COA: NFA used P5 billion for loan payment instead of buying rice

Adrian Ayalin, ABS-CBN News

Posted at Aug 08 2018 04:38 PM

MANILA - The Commission on Audit questioned the decision of the National Food Authority to use the P5.1 billion subsidy from the national government as payment for maturing loans instead of allocating the funds for the food security program of the agency. 

In the 2017 audit report on the NFA, government auditors said the agency received the amount on March 2, 2017 representing the national government subsidy for the agency to make sure there is sufficient food in the country.

“In view of the effort of NFA to meet its current obligations, the funds received by the agency were utilized for the payment of maturing loans, thus, the intended purpose of the allotment/funds received for CY (Calendar Year) 2017 for the implementation of Food Security Program might not be fully realized,” the COA said. 

COA said the subsidy should have been deposited to the Cereal Procurement Fund account to fund the purchase of rice grains in the regional offices and field operating units of the NFA.

The funds could also have been used to compete with local traders during harvest reason which may have contributed to the procurement shortfall of 124,969 metric tons of produce last year.

“Had the NFA attained its target procurement, it would not have only added to the mandatory buffer stock requirement, but would have likewise encouraged farmers to produce more and minimize the need to import rice which utilizes foreign exchange reserve that eventually result in foreign or domestic borrowings for NFA,” the COA said. 

The NFA however said maturing obligations were given priority to save on financial expenses such as interest and documentary stamp tax.

“For CY 2016, financial charges amounted to P6 billion, which was higher than the operating expenses of P4 billion for Personnel Services and Maintenance and Other Operating Expenses,” the COA said quoting NFA.

The NFA also said it was difficult to compete with their price of P17 per kilogram compared to the offer of traders ranging between P18.40 to P20.29 from January to May 2017.

Government auditors consequently flagged the buffer stock of the NFA which “were way below” the mandatory requirement of 15 days in each month and 30 days in June.

The COA noted that low importation and non-competitive buying price of palay in 2017 caused rice supply shortages and higher prices of commercial rice in the market. 

“Had there been regular review of palay prices, the NFA would have at least met its target and would have not only added to the buffer stock for the food security requirement of the country but would have also encouraged farmers to produce more and eventually minimize, if not eliminate, the need to import rice,” the COA said. 

Government auditors reiterated their recommendations in the previous year’s audit that the NFA should have a more “realistic and relevant” rice procurement plan and strengthen the monitoring of rice stocks level at all times.

NFA regional offices told the COA that they are continuously “strategizing” but maintained that their prices should be made competitive.

“The Davao city PO (Provincial Office) commented that since Davao City is non-productive area, it is relying on other province/region’s augmentation or importation, when warranted, thus, strongly suggests the increase in support price of palay to be competitive to farm gate price of traders and attain higher procurement among surplus areas where local stocks are sourced,” the COA said quoting the NFA.

Government auditors also noted the low distribution rate in 2016 of rice procured in 2015 due to the inefficient implementation of the “First In First Out” policy resulting to bags being sold at higher prices. 

The NFA however said it was better to adjust prices of rice in areas where there is abundant supply of commercial rice at low prices than have additional expenses for holding and maintenance costs.