REPORT HIGHLIGHTS: ANNUAL FINANCIAL REPORT OF THE NATIONAL GOVERNMENT
1.0 RESULTS OF OPERATION
1.1 Appropriations – P613.5 billion
For fiscal year 1999, a total appropriation of P613.5 billion was made available for the operation of the National Government, 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 P469.4 billion provided under R.A. No. 8745, the General Appropriations Act (GAA) for fiscal year 1999, forwarding balance of continuing appropriations of P123.1 billion, and automatic appropriations of P21 billion. The total appropriations does not include the amount of P414 billion which was actually paid for interest, commitment charges and amortization of principal on outstanding loans of the government which are chargeable against the existing automatic appropriations on debt servicing.
Of the total available appropriation, P528.7 billion was released, including, P676.2 million which was intended to cover the overdraft incurred in prior years. In addition to the current year release of P492.2 billion, the unobligated balance of the previous year’s continuing appropriations amounting to P36.5 billion also formed part of the released appropriations. Out of the released appropriations, P475.2 was obligated. Upon closing of the books of accounts of the National Government as of December 31, 1999, P4.7 billion of the unobligated balance was reverted to the Cumulative Results of Operation - Unappropriated (Unappropriated Surplus) while P48.1 billion was retained as continuing appropriation.
1.2 Expenditures – P892.8 billion
Expenditures incurred totaled P892.8 billion, composed of Current Operating Expenditures– P811.1 billion (91 percent) and Capital Outlays– P81.7 billion (9 percent).
Forty six percent or P414 billion of the total expenditures was spent on debt service, composed of loan repayments, interests and commitment fees while 13.5 percent or P120.5 billion was given as financial assistance to LGUs and GOCCs. Effectively, only 40.1 percent or P358.3 billion out of the total expenditures of P892.8 billion was spent on the operation of the National Government. This consisted of P216.2 billion in Personal Services, P71 billion in Maintenance and Other Operating Expenses (MOOE), and P71.1 billion in Capital Outlays.
Compared to the budgeted expenditures of P579.5 billion, the actual expenditures of P892.8 billion is higher by 54 percent or P313.3 billion. As in previous fiscal years, the cause of the sharp deviation of the actual amount of expenditures from the programmed level is the non-inclusion of estimated expenditures for principal amortization in the proposed budget. For the fiscal year under review, only a token amount of P13 million was budgeted for amortization of principal of domestic and foreign indebtedness as against actual payment of P194.8 billion made on this item. The non-inclusion of programmed expenditure for principal amortization in the National Budget is a policy of the government which considers the expenditure as an off-budget item.
Out of the total expenditures, 47 percent or P417.6 billion was incurred and paid without allotment released by the Department of Budget and Management (DBM). This consisted mostly of disbursements paid on debt service.
1.3 Revenue – P510.5 billion
Revenue earned totaled P510.5 billion, generated from tax sources – P 430.5 billion and non-tax sources P80 billion.
Total revenue posted a net increase of P29.2 billion based on the previous year’s actual figure of P481.3 billion. Both tax and non-tax revenue items contributed to the net increase of P16.4 billion and P12.7 billion, respectively, indicating a positive turn-around from the declining collection trend recorded in the past two successive fiscal years.
Based on purely income items, however, total revenue for the year would amount to only P487.5 billion instead of P510.5 billion if the P23 billion non-income item, representing contribution of the General Fund to the Bond Sinking Fund is excluded from the Non-Tax Revenue component.
The reported total revenue could be reduced further if the value of Tax Credit Certificates issued during the year is deducted from the portion generated from taxes.
Notwithstanding the increase posted over the year, actual tax revenue earned suffered a shortfall of P76.7 billion based on the projected amount of P507.2 billion. Both the Bureau of Internal Revenue and the Bureau of Customs failed to meet their respective collection targets by P68 billion and P7 billion, respectively. Other tax revenue collecting agencies also failed to meet their projected collections.
On the other hand, actual earned revenue from non-tax sources of P80 billion recorded a P36.7 billion favorable variance over the projected amount of P43.3 billion. On the basis of strictly non-tax revenue items, however, the amount that must be considered as actually realized during the year is only P56.2 billion, net of the P23 billion contribution of the General Fund to the Bond Sinking Fund.
1.4 Borrowings – P430.4 billion
Gross receipts from borrowings amounted to P430.4 billion. Of this total, P304.1 billion was generated from domestic sources and P126.2 billion from external sources. Out of the P126.2 billion foreign borrowings, P102 billion was in cash and P24.2 billion was in kind.
Gross borrowings from domestic and external sources were budgeted at only P35.3 billion and P57.9 billion, respectively. The widening gap between revenue and expenditures brought about by shortage in tax collections and the uncontrolled growth of debt service expenditures forced the government to borrow almost four times more than the programmed amount of P93.2 billion.
1.5 Operational Deficit – P382.3 billion
Matching total revenue of P510.5 billion against total expenditures of P892.8 billion, including loan repayments, the operation of the National Government for fiscal year 1999 would result to a deficit of P382.3 billion. This deficit was covered by proceeds from borrowings of P430.4 billion, resulting to a net income of P48.1 billion.
2.0 FINANCIAL CONDITION
As of December 31, 1999, the books of the National Government showed a total assets of P1.77 trillion, total liabilities of P2.09 trillion, and a negative residual equity of P318.7 billion.
2.1 Assets – P1.77 trillion
Total assets recorded a net increase of P106.2 billion which resulted from the combined growth of Investments and Fixed Assets, Contingent Assets, and Other Assets amounting to P112.1 billion and the decrease in Current Assets by P5.9 billion.
Increase in Investments and Fixed Assets was contributed by new loans and advances granted to GOCCs, acquisition of lands and sites, equipment, and furniture and fixtures, and construction of roads, bridges, and national buildings.
Decrease in the Current Assets resulted mainly from the reclassification of Receivable Accounts from GOCCs to Investment Accounts.
2.2 Liabilities – P2.09 trillion
Total liabilities increased by 21 percent or P356.4 billion, resulting mainly from new or additional loans availed of during the year. This increase could have gone higher were it not for the negative adjustment of P40.6 billion made in the Deferred Credits component related to the reclassification of Receivable Accounts to Investment Accounts under Assets.
2.3 Residual Equity – (P318.7 billion)
Total Residual Equity showed a negative balance of P318.7 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 excess of new loan availments over actual loan repayments pertaining to the current year also contributed to the growth of the negative balance of the Residual Equity.