ANNEX C.

MATERIALITY TEMPLATE

Prepared by: Date:

Reviewed by: ARNEL C. NUQUE Date:
Approved by: JINKY B. ROCAL Date:

1. Determine the sensitivity of the subject matter (check one):

Very Sensitive
Sensitive
Not Sensitive

2. Identify the Most Appropriate Materiality Benchmark

a. Select the most relevant materiality benchmark (check one):

Monetary amounts involved (expenditures, revenues, etc.)

Number of citizens or entities affected by the subject matter
Others – Qualitative – The non-compliance with the subject matter might
result to adverse effects involving the following intended users:

i. National Government - deprivation of additional revenues

ii. GOCC - deferral or disapproval of the performance incentive and/or
assessment of the GOCC of interests and penalty charges
iii. Members of the Governing Board and other Corporate Officers –
administrative sanction and criminal prosecution may be imposed.

Justification for the use of the Qualitative Materiality:

It is Material by Nature and Context

Republic Act (RA) No. 7656 required all Government-Owned and Controlled
Corporations (GOCCs) to declare and remit at least fifty percent (50%) of their
annual net earnings as cash, stock or property dividends directly to the National
Government. This non-compliance is significant due to qualitative aspects such that it
will unduly deprive the State (National Government) additional revenues or funding
intended for the various projects, programs and activities for maintenance of public
welfare and advancement of economic growth.

In addition, the non-compliance is qualitatively material due to the potential adverse

consequences it may have. In the event of delay or non-declaration/non-remittance
of dividends due, there is a risk that it may result to the following:

i. deferral or disapproval of the performance incentive of the GOCC’s

Appointive Directors (including the chief executive) without prejudice to other
sanctions as may be imposed by the GCG or DBM; and

ii. assessment of the GOCC of penalty charges for late payment equivalent to
the prevailing 364-day regular Treasury bill rate plus five percent (5%) on the
Dividend due.

Lastly, any member of the governing board, the chief executive officer, and the chief
financial officer of the VFP, who violates any provision of the Dividends Law, upon

Page 1 of 2
 conviction, shall suffer the penalty of a fine not less than Ten thousand pesos
(P10,000.00) but not more than Fifty thousand pesos (P50,000.00) or imprisonment
of not less than one (1) year but not more than three (3) years, or both at the
discretion of the court, without prejudice to other appropriate sanctions provided by
law

b. Select the measurement percentage by degree of sensitivity (check one):

Degree of Sensitivity Measurement Percentage

Very Sensitive 1⁄2 %

Sensitive 1⁄2 - 2%
Not Sensitive 2%

“Not Applicable”

c. Indicate the benchmark amount (monetary value/number of citizens or entities, etc.)

“Not Applicable”

d. Indicate the source of the benchmark (based on audit scope)

The source of the chosen benchmark is the Dividends Law itself and its IRRs.

e. Calculate materiality

“Not Applicable”

Benchmark Amount Measurement Materiality

(from Step 2.c.) Percentage Amount
(from Step 2.b.)

X =

References:
 COA Compliance Audit Manual
 Compliance Audit ISSAI Implementation Handbook, Page 84-88

Page 2 of 2