29 November 2016

Press Statement of SBMA OIC Administrator Randy Escolango

This is to bring to the fore the facts behind the various media reports pertaining to the Accounts Receivable of the Subic Bay Metropolitan Authority (SBMA) and Cash Advances made by some key officers.

The reports evidently show that the source thereof had made a flawed appreciation of facts and great misimpression on audit observations made by the Commission on Audit (COA) dealing on the transactions and actions mentioned therein.

As the Deputy Administrator for Legal Affairs of the SBMA for more than six (6) years prior to being designated as OIC-Administrator and CEO, and having also served the past administration of former Chairman and Administrator Roberto V. Garcia, the undersigned has first-hand knowledge of the transactions and actions made during the latter’s time including those subject of the recent media reports.

Contrary to reports that the administration of former Chairman and Administrator Garcia had entered into transactions and made management actions disadvantageous to SBMA, tangible reports and records would attest that SBMA during his time was given various distinctions for sound financial and administrative management, breaking records in terms of increased revenue collection and robust financials for SBMA. What came out from the reports are hereafter controverted.

The Annual Audit Report dated June 27, 2015 of the Commission on Audit states that the Balance of SBMA’s Accounts Receivable as of December 31, 2015 is Php4,106,523,069.14; that 85% of said balance is doubtful because the existence and correctness thereof was not established since a majority of the notices sent by COA to locators and residents seeking to confirm SBMA’s receivable from them had been returned due to the fact that said locator or resident could not be located; and that 11.92% of said balance remained non-moving since 2013.

The SBMA has consistently and seasonably replied to these COA observations explaining that the correctness and validity of the Balance of SBMA’s Accounts Receivable cannot be doubted simply because most of the notices sent by COA to the locators and residents who have liabilities to SBMA have not replied. Most of the residents sent notices by COA had already moved out, or refused to receive or acknowledge the notices lest they admit and establish their payables to SBMA.

Furthermore, most of the locators who did not reply or cannot be located where already evicted by the SBMA from their lease premises precisely because of their failure to pay their accountabilities. What is real, valid and on record is that each and every entry in the Balance of the Accounts Receivable of the SBMA is fully substantiated by a signed contract and/or an official billing statement that establishes the legitimacy and validity of the receivable.

That 11.92% of said Accounts Receivable Balance remained non-moving since 2013 is easily explained by the fact that these accounts are either under court litigation, or the SBMA has already repossessed all of the defaulting locator’s assets and yet its receivable still cannot be satisfied. To take the example of three of the SBMA’s biggest Accounts Receivable:

a) Financial Building Corporation (FBC) with total accountabilities to SBMA of Php1,285,803,796.75 has questioned in the Regional Trial Court (RTC) of Olongapo City the lease billings of SBMA. Pending since 2004, certain incidents of the proceedings in the RTC have been elevated to the Court of Appeals, but the RTC has yet to promulgate a decision in the main case. Most of FBC’s assets have been foreclosed by Home Guaranty Corporation (HGC), a government arm, and the SBMA has been able to work with HGC by collecting from the latter the amount of Php36,688,583.01 representing a portion of FBC’s unpaid rentals and charges on the foreclosed assets.

b) The SBMA in 2009 obtained and executed a court judgment against Legenda International Resorts Limited (“Legenda”) in the amounts of Php884,419,064.36 and US$225,886.99 representing Legenda’s unpaid accountabilities to SBMA. However, Legenda was already insolvent at that time, and had already filed for corporate rehabilitation and receivership, which ultimately led to its liquidation. Its only remaining asset was the Legenda Hotel, which the SBMA fully repossessed and took control of also in 2009, and subsequently leased out to another locator. Almost all of Legenda’s movable assets, on the other hand, were attached by PAGCOR.

Thus, even if SBMA obtained a court judgment in its favor and repossessed Legenda’s main asset, the latter no longer has any other assets that the SBMA can run after in order to collect the rest of its receivables. The SBMA has been working with COA to allow this receivable from Legenda to be written off since SBMA has exhausted all legal means to collect.

c) The SBMA in 2007 took over from the Universal International Group of Taiwan (UIG) the Binictican Golf Course and all of the assets contained therein due to UIG’s failure to pay SBMA the amount of Php91,459,412.01 representing unpaid rentals and charges. The court cases between SBMA and UIG remain unresolved, but the SBMA has already repossessed all of UIG’s fixed and movable assets. Even if SBMA subsequently wins in the court cases, which it expects it will, UIG has no other assets that SBMA can levy or collect from.

Aside from FBC, Legenda and UIG discussed above, there are 3 other locators, namely the Freeport Services Corporation, KT Global Subic, Inc. and Subic Leisureworld Inc., with significant accountabilities to SBMA totaling a combined Php266,987,925.66 that remain unsatisfied, because even if SBMA had already repossessed their lease premises, they no longer have any assets that the SBMA can levy or run after.

Clearly, it is not due to a lack of effort that a significant portion of SBMA’s receivables has remained non-moving. The pace of litigation is not something the SBMA can control, and on the several instances that the SBMA has exhausted all legal means to collect and has in fact repossessed almost all of the assets of a defaulting locator, the unfortunate reality is that such repossessed assets are insufficient to satisfy SBMA’s receivable.

It is also relevant to highlight that it was precisely due to the SBMA’s collection efforts across all revenue sources, including receivables, that the SBMA was able to achieve successive record revenues of Php2.02Billion in 2013, Php2.442Billion in 2014 and Php2.755Billion in 2015 – the three highest revenue years in SBMA history.

For 2016, all indications are that SBMA will exceed its year end target revenue of Php2.9Billion. These efforts are what led to SBMA being awarded the 2015 Best Freeport Zone in Asia by FDI Magazine (Financial Times of London) and the 2016 Executive Leadership Team of the Year by the Asia CEO Awards.

As to the alleged irregular Cash Advances by the SBMA’s key officers, these have all been fully liquidated within the prescribed period, and, except for the minor fact that these officers were not covered by written designations as disbursing officers, complied with all the requirements under COA Circular No. 97-002 that: a) the cash advances be for a legally specific purpose and used only for such purpose; b) no cash advance to an official be allowed until the latter’s previous advances are fully settled; c) the submission of a cash advance report; d) the officials to whom the cash advances were issued hold permanent appointments; and e) the cash advances are duly obligated and cannot be used to pay expenses of prior years.

Note that further Cash Advances could not have been made by said officials if there were substantial or relevant requirements not complied with in the previous Cash Advances. Attached is the Report of the SBMA Accounting Department for the Year Ended December 2015 showing the particulars, purposes and status of the Cash Advances cited in the COA Report.