COA flags PCSO for 15.89-B non-charity spending

The Commission on Audit (COA) has warned that the Charity Fund (CF) of the Philippine Charity Sweepstakes Office (PCSO) may soon be depleted as it uncovered the disbursement of 15.89

billion to finance activities not included in the state lottery firm’s mandate to help the poor.

This was learned from the 2017 annual audit report for PCSO which also disclosed that lotto thermal paper it has procured was al-

legedly overpriced by P291.48 million by supplier TMA Group of Companies Pty Limited (TMA), an Australian firm locked in a long legal controversy with the PCSO in disagreements over the supply contract.

COA also issued the following audit observations in its PCSO audit report:

- Conflicts over the lotto paper supply agreements entered into by PCSO with TMA and the Philippine Gaming Management Corporation have resulted in the “critical inventory balance of lotto supplies” during the year.

- The On-Line Keno Gaming Operations of PCSO have incurred deficits in the prize fund from 2006 to 2017, prize payouts having exceeded the allocated amount for prizes by 14.283 billion.

- The 12.2 million for the 2017 PCSO Christmas Party at EDSA Shangri-La Hotel and resort, with the state lottery firm spending 12,000 per head for 1,100 officials and employees, is considered an extravagant expenditure.

- For paying 11.469 million in goods and services for the PCSO 2017 Christmas celebration, suppliers were freed from payment of withholding tax. Not related to charity programs

“Expenses not related to charity programs/projects, hence not in accordance with Section 6.B of RA 1169, as amended, totaling 15.89 billion were charged to the CF, which may deplete the same and eventually affect the delivery and implementation of the mandated purposes of the CF,” COA said.

For 2017, the charity fund utilization reached 118.035 billion, exceeding the net allocated amount of 114.405 billion, thus, incurring a 13.533-billion deficit.

The COA said disbursements from the Charity Fund that should have been excluded were the following: Commission on Higher Education program – 1318,589,872; payment of documentary stamp taxes to the Bureau of Internal Revenue, 15,298,392,920.89; salaries of employees assigned to the PCSO Charity Clinic, 167,980,884.41; and medical benefits of all PCSO employees, 1204,593,025.54.

“We also noted that the 11.5 billion allegedly transferred from the OF (Operating Fund) to the CF (Charity Fund) was a misrepresentation,” COA auditors said.

The COA asked the PCSO management to stop the practice of charging non-charity expenditures to the CF.

Responding to the audit observation, the PCSO management said that being health related, the expenses for the charity clinic were taken from the CF.

Officials also stressed that the CHED contribution is in compliance with the “provisions of the law” and the documentary stamp expenditure was an approved decision made by the PCSO board on April 27, 1996.

Lotto paper supplies The COA report said: “Lotto paper supplies procured from TMA during CYs 2015 to CY 2017 were overpriced by 1291.481 million because the unit costs were not based on the average increase in Consumer Price Index, contrary to the provisions stated under Section 6.3 of the ‘Contractual Joint Venture Agreement (CJVA) between PCSO and TMA Group of Companies PTY. Limited (TMA).”

Under the CJVA, the price of all paper products may only be adjusted annually based on the CPI for the entire term of the joint venture, the report said.

In CPI increases from September, 2011, to May, 2017, the costs of thermal paper (TP) and bet slips (BS) were computed 1226,847 for TP and 10.2917 for BS in November, 2015; 1230.373 for TP and 10.2962 for BS in September, 2016 and 1231.940 for TP and 10.2982 BS in May 2017.

However, prices of Purchase Orders (PO) issued to TMA from 2017 to 2017 “reflected unit prices of thermal paper and bet slips higher than the CPI adjusted units during the period, the COA report said.

Under the POs, the prices indicated were the following: 1 365,000 for TP in November, 2015; 1362.500 for TP and 10.4406 for BS in September, 2016; and 1362.500 for TP in May, 2017.

When computed, the costs of TP and BS were overpriced by a total of 1207.178 million and 183.303 million, respectively, the report said.

State audit examiners asked the PCSO management to demand “for an immediate refund of the overpayment” and guarantee next time the strict compliance of vital provisions of the Contractual Joint Venture Agreement.