3 Ways the DBP May not Perfectly Fit as Secretariat of the Peoples’ Survival Fund

Elpidio V. Peria
13 August 2017

from : http://www.devbnkphl.com

Recent updates from the CSO rep to the Board of the Peoples’ Survival Fund (PSF), a fund created by Republic Act 10174 to finance climate projects of LGUs and communities, indicate that in spite of being warned that such act is premature, the Finance Secretary, Carlos Dominguez, decided to transfer the secretariat function of the Peoples’ Survival Fund from the Climate Change Commission’s Climate Change Office to the Department of Finance, which has planned to outsource some of the Secretariat functions of the PSF to the Development Bank of the Philippines, a government-owned bank infused with a capital of Php 35 billion by the national government back when it was reorganized under Republic Act 8523, in 1998.

While it cannot be denied that such act is filled with good intentions, perhaps the Secretary himself is very much frustrated now that, over five years from its approval on June 6, 2012, the PSF still hasn’t released any single centavo to any of its approved project proponents. His action of deciding that henceforth it is the DBP that will now approve and review project proposals is fraught with several legal questions, notwithstanding the report that such decision by the Finance Secretary was given the go-ahead by the lawyers both of the Department of Finance and the Climate Change Commission.

While we concede that such acts of the Secretary is presumed legal, we hope that there will be further discussion of this development and to search anew for fresh solutions on how to improve the operations of the PSF, particularly on how it can fast-track its fund releases to its approved beneficiaries. Just the same, we believe there are three reasons why the DBP may not be the perfect fit to play the role of the Secretariat of the PSF.

1. It’s what the law, Republic Act 10174,  has clearly stated.

Sec. 23 of the Climate Change Act, as amended by Republic Act 10174, spelled out clearly that :

The Climate Change Office, headed by the Vice-Chairperson of the Commission, shall evaluate and review the proposals, and with the concurrence and endorsement of the majority of Climate Change Commissioners appointed by the President, recommend approval of proposals to the PSF Board, based on policies, guidelines and safeguards, agreed by the PSF Board….xxx”

What this means is that it is the Climate Change Office, not the DBP, that has a clearly specified role as regards the evaluation and review of proposals submitted to the PSF. Now, it appeared in the annexes in the minutes of the 10th PSF Board meeting that the DBP was proposed, among others, to take on the role of “review and evaluation” of proposals, which may have been adopted already by the PSF Board.

That decision of the Board unfortunately cannot override this clear provision of the law, thus perhaps there may need to be a reordering of the tasks of the DBP in relation to the operations of the PSF.

It can be also be argued nonetheless that DBP may have some legal ground to be the PSF Secretariat, since this provision of the law we have cited is not explicit whether such role of the Climate Change Office is the Secretariat function already of the PSF Board. There is also the Revised IRR of the Climate Change Act and the Peoples’ Survival Fund Act, Rule XI, sec. 6, which stated that the Climate Change Commission shall constitute as the Interim Secretariat of the PSF, but it was only until such time that a PSF Board Secretariat has been constituted.

It appears that what the PSF Board should strive eventually to create is a distinct and separate Secretariat that is truly its own, which may be composed of perhaps staff from the Climate Change Commission and eventually the Department of Finance, or even also the DBP.

2. Transferring the whole or part of Secretariat functions of the PSF Board to the DBP affects the maintenance of the fiduciary character of the Board towards the Fund

While the CSO rep thoughtfully raised a lot of sound issues as to the challenges by the DBP in handling the fund, the most basic point that should have been pointed out was that giving the DBP a role in the PSF disbursement may potentially be violative of one key duty of the PSF Board to the Fund, and that is its fiduciary duty, though as written in RA 10174, the duty of the Board is just to “promulgate policies that will maintain the fiduciary character of the Board.” RA 10174 has therefore broadened the duty such that it is not now an individual duty but is attributed to the entire Board, that it has to maintain its “fiduciary character”.

“Fiduciary” was defined in the Revised IRR of the Climate Change Act and it said there that it “refers to the person holding the character of a trustee, or a character analogous to that of a trustee, in respect to the trust and confidence involved in it and the scrupulous good faith and candor which it require”.

How can the Board maintain its “fiduciary character” towards the PSF when it will put part of the running of the operations of the PSF to an entity, the DBP, which is primarily accountable to its own Board of Directors, not the PSF Board ? Can the PSF Board in good faith agree to conditions that will be set by the DBP Board as part of its demands to be made part of the process flow of PSF fund approvals? Can the PSF Board still be true towards maintaining its “fiduciary character” towards the Fund by agreeing to arrangements which may be in conflict later with the purposes of the Fund? Suppose the DBP Board considers it an opportunity to be the sole depositary of the funds approved by the PSF and makes it a condition that the depositary banks of the PSF beneficiaries will only be the DBP, should the PSF Board agree?

Or how about the fees that the DBP will charge as part of its services to the PSF, can the PSF Board agree to it and while for now it appeared from the update of the CSO rep that the Department of Finance will shoulder the amount of Php7 million that the DBP has asked to be the Secretariat of the PSF, in later years of PSF operation, where will that payment to DBP be coming from, or maybe it will have to be made part of a special provision of the General Appropriations Act, so that it will be above-board and no other agency that is currently member of the Board will fork out its own money to pay for this administrative fee that the DBP will charge? Again, can the members of the PSF Board maintain their fiduciary character towards the Fund with this kind of arrangement?

All these and other concerns can easily be solved though by developing and negotiating a MOA between the two Boards, that of the DBP and the PSF, but that may take up some time and will only delay the further processing of the disbursement of funds to the beneficiaries of the PSF. Just the same, this duty of the PSF Board to maintain its fiduciary character may be a principle to ward off potential conflicts of interest that it may confront as it negotiates these matters with the DBP Board.

3. While the DBP may eventually build its internal capacity to handle climate finance projects, DBP’s long-term role in this will eventually require a modification of its charter, but what about the other government banks who may also get interested in this new economic activity?

Starting out on new initiatives take some time, but eventually the culture of the organization takes over and if the DBP’s own internal capacity to deal with the challenges of PSF implementation is sturdy, it will eventually master the tasks needed to discharge its duties to the PSF Board. Long term however, based on lessons to be learned, the charter of the DBP may have to be amended so that it takes on a greater role in climate financing in the Philippines.
For now, however, the DBP may have a leg up vis-à-vis other government banks who may also be interested in funding climate adaptation projects and how they may be accommodated will be up to the PSF Board, if they put forward such interest before the PSF Board.


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