CONSTITUTIONAL LAW REVIEW I

JOHN WESLEY SCHOOL OF LAW AND GOVERNANCE

Case Number: 105

DELA TORRE, JULIE ANN A.

EXECUTIVE DEPARTMENT
Topic: TRANSFERS OF SAVINGS
Case Name: MARIA CAROLINA P. ARAULLO v. BENIGNO SIMEON
C. BENIGNO III
GR No.209287
Date: July 1, 2014

I. Facts:

On September 25, 2013, Sen. Jinggoy Estrada in his privilege

speech, he revealed that Senators, including himself, had been allotted
an additional P50 Million each as incentive for voting in favor of the
impeachment of Chief Justice Renato C. Corona. In response,
Secretary Florencio Abad of the DBM issued a public statement that
the releasing to Senators is a part of spending acceleration program of
the DAP. He clarified that the funds had been released to the Senators
based on their letters of request for funding and that it was not the
first time that releases from the DAP had been made because the DAP
had already been instituted in 2011 to ramp up spending after sluggish
disbursements had caused the growth of the gross domestic product
to slow down. He explained that the funds under the DAP were
usually taken from unreleased appropriations under Personnel
Services, unprogrammed funds, carry-over appropriations
unreleased from the previous year, and budgets for slow-moving items
or projects that had been realigned to support faster-disbursing
projects. The DBM listed the following as the legal bases for the DAP’s
use of savings,6 namely: (1) Section 25(5), Article VI of the 1987
Constitution, which granted to the President the authority to augment
an item for his office in the general appropriations law; (2) Section
49 (Authority to Use Savings for Certain Purposes) and Section 38
(Suspension of Expenditure Appropriations), Chapter 5, Book VI of
Executive Order (EO) No. 292 (Administrative Code of 1987); and
(3) the General Appropriations Acts (GAAs) of 2011, 2012 and 2013,
particularly their provisions on the (a) use of savings; (b) meanings of
savings and augmentation; and (c) priority in the use of savings.
As for the use of unprogrammed funds under the DAP, the DBM cited
as legal bases the special provisions on unprogrammed fund contained
in the GAAs of 2011, 2012 and 2013. After which, the herein
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petitioners brought to the Court’s attention NBC No. 541 (Adoption of

Operational Efficiency Measure – Withdrawal of Agencies’ Unobligated
Allotments as of June 30, 2012), alleging that NBC No. 541, which
was issued to implement the DAP, directed the withdrawal of
unobligated allotments as of June 30, 2012 of government agencies
and offices with low levels of obligations, both for continuing and
current allotments. In due time, the respondents filed their
Consolidated Comment through the Office of the Solicitor General
(OSG). The Court directed the holding of oral arguments on the
significant issues raised and joined.

II. Issues:

1. Whether or not the DAP, National Budget Circular NBC No. 541, and
all other executive issuances allegedly implementing the DAP are
constitutional?

2. Whether or not the transfers made through the DAP were

unconstitutional?

III. Held:

1. Yes. The DAP did not violate Section 29, Art. VI of the
Constitution. DAP was merely a program by the Executive and
is not a fund nor is it an appropriation. It is a program for
prioritizing government spending. As such, it did not violate
the Constitutional provision cited in Section 29, Art. VI of the
Constitution. In DAP no additional funds were withdrawn from
the Treasury otherwise; an appropriation made by law would
have been required. Funds, which were already appropriated
for by the GAA, were merely being realigned via the DAP.
There is no executive impoundment in the DAP.
Impoundment of funds refers to the President’s power to
refuse to spend appropriations or to retain or deduct
appropriations for whatever reason. Impoundment is actually
prohibited by the GAA unless there will be an unmanageable
national government budget deficit (which did not happen).
Nevertheless, there’s no impoundment in the case at bar
because what’s involved in the DAP was the transfer of funds.

2. Yes. The transfers made through the DAP were

unconstitutional. It is true that the President and even the
heads of the other branches of the government are allowed
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by the Constitution to make realignment of funds; however,

such transfer or realignment should only be made “within
their respective offices”. Thus, no cross-border
transfers/augmentations may be allowed. But under the DAP,
this was violated because funds appropriated by the GAA for
the Executive were being transferred to the Legislative and
other non-Executive agencies. Further, transfers “within their
respective offices” also contemplate realignment of funds to
an existing project in the GAA. Under the DAP, even though
some projects were within the Executive, these projects are
non-existent insofar as the GAA is concerned because no
funds were appropriated to them in the GAA. Although some
of these projects may be legitimate, they are still non-
existent under the GAA because they were not provided for
by the GAA. As such, transfer to such projects is
unconstitutional and is without legal basis. On the issue of
what are “savings”. These DAP transfers are not “savings”
contrary to what was being declared by the Executive. Under
the definition of “savings” in the GAA, savings only occur,
among other instances, when there is an excess in the
funding of a certain project once it is completed,
finally discontinued, or finally abandoned. The GAA does not
refer to “savings” as funds withdrawn from a slow moving
project. Thus, since the statutory definition of savings was not
complied with under the DAP, there is no basis at all for the
transfers.  Further, savings should only be declared at the
end of the fiscal year. But under the DAP, funds are already
being withdrawn from certain projects in the middle of the
year and then being declared as “savings” by the Executive
particularly by the DBM. Unprogrammed funds from the GAA
cannot be used as money source for the DAP because under
the law, such funds may only be used if there is a certification
from the National Treasurer to the effect that the revenue
collections have exceeded the revenue targets. In this case,
no such certification was secured before unprogrammed funds
were used.

IV. RATIO DECIDENDI: Such transfer must be made upon the

concurrence of the following requisites, namely: (1) there is a law
authorizing the president, the Senate President, the Speaker of the
HOR, the Chief Justice of the SC, and the heads of the Constitutional
Commissions to transfer such funds within their respective offices; (2)
the funds to be transferred are savings, generated from the
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appropriations for their respective offices; and (3) the purpose of the
transfer is to augment an item in the General Appropriations Law for
their respective offices. That law, generally, is the GAA of a given fiscal
year. To comply with the first requisite, the GAAs should expressly
authorize such transfers. Whereas the GAAs of 2011 and 2012 lacked
valid provisions to authorize transfers of funds under the DAP, such
transfers were unconstitutional. DAP also failed to comply with the
second requisite since the DAP transfers are not savings contrary to
what was being declared by the Executive. Under the definition of
savings in the GAA, savings only occur, among other instances, when
there is an excess in the funding of a certain project once it is
completed, discontinued, or abandoned. The GAA does not refer to
savings as funds withdrawn from a slow moving project. Thus, since
the statutory definition of savings was not complied with under the
DAP, there is no basis for the transfers, further, savings should only be
declared at the end of the fiscal year. However, under the DAP; funds
are already being withdrawn from certain projects in the middle of the
year and subsequently being declared as savings by the Executive
through the DBM.

V. Doctrine of operative fact was applicable

The doctrine of operative fact recognizes the existence of the law or
executive act prior to the determination of its unconstitutionality as an
operative fact that produced consequences that cannot always be
erased, ignored or disregarded. In short, it nullifies the void law or...
executive act but sustains its effects. It provides an exception to the
general rule that a void or unconstitutional law produces no effect.
In that context, as Justice Brion has clarified, the doctrine of operative
fact can apply only to the PAPs that can no longer be undone, and
whose beneficiaries relied in good faith on the validity of the DAP, but
cannot apply to the authors, proponents and implementors of the
DAP, unless there are concrete findings of good faith in their favor by
the proper tribunals determining their criminal, civil, administrative
and other liabilities.