DAP CASE

Araullo vs. Aquino III 749 SCRA 283 , February 03, 2015

Submitted by:
KULANI, MIDZMAR A. (LLB-IV)
RELIQUIAS, MACY (LLB-I)

FACTS:
On September 25, 2013, Sen. Jinggoy Ejercito Estrada delivered a privilege speech in the
Senate of the Philippines to reveal that some Senators, including himself, had been
allotted an additional P50 Million each as incentive for voting in favor of the
impeachment of Chief Justice Renato C. Corona.
Responding to Sen. Estrada's revelation, Secretary Florencio Abad of the DBM
issued a public statement entitled Abad: Releases to Senators Part of Spending
Acceleration Program explaining that the funds released to the Senators had been part
of the DAP, a program designed by the DBM to ramp up spending to accelerate
economic expansion.
Secretary Abad clarified that the funds had been released to the Senators based
on their letters of request for funding; and that it was not the first time that releases
from the DAP had been made because the DAP had already been instituted in 2011 to
ramp up spending after sluggish disbursements had caused the growth of the gross
domestic product (GDP) to slow down.
The revelation also prompted Maria Carolina Araullo, Chairperson of the
Bagong Alyansang Makabayan, and several other concerned citizens to file various
petitions with the Supreme Court questioning the validity of the DAP. Among their
contentions was:
DAP is unconstitutional because it violates the constitutional rule which
provides that “no money shall be paid out of the Treasury except in pursuance of
an appropriation made by law.”
But Secretary Abad argued that the DAP is based on certain laws particularly the
General Appropriations Act (GAA) (savings and augmentation provisions thereof), Sec.
25(5), Art. VI of the Constitution (power of the President to augment), Secs. 38 and 49 of
Executive Order 292 (power of the President to suspend expenditures and authority to
use savings, respectively).
The Philippine Budget Cycle
1. Budget Preparation
2. Budget Legislation
3. Budget Execution
4. Accountability

The Nature of DAP

When he assumed office in the middle of 2010, President Aquino made efficiency
and transparency in government spending a significant focus of his Administration.
Yet, although such focus resulted in an improved fiscal deficit of 0.5% in the gross
domestic product (GDP) from January to July of 2011, it also unfortunately decelerated
government project implementation and payment schedules.
The World Bank observed that the Philippines' economic growth could be
reduced, and potential growth could be weakened should the Government continue
with its under spending and fail to address the large deficiencies in infrastructure.
The economic situation prevailing in the middle of 2011 thus paved the way for
the development and implementation of the DAP as a stimulus package intended to
fast-track public spending and to push economic growth by investing on high-impact
budgetary PAPs to be funded from the savings generated during the year as well as
from unprogrammed funds.
Basically, the DAP was to be implemented and funded by declaring savings
coming from the various departments and agencies derived from pooling unobligated
allotments and withdrawing unreleased appropriations; (2) releasing unprogrammed
funds; and (3) applying the savings and unprogrammed funds to augment existing P
APs or to support other priority PAPs.

ISSUES:
1. Whether or not the DAP violates Sec. 29, Art. VI of the 1987 Constitution, which
provides: “No money shall be paid out of the Treasury except in pursuance of an
appropriation made by law.”
Whether or not the DAP, and all other executive issuances allegedly
implementing the DAP, violate Sec. 25(5), Art. VI of the 1987 Constitution,
specifically:
 a.) Whether or not the cross-border transfers of the savings of the
Executive to augment the appropriations of other offices outside the
Executive is unconstitutional;
b.) Whether or not the funding of projects, activities and programs that
were not covered by any appropriation in the General Appropriations
Act is unconstitutional;
c.) Whether or not the withdrawal of unobligated allotments from the
implementing agencies, and the declaration of the withdrawn
unobligated allotments and unreleased appropriations as savings prior
to the end of the fiscal year is unconstitutional:
2. Whether the funding of projects, activities and programs that were not covered
by any appropriation in the General Appropriations Act is unconstitutional.
3. Whether or not the withdrawal of unobligated allotments from the implementing
agencies, and the declaration of the withdrawn unobligated allotments and
unreleased appropriations as savings prior to the end of the fiscal year is
unconstitutional

RULING:
1. No. DAP did not violate Sec. 29, Art. VI of the 1987 Constitution. DAP was not
an appropriation measure; hence no appropriation law was required to adopt or
to implement it.

However:
DAP, and all other executive issuances allegedly implementing the DAP,
violated Sec. 25(5), Art. VI of the 1987 Constitution

Sec. 25(5), Art. VI of the 1987 Constitution provides:

5) No law shall be passed authorizing any transfer of appropriations;
however, the President, the President of the Senate, the Speaker of the
House of Representatives, the Chief Justice of the Supreme Court, and the
heads of Constitutional Commissions may, by law, be authorized to
augment any item in the general appropriations law for their respective
offices from savings in other items of their respective appropriations
The transfer of appropriated funds, to be valid under Section 25(5), supra must
be made upon a concurrence of the following requisites, namely:
(1) There is a law authorizing the President, the President of the Senate, the
Speaker of the House of Representatives, the Chief Justice of the Supreme
Court, and the heads of the Constitutional Commissions to transfer funds
within their respective offices;
 (2) The funds to be transferred are savings generated from the appropriations
for their respective offices; and
(3) The purpose of the transfer is to augment an item in the general law for
their respective offices.

As to the first requisite:

The General Appropriation Act (GAA) of 2011 and 2012 lacked valid
provisions to authorize transfers of funds under the DAP; hence transfers under
the DAP were unconstitutional. And although the GAA of 2013 had provision for
such transfer, it however lacked other the requisites.

As to the second requisite:

There were no savings from which funds could be sourced for the DAP.
The funds used in the DAP -the unreleased appropriations and
withdrawn unobligated allotments -were not actual savings within the context of
Section 25(5), supra, and the relevant provisions of the GAAs.
Savings should be understood to refer to the excess money after the items
that needed to be funded have been funded, or those that needed to be paid have
been paid pursuant to the budget. There could be savings only when the PAPs
for which the funds had been appropriated were actually implemented and
completed, or finally discontinued or abandoned. Savings could not be realized
with certainty in the middle of the fiscal year; The funds for slow-moving PAPs
could not be considered as savings because such PAPs had not actually been
abandoned or discontinued yet.
At this point, the Supreme Court also discussed that there is no executive
impoundment in the DAP. Impoundment of funds refers to the President’s
power to refuse to spend appropriations or to retain or deduct appropriations for
whatever reason. Impoundment is actually prohibited by the GAA unless there
will be an unmanageable national government budget deficit (which did not
happen). Nevertheless, there’s no impoundment in the case at bar because what’s
involved in the DAP was the transfer of funds.

As to the third requisite:

Cross-border augmentations from savings were prohibited by The
Constitution. The phrase respective offices used in Section 25(5), supra refers to
 the entire Executive, with respect to the President; the Senate, with respect to the
Senate President; the House of Representatives, with respect to the Speaker; the
Judiciary, with respect to the Chief Justice; the Constitutional Commissions, with
respect to their respective Chairpersons.
Those transfers of funds, which constituted crossborder augmentations for
being from the Executive to the COA and the House of Representatives, are
graphed as follows:

2. Yes. No funds from savings could be transferred under the DAP to augment
deficient items not provided in the GAA
The Supreme Court conclude that the "savings" pooled under the DAP were
allocated to PAPs that were not covered by any appropriations in the pertinent
GAAs:
a.) Disaster Risk, Exposure, Assessment and Mitigation (DREAM)
project under the Department of Science and Technology (DOST)
covered the amount of Pl.6 Billion;
b.) Aside from this transfer under the DAP to the DREAM project
exceeding by almost 3 00 the appropriation by Congress for the
program Generation of new knowledge and technologies and
research capability building in priority areas identified as strategic
to National Development the Executive allotted funds for
personnel services and capital outlays. The Executive thereby
substituted its will to that of Congress;
c.) Philippine Council for Industry, Energy and Emerging Technology
Research and Development (DOST-PCIEETRD) for Establishment
Of the Advanced Failure Analysis Laboratory, which the
appropriation code and the particulars -Research and Management
Services -appearing in the SARO did not correspond to the
program specified in the GAA.
3. Yes. Sourcing the DAP from unprogrammed funds despite the original revenue
targets not having been exceeded was invalid.
Unprogrammed funds from the GAA cannot be used as money source for the
DAP because under the law, such funds may only be used if there is a
certification from the National Treasurer to the effect that the revenue collections
have exceeded the revenue targets. In this case, no such clear certification was
secured before unprogrammed funds were used.
The requirement that revenue collections must exceed revenue target should be
understood to mean that the revenue collections must exceed the total of the
revenue targets stated in the BESF. Moreover, to release the unprogrammed
funds simply because there was an excess revenue as to one source of revenue
would be an unsound fiscal management measure because it would disregard
the budget plan and foster budget deficits.
 OTHER CASES ON TRANSFER OF FUNDS AND SAVINGS OF THE
GOVERNMENT

Pichay v. Office of the Deputy Executive Secretary, G.R. No. 196425, 24 July 2012, 677
SCRA 408

FACTS: A petition was filed seeking declare unconstitutional EO No. 13 (Abolishing

the Presidential Anti-Graft Commission) and Transferring Its Investigative,
Adjudicatory and Recommendatory Functions (Investigative and Adjudicative Division
or IAD) to the Office of The Deputy Executive Secretary for Legal Affairs (ODESLA),
Office of the President. And prayed for to prohibit respondents from administratively
proceeding against petitioner based on the executive order.
Pichay contends that the President is not authorized under any law to create the
IAD-ODESLA and that by creating such, the President has usurped the powers of
congress (to create a public office, appropriate funds and delegate quasi-judicial
functions to administrative agencies) and that of the Ombudsman.
ISSUE: Whether or not there was usurpation of the legislative power to appropriate
public funds.
RULING: No. Section 31 of Executive Order No. 292 (E.O. 292), otherwise known as the
Administrative Code of 1987, vests in the President the continuing authority to
reorganize the offices under him in order to achieve simplicity, economy and efficiency.
And to further enable the President to run the affairs of the executive
department, he is likewise given constitutional authority to augment any item in the
General Appropriations Law using the savings in other items of the appropriation for
his office. In fact, he is explicitly allowed by law to transfer any fund appropriated for
the different departments, bureaus, offices and agencies of the Executive Department
which is included in the General Appropriations Act, to any program, project or activity
of any department, bureau or office included in the General Appropriations Act or
approved after its enactment.
Thus, while there may be no specific amount earmarked for the IAD-ODESLA
from the total amount appropriated by Congress in the annual budget for the Office of
the President, the necessary funds for the IAD-ODESLA may be properly sourced from
the President's own office budget without committing any illegal appropriation. After
all, there is no usurpation of the legislature's power to appropriate funds when the
President simply allocates the existing funds previously appropriated by Congress for
his office.
 Demetria v. Alba- 148 SCRA 208 [1987]
FACTS: Petitioner questions the constitutionality of the first paragraph of Section 44 of
Presidential Decree No. 1177, otherwise known as the “Budget Reform Decree of 1977.”
The said PD authorizes the President to transfer any fund appropriated for different
departments to any program, project or activity of any department on the grounds
among others, allowing the President to override the safeguards prescribed for
approving appropriations. Said paragraph 1 of Section 44 provides:
The President shall have the authority to transfer any fund, appropriated for the different
departments, bureaus, offices and agencies of the Executive Department, which are
included in the General Appropriations Act, to any program, project or activity of any
department, bureau, or office included in the General Appropriations Act or approved
after its enactment.
ISSUE: Whether Paragraph 1 of Section 44 of PD 1177 is unconstitutional for being
repugnant to Section 16(5) Article VIII of the 1973 Constitution.
RULING: Yes. Paragraph 1 of Section 44 of P.D. No. 1177 unduly over-extends the
privilege granted under said Section 16[5], It empowers the President to
indiscriminately transfer funds from one department, bureau, office or agency of the
Executive Department to any program, project or activity of any department, bureau or
office included in the General Appropriations Act or approved after its enactment,
without regard as to whether or not the funds to be transferred are actually savings in
the item from which the same are to be taken, or whether or not the transfer is for the
purpose of augmenting the item to which said transfer is to be made. It does not only
completely disregard the standards set in the fundamental law, thereby amounting to
an undue delegation of legislative powers, but likewise goes beyond the tenor thereof.
Indeed, such constitutional infirmities render the provision in question null and void.
 Philconsa v. Enriquez- 235 SCRA 506
FACTS: Petitioners wants to declare unconstitional and void some of the provisions in
the General Appropriation Bill of 1994 which was passed and approved. Among other
special provisions in question are:
 To allow the Chief of Staff to use savings to augment the pension fund for the
AFP being managed by the AFP Retirement and Separation Benefits System
 Authorize members of Congress to propose and identify projects in the "pork
barrels" allotted to them and to realign their respective operating budgets
(because petitioners, the Senate President and the Speaker of the HR, but not the
individual members of Congress are the ones authorized to realign the savings as
appropriated.

ISSUES:
1. Is the Chief of Staff allowed to use savings to augment the pension fund for the AFP.
2. Are members of Congress allowed to propose and identify projects and to realign
their operating budgets.

RULING:

1. The Special Provision, which allows the Chief of Staff to use savings to augment.
Allowed. The Special Provision, which allows the Chief of Staff to use savings to
augment the pension fund for the AFP being managed by the AFP Retirement and
Separation Benefits System is violative of Sections 25(5) and 29(1) of the Article VI of the
Constitution. Under Section 25(5), no law shall be passed authorizing any transfer of
appropriations, and under Section 29(1)

“no money shall be paid out of the Treasury except in pursuance of an

appropriation made by law. While Section 25(5) allows as an exception the realignment
of savings to augment items in the general appropriations law for the executive branch,
such right must and can be exercised only by the President pursuant to a specific law.”

The provision grants the President of the Senate and the Speaker of the HR the power to
augment items in an appropriation act for their respective offices from savings in other
items of their appropriations, whenever there is a law authorizing such augmentation.

2. Authorize members of Congress to propose and identify projects and to realign their operating
budgets. The members of Congress only determine the necessity of the realignment for
their operating expenses. However, it is the Senate President and the Speaker of the HR
who shall approve the realignment. Before giving their stamp of approval, these two
officials will have to see to it that:
1. The funds to be realigned or transferred are actually savings in the items of
expenditures from which the same are to be taken; and
2. The transfer or realignment is for the purposes of augmenting the items of
expenditure to which said transfer or realignment is to be made.
 Sanchez v. COA- 552 SCRA 471
FACTS: Congress passed R.A. 7180 (GAA of 1992), w/c provided an appropriation for
the DILG and the amount for its Capability Building Program which is P75M. The
Project Director of the Ad Hoc Task Force informed then Deputy Executive Secretary its
proposed task force to implement local autonomy institutionalized under the LGC to
have design programs, strategize and prepare modules. The proposal was accepted by
the Deputy Executive Secretary and attested by then DILG Secretary, who issued a
memorandum for the transfer and remit to the Office of the President of the sum of
P300K for the operational expenses of the task force. An additional cash advance of
P300K was requested. These amounts were taken from the Fund. Upon post-audit
conducted by the Department auditor the amounts were disallowed for having no legal
basis for the creation, the cash advance not liquidated, expenditures funded from
capability building are subject to restrictions/conditions embodied in the Special
Provisions of the DILG Appropriations, and expenses covered by the cash advance not
specified.

A Notice of Disallowance was then sent which the COA affirmed. The COA
argued that, the Transfer under Sec. 25(5), Art. VI may be made only by the persons
mentioned in the section and may not be re-delegated being already a delegated
authority. That the transfer must come only from savings of the office in other items of
its appropriation and be used for other items in the appropriation of the same office.
Here, there were no savings from which augmentation can be taken. The Fund is a
regular appropriation, it partakes the nature of a trust fund because it was allocated for
a specific purpose. Thus, it may be used only for the specific purpose for which it was
created or the fund received.

ISSUE: Is the transfer of fund valid

RULING: No. The power and authority to transfer was exercised not by the President
but only at the instance of the Deputy Executive Secretary, not the Executive Secretary.
Also, petitioners fail to point out the specific law and provision thereof which
authorizes the transfer of funds. Finally, the records of this case unmistakably point to
the reality that there were no savings at the time of the questioned transfer. Before
transferring of funds, (1) the funds to be transferred are actually savings in the items of
expenditures from which the same are to be taken; and (2) the transfer is for the
purpose of augmenting the items of expenditure to which such transfer is to be made.