Republic of the Philippines DEPARTMENT OF FINANCE Manila

Department Order No. 75-92 November 20, 1992

TO

:

SUBJECT

1.0

The Treasurer of the Philippines, Board of Directors/Heads of Government-Owned and Controlled Corporations ( GOCCs) including Government Financial Institutions, Chiefs of Financial and Management Services of GOCCs and other concerned officials Guidelines on the Treasury Advances by the National Government for the Servicing of Guaranteed & Re-lent Domestic and Foreign Borrowings of GOCCs

Purpose

To prescribe the criteria, grounds and procedures which would govern the extension of advances by the national government for the servicing of relent and/or guaranteed domestic and foreign borrowings of GOCCs. 2.0

Coverage

This Department Order shall cover all loan obligations of GOCCs, both foreign and domestic, for which an ROP guarantee has been issued, and loans contracted by the national government and relent to GOCCs. 3.0

Definition of Terms

For purposes of this Order, the following terms shall be taken to mean as: T.I. Government-owned or controlled corporation, hereinafter referred to as a GOCC, is a corporation created by special law or organized under the Corporation Code in which the Government directly or indirectly thru a parent or subsidiary corporation has ownership of the majority of the outstanding capital of the Corporation or of its outstanding voting capital stock. 3.2 Government guarantee refers to the commitment of the national government to service the loans obtained by a GOCC either directly as principal borrower or indirectly thru a relending program. 3.3 Borrowings refers to loans, credits or indebtedness including security issues such as notes, bonds and similar

debt instruments which have been guaranteed by the National Government, and those directly contracted by the National Government on-lent to GOCCs whether covered by a relending agreement or not. 3.4 Net Lending Program refers to the annual provision for the extension of credits by the Bureau of Treasury (BTr) for GOCCs for the settlement of maturing obligations, domestic or foreign, as approved by Secretary of Finance / Development Budget Coordinating Committee (DBCC). 4.0

General Guidelines The annual net lending program shall be integrated with the fiscal and financial plan of the National Government, taking into account fiscal constraints and availability of alternative fund sources. Advances shall be programmed only when the cash flows of the requesting GOCC after evaluation by the Corporate Affairs Group of the Department of Finance (CAG) clearly indicates insufficiency of funds for the settlement of maturing obligations. Provided, however, that the requesting GOCC's projected receipts and expenditures shall have been carefully reviewed taking into consideration the reasonableness of its existing tariff structure/pricing policy, credit and collection policy and procedures, operating and capital expenditure levels and asset management and asset disposal policy. Advances for net lending to GOCCs shall only be allowed if included in the approved annual net lending program, or only under exceptionally meritorious circumstances, if outside the Program. Further, as provided under the General Appropriations Act, if the total level of actual revenues at the end of the immediately preceding year, liquid assets ( i.e., cash and short term investments), bond investments and other fund sources of a GOCC exceed the corresponding projects consistent with the formulation of the budgetary support program, then the excess may be deducted from the said program and may be reduced to the extent of such favorable effect. Repeated failure to comply with procedures and schedule herein prescribed shall be dealt with severely and sanctions imposed on concerned GOCCs.

5.0

Documentation Requirements GOCCs needing assistance for the servicing of its loans shall for the purpose of drawing the required covering net lending program submit to the Secretary of Finance (Attention: Undersecretary- C A G ) the following documents:

For cash programming: 5.1 An application for the programming of the advances signed by the CEO, General Manager or Administrator stating the purpose, amount of required advances supported by the details of the borrowing transaction(s) and the justification for the requested programming of advances; 5.2 Board of Director's (BOD) approval of the request and management plan for the repayment of the requested advances; 5.3 Corporate/ project financial projections covering the life of the loan, consisting of pro forma income statement, balance sheet and cash flows together with the set of assumptions used; 5.4 Corporate financial performance during the last three (3) years including audited financial statements and annual reports, and 5.5

Other documents as may be required by CAG. The documents submitted to DOF in connection with net lending requests must be consistent with the documents submitted to the Department of Budget of Management for budget preparation purposes. If not, sufficient explanation of the variances should accompany the submissions.

For actual advances:

6.0

5.6

An application for advances signed by the CEO, General Manager or Administrator stating the purpose, amount with details of borrowing transactions and the justifications for the requested advances;

5.7

Actual monthly income and cash flows during the last six (6) months and projections during the next six ( 6 months;

5.8

Other documents as may be required.

Procedures 6.1 Documents 5.1 to 5.5 shall be submitted to CAG during the first quarter of the current year for the programming of required advances for the succeeding year. Documents 5.6 to 5.8 shall be submitted to CAG every April and October of subject year. 6.2 r An Inter-Agency Committee composed of representatives from DBM, BTr and chaired by CAG shall determine the appropriate amount to be programmed for net lending and submit

0 its final recommendations to the Secretary of Finance/ DBCC within the second quarter of the current year . The decision of the Finance Secretary /DBCC shall be forwarded to the BTr and CAG for appropriate action. The 6.3 implementation of decisions on advances and collections thereof shall be the full responsibility of the BTr. This shall cover the reconciliation of debt servicing records of the BTr and the GOCC. CAG shall advice the BTr on the actual debt servicing requirements of the GOCCs on a semestral basis. 6.4 The Bureau of the Treasury shall submit to DOF-CAG a summary of advances and collections made every October.

7.0

Effectivity These guidelines shall take effect immediately. t / ON R. DEL ROBAR

Secretary of Fina