MANILA, Philippines — Some P33 billion in public funds is sitting idle in the bank accounts of Philippine International Trading Corp. (PITC) as of December, as shown by audit documents that give a fuller picture of the state-run trading company that has been tasked with procuring COVID-19 vaccines.
The amount, representing cash transfers by more than 80 government offices that are still waiting for their deliverables, is almost twice as big as the earlier P18-billion estimate of Senate Minority Leader Franklin Drilon, who is seeking a Senate inquiry into PITC’s alleged poor performance.
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 overseen by the Department of Trade and Industry (DTI) reported total assets of P34.7 billion and total liabilities of P33.5 billion as of Dec. 31, 2019.
Of that sum, total fund transfers made by “client agencies,” referring to government offices, had accumulated to P33.28 billion as of the end of 2019, as shown by the Commission on Audit (COA) annual report on PITC released in August. In 2018, the figure stood at P30.7 billion.
The documents showed that the bulk of the money was “cash in bank,” Philippine peso-denominated, and held in trust by PITC for different government agencies for the procurement of various items.
But the COA report found that the balances of fund transfers from client agencies amounting to P9.176 billion from 2009 to 2019 “remained unutilized as of Dec. 31, 2019, due to pending procurements.”
“These unutilized fund transfers were not yet returned to the concerned client-government agencies and/or the national government, contrary to the provision under Section 10 of the General Appropriations Act of 2019,” state auditors noted.
But PITC kept getting 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 procurement of goods. In 2018, the funds transferred by government offices to PITC amounted to P14.89 billion.
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.
Funds intact
Trade Secretary Ramon Lopez, the PITC chair and trade chief, said all funds held by the company for requesting agencies were intact. Any unused funds given to it for procurement of goods are returned to the national treasury, he said.
If procurement takes time, it is because it “undergoes very strict procedure,” Lopez said.
On Monday, Drilon called on the agencies that had entered into procurement deals with PITC to “rescind” the contracts so the money could be immediately returned to them and then reverted to the national treasury, possibly to be diverted to calamity or pandemic response.
In a phone interview, Drilon said the bulk of those cash deposits was stored in PITC’s bank accounts anyway, only collecting interest over several months or even years, while the trading company took its time importing the ordered items.
Ramon Lopez
“Since the items have not been delivered, then you can question if there is an immediate need for them. If it has not been delivered since 2017, since 2018, since 2019, you can question if there is an immediate need and if the procurement 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 rose 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 it just keeps growing every year,” he said.
‘Outlived its purpose’
Sen. Panfilo Lacson said PITC “may have outlived its purpose,” suggesting it might be wise to reconsider the government’s decision to let the agency import the not-yet-available COVID-19 vaccines in the coming months.
“Utilizing PITC for the procurement requirements of several national government agencies may have to be revisited and stopped, not only to save on unnecessary expenses amounting to billions of pesos in delays and commissions or service fees,” he said.
“That said, it is only prudent that the government at least take a long hard look at the involvement of the PITC in the procurement of COVID-19 vaccines,” Lacson said in a statement.
PITC was recently tasked with procuring COVID-19 vaccines on the heels of reports of successful trials of various drugs being developed by multinational pharmaceutical companies.
During plenary budget deliberations, senators cited PITC’s poor track record in fulfilling its mandate as the country’s exclusive trading company “engaging in exports, trade services and special trading arrangements” to support domestic industries.
They learned further that the agency charges a commission of 1 to 4 percent as “service fee.”
In a Nov. 18 letter to Drilon, PITC President and CEO Dave Almarinez defended the firm’s practice of charging a commission for procurement.
“PITC is a self-sustaining government-owned and -controlled corporation and does not receive any subsidy from the national government,” Almarinez wrote.
“Part of the service and trading fees earned in the course of its business activities are used for the operational expenses of the corporation. Fifty percent of the corporate net income is remitted to the Bureau of Treasury as dividends,” Almarinez added.
‘Zigzag way of buying’
Senate President Pro Tempore Ralph Recto earlier said one explanation for the procurement bottleneck was PITC’s “brokerage-type, zigzag way of buying.”
Under the government’s vaccine procurement plan, according to Recto, “the government will borrow money from Development Bank of the Philippines and Land Bank of the Philippines, give it to PITC, which shall do the buying, and then PITC will turn over the vaccines to the [Inter-Agency Task Force for the Management of Emerging Infectious Diseases] and the [Department of Health].”
‘Very strict procedure’
Commenting on the senators’ concerns on Monday, Trade Secretary Lopez said no funds lodged with PITC had been lost.
PITC’s procurement “undergoes very strict procedure,” which explains why it is lengthy, Lopez told a news briefing. The process includes determining the technical specifications of the items to be procured, he said.
There is usually a series of communication between PITC and the requesting government agency before the terms of reference could be concluded, Lopez said.
“This process takes time,” he said.
Only after the terms of reference are finished that PITC can get the go-signal to hold the bidding, Lopez said.
In the meantime, the funds for the procurement are held in escrow so that PITC can immediately pay for the procured items, he added.
If the bidding fails, the funds are returned to the agency and to the national treasury, Lopez said.
The only amount left with PITC is the income it generates, part of which funds its operations. The company charges a service fee or commission for its services.
Lopez said he had asked PITC to submit its records and full accounting to the Senate.
Galvez on the job
Presidential spokesperson Harry Roque said the questions about PITC’s performance would not affect the country’s procurement of COVID-19 vaccines.
Roque said President Duterte had designated Carlito Galvez Jr., head of the National Task Force Against COVID-19, to handle the acquisition of the vaccines.
“PITC’s track record has nothing to do with this because Secretary Galvez would ensure that we would be able to import enough vaccines that could be used on our countrymen,” Roque said.
Galvez, he added, would ensure that the country’s purchase of the vaccines would be done “promptly and efficiently.”
—With a report from Leila B. Salaverria