MANILA, Philippines – The Commission on Audit (COA) called out the Department of Science and Technology (DOST) for inefficient implementation of its program for small businesses that has cost the agency P461 million so far.

COA noted in a 2018 audit report that the DOST’s Small Enterprise Technology Upgrading Program (SETUP) has accumulated P461.150 million in uncollected refunds that have been due for up to 10 years.

SETUP is a flagship DOST program which provides financial and technical assistance to micro, small, and medium enterprises (MSMEs). The program has a repayment system where the SMEs have to repay the DOST in 3 to 5 years after their businesses have taken off.

COA found P461.150 million that is “already past due for almost one to over 10 years.”

Many businesses, it turned out, flailed despite the SETUP funding and therefore were not able to repay the DOST.

“Termination of contract agreements by various beneficiaries was due to the following: weak market demand, health problems of the owners, internal conflicts within the organization, low sales, and others which ultimately led to non-payment of their obligation to the government,” said COA.

Auditors also said the DOST had “lax enforcement” of the provisions in the memoranda of agreement.

“Inadequate monitoring and thorough evaluation of the factors that will ultimately impact on the success or failure of the project, such as ready building facility that will house the SETUP equipment, financial capacity of the proponent, appropriate equipment technology, and potential market of the product resulted in defaulted refund payments of several proponents/beneficiaries, premature termination of the projects, and pullout of equipment,” said COA.

Wasted equipment

On top of that, auditors found that P48.62 million worth of equipment for SETUP “remained unutilized and not properly secured/stored for several years, thus, exposing the equipment to wear and tear and risk of loss of value or purpose of usage.”

Nearly of those equipment, worth P26.7 million, remained in the custody of the delinquent beneficiaries.

“DOST commented that they are having difficulties in facilitating the pullout of SETUP equipment from the beneficiaries due to additional cost of dismantling and such would cause further deterioration. Moreover, it was mentioned that much as management wanted to donate the equipment there are no interested takers due to obsolescence,” said COA.

When auditors conducted a site inspection, they could not find P76.23 million worth of equipment.

Auditors also found that P5.710 million worth of SETUP funds were spent for other purchases outside of the program.

The inefficiencies affected “the reliability of the account, fairness of the presentation of the agency’s financial condition, and the attainment of program objectives with minimal returns to government’s investments,” according to COA.

Auditors told the DOST to more comprehensively evaluate the feasibility of proposals from SMEs.

Auditors also recommended that the DOST “intensify collection efforts by sending demand letters and take appropriate legal action against the defaulting proponents for their failure to settle or refund their obligations on time.”

The DOST was also told to identify who should be liable for spending SETUP funds for other purposes. – Rappler.com