P23.8M APECO funds unaccounted for – COA

Pia Ranada
Unliquidated cash advances, undocumented transportation expenses and the unnecessary hiring of consultants are some of the alleged irregularities cited by the COA report

FOR DEVELOPMENT. A bird's eye-view of parcel 1 (493 hectares) of the Aurora Pacific Economic Zone and Freeport. Photo courtesy of Gerardo Erquiza

MANILA, Philippines – The Aurora Pacific Economic Zone and Freeport Authority (APECO) has yet to account for P23.8 million ($536,000) in unliquidated cash advances in 2012, according to the Commission on Audit (COA).

The full report also shows that APECO has no proper inventory of property and equipment worth P575.7 million ($13 million), has questionable liquidation of its transportation expenses, and hired unnecessary consultants for non-technical and non-professional services.

APECO is the entity created by law to oversee the establishment of the Aurora Pacific Economic Zone and Freeport, a 12,923-hectare development in the remote town of Casiguran, Aurora.

Despite its promise of economic growth and livelihood to locals, APECO has come under fire for not holding proper consultations with local communities, indigenous peoples and officials directly affected by the project. It is also criticized for lacking a feasibility and master plan. (READ: A ‘small-time’ Angara faces the skeletons of APECO)

The COA report, which covered the period from January 1, 2012 to December 31, 2012, stated that APECO did not liquidate cash advances amounting to P23,843,572.63 (US$536,000).

This was a 58% higher than its 2011 unliquidated cash advances of P13.8 million (US$311,000). COA attributed the increase to “non-liquidation of cash advances for Salaries and Wages and for special purpose/time-bound undertaking.”

COA noted the following discrepancies in the granting of cash advances:

  • Some of the officers and employees granted cash advances had not liquidated or accounted for their previous cash advances.
  • Cash advances granted for travel expenses remained unsettled as of year-end contrary to rules requiring liquidation within 30 to 60 days after return from local and foreign travel, respectively.
  • Some of the employees with unliquidated cash advances had resigned and were no longer with the APECO.

In an interview with Rappler, APECO president Gerardo Erquiza gave his assurance that they are now accounting for the amount indicated by COA.

“We have until May. More or less we’ve liquidated P10 million (US$225,000) already. What remains to be liquidated are the advances made to employees who are no longer with APECO,” he said.

Much of the COA report is new to Erquiza, a lawyer-engineer who had been the APECO board’s vice-chairperson before being named president and CEO in November 2013.

The COA report covered the period when Malcolm Sarmiento was APECO president. Sarmiento left the post due to health concerns, said Erquiza.

No inventory of property

The COA report said APECO management failed to keep a physical inventory of its property and equipment, leading the state auditor to declare as “unreliable” APECO’s Property, Plant and Equipment (PPE) balance of P575.7 million (US$13 million).

DAMAGED PROPERTY. The APECO administration building was damage by Typhoon Labuyo which made landfall in Casiguran in August 2013. All photos by Pia Ranada/Rappler

Keeping an inventory is an “indispensable procedure for checking the integrity of property custodianship,” the report noted, since it determines not only the existence but the actual condition of the property. Inventory-taking is supposed to be done semi-annually or annually.

The failure of APECO to maintain records “casts doubt on the accuracy and existence of the property and supplies,” COA said.

Much of APECO’s property, including the administration building, seaweed farm equipment, computers, and other movable property, were damaged by Typhoon Labuyo, said Erquiza. The storm made landfall in Casiguran in August 2013.

Undocumented transpo expenses

The lack of regulation and monitoring on APECO’s use of government motor vehicles also cast doubt on the accuracy of its declared gas expenses totaling P906,996 (US$20,000), said the report.

COA said APECO did not submit the required monthly reports for official travels and fuel consumption. Audited disbursement documents also revealed that APECO did not attach required driver’s trip tickets that would verify the amount of fuel consumed per trip, the name of passengers and the speedometer reading.

COA also noted that the government vehicles used by APECO were not marked with “For Official Use Only” as required by COA regulations.

“The failure of the agency to observe the above regulation may cause unauthorized use or misuse of the said properties,” observed the report.

APECO management is now working on properly labeling their vehicles, said Erquiza.

However, APECO had previously asked COA to exempt some of the vehicles from the label requirement due to “security concerns,” he added.

APECO management also failed to provide COA with copies of government contracts and purchase orders which are supposed to be submitted within 5 working days from the execution of the contract.

These documents cover agreements with locators and other businesses wishing to partner with APECO.

UNFINISHED HOUSING. The National Housing Authority built homes for Casiguran locals displaced by APECO development projects but the units remain unfinished

There are 11 locators registered with APECO so far, said Erquiza. The locators are involved in business process outsourcing (BPO), deep-sea fishing, seaweed processing, bamboo crafts, rattan processing, solar power and hydroelectric power.

‘Unnecessary’ consultants

APECO hired consultants for services that could have been provided by its regular staff, according to the report.

COA deemed this “dispensable and unnecessary,” resulting in “inessential expenses.”

APECO spent P9,098,603.79 (US$205,000) in consultancy services in 2012. The COA noted that the engagement of these services “was uncertain in origin or the source of its authority to employ the so called consultants was not clearly defined.” 

The ecozone’s management seemed to have a misconception on what a consultant is.

Consultant services are services “requiring adequate external technical and professional expertise that are beyond the capability and/or capacity of the agency,” said COA.

But the skills of the “consultant” hired by APECO were available within APECO. The job function of the consultants were similar to those of regular employees and can thus be deemed redundant.

Some of the consultants did not even have technical or professional expertise. Even without these consultants “there would be no imminent danger to life or loss of property. These conditions would entail that the hiring of some persons as consultants is dispensable,” COA said.

No internal audit

The COA also said that APECO did not have an Internal Audit Service or IAS.

An IAS is supposed to examine and evaluate the effectiveness of accounting, financial and operation controls within an organization. It is responsible for making sure financial and operational information is accurate and reliable.

Erquiza says he has already created such a unit within APECO. He has even asked a retired COA official to check the newly-established “budget control system.”

“We go to COA from time to time. We’re being COA-sensitive. Every move we make we ask them for advice,” he told Rappler.

They have also put in place stricter measures to ensure cash advances are not given to employees who have unliquidated accounts.


The use of government vehicles is also being closely monitored.

“You cannot use the vehicle if you don’t tell the admin [administration] one week before, unless it’s really an emergency.”

The small budget has also forced APECO officials to be more resourceful. Employees going to and from Casiguran from Metro Manila use a carpooling system. Some officials take buses.

To reduce expenses, Erquiza  phased out the APECO office in Makati and transferred all operations to the Casiguran office.

He said the discrepancies observed by COA stemmed from a problem in documentation rather than any dishonesty in the part of the management.

They’ve been given until May to submit everything. 

“We are ready,” said Erquiza. – Rappler.com

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Pia Ranada

Pia Ranada is a senior reporter for Rappler covering Philippine politics and environmental issues. For tips and story suggestions, email her at pia.ranada@rappler.com.