COA to military: Return P61M in Malampaya funds

Carmela Fonbuena
The Malampaya fund was supposed to finance 6 projects of the Philippine Navy, which is fast-tracking the purchase of assets because of escalating maritime disputes in the region

UNINTENDED EFFECT? Supreme Court ruling against Malacañang's Disbursement Acceleration Program endangers military modernization projects

MANILA, Philippines – There goes the funding for 6 Philippine Navy projects.

The Commission on Audit (COA) asked the Armed Forces of the Philippines (AFP) to return to the Bureau of Treasury P61.19 million ($1.4) of Malampaya funds that the military improperly transferred to its accounts, according to an audit observation memorandum obtained by Rappler.

“Remit the funds sourced from Malampaya to the Bureau of Treasury to enable the latter to revert the same to the Malampaya Funds,” reads the COA memo sent on March 17, 2014 to Nilo Abaigar, chief accountant of the Armed Forces of the Philippines general headquarters.

The fund transfer is a possible violation of the Supreme Court (SC) decision on the use of Malampaya funds for projects on energy resource development and exploitation programs.

Malacañang allocated the money – through the Disbursement Acceleration Program (DAP) long before it became controversial – to finance 6 projects of the Philippine Navy. The fund was parked in the national treasury’s Armed Forces of the Philippines Modernization Act Trust Fund (AFPMATF), which the AFP can draw from once the contracts are ready and the money is already needed. (READ: SC stops release of PDAF, Malampaya fund)

Critics protested Malacanãng’s use of the DAP as a channel to allocate funds. It was allegedly used, among others, to bribe senators to convict removed Chief Justice Renato Corona. (READ: Drilon admits receiving P10M after Corona trial

The P900-million ($20-M) Malampaya fund itself has been tainted with corruption. Much of the fund was allegedly lost to the pockets of fake non-governmental organizations linked to detained pork barrel scam suspect Janet Napoles. (READ: How the Malampaya fund was plundered)

When the SC ruling came out in November 2013, military officers lamented its unintended impact on the AFP modernization program. The Malampaya natural gas project funds several AFP modernization projects including the refurbishment of the country’s two warships. (READ: Suspension of Malampaya funds to derail AFP modernization)

AFP ignores Court

The AFP ignored the SC ruling, the COA memo shows.

On December 21, 2013, higher headquarters transferred the money from the treasury’s AFP Modernization Act Trust Fund to an AFPMATF Combo Account. The transfer was made a month after the SC ruling.

It was obviously a move to secure the money for the projects of the navy before the treasury moves the money back to the Malampaya fund to heed the Court’s verdict.

“The transfer of the NCA from MDS to the combo account for future use for the Philippine Navy projects may not be valid, since Malampaya funds has to be utilized only for the special purposes not otherwise declared as unconstitutional, such as those to finance energy resource development and exploitation programs and projects.”

“The transfer to the Combo account of the P61,190,452 sourced from Malampaya funds for future use of the AFP Modernization program may not be proper pursuant to the November 19, 2013 promulgation by the Supreme Court, enjoining the use of the Malampaya funds for purposes other than to finance energy resource development and exploitation programs and projects,” COA added. 

The COA memo covers 6 unidentified projects of the Philippine Navy, which is fast-tracking the acquisition of assets because of the escalating maritime disputes in the region. It is not clear if there are other projects are affected.

A pending project to upgrade a naval detachment facing the disputed Spratlys will also be financed by Malampaya funds, said navy spokesperson Commander Gregory Fabic.

But the Malampaya fund has been tainted with corruption. 

The military, a laggard in the region in terms of ships and aircraft, has been trying to modernize as it begins to focus on external defense and given the Philippine government’s worsening maritime row with China.

But it’s also been beset with corruption over the last decades. –

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