The Insurance Commission (IC) has formed project audit teams to ensure social insurance institutions are adopting the globally accepted Philippine Financial Reporting Standards 4 (PFRS 4), the Department of Finance (DOF) said in a statement yesterday.
Insurance Commissioner Dennis Funa said the audit to monitor the compliance with PFRS 4 covers the Government Service Insurance System (GSIS), Philippine Health Insurance Corp. (PhilHealth) and the Social Security System (SSS).
Funa said the audit starts with the GSIS next month, the SSS in September and PhilHealth in October.
PFRS 4 is the current and interim accounting standard imposed on insurance entities in the Philippines that is based on International Financial Reporting Standards.
All private insurance companies in the Philippines have been using PFRS 4 since 2005.
A review by the DOF, with the assistance of the International Monetary Fund, showed GSIS, PhilHealth and SSS were not adopting internationally accepted accounting principles in their financial reporting and management of their social benefit liabilities, prompting DOF Secretary Carlos Dominguez to order the immediate compliance by these institutions.
With the government social institutions’ full compliance with the PFRS 4, their combined total liability have increased to P9.94 trillion in 2020 from P154 billion in 2019.
The increase in liabilities is primarily because of the proper booking of their social benefit liabilities, as required under PFRS 4.
Dominguez has assured members of SSS, GSIS and PhilHealth the booking and reporting of the social benefit liabilities under PRFS 4 do not affect the cash flow and funding status of these institutions, and that these remain fully capable of meeting their short- and long-term obligations.
To improve the management of the funds and maximize the return on investments in these institutions, the DOF has recommended that these resources be pooled to constitute a sovereign wealth fund, which is the practice of many countries, including Singapore, Japan and Indonesia.
Adopting PFRS 4 in their financial reporting will ensure that SSS, GSIS and PhilHealth would be able to provide their management and the national government with an accurate picture of the funding reality of these institutions, Dominguez said.
