xvii. Araullo v. Aquino III, G.R. No.

209287 (2014)

Power of the Purse – Executive Impoundment

When President Benigno Aquino III took office, his administration noticed the sluggish growth
of the economy. The World Bank advised that the economy needed a stimulus plan. Budget
Secretary Florencio “Butch” Abad then came up with a program called the Disbursement
Acceleration Program (DAP).

The DAP was seen as a remedy to speed up the funding of government projects. DAP enables
the Executive to realign funds from slow moving projects to priority projects instead of waiting
for next year’s appropriation. So what happens under the DAP was that if a certain government
project is being undertaken slowly by a certain executive agency, the funds allotted therefor
will be withdrawn by the Executive. Once withdrawn, these funds are declared as “savings” by
the Executive and said funds will then be reallotted to other priority projects. The DAP program
did work to stimulate the economy as economic growth was in fact reported and portion of
such growth was attributed to the DAP (as noted by the Supreme Court).

Other sources of the DAP include the unprogrammed funds from the General Appropriations
Act (GAA). Unprogrammed funds are standby appropriations made by Congress in the GAA.

Meanwhile, in September 2013, Senator Jinggoy Estrada made an exposé claiming that he, and
other Senators, received Php50M from the President as an incentive for voting in favor of the
impeachment of then Chief Justice Renato Corona. Secretary Abad claimed that the money was
taken from the DAP but was disbursed upon the request of the Senators.

This apparently opened a can of worms as it turns out that the DAP does not only realign funds
within the Executive. It turns out that some non-Executive projects were also funded; to name a
few: Php1.5B for the CPLA (Cordillera People’s Liberation Army), Php1.8B for the MNLF (Moro
National Liberation Front), P700M for the Quezon Province, P50-P100M for certain Senators
each, P10B for Relocation Projects, etc.

This prompted Maria Carolina Araullo, Chairperson of the Bagong Alyansang Makabayan, and
several other concerned citizens to file various petitions with the Supreme Court questioning
the validity of the DAP. Among their contentions was:

DAP is unconstitutional because it violates the constitutional rule which provides that “no
money shall be paid out of the Treasury except in pursuance of an appropriation made by law“.

Secretary Abad argued that the DAP is based on certain laws particularly the GAA (savings and
augmentation provisions thereof), Sec. 25(5), Art. VI of the Constitution (power of the President
to augment), Secs. 38 and 49 of Executive Order 292 (power of the President to suspend
expenditures and authority to use savings, respectively).

Issues:

I. Whether or not the DAP violates the principle “no money shall be paid out of the Treasury
except in pursuance of an appropriation made by law” (Sec. 29(1), Art. VI, Constitution).

II. Whether or not the DAP realignments can be considered as impoundments by the executive.

III. Whether or not the DAP realignments/transfers are constitutional.

IV. Whether or not the sourcing of unprogrammed funds to the DAP is constitutional.

V. Whether or not the Doctrine of Operative Fact is applicable.

HELD:

I. No, the DAP did not violate Section 29(1), 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(1), 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.

II. No, 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.

III. No, 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 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.

IV. No. 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.

V. Yes. The Doctrine of Operative Fact, which recognizes the legal effects of an act prior to it
being declared as unconstitutional by the Supreme Court, is applicable. The DAP has definitely
helped stimulate the economy. It has funded numerous projects. If the Executive is ordered to
reverse all actions under the DAP, then it may cause more harm than good. The DAP effects can
no longer be undone. The beneficiaries of the DAP cannot be asked to return what they
received especially so that they relied on the validity of the DAP. However, the Doctrine of
Operative Fact may not be applicable to the authors, implementers, and proponents of the DAP
if it is so found in the appropriate tribunals (civil, criminal, or administrative) that they have not
acted in good faith.