Admin Law

G.R. No. 177131 June 7, 2011

Boy Scouts of the Philippines, petitioner v Commission on Audit, respondents
Leonardo-De Castro, J.:

Facts:
1. COA issued a Resolution “Defining the Comission’s Policy with respect to the audit of the
Boy Scouts of the Philippines”.
2. The COA Resolution stated that:
a. BSP was created as a public corporation under Commonwealth Act No. 111
b. In Boy Scouts of the Philippines v NLRC, the SC ruled that BSP was a “government-
controlled corporation” under Art. IX(B)(2)(1) of the Constitution
c. Under the 1987 Admin. Code, BSP is regarded as a government instrumentality
3. Under the COA Resolution, the COA resolved to conduct an annual financial audit of the Boy
Scouts of the Philippines.
4. BSP, through its National President Jejomar Binay, sought for reconsideration of the COA
Resolution but was denied (reasons for denial are mostly the same as the COA arguments
below).
5. Hence, this petition for prohibition by the BSP.
6. BSP argues that:
a. BSP v NLRC is inapplicable in determining the audit jurisdiction of COA as the issue
there was the jurisdiction of the NLRC;
b. Although the functions of BSP relate to those that the government can do on its own,
this alone cannot be determinative of COA’s audit jurisdiction over it. BSP v. NLRC just stated
that it is “akin to a public corporation” but this is not synonymous to holding BSP as a
government corporation or entity subject to COA’s audit;
c. R.A. 7278 introduced crucial amendments to its charter; hence, BSP v. NLRC findings
are no longer valid. BSP v. NLRC classified BSP as a government-controlled corporation based
on the “substantial government participation” in its Executive Board. But R.A. 7278 eliminated
“substantial government participation” in the National Executive Board by removing: (1) the
President + Exec. Secretaries, and (2) the appointment and confirmation power of the President
of the PH as Chief Scout. R.A. 7278 suggest that governance of BSP has come to be
overwhelmingly a private affair or nature.
Admin Law

d. The assets of the BSP were acquired from the Boy Scouts of America, and not from
the PH Government, and that their operations were financed chiefly from membership dues of
the Boy Scouts themselves. BSP is not even included in any appropriations for the Government.
e. BSP is neither a government-owned or controlled corporation; nor is it an
instrumentality, agency or subdivision of the Government, as defined by the Administrative
Code.
f. While it is not a public corporation within purview of COA’s audit jurisdiction, neither
is it a private corporation created by special law. BSP has unique characteristics which “neither
classifies it as a purely public nor a purely private corporation
7. COA, however, argues that:
a. BSP is a public corporation created under Commonwealth Act No. 111, whose
functions relate to the forstering of public virtues of citizenship and patriotism and the general
improvement of the moral spirit and fiber of youth. Such manner of creation and purpose prove
that it is a government agency.
b. Any attempt to classify BSP as a private corporation would be incomprehensible since
no less than the law which created it had designated it as a public corporation and its statutory
mandate embraces performance of sovereign functions.
c. Since BSP is an attached agency of the DECS, BSP is an agency of the government;
and that BSP is a chartered institution under the Administrative Code, embraced under the term
instrumentality.
d. The government is not precluded from extending financial support to the BSP and
adding to its funds, and that as a government instrumentality imbued with public interest, the
BSP’s funds from whatever source are public funds, and can be used solely for public purpose.

Issue: Whether or not the BSP falls under the COA’s audit jurisdiction.

Ruling: Yes. BSP is a public corporation and its funds are subject to the COA’s audit
jurisdiction.
BSP as a Public Corporation under the Civil Code
1. Under Art. 44 of the Civil Code, there are three classes of juridical persons and BSP falls
under the second classification: “xxx (2) other corporations, institutions and entities for public
interest or purpose created by law.”
2. BSP, which is a corporation created for public interest, is subject to the law creating it. The
purpose of the BSP, as stated in the BSP Charter (Commonwealth Act No. 111) as amended by
R.A. 7278,1 shows that it was created in order to “inculcate in the youth patriotism and
nationalism, and encourage their involvement in public and civic affairs.
Admin Law

3. Hence, the BSP, which was created by a special law to serve a public purpose, comes within
the class of “public corporations” defined by par. 2, Art. 44 of the CC.
BSP’s Classification under the Administrative Code of 1987
1. The public character of the BSP is recognized by the fact that, along with the Girl Scouts of
the Philippines, it is classified as an attached agency of the DECS under Sec. 20 of the Admin.
Code of 1987.
2. As an attached agency, the BSP enjoys operational autonomy, as long there is at least one
government representative in its governing board, which in this case is the DECS Secretary. In
this sense, BSP is not under governmental control; but still, this characteristic does not make an
attached chartered agency into a private corporation.
3. Assuking for the sake of argument that the BSP ceases to be owned/controlled by the
government because of the reduction of government representatives in its Board, it does not
follow that it ceases to be a government instrumentality as it still retains all the characteristics of
an attached agency3 under the Administrative Code.
Discussion on Art. XII, Sec. 16 of the Constitution
1. Art. XII, Sec. 16 of the Constitution deals with the regulation of PRIVATE
CORPORATIONS, which should be done through a general law enacted by Congress.
Such provision bans creation of private corporations by special law. But such provision
should not be construed so as to prohibit the creation of PUBLIC CORPORATIONS
intended to serve a public purpose. Congress has enacted numerous laws creating
government agencies vested with corporate powers.
2. The BSP is a public corporation or a government agency/instrumentality, which does not
fall within the constitutional prohibition in Art. XII, Sec. 16, notwithstanding the
amendments to its charter.
3. Not all corporations which are not government-owned or controlled, are ipso facto to be
considered private corporations as there exists another distinct class of corporations
known as “public corporations”. Such corporations are not subject to tests of
ownership/control and economic viability, but to different criteria relation to public
purposes.

Economic Viability and Ownership and Control Tests are Inapplicable to Public
Corporations
1. According to the discussion of the 1986 Constitutional Convention, the framers
intended not to apply the economic viability tests on the creation of public corporations,
as said test would only aply if the corporation is engaged in some economic activity or
business function for the govenrmnet.
2. In this case, BSP performs functions that are impressed with public interest, as proven
by the discussion on the Senate Bill that eventually became R.A. 7278, stating that that
BSP “will inculcate moral uprightness among the young people”.
Admin Law

BSP is a Public Corporation Impressed with Public Interest

1. R.A. 7278 did not intend to “return the BSP to the private sector” (as stated by Justice
Carpio in his dissent in BSP v. NLRC). It was not the intention of the Congress to
give up all interests in this basic youth organization. It intended to rejuvenate the
organization, as BSP suffered from low morale as Secretaries in different departments
who were too busy to attend meetings of the BSP Board sent respresentatives who
changed from meeting to meeting. Hence, such Secretaries were not in touch with
everything that’s happening.
2. Therefore, even though the amended BSP charter did away with most of the
governmental presence in the BSP Board, this was done to more strongly promote the
BSP objectives.
3. The amendments were not done with the view of changing BSP into a privatized
corporation, but remains to be an agency attached to the DECS.
Re: COA’s jurisdiction to audit BSP
1. Section 8 of its amended charter4 allows the BSP to receive contributions or
donations from the government.
2. Historically, therefore, the BSP had been subjected to government audit in so far as
public funds had been infused thereto. However, this practice should not preclude the
exercise of the audit jurisdiction of COA, clearly set forth under the Constitution .
3. Since the BSP, under its amended charter, continues to be a public corporation or a
government instrumentality, it is subject to the exercise by the COA of its audit jurisdiction
in the manner consistent with the provisions of the BSP Charter.

WHEREFORE, petition for prohibition is DISMISSED.