To be fair

Late last year, the Securities and Exchange Commission (SEC) announced that it was investigating alleged discrepancies in the books of logistics provider 2GO which was discovered by the group of Davao-based businessman Dennis Uy and the SM Group following the firm’s acquisition.

2GO said there was a substantial downward restatement of its profit for 2015 and 2016 of around P1 billion for each fiscal year. This was revealed after the new owners hired SGV & Co. to conduct a special audit on the periods previously handled by KPMG.

SEC chair Tess Herbosa has said that their attention had been called on possible deficiencies under Securities Regulation Code Rule 68, which provides for the requirements as to the form and content of financial statements to be filed by corporations.

The local partner of KPMG, RG Manabat & Co., has said that it was seeking more information about the alleged infirmities, and that it was confident it has performed the audits of 2GO in compliance with the Philippine Standards on Auditing.

SGV was 2GO’s external auditor from 1977 until 2013, and was replaced by KPMG in 2014.

It has been observed that the restated items in question, in particular the treatment of non-cash receivables on the books, may have been treated liberally by KPMG and conservatively by SGV because of the different roles they played in examining the firm’s books.

The SEC has reportedly created a technical working group to investigate the accounting row. The team will be headed by SEC commissioner Antonietta Ibe. Its members include representatives from the new 2GO management, SGV and KPMG.

Some quarters are asking why the old management was not invited to shed light on the issues.

Business and government

The 1987 Constitution treats officials of the executive, legislative, and judicial branches differently in so far as engaging in business.

In the case of the President, Vice-President, and Cabinet members, it prohibits these officials from directly or indirectly participating in any business, or from being financially interested in any contract with, or in any franchise, or special privilege granted by the government.

For members of Congress, what the Constitution requires is for them to make a full disclosure of their financial and business interests. They are also not allowed to be directly or indirectly interested financially in any contract with, or any franchise or special privilege granted by the government, during his term.

While there is no express prohibition regarding members of the judiciary in the Constitution, the Code of Judicial Conduct urges judges to refrain from financial and business dealings that tend to reflect adversely on the court’s impartiality, or interfere with the proper performance of judicial activities.

Recently, these prohibitions were put to the test when Davao del Norte Rep. Antonio Floirendo was charged with violating the anti-graft law which prohibits government officials from directly or indirectly having financial or pecuniary interest in any business, contract or transaction in which he is prohibited by the Constitution, or by any law from having any interest.

It was alleged that Floirendo continued to be a board member of Tagum Agricultural Development Co. Inc. (Tadeco), despite his election as congressman.

Floirendo, however, contends that the law prohibits only those holding “substantial” stocks in private corporation from having contracts with the government.

The Ombudsman has affirmed the graft charges against Floirendo and had said that Floirendo’s failure to divest his interest in Tadeco violates the prohibition, especially with the company having a joint venture agreement with the Bureau of Corrections that allowed the former to lease lands in the Davao Penal Colony for a banana plantation.

Let us just hope that the Ombudsman, which has the power to conduct motu propio or on its own investigations of public officials, looks at other possible violations objectively and without any political biases. There are members of Congress who own shares in mining, real estate, construction, shipping, airline, agriculture, and many of these businesses would require getting franchises or licenses from government.

Illegal transfer

Is rewarding employees by distributing to them savings generated by a government agency from operations against the law? The Commission on Audit reminds everybody in the public sector that it is.

Just recently, the COA ordered former National Economic and Development Authority (NEDA) director-general Antonio Balisacan to return to the government around P73.64 million in employee incentives that were unlawfully granted from 2010 to 2012. The COA directed its Prosecution and Litigation Office to forward the case to the Office of Ombudsman for investigation and the filing of appropriate charges.

COA said NEDA’s grant of the cost economy measure award (CEMA), which is a reward for personnel who propose time-saving measures, was not reviewed by the Department of Budget and approved by the President, and therefore, the grant was not clothed with authority, and its disallowance is proper.

The transfer was approved by Balisacan, who is now the head of the Philippine Competition Commission (PCC).

It noted that NEDA did not even set the criteria for entitlement to the incentive and specify or quantify how many man-hours and costs were saved with sufficient evidence, which was required even if NEDA met or exceeded its target accomplishment despite only 64 percent of the manpower requirement.

COA, likewise, pointed out that the grant of the CEMA was also not supported with a specific appropriation from the annual financial budget and instead was sourced from savings, such as those from NEDA’s maintenance and other operating expenses (MOOE).

Realignment of MOOE to its personal services expenses in 2012 violated the General Appropriations Act, it pointed out.

Although COA did not fault the employees who received the reward, it put the blame on the person who authorized the appropriation of public funds for a purpose other than that authorized by law.

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