Corruption Red Flags: Fake transactions, doubtful accounts in government spending

Lian Buan
Rappler conducts an analysis of 323 audit reports of government agencies to find irregularities and flagged spendings. Part 1 is all about the fake and the doubtful.

AT A GLANCE:

  • Half of all national government agencies (NGAs) and government-owned and controlled corporations (GOCCs) have doubtful accounts
  • The Philippine Coast Guard, Mines and Geosciences Bureau, Philippine Amusement and Gaming Corporation, Technical Education and Skills Development Authority, and ZNAC Rubber Estate Corporation are the only 5 agencies found with fake transactions

MANILA, Philippines – “I don’t want to hear about any trace of corruption, [not] even a whiff or whisper. I will fire you or place you somewhere,” said the tough-talking Rodrigo Duterte in a mix of Filipino and English on June 22, 2016.

Three years later, halfway into his term, Rappler analyzed audit reports of 323 national government agencies and government-owned and controlled corporations (GOCCs) for 2017. We point out where the President should start sniffing if he’s serious about fighting corruption. (The Commission on Audit has just recently started releasing 2018 audit reports.)

Fake transactions

We scanned hundreds of audit reports for fake, fabricated, and spurious transactions, which indicate outright irregularities. 

Not a lot of agencies popped up except for 5:

  • Philippine Coast Guard (PCG)
  • Mines and Geosciences Bureau (MGB)
  • Philippine Amusement and Gaming Corporation (PAGCOR)
  • Technical Education and Skills Development Authority (TESDA)
  • ZNAC Rubber Estate Corporation (ZREC)

The Coast Guard was flagged for two transactions worth P818,000 and P335,000 respectively, which were “confirmed to be irregular expenditures” because they were supported by fake or spurious receipts.

For the first transaction, the receipts and sales invoices to support the liquidation “were either disowned or claimed as fake/spurious by eleven suppliers/dealers.”

In PCG’s 2017 audit report, COA even noted that the cash mess continued even though it has not solved similar problems from the past.

“No appropriate administrative and legal action was taken by the Management against persons found responsible/liable for the fake/irregular transactions,” COA said in its report.

In 2017, the Mines and Geosciences Bureau was flagged for P170,517 worth of “unneccessary and excessive expenses,” which COA tagged as “spurious transactions whereby the stores inspected do not sell the items purchased indicated in the official receipts submitted.”

As for PAGCOR, it was found to have P445 million worth of irregular transactions, P3.75 millon of which involved either fake or falsified receipts.

TESDA, which has been implicated in the pork barrel scam, was found by auditors to have let slip fake scholars under its programs starting 2015.

Auditors said TESDA spent P9.3 million from 2015 to 2016 to train scholars in Technical Vocational Institutions (TVIs), but the Manila headquarters failed to monitor the projects and therefore failed to discover that many were fictitious scholars.

Because of fictitious scholars, the program did not hit its target number of employable graduates. That meant the program was not allowed to use an allotment of P4.35 million “since the funds were reverted back to the National Treasury as trainings were no longer pursued, therefore, contributed to the non- attainment of the target graduates under the program.”

For ZREC, the agency was involved in the pork barrel scam as COA noted that it transferred P194.97 million of funds from lawmakers’ Priority Development Assistance Fund (PDAF) to non-governmental organization (NGO) Pangkabuhayan Foundation Inc. (PFI).

COA said it had been nagging ZREC to compel the Pangkabuhayan Foundation to refund P161.914 million which was supported by fabricated documents and forged signatures, but that the agency has yet to implement the recommendation as of 2017.

Flagged accounts

We then scanned the audit reports for “doubtful accounts,” a general terminology used by COA to flag any transaction, record, or expenditure that has doubtful validity. Of the 323 agencies, 161 of them were flagged, representing billions of pesos in taxpayers’ money, because they could be tainted with possible corruption.

Taking the lead was the National Irrigation Administration (NIA) with 16 flagged doubtful accounts.

  • National Irrigation Administration

For NIA, auditors mostly flagged non-reconciliation of finances, non-inventory of physical assets, non-liquidation of cash advances, and lack of supporting documents.

One transaction involved the payment of P154-million worth of incentives and wages for Irrigators Association which were not completely and properly supported with documents contrary to Section 4 (6) of PD No. 1445 and COA Circular Nos. 2012-001 and 2009-001, thereby casting doubt on the validity of the expenditures.”

“As in previous years’ audit, poor documentation and record keeping have been consistent concerns in the post audit of payments of Progress Billings (PBs). In some cases, although Notices of Suspension (NS) were issued, some vital supporting documents were still not submitted casting doubt on whether these documents actually existed,” said COA about NIA.

  • DOLE, DEPED, PEZA

The Department of Labor and Employment (DOLE) had the 2nd most doubtful accounts at 15. The accounts comprised mostly of hundreds of millions worth of unliquidated transfers to Local Government Units (LGUs) and NGOs.

Lack of inventory also got DOLE flagged for doubtful existence of its physical assets.

The Department of Education (DepEd) and Philippine Economic Zone Authority (PEZA) came in 3rd with 12 doubtful accounts each. 

For DepEd, the doubtful accounts were variations of unsubstantiated cash advances, purchases, leave claims, and other expenditures such as snacks and fuel.

PEZA was mostly flagged for book-keeping lapses which led auditors to say that the reliability of information on its accounts were doubtful.

One of the biggest flagged accounts for PEZA was its spending of P35.2 million for contractual workers in 2017 and for escort fees and transshipment allowances, whose “propriety and regularity cannot be ascertained due to the incomplete and/or doubtful supporting documents.”

  • Philippine Coconut Authority

The Philippine Coconut Authority chalked up 9 doubtful accounts, including deficiencies in its P14-million Accelerated Coconut Planting and Replanting Program (ACPRP).

According to COA, the program was marred by incomplete and delayed deliveries, payment of incentives to unqualified farmers, and distribution of seedlings without conducting a soil assessment first.

The “efficiency and economy” of the program “were not assured,” said COA.

  • Philippine Crop Insurance Corporation

Though it only had 5 doubtful accounts, a glaring irregularity was observed with the Philippine Crop Insurance Corporation (PCIC) which is tasked to provide insurance to farmers against losses that may be brought by calamities and infestations.

In 2017, PCIC paid P188.961 million to 20,924 claimants but the records showed no dates of payments and no check numbers, while the word “null” was provided in place of date of payments and check numbers for P212.167 million involving 6,579 claims.

“The date of payment and the check number of transactions are relevant information in the CCR as proof that claims included in the register are claims of insured farmers and fisherfolk which are verifiable in the Check Disbursements Journal (CDJ). The non-inclusion in the CCR of these two information casts doubt on the validity and reliability of claims processed and paid,” said COA.

  • Department of Information and Communications Technology

Despite being a newly-created agency, the Department of Information and Communications Technology (DICT) had an “alarmingly” doubtful account when auditors found that P2.35-billion worth of physical assets, and P432.2-million worth of computer software has “unaccounted/doubtful existence.”

This is quite alarming because the discrepancies could pertain to undetected losses or undelivered IT Equipment and Software where DICT has considerable investments,” said COA.

  • Department of Social Welfare and Development

The government’s conditional cash transfer (CCT) program, a cash dole out for the poorest of the poor, has always been scrutinized for its efficiency, and that did not change in 2017 when auditors found that P1.2 billion of financial aid was not withdrawn upon pay-out, “showing that there is no immediate need for the financial assistance, and casting doubt on the eligibility of the chosen beneficiaries.”

This observation was made in the audit report of the Department of Social Welfare and Development (DSWD), the agency tasked to implement the CCT. 

Auditors also found that accounts worth P108.614 million have no date of last monetary activity or no withdrawal since date of opening of the accounts, but were still included in the list of beneficiaries.”

Problems revolving the CCT persist as Duterte passed the law that would institutionalize the program most commonly known as the Pantawid Pamilyang Pilipino Program (4Ps).

  •  Government Service Insurance System

Another glaring doubtful account is that of state insurer Government Service Insurance System (GSIS), which spent P22.68 million in corporate gifts given to pensioners. media, Cabinet secretaries, lawmakers, judges, and justices.

COA called this an unnecessary expense. And not only that, COA found that the disbursement vouchers were not supported with a list of recipients, making it an “irregular expenditure.”

The corporate gifts given to other recipients are considered excessive in quantity and unnecessary since it can be dispensed without losses to the System. If not properly justified and explained may result in the issuance of Notice of Disallowance,” said COA.

Duterte has not hidden his dislike for COA, saying he would push auditors down the stairs. But it might serve the President and his supposed anti-corruption agenda if he pays more attention to the government audits. (To be concluded)  with research from Jane Bautista, Frances Roberto, Jomar Villanueva, Flint Gorospe, Josiah Antonio and Dana Cruz/Rappler.com

READ: PART 2 | Corruption Red Flags: Excesses in government spending

 In Part 2, we will take a look at the excesses in government spending, and Duterte’s pet peeve: excessive travels. 


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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 lian.buan@rappler.com or tweet @lianbuan.