COA calls out PCSO for P5.89-B disbursements not related to charity projects

MANILA, Philippines — The Commission on Audit has called out the Philippine Charity Sweepstakes Office for P5.89-billion worth of disbursements in 2017 not related to charity programs, warning that such practice may soon the deplete the state firm's Charity Fund (CF) rendering it incapable to perform its primary mandate.

In an annual audit report posted on its website Friday, the COA noted that for 2017, the PCSO has utilized a total of P18.035 billion of its CF exceeding its allocated fund of P14.405 billion for the year thus, resulting in a deficit of P3.533 billion.

“Said deficit may be attributed to the various disbursements/charges to the CF in the total amount of P5.890 billion that were not related to health programs, medical assistance/services and/or charities of national character, as specified under Section 6. B of RA 1169,” the COA report read.

The COA pointed out that under Republic Act 1169 or the The Philippine Charity Sweepstakes Office Charter, 30 percent of PCSO's earnings shall be set aside for its CF which shall be used strictly for payment of grants to various charitable institutions, such as the Philippines National Red Cross, for their health, medical and other charity programs “of national character.”

The agency said a review of the PCSO's utilization of its CF in 2017 revealed that P 318.589 million was disbursed to the Commission on Higher Education for “strengthening higher education in the entire country” and P5.298 billion to the Bureau of Internal Revenue as payment of documentary stamp taxes in connection with the PCSO's lotto, small-time lottery (STL) and Keno online game operations;

A total of P67.98 million was also charged to the CF as payment of personal services of PCSO employees assigned at the PCSO Charity Clinic and P204.593 million as payment of medical benefits of all PCSO employees under the Expanded Medical Assistance Program (EMAP).

The COA said such expenses should have been charged to the PCSO's Operating Fund (OF) and not to its CF.

It said that while the PCSO management claimed that a total of P1.5 billion was already transferred from its OF to its CF, the audit team's verification revealed “that no actual physical transfer of funds from the Cash in Bank-OF account to the Cash in Bank – CF took place.”

Therefore, the Unutilized Charity Fund balance of P933.836 million as of Dec. 31, 2017 reflected in the [PCSO's] Statement of Charity Fund Utilization for CY 2017 was inaccurate and misleading, the COA report read.

Losses due to Keno operations

In the same audit report, the COA also recommended to the PCSO to revisit the operation of its Keno online games due to its accumulated income deficit amounting P4.283 billion from 2006 to 2017.

The COA said that since PCSO started its On-line Keno Games draw operations in 2006, it has already incurred losses amounting P4,282,538,724.56 as of Dec. 31, 2017 “due to pay-outs that exceeded the allocated amount for prizes.”

The agency did not buy the management's defense that despite the losses, Keno operations continued to contribute funds for various charity programs of the PCSO.

The COA said such contributions still do not exceed the amount of accumulated deficit.

Based on COA's records, the Keno operations only contributed P2.845 billion to the PCSO's Charity Fund from 2006 to 2017, thus, the deficit it had caused to the state gaming firm's Price Fund (PF) “exceeded the actual amount contributed to the CF by P1.437 billion.”

“Hence, it can be concluded that the current operation of the On-line Keno game is not financially viable,” the COA said.

The COA said that as of end of 2017, the PCSO has a total deficit of P741.574 million in its consolidated PF, mainly due to the losses caused by the Keno operation.

The COA said that without Keno's deficit, the PCSO's consolidated PF “should have reflected a P440.155 million savings...instead of the deficit balance of P741.574 million.”

“If this trend shall continue, the consolidated Prize Fund might be eventually depleted,” the COA said.

“We recommended that Management revisit the existing policies and guidelines for the Keno operations and determine the cause/s of the continuous incurrence of deficit in the Prize Fund...Otherwise, consider the possibility of discontinuing the Keno operations if it will continuously incur deficits in the prize fund which is detrimental to the stability of the consolidated Prize Fund,” the COA added. — Elizabeth Marcelo