You don’t need to be a genius to understand the Statement of Assets, Liabilities and Net Worth (SALN) of a government official. The formula is simple: Assets – Liabilities = Net Worth.
What these terms include are clearly stated in Republic Act 6713, the Code of Conduct and Ethical Standards for Public Officials and Employees. The implementing rules of RA 6713 break down “Assets” into the following categories:
(a) real property, its improvements, acquisition costs, assessed value, and current fair market value;
(b) personal property and acquisition costs;
(c) all other assets such as investments, cash on hand or in banks, stocks, bonds, and the like
“Liabilities” is more general, simply stating:
(d) All financial liabilities, both current and long-term.
Real property includes land, the house or houses that stand on it, condominium units or any building (or a portion thereof) one owns.
Ideally, there should be very little difference between the assessed value and the fair market value. This would allow governments to collect the proper amount of property taxes.
But assessed values often lag way behind fair market values. It takes a while for LGUs to catch up with rising property values.
It is also not surprising to see sellers and buyers of real property under-declare the selling/buying price. They put a figure closer to the assessed value to minimize their capital gains tax (the difference between your acquisition cost and the price you place on the property for sale). That form of corruption is a private sector specialty.
Note that the SALN form under RA 6713 – which has been around for decades –includes the acquisition cost and the cost of any improvements on one’s property. Many government employees have been privileged to purchase original homes in state-owned housing projects. Many subdivisions may have featured modest structures in their original state, but they now display multi-million structures. (You can also go through any number of low-cost housing subdivisions and discover the sometimes amazing transformation on the houses of hard-working overseas Filipino workers.)
Personal property would include:
- Jewelry (Have you seen the bling-blings on some cops or on certain employees of the Bureau of Customs?)
- Expensive electronic gadgets (Yes, your Ipad and any of those power Macs – depending on the model, their cost could be triple a government employee’s monthly income!)
- Vehicles (The four-wheel drives at the port area would put any plush village to shame)
Other assets, I suppose, would also include time-shares and the like.
Liability, whether personal or business-related, refers to debts or obligations you incur from services hired and transacted, the purchase of new property, or special investment plans. This includes loans, accounts payable, mortgages. Property taxes owned to an LGU could be considered a liability.
Other things that could be considered liabilities are payments owed for, say, your child’s education plan, your family burial plots; a retirement plan over and above the state-covered programs. These things, however, should also be declared as assets, with the proper value and cost of acquisition.
In business spreadsheets, liabilities are lumped as “current” (debts payable within one year) or “long-term.” The form that comes with the implementing rules of RA 6713, however, doesn’t go into these distinctions.
Corona’s SALNs since 2002 are full of holes.
I am not going to rehash reports of his alleged properties that are missing from the SALNs (see image on the left) or Raissa Robles’ superb sleuthing that discovered payment of debts to a company that had ceased to exist.
Let me just go over several “sins” of omission:
In his 2002 SALN, Corona listed only three properties: donated land and constructed house dating from the 1970s and land purchased in 1992, a total value of more than P10 million.
Just a cursory read of that year’s SALN gives you an idea why folks with disposable income prefer to land bank or invest in real property. (It also makes you wonder how much the QC government lost through the years by not updating their land valuation.)
The 70’s land gift had jumped in value from just a little more than P50,000 (granted, a big amount in the 70s) to P5 million.
Land has become an even more lucrative investment lately. In just ten years, the value of a plot of land purchased in 1992 grew from P30,000 to P3 million.
Corona’s SALNs have a curious way of suddenly displaying properties purchased earlier than the declared year. His 2003 SALN shows a property purchased in 2002 by installment; the 1992 land, previously declared as purchase, sprouted “installment” under mode of acquisition.
None of these properties are indicated in the liability section. The only liability Corona lists in 2oo3 is an P11 million loan acquired from his wife family’s company. By 2010, he had paid back his debt to the missus’ firm and was back at zero liabilities.
How to fill up the SALN
We asked accountants, government auditors and tax lawyers to show how property bought by installment should appear on the SALN.
The answer, across the board, is that the property should be listed under Assets (with the right value) and then, minus downpayment, the balance (factoring in the value of whatever interest you’ve agreed to pay) should be listed on the Liability section.
For example, if you purchase a P2-million house but have only paid P200,000 on it, here’s what it represents:
- House (installment) P2-million under assets
- P1.8 million (house loan or mortgage) under Liabilities
So, let’s do an exercise. Imagine scaRRedcat as a government employee filing a 2008 SALN. She has the following properties:
- House and lot in Sta. Rosa, purchased 2005, for P2.5 million, installment – paid a P500,000 down and pay annually P150,000.
- Condo in Makati purchased in 2000 for P1.2 million, installment – paid a P200,000 down and pay annually P30,000
- Multi-media editing equipment, purchased 2007 for P800,000, installment – paid a P200,000 down and need to pay P60,000 annually
- Car for P400,000 in 2003, installment — downpayment of P75,000 with annual payment of P40,000
scaRRedcat needs to list the Sta Rosa house under Assets and — subtracting the P500,000 downpayment in 2005 and the annual payments for three years or P450,000 — place its mortgage under liabilities at P1,550,000. The same formula goes for the other properties.
Here’s what scaRRedcat’s SALN should look like:
- Strictly for exercise purposes. No similarity to any particular SALN implied.
Checks and balance
What would scaRRedcat’s SALN tell government auditors?
Since 1994, SALNs needed to include an official’s income and business interests, including those of spouses and unmarried children below 18 yrs old.
Suppose in 2008, scaRRedcat was earning P40,000 – executive pay by government standards. She doesn’t detail the monthly installments on the various mortgages in her name. But auditors can always compare the 2008 SALN with those from previous years and learn how much in mortgage she pays annually/monthly.
So, can a civil servant who earns P40,000 a month afford P280,000 worth of annual mortgage payments? scaRRedcat is earning at least P520,000 a year (including 13th month pay, excluding other bonuses).
If scaRRedcat is single, she can probably afford the mortgage payments (barely). She could, of course, be a trust fund baby (like, say, former senator Jamby Madrigal).
What if she’s married with three kids, two in college and one in high school?
That’s why the income and business interest statements are important. If scaRRedcat happens to be married to a senior executive of a multinational corporation, or an overseas contract worker in one of the more lucrative markets, those mortgage payments are a reasonable expense.
If, however, her husband is out of work, or barely earns a minimum wage – or, if she is a single parent with no other extra source of income, then auditors are going to look closer.
The logical step after looking at the income and business interest statements is checking the employee’s ITR.
But, unless ordered by a court (or an impeachment court, in the case of Corona), there’s no way to get hold of a full income tax picture. At the most, what government auditors will have is an ITR based on withholding taxes – only for her government job. Any taxes paid on income from business, from trust funds will need to be volunteered.
News reporters have discovered a number of properties not included in Corona’s SALN, or properties whose Transfer Certificate of Titles show acquisition cost much higher than either the declared assessed value or fair market price. Corona’s SALNs are also opaque precisely because he doesn’t state his income. He doesn’t even list his wife as among relatives in government.
The Chief Justice has already said he and his wife come from clans with more than ordinary means – in other words, well-to-do families. His lawyers also tell us the Chief Justice can very much afford his properties because he has other sources of income.
Had Corona’s SALN contained all his sources of income and acquisition costs, he would probably have an easier time today explaining his acquisition of properties. (Actually, a Chief Justice should divest of active business interests and keep the money in a blind trust.)
After all, the law states that you do not just file on time. Its implementing rules clearly mandate what your SALN should include. Even an admirer of the Chief Justice has only to scan his SALNs and acknowledge that deficient is the least you can call these documents.