national home mortgage finance corporationnhmfc.gov.ph/.../manualofcorporategovernancerev.pdf ·...

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NATIONAL HOME MORTGAGE FINANCE CORPORATION

MANUAL OF CORPORATE GOVERNANCE (As Amended) 1

I. INTRODUCTION The National Home Mortgage Finance Corporation (NHMFC) adheres to the Code of Corporate Governance prescribed by the Governance Commission for Government Owned and Controlled Corporations (GCG), and commits to observe accountability and transparency in the performance of its mandate of establishing a strong and sustainable housing finance and developing a system that will attract private institutional funds into long term housing mortgages, as the government's secondary mortgage institution. As such, the Corporation adopts this Corporate Governance Manual to effectively achieve its objectives, mission and vision through good corporate governance. II. DEFINITION OF TERMS

1) Board of Directors - The collegial body that exercises the corporate powers of the NHMFC as specified in Section 10 of P.D. No. 1267. It is primarily responsible for the governance of the NHMFC and, hence, in charge of setting policy direction and monitoring the implementation of strategic and long term goals. 2) Confidential Information - refers to all non-public information entrusted to or obtained by a member of the Board or Officer by reason of his/her position as such with NHMFC. It includes, but is not limited to, non-public information that might be harmful to NHMFC or its stakeholders if disclosed, such as, but not limited to: (a) non-public information about accounts managed/serviced by the Corporation (i.e. book value, computation for the minimum selling price of a property, details of accounts which by their very nature are confidential, etc.), prospects or plans, research and development information; and (b) non-public information about internal discussions, deliberations and decisions, between and among Directors and officers. 2 *Confidentiality of borrowers' account information does not apply to the particular borrower concerned.

3) Conflict of Interest - arises when a member of the Board or an executive officer has a substantial interest in a business, and the interest of such corporation or business, or his or her rights or duties therein, may be opposed to or affected by the faithful performance of his or her official duties in the NHMFC.3

4) Charter Statement - refers to a statement of NHMFC's vision, mission and core values.4

1 As amended on 9 June and 3 September 2014 2 Adopted from Sec. 1, GCG Memorandum Circular No. 2013-07, Code of Corporate Governance for GOCCs 3 Adopted from R.A. No. 6713, Code of Conduct and Ethical Standards for Public Officials and Employees 4 Adopted from Sec. 1, GCG Memorandum Circular No. 2012-07, Code of Corporate Governance for GOCCs

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5) Corporate Governance - The framework of rules, systems and processes in NHMFC that governs the performance by the Board and the Management of their respective duties and responsibilities to the stakeholders.5 6) Director - refers to any member of the governing board of the NHMFC, formally referred to as the "Board of Directors".6

7) Gift - refers to a thing or a right to dispose of gratuitously, or any act of liberality, in favor of another who accepts it, and shall include a simulated sale or an ostensibly onerous disposition thereof. It shall not include an unsolicited gift of nominal or insignificant value not given in anticipation of, or in exchange for, a favor from any director, officer or employee of the Corporation.7

8) Management - refers to the body given the authority to implement the policies determined by the Board in directing the course and business of the NHMFC.8

9) Receiving any gift - includes the act of accepting directly or indirectly, a gift from a person other than a family member or relative within the fourth civil degree of consanguinity or affinity, in behalf of himself or of any such family member or relative, even on the occasion of a family celebration or national festivity like Christmas, if the value of the gift is neither nominal nor insignificant, or the gift is given in anticipation of, or in exchange for, a favor.9

10) Stakeholder - a person, group, or organization that has direct or indirect interest or stake in the NHMFC because they can affect or be affected by the actions of the NHMFC, its objectives, or policies.

III. GOVERNANCE STRUCTURE

1) Board of Directors - The powers and functions of the corporation shall be exercised by the Board of Directors (hereinafter, referred to as the "Board").10

A. Composition of the NHMFC Board 11- The Board shall be composed of:

1. The Chairman of the Housing and Urban Development Coordinating Council (HUDCC), who shall be the ex-officio Chairman of the Board.12

2. The President of the NHMFC, who shall be the Vice-Chairman.

5 Adopted from SEC Memorandum Circular No. 6, Series of 2009, Revised Code of Corporate Governance 6 Adopted from Sec. 1, GCG Memorandum Circular No. 2012-07, Code of Corporate Governance for GOCCs 7 Adopted from Sec. 3 (c) of R.A. No. 6713 8 Adopted from Sec. 1, GCG Memorandum Circular No. 2012-07, Code of Corporate Governance for GOCCs 9 Adopted from Sec. 3 (d) of R.A. No. 6713 10 Section 9, P.D. No. 1267, NHMFC Charter 11 P.D. No. 1267, NHMFC Charter, as amended by Sec. 6 of E.O. No. 90 12 Sec. 6, E.O. No. 90, Identifying the Government Agencies Essential for the National Shelter Program and Defining their Mandates, Creating the Housing and Urban Development Coordinating Council, Rationalizing Funding Sources and Lending Mechanisms for Home Mortgages and for other purposes

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3. The Secretary of Finance. 4. The Secretary of the Department of Budget and Management (DBM). 5. The Governor of the Bangko Sentral ng Pilipinas (BSP).

Whenever an ex-officio Board Member is unable to attend the meeting of the Board, he shall designate an alternate whose acts shall be considered the acts of his principal. However, the designated alternate of the Chairman of the HUDCC shall not act as chairman in the meeting of the Board. An ex-officio Board Member may designate as his alternate only an officer of his department or agency who holds a rank not lower than the equivalent of Director III, is not already a member of the Governing Board of NHMFC, and reports directly to the Principal Director on the matters covered by NHMFC.13

B. Powers and Functions of the Board14 1. To formulate policies, rules and regulations to carry out effectively the functions of the corporation. 2. To direct the management, operations and administration of the corporation. 3. To authorize such expenditures by the corporation as are in the interest of the effective administration and operations of the corporation. 4. To determine/recommend to the Governance Commission, the remuneration and other emoluments of subordinate officers and personnel of the corporation based on the Compensation and Position Classification System (CPCS).

5. On recommendation of the President of the corporation, to appoint, remove or otherwise discipline such officers or employees for cause, as provided by law: Provided, however, that high level positions as specified by the Board as coterminous positions as reflected in the corporation's official staffing pattern/plantilla of positions who must be elected annually, may be removed on the ground of loss of confidence. 6. Subject to existing civil service law, rules and regulations, and ensuring compliance with the requirements of due process, the Board shall have the authority to discipline, or remove from office any officer, upon majority vote of the members of the Board who actually took part in the investigation and deliberation.15

7. To exercise such other powers as may be necessary to accomplish the purposes for which the corporation was organized.

13 Section 6, GCG Memorandum Circular No. 2012-08 14 Section 10, P.D. No. 1267, NHMFC Charter 15 Section 22, R.A. No. 10149

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C. Mandate and Responsibility of the Board for NHMFC's Performance16 The Board shall be responsible for providing policy directions, monitoring and overseeing Management actions. These functions and responsibilities shall include the following: 1. Provide the corporate leadership of the NHMFC subject to the rule of law, and the objectives set by the National Government through the supervising agencies and the GCG; 2. Establish the NHMFC vision and mission, strategic objectives, policies and procedures, as well as define the NHMFC values and standards through: a) Charter Statements; b) Strategy Maps; and c) Other control mechanisms mandated by best business practices; 3. Determine important policies that bear on the character of the NHMFC, to foster its long-term success, ensure its long-term viability and strength, and secure its sustained competitiveness; 4. Determine the organizational structure of the NHMFC, define the duties and responsibilities of its officers and employees and adopt a compensation and benefit scheme that is consistent with the GOCC Compensation and Position Classification (CPCS) developed by the GCG and formally approved by the President of the Philippines; 5. Ensure that personnel selection and promotion shall be on the basis of merit and fitness and that all personnel action shall be in consonance with applicable laws, rules and regulations; 6. Provide sound written policies and strategic guidelines on the NHMFC's operating budget and major capital expenditures, and approve the annual and supplemental budgets of the NHMFC;

7. Comply with all reportorial requirements as required under the NHMFC Charter, as well as applicable laws, rules and regulations;

8. Formally adopt and conduct annually the mandated Performance Evaluation System and the Performance Scorecard and timely and accurately report the results to the GCG; and

9. To be responsive to its stakeholders and ensure that the Corporation is being run in a prudent manner and with due regard of the interests of all stakeholders. Members of the Board shall fairly deal with the National Government, borrowers/buyers, funders, partner government agencies and other external agencies, housing developers, banks and other financial institutions.

16 GCG Memorandum Circular No. 2012-07, Code of Corporate Governance for GOCCs

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D. Specific functions of the Board17

In addition to those specified under P.D. No. 1267 and R.A. No. 10149, the Board shall also perform the following functions:

1. Meet regularly, ideally at least once every month, to properly discharge its responsibilities, with independent views expressed during such meetings being given due consideration and, with all such meetings properly documented or minuted; 2. Determine the NHMFC's purpose and value, as well as, adopt strategies and policies, including risk management policies and programs, in order to ensure that the NHMFC survives and thrives despite financial crises and that its assets and reputation are adequately protected; 3. Monitor and evaluate on a regular basis the implementation of corporate strategies and policies, business plans and operating budgets, as well as, Management's overall performance to ensure optimum results; 4. Adopt a competitive selection and promotion process, a professional development program, as well as, a succession plan, to ensure that the Officers of the NHMFC have necessary motivation, integrity, competence and professionalism; 5. Monitor and manage potential conflicts of interest of Directors, Management, and Stakeholders, including the issuance of measures to prevent misuse of corporate assets and abuse in related-party transactions; 6. Implement a system of internal checks and balances, which may be applied in the first instance to the Board and ensure that such systems are reviewed and updated on a regular basis; 7. Ensure the integrity of the NHMFC's accounting and financial reporting systems, including the conduct of independent audit, and the establishment of appropriate systems of control, particularly systems for risk management, financial and operational control, and compliance with the law and relevant standards; 8. Identify, monitor and provide appropriate technology and systems for the identification

and monitoring of key risks and performance areas; 9. Adopt, implement and oversee the process of disclosure and communications; 10. Constitute an Audit Committee and such other committees as may be necessary, or required by applicable regulations, to assist the Board in discharging its functions; and

17 Ibid.

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11. Conduct and maintain the affairs of the NHMFC within the scope of its authority, as prescribed in its Charter and applicable laws, rules and regulations. 2) Board Officers

The Board Officers of the NHMFC are the Chairman, Vice-Chairman, the Corporate Secretary, and the Compliance Officer who must all be Filipino citizens.18 They shall be vested with powers and functions, to wit:

A. Chairman of the Board19 1. Preside over all meetings; 2. Call meetings (through the Corporate Secretary) to enable the Board to perform its duties and responsibilities; 3. Approve the agenda for Board meetings in consultation with the President and the Corporate Secretary, and additional matters for inclusion in the agenda; 4. Exercise control over quality, quantity and timeliness of the information between Management and the Board; and 5. Assist in ensuring compliance with NHMFC's guidelines on corporate governance. The Chairman shall have such other powers and duties as the Board may prescribe. B. The Vice-Chairman of the Board The roles of the Vice-Chairman in the corporation as follows: 1. Attend all meetings of the Board. In the absence of the Chairman, he shall preside at the meetings of the Board; and 2. Execute and administer the policies, measures, orders and resolutions approved by the Board, and direct and supervise the operations and administration of the corporation. C. Corporate Secretary The Corporate Secretary shall act as the Legal Counsel of the corporation and provide secretariat services for the Board. He shall have the following functions:

1. Prepare the agenda and record the minutes of the Board meetings; 2. Send out notices of such meeting to all members;

18 Section 15, GCG Memorandum Circular No. 2012-07, Code of Corporate Governance for GOCCs 19 Ibid.

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3. Disseminate information and other pertinent communications to management for the decision of the Board; 4. Prepare advice on matters acted upon by the Board; 5. Render assistance to management on the interpretation and drafting of policies in response to and in accordance with Board decisions; 6. Prepare and maintain an index record of all resolutions adopted by the Board in all its meetings; 7. Be responsible for the custody and safekeeping of all documents and/or correspondence and reports submitted to the Board for action; 8. Render and provide clarificatory opinions/statements on legal matters and issues which affect NHMFC; 9. Keep the minutes of the meetings of the Board and all committees in a book or books kept for that purpose, and furnish copies thereof to the Chairman, the President and other members of the Board as appropriate;20

10. Be fully informed and be part of the scheduling process of other activities of the Board; 11. Receive instructions from the Chairman on the preparation of an annual schedule, the calling of Board meetings, and the preparation of regular agenda for meetings, and notify the Board of such agenda at every meeting; 12. Ensure fulfillment of disclosure requirements to regulatory bodies; and 13. Perform such other related functions that may be assigned from time to time. D. Compliance Officer21 The Compliance Officer shall perform the following functions and duties:

1. Monitor compliance by the corporation of the requirements under Republic Act No. 10149, the rules and regulations of the appropriate regulatory agencies and, if any violations are found, report the matter to the Board and recommend the imposition of appropriate disciplinary action on the responsible parties and the adoption of measures to prevent a repetition of the violation;

2. Appear before the GCG when summoned in relation to compliance with the codes, manuals, rules or regulations that it has issued, or other compliance issues;

20 Items 9 to 12 were adopted from paragraph 15.3, GCG Memorandum Circular No. 2012-07, Code of Corporate Governance for GOCCs. 21 NHMFC Board Resolution No. 3754, Series of 2012

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3. Issue a certification every 30 May of the year on the extent of the corporation's compliance with the government corporate standards governing GOCCs for the period beginning 01 July of the immediate preceding calendar year and, if there are any deviations, explain the reason for such deviation; and 4. Perform such other functions as may be required under the law, rules and regulations issued by the relevant government agencies, or as may be required by the Board. 3) Board Committees

A. Audit and Risk Management Committee22

1. Composition The Committee shall be composed of three (3) members of the Board of Directors, namely, the directors from the BSP, the DOF and the HUDCC, or their duly-designated alternates. The Chairman shall be elected from among themselves. Each member shall have an adequate understanding of risk management, accounting and auditing principles in general, and of the corporation's Financial Management systems and environment in particular. 2. Functions and Duties a) Audit Functions 1. Engage and provide oversight of the corporation's internal and external auditors; 2. Review and approve audit scope and frequency, and the annual internal audit plan, and quarterly, half-year and annual financial statements before their submission to the Board, focusing on the changes in accounting policies and practices, major judgmental areas, significant adjustments resulting from the audit, going concern assumptions, compliance with accounting standards, and compliance with tax, legal and Commission on Audit (COA) requirements; 3. Consider the appointment of an external auditor, with prior clearance/approval of the Commission on Audit (COA), in compliance with its rules and regulations on the matter. 4. Discuss with the external auditor before the audit commences, the nature and scope of the audit, and ensure coordination where more than one audit firm is involved; 5. Monitor and evaluate the adequacy and effectiveness of the corporation's internal control system;

22 NHMFC Board Resolution No. 3746, Series of 2012.

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6. Receive and review reports of internal and external auditors and regulatory agencies, where applicable, and ensure that management is taking appropriate corrective actions, in a timely manner in addressing control and compliance functions with regulatory agencies; 7. Perform oversight financial management functions specifically in the areas of managing credit, markets, liquidity, operational, legal, reputational and other risks of the corporation, and crisis management. This function shall include receiving from senior management periodic information on risk exposure and risk management activities; 8. Be responsible for setting up an internal audit department and consider the appointment of the Chief Audit Executive; establish and identify the reporting line of the Chief Audit Executive so that the reporting levels allow the internal audit activity to fulfill its responsibilities; 9. Ensure that internal auditors have free and full access to all the corporation's records, properties and personnel relevant to and required by its function and that the internal audit activity shall be free from interference in determining its scope, performing its work and communicating its results; 10. Oversee the corporation's internal control system and coordinate with the Commission on Audit; 11. Develop a transparent financial management system that will ensure the integrity of internal control activities throughout the corporation through a procedures and policy handbook that will be used by the entire organization; 12. Ensure that management is taking appropriate corrective actions in a timely manner in addressing control and compliance functions with regulatory agencies; 13. Confirm any adjustments in the interest rates under HLRPP; and 14. Perform such other functions as may be required under the law or rules and regulations issued by the relevant government agencies, or as may be required by the Board.

b) Risk Management Functions

1. Ensure that the risk management process and culture are embedded throughout the operations of the corporation, especially at the Board level; 2. Develop the Risk Management Policy of the corporation and ensure compliance with the same; 3. Provide routine quarterly reporting and update the Board on key risk management issues, as well as, ad hoc reporting and evaluation of investment proposals; and

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4. Perform such other functions as may be required under the law or rules and regulations issued by the relevant government agencies, or as may be required by the Board.

B. Governance Committee23

1. Composition

The Governance Committee shall be composed of three (3) members of the Board of Directors of the corporation, namely, the directors from the DOF, the BSP and the DBM or their alternates. The Chairman of the Committee shall be elected among the members of the Committee.

2. Functions and Duties a) Oversee the periodic performance evaluation of the Board and its committees and executive management, and conduct an annual self-evaluation of its performance; b) Decide whether or not a Director is able to and has been adequately carrying out his /her duties as director bearing in mind the director's contribution and performance (e.g., competence, candor, attendance, preparedness and participation). Internal guidelines shall be adopted that address the competing time commitments that are faced when directors serve on multiple boards; c) Make recommendations to the Board regarding the continuing education of Directors, assignment to Board committees, succession plan for the Board members and senior officers, and their remuneration commensurate with corporate and individual performance; d) Decide the manner by which the Board's performance may be evaluated and propose an objective performance criteria approved by the Board; and e) Perform such other functions as may be required under the law or rules and regulations issued by the relevant government agencies, or as may be required by the Board.

C. Other Committees

The Board may create such other committees, as may be necessary and practicable/feasible, considering the number and composition of the Board, four (4) of whom are ex-officio directors (i.e., HUDCC Chairman, BSP Governor, DOF Secretary and DBM Secretary).

23 NHMFC Board Resolution No. 3758, Series of 2012

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IV. MANAGEMENT The Management shall stand as the center of decision making for the day-to-day affairs of the NHMFC. It shall determine the activities of the corporation by putting the targets set by the Board in concrete terms and by implementing basic strategies for achieving those targets. Management shall be responsible to the Board for implementing the infrastructure for the success of NHMFC through the following mechanisms in its organization as set by the Board: organizational structures that work effectively and efficiently in attaining the goals of NHMFC; useful planning, control and risk management systems that assess risks on an integrated cross-functional approach; information systems that are defined and aligned with an information technology strategy and business goals of NHMFC; and a plan of succession that formalizes the process of identifying, training and selection of successors in key positions.24 1) Accountability of the Management to the Board Management shall be primarily liable to the Board for the operations of the NHMFC. As part of its accountability, Management shall provide all members of the Board with a balanced and understandable account of the performance, position and prospects of NHMFC on a monthly basis.25 2) Powers and Duties of the President The President of the corporation shall have the following duties and responsibilities: A. Direct the preparation of the agenda for meetings of the Board and present/submit for the

consideration of the Board, policies and measures which are necessary to carry out corporate goals, objectives and thrust;

B. Direct the execution and administration of the policies and measures adopted by the

Board; C. Direct and supervise the operations and internal administration of the corporation. He may

delegate certain of his administrative responsibilities to other executive officers of the corporation, subject to such rules and regulations as may be promulgated by the Board, and to exercise such other powers as may be vested in him by the Board;26

D. Establish and maintain linkages with other government/private corporation/entities, financial institutions, commercial/industrial establishments, banks, trades and associations which directly or indirectly affect NHMFC’s operations;

E. Formulate appropriate programs to ensure the development and improvement of supervisory and managerial skills of officers and employees giving emphasis on management, planning and public relations; and

24 Section 18, GCG Memorandum Circular No. 2012-07, Code of Corporate Governance for GOCCs 25 Section 19, GCG Memorandum Circular No. 2012-07, Code of Corporate Governance for GOCCs 26 Section 14, P.D. No. 1267

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F. Oversee the undertaking of progressive modification concepts and organizational/structural changes to keep in line with changing requirements of corporation and governmental policies/regulations.

The President shall have such other duties and responsibilities as the Board may impose upon him. 3) Other Officers A. Executive Vice President The Executive Vice President of the corporation shall have the following duties and responsibilities: 1. Lend overall direction and provide the thrust to the corporation's operations and programs of activities according to a hierarchy of priorities that will assure effectiveness of their implementation; 2. Assist the President in the overall management of the corporation and in his (the President's) absence, act as Officer-In-Charge in administering the corporation's policies, programs and projects as adopted/confirmed by the Board; 3. Act on all operational matter presented for her consideration and action; 4. Oversee and control the exercise of functions of the officials and employees directly under her supervision; 5. Support/assist the President in the formulation of new policies, plans, and programs for consideration of the Board; 6. Evaluate, review and endorse all recommendations and proposals coming from various work units of the corporation for the consideration/approval of the President and the Board. 7. Assist the President in the conceptualization/formulation of financial programs/operations, to maximize returns on investments and to increase productivity; 8. Support the President in the task of sustaining and improving the corporation's image, relations and services to clients, beneficiaries and the general public; 9. Evaluate and monitor the performance of officials and employees in a concerted effort to bring about continuing improvements in NHMFC's operations and productivity; 10. Oversee the placement of officers and employees and evaluate performance of their assigned tasks towards achieving a streamlined, effective and productive organization; 11. Attend meetings, seminars and conventions where her presence is required;

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12. Monitor and evaluate the effect of overall corporate policies and programs among the intended target beneficiaries, including current trends and issues affecting them and prepare progress reports for the information and guidance of the President and the Board; 13. Ensure that operational systems are effectively and efficiently in place in the conduct of the business of the corporation; 14. Discharge her duties and responsibilities with the highest degree of professional level; and 15. Undertake and perform other related tasks as may be assigned by the President, the Board or the Chairman of the HUDCC from time to time; V. DUTIES AND OBLIGATIONS OF DIRECTORS AND OFFICERS27 The Directors and Officers of the NHMFC are also public officials who are at all times accountable to the people. As such, they shall act in the best interest of NHMFC, exercise extraordinary diligence and skill, discharge their duties with utmost responsibility, integrity, competence, and loyalty, act with patriotism and justice, lead modest lives, and uphold public interest over personal interest. 1) Duty of Diligence - Every Director or Officer shall: A. Have a working knowledge of the statutory and regulatory requirements affecting the NHMFC, including the contents of its Charter, the requirements of the GCG, and where applicable the requirements of the partner agencies. He/she must always keep himself/herself informed of industry developments and business trends in order to safeguard NHMFC's interests and preserve its competitiveness; B. Devote time and attention necessary to the proper discharge of his or her duties and responsibilities. He/she shall offer sufficient time and efforts to familiarize himself or herself with the business of the NHMFC and shall be constantly aware of the corporation's condition and be knowledgeable enough to contribute meaningfully to the Board's or management's work. He or she shall attend and actively participate in Board or management meetings, request and review meeting materials, ask questions, and request explanations, if necessary; C. Act judiciously before deciding on any matter brought before the Board or Management. He/she shall thoroughly evaluate the issues, make inquiries and seek clarification when necessary; and D. View each problem or situation objectively. When a disagreement with other Board members or officers occurs, he or she shall carefully evaluate the situation and state his or her position. He or she shall not be afraid to take an unpopular position. Corollarily,

27 Adopted from the norms of conduct specified under SEC Memorandum Circular No. 6, Series of 2009 and Secs. 24 and 26, GCG Memorandum Circular No. 2012-07, Code of Corporate Governance for GOCCs

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he or she shall support plans and ideas that he or she thinks are beneficial to the corporation. 2) Duty of Loyalty - Every Director or Officer shall: A. Conduct fair business transactions with the NHMFC, and ensure that personal interest does not compromise Board or Management decisions. The basic principle to be observed is that a Board member or officer shall not use his or her position to acquire benefit or advantage for himself or herself or his or her related interests. He or she shall avoid situations that may compromise his or her impartiality. B. At all times avoid any actual or apparent conflict between NHMFC's business interest and their own personal interest, including their relatives within the 4th degree of consanguinity or affinity and/or instances where the interest of the corporation and their rights and duties therein, are opposed to or affected by their faithful performance of their official duties. Any question about a Board member or officer involving any actual or potential conflict with the NHMFC shall be brought promptly to the attention of the Chairman of the Board, who together with the Board shall review the question and determine an appropriate course of action.28 3) Confidentiality The Directors and officers shall observe the confidentiality of material/non-public information acquired by reason of his or her position. He or she should not divulge valuable information of a confidential character, acquired by his office or by him on account of his official position to unauthorized persons, or releasing such information in advance of its authorized released date. 29 They shall not, either during or following the termination of their appointment, disclose such information to any outside person unless authorized. Similarly, they shall not disclose or use confidential information gained by virtue of his/her association with the organization for personal gain, or to benefit friends, relatives or associates. VI. FORMAL CHARTER OF EXPECTATIONS The Board shall adopt a Formal Charter of Expectations wherein the Board and Management shall be committed and expected to comply with and observe their specific duties and responsibilities as provided under Chapter V of this Manual, in the pursuit of good corporate governance in the NHMFC.

27 Paragraph 27.1, GCG Memorandum Circular No. 2012-07, Code of Corporate Governance for GOCCs 29 NHMFC Office Order No. 2244, 12 December 2013

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VII. NO GIFT POLICY30 All officers and employees shall strictly observe and comply with the "No Gift Policy" of the corporation. 1) Prohibitions The directors, officers and employees of the corporation, shall not solicit or accept, directly, any gift, gratuity, favor, entertainment, loan or use, anything of monetary value from any person or entity, whether from the public or the private sectors, at any time, on or off the work premises, in the course of the performance of their official duties, or any transaction which may be affected by the exercise of the functions of their office. Such prohibition shall include, but not limited to: A. Honoraria given as speaker or resource person in seminars or where the officer or employee is participating by reason of his/her office; B. Parties or entertainments in honor of the director, officer or employee or his/her immediate relatives; C. Any sponsorship of internal corporate programs, activities and affairs, such as Christmas parties and anniversary celebration; D. Advertisements in corporate publications;

E. Discounts, rebates, waivers and other forms of monetary incentives or benefits given to the corporation, its directors, officers and employees, in availing of the services and/or facilities of persons (natural or juridical) having any transaction with the corporation; and

F. Acceptance of invitations to social lunches and dinners with persons or entities with pending or forthcoming transactions with the corporation. As a rule, for purposes of this policy, the propriety or impropriety of the foregoing shall be determined by the value of the gift, kinship or relationship between the giver and receiver and the motivation (when such gift is given by reason of the director's, officer's or employee's official position with the hope or expectation of receiving future favors or better treatment from them in the discharge of their official function). A thing of monetary value is one which is evidently or manifestly excessive by its very nature.

2) Exceptions The prohibition shall not be deemed to include the acceptance/availment of the following:

A. Unsolicited gifts of nominal or insignificant value not given in anticipation of, or in exchange

for, a favor from a director, officer or employee, or given after the transaction is completed, or

30 NHMFC Office Order No. 2244, 12 December 2013

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service is rendered. As to what is a gift of nominal value will depend on the circumstances of each case taking into account the salary of the official or employee, the frequency or infrequency of the giving, the expectation of benefits, and other similar factors; B. Gifts from a family member or relative within the fourth degree of consanguinity or affinity on the occasion of a family celebration, and without any expectation of pecuniary gain or benefit;

C. Nominal donations from persons with no regular, pending, or expected transactions with

the corporation, or the department, office or unit with which the officer or employee is connected, and without any expectation of pecuniary gain or benefits; D. Donations coming from private organizations whether local or foreign, which are considered and accepted as humanitarian and altruistic in purpose and mission; E. Donations from government entities;

F. Gifts or grants/expense from foreign governments:

1. of nominal value tendered and received as a souvenir or mark of courtesy; 2. in the nature of a scholarship or fellowship grant or medical treatment; or 3. for travel taking place entirely outside the Philippines (such as allowances, transportation, food and lodging) of more than nominal value if such acceptance is appropriate or consistent with the interest of the Philippines, and permitted by the Chairman of NHMFC. G. Certificates, plaques or other forms of souvenir or mark of courtesy of nominal value;

H. Seminar bags/materials and moderately priced meals/beverages at events, conferences and seminars, which are offered equally to all members of the public attending the same; I. Books, pamphlets, publications, data/information or reading materials that are useful to the corporation and which are given by persons/entities that have no pending business with the corporation as to create an actual or potential conflict of interest; and

J. Grants from local or foreign institutions in the pursuit of the corporation's mandates, projects and activities, such as those coming from ADB, World Bank and USAID, strictly in compliance with applicable procurement laws, rules and regulations.

3) Written Exemption Any other exception to this policy may be made only with the written permission of the Chairman of the Board.

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4) Requirement to Inform All individuals or entities expressing interest in doing business, or with any pending or upcoming business, with the corporation shall be informed of and requested to respect this "No Gift Policy". Notices informing clients and visitors of this Policy shall be posted in the corporation's website and in conspicuous areas within the premises of the corporation. 5) Acknowledgement and Return or Disposal of Gifts If the corporation, or any of its directors, officers or employees, receives a gift prohibited under this Policy, such gift, if feasible, shall immediately and politely be declined and returned. If it is not feasible, appropriate or practical to return the gift (e.g., perishable items), the same shall be donated to an appropriate charitable or social welfare institution. An acknowledgement letter shall be sent to the giver informing him/her/it of the "No Gift Policy" and the gift is being returned or has been donated to a charitable or social welfare institution.

VIII. FORMAL RECOGNITION AND RELATIONS WITH STAKEHOLDERS NHMFC recognizes the following as its stakeholders: 1) Borrowers/buyers/investors. whether natural or juridical. These stakeholders are account holders of NHMFC with existing loan obligations on properties owned by/within the control of the Corporation, and/or investors, with existing investments either in the Corporation's assets or with the bonds it issued/will issue; 2) Funders. Those who provide funds to NHMFC to purchase mortgages originated by private and public institutions that are within the government approved-guidelines with the expectation of getting returns on such investment; 3) Housing Developers/Originators. Business enterprises established for housing development primarily aiming the immediate return of their investment and source of funding for their projects; 4) Banks and other financial institutions. Those incorporated under Philippine laws as such (eg. banks, collection/bayad centers and remittance partners), who entered into partnership with NHMFC, as an additional source of income; 5) National Government. The State through the National Government owns the controlling interest in the Corporation, thereby exercises all prerogatives of ownership over the Corporation; 6) Partner government agencies and other external agencies. Those associated with NHMFC with the aim acquiring: (a) additional funding for housing, and (b) increase in source of government revenue, and creation of more housing development for government employees.

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NHMFC shall establish mechanisms and procedures to serve its stakeholders' interest and ensure that they have access to relevant, sufficient and reliable information on a timely and regular basis to be able to exercise their rights. The Corporation shall endeavor to enhance its capability, efficiency and effectiveness as a primary Secondary Mortgage Institution and fund mobilizer, in providing sustainable housing finance. It shall continue to improve its Housing Loans Receivables Purchase Program (HLRPP) which enables it to purchase seasoned and quality mortgages/loans/receivables from originating public and private institutions/developers. By purchasing mortgages/receivables from the originating institutions, the corporation helps these institution immediately liquefy their assets, help them avoid risks involving the long term exposure of their funds, and gives them available funds to construct more houses for the people -- thus increasing the velocity of housing funds and making housing credit available to more buyers/borrowers. The corporation shall continue to enlarge its asset pool of quality home mortgages and receivables for the regular issuance of asset-backed securities for sale in the capital market, thus allowing small investors to invest and earn in a safe, affordable, high yielding and tax-free interest rates, and allowing securitization proceeds to be recycled to ensure continuous availability of funds for housing. As a servicer of the accounts, NHMFC shall continue the administration and management of accounts that shall include counseling, monitoring, collection and reporting to ensure the timely and regular cash flow from the accounts. The corporation shall continue to offer various updating/restructuring programs to assist its borrowers in rehabilitating their past-due accounts (thru the In-House Loan Restructuring Program, Six-Months Updating Program and Special Repayment Program). Moreover, in addition to the updating/restructuring programs, the corporation shall, whenever necessary/authorized, offer moratorium programs for amortization payments to those borrowers/clients affected by typhoons and other natural or man-made calamities, thus, alleviating their burden and giving them relief on their financial obligations. In partnership with public and private institutions (e.g. banks, collection/bayad centers and remittance partners, etc.) and thru innovative and improved systems/processes (including securing ISO certification), the corporation shall continue to enhance the delivery of customer service and seek more efficient and convenient ways to allow its buyers/borrowers to easily/conveniently transact with it (for amortization payments which should be promptly and accurately posted, and for buyer-information and account updates, etc.); enable them to raise and resolve issues/problems encountered, be regularly informed of corporate policies and programs, as well as, give feedback/suggestions (aside from electronic mail and social media feedback means) to the corporation.

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To enable its officers and employees to accomplish its mandate/objectives and protect the interest of its stakeholders, the corporation shall continue to send its officers/employees to relevant training programs to upgrade their technical knowledge, competence and skills. In order to sustain its financial viability, the corporation shall continue to improve the collection of amortization payments from borrowers, dispose Acquired Assets and Non-performing Loans (NPLs) and operate as a Secondary Mortgage Institution. The funds may be used, as may be appropriate, to pay its obligations to funders, provide dividends to the national government and support the HLRPP. As a rule, in cases of conflict involving the interest of the corporation's stakeholders, the welfare and legitimate interest of the borrowers, buyers and investors interests shall take precedence. The interest of the other stakeholders shall then be prioritized in the following order: (a) Housing Developers/Originators; (b) Banks and other financial institutions; (c) Funders; (d) Partner government agencies and other external agencies; and (e) National Government IX. DISCLOSURE AND TRANSPARENCY The NHMFC shall continue to undertake timely and accurate disclosure of all material information to the government and the public, its ultimate stakeholder.

1) Disclosure in the NHMFC Website

The NHMFC shall maintain a website and post therein for unrestricted public access the following, as applicable.31

A. On Institutional Matters

1. Latest version of the NHMFC Charter; and 2. List of Subsidiaries and Affiliates; B. On the Board and Officers

1. Complete listing of the members of the Board and Officers with attached resume, and their membership in Board Committees; 2. Complete compensation package of all Board members and officers, including travel, representation, transportation and any other forms of expenses or allowances;

31 Section 43, GCG Memorandum Circular No. 2012-07, Code of Corporate Governance for GOCCs except for item 3(b) which was based on Section 25(b) of R.A. No. 10149, GOCC Governance Act of 2011.

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3. Information on Board Committees and their activities; and 4. Attendance record of Board members in Board and Committees meetings.

C. On Financial and Operational Matters 1. Latest Annual Audited Financial and Performance Report within Thirty (30) days from receipt of such report; 2. Audited Financial Statements in the immediate past five (5) years; 3. Quarterly and Annual Reports and Short Version of the Trial Balance; 4. Current Corporate Operating Budget (COB); 5. Local and foreign borrowings; 6. Government subsidies and net lending; 7. All borrowings guaranteed by the government; 8. Any material risk factors and measures taken to manage such risks as stated above; and 9. Performance Evaluation System D. On Governance Matters 1. Charter Statement/Mission-Vision Statements; 2. Performance Scorecards and Strategy Map; 3. Organizational Chart; 4. Manual of Corporate Governance; 5. Corporate Social Responsibility (CSR) Statement; and 6. Balance Scorecard. X. STATEMENT OF RESPOSIBILITY FOR FINANCIAL STATEMENTS32 The Board of Directors is responsible for confirming the truthfulness and fairness of all information and representations contained in the Balance Sheets and the Statements of Income and Expenses and Cash Flows of the corporation. The financial statements should be prepared in conformity with generally accepted accounting principles and reflect amounts that are based on the best estimates and informed judgment of management, with appropriate consideration for materiality. In this regard, the Board, through the Management, shall maintain a system of accounting and reporting which provides for necessary internal controls to ensure that transactions are properly authorized and recorded, assets are safeguarded against unauthorized use or disposition, and liabilities recognized. XI. ADMINISTRATIVE SANCTIONS The Board may formulate penalties to be imposed for every instance that any director, officer or member of management violates the provisions of this Manual or omits to carry out his or her

32 Based on Sec. 42.4 GCG Memorandum Circular No. 2012-07 and COA template on Statement of Management’s Responsibility for Financial Statements.

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duties, without prejudice to other sanctions that the GCG may be authorized to impose under the law. XII. MISCELLANEOUS PROVISIONS This Manual shall be submitted to the GCG for evaluation and approval taking into consideration the nature, size and scope of the corporation, and the composition of its Board. It shall be used as reference by the Board and Management, and shall be made available for inspection by any of the NHMFC stakeholders at reasonable hours on business days. The Manual shall be deposited with the Office of the Corporate Secretary and shall be reviewed, updated and/or revised periodically, as needed. This Manual shall take effect upon approval of the Board.

national home mortgage finance corporationnhmfc.gov.ph/.../manualofcorporategovernancerev.pdf ·...

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