WHEREAS, its is the policy of the State to maintain honesty and integrity in public service and take positive and effective measures against graft and corruption.

WHEREAS, subject to reasonable conditions prescribed by law, the State adopts and implements a policy of full public disclosure of all its transactions involving public interest.

WHEREAS, in line with the government’s program of good governance, there is a need to streamline procedures for defense contracts for the expeditious implementation of defense projects and the speedy response to speedy response to security threats while promoting transparency, impartiality and accountability in government transactions.

WHEREAS, an interim Presidential Task Force was created to study and reform the procurement and fund disbursement systems of the Armed Forces of the Philippines (AFP) vis-ā-vis delivery of mandate and functions.

WHEREAS, to sustain and institutionalize these initiatives in the AFP and to ensure continuous execution of such reform measures within the organization, a complimentary Department of National Defense (DND) structure will be necessary to rationalize the operational systems and reporting procedures of the Department.

NOW, THEREFORE, I, GLORIA MACAPAGAL-ARROYO, President of the Philippines, by virtue of the powers vested in me by law, do hereby order:

SECTION 1. Creation and Mandate. The Office of the Undersecretary for Internal Control is hereby created in the DND. Among its functions shall be to institutionalize reforms in the procurement and fund disbursement systems in the DND and AFP.

SECTION. 2. Duties and Functions Regarding Institutional Reforms in the Procurement and Fund Disbursement System in the DND and AFP. Among its functions and duties, the Office of the Department of National Defense (DND) Undersecretary for Internal Control shall perform the Following:

1. To recommend and implement improvements in the Procurement and Fund Disbursement Systems of the DND and AFP, and to ensure timely delivery of logistical requirements with the right quality and quantity.
2. To ensure the efficiency of the Procurement and Fund Disbursement of the DND and AFP vis-ā-vis the delivery of the respective mandate and functions of these institutions.
3. To ensure that adequate internal controls are in place at the DND and AFP in the areas of procurement and fund disbursement systems, to determine adherence to existing rules and regulations and their responsiveness to operational requirements. The Undersecretary shall therefore facilitate the establishment of Internal Audit Service Units both at the DND and AFP levels to fulfill this objective, in accordance with Republic Act (R.A.) No 3456 dated June 16 1962 as amended by R.A. No. 4177 dated 26 March 1965, and Administrative Order (A.O.) No. 278 dated 28 April 1992 as amended by A.O. No. 70 dated 14 April 2003.
4. To coordinate with concerned government and non-government institutions the conduct of capacity-building activities and skills enhancement trainings in the areas of procurement and fund disbursement to concerned entities of the DND and AFP, to equip the latter with appropriate tools and techniques on the same.
5. To facilitate the establishment of a single Bids and Awards Committee (BAC) in the DND and AFP procurement contracts over P50 million such as centrally managed and peculiar items. The Undersecretary shall likewise ensure the proper implementation of Executive Order No. 235 (series of 2003) entitled "Streamlining the Rules and Procedures of Defense Contracts" for AFP-wide procurement below P50 million.

SECTION. 3. Multi-Sectoral Support. In its task of institutionalizing reforms in the procurement and fund disbursements in the DND and AFP, the following are enjoined to assist the Office of the DND Undersecretary for Internal Control:

Assistant Commissioner Arcadio B. Cuenco, Jr.

Commission on Audit

Assistant Executive Secretary Alberto A. Bernardo

Internal Audit Service, Office of the President

Major General Cicero L. Castellano

Armed Forces of the Philippines

Major General Carlos F. Garcia

Armed Forces of the Philippines

Director Virginia G. Garriel

Association of Government Internal Auditors of the Philippines

Professor Victor S. Limlingan

Asian Institute of Management

For the purpose of the mandate, duties and functions cited herein, the DND Undersecretary for Internal Control shall be supported by a secretarial staff, the members of which shall be determined and constituted by the Internal Audit Service of the Office of the President.

SECTION. 5. Effectivity. This Executive Order shall take effect immediately.

DONE in the City of Manila, Philippines, this 24^th day of September, in the year of our Lord, two thousand and three.

(Sgd) GLORIA MACAPAGAL-ARROYO

By the President:

(Sgd) ALBERTO G. ROMULO