Part I AUDITED FINANCIAL STATEMENTS

Transcription

Part I
AUDITED FINANCIAL STATEMENTS
Part II
A. OBSERVATIONS AND
RECOMMENDATIONS
B. STATUS OF IMPLEMENTATION OF
PRIOR YEARS’ AUDIT RECOMMENDATIONS
ABOT- KAYA PABAHAY FUND
Republic of the Philippines
COMMISSION ON AUDIT
Commonwealth Ave., Quezon City
ANNUAL AUDIT REPORT
on the
NATIONAL HOME MORTGAGE
FINANCE CORPORATION
For the Year Ended December 31, 2012
EXECUTIVE SUMMARY
INTRODUCTION
The National Home Mortgage Finance Corporation (NHMFC) was created by virtue of
Presidential Decree No. 1267 dated December 21, 1977, as amended by Executive
Order (EO) No. 90 on December 17, 1986 identifying NHMFC as one of the key
agencies in the implementation of the National Shelter Program that was tasked as the
major government home mortgage institution. Executive Order No. 357 dated May 24,
1989 placed NHMFC under the administrative supervision of the Housing and Urban
Development Coordinating Council.
The primary objectives of the Corporation are (1) to develop and provide for a secondary
market for home mortgages granted by public and/or private home financing institutions;
(2) to develop a system that will attract private institutional funds into long-term housing
mortgages; and (3) to provide amortization support to borrowers during the first five
years of the term of their housing loans under the Abot – Kaya Pabahay Fund.
The governing board of NHMFC, which exercises the corporate powers and determines
policies, is composed of five members with the Chairman of the Housing and Urban
Development Coordinating Council as Chairman, the President of NHMFC as ViceChairman and the Secretaries of Department of Finance, Department of Budget and
Management, and the Governor of the Bangko Sentral ng Pilipinas.
The President is assisted in the management of the Corporation by the Executive VicePresident, four Vice-Presidents and ten Department Managers.
The four Groups headed by Vice-Presidents are the Collection and Accounts
Management Group, Corporate Support Services Group, Securitization Group and
Corporate Secretary. The personnel complement as at December 31, 2012 consisted of
218 regular employees and 147 agency-hired employees.
The registered office of the Corporation is located at Filomena Building III, 104 Amorsolo
Street, Legaspi Village, Makati City. The Corporation has satellite offices located in the
provinces of Laguna and Cavite, cities of Bacolod and Cagayan de Oro, a zonal office in
Davao City and desk offices in the cities of Cebu and General Santos.
The approved corporate operating budget of NHMFC during the calendar year 2012
totalled P5.303 billion, which included among others, the following:
Budget
Personal services
Maintenance and other
operating expenses
Capital outlay
Utilization
Variance
151,576,000
153,115,890
(1,539,890)
259,102,000
31,157,000
441,835,000
223,267,073
12,433,458
388,816,421
35,834,927
18,723,542
53,018,579
i
FINANCIAL HIGHLIGHTS (In Philippine Peso)
I. Comparative Financial Position
Assets
Liabilities
Capital deficiency
2012
2011
(As Restated)
33,630,898,578
37,186,482,376
3,555,583,798
36,857,631,102
41,477,232,015
4,619,600,913
Increase
(Decrease)
(3,226,732,524)
(4,290,749,639)
(1,064,017,115)
II. Comparative Results of Operations
2012
Gross income
Expenses
Net income after income tax
4,490,075,272
3,873,098,308
616,976,964
2011
(As Restated)
2,343,373,359
903,253,137
1,440,120,222
Increase
(Decrease)
2,146,701,913
2,969,845,171
(823,143,258)
SCOPE OF AUDIT
The audit covered the examination, on a test basis, of the accounts and financial
transactions of the NHMFC for the calendar year ended December 31, 2012 in
accordance with the International Standards on Auditing. Our audit was also made to
assess the propriety of financial transactions and compliance with laws, rules and
regulations.
AUDITOR’S OPINION
The Auditor rendered a qualified opinion on the fairness of presentation of the financial
statements for CY 2012 due to the following:
1.
Undistributed Collections not posted in the borrower’s subsidiary ledgers resulted
in the variance between the general and subsidiary ledger balances as at December 31,
2012, thereby casting doubt on the validity of the Loans Receivable and other affected
account balances totalling P393.018 million. (Observation No. 1)
2.
Reconciling items totaling P38.996 million were debited as collections of PNB for
NHMFC during the months of March, April and May 2009 even without the
corresponding bank credit memo, contrary to IFRS Framework for the Preparation and
Presentation of Financial Statements and casts doubt on the accuracy of the balance of
Sundry Credit account of P6.684 million as at December 31, 2012. (Observation No. 3)
3.
Discrepancy of P26.896 million between the total balance of Physical Inventory
and the balance per General Ledger, consisting of unaccounted property and
unserviceable property not included the inventory report and were not reclassified under
ii
Other Assets account at year-end as required under Paragraph 67 of Philippine
Accounting Standard. (Observation No. 4)
4.
Loans Receivable – Folio 1 account balance per general ledger and the detailed
listings of Folio 1 accounts as at year-end differ by P19.045 million creating doubt on the
validity of the account balance. Non-foreclosure of inactive Folio 1 accounts aged/
categorized as highly delinquent past due accounts totaling P418.022 million as at
December 31, 2012 affects the recovery of corporate exposure and the availability of
funds for other projects. (Observation No. 5)
For the above audit observations, which caused the issuance of a qualified opinion, we
recommended that Management:
a.
Establish and formulate guidelines on the proper and timely allocation of
undistributed collections to the appropriate accounts by concerned departments.
Evaluate the existing billing and collection system currently utilized for Folio 1 accounts
to address the delay in the posting of loan amortization payments of the borrower to their
subsidiary ledgers.
b.
Conduct continuous reconciliation of accounts to minimize the accumulation of
undistributed collections and to identify the reasons for the abnormal balances of UC
accounts.
c.
Reverse the entry made in the basis of reconciliation only. Record all the
transactions based on the credit memo identifying the borrower’s name and account
number provided by PNB.
d.
Require the depository bank to provide the NHMFC with all the reports and
documents, in conformity with Section 74, P. D. 1445.
e.
All credits to Sundry Credit account should be reviewed on a timely basis, and all
debits to clear the account should be approved by authorized official of the corporation.
f.
Revisit and re-assess the Memorandum of Agreement with the bank to ensure
the proper and timely submission of remittance reports, credit advices and other
necessary documents to address the delay in the posting of loan amortization payments
of the borrowers to their subsidiary ledgers.
g.
Include in the inventory report the unserviceable property not disposed of in the
total amount of P17.912 million.
h.
The General Services Division to locate the missing property totaling P8.984
million. For this purpose, implement the following measures:
h.1
Determine the persons liable for the items that were not located during
the conduct of inventory.
h.2
Issue memorandum to the persons liable to produce immediately the item
under their accountability. In case of failure to produce, require a written
explanation. If from the explanation, it would appear that the cause for the loss of
the item is due to negligence of the accountable officer, demand immediate
iii
payment of the appraised value of the property. On the other hand, if the cause
of the loss is not through negligence but due to fortuitous event, require the
accountable officer to file request for relief to COA pursuant to Section 73 of P.D.
1445. The request should be supported by relevant documents enumerated
under COA Cir. No. 92-751 dated February 24, 1992.
i.
Conduct physical inventory of property at least once a year and accordingly
reconcile the results of inventory with the accounting records maintained by General
Accounting Division.
j.
Require the Property Custodian to maintain detailed property (subsidiary) record
for each category of property and reconcile the same with the accounting and property
records to ensure the validity, accuracy and completeness of detailed property and
accounting records.
k.
Reclassify unserviceable property worth P17.912 million to Other Asset account
in accordance with Paragraph 67 of PAS 16.
l.
Facilitate the immediate appraisal and disposal of all unserviceable property to
maximize the benefits that could be derived therefrom.
m.
Require the General Accounting Division and Folio 1 Accounts Servicing Unit to
conduct a reconciliation of balances to identify the cause(s) of the variances and if
necessary, appropriate adjusting entries be made to bring the balances in agreement.
n.
Initiate foreclosure action or adopt more aggressive collection measures, if
warranted, on long outstanding or highly delinquent receivables under Folio 1 to quickly
recover corporate exposure and provide more funds for NHMFC projects.
OTHER SIGNIFICANT AUDIT OBSERVATIONS AND RECOMMENDATIONS
1.
Default or missed payments of securitized BahayBonds series 1 and 2 accounts
have significantly reached 1 to 51 months and 1 to 12 months, respectively, during the
year, resulting in the total under collection of loan receivables totalling to P569.845
million, equivalent to 34.87 per cent of the total outstanding diminishing principal of
P1.634 billion for the 12,225 accounts for both series of issuances as at December 31,
2012. (Observation No. 2)
1.1
We recommended the following courses of action:
a.
Demand, immediately, the payment of the under collection of loan
receivables totalling P454.863 million for BB1 and P114.982 for BB2 or a total of
P569.845 million for both issuances;
b.
Undertake more aggressive collection strategies for correcting
delinquency shown in the aging analysis and strictly monitor the performance of
these collections strategies; and
c.
Formulate a well-written and up-to-date monitoring processes and
procedures on receivables to improve collections of securitized accounts.
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2.
Seven hundred twenty five (725) accounts were not secured by original copy of
owner’s duplicate copy of TCTs. Further, erroneous information on the number of TCTs
not in custody and TCTs temporarily released to Legal Services and Documentation
Division, among others, casts doubt on the accuracy of the inventory report of TCTs of
UHLP accounts, as well as other housing programs/accounts. (Observation No. 6)
2.1
We recommended therefore the following courses of action:
a.
Require the Custodianship Division to reconcile the results of inventory of
Transfer Certificates of Title with the concerned offices handling the housing
programs to determine the precise number of loan portfolio and accuracy of
inventory;
b.
Require the TCT custodian to adjust its records to conform to the correct
actual/reconciled number of TCT’s;
c.
Determine the persons liable for the accounts without titles and hold them
administratively liable for their failure to perform their function. Any additional
cost that the corporation would incur for the reissuance of Transfer Certificates of
Title should be on their account; and
d.
Establish clear lines of responsibilities and accountabilities for both the
Custodianship Division and the Legal Services and Documentation Division in
their custody and safekeeping of Transfer Certificates of Title.
STATUS OF IMPLEMENTATION OF PRIOR YEARS’ AUDIT RECOMMENDATIONS
Out of the 22 audit recommendations embodied in the prior years’ Annual Audit Reports,
20 were partially implemented and two were not implemented.
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TABLE OF CONTENTS
Page
PART I
Independent Auditor’s Report
Balance Sheet
Statement of Income and Expenses
Statement of Changes in Capital Deficiency
Statement of Cash Flows
Notes to Financial Statements
PART II A. OBSERVATIONS AND RECOMMENDATIONS
B. STATUS OF PRIOR YEARS’ AUDIT RECOMMENDATIONS
1
3
4
5
6
7
33
53
ABOT-KAYA PABAHAY FUND
Balance Sheet
Statement of Income and Expenses
Statement of Changes in Fund Balance
Statement of Cash Flows
Notes to Financial Statements
71
72
73
74
75
NATIONAL HOME MORTGAGE FINANCE CORPORATION
BALANCE SHEET
DECEMBER 31, 2012
(In Philippine Peso)
Note
2012
2011
(As restated)
ASSETS
Current Assets
Cash and cash equivalents
Receivables
Other current assets
4
5
6
1,401,695,049
1,035,636,149
35,583,944
2,472,915,142
1,984,281,686
989,660,091
39,406,319
3,013,348,096
Non-current Assets
Long - term receivables
Long - term investments
Other garnished/foreclosed assets
Property and equipment
Other assets
7
8
9
10
11
17,755,967,620
11,390,589,130
1,231,132,376
93,997,382
686,296,928
31,157,983,436
21,668,294,268
10,222,532,054
1,175,869,723
89,409,818
688,177,143
33,844,283,006
33,630,898,578
36,857,631,102
TOTAL ASSETS
LIABILITIES AND CAPITAL DEFICIENCY
Current Liabilities
Payable accounts
Inter-agency payables
Other current liabilities
12
13
14
169,000,575
938,293,115
1,567,802,689
2,675,096,379
163,050,684
793,379,179
1,155,544,355
2,111,974,218
Long-term Liabilities
Loans payable - domestic
Other long-term liabilities
15
16
29,568,489,902
698,084,599
30,266,574,501
34,715,692,962
691,389,203
35,407,082,165
Deferred Credits
17
4,244,811,496
3,958,175,632
TOTAL LIABILITIES
CAPITAL DEFICIENCY
37,186,482,376
3,555,583,798
41,477,232,015
4,619,600,913
TOTAL LIABILITIES AND CAPITAL DEFICIENCY
33,630,898,578
36,857,631,102
The Notes on pages 7 to 32 form part of these financial statements.
3
STATEMENT OF INCOME AND EXPENSES
Note
INCOME
Subsidy income
Interest income
Service income
Other income
Income from debt restructuring
Miscellaneous income
Gain on sale of disposed assets
Loss on foreign exchange rate
Loss on investment in BHFI
Loss on sale of securities/NPLs
2011
(As restated)
500,000,000
453,168,690
27,827,702
1,462,140,244
641,607,241
43,277,998
3,109,379,135
353,997,638
45,742,100
(39,993)
4,490,075,272
352,337,228
36,285,900
(191,170,065)
(1,105,187)
2,343,373,359
82,385,712
38,153,438
21,867,628
10,709,111
153,115,889
70,276,298
21,195,030
23,314,063
9,745,661
124,531,052
3,057,706,367
53,172,178
45,035,105
31,485,133
20,292,464
18,194,557
15,789,549
7,758,970
7,306,615
5,258,889
4,792,148
3,858,746
3,806,949
2,851,125
1,805,275
1,094,053
555,378
158,439
39,500
12,000
3,280,973,440
47,128,747
49,688,937
47,092,996
28,545,916
14,884,350
11,953,897
42,151,859
7,210,247
6,802,683
4,691,201
3,704,259
232,302
4,401,444
3,347,924
1,255,635
956,006
223,347
150,756
106,500
5,000
102,361,195
376,895,201
375,631,336
4,963,709
380,595,045
356,688,654
5,000,288
361,688,942
INCOME BEFORE INCOME TAX
Income tax
675,390,898
58,413,934
1,480,258,164
40,137,942
NET INCOME AFTER INCOME TAX
616,976,964
1,440,120,222
EXPENSES
Personal Services
Salaries and wages
Other compensation
Other personnel benefits
Personnel benefit contributions
Maintenance and Other Operating Expenses
Bad debts
Professional services
Rent expenses
Taxes, insurance premiums and other fees
Utility expenses
Repairs and maintenance
Litigation and foreclosure
Supplies and materials expenses
Depreciation
Communication expenses
Extraordinary and miscellaneous expenses
Advertising expenses
Representation expenses
Travelling expenses
Training and scholarship expenses
Printing and binding expenses
Others
Subscription expenses
Subsidies and donations
Transportation and delivery expense
Dividends expense
Financial Expenses
Interest expense
Bank charges
22
2012
4
STATEMENT OF CHANGES IN CAPITAL DEFICIENCY
Paid-in
Capital
(Note 19)
Balance at
December 31, 2010
Prior period errors
As restated
Net income, as restated
Balance at
December 31, 2011
Balance at
December 31, 2011
As restated
Addition during the year
Net income
Balance at
December 31, 2012
Government
Equity
(Note 20)
Deficit
(Note 21)
Total
3,870,509,783
61,154,911
(9,993,136,924)
1,751,095
(9,991,385,829)
1,440,120,222
(6,061,472,230)
1,751,095
(6,059,721,135)
1,440,120,222
3,870,509,783
61,154,911
(8,551,265,607)
(4,619,600,913)
3,870,509,783
400,000,000
61,154,911
47,040,151
(8,551,265,607)
(4,619,600,913)
447,040,151
616,976,964
616,976,964
4,270,509,783
108,195,062
(7,934,288,643)
(3,555,583,798)
5
STATEMENT OF CASH FLOWS
Note
2012
2011
CASH FLOWS FROM OPERATING ACTIVITIES
Cash receipts from borrowers
Other income
Other receipts
Subsidy for CMP from national government
Additional paid in capital
Cash paid to funders, suppliers and employees
Purchase of receivables under HLRPP
Payment of dividend
Net cash generated from operating activities
2,890,405,988
89,537,746
86,659,677
500,000,000
400,000,000
(3,165,922,626)
(736,095,008)
(18,000,000)
46,585,777
2,392,935,421
106,066,035
64,601,937
1,462,140,244
(2,574,748,627)
(43,424,570)
(18,000,000)
1,389,570,440
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of BahayBonds series 2
Proceeds from matured short-term investments
Receipt of payment for Commingle Reserve from AKPF
Excess spread from securitized accounts
Receipt of payment for Liquidity Reserve from AKPF
Investment in fixed rate treasury notes
Investment in SHFC, subsidiary corporation
Purchase of property and equipment
Interest on short-term investments
Net cash used in investing activities
314,010,372
265,654,539
19,913,754
14,151,248
11,782,828
(1,250,000,000)
(11,894,178)
7,209,023
(629,172,414)
328,716,394
14,007,008
24,155,825
10,523,304
(369,161,882)
(462,140,244)
(28,984,982)
6,936,356
(475,948,221)
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
CASH AND CASH EQUIVALENTS AT END OF YEAR
4
(582,586,637)
1,984,281,686
913,622,219
1,070,659,467
1,401,695,049
1,984,281,686
6
NOTES TO FINANCIAL STATEMENTS
(All amounts in Philippine Peso unless otherwise stated)
1.
GENERAL INFORMATION
The National Home Mortgage Finance Corporation (NHMFC) was created by virtue of
Presidential Decree No. 1267 dated December 21, 1977, as amended by Executive
Order (EO) No. 90 on December 17, 1986 identifying NHMFC as one of the key
agencies in the implementation of the National Shelter Program that was tasked as the
major government home mortgage institution. Executive Order No. 357 dated May 24,
1989 placed NHMFC under the administrative supervision of the Housing and Urban
Development Coordinating Council.
The NHMFC’s original mandate was transformed by EO No. 90 into one serving as a
major government home mortgage institution to operate a viable mortgage market,
utilizing long-term funds principally provided by the Social Security System, the
Government Service Insurance System, and the Home Development Mutual Fund, to
purchase mortgages originated by both private and public institutions that are within
government-approved guidelines.
On January 24, 1990, Republic Act (RA) No. 6846 was enacted creating the Abot-Kaya
Pabahay Fund (AKPF), otherwise known as the Social Housing Support Fund, which
mandated NHMFC to administer the developmental loan financing assistance and
amortization support components of the fund. Later, RA No. 7279 was approved on
March 24, 1992 mandating NHMFC to administer the Community Mortgage Program.
On January 20, 2004, EO No. 272 was signed by the President of the Philippines which
mandated the NHMFC to organize and establish the Social Housing Finance
Corporation (SHFC). The creation of the SHFC, a NHMFC wholly owned subsidiary,
was in accordance with the Corporation Code and pertinent rules and regulations issued
by the Securities and Exchange Commission. Its main mandate is to be the lead
government agency to undertake financing of social housing programs that will cater to
the formal and informal sector in the low-income bracket. Thus, in October 2005, the
NHMFC transferred to SHFC the funds and assets of the Community Mortgage Program
and the amortization support fund of the AKPF.
The governing board of NHMFC which exercises corporate powers and determines
policies is composed of the following:
1.
2.
3.
4.
5.
The Vice-President of the Philippines and Chairman, HUDCC
The President, NHMFC
The Secretary, Department of Finance
The Secretary, Department of Budget and Management
The Governor, Bangko Sentral ng Pilipinas
Chairman
Vice-Chairman
Member
Member
Member
The President is assisted in the management of the Corporation by the Executive VicePresident, four Vice-Presidents and ten Department Managers.
The personnel
complement as at December 31, 2012 consisted of 365 employees, 218 of which are
regular employees and 147 agency-hired employees.
7
The registered office of the Corporation is located at Filomena Building III, 104 Amorsolo
Street, Legaspi Village, Makati City. The Corporation operates within the Philippines.
2.
ACCOUNTING POLICIES
The principal accounting policies used are consistent with those used in the previous
financial year.
Basis of preparation
2.1
Adoption of New Government Accounting System Revised Chart of
Accounts
A new chart of accounts have been adopted to comply with the requirements of the New
Government Accounting System (NGAS) – Revised Chart of Accounts for Corporations
prescribed under COA Circular Nos. 2004-002 dated April 29, 2004 and 2004-008 dated
September 20, 2004.
2.2
Financial Statements
The financial statements of National Home Mortgage Finance Corporation (NHMFC)
were prepared and presented in accordance with state accounting principles.
3.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
3.1
Accounting basis
The Corporation uses the accrual basis of accounting. The effects of transactions and
events on assets and liabilities are recognized in the periods to which they relate.
Accrual of interest income is computed on accounts with zero to three months
arrearages following the provisions of Circular No. 202, Series of 1999, issued by the
Bangko Sentral ng Pilipinas (BSP).
3.2
Going concern basis
The financial statements are prepared on historical cost and going concern basis.
Despite the transfer of the Community Mortgage Program (CMP) to NHMFC’s whollyowned subsidiary, the Social Housing Finance Corporation (SHFC), effective October
16, 2005 pursuant to E.O. No. 272 and the formal closing of the non-performing loans
(NPLs) sale on November 10, 2005, the financial statements are prepared on a going
concern basis for the following reasons: (1) NHMFC shall endeavor to become the
premiere government secondary mortgage institution (SMI) through programmed
securitizations of selected mortgages/assets in order to develop an active secondary
market for home mortgages; (2) it shall continue to manage and service Unified Home
Lending Program (UHLP) accounts with low to moderate delinquencies until such time
that securitization of mortgages shall be in place; and (3) it shall strive to aggressively
implement a collection system that will enable itself to comply with the amortization
payment requirements under the loan restructuring agreement.
8
3.3
Related party disclosures
The Philippine Accounting Standard (PAS) 24 ensures that an entity’s financial
statements contain the disclosures necessary to draw attention to the possibility that its
financial position and profit or loss may be affected by the existence of related parties
and by transactions and outstanding balances with such parties. Related party
transactions are transfer of resources, services or obligations between related parties,
regardless of whether a price is charged.
3.4
Allowance for doubtful accounts
In conformity with the Philippine Accounting Standard 39 – Financial Instruments:
Recognition and Measurement, NHMFC assesses at each balance sheet date whether
there is objective evidence that a financial asset or group of financial asset is impaired.
If such evidence exists, an impairment loss is recognized.
Based on the study of the Folio II receivable portfolio and sample costs of foreclosed
accounts, the provision for impairment loss for CY 2012 was computed at two per cent
for current accounts and 20 per cent for past due accounts of gross loan portfolio. The
corresponding amount of the receivable was reduced through the use of allowance
account and the amount of impairment loss was recognized in the statement of income.
3.5
Property and equipment are recorded at cost and are depreciated using the straight line
method based on the estimated life of the property with ten per cent salvage value.
Repairs and maintenance and minor replacements are charged to expense as incurred.
Major repairs and betterments are capitalized.
Leasehold improvements are amortized over five years or the actual length of lease
contract using the straight-line method with ten per cent salvage value.
4.
CASH AND CASH EQUIVALENTS
The account consists of the following:
2012
Cash on hand 4.1/
Cash in bank – local 4.2/
Cash in bank - combo account
Cash in bank - savings account
Cash in bank - time deposit
Cash in bank – foreign 4.3/
2011
22,779,871
8,285,014
12,110,377
34,793,198
1,331,145,489
866,114
120,592,024
48,863,178
1,805,654,033
887,437
1,401,695,049
1,984,281,686
9
4.1
Cash on hand
The account represents collections of Cash Collecting Officers and Supervising Tellers,
cash advances granted to Cash Disbursing Officers, and Petty Cash Fund established at
the Head Office and Regional/Satellite Offices to defray immediate or emergency
minimal disbursements.
4.2
Cash in bank – local
a. Funds deposited with government banks for payroll and corporate operating funds.
b. Cash in banks earns interest at prevailing interest rates of 0.375 per cent per annum
for savings account and 3.65625 per cent per annum for time deposit.
4.3
Cash in bank - foreign
The account represents the dollar account opened to accommodate dollar payment
(non-refundable) by participating bidders for bid documents during the sale of NonPerforming Loans accounts. The account earns interest at 2.5 per cent per annum.
5.
RECEIVABLES
2012
Loans receivable 5.1/
Interest receivable 5.2/
Notes receivable 5.3/
Other receivables 5.4/
Due from subsidiaries/affiliates 5.5/
Due from officers and employees 5.6/
Due from GOCCs 5.7/
Housing Loan Receivable Purchase
Program (HLRPP) receivable 5.8/
5.1
2011
(As restated)
98,057,519
464,982,831
257,738,512
88,795,747
128,253,401
19,885,987
3,322,897
157,111,318
508,481,906
257,738,512
41,762,527
19,900,015
24,080,110
4,016,748
427,468
1,061,464,362
25,828,213
427,468
1,013,518,604
23,858,513
1,035,636,149
989,660,091
Loans receivable
The account pertains to the current portion of the loans extended to the borrowers under
the UHLP of the Corporation. The loans are also amortized monthly for a maximum
period of 25 years with a rate ranging from nine per cent to 16 per cent depending on the
loan package availed of.
10
5.2
Interest receivable
The account represents accrual of interest income as shown below:
2012
Folio II
Developmental loans
HLRPP
Others
Folio I
Sales contract
Refinanced loans
389,419,623
69,492,153
4,774,773
661,567
311,028
218,764
104,923
464,982,831
9,299,657
455,683,174
5.3
2011
(As restated)
429,039,842
69,492,153
1,118,290
909,300
7,685,291
132,107
104,923
508,481,906
9,299,657
499,182,249
Notes receivable
The account represents Subordinated Debt Series B which earns interest at 18 per cent
per annum and the Junior Subordinated Capital made to Balikatan Housing Finance, Inc.
(BHFI) by NHMFC in accordance with the Junior Subordinated Capital Facility
Agreement with interest rate of 20 per cent per annum.
5.4
Other receivables
2012
Claims for disallowed payments a/
Bahayan Mortgage Participation Certificates
Accounts receivable - others c/
b/
2011
66,331,754
13,700,000
8,763,993
88,795,747
14,558,856
19,291,603
13,700,000
8,770,924
41,762,527
14,558,856
74,236,891
27,203,671
a. Claims for disallowed payments consist of the disbursements/transactions disallowed
in audit by the COA debited to the above account and credited to Contingent Surplus –
Claims for disallowed payments. The former account is presented in the balance sheet
under Receivables while the latter is presented as Government Equity in the Statement
of Changes in Capital Deficiency.
b. Bahayan Mortgage Participation Certificates (BMPC) represents sales of BPMCs in
1980 to 1981, net of two per cent discount, which have not been paid within the 60 or 90
days credit terms. The provision for doubtful accounts has brought down its value to P1.
11
c. Accounts receivable-others refers to loan amortization collections made by collecting
banks that have not been remitted to NHMFC as verified by the Treasury Department.
5.5
Due from subsidiaries/affiliates
The account represents advances made by NHMFC for various expenses incurred by
SHFC, AKPF and BHFI.
5.6
Due from officers and employees
The account represents cash advances granted to officers and employees on official
travel within the Philippines or abroad which should be liquidated in full upon completion
of travel. Included also in this account are the car loans of officers.
5.7
Due from GOCCs
The account is composed of the following:
2012
Home Guaranty Corporation a/
Home Development Mutual Fund
Others c/
b/
1,375,426
1,947,471
3,322,897
2011
(As restated)
1,375,426
808,618
1,832,704
4,016,748
a. Home Guaranty Corporation (HGC) represents the balance of the aggregate loan
value of mortgages assigned pursuant to the credit insurance agreement between HGC
and NHMFC.
b. Home Development Mutual Fund (HDMF) pertains to cash advances and other
charges collectible from HDMF which have been settled in CY 2012.
c. Others represents the part of the assets/liabilities acquired by NHMFC upon
absorption of the Private Sites and Services Projects Office in 1988.
5.8
HLRPP receivable
The account represents the current portion of purchased mortgages/receivables
originated by public/private financial institutions and developers in accordance with the
terms, conditions and standards of NHMFC to serve as the underlying collaterals for
accounts eligible for securitization.
12
6.
OTHER CURRENT ASSETS
2012
Rentals and other deposits
Office supplies inventory
Prepaid insurance
Prepaid rent
Other prepaid expenses
6.1
6.1/
2011
(As restated)
33,817,868
979,134
769,581
14,000
3,361
33,864,187
861,141
1,291,592
3,384,336
5,063
35,583,944
39,406,319
Rentals and other deposits
The account refers to deposits made by NHMFC to various lessors for office space
rental and services.
7.
LONG - TERM RECEIVABLES
Previously termed as Loan Installment Receivables, Long-term Receivables (LTR) the
account represents mortgages purchased from the accredited originating institutions/
developers/community mortgage associations consisting of the following:
Regular LTR
Folio II 7.1/
HLRPP Receivable 7.2/
Folio I 7.3/
Loans Receivable-PRA 7.4/
Folio II Buy Back 7.5/
CMP 7.6/
Past due loans receivables 7.7/
Items in litigation 7.8/
Insurance receivable 7.9/
Sales contract receivable 7.10/
Liquidity reserve 7.11/
Commingle reserve 7.12/
Others
2012
2011
(As restated)
1,515,794,085
1,460,591,536
348,169,843
146,558,424
92,235,342
80,000,000
3,643,349,230
14,824,380,457
1,890,559,558
490,626,095
324,731,579
85,345,520
63,312,396
33,244,241
21,355,549,076
3,599,581,456
2,451,330,636
1,470,825,353
122,947,220
151,380,652
96,900,508
80,000,000
4,373,384,369
15,325,857,486
1,557,058,926
496,356,888
275,882,680
95,267,959
72,896,784
16,772,387
22,213,477,479
545,183,211
17,755,967,620
21,668,294,268
13
7.1
Regular LTR - Folio II
The account refers to the loans extended to the borrowers under the UHLP of the
Corporation. The loans are also amortized monthly for a maximum period of 25 years
with a rate ranging from nine per cent to 16 per cent depending on the loan package
availed of.
A significant portion of the decrease in amount of Regular LTR – Folio II represents the
4,410 accounts from the UHLP portfolio purchased by NHMFC. In cognizance to
NHMFC’s need to augment the pool of mortgages for eventual securitization, the
NHMFC Board Resolution No. 3737 dated November 15, 2011 granted Management the
authority to utilize the equity release from the Department of Budget and Management
for the purchase of selected UHLP low delinquent accounts. This transaction was also
approved by the Purchase Executive Committee under Resolution No. 16 dated
December 14, 2011. The purchased UHLP accounts were reclassified from Regular
LTR-Folio II to HLRPP LTR account.
7.2
HLRPP Receivable
The account represents the non-current portion of purchased mortgages/receivables
originated by public/private financial institutions and developers in accordance with the
terms, conditions and standards of NHMFC to serve as the underlying collaterals for
accounts eligible for securitization.
The increase of amount in HLRPP LTR receivable account represents the 4,410
accounts from the UHLP portfolio purchased by NHMFC. In cognizance to NHMFC’s
need to augment the pool of mortgages for eventual securitization, the NHMFC Board
Resolution No. 3737 dated November 15, 2011 granted Management the authority to
utilize the equity release from the Department of Budget and Management for the
purchase of selected UHLP low delinquent accounts. This transaction was also
approved by the Purchase Executive Committee under Resolution No. 16 dated
December 14, 2011. The purchased UHLP accounts were reclassified from Regular
LTR – Folio II to HLRPP LTR account.
7.3
Regular LTR - Folio I
The account pertains to receivables retained by NHMFC under the old program after the
outright assignment of P4.42 billion to HDMF as payment for trust liabilities due to the
latter. The loans are amortized monthly up to a maximum term of 25 years with interest
rates ranging from nine per cent to 16 per cent depending on the classification as well as
amount of financing availed of.
7.4
Loans receivable – Philippine Reclamation Authority (PRA), formerly Public
Estate Authority
The account refers to mortgage take-outs under the PRA Pabahay 2000 Project.
7.5
Folio II Buy Back
The account represents the 486 Defective Loans and Social Put Loans
repurchased/buy-back from BHFI. Pursuant to the provisions of the Loan Sale and
14
Purchase Agreement between NHMFC and BHFI on defective mortgages as specifically
stated in Section 4.01(b) and Section 10.01, BHFI is entitled to return to NHMFC 500
accounts per year for three consecutive years starting 2006 as Social Putback. Under
the same agreement, BHFI can also return accounts that breached the representation
and warranties under the Loan Sale and Purchase Agreement or the so called
“Defective Accounts”.
7.6
CMP
The account pertains to the retained CMP project originated by National Housing
Authority (NHA) for loans extended to qualified borrowers under the community
association of BASECO. The loans bear six per cent interest and are amortized for a
maximum period of 25 years.
7.7
Past due loans receivables
Folio II - Regular LTR
Folio I - Regular LTR
Loan Installment Receivable (LIR) - Refinanced
2012
2011
14,479,519,338
344,709,088
152,031
14,824,380,457
2,964,845,685
14,949,795,964
375,909,491
152,031
15,325,857,486
-
11,859,534,772
15,325,857,486
The past due loans reported under Folio I, Folio II and LIR - Refinanced represent the
total outstanding balance of borrowers account which were more than three months in
arrears as at December 31, 2012.
The segregation and classification of the entire outstanding balance of these delinquent
accounts to past due are in compliance with BSP Circular No. 143, s. of 1997, amending
Section 1. Item e of Subsection 304.1 (Books 1 and 11) and 4304 Q.1 (Book IV) and
item c of Section 3304 (Book 111) quoted as follows:
“Loans/receivables payable in installments - the total outstanding balance
thereof shall be considered past due in accordance with the following
schedule:
Mode of Payment
Monthly
Quarterly
Semestral
Annually
Minimum Number of Installments in Arrears
3
1
1
1
Provided, however, that when the total amount of arrearages reaches 20
per cent of the total outstanding balance of the loan/receivable, the total
outstanding balance of the loan/receivable shall be considered as past
due, regardless of the number of installments in arrears.”
15
7.8
Items in litigation
The account pertains to the actual outstanding balance of delinquent loans of home
borrowers transferred to the Legal Department of the Corporation for foreclosure or with
petitions already filed in court.
7.9
Insurance receivable
The account pertains to the mortgage redemption insurance premium component of the
borrowers monthly loan amortizations advanced by the Corporation for accounts with
more than 12 months in arrears.
7.10
Sales contract receivable
The account pertains to the Sale of Mortgage Rights (SAMOR) under the 1998 SAMOR
program with approved installment payments of five years and above. Amortization
payments of borrowers for Sales Contract Receivables are recorded as Deposit on
Rights Sold (see Note 14.1c).
7.11
Liquidity reserve
The account pertains to the reserve account established to cover any shortfall, Issuer
expenses and coupon payments of the Senior Notes from the time lag of the start of
delinquency of a current account until the receipt of cash flow from both delayed
Collections and the Guaranty.
7.12
Commingle reserve
The account pertains to the bank account of the Issuer established with the relevant
Account Bank into which amount equal to expected Collections for three months is
deposited from the proceeds of the Senior Notes issuance to cover the lagging time
between the Collection Period and the Monthly Servicer Report. The Commingle
Reserve Account shall be used upon the occurrence of a Servicer Termination Event.
8.
LONG-TERM INVESTMENTS
The account is composed of the following:
2012
Investment in SHFC 8.1/
Investment in BHFI 8.2/
Investment in Bahay Bonds-Junior Notes 8.3/
Investment in Bahay Bonds2-Class C Notes
Investment in PLDT Stocks 8.4/
Investment in Balikatan Holdings Two (BHT)
8.5/
9,853,069,113
1,225,636,830
310,898,054
183,744,442
285,500
147,276
2011
(As restated)
8,603,101,940
1,225,636,830
310,898,054
285,500
147,276
16
Investment in Balikatan Property Holdings,
Incorporated (BPHI) 8.6/
Investment in HGC Debenture Bonds 8.7/
8.1
2012
2011
(As restated)
62,500
11,573,843,715
183,254,585
62,500
265,654,539
10,405,786,639
183,254,585
11,390,589,130
10,222,532,054
Investment in SHFC
On January 20, 2004, Executive Order No. 272 was issued by the President of the
Republic of the Philippines authorizing the NHMFC to organize and establish the SHFC
as a wholly-owned subsidiary, in accordance with the Corporation Code and pertinent
rules and regulations issued by the Securities and Exchange Commission.
As a subsidiary, SHFC was created primarily to be the lead agency to undertake social
housing programs that will cater to the formal and informal sectors in the low-income
bracket and shall take charge of developing and administering social housing program
schemes, particularly the Community Mortgage Program (CMP) and the Amortization
Support and Developmental Financing Programs of the Abot-Kaya Pabahay Fund
(AKPF) as well as other social housing programs of the NHMFC in order to allow the
NHMFC to focus on its primary mandate that is, developing the secondary market for
home mortgages.
Presently, SHFC is merely a trustee of the transferred CMP Funds. The NHMFC
remains in control of the affairs of SHFC and did not abandon its obligation to use its
ownership under a trust relationship having retained its full ownership over the subject
funds.
The Investment in SHFC account consists of the P10 million corporate equity investment
and CMP assets consisting of cash amounting to P532.042 million and mortgages
amounting to P4,492.064 million transferred by NHMFC to SHFC under the Trust
Agreement dated October 24, 2005 in pursuance of Executive Order (EO) No. 272
dated January 20, 2004. EO No. 272 provides for the transfer of the assets and
liabilities of NHMFC under its Community Mortgage and AKPF Programs to the whollyowned subsidiary, SHFC. For the reason that certain CMP mortgages were funded out
of proceeds from borrowings, the receivables that were transferred to SHFC were those
funded out of government appropriations which were identified as those taken-out from
1994 up to September 30, 2005.
To rationalize the operations of NHMFC into Government Secondary Mortgage
Institutions and to consolidate the servicing of all CMP accounts, NHMFC has decided to
entrust, assign, and transfer the remaining 272 CMP accounts to SHFC in February 22,
2010. The consideration of the assignment is in the amount of P649.212 million
representing the original principal amount of the CMP retained accounts, unpaid
insurances less guaranty deposits. The amount of P649.212 million was offset against
the amount of SARO released for CMP subsidy for calendar years 2000-2001. The cutoff date of the transfer was December 31, 2009. All payments made by the Community
17
Associations and its member-beneficiaries after said cut-off date shall be for the account
of SHFC. NHMFC has likewise turned over to SHFC the CMP Servicing System, CMP
computer programs and all files/records used in the 272 CMP accounts.
8.2
Investment in BHFI
The account represents NHMFC’s equity as a joint venture partner in BHFI consisting of
P746.451 million preferred shares, P4.900 million common shares and P3,372.61 million
mortgage receivables. In pursuance of the implementation structure and strategy
designed to effect the transfer of assets to a Special Purpose Entity (SPE), NHMFC
incorporated and registered with the Securities and Exchange Commission the Balikatan
Housing Finance, Incorporated (formerly Balikatan Housing, Inc.) pursuant to Board
Resolution No. 3349 dated November 30, 2004 and authorized by the Office of the
President of the Philippines thru the Executive Secretary’s Memorandum dated
December 28, 2004. This corporation was organized as a financing company under the
Finance Company Act.
This is the corporation where NHMFC transferred all of the high delinquency NPLs in
exchange for shares and debt. Initially, NHMFC owned 100 per cent of BHFI but on
closing date of NPL sale, only 49 per cent of the equity was retained and Deutsche Bank
Global Opportunities (DBGO) owning 51 per cent. Thus, NHMFC became a minority
partner in BHFI.
With the formal closing of the sale of NPLs to DBGO in November 2005, the Final
Purchase Price was P5.173 billion with total cash proceeds of P4.263 billion and P0.910
billion NHMFC equity in BHFI broken down as: Investment in BHFI in the amount of
P0.751 billion and P0.159 billion Subordinated Debt B under Notes Receivable. NHMFC
remitted P3.299 billion and P0.463 billion to SSS and HDMF, respectively, as payment
of the High Delinquency Funder Loan Payable.
Per COA recommendation, NHMFC adopted the equity method of accounting for its
equity investment in BHFI in accordance with the Philippine Accounting Standards 28,
Investment in Associate - “An associate is an entity over which the Corporation has
significant influence and that is neither a subsidiary nor an interest in a joint venture.”
Significant influence is the power to participate in the financial and operating policy
decisions of the investee but is not control or joint control over those policies.
The results of assets and liabilities of associates are incorporated in these financial
statements using the equity method of accounting, except when the investment is
classified as held for sale, in which case it is accounted for in accordance with PFRS 5,
Non-current Assets Held for Sale and Discontinued Operations. Under the equity
method, an investment in an associate is initially recognized in the balance sheet at cost
and adjusted thereafter to recognize the Corporation’s share of the profit or loss and
other comprehensive income of the associate. When the corporation’s share of losses of
an associate exceeds the Corporation’s interest in that associate (which includes any
long-term interests that, in substance, form part of the Corporation’s net investment in
the associate), the corporation discontinues recognizing its share of further losses.
Additional losses are recognized only to the extent that the Corporation has incurred
legal or constructive obligations or made payment on behalf of the associate.
18
The Corporation assess whether there is any objective evidence that the investment in
associate is impaired. If such evidence exists, the entity shall determine the amount of
any impairment loss.
The investment account was increased by the share in the profit or loss for the calendar
years 2006 to 2011. The financial statements of BHFI as parent company was the basis
in the computation of the share in a loss of P191.170 million in 2011 and a profit
aggregating P665.456 million from 2006 to 2010.
8.3
Investment in Bahay Bonds – Junior Notes
On March 23, 2009, the NHMFC launched its maiden securitization Bahay Bonds 1
(BB1) issue using more than 12,000 prime residential mortgage loans. The NHMFC
issued P2.060 billion worth of asset-backed securities called Bahay Bonds. Again, in
August 2012, Bahay Bonds 2 (BB2) dubbed as the first ever retail mortgage backed
securities in the Philippine market was issued. This BB2 successfully raised P603.7
million.
8.4
Investment in PLDT stocks
The account pertains to NHMFC’s PLDT trunk line and direct lines.
8.5
Investment in BHT
The account represents NHMFC’s equity as a joint venture partner in BHT where
NHMFC owns 81.82 per cent common equity interest while DBGO owns 18.18 per cent.
The purpose of BHT is to own and hold the share of Balikatan Holdings One (BHO).
8.6
Investment in BPHI
Since the high delinquency NPLs are collateralized by real estate mortgages, the BHFI
may need to foreclose on some of the underlying mortgages. Under the law, foreign
equity in corporations who can own land is limited to 40 per cent. Since the foreign
equity component of the BHFI is 51 per cent, then the BHFI cannot own the land. Thus,
there is a need to create BPHI as a separate corporation that will own the land. To
qualify BPHI under the law on foreign equity restrictions, the capital stock of this
corporation must be layered (or “grandfathered”) through additional corporations – BHO
and BHT. Such layering will mirror a 51 per cent - 49 per cent capital structure in the
BPHI between DBGO and NHMFC, respectively. The purposes of the BPHI are to
foreclose and bid on the underlying real estate mortgages and to own, refurbish and sell
real estate after foreclosure.
8.7
Investment In HGC debenture bonds
The account represents the investments in government securities with maturity date in
2012. No additional investment in HGC debenture bonds was made in 2012.
19
9.
OTHER GARNISHED/FORECLOSED ASSETS
The account pertains to property acquired by NHMFC judicially or extra-judicially on the
settlement of loans/receivables and/or other reasons. Valuation of the asset includes
outstanding principal, six months accrued interest, unpaid insurances and capitalized
foreclosure expenses. The breakdown according to programs is as follows:
2011
(As restated)
2012
Folio II
Developmental loans
Community Mortgage Program
10.
1,024,313,029
177,963,375
53,981,122
1,256,257,526
25,125,150
961,532,105
184,538,181
53,586,166
1,199,656,452
23,786,729
1,231,132,376
1,175,869,723
PROPERTY AND EQUIPMENT
Leasehold
Improvements
Cost
January 1, 2012
Additions
Retirement
December 31, 2012
Accumulated
depreciation
January 1, 2012
Depreciation
Retirement
December 31, 2012
Office
Equipment
Office
Furniture
and
Fixtures
Transportation
Equipment
IT
Equipment
and
Software
Library
Materials
Other
SemiProperty ExpendaTools
and
ble
Equipment Property
Total
3,350,159
149,114
3,499,273
36,651,106
848,913
16,664,546
20,835,473
13,970,296
838,431
13,131,865
24,859,330 144,232,867
10,026,198
2,222,000 24,021,329
22,637,330 130,237,736
141,356
141,356
5,829,320
415,389
517,273
5,727,436
454,564
454,564
8,650 229,043,084
11,894,178
44,263,579
8,650 196,673,683
2,455,821
120,678
2,576,499
35,269,277
523,608
16,676,960
19,115,925
13,702,558
34,229
843,785
12,893,002
18,752,074
1,157,160
2,222,000
17,687,234
63,993,533
5,268,932
24,021,329
45,241,136
137,998
1,436
139,434
5,317,149
199,015
519,739
4,996,425
20,233
20,233
4,856 139,633,266
1,557
7,306,615
44,263,580
6,413 102,676,301
Net Book Value,
December 31, 2012
922,774
1,719,548
238,863
4,950,096
84,996,600
1,922
731,011
434,331
2,237
93,997,382
Net Book Value,
December 31, 2011
(as restated)
894,338
1,381,829
267,738
6,107,256
80,239,334
3,358
512,171
3,794
89,409,818
11.
-
OTHER ASSETS
The account includes the following:
2012
Other assets held in trust - Abot-Kaya
Pabahay Fund (Note 16) 11.1/
Unamortized mortgage origination cost
11.2/
573,580,894
65,029,209
2011
563,171,266
77,319,052
20
2012
Application system development cost
Sundry debits
Land and land improvement held in trust
Project investment
Deferred interest on BMPC
11.1
2011
30,104,361
10,735,558
6,795,904
41,993
9,009
30,104,361
10,735,558
6,795,904
41,993
9,009
686,296,928
688,177,143
Other assets held in trust – Abot-Kaya Pabahay Fund
The account pertains to the interest subsidy and liquidity support components of the
Abot-Kaya Pabahay Fund. The amortization and developmental components of the
AKPF were transferred to SHFC in October 2005 pursuant to E.O. No. 272. At the time
of transfer to SHFC in October 2005, the Interest Subsidy and Liquidity support
components has a balance of P501.90 million and the amortization and developmental
financing components amounted to P601.164 million in assets and P5.383 million in
liabilities as at September 30, 2005.
11.2
Unamortized mortgage origination cost
Previously termed as Deferred Charges, this account includes unamortized mortgage
origination and appraisal costs paid to originators of Unified Home Lending Program
mortgages up to March 31, 1992 and on CMP mortgages. These costs are amortized
over the term of the mortgage contract. Commitment cost of ¾ of one per cent per
annum charged by the International Bank for Reconstruction and Development (IBRD)
on the principal amount of the housing sector loan is also included in this account.
12.
PAYABLE ACCOUNTS
2012
Dividends payable 12.1/
Interest payable 12.2/
Accounts payable
Due to officers and employees
12.1
2011
(As restated)
75,766,079
72,240,125
13,924,307
7,070,064
93,766,079
53,928,111
8,323,212
7,033,282
169,000,575
163,050,684
Dividends payable
The account represents the accrual of dividends on net earnings for prior years based
on the repayment schedule agreed upon by DOF and NHMFC.
21
12.2
Interest payable
The account represents the accrued interest expense on loans payable to the funders as
shown below:
Government Service Insurance System (GSIS) a/
Social Security System (SSS) b/
Others
2012
2011
57,652,336
11,277,707
1,765,196
1,544,886
52,296,502
86,723
1,544,886
72,240,125
53,928,111
a. Interest payable - GSIS represents accrued interest expense on loans payable to
GSIS under the GSIS-NHMFC Restructuring Agreement dated April 11, 2012.
b. Interest payable – SSS represents accrued interest expense on loans payable to
SSS under the SSS-NHMFC Restructuring Agreement dated December 31, 2002.
13.
INTER-AGENCY PAYABLES
2012
Due to National Treasury 13.1/
Due to subsidiaries/affiliates 13.2/
Due to BIR
Due to Other NGA’s 13.3/
Due to GSIS
Due to HDMF
Due to PhilHealth
13.1
2011
(As restated)
807,896,181
59,342,196
44,559,717
25,065,998
830,615
589,354
9,054
697,956,429
59,077,293
34,658,599
1,092,749
585,317
8,792
938,293,115
793,379,179
Due to National Treasury
The account represents advances made by the Bureau of Treasury (BTr) for the
payment of the World Bank Loan released to NHMFC through the BTr. The amount due
includes interest on advances charged by the BTr as of December 2012.
The NHMFC has an obligation of P697.956 million to BTr on the World Bank Loan.
However, NHMFC’s review and evaluation of the advances/payments by BTr showed a
net obligation amounting to P229.407 million as at December 31, 2011 thus an excess
obligation of P468.549 million. Pending the formal confirmation and acceptance by the
DOF of the excess obligation of P468.549 million, the P697.956 million and P807.896
22
million payable remained recorded in the books of NHMFC in 2011 and 2012,
respectively.
13.2
Due to subsidiaries/affiliates
The account represents bank remittances of CMP accounts for the account of SHFC.
13.3
Due to Other NGA’s
The account represents NHA deposit under the special take out arrangement for
accounts without titles. As a result of the review, the titles amounting to P25.06 million
was determined to be fully paid and was reclassified under Due to Other NGA’s.
14.
OTHER CURRENT LIABILITIES
2012
Guaranty deposit payable
Financing charges payable
Tax refund payable
Other payables 14.1/
14.1
2011
(As restated)
56,252,387
8,114,436
815,186
1,502,620,680
80,927,190
8,114,436
815,186
1,065,687,543
1,567,802,689
1,155,544,355
2012
2011
(As restated)
Other payables
Breakdown of this account as follows:
Undistributed collections a/
Insurance payable b/
Other Payable – AKPF c/
Deposits – option money
Due to SPT d/
Deposits on rights sold e/
Guarantee fee payable f/
Accrued other expense payable
Miscellaneous liabilities
Other liabilities
Other Payables – Meralco g/
Transaction registration deposit
Deposits on acquired assets-housing fair
Insurance claims payable
399,721,173
295,120,542
208,112,216
170,034,420
119,842,363
110,408,092
72,151,335
65,206,679
16,083,411
14,344,766
11,647,051
6,598,072
5,782,805
3,403,528
182,124,587
274,482,959
203,872,253
118,597,822
114,098,931
72,151,335
45,169,964
20,146,118
14,343,352
6,598,072
6,048,605
4,374,225
23
2012
Deposits-special restructured program
Due to contractor
Other Payables – Professional Fees
Home Mortgage Employees Association, Inc.
Claims for disallowed payments
Provident fund payable
Home Mortgage Multi Purpose Cooperative
Deposits – procurement
Advances - Ministry of Human Settlements
2011
(As restated)
2,977,430
486,082
413,798
96,102
88,746
75,235
10,769
8,584
7,481
2,977,430
36,082
413,798
96,508
88,746
22,028
28,663
8,584
7,481
1,502,620,680
1,065,687,543
a. Undistributed collections (UC) - In the absence of any other account to which
collections can be properly classified, the payments of the borrowers for their loan
amortization are temporarily recorded as UC categorized under the general caption of
Other Payables (formerly Other Liabilities). The reason for this is that the distribution as
to the proper accounts to be credited for these payments cannot be determined at the
time of their receipt.
The application of these amounts to the corresponding borrowers’ loan accounts is done
at a later date that is why the UC always carries a balance at the end of any given
period. As collections from borrowers’ amortization, this account is actually a reduction
on the Receivable accounts, which if not accordingly distributed will render the balances
of the affected accounts inaccurate.
The remaining balance of Undistributed Collections as at December 31, 2012 and 2011
are as follows:
2012
Undistributed collection
Folio II
Folio I
HLRPP
Samor III
PEA
Sundry credits
Advances from borrowers
SAMOR
Folio II
HLRPP
PRA
CMP
2011
(As restated)
114,146,779
187,316,017
9,273,301
1,791,773
9,260
6,684,432
236,309,450
(171,151,038)
46,090,882
38,990,498
27,593,160
11,724,434
2,181,987
9,532
399,721,173
37,140,004
19,269,576
12,583,400
1,872,781
9,532
182,124,587
24
b. Insurance payable account is credited for the receipt of the Mortgage Redemption
Insurance (MRI) premium composed of the borrower’s monthly loan and debited upon
payment of the insurance premiums to the MRI Pool.
c. Other payable–AKPF represents amount of loan released by AKPF to fund
Commingle and Liquidity Reserve accounts. The year-end balance of Other PayableAKPF is inclusive of interest payable amounting to P5.914 million.
d. Due to SPT represents collections of securitized accounts covering the months of
September to December, 2012 for remittance in the 1st quarter of 2013.
e. Deposits on right sold pertains to the downpayment and amortization payments of
buyers of Acquired Assets sold under the Sale of Mortgage Rights (SAMOR) program,
cash sale and sheriff sale temporarily lodged to this account since distribution as to
proper accounts cannot be determined at the time of receipt. As at December 31, 2012,
the balance of the account represents accumulated collections from CY 2007 up to CY
2012. This balance will be distributed to its proper accounts upon full implementation of
NHMFCs Information Technology Road Maps under the Acquired Asset Management
System.
f. Guaranty fee payable pertains to the guaranty by the National Government on
NHMFC’s UHLP loans with GSIS, HDMF, and SSS equivalent to one per cent of the 22
per cent of Guarantee Fee (GF) based on the outstanding loan balance pursuant to the
Memorandum of Agreement entered into by and among the Republic of the Philippines,
represented by the Secretary of Finance, the Housing and Urban Development
Coordinating Council, the SSS, GSIS and HDMF and the NHMFC on February 4, 1994.
On December 11, 2008, the NHMFC submitted a proposal to the Bureau of Treasury
(BTr) with the computation of the GF based on the declining balance of the loan, to
amortize the arrears (Y1989-2007 unpaid GF) up to Y2018, and to compute the current
GF at the end of each year based on actual loan balance payable of the following year.
The proposal was for a GF payable of P678.559 million as at December 31, 2009. This
was accepted by the DOF subject to the reconciliation of GF payable balances by and
between BTr and NHMFC.
As at December 31, 2010, the computed unpaid GF was in the amount of P613.729
million and recognized GF Payable in the amount of P117.006 million. However, BTr
confirmed the GF obligation of NHMFC in the amount of P614.273 million as at
December 31, 2010.
On the other hand, under the Letter of Guarantee dated April 12, 1995 issued by the
DOF, the computation of GF obligation consisted of the following:
a. The loans outstanding as at December 31, 1994 were covered by full
and unconditional NG Guarantee to the extent of 22 per cent of P8.91
billion;
b. The borrowings by NHMFC in 1995 up to the maximum amount of
P11.80 billion shall be covered by the full and unconditional guarantee of
the NG to the extent of 22 per cent thereof while the loans are
outstanding; and
25
c. The guarantee cover shall be subject to a one per cent guarantee fee to
be paid by NHMFC to the NG.
Based on the above stated DOF Letter of Guarantee, the GF payable would only be
P88.527 million. NHMFC had already paid a total of P692.705 million as at December
31, 2010. It appeared an overpayment of GF in the amount of P604.178 million as at
December 31, 2010.
In 2011, the reconciliation with the BTr based on the Letter of Guarantee resulted in an
agreed GF payable of P183.916 million. Having paid a total GF of P746.781 million as
at December 31, 2011 and an agreed GF payable of P183.916 million, there is an
excess payment of P562.865 million. This excess payment of P562.865 million was
agreed in principle and accepted by the DOF as can be gleaned upon their letter dated
February 1, 2012. However, BTr confirmed the GF obligation of NHMFC in the amount
of P578.438 million as at December 31, 2011. The BTr confirmation further stated that
their recomputation of guarantee fee due from NHMFC amounted to P562.865 million
but adjustments was not effected in their books pending confirmation/instruction from the
DOF whether NHMFC’s loans from CY 1996 and onwards will be subjected to guarantee
fee. Therefore, until the DOF formally accepts the reconciled figures resulting in excess
payment of P562.865 million, the NHMFC recorded the GF payable in the amount of
P72.151 million only in 2011. No further accruals for the GF payable account were
made in 2012. Hence, the balance of P72.151 million remained recognized as the
balance as at December 31, 2012.
g. Other Payables – Meralco represents adjustment for unpaid electric bills from July
2002 to July 2004 due to metering installation error or interchanged meter in the amount
of P17.471 million to be paid monthly for 24 months starting May 15, 2012.
15.
LOANS PAYABLE – DOMESTIC
The account represents obligations to Funders of the UHLP with details as follows:
Social Security System
Government Service Insurance System
2012
2011
24,579,207,555
3,703,882,275
1,285,400,072
25,732,653,101
3,897,194,672
5,085,845,189
29,568,489,902
34,715,692,962
In March 2003, the NHMFC Board, SSS and HDMF approved the Restructuring and
Disposition Strategy for UHLP portfolio. The GSIS opted not to participate in the said
strategy but instead negotiated for a separate agreement with NHMFC in settlement of
its GSIS loans.
In view of the approval of the loan restructuring the balances of NHMFC’s obligations
with SSS and HDMF were adjusted to conform to the amounts reflected in the
agreement. As a consequence, total liabilities to SSS and HDMF were increased by
P7.27 billion and P0.54 billion, respectively and segregated into: 1) Allocated Low
26
Delinquency Funder Loan; 2) Allocated Moderate Delinquency Funder Loan; 3)
Allocated High Delinquency Funder Loan; 4) Allocated Accrued Interest; and 5)
Allocated Accrued Penalties.
The above increase in SSS and HDMF liabilities of P7.81 billion represents the
difference in the balances of the liability accounts reported in the books of NHMFC
compared with those of the funders as of the cut-off date of December 31, 2002.
The approval of the restructuring agreement made the contingent liabilities a real
obligation, hence, the adjustment of the NHMFCs obligations with SSS and HDMF.
However, the said approval yielded for NHMFC the benefit of a much lower interest rate
of only 4 per cent per annum compared to the previous rates charged by SSS and
HDMF of 11.32 per cent and 12.17 per cent, respectively. In addition, interest shall be
computed only on the outstanding principal balance of the Allocated Low and Moderate
Delinquency Funder Loans and not on the Allocated High Delinquency Funder Loan,
Allocated Accrued Interest and Allocated Accrued Penalties components.
The balances of Loans Payable to SSS and HDMF as at December 31, 2012 are as
follows:
Restructured Loan
Low Delinquency
Moderate Delinquency
High Delinquency
Allocated Accrued Interest
Allocated Accrued Penalties
SSS
HDMF
732,935,635
2,650,376,329
8,620,374,660
11,961,415,991
614,104,940
28,465,261
475,076,752
1,168,041,977
1,524,283,148
508,015,137
24,579,207,555
3,703,882,275
The loan agreement between NHMFC and GSIS was deemed terminated in December
2002 based on communications between the two parties. The effect of the termination
was reflected in the books in December 2003. However, because of the lack of a formal
settlement of the loan, COA recommended to restore the GSIS principal loan obligation
in the books of NHMFC by reversing previous entries recording the termination of the
loan (see Note 12.2a).
In April 11, 2012, a Restructuring Agreement was made and entered between NHMFC
and GSIS relative to the GSIS loans extended to NHMFC for the UHLP from 1988 to
1995. As provided for in the restructuring agreement, the total amount of loans payable
to GSIS was P6.495 billion and the restructured obligations payable under said
agreement is P1.886 billion. To date the remaining obligation with GSIS is P1.285 billion
due to the substantial payment made for the purchase of Low-delinquency accounts and
amortization of restructured loans. The expected final repayment date shall be on
December 31, 2012 or earlier.
27
16.
OTHER LONG-TERM LIABILITIES
2012
Abot-Kaya Pabahay Fund (Note 11)
Notes payable - PRA 16.1/
Accounts payable- matured securities
16.1
573,580,894
122,500,582
2,003,123
698,084,599
2011
563,171,266
126,214,814
2,003,123
691,389,203
Notes payable
The account pertains to the guaranty transfer price of the Philippine Reclamation
Authority (PRA) special housing loan program as agreed upon by NHMFC and PRA.
17.
DEFERRED CREDITS
Unrealized
income
from
capitalized
arrearages of Restructured Loans - Folio II
12 per cent unrealized service fee income
from remittance of GSIS collections
Unrealized income from capitalized interest
income from commingle and liquidity
reserve
Unrealized income recognized from take-out
of PRA accounts against payable to BTr
Unrealized income from Folio I accounts
Returned by HDMF
Unrealized
income
recognized
from
negotiated sale and unrealized service fee
income from renewal of MRI coverage with
more than 12 months in arrears
18.
2012
2011
(As restated)
4,031,929,323
3,800,482,351
85,806,347
98,095,006
36,394,254
24,204,499
28,313,681
28,372,094
20,186,742
42,181,149
4,244,811,496
-
7,021,682
3,958,175,632
CAPITAL STOCK
The account represents the amount received from the National Government in payment
of capital as released by the Department of Budget and Management and subsequently
by the Bureau of Treasury.
28
Originally, as embodied in its charter, the Corporation had an authorized capital stock of
P500 million divided into 500,000 shares at P1,000 par value per share. The authorized
capital was fully subscribed and paid up by the Government of the Republic of the
Philippines (GRP) as at December 31, 1986 with the release of P305 million
appropriation for the NHMFC for that particular year.
With the passage into law of the Comprehensive and Integrated Shelter Finance Act
(RA 7835) on December 22, 1994, the Corporation’s authorized capital stock is now
Five billion five hundred million pesos (P5,500,000,000) divided into five million five
hundred thousand (5,500,000) shares of common stock with par value of One
Thousand Pesos (P1,000) per share, to be fully subscribed and paid up by the GRP.
19.
PAID-IN CAPITAL
The paid in portion of the authorized capital stock consists of the following:
Original paid in capital
Paid in capital released in 1995
Additional paid in capital released in 2008
Additional paid in capital released in 2012 a/
NHMFC’s loan from World Bank - IBRD converted to equity b/
Released in June 1996 as equity support to NHMFC
Released in August 1996 representing ten per cent annual
contribution of PCSO to Socialized Low-Cost Housing pursuant
to Section 6 of R.A. 1169
Programmed equity in 1997
500,000,000
900,000,000
500,000,000
400,000,000
1,582,005,642
135,000,000
73,504,141
180,000,000
4,270,509,783
a. An additional paid in capital in the amount of P400 million representing government
equity for CY 2010 released in CY 2012.
b. The Department of Justice Opinion No. 18 Series of 1996 dated January 24, 1996
states that the principal loan of US $76.73 million from the World Bank - IBRD is ipso
jure or by operation of law, which means that it is an outright conversion, and therefore,
the full amount of the loan thus converted to equity should be deemed part of the fully
paid capital of the NHMFC as provided for under Section 6 of R.A. No. 7835
(Comprehensive and Integrated Shelter Financing Act of 1994).
20.
GOVERNMENT EQUITY
2012
Contingent surplus - Claims for disallowed payments
Equity in sites and services b/
Donated capital c/
a/
66,331,754
39,840,799
2,022,509
108,195,062
2011
19,291,603
39,840,799
2,022,509
61,154,911
29
a. Contingent Surplus - Claims for disallowed payments
The account consists of disbursements/transactions disallowed in audit by COA which
was debited to the Other receivables-Claims for disallowed payments account and
credited to Contingent Surplus – Claims for disallowed payments. The former account is
presented in the Balance Sheet under Receivables while the latter is presented in the
Statement of Changes in Capital Deficiency.
b. Government equity in sites and services
The account covers the Government of the Philippines’ counterpart fund and the fund
from the World Bank which were used for the construction of the civil works in various
Private Sites and Service Projects Office projects absorbed by NHMFC.
c. Donated capital
The account pertains to furniture and fixtures and other assets acquired through the
World Bank Technical Fund for the regionalization of NHMFC operations. It also
includes donations from government agencies and other individuals.
21.
DEFICIT
The Deficit account consists of the following:
2012
2011
(As restated)
Deficit at beginning of year
Prior period errors 21.1/
As restated
2011 Net income, as restated
2012 Net income
8,551,265,607
8,551,265,607
616,976,964
9,993,136,924
1,751,095
9,991,385,829
1,440,120,222
-
Deficit at end of year
7,934,288,643
8,551,265,607
21.1
Prior period errors
Reversal of miscellaneous income and penalty from long-term
receivables previously recognized under Undistributed
Collections in 2010
Various adjustments to income and expenses (net) for 2010
Adjustment on loan loss provision recorded prior to 2011
Reversal of interest income from long-term receivables previously
recognized under Undistributed Collections in 2010
46,170,267
20,899,639
20,247,166
(85,565,977)
1,751,095
30
22.
SUBSIDY INCOME
The account pertains to funds released by the National Government to cover the
implementation of the Community Mortgage Program.
23.
COMPLIANCE WITH TAX LAWS
In compliance with the requirements set forth by Revenue Regulation No. 15-2010,
hereunder are the information on taxes, licenses and fees paid or accrued during the
taxable year:
2012
2011
500
500
500
500
58,413,933
14,673,944
31,527,757
14,845,164
3,036,923
3,130,841
76,124,800
49,503,762
A. National
BIR Registration
B. Withholding taxes paid/accrued for the year:
Corporate income
Percentage tax
Taxes on compensation and benefits/creditable
withholding taxes
24.
OFF-BOOKS DISCLOSURES
Software Ventures International Technologies, Inc. (SVIT) Claim
In 1999, several demands were made by SVIT from NHMFC to pay for services
rendered by it under the Collection Outsourcing Agreement dated October 7, 1999 which
was allegedly terminated abruptly. A series of negotiations thereafter took place which
culminated in the execution of a Compromise Agreement which was signed by the
parties in January 2007. The said Compromise Agreement provided, among others, that
NHMFC shall pay SVIT the amount of P118,259,799.05. Per Resolution No. 3503,
Series of 2007, the Board confirmed the terms of the Compromise Agreement with the
condition that the same be submitted, thru the Office of the Solicitor General or Office of
the Government Corporate Counsel (OGCC), to a court of competent jurisdiction for
approval.
This condition, according to SVIT, is contrary to law and jurisprudence and imputed bad
faith on the NHMFC Board of Directors and its officers. The Arbitral Tribunal rendered
its decision in said case on June 20, 2008. The important part of the dispositions of the
Final Award is reproduced here as follows:
The National Home Mortgage Finance Corporation is hereby ordered to pay
SVI Technologies, Inc., the amount of One Hundred Eighteen Million Two
31
Hundred Fifty-Nine Thousand Seven Hundred Ninety-Nine and 05/100
Pesos (P118,259,799.05), Philippine Currency.
The National Home Mortgage Finance Corporation is further ordered to pay
the SVI Technologies, Inc. interest which has accrued up to June 20, 2008
the amount of P9,868,474.74.
Finally, the National Home Mortgage Finance Corporation is ordered to pay
the SVI Technologies, Inc. attorney’s fee in the amount of P1,000,000.00.
In order to keep the said award from being final and executory, and in accordance with
the general laws on arbitration and procedural rules of the PDRCI, NHMFC on 04
August 2008, filed a petition before the Regional Trial Court, Makati City for modification
of the Final Award. In fine, what NHMFC seeks is for the non-imposition of interests and
attorney’s fees amounting to approximately P10.8 million.
On 05 January 2010, the Makati RTC, Branch 147 rendered its Decision dismissing
NHMFC petition for lack of appropriate basis. While the trial court dismissed NHMFC’s
petition, no express confirmation was made by the trial court on the Final Award.
On 13 October 2010, NHMFC was informed of an Order dated 27 September 2010 from
the Makati RTC Branch 147 directing the issuance of a Writ of Execution to enforce
payment by NHMFC to SVIT of the principal amount of P118,259,799.05 with interest on
the said principal amount at the rate of 12 per cent per annum from July 6, 2008 until the
said amount is fully paid.
On 14 October 2010, NHMFC received a final demand letter from PhilExim demanding
for the immediate payment and direct remittance of the amount of P100 million.
NHMFC paid the principal amount of P118,259,799.05, with one check dated October
29, 2010 for P100 million payable to PhilExim and another check dated October 29,
2010 for P18,259,799.05 payable to SVIT.
For the remaining issue on the award for interest and attorney’s fees amounting to
P10,868,474.77, the SVIT claimed for the amount of P48,362,478.24 as at November
15, 2011 (with interest of P14,451.05 per day after November 15, 2011 until fully paid)
inclusive of all interests and attorney’s fees.
On 15 December 2011, NHMFC paid SVIT the amount of P46,580,772.05 in accordance
with the Supreme Court (SC) Order in its decision on the case NHMFC vs SVIT (GR
196086). The total amount for execution per SVIT computation was P48,709,303.44,
thus, the NHMFCs payment is lower by P2,128,531.39. The difference of P2,128,531.39
was largely attributed to the item “interest on accrued interest” amounting to
P1,658,873.63 which NHMFC deducted in the absence of the Court’s express ruling
allowing compound interest. The other amount of P469,657.76 represents difference in
the date of computation of the effectivity of the 12 per cent interest which NHMFC held
as 15 days from receipt of the SC decision on 25 November 2011 and not from
September 6, 2011 when SVIT allegedly received the said decision. To date, there is a
pending case for final accounting with Makati RTC Branch 139.
32
A. OBSERVATIONS AND RECOMMENDATIONS
1.
The Undistributed Collections not posted in the borrower’s subsidiary
ledgers resulted in the variance between the general and subsidiary ledger
balances as at December 31, 2012, thereby casting doubt on the validity of the
Loans Receivable and other affected account balances totaling P393.018 million.
1.1.
Undistributed Collections (UC) account is a temporary liability account where
collection of borrower’s loan amortizations, from the various housing programs namely:
Folio 1 or the old program of NHMFC, Folio II or the Unified Home Lending Program,
Housing Loan Receivable Purchase Program, Sale of Mortgage Rights Program,
Community Mortgage Program, projects originated by National Housing Authority, and
the Philippine Reclamation Authority Pabahay 2000 Project, are initially recorded
pending distribution to the proper accounts.
1.2.
The distribution of collections of loan amortization included the following
accounts whichever is applicable to the program:
(a) debit to undistributed collections;
(b) debit or credit to advances from borrowers;
(c) credit to the accounts namely, loan receivable, interest receivable, insurance
payable-MRI, insurance payable-Fire, insurance payable-HFC, interest
income, other income, miscellaneous income-penalty, prior years
adjustments.
The excess of the debit to the Advances from Borrowers account over the amount
credited have remained the balance of UC at year-end.
1.3.
As gathered from the General Accounting Division, the aging of the balance of
Undistributed Collection of P393.018 million are as follows:
Balance
as at
December
31, 2012
Housing Program
UC – FOLIO I
UC – FOLIO II
UC – FOLIO HLRPP
UC – FOLIO SAMOR III
UC – Advances from Borrowers
regular
TOTAL
– SAMOR
– FOLIO I
– HLRPP
– PEA
Age of Balance as at December 31, 2012
0-3
months
4-12
months
Over 12
months to
3 years
Over 3
years
187,316,017
114,146,779
9,273,301
1,791,772
38,990,498
9,365,801
19,573,555
1,088,501
91,568
-
18,731,601
164,121
8,184,800
244,397
-
43,082,684
94,409,103
1,455,807
-
116,135,931
38,990,498
27,593,161
11,724,433
2,181,987
393,017,948
13,426,513
11,191,538
543,551
55,281,027
3,946,279
532,895
457,097
32,261,190
4,772,671
864,297
144,584,562
5,447,698
317,042
160,891,169
1.4.
As shown in the foregoing table, the amount of P305.476 million out of the
P393.018 million or 77.72 per cent of the total undistributed collections for 2012
represents prior years undistributed collections and the amount of P87.542 million for the
33
current year resulted in the overstatement of the account Loans Receivable and other
affected accounts by P393.018 million. Also, the undistributed collections under the
Folio 1 program constituted the bulk of the prior year’s balance of UC.
1.5.
As discussed in Observation No. 1 of the 2011 Annual Audit Report, the UC
under the Folio I program constituted the bulk of the prior year’s balance of UC, as well.
In 2012, contractual employees were hired to augment current employees in the
distribution of payments in the Folio I Accounts Servicing Unit’s stand-alone computer
system. As at December 31, 2012, the Unit had distributed P246.415 million or 71.74
per cent of the P343.507 million UC under the Folio I program for 2011. Thus, the
balance of UC under Folio 1 program was decreased to P187.316 million as at
December 31, 2012.
1.6.
Further, the undistributed collections remained unposted in the borrower’s
subsidiary ledgers, thus, there is variance between the balance per general ledger and
subsidiary ledgers.
1.7
We reiterated our prior years’ audit recommendations that Management:
a.
Establish and formulate guidelines on the proper and timely
allocation of undistributed collections to the appropriate accounts by
concerned departments. Evaluate the existing billing and collection
system currently utilized for Folio 1 accounts to address the delay in the
posting of loan amortization payments of the borrower to their subsidiary
ledgers; and
b.
Conduct continuous reconciliation of accounts to minimize the
accumulation of undistributed collections and to identify the reasons for
the abnormal balances of UC accounts.
1.8
Management informed that the Folio 1 Servicing Unit, with the assistance of the
Information System and Technical Support Division (ISTF), has established the Folio I
Payments File (FIMBR) to help in the posting of payments. Also, the implementation
and use of the Mortgage Accounting and Collection Information System (MACIS) Folio 1
computer program will significantly lessen the Corporations’ undistributed collections.
Further, the monthly reconciliation between Folio I Servicing Unit and the General
Accounting Division will be undertaken every 15 th of the month.
1.9
By way of an auditor’s rejoinder, the MACIS Folio 1 computer program has not
been implemented in 2012 and the effect of the program to the undistributed collections
under Folio I will be evaluated in 2013.
34
2.
Default or missed payments of securitized BahayBonds series 1 and 2
accounts have significantly reached 1 to 51 months and 1 to 12 months,
respectively, during the year, resulting in the total under collection of loan
receivables totaling to P569.845 million, equivalent to 34.87 per cent of the total
outstanding diminishing principal of P1.634 billion for the 12,225 accounts for
both series of issuances as at December 31, 2012.
BahayBonds series 1
2.1
On March 23, 2009, the corporation issued P2.06 billion worth of mortgage/
asset-backed securities called BahayBonds (the first series of BahayBonds or BB1).
The BahayBonds consisted of two classes of Notes, the Class A - Senior Notes valued
at P1.75 billion have been bought by Qualified Institutional Investors/Banks and the
Class B - Subordinated Notes valued at P310 million have been retained by the
Corporation. The Senior Notes have fixed interest rate, while a variable interest rate on
Subordinated Notes but both Notes have an expected maturity date of 5 January 2018
or 8.8 years from issue date.
2.2
Under this mortgage/asset-backed securitization transaction, the Philippine
National Bank Trust Banking Group is the Special Purpose Trust Bank, the Development
Bank of the Philippines is the Trustee, Standard Chartered Bank Philippines is the
Registry and Paying Agent, Home Guaranty Corporation is the Guarantor and NHMFC is
the Servicer.
BahayBonds series 2
2.3
On August 17, 2012, the NHMFC issued the second series of mortgage/assetbacked securitization with its issuance of P603,744,442.46 worth of BahayBonds (or
BB2). There were three types of securities issued namely: (1) Class A Senior Notes in
the aggregate principal amount of P300,000,000, which were sold to retail investors; (2)
Class B Senior Notes in the aggregate principal amount of P120,000,000, which were
sold to qualified institutional investors; and, (3) Subordinated Notes in the aggregate
principal amount of P183,744,442.46, which was kept by NHMFC.
2.4
The Class A Senior Notes have a maturity date of August 17, 2017 with a fixed
interest rate equivalent to 4.8 per cent per annum. The said Notes were issued in
scripless form, listed on the Philippine Dealing & Exchange Corporation (PDEx) in
minimum denominations of P5,000 each, and in increments of P5,000 thereafter beyond
the minimum. On the other hand, the Class B Senior Notes have a maturity date of
August 17, 2022 with a fixed interest rate equivalent to 6.0 per cent per annum in
minimum denominations of P100,000 each, and in increments of P10,000 thereafter
beyond the minimum. The Subordinated Notes have variable interest rates with maturity
date of August 17, 2022.
2.5
Under this mortgage/asset-backed securitization transaction, the Land Bank of
the Philippines is the Special Purpose Trust Bank, the Development Bank of the
Philippines is the Trustee, the Philippine Depository & Trust Corporation is the Registrar
and Paying Agent, Home Guaranty Corporation is the Guarantor and NHMFC is the
Servicer.
35
2.6
The assets underlying the Notes were made up of long term mortgages from the
Unified Home Lending Program loan portfolio of 3,364 residential loans with an
aggregate outstanding principal balance of P603,744,442.46 as at cut-off date of March
31, 2012.
2.7
In view of the magnitude of the amounts involved in both series of issuances,
performance monitoring, which is the systematic and continuous assessment of the
progress of a piece of work over time, is necessary to achieve the desired results. It
includes checking whether services, activities, processes, policies and procedures are
implemented correctly, to a high standard and a timely manner. It also includes
monitoring of the financial performance, such as the efficiency of the collections of
receivables as they fall due.
2.8
Analysis of the Monthly Trustee Reports on BahayBonds Series 1 and 2 as at
December 31, 2012 prepared by NHMFC, as servicer, showed that:
a.
Of the total outstanding securitized accounts of 8,949 for BB1 with a total
outstanding principal balance of P1.082 billion, 3,370 accounts have missed from
1 to 51 payments resulting in the under collection of P454.863 million. For BB2,
696 accounts of the total outstanding securitized accounts of 3,276 securitized
accounts with a total principal balance of P551.722 million have missed 1 to 12
payments as at December 31, 2012 resulting in the under collection of loan
receivables totaling P114.982 million or a total under collection of P569.845 for
both series.
b.
For BB1, the ratio of the cumulative missed payments on the total
outstanding principal balance of securitized accounts over the total outstanding
diminishing principal balance of securitized portfolio of P1.082 billion reached
42.03 per cent as at December 31, 2012. On the other hand, the ratio of the
cumulative missed payments on the total outstanding principal balance of
securitized accounts over the total outstanding diminishing principal balance of
securitized portfolio of BB2 continue to increase from the 15.91 per cent in April
2012 to 20.84 per cent in December 31, 2012.
c.
Prepayments totaled P92,196,310 or 5.64 per cent of the outstanding
principal balance of the total securitized BB1 and BB2 portfolio of
P1,633,995,173 as at December 31, 2012. The amount of prepayments varies
monthly and resulted on a minimal reduction in the total value of the asset pool.
36
2.9
Details of the default or missed payments for BahayBonds1 and for the initial
year of issuance on BahayBonds series 2 covering the 9-month period ending
December 31, 2012 are shown in the table below:
Collection
Month
Amount
Should be
Billed
Actual Collections
Prepayments
Principal
Interest
Total
Cumulative
Missed Payments
for the Period
(Per Amortization
Schedule)
Amount
Cumulative Missed
Payments on the
Outstanding Principal
Balance of Securitized
Accounts
No. of
Months
Amount
No. of
Accounts
% of Cumulative Missed
Payments on the
Outstanding Principal
Outstanding
Diminishing Principal
Accounts to Total
Outstanding
Portfolio
Diminishing Principal
Portfolio
No. of
No. of
Amount
Amount
Accounts
Accounts
BahayBonds Series 1
January
February
March
April
May
June
July
August
September
October
November
December
TOTAL
291,711,707
10,366,871 20,709,636 31,076,507
9,820,998 17,654,763 27,475,761
11,634,687 19,034,847 30,669,534
11,724,400 18,630,935 30,355,334
11,966,509 16,457,347 28,423,855
11,350,179 19,064,663 30,414,843
11,306,605 18,015,864 29,322,469
10,731,972 15,630,912 26,362,884
8,139,909 14,617,577 22,757,485
10,014,925 16,064,820 26,079,745
10,783,544 18,115,934 28,899,479
16,323,096 10,782,783 27,105,879
134,163,695 204,780,082 338,943,776
BahayBonds Series 2
April
6,072,625
5,308,879 11,381,504
May
6,103,436
6,014,601 12,118,037
June
5,931,621
6,086,445 12,018,066
July
5,790,370
6,321,134 12,111,504
August
5,769,943
5,578,406 11,348,349
September
5,576,534
5,659,179 11,235,713
October
5,454,878
4,750,393 10,205,271
November
5,987,732
6,332,124 12,319,855
December
5,971,601
5,597,637 11,569,238
TOTAL
120,911,143 52,658,738 51,648,799 104,307,538
Total for
BB1 and 2 412,622,850 186,822,433 256,428,881 443,251,314
75,410,789
74,823,029
77,144,554
79,304,340
80,596,999
82,743,768
84,683,189
87,619,058
91,025,821
93,924,785
95,973,186
96,849,148
96,849,148
1-40
1-41
1-42
1-43
1-44
1-45
1-46
1-47
1-48
1-49
1-50
1-51
487,001,964
479,681,136
471,327,352
474,106,849
464,325,224
458,239,869
467,791,058
469,639,660
475,899,623
480,002,562
468,332,221
454,863,010
454,863,010
3,381
3,365
3,337
3,384
3,306
3,289
3,394
3,433
3,503
3,557
3,488
3,370
3,370
1,292,593,887
1,271,884,251
1,254,229,488
1,235,194,641
1,216,563,706
1,200,106,360
1,181,041,696
1,163,025,833
1,147,394,920
1,132,777,344
1,116,712,523
1,098,596,589
1,082,273,493
1,082,273,493
9,793
9,708
9,639
9,555
9,481
9,419
9,341
9,264
9,202
9,146
9,084
9,023
8,949
8,949
38.29
38.24
38.16
38.97
38.69
38.80
40.22
40.93
42.01
42.98
42.63
42.03
42.03
34.83
34.91
34.92
35.69
35.10
35.21
36.64
37.31
38.30
39.16
38.66
37.66
37.66
1,719,858
2,256,412
1,969,966
2,673,534
1,971,473
2,080,646
1,194,815
1,623,732
1,926,882
17,417,317
2,659,430
2,951,713
3,312,420
3,912,942
4,473,707
5,221,666
6,045,339
6,173,580
6,310,895
6,310,895
1-4*
1-5
1-6
1-7
1-8
1-9
1-10
1-11
1-12
95,207,929
92,240,788
97,372,397
106,807,476
110,703,758
121,283,828
129,682,638
122,112,480
114,982,548
114,982,548
576
558
585
651
672
746
790
745
696
696
598,435,564
592,420,963
586,334,517
580,013,383
574,434,977
568,775,797
564,025,404
557,693,281
551,721,680
551,721,680
3,352
3,343
3,333
3,321
3,314
3,306
3,301
3,287
3,276
3,276
15.91
15.57
16.60
18.41
19.27
21.32
22.99
21.90
20.84
20.84
17.18
16.69
17.55
19.60
20.28
22.56
23.93
22.66
21.25
21.25
92,196,310
103,160,043
569,845,558
4,066
1,633,995,173
12,225
34.87
33.26
8,511,229
8,674,985
7,136,218
6,822,504
4,858,673
7,774,105
6,801,950
5,260,042
4,404,825
5,119,123
5,464,124
3,951,215
74,778,993
* the classification of account as current is 0-3 months arrears
2.10 We , likewise observed the following on the audit of the outstanding principal
balance of securitized accounts:
a.
The aging analysis of the outstanding principal balance of securitized
accounts showed increase in default in the payment of loan amortization in the
current year when compared with last year principal balance, details below:
Age of
Accounts
BB1
Current
0 month
1-6 months
Total Current
Default
7-12 months
Over 1 year
Over 2 years
Over 3 years
Total Default
Grand Total
Number of
accounts
2012
Outstanding
Balance
Percentage of
accounts
Number of
accounts
2011
Outstanding
Balance
Percentage of
accounts
5,579
2,048
7,627
627,410,483
252,933,606
880,344,089
57.97%
23.37%
81.34%
6,368
2,340
8,708
796,868,957
316,771,044
1,113,640,001
61.65%
24.50%
86.15%
422
414
237
249
1,322
8,949
53,829,923
59,713,763
40.504,031
47,881,686
201,929,403
1,082,273,492
4.97%
5.52%
3.74%
4.43%
18.66%
100%
380
411
243
51
1,085
9,793
54,662,548
67,720,450
46,762,150
9,868,738
179,013,886
1,292,653,887
4.23%
5.24%
3.62%
.76%
13.85%
100%
37
Age of
Accounts
BB2
Current
0 month
1-6 months
4-6 months
Total Current
Default
7-9 months
10-12months**
Total Default
Grand Total
Total for BB1
and BB2
Number of
accounts
2012
Outstanding
Balance
Percentage of
accounts
Number of
accounts
2011
Outstanding
Balance
Percentage of
accounts
-
-
1,292,653,887
2,580
501
116
3,197
436,739,131
79,420,282
20,598,254
536,757,667
26.73%
4.86%
1.26%
97.29%
46
33
79
3,276
8,154,083
6,809,929
14,964,012
551,721,679
0.50%
0.42%
2.71%
33.77%
-
12,225
1,633,995,171
100.00%
9,793
** Out of the 33 defaulting accounts, 9 accounts defaulted since the start of issuance of BB2.
b.
The above table, likewise, showed that the default rate (computed as the
value of loans with delinquency of more than six months totaling P201.929 million
for BB1 and P14.964 million for BB2 over the total outstanding principal balance
of securitized portfolio of P1.633 billion) reached to 18.66 per cent. The default
rate of 18.66 per cent in the current year is slightly higher when compared to last
year’s default rate of 13.85 per cent. The default rate of 18.66 per cent is,
likewise, slightly higher than the 15 per cent of the securitized portfolio
representing Class B – Subordinated Loans, which was retained by the NHMFC.
With the 18.66 per cent default rate higher than value of Subordinated Loans
representing 15 per cent of the securitized portfolio, there is risk that the cash
inflow to be generated from the Residential Loans may be insufficient for the
payment of Senior Notes as they fall due. In the event of losses from the
Defaulted Residential Loans, the losses will be applied in the order of seniority
with Subordinated Loans absorbing first the loss before it is applied to Senior
Notes. Therefore, NHMFC as the holder of Subordinated Loans, will absorb first
the said losses.
c.
As shown in the table below, the collection performance of BB1
securitized accounts showed a continuing increase in default or missed
payments for the four-year period from the maiden securitization issue in 2009,
placing the securitization operations at risk:
Year
2012
2011
2010
2009
Missed Payments
Number of
Outstanding
Loan
Principal Balance
Accounts
3,370
454,883,010
3,425
495,724,930
3,931
602,713,041
3,978
654,337,611
Number of
Months
One to 51 months
One to 39 months
One to 27 months
One to 15 months
2.11 The Collection and Accounts Management Group (CAMG) is responsible for the
collection of all accounts under the various lending programs including the securitized
accounts of the corporation. The CAMG provided us their collection process flow and
procedures but we noted the absence of monitoring process and procedures of loan
38
receivables. In practice, one method used in collection of loan receivables is sending
notices/letters to borrowers as shown below:
Age of Accounts
0-3 months in arrears
4-12 months in arrears
25 months and above
Notices/Forms Issued
Notice of Amortization
First Demand Letter and Billing Statement
Final Demand Letter and Billing Statement
CAMG telemarketers, likewise, make telephone calls and send text messages reminding
of the payment of monthly amortization to borrowers three days before the due dates
and another text message three days after due date.
2.12 The inadequacy of monitoring processes and procedures of loan receivables put
in written policies or guidelines primarily contributed to the increasing missed payments
of securitized accounts.
2.13
a.
Demand, immediately, the payment of the under collection of loan
receivables totaling P454.863 million for BB1 and P114.982 for BB2 or a
total of P569.845 million for both issuances;
b.
delinquency shown in the aging analysis and strictly monitor the
performance of these collections strategies; and
c.
procedures on receivables to improve collections of securitized accounts.
2.14
Management explained as follows:
a.
Demand immediately the payment of the under collection of loan
receivables totaling P569.845 million
a.1
Historically, 100 per cent collection efficiency for UHLP accounts
from which BB1 and 2 emanated, has never been realized. There are
reasons and intervening circumstances beyond both the NHMFC and the
borrower’s control rendering non-payment of amortizations.
Some
classical causes are delayed salaries and remittances from abroad,
retrenchment from employment, prioritizing school enrolment over
payment of amortization, and some are linked to the larger economic
perspective. While there are reasons beyond NHMFC’s control, there
were also identified causes of non-payment, which NHMFC could
address. Based on interview conducted for securitized and UHLP low
delinquent accounts, one apparent reason is the inaccessibility of
payment venue. The borrowers claimed that they are unaware of Bayad
Centers accepting payments. This was addressed last March 2013. The
borrowers were provided through mail, the list of accredited Bayad
Centers within their vicinity/locality.
39
a.2
As a come-on for the borrowers to pay, NHMFC introduced in
2012 the “Bahay Ko Pananagutan Ko” program, the NHMFC rewards and
incentive program, which is continuing until 2015. The program consists
of three parts, namely:
1.
Raffle coupons for qualified/updated accounts with cash
prizes for the winners.
2.
Early payment discount or 0.5 per cent discount on the
monthly amortization if payment is made at least 5 days prior to
due date.
3.
Free T-shirt for updated accounts.
a.3
In order to maximize capture of the target accounts, massive
information dissemination shall be undertaken with the 3 rd and 4th quarters
of 2013, for the “Bahay Ko Pananagutan Ko” program. One suggested
activity shall be the printing of an information campaign the size of the
COMELEC-approved campaign posters. These shall be distributed to
active collecting agents for posting. Last March 2013, flyers were sent to
delinquent securitized accounts to promote the program, aside from the
newspaper release during the 4 th quarter of 2012.
b.
delinquency shown in the ageing analysis and strictly monitor the performance of
these collections strategies
b.1
The Loan Advisory Office of the Corporation prepared the plans
and programs for the remaining 3 rd and 4th quarters of 2013 for
BahayBonds series 1 and 2. The Key Result Area (KRA) has its
corresponding number of accounts and values stratified as to updating
plans targeted for availment. Cognizant of the differences in values per
account, for projection purposes, simple averaging was adopted (value
over total number of accounts.)
b.2
In addition to the updating options, existing schemes were
modified to address the delinquent HLRPP and securitized accounts and
these were already tapped in the KRA. The following programs shall be
presented in the next NHMFC Board meeting: a) one-year updating plan;
and, b) Modified In-house Loan Restructuring.
c.
procedures on receivables to improve collections of securitized accounts
The Loan Advisory Office shall be implementing its own monitoring
processes to determine the impact of its collection strategies based on
the stratification of accounts presented in the Key Results Area.
2.15 Management further informed that the PhilRatings’ ratings of the NHMFC maiden
issued or BahayBonds series1 has sustained its PRs Aa and PRs Baa for Senior Notes
or Class A and Junior Notes or Class B Sub Notes, respectively on its recent annual
40
review released on January 31, 2013. According to the news, Notes rate “PRs As’ are of
high quality and are subject to very low credit risk and the obligor shows strong capacity
to meet financial obligations. While noted rated Baa’ exhibit adequate protection
parameters. The ratings reflected the following considerations: (1) sustained credit
enhancement and standby liquidity reserves; (2) positive economic fundamentals which
may lead to improved payment capacity of loan borrowers, as well as to sustainable lowincome housing projects; (3) deteriorating asset quality of the loans included in the asset
pool.
2.16 The report did mention the continued weakening of the BBI asset pool’s quality in
the NHMFC Servicer Report where actual default rate has increased with the value and
number of accounts with 6 months or more missed payments. According to the same
report, the weakening is mitigated by the sustained credit enhancement and standby
credit liquidity reserves. The standby liquidity facilitates continue to comply with the
required reserve amounts ensuring uninterrupted payments on the Senior Notes and the
Home Guaranty Corporation documented that guaranty on the mortgages backing up
BBI has not been called upon.
2.17 Management explanations on these observations on delinquent accounts under
Bahaybonds series 1 also encompassed the delinquent accounts under Bahaybonds
series 2. It added that the PhilRatings’ report on BahayBonds series 2 has not been
released since the bonds were issued last August 2012 only.
2.18 By way of an auditor’s rejoinder, a combination of internal and external credit
enhancements namely: Excess Spread, Class B or Subordinated Notes amounting
P310.898 million and Home Guaranty Corporation Cash Flow Guaranty, are indeed in
place for Bahaybonds to increase the likelihood that investors will receive the cash flows
to which they are entitled. It is equally significant that there is a timely or sufficient
collection of payments from the residential loans, which serve as the principal source of
payments to investors as they fall due. However, as discussed above, there was a
continuing default or missed payments over the four-year period, which could affect the
availability of funds for the Senior Notes, as well as the Subordinated Notes when they
fall due.
3.
Reconciling items totaling P38.996 million were debited as collections of
PNB for NHMFC during the months of March, April and May 2009 even without the
corresponding bank credit memo, contrary to IFRS Framework for the Preparation
and Presentation of Financial Statements and casts doubt on the accuracy of the
balance of Sundry Credit account of P6.684 million as at December 31, 2012.
3.1
The IFRS Framework for the Preparation and Presentation of Financial
Statements provides:
“General purpose financial reports represent economic phenomena in
words and numbers. To be useful, financial information must not only be
relevant, it must also represent faithfully the phenomena it purports to
represent. This fundamental characteristic seeks to maximize the
underlying characteristics of completeness, neutrality and freedom from
error. [F QC12] Information must be both relevant and faithfully
represented if it is to be useful. [F QC17]
41
Comparability, verifiability, timeliness and understandability are qualitative
characteristics that enhance the usefulness of information that is relevant
and faithfully represented. [F QC19]”
3.2
Likewise, Section 74 of P. D. 1445 states and we quote:
“Monthly reports of depositories to agency head. At the close of each
month, depositories shall report to the agency head, in such form as he
may direct, the condition of the agency account standing on their books.
The head of agency shall see to it that reconciliation is made between the
balance shown in the reports and the balance found in the books of the
agency.”
3.3
Sundry Credit account is the account used to record all collections/receipts from
collection partners which cannot be classified under any of the existing housing
programs due to the absence of inter-branch credit advice identifying the borrowers’
name, account number, etc.; invalid name and/or invalid account numbers indicated in
the remittance report. The account is used as a clearing account to record/credit
immediately such collections and reversal/debit to the account when proper identification
is provided by the bank. A Notice of Findings is being issued to collection partners’
relative to the incomplete or incorrect information.
3.4
Every month or on a weekly basis for large businesses, the bank provides every
depositor with bank statement summarizing the activity in the depositor’s account. The
bank statement is usually accompanied by documents such as paid checks, credit
memos representing deposits credited by the bank, debit memos representing checks
paid by the bank which were charged or debited by the bank to the account or any other
changes in the depositor’s account balance. These documents are necessary to support
any adjustments in the accounting records.
3.5
Among other collection partners, a Memorandum of Agreement was entered into
by and between the NHMFC and Philippine National Bank (PNB) in March 26, 1990 for
the availment of the latter collection and remittance services utilizing all banking
networks including offshore banking.
3.6
In March 2009, PNB upgraded its information technology system and adopted
the FLEXCUBE SYSTEM in March 2009, which affected their collections for NHMFC for
the months of March, April and May 2009. Credit advice and remittance report partly
submitted to NHMFC on said collections could not be matched with the individual entries
in the Savings Account Passbook of NHMFC, thus, credited these collections to Sundry
Credit account in 2009.
3.7
Audit of the Sundry Credit account noted a debit entry recording the collections of
PNB for NHMFC during the months of March, April and May 2009 totaling P38,995,742
on the basis of the reconciliation between the balances in the Savings Account
Passbook of NHMFC and Cash Position Report as at January 28, 2011 since the credit
memo identifying the borrowers’ name and account number cannot be provided by PNB.
The balance of Sundry Credit account significantly decreased by P38,995,742, thus, the
balance totaled to P6,684,432 as at December 31, 2012.
42
3.8
Management explained that the recording of bank collections totaling
P38,995,742 on the basis of the reconciliation between the balances in the Savings
Account Passbook of NHMFC and Cash Position Report as at January 28, 2011 and not
supported by credit memo identifying the borrowers’ name and account number, created
doubt on the accuracy of the balance of Sundry Credit account contrary to IFRS
Framework for the Preparation and Presentation of Financial Statements. Also, the
borrower’s subsidiary ledgers were not updated since the collections were distributed
only to the general ledger control account of Sundry Credit. Thus, there are variances
between the balances per general ledger and subsidiary ledgers on these accounts.
3.9
Other deficiencies noted in audit were as follows:
a.
The clearing the collections/receipts not identified as to borrowers’ name
and account number, which partly explained the bulk of the reconciling items in
the bank reconciliation statement on PNB account was delayed for several years.
b.
However, the General Accounting Department could not provide the
details or Schedule with Aging of the year-end balance of Sundry Credit, thus,
the number of days, months or years that these accounts have not been
cleared/debited could not be established.
3.10
a.
Reverse the entry made in the basis of reconciliation only. Record
all the transactions based on the credit memo identifying the borrower’s
name and account number provided by PNB;
b.
Require the depository bank to provide the NHMFC with all the
reports and documents, in conformity with Section 74, P. D. 1445;
c.
All credits to Sundry Credit account should be reviewed on a timely
basis, and all debits to clear the account should be approved by authorized
official of the corporation; and
d.
Revisit and re-assess the Memorandum of Agreement with the bank
to ensure the proper and timely submission of remittance reports, credit
advices and other necessary documents to address the delay in the
posting of loan amortization payments of the borrowers to their subsidiary
ledgers.
3.11 Management explained that when the reconciliation was made between the PNB
passbook balance and the Daily Cash Position Report balance, there was no accounting
entry. However, reconciliation of the Sundry Credit account entries against the booking
report of the Verification Section revealed that the portion of P38,995,742 was already
booked on various dates prior to January 2011 but not included in the Daily Cash
Position Report. The debit entry noted by COA already represents the reversal of the
previous entries made based on the reconciliation of the PNB passbook against the
booking reports will be conducted to erase any doubt on the accuracy of the balance of
Sundry Credit account.
43
3.12 By way of an auditor’s rejoinder, the result of the reconciliation between the PNB
bank passbook and Cash Position Report was not duly supported with details and
documents namely: bank passbook, cash position report, bank remittance report and
others, for our audit. Based on available documents, of the total P38,995,742.41
unrecorded PNB credit memo, a significant amount of P38,336,610.53 collections were
not traced and identified to the bank passbook and without corresponding credit memo.
4.
Discrepancy of P26.896 million between the total balance of Physical
Inventory and the balance per General Ledger, consisting of unaccounted
property and unserviceable property not included the inventory report and were
not reclassified under Other Assets account at year-end as required under
Paragraph 67 of Philippine Accounting Standard 16.
4.1
Physical inventory-taking is an indispensable procedure for checking the integrity
of property maintenance and custodianship. This control strategy is periodically made
(e.g. at least annually) to ensure the validity, accuracy, and correctness of property
records. Accordingly, the reconciliation between the property records and accounting
records was made and differences disclosed by reconciliation be promptly investigated.
4.2
Paragraph 67 of the Philippine Accounting Standard (PAS) 16 provides that the
carrying amount of an item of property, plant and equipment shall be derecognized: (a)
on disposal; or (b) when no future economic benefits are expected from its use or
disposal.
4.3
Section 79 of Presidential Decree No. 1445 requires the disposal of government
property that has become unserviceable for any cause or is no longer needed, upon
application of the officer accountable therefore; inspection by the head of the agency or
his duly authorized representative in the presence of the auditor concerned. Said
property, if valuable, may be sold at public auction to the highest bidder under the
supervision of duly authorized representative of the Commission on Audit.
4.4
On various dates of November and December 2012, a physical inventory of
property located in the Head Office and various regional/satellite/desk offices was
conducted. The inventory reports showed a total balance of P165,673,917. Comparison
of the balance of the inventory of property (property record) with the general ledger
balance (accounting record) showed difference totaling P26,895,913, details below:
Category of Property
Office Equipment
Furniture & Fixtures
IT Equipment, Software & Contracts
Motor Vehicles
Other Equipment
TOTAL
Physical Inventory of Property (At Cost)
Regional/
Total
Head Office
Satellite
Amount
(A)
Offices
(A+B=C)
(B)
4,007,681
698,559
4,706,240
12,486,365
912,630
13,398,995
115,671,087
7,470,553
123,141,640
17,205,650
4,923,550
22,129,200
1,522,508
775,334
2,297,842
150,893,291 14,780,626
165,673,917
Balance Per
General
Ledger (At
Cost)
(D)
20,835,463
13,131,865
130,237,736
22,637,330
5,727,436
192,569,830
Difference
(D-C)
16,129,223
(267,130)
7,096,096
508,130
3,429,594
26,895,913
4.5
Reconciliation between the General Accounting Division, the General Services
Division identified unserviceable property totaling P17,911,699 which the General
44
Services Division failed to include in the physical inventory of property as at December
31, 2012. Ocular inspection disclosed these property were already unserviceable.
4.6
The reported difference of P26,895,913 is reduced to P8,984,214 to take into
consideration the identified unserviceable property totaling P17,911,699, remained
recorded in the books as at year-end 2012 but was not included in the Inventory Report
and further not transferred under Other Assets account inasmuch that these
unserviceable property do not met the criteria for recognition under Property and
Equipment as defined in Paragraph 67 of PAS 16.
4.7
On the other hand, the property totaling P8,984,214 cannot be located and
constitutes missing and unaccounted property. These unaccounted property affected
the validity of the balance of the Property and Equipment account as at year-end.
4.8
We also noted that each category of property of the corporation was not
adequately supported by detailed property (subsidiary) records.
4.9
a.
Include in the inventory report the unserviceable property not
disposed of in the total amount of P17.912 million.
b.
The General Services Division to locate the missing property
totaling P8.984 million.
For this purpose, implement the following
measures:
b.1.
Determine the persons liable for the items that were not
located during the conduct of inventory.
b.2.
Issue memorandum to the persons liable to produce
immediately the item under their accountability. In case of failure to
produce, require a written explanation. If from the explanation, it
would appear that the cause for the loss of the item is due to
negligence of the accountable officer, demand immediate payment
of the appraised value of the property. On the other hand, if the
cause of the loss is not through negligence but due to fortuitous
event, require the accountable officer to file request for relief to COA
pursuant to Section 73 of P.D. 1445. The request should be
supported by relevant documents enumerated under COA Cir. No.
92-751 dated February 24, 1992.
c.
Conduct physical inventory of property at least once a year and
accordingly reconcile the results of inventory with the accounting records
maintained by General Accounting Division;
d.
Require the Property Custodian to maintain detailed property
(subsidiary) record for each category of property and reconcile the same
with the accounting and property records to ensure the validity, accuracy
and completeness of detailed property and accounting records.
45
e.
Reclassify unserviceable property worth P17.912 million to Other
Asset account in accordance with Paragraph 67 of PAS 16.
f.
Facilitate the immediate appraisal and disposal of all unserviceable
property to maximize the benefits that could be derived therefrom.
5.
Loans Receivable – Folio 1 account balance per general ledger and the
detailed listings of Folio 1 accounts as at year-end differ by P19.045 million
creating doubt on the validity of the account balance. Non-foreclosure of inactive
Folio 1 accounts aged/categorized as highly delinquent past due accounts totaling
P418.022 million as at December 31, 2012 affects the recovery of corporate
exposure and the availability of funds for other projects.
5.1
Folio I accounts pertains to the accounts retained by NHMFC under the old
programs or programs prior to the Unified Home Lending Program in 1987. The Folio 1
loans were amortized monthly up to a maximum term of 25 years with interest rates
ranging from 9 to 16 per cent depending on the classification as well as amount of
financing availed of.
5.2
Folio 1 accounts included the Urban Bagong Lipunan Improvement of Sites and
Services (BLISS) Projects and the NHMFC accounts.
5.3
There are 15 Urban BLISS projects with the lot owners either (a) owned or
expropriated by a City or Municipal Government or government entities and with Deed of
Donation executed in favor of the Ministry of Human Settlements as the developer; or (b)
owned by government entities and with Usufruct Agreement with the Ministry of Human
Settlements as the developer. The Usufruct Agreements covered any of the following:
(a) 50 year Contract of Lease of both land and improvements; (b) 50 year Lease with
Deed of Mortgage of both land and improvements; (c) a Deed of Absolute Sale in the
Valle Verde 1 and III project sites. The occupant beneficiaries of the BLISS sites have
duly organized and registered as corporation(s) and secured loans from the
Development Bank of the Philippines (DBP) to finance the acquisition of the leasehold
rights on the BLISS sites from the Ministry. The NHMFC had taken-out the DBP
originated mortgages and subsequently the latter assigns its rights, title and interests in
the loan and its corresponding collaterals to NHMFC.
5.4
Audit of the Folio 1 accounts disclosed deficiencies in the recording and
monitoring of outstanding loan receivables, as discussed in the preceding paragraphs.
5.5
Folio 1 Accounts Servicing Unit is responsible for the collection of the monthly
amortizations and disposition of BLISS accounts and NHMFC accounts under Folio 1.
The Unit uses a Foxplus computer program for encoding amortization payments of
borrowers and posting of such payments to the borrower’s ledgers. The Unit forwards a
report/summary of the application of borrower’s amortization payments (or collections) to
the General Accounting Division (GAD). The GAD personnel then prepare the Journal
Entry Voucher for the collections of Folio 1 accounts and record them to the General
Ledger using Microsoft Office – Excel.
46
Variance between balances per general ledger and per detailed listings of Folio 1
accounts - P19.045 million
5.6
The Folio 1 Accounts Servicing Unit manually prepared a detailed listing
(analysis) of Folio 1 accounts showing the account number, borrower’s name, location of
property, loan vale/ restructured, take out date/ restructured date, outstanding principal
balance and last payment date as at year-end 2012. On the other hand, the GAD was
not able to provide the account details of the P693.136 million year-end balance of Folio
1 due to the absence of an electronic data system for Folio 1.
5.7
Folio 1 Comparison of the detailed listings (analysis) with aging of Folio 1
accounts with the balance of the general ledger disclosed a variance amounting to
P79.631 million, computed as follows:
Folio 1
Accounts
No. of
Accounts
Loan
Value*
BLISS accounts
NHMFC accounts
TOTAL
1,765
1,505
3,270
455,588,029
347,339,663
802,927,692
Outstanding Principal Balance
General
Listings*
Variance
Ledger
Not available 407,516,679
Not available
Not available 304,664,888
Not available
693,136,449 712,181,567
19,045,118
*Detailed listings with aging (analysis) were prepared by Folio 1 Accounts Servicing Unit
5.8
The variance amounting P19.045 million between the general ledger and the
detailed listings cast doubt on the validity of the Loans Receivable – Folio 1 as at yearend balance. There is no assurance what record/report is correct since no reconciliation
is being made by both offices.
5.9
We recommended that Management require the General Accounting
Division and Folio 1 Accounts Servicing Unit to conduct a reconciliation of
balances to identify the cause(s) of the variances and if necessary, appropriate
adjusting entries be made to bring the balances in agreement.
5.10 Management informed that the Folio 1 Accounts Servicing Unit has continued
coordination with the Information System and Technology Support Division and the
Incuventure Partners Corporation team in the development of the MACIS-Folio 1
system. The system will be implemented by the 4 th quarter of 2013. There is an ongoing data build-up/ set-up of all the restructured loan balances in the stand-alone Folio
1 database system and also an update of the MACIS-Folio 1 system (1,302 to 3,032
accounts in the MACIS).
Non-foreclosure of Folio 1 accounts aged/categorized as highly delinquent past
due accounts - P418.022 million
5.11 An aging schedule is useful to management in reviewing the status of individual
loans receivable and in evaluating the effectiveness of credit and collection policies.
47
5.12 The general ledger balance of Loans Receivable- Folio 1 amounting P693.136
million as at December 31, 2012 has the following classification:
General Ledger Account Classification
Past Due Loan Receivable Folio I
Loans Receivable – Restructured Loan Folio I
Items In Litigation Folio I
Balance as at December 31, 2012
344,709,088
348,169,843
257,518
693,136,449
5.13 The past due accounts under Folio I represent the total outstanding balance of
borrowers account which were more than three months of unpaid monthly amortizations
as at reporting date. All Folio 1 accounts were considered past due and recorded under
the account Past Due Loan Receivable Folio 1 but defaulting borrowers who availed of
the restructuring program were reclassified to Loans Receivable – Restructured Loan
Folio 1 account.
5.14 As gathered from the Folio 1 Accounts Servicing Unit, the aging or delinquency
trends of the Folio 1 portfolio are shown in the next page:
BLISS accounts
Low
Moderate
High
Take-out Date/
Restructured
Date
2004 to 2012
2006 to 2011
1983 to 2008
NHMFC accounts
Low
Moderate
High
2000 to 2011
1985 to 2011
1983 to 2011
Folio 1 Accounts
Delinquency
Categories
Last
Payment
Date
2007 to 2012
2010 to 2012
1984 to 2008
2012
2009-2012
1983 to 2011
Outstanding
No. of
Principal
Accounts
Balance
85
19,258,129
525
167,214,347
1,155
221,044,203
1,765
407,516,679
314
95,903,647
47
11,783,158
1,144
196,978,084
1,505
304,664,889
3,270
712,181,568
5.15 As defined by Management, high delinquency (“High Del”) refers to the
borrowers that have never made a payment since takeout or have made only marginal
payments of their monthly amortization obligations. On the other hand, moderate
delinquency (“Mod Del”) consists of borrowers that have been inconsistent in their
payment of monthly amortization obligation and have moderately low to high arrears
balances. Further, borrowers that have remained more or less current in their payment
of monthly amortization obligations and have relatively low arrears balances are
classified as low delinquency (“Low Del”).
5.16 Under existing corporate guidelines, the High Delinquency and Moderate
Delinquency will require loan restructuring to improve collection. Where restructuring
fails, foreclosure on the delinquent loans will be resorted to by the corporation.
5.17 With the above circumstances, however, the 2,299 (1,155 for BLISS and 1,144
for NHMFC) high delinquent accounts with an aggregate amount of P418,022,287 has
not been referred to the NHMFC Legal Group for foreclosure action/proceedings or a
more aggressive collection measures adopted, if warranted.
48
5.18 We recommended that Management initiate foreclosure action or adopt
more aggressive collection measures, if warranted, on long outstanding or highly
delinquent receivables under Folio 1 to quickly recover corporate exposure and
provide more funds for NHMFC projects.
5.19 During the audit exit conference, the Vice President – Legal Department
explained that the foreclosure of highly delinquent accounts was not incorporated in the
2012 corporate budget and there is limited number of lawyers to pursue with the
foreclosure action. However, an increase in the Maintenance and Other Operating
Expenses to include the foreclosure of 1,300 highly delinquent accounts and hiring of 2
additional lawyers was made in 2013.
6.
Seven hundred twenty five (725) accounts were not secured by original
copy of owner’s duplicate copy of TCTs. Further, erroneous information on the
number of TCTs not in custody and TCTs temporarily released to Legal Services
and Documentation Division, among others, casts doubt on the accuracy of the
inventory report of TCTs of UHLP accounts, as well as other housing
programs/accounts.
6.1
Transfer Certificates of Title (TCTs), the original copy of owner’s duplicate copy
in particular, are the required collaterals for the long-term receivables of the corporation.
The long-term receivables represent housing loans extended to qualified borrowers or
mortgages purchased from the accredited originating institutions/developers.
6.2
A perpetual inventory system for TCTs is the preferred method for tracking TCTs
since it continually updates its inventory record for receipts and withdrawals in the
inventory of TCTs and can yield reasonably accurate results on an ongoing basis, if
properly managed. A physical count of the TCTs at least once a year is equally
important to compare inventory record to actual on-hand number of TCTs, identify any
missing TCTs and establish the sufficiency of value of collaterals securing the
outstanding long-term receivables.
6.3
As at December 31, 2012, the inventory listings of Transfer Certificates of Title in
custody and safekeeping of the Custodianship Division are as follows:
Housing Program/Accounts
Folio 1
Folio II or United Home Lending
Program
Special Projects
PEA-Bahay Pangarap 2000
Housing
Loan
Receivable
Purchased Program
TOTAL
Sold or
Transferred
Outstanding Accounts
With MOA, Without
With
Others CRM & CMO
TCTs
TCTs
209
123
1,175
Total
Portfolio
1,880
Fully
Paid
373
220,769
7,668
1,210
80,170
123
53
63,665**
445*
2***
-
602
-
75,887
7,545
1,155
76,934
7,545
1,157
139
231,666
80,719
63,665
447
209
725
139
85,901
139
87,282
Total
1,507
*Accounts for verification with concerned departments and tracing to loan folders totaled 485
** 1,469 accounts transferred to HDMF and 62,196 accounts sold to BFS
***No documents on file
49
6.4
Our audit disclosed the following:
a.
As shown in the above table, a total of six hundred two (602) UHLP
accounts were not secured by original copy of owner’s duplicate copy of TCTs.
However, an additional twenty eight (28) UHLP accounts without TCTs and loan
folders were not included in the detailed accounting of TCTs. Inquiry with the
Legal Services and Documentation Division (LSDD) confirmed the original copy
of owner’s duplicate copy of TCT were not in their custody and necessitates the
filing for reissuance of TCT but the absence of loan folders delayed its filing.
Eight (8) of the 28 accounts have been fully paid by the borrowers.
Thus, the totality of UHLP accounts without the TCTs should be 630 (602 plus
28).
b.
There were eight hundred seven (807) TCTs temporarily released to the
LSDD in the detailed accounting of TCTs but the supporting details showed a
higher number totaling 1,549 TCTs from 2007 to 2012:
Purpose of Temporary
Release of TCTs
Registration of Certificate
of Sale
Assumption of Mortgage
Refinancing (Assumption of
Mortgage)
Others
Total
Year and Number of TCTs Released
2012
2011
2010
2009
2008
1,510
9
985
2
348
-
127
5
37
1
11
1
2
-
9
21
1,549
7
16
1,010
1
2
351
1
2
135
1
39
12
2
2007
Thus, a total of 742 TCTs (1,549 less 807) was not reported as temporarily
released to LSDD by the Custodianship Division.
c.
A considerable number of TCTs remained in LSSD custody for several
years which put at risk of theft or loss of these TCTs. Our inspection of the TCTs
in the custody of LSDD confirmed the numerous TCTs in a steel cabinet with
lock. No official listing of TCTs and tracking of the TCTs which has to remain in
LSDD or returned to Custodianship Department.
d.
For Folio 1 accounts, a total of 3,270 accounts consisting of 1,765
accounts and 1,505 on BLISS and NHMFC accounts respectively, were reported
by the Folio 1 Accounts Servicing Unit. However, a total of 1,507 TCTs only
were accounted for by the Custodianship Division as shown in Item No. 6.3, thus,
a difference of 1,763 accounts do not have TCTs.
e.
The total number of accounts in the detailed accounting of UHLP
accounts prepared by Custodianship Department differs from the Electronic Data
Processing (EDP) Department, as shown on the next page:
50
Total Number of Accounts on Program Implementation
EDP
Custodianship
Difference
Department
Department
221,055
220,769
286
Particulars
Total UHLP Loan Portfolio
Accounts transferred to
Financial Services, Inc.
Bahay Bonds 1 accounts
Bahay Bonds 2 accounts
Bahay
51,803
12,408
3,364
62,196
9,375
3,318
10,393
3,033
46
6.5
The most important consideration to be able to generate a reasonably accurate
inventory of TCTs is to establish the precise number of loan portfolio. The EDP and
Custodianship Department differs in the total loan portfolio of UHLP. With this variance
and the deficiencies noted in the detailed accounting of TCTs for UHLP accounts casts
doubt on the accuracy of the inventory listing of TCTs for UHLP accounts as well as
other housing programs.
6.6
We recommended therefore the following courses of action:
a.
Require the Custodianship Division to reconcile the results of
inventory of Transfer Certificates of Title with the concerned offices
handling the housing programs to determine the precise number of loan
portfolio and accuracy of inventory;
b.
Require the TCT custodian to adjust its records to conform to the
correct actual number of TCT’s;
c.
Determine the persons liable for the accounts without titles and hold
them administratively liable for their failure to perform their function. Any
additional cost that the corporation would incur for the reissuance of
Transfer Certificates of Title should be on their account; and
d.
Establish clear lines of responsibilities and accountabilities for both
the Custodianship Division and the Legal Services and Documentation
Division in their custody and safekeeping of Transfer Certificates of Title.
6.7
Management informed us on the following:
a.
The status of the 602 accounts are as follows:
1.
2.
3.
4.
The 499 accounts are NHA originated accounts covered by a
Memorandum of Agreement dated September 18, 1990 between
NHA and NHMFC, whereby a guarantee deposit was given to
NHMFC to cover for the undelivered titles.
The 35 AMWSLAI and 12 AFSLAI accounts were covered by an
agreement between AMWSLAI, AFSLAI, NHMFC and NHA dated
May 6, 1988 and the TCTs were in their custody.
The 6 accounts were submitted to Legal Department requesting
for issuance of owner’s copy.
Some 38 accounts were returned by Legal Department with
photocopied TCTs. These are TCTs withdrawn for purposes of
transfer of mortgage in favor of banks and HDMF, registration of
certificates of sale, annotation of additional loans.
51
5.
The 12 accounts are pending for verification.
b.
The 123 Folio 1 accounts are what is known as the “pari-passu” accounts
covered under a Memorandum of Agreement between the Development Bank of
the Philippines and NHMFC dated February 14, 1980 particularly Section III.4
which provides that “The Certificates of Title covering property mortgaged under
the pari-passu arrangement shall be in the custody of DBP.”
c.
The status of the 28 unaccounted accounts are:
1.
2.
3.
4.
5 accounts have been fully paid and TCTs have been released to
the owner;
3 accounts are AFPSLAI accounts and TCTs are still with
AFPSLAI;
5 accounts are Bahay Financial Services, Inc. (BFS) accounts and
TCTs are in the custody of BFS;
15 accounts are pending verification
d.
The remaining 1,763 accounts are BLISS accounts with mother title/s.
Under this program, the titles are still under the name and custody of the original
owners, the NHMFC and the borrower are covered by a Lease Agreement.
e.
The Custodianship Department has an existing tracking system on the
receipt and withdrawal of TCTs that is documented and monitored. It is taking
steps to improve the same.
6.8
By way of an auditor’s rejoinder, a total 657 TCTs representing NHA originated
accounts, AFPSLAI, AMSWLAI and DBP accounts in the custody of that offices will be
validated with that offices. Further, information and details of the Folio 1 accounts with
TCTs requested from the Folio 1 Servicing Office was not submitted for audit.
6.9
We would also like to emphasize that Management determine the persons liable
for the accounts without titles and hold them administratively liable for their failure to
perform their function. Any additional cost that the corporation would incur for the
reissuance of Transfer Certificates of Title should be on their account.
7.
As at December 31, 2012, disallowances aggregating P66.332 million,
remained unsettled.
7.1
The disallowances aggregating P66,331,754 remained unsettled as at December
31, 2012. These disallowances consisted of disbursements/transactions disallowed in
audit prior to the effectivity of the 2009 Rules and Regulations on Settlement of
Accounts. No Notice of Suspension, Notice of Disallowance or Notice of Charge was
issued thereafter.
7.2
These disallowances were recorded by a debit to Claims for Disallowed Payment
and a credit to Contingent Surplus – Claims for Disallowed Payment accounts.
52
B. STATUS OF IMPLEMENTATION OF PRIOR YEARS’ AUDIT RECOMMENDATIONS
Out of the 22 audit recommendations embodied in the prior years’ Annual Audit Report,
20 were partially implemented and two were not implemented, as follows:
OBSERVATIONS AND RECOMMENDATIONS
ACTIONS TAKEN / COMMENTS
2011
1.
The accuracy of the balance of Long-Term
Receivables (LTR) – Regular LTR, Folio I and
Folio II and other affected accounts cannot be
ascertained due to the temporary distribution of
the current year’s balance of Undistributed
Collections account using the average
percentage of actual distribution of collections
made during the year and reversal of the
distribution made at the beginning of the
following year in the amount of P880.255 million,
of which P585.588 million pertained to prior
years and remained unposted in the borrowers’
subsidiary ledgers.
a.
Revisit the present policy adopted of
temporarily allocating the amount of
undistributed collections as of year-end
based on the average percentage of
actual distribution of collection made
during the year;
b.
Establish and formulate guidelines on the
proper
and
timely
allocation
of
undistributed
collections
to
the
appropriate accounts by concerned
departments. Evaluate the existing billing
and computation system currently
utilized for Folio I accounts to address
the delay in the posting of loan
amortization payments of the borrowers
to their subsidiary ledgers; and
c.
Conduct continuous reconciliation of
accounts to minimize the accumulation of
undistributed collections and to identify
the reasons for the abnormal balances of
Undistributed Collections account.
Partially Implemented.
a.
Management discontinued the
policy of temporarily allocating the
amount of undistributed collections
based on the average percentage
of actual distribution of collection
made during the year.
b.
Audit noted that out of the
balance of the Undistributed
Collections account amounting
P393,017,948 as at December 31,
2012, P305,475,730 or 77.72%
represents over one year delay in
the allocation of undistributed
collections. Thus, this observation
was reiterated in Observation No.
1.
53
2.
The increasing default or missed
payments on the outstanding principal balance
of securitized accounts ranging from 1 to 39
months as at December 31, 2011 placed the
securitization operations at risk, which could
affect the cash inflow and availability of funds for
the payment of Senior Notes and Subordinated
Notes when these fall due.
Reiterated in Observation No. 2.
Undertake more aggressive collection strategies
focusing on default and non-moving past due
accounts. Strict monitoring of the performance of
these collection strategies has to be
implemented.
3.
Several
deficiencies
in
the
administration, management and disposal of
acquired property were observed.
3.1
The balances per general ledger and the
listings of Other Garnished/Foreclosed Assets
account as at year-end showed variance totaling
P19.469 million due to the absence of regular
reconciliation between the two records thus
creating doubt on the accuracy and validity of
the account balance.
3.1 The balances of the general
ledger reconciled with the listings of
Other
Garnished/Foreclosed
Assets account as at December 31,
2012.
3.2
Titles of 6,731 acquired properties with
accumulated book value of P552.951 million
were not yet consolidated in the name of the
Corporation notwithstanding the lapse of one to
twenty years after the expiration of the one-year
redemption period resulting in the delay in the
disposal of these properties and recovery of
investment. The delay also exposed the property
to further depreciation and deterioration thus,
the Corporation may not recover its actual
investment.
3.2 The 1,467 of 6,731 acquired
properties are handled by the
Acquired Assets Division (AAD)
and the status of these properties
as at year-end 2012 were as
follows:
For Registration
Sold
Reclassified from AAD to Regular
Account due to restructuring/
updating
Reclassified from AAD to Items-inLitigation
Registered accounts for Disposal
1,209
112
21
14
111
1,467
AAD further informed that the 111
registered properties shall be
inspected, appraised and offered
for sale in 2013 based on the
guidelines under the Housing Fair
54
Program.
Any unsold will be
posted in the website for sale the
balance of the unsold shall be
offered for sale in Housing Fair and
any unsold properties after the
housing fair shall be consolidated in
the name of NHMFC. On the other
hand, 1,209 properties have been
referred to Legal Department for
registration of Certificate of Sale
(COS):
1.
Estimated
COS
for
registration is 200 accounts;
2.
While
waiting
for
the
registration of the COS, properties
will be inspected and appraised;
3.
If found to be occupied the
properties will be offered to the
occupants at appraised value;
4.
After the lapsed of redemption
period any unsold properties will be
published and posted in the
website for sale, the balance of the
unsold shall be offered for sale in
Housing Fair and any unsold
properties after the Housing Fair
shall be consolidated in the name
of NHMFC.
For the remaining 5,264 of the
6,731
properties
representing
Special Projects Division (SPD)
accounts, although there is a delay
in the consolidation/annotation of
the COS, a sale can still be
pursued
through
the
actual
occupants,
home
owners
association and other interested
parties.
3.3
Deficiencies in the management of
acquired properties were noted: a) illegal
occupants/informal dwellers; b) abandoned
property/unoccupied; and c) unlocated property.
a.
Management requires the General
Accounting Department and Special
Project Division Task Force to conduct a
Not Implemented.
Management will engage the
services of the Geodetic Engineer
for the unlocated properties within
the 2nd quarter of 2013.
55
regular reconciliation of balances to
identify the cause(s) of the variances and
if necessary, appropriate adjusting
entries be made to bring the balances in
agreement.
b.
Expedite the consolidation of titles in the
name of the NHMFC. In order to
expedite the consolidation of ownership,
immediately register the Certificate of
Sale with the proper Registry of Deeds
and annotate the said Certificate of Sale
on the Transfer Certificate of Title;
c.
Dispose immediately acquired/foreclosed
assets to recover exposure. Develop
strategies to expedite the disposition of
non-performing assets to
prevent
accumulation thereof;
d.
Establish guidelines on the proper and
timely recording and accounting in the
books of accounts the sale of acquired
properties through Housing Fair Program
and SAMOR Program.
e.
Pending
disposal
of
the
acquired/foreclosed assets, a lease
agreement may be entered into by and
between the former owners occupying
the property with the condition that this
would be terminated upon sale of the
acquired asset;
f.
Enforce legal remedies against the illegal
occupants of the property or enter into a
lease agreement to protect the interest of
the Corporation; and
g.
Locate the missing property.
2010
4.
Several deficiencies were observed in
the repurchase of 486 Defective Loans and
Social Put Loans which formed part of the
52,289 non-performing loan accounts previously
sold at a loss of P7.665 billion.
Management has not submitted
updates on actions taken in 2012
on the observations.
56
4.1
Repurchase price of 486 Defective
Loans and Social Put Loans at P100.531 million
was higher than its selling price during the 2005
sale of non-performing loans resulting in a
further loss of P39.696 million.
4.2
The P19.585 million unreimbursed
operating expenses included in the final
repurchase price of the 486 Defective Loans and
Social Put Loans were not duly supported by
documents to establish the reasonableness of
the expenses contrary to Section 4(6) of
Presidential Decree 1445.
4.3 No document showing validation has been
conducted by the Corporation to verify the
alleged breach of warranties/representations
stated in the Defective Loan Certificate/Social
Put Notice for the 486 accounts subject of
repurchase, contrary to Section 5.03 of the
LSPA.
4.4 Corporation would likely incur additional
losses due to the onerous provisions of the
LSPA if the collection and/or rehabilitation of
these Defective Loans and Social Put Loans are
not closely monitored.
a.
Revisit and re-assess the provisions of
the Loan Sale and Purchase Agreement
(LSPA) particularly on the recourse
period,
interest
on
unreimbursed
operating expenses and penalty interest
from the original due date of the
repurchase price to the date when the
repurchase price is paid, that could
manifest high risk of loss on operations;
b.
Require BHFI to submit all documents
necessary to support their claim for
unreimbursed operating expenses and
this has to be validated by the
Corporation;
c.
Document the validation of the alleged
breach warranties/representations; and
57
d.
Undertake
aggressive
collection
strategies to minimize, if not eliminate
the loss incurred on the repurchase of
the defective loan accounts.
5.
The appraisals of 3,246 out of 3,555
foreclosed properties were not updated, thus
these properties were not stated at their fair
value necessary in the estimation of their
recoverable amount and determination of
whether or not impairment loss has to be
recognized, contrary to International Accounting
Standard 40.
Assess at every reporting date whether there
are indications that the foreclosed properties are
impaired. If there are indications that these
assets are impaired, the Corporation has to
estimate the recoverable amount of the asset in
accordance with the International Accounting
Standard 36 on Impairment of Assets. If the
recoverable amount is less than carrying
amount, then appropriate journal entries has to
be drawn to recognize impairment loss.
Properties without appraisal
CMP accounts
Developmental
Loan
accounts
Acquired Assets Division
inventory in 2010
Appraised from 2011-2012
Sold in 2012
Declassified accounts:
Regular accounts
Registered for Disposal
For registration
Total appraised properties
Sold properties
Balance of properties for
appraisal
3,246
(9)
(9)
3,228
113
4
34
588
739
1,051
2,690
538
Comparison of the appraised value
and book value of the 739
properties showed a net increment
of appraised value over book value
of P155.64 million. No impairment
loss was recognized in said
properties.
6.
The result of confirmation of the balance of
Investments with Subsidiary and Affiliates and
related accounts compared with the balance
reported in the NHMFC’s books showed
variances totaling P136.942 million creating
doubt on the accuracy of the account balances
presented in the financial statements.
Conduct a regular reconciliation with its
subsidiary/affiliates to identify the cause(s) of the
variances and if necessary, appropriate
adjusting entries be made to bring the accounts
in agreement.
Of the P136.942 million variance of
balance between the NHMFC and
subsidiary/affiliate
books,
the
variance of P23 million on the
Receivable from Balikatan Housing
Finance,
Inc.
remained
not
reconciled in 2012.
58
7.
Reporting difference of P8.685 million
between the Cash in Bank-Savings Account and
the bank confirmation balance created doubt on
the accuracy of the balance of the account.
Prepare
regularly
the
monthly
bank
reconciliation statements on the Cash in Bank Savings Account.
a.
The difference of P8.685
million
represents
collections
through PNB and its nationwide
branches which have been directly
credited to the account of NHMFC
but without the payment details as
to the borrowers’ name and
account number.
On March 2009, PNB upgraded its
information technology system and
adopted the FLEXCUBE SYSTEM.
The system upgrade resulted in the
individual crediting of payments
accepted by all PNB branches.
Before the upgrade, PNB Head
Office
consolidated
all
PNB
branches payments and credited
the total amount in the NHMFC
passbook.
Also, the system
upgrade resulted in the absence of
the name of the PNB branches that
credited the payments.
Further, the system upgrade
affected the collections for NHMFC
from March to May 2009 since the
Credit Advice and Remittance
Report submitted to NHMFC could
not be matched with the entries in
the PNB passbook of NHMFC.
Furthermore, PNB stopped printing
the entries in the Passbook due to
voluminous transactions as a result
of the branches individually posted
transactions.
The NHMFC and PNB through their
collaborative efforts painstakingly
traced and identified the borrowers
whose payments where directly
credited to the passbook of
NHMFC without the issuance of the
corresponding credit advice and
remittance reports by the bank. As
a result, PNB and NHMFC were
able to identify some of the
59
borrowers and payors whose
payments were recorded through
the FLEXCUBE System of PNB.
The Bank Reconciliation Statement
as of December 31, 2012 showed
total recording items amounting to
P1.305 million, including the
P557,756.98 unidentified entries
from March to May 2009 as a result
of the adoption by PNB of the
FLEXCUBE system.
After a series of meetings and email exchanges with the PNB
representatives, PNB committed to
a creation of a Task Force to
identify the unreconciled balances.
The Verification Section of Cash
Division shall monitor the response
of PNB.
To ensure reconciled balances, the
following activities shall be strictly
done:
1.
Daily updating of NHMFC
Passbook.
2.
Weekly coordination with PNB
on the timely submission of Credit
Memos to prevent filing up of
unrecorded Credit Memos.
3.
Preparation of Monthly Bank
Reconciliation Statement at the end
of each month.
b.
The
adjustment
to
the
NHMFC books for any unrecorded
cash transactions brought to light in
the bank reconciliation in 2010 was
not submitted for audit. The bank
reconciliation for the period January
to December 31, 2011 was not also
submitted for audit. Thus, the
verification whether the bank and
the NHMFC records are in
agreement in 2010 and 2011.
60
The bank reconciliation statement
of December 31, 2012 still reported
significant amount of unrecorded
debit and credit memorandum
which may have included the 2010
and 2011 bank/book reconciling
items.
2009
8.
Deposits for taken-out mortgages in 1994
and 1995 delivered by the National Housing
Authority (NHA) to the NHMFC without the
corresponding Transfer Certificates of Title
(TCTs) amounting to P48.172 million and those
pertaining to bid/performance bonds aggregating
P0.826 million on expired/terminated contracts
were still included in the Guaranty Deposits
Payable account, resulting in the misstatement
of the payable and other related accounts.
a.
Coordinate with NHA for the delivery of
TCTs and make the necessary entries in
the books for delivered TCTs and applied
deposits; and
b.
Adjust the books for various deposits
which should have already been applied
or served, as the case maybe.
9.
The Collection Efficiency Ratio (CER) of
31.92 per cent as at November 2009 for Long
Term Receivables - Past Due - Folio II accounts
totaling P20.573 billion aging 25 to over 48
months overdue did not improve significantly, as
compared to last year’s 32.62 per cent, thus,
indicating that collection strategies being
adopted are not effective under existing
conditions.
a.
Undertake more aggressive collection
strategies to improve collection efficiency
on LTR past due Folio II accounts; and
b.
Inform the borrowers on the extension of
penalty condonation, housing loan
payment incentives, and restructuring
programs in order to encourage them to
pay regularly.
Transfer Certificates of
Title
determined to be fully paid in the
total amount of P25,065,998 was
recorded under JEV No. 12-120646 dated December 28, 2012.
Further, Management will send
letter to the NHA General Manager
for the delivery of the TCTs.
updates on action taken in 2012 on
the observation.
61
10.
Non-compliance with the computation of
the documentary stamp tax (DST) on
restructured loans under Section 183 of the
National Internal Revenue Code as amended
resulted in overpayment of said tax to the
Bureau of Internal Revenue by at least P4.11
million for 2009 alone to the detriment of the
NHMFC borrowers.
a.
Strictly follow the computation of the DST
payments based on the National Internal
Revenue Code of 1997 as amended; and
b.
Request Pag-ibig MRI Pool Inc. (PMRI)
to
submit
list
of
DST
payments/remittances made to BIR in
behalf of NHMFC to determine the
amount that should be refunded to
housing loan borrowers.
Management sent a letter dated
January 24, 2013 reminding of the
request to refund the excess
remittances made to the Pag-ibig
MRI
Pool
regarding
the
documentary stamp taxes collected
from borrowers of the corporation
covering the period October 2000
to January 2010.
11. Physical inventory of property and
equipment stated at P43.605 million, net of
accumulated depreciation of P124.278 million as
at December 31, 2009, was not conducted for
the year 2009 contrary to COA Circular No. 80124 dated January 18, 1980, hence
reconciliation of the property records with
accounting records could not be made.
a.
Conduct inventory of property and
equipment and follow strictly COA
Circular No. 80-124; and
b.
Reconcile
the
property
records
maintained by the General Services
Division (GSD) with the accounting
records maintained by the General
Accounting Division every year.
12.
Failure to update the borrowers’ records
on Long-Term Receivables – Past Due Folio II
account resulted in low turn-over of confirmation
requests, thereby rendering said account
doubtful of accuracy and reliability.
a.
On April 2010, the NHMFC
Insurance Office implemented the
corrected rate based on MRI
premiums and computed the over
remittance to the Pag-ibig MRI
Pool.
updates on actions taken in 2012
on the observations.
Reconcile their records with individual
borrower’s
account
and
correct
variances, if any, in order to determine
62
the validity and accuracy of Long-term
Receivables-Past Due Folio II accounts;
and
b.
Update the addresses and whereabouts
of the borrowers and evaluate the
status/condition
of
collaterals
to
determine what courses of action should
be taken.
13.
Total audit disallowances and charges
prior to September 2009 amounted to P66.332
million and remained unsettled to date.
Not Implemented.
2008
14.
The loans payable and interest payable
to the GSIS remained at P7.078 billion since
2002, despite the payment of P2.189 billion to
the latter from 2003 to 2008 and confirmation of
said accounts with the GSIS showed an
unreconciled difference of P870.764 million,
thereby rendering the accounts doubtful of
accuracy.
a.
Re-negotiate with the GSIS for the final
settlement of their accounts with the
latter and adjust the books accordingly in
order to fairly present the accounts in the
financial statements as at December 31,
2008; and
b.
Reconcile the variance of P870.764
million and effect the necessary
adjustments in the books.
15. NHMFC has not obtained original
certificates of stocks since BHFI’s incorporation
in 2005 to evidence ownership of its Investments
in BHFI of P751.351 million, rendering its stock
investments doubtful.
Secure from BHFI the original certificates of
stocks covering NHMFC’s recorded investments
in the joint venture amounting to P751.351
million.
An agreement with GSIS on the
restructuring of the loans was
finalized in 2012. This resolved the
issue of the valuation being carried
in the books of both parties.
Necessary
adjustments
have
accordingly been made.
The
NHMFC
submitted
a
certification issued by Ms. Faye
Babasa, AVP Trust Operations
Head, Hongkong and Shanghai
Banking Corporation, stating and
we quote:
“This is to certify that HSBC Trust
Department has, under Balikatan
Housing Finance, Inc. Trust
63
Account No. 000-175-072274 as of
31 January 2013, the original
copies of two Balikatan Housing
Finance, Inc. Stock Certificates in
the name of National Home
Mortgage Finance Corporation, the
first Stock Certificate is for 48,995
shares and the second is for
58,000 shares.”
COA will validate the
certification
submitted
Management.
16.
NHMFC did not institute foreclosure
proceedings on 43,321 past due long-term
receivable Folio II accounts amounting to
P8.991 billion with installment arrearages
ranging from over five to twenty years, resulting
in the delayed recovery of exposure.
Submit a report to the Legal Department on past
due accounts which are outstanding for long
period of time to monitor collectibility and initiate,
if warranted, litigation/ foreclosure action on
these accounts.
above
by
Of the 43,321 highly delinquent
accounts, the Collection Group had
referred 4,164 of those accounts to
Legal Department for foreclosure.
Out of the said numbers, 3,077
accounts were endorsed by Legal
Department to Electronic Data
Processing (EDP) Division for
tagging
as
Items-In-Litigation
preparatory to the initiation of
foreclosure proceeding. Hereunder
is the status of those accounts:
For Filing
For Auction
Foreclosed
Cancelled
Declassified
External
For Processing
For Further Verification
332
149
886
23
208
367
146
966
As regard to the remaining 1,087
accounts, the Legal Department
took action thereon summarized as
follows:
For Filing
For Auction
Foreclosure
Cancelled
Reclassified
For Processing
For Further Verification
253
86
331
9
24
336
48
64
Concerning the 1,014 accounts
(966 and 48 accounts), the Legal
Division believed that most of the
accounts were foreclosed but the
respective foreclosure documents
are still for retrieval. The Legal
Department
will
furnish
the
Collection Group of reports of their
actual status as soon as verification
is finished.
The above status of past due longterm receivables under Folio II
accounts was submitted for audit
on March 26, 2013 and validation
thereof will be conducted in 2013
as well.
17.
The NHMFC has not disposed, for 5 to
13 years, the collaterals on the 10 CMP
accounts totaling P95.185 million due to delayed
registration/annotation of the Certificates of Sale
and consequently the non-consolidation of titles,
thereby depriving the Corporation of the
opportunity to recover its exposure.
Issue clear-cut policies regarding the disposition
of past due long-term receivables and strictly
implement such policies to insure immediate
recovery of exposure.
As explained by the Fund and
Asset Management Group officials,
the Community Mortgage Program
(CMP) has a different approach in
the sale/disposal of its properties.
The lump sum sale/disposal of its
property was the contributory factor
why NHMFC was not able to
dispose the properties.
Approval as to the sale/disposal of
the lots to individual buyers or to
actual occupants on said properties
was sought from the Board and
accordingly approved as per Board
Resolution No. 3695 dated March
10, 2010.
The amount of P95,185 million was
brought down to P58.494 million
due to the sale of AMAKO and the
continuous sale/disposal of WEA
Homes and Samahang Nagbayan
ng Sta. Monica in 2010.
It was further explained that there
was
delay
in
the
consolidation/annotation of the
certificate of sale, a sale can still be
65
pursued
through
the
actual
occupants,
home
owners
association and other interested
parties.
Per validation, 2 of the 10 CMP
properties were sold as at
December 31, 2012.
18.
Payments of P11 million made by
NHMFC’s Folio II housing loan borrowers who
are Not in the Masterlist (NIM) accounts and
lodged in the Undistributed Collections account
as at December 31, 2008 resulted in the nonposting of these payments to individual
borrower’s ledgers thereby subjecting them to
penalties/surcharges and the non-distribution of
said payments to affected general ledger
accounts.
a.
b.
Verify the unpostable balances per
borrower to insure that only bonafide
NHMFC borrowers are being considered
in the distribution of UC. Once confirmed
to be NHMFC borrowers, ascertain which
accounts are for Folio I, Folio II, CMP,
PEA, etc so that distribution of UC could
be recorded and posting of payments to
subsidiary ledgers per program can be
facilitated to reflect their correct balances
as at December 31, 2008; and
As to collections which were intended for
other government institutions like HDMF,
GSIS, SSS, etc., remit the collections to
the proper institution.
Management explained that the
Not-In-Masterlist (NIM) accounts
were payments made by NHMFC
borrowers thru the accredited
collection banks (i.e., PNB, DBP,
PCIB, BPI-FB).
These are
payments with borrower’s name
and account numbers as reflected
in the report and MBRs but do not
matched with the name and
account number of the borrowers in
the database.
From P11 million as of December
31, 2008, the NIM account was
significantly reduced to only P6.7
million as of December 30, 2012.
This is the result of the information
dissemination among collection
partners
to
request
paying
borrowers to provide the correct
account number and borrowers
name every time payment is made.
The remaining balance of NIM
accounts represents payments
made from 1999 to 2006.
Concerned unit is exhausting all
possible means to identify the
correct details of these payments.
The names of all NIM accounts
have been posted in NHMFC
website and have written the
collection partners seeking their
help in the identification of these
unidentified borrowers.
The
resolution of NIM accounts is part
of the undergoing reconciliation
66
with the Philippines National Bank
(PNB), of which majority of the
payments were made.
Current
procedures,
system
processes have prevented the
accumulation of “additional” NIM
accounts. With the use of the
Remittance Verification Monitoring
System (RVMS), only the bonafide
distribution of postable payments
will be made. If the payments were
verified to be due to other
government institution (SSS, GSIS,
HDMF),
the
same
were
correspondingly remitted to the
respective institutions.
Also, the corporation implemented
the Borrowers Service Card
System
(BSCS),
uses
the
Electronic Data Capture terminal
(EDC) and the NHMFC Pabahay
Card. The BSCS uses the “checkdigit-validation” wherein only valid
account numbers are accepted by
the machine. With this system,
occurrence of NIM accounts will be
minimized if not totally eradicated.
With
the
BSCS,
borrower’s
payments can be immediately
posted in the NHMFC database on
the same day the payments are
made.
The new additional collection
partners namely: United Coconut
Planters Bank and Shoemart, Inc.
will also the “check-digit-validation”
in the acceptance of payments from
borrowers. Whenever, borrowers
opted to pay thru the new
accredited
collection
partners,
occurrence of NIM and payments
intended to other government
institution will be avoided. The
collection agreement with other
collecting bank partners will be
revisited for the adoption of the
67
check-digit validation.
Initial
discussion on this was made with
PNB.
To avoid, if not totally eliminated,
the following courses of action will
be followed:
a.
Publication of NIM accounts
within the first quarter of 2013.
b.
Monthly updating of NIM
accounts in the NHMFC website.
c.
Communicate with collection
partners within five days after
receipt of collection reports every
time unidentified payments are
reflected in their reports.
2007
19.
The general ledger balance of past-due
and restructured long-term receivables - Folio I
accounts as at December 31, 2007 remained
unreconciled with the total appearing in the lists
of borrowers by P140.260 million.
Expedite the reconciliation of the general ledger
balance and the borrower’s subsidiary ledgers
maintained by the Folio I Accounts Servicing
Unit in order to ensure the accuracy and
propriety of the past-due and restructured longterm receivables and the reliability of pertinent
accounting records and reports.
20.
Collections / payments received during
the year still remained undistributed and lodged
to Deposit on Rights Sold (DORS).
Make an adjustment on the Deposits on Rights
Sold whenever the property is redeemed by the
original borrower, cancellation of the buyer’s
intention to purchase NHMFC’s rights over the
mortgage or the application of the deposit by the
buyer.
Acquired Assets Division has
endorsed for booking various
installment
amortizations
amounting to P71.77 million in
2012.
68
21.
The general and subsidiary ledger
balances of the liability accounts, Advances from
Borrowers – Folio II and Advances from
Borrowers – Philippine Reclamation Authority
(PRA) showed a P4.106 million difference.
a.
b.
Reconcile the difference between the
general and subsidiary ledger balances of
the Advances from Borrowers – Folio II
and Advances from Borrowers – PRA
accounts to reflect the correct balance of
these accounts and other affected
accounts; and
Review the existing system to ensure that
all financial transactions affecting the
accounts are captured and recorded
properly, both on the general and
subsidiary ledgers.
As of October 2012, the balance of
Advances from Borrowers – Folio II
are as follows:
Unadjusted
balance
Refund
of
excess
payment
Total
Variance
GL
SL
26,323,862
35,838,716
26,323,862
2,768,812
33,069,904
9,514,854
To resolve the variance between
the GL and SL, the following
activities have been undertaken:
1.
Account for the difference
resulting from:
a.
Refund of excess payment
reflected in the GL from Cash
disbursement book;
b.
Miscellaneous
income
resulting from the excess payment
below P1,000;
c.
Offsetting of unpaid insurance
against the excess payment from
borrowers.
2.
Modify
needed.
the
program,
if
3.
Target date of completion is
March 31, 2013.
22. Security and other deposits entrusted by
the Corporation to various lessors/service
providers as a result of lease or service
agreements amounting to P5.059 million at yearend remained uncollected for so many years
despite the termination of NHMFC’s contracts
with these lessors and service providers.
Demand from the concerned lessors/service
providers the immediate refund of these security
and other deposits. Write-off in the books the
recorded deposit accounts which can no longer
be recovered and where the corresponding
The Head of the General Services
Division
informed
that
a
memorandum was sent to the
Regional
Accounts
Servicing
Division to facilitate the refund of
security deposits.
Also, certifications as to existence
of the various lessors/service
providers will be requested from the
Security
and
Exchange
69
contracted services have already been served
and/or terminated, after approval have been
secured from proper authorities.
Commission. The deposits to these
offices totaled P208,464.38.
Monitor the expired lease/service agreements in
order to immediately collect or refund the
corresponding deposits.
70
LIQUIDITY SUPPORT AND INTEREST SUBSIDY COMPONENTS
BALANCE SHEET
DECEMBER 31, 2012
Note
2012
2011
ASSETS
Current Assets
Cash in bank
Short - term investments
Receivables
Accrued interest receivable
485,599
325,000,000
201,998,159
6,275,376
5,162,863
287,472,029
201,998,159
5,153,465
533,759,134
499,786,516
40,752,455
34,137
64,733,208
56,895
40,786,592
64,790,103
574,545,726
564,576,619
Liabilities
Accrued salaries and wages
Accrued other personal services
Accounts payable
Accrued tax on interest on bonds
Accrued maintenance and other operating expenses
475,208
269,952
120,269
81,403
18,000
497,980
514,226
120,269
251,878
21,000
TOTAL LIABILITIES
964,832
1,405,353
573,580,894
563,171,266
574,545,726
564,576,619
Non-current Assets
Long - term investments
3
4
5
6
7
TOTAL ASSETS
LIABILITIES AND FUND BALANCE
FUND BALANCE
TOTAL LIABILITIES AND FUND BALANCE
9
71
STATEMENT OF INCOME AND EXPENSES
Note
2012
2011
OPERATING AND MISCELLANEOUS INCOME
7,780,244
3,381,726
2,019,982
1,449,915
30,549
14,662,416
9,179,168
2,019,982
2,309,684
17,904
13,526,738
910,076
662,059
196,169
37,700
22,758
1,828,762
813,545
842,900
36,000
30,776
1,723,221
INCOME BEFORE TAX
Final tax paid on income
12,833,654
2,421,997
11,803,517
2,166,419
NET INCOME
10,411,657
9,637,098
Interest income-LBP-IMA
Interest income-LBP-HYSA
Interest income on commingle and liquidity reserve
Interest income on bonds
Interest income-savings account
ADMINISTRATIVE AND OPERATING EXPENSES
Salaries and wages
Other services
Trustee fee
Maintenance and other operating expenses
Depreciation
2.1
72
STATEMENT OF CHANGES IN FUND BALANCE
Note
Balance at December 31, 2010
Net income
Prior period errors
As restated
Net income
Total
553,534,168
9,637,098
563,171,266
8
9
563,171,266
(2,029)
563,169,237
10,411,657
573,580,894
73
ABOT- KAYA PABAHAY FUND
STATEMENT OF CASH FLOWS
Note
2012
2011
CASH FLOWS FROM OPERATING ACTIVITIES
Payment of salaries and wages
Interest on savings account
Interest on LBP - HYSA
Interest on LPB - IMA
Taxes paid on savings account
Other receipts
(1,878,180)
30,549
297,153,218
165,770,310
(6,110)
1,000
(1,788,837)
17,904
(3,581)
-
Net cash used in operating activities
461,070,787
(1,774,514)
Opening of bank account - trust account
Purchase of computer spare parts and services
Investments in government securities
Collection on 10% redemption and interest on AR bonds
(1,000)
(1,700)
(491,000,000)
25,254,649
(28,000,000)
33,217,191
Net cash provided by investing activities
(465,748,051)
5,217,191
(4,677,264)
3,442,677
5,162,863
1,720,186
485,599
5,162,863
CASH FLOWS FROM INVESTING ACTIVITIES
NET INCREASE / (DECREASE) IN CASH IN BANK
CASH IN BANK AT BEGINNING OF YEAR
CASH IN BANK AT END OF YEAR
3
74
ABOT - KAYA PABAHAY FUND
NOTES TO FINANCIAL STATEMENTS
1.
GENERAL INFORMATION
The Abot-Kaya Pabahay Fund (AKPF) was created under Republic Act (RA) No. 6846
under the trusteeship of the National Home Mortgage Finance Corporation (NHMFC)
and was amended under RA 7835. The fund shall be used exclusively for the objectives
of enhancing affordability of low-cost housing by low income families through the
amortization support component and by providing developmental financing for low-cost
housing projects, and liquidity support and interest subsidy.
In October 2005, the Abot-Kaya Pabahay Fund’s liquidity support and developmental
financing components were transferred to the newly created Social Housing Finance
Corporation (SHFC), a wholly-owned subsidiary of the National Home Mortgage Finance
Corporation by virtue of Executive Order 272 which was signed and approved by the
President of the Republic of the Philippines on January 20, 2004.
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Fund uses the commercial accounting system wherein the recording of financial
transactions is centralized in the Finance Department. The Fund submits monthly
summary of transactions duly reviewed, certified and approved by its responsible officers
to the Finance Department for journal entry voucher (JEV) preparation and recording in
the books of accounts.
2.1
Property and equipment are carried at cost less accumulated depreciation. Significant
improvements and accessories are capitalized while cost of maintenance and repairs is
treated as expense.
In adherence to the New Government Accounting System (NGAS), AKPF uses the
straight-line method of depreciation with a residual value equivalent to ten per cent of the
total cost recognized. Straight-line depreciation results in constant charge over the
useful life if the asset’s residual value does not change. This method is applied
consistently from period to period. Depreciation of an asset begins when it is available
for use.
2.2
Income and expense recognition
The Fund uses the accrual basis of accounting. All expenses are recognized when
incurred and reported in the financial statements in the period to which they relate.
75
3.
CASH IN BANK
This account represents cash deposited in the Land Bank of the Philippines (LBP).
4.
SHORT – TERM INVESTMENTS
This account represents investments in treasury bills and high-yield savings account
(HYSA) with the Bureau of Treasury and LBP, respectively, with maturities of more than
three months to one year.
5.
RECEIVABLES
This account represents amount of loan released to NHMFC to fund Commingle and
Liquidity Reserve accounts for Bahay Bonds Maiden Issue.
6.
ACCRUED INTEREST RECEIVABLE
This account represents interest receivable from short-term investments in treasury bills,
Land Bank of the Philippines (LBP) Agrarian Reform bonds, placement in LBP-High
Yield Savings Account and due from NHMFC amounting to P27,751, P333,568 and
P5,914,057, respectively.
7.
LONG - TERM INVESTMENTS
This account represents the investments in LBP Agrarian Reform Ten-Year Bonds with
interest rates aligned with that of the 91-day Treasury Bills and payable six months from
date of issue and every six months thereafter. Ten per cent of the bond’s original face
value matures every year and is paid to the bondholder until the tenth year / maturity
date.
8.
PRIOR PERIOD ERRORS
This account represents the adjustment in AR bonds amounting to P2,029.
9.
FUND BALANCE
This represents the fund balance of the AKPF’s third component which is liquidity
support and interest subsidy component including its total earnings from October 2005 to
December 2011. This amount is reflected under “Other Assets” in the NHMFC’s
Financial Statements (see Note 11 of NHMFC Notes to Financial Statements).
76

Part I AUDITED FINANCIAL STATEMENTS

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