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COA calls out NFA for using P5.1-B food security fund to pay loans

The National Food Authority (NFA) has misused its P5.1-billion allotment for the price and supply stabilization of rice and corn in 2017 to cover the payments of maturing loans, the Commission on Audit (COA) said in its annual audit report.

The COA said the subsidy from the national government was intended for the implementation of the NFA's Food Security Program through the purchase of palay from farmers, rice distribution and importation, grains business licensing and registration, and buffer stocking.

It said the funds should have been deposited to the NFA Cereal Procurement Fund to ensure cash is readily available for regional offices and field operating units for their palay needs.

However, the COA said NFA used P3.01 billion to offset the Bureau of Treasury's payment of previous guarantee fees and contribution to Debt Reserve Funds, while P2.09 billion went to loan payments to the Land Bank of the Philippines and Development Bank of the Philippines.

"NFA could have used the subsidy for additional incentives to farmers to level up and/or compete with local traders in order to attain its objective of providing market for farmers' produce with fair return on their investment in production cost so as to encourage farmers to sell their produce to the agency," the COA said.

"Had the NFA attained its target procurement, it would not have only added to the mandatory buffer stock requirement, but would have likewise encouraged farmers to produce more and minimize the need to import rice which utilizes foreign exchange reserve that eventually result in foreign or domestic borrowings for NFA," it added.

COA said this led to shortfalls of 124,969 metric tons in palay purchase and 429,256 metric tons for rice distribution.

The buffer stock of the rice supply was also eight days below the 15-day average daily inventory and 25 days behind the 30-day buffer during lean months.

The COA further said the deficit resulted to higher rice prices, unavailability of NFA rice in the market, and lower inventory in various NFA warehouses.

The commission recommended for NFA management to ensure that the government subsidy is solely used for the Food Security Program and regularly monitor the utilization of funds.

In response, the NFA said it had to particularly pay the P2.09 billion to government banks to lessen its expenses on interest and documentary stamp taxes of its "high level of outstanding debts." It noted a P6-billion financial charge in 2016 which is higher than its operating expenses worth P4 billion.

The NFA management said depositing the amount would only incur an interest between 0.10 to 0.25 percent compared to 2.5-percent savings by paying its debt.

It added the shortfall in palay purchase was caused by the low government support price of only P17 per kilogram of clean and dry palay while traders paid farmers between P18.98 to P20.29 per kilogram from January to May 2017.

The COA recognized the need for NFA to settle its loans first, but said the "utilization of the subsidy other than the intended purpose could compromise the implementation of NFA's programs for food security." —KBK, GMA News