Auditors: NFA must delegate some services to others

MANILA, Philippines—The National Food Authority (NFA) must privatize or delegate some of its services to other agencies, while keeping its mandate to ensure food security, to cut its debts and trading losses worth P180 billion, an audit team that reviewed the agency’s books said.

The audit team, composed of Jesus P. Posadas, Oscar A. Torralba and Arthur O. Juan, said the NFA should focus on its core mandate of national food security and let go of other services so that it can trim the unsustainable losses it incurred over the past decade.

The NFA, a government corporation, is tasked with stabilizing the price of the staple and ensuring that the country has enough buffer stocks during lean months. It sells rice to poor consumers and buys unmilled rice from farmers.

The agency also buys rice from governments and private companies abroad to fill the buffer stock.

Transfer of tasks

The audit team said the NFA should be “reengineered as a ‘national food agency.’ It shall concentrate its restructured budget and corresponding financial accountability solely on its core national food security mandate.”

The agency should cease dispensing rice subsidies to the poor and farmers because it does not have the manpower and the infrastructure to sell rice and assist farmers, according to the team’s report.

The audit team proposed that the agency just let other agencies such as the Department of Social Welfare and Development (DSWD) and the Department of Agriculture take over these tasks.

It noted that the NFA suffered leakages when selling rice, the bulk of which was supposed to go to the urban poor. Because the NFA sells its cheap rice in the open market, even those who can afford commercial rice flock to its stores, the audit team said.

The DSWD should take over this function of subsidizing consumers as the agency has a database on the poorest of the poor, the audit team said. “The DSWD has the means to identify the poor consumers,” the audit team said in an interview with the Inquirer.

The NFA, the audit team said, could also sell its rice to local government units and the Department of Education for its feeding program for a more targeted distribution.

The audit panel said the NFA policy of buying high and selling low had contributed to huge trading losses. The NFA spent about P77 billion for subsidy from 2000 to 2009, the report said.

Palay subsidy

As to the palay subsidy and farmers’ support, the audit panel said this task should be handled by the agriculture department.

The Department of Agriculture, with the help of the NFA, should prioritize buying palay from provinces where there is a rice deficit to encourage farmers there to plant rice.

“From 2000-2009, the NFA bought 2.3 percent of the total national palay production at an average price of P12.45/farmgate at P10.72 (or 16 percent over market). Total subsidy was P5.8 billion (P1.73/kilogram),” the report said.

The NFA, to cut its losses and ensure proper management of rice inventories, should also let the private sector do its work in distributing and storing rice.

The audit said the grains agency failed several times to ensure enough buffer stocks at certain months, which encouraged traders to increase their prices.

Its report proposed that the NFA “bid out the right to the private sector to finance rice, feed grains and basic meat imports with the option to acquire and market their financed commodity after payment of service fees.”

The agency should also “bid out the right to private sector to build, operate, lease grains and meats storage facilities and rice mills to keep strategic food reserves.”

It said the NFA could continue the private importation program but should tweak it to ensure that the playing field was level among rice traders.

Fictitious companies

The audit team noted that the private sector-financed rice importation program was marred by anomalies and fictitious companies were given licenses to import.

The audit team urged the NFA to bid out service fees and not to give rebates to commercial rice traders. It also suggested that the NFA do a background check on the participating rice firms to make sure that they are unrelated to one another and that they have the capital to buy rice.

The NFA should also invest in better rice intelligence reports so that it can import rice at the best time, the team said.