs served 7.4 ARCs served

680 10,399

48 341

1,123 18,154 130 153

165 175 271 45

8. Generation of Sales (in million) P40.56 P55.99 138 9. Assistance to MSMEs 9.1 MSMEs assisted 9.2 FBs served 9.3 LOs served 9.4 ARCs served 9.5 Monitored Sales Impact (in million)

2,003 49,175 133

605 P924.84

1,696 54,699 492

714 P1,440.94

85 111 370 118 156

B. Trainings and Seminars Conducted 1. Entrepreneurial Training 1.1 Trainings conducted 1.2 FBs served 1.3 LOs served 1.4 ARCs served

573

12,747 104 491

774

15,893 226 304

135 125 217 62

2. Skills Training 2.1 Trainings conducted 2.2 FBs served 2.3 LOs served 2.4 ARCs served

620

10,297 125 487

742

14,320 158 195

120 139 126 40

3. Productivity Improvement 3.1 Trainings conducted 3.2 FBs served 3.3 LOs served 3.4 ARCs served

265

5,617 69

229

283

6,821 67

129

107 121 97 56

C. Project Feasibility Studies 1. Number of Studies

153

Program/Project/Activity Target Accomplish-ments Percent

1.1 Studies completed 368 495 135 1.2 FBs served 11,385 30,996 272

1.3 LOs served 233 192 821.4 ARCs served 270 155 57

2. Technology Missions 2.1 Missions conducted 97 113 116 2.2 FBs served 1,300 1,587 122 2.3 LOs served 19 27 142

2.4 ARCs served 110 55 50D. Market and Development Activities

1. Market Matching 1.1 Matching conducted 1.2 FBs served 1.3 LOs served 1.4 ARCs served 1.5 Sales (cash and booked, in million)

2,193

40,130 133 519

P470.75

2,854

54,485 1,219

350 P551.19

130 136 917 67

1172. Selling Missions

2.1 Missions conducted 31 24 77 2.2 FBs served 593 383 65 2.3 LOs served 13 11 85 2.4 ARCs served 54 23 43 2.5 Sales (cash and booked, in million) P3.42 P2.70 79

3. Trade Fairs 3.1 Trade Fairs conducted 341 529 1553.2 FBs served 26,658 336,689 1,2633.3 LOs served 71 310 4373.4 ARCs served 497 363 73

3.5 Sales (cash and booked, in million) P67.63 P95.98 1424. Promo Collaterals 4.1 Promo conducted 297 431 145 4.2 FBs served 13,973 17,413 125 4.3 LOs served 53 1,087 2,051 4.4 ARCs served 348 153 44

E. Product Development Activities 1. Development activities done 327 498 1522. Products design developed 3. Prototype executed 4. Packaging and labels developed 5. FBs served 6. LOs served 7. ARCs served

565 549 344

12,679 132 364

1,014 1,000

858 13,959

338 159

179 182 249 110 256 44

F. Consultancy Services 1.1 Man-months extended 1.2 FBs served 1.3 LOs served 1.4 ARCs served

213 31,658

222 404

170 52,733

228 315

80 167 103 78

G. Number of CARP Personnel 135 113 84H. Number of Staff Development Activities

101

87

86

Source: DTI CARP Summary of Accomplishments, For the Year 2011

154

8.6.3 DOLE

Program/Project /Activity Accomplishments

Self-Reliant Organizations for CARP (SRO-CARP) No. of Trainings

No. of Participants

1. Organizational Development 1.1 Trainings Conducted 46 1,522

1.1.1 Region VI 18 597 1.1.2 Region X 5 200 1.1.3 Region XI 13 419 1.1.4 Region XIII 10 306 Trainings and seminars include, capability building on organizational development and management, enterprise/project and financial management and specific skills trainings such as abaca, nito, coconut midribs weaving, organic farming technologies, food lot technology, dried fish processing, etc.

2. Livelihood and Enterprise Development Name of Cooperative Region Project

2.1 San Rafael ARC MPC, Murcia, Negros Occidental

VI a. Bio-Intensive Gardening b. Organic Red Rice Production Demo

Farm c. Sugarcane Production

2.2 Bulanon Farmers ARB Cooperative, Sagay City

VI a. Basic Commodity and Agri-Inputs Store

b. Food Lot Module Technology Demo Farm

c. Dried Fish Processing/ Production and Iron Works

2.3 Umagos-Banglay ARC, Lagonglong, Misamis Oriental

X a. Banana Production and Trading b. Abaca, Nito, Coconut Mid-ribs and

Romblon Weaving Projects 2.4 Bread Muti-purpose Coop, Barangay

Darong, Sta. Cruz, Davao del Sur XI a. Coconut Wine and Coco-Vinegar

Production b. Vermi- composing c. Backyard organic vegetable

gardening 2.5 JORIFA and Sibulan Upland Farmers

Association XI a. Abaca Production

b. Native/Black Coffee Production 2.6 PASCOFBEC, Las Nieves, Agusan

del Norte XIII a. Consumers’ Store

b. Coconut Trading c. Coco-Rehab and Fertilizer

Distribution d. Post Harvest Facility e. Coco-Charcoal Production

Source: DOLE SRO-CARP CY 2011 Accomplishment Report

8.6.4 LRA

Program/Project/Activity Target Accomplish-

ments Percent

I. Registration and Titling 1. Emancipation Patent (EP) 1.1 Number of Titles 3,886 3,850 99

1.2 Number of Areas (has.)

3,695 3,681 99.6

155

Program/Project/Activity Target Accomplish-ments Percent

2. Certificate of Land Ownership 2.1 Number of Titles 32,307 30,497 94 2.2 Number of Areas (has.) 85,791 84,188 98 II. Patent Registration 1. Free Patent Registration 1.1 Number of Titles 64,682 64,682 100 1.2 Number of Areas (has.) 37,286 2. Free Patent Distribution 2.1 Number of Titles 80,848 71,212 88 2.2 Number of Areas (has.) 36,775 III. Other CARP Related Activities Accomplishments

A. Central Office No. of Titles No. of Hectares 1. DAR (Status Verification)

1.1 No. of Certificates Issued 2,345 9,958.33 1.2 Letters to RTDs 653 3,019.66 1.3 No. of Certified True Copies 217 720.45 1.4 Letter Returned to DAR 79 596.09

2. LBP (Status Verification) 2.1 No. of Certificates Issued 54 1,446.962.2 Letters to RTDs 54 3,454.81

3. Reconstitution of CARP Titles 3.1 No. of Reconstituted CARP Titles 165 3.2 No. of Letter Request to petitioner 40

B. Registry of Deeds 1. Segregation of Mother CLOA 20,950 28,751.85 2. Transfer Action (EP/CLOA) 795 704.38 3. Issuance of RP Titles 676 4. Deeds of Transfer 541 5. Voluntary Land Transfer 2,308 6. Deeds of Partition 4,269 7. No. of Certification Issued 95,518 8. No. of Certified True Copies 118,130 9. Cancellation of Outstanding Balance/

Amortization Mortgage 4,711

10. Verification/Research 11,221 11. Other Assistance to DAR and Farmer

Beneficiaries 49,377

Source: LRA CARP Accomplishment Report - January to December 2011

8.6.5 NIA

Particulars Accomplishments 1st Qtr. 2nd Qtr. 3rd Qtr. 4th Qtr. Total

A. Engineering Activities 1. No. of Projects 9 3 7 9 28 2. Area Accomplished (in has.) 655 225 589 562 2,031 3. Generated 71 0 485 136 692 4. Restored 584 225 104 426 1,339 5. No. of FB’s Benefited 1,642 492 539 270 2,943 B. Institutional Development Program 1. IA Organization 1.1 No. of Organization 2 2 15 7 26

156

Particulars Accomplishments

1st Qtr. 2nd Qtr. 3rd Qtr. 4th Qtr. Total 1.2 IA Strengthening - 55 21 - 76 1.3 IA Members Organization 200 110 1,153 386 1,849 1.4 IA Members Strengthening - 9,559 - 2,767 12,326

2. IA Development 2.1 No. of Batches 10 4 3 18 36 2.2 No. of Participants 205 111 126 577 1,019

3. Staff Development Training 3.1 No. of Batches 6 8 12 14 40

3.2 No. of Participants 82 177 316 372 947Source: NIA Executive Summary Report, Accomplishment : CY 2011

8.6.6 DENR

Particulars Accomplishments 1st Qtr. 2nd Qtr. 3rd Qtr. 4th Qtr. Total

1. Inspection, Verification and Approval of Survey

1.1 No. of surveys 1.2 Areas covered (has.)

11,213 18,809

11,033 24,650

17,485 21,588

23,812 45,338

63,543 110,385

2. Public Land Survey (has.) 5,124 5,918 20,409 30,965 62,4163. Patent Processing and Issuance 3.1 No. of Patents 6,971 25,524 23,583 59,553 115,631 3.2 Areas covered (has.) 4,821 18,989 19,549 48,787 92,146Source: Status of DENR-CARP Activities as of December, CY 2011

8.6.7 LBP

Program Type

Accomplishments PD27/

EO 228 RA 6657/ EO 229 Total

Beginning Inventory No. of Claims 20 5,541 5,561 Area (Has.) 241.50 82,426.25 82,667.75 Recipients from DAR No. of Claims 446 1,484 1,930 Area (Has.) 1,202.23 16,754.93 17,957.16 Total Claims on Hand No. of Claims 466 7,025 7,491 Area (Has.) 1,443.73 99,181.18 100,624.91 Returns to DAR No. of Claims Area (Has.)

22

189.67

1,184

13,128.50

1,206

13,318.17 Excluded Portion Area (Has.)

17

73

90

Suspended ARMM Claims No. of Claims Area (Has.)

7

113.64

4,345

68,573.89

4,352

68,687.53Net Processable Claims No. of Claims Area (Has.)

437

1,123.24

1,496

17,405.76

1,933

18,529.00Approved for Payment with COD No. of Claims 429 1,124 1,153 Area (Has.) 930.53 12,883.30 13,813.83

157

Program Type Accomplishments

PD27/ EO 228

RA 6657/ EO 229 Total

No. of LOs 109 639 749 No. of FBs 1,068 9,603 10,671 Land Value (P Mn) 72.20 1,260.55 1,332.75Ending Inventory No. of Claims Area (Has.)

8

192.71

372

4,522.46

380

4,715.17 Source: LBP Summary of CARP Accomplishment, YTD, as of December 2011

8.6.8 DPWH

Particulars No. of Projects

Length (in kms.)

Cost (in million pesos)

Roads Construction 1,727 2,987.43 2,424.17 Improvement/Rehabilitation 2,272 5,036.25 2,715.57 Multipurpose Pavement/ Concreting 1,344 268.41 504.66

Small Water Impounding Projects 8 0.00 15.58Completed 5,350 8,292.09 5,658.99Pre-Construction Activities 1 0.00 1.00 Total 5,351 8,292.09 5,659.99Difference between totals and sum of components is due to rounding off.Source: Summary of DPWH CARP Projects under CY 1988-2010 Programs , as of December 21, 2011

IX. COMMON AND SIGNIFICANT

AUDIT OBSERVATIONS AND RECOMMENDATIONS

158

COMMON AND SIGNIFICANT AUDIT OBSERVATIONS AND RECOMMENDATIONS

9.1 Overview

Pursuant to Section 2, Article IX-D of the Philippine Constitution, the Commission on Audit regularly conducts audit of 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 Reports (AARs) and in the Management Letters (MLs) 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 audited agency in conformity with generally accepted accounting principles (GAAP). This is equivalent to a 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 qualifications. 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 audited agency’s financial position, results of operations and cash flows in conformity with the 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 case when: (1) material scope limitation exists, or (2) significant uncertainty exists.

9.3 Results of Audit

As reflected on the transmitted AARS for CY 2011 of 222 NGAs the audit opinions are broken down as follows: 44 unqualified/clean or 20 percent, 59 qualified or 72 per cent, 17 adverse or 8 per cent, and 2 disclaimers.

159

The audit opinions excluded audited agencies with AARs not yet transmitted as of 31 August 2012 and/or only management letters were issued. Presented in the graph below is the Summary of Audit Opinions for CY 2011.

Summary of Audit Opinions Calendar Year 2011

0

20

40

60

80

100

120

140

160

2011

UnqualifiedQualifiedAdverseDisclaimer

Forty - four agencies were given unqualified or clean audit opinion on

the financial statements, namely:

1. Office of the Vice-President 2. Senate Electoral Tribunal 3. House of Representatives Electoral Tribunal 4. Cotton Development Administration 5. Government Procurement Policy Board 6. National Book Development Board 7. Mariano Marcos State University 8. Apayao State University 9. Benguet State University 10. Ifugao State University 11. Mountain Province State Polytechnic College 12. Don Honorio Ventura Technological State University 13. Tarlac College of Agriculture 14. Tarlac State University 15. Cavite State University 16. Southern Luzon State University 17. Mindoro State College of Agriculture and Technology 18. Occidental Mindoro State College 19. Catanduanes State Colleges 20. Guimaras State College 21. Northern Negros State College of Science and Technology

160

22. University of Antique 23. Southern Leyte State University 24. Camiguin Polytechnic State College 25. Mindanao University of Science and Technology 26. Davao Oriental State College of Science and Technology 27. Mindanao State University – General Santos City 28. Adiong Memorial Polytechnic State College 29. Philippine Visiting Forces Agreement Commission 30. Food and Nutrition Research Institute 31. Metal Industry Research and Development Center 32. National Academy of Science and Technology 33. Philippine Council for Health Research and Development 34. Philippine Trade Training Center 35. Intellectual Property Office of the Philippines 36. Office of the Transport Cooperatives 37. Legislative Executive Development Advisory Council 38. Philippine National Volunteer Service Coordinating Agency 39. Tariff Commission 40. Anti-Money Laundering Council 41. Film Development Council of the Philippines 42. ARMM Social Fund 43. Court of Appeals 44. Sandiganbayan

Adverse audit opinions were issued to 17 NGAs such as Fertilizer and Pesticide Authority, National Agricultural and Fishery Council, National Meat Inspection Services, Philippine Center for Post Harvest and Modernization (formerly BUPRE), Central Luzon State University, Philippine Merchant Marine Academy, Cotabato Foundation College of Science and Technology, MSU - Tawi-Tawi College of Technology and Oceanography, Tawi-Tawi Regional Technological College, National Labor Relations Commission, Department of National Defense – OSEC, Philippine Atmospheric, Geophysical and Astronomical Services Administration, Philippine Council for Agriculture, Aquatic and Natural Resources Research and Development, Philippine Council for Industry, Energy and Emerging Technology Research and Development, Philippine Coast Guard, Toll Regulatory Board and Manila Metropolitan Development Authority.

The common reasons for the adverse opinions are the following

audit observations: 1. Material overstatement/understatement of cash balances and unreconciled

discrepancies in book and bank balances due to failure of the agencies to prepare bank reconciliation statements (BRS) which render the amount reflected in the balance sheet unreliable;

2. Reported balances of Receivable accounts were doubtful due to unliquidated, cash advances, unreconciled General Ledger and Subsidiary Ledger balances, erroneous recording of transactions, absence of supporting documents and schedules, among others;

161

3. Unreliable Inventory balances due to incomplete/non-recording of procurements and issuances, non-preparation of Report of Supplies and Materials Issued (RSMI), unreconciled Subsidiary Ledgers and stock cards, and no physical inventory;

4. Material overstatement/understatement of Property, Plant and Equipment 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.

Two NGAs, namely, Siquijor State College and Eastern Visayas State University, were issued with a disclaimer of opinion due to material scope limitation on certain audit areas which prevented the audit teams to determine the correctness and validity of the financial data. Details of the Summary of Audit Opinions is shown in Annex B.

9.4 Consolidated Common Audit Observations and Recommendations from the

Annual Audit Reports for National Government Agencies (NGAs) for Calendar Year 2011

9.4.1 Cash

The audit of the cash accounts in the books of National Government Agencies (NGAs) disclosed non - compliance with existing laws, rules and regulations as well as deviations from required accounting procedures as follows:

9.4.1.1 Unreconciled differences between the book and bank balances figures were reported from 72 audited agencies amounting to

P 2.15 billion affecting the reliability of the cash account balance. Contributory to this finding, is the non-submission or delayed preparation of the bank reconciliation statements (BRS) of said agencies.

9.4.1.2 Cash collected by collecting/accountable officers totalling P 89.62

million in 28 NGAs was not remitted/deposited intact within the prescribed time hence, exposing the assets to risk of misuse and loss.

162

9.4.1.3 Unused and/or dormant cash balances of 59 NGAs amounting to Php 949.29 million were not remitted to the Bureau of Treasury (BTr) resulting in huge balances of idle and unutilized funds in Authorized Government Depository Banks (AGDBs) which should have been used by the National Government. 9.4.1.4 Cash advances issued to Cash-Disbursing Officers for payroll fund

or petty cash fund of 92 audited agencies totaling P1.22 billion remained unliquidated, for 30 days up to over 3 years, due to failure to observe strictly Sections 4.1.2 and 5.8 of COA Circular

No. 97-02 and Section 89, P.D. No. 1445, opening possible risks of misuse or malversation.

9.4.1.5 Cash shortages were incurred in nine audited agencies amounting to P9.64 million due to lapses/weaknesses in internal control on collection. 9.4.1.6 Under assessment/collection of revenues and custom duties in 23 NGAs totaling P389.13 million resulted in collection inefficiency and lesser funds to be used for the country’s primordial programs necessary for economic stability and sustainability.

9.4.1.7 Non-existent cash/investments were reported in three NGAs totalling P35.94 million since these assets were not substantiated. 9.4.1.8 Bank confirmations disclosed unrecorded bank accounts in nine audited agencies amounting to P363.19 million.

9.4.1.9 Erroneous recording of cash transactions in 17 NGAs resulted in the

understatement/overstatement of the Cash account balances.

Recommendations

9.4.1.10 Prepare the 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 the errors, if any, to reflect the correct balance of the cash account in the financial statements. 9.4.1.11 Verify and analyze 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.

9.4.1.12 Closely monitor and supervise the prompt remittance of

collections in consonance with Section 69, P.D. No. 1445 to safeguard government funds from misappropriation, loss or misuse. Ensure collections are deposited intact with authorized government depository bank as prescribed in the Manual on the New Government Accounting System (MNGAS).

163

9.4.1.13 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 Executive Order No. 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 Bureau of Internal Revenue, they should monitor compliance of their Collecting Officers on remitting their collections intact and regularly as required under Section 21, Volume II of the MNGAS for National Government Agencies (NGAs).

9.4.1.14 Return to the source agency the unused funds for the completed

projects, pursuant to COA Circular No. 94-013 dated December 13, 1994 as agreed in the Memorandum of Agreement (MOA).

9.4.2 Receivables

9 4.2.1 Cash advances to Officers and Employees of 208 audited agencies for travel, special time bound undertakings and other activities totaling P1.44 billion were not liquidated within the specified period and remained unliquidated due to the non-implementation of the prescribed controls on the granting and liquidation of cash advances.

9.4.2.2 Funds transferred by 131 NGAs to other NGAs, Local Government Units

(LGUs), Government - Owned and Controlled Corporations (GOCCs) and Non-Governmental Organizations (NGOs)/ People’s Organizations (POs) for the implementation of projects with an aggregate amount of P19.30 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.

9.4.2.1 Dormant receivables were reported in 70 NGAs amounting to P2.33 billion primarily due to insufficient or lack of supporting documents leading to a remote possibility of its collection.

9.4.2.2 Unrecorded receivables of 11 NGAs amounting to P118.92 million resulted to

an understatement of the agencies’ receivable accounts balances.

9.4.2.3 Two audited agencies failed to recoup their advances to contractors totaling P1.46 million which is disadvantageous to the government.

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Recommendations 9.4.2.3 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. No. 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.

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.

9.4.2.4 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.

9.4.2.5 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.

9.4.2.6 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;

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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 audited agencies from the Department of Budget and Management (DBM)-Procurement Service (PS) defeated the good intention to facilitate the procurement process and resulted to the accumulation of undelivered items to P46.09 million.

9.4.3.2 Unreconciled difference totaling P3.65 billion between the Accounting

and Property records/ inventory reports of 101 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 the General Ledger (GL) and

Subsidiary Ledgers (SLs) were reported for 32 NGAs amounting to P2.97 billion hence, accuracy of the Inventory account balances cannot be determined.

9.4.3.4 Overstatement of P104.97 million of 31 agencies mainly due to the

non-submission of the Report of Supplies and Material Issued (RSMI) by the supply officer to the Accounting Unit.

9.4.3.5 Inventory accounts balances of 62 agencies amounting to P1.80

billion were doubtful due to failure of these agencies to conduct physical inventory/count of supplies and materials.

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9.4.3.6 Nineteen audited agencies did not procure their supplies amounting to

P76.92 million from the Department of Budget and Management (DBM) - Procurement Service (PS) contrary to the provisions of RA No. 9184, thus, depriving the government of additional revenues as well as savings.

9.4.3.7 Inventory account balances of 14 NGAs were understated by P15.67

million due to outright recording of purchases for supplies and materials to expense accounts.

Recommendations

9.4.3.8 Coordinate with the DBM-PS regarding the settlement of undelivered

supplies.

9.4.3.9 Require the Accountant and Property/Supply Officer 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 Report of Supplies

and Materials Issued (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 Accountant to maintain the Supplies Ledger Card (SLC)

in accordance with Sections 12, Volume II of the MNGAS, undertake regular reconciliation of the SLC with the GL and prepare the necessary adjustments.

9.4.3.13 Adhere to the provisions of Administrative Order No. 17 to use the Procurement Service (PS) in the procurement activities of the NGAs to achieve transparency, efficiency and economy in the procurement process.

Comply with Section 53(e) of the Implementing Rules and Regulations of Republic Act No. 9184 which provides that agency’s

procurement of commonly used goods shall be through the DBM - Procurement Service.

9.4.3.14 Record all purchases of supplies and materials following the perpetual inventory record and maintain supplies ledger cards for each item in accordance to Section 43 of MNGAS, Volume I.

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9.4.4 Property, Plant and Equipment

9.4.4.1 Unrecorded Property, Plant and Equipment (PPE) totaling P4.97 billion was reported by auditors for 71 NGAs due to lack of appropriate supporting documents and/or basis of the cost, in violation of Section 63 of Presidential Decree (PD) No. 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 P466.86 million

remained in the books of 132 audited agencies in violation of Section 79 of PD 1445 and Section 143 of the MNGAS, Volume III requiring the disposal of unserviceable properties.

9.4.4.3 Idle/unutilized properties and equipment were reported from 26 NGAs

totalling P646.46 million which defeat the purpose for which these properties were acquired and exposed the government to the possibility of incurring losses due to deterioration/destruction or misuse of the properties.

9.4.4.4 Records of Accounting and Property Units of 179 audited agencies are

reported not reconciled at yearend due to failure to maintain Property, Plant and Equipment (PPE) ledger and property cards, failure to conduct physical count, failure to transfer completed projects from Construction-in-Progress to PPE and the failure of the Accounting Section to maintain Property, Plant and Equipment Ledger Cards in violation of Section 490 of the GAAM Volume I, among others. These deviations mainly contributed to the unreconciled PPE account balances between the accounting and property records.

9.4.4.5 At least 13 NGAs failed to recognize the depreciation of the PPEs by

recording the monthly depreciation expense at the end of each month contrary to Sections 67-68, Volume I, MNGAS thereby, affecting accuracy of the PPE and expense accounts balances.

9.4.4.6 Fifty-six audited agencies failed to insure their equipment, buildings

and other structures amounting to P3.54 billion with the Government Service Insurance System 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 the agencies’ assets to unnecessary losses in case of fire, calamities and other fortuitous events.

9.4.4.7 Validity, existence and correctness of the PPE balances totalling

P48.75 billion could not be ascertained due to failure of 206 NGAs to conduct the actual physical inventory of the fixed assets.

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Recommendations

9.4.4.8 Require the Property Officer to submit to the Accounting Unit the necessary supporting documents for the recording of the PPE in the books of accounts.

9.4.4.9 Require the Accountant to reclassify the unserviceable properties to

Other Assets account, based on the list submitted by the Property Officer, prior to the disposal of said properties, in accordance with Section 143, MNGAS, Volume III and management to immediately dispose all unserviceable properties in accordance with Section 79 of PD1445. 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.

9.4.4.10 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.

9.4.4.11 Require the Accountant to prepare and maintain Property, Plant and

Equipment 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.

9.4.4.12 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.

9.4.4.13 Require the Management to insure all its insurable physical assets with

the General Insurance Fund of the Government Service Insurance System (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.

9.4.4.14 Require the Management to undertake various remedial actions to

ensure optimum utilization of the idle/unutilized PPE and ensure proper maintenance of these assets to avoid wastage of government resources.

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9.4.5 Liabilities

9.4.5.1 The recorded liabilities totaling P9.94 billion of 22 audited 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 seven agencies totaled P16.62 million.

9.4.5.3 Forty-seven NGAs were reported to have an unbooked or erroneously

recorded payables totaling P2.13 billion which contributed to the understatement/overstatement of the Liabilities account balances.

9.4.5.4 Seven audited agencies showed unremitted balances to the Bureau of

Internal Revenue (BIR) for taxes withheld and other trust liabilities for remittance to Government Service Insurance System (GSIS), Home Development Mutual Fund (HDMF) and Philippine Health Insurance Corporation (Phil Health).

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:

9.4.5.5 Review all outstanding payables and revert those which are

undocumented/not supported with valid claims and those aged two years or more.

9.4.5.6 Strictly enforce the submission of supporting documents prior to the

recording of transactions to minimize payables with no claimants.

9.4.5.7 Prepare journal entries to correct the unrecorded payables and adjust errors in recording the fund transferred to reflect the correct balances.

9.4.5.8 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.

9.4.5.9 Adhere to the detailed procedures in the COA Cir. 97-001 dated Feb.

5, 1997 for dormant accounts.

9.4.5.10 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.

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9.4.6 Revenues

9.4.6.1 Twelve audited agencies disclosed failure to accrue income and 13

NGAs showed unbooked/erroneously recording of income totaling P60.61 million and P296.95 million, respectively resulting to the understatement/overstatement of the Income account balances.

9.4.6.2 Uncollected income of ten NGAs amounting to P124.11 million was reported such as the (a) current and prior year’s rental fees from Fishpond Lease Agreement (FLA) required in the Fisheries Administrative Order (FAO) No. 197, (b) mandated one percent share on the gross sales of betting tickets in horse races, (c) dividend/interest earnings of investments in banks, (d) fees due from electric cooperatives including penalties, (d) penalties collected for late payment, and (e) collections made thru interbranch bank deposits representing deposits made by applicants for payment of fees still treated as reconciling items and no accounting entries were made to record collections.

9.4.6.3 Collections of 14 NGAs, estimated to reach P74.18 million, were not

remitted or deposited intact daily to the National Treasury, 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.

Recommendations

9.4.6.4 Instruct the Accountants to: (1) effect the recording of unrecorded

collections, (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.

9.4.6.5 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.

9.4.6.6 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.

9.4.7 Expenses

9.4.7.1 Unauthorized/Illegal/Irregular expenses of about P267.40 million were incurred for Collective Negotiation Agreement (CNA), incentives, additional bonuses, Representation Allowance and Transportation Allowance (RATA) and other allowances.

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a. CNA estimated at P141.905 million were granted to agency officials and

employees including contractual employees in 30 NGAs. The Department of Agrarian Reform (DAR Region XI) registered the highest CNA paid out amounting to P9.37 million. 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. 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.

c. Other unauthorized/illegal/irregular expenditures incurred by 40

agencies in estimated amount of P39.96 million include: a) traveling expenses collected were excessive and had no adequate supporting documents, b) Implementation of project for the Construction/Rehabilitation of MPB for Package 1-D, a) Construction of MPB, Bago Aplaya and c) Rehab of MPB Ma-a, Davao City amounted to P1.94 million was found irregular due to beneficiaries of the said projects were cooperative and private corporation in violation Section 4(2) of PD 1445.

9.4.7.2 Expenses amounting to approximately P43.96 million were incurred without

approved budget while excessive expenditures for 19 NGAs amounting to P 680.55 million. Included therein are the following: a) Funds received from Philippine Gaming Corporation (PAGCOR) were used for advertising and media promotion activities by Department of Public Works and Highways (DPWH) amounting to P30 million; b) meals and snacks were served during meetings and in-house seminars that caused additional unnecessary expenses amounting P5.87 million by Region III, among others.

9.4.7.3 Government fund amounting to P12.83 million was used for

activities/programs different from the fund’s intended purpose.

a. The school used its Maintenance and Other Operating Expenses (MOOE) fund for 2011 to purchase supplementary reading and reference materials (SRMs) contrary to Department of Education (DepEd)-Department of Budget and Management (DBM) Joint Circular No. 2004-1. Likewise, the requirements in its purchase set forth under Department of Education Order (DO) Nos. 48, S. 2011 and 112, S. 2009 were not strictly complied totaling P7.86 million for purposes other than for which they were appropriated contrary to Section 37 of Presidential Decree No. 1177 resulting in the misuse of government funds as defined under Section 87 of Presidential Decree No. 1445.

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b. The Special Trust Fund (STF) was used to the Program on Awards and

Incentives for Service Excellence (PRAISE) Incentive contrary to Commission on Audit (COA) Circular No. 2000-002, Section 4(d) of RA No. 8292 and RA No. 6758 as well as Civil Service Commission (CSC) Resolution No. 010112, resulting in audit disallowance by Northwest Samar State University amounting to P4.96 million.

9.4.7.4 Expenses amounting to approximately P485.60 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 Executive Order No. 298 dated March 23, 2004; c) payments to consultants which were not supported with proofs of actual service rendered; d) grants of Collective Negotiation Agreement (CNA) were not supported with documentations as required under Department of Budget and Management (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:

9.4.7.2 Require the agency heads to explain in writing and submit legal basis that

would justify the granting of Collective Negotiation Agreement (CNA), incentives, representation allowance and transportation allowance (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, Presidential Decree No. 1597, Section 4 of Presidential Decree No. 1445 and other issuances relevant to said transactions.

9.4.7.3 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 Presidential Decree No. 1177, Section 20 of Republic Act No. 992, and other related issuances.

9.4.7.4 Ensure that overspending of allocated funds is avoided through realistic

planning/programming; otherwise realignment should be properly made, if warranted. Make representations with the Department of Budget and Management (DBM) for the issuance of the Special Allotment Release Order (SARO), for authorized overdrafts, to adjust the same.

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9.4.7.5 Secure the operational efficiency of agency’s assets in order to attain the desired goals/outputs of each program or project.

9.4.7.6 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 Department of Budget and Management (DBM) Circular No. 2007-01 on the responsibility and personal liability of agency heads. Require the refund of the amounts illegally received.

9.4.7.7 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.

9.4.7.8 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.

9.4.7.9 Direct the Accountant to adhere strictly to the provisions of Section 4 (6) of

Presidential Decree No. 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, Department of Budget and Management Circular No. 2006-001 dated February 1, 2006, Department of Budget and Management 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 12 agencies were submitted beyond the reglementary period as required under Section 7.2.1(a) of Commission on Audit (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 nine 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 Disbursement vouchers amounting to P40.96 million of 30 agencies were

paid even without complete supporting documents and/or approval/certifications by proper officials contrary to the provisions of Section 4 of Presidential Decree No. 1445.

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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 the Commission on Audit as required under Sections 100 and 122 of Presidential Decree No. 1445 and Section 7.2.1(a) of COA Circular No. 2009-006 dated September 15, 2009. Enjoin the 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 supporting documents 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 supporting documents 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 P4.75 billion reported by 31 audited 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.

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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 Annual Procurement Plan (APP) and observe Competitive Bidding and/or Alternative Modes of Procurement in accordance with the provisions of Republic Act No. 9184 and its implementing rules and regulations (IRR).

9.5 Significant Audit Observations and Recommendations Presented below are the significant audit observations and recommendations on the audit of national government agencies submitted by auditors of the National Government Sector and Regional Offices of this Commission.

AUDIT OBSERVATIONS

9.5.1 Games and Amusement Board (GAB)/Philippine Racing Commission (PhilRaCom) PhilRaCom failed to enforce timely collection of the mandated one per cent share on the gross sales of betting tickets in horse races conducted by the Philippine Racing Club, Inc. (PRCI) and Manila Jockey Club, Inc. (MJCI) hence, the aggregate amount of P29,115,017.22 remained uncollected as of December 31,2011.

9.5.2 Bureau of Customs (BOC) 9.5.2.1 BOC-OCOM Illegal drawback of custom duties and taxes approved by BOC amounting to P26,072,076,273.68 from CYs 2006 to 2011 contrary to the provisions of the Tariff and Customs Code of the Philippines. 9.5.2.2 Port of Manila (BoC-POM) (a) Matured bonds/outstanding accounts of surety companies relative to warehousing in the total amount of P4,633,233,743.28 for CY 2011 and prior years have not been collected/

RECOMMENDATIONS Establish a stricter collection policy so that all revenues are collected in full when due and conduct a legal study with the assistance of the Office of the Solicitor General on the imposition of a penalty for every day of delay in the remittance or possible refusal to grant a racing permit. BOC Commissioner to: (a) Collect the customs duties and taxes Of P26,072,076,273.68; (b) cancel the TCCs revalidated in August 2006 in the amount of P992,617,575.46; (c) adjust the unaccounted utilization of P1,902,363,177.08; and (d) require the submission of the dockers corresponding to the TCCs issued by OSS-DOF in the amount of P436,996,426.84. Consider the possibility of requiring importers to pay immediately the customs duties and taxes, subject to refund if imported articles were used in the production of export articles/goods, instead of the present practice of accepting bonds which was proven not to be a sufficient

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AUDIT OBSERVATIONS settled, which is an indication of lapses in the enforcement of existing operational procedures to collect/settle such matured bonds. Of this amount, P718,901,439.50 refers to 2011 transactions. (b) A total of 1,489 container vans were not confirmed as received by the Port of Batangas and did not reach its final destination at the Port of Batangas with invoice value of S7,776,390.33 or P339,124,957.42. This resulted due to the failure of POM officials and employees to implement the proper operational procedures for transhipment and security measures instituted by the Bureau of Customs such as the mandatory x-ray scanning, underguarding of the shipments until receipted by the Port of Destination in case of manual processing and payment of duties and taxes at the Port of Discharge in case of e2m processing and disapproval of the Transhipment Permit in case where the registered address of the consignee is nearer the Port of Discharge. This resulted in the loss of revenue in the form of duties and taxes. 9.5.2.3 Manila International Container Port (BoC-MICP)

(a) Based on the List of Surety Companies with Outstanding Accounts as of December 31, 2011, 44 surety companies have outstanding accounts totalling P1,198,653,525.03. Of this amount,

RECOMMENDATIONS surety to various obligations of the importer or principal. Hold all personnel involved in the processing of transshipment of the missing container vans responsible for the loss of revenues; file criminal and administrative charges against them. Intensify collection of all outstanding accounts of concerned surety companies and importers; submit to COA, a report on the receivables collected.

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AUDIT OBSERVATIONS

P254,395,327.23 pertain to CYs 2000 to 2011 transactions, while the rest representing 79 percent were outstanding accounts of 1999 and prior years. According to the Chief of Bonds Division, the 79 percent accounts are no longer moving and suggested to be recommended for write-off. (2) Eight hundred seventy containers for transshipment, with an estimated duties and taxes of S7,352,627.51 and P341,752,699.90, respectively were not confirmed as received by the Port of Batangas. While out of the 222 manually processed transhipments, 162 container vans were also not confirmed as received by the Port of Batangas. This indicated failure on the part of concerned MICP officials and employees to implement the proper procedures and security measures on transhipment instituted by the Bureau of Customs such as the applicable provision of the TCCP, CMO Nos. 14-2011, 9-2011 and 43-2010, that have resulted in the loss of revenue in the form of uncollected customs duties and taxes of at least P342 million for transhipments processed under the e2m alone and an undetermined amount for the a62 container vans manually processed. (3) Excise Tax was misapplied to custom duties and taxes amounting to P8,345,184.40 since this excise tax was not paid at the Bureau of Customs and therefore not a duty drawback. The total amount of duties and taxes of

RECOMMENDATIONS

Hold all personnel involved in the processing of transshipments of the unaccounted containers liable through their payment of the duties and taxes due to the National Government; charge them criminally and administratively; implement Section 3.1.1.6 of CMO 43-2010 for all transit shipments, whether under manual or electronic to mobile customs system processing; explain why the 5,813 declaration, with duties and taxes due of P8,231,867,748.09 were allowed to be transshipped to the nearby port.

Submit the original copy of Bill of Lading, supplier’s commercial Invoice and Packing List; collect the amount of P8,345,184.40 from the importers otherwise, customs personnel, who approved the transactions, shall pay the amount.

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AUDIT OBSERVATIONS P11,008,634.00 should have been collected by the MICP. 9.5.2.3 Bureau of Customs –Ninoy Aquino International Airport (BoC-NAIA) (1) Due and Demandable Bonds totaling P66,842,444.50 which pertains to prior years transactions and expired since 1973-2005 remained outstanding as of December 31, 2011. (2) There were unaccounted/missing jewelry, watches and Philippine currency, and other held baggage receipt (HBR) with some articles of undetermined amount. The HBRs are high value goods that are supposed to have been transferred from the In-Bond Section to the Vault of Collection Division. Out of the 15 HBR forfeited/seized, only six were inventoried and nine are unaccounted/missing. 9.5.3 Veterans Memorial Medical Center (VMMC) Delayed implementation of VMMC projects for “Renovation of Out Patient Department and Dialysis Center” with allocated Capital Outlay of P53,000,000.00 for CY 2011 deprived the patients of the use of the equipment and facilities for hospitalization and medical care and treatment.

RECOMMENDATIONS Institute measures to intensify the collections of all outstanding bonds of surety companies; ensure that no surety company shall be given accreditation until they settle their obligations with the BoC. Submit held baggage receipt (HBR) for each seizure or confiscation made, regardless of the articles and the amounts involved, within 24 hours upon seizure; provide for a safe bodega to deter loss, pilferage or theft of the valuable cargoes; require proper turn-over of accountability between the outgoing and incoming responsible officials or AOs; conduct an investigation on the alleged missing jewelries and hold liable those responsible for the loss of government property pursuant to Section 105, PD 1445. Plan carefully all activities and review prior year’s accomplishments before setting its performance measures and targets to ensure the attainment of the agency’s goals and objectives.

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AUDIT OBSERVATIONS 9.5.4 Department of Energy (DOE) (1) Based on the list provided by the LTO and LTFRB, out of the estimated 220,000 Public Transport Assistance Program (PTAP) beneficiaries, only 156,514 PTAP cards or 71.1 percent were generated/printed; out of the printed PTAP cards, only 90,259 or 57.67 percent were loaded with cash value of P1,050 each, as of December 31, 2011, due to lack of verified and validated final list of beneficiaries, disinterest and reluctance of some driver beneficiaries to stop plying their routes just to claim the cards and their inability to produce the required documents. (2) The distribution of the five million Compact Fluorescent Lamps (CFLs) procured under Lot 1 of Component 1.2 - National Residential Lighting Program of the Philippine Energy Efficiency Project (PEEP) at a total cost of P171,593,960.00, programmed to be distributed within a period of three months as per contract to GRM International Inc. (GRM) dated September 9, 2009, was not yet completed as at year-end despite lapse of two years and three months with 359,711 pieces costing P13.6 million remaining undelivered as at January 12, 2012. Further, the 2,533,705 Incandescent Bulbs (IBs) stored at GRMs warehouse for disposal plus an undetermined number with the Electric Cooperatives (ECs) in Mindanao remained undisposed as at year-end.

RECOMMENDATIONS Request a report from the LTO/LTFRB Regional Offices citing the factors/ reasons for the non-availment of the beneficiaries in some regions that contributed to the very low distribution rate to enable the DOE to come up with remedial measures to address the constraints for better performance; in coordination with LTO/LTFRB, maintain an updated database of the PUJ beneficiaries who have complied with the required annual vehicle registration to assure that in the succeeding round of PTAP assistance, all the PTAP cards to be loaded with the cash value are valid. Ensure that the causes of the delay of project implementation of Lot 1 are addressed by the PEEP officials for the effective implementation of Lot 2 involving 3,600,000 CFLs for distribution up to 31 March 2013 and extend assistance to GRM and concerned ECs in the disposal of the IBs.

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AUDIT OBSERVATIONS 9.5.5 Philippine Air Force (PAF) Out of the total P12.3 billion cash allocation received by the Philippine Air Force from the Department of Budget and Management (DBM) and from the AFP General Headquarters (GHQ) for the year 2011, only P10.7 billion was utilized due to the delay in the downloading of projects to procurement centers and in the conduct of bidding and procurement activities thus, P1.6 billion or 13.17 percent intended for various programs/ activities was reverted back to the National Treasury. 9.5.6 Industrial Technology Development Institute (ITDI) Financial resources of P36,110,010.00 could have been saved and utilized for other research and development projects had the agency limited its activities to the implementation of projects that are aligned with its mandated functions of research and development, transfer of technology and technical services, among others. The production and distribution of ovil larvicidal trap kits are not among the mandated functions of the agency. 9.5.7 Science and Technology Information Institute (STII) Appropriation in the amount of P7,000,000.00 released under Agency Budget Matrix No. BMB 11-005015 dated February 3, 2011 for the project “Rehabilitation of STII Building (electrical and cable system) was not utilized due to failure to implement the project during the year.

RECOMMENDATIONS Streamline the agency’s procurement procedures; provide specific timeline in processing of claims to maximize utilization of funds. Limit the activities to the agency’s mandated functions as identified in the OPIF and focus more on the monitoring and documentation of results from the users of the technology to determine success or failures which would help management in further improving the technology. Maximize the use of the fund appropriated for the project and make sure that it is utilized for the intended purpose.

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AUDIT OBSERVATIONS 9.5.8 Metro Manila Development Authority (MMDA) The agency, in line with its sanitation program, procured between 2003 and 2009 a total of 1,040 units of male urinals costing P26.25 million of which only 477 units were installed but were not also properly maintained. The balance of 563 units costing P12.18 million remained uninstalled and improperly stored, some of which are already dilapidated, being exposed to the elements, thereby, defeating the objective of the program and resulting in wastage of government funds. Mobilization fee amounting to P10,522,582.00 paid to ITP Construction, Inc. for a project that was not implemented has not been collected from the contractor and remained outstanding for over eight (8) years resulting in loss/wastage of government resources. 9.5.9 Office of Civil Defense (OCD) The Joint Venture of Joavi Philippines Inc., Talon Security Consulting & Trade Ltd and Aquasports Boats & Yachts Co., Ltd. failed to deliver within the scheduled timeline of September 30, 2011 the 52 units of Rigid Hull Inflatable Boats (RHIBs),as stipulated in their contract, but management only took action to terminate the contract per Notice of Termination issued dated January 12, 2012, contrary to the provisions of RA No. 9184. Such failure deprived the beneficiary municipalities on the use of the same for rescue and relief operations in times of calamities.

RECOMMENDATIONS Determine the proper and immediate utilization of the remaining urinals. In the meantime, store/keep them in a covered place to prevent them from further deterioration/corrosion; observe prudence in the exercise of the agency’s function and stop the practice of procuring items in excess of what is needed; undertake proper maintenance and cleanliness of installed urinals to avoid the presence of foul/stinky odor. Submit the status report on management action pertaining to the collection of P10,522,582.00 from ITP Construction, Inc. and institute appropriate legal action against the contractor. Forfeit the performance security posted by the contractor; enter into a new contract for the delivery of 52 units of RHIBs through the applicable mode of procurement provided under RA No. 9184; and blacklist the Joint Venture of Joavi Philippines Inc., ltd., in future public biddings to be undertaken by the office.

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AUDIT OBSERVATIONS 9.5.10 Department of Social Works and Development (DSWD) -OSEC The total Over-the Counter disbursements/ liquidations recorded in the books for the Pantawid Pamilyang Pilipino Program (4Ps) amounted to P14,486,750,011.28, out of which only P10,716,588,449.28 were properly documented and verified, leaving P3,770,161,562.00 as unaccounted balance, thus affecting the reliability of the ending balances of the Cash in Bank -LCCA for various 4Ps account. 9.5.11 University of the Philippines (UP) System The P169,430,596.88 rentals for the UP-Ayala Techno Hub property could not be verified due to lack of supporting documents, including the unsettled technical and auditorial issues raised previously on the P4.2 billion 25-year lease contract entered into by the University of the Philippines and the Ayala Land, Inc. (ALI) delaying further the complete determination of the accuracy, reasonableness and validity of the said project. 9.5.12 Tondo Medical Center (TMC) Laboratory equipment for processing of histopath specimen costing P7,124,615.00 were left unutilized since CY 2002 due to non-assignment of personnel to handle the procedure thereby maximum utilization and purpose to which the machine was procured was not achieved as the machine remained idle, resulting in foregone undetermined revenues and deprived the

RECOMMENDATIONS Demand from the LBP the immediate submission of the complete reports including the Lists of Paid 4Ps Beneficiaries for the period October, 2008 to December, 2009 so that the pertinent disbursements could be recorded in the books and their legitimacy and regularity could be established; henceforth, require regular and timely submission of the reports/lists to avoid accumulation of unaccounted disbursements and thus, establish a reliable Cash in Bank-LCCA (4Ps OTC disbursements) account. Submit the documents and clarify matters as aforementioned to enable us to make a decision in audit; conduct regular and strict monitoring and checking of the rentals made by ALI based on the actual occupancies and lease rates realized to ensure that the accurate/correct amount is reflected and acknowledged accordingly; exercise the agency’s right to audit and examine pertinent documents related to the operation of the said leased property. Undertake the necessary measures to make all the machines which are still functional or can still be repaired operational such as immediate repair of the machines and assign personnel to handle this type of lab test; after the machines became operational, recommend for termination of the contract for conduct of lab test for histopath with private provider; and henceforth, ensure .

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AUDIT OBSERVATIONS hospital in the delivery of quality health care services using its own machines. 9.5.13 Bureau of Workers of Special Concerns (BWSC) The forfeiture scheme of the unclaimed/ undistributed Sugar Amelioration Program (SAP) funds provided under RA No. 6982 and RA No. 809 is still not fully implemented due to the failure of BWSC to enforce compliance by DOLE ROs with DOLE Administrative Order No. 311 and DOLE Department Order No. 70-04 requiring the remittance of the forfeited UCBF, thus, the forfeited UCBFs amounting to P89,825,939.34 are still unremitted by the Mills/Planters’ Associations/Cooperatives. 9.5.14 Food and Drugs Administration (FDA) After six years from the procurement of the needed equipment for the Bureau of Food and Drugs Administration (BFAD) Integration Information System (BIIS) Automation Project of the then BFAD with Project cost of P51,524,482.00, its intended purpose which is to make efficient and effective the systems and procedures registering product and licensing establishments and in verifying and confirming transaction status through the implementation of automated system is yet to be achieved or even is in danger of not attaining it at all since the BIIS was not yet tested as of December 31, 2011 to determine its present capability for the automation of the systems coupled with the obsolescence and utilization of some of its component equipment for other purposes costing P11,741,592.00.

RECOMMENDATIONS

that the requirements of the machines are taken-cared of to maintain their functionality.

Enforce compliance by DOLE – ROs with DOLE AO No. 311 and DO No.70-04 to remit the forfeited amounts; take up the receivables from DOLE – RO and Mill Planters Association/Cooperative for the unremitted amount; and require the Accountant to work back and prepare a subsidiary ledger on a per region/mill basis to arrive at a reconciled balance.

Create an Inventory Committee to conduct an inventory of all equipment procured thru the e-Government funds of BIIS to determine/assess their existence, condition and the usage and prepare a report thereon; on the basis of the report of the Inventory Committee, determine the appropriate action to be made; and resort to legal remedies to oblige the Medi Data Inc. to submit all the contracted deliverables.

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AUDIT OBSERVATIONS 9.5.15 Department of Labor and Employment (DOLE) – OSEC (a) In 2011, prospective employers of 13 POLOs were erroneously charged with verification fees in the total amount of P20,419,688.04 due to the use of fixed arbitrary rates which were neither the spot rate or collection rate, as periodically determined by the DFA in computing for the local currency equivalent of the US$10 verification fee pursuant to DOLE/DFA/DBM/DOF/ COA Joint Circular No. 3-99 dated September 28, 1999. (b) The recorded collections in the books of the DOLE-OSEC were understated by P20,711,535.12 as the same arbitrary fixed rate of exchange was used in computing for the United States dollar (US$) equivalent of the total local currency collection, or the fixed rate of US$10 per document verified. (c) While the amounts set aside for the Third Portion/Common Fund are intended for DOLE’s programs and projects in Taiwan, these were considered as MECO’s share under the existing MOAs, thereby understating the receivable, income, expense and cash accounts by the same amounts. Moreover, DOLE did not even assert its rights under the MOAs to demand its share on the excess funds including interest earned from the Third Portion/Common Fund. For CYs 2010 and 2011 alone, comparison of actual collections with the approved Work and Financial Plan for the same period showed excess funds amounting to NT$5,413,675.00 or a 50 percent share share of NT$2,706,837.70, excluding share from interest earned on the funds, which remained in the custody of MECO. (FX rate is P1 per NT$1)

RECOMMENDATIONS Make representation with the concerned agencies to revisit existing guidelines on the collection rates to be applied in the collection of verification fees in the posts in order to arrive at just fair and proper collection rates; apply the average rate of exchange for the month in converting local currency to US$ and eventually to Philippine Peso, observe diligence in the use of conversion rates, carefully review the computations, and prepare the necessary adjusting entries to correct the affected accounts. Require Manila Economic Cultural Office (MECO) to account for the excess funds including interest earned from the Third Portion/Common Fund as of CY 2008 up to December 31, 2011 and remit DOLE’s share pursuant to the provisions of existing MOAs; through the FMS, take up such share in the Third Portion/Common Fund in the books of accounts; and initiate the amendment of existing MOAs to the effect that the verification fee collections set aside for the Third Portion/Common Fund should not be considered as the share of MECO but the share of DOLE which is to be administered by MECO.

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AUDIT OBSERVATIONS 9.5.16 Department of Labor and Employment (DOLE) – OSEC (a) The failure of Labor Attaches to deposit and seek clearance from accountabilities prior to transfer to another post or upon recall to Home Office as required under Sections 69 and 80 of PD 1145, Section 101 Part H of DFA Department Order No. 19A-95 and Section 57 of MNGAS ,Volume II, collections amounting to P5.30 million remained in their custody as of January 2012, thereby exposing the funds to risk of loss thru theft or personal use. (b) The receipt of donations in the total amount of P116.83 million (inclusive of P1.56 million interest income) and disbursements of P116.72 million as of December31, 2011 for the implementation

RECOMMENDATIONS

Demand from the concerned incumbent Labor Attaches the immediate deposit to the bank of their respective collections which remained undeposited, and the former Labor Attaches the immediate payment to DOLE Central Office of their unsettled accountabilities; institute appropriate administrative disciplinary action for any unjustified failure by the Labor Attaches concerned to comply with Section 69 of PD 1445 pursuant to Section 127 of P.D 1445; refrain from allowing deduction of accountabilities from claims for terminal leave benefits and other allowances. (Note: Management allowed the accountabilities of the five (5) Labor Attaches totaling P491,272.26 be deducted from their respective claims for terminal leave benefits and overseas allowances instead of imposing appropriate disciplinary action for their non-compliance with existing laws, rules and regulations. Advise Labor Attaches to strictly adhere to existing rules and regulations on collection and deposit and on the requirements to be complied with upon end of tour of duty or prior to assignment to another post; and require the Labor Attaches/Collecting Officers to regularly deposit collections and to submit Certificate of Clearance from fund and property accountabilities or Final Report of Accountability upon recall or prior to transfer to another post. Require: the FMS to take up the financial transactions of the DOLE-CGMA Project in the books of DOLE; the Manager/Director of DOLE-CGMA Project to advise the FFCCCII to prepare and submit Certificate

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AUDIT OBSERVATIONS of the DOLE-CGMA Project were not taken up in the DOLE’s books of accounts despite COA’s opinion that the funds collected are government funds. Moreover, the funds were not safeguarded against misuse/misappropriation as DOLE did not require its Labor Attaches to issue Official Receipts upon acceptance of donations in violation of Section 68 of PD 1445. Likewise, there was inadequate monitoring of completed classrooms casting doubt on the existence of the reported 495 classrooms as Certificate of Completion by the Contractors and Certificate of Acceptance by the Principals were not submitted to DOLE, contrary to the requirements of the MOA and COA Circular 89-294 dated February 1, 1989. As a result, completed classrooms were not taken up in the books of the Department of Education (DepEd). 9.5.17 Philippine Overseas Employment Administration (POEA) OEC fees collected by POLOs totaling P3,504,912.12 were not remitted/deposited to the depository banks of POEA as of December 31, 2011 while of the P56,731,245.68 collections during CY 2011, only P55,946,854.31 were remitted/ deposited as courier/freight and bank charges of P784,391.37 were deducted outright from the collections. Remittances of collections during the year were also delayed by one to eleven months contrary to Section 69 (1 and 4) of PD 1445 and the requirements of unnumbered POEA Memorandum Order dated March 11, 1997.

RECOMMENDATIONS of Completion and Certificate of Acceptance for every school building project completed, and submit to COA the original copy of the following documents pertaining to the reported 603 classrooms completed as of December 31, 2011: a. Statements of Work Accomplished for the school building projects completed; b. Certificate of Completion from FFCCCII with information on project cost; c. Certificates of Acceptance by the Principals of the respective schools; d. Matrix of Completed Projects by Region with project costs as basis for recording in the books of DepEd; e. Official Receipts from DBP for the accepted donations; and Bank Statements from DBP. Require the Chief of the Regional and Overseas Coordinating Office (ROCO) to coordinate immediately with the concerned POLO accountable officers and demand immediate remittance of all collections still maintained with the Embassy account to the depository account of POEA; submit the collection reports together with the supporting documents right after the deposit of collections to avoid delay in the submission of such to the Accounting office; consider imposing of penalties/ sanctions to those who fail to follow the requirements of existing regulations; and

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AUDIT OBSERVATIONS 9.5.18 National Museum (NM) Adequacy of the Museum's financial management system was not sufficient to efficiently track cash and investment transactions, resulting to unrecorded bank transfers of P188,921,248.99 from the Endowment Fund to private depository banks (BPI/BDO), which rendered Cash in Bank-LCCA and Investment accounts unreliable, as well as putting the legality of the transaction in question.

RECOMMENDATIONS require all designated/deputized POLO collecting officers, to adhere strictly to the guidelines and stop the malpractice of charging expenses outright from the funds collected. All expenses incidental to the remittance shall be requested for reimbursement from POEA office; and concerned officials, in coordination with the International Labor Bureau (ILAB) of the Department of Labor and Employment (DOLE) with the approval of the DOLE Secretary, to devise/ formulate updated policy/ guidelines on deposit/remittance of processing fees collected by POLOs in behalf of POEA and the charges of expenses pertinent to the remittance and transmittal/ submission of financial reports to the Accounting Division in accordance with existing laws, rules and regulations. Seek authority from the BSP Monetary Board to invest Museum Endowment Fund thru private banking institutions; provide the proper basis of investing in non-government securities; capture in the agency’s financial management system vital information on any and all aspects of government financial transactions; promptly clear discrepancies and errors in the books; regularly prepare and reconcile balances per books and per bank.

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AUDIT OBSERVATIONS 9.5.19 Technical Education & Skills Development Authority (TESDA)-Main Advance payments to the Procurement Services (PS) amounting to P19,391,647.01 as of December 31, 2011 remained outstanding for six years now due to the failure of the said agency to deliver the goods intended for the operations of the three foreign assisted projects which were already completed in 2006 and 2009. In effect, the opportunity to maximize the utilization of the said amount during the project’s implementation became futile. 9.5.20 Department of Public Works and Highways (DPWH) - NCR (a) Five infrastructure projects from 2008 to 2010 amounting to P233.53 million were not yet started as of December 31, 2011 while eight projects totaling to P453.11 million were repeatedly suspended due to lack of sufficient detailed engineering investigations, surveys and courses of action to hasten the resolution of the right of way (ROW) issues resulting in the non-provision of the needed infrastructures as planned. (b) Non-pay items amounting to P10,122,306.85 were included in the contract cost of P1,097,200,095.04 of 16 infrastructure projects to the detriment of the government.

RECOMMENDATIONS Make representation to the Procurement Services to remit to the National Treasury the amount of advance payments that remained idle which were intended for the foreign assisted projects that had already been completed in 2006 and 2009; or coordinate with DBM for fund realignment then suspend the issuance of advance payments to PS until the said amount had been consumed by delivering the requested orders of TESDA. Strict compliance with the requirement under Section 17.6, Rule VI, IRR, RA No. 9184 before bidding or award of contracts; undertake a review of all the “Not yet Started” projects and the covering contract; monitor all security/warranty filed for projects suspended for more than one year; and refrain from awarding contracts and issuing Notice to proceed. Exclude the non-pay items in the contract cost since this is not in accordance with the standard set by DPWH and for being disadvantageous to the government.

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AUDIT OBSERVATIONS 9.5.21 Department of Public Works and Highways (DPWH) -OSEC Significant delays in the implementation of foreign-assisted infrastructure projects funded by Official Development Assistance (ODA) adversely affected the timely utilization of the loan proceeds for the purpose, thus resulted in the payment by the government of commitment fees amounting to P46,673,689.12 for Calendar Year 2011 and deprived the public of the benefits that could have been derived from their immediate and maximum use.

9.5.22 Department of Transportation and Communication (DOTC)-OSEC The balance of Accounts Receivable totaling P799,785,218.11, as of December 31, 2011 includes condition receivables of P796,799,336.97 representing uncollected Development Rights Payments (DRPs) from the Metro Rail Transit Development Corporation (MRTDevco) for the air space above the undeveloped Stations of the LRTS Phase I, which are under dispute rendering the reported balance bloated.

RECOMMENDATIONS Accelerate/maximize the utilization of loan proceeds by adopting efficient and timely procurement procedures in accordance with the guidelines of the foreign lending institutions (FLIs); perform resurvey/update the project design/specifications/scope of work before the procurement/bidding in order to avoid additional works and/or several variation orders during the project implementation; settle first the problems on the land acquisition and resettlement, which is a factor contributory to the delay, before entering into loan agreement with foreign countries/institutions, to ensure smooth implementation of the project; make representations with DBM for the immediate allocation of the peso counterpart funds; adopt an effective Project Monitoring System that will keep track of the implementation of the project vis-a-vis the approved Implementation Schedule and Disbursement Schedule embodied in the loan agreement to avoid the incurrence of commitment fees.

Initiate action for the resolution of the herein dispute with the MRTDC using the dispute settlement provided under the BLT Agreement to finally put closure to the above discussed matters; instruct the Accounting Division to stop recording the conditional DRP receivables until the dispute between the DOTC and MRTDC is finally resolved in order not to overstate the balance of the Accounts Receivable and

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AUDIT OBSERVATIONS 9.5.23 Philippine Coast Guard (PCG) Philippine Coast Guard recorded the receipt of Marine Environment and Protection Equipment and Supplies from the Department of Transportation and Communications (DOTC) in the total amount of P319 million without complete documentation. The receipt includes some equipment which were not requested. There was no report submitted by PCG Technical Inspection and Acceptance Committee.

9.5.24 Department of Trade and Industry (DTI) – OSEC Ineffective use of the Barangay Micro Business Enterprise (BMBE) Development Fund amounting to P362,161,074.38 in view of the: (a) treatment of PAGCOR donation of P300 million endowment fund, which limits the use to the interest earned from the placements, (b) exceptionally low fund availment rate of 3.49 per cent due to the absence of plans and the inability of the Micro Small and Medium Enterprise Development (MSMED) Council to take appropriate actions on the consistently very low fund utilization, (c) actual beneficiaries of the projects/activities were mostly government officials/ employees and existing micro entrepreneurs who were not the intended beneficiaries under the BMBE law, and (d) the nature and purpose of some of the projects/activities undertaken were not in accord with the specific intent for which the fund was established

RECOMMENDATIONS Government Equity; and make proper disclosure in the Notes to FS the disputed accounts receivable from the MRT DevCo so as not to mislead the readers of the financial statements. Coordinate with DOTC officials on the equipment to be requested and to be accepted. PCG may refuse acceptance of equipment and inventories being transferred when not needed or when not in accordance with the specifications to avoid wastage of government resources.

MSMED Council to ensure the full realization of the expected outcome provided under the BMBE law, which is the growth and integration of the informal BMBEs to the mainstream economy to generate employment and alleviate poverty, through the maximum use of the BMBE Development Fund; cause compliance with Section 12 of RA 10147 and facilitate the remittance of the Fund to the National Treasury; formulate and issue policy directive requiring the implementing agencies to prepare and submit work and financial plans that will support the Special Budget that will be submitted to the DBM to facilitate the withdrawal of needed funds for the implementation of the projects/activities included in the plans; ascertain and assess constraints that caused the very low rate of fund availment, and promptly take appropriate actions to

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AUDIT OBSERVATIONS .

9.5.25 Department of Agriculture (DA) - OSEC (a) Slow availment of Official Development Assistance (ODA) funds arising from delayed implementation of foreign-assisted infrastructure projects resulted in the incurrence of commitment fees amounting of P308,448,184.70 on top of interest charges from CY 2002 to 2010.

(b) At the end of the Rapid Seed Supply Financing Project (RaSSFiP) Phase II, a total of 156,048 bags of undistributed certified seeds (CSs) were converted to ordinary palay due to age and low germination rate after retesting and had weight shrinkage of 197,823.11 kilos. or 4,945.58 bags causing loss to RaSSFip and the government in amount of P84,446,453.03.

RECOMMENDATIONS address the problems at hand; ensure that the registered BMBEs are the end beneficiaries of the projects/activities and the objectives of the projects/activities to be undertaken are strictly in accordance with the purpose for which the BMBE Fund was set up; revisit the related provisions of RA 9178 and the Implementing Guidelines drawn by the DTI; and if deemed warranted, initiate and move for the amendment of the law and the guidelines with the end in view of expediting program/projects/activities that will spur the development of MSMEs in general and BMBEs in particular.

Accelerate/maximize the utilization of loan proceeds by adopting efficient and timely procurement procedures in accordance with the guidelines of the foreign lending institutions; adopt an effective Project Monitoring System that will keep track of the implementation of the projects vis-à-vis the approved Implementation Schedule and Disbursement Schedule embodied in the loan agreement; settle first problems on land acquisition and resettlement in order to avoid delays in project implementation. Adhere to the RaSSFip Implementing Guidelines for the delivery of certified seeds in order to avail of the high germination rate of the CS for a high rice yield/production and avoid the incurrence of losses.

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AUDIT OBSERVATIONS 9.5.26 Bureau of Soils and Water Management (BSWM) A total of 166 units of Shallow Tube Wells (STWs) amounting to P12,939,700.00 have not been fully utilized to provide irrigation needed to intensify rice production areas affected by the El Niño phenomenon because they remained undistributed to farmer-beneficiaries as of December 31, 2011. 9.5.27 Pasig River Rehabilitation Center (PRRC) (a) Rent income from the housing units of the informal settler families (ISF) at Cardinal Sin Village and Villa San Isidro Resettlement Sites amounting to P37,785,500.00 was not realized due to the absence of lease contract between the ISF and PRRC. (b) Ten ferry stations costing P180,871,959.43 constructed at Pasig River funded out of Asian Development Bank loan remained idle after the Pasig River Ferry Service ceased its operation since January 16, 2011 thus, the government is paying a foreign loan for a project whose main objective of decongesting road traffic was not attained. 9.5.28 Department of Transportaion and Communications (DOTC) - ML (a) The suspension of some airport/port projects with the total recorded value of P481,162,167.51 caused the non-commissioning of the new air traffic control facility costing P510,221,290.30 and non-utilization of lighthouse spare parts/

RECOMMENDATIONS Conduct a full inventory of all the STWs nationwide to completely account those that were not distributed and those distributed to beneficiaries; require them to support the receipt and distribution with necessary documents; and institute control measures in order to safeguard the assets. Prepare the lease contract between PRRC and the ISF effective from the time they occupied the housing units and thereafter, and intensify the collection of the rental due. Open the ferry service to competitive bidding and adhere to the requirement of eighteen 50-passenger vessels instead of six 150-seater capacity vessels. Coordinate with the owners of the affected properties and other concerned offices for the immediate resolution of the problems; require the contractor to immediately rectify the defect noted in the re-testing of the system and undertake the commissioning of the new system; and

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AUDIT OBSERVATIONS

equipment worth P250,456,620.00 delaying the achievement of the intended purposes of these projects and may result in the incurrence of additional cost or wastage of government resources in the future. (b) Out of the FrF 48.797 million or P295.593 million worth of delivered equipment for the Global Maritime Distress and Safety System (GMDSS), 70 percent or P208,453,760.85 remained uninstalled and unutilized resulting in the non-attainment of the project objectives and wastage of government resources. Region 1 9.5.29 Don Mariano Marcos Memorial State University (DMMMSU) DMMMSU Pig Extension Research Farm (DPERF) still posted a net loss of P5.37M from its operation, thereby giving doubt to its continued operation without budgetary support from the National Government. For the past nine years (2003-2011), DPERF incurred a total net loss of P46,236,234.50 with annual net loss ranging from P305,790.24 to P11,108,705.51. Further, loan payable of P18M to National Livelihood Support Fund (NLSF) had incurred accumulated Interest Payables and Penalties amounting to P47.7M and P46.6M, respectively. Region 2 9.5.30 Department of Agriculture (DA) (a) Of the P463 million Malampaya Fund received in CY 2008-2019, P74,817,784.91 was used for other purposes like projects and allowances of employees.

RECOMMENDATIONS

prioritize the use of ATON spare parts stocked at DOTC, including those readily available in the Philippine Coast Guard (PCG). Take the necessary remedial measures to prevent the GMDSS equipment/facilities from further deterioration and damage; provide adequate security measures to safeguard the equipment from thief; explore all the possibilities on how to make use of the equipment to other projects of the agency to recover part of the cost invested in the project, if there is no pending arbitration filed. Exert more effort to maximize income and minimize the expenses of the Farm with the end view of reducing its losses or operating without incurring any loss. Utilize the allotments solely for the purpose specified unless there is an authorized reprogramming by proper authority.

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AUDIT OBSERVATIONS

(b) Obligation of fund transferred to Cagayan Valley Lowland and Marine Research Outreach Station (CVLMROS) or Department of Agriculture Hillyland Research Outreach Station (HILROS) aggregating to P25,009,616 for LGU incentives and payment of certified seeds were not supported by an approved payroll/ contracts with no specific name of creditors.

(c) The fund and cash allocation intended for Organic Agriculture Program amounting to P2,611,000.00 was transferred by DA Region to the Cagayan Breeding Station which was disbursed/spent for purposes other than that stated in the SARO. Region 5 9.5.31 Philippine National Police (PRO 5) Various guidelines/ procedures/ responsibilities on the accounting and preparation/submission of Program of Expenditures (POE) and reports on the receipt and utilization of PCSO Funds remitted to PNP PRO5 for CY 2011 totaling P10,123,399.41 were not strictly complied/adopted by RHQ/PPOs/PS pursuant to PNP Memorandum Circular Nos. 2011-002 and 2011-004 dated January 17, 2011 and February 10,2011, respectively; hence, funds received/utilized were not properly recorded and disbursement vouchers together with the supporting documents were not submitted to the auditor. This hampered the timeliness of audit/review of the STL transactions and validation whether the funds received were used for the intended purpose and in accordance with the approved POE.

RECOMMENDATIONS Explain why transaction should not be disallowed in audit considering it is irregular as defined in COA Circular No. 85-55A and violation of DBM Letter Circular No. 2004-2. Explain why transaction should not be disallowed in audit considering it is irregular as defined in COA Circular No. 85-55A and violation of DBM Letter Circular No. 2004-2. a. Strict compliance with COA Circular No. 94-013 dated December 13, 1994 and the guidelines of PNP Memorandum Circular No. 2011-002, dated January 17, 2011 to ensure compliance to the said guidelines on the transfer and utilization of PCSO-STL Funds by PNP PRO 5. b. Review of specific guidelines under Memo Circular No. 2011-002 particularly IV.D on the preparation of the POE that would be suitable and appropriate to the existing situation on the receipt and utilization of the PCSO-STL Funds. The agency can prepare and approve the POE after the receipt of funds but the programmed POE shall be utilized on the succeeding month for which the funds are allocated; and VI.B.3 and VII.C.2 on the final approval of the POE in the Provincial Level/District Level;

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AUDIT OBSERVATIONS

REGION 6 9.5.32 Department of Interior and Local Government (DILG) The amount invested by the government in its Emergency Network Philippines Project (ENP) amounting to P100,138,592.69, especially the DILG Patrol, is not commensurate with the benefits so far obtained. 9.5.33 Department of Science and Technology (DOST) Non-compliance with the provisions of the Memorandum of Agreement (MOA) such as acquisition of not a brand new equipment and failure to procure supplies, tools and equipment within the scheduled period

RECOMMENDATIONS

c. Require the Accountant to prepare and submit the Report of Collections and Disbursements together with the Disbursement Vouchers (DVs) and the authenticated copy of deposit slips monthly, pursuant to VI.A.4 of Memo Circular No. 2011-002, and also submit the DVs and supporting documents for the expenses incurred for the month of December 2011 on the PCSO-STL funds received by the PNP PRO 5; d. Prepare regularly the Bank Reconciliation Statements for the PCSO-STL Fund under LBP CA No. 0132- 1063-98 pursuant to the aforecited Memo Circular; and e. Require the submission of the documents/DVs for the receipt and utilization of the PCSO-STL funds for the period January to June 2011 and for the month of July 2011, if there was any. Coordinate with DILG Main Office as to the Emergency Network Project since the same has not been fully operational. Implement strictly the provisions of the MOA to ensure the proper implementation of the project and identify alternative courses of actions to address the problems met, if any.

196

AUDIT OBSERVATIONS

affected the effectiveness of the SET-UP project amounting to P5,587,902.64. 9.5.34 Department of Science and Technology (DOST) Payback of SET-UP funds amounting to P7,273,911.67 for the cost of equipment and financial assistance to beneficiaries was delayed. 9.5.35 Department of Social Works and Development (DSWD) Core shelter units located at Barangay Alimbo-Baybay, Nabas, Aklan remained unfinished, incomplete, unoccupied while in Belison, Antique, all 60 units were not constructed. Amount of CSAP/Modified Shelter Assistance Project is P56 million. Out of the 43 shelter units programmed under the Modified Shelter Assistance Project costing P2,150,000.00 in Tigayon, Kalibo, Aklan, 27 units were completed, 5 units remained unfinished, 2 units were not constructed and 9 units were constructed in other barangays contrary to DSWD’s submitted accomplishment report. Region 7 9.5.36 Cebu Technological University (CTU) – Main Campus (a) The contract for the construction of the 5-Storey Technology Building With roof deck costing P45,805,005.08 at CTU Main Campus was awarded to JO Builders who cannot be considered an eligible bidder since the company’s Net Financial Contracting Capacity (NFCC) did not meet the requirement under Section 23.5.2.6 of the Revised Implementing Rules and Regulations (IRR) of RA 9184. Moreover,

RECOMMENDATIONS

Intensify the collection of refunds from various SET-UP beneficiaries; present provisions on penalty and default charges to DOST-Central Office for reconsideration. Supervise and monitor the proper implementation of the project; demand from the LGUs concerned compliance with their obligations as stated in the MOA; make accurate and reliable report on the implementation of CSAP/Modified Shelter Assistance Project; undertake regular ocular inspection to ensure funds are utilized according to the objectives of the program. Direct the Bids and Awards Committee (BAC) to submit a written explanation for the deviations from the Revised Implementing Rules and Regulations (IRR) of RA 9184. Henceforth, strict compliance of the Revised IRR of RA 9184, the Government Procurement Reform Act should be made.

197

AUDIT OBSERVATIONS

JO Builders’ bid was not disqualified even if the bid security presented was a company check which is not a valid bid security under Section 27.2 of the said IRR. Therefore, the contract entered into by the University with JO Builders cannot be considered valid under RA 9184. (b) The advance payment to the contractor in the amount of P6,870,000.00 for the construction of the 5-storey Technology Building with roof deck was not supported with an irrevocable standby letter of credit of equivalent value from a commercial bank nor a surety bond callable upon demand which is a violation of Section 4.2, Annex Ë” of the Revised IRR of RA No. 9184. Hence the University is not secured in case of default by the contractor. (c) Priority Development Assistance Fund (PDAF) for scholarship totaling P3.75 million remained unutilized at year-end, a situation which has deprived financially needy but deserving students to avail of the scholarship program financed by the national government. 9.5.37 Applied Nutrition Council (ANC) The Center incurred a net loss of P510,459.29 which may cause the closure of the facility.

RECOMMENDATIONS

Require the contractor to submit an irrevocable standby letter of credit from a commercial bank or a surety bond callable on demand equivalent to his outstanding advance payment as recorded in the books of accounts to protect the interests of the government; require a thorough review of the documents to support payment of any transaction to prevent audit suspensions/ disallowances. Instruct the Scholarship Office of the University to closely coordinate with the donor congressmen/ senators for the requirements on their scholarship fund so that these resources can be extended to deserving students within the academic year stated in the fund advice. Submit the financial statements of the Center to the ANC Board for their in-depth review to determine the causes of the losses incurred in the past two years and to formulate the solutions thereof; direct the Administrative Officer IV to prepare an annual budget that shall contain an itemized summary of estimated expenditures along with the proposals for financing them, effective CY 2013; the budget has to be approved by the ANC Board.

198

AUDIT OBSERVATIONS

9.5.38 Department of Public Works and Highways (DPWH)- 3rd ED Failure of management to thoroughly review the detailed engineering, surveys, designs and condition of the site on the Rehabilitation of Progreso – Cambaol –Cayacay - Napo Road with a contract cost of P31,850,129.00 resulted in the delay in the implementation of the project. 9.5.39 Provincial Agrarian Reform Office (PARO) Regular maintenance and other operating expenses such as utilities, repairs, janitorial and security services, construction materials and labor, meals, sports uniforms and bar review fee amounting to P6,625,941.51 were charged to the Agrarian Reform/ CARP Fund, contrary to Executive Order No. 229 dated July 22, 1987, to the prejudice of the Comprehensive Agrarian Reform Program. Region 8 9.5.40 Department of Education (Southern Leyte) Of the 14 school buildings costing P25,519,487.95 validated by the Team, only 3 were completed while 11 were still on-going construction with estimated percentages of completion ranging from 20 percent to 90 percent as of December 31, 2011 in violation of the contract terms and

RECOMMENDATIONS

The contractor and the implementing unit concerned should resolve the issue of the contract. Refund the amount of the excess cash advance (mobilization) based on the percentage of accomplishment, if any. The Engineers concerned are enjoined to exercise due care in the preparation and review of the Program of Work and the Approved Budget for the Contract, to preclude errors on estimates of works to be undertaken. Stop the practice of utilizing the Agrarian Reform Form/CARP Fund for regular maintenance and operating expenses for which appropriations are provided under the General Fund, and instead use the same in accordance with Executive Order No. 229 dated July 22, 1987. Furthermore, make representations with DAR Central Office for them to provide appropriations for regular maintenance and operating expenses under the General Fund (Fund 101). Intensify monitoring and supervision on the strict implementation of projects in order to comply with the timely completion of the same and in order to answer the shortage of classrooms.

199

AUDIT OBSERVATIONS

conditions, thus, thwarting the program of government to address the shortage of school buildings in the province. 9.5.41 Department of Education (RO8) The implementation of the Department of Education Food for School Programs in CY 2 010-2011 in the selected schools in Samar provinces amounting to P19,697,860.00 was not in accordance with the guidelines set forth in COA Cir. 94-013 resulting to long delayed liquidation from National Food Authority (NFA) RO8. 9.5.42 Balicuatro College of Arts and Trades (BCAT) Tools and Equipment amounting to P6,498,819.36 delivered in 2007 and 2008 by the Central Office intended for use of Automotive Servicing program of the agency remain unutilized due to non-readiness of the trainor/non offering of the course/no consultation at the assessment centers level. 9.5.43 Department of Labor and Employment RO8 The efficiency in the utilization of program funds and the effectiveness of addressing the objectives of the programs cannot be accurately gauged due to failure to optimize the utilization of available program funds amounting to P7,001,714.63.

RECOMMENDATIONS

Adhere to the Provision of COA Cir. No. 94-013 dated Dec. 13, 1994 particularly Sections 4.3, 4.6, 4.8, 5.4 and 6.4 and item no. 8 of the MOA between National Food Authority and Department of Education Regional Office. Ensure full utilization of the tools and equipment delivered specifically for the Automotive Servicing and extend its usage to the community as an Income Generating Project in order to generate additional income to augment maintenance expenses and enable the trainees to apply skills to actual situation. Conduct a re-evaluation of the current program strategies being implemented and devise alternative measures to fully achieved its goals and objectives and make these more responsive in addressing the needs of the program beneficiaries.

200

AUDIT OBSERVATIONS 9.5.44 Department of Public Works and Highways (DPWH) – 1st DEO The absence of an Annual Procurement Plan/Program for the regular repair and maintenance of national roads and bridges and making as basis the amount of Agency Budget Matrix (ABM)/Special Allotment Release Orders (SAROs) in the Monthly Cash Program (MCP) submitted to DBM instead of the actual due and demandable obligations, resulted in the lapsing/reversion of unutilized and excess Notice of Cash Allocation (NCA)/Notice of Transfer of Allocation (NTA) in an aggregate amount of P148,855,753.41, and may open the possibility for the agency to utilize the excess amount for purposes other than the intended ones. Region 11 9.5.45 Department of Public Works and Highways (DPWH) RO XI (a) The agency could have made use of the steel bollards, blinking lights and tower lights, amounting to P2,922,275.00, P302,032.00 and P514,976.00, respectively or totaling P3,739,283.00, had the turnover of the items been required of the contractor after the conduct of inventory upon completion of the current project, thus, making possible the generation of savings from incoming projects. (b) An asset originally recorded without title under Land Account (201) valued at P39,039,593.50 was reclassified into Construction In Progress (266) even without any identified projects and documents to support the reclassification made, thereby, casting doubts on the existence, reliability and propriety of the asset account.

RECOMMENDATIONS Prepare a procurement plan/program for the repair and maintenance of national roads and bridges and implement the same on schedule taking into consideration the annual budget released to them by the DPWH Central Office in order to fully maximize the utilization of the NTAs received, thereby benefiting the riding public of the full benefits of the amount released. Strictly require the contractor to make an inventory of the steel bollards and blinking lights and have it turned over upon completion of the projects to the Office to be utilized in future projects and to reduce project cost. Exert more effort in the retrieval of documents to support the reclassification of the land account to Construction In Progress Account. Coordination with the Land Registration Authority should be made to determine the designated owner of the land as indicated in the official records .

201

AUDIT OBSERVATIONS

9.5.46 Center for Health Development (CHD) (a) The CHD failed to recover the seed capital in the form of drugs and medicines amounting to P2,206,287.40 distributed to 100 Botika ng Barangay (BnB) outlets that closed operations. (b) Numerous BnB outlets were allowed to operate and were given seed capital in the amount of P2,794,917.75 in the form of drugs and medicines pending approval of their licenses. 9.5.47 DPWH – Compostela Valley Dormant balance of Guaranty Deposits Payable for more than ten years amounting to P5,053,096.71 was dropped from the books without the required authority from COA. 9.5.48 DPWH-Davao City District Engineering Office Implementation of project for the Construction/Rehabilitation of MPB for Package 1-D, a) Construction of MPB, Bago Aplaya and b) Rehab of MPB Ma-a, Davao City amounting to P1,940,895.84 was found irregular because beneficiaries of the said projects were cooperatives and private corporation in violation Section 4(2) of PD 1445.

RECOMMENDATIONS Send demand letters to the Botika ng Barangay (BnB) operators, copy furnished the Barangay Captains and the Municipal Mayors, for the recovery of the initial seed capital of closed BnBs; institute legal sanctions against operators of the closed BnB outlets. Explain and justify the inability to enforce the licensing requirements from operators. BnB operators who did not comply with the documentary requirements within the deadline shall be required to return the seed capital and immediately pay the equivalent amount of the unaccounted items. Follow the procedures provided in COA Circular No. 97-001 on the dropping of dormant account and reverting the entry made. Establish property ownership by the government before implementing infrastructure projects; see to it that releases of funds are spent for public purposes.

202

AUDIT OBSERVATIONS 9.5.49 Provincial Environment and Natural Resources Office (PENRO), Davao del Sur The swapping of the office building between Provincial Environment and Natural Resources Office (PENRO) located at Mabini Superhighway, Barangay Aplaya and City Environment and Natural Rresources Office (CENRO) located in Barangay Matti, all in Digos City through a regional directive had grossly undermined the purpose and intent of PD No. 740 dated Nov. 26, 2004. Furthermore, it caused the agency to incur capital investment for the repair and rehabilitation of office building in the amount of P2,371,965.84 on a lot not owned by the agency in violation of existing laws, rules and regulations. Region 12 9.5.50 Commission on Higher Education (CHED), RO XII Deficiencies in the Memorandum of Agreement of CHED Regional Office 12 with Higher Education Institutions (HEIs) and poor monitoring of the Student Assistance Fund for Education (SAFE) loan/scholarship and Student Financial Assistance Program (STUFAP) program implementation resulted in the non-submission of reports/ status of fund utilization which serves as liquidation reports on transferred funds to various HEIs, thus, receivables totaling P41,729,000.00 remain unliquidated in the books.

RECOMMENDATIONS

Re-visit Proclamation No. 740 dated November 26, 2004, Provincial Board Resolution no. 137 dated July 23, 1970 and make representation with the Regional Executive Director (RED), Department of Environment and Natural Resources, Regional Office XI to revert the Provincial Environment and Natural Resources Office (PENRO) and City Environment and Natural Resources Office (CENRO) to their original locations; if the Regional Executive Director insisted in his decision, then facilitate the approval from the Office of the President on the transfer of involved offices so as to legitimize such transfer. Strengthen the monitoring system of the scholarship programs; require the Higher Education Institutions to comply strictly with applicable guidelines on scholarship programs set by the Commission on Higher Education (CHED); and incorporate in the Memorandum of Agreements of the CHED Regional Offices and in the CHED policy/guidelines the related provisions of COA Circular Nos. 94-013 and 2007-001 including sanctions for non-compliance to ensure the efficient and effective implementation of the program.

203

AUDIT OBSERVATIONS 9.5.51 Department of Environment and Natural Resources (RO 12) People’s Organizations (POs) contracted to produce seedlings procured from outside sources, defeating the purpose of the National Greening Program (NGP) and depriving them of immediate employment and income that could have been derived from said activities.

RECOMMENDATIONS Encourage POs to produce seedlings through the establishment and maintenance of nurseries as the NGP would require additional seedlings for the next five years. These nurseries should be strictly monitored as to seedling quality and quantity. A team from the Regional Office should be created to validate the status of these seedlings as reported in the accomplishment reports of the Provincial Environment and Natural Resources Offices (PENROs)/City Environment and Natural Resources Offices (CENROs).

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2011 afr natlgovt vol1a

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