COA tells GSIS to go after 21 firms owing P2.11 billion

The Government Service Insurance System (GSIS) should go after private companies whose loans amounting to more than P2 billion remain unpaid, with accumulated interest reaching more than P800 million, according to the Commission on Audit (COA).

In a 140-page report, state auditors noted that the loans granted by the GSIS to 21 delinquent private companies have remained uncollected for 24 to 53 years.

According to the COA, this was due to the “absence of concrete action plan” of the GSIS to recover the unpaid loans amounting to P2.11 billion, with accrued interest worth P823.15 million.

“[This] resulted in the opportunity loss to reinvest and yield incremental income, wastage of government funds, as well as the possibility that these private loans would remain recorded as fully impaired in the books of accounts over an indefinite period of time,” the COA said in its report dated June 6.

State auditors did not name the 21 delinquent borrowers, but provided information on each company.

The biggest, identified only as “Company 1,” had a loan amounting to P600 million that remains unpaid for the past 25 years.

Failure to foreclose

The COA report stated that “Company 1” was a property developer whose loan security included water theme parks, condominium units, and houses and lots in a residential subdivision.

Citing the GSIS records, state auditors found that the borrower was “in default” in paying the loan, prompting the state pension fund to foreclose some of its properties in 2003.

These included Water Fun in Muntinlupa City and Quezon City; 102 units in St. John Condominium in Quezon City; 366 lots in Mary Homes Subdivision in Cavite, and the rights to 240 units in Metro Homes in Manila.

The GSIS records showed that the loan for this borrower was approved on Dec. 10, 1997, and was payable for five years at an interest rate of 18 percent a year.

Another big borrower flagged by the COA and identified only as “Company 3” obtained a P353.99-million loan from the GSIS on Aug. 26, 1994, payable over seven years at an interest rate of 16 percent annually.

“Records disclosed that no payment was made by the borrower on the loan secured by properties with aggregate loanable value of P400.898 million at the time of loan granting,” the COA report noted.

Auditors also noted that the GSIS did not foreclose the properties assigned by the borrower as collateral for the loan despite the firm’s failure to pay.

Among those listed as collateral of “Company 3” were Adelina Complex 3, Phases 4, 5, and 6 in Biñan, Laguna; Adelina Complex Extension in Trece Martires, Cavite, and properties in Xavierville Avenue in Quezon City and in Pacita Complex I in San Pedro, Laguna.

One of the 21 companies listed by the COA was the state-owned Philippine Ports Authority (PPA), but auditors pointed out that this was not a loan contract but an agreement wherein the GSIS would fund the proposed development and construction of the Manila International Port/International Cargo Terminal.

The GSIS was to set aside an amount not exceeding P85 million to be used for the reclamation, land development, and construction of buildings, according to the COA.

It was not mentioned when the agreement was made, but state auditors said the outstanding balance by the PPA has been unpaid for the past 46 years.

Under Presidential Decree No. 1284, the responsibility of developing and further enhancement of the International Cargo Terminal had been transferred to the PPA, but prior to the transfer, the COA said the GSIS was able to extend P2 million to finance the Manila International Ports Terminal Inc. (Mipti) project.

File charges

The same decree required the PPA to reimburse the GSIS the “actual reasonable expenses” determined by a committee composed of representatives from the COA, PPA and Mipti.

Based on the committee’s findings, the “actual and reasonable expenses” incurred by Mipti were only P1.38 million, leaving an unaccounted balance of loan worth P619,000.

“When GSIS sent a collection letter to PPA for the collection of the said amount in CY 2000, PPA refused to pay the amount, contending that they have already paid the amount as evidenced by two official receipts issued by GSIS in CY 1978,” the COA said, adding that the P1.38 million “remained in the books of GSIS as part of the loan accounted” as of Dec. 31, 2022.

“It is worth mentioning that GSIS considered the amount as loan and computed interest and surcharges,” it added.

State auditors reiterated its recommendation in the previous years, such as the creation of a task force, committee or team that would focus on the recovery of outstanding private loans with interests and surcharges.

It also told the GSIS to update the total loan balances of the accounts and formulate a concrete action plan for the recovery of the loans.

The GSIS was also told to file criminal or civil cases that need to be pressed against some of the 21 companies and for the agency to “identify and resolve” factors that caused the delays in reaching final settlement agreements and negotiations with the borrowers.

READ: COA to GSIS: Collect P 6.6 million from separated employees