Defense Reform and Fund Stewardship Order

Constitutional and programmatic basis

Article XI, Section 1 of the 1987 Constitution is cited to require accountability of public officers and employees to the people.
The order identifies recurring allegations of graft and corruption in the AFP, involving particularly the defunct Deputy Chief of Staff for Comptrollership, J6.
The order cites the RP-US Joint Defense Assessment (JDA) completed in September 2003 as revealing critical deficiencies in Philippine defense and military establishment, including policy planning, personnel management and leadership, defense expenditures and budgeting, acquisition, supply and maintenance, quality assurance for existing industrial base, and infrastructure support.
The order cites recommendations of the JDA to establish an effective and efficient accounting and financial management system supporting planning, programming, and execution of modernization and other multi-year capability development programs.
The order cites the Feliciano Fact-Finding Commission (Feliciano Commission) (2003) as finding bases for grievances involving graft and corruption, including matters connected with the retirement and separation benefits system, modernization fund, and procurement system, and as recommending reform focusing on AFP financial management systems to reduce opportunities for corruption, misappropriation, and misuse of public funds.
The order references DND Department Order No. 82 dated 30 November 2005 as having introduced reforms under the Philippine Defense Reform (PDR) Program after the Deputy Chief of Staff for Comptrollership, J6 revelations, incorporating reform initiatives and management structures/processes.
The order specifically ties defense capability upgrade and procurement compliance to Republic Act No. 9184 (Government Procurement Act).

Core policy intent and coverage

The order directs the full implementation and strengthening of systems to improve financial and management controls in the defense and military establishment.
It requires optimization of the defense budget while continuing defense reform programs and implementing JDA and Feliciano Commission recommendations.
It institutionalizes proper stewardship of public funds by the Department of National Defense (DND) and the Armed Forces of the Philippines (AFP).
It mandates investigation and coordination to support the expeditious and effective filing of criminal and/or administrative cases against erring DND and AFP personnel.
It covers actions by the Secretary of National Defense, the Secretary of Budget and Management, DND, AFP, the Department of Justice (DOJ), and supporting government instrumentalities.

Comprehensive defense reform review (Section 1)

The Secretary of National Defense must conduct a comprehensive and intensified review of the status of defense reform program implementation.
The review must be concluded within sixty (60) days from issuance and must focus on the implementation status of the following reform areas:
- The Defense System of Management (DSOM), built on a strategy-driven, capability-based, multi-year planning process, including four mutually supporting components:
  - The Defense Strategic Planning System (DSPS);
  - The Defense Capability Assessment and Planning System (DCAPS);
  - The Defense Acquisition System (DAS);
  - The Defense Resource Management System (DRMS) incorporating two sub-systems:
    - Planning, Programming, Budgeting and Execution System (PPBES); and
    - Financial Management System (FMS).
- Improvement of logistics capacity to address, among others, urgent requirements for combat operations.
- Transparent implementation of the AFP Capability Upgrade Program (CUP) that optimizes the use of the Modernization Trust Fund through a centralized defense acquisition system under the DND.
- Compliance of the centralized defense acquisition system with Republic Act No. 9184.
- Optimization of the defense budget and improved financial and management controls that push resources to operating units down to the company commanders and minimize centrally managed funds in the AFP General Headquarters.

Public funds stewardship assessment (Section 2)

The Secretary of National Defense and the Secretary of Budget and Management must jointly conduct a comprehensive review and assessment of current policies, guidelines, and processes related to stewardship of public funds by the DND and the AFP.
The joint report and recommendations must be submitted to the Office of the President within sixty (60) days from issuance.
After completion of the review and assessment, the Secretary of National Defense must incorporate the findings into appropriate reform programs.
The Secretary of National Defense must ensure the full and immediate implementation of the incorporated findings.

Investigation and DOJ coordination (Section 3)

The Secretary of National Defense must immediately re-convene the DND-SIC.
The DND-SIC is constituted through Department Order No. 22 (dated 28 January 2011).
The DND-SIC is directed to Investigate and Inquire on the Irregularities and Corrupt Practices of MGEN Carlos Garcia and Others.
The DND and DOJ must coordinate based on the DND-SIC findings to determine whether appropriate criminal and/or administrative cases may be filed against erring officers or personnel.
Within ninety (90) days from issuance, the DND and DOJ must submit a report to the Office of the President stating whether criminal and/or administrative cases have been filed.
If no cases have been filed, the report must state the reasons for the non-filing.

Agency assistance obligation (Section 4)

All departments, bureaus, agencies, and instrumentalities, including government-owned or controlled corporations, must provide support to the Secretary of National Defense and the Secretary of Budget and Management.
The support must be given to enable them to discharge their functions under the Memorandum Order.

Reporting requirements and timelines (Sections 5)

Within ninety (90) days from issuance, the Secretary of National Defense and the Secretary of Budget and Management must jointly submit a progress report to the Office of the President.
The progress report must focus on implementation of Sections 1 and 2.
After the initial progress report, the same officials must jointly submit quarterly reports to the Office of the President on implementation of this Memorandum Order.

Separability, repealing, and effectivity (Sections 6–8)

Section 6 provides a separability clause: if any provision is declared unconstitutional, other provisions remain valid and effective.
Section 7 provides a repealing clause: all executive issuances, rules and regulations, or parts thereof inconsistent with the Memorandum Order are revoked, amended, or modified accordingly.
Section 8 provides that the Memorandum Order takes effect immediately.