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COA seeks criminal probe into DBM's P38.8-B Malampaya Fund releases

November 2, 2017 | 4:45am

COA seeks criminal probe into DBM's P38.8-B Malampaya Fund releases

The performance audit report, released last October 30, covers Malampaya Fund releases by the DMB from 2004 to 2012. File

MANILA, Philippines — The Commission on Audit has recommended a criminal investigation on the Department of Budget and Management and other government agencies over the allegedly unlawful releases of P38.807 billion drawn from the proceeds of the Malampaya natural gas project.

"In view of the apparent disregard of applicable laws, rules and regulations which contributed to the misuse of funds, the [audit] Team recommends immediate conduct of investigation to determine officials and employees who may be responsible for the questionable release of funds and file appropriate charges, if warranted," the COA said in the recommendatory portion of its 80-page Sectoral Performance Audit report.

The performance audit report, released last October 30, covers Malampaya Fund releases by the DMB from 2004 to 2012, involving the full six-year presidential term of Pampanga Rep. Gloria Macapagal-Arroyo and the first two years of the term of former President Benigno Aquino III.

Based on the report, a total of P173.280 billion was received by the government as of June 30, 2013 as its share from the net proceeds of the operations of the Camago-Malampaya gas plant in Palawan.

The audit body said that of this amount, P38.807 billion or 22.41 percent were released by the DBM to various national government agencies (NGAs), government owned and controlled corporations (GOCCs) and the Provincial Government of Palawan from January 20, 2004 to May 21, 2012.

The COA said the fund releases “were not intended for energy resource development and exploitation programs and projects of the government.”

Thus, “the very purpose for which Malampaya Fund was established is therefore yet to be served”.

The special audit was conducted by overall team leader Grace De Castro, co-team leaders Ma. Luisa Gutay, Michelle Ceras, and Ray Christopher Pio Roda, and team member Pater Jigo Boado.

The audit team grouped their observations into three major findings based on the nature of the fund releases violations.

Lack of documentary requirements

Based on the report, a total of P36,287,503,000 of the funds was released to 62 government implementing agencies (IAs) through 184 special allotment release orders (SAROs).

The COA said the fund releases were made by the DBM despite the absence of the mandatory documents such as formal request from the IAs, approval from the Office of the President, endorsement from the Department of Energy and DBM evaluation reports.

The table provided in the report shows that the following IAs received the biggest amounts of fund:

Department of National Defense (Armed Forces of the Philippines- General Headquarters) - P7.268 billion
Department of Finance-Bureau of Treasury (National Power Corp.) – P6.624 billion
Department of Agriculture – P5.824 billion
Department of Public Works and Highways (Office of the Secretary) – P2.99 billion
Department of Interior and Local Government (Philippine National Police) – P2.14 billion
DOF-BTr (National Electrification Administration) – P1.922 billion
DOF-BTr (National Housing Authority) – P1.399 billion
Department of Agrarian Reform – P900 million
DPWH-Regional Office 1 – P759.362 million
Department of Health – P745.926 million
Department of Energy-Provincial Government of Palawan – P560 million
DOE – P550 million

The rest of the IAs identified in the report received well below P500 million.

“[The] DBM failed to properly evaluate and establish the basis for the release of Malampaya funds to 62 IAs due to the absence of the mandatory documentary requirements prescribed under existing laws, rules and regulations, which contributed to the irregular disbursement of public funds,” the audit team said.

No purpose and cost evaluation

In its second finding, the COA said fund releases totaling P7.103 billion covering 15 SAROs were made by DBM “without first establishing the propriety of the projects to be funded and the reasonableness of the amount being requested” by the IAs.

The 15 SAROs were released from 2004 to 2009 under the term of Arroyo.

The table provided in the report shows that P5.824 billion of the fund went to DA; P900 million to DAR; P745.926 million to DOH; P200 million to the DOE; P100 million to DOE-Second District of Palawan; and P100 million to DOE-First District of Palawan

“In the absence of specific documentary requirements, the DBM does not have an idea on whether the project was necessary or not. This clearly manifested that the DBM released the funds without thorough evaluation,” the report read.

Unlawful fund releases

Lastly, the COA said SAROs amounting P2.171 billion were released by DBM “for purposes other than those for which the funds were approved for release by the President”.

The COA said the fund releases were, therefore, in violation of Section 8 of Presidential Decree 910 signed by the late President Ferdinand Marcos on March 22 1976, which states that a special fund shall be used “only to finance energy resource development and exploitation.”

“Examination of the documents submitted by the DBM however disclosed that this provision was not strictly observed,” the report read.

The audit team listed 24 fund releases made from 2004 to 2009, which were supposedly in contravention to PD 910.

Among the big items on list were the following:

P584 million released to DILG-PNP for “procurement, transport, storage, and distribution of supplies and materials including maintenance of equipment and facilities”;
P375 million released to DILG-PNP for “conduct of operations and other related confidential activities against dissidents, subversive lawless elements and organized crime syndicates”;
P293.63 million release to DILG-PNP for “procurement, transport, storage, and distribution of supplies and materials including maintenance of equipment and facilities...to enable the PNP to respond immediately in times of natural calamities”;
P185.39 million released to DND-AFP for “internal security operations – air and ground combat services”;
P160 million released to DILG-PNP for “conduct of intelligence and counter-intelligence activities”;
P114.8 million released to DILG-PNP for “conduct of operations and other related confidential activities against dissidents, subversive lawless elements and organized crime syndicates”; and
P100 million released to DOE for “Coron waterfront development project”

“Clearly, the specific purpose for which the fund was released…was no longer aligned with the purpose for which the fund release was approved by the President,” the COA said.

A copy of the report was submitted to the office of DBM Secretary Benjamin Diokno on August 31, 2017.

Those who served as DBM secretaries under Arroyo were the late Emilia Boncodin (January 23, 2001 to July 8, 2005), Romulo Neri (July 19, 2005 to February 15, 2006), Rolando Andaya Jr. (February 15, 2006 to February 24, 2010) and Joaquin Lagonera (in acting capacity from March 8, 2010 to June 30, 2010).

Serving as DBM secretary under Aquino's term was Florencio “Butch” Abad from June 30, 2010 to June 30, 2016.