FIFTEENTH CONGRESS )
OF THE REPUBLIC OF THE PHILIPPINES )
First Regular Session )

HOUSE OF REPRESENTATIVES

a
House Bill No._357

Introduced by Representative Susan A. Yap

EXPLANATORY NOTE

“SEC. 16 of Article XI1 of the Constitution provides that government owned and
controlled corporations (GOCCS) should be established only by special charters in the interest,
of the common good and subject to the test of economic viability.

Government owned and controlled corporations (GOCCs) play a primary in undertaking
desirable economic activities, especially in the production and distribution of goods and
services. While GOCCs have generated income to our cash-strapped government and have
provided employment to several of our citizens, most of them have become financial burdens.

The Department of Budget and Management is mandated to release equity, subsidy and
net lending to GOCCs and government financial institutions. Accordingly, the departments of
budget and finance have been releasing subsidies to GOCCs and GFls for years despite the
fiscal deficit position. These subsidies are released to corporations with depleted capitalization
to enable them to continue and sustain their operations.

Despite attempts from the Department of Finance to reduce GOCC subsidies as it
runs counter to its goal of making these firms self-reliant and less dependent on government
financial assistance, it was reported last month that the national government's expenses in
subsidizing the operations GOCCs) grew by 302 percent. Data from the Bureau of Treasury
showed that the government spent P2.84 billion in subsidies in May (2010), significantly
higher compared with only P942 million in the same period last year. The state-owned firms
that enjoyed hefty subsidies were the cash-strapped National Food Authority (NFA) with
P2,03 billion, and the National Housing Authority (NHA) with P255 million.

In liew of revenue measures, the incoming administration may adopt an expenditure
reform, including the cutting of expenses by not providing subsidies to losing government-
owned and -controlled corporations (GOCCs) in order to manage the deficit. Due to its
impact on the consolidated public sector financial position, it should closely monitor the
National Food Authority, Philippine National Oil Co., Philippine Economic Zone Authority,
Philippine Ports Authority, Metropolitan Waterworks and Sewerage System, Local Watet
Utilities Administration, Home Guaranty Corp., National Housing Authority, National Power
Corp., National Electrification Administration, Light Rail Transit Authority, National
Irrigation Administration, Philippine National Railways, and National Development Co.



The State should continuously evaluate and review existing GOCCs to determine
whether they satisfy the tests as enshrined in our Constitution. There is a need to improve
their operations in order to promote economy, efficiency in the delivery of public service.
‘They must answer to the common good of the people, be financially viable, provide social
benefits and not unduly compete with private sector.

This bill institutionalizes such mechanism of systematic review and evaluation of
GOCCs. It directs all government corporations to prepare their respective assets and liability
management guidelines that will define the parameters and/or limits of their financial and
operational capabilities for central control and monitoring by the DOF. These guidelines shall
serve as tools to anticipate, prevent and/or minimize certain eventualities that may adversely
affect the financial condition of the corporation. The financial guidelines seck to limit
borrowing, lending and guaranteeing any form of financial transaction while the operational
guidelines seek to inhibit the corporation from engaging in activities outside its defined
capabilities.

In view of preserving our scarce resources, immediate passage of this bill is requested.



DIS cary dsHysune

14
15
16
17
18
19

29
30
31
32
33
34
35
36
37
38
39
40
41
42
B
44
45
46
47
48
49
30
SI

527

53
54
55
56
ST
38

FIFTEENTH CONGRESS )
OF THE REPUBLIC OF THE PHILIPPINES )
First Regular Session )

HOUSE OF REPRESENTATIVES
if 357

House Bill No.

Introduced by Representative Susan A. Yap

AN ACT
TO ENSURE THE ACCOUNTABILITY OF GOVERNMENT-OWNED OR
CONTROLLED CORPORATIONS, GOVERNMENT FINANCIAL
INSTITUTIONS, STATE-OWNED UNIVERSITI AND OTHER SIMILAR
AGENCIES IN THE PUBLIC SECTOR BY REQUIRING THESE ENTITIES

TO BE EVALUATED AND SUBJECTED TO THE TEST OF ECONOMIC
AND __ FINANCIAL VIABILITY, CREATING A CONGRESSIONAL

OVERSIGHT COMMITTEE, AND FOR OTHER PURPOSES
Be it enacted by the Senate and House of Representatives of the Philippines in Congress assembled:

SECTION 1. Short Title. - This Act shall be known as the “Government-Owned or

Controlled Corporations (GOCCs) Accountability Act”.

SEC. 2. Policy. - It is the policy of the State to create or establish Government-
Owned or Controlled Corpo tions only in the interest of the common good aad subject to
the test of economic and financial viability

Every GOCC must be free from fraud, abuse and wastage, and must be made
accountable through effective" monitoring oversight by Congress for the benefit of the
people

Itis hereby declared a national policy to require all government corporations to clearly
define the parameters and/or limits of their financial and operational capabilities consistent

with their established mandates and charters. y

SEC. 3. Government-Owned or Controlled Corporation Defined. - For purpose
of this Act, “Government-owned ot Controlled Corporation” or “GOCC” refers to a stock
or non-stock corporation, performing governmental or proprietary functions. directly
chartered by special law or, if otherwise formed, is owned of controlled by the Government
directly of indirectly through a parent or subsidiary corporation, It includes Government
Financial Institutions, State-owned Universities, and other similar agencies in the public
sector.

SEC. 4. Asset and Liability Management Guidelines. - ‘The definition of the limits
of the financial and_operational capabilities of each GOCC shall be embodied in their

respective _assét_and liability management guidelines which are universally accepted
management tools whereby financial and operational activities are autom:

within clearly defined limits.

ally confined

Foremost among the_financial guideliney are the limits on borrowing, lendiag and

waranteeing any form of financial transaction, risk and/or commitment.
gu y

Foremost amonj the operational guidelines are che recognition and acceptance of the
_limits of in-house talents and capabilities, thereby inhibiting said corporation from engaging



Ceraunene

i
12
13
14
15
16
7
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
30
40
41
42
43
44
45
46
47
48
49
50
51
52
53
54
35
56
37
58

in activities\outsidegits defined capab
transactions or activities, the mandatory
other government agencies or institutions.

5 or in cases where it is necessary to engage in such
Tequirement to tap outside talents preferably from

SEC. 5. Use of Asset and Liability Management Guidelines, - Vhe Asset and
Liability Management Guidelines shall be used primarily as a tool to anticipate, obviate
prevent and/or minimize certain eventualities that may adversely affect the financial
condition of individual corporations. As a standard requirement, however, it is seen as a vital
instrament to stabilize and solidify the country’s overall financial condition.

In cases where a GOCC is under the control or supervision of a department of the
National Government, adherence to these asset and liability guidelines shall be the
responsibility of the department under which these corporations belong. The department
covered shall prescribe their respective policies and procedures including penalties for their
violations, in order to ensure that such guidelines are strictly complied with.

SEC. 6. Central Monitoring and Control by the Department of Finance. ‘The
central monitoring and control of the overall financial condition of GOCCs shall be made by
the Department of Finance (DOF) which shall consolidate all related figures into an annual
report. Within thirty (30) days from the end of each calendar year, the DOF shall submit this
annual report to the Office of the President, copy furnished the Senate and the House of
Representatives.

SEC. 7, Submission of GOCC Reports. - Every GOCC is required to submit
quarterly and consolidated annual reports to Congress.

Each quarterly report, to be submitted within thirty (30) days from the end of exch
calendar quarter, shall be in the form of an executive summary concerning the finances and
operations of the GOCC and shall indicate any achievement and major projects. It shall
inclide all financial reports and minutes of directors’ and shareholders’ meetings for dhe
subject quarter,

Bach annual report, co be submitted within sixty (60) days from the end of each
calendar or fiscal year as may be applicable, shall include the following:

(1) A consolidated executive summary;

(2) A list of directors and officers;

(3) A summary of the remuneration paid to directors and officers over the last y

(4) The Commission on Audit report for the last year; and

(5) The audited financial statement for the last year.

SEC 8. Mandatory Publication. - Every GOCC is required to disclose and publish in
at least one (1) newspaper of general circulation within thirty (30) days from the end of each
calendar or fiscal year as may be applicable the following information:

(1) Travel and hospitality expenses for directors and officers; and

(2) Contracts for goods and services over one million pesos (PHp 1,000,000)

SEC. 9. Creation of a Congressional Oversight Commitice for GOCCS, - ‘There is
hereby created a Congressional Oversight Committee for GOCCs to be composed of six (6)
members, with three (3) Representatives each from the Senate and the House of
Representatives, and co-chaired by the Chairpersons of the Senate Committee on
Government Corporations and Public Enterprises and the House Committee on
Government Enterprises and Privatization.

‘The Congressional Oversight Committee for GOCCs shall receive and evaluate the
reports submitted by the GOCCs to Congress. It shall be the principal legislative monitoring

arm and policy recommending body for all GOCCs.

SEC. 10. Powers and Functions of the Congressional Oversight Commitice for


BS cen auaevn—

8

13
14
15
16
7
18
19
20
21

22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41

2
B
44
45
46
a7
48
49
50
Si
52
33
34
35
56

58

GOCCS. - The Congressional Oversight Committee for GOCCs shall have the following
powers and functions:

(1) Prescribe and adopt guidelines that will govern its work;
(2) Hold hearings, receive testimonies and reports pertinent ro its specified concerns;

(3) Secure from any department, bureau, office, agency or instrumentality of the
Government such assistance as may be needed, including technical information
preparation and production of reports and submission of recommendations or plans
as it may require;

(4) Summon by subpoena ad lesfzandum any public or private citizen to testify before
it, oF require by subpoena duces tecum to produce before it such records, reports or other

documents as may be necessary in the performance of its functions;

(5) Use resource persons from the public and private sectors as may be needed;

(©) Approve the budget for the Congressional Oversight Committee for GOCCs and

all disbursements therefrom, including compensation of all personnel;

(7) Organize its staff and hire and appoint employees and_personnel,whether
temporary or contractual, subject to applicable laws; and

(8) Exercise all other powers necessary to attain its purposes.

SEC. 11. Conduct of Review. - The Congressional Oversight Committee for GOCCs
shall review the quarterly and annual reports submitted by the GOCCs to Congress

The Congressional Oversight Committee for GOCCs may require the submission of
additional pertinent corporate and commercial documents and/or the revelation of all
relevant data as may be deemed necessary for the conduct of such review. Failure to submit
any of the required documents or to reveal any required data shall subject the directors and
officers of the concerned GOCC to appropriate administrative, civil, and criminal liability

‘The Congressional Oversight Committee for GOCCs shall review the reports,
documents, and data submitted by each GOCC and shall be authorized to conduct
investigations in furtherance of such review. The scope of review shall include the following:

(1) Accomplishment of the set goals as may be set forth in their respective
charters or otherwise;

(2) Allocation of resources of each GC

3) Instances of duplication of functions;

(4) Financial and social investment rate of returns and productivity; and

(8) Interest of the common good.

SEC. 12. Submission of Recommendations - The Congressional Oversight
Committee on GOCCs shall submit its recommendations to the Senate and the House of
Representatives, copy furnished to the Office of the President, for appropriate action. The
recommendations may include the following:

(1) Continued existence of and corresponding budgetary allocation for each GOCC;

2) Termination of the existence of or budget allocation for the GOCC by cither


Seceraausen—

i
12
13
14
15
16
7
18
19
20
21
22
23
24
25
26
27

privatization or dissolution;

(3) Merger or consolidation of GOCCs performing similar or overlapping functions;

(4) Restructure of the GOCCs in the Executive branch;

(5) Adjustment of compensation packages for directors, officers, and employees;

(©) Filing of appropriate civil, criminal, or administrative charges;

() Contract review or renegotiation as may be appropriate; and

(8) Other recommendations as may be deemed appropriate

SEC. 13. Repealing Clause. - All laws, decrees, orders, rules and regulations or other
issuances or parts thereof inconsistent with the provisions of this Act are hereby repealed or
modified accordingly.

SEC. 14. Separability Clause. - \f any portion or provision of this Act is declared
unconstitutional, the remainder of this Act or any provisions not affected thereby shall
remain in force and effect.

SECTION 15. Effectivity Clause. - This Act shall take effect after fifteen (15) days

following the completion of its publication either in the Official Gazette or in a newspaper
of general circulation in the Philippines.

Approved,