Metro Manila (CNN Philippines, November 3) — The Commission on Audit (COA) is calling for a probe on former officials of the Budget Department and other government agencies over the “questionable release” of ₱36.2 billion worth of royalties from the Malampaya fund from 2004 to 2012.
In an 80-page report, COA cited lapses by the Department of Budget and Management (DBM) in the funds’ release, saying its distribution to various implementing agencies “may not be considered proper in view of non-compliance with existing rules, and regulations”
The Malampaya fund is derived from royalties from the Malampaya Deepwater Gas-to-Power project generating energy offshore Palawan.
Under Presidential Decree 910, it is intended to finance the government’s energy resource exploration, development and exploitation programs and projects and such other purpose as may be directed by the President.
According to COA, the Malampaya fund amounted to a total of ₱173.2 billion from 2002 to 2013.
The Budget Department authorized the release of ₱38.8 billion from the Malampaya fund from the term of Pres. Gloria Macapagal Arroyo to the first two years of Pres. Benigno Aquino III’s term.
This was released to national government agencies, government owned and controlled corporations, and the Palawan government, which is the site of the Camago-Malampaya reservoir.
The COA said, however, its review of ₱36.2 billion of the funds shows DBM had allowed its disbursement even without necessary documents for their release.
Out of 184 special allotment release orders (SAROs) issued by the DBM to 62 agencies, only four cases had complete documents, such as the request of funds from agencies, endorsement from the Energy Department and DBM evaluation, COA said.
Some 171 SAROs were also released even without proof of evaluation by the Budget Department.
COA said these lapses contributed to misuse of the Malampaya funds by implementing agencies, and the “irregular disbursement of funds.”
It recommended an “immediate” investigation as well as possible charges against authorities responsible for the issue.
“In view of the apparent disregard of applicable laws, rules, and regulations which contributed to the misuse of funds as illustrated in the results of completed audit of sample IAs (implementing agencies), the 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,” it said.
DBM didn’t evaluate basis for release of funds
Aside from releasing SAROs without complete documents, the COA also said the DBM failed to “properly evaluate” and establish the basis for the release of funds to 62 agencies.
“The DBM released the SAROs without first establishing the propriety of the projects to be funded and reasonableness of the amount being requested as shown in the collatilla to the SAROs requiring submission of documents prior to disbursements of funds,” the report said.
According to COA, the required documents should have been the basis for determining if the project to be financed was within the scope of the request, and if the funds allotted were reasonable.
“In the absence of specific documentary requirements, the DBM does not have an idea on whether the project is necessary or not,” COA said.
“This clearly manifested that the DBM released the funds without thorough evaluation,” it added.
Funds not used for energy programs
The audit also showed funds were not used for their initial purpose of financing energy development initiatives.
The Malampaya fund is intended to finance energy resource development related ventures, along with other purposes directed by the President under Presidential Decree No. 910, which created the Energy Development Board (EDB).
COA said the ₱38.8 billion — roughly 22.41 percent of the Malampaya’s collection of ₱173 billion as of June 2013 — were not used for energy resource development. Instead, they fell under the category of purposes directed by the President.
With roughly a fifth of the funds financing non-energy related ventures, COA said the purpose of the Malampaya fund was not addressed.
“The very purpose for which Malampaya Fund was established is therefore yet to be served,” it said.
₱2.1B went to projects other than approved by President
The Commission also noted more than two billion of the funds went to projects other than those approved by the President.
This includes the use of funds meant for relief operations, rehabilitation, and reconstruction in areas affected by natural calamities for operations against lawless elements, and other anti-crime activities.
It said in instances like these, the specific purpose for which the fund was released under the DBM’s were no longer aligned with the purpose for which the fund was approved by the president.
COA said this was a violation of section 8 of Presidential Decree No. 910, which states “All fees, revenues and receipts of the (Energy Development) Board from any and all sources… shall form part of a Special Fund to be used to finance energy resource development and exploitation programs and projects of the government and for such other purposes as may be hereafter directed by the President.”
So far at least one Senator has expressed support for the probe.
Senator Sherwin Gatchalian said in a statement Thursday the investigation was ” a long time coming.”
“I made it a point to flag the discrepancies in the collection and disbursement of the Malampaya Fund during the Senate deliberations on the DOE budget last month,” said Gatchalian.
“Those funds are meant to be used in building a brighter future for the Philippine energy sector. Their misuse will put that future in jeopardy,” he added.
Former Budget Secretaries from 2004-2010 include the late Emilia Boncodin (2001-2005), Romulo Neri (2005-2006), Rolando Andaya, Jr. (2006 to 2010), Joaquin Lagonera (2010) and Florencio Abad (2010 to 2016). The COA has sent a copy of the report to current Budget Secretary Benjamin Diokno.
In a comment included in the COA report, former Sec. Andaya said he was “very confident” about the professionalism of his subordinates during his tenure as Budget Secretary.
“Prior to the release of government funds, including Malampaya Fund, the requests for funding go through the regular and strict process of determining compliance with and completeness of all the documentary requirements under existing laws, rules and regulations,” he said.
“It is clear that the non-submission of all the documents required and demanded by SAO-COA is not tantamount to failure to observe the existing laws, rules and regulations for the use and allocation of Malampaya Fund,” he added.
