II. The Acid Test (1)
GENERAL SANTOS CITY, January 27, 2014 — The GOCCs and GFIs are questioning the COA report of their unauthorized payments of per diems, bonuses, etc. to their board directors or trustees and order to refund. They may challenge these in the Supreme Court. The top officials of the Government Commission on GOCCs (GCG), as well as Malacanang, appear more concerned in clearing their image from implications of negligence and tolerance than in fully supporting the COA order. Will President Aquino III succeed in rooting out this long-entrenched scandal?
Within the first year of his administration, President Aquino III signed three measures to stop the scandal – EO No. 7 (September 8, 2010), EO No. 24 (February 6, 2011) and RA 10149 (June 6, 2011). They were supposed to have been implemented immediately. They were synchronized to rein the run-away per diems, bonuses, etc. Yet, the 2013 COA report showed no stopping of the scandal. What could have happened?
EO No. 7
Obviously, its Guiding Principles did not change or supplement the prevailing norms. The EO adopted the categories of compensation already in place. However, the EO (1) created the Task Force on Corporate Compensation (TFCC); (2) imposed a moratorium on the increases in salaries, allowances, incentives and other benefits; and (3) suspended all allowances, bonuses and incentives for members of the board of directors/trustees of the GOCCs and GFIs.
What may be considered the most vital task of the TFCC was: “Formulate and recommend measures to rationalize the compensation system and the use of discretionary funds in specific GOCCs and GFIs, including putting a cap on total compensation” and “submit a report on its findings and recommendations to the President within 90 days from issuance of this Order”.
Evidently, TFCC had accomplished its assignment. Section 16 of EO 24 provides: “Any request for clarifications to the provisions of this Executive Order shall be directed to the Task Force on Corporate Compensation and must be in writing.” It shows it embodies the recommendations of the TFCC.
EO No. 24:
Noting, “WHEREAS, the Board of Directors/Trustees of certain GOCCs have granted their members excessive salaries, per diems, allowances, bonuses, incentives and other benefits which cause demoralization in the bureaucracy and depletion of government revenues”, EO 24 lays down (See: Section 3) the general principles for “the compensation of members of the Board of Directors/Trustees in GOCCs” spelling out in details the compensation system and its characteristics.
The EO sets the “maximum allowable compensation for members of the Board of Directors/Trustees” according to the classification GOCCs by size, assets and revenues:
Class A: Assets, P100 billion; Revenues, P10 billion or more; Per Diems, (board) P40,000 per meeting; P960,000 per year; (committee) P24,000 per meeting; P576,000 per year.
Class B: Assets, P25 billion to P100 billion; Revenues, P2.5 billion to P10 billion; Per Diems, (board) P20,000 per meeting; P480,000 per year; (committee) P12,000 per meeting; P288,000 per year.
Class C: Assets, P5 billion to P25 billion; Revenues, P500 million to P2.5 billion: Per Diems, (board) P15,000 per meeting; P360,000 per year; (committee) P9,000 per meeting; P216,000 per year.
Class D: Assets, P1 billion to P5 billion; Revenues, P100 million to P500 million; Per Diems, (board) P10,000 per meeting; P240,000 per year; (committee) P6,000 per meeting; P144,000 per year.
Class E: Assets, less than P1 billion; Revenues, less than P100 million; Per Diems, (board) P5,000 per meeting; P120,000 per year; (committee) P3.000 per meeting; P72,000 per year.
With the cap set by EO 24, how much is the maximum in per diems that each board member or trustee can get per year? Add the maximums from the board and committee meetings: Class A, P1,536,000; Class B, P768,000; Class C, P576,000; Class D, P384,000; Class C, P192,000.
EO 24 also provides: “The Board chairperson may receive not more than 20% of the amount set for members of the Board of Directors/Trustees”.
Intriguingly, media reports are focusing on the Class A GOCCs and GFIs. How much will they (Class A) get including bonuses or performance-based incentives? There are no fixed figures for these; the determination is provided in Section 11 of the EO. However, the government has put the maximum limit of P3 million total per year for the per diems and bonuses. (Philippine Daily Inquirer, January 23, 2014: Palace puts P3M cap on GOCC execs’ pay, benefits)
“Non-compliance with any of the provisions” of EO 24 “shall be considered insubordination or neglect of duty and such other administrative offences as may be warranted and shall be dealt with accordingly” (Section 14). R.A. 10149 amended this with penalty clause.
The COA order is based on Section 15: “Upon the determination and report of the Commission on Audit (COA) that a member of the Board of Directors/Trustees has received any amount or property beyond what is allowed in this Executive Order or has received anything which accrues to the GOCC represented by him/her, the member of the Board of Directors/Trustees shall immediately return the same to the GOCC concerned.” (Emphasis supplied)
R.A. No. 10149
As its title states, the general objectives of R. A. No. 10149 are ” to promote financial viability and fiscal discipline in government-owned or -controlled corporations” [GOCC, as used here, includes GFI]; and,  “to strengthen the role of the state in its governance and management to make them more responsive to the needs of public interest”.
Chapter VI, Section 32 states: “The charters of the GOCCs under existing laws and all other laws, executive orders including Executive Order No. 323, Series of 2000, administrative orders, rules, regulations, decrees and other issuances or parts thereof which are inconsistent with the provisions of this Act are hereby revoked, repealed or modified accordingly”. [Emphasis supplied] R.A. 10149 is an amendatory Act.
Chapters I to IV provide for the accomplishment of the two general objectives of the Act. There are two notable provisions: (1) Chapter II, Section 5 — the creation of the Governance Commission for GOCCs (GCG); and (2) Chapter III, Section 8 – the drawing up of the Compensation and Position Classification System (CPCS).
The GCG is the “central advisory, monitoring, and oversight body with authority to formulate, implement and coordinate policies to be known as the Governance Commission for Government-Owned or -Controlled Corporations, hereinafter referred to as the GCG, which shall be attached to the Office of the President.” It has vast functions and powers.
The CPCS “shall apply to all officers and employees of the GOCCs whether under the Salary Standardization Law or exempt therefrom and shall consist of classes of positions grouped into such categories as the GCG may determine, subject to approval of the President.” The CPCS, submitted by the GCG late last year, is still awaiting the President’s approval. However, this is immaterial to the controversial COA order.
Sections 23 and 24, Chapter IV, refer only to the board directors and trustees of the GOCCs and GFIs and, incidentally, are material to the controversial COA order.
Section 23 states:  “The charters of each of the GOCCs to the contrary notwithstanding, the compensation, per diems, allowances and incentives of the members of the Board of Directors/Trustees of the GOCCs shall be determined by the GCG using as a reference, among others, Executive Order No. 24 dated February 10, 2011”; and  Directors/Trustees shall not be entitled to retirement benefits …” (Emphasis supplied)
Section 24 restates Section 15 of EO No. 24 and adds the penalty clause: “Failure to make the restitution within thirty (30) days after a written demand has been served shall, after trial and final judgment, be punished by an imprisonment of one (1) year and a fine equivalent to twice the amount to be restituted, and in the discretion of the court of competent jurisdiction, disqualification to hold public office.”
Unfortunately, the inferences have not matched the expectations.
1. In EOs 7 and 24 and R.A. 10149, the Aquino III government has good instruments to rein the run-away per diems, bonuses, etc. and redirect them into the daang matuwid. But after being in effect for three years – two and a half for R.A. 10149 – the COA report suggests failure.
2. By Section 32, the repealing clause, and Section 23 of R.A. 10149, the three measures should be the prevailing governing rules and standards in the granting of per diems, bonuses, etc. under the Aquino III government. Yet, the GOCC and GFI executives have cited other references in questioning the COA order and justifying their payments.
3. Besides its established rules and standards, the COA evidently found the 31 GOCCs and GFIs violating EOs 7 and 24 and R.A. 10149. Yet, the GCG and the Palace have appeared ambivalent.
4. The fault is not in EOs 7 and 24 and R.A. 10149 but in their implementation.
The GOCC and GFI executives contend that their payments of per diems, bonuses, etc. were above board. That is the core of their defense and justification. They had the authorization; they were shocked and puzzled by the COA findings and order.
No person can lie and tell the truth on the same matter at the same time. What have they stated in the media? Shock and puzzlement can be feigned; but words straight from the horse’s mouth can undo the feigning.
Following are statements of officials from five GOCCs and DFIs – samples of GOCC and GFI defense and justification – reported in Philippine Daily Inquirer and InterAksyon. Similar reports have been published or posted in other Philippine media outlets.
In statements to Philippine Daily Inquirer (January 15, 2014: Return bonuses, gov’t execs told; COA issues order to 31 GOCCs):
I. The Development Bank of the Philippines, through its media relations officer, explained that it distributed bonuses to its officials and employees using guidelines set by the GCG. The COA, however, in confirming this clarified that these bonuses went in excess of what it was authorized by the Governance Commission for GOCCs.
II. PhilHealth president and CEO Alex Padilla, refuting the COA finding that the release of its incentives had no approval from the Office of the President and had no legal basis, argued: (1) We have responded to this same issue raised by the COA a few months ago. (2) These payments, granted since six or seven years ago, are not new. (3) Some of these benefits were either magna carta benefits for health workers or part a collective negotiation agreement that cannot be breached. (4) The PhilHealth law allows the agency to decide on its own the compensation of its personnel so long as it was approved by the board and does not require presidential approval.
He is referring to the PhilHealth charter (Republic Act 7875,) which empowered the board “to provide for a compensation framework” approved by President Gloria Macapagal-Arroyo.
Padilla is saying that PhilHealth has other bases in granting bonuses, per diems, etc. — not requiring presidential approval and the repealing and restricting provisions of EO 24 and RA 10149 notwithstanding.
He corrected COA. The amount asked to be returned is P1.4 billion, not P1.6 billion. This was distributed to 5,900 employees — not a single centavo of that going to the board of directors. He clarified the PhilHealth is “actually in the lower bracket of compensation compared to other GOCCs and the private sector”. He justified the payment of P1.4 billion since “PhilHealth has been giving P1.2 billion a week in benefits to PhilHealth members” – or P62.4 billion a year.
He considered the controversy as “obviously a difference in the opinion of the COA and PhilHealth” — a question of interpretation of the law. He said “they intend to challenge in court the findings of the COA”.
In statements to Philippine Daily Inquirer (January 16, 2014:GOCCs defend P2.3B bonuses for employees):
III. Mactan-Cebu International Airport Authority Nigel Paul Villarete said: “We are perplexed by the report that we distributed unauthorized bonuses. The bonuses we gave out for 2012 were based on the guidelines issued by the GCG earlier this month.” He clarified MCIAA distributed only the performance-based bonus authorized by the GCG, the mandated 13th month pay, and the cash gift that was common for all government employees worth P5,000 each.
IV. Clark International Airport Corp. (CIAC) President Victor Jose Lucian said the P23.9 million in bonuses and other benefits that the agency’s officials and employees received in 2012 were “all aboveboard in compliance with the [requirements of the GCG]”. The P23.9 million included the 13th month pay mandated by the Labor Code and the 14th month pay as part of the agency’s employment compensation package.
V. The Social Security System, through its vice president for public affairs, Marissa G. Bugante, defended the controversial P9.5-million bonuses granted to members of the Social Security Commission in 2012. Aside from this, each of the eight members of the Commission received P40,000 per diem for every board meeting, at the maximum of twice a month. These are allowed in R.A. No. 10149 or “Dilon law” and EO No.24. (InterAksyon.com, January 13, 2014 6: Drilon law allows P9.5-M bonus to SSS execs, says media chief)
The SSS being a Class A GFI, every member of the Commission — citing Section 11 of E O 24 – is limited to the total amount of P960.000 million in per diems yearly, she explained.
From the above statements, it appears that the P2.313 billion the COA has ordered the 31 GOCCs and GFIs to refund was paid to all officials and employees – not just to the board directors and trustees. Were the paynents in violation of EO No. 24 and R.A. No. 10149?
What does the GCG say?
(The conclusion to be concluded)
(“Comment” is Mr. Patricio P. Diaz’ column for MindaViews, the opinion section of MindaNews. The Titus Brandsma Media Awards recently honored Mr. Diaz with a “Lifetime Achievement Award” for his “commitment to education and public information to Mindanawons as Journalist, Educator and Peace Advocate.” You can reach him at [email protected].)