Why fake NGOs got away

Jee Y. Geronimo, Katerina Francisco

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Rappler looks at regulatory gaps that allow the existence of fake NGOs like those linked to alleged pork barrel scam mastermind Janet Napoles

MANILA, Philippines – P6 billion could build houses, build a thousand classrooms, and pay more than 50,000 teachers. It could help earthquake victims rebuild their lives from the rubble.

In the right hands, P6 billion could generate jobs, provide livelihood, and uplift the lives of many still living under the poverty threshold. Instead, a Commission on Audit (COA) special report said, P6 billion of government funds ended up in the pockets of 82 dubious non-governmental organizations.

Whistleblowers revealed how non-governmental organizations (NGOs) — associated with Janet Lim Napoles (the alleged mastermind of corruption and collusion involving lawmakers’ Priority Development Assistance Funds or PDAF) — were set up as fronts that cornered over P2 billion in funds.

How did NGOs with questionable credentials get past different government agencies that are supposed to monitor them? Somewhere along the way, institutions operated on a system of trust that failed to adequately clear the check and balance system.

With the damage done, the blame game began. Senators tagged in the scam said they only endorsed the NGOs – it was not their job to vet them. But national line agencies countered: you should also know what you’re endorsing.

The road from registration to funding means going through some institutional hoops that ideally should have mechanisms to ensure accountability and transparency. Understanding how the system works — from setting up an NGO to monitoring — is also key to understanding lapses in the system.

Registered ≠ accredited

Setting up a non-stock, non-profit organization in the Philippines is fairly easy. NGOs need not register to exist. But before they can open bank accounts, enter into contracts, and raise public funds, they need to be registered with the Securities and Exchange Commission (SEC).

There’s no fixed amount of contributions required of NGOs to start operations, except for foundations. To ensure that donations are used in ways that are consistent with their indicated purpose, the SEC, in a 2004 memorandum, required foundations to have at least P1 million in funds for grants and endowments, as well as a plan of operation.

If the applicant complies with the requirements, the SEC approves the application.

But Caucus of Development NGO Networks (CODE-NGO) executive director Sixto Donato Macasaet explained that registration does not necessarily mean an NGO is legitimate.

They may be listed as SEC-registered entities, but Macasaet said legitimate NGOs should obtain secondary registration and accreditation from national line agencies.

For Philippine Council for NGO Certification (PCNC) chairman Sonny Carpio, this distinction between registration and accreditation is important. Many NGOs may be registered, he said, but may not be up to par with standards set by government agencies.

As a safeguard, the SEC requires NGOs to first obtain endorsements from line agencies before they can be allowed to register. For example, social welfare NGOs need to be endorsed by the Department of Social Welfare and Development (DSWD).

DSWD Standards Bureau division chief Priscila Nitafan said her office looks at the NGO’s articles of incorporation and checks whether its purpose is in line with the DSWD’s mandate.


Different line agencies have different processes. In the Department of Public Works and Highways (DPWH), NGOs that want to help identify and evaluate projects simply need to submit documents to the DPWH’s public information division. It checks the NGO’s SEC registration, its charter, and “proof of interest in infrastructure development” and recommends accreditation to the DPWH Secretary.

The process is more tedious in the DSWD, as it makes distinctions between registration, licensing, and accreditation.

Registration means a social welfare development agency (SWDA) is officially recognized and included in the registry. A license gives it a legal permit to provide direct services to beneficiaries. Accreditation means an SWDA’s programs are officially recognized and vetted.

A DSWD administrative order lists the entire process. It’s an exhaustive list that details the different sets of requirements needed — a process that, even Nitafan admitted, can put off some applicant NGOs.

Besides documentary requirements, the DSWD also conducts a one-day validation visit. This includes ocular inspection of offices and project sites, as well as interviews with board members, beneficiaries, and local community leaders.

Monitoring the sector

As long as the documents are in order, registration is hassle-free. The real challenge lies in the monitoring process. Registered and accredited NGOs are expected to submit annual reports to both the SEC and line agencies.

To monitor the activities of their registered NGOs, the DSWD requires them to submit audited financial reports, accomplishment reports, and inventory of cases. The department also asks regional offices to conduct on-site interviews and oculars to verify the information.

In March 2013, the SEC issued a memorandum mandating non-stock organizations to provide annual audited financial statements. The statements should indicate the NGO’s source of funds and how these were disbursed. They are also required to submit documents from government agencies certifying the existence of projects in a particular area.

There’s one glaring gap in the monitoring process though: The SEC relies heavily on line agencies to verify the information in these documents – but not all agencies do so. Monitoring agencies simply check compliance with annual reportorial requirements, but in the absence of tip-offs and complaints, they do not always analyze the documents.

Gaps in the system

When granting funds, donors usually check if an NGO is legitimate by looking at its accreditation. The problem is that much of the process depends heavily on the legitimacy of documents the NGO submits to monitoring agencies.

In the DPWH, accreditation depends entirely on the documents. DPWH Public Information head Elizabeth Pilorin said they don’t have the manpower to conduct ocular inspections.

If the documents are in order, the NGO is accredited. And once it’s accredited, it’s accredited for life. The department does not require the submission of annual accomplishment reports.

The DPWH says it does not release funds to NGOs, however, and also prohibits them from using the DPWH name for its fund-raising activities.  (An earlier version of this story said accreditation makes them eligible to solicit funds elsewhere. The DPWH clarified this.)

As for the SEC, it checks whether an NGO submits complete documents every year, but it does not analyze them.

What if the documents are falsified? SEC Monitoring and Audit Division head Leonora Tandoc said it would be difficult to know. When the DSWD issues certification, for instance, the SEC assumes that the DSWD already checked the information itself.

“[Line agencies] are supposed to be the ones in the field and looking into the activities of the NGOs. That’s not our turf anymore,” Tandoc said.

“If documents are issued by a government agency, we take [them at face] value,” she added. “We presume regularity of all the documents submitted, especially if they’re under oath and they’re coming from a government agency. We no longer validate.”

But for Nitafan, the SEC should not place the burden of doing the legwork on line agencies alone.

“They should also do their own monitoring,” she said. “We need checks and balances to strengthen the system.”

Personal accountability

The mindset of monitoring agencies seems to be that they trust other agencies will do their own verification independently. This same “trust” extends to the vetting system when it comes to the release of funds. In the wake of the pork barrel scam, lawmakers pinned the blame on implementing agencies, but the agencies said the vetting process should also include legislators.

For DSWD National Office executive assistant Roy Calfoforo, it’s logical to assume that NGOs endorsed by lawmakers already passed the lawmakers’ standards.

“Legislators recommend NGOs. Dapat obligasyon nilang i-check ‘yun,” he said. “Dapat bago sa national agencies, alam muna nila kung fake ‘yan o hindi.” (It’s also their obligation to check the NGOs they endorse. Before these go to national agencies, lawmakers should also know whether the NGOs they are endorsing are fake or not.)

Nitafan said there’s a presumption of credibility that comes when a lawmaker personally puts his name on the line for these NGOs.

For PCNC’s Carpio, personal accountability plays a role as well.

“If you sign some vouchers, you know where it’s going,” he said. “You cannot just deny that it’s [a line agency] who gave it to the NGO. It’s your money.”

CODE-NGO’s Macasaet said implementing agencies have the legal obligation to check on the NGOs, but added, lawmakers are not completely off the hook.

Without saying na tama ‘yung sinasabi ng mga senator, legally, tingin ko may lusot ang lawmakers…dapat implementing agencies ang nagchecheck. May sabit yung implementing agency,” he said. (Without saying that the senators are right, legally, I think there’s a loophole for lawmakers. Implementing agencies should check. They can’t get away with it.)

But morally questionable ‘yung mga lawmakers. ‘Di naman sila pwedeng maghugas ng kamay. Kung endorsement lang, bakit pinipirmahan yung expense report?(But the involvement of lawmakers is morally questionable. They cannot wash their hands off this. If it was just an endorsement, why do they sign expense reports?)

He added, “It shows they were involved in the implementation when they should not have been. Even if it is legitimately implemented.”

Herculean task

The SEC lists more than 70,000 registered non-stock, non-profit corporations. Tandoc’s office deals with foundations, which number around 10,000. With the huge numbers involved, validating a couple is merely a drop in the bucket.

Carpio knows it’s a Herculean task, and agencies cannot be expected to monitor them all.

“No private entity can monitor more than 25,000 NGOs,” Carpio said. “You will have to have a group or an organization as large as these NGOs also, if you really want to monitor them.”

But even if it’s a huge task, there’s room for improvement in coordinating processes between agencies. At present, if a line agency revokes the accreditation of an NGO, this does not automatically mean SEC revocation. An NGO must first be found to have violated SEC rules before its registration can be revoked.

SELF REGULATION. PCNC's Sonny Carpio and CODE-NGO's Sixto Macasaet say a combination of self-regulatory measures and efficient government processes are needed to monitor the NGO sector. Photos by Katerina Francisco and Jee Geronimo/Rappler


Because government agencies cannot do it alone, the NGO sector itself took steps to police its own ranks. The PCNC is a self-regulatory body that certifies NGOs applying for donee institution status. This means accredited NGOs can receive tax-deductible or tax-exempt contributions under the law.

PCNC’s Carpio called their certification a “seal of good housekeeping” to identify NGOs of good standing. An 11-member board of trustees screens applicant-NGOs and holds them to a stringent set of standards.

The application process is thorough: aside from the documentary requirements, applicant NGOs are visited by evaluators every year and thoroughly assessed.

“We look at vision and mission, operations, financial stability, sustainability, and network linkages,” Carpio said. “We’re not only looking at external functions, we’re also looking at internal structures. How do they do things? Will they be alive in 10 years?”

NGOs may be given certifications ranging from 1-3 years or 5 years. These are then endorsed to the Bureau of Internal Revenue for donee institution status.

After an NGO gets accredited, it is required to submit annual reports and financial statements.

When the accreditation expires, re-applicants need to go through the entire vetting process again. Carpio said this makes the monitoring process more manageable, compared to NGOs simply being given a lifetime accreditation.

Although the PCNC’s process is a step in the right direction, not all NGOs are members, and not all are willing to be subjected to PCNC’s stringent rules. Some even believe they should be exempt from any form of monitoring.

But for CODE-NGO’s Macasaet, the ideal regulation scenario involves a mix of self-regulation and monitoring from outside the sector.

The pork barrel scam has had a damning consequence on a sector envisioned to be a direct line to helping marginalized communities. A proposed overhauled pork now excludes NGOs from getting a share of the pie, and some NGO coalitions said their donors are now reluctant to provide funding, fearing these would be misspent.

Carpio said that although the NGO sector is large, there is loose talk among NGOs about questionable operations and practices.

Some of the NGOs that COA reported on, for instance, had the same board members listed for multiple organizations. It’s a glaring sign that could have been hard to miss — if safeguard mechanisms had made it easier to spot. –

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Jee Y. Geronimo

Jee is part of Rappler's Central Desk, handling most of the world, science, and environment stories on the site. She enjoys listening to podcasts and K-pop, watching Asian dramas, and running long distances. She hopes to visit Israel someday to retrace the steps of her Savior.