EN BANC

[G.R. No. 125350. December 3, 2002.]

HON. RTC JUDGES MERCEDES G. DADOLE (Executive Judge, Branch

28), ULRIC R. CAÑETE (Presiding Judge, Branch 25), AGUSTINE R.
VESTIL (Presiding Judge, Branch 56), HON. MTC JUDGES
TEMISTOCLES M. BOHOLST (Presiding Judge, Branch 1), VICENTE
C. FANILAG (Judge Designate, Branch 2), and WILFREDO A.
DAGATAN (Presiding Judge, Branch 3), all of Mandaue City ,
petitioners, vs . COMMISSION ON AUDIT , respondent.

Malcomn D. Seno for petitioners.

The Solicitor General for respondent.

SYNOPSIS

In 1986, petitioners as RTC and MTC judges stationed in Mandaue City received a
monthly allowance of P1,260 each pursuant to the yearly appropriation ordinance.
Eventually, in 1991, it was increased to P1,500 for each judge. However, on March 15,
1994, the Department of Budget and Management (DBM) issued Local Budget Circular No.
55 (LBC 55) which provides that the additional monthly allowances to be given by a local
government unit should not exceed P1,000 in provinces and cities and P700 in
municipalities. Acting on the said DBM directive, the Mandaue City Auditor issued notices
of disallowance to herein petitioners in excess of the amount authorized by LBC 55. Thus,
petitioners led with the O ce of the City Auditor a protest. However, it was treated as a
motion for reconsideration and was endorsed to the Commission on Audit (COA) Regional
O ce No. 7. In turn, the COA Regional O ce referred the said motion to their Head O ce
with recommendation that the same should be denied. Accordingly, it was denied by the
COA. Hence, petitioners led the instant petition. They argued, among others, that LBC 55
is void for infringing on the local autonomy of Mandaue City by dictating a uniform amount
that a local government unit can disburse as additional allowances to judges stationed
therein. cADSCT

The Court ruled in favor of the petitioner judges. Section 458, par. (a)(1)(xi), of RA
7160, the law that supposedly serves as the legal basis of LBC 55, allows the grant of
additional allowances to judges "when the nances of the city government allow." The said
provision does not authorize setting a de nite maximum limit to the additional allowances
granted to judges. Thus, this Court need not belabor the point that the nances of a city
government may allow the grant of additional allowances higher than P1,000 if the
revenues of the said city government exceed its annual expenditures. Setting a uniform
amount for the grant of additional allowances is an inappropriate way of enforcing the
criterion found in Section 458, par. (a)(l)(xi), of RA 7160. The DBM over-stepped its power
of supervision over local government units by imposing a prohibition that did not
correspond with the law it sought to implement. In other words, the prohibitory nature of
the circular had no legal basis.

SYLLABUS
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 1. POLITICAL LAW; LOCAL GOVERNMENT; AUTONOMY OF LOCAL
GOVERNMENT UNITS; SUBJECT TO THE POWER OF CONTROL BY CONGRESS AND THE
POWER OF SUPERVISION BY THE PRESIDENT. — We recognize that, although our
Constitution guarantees autonomy to local government units, the exercise of local
autonomy remains subject to the power of control by Congress and the power of
supervision by the President. Section 4 of Article X of the 1987 Philippine Constitution
provides that: "Sec. 4. The President of the Philippines shall exercise general supervision
over local governments. . . . "
2. ID.; ID.; ID.; PRESIDENT CAN ONLY INTERFERE IN THE AFFAIRS AND
ACTIVITIES OF THE LOCAL GOVERNMENT UNIT IF HE FINDS THAT THE LATTER HAS
ACTED CONTRARY TO LAW. — The President can only interfere in the affairs and activities
of a local government unit if he or she nds that the latter has acted contrary to law. This is
the scope of the President's supervisory powers over local government units. Hence, the
President or any of his or her alter egos cannot interfere in local affairs as long as the
concerned local government unit acts within the parameters of the law and the
Constitution. Any directive therefore by the President or any of his or her alter egos
seeking to alter the wisdom of a law-conforming judgment on local affairs of a local
government unit is a patent nullity because it violates the principle of local autonomy and
separation of powers of the executive and legislative departments in governing municipal
corporations.
3. ID.; ADMINISTRATIVE LAW; REPUBLIC ACT NO. 7160 (LOCAL GOVERNMENT
CODE OF 1991); DOES NOT SET A MAXIMUM LIMIT TO THE ADDITIONAL ALLOWANCES
GRANTED TO JUDGES. — LBC 55 provides that the additional monthly allowances to be
given by a local government unit should not exceed P1,000 in provinces and cities and
P700 in municipalities. Section 458, par. (a)(1)(xi), of RA 7160, the law that supposedly
serves as the legal basis of LBC 55, allows the grant of additional allowances to judges
"when the nances of the city government allow." The said provision does not authorize
setting a de nite maximum limit to the additional allowances granted to judges. Thus, we
need not belabor the point that the nances of a city government may allow the grant of
additional allowances higher than P1,000 if the revenues of the said city government
exceed its annual expenditures. Thus, to illustrate, a city government with locally generated
annual revenues of P40 million and expenditures of P35 million can afford to grant
additional allowances of more than P1,000 each to, say, ten judges inasmuch as the
finances of the city can afford it.
4. ID.; ID.; ID.; ID.; JUST BECAUSE CITY'S LOCALLY GENERATED REVENUES
WERE NOT ENOUGH TO COVER ITS EXPENDITURES DID NOT MEAN THAT THE
ADDITIONAL ALLOWANCES OF JUDGES WERE TAKEN FROM INTERNAL REVENUE
ALLOTMENT (IRA). — Respondent COA failed to prove that Mandaue City used the IRA to
spend for the additional allowances of the judges. There was no evidence submitted by
COA showing the breakdown of the expenses of the city government and the funds used
for said expenses. All the COA presented were the amounts expended, the locally
generated revenues, the de cit, the surplus and the IRA received each year. Aside from
these items, no data or gures were presented to show that Mandaue City deducted the
subject allowances from the IRA. In other words, just because Mandaue City's locally
generated revenues were not enough to cover its expenditures, this did not mean that the
additional allowances of petitioner judges were taken from the IRA and not from the city's
own revenues.
5. ID.; ID.; ID.; ID.; DEPARTMENT OF BUDGET AND MANAGEMENT (DBM) CAN
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 NO LONGER QUESTION THE LEGALITY OF CITY'S APPROPRIATION ORDINANCES FOR
FAILURE TO CONDUCT A FORMAL REVIEW; CASE AT BAR. — [T]he DBM neither conducted
a formal review nor ordered a disapproval of Mandaue City's appropriation ordinances, in
accordance with the procedure outlined by Sections 326 and 327 of RA 7160[.] . . . Within
90 days from receipt of the copies of the appropriation ordinance, the DBM should have
taken positive action. Otherwise, such ordinance was deemed to have been properly
reviewed and deemed to have taken effect. Inasmuch as, in the instant case, the DBM did
not follow the appropriate procedure for reviewing the subject ordinance of Mandaue City
and allowed the 90-day period to lapse, it can no longer question the legality of the
provisions in the said ordinance granting additional allowances to judges stationed in the
said city.
6. ID.; ID.; DBM LOCAL BUDGET CIRCULAR NO. 55; PROHIBITORY NATURE
THEREOF HAD NO LEGAL BASIS. — Setting a uniform amount for the grant of additional
allowances is an inappropriate way of enforcing the criterion found in Section 458, par. (a)
(l)(xi), of RA 7160. The DBM over-stepped its power of supervision over local government
units by imposing a prohibition that did not correspond with the law it sought to
implement. In other words, the prohibitory nature of the circular had no legal basis.
7. ID.; ID.; ID.; VOID ON ACCOUNT OF ITS LACK OF PUBLICATION. — LBC 55 is
void on account of its lack of publication, in violation of our ruling in Tañada vs. Tuvera
where we held that: ". . . . Administrative rules and regulations must also be published if
their purpose is to enforce or implement existing law pursuant to a valid delegation.
Interpretative regulations and those merely internal in nature, that is, regulating only the
personnel of an administrative agency and the public, need not be published. Neither is
publication required of the so-called letters of instruction issued by administrative
superiors concerning the rules or guidelines to be followed by their subordinates in the
performance of their duties." Respondent COA claims that publication is not required for
LBC 55 inasmuch as it is merely an interpretative regulation applicable to the personnel of
an LGU. We disagree. In De Jesus vs. Commission on Audit where we dealt with the same
issue, this Court declared void, for lack of publication, a DBM circular that disallowed
payment of allowances and other additional compensation to government o cials and
employees. STcADa

DECISION

CORONA , J : p

Before us is a petition for certiorari under Rule 64 to annul the decision 1 and
resolution, 2 dated September 21, 1995 and May 28, 1996, respectively, of the respondent
Commission on Audit (COA) a rming the notices of the Mandaue City Auditor which
diminished the monthly additional allowances received by the petitioner judges of the
Regional Trial Court (RTC) and Municipal Trial Court (MTC) stationed in Mandaue City. CHEIcS

The undisputed facts are as follows:

In 1986, the RTC and MTC judges of Mandaue City started receiving monthly
allowances of P1,260 each through the yearly appropriation ordinance enacted by the
Sangguniang Panlungsod of the said city. In 1991, Mandaue City increased the amount to
P1,500 for each judge.
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 On March 15, 1994, the Department of Budget and Management (DBM) issued the
disputed Local Budget Circular No. 55 (LBC 55) which provided that:

"xxx xxx xxx

2.3.2. In the light of the authority granted to the local government units
under the Local Government Code to provide for additional allowances and other
benefits to national government officials and employees assigned in their locality,
such additional allowances in the form of honorarium at rates not exceeding
P1,000.00 in provinces and cities and P700.00 in municipalities may be granted
subject to the following conditions:

a) That the grant is not mandatory on the part of the LGUs;

b) That all contractual and statutory obligations of the LGU
including the implementation of R.A. 6758 shall have been fully provided in
the budget;
c) That the budgetary requirements/limitations under Section
324 and 325 of R.A. 7160 should be satisfied and/or complied with; and
d) That the LGU has fully implemented the devolution of
functions/personnel in accordance with R.A. 7160." 3 (italics supplied)
xxx xxx xxx

The said circular likewise provided for its immediate effectivity without need of
publication:
"5.0 EFFECTIVITY
This Circular shall take effect immediately."

Acting on the DBM directive, the Mandaue City Auditor issued notices of
disallowance to herein petitioners, namely, Honorable RTC Judges Mercedes G. Dadole,
Ulric R. Cañete, Agustin R. Vestil, Honorable MTC Judges Temistocles M. Boholst, Vicente
C. Fanilag and Wilfredo A. Dagatan, in excess of the amount authorized by LBC 55.
Beginning October, 1994, the additional monthly allowances of the petitioner judges were
reduced to P1,000 each. They were also asked to reimburse the amount they received in
excess of P1,000 from April to September, 1994.
The petitioner judges led with the O ce of the City Auditor a protest against the
notices of disallowance. But the City Auditor treated the protest as a motion for
reconsideration and indorsed the same to the COA Regional O ce No. 7. In turn, the COA
Regional O ce referred the motion to the head o ce with a recommendation that the
same be denied.
On September 21, 1995, respondent COA rendered a decision denying petitioners'
motion for reconsideration. The COA held that:
The issue to be resolved in the instant appeal is whether or not the City
Ordinance of Mandaue which provides a higher rate of allowances to the
appellant judges may prevail over that xed by the DBM under Local Budget
Circular No. 55 dated March 15, 1994.

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 xxx xxx xxx
Applying the foregoing doctrine, appropriation ordinance of local
government units is subject to the organizational, budgetary and compensation
policies of budgetary authorities (COA 5th Ind., dated March 17, 1994 re: Province
of Antique; COA letter dated May 17, 1994 re: Request of Hon. Renato Leviste,
Cong. 1st Dist. Oriental Mindoro). In this regard, attention is invited to
Administrative Order No. 42 issued on March 3, 1993 by the President of the
Philippines clarifying the role of DBM in the compensation and classi cation of
local government positions under RA No. 7160 vis-a-vis the provisions of RA No.
6758 in view of the abolition of the JCLGPA. Section 1 of said Administrative
Order provides that:
"Section 1. The Department of Budget and Management as the lead
administrator of RA No. 6758 shall, through its Compensation and Position
Classi cation Bureau, continue to have the following responsibilities in
connection with the implementation of the Local Government Code of
1991:

a) Provide guidelines on the classification of local government

positions and on the specific rates of pay therefore;
b) Provide criteria and guidelines for the grant of all allowances
and additional forms of compensation to local government
employees; . . . ." (italics supplied)

To operationalize the aforecited presidential directive, DBM issued LBC No.

55, dated March 15, 1994, whose effectivity clause provides that:

xxx xxx xxx

"5.0 EFFECTIVITY
This Circular shall take effect immediately."

It is a well-settled rule that implementing rules and regulations

promulgated by administrative or executive o cer in accordance with, and as
authorized by law, has the force and effect of law or partake the nature of a
statute (Victorias Milling Co., Inc., vs. Social Security Commission, 114 Phil. 555,
cited in Agpalo's Statutory Construction, 2nd Ed. P. 16; Justice Cruz's Phil.
Political Law, 1984 Ed., p. 103; Espanol vs. Phil Veterans Administration, 137
SCRA 314; Antique Sawmills Inc. vs. Tayco, 17 SCRA 316).
xxx xxx xxx
There being no statutory basis to grant additional allowance to judges in
excess of P1,000.00 chargeable against the local government units where they
are stationed, this Commission nds no substantial grounds or cogent reason to
disturb the decision of the City Auditor, Mandaue City, disallowing in audit the
allowances in question. Accordingly, the above-captioned appeal of the MTC and
RTC Judges of Mandaue City, insofar as the same is not covered by Circular
Letter No. 91-7, is hereby dismissed for lack of merit.

xxx xxx xxx 4

On November 27, 1995, Executive Judge Mercedes Gozo-Dadole, for and in behalf of
the petitioner judges, led a motion for reconsideration of the decision of the COA. In a
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 resolution dated May 28, 1996, the COA denied the motion.
Hence, this petition for certiorari by the petitioner judges, submitting the following
questions for resolution:
I
HAS THE CITY OF MANDAUE STATUTORY AND CONSTITUTIONAL BASIS TO
PROVIDE ADDITIONAL ALLOWANCES AND OTHER BENEFITS TO JUDGES
STATIONED IN AND ASSIGNED TO THE CITY?
II

CAN AN ADMINISTRATIVE CIRCULAR OR GUIDELINE SUCH AS LOCAL BUDGET

CIRCULAR NO. 55 RENDER INOPERATIVE THE POWER OF THE LEGISLATIVE
BODY OF A CITY BY SETTING A LIMIT TO THE EXTENT OF THE EXERCISE OF
SUCH POWER?
III

HAS THE COMMISSION ON AUDIT CORRECTLY INTERPRETED LOCAL BUDGET

CIRCULAR NO. 55 TO INCLUDE MEMBERS OF THE JUDICIARY IN FIXING THE
CEILING OF ADDITIONAL ALLOWANCES AND BENEFITS TO BE PROVIDED TO
JUDGES STATIONED IN AND ASSIGNED TO MANDAUE CITY BY THE CITY
GOVERNMENT AT P1,000.00 PER MONTH NOTWITHSTANDING THAT THEY
HAVE BEEN RECEIVING ALLOWANCES OF P1,500.00 MONTHLY FOR THE PAST
FIVE YEARS?
IV
IS LOCAL BUDGET CIRCULAR NO. 55 DATED MARCH 15, 1994 ISSUED BY THE
DEPARTMENT OF BUDGET AND MANAGEMENT VALID AND ENFORCEABLE
CONSIDERING THAT IT WAS NOT DULY PUBLISHED IN ACCORDANCE WITH
LAW? 5

Petitioner judges argue that LBC 55 is void for infringing on the local autonomy of
Mandaue City by dictating a uniform amount that a local government unit can disburse as
additional allowances to judges stationed therein. They maintain that said circular is not
supported by any law and therefore goes beyond the supervisory powers of the President.
They further allege that said circular is void for lack of publication.
On the other hand, the yearly appropriation ordinance providing for additional
allowances to judges is allowed by Section 458, par. (a)(1)[xi], of RA 7160, otherwise
known as the Local Government Code of 1991, which provides that:
Sec. 458. Powers, Duties, Functions and Compensation. — (a) The
sangguniang panlungsod, as the legislative body of the city, shall enact
ordinances, approve resolutions and appropriate funds for the general welfare of
the city and its inhabitants pursuant to Section 16 of this Code and in the proper
exercise of the corporate powers of the city as provided for under Section 22 of
this Code, and shall:

(1) Approve ordinances and pass resolutions necessary for an efficient and
effective city government, and in this connection, shall:
xxx xxx xxx

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 (xi) When the nances of the city government allow, provide for
additional allowances and other bene ts to judges, prosecutors, public
elementary and high school teachers, and other national government
officials stationed in or assigned to the city; (italics supplied)
Instead of ling a comment on behalf of respondent COA, the Solicitor General led
a manifestation supporting the position of the petitioner judges. The Solicitor General
argues that (1) DBM only enjoys the power to review and determine whether the
disbursements of funds were made in accordance with the ordinance passed by a local
government unit while (2) the COA has no more than auditorial visitation powers over the
local government units pursuant to Section 348 of RA 7160 which provides for the power
to inspect at any time the financial accounts of local government units.
Moreover, the Solicitor General opines that "the DBM and the respondent are only
authorized under RA 7160 to promulgate a Budget Operations Manual for local
government units, to improve and systematize methods, techniques and procedures
employed in budget preparation, authorization, execution and accountability" pursuant to
Section 354 of RA 7160. The Solicitor General points out that LBC 55 was not exercised
under any of the aforementioned provisions.
Respondent COA, on the other hand, insists that the constitutional and statutory
authority of a city government to provide allowances to judges stationed therein is not
absolute. Congress may set limitations on the exercise of autonomy. It is for the President,
through the DBM, to check whether these legislative limitations are being followed by the
local government units.
One such law imposing a limitation on a local government unit's autonomy is Section
458, par. (a) (1) [xi], of RA 7160, which authorizes the disbursement of additional
allowances and other bene ts to judges subject to the condition that the nances of the
city government should allow the same. Thus, DBM is merely enforcing the condition of the
law when it sets a uniform maximum amount for the additional allowances that a city
government can release to judges stationed therein.
Assuming arguendo that LBC 55 is void, respondent COA maintains that the
provisions of the yearly approved ordinance granting additional allowances to judges are
still prohibited by the appropriation laws passed by Congress every year. COA argues that
Mandaue City gets the funds for the said additional allowances of judges from the Internal
Revenue Allotment (IRA). But the General Appropriations Acts of 1994 and 1995 do not
mention the disbursement of additional allowances to judges as one of the allowable uses
of the IRA. Hence, the provisions of said ordinance granting additional allowances, taken
from the IRA, to herein petitioner judges are void for being contrary to law.
To resolve the instant petition, there are two issues that we must address: (1)
whether LBC 55 of the DBM is void foregoing beyond the supervisory powers of the
President and for not having been published and (2) whether the yearly appropriation
ordinance enacted by the City of Mandaue that provides for additional allowances to
judges contravenes the annual appropriation laws enacted by Congress.
We rule in favor of the petitioner judges.
On the first issue, we declare LBC 55 to be null and void.
We recognize that, although our Constitution 6 guarantees autonomy to local
government units, the exercise of local autonomy remains subject to the power of control
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 by Congress and the power of supervision by the President. Section 4 of Article X of the
1987 Philippine Constitution provides that:
Sec. 4. The President of the Philippines shall exercise general supervision
over local governments. . . .

I n Pimentel vs. Aguirre, 7 we de ned the supervisory power of the President and
distinguished it from the power of control exercised by Congress. Thus:
This provision (Section 4 of Article X of the 1987 Philippine Constitution)
has been interpreted to exclude the power of control. In Mondano v. Silvosa, i[5] the
Court contrasted the President's power of supervision over local government
o cials with that of his power of control over executive o cials of the national
government. It was emphasized that the two terms — supervision and control —
differed in meaning and extent. The Court distinguished them as follows:
". . . In administrative law, supervision means overseeing or the power or
authority of an o cer to see that subordinate o cers perform their duties. If the
latter fail or neglect to ful ll them, the former may take such action or step as
prescribed by law to make them perform their duties. Control, on the other hand,
means the power of an o cer to alter or modify or nullify or set aside what a
subordinate o cer ha[s] done in the performance of his duties and to substitute
the judgment of the former for that of the latter." ii[6]
In Taule v. Santos , iii[7] we further stated that the Chief Executive wielded no
more authority than that of checking whether local governments or their o cials
were performing their duties as provided by the fundamental law and by statutes.
He cannot interfere with local governments, so long as they act within the scope
of their authority. "Supervisory power, when contrasted with control, is the power
of mere oversight over an inferior body; it does not include any restraining
authority over such body," iv[8] we said.
In a more recent case, Drilon v. Lim , v[9] the difference between control and
supervision was further delineated. O cers in control lay down the rules in the
performance or accomplishment of act. If these rules are not followed, they may,
in their discretion, order the act undone or redone by their subordinates or even
decide to do it themselves. On the other hand, supervision does not cover such
authority. Supervising o cials merely see to it that the rules are followed, but
they themselves do not lay down such rules, nor do they have the discretion to
modify or replace them. If the rules are not observed, they may order the work
done or redone, but only to conform to such rules. They may not prescribe their
own manner of execution of the act. They have no discretion on this matter
except to see to it that the rules are followed.
Under our present system of government, executive power is vested in the
President. vi[10] The members of the Cabinet and other executive o cials are
merely alter egos. As such, they are subject to the power of control of the
President, at whose will and behest they can be removed from o ce; or their
actions and decisions changed, suspended or reversed. vii[11] In contrast, the heads
of political subdivisions are elected by the people. Their sovereign powers
emanate from the electorate, to whom they are directly accountable. By
constitutional at, they are subject to the President's supervision only, not control,
so long as their acts are exercised within the sphere of their legitimate powers. By
the same token, the President may not withhold or alter any authority or power
given them by the Constitution and the law.
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 Clearly then, the President can only interfere in the affairs and activities of a local
government unit if he or she nds that the latter has acted contrary to law. This is the
scope of the President's supervisory powers over local government units. Hence, the
President or any of his or her alter egos cannot interfere in local affairs as long as the
concerned local government unit acts within the parameters of the law and the
Constitution. Any directive therefore by the President or any of his or her alter egos
seeking to alter the wisdom of a law-conforming judgment on local affairs of a local
government unit is a patent nullity because it violates the principle of local autonomy and
separation of powers of the executive and legislative departments in governing municipal
corporations.
Does LBC 55 go beyond the law it seeks to implement? Yes.
LBC 55 provides that the additional monthly allowances to be given by a local
government unit should not exceed P1,000 in provinces and cities and P700 in
municipalities. Section 458, par. (a)(1)(xi), of RA 7160, the law that supposedly serves as
the legal basis of LBC 55, allows the grant of additional allowances "when the nances of
the city government allow." The said provision does not authorize setting a de nite
maximum limit to the additional allowances granted to judges. Thus, we need not belabor
the point that the nances of a city government may allow the grant of additional
allowances higher than P1,000 if the revenues of the said city government exceed its
annual expenditures. Thus, to illustrate, a city government with locally generated annual
revenues of P40 million and expenditures of P35 million can afford to grant allowances of
more than P1,000 each to, say, ten judges inasmuch as the nances of the city can afford
it.
Setting a uniform amount for the grant of additional allowances is an inappropriate
way of enforcing the criterion found in Section 458, par. (a)(1)(xi), of RA 7160. The DBM
over-stepped its power of supervision over local government units by imposing a
prohibition that did not correspond with the law it sought to implement. In other words, the
prohibitory nature of the circular had no legal basis.
Furthermore, LBC 55 is void on account of its lack of publication, in violation of our
ruling in Tañada vs. Tuvera 8 where we held that:
. . . . Administrative rules and regulations must also be published if their
purpose is to enforce or implement existing law pursuant to a valid delegation.
Interpretative regulations and those merely internal in nature, that is,
regulating only the personnel of an administrative agency and the public, need
not be published. Neither is publication required of the so-called letters of
instruction issued by administrative superiors concerning the rules or guidelines
to be followed by their subordinates in the performance of their duties.

Respondent COA claims that publication is not required for LBC 55, inasmuch as it is
merely an interpretative regulation applicable to the personnel of an LGU. We disagree. In
De Jesus vs. Commission on Audit 9 where we dealt with the same issue, this Court
declared void, for lack of publication, a DBM circular that disallowed payment of
allowances and other additional compensation to government o cials and employees. In
refuting respondent COA's argument that said circular was merely an internal regulation,
we ruled that:
On the need for publication of subject DBM-CCC No. 10, we rule in the
a rmative. Following the doctrine enunciated in Tañada v. Tuvera , publication in
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 the O cial Gazette or in a newspaper of general circulation in the Philippines is
required since DBM-CCC No. 10 is in the nature of an administrative circular the
purpose of which is to enforce or implement an existing law. Stated differently, to
be effective and enforceable, DBM-CCC No. 10 must go through the requisite
publication in the O cial Gazette or in a newspaper of general circulation in the
Philippines.

In the present case under scrutiny, it is decisively clear that DBM-CCC No.
10, which completely disallows payment of allowances and other additional
compensation to government officials and employees, starting November 1, 1989,
is not a mere interpretative or internal regulation. It is something more than that.
And why not, when it tends to deprive government workers of their allowance and
additional compensation sorely needed to keep body and soul together. At the
very least, before the said circular under attack may be permitted to substantially
reduce their income, the government o cials and employees concerned should
be apprised and alerted by the publication of subject circular in the O cial
Gazette or in a newspaper of general circulation in the Philippines — to the end
that they be given amplest opportunity to voice out whatever opposition they may
have, and to ventilate their stance on the matter. This approach is more in keeping
with democratic precepts and rudiments of fairness and transparency. (italics
supplied)

In Philippine International Trading Corporation vs. Commission on Audit, 1 0 we again

declared the same circular void, for lack of publication, despite the fact that it was re-
issued and then submitted for publication. Emphasizing the importance of publication to
the effectivity of a regulation, we therein held that:
It has come to our knowledge that DBM-CCC No. 10 has been re-issued in
its entirety and submitted for publication in the O cial Gazette per letter to the
National Printing O ce dated March 9, 1999. Would the subsequent publication
thereof cure the defect and retroact to the time that the above-mentioned items
were disallowed in audit?
The answer is in the negative, precisely for the reason that publication is
required as a condition precedent to the effectivity of a law to inform the public of
the contents of the law or rules and regulations before their rights and interests
are affected by the same. From the time the COA disallowed the expenses in audit
up to the ling of herein petition the subject circular remained in legal limbo due
to its non-publication. As was stated in Tañada v. Tuvera, "prior publication of
laws before they become effective cannot be dispensed with, for the reason that it
would deny the public knowledge of the laws that are supposed to govern it." 1 1

We now resolve the second issue of whether the yearly appropriation ordinance
enacted by Mandaue City providing for xed allowances for judges contravenes any law
and should therefore be struck down as null and void.
According to respondent COA, even if LBC 55 were void, the ordinances enacted by
Mandaue City granting additional allowances to the petitioner judges would "still (be)
bereft of legal basis for want of a lawful source of funds considering that the IRA cannot
be used for such purposes." Respondent COA showed that Mandaue City's funds
consisted of locally generated revenues and the IRA. From 1989 to 1995, Mandaue City's
yearly expenditures exceeded its locally generated revenues, thus resulting in a de cit.
During all those years, it was the IRA that enabled Mandaue City to incur a surplus.
Respondent avers that Mandaue City used its IRA to pay for said additional allowances and
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 this violated paragraph 2 of the Special Provisions page 1060, of RA 7845 (The General
Appropriations Act of 1995) 1 2 and paragraph 3 of the Special Provision, page 1225, of RA
7663 (The General Appropriations Act of 1994) 1 3 which speci cally identi ed the objects
of expenditure of the IRA. Nowhere in said provisions of the two budgetary laws does it
say that the IRA can be used for additional allowances of judges. Respondent COA thus
argues that the provisions in the ordinance providing for such disbursement are against
the law, considering that the grant of the subject allowances is not within the speci ed use
allowed by the aforesaid yearly appropriations acts.
We disagree.
Respondent COA failed to prove that Mandaue City used the IRA to spend for the
additional allowances of the judges. There was no evidence submitted by COA showing
the breakdown of the expenses of the city government and the funds used for said
expenses. All the COA presented were the amounts expended, the locally generated
revenues, the de cit, the surplus and the IRA received each year. Aside from these items,
no data or gures were presented to show that Mandaue City deducted the subject
allowances from the IRA. In other words, just because Mandaue City's locally generated
revenues were not enough to cover its expenditures, this did not mean that the additional
allowances of petitioner judges were taken from the IRA and not from the city's own
revenues.
Moreover, the DBM neither conducted a formal review nor ordered a disapproval of
Mandaue City's appropriation ordinances, in accordance with the procedure outlined by
Sections 326 and 327 of RA 7160 which provide that:
Section 326. Review of Appropriation Ordinances of Provinces, Highly
Urbanized Cities, Independent Component Cities, and Municipalities within the
Metropolitan Manila Area. — The Department of Budget and Management shall
review ordinances authorizing the annual or supplemental appropriations of
provinces, highly-urbanized cities, independent component cities, and
municipalities within the Metropolitan Manila Area in accordance with the
immediately succeeding Section.
Section 327. Review of Appropriation Ordinances of Component Cities and
Municipalities. — The sangguniang panlalawigan shall review the ordinance
authorizing annual or supplemental appropriations of component cities and
municipalities in the same manner and within the same period prescribed for the
review of other ordinances.

If within ninety (90) days from receipt of copies of such ordinance, the
sangguniang panlalawigan takes no action thereon, the same shall be deemed to
have been reviewed in accordance with law and shall continue to be in full force
and effect. (italics supplied)
Within 90 days from receipt of the copies of the appropriation ordinance, the DBM
should have taken positive action. Otherwise, such ordinance was deemed to have been
properly reviewed and deemed to have taken effect. Inasmuch as, in the instant case, the
DBM did not follow the appropriate procedure for reviewing the subject ordinance of
Mandaue City and allowed the 90-day period to lapse, it can no longer question the legality
of the provisions in the said ordinance granting additional allowances to judges stationed
in the said city.
WHEREFORE, the petition is hereby GRANTED, and the assailed decision and
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 resolution, dated September 21, 1995 and May 28, 1996, respectively, of the Commission
on Audit are hereby set aside. DcAEIS

No costs.
SO ORDERED.
Davide, Jr., C.J., Bellosillo, Vitug, Mendoza, Panganiban, Quisumbing, Ynares-
Santiago, Sandoval-Gutierrez, Carpio, Austria-Martinez, Carpio-Morales and Callejo, Sr., JJ.,
concur.
Puno, J., is on official business.
Azcuna, J., is on leave.

Footnotes

1. COA Decision No. 95-568; Rollo, pp. 42–47.

2. COA Decision No. 96-282; Rollo, pp. 48–49.

3. Rollo, p. 128; Rollo, p. 47.

4. Rollo, pp. 44–47.
5. Rollo, p. 24.
6. Sec. 25, [Art. II]. The State shall ensure the autonomy of local governments.
Sec. 2, [Art. X]. The territorial and political subdivisions shall enjoy local autonomy.

7. 336 SCRA 201, 214–215 (2000).

8. 146 SCRA 453, 454 (1986).

9. 294 SCRA 152, 157–158 (1998).

10. 309 SCRA 179, 189 (1999).

11. Id., p. 189.
12. SPECIAL PROVISIONS

xxx xxx xxx

3. Use of Funds. The amount herein shall, pursuant to Section 17(g) of the Code,
provide for the cost of basic services and facilities enumerated under Section 17(b)
thereof, particularly those which have been devolved by the Department of Health, the
Department of Social Welfare and Development, the Department of Agriculture, and the
Department of Environment and Natural Resources as well as other agencies of the
national government, including (1) construction/improvement, repair and maintenance
of local roads; (2) concrete barangay roads/multi-purpose pavements construction and
improvement program to be implemented in accordance with R.A. No. 6763; (3)
construction, rehabilitation and improvement of communal irrigation projects/systems;
PROVIDED, That each local government unit shall, in accordance with Section 287 of the
Code, appropriate in its annual budget no less than twenty percent (20%) of its share
from internal revenue allotment for development projects; PROVIDED, FURTHER, That
enforcement of the provisions of Sections 325(a) and 331(b) of the Code shall be
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 waived to enable local government units to absorb national government personnel
transferred on account of devolution, create the mandatory positions specified in the
Code, enable the barangay officials to receive the minimum allowable level of
remuneration provided under Section 393 of the Code as well as continue the
implementation of the salary standardization authorized under R.A. No. 6758:
PROVIDED, FINALLY, That such amounts as may be determined by the Department of
Budget and Management corresponding to the requirements of health care and services
as devolved to Local Government Units R.A. No. 7160 shall not be realigned or utilized by
LGUs concerned for any other expenditure of purpose.

13. SPECIAL PROVISIONS

xxx xxx xxx

2. Use of Funds. — The amount herein appropriated shall, pursuant to Section
17(g) of the Code, provide for the cost of basic services and facilities enumerated under
Section 17(b) thereof, particularly those devolved by the Department of Health, the
Department of Social Welfare and Development, the Department of Agriculture, and the
Department of Environment and Natural Resources as well as other agencies of the
National Government, including (1) construction/improvement, repair and maintenance
of local roads; (2) concrete barangay roads/multi-purpose, pavements, construction and
improvement program to be implemented in accordance with R.A. No. 6763; (2)
construction, rehabilitation and improvement of communal irrigation projects/systems;
and (4) payment of not less than fifty percent (50%) of the total requirement for the
Magna Carta benefits of devolved health workers pursuant to the provisions of R.A. No.
7305 and such other guidelines that may be issued by the Department of Health for the
purpose: PROVIDED, That each local government unit shall, in accordance with Section
287 of the Code, appropriate in its budget no less than twenty percent (20%) of its share
from Internal Revenue Allotment for development projects; PROVIDED, FURTHER, That
enforcement of the provisions of Sections 325(a) and 331(b) of the Code shall be
waived enable local government units to absorb and/or maintain national government
personnel transferred on account of devolution, create the mandatory positions specified
in the Code, enable the barangay officials to receive the minimum allowable level of
remuneration provided under Section 393 of the Code, as well as continue the
implementation of the salary standardization authorized under R.A. No. 6758 and the
payment of not less than fifty percent (50%) of the total requirement for the Magna
Carta benefits of health workers mandated under R.A. No. 7305 and such other
guidelines as may be issued by the Department of Health for the purpose.

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