COA uncovers more fertilizer fund irregularities from 2005 to 2007

FLORIAN TARCELO-BALMES, GMA News Research With reports from Sandra Aguinaldo. GMA News and Mary Ann Señir, GMA News Research MANILA, Philippines - Tears, fervent apologies and a recantation were a few of the highlights of the resumption of the Senate hearing on the fertilizer fund last week. Businesswoman and fertilizer supplier Julie Gregorio took back statements made in an earlier sworn affidavit and admitted that the fertilizers she had supplied government were overpriced by more than 400 percent per bottle. The tearful disclosure did not make legislators and observers fall off their seats, least of all the farmers who knew all along and the government auditors who painstakingly document these irregularities year in and year out. GMA News Research’s careful review of the Commission on Audit’s reports, together with interviews with representatives of the farming sector, shows that problems with the fertilizer funds did not begin and end with Joc-Joc Bolante and his associates. From 2005 to 2007, three consecutive years right after the questioned P728 million disbursement, official audit reports note the same, exact irregularities worth at least P800 million in fertilizers and farm inputs. It was like a familiar refrain. Same old, same old Although the Senate was investigating the fertilizer fund in 2006, the same funds – for farm inputs and implements – were being misused and misallocated. It was business as usual. Looking at the data, the problems with fertilizer or farm input funds seem to be staple audit findings rather than a “one-time-big-time" scam. Romeo Royandoyan, executive director of farmers’ group Centro Saka, says, “Structurally corrupt na yung setup. Matagal na yan. Ang issue na lang ay kung gaano kalaki o gaano kaliit (ang amount involved)." The following are the common problems noted by the COA audit reports in the use of the fertilizer funds, the exact same problems it had noted in the special audit of the fertilizer fund: Overprice/ Excess cost 2005 In the questioned P330 million worth of fertilizers - two-thirds of it, or more than P223 million - was cited for overprice. The biggest amount cited by the auditors was a P123- million excess cost in the purchase of 166,781 bottles of Prime EC Foliar Liquid fertilizers. Government auditors had computed an overprice of P717.50 per 300 ml bottle and P1,335 per 1 liter bottle. The funds used for the purchase of these fertilizers were from the DA’s Ginintuang Masaganang Ani Farm Inputs and the Priority Development Assistance Fund, more commonly known as the pork barrel of legislators. The fertilizer supplier for this transaction is a familiar name to the auditors – it was identified as one of the suppliers of overpriced fertilizers in the COA’s special audit of the P728 million fertilizer fund. In that report, the overprice attributed to the same supplier was P7.5 million. This supplier has been invited to attend the ongoing Senate hearing. In the same 2005 report, the COA canvass noted that the fertilizers for Regions V, VII and XI were overpriced by P32.12 million. The seedlings and planting materials purchased by the DA regional office in Region IX and XI were likewise found overpriced by P3.36 million. It turned out that even the Marcos funds meant for the agrarian reform program was used to buy fertilizers. Of the P544 million Agrarian Reform Fund- Foreign Swiss Deposit (ARF-FSD), P87.80 million was used to buy fertilizers. COA noted that the purchased fertilizers were overpriced by P42.09 million. COA found out the foliar fertilizers were common enough, but those entrusted with the funds -- the DA regional offices, the local government units and the NGOs – chose to buy fertilizers from exclusive distributors. The auditors’ stern recommendation was, “We recommend that DA-OSEC conduct further investigation to determine the persons liable in the purchase of fertilizers at an excess cost, and file legal action if warranted." 2007 In the 2007 audit of the DA, the COA said there was an excess cost and overpayment worth P31. 327 million in the purchase of farm inputs and implements. The break down of the amount showed that the biggest excess cost incurred –P30,594,969.38 - was in Region VII in the purchase of irrigation pumps, seedlings, and fertilizers. In another transaction, the auditors chastised the DA’s Regional Field Unit XI for spending more than P60 million in expensive fertilizers when it could have saved P54.60 million had it chosen another type of fertilizer prescribed by the Fertilizer and Pesticide Authority. These fertilizers were distributed to farmers as part of the GMA Rice Program and to implement projects of some legislators. Dubious transactions/ purchases In 2005, fertilizers worth P11.5 million caught the eye of the auditors for the lack of supporting documents. This, the COA said, is “reflective of a weak control in the disbursement of funds." The purchase of said fertilizers had deficient inspection and acceptance reports as well as missing distribution lists. “The payment of claims with incomplete documentation exposes government funds to losses due to irregular claims," the COA says. Fertilizers did not reach the beneficiaries 2005 P3 million-worth of liquid fertilizers were undelivered when the audit was conducted 145 days -- almost 5 months -- after the date set for delivery in November 2005. But COA notes that the congressional staff had signed the delivery receipts sans the fertilizers. This, the auditors stressed, violates provisions in the Government Auditing Code (PD 1445). The supplier had earlier been identified by the COA as one of the suppliers of overpriced fertilizers in the special fertilizer fund audit. In some other cases, fertilizers were distributed but did not necessarily get to the intended recipients. In the distribution of P3.98 million worth of fertilizers and knapsack sprayers in two districts in Pangasinan, COA found forged signatures of barangay captains and fictitious names in the list of beneficiaries. 2007 In the 2007 audit, COA said eight projects implemented by NGOs were “doubtful", among them a project involving P10 million worth of liquid fertilizers, soil conditioners and knapsack sprayers. The COA could not validate the distribution of the farm inputs because the NGO in charge was not able to identify the beneficiaries. Problems with beneficiaries also marked a P103.7 million procurement of DA-RFU III. COA found 36 percent of the intended beneficiaries did not get the fertilizers. “The good intention of the GMA Rice Program to reduce poverty incidence and attain national food security is tainted with weaknesses and irregularities in its implementation, reducing the effectiveness of the program," COA said. Misallocation 2005 The Comprehensive Agrarian Reform Law (RA 6657) identifies the recovered Marcos wealth as one of its sources of funding. P87.80 million of the P544 million Agrarian Reform Fund- Foreign Swiss Deposit (ARF-FSD) was used to buy fertilizers. But the auditors found that only 14.35% of the recipients were agrarian reform beneficiaries. This did not escape the government auditors: “ARF-FSD is intended by law to benefit agrarian reform beneficiaries , however, the MOA for the fund transfer did not specify any activity related to agrarian reform program, thus, 87.8% or P87.80 million was spent for the purchase of fertilizers." 2006 The DA’s livelihood projects funded by legislators’ pork – officially known as the Priority Development Assistance Fund (PDAF)—failed the COA’s Value for Money audit. The P74.740- million fund for six regions that was spent on agricultural supplies, equipment and administrative cost rather on livelihood projects “ hindered the attainment of increased diversified income generating opportunities for the poor and decreased poverty incidence," the COA said. Of this amount, at least P20 million was spent on fertilizers – an out of line purchase, as far as the COA is concerned. The auditors pointed out that fertilizers and farm inputs are not among the livelihood projects under the DA program for which the fund was meant for. COA recommended that the DA should “coordinate with the legislators to align projects with the agency’s priority programs." Failed use of fertilizers, delays, lack of DA monitoring 2006 In 2006, P266 million from Priority Development Assistance Fund and the GMA Rice and Corn program was spent on fertilizers in four provinces in CARAGA region. The COA found the program wanting, stating that “yield did not significantly increase in spite of the huge funds spent." The auditors scored the way the project was implemented, saying the DA failed to monitor the NGO that received the funds and was in charge of the project. While the COA report did not make any inference as to the less than stellar yield, the COA advised the DA to check whether the local government units receive the fertilizers from the NGOs. 2007 The COA tagged as “doubtful" 15 projects worth P134.125 million. These were part of the P542.7 million projects under the DA’s field office in Region IV. Of these, two projects were for the procurement of fertilizers and farm inputs worth P10 million. These projects, entrusted to two NGOs, were cited for delayed implementation. Upon inspection, the audit team found that the fertilizers and farm inputs were not delivered according to schedule; some remain unused and stocked in warehouses. This, the auditors said, “deprived the intended beneficiaries of its immediate use and benefit." Questionable NGOs Among the major findings in the fertilizer fund audit was on NGOs of “dubious legitimacy." "Some of the NGOs that entered into agreements concerning the GMA Fertilizer fund were of dubious legitimacy," the COA said of NGOs entrusted with millions of DA funds for the implementation of DA projects in 2004. When the auditors checked, some were lacking SEC papers while some cannot be located in the addresses the NGOs had declared. But these exact same issues – and more -- marched repeatedly on the pages of the DA audit reports in 2005, 2006, and 2007. Worse, some of the NGOs in these reports were the same groups the COA had already tagged as “dubious" based on questionable transactions and projects in the P728 million fertilizer fund. The following were irregularities in NGO-led projects as noted by COA: * release of funds to NGOs even without a project proposal * release of the full amount of funds, rather than in tranches * purchase of overpriced fertilizers and farm inputs * failure to provide a masterlist of beneficiaries for the project * failure to liquidate * release of funds to the same NGO pending liquidation of earlier released funds * entrusting projects to NGOs/ POs without any experience in implementing that kind of project And this was despite the revised and stricter COA circular on the release of funds to NGOs and POs. COA Circular 2007-001 was triggered by problematic agriculture projects coursed through these private groups, particularly the P728-million fertilizer fund scam. The auditors repeatedly scored the DA for failure to monitor the projects given to these NGOs. In one case cited in the 2007 audit, the DA regional office could not even identify where the projects were implemented. In 2007, the DA’s region IV office transferred P542.706 million to NGOs and POs. In an observation that spoke volumes, the COA said 43 percent of the funds were released prior to the May 2007 elections. In the same audit report, COA recommended that DA create a project monitoring and validation committee for the projects entrusted to NGOs and POs. DA management said it has created a Committee of Accreditation and Evaluation tasked with the screening of the NGOs. Same audit recommendations every year The COA sounds almost like a broken record as it calls attention to the same violations and irregularities every year. Do your job well, and run after those who don’t. Essentially, these are what the auditors tell the agriculture department year in and year out. The following are the recurring issues in the yearly audit recommendations to the DA: * Prompt liquidation NGOs and POs are mentioned specifically in two consecutive audit reports. *Transparency and accountability COA wants the DA offices to ensure that farmers get the benefits due them. The consistent suggestion is proper documentation, coordination and monitoring among authorized personnel. The auditors also noted the need to conduct a careful screening of the NGOs and suppliers who receive government funds. *Investigation and prosecution In three consecutive years from 2005-2007, the auditors consistently asked the DA to investigate and to take specific cases to the Office of the Ombudsman. In many cases, the auditors said the excessive amount spent should be recovered. No surprises here Mang Manuel is not surprised by the long list of irregularities; in his 30 years of farming rice and onion, he has seen many of them. “Kung susuriin nating mabuti, mas marami ang di nakakarating," he says about the benefits for farmers. “Sabwatan yan, madam. From national level pababa. Panahon pa ni Marcos yan. Masagana 99 pa." But if we were to believe Bolante, the system works just fine. In one of last year’s Senate hearings, Sen. Pia Cayetano asks Bolante if there are enough checks and balances to ensure that the money released by the DA goes to its intended recipients. Bolante says, yes, there are. Sen. Cayetano was incredulous: “I think you are the only one in this room, and in the entire Philippine nation, who believes that." Farmers’ group leader Royandoyan agrees with the senator. “Wala pang mekanismo that will really address the issue of corruption, release ng funds sa farmers. Uulit pa yan next year, lalo pa next year. Election sa 2010," says Royandoyan. He finds fault in the current set-up where the DA representative reaches up to only the regional level. After devolution, the local government took supervision over the local agriculture technicians. GMA Rice Program Director Frisco Malabanan says, “Hindi kasi kami ang directly in charge sa ibaba. We depend on the MAO (municipal agriculture officer) for the implementation of program on the ground level." But the problem with this set-up, Mang Manuel says, is that many farm inputs end up in the hands of those who do not till the land. “Yung mga malakas sa MAO at barangay captain, yan ang madalas nakakakuha," he says. He points to the masterlists as one of the sources of corruption. These lists are obsolete, put together way back in the 80s, he says. Many of those in the list have sold or pawned off their land. “Ang DA na naka-assign dun, di naman nya kilala yung mga tao dun. Dapat mag-ocular inspection sila. Tingnan nila kung sino talaga ang nagsasaka." DA says focus is on agri structures In an interview with GMA News, DA Secretary Arthur Yap insists that DA funds are no longer spent on fertilizers. Sec. Yap took the reins of the agriculture department in July 2004, replacing Cito Lorenzo. Almost a year after, Yap resigned in the midst of a controversial tax case. President Arroyo reappointed him in October 2006. Now, as DA transactions are under Senate probe, Sec. Yap says fertilizers are not a priority at all in his administration. He says he’d much rather spend on irrigation and farm-to-market roads. “Kung ang iniisip natin ‘yung meron kami sa budget namin for 2004 up to today na nagse-set aside na bibili ka ng isang type of fertilizer lang…hindi namin ginawa ‘yun… Kahit ipatawag ako kahit saan ipakikita ‘yung records ko rito na wala talaga kaming ibinibigay na ganung klaseng pondo…," Yap says. But GMA News Research’s review of COA reports from 2005 to 2007 showed that DA funds were indeed used to purchase fertilizers. The following were some of the cases cited by COA: * In 2005, in a transaction cited by COA for a P123- million excess cost in the purchase of liquid fertilizers, the funds were sourced from the DA’s Ginintuang Masaganang Ani Farm Inputs and the Priority Development Assistance Fund. * In 2006, the auditors noted P266 million from PDAF and the GMA Rice and Corn program spent on fertilizers in the CARAGA region. * In 2007, COA called the attention of DA Regional Field Unit XI for spending P60 million in fertilizers as part of the GMA Rice Program and to implement PDAF projects. In a more recent move, at the height of rice crisis last year, the government launched the FIELDS program, allocating P500 million for fertilizers. The agriculture secretary qualifies that the irregularities in funds spent on fertilizer may not have come from DA funds but from other fund sources coursed through DA, like the PDAF. The audit reports did note that much of the fertilizer funds were sourced from PDAF. But the COA also said the DA cannot simply wash its hands on the use of the pork barrel funds. The COA has maintained that DA must still be the lead in project implementation to make sure that transactions are above board. The COA in fact criticizes the DA for its lack of guidelines in the use of PDAF and the implementation of its projects. This, the COA said, has resulted in “giving legislators a free hand to select projects that are not among the priority projects of the department." In its defense, the DA management has said “political intervention will always occur as long as the project or program is under PDAF of the Congressmen." And to underscore its seeming helplessness, the DA said, “The DA RFUs have no control as to the priority of the legislator in the utilization of his/her PDAF, but one thing for sure is that the project is for the best interest of their respective constituents." This exchange between the auditors and the DA management will likely continue. And the story on the misuse of fertilizer funds will continue to unravel as the Senate hearing goes on. But those who have the most at stake in the issue may no longer be waiting for the conclusion, nor hoping for a resolution. Three decades of farming has left Mang Manuel with little faith on how things work – or from his experience – don’t. “Sistema ang dapat umayos dyan. Kahit pa mawala ang Bolante na yan…yun at yun pa rin ang mangyayari, walang pagbabago," he says. He pauses, then adds, “Wala tayong maaasahan sa national. Wala tayong maasahan sa provincial. Sariling sikap na lang po." - GMA News Research

Irregularity/Deficiency	Cost 2005	Cost 2006	Cost 2007
Excess cost / Possible savings	P 227. 02 million	-	P85.87 million (includes amount spent for irrigation pumps)
Misallocation	P87. 8 million	At least P20 million	-
Undelivered	P 3 million	-	-
Purchase lacked supporting docs	P11,498,100	-	-
Problem with recipients: forged signatures, fictitious beneficiaries, no list, did not receive fertilizers	P3.98 million	-	*P10 million *P103, 735, 970.10
Ineffective, inefficient use	-	P266 million	-
Delayed implementation	-	-	P10 million