Commission on Audit (COA) Commissioner Douglas Michael Mallillin on Thursday, September 3, agreed with senators that the rules governing the use and liquidation of confidential funds by government agencies should be revisited.
Mallillin made the statement during a Senate budget hearing after Senate Deputy Majority Leaders JV Ejercito and Joel Villanueva sought the COA’s position on the implementation of the Joint Memorandum Circular (JMC) covering confidential and intelligence funds (CIFs).
Villanueva raised concerns over possible gaps in COA Joint Memorandum Circular No. 2015-01, particularly provisions that allow the use of aliases to protect informants who receive rewards from agencies with confidential funds.
“I will not put you on the spot, Commissioner Malilin. When I was listening to the explanation and the provisions behind the joint memorandum, without going through or talking about any particular case, I find it, I think there are some loopholes in that particular joint memorandum circular. And you yourself were saying, and I wanted to ask you, because I strongly believe that it should be revisited. Do you think that it should be revisited?”
Mallillin agreed with the senator’s assessment.
“Yes, po. We agree, po.”
The issue has been repeatedly discussed during the impeachment proceedings involving Vice President Sara Duterte, particularly allegations concerning the supposed misuse of confidential funds during her leadership of the Office of the Vice President (OVP) and her previous tenure as Department of Education (DepEd) secretary.
COA explains role of SDOs
Mallillin explained that the existing rules require a Special Disbursing Officer (SDO) to personally release confidential funds to the recipient or end-user.
“…Because, at the end, the SDO will be the one to release the certification saying that this money went to this specific person or recipient. There’s no limit to how may SDOs an agency can appoint,” Mallillin explained.
He said agencies may designate multiple SDOs depending on their operational requirements and geographic coverage.
“With regards to the issue of location—such as the need to cover areas ranging from Aparri to Jolo—the determination of who is assigned as the Special Disbursing Officer (SDO) rests with the head of the agency or the agency itself. The key requirements for an SDO are that they must be an accountable officer and bonded; there is no rule restricting the role to just one person,” Mallillin said.
The COA official said having several SDOs can help maintain accountability when agencies handle different programs and large amounts of money.
“The practice is to ensure accountability among everyone involved, especially when substantial amounts of money are involved. Different SDOs are designated because the programs themselves vary,” he pointed out.
Mallillin added that agencies handling confidential funds could assign separate SDOs because the officer responsible for disbursing the money must personally know the recipient and directly handle the transaction.
“The SDO is actually required to maintain a second document or record—beyond just the acknowledgement receipt—such as a journal that must be kept securely in a vault, as stipulated in the Joint Memorandum Circular,” he further explained.
He noted that while military agencies follow a different documentation system, accountability requirements remain in place.
“While the military follows a different documentation process, there is a specific required record that must be maintained. Ultimately, there can be multiple SDOs; there is no limit, provided there is proper management, bonding, and accountability,” the COA commissioner stressed.
OVP confidential fund raised in impeachment proceedings
The Senate discussion also revisited testimony from Gina Acosta, an SDO at the OVP and the first hostile witness in the impeachment trial.
Acosta testified that she disbursed the OVP’s ₱125-million confidential fund and turned it over to Col. Raymund Lachica, the office’s security officer, following Duterte’s instructions.
She said she was unable to personally distribute reward payments to informants because Lachica was responsible for the OVP’s security and intelligence operations.
According to OVP Assistant Secretary and Assistant Chief of Staff Lemuel Ortonio, who testified as the second hostile witness, Lachica was not an OVP employee.
Acosta also told the impeachment court that expenses charged against the confidential funds were supported by acknowledgement receipts (ARs) rather than official receipts (ORs).
When Villanueva asked whether an AR alone would be enough to establish that a reward had been properly granted, Mallillin said it would not.
“When we talk about rewards, it is a unique matter. A reward implies success, and the auditing process for rewards is much stricter,” the COA official pointed out.
Mallillin said rewards must meet additional requirements, including approval from the agency head or, in the case of a government-owned or controlled corporation, its board chairman.
“The second condition is that it must be approved by the head of the agency—or, in the case of a GOCC, the chairman of its board. The second requirement is that it must be supported by documents evidencing the success of the information-gathering and surveillance activities,” he added.
He clarified that a successful result does not necessarily mean that an arrest or conviction has already taken place. What matters is that the information or surveillance activity produced a positive outcome that justifies the reward.
“This is not limited to making an arrest; that is precisely why the reward is granted. A conviction is not required before the reward is given; what matters is that a positive outcome was achieved, which is the basis for awarding it. If there is no success yet—for instance, if the aim is simply to organize the program or the confidential activity—then it is not considered a reward, but rather a payment for information,” Mallillin explained.
COA says rewards need proof of success
Mallillin cited the Philippine Drug Enforcement Agency (PDEA) as an example of how supporting evidence can establish the success of an intelligence operation.
He said documentation may include police affidavits of arrest, detention records, photographs from operations, and other evidence showing that an enforcement action resulted from information obtained through PDEA’s intelligence activities.
As a result, Mallillin said an acknowledgement receipt by itself would not satisfy the auditing requirements for a confidential fund reward.
“So, if we only provide an acknowledgment receipt (AR) for the reward, it will not comply with the requirements (under the joint memorandum). Consequently, it would be immediately disallowed because the success was not substantiated,” the COA official reiterated.