Government offices may be using DTI signature to avoid return of unspent funds – Drilon

MANILA, Philippines – Government offices may be using the controversial Philippine International Trading Corp. (PITC) either to circumvent their obligation to return unspent funds to the treasury after the fiscal year or to circumvent procurement rules, said the Senate Minority Leader Franklin Drilon on Tuesday.

“It appears that government agencies are using PITC to circumvent the validity of year-end allocations,” Drilon said in a privileged speech.

“Instead of giving back to the General Fund the money that they cannot use, it appears that the government agencies deposit the funds in PITC,” he said. Thus, “billions of pesos in public funds are parked in the bank accounts of the PITC.”

Drilon’s allegation, if true, could explain why PITC has continued to receive takeover requests from its client agencies despite the huge backlog of undelivered goods, one of the mysteries surrounding the finding that cash deposits received by the state trading company had skyrocketed to P33 billion by the end of 2019.

Deliveries begin

In a letter sent to the Inquirer on Monday, Commerce Secretary Ramón López, president of the PITC, said the company had begun to turn over applications from various government offices.

“The DTI (Department of Commerce and Industry, PITC’s parent agency) also received a report from PITC that many of the transactions mentioned in the article are already being delivered,” Lopez said, referring to the Inquirer report on Drilon’s allegation. that billions of pesos in public funds were “parked” in the PITC, representing undelivered procurement requests (Inquirer cover, November 23).

“We emphasize that if the bidding processes for these transactions fail, all funds are returned to the national treasury,” Lopez said.

The trade chief said he appreciated Drilon’s call for a Senate investigation into the matter, adding that he had directed the PITC to submit to the Senate “the status and full accounting of all its transactions.”

The Inquirer has requested a copy of an updated list of completed PITC submissions.

One year to spend funds

Under the cash-based rules of the General Appropriations Act (GAA), the government has only one year to release and spend funds for the acquisition of budget items, unlike the traditional rules based on obligations with validity of two years for the assignments.

Section 10 of the 2020 GAA mandates the reversal of funds to the treasury when the terms have expired or “when they are no longer necessary to achieve the purposes for which the funds were established.”

The PITC, tasked with procuring coronavirus vaccines that are not yet available, is now at the center of a controversy involving billions of pesos in dormant public funds in its coffers due to procurement bottlenecks. .

Senate President Pro Tempore Ralph Recto said he expected Cabinet to “dictate the pace” of the vaccine procurement “and not the rank PITC fans whose tenure in office thus far has been flawless with success.” .

“If they already have trouble buying vinegar, what else about vaccines?” Recto said in a statement Tuesday.

Citing the Audit Commission’s (COA) annual report on PITC and its own financial statements in its insider speech, Drilon said that PITC consumer deposits showed “tremendous growth” in five years, from P4.8 billion. in 2015 to P33.4 billion in 2019..

He said he received information that “some agencies turn to the PITC to avoid liability related to acquisitions.”

After all, it is the PITC and not the contracting agency that would ultimately be responsible for any irregularities in the bidding procedures, Drilon said.

“So if there is a problem with the tender, the agency will not be involved. Is this an outline? ” he said.

This, Drilon added, led him to conclude that the PITC was being used as a “pawn.”

Once the agencies are unable to bind and disburse the funds allocated to them by the end of the year, he said, the allocation will expire and the funds will return to the national treasury. This, he noted, will negatively affect the absorptive capacity of the agencies and can be used by the Department of Budget and Management (DBM) to reduce its allocations in the next budget cycle.

Coverage of inefficiencies

But this problem is solved if PITC makes the acquisitions, Drilon said. “PITC effectively provides a mechanism to hide inefficiencies in government,” he said.

“The government is having a hard time raising funds due to falling revenues. But here there are government agencies that deposit their budgets in the PITC so that it appears that the funds are obligated, where, in truth and in fact, it is sleeping in the coffers of the PITC and interest is being earned, “he said.

“It is not surprising, Mr. President, that public spending, as part of GDP, is a low 5.8 percent,” added the senator when addressing the president of the Senate, Vicente Sotto III.

Drilon reiterated his call for the return of the billions of pesos in public funds parked at the PITC.

“These P33.4 billion in cash have been kept for years in PITC accounts. Why? It just means that national origin agencies don’t need the funds for projects budgeted under GAA, ”he said.

“If these funds have been there, doing nothing, in the PITC accounts, it means that government agencies do not have an immediate and overriding need for these projects,” he said.

He also questioned the authority of the PITC to impose a service fee of 1 to 4 percent for acquisitions.

“You will be even more surprised by the coverage or the type of acquisitions that PITC is carrying out for the government bureaucracy: from face towels, T-shirts, shoes, guns, X-ray machines and fire trucks to infrastructure projects like fire stations, lighthouses, multipurpose rooms and training centers, ”he said.

Processes explained

In his letter to the Inquirer, López explained the procurement processes that cause bottlenecks in PITC transactions.

“We wish to emphasize that the terms of reference (TOR) for these projects are thoroughly reviewed with client agencies prior to the bidding process to ensure maximum transparency and neutrality for all bidders,” he said.

“In addition, the COA audits all procurement projects to ensure compliance with the Law of the Republic No. 9184, or the Public Procurement Law, and the related rules and regulations. We would like to point out that the terms of reference are coordinated with other agencies, ”he said.

These, according to López, include the finalization of technical specifications that “generally take time as they are closely discussed with the agencies.”

“TORs go through an iteration process before finalizing. Since 2018, the PITC has also adopted the policy reform that agency funds should not be transferred until there is a finalized ToR, as the preparation of the ToR takes time, ”he said.

“Only when the terms of reference are finalized, the funds are transferred to the PITC and the bidding process begins to be administered,” said López. “As such, the agencies cannot transfer the funds at the end of the year just to prevent those funds from being returned to the national treasury.”

Commission defended

PITC “just manages the bidding process,” he emphasized.

López also defended that PITC charge a commission for acquisitions.

“It is allowed to charge service fees following the fee schedule. It is a government corporation and has the mandate to generate income since it does not receive any budget allocation, ”he said.

Half of PITC’s income is declared and remitted as cash dividends to the treasury, he added.

López, when asking the Inquirer to publish his letter in its entirety, said that “there is no controversy on these matters, as all government procedures and the mandates of government agencies and government corporations are followed.”

“The DTI and its attached agencies, under the leadership of President Rodrigo Roa Duterte, remain committed to transparency and accountability,” he said.

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