What to Know: Are confidential funds secret funds not subject to audit?

Vice President Sara Duterte, who is also the education secretary, defends the confidential fund of her department. —PHOTO FROM PNA.GOV.PH

The use of confidential funds (CF) by the Office of Vice President Sara Duterte, concurrently the secretary of education, continues to be in the news and in social media posts. While most of the comments dwell on the P125 million in confidential funds supposedly spent in an 11-day period in December 2022, among the other questions asked is: Are confidential funds secret and not subject to the inspection of the Commission on Audit (COA)?

As the term suggests, secrecy is involved in the use of confidential funds. They appear in the General Appropriations Act (GAA) as lump sums, and they are not subject to the COA’s regular auditing requirements. But an accountable officer and a special designated officer (SDO) are to be named in agencies with CF. The SDO takes charge of making disbursement reports to be submitted to the Intelligence and Confidential Fund Audit Unit (Icfau) under the office of the COA chair. 

The reporting requirements and audit procedures as well as the templates of reports to be made are stated in the joint circular issued in January 2015 during the administration of President Benigno Aquino III (since deceased). The circular was signed by the heads of five agencies: Maria Gracia Pulido Tan, then COA chair; Florencio Abad, then budget secretary; Cesar Villanueva, then chair of the Governance Commission for GOCCs; Mar Roxas, then interior and local government secretary; and Voltaire Gazmin, then defense secretary.

Sen. Francis Escudero referred to the joint circular when he said during the hearing of the Senate committee on finance last Sept. 5  that he wanted to “disabuse the thoughts of the people that the confidential fund is a secret fund.”

He said the education secretary could not just use the confidential fund as she wished: “Hindi naman ito pwedeng gastusin sa gusto lang gastusin ng DepEd secretary.” He added: “There are specific rules as to where this can be spent, how this can be spent. What is secret is the reporting of the disbursement.” 

The senator was referring to the physical and financial plan for confidential and intelligence funds, to be submitted to support the request for funding. According to the joint circular, the plan is to state the estimated amount for the project, activity and program using the CF. 

Here are some notes from the joint circular titled “Guidelines on the Entitlement, Release, Use, Reporting and Audit of the Confidential and/or Intelligence Funds”:

Agencies entitled to have CF. The Office of the President and the Office of the Vice President are not the only agencies that can have such funds. All other national agencies as well as government-owned and -controlled corporations and local government units can also have CF.

Definition. The term “confidential funds” refers to the lump-sum amount provided as such in the GAA. Expenses are confidential if they are related to the surveillance activities of civilian government agencies conducted to support their mandate or operation. 

It differs from intelligence funds (IF), which are for the use of uniformed and military personnel. Intelligence expenses are the costs incurred in gathering intelligence and information that have direct impact on national security.

CF can only be used for the

  • Purchase of information needed to formulate and implement programs, projects and activities relevant to national security and peace and order.
  • Rental of transport vehicles related to confidential activities; rental and other expenses to maintain safe houses. 
  • Purchase or rental of supplies, materials or equipment for confidential activities that can be purchased through regular procedures.
  • Payment of rewards for informers.
  • Payment to uncover or prevent illegal activities that pose clear and present danger to the agency, its personnel or facilities; other activities specified by the GAA or special laws.

In no case can the CF and the IF be used in the: 

  • Salaries, wages, overtime, additional compensation, allowances and other fringe benefits of the agency’s officials and employees, and employees hired by the government or elected officials, except when authorized by law. 
  • Consultancy fees, entertainment.
  • Construction or acquisition of building or housing structures.

Disbursement report and audit. The report on disbursements from the CF, with documentary evidence, is to be signed by the SDO and submitted in a sealed envelope to the Icfau. The cash disbursement record shall be kept in the safe or steel cabinet of the SDO. It may be taken out of his/her custody only by the Icfau or by someone duly authorized by it, or by the head of the agency, or the representative who is to issue the necessary receipt.

On the other hand, the record disbursements from the IF shall be kept at all times in a vault in the SDO’s office.  It may be inspected by the Icfau or officers/personnel duly authorized in writing by the COA chair if circumstances so demand.

In the COA news release on Jan. 8, 2015, when the joint circular was signed, then Budget Secretary Abad said the document “comes at a time when our people are demanding greater public accountability in the use of funds and ensures that activities funded by the CIF are legitimate ones.”

In July 2019, then Sen. Leila de Lima filed Senate Bill No. 377, or the proposed Intelligence Oversight Act of 2019, which seeks to ensure accountability on the use of intelligence and confidential funds and to establish a joint congressional intelligence committee to strengthen Congress’ oversight powers to monitor the funds. Two months later, the bill was referred to the committee on national defense, security, peace, unification and reconciliation. 

Last Sept. 25, Marikina Rep. Stella Quimbo, senior vice chair of the committee on appropriations, proposed the creation of a special oversight committee “to increase transparency in the use of intelligence and confidential funds.”

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