Excerpts from the Book Manuscript: 

HOW TO FIGHT CORRUPTION

IN PHILIPPINE SETTING

Why the Government Cannot Lick Corruption:

Half of the Anti-Corruption War is Not Waged at All

* The expertise of internal-control-specialist CPA’s is not tapped, laymen on internal control manage the anti-corruption program.

* One of two types of corruption is overlooked: focus is on graft in revenue collections, none on fraud in fund disbursements.

* One of two modes of fighting corruption is not employed: thrust is on punitive system, no real effort on preventive aspect.

* One of two anti-corruption weapons is intentionally held back: the Commission on Audit does 100% post audit, it cast aside pre-audit.

By

MARCELO  L. TECSON

(Part One of a Series . . .)

Prologue

AMIDST ALL THE CORRUPTION,

WHERE WAS THE AUDITING PROFESSION?

MISSING THE OBVIOUS

IN THE ANTI-CORRUPTION CAMPAIGN—

LACK OF ROLE OF FRAUD-PREVENTION SPECIALISTS—

THE ROOT OF FAILURE TO LICK STAGGERING CORRUPTION

To Begin With,

After Many Years of Trying but Failing to Vanquish Corruption,

the Government Has to Know Why it Failed to Lick it

The obvious error in the protracted anti-corruption war constitutes the mother of all reasons why the Philippine Government has not won against corruption, that is, half of its anti-corruption program is managed by square pegs in round holes: mainly lawyers and other professionals who are laymen on the basic weapon against corruption—sound internal control, or fraud-prevention systems--the area of expertise of a specific breed of professionals, Certified Public Accountants (CPA’s), who specialized as auditors and made a living out of practising the art of fraud prevention.

For example, topnotch lawyers might have seen many times the TV newscasts years ago about how Governor Chavit Singson obtained P200-million cash advance for the purchase of tobacco flue-curing equipment, then had a part of it misappropriated. The news might have registered nothing to them except for the anomalous diversion of a significant part of the cash advance to an illegal purpose.

Internal control specialists, however, would see much more. They would know that granting of cash advances should be generally limited to small expenditures like transportation and travel expenses, not for such multi-million-peso purchase of equipment, which should have been subjected to public bidding by the provincial government itself, not handled solely by the provincial Governor. The cash advance violated the internal control rule that no one person should be in complete control of transactions. Such violation eliminates checks and balances and facilitates fraud because the one in control of transactions does not need the connivance of other persons in the successful execution of corruption.

With the very lax rule on granting of cash advances, especially with the absence of pre-audit on subsequent cash advances even without full liquidation of old ones, the result is the present staggering P17.1 billion unliquidated cash advances in the government! (Jude C. Galford III, “P17.1 B in gov’t cash advances unliquidated—COA,” Manila Bulletin, September 27, 2006). 

Indeed, How Could They Succeed

If they Have Not Even Heard of Select Professionals—CPA’s

Who Made a Career Out of Preventing Fraud and Fighting Corruption?

It is astounding how World Bank (WB), Asian Development Bank (ADB), and the Philippine Government have, for years, missed the obvious in the pursuit of the foreign-assisted and generally lawyer-managed national anti-corruption program:  having the right professionals—expert CPA’s who specialized as auditors--at the forefront of the war against corruption. Having the wrong professionals conceptualize and implement the nation’s anti-corruption roadmap is like having an engineer argue a case on a question of law before the Supreme Court. This monumental omission is one of the key factors in the government’s failure to minimize corruption.

In college, students aspiring to become CPA’s studied auditing that included internal control and fraud prevention. Later, over the years, as CPA’s who practise the auditing profession, they gained audit expertise and attained professional maturity, so that whatever fraud-prevention knowledge laymen and lawyers learned by accident--and accidents do not always happen--in the course of their overseeing the country’s anti-corruption campaign, CPA’s learned by design in college and in actual training and practice, to the extent that it has become instinctive to them. Therefore, why didn’t WB and ADB require the Philippine Government, as precondition to their technical and financial assistance, to utilize capable CPA’s in the anti-corruption war? Or, on its own, why didn’t the Office of the President, or the government, employ fraud-prevention expert CPA’s in managing the fight against corruption? Haven’t concerned government officials heard of these professionals?

If right men and resources are needed in the successful pursuit of any major undertaking, in the government’s anti-corruption program it does not employ some of the crucially needed right men.

(To be continued . . .)

ABOUT THE AUTHOR

Marcelo L. Tecson is a high-school valedictorian and Certified Public Accountant (CPA), with some MBA units from De La Salle University. He took up finance and economics subjects in his undergraduate business course in the University of the East, as well as in the executive-development and financial-management programs he attended in two universities in the United States in 1980 and 1985. He also attended orientation on management-information systems in some US government entities in the energy industry.

As a professional, the author worked in an auditing firm, then in the Phinma group of companies. Thereafter, he served at different times as head of accounting, internal audit and systems, corporate planning, project planning and control, and Controller's group in parent and affiliated companies of the Philippine National Oil Company (PNOC) group of companies, listed and ranked then by Fortune magazine as among the first 200 out of the top 500 corporations outside the United States. In between, as seconded official and de facto chief financial officer, he acted as Chief Accountant and later as Finance and Management Service Chief of the forerunner agency of the now Department of Energy, where his more than six-year stint gave him insights on how to fight corruption in government under Philippine setting.

Shortly before he moved to his next assignment and eventually to Petron Corporation, when the combined team of the Presidential Commission on Good Government (PCGG) and Commission on Audit (COA) conducted a special audit of the books of the government agency and its bureaus where he served, including the then billion-peso Oil Price Stabilization Fund (OPSF) administered by the government agency, the audit team had no derogatory findings to report.

Handpicked by the PNOC conglomerate Chief Executive Officer as Controller of the flagship oil company Petron Corporation—a PNOC subsidiary which was then the biggest Philippine corporation in terms of sales—Tecson changed career more than 10 years before his normal retirement date to become one of countless entrepreneurs who operated on their own and assumed risks. In this capacity, he became an insider in the Asian meltdown and had the opportunity of a lifetime to discover the economic folly of IMF-prescribed antidote to the crisis—high interest rates—a disastrous scheme of bad-loan provoking subsidy by discriminated paying borrowers to non-paying but equally benefiting non-borrowers. For the record, he wrote a book entitled “Puzzlers: Economic Sting,” published in 2005.