Atty. Edgardo M.

Villareal II – Constitutional Law I

Araullo vs Aquino
GR No. 209287 / July 1, 2014
Bersamin, J.

FACTS:
This is a consolidated petitions assailing the constitutionality of the Disbursement
Acceleration Program(DAP), National Budget Circular (NBC) No. 541, and related
issuances of the Department of Budget and Management (DBM) implementing the DAP.
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 ₱50 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 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 appropriations, like unreleased Personnel Services
appropriations that would lapse at the end of the year, unreleased appropriations of
slow-moving projects and discontinued projects per zero based budgeting findings; 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 DBM listed the following as the legal bases for the DAP’s use of savings, 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.

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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.
Nine petitions assailing the constitutionality of the DAP and the issuances relating to the
DAP were filed within days of each other
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.

ISSUES:
1. 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).
2. Whether or not the DAP realignments can be considered as impoundments
by the executive.
3. Whether or not the DAP realignments/transfers are constitutional.
4. Whether or not the sourcing of unprogrammed funds to the DAP is
constitutional.
5. Whether or not the Doctrine of Operative Fact is applicable.

RULING:

1. 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.

2. 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.

3. 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”.

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 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.

4. 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.

5. 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.

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