DOF to PITC: Return P1 billion in interest on ‘idle’ funds

Finance Secretary Carlos G. Dominguez III (Photo from the Department of Finance)

MANILA, Philippines — Finance Secretary Carlos Dominguez III is pressing Philippine International Trading Corp. (PITC) for the turnover to the national coffers of over P1 billion in interest on P33 billion in taxpayer money sitting idle in the accounts of the state-run procurement company, the Inquirer learned on Sunday.

In a Nov. 27 letter, the head of the government’s economic team urged Trade Secretary Ramon Lopez, the PITC chair, to revert to the treasury P1.151 billion representing the balance of interests earned on funds held in trust by PITC for its client agencies to purchase various goods, such as fire trucks, army boots and first-aid kits.

“Following our discussion, we would like to request the return to the Bureau of Treasury by PITC, the interest earned on such funds held in trust,” Dominguez said in the letter, a copy of which was sent to Senate Minority Leader Franklin Drilon, who had exposed the existence of billions of pesos in idle funds in the trading company overseen by the Department of Trade and Industry (DTI).

“From 2018 to 2019, the interest earned on such funds totaled P1.151 billion,” said Dominguez, whose letter Drilon shared exclusively with the Inquirer on Sunday.

Parking unused funds

Dominguez called Lopez’s attention to the cash and balances held in trust by PITC for several government agencies amounting to P33.3 billion by the end of 2019. That went slightly down to P32.6 billion as of Oct. 31, representing PITC’s completed deliveries, but the remaining balance indicated the huge backlog of procurement requests.

Lopez declined to comment on Dominguez’s letter. PITC President and CEO Dave Almarinez has not responded to a request for comment from the Inquirer as of press time Sunday.

Earlier, Drilon said he believed government agencies were choosing to “park” their unused funds for procurement of goods with PITC to dodge budgeting and procurement laws that required them to return unspent appropriations to the treasury at the end of the fiscal year.

In a letter to Budget Secretary Wendel Avisado dated Nov. 25, Dominguez asked the Department of Budget and Management (DBM) to recommend to the President the return of the entirety of PITC-held funds to the treasury.

Lopez, however, insisted that there was nothing irregular in PITC’s transactions, arguing that all funds deposited with the corporation were either ongoing procurement or already awarded to suppliers.

Dominguez, in his letter to Lopez, cited the Commission on Audit (COA) 2019 audit report on PITC showing that the company apparently did not follow procedure by recording the interest earnings on the fund transfers as income and using the money for its operations instead of returning it to the treasury.

“[Interest] earnings aggregating P581.135 million as of Dec. 31, 2019, on fund transfers from various (source agencies) invested in money market placements were recorded as income of PITC, instead of remitting the same to the national treasury, which is not in accordance with Presidential Decree No. 1445 and Department of Finance Circular No. 01-2017,” the COA report said.

New funding sources

In calling for the return of PITC’s interest earnings, Dominguez noted the government’s urgent need for new funding sources while grappling with the effects of the coronavirus pandemic and a series of highly destructive natural disasters.

“This is in line with our continuous efforts to identify sources of fiscal space and to accommodate the country’s various medical and social needs as a result of the pandemic, compounded by the successive calamities which recently hit the country,” he wrote.

On Saturday, Drilon said PITC had used “a devious scheme” to illegally keep the P1 billion in interest earnings.

The opposition senator said PITC had shortchanged the government by holding on to the interest generated by the money it had received from various state agencies for purchasing goods and services in violation of the Government Auditing Code of the Philippines, or Presidential Decree No. 1445.

“We are being taken for fools. What they are remitting to the government is loose change compared to the billions of pesos that they are able to rake in,” he said.

It was the latest disclosure of alleged irregularities by PITC made by Drilon in the course of his scrutiny of the proposed P4.5-trillion national budget.

The senator cited documents showing that PITC remitted only P392.6 million from its interest earnings from 2016 to 2019, representing less than a third of the total P1.4 billion.

Duplication of functions

PITC is mandated to “engage in exports, trade services and special trading arrangements” while ensuring the “most efficient and cost-effective procurement services for the government.”

Its functions also include helping stabilize price and supply of goods and services, and create “strategic alliances” that promote the sustainability of enterprises.

In a radio interview also on Sunday, Drilon suggested that it was time to abolish PITC since it was just duplicating the functions of the DBM’s own Procurement Service, as well as the bids and awards committees of government agencies.

Sen. Panfilo Lacson made a similar comment last week, citing the need to “revisit the functions” of PITC.

The Government-owned and -controlled Corporation (GOCC) Governance Act grants the President vast powers to reform, reorganize or abolish GOCCs, such as PITC.

The law empowers the Governance Council for GOCCs (GCG) to “evaluate the performance and determine the relevance of the GOCC, to ascertain whether such GOCC should be reorganized, merged, streamlined, abolished or privatized.”

The GCG may also recommend to the President the abolition or privatization of any GOCC. INQ