MANILA — State auditors have called out the Civil Aviation Authority of the Philippines (CAAP) for availing a P500-million insurance policy for 10 officials.
The single-pay variable life insurance from state-run United Coconut Planter's Assurance Corporation (Cocolife) was "without approval by Board, without in-depth study prior to the investment, and with no adequate criteria for the selection of the insured 10 key men," the Commission on Audit (COA) said in its 2018 report.
ALLEGED LACK OF BOARD APPROVAL
Auditors noted that the CAAP management said its corporate board secretary, Atty. Victor Eleazar, issued a certificate in July 2017 allowing the investment of its funds in special savings, time deposit and trust accounts.
The Board of Directors "interposed no objection" when the Cocolife insurance placement was presented to them on December 13, 2018 so it was "deemed approved," CAAP was quoted as saying in the audit report.
However, COA said it found the agency's comments "untenable" considering that there was no signed board resolution approving the investment.
The minutes of the December 13 meeting, it added, did not mention any action of the the Board because CAAP presented the proposed investment insurance "only for the information of the Board... and did not seek its approval."
CAAP transferred P500 million to the savings account of Cocolife just a day after the board meeting, noted the auditors.
SUPPOSED LACK OF STUDY
COA also pointed out that the insurance product was not among the investment facilities authorized by CAAP's corporate board secretary.
CAAP "could have earned 113% more if the amount was invested in Treasury bonds and 110% more if placed in Treasury bills" compared to the Cocolife insurance, said the audit team.
"The Funds wherein the P500 million were actually invested are less aggressive, hence, the potential of the money to grow is lesser," said COA.
QUESTIONS ON SELECTION PROCESS
Thirty officers took a medical exam to determine whether they are qualified for the insurance and Cocolife "evaluated that only 10 officers would be acceptable," making their selection "an exclusive determination" by the insurance firm, said COA.
Auditors added that the aviation agency's definition of "key men" covered by the insurance "is very broad as to include officers whose functions are not critical or essential to the operations of CAAP."
These "key men" included the corporate secretary, executive officer of the Office of the Director General, area center manager and head of the finance department, COA said.
"The selection of the key men raises doubt as to the objective of the Management in insuring them," it remarked.
COA also noted that 2 of the 10 officers insured are political appointees who generally serve at the pleasure of the President or are co-terminus with him, leaving them with only 3 years in office.
The insurance is non-transferable, which means that when the 2 political appointees leave CAAP, the account value of the investment "shall then be automatically withdrawn with corresponding charges, depending on the number of years invested."
"Any replacement of the key men shall be treated as newly insured thus, shall be charged with premium which will require another investment," said COA.
The audit team urged CAAP to "recover the full amount of P500 million paid to Cocolife," invest funds in a government facility with higher returns and less risk, and consider creating a group that will handle investments.