P129 Million Collusion

Connivance for personal gain defies all means of control but jealousy will eventually work against it.

Modus Operandi

Common frauds committed by a private field contractor include collecting payments for services not rendered, non-delivery of construction materials and poor workmanship. The contractor takes advantage of the remoteness of the construction site making inspection difficult and the weaknesses of the control system of his client. He usually connives with responsible people to make defrauding easier.

Tremendous expenditures in public works covering wide areas provide great opportunities for the embezzlers. Huge amounts of public works funds are made available every year to the different engineering districts of the Ministry of Public Highways by the Budget Commission through the Advice of Allotment and the corresponding Cash Disbursement Ceiling documents. These two documents authorize the district engineering office to spend a budgeted amount for a particular public work job. For instance, when the government of a developing country embarked in massive infrastructure projects, its ministry of public highways had billions of pesos to spend on its operations, roads and equipment.

After several years, dishonest employees and private contractors discovered certain weaknesses in the control system and it was found that the victimized government was defrauded of about P129 million of public works funds. Many public highways and audit high-officials and personnel were involved in rampant collusion with the certain private contractors in falsifying government documents by making it appear that biddings had been made, concealing the non-deliveries of construction materials, and faking the advice of allotment and the corresponding cash disbursement ceiling to divert funds from the government for personal uses. There were cases when requisitions, purchase orders, and disbursement vouchers were purposely split into the smaller amounts for the same item to avoid review of the transactions by higher auditing officials. To cover up certain anomalies, the accounting records of some regional offices of the Ministry of Public Highways were made incomplete. Many unauthorized disbursement checks were willfully not recorded to avoid detection. Payments on fake allotments substantially exceeded the obligations indicated therein. Certain payrolls were padded. There were thousands of laborers who were fraudulently hired, paid and the money pocketed.

Detection and Prevention

The highways funds irregularity was discovered through an anonymous letter from someone who was apparently shortchanged in the partition. Everything was brought to light prompting the regional office of the commission on audit to look into the case. As in almost all cases of embezzlements, the lack of frequent surprise field audits emboldened some employees to collude and steal from their employer. So to keep honest people honest, constant vigilance from the office should be practiced through surprise field audits. Some resident auditors assigned in the regional offices succumbed to temptation and were involved in the collusion. Hence, for economy and effectiveness, all regional resident auditors should be recalled by their head office and reassigned as field auditors so that the regional offices of the ministry of public highways can be audited more frequently.

Weaknesses in the internal control and poor accounting procedures contributed greatly to the diversion of public funds for personnel gains through non-divers of goods and services as well as inflated expenditures. For example, a certain engineering district had spent P6 million on a job when the authorized expenditure ceiling was less than P300 thousand!

For better control, the head office of the office of the ministry of public highways should effectively monitor the highway fund expenditures: Each construction or repair job should be authorized and assigned a job number for easy recording of expenses and control. A ledger indicating the amount authorized to be spent as required by the advice of allotment and cash disbursement ceiling documents should be provided for very job. The head office should be furnished with copies of all authority and disbursement documents pertaining to each construction or repair job for recording in the corresponding ledger. By this method, the head office can detect easily any over expenditures or unauthorized disbursements. As a further check, the drawee bank against whom the fund is to be withdrawn should be given a copy of the cash disbursement ceiling document for its information on the authorized amount that can be withdrawn on each job. The head office of the commission on audit should also be given copies of all documents for each job. The head office of the commission on audit should also be given copies of all documents for each job for post-audit purposes.

In most instances, irregularities progress due to lack of supervision. Since effective supervision is achieved by inspection, the assistants of the minister of public highways should go to the field more frequently to inspect physically the jobs supposed to be under construction or completed. Monthly reconciliations of the regional office records with the head office books on a current basis will promptly disclose any anomaly. For instance, the huge frauds were not discovered for several years because the accounts had not been reconciled. An informer made the disclosure.

In general, public works expenditures can be controlled more successfully by giving the jobs to private contractors through competitive biddings, progress payment based on percentage of work completed and retention of twenty percent of the total contract price which shall be released only after final inspection and satisfactory completion of he job.

Justice however, caught up with the culprits and guilty Ministry of Highways officials and staff and they were eventually sentenced to long prison terms exceeding life which proved once more that crime exceeding life which once more that the crime does not pay.