public fiscal admin report

Republic of the PhilippinesEULOGIO “AMANG” RODRIGUEZ

INSTITUTE OF SCIENCE AND TECHNOLOGYNagtahan, Sampaloc, Manila

GRADUATE PROGRAMMASTER OF PUBLIC ADMINISTRATION

PUBLIC FISCAL ADMINISTRATION

Presented by:

LOUIE A. MEDINACELI

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

Broad Fiscal Policy Goals of Government Expenditures1. 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 Trend1. 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 ExpendituresPrinciple of Minimum Expenditure

the government should spend the least it possibly can, consistent with the protection of its citizens.

Principle of Minimum Interference with Private Enterprise

this would mean that the services provided by the government should not compete with established private firms

Principle of Maximum Employment

the aim of government expenditures is sometimes to raise the level of employment as high as possible

Principle of Maximum Advantage

its implication is that each should be spent where the marginal social utility is the greatest

The Government Procurement Law

(Republic Act 9184)

IntroductionHistorical Background

Procurement Reform ActAssessment and Evaluation

R.A. 9184 as a catalyst of change?

Amending R.A. 9184

R.A. 9184Government Procurement Act

Presentation Outline

- 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


Introduction

- 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 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

- Philippine Commission Act No. 22 (1900)

-PC Act No. 74 and 82 (1901)- PC Act No. 146 (1901)

- Commonwealth Period, EO No. 16 (1936)


HistoricalBackground

- Administrative Code on Procurement (1917)

-Procurement and the Supply Law

- Contracts for Public Works- Decentralized Procurement

System


HistoricalBackground

- Procurement of Civil Works-Procurement of goods

- Procurement of Consultancy Services

- Procurement in LGUs- Procurement in GFIs /

GOCCs- E.O. No. 40 (2001)


Pre-reform procurement

structures

- 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;


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.


Pre-reform issues

- 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

Government Procurement Act

- 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

R.A. 9184


The basic tenet is that there must be competitive

bidding

- 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.

R.A. 9184


GPPB composed ofSecretary 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.

- Basic features:1.Bids and Awards Committee (BAC)2.Threshold amount is P500,00.003.Splitting of Contract – not allowed4.Approved Budget for Contract (ABC)5.Pass/Fail Criteria6.Alternative Procurement7.Generic Procurement Manuals8.Procurement by brand name – prohibited9.Uses online technology (G-EPS)10.Penal Clause

R.A. 9184


-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;


Assessment and Evaluation

-WB Country Procurement Assessment Report (CPAR)

- 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;



- WB Country Procurement Assessment Report (CPAR)

- Use of standard bidding forms and manuals – the standard bidding

documents for works, goods and consulting services as harmonized

with development partners institutions.





Table 1: Summary Status Report of the Training for Local Government Units (period covering April to December

2004)

Participants (LGUs)

Percentage of

II III III

Region Province 4 trained/4 P 100% 5 trained/5 P 100% 7 trained/7 P 100%

Municipality 113 trained/117 M 96.58% 85 trained/90 M 94.44% 103 trained/118 M 87.29%

City 8 trained/8 C 100% 3 trained/3 P 100% 10 trained/12 C 83.33%

LGUs Trained 125/129 96.90% 93/93 94.90% 120/137 87.59%

IV - A2

V VI VII VIII IX X XI XII XIII CAR National Capital Region (NCR) Autonomous Region of Muslim Mindanao (ARMM) Total

5 trained/5P 100% 6 trained/6 P 100% 6 trained/6 P 100% 4 trained/4 P 100% 6 trained/6 P 100% 3 trained/3 P 100% 5 trained/5 P 100% 4 trained/4P 100% 4 trained/4 P 100% 4 trained/4 P 100% 6 trained/6 P 100% 3 trained/5 P 60% 72 trained/79 P

103 trained/132 P 78.03% 73 trained/107 M 68.22% 117 trained/117 M 100% 114 trained/120 M 95% 129 trained/139 M 92.81% 44 trained/66 M 66.67% 85 trained/85 M 100 % 38 trained/43 M 28.37% 38 trained/45 M 84.44% 49 trained/70 M 70% 51 trained/76 M 67.11% 3 trained/4 M 75% 34 trained/94 M 36.17% 1,179 trained/1,494 M

11 trained/11 P 100% 6 trained/10 C 60% 16 trained/16 C 100% 12 trained/12 C 100% 4 trained/4C 100% 5 trained/5 C 100% 8 trained/8 C 100% 4 trained/5 C 80% 5 trained/5 C 100% 3 trained/3 C 100% 1 trained/1 C 100% 12 trained/13 C 92.31% 1 trained/1 C 100% 109 trained/119 C

119/148 80.41% 85/123 69.11% 139/139 100% 130/136 95.59% 139/149 93.29% 52/74 70.27% 98/98 100% 46/52 88.46% 47/54 87.04% 56/77 72.73% 58/83 69.90% 15/17 88.24% 38/100 38% 1,360/1,692

91.14% 78.92% 91.60% 1 For Region IV-B, training was handled by the Commission on Audit.


Catalyst of Change?

-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?

-Public procurement encompasses much more than the bidding process

- Address and monitor how priorities and terms of

reference for processes are actually set


Catalyst of Change?

-After a contract has been won and awarded, the

process may be further subverted by the likes of ghost deliveries, under-delivery, or delivery of

inferior quality materials


Catalyst of Change?

-Long and complex procedures

- A procurement system that dwells on checks and balances

vs. long-drawn-out bidding process


Catalyst of Change?

YES!

“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 anti-

corruption aspects of procurement.”- former DBM Undersecretary

Laura B. Pascua


Catalyst of Change?

YES!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.


ProposedAmendments

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. 9184Government Procurement ActJOKE LANG!

The ContractWritten 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“.

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)

involves the activities of obtaining, examining, verifying, evaluating, and reporting agency actions and decisions

SIX PHASES OF THE AUDIT CYCLE1. Preliminary survey of the audited agency. The purpose of this is to have a 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

Custodial function-COA shall preserve the vouchers, particularly the general accounts of the government

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 timinga. 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 PolicyFiscal Policy

• 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.


Concept of TaxationConcept 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.


Significance of TaxationSignificance of TaxationPrimary 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


Principles and Theories of TaxationPrinciples 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.



• 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.



• 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. 9184Government Procurement ActCharacteristics of TaxCharacteristics 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. 9184Government Procurement ActClassification of TaxesClassification of Taxes

I. As to who bears the burden• Direct Tax (ex. Income Tax)• Indirect Tax (ex. R-VAT)

II. As to purpose • General Tax (ex. Almost All Taxes)• Special Tax

III. As to scope• National Tax (ex. National Revenue

Taxes)• Local Tax

R.A. 9184Government Procurement ActEntities Exempted from TaxationEntities Exempted from Taxation

• Religious Institutions• Charitable Institutions• Non-Profit, Non-Stock Educational

Institutions• Non-profit Cemeteries• Government Institutions• Foreign Diplomats