Slump in levies income pulls into deficit
Isaac Pinielo | Friday February 13, 2015 15:20
As reflected in the recently released report by the Auditor General for the financial year ended March 31, 2014, the regulatory authority’s income declined from P46.51 million in the previous year to P41.48 million in the year under review.
This represents a decline of 10.8 percent, mainly comprising supervisory levies which significantly declined from P43.17 million in the previous year to P28.29 million in the year under review. Expenditure increased from P30.54 million in the previous year to P42.79 million in the year under review. This is an increase of 40 percent, mainly attributable to staff and training costs. The authority’s working capital position as at March 31, 2014 showed current assets of P50.37 million and current liabilities of P7.33 million, giving a net current assets position of P43.04 million.
It was also indicated that the auditors noted instances of potential non-compliance with some sections of the Statutory Instrument as the majority of the supervisory levies were received after April 30, 2013 and October 31, 2013, without the authority charging interest on the long outstanding balances.
Auditors indicated that the non-charging interest on outstanding balances might create the perception that the authority does not charge for delayed payments of levies.
In response, NBFIRA indicated that the supervisory levies were gazetted April 24, 2013, which was after the billing date, hence it would not have been prudent to charge the interest for the delay not occasioned by the regulated entities.
However, the auditors said some entities that were not charged penalties for late payment due to absence of a functionality to charge interest in the current accounting package.
An envisaged ERP system would have an inbuilt functionality to permit calculation of interest. A spreadsheet-based system has also been developed as a stopgap measure.
The auditors observed that not all receipts from the regulated entities had been satisfactorily matched and allocated since the deposits did not have sufficient reference details to facilitate tracing. The unallocated receipt account had a balance of P176, 911 at the end of the year under review, compared to P324, 879 last year. The long outstanding supervisory levy balances amounted to P1.73 million at March 31, 2014, compared to P1.87 million on the same date in the previous year.
Some of the entities had not communicated with the authority to confirm their operational status. Management stated that despite the measures put in place, the authority continued to experience challenges in addressing the unallocated receipts primarily as a result of deregistration of discontinuation rate of the regulated entities. Nevertheless, there has been an improvement as the balance reduced from P324, 870 on March 31, 2013, to P176, 911.
On March 31, 2014, the bankers had rolled out a new system, which will address some of these challenges.
In effort to step up collections, the authority issued demand letters to defaulting companies from January to March 2014. About P2 million out of P3.9 million was recovered.
However, increasing the penalty interest on overdue debts would not be prudent since most of the entities could not be easily traced, which would result in them being ultimately written off.