THE National Economic and Development Authority (NEDA) recently announced that funds from the Government Service Insurance System (GSIS), Social Security System (SSS), and Philippine Health Insurance Corp. (PhilHealth) have been used by the national government “for infrastructure and other projects aligned with long-term development plans.”
The news story was an official press release of the Presidential Communications Office, quoting NEDA Director General Arsenio Balisacan who made the announcement in a Malacanang briefing.
I was surprised that major newspapers did not carry the news, and no member of Congress raised alarms over the fund use.
Secretary Balisacan did not say exactly where and how the funds were used and no reporter (not even those from the PCO) bothered to ask Balisacan for details. But the details were crucial because, as they say, the devil is in the details.
Balisacan also stressed that government funds should always be used for productive and beneficial projects that contribute to national development.
There is no quarrel with that.
But first, we must ask: Are GSIS, SSS and PhilHealth funds government funds?
The answer is, they are not. They are “private funds imbued with public interest.” The funds belong to the members of the three institutions. And those funds cannot be used or invested other than where and how as defined in their respective charters.
So, because of the nature of these funds, GSIS, SSS and PhilHealth are not government-owned and controlled corporations (GOCC), although they are erroneously referred to as such and lumped together with other GOCCs. They are government-controlled but not government-owned.
Ownership and control are not the same. One may own something but not control it, or one may have control over something but not own it.
In the case of the three, the government has control over them only in so far as:
One, they are created by law;
Two, the President appoints their governing boards;
Three, they are subject to the policies and regulations of the Governance Commission for Government-Owned or Controlled Corporations;
Four, they are required to submit reports to Congress;
Five, they are subject to audit by the Commission on Audit;
And six, their officials and employees are subject to civil-service laws and the Code of Ethics for Public Officials and Employees.
To repeat, they are not owned by the government.
That being the case, the laws that created them—their corporate charters—spell out in clear and unequivocal terms where and how the funds are to be used or invested, including limitations on fund use and investment.
As a general rule, the charters of these institutions state in no uncertain terms that “no portion of their reserve funds and income shall accrue to the general fund” of the national government or to any of its agencies, instrumentalities, including other GOCCs.
Their charters prohibit the use of the funds in purposes or their investment in instruments other than those allowed by their charters.
And limits are imposed. For example, the GSIS law caps its administrative and operational expenses to not more than 12 percent of its yearly revenues from all sources.
Investments can be made in several investment instruments—private and government, such as in shares of stocks of corporations, private and commercial bonds and securities, mutual funds, and real estate.
Since all three are also allowed to invest a portion of their funds in government bonds, treasury bills and other government debt instruments, that is the only way that such money may be used for infrastructure—if the bond issuance is intended to raise money for such, for example, the bonds or T-bills are national government debt to whoever holds them.
There’s no other way, except in the case of SSS, which is allowed by its charter to invest not more than five percent of its investment reserve fund in private-sponsored infrastructure projects without guarantee and five percent in private and government sponsored infrastructure projects with guarantee. The mechanism for such investment is not clear.
So, it is important not just for NEDA but for the GSIS, SSS and PhilHealth to provide its members and the public the details of how their funds were used by the national government for infrastructure.
They have some explaining to do.
