Political Law – Constitutional Law – Separation of Powers – Fund Realignment – Constitutionality of the

Disbursement Acceleration Program

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undertaken slowly by a certain executive agency, the funds allotted therefor will be withdrawn by the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 Once withdrawn, these funds are declared as “savings” by the Executive and said funds will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.