National Electrification Administration v.

Commission on Audit

National Electrification Administration, petitioner v. Commission on Audit, respondent

Doctrine: The Branches of Government; Executive Department; Powers and

Functions of the President; Control of Executive Departments* Nature:
Special Civil Action in the Supreme Court. Certiorari. Date: 2002

Ponente: Carpio, J.

Facts: Government employee salaries were raised via a Joint Resolution of

Congress (No. 01), urging the President to revise the existing compensation.
This was made into a 4-year program. On 28 December 1996, President Ramos
issues Executive Order No. 389 (EO 389) to implement the final year salary
increases authorized by the Joint Resolution. EO 389 called for a 2-tranche (or
2-part) salary increase: one on 1 January 1997, and another on 1 November
1997.

In January 1997, petitioner NEA implemented the salary increases. However,

they implement such increase in a single lump sum beginning 1 January 1997
(NEA accelerated the implementation by paying the second tranche starting 1
January instead of 1 November). Respondent COA issued a Notice of
Suspension and Notices of Disallowance. The Notices of Disallowance were
appealed by NEA, but rejected by the Commission en banc. The decision of the
respondent was then challenged in the Supreme Court.

Issues: Did the COA commit a grave abuse of discretion amounting to lack or
excess of jurisdiction in disallowing the increased salaries? In other words, is
NEA allowed to accelerate the implementation of the salaries due to availability
of funds?

Held: No, COA did not commit any grave abuse of discretion. Neither is NEA
allowed to accelerate the implementation.

The petition was dismissed for lack of merit. COAs decision was affirmed in
toto.
Ratio: On NEAs accelerated implementation and its accordance with the
law. The Court ruled that such acceleration was not in accordance with the
law. NEA claimed that Republic Act No. 8250 (General Appropriations Act of
1997) was their legal basis. However, such law was not self-executory.
Budgetary appropriations under the GAA do not constitute unbridled
authority to government agencies to spend the appropriated amounts as
they wish.
Itemization of the Personal Services (the appropriation used by NEA) is
prepared after the enactment of the GAA, and requires the approval of the
President (Sec. 23, Chap. 4, Book IV of the Administrative Code, p. 229). The
execution of the GAA is subject to a program of expenditure to be approved by
the President, which will be the basis for the fund release (Sec. 34, Chap. 5,
Book IV of the Administrative Code, p. 229).
No portion of the appropriations in the GAA shall be used for payment of any
salary increase, unless authorized by law (Sec. 60, Chap. 7, Book VI of the
Administrative Code, p. 230). Sec. 33 of the 1997 GAA (p. 230) also provides
for salary increases subject to the approval of the President.

In essence, the mere approval of Congress of the GAA does not make the funds
available for spending instantly. The funds must still be collected during the
fiscal year.

NEA also argues, from Sec. 10 of EO 389 (p. 231) that adequately funded
government-owned or controlled corporations (GOCCs) are exempted. The
Court rejected this argument, as Sec. 10 only refers to GOCCs with insufficient
funds. There is nothing in the Section that allows those with sufficient funds to
accelerate their schedule. There is no express or implied authorization in Sec.
10.

NEA also argues that such acceleration was allowed in a Memorandum of the
Office of the President (7 November 1995, p. 232). However, the Court pointed
out that the accelerated implementation is also allowed upon approval of the
Department of Budget and Management (DBM). There are also nine terms and
conditions, which must be met by the agency (listed in pp. 233-234, although
they are not necessary). NEA did not comply by seeking approval from the
DBM.
The Court also pointed out that the petitioner cannot assail the authority of the
President to issue EO 389. The Administrative Code gives the President such
powers (p.234). Joint Resolution No. 01 has also acknowledged such authority
(p. 235). Considering also that it is the fourth and final year, the Court found it
odd that NEA did not question the previous EOs.
NEA also argued that COA did not have the power in determining whether
NEA violated the law. COA exceeded its authority in its inquiry. NEA cited
Guevara v. Gimenez. However, the Supreme Court overturned this decision
with Caltex Philippines, Inc. v. Commission on Audit, stating that Guevara was
not controlling anymore, as it was decided in light of the 1935 Constitution. The
1987 Constitution gives the Commission more powers, as provided in Sec. 2
(D), Art. IX (p. 237). The Constitution and other laws mandate the Commission
to audit all government agencies, including GOCCs.

On the DBMs approval of NEAs proposed budget.

NEA also contends that the DBMs approval of NEAs proposed budget was an
approval also of the accelerated implementation. This was because NEA
included such accelerated implementation in its proposal. The Court again
referred to the nine conditions required of them for the approval to actually take
place. In fact, the approval of the proposed budget was only a part of the first
phase of the entire budget process. (There are four phases: Budget Preparation,
Budget Authorization, Budget Execution, and Budget Accountability).

Once the proposed budget was approved by the DBM, it is submitted to

Congress for evaluation and inclusion in the appropriations law. This
authorization does not include the authority to disburse.
*On the Presidents control of all executive departments.

The Court finally cited the control of the President over all executive
departments, bureaus, and offices, as provided by our system of government.
Sec. 17, Art. VII of the 1987 Constitution provides for this (p. 239). According
to the Court: The presidential power of control over the executive branch
of government extends to all executive employees from Cabinet Secretary
to the lowliest clerk. This power is self-executing and does not require
statutory implementation. It cannot be limited nor withdrawn by Congress.
All other executive officials must implement in good faith his directives and
orders. The case would not have arisen had NEA complied in good faith with
the directives and orders of the President. NEAs reasons in disregarding the
President were patently flimsy, even ill-conceived.

(No separate concurring or dissenting opinions.)