Looking into the financial records of the Philippine Health Insurance Corp. (PhilHealth), state auditors were dumbfounded to find the agency that collects and maintains hundreds of billions of pesos in public money had a fragmented data system.

The disjointed data management system stemmed from the delayed implementation of an integrated information technology (IT) system.

CoA also reported on the compromised application servers of PhilHealth “due to weak system security measures” that significantly impacted the data capture of various transactions.

State auditors said this manifested a significant weakness in internal control over financial reporting, exposing the information presented in the financial statements “to the heightened risks of misstatements and questionable integrity and reliability.”

Reading between the lines of the report indicated a suspicion that the delay in adopting a centralized digital system was intentional.

The siphoning off of P89.9 billion in so-called PhilHealth excess funds by the Department of Finance was the indirect result of its unreliable record-keeping that classified the amount as a surplus instead of a reserve fund.

The reserve fund is an obligation to its members considering the insurance contract liabilities of an estimated P1.25 trillion.

CoA’s report stated that despite the agency’s mandate, capacity, and substantial transaction volume warranting the urgent procurement and implementation of an integrated IT system, PhilHealth struggled for several years relying on its fragmented data management system.

The audit team in prior annual reviews had emphasized the importance of an integrated system in preparing financial reports.

“In response to the audit team’s recommendation, PhilHealth’s management procured the Enterprise Resource Management Information System (ERMIS) that was delivered on 3 February 2022 as part of the envisioned integrated system solution,” according to the audit report. The procured system has not reached full operational status, however.

The goal of achieving an integrated information system for its financial reporting remains incomplete, according to the CoA.

It said the audit team requested an updated list of information technology (IT) systems being used by the PhilHealth head office, regional branches and other offices, and noted that only two of the total 92 applications or systems were intended primarily for data management and financial reporting which are the Financial Accounting and Reporting Utility (FARU) and the PhilHealth Dashboard.

It added that despite the procurement of the ERMIS in 2022, the prior year’s audit revealed several deficiencies in the procurement planning, inspection of the project, contract implementation, warranty and acceptance concerning ERMIS.

“This protracted procurement process has led to inefficiencies in resource utilization, contradicting government procurement principles,” CoA assessed.

As of 15 December 2023, the implementation of the first phase of ERMIS was in progress, with the development and implementation of the succeeding phase targeted through managed services, the CoA indicated.

PhilHealth is currently procuring several integration systems as part of its digitalization plan, similar to ERMIS, to be developed through managed services.

CoA lamented that while achieving complete integration of the data management system may require significant time, the delayed implementation of ERMIS continues to risk errors, duplicate transactions, data migration issues, data manipulation, and data delays until the integrated system is in place.

The decentralized accounting of voluminous transactions in the PhilHealth head office, 17 regional offices, and five branch offices remains laborious and susceptible to human error.

This condition magnifies the risk of misstatements and questionable integrity and reliability of the information in the financial statements.

Almost in a prayer, CoA reiterated its recommendation that PhilHealth prioritize and expedite the implementation of an integrated IT system.

The leadership at PhilHealth “has fully acknowledged and accepted the noted observation and recommendation,” but CoA said it has not provided a specific timeframe for the project completion.

Those aching to get their hands on the huge reserves of PhilHealth would prefer the inaccurate data system stays.