COA wants review of aerospace agency’s viability after P178-M losses 

Commission on Audit. (INQUIRER FILE PHOTO)

MANILA, Philippines – The Commission on Audit (COA) has urged the Philippine Aerospace Development Corporation (PADC) management to review whether the agency should still operate in view of losses worth P177.9 million in the past six years.

In an audit report released on Monday, COA said that PADC is “no longer performing its core mandate,” and the financial losses will require a “comprehensive review of its structure, policies, financial capability and business market” to determine if the PADC’s continued existence is still sustainable and economically viable.

“In the late 90’s, the revenue/earnings of PADC declined over the years. In the CY 2017 audit, it was reported that PADC’s operational losses for the past five consecutive years (CY 2013 – 2017) had amounted to P149.615 million,” the commission said.

“CY 2018 is no different as PADC’s sales revenue totaled only to P5.918 million, with cost of sales and operating expenses of P34.207 million, resulting to operating losses of P28.289 million,” it added.

PADC, a government owned and/or controlled corporation, was created in 1973 to develop and maximize the country’s aviation industry, targeted at bolstering the security capabilities of the military.

“The goal was to establish a modernized and reliable technical repair and maintenance support system and a developed aircraft assembly and manufacturing industry, that will meet the needs of the aviation industry, both private and government, particularly the Armed Forces of the Philippines (AFP),” COA said.

According to COA, interviews with PADC personnel said that the corporation had a good standing in the 90s, because major commands of the AFP and the Philippine Air Force were tapping its services.

Now, financial losses were being compensated by lending three hangars inside the Manila International Airport Authority to commercial airline companies.

“PADC’s continuous existence is sustained primarily by the three hangars leased by Cebu Pacific and eight others. These hangars are located and installed in the properties of Manila International Airport Authority (MIAA) which are leased to PADC,” COA said.

“Rental income from these properties in CY 2018 aggregated P43.448 million, which compensated PADC’s current operational loss of P28.289 million, which resulted to positive net income for the Corporation,” it added.

Not business-friendly

State auditors also mentioned other factors, which hindered PADC from generating revenue, such as unsettled tax obligations from 2003 to 2004, which prevent the office from securing tax clearances.

PADC cannot participate in public bidding without tax clearances, as mandated by Republic Act 9184 or the Government Procurement Reform Act.

Aside from that, PADC’s accreditation to repair — one of its primary tasks — has been expired since August 2018.  It has also been blacklisted by the Philippine Navy.

“Application for renewal was submitted to Civil Aviation Authority of the Philippines (CAAP) but was not acted upon due to lack of documents showing compliance with the required trainings of PADC’s technical personnel and the non-calibration of PADC’s equipment,” COA explained.

“PADC was blacklisted by the Philippine Navy (PN) in CY 2018 for failure to deliver/comply with conditions of the contract entered by the parties in CY 2015,” COA added.

The commission noted that PADC’s office was also poorly maintained, with some areas having no landline phones and internet connectivity.

“PADC’s offices/rooms are in poor condition and do not portray a reputable business image to the Corporation […] landline and internet connections were made available only in February 2019,” COA added.

COA has discussed the issues with PADC’s management, who said that steps are being taken to fix the problems.  Also, management expects developments to happen after PADC was transferred under the Department of National Defense, effective March 15, 2019.

“Management commented that […] The blacklisting order of PN against PADC had been shelved and the former signified its intention for the latter to perform the IRAN (Inspection Repair As Necessary) of PN 311,” COA relayed.

“Likewise, Memorandum of Agreement (MOA) has been signed with Philippine State College of Aeronautics (PHILSCA) for the maintenance of their aircraft which will resume immediately upon the renewal of PADC’s AMO accreditation with CAAP,” they added. (Editor: Jonathan P. Vicente)

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