The Commission on Audit said that from 2011 to 2017, PAGCOR computed the mandated national government's 50 percent share in its income based solely on its earning from gaming operations and not on its aggregate gross earnings contrary to what was provided under the law.
AFP, File
PAGCOR owes gov't P21B, COA says
(philstar.com) - July 18, 2018 - 4:21pm

MANILA, Philippines (Updated July 20, 6:30 p.m.) — The Philippine Amusement and Gaming Corporation erroneously computed the government's share in its earnings resulting in under remittance to the Bureau of Treasury for the past seven years amounting P21.186 billion, the Commission on Audit said in its latest report.

In an annual audit report uploaded on its website on Tuesday, COA said PAGCOR from 2011 to 2017 computed the mandated national government's 50 percent share in its income based solely on its earning from gaming operations and not on its “aggregate gross earning” contrary to what was provided under the law.

The COA said that Section 12 of Presidential Decree 1869, which regulates the powers and franchise of PAGCOR, clearly states that the national government shall have a 50 percent share in the state gaming firm's “aggregate gross earnings” which shall be allocated for infrastructure and socio-civic projects such as flood control and sewerage improvement, medical and nutrition missions and livelihood programs.

The state auditors said the Office of the General Counsel under COA's Legal Services Sector had earlier issued a position that “gross income/earning” pertains to the entire earning or revenue earned by a person or corporation from its business or operations “before taxes or adjustment.”

The COA said it had already raised in the 2016 audit report the issue of PAGCOR's faulty computation of the government's share, but the state firm continued with its own way of computation in 2017, only basing the shares on the earning from gaming operations.

“The COA Audit Team also continues to hold its stance that the 50 percent government share should be computed based on the entire income of PAGCOR and not only on income from gaming operations,” the COA said.

Under remittance to PSC

Furthermore, the audit body said PAGCOR also owed the Philippine Sports Commission a total of P1.631-billion in under remittance in 2017 still due to the gaming firm's wrong interpretation of “gross income.”

The COA pointed out that under Section 26 Paragraph 2 of Republic Act 6847 otherwise known as the Philippine Sports Commission Act, the commission shall have a 5 percent share in PAGCOR's annual gross income to finance the country’s integrated sports development programs.

The audit body said that just like in the case of the national government, PAGCOR pegged PSC's share in the earnings from gaming operations only.

“Validation of available records revealed that PSC’s share from PAGCOR earnings was computed at five percent of gaming operations, after deducting the five percent franchise tax and the 50 percent NG’s (national government) share which is apparently inconsistent with Section 26 of RA No. 6847.” the COA said.

The audit body recommended that PAGCOR “seek clarification with higher authorities” such as the Office of the President and the Department of Finance as well as the Congress in order to settle the issue on the interpretation of the phrase “aggregate gross income from franchise.”

COA admitted that the payment of the unremitted shares of the national government and PSC “would result to the abrupt depletion of PAGCOR earnings,” thus, it recommended to the management to make representation to Congress for the revision or repeal of law “to conform to the changing times and complement with the level of [its] earnings.”

PAGCOR declared a total income of P60.15 billion in 2017, of which P57.33 billion was generated from gaming operations. The state firm's 2017 income was 9.06 percent higher than its P55.16 billion income in 2016, P53.3 billion of which came from gaming operations.

Unauthorized allowances, cash grants, gold rings

Meanwhile, in the same audit report, COA flagged the millions of pesos worth of allowances, cash grants, loans and even gold rings that PAGCOR awarded to its officials and employees.

COA said that for 2017, PAGCOR granted “loyalty cash awards” amounting to P12.495 million to its officials and employees who have completed 5, 10, 15 and 20 years of service on top of 18-karat gold memento rings amounting P13.02 million for employees who have completed 20 years of service.

COA said such grants were “in excess of the amount allowed in COA Circular No. 2013-003A dated September 18, 2013.”

The state audit body also noted that a total of P643,000 was granted to PAGCOR officers and employees who made it to its 2017 Circle of Extra-Ordinaire, or CEO, Awards.

COA said the cash grants were released to the awardees without first submitting to the Civil Service Commission the basis for such grants.

It pointed out that under CSC Memorandum Circular No. 01, s. 2001, “All government agencies shall submit their Program on Awards and Incentives for Service Excellence (PRAISE) and its subsequent amendments to the Civil Service Regional Office” for review and approval.

The audit body said a total of P58.334 million in Representation and Transportation Allowance was also granted to PAGCOR officials “in excess of what was allowed under Section 54 of the General Appropriations Act (GAA) of 2017.”

Furthermore, COA said those granted with transportation allowance were “the same officers who availed of the car plan of PAGCOR.”

COA said the car plan amounting P125.954 million and housing benefits amounting P121.289 million were granted to PAGCOR officials in 2016 and 2017 “without clear and express Presidential approval but were based only on the approved Resolution of the [Pagcor] Board of Directors (BOD).”

“We recommended and Management agreed to seek post facto approval from the Office of the President to avoid possible audit suspensions and/or disallowance,” the COA said.

PAGCOR responds

In a statement, PAGCOR said the PSC is the largest funding obligation of the gaming regulator, with more than P13 billion in remittances from 1990 to 2017.

"In fact, starting 2015, the annual PSC share already exceeded P1 billion, since the PSC share also increases as PAGCOR’s Gross Gaming Revenues increase. Currently, PAGCOR is remitting an average of P120 million a month to PSC," the agency added.

On top of this, PAGCOR said it also provides funding support for the Sports Benefits and Incentives Act, which already amounted to more than P225 million from 2002 to 2017.

"Thus PAGCOR’s total sports-related funding to date already amounts to more than P13.25 billion," it said.

On the issue of the computation of its remittances to the PSC, PAGCOR said a case is already pending before the Supreme Court.

Pending the decision, PAGCOR said it is obliged to continue with its current computation of the five percent PSC share, which it said was approved by former President Fidel Ramos in 1995.

The gaming regulator said it has also sought clarification from the Office of the President on the matter, and is just awaiting response from the President.

In its statement, PAGCOR also denied the allegations that it lacked in dividends remitted to the Bureau of the Treasury (BTr). However, PAGCOR did not expound much on the matter.

Meanwhile, PAGCOR said it has already stopped giving 18-karat gold memento rings and cash awards to its 20-year loyalty awardees since 2016 under the management of PAGCOR Chairman and chief executive officer Andrea Domingo.

The state firm, however, clarified that its Board of Directors has the authority to craft the company's personnel policies, as provided in Section 16 of Presidential Decree Number 1869 (PD 1869).

"The exercise of this authority has been affirmed on several occasions by the Office of the President (OP) and the Government Corporate Counsel (OGCC). Hence, PAGCOR’s Board of Directors has the authority to determine appropriate personnel management policies of the company," it said.

PAGCOR said it even sought the approval of former President Benigno Aquino III on the adjustments in the salaries and benefits of its personnel, including the loyalty award granted since 2008.

On November 8, 2011, the Governance Commission for GOCCs (GCG) granted the post facto approval of PAGCOR’s total compensation package, the regulator added.

According to PAGCOR, the Board's authority, as well as the approvals from OP and the GCG apply to the compensation package of all PAGCOR personnel, the Circle of Extra Ordinaire Awards, representation and transportation allowance, and car plans and housing benefits.

"Meanwhile, the allegation that PAGCOR released backpacks directly to the politicians and their representatives was done sans the proper perspective, thus calculated to sensationalize what would have been a mundane detail," the state corporation said.

PAGCOR said of the 30,000 backpacks it distributed, 25,000 went directly to beneficiaries.

"However, from time to time for practicality, wider dissemination, or as a matter of courtesy to elected officials when they make official requests, PAGCOR accommodated and relied on the 'politicians' since they are the ones who have direct knowledge of the needs of their constituents," the agency noted.

"Notably, all backpacks have PAGCOR logos so they cannot be mistaken as that bought by the elected officials," it added. — Elizabeth Marcelo

COMMISSION ON AUDIT PAGCOR
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