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MANILA (Reuters) - A top adviser to Philippine President Benigno Aquino is facing a corruption investigation, a government agency said on Wednesday, a potential blow for the president who has built a reputation as a graft fighter.
The anti-graft agency Ombudsman said the adviser, Budget Secretary Florencio "Butch" Abad, and his deputy, Mario Relampagos, were "facing preliminary investigation for technical malverzation and administrative charges".
The case was related to the transfer of funds to government projects outside of what was approved by Congress, it said.
Aquino had made fighting corruption a priority of his administration but he has struggled to keep scandals involving allies and friends at arm's length.
Graft allegations are far from new in the Philippines and little has changed despite Aquino's reform drive.
Abad, who served as Aquino's campaign manager for a 2007 Senate election and the presidential election in 2010, denied wrongdoing, and said he welcomed the investigation of the disbursement program.
"Technical malverzation does not suggest that the individuals in question committed acts of graft or corruption," Abad said in a statement.
He said he and Relampagos "acted in good faith and with regularity in the performance of their official duties" and their action helped accelerate public spending and boosted the economy.
Last year, the Supreme Court declared parts of Aquino's disbursement program unconstitutional, particularly the transfer of funds amounting to more than 280 million pesos ($5.99 million) from the executive department to other government branches.
The court decision was a big blow to Aquino's program to stimulate the economy, dealing a setback to his bid to portray himself as a champion of the fight against corruption.
The Ombudsman said some projects, like the construction of legislative library, were not among those approved by the president, and so were a clear violation of the law.
Aquino will step down next year at the end of a single five-year term, as allowed under the constitution.
A May presidential election will be closely watched by investors, who fear the political succession in one of Asia's fastest growing economies could derail gains made during his rule.
Under Aquino, the Philippines has seen economic growth of more than 6 percent on average, its best 5-year record in four decades.
Reporting By Manuel Mogato; Editing by Robert Birsel