PEZA fails to collect P23 million permit, admin fees from locators

The Philippine Economic Zone Authority (PEZA) has failed to collect P23 million permit, inspection and administrative fees from businesses under its jurisdiction, the Commission on Audit (COA) said.

PEZA is the government agency in charge of granting incentives and facilitating business operations in special economic zones.

Based on COA’s annual audit report on PEZA, state auditors learned that while the process firstly requires applicants to secure the Statement of Assessment (SOA) as basis for the payment of fees and present the official receipt to PEZA’s Support Services Department before the release of permits, applicants do not secure SOA and just proceed on paying the permit and inspection fees depending on their discretion and operate without permits —resulting in P11.179 million of unbilled and uncollected permit and inspection fees as of December 31, 2018.

These permits include:

• building permit, sanitary permit, fencing permit, electrical permit, mechanical permit under pre-construction permits;
• occupancy permit, electrical permit to operate, mechanical permit to operate and electronics permit to operate under post-construction permits; and,
• annual inspection, electrical permit to operate, mechanical permit to operate and electronics permit to operate under renewal of permits

“Interview with Support Services Department (SuSD) personnel disclosed that even though SOAs had already been prepared, not all of them are issued to bill the locators since their work covers only from the processing of application of permits to the preparation of SOAs,” COA said.

“There are locators who do not claim the permits they applied for, hence the corresponding fees are not being paid. Unclaimed permits remain in the possession of the SuSD. Apparently, locators continue with their operations despite the absence of permits,” state auditors added.

The responsibility to distribute SOAs and collect the required fees, per COA, rests with the Finance Group.

Given the set up, COA noted that the engineering department has no authority to  stop or suspend the locators' operations because only the mechanical, electronics or electrical aspect of the entity lack the necessary permit, not the whole company operations.

“While SuSD maintains a record of unpaid inspection fees for monitoring purposes but the report is not submitted to nor required by the Finance Group to monitor the locators who have outstanding accounts with PEZA. Thus, SOAs are not being sent to locators to remind them to pay the fees due from them,” COA said.

As for uncollected administrative fees, COA said it already reached P12.556 million  as of December 31, 2018 since PEZA did not implement the billing and collection procedures as provided by the registration agreement between PEZA and the developers/operators which requires businesses to pay the annual administrative fee as may be prescribed by the PEZA Board.

The same Registration Agreement states that “in case of delinquency in the payment, such delinquency will bear interest at the rate of one per cent per month or at such rate as may be prescribed by the PEZA Board.”

Moreover, the same Agreement states that PEZA may withhold, suspend or disapprove after due notice any application for permit being issued by the PEZA if the developer/operator fails or refuses to pay the administrative fee or if it violates any of the terms and conditions set forth under the registration agreement.

Damages that may result due to the said suspension, disapproval or withholding, on the other hand, will be solely borne by the developer/operator while PEZA will be wholly free from liability for whatever damages that may result from it.

State auditors revealed that the developer/ operator of Tabangao Special Economic was unable to pay the administrative fee worth P326,000 since 2011.

Tipco Estates Corporation, for its part, was not fined for interest despite its late payment.

COA then noted that the Finance Group did not send the Statement of Account for administrative fees to the developers/operators in a timely manner as required under PEZA Memorandum Circular No. 2016-026, resulting in the developers'/ operators' delayed payment.

In response to COA’s findings, PEZA argued in the same COA report that voluminous work, coupled with the lack of manpower in the Accounting Division prevented the Finance Group from sending the Statement of Accounts to the developers/operators on time.

PEZA also reasoned out that the number of operating/active locators for each economic zone, which is necessary in determining the amount of administrative fee to be billed to developers/operators, were not immediately provided to the Accounting Division by the concerned department of the Authority and that the personnel handling the billing was not aware of the said Circular and was not oriented regarding the billing policy of PEZA.

In addition, the Finance Group also said that some of the developers/operators disputed the amounts billed to them that allegedly did not tally with their records and thus, they paid only a partial amount of the fees due from them.

Still, state auditors maintained that the registration agreement provides that the fee should be made without necessity of demand; it is essential that billings be sent out to locators promptly and accurately.

“It bears stressing that even though the developer did not pay the required fees, as registered developer/operator of PEZA, they are still enjoying the incentives provided under RA 7916,” COA said.

“Bills serve as reminders that the developers/operators have obligations to PEZA, and that they have to make true to their commitment of paying their dues on time,” COA added.

COA tasked PEZA to take the following actions:

• collect the uncollected permit fees and administrative fees;
• strictly implement the billing and collection policy and intensify collection efforts to ensure the collection of all outstanding receivables by designating personnel to regularly issue billings/SOAs to developers/locators on a timely manner and follow-up their payment, among others;
• issue a directive requiring all concerned departments to coordinate with and submit a report to the Finance Group relative to all types of income being collected/assessed from developers/locators for documentation and monitoring; and
• require the Finance Group to maintain a registry/subsidiary ledger for each developer/locator indicating the amount assessed, billed and collected.

PEZA said it is now in the process of procuring/ developing a billing and collection system for an effective and efficient monitoring/collection of income and receivables, and will create an ad-hoc billing and collection unit.

Likewise, PEZA also assured COA that it will check all the unpaid balances and send final demand letters to the developers/locators to settle their payables to PEZA or they will ask the Legal Services Group to take appropriate legal action. —LDF, GMA News