Department of Finance
Manila
DEPARTMENT CIRCULAR NO. 6-90
December 06, 1990
TO : Treasurer of the Philippines, Heads of Government-Owned and/or Controlled
Corporations (GOCCs) and All Others Concerned.
SUBJECT: Guidelines for Section 1, 2 and 3 of Administrative Order No. 173 dated 18 June
1990 Providing for Certain Innovative Measures for the Government to Reduce
the Pressure on Domestic Interest Rates.
1.0 Purpose
This Circular is issued to provide guidelines to be followed in the implementation of
Sections 1, 2 and 3 of Administrative Order No. 173, designed to reduce the cost of
borrowings of the National Government in the domestic market.
2.0 Definition of Terms
For purposes of these Guidelines, the following terms shall mean:
A. Government-owned and/or controlled corporation (GOCC) shall
refer to a corporation which is created by special law or organized
under the Corporation Code in which the Government, directly or
indirectly, has ownership of the majority of the capital or has voting
control.
B. Equity is an amount granted to a GOCC as National Government
subscription to the authorized capital stock of the said corporation.
It may also refer to the peso counterpart contributions to a GOCC
for the implementation of foreign-assisted projects released as
equity to the corporation concerned, as provided in the General
Appropriations Act or other existing laws.
C. Subsidy is an amount granted to a GOCC from the General Fund to
cover operational expenses that are not supported by corporate
revenues or to cover corporate deficits and losses or to defray
expenditures for projects which are not financially viable but may be
required by the national/local government and are intended to
create a bias for the disadvantaged sector of society.
D. The phrase "idle funds in excess of normal operating requirement"
shall generally mean the level of funds which an entity can freely
invest in government securities and/or fixed term deposits after
considering provisions for coverage or regular and recurring
operating expenses like salaries and wages, repairs and
maintenance, inventories and supplies, debt servicing, etc. Within
the context of the entity's cash operating cycle. In the case of
LGUs, unremitted national collections and funds set aside for
payment of obligations to government corporations/cooperatives
shall not form part of their idle funds.
E. Trust accounts shall refer to collections from non-income sources
authorized by law for specific purposes which are collected/received
by a government office/agency or GOCC acting as trustee, agent or
administrator or which have been received as guaranty for the
fulfillment of an obligation and booked as trust liabilities of the
recipient agency/GOCC. It is also a fund held by an entity (trustee)
for the benefit of another, pursuant to the provisions of a formal trust
agreement.
3.0 Specific Guidelines
3.1 Guidelines for Section 1 of AO 173:
3.1.1 The release of equity and subsidy funds to the GOCCs by the Bureau of
Treasury (BTR) shall be based on the cash availability of the National
Government.
3.1.2 These guidelines shall apply to equity and subsidy releases made after the
issuance of this Circular.
3.2 Guidelines for Section 2 of AO 173:
3.2.1 All government-owned and/or controlled corporations, government financial
institutions and local government units shall invest their idle funds in excess
of normal operating requirements in medium-term and long-term government
securities, special short-term government securities, and/or special fixed term
deposits with Central Bank thru BTR except operating funds or loanable
funds of GFIs and funds of Petron, a PNOC subsidiary.
3.2.2 GOCCs excluding SSS and GSIS, which are covered by a separate
arrangement, shall convert their current holdings of Treasury bills, except the
amounts needed for operations, into medium to long-term government
securities, special short-term government securities, and/or special fixed term
deposits as and when they mature.
3.2.3 GOCCs shall also be given the option to invest their newly, internally-
generated excess funds i.e., funds which have not been previously invested
in government securities nor sourced from equity or subsidy from the national
government, into special 364-day Treasury Bills, special Treasury Notes
and/or fixed term deposits.
GOCCs shall coordinate with the Government Securities Department, Central
Bank of the Philippines (CBP) for the conversion of their existing Treasury
Bills into medium/long term government securities or special short-term
government securities. However, for placements in special fixed term
deposits, GOCCs shall coordinate with the Bureau of the Treasury, Treasury
Miscellaneous Accounting Division.
3.2.4 Local government units shall invest their temporary idle funds in medium-
term/long-term government securities as may be allowed by their cash
requirements, provided however, that such investments will not delay the
implementation of projects.
3.3 Guidelines for Section 3 of AO 173:
3.3.1 All trust accounts of GOCCs shall be remitted to BTR for deposit with the
Central Bank of the Philippines (CBP).
3.3.2 As the need arises, GOCCs may request for the withdrawal of such amount
from the BTR.
3.3.3 BTR shall assure the prompt release of such funds by making appropriate
arrangement with CB to transfer the amount needed to the GOCC concerned.
3.3.4 The BTR shall regularly report to the GOCCs the interest earned on their trust
deposits.
4.0 Interest Rate
All interest rates covering deposits and securities referred to under this Circular, shall
be in accordance with the rates prescribed by or agreed upon with the Department of
Finance (DOF).
5.0 Reportorial Requirement
GOCCs shall report to the Corporate Affairs Group (CAG)-DOF, investments in
securities and deposits under this Circular, within five (5) working days after the end of the
reference month.
6.0 Resolution of Related Issues
Cases for clarification and those not specifically covered by this Circular shall be
referred to the Secretary of Finance for appropriate action who shall decide based on the
joint recommendation of the BTR and the Corporate Affairs Group-Department of Finance.
7.0 Responsibility and Sanctions
The chief executive and finance officers of the GOCC shall be responsible for their
corporation's compliance to the provisions of the Administrative Order.
In case of failure by the abovementioned officials to comply with the Order, the Secretary
of Finance shall recommend to the President the imposition of appropriate administrative
sanctions on said officers.
In addition, any equity or subsidy releases as well as guarantees on loans proposed to be
secured by the corporation may be withheld pending compliance to the provisions of this Order.
8.0 Effectivity
This implementing guidelines shall take effect immediately.
(Sgd.) JESUS P. ESTANISLAO
Secretary of Finance"
All concerned are hereby enjoined to enforce the provisions of said Administrative Order.
The Auditors concerned shall observe the necessary audit procedures included but not limited
to those listed in the attached Annex A hereof.
Please be guided accordingly.
(SGD.) ROGELIO B. ESPIRITU, Commissioner
(SGD.) BARTOLOME C. FERNANDEZ, JR., Commissioner
(SGD.) EUFEMIO C. DOMINGO, Chairman
