The government has probably the largest and most number of properties and assets in the country as compared to private companies.
Most of these properties include buildings (e.g., government offices), facilities, vehicles, equipment, machineries, etc.
A sound internal control dictates that properties and assets have to be safeguarded against any elements that could loss or damage these properties such as fire, flood, earthquake, theft, robbery, bulglary, etc.
According to the Commission on Audit (COA), it has come to its attention that there are still properties owned by government agencies which are not insured under the Government Insurance Fund (GIF) or while insured under the GIF, they are not insured adequately.
In this post, we’ll explore 3 compelling reasons why you should buy insurance for the properties of your agency and the guidelines prescribed by COA on purchasing insurance for the properties of government agencies.
Reason No. 1: It’s required by law.
Who in his/her right mind wants to violate a law?
The Property Insurance Fund Law (R.A No. 656) requires all government agencies (except municipal governments below first class category) to insure against any insurable risk their properties, assets, and interests with the General Insurance Fund (GIF), as administered by the Government Service Insurance System (GSIS).
RA 656 authorizes GSIS to issue insurance covers for all properties, contracts, rights of action and other insurance risks of the government. Government agencies, offices, and government-owned and controlled corporations (GOCCs) are required by law to insure all properties, assets and interests of their respective offices with GSIS.
Why is this compelling?
Well, it being required by law, government agencies are mandated to comply with the law.
Reason No. 2: Insurance is meant to protect government properties against insurable risks.
You will not appreciate the value of having an insurance until you suffer financial loss due to an unforseen disaster.
According to Administrative Order No. 33, issued by Former President Corazon C. Aquino, government agencies are required to insure their properties with the General Insurance Fund against any insurable risk.
What is an Insurable Risk?
Insurable risks are risks that insurance companies will cover. These include a wide range of losses, including those from fire, theft, or lawsuits.
– Tech Insurance
According to GSIS’s Property Application Form, government agencies may apply for insurance to protect their properties (e.g., building and/or contents) against the following:
- Fire/Lightning
- Typhoon
- Flood
- Earthquake/Fire
- Earthquake/Shock
- Robbery and Burglary
- Others
Moreover, GSIS provides non-life insurance coverage such as fire, engineering, marine hull and cargo, aviation, contractor’s all risk, bonds, motor car, and personal accident to its instutional clients (i.e., government agencies)
Why is this compelling?
Well, insurance is a way to manage risks brought about by uncertainties. We do not know when these risks will happen so we have to have the necessary protection such as an insurance. Insurance is a way to effectively manage financial loss or damage.
Under the Property Insurance Fund Law (RA 656), the insurance provided by the GSIS is meant to indemnify or compensate the Government for any damage to, or loss of, its properties due to fire, earthquake, storm, or other casualty which shall consist of all moneys resulting from the liquidation of the insurance constituted in section three hundred forty of the Revised Administrative Code and from premiums and other incomes. [Ref]
Reason No. 3: Non-compliance with the law may or will definitely result to adverse audit observation from COA.
You don’t want to receive AOM from COA, right?
Various agencies have already received adverse Audit Observation Memorandum (AOM) from COA because their properties are not covered by appropriate insurance under the GSIS General Insurance Fund, or if there may be an insurance the subject prorties are not adequately covered.
Common adverse audit observation/finding on property insurance include the following:
- The property, plant and equipment amounting to Pxxx were not yet covered by an insurance from the Government Service Insurance System (GSIS) General Insurance Fund which exposes the government to the risk of not being indemnified for any damage to or loss of its properties arising from fire, earthquake, storm, flood, and other force majeure in violation with Sec. 489 of the Government Accounting and Auditing Manual, Volume I and Sec. 11 of Republic Act No. 656. [Ref]
- Government motor vehicles were not properly registered nor covered by comprehensive insurance from the Government Service Insurance System (GSIS) as required under COA Circular No. 82-156 and Section 489 of the Government Accounting and Auditing Manual (GAAM Volume I, respectively, thus the risk of losses in case of damage to or loss thereof. [Ref]
- Insurable properties with a net book value of Pxxx were not covered with property insurance from the General Insurance Fund (GIF) of the Government Service Insurance System (SIS) which is not in accordance with RA No. 656. In addition, the pertinent Property Inventory Form (PIF) was not prepared and submitted on or before the deadline contravening COA Circular No. 2018-002, thus exposing government properties to risk of loss and/or damages without the right of indemnification. [Ref]
What is an AOM and when to answer the same?
10 Effective Tips to Avoid Receiving AOM from COA
Effective Tips in Answering Audit Observation Memorandum (AOM) from COA
Why is this compelling? Well, receiving a negative AOM from COA means there is something that an agency needs to improve or correct in its processes. Sound and good governance provide that if there is something wrong with the service/process of the agency, the same must be acted upon immediately.
Guidelines on Acquiring Insurance for the Properties of Government Agencies
Based on COA Circular No. 2018-002 dated May 31, 2018 re: Guidelines Prescribing the Submission of Property Inventory Form as Basis for the Assessment of General Insurance coverage over all Insurable Assets, Properties and Interests of the Government with the General Insurance Fund of the Government Service Insurance System
In order to avoid violating the law and to avoid receiving adverse audit observation/findings from COA, as well as to ensure adequate protection for the Government by insuring properties under the GSIS General Insurance Fund, the Commission on Audit provided guidelines for agencies on acquiring appropriate insurance for their properties.
How to acquire insurance for properties from the GSIS?
Below is a summary of the prescribed process in acquiring property insurance from the GSIS.
- Secure directly from the GSIS GIF appropriate insurance for properties using the prescribed GSIS Property Application Form.
- Prepare the required Property Inventory Form (PIF). The necessary data for the preparation of PIF shall come from the RCPPE and RPCI of the agency.
- Cause the appraisal of the insurable properties and other assets.
- Submit the PIF to COA and GSIS, not later than April 30 of each year.
- Ensure that the corresponding budget covering the insurance is included in the agency annual budget.
Fine for violating the provisions of the Property Insurance Law (RA No. 656)
Accountable officers who are responsible for the payment of the premiums prescribed, who refuses or habitually neglects to comply within the time prescribed, shall be held liable for the payment of said premiums and shall pay to GSIS a fine of two per centum (2%) per month of said premiums from their due dates until received by the GIF, as provided for under Section 6(b) of RA No. 656.
Moreover, failure on the part of the accountable officers of the agency concerned to submit the required documents to GSIS shall automatically cause the suspension of the payment of their salaries until they shall have complied with the requirements.
Conclusion
An insurance covering the properties of the government is important as it is required by law and it’s meant to protect the government from unnecessary financial loss. Government agencies are mandated to comply with the law, rules and regulations covering the insurance of government properties.
