GOVERNMENT SERVICE INSURANCE SYSTEM SOCIAL INSURANCE FUND NOTES TO FINANCIAL STATEMENTS

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Oct 30, 2013 (3 years and 8 months ago)

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9

GOVERNMENT SERVICE INSURANCE SYSTEM

SOCIAL INSURANCE FUND

NOTES TO FINANCIAL STATEMENTS

(All amounts in Philippine Peso unless otherwise stated)



1.

GENERAL INFORMATION



The Government Service Insurance System (GSIS) is a government financial institution
,
organized and created to administer the System’s funds and implement the laws that
govern the social security and insurance benefits of all government employees. The
GSIS maintains its officially registered address at the Government Financial Center,
Ro
xas Boulevard, Pasay City, which is also its Home Office. It has 15 Regional Offices,
25 Branch Offices, 19 Satellite Offices and 5 District Offices strategically located in
various cities and municipalities of the country.


The GSIS was created by the Co
ngress of the Philippines through
the passing of
Commonwealth Act

No.186 on November 14, 1936. Its primary objective is to promote
the welfare of the employees of the government through an insurance system that will
protect its members against adverse eco
nomic effects resulting from death, disability
and old age.


On May 31, 1977, Presidential Decree No. 1146, otherwise known as “Revised
Government Service Insurance Act of 1977,” was issued by then President Ferdinand E.
Marcos. On June 24, 1997, Republi
c Act (RA) No. 8291 otherwise known as, “The
Government Service Insurance System Act of 1997”, was enacted into law, enhancing
the social security coverage of the GSIS.


Pursuant to Section 34 of RA 8291, all contributions payable under Section 5 thereof
,
together with the earnings and accruals thereon shall constitute the GSIS Social
Insurance Fund (SIF). The said Fund shall be used to finance the benefits administered
by the GSIS under RA 8291. As such, the Social Insurance Fund (SIF) serves as the core

fund of the GSIS, as distinguished from the other funds that the GSIS is mandated to
administer.


The accompanying consolidated financial statements of the GSIS were authorized for
issue by the GSIS management represented by the President and General Man
ager and
the Senior Vice President


Controller Group on April

30,

2009.



2.

CHANGE IN FINANCIAL STATEMENTS PRESENTATION


The GSIS Board of Trustees, in its Resolution No. 180, dated November 5, 2008, has
approved the change in financial statements p
resentation of the GSIS Social Insurance
Fund to conform to the format prescribed under Philippine Accounting Standards (PAS)
26 and International Financial Reporting Standards (IFRS) for pension funds.


PAS 26 prescribes measurement and disclosure princi
ples for the reports of retirement
benefit plans, under either defined contribution plan or defined benefit plan. The standard
requires that for defined benefit plans, the financial statements shall contain a statement
of net assets available for benefits
and a statement of changes in net assets available for



10

benefits. The format in the disclosure and presentation of actuarial information, however,
may vary (i.e. can be included as a statement of changes in the actuarial present value of
promised retiremen
t benefits; or in a disclosure in the notes to financial statements; or
contained in a separate actuarial report).


The financial reporting format prescribed under PAS 26
is

used for the reporting period
December 31, 2008.


The financial statements for t
he Social Insurance Fund consist of the following:




Statement of Net Assets



Statement of Changes in Net Assets



Statement of Changes in Net Worth



Cash Flow Statement



Notes to Financial Statements



In compliance with
PAS

27 which requires the preparation
and presentation of
consolidated financial statements for a group of entities under the control of a parent, and
the applicable rules and regulations issued by the Commission on Audit, the Financial
Statements of the GSIS Subsidiaries now form part of the
GSIS Financial Statements for
Social Insurance Fund for the year December 31, 2008 with 2007 as its transition date.


The adoption of PAS 27 involved the following steps/procedures:




The carrying amount of GSIS’ investment in each subsidiary and the GSIS p
ortion of
equity of each subsidiary are eliminated;




Intragroup balances, transactions, income and expenses are eliminated in full;




The accounts for both GSIS and those of the Subsidiaries were combined line by line
by adding together like items of assets
,

liabilities, equity, income and expenses;




Minority interests in the profit or loss of consolidated subsidiaries for the reporting
period are identified; and




Minority interests in the net assets of consolidated subsidiaries are identified
separately fro
m the GSIS’ net assets.


Basis of Consolidation


The consolidated financial statements include the financial statements of the GSIS and
its subsidiaries as
at

December 31, 2008.

Subsidiaries are consolidated from the date on
which control is transferred to

the Group and cease to be consolidated from the date on
which control is transferred out of the Group. Consolidated financial statements are
prepared using uniform accounting policies for like transactions and other events in
similar circumstances. Inter
-
company balances and transactions, including int
ra
-
group

profits and losses are eliminated.






11

The GSIS Subsidiaries and
its

percentage of ownership

as at December 31, 2008
are as

follows:


Subsidiaries

Percentage of Ownership

GSIS Family Bank (GFB)

99.5
5%

GSIS Properties, Inc. (GPI)

100.00%

Meat Packing Corp. of the Philippines (MPCP)

100.00%

GSIS Mutual Fund

Inc. (GMFI)

57.48%


Meat Packing Corporation of the Philippines, however, is not included in the
consolidation.

It is now in the process of li
quidation, thus, equity method is used in
recording GSIS’ investments in the subsidiary.



3.

UPDATE ON GSIS NEW COMPUTERIZED SYSTEM


3.1

Integrated loans, membership, acquired assets and accounts management
system (ILMAAAMS)


The ILMAAAMS is designed to handle a
nd process all data requirements in four major
areas that form the core of GSIS operations: membership, loans origination and
administration, acquired assets, and accounts management.

Its main objective is to
have a concrete grasp on the concept of “one m
ember view”.



The system facilitates the automatic posting of financial data to the members’ accounts
on a transaction level. As a result, the GSIS has drastically quickened the pace by which
it administers membership accounts from loans processing to the

identification of
delinquent members


by integrating its financial requirements in all processes of loan
granting, premium billing, and loan and premium collection.


ILMAAAMS can integrate with the general ledger system of the Financial Information (FI
-
GL).

Transactions like loan granting and collections, premium billing and collections

etc.
are automatically reflected in the general ledger.

There is seamless communication
between these two systems.


At present, posting periods from January 1997 to Dec
ember 2008 in the SAP are still
open due to the on
-
going updating of members’ accounts.





3.2

Financial information system (FIS)


The FIS is designed to capture the recording of all the financial transactions from the
source or feeder systems.

These fee
der systems have implementation environments
different from that of the FIS subsystems.

Financial data from various feeder systems
are either automatically extracted and uploaded to FIS through interface program or
generated in excel format following a Sy
stems Applications and Programs (SAP)
-
prescribed template with pre
-
defined accounting entries and manually uploaded to FIS
through an upload program.




12

The following are the different feeder systems and a brief description on how accounting
data are capture
d and fed to the FIS:


a.

Technistock portfolio management system (TPMS)


The TPMS is a portfolio management solution which was customized to fit the
back
-
office portfolio requirements of the Investment Management Office. It
captures transactions involving
equities as well as local and foreign fixed
-
income
securities.

It also handles accruals, maturities, amortizations of bond and
premiums and mark
-
to
-
market valuations of equities.

The system generates a
SAP
-
prescribed template with predefined accounting e
ntries in excel format for
batch uploading to FIS.


b.

Human resources information system (HRIS)


The payroll system of the GSIS is processed through HRIS.

The system
generates the payroll file with predefined accounting entries in excel format.

The
file
is saved in a specified storage directory, and extracted for batch uploading to
FIS.


c.

Real and other properties owned and acquired (ROPOA) and Leasing
manager


The ROPOA Manager is a system used for monitoring and recording the
acquisition, administration

and disposition of acquired assets.

For financial
recording purposes, the system is capable to do the following:




Creation of records for new acquired assets upon tagging of loans in default in
the Customer Mortgage Loan (CML) module of ILMAAAMS;




Seamle
ss interface with Leasing Manager for the creation of rental record and
accrual of rental receivables;




Generation of report on gain or loss on valuation;




Tagging of acquired assets as disposed upon cash or installment sale; and




Automatic creation of in
terface file for FIS to book newly acquired assets, gain
or loss on valuation, disposal and closing of corresponding rental receivables
upon cash or installment sale.


The Leasing Manager, on the other hand, is a system that creates the records for
the acc
rued rental receivables on occupied properties that were previously
covered by cancelled deed of conditional sale (DCS) and occupied foreclosed
properties after the expiration of the redemption period.

For financial recording
purposes, the system is capab
le to do the following:




Creation of property record, lease contract and tenant record;




Monthly accrual of rental receivables;




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Generation of statement of account on rental receivables;




Posting of rental payments from cash desk (CD) module as well as th
ose
collected through Claims and Loans Interdependency Program (CLIP);




Stoppage of rental receivable upon conclusion of sale; and




Automatic creation of interface file for FIS to book accrued rental receivable,
rental payments collected or “CLIPped”, and
closing of rental receivables
upon disposition of acquired assets.


Both systems generate file with predefined accounting entries in excel format.
The file is saved in a specified storage directory and extracted for batch uploading
to FIS.


d.

Claims and pens
ions administration system (CPAS)


CPAS is a comprehensive application system that will consolidate all information
and processing requirements of members’ claim, pension, retirement and
dividend under the new open system platform
-

SAP.


The CPAS is desi
gned to provide online facility for inquiry, processing and
computation of life, retirement and survivorship claims.




It can integrate with the
general ledger system of the FIS.


Completed transactions of claims and
pensions will be automatically reflected

in the general ledger.

The CPAS Project
will be implemented in 2009.


At present, all social insurance claims and pensions are uploaded to FIS through
manually
-
prepared templates based on the monthly abstract of disbursed claims
extracted by the Informat
ion Technology Services Group (ITSG) from the
mainframe.


The GSIS is still in a transition period due to the recent implementation of the new
systems, thus the financial statements for CY2008 were prepared manually based on the
readily available data from

the SAP and feeder systems.



4.

RECORDING OF COLLECTIONS AND DISBURSEMENTS IN FIS



4.1

Collections


a.

Collections thru the Financial information
-

Cash desk (F
S
-
CD) facility of
ILMAAAMS


Effective October 13, 2008, all collections pertaining to loans a
nd contributions
were processed thru the F
S
-
CD of ILMAAAMS where transactions are
automatically recorded simultaneously in the general ledger and subsidiary
ledger.





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b.

Collections thru the Cash receipts and management system (CRMS)


All collections pertaini
ng to Social Insurance (SI) accounts not covered by the FS
-
CD, investments and other miscellaneous transactions are processed thru the
CRMS.

Collections done thru the CRMS are uploaded to FIS through the use of
templates.



c.

Collections covered by Letter o
f authority (LOAs)


All collections pertaining to investment maturities and interests and all fund
transfers from other bank accounts are covered by LOAs.

Collections that are
covered by LOAs are uploaded to FIS through manually prepared templates
based o
n the manually processed LOAs.


Effective December 2008, all LOAs

covering incoming collections a
re prepared in
the SAP where transactions are automatically recorded in the FI
-
GL.


4.2

Disbursements


All disbursements pertaining to investments, payroll and ot
her miscellaneous
transactions from January to May 2008 were uploaded to Financial Information System
(FIS) through manually prepared templates based on the manually
-
processed
disbursement vouchers and LOAs.


In June 2008, the Accounts Payable (AP) Module,

one of the subsystems of the FIS was
implemented.

The subsystem provides automated support in processing the
miscellaneous disbursements of the GSIS.

It generates disbursement checks and
provides accounting information.


Effective October 2008, all LOAs

covering miscellaneous disbursements and fund
transfers to other bank accounts
a
re prepared in the SAP where transactions are
automatically recorded in the FI
-
GL.




5.

GSIS RATIONALIZATION PROGRAM


In 2008, the GSIS underwent a major ch
ange in its corporate structure. The
rationalization was a direct offshoot to the implementation of the new computerized
systems in the GSIS operational processes.


As the GSIS geared towards full automation, a lot of units were rendered irrelevant and a
number of employees previously engaged in paper
-
based transactions were left in
operational limbo.

There was an overlapping of functions.

As a result, the GSIS has
offered the GSIS Retirement Incentive Program (GRIP) to solve its “redundancy problem”
and

to be able to hire people with expertise and necessary skills and talents that will
improve the overall productivity and operational efficiency of the System.

There were 790
GSIS employees who availed of the retirement program. In the light of the
imple
mentation of the FIS, the accounting function was centralized in the Home Office;
hence the accounting divisions in the Field Offices were abolished
.






15

The GSIS has applied the so
-
called “scrap and build” scheme wherein certain executive
positions that hav
e been vacated were dissolved and converted into multiple lower
-
r
ank

positions.

The cost of keeping many of these created positions virtually equaled the cost
of paying the few executive positions that were vacated.


The GSIS Corporate Rationalization has

been approved in a series of board resolutions,
as follows:




Board Resolution No. 197, dated December 3, 2008;



Board Resolution No. 70, dated May 14, 2008; and



Board Resolution No. 62, dated April 23, 2008.


6.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES


6.1

Ba
sis of preparation of financial statements


The accompanying financial statements for the Social Insurance Fund (SIF)
have been

prepared in accordance with the
Philippine Accounting Standards (PAS)/
Philippine
Financial Reporting Standards (PFRS) and
the g
enerally accepted insurance principles
and
reporting practices prescribed by the Insurance Commission.


The financial statements
are

prepared on historical cost basis, except for certain financial

instruments and investment propert
y

which are carried at f
air values.


6.2

Centralized deposit and funding system or “One
-
bank account” policy


Under the centralized deposit and funding system, all collections are deposited to a
centralized collection account and all disbursements are funded through the same
account
, which is maintained in the Home Office.






This cash management policy is adopted t
o manage efficiently the cash in bank and to
strengthen the monitoring and control of cash flows.


6.3

Cash and cash equivalents


Cash includes cash on hand and in banks.

Cash equivalents are short
-

term and highly
liquid investments with
original
maturity

of less than three months
,

are

readily convertible
into cash
.

These include
special savings
deposits
and time deposits.


6.4

Contributions and premiums receivable


Pursuant to Section 5 of RA 8291, it shall be mandatory for all the covered members of
the GS
IS to pay monthly contributions based on the members’ Monthly Compensation
(MC), as follows: nine per cent thereof payable by the member and 12 per cent payable
by the employer. The premium contributions are remitted directly to the GSIS within the
first
ten days of the month following the month to which the contributions apply.


Based on the monthly billing reports, premium contributions are set
-
up in the books as
Premiums Receivable and correspondingly presented as additions to net assets.

Upon
actual r
eceipt of remittances, the receivable account is adjusted accordingly.




16

6.5

Loans and accounts receivable


Loans and accounts receivables are stated net of deferred income or provision for
estimated uncollectible accounts.


a.

Provision for probable losses

is esta
blished for estimated losses on the
principal portion of business loans and receivable accounts based on
management’s evaluation if the accounts are collectible.


b.

Allowance for doubtful accounts/bad debts

is established for estimated
losses on the interes
t income portion of business loans and receivable accounts.



6.6

Investments


Investments are classified according to the following categories at initial recognition
based on the purpose for which they are acquired.


a.

Held for trading (HFT) or Fair value th
rough profit or loss (FVPL)


These are financial assets acquired principally for the purpose of generating profit
from short
-
term fluctuations in price or dealer’s margin.


These are initially recorded at cost and are revalued at fair values every reporti
ng
date.

Any difference between the cost and the fair value is recorded as
appreciation or depreciation of the fair value of investments in the statement of
changes in net assets.



Investments in equity securities
-

stocks traded are classified as HFT or

FVPL
and as such, these are recorded at cost and are revalued every month
-
end.


b.

Held
-
to
-
maturity investments (HTM)


These are financial assets with fixed or determinable payments and fixed
maturities.

They are carried at amortized cost using the effect
ive interest method
and are classified as non
-
current assets.


Investments in Foreign Currency and Peso Denominated Bonds are classified as
Held to Maturity and as such, these are recorded at cost, duly adjusted
periodically through the amortization of pr
emiums or discounts.


c.

Available
-
for
-
sale (AFS)


AFS

financial assets are acquired and held indefinitely for long
-
term capital
appreciation or are not classified as (a) loans and receivables (b) held
-
to
-
maturity
investments or (c) financial assets of fair

value thru profit and loss.



These assets are initially recognized at cost and are subsequently valued at fair
values.

Any difference between the cost and the fair value is recorded as
appreciation or depreciation of the fair value of investments in
the statement of
changes in net assets.




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d.

Investments in subsidiaries


The System practices the equity method in accounting for investments in shares
of stocks in which it holds at least 20 per cent ownership or where it has the ability

to exercise signif
icant influence over the companies’ operating and financial
affairs.


The equity method is a method of accounting whereby the investment is initially
recognized at cost and adjusted thereafter for the post
-
acquisition change in the
net investors’ share of

the net assets of the investee.


e.

Investments in non
-
traded stocks


Non
-
traded stocks are valued at cost, net of allowance for impairment in value.


6.7

Investment property


Investment property pertains to land or a building or part of a building or both, he
ld to earn
rentals or for capital appreciation or both.


These consist of real properties that
a
re previously the subject of mortgage loan,
individual real estate loan, commercial
-
industrial loan, lease
-
purchase agreement, or
deed of co
nditional sale, whi
ch a
re either foreclosed or cancelled or dacioned by former
owners in favor of the System.


a.

Fair valuation model


In compliance with Philippi
ne Accounting Standard (PAS)

40, the GSIS applies fair
value model consistently on its investment

property, whereb
y the assets a
re
initially recorded at cost (consisting of the purchase price and any directly
attributable expenditures), then subsequently valued at fair values.


Gains or losses from changes in fair values are recognized during the period in
which they

occur.


b.

Selling price


In November 2007, the GSIS Board of Trustees thru Board Resolution No. 167
approved the computation of the new selling price of acquired housing units and
lots for disposition by applying the higher of 70 per cent of the current ma
rket
values (CMV) of the said acquired properties; and book value plus 50 per cent of
the rental receivables of the acquired property.


6.8

Property and equipment


These assets are recognized and recorded in accordance with PAS 16.


Depreciation is computed
in conformity with the provisions of COA Circular No. 2003
-
007
dated December 11, 2003.

The COA Circular provides the revised estimated useful life



18

in computing depreciation for government property, and equipment effective January 1,
2004.

The major chan
ges involve the following:




Depreciation is computed on a straight
-
line method based on the estimated useful life
of 20 to 30 years for buildings and a residual value of
ten

per cent of the acquisition
cost/appraised value thereof.




Prior to CY 2004, the s
alvage value for building was computed at five per cent of its
cost while useful life is estimated at 50 years.

For land improvements, depreciation
was computed at five per cent residual value and useful life of five years.




In October 2004, the above cir
cular was amended by COA Circular No. 2004
-
003
which prescribe
s

that the resulting adjustment from the change in the depreciation
computation shall be charged to the current depreciation expense and that past
depreciation expense need not be adjusted.




Com
puter equipment is carried at cost less salvage value of ½ per cent of the cost of
the equipment.

Depreciation is computed on a straight
-
line method over estimated
life of five years.


In September 2008, the Asset Accounting (AA) Module, one of the FIS su
bsystems was
implemented.

The subsystem is designed to manage and supervise all GSIS’ assets
which are used in the normal business operations.

These assets include, but are not
limited to, land and land improvement, building and building improvement, inf
ormation
technology (IT) resources, construction in progress, furniture, equipment and fixtures,
and asset under construction (AUC).


The AA module provides an efficient and effective system of recording assets in the
financial book of accounts from asset

acquisition, transfers, retirements, and
depreciation postings.

It also serves as a subsidiary ledger to the financial information
-

general ledger (FI
-
GL), providing detailed information on asset transactions.


6.9

Revenue recognition


The major sources of

operating revenues of the Fund are investment income, interest
income from loans, rental income from investment property and other income.


The GSIS uses the accrual method in recognizing revenues.


a.

Service loans



The full implementation of ILMAAAMS and

FIS facilitates the accurate computation
and recording of interest for each loan and timely distribution of collection to the
proper loan account.



The system computes interests in advance on eCard cash advance, emergency
loans, emergency loans assi
stance and pension loans for the entire term of the
loan upon granting and are made part of the loan amortization.

This is recorded
as deferred interest income and recognized as earned upon collection.





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b.

Housing loans




Accrual of interest on housin
g loans, Real estate loans (REL) and Deeds of
conditional sale (DCS)


The system accurately computes and records interest on REL and DCS and
timely distributes collections to the proper loan account.


Interest Income on housing loans, REL and DCS


In

May
2007, the interest rate on housing loans was reduced to six per cent
pursuant to “SAIS Program”. A grace period of three months (May to July 2007)
was provided under this program.

Hence, interests at six per cent for these three
months based on the outst
anding principal balance as of April
30, 2007 are
capitalized and a
re made part of the new outstanding principal.


6.10

Foreign currency transactions and translations


a.

Functional and presentation currency


The financial statements are measured and presented
using the Philippine Peso,
which is the System’s functional and presentation currency.


b.

Foreign currency translations


Foreign currency income and expenses are translated into Philippine Pesos
based on the Philippine Dealing System Weighted Average Rat
e (PDSWAR)
exchange rate prevailing on transaction dates.


Foreign currency
-
denominated assets and liabilities are translated into Philippine
Pesos based on PDSWAR prevailing at the end of the interim reporting period. At
the end of the reporting year, fo
reign currency
-
denominated assets and liabilities
are translated to Philippine Peso using the exchange rate provided by the
Insurance Commission.


Gain or Loss from foreign exchange transactions and revaluation of foreign
currency

denominated assets and
liabilities are credited to or charged against
current operations.




6.11

Administrative loading


Pursuant to Section 35, RA 8291, the Fund is allowed to disburse a maximum of 12 per
cent of the annual revenues from all sources for administrative and operati
ng expenses.


6.12

Claims and benefits


Regular disbursements of the Social Insurance Fund comprise the claims of
members/pensioners involving the following:





20



Life insurance benefits claims which consist of policy maturities, cash surrender
values, disabili
ty benefit, death benefit, accidental benefit, accidental death benefit,
and funeral benefits;




Retirement Claims;




Monthly Old
-
Age Pension;




Monthly Survivorship Pension; and




Cash Gift to all entitled old
-
age pensioners


6.13

Actuarial reserves


Actuarial Re
serve requirements for the mandated obligations of the System are
computed monthly by the GSIS Actuarial Group based on certain assumptions which are
in accordance with generally accepted principle of actuarial valuation.



The actuarial reserves

are set up / appropriated out of the accumulated earnings of the
Social Insurance Fund.


Any amount in excess of actuarial reserves requirements is
presented as additional reserves for contingencies.


6.14

Non
-
admitted assets


Pursuant to Section 179 of the I
nsurance Code, certain assets are not allowed as
Admitted Assets; hence, are presented as Non
-
Admitted Assets. These are furniture,
fixtures and equipment; deposit and indent orders; supplies and materials in stock;
prepaid expenses; income receivable; an
d such other assets proven to be of doubtful
value.


Non
-
Admitted Assets include accrued interests on obligations of Department of Budget
and Management (DBM) and other government agencies for unpaid and/or delayed
remittances of social insurance premiums

and rental receivable on occupied housing
units with cancelled DCS and foreclosed REL. Since collection thereof is very low and
the receivables are not readily realizable, the same were classified from admitted to non
-
admitted assets
.



6.15

Related
p
arty
t
ra
nsactions/
a
greements


Related party relationships exist when one party has the ability to control, directly or
indirectly through one or more intermediaries, the other party or exercise significant
influence over the other party in making financial and op
erating decisions.

Such
relationships also exist between and/or among entities which are under common control
with the reporting enterprise, or between and/or among the reporting enterprises and their

key management personnel, directors, or its stockholde
rs.

Transactions between related

parties are accounted for at arm’s length prices or on terms similar to those offered to
non
-
related entities in an economically comparable market.


PAS 24 provides additional guidance and clarity in the scope of the stand
ard definitions
and disclosures for related parties.





21


7.

CASH AND CASH EQUIVALENTS



This account consists of the following:



2008

2007




Cash on hand and in banks

4,581,137,015

3,086,682,259

Cash equivalents

40,573,044,950

7,240,720,523


4
5,154,181,965

10,327,402,782








8.

RECEIVABLES



This account consists of the following:



2008

2007




Contributions and premiums receivable

19,143,790,623

18,153,430,739

Other receivables

57,195,190,667

37,797,607,988


76,338,981,2
90

55,951,038,727





8.1

Contributions and premiums receivable


General Ledger (GL) and Subsidiary Ledger (SL) Discrepancies




At present, the SL balances of the contributions and premiums receivable are not yet fully
reconciled with their GL balances due
to the ongoing cleansing and updating of the
members’ records.



In the design of the Financial Information System (FIS), the reconciliation of the
discrepancies between SL and GL balances of contributions and premiums receivable
was taken into considera
tion by creating migration GL accounts (eight series)
representing the Controller’s records and another GL accounts (one series) linked to the
SL.

This was done to preserve the balances of the GL and SL upon migration to the FIS.


It will only be upon com
pletion of the updating of members’ records that the final adjusting
entry will be recorded to reconcile discrepancies between GL and SL balances of
contributions and premiums receivable. The difference between SL and GL will be
closed to the surplus adju
stments account.











22

8.2

Other receivables


Other receivables
account

consist
s

of the following:



2008

2007




Revenue receivable

33,235,076,787

26,854,128,760

Notes receivable

21,143,238,859

7,249,094,589

Accounts receivable for deficit cases
-

n
et

329,513,793

331,685,741

Contingent asset disallowance

53,289,367

82,365,687

Advances to contractors

16,437,718

16,623,327

Cash advances

3,265,576

2,628,276

Other receivable
-
agencies with MOA

1,310,747,885

1,963,971,930

Other receivable
s
-
subsidia
ries

368,541,390

423,144,247

Sundry accounts receivable
-

net

735,079,292

873,965,431


57,195,190,667

37,797,607,988





The increase in Notes Receivable account of

P13.894 billion or 192 per cent
is
primarily
due to the installment sal
e of MERALCO shares in October 2008.


Other receivables
-

subsidiaries


Other receivables
-
subsidiaries
account
consist
s

of the following:



2008

2007




Due from Bangko Sentral ng Pilipinas

20,941,645

25,164,221

Due from other banks

11,707,712

30,61
0,560

Sales contract receivable

18,395,913

8,197,077

Other assets

317,496,120

359,172,389


368,541,390

423,144,247






9.

INVESTMENTS


This account consists of the following:



2008

2007




Financial securities

179,874,367,445

198,397,244,691

Loans


net

122,866,606,555

125,855,725,578

Investment property

26,273,028,467

23,969,501,391


329,014,002,467

348,222,471,660





9.1

Financial securities





23


Financial securities
account

consist
s

of the following:



2008

2007




ROP notes and bonds


Held t
o maturity

107,463,707,147

89,010,872,380

ROP bills

24,907,207,476

21,481,553,619

Externally managed funds
-

global

24,014,881,155

-

Externally managed funds
-

domestic

5,141,899,817

6,444,649,437

Stocks
-

traded
-

AFS

4,267,457,282

14,666,478,660

In
vestment in bonds and other debt instruments

3,866,611,085

5,175,618,663

Investment in joint venture

1,275,317,941

975,317,941

Stocks
-

non
-
traded

921,681,100

921,681,100

Investment in subsidiaries

762,808,146

762,808,146

Stocks
-

traded


Held for tra
ding

429,983,804

918,664,745

Asset participation certificate

181,257,354

551,600,000

STI placements
-

BSP

-

34,000,000,000

Other investments
-

subsidiaries

6,641,555,138

23,488,000,000


179,874,367,445

198,397,244,691





a.

Investment in externally man
aged funds
-

global


The Board of Trustees in its resolution no. 155 dated October 25, 2007 approved
the hiring of ING Investment Management (ING IM) and Credit Agricole Asset
Management (CAAM) as global fund managers of GSIS with the following
objectives:




Assist the GSIS to invest in global financial instruments through sufficient
diversification among asset classes and geographically; and




Provide GSIS with consistent investment returns with capital preservation and
sufficient liquidity over a three
-
year

period.


b.

Foreign
-
currency denominated
Republic of the Philippines (
ROP
)

bonds


The foreign
-
currency denominated ROP bonds in the total amount of P58.387
billion were reclassified from HFT or FVPL to HTM.


Due to the current financial crisis resulting
in
market volatility, the Philippine
Financi
al Reporting Standard Council (P
FRSC) has approved last October 29,
2008 the immediate adoption of the amendments to PAS 39, reclassification of
financial assets from HFT to HTM.


The Bangko Sentral ng Pilipinas (B
SP) came out with the Guidelines on the
Reclassification of Financial Assets between categories under Circular Nos. 626
and 628 dated October 23 and 31, 2008, respectively. BSP allowed financial



24

institutions to look back anytime between July 1, 2008 and N
ovember 14, 2008 for
the purpose of selecting the effective date of their reclassification.


GSIS has selected the date August 31, 2008 to reclassify its FCY ROPs from
HFT to HTM, resulted
in

a net unrealized gain of P0.539 billion.


9.2

Loans
-

net



Th
e total loans financed by the Fund consist of the following:



2008

2007




Consolidated loans


56,284,297,406

44,360,545,786

Salary loans


19,223,207,405

30,340,974,859

Policy loans


14,786,620,440

15,029,972,934

Real estate loans


9
,745,080,544

10,499,207,847

Government loans


6,371,007,803

6,293,973,426

eCard plus cash advance loan


5,090,752,378

6,156,104,292

Deeds of conditional sale


3,034,998,762

3,155,499,579

Private loans


2,955,023,616

2,922,463,9
19

Emergency/calamity loans

1,999,915,481

1,119,491,486

Summer one month

1,451,624,139

2,675,319,482

Pension loan

1,325,666,478

1,262,362,129

Emergency loan assistance

543,517,291

910,608,847

Lease purchases

160,016,846

160,016,846

Stock purchase l
oans

41,043,549

44,353,094

Educational assistance loans

31,889,936

32,438,993

Loans receivable
-
subsidiaries

-

703,835,241

eCard cash advance loan


(178,055,519)

188,556,818


122,866,606,555

125,855,725,578





General Ledger (GL) and Subsidiary Ledg
er (SL) Discrepancies


At present, the SL balances of service loans and interest receivable are not yet fully
reconciled with their GL balances due to the ongoing cleansing and updating of the
individual loan accounts.


In the design of the FIS, the recon
ciliation of the discrepancies between SL and GL
balances of loans and interest receivable was taken into consideration by creating
migration GL accounts (eight series) representing the Controller’s records and another
GL accounts (one series) linked to th
e SL.

This was done to preserve the balances of
the GL and SL upon migration to the FIS.


It will only be upon completion of the updating of members’ loan accounts that the final
adjusting entry will be recorded to reconcile discrepancies between GL and S
L balances
of loans and interest receivable.

The difference between SL and GL will be closed to the
surplus adjustments account.





25

As
at

December 31, 2008, the summary of the SL balances based on SAP
-
ILMAAAMS
data for service and housing loans and the GL b
alances for the same showed the
following:



GL

SL

Difference
Over/(Under)

% to GL






Service loans





Conso
-
loan

56,284,297,406

59,320,604,560

(3,036,307,154)

(5.39)

Salary loan

19,223,207,405

25,574,318,403

(6,351,110,998)

(33.04)

Policy loans

14
,786,620,440

19,003,901,008

(4,217,280,568)

(28.52)

eCard cash advance/ eCard
plus cash advance loan

4,912,696,859

5,834,824,157

(922,127,298)

(18.77)

Emergency/Calamity loan/
Emergency loan assistance

2,543,432,772

5,458,986,520

(2,915,553,748)

(114.63)

Summer one month salary
loan

1,451,624,139

1,135,843,176

315,780,963

(21.75)


99,201,879,021

116,328,477,824

(17,126,598,803)

(17.26)






Housing loans





Real estate loans

9,745,080,544

14,536,939,613

(4,791,859,069)

(49.17)

Deeds of conditional
sale

3,034,998,762

4,828,945,881

(1,793,947,119)

(59.11)


12,780,079,306

19,365,885,494

(6,585,806,188)

(51.53)


111,981,958,327

135,694,363,318

(23,712,404,991)

(21.18)







9.3

Investment property



As of December 31, 2008, Investment property is broke
n down as follows:




2008

2007




Cancelled deeds of conditional sale/
(Mass housing)

14,611,671,110

14,727,394,969

Foreclosed real estate loans

161,498,118

161,498,118

Other investment property

11,499,859,239

9,080,6
08,304


26,273,028,467

23,969,501,391





The investment propert
y

of the GSIS earned P2.999
b
illion in 2008 and P1.862
b
illion
in
2007,
primarily from the capital appreciation, disposition and rental of the propert
y
.











26


10.

PROPERTY AND EQUIPMENT


NET


The property and equipment account consists of the following:




11.

OTHER ASSETS


The Other assets
account

consist
s

of the following:




2008

2007




Discontinued operations



Land

43,048,600

43,048,600

Building

2,975,410

2,975,410

Paintings and tapestries

18,566,310

16,693,267


64,590,320

62,717,277







Land and
land
improve
-

ments

Building and

improve
-
ments

Real
estate
apprecia
-
tion

Technology
(IT)

resources

Construc
-
tion in
progress

FFE
-

Subsidiary

Total

Cost








January 1, 2008

486
,988,52
8

4,014,468,195

69,781,10
3

1,
815,410,612

36,237,805

50,660,687

6,473,546,930

Additions

-

71,878,178

-

259,804,217

359,531,123

10,338,559

701,552,077

Adjustments

-

(110,613)

-

7,912,136

(92,569,946)

(165,274)

(
84,933,697
)

Derecognition in books

(d
ue to donations/sale)

-

-

-

(22,066,557)

-

(1,260,830)

(23,327,387)

December 31, 2008

486,988,52
8

4,086,235,760

69,781,10
3

2,061,060,408

303,198,982

59,573,142

7,066,837,92
3

Accumulated
Depreciation








January 1, 2008

185,393,05
0

1,167,362,088

-

1,0
42,545,897

-

32,347,009

2,427,648,044

Depreciation Charges
during the year

407,205

142,084,607

-

169,058,354

-

5,823,711

317,373,877

Derecognition in the
books


(due to
donations/sale of
unserviceable units)

-

-

-

19,859,901

-

(1,225,41
6
)

18,634,48
5

Ad
justments

157,013

(1,613)

-


-

(187,624)

(32,224)

December 31, 2008

185,957,26
8

1,309,445,082

-

1,231,464,152

-

36,757,6
80

2,763,624,18
2

Net Book Value


December 31, 2008

301,031,26
0

2,776,790,678

69,781,10
3

829,596,25
6

303,198,982

22,815,46
2

4,303,21
3,74
1









Net Book Value


December 31, 2007

301,595,47
8

2,847,106,10
7

69,781,10
3


772,864,71
5

36,237,805

18,313,678

4,045,898,886












27




12.

SOCIAL INSURANCE CLAIMS PAYABLE


Social insurance claims payable account pertains to t
he claims on retirement and life
insurance benefits due to members as
at
December 31, 2008 but which remained unpaid

as of year
-
end broken down as follows:



2008

2007




Claims and benefits payable



Retirement claims

2,784,448,463

387,089,954

Life in
surance claims

1,738,692,401

634,472,676

Survivorship

44,619,450

50,494,105

Funeral

6,309,144

-

Other social insurance
benefits
-
scholarship
program

12,000,000

111,239,242


4,586,069,458

1,183,295,977




Div
idends payable

967,886,097

1,063,824,019


5,553,955,555

2,247,119,996





Dividends payable


The GSIS Board of Trustees under Resolution No. 206 dated December 17, 2008
declared an annual cash dividend of P950 million to Compulsory Life Insurance Policy

Holders, chargeable against the surplus of the Social Insurance Fund.



13.

DEFERRED CREDITS



Deferred credits account consists of the following:



2008

2007




Unrealized income

7,955,262

286,395,648

Undistributed collections

311,334

311,334


8,266,596

286,706,982















28





14.

OTHER LIABILITIES


This account consists of the following:



2008

2007




Funds held in trust

1,082,397,308

894,095,905

Due to Philam asset management

33,831,476

17,753,632

Leasehold liability

4,
221,855

4,221,855

Sundry accounts payable

1,893,063,917

2,822,422,395

Other liabilities


subsidiaries

1,626,554,297

1,202,729,532


4,640,068,853

4,941,223,319





14.1

Funds held in trust



2008

2007




DBM payments to Philippine Health Insurance
Corpor
ation (PHIC)

408,875,850

408,875,850

FHIT
-
Bidder's Deposits


ROPOA

144,102,799

33,356,097

FHIT
-
(developer)

166,379,057

166,379,057

GSIS Employee Loyalty Incentive Plan (ELIP)
Retirement fund

96,057,740

96,057,740

Others (retention fee of contractor/Bi
d
Security/Pe
r
formance Bond/Rental Deposit/Cash
col
l
ateral)

266,981,862

189,427,16
1


1,082,397,308

894,095,905





14.2

Sundry accounts payable


The account consists of the following:




Accrued employees’ benefits
-

in compliance with PAS 19;



Administrative a
nd operating expenses already incurred but not yet paid as of balance
sheet date;



Goods already delivered and services already rendered but not yet paid as of balance
sheet date;



Unpaid bank service fee on eCrediting transactions;



Negative loan balance for

refund; and



Custody fee.






29





14.3

Other liabilities


subsidiaries


This account consists of the following:



2008

2007




Deposit liabilities

1,621,233,097

1,173,560,638

Treasurer's/Cashier
’s
/Manager's check

3,819,192

2,912,955

Due to the Treasurer of t
he Philippines

1,361,116

1,244,485

Bills payable

119,685

25,011,454

Time certificates of deposits

21,207

-



1,626,554,297

1,202,729,532






15.

MINORITY INTEREST IN THE NET
ASSETS OF THE CONSOLIDATED
SUBSIDIARIES




This accoun
t consists of the following:



2008

2007

GSIS Family Bank (GFB)

3,384,563

3,322,043


GSIS Mutual Fund, Inc. (GMFI)


1,119,505,318


1,731,055,828



1,122,889,881

1,734,377,871



The net decrease in the minority interest in CY 2008 amounts to P
611.487 million.



16.

RESERVES


A comparison between the actuarial reserves requirements and the actual financial
reserves is shown as follows:




2008

2007




Old age benefits

318,929,470,318

282,494,615,310

Survivorship benefits

59,881,700,42
3

57,388,9
86,738

Policies in force

43,388,619,42
4

40,031,258,930

Disability benefits

10,918,356,716

14,755,962,595

Burial benefits

2,568,096,718

3,108,173,582

Contingencies

1
,
700
,
667
,
353

1,
771
,
167
,
122




30

Actua
rial

reserves

requirements

4
37
,
386
,
910
,
952

399,550,1
64,277

Surplus appropriated to additional reserves for

contingencies

6,162,877,946

9,849,936,887

Total reserves

443,549,788,898

409,400,101,164





The reserves for policies in force are computed using the mean reserve formula. This
formula assumes th
at the entire premium for the calendar year was paid at the beginning
of that policy year.

The amount presented above is net of P2.576 billion representing the
net deferred premiums for 2008.



17.

LOANS AND INVESTMENT REVENUE


NET


This consists of the foll
owing:



2008

2007




Revenue from loans



Interest on conso loans

6,145,029,749

4,188,448,690

Interest on salary loans

3,008,571,976

6,891,561,943

Interest on policy loans

1,284,309,972

1,883,655,265

Interest on eCard plus cash advances

698,75
6,211

459,223,051

Interest on real estate loans

443,177,636

805,297,716

Interest on emergency/calamity loans

357,943,573

288,355,903

Interest on SOS loans

278,714,331

1,002,071,085

Interest on deeds of conditional sale

187,565,614

552,030,761

Interest on emergency loan assistance

171,660,235

367,508,207

Interest on pension loans

168,606,815

128,319,762

Interest on eCard cash advances

140,752,792

679,830,647

Interest on private loans

18,678,201

97,308,575

Interest on government and

government guaranteed loans

485,991,472

298,075,447

Service revenue

458,947,455

376,376,162

Surcharge on loans in arrears

105,041,469

591,450,769

Interest revenue from loans


subsidiaries

1,175,623,435

1,544,771,798




15,129,370,936

20,154,
285,781




Revenue from investments



Gain on sale of stocks

9,221,355,361

10,595,433,264

(Loss)
/Gain on sale of bonds

(457,362,100)

85,304,852



8,763,993,261

10,680,738,116




Net appreciation/(depreciation) in FV of investments



Unrealized gain
(loss)


Held for trading

187,123,950

(8,966,276,792)




Interest on investments



Interest on ROP notes and bonds

6,387,885,22
8

8,874,390,380

Interest on ROP bills

1,409,298,257

1,250,525,067




31

Interest on Asset Participation Certificates

29,154,327

47
,537,194



7,826,337,81
2

10,172,452,641







2008

2007




Gain/(loss) on forex

5,579,746,574

(390,324,546)

Dividend on stocks

607,280,714

301,641,082

Externally managed funds


domestic

-

444,649,437

Other investment revenue

2,979,221,089

2,453,68
5,291

(Loss)/Gain on revenue from investments
-

subsidiaries

(1,288,890,561)

626,429,422



7,877,357,816

3,436,080,686


Investment expenses



Interest expenses

878,068,776

1,414,797,735

Investment fees and others

45,774,40
5


28,911,428

Expenses on

eCard

38,508,995

85,834,094

Foreclosure expenses

8,750,861

136,234,084

Bad debts expenses

-

6,713,963

Impairment loss

-

527,181,540


971,103,03
7

2,199,672,844


23,683,709,80
2

13,123,321,807




Revenue from investment property



Gain on valuatio
n of investment property

2,813,566,294

1,771,874,934

Gain on disposition of investment property

110,198,972

16,600,847

Rental of investment property

75,549,036

73,740,545


2,999,314,302

1,862,216,326


41,812,395,0
40


35,139,823,914






18.

OTHER REVEN
UE



This account consists of the following:



2008

2007




GSIS fees and commissions



Marketing commission

1,098,675,080

1,042,593,659

Administration fee

979,166,878

680,185,635

Management fee

182,941,745

216,008,464


2,260,783,703

1,938
,787,758

Interest on receivables


agencies with MOA

228,629,079

49,933,757

Revenue from rental

104,759,883

96,835,510

Interest on savings deposits

20,341,158

29,973,164

Refund of gratuity

771,252

55,506




32

Gain/(Loss) on disposition of assets

4,966

66,0
13,252

Others

61,308,567

409,115,800


2,676,598,608

2,590,714,747






GSIS
f
ees and commissions revenues


The Social Insurance Fund, being the administrator of the General Insurance Fund (GIF)
which consists of the General Insurance business, Optional

Life Insurance (OLI)
business and Pre
-
Need (PN) business, and Employees Compensation Insurance Fund
(ECF), charges the latter funds administration fees, marketing commissions, and
management fees, as follows:




Ten

per cent Administration Fee based on the
three Businesses’ respective gross
income;




Twenty

per cent Marketing Commission based on gross premium earned of the GI
and the OLI businesses; and




Ten

per cent Management fee on ECF premium collections.




19.

PERSONAL SERVICES


This account consists o
f the following:



2008

2007




Salaries and wages

1,245,788,205

1,440,583,431

Statutory expenses

690,106,275

842,772,613

Allowances

491,828,777

598,489,501

Fringe benefits

448,236,024

464,473,389

Bonus/Awards

311,586,642

388,124,961


3,187,545,923

3,734,443,895









20.

OPERATING EXPENSES


This account consists of the following:



2008

2007

Separation pay

1,644,405,835

136,340,697

Depreciation
and amortization
expense

368,221,726

357,468,309

Electric and water consumption

127,619,557

143,201,47
4

Assets and facilities maintenance expense

122,449,946

157,755,974

Public relations and advertisement

120,234,894

129,763,725

Retainer's and consultants

99,803,265

103,142,809

Communication services

84,425,133

132,767,648




33

Insurance expense

83,033,39
4

90,917,973

Overtime expenses

80,039,345

32,373,828

Auditing expenses

78,563,877

72,155,215

Computer expenses

71,258,530

125,649,426

Office supplies expenses

65,940,078

187,946,230

Education, training and scholarship

42,667,692

46,957,686


2008

2007

Traveling expenses

33,358,679

66,559,722

Contractual services

31,929,565

76,868,564

Rental expenses

25,759,689

51,463,339

Provision for income tax

21,688,790

10,961,911

Representation expenses

16,820,370

20,093,666

Athletic and cultural expenses

15,
320,604

11,318,707

Taxes and licenses

14,721,706

17,048,853

Discretionary expenses

14,063,674

10,214,548

Fuel and gasoline consumption

13,135,192

14,974,978

Contributions
-
others

2,921,748

2,329,715

Medical supplies expenses

2,155,423

2,482,426

Extra
remuneration

966,873

5,977,785

Library books and materials

395,857

717,442

Amortization expenses

-

6,544,308

Miscellaneous expenses

137,089,657

77,036,740



3,318,991,099

2,091,033,698







Separation pay increased by P1.508 billion or 1
,
106 per cent
while personal services
decreased by P0.546
b
illion or 15 per cent. The increase in separation pay and
decrease in personal services
a
re primarily due to the 790 GSIS employees who
availed of the GSIS Retirement Incentive Program (GRIP) in 2008.




GSIS was

able to finance the retirement pay out of the savings from the approved
budget for CY 2008.



21.

MINORITY INTEREST IN THE NET (LOSS)/INCOME OF THE
CONSOLIDATED SUBSIDIARIES



This account consists of the following:




2008

2007

GS
IS Family Bank (GFB)


293,078

497,914

GSIS Mutual Fund, Inc. (GMFI)


(545,615,53
7
)

186,438,128




(545,322,45
9
)

186,936,042









34







22.

OTHER (DEDUCTIONS)/ ADDITIONS


This account consists of the following:



2008

2007




De
crease

in
n
on
-
admitted assets
/ Increase in
income/surplus

952,063,227


(2,028,690,199)

Increase
in
minority interest in the changes in the
equity of the consolidated subsidiaries

66,165,531


(1,734,377,871)

Decrease in unrealized (loss)/gain



Available
-
for
-
sale

(13,401,533,025)


8,686,394,026

Decrease in proceeds(payment) from issuance
(redemption) of capital stock


net

(160,527,264)


1,750,533,435

Decrease in surplus adjustments


(44,998,028)


632,875

Decrease in c
ontingent surplus

(29,161,579)


82,371,917

De
crease in appraisal surplus

-


72,994,538

De
crease in donation surplus

-


11,677,212



(12,617,991,138)


6,841,535,933





22.1

Non
-
admi t t ed as s et s


The Non
-
admi t t ed as s et s
ac
count
consist
s

of the following:



2008

2007




Furniture, fixtures and equipment
-

net

387,568,807

355,055,970

Loans and investment

304,511,943

309,511,943

Prepaid expenses

55,601,461

1,021,050,796

Medicines and other medical supplies

25,829,774

2
5,861,006

Supplies and materials in stock

19,721,10
3

31,136,35
9

Deposit and Indent orders

9,416,609

9,639,472

Educational assistance loan

7,244,209

7,244,209

Contingent asset
-

deficit cases

4,367,914

6,825,292

Suspense account

98,077,809

98,077,809

Others

262,365,15
2

262,365,152


1,174,704,78
1

2,126,768,008









35







22.2

Minor
i
ty interest in the changes in the equity o
f the consolidated subsidiaries due
to Other (deductions)/additions



For CY 2008, the increase of P66
m
illion in minority interest i
n the changes in the equity
of the consolidated subsidiaries consists of the following:




2008

2007

GSIS Family Bank (GFB)


(230,55
8
)


3,322,043

GSIS Mutual Fund, Inc. (GMFI)


(65,934,973)


1,731,055,82
8




(66,165,531)


1,734,377,87
1




23.

CONTINGENT LIABILITIES


At present, there are lawsuits and claims against the GSIS that are either awaiting
decisions by the courts or are subject to settlement agreements.

In the opinion of
Management and its legal counsels, the conting
ent liability or loss arising there from,
under the Social Insurance Fund amounts to at least P781
.381

million.

Reserve for
Contingencies has been set for the same amount.


Additional Reserve for contingencies


2008

2007




Cases involving the Housing
and Real Property
Development Group

725,366,465

833,433,464

Cases involving the Administration Group

53,107,825

88,607,825

Cases involving the Field Operations Group

2,907,037

9,045,537

Cases involving the Social Insurance Group

-

36,394


781,381,327

9
31,123,220






24.

RELATED PARTY TRANSACTIONS




The GSIS, in its regular conduct of business, has transactions with its subsidiaries
.


GFB
acts as conduit for
it
s short
-
term p
la
cement with the BSP.

While waiting for longer tenor
instru
ments providing bett
er yields, G
SIS
places

its investible funds with BSP through
GFB.





36

As
at

December
31,
2008, the total short
-
term placements of the GSIS through GFB
amounted to P5.34
0 billion.

These funds a
re invested overnight to BSP.

Maturiti
es of the
overnight placeme
nts a
re credited back to GSIS investment account with the Union Bank
of the Philippines (UBP) via Real
-
Time Gross Settlement (RTGS).





25.

ADMINISTRATIVE LOADING



For CY 200
8
, the administrative load
ing of the Fund
is
6.97 per cent
which is well below
th
e allowable limit of 12

per cent
.



26.

EXEMPTION FROM TAX


Pursuant to Section 39 of RA 8291, the GSIS, its assets, revenues including all accruals
thereto, and benefits paid are exempted from all taxes, assessments, fees, charges or
duties of all kind.



27.

EVENTS AFTER THE BALANCE SHEET DATE


On March 30, 2009, the GSIS experienced the first crash of its database management
system software or the IBM
-
DB2 software, in its unstable, corrupted state.

The second
incident occurred on April 2, 2009. The GSIS
experienced eight system crashes in two
months.

About 90 per cent of the GSIS’ operations were adversely affected by the crash.

Thousands of loans and claims of GSIS members could not be processed, membership
records could not be updated, transactions co
uld not be recorded, and a sizeable data in
the GSIS database were either corrupted or lost temporarily.

During system crashes, the

G
-
W@PS kiosks were rendered off
-
line.

The GSIS has suffered at least P5 billion in
actual damages as a result of the syste
m crashes.


On June 3, 2009, the GSIS filed a civil case against IBM Corporation, IBM Philippines and
Questronix Corporation as it asked the court to order these companies to pay the GSIS
the amount of P100 million in damages.


T
he GSIS has implemented va
rious measures for data recovery and upgraded its back
-
up systems.

The GSIS
has
assure
d

all its members and pensioners that the integrity of
all its data has not been compromised
.


For every step of a process, records are
preserved and kept in perpetual s
torage.

The GSIS
is currently implementing migration
to Oracle
database system software
.