An unsolicited defense of the treasury

The government entities which authorize and utilize the expenditures from the Malampaya fund have the duty to answer questions from the public

Prof. Leonor Magtolis Briones

Published: 8:50 AM October 29, 2013

Updated: 11:52 AM October 29, 2013

Recently, a newspaper headline reported, "Execs can't account for Malampaya Fund." During the Senate briefing on the National Expenditure Program the National Treasurer was quoted as saying, "there's no more cash," in relation to the commingling of the Malampaya fund with the General Fund. (Read: 'No more cash left' left of the Malampaya fund)

Soon after, radio commentators were worrying  aloud if the P136-billion Malampaya fund had already disappeared. Was it spent for activities not related to the objectives of the fund which is for exploration, exploitation, development and extraction of energy resources?

The  Department of Finance and the Bureau of the Treasury are perfectly able to explain their side.

With all the speculation surrounding the utilization of the fund, it might be helpful to have additional clarification on the role of the Bureau of the Treasury in the management of off-budget funds like the Malampaya fund. These are funds which are not included in the General Appropriations Act.

Commingling of Malampaya with general fund

The information that the Malampaya fund is commingled with the General Fund has triggered concerns from sectors. Speculations were aired that the fund might be dissipated and used for general expenditures.

When I was asked about this in radio interviews and on TV, I explained that it's a non-issue. Public finance in the Philippines adheres to the "One Fund Concept," in contrast to other systems where many funds are recorded in the financial records of the government. Thus, all other funds are commingled with the General Fund.  

Is there a risk that the fund will disappear?

Let us  make a simplistic analogy to financial management at the household level.  When they budget their funds, some families place real money in separate envelopes for different expenses. This is to make sure that the funds intended for specific  expenditures will not be used  for other expenses.  

Other families keep their funds only in one receptacle or bag. However, they keep in the same receptacle a list of the sources as well as the purposes of the money which is  placed inside. Thus, even if the money is commingled, the family knows its composition. When there is a need for an expenditure which is on the list, the family treasurer will produce the money.

For as long as the Malampaya fund is listed as a special account in the General Fund, money will be made available when it is needed.

We know  that the amount of P136 billion can be produced as needed. The better question to ask is: If more than P180 billion was raised for the Malampaya fund and the balance is in the custody of the Treasurer, what were the expenses charged to the fund? Were these expenses legitimate? Who are accountable?

These are the questions which should not be addressed to the Treasurer since she's not involved in the decision on how the fund should be spent. These are questions  that will have to be answered by the Department of Energy, the Department of Budget and Management and the Office of the President.

Legal basis

Ironically, the basis for the establishment of the Special Fund is a decree promulgated by former President Ferdinand Marcos. Presidential Decree 910  created the Energy Development Board whose 5 main functions are all related to "exploration, exploitation, development and extraction of fossil and nuclear fuels and geothermal resources."

The decree provided further for the creation of a Special Fund "to finance energy resource development and exploitation programs and projects of the government and for such other purposes as may be hereafter directed by the President." The latter phrase has been the subject of debate.

Can the President order the funding of expenditures for just any "other purposes?" Lawyers say that the President can only authorize expenditures which are also related to financing energy resource development and exploitation programs and projects of the government. He or she cannot use it to fund  unrelated projects such as roads, bridges, buildings and others.

Vulnerable to other expenses

Ironically again, another legal issuance issued by former President Gloria Macapagal Arroyo has led to questions about expenditures from the Malampaya fund. This is Executive Order No. 848, issued on Oct 13, 2009, "Authorizing the Use of the Special Account in the General Fund (Fund 151) of the Department of Energy for Purposes as May be Directed by the President of the Philippines."

Unlike the explicit provisions of PD 910, Section 1 of EO 848  does not re-state the authorized expenses from the fund but retained the phrase "for purposes as may be authorized by the President of the Philippines."

Thus EO 848 makes the fund vulnerable to expenses which are not related to energy resource development and exploitation. Thus, the Malampaya fund was used to finance projects which are unrelated to these objectives. This is obvious in the case of Palawan which used its share of the Malampaya fund to build substandard and overpriced roads, bridges and  school buildings. (READ: How the Malampaya fund was plundered)

EO 848 raises questions which might have implications on the separation of powers between the Legislature and the Executive. This is another instance where the Executive makes allocation decisions without the participation of Congress. We are not talking here about a few thousand pesos. The fund involves billions of pesos generated from the exploitation of  non-renewable national wealth.

To summarize: the questions which are now being raised about the Malampaya fund and the expenditures which are charged to the Special Account do not have to be directed to the Treasurer. The government entities which authorized and utilized  the expenditures from the Fund have the duty to answer the questions from the public. –

Prof. Leonor Magtolis Briones is an emeritus professor at the University of the Philippines and convenor of Social Watch Philippines.