COA berates PMDC for flawed handling of P50-M loan that ballooned to P222M

Published June 4, 2018, 7:35 PM

by Roel Tibay

By Ben Rosario

The Commission on Audit berated the Philippine Mining Development Corporation for its flawed management skills as the state audit agency noted that a P50-million loan acquired over a decade ago has ballooned to P222 million or 345.87 percent than the original amount.

MB FILE—Commission on Audit.
Commission on Audit
(MANILA BULLETIN FILE PHOTO)

COA noted in its 2017 annual audit report of the PMDC that the huge interests on the P50-million loan it received from the National Development Corporation in 2005 and 2006 and the wastage of funds could have been avoided.

COA said the loans accumulated to P152.379 million in 2011 “due to interests and penalties for nonpayment of the loan amortizations despite sufficient cash in bank that only earned very minimal interest.”

The P50-million loan has now reached P222.934, which is P172.934 million or 345.87 percent higher than the original amount.

Had Management exercised sound financial management, substantial interst expenses and penalties could have been avoided,” COA said.

State audit examiners recalled that half of the original loan of P50 million was acquired by the PMDC from the NDC in 2005 when the latter advanced the P25 million for conversion as additional subscription to the former, since NDC holds 20 percent PMDCs equity.

However, the PMDC failed to increase its authorized capital stock to accommodate the additional subscription of NDC, thus, the P25 million was treated as its loan to the mining development council.

In 2006, PMDC was given another P25 million by the PMDC to finance its exploration activities.

Nevertheless, PMDC has not performed its mandate of exploring, developing, mining, among others, of mineral resources, since it goes into royalty business wherein it is being paid royalty fee from the proceeds of the sale of ores by its partner-operator,” COA said.

No loan amortizations were made by the PMDC until on June 14, 2011, the state-run firm sought and was granted a loan restructuring privilege that required it to pay an additional 12 per annum in interest.

Still, the loan remained outstanding until another restructuring agreement resulted in further increasing the loan and interest to P222.934 by September 30, 2026.

What baffled auditors is the fact that when it had sufficient funds to pay for the loans in the past three years, the government corporation still did not.

“The excess funds have not been efficiently and effectively utilized for profit maximization considering that the cost of borrowing was 12 percent per annum, while its excess cash earned a minimal return of 1.4 percent per annum,” COA said.

The state audit agency added that there has been a wastage of funds due to the interest expense and penalties incurred by the PMDC.

“Had management exercised sound financial management, interest expenses and penalties could have been avoided, while its shareholders can enjoy increase in the net assets of their investments and/or share in the dividends,” COA stated

 
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