COA notes P2.6-B overstatement of coco levy fund

The Commission on Audit (COA) has noted an overstatement amounting to P2.626 billion in the Presidential Commission on Good Government (PCGG)’s accounting and inventory of the coco levy assets.

In its “Special Audit Report on Coco Levy Assets” uploaded on its website last June 30, the COA said that the value of the coco levy assets must be adjusted to P111.252 billion from P113.878 billion reported by the PCGG as of Dec. 31, 2020.

The PCGG submitted its accounting and inventory report to state auditors on April 12, 2021.

“Based on the results of audit and after considering the effects of the foregoing audit observations and other audit limitations and exclusions... the total audit adjustments to be made amounted to P2,626,074,699.53 (net), representing an overstatement in the total reported coconut levy assets of P113.878 billion as of Dec. 31, 2020,” the COA report read.

“Thus, the total audited amount of coconut levy assets as of even date is only P111.252 billion,” it added.

Furthermore, the COA said that as discussed during the 7th Trust Fund Management Committee held last May 4, the P111.252 billion new valuation of coco levy assets is still “subject to further adjustments” to reflect “the effects of subsequent events.”

The COA said that among these “subsequent events” not factored in during the conduct of its special audit were the “conversion of P12 billion capital notes of the Philippine Deposit Insurance Corporation (PDIC) in United Coconut Planters Bank (UCPB) and the subsequent issuance of P12 billion special preferred shares to PDIC on July 9, 2020.”

The COA also cited the “privatization or reacquisition from UCPB of Balmoral Resources Corp. with net equity of P11.076 million as of Dec. 31, 2019 by the Villar Group of Companies in 2017,” as well as the “exclusion of unverified assets of United Coconut Planters International.”

The COA said that its special audit revealed that 18 of the 70 coco levy-financed companies included in the PCCG’s accounting and inventory report were no longer in operation.

The COA said that of these 18 companies, the PCGG only disclosed that 10 have already ceased their operations but no reason was provided why their assets have yet to be liquidated “despite their inactivity since 1988.”

Furthermore, the COA said that P247 million worth of shares of stocks of 14 Coconut Industry Investment Fund (CIIF) holdings companies have yet to be reconveyed and transferred in the name of the government despite an earlier executive order as well as a court order.

“The titles over the shares of stocks of the 14 Holding Companies amounting to P247 million were not yet reconveyed and transferred to the Republic of the Philippines as of audit date, contrary to EO (Executive Order) No. 180 dated March 18, 2015 and Sandiganbayan Resolution dated Aug. 7, 2018,” the COA said.

The audit body, nonetheless, noted that the 14 CIIF holdings companies have agreed to coordinate with the PCGG, Bureau of the Treasury, Governance Commission for Government-Owned or Controlled Corporations, and the Office of the Solicitor General for the implementation of the reconveyance and transfer of title of their shares of stocks to the government.

In its Aug. 7, 2018 ruling, the Sandiganbayan Second Division ordered the turnover to the government of P83 billion in assets acquired through the CIIF for the benefit of coconut farmers.

Ordered by the anti-graft court to be transferred to the government were six companies known as the CIIF Oil Mills Group, 14 CIIF holdings companies and these holding companies’ 753.85 million CIIF shares of stocks in San Miguel Corp. (SMC) worth P71.04 billion.

The Sandiganbayan’s transfer and reconveyance order was in compliance with the Supreme Court’s landmark decision on Jan. 24, 2012, declaring the CIIF as “public funds.” Thus, the firms created through CIFF – including all their assets – must be reconveyed to the government.

The Sandiganbayan stressed that all the assets to be reconveyed to the government “shall be used only for the benefit of all coconut farmers and for the development of the coconut industry,” in accordance with SC ruling.

The coco levy funds refer to various funds generated from levies, taxes, charges and other fees exacted or imposed to coconut farmers, planters, millers, refiners, processors, exporters, desiccators and other end-user of copra or its equivalent in coconut products.

During martial law, coconut farmers were made to contribute to the Coconut Industry Development Fund, which formed part of the coco levy funds, for the supposed development of the coconut industry and to give them shares of investments.