MANILA, Philippines - The Trade and Investment Development Corp. (Tidcorp), a government-owned and controlled corporation (GOCC), lost over P665 million to creditor banks last year, a Commission on Audit (COA) report revealed.
Tasked primarily to guarantee loans granted by Philippine and foreign banking and financial institutions to qualified exporters, producers of export products and contractors with service contracts abroad through advance payments, Tidcorp spent more than half-a-billion pesos in advances to creditor-banks in 2009.
State auditors said Tidcorp failed to recover the amount due to various reasons including lapses in the areas of credit evaluation, with the account officers failing to conduct an in-depth analysis of the borrower’s management quality.
There was a failure to evaluate further the true picture of the financial condition of the business as the viability of the client’s business are overlooked.
The COA report said there was also careless housekeeping of loan accounts, weak monitoring scheme, and inability to effectively manage credit risks that resulted in failure to identify situations that have negative effect on the quality of the accounts and eventually invite loan loss.
State auditors explained that Tidcorp, as a guarantor, becomes immediately liable for debts and other charges once the borrowers defaulted in their loan amortizations.
The COA report noted that in 2009, the GOCC derecognized from its books 21 non-performing accounts (NPAs) worth P665,264,503 due to non-recovery of its advances to creditor-banks despite all the efforts exerted to collect the accounts.
Such loses resulted in the impairment of Tidcorp’s capital “which contributed largely to its deficit of P4.27 billion to date and in the over exposure of risk assets under its several program offerings of about P9.632 billion.”
“The collection efficiency of the corporation, as far as the above accounts are concerned, was very low resulting in substantial drain in the financial position of Tidcorp,” state auditors said.
“Had these accounts been collected, it would have flowed back to the corporate funds to be used for the effective operations of Tidcorp,” they added.
The COA report said the effect of the lapses in the means to recover the advances made to creditor-banks resulted in yielding low-quality guarantee/loan portfolio that led to defaults in loan payments by the borrowers/clients.
State auditors said Tidcorp should revisit existing policies on credit evaluation before the grant of guarantees or loans.