Commission on Audit

Going legit

cross-roads

How Philippine politics needs to move on from its shady past.

In 2016, the Philippines will be commemorating the 30th anniversary of the EDSA people power revolt that toppled Ferdinand Marcos who ruled the country for twenty years. These three decades will be book-ended by two Aquino presidencies: the first representing a transition from dictatorship to democracy, and the second which was billed a transition from impunity to legitimacy.

For many, the period in between the two Aquinos demonstrates the fragility of our democratic institutions under conditions less than ideal. The fragility is owed in large part to the concentration of power in the hands of the ruling elites whose dynastic families pre-date the Martial Law period.

By declaring martial law in 1972, Marcos claimed he wanted to uproot the old order (that these landed elites represented), only to replace them later on with his own cronies and acolytes. Under the first Aquino presidency, many elements of the ancien régime were restored. New and old dynasties were rehabilitated although greater democratic “space” was afforded the media and cause oriented groups to engage in dissent.

This so-called space has not always been free and open. Forced disappearances and extrajudicial killings have been committed with impunity, undeterred by the existence of a Commission on Human Rights whose investigative powers are weak.

Fraud and corruption at a grand scale have persisted, making life difficult for those dependent on government services. The completion of land reform, the centerpiece program of the first Aquino president has still not been achieved, and remains a promise under the second Aquino. Communist insurgents and Muslim separatists have survived despite intermittent efforts to wage an all out war and negotiate a permanent peace settlement. Poverty and unemployment rates refuse to fall substantially despite the country’s new-found economic wings.

Three years ago, the second coming of the Aquinos enamored the country, but with three years remaining in its “second term” of office, many are saying that time is insufficient to finish the job. Indeed, many are seeing this term of office as a brief respite before the same old system of patrimonial plunder and corruption pervades.

The persistence of pork barrel as a vehicle for self-aggrandizement under the nose of the present administration and the long process for prosecuting cases against the senators, congressmen and other people involved in the PDAF scam uncovered by the Commission on Audit and exposed by whistleblowers puts into doubt the durability of changes initiated by it.

The Aquinos have always sought to restore the Philippine house in order after a long period of serious erosion. They have always tried to reinforce it by proving that the Philippine brand of democracy could work, if managed with integrity. They represent the best and most noble elements of the political elite, a throwback to an era which, as sociology professor Randy David suggests, was governed by a gentleman’s code consisting of “moral restraints (e.g., delicadeza and sense of honor) that used to bind rulers.”

To a certain extent the administration has succeeded in returning us to that imagined mythical chivalrous era, which is why the Aquino brand still defies gravity. Unfortunately, by virtue of this conservative inclination, President Aquino has resisted the urge to weaken the structural foundations of cacique democracy and construct a new modern political architecture.

Earlier in his term, he tried creating a Truth Commission to go after his predecessor Mrs Arroyo, only to have it struck down by the Supreme Court. He then proceeded to go after Ombudsman Gutierrez and Chief Justice Corona using all the powers of influence over congress which eventually caused the former to abdicate and the latter to be removed from office.

His appointees to the Commission on Audit and Office of the Ombudsman have helped to uncover anomalous transactions, which have sparked outrage among the urban chattering classes and led to widespread protests. It is becoming quite clear that the moral restraints that Prof David spoke of have long since ceased to bind the behavior of our “honorable” representatives. And yet as David states we are still stuck with a “ a premodern political system that is basically unchecked by the rule of law.”

So far the Aquino government has focused on improving the managerial aspects of governance–by instituting operational reforms in the way public works, public finance and administration is conducted. He has done so while working within the current framework, which suffers from serious legal and statutory constraints.

He has so far shied away from substantive reforms to the legal and political architecture which would mean adopting executive and congressional compensation programs that address the incentive problem in elected and senior public officials (past reforms have focused on raising the pay of rank and file public employees creating pay compression with that of middle to senior level officers). It would include strengthening the power of agencies whose job it is to police public officials and guarantee transparency and accountability, and would mean enacting safeguards to the freedom of information and providing protection to whistleblowers.

President Aquino has found himself at the helm of this giant enterprise known as the national government, wielding the levers of power that dispense political patronage. He has sought to show us what it would look like to have an honest person pulling on these levers. By lifting the veil on the inner workings of the state, the public who delight in receiving gifts from pandering politicians, now stand aghast as they view the actual process behind the facade. They now see just how messy and dirty it is, and want it fixed.

The problem now confounding our political operators is just how much of their demands to take on board. Just like a family crime syndicate that has prospered so much that it can now opt to turn a new leaf and become legit, the nation now finds itself at a crossroads. It has to decide where to go. Channeling state funds to political parties to support a new breed of politicians and professionally run national campaigns, with strong mechanisms to enforce limits on political spending and restrictions on sources of campaign donations is the way modern political systems work. The old way is to use patronage and plunder to amass resources to retain high office.

The choice could not be clearer. We either stick with the old ways and try to make the best of it by harking back to a chivalrous code, that no longer binds people’s behavior, or we adopt new ways of doing things based on a new legal framework and policy settings that promote a culture of meritocracy in our public and political institutions.

This limbo that the Philippines finds itself in, stuck in between a feudal past and a modern future is nowhere to be for a country with the skills, talents and resources that it has. It is now time for the second Aquino to complete the process of going legit, which is now nearly thirty years in the making.

From Erap’s Playbook

Jinggoy

Jinggoy is no stranger to controversy. More than a decade ago, he and his father were jailed for participating in the Jueteng scandal exposed by whistleblower Chavit Singson. He was later released on bail by the Sandiganbayan and acquitted. His father Joseph Erap Estrada however was not so lucky. He was found guilty and sentenced to life imprisonment, although later pardoned by the woman who deposed and prosecuted him, Mrs Arroyo.

The fact that Mr Estrada today enjoys his freedom and greater popularity than Mrs Arroyo is nothing short of a stunning turn of events. It should be recalled that in the lead up to his impeachment, Erap’s popularity was plummeting. He had always denied any involvement in the Jueteng scandal, maintained his innocence throughout the judicial proceedings, refused to recognise the legitimacy of the trial and its verdict, and likened his predicament to that of many famous dissidents like Ninoy Aquino and Nelson Mandela.

In 2010, the rehabilitation of the Estradas was complete as Erap overtook Manny Villar to claim second spot after Noynoy Aquino in the presidential derby. His ability to knock off Alfredo Lim in 2013 to become Manila mayor is testament to the success of his strategy to regain the people’s trust despite having been convicted of a high crime by claiming himself a victim of political persecution by someone he presented as a usurper of his office. The fact that Mrs Arroyo damaged her own credibility by subsequent events fed into this narrative.

But now his son, who has been tagged by whistleblowers to be a principal in the Janet Napoles P10 billion pork barrel scam, is seeking to lift a page from the father’s playbook. In a privilege speech before the Senate, the younger Estrada claimed he was a victim of trial by publicity, of political persecution and of demonisation by his colleagues. He decried the fact that despite the COA’s identification of anomalous transactions by his colleagues, he and two other opposition bloc senators have been singled out by the Senate Blue Ribbon committee investigations.

In an attempt to undermine the legitimacy of proceedings at the senate, he accused its president Sen Franklin Drilon of offering a gratuitous amount of P50 million to reward him and his colleagues for voting to convict Chief Justice Corona with the imprimatur of Budget Secretary Butch Abad. After accusing his fellow senators of dragging his name through the mud, he then proceeded to name a number of them as well and question why the spotlight hasn’t been focused on them.

There are several reason why this ploy by Jinggoy may not work effectively against the current administration as it did against its predecessor. One is the fact that President Aquino enjoys the public’s trust and confidence, maintaining his net satisfaction rating at high levels three years into his presidency, something unheard of since data has been collected on this. Two is the fact that Jinggoy has not denied receiving and using his PDAF allotments. Third is the unpopularity of pork barrel, in the light of the ostentatious display of wealth by one of its fixers Ms Janet Napoles.

PDAF, BUB, August 26 and 2016

President Benigno S. Aquino III calls for the abolition of the Priority Development Assistance Fund at the President’s Hall of Malacanang Palace on Friday, (August 23). The announcement was made in the aftermath of the alleged Php10B pork barrel scam. (Photo by Gil Nartea/ Lauro Montellano Jr./ Malacanang Photo Bureau)

Just as he did with the RH Bill, the president came late to the party and led from behind in the scandal  involving the Priority Development Assistance Fund (PDAF) of Congress by belatedly bowing to public calls for its abolition.  Although as Winnie Monsod noted he did not indicate this meant the abolition of all forms of pork barrel. With nationwide protests slated for August 26, his administration could not afford to be seen on the wrong side of history, not after mouthing anti-corruption slogans like Daang Matuwid and Kung Walang Kurap, Walang Mahirap in the 2010 and 2013 elections.

This is perhaps his only out, after a former treasury chief showed how large his own discretionary funds are, dwarfing that of Congress. His initial tone deaf and dismissive response to public calls for PDAF abolition threatened to turn it into his “Flor Contemplacion moment”. This is a reference to the hanging of a domestic helper in Singapore by that name accused and convicted of killing her ward. The Ramos government’s lethargic response at the time to seek a commutation of her death sentence and vigorously raise a diplomatic protest with the Singaporean government was judged inadequate and subsequently led to virulent protests.

What the angry twittering masses behind the August 26 rally fail to grasp, however, and this I believe should be credited to the president, is that the scale of congressional pork barrel would not have even been known if he had not taken the decision to make it more transparent in the budget. Secondly, the Commission on Audit special report conducted under the tearful eye of Ms Grace Pullido-Tan, its chair, would not have even been possible without President Aquino’s leadership.

The problem was the Palace’s foot-dragging made it seem part of the problem rather than the solution. At first it responded to the concerns of the masses over the alleged Php 10 billion scam involving Janet Napoles’s syndicate of NGOs by window dressing, making the DSWD the accrediting agency for NGOs receiving PDAF allocations. This was wrong since as the COA report revealed, releasing public funds to NGOs without an appropriations law or ordinance violates the government’s own procurement policy.

The COA report, incomplete as it was gave an indication as to the scale and scope of corruption and abuse. About 75 per cent of audited PDAF went to NGOs. Thus, the 192 members of the 14th Congress that were found to have engaged in the practice are in fact liable. The DOJ does not even have to prove that the funds were diverted back to them.

The senators and congressmen who want to wash their hands clean by either saying the money was liquidated appropriately or that monitoring of funds is the sole function of the executive branch don’t have a leg to stand on. The only defence they can mount is that their signatures in authorising the allocation of PDAF to those NGOs were forged as 22 of them have done.

Even assuming their signatures were forged, why would it have taken them so long to protest against it? It stands to reason that anyone who had P70 to P200M allocated to them would be adamant in getting it released for their use. Why has it taken them 3-5 years to denounce the siphoning off of their PDAF? If anything, they would be negligible for allowing it to go on for so long.

So any which way you look at it, the legislators in question have something to answer for. True, the DBM’s record-keeping has been found wanting. In fact the COA report only covered a mere 39 per cent of the total P115 billion worth of PDAF released from 2007 to 2009 because DBM could not even identify correctly the legislators who approved the majority of funds amounting to some P70.4 billion.

Even so, the legislators that have been rightly identified need to apologise to the public for allocating their PDAF to NGOs and take leave from their party if they are currently in public office or loose whatever committee chairmanships and privileges they have enjoyed as such.

British and Canadian examples

In the UK parliamentary allowance scandal of 2009, both PM Gordon Brown and Opposition Leader David Cameron issued apologies to the British public for the excesses committed by members of their parties who used housing allowances to invest in the property market. Subsequently, an independent body was set up to determine the compensation and allowances for MPs, and the disbursement of the same was made more available to the public.

In the current scandal in the Canadian senate, PM Harper’s chief of staff resigned after being implicated, a number of senators were suspended from their party and issued public apologies for their abuse of privileges. In both the UK and Canadian cases, a Freedom of Information request led to uncovering the facts and those that had been found to have abused their privileges were ordered to repay every last penny they had unlawfully charged to the public purse.

The amounts in question ran only in the hundreds of thousands of pounds or dollars per representative or senator. In the Philippine case, the amounts run into the billions of pesos (which amounts to millions of dollars!). And yet the legislators in question do not seem to be ashamed in the least. Some of them in fact have the gall to now champion the scrapping of pork, when they in fact have been identified by the COA for certain anomalies in their use of pork, such as Majority Senate Leader Peter Cayetano whose release of P2.7 million to baranggays in Taguig were found to be deficient, and whose wife exceeded her PDAF by P8.5 million.

BUB, another acronym for pork masquerading as reform

The protesters heading for the Rizal Park on August 26 would probably say that there needs to be an investigation and prosecution of those involved in the PDAF scam. The DOJ has said that it will be issuing indictments soon. The case could easily drag on beyond 2016, after the president steps down. The senate and the house seem poised to investigate their use and abuse of PDAF. Senator Cayetano has endorsed former Senator Panfilo Lacson to head an independent body to investigate it, which found support from the President. This was ridiculed by many including Senator Miriam Santiago who questions Lacson’s ability to impartially run the investigation.

The politicisation of the investigations and reform process is becoming a problem. This is precisely what shouldn’t be happening as abuses cut across party-lines. Take the unveiling of a fund associated with the Department of Budget and Management’s Bottom Up Budgeting approach or BUB. This is a fund amounting to P20 billion to be allocated by Interior and Local Government Secretary Mar Roxas to local governments. It is no secret that Mr Roxas is the Liberal Party’s presidential nominee to succeed Pres Aquino in 2016. Budget Secretary Abad is the party’s chief ideologue.

The fund’s existence was apparently leaked by congressmen from within the LP. It was reported that many of them were dissatisfied with the manner in which this fund has been set up: to give Mr Roxas the role of a padrino in handing it out. This charge was denied of course by Messrs Roxas and Abad who do not deny the existence of BUB funds but instead say that legislators were supportive of it.

If we needed a reminder for why PDAF and its predecessor CDF (countrywide development funds) came into being, this is it. Pork barrel has evolved through the years from a means for the executive to control congress and get it on its side, to a means by which the legislators can wrest control of patronage from Malacañang by limiting its ability to withhold pork to congress. BUB seems like an attempt by the Palace to retake control, at a time when congressional pork has been abolished.

Just as an aside, what the reaction of local LP stalwarts shows is that party discipline is weak. These legislators probably do not plan to endorse Mr Roxas in 2016. They are probably planning to jump ship again just like they did in 2010 when President Aquino’s lead in the polls was evident. Given the lead Vice President Binay now has in public polls, it would seem they might be hedging their bets both ways, or in the very least, they want to hand out the BUB funds themselves to local officials, to be the sole padrinos in their districts.

On the other hand, it can be argued that Mr Binay has been receiving pork with the president’s blessing, worth P200 million a year, so that this is simply a way of evening up the playing field for Mr Roxas and the Liberal Party. Given that the president has abolished pork (which presumably includes the vice president’s), shouldn’t his heir apparent refuse to use it too? By politicising the bottom-up budgeting approach, a key reform of President Aquino’s administration, Abad and Roxas could be tarnishing their reformist credentials and weakening the very institutions they seek to build.

To 2016 and beyond

A number of prospective presidential and vice presidential contenders could be ruined by this scandal. Senators Bong Bong Marcos, Bong Revilla and Jinggoy Estrada all have plans to run for higher office. All were tagged as part of the original PDAF scam. Senator Peter Cayetano may also have plans to run for higher office in 2016 and was also given special mention in the COA report for irregular PDAF releases. Mar Roxas could sully himself if BUB is perceived to be used for political motives.

You might think this is the end of the road for pork, but don’t count pork out, just yet. As Manolo Quezon points out, pork has a funny way of resurfacing under a different guise. Winnie Monsod believes it will revert back to the old way of being hidden, inserted in line agency budgets, as was the practice before President Aquino made it more transparent. This could be an unintended consequence of abolishing PDAF.

What the inchoate masses gathering on August 26 fail to understand is that unless PDAF is replaced with something more suited to a modern democracy, it will be reincarnated in some other shape or form even if the current set of PDAF abusers are put behind bars. The real answer in my view is for the state to provide campaign finance to accredited political parties.

Without such state support, congressmen and senators will find a way to access state funds anyway through some form of pork barrel or worse, they could go underground and raise money through illegal means. Of course they may harass legitimate businesses and rich individuals for donations with adverse consequences for policy making if they win. The piso-piso campaign to raise money has very limited impact in a country with very large disparities in income.

Perhaps the president who until now has been so focused on proving he can make government work, as in he wanted to prove that PDAF could be used properly for good, can now lift his gaze towards undertaking real reform that would not only restore systems to the way they were under some imagined golden age, but transform them above and beyond what they are currently capable of becoming.

To use an automotive analogy, which I am sure the motoring enthusiast in him would appreciate, imagine that you have an old 1950s engine which you have worked so hard to restore, but is still leaking fuel and is inefficient. You can choose to keep fiddling with the old system by adding dashboards with indicators that tell you if fuel is leaking (i.e. making expenditure more transparent) or you might decide to overhaul the engine completely with a new up to date model that injects fuel well and does not leak with indicators that tell you what is happening under the hood.

Having a modern democracy entails campaign finance and political party reform combined with beefed up integrity measures as well as an adequate level of compensation for elective officials to remove the incentive that lead to the plunder of public funds. That is the reality that neither the president, nor the people massing at Rizal park on Monday, have yet realised needs to be confronted if we are to have a sound democracy in the lead up to 2016 and beyond.

Getting the Philippine house in order

Now that all sides of politics have been tarnished with the same PDAF scam brush, it is time to lay the foundation for a new political order.

Another week, another scandal. The controversy that originally involved but a handful of senators and congressmen over the rorting of their Priority Development Assistance Funds, otherwise known as pork barrel, has now engulfed 180 of the 264 members of the house of representatives and twelve of the 23 senators that served in the 14th Congress from 2007-09.

The Commission on Audit’s (COA) findings are that of the Php 8 billion worth of PDAF allotments covered by its report, Php 6.156 billion was released to dubious non-government organisations, and that Php 2.157 billion was cornered by Janet Lim-Napoles’s ten allegedly fake NGOs.

This means that 77 per cent of the audited PDAF allotments in those three years associated with two thirds or 192 of the 287 members of the 14th Congress have been identified as anomalous by the COA. It involves congressmen and senators of all political stripes, including members of the ruling Liberal Party.

This can no longer be considered a set of isolated occurrences involving a small minority. It is a systemic problem that needs to be addressed with systemic and structural reform. The full investigation and resolution of this case could easily take the next three years and beyond. We cannot wait that long to methodically deal with the weaknesses of our political system. The very edifice representing our political order has been infested by termites and is at risk of crumbling to the ground unless serious measures are taken to fix it.

Diagnosing the problem

The first step in renovating our state towards a new political order requires us to diagnose what the source of the problem is. Most people reading about the PDAF scam would probably come to the conclusion that pork barrel is the root cause of the problem without considering why PDAF became necessary in the first place – for the Palace to secure votes for its legislative agenda, particularly the budget.

In defence of the practice some solons claim that it is a way of equitably distributing infrastructure and other forms of development spending across the Philippines, and that abuses can be stopped through reforms in the way the funds are allocated and spent. The Palace has trained its sights on the approval of NGOs as the key to ridding PDAF of anomalies.

The problem with these views is that they do not go to the heart of the issue, which is why solons need to rort the system in the first place. Given the high cost of running an election campaign, the only way for them to recover their campaign expenses and to seek re-election is by accessing public funds.

PDAF is simply a means to an end. Doing away with PDAF will simply mean that other shadier forms of raising money will arise. Other options include narcopolitics, gunrunning and smuggling. To get the Philippine house in order means providing an alternative means of financing political parties so their candidates have a way of preserving their integrity once elected.

Laying a new foundation

We have seen how relying on the ruling elite’s sense of noblesse oblige has turned out. Asking our politicians to refrain from pork barrel much less rorting it is like asking prostitutes to abstain from sexual intercourse to prevent the spread of AIDS. It simply won’t work.

Providing extra checks and balances is like providing contraceptives to sex workers. It helps to a certain extent, as a risk mitigation procedure. Removing the need for that sex worker to enter the flesh trade in the first place would be more effective. Extending the analogy to our legislators that would mean lowering the private costs of electoral contests.

In a previous post, I identified three pillars to support a new political order in the country. They are:

1. State subsidy of political parties

2. Adequate compensation and allowances for elected officials

3. Meritocratic selection of candidates as a condition for public funding of parties

These three pillars would be built on the foundation of greater transparency and accountability. Strengthening the powers and capabilities of the Commission on Audit, Commission on Elections, Ombudsman, National Bureau of Investigation and Bureau of Internal Revenue to engage in forensic accounting and electronic surveillance in investigating corrupt activities of public officials is required.

This new foundation would include having a whistleblower protection program and freedom of information act. Any candidate found to have abused his or her allowances would have to be cast out of the system of campaign finance. Political parties would have to expel or dis-endorse them at the next election for that party to have access to public campaign finance.

If we wanted to take things a step further, we could even enact a charter of budget honesty and sustainability. This would require political parties to submit their policies to the Congressional Budget Office, which would cost them prior to elections and release their findings. This is so that parties that promise the sun, moon and stars would be forced to come clean regarding their policies and show how they would pay for them through new taxes or savings.

We have already seen how that a considerable proportion of PDAF spending is being wasted. If we spent that much money on laying the new foundation and three pillars of a new political order, we would have a safer, sound structure on which to renovate our political system.

The time to do this is before the 2016 elections. We need at least two years’ lead time to allow the new foundation to settle and for the pillars to be erected. If we wait too long or get fixated on catching the criminals of yesterday, we will simply allow new criminals to breed in their place. We cannot let this infestation of termites eat us out of house and home.

The Philippines needs a new political order, and the time for it is NOW!

 

Long overdue: Bureau of Customs abolition

So, this morning’s banner story in the Philippine Daily Inquirer reads: Bureau of Customs abolition planned.

Who’s planning it? Malacañang. Who is proposing it? Embattled Customs Commissioner Ruffy Biazon. That’s right, the head of the agency itself who has been under the pump for failing to curb the rampant smuggling activities that are allegedly continuing despite the president’s mantra of Daang Matuwid.

In a face-to-face conference with editors of the PDI, Biazon offered up the possibility of overhauling the agency from the top-down, by replacing it with a new professionally led one. He says resistance to his reform measures from the frontline staff at the bureau has led him to take this view. In public policy parlance, we call this phenomenon the tail wagging the dog or “street-level bureaucrats” distorting the policy decisions made at the top. Here is a quote from the report:

Biazon cited the example of Peru, which, to defeat corruption and smuggling, abolished its custom department, put up a new one, adopted strict qualifications for hiring, and paid higher salaries to the new officers and employees running the new agency. In the case of the Philippines, Biazon said, corruption is deeply entrenched in the customs bureau’s culture and system so firing a few people or catching some smugglers will not solve the problem. [emphasis mine]

Well, well, well, I am happy to see that something I had recommended back in July 2011 in a piece called, the National Development Project, is finally being given some serious consideration although my proposal included not just the Bureau of Customs, but the Bureau of Internal Revenue and all other revenue generating agencies. Despite their best intentions, it has taken the palace nearly two years to catch-up to the policy conclusion I had already made regarding its anti-corruption campaign in the bureau.

Pursuing good governance doesn’t come cheap. I recognised this fact. But the administration of PNoy felt that it needed to wage a moral crusade first to separate “light from darkness”. My proposals at least acknowledge that if we are to address the cost impact of Daang Matuwid, we have to raise additional revenues. And to do that we need to ensure that our revenue generating agencies are professionally run. With respect to the proposal itself, here is a brief quote from my previous post:

Corporatization is the way by which the government has been able to pay its agents salaries commensurate to, if not exceeding that of, their private counterparts. Singapore achieved this for its entire bureaucracy, but it is the sole Confucian state to do so. The others achieved it through a combination of salaries, allowances and benefits.

The newly minted GOCC (Government Owned or Controlled Corporations) law now provides greater safeguards against abuse done by non-performing companies. It will govern the corporatization of the BIR and BoC. In exchange for the higher compensation, transition into the new agencies must be based on merit and not guaranteed for old bureau officials.

The boards of the new revenue agencies should be allowed to appoint people from among the ‘best and brightest’. Tougher qualifying exams, educational attainments, and past performance should all be part of the selection process. Where posts cannot be filled with existing staff, recruiting externally should be the resort.

Biazon supports the idea of the new corporate entity to takeover the Bureau of Customs to retain 3 per cent of the total revenue it produces to allow it to pay its staff according to their performance. This again was something I had broached before with regard to prosecutors of corruption cases.

It was my view that these state prosecutors were not paid well enough to exert best efforts in retrieving ill gotten wealth, and as a result, certain cases have been left languishing for decades, or worse, settled for a pittance through plea bargain arrangements. Here is what I said on the matter:

The Ombudsman and the Office of the Solicitor General (essential generals in the fight) which are given the task of prosecuting graft cases before the Sandiganbayan and Supreme Court respectively need to have more than a kind of altruistic motivation for performing their duties. They need to have protection and financial security.

Paying them higher salaries alone might not be enough to motivate them to exert maximum effort even in very winnable cases. Some sort of sharing in the spoils which would go both to their office and to chief prosecutors and their staff needs to be put on the table.

I know that some will argue that this is the people’s money and that any recovered ill-gotten or plundered wealth needs to be returned 100% to the coffers to fund social programs. This assumes that we are working with incorruptible Confucian super bureaucrats. That is not the case here. We need to live in the real world, not in some ideal fantasy land.

Apart from these two suggestions, I also proposed outsourcing the main functions of the Commission on Audit to private accounting firms, which is the practice in Australia. If we are to truly tread the good governance path, the government has to start taking seriously these recommendations. At least with respect to customs collection, they may finally be doing so.

COA Chair Tan: text us complaints or reports

Newly sworn in Commission on Audit Chair Grace Tan was interviewed by Karen Davila on ANC’s Headstart. Host Karen Davila tweeted that COA Chair Grace Tan admited that they have to increase budget of COA to prevent field auditors from being compromised. Mrs. Tan’s plan is to rotate auditors every 2 years, as an added precaution against corruption.

Grace Tan will be working with AFP corruption whistleblower Heidi Mendoza.

COA Chair Tan on Ms. Davila’s program also announced a phone number where complaints or reports of corruption could be sent. You may reach them at 0915 5391957.

“I never expected PNoy to get me for this post,” COA Chair Tan explained. “I was in private life, I prayed about it for 2 weeks.”

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On twitter:

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Is it time to outsource the CoA's functions?

Tarnished beyond repair?

With the recent revelations of alleged collusion between the Commission on Audit and members of the military the latest of which involving an ex-Commissioner receiving payoffs from the Armed Forces of the Philippines, what should we make of the Commission and its capacity to adequately perform its functions that are critical to maintaining the integrity of our public service?

In other countries, government departments are audited by independent auditing firms. The reports by these firms are then submitted to an auditor-general whose job it is to determine if these comply with existing codes. Mind you, these auditing firms do not necessarily check every single invoice, voucher and receipt. They simply certify that proper accounting procedures are adhered to–such as whether the delegations to approve expenditures exceeding a certain amount and whether the proper liquidation and reporting of expenses are followed.

The secretary of each department would have to affix his or her signature on the financial statements produced by his internal audit team and certified by an independent auditing firm. Once a public official or public accountant certifies a statement, they then become liable if it is later discovered that some “creative accounting” practices distorted the true picture of the agencies concerned. This was demonstrated when the scandals around the dissolution of Enron and WorldCom also affected Arthur Andersen one of the world’s leading auditing and consulting firms at the time. Andersen had to surrender its license to practice as Certified Public Accountants due to its criminal liabilities. Also due to its tarnished reputation, its consulting arm Accenture had to split off from it.

To prevent a cozy relationship from developing from what should be an arm’s length one, auditing firms must be rotated every now and again, say every two or three years. These regulations are already in existence for corporations after the Securities and Exchange Commission adopted the Good Corporate Governance Code as part of the fallout from the Asian Financial Crisis of 1997. The CoA could draft similar rules affecting the public sector and monitor their compliance.

Given the dismal record of the Commission on Audit, has the time now come for us to simply dissolve most of its auditing functions and lay off most of its employees? It can retain the core function of collecting and approving the reports submitted to it by independent auditing firms. Only a skeletal staff would be required for that. The bulk of its budget could then be distributed to the different line agencies which would have to absorb the expense of hiring independent auditors.

Of course that might mean that the cost of hiring independent auditors could be higher if it were outsourced to the private sector, and it does not necessarily mean that collusion will be eradicated. Maybe, maybe not, you never know. But at least we would have a greater level of assurance with these independent auditors: that they would be discharging their functions a lot better than the CoA at present. So with that let me pose the question, is it time to outsource the Commission on Audit’s functions?

For whom the whistle blows

“It no longer shocks me.” That seems to sum up the sentiment of P-Noy following revelations of corruption in the military’s top brass. It was just the last of litany of reports on graft across the broad spectrum of the public sector. Indeed what is shocking is not that such appalling acts of brazen theft and collusion occur, but that there remains a few good men and women within the service who would not only resist this but also find the courage to blow the whistle on such nefarious activities.

Indeed, for Ms Heidi Mendoza, the former auditor who served as resource person at the Congressional hearing into the alleged anomalous plea bargain deal entered into by Ombudsman Merceditas Gutierrez and Gen Carlos Garcia, her whistle blowing was not just for the officials concerned, but for the entire polity for allowing such practices to come about. Her credibility as a witness seemed almost unimpeachable to Senate President Juan Ponce Enrile. So much so that he voiced his view regarding the need for the Ombudsman to review its deal with Garcia.

And so in this episode it would seem that the rear guard action conducted by Mrs Arroyo’s forces via the fixed term appointment of Ms Gutierrez as Ombudsman has been foiled. Given the weight of both public and legal opinion following the combined exposés of Lt Col Rabusa in the Senate and Ms Mendoza at the Lower House, it will be exceedingly difficult for her to maintain her stance with respect to the deal. Kudos to both Blue Ribbon Committee Chairman Sen Teofisto “TG” Guingona III and Rep Neil Tupas, Jr for conducting their respective investigations so diligently.

The question now is to what extent legislation can be aided given the findings of their respective committees? With regards to this, I would like to hazard a couple of proposals whose relevance has now become much more apparent. Apart from administrative measures aimed at strengthening the budget processes and systems of procurement and disbursement within the military, there are a few more strategic pieces of legislation that need to be pushed forward.

If the thesis of Ms Mendoza is correct that not everyone who works in government is seeking to profit at the expense of the Filipino people, then we need to equip those individuals with the tools they will need in order to press their case against those who seek to profit from the system. It is not enough to deliver homilies to honor such individuals.

First of all, there needs to be a whistle-blower protection act. Consider how Ms Mendoza’s career was threatened and how she was forced to quit after 20 long years of service in government due to the pressures she faced. That could have been avoided if there had been a whistle-blower act. Seeing how she was told to go slow in her investigations, she could have filed a complaint against her agency for covering up the anomalies she had uncovered. This is the first proposal.

Secondly, the time has come to pass a freedom of information or FOI act. Without the oversight powers of Congress enabling it to subpoena important documents for the purpose of its investigation, the media had to rely on Ms Mendoza’s personal account of events in reporting the story. With an FOI law, any ordinary citizen or media outfit would have the right to obtain pertinent documents such as the COA report of Ms Mendoza and take it from there. The FOI law would work in tandem with the whistle-blower protection law in the same way that the audit documents corroborated Ms Mendoza’s testimony.

These two laws would subject government officials to unprecedented scrutiny by the opposition, the media, and ordinary citizens alike. They would encourage more whistle-blowers to come forth. While designing and implementing more sophisticated budget systems and procedures based on expert advice constitutes a good first line of defense, greater public participation and scrutiny of government would act as the final line of defense and might be more potent as a deterrent against illegal activity.

If the thesis of Ms Mendoza is correct that not everyone who works in government is seeking to profit at the expense of the Filipino people, then we need to equip those individuals with the tools they will need in order to press their case against those who seek to profit from the system. It is not enough to deliver homilies to honor such individuals.

At the start of the year, the president outlined his legislative priorities. These did not include the integrity and transparency measures mentioned here.  It is quite ironic that some of the funds diverted to provide golden parachutes for the generals was meant for the AFP modernization program. It is now becoming apparent that if we want to modernize our way of governing, then we first need to tack these items on to the public policy agenda.