REPORT HIGHLIGHTS: ANNUAL FINANCIAL REPORT OF THE NATIONAL GOVERNMENT
1.0 RESULTS OF OPERATION
1.1 Appropriations - P1.4 trillion
For fiscal year 1997, total appropriations of P1.4 trillion was made available for the operation of the National Government, servicing of public debt, budgetary support to Government-Owned and/or Controlled Corporations (GOCCs) and financial assistance/allocation to Local Government Units (LGUs). The total appropriations is composed of a new sum of P375.7 billion provided under R.A. No. 8250, the 1997 General Appropriations Act (GAA), continuing appropriations of P133.5 billion provided under Executive Order No. 182, the Public Works Act, R.A. No. 8174, the 1996 GAA and other special appropriation laws on multi-year projects and activities; and automatic appropriations of P900.1 billion authorized under various mandatory laws on servicing of foreign and domestic loans, payment of retirement and life insurance premiums of government personnel and Special Accounts in the General Fund.
As approved by both Houses of Congress, the total new appropriations authorized under R.A. No. 8250 was P433.8 billion. Two items of expenditures were, however, directly vetoed by former President Fidel V. Ramos, namely, the Debt Service - Interest Payment - P57.7 billion and Internal Revenue Allotment - Assistance to Cities - P500 million, reducing the total new appropriations to P375.7 billion, as approved with finality by the President.
Out of the new appropriations, P351.8 billion was released which included subsidies to LGUs of P75.9 billion, and equity investments, loans and subsidies to GOCCs of P14.4 billion.
From automatic appropriations for debt servicing, P825.1 billion was released, out of which, P181.5 billion was for current year obligations and P643.6 billion was to cover the disbursements made in previous years without obligational authority.
Appropriations released from all sources totalled P1.3 trillion. Of this amount, P45.1 billion came from the preceding fiscal year’s allotment which was also made available for obligation during the year.
At the close of the fiscal year, P63.2 billion of the total released appropriation remained unobligated. Out of this balance, P9.2 billion was reverted to the Cumulative Results of Operation - Unappropriated of the General Fund while P54 billion was retained as continuing appropriations to be made available for obligation in the succeeding fiscal year.
1.2 Expenditures - P870.8 billion
Expenditures incurred reached P870.8 billion, consisting of Personal Services - P178.9 billion (21%), Maintenance and Other Operating Expenses (MOOE) - P275.5 billion (32%), Capital Outlays - P88.4 billion (9%) and loan repayment and contribution to Bond Sinking Fund - P328 billion (38%).
Of the total MOOE of P275.5 billion, 70 percent or P192.2 billion was incurred for the operation of national agencies, 26 percent or P72.4 billion was given as subsidies to LGUs and 4 percent or P10.9 billion went to budgetary support for GOCCs. The operating cost of the National Government includes P124.7 billion payments made for interests, commitment fees, and other debt servicing charges.
Actual expenditures on loan repayments or principal amortization amounting to P328 billion is 754 percent more than the appropriation ceiling of P43.5 billion set by R.A. No. 8250 for the same item of expenditure. The cost of debt service shares more than one half (52%) of the total expenditures for the fiscal year.
Compared to the proposed obligations of the National Government amounting to P476.2 billion, 1/ the actual expenditures of P870.8 billion is 83 percent higher. The sharp deviation is attributed primarily to the very unrealistic budgetary allocation made for loan repayments which was proposed at only P30.85 billion.1/
1.3 Revenue - P492.2 billion
Revenue earned totalled P492.2 billion, generated from taxes - P414.7 billion and non-tax sources, such as Operating and Miscellaneous Revenue, Capital Revenue, and Proceeds from Grants - P77.5 billion.
Tax Revenue increased by 13.3 percent or P48.8 billion over the previous year’s record of P365.9 billion. The increase was contributed largely by the following components: Taxes on Goods and Services - P34.6 billion, Taxes on Income - P19.4 billion, and Other Taxes, including Fines and Penalties on Tax Revenue - P3.5 billion. The gross increase in Tax Revenue was, however, offset partly by a P9 billion decline in Taxes on International Trade and Transactions.
Based on the targetted level of P450.6 billion, 2/ earned revenue on taxes is short by P35.9 billion.
From P87.7 billion in fiscal year 1996, Non-Tax Revenue recorded a negative growth of 12 percent or P10.3 billion despite increases posted by most of the items under this revenue category. The decline resulted mainly from the decrease of the General Fund contribution to the Bond Sinking Fund and the exhaustion of the Oil Price Stabilization Fund (OPSF).
1.4 Borrowings - P346.2 billion
Gross receipts from borrowings amounted to P346.2 billion. Of this total, P314.6 billion was generated from domestic sources and P31.5 billion from foreign source. Borrowings increased by 82 percent or P155.8 billion compared to the 1996 actual gross receipts of P190.4 billion.
Based on the 1997 proposed levels, Gross Domestic Borrowings was estimated at P86.5 billion while Gross External Borrowings was at P16.8 billion. 3/
1.5 Overall Operational Deficit - P32.4 billion
The fiscal operation of the National Government resulted in an overall deficit of P32.4 billion representing the gap between revenue and borrowing receipts in the aggregate amount of P838.4 billion and total Current Operating and Capital Expenditures of P870.8 billion.
2.0 FINANCIAL CONDITION
As of December 31, 1997, the National Government showed a total assets of P1.6 trillion, total liabilities of P1.58 trillion and total residual equity of P16.3 billion.
2.1 Assets - P1.6 trillion
Total Assets increased by 11.4 percent or P164.1 billion, contributed principally by the Investments and Fixed Assets and Contingent Assets group of accounts. The increase resulted from the following transactions: new or additional investments in the form of loans granted to GOCCs, and purchases of stocks and bonds; acquisition of lands and sites, furniture, fixtures and equipment; construction of land improvements which include roads and bridges, and construction of buildings and structures which include schools, national offices, hospitals and health centers; and mandatory payments made by the National Government on foreign financial obligations of GOCCs. These payments are recorded as Contingent Assets - Miscellaneous in the books of the National Treasury pending repayment by the GOCCs.
2.2 Liabilities - P1.58 trillion
Total Liabilities increased by 24.3 percent or P309.5 billion. Seventy one percent or P220.8 billion of this increase is accounted for by the growth in Foreign Loans Payable under the Long-Term Liabilities which arose from new or additional loans contracted during the year as well as the devaluation of the Philippine peso vis-à-vis the U.S. dollar. The P31.3 billion increase in Payables - Unliquidated Obligations under the Current Liabilities also contributed significantly to the increase in the Total Liabilities. The accumulation of Payables - Unliquidated Obligations could be attributed to the restricted release of Notice of Cash Allocation by the Department of Budget and Management (DBM) to the National Agencies due to the scarcity of cash in the National Treasury.
2.3 Residual Equity - P16.3 billion
Total Residual Equity decreased by P145.4 billion, resulting largely from the negative growth in Invested Capital. The P131.9 billion negative increase in Invested Capital shows that total Long-term Liabilities is greater than the amount of Investments and Fixed Assets primarily due to foreign currency adjustment of external debt.
3.0 COUNTRYWIDE DEVELOPMENT FUND (CDF)
For fiscal year 1997, appropriation for CDF totaled P2.58 billion. The released allotments amounted to P2.6 billion, sourced as follows: P2.47 billion from R.A. No. 8250 (1997 GAA), and P136 million from R.A. No. 8174 (1996 GAA). The National Government Agencies (NGAs) received the biggest allotment of P1.53 billion while GOCCs and LGUs received P95 million and P974 million, respectively.
Based on Audit Reports received by the Accountancy Office, projects identified by the legislators with an aggregate cost of P708.6 million were implemented, representing 43 percent of the P1.63 billion allotments released to the NGAs and GOCCs.
The Auditor’s reports on the utilization of CDF showed that only P177 million of the project costs was audited. Of this amount, P101 million was passed in audit, P75 million was issued suspensions, and P0.5 million was disallowed in audit. For the amount of P531.6 million, the audit status indicated were: (1) not yet audited, (2) audit is on-going and (3) audit status not stated. The audit findings and recommendations are discussed in Part VI of this report.
Parts VI and VII of this report discuss the results of audits conducted by the Auditors of NGAs and the observations on the accounts as reviewed/analyzed by the Accountancy Office. They also present the recommendations to improve the economy and efficiency of government operations as well as to enhance the accuracy and reliability of the government financial reports. Following is a summary of the recommendations:
Agency heads and officials concerned should strictly enforce the rules and regulations on the granting, utilization and liquidation of cash advances as provided in COA Circular Nos. 97-002 and 94-013. The Departments with huge balances of cash advances should create a Task Force or Committee to expedite liquidation and review of long outstanding cash advances. The Committee should work within a set time frame and the progress of work should be regularly monitored.
Agency heads and Finance Directors/Chief Accountants should comply with the requirements under Memorandum Order No. 181 as implemented by National Budget Circular No. 403 particularly on the reversion of accounts payable that are outstanding for more than two years.
Finance Directors and Chief Accountants of agencies using decentralized accounting system should intensify efforts to eliminate the unreconciled balances of reciprocal accounts for sub-allotments not covered by funding checks. A task force should be created to work on the reconciliation of prior years’ balances. Current year’s reciprocal accounts should be reconciled on a quarterly basis. They should follow the prescribed accounting for sub-allotments not covered by funding checks (COA Circular No. 90-326) and ensure timely submission of consolidated year-end trial balances.
Heads of agencies and officials concerned should coordinate efforts to establish an effective collection system. Chief Accountants should exert efforts to determine collectibility of accounts and take further action on their collection or write-off or settlement.
Officials concerned should ensure the conduct of physical inventory of fixed assets and semi-expendable items at least once a year and the reconciliation of the physical inventory with the accounting records. Where discrepancies are noted, appropriate adjustments should be effected to bring the two records in agreement.
1/ Budget of Expenditures and Sources of Financing - Fiscal Year 1997 - pages 11 to 13
2/ Budget of Expenditures and Sources of Financing - Fiscal Year 1997 - pages 145 to 146
3/ Budget of Expenditures and Sources of Financing - Fiscal Year 1997 - pages 145 to 146