TURNING POINT: Duterte versus the Philippine Red Cross

NAAWAN, Misamis Oriental (MindaNews / 9 September) – President Duterte is obviously pissed off at Senator Gordon for what is now unfolding in the Senate Blue Ribbon Committee’s investigation on alleged anomalies in the Department of Health’s handling of government funds the trail of which is inching towards Malacanang, such that he threatened again to have the Philippine Red Cross (PRC), where Gordon is the CEO, audited by the Commission on Audit (COA) in his latest address to the nation.

Can the President order the COA to audit the PRC?

No, the COA is a Constitutional body outside his authority. He may request the COA, but his request may be denied because the PRC is an autonomous humanitarian organization not a government-funded agency or a government-controlled corporation.

As the supreme auditing arm of the government, the COA’s mandate under the 1987 Constitution is to examine, audit and settle all accounts pertaining to the expenditures and uses, among others, of funds and properties owned or controlled by the government.

The PRC, established under RA 95, embodies the country’s commitment to the principles and objectives of the Red Cross-initiated Geneva Conventions. Although the PRC is a corporate entity created by the government of the Republic of the Philippines, it is a special corporation in a way that it operates as an autonomous, voluntary organization outside the control and supervision of the government.

Since its creation in 1947, no law has ever been passed authorizing Congress to provide appropriation to the PRC. So it does not receive any regular budget from the government. Its budget comes mostly from contributions of individuals and private organizations, as well as from cost-recovery fees that are charged for some services, like in RT-PCR tests – its swab-testing service in this pandemic. PRC is, therefore, outside the constitutional mandate of COA.

If it receives money from the government through the Philippine Charity Sweepstakes Office or the Philippine Amusement and Gaming Corporation (PAGCOR), such money may come as contribution of these agencies or of the government to the Red Cross in carrying out its humanitarian and relief efforts in the Philippines.

You don’t audit the funds of an organization that receives your contribution or donation. It is irregular, unethical and intrusive and could be illegal. The United Nations, for instance, is funded from assessed contributions of member countries and voluntary contributions from other sources. Have you heard of any member country auditing the world organization? Had the Philippines audited it?

The COA has the authority to audit the PRC if what is given to it by PAGCOR is a subsidy or an equity [Section 2 (1) (d), Article IX-D, Constitution]. But it is unlikely a subsidy because the PRC is a relief and humanitarian institution not a business enterprise whose products or services may be improved with a government subsidy to benefit the public.

This is a settled issue in Blue Bar Coconut Philippines, Cagayan de Oro Oil Co.et. al. vs. Tantuico.  The Supreme Court upheld the COA’s  audit of the subsidies granted to the petitioner coconut manufacturing companies. It affirmed the constitutional mandate of COA to audit private enterprises that received government subsidies.

A government subsidy is money paid by the government to help an organization or industry reduce its costs, so that it can provide better products or services at lower prices. In other words, in providing subsidy, the government has a definite interest, purpose and expectation for the use of its money by the beneficiary. Such was the case of Blue Bar Coconut Philippines et. al. The subsidies granted to the coconut manufacturers were intended to improve coconut products to benefit the consuming public, such as in the production of pure coconut oil which contains no additives, contaminants or trans-fats and is naturally cholesterol free, in consonance with the government coconut improvement program. Needless to say, the interest of the government in granting the subsidy is the value added to coconut products which could boost production, domestic sales and export.

As fund allocated by the government for the said purpose, the subsidy is subject to COA’s scrutiny on how the money is spent vis. the purpose.

A subsidy remains a government fund even if is already handed to a private entity, thus, within COA’s mandate. On the other hand, the government has no design or compelling reason and interest on how its contribution is spent by the recipient. How the money is spent is left to the discretion of the recipient in accordance with it goals or reason for being. The contribution ceases to be a government’s money once it is already in the hand of a recipient. It may be considered an expense of the contributor. What PAGCOR may have given as contribution to PRC is part of the former’s expenditure subject then to the audit of the COA.

The President’s consolation is, by law, he is the honorary chairman of the PRC. He is entitled to the annual report of the operations of the organization and may also look into its book of accounts and its audited financial report if he wishes to.

(MindaViews is the opinion section of MindaNews. William R. Adan, Ph.D., is retired professor and former chancellor of Mindanao State University at Naawan, Misamis Oriental, Philippines.)