COA: PCSO owes gov't P12.6B of unremitted earnings

The Philippine Charity Sweepstakes Office (PCSO) did not remit P8 billion of its earnings to the national government as required by law, according to the Commission on Audit (COA).

Aside from this, COA, in its 2018 audit report for PCSO, said Small Town Lottery operators owe the state charity agency P4 billion worth of shortfall.

According to COA, the PCSO failed to remit P8.426 billion worth of dividends to the national government from 1994 to 2016 in alleged violation of Republic Act 7656.

The law requires government-owned or -controlled corporations (GOCC) to declare and remit at least 50 percent of their annual net earnings as cash, stock or property dividends to the national government.

Likewise, the IRR of RA 7656 provides that all GOCCs "should annually declare and remit dividends directly to the National Government in the name of the Treasurer of the Philippines on or before May 15 of each year."

"This is a reiteration of the audit observations as Management has not complied yet with recommendation to remit dividends due the national government," the COA said.
"Review of the financial statements of the PCSO from 1994 to 2016 revealed that it had total net earnings of P16.852 billion during those years. Thus, total dividends due to the national government amounted to P8.426 billion."

In response to COA's findings, the PCSO argued that it does not have annual net earnings since it generates savings from operations after deducting all the operating expenses which are reverted to and form part of the Charity Fund.

Exempted?

In addition, the PCSO cited the Office of the Government Corporate Counsel (OGCC) argument in its Opinion No. 198 dated December 20, 2016 which states that the PCSO is not covered by RA 7656 as its net earnings were already allocated by law, earmarked for certain expenses, and all unutilized balance in any of its funds are reverted to Charity Fund.

State auditors, however, countered that under its memorandum dated January 17, 2018, the provisions of RA 7656 should be interpreted in a way that they can be harmonized in accordance with the rules on statutory construction.

"The interpretation that any balance from the Operating Fund will be reverted back to the Charity Fund only after the declaration and remittance of the required dividends under RA No. 7656, is more in accord with the purposes and intents of the law," COA said.

In addition, COA cited that PCSO is not among the GOCCs exempted from the coverage of RA No. 7656 as enumerated under Section 4 of the Revised IRR to RA No. 7656 dated 2016.

"We recommended that Management settle the P8.426 billion dividends in arrears due to the National Government in compliance with RA No. 7656, once their request for exemption will be denied by the Department of Finance,” COA said.

PCSO conceded that the Department of Finance indeed confirmed that the PCSO is not exempted from RA No. 7656 but still maintained that the PCSO need not remit the P8.4 billion since the DOF, in the same letter, recognized PCSO’s mandate that all balances of any fund will regularly revert to and form part of the Charity Fund.

"To date, the PCSO is still in negotiation with the DOF, on whether or not it would be required to remit the dividends from 1994 to 2016 and is also in close coordination with the said Department regarding the proposed settlement of arrears in dividends," COA quoted PCSO as saying in its report.

Uncollected P4.6 billion Small Town Lottery proceeds

PCSO’s authorized Small Town Lottery (STL) agents were no better than PCSO, posting a P4.6 billion Presumptive Monthly Retail Receipts (PMRR) or STL proceeds shortfall as of December 2018 according to COA.

“Verification disclosed that out of the 85 operational STL agents, the P4.607 billion PMRR shortfalls of 67 STL agents remained unsettled,” state auditors said.

Of the P4.6 billion, P2.318 billion dates back to 2017, an amount that COA brought to the attention of PCSO Management in March 22, 2018.

“Despite the recommendation for its immediate collection, only 22.34 percent of the total shortfall due in 2017 was remitted by the concerned STL agents in 2018,” COA added.

In response to COA’s findings, PCSO’s Branch Operations Sector (BOS) personnel explained that STL agents with unremitted shortfall due as of December 31, 2018 were already notified to settle their accounts.

Only 13 STL agents with PMRR shortfalls, however, responded by issuing 13 post-dated checks amounting to P164.252 million as guarantee of payment for their shortfalls.

Per COA, the rest of STL agents did not take any action.

Under the law, the non-remittance or under-remittance by the STL agents of proceeds due to PCSO at any given time is a ground for suspension, cancellation or revocation of STL agency agreements.

“Had the PMRR Shortfalls due of P4.607 billion been promptly remitted to the PCSO, it could have been utilized to finance its various charity programs, particularly the Individual Medical Assistance Program (IMAP), where many less fortunate individuals depend for their medical needs,” state auditors said.

“We recommended that Management intensify collection of the PMRR shortfalls due from the concerned STL agents so that the same can be utilized for the various charitable programs of the PCSO, particularly the IMAP,” COA added.

In the event that PCSO fails to do so, state auditors said that PCSO, as provided by existing laws, should suspend and/or revoke the STL agents’ Authorities to Operate (ATO) and forfeit their cash bonds corresponding to the amount of their PMRR shortfalls.

PCSO, in the same COA report, said that they already issued a Memorandum dated April 30 this year directing all department and branch managers to strictly monitor the PMRR compliance within their respective areas, more particularly sales shortfall and under remittances.

Likewise, the same memorandum had provided for the process flow to be observed in cases of non-compliance and the actions to be taken in case of infraction.

Another directive was also issued to all department and branch managers in line with the directive of the chairperson and interim general manager to conduct aggressive and sustained collection of shortfalls of identified STL agents.

Finally, the department and branch managers were likewise directed to endorse to the Legal Department cases of ASAs who failed to settle their obligation within the prescribed period.—KBK/LDF, GMA News