Maria Carolina P. Araullo v. Benigno Simeon C. Aquino III, G.R. No. ATTY. JOSE MALV AR VILLEGAS, JR.

, Petitioner,
209287, 1 July 2014
♦ Decision, Bersamin [J] vs.
♦ Separate Opinion, Carpio [J] THE HONORABLE EXECUTIVE SECRETARY
♦ Separate Opinion, Brion [J]
♦ Concurring and Dissenting Opinion, Del Castillo [J]
PAQUITO N. OCHOA, JR.; AND THE SECRETARY
♦ Separate Concurring Opinion, Perlas-Bernabe [J] OF BUDGET AND MANAGEMENT FLORENCIO B.
♦ Concurring Opinion, Leonen [J] ABAD, Respondents.

x-----------------------x
Republic of the Philippines
SUPREME COURT G.R. No. 209164
Manila
PHILIPPINE CONSTITUTION ASSOCIATION
EN BANC (PHILCONSA), REPRESENTED BY DEAN
FROILAN M. BACUNGAN, BENJAMIN E. DIOKNO
G.R. No. 209287               July 1, 2014 AND LEONOR M. BRIONES, Petitioners,
vs.
MARIA CAROLINA P. ARAULLO, CHAIRPERSON, DEPARTMENT OF BUDGET AND MANAGEMENT
BAGONG ALYANSANG MAKABAYAN; JUDY M. AND/OR HON. FLORENCIO B.
TAGUIWALO, PROFESSOR, UNIVERSITY OF THE ABAD, Respondents.
PHILIPPINES DILIMAN, CO-CHAIRPERSON,
PAGBABAGO; HENRI KAHN, CONCERNED x-----------------------x
CITIZENS MOVEMENT; REP. LUZ ILAGAN,
GABRIELA WOMEN'S PARTY REPRESENTATIVE; G.R. No. 209260
REP. CARLOS ISAGANI ZARATE, BAY AN MUNA
PARTY-LIST REPRESENTATIVE; RENATO M.
INTEGRATED BAR OF THE PHILIPPINES
REYES, JR., SECRETARY GENERAL OF BAYAN;
(IBP), Petitioner,
MANUEL K. DAYRIT, CHAIRMAN, ANG
vs.
KAPATIRAN PARTY; VENCER MARI E.
SECRETARY FLORENCIO B. ABAD OF THE
CRISOSTOMO, CHAIRPERSON, ANAKBAYAN;
DEPARTMENT OF BUDGET AND MANAGEMENT
VICTOR VILLANUEVA, CONVENOR, YOUTH ACT
(DBM), Respondent.
NOW, Petitioners,
vs.
BENIGNO SIMEON C. AQUINO III, PRESIDENT OF x-----------------------x
THE REPUBLIC OF THE PHILIPPINES; PAQUITO
N. OCHOA, JR., EXECUTIVE SECRETARY; AND G.R. No. 209442
FLORENCIO B. ABAD, SECRETARY OF THE
DEPARTMENT OF BUDGET AND GRECO ANTONIOUS BEDA B. BELGICA; BISHOP
MANAGEMENT, Respondents. REUBEN MABANTE AND REV. JOSE L.
GONZALEZ, Petitioners,
x-----------------------x vs.
PRESIDENT BENIGNO SIMEON C. AQUINO III,
G.R. No. 209135 THE SENATE OF THE PHILIPPINES,
REPRESENTED BY SENATE PRESIDENT
FRANKLIN M. DRILON; THE HOUSE OF
AUGUSTO L. SY JUCO JR., Ph.D., Petitioner,
REPRESENTATIVES, REPRESENTED BY
vs.
SPEAKER FELICIANO BELMONTE, JR.; THE
FLORENCIO B. ABAD, IN HIS CAPACITY AS THE
EXECUTIVE OFFICE, REPRESENTED BY
SECRETARY OF DEPARTMENT OF BUDGET AND
EXECUTIVE SECRETARY PAQUITO N. OCHOA,
MANAGEMENT; AND HON. FRANKLIN
JR.; THE DEPARTMENT OF BUDGET AND
MAGTUNAO DRILON, IN HIS CAP A CITY AS THE
MANAGEMENT, REPRESENTED BY SECRETARY
SENATE PRESIDENT OF THE
FLORENCIO ABAD; THE DEPARTMENT OF
PHILIPPINES, Respondents.
FINANCE, REPRESENTED BY SECRETARY
CESAR V. PURISIMA; AND THE BUREAU OF
x-----------------------x TREASURY, REPRESENTED BY ROSALIA V. DE
LEON, Respondents.
G.R. No. 209136
x-----------------------x
MANUELITO R. LUNA, Petitioner,
vs. G.R. No. 209517
SECRETARY FLORENCIO ABAD, IN HIS OFFICIAL
CAPACITY AS HEAD OF THE DEPARTMENT OF
CONFEDERATION FOR UNITY, RECOGNITION
BUDGET AND MANAGEMENT; AND EXECUTIVE
AND ADV AN CEMENT OF GOVERNMENT
SECRETARY PAQUITO OCHOA, IN HIS OFFICIAL
EMPLOYEES (COURAGE), REPRESENTED BY ITS
CAPACITY AS ALTER EGO OF THE
1ST VICE PRESIDENT, SANTIAGO DASMARINAS,
PRESIDENT, Respondents.
JR.; ROSALINDA NARTATES, FOR HERSELF AND
AS NATIONAL PRESIDENT OF THE
x-----------------------x CONSOLIDATED UNION OF EMPLOYEES
NATIONAL HOUSING AUTHORITY (CUENHA);
G.R. No. 209155 MANUEL BACLAGON, FOR HIMSELF AND AS
PRESIDENT OF THE SOCIAL WELFARE
EMPLOYEES ASSOCIATION OF THE On September 25, 2013, Sen. Jinggoy Ejercito
PHILIPPINES, DEPARTMENT OF SOCIAL Estrada delivered a privilege speech in the Senate of
WELFARE AND DEVELOPMENT CENTRAL the Philippines to reveal that some Senators,
OFFICE (SWEAP-DSWD CO); ANTONIA PASCUAL, including himself, had been allotted an additional ₱50
FOR HERSELF AND AS NATIONAL PRESIDENT Million each as "incentive" for voting in favor of the
OF THE DEPARTMENT OF AGRARIAN REFORM impeachment of Chief Justice Renato C. Corona.
EMPLOYEES ASSOCIATION (DAREA); ALBERT
MAGALANG, FOR HIMSELF AND AS PRESIDENT Responding to Sen. Estrada’s revelation, Secretary
OF THE ENVIRONMENT AND MANAGEMENT Florencio Abad of the DBM issued a public statement
BUREAU EMPLOYEES UNION (EMBEU); AND entitled Abad: Releases to Senators Part of Spending
MARCIAL ARABA, FOR HIMSELF AND AS Acceleration Program,  explaining that the funds
1

PRESIDENT OF THE KAPISANAN PARA SA released to the Senators had been part of the DAP, a
KAGALINGAN NG MGA KAW ANI NG MMDA program designed by the DBM to ramp up spending
(KKKMMDA), Petitioners, to accelerate economic expansion. He clarified that
vs. the funds had been released to the Senators based
BENIGNO SIMEON C. AQUINO Ill, PRESIDENT OF on their letters of request for funding; and that it was
THE REPUBLIC OF THE PHILIPPINES; PAQUITO not the first time that releases from the DAP had been
OCHOA, JR., EXECUTIVE SECRETARY; AND made because the DAP had already been instituted in
HON. FLORENCIO B. ABAD, SECRETARY OF THE 2011 to ramp up spending after sluggish
DEPARTMENT OF BUDGET AND disbursements had caused the growth of the gross
MANAGEMENT, Respondents. domestic product (GDP) to slow down. He explained
that the funds under the DAP were usually taken from
x-----------------------x (1) unreleased appropriations under Personnel
Services;  (2) unprogrammed funds; (3) carry-over
2

G.R. No. 209569 appropriations unreleased from the previous year;

and (4) budgets for slow-moving items or projects that
VOLUNTEERS AGAINST CRIME AND had been realigned to support faster-disbursing
CORRUPTION (VACC), REPRESENTED BY DANTE projects.
L. JIMENEZ, Petitioner,
vs. The DBM soon came out to claim in its website  that
3

PAQUITO N. OCHOA, EXECUTIVE SECRETARY, the DAP releases had been sourced from savings
AND FLORENCIO B. ABAD, SECRETARY OF THE generated by the Government, and from
DEPARTMENT OF BUDGET AND unprogrammed funds; and that the savings had been
MANAGEMENT, Respondents. derived from (1) the pooling of unreleased
appropriations, like unreleased Personnel
DECISION Services  appropriations that would lapse at the end
4

of the year, unreleased appropriations of slow-moving

projects and discontinued projects per zero based
BERSAMIN, J.:
budgeting findings;  and (2) the withdrawal of
5

unobligated allotments also for slow-moving programs

For resolution are the consolidated petitions assailing and projects that had been earlier released to the
the constitutionality of the Disbursement Acceleration agencies of the National Government.
Program(DAP), National Budget Circular (NBC) No.
541, and related issuances of the Department of
The DBM listed the following as the legal bases for
Budget and Management (DBM) implementing the
the DAP’s use of savings,  namely: (1) Section 25(5),
6

DAP.
Article VI of the 1987 Constitution, which granted to
the President the authority to augment an item for his
At the core of the controversy is Section 29(1) of office in the general appropriations law; (2) Section 49
Article VI of the 1987 Constitution, a provision of the (Authority to Use Savings for Certain Purposes) and
fundamental law that firmly ordains that "[n]o money Section 38 (Suspension of Expenditure
shall be paid out of the Treasury except in pursuance Appropriations), Chapter 5, Book VI of Executive
of an appropriation made by law." The tenor and Order (EO) No. 292 (Administrative Code of 1987);
context of the challenges posed by the petitioners and (3) the General Appropriations Acts (GAAs) of
against the DAP indicate that the DAP contravened 2011, 2012 and 2013, particularly their provisions on
this provision by allowing the Executive to allocate the (a) use of savings; (b) meanings of savings and
public money pooled from programmed and augmentation; and (c) priority in the use of savings.
unprogrammed funds of its various agencies in the
guise of the President exercising his constitutional
As for the use of unprogrammed funds under the
authority under Section 25(5) of the 1987 Constitution
DAP, the DBM cited as legal bases the special
to transfer funds out of savings to augment the
provisions on unprogrammed fund contained in the
appropriations of offices within the Executive Branch
GAAs of 2011, 2012 and 2013.
of the Government. But the challenges are further
complicated by the interjection of allegations of
transfer of funds to agencies or offices outside of the The revelation of Sen. Estrada and the reactions of
Executive. Sec. Abad and the DBM brought the DAP to the
consciousness of the Nation for the first time, and
made this present controversy inevitable. That the
Antecedents
issues against the DAP came at a time when the
Nation was still seething in anger over Congressional
What has precipitated the controversy? pork barrel – "an appropriation of government
spending meant for localized projects and secured
solely or primarily to bring money to a representative’s the term is used in Sec. 25(5), in
district"  – excited the Nation as heatedly as the pork
7
relation to the provisions of the GAAs
barrel controversy. of 2011, 2012 and 2013;

Nine petitions assailing the constitutionality of the (b)They authorize the disbursement of
DAP and the issuances relating to the DAP were filed funds for projects or programs not
within days of each other, as follows: G.R. No. provided in the GAAs for the
209135 (Syjuco), on October 7, 2013; G.R. No. Executive Department; and
209136 (Luna), on October 7, 2013; G.R. No. 209155
(Villegas),  on October 16, 2013; G.R. No. 209164
8
(c)They "augment" discretionary lump
(PHILCONSA), on October 8, 2013; G.R. No. 209260 sum appropriations in the GAAs.
(IBP), on October 16, 2013; G.R. No. 209287
(Araullo), on October 17, 2013; G.R. No. 209442 D. Whether or not the DAP violates: (1) the Equal
(Belgica), on October 29, 2013; G.R. No. 209517 Protection Clause, (2) the system of checks and
(COURAGE), on November6, 2013; and G.R. No. balances, and (3) the principle of public accountability
209569 (VACC), on November 8, 2013. enshrined in the 1987 Constitution considering that it
authorizes the release of funds upon the request of
In G.R. No. 209287 (Araullo), the petitioners brought legislators.
to the Court’s attention NBC No. 541 (Adoption of
Operational Efficiency Measure – Withdrawal of E. Whether or not factual and legal justification exists
Agencies’ Unobligated Allotments as of June 30, to issue a temporary restraining order to restrain the
2012), alleging that NBC No. 541, which was issued implementation of the DAP, NBC No. 541, and all
to implement the DAP, directed the withdrawal of other executive issuances allegedly implementing the
unobligated allotments as of June 30, 2012 of DAP.
government agencies and offices with low levels of
obligations, both for continuing and current
In its Consolidated Comment, the OSG raised the
allotments.
matter of unprogrammed funds in order to support its
argument regarding the President’s power to spend.
In due time, the respondents filed their Consolidated During the oral arguments, the propriety of releasing
Comment through the Office of the Solicitor General unprogrammed funds to support projects under the
(OSG). DAP was considerably discussed. The petitioners in
G.R. No. 209287 (Araullo) and G.R. No. 209442
The Court directed the holding of oral arguments on (Belgica) dwelled on unprogrammed funds in their
the significant issues raised and joined. respective memoranda. Hence, an additional issue for
the oral arguments is stated as follows:
Issues
F. Whether or not the release of unprogrammed funds
Under the Advisory issued on November 14, 2013, under the DAP was in accord with the GAAs.
the presentations of the parties during the oral
arguments were limited to the following, to wit: During the oral arguments held on November 19,
2013, the Court directed Sec. Abad to submit a list of
Procedural Issue: savings brought under the DAP that had been
sourced from (a) completed programs; (b)
A. Whether or not certiorari, prohibition, and discontinued or abandoned programs; (c) unpaid
mandamus are proper remedies to assail the appropriations for compensation; (d) a certified copy
constitutionality and validity of the Disbursement of the President’s directive dated June 27, 2012
Acceleration Program (DAP), National Budget referred to in NBC No. 541; and (e) all circulars or
Circular (NBC) No. 541, and all other executive orders issued in relation to the DAP.9

issuances allegedly implementing the DAP.

Subsumed in this issue are whether there is a In compliance, the OSG submitted several
controversy ripe for judicial determination, and the documents, as follows:
standing of petitioners.
(1) A certified copy of the Memorandum for
Substantive Issues: the President dated June 25, 2012 (Omnibus
Authority to Consolidate Savings/Unutilized
B. Whether or not the DAP violates Sec. 29, Art. VI of Balances and their Realignment); 10

the 1987 Constitution, which provides: "No money

shall be paid out of the Treasury except in pursuance (2) Circulars and orders, which the
of an appropriation made by law." respondents identified as related to the DAP,
namely:
C. Whether or not the DAP, NBC No. 541, and all
other executive issuances allegedly implementing the a. NBC No. 528 dated January 3,
DAP violate Sec. 25(5), Art. VI of the 1987 2011 (Guidelines on the Release of
Constitution insofar as: Funds for FY 2011);

(a)They treat the unreleased b. NBC No. 535 dated December 29,
appropriations and unobligated 2011 (Guidelines on the Release of
allotments withdrawn from Funds for FY 2012);
government agencies as "savings" as
 c. NBC No. 541 dated July 18, 2012 e. Memorandum for the President
(Adoption of Operational Efficiency dated December 19, 2012 (Proposed
Measure – Withdrawal of Agencies’ Priority Projects and Expenditures of
Unobligated Allotments as of June 30, the Government);
2012);
f. Memorandum for the President
d. NBC No. 545 dated January 2, dated May 20, 2013 (Omnibus
2013 (Guidelines on the Release of Authority to Consolidate
Funds for FY 2013); Savings/Unutilized Balances and their
Realignment to Fund the Quarterly
e. DBM Circular Letter No. 2004-2 Disbursement Acceleration Program);
dated January 26, 2004 (Budgetary and
Treatment of
Commitments/Obligations of the g. Memorandum for the President
National Government); dated September 25, 2013 (Funding
for the Task Force Pablo
f. COA-DBM Joint Circular No. 2013-1 Rehabilitation Plan).
dated March 15, 2013 (Revised
Guidelines on the Submission of (2) Second Evidence Packet  – consisting of
12

Quarterly Accountability Reports on 15 applications of the DAP, with their

Appropriations, Allotments, corresponding Special Allotment Release
Obligations and Disbursements); Orders (SAROs) and appropriation covers;

g. NBC No. 440 dated January 30, (3) Third Evidence Packet  – containing a list
13

1995 (Adoption of a Simplified Fund and descriptions of 12 projects under the

Release System in the Government). DAP;

(3) A breakdown of the sources of savings, (4) Fourth Evidence Packet  – identifying the
14

including savings from discontinued projects DAP-related portions of the Annual Financial
and unpaid appropriations for compensation Report (AFR) of the Commission on Audit for
from 2011 to 2013 2011 and 2012;

On January 28, 2014, the OSG, to comply with the (5) Fifth Evidence Packet  – containing a
15

Resolution issued on January 21, 2014 directing the letter of Department of Transportation and
respondents to submit the documents not yet Communications(DOTC) Sec. Joseph Abaya
submitted in compliance with the directives of the addressed to Sec. Abad recommending the
Court or its Members, submitted several evidence withdrawal of funds from his agency, inclusive
packets to aid the Court in understanding the factual of annexes; and
bases of the DAP, to wit:
(6) Sixth Evidence Packet  – a print-out of the
16

(1) First Evidence Packet  – containing seven

11
Solicitor General’s visual presentation for the
memoranda issued by the DBM through Sec. January 28, 2014 oral arguments.
Abad, inclusive of annexes, listing in detail the
116 DAP identified projects approved and On February 5, 2014,  the OSG forwarded the
17

duly signed by the President, as follows: Seventh Evidence Packet,  which listed the sources
18

of funds brought under the DAP, the uses of such

a. Memorandum for the President funds per project or activity pursuant to DAP, and the
dated October 12, 2011 (FY 2011 legal bases thereof.
Proposed Disbursement Acceleration
Program (Projects and Sources of On February 14, 2014, the OSG submitted another
Funds); set of documents in further compliance with the
Resolution dated January 28, 2014, viz:
b. Memorandum for the President
dated December 12, 2011 (Omnibus (1) Certified copies of the certifications issued by the
Authority to Consolidate Bureau of Treasury to the effect that the revenue
Savings/Unutilized Balances and its collections exceeded the original revenue targets for
Realignment); the years 2011, 2012 and 2013, including collections
arising from sources not considered in the original
c. Memorandum for the President revenue targets, which certifications were required for
dated June 25, 2012 (Omnibus the release of the unprogrammed funds as provided
Authority to Consolidate in Special Provision No. 1 of Article XLV, Article XVI,
Savings/Unutilized Balances and their and Article XLV of the 2011, 2012 and 2013 GAAs;
Realignment); and (2) A report on releases of savings of the
Executive Department for the use of the Constitutional
d. Memorandum for the President Commissions and other branches of the Government,
dated September 4, 2012 (Release of as well as the fund releases to the Senate and the
funds for other priority projects and Commission on Elections (COMELEC).
expenditures of the Government);
RULING
 I. when there is no case or controversy is for that court
to set itself up as a reviewer of the acts of Congress
Procedural Issue: and of the President in violation of the principle of
separation of powers; and that, in the absence of a
a) The petitions under Rule 65 are proper remedies pending case or controversy involving the DAP and
NBC No. 541, any decision herein could amount to a
mere advisory opinion that no court can validly
All the petitions are filed under Rule 65 of the Rules of
render.23

Court, and include applications for the issuance of

writs of preliminary prohibitory injunction or temporary
restraining orders. More specifically, the nature of the The respondents argue that it is the application of the
petitions is individually set forth hereunder, to wit: DAP to actual situations that the petitioners can
question either in the trial courts or in the COA; that if
the petitioners are dissatisfied with the ruling either of
G.R. No. 209135 Certiorari, Prohibition the trial courts or of the COA, they can appeal the
(Syjuco) and Mandamus decision of the trial courts by petition for review on
G.R. No. 209136 Certiorariand certiorari, or assail the decision or final order of the
(Luna) Prohibition COA by special civil action for certiorari under Rule 64
of the Rules of Court.24

G.R. No. 209155 Certiorariand

(Villegas) Prohibition The respondents’ arguments and submissions on the
procedural issue are bereft of merit.
G.R. No. 209164 Certiorariand
(PHILCONSA) Prohibition
Section 1, Article VIII of the 1987 Constitution
G.R. No. 209260 expressly provides:
Prohibition
(IBP)
G.R. No. 209287 Certiorariand Section 1. The judicial power shall be vested in one
(Araullo) Prohibition Supreme Court and in such lower courts as may be
established by law.
G.R. No. 209442
Certiorari
(Belgica) Judicial power includes the duty of the courts of
justice to settle actual controversies involving rights
G.R. No. 209517 Certiorari and
which are legally demandable and enforceable, and to
(COURAGE) Prohibition
determine whether or not there has been a grave
G.R. No. 209569 Certiorari and abuse of discretion amounting to lack or excess of
(VACC) Prohibition jurisdiction on the part of any branch or
instrumentality of the Government.
The respondents submit that there is no actual
controversy that is ripe for adjudication in the absence Thus, the Constitution vests judicial power in the
of adverse claims between the parties;  that the
19
Court and in such lower courts as may be established
petitioners lacked legal standing to sue because no by law. In creating a lower court, Congress
allegations were made to the effect that they had concomitantly determines the jurisdiction of that court,
suffered any injury as a result of the adoption of the and that court, upon its creation, becomes by
DAP and issuance of NBC No. 541; that their being operation of the Constitution one of the repositories of
taxpayers did not immediately confer upon the judicial power.  However, only the Court is a
25

petitioners the legal standing to sue considering that constitutionally created court, the rest being created
the adoption and implementation of the DAP and the by Congress in its exercise of the legislative power.
issuance of NBC No. 541 were not in the exercise of
the taxing or spending power of Congress;  and that
20 The Constitution states that judicial power includes
even if the petitioners had suffered injury, there were the duty of the courts of justice not only "to settle
plain, speedy and adequate remedies in the ordinary actual controversies involving rights which are legally
course of law available to them, like assailing the demandable and enforceable" but also "to determine
regularity of the DAP and related issuances before whether or not there has been a grave abuse of
the Commission on Audit (COA) or in the trial courts. 21 discretion amounting to lack or excess of jurisdiction
on the part of any branch or instrumentality of the
The respondents aver that the special civil actions of Government." It has thereby expanded the concept of
certiorari and prohibition are not proper actions for judicial power, which up to then was confined to its
directly assailing the constitutionality and validity of traditional ambit of settling actual controversies
the DAP, NBC No. 541, and the other executive involving rights that were legally demandable and
issuances implementing the DAP. 22
enforceable.

In their memorandum, the respondents further The background and rationale of the expansion of
contend that there is no authorized proceeding under judicial power under the 1987 Constitution were laid
the Constitution and the Rules of Court for out during the deliberations of the 1986 Constitutional
questioning the validity of any law unless there is an Commission by Commissioner Roberto R.
actual case or controversy the resolution of which Concepcion (a former Chief Justice of the Philippines)
requires the determination of the constitutional in his sponsorship of the proposed provisions on the
question; that the jurisdiction of the Court is largely Judiciary, where he said:–
appellate; that for a court of law to pass upon the
constitutionality of a law or any act of the Government
The Supreme Court, like all other courts, has one MR. NOLLEDO. The Gentleman used the term
main function: to settle actual controversies involving "judicial power" but judicial power is not vested in the
conflicts of rights which are demandable and Supreme Court alone but also in other lower courts as
enforceable. There are rights which are guaranteed may be created by law.
by law but cannot be enforced by a judicial party. In a
decided case, a husband complained that his wife MR. CONCEPCION. Yes.
was unwilling to perform her duties as a wife. The
Court said: "We can tell your wife what her duties as MR. NOLLEDO. And so, is this only an example?
such are and that she is bound to comply with them,
but we cannot force her physically to discharge her
MR. CONCEPCION. No, I know this is not. The
main marital duty to her husband. There are some
Gentleman seems to identify political questions with
rights guaranteed by law, but they are so personal
jurisdictional questions. But there is a difference.
that to enforce them by actual compulsion would be
highly derogatory to human dignity." This is why the
first part of the second paragraph of Section 1 MR. NOLLEDO. Because of the expression "judicial
provides that: Judicial power includes the duty of power"?
courts to settle actual controversies involving rights
which are legally demandable or enforceable… MR. CONCEPCION. No. Judicial power, as I said,
refers to ordinary cases but where there is a question
The courts, therefore, cannot entertain, much less as to whether the government had authority or had
decide, hypothetical questions. In a presidential abused its authority to the extent of lacking jurisdiction
system of government, the Supreme Court has, also, or excess of jurisdiction, that is not a political
another important function. The powers of question. Therefore, the court has the duty to decide. 27

government are generally considered divided into

three branches: the Legislative, the Executive and the Our previous Constitutions equally recognized the
Judiciary. Each one is supreme within its own sphere extent of the power of judicial review and the great
and independent of the others. Because of that responsibility of the Judiciary in maintaining the
supremacy power to determine whether a given law is allocation of powers among the three great branches
valid or not is vested in courts of justice. of Government. Speaking for the Court in Angara v.
Electoral Commission,  Justice Jose P. Laurel
28

Briefly stated, courts of justice determine the limits of intoned:

power of the agencies and offices of the government
as well as those of its officers. In other words, the x x x In times of social disquietude or political
judiciary is the final arbiter on the question whether or excitement, the great landmarks of the Constitution
not a branch of government or any of its officials has are apt to be forgotten or marred, if not entirely
acted without jurisdiction or in excess of jurisdiction, obliterated. In cases of conflict, the judicial
or so capriciously as to constitute an abuse of department is the only constitutional organ which can
discretion amounting to excess of jurisdiction or lack be called upon to determine the proper allocation of
of jurisdiction. This is not only a judicial power but a powers between the several department and among
duty to pass judgmenton matters of this nature. the integral or constituent units thereof.

This is the background of paragraph 2 of Section 1, xxxx

which means that the courts cannot hereafter evade
the duty to settle matters of this nature, by claiming The Constitution is a definition of the powers of
that such matters constitute a political question. (Bold government. Who is to determine the nature, scope
emphasis supplied) 26 and extent of such powers? The Constitution itself
has provided for the instrumentality of the judiciary as
Upon interpellation by Commissioner Nolledo, the rational way. And when the judiciary mediates to
Commissioner Concepcion clarified the scope of allocate constitutional boundaries, it does not assert
judicial power in the following manner:– any superiority over the other department; it does not
in reality nullify or invalidate an act of the legislature,
MR. NOLLEDO. x x x but only asserts the solemn and sacred obligation
assigned to it by the Constitution to determine
conflicting claims of authority under the Constitution
The second paragraph of Section 1 states: "Judicial
and to establish for the parties in an actual
power includes the duty of courts of justice to settle
controversy the rights which that instrument secures
actual controversies…" The term "actual
and guarantees to them. This is in truth all that is
controversies" according to the Commissioner should
involved in what is termed "judicial supremacy" which
refer to questions which are political in nature and,
properly is the power of judicial review under the
therefore, the courts should not refuse to decide those
Constitution. x x x29

political questions. But do I understand it right that this

is restrictive or only an example? I know there are
cases which are not actual yet the court can assume What are the remedies by which the grave abuse of
jurisdiction. An example is the petition for declaratory discretion amounting to lack or excess of jurisdiction
relief. on the part of any branch or instrumentality of the
Government may be determined under the
Constitution?
May I ask the Commissioner’s opinion about that?
The present Rules of Court uses two special civil
MR. CONCEPCION. The Supreme Court has no
actions for determining and correcting grave abuse of
jurisdiction to grant declaratory judgments.
discretion amounting to lack or excess of jurisdiction.
These are the special civil actions for certiorari and directed to the court itself.  The Court expounded on
32

prohibition, and both are governed by Rule 65. A the nature and function of the writ of prohibition in
similar remedy of certiorari exists under Rule 64, but Holy Spirit Homeowners Association, Inc. v.
the remedy is expressly applicable only to the Defensor: 33

judgments and final orders or resolutions of the

Commission on Elections and the Commission on A petition for prohibition is also not the proper remedy
Audit. to assail an IRR issued in the exercise of a quasi-
legislative function. Prohibition is an extraordinary writ
The ordinary nature and function of the writ of directed against any tribunal, corporation, board,
certiorari in our present system are aptly explained in officer or person, whether exercising judicial, quasi-
Delos Santos v. Metropolitan Bank and Trust judicial or ministerial functions, ordering said entity or
Company: 30
person to desist from further proceedings when said
proceedings are without or in excess of said entity’s
In the common law, from which the remedy of or person’s jurisdiction, or are accompanied with
certiorari evolved, the writ of certiorari was issued out grave abuse of discretion, and there is no appeal or
of Chancery, or the King’s Bench, commanding any other plain, speedy and adequate remedy in the
agents or officers of the inferior courts to return the ordinary course of law. Prohibition lies against judicial
record of a cause pending before them, so as to give or ministerial functions, but not against legislative or
the party more sure and speedy justice, for the writ quasi-legislative functions. Generally, the purpose of
would enable the superior court to determine from an a writ of prohibition is to keep a lower court within the
inspection of the record whether the inferior court’s limits of its jurisdiction in order to maintain the
judgment was rendered without authority. The errors administration of justice in orderly channels.
were of such a nature that, if allowed to stand, they Prohibition is the proper remedy to afford relief
would result in a substantial injury to the petitioner to against usurpation of jurisdiction or power by an
whom no other remedy was available. If the inferior inferior court, or when, in the exercise of jurisdiction in
court acted without authority, the record was then handling matters clearly within its cognizance the
revised and corrected in matters of law. The writ of inferior court transgresses the bounds prescribed to it
certiorari was limited to cases in which the inferior by the law, or where there is no adequate remedy
court was said to be exceeding its jurisdiction or was available in the ordinary course of law by which such
not proceeding according to essential requirements of relief can be obtained. Where the principal relief
law and would lie only to review judicial or quasi- sought is to invalidate an IRR, petitioners’ remedy is
judicial acts. an ordinary action for its nullification, an action which
properly falls under the jurisdiction of the Regional
The concept of the remedy of certiorari in our judicial Trial Court. In any case, petitioners’ allegation that
system remains much the same as it has been in the "respondents are performing or threatening to perform
common law. In this jurisdiction, however, the functions without or in excess of their jurisdiction" may
exercise of the power to issue the writ of certiorari is appropriately be enjoined by the trial court through a
largely regulated by laying down the instances or writ of injunction or a temporary restraining order.
situations in the Rules of Court in which a superior
court may issue the writ of certiorari to an inferior With respect to the Court, however, the remedies of
court or officer. Section 1, Rule 65 of the Rules of certiorari and prohibition are necessarily broader in
Court compellingly provides the requirements for that scope and reach, and the writ of certiorari or
purpose, viz: prohibition may be issued to correct errors of
jurisdiction committed not only by a tribunal,
xxxx corporation, board or officer exercising judicial, quasi-
judicial or ministerial functions but also to set right,
undo and restrain any act of grave abuse of discretion
The sole office of the writ of certiorari is the correction
amounting to lack or excess of jurisdiction by any
of errors of jurisdiction, which includes the
branch or instrumentality of the Government, even if
commission of grave abuse of discretion amounting to
the latter does not exercise judicial, quasi-judicial or
lack of jurisdiction. In this regard, mere abuse of
ministerial functions. This application is expressly
discretion is not enough to warrant the issuance of the
authorized by the text of the second paragraph of
writ. The abuse of discretion must be grave, which
Section 1, supra.
means either that the judicial or quasi-judicial power
was exercised in an arbitrary or despotic manner by
reason of passion or personal hostility, or that the Thus, petitions for certiorari and prohibition are
respondent judge, tribunal or board evaded a positive appropriate remedies to raise constitutional issues
duty, or virtually refused to perform the duty enjoined and to review and/or prohibit or nullify the acts of
or to act in contemplation of law, such as when such legislative and executive officials.34

judge, tribunal or board exercising judicial or quasi-

judicial powers acted in a capricious or whimsical Necessarily, in discharging its duty under Section 1,
manner as to be equivalent to lack of jurisdiction. 31 supra, to set right and undo any act of grave abuse of
discretion amounting to lack or excess of jurisdiction
Although similar to prohibition in that it will lie for want by any branch or instrumentality of the Government,
or excess of jurisdiction, certiorari is to be the Court is not at all precluded from making the
distinguished from prohibition by the fact that it is a inquiry provided the challenge was properly brought
corrective remedy used for the re-examination of by interested or affected parties. The Court has been
some action of an inferior tribunal, and is directed to thereby entrusted expressly or by necessary
the cause or proceeding in the lower court and not to implication with both the duty and the obligation of
the court itself, while prohibition is a preventative determining, in appropriate cases, the validity of any
remedy issuing to restrain future action, and is assailed legislative or executive action. This
entrustment is consistent with the republican system It is true that Sec. Abad manifested during the
of checks and balances. 35
January 28, 2014 oral arguments that the DAP as a
program had been meanwhile discontinued because it
Following our recent dispositions concerning the had fully served its purpose, saying: "In conclusion,
congressional pork barrel, the Court has become Your Honors, may I inform the Court that because the
more alert to discharge its constitutional duty. We will DAP has already fully served its purpose, the
not now refrain from exercising our expanded judicial Administration’s economic managers have
power in order to review and determine, with recommended its termination to the President. x x x." 39

authority, the limitations on the Chief Executive’s

spending power. The Solicitor General then quickly confirmed the
termination of the DAP as a program, and urged that
b) Requisites for the exercise of the its termination had already mooted the challenges to
power of judicial review were the DAP’s constitutionality, viz:
complied with
DAP as a program, no longer exists, thereby mooting
The requisites for the exercise of the power of judicial these present cases brought to challenge its
review are the following, namely: (1) there must bean constitutionality. Any constitutional challenge should
actual case or justiciable controversy before the no longer be at the level of the program, which is now
Court; (2) the question before the Court must be ripe extinct, but at the level of its prior applications or the
for adjudication; (3) the person challenging the act specific disbursements under the now defunct policy.
must be a proper party; and (4) the issue of We challenge the petitioners to pick and choose
constitutionality must be raised at the earliest which among the 116 DAP projects they wish to
opportunity and must be the very litis mota of the nullify, the full details we will have provided by
case.36 February 5. We urge this Court to be cautious in
limiting the constitutional authority of the President
The first requisite demands that there be an actual and the Legislature to respond to the dynamic needs
case calling for the exercise of judicial power by the of the country and the evolving demands of
Court.  An actual case or controversy, in the words of
37 governance, lest we end up straight jacketing our
Belgica v. Executive Secretary Ochoa: 38 elected representatives in ways not consistent with
our constitutional structure and democratic
principles. 40

x x x is one which involves a conflict of legal rights, an

assertion of opposite legal claims, susceptible of
judicial resolution as distinguished from a hypothetical A moot and academic case is one that ceases to
or abstract difference or dispute. In other words, present a justiciable controversy by virtue of
"[t]here must be a contrariety of legal rights that can supervening events, so that a declaration thereon
be interpreted and enforced on the basis of existing would be of no practical use or value. 41

law and jurisprudence." Related to the requirement of

an actual case or controversy is the requirement of The Court cannot agree that the termination of the
"ripeness," meaning that the questions raised for DAP as a program was a supervening event that
constitutional scrutiny are already ripe for effectively mooted these consolidated cases. Verily,
adjudication. "A question is ripe for adjudication when the Court had in the past exercised its power of
the act being challenged has had a direct adverse judicial review despite the cases being rendered moot
effect on the individual challenging it. It is a and academic by supervening events, like: (1) when
prerequisite that something had then been there was a grave violation of the Constitution; (2)
accomplished or performed by either branch before a when the case involved a situation of exceptional
court may come into the picture, and the petitioner character and was of paramount public interest; (3)
must allege the existence of an immediate or when the constitutional issue raised required the
threatened injury to itself as a result of the challenged formulation of controlling principles to guide the
action." "Withal, courts will decline to pass upon Bench, the Bar and the public; and (4) when the case
constitutional issues through advisory opinions, bereft was capable of repetition yet evading review. 42

as they are of authority to resolve hypothetical or

moot questions." Assuming that the petitioners’ several submissions
against the DAP were ultimately sustained by the
An actual and justiciable controversy exists in these Court here, these cases would definitely come under
consolidated cases. The incompatibility of the all the exceptions. Hence, the Court should not
perspectives of the parties on the constitutionality of abstain from exercising its power of judicial review.
the DAP and its relevant issuances satisfy the
requirement for a conflict between legal rights. The Did the petitioners have the legal standing to sue?
issues being raised herein meet the requisite ripeness
considering that the challenged executive acts were Legal standing, as a requisite for the exercise of
already being implemented by the DBM, and there judicial review, refers to "a right of appearance in a
are averments by the petitioners that such court of justice on a given question."  The concept of
43

implementation was repugnant to the letter and spirit legal standing, or locus standi, was particularly
of the Constitution. Moreover, the implementation of discussed in De Castro v. Judicial and Bar
the DAP entailed the allocation and expenditure of Council,  where the Court said:
44

huge sums of public funds. The fact that public funds

have been allocated, disbursed or utilized by reason In public or constitutional litigations, the Court is often
or on account of such challenged executive acts gave burdened with the determination of the locus standi of
rise, therefore, to an actual controversy that is ripe for the petitioners due to the ever-present need to
adjudication by the Court. regulate the invocation of the intervention of the Court
to correct any official action or policy in order to avoid in his petition that he is entitled to protection or relief
obstructing the efficient functioning of public officials from the Court in the vindication of a public right.
and offices involved in public service. It is required,
therefore, that the petitioner must have a personal Quite often, as here, the petitioner in a public action
stake in the outcome of the controversy, for, as sues as a citizen or taxpayer to gain locus standi.
indicated in Agan, Jr. v. Philippine International Air That is not surprising, for even if the issue may
Terminals Co., Inc.: appear to concern only the public in general, such
capacities nonetheless equip the petitioner with
The question on legal standing is whether such adequate interest to sue. In David v. Macapagal-
parties have "alleged such a personal stake in the Arroyo, the Court aptly explains why:
outcome of the controversy as to assure that concrete
adverseness which sharpens the presentation of Case law in most jurisdiction snow allows both
issues upon which the court so largely depends for "citizen" and "taxpayer" standing in public actions.
illumination of difficult constitutional questions." The distinction was first laid down in Beauchamp v.
Accordingly, it has been held that the interest of a Silk, where it was held that the plaintiff in a taxpayer’s
person assailing the constitutionality of a statute must suit is in a different category from the plaintiff in a
be direct and personal. He must be able to show, not citizen’s suit. In the former, the plaintiff is affected by
only that the law or any government act is invalid, but the expenditure of public funds, while in the latter, he
also that he sustained or is in imminent danger of is but the mere instrument of the public concern. As
sustaining some direct injury as a result of its held by the New York Supreme Court in People ex rel
enforcement, and not merely that he suffers thereby Case v. Collins: "In matter of mere public right,
in some indefinite way. It must appear that the person however…the people are the real parties…It is at
complaining has been or is about to be denied some least the right, if not the duty, of every citizen to
right or privilege to which he is lawfully entitled or that interfere and see that a public offence be properly
he is about to be subjected to some burdens or pursued and punished, and that a public grievance be
penalties by reason of the statute or act complained remedied." With respect to taxpayer’s suits, Terr v.
of. Jordan held that "the right of a citizen and a taxpayer
to maintain an action in courts to restrain the unlawful
It is true that as early as in 1937, in People v. Vera, use of public funds to his injury cannot be denied." 45

the Court adopted the direct injury test for determining

whether a petitioner in a public action had locus The Court has cogently observed in Agan, Jr. v.
standi. There, the Court held that the person who Philippine International Air Terminals Co., Inc.  that
46

would assail the validity of a statute must have "a "[s]tanding is a peculiar concept in constitutional law
personal and substantial interest in the case such that because in some cases, suits are not brought by
he has sustained, or will sustain direct injury as a parties who have been personally injured by the
result." Vera was followed in Custodio v. President of operation of a law or any other government act but by
the Senate, Manila Race Horse Trainers’ Association concerned citizens, taxpayers or voters who actually
v. De la Fuente, Anti-Chinese League of the sue in the public interest."
Philippines v. Felix, and Pascual v. Secretary of
Public Works. Except for PHILCONSA, a petitioner in G.R. No.
209164, the petitioners have invoked their capacities
Yet, the Court has also held that the requirement of as taxpayers who, by averring that the issuance and
locus standi, being a mere procedural technicality, implementation of the DAP and its relevant issuances
can be waived by the Court in the exercise of its involved the illegal disbursements of public funds,
discretion. For instance, in 1949, in Araneta v. have an interest in preventing the further dissipation
Dinglasan, the Court liberalized the approach when of public funds. The petitioners in G.R. No. 209287
the cases had "transcendental importance." Some (Araullo) and G.R. No. 209442 (Belgica) also assert
notable controversies whose petitioners did not pass their right as citizens to sue for the enforcement and
the direct injury test were allowed to be treated in the observance of the constitutional limitations on the
same way as in Araneta v. Dinglasan. political branches of the Government. 47

In the 1975 decision in Aquino v. Commission on On its part, PHILCONSA simply reminds that the
Elections, this Court decided to resolve the issues Court has long recognized its legal standing to bring
raised by the petition due to their "far reaching cases upon constitutional issues.  Luna, the petitioner
48

implications," even if the petitioner had no personality in G.R. No. 209136, cites his additional capacity as a
to file the suit. The liberal approach of Aquino v. lawyer. The IBP, the petitioner in G.R. No. 209260,
Commission on Elections has been adopted in stands by "its avowed duty to work for the rule of law
several notable cases, permitting ordinary citizens, and of paramount importance of the question in this
legislators, and civic organizations to bring their suits action, not to mention its civic duty as the official
involving the constitutionality or validity of laws, association of all lawyers in this country." 49

regulations, and rulings.

Under their respective circumstances, each of the
However, the assertion of a public right as a predicate petitioners has established sufficient interest in the
for challenging a supposedly illegal or unconstitutional outcome of the controversy as to confer locus standi
executive or legislative action rests on the theory that on each of them.
the petitioner represents the public in general.
Although such petitioner may not be as adversely In addition, considering that the issues center on the
affected by the action complained against as are extent of the power of the Chief Executive to disburse
others, it is enough that he sufficiently demonstrates and allocate public funds, whether appropriated by
Congress or not, these cases pose issues that are of
transcendental importance to the entire Nation, the government, namely: (1) to carry on all government
petitioners included. As such, the determination of activities under a comprehensive fiscal plan
such important issues call for the Court’s exercise of developed, authorized and executed in accordance
its broad and wise discretion "to waive the with the Constitution, prevailing statutes and the
requirement and so remove the impediment to its principles of sound public management; and (2) to
addressing and resolving the serious constitutional provide for the periodic review and disclosure of the
questions raised." 50
budgetary status of the Government in such detail so
that persons entrusted by law with the responsibility
II. as well as the enlightened citizenry can determine the
Substantive Issues adequacy of the budget actions taken, authorized or
proposed, as well as the true financial position of the
1. Government. 59

Overview of the Budget System

b) Evolution of the Philippine Budget System
An understanding of the Budget System of the
Philippines will aid the Court in properly appreciating The budget process in the Philippines evolved from
and justly resolving the substantive issues. the early years of the American Regime up to the
passage of the Jones Law in 1916. A Budget Office
a) Origin of the Budget System was created within the Department of Finance by the
Jones Law to discharge the budgeting function, and
was given the responsibility to assist in the
The term "budget" originated from the Middle English
preparation of an executive budget for submission to
word bouget that had derived from the Latin word
the Philippine Legislature. 60

bulga (which means bag or purse). 51

As early as under the 1935 Constitution, a budget

In the Philippine setting, Commonwealth Act (CA) No.
policy and a budget procedure were established, and
246 (Budget Act) defined "budget" as the financial
subsequently strengthened through the enactment of
program of the National Government for a designated
laws and executive acts.  EO No. 25, issued by
61

fiscal year, consisting of the statements of estimated

President Manuel L. Quezon on April 25, 1936,
receipts and expenditures for the fiscal year for which
created the Budget Commission to serve as the
it was intended to be effective based on the results of
agency that carried out the President’s responsibility
operations during the preceding fiscal years. The term
of preparing the budget.  CA No. 246, the first budget
62

was given a different meaning under Republic Act No.

law, went into effect on January 1, 1938 and
992 (Revised Budget Act) by describing the budget as
established the Philippine budget process. The law
the delineation of the services and products, or
also provided a line-item budget as the framework of
benefits that would accrue to the public together with
the Government’s budgeting system,  with emphasis
63

the estimated unit cost of each type of service,

on the observance of a "balanced budget" to tie up
product or benefit.  For a forthright definition, budget
52

proposed expenditures with existing revenues.

should simply be identified as the financial plan of the
Government,  or "the master plan of government."
53 54

CA No. 246 governed the budget process until the

passage on June 4, 1954 of Republic Act (RA) No.
The concept of budgeting has not been the product of
992,whereby Congress introduced performance-
recent economies. In reality, financing public goals
budgeting to give importance to functions, projects
and activities was an idea that existed from the
and activities in terms of expected results.  RA No.
64

creation of the State.  To protect the people, the

55

992 also enhanced the role of the Budget

territory and sovereignty of the State, its government
Commission as the fiscal arm of the Government. 65

must perform vital functions that required public

expenditures. At the beginning, enormous public
expenditures were spent for war activities, The 1973 Constitution and various presidential
preservation of peace and order, security, decrees directed a series of budgetary reforms that
administration of justice, religion, and supply of limited culminated in the enactment of PD No. 1177 that
goods and services.  In order to finance those
56 President Marcos issued on July30, 1977, and of PD
expenditures, the State raised revenues through No. 1405, issued on June 11, 1978. The latter decree
taxes and impositions.  Thus, budgeting became
57 converted the Budget Commission into the Ministry of
necessary to allocate public revenues for specific Budget, and gave its head the rank of a Cabinet
government functions.  The State’s budgeting
58 member.
mechanism eventually developed through the years
with the growing functions of its government and The Ministry of Budget was later renamed the Office
changes in its market economy. of Budget and Management (OBM) under EO No.
711. The OBM became the DBM pursuant to EO No.
The Philippine Budget System has been greatly 292 effective on November 24, 1989.
influenced by western public financial institutions. This
is because of the country’s past as a colony c) The Philippine Budget Cycle 66

successively of Spain and the United States for a long

period of time. Many aspects of the country’s public Four phases comprise the Philippine budget process,
fiscal administration, including its Budget System, specifically: (1) Budget Preparation; (2) Budget
have been naturally patterned after the practices and Legislation; (3) Budget Execution; and (4)
experiences of the western public financial Accountability. Each phase is distinctly separate from
institutions. At any rate, the Philippine Budget System the others but they overlap in the implementation of
is presently guided by two principal objectives that are the budget during the budget year.
vital to the development of a progressive democratic
c.1.Budget Preparation 67
expenditures. Capital expenditures are the expenses
whose usefulness lasts for more than one year, and
The budget preparation phase is commenced through which add to the assets of the Government, including
the issuance of a Budget Call by the DBM. The investments in the capital of government-owned or
Budget Call contains budget parameters earlier set by controlled corporations and their
the Development Budget Coordination Committee subsidiaries.  Current operating expenditures are the
69

(DBCC) as well as policy guidelines and procedures purchases of goods and services in current
to aid government agencies in the preparation and consumption the benefit of which does not extend
submission of their budget proposals. The Budget beyond the fiscal year.  The two components of
70

Call is of two kinds, namely: (1) a National Budget current expenditures are those for personal services
Call, which is addressed to all agencies, including (PS), and those for maintenance and other operating
state universities and colleges; and (2) a Corporate expenses(MOOE).
Budget Call, which is addressed to all government-
owned and -controlled corporations (GOCCs) and Public expenditures are also broadly grouped
government financial institutions (GFIs). according to their functions into: (1) economic
development expenditures (i.e., expenditures on
Following the issuance of the Budget Call, the various agriculture and natural resources, transportation and
departments and agencies submit their respective communications, commerce and industry, and other
Agency Budget Proposals to the DBM. To boost economic development efforts);  (2) social services or
71

citizen participation, the current administration has social development expenditures (i.e., government
tasked the various departments and agencies to outlay on education, public health and medicare, labor
partner with civil society organizations and other and welfare and others);  (3) general government or
72

citizen-stakeholders in the preparation of the Agency general public services expenditures (i.e.,
Budget Proposals, which proposals are then expenditures for the general government, legislative
presented before a technical panel of the DBM in services, the administration of justice, and for
scheduled budget hearings wherein the various pensions and gratuities);  (4) national defense
73

departments and agencies are given the opportunity expenditures (i.e., sub-divided into national security
to defend their budget proposals. DBM bureaus expenditures and expenditures for the maintenance of
thereafter review the Agency Budget Proposals and peace and order);  and (5) public debt.
74 75

come up with recommendations for the Executive

Review Board, comprised by the DBM Secretary and Public expenditures may further be classified
the DBM’s senior officials. The discussions of the according to the nature of funds, i.e., general fund,
Executive Review Board cover the prioritization of special fund or bond fund. 76

programs and their corresponding support vis-à-vis

the priority agenda of the National Government, and On the other hand, public revenues complement
their implementation. public expenditures and cover all income or receipts
of the government treasury used to support
The DBM next consolidates the recommended government expenditures. 77

agency budgets into the National Expenditure

Program (NEP)and a Budget of Expenditures and Classical economist Adam Smith categorized public
Sources of Financing (BESF). The NEP provides the revenues based on two principal sources, stating:
details of spending for each department and agency "The revenue which must defray…the necessary
by program, activity or project (PAP), and is submitted expenses of government may be drawn either, first
in the form of a proposed GAA. The Details of from some fund which peculiarly belongs to the
Selected Programs and Projects is the more detailed sovereign or commonwealth, and which is
disaggregation of key PAPs in the NEP, especially independent of the revenue of the people, or,
those in line with the National Government’s secondly, from the revenue of the people."  Adam 78

development plan. The Staffing Summary provides Smith’s classification relied on the two aspects of the
the staffing complement of each department and nature of the State: first, the State as a juristic person
agency, including the number of positions and with an artificial personality, and, second, the State as
amounts allocated. a sovereign or entity possessing supreme power.
Under the first aspect, the State could hold property
The NEP and BESF are thereafter presented by the and engage in trade, thereby deriving what is called
DBM and the DBCC to the President and the Cabinet its quasi private income or revenues, and which
for further refinements or reprioritization. Once the "peculiarly belonged to the sovereign." Under the
NEP and the BESF are approved by the President second aspect, the State could collect by imposing
and the Cabinet, the DBM prepares the budget charges on the revenues of its subjects in the form of
documents for submission to Congress. The budget taxes.79

documents consist of: (1) the President’s Budget

Message, through which the President explains the In the Philippines, public revenues are generally
policy framework and budget priorities; (2) the BESF, derived from the following sources, to wit: (1) tax
mandated by Section 22, Article VII of the revenues(i.e., compulsory contributions to finance
Constitution,  which contains the macroeconomic
68
government activities); 80 (2) capital revenues(i.e.,
assumptions, public sector context, breakdown of the proceeds from sales of fixed capital assets or scrap
expenditures and funding sources for the fiscal year thereof and public domain, and gains on such sales
and the two previous years; and (3) the NEP. like sale of public lands, buildings and other
structures, equipment, and other properties recorded
Public or government expenditures are generally as fixed assets); 81 (3) grants(i.e., voluntary
classified into two categories, specifically: (1) capital contributions and aids given to the Government for its
expenditures or outlays; and (2) current operating operation on specific purposes in the form of money
 and/or materials, and do not require any monetary Reading before the House of Representatives’
commitment on the part of the recipient);  (4)
82
version is transmitted to the Senate.88

extraordinary income(i.e., repayment of loans and

advances made by government corporations and After transmission, the Senate conducts its own
local governments and the receipts and shares in committee hearings on the GAB. To expedite
income of the Banko Sentral ng Pilipinas, and other proceedings, the Senate may conduct its committee
receipts);  and (5) public borrowings(i.e., proceeds of
83
hearings simultaneously with the House of
repayable obligations generally with interest from Representatives’ deliberations. The Senate’s Finance
domestic and foreign creditors of the Government in Committee and its Sub-Committees may submit the
general, including the National Government and its proposed amendments to the GAB to the plenary of
political subdivisions).
84
the Senate only after the House of Representatives
has formally transmitted its version to the Senate. The
More specifically, public revenues are classified as Senate version of the GAB is likewise approved on
follows:85
Third Reading. 89

General Income Specific Income The House of Representatives and the Senate then
constitute a panel each to sit in the Bicameral
Subsidy Income from National
Income Taxes
Conference Committee for the purpose of discussing
Government Property Taxes and harmonizing the conflicting provisions of their
Subsidy from Central Office
Taxes on Goods and Services versions of the GAB. The "harmonized" version of the
Subsidy from Regional Taxes on International Trade and GAB is next presented to the President for
Office/Staff Bureaus Transactions approval.  The President reviews the GAB, and
90

ncome from Government prepares the Veto Message where budget items are
Other Taxes 6.Fines and Penalties-Tax Revenue
Services subjected to direct veto,  or are identified for
91

Other Specific Income conditional implementation.

ncome from Government
Business Operations
If, by the end of any fiscal year, the Congress shall
Sales Revenue have failed to pass the GAB for the ensuing fiscal
Rent Income year, the GAA for the preceding fiscal year shall be
nsurance Income deemed re-enacted and shall remain in force and
Dividend Income effect until the GAB is passed by the Congress. 92

nterest Income
c.3. Budget Execution 93

Sale of Confiscated Goods and

Properties
With the GAA now in full force and effect, the next
Foreign Exchange (FOREX) step is the implementation of the budget. The Budget
Execution Phase is primarily the function of the DBM,
Miscellaneous Operating and which is tasked to perform the following procedures,
Service Income namely: (1) to issue the programs and guidelines for
Fines and Penalties-Government the release of funds; (2) to prepare an Allotment and
Services and Business Operations Cash Release Program; (3) to release allotments; and
(4) to issue disbursement authorities.
ncome from Grants and
Donations
The implementation of the GAA is directed by the
guidelines issued by the DBM. Prior to this, the
various departments and agencies are required to
submit Budget Execution Documents(BED) to outline
c.2. Budget Legislation 86
their plans and performance targets by laying down
the physical and financial plan, the monthly cash
The Budget Legislation Phase covers the period program, the estimate of monthly income, and the list
commencing from the time Congress receives the of obligations that are not yet due and demandable.
President’s Budget, which is inclusive of the NEPand
the BESF, up to the President’s approval of the GAA. Thereafter, the DBM prepares an Allotment Release
This phase is also known as the Budget Authorization Program (ARP)and a Cash Release Program
Phase, and involves the significant participation of the (CRP).The ARP sets a limit for allotments issued in
Legislative through its deliberations. general and to a specific agency. The CRP fixes the
monthly, quarterly and annual disbursement levels.
Initially, the President’s Budget is assigned to the
House of Representatives’ Appropriations Committee Allotments, which authorize an agency to enter into
on First Reading. The Appropriations Committee and obligations, are issued by the DBM. Allotments are
its various Sub-Committees schedule and conduct lesser in scope than appropriations, in that the latter
budget hearings to examine the PAPs of the embrace the general legislative authority to spend.
departments and agencies. Thereafter, the House of Allotments may be released in two forms – through a
Representatives drafts the General Appropriations Bill comprehensive Agency Budget Matrix (ABM),  or, 94

(GAB). 87
individually, by SARO. 95

The GABis sponsored, presented and defended by Armed with either the ABM or the SARO, agencies
the House of Representatives’ Appropriations become authorized to incur obligations  on behalf of
96

Committee and Sub-Committees in plenary session. the Government in order to implement their PAPs.
As with other laws, the GAB is approved on Third
Obligations may be incurred in various ways, like it also unfortunately decelerated government project
hiring of personnel, entering into contracts for the implementation and payment schedules.  The World 103

supply of goods and services, and using utilities. Bank observed that the Philippines’ economic growth
could be reduced, and potential growth could be
In order to settle the obligations incurred by the weakened should the Government continue with its
agencies, the DBM issues a disbursement authority underspending and fail to address the large
so that cash may be allocated in payment of the deficiencies in infrastructure.  The economic situation
104

obligations. A cash or disbursement authority that is prevailing in the middle of 2011 thus paved the way
periodically issued is referred to as a Notice of Cash for the development and implementation of the DAP
Allocation (NCA),  which issuance is based upon an
97 as a stimulus package intended to fast-track public
agency’s submission of its Monthly Cash Program spending and to push economic growth by investing
and other required documents. The NCA specifies the on high-impact budgetary PAPs to be funded from the
maximum amount of cash that can be withdrawn from "savings" generated during the year as well as from
a government servicing bank for the period indicated. unprogrammed funds.  In that respect, the DAP was
105

Apart from the NCA, the DBM may issue a Non-Cash the product of "plain executive policy-making" to
Availment Authority(NCAA) to authorize non-cash stimulate the economy by way of accelerated
disbursements, or a Cash Disbursement spending.  The Administration would thereby
106

Ceiling(CDC) for departments with overseas accelerate government spending by: (1) streamlining
operations to allow the use of income collected by the implementation process through the clustering of
their foreign posts for their operating requirements. infrastructure projects of the Department of Public
Works and Highways (DPWH) and the Department of
Actual disbursement or spending of government funds Education (DepEd),and (2) front loading PPP-related
terminates the Budget Execution Phase and is usually projects  due for implementation in the following
107

accomplished through the Modified Disbursement year.108

Scheme under which disbursements chargeable

against the National Treasury are coursed through the Did the stimulus package work?
government servicing banks.
The March 2012 report of the World Bank,  released 109

c.4. Accountability 98 after the initial implementation of the DAP, revealed

that the DAP was partially successful. The
Accountability is a significant phase of the budget disbursements under the DAP contributed 1.3
cycle because it ensures that the government funds percentage points to GDP growth by the fourth
have been effectively and efficiently utilized to quarter of 2011.  The continued implementation of
110

achieve the State’s socio-economic goals. It also the DAP strengthened growth by 11.8% year on year
allows the DBM to assess the performance of while infrastructure spending rebounded from a 29%
agencies during the fiscal year for the purpose of contraction to a 34% growth as of September 2013. 111

implementing reforms and establishing new policies.

The DAP thus proved to be a demonstration that
An agency’s accountability may be examined and expenditure was a policy instrument that the
evaluated through (1) performance targets and Government could use to direct the economies
outcomes; (2) budget accountability reports; (3) towards growth and development.  The Government, 112

review of agency performance; and (4) audit by spending on public infrastructure, would signify its
conducted by the Commission on Audit(COA). commitment of ensuring profitability for prospective
investors.  The PAPs funded under the DAP were
113

chosen for this reason based on their: (1) multiplier

2.
impact on the economy and infrastructure
development; (2) beneficial effect on the poor; and (3)
Nature of the DAP as a fiscal plan translation into disbursements. 114

a. DAP was a program designed to b. History of the implementation of

promote economic growth the DAP, and sources of funds
under the DAP
Policy is always a part of every budget and fiscal
decision of any Administration.  The national budget
99
How the Administration’s economic managers
the Executive prepares and presents to Congress conceptualized and developed the DAP, and finally
represents the Administration’s "blueprint for public presented it to the President remains unknown
policy" and reflects the Government’s goals and because the relevant documents appear to be scarce.
strategies.  As such, the national budget becomes a
100

tangible representation of the programs of the

The earliest available document relating to the
Government in monetary terms, specifying therein the
genesis of the DAP was the memorandum of October
PAPs and services for which specific amounts of
12,2011 from Sec. Abad seeking the approval of the
public funds are proposed and allocated.  Embodied
101

President to implement the proposed DAP. The

in every national budget is government spending. 102

memorandum, which contained a list of the funding

sources for ₱72.11 billion and of the proposed priority
When he assumed office in the middle of 2010, projects to be funded,  reads:
115

President Aquino made efficiency and transparency in

government spending a significant focus of his
MEMORANDUM FOR THE PRESIDENT
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, xxxx
 SUBJECT: FY 2011 PROPOSED DISBURSEMENT
Agency/Project Allotment
ACCELERATION PROGRAM (PROJECTS AND
(SARO and NCA Release) (in Million Ph
SOURCES OF FUNDS)
1. LRTA: Rehabilitation of LRT 1 and 2 1,868
DATE: OCTOBER 12, 2011
2. NHA: 11,050
Mr. President, this is to formally confirm your approval 450
of the Disbursement Acceleration Program totalinga. Resettlement of North Triangle residents to
₱72.11 billion. We are already working with all theCamarin A7 500
agencies concerned for the immediate execution of b. Housing for BFP/BJMP
c. On-site development for families living 10,000
the projects therein.
along dangerous
d. Relocation sites for informal settlers 100
A. Fund Sources for the Acceleration Program
along Iloilo River and its tributaries

3. PHIL. HEART CENTER: Upgrading of 357

Amount
ageing physical plant and medical equipment
rces (In million Description
Php) 4. CREDIT INFO CORP: Establishment of 75
centralized credit information system
30,000 Unreleased Personnel Declare as
Services (PS) 5. PIDS: purchase
savings and of land to relocate the PIDS 100
appropriations which office and building construction
approve/
S) will lapse at the end of authorize its use
ns FY 2011 but may be 6. HGC:forEquity infusion for credit insurance
the 2011 400
pooled as savings and and mortgage guaranty
Disbursement operations of HGC
realigned for priority Acceleration
7. PHIC: Obligations incurred (premium 1,496
programs that require Program
subsidy for indigent families) in January-June
immediate funding
2010, booked for payment in Jul[y] – Dec
2010. The delay in payment is due to the
482 Unreleased  
delay in the certification of the LGU
appropriations (slow
counterpart. Without it, the NG is obliged to
ns moving projects and
pay the full amount.
programs for
discontinuance) 8. Philpost: Purchase of foreclosed property. 644
Payment of Mandatory Obligations, (GSIS,
12,336 Supported by the GFI Approve
PhilHealth, andFranking Privilege
ECC),
med Dividends authorize its use
9. BSP:forFirst
the equity
2011 infusion out of Php 40B 10,000
capitalization under the BSP Law
Disbursement
Acceleration
10. PCMC:
ProgramCapital and Equipment Renovation 280

11. LCOP: 105

21,544 Unreleased With prior
a. Pediatric Pulmonary Program
appropriations (slow approval from 35
b. Bio-regenerative Technology Program
n moving projects and the President in
(Stem-Cell Research – subject to legal
programs for November 2010 70
review and presentation)
discontinuance) and to declare as
savings from Zero-based Budgeting12. TIDCORP:
savings andNG with
Equity infusion 570
Initiative authority to use
for priority TOTAL 26,945
projects

dget 7,748 FY 2011 Agency For information NGAs/LGUs

Budget items that can
be realigned within the Agency/Project Allotment
agency to fund new fast (SARO) Cash
disbursing projects (In Million Requirem
DPWH-3.981 Billion Php) (NCA)
DA – 2.497 Billion
DOT – 1.000 Billion 13. DOF-BIR: NPSTAR
DepEd – 270 Million centralization of data    
processing and others (To be    
L 72.110   synchronized
  with GFMIS    
activities) 758 758

14. COA: IT infrastructure

B. Projects in the Disbursement Acceleration Program
program and hiring of    
(Descriptions of projects attached as Annex A) additional litigational experts 144 144

15. DND-PAF: On Base Housing

GOCCs and GFIs Facilities and Communication    
 pment 30 Development
30 with DSWD and    
250 50
DA: 2,959 2,223
igation, FMRs and 30. ARMM: Comprehensive Peace
grated Community Based Multi-Species   and Development Intervention 8,592 8,592
hery and Aquasilvi  
ming 1,629 31. DOTC-MRT:
1,629 Purchase of
indanao Rural additional MRT cars 4,500 -
elopment Project 919 183
32. LGU Support Fund 6,500 6,500
A Agno River Integrated
33. Various Other Local Projects 6,500 6,500
ation Project 411 411
34. Development Assistance to the
DAR: 1,293 1,293
Province of Quezon 750 750
grarian Reform
mmunities Project 2 1,293 132 TOTAL 45,165 44,000
andowners Compensation 5,432

DBM: Conduct of National C. Summary

ey of  
mers/Fisherfolks/Ips 625 625
Fund Sources
DOJ: Operating requirements Identified for Allotments Cash
0 investigation agents and   Approval for Release Requirements fo
tate attorneys 11 11 (In Million Release in FY
Php) 2011
DOT: Preservation of the Cine
egidor Complex 25 25 72,110 72,110 70,895

OPAPP: Activities for Peace GOCCs 26,895 26,895

ess (PAMANA- Project  
ils: budget breakdown,   NGAs/LGUs 45,165 44,000
ementation plan, and  
ditions on fund release   For His Excellency’s Consideration
ched as Annex B) 1,819 1,819

DOST 425 425 (Sgd.) FLORENCIO B. ABAD

stablishment of National
erological and Climate   [/] APPROVED
ter 275 275
nhancement of Doppler [ ] DISAPPROVED
ar Network for National  
ther Watch, Accurate   (Sgd.) H.E. BENIGNO S. AQUINO, III
casting and Flood Early  
ning 190 190 OCT 12, 2011

DOF-BOC: To settle the

cipal obligations with   The memorandum of October 12, 2011 was followed
C consistent with the   by another memorandum for the President dated
ement with the CISS and   December 12, 2011  requesting omnibus authority to
116

S 2,800 2,800consolidate the savings and unutilized balances for

fiscal year 2011. Pertinent portions of the
OEO-FDCP: Establishment of memorandum of December 12, 2011 read:
National Film Archive and  
cinematheques, and other   MEMORANDUM FOR THE PRESIDENT
activities 20 20
xxxx
DPWH: Various infrastructure
ects 5,500 5,500
SUBJECT: Omnibus Authority to Consolidate
DepEd/ERDT/DOST: Thin Savings/Unutilized Balances and its Realignment
nt Cloud Computing  
ect 270 270 DATE: December 12, 2011

DOH: Hiring of nurses and

This is to respectfully request for the grant of
wives 294 294
Omnibus Authority to consolidate savings/unutilized
TESDA: Training Program in balances in FY 2011 corresponding to completed or
nership with BPO industry   discontinued projects which may be pooled to fund
other sectors 1,100 1,100additional projects or expenditures.

DILG: Performance Challenge In addition, Mr. President, this measure will allow us
d (People Empowered   to undertake projects even if their implementation
mmunity Driven  
carries over to 2012 without necessarily impacting on 5.1 The 2010 Continuing
our budget deficit cap next year. Appropriations (pooled
savings) is proposed to be
BACKGROUND spent for the projects that we
have identified to be
1.0 The DBM, during the course of immediate actual
performance reviews conducted on disbursements considering
the agencies’ operations, particularly that this same fund source will
on the implementation of their expire on December 31, 2011.
projects/activities, including expenses
incurred in undertaking the same, 5.2 With respect to the
have identified savings out of the 2011 proposed expenditure items to
General Appropriations Act. Said be funded from the FY 2011
savings correspond to completed or Unreleased Appropriations,
discontinued projects under certain most of these are the same
departments/agencies which may be projects for which the DBM is
pooled, for the following: directed by the Office of the
President, thru the Executive
1.1 to provide for new Secretary, to source funds.
activities which have not been
anticipated during preparation 6.0 Among others, the following are
of the budget; such proposed additional projects that
have been chosen given their
1.2 to augment additional multiplier impact on economy and
requirements of on-going infrastructure development, their
priority projects; and beneficial effect on the poor, and their
translation into disbursements. Please
note that we have classified the list of
1.3 to provide for deficiencies
proposed projects as follows:
under the Special Purpose
Funds, e.g., PDAF, Calamity
Fund, Contingent Fund 7.0 x x x

1.4 to cover for the FOR THE PRESIDENT’S APPROVAL

modifications of the original
allotment class allocation as a 8.0 Foregoing considered, may we
result of on-going priority respectfully request for the President’s
projects and implementation of approval for the following:
new activities
8.1 Grant of omnibus authority
2.0 x x x x to consolidate FY 2011
savings/unutilized balances
2.1 x x x and its realignment; and

2.2 x x x 8.2 The proposed additional

projects identified for funding.
ON THE UTILIZATION OF POOLED SAVINGS
For His Excellency’s consideration and approval.
3.0 It may be recalled that the
President approved our request for (Sgd.)
omnibus authority to pool
savings/unutilized balances in FY [/] APPROVED
2010 last November 25, 2010.
[ ] DISAPPROVED
4.0 It is understood that in the
utilization of the pooled savings, the (Sgd.) H.E. BENIGNO S. AQUINO, III
DBM shall secure the corresponding
approval/confirmation of the President. DEC 21, 2011
Furthermore, it is assured that the
proposed realignments shall be within Substantially identical requests for authority to pool
the authorized Expenditure level. savings and to fund proposed projects were contained
in various other memoranda from Sec. Abad dated
5.0 Relative thereto, we have June 25, 2012,  September 4, 2012,  December 19,
117 118

identified some expenditure items that 2012,  May 20, 2013,  and September 25,
119 120

may be sourced from the said pooled 2013.  The President apparently approved all the
121

appropriations in FY 2010 that will requests, withholding approval only of the proposed
expire on December 31, 2011 and projects contained in the June 25, 2012
appropriations in FY 2011 that may be memorandum, as borne out by his marginal note
declared as savings to fund additional therein to the effect that the proposed projects should
expenditures. still be "subject to further discussions." 122
In order to implement the June25, 2012 and undertake other priority expenditures of the
memorandum, Sec. Abad issued NBC No. 541 national government.
(Adoption of Operational Efficiency Measure –
Withdrawal of Agencies’ Unobligated Allotments as of 2.0 Purpose
June 30, 2012),  reproduced herein as follows:
123

2.1 To provide the conditions and

NATIONAL BUDGET CIRCULAR No. 541 parameters on the withdrawal of
unobligated allotments of agencies as
July 18, 2012 of June 30, 2012 to fund priority
and/or fast-moving programs/projects
TO: All Heads of Departments/Agencies/State of the national government;
Universities and Colleges and other Offices of the
National Government, Budget and Planning Officers; 2.2 To prescribe the reports and
Heads of Accounting Units and All Others Concerned documents to be used as bases on
the withdrawal of said unobligated
SUBJECT : Adoption of Operational Efficiency allotments; and
Measure – Withdrawal of Agencies’ Unobligated
Allotments as of June 30, 2012 2.3 To provide guidelines in the
utilization or reallocation of the
1.0 Rationale withdrawn allotments.

The DBM, as mandated by Executive Order (EO) No. 3.0 Coverage

292 (Administrative Code of 1987), periodically
reviews and evaluates the departments/agencies’ 3.1 These guidelines shall cover the
efficiency and effectiveness in utilizing budgeted withdrawal of unobligated allotments
funds for the delivery of services and production of as of June 30, 2012 of all national
goods, consistent with the government priorities. government agencies (NGAs) charged
against FY 2011 Continuing
In the event that a measure is necessary to further Appropriation (R.A. No.10147) and FY
improve the operational efficiency of the government, 2012 Current Appropriation (R.A. No.
the President is authorized to suspend or stop further 10155), pertaining to:
use of funds allotted for any agency or expenditure
authorized in the General Appropriations Act. 3.1.1 Capital Outlays (CO);
Withdrawal and pooling of unutilized allotment
releases can be effected by DBM based on authority 3.1.2 Maintenance and Other
of the President, as mandated under Sections 38 and Operating Expenses (MOOE)
39, Chapter 5, Book VI of EO 292. related to the implementation
of programs and projects, as
For the first five months of 2012, the National well as capitalized MOOE; and
Government has not met its spending targets. In order
to accelerate spending and sustain the fiscal targets 3.1.3 Personal Services
during the year, expenditure measures have to be corresponding to unutilized
implemented to optimize the utilization of available pension benefits declared as
resources. savings by the agencies
concerned based on their
Departments/agencies have registered low spending updated/validated list of
levels, in terms of obligations and disbursements per pensioners.
initial review of their 2012 performance. To enhance
agencies’ performance, the DBM conducts continuous 3.2 The withdrawal of unobligated
consultation meetings and/or send call-up letters, allotments may cover the identified
requesting them to identify slow-moving programs, projects and activities of the
programs/projects and the factors/issues affecting departments/agencies reflected in the
their performance (both pertaining to internal systems DBM list shown as Annex A or specific
and those which are outside the agencies’ spheres of programs and projects as may be
control). Also, they are asked to formulate strategies identified by the agencies.
and improvement plans for the rest of 2012.
4.0 Exemption
Notwithstanding these initiatives, some
departments/agencies have continued to post low These guidelines shall not apply to the following:
obligation levels as of end of first semester, thus
resulting to substantial unobligated allotments.
4.1 NGAs
In line with this, the President, per directive dated
4.1.1 Constitutional
June 27, 2012 authorized the withdrawal of
Offices/Fiscal Autonomy
unobligated allotments of agencies with low levels of
Group, granted fiscal
obligations as of June 30, 2012, both for continuing
autonomy under the Philippine
and current allotments. This measure will allow the
Constitution; and
maximum utilization of available allotments to fund
 4.1.2 State Universities and Premium and Special
Colleges, adopting the Accounts in the General Fund.
Normative Funding allocation
scheme i.e., distribution of a 5.0 Guidelines
predetermined budget ceiling.
5.1 National government agencies
4.2 Fund Sources shall continue to undertake
procurement activities notwithstanding
4.2.1 Personal Services other the implementation of the policy of
than pension benefits; withdrawal of unobligated allotments
until the end of the third quarter, FY
4.2.2 MOOE items earmarked 2012. Even without the allotments, the
for specific purposes or agency shall proceed in undertaking
subject to realignment the procurement processes (i.e.,
conditions per General procurement planning up to the
Provisions of the GAA: conduct of bidding but short of
awarding of contract) pursuant to
• Confidential and GPPB Circular Nos. 02-2008 and 01-
Intelligence Fund; 2009 and DBM Circular Letter No.
2010-9.
• Savings from
Traveling, 5.2 For the purpose of determining the
Communication, amount of unobligated allotments that
Transportation and shall be withdrawn, all
Delivery, Repair and departments/agencies/operating units
Maintenance, Supplies (OUs) shall submit to DBM not later
and Materials and than July 30, 2012, the following
Utility which shall be budget accountability reports as of
used for the grant of June 30, 2012;
Collective Negotiation
Agreement incentive • Statement of Allotments,
benefit; Obligations and Balances
(SAOB);
• Savings from
mandatory • Financial Report of
expenditures which Operations (FRO); and
can be realigned only
in the last quarter after • Physical Report of
taking into Operations.
consideration the
agency’s full year 5.3 In the absence of the June 30,
requirements, i.e., 2012 reports cited under item 5.2 of
Petroleum, Oil and this Circular, the agency’s latest report
Lubricants, Water, available shall be used by DBM as
Illumination, Power basis for withdrawal of allotment. The
Services, Telephone, DBM shall compute/approximate the
other Communication agency’s obligation level as of June 30
Services and Rent. to derive its unobligated allotments as
of same period. Example: If the March
4.2.3 Foreign-Assisted 31 SAOB or FRO reflects actual
Projects (loan proceeds and obligations of P 800M then the June
peso counterpart); 30 obligation level shall approximate
to ₱1,600 M (i.e., ₱800 M x 2
4.2.4 Special Purpose Funds quarters).
such as: E-Government Fund,
International Commitments 5.4 All released allotments in FY 2011
Fund, PAMANA, Priority charged against R.A. No. 10147 which
Development Assistance remained unobligated as of June 30,
Fund, Calamity Fund, 2012 shall be immediately considered
Budgetary Support to GOCCs for withdrawal. This policy is based on
and Allocation to LGUs, the following considerations:
among others;
5.4.1 The
4.2.5 Quick Response Funds; departments/agencies’
and approved priority programs
and projects are assumed to
4.2.6 Automatic Appropriations be implementation-ready and
i.e., Retirement Life Insurance doable during the given fiscal
year; and
 5.4.2 The practice of having third quarter i.e., September 30, 2012.
substantial carryover After said cut-off date, the withdrawn
appropriations may imply that allotments shall be pooled and form
the agency has a slower-than- part of the overall savings of the
programmed implementation national government.
capacity or agency tends to
implement projects within a 5.10 Utilization of the consolidated
two-year timeframe. withdrawn allotments for other priority
programs and projects as cited under
5.5. Consistent with the President’s item 5.7.3 of this Circular, shall be
directive, the DBM shall, based on subject to approval of the President.
evaluation of the reports cited above Based on the approval of the
and results of consultations with the President, DBM shall issue the SARO
departments/agencies, withdraw the to cover the approved priority
unobligated allotments as of June 30, expenditures subject to submission by
2012 through issuance of negative the agency/OU concerned of the SBR
Special Allotment Release Orders and supported with PFP and MCP.
(SAROs).
5.11 It is understood that all releases
5.6 DBM shall prepare and submit to to be made out of the withdrawn
the President, a report on the allotments (both 2011 and 2012
magnitude of withdrawn allotments. unobligated allotments) shall be within
The report shall highlight the agencies the approved Expenditure Program
which failed to submit the June 30 level of the national government for
reports required under this Circular. the current year. The SAROs to be
issued shall properly disclose the
5.7 The withdrawn allotments may be: appropriation source of the release to
determine the extent of allotment
5.7.1 Reissued for the original validity, as follows:
programs and projects of the
agencies/OUs concerned, • For charges under R.A.
from which the allotments 10147 – allotments shall be
were withdrawn; valid up to December 31,
2012; and
5.7.2 Realigned to cover
additional funding for other • For charges under R.A.
existing programs and projects 10155 – allotments shall be
of the agency/OU; or valid up to December 31,
2013.
5.7.3 Used to augment
existing programs and projects 5.12 Timely compliance with the
of any agency and to fund submission of existing BARs and other
priority programs and projects reportorial requirements is reiterated
not considered in the 2012 for monitoring purposes.
budget but expected to be
started or implemented during 6.0 Effectivity
the current year.
This circular shall take effect immediately.
5.8 For items 5.7.1 and 5.7.2 above,
agencies/OUs concerned may submit (Sgd.) FLORENCIO B. ABAD
to DBM a Special Budget Request Secretary
(SBR), supported with the following:
As can be seen, NBC No. 541 specified that the
5.8.1 Physical and Financial unobligated allotments of all agencies and
Plan (PFP); departments as of June 30, 2012 that were charged
against the continuing appropriations for fiscal year
5.8.2 Monthly Cash Program 2011 and the 2012 GAA (R.A. No. 10155) were
(MCP); and subject to withdrawal through the issuance of
negative SAROs, but such allotments could be either:
5.8.3 Proof that the (1) reissued for the original PAPs of the concerned
project/activity has started the agencies from which they were withdrawn; or (2)
procurement processes i.e., realigned to cover additional funding for other existing
Proof of Posting and/or PAPs of the concerned agencies; or (3) used to
Advertisement of the Invitation augment existing PAPs of any agency and to fund
to Bid. priority PAPs not considered in the 2012 budget but
expected to be started or implemented in 2012.
5.9 The deadline for submission of Financing the other priority PAPs was made subject
request/s pertaining to these to the approval of the President. Note here that NBC
categories shall be until the end of the No. 541 used terminologies like "realignment" and
"augmentation" in the application of the withdrawn the legislative authorization prescribed by the
unobligated allotments. Constitution that money may be paid out of the
Treasury,’ while appropriation made by law refers to
Taken together, all the issuances showed how the ‘the act of the legislature setting apart or assigning to
DAP was to be implemented and funded, that is — (1) a particular use a certain sum to be used in the
by declaring "savings" coming from the various payment of debt or dues from the State to its
departments and agencies derived from pooling creditors.’" 126

unobligated allotments and withdrawing unreleased

appropriations; (2) releasing unprogrammed funds; On the other hand, the President, in keeping with his
and (3) applying the "savings" and unprogrammed duty to faithfully execute the laws, had sufficient
funds to augment existing PAPs or to support other discretion during the execution of the budget to adapt
priority PAPs. the budget to changes in the country’s economic
situation.  He could adopt a plan like the DAP for the
127

c. DAP was not an appropriation purpose. He could pool the savings and identify the
measure; hence, no appropriation PAPs to be funded under the DAP. The pooling of
law was required to adopt or to savings pursuant to the DAP, and the identification of
implement it the PAPs to be funded under the DAP did not involve
appropriation in the strict sense because the money
Petitioners Syjuco, Luna, Villegas and PHILCONSA had been already set apart from the public treasury by
state that Congress did not enact a law to establish Congress through the GAAs. In such actions, the
the DAP, or to authorize the disbursement and Executive did not usurp the power vested in Congress
release of public funds to implement the DAP. under Section 29(1), Article VI of the Constitution.
Villegas, PHILCONSA, IBP, Araullo, and COURAGE
observe that the appropriations funded under the DAP 3.
were not included in the 2011, 2012 and 2013 GAAs. Unreleased appropriations and withdrawn
To petitioners IBP, Araullo, and COURAGE, the DAP, unobligated allotments under the DAP
being actually an appropriation that set aside public were not savings, and the use of such
funds for public use, should require an enabling law appropriations contravened Section 25(5),
for its validity. VACC maintains that the DAP, because Article VI of the 1987 Constitution.
it involved huge allocations that were separate and
distinct from the GAAs, circumvented and duplicated Notwithstanding our appreciation of the DAP as a
the GAAs without congressional authorization and plan or strategy validly adopted by the Executive to
control. ramp up spending to accelerate economic growth, the
challenges posed by the petitioners constrain us to
The petitioners contend in unison that based on how it dissect the mechanics of the actual execution of the
was developed and implemented the DAP violated DAP. The management and utilization of the public
the mandate of Section 29(1), Article VI of the 1987 wealth inevitably demands a most careful scrutiny of
Constitution that "[n]o money shall be paid out of the whether the Executive’s implementation of the DAP
Treasury except in pursuance of an appropriation was consistent with the Constitution, the relevant
made by law." GAAs and other existing laws.

The OSG posits, however, that no law was necessary a. Although executive discretion
for the adoption and implementation of the DAP and flexibility are necessary in
because of its being neither a fund nor an the execution of the budget, any
appropriation, but a program or an administrative transfer of appropriated funds
system of prioritizing spending; and that the adoption should conform to Section 25(5),
of the DAP was by virtue of the authority of the Article VI of the Constitution
President as the Chief Executive to ensure that laws
were faithfully executed. We begin this dissection by reiterating that Congress
cannot anticipate all issues and needs that may come
We agree with the OSG’s position. into play once the budget reaches its execution stage.
Executive discretion is necessary at that stage to
The DAP was a government policy or strategy achieve a sound fiscal administration and assure
designed to stimulate the economy through effective budget implementation. The heads of offices,
accelerated spending. In the context of the DAP’s particularly the President, require flexibility in their
adoption and implementation being a function operations under performance budgeting to enable
pertaining to the Executive as the main actor during them to make whatever adjustments are needed to
the Budget Execution Stage under its constitutional meet established work goals under changing
mandate to faithfully execute the laws, including the conditions.  In particular, the power to transfer funds
128

GAAs, Congress did not need to legislate to adopt or can give the President the flexibility to meet
to implement the DAP. Congress could appropriate unforeseen events that may otherwise impede the
but would have nothing more to do during the Budget efficient implementation of the PAPs set by Congress
Execution Stage. Indeed, appropriation was the act by in the GAA.
which Congress "designates a particular fund, or sets
apart a specified portion of the public revenue or of Congress has traditionally allowed much flexibility to
the money in the public treasury, to be applied to the President in allocating funds pursuant to the
some general object of governmental expenditure, or GAAs,  particularly when the funds are grouped to
129

to some individual purchase or expense."  As pointed

124 form lump sum accounts.  It is assumed that the
130

out in Gonzales v. Raquiza:  ‘"In a strict sense,

125 agencies of the Government enjoy more flexibility
appropriation has been defined ‘as nothing more than when the GAAs provide broader appropriation
items.  This flexibility comes in the form of policies
131
but has emanated from law itself. It has existed since
that the Executive may adopt during the budget the time of the American Governors-General.  Act 134

execution phase. The DAP – as a strategy to improve No. 1902 (An Act authorizing the Governor-General to
the country’s economic position – was one policy that direct any unexpended balances of appropriations be
the President decided to carry out in order to fulfill his returned to the general fund of the Insular Treasury
mandate under the GAAs. and to transfer from the general fund moneys which
have been returned thereto), passed on May 18, 1909
Denying to the Executive flexibility in the expenditure by the First Philippine Legislature,  was the first
135

process would be counterproductive. In Presidential enabling law that granted statutory authority to the
Spending Power,  Prof. Louis Fisher, an American
132 President to transfer funds. The authority was without
constitutional scholar whose specialties have included any limitation, for the Act explicitly empowered the
budget policy, has justified extending discretionary Governor-General to transfer any unexpended
authority to the Executive thusly: balance of appropriations for any bureau or office to
another, and to spend such balance as if it had
[T]he impulse to deny discretionary authority originally been appropriated for that bureau or office.
altogether should be resisted. There are many
number of reasons why obligations and outlays by From 1916 until 1920, the appropriations laws set a
administrators may have to differ from appropriations cap on the amounts of funds that could be
by legislators. Appropriations are made many months, transferred, thereby limiting the power to transfer
and sometimes years, in advance of expenditures. funds. Only 10% of the amounts appropriated for
Congress acts with imperfect knowledge in trying to contingent or miscellaneous expenses could be
legislate in fields that are highly technical and transferred to a bureau or office, and the transferred
constantly undergoing change. New circumstances funds were to be used to cover deficiencies in the
will develop to make obsolete and mistaken the appropriations also for miscellaneous expenses of
decisions reached by Congress at the appropriation said bureau or office.
stage. It is not practicable for Congress to adjust to
each new development by passing separate In 1921, the ceiling on the amounts of funds to be
supplemental appropriation bills. Were Congress to transferred from items under miscellaneous expenses
control expenditures by confining administrators to to any other item of a certain bureau or office was
narrow statutory details, it would perhaps protect its removed.
power of the purse but it would not protect the purse
itself. The realities and complexities of public policy During the Commonwealth period, the power of the
require executive discretion for the sound President to transfer funds continued to be governed
management of public funds. by the GAAs despite the enactment of the
Constitution in 1935. It is notable that the 1935
xxxx Constitution did not include a provision on the power
to transfer funds. At any rate, a shift in the extent of
x x x The expenditure process, by its very nature, the President’s power to transfer funds was again
requires substantial discretion for administrators. experienced during this era, with the President being
They need to exercise judgment and take given more flexibility in implementing the budget. The
responsibility for their actions, but those actions ought GAAs provided that the power to transfer all or
to be directed toward executing congressional, not portions of the appropriations in the Executive
administrative policy. Let there be discretion, but Department could be made in the "interest of the
channel it and use it to satisfy the programs and public, as the President may determine." 136

priorities established by Congress.

In its time, the 1971 Constitutional Convention wanted
In contrast, by allowing to the heads of offices some to curtail the President’s seemingly unbounded
power to transfer funds within their respective offices, discretion in transferring funds.  Its Committee on the
137

the Constitution itself ensures the fiscal autonomy of Budget and Appropriation proposed to prohibit the
their offices, and at the same time maintains the transfer of funds among the separate branches of the
separation of powers among the three main branches Government and the independent constitutional
of the Government. The Court has recognized this, bodies, but to allow instead their respective heads to
and emphasized so in Bengzon v. Drilon,  viz:
133 augment items of appropriations from savings in their
respective budgets under certain limitations.  The 138

The Judiciary, the Constitutional Commissions, and clear intention of the Convention was to further
the Ombudsman must have the independence and restrict, not to liberalize, the power to transfer
flexibility needed in the discharge of their appropriations.  Thus, the Committee on the Budget
139

constitutional duties. The imposition of restrictions and Appropriation initially considered setting stringent
and constraints on the manner the independent limitations on the power to augment, and suggested
constitutional offices allocate and utilize the funds that the augmentation of an item of appropriation
appropriated for their operations is anathema to fiscal could be made "by not more than ten percent if the
autonomy and violative not only of the express original item of appropriation to be augmented does
mandate of the Constitution but especially as regards not exceed one million pesos, or by not more than five
the Supreme Court, of the independence and percent if the original item of appropriation to be
separation of powers upon which the entire fabric of augmented exceeds one million pesos."  But two
140

our constitutional system is based. members of the Committee objected to the

₱1,000,000.00 threshold, saying that the amount was
arbitrary and might not be reasonable in the future.
In the case of the President, the power to transfer
The Committee agreed to eliminate the
funds from one item to another within the Executive
has not been the mere offshoot of established usage,
₱1,000,000.00 threshold, and settled on the ten Indeed, such constitutional infirmities render the
percent limitation.
141
provision in question null and void.143

In the end, the ten percent limitation was discarded It is significant that Demetria was promulgated 25
during the plenary of the Convention, which adopted days after the ratification by the people of the 1987
the following final version under Section 16, Article Constitution, whose Section 25(5) of Article VI is
VIII of the 1973 Constitution, to wit: identical to Section 16(5), Article VIII of the 1973
Constitution, to wit:
(5) No law shall be passed authorizing any transfer of
appropriations; however, the President, the Prime Section 25. x x x
Minister, the Speaker, the Chief Justice of the
Supreme Court, and the heads of Constitutional xxxx
Commissions may by law be authorized to augment
any item in the general appropriations law for their 5) No law shall be passed authorizing any transfer of
respective offices from savings in other items of their appropriations; however, the President, the President
respective appropriations. of the Senate, the Speaker of the House of
Representatives, the Chief Justice of the Supreme
The 1973 Constitution explicitly and categorically Court, and the heads of Constitutional Commissions
prohibited the transfer of funds from one item to may, by law, be authorized to augment any item in the
another, unless Congress enacted a law authorizing general appropriations law for their respective offices
the President, the Prime Minister, the Speaker, the from savings in other items of their respective
Chief Justice of the Supreme Court, and the heads of appropriations.
the Constitutional omissions to transfer funds for the
purpose of augmenting any item from savings in xxxx
another item in the GAA of their respective offices.
The leeway was limited to augmentation only, and
The foregoing history makes it evident that the
was further constricted by the condition that the funds
Constitutional Commission included Section 25(5),
to be transferred should come from savings from
supra, to keep a tight rein on the exercise of the
another item in the appropriation of the office.
142

power to transfer funds appropriated by Congress by

the President and the other high officials of the
On July 30, 1977, President Marcos issued PD No. Government named therein. The Court stated in
1177, providing in its Section 44 that: Nazareth v. Villar: 144

Section 44. Authority to Approve Fund Transfers. The In the funding of current activities, projects, and
President shall have the authority to transfer any fund programs, the general rule should still be that the
appropriated for the different departments, bureaus, budgetary amount contained in the appropriations bill
offices and agencies of the Executive Department is the extent Congress will determine as sufficient for
which are included in the General Appropriations Act, the budgetary allocation for the proponent agency.
to any program, project, or activity of any department, The only exception is found in Section 25 (5), Article
bureau or office included in the General VI of the Constitution, by which the President, the
Appropriations Act or approved after its enactment. President of the Senate, the Speaker of the House of
Representatives, the Chief Justice of the Supreme
The President shall, likewise, have the authority to Court, and the heads of Constitutional Commissions
augment any appropriation of the Executive are authorized to transfer appropriations to
Department in the General Appropriations Act, from augmentany item in the GAA for their respective
savings in the appropriations of another department, offices from the savings in other items of their
bureau, office or agency within the Executive Branch, respective appropriations. The plain language of the
pursuant to the provisions of Article VIII, Section 16 constitutional restriction leaves no room for the
(5) of the Constitution. petitioner’s posture, which we should now dispose of
as untenable.
In Demetria v. Alba, however, the Court struck down
the first paragraph of Section 44 for contravening It bears emphasizing that the exception in favor of the
Section 16(5)of the 1973 Constitution, ruling: high officials named in Section 25(5), Article VI of the
Constitution limiting the authority to transfer savings
Paragraph 1 of Section 44 of P.D. No. 1177 unduly only to augment another item in the GAA is strictly but
over-extends the privilege granted under said Section reasonably construed as exclusive. As the Court has
16. It empowers the President to indiscriminately expounded in Lokin, Jr. v. Commission on Elections:
transfer funds from one department, bureau, office or
agency of the Executive Department to any program, When the statute itself enumerates the exceptions to
project or activity of any department, bureau or office the application of the general rule, the exceptions are
included in the General Appropriations Act or strictly but reasonably construed. The exceptions
approved after its enactment, without regard as to extend only as far as their language fairly warrants,
whether or not the funds to be transferred are actually and all doubts should be resolved in favor of the
savings in the item from which the same are to be general provision rather than the exceptions. Where
taken, or whether or not the transfer is for the purpose the general rule is established by a statute with
of augmenting the item to which said transfer is to be exceptions, none but the enacting authority can curtail
made. It does not only completely disregard the the former. Not even the courts may add to the latter
standards set in the fundamental law, thereby by implication, and it is a rule that an express
amounting to an undue delegation of legislative exception excludes all others, although it is always
powers, but likewise goes beyond the tenor thereof.
proper in determining the applicability of the rule to Supreme Court, the Heads of Constitutional
inquire whether, in a particular case, it accords with Commissions enjoying fiscal autonomy, and the
reason and justice. Ombudsman are hereby authorized to augment any
item in this Act from savings in other items of their
The appropriate and natural office of the exception is respective appropriations.
to exempt something from the scope of the general
words of a statute, which is otherwise within the In the 2012 GAA, the empowering provision was
scope and meaning of such general words. Section 53, to wit:
Consequently, the existence of an exception in a
statute clarifies the intent that the statute shall apply Section 53. Use of Savings. The President of the
to all cases not excepted. Exceptions are subject to Philippines, the Senate President, the Speaker of the
the rule of strict construction; hence, any doubt will be House of Representatives, the Chief Justice of the
resolved in favor of the general provision and against Supreme Court, the Heads of Constitutional
the exception. Indeed, the liberal construction of a Commissions enjoying fiscal autonomy, and the
statute will seem to require in many circumstances Ombudsman are hereby authorized to augment any
that the exception, by which the operation of the item in this Act from savings in other items of their
statute is limited or abridged, should receive a respective appropriations.
restricted construction.
In fact, the foregoing provisions of the 2011 and 2012
Accordingly, we should interpret Section 25(5), supra, GAAs were cited by the DBM as justification for the
in the context of a limitation on the President’s use of savings under the DAP. 145

discretion over the appropriations during the Budget

Execution Phase. A reading shows, however, that the aforequoted
provisions of the GAAs of 2011 and 2012 were
b. Requisites for the valid transfer of textually unfaithful to the Constitution for not carrying
appropriated funds under Section the phrase "for their respective offices" contained in
25(5), Article VI of the 1987 Section 25(5), supra. The impact of the phrase "for
Constitution their respective offices" was to authorize only
transfers of funds within their offices (i.e., in the case
The transfer of appropriated funds, to be valid under of the President, the transfer was to an item of
Section 25(5), supra, must be made upon a appropriation within the Executive). The provisions
concurrence of the following requisites, namely: carried a different phrase ("to augment any item in
this Act"), and the effect was that the 2011 and 2012
(1) There is a law authorizing the President, GAAs thereby literally allowed the transfer of funds
the President of the Senate, the Speaker of from savings to augment any item in the GAAs even if
the House of Representatives, the Chief the item belonged to an office outside the Executive.
Justice of the Supreme Court, and the heads To that extent did the 2011 and 2012 GAAs
of the Constitutional Commissions to transfer contravene the Constitution. At the very least, the
funds within their respective offices; aforequoted provisions cannot be used to claim
authority to transfer appropriations from the Executive
(2) The funds to be transferred are savings to another branch, or to a constitutional commission.
generated from the appropriations for their
respective offices; and (3) The purpose of the Apparently realizing the problem, Congress inserted
transfer is to augment an item in the general the omitted phrase in the counterpart provision in the
appropriations law for their respective offices. 2013 GAA, to wit:

b.1. First Requisite–GAAs of 2011 and Section 52. Use of Savings. The President of the
2012 lacked valid provisions to Philippines, the Senate President, the Speaker of the
authorize transfers of funds under House of Representatives, the Chief Justice of the
the DAP; hence, transfers under the Supreme Court, the Heads of Constitutional
DAP were unconstitutional Commissions enjoying fiscal autonomy, and the
Ombudsman are hereby authorized to use savings in
Section 25(5), supra, not being a self-executing their respective appropriations to augment actual
provision of the Constitution, must have an deficiencies incurred for the current year in any item
implementing law for it to be operative. That law, of their respective appropriations.
generally, is the GAA of a given fiscal year. To comply
with the first requisite, the GAAs should expressly Even had a valid law authorizing the transfer of funds
authorize the transfer of funds. pursuant to Section 25(5), supra, existed, there still
remained two other requisites to be met, namely: that
Did the GAAs expressly authorize the transfer of the source of funds to be transferred were savings
funds? from appropriations within the respective offices; and
that the transfer must be for the purpose of
augmenting an item of appropriation within the
In the 2011 GAA, the provision that gave the
respective offices.
President and the other high officials the authority to
transfer funds was Section 59, as follows:
b.2. Second Requisite – There were
no savings from which funds
Section 59. Use of Savings. The President of the
could be sourced for the DAP
Philippines, the Senate President, the Speaker of the
Were the funds used in the DAP actually savings?
House of Representatives, the Chief Justice of the
The petitioners claim that the funds used in the DAP delegated authority. And the fourth principle is that
— the unreleased appropriations and withdrawn savings should be actual. "Actual" denotes something
unobligated allotments — were not actual savings that is real or substantial, or something that exists
within the context of Section 25(5), supra, and the presently in fact, as opposed to something that is
relevant provisions of the GAAs. Belgica argues that merely theoretical, possible, potential or
"savings" should be understood to refer to the excess hypothetical.150

money after the items that needed to be funded have

been funded, or those that needed to be paid have The foregoing principles caution us to construe
been paid pursuant to the budget.  The petitioners
146
savings strictly against expanding the scope of the
posit that there could be savings only when the PAPs power to augment. It is then indubitable that the
for which the funds had been appropriated were power to augment was to be used only when the
actually implemented and completed, or finally purpose for which the funds had been allocated were
discontinued or abandoned. They insist that savings already satisfied, or the need for such funds had
could not be realized with certainty in the middle of ceased to exist, for only then could savings be
the fiscal year; and that the funds for "slow-moving" properly realized. This interpretation prevents the
PAPs could not be considered as savings because Executive from unduly transgressing Congress’ power
such PAPs had not actually been abandoned or of the purse.
discontinued yet.  They stress that NBC No. 541, by
147

allowing the withdrawn funds to be reissued to the The definition of "savings" in the GAAs, particularly for
"original program or project from which it was 2011, 2012 and 2013, reflected this interpretation and
withdrawn," conceded that the PAPs from which the made it operational, viz:
supposed savings were taken had not been
completed, abandoned or discontinued. 148

Savings refer to portions or balances of any

programmed appropriation in this Act free from any
The OSG represents that "savings" were obligation or encumbrance which are: (i) still available
"appropriations balances," being the difference after the completion or final discontinuance or
between the appropriation authorized by Congress abandonment of the work, activity or purpose for
and the actual amount allotted for the appropriation; which the appropriation is authorized; (ii) from
that the definition of "savings" in the GAAs set only appropriations balances arising from unpaid
the parameters for determining when savings compensation and related costs pertaining to vacant
occurred; that it was still the President (as well as the positions and leaves of absence without pay; and (iii)
other officers vested by the Constitution with the from appropriations balances realized from the
authority to augment) who ultimately determined implementation of measures resulting in improved
when savings actually existed because savings could systems and efficiencies and thus enabled agencies
be determined only during the stage of budget to meet and deliver the required or planned targets,
execution; that the President must be given a wide programs and services approved in this Act at a
discretion to accomplish his tasks; and that the lesser cost.
withdrawn unobligated allotments were savings
inasmuch as they were clearly "portions or balances
The three instances listed in the GAAs’ aforequoted
of any programmed appropriation…free from any
definition were a sure indication that savings could be
obligation or encumbrances which are (i) still available
generated only upon the purpose of the appropriation
after the completion or final discontinuance or
being fulfilled, or upon the need for the appropriation
abandonment of the work, activity or purpose for
being no longer existent.
which the appropriation is authorized…"
The phrase "free from any obligation or
We partially find for the petitioners.
encumbrance" in the definition of savings in the GAAs
conveyed the notion that the appropriation was at that
In ascertaining the meaning of savings, certain stage when the appropriation was already obligated
principles should be borne in mind. The first principle and the appropriation was already released. This
is that Congress wields the power of the purse. interpretation was reinforced by the enumeration of
Congress decides how the budget will be spent; what the three instances for savings to arise, which showed
PAPs to fund; and the amounts of money to be spent that the appropriation referred to had reached the
for each PAP. The second principle is that the agency level. It could not be otherwise, considering
Executive, as the department of the Government that only when the appropriation had reached the
tasked to enforce the laws, is expected to faithfully agency level could it be determined whether (a) the
execute the GAA and to spend the budget in PAP for which the appropriation had been authorized
accordance with the provisions of the GAA.  The 149
was completed, finally discontinued, or abandoned; or
Executive is expected to faithfully implement the (b) there were vacant positions and leaves of absence
PAPs for which Congress allocated funds, and to limit without pay; or (c) the required or planned targets,
the expenditures within the allocations, unless programs and services were realized at a lesser cost
exigencies result to deficiencies for which because of the implementation of measures resulting
augmentation is authorized, subject to the conditions in improved systems and efficiencies.
provided by law. The third principle is that in making
the President’s power to augment operative under the
The DBM declares that part of the savings brought
GAA, Congress recognizes the need for flexibility in
under the DAP came from "pooling of unreleased
budget execution. In so doing, Congress diminishes
appropriations such as unreleased Personnel
its own power of the purse, for it delegates a fraction
Services appropriations which will lapse at the end of
of its power to the Executive. But Congress does not
the year, unreleased appropriations of slow moving
thereby allow the Executive to override its authority
projects and discontinued projects per Zero-Based
over the purse as to let the Executive exceed its
Budgeting findings."
The declaration of the DBM by itself does not state ON THE AUTHORITY TO WITHDRAW
the clear legal basis for the treatment of unreleased or UNOBLIGATED ALLOTMENTS
unalloted appropriations as savings.
5.0 The DBM, during the course of
The fact alone that the appropriations are unreleased performance reviews conducted on the
or unalloted is a mere description of the status of the agencies’ operations, particularly on the
items as unalloted or unreleased. They have not yet implementation of their projects/activities,
ripened into categories of items from which savings including expenses incurred in undertaking
can be generated. Appropriations have been the same, have been continuously calling the
considered "released" if there has already been an attention of all National Government agencies
allotment or authorization to incur obligations and (NGAs) with low levels of obligations as of end
disbursement authority. This means that the DBM has of the first quarter to speedup the
issued either an ABM (for those not needing implementation of their programs and projects
clearance), or a SARO (for those needing clearance), in the second quarter.
and consequently an NCA, NCAA or CDC, as the
case may be. Appropriations remain unreleased, for 6.0 Said reminders were made in a series of
instance, because of noncompliance with consultation meetings with the concerned
documentary requirements (like the Special Budget agencies and with call-up letters sent.
Request), or simply because of the unavailability of
funds. But the appropriations do not actually reach the 7.0 Despite said reminders and the availability
agencies to which they were allocated under the of funds at the department’s disposal, the
GAAs, and have remained with the DBM technically level of financial performance of some
speaking. Ergo, unreleased appropriations refer to departments registered below program, with
appropriations with allotments but without the targeted obligations/disbursements for the
disbursement authority. first semester still not being met.

For us to consider unreleased appropriations as 8.0 In order to maximize the use of the
savings, unless these met the statutory definition of available allotment, all unobligated balances
savings, would seriously undercut the congressional as of June 30, 2012, both for continuing and
power of the purse, because such appropriations had current allotments shall be withdrawn and
not even reached and been used by the agency pooled to fund fast moving programs/projects.
concerned vis-à-vis the PAPs for which Congress had
allocated them. However, if an agency has unfilled
9.0 It may be emphasized that the allotments
positions in its plantilla and did not receive an
to be withdrawn will be based on the list of
allotment and NCA for such vacancies, appropriations
slow moving projects to be identified by the
for such positions, although unreleased, may already
agencies and their catch up plans to be
constitute savings for that agency under the second
evaluated by the DBM.
instance.
It is apparent from the foregoing text that the
Unobligated allotments, on the other hand, were
withdrawal of unobligated allotments would be based
encompassed by the first part of the definition of
on whether the allotments pertained to slow-moving
"savings" in the GAA, that is, as "portions or balances
projects, or not. However, NBC No. 541 did not set in
of any programmed appropriation in this Act free from
clear terms the criteria for the withdrawal of
any obligation or encumbrance." But the first part of
unobligated allotments, viz:
the definition was further qualified by the three
enumerated instances of when savings would be
realized. As such, unobligated allotments could not be 3.1. These guidelines shall cover the
indiscriminately declared as savings without first withdrawal of unobligated allotments as of
determining whether any of the three instances June 30, 2012 ofall national government
existed. This signified that the DBM’s withdrawal of agencies (NGAs) charged against FY 2011
unobligated allotments had disregarded the definition Continuing Appropriation (R.A. No. 10147)
of savings under the GAAs. and FY 2012 Current Appropriation (R.A. No.
10155), pertaining to:
Justice Carpio has validly observed in his Separate
Concurring Opinion that MOOE appropriations are 3.1.1 Capital Outlays (CO);
deemed divided into twelve monthly allocations within
the fiscal year; hence, savings could be generated 3.1.2 Maintenance and Other
monthly from the excess or unused MOOE Operating Expenses (MOOE) related
appropriations other than the Mandatory Expenditures to the implementation of programs and
and Expenditures for Business-type Activities projects, as well as capitalized MOOE;
because of the physical impossibility to obligate and and
spend such funds as MOOE for a period that already
lapsed. Following this observation, MOOE for future 3.1.3 Personal Services
months are not savings and cannot be transferred. corresponding to unutilized pension
benefits declared as savings by the
The DBM’s Memorandum for the President dated agencies concerned based on their
June 25, 2012 (which became the basis of NBC No. undated/validated list of pensioners.
541) stated:
A perusal of its various provisions reveals that NBC
No. 541 targeted the "withdrawal of unobligated
allotments of agencies with low levels of Thus, another alleged area of constitutional infirmity
obligations"  "to fund priority and/or fast-moving
151
was that the DAP and its relevant issuances
programs/projects."  But the fact that the withdrawn
152
shortened the period of availability of the
allotments could be "[r]eissued for the original appropriations for MOOE and capital outlays.
programs and projects of the agencies/OUs
concerned, from which the allotments were Congress provided a one-year period of availability of
withdrawn"  supported the conclusion that the PAPs
153
the funds for all allotment classes in the 2013 GAA
had not yet been finally discontinued or abandoned. (R.A. No. 10352), to wit:
Thus, the purpose for which the withdrawn funds had
been appropriated was not yet fulfilled, or did not yet Section 63. Availability of Appropriations.— All
cease to exist, rendering the declaration of the funds appropriations authorized in this Act shall be available
as savings impossible. for release and obligation for the purposes specified,
and under the same special provisions applicable
Worse, NBC No. 541 immediately considered for thereto, until the end of FY 2013: PROVIDED, That a
withdrawal all released allotments in 2011 charged report on these releases and obligations shall be
against the 2011 GAA that had remained unobligated submitted to the Senate Committee on Finance and
based on the following considerations, to wit: House Committee on Appropriations, either in printed
form or by way of electronic document.
5.4.1 The departments/agencies’ approved
priority programs and projects are assumed to Yet, in his memorandum for the President dated May
be implementation-ready and doable during 20, 2013, Sec. Abad sought omnibus authority to
the given fiscal year; and consolidate savings and unutilized balances to fund
the DAP on a quarterly basis, viz:
5.4.2 The practice of having substantial
carryover appropriations may imply that the 7.0 If the level of financial performance of
agency has a slower-than-programmed some department will register below program,
implementation capacity or agency tends to even with the availability of funds at their
implement projects within a two-year disposal, the targeted
timeframe. obligations/disbursements for each quarter will
not be met. It is important to note that these
Such withdrawals pursuant to NBC No. 541, the funds will lapse at the end of the fiscal year if
circular that affected the unobligated allotments for these remain unobligated.
continuing and current appropriations as of June 30,
2012, disregarded the 2-year period of availability of 8.0 To maximize the use of the available
the appropriations for MOOE and capital outlay allotment, all unobligated balances at the end
extended under Section 65, General Provisions of the of every quarter, both for continuing and
2011 GAA, viz: current allotments shall be withdrawn and
pooled to fund fast moving programs/projects.
Section 65. Availability of Appropriations. —
Appropriations for MOOE and capital outlays 9.0 It may be emphasized that the allotments
authorized in this Act shall be available for release to be withdrawn will be based on the list of
and obligation for the purpose specified, and under slow moving projects to be identified by the
the same special provisions applicable thereto, for a agencies and their catch up plans to be
period extending to one fiscal year after the end of the evaluated by the DBM.
year in which such items were appropriated:
PROVIDED, That appropriations for MOOE and The validity period of the affected appropriations,
capital outlays under R.A. No. 9970 shall be made already given the brief Lifes pan of one year, was
available up to the end of FY 2011: PROVIDED, further shortened to only a quarter of a year under the
FURTHER, That a report on these releases and DBM’s memorandum dated May 20, 2013.
obligations shall be submitted to the Senate
Committee on Finance and the House Committee on
The petitioners accuse the respondents of forcing the
Appropriations.
generation of savings in order to have a larger fund
available for discretionary spending. They aver that
and Section 63 General Provisions of the 2012 GAA, the respondents, by withdrawing unobligated
viz: allotments in the middle of the fiscal year, in effect
deprived funding for PAPs with existing appropriations
Section 63. Availability of Appropriations. — under the GAAs. 155

Appropriations for MOOE and capital outlays

authorized in this Act shall be available for release The respondents belie the accusation, insisting that
and obligation for the purpose specified, and under the unobligated allotments were being withdrawn
the same special provisions applicable thereto, for a upon the instance of the implementing agencies
period extending to one fiscal year after the end of the based on their own assessment that they could not
year in which such items were appropriated: obligate those allotments pursuant to the President’s
PROVIDED, That a report on these releases and directive for them to spend their appropriations as
obligations shall be submitted to the Senate quickly as they could in order to ramp up the
Committee on Finance and the House Committee on economy. 156

Appropriations, either in printed form or by way of

electronic document. 154

We agree with the petitioners.

Contrary to the respondents’ insistence, the deduction of appropriations. The 2011 GAA
withdrawals were upon the initiative of the DBM itself. authorized impoundment only in case of
The text of NBC No. 541 bears this out, to wit: unmanageable National Government budget deficit, to
wit:
5.2 For the purpose of determining the amount of
unobligated allotments that shall be withdrawn, all Section 66. Prohibition Against Impoundment of
departments/agencies/operating units (OUs) shall Appropriations. No appropriations authorized under
submit to DBM not later than July 30, 2012, the this Act shall be impounded through retention or
following budget accountability reports as of June 30, deduction, unless in accordance with the rules and
2012; regulations to be issued by the DBM: PROVIDED,
That all the funds appropriated for the purposes,
• Statement of Allotments, Obligation and programs, projects and activities authorized under this
Balances (SAOB); Act, except those covered under the Unprogrammed
Fund, shall be released pursuant to Section 33 (3),
• Financial Report of Operations (FRO); and Chapter 5, Book VI of E.O. No. 292.

• Physical Report of Operations. Section 67. Unmanageable National Government

Budget Deficit. Retention or deduction of
appropriations authorized in this Act shall be effected
5.3 In the absence of the June 30, 2012 reports cited
only in cases where there is an unmanageable
under item 5.2 of this Circular, the agency’s latest
national government budget deficit.
report available shall be used by DBM as basis for
withdrawal of allotment. The DBM shall
compute/approximate the agency’s obligation level as Unmanageable national government budget deficit as
of June 30 to derive its unobligated allotments as of used in this section shall be construed to mean that (i)
same period. Example: If the March 31 SAOB or FRO the actual national government budget deficit has
reflects actual obligations of P 800M then the June 30 exceeded the quarterly budget deficit targets
obligation level shall approximate to ₱1,600 M (i.e., consistent with the full-year target deficit as indicated
₱800 M x 2 quarters). in the FY 2011 Budget of

The petitioners assert that no law had authorized the Expenditures and Sources of Financing submitted by
withdrawal and transfer of unobligated allotments and the President and approved by Congress pursuant to
the pooling of unreleased appropriations; and that the Section 22, Article VII of the Constitution, or (ii) there
unbridled withdrawal of unobligated allotments and are clear economic indications of an impending
the retention of appropriated funds were akin to the occurrence of such condition, as determined by the
impoundment of appropriations that could be allowed Development Budget Coordinating Committee and
only in case of "unmanageable national government approved by the President.
budget deficit" under the GAAs,  thus violating the
157

provisions of the GAAs of 2011, 2012 and 2013 The 2012 and 2013 GAAs contained similar
prohibiting the retention or deduction of allotments.
158 provisions.

In contrast, the respondents emphasize that NBC No. The withdrawal of unobligated allotments under the
541 adopted a spending, not saving, policy as a last- DAP should not be regarded as impoundment
ditch effort of the Executive to push agencies into because it entailed only the transfer of funds, not the
actually spending their appropriations; that such retention or deduction of appropriations.
policy did not amount to an impoundment scheme,
because impoundment referred to the decision of the Nor could Section 68 of the 2011 GAA (and the
Executive to refuse to spend funds for political or similar provisions of the 2012 and 2013 GAAs) be
ideological reasons; and that the withdrawal of applicable. They uniformly stated:
allotments under NBC No. 541 was made pursuant to
Section 38, Chapter 5, Book VI of the Administrative Section 68. Prohibition Against Retention/Deduction
Code, by which the President was granted the of Allotment. Fund releases from appropriations
authority to suspend or otherwise stop further provided in this Act shall be transmitted intact or in full
expenditure of funds allotted to any agency whenever to the office or agency concerned. No retention or
in his judgment the public interest so required. deduction as reserves or overhead shall be made,
except as authorized by law, or upon direction of the
The assertions of the petitioners are upheld. The President of the Philippines. The COA shall ensure
withdrawal and transfer of unobligated allotments and compliance with this provision to the extent that sub-
the pooling of unreleased appropriations were invalid allotments by agencies to their subordinate offices are
for being bereft of legal support. Nonetheless, such in conformity with the release documents issued by
withdrawal of unobligated allotments and the retention the DBM.
of appropriated funds cannot be considered as
impoundment. The provision obviously pertained to the retention or
deduction of allotments upon their release from the
According to Philippine Constitution Association v. DBM, which was a different matter altogether. The
Enriquez:  "Impoundment refers to a refusal by the
159
Court should not expand the meaning of the provision
President, for whatever reason, to spend funds made by applying it to the withdrawal of allotments.
available by Congress. It is the failure to spend or
obligate budget authority of any type." Impoundment The respondents rely on Section 38, Chapter 5, Book
under the GAA is understood to mean the retention or VI of the Administrative Code of 1987 to justify the
withdrawal of unobligated allotments. But the The GAAs for 2011, 2012 and 2013 set as a condition
provision authorized only the suspension or stoppage for augmentation that the appropriation for the PAP
of further expenditures, not the withdrawal of item to be augmented must be deficient, to wit: –
unobligated allotments, to wit:
x x x Augmentation implies the existence in this Act of
Section 38. Suspension of Expenditure of a program, activity, or project with an appropriation,
Appropriations.- Except as otherwise provided in the which upon implementation, or subsequent evaluation
General Appropriations Act and whenever in his of needed resources, is determined to be deficient. In
judgment the public interest so requires, the no case shall a non-existent program, activity, or
President, upon notice to the head of office project, be funded by augmentation from savings or
concerned, is authorized to suspend or otherwise stop by the use of appropriations otherwise authorized in
further expenditure of funds allotted for any agency, this Act.
or any other expenditure authorized in the General
Appropriations Act, except for personal services In other words, an appropriation for any PAP must
appropriations used for permanent officials and first be determined to be deficient before it could be
employees. augmented from savings. Note is taken of the fact that
the 2013 GAA already made this quite clear, thus:
Moreover, the DBM did not suspend or stop further
expenditures in accordance with Section 38, supra, Section 52. Use of Savings. The President of the
but instead transferred the funds to other PAPs. Philippines, the Senate President, the Speaker of the
House of Representatives, the Chief Justice of the
It is relevant to remind at this juncture that the Supreme Court, the Heads of Constitutional
balances of appropriations that remained unexpended Commissions enjoying fiscal autonomy, and the
at the end of the fiscal year were to be reverted to the Ombudsman are hereby authorized to use savings in
General Fund.  This was the mandate of Section 28,
1âwphi1 their respective appropriations to augment actual
Chapter IV, Book VI of the Administrative Code, to deficiencies incurred for the current year in any item
wit: of their respective appropriations.

Section 28. Reversion of Unexpended Balances of As of 2013, a total of ₱144.4 billion worth of PAPs
Appropriations, Continuing Appropriations.- were implemented through the DAP. 161

Unexpended balances of appropriations authorized in

the General Appropriation Act shall revert to the Of this amount ₱82.5 billion were released in 2011
unappropriated surplus of the General Fund at the and ₱54.8 billion in 2012.  Sec. Abad has reported
162

end of the fiscal year and shall not thereafter be that 9% of the total DAP releases were applied to the
available for expenditure except by subsequent PAPs identified by the legislators.163

legislative enactment: Provided, that appropriations

for capital outlays shall remain valid until fully spent or The petitioners disagree, however, and insist that the
reverted: provided, further, that continuing DAP supported the following PAPs that had not been
appropriations for current operating expenditures may covered with appropriations in the respective GAAs,
be specifically recommended and approved as such namely:
in support of projects whose effective implementation
calls for multi-year expenditure commitments:
(i) ₱1.5 billion for the Cordillera People’s
provided, finally, that the President may authorize the
Liberation Army;
use of savings realized by an agency during given
year to meet non-recurring expenditures in a
subsequent year. (ii) ₱1.8 billion for the Moro National Liberation
Front;
The balances of continuing appropriations shall be
reviewed as part of the annual budget preparation (iii) ₱700 million for assistance to Quezon
process and the preparation process and the Province; 164

President may approve upon recommendation of the

Secretary, the reversion of funds no longer needed in (iv) ₱50 million to ₱100 (million) each to
connection with the activities funded by said certain senators; 165

continuing appropriations.
(v) ₱10 billion for the relocation of families
The Executive could not circumvent this provision by living along dangerous zones under the
declaring unreleased appropriations and unobligated National Housing Authority;
allotments as savings prior to the end of the fiscal
year. (vi) ₱10 billion and ₱20 billion equity infusion
under the Bangko Sentral;
b.3. Third Requisite – No funds from
savings could be transferred under (vii) ₱5.4 billion landowners’ compensation
the DAP to augment deficient items under the Department of Agrarian Reform;
not provided in the GAA
(viii) ₱8.6 billion for the ARMM comprehensive
The third requisite for a valid transfer of funds is that peace and development program;
the purpose of the transfer should be "to augment an
item in the general appropriations law for the (ix) ₱6.5 billion augmentation of LGU internal
respective offices." The term "augment" means to revenue allotments
enlarge or increase in size, amount, or degree. 160
 (x) ₱5 billion for crucial projects like tourism Technolog
road construction under the Department of y Activities
Tourism and the Department of Public Works
and Highways; 1 Central Office 1,554,2 1,554,2
. 38,000 38,000
(xi) ₱1.8 billion for the DAR-DPWH Tulay ng a.
Pangulo; Gener
ation
(xii) ₱1.96 billion for the DOH-DPWH of new
rehabilitation of regional health units; and knowle
dge
(xiii) ₱4 billion for the DepEd-PPP school and
infrastructure projects.
166
techno
logies
In refutation, the OSG argues that a total of 116 DAP- and
financed PAPs were implemented, had appropriation resear
covers, and could properly be accounted for because ch
the funds were released following and pursuant to the capabil
standard practices adopted by the DBM.  In support
167 ity
of its argument, the OSG has submitted seven buildin
evidence packets containing memoranda, SAROs, g in
and other pertinent documents relative to the priority
implementation and fund transfers under the DAP. 168 areas
identifi
Upon careful review of the documents contained in ed as
the seven evidence packets, we conclude that the strateg
"savings" pooled under the DAP were allocated to ic to
PAPs that were not covered by any appropriations in Nation
the pertinent GAAs. al
Develo 537,91 537,91
For example, the SARO issued on December 22, pment 0,000 0,000
2011 for the highly vaunted Disaster Risk, Exposure,
Assessment and Mitigation (DREAM) project under Aside from this transfer under the DAP to the DREAM
the Department of Science and Technology (DOST) project exceeding by almost 300% the appropriation
covered the amount of ₱1.6 Billion,  broken down as
169
by Congress for the program Generation of new
follows: knowledge and technologies and research capability
building in priority areas identified as strategic to
National Development, the Executive allotted funds
ATION PARTICULARS
for personnel services and capital outlays. The
E AUTHORIZED
Executive thereby substituted its will to that of
01.a Generation of new knowledge and technologies Congress. Worse, the Executive had not earlier
and research capability building in priority areas proposed any amount for personnel services and
identified as strategic to National Development capital outlays in the NEP that became the basis of
Personnel Services the 2011 GAA. 170

Maintenance and Other Operating Expenses

Capital Outlays It is worth stressing in this connection that the failure
of the GAAs to set aside any amounts for an expense
category sufficiently indicated that Congress
purposely did not see fit to fund, much less
implement, the PAP concerned. This indication
the pertinent provision of the 2011 GAA (R.A. No. becomes clearer when even the President himself did
10147) showed that Congress had appropriated only not recommend in the NEP to fund the PAP. The
₱537,910,000 for MOOE, but nothing for personnel consequence was that any PAP requiring expenditure
services and capital outlays, to wit: that did not receive any appropriation under the GAAs
could only be a new PAP, any funding for which
Perso Mainte Capit TOTAL would go beyond the authority laid down by Congress
nnel nance al in enacting the GAAs. That happened in some
Servic and Outla instances under the DAP.
es Other ys
Operati In relation to the December 22, 2011 SARO issued to
ng the Philippine Council for Industry, Energy and
Expend Emerging Technology Research and Development
itures (DOST-PCIEETRD)  for Establishment of the
171

Advanced Failure Analysis Laboratory, which reads:

II Operations
I.
a Funding 177,4 1,887,3 49,09 2,113,8
APPROPRIATION PARTICULARS A
. Assistance 06,00 65,000 0,000 61,000 AUT
to Science 0
and Development, integration and coordination of the P 300
National Research System for Industry, Energy and received from whatever source by any part of the
Emerging Technology and Related Fields government are public funds;" and (2) "a Principle of
Capital Outlays Appropriations Control, prohibiting expenditure of any
public money without legislative authorization."  To
181

conform with the governing principles, the Executive

the appropriation code and the particulars appearing cannot circumvent the prohibition by Congress of an
in the SARO did not correspond to the program expenditure for a PAP by resorting to either public or
specified in the GAA, whose particulars were private funds.  Nor could the Executive transfer
182

Research and Management Services(inclusive of the appropriated funds resulting in an increase in the
following activities: (1) Technological and Economic budget for one PAP, for by so doing the appropriation
Assessment for Industry, Energy and Utilities; (2) for another PAP is necessarily decreased. The terms
Dissemination of Science and Technology of both appropriations will thereby be violated.
Information; and (3) Management of PCIERD
Information System for Industry, Energy and Utilities. b.4 Third Requisite – Cross-border
Even assuming that Development, integration and augmentations from savings were
coordination of the National Research System for prohibited by the Constitution
Industry, Energy and Emerging Technology and
Related Fields– the particulars stated in the SARO –
By providing that the President, the President of the
could fall under the broad program description of
Senate, the Speaker of the House of Representatives,
Research and Management Services– as appearing
the Chief Justice of the Supreme Court, and the
in the SARO, it would nonetheless remain a new
Heads of the Constitutional Commissions may be
activity by reason of its not being specifically stated in
authorized to augment any item in the GAA "for their
the GAA. As such, the DBM, sans legislative
respective offices," Section 25(5), supra, has
authorization, could not validly fund and implement
delineated borders between their offices, such that
such PAP under the DAP.
funds appropriated for one office are prohibited from
crossing over to another office even in the guise of
In defending the disbursements, however, the OSG augmentation of a deficient item or items. Thus, we
contends that the Executive enjoyed sound discretion call such transfers of funds cross-border transfers or
in implementing the budget given the generality in the cross-border augmentations.
language and the broad policy objectives identified
under the GAAs;  and that the President enjoyed
172

To be sure, the phrase "respective offices" used in

unlimited authority to spend the initial appropriations
Section 25(5), supra, refers to the entire Executive,
under his authority to declare and utilize
with respect to the President; the Senate, with respect
savings,  and in keeping with his duty to faithfully
173

to the Senate President; the House of

execute the laws.
Representatives, with respect to the Speaker; the
Judiciary, with respect to the Chief Justice; the
Although the OSG rightly contends that the Executive Constitutional Commissions, with respect to their
was authorized to spend in line with its mandate to respective Chairpersons.
faithfully execute the laws (which included the GAAs),
such authority did not translate to unfettered
Did any cross-border transfers or augmentations
discretion that allowed the President to substitute his
transpire?
own will for that of Congress. He was still required to
remain faithful to the provisions of the GAAs, given
that his power to spend pursuant to the GAAs was but During the oral arguments on January 28, 2014, Sec.
a delegation to him from Congress. Verily, the power Abad admitted making some cross-border
to spend the public wealth resided in Congress, not in augmentations, to wit:
the Executive.  Moreover, leaving the spending
174

power of the Executive unrestricted would threaten to JUSTICE BERSAMIN:

undo the principle of separation of powers. 175

Alright, the whole time that you have been Secretary

Congress acts as the guardian of the public treasury of Department of Budget and Management, did the
in faithful discharge of its power of the purse Executive Department ever redirect any part of
whenever it deliberates and acts on the budget savings of the National Government under your
proposal submitted by the Executive.  Its power of
176 control cross border to another department?
the purse is touted as the very foundation of its
institutional strength,  and underpins "all other
177
SECRETARY ABAD:
legislative decisions and regulating the balance of
influence between the legislative and executive Well, in the Memos that we submitted to you, such an
branches of government."  Such enormous power
178
instance, Your Honor
encompasses the capacity to generate money for the
Government, to appropriate public funds, and to JUSTICE BERSAMIN:
spend the money.  Pertinently, when it exercises its
179

power of the purse, Congress wields control by

Can you tell me two instances? I don’t recall having
specifying the PAPs for which public money should be
read your material.
spent.
SECRETARY ABAD:
It is the President who proposes the budget but it is
Congress that has the final say on matters of
appropriations.  For this purpose, appropriation
180 Well, the first instance had to do with a request from
involves two governing principles, namely: (1) "a the House of Representatives. They started building
Principle of the Public Fisc, asserting that all monies their e-library in 2010 and they had a budget for about
207 Million but they lack about 43 Million to complete SECRETARY ABAD:
its 250 Million requirements. Prior to that, the COA, in
an audit observation informed the Speaker that they Well, in that particular situation when the request was
had to continue with that construction otherwise the made by the Commission and the House of
whole building, as well as the equipments therein may Representatives, we felt that we needed to respond
suffer from serious deterioration. And at that time, because we felt…(interrupted). 183

since the budget of the House of Representatives was

not enough to complete 250 Million, they wrote to the The records show, indeed, that funds amounting to
President requesting for an augmentation of that ₱143,700,000.00 and ₱250,000,000.00 were
particular item, which was granted, Your Honor. The transferred under the DAP respectively to the
second instance in the Memos is a request from the COA  and the House of Representatives.  Those
184 185

Commission on Audit. At the time they were pushing transfers of funds, which constituted cross-border
very strongly the good governance programs of the augmentations for being from the Executive to the
government and therefore, part of that is a COA and the House of Representatives, are graphed
requirement to conduct audits as well as review as follows:186

financial reports of many agencies. And in the

performance of that function, the Commission on
Audit needed information technology equipment as
well as hire consultants and litigators to help them AMOU
with their audit work and for that they requested funds DATE (In thousan
from the Executive and the President saw that it was PURPOSE
RELEASED Reserve
important for the Commission to be provided with
Imposed
those IT equipments and litigators and consultants
and the request was granted, Your Honor. IT Infrastructure Program and 11/11/11  
hiring of additional litigation
JUSTICE BERSAMIN: experts
Completion of the construction of 07/23/12 207,034
These cross border examples, cross border
the Legislative Library and (Savings of HOR)
augmentations were not supported by
Archives Building/Congressional
appropriations…
e-library
SECRETARY ABAD:
The respondents further stated in their memorandum
They were, we were augmenting existing items within that the President "made available" to the
their… (interrupted) "Commission on Elections the savings of his
department upon [its] request for funds…"  This was
187

another instance of a cross-border augmentation.

JUSTICE BERSAMIN:
The respondents justified all the cross-border
No, appropriations before you augmented because
transfers thusly:
this is a cross border and the tenor or text of the
Constitution is quite clear as far as I am concerned. It
says here, "The power to augment may only be made 99. The Constitution does not prevent the President
to increase any item in the General Appropriations from transferring savings of his department to another
Law for their respective offices." Did you not feel department upon the latter’s request, provided it is the
constricted by this provision? recipient department that uses such funds to augment
its own appropriation. In such a case, the President
merely gives the other department access to public
SECRETARY ABAD:
funds but he cannot dictate how they shall be applied
by that department whose fiscal autonomy is
Well, as the Constitution provides, the prohibition we guaranteed by the Constitution. 188

felt was on the transfer of appropriations, Your Honor.

What we thought we did was to transfer savings
In the oral arguments held on February 18, 2014,
which was needed by the Commission to address
Justice Vicente V. Mendoza, representing Congress,
deficiency in an existing item in both the Commission
announced a different characterization of the cross-
as well as in the House of Representatives; that’s how
border transfers of funds as in the nature of "aid"
we saw…(interrupted)
instead of "augmentation," viz:
JUSTICE BERSAMIN:
HONORABLE MENDOZA:
So your position as Secretary of Budget is that you
The cross-border transfers, if Your Honors please, is
could do that?
not an application of the DAP. What were these
cross-border transfers? They are transfers of savings
SECRETARY ABAD: as defined in the various General Appropriations Act.
So, that makes it similar to the DAP, the use of
In an extreme instances because…(interrupted) savings. There was a cross-border which appears to
be in violation of Section 25, paragraph 5 of Article VI,
JUSTICE BERSAMIN: in the sense that the border was crossed. But never
has it been claimed that the purpose was to augment
No, no, in all instances, extreme or not extreme, you a deficient item in another department of the
could do that, that’s your feeling. government or agency of the government. The cross-
border transfers, if Your Honors please, were in the JUSTICE LEONEN:
nature of [aid] rather than augmentations. Here is a
government entity separate and independent from the So, the theory of aid rather than augmentation applies
Executive Department solely in need of public funds. in extra-ordinary situation?
The President is there 24 hours a day, 7 days a week.
He’s in charge of the whole operation although six or HONORABLE MENDOZA:
seven heads of government offices are given the
power to augment. Only the President stationed there
Very extra-ordinary situations.
and in effect in-charge and has the responsibility for
the failure of any part of the government. You have
election, for one reason or another, the money is not JUSTICE LEONEN:
enough to hold election. There would be chaos if no
money is given as an aid, not to augment, but as an But Counsel, this would be new doctrine, in case?
aid to a department like COA. The President is
responsible in a way that the other heads, given the HONORABLE MENDOZA:
power to augment, are not. So, he cannot very well
allow this, if Your Honor please. 189
Yes, if Your Honor please. 190

JUSTICE LEONEN: Regardless of the variant characterizations of the

cross-border transfers of funds, the plain text of
May I move to another point, maybe just briefly. I am Section 25(5), supra, disallowing cross border
curious that the position now, I think, of government is transfers was disobeyed. Cross-border transfers,
that some transfers of savings is now considered to whether as augmentation, or as aid, were prohibited
be, if I’m not mistaken, aid not augmentation. Am I under Section 25(5), supra.
correct in my hearing of your argument?
4.
HONORABLE MENDOZA: Sourcing the DAP from unprogrammed
funds despite the original revenue targets
That’s our submission, if Your Honor, please. not having been exceeded was invalid

JUSTICE LEONEN: Funding under the DAP were also sourced from
unprogrammed funds provided in the GAAs for 2011,
May I know, Justice, where can we situate this in the 2012,and 2013. The respondents stress, however,
text of the Constitution? Where do we actually derive that the unprogrammed funds were not brought under
the concepts that transfers of appropriation from one the DAP as savings, but as separate sources of
branch to the other or what happened in DAP can be funds; and that, consequently, the release and use of
considered a said? What particular text in the unprogrammed funds were not subject to the
Constitution can we situate this? restrictions under Section 25(5), supra.

HONORABLE MENDOZA: The documents contained in the Evidence Packets by

the OSG have confirmed that the unprogrammed
funds were treated as separate sources of funds.
There is no particular provision or statutory provision
Even so, the release and use of the unprogrammed
for that matter, if Your Honor please. It is drawn from
funds were still subject to restrictions, for, to start with,
the fact that the Executive is the executive in-charge
the GAAs precisely specified the instances when the
of the success of the government.
unprogrammed funds could be released and the
purposes for which they could be used.
JUSTICE LEONEN:
The petitioners point out that a condition for the
So, the residual powers labelled in Marcos v. release of the unprogrammed funds was that the
Manglapus would be the basis for this theory of the revenue collections must exceed revenue targets; and
government? that the release of the unprogrammed funds was
illegal because such condition was not met. 191

HONORABLE MENDOZA:
The respondents disagree, holding that the release
Yes, if Your Honor, please. and use of the unprogrammed funds under the DAP
were in accordance with the pertinent provisions of
JUSTICE LEONEN: the GAAs. In particular, the DBM avers that the
unprogrammed funds could be availed of when any of
A while ago, Justice Carpio mentioned that the the following three instances occur, to wit: (1) the
remedy is might be to go to Congress. That there are revenue collections exceeded the original revenue
opportunities and there have been opportunities of the targets proposed in the BESFs submitted by the
President to actually go to Congress and ask for President to Congress; (2) new revenues were
supplemental budgets? collected or realized from sources not originally
considered in the BESFs; or(3) newly-approved loans
HONORABLE MENDOZA: for foreign assisted projects were secured, or when
conditions were triggered for other sources of funds,
such as perfected loan agreements for foreign-
If there is time to do that, I would say yes.
assisted projects.  This view of the DBM was
192
adopted by all the respondents in their Consolidated agreement for the purpose shall be sufficient basis for
Comment. 193
the issuance of a SARO covering the loan proceeds.

The BESFs for 2011, 2012 and 2013 uniformly As can be noted, the provisos in both provisions to
defined "unprogrammed appropriations" as the effect that "collections arising from sources not
appropriations that provided standby authority to incur considered in the aforesaid original revenue targets
additional agency obligations for priority PAPs when may be used to cover releases from appropriations in
revenue collections exceeded targets, and when this Fund" gave the authority to use such additional
additional foreign funds are generated.  Contrary to
194
revenues for appropriations funded from the
the DBM’s averment that there were three instances unprogrammed funds. They did not at all waive
when unprogrammed funds could be released, the compliance with the basic requirement that revenue
BESFs envisioned only two instances. The third collections must still exceed the original revenue
mentioned by the DBM – the collection of new targets.
revenues from sources not originally considered in the
BESFs – was not included. This meant that the In contrast, the texts of the provisos with regard to
collection of additional revenues from new sources additional revenues generated from newly-approved
did not warrant the release of the unprogrammed foreign loans were clear to the effect that the
funds. Hence, even if the revenues not considered in perfected loan agreement would be in itself "sufficient
the BESFs were collected or generated, the basic basis" for the issuance of a SARO to release the
condition that the revenue collections should exceed funds but only to the extent of the amount of the loan.
the revenue targets must still be complied with in In such instance, the revenue collections need not
order to justify the release of the unprogrammed exceed the revenue targets to warrant the release of
funds. the loan proceeds, and the mere perfection of the
loan agreement would suffice.
The view that there were only two instances when the
unprogrammed funds could be released was It can be inferred from the foregoing that under these
bolstered by the following texts of the Special provisions of the GAAs the additional revenues from
Provisions of the 2011 and 2012 GAAs, to wit: sources not considered in the BESFs must be taken
into account in determining if the revenue collections
2011 GAA exceeded the revenue targets. The text of the
relevant provision of the 2013 GAA, which was
1. Release of Fund. The amounts authorized herein substantially similar to those of the GAAs for 2011
shall be released only when the revenue collections and 2012, already made this explicit, thus:
exceed the original revenue targets submitted by the
President of the Philippines to Congress pursuant to 1. Release of the Fund. The amounts authorized
Section 22, Article VII of the Constitution, including herein shall be released only when the revenue
savings generated from programmed appropriations collections exceed the original revenue targets
for the year: PROVIDED, That collections arising from submitted by the President of the Philippines to
sources not considered in the aforesaid original Congress pursuant to Section 22, Article VII of the
revenue targets may be used to cover releases from Constitution, including collections arising from
appropriations in this Fund: PROVIDED, FURTHER, sources not considered in the aforesaid original
That in case of newly approved loans for foreign- revenue target, as certified by the BTr: PROVIDED,
assisted projects, the existence of a perfected loan That in case of newly approved loans for foreign-
agreement for the purpose shall be sufficient basis for assisted projects, the existence of a perfected loan
the issuance of a SARO covering the loan proceeds: agreement for the purpose shall be sufficient basis for
PROVIDED, FURTHERMORE, That if there are the issuance of a SARO covering the loan proceeds.
savings generated from the programmed
appropriations for the first two quarters of the year, Consequently, that there were additional revenues
the DBM may, subject to the approval of the from sources not considered in the revenue target
President, release the pertinent appropriations under would not be enough. The total revenue collections
the Unprogrammed Fund corresponding to only fifty must still exceed the original revenue targets to justify
percent (50%) of the said savings net of revenue the release of the unprogrammed funds (other than
shortfall: PROVIDED, FINALLY, That the release of those from newly-approved foreign loans).
the balance of the total savings from programmed
appropriations for the year shall be subject to fiscal The present controversy on the unprogrammed funds
programming and approval of the President. was rooted in the correct interpretation of the phrase
"revenue collections should exceed the original
2012 GAA revenue targets." The petitioners take the phrase to
mean that the total revenue collections must exceed
1. Release of the Fund. The amounts authorized the total revenue target stated in the BESF, but the
herein shall be released only when the revenue respondents understand the phrase to refer only to
collections exceed the original revenue targets the collections for each source of revenue as
submitted by the President of the Philippines to enumerated in the BESF, with the condition being
Congress pursuant to Section 22, Article VII of the deemed complied with once the revenue collections
Constitution: PROVIDED, That collections arising from a particular source already exceeded the stated
from sources not considered in the aforesaid original target.
revenue targets may be used to cover releases from
appropriations in this Fund: PROVIDED, FURTHER, The BESF provided for the following sources of
That in case of newly approved loans for foreign- revenue, with the corresponding revenue target stated
assisted projects, the existence of a perfected loan for each source of revenue, to wit:
 TAX REVENUES For 2012, the OSG submitted the certification dated
April 26, 2012 issued by National Treasurer Roberto
Taxes on Net Income and Profits B. Tan, viz:
Taxes on Property
Taxes on Domestic Goods and Services This is to certify that the actual dividend collections
remitted to the National Government for the period
General Sales, Turnover or VAT January to March 2012 amounted to ₱19.419 billion
Selected Excises on Goods compared to the full year program of ₱5.5 billion for
2012. 197

Selected Taxes on Services

Taxes on the Use of Goods or Property or And, finally, for 2013, the OSG presented the
Permission to Perform Activities certification dated July 3, 2013 issued by National
Other Taxes Treasurer Rosalia V. De Leon, to wit:
Taxes on International Trade and
Transactions This is to certify that the actual dividend collections
remitted to the National Government for the period
NON-TAX REVENUES January to May 2013 amounted to ₱12.438 billion
compared to the full year program of ₱10.0  billion for
198

Fees and Charges 2013.

BTR Income
Moreover, the National Government accounted for the
Government Services sale of the right to build and operate the NAIA
Interest on NG Deposits expressway amounting to ₱11.0 billion in June 2013. 199

Interest on Advances to Government

Corporations The certifications reflected that by collecting dividends
Income from Investments amounting to ₱23.8 billion in 2011, ₱19.419 billion in
2012, and ₱12.438 billion in 2013 the BTr had
Interest on Bond Holdings exceeded only the ₱5.5 billion in target revenues in
the form of dividends from stocks in each of 2011 and
2012, and only the ₱10 billion in target revenues in
Guarantee Fee
the form of dividends from stocks in 2013.
Gain on Foreign Exchange
NG Income Collected by BTr
However, the requirement that revenue collections
exceed the original revenue targets was to be
Dividends on Stocks
construed in light of the purpose for which the
NG Share from Airport
unprogrammed funds were incorporated in the GAAs
Terminal Fee
as standby appropriations to support additional
NG Share from PAGCOR
expenditures for certain priority PAPs should the
Income
revenue collections exceed the resource targets
NG Share from MIAA Profit
assumed in the budget or when additional foreign
project loan proceeds were realized. The
Privatization unprogrammed funds were included in the GAAs to
Foreign Grants provide ready cover so as not to delay the
implementation of the PAPs should new or additional
Thus, when the Court required the respondents to revenue sources be realized during the year.  Given200

submit a certification from the Bureau of Treasury the tenor of the certifications, the unprogrammed
(BTr) to the effect that the revenue collections had funds were thus not yet supported by the
exceeded the original revenue targets,  they
195
corresponding resources. 201

complied by submitting certifications from the BTr and

Department of Finance (DOF) pertaining to only one The revenue targets stated in the BESF were
identified source of revenue – the dividends from the intended to address the funding requirements of the
shares of stock held by the Government in proposed programmed appropriations. In contrast, the
government-owned and controlled corporations. unprogrammed funds, as standby appropriations,
were to be released only when there were revenues
To justify the release of the unprogrammed funds for in excess of what the programmed appropriations
2011, the OSG presented the certification dated required. As such, the revenue targets should be
March 4, 2011 issued by DOF Undersecretary Gil S. considered as a whole, not individually; otherwise, we
Beltran, as follows: would be dealing with artificial revenue surpluses. The
requirement that revenue collections must exceed
This is to certify that under the Budget for revenue target should be understood to mean that the
Expenditures and Sources of Financing for 2011, the revenue collections must exceed the total of the
programmed income from dividends from shares of revenue targets stated in the BESF. Moreover, to
stock in government-owned and controlled release the unprogrammed funds simply because
corporations is 5.5 billion. there was an excess revenue as to one source of
revenue would be an unsound fiscal management
This is to certify further that based on the records of measure because it would disregard the budget plan
the Bureau of Treasury, the National Government has and foster budget deficits, in contravention of the
recorded dividend income amounting to ₱23.8 billion Government’s surplus budget policy. 202

as of 31 January 2011. 196

We cannot, therefore, subscribe to the respondents’ some of them having refused to accept such funds
view. were unsupported with relevant data. Also, the claim
that the Executive discriminated against some
5. legislators on the ground alone of their receiving less
Equal protection, checks and balances, than the others could not of itself warrant a finding of
and public accountability challenges contravention of the Equal Protection Clause. The
denial of equal protection of any law should be an
The DAP is further challenged as violative of the issue to be raised only by parties who supposedly
Equal Protection Clause, the system of checks and suffer it, and, in these cases, such parties would be
balances, and the principle of public accountability. the few legislators claimed to have been discriminated
against in the releases of funds under the DAP. The
reason for the requirement is that only such affected
With respect to the challenge against the DAP under
legislators could properly and fully bring to the fore
the Equal Protection Clause,  Luna argues that the
203

when and how the denial of equal protection

implementation of the DAP was "unfair as it [was]
occurred, and explain why there was a denial in their
selective" because the funds released under the DAP
situation. The requirement was not met here.
was not made available to all the legislators, with
Consequently, the Court was not put in the position to
some of them refusing to avail themselves of the DAP
determine if there was a denial of equal protection. To
funds, and others being unaware of the availability of
have the Court do so despite the inadequacy of the
such funds. Thus, the DAP practised "undue
showing of factual and legal support would be to
favoritism" in favor of select legislators in
compel it to speculate, and the outcome would not do
contravention of the Equal Protection Clause.
justice to those for whose supposed benefit the claim
of denial of equal protection has been made.
Similarly, COURAGE contends that the DAP violated
the Equal Protection Clause because no reasonable
The argument that the release of funds under the
classification was used in distributing the funds under
DAP effectively stayed the hands of the legislators
the DAP; and that the Senators who supposedly
from conducting congressional inquiries into the
availed themselves of said funds were differently
legality and propriety of the DAP is speculative. That
treated as to the amounts they respectively received.
deficiency eliminated any need to consider and
resolve the argument, for it is fundamental that
Anent the petitioners’ theory that the DAP violated the speculation would not support any proper judicial
system of checks and balances, Luna submits that determination of an issue simply because nothing
the grant of the funds under the DAP to some concrete can thereby be gained. In order to sustain
legislators forced their silence about the issues and their constitutional challenges against official acts of
anomalies surrounding the DAP. Meanwhile, Belgica the Government, the petitioners must discharge the
stresses that the DAP, by allowing the legislators to basic burden of proving that the constitutional
identify PAPs, authorized them to take part in the infirmities actually existed.  Simply put, guesswork
205

implementation and execution of the GAAs, a function and speculation cannot overcome the presumption of
that exclusively belonged to the Executive; that such the constitutionality of the assailed executive act.
situation constituted undue and unjustified legislative
encroachment in the functions of the Executive; and
We do not need to discuss whether or not the DAP
that the President arrogated unto himself the power of
and its implementation through the various circulars
appropriation vested in Congress because NBC No.
and memoranda of the DBM transgressed the system
541 authorized the use of the funds under the DAP for
of checks and balances in place in our constitutional
PAPs not considered in the 2012 budget.
system. Our earlier expositions on the DAP and its
implementing issuances infringing the doctrine of
Finally, the petitioners insist that the DAP was separation of powers effectively addressed this
repugnant to the principle of public accountability particular concern.
enshrined in the Constitution,  because the
204

legislators relinquished the power of appropriation to

Anent the principle of public accountability being
the Executive, and exhibited a reluctance to inquire
transgressed because the adoption and
into the legality of the DAP.
implementation of the DAP constituted an assumption
by the Executive of Congress’ power of appropriation,
The OSG counters the challenges, stating that the we have already held that the DAP and its
supposed discrimination in the release of funds under implementing issuances were policies and acts that
the DAP could be raised only by the affected the Executive could properly adopt and do in the
Members of Congress themselves, and if the execution of the GAAs to the extent that they sought
challenge based on the violation of the Equal to implement strategies to ramp up or accelerate the
Protection Clause was really against the economy of the country.
constitutionality of the DAP, the arguments of the
petitioners should be directed to the entitlement of the
6.
legislators to the funds, not to the proposition that all
Doctrine of operative fact was applicable
of the legislators should have been given such
entitlement.
After declaring the DAP and its implementing
issuances constitutionally infirm, we must now deal
The challenge based on the contravention of the
with the consequences of the declaration.
Equal Protection Clause, which focuses on the
release of funds under the DAP to legislators, lacks
factual and legal basis. The allegations about Article 7 of the Civil Code provides:
Senators and Congressmen being unaware of the
existence and implementation of the DAP, and about
Article 7. Laws are repealed only by subsequent In the language of an American Supreme Court
ones, and their violation or non-observance shall not decision: ‘The actual existence of a statute, prior to
be excused by disuse, or custom or practice to the such a determination [of unconstitutionality], is an
contrary. operative fact and may have consequences which
cannot justly be ignored. The past cannot always be
When the courts declared a law to be inconsistent erased by a new judicial declaration. The effect of the
with the Constitution, the former shall be void and the subsequent ruling as to invalidity may have to be
latter shall govern. considered in various aspects, with respect to
particular relations, individual and corporate, and
Administrative or executive acts, orders and particular conduct, private and official.’"
regulations shall be valid only when they are not
contrary to the laws or the Constitution. The doctrine of operative fact recognizes the
existence of the law or executive act prior to the
A legislative or executive act that is declared void for determination of its unconstitutionality as an operative
being unconstitutional cannot give rise to any right or fact that produced consequences that cannot always
obligation.  However, the generality of the rule makes
206 be erased, ignored or disregarded. In short, it nullifies
us ponder whether rigidly applying the rule may at the void law or executive act but sustains its effects. It
times be impracticable or wasteful. Should we not provides an exception to the general rule that a void
recognize the need to except from the rigid or unconstitutional law produces no effect.  But its
208

application of the rule the instances in which the void use must be subjected to great scrutiny and
law or executive act produced an almost irreversible circumspection, and it cannot be invoked to validate
result? an unconstitutional law or executive act, but is
resorted to only as a matter of equity and fair play.  It
209

applies only to cases where extraordinary

The need is answered by the doctrine of operative
circumstances exist, and only when the extraordinary
fact. The doctrine, definitely not a novel one, has
circumstances have met the stringent conditions that
been exhaustively explained in De Agbayani v.
will permit its application.
Philippine National Bank: 207

We find the doctrine of operative fact applicable to the

The decision now on appeal reflects the orthodox
adoption and implementation of the DAP. Its
view that an unconstitutional act, for that matter an
application to the DAP proceeds from equity and fair
executive order or a municipal ordinance likewise
play. The consequences resulting from the DAP and
suffering from that infirmity, cannot be the source of
its related issuances could not be ignored or could no
any legal rights or duties. Nor can it justify any official
longer be undone.
act taken under it. Its repugnancy to the fundamental
law once judicially declared results in its being to all
intents and purposes a mere scrap of paper. As the To be clear, the doctrine of operative fact extends to a
new Civil Code puts it: ‘When the courts declare a law void or unconstitutional executive act. The term
to be inconsistent with the Constitution, the former executive act is broad enough to include any and all
shall be void and the latter shall govern.’ acts of the Executive, including those that are quasi
Administrative or executive acts, orders and legislative and quasi-judicial in nature. The Court held
regulations shall be valid only when they are not so in Hacienda Luisita, Inc. v. Presidential Agrarian
contrary to the laws of the Constitution. It is Reform Council: 210

understandable why it should be so, the Constitution

being supreme and paramount. Any legislative or Nonetheless, the minority is of the persistent view that
executive act contrary to its terms cannot survive. the applicability of the operative fact doctrine should
be limited to statutes and rules and regulations issued
Such a view has support in logic and possesses the by the executive department that are accorded the
merit of simplicity. It may not however be sufficiently same status as that of a statute or those which are
realistic. It does not admit of doubt that prior to the quasi-legislative in nature. Thus, the minority
declaration of nullity such challenged legislative or concludes that the phrase ‘executive act’ used in the
executive act must have been in force and had to be case of De Agbayani v. Philippine National Bank
complied with. This is so as until after the judiciary, in refers only to acts, orders, and rules and regulations
an appropriate case, declares its invalidity, it is that have the force and effect of law. The minority
entitled to obedience and respect. Parties may have also made mention of the Concurring Opinion of
acted under it and may have changed their positions. Justice Enrique Fernando in Municipality of Malabang
What could be more fitting than that in a subsequent v. Benito, where it was supposedly made explicit that
litigation regard be had to what has been done while the operative fact doctrine applies to executive acts,
such legislative or executive act was in operation and which are ultimately quasi-legislative in nature.
presumed to be valid in all respects. It is now
accepted as a doctrine that prior to its being nullified, We disagree. For one, neither the De Agbayani case
its existence as a fact must be reckoned with. This is nor the Municipality of Malabang case elaborates
merely to reflect awareness that precisely because what ‘executive act’ mean. Moreover, while orders,
the judiciary is the governmental organ which has the rules and regulations issued by the President or the
final say on whether or not a legislative or executive executive branch have fixed definitions and meaning
measure is valid, a period of time may have elapsed in the Administrative Code and jurisprudence, the
before it can exercise the power of judicial review that phrase ‘executive act’ does not have such specific
may lead to a declaration of nullity. It would be to definition under existing laws. It should be noted that
deprive the law of its quality of fairness and justice in the cases cited by the minority, nowhere can it be
then, if there be no recognition of what had transpired found that the term ‘executive act’ is confined to the
prior to such adjudication. foregoing. Contrarily, the term ‘executive act’ is broad
enough to encompass decisions of administrative said decision, which must be respected. It is on this
bodies and agencies under the executive department score that the operative fact doctrine should be
which are subsequently revoked by the agency in applied to acts and consequences that resulted from
question or nullified by the Court. the implementation of the PARC Resolution approving
the SDP of HLI. (Bold underscoring supplied for
A case in point is the concurrent appointment of emphasis)
Magdangal B. Elma (Elma) as Chairman of the
Presidential Commission on Good Government In Commissioner of Internal Revenue v. San Roque
(PCGG) and as Chief Presidential Legal Counsel Power Corporation,  the Court likewise declared that
211

(CPLC) which was declared unconstitutional by this "for the operative fact doctrine to apply, there must be
Court in Public Interest Center, Inc. v. Elma. In said a ‘legislative or executive measure,’ meaning a law or
case, this Court ruled that the concurrent appointment executive issuance." Thus, the Court opined there
of Elma to these offices is in violation of Section 7, that the operative fact doctrine did not apply to a mere
par. 2, Article IX-B of the 1987 Constitution, since administrative practice of the Bureau of Internal
these are incompatible offices. Notably, the Revenue, viz:
appointment of Elma as Chairman of the PCGG and
as CPLC is, without a question, an executive act. Under Section 246, taxpayers may rely upon a rule or
Prior to the declaration of unconstitutionality of the ruling issued by the Commissioner from the time the
said executive act, certain acts or transactions were rule or ruling is issued up to its reversal by the
made in good faith and in reliance of the appointment Commissioner or this Court. The reversal is not given
of Elma which cannot just be set aside or invalidated retroactive effect. This, in essence, is the doctrine of
by its subsequent invalidation. operative fact. There must, however, be a rule or
ruling issued by the Commissioner that is relied upon
In Tan v. Barrios, this Court, in applying the operative by the taxpayer in good faith. A mere administrative
fact doctrine, held that despite the invalidity of the practice, not formalized into a rule or ruling, will not
jurisdiction of the military courts over civilians, certain suffice because such a mere administrative practice
operative facts must be acknowledged to have may not be uniformly and consistently applied. An
existed so as not to trample upon the rights of the administrative practice, if not formalized as a rule or
accused therein. Relevant thereto, in Olaguer v. ruling, will not be known to the general public and can
Military Commission No. 34, it was ruled that ‘military be availed of only by those with informal contacts with
tribunals pertain to the Executive Department of the the government agency.
Government and are simply instrumentalities of the
executive power, provided by the legislature for the It is clear from the foregoing that the adoption and the
President as Commander-in-Chief to aid him in implementation of the DAP and its related issuances
properly commanding the army and navy and were executive acts.  The DAP itself, as a policy,
1avvphi1

enforcing discipline therein, and utilized under his transcended a merely administrative practice
orders or those of his authorized military especially after the Executive, through the DBM,
representatives.’ implemented it by issuing various memoranda and
circulars. The pooling of savings pursuant to the DAP
Evidently, the operative fact doctrine is not confined to from the allotments made available to the different
statutes and rules and regulations issued by the agencies and departments was consistently applied
executive department that are accorded the same throughout the entire Executive. With the Executive,
status as that of a statute or those which are quasi- through the DBM, being in charge of the third phase
legislative in nature. of the budget cycle – the budget execution phase, the
President could legitimately adopt a policy like the
Even assuming that De Agbayani initially applied the DAP by virtue of his primary responsibility as the
operative fact doctrine only to executive issuances Chief Executive of directing the national economy
like orders and rules and regulations, said principle towards growth and development. This is simply
can nonetheless be applied, by analogy, to decisions because savings could and should be determined
made by the President or the agencies under the only during the budget execution phase.
executive department. This doctrine, in the interest of
justice and equity, can be applied liberally and in a As already mentioned, the implementation of the DAP
broad sense to encompass said decisions of the resulted into the use of savings pooled by the
executive branch. In keeping with the demands of Executive to finance the PAPs that were not covered
equity, the Court can apply the operative fact doctrine in the GAA, or that did not have proper appropriation
to acts and consequences that resulted from the covers, as well as to augment items pertaining to
reliance not only on a law or executive act which is other departments of the Government in clear
quasi-legislative in nature but also on decisions or violation of the Constitution. To declare the
orders of the executive branch which were later implementation of the DAP unconstitutional without
nullified. This Court is not unmindful that such acts recognizing that its prior implementation constituted
and consequences must be recognized in the higher an operative fact that produced consequences in the
interest of justice, equity and fairness. real as well as juristic worlds of the Government and
the Nation is to be impractical and unfair. Unless the
Significantly, a decision made by the President or the doctrine is held to apply, the Executive as the
administrative agencies has to be complied with disburser and the offices under it and elsewhere as
because it has the force and effect of law, springing the recipients could be required to undo everything
from the powers of the President under the that they had implemented in good faith under the
Constitution and existing laws. Prior to the nullification DAP. That scenario would be enormously
or recall of said decision, it may have produced acts burdensome for the Government. Equity alleviates
and consequences in conformity to and in reliance of such burden.
The other side of the coin is that it has been LUCAS P. BERSAMIN
adequately shown as to be beyond debate that the Associate Justice
implementation of the DAP yielded undeniably
positive results that enhanced the economic welfare WE CONCUR:
of the country. To count the positive results may be
impossible, but the visible ones, like public MARIA LOURDES P. A. SERENO
infrastructure, could easily include roads, bridges, Chief Justice
homes for the homeless, hospitals, classrooms and
the like. Not to apply the doctrine of operative fact to
the DAP could literally cause the physical undoing of I join the Concurring
such worthy results by destruction, and would result in See Dissenting and Dissenting
most undesirable wastefulness. Opinion Opinion of J. Del
ANTONIO T. Castillo
Nonetheless, as Justice Brion has pointed out during CARPIO PRESBITERO J.
the deliberations, the doctrine of operative fact does Associate Justice VELASCO, JR.
not always apply, and is not always the consequence Associate Justice
of every declaration of constitutional invalidity. It can
be invoked only in situations where the nullification of No part:
the effects of what used to be a valid law would result See: Separate
TERSITA J.
in inequity and injustice;  but where no such result Opinion
212
LEONARDO-DE
would ensue, the general rule that an unconstitutional ARTURO D. BRION
CASTRO
law is totally ineffective should apply. Associate Justice
Associate Justice

In that context, as Justice Brion has clarified, the Pls. see separate

doctrine of operative fact can apply only to the PAPs concurring and
that can no longer be undone, and whose DIOSDADO M.
dissenting opinion
beneficiaries relied in good faith on the validity of the PERALTA
MARIANO C. DEL
DAP, but cannot apply to the authors, proponents and Associate Justice
CASTILLO
implementors of the DAP, unless there are concrete Associate Justice
findings of good faith in their favor by the proper
tribunals determining their criminal, civil,
MARTIN S. JOSE PORTUGAL
administrative and other liabilities.
VILLARAMA, JR. PEREZ
Associate Justice Associate Justice
WHEREFORE, the Court PARTIALLY GRANTS the
petitions for certiorari and prohibition; and
DECLARES the following acts and practices under JOSE CATRAL BIENVENIDO L.
the Disbursement Acceleration Program, National MENDOZA REYES
Budget Circular No. 541 and related executive Associate Justice Associate Justice
issuances UNCONSTITUTIONAL for being in
violation of Section 25(5), Article VI of the 1987 See separate
Pls. see Separate
Constitution and the doctrine of separation of powers, concurring opinion
Concurring Opinion
namely: MARVIC MARIO
ESTELA M.
VICTOR F.
PERLAS-BERNABE
(a) The withdrawal of unobligated allotments LEONEN
Associate Justice
from the implementing agencies, and the Associate Justice
declaration of the withdrawn unobligated
allotments and unreleased appropriations as
CERTIFICATION
savings prior to the end of the fiscal year and
without complying with the statutory definition
of savings contained in the General I certify that the conclusions in the above Decision
Appropriations Acts; had been reached in consultation before the cases
were assigned to the writer of the opinion of the court.
(b) The cross-border transfers of the savings
of the Executive to augment the MARIA LOURDES P. A. SERENO
appropriations of other offices outside the Chief Justice
Executive; and

(c) The funding of projects, activities and

programs that were not covered by any
appropriation in the General Appropriations
Act.

The Court further DECLARES VOID the use of

unprogrammed funds despite the absence of a
certification by the National Treasurer that the
revenue collections exceeded the revenue targets for
non-compliance with the conditions provided in the
relevant General Appropriations Acts.

SO ORDERED.