THE Commission on Audit (COA) declared as illegal the Philippine Health Insurance Corporation (PhilHealth) release of P14.971 billion to various private and government hospitals under the Interim Reimbursement Mechanism (IRM) last year.

In its 2020 report, COA said the governing board of the Philhealth violated Section 88 (1) of Presidential Decree No. 1445 when it passed Board Resolution No. 2496 s. 2020 which authorized the release of aid funds.

The COA said the sum released constituted “advanced payments” which is explicitly prohibited under PD 1445.

PhilHealth said the sum was distributed to various health care institutions (HCIs) in various regions of the country to assist private and state-run hospitals and clinics to continue providing health care services during the pandemic.

However, the state auditors pointed out that PhilHealth failed to secure prior approval from the Office of the President in order to avoid being questioned.

“Considering the enormous sum of P14.971 billion of funds released by PhilHealth to the HCIs through the IRM scheme, it could have at least exercised the required diligence. At the very least, PhilHealth could have secured the prior approval of the President of the Philippines, which the latter might approve given the circumstances faced by the country brought about by the COVID-19 pandemic,” the COA said.

“Thus, in the absence of proof showing that IRM fund releases have legal bases or prior approval of the President of the Philippines justifying exemption from the prohibition against advance payments, the disbursements made under the IRM scheme were without legal authority and could be considered illegal expenditures,” it added.

Responding to COA, PhilHealth said the IRM had already been suspended and that around 95 percent of the funds released have been liquidated by the recipient HCIs.

It added that, although belatedly, the agency has requested the Office of the President for post-facto approval of the said advance payments.

Also the COA reports indicated that P7.68 billion or 51 percent of the total IRM released went to private HCIs but these were not subjected to two-percent creditable income tax amounting to P152.83 million which would have been withheld before the funds were transferred.

PhilHealth management admitted its oversight during the exit conference with the audit team. It said it had already taken steps to recoup the unpaid taxes by requiring its regional offices to collect the amount from the hospitals.

As of June 11, 2021, the PhilHealth said it has recouped a total of P137.502 million of the sum required.

However, by failing to withhold the proper taxes and to remit them on time, the COA said PhilHealth officials have already violated various provisions of the National Internal Revenue Code.

These offenses are punishable by fines or imprisonment of six months to two years per count, or both.

“Failure to withhold the appropriate income taxes and/or to make timely remittance thereof would expose the officers of PhilHealth charged with the duty to deduct, withhold and remit the required taxes to possible prosecution and imposition of penalties, interest and criminal liabilities,” the COA stressed.