The Philippine Postal Savings Bank Inc. (PPSBI) may not be able to collect loans aggregating P2.694 billion as of end-December last year, a risk the Commission on Audit (COA) said formed part of a number "inefficiencies" uncovered by a review of its financial statements. The PPSBI is a subsidiary of the Philippine Postal Bank.
The COA said accumulated past-due loans totaling P386.46 million have, in fact, already deprived the bank immediate recovery of its investment that would result to a reduction in interest income.
COA analysis revealed that past-due accounts in 2012 increased by as much as 20 percent from its level in 2011, an indication of management's failure to collect past due accounts.
Based on the report, the bulk of the past-due loans went to private corporations amounting to P118.7 million; agrarian reform and agricultural loans, P99.187 million; consumption loans, P22.77 million; loans to small- and medium-scale enterprises, P18.5 million; housing loans, P12.996 million; and microfinance loans totaling P266,034 million.
The COA report noted that past-due loans, which were mostly consumption loans, uncollected as of end-December 2012, were loans owed by local government units, government agencies under a so-called memorandum of agreement (MOA) and certain private individuals who took commercial and housing loans.
"The conditions indicate the management's weakness to strictly enforce the terms and conditions of the MOA, more specifically on the head of the agency's sworn undertaking to deduct the monthly amortization from the employees' monthly payroll and remit the payment to PPSBI," the COA reported.
PPSBI has yet to collect 98 percent of P237.655 million worth of funds released as loans in 2009 and 2010 under the project Dagdag Regular Income via Entrepreneurship (Drive) program.
The COA doubted the likelihood the PPSBI may still be able collect the outstanding loans, citing that several loan releases showed documentary deficiencies and lapses in the observance of the provisions of the terms of reference (TOR) and applicable lending policies of the bank.
Since the funding for the Drive project was sourced from value-added tax released by the Department of Budget and Management, the COA recommended that PPSBI management exhaust all means necessary to collect from the borrowers and pursue legal or administrative actions. It also recommended the filing of cases against erring officials and employees involved in the release of the loans in violation of the applicable PPSBI's lending policies and TOR.
The COA said PPSBI approved P213 million worth of loans in 2012 without strictly following the policies stated in the manual on lending operations (Molo).
Of the P213-million total loans, a single real-estate developer was beneficiary to P124 million; a construction company got P40 million; a transport company, P39 million; and a drug distributor another P10 million.
These non-performing loans, the COA said, were granted approvals despite having problems in solvency and disclosure requirements in trade, as well as court checking.
"Notwithstanding the power and authority of PPSBI under the loan/line agreement, MOA and promissory notes to run after delinquent borrowers, management slackened its filing of legal actions against them," the COA said.
The COA recommended the evaluation of collection targets for each type of loan and to assess the achievement of these targets against the performance of the department handling these loans.
"PPSBI exposes itself to higher risk and probable non-collection from the borrower. We recommend that management strictly follow the Molo with regard to loan evaluation and approval of borrowers without exception to certain borrowers through board resolutions to avoid risk of loss," the COA said.
