'Extraordinary' perks: The Angeles City Water District's former manager topped last year with the biggest discretionary and extraordinary and miscellanous expenses, reaching to Ph 15 million. Courtesy of the Angeles City Water District website

Given the pursuit of exorbitant discretionary funds and perks granted by officials to themselves in the different government-owned and -controlled corporations (GOCCs) such as the Metropolitan Waterworks and Sewerage System (MWSS), Power Sector Assets and Liabilities Management (PSALM), Philippine Amusement and Gaming Corporation (PAGCOR) and the Local Water Utilities Administration (LWUA) – it is clear the Aquino government has been taking bold steps to track down and punish those who abused the system during the previous administration.

But what about the future? Will there be future exposes and Commission on Audit (COA) reports that will highlight abusive spending on perks by officials in 2011, or 2012? What exactly is the system that allows for discretionary funds and public perks?

 The Philippine Public Transparency Reporting Project (PPTRP) delves into some of the laws, rules and regulations in an effort to understand past and current practices. It is sometimes said that what is allowable is not always right – and what is right is not always allowed.

Public funds for GOCC and National Government Agency Officials’ extraordinary or miscellaneous discretion

Discretionary and Extraordinary and Miscellaneous Expenses (EME) funds are defined and generally governed by the following laws, rules and regulations:

• Article VI. Section 25. (6) of the Philippine Constitution, which states “Discretionary funds appropriated for particular officials shall be disbursed only for public purposes to be supported by appropriate vouchers and subject to such guidelines as may be prescribed by law”;

• COA Circular No. 85-55A that renamed the Discretionary Fund into Extraordinary and Miscellaneous Expenses;

• COA Circular No. 2006-001 that covers EME and other similar expenses, which sets limits for the said expenses in GOCCs and Government Financial Institutions (GFIs), and;

• The General Provisions of the General Appropriations Act of every fiscal year for officials of NGAs.

Discretionary and EME funds as prescribed by the aforementioned policies “include, but shall not be limited to expenses incurred for (1) meetings, seminars and conferences; (2) official entertainments; (3) public relations; (4) educational, athletic and cultural activities; (5) subscriptions to professional technical journals, informative magazines, library books and materials; (6) contributions to civic and charitable institutions; (7) membership in government associations, national professional organizations accredited by the Professional Regulations Commission (PRC), and in the Integrated Bar of the Philippines (IBP); and (8) other similar expenses not supported by regular budget allocation.”

In fact, in the annual General Appropriations Act (GAA), the national budgets of 2010 and 2011 clearly stipulate the following:

PPTRP also confirmed that the transparency and accountability clause in the 2011 national budget is a first in the history of legislation that gives teeth to the general clause found in every GAA: “No portion of the amounts authorized (for EME) herein shall be used for salaries, wages, allowances, confidential and intelligence expenses.”

But as PPTRP is finding out, most of the existing rules and regulations were not sufficient to prevent abuse in the past and instead gave wide latitude for board members of GOCCs, GFIs, high officials of NGAs and even officials of different water districts (WDs) to feast on millions of pesos in discretionary and/or EME funds every year. Governing boards of these GOCCs, GFIs and WDs found ways to skirt these policies by coming up with resolutions to jack up EME, other allowances and bonuses in ways they found fit. In the NGAs, many government officials took EME way above the limits set by the GAA.

In fact, many COA Annual Audit Reports on different GOCCs and NGAs over the years have pointed out the questionable “propriety of extraordinary and miscellaneous expenses as these were not adequately documented or were not supported with any document.”

The COA cited a bad example in its 2006 government-wide performance audit report that PhP 19,862,524.93 (USD 472,917) in EME were spent by Board Members of the following GOCCs: Bangko Sentral ng Pilipinas (PhP 3,173,199.80); Land Bank of the Philippines (PhP 12,397,090.18); PAGCOR (PhP 652,396.38); Metropolitan Waterworks and Sewerage System (PhP 2,968,777.34); and the Philippine Charity Sweepstakes Office (PhP 671,061.23) for meals and snacks in meetings wherein all the GOCC officials did not state the purpose of the meetings nor the number and names of participants.

EME use in 2010

The COA further said that in the biggest amount of PhP 12.39 million (USD 295,000), the LBP bank officers also purchased gifts amounting to PhP 723,818.84 (USD 17,233) and groceries and other items worth PhP 489,131.93 (USD 11,646). All these were not itemized or specified, the purpose and recipients of the gifts and groceries were not disclosed.

In the 2010 Report on Salaries and Allowances (ROSA) Received by Principal Officers and Members of Governing Boards of GOCCs and their Subsidiaries; and Secretaries, Undersecretaries and Assistant Secretaries and Other Officials of Equivalent Rank of NGAs, discretionary and EME funds were used by 1,243 of the 6,155 government officials of agencies who submitted to the audit procedures of the COA.

The PPTRP reviewed the list and discovered that some of the government officials are the same controversial names and come from the same controversial agencies that were previously tackled in an earlier PPTRP report on millionaire public officials.

The 1,243 government officials had a total of PhP 201,356,694 (USD 4.79 million) in discretionary and EME funds in 2010. Comprising this figure were 818 officials from NGAs; 299 from GOCCs and GFIs; and 126 officials from WDs.

NGAs, GOCCs and WDs abused EME?

Among the NGAs, the freshest data came from the Supreme Court (see Table 1).

Table 1. Supreme Court Officials with Discretionary and EME Funds in 2010

Source: 2010 COA Report on Salaries and Allowances

All our High Court Justices officials – except Associate Justice Maria Lourdes Sereno who received a total of PhP 596,915.64 (USD 14,212) -- are among millionaire government officials even if you take away their EME perks.

But the 19 Supreme Court officials were actually upstaged by 11 officials of the LWUA who took more than double the amount taken by Supreme Court officials from government coffers in the same year as seen below in Table 2:

Table 2. LWUA Officials with Discretionary and EME Funds in 2010

Sources: LWUA 2010 Annual Audit Report, 2010 COA ROSA

After the Ombudsman’s July 5 order to dismiss Pichay from government service, PPTRP then looked into new data from the country’s 447 water districts that were under the supervision of the LWUA.

Former Angeles City Water District General Manager Romeo Calara received an astronomical PhP 8,727,857 (USD 207,806) in EME and PhP 5 million (USD 119,047) in confidential/intelligence funds out of a total compensation of PhP 15,012,057 (USD 357,429) in 2010 that put him in the Top 10 list of government millionaires in 2010.

Water consumers in the provinces should know that some officials have been taking EME perks and sometimes “confidential/intelligence” funds from WD coffers that derive revenues from the water service fees that are collected monthly. Other WD officials who received EME funds last year are listed in Table 3.

Table 3. Selected Water District Officials with EME Funds Received in 2010

Sources: COA 2010 ROSA, various water district Annual Reports

Aquino cracking the whip?

In 2005, the Organisation for European Economic Cooperation (OECD) refined the guidelines on corporate governance for State-Owned Enterprises (SOEs), emphasizing the importance of an effective legal and regulatory framework and on the state acting as an owner. Among the major points of the “OECD Guidelines on Corporate Governance of State-Owned Enterprises” are: ensuring an effective legal and regulatory framework for SOEs that should practice full disclosure of obligations and responsibilities; being subject to general laws and regulations, and facing competitive conditions regarding access to finance; and having utmost transparency and disclosure by giving aggregate reports on financial and operating results, remuneration policy, related transactions and governance structures and processes to the general public, parliament and media.

It took a change in administration for the Philippine government to respond with policy changes.

On February 10, 2011, President Benigno Aquino III issued Executive Order 24 that regulates GOCC and GFI board members’ compensation, allowances and privileges by limiting these to per diems for board meetings and committee meetings and performance-based incentives.

Department of Budget and Management (DBM) Secretary Florencio Abad said in a press statement posted on the DBM website that EO 24 mandates that “the government can compel GOCC or GFI board members to return properties if these are in their unauthorized possession; or monies if they earned profits in excess of limits to compensation to the government.”

The government hopes to save about PhP 118 million (USD 2.8 million) or about 47 percent of the total compensation that GOCC and GFI board members have been receiving annually.

“GOCC and GFI officials should not just sit around as they have to carry the people’s interests in these firms. Their compensation should be commensurate with their level of responsibility, accountability, and the performance of their firms,” Abad said.EO 24 puts in standards on per diems depending on the asset size and revenues of GOCCs and GFIs wherein board members may only receive a maximum annual per diem equivalent to 24 meetings.

For their attendance in committee meetings, board members may receive additional per diems but only up to 60 percent of the per diems they receive for their attendance in full board meetings.

“Through EO 24, we are limiting the entitlement of board members to the resources of their GOCCs and GFIs. They cannot just use these for their personal benefit. They must work hard, be transparent and accountable,” Abad said.

Abad furthered “the EO eliminated the past practice of giving board members hefty discretionary funds and established clear rules on reimbursable expenses. As a general rule, the GOCCs and GFIs directly pay for expenses of board members in discharging their official duties. Reimbursable expenses are limited to transportation expenses in going to and from meetings, travel expenses during official travel, communication expenses and meals during business meetings.”

Abad also said that compensation received by ex-officio board members sitting in boards of subsidiaries or private corporations wherein the government has investments shall accrue to the GOCC and GFI represented.

The EO also states that “board members sitting in an ex-officio capacity such as Cabinet secretaries and government officials, GOCC or GFI President, and board members of parent GOCCs or GFIs will not receive additional per diems in line with existing laws and regulations against double compensation.”

No more discretionary funds and limited reimbursements with new law?

The legislature, after different exposés and investigations in aid of legislation on the gargantuan perks being awarded by members of governing boards of GOCCs and GFIs on themselves, followed through with the passage of Republic Act 10149 or the GOCC Governance Act.

The new law pushes for transparent, responsible and accountable governance of GOCCs is carried out by emplacing a strict reporting and evaluation system and justifiable and appropriate remuneration schemes for the directors/trustees, officers and employees of GOCCs and their subsidiaries to prevent or deter the granting of unconscionable and excessive remuneration packages.

The law also created the Governance Commission for GOCCs (GCG) to centrally advise, monitor, and enforce transparency on all GOCCs, GFIs and their subsidiaries.

RA 10149 excludes from its coverage the Bangko Sentral ng Pilipinas, state universities and colleges (SUCs), cooperatives, local water districts, economic zone authorities and research institutions.

“The law actually strengthens the government moves to bring GOCC personnel compensation to a reasonable level and by eliminating leeway for discretionary funds, putting a cap on per diems, allowances, incentives and reimbursable expenses,” Abad said.

Truly, Section 23 of the law stipulates that the GCG shall determine the levels of monies for GOCC directors, trustees, officials and employees by using as a reference, among others, EO 24 standards for compensation, and per diems for board and committee meetings.

GOCCs, GFIs and their subsidiaries are now classified by law depending on their assets and revenues that shall be the basis of all the per diems of all its officials as shown in Table 4.

Table 4. Classification of GOCCs, GFIs and their subsidiaries and the corresponding maximum per diems for each official

Source: RA 10149

The aforementioned parameters would indeed lower the number of millionaire state officials and perhaps save more government money.

The most welcome dimension of the GOCC Governance Law is its full disclosure requirement (Section 25) that mandates all GOCCs to maintain a website and post for unrestricted public access audited financial statements in the immediate past five years; quarterly, annual reports and trial balance; current corporate operating budget; and the complete compensation package of all the board members and officers, including travel, representation, transportation and any other form of expenses or allowances.

Will the two new anti-corruption laws be enough?

PPTRP estimates that the two laws on GOCC governance (EO 24 and RA 10149), if effectively implemented, can save the government close to PhP 150 million (USD 3.57 million) from at least 300 GOCC officials. But exempting the WDs from coverage of the law leaves much more to be desired since WD officials have and will continue to get astronomical EME and even confidential funds since WD boards will only treat the exemption as a license to continue to get more than what is due them.

It is also important that Secretary Abad also said “EO 24 and RA 10149 allow performance-based incentives to board members based on performance measures agreed upon with their supervising department, endorsed by the Departments of Budget and Management and Finance, and approved by the President, once the GOCCs and GFIs meet their obligations and hit their targets.”

But this gives possibly new parameters for granting additional benefits to GOCC and GFI re-packaged as “additional perks based on performance” with the endorsement of Presidential appointees to the said departments and approval of the appointing power.

To effectively address the situation, more policies are still needed to cover EME and other related monetary perks in the WDs and the NGAs. There is also a need to go after those who abused and took more than what is legally mandated by different laws.

Indeed, a lot more has to be done. Philippine Public Transparency Reporting Project

(The author is a freelance writer and researcher on government policies and trends.)