Republic of the Philippines
HOUSE OF REPRESENTATIVES,
Quezon City

EIGHTEENTH CONGRESS
First Regular Session

2385

HOUSE BILL NO.

Introduced by HON. LORD ALLAN JAY Q. VELASCO

EXPLANATORY NOTE

This bill seeks to implement the policy of the Duterte administration to put a stop to corrupt
practices and also to strengthen the Commission on Audit (COA) by specifically giving it the
power to audit government financial institutions (GFls). At the same time, this measure will
propose a penalty for any omission on the part of the Commission and its officers to render
a decision in a case submitted to it for resolution within the prescribed period of sixty (60)
days.

Under Section 2(1) of Article IX-D of the 1987 Philippine Constitution, or the article which
created the Commission on Audit, the Commission shall have the power, authority, and duty
to examine, audit, and settle all accounts pertaining to the revenue and receipts of, and
expenditures or uses of funds and property, owned or held in trust by, or pertaining to the
Government, or any of its subdivisions, agencies, or instrumentalities, including
government-owned or controlled corporations with original charters.

According to the “Global Financial Development Report 2013,” the World Bank (WB) warned
governments about mishandling state-run financial institutions, such as banks and pension
funds. In the Philippines, the leading state-run banking institutions are the Land Bank of the
Philippines (LBP) and the Development Bank of the Philippines (DBP). Meanwhile, the
country has created state-run pension funds like the Social Security System (SSS) and the
Government Service Insurance System (GSIS).

Government financial institutions (GFls), such as Land Bank of the Philippines and the Social
Security System (SSS), are covered under Section 2(1) of Article IX-D of the 1987 Philippine
Constitution since these institutions are government-controlled and they have their own
original charters. The Land Bank was established on August 8, 1963 through Republic Act
No. 3844 or the Agricultural Land Reform Code, while the Duterte administration has issued
a new charter for SSS through Republic Act No. 11199 which was signed on February 7, 2019
and it repealed the old “Social Security Act of 1997.”

Just a while back, the news industry had a big coverage on the huge bonuses and perks being
received by SSS officials when Mr. Emilio de Quiros, Jr., a former SSS president and CEO,
informed the public that seven (7) members of the SSS board received at least one (1) million
pesos each as bonuses for the alleged “good performance” of the fund. This fanned public
backlash, especially since this came after the Aquino administration vetoed a measure which
proposed a P2,000 across-the-board increase on the monthly pension of SSS members.

Back in 2015, too, former Land Bank and SSS executives were charged for multiple graft
complaints before the Office of the Ombudsman in connection with the anomalous P9-billion
Manila Electric Co. (Meralco) block sale. According to the Ombudsman’s investigators, SSS
executives approved a P5.669-billion stock purchase agreement of its Meralco shares of stock
to Global 5000 Investment Inc. in 2009. The Land Bank officials also approved this block sale


within ten (10) days without negotiations, giving ‘unwarranted benefits, advantage or
preference’ to Global 5000. The investigators further espoused the notion that this block was
not in accordance with sound business practice.

Hence, in order to ensure that all offices under the government are fully-audited and corrupt-
free, Presidential Decree No. 1445, as amended by Executive Order No. 292, or the
Government Auditing Code, should be amended further to include government financial
institutions under COA’s jurisdiction.

With this amendment, GFis will be placed under the scope of COA’s power to scrutinize
books of accounts of government offices. Said amendment will give the government's
auditing arm the capability to abet and reverse the effects of corruption in government
financial institutions and protect the monies of government coffers from wanton abuse and
deliberate mishandling,

In addition to this and to curb other corrupt practices, under this measure, the amendment
of the Government Auditing Code will provide for a new provision which will penalize, after
compliance with due process, liable officers of the Commission if they fail to render a decision
ina case submitted to it for resolution within the prescribed period of sixty (60) days.

In view of the foregoing reasons, the passage of this bill is earnestly sought.

LORD ALI JAY Q. VELASCO


16
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Republic of the Philippines
HOUSE OF REPRESENTATIVES,
Quezon City

EIGHTEENTH CONGRESS
First Regular Session

HOUSE BILL No._2395

Introduced by HON. LORD ALLAN JAY Q. VELASCO.

AN ACT AMENDING PRESIDENTIAL DECREE NO. 1445, AS AMENDED BY
EXECUTIVE ORDER NO. 292, OTHERWISE KNOWN AS THE GOVERNMENT
AUDITING CODE OF THE PHILIPPINES, TO GRANT THE COMMISSION ON AUDIT
WITH POWER TO AUDIT GOVERNMENT FINANCIAL INSTITUTIONS AND FOR
OTHER PURPOSES

Be it enacted by the Senate and the House of Representatives of the Philippines in Congress assembled:
SECTION 1.Section3 (8) of P.D. No. 1445, as amended, is hereby amended to read as follows:
“Section 3. Definitions of terms.

XXX

(8) “Government agency” or “agency of the government,” or
“agency” refers to any department, bureau or office of the
national government, or any of its branches and
instrumentalities, or any political subdivision, as well as any
government owned or controlled corporation, including its
subsidiaries, GOVERNMENT FINANCIAL INSTITUTIONS
or other self-governing board or commission of the
government.”

SECTION 2. Section 12 (1) of P.D. No. 1445, as amended, is hereby amended to read as
follows:

“Section 12. The Accountancy Office. The Accountancy Office
shall have the following functions:

(1) Prepare, for the Commission, the annual financial report of the
Government, its subdivisions, agencies, and instrumentalities,
including government-owned or controlled corporations,
GOVERNMENT FINANCIAL INSTITUTIONS, and such

other financial or statistical reports as may be required by the
Commission;

Xxx’

SECTION 3. Section 15 (1) to (3) of P.D. No. 1445, as amended, is hereby amended to read
as follows:

“Section 15. The Corporate Audit Office. The Corporate Audit
Office shall perform the following functions:


SECTION 4.
follows:

SECTION 5. Section 26 of P.D. No. 1445, as amended, is hereby amended to read as follows:

SECTION 6. Section 35 of P.D. No. 1445, as amended, is hereby amended to read as follows:

(1) Formulate and develop plans, programs, operating standards,
and administrative techniques for the implementation of
auditing rules and regulations in government-owned or
controlled corporations, INCLUDING GOVERNMENT
FINANCIAL INSTITUTIONS, and self-governing boards,
commissions, or agencies of the government, as well as for the
conduct of audit of financial operations of public utilities and
franchises;

(2) Formulate accounting rules and regulations for government-
owned or controlled corporations, INCLUDING
GOVERNMENT FINANCIAL INSTITUTIONS, and  self-
governing boards, commissions, or agencies of the
government;

(3) Advise and assist the Chairman on matters pertaining to the
audit of government-owned or controlled corporations,
INCLUDING GOVERNMENT FINANCIAL INSTITUTIONS,
and self-governing boards, commissions, or agencies of the
government.”

Section 24 (2) of P.D. No. 1445, as amended, is hereby amended to read as

“Section 24. Appropriations and funding.

XXX

(2) All government-owned or controlled corporations, including
their subsidiaries AND GOVERNMENT FINANCIAL
INSTITUTIONS, and self-governing boards, commissions or
agencies of the government shall appropriate in their
respective budgets and remit to the National Treasury an
amount at least equivalent to the appropriation for the salaries
and allowances of the representative and staff of the
Commission during the preceding fiscal year,”

“Section 26. General jurisdiction.
XXX

The said jurisdiction extends to all government-owned or
controlled corporations, including their subsidiaries AND
GOVERNMENT FINANCIAL INSTITUTIONS, and other self-
governing boards, commissions, or agencies of the Government,
and as herein prescribed, including non-governmental entities
subsidized by the government, those funded by donation through
the government, those required to pay levies or government
share, and those for which the government has put up a
counterpart fund or those partly funded by the government.”

“Section 35. Collection of indebtedness due the government.
The Commission shall, through proper channels, assist in the


SECTION 7.
follows:

collection and enforcement of all debts and claims, and the
restitution of all funds or the replacement or payment at a
reasonable price of property, found to be due the Government, or
any of its subdivisions, agencies or instrumentalities, or any
government-owned or controlled corporation, INCLUDING
GOVERNMENT FINANCIAL INSTITUTIONS, or self-governing
board, commission or agency of the government, in the settlement
and adjustment of its accounts. If any legal proceeding is
necessary to that end, the Commission shall refer the case to the
Solicitor General, the Government Corporate Counsel, or the legal
staff of the creditor government office or agency concerned to
institute such legal proceeding. The Commission shall extend full
support in the litigation. All such moneys due and payable shall
bear interest at the legal rate from the date of written demand by
the Commission.”

Section 36 (2) of P.D. No. 1445, as amended, is hereby amended to read as

“Section 36. Power to compromise claims.

XXX

(2) The respective governing bodies of government-owned or controlled
corporations, INCLUDING = GOVERNMENT FINANCIAL
INSTITUTIONS, and self-governing boards, commissions, or agencies of
the government shall have the exclusive power to compromise or release
any similar claim or liability when expressly authorized by their charters
and if in their judgment, the interest of their respective corporations or
agencies so requires. When the charters do not so provide, the power to
compromise shall be exercised by the Commission in accordance with the
preceding paragraph.”

SECTION 8. Section 49 of P.D. No. 1445, as amended, is hereby amended to read as follows:

“Section 49. Period for rendering decisions of the Commission.
‘The Commission shall decide any case brought before it within
sixty days from the date of its submission for resolution. If the
account or claim involved in the needs reference to other persons
or offices, or to a party interested, the period shall be counted
from the time the last comment necessary to a proper decision is
received by it.

FAILURE TO RENDER A DECISION IN A CASE WITHIN SIXTY
(60) DAYS FROM THE DATE OF ITS SUBMISSION FOR
RESOLUTION SHALL BE A PROPER GROUND FOR
ADMINISTRATIVE LIABILITY AGAINST THE  LIABLE
OFFICER(S) OF THE COMMISSION.

FOR THE FIRST OFFENSE, THE LIABLE OFFICER(S) SHALL,
AFTER COMPLIANCE WITH DUE PROCESS, BE PUNISHED
WITH SEVERE REPRIMAND.

FOR THE SECOND OFFENSE, THE LIABLE OFFICER(S)
SHALL, AFTER COMPLIANCE WITH DUE PROCESS, BE
SUSPENDED FOR SIXTY (60) DAYS WITHOUT PAY.


FOR THE THIRD OFFENSE, THE LIABLE OFFICER(S) SHALL,
AFTER COMPLIANCE WITH DUE PROCESS, BE
‘TERMINATED FROM SERVICE.”

SECTION 9. Section 76 of P.D. No. 1445, as amended, is hereby amended to read as follows:

“Section 76. Transfer of property between government agencies.
Any government property that is no longer serviceable or needed
by the agency to which it belongs may be transferred without cost,
or at an appraised value, to other agencies of the government
upon authority of the respective heads of agencies in the national
government, or of the governing bodies of government-owned or
controlled corporations, INCLUDING GOVERNMENT
FINANCIAL INSTITUTIONS, other self-governing boards or
commissions of the government, or of the local legislative bodies
for local government units concerned.”

SECTION 10. Section 104 of P.D. No. 1445, as amended, is hereby amended to read as

“Section 104. Records and reports required by primarily responsible officers.
The head of any agency or instrumentality of the national government or any
government-owned or controlled corporation, INCLUDING GOVERNMENT
FINANCIAL INSTITUTIONS, and any other self-governing board or
commission of the government shall exercise the diligence of a good father of
a family in supervising accountable officers under his control to prevent the
incurrence of loss of government funds or property, otherwise he shall be
jointly and solidarily liable with the person primarily accountable therefor. The
treasurer of the local government unit shall likewise exercise the same degree
of supervision over accountable officers under his supervision, otherwise he
shalll be jointly and solidarily liable with them for the loss of government funds
or property under their control.”

Approved,