SALN: What it shows and hides

I used to work with the Philippine government, and as such, was also required to prepare and submit my SALN, and here’s my two cents about this requirement.

The Statement of Assets, Liabilities and Net Worth (SALN) is one of the principal means for promoting transparency and accountability in government. It requires public officials and employees to disclose their assets, liabilities, net worth, business and financial interests, and other information required by law.

Its constitutional foundation is simple: public office is a public trust. The SALN is, therefore, not merely an administrative form.

It is intended to provide the public and government oversight agencies with a means of examining whether an official's financial circumstances are consistent with lawful income and whether potential conflicts of interest exist.

Yet recent controversies surrounding the SALN in the impeachment trial of Vice President Sara Duterte also demonstrate the limitations of the present system.

Objectives of the SALN

The first objective of the SALN is transparency. Citizens have a legitimate interest in knowing the financial circumstances of those who hold public office. Requiring officials to disclose their net worth creates a record against which changes in wealth can be examined over time.

Second, the SALN is intended to deter and detect corruption. SALN is an official’s own declaration of their assets and financial interests, and any wealth not included in said SALN may be presumed to be “hidden”, and probably, ill-gotten.

Significant increases in assets, undisclosed business interests, or inconsistencies between successive SALNs may also raise legitimate questions requiring explanation from said official.

Third, the SALN helps identify conflicts of interest. Disclosure of business interests and financial relationships can reveal circumstances where an official's private interests may conflict with official responsibilities and may indicate the need for recusal, divestment or other safeguards.

Weaknesses of the Present System

The first weakness of the SALN is that it is fundamentally based on self-reporting, and remains private, unless there is a controversy. The official signs the declaration under oath and is responsible for its accuracy.

While government review mechanisms exist, it focuses more on completeness in form, and not necessarily accuracy in substance. A dishonest official can theoretically submit a properly completed document containing incomplete or misleading information, and not be held to account for it.

Second, asset valuation is flawed. SALN is basically what a Balance Sheet is for companies or organizations, wherein accountants and auditors follow generally accepted reporting standards and principles on how items are valued and presented, starting with the most “liquid” asset- cash and cash equivalents.

No such standards exist for SALN. It appears that rules on SALN are crafted without much regard to the purposes for which SALN is created. For instance, “depreciable” personal assets like vehicles are valued at cost year after year until disposed, without regard to depreciation, which is misleading in terms of vehicles’ actual worth or value.

Third, the SALN provides only a snapshot of financial circumstances as of a specific date (usually, end of the year). It does not necessarily reveal the source of funds used to acquire new assets or the transactions that occurred during the year.

To complete the picture, there should be a corresponding Statement of Income and Expenses, and preferably, also a Statement of Cash Flow. SALN alone will not explain the changes in net worth year after year.

Fourth, the SALN form does not provide clear breakdown of personal assets. Major classifications such as cash and cash equivalents, advances and receivables, investments in stocks, etc., are not required to be separately disclosed.

I remember that a SALN trainer told us then that all assets should be included- books, pets, even small items, etc. With due respect, I think that small items or those considered as personal expenses should be dropped, since their inclusion will not serve any of the purposes of the SALN.

Fifth, there is no mechanism for regular checking of SALN. Most corrupt officials get away with even the most revealing SALNs, simply because their SALNs do not get reviewed, and there is no mechanism to require explanation or exact accountability.

I know of a colleague who was “poor” then, and now appears “very rich”. Only when officials get caught in a controversy or

political trouble are their SALNs scrutinized.

How the SALN System Can Be Improved

The first reform should be to establish clearer rules for disclosure and valuation. Officials need practical guidance and rules on what to be included and what valuation to use (cost, net of depreciation, market value, etc) to reduce both inadvertent errors or opportunities for misrepresentation.

Second, there is a need for creation of a secure, integrated electronic SALN system for filing and storage. Digital filing can make records easier to preserve, compare, and review. Successive SALNs could be automatically linked so that significant changes in declared assets and liabilities can be analyzed more efficiently.

Third, SALN review and oversight should be strengthened. The SALNs can be used to deter corruption in the government. For instance, certain circumstances should trigger a review by the concerned government agency, such as unusually large increases in net worth over the years, changes in lifestyle, and substantial unexplained assets.

The DPWH engineers in Bulacan who were involved in the flood control scandals could have been flagged much earlier if their office did its job of SALN verification and review.

Finally, the requirement for disclosure of business interests and beneficial ownership should be improved. Simply identifying a corporation may not be sufficient. The SALN should provide enough information to determine the nature and extent of an official's financial interest.

The financial interests before assumption of office should be clearly stated, and any divestment required by law should be clearly supported.

The goal of reform should therefore be to move from a system of mere “filing and compliance” to one of “disclosure, verification and accountability.”

Clearer disclosure and valuation rules, electronic filing, risk-based review, stronger oversight, and responsible public access can make the SALN considerably more effective for the purposes it was created.

Atty. Nena Radoc is a CPA-Lawyer-MBA with over 40 years of management experience in local and multinational companies.

Disclaimer: The opinions expressed by the author are her own and do not in any way reflect those of Paraluman News.