Confidential Funds
Legality of confidential funds does not justify its huge allocation — lawmaker
Confidential funds, as the name implies, cover expenses linked to confidential
surveillance tasks within government agencies. Similarly, intelligence funds are for intelligence
expenses related to information-gathering activities of uniformed and military personnel and
intelligence practitioners.
Auditing Confidential and Intelligent Funds is largely dependent on the transparent and
accurate submissions of government agencies with these funds. However, a 2015 joint circular
requires these entities to present a detailed physical and financial plan when requesting such
funds. This plan should include estimated amounts for each project, activity, and program.
Opposition lawmakers have also likened CIFs to pork barrel in the past, which the
Supreme Court considered unconstitutional in 2013.
1. What is the difference between confidential and intelligence funds?
According to a set of guidelines from the Commission on Audit (COA),
confidential funds are lump sum (single payment) amounts provided for expenses related
to “surveillance activities in civilian government agencies” to support their mandate or
operations.
Intelligence funds, on the other hand, are disbursements (payment made from a fund)
for “intelligence information gathering activities of uniformed and military personnel and
intelligence practitioners” that have a direct impact on national security.
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Confidential funds may be lodged in civilian agencies, intelligence funds cannot be
lodged in civilian agencies. Intelligence funds only belong to military or uniformed
agencies
COA issued these guidelines in 2015 together with the Department of Budget and
Management, Department of the Interior and Local Government (DILG), Department of
National Defense, and Governance Commission for Government-Owned and Controlled
Corporations (GCG) through Joint Circular No. 2015-01.
2. Where and how can CIFs be used?
The 2015 COA guidelines list specific activities where CIFs can be used. Contrary
to Zubiri’s claim, these activities are limited to those concerning peace and order as well
as national security.
The document specifically states that funds may not be used to pay for salaries
and allowances of employees and officials unless authorized by law. It also prohibits the
allocation of CIFs for the construction or acquisition of buildings and housing structures,
and for representation, consultation fees, or entertainment expenses.
All CIF expenses must be supported by a physical and financial plan where the
proposed amount for each program, project and activity is indicated.
For national government agencies, CIF appropriations should be included among
the items to be released upon approval of the GAA. Utilization of the funds is subject to
the approval of the department secretary or agency head.
3. How are CIFs audited and monitored?
The joint circular requires all agencies to submit quarterly accomplishment reports on
the use of CIFs. All disbursements need to be supported by documentary evidence of
payment and certification of the accountable officer signed under oath.
“The utilization of such funds is generally confidential and classified by nature, which
requires not only strong internal controls in the release and utilization thereof, but also
strict accounting and auditing rules to prevent mishandling or improper application of
the funds,” the document states.
In an Oct. 3 statement, Albay Rep. Edcel Lagman called for cuts in the CIFs as proposed in the
2023 budget as he warned of the potential for corruption.
“Since the utilization of confidential and intelligence funds are shrouded in mystery and
the supposed audit by (COA) could not be disclosed to the Congress and the public,
these funds breed corruption, and the more enormous the funds are, the greater the
magnitude is for the possibility of graft,” he stated.
Likewise, Senate Minority Leader Aquilino “Koko” Pimentel urged Congress not to start
the practice of providing CIFs to agencies such as the Office of the Vice President,
DepEd and the Office of the Solicitor General which had not been previously allotted
such funds.
Confidential and intelligence funds are lump sum appropriations that are earmarked for
expenses involving surveillance and intelligence information gathering activities.
Confidential funds are used for confidential expenses in relation to the conduct of
surveillance activities by non-military government agencies in support of their mandate
or operations.
The existence of this fund was presumably given legal cover by the 2015 joint circular
signed by CoA with the Department of Budget and Management, the Department of the
Interior and Local Government, the Governance Commission for Government-Owned and
-Controlled Corporations, and the Department of National Defense.
There can be no debate that uniformed agencies and the military would require these
kinds of funds. It is, however, anomalous when agencies that are not supposed to be
involved in surveillance are given funds. The case of the Office of the Vice President,
which constitutionally has no distinct official function, will receive P500 million in
confidential funds, an amount that is second only to the Office of the President and is
even much higher than the confidential funds for the Department of Justice and for the
Defense department.
The Department of Education, which is headed by Vice President Sara Duterte, will
receive P150 million in confidential funds. In reaction to criticisms, Duterte defended the
amount by arguing that education is "intertwined with national security."
What is most worrisome is that these funds, by their very nature of being
confidential, would not be subjected to regular auditing mechanisms. While funds
can be appropriated for the purposes outlined in the joint circular, what becomes
problematic is when these funds are in the form of lump sum appropriations and
where normal post-audit processes are not conducted. While agencies are
required to submit proposals on how the funds will be spent, there is no
mechanism to audit how this is spent, thereby opening the possibility for abuse
or misuse.
Lawmakers and critics have questioned once again the proliferation of CIF budgets and
requests, pointing out that some government agencies that are not directly responsible for
national security, law enforcement, or surveillance are receiving millions and billions of pesos
worth of CIFs. The total amount of CIF across all agencies in the proposed 2024 budget is
P10.14 billion, with a P120 million increase compared to last year.
People might find this scenario familiar, like how President Sarah Duterte, the Secretary of the
Department of Education (DepEd), has requested P150 million for CIF, aside from the OVP
worth 500 million. These double expenditures under their offices do not look good at all,
especially when the DA and DepEd are not particularly responsible for national security, law
enforcement, and surveillance. Not to mention that the OP and OVP hold the top shares of the
total proposed CIF budget.
Confidential and intelligence funds are purposes related to national security, intelligence, and
other confidential matters. These funds are typically used by government agencies with
sensitive functions which requires secrecy.+
The use of confidential funds has been the subject of much debate in Philippine politics;
because of the confidentiality around its use, it inevitably lends itself to corruption.
However, one can imagine when government spending requires discretion – think intelligence
gathering or surveillance of organised crime groups. Outside law enforcement however, you
would be hard-pressed to justify the use of confidential and intelligence funds.
For Vice President Sara Duterte, the use of confidential funds seems to be second nature to
doing her job. In both her roles as Vice President and as Education Secretary, the former
presidential daughter has opted to spend confidential funds despite the civilian nature of both
offices.
In 2024, Duterte’s Office of the Vice President (OVP) has requested Php500 million in
confidential funds and a separate Php150 million for the Department of Education (DepEd). It
is difficult to think why the OVP would need confidential funds, and even more so the DepEd.
- According to the DepEd spokesman Michael Poa, “These confidential funds will be used for
programs, projects and activities of DepEd in line with national security and, of course, public
safety.”
To put that amount into perspective, DepEd’s proposed Php150 million confidential fund is
higher than the Php141 million budget allocated for the entire National Intelligence
Coordination Agency (NICA) – a government agency which actually has intelligence-gathering
functions (which is what the confidential funds is for)
This proposed confidential fund for the DepEd is also not far off from the confidential
funds allocated to the National Bureau of Investigation (NBI) which stands at Php174.5
million, and the Department of Justice (DOJ) which had an allotment of Php168 million – two
agencies which are responsible for law enforcement.
It beggars belief how the Education Department can justify having a greater need for an
intelligence budget than an actual intelligence agency, or close to that of law enforcement
institutions.
Furthermore, at a time when the Philippines faces a backlog of classrooms and a shortage of
teachers, there is no lack of areas where those confidential funds could be put to better use. As
the Alliance for Concerned Teachers (ACT) Party-list articulated, the Php150 million in
confidential funds for DepEd “can already procure 150,000 armchairs, or about three million
textbooks, or 4,286 laptops for teachers at P35,000 per unit“.
During Congressional hearings on the Budget, it was also revealed that the OVP – under Sara
Duterte – had spent Php125 million in confidential funds in 2022. This despite having no
allocation for confidential funds for the OVP in the 2022 Budget.
Unless Congress passed a supplemental budget for the OVP (which it didn’t), it would have
been impossible for the OVP to find an extra Php125 million to spend as confidential funds.
Where the funds came from and what it was used for remains unknown, while VP Duterte
continually refuses to divulge the nature of her spending in 2022.
Even more astonishing is the speed by which the OVP spent the Php125 million confidential
funds. Opposition lawmaker Rep. France Castro, of the ACT-Teachers party-list, bared that the
Vice President spent the confidential funds in only 19 days – from December 13 to 31, 2022.
As expected, Duterte used the secrecy around the use of confidential funds to evade
questioning from the House Committee on Appropriations. During the hearing, the Vice
President stated “the OVP has already planned and identified events, activities, and projects to
be covered by the CF”; however, she refused to specify what those projects are.
The Vice President also received help from her allies in Congress. When Castro further
confronted Duterte on how the Php125 million was spent, she found her microphone switched
off – stopping her from asking further questions.
ARGUMENTS:4
Source Law: Joint Circular No. 2015-01 , Article IX, Letter D, of the 1987 Constitution
1. Huge amount of Confidential Fund allocation to civilian agencies not directly
involved in the national security and maintaining peace and order in our country
should be _____________.
 Confidential and intelligence funds are lump sum appropriations that are earmarked for
expenses involving surveillance and intelligence information gathering activities.
Confidential funds are used for confidential expenses in relation to the conduct of
surveillance activities by non-military government agencies in support of their mandate
or operations. On the other hand, intelligence funds are used to finance informationgathering activities conducted by the uniformed and military personnel and intelligence
practitioners that have a direct impact on national security.
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The existence of this fund was presumably given legal cover by the 2015 joint circular
signed by CoA with the Department of Budget and Management, the Department of the
Interior and Local Government, the Governance Commission for Government-Owned
and -Controlled Corporations, and the Department of National Defense. The circular
enumerated the allowable expenses for the funds. It clearly stipulated that while national
government agencies can receive both confidential and intelligence funds, local
government units and government-owned and controlled corporations can only receive
confidential funds.
There can be no debate that uniformed agencies and the military would require these
kinds of funds. It is, however, anomalous when agencies that are not supposed to be
involved in surveillance are given funds. The case of the Office of the Vice President,
which constitutionally has no distinct official function, will receive P500 million in
confidential funds, an amount that is second only to the Office of the President and is
even much higher than the confidential funds for the Department of Justice and for the
Defense department.
The Department of Education, which is headed by Vice President Sara Duterte, will
receive P150 million in confidential funds. In reaction to criticisms, Duterte defended the
amount by arguing that education is "intertwined with national security."
In any democracy, government spending is rightfully complemented with transparency.
After all, public funds are being used and it is imperative to ensure these are spent
responsibly, efficiently, and in the best interests of the public.
Under the Philippines’ General Appropriations Act (GAA), the legislation that
determines how taxpayer funds are to be spent and allocated, there may be funds that
are appropriated without the need for transparency at all.
Confidential and intelligence funds are purposes related to national security, intelligence,
and other confidential matters. These funds are typically used by government agencies
with sensitive functions which requires secrecy.
If the supposed purpose of the confidential funds granted to the Department of
Education includes budget for the programs linked with sexual abuse, all forms of
violence, graft, corruption, child labor, illegal drugs use of learners and personnel, then
why is there a need to disclose the budget under the confidential funds? When in fact,
people would not raise objections if they are given the actual accounts for this kind of
projects. It will be delightful for them, knowing that their taxes and our government’s
budget will not be in vain.
2. Since the utilization and supposed audit of confidential funds could not be
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disclosed to the Congress and the public, these funds are vulnerable to
corruption.
ONE of the main bedrocks of representative democracy that is financed by hard-earned
taxes from citizens is the principle of transparency and accountability in relation to how
these taxes are spent. In an ideal world, this principle is operationalized when Congress,
which is composed of elected representatives, prepares and deliberates on the national
budget.
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The process, in itself, allows for members of Congress to review how previously
appropriated funds were spent, even though this power of oversight can also be invoked
outside the budget deliberations. As designed, it is the people's elected representatives
that approve the budget, and the people, through them, are represented in ensuring
transparency and accountability.
Beyond congressional budget deliberations and oversight, transparency and
accountability of public funds are further ensured through the constitutionally
warranted auditing mechanisms conducted by the Commission on Audit (CoA),
whose powers are specified in Article IX, Letter D, of the 1987 Constitution.
Section 2 (1) clearly states that the CoA "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." Furthermore, Section 2 (2) bestows on CoA exclusive authority,
subject to the limitations provided by the Constitution, the power to "define the
scope of its audit and examination, establish the techniques and methods
required therefor, and promulgate accounting and auditing rules and regulations,
including those for the prevention and disallowance of irregular, unnecessary,
excessive, extravagant, or unconscionable expenditures, or uses of government
funds and properties."
The Constitution has also stated clearly and in no uncertain terms that no agency, or
expenditure, shall be exempt from the power of CoA. Specifically, Section 3 states that
"No law shall be passed exempting any entity of the Government or its subsidiary in any
guise whatsoever, or any investment of public funds, from the jurisdiction of the
Commission on Audit."
We now witness the wholesale violation of this constitutional provision not just by the
executive branch but with complicity by Congress and, ironically, with consent by CoA
itself, in the anomalous presence of the so-called confidential and intelligence funds.
What is most worrisome is that these funds, by their very nature of being confidential,
would not be subjected to regular auditing mechanisms. While funds can be
appropriated for the purposes outlined in the joint circular, what becomes problematic is
when these funds are in the form of lump sum appropriations and where normal postaudit processes are not conducted. While agencies are required to submit proposals on
how the funds will be spent, there is no mechanism to audit how this is spent, thereby
opening the possibility for abuse or misuse.
We thus see the specter of secretive surveillance operations that the public has no
recourse to scrutinize, in violation of the principles of transparency and accountability.
Defenders of these funds point to their legality being ensured by the existence of the
2015 joint circular. They further point out that since it is contained in the General
Appropriation Act, approved by Congress as law, it is perfectly legal.
However, the Constitution, which is supreme, speaks differently. It can be argued that
the complicity of CoA in suspending its regular auditing procedures, and its giving
special treatment to confidential and intelligence funds, is an act that can be construed
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as a betrayal of its constitutional jurisdiction. One cannot argue that just because reports
are submitted to CoA, it is already exercising its jurisdictional powers. CoA's jurisdiction
is not just a matter of receiving proposals for funding. To exercise jurisdiction properly
entails the full exercise of official powers pursuant to what is constitutionally prescribed,
which is to examine and audit how funds are actually spent and to settle all accounts
without exception.
The use of confidential funds has been the subject of much debate in Philippine politics;
because of the confidentiality around its use, it inevitably lends itself to corruption.
However, one can imagine when government spending requires discretion – think
intelligence gathering or surveillance of organised crime groups. Outside law
enforcement however, you would be hard-pressed to justify the use of confidential and
intelligence funds.
For Vice President Sara Duterte, the use of confidential funds seems to be second
nature to doing her job. In both her roles as Vice President and as Education Secretary,
the former presidential daughter has opted to spend confidential funds despite the
civilian nature of both offices.
In 2024, Duterte’s Office of the Vice President (OVP) has requested Php500 million in
confidential funds and a separate Php150 million for the Department of Education
(DepEd). It is difficult to think why the OVP would need confidential funds, and even
more so the DepEd.
To put that amount into perspective, DepEd’s proposed Php150 million confidential
fund is higher than the Php141 million budget allocated for the entire National
Intelligence Coordination Agency (NICA) – a government agency which actually has
intelligence-gathering functions.
This proposed confidential fund for the DepEd is also not far off from the confidential
funds allocated to the National Bureau of Investigation (NBI) which stands at
Php174.5 million, and the Department of Justice (DOJ) which had an allotment of
Php168 million – two agencies which are responsible for law enforcement.
It beggars belief how the Education Department can justify having a greater need for an
intelligence budget than an actual intelligence agency, or close to that of law
enforcement institutions.
Furthermore, at a time when the Philippines faces a backlog of classrooms and a
shortage of teachers, there is no lack of areas where those confidential funds could be
put to better use. As the Alliance for Concerned Teachers (ACT) Party-list articulated,
the Php150 million in confidential funds for DepEd “can already procure 150,000
armchairs, or about three million textbooks, or 4,286 laptops for teachers at P35,000 per
unit“.
3. Guidelines and Provisions for Confidential Funds should be strengthened.
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Corruption has long been a pervasive issue in Philippine governance, characterized
by a lack of transparency, limited accountability, and unchecked discretion. Robert
Klitgaard’s formula for corruption, C=M+D-A (Corruption is Monopoly plus Discretion
without Accountability), underscores the importance of systems in addressing this
challenge. To combat corruption effectively, it is crucial to shift the focus from
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individual motivations imputed to politicians to developing robust systems that limit
discretion and exact accountability, especially in the use of confidential and
intelligence funds (CIFs) by government agencies. Here are the key risks and
challenges in CIF management:
One pressing concern is the proliferation of agencies with CIFs. In the 2024 budget,
28 agencies have allocated such funds, raising questions about the legitimacy of
their entitlement. This trend sets a dangerous precedent, as more agencies may
begin to claim CIFs for themselves.
CIFs are meant for “surveillance activities in civilian government agencies supporting
their mandate or operations.” However, the lack of clarity on their purpose can lead
to misuse. Establishing clear categories and processes for designing, implementing,
and evaluating CIF usage is essential.
Some agencies have reclassified intelligence funds as confidential funds to avoid
stricter accountability requirements. These reclassifications warrant proper vetting to
ensure transparency and adherence to regulations.
Imbalances in fund allocation are another concern. Some civilian agencies receive
substantial CIF increases, while agencies dealing with critical national security
challenges receive disproportionately less. A robust system is needed to ensure that
CIFs prioritize crucial security objectives.
The secretive nature of CIF usage poses auditing challenges. Relying on
certifications from government agencies and the absence of receipts for many
expenses hinder transparency. Developing a fit-for-purpose auditing system can
enhance transparency.
Although agencies are required to submit quarterly reports on CIF usage, it is
unclear whether these reports are consistently provided. Congressional oversight
should play a significant role in ensuring that CIF utilization enhances national
security.
The tradition of parliamentary courtesy can allow certain offices, such as the Office of
the Vice President, to evade scrutiny in CIF use. Preventing premature closure of
hearings is essential for accountability.
Allocating substantial CIF amounts to certain offices, especially when they exceed
norms, raises concerns about financial transparency.
Reports of certain offices receiving CIFs in 2022 without a corresponding line item in
the General Appropriations Act (GAA) raise legal concerns regarding fund allocation.
To develop effective systems for overseeing and ensuring accountability in CIF
usage, we can draw inspiration from countries that have successfully implemented
such systems.
United Kingdom’s Intelligence and Security Committee (ISC): (1) Independent
oversight: The ISC is an independent parliamentary committee tasked with
overseeing the UK’s intelligence and security agencies, including CIF allocation and
utilization. (2) Comprehensive reporting: The ISC produces annual reports that offer
in-depth insights into intelligence agency activities and expenditures, enhancing
transparency. (3) Access to classified information: Committee members are granted
security clearances, allowing them to access classified information relevant to CIFs
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and intelligence operations. (4) In-depth investigations: The ISC can initiate
investigations into various aspects of intelligence agency operations, including
financial matters, promoting accountability. (5) Cross-party membership: Comprising
members from different political parties.
Canada’s Security Intelligence Review Committee (SIRC): (1) Independent
oversight: SIRC is an independent agency responsible for reviewing the operations
of the Canadian Security Intelligence Service (CSIS). (2) Annual reports: SIRC
submits to the parliament and publishes annual reports that assess CSIS activities
and expenditures, including financial practices. (3) Access to classified information:
SIRC members possess security clearances, allowing them access to sensitive
information relevant to CIF utilization. (4) Investigative powers: SIRC has the
authority to investigate various aspects of CSIS operations, including financial
matters, ensuring accountability. (5) Engagement with civil society: SIRC actively
engages with civil society organizations and stakeholders to gather input on CSIS
activities, including financial transparency. (6) Transparent reporting: SIRC’s reports
are publicly available, offering insights into CSIS financial practices and CIF usage,
and promoting public awareness and accountability.
In both the UK and Canada, systemic improvements are key to combating corruption
and ensuring the responsible use of CIFs. If we do not purposively develop similar
systems, CIFs will continue to distort our governance and handicap our efforts to
provide inclusive security and development to our people.
While, in U.S., a similar case happened. The Federal Bureau of Investigation (FBI)
conducts undercover activities as part of its mission to detect and deter terrorist
attacks and foreign intelligence threats and to enforce the laws of the United States.
The FBI uses confidential funds to support its undercover activities. By using these
funds, the FBI is able to conceal its role and identity from criminals, vendors, or the
public. However, the way FBI field divisions currently handle confidential funds
presents special challenges and creates potential vulnerabilities for theft.
The Department of Justice Office of the Inspector General (OIG) recently concluded
a criminal investigation into allegations that an FBI employee stole FBI confidential
case funds. As a result of this investigation, in June 2006 a telecommunication
specialist at an FBI field division pled guilty to stealing over $25,000 in confidential
case funds intended for undercover telecommunication services. The investigation
showed that the employee took advantage of weak controls over field division
confidential funds to convert FBI monies for her own use.
OIG Findings
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The FBI Lacks an Effective Confidential Case Fund Financial Management System
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The FBI Pays Telecommunication Surveillance Expenses Inefficiently and Untimely
Conclusion
The FBI
Untimely
Pays
Telecommunication
Surveillance
Expenses
Inefficiently
and
FBI’s FMS lacks the controls necessary to prevent theft and, as such, is not an
effective financial system for FBI employees to use to account for and approve
confidential case funds. In addition, the audit found that the FBI has not established
sufficient guidance and consistent procedures necessary to track and pay
telecommunication surveillance bills accurately and timely. The audit also identified
areas where field division oversight should be improved to further mitigate the risk of
improper use of confidential case funds.
Status of Final Report Recommendations
The report offered 16 recommendations to improve the FBI’s management of
confidential case funds and telecommunication costs. For example, our
recommendations addressed improvements in the FBI’s processing of and tracking
confidential case funds in FMS; improvements on how the FBI tracks and pays
undercover telecommunication expenses; and improvements in the FBI’s oversight
of confidential case fund management. The report also recommended that the FBI
should implement FMS-related recommendations when developing its new financial
management system.
In its response, the FBI: (1) provided sufficient evidence to close a recommendation
relating to personal financial concerns of employees charged with managing
confidential case funds; (2) agreed to implement controls or other procedures
adequate to resolve 11 recommendations concerning telecommunication costs and
confidential case fund operations and oversight; and (3) stated that 4
recommendations would be either unfeasible or too cost prohibitive considering its
current FMS. As a result, the FBI stated that it had referred these 4
recommendations to those units charged with developing the FBI’s new financial
management information system.