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Monday, October 8, 2012

Probing the government’s P101.8-billion hole

By RICARDO SALUDO

Most audit findings categorically indicate pecuniary loss on the part of the government as a result of violations of law, rules and regulations.

For [calendar year] 2011, unauthorized irregular/unnecessary expenses, unliquidated cash advances, violations of the Procurement Act, underassessment / undercollection, unutilized / ineffective projects, and lack of appropriation constituted the most number of cases where the public coffers suffered unwarranted loss as shown in the succeeding table . . .

— Commission on Audit, 2011 Audit Performance Summary Report (http://coa.gov.ph/APSR/coa_apsr.htm)

There are those who immediately concluded upon seeing the table that there were losses. That’s the conclusion of the person who wrote the [news] report based on the report that was generated by the COA . . . According to [COA Chairperson Grace Tan’s] letter, that’s not a justified conclusion. There are other things . . . not necessarily it’s lost to graft.

— deputy Presidential spokesman Abigail Valte on news about the COA report

Maybe the press is using a different kind of English than Palace spokesman Abigail Valte. If the Commission on Audit (COA)’s 2011 Audit Performance Summary Report said in black and white that, “public coffers suffered unwarranted loss as shown in the succeeding table,” then the amounts given in that tabulation—totaling to P101.86 billion—were indeed lost. And media reporting such losses told the truth.

Valte rightly argued that the entire sum was not necessarily lost to graft, as many newspapers headlined. After all, COA is not mandated to investigate if anyone illicitly gained from the irregularities it cites; that’s the Ombudsman’s job. Maybe some or most of the unauthorized expenses, unliquidated advances, procurement law violations, undercollection, and other anomalies were honest mistakes. Anything’s possible.

But the real issue is not whether news headlines misrepresented the audit findings. Rather, those committed to good governance, including President Benigno Aquino 3rd, should instead demand to know what big anomalies COA found, and how concerned officials, agencies and local government units (LGUs) will address the irregularities, prevent their recurrence, and hold accountable those responsible.

So what are the highlights of the 2011 report? COA completed 38,505 audits, or 62 percent of the 61,418 state entities it covers in three categories: 14,013 in the National Government Sector (NGS), 43,740 in the Local Government Sector (LGS), including 42,026 barangays; and 3.665 in the Corporate Government Sector (CGS). COA noted a rising percentage of unqualified or qualified reports in the NGS and CGS groups, which is good, but an increasing percentage of adverse reports for the LGS.

Local governments also accounted for the bulk of COA disclaimers, in which no audit could be done because there were no complete books of accounts, missing or delayed transaction documents, lack of bank statements covering agency finances, and denied access to government accounts due to bank secrecy.

How much of public finances were tainted by such weak controls? For all 61,000-plus audited entities, COA found such weak or absent controls affecting nearly P2.5 trillion in state finances. That exceeds both the 2011 income and 2011 expenses of the entire state sector (about P2.4 trillion each), and is a little less than one-fifth of total public sector assets of P12.7 trillion. Hence, for every peso the government earns or spends, there is an equivalent amount that cannot be properly accounted for.

Such weak or absent controls alone should give the Ombudsman, the Civil Service Commission, and the Department of Interior and Local Government much to look into, if not many to lock up. Failure to maintain books of accounts and transaction records would constitute at least neglect of duty and violation of rules, if not conduct prejudicial to the service. If missing records are for funds advanced to officials and staff, then there could be grounds for malversation or corruption charges.

What about the P101.86 billion hole in state finances?

COA cited 19 kinds of problems that led to the losses. Underassessment/undercollection deprived the state of P20.8 billion in rightful taxes or fees. Unauthorized, irregular or unnecessary expenses reached P18.6 billion. Procurement with no bidding or in violation of law amounted to P15.1 billion, while funds spent on initialized or ineffective projects topped P13.5 billion. Unliquidated cash advances and fund transfers totaled P14.3 billion. Those six categories accounted for over four-fifths of 2011 losses.

So which entities should President Aquino and other Tuwid na Daan guardians target, based on audit findings? Here are some priority anomalies:

The Bureau of Customs failed to collect more than P32 billion in duties, taxes, matured bonds, and unaccounted tax certificates. The Department of Social Welfare and Development has to properly document P3.77 billion of the P14.49 billion in conditional cash transfers for the poor. The Department of Budget and Management mis-recorded P2.69 billion in fund transfers or releases to LGUs.

Some findings don’t involve big amounts of money, but the cost in lives may be great. Marikina, Manila and Pasay failed to implement important provisions of the Philippine Disaster Risk Reduction and Management Act, hampering calamity readiness. The Department of National Defense’s Office of Civil Defense may have mishandled the procurement of 52 rescue boats, which could not be delivered as scheduled a year ago.

The 111-page COA report was sent last month to the President, the Senate President and the House Speaker. Unfortunately, it’s election time.

Ricardo Saludo serves Bahay ng Diyos Foundation for church repair. He heads the Center for Strategy, Enterprise & Intelligence, publisher of The CenSEI Report on national and global issues ( report@censeisolutions.com).

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