First of Three Parts
“Good intentions are not good enough.”
That, according to Public Works and Highways Secretary Rogelio ‘Babes’ Singson, is the lesson from the sorry episode that was the Disbursement Acceleration Program or DAP.
The Supreme Court on July 1 voted 13-0 to declare DAP unconstitutional in part because of the amounts that crossed over to other branches of government, the withdrawal of funding for items enrolled in the national budget, and the transfer of funding to items not enrolled in the national budget.
Until a fortnight ago, DAP was a concept not quite clear to even some Cabinet members themselves.
Half a dozen interviewed by PCIJ agreed unanimously, too, that the High Court’s ruling raised valid points but should not have crossed over also to questioning “good faith” on the part of the Executive.
What apparently started as a mere budget management tool soon evolved into “a big pool of funds” or a virtual special purpose fund that did not exist as a line item in the General Appropriations Acts for 2011, 2012, and 2013.
Under DAP, the Department of Budget and Management (DBM) under Secretary Florencio ‘Butch’ Abad released a supposed total of P144.38 billion in taxpayers’ money for supposedly 116 projects from October 2011 to December 2013.
DBM itself could not seem to get its numbers right, however. Various official DBM statements place the DAP funds that had been disbursed to be anywhere from P136 billion to P144 billion to P149 billion, for a significant variance of P5 billion to P13 billion.
A smorgasbord
In truth, DBM’s list of “DAP-funded projects” is a virtual smorgasbord of specific projects to be implemented by single agencies allotted relatively smaller amounts, as well as unspecified “various priority local projects” or “various priority infrastructure projects” given billions of DAP pesos.
Two to four agencies were assigned to implement the latter through transfers or sub-allotment of funds covered by a web of inter-agency memoranda of agreement. In these cases, accountability for fund spending and project implementation had been shared, and thus diffused, among the agencies.
This vague category of DAP “projects” include those that DBM said had been “requested by legislators, local officials, and national agencies.”
But 10 months after the DAP row broke in September 2013, DBM has yet to disclose the full details of which lawmaker or agency had proposed what types of projects, where, and for how much, with lump-sum fund cover under DAP.
(Since October 16, 2013 or nine months ago, PCIJ has filed repeated requests with DBM for sets of data and documents relevant to an inquiry into DAP. Last week, all that DBM did was give PCIJ copies of documents about DAP that it had actually released and published earlier.)
A third or about P40 billion of the P144.3-billion total DAP kitty went to equity infusion and payment of insurance claims — including P30 billion for the Bangko Sentral, P8.6 billion for the Bureau of Customs, and the rest for the Metropolitan Manila Development Authority, Philippine Health Insurance Corporation, Department of Education, and Philippine Postal Corporation.
This amount, the apparent “fat” in DAP, could likely have only low and slow potential to instantaneously trigger what DBM said was DAP’s raison d’etre: “high-impact, quick-disbursing, socially responsive” projects.
DAP fat & meat
Net of the P40 billion, the P144.3-billion DAP monies would be reduced to P104 billion in real spending on programs, activities, and projects.
To be sure, a few, small DAP projects are simple, urgent interventions with apparently clear and immediate public-service impact, such as the acquisition of medical equipment and the renovation of public hospitals, as well as the purchase of equipment for weather-forecasting and flood control.
Yet still, about a third or P35.54 billion of what might be called the meaty part of DAP went to broad and vague “various priority projects” that entailed retail, scattered, and possibly inefficient, spending of tax monies.
For instance, farm-to-market roads, flood control projects, capacity-building and skills training activities, and a “Registry of Basic Sectors in Agriculture”, among other projects funded by DAP, have met with mediocre to bad results, as well as qualified and adverse observations from the Commission on Audit (COA).
Some DAP projects had not been implemented or bidded out at all over a year after DBM had released the funds, remain only partially implemented, had supposedly been attended by “ghost” beneficiaries, are locked in agency disputes over actual amounts of fund transfers, or because the yearend had passed, the funds had to be reverted to the National Treasury.
Cabinet officials interviewed by PCIJ are unanimous: The pooling of savings under DAP for realignment or augmentation of funds for certain agencies and projects had always been de rigeur practice of all past administrations.
What went wrong only was that DBM turned it into a pool of funds and christened with a name that is almost in perfect rhyme with the much-maligned PDAF (Priority Development Assistance Fund) or pork barrel.
The confusion continued when, in the view of certain agencies, what they got in fact were internally generated savings that they had surrendered to the Treasury and for which they had sought authority to realign or use to augment internal agency activities.
Internal savings
This much was the case with the DPWH and the Bureau of Internal Revenue (BIR), according to their agency heads.
DPWH’s Singson and four other Cabinet officials said they belatedly realized that the additional funds they got from DBM came under the umbrella of DAP, and had been sourced not just from their own agencies’ savings.
By his estimate, Singson said his department received at most P33 billion in additional funds from October 2011 to mid-2013 but stressed that this represented savings that DPWH had generated through competitive bidding of projects and from funds allotted to slow-moving projects that he had proposed to be “deobligated” or suspended.
Singson adds that until recently, he had no inkling that his department’s savings from its own budget allocation had been pooled under DAP.
“May dumating from savings namin (We received some from our savings),” Singson says. Galing sa savings namin ’yun. Nagulat din ako, DAP pala (We assumed it was from our savings. I was also surprised that it was DAP).”
“DAP, PDAF, nakakalito (it’s confusing),” Singson continues. “Until the end, I was arguing with Butch (Abad). He said the DPWH received P39 billion in DAP funds. I said only P29 billion. We agreed on P33 billion.”
A Cabinet undersecretary posted in Malacañang says he was just as surprised that DAP had evolved into a big kitty of funds, even if it was not enrolled as a distinct expenditure item in the GAA. “Two things went wrong,” says the undersecretary. “The funds that crossed over and they gave it a name.”
Another undersecretary echoes this, replying when asked what he thought went wrong with DAP: “The cross-over funds and the name.” A third undersecretary also comments that naming the pool of funds DAP was a big mistake. “They did not have to call it DAP,” says the official. “All presidents had done that, realign and augment budgets for certain agencies or projects.”
Commissioner Kim Jacinto Henares of the Bureau of Internal Revenue (BIR), though, remarks, “Masyadong obsessed tayo sa name.”
Although she also says two things might have gone wrong with DAP, her version differs slightly with that of the undersecretaries: “The withdrawal of allotment (for items enrolled in the national budget) and cross-border funding.”
The latter, she says, includes the P143.7 million that the Commission of Audit received for its IT project and the hiring of additional lawyers, as well as the P200 million that Speaker Feliciano Belmonte Jr. sought and secured for the completion of the Legislative Library and Archives Building of the House of Representatives.
BIR itself was a DAP beneficiary, supposedly receiving P758.4 million in DAP monies for its information technology project under the “National Program Support for Tax Administration Reform (NPSTAR), Centralization of Data Processing and Others (To be Synchronized with GIFMIS Activities).”
But Henares says that what she knew was that she had generated savings in her own agency budget. “Alam ko savings ng agency ko ’yun (To my knowledge, those were my agency’s savings),” she says. “I requested a realignment.”
Whether or not what BIR received was DAP money matters less, she says.
How COA met DAP
COA Chairperson Maria Gracia M. Pulido-Tan, for her part, tells PCIJ that soon after she was appointed in April 2011, she saw the need to hire new lawyers and assist COA field auditors with IT equipment. This prompted her, she says, to seek Malacañang’s assist. “I did not know it was DAP,” Pulido-Tan says of the amount COA received.
She says COA auditors on ground came to know about DAP only in mid-2012 after seeing Special Allotment Release Orders (SAROs) listing DAP as fund source for certain projects. In several audit reports for 2011 and 2012 on agencies like the DBM, Department of Agriculture, Department of the Interior and Local Government, Technical Education and Skills Development Authority (TESDA), the Autonomous Region in Muslim Mindanao (ARMM), and government-owned and –controlled corporations, COA had actually raised red flags about DAP spending patterns.
“It was in mid-2012 when we started seeing SAROs bearing DAP,” Pulido-Tan says. “There are so many lump-sum funds already and then DAP comes in. They seem to want to make life harder for auditors.”
Apart from PDAF and DAP, COA undertakes annual financial audit of sundry lump-sum “Special Purpose Funds” that are lodged with DBM and the Office of the President.
The Budget Department disburses “Special Purpose Funds for LGUs” that include, among others, the Internal Revenue Allotments (IRA), “Shares in the Utilization and Development of the National Wealth”; Gross Income Taxes paid by businesses and enterprises within the ECOZONES; Tobacco Excise Taxes; Value-Added Taxes; Calamity Fund; Pension Gratuity Fund, et cetera. “All of these funds are administered by the DBM,” COA reports state.
The Office of the President, meanwhile, administers and authorizes the release of other lump-sum funds, including the multi-billion-peso President’s Social Fund and Contingency Fund.
How much really?
Across a 26-month period from October 2011 to December 2013, DBM’s Abad released “DAP” monies in six tranches for projects listed in five memoranda that he asked President Benigno S. Aquino III to sign and approve.
The President did as requested, allowing Abad to release supposedly P144.3 billion in DAP funds for a supposed list of “116 projects.”
But the unsolved puzzle is exactly how much in total DAP monies had been actually disbursed or released by DBM from October 2011 to December 2013.
In various press statements and official documents, Abad and DBM had put the total DAP fund releases during the period variably at P136.75 billion, P144.38 billion, and P149.25 billion — for a significant variance of up to P13 billion.
In the “For the Record” list of DAP projects that was posted online on July 14, 2014 in the Official Gazette, a DBM report signed by Abad said DBM had proposed projects for DAP funding worth P167.06 billion but actually released P144.38 billion and retained a balance of P13.61 billion, as of “OP (Office of the President) Approval date of June 14, 2013.”
In a memo to the President dated Dec. 28, 2013 in which Abad and two other secretaries recommended the termination of DAP, Abad wrote that DBM had released “P75.1 billion in DAP funds in 2011; P53.2 billion in 2012; and P16 billion in 2013.”
The three amounts add up to “actual releases as of Dec. 28, 2013” of total DAP releases of P144.3 billion, or about the same value enrolled in the Official Gazette posting.
Smaller, bigger totals
Earlier, however, DBM had submitted documents to the Supreme Court that enrolled a bigger total amount of DAP fund releases.
Based on various “information packets” that the DBM gave the High Court, Senior Associate Justice Antonio T. Carpio, in his separate opinion on DAP, wrote that “the DBM admits that under the DAP, total actual disbursements” until Sept. 26, 2013 had reached “P149,252,523,000.”
A DBM official told PCIJ that DBM’s Bureau of Technical Services had actually submitted other documents later to correct the wrong figures that it had sent earlier to the Supreme Court. It is not clear though if Carpio and the other justices had been informed that DBM had made corrections in its submitted data.
Yet still, the bigger P149-billion DAP releases were supposedly made across a shorter period of time, ending on Sept. 26, 2013.
The smaller P144-billion DAP releases were supposedly made across a longer period, ending Dec. 28, 2013.
Three days after the Supreme Court ruling came out, Abad himself gave the smallest figure.
In a press statement on July 4, 2014, Abad chided the news media for getting its DAP data wrong. He said, “The reported total of P352.7 billion made at the disposal of the Executive branch through DAP in just two years is grossly inaccurate.”
According to Abad, “DBM records as of December 31, 2013 show that only a total of P136.75 billion — P65.59 billion under the 2011 National Budget (R.A. 10147) and P71.16 billion under the 2012 National Budget (R.A. 10155) — was made available to fund high-impact priority projects under the DAP for the mentioned years.”
Abad continued that, “the total amount actually used from this available fund, which was P114.58 billion, is even much lower than the P352 billion reported (in the media).”
He did not quote DAP releases made in 2013 but if his Dec. 28, 2013 memo to the President in which he wrote that P16 billion DAP funds were released in 2013 is any reference, yet another amount of total DAP fund releases would emerge.
And that would be P152.75 billion in DAP monies released from 2011 to 2013, according to figures cited in Abad’s press statement and Abad’s memo to the President.
Interestingly, the figures on DAP releases by year that appear in the two documents do not match either.
Abad’s July 4, 2014 press statement cited DAP fund releases at “P65.59 billion under the 2011 National Budget (R.A. 10147) and P71.16 billion under the 2012 National Budget.”
Abad’s December 28, 2013 memo to the President said DBM had released “P75.1 billion in DAP funds in 2011; P53.2 billion in 2012; and P16 billion in 2013.”
Fiscal stimulus measure
Based on DBM’s own reports, DAP is a mixed basket of clear, concrete projects given relatively smaller funding that were bundled with vague, insubstantial activities and programs allotted lump-sum billion-peso funding.
The latter set of activities cornered nearly half of all DAP funds, allowing for variably low to no guarantees of impact, transparency, and accountability.
Abad and Aquino have explained that through DAP, the government wanted to give priority funding to high-impact, fast-moving, socially responsive projects, in order to shore up public spending and boost economic growth.
But the lump-sum funds tucked under DAP that went to projects supposedly requested by still unnamed legislators and local officials seemed to have worked like the much-maligned PDAF that the Supreme Court had declared in October 2013 to be unconstitutional.
In DAP’s case, the apparent haste that marked the release of DAP funds apparently left little room for the typically tedious process of doing project feasibility studies, program of work, or even disclosure of project specifications that are among the hallmarks of open and transparent budget planning and execution that, ironically, DBM under Abad had championed since 2011.
Yet still, DBM had defended DAP to be “a fiscal stimulus measure” and “a package of reform interventions to address the inefficiencies and leakages in government spending and to stimulate economic growth.”
The “fiscal stimulus measure” soon evolved into “a pool of funds” that, Abad has said, supported “proposed additional projects that have been chosen given their multiplier impact on economy and infrastructure development, their beneficial effect on the poor, and their translation into disbursements.”
Lump-sums galore
The DBM list of DAP-funded projects featured, too, not actual projects but broad activities or programs (i.e. LGU Support Fund, Various Infrastructure Projects, projects for “capacity development”) that drew much bigger lump-sum funds.
These lump-sum amounts represent at least a fourth of total DAP funds released by DBM across a 26-month period.
PCIJ’s review of DBM’s DAP projects list reveals that at least P35.54 billion of the total P144.37 billion DAP monies were spent on various local projects, details of which are not all fully disclosed.
The P35.54 billion excludes as yet the P6.49-billion support fund provided to local government units to supposedly cushion the impact of the 4.8-percent decrease in the 2012 IRA.
Half of the lump-sum amount or P17.31 billion went to projects “requested by legislators, local government officials, and national agencies” that DBM has yet to itemize.
In total, “legislators, local government officials, and national agencies” were assigned 12 percent of DAP projects, the second largest portion of DAP total funds. Abad had earlier said that only nine percent of DAP projects were identified by lawmakers.
The largest, single DAP allotment that was released in two tranches was the P30-billion equity infusion in the Bangko Sentral ng Pilipinas (BSP). The New Central Bank Act of 1993 mandated a P50-billion recapitalization for the BSP.
DBM said that since 1996, national government had not allotted P40 billion of the amount. Through its DAP funding, DBM said BSP will “expand its rediscounting facility and help stimulate economic activity by enhancing the delivery of credit to productive sectors of the economy, including micro, small, and medium enterprises.”
The balance of P17.95 billion that went to lump-sums under DAP went to more lumped local projects through the Payapa at Masaganang Pamayanan Program (PAMANA), Comprehensive Peace and Development Intervention for ARMM, various projects through government corporations, and development assistance to the province of Quezon.
Projects related to housing and resettlement of informal settlers, as well as roads, bridges, and flood control, took P11.07 billion and P16.3 billion, respectively.
Steady flow for LGUs, solons
DBM made sure that projects “requested by legislators, local government officials, and national agencies” secured a steady flow of DAP funds. In at least several tranches of DAP releases, these unspecified projects got DAP monies:
- P6.49 billion for “Other various local projects” that “shall fund priority local projects nationwide requested by legislators, local government officials, and national agencies.” This item was approved under the first tranche of DAP or “DAP 1” on October 12, 2011.
- P1.88 billion for “GOCCs: Other various local projects” that “shall fund priority development projects nationwide in the areas of municipal ports, FMR (farm-to-market roads), local roads and bridges, livelihood, nutrition development, and electrification through certain government-owned and -controlled corporations.” This item was approved under “DAP 2” on December 21, 2011.
- P8.06 billion for “Other various infrastructure projects” that “shall fund other priority local projects nationwide requested by legislators, local government officials, and national agencies.” This item was approved under “DAP 3” on June 27, 2012.
- P2.76 billion for “Other various local projects” that “shall fund other priority local projects nationwide requested by legislators, local government officials, and national agencies.” This item was approved under “DAP 5” on December 21, 2012.
- P4.45 billion for “GOCCs/DPWH/LGUs: Priority Local Projects Nationwide” that “shall fund priority projects nationwide, including recovery, reconstruction, and rehabilitation projects due to calamities.” This item was approved under “DAP 6” on June 14, 2013.
- P6.49 billion in “LGU Support Fund” that DBM said was “pursuant to the President’s directives, the amount will help local governments cushion the impact of the 4.8-percent decrease in the 2012 IRA (Internal Revenue Allotment) over the 2011 levels due to abrupt decreases in national internal revenue collection in 2009.” This item was approved under DAP 1 on Oct. 12, 2011.
— With reporting and research by Karol Ilagan, Rowena F. Caronan and Fernando Cabigao Jr., PCIJ, July 20, 2014