By Ben Rosario
The Commission on Audit (COA) has demanded the refund of the P500 million invested by the Civil Aviation Authority of the Philippines (CAAP) for a “single-pay variable life insurance,” noting that the investment had not been authorized by the CAAP Board.
Commission on Audit (MANILA BULLETIN FILE PHOTO)
The 2018 CAAP Annual Audit Report also questioned the state-run civil aviation agency’s payment of P157.62 million in rentals and real property taxes for the alleged leased properties belonging to the Philippine Airlines and situated in Bacolod City and Ozamiz City.
“Investment in United Coconut Planter’s Life Assurance Corporation (Cocolife) for a single-pay variable life insurance in the amount of P500 million is without approval by the Board, without in-depth study prior to the investment and with no adequate criteria for the selection of the insured 10 key men,” said COA.
The P500-million investment was placed by CAAP at Cocolife, a government-owned and controlled corporation, on December 14, 2018.
State auditors said the transaction was questionable since it had not been approved by the CAAP board of directors.
But the audit report was rejected by the management as it pointed out that the placement was presented to the CAAP board of directors on December 13 and none among the members interposed any objection to the investment proposal.
“The audit team finds the above comments untenable considering that there is no duly signed Board Resolution approving the investment in single-pay variable life insurance, being a new mode of investment,” state auditors said.
According to COA, the investment was not supported by an in-depth study on options for such huge investment.
To support its findings, COA presented a comparison of interest income if the fund were to be invested in Treasury Bonds or Treasury Bills.
The comparison disclosed that a P500-million investment in Treasury Bonds or Treasury Bills would yield a higher return on investment compared to the value of the funds where Cocolife invested the money.
“This only shows that the variable unit linked insurance with Cocolife did not undergo the proper evaluation and in-depth study by an investment group of possible investment options so that CAAP is assured of the most advantageous offer/investment portfolio of its idle funds,” state auditors stressed.
Moreover, COA said the selection of the 10 key men insured by CAAP has not been supported with adequate criteria.
The CAAP said key officials to be considered should be those with ranks of department manager and above.
With this, 30 officers took the medical examination but Cocolife accepted only 10 for purposes of insurance.
“The selection of the 10 officers as designated key men of the authority was an exclusive determination of Cocolife,” the COA lamented.
“It is also worthy to note that two of the 10 officers insured are political appointees and they generally serve at the pleasure of the President of the Philippines,” COA said.
Meanwhile, the state audit agency flagged the payment of P157.625 million rental and real property taxes to leased properties of PAL from 1992 to 2018.
“There was no lease contract and the alleged prior years obligations are payables that were not recorded in the books of CAAP or disclosed in the Notes to its Financial Statements, thus, raising doubts as to the validity of PAL’s claim,” state audit examiners said.
The questioned transaction involved PAL properties in the cities of Bacolod and Ozamiz.
Auditors said CAAP should require refund of the amount paid to PAL if the claims for lease payments in prior years are not substantiated by the private airline company.