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Bicol’s richest coop cited over fund misuse

By Bobby Q. Labalan

Sorsogon City- The Commission on Audit (COA) has flagged what it described as “misuse’ of grant fund by the Gubat Saint Anthony Cooperative (GSAC) under the Philippine Rural Development Program (PRDP) amounting to P7,401,815.43.

The cooperative was granted the amount by the Department of Agriculture though the provincial government of Sorsogon as assistance purposely to invigorate the local pili industry in the province through increased pili delicacy production.

Based on records, GSAC was one of the three “Proponent Groups” (PGs) comprising the Sorsogon Pili Enterprise (SPE) whose main objective was “to create a thriving pili industry in the province of Sorsogon that creates jobs for poor households, provides additional income to pili farmers and micro-processors and promotes increased linkages leading to robust agro-industry development”.

The SPE was granted a total of ₱14,766,065.91,whereby GSAC got the lion share while the other two proponent groups, the Sorsogon Pili Producers Cooperative (SPPC) based in San Pedro, Irosin and the Barcelona Development Cooperative (BADECO) based in Poblacion Sur, Barcelona got a combined assistance of P7,330,214.88.

In its audit report for 2022 published recently, the COA cited the irregularity in the use of the government assistance “because the facilities procured out of the fund were used instead in the Cooperative’s own milk production business rather than for the processing of pili products, contrary to Sections 2.01 and 5.02.c of the Enterprise Investment Agreement (EIA) and COA Circular No. 2012-003”.

The report said “Section 2.01, Article II of the EIA states that the agreement shall cover the implementation of Sorsogon Pili Enterprise in accordance with the approved Business Plan as described in Schedule 2 (Description of Subproject)” while “Section 5.02.c specifically provides that the operations and maintenance of the facilities and other properties shall be relevant to the enterprise”.

The COA also cited “Annex B of COA Circular No. 2012-003 dated October 29, 2012 enumerates the cases that are considered “Illegal” Expenditures or Uses of Government Funds and Property”. Number 12 of the same Annex includes in its provision that the “Use of funds intended for a specific purpose/project, for other purposes such as administrative and miscellaneous expenses of the implementing agency, and for projects not intended to be implemented under the program” is illegal”.

The report said that the “SPE will engage in processing of pili kernel into pili candies, selling of by-products like processed pili pulp oil for cosmetics, pharmaceutical and food purposes and cracked pili shells as an industrial fuel or manufacture into accessories and other crafts”.

It also said that the venture “will further enhance the Pili Industry since it will encourage PG members and the community to plant more pili trees/seedlings, thus, offer mitigating measures against environment degradation, soil erosion, and the ill effects of climate change or global warming and an that “the business will boost value addition for pili pulp oil using the pili pulp and by-products of pili shells which are considered as waste products”.

Based on the approved grant P6,134,815.43 will be spent for the warehouse and Pili Processing Center, P1,044,100 for the procurement of a delivery van/hauling truck, P86,000.00 for the purchase of a motorcycle as service vehicle, P37,000.00 for the top down for the motorcycle and P99,000 for an oven for a total of P7,401,815.43.

The COA said that the two PGs, the SPPC and the BADECO, both complied faithfully to the terms and conditions of the grant as the BADECO warehouse were almost full of pili inventories with machines being used to prolong and improve the quality of their products.

Meanwhile, the field inspection conducted on SPPC “revealed a thriving pili production cooperative” whose members were “helped in improving their livelihood through employment and business opportunities”.

The auditors also noted that “Inventories of various pili products were also displayed in their store for walk-in clients”.

Coop officials “disclosed that they had to turn down a contract opportunity to supply pili oil to a multi-national cosmetic company due to lack of facilities for bigger production”, which GSAC has.

A significant part of the audit report stated:

“On the other hand, the subsidy awarded to GSAC for the pili enterprise implementation was actually used by the GSAC for the Cooperative’s own milk production instead for pili processing. It was apparent upon the AT’s arrival in the warehouse that the supposed pili processing facility was actually a dairy production plant with the presence of boxes of milk around the warehouse and a running milk production facility. Although there was a display of five sacks of pili at the entrance of the warehouse, it was insignificant compared to the hundreds of stored boxes of milk, in which some were even loaded in trucks ready for transport. Further inspection around the plant area exposed an unused yet corroding big oven for pili production, while motor vehicles purchased by PRDP were also used to transport the milk products”.

When queried by the audit team why there was no pili processing going on yet, GSAC supposedly said cited various reasons, “such as the absence of business permits and insufficient supply of pili materials to process because of the pandemic” however the COA noted that the grant was released to GSAC as early as 2018 while the pandemic went full blown in 2020.

It also stressed that obtaining a business permit does not take much time while supply of pili materials was in abundance as shown by the BADECO warehouse full of pili materials. The BADECO was enjoined under the term of the project to sell their pili inventory to GSAC.

“Schedule 2 of the IMA and EIA illustrates that 82 per cent of the total forecasted pili candy production of the SPE shall be done by GSAC while only 18 per cent to be produced by BADECO. However, during the inspection, BADECO had more pili supplies on stock than GSAC”, the COA further stated.

The COA lamented that “GSAC unjustly disregarded the provisions of the EIA and misused the facilities provided for the pili enterprise subproject (the oven was abandoned) by using the warehouse and motor vehicles provided by the PRDP for the Cooperative’s own milk production”.

It stressed that the cooperative’s failure “casted doubts on GSAC’s intention to actually help pili farmers,” defeating “the purpose of the program, thus, deprived the intended pili farmers/beneficiaries and other stakeholders of the benefits they could have derived therefrom”.

Queried by COA on why this happened, the Office of the Provincial Agriculture of Sorsogon (OPAGS) explained that “GSAC asked verbally from PRDP officials of the Department of Agriculture (DA), Regional Office No. V, to temporarily use the warehouse for milk production while the pandemic was prevalent”.

However, the audit agency noted that GSAC continued, until the time of the inspection, to use the PRDP’s facilities for the Cooperative’s own milk production business which defeated the actual purpose of the subproject”.

The COA directed GSAC, through the OPAGS, to institute the necessary rectification to correct the irregularities in the use of the grant fund and failure to do so should require the cooperative to refund the amount of the grant, otherwise, “possible Notice of Disallowance may be issued in accordance with COA Circular No. 2012-003 and/or legal actions will be meted to responsible and liable persons”.

Sought for comment through email, GSAC refused to provide any statement except by saying that it has already communicated with the PRDP and COA.

Request for a copy of the communications to the two government agencies remained unanswered as of press time.

GSAC is touted by the Cooperative Development Authority (CDA) as the first and only billionaire cooperative in Bicol Region.

As of now, it owns several businesses like pharmacies, stores, banks and a hospital, among others.


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