G.R. No. 210314 Separate Concurring Opinion

G.R. No. 210314, October 12, 2021,
♦ Decision, Hernando, [J]
♦ Concurring Opinion, Perlas-Bernabe, [J]
♦ Separate Opinion, Leonen, [J]
♦ Concurring Opinion, Caguioa, [J]
♦ Concurring Opinion, Lazaro-Javier, [J]
♦ Separate Concurring Opinion, Zalameda, [J]

BANGKO SENTRAL NG PILIPINAS, PETITIONER, VS. THE COMMISSION ON AUDIT, RESPONDENT.

I concur with the ponente's conclusion that the Commission on Audit (COA) committed grave abuse of discretion when it held in its assailed Decision No. 20112-154 dated 07 September 2012 and Resolution No. 2013-214 dated 03 December 2013 that COA Resolution No. 2011-007 dated 25 January 2011, in its entirety, had already attained finality and is the concrete precedent for future dividend payments of the Bangko Sentral ng Pilipinas (BSP).

I also join the ponencia in finding that BSP is not a government owned or controlled corporation (GOCC) as defined under Section 2(b) of Republic Act No. 7656 (RA 7656);1 thus, BSP is governed by Republic Act No. 7653 (RA 7653) or the BSP Charter.2 The ponencia ruled that BSP is allowed to set up reserves under its Charter. To avoid any confusion, however, it is necessary to clarify that BSP's reserves for property insurance and rehabilitation of the Security Plant Complex (SPC)3 are not allowable reserves which may be deducted in arriving at net profits under Section 43 of the BSP Charter, which reads:

Section 43. Computation of Profits and Losses. - Within the first thirty (30) days following the end of each year, the Bangko Sentral shall determine its net profits or losses. In the calculation of net profits, the Bangko Sentral shall make adequate allowance or establish adequate reserves for bad and doubtful accounts.

BSP's reserves for property insurance and rehabilitation of the SPC are not bad debts or doubtful accounts

Section 112 of Presidential Decree No. 1445 (PD 1445)4 provides that government agencies, such as the BSP, shall record its financial transactions and operations in conformity with the generally accepted accounting principles, and in accordance with pertinent laws and regulations. In the Philippines, we adhere to the Conceptual Framework for Financial Reporting, Philippine Financial Reporting Standards (PFRS), and Philippine Accounting Standards (PAS). Under PAS, the provision for bad debts or doubtful accounts is required when there is objective evidence that the receivable amount is no longer recoverable. We may also be guided by the Manual on the New Government Accounting System (NGAS), which was in effect during the period under consideration. NGAS defines bad debts or doubtful accounts as follows:

Section 66. Bad Debts. Trade receivables shall be valued at their face amounts minus, whenever appropriate, allowance for doubtful accounts. Bad Debts expense and/or any anticipated adjustments, which in the normal course of events will reduce the amount of receivables from the debtors to estimated realizable values, shall be set up at the end of the accounting period.

The Allowance for Doubtful Accounts shall be provided in an amount based on collectibility of receivable balances and evaluation of such factors as aging of the accounts, collection experiences of the agency, expected loss experiences and identified doubtful accounts. [Emphasis supplied.]

In the performance of its mandate to maintain price stability,5 BSP extends loans to banks and other financial institutions. Almost invariably, some receivables will prove uncollectible, such that an amount of said loans or receivables must be recognized as expense in computing net profits. Thus, RA 7653 directs BSP to make adequate allowance or establish reserve for bad or doubtful accounts.6

Based on BSP's website, the SPC is BSP's currency production facility in East Avenue, Diliman, Quezon City that "produces banknotes and coins, [...] refines gold, prints land titles for the Land Registration Authority, crafts presidential medals and commemorative coins, and will soon print the National ID cards for the Philippine Statistics Authority."7 These functions of SPC being the currency production facility have nothing to do with the lending function of BSP which gives rise to the setting up of allowance or establishment of reserve for bad debts or doubtful accounts. As such, reserves for property insurance and rehabilitation of a building are not allowance for bad debts or doubtful accounts.

As discussed in the ponencia, BSP is not a GOCC as defined under Section 2(b) of RA 7656. It follows, therefore, that Section 2(d) of said law,8 which precludes the recognition of any reserve for whatever purpose, does not apply to BSP. Nonetheless, this should not be taken to mean as an unbridled discretion for BSP to reduce its net profits with any or all kinds of reserves. After all, Section 44 of the BSP Charter requires that 50% of its net profits shall revert to the National Treasury, viz:

Section 44. Distribution of Net Profits. - Within the first sixty (60) days following the end of each fiscal year, the Monetary Board shall determine and carry out the distribution of the net profits, in accordance with the following rule:

Fifty percent (50%) of the net profits shall be carried to surplus and the remaining fifty percent (50%) shall revert back to the National Treasury, except as otherwise provided in the transitory provisions of this Act.

Even if Section 43 of the BSP Charter may be read as an authority for BSP to recognize other allowances or reserves (aside from allowance for bad debts and doubtful accounts), the particulars of said allowance or reserves must still find basis under applicable laws and government accounting rules. Under government accounting rules, there are several deductible items that may reduce net profits (aside from bad debts), such as depreciation expenses and foreign exchange losses. Reserves or allowances for future expenses are not among those recognized as allowable deductions from net profits.

In this case, BSP merely cites Section 43 of its Charter as its basis in setting up reserves for property insurance and rehabilitation of the SPC. However, nothing in Section 43 suggests that it is allowed to reduce its net profits, thereby the 50% share of National Government, with said reserves or allowances for future expenses. NGAM is also bereft of basis for these deductions.

Notably, the Corporation Code allows stock corporations to setup reserves in its retained earnings in excess of one hundred percent of their paid-in capital stock in limited cases, for example, when there is definite corporate expansion projects or programs approved by the board of directors, or when necessary under special circumstances, such as when there is need for special reserve for probable contingencies.9 For private stock corporations, reserves for future expenses justify reduced dividends which may be declared to shareholders. However, there is no equivalent provision for government agencies, such as the BSP, especially, considering any deduction from net profits will reduce dividends that will ultimately redound to the National Government.

Finally, the ponencia considered the amendment of Section 43 pursuant to Republic Act No. 11211 (RA 11211) as a confirmation of the intent of Congress to allow BSP to maintain reserves for its operations.10 The manifest intention of Congress is to broaden the allowable deductions from net profits. This considering that it now includes "such allowances and provisions for contingencies or other purposes as the Monetary Board may determine in accordance with prudent financial management and effective central banking operations." The Congress even phrased BSP's authority to be "notwithstanding any provision of law to the contrary[.]" To wit:

SEC. 43. Computation of Profits and Losses. - Within the first sixty (60) days following the end of each year, the Bangko Sentral shall determine its net profits or losses. Notwithstanding any provision of law to the contrary, the net profit of the Bangko Sentral shall be determined after allowing for expenses of operation, adequate allowances and provisions for bad and doubtful debts, depreciation in assets, and such allowances and provisions for contingencies or other purposes as the Monetary Board may determine in accordance with prudent financial management and effective central banking operations.

While the full extent of BSP's authority under the amended provision of Section 43 may be brought this Court on a future occasion, the amendment shows that prior to the enactment of RA 11211, BSP is not permitted to reduce its net profits for future expenses, such as reserves for property insurance and rehabilitation of a building. To avoid any impression of BSP's unbridled authority in setting up reserves that will reduce its net profits, this clarification is set forth. To stress, the general limitation on reserves for GOCCs under Section 2(d) of RA 7656 does not apply to BSP.1âшphi1