CoA urges takeover of Malampaya funds

The Commission on Audit (CoA) has recommended that Congress be allowed to appropriate the government’s share from the Malampaya natural gas project so the funds could be included in the national budget or be used to pay the country’s debts.

The CoA made the proposal after finding that P77.2 billion of the Malampaya funds had been lying idle for eight years, while P19.4 billion went mostly to projects unrelated to energy development.

While this was not illegal, the CoA said the projects could have been funded with the budgets of the departments implementing them.

The Malampaya natural gas project, which began in 2002, involves the extraction of natural gas from the waters of Palawan.

The government receives net proceeds from service contractors Shell Philippines Exploration BV and Chevron-Texaco which operate the project. The government has a 10–percent stake in the project through the Philippine National Oil Company-Exploration Corp.

In its 2010 report on the Department of Energy (DoE), the CoA said that from 2002 to 2010, P23.601 billion of the Malampaya funds were released to various government agencies and to the province of Palawan.

The amount that went to the national government agencies totalled P19.643 billion, and only 1.27 percent of this went to the DoE for the electrification of 211 villages.

The remaining 98.73 percent, or P19.39 billion, was used for various projects other than exploration, development and exploitation of energy resources.

These projects included the rehabilitation of agricultural industries and agrarian reform communities affected by Tropical Storm “Ondoy” and Typhoon “Pepeng,” the relocation of families affected by typhoons, the rehabilitation of roads and bridges, and the modernization program of the Armed Forces of the Philippines. The funds went to the departments and agencies concerned.

Usage allowed

The CoA said the use of the Malampaya funds for these projects was allowed in the Energy Development Board’s (EDB) charter, but since the projects fell under the mandate of the various departments, their budgets should have been used for the activities.

Under the EDB’s charter, all receipts from service contracts and agreements form part of a Special Action Government Fund and are deposited with the Bureau of Treasury. These are subject to release by automatic appropriation as approved by the President, or used to finance energy resource development and exploitation programs, and for other purposes directed by the President.

The CoA said the special account maintained by the DoE for Malampaya had a balance of P77.187 billion as of Dec. 31, 2010. It noted that this had been idle for eight years.

It thus recommended that Congress be allowed to appropriate the funds to help ease the government’s financial woes. It would also allow agencies to get more funds to fulfill their mandates.

“It would be favorable to the government if subject funds were transferred to the unappropriated surplus and made available for appropriation by the Congress of the Philippines. This will not only augment depleting funds of the National Government and greatly ease current financial pressures but will also facilitate the fair allocation of resources to agencies in accordance with their identified plans/programs/activities,” the CoA said.

Fund utilization

“Considering the huge increasing balances of the fund reaching P77.187 billion at yearend which remained continuously idle for a long period… it may also be considered as source for payments of public debt to reduce interest expenses and other foreign borrowing charges,” it added.

It also recommended that the DoE coordinate with the finance department and Congress to amend the provisions of the EDB’s charter so that the income collected from service contractors could be part of the unappropriated surplus of the general fund of the government.

The DoE, for its part, told the CoA that it agreed that the Malampaya funds were mostly used for non-energy related projects. But it said that it was not in a position to question the

wisdom of the President in approving the releases, especially since the releases were allowed under the law.

As for the rest of the funds lying idle, the DoE agreed that it had not been harnessed as much as it should have been for energy projects. The DoE legal chief said this should be considered in the department’s future actions, subject to the President’s approval.