EXPLAINER: Understanding confidential funds and intelligence funds

“Confidential funds” and “intelligence funds” are terms seen as line items in government agency budgets.

Generally, these are budget items allocated for confidential government operations. However, despite their nature, their expenditure remains subject to auditing under existing guidelines to prevent the misuse of funds.

One example is the ongoing public scrutiny of Vice President Sara Duterte’s P125 million confidential funds in 2022 in her impeachment proceedings.

Are confidential funds different from intelligence funds?

CF vs IF

Under Joint Circular No. 2015-01, Confidential Funds (CF) refers to the lump-sum amount provided for National Government Agencies (NGAs) in the annual national budget, also called the General Appropriations Act (GAA).

CF is allocated to agencies for Confidential Expenses, or expenses for “surveillance activities in civilian government agencies that are intended to support the mandate or operations of the agency.”

The circular considers the following items as Confidential Expenses:

• Purchase of information necessary for the formulation and implementation of the program activities, and projects relevant to national security and peace and order
• Rental of transport vehicles related to confidential activities
• Rentals and the incidental expenses related to the maintenance of safehouses
• Buying or rental of supplies, materials, and equipment for confidential operations that cannot be done through regular procedure without compromising the activity
• Payment of rewards to informers (should not be an employee of the concerned agency) subject to further conditions
• Uncoover/prevent illegal activities that pose a clear and present danger to agency personnel/property, or other resources under the agency’s protection
• Others that may be authorized by the GAA or other special laws

According to General Guidelines 4.9, confidential activities, if practicable, should be done in proper collaboration with any law-enforcement agencies, such as but not limited to the Philippine National Police (PNP), Armed Forces of the Philippines, and the Philippine Drug Enforcement Agency (PDEA).

On the other hand, Intelligence Funds (IF) refers to the lump-sum amount also provided to NGAs through the national budget used for Intelligence Expenses (IE).

Compared to confidential expenses, Intelligence Expenses were particularly defined as “intelligence information gathering activities of uniformed and military personnel, and Intelligence Practitioners that have direct impact to national security.”

Intelligence practitioners refer to experts or agents from the following agencies:

• DND OSEC and Government Arsenal
• Philippine Navy, Philippine Air Force, Philippine Army and Armed Forces of the Philippines-General Headquarters
• PNP
• Philippine Coast Guard
• National Intelligence Coordinating Agency
• PDEA
• Other NFAs which are expressly provided budget allocation for IF under the GAA or other laws

Which agencies are entitled to CF and/or IF?

Aside from law-enforcement agencies who have the primary duty to ensure national security, CF and/or IF can also be allocated to other agencies such as the Office of the President and Office of the Vice President.

Under the general guidelines for both funds, NGAs that are allocated CF and/or IF under the GAA must have a specific mandate to receive such allocations—as was the case with the Department of Education, which received its first confidential funds under the tenure of Vice President Duterte, according to a state auditor.

Government-Owned or -Controlled Corporations (GOCCs) can also be allocated with CF as authorized by their governance commission and the Department of Budget and Management.

Local Government Units (LGUs) where peace and order is a priority concern may also be allotted such funds, provided they meet specific requirements.

Dos and don’ts in spending

Confidential funds and intelligence funds are allocated to agencies for a specific purpose.

Under its guidelines, they cannot be used for the following expenses:

• Salaries, wages, overtime, additional compensation, allowances, or fringe benefits for any government official or employee—whether appointed, hired, or elected—unless explicitly authorized by law
• Representation, consultancy fees, or entertainment expenses
• Construction or acquisition of buildings or housing infrastructures

Are CF and IF expenditures kept secret?

As noted previously, the confidential nature of these funds does not shield them from public accountability. Both proposed and actual disbursements are subject to audits to detect any potential misuse of public funds.

At the planning stage, all allocations for confidential and intelligence funds must be supported by a Physical and Financial Plan detailing the proposed amounts for each program, activity, and project.

This means that where these funds go is not entirely a secret, as agencies are required to present a clear plan outlining how their appropriated funds will be allocated.

During the implementation of projects, who approves the utilization of funds?

Under guideline 4.3, utilization of confidential funds is subject to the approval of the Department Secretary or the Head of Agency (HoA). In GOCCs, they are the President and/or CEO who’s in charge of day-to-day operations.

Meanwhile, releases for IF are “subject to the prior approval of the President of the Philippines.”

The duty of agencies does not end once the funds are spent.

The Commission on Audit (COA) features a specialized unit known as the Intelligence and Confidential Fund Audit Unit (ICFAU). Operating directly under the Office of the COA Chairperson, the ICFAU is tasked with auditing all CF and IF disbursements.

Under the rules, all confidential fund disbursements must include documentary proof of payment, among others, submitted to the ICFAU.

The documents must be submitted in a sealed envelope signed by the Special Disbursing Officer (SDO) signed by the Special Disbursing Officer (SDO)—a regular employee designated by the agency head, or the agency head themselves should they assume the role.

A similar requirement applies to intelligence fund disbursements, with a specific provision stating that sealed documentary evidence must be kept in the SDO's office vault at all times.

Additionally, disbursements from both CF and IF must be supported by a Certification of the Accountable Officer executed under oath.

Accountability

Officials or employees who fail or refuse to follow the rules on CF and IF—without a valid reason—can face administrative disciplinary action.

This means they may be penalized under internal government rules, such as suspension or other sanctions, and may also be denied future access to cash advances tied to these funds.

Aside from administrative penalties, violations can also lead to criminal charges. If an official misuses or mishandles confidential or intelligence funds, they may be prosecuted under existing laws, depending on the nature and seriousness of the offense.

Ultimately, if an accountable officer fails to properly liquidate or explain how public funds were used, it can be taken as initial evidence that the funds were used for personal benefit.

In simple terms, not accounting for the money raises a strong presumption of misuse.

Remember, the national government’s money is the people’s money. Laws and guidelines are put in place not only to scrutinize possible misuse, but also to hold accountable those in power who are entrusted with these funds. –NB, GMA News