Millions of dollars in U.S. aid money that flowed to the Philippines when President Ferdinand Marcos was in power may never be accounted for because the U.S. system of cash disbursements lacks adequate safeguards, according to a congressional audit.
The report, prepared by the General Accounting Office, said there was no proof to substantiate allegations that Marcos misused American aid. But the report also said Marcos could have misused it if he wanted to, since foreign governments do not have to account for large portions of U.S. aid.
"He could have done anything he damned well pleased with the money," said Jerry Herley, who led the GAO audit team that prepared the report. "We don't know where the dollars went."
Herley said that even if there was no misuse of U.S. aid, the presence of American dollars in Philippine accounts "could have freed up other foreign exchange reserves," which could have been used to finance Marcos' alleged purchase of expensive real estate in the United States.
The funds in question are given to the Philippines under the Economic Support Fund (ESF) program, a relatively new component of U.S. foreign aid that has become widely used under the Reagan administration. The ESF money, in the form of U.S. dollars, can be used to repay loans.
When ESF dollars are transferred into a foreign account, the country matches them with equal amounts of its currency. According to the interpretation of the U.S. Agency for International Development, which oversees the program, the foreign government is essentially "buying" U.S. dollars for an equivalent amount of its currency.
The United States then oversees disbursement of money from the local currency accounts for specific aid projects.
"We have no reason to be monitoring the dollars that they bought," said Jay F. Morris, the AID deputy administrator. "They buy our currency with foreign exchange, in effect. We are concerned with monitoring the Philippine pesos.
"The purpose is to enable them to repay their debts with U.S. dollars ," Morris said. "Our obligation is to manage the local currency that we got. We care what they do with the dollars in a general sense. But we don't micro-manage every dollar."
Morris acknowledged that such a system hypothetically could allow a corrupt ruler to misuse the dollars he receives. But he said such misuse could be detected if the country failed to make scheduled loan repayments.
ESF dollars donated for a specific project are more easily monitored, officials said, since a road or a school can be inspected. But the dollars deposited for loan repayment usually get mixed in with other government receipts.
AID transferred $92.5 million in nonproject designated ESF funds to the Marcos government in two installments, one in December 1984 and the other in December 1985. AID made the second deposit of $45 million even though the first deposit was not all spent, the GAO said.
The GAO, Congress' investigative arm, has in the past noted the lack of accountability for ESF funds transferred to foreign governments, specifically El Salvador, Honduras and Costa Rica. After a 1984 GAO report pointed out the lack of controls, Congress voted, in the case of El Salvador, that the money be placed in a special, separate account and not mixed in with other government revenue.
The GAO in its report, and several U.S. officials in their private remarks, noted the political difficulty in exerting more control over U.S. aid money. The ESF program gives the administration more flexibility to make large cash donations to allies such as Israel -- the largest ESF recipient by far -- Egypt, Greece and Turkey.
The political difficulty in the Philippines is heightened by the fact that the Marcos government, and now the new government of President Corazon Aquino, have consistently viewed ESF payments as a kind of informal "rent" for the presence of American military facilities on Philippine soil.
Also, one official said, any attempt to introduce tighter safeguards might be resented by the new Philippine government, since a change in the regulations essentially would be subjecting Aquino to greater controls than those placed on Marcos.
The GAO report was prepared for Sen. Edward M. Kennedy (D-Mass.), who said yesterday it "underscores fundamental problems with our foreign aid program. We don't know what our aid is being used for and we aren't even trying to find out." The current system, Kennedy said, is based on "blind trust."
Morris said any controls on the U.S. dollars would violate the understanding between Manila and Washington. "I think sovereign governments would have a lot of problems with that," he said. "I think there is a misunderstanding and a misperception. If the GAO feels that further improvement is needed, it would be helpful if they said how."