Ombudsman orders graft raps vs. Duque, Lao over P41-B fund transfer

The Ombudsman has ordered the filing of graft charges against former Health Secretary Francisco Duque III and former Budget Undersecretary Christopher Lao over the alleged irregular transfer of over P41 billion for the procurement of COVID-19 supplies in March 2020.

In a separate decision on the administrative complaint against them, the Ombudsman also found Duque and Lao guilty of grave misconduct, gross neglect of duty, and conduct prejudicial to the service. 

The Ombudsman dismissed the criminal and administrative complaints in connection with the same information against Ma. Carolina V. Taiño, Myrna C. Cabotaje, Roger Tong-an. Leopoldo Vega, Napoleon Arevalo, Enrique Tayag, Filpina Velasquez, Lorica Rabago, and Crispinita Valdez.

In a 49-page resolution dated May 6 and released on Friday, the Ombudsman said it was unlawful for the DOH to transfer P41 billion to the DBM Procurement Services (PS-DBM) that Lao headed.

It said the PS-DBM was only allowed to buy common use supplies (CSE), a category that did not apply to the COVID-19 pandemic supplies bought with the P41-billion allocation.

The Ombudsman cited the 2020 General Appropriations Act which defined CSE as those included in the Electronic Catalogue of the PS-DBM and those which will be regularly updated to include all items commonly procured by agencies of the government. 

“There is no indication that when GPPB (Government Procurement Policy Board) Resolution No. 03-2020 was approved on 09 March 2020, or immediately thereafter, the items declared as CSE are already available at the PS-DBM," the Ombudsman resolution read.

"In fact, a 25 March 2020 announcement in the Philippine Government Electronic Procurement System (PhilGEPS), which serves as the central mortal for all procurement information and activities of the Philippine Government, showed that PPEs (personal protective equipment), testing kits and other CSE included items were not available in the PS-DBM,” it added.

“Thus, the technical condition set by the CSE definition was not met in this case. Worth stressing is the fact that the advisory is consistent with Lao's testimony [during the Senate hearing] as to the lack of medical items in the PS-DBM's inventory," the Ombudsman said.

"It is evident that DOH did not 'source' the COVID-19-related supplies from PS-DBM but instead 'outsourced' the procurement activity to PS-DBM since the latter's 'store' did not have the medical supplies that DOH intended to buy at the time the fund transfers were made,” it added.

The Ombudsman said that the DOH’s decision to transfer the P41 billion fund to Lao’s unit for the purchase of COVID-19 supplies did not hasten the procurement process of the much-needed items.

The DOH, being the source of the fund and equipped with its own Bids and Awards Committee, may procure the COVID-19 supplies on its own.

The Ombudsman said the more simplified process of procurement was for DOH, which had the money, to buy directly from the suppliers of COVID-19 supplies and equipment.

"In this case, however, the DOH has opted to transfer the funds to PS-DBM in order for the latter to acquire the items needed by the DOH from the suppliers,” the Ombudsman said.

“Thus, the resulting arrangement added another layer by bringing in PS-DBM as DOH's Procurement Agent. Instead of a simplified process, the procurement mechanism that involves/PS-DBM became more complicated and therefore, inconsistent with the purpose to hasten project implementation,” it added.

Administrative liability

In finding Duque and Lao guilty of administrative charges, the Ombudsman said the two, "with conscious and deliberate disregard or reckless abandonment of their obligation to ensure that the applicable requirements for the transfer of funds be observed effectively, caused the DOH to abandon, in times of health emergency, its bounden duty to expeditiously acquire the needed COVID-19 goods through direct negotiation with the suppliers."

"The illegal, unjustified and unwarranted transfer of funds caused the consequent imposition of service fee that effectively removed a sizeable amount of money intended for purchase of PPEs, test kits and other COVID-essential goods requested by medical facilities and DOH offices and bureaus," the Ombudsman added.

Delays and deviations were also cited in the Ombudsman's decision, resulting from the "absence of clear procedure and lack of agreement laying down the terms and conditions of the arrangement."

"Duque and Lao's wrongdoing was highlighted by the fact that the illegal fund transfers occurred amid a national health emergency where respondents were expected to be more prudent and diligent in handling people's money, especially on transactions involving enormous amounts. At the time of dire need, the people were looking up at respondents' offices for relief but have instead entertained suspicions due to their failure to follow the prescribed rules and procedures. Their actions cast the DOH, PS-DBM, and the public service in a bad light," the Ombudsman added. — NB/VDV, GMA Integrated News