Public fiscal admin report

Republic of the Philippines
EULOGIO “AMANG” RODRIGUEZ
INSTITUTE OF SCIENCE AND TECHNOLOGY
Nagtahan, Sampaloc, Manila
GRADUATE PROGRAM
MASTER OF PUBLIC ADMINISTRATION

TOPIC: 1. GOVERNMENT EXPENDITURES BY FUNCTION
2. TAXATION PRINCIPLES

PUBLIC FISCAL ADMINISTRATION
Presented by:
LOUIE A. MEDINACELI

Broad Fiscal Policy Goals of Government
Expenditures
1. to promote a desirable level of employment
(to maximize and optimize the country’s manpower resource’s contributions to socio-economic growth)
2. to promote a desirable level of output
(related with goal 1, aggregate output must expand if only to meet the expected natural increase in population)
3. to promote a desirable level of income and its proper distribution
(while the labor force must be employed to raise overall productivity, the employed members of the labor force would work only when they
are properly compensated for their effort)
4. to promote a desirable level of prices
(it must stabilize prices at that level which is within the reach of the majority of the people, especially the low income groups, while
giving the business sector ample inducement to expand employment, production, and income, and to earn reasonable profits.)

Factors Affecting the Increasing Expenditure Trend
1. the growth in population
2. inflation ( or the increase in the prices of goods and
services purchased by the government)
3. the increasing demand for economic and social development
projects

Principles of Government Expenditures
Principle of Minimum  the government should spend the
Expenditure
least it possibly can, consistent with the
protection of its citizens.
Principle of Minimum  this would mean that the services
Interference with
provided by the government should not
Private Enterprise
compete with established private firms
Principle of Maximum  the aim of government expenditures
Employment
is sometimes to raise the level of
employment as high as possible
Principle of Maximum  its implication is that each should be
Advantage
spent where the marginal social utility is
the greatest

The Government
Procurement Law
(Republic Act
9184)

R.A. 9184
Government Procurement Act

Presentation
Outline
Introduction
Historical Background
Procurement Reform Act
Assessment and Evaluation
R.A. 9184 as a catalyst of
change?
Amending R.A. 9184

R.A. 9184

Introduction

- Government procurement
has long been perceived as
plagued by corruption
-Irregularities and budget
losses
- Subsequent distortion in the
quality and quantity of
delivered public services

R.A. 9184

- Government Procurement
Reform Act of 2003 (R.A.
9184) was enacted to uphold
transparency, accountability,
equity, efficiency and
economy in the procurement
process.
- Procurement – refers to the
acquisition of Goods, Consulting
Services, and the contracting for
Infrastructure Projects by the
Procuring Entity.

Introduction

R.A. 9184

R.A. 9184 mandates the
following:
• Wide dissemination of bid
opportunities thru G-EPS;
• Participation of NGOs in
procurement process as
observers;
• Streamlined procurement
process
• System of accountability;
and,
• Public monitoring of the
procurement process.

Introduction

R.A. 9184

Historical
Background

- Philippine Commission Act
No. 22 (1900)
-PC Act No. 74 and 82 (1901)
- PC Act No. 146 (1901)
- Commonwealth Period, EO
No. 16 (1936)

R.A. 9184

Historical
Background

- Administrative Code on
Procurement (1917)
-Procurement and the
Supply Law
- Contracts for Public Works
- Decentralized Procurement
System

R.A. 9184

Pre-reform
procurement
structures
- Procurement of Civil Works
-Procurement of goods
- Procurement of Consultancy
Services
- Procurement in LGUs
- Procurement in GFIs /
GOCCs
- E.O. No. 40 (2001)

R.A. 9184

Pre-reform issues
- The proliferation of laws and
regulations in public sector
procurement has rendered the
system uncoordinated,
ambiguous and confusing in
many procedural aspects;
- The government should take
advantage of the latest trend in IT
to render procurement process
more transparent;

R.A. 9184

Pre-reform issues
- Agency procurement
structures and staffing
patterns need to be examined
with a view of prescribing
model organizational units for
the different agency
categories.

R.A. 9184

Government
Procurement Act
- Act Providing for the
Modernization,
Standardization and
Regulation of the
Procurement Activities of the
Government and for Other
Purposes.
- Signed into law January 3,
2003 by Pres. Gloria
Macapagal-Arroyo

R.A. 9184

- Applies to the procurement of
infrastructure projects, goods,
and consulting services,
regardless of source of funds,
whether local or foreign, by all
branches and instrumentalities of
government, its department,
offices and agencies, including
government-owned and/or
controlled corporations and local
government units

Government
Procurement Act

The basic tenet is that
there must be competitive
bidding

R.A. 9184

- The law establishes the
Government Procurement
Policy Board (GPPB)
-Functions:
(a)Protect national interest in all matters
affecting public Procurement;
(b)Formulate and amend, whenever
necessary, the IRR and the corresponding
standard forms for Procurement;
(c)Ensure that Procuring Entities regularly
conduct Procurement training programs; and
(d)Conduct an annual review of the
effectiveness of the Act and recommend any
amendments thereto, as may be necessary.

Government
Procurement Act

GPPB composed of
Secretary of DBM as Chairman
Director-General of NEDA as
Alternate Chairman
Members: Secretaries of DPWH,
DTI, DOH, DND, DepEd, DOF, DILG,
DOST, DOTC, DOE, and
representative/s from private
sector appointed by the Pres. On
recommendation of GPPB.

R.A. 9184

- Basic features:
1.Bids and Awards Committee (BAC)
2.Threshold amount is P500,00.00
3.Splitting of Contract – not allowed
4.Approved Budget for Contract
(ABC)
5.Pass/Fail Criteria
6.Alternative Procurement
7.Generic Procurement Manuals
8.Procurement by brand name –
prohibited
9.Uses online technology (G-EPS)
10.Penal Clause

Government
Procurement Act

-WB Country Procurement
Assessment Report (CPAR)
- A single oversight body called the
Government Procurement Policy
Board (GPPB);
- Procurement planning and budget
linkage through the Annual
Procurement Plan;
- Approved Budget for the Contract
as ceiling for bid prices;
- Use of Government Electronic
Procurement System becomes
mandatory, including the posting of
bid opportunities and awards of
contracts;

R.A. 9184

Assessment and
Evaluation

R.A. 9184

-WB Country Procurement
- Fixed responsibilities and
accountabilities of the Bids and
Awards Committee (BAC), BAC
Secretariats, Technical Working
Groups, and the bidders;
- A national and local training
program for capacity building on the
new procurement system, its
documents and forms;
- Move towards professionalization
of procurement officials;

Assessment and
Evaluation

R.A. 9184

- WB Country Procurement
- Use of standard bidding forms and
manuals – the standard bidding
documents for works, goods and
consulting services as harmonized
with development partners
institutions.

Assessment and
Evaluation

Assessment and
Evaluation

R.A. 9184

R.A. 9184

Assessment and
Evaluation

Table 1: Summary Status Report of the Training for Local Government Units (period covering April to December
2004)
Participants (LGUs)
Region

Province

Municipality

City

Percentage of
LGUs Trained

II

4 trained/4 P
100%

113 trained/117 M
96.58%

8 trained/8 C
100%

125/129
96.90%

III

5 trained/5 P
100%

85 trained/90 M
94.44%

3 trained/3 P
100%

93/93
94.90%

III

7 trained/7 P
100%

103 trained/118 M
87.29%

10 trained/12 C
83.33%

120/137
87.59%

IV - A2

5 trained/5P
100%

103 trained/132 P
78.03%

11 trained/11 P
100%

119/148
80.41%

V

6 trained/6 P
100%

73 trained/107 M
68.22%

6 trained/10 C
60%

85/123
69.11%

VI

6 trained/6 P
100%

117 trained/117 M
100%

16 trained/16 C
100%

139/139
100%

VII

4 trained/4 P
100%

114 trained/120 M
95%

12 trained/12 C
100%

130/136
95.59%

VIII

6 trained/6 P
100%

129 trained/139 M
92.81%

4 trained/4C
100%

139/149
93.29%

IX

3 trained/3 P
100%

44 trained/66 M
66.67%

5 trained/5 C
100%

52/74
70.27%

X

5 trained/5 P
100%

85 trained/85 M
100 %

8 trained/8 C
100%

98/98
100%

XI

4 trained/4P
100%

38 trained/43 M
28.37%

4 trained/5 C
80%

46/52
88.46%

XII

4 trained/4 P
100%

38 trained/45 M
84.44%

5 trained/5 C
100%

47/54
87.04%

XIII

4 trained/4 P
100%

49 trained/70 M
70%

3 trained/3 C
100%

56/77
72.73%

CAR

6 trained/6 P
100%

51 trained/76 M
67.11%

1 trained/1 C
100%

58/83
69.90%

3 trained/4 M
75%

12 trained/13 C
92.31%

15/17
88.24%

National
Capital Region
(NCR)
Autonomous
Region of Muslim
Mindanao
(ARMM)

34 trained/94 M
36.17%

1 trained/1 C
100%

38/100
38%

Total

1

3 trained/5 P
60%

72 trained/79 P
91.14%

1,179 trained/1,494 M
78.92%

109 trained/119 C
91.60%

1,360/1,692

For Region IV-B, training was handled by the Commission on Audit.

R.A. 9184

Assessment and
Evaluation

R.A. 9184

-Collusion
“Collusion is part of the way
contractors do business but it does
not mean that public works officials
are involved in it.”
- Hermogenes Ebdane, DPWH
- The law clearly prohibits

collusion and other attempts
to subvert the public bidding
process

Catalyst of
Change?

R.A. 9184

Catalyst of
Change?
-Public procurement
encompasses much more
than the bidding process
- Address and monitor how
priorities and terms of
reference for processes are
actually set

R.A. 9184

Catalyst of
Change?
-After a contract has been
won and awarded, the
process may be further
subverted by the likes of
ghost deliveries, underdelivery, or delivery of
inferior quality materials

R.A. 9184

Catalyst of
Change?
-Long and complex
procedures

- A procurement system that
dwells on checks and balances
vs. long-drawn-out bidding
process

“While we sometimes like to pat
ourselves on the back with the
progress made in setting in place the
new Procurement Law in
government; disturbing
developments like the further
downgrade we got under the quality
of public and institutional world
competitiveness study, including that
for government procurement and the
corruption issue in the military
procurement finance management,
make us realize that we have a long
way to go in achieving the anticorruption aspects of procurement.”
- former DBM Undersecretary
Laura B. Pascua

R.A. 9184

Catalyst of
Change?

YES!

R.A. 9184

Catalyst of
Change?
The battle is not lost.
The Philippines has the
Supreme Court where it can
turn to when there is a
palpable violation of R.A. 9184.

YES!

1. To place under its coverage
procurements funded by foreign
loans or credit under RA No. 8182
or the Official Development Act
(ODA), as amended;
2. To strengthen transparency by
posting the criteria, ratings and
calculations of bids used by the
BAC on the procuring agency’s
website or that of the Government
Procurement Policy Board
(GPPB);
3. To lessen the discretion of a
procuring agency in the
consideration of single
calculated/rated and responsive
bid submissions.

R.A. 9184

Proposed
Amendments

JOKE LANG!
The Contract
Written by Louie
Three contractors are bidding to fix the White House fence.
One from the Philippines, another from Mexico and an
American. They went with a White House official to examine
the fence.
The American contractor takes out a tape measure and does
some measuring, then works out some figures with a pencil.
"Well," he says. "I figure the job will run about $900: $400
for materials, $400 for my crew and $100 profit for me.“
The Mexican contractor also does some measuring and
figuring, then says, "I can do $700: $300 for materials, $300
for my crew and $100 profit for me.“
The Filipino contractor doesn't measure or figure, but leans
over to the White House official and whispers: "$2,700." The
official, incredulous, says, " What? You didn't even measure
like the other guys! How did you come up with such a high
figure?" How do you expect me to consider your service with
that bid?
"Easy Sir," the Pinoy explains, "$1,000 for you, $1,000
for me and we hire the guy from Mexico“.

R.A. 9184

STATE AUDITING
 the analytical and systematic examination and verification
of financial transactions, operations, accounts, and reports of
any government agency for the purpose of determining their
accuracy, integrity, and authenticity, and classifying the
requirements of law, rules, and regulations (Government
Auditing Code of the Philippines)
 PHASES OF THE AUDIT CYCLE
SIXinvolves the activities of obtaining, examining, verifying,
evaluating, of the audited agency. The purpose of this is to have a
1. Preliminary surveyand reporting agency actions and decisions
working knowledge to gather the needed information on the legal, policy and
administrative environment of the agency concerned.
2. Review of legal and policy framework within the agency operates, and the
plans, policies, objectives, and standards it has adopted.
3. In depth examination of the agency’s internal control system.
4. Preparation of draft report and presentation to agency
5. Finalization of the report
6. Follow-up on the implementation of audit recommendation

FUNCTIONS OF COA as per Sec. 2, Art. IX-D of the 1987
Constitution

Auditorial function - covering all govt. accounts having to do with
revenues and receipts and all expenditures or uses of public funds and
property as well
Rule-making for accounting and auditing -COA is mandated to
prescribe accounting and auditing rules and regulations to be observed
by government agencies in the management of their financial operations
and as bases in the review and appraisal of such operations
Prevention of irregular, unnecessary, excessive & extravagant
expenditures-this function elevates and meaningfully strengthens the
once passive role of the government auditor relative to excesses and
irregularities in government transactions

FUNCTIONS OF COA
Reportorial function-through the annual report of the COA, the country’s executive
and legislative arms are kept posted on the financial state of the government
three annual reports prepared by COA: (1) Annual Report on National Government,
(2) Annual Report on Local Governments, (3) Annual Corporate Summary
Recommendatory function for improving efficiency and effectiveness-this provides
the legal basis for the modern thrust in state audit called the three Es – economy,
efficiency, and effectiveness audit
Limited accounting function-COA is mandated to perform a limited accounting
function, because ordinarily, an audit office does not carry out accounting functions
Quasi-judicial function-COA exercises adjudicatory power. Any party, whether a
public officer or private person, aggrieved by the decision, order or ruling of the
Commission, may elevate the matter to the Supreme Court for Certiorari
Report on expenses of the national assembly-the records and books of accounts of
the National assembly shall be open to the public in accordance with law and such
books shall be audited by the COA, which shall publish annually the itemized
expenditures of each member
Other functions as may be prescribed by law

1. As to timing
a. PRE-AUDIT – is the examination of financial transactions before their
consummation or payment. It is basically a control device and hence
an integral part of accounting which is a managerial function
b. POST-AUDIT – refers to the examination of financial transactions after
payment has been made.
Note: in both cases, the review may consist of :
i. determining whether all regulations relevant laws have been
observed in the transaction
ii. Physical inspection of supplies or equipment;
iii. Checking whether all necessary documents are submitted and
properly accomplished
iv. Determining whether the required authority or approval has
been secured;
v. Checking mathematical accuracy

2. As to Organizational Status of Auditor
 Related to the lifting of pre-audit and installation of post-audit is the
definition of the status of the auditor. There are two possibilities: Having an
(a) Internal Audit, or an (b) External Audit.
a. INTERNAL AUDIT
– Is mainly a function of management. In here, the auditor heads the
internal control system of an agency and his or her activities are considered
forms of pre-audit.
- The agency can use internal audit as a tool for control and evaluation of
management operations. It is considered a part of the functions of the
audited agency with the view of achieving regularity, efficiency, economy,
and effectiveness in agency operations, especially in large organizations.
b. EXTERNAL AUDIT
- Is what the COA does. The COA Auditors are independent of the
audited agency.
- Under the Constitution, external audit by the COA cannot be replaced
by internal audit or any private external audit.
- While the internal auditor may conduct audit of his agency, only the
COA is authorize to conduct government audit.
- Unlike internal audit, external audit is called upon to give a professional
opinion on the fairness of presentation of financial statements.

3. As to Audit Scope
a. FISCAL AUDIT – is the traditional financial audit in government.
It is a combination of financial audit and compliance audit.
i. FINANCIAL AUDIT
– is the most widely practiced type of audit in the private sector.
- it is performed primarily through an examination of financial
statements in order o express an opinion on the fairness with which the
financial condition and results of operations of an audited entity are
presented.
- in the government, the constitution requires COA to submit an
annual report on the financial condition and operation of the NG and its
subdivisions, instrumentalities, and agencies, including GOCCs.
ii. COMPLIANCE AUDIT
- is an evaluation of the extent to which the agency has complied with
pertinent laws, policies, and rules and regulations in the conduct of its
operations
- the auditor tests the agency’s financial transactions and specific
program, function or activity to determine their legality or regularity.

Fiscal Policy

R.A. 9184

• It is the process by which revenues are
generated used to defray expenses of
government.
• The authority of the law in increasing its
revenue under, purposely used to promote
welfare and protection of its citizenry.
• It is the collection of the share of individual
and organizational income by a
government under the authority of the law.

R.A. 9184

Concept of Taxation

Taxation is the inherent
power of the state to
impose and demand
contribution upon persons,
properties, or rights for the
purpose of generating
revenues for public
purposes.

R.A. 9184

Significance of Taxation

Primary purpose:
• To generate funds to defray expenses incurred by
the government in promoting the general welfare
of its citizenry.
Other purposes:
• to equitably contribute to the wealth of the nation
• to protect new industries
• to protect local producers

R.A. 9184

Principles and Theories of Taxation
• The Benefit Principle. This principle
holds the individuals should be taxed in
proportion to the benefits they receive
from the governments and that taxes
should be paid by those people who
receive the direct benefit of the
government programs and projects out of
the taxes paid.

R.A. 9184

• The Ability-to-Pay Principle. This
principle holds that taxes should relate
with the people’s income or the ability to
pay, that is, people with greater income or
wealth and can afford to pay more taxes
should be taxed at a higher rate than
people with less wealth. Ex. Individual
income tax.

R.A. 9184

• The Equal-Distribution Principle. This
principle states that income, wealth, and
transaction should be taxed at a fixed
percentage; that is, people who earn more
and buy more should pay more taxes, but
will not pay a higher rate of taxes.

R.A. 9184

Characteristics of Tax

• It is enforced contribution. Its payment is not voluntary
nature, and the imposition is not dependent upon the will
of the person taxed.
• It is generally payable in cash. This means that payment
by checks, promissory notes, or in kind is not accepted.
• It is proportionate in character. Payment of taxes should
be base on the ability to pay principle; the higher income
of the tax payer the bigger amount of the tax paid.
• It is levied (to impose; collect) on person or property.
There are taxes that are imposed or levied on acts,
rights or privileges. Ex. Documentary tax.

R.A. 9184

Classification of Taxes
I.

I.

I.

As to who bears the burden
• Direct Tax (ex. Income Tax)
• Indirect Tax (ex. R-VAT)
As to purpose
• General Tax (ex. Almost All Taxes)
• Special Tax
As to scope
• National Tax (ex. National Revenue
Taxes)
• Local Tax

R.A. 9184

Entities Exempted from Taxation
• Religious Institutions
• Charitable Institutions
• Non-Profit, Non-Stock Educational
Institutions
• Non-profit Cemeteries
• Government Institutions
• Foreign Diplomats

R.A. 9184

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