Press Release
November 9, 2009

APOCALYPTIC CORRUPTION: THE P60.5 BILLION ROAD FUND
By Senator Miriam Defensor Santiago
(Sponsorship speech on 9 November 2009)

Mr. President, distinguished colleagues:

As chair of the economic affairs committee, I have the honor to sponsor for your kind approval P.S. Res. No. 1413, entitled "Resolution recommending to the Ombudsman the prosecution of the Road Board led by its chair, and its Secretariat, led by the executive director, for unconscionable multibillion anomalies reported by the Commission on Audit; recommending amendment or repeal of the Motor Vehicle User's Charge Act; and in any case, recommending the creation of the Oversight Committee on the Road User's Tax."

Historical Background

R.A. No. 8794, a.k.a. the Motor Vehicle User's Charge Act, or MVUC, here known as Road Tax, was promulgated in 2000. It is the latest successor to three prior laws.[1] The Road Tax is the government's third largest source of tax revenue, after the Bureau of Internal Revenue and the Bureau of Customs.

The Road Tax is part of a vehicle's annual registration fee. It is paid by the vehicle owner to the Land Transportation Office. The LTO remits the fund to the Bureau of Treasury. But the fund will not be commingled with other funds. Instead, this specific fund is deposited under four different Special Accounts. The LTO submits a certification of the amounts deposited to the Road Board Secretariat, for the monitoring of the status of the Road Fund. There are four Special Accounts in the General Fund:

First, the Special Support Fund, with 80% share. Its exclusive purpose is to maintain national primary and secondary roads, and to improve the drainage system.

Second, the Special Local Road Fund, with 5% share. Its exclusive purpose is to maintain local roads, and to provide the traffic and road safety devices of city and provincial governments.

Third, the Special Road Safety Fund, with 7.5% share. Its exclusive purpose is to install road safety devices throughout the country.

Fourth, the Special Vehicle Pollution Control Fund, with 7.5% share. Its exclusive purpose is to institute programs for prevention, control, and management of air pollution from vehicle sources.

As the third biggest revenue earner, the Road Fund collects billions of income every year. From 2001 to 2009, the Road Fund amounts to P60.5 billion. The annual collections, in round figures, are as follows:

2001 P 3

2002 4.4

2003 5.4

2004 6.6

2005 7.2

2006 7.8

2007 8.4

2008 8.5

2009 8.7

Total P60.5 B

No Congress Control or Oversight

The Road Fund is reported annually in the President's Budget of Expenditures and Sources of Financing (BESF) under "Earmarked Revenue." For fiscal year 2010, the MVUC Report is shown in Table B.16, Earmarked Revenue, 2010, on p. 224.

That the Road Fund is an automatically appropriated earmarked revenue means that it does not need the year-by-year appropriation from Congress. Its budget is not a matter of congressional approval, but a mere matter of mathematical computation. With or without the GAA, the total revenue collected by the LTO is remitted and deposited to the four accounts, according to the percentages prescribed by law, and are then spent by the Road Board.

The Road Tax Law, Section 8, expressly states that the four special funds established shall be distinct and separate from, and in addition to, any appropriations granted yearly to the DPWH and the DOTC, the two departments that control the Road Tax. Section 8 emphasizes that although the Road Fund is controlled by the two departments, the Road Fund does not form part of their respective regular appropriations in the GAA.

There is no legislative discretion involved in the process of giving and spending the Road Fund. Congress has no control over the Road Fund with respect to its accounts, budgeting, and implementation. IN OTHER WORDS, CONGRESS NEITHER SCRUTINIZES NOR EXERCISES OVERSIGHT OVER THE ROAD FUNDS WHICH, FROM 2000 TO 2009, AMOUNTS TO P60.5 BILLION!

Road Fund Anomalies

The reality is that the Road Fund has annual billion-peso collections which get bigger every year. For example, this 2009, the collection will be P8.7 billion. And yet, this amount will not undergo the annual budget deliberations and processes. The law classifies it as "earmarked revenue," meaning that it is either a tax or non-tax revenue set aside, in whole or in part, for specific expenditures or purposes.

There is no report on the breakdown of expenses from the total collection of the P60.5 billion for the nine-year period. There is no full disclosure of all the Road Board transactions. Thus, it is not surprising that the COA, over the years, has noted unconscionable scandals in the use of the Road Fund, as follows:

CY 2004 - 2008. The Road Fund was diverted from the specific purposes listed by law, to payment of salaries, allowances, maintenance, and other operating expenses properly chargeable to the regular budget. The unlawful expenses for this period amounted to P515.50 million.

CY 2006 unlawful expenses:

Total of 136 projects for the 12th Asean Summit, implemented thru negotiated procurement instead of public bidding - P1.525 billion.

Total of 63 projects were implemented at contractors' own risks, without appropriate funding and perfected contracts - P766.7 million.

Overpricing of street lamps in Cebu and Mandaue cities - P35.5 million.

Failure to deliver money from the 2006 Asean Summit to DPWH Regional Office 7 and to district engineering office - P500 million.

CY 2007 unlawful expenses:

Installation of road safety devices, contrary to the purpose of road maintenance under Special Road Support Fund - P76.1 million.

Maintenance/improvement of national road, contrary to the purpose of the Special Local Road Fund - P4.8 million.

CY 2008 unlawful expenses:

Repair/rehabilitation of provincial road, contrary to the purpose of Special Road Support Fund for road maintenance of national roads - P10 million.

In October 2008, unreconciled difference between P53.3 billion certified by LTO as collected and deposited to the special accounts in the Bureau of Treasury; as against the amount certified by the Treasury of P51. billion - P1.2 billion.

Irregular and excessive disbursements - P11.9 million, for:

a. Installation of excess raised pavement markers not in accordance with the standard distance.

b. Payment for accomplishment on two asphalt overlay projects even though it was short of 329,897 metric tons of bituminous surface concrete course.

c. Pay items that were not turned over, after completion of the projects and the provision of rental and pay items in the program of work.

d. Overpricing of the cost of the repainting of guardrails.

Hiring of 6,727 workers under the Out-of-School Youth Serving Towards Economic Recovery (OYSTER) program, even though there were no guidelines in determining the number of workers needed, and the manner of payment gave no assurance that the number of OYSTERS hired and expenses incurred was not excessive. From the Road Fund allotment of DPWH-NCR, 57% of the allotment, or P564.7 million, was used for this employment program. Of that amount, P332.6 million was inexplicably transferred to the Philippine National Police.

Various equipment acquired for LTO projects were not installed, due to lack of prepared sites and buildings - P25.7 million.

Installed equipment that turned out not fully operational - P70.3 million.

2008 COA Audit Report

The 2008 COA Audit Report contains at least 19 red flags, called COA Observations, all of which taken together sound like a funeral dirge, as follows:

  • Overstatement of receivables - P160 M

  • Unreliable yearend balances of inventory accounts - P31.6 M

  • Unreliable property, plant, and equipment account balances - P453 M

  • Invalid MVUC charges - P76 M

  • Irregular issuances of gasoline to private vehicles and non-compliance with prescribed controls on fuel consumption - P0.84 M

  • Irregular and excessive disbursements - P12 M

  • Juggling of funds for national to provincial roads - P10 M

  • Unused balances of funds in Region 1 were not remitted - P0.56 M

  • Warranty security was not posted for completed projects in Region 5 and 11 - P57 M

  • Overdraft in allotment by DPWH regional offices - P1.47 B

As a lawyer, I can only be aghast. Even as I speak, I have trouble restraining myself from running amok at the P1.47 B overdraft. This overdraft was caused by the Road Board's delay in submitting the special budget to the DBM. As a result, the DBM was forced to issue NCAs without SAROs. Consequently, DPWH issued NTAs without SAAs to the regional and district offices.[2] In other words, because of lack of necessary documents, the Road Board incurred an overdraft in allotment of P1.47 billion. An overdraft is strictly prohibited by the Administrative Code, and an overdraft as big as P1.47 billion defies all conceptions of the rule of law and the constitutional concept of public office as a public trust.

  • Unreconciled deposits of MVUC collections and penalties in the national government books - P1.26 B

This means that from 2001 to 2008, the Road Board just kept piling on the money that could not be accounted for, which has now reached the sum of P1.26 billion. Each year, there have been unreconciled differences between two books. The first book is the record of the collections and deposits reported by LTO to the Road Board. The second book is the certificate of deposits from the Bureau of Treasury.

This problem arose because of the failure of the Road Board Secretariat to require the LTO to submit copies of the remittance advice showing the actual amounts of the Road Tax and overlooking penalties deposited to the special funds by regional offices. The Road Board Secretariat, out of willfulness, laziness, or incompetence, simply allowed the unreconciled differences to build up over time. Thus, the Secretariat failed to discharge its duty to ensure that deposits are properly accounted for and accurately determined at any given time.

  • Inadequate road maintenance activities in Region 4

  • Absence of guidelines in hiring OYSTER workers.

  • Unimplemented MVUC projects - P57 M

  • Unfinished MVUC projects for more than two years - P5.7 M

  • LTO Motor Vehicle Inspection System (MVIS) project not operational

  • Fifteen sets of smoke testing equipment procured by LTO Region 11 in

October 2007 were idle or not utilized - P5.58 M

  • Slow or delayed implementation of the DOTC Special Vehicle Pollution Control (SVPC) program

  • Unremitted taxes withheld - P1.9 M

COA Conclusions

In its resource paper submitted at the committee hearing, the COA made the following conclusions:

1. The Road Tax has failed to fully achieve its objectives.

2. The allocation of the Road Tax Fund was based on the request of favored politicians, other public officials, and district engineers. This practice is contrary to the prescribed procedures, under which the allocation should be made pursuant to the Annual Work Program (AWP) prepared by the DPWH Road Program Office, taking into consideration the priority projects as determined under the software tool called Highway Development Management Version 4 and TARAS (Traffic Accident Recording and Analysis System) of the DPWH.

3. Funds were diverted from the original objectives of the Road Tax, which are to maintain roads, improve drainage, install traffic lights and road safety devices, and control vehicle pollution. One glaring example of illegal diversion of funds is the PNP OYSTER Program for road clearing and maintenance. According to COA, this is not a function of PNP, but of MMDA and local government units.

In other words, the bulk of the Road Tax has not been used in connection with roads and drainage. The bulk of the Road Tax, in billions of pesos, has gone to private pockets in the Road Board, the Secretariat, and their cohorts. Taxpayers' money has been spent for shameless graft and corruption, the likes of which are rarely seen even in this corruption-ridden society.

2009 World Bank Report

The implementation of the Road Tax Law is an unmitigated disaster. There is no better proof of its utter failure to improve the drainage, than the floods of the killer typhoon Ondoy last September 26, and its successor typhoons. These typhoons destroyed so many lives and properties that on TV they summoned visions of Armageddon and the end of the world. Sa halagang P60.5 billion, to maintain roads and improve drainage, ganoon pa rin kalawak at kalalim ang mga baha sa Metro Manila at sa marami pang lugar sa ating kapuluan? Saan napunta ang P60.5 billion na binabayad ng mga mamamayang may-ari ng sasakyan? The plunder, shocking beyond belief, of the Road Tax is documented by the World Bank Report dated 24 February 2009, entitled "Philippine Transport for Growth." From 2001 to 2008, the sum of P40.4 billion was released for maintenance of national roads. But the achievement was plain lousy. From 2001 to 2008, the percentage of paved national roads in good to fair condition rose by only 7.8 percent of the total length. In other words, only 1.1 percent of the total length of national roads rose to the level of good to fair condition. The people's money of P40.4 billion is gone with the wind.

The World Bank concluded that the Road Board and its Secretariat have politicized the process of allocating the proceeds of the road tax. Wala nang criteria kung hindi ang laki ng kickback ng bawa't proyekto sa kalsada at sa labasan ng tubig. In other words, hindi napaganda ang mga daan at mga labasan ng tubig, kaya hindi nahinto ang baha, dahil sa ating kaibigang si Mr. Super Graft and Corruption, at world class pa!

According to the World Bank Report, compared to other Asian countries, the Philippines has the worst roads:

Percent of                                Percent of Roads
Paved Roads                            In Good Condition

Philippines           20                                             18

China                  81                                              -

Indonesia            58                                              -

Japan                 78                                              -

Korea                 87                                              87

Malaysia             81                                              78

Thailand             98                                              98

The Road Board and Secretariat (Fie!)

The Road Tax Law, Section 7, provides that the President of the Philippines shall organize the Road Board with seven members, with the secretary of DPWH as ex-officio head; the secretaries of transportation and communication; finance; and budget, as ex-officio members. In addition to the four cabinet members, there are three representatives of the private sector engaged in transport and motorist organizations.

Naturally, because the public officials merely serve ex-officio, they meet more or less only once every quarter. This means that the Road Board meets only very few times in the year. When it allocates money, it appears to do so through resolutions, which a former Road Board member describes as "ad hoc and rudimentary."

Obviously, since it meets only a few times each year, the Road Board does not have time to satisfy itself that the multifarious criteria have been met. These criteria are set out in the Road Board Operating Procedures Manual,[3] and in the planning tool known as Highway Development and Management Version 4, or HDM-4.[4] As with most boards of directors in other organizations, the Board has to rely on the processing of the necessary documentation by its secretariat.

But, lo and behold! The Road Board Secretariat consists of only five, repeat five, regular positions - executive director, fiscal controller, executive assistant, engineer, and accountant! Definitely, only five technical people cannot adequately monitor the use of billions of special funds, much less supervise projects and activities funded by the special funds.

The Puno Brothers: Scandal in the Family

Ronaldo Puno is Secretary of Interior and Local Government. His brother Rodolfo Puno was Road Board Executive Director from 2005 to the first half of 2008, or a tenure of three and a half years. In 2008, he was replaced by Danilo Valero, who just happens to have been a DILG assistant secretary, under Ronaldo Puno.

This seems to be the only explanation on why the Road Board Oyster Program was transferred to the national police, which is under DILG. For this program, the national police received P332.64 million. This is a brazen violation of the Road Tax Law, Section 7, which provides that the Road Fund "shall be earmarked solely and used exclusively for road maintenance and the improvement of road drainage." The COA should have taken out the two brothers and ordered them shot, but COA limited itself to this observation: "The absence of guidelines in determining the number of workers needed and the manner of payment gave no assurance that the number of OYSTER workers hired, and the expenses incurred, were not excessive."

Ronaldo "Ronnie" Puno claims that every time I mention his name in exposing a scandal, I am driven by revenge because I lost the 1992 presidential election. That is always his mantra. I believe he repeats it in his sleep. He is driven by guilt, for cheating me of the presidency by the time-honored formula of Dagdag-Bawas. Thus, Ronnie earned his reputation as a man of the world, a man of means, and a "political strategist," which is a polite word for something that should not be repeated in civilized society. Ronnie said that I am pursuing a program of personal vendetta. No, Mr. Ronnie, don't flatter yourself. I am conducting an infinite vendetta against all crooks in my tragic country.

And for the information of his brother Rodolfo "Dodie" Puno, I was not the only senator to seek a probe of the Road User's Tax. So did Senator Legarda, who was the one who filed a motion to transfer the reference of the two resolutions to the economic affairs committee, which she used to chair, and which I chair now.

For the lifestyle of Dodie, I refer to the Daily Tribune issue of 1 October 2009, particularly the column "Mr. Expose" by former Senate President Ernest Maceda. Let me quote his column in full:

"Giveaway. Former Road Board Executive Director Rodolfo 'Dodie' Puno in a TV interview with Ces Drilon denies any anomalies in the disbursement of P56 billion of Road user's tax collections. He charges Sen. Miriam Santiago with political vendetta against him and his brother Ronnie.

"Unfortunately for Dodie, his 'rich and famous' lifestyle gives him away. He is reportedly the owner of two yachts, expensive cars, luxury condominiums, gives expensive parties and has been totally indiscreet in this moneyed pursuit of movie stars and beauty queens.

"In Nueva Ecija alone, former Gov. Tomas Joson released Road Board records showing a release of more than P3 billion for aluminum road guards which Governor Joson said cost less than P1 billion, awarded to two contractors without public bidding. The same system has been reported in Laguna.

"Senator Santiago is correct in saying this is enough evidence for a prima facie case of plunder against Dodie Puno."

In addition, I also refer to the Daily Inquirer issue of 5 November 2009, particularly the column "On Target" by Ramon Tulfo, which reads:

"A brother of a high government official who used to be a public servant himself allegedly bought a huge rest house in Boracay for P250 million.

"The house was reportedly bought from a member of a prominent family in Metro Manila.

"Maybe the rumors are without basis, but can you blame people for believing the rumors?

"The guy earned billions of pesos from motor vehicle owners when he was still in government.

"I went to the Manila Yacht Club a couple of months ago and a boatman pointed out to me a yacht that this guy bought from a multi-millionaire.

"From the size of the yacht, it must cost him a fortune.

"This man doesn't know how to hide the fruits of his corruption."

If the Maceda column is too general for you, let me give a more particular account from the Iloilo provincial administrator, who wrote me on 24 September 2009, before the committee hearing. I quote these excerpts:

"It shows the misuse and abuse of the discretionary powers wielded by the Executive Director of the Road Board in allocating funds outside of the scope authorized by the law, to the disadvantage and detriment of Provinces and Cities that are supposed to receive yearly shares for the repair and maintenance of its roads.

"The major anomalies I wish to highlight are the following:

"1. Illegal allotment and disbursement of funds - Under the law, only provinces and cities are entitled to get a proportionate share of the Road Users Tax, particularly the Special Local Road Fund (SLRF). In 2007, the share of the Province of Iloilo was only P4.6 million. This amount went up slightly to P5.25 million in 2008. The province maintains more than six hundred kilometers of provincial roads, and this measly sum hardly makes a dent on our road maintenance operations.

"Even though the amounts allocated to Iloilo Province were small, we have endeavored to put every centavo into these projects and maximize its utilization.

"But in the case of the Municipal Government of Pavia, it got a handsome amount of P12 million, apparently upon the say-so of the Executive Director of the Road Board at the time, Rodolfo 'Dodie' Puno. Such power must be removed, and only provinces and cities as mandated by RA 8794 should receive their just, rightful and equitable share."

One thing you can say about the Puno brothers: they don't allow facts to get in the way of their ideology.

Recommended Amendments

In view of the hornet's nest, allow me to recommend some amendments to the Road Tax Law:

  • Transparency. The Road Board and DPWH should post on their websites the list of projects programmed for Road Tax funding, based on their planning tool known as HDM-4. They should also put the list of projects actually funded, the actual releases, disbursements, and accomplishments.

  • Composition of Road Board. The present composition of four public officials serving ex-officio out of seven members, renders the Road Board dependent on its full-time Executive Director, who becomes a financial despot. Perhaps, as in New Zealand , the Road Board should be composed of road users themselves, without any member from government. In the alternative, the road users should at least be the majority in the Road Board, for better control and accountability.

  • Criteria for funding. Strictly use the modern planning tool known as the Highway Development and Management Version 4, or HDM-4, which identifies and prioritizes projects for funding, using objective technical and economic criteria.

  • Raise the penalty to discourage truck overloading. At present, an overloaded truck is liable for a penalty of maybe less than P1,000. The truck owner would choose to pay this small fine, rather than use additional trucks to carry the excess load, specially if it consists of high-value items like gravel, sand, minerals, and grains. The law should be amended to raise the penalty to a realistic level.

Public Hearing Found Prima Facie Evidence

Your Committee on Economic Affairs held a public hearing on 25 September 2009. The COA representative affirmed the 2008 COA Audit Report on the Road Fund. The then DPWH Secretary and ex-officio chair of the Road Board, Hermogenes Ebdane Jr., sent documents which, however, proved to be unresponsive to the issues raised by the COA. The former Executive Director of the Road Board Secretariat, Rodolfo Puno, also failed to attend, and requested for five days' notice. The Rules of the Senate require only three-day notice. So his request was denied, and he was deemed to have waived his right to be heard. The incumbent Executive Director, Danilo Valero, submitted documents, but they were also unresponsive to COA issues.

As committee chair and sponsor of the resolution on the table, I respectfully appeal to this Senate to approve the resolution, on two grounds:

First, the Senate is neither authorized nor equipped to conduct a full-blown preliminary investigation. Let the Ombudsman do that. Under the Rules of Court, the standard for preliminary investigation is probable cause (Rule 112, Section 1). In criminal law, probable cause means that there is a reasonable ground to suspect that a person has committed a crime. In our country, probable cause includes evidence for both the complainant and the respondent, and even a public hearing for clarificatory questions.

Since a legislative inquiry is not a criminal proceeding, the standard is lower than probable cause. I respectfully submit that the standard is merely prima facie evidence, which means evidence that will establish a fact or even sustain a judgment, unless contradictory evidence is produced. Your committee has found at least prima facie evidence against the Road Board officials and Secretariat involved.

Second, the Road Tax Law is an abject and deadly failure, as proven by the virtual lack of drainage during the killer typhoon Ondoy and its successors in Metro Manila, Rizal, and other provinces listed as calamity areas. I appeal to our colleagues to either amend or even repeal the existing Road Tax Law, which has proved to be a hotbed of multibillion corruption.

Finally, I humbly appeal to our Senate President, the Honorable Juan Ponce Enrile, to immediately establish an Oversight Committee on the Road Tax, so that at least some form of legislative monitoring could be exercised over this particular giant pot of honey that has attracted so many busy bees.

Conclusion

Our last slide is the painting entitled "The Man With the Hoe," by Jean -Francois Millet. It shows a weary farmer leaning on his hoe. It is said that this painting is the most powerful portrayal of how farm labor can degrade human beings to the level of animals.

Let us look at it, against the background of climate change and global warming that has periodically visited planet Earth. Climate change is not a new concept. It began from the time of the great flood that impelled Noah to build his ark. Global warming and global icing take place according to the life cycle of our planet. At this time, it signifies massive human deaths from floods, volcanic eruptions, tsunamis, and earthquakes.

It is always wrong to be a corrupt public official, but today more than ever, we cannot afford to leave the greedy crook to grab public funds that are mandated by law to improve our roads and to improve our drainage systems. Because of godless graft and corruption, the crooks in the Road Board and its Executive Secretariat should be held responsible and accountable for the following carnage in our poverty-stricken country:

  • 961 deaths

  • 90 missing

  • 756 human physical injuries

  • P 38.68 billion worth of properties destroyed

I accuse those crooks of the crime of terminal corruption. They are ghouls, they are vampires, and they should spend the rest of their lives in jail, for they have violated the laws of civilized society, the laws of nature, and the laws of God!

I invoke the poem "The Man With the Hoe" by Edwin Markham:

Bowed by the weight of centuries he leans

Upon his hoe and gazes on the ground,

The emptiness of ages in his face,

And on his back the burden of the world.

. . . .

Who made him dead to rapture and despair,

A thing that grieves not and that never hopes,

Stolid and stunned, a brother to the ox?

Who loosened and let down this brutal jaw?

Whose was the hand that slanted back this brow?

Whose breath blew out the light within this brain?

. . . .

Through this dread shape humanity betrayed,

Plundered, profaned and disinherited,

Cries protest to the Judges of the World,

A protest that is also prophecy.

. . . .

O masters, lords and rulers in all lands,

Is this the handiwork you give to God,

This monstrous thing distorted and soul-quenched?

. . . .

How will it be with kingdoms and with kings -

With those who shaped him to the thing he is -

When this dumb Terror shall reply to God,

After the silence of the centuries?

 

FOOTNOTES

--------------------------------------------------------------------------------

[1] R.A. No. 4136, Land Transportation and Traffic Code of 1964; P.D. No. 1958, Private Motor Vehicle Tax of 1984; E.O. No. 43 of 1986 issued by President Aquino.

[2] NCA means Notice of Cash Allocation. SARO means Special Allotment Release Order. SAA means Sub-Allotment Advice. NTA means Notice of Transfer of Allocation.

[3] a. Funds available in the Special Road Support Fund; b. Funds available for maintenance of national roads from other sources; c. Length and type of road; d. Traffic volumes and composition; e. Physical inspections of the condition of the road network; f. The asset management plan for national roads; g. The Board's standards for roadside and carriage way maintenance; h. Results of HDM-4 analysis or equivalent; i. Maintenance savings from construction projects; j. One-off needs created by particular or universal circumstances; k. Findings from audit reports; l. Equity between regions and districts.

[4] HDM-4 stands for Highway Development and Management Version-4. It is acquired for use by the Road Board in allocating Road Funds for preventive maintenance.

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