Financial Statements and Procurement Policies Quiz

Public Procurement (RA 9184)

• Public procurement is the purchase of goods, services, and works by governments and state-owned entities.
• It's a significant portion of taxpayers' money, demanding efficiency and high conduct standards to ensure service quality and protect public interest.
• The procurement process starts with identifying the need for a purchase.
• The process ends when the product is used or sold, or the service contract is fulfilled, and payment is made.

Procurement Definition

• In modern business terms, "procurement" encompasses various concepts like logistics, inventory management, online transactions, outsourcing, supply chain management, and e-bidding.
• Good procurement practices prioritize value for money, ensuring the purchase fits its intended purpose while considering the overall cost.
• Efficiency is equally important to limit time and expenses for all involved parties.

Government Procurement Reform Act (RA 9184, 2003)

• This act has standardized and rationalized the Philippine procurement system, aligning it with international best practices.
• The Philippines spends hundreds of billions of pesos on goods and services annually for bureaucracy, projects, and citizen services.

Government Procurement Policy Board (GPPB)

• GPPB oversees all government procurement.
• It is headed by the Secretary of the Department of Budget and Management (DBM) as Chairman, with the Director General of the National Economic and Development Authority (NEDA) as Alternate Chairman.
• Members consist of secretaries or authorized representatives from various government departments (Public Works and Highways, Finance, Trade and Industry, Health, National Defense, Education, Interior, Technology, Transportation, Local Government, Science and Communication, and Energy).
• Also a representative from the private sector appointed by the President sits as a member.
• Representatives from the Commission on Audit and relevant government agencies and private-sector organizations are invited to serve as resource persons in GPPB meetings.

Government Electronic Procurement System (PhilGEPS)

• The Government Procurement Reform Act mandates all government agencies to utilize the PhilGEPS portal to procure goods and services.
• The PhilGEPS is the primary source of information on all government procurement (http://philgeps.gov.ph).

Procurement Entity

• Refers to any government branch, constitutional commission, bureau, office, agency, department, instrumentality of the GoP (NGA), including GOCC, GFI, SUC, and LGU involved in procuring goods, infrastructure projects, and consulting services.

Procurement:

• Refers to the acquisition of goods, consulting services, and contracting for infrastructure projects by the procuring entity.
• Mixed procurements (Goods, Infrastructure Projects, Consulting Services) are categorized based on the primary purpose of the contract.
• Leases of goods and real estate are covered by this definition.
• Land procurement is regulated by provisions of R.A. 10752 and related laws.

Section 2. Declaration of Policy.

• The Implementing Rules and Regulations (IRR) are in alignment with the Government of the Philippines' (GoP) commitment to promote good governance through transparency, accountability, equity, efficiency, and economy in its procurement process.

Procurement Methods

• Competitive Bidding: The method used for Infrastructure Projects, Consulting Services, and Goods, except under specific conditions outlined in Rule XVI.
• Limited Source Bidding: Involves direct invitations to pre-selected suppliers/consultants with proven capability. Justified in situations where only a few competent suppliers exist for highly specific goods or services.
• Direct Contracting: Suitable for procurement of goods with proprietary features (patents, trade secrets, copyrights) or unique components vital to a contract; exclusive dealerships without sub-dealers; and more advantageous prices for the GoP.
• Repeat Order: Replenishing goods previously procured. The unit prices must remain the same or lower, and the order shouldn't exceed 25% of the original contract's quantity.

Procurement Defined Terms

• Act (RA 9184): An Act Providing for the Modernization, Standardization, and Regulation of the Procurement Activities of the Government.
• Approved Budget for the Contract (ABC): The budget of a contract, duly approved by the HoPE, per General Appropriations Act (GAA).
• Bid: A proposal to undertake a contract.
• Bidder: A party submitting a bid.
• Bidding Documents: All documents supplied by the Procuring Entity to guide bidders.
• Bids and Awards Committee (BAC): The Committee handling bidding processes based on IRR rules.
• Common-Use Supplies and Equipment (CSE): Everyday goods/equipment used in government operations.
• Competitive Bidding: The main procurement method.
• Consulting Services: Professional services needed for infrastructure projects.
• Domestic Bidder: A party offering unmanufactured products mainly produced in the Philippines.
• Domestic Entity: Individual, partnership, corporation, or association whose businesses are located in the Philippines.
• Expendable Supplies: Items consumed within a year in operations.
• Foreign Bid: Offers for products not manufactured in the Philippines.
• Foreign-Funded Procurement: Procurement wholly or partially funded by foreign entities.
• Foreign Grants: Funds from foreign entities without repayment obligations.
• Foreign Loans: Funds from foreign entities with repayment obligations.
• Goods: Items used in governmental operations.
• Head of the Procuring Entity (HoPE): Usually heads of agencies or offices.
• Infrastructure Projects: Projects concerned with infrastructure improvements.
• International Agreement: Legal agreements between governments.
• Non-expendable Supplies: Items retained in their original shape.
• PhilGEPS: Government Electronic Procurement System.
• Philippine National: Citizen(s), partnership, corporation, or association that holds ownership of the business.
• Portal: A website that manages and centralizes information and interactions.
• Procurement: The acquisition of goods and services.
• Procuring Entity (PE): A government body, department, or agency.
• Procurement Reform Act: Another name for RA 9184.
• Ratio Analysis: Analysis that evaluates financial relationships of parts of the financial elements.
• Repeat Order: A procurement for additional items of goods or services.
• Shopping: A procurement method for commonly available products/equipment.

Financial Statement Analysis

• Component percentage: Used in vertical analysis to show proportion of items.
• Common size: Vertical analysis statement showing component percentage.
• Vertical analysis: Evaluates items within a specific timeframe/context in relation to the total.

Ratio Analysis

• Ratio Analysis: Is a method used to establish relationships between different parts of financial statements.
• Liquidity Ratios: Shows the ability of a company to meet its immediate obligations (Current Ratio, Acid-Test/Quick Ratio).
• Inventory ratios: Evaluate how well a company manages its inventory (Inventory Turnover, Number of Days Sales in Inventory).
• Receivables Ratios: Measures efficiency in collecting customer payments (Accounts Receivable Turnover, Average Collection Period).
• Profitability Ratios: Measures profitability (Return on Total Assets, Return on Sales, Gross Profit Ratio, Return on Investment).
• Solvency/Stability Ratios: Illustrates the claims of creditors (Debt to Total Assets Ratio, Owner's Equity to Total Assets Ratio).

Cash Management

• Cash Management: Government strategy to efficiently control short-term cash inflows and outflows.
• Principles: Speeding up collection of receivables. Timely payment of liabilities. Investing idle cash. Preparing cash forecasts.
• Importance: Ensures timely payments. Reduces idle cash risks. Improves financial flexibility.
• Objectives (National Level): Economizing cash within the government, managing short-term cash flows effectively, and aligning with monetary policies.
• Objectives (Agency Level): Establishing accurate cash flow forecasts for agencies, ensuring accurate monitoring templates, and facilitating coordination for accurate forecasting.

Cash Management Cycle

• The cash management cycle involves analyzing cash inflows (tax revenue, non-tax revenue, grants, sale of assets, borrowing) and outflows (salaries, goods/services, debt service).

Uses of Cash

• Personal services
• Maintenance
• Operating expenses
• Interest and loan principal payments.

Steps in Releasing Cash

• Approval of Agency National Expenditures Program.
• Agency prepares a monthly disbursement program.

Annual Expenditure Profile

• Government spending agencies provide monthly expenditure projections for the whole year for the Budget department's comprehensive analysis.

Bureau of Treasury Function

• BTr monitors expected daily cash flow projections based on prior trends and financial scenarios.

Treasury Single Account (TSA)

• TSA centralizes government cash balances, improving control and optimizing resource use.

Revenue Collection Flow

• Describes the flow of collected revenue from taxpayers to the Treasury Single Account.

Lesson 9: Cash Management Cycle

• Focuses on the cycle of cash inflows (e.g. taxes) and outflows (e.g. salaries).