Philippines
National
COA airs concerns on inability of Pinagkaisa Realty Corp., a gov't firm, to generate income
COA airs concerns on inability of Pinagkaisa Realty Corp., a gov't firm, to generate income
The Commission on Audit (COA) has aired concerns over the inability of Pinagkaisa Realty Corporation (PRC), a government-owned and controlled corporation (GOCC), to generate income.
In the 2023 annual audit report on PRC released on Feb. 27, the COA said “the PRC has been operating without a source of income since Aug. 31, 2023.”
“Impending cash flow and financial difficulties pose significant risks to its capability and sustainability for its continued operation, casting doubts on its ability to continue as a going concern entity,” COA said.
It noted that the PRC, which was organized in 1977 under the Corporation Law of the Philippines and registered with the Securities and Exchange Commission (SEC) on March 13, 1978, was “organized to acquire, buy, sell, exchange, manage, improve, lease, or otherwise deal in property.”
It said that PRC owns a lone investment property in Makati City measuring 17, 320 square meters that was leased to Philippine Electric Manufacturing Company, now called GE Lighting Philippines (GELP), since 1977.
However, COA said that PRC "took possession of the property on Aug. 31, 2023 after it signed with GELP on Aug. 30, 2023 a Lease Termination Agreement.”
“The absence of a foreseeable source of income after the termination of the lease agreement between Pinagkaisa Realty Corporation (PRC) and GE Ligyhting Philippines (GELP), the the poor financial conditions of the PRC cause significant doubt on its ability to continue as a going concern,” it said.
Since there has been no definite plan established prior to and after the expiration of the contract with GELP, the COA said “PRC continues to incur operational expenses, difficulties in cash flows would be imminent.”
It pointed out that “the PRC’s working capital amounting to P3.334 million may not be sufficient to maintain its liquidity beyond three years….”
The COA also found that “the dividends in arrears due to other shareholders on the net earnings in CYs 2020 and 2021 amounting to P1.288 million were not yet paid.”
It noted that the National Development Company, the majority shareholder of PRC, has entered into a contract with a private corporation for consultation services “for the highest and best use (HABU) study and valuation of PRC’s lone investment property.”
It then advised the PRC management to establish and perform “a plan of action to utilize the property and to avoid further deterioration of its financial conduction pending the result of the HABU study.”
It also asked the Department of Finance (DOF) in a letter dated May 15, 2023 “for exemption to pay dividends to the National Government from its year 2022 net earnings due to the need of the Corporation to earmark funds for operating expenses which was projected at P1.878 million in Calendar Year (CY) 2024.”