Scam prevention: A crash course on internal control

Today, the word “scam” is the country’s most overused jargon in the dictionary.  With an equally popular but blood-pressure-raising phrase “pork barrel” preceding, the nation is boiling.   However, amid the hoopla brought about by the “pork barrel” scam as chronicled by Benhur Luy, the whistleblower, and played to the hilt by Janet Lim Napoles through her strong assertion of non-involvement, climaxed by her mysterious disappearance, and capped by her mind-boggling surrender to no less than President Noynoy Aquino, the nation, in general, hasn’t even dared delving into the significance of internal control.  So far, they’ve talked about punishment (after the act is done, which, of course, should be dealt with).  No one has, so far, raised the importance of preventing perpetrators from committing frauds by establishing the most appropriate internal control system. 

In business, to safeguard company’s assets, internal control system is established and made sure to be adequate.  To ensure success, the internal control system is structured to have both basic and supervisory controls.  With this in mind, the company’s organizational structure is so designed that each person does not handle incompatible functions.  It is established in a way that the internal control’s cardinal rule of segregation of duties is well observed and checks and balances are assured.  On top of these, most companies made it a policy that their personnel are rotated periodically to ensure that the work of a person shall be reviewed by another and accountabilities are established upon turnover.  To some extent, some companies even make it a policy to have unannounced leaves or forced leaves on custodians of funds or those with influences over some company funds just to make sure that should anomalies exist, they could no longer tamper evidences.

The same should have been true (or even more) in public service.  This is so, because what these public servants deal with are publicly-owned funds or our money.  But with a congress and, worst, local government units ran like family-owned corporations by our government leaders (who have made sure their family members and favored friends or employees are in key positions, whether by election or appointment), the internal control aspect of governance is set aside. 

Truth to tell, in the examination of the Commission on Audit (COA) of the 2008 financial statements of the National Agribusiness Corporation (NABCOR), PDAF (Priority Development Assistance Fund) releases to bogus NGOs/POs were already noted.  Reported on December 11, 2009, the COA stated that P814,334,400 of PDAF releases were made.  Of these releases, P330,207,400 went into six (6) NGOs/POs (Kasangga sa Magandang Bukas Foundation, Inc., Kabuhayan at Kalusugang Alay Sa Masa Foundation, Inc., Uswag Guimaras Foundation, Inc., Aaron Foundation Phils., Inc. Gabaymasa Development Foundation, Inc. and Kapuso’t Kapamilya Foundation, Inc.) without supporting letters of recommendations from legislators. Notably, the COA further stated, among others, that, likewise, there were no project proposals submitted for the livelihood projects implemented by these NGOs/POs.  Ironically, these six (6) NGOs/POs did not submit SEC Certificates of Registration, therefore, their existence was highly questionable.  Worst, the same report disclosed that checks issued to the aforementioned NGOs/POs were not crossed for deposit.  Therefore, the checks issued to these NGOs/POs were, probably, directly encashed.  This is an apparent scenario that confirms existence of collusion among NABCOR officers (probably, at the instance of some legislators) and PDAF beneficiaries. 

To recall, this report was released during President Gloria M. Arroyo’s (PGMA) term yet.  Yet, we didn’t hear any grumbling from the executive department of the PDAF’s misuse.  The answer though is so simple.  PGMA had her own dirty linens as well.  If she dared questioned them, they’ll be all washing their dirty linens before the general public.  Thus, it is so obvious, that because of PDAF, there were no checks and balances in the three (3) equal branches of our government. The same is true in the practices of our local government units in giving allowances to our RTC and MTCC judges. In fact, it can even be worst in Cebu City, where the City Treasurer would wish to become the City Accountant too.  Clearly, in all these scenarios, internal control is totally ignored.

Indeed, as politicians (especially from dynasties) and their cohorts (friends and relatives in key government positions) deceitfully siphon money from the government’s treasury through illegitimate deals, the economy is starved with it.  Therefore, let us put the appropriate internal control system in place. In doing so, we won’t be giving them the opportunity to be in a position to steal conveniently and conceal perpetually.

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