World Bank bares Supreme Court misuse of loan for judiciary reform | Inquirer News

World Bank bares Supreme Court misuse of loan for judiciary reform

/ 08:12 PM January 14, 2012

MANILA, Philippines—The World Bank has uncovered questionable procurements and disbursements by the Supreme Court under the watch of Chief Justice Renato Corona in connection with the bank-funded Judicial Reform Support Project (JRSP).

The project, partly funded by a World Bank loan of $21.9 million (P945 million at an exchange rate of P42.50 to US$1), was designed to restore efficiency in the dispensation of justice in the country.


In an aide memoire dated December 28, 2011, the bank said  since Corona assumed the post of chief magistrate in mid-2010, progress in reforming the judiciary “has been rated unsatisfactory,” with the program having to grapple with “implementation delays and the additional work required for smooth project closing.”

The aide memoire, addressed Justice Teresita Leonardo de Castro, chair of the management committee of the JRSP, contained the results of a fiduciary review conducted by a World Bank task team from October 24 to November 11, 2011 that included meetings with Supreme Court justices and field visits to courts in Luzon, Visayas and Mindanao.


The review uncovered, among others, “inaccurate/incomplete information” on the project’s financial management report; “diminished existing internal check-and-balance mechanism”; purchase of Information Technology (IT) equipment outside of the agreed procurement plan; and the practice of borrowing funds from the loan proceeds for foreign travels of justices paid to a travel agency owned by lawyer Estelito Mendoza.

The World Bank is now demanding a refund by January 31, 2012 of $199,900 covering “70 payments” deemed “ineligible” (unauthorized) under the terms of JRSP.

“The review discloses that the fiduciary environment pertaining to JRSP implementation has so deteriorated that the task team now rates the JRSP as a ‘high risk’ and ‘unsatisfactory’ on project management, project procurement and financial management dimensions, and observes that project financial statements can no longer be relied upon,” said the aide memoire.

“The project result indicators depict achievements in several areas, but significant missed opportunities due to capacity and coordination constraints and delays in decision-making, procurement and contracting,” it added.

The diminished internal auditing mechanism in the court was exemplified by the uncanny appointment by Corona of  Jose Midas Marquez as court administrator, head of the Public Information Office, and chair of the Bids and Awards Committee of the APJR or the court’s Action Program for Judicial Reform.

As court administrator, Marquez was authorized to approve, on behalf of Corona, payments up to P200,000, which was later increased to P500,000, according to the World Bank.

“Lack of appropriate segregation of duties of key officials involved in the JRSP has created a breakdown of the control environment, increased fiduciary and reputation risks, and lead to irregular/inappropriate procurement and expenditure decisions,” said the aide memoire.


Without naming Marquez, the bank said that “this senior official, due to the combination of his appointments and functions, was the requestor of the services, the approver of the terms of reference, the end-user of the services provided by the firm, the authorizer of contract extensions, and the authorizer of payments to the firm.”

On the other hand, the JRPA administrator as head of PMO (Program Management Office), was authorized to approve payments of up to P100,000. But the PMO head is a voting member of the BAC-APJR.

“Both sets of arrangements present a conflict of interest and eliminate internal checks and balances applicable to the procurement and disbursement functions,” the bank said.

The World Bank approved the loan in 2003 (Loan No. 7191-PH) “to assist the borrower in developing a more effective and accessible judiciary that would foster public trust and confidence through the implementation of the SC’s Action Program for Judicial Reform (APJR).”

JRSP is the name of the World Bank’s financial support to APJR.

APJR was the brainchild of then Chief Justice Hilario G. Davide Jr., who envisioned the much-needed judicial reforms to be bankrolled by combined resources from the national budget, the judiciary’s own funds and financing from development partners.

The four project components involved improving case adjudication and access to justice (i.e., mobile courts); enhancing institutional integrity (i.e., code of ethics and related training of judges and judicial personnel); strengthening the institutional capacity of the judiciary (i.e., e-Library); and support for the reform of the judicial system and for the Supreme Court’s Program Management Office (PMO).

The sweeping judicial reform was operationalized in six key areas: judicial system procedures, institutional development, human resources development, integrity infrastructure development, access to justice by the poor, and reform support systems.

The World Bank participated in all six key areas of reform, while six other development partners have varying degrees of exposure to the APJR.

The project’s life was set to expire on December 31, 2009, during the incumbency of Chief Justice Reynato Puno, but the bank extended the closing date of the loan twice—first for 18 months (until June 30, 2011), and then by 12 months (until June 30, 2012).

Due to questions over the fiscal discipline of the tribunal in adhering to loan stipulations, the bank cancelled the final tranche of the loan proceeds amounting to $0.5 million. The court thus far has spent $16.3 million (76 percent of the revised loan amount of US$21.4 million, after deducting the US$0.5 million).

Apparently unsatisfied with how things worked out in the implementation of judicial reform, the World Bank issued a mixed review of the status and progress of APJR.

“Progress towards achievement of the development objective discloses a mixed picture, with several achievements, but continuing procurement delays, uneven pace and quality of implementation, limited information on project results and recent fiduciary issues. As a result, the sustainability of the project’s fragile and limited gains remains at considerable risk unless clear actions are taken to address implementation issues and constraints,” said the bank.

The bank noted “significant wins” in the first component of the APJR (improved case adjudication), citing the success of the mobile courts a.k.a. “Enhanced Justice on Wheels” or EJOW, support for 800 Small Claims Courts across the country through essential Information Communications Technology (ICT) equipment, and Case Management Systems for the electronic raffling of cases, and assessment and cashiering for court fees.

For the second component (enhancing institutional integrity), the tribunal has “partially achieved its intermediate results but these have not yet translated into outcomes.”

The bank noted that this component was intended to improve public trust and confidence in the justice system and to strengthen institutional integrity and impartiality in judicial processes and decisions.

“Available data indicates that this remains an unfinished journey,” said the bank.

On the third component (strengthening the institutional capacity of the judiciary), the bank noted that the e-Library was a “significant early win.” It was designed to strengthen institutional capacity by implementing a “decentralized administration model,” among other programs.

Available online, the e-Library provides signed court decisions and laws since 1901, important Minute Resolutions, court rules and regulations, executive or presidential issuances, references such as e-books, and online catalogs and indexes. Compact disc copies of recent Supreme Court decisions are also distributed quarterly to the judiciary.

The bank, however, noted that the use of the e-Library was “steadily growing, but little has been done to disseminate the impressive usage data widely and effectively.”

The establishment of pilot model halls of justice (HOJ) was part of this component. However, the Supreme Court reduced these to only two from the original four which the bank said “is the single activity representing the greatest challenge, and the most significant failure, under JRSP.”

The pilot HOJ for Cagayan de Oro and Manila have been dropped from the project due to extensive delays. The Angeles City HOJ will be completed in June this year, while the Lapu-Lapu courts have never functioned as a model pilot HOJ, and “remain the worst-performing lower courts in the Philippines” in terms of backlog reduction and case disposal, said the bank.

Regarding the fourth component (support for the Program Management Office), the court “partially achieved its objective of developing and strengthening support for the reform process.” This component ensures that judges and other stakeholders design and implement key reform activities.

The Supreme Court has actively arranged stakeholder consultations, but was remiss in strengthening the PMO.

“The capacity of the PMO has steadily diminished even as the pace and quality of procurement and implementation, and attention to fiduciary issues, has declined, as the Fiduciary Review discloses,” the bank said.

The PMO’s original function was to actively coordinate big-ticket projects under the APJR. However, its technical staff was reduced from 30 to 10, an action that baffled the World Bank.

The bank’s suggestion to augment the personnel of PMO fell on deaf ears.

“Since mid-2010 (when Corona assumed the post of chief justice), an increasingly top-down project decision-making and implementation process (especially on what to procure and through what method) has resulted in the exclusion of key stakeholders within the Supreme Court, and diminished existing internal ‘check-and-balance’ mechanisms,” the bank said.

The World Bank initiated the review after Corona was  appointed by then President Gloria Macapagal-Arroyo to the helm of the tribunal despite an election ban.

“The review was triggered by several withdrawal applications presented to the World Bank by the PMO which seemed to signal a sudden and significant increase in the disbursement in the latter half of calendar 2011,” the bank said.

The bank was concerned that the Supreme Court had not been forthright in publicly disclosing the counterpart funds from the national government for the APJR as evidenced by the “incomplete information from the PMO on the extent of GOP contributions for the JRSP actually received and spent by the PMO.”

“(T)he sudden increase in disbursements gave rise to concerns about the completeness and accuracy of the information on JRSP physical and financial implementation,” said the bank, noting the undue haste in procurement, especially “non-priority” IT equipment purchases for Manila-based higher courts and court offices.

The bank noted that numerous expenditures were made “not in the agreed procurement plan.” (Lenders such as World Bank stipulate conditions in the utilization of loan proceeds.)

In the flurry of these unauthorized purchases, the bank instituted a safety net governing withdrawals from the loan proceeds. The bank wrote a letter to the Supreme Court on Sept. 29, 2011 informing it that “henceforth all withdrawal applications would be reviewed by the task team before being processed.”

The bank cited a total of 133 transactions/contracts which totaled P233.8 million. These were covered by withdrawal applications dubbed “W/As” submitted by PMO from January 1, 2010 to October 31, 2011.

In these transactions there were “instances of inaccurate/incomplete information,” “uncertainty about the amounts actually committed and expended” and “lack of clarity about whether the Court could be subject to the risk of contingent liabilities for activities begun but not completed/paid in full.”

The World Bank task team, after a review, declared the expenditures totaling $199,000 as “ineligible.” These expenditures, it said, represented a “high proportion, which reinforces a key conclusion of this review: that there has been a breakdown in the internal control environment pertaining to the project.”

The bank requested the borrower to arrange refund, by January 31, 2012, any unrefunded amounts.

The PMO has initiated the refund of many of the ineligible expenditures, but as of November 2011, the Supreme Court had yet to remit $161,422.

Included in the ineligible purchases were the printing supply of the Court Reporter’s Case Index, purchase of laptop computers, speaker’s fees for seminars, registration fee of justices attending international conferences, and foreign travels of justices and their staff (including airfare, hotel accommodations and meal allowances).

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TAGS: Foreign affairs, Judiciary, Renato Corona, Supreme Court, World Bank
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