COA: Gov’t lost P460M in revenue due to ‘disadvantageous’ BuCor-TADECO deal

The government has lost more than P460 million in lease payments following the joint venture agreement (JVA) entered by the Bureau of Corrections (BuCor) and the Floirendo-owned Tagum Agricultural Development Co. Inc. (TADECO), the Commission on Audit said.

In its audit report, the COA stressed that the deal had been "disadvantageous" to the government.

"The annual guaranteed income, including the profit share as consideration for the use of the reserved land of the BuCor, is grossly disadvantageous to the government considering the prevailing rental rate of P50,000 per hectare in the locality, or a revenue loss for the government of P460,181,652," the COA said.

It was on May 21, 2003 when BuCor and TADECO, owned by Davao Del Norte Representative Antonio Floirendo Jr., entered into the 25-year JVA.

Under the deal, the BuCor formally turned over 5,212.45 hectares of the land reserved for Davao Prison and Penal Farm (DPPF) for the use and development of TADECO. However, for all legal intents and share in purposes the parties agreed to an area of 5,308.36 hectares with an annual guaranteed income of P26,541,809 including automatic increase of 10 percent every five years, beginning on the sixth term of the agreement.

The COA noted that based on the annual guaranteed incomes earned against the total land area of 5,308.36 hectares leased to TADECO, the average annual rental income per hectare was P6,655.01.

However, after ocular inspection with the help of the COA Regional Technical Services (RTS) in Davao City, state auditors disclosed that the prevailing rental rates in the area are as follows:

• Developed banana plantation at the beginning of the year - P40,000 to P50,000
• Abandoned banana plantation at the beginning of the lease; lessee rehabilitated the area - P30,000 to P40,000
• Undeveloped land area at the beginning of the lease; lessee developed the area - P15,000 to P25,000

"Comparing the rental of developed banana plantation at the beginning of the year, the government stands to incur losses in the amount of P438,840,855.82," the COA said.

"Indeed, the JVA entered into by Bucor with TADECO is grossly disadvantageous to the government. Hence, the same has to be revisited with the view to increase the guaranteed rates in the time that the same JVA is not yet declared unconstitutional by proper authority," the audit agency added.

The COA, in 2017, recommended the filing of criminal charges against government officials involved in the deal before the Office of the Ombudsman.

It also asked for the nullification of the land agreement.

The COA said BuCor has to make representation with TADECO for the increase in the guaranteed income and profit share in order to avoid more losses.

Amid allegations that the agreement was forged without legal basis on the part of the BuCor, the BuCor noted that the land was under the sole administration of Davao Penal Colony, meaning it was within the authority of BuCor to enter into a deal involving the reserved area.

It added that the agreement was approved by the Department of Justice.

The BuCor also maintained that the JVA was "beneficial" to the government as it "serves the primordial purpose and mandate of the agency in the process of trhe rehabilitation of inmates."

When it comes to the supposed prevailing rates of P40,000 to P50,000 per hectare per year, BuCor said the rates were "jointly" agreed when the deal was renewed in 2003.

It added that both BuCor and TADECO were open for renegotiation of the rates and in fact, the present BuCor leadership is currently negotiating for the increase of Guaranteed Income and Production Share pursuant to the prevailing valuation.

Bananas

The audit agency also questioned why the total volume of bananas exported by TADECO differed from the actual volume of bananas reported in the monthly production report submitted to BuCor.

The alleged under-remittance of the profit share by TADECO amounted to P5,826,567.01, the COA said.

According to state auditors, the profit share of BuCor amounted to P9,513,014.17 and P9,527,552.02 in 2015 and 2016, respectively or a total of P19,040,566.19.

However, the COA, citing information from TADECO's data, revealed that the firm has an average yield of 5,000 boxes of annual yield per hectare of bananas or a production of "no less than 30,000,000 boxes per year" on the land occupied by TADECO.

Based on this, the COA said BuCor should have at least a profit share of P12,433,566.62.

The COA recommended that BuCor should closely monitor the production of bananas in order to ensure accuracy of the reported volume of production.

It also asked for "justification" why the more than P5 million should not be charged in audit. — Anna Felicia Bajo/BM, GMA News