COA urges ‘immediate’ investigation into P38-B Malampaya fund releases

Lian Buan
COA urges ‘immediate’ investigation into P38-B Malampaya fund releases
'The DBM’s laxity in the release of SAROs to Implementing Agencies and without thorough evaluation, contributed to the misuse of funds by the IAs,' says the Commission on Audit

MANILA, Philippines – The Commission on Audit (COA) has recommended an “immediate” investigation into the alleged irregular disbursement of P38.8-billion in Malampaya funds, based on its performance audit of fund releases from 2004 to 2012.

This 80-page sectoral performance audit of the Malampaya fund released on October 30 said the release of funds amounting to P38.837 billion were rife with irregularities and sorely lacked mandatory documents. (READ: Malampaya scam worse than fertilizer fund scandal)

The subject of the investigation will be officials and employees of the Department of Budget and Management (DBM). 

“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,” COA said in its report.

The audit covered the years 2004 to 2012, spanning 4 budget secretaries: the late Emilia Boncodin, Romulo Neri, Camarines Sur 1st District Representative Rolando Andaya Jr, and Butch Abad.

The audit team has already sought the comments of Andaya, who served as budget chief during the administration of Gloria Macapagal-Arroyo from 2006 to 2010, and former budget undersecretary Mario Relampagos.

Andaya and Relampagos are already facing charges. Relampagos has been charged in the pork barrel scam while Andaya has been indicted for the Malampaya fund scam.

Under an agreement signed in February, cases involving at least P100 million will fall upon the Joint Investigation Team of the COA and the Office of the Ombudsman, where it will go to a priority lane for filing, docketing, and preliminary investigation.

Questionable releases

The P900-million Malampaya fund scam involves funds released in 2009 to help farmers who were affected by Typhoons Ondoy and Pepeng. A Rappler investigative report showed that it followed the same scheme as the pork barrel scam, even involving the same fake non-governmental organizations (NGOs) ran by alleged pork scam mastermind Janet Lim Napoles.

Under the law,  the Malampaya fund – the government’s share in royalties from the Malampaya natural gas facility – is to be used only for the government’s oil and energy programs. In 2009, Arroyo signed Executive Order No. 848 which authorized the use of the fund for other purposes directed by the President. (READ: Malampaya fund: Ex-Palawan gov Reyes faces P1.5-B graft case)

The COA audit showed that of the P173.280 billion in the government’s share in royalties from  Malampaya, 22.41% or P38.837 billion was tapped for “other purposes.”

DBM failed to properly evaluate and establish the basis for the release of Malampaya funds to 62 Implementing Agencies (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,” COA said.

“The DBM’s laxity in the release of Special Allotment Release Orders (SAROs) to IAs and without thorough evaluation, contributed to the misuse of funds by the IAs,” reads the audit report of a 5-man team, which was approved by COA Director Elsielin Masangcay.

Ghost projects

COA said the P900-million allotment for farmers was “irregularly and illegally disbursed.” It said that “the project implementation is also considered questionable as the purported recipients either could not be located at their given addresses or denied participation in the transactions.”

At least P40 million in projects implemented by the Department of Agriculture (DA) were found to be ghost projects. Other anomalies uncovered in other projects implemented by different agencies were the lack of monitoring reports and the immediate damage found in the project upon inspection.

The COA observed that of the 184 SAROs released, 137 did not have proof of requests. There were also 62 releases which did not have approval from the Office of the President which, COA said, was specifically required by law.

There were also releases which were not accompanied by DBM evaluation reports. DBM said it cannot provide the reports to COA as these are classified internal documents, but COA insisted the documents must be presented.

“Thus, it is clear that DBM is releasing SAROs without complete documents required under laws, rules, and regulations,” COA said.

The audit report added, “There were cases where funds released were practically wasted as the transactions were deemed questionable and/or transactions not compliant with existing laws and regulations.”


The COA also found SAROs released under the Arroyo administration that lacked evaluation. The COA said the DBM released the funds without even establishing whether the projects were really covered by the authorizations for which to use the fund, and whether the amount was reasonable.

“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 COA said. (READ: ‘No more cash’ left of Malampaya fund)

The COA cited missing mandatory requirements, including endorsements from the Department of Energy (DOE). In his reply to COA, Budget Secretary Benjamin Diokno said that a DOE endorsement was not considered mandatory.

But COA noted that projects during the time of Diokno’s predecessor, Abad, had endorsements from DOE. This covers 5 projects of the Department of Finance and the Department of National Defense from 2011 to 2012, amounting to P11 billion. 

The COA report makes it clear that it is not holding DBM responsible for the misuse of fund, but “for releasing the SAROs to IAs without the complete documentary requirements and specific projects for implementation.”

The report had been sent to Diokno, who has responded to COA on certain matters.

The audit team asked Diokno that it be updated of the actions taken by the DBM. – 

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Lian Buan

Lian Buan covers justice and corruption for Rappler. She is interested in decisions, pleadings, audits, contracts, and other documents that establish a trail. If you have leads, email or tweet @lianbuan.