The Commission on Audit has flagged the decision of the National Food Authority in using 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 was 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 procurement shortfall affected other programs of NFA, such as rice distribution and buffer stocking resulting in a higher price of rice, unavailability of NFA rice in the market and a lower inventory of rice in various NFA warehouses,” it read.
NFA got a P5.1-billion subsidy to be used “specifically to stabilize the price and supply of rice and corn, but NFA spent P3.01 billion to pay its debt, which the Bureau of Treasury earlier paid on behalf of the agency.
The other P2.09 billion was deposited to NFA’s rice collection savings account, which was utilized to foot the principal and interest of NFA’s loan to the Land Bank of the Philippines and Development Bank of the Philippines.
According to CoA, NFA should have deposited the P5.1 billion to its cereal procurement fund to safeguard the fund.
The audit report noted that NFA fell short of procuring 1,24,969 metric tons of palay due to lack of funds.
“NFA could have used the subsidy for additional incentives to farmers to level up and/or compete with local traders in order to attain its objective of providing market for farmers’ produce with fair return on their investment in production cost so as to encourage farmers to sell their produce to the Agency,” it stated.
CoA said NFA could have stayed away from rice importation if only it used the P5.1-billion subsidy to buy local produce.
“Had 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,” it added.
NFA, however, said it opted to pay the maturing loans to be able to save on interest and documentary stamp tax.
CoA said NFA used P3.01 billion to offset the Bureau of Treasury’s payment of previous guarantee fees and contribution to Debt Reserve Funds, while P2.09 billion went to loan payments to the Land Bank of the Philippines and Development Bank of the Philippines.
“Maintaining the idle/unutilized procurement fund of P2.090 billion as of March 2017 in the bank will only earn minimal interest income of 0.10 percent [regular savings] to 0.25 percent (high yielding rate) per annum, compared to the savings in paying interest expenses for loans at the rate of 2.5 percent per annum aside from the savings on documentary stamp tax,” NFA told CoA.
On the other hand, CoA said “we recognize management’s prudent decision in paying maturing loans to save on interest expenses and documentary stamp tax. However, the utilization of the subsidy other than the intended purpose could compromise the implementation of NFA’s programs for food security through procurement of palay and rice importation.”