FUND

MANAGEMENT

An important pillar in the transparency and accountability chain

Melvin LamanilaoExecutive Director

Paglilingkod Batas Pangkapatiran Foundation, Inc.

CHAIN FOR CHANGE

• A FRAMEWORK OF LOOKING AT THINGS IN AN INTEGRATIVE MANNER

• PROVIDES THE BASIC FOUNDATION OF BK’S TRANSPARENCY AND ACCOUNTABILITY ADVOCACY

Publish why you pay and

How you extract

Publish What you

pay

Publish what you earn and How you

spend

Publish what you

Learn

Transparency and Accountability

PILLARS

To understand and learn one is to undertand the

other…

PUBLISH WHY YOU PAY AND HOW YOU EXTRACT

• WHAT ARE OUR NATURAL RESOURCES

• WHAT ARE THE NATURAL RESOURCES LEGAL FRAMEWORK?

• TO EXTRACT OR NOT TO EXTRACT?

• HOW TO ENSURE THE BEST POSSIBLE DEAL?

• HOW TO MONITOR THE PROJECT?

PILLARS

1

PUBLISH WHAT YOU PAY

• WHAT PAYMENTS COMPANIES ARE MAKING?

• DID THE MONEY REACH THE STATE COFFERS?2

LIST OF MANDATORY EXPENDITURESRESPONSIBLE AGENCY: MGB

Type Description Rate Paid to Agency

Annual Environmental Protection and Enhancement Program (AEPEP)

The AEPEP cost covers the amount of environment-related expenses for the entire life of the project wherein the initial 10% of capital/project cost was derived from the feasibility study forming part of the Declaration of Mining Project Feasibility (DMPF).

Under DAO No. 2010-21,AEPEP costshall approximate 3-5% of direct mining & milling cost

No

Community Development Program

The amount is imposed on exploration activities, which is intended to enhance the development of the host and its neighboring communities.

10% of the approvedbudget for anentity’s two (2) year Exploration Work Program

No

Type Description Rate Paid to Agency

Safety and Health Program

The program includes standard operating procedures for mining and milling operations, management and employee training, housekeeping, environmental risk management including emergency response program and occupational health and safety management.

N/A No

Social Development Management Program (SDMP)

SDMP is formulated to fulfill social obligations enhancing the development of communities that are directly and/or indirectly affected by the mining project. SDMP is allocated as follows:

Social Development & Management (host and neighboring communities) – 75%

Mining Technology and Geosciences Advancement – 10%

Information, Education, and Communication – 15%

1.5% of prior year’s operating expenses

No

Type Description Rate Paid to Agency

Environmental work program (EWP)

EWP details existing environment programs where the exploration work is proposed to be undertaken. Potential effects are identified, as well as environmental management measures to be implemented, including the total cost of such projects.

N/A No

Mine rehabilitation funds (MRF)

The MRF is maintained as a reasonable environmental deposit to ensure availability of funds for the satisfactory compliance with the commitments and performance of the activities stipulated in the AEPEP. This is deposited as a trust fund in a government depository bank and shall be used for physical and social rehabilitation of areas and communities affected by mining activities and for research on the social, technical and preventive aspects of rehabilitation.

The MRF is further broken down into two forms, namely the Mine Monitoring Trust Fund and the Rehabilitation Cash Fund.

Mine Monitoring Trust Fund is a deposit of not less than PHP 150 thousand.

Rehabilitation Cash Fund is equivalent to 10% of the total amount needed to implement the EPEP or PHP5m, whichever is lower

No

Type Description Rates Paid to Agency

Mine Waste and Tailings Fees Reserve Fund

The Mine Waste and Tailings Fees Reserve Fund is to be used for payment of compensation for damages caused by any mining operations and for research projects duly approved by the Contingent Liability and Rehabilitation Fund Steering Committee.

PHP0.05/MT of mine waste produced and PHP0.10/MT of mill tailings generated

Yes

Final Mine Rehabilitation and Decommissioning Fund

The fund is established to ensure the full cost of the approved FMR/DP accrued before the end of the operating life of the mine

N/A No

ENVIRONMENTAL TRUST FUND

(PLEASE REFER TO YOUR HAND OUTS ON PAGE 67)

FINAL MINE REHABILITATION

AND DECOMMISSIONIN

G TRUST FUND

(PLEASE REFER TO YOUR HANDOUTS ON PAGE 71)

PUBLISH WHAT YOU EARN AND HOW YOU SPEND

• WHO’S COLLECTING THE MONEY?

• WHERE SHOULD THE MONEY GO?

• DID THE MONEY GET THERE?

3

PUBLISH WHAT YOU LEARN

• WAS IT WORTH IT?

• ALWAYS ASSESS

• WHEN THE DUST SETTLES4

PUBLISH WHAT YOU EARN AND HOW YOU SPEND

• WHERE SHOULD THE MONEY GO?

• DID THE MONEY GET THERE?

FUND MANAGEMENT

3

WHERE SHOULD THE MONEY GO?

• HOW DO COMMUNITIES PARTICIPATE IN THE BUDGET PROCESS?

• DO BUDGET PRIORITIES AND ALLOCATION RESPONDED CLEARLY TO WHAT THE PEOPLE NEED TO ALLEVIATE THEM FROM POVERTY?

DID THE MONEY GET THERE?

• DO THE FUNDS GO EXACTLY TO WHERE IT IS ALLOCATED?

• WHO DECIDE ITS INTENDED USE? DO COMMUNITIES PARTICIPATE IN THE DECISION-MAKING?

• ARE THERE MEASURES TO RECTIFY IF THE MONEY GOES MISSING EN ROUTE?

KEY PRINCIPLES OF FUND MANAGEMENT

EFFICIENCY

EFFECTIVITY

TRANSPARENCY

ACCOUNTABILITY

How well are the outcomes achieved with resources at

hand?

How resources are optimized

to achieve desired

outcomes?

How inclusive is the process of managing resources?

How resources are utilized

impacting the quality of life?

Quality

Quantity

Process

Impact

WHAT WE CAN SEE IN THE REPORT?

• DISCLOSURE OF PAYMENTS AND RECEIPTS/ COLLECTIONS

• GAPS/ LIMITATIONS – REASONS OF VARIANCES ARE EXPLAINED, BUT ITS NOT CLEAR, WHERE ARE THOSE VARIANCES NOW; WHO IS ACCOUNTABLE?

• PROCEDURES AND STRUCTURES OF FUND MANAGEMENT

• GAPS/ LIMITATIONS – ACTUAL EXPENDITURES ARE NOT DISCLOSED; NO INFORMATION WHERE THE MONEY GOES

REFLECTING ON THE LIMITATIONS CAN PUSH US TO ACHIEVE WHAT IS NECESSARY

• DISCLOSING WHY, WHAT AND HOW THE COMPANIES’ PAYMENT FROM EXTRACTING OUR NON-RENEWABLE RESOURCES ARE BEING DONE AND HOW GOVERNMENT COLLECTS THESE

PAYMENTS IS NECESSARY TO BENCHMARK TRANSPARENCY

MECHANISMS.

• BUT DISCLOSING HOW GOVERNMENT USE THESE PAYMENTS AND WHERE THESE PAYMENTS GO TO ENHANCE THE QUALITY OF LIFE OF THE PEOPLE ARE NECESSARY PRECONDITIONS TO

DEMONSTRATE FULL ACCOUNTABILITY.

TRANSPARENCY

ACCOUNTABILITY

GOOD EI GOVERNANCE

+

=

x(Efficiency + Effectivity)