REPORT HIGHLIGHTS: ANNUAL FINANCIAL REPORT OF THE NATIONAL GOVERNMENT
1.0 BUDGET LEVELS AND PRIORITIES
The government in its effort to attain modest economic growth, and ultimately, make some improvement in the life of the Filipino people, particularly, the less-privileged group, proposed a total budget of P651 billion for fiscal year 2000. To help ensure that this aspiration is translated into reality that would really redound to the benefit of the poor, four sectors were identified as top spending priorities and were allocated the following amounts of budget: Education – P118 billion, Agriculture – P21.5 billion, Housing – P5.9 billion, and Local Governance – P131.2 billion.
For the purpose of funding the budgeted expenditures, sources of financing were proposed, as follows: Revenue collections – P597.7 billion and borrowing proceeds – P147.6 billion. The Bureau of Internal Revenue and the Bureau of Customs were expected to generate tax collections amounting to P447.2 billion and P98 billion, respectively.
Operational deficit was estimated at P40 billion, representing 1.1 percent of Gross National Product.
2.0 RESULTS OF OPERATION
2.1 Appropriations – P 1.7 trillion
For fiscal year 2000, P1.2 trillion out of the total appropriations of P1.7 trillion was available for operational requirements of the government. This consisted of current year’s appropriations authorized under R.A. No. 8760, amounting to P555.8 billion; balances of continuing appropriations of P149.9 billion, provided under various Acts, including Executive Order No. 182, the Public Works Act; and automatic appropriations of P522.7 billion, provided under various laws on special accounts and mandatory obligations, including those intended for servicing public debt amounting to P492.2billion. The amount of appropriations for debt service during the year was based on actual disbursements made by the Bureau of the Treasury on interests, commitment charges, redemptions and principal amortization of outstanding loans.
A portion of the total automatic appropriations amounting to P495.6 billion was no longer available for use of the government during the year as this was intended to cover the expenditures incurred on debt service in the previous year.
2.2 Allotments – P1.1 trillion
Out of the total appropriations, P1.1 trillion was released to various agencies of the government through the approval and/or issuance of Agency Budget Matrices and Special Allotment Release Orders. Forty five percent or P497 billion of the total appropriations released cannot be used anymore for fiscal year 2000 operations as this was intended to be applied to expenditures incurred in prior years which were not covered by allotments.
2.3 Expenditures – P 1.07 trillion
Expenditures of the National Government reached P1.07 trillion, consisting of Current Operating Expenditures of P951.1 billion1 and Capital Expenditures of P120.7 billion. Close to one half or 46 percent of the total expenditures amounting to P492.2 billion was paid out to service public debt in the form of interest payments, loan repayments and commitment fees and other charges. Sixteen percent or P175.2 billion was given to Local Government Units and to Government Owned or Controlled Corporations in the form of subsidy, loans and equity investments. The remaining 38 percent or P404.4 billion pertained to expenditures incurred by various national agencies of the government on Personal Services, Maintenance and Other Operating Expenses, and Capital Outlays.
Compared to the budgeted or proposed amount of P651 billion, actual expenditures for the current year is higher by 64.6 percent or P420.8 billion. The big deviation of actual expenditures from the proposed amount is attributed principally to non-inclusion of Loan Repayments and Sinking Fund Contributions item in the proposed program of expenditures. Loan Repayments and Sinking Fund Contributions at P321.3 billion shared 30 percent of actual expenditures. This item, as a matter of policy of the government is considered "off budget", hence, not included in the program of expenditures.
Actual expenditures of P1.07 trillion for the current year increased by 20 percent or P179 billion based on the previous year’s level of P892.8 billion.
The levels of actual expenditures incurred on the four top priority spending sectors were the following: Education – P121.2 billion, Agriculture – P20.4 billion2, Housing – P5.4 billion2, and Local Governance – P121 billion.
Out of the total expenditures of P1.07 trillion, 49 percent or P528.8 billion was incurred without the required covering allotment that should have been issued by the Department of Budget and Management. Included in the expenditures not covered by allotments were actual disbursements made by the Bureau of the Treasury on debt service amounting to P492.2 billion.
2.4 Revenue – P564.7 billion
Revenue totaled P564.7 billion, generated from tax sources – P459.1 billion and non-tax sources – P105.6 billion. Based on the previous year’s figure of P510.5 billion, total revenue posted an increase of 10.6 percent or P54.2 billion. The bigger portion of the increase, amounting to P28.6 billion came from the tax component. The remaining P25.6 billion was contributed by non-tax sources, specifically, Operating and Miscellaneous Revenue and Capital Revenue.
Operating and Miscellaneous Revenue included a non-income item of P34.5 billion, representing contribution of the General Fund to the Bond Sinking Fund. Excluding this non-income item, total Non-Tax Revenue will amount to only P71.1billion.
On the other hand, the reported total Tax Revenue of P459.1 billion included amounts which were mere book entries without actual cash inflow, representing assessed taxes and duties on importations of government agencies. The reported Tax Revenue is also subject to adjustment based on the value of Tax Credit Certificates issued during the year which should have been deducted from it.
Compared to the proposed amount of P551.8 billion, actual revenue from taxes fell short by 16.8 percent or P92.7 billion. Based on submitted reports, tax collecting agencies of the government reported the following amounts of earned tax revenue: Bureau of Internal Revenue – P360.4 billion, Bureau of Customs – P96.5 billion, Other Collecting Agencies – P2.2 billion. As in previous years, both the Bureau of Internal Revenue and the Bureau of Customs failed to meet their respective collection targets. The Bureau of Internal Revenue suffered the biggest shortfall of 19.4 percent or P86.8 billion. The Bureau of Customs and the Other Tax Collecting agencies recorded unfavorable variances of P1.5 billion and P4.4 billion, respectively.
2.5 Gross Borrowings – P494.2 billion
Gross borrowings amounted to P494.2 billion. Of this total, P339.7 billion was generated from domestic sources while P154.5 billion was from external sources.
Actual borrowings availed of exceeded the proposed amount of P147.6 billion by 235 percent or P346.6 billion. Domestic and foreign borrowings were targeted at only
P94.3 billion and P53.3 billion, respectively.
The big deviation of actual borrowings from the proposed level could be attributed to the decision of the government to avail more loans in order to raise the much needed funds to narrow down the widening operational deficit brought about by the expanding magnitude of debt service expenditures and the shortfall in revenue collections.
2.6 Gross Operational Deficit – P507.1 billion
Matching total revenue of P564.7 billion with total expenditures of P1.07 trillion, inclusive of loan repayments, operations of the National Government would result to a gross deficit of P507.1 billion. Operational deficit will amount to P65.1 billion only if loan repayments of P321.3 billion and capital outlays of P120.7 billion are excluded from total expenditures.
The gross operational deficit was substantially covered by proceeds from borrowings of P494.2 billion, resulting to a net operational deficit of P12.9 billion.
3.0 FINANCIAL CONDITION
As of December 31, 2000, the books of accounts showed the value of the total assets of the National Government at P1.9 trillion. Total Liabilities amounted to P2.5 trillion, resulting to a negative Residual Equity of P601.2 billion.
3.1 Assets – P1.9 trillion
Total assets recorded a net increase of seven percent or P124.2 billion over the year. This increase resulted from substantial growth in the following accounts: Receivables – P7.1 billion, Contingent Assets – P12.8 billion, Investments – P36 billion, Land and Land Improvements – P62.4 billion, and Building and Structures, and Furniture, Fixtures and Equipment – P24.5 billion. The combined increase in these accounts was partly offset by reduction in Cash Account of P6 billion, and in Acquired Assets of P14.6 billion.
The significant increase in Contingent Assets was brought about by additional advances made by the National Government in settlement of the CB-BOL outstanding liabilities.
Growth in Investment account resulted mainly from new purchases and subscriptions of Stocks and Bonds of National Power Corporation and other GOCCs worth P34.4 billion and P0.6 billion, respectively. Increase in Land and Land Improvement account is ascribed to acquisition or purchase of lands and sites; and construction of new roads, bridges, and flood control and other infrastructure projects.
Total Current Assets at P533.9 billion and Total Investments and Fixed Assets at P1.2 trillion, represent 28.2 percent and 64.9 percent of Total Assets, respectively.
3.2 Liabilities – P2.5 trillion
Total Liabilities increased by 19.5 percent or P406.7 billion, contributed mostly by additional Long-term Liabilities incurred arising from new loans availed of during the year. Increase in Payables and Trust Liabilities amounting to P22.3 billion and P8.4 billion, respectively, also contributed to overall growth in Total Liabilities.
Out of the Total Liabilities, 85.4 percent or P2.1 trillion falls under the category of Long-term Liabilities pertaining to public debt while 14.6 percent or P363.2 billion is Current Liabilities. Current Liabilities include unliquidated obligations on cash advances amounting to P22.8 billion.
3.3 Residual Equity – (P601.2 billion)
Residual Equity showed a negative balance of P601.2 billion, resulting from the excess of Total Liabilities over Total Assets. Negative balance in Residual Equity is attributed to the prevailing practice of the government to use proceeds of borrowings in purely Current Operating Expenditures, such as; payment of interest and principal amortization of outstanding loans instead of financing capital projects which cannot be supported by revenues as required by existing laws on borrowings. The excess of new loans availed of over loan repayments year after year also contributed steadily to the growth of negative balance of Residual Equity.
1 Includes Loan Repayments.
2 Includes subsidies to GOCCs intended for the implementation of agriculture and housing programs.