REPORT HIGHLIGHTS: ANNUAL FINANCIAL REPORT OF THE NATIONAL GOVERNMENT
1.0 RESULTS OF OPERATION
1.1 Appropriations - P734.7 billion
For fiscal year 1998, a total appropriation of P734.7 billion was made available for the operation of the National Government, servicing of outstanding public debt, financial assistance to Local Government Units (LGUs) and Government Owned or Controlled Corporations (GOCCs), and for other purposes. The appropriation is composed of a new sum of P495.7 billion provided under R.A. No. 8522, the General Appropriations Act for fiscal year 1998, continuing appropriation of P52.2 billion, and automatic appropriation of P186.8 billion.
Of the total available appropriation, P606.3 billion was released, including, P2 billion which was intended to cover the overdraft incurred in prior years on payment of debt service expenditures. In addition to the current year release of P606.3 billion, the unobligated balance of the previous years continuing appropriation amounting to P54.3 billion also formed part of the released appropriation. Out of the released appropriation, P611.2 was obligated while P2 billion was applied to cover the overdraft incurred in prior years on debt service. Upon closing of the books of the National Government as of December 31, 1998, P10.3 billion of the unobligated balance was reverted to the Cumulative Results of Operation - Unappropriated (Unappropriated Surplus) while P37.1 billion was retained as continuing appropriation.
1.2 Expenditures - P838.3 billion
Expenditures incurred totaled P838.3 billion, composed of Current Operating Expenditures - P751.6 billion (90%) and Capital Outlay - P86.7 billion (10%).
Forty six percent or P388.2 billion of the total expenditures was spent on debt service, composed of loan repayments, interests and commitment fees and other charges while 12 percent or P98.8 billion was given as financial assistance to LGUs (P81.4 billion) and GOCCs (P17.4 billion). Effectively, only 42 percent or P351.3 billion out of the total expenditures of P838.3 billion is directly related to the operation of the National Government.
Based on the budgeted expenditures of P540.8 billion,1 the actual expenditures of P838.3 billion is higher by 55 percent or P297.5 billion. The big deviation can be traced to the debt service component which was programmed at only P75.6 billion2 as against actual payment made of P388.2 billion.
Out of the total expenditures, P227.1 billion was incurred without the required covering allotment. Ninety nine percent or about P224.5 billion of this overdraft was already paid or liquidated.
1.3 Revenue and Receipts- P481.3 billion
Revenue earned totaled P481.3 billion, generated from tax sources - P414 billion and non-tax sources P67.3 billion.
Total revenue declined by P10.9 billion based on the previous year’s actual figure of P492.2 billion. The decrease is principally attributed to the shrinkage of Import Duties and Taxes collected by the Bureau of Customs which contracted from P97.8 billion in fiscal year 1997 to only P77 billion for the current year. Actual revenue generated by the Bureau of Customs is short by 36 percent or P44.2 billion based on the targeted amount of P121.2 billion3. Likewise, the reported income of the Bureau of Internal Revenue amounting to P334.4 billion fell short of target by 14 percent or P54.6 billion. It, however, posted a positive growth rate of six percent over the 1997 actual performance of P314.7 billion.
Tax revenue earned from all sources totaled P414 billion. However, this amount can be reduced subsequently by as much as P6.9 billion, representing the total value of Tax Credit Certificates issued during the year by the Bureau of Customs, Bureau of Internal Revenue, and the One Stop Shop Inter-Agency Tax Credit and Duty Drawback Center of the Department of Finance.
Revenue from non-tax sources also decreased by 13 percent or P10.2 billion compared to the previous year’s recorded figure of P77.5 billion. Among the components that registered significant decreases were Capital Revenue - P6.9 billion, Income from Public Enterprises/Investments - P4.6 billion, and Operating and Service Income - P3.2 billion. These decreases were offset partly by a P5 billion increase in the Miscellaneous Income category.
The reported non-tax revenue of P67.3 billion for the current year is inclusive of strictly non-revenue items, such as; current year contribution of the General Fund to the Bond Sinking Fund - P18.4 billion, proceeds from grants and aids - P1.2 billion, extraordinary receipts which represent repayment of loans or advances by the National Government to the GOCCs and LGUs - P584.8 million, and stock dividends of P591.9 million paid by the National Power Corporation to the National Government. Net of these items, non-tax revenue would amount to only P46.5 billion instead of P67.3 billion. Also included in non-tax revenue is the uncollected Account Receivables which were credited to Income account during the year.
Revenue from tax and non-tax sources were programmed at P513.1 billion and P27.8 billion, respectively or a total revenue target of P540.9 billion.4
1.4 Borrowings Receipts - P357.3 billion
Gross receipts from borrowings amounted to P357.3 billion. Of this total, P297.3 billion was generated from domestic sources and P60 billion from foreign creditors. Out of the P60 billion foreign borrowings, P38.5 billion was in cash and P21.5 billion was in kind.
Gross borrowings from domestic and external sources were budgeted at only P17 billion and P12.8 billion, respectively5. The need to fill in the huge financial gap between revenue and total expenditures forced the government to borrow eleven times more than the programmed amount of P29.8 billion.
1.5 Overall Operational Income - P372.8 billion
Matching total revenue and receipts of P481.3 billion against expenditures of P838.3 billion, including loan repayments, the operation of the National Government for fiscal year 1998 would result to a net deficit of P357 billion. This deficit was covered by proceeds from borrowings of P357.3 billion, resulting to a net income of P372.8 million.
2.0 FINANCIAL CONDITION
As of December 31, 1998, the books of the National Government showed a total assets of P1.66 trillion, total liabilities of P1.73 trillion, and a negative residual equity of P68.5 billion.
2.1 Assets - P1.66 trillion
Total assets recorded a net increase of P60.7 billion which resulted from the growth of Investments and Fixed Assets by P132.3 billion and the combined decrease of the Current Assets, Other Assets and, Contingent Assets by P71.6 billion.
Increase in the Investments and Fixed Assets was contributed by new investments made out of idle funds from the Bond Sinking Fund, purchases of stocks and bonds, new loans granted to GOCCs, acquisition of lands and sites, equipment, and furniture and fixtures, and construction of roads, bridges, irrigation and flood control projects, telecommunication projects, and national buildings.
Decrease in the Current Assets resulted mainly from the depletion of the National Government’s cash deposit with the Bangko Sentral Ng Pilipinas and other Authorized Government Depository Banks. On the other hand, decrease in Other Assets and Contingent Assets resulted from the partial retirement of short-term investments, and the adjustment effected in the books pertaining to Contingent Assets - Miscellaneous account which was determined to be erroneous.
2.2 Liabilities - P1.73 trillion
Total liabilities increased by 9.2 percent or P145.4 billion, resulting primarily from new or additional loans availed of during the year, and increase in unliquidated obligations and trust liabilities.
2.3 Residual Equity - (P68.5 billion)
Total Residual Equity showed a negative balance of P68.5 billion, indicating that the total liabilities of the government has exceeded its total assets. One factor that led to the diminution of total assets vis-a-vis total liabilities is the current practice of the government to use proceeds of borrowings in purely Current Operating Expenditures, such as payment of interests and principal amortization of loans instead of financing Capital Projects which cannot be supported by revenues as required by existing laws on borrowings. The adjustment made in the books of the Bureau of the Treasury during the year, reducing the balance of Contingent Assets - Miscellaneous account by P70.6 billion is another contributory factor to the negative balance of the Residual Equity.
1 Budget of Expenditures and Sources of Financing (Tables), FY 1998 - pages 11 - 13.
2 Budget of Expenditures and Sources of Financing (Tables), FY 1998 - pages 11 - 13.
3 Budget of Expenditures and Sources of Financing (Tables), FY 1998 - pages 141 - 142.
4 Budget of Expenditures and Sources of Financing (Tables), FY 1998 - pages 141 - 142.
5 Budget of Expenditures and Sources of Financing (Tables), FY 1998 - page 207.