PRIORITY DEVELOPMENT ASSISTANCE FUND &

DISBURSEMENT ACCELERATION PROGRAM

Submitted by:

Baldeo, Francis Sales O.

Rodriguez, Marion Patricia L.

THE PORK BARREL SYSTEM

“Pork Barrel” is a budget system used for allocating government funds to particular
projects or for the benefit of specific areas or districts of a nation. The Supreme Court defined
it as “the collective body of rules and practices that govern the manner by which lump-sum,
discretionary funds, primarily intended for local projects, are utilized through the respective
participation of the Legislative and Executive branches of the government, including its
members” (Belgica v Ochoa, 2013). The purpose of this system is to set aside a portion of the
national budget to be later used for funding local projects selected by individual legislators, as
well as by the President and the Vice-President.

In the Philippines, Pork Barrel has undergone several transformations from its earliest
stage in 1922. Public Works Act of 1922 is considered as the earliest form of Pork Barrel in
the country. In this Act, public works appropriation, including distribution and realignment, was
subject to the approval of a joint committee assigned by the Senate and the House of
Representatives. The Secretary of Commerce and Communications was in charge of the
distribution and realignment of the funds, with the latter being limited to the transfer of
unexpended portions of any item of appropriation to any other item under the same Act.

In 1950, legislative authority and participation was expanded from mere fund approval,
release, and realignment to include even project identification. This modification transferred
the discretion of choosing projects from the Secretary of Commerce and Communications to
the legislators, and as a result, individuals and local groups started petitioning to Senators
and Congressmen for projects. This new scheme, however, was abruptly stopped in 1960 due
to a stalemate between the Senate and the House of Representatives.

Under the Marcos regime, with the declaration of Martial Law and the abolishment of
Congress, the Pork Barrel was dissolved but only temporarily. By 1982, the Support for Local
Development Projects (SLDP) was prepared. It was a program that started giving lump-sum
funds to individual legislators. Under the SLDP, the scope of fund allocation included not only
hard projects (public works, infrastructure, etc.) but also soft projects (education, health,
livelihood, etc.).

After the EDSA People Power Revolution, Congress was restored and the Pork Barrel
system was revived under the Visayan Development Fund (VDF) and the Mindanao
Development Fund (MDF). Both were later transformed and incorporated into the
Countrywide Development Fund (CDF) in 1990 after the Senators and the Luzon legislators
demanded for a similar funding. The CDF, subject to the submission of the required list of
projects and activities, was to be approved by the President and was to be released directly to
the implementing agencies. The legislators were each receiving a fixed amount (P12.5M for
each representative and P18M for each senator) without any limitation or qualification, and
they could identify any kind of project – hard or soft – that they want to fund.

The General Appropriations Act (GAA) of 1993 provided that CDF would be released
upon the submission of a list of projects identified by individual legislators, and for the first
time, an allocation for the Vice-President was created. The Pork Barrel, originally designed for
legislators, was extended to the Executive branch. All this was constitutionally accepted under
the Supreme Court, for the CDR is a valid and constitutional exercise of “the power of the
purse” (PHILCONSA v Enriquez, 1994).

In 1997, legislators and the Vice-President, in consultation with concerned agencies,

were required to submit 50% of the list of projects for the release of their CDF appropriations.
The other half of the project and activity listings were to be submitted six months after the
release of the CDF. The list was to be published by the Department of Management. In 1998,
however, the requirement of the publishing of the list was scrapped.

The CDF was not the only form of Congressional Pork Barrel at this point, for there
were also the Congressional Insertions (“CIs”), including the DepEd School Building Fund, the
Public Works, Fund, the El Niño Fund, and the Poverty Alleviation Fund, among others. These
CIs, over which the legislators had the power to direct how, where, and when they are to be
spent, were not easily identifiable and were harder to monitor since they formed part of the
budgets of the executive departments.

In 1999, the CDF was removed in the GAA but was replaced by three forms of CIs,
namely, the Food Security Program Fund, the Lingap Para sa Mahihirap Program Fund, and
the Rural/Urban Development Infrastructure Program Fund. All three CIs required prior
consultation with the legislators before funds were released.

In 2000, CDF became Priority Development Assistance Fund (PDAF), allowing

legislators to realign the funds to any expense category as long as it is not for personal
services and for other personnel benefits. Then in 2003, PDAF, under the Department of
Education and Department of Public Works and Highways, required consultation from the
Members of Congress on the aspect of implementation, delegation, and project list
submission. In 2005, PDAF was given a program menu concept which is a list of general
programs and list of implementing agencies to be chosen by the legislators. It was also during
this era (Macapagal-Arroyo Administration) that the formal participation of NGOs in the
implementation of government projects was introduced.

During the Noynoy Aquino Administration, House Representatives were being given a
total of P70 million each, while the Vice-President and the Senators were receiving P200
million pesos each. Allocation for the House Representatives is P30 million for soft project
and P40 million for hard projects, while allocation for the Vice-President and the Senators is
P100 million each for hard projects and soft projects. Realignment of funds was allowed, but
it may only be done once.

In 2013, the allocation for the Vice President was removed and the LGUs were given
the chance to become the implementing agencies of the projects but only if they possessed
the technical capability to perform such undertakings.

The concept of Pork Barrel is typically associated with the lump-sum, discretionary
funds of the Members of the Congress, but as previously mentioned, it also encompasses
that of the Vice President. The President is covered by the concept as well, particularly
because of his control over the Malampaya Funds and the Presidential Social Fund.

DISBURSEMENT ACCELERATION PROGRAM (DAP)

The Aquino Administration introduced the Disbursement Acceleration Program (DAP)

as a reform intervention to speed-up public spending and to boost economic growth. It is not a
fund, but a mechanism to support high-impact and priority programs and projects using
savings and unprogrammed funds. DAP also enabled the government to introduce greater
speed, efficiency, and effectiveness in budget execution.

In basic terms, savings acquired throughout the year from different agencies will be
appropriated to agencies in need of funds, all within the power of the President. Its inception
was due to government underspending expenditures for the first eight months of 2011. The
administration deemed it necessary to intervene fiscally as key projects such as public
infrastructure developed slowly. According to former NEDA Director-General Professor
Cayetano Paderanga, public infrastructure expenditures grew 49.4% in the fourth quarter of
2011, largely due to the implementation of DAP. Furthemore, according to the DBM, “the
acceleration in public expenditure led to a 5.8% increase in government final consumption
expenditure and a 6.3% increase in public administration and defense subsectors.”

Projects funded by DAP come mainly from the Department of Budget and Management
(DBM), as they assess different projects and programs submitted according to these criteria:

◦ Fast –Moving and Quick – Disbursing (National Health Insurance Program)

◦ Urgent, in terms of social and economic developmental objectives (Light Railway

Transit & Metro Railway Transit)

◦ Programs or projects performing well and could deliver more services to the public
(TESDA Scholarship Program)

Other than the DBM, legislators can also endorse programs and projects of social and
economic for the DAP funds. Most programs and projects from legislators would tackle local
projects that intersect with the PDAF. Per the Official Gazette, “of the total DAP approved by
OP for 2011-2012 amounting to a total of P142.23 Billion only 9% was released to programs
and projects identified by legislators. These were not released directly to legislators but to
implementing agencies.”

Funds for DAP come from savings generated by the government. These savings are
appropriations unreleased from other programs and/or slow-moving projects lapsed to be
used before the end of the year. The DBM is responsible in appropriating the DAP funds to
proper projects within the General Appropriation Act (GAA).

THE PORK BARREL CONTROVERSY

Pork Barrel had been a burning issue even before the Napoles exposé. In 1996,
Former Marikina Representative Romeo Candazo disclosed that legislators regularly receive
huge sums of money in the form of kickbacks. These kickbacks would come from any hard or
soft government project, and according to Candazo, this practice was considered as “SOP.”
Then in 2004, several concerned citizens filed a petition seeking for the nullification of the
PDAF. The case was unfortunately dismissed for lack of any evidentiary support proving that
PDAF was indeed being misused in the form of kickbacks and that the same had become a
common practice (LAMP v Secretary of Budget and Management, 2012).

In 2013, Benhur Luy and five (5) other whistle-blowers spilled that the JLN Corporation,
owned and headed by Janet Lim Napoles, had defrauded the government of billions of pesos
over the past decade by using dummy NGOs in collusion with a number of legislators. The
subsequent investigation by the Commission on Audit revealed among others that: (1)
significant amounts were released to implementing agencies without the latter's endorsement
and without considering their mandated functions and administrative and technical capabilities
to implement projects; (2) implementation of most livelihood projects was not undertaken by
the implementing agencies themselves but by NGOs endorsed by the proponent legislators to
which the funds were transferred; (3) amounts released by a considerable number of
legislators significantly exceeded their respective allocations; (4) the funds were transferred to
NGOs in spite of the absence of any appropriation law or ordinance; and (5) selection of the
NGOs were not compliant with law and regulations. As regards the Presidential Pork Barrel,
the whistle-blowers also alleged that hundreds of millions of pesos from the Malampaya gas
project that were intended for agrarian reform beneficiaries have gone to dummy NGOs
instead.

Following the revelation of Luy et al., several petitions were filed before the Supreme
Court asking for the Pork Barrel system to be declared as unconstitutional.

The center of the constitutionality issue on PDAF is government mandate. Branches of

government are separated by reason; it is because each has its own duty and each checks
and balances the other branches. The Constitution is a testament on how the Filipino people
are anti-single power rule, practically from the experiences of the Marcos regime. A lot of the
provisions in the Constitution are to deter or held nugatory the chances of having another
dictator rule.

In addition to its unconstitutionality, moral hazard and adverse selection are large risks
in the PDAF. Discretionary powers of legislators empower these market failures through
asymmetric flow of information between the government and the people. Since legislators are
aware of their security as government officials, they undertake risky projects with the very
least accountability. Misuse and abuse of funds is highly probable with PDAF. Legislators can
undertake corruption with ease because of said asymmetric flow of information.
 Another issue is that there is a principal-agent problem. Government’s (especially
Congressmen and Senators) eye focuses on re-election. The PDAF is used by these
government officials for projects – as AJ Montesa, President of UP Economics Towards
Consciousness, aptly calls it, “Pogi Projects” - that would help them get votes for the next
election.

THE DAP CONTROVERSY

The controversy concerning the DAP came to light just as when the people were still
fuming over the PDAF issue. In his privileged speech, Former Senator Jinggoy Ejercito
Estrada revealed that some Senators, including himself, were given an incentive amounting to
P50 Million each for voting in favor of the impeachment of Chief Justice Renato Corona. DBM
Secretary Florencio Abad responded by explaining that the funds were part of the DAP, a
program designed by the DBM to ramp up spending to accelerate economic expansion, and
that said funds were released to the Senators based on their letters of request for funding.

Several petitions assailing the constitutionality of the DAP were soon filed before the
Supreme Court.

The reason why the DAP is immediately investigated right after the PDAF scam is that
both are similar lump-sum funds controlled by government officials. As previosly mentioned,
DAP receives its funding from year end savings and unspent agency budgets. By October of
2013, DAP funds amounted to P137.3 Billion.

With the abolishment of PDAF, the President, who panels DAP, receives a hefty
amount of power for public spending. In this case, the Presidents is one of the very few
officials, if not the only one, to spend billions of pesos of the Philippine budget. Putting into
account the structure of the DAP, public spending becomes a control of one man. The
President has the power to realign state funds from congressionally approved programs. This
idea gives a lot of questions to the constitutionality of DAP as budgeting should involve the
three branches of government.

In addition to the issue of government mandate, the DAP’s ratification in 2011 is

controversial as it mixes with the timing of the accusation of Chief Justice Renato Corona for
graft. Rumors have it that the P13 billion given to legislators from the DAP funds was a bribe
for Congress to oust Justice Corona. Like the PDAF, discretionary actions of this institution
result in asymmetric flow of information, moral hazards, adverse selection, and principal-
agent problem.

The DAP may also be a potential perverse incentive. Men who run for presidency will
never be perceived as an honest man as the DAP will always be linked to the position.
Politicians may abuse this power by making DAP their motive to run for the leadership of the
nation.

Like the PDAF, DAP gives power to the President to strongly influence. With the PDAF
gone, the President is the only government official to discretionarily allocate funds. In the
realities of DAP, the President may have used funds to allocate to the legislators (Corona
Case). The President gets power to control others with the power to control discretionary
funds. Though, the accountability issue for DAP becomes less of a problem. The public knows
that it is the President who has power over DAP funds. If one anomaly sprouts from the DAP,
the public know who would be accountable since transactions are limited to the Executive
branch. Transparency, however, is a key for the success of the accountability problem for
DAP.

THE UNCONSTITUTIONALITY OF THE PORK BARREL SYSTEM

In the landmark case of Belgica v Ochoa (2013), the Congressional Pork Barrel or the
PDAF was declared by the Court as unconstitutional for violating several constitutional
principles.

First, the PDAF violated the principle of separation of powers. The role of the
Legislative branch should have ended after the GAA became effective. Any post-enactment
participation by the legislature, save for its oversight function, would be an encroachment
upon the powers of the Executive branch. Under the 2013 PDAF Article, the Members of the
Congress were given not only the post-enactment discretion to identify projects that would be
funded but also the authority to release and realign funds – powers that should have been
exercised by the Executive branch instead (see Table 1).
 Table 1. The Process of Releasing PDAF Allocations

Step 1: A Senator or a Congressman makes a request for the release of his/her allocation,
accompanied by a project list. The projects in the list are drawn from a menu specified in the
annual budget law.

Step 2: The request is sent to the Senate Finance Committee (for a Senator) or the House
Appropriations Committee (for a House Member).Thereafter, the respective Committee
Chairman endorses the request to the Senate President or the House Speaker, as the case
may be.

Step 3: The Senate President or the House Speaker then forwards the request to the
Department of Budget and Management.

Step 4: After making sure that the project list conforms to the menu in the budget law, the
DBM releases the funds and furnishes a copy of the release document known as special
allotment release order (SARO) to the implementing agency identified by the lawmaker.

Step 5: The implementing agency chooses the NGO(s) that will receive the funds and
implement the project. The NGO(s) is often handpicked by the lawmaker.

The PDAF was also violative of the principle of the non-delegability of legislative power.
In the 1987 Constitution, the legislative power was vested in the Congress, composed of the
Senate and the House of Representatives, except to the extent reserved to the people by the
provision on referendum and initiative. Another exception is the immemorial practice of
granting rule-making power to administrative agencies either for filling up the details of the law
for its enforcement or ascertaining facts to bring the law into actual operation. In the
Congressional Pork Barrel system, the non-delegability of legislative power was violated
when individual legislators were given the authority to exercise the power of appropriation,
specifically the post-enactment identification authority. The legislative power should be
exercised by the Congress as a body and not by individual legislators.
 Another constitutional principle that was violated by the PDAF was the principle of
checks and balances. To temper the Legislative branch's power of appropriation, the
President was given the item-veto power or the power to reject an item in an appropriation bill
that he deemed to be inimical to the interest or the welfare of the public. However, said power
can only be exercised before the enactment of the appropriation act. In the Pork Barrel
system, the President was stripped of his item-veto power since the legislators were given the
post-enactment authority to identify projects to be funded – well beyond the reach of the
President's veto power.

Likewise, the Congressional Pork Barrel system impaired public accountability,

particularly with regards to the oversight function of the Congress, since their post-enactment
roles in the implementation of the budget made them partial and not just mere disinterested
observers when scrutinizing, investigating, or monitoring the implementation of the
appropriation law.
Lastly, the PDAF violated the State's policy on local autonomy when it allowed
individual legislators to intervene in purely local matters, specifically when individual
legislators were given the authority to bypass the local development council and initiate
projects on their own.

With regards to the Presidential Pork Barrel, the Court partially upheld its
constitutionality, for the laws that created it – PD 910 (the Malampaya Funds) and PD 1869
(the Presidential Social Fund) – were indeed valid appropriations laws even if they did not
have the primary and specific purpose of authorizing the release of funds from the National
Treasury. As long as a law contains a provision that designates a determinate or determinable
amount of money and allocates the same for a particular public purpose, it already satisfies
the requirement of an “appropriation made by law” as provided in the Constitution (1987
Philippine Constitution, art. VI, § 29). Despite the foregoing, the PD 910, Section 8 phrase
“and for such other purposes as may be hereafter directed by the President” was stricken
down by the Court as it constituted an undue delegation of legislative power since it did not
provide a sufficient standard to determine the limits of the President's authority on how to use
the Malampaya Funds. Likewise, the PD 1869, Section 12 phrase “to finance the priority
infrastructure development projects” was also stricken down for the same reason that it did
not pass the sufficient standard test.
THE UNCONSTITUTIONALITY OF THE DAP

The Supreme Court declared DAP as unconstitutional but only partially. Specifically, it
ruled that two acts under the DAP regarding the use of savings were unconstitutional: (1) the
declaration of unutilized appropriations, in the form of unobligated allotments and unreleased
appropriations, as savings prior to the end of the fiscal year without complying with the
statutory definition of “savings” contained in the General Appropriations Act; and (2) the cross-
border transfer of savings from the Executive branch to augment the appropriations of offices
outside the Executive.

“Savings” are funds that remain unspent or unused after the completion or the
discontinuance of a project at the end of the fiscal year. Under the DAP, however, unused
funds are collected and consolidated for the financing of the projects on a quarterly basis.

Cross-border transfers are also violative of the Constitution, for transfers are allowed
only within respective offices. Inter-department transfers such as the use of DAP funds for the
infrastructure program and hiring of litigation experts for the Commission on Audit, as well as
the library for the House of Representatives are clearly repugnant to the Constitution.

The Court also voided the use of unprogrammed appropriations for non-compliance
with the conditions provided in the relevant General Appropriations Act, since they were used
despite the absence of a certification by the National Treasurer that the revenue collections
exceeded the revenue targets.

SUMMARY

From the above facts about Pork Barrel and DAP, both are simply lump-sum funds
allocated to projects listings controlled by government officials. Essentially, the Pork Barrel is
the spending allocated for the use of projects from the legislators, the Vice-President, and the
President, while DAP is the fast spending of savings allocated for the use of projects selected
by the President. The Pork Barrel was made for the purpose of focusing budget in
developmental and localized projects, while DAP was made for the purpose of fiscal stimuli by
accelerated spending of savings.
 In terms of government mandate, both branches break the rule of separation of
powers. In PDAF and DAP, the Legislative and the Executive encroach upon the
responsibilities of one another. In PDAF, legislators are not supposed to implement or execute
projects, but they do. In DAP, the Executive branch is not supposed to manipulate legislated
budgets, but they do. With this setting, discretionary actions are enabled and in fact,
practiced.

Both the Pork Barrel and DAP give discretionary control to government officials over
portions of the national budget. There arise a problem of asymmetric flow of information and
an issue on transparency. The people are not given the opportunity to know where the taxes
go. The moral hazard, adverse selection, and principal-agent problems also step into the
scene. Government officials do not feel the need to follow the needs and demands of their
constituents, while the people do not know which public officials they could trust.

The Pork Barrel and DAP are perverse incentives: politicians run for the control of
these kinds of institutions. With the control of these institutions, politicians have strong
influence and control over government agencies and other groups that need (or want) the
funds.

The Pork Barrel, in the form of PDAF, and DAP differ in terms of transaction costs.
PDAF undergoes a lot of processes before funds are release. The executive and legislative
branches of government take turns in checking the PDAF, so the transaction cost for the
PDAF is high. For DAP, on the other hand, the executive branch need not consult the
legislative branch. Transactions are internal between DBM/other agencies and the President,
resulting in lower transaction cost for DAP.
Jurisprudence

Belgica v. Ochoa

G.R. No. 208566, November 19, 2013

FACTS:

After the revelation by Benhur Luy and the other whistle-blowers regarding the decade-
long collusion between JLN Corporation and a number of legislators to defraud the
government of hundreds of millions of pesos, petitions were filed before the Supreme Court
asking for the Priority Development Assistance Fund (PDAF) – more commonly known as the
Congressional Pork Barrel – to be declared unconstitutional, along with the Presidential Pork
Barrel consisting of the Malampaya Funds and the Presidential Social Fund.

The petitioners argued that the PDAF violated several principles of the Constitution
including the separation of powers, non-delegation of legislative power, checks and balances,
public accountability, and local autonomy, and anti-political dynasty, among others. Likewise,
the petitioners averred that the Malampaya Funds and the Presidential Social Fund were
unconstitutional, for the laws that created them were not valid appropriation laws since the
appropriation clauses in the said laws were mere incidental. Furthermore, it was argued that
the same laws constituted undue delegation of legislative power since they gave the
President an unbridled discretion to choose where the funds would go.

ISSUES:

1. Whether the Congressional Pork Barrel system or the PDAF is unconstitutional for
violating the following constitutional principles:

a. separation of powers

b. non-delegation of legislative power

c. checks and balances

d. public accountability

e. local autonomy

f. anti-political dynasty
 2. Whether the laws creating the Presidential Pork Barrel:

a. are valid appropriation laws; and

b. constitutes undue delegation of legislative power

RULING:

1. Congressional Pork Barrel

a. Separation of powers – YES

The PDAF violated the principle of separation of powers when it vested the
legislators the post-enactment authority to identify projects and to release
and realign funds therefor. The role of the Legislative branch should have
ended after the appropriation act was passed. Any participation in the post-
enactment, aside from the oversight function, is an encroachment upon the
power of the Executive branch.

b. Non-delegation of legislative power – YES

It was also violative of the principle of non-delegation of legislative power, for

it gave individual legislators authority to identify projects worthy of being
funder – authority that should have been exercised by the Congress as a
body.

c. Checks and balances – YES

The PDAF also violated checks and balances principle when it robbed the
President of his item-veto power. Under the PDAF system, the legislators
may identify the projects on which the funds were to be used even after the
appropriation act has already been enacted. Such projects or items are well
beyond the item-veto power of the President.

d. Public accountability – YES

The Congressional Pork Barrel also defied public accountability: the

legislators were no longer disinterested and impartial observers in the
exercise of their oversight function since they already had stakes in the
projects that they themselves had chosen.

e. Local autonomy – YES

 It also violated the State's policy on local autonomy when it allowed
individual legislators to intervene in purely local matters, particularly when
individual legislators were given the authority to bypass the local
development council and initiate projects on their own.

f. Anti-political dynasty – NO

The Constitutional provision regarding anti-political dynasty needs an

enabling law, and currently, there is none. The Court also ruled that there
was not enough evidence to link the PDAF to the perpetuation of political
dynasties.

2. Presidential Pork Barrel

a. YES.

PD 910 (the Malampaya Funds) and PD 1869 (the Presidential Social Fund) are
valid appropriations laws even if they do not have the primary and specific
purpose of authorizing the release of funds from the National Treasury. As long
as a law contains a provision that designates a determinate or determinable
amount of money and allocates the same for a particular public purpose, it
already satisfies the requirement of an “appropriation made by law” as provided
in Article VI, Section 29 of the 1987 the Constitution.

b. YES

The phrase “and for such other purposes as may be hereafter directed by the
President” under Section 8 of PD 910 was stricken down by the Court as it
constituted an undue delegation of legislative power since it did not provide a
sufficient standard to determine the limits of the President's authority on how to
use the Malampaya Funds. The PD 1869, Section 12 phrase “to finance the
priority infrastructure development projects” was also stricken down for the same
reason. Despite the foregoing, the said laws were deemed constitutional, for the
removal of the repugnant phrases did not affect their validity.
 Araullo v. Aquino III

G.R. No. 209287, Feb. 3, 2015

FACTS:

On September 25, 2013, Sen. Jinggoy Ejercito Estrada delivered a privilege speech in
the Senate of the Philippines to reveal that some 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.

Responding to Sen. Estrada’s revelation, Secretary Florencio Abad of the DBM issued
a public statement entitled Abad: Releases to Senators Part of Spending Acceleration
Program, explaining that the funds released to the Senators had been part of the DAP, a
program designed by the DBM to ramp up spending to accelerate economic expansion.

The DBM soon came out to claim in its website that the DAP releases had been
sourced from savings generated by the Government, and from unprogrammed funds; and that
the savings had been derived from (1) the pooling of unreleased and (2) the withdrawal of
unobligated allotments also for slow-moving programs and projects that had been earlier
released to the agencies of the National Government.

The 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.

ISSUES:

1. Whether or not DAP violates Sec. 29, Art. VI of the 1987 Constitution, which provides:
"No money shall be paid out of the Treasury except in pursuance of an appropriation
made by law?

2. Whether or not the DAP, NBC No. 541, and all other executive issuances allegedly
implementing the DAP violate Sec. 25(5), Art. VI of the 1987 Constitution insofar as:

a. They treat the unreleased appropriations and unobligated allotments withdrawn

 from government agencies as "savings" as the term is used in Sec. 25(5), in
relation to the provisions of the GAAs of 2011, 2012 and 2013; and

b. They authorize the disbursement of funds for projects or programs not provided in
the GAAs for the Executive Department

RULING:

NO. The OSG posits, however, that no law was necessary for the adoption and
implementation of the DAP because of being neither a fund nor an appropriation, but a
program or an administrative system of prioritizing spending; and that the adoption of the DAP
was by virtue of the authority of the President as the Chief Executive to ensure that laws were
faithfully executed.

The DAP was a government policy or strategy designed to stimulate the economy
through accelerated spending. In the context of the DAP’s adoption and implementation
being a function pertaining to the Executive as the main actor during the Budget Execution
Stage under its constitutional mandate to faithfully execute the laws, including the GAAs,
Congress did not need to legislate to adopt or to implement the DAP. Congress could
appropriate but would have nothing more to do during the Budget Execution Stage.

The President, in keeping with his duty to faithfully execute the laws, had sufficient
discretion during the execution of the budget to adapt the budget to changes in the country’s
economic situation. He could adopt a plan like the DAP for the purpose. He could pool the
savings and identify the PAPs to be funded under the DAP. The pooling of savings pursuant
to the DAP, and the identification of the PAPs to be funded under the DAP did not involve
appropriation in the strict sense because the money had been already set apart from the
public treasury by Congress through the GAAs. In such actions, the Executive did not usurp
the power vested in Congress under Section 29(1), Article VI of the Constitution.

NO. The transfer of appropriated funds, to be valid under Section 25(5), supra, must
be made upon a concurrence of the following requisites, namely:

a. There is a law authorizing the President, the President of the Senate, the
Speaker of the House of Representatives, the Chief Justice of the Supreme
Court, and the heads of the Constitutional Commissions to transfer funds
 within their respective offices;

b. The funds to be transferred are savings generated from the appropriations

for their respective offices; and

c. The purpose of the transfer is to augment an item in the general

appropriations law for their respective offices.

GAA’s of 2011 and 2012 lacked a law to authorize transfers of funds under the DAP.
Hence, transfers under DAP were unconstitutional.

Section 25(5), supra, not being a self-executing provision of the Constitution, must
have an implementing law for it to be operative. That law, generally, is the GAA of a given
fiscal year. To comply with the first requisite, the GAAs should expressly authorize the transfer
of funds. In the 2011 GAA, the provision that gave the President and the other high officials
the authority to transfer funds was Section 59, as follows:

Section 59. Use of Savings. The President of the Philippines, the Senate President, the
Speaker of the House of Representatives, the Chief Justice of the Supreme Court, the
Heads of Constitutional Commissions enjoying fiscal autonomy, and the Ombudsman
are hereby authorized to augment any item in this Act from savings in other items of
their respective appropriations.

In the 2012 GAA, the empowering provision was Section 53, to wit:

Section 53. Use of Savings. The President of the Philippines, the Senate President, the
Speaker of the House of Representatives, the Chief Justice of the Supreme Court, the
Heads of Constitutional Commissions enjoying fiscal autonomy, and the Ombudsman
are hereby authorized to augment any item in this Act from savings in other items of
their respective appropriations.

A reading shows, however, that the aforequoted provisions of the GAAs of 2011 and
2012 were textually unfaithful to the Constitution for not carrying the phrase "for their
respective offices" contained in Section 25(5), supra. The impact of the phrase "for their
respective offices" was to authorize only transfers of funds within their offices (i.e., in the
case of the President, the transfer was to an item of appropriation within the Executive). The
provisions carried a different phrase ("to augment any item in this Act"), and the effect was
that the 2011 and 2012 GAAs thereby literally allowed the transfer of funds from savings to
augment any item in the GAAs even if the item belonged to an office outside the Executive.
To that extent did the 2011 and 2012 GAAs contravene the Constitution.

The petitioners claim that the funds used in the DAP — the unreleased appropriations
and withdrawn unobligated allotments — were not actual savings within the context of
Section 25(5), supra, and the relevant provisions of the GAAs.

We partially find for the petitioners.

The definition of "savings" in the GAAs, particularly for 2011, 2012 and 2013, reflected this
interpretation and made it operational, viz:

Savings refer to portions or balances of any programmed appropriation in this Act free
from any obligation or encumbrance which are: (i) still available after the completion
or final discontinuance or abandonment of the work, activity or purpose for which the
appropriation is authorized; (ii) from appropriations balances arising from unpaid
compensation and related costs pertaining to vacant positions and leaves of absence
without pay; and (iii) from appropriations balances realized from the implementation of
measures resulting in improved systems and efficiencies and thus enabled agencies
to meet and deliver the required or planned targets, programs and services approved
in this Act at a lesser cost.

In ascertaining the meaning of savings, certain principles should be borne in mind.

The first principle is that Congress wields the power of the purse. Congress decides how the
budget will be spent; what PAPs to fund; and the amounts of money to be spent for each
PAP. The second principle is that the Executive, as the department of the Government tasked
to enforce the laws, is expected to faithfully execute the GAA and to spend the budget in
accordance with the provisions of the GAA. The Executive is expected to faithfully implement
the PAPs for which Congress allocated funds, and to limit the expenditures within the
allocations, unless exigencies result to deficiencies for which augmentation is authorized,
subject to the conditions provided by law. The third principle is that in making the President’s
power to augment operative under the GAA, Congress recognizes the need for flexibility in
budget execution. In so doing, Congress diminishes its own power of the purse, for it
delegates a fraction of its power to the Executive. But Congress does not thereby allow the
Executive to override its authority over the purse as to let the Executive exceed its delegated
authority. And the fourth principle is that savings should be actual. "Actual" denotes
something that is real or substantial, or something that exists presently in fact, as opposed to
something that is merely theoretical, possible, potential or hypothetical.

The foregoing principles caution us to construe savings strictly against expanding the
scope of the power to augment. It is then indubitable that the power to augment was to be
used only when the purpose for which the funds had been allocated were already satisfied,
or the need for such funds had ceased to exist, for only then could savings be properly
realized. This interpretation prevents the Executive from unduly transgressing Congress’
power of the purse.

The DBM declares that part of the savings brought under the DAP came from "pooling
of unreleased appropriations such as unreleased Personnel Services appropriations which
will lapse at the end of the year, unreleased appropriations of slow moving projects and
discontinued projects per Zero- Based Budgeting findings. The fact alone that the
appropriations are unreleased or unallotted is a mere description of the status of the items as
unallotted or unreleased. They have not yet ripened into categories of items from which
savings can be generated.

Unobligated allotments, on the other hand, were encompassed by the first part of the
definition of "savings" in the GAA, that is, as "portions or balances of any programmed
appropriation in this Act free from any obligation or encumbrance." But the first part of the
definition was further qualified by the three enumerated instances of when savings would be
realized. As such, unobligated allotments could not be indiscriminately declared as savings
without first determining whether any of the three instances existed. This signified that the
DBM’s withdrawal of unobligated allotments had disregarded the definition of savings under
the GAAs.

No funds from savings could be transferred under DAP to augment deficient items not
provided in the GAA.

The third requisite for a valid transfer of funds is that the purpose of the transfer
should be "to augment an item in the general appropriations law for the respective offices."
The term "augment" means to enlarge or increase in size, amount, or degree.

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 becomes clearer when even the President himself did not
recommend in the NEP to fund the PAP. The consequence was that any PAP requiring
expenditure that did not receive any appropriation under the GAAs could only be a new PAP,
any funding for which would go beyond the authority laid down by Congress in enacting the
GAAs.

Cross-border augmentations from savings were prohibited by the Constitution.

By providing that the President, the President of the Senate, the Speaker of the House
of Representatives, the Chief Justice of the Supreme Court, and the Heads of the
Constitutional Commissions may be authorized to augment any item in the GAA "for their
respective offices," Section 25(5), supra, has delineated borders between their offices, such
that funds appropriated for one office are prohibited from crossing over to another office
even in the guise of augmentation of a deficient item or items. Thus, we call such transfers of
funds cross-border transfers or cross-border augmentations.

To be sure, the phrase "respective offices" used in Section 25(5), supra, refers to the
entire Executive, with respect to the President; the Senate, with respect to the Senate
President; the House of Representatives, with respect to the Speaker; the Judiciary, with
respect to the Chief Justice; the Constitutional Commissions, with respect to their respective
Chairpersons.

The records show, indeed, that funds amounting to P143,700,000.00 and

P250,000,000.00 were transferred under the DAP respectively to the COA and the House of
Representatives. Those transfers of funds, which constituted cross-border augmentations for
being from the Executive to the COA and the House of Representatives.

The respondents further stated in their memorandum that the President "made
available" to the "Commission on Elections the savings of his department upon its request
for funds…" This was another instance of a cross-border augmentation.
 Regardless of the variant characterizations of the cross-border transfers of funds, the
plain text of Section 25(5), supra, disallowing cross border transfers was disobeyed. Cross-
border transfers, whether as augmentation, or as aid, was prohibited under Section 25(5),
supra.

Sourcing the DAP from unprogrammed funds despite the original revenue targets not
having been exceeded was invalid.

The documents contained in the Evidence Packets by the OSG have confirmed that
the unprogrammed funds were treated as separate sources of funds. Even so, the release
and use of the unprogrammed funds were still subject to restrictions, for, to start with, the
GAAs precisely specified the instances when the unprogrammed funds could be released
and the purposes for which they could be used.

The respondents disagree, holding that the release and use of the unprogrammed
funds under the DAP were in accordance with the pertinent provisions of the GAAs. In
particular, the DBM avers that the unprogrammed funds could be availed of when any of the
following three instances occur, to wit: (1) the revenue collections exceeded the original
revenue targets proposed in the BESFs submitted by the President to Congress; (2) new
revenues were collected or realized from sources not originally considered in the BESFs;
or(3) newly-approved loans for foreign assisted projects were secured, or when conditions
were triggered for other sources of funds, such as perfected loan agreements for foreign-
assisted projects. This view of the DBM was adopted by all the respondents in their
Consolidated Comment.

The BESFs for 2011, 2012 and 2013 uniformly defined "unprogrammed
appropriations" as appropriations that provided standby authority to incur additional agency
obligations for priority PAPs when revenue collections exceeded targets, and when additional
foreign funds are generated. Contrary to the DBM’s averment that there were three
instances when unprogrammed funds could be released, the BESFs envisioned only two
instances. The third mentioned by the DBM – the collection of new revenues from sources
not originally considered in the BESFs – was not included. This meant that the collection of
additional revenues from new sources did not warrant the release of the unprogrammed
funds. Hence, even if the revenues not considered in the BESFs were collected or
generated, the basic condition that the revenue collections should exceed the revenue
targets must still be complied with in order to justify the release of the unprogrammed funds.
References:

Araullo v. Aquino III (G.R. No. 209287, 2015)

Belgica v. Ochoa (G.R. No. 208566, 2013)
Diaz, J. (2013, August 17). PDAF: How It Works. The Philippine Star. Retrieved from
http://www.philstar.com/headlines/2013/08/17/1100731/pdaf-how-it-works

Diokno, B.E., (2013, November 2). Understanding the DAP. Per SE. Retrieved
from http://www.econ.upd.edu.ph/perse/?p=3247

Gotcha. (2013, November 22). Warning: DAP without PDAF creates almighty President.
The Philippine Star. Retrieved from
http://www.philstar.com/opinion/2013/11/22/1259460/warning- dap-without-pdaf-creates-
almighty-president

Official Gazette. (2012, January 30). Secretary of Socio-Economic Planning Cayetano

W. Paderanga, Jr.: On the fourth quarter and FY 2011. Retrieved from
http://www.gov.ph/2012/01/30/the-secretary-of-socio-economic-planning-on-the-q4-
and-fy- 2011-national-income-accounts/

Official Gazette. (2013, October 8). The Disbursement Acceleration Program. Retrieved
from http://www.gov.ph/featured/the-disbursement-acceleration-program/