COVID-19 travel restrictions increased the losses of Duty Free Philippines Corp. (DFPC) in 2021, necessitating the government firm to appeal for funding assistance from the national government.
In its latest audit of DFPC’s finances, the Commission on Audit (COA) said the firm posted a net loss of P558 million in the year ending December 31, 2021, up 47 percent from the net loss of P379 million in 2020.
“These continued losses placed the company in a precarious state as it already incurred P156-million deficit in its equity and may already require negotiation from the national government for possible assistance/funding,” the COA said.
Under Republic Act 9593 (Tourism Act of 2009), DFPC has an authorized capital of P500 million that has yet to be fully paid by the national government. Prior to RA9593, the government firm was set up with a P50-million capital from the Philippine Tourism Authority (now the Tourism Infrastructure and Enterprise Zone Authority), and has been sustaining its operations from its sales and revenue.
Profits of the DFPC are supposed to help fund the tourism projects of its parent unit, the Department of Tourism (DOT). The agency had earlier mulled the possibility of privatizing DFPC. (See, “DOT chief: Duty Free firm’s privatization possible,” in the BusinessMirror, September 5, 2019)
‘Qualified opinion’
THE COA said that “management commented that, due to the impact of Covid-19 pandemic to DFPC’s business operations, they have already been sending letters requesting financial support to DBM [Department of Budget and Management] which covers both subsidy and relief from the National Government and request for the P500 million capitalization to be included in their General Appropriations Act Fiscal Year (FY) 2023.”
“Moreover, DFPC is currently working for the implementation of proposed online shopping program in order to update its current selling presence in the retail travel industry,” the audit agency said.
Prior to the pandemic, DFPC earned a profit of P470.37 million in 2019.
The COA rendered a “qualified opinion” on the government firm’s financial statements, due to the wrong computation of its Property, Plant and Equipment (PPE) and Retained Earnings/Deficit, contrary to Philippine accounting standards.
The pandemic travel restrictions resulted in a “drastic drop” in DFPC sales. Even when these restrictions were eased, allowing the firm to reopen several stores, its net sales fell 45 percent to some P1.71 billion in 2021. Expenses fell 36 percent to P2.29 billion that same year.
Aside from making representations with the DBM to pay up the firm’s subscribed capital, the COA also advised DFPC to: “establish strategies that will adapt to the changes in trade and tourism industry, while coping with the Covid-19 during the pandemic and beyond; and Continue to maintain cost-cutting measures to minimize costs and losses as well as to economically spend its resources.”
Disallowances unsettled
WHILE the firm had no unsettled audit charges and suspensions, it still had unsettled audit disallowance amounting to some P28.65 million. The bulk of this at P28.61 million was a disallowed car plan benefit of DFPC’s executives and managers “due to non-submission within the reglementary period of required documents stated in the Notices of Suspension” issued on February 19, 2018.
The rest of the disallowances were travel expenses and excess claims for inland transportation and per diem in 2018.
The government firm has a total workforce of 767, of which 757 are regular employees while seven are job order personnel. DFPC currently operates stores at the following: Fiesta Mall in Parañaque; the Ninoy Aquino International Airport terminals 1, 2 and 3 in Pasay; and, the international airports in Davao, Kalibo, Clark, Iloilo and Bacolod (Silay).