Creation of Executive Committee to Discuss Policy, Structural and Procedural Changes to Address MCC Conditions Precedent

September 22, 2010 DOF DEPARTMENT ORDER NO. 037-10 Pursuant to the Department's commitment to comply with the conditions precedent (CP) set by the Millennium Challenge Corporation (MCC) as a requirement for funding under the MCC Compact Project granted to the Revenue Integrity Protection Service (RIPS), an Executive Committee is hereby formed for the purpose of discussing possible policy, structural and procedural changes in order to address the various issues raised in the CPs. Moreover, the Committee shall likewise be utilized for formulating and implementing other Anti-Corruption initiatives. The composition of the Committee shall be as follows: Secretary of Finance Chairman Supervising Undersecretary of RIPS Vice-Chairman Executive Director of RIPS Member Commissioner of Customs Member Commissioner of Internal Revenue Member The Committee shall be convened immediately after the issuance of this Order and regular meetings shall be held thereafter. The Office of the Deputy Director of RIPS is hereby appointed as the Committee's Secretariat. (SGD.) CESAR V. PURISIMA Secretary ATTACHMENT MEMORANDUM FOR : The Secretary FROM : RIPS Executive Director SUBJECT : Proposal of RIPS to Address the Conditions Precedent Set by the MCC for the Compact Grant DATE : August 16, 2010 This is to inform the Secretary of the Conditions Precedent set by the Millennium Challenge Corporation (MCC) prior to the award of the Compact grant and our corresponding recommendations. THCSAE Background: 1. One of the projects being considered by the MCC for a Compact grant is the DOF-RIPS proposal. Part of said proposal is the Case Management System which intends to monitor the flow of cases being handled and investigated by RIPS including graft and corruption related administrative cases being handled by the Internal Affairs offices of the Bureau of Internal Revenue (BIR) and the Bureau of Customs (BOC). 2. There were, however, certain concerns raised by the MCC prior to the award of the Compact grant. Accordingly, MCC imposed the following Conditions Precedent (CPs): (i) Removal of all individual (including revenue agency Commissioner) discretionary power to end investigations of graft-related cases without review and appeal to the (Board of Personnel Inquiry and Review) BOPIR by RIPS; (ii) Prior to the procurement of case management hardware or software, RIPS shall have MCC-approved protocols with RATS and RATE regarding the exchange of information; (iii) RIPS be given formal authority for the oversight of graft-related programs, policies and procedures of DOF agencies inspection services including the ability to conduct operational audits of those activities at those units; (iv) MCC will ask the Secretary of Finance to implement a reorganization of BOC and BIR staff units so that Internal Affairs and Internal Audit Staffs in each agency report to their respective Commissioners through different organizational reporting lines; (v) Permanent staffing for RIPS unit; (vi) The DOF will also be asked to covenant that the RIPS procedure manual be enforced throughout the compact; and (vii) By the date of submission for the first QDR following the one year anniversary of the entry into force of (EIF) of the contract, and annually thereafter, RIPS shall publish on its website and in the DOF annual report statistics profiling its activities including the number of cases filed for each agency, the status of outstanding cases, and the disposition of old cases. 3. The DOF-RIPS is given 1 year from EIF to comply with the above CPs after which MCC will commence releasing the funds on a staggered basis. Recommendations: 4. Since the first four (4) conditions precedent involve inter-agency issues, it is proposed that an Executive Committee (ExeCom) should be formed composed of the Secretary, the Commissioners of BIR and BOC, the Supervising Undersecretary of RIPS and the Executive Director of RIPS. The function of the ExeCom is to discuss possible policy, structural and procedural changes so that we can comply with the issues raised in the CPs. DAEIHT 5. Following the initial ExeCom meeting, it is suggested that Technical Working Groups (TWGs) be formed composed of RIPS, BIR and BOC to come up with recommendations to address these concerns. 6. Some of the primary issues proposed to be discussed by the TWGs are as follows: (i) Revision of the rules of procedure in administrative cases and protocols for exchange of information/data with the end view of monitoring case flow and addressing the issued on the discretion of the BIR and BOC in dismissing cases. Initially, since MCC signified that their concern relative to the discretion of the Deputy Commissioner to unilaterally terminate administrative investigation should be addressed before EIF, RIPS recommends that during the initial meeting of the ExeCom, the Committee agrees that the Closing Memoranda for administrative cases prepared by the Deputy Commissioners should be elevated to the Secretary through RIPS for the purpose of reviewing the same. The appropriate Department Order and instructions to operationalize said procedure should be issued to signify that DOF has already addressed the concern of the MCC. Other revisions on the rules of procedure of the internal affairs offices can follow later after the TWGs have submitted their respective reports/recommendations. (ii) Establish protocols for exchange of information/data wherein the BOC-RATS and BIR-RATE will provide information to RIPS regarding the cases they are handling which can be developed into graft/corruption related cases. As stated above, one of the conditions is that the protocol for exchange of information should be approved by the MCC. (iii) Strengthen the Internal Affairs and Internal Audit offices of the DOF, BIR and BOC. Structural changes may have to be made. Initially, one possible structural change in the BIR is to put the Internal Audit directly under the Office of the Commissioner. It is also recommended that there be an Audit Committee to which the Internal Audit offices of the DOF, BIR and BOC will report to in addition to their heads of agencies. The illustration below shows the proposed change of structure. Other steps to be taken to strengthen the Internal Audit offices of the DOF, BIR and BOC can be discussed by the TWG. Proposed Structure: 7. It may be noted that the initial composition of the ExeCom does not include all attached bureaus and agency of the Department. The reason for such is that the computerization of the case management system does not include other attached agencies. The original proposal of RIPS is to include all attached agencies in the case management system; however, the same did not merit the approval of the MCC. As such, the case management system shall only include the BIR and BOC. 8. For this reason, for purposes of addressing the CPs, only the Commissioners of the two bureaus are included. However, inclusion of the respective heads of the other attached bureaus and agencies may later on be included as members. 9. Attached is a draft Department Order creating an Executive Committee for the approval and signature of the Secretary. For the Secretary's consideration. HcSaTI (SGD.) ROMEO D. TOMAS, JR.