Dormant funds in the DTI company total P33 billion, says COA

MANILA, Philippines – Some 33 billion pesos in public funds are dormant in Philippine International Trading Corp.’s (PITC) bank accounts as of December, as shown by audit documents that provide a more complete picture of the state trading company that has been commissioned to acquire COVID-19 vaccines.

The amount, which represents cash transfers by more than 80 government offices that are still awaiting their deliverables, is nearly double the previous estimate of 18 billion pesos by Senate Minority Leader Franklin Drilon, who is seeking an investigation from the Senate on the alleged low performance of the PITC. .

State audit report

According to PITC’s audited financial statements submitted to Drilon’s office, a copy of which was sent to the Inquirer, the company supervised by the Department of Commerce and Industry (DTI) reported total assets of 34.7 billion pesos and total liabilities of 33,500. millions of pesos. as of December 31, 2019.

Of that sum, total fund transfers made by “client agencies”, referring to government offices, had accumulated to P33,280 million at the end of 2019, as shown in the annual report of the Audit Commission (COA) on PITC Posted in August. . In 2018, the figure stood at P30.7 billion.

The documents showed that most of the money was “cash in the bank”, denominated in Philippine pesos, and the PITC held it in trust for different government agencies for the acquisition of various items.

But the COA report found that client agency fund transfer balances amounting to P9.176 billion from 2009 to 2019 “remained unused as of December 31, 2019, due to pending acquisitions.”

“These unused funds transfers have not yet been returned to the interested government-client agencies and / or the national government, contrary to the provision of Section 10 of the General Appropriations Act of 2019,” state auditors noted.

But PITC continued to receive more and more orders from various government agencies despite the huge backlog of undelivered orders, the COA report showed.

In 2019 alone, PITC received P9.66 billion in new fund transfers from client agencies for the acquisition of goods. In 2018, funds transferred by government offices to the PITC amounted to P14,890 million.

PITC’s two biggest clients last year, according to the report, were the Technical Education and Skills Development Authority, which remitted P3 billion, and the Philippine Army, which remitted another P3 billion.

Intact funds

The Secretary of Commerce, Ramón López, president of the PITC and chief of commerce, said that all the funds that the company had for the requesting agencies were intact. Any unused funds given to him for the acquisition of goods are returned to the national treasury, he said.

If the acquisition takes time, it is because “it undergoes a very strict procedure,” López said.

On Monday, Drilon asked agencies that had entered into acquisition agreements with PITC to “terminate” the contracts so that the money could be immediately returned and then reverted to the national treasury, possibly to be diverted to a calamity or response to a pandemic. .

In a phone interview, Drilon said that most of those cash deposits were stored in PITC’s bank accounts anyway, only charging interest for several months or even years, while the trading company took its time importing the items. ordered items.

“Since the items have not been delivered, you may wonder if there is an immediate need for them. If it has not been delivered since 2017, since 2018, since 2019, it can be questioned if there is an immediate need and if the acquisition can be postponed until 2022, “he told the Inquirer.

Drilon, citing PITC’s own financial documents, noted that fund deposits received by PITC from its clients increased from P4.8 billion in 2015 to P10.9 billion in 2016, then to P19.7 billion in 2017, P30.7 billion in 2018 and P33.4 billion in 2019.

“This money stays there and continues to grow every year,” he said.

‘It survived its purpose’

Senator Panfilo Lacson said that the PITC “may have outlived its purpose,” suggesting that it would be prudent to reconsider the government’s decision to allow the agency to import COVID-19 vaccines not yet available in the coming months.

“The use of the PITC may need to be reviewed and stopped for the procurement requirements of various national government agencies, not just to save unnecessary expenses amounting to billions of dollars in delays and commissions or service fees,” he said.

“That said, it is prudent for the government to at least look closely at the PITC’s involvement in the procurement of COVID-19 vaccines,” Lacson said in a statement.

The PITC was recently commissioned to purchase COVID-19 vaccines following reports of successful trials of various drugs developed by multinational pharmaceutical companies.

During plenary deliberations on the budget, senators cited PITC’s poor record in fulfilling its mandate as the country’s exclusive trading company “engaging in exports, commercial services, and special trade agreements” to support domestic industries.

They further discovered that the agency charges a commission of 1 to 4 percent as a “service fee.”

In a Nov. 18 letter to Drilon, PITC President and CEO Dave Almarinez defended the company’s practice of charging a commission on acquisitions.

“PITC is an autonomous corporation owned and controlled by the government and does not receive any subsidies from the national government,” Almarinez wrote.

“Part of the service and commercial rates obtained in the course of its commercial activities are used for the operating expenses of the corporation. Fifty percent of corporate net income is remitted to the Treasury Office as dividends, ”added Almarinez.

‘Zigzag way to shop’

Senate President Pro Tempore Ralph Recto previously said that one explanation for the procurement bottleneck was PITC’s “zigzag, brokerage-style buying.

Under the government’s vaccine procurement plan, according to Recto, “the government will borrow money from the Philippine Development Bank and the Philippine Land Bank, give it to PITC, which will handle the purchase, and then PITC will deliver vaccines to [Inter-Agency Task Force for the Management of Emerging Infectious Diseases] and the [Department of Health]. “

‘Very strict procedure’

Commenting on senators’ concerns Monday, Commerce Secretary Lopez said no funds deposited with the PITC had been lost.

The PITC acquisition “undergoes a very strict procedure,” which explains why it is so long, López said at a news conference. The process includes determining the technical specifications of the items to be purchased, he said.

Typically, there is a series of communications between PITC and the requesting government agency before the terms of reference are finalized, Lopez said.

“This process takes time,” he said.

Only after the terms of reference are finalized can the PITC receive the start signal to hold the tender, Lopez said.

Meanwhile, the funds for the acquisition are held in escrow so that PITC can immediately pay for the items purchased, he added.

If the tender fails, the funds are returned to the agency and the national treasury, López said.

The only amount left to the PITC is the revenue it generates, part of which finances its operations. The company charges a service fee or commission for its services.

Lopez said he had asked the PITC to submit his records and full accounting to the Senate.

Galvez at work

Presidential spokesman Harry Roque said questions about the performance of the PITC would not affect the country’s procurement of COVID-19 vaccines.

Roque said that President Duterte had appointed Carlito Gálvez Jr., head of the National Task Force Against COVID-19, to handle the procurement of the vaccines.

“The record of the PITC has nothing to do with this because Secretary Gálvez would make sure that we could import enough vaccines that could be used in our compatriots,” said Roque.

Gálvez, he added, would ensure that the country’s purchase of the vaccines was done “quickly and efficiently.”

–With a report by Leila B. Salaverria

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