Araullo vs. Aquino, G.R. No. 209287, July 1, 2014

G.R. No. 209287. July 1, 2014.
*
MARIA CAROLINA P. ARAULLO, CHAIRPERSON, BAGONG ALYANSANG MAKABAYAN;
JUDY M. TAGUIWALO, PROFESSOR, UNIVERSITY OF THE PHILIPPINES DILIMAN, CO-
CHAIRPERSON, PAGBABAGO; HENRI KAHN, CONCERNED CITIZENS MOVEMENT; REP.
LUZ ILAGAN, GABRIELA WOMEN’S PARTY REPRESENTATIVE; REP. TERRY L. RIDON,
KABATAAN PARTY-LIST REPRESENTATIVE; REP. CARLOS ISAGANI ZARATE,
______________
* EN BANC.
2 SUPREME COURT REPORTS ANNOTATED

Araullo vs. Aquino III
BAYAN MUNA PARTY-LIST REPRESENTATIVE; RENATO M. REYES, JR., SECRETARY

GENERAL OF BAYAN; MANUEL K. DAYRIT, CHAIRMAN, ANG KAPATIRAN PARTY;
VENCER MARI E. CRISOSTOMO, CHAIRPERSON, ANAKBAYAN; VICTOR VILLANUEVA,
CONVENOR, YOUTH ACT NOW, petitioners, vs. BENIGNO SIMEON C. AQUINO III,
PRESIDENT OF THE REPUBLIC OF THE PHILIPPINES; PAQUITO N. OCHOA, JR.,
EXECUTIVE SECRETARY; and FLORENCIO B. ABAD, SECRETARY, THE DEPARTMENT
OF BUDGET AND MANAGEMENT, respondents.
G.R. No. 209155. July 1, 2014.*

ATTY. JOSE MALVAR VILLEGAS, JR., petitioner, vs.THE HONORABLE EXECUTIVE
SECRETARY PAQUITO N. OCHOA, JR.; and THE SECRETARY OF BUDGET AND
MANAGEMENT FLORENCIO B. ABAD, respondents.
VOL. 728, JULY 1, 2014 3

G.R. No. 209164. July 1, 2014.*

PHILIPPINE CONSTITUTION ASSOCIATION (PHILCONSA), REPRESENTED BY DEAN
FROILAN M. BACUNGAN, BENJAMIN E. DIOKNO and LEONOR M.
BRIONES, petitioners, vs. DEPARTMENT OF BUDGET AND MANAGEMENT and/or HON.
FLORENCIO B. ABAD, respondents.
G.R. No. 209260. July 1, 2014.*
INTEGRATED BAR OF THE PHILIPPINES (IBP), petitioner, vs. SECRETARY FLORENCIO B.
ABAD OF THE DEPARTMENT OF BUDGET AND MANAGEMENT (DBM), respondent.
G.R. No. 209442. July 1, 2014.*
GRECO ANTONIOUS BEDA B. BELGICA; BISHOP REUBEN M. ABANTE and REV. JOSE L.
GONZALEZ, petitioners, vs. PRESIDENT BENIGNO SIMEON C. AQUINO III, THE SENATE
OF THE PHILIPPINES, REPRESENTED BY SENATE PRESIDENT FRANKLIN M. DRILON;
THE HOUSE OF REPRESENTATIVES, REPRESENTED BY SPEAKER FELICIANO
BELMONTE, JR.; THE EXECUTIVE OFFICE, REPRESENTED BY EXECUTIVE SECRETARY
PAQUITO N. OCHOA, JR.; THE DEPARTMENT OF BUDGET AND MANAGEMENT,
REPRESENTED BY SECRETARY FLORENCIO ABAD; THE DEPARTMENT OF FINANCE,
REPRESENTED BY SECRETARY CESAR V. PURISIMA; and THE BUREAU OF TREASURY,
REPRESENTED BY ROSALIA V. DE LEON, respondents.
G.R. No. 209517. July 1, 2014.*
CONFEDERATION FOR UNITY, RECOGNITION AND ADVANCEMENT OF GOVERNMENT
EMPLOYEES (COURAGE), REPRESENTED BY ITS 1ST VICE PRESI-
4

DENT, SANTIAGO DASMARINAS, JR.; ROSALINDA NARTATES, FOR HERSELF AND AS
NATIONAL PRESIDENT OF THE CONSOLIDATED UNION OF EMPLOYEES NATIONAL
HOUSING AUTHORITY (CUE-NHA); MANUEL BACLAGON, FOR HIMSELF AND AS
PRESIDENT OF THE SOCIAL WELFARE EMPLOYEES ASSOCIATION OF THE
PHILIPPINES, DEPARTMENT OF SOCIAL WELFARE AND DEVELOPMENT CENTRAL
OFFICE (SWEAP-DSWD CO); ANTONIA PASCUAL, FOR HERSELF AND AS NATIONAL
PRESIDENT OF THE DEPARTMENT OF AGRARIAN REFORM EMPLOYEES ASSOCIATION
(DAREA); ALBERT MAGALANG, FOR HIMSELF AND AS PRESIDENT OF THE
ENVIRONMENT AND MANAGEMENT BUREAU EMPLOYEES UNION (EMBEU); AND
MARCIAL ARABA, FOR HIMSELF AND AS PRESIDENT OF THE KAPISANAN PARA SA
KAGALINGAN NG MGA KAWANI NG MMDA (KKK-MMDA), petitioners, vs.BENIGNO
SIMEON C. AQUINO III, PRESIDENT OF THE REPUBLIC OF THE PHILIPPINES; PAQUITO
OCHOA, JR., EXECUTIVE SECRETARY; and HON. FLORENCIO B. ABAD, SECRETARY OF
THE DEPARTMENT OF BUDGET AND MANAGEMENT, respondents.
G.R. No. 209569. July 1, 2014.*

VOLUNTEERS AGAINST CRIME AND CORRUPTION (VACC), REPRESENTED BY DANTE L.
JIMENEZ, petitioner, vs. PAQUITO N. OCHOA, EXECUTIVE SECRETARY, and FLORENCIO
B. ABAD, SECRETARY OF THE DEPARTMENT OF BUDGET AND
MANAGEMENT, respondents.
Constitutional Law; Judicial Power; Courts; The Constitution vests judicial power in the Supreme Court
(SC) and in such lower courts as may be established by law.—The Constitution vests judicial power in the
Court and in such lower courts as may be established by law. In creating a lower court, Congress
concomitantly determines the jurisdiction of that court, and that court, upon its creation,
VOL. 728, JULY 1, 2014 5
becomes by operation of the Constitution one of the repositories of judicial power. However, only the
Court is a constitutionally created court, the rest being created by Congress in its exercise of the legislative
power.
Same; Same; The Constitution states that judicial power includes the duty of the courts of justice not only
“to settle actual controversies involving rights which are legally demandable and enforceable” but also “to
determine whether or not there has been a grave abuse of discretion amounting to lack or excess of
jurisdiction on the part of any branch or instrumentality of the Government.”—The Constitution states that
judicial power includes the duty of the courts of justice not only “to settle actual controversies involving
rights which are legally demandable and enforceable” but also “to determine whether or not there has been
a grave abuse of discretion amounting to lack or excess of jurisdiction on the part of any branch or
instrumentality of the Government.” It has thereby expanded the concept of judicial power, which up to then
was confined to its traditional ambit of settling actual controversies involving rights that were legally
demandable and enforceable.
Remedial Law; Special Civil Actions; Certiorari; Prohibition; The present Rules of Court uses two special
civil actions for determining and correcting grave abuse of discretion amounting to lack or excess of
jurisdiction.—What are the remedies by which the grave abuse of discretion amounting to lack or excess of
jurisdiction on the part of any branch or instrumentality of the Government may be determined under the
Constitution? The present Rules of Court uses two special civil actions for determining and correcting grave
abuse of discretion amounting to lack or excess of jurisdiction. These are the special civil actions
for certiorari and prohibition, and both are governed by Rule 65. A similar remedy of certiorari exists under
Rule 64, but the remedy is expressly applicable only to the judgments and final orders or resolutions of the
Commission on Elections and the Commission on Audit.
Same; Same; Same; Same; Certiorari is to be distinguished from prohibition by the fact that it is a
corrective remedy used for the re-examination of some action of an inferior tribunal, and is directed to the
cause or proceeding in the lower court and not to the court itself, while prohibition is a preventative remedy
issuing to restrain
6 SUPREME COURT REPORTS

ANNOTATED
future action, and is directed to the court itself.—Although similar to prohibition in that it will lie for
want or excess of jurisdiction, certiorari is to be distinguished from prohibition by the fact that it is a
corrective remedy used for the reexamination of some action of an inferior tribunal, and is directed to the
cause or proceeding in the lower court and not to the court itself, while prohibition is a preventative remedy
issuing to restrain future action, and is directed to the court itself.
Same; Same; Same; Same; Petitions for certiorari and prohibition are appropriate remedies to raise
constitutional issues and to review and/or prohibit or nullify the acts of legislative and executive officials.—
With respect to the Court, the remedies of certiorari and prohibition are necessarily broader in scope and
reach, and the writ of certiorari or prohibition may be issued to correct errors of jurisdiction committed not
only by a tribunal, corporation, board or officer exercising judicial, quasi-judicial or ministerial functions but
also to set right, undo and restrain any act of grave abuse of discretion amounting to lack or excess of
jurisdiction by any branch or instrumentality of the Government, even if the latter does not exercise judicial,
quasi-judicial or ministerial functions. This application is expressly authorized by the text of the second
paragraph of Section 1, supra. Thus, petitions for certiorari and prohibition are appropriate remedies to
raise constitutional issues and to review and/or prohibit or nullify the acts of legislative and executive
officials. Necessarily, in discharging its duty under Section 1, supra, to set right and undo any act of grave
abuse of discretion amounting to lack or excess of jurisdiction by any branch or instrumentality of the
Government, the Court is not at all precluded from making the inquiry provided the challenge was properly
brought by interested or affected parties. The Court has been thereby entrusted expressly or by necessary
implication with both the duty and the obligation of determining, in appropriate cases, the validity of any
assailed legislative or executive action. This entrustment is consistent with the republican system of checks
and balances.
Constitutional Law; Judicial Review; Requisites for the Exercise of Judicial Review.—The requisites for
the exercise of the power of judicial review are the following, namely: (1) there must be an actual case or
justiciable controversy before the Court; (2) the question before the Court must be ripe for adjudication; (3)
the person
VOL. 728, JULY 1, 2014 7
challenging the act must be a proper party; and (4) the issue of constitutionality must be raised at the
earliest opportunity and must be the very litis mota of the case.
Disbursement Acceleration Program; The implementation of the Disbursement Acceleration Program
(DAP) entailed the allocation and expenditure of huge sums of public funds. The fact that public funds have
been allocated, disbursed or utilized by reason or on account of such challenged executive acts gave rise,
therefore, to an actual controversy that is ripe for adjudication by the Court.—An actual and justiciable
controversy exists in these consolidated cases. The incompatibility of the perspectives of the parties on the
constitutionality of the DAP and its relevant issuances satisfy the requirement for a conflict between legal
rights. The issues being raised herein meet the requisite ripeness considering that the challenged executive
acts were already being implemented by the DBM, and there are averments by the petitioners that such
implementation was repugnant to the letter and spirit of the Constitution. Moreover, the implementation of
the DAP entailed the allocation and expenditure of huge sums of public funds. The fact that public funds
have been allocated, disbursed or utilized by reason or on account of such challenged executive acts gave
rise, therefore, to an actual controversy that is ripe for adjudication by the Court.
Remedial Law; Civil Procedure; Moot and Academic; The Supreme Court (SC) cannot agree that the
termination of the Disbursement Acceleration Program (DAP) as a program was a supervening event that
effectively mooted these consolidated cases. Verily, the Court had in the past exercised its power of judicial
review despite the cases being rendered moot and academic by supervening events.—A moot and academic
case is one that ceases to present a justiciable controversy by virtue of supervening events, so that a
declaration thereon would be of no practical use or value. The Court cannot agree that the termination of
the DAP as a program was a supervening event that effectively mooted these consolidated cases. Verily, the
Court had in the past exercised its power of judicial review despite the cases being rendered moot and
academic by supervening events, like: (1) when there was a grave violation of the Constitution; (2) when the
case involved a situation of exceptional character and was of paramount public interest; (3) when the
constitutional issue raised required the formulation of controlling principles to guide the

ANNOTATED

Bench, the Bar and the public; and (4) when the case was capable of repetition yet evading
review. Assuming that the petitioners’ several submissions against the DAP were ultimately sustained by
the Court here, these cases would definitely come under all the exceptions. Hence, the Court should not
abstain from exercising its power of judicial review.
Constitutional Law; Judicial Review; Locus Standi; Legal standing, as a requisite for the exercise of
judicial review, refers to “a right of appearance in a court of justice on a given question.”—Legal standing, as
a requisite for the exercise of judicial review, refers to “a right of appearance in a court of justice on a given
question.” The concept of legal standing, or locus standi, was particularly discussed in De Castro v. Judicial
and Bar Council, 615 SCRA 666 (2010), where the Court said: In public or constitutional litigations, the
Court is often burdened with the determination of the locus standi of the petitioners due to the ever-present
need to regulate the invocation of the intervention of the Court to correct any official action or policy in order
to avoid obstructing the efficient functioning of public officials and offices involved in public service. It is
required, therefore, that the petitioner must have a personal stake in the outcome of the controversy, for, as
indicated in Agan, Jr. v. Philippine International Air Terminals Co., Inc., 402 SCRA 612 (2003): The
question on legal standing is whether such parties have “alleged such a personal stake in the
outcome of the controversy as to assure that concrete adverseness which sharpens the
presentation of issues upon which the court so largely depends for illumination of difficult
constitutional questions.” Accordingly, it has been held that the interest of a person assailing
the constitutionality of a statute must be direct and personal. He must be able to show, not only
that the law or any government act is invalid, but also that he sustained or is in imminent
danger of sustaining some direct injury as a result of its enforcement, and not merely that he
suffers thereby in some indefinite way. It must appear that the person complaining has been or
is about to be denied some right or privilege to which he is lawfully entitled or that he is about
to be subjected to some burdens or penalties by reason of the statute or act complained of.
9
VOL. 728, JULY 1, 2014 9
Same; Same; Same; The Court has cogently observed in Agan, Jr. v. Philippine International Air
Terminals Co., Inc., 402 SCRA 612 (2003), that “standing is a peculiar concept in constitutional law because
in some cases, suits are not brought by parties who have been personally injured by the operation of a law or
any other government act but by concerned citizens, taxpayers or voters who actually sue in the public
interest.”—The Court has cogently observed in Agan, Jr. v. Philippine International Air Terminals Co., Inc.,
402 SCRA 612 (2003), that “[s]tanding is a peculiar concept in constitutional law because in some cases,
suits are not brought by parties who have been personally injured by the operation of a law or any other
government act but by concerned citizens, taxpayers or voters who actually sue in the public interest.”
Except for PHILCONSA, a petitioner in G.R. No. 209164, the petitioners have invoked their capacities as
taxpayers who, by averring that the issuance and implementation of the DAP and its relevant issuances
involved the illegal disbursements of public funds, have an interest in preventing the further dissipation of
public funds. The petitioners in G.R. No. 209287 (Araullo) and G.R. No. 209442 (Belgica) also assert their
right as citizens to sue for the enforcement and observance of the constitutional limitations on the political
branches of the Government. On its part, PHILCONSA simply reminds that the Court has long recognized
its legal standing to bring cases upon constitutional issues. Luna, the petitioner in G.R. No. 209136, cites his
additional capacity as a lawyer. The IBP, the petitioner in G.R. No. 209260, stands by “its avowed duty to
work for the rule of law and of paramount importance of the question in this action, not to mention its civic
duty as the official association of all lawyers in this country.” Under their respective circumstances, each of
the petitioners has established sufficient interest in the outcome of the controversy as to confer locus
standi on each of them. In addition, considering that the issues center on the extent of the power of the
Chief Executive to disburse and allocate public funds, whether appropriated by Congress or not, these cases
pose issues that are of transcendental importance to the entire Nation, the petitioners included. As such, the
determination of such important issues call for the Court’s exercise of its broad and wise discretion “to waive
the requirement and so remove the impediment to its addressing and resolving the serious constitutional
questions raised.”
10

ANNOTATED
Budget; Words and Phrases; In the Philippine setting, Commonwealth Act (CA) No. 246 (Budget Act)
defined “budget” as the financial program of the National Government for a designated fiscal year, consisting
of the statements of estimated receipts and expenditures for the fiscal year for which it was intended to be
effective based on the results of operations during the preceding fiscal years.—In the Philippine setting,
Commonwealth Act (CA) No. 246 (Budget Act) defined “budget” as the financial program of the National
Government for a designated fiscal year, consisting of the statements of estimated receipts and expenditures
for the fiscal year for which it was intended to be effective based on the results of operations during the
preceding fiscal years. The term was given a different meaning under Republic Act No. 992 (Revised Budget
Act) by describing the budget as the delineation of the services and products, or benefits that would accrue
to the public together with the estimated unit cost of each type of service, product or benefit. For a forthright
definition, budget should simply be identified as the financial plan of the Government, or “the master plan of
government.”
Same; The budget preparation phase is commenced through the issuance of a Budget Call by the
Department of Budget and Management (DBM).—The budget preparation phase is commenced through the
issuance of a Budget Call by the DBM. The Budget Call contains budget parameters earlier set by the
Development Budget Coordination Committee (DBCC) as well as policy guidelines and procedures to aid
government agencies in the preparation and submission of their budget proposals. The Budget Call is of
two kinds, namely: (1) a National Budget Call, which is addressed to all agencies, including state
universities and colleges; and (2) a Corporate Budget Call, which is addressed to all government-owned
and controlled corporations (GOCCs) and government financial institutions (GFIs).
Same; Public or government expenditures are generally classified into two categories, specifically: (1)
capital expenditures or outlays; and (2) current operating expenditures.—Public or government
expenditures are generally classified into two categories, specifically: (1) capital expenditures or
outlays; and (2) current operating expenditures. Capital expenditures are the expenses whose
usefulness lasts for more than one year, and which add to the assets of the Government, including
investments in the capital of
11
VOL. 728, JULY 1, 2014 11
government-owned or -controlled corporations and their subsidiaries.Current operating

expenditures are the purchases of goods and services in current consumption the benefit of which does not
extend beyond the fiscal year. The two components of current expenditures are those for personal
services (PS), and those for maintenance and other operating expenses (MOOE). Public
expenditures are also broadly grouped according to their functions into: (1) economic development
expenditures (i.e., expenditures on agriculture and natural resources, transportation and communications,
commerce and industry, and other economic development efforts); (2) social services or social
development expenditures (i.e., government outlay on education, public health and medicare, labor and
welfare and others); (3) general government or general public services expenditures (i.e.,
expenditures for the general government, legislative services, the administration of justice, and for pensions
and gratuities); (4) national defense expenditures (i.e., subdivided into national security expenditures
and expenditures for the maintenance of peace and order); and (5) public debt.
Same; Sources of Public Revenues.—In the Philippines, public revenues are generally derived from
the following sources, to wit: (1) tax revenues (i.e., compulsory contributions to finance government
activities); (2) capital revenues (i.e., proceeds from sales of fixed capital assets or scrap thereof and public
domain, and gains on such sales like sale of public lands, buildings and other structures, equipment, and
other properties recorded as fixed assets); (3) grants (i.e., voluntary contributions and aids given to the
Government for its operation on specific purposes in the form of money and/or materials, and do not require
any monetary commitment on the part of the recipient);(4) extraordinary income (i.e., repayment of loans
and advances made by government corporations and local governments and the receipts and shares in
income of the Bangko Sentral ng Pilipinas, and other receipts); and (5) public borrowings (i.e., proceeds of
repayable obligations generally with interest from domestic and foreign creditors of the Government in
general, including the National Government and its political subdivisions).
Same; Budget Legislation Phase; The Budget Legislation Phase covers the period commencing from the
time Congress receives the President’s Budget, which is inclusive of the National Expenditure Program
(NEP) and the Budget of Expenditures and Sources of Fi-
12

ANNOTATED
nancing (BESF), up to the President’s approval of the General Appropriations Act (GAA).—The Budget
Legislation Phasecovers the period commencing from the time Congress receives the President’s
Budget, which is inclusive of the NEP and the BESF, up to the President’s approval of the GAA.
Same; Reenacted Budget; If, by the end of any fiscal year, the Congress shall have failed to pass the
General Appropriations Bill (GAB) for the ensuing fiscal year, the General Appropriations Act (GAA) for the
preceding fiscal year shall be deemed reenacted and shall remain in force and effect until the GAB is passed
by the Congress.—The House of Representatives and the Senate then constitute a panel each to sit in
the Bicameral Conference Committee for the purpose of discussing and harmonizing the conflicting
provisions of their versions of the GAB. The “harmonized” version of the GAB is next presented to the
President for approval. The President reviews the GAB, and prepares the Veto Message where budget
items are subjected to direct veto, or are identified for conditional implementation. If, by the end of any
fiscal year, the Congress shall have failed to pass the GAB for the ensuing fiscal year, the GAA for the
preceding fiscal year shall be deemed reenacted and shall remain in force and effect until the GAB is passed
by the Congress.
Same; Budget Execution Phase; The Budget Execution Phase is primarily the function of the Department
of Budget and Management (DBM).—With the GAA now in full force and effect, the next step is the
implementation of the budget. The Budget Execution Phase is primarily the function of the DBM, which
is tasked to perform the following procedures, namely: (1) to issue the programs and guidelines for the
release of funds; (2) to prepare an Allotment and Cash Release Program; (3) to release allotments; and
(4) to issue disbursement authorities.
Same; In order to settle the obligations incurred by the agencies, the Department of Budget and
Management (DBM) issues a disbursement authority so that cash may be allocated in payment of the
obligations.—In order to settle the obligations incurred by the agencies, the DBM issues a disbursement
authority so that cash may be allocated in payment of the obligations. A cash or disbursement
authority that is periodically issued is referred to as a Notice of Cash Allocation (NCA), which issuance
is based upon an agency’s
13
VOL. 728, JULY 1, 2014 13
submission of its Monthly Cash Program and other required documents. The NCA specifies the
maximum amount of cash that can be withdrawn from a government servicing bank for the period indicated.
Apart from the NCA, the DBM may issue a Non-Cash Availment Authority (NCAA) to authorize
noncash disbursements, or a Cash Disbursement Ceiling (CDC) for departments with overseas
operations to allow the use of income collected by their foreign posts for their operating requirements.
Same; Accountability; Accountability is a significant phase of the budget cycle because it ensures that the
government funds have been effectively and efficiently utilized to achieve the State’s socio-economic goals.—
Accountability is a significant phase of the budget cycle because it ensures that the government funds
have been effectively and efficiently utilized to achieve the State’s socio-economic goals. It also allows the
DBM to assess the performance of agencies during the fiscal year for the purpose of implementing reforms
and establishing new policies. An agency’s accountability may be examined and evaluated
through (1) performance targets and outcomes; (2) budget accountability reports; (3) review of
agency performance; and (4) audit conducted by the Commission on Audit (COA).
Same; The national budget becomes a tangible representation of the programs of the Government in
monetary terms, specifying therein the project, activity or program (PAPs) and services for which specific
amounts of public funds are proposed and allocated.—Policy is always a part of every budget and fiscal
decision of any Administration. The national budget the Executive prepares and presents to Congress
represents the Administration’s “blueprint for public policy” and reflects the Government’s goals and
strategies. As such, the national budget becomes a tangible representation of the programs of the
Government in monetary terms, specifying therein the PAPs and services for which specific amounts of
public funds are proposed and allocated. Embodied in every national budget is government spending.
Same; 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.—The
President, in keeping with his duty to faithfully
14

ANNOTATED
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.
Same; Transfer of Funds; The power to transfer funds can give the President the flexibility to meet
unforeseen events that may otherwise impede the efficient implementation of the project, activity or programs
(PAPs) set by Congress in the General Appropriations Act (GAA).—We begin this dissection by reiterating
that Congress cannot anticipate all issues and needs that may come into play once the budget reaches its
execution stage. Executive discretion is necessary at that stage to achieve a sound fiscal administration and
assure effective budget implementation. The heads of offices, particularly the President, require flexibility in
their operations under performance budgeting to enable them to make whatever adjustments are needed to
meet established work goals under changing conditions. In particular, the power to transfer funds can give
the President the flexibility to meet unforeseen events that may otherwise impede the efficient
implementation of the PAPs set by Congress in the GAA. Congress has traditionally allowed much flexibility
to the President in allocating funds pursuant to the GAAs, particularly when the funds are grouped to form
lump sum accounts.It is assumed that the agencies of the Government enjoy more flexibility when the GAAs
provide broader appropriation items.This flexibility comes in the form of policies that the Executive may
adopt during the budget execution phase. The DAP — as a strategy to improve the country’s economic
position — was one policy that the President decided to carry out in order to fulfill his mandate under the
GAAs.
Same; Same; Requisites for a Valid Transfer of Appropriated Funds.—The transfer of appropriated
funds, to be valid under Section 25(5), Article VI of the 1987 Constitution, must be made upon a concurrence
of the following requisites, namely: (1) There is a law authorizing the President, the President of the Senate,
the Speaker
15
VOL. 728, JULY 1, 2014 15
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; (2) The funds to be transferred
are savings generated from the appropriations for their respective offices; and (3) The purpose of the
transfer is to augment an item in the general appropriations law for their respective offices.
Same; Constitutional Law; Section 25(5), Article VI, not being a self-executing provision of the
Constitution, must have an implementing law for it to be operative.—Section 25(5), Article VI of the 1987
Constitution, 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.
Same; Savings; For us to consider unreleased appropriations as savings, unless these met the statutory
definition of savings, would seriously undercut the congressional power of the purse, because such
appropriations had not even reached and been used by the agency concerned vis-à-vis the project, activity or
programs (PAPs) for which Congress had allocated them.—For us to consider unreleased appropriations as
savings, unless these met the statutory definition of savings, would seriously undercut the congressional
power of the purse, because such appropriations had not even reached and been used by the agency
concerned vis-à-vis the PAPs for which Congress had allocated them. However, if an agency has unfilled
positions in its plantilla and did not receive an allotment and NCA for such vacancies, appropriations for
such positions, although unreleased, may already constitute savings for that agency under the second
instance. 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.
16

ANNOTATED
Same; Impoundment; Words and Phrases; According to Philippine Constitution Association v. Enriquez,
235 SCRA 506 (1994), “Impoundment refers to a refusal by the President, for whatever reason, to spend funds
made available by Congress. It is the failure to spend or obligate budget authority of any type.”—According
to Philippine Constitution Association v. Enriquez, 235 SCRA 506 (1994): “Impoundment refers to a refusal
by the President, for whatever reason, to spend funds made available by Congress. It is the failure to spend
or obligate budget authority of any type.” Impoundment under the GAA is understood to mean the retention
or deduction of appropriations. The 2011 GAA authorized impoundment only in case of unmanageable
National Government budget deficit.
Same; It is the President who proposes the budget but it is Congress that has the final say on matters of
appropriations.—Congress acts as the guardian of the public treasury in faithful discharge of its power of
the purse whenever it deliberates and acts on the budget proposal submitted by the Executive. Its power of
the purse is touted as the very foundation of its institutional strength, and underpins “all other legislative
decisions and regulating the balance of influence between the legislative and executive branches of
government.” Such enormous power encompasses the capacity to generate money for the Government, to
appropriate public funds, and to spend the money. Pertinently, when it exercises its power of the purse,
Congress wields control by specifying the PAPs for which public money should be spent. It is the President
who proposes the budget but it is Congress that has the final say on matters of appropriations. For this
purpose, appropriation involves two governing principles, namely: (1) “a Principle of the Public Fisc,
asserting that all monies received from whatever source by any part of the government are public funds”;
and (2) “a Principle of Appropriations Control, prohibiting expenditure of any public money without
legislative authorization.” To conform with the governing principles, the Executive cannot circumvent the
prohibition by Congress of an expenditure for a PAP by resorting to either public or private funds. Nor could
the Executive transfer appropriated funds resulting in an increase in the budget for one PAP, for by so doing
the appropriation for another PAP is necessarily decreased. The terms of both appropriations will thereby be
violated.
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VOL. 728, JULY 1, 2014 17
Same; Cross-Border Augmentations; 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.—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.
Same; Equal Protection of the Laws; Parties; Disbursement Acceleration Program; The denial of equal
protection of any law should be an issue to be raised only by parties who supposedly suffer it, and, in these
cases, such parties would be the few legislators claimed to have been discriminated against in the releases of
funds under the Disbursement Acceleration Program (DAP).—The challenge based on the contravention of
the Equal Protection Clause, which focuses on the release of funds under the DAP to legislators, lacks
factual and legal basis. The allegations about Senators and Congressmen being unaware of the existence
and implementation of the DAP, and about some of them having refused to accept such funds were
unsupported with relevant data. Also, the claim that the Executive discriminated against some legislators
on the ground alone of their receiving less than the others could not of itself warrant a finding of
contravention of the Equal Protection Clause. The denial of equal protection of any law should be an issue to
be raised only by parties who supposedly suffer it, and, in these cases, such parties would be the few
legislators claimed to have been discriminated against in the releases of funds under the DAP. The reason
for the requirement is that only such affected legislators could properly and fully bring to the fore when and
how the denial of equal protection occurred, and explain why there was a denial in their situation. The
requirement was not
18

ANNOTATED
met here. Consequently, the Court was not put in the position to determine if there was a denial of
equal protection. To have the Court do so despite the inadequacy of the showing of factual and legal support
would be to compel it to speculate, and the outcome would not do justice to those for whose supposed benefit
the claim of denial of equal protection has been made.
Constitutional Law; Operative Fact Doctrine; The doctrine of operative fact recognizes the existence of the
law or executive act prior to the determination of its unconstitutionality as an operative fact that produced
consequences that cannot always be erased, ignored or disregarded; It provides an exception to the general
rule that a void or unconstitutional law produces no effect.—The doctrine of operative fact recognizes the
existence of the law or executive act prior to the determination of its unconstitutionality as an operative fact
that produced consequences that cannot always be erased, ignored or disregarded. In short, it nullifies the
void law or executive act but sustains its effects. It provides an exception to the general rule that a void or
unconstitutional law produces no effect. But its use must be subjected to great scrutiny and circumspection,
and it cannot be invoked to validate an unconstitutional law or executive act, but is resorted to only as a
matter of equity and fair play. It applies only to cases where extraordinary circumstances exist, and only
when the extraordinary circumstances have met the stringent conditions that will permit its application. We
find the doctrine of operative fact applicable to the adoption and implementation of the DAP. Its application
to the DAP proceeds from equity and fair play. The consequences resulting from the DAP and its related
issuances could not be ignored or could no longer be undone. To be clear, the doctrine of operative fact
extends to a void or unconstitutional executive act. The term executive act is broad enough to include any
and all acts of the Executive, including those that are quasi-legislative and quasi-judicial in nature.
Same; Same; In Commissioner of Internal Revenue v. San Roque Power Corporation, 707 SCRA 66
(2013), the Court likewise declared that “for the operative fact doctrine to apply, there must be a ‘legislative or
executive measure,’ meaning a law or executive issuance.”—In Commissioner of Internal Revenue v. San
Roque Power Corporation, 707 SCRA 66 (2013), the Court likewise declared that “for the operative fact
doctrine to apply, there must be a ‘legislative
19
VOL. 728, JULY 1, 2014 19
or executive measure,’ meaning a law or executive issuance.” Thus, the Court opined there that
the operative fact doctrine did not apply to a mere administrative practice of the Bureau of Internal
Revenue, viz.: Under Section 246, taxpayers may rely upon a rule or ruling issued by the Commissioner from
the time the rule or ruling is issued up to its reversal by the Commissioner or this Court. The reversal is not
given retroactive effect. This, in essence, is the doctrine of operative fact. There must, however, be a rule
or ruling issued by the Commissioner that is relied upon by the taxpayer in good faith. A mere
administrative practice, not formalized into a rule or ruling, will not suffice because such a
mere administrative practice may not be uniformly and consistently applied. An administrative
practice, if not formalized as a rule or ruling, will not be known to the general public and can be
availed of only by those with informal contacts with the government agency. It is clear from the
foregoing that the adoption and the implementation of the DAP and its related issuances were executive
acts. The DAP itself, as a policy, transcended a merely administrative practice especially after the
Executive, through the DBM, implemented it by issuing various memoranda and circulars. The pooling of
savings pursuant to the DAP from the allotments made available to the different agencies and departments
was consistently applied throughout the entire Executive. With the Executive, through the DBM, being in
charge of the third phase of the budget cycle — the budget execution phase, the President could legitimately
adopt a policy like the DAP by virtue of his primary responsibility as the Chief Executive of directing the
national economy towards growth and development. This is simply because savings could and should be
determined only during the budget execution phase.
Same; Same; Disbursement Acceleration Program; To declare the implementation of the Disbursement
Acceleration Program (DAP) unconstitutional without recognizing that its prior implementation constituted
an operative fact that produced consequences in the real as well as juristic worlds of the Government and the
Nation is to be impractical and unfair.—The implementation of the DAP resulted into the use of savings
pooled by the Executive to finance the PAPs that were not covered in the GAA, or that did not have proper
appropriation covers, as well as to augment items pertaining to other departments of the Government in
clear violation of the Constitu-
20

ANNOTATED
tion. To declare the implementation of the DAP unconstitutional without recognizing that its prior
implementation constituted an operative fact that produced consequences in the real as well as juristic
worlds of the Government and the Nation is to be impractical and unfair. Unless the doctrine is held to
apply, the Executive as the disburser and the offices under it and elsewhere as the recipients could be
required to undo everything that they had implemented in good faith under the DAP. That scenario would
be enormously burdensome for the Government. Equity alleviates such burden.

CARPIO, J., Separate Opinion:

Locus Standi; Taxpayer’s Suit; View that the well-settled rule is that taxpayers, like petitioners here, have
the standing to assail the illegal or unconstitutional disbursement of public funds.—The well-settled rule is
that taxpayers, like petitioners here, have the standing to assail the illegal or unconstitutional
disbursement of public funds. Citizens, like petitioners here, also have standing to sue on matters of
transcendental importance to the public which must be decided early, like the transfer of appropriations
from one branch of government to another or to the constitutional bodies, since such transfer may impair the
finely crafted system of checks and balances enshrined in the Constitution.
Constitutional Law; Budget; Transfer of Funds; View that Section 25(5), Article VI of the Constitution
prohibits the transfer of funds appropriated in the general appropriations law for one branch of government
to another branch, or for one branch to other constitutional bodies, and vice versa.—Section 25(5) prohibits
the transfer of funds appropriated in the general appropriations law for one branch of government to
another branch, or for one branch to other constitutional bodies, and vice versa. However, “savings” from
appropriations for a branch or constitutional body may be transferred to another item of
appropriation within the samebranch or constitutional body, as set forth in the second clause of the same
Section 25(5).
Same; Same; Same; View that Section 25(5), Article VI of the Constitution mandates that no law shall be
passed authorizing any transfer of appropriations. However, there can be, when authorized by law,
augmentation of existing items in the General Appropriations
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VOL. 728, JULY 1, 2014 21
Act (GAA) from savings in other items in the GAA within the same branch or constitutional body.—
Section 25(5) mandates that no law shall be passed authorizing any transfer of appropriations. However,
there can be, when authorized by law, augmentation of existing items in the GAA from savings in other
items in the GAA within the same branch or constitutional body. This power to augment or realign is lodged
in the President with respect to the Executive branch, the Senate President for the Senate, the Speaker for
the House of Representatives, the Chief Justice for the Judiciary, and the Heads of the constitutional bodies
for their respective entities. The 2011, 2012 and 2013 GAAs all have provisions authorizing the President,
the Senate President, the House Speaker, the Chief Justice and the Heads of the constitutional bodies to
realign savings within their respective entities. Section 25(5) expressly states that what can be realigned are
“savings” from an item in the GAA. To repeat, only savings can be realigned. Unless there are savings,
there can be no realignment.
Same; Same; Same; View that funds appropriated for the Executive branch, whether savings or not,
cannot be transferred to the Legislature or Judiciary, or to the constitutional bodies, and vice versa.—Section
25(5), Article VI of the Constitution likewise mandates that savings from one branch, like the Executive,
cannot be transferred to another branch, like the Legislature or Judiciary, or to a constitutional body,
and vice versa. In fact, funds appropriated for the Executive branch, whether savings or not, cannot be
transferred to the Legislature or Judiciary, or to the constitutional bodies, and vice versa. Hence, funds from
the Executive branch, whether savings or not, cannot be transferred to the Commission on Elections, the
House of Representatives, or the Commission on Audit.
Same; Same; Same; View that one of the requisites for a valid transfer of appropriations under Section
25(5), Article VI of the Constitution is that there must be savings from the appropriations of the same branch
or constitutional body.—One of the requisites for a valid transfer of appropriations under Section 25(5),
Article VI of the Constitution is that there must be savings from the appropriations of the same branch or
constitutional body. For the President to exercise his realignment power, there must first be savings from
other items in the GAA appropriated to the departments, bureaus and
22

ANNOTATED
offices of the Executive branch, and such savings can be realigned only to existing items of
appropriations within the Executive branch.
Same; Same; Same; Savings; View that Section 60, Section 54, and Section 53 of the General Provisions
of the 2011, 2012 and 2013 General Appropriations Acts (GAAs), respectively, contemplate three sources of
savings.—Section 60, Section 54, and Section 53 of the General Provisions of the 2011, 2012 and 2013 GAAs,
respectively, contemplate three sources of savings. First, there can be savings when there are funds still
available after completion of the work, activity or project, which means there are excess funds remaining
after the work, activity or project is completed. There can also be savings when there
is finaldiscontinuance of the work, activity or project, which means there are funds remaining after the
work, activity, or project was started but finally discontinued before completion. To illustrate, a
bridge, half-way completed, is destroyed by floods or earthquake, and thus finally discontinued because the
remaining funds are not sufficient to rebuild and complete the bridge. Here, the funds are obligated but the
remaining funds are de-obligated upon final discontinuance of the project. On the other hand, abandonment
means the work, activity or project can no longer be started because of lack of time to obligate the funds,
resulting in the physical impossibility to obligate the funds. This happens when a month or two before the
end of the fiscal year, there is no more time to conduct a public bidding to obligate the funds. Here,
the funds are not, and can no longer be, obligated and thus will constitute savings. Final
discontinuance or abandonment excludes suspension or temporary stoppage of the work, activity, or
project. Second, there can be savings when there is unpaid compensation and related costs pertaining to
vacant positions. Third, there can be savings from cost-cutting measures adopted by government agencies.
Same; Same; Same; Same; View that funds which are temporarily not spent under Section 38 are not
savings that can be realigned by the President.—Funds which are temporarily not spent under Section 38 are
not savings that can be realigned by the President. Only funds that qualify as savings under Section 60,
Section 54, and Section 53 of the 2011, 2012 and 2013 GAAs, respectively, can be realigned. If the work,
activity or program is merely suspended, there are no savings because there is no final discontinuance
23
VOL. 728, JULY 1, 2014 23
of the work, activity or project. If the work, activity or project is only suspended, the funds remain obligated.
If the President “stops further expenditure of funds,” it means that the work, activity or project has already
started and the funds have already been obligated. Any discontinuance must be final before the unused
funds are de-obligated to constitute savings that can be realigned.
Same; Same; Same; Same; Dividends; View that dividends from government-owned or -controlled
corporations are not savings but revenues, like tax collections, that go directly to the National Treasury in
accordance with Section 44, Chapter 5, Book VI of the Administrative Code of 1987.—Dividends from
government-owned or controlled corporations are not savings but revenues, like tax collections, that go
directly to the National Treasury in accordance with Section 44, Chapter 5, Book VI of the Administrative
Code of 1987, which states: SEC. 44. Accrual of Income to Unappropriated Surplus of the General Fund.—
Unless otherwise specifically provided by law, all income accruing to the departments, offices and agencies
by virtue of the provisions of existing laws, orders and regulations shall be deposited in the National
Treasury or in the duly authorized depository of the Government and shall accrue to the unappropriated
surplus of the General Fund of the Government: Provided, That amounts received in trust and from
business-type activities of government may be separately recorded and disbursed in accordance with such
rules and regulations as may be determined by the Permanent Committee created under this Act. Dividends
form part of the unappropriated surplus of the General Fund of the Government and they cannot be spent
unless there is an appropriations law. The same rule applies to windfall revenue collections which also form
part of the unappropriated General Fund. Proceeds from sales of government assets are not savings but
revenues that also go directly to the National Treasury. Savings can only come from the three sources
expressly specified in Section 60, Section 54 and Section 53 of the General Provisions of the 2011, 2012, and
2013 GAAs, respectively.
Same; Same; Same; Disbursement Acceleration Program; View that the use of the Unprogrammed Fund
under the Disbursement Acceleration Program (DAP) is unlawful, and hence, void.—Dividend collections of
government-owned and -controlled corporations do not qualify as savings as defined in Section 60, Section
54, and Section
24

ANNOTATED
53 of the General Provisions of the 2011, 2012, and 2013 GAAs, respectively. Dividend collections are
revenues that go directly to the National Treasury. The Unprogrammed Fund under the 2011, 2012, and
2013 GAAs can only be released when revenue collections exceed the original revenue targets. The DBM
miserably failed to show any excess revenue collections during the period the DAP was implemented.
Therefore, in violation of the GAAs, the Executive used the Unprogrammed Fund without complying with
the express condition for its use — that revenue collections of the government exceed the original revenue
target, as certified by the Bureau of Treasury. In other words, the use of the Unprogrammed Fund under the
DAP is unlawful, and hence, void.
Same; Same; Same; Cross-Border Transfer of Funds; View that this constitutional prohibition on cross-
border transfers is clear: the President, the Senate President, the Speaker of the House of Representatives, the
Chief Justice, and the Heads of constitutional bodies are only authorized to augment any item in the general
appropriations law for their respective offices from savings in other items of their respective appropriations.—
Section 25(5), Article VI of the Constitution mandates that savings from one government branch cannot be
transferred to another branch, and vice versa. This constitutional prohibition on cross-border transfers is
clear: the President, the Senate President, the Speaker of the House of Representatives, the Chief Justice,
and the Heads of constitutional bodies are only authorized to augment any item in the general
appropriations law for their respective offices from savings in other items of their respective
appropriations. Contrary to Section 25(5), Article VI of the Constitution, there were instances of cross-
border transfers under the DAP. In the interpellation by Justice Bersamin during the Oral Arguments,
Budget Secretary Florencio Abad expressly admitted the existence of cross-border transfers of funds.
Same; Same; Same; Same; View that the Constitution clearly prohibits the President from transferring
appropriations of the Executive branch to other branches of government or to constitutional bodies for
whatever reason.—The OSG contends that “[t]he Constitution does not prevent the President from
transferring savings of his department to another department upon the latter’s request, provided it is the
recipient department that uses such funds to augment its own appropriation.” The OSG further submits
that “[i]n rela-
25
VOL. 728, JULY 1, 2014 25
tion to the DAP, the President made available to the Commission on Audit, House of
Representatives, and the Commission on Elections the savings of his department upon their
request for funds, but it was those institutions that applied such savings to augment items in
their respective appropriations.” Thus, the OSG expressly admitsthat the Executive transferred
appropriations for the Executive branch to the COA, the House of Representatives and the COMELEC but
justifies such transfers to the recipients’ request for funds to augment items in the recipients’ respective
appropriations. The OSG’s arguments are obviously untenable. Nowhere in the language of the Constitution
is such a misplaced interpretation allowed. Section 25(5), Article VI of the Constitution does not distinguish
whether the recipient entity requested or did not request additional funds from the Executive branch to
augment items in the recipient entity’s appropriations. The Constitution clearly prohibits the President from
transferring appropriations of the Executive branch to other branches of government or to constitutional
bodies for whatever reason. Congress cannot even enact a law allowing such
transfers.“The fundamental policy of the Constitution is against transfer of appropriations even by law,
since this ‘juggling’ of funds is often a rich source of unbridled patronage, abuse and interminable
corruption.” Moreover, the “cross-border” transfer of appropriations to constitutional bodies impairs the
independence of the constitutional bodies.
Same; Same; Same; View that once the President approves the General Appropriations Act (GAA) or
allows it to lapse into law, the President can no longer veto or cancel any item in the GAA or impound the
disbursement of funds authorized to be spent in the GAA.—The GAA is a law and the President is sworn to
uphold and faithfully implement the law. If Congress in the GAA directs the expenditure of public funds for
a specific purpose, the President has no power to cancel, prevent or permanently stop such expenditure once
the GAA becomes a law. What the President can do is to veto that specific item in the GAA. But once
the President approves the GAA or allows it to lapse into law, the President can no longer veto or cancel any
item in the GAA or impound the disbursement of funds authorized to be spent in the GAA.
Same; Same; Same; View that Section 38, Chapter V, Book VI of the Administrative Code of 1987 allows
the President “to suspend
26

ANNOTATED
or otherwise stop further expenditure” of appropriated funds but this must be for a legitimate purpose,
like when there are anomalies in the implementation of a project or in the disbursement of funds.—Section
38, Chapter V, Book VI of the Administrative Code of 1987 allows the President “to suspend or otherwise
stop further expenditure” of appropriated funds but this must be for a legitimate purpose, like when
there are anomalies in the implementation of a project or in the disbursement of funds. Section 38 cannot be
read to authorize the President to permanently stop so as to cancel the implementation of a project in the
GAA because the President has no power to amend the law, and the GAA is a law. Section 38 cannot also be
read to authorize the President to impound the disbursement of funds for projects approved in the GAA
because the President has no power to impound funds approved by Congress.
Same; Same; Same; Veto Power; View that under the present Constitution, if the President vetoes an item
of appropriation in the General Appropriations Act (GAA), Congress may override such veto by an
extraordinary two-thirds vote of each chamber of Congress.—Under the present Constitution, if the President
vetoes an item of appropriation in the GAA, Congress may override such veto by an extraordinary two-thirds
vote of each chamber of Congress. However, if this Court allows the President to impound the funds
appropriated by Congress under a law, then the constitutional power of Congress to override the President’s
veto becomes inutile and meaningless. This is a substantial and drastic revision of the constitutional check
and balance finely crafted in the Constitution.
Same; Same; Same; View that the authority of the President to suspend or stop the disbursement of
appropriated funds under Section 38 can refer only to obligated funds; otherwise, Section 38 will be patently
unconstitutional because it will constitute a power by the President to impound appropriated funds.—Section
38 cannot be invoked by the President to create “savings” by ordering the permanent stoppage of
disbursement of appropriated funds, whether obligated or not. If the appropriated funds are
already obligated, then the stoppage of disbursements of funds does not create any savings because the
funds remain obligated until the contract is rescinded. If the appropriated funds are unobligated, such
permanent stoppage amounts to an impoundment of appropriated funds which is unconstitutional. The
authority of the President to
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VOL. 728, JULY 1, 2014 27
suspend or stop the disbursement of appropriated funds under Section 38 can refer only to
obligated funds; otherwise, Section 38 will be patently unconstitutional because it will
constitute a power by the President to impound appropriated funds.
Same; Operative Fact Doctrine; View that an unconstitutional act confers no rights, imposes no duties,
and affords no protection. An unconstitutional act is inoperative as if it has not been passed at all. The
exception to this rule is the doctrine of operative fact.—An unconstitutional act confers no rights, imposes no
duties, and affords no protection. An unconstitutional act is inoperative as if it has not been passed at all.
The exception to this rule is the doctrine of operative fact. Under this doctrine, the law or administrative
issuance is recognized as unconstitutional but the effects of the unconstitutional law or administrative
issuance, prior to its declaration of nullity, may be left undisturbed as a matter of equity and fair play.
Same; Same; View that as a rule of equity, the doctrine of operative fact can be invoked only by those who
relied in good faith on the law or the administrative issuance, prior to its declaration of nullity.—As a rule of
equity, the doctrine of operative fact can be invoked only by those who relied in good faith on the law or the
administrative issuance, prior to its declaration of nullity. Those who acted in bad faith or with gross
negligence cannot invoke the doctrine. Likewise, those directly responsible for an illegal or
unconstitutional act cannot invoke the doctrine. He who comes to equity must come with clean hands, and
he who seeks equity must do equity. Only those who merely relied in good faith on the illegal or
unconstitutional act, without any direct participation in the commission of the illegal or
unconstitutional act, can invoke the doctrine. Moreover, the doctrine of operative fact is applicable
only if nullifying the effects of the unconstitutional law or administrative issuance will result in injustice or
serious prejudice to the public or innocent third parties. To illustrate, if DAP funds were used to build school
houses without anomalies other than the fact that DAP funds were used, the contract could no longer be
rescinded for to do so would prejudice the innocent contractor who built the school houses in good faith.
However, if DAP funds were used to augment the PDAF of members of Congress whose identified
28

ANNOTATED
projects were in fact nonexistent or anomalously implemented, the doctrine of operative fact would not
apply.
BRION, J., Separate Opinion:
Constitutional Law; Judicial Power; View that the present Constitution not only integrates the
traditional definition of judicial power, but introduces as well a completely new power and duty to the
Judiciary under the last phrase — “to determine whether or not there has been a grave abuse of discretion
amounting to lack or excess of jurisdiction on the part of any branch or instrumentality of the Government.”—
The present Constitution not only integrates the traditional definition of judicial power, but introduces
as well a completely new power and duty to the Judiciary under the last phrase — “to determine
whether or not there has been a grave abuse of discretion amounting to lack or excess of jurisdiction on
the part of any branch or instrumentality of the Government.” This addition was apparently in
response to the Judiciary’s past experience of invoking the political question doctrine to avoid cases that
had political dimensions but were otherwise justiciable. The addition responded as well to the societal
disquiet that resulted from these past judicial rulings. Under the expanded judicial power,
justiciability expressly and textually depends only on the presence or absence of grave abuse of discretion,
as distinguished from a situation where the issue of constitutional validity is raised within a “traditionally”
justiciable case which demands that the requirement of actual controversy based on specific legal rights
must exist. Notably, even if the requirements under the traditional definition of judicial power are applied,
these requisites are complied with once grave abuse of discretion is prima facie shown to have taken place.
The presence or absence of grave abuse of discretion is the justiciable issue to be resolved.
Same; Expanded Judicial Review; View that petitions — in order to successfully invoke the Court’s power
of expanded judicial review — must satisfy two essential requisites: first, they must demonstrate a prima
facie showing of grave abuse of discretion on the part of the governmental body’s actions; and second, they
must prove that they relate to matters of transcendental importance to the nation.—All courts have the power
of expanded judicial review, but only when a petition involves a matter of transcendental importance
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VOL. 728, JULY 1, 2014 29
should it be directly filed before this Court. Otherwise, the Court may either dismiss the petition or remand
it to the appropriate lower court, based on its consideration of the urgency, importance, or the evidentiary
requirements of the case. In other words, petitions — in order to successfully invoke the Court’s power of
expanded judicial review — must satisfy two essential requisites: first, they must demonstrate a prima
facie showing of grave abuse of discretion on the part of the governmental body’s actions; and second, they
must prove that they relate to matters of transcendental importance to the nation.
Same; Same; Supreme Court; View that while the Supreme Court (SC), unlike the trial courts, does not
conduct proceedings to receive evidence, it must recognize as established the facts admitted or undisputedly
represented by the parties themselves.—I note that aside from newspaper clippings showing the antecedents
surrounding the DAP, the petitions are filled with quotations from the respondents themselves, either
through press releases to the general public or as published in government websites. In fact, the
petitions — quoting the press release published in the respondents’ website — enumerated
disbursements released through the DAP; it also included admissions from no less than Secretary
Abad regarding the use of funds from the DAP to fund projects identified by legislators on top of their
regular PDAF allocations. Additionally, the respondents, in the course of the oral arguments, submitted
details of the programs funded by the DAP, and admitted in Court that the funding of Congress’ e-library
and certain projects in the COA came from the DAP. They likewise stated in their submitted memorandum
that the President “made available” to the Commission on Elections (COMELEC) the “savings” of his
department upon request for funds. The mechanics by which funds were pooled together to create and fund
the DAP are also evident from the statements published in the DBM website, as well as in national budget
circulars and approved memoranda implementing the DAP. The respondents also submitted a memo
showing the President’s approval of the DAP’s creation. All of these cumulatively and sufficiently lead
to a prima facie case of grave abuse of discretion by the Executive in the handling of public funds. In other
words, these admitted pieces of evidence, taken together, support the petitioners’ allegations and establish
sufficient basic premises for the Court’s action on the merits. While the Court, unlike the trial courts,
30

ANNOTATED
does not conduct proceedings to receive evidence, it must recognize as established the facts admitted
or undisputedly represented by the parties themselves.
Disbursement Acceleration Program; View that if a “practice” similar to the mechanism under the
Disbursement Acceleration Program (DAP) already existed and was being observed by the Executive in the
execution of the enacted budget — in the same manner that the Priority Development Assistance Fund
(PDAF)was also a “practice” during the execution stage of a General Appropriations Act (GAA) and which
was simply embodied in the GAA provisions — then there is every reason for the Court to squarely rule on the
constitutionality of the Executive’s action in light of the seriousness of the allegations of constitutional
violations in the petitions.—To point out the obvious, if a “practice” similar to the mechanism under the DAP
already existed and was being observed by the Executive in the execution of the enacted budget — in the
same manner that the PDAF was also a “practice” during the execution stage of a GAA and which was simply
embodied in the GAA provisions — then there is every reason for the Court to squarely rule on the
constitutionality of the Executive’s action in light of the seriousness of the allegations of constitutional
violations in the petitions. In fact, the nature and amounts of the public funds involved are more than
enough to sound alarm bells to this Court if we are to maintain fealty to our role as the guardian of the
Constitution. Secretary Abad’sofficial, public and unrefuted statement that part of the releases of
DAP funds in 2012 was “based entirely on letters of request submitted to us by the Senators” should
neither escape the Court’s attention nor should the Court gloss over it.
Constitutional Law; Justiciability; Political Questions; Words and Phrases; View that justiciability refers
to the fitness or propriety of undertaking the judicial review of particular matters or cases; it describes the
character of issues that are inherently susceptible of being decided on grounds recognized by law. In
contradistinction, political questions refer to those that, under the Constitution, are to be decided by the
people in their sovereign capacity, or in regard to which full discretionary authority has been delegated to the
legislative or executive branch of the government; it is concerned with issues dependent upon the wisdom, and
not the legality of a particular measure.—Justiciability refers to the fitness or propriety of under-
31
VOL. 728, JULY 1, 2014 31
taking the judicial review of particular matters or cases; it describes the character of issues that are
inherently susceptible of being decided on grounds recognized by law. In contradistinction, political
questions refer to those that, under the Constitution, are to be decided by the people in their sovereign
capacity, or in regard to which full discretionary authority has been delegated to the legislative or
executive branch of the government; it is concerned with issues dependent upon the wisdom, and not the
legality of a particular measure. Where the issues so posed are tion underhe doctrine of separation of
powerpolitical, the Court normally can tnot assume jurisdics except limits on the exercise of the
powers conferred on a polwhere the court finds that there are constitutionally-imposeditical
branch of the government.
Budget; Transfer of Funds; Disbursement Acceleration Program; View that far from bordering on
political questions, the challenges raised in the present petitions against the constitutionality of the
Disbursement Acceleration Program (DAP) are actually anchored on specific constitutional and statutory
provisions governing the realignment or transfer of funds.—In these cases, the petitioners have strongly
shown the textual limits to the Executive’s power over the implementation of the GAA, particularly in the
handling and management of funds. Far from bordering on political questions, the challenges raised in
the present petitions against the constitutionality of the DAP are actually anchored on specific
constitutional and statutory provisions governing the realignment or transfer of funds. The increase of
government expenditures is a macroeconomic tool that is at the disposal of the country’s policy-makers to
stimulate the country’s economy and improve economic growth. From this perspective, constitutional
provisions touching on economic matters are understandably broadly worded to accommodate competing
needs and to give policy-makers (and even the Court) the necessary flexibility to decide policy questions or
disputes on a case-to-case basis.
Constitutional Law; Separation of Powers; Supreme Court; View that although the Supreme Court (SC)
may, in effect, nullify governmental actions abhorrent to the Constitution, it does not undertake this role
because of “judicial supremacy” but because this duty has been assigned to it by the Constitution.—As early
as Angara v. Electoral Commission, 63 Phil. 139 (1936), this Court has identi-
32

ANNOTATED
fied itself as the mediator in demarcating the constitutional limits in the exercise of power by each branch of
government. We then observed that these constitutional boundaries tend to be forgotten or marred in times
of societal disquiet or political excitement, and it is the Court’s role to clarify and reinforce the proper
allocation of powers so that the different branches of government would not act outside their respective
spheres of influence. We clarified that although we may, in effect, nullify governmental actions abhorrent to
the Constitution, we do not undertake this role because of “judicial supremacy” but because this duty has
been assigned to us by the Constitution.
Same; Same; Budget; View that Congress is granted the power of appropriations under the framework
provided in the Constitution, while the Executive is granted the power to implement the programs funded by
these appropriations, also based on the same constitutional framework. It is in this manner that the
separation of powers principle operates in the budgetary process.—The 1987 Constitution, recognizing the
importance of the national budget, provided not only the general framework for its enactment,
implementation and accountability; it also set forth specific limits in the exercise of the respective powers by
the Executive and the Legislative, all the time clearly separating them so that they would not overstep into
each other’s pre-assigned domain. Thus, Congress is granted the power of appropriations under the
framework provided in the Constitution, while the Executive is granted the power to implement the
programs funded by these appropriations, also based on the same constitutional framework. It is in this
manner that the separation of powers principle operates in the budgetary process. Under the
complementary principle of checks and balances, as applied to the budget process, both the Executive and
the Legislative play constitutionally-defined roles.
Same; Same; Same; Cross-Border Augmentations; View that upon passage of the general appropriations
bill into law (either by presidential approval or inaction allowing the bill to lapse into a law), none of the
three branches of government and the constitutional bodies can thwart congressional budgetary will by
crossing constitutional boundaries through the transfer of appropriations or funds across departmental
borders.—Upon passage of the general appropriations bill into law (either by presidential approval or
inaction
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VOL. 728, JULY 1, 2014 33
allowing the bill to lapse into a law), none of the three branches of government and the constitutional
bodies can thwart congressional budgetary will by crossing constitutional boundaries through the transfer of
appropriations or funds across departmental borders. This is the added precautionary measure thrown in to
secure the painstakingly designed check-and-balance mechanisms. In the end, what appears clear from all
the carefully-designed plan is that the Legislative and the Executive check and counter-check one another,
so that no one branch achieves predominance in the operations of the government. The Constitution, in
effect, holds the vision that all these measures shall result in balanced governance, to the benefit of the
governed, with enough flexibility to respond and adjust to the myriad situations that may transpire in the
course of governance (such as the provision allowing the transfer of appropriations within very narrow
constitutionally-defined limits).
Same; Budget; Disbursement Acceleration Program; View that under this carefully laid-out
constitutional system, the Disbursement Acceleration Program (DAP) violates the principles of separation of
powers and checks and balances on two (2) counts: first, by pooling funds that cannot at all be classified as
savings; and second, by using these funds to finance projects outside the Executive or for projects with no
appropriation cover.—Under this carefully laid-out constitutional system, the DAP violates the principles of
separation of powers and checks and balances on two (2) counts: first, by pooling funds that cannot at
all be classified as savings; and second, by using these funds to finance projects outside the
Executive or for projects with no appropriation cover. The details behind these transgressions and
their constitutional status are further discussed below. These violations — in direct violation of the “no
transfer” proviso of Section 25(5) of Article VI of the Constitution — had the effect of allowing the
Executive to encroach on the domain of Congress in the budgetary process. By facilitating the use of
funds not classified as savings to finance items other than for which they have been appropriated, the DAP
in effect allowed the President to circumvent the constitutional budgetary process and to veto items of the
GAA without subjecting them to the 2/3 overriding veto that Congress is empowered to exercise.
Additionally, this practice allows the creation of a budget within a budget: the use of funds not
otherwise classifiable as savings disregards the items for which these funds had been appropriated, and
allows their use for
34

ANNOTATED
items for which they had not been appropriated. Worse, the violation becomes even graver when, as the oral
arguments and admissions later showed, the funds provided to finance appropriations in the Executive
Department had been used for projects in the Legislature and other constitutional bodies. In short, the
violation allowed the constitutionally-prohibited transfer of funds across constitutional
boundaries.
Same; Same; Same; View that public funds cannot be used for projects and programs other than what
they have been intended for, as expressed in appropriations made by law.—Section 25(5), Article VI of the
1987 Constitution prohibits the enactment of any law authorizing the transfer of appropriations: 5. No law
shall be passed authorizing any transfer of appropriations;however, 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 Constitutional Commissions may, by law, be authorized to augment any item in the general
appropriations law for their respective offices from savings in other items of their respective appropriations.
[italics, emphasis and underscore ours] This general prohibition against the transfer of funds is related to,
and supports, the constitutional rule that “No money shall be paid out of the Treasury except in pursuance
of an appropriation made by law.” Public funds cannot be used for projects and programs other than what
they have been intended for, as expressed in appropriations made by law. Likewise, appropriated funds
cannot, through transfers, be withheld from the use for which they have been intended.
Budget; Transfer of Funds; View that it at once becomes clear that thw, can only be a very narrow
exception to the general prohibition agaie authority to transfer funds that Congress may grant by lanst the
transfer of funds; all the requisites must fall in place before any transfer of funds allotted in the General
Appropriations Act (GAA) may be made.—But recognizing that unforeseeable events may transpire in the
actual implementation of the budget, the Constitution allowed a narrow exception to Article VI, Section
25(5)’s general prohibition: it allowed a transfer of funds allocated for a particular appropriation,
once these have become savings, to augment items in other appropriations within the same branch of
government. To ensure that this exception does not become the rule, the Constitution provided a catch: a
transfer of appropriations may only
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VOL. 728, JULY 1, 2014 35
be exercised if Congress authorizes it by law. The authority to legislate an exception, however, is not a
plenary; it must be exercised within the parameters and conditions set by the Constitution itself, as
follows: First, the transfer may be allowed only when appropriations have become savings; Second, the
transfer may be exercised only by specific public officials (i.e., by 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
Constitutional Commissions); Third, these savings may only be used to augment and only existing items in
the GAA can be augmented; and Fourth, these items must be found within each branch of government’s
respective appropriations. Viewed in this manner, it at once becomes clear that the authority to transfer
funds that Congress may grant by law, can only be a very narrow exception to the general prohibition
against the transfer of funds; all the requisites must fall in place before any transfer of funds allotted in
the GAA may be made.
Same; Same; View that in Demetria v. Alba, 148 SCRA 208 (1987), the Supreme Court (SC) struck down
paragraph 1, Section 44 of Presidential Decree (PD) No. 1177 (that allowed the President to “transfer any
fund” appropriated for the Executive Department under the General Appropriations Act (GAA) “to any
program, project or activity of any department, bureau, or office included in the General Appropriations Act”)
as unconstitutional for directly colliding with the constitutional prohibition on the transfer of an
appropriation from one item to another.—In Demetria v. Alba, 148 SCRA 208 (1987), the Court struck
down paragraph 1, Section 44 of Presidential Decree No. 1177 (that allowed the President to “transfer any
fund” appropriated for the Executive Department under the GAA “to any program, project or activity of any
department, bureau, or office included in the General Appropriations Act”) as unconstitutional for directly
colliding with the constitutional prohibition on the transfer of an appropriation from one item to another.
The Court ruled that this provision authorizes an “[i]ndiscriminate transfer [of] funds x x x without regard
as to whether or not the funds to be transferred are actually savings in the item from which the same are to
be taken, or whether or not the transfer is for the purpose of augmenting the item to which said transfer is
to be made” in violation of Section 16(5), Article VIII of the 1973 Constitution (presently Section 25(5),
Article VI of the 1987 Constitution). In Demetria,
36

ANNOTATED
the Court noted that the leeway granted to public officers in using funds allotted for appropriations to
augment other items in the GAA is limited since Section 16(5), Article VIII of the 1973 Constitution
(likewise adopted in toto in the 1987 Constitution) has specified the purpose and conditions for the transfer
of appropriations. A transfer may be made only if there are savings from another item in the appropriation
of the government branch or constitutional body.
Same; Same; Savings; View that savings cannot be used to augment nonexistent items in the General
Appropriations Act (GAA).—Savings cannot be used to augment nonexistent items in the GAA. Where there
are no appropriations for capital outlay in a specific agency or program, for example, savings cannot be used
to buy capital equipment for that program. Neither can savings be used to fund the hiring of personnel,
where a program’s appropriation does not specify an item for personnel services.
Same; Constitutional Law; View that the Constitution expressly provides that no money shall be paid out
of the Treasury except in pursuance of an appropriation made by law.—The appropriations in the GAA could
be released and used only as programmed. This is the general rule. As an exception, the President was given
the power to retain or reduce appropriations only in case of an unmanageable National Government
budget deficit. A very narrow exception has to prevail in reading these provisions as the general rule came
from the command of the Constitution itself. The Constitution expressly provides that no money shall be
paid out of the Treasury except in pursuance of an appropriation made by law. As an authorization to the
Executive, the constitutional provision actually serves as a legislative check on the disbursing power of the
Executive. It carries into effect the rule that the President has no inherent authority to countermand what
Congress has decreed since the Executive’s constitutional duty is to ensure the faithful execution of the
laws. Impounding appropriations is an action contrary to the President’s duty to ensure that all laws are
faithfully executed. As appropriations in the GAA are part of a law, the President is duty bound to
implement them; any suspension or deduction of these appropriations amounted to a refusal to execute the
provisions of a law.
Same; Impoundment; Words and Phrases; View that impoundment refers to the refusal by the President,
for whatever reason, to spend funds made available by Congress.—Impoundment refers
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VOL. 728, JULY 1, 2014 37
to the refusal by the President, for whatever reason, to spend funds made available by Congress. It is the
failure to spend or obligate budgetary authority of any type. The President may conceivably impound
appropriated funds in order to avoid wastage of public funds without ignoring legislative will (routine
impoundments) or because he disagrees with congressional policy (policy impoundments).
Same; Disbursement Acceleration Program; View that in pooling together “unobligated allotments” to
augment other items in the General Appropriations Act (GAA), the Disbursement Acceleration Program (DAP)
used funds that had already been allotted but had yet to be obligated or spent for its intended purpose.—As I
earlier emphasized, funds allotted for particular appropriations may only be used to augment other items in
the GAA when there are actual savings. The DAP, by pooling funds together to fast-track priority projects of
the government, violated this critical requirement as the sources of DAP funds cannot qualify as savings. In
pooling together “unobligated allotments” to augment other items in the GAA, the DAP used funds that had
already been allotted but had yet to be obligated or spent for its intended purpose. I fully agree
with J. Carpio that these funds cannot be considered as savings, as well as in the distinction he made on
when appropriations for CO and MOOE may be considered as savings.
Same; Same; Allotment; Words and Phrases; View that allotment is part of the President’s power to
execute an appropriations law and it is this power that he can suspend or reverse, not the will of Congress
expressed through the appropriations law.—Since the actual execution of the budget could meet unforeseen
contingencies, this provision delegated to the President the power to suspend or otherwise stop further
expenditure of allotted funds based on a broad legislative standard of public interest. By its clear terms,
the authority granted is to stop or suspend the expenditure of allotted funds.Funds are only
considered allotted when the DBM has authorized an agency to incur obligation for specified amounts
contained in an appropriation law. Unlike an appropriation which is made by the legislative,
an allotment is an executive authorization to the different departments, bureaus, offices and agencies that
obligations may now be incurred. Allotment is part of the President’s power to execute an appropriations
law and it is this power that
38

ANNOTATED
he can suspend or reverse, not the will of Congress expressed through the appropriations
law. Thus, the President cannot exercise the power to suspend or stop expenditure under Section 38
towards appropriations, as funds for it have yet to be released and allotted. Neither can the President use
Section 38 to justify the withdrawal of unobligated allotments under the terms of NBC 541 and its
treatment as savings.
Same; Same; View that the Executive does not have any power to impound appropriations (where
otherwise appropriable) except on the basis of an unmanageable budget deficit or as reserve for purposes of
meeting contingencies and emergencies.—To restate, Section 38 of the Administrative Code covers stoppage
or suspension of expenditure of allotted funds. This provision cannot be used as basis to justify the
withdrawal and pooling of unreleased appropriations for slow-moving projects. The Executive does not have
any power to impound appropriations (where otherwise appropriable) except on the basis of
an unmanageable budget deficit or as reserve for purposes of meeting contingencies and
emergencies. None of these exceptions, however, were ever invoked as a justification for the withdrawal of
unreleased appropriations for slow-moving projects. As the records show, these appropriations were
withdrawn simply on the basis of the pace of the project as a slow-moving project. This executive action does
not only directly contravene the GAA that the President is supposed to implement; more importantly, it is a
presidential action that the Constitution does not allow.
Same; Same; Impoundment; Words and Phrases; View that the funds used to spend on Disbursement
Acceleration Program(DAP) projects were funds impounded from other projects; Impoundment refers to the
refusal by the President, for whatever reason, to spend funds for appropriations made by Congress.—The
funds used to spend on DAP projects were funds impounded from other projects. In order to
increase funding on the projects it funded, the DAP had to create savings that would be used to finance
these increases. The process by which DAP created these savings involved the impoundment of unreleased
appropriations for slow-moving projects. As I have earlier explained, impoundment refers to the refusal by
the President, for whatever reason, to spend funds for appropriations made by Congress. Through the DAP,
funds that were meant to finance appropriations for slow-moving projects were
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VOL. 728, JULY 1, 2014 39
not released, allotted and spent for the appropriations they were meant to cover. They were impounded.
That these funds were used to finance other appropriations is inconsequential, as the impoundment had
already taken place. Thus, insofar as unreleased appropriations for slow-moving programs are concerned,
these had been impounded, in violation of the clear prohibition against it in the GAA.
Same; Same; View that while the President has flexibility in pushing for priority programs and crafting
policies that he may deem fit and necessary, the Disbursement Acceleration Program(DAP) exceeded and over-
extended what the President can legitimately undertake.—In sum, while the President has flexibility in
pushing for priority programs and crafting policies that he may deem fit and necessary, the DAP exceeded
and over-extended what the President can legitimately undertake. Specifically, several sources of funding
used to facilitate the DAP, as well as the programs that the DAP funded, went beyond the allowed flexibility
given to the President in budget execution.
Same; Same; Power of Augmentation; View that for the power of augmentation to be validly exercised,
the item to be augmented must be an item that has an appropriation under the General Appropriations Act
(GAA); if the item funded under the Disbursement Acceleration Program (DAP) through savings did not
receive any funding from Congress under the GAA, the Executive cannot provide funding; it may not
countermand legislative will by “augmenting” an item that is not existing and therefore can never be
“deficient.”—For emphasis, for the power of augmentation to be validly exercised, the item to be augmented
must be an item that has an appropriation under the GAA; if the item funded under the DAP through
savings did not receive any funding from Congress under the GAA, the Executive cannot provide funding; it
may not countermand legislative will by “augmenting” an item that is not existing and therefore can never
be “deficient.”
Same; Same; Operative Fact Doctrine; View that the operative fact doctrine was a departure from the old
and long established rule (known as the void ab initio doctrine) that an “unconstitutional act is not a law; it
confers no rights; it imposes no duties; it affords no protection; it creates no office; it is, in legal contemplation,
as inop-
40

ANNOTATED
erative as though it had never been passed.”—The doctrine of operative fact is American in origin,
and was discussed in the 1940 case of Chicot County Drainage Dist. v. Baxter State Bank, et al.: The effect
of a determination of unconstitutionality must be taken with qualifications. The actual
existence of a statute, prior to such a determination, is an operative fact and may have
consequences which cannot justly be ignored. The past cannot always be erased by a new
judicial declaration. The effect of the subsequent ruling as to invalidity may have to be considered in
various aspects, with respect to particular relations, individual and corporate, and particular conduct,
private and official. Questions of rights claimed to have become vested, of status, of prior determinations
deemed to have finality and acted upon accordingly, of public policy in the light of the nature both of the
statute and of its previous application, demand examination. These questions are among the most difficult
of those which have engaged the attention of courts x x x and it is manifest from numerous decisions that an
all-inclusive statement of a principle of absolute retroactive invalidity cannot be justified. [emphasis
supplied] The doctrine was a departure from the old and long established rule (known as the void ab
initio doctrine) that an “unconstitutional act is not a law; it confers no rights; it imposes no duties; it
affords no protection; it creates no office; it is, in legal contemplation, as inoperative as though it had never
been passed.” By shifting from retroactivity to prospectivity, the US courts took a pragmatic and realistic
approach in assessing the effects of a declaration of unconstitutionality of a statute.
Same; Same; Same; View that the persons and officials, on the other hand, who merely received or
utilized the budgetary funds in the regular course and without knowledge of the Disbursement Acceleration
Program’s (DAP’s) invalidity, would suffer prejudice if the invalidity of the DAP would affect them. Thus,
they should not incur any liability for utilizing DAP funds, unless they committed criminal acts in the course
of their actions other than the use of the funds in good faith.—Given the jurisprudential meaning of the
operative fact doctrine, a first consideration to be made under the circumstances of this case is the
application of the doctrine: (1) to the programs, works and projects the DAP funded in relying on its
validity; (2) to the officials who undertook the programs, works and projects; and (3) to the public officials
responsible for the establishment and im-
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VOL. 728, JULY 1, 2014 41
plementation of the DAP. With respect to the programs, works and projects, I fully agree with J.
Bersamin that the DAP-funded programs, works and projects can no longer be undone; practicality
and equity demand that they be left alone as they were undertaken relying on the validity of the DAP funds
at the time these programs, works and projects were undertaken. The persons and officials, on the other
hand, who merely received or utilized the budgetary funds in the regular course and without
knowledge of the DAP’s invalidity, would suffer prejudice if the invalidity of the DAP would affect them.
Thus, they should not incur any liability for utilizing DAP funds, unless they committed criminal acts in the
course of their actions other than the use of the funds in good faith.
Same; Same; Same; View that the operative fact doctrine cannot simply and generally be extended to the
officials who never relied on the Disbursement Acceleration Program (DAP’s) validity and who are merely
linked to the DAP because they were its authors and implementors.—The doctrine, on the other hand, cannot
simply and generally be extended to the officials who never relied on the DAP’s validity and who are
merely linked to the DAP because they were its authors and implementors. A case in point is the case
of the DBM Secretary who formulated and sought the approval of NBC No. 541 and who, as author, cannot
be said to have relied on it in the course of its operation. Since he did not rely on the DAP, no occasion
exists to apply the operative fact doctrine to him and there is no reason to consider his “good or
bad faith” under this doctrine.
Same; Same; Same; View that we can only apply the operative fact doctrine to the programs, projects and
works that can no longer be undone and where the beneficiaries relied in good faith on the validity of
the Disbursement Acceleration Program (DAP).—To be very clear about our positions, we can only apply the
operative fact doctrine to the programs, projects and works that can no longer be undone and where
the beneficiaries relied in good faith on the validity of the DAP. The authors, proponents and
implementors of DAP are not among those who can seek coverage under the doctrine; their link to
the DAP was merely to establish and implement the terms that we now find unconstitutional. The
matter of their good faith in the performance of duty (or its absence) and their liability therefor,
if any, can be
42

ANNOTATED
made only by the proper tribunals, not by this Court in the present case.

DEL CASTILLO, J., Concurring and Dissenting:
Constitutional Law; Budget; View that Congress is allowed to enact a law to authorize the heads of
offices to transfer savings from one item to another provided that the items fall within the appropriations of
the same office: the President relative to the Executive Department, the Senate President with respect to the
Senate, the Speaker relative to the House of Representatives, the Chief Justice with respect to the Judicial
Department, and the heads of the constitutional bodies relative to their respective offices.—The subject
constitutional provision prohibits the transfer of appropriations. Congress cannot pass a law authorizing
such transfer. However, it is allowed to enact a law to authorize the heads of offices to transfer savings from
one item to another provided that the items fall within the appropriations of the same office: the President
relative to the Executive Department, the Senate President with respect to the Senate, the Speaker relative
to the House of Representatives, the Chief Justice with respect to the Judicial Department, and the heads of
the constitutional bodies relative to their respective offices. The purpose of the subject constitutional
provision is to afford considerable flexibility to the heads of offices in the use of public funds and resources.
For a transfer of savings to be valid under Article VI, Section 25(5), four (4) requisites must concur: (1) there
must be a law authorizing the heads of offices to transfer savings for augmentation purposes, (2) there must
be savings from an item/s in the appropriations of the office, (3) there must be an item requiring
augmentation in the appropriations of the office, and (4) the transfer of savings should be from one item to
another of the appropriations within the same office.
Same; Same; Power to Augment; View that the power to augment under Article VI, Section 25(5) of the
Constitution serves two principal purposes: (1) negatively, as an integral component of the system of checks
and balances under our plan of government, and (2) positively, as a fiscal management tool for the effective
and efficient use of public funds to promote the common good.—In sum, the power to augment under Article
VI, Section 25(5) of the Constitution serves two principal purposes: (1) negatively, as an integral component
of
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VOL. 728, JULY 1, 2014 43
the system of checks and balances under our plan of government, and (2) positively, as a fiscal management
tool for the effective and efficient use of public funds to promote the common good. For these reasons, as
preliminarily intimated, the just resolution of this case hinges on the balancing of two paramount State
interests: (1) the prevention of abuse or misuse of the power to augment, and (2) the promotion of the
general welfare through the power to augment.
Same; Same; Same; View that the authority to augment is limited to items within the appropriations of
the office from which the savings were generated.—The subject GAAs are duly enacted laws which enjoy the
presumption of constitutionality. Thus, they are to be construed, if possible, to avoid a declaration of
unconstitutionality. The rule of long standing is that, as between two possible constructions, one obviating a
finding of unconstitutionality and the other leading to such a result, the former is to be preferred. In the
case at bar, the 2011 and 2012 GAAs can be so reasonably interpreted by construing the phrase “of their
respective appropriations” as qualifying the phrase “to augment any item in this Act.” Under this
construction, the authority to augment is, thus, limited to items within the appropriations of the office from
which the savings were generated. Hence, no constitutional infirmity obtains.
Same; Same; Same; Savings; Doctrine of Necessary Implication; View that the Constitution does not
define “savings” and “augmentation” and, thus, the power to define the nature and scope thereof resides in
Congress under the doctrine of necessary implication.—The Constitution does not define “savings” and
“augmentation” and, thus, the power to define the nature and scope thereof resides in Congress under the
doctrine of necessary implication. To elaborate, the power of the purse or to make appropriations is vested in
Congress. In the exercise of the power to augment, the definition of “savings” and “augmentation” will
necessarily impact the appropriations made by Congress because the power to augment effectively allows
the transfer of a portion of or even the whole appropriation made in one item in the GAA to another item
within the same office provided that the definitions of “savings” and “augmentation” are met. Thus, the
integrity of the power to make appropriations vested in Congress can only be preserved if the power to
define “savings” and “augmentation” is in Congress as well. Of course, the power to define “savings” and
“augmentation” cannot be exercised in
44

ANNOTATED
contravention of the tenor of Article VI, Section 25(5) so as to effectively defeat the objectives of the
aforesaid constitutional provision. In the case at bar, petitioners do not question the validity of the
definitions of “savings” and “augmentation” relative to the 2011, 2012 and 2013 GAAs.
Same; Same; Same; Same; View that pertinent to this case is the first type of “savings” involving portions
or balances of any programmed appropriation in the General Appropriations Act (GAA) that is free from any
obligation or encumbrances and which are still available after the completion or final discontinuance or
abandonment of the work, activity or purpose for which the appropriation is authorized.—Pertinent to this
case is the first type of “savings” involving portions or balances of any programmed appropriation in the
GAA that is free from any obligation or encumbrances and which are still available after the completion or
final discontinuance or abandonment of the work, activity or purpose for which the appropriation is
authorized. Thus, for “savings” of this type to arise the following requisites must be met: 1. The
appropriation must be a programmed appropriation in the GAA; 2. The appropriation must be free from any
obligation or encumbrances; 3. The appropriation must still be available after the completion or final
discontinuance or abandonment of the work, activity or purpose for which the appropriation is authorized.
The portion or balance of the appropriation, when the above requisites are met, thus, constitutes the first
type of “savings.”
Same; Same; Same; Same; View that the law permits augmentation even before the program, activity, or
project is implemented if, through subsequent evaluation of needed resources, the appropriation for such
program, activity, or project is determined to be deficient.—For “augmentation” to be valid, in accordance
with the Article VI, Section 25(5) in relation to the relevant GAA provision thereon, the following requisites
must concur: 1. The program, activity, or project to be augmented by savings must be a program, activity, or
project in the GAA; 2. The program, activity, or project to be augmented by savings must refer to a program,
activity, or project within or under the same office from which the savings were generated; 3. Upon
implementation or subsequent evaluation of needed resources, the appropriation of the program, activity, or
project to be augmented by savings must be shown to be deficient. Notably, the law permits
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VOL. 728, JULY 1, 2014 45
augmentation even before the program, activity, or project is implemented if, through subsequent
evaluation of needed resources, the appropriation for such program, activity, or project is determined to be
deficient.
Same; Same; Same; Same; Doctrine of Necessary Implication; View that under the doctrine of necessary
implication, it is reasonable to presume that the power to finally discontinue or abandon the work, activity or
purpose is vested in the person given the duty to implement the appropriation (i.e., the heads of offices), like
the President with respect to the budget of the Executive Department.—Under the doctrine of necessary
implication, it is reasonable to presume that the power to finally discontinue or abandon the work, activity
or purpose is vested in the person given the duty to implement the appropriation (i.e., the heads of offices),
like the President with respect to the budget of the Executive Department. As to the manner it shall be
exercised, the silence of the law, as presently worded, allows the exercise of such power to be express or
implied. Since there appears to be no particular form or procedure to be followed in giving notice that such
power has been exercised, the Court must look into the particular circumstances of a case which tend to
show, whether expressly or impliedly, that the work, activity or purpose has been finally abandoned or
discontinued in determining whether the first type of “savings” arose in a given case.
Same; Same; Same; Same; View that the power to finally discontinue or abandon the work, activity or
purpose for which the appropriation is authorized in the General Appropriations Act (GAA) should be related
to the power of the President to suspend or otherwise stop further expenditure of funds, relative to the
appropriations of the Executive Department, under Book VI, Chapter V, Section 38 (hereinafter “Section 38”)
of the Administrative Code.—The power to finally discontinue or abandon the work, activity or purpose for
which the appropriation is authorized in the GAA should be related to the power of the President to suspend
or otherwise stop further expenditure of funds, relative to the appropriations of the Executive Department,
under Book VI, Chapter V, Section 38 (hereinafter “Section 38”) of the Administrative
Code: SECTION 38. Suspension of Expenditure of Appropriations.—Except as otherwise provided in the
General Appropriations Act and whenever in his judgment the public interest so requires, the President,
upon notice to the head of
46

ANNOTATED
office concerned, is authorized to suspend or otherwise stop further expenditure of funds allotted for
any agency, or any other expenditure authorized in the General Appropriations Act, except for personal
services appropriations used for permanent officials and employees.
Statutory Construction; View that as a general rule, in construing words and phrases used in a statute
and in the absence of a contrary intention, they should be given their plain, ordinary and common usage
meaning.—As a general rule, in construing words and phrases used in a statute and in the absence of a
contrary intention, they should be given their plain, ordinary and common usage meaning. They should be
understood in their natural, ordinary, commonly-accepted and most obvious signification because words are
presumed to have been used by the legislature in their ordinary and common use and acceptation.
Administrative Code; Budget; Savings; View that there is nothing in Section 38 of the Administrative
Code that requires that the project has already begun before the President may permanently order the
stoppage of expenditure.—There is, again, nothing in Section 38 that requires that the project has already
begun before the President may permanently order the stoppage of expenditure. To illustrate, if reliable
information reaches the President that anomalies will attend the execution of an item in the GAA or that
the project is no longer feasible, then it makes no sense to prevent the President from permanently stopping
the expenditure, by withdrawing the unobligated allotments, preciselyto prevent the commencement of the
project. The government need not wait for it to suffer actual injury before it takes action to protect public
interest nor should it waste public funds in pursuing a project that has become impossible to accomplish. In
both instances, Section 38 empowers the President to withdraw the unobligated allotments and thereby
permanently stop expenditure thereon in furtherance of public interest.
Same; Same; Same; View that in all instances that the power to suspend or to permanently stop
expenditure under Section 38 of the Administrative Code is exercised by the President, the “public interest”
standard must be met and, any challenge thereto, will have to be decided on a case-to-case basis, as was done
here.—Concededly, the “public interest” standard is broad enough to include cases when anomalies have
been uncovered in the implementation of a project or
47
VOL. 728, JULY 1, 2014 47
when the accomplishment of a project has become impossible. However, there may be other cases, not now
foreseeable, which may fall within the ambit of this standard, as is the case here where the exigencies of
spurring economic growth prompted the Executive Department to finally discontinue slow-moving projects.
Verily, in all instances that the power to suspend or to permanently stop expenditure under Section 38 is
exercised by the President, the “public interest” standard must be met and, any challenge thereto,
will have to be decided on a case-to-case basis, as was done here. As previously noted, petitioners have
failed to prove that the final discontinuance of slow-moving projects and the transfer of savings generated
therefrom to high-impact, fast-moving projects in order to spur economic growth did not serve public interest
or was done with grave abuse of discretion. On the contrary, it is not disputed that the DAP significantly
contributed to economic growth and achieved its purpose during the limited time it was put in place.
Impoundment; Words and Phrases; View that “impoundment” in the General Appropriations Act (GAA)
may, thus, be defined as the refusal or failure to wholly (i.e., retention of appropriations) or partially (i.e.,
deduction of appropriations) spend funds appropriated by Congress.—Section 64 indirectly defines
“impoundment” as retention or deduction of appropriations. “Impoundment” in the GAA may, thus, be
defined as the refusal or failure to wholly (i.e., retention of appropriations) or partially (i.e., deduction of
appropriations) spend funds appropriated by Congress. But note the all-encompassing tenor of Section 64
referring as it does to the prohibition on impoundment of allappropriations under the GAA, specifically, the
appropriations to the three great branches of government and the constitutional bodies.
Constitutional Law; Budget; Savings; Cross-Border Transfer of Funds; View that Article VI, Section
25(5) of the Constitution clearly prohibits cross-border transfer of savings regardless of whether the recipient
office requested for the funds.—Article VI, Section 25(5) clearly prohibits cross-border transfer of savings
regardless of whether the recipient office requested for the funds. For if we uphold the Solicitor General’s
theory, nothing will prevent the other heads of offices from subsequently flooding the Executive Department
with requests for additional funds. This would spawn the evil that the subject constitutional provision
precisely seeks to prevent because it
48

ANNOTATED
would make the other offices beholden to the Executive Department in view of the funds they received. It
would, thus, undermine the principle of separation of powers and the system of checks and balances under
our plan of government.
Operative Fact Doctrine; View that the doctrine of operative fact is limited to the effects of the declaration
of unconstitutionality on the executive or legislative act that is declared unconstitutional.—Because of the
various views expressed relative to the impact of the operative fact doctrine on the potential administrative,
civil and/or criminal liability of those involved in the implementation of the DAP, I additionally state that
any discussion or ruling on the aforesaid liability of the persons who authorized and the persons who
received the funds from the aforementioned unconstitutional cross-border transfers of savings, is premature.
The doctrine of operative fact is limited to the effects of the declaration of unconstitutionality on the
executive or legislative act that is declared unconstitutional. Thus, it is improper for this Court to discuss or
rule on matters not squarely at issue or decisive in this case which affect or may affect their alleged
liabilities without giving them an opportunity to be heard and to raise such defenses that the law allows
them in a proper case where their liabilities are properly at issue. Due process is the bedrock principle of our
democracy. Again, we cannot run roughshod over fundamental rights.

PERLAS-BERNABE, J., Separate Concurring Opinion:
Constitutional Law; Budget; Augmentation; View that the concept of augmentation pertains to the
delegated legislative authority, conferred by law (as Section 25[5], Article VI of the 1987 Philippine
Constitution [Constitution] cited below reads), to the various heads of government to transfer appropriations
within their respective offices.—The actions and/or practices taken under the DAP should not entirely be
taken as augmentations. This is because the “withdrawal of allotments” and “pooling of funds” by the
Executive Department for realignment (in case of suspension under Section 38, infra) and/or simple
utilization for projects without sufficient funding due to fiscal deficits (in case of stoppage under Section
38, infra) is not “augmentation” in the constitutional sense of the word. The concept of augmentation
pertains to the delegated legislative authority, conferred by law(as Section 25[5], Article VI of the 1987
Philippine Constitu-
49
VOL. 728, JULY 1, 2014 49
tion [Constitution] cited below reads), to the various heads of government to transfer
appropriations within their respective offices: (5) No law shall be passed authorizing any transfer of
appropriations; however, 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 Constitutional Commissions
may, by law, be authorized to augment any item in the general appropriations law for their respective
offices from savings in other items of their respective appropriations.
Same; Same; Appropriations; Words and Phrases; View that the term “appropriation” merely relates to
the authority given by legislature to proper officers to apply a distinctly specified sum from a designated fund
out of the treasury in a given year for a specific object or demand against the State.—The term
“appropriation” merely relates to the authority given by legislature to proper officers to apply a distinctly
specified sum from a designated fund out of the treasury in a given year for a specific object or demand
against the State. In other words, it is “nothing more than the legislative authorization prescribed
by the Constitution that money be paid out of the Treasury.” Borne from this core premise that an
appropriation is essentially a legislative concept, the process of a “transfer of appropriations” should then be
understood to pertain to changes in the legislative parameters found in selected items of appropriations,
whereby the statutory value of one increases, and another decreases. To expound, it is first essential to
remember that an appropriation is basically made up of two (2) legislative parameters, namely: (a) the
amount to be spent (or, in other words, the statutory value); and (b) the purpose for which the amount is to
be spent (or, in other words, the statutory purpose). The word “augmentation,” in common parlance, means
“[t]he action or process of making or becoming greater in size or amount.” Accordingly, by the import of this
word “augmentation,” the process under Section 25(5), supra would then connote changes in the selected
appropriation items’ statutory values, and not of its statutory purposes. As earlier stated, augmentation
would lead to the increase of the statutory value of one appropriation item, and a decrease in another.
Same; Same; Same; Savings; Words and Phrases; View that the incremental value coming from one
appropriation item to effectively and actually increase the statutory value of another appropriation
50

ANNOTATED
item is what Section 25(5), Article VI of the Constitution refers to as “savings.”—The incremental value
coming from one appropriation item to effectively and actually increase the statutory value of another
appropriation item is what Section 25(5), supra refers to as “savings.” The General Appropriations Acts
(GAA) define savings as those “portions or balances of any programmed appropriation x x x free from any
obligation or encumbrance x x x.” A programmed appropriation item produces “portions or balances”
“free from any obligation and encumbrance” when the said item becomes defunct, thereby “freeing-up” either
totally or partially the funds initially allotted thereto. Because an appropriation item is passed at the
beginning of the year, the reality and effect of supervening events hardly figure into the initial budget
picture. According to the GAAs, the following supervening events would render an appropriation item
defunct: (a) completion or final discontinuance or abandonment of the work, activity or purpose for which
the appropriation is authorized (this may happen, when, take for instance, a project, activity or program
[PAP] is determined to be illegal or involves irregular, unnecessary, excessive, extravagant, or
unconscionable expenditures or uses of government funds and properties); (b) regarding employee
compensation, vacancy of positions and leaves of absence without pay; and (c) implementati efficiencies,
thus enabling agencies toon of measures resulting in improved systems and meet and deliver required or
planned targets, programs, and services.
Same; Same; Same; Words and Phrases; View that the term “appropriation” properly refers to the
statutory authority to spend.—The term “appropriation” properly refers to the statutory authority to spend.
Although practically related, said term is conceptually different from the term “funds” which refers to the
tangible public money that are allotted, disbursed, and spent. Appropriation is the province of Congress. The
President, in full control of the executive arm of government, in turn, implements the legislative command
in the form of appropriation items pursuant to his constitutional mandate to faithfully execute the laws. The
Executive Department controls all phases of budget execution; it acts according to and carries out the
directive of Congress. Hence, the constitutional mandate that “[n]o money shall be paid out of the Treasury
except in pursuance of an appropriation made by law.” It is hornbook principle that when the appropriation
law is passed, the role and participation of Congress, except for the function of legislative oversight, ends,
and the
51
VOL. 728, JULY 1, 2014 51
Executive’s begins. Based on the foregoing, it is then clear that it is the Executive’s job to deal with the
actual allotment and disbursement of public funds, whereas Congress’ job is to pass the statutory license
sanctioning the Executive’s courses of action.
Same; Same; Same; Disbursement Acceleration Program; View that notwithstanding any confusion as to
the Disbursement Acceleration Program’s (DAP’s) actual workings or the laudable intentions behind the
same, the one guiding principle to which the Executive should be respectfully minded is that no policy or
program of government can be adopted as an avenue to wrest control of the power of the purse from Congress,
for to do so would amount to a violation of the provisions on appropriation and augmentation as well as an
aberration of the faithful execution clause engraved and enshrined in our Constitution.—Under its broad
context and the government’s presentment thereof, the observation I make is that the DAP actually
constitutes an amalgam of executive actions and/or practices whereby augmentations may be undertaken,
and/or funds realigned or utilized to address fiscal deficits. Thus, with this in mind, I concur, with
the ponencia’s limited conclusion that the withdrawal of unobligated allotments not considered as savings
for the purposes of augmentation, or, despite the funds being considered as savings, the augmentation of
items cross-border or the funding of PAPs without an existing appropriation cover are unconstitutional acts
and/or practices taken under the DAP. I also maintain a similar position with respect to
the ponencia’s pronouncement on the Unprogrammed Fund considering the absence of any proof that the
general or exceptive conditions for its use had been duly complied with. Ultimately, notwithstanding any
confusion as to the DAP’s actual workings or the laudable intentions behind the same, the one guiding
principle to which the Executive should be respectfully minded is that no policy or program of government
can be adopted as an avenue to wrest control of the power of the purse from Congress, for to do so would
amount to a violation of the provisions on appropriation and augmentation as well as an aberration of the
faithful execution clause engraved and enshrined in our Constitution.

LEONEN, J., Concurring Opinion:
Constitutional Law; Separation of Powers; View that I agree with the ponencia’s efforts to clearly
demarcate the discretion granted
52

ANNOTATED
by the Constitution to the legislature and the executive.—In the spirit of deliberate precision, I agree
with the ponencia’s efforts to clearly demarcate the discretion granted by the Constitution to the legislature
and the executive. I add some qualifications. The budget process in the ponencia is descriptive, not
normative. That is, it reflects what is happening. It should not be taken as our agreement that the present
process is fully compliant with the Constitution. For instance, I am of the firm view that the treatment of
departments and offices granted fiscal autonomy should be different. Levels of fiscal autonomy among
various constitutional organs can be different. For example, the constitutional protection granted to the
judiciary is such that its budget cannot be diminished below the amount appropriated during the previous
year. Yet, we submit our items for expenditure to the executive through the DBM year in and year out. This
should be only for advice and accountability; not for approval. In the proper case, we should declare that this
constitutional provision on fiscal autonomy means that the budget for the judiciary should be a lump sum
corresponding to the amount appropriated during the previous year. This may mean that as a proportion of
the national budget and in its absolute amount, the judiciary’s budget cannot be reduced. Any additional
appropriation for the judiciary should cover only new items for amounts greater than what have already
been constitutionally appropriated. Public accountability on our expenditures will be achieved through a
resolution of the Supreme Court En Bancdetailing the items for expenditure corresponding to that amount.
Same; Budget; Transfer of Funds; Augmentation; View that any expenditure beyond the maximum
amount provided for the item in the appropriations act is an augmentation of that item. It amounts to a
transfer of appropriation. This is generally prohibited except for instances when “upon implementation or
subsequent evaluation of needed resources, [the appropriation for a program, activity or project existing in the
General Appropriations Act (GAA)] is determined to be deficient.”—Any expenditure beyond the maximum
amount provided for the item in the appropriations act is an augmentation of that item. It amounts to a
transfer of appropriation. This is generally prohibited except for instances when “upon implementation or
subsequent evaluation of needed resources, [the appropriation for a program, activity or project existing in
the General Appropriations Act] is determined to be deficient.” In which case, all the conditions provided in
Article VI, Section 25(5) of the Constitution must first be
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VOL. 728, JULY 1, 2014 53
met. The limits defined in this case only pertain to the power of the President — and by implication, other
constitutional offices — to augment items of appropriation. There is also the power of the President to
realign allocations of funds to another item — without augmenting that item — whenever revenues are
insufficient in order to meet the priorities of government.
Same; Separation of Powers; Presidency; View that the President does not have the discretion to
withhold any amount pertaining to the judiciary.—Parenthetically, because of the constitutional principle of
independence, the power to spend is also granted to the judiciary. The President does not have the discretion
to withhold any amount pertaining to the judiciary. The Constitution requires that all appropriations for it
shall be “automatically and regularly released.” The President’s power to implement the laws and the
existence of provisions on automatic and regular release of appropriations of independent constitutional
branches and bodies support the concept that the President’s discretion to spend up to the amount allowed
in the appropriations act inherent in executive power is exclusively for offices within his department.
Same; Same; Same; View that the President, not Congress, decides priorities when actual revenue
collections during a fiscal year are not sufficient to fund all authorized expenditures.—The President, not
Congress, decides priorities when actual revenue collections during a fiscal year are not sufficient to fund all
authorized expenditures. In doing so, the President may have to leave some items with partial or no funding.
Making priorities for spending is inherently a discretion within the province of the executive. Without
priorities, no legal mandate may be fulfilled. It may be that refusing to fund a project in deficit situations is
what is needed to faithfully execute the other mandates provided in law. In such cases, attempting to
partially fund all projects may result in none being implemented.
Same; Savings; Augmentation; View that the existence of savings in one item is a fundamental
constitutional requirement for augmentation of another item.—The existence of savings in one item is a
fundamental constitutional requirement for augmentation of another item. Augmentation modifies the
maximum amount provided in the General Appropriations Act appropriated for an item by way of increasing
such amount. The power to augment items allows
54

ANNOTATED
heads of government branches and constitutional commissions to exceed the limitations imposed on
their appropriations, through their savings, to meet the difference between the actual and authorized
allotments.
Same; Transfer of Funds; View that transfer of funds from one department to other departments had
already been declared as unconstitutional in Demetria v. Alba, 148 SCRA 208 (1987); Transfers across
departments are unconstitutional for being violative of the doctrine of separation of powers.—Transfer of
funds from one department to other departments had already been declared as unconstitutional in Demetria
v. Alba, 148 SCRA 208 (1987). Moreover, a corollary to our pronouncement in Gonzales v. Macaraig, Jr., 191
SCRA 452 (1990), that “[t]he doctrine of separation of powers is in no way endangered because the transfer
is made within a department (or branch of government) and not from one department (branch) to another” is
that transfers across departments are unconstitutional for being violative of the doctrine of separation of
powers.
Same; Supreme Court; View that acquiescence of an unconstitutional act by one department of
government can never be a justification for the Supreme Court (SC) not to do its constitutional duty.—
Acquiescence of an unconstitutional act by one department of government can never be a justification for
this court not to do its constitutional duty. The Constitution will fail to provide for the neutrality and
predictability inherent in a society thriving within the auspices of the rule of law if this court fails to act in
the face of an actual violation. The interpretation of the other departments of government of their powers
under the Constitution may be persuasive on us, but it is our collective reading which is final. The
constitutional order cannot exist with acquiescence as suggested by respondents.
Same; Budget; Supplemental Appropriations; View that if there are instances that require more funds for
a specific item outside the executive agencies, a request for supplemental appropriation may be made with
Congress.—The residual powers of the President exist only when there are plainly ambiguous statements in
the Constitution. If there are instances that require more funds for a specific item outside the executive
agencies, a request for supplemental appropriation may be made with Congress. Interdependence is not
proscribed but must happen in the context of the rule of law. No
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VOL. 728, JULY 1, 2014 55
exigent circumstances were presented that could lead to a clear and convincing explanation why this
constitutional fiat should not be followed.
Same; Operative Fact Doctrine; View that the general rule is that a declaration of unconstitutionality of
any act means that such act has no legal existence: It is null and void ab initio; The existing exception is the
doctrine of operative facts.—The general rule is that a declaration of unconstitutionality of any act means
that such act has no legal existence: It is null and void ab initio.The existing exception is the doctrine of
operative facts. The application of this doctrine should, however, be limited to situations where (a) there is a
showing of good faith in the acts involved or (b) where in equity we find that the difficulties that will be
borne by the public far outweigh rigid application to the effect of legal nullity of an act. The doctrine saves
only the effects of the unconstitutional act. It does not hint or even determine whether there can be any
liability arising from such acts. Whether the constitutional violation is in good faith or in bad faith, or
whether any administrative or criminal liability is forthcoming, is the subject of other proceedings in other
forums.
SPECIAL CIVIL ACTIONS in the Supreme Court. Certiorari and Prohibition.

The facts are stated in the opinion of the Court.
BERSAMIN, J.:
For resolution are the 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.
At the core of the controversy is Section 29(1) of Article VI of the 1987 Constitution, a
provision of the fundamental law that firmly ordains that “[n]o money shall be paid out of the
Treasury except in pursuance of an appropriation made by law.” The tenor and context of the
challenges posed by the petitioners against the DAP indicate that the DAP contra-
56

vened this provision by allowing the Executive to allocate public money pooled from programmed
and unprogrammed funds of its various agencies in the guise of the President exercising his
constitutional authority under Section 25(5) of the 1987 Constitution to transfer funds out of
savings to augment the appropriations of offices within the Executive Branch of the Government.
But the challenges are further complicated by the interjection of allegations of transfer of funds
to agencies or offices outside of the Executive.
Antecedents
What has precipitated the controversy?
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,
[1] 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. He clarified that
the funds had been released to the Senators based on their letters of request for funding; and that
it was not the first time that releases from the DAP had been made because the DAP had already
been instituted in 2011 to ramp up spending after sluggish disbursements had caused the growth
of the gross domestic product (GDP) to slow down. He explained that the funds under the DAP
were usually taken from (1) unreleased appropriations under Personnel Services;[2] (2)
unprogrammed funds; (3) carry-over appropriations unre-
_______________
[1] <http://www.dbm.gov.ph/?p=7302> (visited May 27, 2014).
[2] Labeled as “Personal Services” under the GAAs.
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leased from the previous year; and (4) budgets for slow-moving items or projects that had been
realigned to support faster-disbursing projects.
The DBM soon came out to claim in its website[3] 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[4] appropriations that would lapse at the end of the year, unreleased appropriations of
slow-moving projects and discontinued projects per zero-based budgeting findings;[5] 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,[6] 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
_______________
[3] Frequently Asked Questions about the Disbursement Acceleration Program (DAP) <http://www.dbm.gov.ph/?
page_id=7362> (visited May 27, 2014).
[4] Supra note 2.
[5] Zero-based budgeting is a budgeting approach that involves the review/evaluation of ongoing programs and projects
implemented by different departments/agencies in order to: (a) establish the continued relevance of programs/projects
given the current developments/directions; (b) assess whether the program objectives/outcomes are being achieved; (c)
ascertain alternative or more efficient or effective ways of achieving the objectives; and (d) guide decision makers on
whether or not the resources for the program/project should continue at the present level or be increased, reduced or
discontinued. (see NBC Circular No. 539, March 21, 2012)
[6] Constitutional and Legal Bases <http://www.dbm.gov.ph/?
58

(EO) No. 292 (Administrative Code of 1987); and (3) the General Appropriations Acts (GAAs) of
2011, 2012 and 2013, particularly
http://www.chanrobles.com/cralaw/2014septemberdecisions.php?id=770their provisions on the (a)
use of savings; (b) meanings of savings and augmentation; and (c) priority in the use of savings.
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.
The revelation of Sen. Estrada and the reactions of Sec. Abad and the DBM brought the DAP
to the consciousness of the Nation for the first time, and made this present controversy
inevitable. That the issues against the DAP came at a time when the Nation was still seething in
anger over Congressional pork barrel — “an appropriation of government spending meant for
localized projects and secured solely or primarily to bring money to a representative’s
district” [7] — excited the Nation as heatedly as the pork barrel controversy.

Nine petitions assailing the constitutionality of the DAP and the issuances relating to the DAP
were filed within days of each other, as follows: G.R. No. 209135 (Syjuco), on October 7, 2013;
G.R. No. 209136 (Luna), on October 7, 2013; G.R. No. 209155 (Villegas),[8] on October 16, 2013;
G.R. No. 209164 (PHILCONSA), on October 8, 2013; G.R. No. 209260 (IBP), on October 16, 2013;
G.R. No. 209287 (Araullo), on October 17, 2013; G.R. No. 209442 (Belgica), on October 29, 2013;
G.R. No. 209517 (COURAGE), on November 6, 2013; and G.R. No. 209569 (VACC), on November
8, 2013.
In G.R. No. 209287 (Araullo), 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,
_______________
[7] Belgica v. Executive Secretary Ochoa, G.R. No. 208566, November 19, 2013, 710 SCRA 1.
[8] The Villegas petition was originally undocketed due to lack of docket fees being paid; subsequently, the docket fees
were paid.
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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.
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
Under the Advisory issued on November 14, 2013, the presentations of the parties during the
oral arguments were limited to the following, to wit:
Procedural Issue:
A. Whether or not certiorari, prohibition, and mandamus are proper remedies to assail the
constitutionality and validity of the Disbursement Acceleration Program (DAP), National Budget Circular
(NBC) No. 541, and all other executive issuances allegedly implementing the DAP. Subsumed in this issue
are whether there is a controversy ripe for judicial determination, and the standing of petitioners.
Substantive Issues:
B. Whether or not the 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.”
C. 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
60

provisions of the GAAs of 2011, 2012 and 2013;

(b) They authorize the disbursement of funds for projects or programs not provided in the GAAs for the
Executive Department; and
(c) They “augment” discretionary lump sum appropriations in the GAAs.
D. Whether or not the DAP violates: (1) the Equal Protection Clause, (2) the system of checks and
balances, and (3) the principle of public accountability enshrined in the 1987 Constitution considering that it
authorizes the release of funds upon the request of legislators.
E. Whether or not factual and legal justification exists to issue a temporary restraining order to restrain
the implementation of the DAP, NBC No. 541, and all other executive issuances allegedly implementing the
DAP.
In its Consolidated Comment, the OSG raised the matter of unprogrammed funds in order to
support its argument regarding the President’s power to spend. During the oral arguments, the
propriety of releasing unprogrammed funds to support projects under the DAP was considerably
discussed. The petitioners in G.R. No. 209287 (Araullo) and G.R. No. 209442 (Belgica) dwelled on
unprogrammed funds in their respective memoranda. Hence, an additional issue for the oral
arguments is stated as follows:
F. Whether or not the release of unprogrammed funds under the DAP was in accord with the GAAs.
During the oral arguments held on November 19, 2013, the Court directed Sec. Abad to submit
a list of savings brought under the DAP that had been sourced from (a) completed programs; (b)
discontinued or abandoned programs; (c) unpaid appropriations for compensation; (d) a certified
copy of the President’s directive dated June 27, 2012 referred to in NBC
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No. 541; and (e) all circulars or orders issued in relation to the DAP.[9]
In compliance, the OSG submitted several documents, as follows:
(1) A certified copy of the Memorandum for the President dated June 25, 2012 (Omnibus
Authority to Consolidate Savings/Unutilized Balances and their Realignment);[10]
(2) Circulars and orders, which the respondents identified as related to the DAP, namely:
a. NBC No. 528 dated January 3, 2011 (Guidelines on the Release of Funds for FY
2011);
b. NBC No. 535 dated December 29, 2011 (Guidelines on the Release of Funds for FY
2012);
c. NBC No. 541 dated July 18, 2012 (Adoption of Operational Efficiency Measure —
Withdrawal of Agencies’ Unobligated Allotments as of June 30, 2012);
d. NBC No. 545 dated January 2, 2013 (Guidelines on the Release of Funds for FY
2013);
e. DBM Circular Letter No. 2004-2 dated January 26, 2004 (Budgetary Treatment of
Commitments/Obligations of the National Government);
_______________
[9] Rollo (G.R. No. 209287), p. 119.
[10] Id., at pp. 190-196. Sec. Abad manifested that the Memorandum for the President dated June 25, 2012 was the
directive referred to in NBC No. 541; and that although the date appearing on the Memorandum was June 25, 2012, the
actual date of its approval was June 27, 2012.
62

f. COA-DBM Joint Circular No. 2013-1 dated March 15, 2013 (Revised Guidelines
on the Submission of Quarterly Accountability Reports on Appropriations,
Allotments, Obligations and Disbursements);
g. NBC No. 440 dated January 30, 1995 (Adoption of a Simplified Fund Release
System in the Government).
(3) A breakdown of the sources of savings, including savings from discontinued projects
and unpaid appropriations for compensation from 2011 to 2013.
On January 28, 2014, the OSG, to comply with the Resolution issued on January 21, 2014
directing the respondents to submit the documents not yet submitted in compliance with the
directives of the Court or its Members, submitted several evidence packets to aid the Court in
understanding the factual bases of the DAP, to wit:
(1) First Evidence Packet[11] — containing seven memoranda issued by the DBM
through Sec. Abad, inclusive of annexes, listing in detail the 116 DAP identified
projects approved and duly signed by the President, as follows:
a. Memorandum for the President dated October 12, 2011 (FY 2011 Proposed
Disbursement Acceleration Program [Projects and Sources of Funds]);
b. Memorandum for the President dated December 12, 2011 (Omnibus Authority to
Consolidate Savings/Unutilized Balances and its Realignment);
_______________
[11] Id., at pp. 523-625.
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c. Memorandum for the President dated June 25, 2012 (Omnibus Authority to
Consolidate Savings/Unutilized Balances and their Realignment);
d. Memorandum for the President dated September 4, 2012 (Release of funds for
other priority projects and expenditures of the Government);
e. Memorandum for the President dated December 19, 2012 (Proposed Priority
Projects and Expenditures of the Government);
f. Memorandum for the President dated May 20, 2013 (Omnibus Authority to
Consolidate Savings/Unutilized Balances and their Realignment to Fund the
Quarterly Disbursement Acceleration Program); and
g. Memorandum for the President dated September 25, 2013 (Funding for the Task
Force Pablo Rehabilitation Plan).
(2) Second Evidence Packet[12] — consisting of 15 applications of the DAP, with their
corresponding Special Allotment Release Orders (SAROs) and appropriation covers;
(3) Third Evidence Packet[13] — containing a list and descriptions of 12 projects under
the DAP;
(4) Fourth Evidence Packet[14] — identifying the DAP-related portions of the Annual
Financial Report (AFR) of the Commission on Audit for 2011 and 2012;
_______________
[12] Id., at pp. 627-692.
[13] Id., at pp. 693-698.
[14] Id., at pp. 699-746.
64

(5) Fifth Evidence Packet[15] — containing a letter of Department of Transportation

and Communications (DOTC) Sec. Joseph Abaya addressed to Sec. Abad
recommending the withdrawal of funds from his agency, inclusive of annexes; and
(6) Sixth Evidence Packet[16] — a print-out of the Solicitor General’s visual
presentation for the January 28, 2014 oral arguments.
On February 5, 2014,[17] the OSG forwarded the Seventh Evidence Packet,[18] which listed
the sources of funds brought under the DAP, the uses of such funds per project or activity
pursuant to DAP, and the legal bases thereof.
On February 14, 2014, the OSG submitted another set of documents in further compliance
with the Resolution dated January 28, 2014, viz.:
(1) Certified copies of the certifications issued by the Bureau of Treasury to the effect
that the revenue collections exceeded the original revenue targets for the years 2011,
2012 and 2013, including collections arising from sources not considered in the original
revenue targets, which certifications were required for the release of the
unprogrammed funds as provided in Special Provision No. 1 of Article XLV, Article
XVI, and Article XLV of the 2011, 2012 and 2013 GAAs; and
(2) A report on releases of savings of the Executive Department for the use of the
Constitutional Commissions and other branches of the Government, as well as the
fund releases to the Senate and the Commission on Elections (COMELEC).
______________
[15] Id., at pp. 748-764.
[16] Id., at pp. 766-784.
[17] Id., at p. 925.
[18] Id., at pp. 786-922.
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Ruling
I.
Procedural Issue:
a) The petitions under Rule 65 are proper remedies

All the petitions are filed under Rule 65 of the Rules of Court, and include applications for the
issuance of writs of preliminary prohibitory injunction or temporary restraining orders. More
specifically, the nature of the petitions is individually set forth hereunder, to wit:
G.R. No. 209135 (Syjuco) Certiorari, Prohibition and Mandamus

G.R. No. 209136 (Luna) Certiorari and Prohibition
G.R. No. 209155 (Villegas) Certiorari and Prohibition
G.R. No. 209164 (PHILCONSA) Certiorari and Prohibition
G.R. No. 209260 (IBP) Prohibition
G.R. No. 209287 (Araullo) Certiorari and Prohibition
G.R. No. 209442 (Belgica) Certiorari
G.R. No. 209517 (COURAGE) Certiorari and Prohibition
G.R. No. 209569 (VACC) Certiorari and Prohibition
The respondents submit that there is no actual controversy that is ripe for adjudication in the
absence of adverse claims between the parties;[19] that the petitioners lacked legal standing to
sue because no allegations were made to the effect that they had suffered any injury as a result of
the adoption of the DAP and issuance of NBC No. 541; that their being taxpayers did not
immediately confer upon the petitioners the legal standing to sue considering that the adoption
and implementation of the DAP and the issuance of NBC No. 541 were not
_______________
[19] Rollo (G.R. No. 209287), pp. 1050-1051 (Respondents’ Memorandum).
66

in the exercise of the taxing or spending power of Congress;[20] and that even if the petitioners
had suffered injury, there were plain, speedy and adequate remedies in the ordinary course of law
available to them, like assailing the regularity of the DAP and related issuances before the
Commission on Audit (COA) or in the trial courts.[21]
The respondents aver that the special civil actions of certiorari and prohibition are not proper
actions for directly assailing the constitutionality and validity of the DAP, NBC No. 541, and the
other executive issuances implementing the DAP.[22]
In their memorandum, the respondents further contend that there is no authorized proceeding
under the Constitution and the Rules of Court for questioning the validity of any law unless there
is an actual case or controversy the resolution of which requires the determination of the
constitutional question; that the jurisdiction of the Court is largely appellate; that for a court of
law to pass upon the constitutionality of a law or any act of the Government when there is no
case or controversy is for that court to set itself up as a reviewer of the acts of Congress and of the
President in violation of the principle of separation of powers; and that, in the absence of a
pending case or controversy involving the DAP and NBC No. 541, any decision herein could
amount to a mere advisory opinion that no court can validly render.[23]
The respondents argue that it is the application of the DAP to actual situations that the
petitioners can question either in the trial courts or in the COA; that if the petitioners are
dissatisfied with the ruling either of the trial courts or of the COA, they can appeal the decision of
the trial courts by petition for review on certiorari, or assail the decision or final
_______________
[20] Id., at p. 1044.
[21] Id., at p. 1048.
[22] Id., at p. 1053.
[23] Id., at pp. 1053-1056.
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order of the COA by special civil action for certiorari under Rule 64 of the Rules of Court.[24]
The respondents’ arguments and submissions on the procedural issue are bereft of merit.
Section 1, Article VIII of the 1987 Constitution expressly provides:
Section 1. The judicial power shall be vested in one Supreme Court and in such lower courts as may be
established by law.
Judicial power includes the duty of the courts of justice to settle actual controversies involving rights
which are legally demandable and enforceable, and to determine whether or not there has been a grave
abuse of discretion amounting to lack or excess of jurisdiction on the part of any branch or instrumentality
of the Government.

Thus, the Constitution vests judicial power in the Court and in such lower courts as may be
established by law. In creating a lower court, Congress concomitantly determines the jurisdiction
of that court, and that court, upon its creation, becomes by operation of the Constitution one of
the repositories of judicial power.[25] However, only the Court is a constitutionally created court,
the rest being created by Congress in its exercise of the legislative power.
The Constitution states that judicial power includes the duty of the courts of justice not only
“to settle actual controversies involving rights which are legally demandable and enforceable” but
also “to determine whether or not there has been a grave abuse of discretion amounting to lack or
excess of jurisdiction on the part of any branch or instrumentality of the Government.” It has
thereby expanded the concept of
_______________
[24] Id., at p. 1056.
[25] Bernas, The 1987 Constitution of the Republic of the Philippines: A Commentary, p. 959, 2009 edition.
68

judicial power, which up to then was confined to its traditional ambit of settling actual
controversies involving rights that were legally demandable and enforceable.
The background and rationale of the expansion of judicial power under the 1987 Constitution
were laid out during the deliberations of the 1986 Constitutional Commission by Commissioner
Roberto R. Concepcion (a former Chief Justice of the Philippines) in his sponsorship of the
proposed provisions on the Judiciary, where he said:
The Supreme Court, like all other courts, has one main function: to settle actual controversies involving
conflicts of rights which are demandable and enforceable. There are rights which are guaranteed by law but
cannot be enforced by a judicial party. In a decided case, a husband complained that his wife was unwilling
to perform her duties as a wife. The Court said: “We can tell your wife what her duties as such are and that
she is bound to comply with them, but we cannot force her physically to discharge her main marital duty to
her husband. There are some rights guaranteed by law, but they are so personal that to enforce them by
actual compulsion would be highly derogatory to human dignity.”
This is why the first part of the second paragraph of Section 1 provides that:
Judicial power includes the duty of courts to settle actual controversies involving rights which are legally
demandable or enforceable…
The courts, therefore, cannot entertain, much less decide, hypothetical questions. In a presidential
system of government, the Supreme Court has, also, another important function. The powers of
government are generally considered divided into three branches: the Legislative, the Executive
and the Judiciary. Each one is supreme within its own sphere and independent of the others.
Because of that suprem-
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acy power to determine whether a given law is valid or not is vested in courts of justice.
Briefly stated, courts of justice determine the limits of power of the agencies and offices of the
government as well as those of its officers. In other words, the judiciary is the final arbiter on
the question whether or not a branch of government or any of its officials has acted without
jurisdiction or in excess of jurisdiction, or so capriciously as to constitute an abuse of discretion
amounting to excess of jurisdiction or lack of jurisdiction. This is not only a judicial power but a
duty to pass judgment on matters of this nature.
This is the background of paragraph 2 of Section 1, which means that the courts cannot
hereafter evade the duty to settle matters of this nature, by claiming that such matters
constitute a political question. (Bold emphasis supplied)[26]
Upon interpellation by Commissioner Nolledo, Commissioner Concepcion clarified the scope of

judicial power in the following manner:
MR. NOLLEDO. x x x
The second paragraph of Section 1 states: “Judicial power includes the duty of courts of justice to settle
actual controversies…” The term “actual controversies” according to the Commissioner should refer to
questions which are political in nature and, therefore, the courts should not refuse to decide those political
questions. But do I understand it right that this is restrictive or only an example? I know there are cases
which are not actual yet the court can assume jurisdiction. An example is the petition for declaratory relief.
May I ask the Commissioner’s opinion about that?
_______________
[26] I RECORD of the 1986 Constitutional Commission, 436 (July 10, 1986).
70

MR. CONCEPCION. The Supreme Court has no jurisdiction to grant declaratory judgments.

MR. NOLLEDO. The Gentleman used the term “judicial power” but judicial power is not vested in the
Supreme Court alone but also in other lower courts as may be created by law.
MR. CONCEPCION. Yes.
MR. NOLLEDO. And so, is this only an example?
MR. CONCEPCION. No, I know this is not. The Gentleman seems to identify political questions with
jurisdictional questions. But there is a difference.
MR. NOLLEDO. Because of the expression “judicial power?”
MR. CONCEPCION. No. Judicial power, as I said, refers to ordinary cases but where there is a
question as to whether the government had authority or had abused its authority to the extent
of lacking jurisdiction or excess of jurisdiction, that is not a political question. Therefore, the
court has the duty to decide.[27]
Our previous Constitutions equally recognized the extent of the power of judicial review and
the great responsibility of the Judiciary in maintaining the allocation of powers among the three
great branches of Government. Speaking for the Court in Angara v. Electoral Commission,
[28] Justice Jose P. Laurel intoned:
x x x In times of social disquietude or political excitement, the great landmarks of the Constitution are
apt to be forgotten or marred, if not entirely obliterated. In cases of conflict, the judicial department is
the only constitutional organ which can be called upon
_______________
[27] I RECORD of the 1986 Constitutional Commission, 439 (July 10, 1986).
[28] 63 Phil. 139 (1936).
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to determine the proper allocation of powers between the several department and among the
integral or constituent units thereof.
xxxx
The Constitution is a definition of the powers of government. Who is to determine the nature,
scope and extent of such powers? The Constitution itself has provided for the instrumentality of
the judiciary as the rational way. And when the judiciary mediates to allocate constitutional
boundaries, it does not assert any superiority over the other department; it does not in reality
nullify or invalidate an act of the legislature, but only asserts the solemn and sacred obligation
assigned to it by the Constitution to determine conflicting claims of authority under the
Constitution and to establish for the parties in an actual controversy the rights which that
instrument secures and guarantees to them. This is in truth all that is involved in what is
termed “judicial supremacy” which properly is the power of judicial review under the
Constitution.
x x x [29]
What are the remedies by which the grave abuse of discretion amounting to lack or excess of
jurisdiction on the part of any branch or instrumentality of the Government may be determined
under the Constitution?
The present Rules of Court uses two special civil actions for determining and correcting grave
abuse of discretion amounting to lack or excess of jurisdiction. These are the special civil actions
for certiorari and prohibition, and both are governed by Rule 65. A similar remedy
of certiorariexists under Rule 64, but the remedy is expressly applicable only to the judgments
and final orders or resolutions of the Commission on Elections and the Commission on Audit.
_______________
[29] Id., at pp. 157-158.
72

The ordinary nature and function of the writ of certiorari in our present system are aptly
explained in Delos Santos v. Metropolitan Bank and Trust Company:[30]
In the common law, from which the remedy of certiorarievolved, the writ of certiorari was issued out of
Chancery, or the King’s Bench, commanding agents or officers of the inferior courts to return the record of a
cause pending before them, so as to give the party more sure and speedy justice, for the writ would enable
the superior court to determine from an inspection of the record whether the inferior court’s judgment was
rendered without authority. The errors were of such a nature that, if allowed to stand, they would result in a
substantial injury to the petitioner to whom no other remedy was available. If the inferior court acted
without authority, the record was then revised and corrected in matters of law. The writ of certiorari was
limited to cases in which the inferior court was said to be exceeding its jurisdiction or was not proceeding
according to essential requirements of law and would lie only to review judicial or quasi-judicial acts.
The concept of the remedy of certiorari in our judicial system remains much the same as it has been in
the common law. In this jurisdiction, however, the exercise of the power to issue the writ of certiorari is
largely regulated by laying down the instances or situations in the Rules of Court in which a superior court
may issue the writ of certiorari to an inferior court or officer. Section 1, Rule 65 of the Rules of
Court compellingly provides the requirements for that purpose, viz.:
xxxx
The sole office of the writ of certiorari is the correction of errors of jurisdiction, which includes the
commission of grave abuse of discretion amounting to lack of jurisdiction. In this regard, mere abuse of
discretion is not enough to warrant the issuance of the writ. The abuse of
_______________
[30] G.R. No. 153852, October 24, 2012, 684 SCRA 410.
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discretion must be grave, which means either that the judicial or quasi-judicial power was exercised in an
arbitrary or despotic manner by reason of passion or personal hostility, or that the respondent judge,
tribunal or board evaded a positive duty, or virtually refused to perform the duty enjoined or to act in
contemplation of law, such as when such judge, tribunal or board exercising judicial or quasi-judicial powers
acted in a capricious or whimsical manner as to be equivalent to lack of jurisdiction.[31]
Although similar to prohibition in that it will lie for want or excess of jurisdiction, certiorari is
to be distinguished from prohibition by the fact that it is a corrective remedy used for the
reexamination of some action of an inferior tribunal, and is directed to the cause or proceeding in
the lower court and not to the court itself, while prohibition is a preventative remedy issuing to
restrain future action, and is directed to the court itself.[32]The Court expounded on the nature
and function of the writ of prohibition in Holy Spirit Homeowners Association, Inc. v. Defensor:[33]
A petition for prohibition is also not the proper remedy to assail an IRR issued in the exercise of a quasi-
legislative function. Prohibition is an extraordinary writ directed against any tribunal, corporation, board,
officer or person, whether exercising judicial, quasi-judicial or ministerial functions, ordering said entity or
person to desist from further proceedings when said proceedings are without or in excess of said entity’s or
person’s jurisdiction, or are accompanied with grave abuse of discretion, and there is no appeal or any other
plain, speedy and adequate remedy in the ordinary course of law. Prohibition lies against judicial or
ministerial functions, but not against legislative or quasi-legislative functions. Gen-
_______________
[31] Id., at pp. 420-423.
[32] Municipal Council of Lemery v. Provincial Board of Batangas, No. 36201, October 29, 1931, 56 Phil. 260, 266-267.
[33] G.R. No. 163980, August 3, 2006, 497 SCRA 581, 595-596.
74

erally, the purpose of a writ of prohibition is to keep a lower court within the limits of its jurisdiction in
order to maintain the administration of justice in orderly channels. Prohibition is the proper remedy to
afford relief against usurpation of jurisdiction or power by an inferior court, or when, in the exercise of
jurisdiction in handling matters clearly within its cognizance the inferior court transgresses the bounds
prescribed to it by the law, or where there is no adequate remedy available in the ordinary course of law by
which such relief can be obtained. Where the principal relief sought is to invalidate an IRR, petitioners’
remedy is an ordinary action for its nullification, an action which properly falls under the jurisdiction of the
Regional Trial Court. In any case, petitioners’ allegation that “respondents are performing or threatening to
perform functions without or in excess of their jurisdiction” may appropriately be enjoined by the trial court
through a writ of injunction or a temporary restraining order.
With respect to the Court, however, the remedies of certiorari and prohibition are necessarily
broader in scope and reach, and the writ of certiorari or prohibition may be issued to correct
errors of jurisdiction committed not only by a tribunal, corporation, board or officer exercising
judicial, quasi-judicial or ministerial functions but also to set right, undo and restrain any act of
grave abuse of discretion amounting to lack or excess of jurisdiction by any branch or
instrumentality of the Government, even if the latter does not exercise judicial, quasi-judicial or
ministerial functions. This application is expressly authorized by the text of the second paragraph
of Section 1, supra.
Thus, petitions for certiorari and prohibition are appropriate remedies to raise constitutional
issues and to review
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and/or prohibit or nullify the acts of legislative and executive officials.[34]

Necessarily, in discharging its duty under Section 1, supra, to set right and undo any act of
grave abuse of discretion amounting to lack or excess of jurisdiction by any branch or
instrumentality of the Government, the Court is not at all precluded from making the inquiry
provided the challenge was properly brought by interested or affected parties. The Court has been
thereby entrusted expressly or by necessary implication with both the duty and the obligation of
determining, in appropriate cases, the validity of any assailed legislative or executive action. This
entrustment is consistent with the republican system of checks and balances.[35]
_______________
[34] Francisco, Jr. v. Toll Regulatory Board, G.R. No. 166910, October 19, 2010, 633 SCRA 470, 494.
[35] Planas v. Gil, 67 Phil. 62, 73-74 (1939), with the Court saying:
It must be conceded that the acts of the Chief Executive performed within the limits of his jurisdiction are his official
acts and courts will neither direct nor restrain executive action in such cases. The rule is noninterference. But from
this legal premise, it does not necessarily follow that we are precluded from making an inquiry into the
validity or constitutionality of his acts when these are properly challenged in an appropriate proceeding.
x x x As far as the judiciary is concerned, while it holds “neither the sword nor the purse” it is by
constitutional placement the organ called upon to allocate constitutional boundaries, and to the Supreme
Court is entrusted expressly or by necessary implication the obligation of determining in appropriate cases
the constitutionality or validity of any treaty, law, ordinance, or executive order or regulation. (Sec. 2[1],
Art. VIII, Constitution of the Philippines.) In this sense and to this extent, the judiciary restrains the other
departments of the government and this result is one of the necessary corollaries of
76

Following our recent dispositions concerning the congressional pork barrel, the Court has
become more alert to discharge its constitutional duty. We will not now refrain from exercising
our expanded judicial power in order to review and determine, with authority, the limitations on
the Chief Executive’s spending power.
b) Requisites for the exercise of the power of judicial review

were complied with
The requisites for the exercise of the power of judicial review are the following, namely: (1)
there must be an actual case or justiciable controversy before the Court; (2) the question before
the Court must be ripe for adjudication; (3) the person challenging the act must be a proper
party; and (4) the issue of constitutionality must be raised at the earliest opportunity and must
be the very litis mota of the case.[36]
The first requisite demands that there be an actual case calling for the exercise of judicial
power by the Court.[37]An actual case or controversy, in the words of Belgica v. Executive
Secretary Ochoa:[38]
x x x is one which involves a conflict of legal rights, an assertion of opposite legal claims, susceptible of
judicial resolution as distinguished from a hypothetical or abstract difference or dispute. In other words,
“[t]here must be a contrariety of legal rights that can be interpreted and enforced on the basis of existing
law and jurispru-
_______________
the “system of checks and balances” of the government established.
[36] Funa v. Villar, G.R. No. 192791, April 24, 2012, 670 SCRA 579, 593. According to Black’s Law Dictionary (Ninth edition), lis
mota is “[a] dispute that has begun and later forms the basis of a lawsuit.”
[37] Bernas, op. cit., at p. 970.
[38] Supra note 7.
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dence.” Related to the requirement of an actual case or controversy is the requirement of “ripeness,”
meaning that the questions raised for constitutional scrutiny are already ripe for adjudication. “A question
is ripe for adjudication when the act being challenged has had a direct adverse effect on the individual
challenging it. It is a prerequisite that something had then been accomplished or performed by either branch
before a court may come into the picture, and the petitioner must allege the existence of an immediate or
threatened injury to itself as a result of the challenged action.” “Withal, courts will decline to pass upon
constitutional issues through advisory opinions, bereft as they are of authority to resolve hypothetical or
moot questions.”
An actual and justiciable controversy exists in these consolidated cases. The incompatibility of
the perspectives of the parties on the constitutionality of the DAP and its relevant issuances
satisfy the requirement for a conflict between legal rights. The issues being raised herein meet
the requisite ripeness considering that the challenged executive acts were already being
implemented by the DBM, and there are averments by the petitioners that such implementation
was repugnant to the letter and spirit of the Constitution. Moreover, the implementation of the
DAP entailed the allocation and expenditure of huge sums of public funds. The fact that public
funds have been allocated, disbursed or utilized by reason or on account of such challenged
executive acts gave rise, therefore, to an actual controversy that is ripe for adjudication by the
Court.
It is true that Sec. Abad manifested during the January 28, 2014 oral arguments that the DAP
as a program had been meanwhile discontinued because it had fully served its purpose, saying:
“In conclusion, Your Honors, may I inform the Court that because the DAP has already fully
served its pur-
78

pose, the Administration’s economic managers have recommended its termination to the
President. x x x.”[39]
The Solicitor General then quickly confirmed the termination of the DAP as a program, and
urged that its termination had already mooted the challenges to the DAP’s constitutionality, viz.:
DAP as a program, no longer exists, thereby mooting these present cases brought to challenge its
constitutionality. Any constitutional challenge should no longer be at the level of the program, which is now
extinct, but at the level of its prior applications or the specific disbursements under the now defunct policy.
We challenge the petitioners to pick and choose which among the 116 DAP projects they wish to nullify, the
full details we will have provided by February 5. We urge this Court to be cautious in limiting the
constitutional authority of the President and the Legislature to respond to the dynamic needs of the country
and the evolving demands of governance, lest we end up straightjacketing our elected representatives in
ways not consistent with our constitutional structure and democratic principles.[40]
A moot and academic case is one that ceases to present a justiciable controversy by virtue of
supervening events, so that a declaration thereon would be of no practical use or value.[41]
The Court cannot agree that the termination of the DAP as a program was a supervening
event that effectively mooted these consolidated cases. Verily, the Court had in the past exercised
its power of judicial review despite the cases being rendered moot and academic by supervening
events, like: (1) when there was a grave violation of the Constitution; (2)
_______________
[39] Oral Arguments, TSN of January 28, 2014, p. 14.
[40] Id., at p. 23.
[41] Funa v. Ermita, G.R. No. 184740, February 11, 2010, 612 SCRA 308, 319.
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when the case involved a situation of exceptional character and was of paramount public interest;
(3) when the constitutional issue raised required the formulation of controlling principles to guide
the Bench, the Bar and the public; and (4) when the case was capable of repetition yet evading
review.[42] Assuming that the petitioners’ several submissions against the DAP were ultimately
sustained by the Court here, these cases would definitely come under all the exceptions. Hence,
the Court should not abstain from exercising its power of judicial review.
Did the petitioners have the legal standing to sue?
Legal standing, as a requisite for the exercise of judicial review, refers to “a right of
appearance in a court of justice on a given question.”[43] The concept of legal standing, or locus
standi, was particularly discussed in De Castro v. Judicial and Bar Council,[44] where the Court
said:
In public or constitutional litigations, the Court is often burdened with the determination of the locus
standi of the petitioners due to the ever-present need to regulate the invocation of the intervention of the
Court to correct any official action or policy in order to avoid obstructing the efficient functioning of public
officials and offices involved in public service. It is required, therefore, that the petitioner must have a
personal stake in the outcome of the controversy, for, as indicated in Agan, Jr. v. Philippine International
Air Terminals Co., Inc.:
The question on legal standing is whether such parties have “alleged such a personal stake in
the outcome of the controversy as to assure that concrete
_______________
[42] Funa v. Villar, supra note 36 at p. 592; citing David v. Macapagal-Arroyo,G.R. Nos. 171396, 171409, 171485, 171483, 171400,
171489 & 171424, May 3, 2006, 489 SCRA 160, 214-215.
[43] Black’s Law Dictionary, p. 941 (6th ed. 1991).
[44] G.R. No. 191002, March 17, 2010, 615 SCRA 666.
80

adverseness which sharpens the presentation of issues upon which the court so largely depends
for illumination of difficult constitutional questions.” Accordingly, it has been held that the
interest of a person assailing the constitutionality of a statute must be direct and personal. He
must be able to show, not only that the law or any government act is invalid, but also that he
sustained or is in imminent danger of sustaining some direct injury as a result of its
enforcement, and not merely that he suffers thereby in some indefinite way. It must appear that
the person complaining has been or is about to be denied some right or privilege to which he is
lawfully entitled or that he is about to be subjected to some burdens or penalties by reason of
the statute or act complained of.
It is true that as early as in 1937, in People v. Vera, the Court adopted the direct injury test for
determining whether a petitioner in a public action had locus standi. There, the Court held that the person
who would assail the validity of a statute must have “a personal and substantial interest in the case such
that he has sustained, or will sustain direct injury as a result.” Vera was followed in Custodio v. President of
the Senate, Manila Race Horse Trainers’ Association v. De la Fuente, Anti-Chinese League of the Philippines
v. Felix, and Pascual v. Secretary of Public Works.
Yet, the Court has also held that the requirement of locus standi, being a mere procedural technicality,
can be waived by the Court in the exercise of its discretion. For instance, in 1949, in Araneta v. Dinglasan,
the Court liberalized the approach when the cases had “transcendental importance.” Some notable
controversies whose petitioners did not pass the direct injury testwere allowed to be treated in the same way
as in Araneta v. Dinglasan.
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In the 1975 decision in Aquino v. Commission on Elections, this Court decided to resolve the issues raised
by the petition due to their “far-reaching implications,” even if the petitioner had no personality to file the
suit. The liberal approach of Aquino v. Commission on Elections has been adopted in several notable cases,
permitting ordinary citizens, legislators, and civic organizations to bring their suits involving the
constitutionality or validity of laws, regulations, and rulings.
However, the assertion of a public right as a predicate for challenging a supposedly illegal or
unconstitutional executive or legislative action rests on the theory that the petitioner represents the public
in general. Although such petitioner may not be as adversely affected by the action complained against as
are others, it is enough that he sufficiently demonstrates in his petition that he is entitled to protection or
relief from the Court in the vindication of a public right.
Quite often, as here, the petitioner in a public action sues as a citizen or taxpayer to gain locus standi.
That is not surprising, for even if the issue may appear to concern only the public in general, such capacities
nonetheless equip the petitioner with adequate interest to sue. In David v. Macapagal-Arroyo, the Court
aptly explains why:
Case law in most jurisdictions now allows both “citizen” and “taxpayer” standing in public actions. The
distinction was first laid down in Beauchamp v. Silk, where it was held that the plaintiff in a taxpayer’s suit
is in a different category from the plaintiff in a citizen’s suit. In the former, the plaintiff is affected by
the expenditure of public funds, while in the latter, he is but the mere instrument of the public
concern.As held by the New York Supreme Court in People ex rel Case v. Collins: “In matter of mere
public right, however…the people are the real parties…It is at least the right, if not the duty, of
every citizen to interfere and see that a public offence be properly pursued and punished, and
that a public grievance be remedied.” With respect to taxpayer’s suits, Terr v. Jor-
82

dan held that “the right of a citizen and a taxpayer to maintain an action in courts to restrain the
unlawful use of public funds to his injury cannot be denied.”[45]
The Court has cogently observed in Agan, Jr. v. Philippine International Air Terminals Co.,
Inc.[46] that “[s]tanding is a peculiar concept in constitutional law because in some cases, suits
are not brought by parties who have been personally injured by the operation of a law or any
other government act but by concerned citizens, taxpayers or voters who actually sue in the
public interest.”
Except for PHILCONSA, a petitioner in G.R. No. 209164, the petitioners have invoked their
capacities as taxpayers who, by averring that the issuance and implementation of the DAP and
its relevant issuances involved the illegal disbursements of public funds, have an interest in
preventing the further dissipation of public funds. The petitioners in G.R. No. 209287 (Araullo)
and G.R. No. 209442 (Belgica) also assert their right as citizens to sue for the enforcement and
observance of the constitutional limitations on the political branches of the Government.[47] On
its part, PHILCONSA simply reminds that the Court has long recognized its legal standing to
bring cases upon constitutional issues.[48] Luna, the petitioner in G.R. No. 209136, cites his
additional capacity as a lawyer. The IBP, the petitioner in G.R. No. 209260, stands by “its avowed
duty to work for the rule of law and of paramount importance of the question in this action, not to
mention its civic duty as the official association of all lawyers in this country.”[49]
_______________
[45] Id., at pp. 722-726.
[46] G.R. No. 155001, May 5, 2003, 402 SCRA 612, 645.
[47] Rollo (G.R. No. 209412), Petition, pp. 3-4.
[48] Rollo (G.R. No. 209164), p. 5.
[49] Rollo (G.R. No. 209260), p. 6.
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Under their respective circumstances, each of the petitioners has established sufficient
interest in the outcome of the controversy as to confer locus standi on each of them.
In addition, considering that the issues center on the extent of the power of the Chief
Executive to disburse and allocate public funds, whether appropriated by Congress or not, these
cases pose issues that are of transcendental importance to the entire Nation, the petitioners
included. As such, the determination of such important issues call for the Court’s exercise of its
broad and wise discretion “to waive the requirement and so remove the impediment to its
addressing and resolving the serious constitutional questions raised.”[50]
II.
Substantive Issues
1.
Overview of the Budget System
An understanding of the Budget System of the Philippines will aid the Court in properly
appreciating and justly resolving the substantive issues.
a) Origin of the Budget System
The term “budget” originated from the Middle English word bouget that had derived from the
Latin word bulga(which means bag or purse).[51]
In the Philippine setting, Commonwealth Act (CA) No. 246 (Budget Act) defined “budget” as
the financial program of the National Government for a designated fiscal year, consisting of the
statements of estimated receipts and expenditures for
_______________
[50] Supra note 46.
[51] Magtolis-Briones, Leonor, Philippine Public Fiscal Administration, National Research Council of the Philippines
and Commission on Audit, p. 243, 1983.
84

the fiscal year for which it was intended to be effective based on the results of operations
during the preceding fiscal years. The term was given a different meaning under Republic Act
No. 992 (Revised Budget Act) by describing the budget as the delineation of the services and
products, or benefits that would accrue to the public together with the estimated unit cost of each
type of service, product or benefit.[52] For a forthright definition, budget should simply be
identified as the financial plan of the Government,[53] or “the master plan of government.”[54]
The concept of budgeting has not been the product of recent economies. In reality, financing
public goals and activities was an idea that existed from the creation of the State.[55] To protect
the people, the territory and sovereignty of the State, its government must perform vital
functions that required public expenditures. At the beginning, enormous public expenditures
were spent for war activities, preservation of peace and order, security, administration of justice,
religion, and supply of limited goods and services.[56] In order to finance those expenditures, the
State raised revenues through taxes
_______________
[52] Manasan, Rosario G., Public Finance in the Philippines: A Review of the Literature, Philippine Institute for
Development Studies Working Paper 81-03, p. 37, March 1981.
[53] Magtolis-Briones, op. cit., p. 79.
[54] American economist Prof. Philip E. Taylor has tendered the following understanding of the term budget (as quoted
in Magtolis-Briones, op. cit., p. 243), to wit:
The budget is the master plan of government. It brings together estimates of anticipated revenues and proposed
expenditures, implying the schedule of activities to be undertaken and the means of financing those activities. In the
budget, fiscal policies are coordinated, and only in the budget can a more unified view of the financial direction
which the government is going to be observed.
[55] Id., at p. 10.
[56] Id., at pp. 10-11.
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and impositions.[57] Thus, budgeting became necessary to allocate public revenues for specific
government functions.[58] The State’s budgeting mechanism eventually developed through the
years with the growing functions of its government and changes in its market economy.
The Philippine Budget System has been greatly influenced by western public financial
institutions. This is because of the country’s past as a colony successively of Spain and the United
States for a long period of time. Many aspects of the country’s public fiscal administration,
including its Budget System, have been naturally patterned after the practices and experiences of
the western public financial institutions. At any rate, the Philippine Budget System is presently
guided by two principal objectives that are vital to the development of a progressive democratic
government, namely: (1) to carry on all government activities under a comprehensive fiscal plan
developed, authorized and executed in accordance with the Constitution, prevailing statutes and
the principles of sound public management; and (2) to provide for the periodic review and
disclosure of the budgetary status of the Government in such detail so that persons entrusted by
law with the responsibility as well as the enlightened citizenry can determine the adequacy of the
budget actions taken, authorized or proposed, as well as the true financial position of the
Government.[59]
b) Evolution of the Philippine Budget System

The budget process in the Philippines evolved from the early years of the American Regime up
to the passage of the Jones Law in 1916. A Budget Office was created within the Department of
Finance by the Jones Law to discharge the
_______________
[57] Id., at p. 11.
[58] Id., at p. 12.
[59] Manasan, op. cit., at p. 39; Manasan, Budget Operations Manual Revised Edition, Operations Budget Commission, p.
3 (1968).
86

budgeting function, and was given the responsibility to assist in the preparation of an executive
budget for submission to the Philippine Legislature.[60]
As early as under the 1935 Constitution, a budget policy and a budget procedure were
established, and subsequently strengthened through the enactment of laws and executive acts.
[61] EO No. 25, issued by President Manuel L. Quezon on April 25, 1936, created the Budget
Commission to serve as the agency that carried out the President’s responsibility of preparing the
budget.[62] CA No. 246, the first budget law, went into effect on January 1, 1938 and established
the Philippine budget process. The law also provided a line-item budget as the framework of the
Government’s budgeting system,[63] with emphasis on the observance of a “balanced budget” to
tie up proposed expenditures with existing revenues.
CA No. 246 governed the budget process until the passage on June 4, 1954 of Republic Act
(RA) No. 992, whereby Congress introduced performance-budgeting to give importance to
functions, projects and activities in terms of expected results.[64] RA No. 992 also enhanced the
role of the Budget Commission as the fiscal arm of the Government.[65]
The 1973 Constitution and various presidential decrees directed a series of budgetary reforms
that culminated in the enactment of PD No. 1177 that President Marcos issued on July 30, 1977,
and of PD No. 1405, issued on June 11, 1978. The latter decree converted the Budget Commission
into the Ministry of Budget, and gave its head the rank of a Cabinet member. The Ministry of
Budget was later renamed the Office
_______________
[60] Magtolis-Briones, op. cit., at p. 80.
[61] Id.
[62] http://www.dbm.gov.ph/?page_id=352. Visited on May 27, 2014.
[63] Id.
[65] http://www.dbm.gov.ph/?page_id=352. Visited on March 27, 2014.
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of Budget and Management (OBM) under EO No. 711. The OBM became the DBM pursuant to
EO No. 292 effective on November 24, 1989.
c) The Philippine Budget Cycle[66]
Four phases comprise the Philippine budget process, specifically: (1) Budget Preparation;
(2) Budget Legislation; (3) Budget Execution; and (4) Accountability. Each phase is
distinctly separate from the others but they overlap in the implementation of the budget during
the budget year.
.1. Budget Preparation[67]
The budget preparation phase is commenced through the issuance of a Budget Call by the
DBM. The Budget Call contains budget parameters earlier set by the Development Budget
Coordination Committee (DBCC) as well as policy guidelines and procedures to aid government
agencies in the preparation and submission of their budget proposals. The Budget Call is of two
kinds, namely: (1) a National Budget Call, which is addressed to all agencies, including state
universities and colleges; and (2) a Corporate Budget Call, which is addressed to all
government-owned and -controlled corporations (GOCCs) and government financial institutions
(GFIs).
Following the issuance of the Budget Call, the various departments and agencies submit
their respective Agency Budget Proposals to the DBM. To boost citizen participation, the
current administration has tasked the various departments and agencies to partner with civil
society organizations and other citizen-stakeholders in the preparation of the Agency Budget
Proposals, which proposals are then pre-
_______________
[66] http://budgetngbayan.com/the-budget-cycle/. Visited on March 27, 2014.
[67] http://budgetngbayan.com/budget-101/budget.preparation.
88

sented before a technical panel of the DBM in scheduled budget hearings wherein the various
departments and agencies are given the opportunity to defend their budget proposals. DBM
bureaus thereafter review the Agency Budget Proposals and come up with recommendations
for the Executive Review Board, comprised by the DBM Secretary and the DBM’s senior officials.
The discussions of the Executive Review Board cover the prioritization of programs and their
corresponding support vis-à-vis the priority agenda of the National Government, and their
implementation.
The DBM next consolidates the recommended agency budgets into the National
Expenditure Program (NEP)and a Budget of Expenditures and Sources of
Financing (BESF). The NEP provides the details of spending for each department and agency
by program, activity or project (PAP), and is submitted in the form of a proposed GAA.
The Details of Selected Programs and Projects is the more detailed disaggregation of key
PAPs in the NEP, especially those in line with the National Government’s development plan.
The Staffing Summary provides the staffing complement of each department and agency,
including the number of positions and amounts allocated.
The NEP and BESF are thereafter presented by the DBM and the DBCC to the President and
the Cabinet for further refinements or reprioritization. Once the NEP and the BESF are
approved by the President and the Cabinet, the DBM prepares the budget documents for
submission to Congress. The budget documents consist of: (1) the President’s Budget Message,
through which the President explains the policy framework and budget priorities; (2) the BESF,
mandated by Section 22, Article VII of the Constitution,[68] which contains
_______________
[68] Section 22. The President shall submit to the Congress, within thirty days from the opening of every regular
session as the basis of the general appropriations bill, a budget of expenditures
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VOL. 728, JULY 1, 2014 89

the macroeconomic assumptions, public sector context, breakdown of the expenditures and
funding sources for the fiscal year and the two previous years; and (3) the NEP.
Public or government expenditures are generally classified into two categories,
specifically: (1) capital expenditures or outlays; and (2) current operating
expenditures. Capital expenditures are the expenses whose usefulness lasts for more than
one year, and which add to the assets of the Government, including investments in the capital of
government-owned or controlled corporations and their subsidiaries.[69] Current operating
expenditures are the purchases of goods and services in current consumption the benefit of
which does not extend beyond the fiscal year.[70] The two components of current expenditures are
those for personal services (PS), and those for maintenance and other operating
expenses (MOOE).
Public expenditures are also broadly grouped according to their functions into:
(1) economic development expenditures (i.e., expenditures on agriculture and natural
resources, transportation and communications, commerce and industry,
_______________
and sources of financing, including receipts from existing and proposed revenue measures.
[69] Section 2(e), P.D. No. 1177 states that capital expenditures refer to appropriations for the purchase of
goods and services, the benefits of which extend beyond the fiscal year and which add to the assets of
Government, including investments in the capital of government-owned or controlled corporations and their
subsidiaries.
[70] Section 2(d), PD 1177 defines current oprating expenditures as appropriations for the purchase of goods
and services for current consumption or within the fiscal year, including the acquisition of furniture and
equipment normally used in the conduct of government operations, and for temporary construction of
promotional, research and similar purposes.
90

and other economic development efforts);[71] (2) social services or social development
expenditures (i.e., government outlay on education, public health and medicare, labor and
welfare and others);[72] (3) general government or general public services
expenditures (i.e., expenditures for the general government, legislative services, the
administration of justice, and for pensions and gratuities);[73] (4) national defense
expenditures (i.e., subdivided into national security expenditures and expenditures for the
maintenance of peace and order);[74]and (5) public debt.[75]
Public expenditures may further be classified according to the nature of funds, i.e., general
fund,special fund or bond fund.[76]
On the other hand, public revenues complement public expenditures and cover all income or
receipts of the government treasury used to support government expenditures.[77]
Classical economist Adam Smith categorized public revenues based on two principal sources,
stating: “The revenue which must defray…the necessary expenses of government may be drawn
either, first from some fund which peculiarly belongs to the sovereign or commonwealth, and
which is independent of the revenue of the people, or, secondly, from the revenue of the
people.”[78]Adam Smith’s classification relied on the two aspects of the nature of the State: first,
the State as a juristic person with an artificial personality, and, second, the
_______________
[71] Manasan, op. cit., at p. 32.
[72] Id.
[73] Id.
[74] Id.
[75] Id.; see also Banzon Abello, Amelia, Pattern of Philippine Public Expenditures and Revenue, UP Institute of
Economic Development and Research, p. 2 (1962).
[77] Id., at p. 139.
[78] Quoted in Banzon Abello, op. cit., at pp. 32-33.
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State as a sovereign or entity possessing supreme power. Under the first aspect, the State could
hold property and engage in trade, thereby deriving what is called its quasi-private
income or revenues, and which “peculiarly belonged to the sovereign.” Under the second aspect,
the State could collect by imposing charges on the revenues of its subjects in the form of taxes.
[79]
In the Philippines, public revenues are generally derived from the following sources, to wit:
(1) tax revenues (i.e., compulsory contributions to finance government activities);[80] (2) capital
revenues (i.e., proceeds from sales of fixed capital assets or scrap thereof and public domain, and
gains on such sales like sale of public lands, buildings and other structures, equipment, and other
properties recorded as fixed assets);[81] (3) grants (i.e., voluntary contributions and aids given to
the Government for its operation on specific purposes in the form
_______________
[79] Prof. Charles Bastable, a political economist, proposed a similar classification of public revenues in Public
Finance (3rd edition [1917], Book II, Chapter I[2], London: McMillan and Co., Ltd.), to wit:
The widest division of public revenue is into (1) that obtained by the State in its various functions as a great
corporation or “juristic person,” operating under the ordinary conditions that govern individuals or private
companies, and (2) that taken from the revenues of the society by the power of the sovereign. To the former
class belong the rents received by the State as landlord, rent charges due to it, interest on capital lent by it, the
earnings of its various employments, whether these cover the expenses of the particular function or not, and
finally the accrual of property by escheat or absence of a visible owner. Under the second class have to be
placed taxes, either general or special, and finally all extra returns obtained by state industrial agencies
through the privileges granted by them.
[80] Magtolis-Briones, supra note 51 at p. 140.
[81] Id., at p. 141.
92

of money and/or materials, and do not require any monetary commitment on the part of the
recipient);[82] (4) extraordinary income (i.e., repayment of loans and advances made by
government corporations and local governments and the receipts and shares in income of
the Bangko Sentral ng Pilipinas, and other receipts);[83] and (5) public borrowings (i.e.,
proceeds of repayable obligations generally with interest from domestic and foreign creditors of
the Government in general, including the National Government and its political subdivisions).[84]
More specifically, public revenues are classified as follows:[85]

_______________
[82] Id.
[83] Id., at p. 142.
[84] Id.
[85] Manual on the New Government Accounting System, Accounting Policies, Volume I, Chapter 1, Section 17 (For
National Government Agencies).
c.2. Budget Legislation[86]

The Budget Legislation Phase covers the period commencing from the time Congress
receives the President’s Budget, which is inclusive of the NEP and the BESF, up to the
President’s approval of the GAA. This phase is also known as the Budget Authorization
Phase, and involves the significant participation of the Legislative through its deliberations.
Initially, the President’s Budget is assigned to the House of
Representatives’ Appropriations Committee on First Reading. The Appropriations
Committee and its various Sub-Committees schedule and conduct budget hearings to examine
the PAPs of the departments and agencies. Thereaf-
_______________
[86] http://budgetngbayan.com/budget-101/budget-legislation.

94

ter, the House of Representatives drafts the General Appropriations Bill (GAB).[87]

The GAB is sponsored, presented and defended by the House of
Representatives’ Appropriations Committeeand Sub-Committees in plenary session. As with
other laws, the GAB is approved on Third Reading before the House of Representatives’ version is
transmitted to the Senate.[88]
After transmission, the Senate conducts its own committee hearings on the GAB. To expedite
proceedings, the Senate may conduct its committee hearings simultaneously with the House of
Representatives’ deliberations. The Senate’s Finance Committee and its Sub-
Committees may submit the proposed amendments to the GAB to the plenary of the Senate only
after the House of Representatives has formally
_______________
[87] Article VI of the 1987 Constitution provides:
Section 24. All appropriation, revenue or tariff bills, bills authorizing increase of the public debt, bills of
local application, and private bills shall originate exclusively in the House of Representatives, but the
Senate may propose or concur with amendments.
[88] Section 26, Article VI of the 1987 Constitution, to wit:
Section 26.
1. Every bill passed by the Congress shall embrace only one subject which shall be expressed in the title
thereof.
2. No bill passed by either House shall become a law unless it has passed three readings on separate days,
and printed copies thereof in its final form have been distributed to its Members three days before its passage,
except when the President certifies to the necessity of its immediate enactment to meet a public calamity or
emergency. Upon the last reading of a bill, no amendment thereto shall be allowed, and the vote thereon shall
be taken immediately thereafter, and the yeas and nays entered in the Journal.
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VOL. 728, JULY 1, 2014 95
transmitted its version to the Senate. The Senate version of the GAB is likewise approved on
Third Reading.[89]
The House of Representatives and the Senate then constitute a panel each to sit in
the Bicameral Conference Committee for the purpose of discussing and harmonizing the
conflicting provisions of their versions of the GAB. The “harmonized” version of the GAB is next
presented to the President for approval.[90] The President reviews the GAB, and prepares
the Veto Message where budget items are subjected to direct veto,[91] or are identified for
conditional implementation.
_______________
[89] Id.
[90] Section 27, 1, Article VI of the 1987 Constitution, viz.:
Section 27.
1. Every bill passed by the Congress shall, before it becomes a law, be presented to the President. If he
approves the same he shall sign it; otherwise, he shall veto it and return the same with his objections to the
House where it originated, which shall enter the objections at large in its Journal and proceed to reconsider it.
If, after such reconsideration, two-thirds of all the Members of such House shall agree to pass the bill, it shall
be sent, together with the objections, to the other House by which it shall likewise be reconsidered, and if
approved by two-thirds of all the Members of that House, it shall become a law. In all such cases, the votes of
each House shall be determined by yeas or nays, and the names of the Members voting for or against shall be
entered in its Journal. The President shall communicate his veto of any bill to the House where it originated
within thirty days after the date of receipt thereof, otherwise, it shall become a law as if he had signed it.
2. The President shall have the power to veto any particular item or items in an appropriation, revenue, or
tariff bill, but the veto shall not affect the item or items to which he does not object.
[91] Id.
96

If, by the end of any fiscal year, the Congress shall have failed to pass the GAB for the ensuing
fiscal year, the GAA for the preceding fiscal year shall be deemed reenacted and shall remain in
force and effect until the GAB is passed by the Congress.[92]
c.3. Budget Execution[93]
With the GAA now in full force and effect, the next step is the implementation of the budget.
The Budget Execution Phase is primarily the function of the DBM, which is tasked to perform
the following procedures, namely: (1) to issue the programs and guidelines for the release of
funds; (2) to prepare an Allotment and Cash Release Program; (3) to release allotments; and
(4) to issue disbursement authorities.
The implementation of the GAA is directed by the guidelines issued by the DBM. Prior to this,
the various departments and agencies are required to submit Budget Execution
Documents (BED) to outline their plans and performance targets by laying down the physical
and financial plan, the monthly cash program, the estimate of monthly income, and
the list of obligations that are not yet due and demandable.
Thereafter, the DBM prepares an Allotment Release Program (ARP) and a Cash Release
Program (CRP).The
[92] Section 25(7), Article VI of the 1987 Constitution, thus:

x x x x.
7. If, by the end of any fiscal year, the Congress shall have failed to pass the general appropriations bill for
the ensuing fiscal year, the general appropriations law for the preceding fiscal year shall be deemed re-enacted
and shall remain in force and effect until the general appropriations bill is passed by the Congress.
x x x x.
[93] http://budgetngbayan.com/budget-101/budget-execution.
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ARP sets a limit for allotments issued in general and to a specific agency. The CRP fixes the
monthly, quarterly and annual disbursement levels.
Allotments, which authorize an agency to enter into obligations, are issued by the
DBM. Allotments are lesser in scope than appropriations, in that the latter embrace
the general legislative authority to spend. Allotmentsmay be released in two forms —
through a comprehensive Agency Budget Matrix (ABM),[94] or, individually, by SARO.[95]
Armed with either the ABM or the SARO, agencies become authorized to incur
obligations[96] on behalf of the Government in order to implement their PAPs. Obligations may be
incurred in various ways, like hiring of personnel, entering into contracts for the supply of goods
and services, and using utilities.
In order to settle the obligations incurred by the agencies, the DBM issues a disbursement
authority so that cash may be allocated in payment of the obligations. A cash or
disbursement authority that is periodically issued is referred to as a Notice of Cash
Allocation (NCA),[97] which
_______________
[94] The ABM disaggregates all programmed appropriations for each agency into two main expenditure categories: “not
needing clearance” and “needing clearance”; it is a comprehensive allotment release document for all appropriations that
do not need clearance, or those that have already been itemized and fleshed out in the
GAA.
[95] Items identified as “needing clearance” are those that require the approval of the DBM or the President, as the
case may be (for instance, lump sum funds and confidential and intelligence funds). For such items, an agency needs to
submit a Special Budget Request to the DBM with supporting documents. Once approved, a SARO is issued.
[96] Liabilities legally incurred that the Government will pay for.
[97] Supra note 7 clarifies the distinction between an NCA and SARO, viz.:
98

issuance is based upon an agency’s submission of its Monthly Cash Program and other
required documents. The NCA specifies the maximum amount of cash that can be withdrawn
from a government servicing bank for the period indicated. Apart from the NCA, the DBM may
issue a Non-Cash Availment Authority (NCAA) to authorize noncash disbursements, or
a Cash Disbursement Ceiling (CDC) for departments with overseas operations to allow the
use of income collected by their foreign posts for their operating requirements.
Actual disbursement or spending of government funds terminates the Budget Execution
Phase and is usually accomplished through the Modified Disbursement Scheme under which
disbursements chargeable against the National Treasury are coursed through the government
servicing banks.
_______________
A SARO, as defined by the DBM itself in its website, is “[a] specific authority issued to identified agencies to incur
obligations not exceeding a given amount during a specified period for the purpose indicated. It shall cover expenditures
the release of which is subject to compliance with specific laws or regulations, or is subject to separate approval or
clearance by competent authority.” Based on this definition, it may be gleaned that a SARO only evinces the
existence of an obligation and not the directive to pay. Practically speaking, the SARO does not have the
direct and immediate effect of placing public funds beyond the control of the disbursing authority. In fact, a
SARO may even be withdrawn under certain circumstances which will prevent the actual release of funds. On the other
hand, the actual release of funds is brought about by the issuance of the NCA, which is subsequent to the
issuance of a SARO. x x x x
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c.4. Accountability[98]
Accountability is a significant phase of the budget cycle because it ensures that the
government funds have been effectively and efficiently utilized to achieve the State’s socio-
economic goals. It also allows the DBM to assess the performance of agencies during the fiscal
year for the purpose of implementing reforms and establishing new policies.
An agency’s accountability may be examined and evaluated through (1) performance targets
and outcomes; (2) budget accountability reports; (3) review of agency performance; and
(4) audit conducted by the Commission on Audit (COA).
2.
Nature of the DAP as a fiscal plan
a. DAP was a program designed to promote economic growth
Policy is always a part of every budget and fiscal decision of any Administration.[99] The
national budget the Executive prepares and presents to Congress represents the Administration’s
“blueprint for public policy” and reflects the Government’s goals and strategies.[100] As such, the
national budget becomes a tangible representation of the programs of the Government in
monetary terms, specifying therein the PAPs and services for which specific amounts of public
funds are proposed and allocated.[101] Embodied in every national budget is government
spending.[102]
_______________
[98] http://budgetngbayan.com/budget-101/budget-accountability.
[99] Fisher, Presidential Spending Power, p. 165, 1975.
[100] Keefe and Ogul, The American Legislative Process: Congress and the States, p. 359, 1993.
[102] Diokno, Philippine Fiscal Behavior in Recent History, The Philippine Review of Economics, Vol. XLVII, No. 1, p. 53,
June 1, 2010.
100

When he assumed office in the middle of 2010, President Aquino made efficiency and
transparency in government spending a significant focus of his Administration. Yet, although
such focus resulted in an improved fiscal deficit of 0.5% in the gross domestic product (GDP) from
January to July of 2011, it also unfortunately decelerated government project implementation
and payment schedules.[103] The World Bank observed that the Philippines’ economic growth
could be reduced, and potential growth could be weakened should the Government continue with
its underspending and fail to address the large deficiencies in infrastructure.[104] The economic
situation prevailing in the middle of 2011 thus paved the way for the development and
implementation of the DAP as a stimulus package intended to fast-track public spending and to
push economic growth by investing on high-impact budgetary PAPs to be funded from the
“savings” generated during the year as well as from unprogrammed funds.[105] In that respect,
the DAP was the product of “plain executive policy-making” to stimulate the economy by way of
accelerated spending.[106] The Administration would thereby accelerate government spending by:
(1) streamlining the implementation process through the clustering of infrastructure projects of
the Department of Public Works and Highways (DPWH) and the Department of Education
(DepEd), and (2) frontloading PPP-
_______________
[103] World Bank, Philippines Quarterly Update: Solid Economic Fundamentals Cushion External Turmoil, available
at http://www.
investphilippines.info/arangkada/wp-content/uploads/2011/10/WB-Philippines-Quarterly-Update-Sept2011.pdf (last
accessed March 31, 2014).
[104] Id.
[105] Department of Budget and Management, Frequently Asked Questions About the Disbursement Acceleration
Program (DAP), available at http://www.dbm.gov.ph/?page_id=7362 (last accessed, December 3, 2013).
[106] Respondent’s Consolidated Comment, p. 8.
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related projects[107] due for implementation in the following year.[108]

Did the stimulus package work?
The March 2012 report of the World Bank,[109] released after the initial implementation of the
DAP, revealed that the DAP was partially successful. The disbursements under the DAP
contributed 1.3 percentage points to GDP growth by the fourth quarter of 2011.[110] The
continued implementation of the DAP strengthened growth by 11.8% year on year while
infrastructure spending rebounded from a 29% contraction to a 34% growth as of September
2013.[111]
The DAP thus proved to be a demonstration that expenditure was a policy instrument that the
Government could use to direct the economies towards growth and development.[112] The
Government, by spending on public infrastructure, would signify its commitment of ensuring
profitability for prospective investors.[113] The PAPs funded under the DAP were chosen for this
reason based on their: (1) multiplier impact on the
_______________
[107] Public-Private Partnership.
[108] Supra note 103.
[109] Respondent’s Memorandum, p. 2, citing the Philippines Quarterly Update: From Stability to Prosperity for All,
available at http://www-wds.worldbank.org/external/default/WDSContentServer/
WDSP/IB/ 2012/06/12/000333037_20120612011744/Rendered/PDF/
698330WP0P12740ch020120FINAL0051012.pdf (last accessed March 31, 2014).
[110] The research group IBON International contests this finding, saying that the contribution of the DAP spending
was only one-fourth of a percentage point at most during the last quarter of 2011, and a “negligible fraction” for the entire
year of 2011. See “DAP did not contribute 1.3 percentage points to growth — IBON,” available
at http://ibon.org/ibon_articles.php?id=344 (last accessed April 5, 2014).
[111] TSN, Oral Arguments, January 28, 2014, p. 12.
[112] Supra note 102 at p. 51.
[113] Id., at p. 52.
102

economy and infrastructure development; (2) beneficial effect on the poor; and (3) translation
into disbursements.[114]
b. History of the implementation of the DAP, and sources of funds

under the DAP
How the Administration’s economic managers conceptualized and developed the DAP, and
finally presented it to the President remains unknown because the relevant documents appear to
be scarce.
The earliest available document relating to the genesis of the DAP was the memorandum of
October 12, 2011 from Sec. Abad seeking the approval of the President to implement the proposed
DAP. The memorandum, which contained a list of the funding sources for P72.11 billion and of
the proposed priority projects to be funded,[115]reads:
MEMORANDUM FOR THE PRESIDENT
xxxx
SUBJECT: FY 2011 PROPOSED DISBURSEMENT ACCELERATION PROGRAM
(PROJECTS AND SOURCES OF FUNDS)
DATE: OCTOBER 12, 2011
_____________________________________________________
Mr. President, this is to formally confirm your approval of the Disbursement Acceleration Program totaling
P72.11 billion. We are already working with all the agencies concerned for the immediate execution of the
projects therein.
[114] Rollo (G.R. No. 209287), p. 539, (Respondent’s 1st Evidence Packet).

[115] Id., at pp. 526-529, (Respondent’s 1st Evidence Packet).
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A. Fund Sources for the Acceleration Program

104


B. Projects in the Disbursement Acceleration Program (Descriptions of projects attached as Annex A)
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106

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108

C. Summary

For His Excellency’s Consideration
(Sgd.) FLORENCIO B. ABAD
[ / ] APPROVED
[ ] DISAPPROVED
(Sgd.) H.E. BENIGNO S. AQUINO, III

OCT 12, 2011
The memorandum of October 12, 2011 was followed by another memorandum for the President dated
December 12, 2011[116]requesting omnibus authority to consolidate the savings and unutilized balances for
fiscal year 2011. Pertinent portions of the memorandum of December 12, 2011 read:
_______________
[116] Id., at pp. 537-540.
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MEMORANDUM FOR THE PRESIDENT

xxxx
SUBJECT: Omnibus Authority to Consolidate Savings/Unutilized Balances and its Realignment
DATE: December 12, 2011
This is to respectfully request for the grant of Omnibus Authority to consolidate savings/unutilized
balances in FY 2011 corresponding to completed or discontinued projects which may be pooled to fund
additional projects or expenditures.
In addition, Mr. President, this measure will allow us to undertake projects even if their implementation
carries over to 2012 without necessarily impacting on our budget deficit cap next year.
BACKGROUND
1.0 The DBM, during the course of performance reviews conducted on the agencies’ operations,
particularly on the implementation of their projects/activities, including expenses incurred in undertaking
the same, have identified savings out of the 2011 General Appropriations Act. Said savings correspond to
completed or discontinued projects under certain departments/agencies which may be pooled, for the
following:
1.1 to provide for new activities which have not been anticipated during preparation of
the budget;
1.2 to augment additional requirements of ongoing priority projects;
1.3 to provide for deficiencies under the Special Purpose Funds, e.g., PDAF, Calamity
Fund, Contingent Fund; and
1.4 to cover for the modifications of the original allotment class allocation as a result of
ongo-
110

ing priority projects and implementation of new activities.

2.0 x x x x
2.1 x x x
2.2 x x x
ON THE UTILIZATION OF POOLED SAVINGS
3.0 It may be recalled that the President approved our request for omnibus authority to pool
savings/unutilized balances in FY 2010 last November 25, 2010.
4.0 It is understood that in the utilization of the pooled savings, the DBM shall secure the
corresponding approval/confirmation of the President. Furthermore, it is assured that the proposed
realignments shall be within the authorized Expenditure level.
5.0 Relative thereto, we have identified some expenditure items that may be sourced from the said
pooled appropriations in FY 2010 that will expire on December 31, 2011 and appropriations in FY 2011 that
may be declared as savings to fund additional expenditures.
5.1 The 2010 Continuing Appropriations (pooled savings) is proposed to be spent for the
projects that we have identified to be immediate actual disbursements considering that this
same fund source will expire on December 31, 2011.
5.2 With respect to the proposed expenditure items to be funded from the FY 2011
Unreleased Appropriations, most of these are the same projects for which the DBM is directed
by the Office of the President, thru the Executive Secretary, to source funds.
6.0 Among others, the following are such proposed additional projects that have been chosen given
their multiplier impact on economy and infrastructure
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development, their beneficial effect on the poor, and their translation into disbursements. Please note that
we have classified the list of proposed projects as follows:
7.0 x x x
FOR THE PRESIDENT’S APPROVAL
8.0 Foregoing considered, may we respectfully request for the President’s approval for the following:
8.1 Grant of omnibus authority to consolidate FY 2011 savings/unutilized balances and
its realignment; and
8.2 The proposed additional projects identified for funding.
For His Excellency’s consideration and approval.
(Sgd.)
[ / ] APPROVED
[ ] DISAPPROVED
(Sgd.) H.E. BENIGNO S. AQUINO, III
DEC 21, 2011
Substantially identical requests for authority to pool savings and to fund proposed projects
were contained in various other memoranda from Sec. Abad dated June 25, 2012,[117] September
4, 2012,[118] December 19, 2012,[119]May 20, 2013,[120] and September 25, 2013.[121] The
President apparently ap-
_______________
[117] Id., at pp. 549-555.
[118] Id., at pp. 563-568.
[119] Id., at pp. 579-587.
[120] Id., at pp. 601-608.
[121] This memorandum was a request to fund the rehabilitation plan for the Typhoon Pablo-stricken areas in
Mindanao amounting to P10.534 billion to be sourced from the (i) 2012 and 2013 pooled savings from programmed
appropriations, and (ii) revenue windfall collections during the first semester comprising the 2013 Unprogrammed Fund,
Respondent’s 1st Evidence Packet, p. 609-B.
112

proved all the requests, withholding approval only of the proposed projects contained in the June
25, 2012 memorandum, as borne out by his marginal note therein to the effect that the proposed
projects should still be “subject to further discussions.”[122]
In order to implement the June 25, 2012 memorandum, Sec. Abad issued NBC No. 541
(Adoption of Operational Efficiency Measure — Withdrawal of Agencies’ Unobligated Allotments
as of June 30, 2012),[123] reproduced herein as follows:
NATIONAL BUDGET CIRCULAR No. 541

July 18, 2012
TO : All Heads of Departments/Agencies/State Universities and Colleges and other Offices of
the National Government, Budget and Planning Officers; Heads of Accounting Units and
All Others Concerned
SUBJECT : Adoption of Operational Efficiency Measure — Withdrawal of Agencies’
Unobligated Allotments as of June 30, 2012
1.0 Rationale
The DBM, as mandated by Executive Order (EO) No. 292 (Administrative Code of 1987), periodically
reviews and evaluates the departments/agencies’ efficiency and effectiveness in utilizing budgeted funds for
the delivery of services and production of goods, consistent with the government priorities.
In the event that a measure is necessary to further improve the operational efficiency of the government, the
President is authorized to suspend or
_______________
[122] Rollo (G.R. No. 209287), p. 555, (Respondent’s 1st Evidence Packet).
[123] Id., at pp. 185-189, (Respondent’s Manifestation dated December 6, 2013).
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stop further use of funds allotted for any agency or expenditure authorized in the General Appropriations
Act. Withdrawal and pooling of unutilized allotment releases can be effected by DBM based on authority of
the President, as mandated under Sections 38 and 39, Chapter 5, Book VI of EO 292.
For the first five months of 2012, the National Government has not met its spending targets. In order to
accelerate spending and sustain the fiscal targets during the year, expenditure measures have to be
implemented to optimize the utilization of available resources.
Departments/agencies have registered low spending levels, in terms of obligations and disbursements per
initial review of their 2012 performance. To enhance agencies’ performance, the DBM conducts continuous
consultation meetings and/or send call-up letters, requesting them to identify slow-moving
programs/projects and the factors/issues affecting their performance (both pertaining to internal systems
and those which are outside the agencies’ spheres of control). Also, they are asked to formulate strategies
and improvement plans for the rest of 2012.
Notwithstanding these initiatives, some departments/agencies have continued to post low obligation levels
as of end of first semester, thus resulting to substantial unobligated allotments.
In line with this, the President, per directive dated June 27, 2012 authorized the withdrawal of unobligated
allotments of agencies with low levels of obligations as of June 30, 2012, both for continuing and current
allotments. This measure will allow the maximum utilization of available allotments to fund and undertake
other priority expenditures of the national government.
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2.0 Purpose
2.1 To provide the conditions and parameters on the withdrawal of unobligated
allotments of agencies as of June 30, 2012 to fund priority and/or fast-moving
programs/projects of the national government;
2.2 To prescribe the reports and documents to be used as bases on the withdrawal of said
unobligated allotments; and
2.3 To provide guidelines in the utilization or reallocation of the withdrawn allotments.
3.0 Coverage
3.1 These guidelines shall cover the withdrawal of unobligated allotments as of June 30,
2012 of all national government agencies (NGAs) charged against FY 2011 Continuing
Appropriation (R.A. No.10147) and FY 2012 Current Appropriation (R.A. No. 10155),
pertaining to:
3.1.1 Capital Outlays (CO);
3.1.2 Maintenance and Other Operating Expenses (MOOE) related to the implementation of
programs and projects, as well as capitalized MOOE; and
3.1.3 Personal Services corresponding to unutilized pension benefits declared as savings by
the agencies concerned based on their updated/validated list of pensioners.
3.2 The withdrawal of unobligated allotments may cover the identified programs,
projects and activities of the departments/agencies reflected in the DBM list shown as Annex
A or specific programs and projects as may be identified by the agencies.
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4.0 Exemption
These guidelines shall not apply to the following:
4.1 NGAs
4.1.1 Constitutional Offices/Fiscal Autonomy Group, granted fiscal autonomy under the
Philippine Constitution; and
4.1.2 State Universities and Colleges, adopting the Normative Funding allocation
scheme i.e., distribution of a predetermined budget ceiling.
4.2 Fund Sources
4.2.1 Personal Services other than pension benefits;
4.2.2 MOOE items earmarked for specific purposes or subject to realignment conditions per
General Provisions of the GAA:
· Confidential and Intelligence Fund;
· Savings from Traveling, Communication, Transportation and Delivery, Repair
and Maintenance, Supplies and Materials and Utility which shall be used for the
grant of Collective Negotiation Agreement incentive benefit;
· Savings from mandatory expenditures which can be realigned only in the last
quarter after taking into consideration the agency’s full year requirements, i.e.,
Petroleum, Oil and Lubricants, Water, Illumination, Power Services, Telephone,
other Communication Services and Rent.
4.2.3 Foreign-Assisted Projects (loan proceeds and peso counterpart);
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4.2.4 Special Purpose Funds such as: E-Government Fund, International Commitments

Fund, PAMANA, Priority Development Assistance Fund, Calamity Fund,
Budgetary Support to GOCCs and Allocation to LGUs, among others;
4.2.5 Quick Response Funds; and
4.2.6 Automatic Appropriations i.e., Retirement Life Insurance Premium and Special
Accounts in the General Fund.
5.0 Guidelines
5.1 National government agencies shall continue to undertake procurement activities
notwithstanding the implementation of the policy of withdrawal of unobligated allotments
until the end of the third quarter, FY 2012. Even without the allotments, the agency shall
proceed in undertaking the procurement processes (i.e., procurement planning up to the
conduct of bidding but short of awarding of contract) pursuant to GPPB Circular Nos. 02-2008
and 01-2009 and DBM Circular Letter No. 2010-9.
5.2 For the purpose of determining the amount of unobligated allotments that shall be
withdrawn, all departments/agencies/operating units (OUs) shall submit to DBM not later
than July 30, 2012, the following budget accountability reports as of June 30, 2012:
· Statement of Allotments, Obligations and Balances (SAOB);
· Financial Report of Operations (FRO); and
· Physical Report of Operations.
5.3 In the absence of the June 30, 2012 reports cited under item 5.2 of this Circular, the
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agency’s latest report available shall be used by DBM as basis for withdrawal of allotment.
The DBM shall compute/approximate the agency’s obligation level as of June 30 to derive its
unobligated allotments as of same period. Example: If the March 31 SAOB or FRO reflects
actual obligations of P800M then the June 30 obligation level shall approximate to P1,600 M
(i.e., P800 M x 2 quarters).
5.4 All released allotments in FY 2011 charged against R.A. No. 10147 which remained
unobligated as of June 30, 2012 shall be immediately considered for withdrawal. This
policy is based on the following considerations:
5.4.1 The departments/agencies’ approved priority programs and projects are assumed to be
implementation-ready and doable during the given fiscal year; and
5.4.2 The practice of having substantial carryover appropriations may imply that the agency
has a slower-than-programmed implementation capacity or agency tends to implement
projects within a two-year timeframe.
5.5. Consistent with the President’s directive, the DBM shall, based on evaluation of the
reports cited above and results of consultations with the departments/agencies, withdraw the
unobligated allotments as of June 30, 2012 through issuance of negative Special Allotment
Release Orders (SAROs).
5.6 DBM shall prepare and submit to the President, a report on the magnitude of
withdrawn allotments. The report shall highlight the agencies which failed to submit the
June 30 reports required under this Circular.
5.7 The withdrawn allotments may be:
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5.7.1 Reissued for the original programs and projects of the agencies/OUs concerned, from

which the allotments were withdrawn;
5.7.2 Realigned to cover additional funding for other existing programs and projects of the
agency/OU; or
5.7.3 Used to augment existing programs and projects of any agency and to fund priority
programs and projects not considered in the 2012 budget but expected to be started or
implemented during the current year.
5.8 For items 5.7.1 and 5.7.2 above, agencies/OUs concerned may submit to DBM a
Special Budget Request (SBR), supported with the following:
5.8.1 Physical and Financial Plan (PFP);
5.8.2 Monthly Cash Program (MCP); and
5.8.3 Proof that the project/activity has started the procurement processes i.e., Proof of
Posting and/or Advertisement of the Invitation to Bid.
5.9 The deadline for submission of request/s pertaining to these categories shall be until
the end of the third quarter i.e., September 30, 2012. After said cut-off date, the withdrawn
allotments shall be pooled and form part of the overall savings of the national government.
5.10 Utilization of the consolidated withdrawn allotments for other priority programs and
projects as cited under item 5.7.3 of this Circular, shall be subject to approval of the
President. Based on the approval of the President, DBM shall issue the SARO to cover the
approved priority expenditures subject to sub-
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mission by the agency/OU concerned of the SBR and supported with PFP and MCP.
5.11 It is understood that all releases to be made out of the withdrawn allotments (both
2011 and 2012 unobligated allotments) shall be within the approved Expenditure Program
level of the national government for the current year. The SAROs to be issued shall properly
disclose the appropriation source of the release to determine the extent of allotment validity,
as follows:
· For charges under R.A. 10147 — allotments shall be valid up to December 31, 2012;
and
· For charges under R.A. 10155 — allotments shall be valid up to December 31, 2013.
5.12 Timely compliance with the submission of existing BARs and other reportorial
requirements is reiterated for monitoring purposes.
6.0 Effectivity
This circular shall take effect immediately.
(Sgd.) FLORENCIO B. ABAD
Secretary
As can be seen, NBC No. 541 specified that the unobligated allotments of all agencies and
departments as of June 30, 2012 that were charged against the continuing appropriations for
fiscal year 2011 and the 2012 GAA (R.A. No. 10155) were subject to withdrawal through the
issuance of negative SAROs, but such allotments could be either: (1) reissued for the original
PAPs of the concerned agencies from which they were withdrawn; or (2) realigned to cover
additional funding for other existing PAPs of the concerned agencies; or (3) used to augment
existing PAPs of any agency and to fund priority PAPs not considered in the 2012 budget but
expected to be
120

started or implemented in 2012. Financing the other priority PAPs was made subject to the
approval of the President. Note here that NBC No. 541 used terminologies like “realignment” and
“augmentation” in the application of the withdrawn unobligated allotments.
Taken together, all the issuances showed how the DAP was to be implemented and funded,
that is — (1) by declaring “savings” coming from the various departments and agencies derived
from pooling unobligated allotments and withdrawing unreleased appropriations; (2) releasing
unprogrammed funds; and (3) applying the “savings” and unprogrammed funds to augment
existing PAPs or to support other priority PAPs.
c. DAP was not an appropriation measure; hence, no appropriation law
was required to adopt or to implement it
Petitioners Syjuco, Luna, Villegas and PHILCONSA state that Congress did not enact a law to
establish the DAP, or to authorize the disbursement and release of public funds to implement the
DAP. Villegas, PHILCONSA, IBP, Araullo, and COURAGE observe that the appropriations
funded under the DAP were not included in the 2011, 2012 and 2013 GAAs. To petitioners IBP,
Araullo, and COURAGE, the DAP, being actually an appropriation that set aside public funds for
public use, should require an enabling law for its validity. VACC maintains that the DAP,
because it involved huge allocations that were separate and distinct from the GAAs,
circumvented and duplicated the GAAs without congressional authorization and control.
The petitioners contend in unison that based on how it was developed and implemented the
DAP violated the mandate of Section 29(1), Article VI of the 1987 Constitution that “[n]o money
shall be paid out of the Treasury except in pursuance of an appropriation made by law.”
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The OSG posits, however, that no law was necessary for the adoption and implementation of
the DAP because of its 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.
We agree with the OSG’s position.
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. Indeed, appropriation was the act by
which Congress “designates a particular fund, or sets apart a specified portion of the public
revenue or of the money in the public treasury, to be applied to some general object of
governmental expenditure, or to some individual purchase or expense.”[124] As pointed out
in Gonzales v. Raquiza:[125] “In a strict sense, appropriation has been defined ‘as nothing more
than the legislative authorization prescribed by the Constitution that money may be paid out of
the Treasury,’ while appropriation made by law refers to ‘the act of the legislature setting apart
or assigning to a particular use a certain sum to be used in the payment of debt or dues from the
State to its creditors.’”[126]
On the other hand, 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
_______________
[124] Blacks’ Law Dictionary, p. 102 (6th ed.).
[125] G.R. No. 29627, December 19, 1989, 180 SCRA 254.
[126] Id., at p. 160.
122

the country’s economic situation.[127] 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.
3.
Unreleased appropriations and withdrawn
unobligated allotments under the DAP were not
savings, and the use of such appropriations
contravened Section 25(5), Article VI of the
1987 Constitution.
Notwithstanding our appreciation of the DAP as a plan or strategy validly adopted by the
Executive to ramp up spending to accelerate economic growth, the challenges posed by the
petitioners constrain us to dissect the mechanics of the actual execution of the DAP. The
management and utilization of the public wealth inevitably demands a most careful scrutiny of
whether the Executive’s implementation of the DAP was consistent with the Constitution, the
relevant GAAs and other existing laws.
_______________
[127] Daniel Tomassi, “Budget Execution,” in Budgeting and Budgetary Institutions, ed. Anwar Shah (Washington: The
International Bank for Reconstruction and Development/World Bank, 2007), p. 279, available
at http://siteresources.worldbank.org/PSGLP/Resources/
BudgetingandBudgetaryInstitutions.pdf (last accessed April 9, 2014).
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a. Although executive discretion and flexibility are necessary in the

execution of the budget, any transfer of appropriated funds should
conform to Section 25(5), Article VI of the Constitution
We begin this dissection by reiterating that Congress cannot anticipate all issues and needs
that may come into play once the budget reaches its execution stage. Executive discretion is
necessary at that stage to achieve a sound fiscal administration and assure effective budget
implementation. The heads of offices, particularly the President, require flexibility in their
operations under performance budgeting to enable them to make whatever adjustments are
needed to meet established work goals under changing conditions.[128] In particular, the power to
transfer funds can give the President the flexibility to meet unforeseen events that may
otherwise impede the efficient implementation of the PAPs set by Congress in the GAA.
Congress has traditionally allowed much flexibility to the President in allocating funds
pursuant to the GAAs,[129] particularly when the funds are grouped to form lump sum accounts.
[130] It is assumed that the agencies of the Government enjoy more flexibility when the GAAs
provide broader appropriation items.[131] This flexibility comes in the form of policies that the
Executive may adopt during the budget execution
_______________
[128] Budget Operations Manual (Revised edition) 1968, Office of the President, Budget Commission.
[129] Fujitani and Shirck, Executive Spending Powers: The Capacity to Reprogram, Rescind, and Impound. Harvard
Law School, Federal Budget Policy Seminar, Briefing Paper No. 8, p. 1, available
at http://www.law.harvard.edu/faculty/hjackson/ExecutiveSpending
Powers_8.pdf (last accessed December 3, 2013).
[130] Id., at p. 8.
[131] Id.
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phase. The DAP — as a strategy to improve the country’s economic position — was one policy
that the President decided to carry out in order to fulfill his mandate under the GAAs.
Denying to the Executive flexibility in the expenditure process would be counterproductive.
In Presidential Spending Power,[132] Prof. Louis Fisher, an American constitutional scholar
whose specialties have included budget policy, has justified extending discretionary authority to
the Executive thusly:
[T]he impulse to deny discretionary authority altogether should be resisted. There are many number of
reasons why obligations and outlays by administrators may have to differ from appropriations by legislators.
Appropriations are made many months, and sometimes years, in advance of expenditures. Congress acts
with imperfect knowledge in trying to legislate in fields that are highly technical and constantly undergoing
change. New circumstances will develop to make obsolete and mistaken the decisions reached by Congress
at the appropriation stage. It is not practicable for Congress to adjust to each new development by passing
separate supplemental appropriation bills. Were Congress to control expenditures by confining
administrators to narrow statutory details, it would perhaps protect its power of the purse but
it would not protect the purse itself. The realities and complexities of public policy require
executive discretion for the sound management of public funds.
xxxx
x x x The expenditure process, by its very nature, requires substantial discretion for administrators. They
need to exercise judgment and take responsibility for their actions, but those actions ought to be directed
toward executing congressional, not administrative policy.
_______________
[132] Id. Princeton University Press, pp. 261-262, 1975.
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Let there be discretion, but channel it and use it to satisfy the programs and priorities established by
Congress.
In contrast, by allowing to the heads of offices some power to transfer funds within their
respective offices, the Constitution itself ensures the fiscal autonomy of their offices, and at the
same time maintains the separation of powers among the three main branches of the
Government. The Court has recognized this, and emphasized so in Bengzon v. Drilon,[133] viz.:
The Judiciary, the Constitutional Commissions, and the Ombudsman must have the independence and
flexibility needed in the discharge of their constitutional duties. The imposition of restrictions and
constraints on the manner the independent constitutional offices allocate and utilize the funds appropriated
for their operations is anathema to fiscal autonomy and violative not only of the express mandate of the
Constitution but especially as regards the Supreme Court, of the independence and separation of powers
upon which the entire fabric of our constitutional system is based.
In the case of the President, the power to transfer funds from one item to another within the
Executive has not been the mere offshoot of established usage, but has emanated from law itself.
It has existed since the time of the American Governors-General.[134] Act No. 1902 (An Act
authorizing the Governor-General to direct any unexpended balances of appropriations be
returned to the general fund of the Insular Treasury and to transfer from the general fund moneys
which have been returned thereto), passed on May 18, 1909 by the First Philippine Legislature,
[135] was the first enabling law that
_______________
[133] G.R. No. 103524, April 15, 1992, 208 SCRA 133, 150.
[134] Waldby, Odell, Philippine Public Fiscal Administration, Institute of Public Administration, University of the
Philippines, p. 319, 1954.
[135] The Philippine Commission, which lasted from 1900 to 1916, comprised the Upper House of the Philippines
Legislature. The
126

granted statutory authority to the President to transfer funds. The authority was without any
limitation, for the Act explicitly empowered the Governor-General to transfer any unexpended
balance of appropriations for any bureau or office to another, and to spend such balance as if it
had originally been appropriated for that bureau or office.
From 1916 until 1920, the appropriations laws set a cap on the amounts of funds that could be
transferred, thereby limiting the power to transfer funds. Only 10% of the amounts appropriated
for contingent or miscellaneous expenses could be transferred to a bureau or office, and the
transferred funds were to be used to cover deficiencies in the appropriations also for
miscellaneous expenses of said bureau or office.
In 1921, the ceiling on the amounts of funds to be transferred from items under miscellaneous
expenses to any other item of a certain bureau or office was removed.
During the Commonwealth period, the power of the President to transfer funds continued to be
governed by the GAAs despite the enactment of the Constitution in 1935. It is notable that the
1935 Constitution did not include a provision on the power to transfer funds. At any rate, a shift
in the extent of the President’s power to transfer funds was again experienced during this era,
with the President being given more flexibility in implementing the budget. The GAAs provided
that the power to transfer all or portions of the appropriations in the Executive Department could
be made in the “interest of the public, as the President may determine.”[136]
In its time, the 1971 Constitutional Convention wanted to curtail the President’s seemingly
unbounded discretion in transferring funds.[137] Its Committee on the Budget and Ap-
_______________
Philippine Assembly, which existed from 1907 to 1916, served in its time as the Lower House of the Philippine
Legislature.
[136] Waldby, op. cit., at pp. 321-322.
[137] In his Sponsorship Speech, Delegate Honesto Mendoza, the Chairman of the Committee on Budget and
Appropriations of the
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propriation proposed to prohibit the transfer of funds among the separate branches of the
Government and the independent constitutional bodies, but to allow instead their respective
heads to augment items of appropriations from savings in their respective budgets under certain
limitations.[138] The clear intention of the Convention was to further restrict, not to liberalize, the
power to transfer appropriations.[139] Thus, the Committee on the Budget and Appropriation
initially considered setting stringent limitations on the power to augment, and suggested that the
augmentation of an item of appropriation could be made “by not more than ten percent if the
original item of appropriation to be augmented does not exceed one million pesos, or by not more
than five percent if the original item of appropriation to be augmented exceeds one million
pesos.”[140] But two members of the Committee objected to the P1,000,000.00 threshold, saying
that the amount was arbitrary and might not be reasonable in the future. The Committee agreed
to eliminate the P1,000,000.00 threshold, and settled on the ten percent limitation.[141]
In the end, the ten percent limitation was discarded during the plenary of the Convention,
which adopted the following final version under Section 16, Article VIII of the 1973 Constitution,
to wit:
(5) No law shall be passed authorizing any transfer of appropriations; however, the President, the Prime
Minister, the Speaker, the Chief Justice of the Supreme Court, and the heads of Constitutional Commissions
_______________
1971 Constitutional Convention, stated that it was deemed “absolutely necessary to remove the anomaly of illegal fund transfers of
public funds to projects or purposes not contemplated by law.”
[138] Minutes of the Meeting, Commission on Budget and Appropriations, 1971 Constitutional Convention, November 4, 1971, p. 18.
[139] Minutes of the Meeting, Commission on Budget and Appropriations, 1971 Constitutional Convention, January 13, 1972, p. 10.
[140] Id., at p. 9.
[141] Id., at pp. 10-11.
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may by law be authorized to augment any item in the general appropriations law for their respective offices
from savings in other items of their respective appropriations.
The 1973 Constitution explicitly and categorically prohibited the transfer of funds from one
item to another, unless Congress enacted a law authorizing the President, the Prime Minister,
the Speaker, the Chief Justice of the Supreme Court, and the heads of the Constitutional
Commissions to transfer funds for the purpose of augmenting any item from savings in another
item in the GAA of their respective offices. The leeway was limited to augmentation only, and
was further constricted by the condition that the funds to be transferred should come from
savings from another item in the appropriation of the office.[142]
On July 30, 1977, President Marcos issued PD No. 1177, providing in its Section 44 that:
Section 44. Authority to Approve Fund Transfers.—The President shall have the authority to
transfer any fund appropriated for the different departments, bureaus, offices and agencies of
the Executive Department which are included in the General Appropriations Act, to any
program, project, or activity of any department, bureau or office included in the General
Appropriations Act or approved after its enactment.
The President shall, likewise, have the authority to augment any appropriation of the Executive
Department in the General Appropriations Act, from savings in the appropriations of another department,
bureau, office or agency within the Executive Branch, pursuant to the provisions of Article VIII, Section
16(5) of the Constitution.
_______________
[142] Demetria v. Alba, No. L-71977, February 27, 1987, 148 SCRA 208.
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In Demetria v. Alba, however, the Court struck down the first paragraph of Section 44 for
contravening Section 16(5) of the 1973 Constitution, ruling:
Paragraph 1 of Section 44 of P.D. No. 1177 unduly overextends the privilege granted under said Section
16. It empowers the President to indiscriminately transfer funds from one department, bureau, office or
agency of the Executive Department to any program, project or activity of any department, bureau or office
included in the General Appropriations Act or approved after its enactment, without regard as to
whether or not the funds to be transferred are actually savings in the item from which the same
are to be taken, or whether or not the transfer is for the purpose of augmenting the item to
which said transfer is to be made. It does not only completely disregard the standards set in the
fundamental law, thereby amounting to an undue delegation of legislative powers, but likewise goes beyond
the tenor thereof. Indeed, such constitutional infirmities render the provision in question null and void.[143]
It is significant that Demetria was promulgated 25 days after the ratification by the people of
the 1987 Constitution, whose Section 25(5) of Article VI is identical to Section 16(5), Article VIII
of the 1973 Constitution, to wit:
Section 25. x x x
xxxx
5) No law shall be passed authorizing any transfer of appropriations; however, 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 Constitutional Commissions may, by law, be authorized to augment any item in the
general appro-
_______________
[143] Id., at pp. 214-215.
130

priations law for their respective offices from savings in other items of their respective appropriations.
x x x x
The foregoing history makes it evident that the Constitutional Commission included Section
25(5), supra, to keep a tight rein on the exercise of the power to transfer funds appropriated by
Congress by the President and the other high officials of the Government named therein. The
Court stated in Nazareth v. Villar:[144]
In the funding of current activities, projects, and programs, the general rule should still be that the
budgetary amount contained in the appropriations bill is the extent Congress will determine as sufficient for
the budgetary allocation for the proponent agency. The only exception is found in Section 25(5), Article VI of
the Constitution, by which 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 Constitutional Commissions are
authorized to transfer appropriations to augment any item in the GAA for their respective offices from the
savings in other items of their respective appropriations. The plain language of the constitutional restriction
leaves no room for the petitioner’s posture, which we should now dispose of as untenable.
It bears emphasizing that the exception in favor of the high officials named in Section 25(5), Article VI of
the Constitution limiting the authority to transfer savings only to augment another item in the GAA is
strictly but reasonably construed as exclusive. As the Court has expounded in Lokin, Jr. v. Commission on
Elections:
When the statute itself enumerates the exceptions to the application of the general rule, the exceptions are
strictly but reasonably construed. The exceptions extend only as far as their language fairly warrants,
and all doubts should be resolved
_______________
[144] G.R. No. 188635, January 29, 2013, 689 SCRA 385, 402-404.
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in favor of the general provision rather than the exceptions. Where the general rule is established by a
statute with exceptions, none but the enacting authority can curtail the former. Not even the courts may add
to the latter by implication, and it is a rule that an express exception excludes all others, although it is
always proper in determining the applicability of the rule to inquire whether, in a particular case, it accords
with reason and justice.
The appropriate and natural office of the exception is to exempt something from the scope of the general
words of a statute, which is otherwise within the scope and meaning of such general words.
Consequently, the existence of an exception in a statute clarifies the intent that the statute shall apply to
all cases not excepted. Exceptions are subject to the rule of strict construction; hence, any doubt will be
resolved in favor of the general provision and against the exception. Indeed, the liberal construction of a
statute will seem to require in many circumstances that the exception, by which the operation of the
statute is limited or abridged, should receive a restricted construction.
Accordingly, we should interpret Section 25(5), supra, in the context of a limitation on the
President’s discretion over the appropriations during the Budget Execution Phase.
b. Requisites for the valid transfer of appropriated funds under

Section 25(5), Article VI of the 1987 Constitution
The transfer of appropriated funds, to be valid under Section 25(5), supra, must be made upon
a concurrence of the following requisites, namely:
(1) There is a law authorizing the President, the President of the Senate, the Speaker of
the House of Representatives, the Chief Justice of
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the Supreme Court, and the heads of the Constitutional Commissions to transfer funds
within their respective offices;
(2) The funds to be transferred are savings generated from the appropriations for their
respective offices; and
(3) The purpose of the transfer is to augment an item in the general appropriations law
for their respective offices.
b.1. First Requisite — GAAs of 2011 and 2012 lacked valid provisions to
authorize transfers of funds under the DAP; hence, transfers under the 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.
Did the GAAs 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.
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In the 2012 GAA, the empowering provision was Section 53, to wit:
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 fact, the foregoing provisions of the 2011 and 2012 GAAs were cited by the DBM as
justification for the use of savings under the DAP.[145]
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. At the very least, the aforequoted provisions cannot be used
to claim authority to transfer appropriations from the Executive to another branch, or to a
constitutional commission.
_______________
[145] Constitutional and Legal Bases <http://www.dbm.gov.ph/?page_id=7364> (visited March 27, 2014).
134

Apparently realizing the problem, Congress inserted the omitted phrase in the counterpart
provision in the 2013 GAA, to wit:
enjoying fiscal autonomy, and the Ombudsman are hereby authorized to use savings in their respective
appropriations to augment actual deficiencies incurred for the current year in any item of their respective
appropriations.
Even had a valid law authorizing the transfer of funds pursuant to Section 25(5), supra,
existed, there still remained two other requisites to be met, namely: that the source of funds to be
transferred were savings from appropriations within the respective offices; and that the transfer
must be for the purpose of augmenting an item of appropriation within the respective offices.
b.2. Second Requisite — There were no savings from which funds

could be sourced for the DAP
Were the funds used in the DAP actually savings?
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. Belgica argues that “savings” should be
understood to refer to the excess money after the items that needed to be funded have been
funded, or those that needed to be paid have been paid pursuant to the budget.[146] The
petitioners posit that
_______________
[146] Rollo (G.R. No. 209442), p. 7.
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there could be savings only when the PAPs for which the funds had been appropriated were
actually implemented and completed, or finally discontinued or abandoned. They insist that
savings could not be realized with certainty in the middle of the fiscal year; and that the funds for
“slow-moving” PAPs could not be considered as savings because such PAPs had not actually been
abandoned or discontinued yet.[147] They stress that NBC No. 541, by allowing the withdrawn
funds to be reissued to the “original program or project from which it was withdrawn,” conceded
that the PAPs from which the supposed savings were taken had not been completed, abandoned
or discontinued.[148]
The OSG represents that “savings” were “appropriations balances,” being the difference
between the appropriation authorized by Congress and the actual amount allotted for the
appropriation; that the definition of “savings” in the GAAs set only the parameters for
determining when savings occurred; that it was still the President (as well as the other officers
vested by the Constitution with the authority to augment) who ultimately determined when
savings actually existed because savings could be determined only during the stage of budget
execution; that the President must be given a wide discretion to accomplish his tasks; and that
the withdrawn unobligated allotments were savings inasmuch as they were clearly “portions or
balances of any programmed appropriation…free from any obligation or encumbrances 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…”
We partially find for the petitioners.
_______________
[147] Rollo (G.R. No. 209260), p. 17; (G.R. No. 209517), p. 19; (G.R. No. 209155), p. 11; (G.R. No. 209135), p. 13.
[148] Rollo (G.R. No. 209287), p. 6; (G.R. No. 209517), p. 19; (G.R. No. 209442), p. 23.
136

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.[149] 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.[150]
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
_______________
[149] Section 17, Article VII of the 1987 Constitution provides:
Section 17. The President shall have control of all the executive departments, bureaus, and offices. He
shall ensure that the laws be faithfully executed.
[150] Sanchez v. Commission on Audit, G.R. No. 127545, April 23, 2008, 552 SCRA 471, 497.
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realized. This interpretation prevents the Executive from unduly transgressing Congress’ power
of the purse.
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.
The three instances listed in the GAAs’ aforequoted definition were a sure indication that
savings could be generated only upon the purpose of the appropriation being fulfilled, or upon the
need for the appropriation being no longer existent.
The phrase “free from any obligation or encumbrance” in the definition of savings in the GAAs
conveyed the notion that the appropriation was at that stage when the appropriation was already
obligated and the appropriation was already released. This interpretation was reinforced by the
enumeration of the three instances for savings to arise, which showed that the appropriation
referred to had reached the agency level. It could not be otherwise, considering that only when
the appropriation had reached the agency level could it be determined whether (a) the PAP for
which the appropriation had been authorized was completed, finally discontinued, or abandoned;
or (b) there were vacant positions and leaves of
138

absence without pay; or (c) the required or planned targets, programs and services were realized
at a lesser cost because of the implementation of measures resulting in improved systems and
efficiencies.
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 declaration of the DBM by itself does not state the clear legal basis for the treatment of
unreleased or unalloted appropriations as savings. The fact alone that the appropriations are
unreleased or unalloted is a mere description of the status of the items as unalloted or
unreleased. They have not yet ripened into categories of items from which savings can be
generated. Appropriations have been considered “released” if there has already been an allotment
or authorization to incur obligations and disbursement authority. This means that the DBM has
issued either an ABM (for those not needing clearance), or a SARO (for those needing clearance),
and consequently an NCA, NCAA or CDC, as the case may be. Appropriations remain unreleased,
for instance, because of noncompliance with documentary requirements (like the Special Budget
Request), or simply because of the unavailability of funds. But the appropriations do not actually
reach the agencies to which they were allocated under the GAAs, and have remained with the
DBM technically speaking. Ergo, unreleased appropriations refer to appropriations with
allotments but without disbursement authority.
For us to consider unreleased appropriations as savings, unless these met the statutory
definition of savings, would seriously undercut the congressional power of the purse, because
such appropriations had not even reached and been used by the agency concerned vis-à-vis the
PAPs for which Congress had allocated them. However, if an agency has un-
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filled positions in its plantilla and did not receive an allotment and NCA for such vacancies,
appropriations for such positions, although unreleased, may already constitute savings for that
agency under the second instance.
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.
Justice Carpio has validly observed in his Separate Concurring Opinion that MOOE
appropriations are deemed divided into twelve monthly allocations within the fiscal year; hence,
savings could be generated monthly from the excess or unused MOOE appropriations other than
the Mandatory Expenditures and Expenditures for Business-type Activities because of the
physical impossibility to obligate and spend such funds as MOOE for a period that already
lapsed. Following this observation, MOOE for future months are not savings and cannot be
transferred.
The DBM’s Memorandum for the President dated June 25, 2012 (which became the basis of
NBC No. 541) stated:
ON THE AUTHORITY TO WITHDRAW UNOBLIGATED ALLOTMENTS
5.0 The DBM, during the course of performance reviews conducted on the agencies’ operations,
particularly on the implementation of their projects/activities, including expenses incurred in undertaking
the same, have been continuously calling the attention of all National Government agencies
140

(NGAs) with low levels of obligations as of end of the first quarter to speed up the implementation of their
programs and projects in the second quarter.
6.0 Said reminders were made in a series of consultation meetings with the concerned agencies and with
call-up letters sent.
7.0 Despite said reminders and the availability of funds at the department’s disposal, the level of financial
performance of some departments registered below program, with the targeted obligations/disbursements
for the first semester still not being met.
8.0 In order to maximize the use of the available allotment, all unobligated balances as of June 30, 2012,
both for continuing and current allotments shall be withdrawn and pooled to fund fast moving
programs/projects.
9.0 It may be emphasized that the allotments to be withdrawn will be based on the list of slow
moving projects to be identified by the agencies and their catch up plans to be evaluated by the
DBM.
It is apparent from the foregoing text that the withdrawal of unobligated allotments would be
based on whether the allotments pertained to slow-moving projects, or not. However, NBC No.
541 did not set in clear terms the criteria for the withdrawal of unobligated allotments, viz.:
3.1. These guidelines shall cover the withdrawal of unobligated allotments as of June 30, 2012 of all
national government agencies (NGAs) charged against FY 2011 Continuing Appropriation (R.A. No. 10147)
and FY 2012 Current Appropriation (R.A. No. 10155), pertaining to:
3.1.2 Maintenance and Other Operating Expenses (MOOE) related to the implementa-tion of
3.1.3 Personal Services corresponding to unutilized pension benefits declared as savings by the
agencies concerned based on their undated/validated list of pensioners.
A perusal of its various provisions reveals that NBC No. 541 targeted the “withdrawal of
unobligated allotments of agencies with low levels of obligations”[151] “to fund priority and/or
fast-moving programs/projects.”[152] But the fact that the withdrawn allotments could be
“[r]eissued for the original programs and projects of the agencies/OUs concerned, from which the
allotments were withdrawn”[153]supported the conclusion that the PAPs had not yet been finally
discontinued or abandoned. Thus, the purpose for which the withdrawn funds had been
appropriated was not yet fulfilled, or did not yet cease to exist, rendering the declaration of the
funds as savings impossible.
Worse, NBC No. 541 immediately considered for withdrawal all released allotments in 2011
charged against the 2011 GAA that had remained unobligated based on the following
considerations, to wit:
5.4.2 The practice of having substantial carryover appropriations may imply that the agency has a
_______________
[151] NBC No. 541 (Rationale); see also NBC No. 541 (5.3), which stated that, in case of failure to submit budget accountability
reports, the DBM would compute/approximate the agency’s obligation level as of June 30 to derive its unobligated allotments as of the
same period.
[152] NBC No. 541 (2.1).
[153] NBC No. 541 (5.7.1).
142

slower-than-programmed implementation capacity or agency tends to implement projects within a two-year

timeframe.
Such withdrawals pursuant to NBC No. 541, the circular that affected the unobligated
allotments for continuing and current appropriations as of June 30, 2012, disregarded the 2-year
period of availability of the appropriations for MOOE and capital outlay extended under Section
65, General Provisions of the 2011 GAA, viz.:
Section 65. Availability of Appropriations.—Appropriations for MOOE and capital outlays authorized in
this Act shall be available for release and obligation for the purpose specified, and under the same
special provisions applicable thereto, for a period extending to one fiscal year after the end of the
year in which such items were appropriated: PROVIDED, That appropriations for MOOE and capital
outlays under R.A. No. 9970 shall be made available up to the end of FY 2011: PROVIDED, FURTHER,
That a report on these releases and obligations shall be submitted to the Senate Committee on Finance and
the House Committee on Appropriations.
and Section 63 General Provisions of the 2012 GAA, viz.:

Section 63. Availability of Appropriations.—Appropriations for MOOE and capital
outlays authorized in this Act shall be available for release and obligation for the purpose specified,
and under the same special provisions applicable thereto, for a period extending to one fiscal year
after the end of the year in which such items were appropriated: PROVIDED, That a report on these
releases and obligations shall be submitted to the Senate Committee on Finance
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and the House Committee on Appropriations, either in printed form or by way of electronic document.[154]
Thus, another alleged area of constitutional infirmity was that the DAP and its relevant
issuances shortened the period of availability of the appropriations for MOOE and capital
outlays.
Congress provided a one-year period of availability of the funds for all allotment classes in the
2013 GAA (R.A. No. 10352), to wit:
Section 63. Availability of Appropriations.—All appropriations authorized in this Act shall be available
for release and obligation for the purposes specified, and under the same special provisions applicable
thereto, until the end of FY 2013: PROVIDED, That a report on these releases and obligations shall be
submitted to the Senate Committee on Finance and House Committee on Appropriations, either in printed
form or by way of electronic document.
Yet, in his memorandum for the President dated May 20, 2013, Sec. Abad sought omnibus
authority to consolidate savings and unutilized balances to fund the DAP on a quarterly
basis, viz.:
7.0 If the level of financial performance of some department will register below program, even with
_______________
[154] These GAA provisions are reflected, respectively, in NBC No. 528 (Guidelines on the Release of funds for FY 2011), thus:
3.9.1.2 Appropriations under FY 2011 GAA, R.A. 10147 shall be available for release and obligations up to December 31,
2012 with the exception of PS which shall lapse at the end of 2011.
and NBC No. 535 (Guidelines on the Release of funds for FY 2012), thus:
3.9.1.2 Appropriations under CY 2012 GAA, R.A. 10155 shall be available for release and obligations up to December 31,
2013 with the exception of PS which shall lapse at the end of 2012.
144

the availability of funds at their disposal, the targeted obligations/disbursements for each quarter will not be
met. It is important to note that these funds will lapse at the end of the fiscal year if these remain
unobligated.
8.0 To maximize the use of the available allotment, all unobligated balances at the end of every
quarter, both for continuing and current allotments shall be withdrawn and pooled to fund fast moving
programs/projects.
9.0 It may be emphasized that the allotments to be withdrawn will be based on the list of slow moving
projects to be identified by the agencies and their catch up plans to be evaluated by the DBM.
The validity period of the affected appropriations, already given the brief lifespan of one year,
was further shortened to only a quarter of a year under the DBM’s memorandum dated May 20,
2013.
The petitioners accuse the respondents of forcing the generation of savings in order to have a
larger fund available for discretionary spending. They aver that the respondents, by withdrawing
unobligated allotments in the middle of the fiscal year, in effect deprived funding for PAPs with
existing appropriations under the GAAs.[155]
The respondents belie the accusation, insisting that the unobligated allotments were being
withdrawn upon the instance of the implementing agencies based on their own assessment that
they could not obligate those allotments pursuant to the President’s directive for them to spend
their appropriations as quickly as they could in order to ramp up the economy.[156]
We agree with the petitioners.
_______________
[155] Rollo (G.R. No. 209442), p. 23.
[156] Rollo (G.R. No. 209287), p. 1060, (Memorandum for the Respondents).
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Contrary to the respondents’ insistence, the withdrawals were upon the initiative of the DBM
itself. The text of NBC No. 541 bears this out, to wit:
5.2 For the purpose of determining the amount of unobligated allotments that shall be withdrawn, all
departments/agencies/operating units (OUs) shall submit to DBM not later than July 30, 2012, the
following budget accountability reports as of June 30, 2012;
Statement of Allotments, Obligation and Balances (SAOB);

Financial Report of Operations (FRO); and
Physical Report of Operations.
5.3 In the absence of the June 30, 2012 reports cited under item 5.2 of this Circular, the agency’s latest
report available shall be used by DBM as basis for withdrawal of allotment. The DBM shall
compute/approximate the agency’s obligation level as of June 30 to derive its unobligated allotments as of
same period. Example: If the March 31 SAOB or FRO reflects actual obligations of P800M then the June 30
obligation level shall approximate to P1,600 M (i.e., P800 M x 2 quarters).
The petitioners assert that no law had authorized the withdrawal and transfer of
unobligated allotments and the pooling of unreleased appropriations; and that the unbridled
withdrawal of unobligated allotments and the retention of appropriated funds were akin to the
impoundment of appropriations that could be allowed only in case of “unmanageable national
government budget deficit” under the GAAs,[157] thus violating the provisions of the GAAs of
2011, 2012 and 2013 prohibiting the retention or deduction of allotments.[158]
_______________
[157] Rollo (209287), pp. 18-19.
[158] Rollo (209442), pp. 21-22.
146

In contrast, the respondents emphasize that NBC No. 541 adopted a spending, not saving,
policy as a last-ditch effort of the Executive to push agencies into actually spending their
appropriations; that such policy did not amount to an impoundment scheme, because
impoundment referred to the decision of the Executive to refuse to spend funds for political or
ideological reasons; and that the withdrawal of allotments under NBC No. 541 was made
pursuant to Section 38, Chapter 5, Book VI of the Administrative Code, by which the President
was granted the authority to suspend or otherwise stop further expenditure of funds allotted to
any agency whenever in his judgment the public interest so required.
The assertions of the petitioners are upheld. The withdrawal and transfer of unobligated
allotments and the pooling of unreleased appropriations were invalid for being bereft of legal
support. Nonetheless, such withdrawal of unobligated allotments and the retention of
appropriated funds cannot be considered as impoundment.
According to Philippine Constitution Association v. Enriquez:[159] “Impoundment refers to a
refusal by the President, for whatever reason, to spend funds made available by Congress. It is
the failure to spend or obligate budget authority of any type.” Impoundment under the GAA is
understood to mean the retention or deduction of appropriations. The 2011 GAA authorized
impoundment only in case of unmanageable National Government budget deficit, to wit:
Section 66. Prohibition Against Impoundment of Appropriations.—No appropriations authorized under
this Act shall be impounded through retention or deduction, unless in accordance with the rules and
regulations to be issued by the DBM: PROVIDED, That all the funds appropriated for the purposes,
programs, projects and activities authorized under this Act, except those covered under the Unprogrammed
Fund, shall be released pur-
_______________
[159] G.R. No. 113105, August 19, 1994, 235 SCRA 506, 545.
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suant to Section 33(3), Chapter 5, Book VI of E.O. No. 292.

Section 67. Unmanageable National Government Budget Deficit.—Retention or deduction of
appropriations authorized in this Act shall be effected only in cases where there is an unmanageable
national government budget deficit.
Unmanageable national government budget deficit as used in this section shall be construed to mean that
(i) the actual national government budget deficit has exceeded the quarterly budget deficit targets consistent
with the full-year target deficit as indicated in the FY 2011 Budget of Expenditures and Sources of
Financing submitted by the President and approved by Congress pursuant to Section 22, Article VII of the
Constitution, or (ii) there are clear economic indications of an impending occurrence of such condition, as
determined by the Development Budget Coordinating Committee and approved by the President.
The 2012 and 2013 GAAs contained similar provisions.

The withdrawal of unobligated allotments under the DAP should not be regarded as
impoundment because it entailed only the transfer of funds, not the retention or deduction of
appropriations.
Nor could Section 68 of the 2011 GAA (and the similar provisions of the 2012 and 2013 GAAs)
be applicable. They uniformly stated:
Section 68. Prohibition Against Retention/Deduction of Allotment.—Fund releases from appropriations
provided in this Act shall be transmitted intact or in full to the office or agency concerned. No retention or
deduction as reserves or overhead shall be made, except as authorized by law, or upon direction of the
President of the Philippines. The COA shall ensure compliance with this provision to the extent that sub-
allotments by agencies to their subordinate offices are in conformity with the release documents issued by
the DBM.
148

The provision obviously pertained to the retention or deduction of allotments upon their
release from the DBM, which was a different matter altogether. The Court should not expand the
meaning of the provision by applying it to the withdrawal of allotments.
The respondents rely on Section 38, Chapter 5, Book VI of the Administrative Code of 1987 to
justify the withdrawal of unobligated allotments. But the provision authorized only the
suspension or stoppage of further expenditures, not the withdrawal of unobligated allotments, to
wit:
Section 38. Suspension of Expenditure of Appropriations.—Except as otherwise provided in the General
Appropriations Act and whenever in his judgment the public interest so requires, the President, upon notice
to the head of office concerned, is authorized to suspend or otherwise stop further expenditure of funds
allotted for any agency, or any other expenditure authorized in the General Appropriations Act, except for
personal services appropriations used for permanent officials and employees.
Moreover, the DBM did not suspend or stop further expenditures in accordance with Section
38, supra, but instead transferred the funds to other PAPs.
It is relevant to remind at this juncture that the balances of appropriations that remained
unexpended at the end of the fiscal year were to be reverted to the General Fund. This was the
mandate of Section 28, Chapter IV, Book VI of the Administrative Code, to wit:
Section 28. Reversion of Unexpended Balances of Appropriations, Continuing Appropriations.—Unex-
pended balances of appropriations authorized in the General Appropriation Act shall revert to the
unappropriated surplus of the General Fund at the end of the fiscal year and shall not thereafter be
available for expenditure except by subsequent legislative enactment: Provided, that ap-
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propriations for capital outlays shall remain valid until fully spent or reverted: provided, further, that
continuing appropriations for current operating expenditures may be specifically recommended and
approved as such in support of projects whose effective implementation calls for multi-year expenditure
commitments: provided, finally, that the President may authorize the use of savings realized by an agency
during given year to meet nonrecurring expenditures in a subsequent year.
The balances of continuing appropriations shall be reviewed as part of the annual budget preparation
process and the preparation process and the President may approve upon recommendation of the Secretary,
the reversion of funds no longer needed in connection with the activities funded by said continuing
appropriations.
The Executive could not circumvent this provision by declaring unreleased appropriations
and unobligated allotments as savings prior to the end of the fiscal year.
b.3. Third Requisite — No funds from savings could be transferred

under the 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.[160]
The GAAs for 2011, 2012 and 2013 set as a condition for augmentation that the appropriation
for the PAP item to be augmented must be deficient, to wit:
_______________
[160] Webster’s Third New International Dictionary.
150

x x x Augmentation implies the existence in this Act of a program, activity, or project with an
appropriation, which upon implementation, or subsequent evaluation of needed resources, is determined
to be deficient. In no case shall a nonexistent program, activity, or project, be funded by augmentation
from savings or by the use of appropriations otherwise authorized in this Act.
In other words, an appropriation for any PAP must first be determined to be deficient before
it could be augmented from savings. Note is taken of the fact that the 2013 GAA already made
this quite clear, thus:
enjoying fiscal autonomy, and the Ombudsman are hereby authorized to use savings in their respective
appropriations to augment actual deficienciesincurred for the current year in any item of their
respective appropriations.
As of 2013, a total of P144.4 billion worth of PAPs were implemented through the DAP.
[161] Of this amount P82.5 billion were released in 2011 and P54.8 billion in 2012.[162] Sec. Abad
has reported that 9% of the total DAP releases were applied to the PAPs identified by the
legislators.[163]
_______________
[161] TSN, January 28, 2014, p. 12.
[162] DBM, “Sec. Abad: DAP used to buoy spending, not to buy votes,” available at http://www.dbm.gov.ph/?
p=7328 (last accessed March 28, 2014).
[163] Id.
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The petitioners disagree, however, and insist that the DAP supported the following PAPs
that had not been covered with appropriations in the respective GAAs, namely:
(i) P1.5 billion for the Cordillera People’s Liberation Army;

(ii) P1.8 billion for the Moro National Liberation Front;
(iii) P700 million for assistance to Quezon Province;[164]
(iv) P50 million to P100 (million) each to certain senators;[165]
(v) P10 billion for the relocation of families living along dangerous zones under the National
Housing Authority;
(vi) P10 billion and P20 billion equity infusion under the Bangko Sentral;
(vii) P5.4 billion landowners’ compensation under the Department of Agrarian Reform;
(viii) P8.6 billion for the ARMM comprehensive peace and development program;
(ix) P6.5 billion augmentation of LGU internal revenue allotments;
(x) P5 billion for crucial projects like tourism road construction under the Department of Tourism
and the Department of Public Works and Highways;
(xi) P1.8 billion for the DAR-DPWH Tulay ng Pangulo;
(xii) P1.96 billion for the DOH-DPWH rehabilitation of regional health units; and
(xiii) P4 billion for the DepEd-PPP school infrastructure projects.[166]
_______________
[164] Rollo (G.R. No. 209136), p. 18.
[165] Rollo (G.R. No. 209136), p. 18; (G.R. No. 209442), p. 13.
[166] Rollo (G.R. No. 209155), p. 9.
152

In refutation, the OSG argues that a total of 116 DAP-financed PAPs were implemented, had
appropriation covers, and could properly be accounted for because the funds were released
following and pursuant to the standard practices adopted by the DBM.[167] In support of its
argument, the OSG has submitted seven evidence packets containing memoranda, SAROs,
and other pertinent documents relative to the implementation and fund transfers under the DAP.
[168]
Upon careful review of the documents contained in the seven evidence packets, we conclude
that the “savings” pooled under the DAP were allocated to PAPs that were not covered by any
appropriations in the pertinent GAAs.
For example, the SARO issued on December 22, 2011 for the highly-vaunted Disaster Risk,
Exposure, Assessment and Mitigation (DREAM) project under the Department of Science and
Technology (DOST) covered the amount of P1.6 Billion,[169] broken down as follows:
_______________
[167] Rollo (G.R. No. 209287), pp. 68-104; (Respondents’ Consolidated Comment).
[168] Rollo (G.R. No. 209287), pp. 524-922.
[169] SARO No. E-11-02253; Rollo (G.R. No. 209287), p. 628, (Respondents’ 2nd Evidence Packet).

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the pertinent provision of the 2011 GAA (R.A. No. 10147) showed that Congress had
appropriated only P537,910,000 for MOOE, but nothing for personnel services and capital
outlays, to wit:
Aside from this transfer under the DAP to the DREAM project exceeding by almost 300% the
appropriation by Congress for the program Generation of new knowledge and technologies and
research capability building in priority areas identified as strategic to National Development, the
Executive allotted funds for personnel services and capital outlays. The Executive thereby
substituted its will to that of Congress. Worse, the Executive had not earlier proposed any
amount for personnel services and capital outlays in the NEP that became the basis of the 2011
GAA.[170]
It is worth stressing in this connection that the failure of the GAAs to set aside any amounts
for an expense category sufficiently indicated that Congress purposely did not see fit
_______________
[170] See FY 2011 National Expenditure Program, p. 1186, available at http://www.dbm.gov.ph/wp-
content/uploads/NEP2011/DOSTG-GAA.pdf.
154

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. That happened in some instances under the DAP.
In relation to the December 22, 2011 SARO issued to the Philippine Council for Industry,
Energy and Emerging Technology Research and Development (DOST-PCIEETRD)
[171] for Establishment of the Advanced Failure Analysis Laboratory, which reads:
the appropriation code and the particulars appearing in the SARO did not correspond to the
program specified in the GAA, whose particulars were Research and Management
Services (inclusive of the following activities: (1) Technological and Economic Assessment for
Industry, Energy and Utilities; (2) Dissemination of Science and Technology Information; and
(3) Management of PCIERD Information System for Industry, Energy and Utilities. Even
assuming that Development, integration and coordination of the National Research System for
_______________
[171] SARO No. E-14-02254; Rollo (G.R. No. 209287), p. 630, (Respondents’ 2nd Evidence Packet).
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Industry, Energy and Emerging Technology and Related Fields — the particulars stated in the
SARO — could fall under the broad program description of Research and Management Services —
as appearing in the SARO, it would nonetheless remain a new activity by reason of its not being
specifically stated in the GAA. As such, the DBM, sans legislative authorization, could not validly
fund and implement such PAP under the DAP.
In defending the disbursements, however, the OSG contends that the Executive enjoyed sound
discretion in implementing the budget given the generality in the language and the broad policy
objectives identified under the GAAs;[172] and that the President enjoyed unlimited authority to
spend the initial appropriations under his authority to declare and utilize savings,[173] and in
keeping with his duty to faithfully execute the laws.
Although the OSG rightly contends that the Executive was authorized to spend in line with its
mandate to faithfully execute the laws (which included the GAAs), such authority did not
translate to unfettered discretion that allowed the President to substitute his own will for that of
Congress. He was still required to remain faithful to the provisions of the GAAs, given that his
power to spend pursuant to the GAAs was but a delegation to him from Congress. Verily, the
power to spend the public wealth resided in Congress, not in the Executive.[174] Moreover,
leaving the spending power of the Executive unrestricted would threaten to undo the principle of
separation of powers. [175]
_______________
[172] Rollo (G.R. No. 209287), p. 27, (Respondents’ Memorandum).
[173] TSN, January 28, 2014, p. 26.
[174] Section 29(1), Article VI of the 1987 Constitution provides that no money shall be paid out of the Treasury except
in pursuance of an appropriation made by law.
[175] According to Allen and Miller. The Constitutionality of Executive Spending Powers, Harvard Law School, Federal
Budget Policy Seminar, Briefing Paper No. 38, p. 16, available at http://www.law.-
156

Congress acts as the guardian of the public treasury in faithful discharge of its power of the
purse whenever it deliberates and acts on the budget proposal submitted by the Executive.
[176] Its power of the purse is touted as the very foundation of its institutional strength,[177] and
underpins “all other legislative decisions and regulating the balance of influence between the
legislative and executive branches of government.”[178] Such enormous power encompasses the
capacity to generate money for the Government, to appropriate public funds, and to spend the
money.[179] Pertinently, when it exercises its power of the purse, Congress wields control by
specifying the PAPs for which public money should be spent.
_______________
harvard.edu/faculty/hjackson/ConstitutionalityOfExecutive_38.pdf(December 3, 2013):
If the executive could spend under its own authority, “then the constitutional grants of power to the legislature to raise
taxes and to borrow money would be for naught because the Executive could effectively compel such legislation by
spending at will. The ‘[L]egislative Powers’ referred to in Section 8 of Article I would then be shared by the President in
his executive as well as in his legislative capacity” The framers intended the powers to spend and the powers to
tax to be “two sides of the same coin,” and for good reason. Separating the two powers — or giving the
President one without the other — might reduce accountability and result in excessive spending: the
President would be able to spend and leave Congress to deal with the political repercussions of financing
such spending through heightened tax rates.
[177] Wander and Herbert (ed.), Congressional Budgeting: Politics, Process and Power (1984), p. 3.
[178] Id., at p. 133.
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It is the President who proposes the budget but it is Congress that has the final say on
matters of appropriations.[180] For this purpose, appropriation involves two governing principles,
namely: (1) “a Principle of the Public Fisc, asserting that all monies received from whatever
source by any part of the government are public funds”; and (2) “a Principle of Appropriations
Control, prohibiting expenditure of any public money without legislative authorization.”[181] To
conform with the governing principles, the Executive cannot circumvent the prohibition by
Congress of an expenditure for a PAP by resorting to either public or private funds.[182] Nor could
the Executive transfer appropriated funds resulting in an increase in the budget for one PAP, for
by so doing the appropriation for another PAP is necessarily decreased. The terms of both
appropriations will thereby be violated.
b.4. Third Requisite — 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.
_______________
[180] Supra note 159 at p. 522.
[181] Stith, Kate, “Congress’ Power of the Purse” (1988), Faculty Scholarship Series, Paper No. 1267, p. 1345, available
at http://digital
commons.law.yale.edu/cgi/viewcontent.cgi?article=2282&context=fss_
papers (last accessed March 29, 2014).
[182] Id., at p. 1377.

158

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.
Did any cross-border transfers or augmentations transpire?
During the oral arguments on January 28, 2014, Sec. Abad admitted making some cross-
border augmentations, to wit:
JUSTICE BERSAMIN:
Alright, the whole time that you have been Secretary of Department of Budget and
Management, did the Executive Department ever redirect any part of savings of the National
Government under your control cross border to another department?
SECRETARY ABAD:
Well, in the Memos that we submitted to you, such an instance, Your Honor.
JUSTICE BERSAMIN:
Can you tell me two instances? I don’t recall having read your material.
SECRETARY ABAD:
Well, the first instance had to do with a request from the House of Representatives. They
started building their e-library in 2010 and they had a budget for about 207 Million but they lack
about 43 Million to complete its 250 Million requirements. Prior to that, the COA, in an audit
observation informed the Speaker that they had to continue with that construction otherwise
the whole building, as well as the equipments therein may suffer from serious deterioration.
And at that
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time, since the budget of the House of Representatives was not enough to complete 250
Million, they wrote to the President requesting for an augmentation of that particular item,
which was granted, Your Honor. The second instance in the Memos is a request from the
Commission on Audit. At the time they were pushing very strongly the good governance
programs of the government and therefore, part of that is a requirement to conduct audits as
well as review financial reports of many agencies. And in the performance of that function, the
Commission on Audit needed information technology equipment as well as hire consultants and
litigators to help them with their audit work and for that they requested funds from the
Executive and the President saw that it was important for the Commission to be provided with
those IT equipments and litigators and consultants and the request was granted, Your Honor.
JUSTICE BERSAMIN:
These cross border examples, cross border augmentations were not supported by
appropriations…
SECRETARY ABAD:
They were, we were augmenting existing items within their… (interrupted)
JUSTICE BERSAMIN:
No, appropriations before you augmented because this is a cross border and the tenor or text
of the Constitution is quite clear as far as I am concerned. It says here, “The power to augment
may only be made to increase any item in the General Appropriations Law for their respective
offices.” Did you not feel constricted by this provision?
SECRETARY ABAD:
Well, as the Constitution provides, the prohibition we felt was on the transfer of appropria-
160

tions, Your Honor. What we thought we did was to transfer savings which was needed by the
Commission to address deficiency in an existing item in both the Commission as well as in the
House of Representatives; that’s how we saw… (interrupted)
JUSTICE BERSAMIN:
So your position as Secretary of Budget is that you could do that?
SECRETARY ABAD:
In an extreme instances because… (interrupted)
JUSTICE BERSAMIN:
No, no, in all instances, extreme or not extreme, you could do that, that’s your feeling.
SECRETARY ABAD:
Well, in that particular situation when the request was made by the Commission and the
House of Representatives, we felt that we needed to respond because we felt… (interrupted).[183]
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[184] and the House of Representatives.
[185] Those transfers of funds, which constituted cross-border augmentations for being from
the Executive to the COA and the House of Representatives, are graphed as follows:[186]
_______________
[183] TSN of January 28, 2014, pp. 42-45.
[184] Rollo (G.R. No. 209287), p. 883, (Respondents’ 7th Evidence Packet).
[185] Id., at p. 562, (Respondents’ 1st Evidence Packet)
[186] See the OSG’s Compliance dated February 14, 2014, Annex B, p. 2.

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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…”[187] This was another instance of a cross-border augmentation.
The respondents justified all the cross-border transfers thusly:
99. The Constitution does not prevent the President from transferring savings of his department to
another department upon the latter’s request, provided it is the recipient department that uses such funds
to augment its own appropriation. In such a case, the President merely gives the other department access to
public funds but he cannot dictate how they shall be applied by that department whose fiscal autonomy is
guaranteed by the Constitution.[188]
In the oral arguments held on February 18, 2014, Justice Vicente V. Mendoza, representing
Congress, announced a different characterization of the cross-border transfers of funds as in the
nature of “aid” instead of “augmentation,” viz.:
_______________
[187] Rollo (G.R. No. 209287), p. 35, (Memorandum for the Respondents).
[188] Id.

162

HONORABLE MENDOZA:
The cross-border transfers, if Your Honors please, is not an application of the DAP. What were these
cross-border transfers? They are transfers of savings as defined in the various General Appropriations Act.
So, that makes it similar to the DAP, the use of savings. There was a cross-border which appears to be in
violation of Section 25, paragraph 5 of Article VI, in the sense that the border was crossed. But never has
it been claimed that the purpose was to augment a deficient item in another department of the
government or agency of the government. The cross-border transfers, if Your Honors please,
were in the nature of [aid] rather than augmentations. Here is a government entity separate and
independent from the Executive Department solely in need of public funds. The President is
there 24 hours a day, 7 days a week. He’s in charge of the whole operation although six or seven
heads of government offices are given the power to augment. Only the President stationed there
and in effect in-charge and has the responsibility for the failure of any part of the government.
You have election, for one reason or another, the money is not enough to hold election. There
would be chaos if no money is given as an aid, not to augment, but as an aid to a department like
COA. The President is responsible in a way that the other heads, given the power to augment,
are not. So, he cannot very well allow this, if Your Honor please.[189]
JUSTICE LEONEN:
May I move to another point, maybe just briefly. I am curious that the position now, I think, of
government is that some transfers of savings is now considered to be, if I’m not mistaken, aid
not augmentation. Am I correct in my hearing of your argument?
_______________
[189] TSN of February 18, 2014, p. 32.
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HONORABLE MENDOZA:
That’s our submission, if Your Honor, please.
JUSTICE LEONEN:
May I know, Justice, where can we situate this in the text of the Constitution? Where do we
actually derive the concepts that transfers of appropriation from one branch to the other or
what happened in DAP can be considered as aid? What particular text in the Constitution can
we situate this?
HONORABLE MENDOZA:
There is no particular provision or statutory provision for that matter, if Your Honor please.
It is drawn from the fact that the Executive is the executive in-charge of the success of the
government.
JUSTICE LEONEN:
So, the residual powers labelled in Marcos v. Manglapus would be the basis for this theory of
the government?
HONORABLE MENDOZA:
Yes, if Your Honor, please.
JUSTICE LEONEN:
A while ago, Justice Carpio mentioned that the remedy is might be to go to Congress. That there are
opportunities and there have been opportunities of the President to actually go to Congress and ask for
supplemental budgets?
HONORABLE MENDOZA:
If there is time to do that, I would say yes.
JUSTICE LEONEN:
So, the theory of aid rather than augmentation applies in extraordinary situation?
164

HONORABLE MENDOZA:
Very extraordinary situations.
JUSTICE LEONEN:
But Counsel, this would be new doctrine, in case?
HONORABLE MENDOZA:
Yes, if Your Honor please.[190]
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, were prohibited under Section 25(5), supra.
4.
Sourcing the DAP from unprogrammed funds despite the original revenue
targets not having been exceeded was invalid
Funding under the DAP were also sourced from unprogrammed funds provided in the GAAs
for 2011, 2012, and 2013. The respondents stress, however, that the unprogrammed funds were
not brought under the DAP as savings, but as separate sources of funds; and that, consequently,
the release and use of unprogrammed funds were not subject to the restrictions under Section
25(5), supra.
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.
_______________
[190] TSN of February 18, 2014, pp. 45-46.
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The petitioners point out that a condition for the release of the unprogrammed funds was that
the revenue collections must exceed revenue targets; and that the release of the unprogrammed
funds was illegal because such condition was not met.[191]
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.[192] This view of the DBM was adopted by
all the respondents in their Consolidated Comment.[193]
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.[194] 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
_______________
[191] Rollo (G.R. No. 209287), p. 1027; (G.R. No. 209442), p. 8.
[192] Other References: A Brief on the Special Purpose Funds in the National Budget <http://www.dbm.gov.ph/?
[193] Rollo (G.R. No. 209287), p. 95.
[194] Glossary of Terms, BESF.
166

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.
The view that there were only two instances when the unprogrammed funds could be released
was bolstered by the following texts of the Special Provisions of the 2011 and 2012 GAAs, to wit:
2011 GAA
1. Release of Fund. The amounts authorized herein shall be released only when the revenue
collections exceed the original revenue targets submitted by the President of the Philippines to
Congress pursuant to Section 22, Article VII of the Constitution, including savings generated from
programmed appropriations for the year: PROVIDED, That collections arising from sources not
considered in the aforesaid original revenue targets may be used to cover releases from
appropriations in this Fund: PROVIDED, FURTHER, That in case of newly approved loans for foreign-
assisted projects, the existence of a perfected loan agreement for the purpose shall be sufficient basis for the
issuance of a SARO covering the loan proceeds: PROVIDED, FURTHERMORE, That if there are savings
generated from the programmed appropriations for the first two quarters of the year, the DBM may, subject
to the approval of the President, release the pertinent appropriations under the Unprogrammed Fund
corresponding to only fifty percent (50%) of the said savings net of revenue shortfall: PROVIDED, FINALLY,
That the release of the balance of the total savings from programmed appropriations for the year shall be
subject to fiscal programming and approval of the President.
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2012 GAA
1. Release of the Fund. The amounts authorized herein shall be released only when the revenue
Congress pursuant to Section 22, Article VII of the Constitution: PROVIDED, That collections arising
from sources not considered in the aforesaid original revenue targets may be used to cover
releases from appropriations in this Fund: PROVIDED, FURTHER, That in case of newly approved
loans for foreign-assisted projects, the existence of a perfected loan agreement for the purpose shall be
sufficient basis for the issuance of a SARO covering the loan proceeds.
As can be noted, the provisos in both provisions to the effect that “collections arising from
sources not considered in the aforesaid original revenue targets may be used to cover releases
from appropriations in this Fund” gave the authority to use such additional revenues for
appropriations funded from the unprogrammed funds. They did not at all waive compliance with
the basic requirement that revenue collections must still exceed the original revenue targets.
In contrast, the texts of the provisos with regard to additional revenues generated from newly-
approved foreign loans were clear to the effect that the perfected loan agreement would be in
itself “sufficient basis” for the issuance of a SARO to release the funds but only to the extent of
the amount of the loan. In such instance, the revenue collections need not exceed the revenue
targets to warrant the release of the loan proceeds, and the mere perfection of the loan agreement
would suffice.
It can be inferred from the foregoing that under these provisions of the GAAs the additional
revenues from sources not considered in the BESFs must be taken into account in determining if
the revenue collections exceeded the revenue targets. The text of the relevant provision of the
2013 GAA,
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which was substantially similar to those of the GAAs for 2011 and 2012, already made this
explicit, thus:
1. Release of the Fund. The amounts authorized herein shall be released only when the revenue
Congress pursuant to Section 22, Article VII of the Constitution, including collections arising from
sources not considered in the aforesaid original revenue target, as certified by the BTr: PROVIDED,
That in case of newly approved loans for foreign-assisted projects, the existence of a perfected loan
agreement for the purpose shall be sufficient basis for the issuance of a SARO covering the loan proceeds.
Consequently, that there were additional revenues from sources not considered in the
revenue target would not be enough. The total revenue collections must still exceed the original
revenue targets to justify the release of the unprogrammed funds (other than those from newly-
approved foreign loans).
The present controversy on the unprogrammed funds was rooted in the correct interpretation
of the phrase “revenue collections should exceed the original revenue targets.” The petitioners take
the phrase to mean that the total revenue collections must exceed the total revenue target stated
in the BESF, but the respondents understand the phrase to refer only to the collections for each
source of revenue as enumerated in the BESF, with the condition being deemed complied with
once the revenue collections from a particular source already exceeded the stated target.
The BESF provided for the following sources of revenue, with the corresponding revenue
target stated for each source of revenue, to wit:
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TAX REVENUES
Taxes on Net Income and Profits
Taxes on Property
Taxes on Domestic Goods and Services
General Sales, Turnover or VAT
Selected Excises on Goods
Selected Taxes on Services
Taxes on the Use of Goods or Property or Permission to Perform Activities
Other Taxes
Taxes on International Trade and Transactions
NON-TAX REVENUES
Fees and Charges
BTR Income
Government Services
Interest on NG Deposits
Interest on Advances to Government Corporations
Income from Investments
Interest on Bond Holdings
Guarantee Fee
Gain on Foreign Exchange
NG Income Collected by BTr
Dividends on Stocks
NG Share from Airport Terminal Fee
NG Share from PAGCOR Income
NG Share from MIAA Profit
Privatization
Foreign Grants
Thus, when the Court required the respondents to submit a certification from the Bureau of
Treasury (BTr) to the effect that the revenue collections had exceeded the original revenue
targets,[195] they complied by submitting certifications from the BTr and Department of Finance
(DOF) pertaining to only one identified source of revenue — the dividends from the
_______________
[195] TSN, January 28, 2014, p. 106.

170

shares of stock held by the Government in government-owned and controlled corporations.

To justify the release of the unprogrammed funds for 2011, the OSG presented the certification
dated March 4, 2011 issued by DOF Undersecretary Gil S. Beltran, as follows:
This is to certify that under the Budget for Expenditures and Sources of Financing for 2011, the
programmed income from dividends from shares of stock in government-owned and controlled corporations
is 5.5 billion.
This is to certify further that based on the records of the Bureau of Treasury, the National Government has
recorded dividend income amounting to P23.8 billion as of 31 January 2011.[196]
For 2012, the OSG submitted the certification dated April 26, 2012 issued by National
Treasurer Roberto B. Tan, viz.:
This is to certify that the actual dividend collections remitted to the National Government for the period
January to March 2012 amounted to P19.419 billion compared to the full year program of P5.5 billion for
2012.[197]
And, finally, for 2013, the OSG presented the certification dated July 3, 2013 issued by
National Treasurer Rosalia V. De Leon, to wit:
January to May 2013 amounted to P12.438 billion compared to the full year program of P10.0[198] billion for
2013.
_______________
[196] Rollo (G.R. No. 209155), pp. 327 & 337.
[197] Id., at pp. 337 & 338.
[198] The target revenue for dividends on stocks of P5.5 billion was according to the BESF (2013), Table C.1 Revenue Program, by
Source 2011-2013.
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Moreover, the National Government accounted for the sale of the right to build and operate the NAIA
expressway amounting to P11.0 billion in June 2013.[199]
The certifications reflected that by collecting dividends amounting to P23.8 billion in 2011,
P19.419 billion in 2012, and P12.438 billion in 2013 the BTr had exceeded only the P5.5 billion in
target revenues in the form of dividends from stocks in each of 2011 and 2012, and only the P10
billion in target revenues in the form of dividends from stocks in 2013.
However, the requirement that revenue collections exceed the original revenue targets was to
be construed in light of the purpose for which the unprogrammed funds were incorporated in the
GAAs as standby appropriations to support additional expenditures for certain priority PAPs
should the revenue collections exceed the resource targets assumed in the budget or when
additional foreign project loan proceeds were realized. The unprogrammed funds were included in
the GAAs to provide ready cover so as not to delay the implementation of the PAPs should new or
additional revenue sources be realized during the year.[200] Given the tenor of the certifications,
the unprogrammed funds were thus not yet supported by the corresponding resources.[201]
The revenue targets stated in the BESF were intended to address the funding requirements of
the proposed programmed appropriations. In contrast, the unprogrammed funds, as standby
appropriations, were to be released only when there were revenues in excess of what the
programmed appropriations required. As such, the revenue targets should be considered as a
whole, not individually; otherwise, we would be dealing with artificial revenue surpluses. The re-
_______________
[199] Rollo (G.R. No. 209155), pp. 337 & 339.
[201] Basic Concepts in Budgeting <http://www.dbm.gov.ph/wp-content/uploads/2012/03/PGB-B1.pdf> (visited May 2,
2014).
172
quirement that revenue collections must exceed revenue target should be understood to mean
that the revenue collections must exceed the total of the revenue targets stated in the BESF.
Moreover, to release the unprogrammed funds simply because there was an excess revenue as to
one source of revenue would be an unsound fiscal management measure because it would
disregard the budget plan and foster budget deficits, in contravention of the Government’s
surplus budget policy.[202]
We cannot, therefore, subscribe to the respondents’ view.
5.
Equal protection, checks and balances,
and public accountability challenges
The DAP is further challenged as violative of the Equal Protection Clause, the system of
checks and balances, and the principle of public accountability.
With respect to the challenge against the DAP under the Equal Protection Clause,[203] Luna
argues that the implementation of the DAP was “unfair as it [was] selective” because the funds
released under the DAP was not made available to all the legislators, with some of them refusing
to avail themselves of the DAP funds, and others being unaware of the availability of such funds.
Thus, the DAP practised “undue favoritism” in favor of select legislators in contravention of the
Equal Protection Clause.
_______________
[202] Id.
[203] The Equal Protection Clause is found in Section 1, Article III of the 1987 Constitution, to wit:
Section 1. No person shall be deprived of life, liberty, or property without due process of law, nor shall any person
be denied the equal protection of the laws.
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Similarly, COURAGE contends that the DAP violated the Equal Protection Clause because no
reasonable classification was used in distributing the funds under the DAP; and that the
Senators who supposedly availed themselves of said funds were differently treated as to the
amounts they respectively received.
Anent the petitioners’ theory that the DAP violated the system of checks and balances, Luna
submits that the grant of the funds under the DAP to some legislators forced their silence about
the issues and anomalies surrounding the DAP. Meanwhile, Belgica stresses that the DAP, by
allowing the legislators to identify PAPs, authorized them to take part in the implementation and
execution of the GAAs, a function that exclusively belonged to the Executive; that such situation
constituted undue and unjustified legislative encroachment in the functions of the Executive; and
that the President arrogated unto himself the power of appropriation vested in Congress because
NBC No. 541 authorized the use of the funds under the DAP for PAPs not considered in the 2012
budget.
Finally, the petitioners insist that the DAP was repugnant to the principle of public
accountability enshrined in the Constitution,[204] because the legislators relinquished the power
of appropriation to the Executive, and exhibited a reluctance to inquire into the legality of the
DAP.
The OSG counters the challenges, stating that the supposed discrimination in the release of
funds under the DAP could be raised only by the affected Members of Congress themselves, and if
the challenge based on the violation of the
Section 1. Public office is a public trust. Public officers and employees must, at all times, be
accountable to the people, serve them with utmost responsibility, integrity, loyalty, and efficiency; act
with patriotism and justice, and lead modest lives.
_______________
[204] Article XI of the 1987 Constitution states:
Section 1. Public office is a public trust. Public officers and employees must, at all times, be
accountable to the people, serve them with utmost responsibility, integrity, loyalty, and efficiency; act
with patriotism and justice, and lead modest lives.
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Equal Protection Clause was really against the constitutionality of the DAP, the arguments of the
petitioners should be directed to the entitlement of the legislators to the funds, not to the
proposition that all of the legislators should have been given such entitlement.
The challenge based on the contravention of the Equal Protection Clause, which focuses on the
release of funds under the DAP to legislators, lacks factual and legal basis. The allegations about
Senators and Congressmen being unaware of the existence and implementation of the DAP, and
about some of them having refused to accept such funds were unsupported with relevant data.
Also, the claim that the Executive discriminated against some legislators on the ground alone of
their receiving less than the others could not of itself warrant a finding of contravention of the
Equal Protection Clause. The denial of equal protection of any law should be an issue to be raised
only by parties who supposedly suffer it, and, in these cases, such parties would be the few
legislators claimed to have been discriminated against in the releases of funds under the DAP.
The reason for the requirement is that only such affected legislators could properly and fully
bring to the fore when and how the denial of equal protection occurred, and explain why there
was a denial in their situation. The requirement was not met here. Consequently, the Court was
not put in the position to determine if there was a denial of equal protection. To have the Court
do so despite the inadequacy of the showing of factual and legal support would be to compel it to
speculate, and the outcome would not do justice to those for whose supposed benefit the claim of
denial of equal protection has been made.
The argument that the release of funds under the DAP effectively stayed the hands of the
legislators from conducting congressional inquiries into the legality and propriety of the DAP is
speculative. That deficiency eliminated any need to consider and resolve the argument, for it is
fundamental that speculation would not support any proper judicial determina-
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tion of an issue simply because nothing concrete can thereby be gained. In order to sustain their
constitutional challenges against official acts of the Government, the petitioners must discharge
the basic burden of proving that the constitutional infirmities actually existed.[205] Simply put,
guesswork and speculation cannot overcome the presumption of the constitutionality of the
assailed executive act.
We do not need to discuss whether or not the DAP and its implementation through the various
circulars and memoranda of the DBM transgressed the system of checks and balances in place in
our constitutional system. Our earlier expositions on the DAP and its implementing issuances
infringing the doctrine of separation of powers effectively addressed this particular concern.
Anent the principle of public accountability being transgressed because the adoption and
implementation of the DAP constituted an assumption by the Executive of Congress’ power of
appropriation, we have already held that the DAP and its implementing issuances were policies
and acts that the Executive could properly adopt and do in the execution of the GAAs to the
extent that they sought to implement strategies to ramp up or accelerate the economy of the
country.
6.
Doctrine of operative fact was applicable
After declaring the DAP and its implementing issuances constitutionally infirm, we must now
deal with the consequences of the declaration.
Article 7 of the Civil Code provides:
_______________
[205] See Fariñas v. Executive Secretary, G.R. No. 147387, December 10, 2003, 417 SCRA 503.

176

Article 7. Laws are repealed only by subsequent ones, and their violation or nonobservance shall not be
excused by disuse, or custom or practice to the contrary.
When the courts declared a law to be inconsistent with the Constitution, the former shall be
void and the latter shall govern.
Administrative or executive acts, orders and regulations shall be valid only when they are not
contrary to the laws or the Constitution.
A legislative or executive act that is declared void for being unconstitutional cannot give rise
to any right or obligation.[206] However, the generality of the rule makes us ponder whether
rigidly applying the rule may at times be impracticable or wasteful. Should we not recognize the
need to except from the rigid application of the rule the instances in which the void law or
executive act produced an almost irreversible result?
The need is answered by the doctrine of operative fact. The doctrine, definitely not a novel one,
has been exhaustively explained in De Agbayani v. Philippine National Bank:[207]
The decision now on appeal reflects the orthodox view that an unconstitutional act, for that matter an
executive order or a municipal ordinance likewise suffering from that infirmity, cannot be the source of any
legal rights or duties. Nor can it justify any official act taken under it. Its repugnancy to the fundamental
law once judicially declared results in its being to all intents and purposes a mere scrap of paper. As the new
Civil Code puts it: ‘When the courts declare a law to be inconsistent with the Constitution, the former shall
be void and the latter shall govern.’ Administrative or executive acts, orders and regulations shall be valid
only when they are not contrary to the laws of the Constitution. It is under-
_______________
[206] Commissioner of Internal Revenue v. San Roque Power Corporation, G.R. No. 187485, October 8, 2013, 707 SCRA 66.
[207] No. L-23127, April 29, 1971, 38 SCRA 429, 434-435.
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standable why it should be so, the Constitution being supreme and paramount. Any legislative or executive
act contrary to its terms cannot survive.
Such a view has support in logic and possesses the merit of simplicity. It may not however be sufficiently
realistic. It does not admit of doubt that prior to the declaration of nullity such challenged legislative or
executive act must have been in force and had to be complied with. This is so as until after the judiciary, in
an appropriate case, declares its invalidity, it is entitled to obedience and respect. Parties may have acted
under it and may have changed their positions. What could be more fitting than that in a subsequent
litigation regard be had to what has been done while such legislative or executive act was in operation and
presumed to be valid in all respects. It is now accepted as a doctrine that prior to its being nullified, its
existence as a fact must be reckoned with. This is merely to reflect awareness that precisely because the
judiciary is the governmental organ which has the final say on whether or not a legislative or executive
measure is valid, a period of time may have elapsed before it can exercise the power of judicial review that
may lead to a declaration of nullity. It would be to deprive the law of its quality of fairness and justice then,
if there be no recognition of what had transpired prior to such adjudication.
In the language of an American Supreme Court decision: ‘The actual existence of a statute, prior to such a
determination [of unconstitutionality], is an operative fact and may have consequences which cannot justly
be ignored. The past cannot always be erased by a new judicial declaration. The effect of the subsequent
ruling as to invalidity may have to be considered in various aspects, with respect to particular relations,
individual and corporate, and particular conduct, private and official.’”
The doctrine of operative fact recognizes the existence of the law or executive act prior to the
determination of its unconstitutionality as an operative fact that produced consequences that
cannot always be erased, ignored or disregarded.
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In short, it nullifies the void law or executive act but sustains its effects. It provides an exception
to the general rule that a void or unconstitutional law produces no effect.[208] But its use must be
subjected to great scrutiny and circumspection, and it cannot be invoked to validate an
unconstitutional law or executive act, but is resorted to only as a matter of equity and fair play.
[209] It applies only to cases where extraordinary circumstances exist, and only when the
extraordinary circumstances have met the stringent conditions that will permit its application.
We find the doctrine of operative fact applicable to the adoption and implementation of the
DAP. Its application to the DAP proceeds from equity and fair play. The consequences resulting
from the DAP and its related issuances could not be ignored or could no longer be undone.
To be clear, the doctrine of operative fact extends to a void or unconstitutional executive act.
The term executive act is broad enough to include any and all acts of the Executive, including
those that are quasi-legislative and quasi-judicial in nature. The Court held so in Hacienda
Luisita, Inc. v. Presidential Agrarian Reform Council:[210]
Nonetheless, the minority is of the persistent view that the applicability of the operative fact doctrine
should be limited to statutes and rules and regulations issued by the executive department that are
accorded the same status as that of a statute or those which are quasi-legislative in nature. Thus, the
minority concludes that the phrase ‘executive act’ used in the case of De Agbayani v. Philippine National
Bank refers only to acts, orders,
_______________
[208] Yap v. Thenamaris Ship’s Management, G.R. No. 179532, May 30, 2011, 649 SCRA 369, 381.
[209] League of Cities Philippines v. COMELEC, G.R. No. 176951, August 24, 2010, 628 SCRA 819, 833.
[210] G.R. No. 171101, November 22, 2011, 660 SCRA 525, 545-548.
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and rules and regulations that have the force and effect of law. The minority also made mention of the
Concurring Opinion of Justice Enrique Fernando in Municipality of Malabang v. Benito, where it was
supposedly made explicit that the operative fact doctrine applies to executive acts, which are ultimately
quasi-legislative in nature.
We disagree. For one, neither the De Agbayani case nor the Municipality of Malabang case elaborates
what ‘executive act’ mean. Moreover, while orders, rules and regulations issued by the President or the
executive branch have fixed definitions and meaning in the Administrative Code and jurisprudence, the
phrase ‘executive act’ does not have such specific definition under existing laws. It should be noted that in
the cases cited by the minority, nowhere can it be found that the term ‘executive act’ is confined to the
foregoing. Contrarily, the term ‘executive act’ is broad enough to encompass decisions of
administrative bodies and agencies under the executive department which are subsequently
revoked by the agency in question or nullified by the Court.
A case in point is the concurrent appointment of Magdangal B. Elma (Elma) as Chairman of the
Presidential Commission on Good Government (PCGG) and as Chief Presidential Legal Counsel (CPLC)
which was declared unconstitutional by this Court in Public Interest Center, Inc. v. Elma. In said case, this
Court ruled that the concurrent appointment of Elma to these offices is in violation of Section 7, par. 2,
Article IX-B of the 1987 Constitution, since these are incompatible offices. Notably, the appointment of Elma
as Chairman of the PCGG and as CPLC is, without a question, an executive act. Prior to the declaration of
unconstitutionality of the said executive act, certain acts or transactions were made in good faith and in
reliance of the appointment of Elma which cannot just be set aside or invalidated by its subsequent
invalidation.
180

In Tan v. Barrios, this Court, in applying the operative fact doctrine, held that despite the invalidity of
the jurisdiction of the military courts over civilians, certain operative facts must be acknowledged to have
existed so as not to trample upon the rights of the accused therein. Relevant thereto, in Olaguer v. Military
Commission No. 34, it was ruled that ‘military tribunals pertain to the Executive Department of the
Government and are simply instrumentalities of the executive power, provided by the legislature for the
President as Commander-in-Chief to aid him in properly commanding the army and navy and enforcing
discipline therein, and utilized under his orders or those of his authorized military representatives.’
Evidently, the operative fact doctrine is not confined to statutes and rules and regulations issued by the
executive department that are accorded the same status as that of a statute or those which are quasi-
legislative in nature.
Even assuming that De Agbayani initially applied the operative fact doctrine only to
executive issuances like orders and rules and regulations, said principle can nonetheless be
applied, by analogy, to decisions made by the President or the agencies under the executive
department. This doctrine, in the interest of justice and equity, can be applied liberally and in a
broad sense to encompass said decisions of the executive branch. In keeping with the demands
of equity, the Court can apply the operative fact doctrine to acts and consequences that resulted
from the reliance not only on a law or executive act which is quasi-legislative in nature but also
on decisions or orders of the executive branch which were later nullified. This Court is not
unmindful that such acts and consequences must be recognized in the higher interest of justice,
equity and fairness.
Significantly, a decision made by the President or the administrative agencies has to be
complied with because it has the force and effect of
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law, springing from the powers of the President under the Constitution and existing laws.
Prior to the nullification or recall of said decision, it may have produced acts and consequences
in conformity to and in reliance of said decision, which must be respected. It is on this score that
the operative fact doctrine should be applied to acts and consequences that resulted from the
implementation of the PARC Resolution approving the SDP of HLI. (Bold underscoring supplied for
emphasis)
In Commissioner of Internal Revenue v. San Roque Power Corporation,[211] the Court
likewise declared that “for the operative fact doctrine to apply, there must be a ‘legislative or
executive measure,’ meaning a law or executive issuance.” Thus, the Court opined there
that the operative fact doctrine did not apply to a mere administrative practice of the Bureau of
Internal Revenue, viz.:
Under Section 246, taxpayers may rely upon a rule or ruling issued by the Commissioner from the time
the rule or ruling is issued up to its reversal by the Commissioner or this Court. The reversal is not given
retroactive effect. This, in essence, is the doctrine of operative fact. There must, however, be a rule or
ruling issued by the Commissioner that is relied upon by the taxpayer in good faith. A mere
administrative practice, not formalized into a rule or ruling, will not suffice because such a
mere administrative practice may not be uniformly and consistently applied. An administrative
practice, if not formalized as a rule or ruling, will not be known to the general public and can be
availed of only by those with informal contacts with the government agency.
_______________

182

It is clear from the foregoing that the adoption and the implementation of the DAP and its
related issuances were executive acts. The DAP itself, as a policy, transcended a merely
administrative practice especially after the Executive, through the DBM, implemented it by
issuing various memoranda and circulars. The pooling of savings pursuant to the DAP from the
allotments made available to the different agencies and departments was consistently applied
throughout the entire Executive. With the Executive, through the DBM, being in charge of the
third phase of the budget cycle — the budget execution phase, the President could legitimately
adopt a policy like the DAP by virtue of his primary responsibility as the Chief Executive of
directing the national economy towards growth and development. This is simply because savings
could and should be determined only during the budget execution phase.
As already mentioned, the implementation of the DAP resulted into the use of savings pooled
by the Executive to finance the PAPs that were not covered in the GAA, or that did not have
proper appropriation covers, as well as to augment items pertaining to other departments of the
Government in clear violation of the Constitution. To declare the implementation of the DAP
unconstitutional without recognizing that its prior implementation constituted an operative fact
that produced consequences in the real as well as juristic worlds of the Government and the
Nation is to be impractical and unfair. Unless the doctrine is held to apply, the Executive as the
disburser and the offices under it and elsewhere as the recipients could be required to undo
everything that they had implemented in good faith under the DAP. That scenario would be
enormously burdensome for the Government. Equity alleviates such burden.
The other side of the coin is that it has been adequately shown as to be beyond debate that the
implementation of the DAP yielded undeniably positive results that enhanced the economic
welfare of the country. To count the positive results
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may be impossible, but the visible ones, like public infrastructure, could easily include roads,
bridges, homes for the homeless, hospitals, classrooms and the like. Not to apply the doctrine of
operative fact to the DAP could literally cause the physical undoing of such worthy results by
destruction, and would result in most undesirable wastefulness.
Nonetheless, as Justice Brion has pointed out during the deliberations, the doctrine of
operative fact does not always apply, and is not always the consequence of every declaration of
constitutional invalidity. It can be invoked only in situations where the nullification of the effects
of what used to be a valid law would result in inequity and injustice;[212] but where no such
result would ensue, the general rule that an unconstitutional law is totally ineffective should
apply.
In that context, as Justice Brion has clarified, the doctrine of operative fact can apply only to
the PAPs that can no longer be undone, and whose beneficiaries relied in good faith on the
validity of the DAP, but cannot apply to the authors, proponents and implementors of the DAP,
unless there are concrete findings of good faith in their favor by the proper tribunals determining
their criminal, civil, administrative and other liabilities.
WHEREFORE, the Court PARTIALLY GRANTS the petitions for certiorari and prohibition;
and DECLARESthe following acts and practices under the Disbursement Acceleration Program,
National Budget Circular No. 541 and related executive issuances UNCONSTITUTIONALfor
being in violation of Section 25(5), Article VI of the 1987 Constitution and the doctrine of
separation of powers, namely:
_______________
[212] This view is similarly held by Justice Leonen, who asserts in his Separate Opinion that the application of the
doctrine of operative fact should be limited to situations (a) where there has been a reliance in good faith in the acts
involved, or (b) where in equity the difficulties that will be borne by the public far outweigh the rigid application of the
legal nullity of an act.
184

(a) The withdrawal of unobligated allotments from the implementing agencies, and the
declaration of the withdrawn unobligated allotments and unreleased appropriations as savings
prior to the end of the fiscal year and without complying with the statutory definition of savings
contained in the General Appropriations Acts;
(b) The cross-border transfers of the savings of the Executive to augment the appropriations
of other offices outside the Executive; and
(c) The funding of projects, activities and programs that were not covered by any
appropriation in the General Appropriations Act.
The Court further DECLARES VOID the use of unprogrammed funds despite the absence of
a certification by the National Treasurer that the revenue collections exceeded the revenue
targets for noncompliance with the conditions provided in the relevant General Appropriations
Acts.
SO ORDERED.
Sereno (CJ.), Peralta, Villarama, Jr., Perez, Mendozaand Reyes, JJ., concur.

Carpio, J., See Separate Opinion.
Velasco, Jr., J., I join the Concurring and DissentingOpinion of J. Del Castillo.
Leonardo-De Castro, J., No part.
Brion, J., See: Separate Opinion.
Del Castillo, J., Pls. see Separate Concurring and Dissenting Opinion.
Perlas-Bernabe, J., Pls. see Separate Concurring Opinion.
Leonen, J., See Separate Concurring Opinion.
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SEPARATE OPINION
CARPIO, J.:
These consolidated special civil actions for certiorari and prohibition[1] filed by petitioners as
taxpayers and Filipino citizens challenge the constitutionality of the Disbursement Acceleration
Program (DAP) implemented by the President, through the Department of Budget and
Management (DBM), which issued National Budget Circular No. 541 (NBC 541) dated 18 July
2012.
Petitioners assail the constitutionality of the DAP, as well as NBC 541, mainly on the
following grounds: (1) there is no law passed for the creation of the DAP, contrary to Section 29,
Article VI of the Constitution; and (2) the realignment of funds which are not savings, the
augmentation of nonexisting items in the General Appropriations Act (GAA), and the transfer of
appropriations from the Executive branch to the Legislative branch and constitutional bodies all
violate Section 25(5), Article VI of the Constitution.
On the other hand, respondents, represented by the Office of the Solicitor General (OSG),
argue that no law is required for the creation of the DAP, which is a fund management system,
and the DAP is a constitutional exercise of the President’s power to augment or realign.
Petitioners have standing to sue. The well-settled rule is that taxpayers, like petitioners here,
have the standing to assail the illegal or unconstitutional disbursement of public funds.
[2] Citizens, like petitioners here, also have standing to
_______________
[1] G.R. No. 209135 is a petition for prohibition, mandamus, and certiorari under Rule 65 with a petition for
declaratory relief under Rule 63, while the rest are petitions for certiorari and/or prohibition.
[2] Pascual v. Secretary of Public Works, 110 Phil. 331 (1960); Information Technology Foundation of the Phils. v.
COMELEC, 464
186

sue on matters of transcendental importance to the public which must be decided early,[3] like the
transfer of appropriations from one branch of government to another or to the constitutional
bodies, since such transfer may impair the finely crafted system of checks and balances enshrined
in the Constitution.
The DBM admits that under the DAP the total actual disbursements are as follows:
Table 3. (Figures in Thousand Pesos)[4]

Under NBC 541, the sources of DAP funds are as follows:
3.1 These guidelines shall cover the withdrawal of unobligated allotments as of June 30, 2012 of all
national government agencies (NGAs) charged against FY 2011
_______________
Phil. 173; 419 SCRA 141 (2004). See also Kilosbayan, Inc. v. Morato, 320 Phil. 171; 250 SCRA 130 (1995), J. Vicente V.
Mendoza, ponente.
[3] Chavez v. PCGG, 360 Phil. 133; 299 SCRA 744 (1998); Chavez v. Public Estates Authority, 433 Phil. 506; 384 SCRA 152
(2002); Province of North Cotabato v. Government of the Republic of the Philippines Peace Panel on Ancestral Domain,589 Phil. 387; 568
SCRA 402 (2008).
[4] Rollo (G.R. No. 209135), p. 175. Consolidated Comment, p. 20.

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Continuing Appropriation (R.A. No. 10147) and FY 2012 Current Appropriation (R.A. No. 10155), pertaining
to:
3.1.2 Maintenance and Other Operating Expenses (MOOE) related to the implementation of
3.1.3 Personal Services corresponding to unutilized pension benefits declared as savings by the agencies
concerned based on their updated/
validated list of pensioners. (Boldfacing supplied)
In its Consolidated Comment,[5] the OSG declared that another source of DAP funds is the
Unprogrammed Fund in the GAAs, which the DBM claimed can be tapped when government has
windfall revenue collections, e.g., dividends from government-owned and controlled corporations
and proceeds from the sale of government assets.[6]
I.
Presidential power to augment or realign
The OSG justifies the disbursements under DAP as an exercise of the President’s power to
augment or realign under the Constitution. The OSG has represented that the President
approved the DAP disbursements and NBC 541.[7] Section 25(5), Article VI of the Constitution
provides:
_______________
[5] Id., at p. 163. Consolidated Comment, p. 8.
[6] Rollo (G.R. No. 209260), p. 29 (Annex “B” of the Petition in G.R. No. 209260), citing the DBM website which
contained the Constitutional and Legal Bases of the DAP (http://www.dbm.gov.ph/? page_id=7364).
[7] Memorandum for the Respondents, p. 25; TSN, 28 January 2014, p. 17. Solicitor General Jardeleza stated during
the Oral Arguments:
188

No law shall be passed authorizing any transfer of appropriations; however, the President, the President of
appropriations law for their respective offices from savings in other items of their respective
appropriations. (Boldfacing supplied)
Section 25(5) prohibits the transfer of funds appropriated in the general appropriations law
for one branch of government to another branch, or for one branch to other constitutional bodies,
and vice versa. However, “savings” from appropriations for a branch or constitutional body may
be transferred to another item of appropriation within the same branch or constitutional body,
as set forth in the second clause of the same Section 25(5).
In Nazareth v. Villar,[8] this Court stated:
budgetary amount contained in the appropriations bill is the extent Congress will determine as sufficient for
the budgetary allocation for the proponent agency. The only exception is found in Section 25(5), Article VI of
the Con-

_______________
SOLICITOR GENERAL JARDELEZA:
xxxx
Presidential approval, again, did the President authorize the disbursements under the DAP? Yes, Your Honors, kindly look at
the 1st Evidence Packet. It contains all the seven (7) memoranda corresponding to the various disbursements under the DAP. The
memoranda list in detail all 116 and I repeat 1-1-6 identified and approved DAP projects. They show that every augmentation exercise
was approved and duly signed by the President himself. This should lay to rest any suggestion that DAP was carried out
without Presidential approval. (Boldfacing supplied)
[8] G.R. No. 188635, 29 January 2013, 689 SCRA 385, 402-403.
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stitution, by which 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 Constitutional Commissions are authorized to
transfer appropriations to augment any item in the GAA for their respective offices from the savings in
other items of their respective appropriations. x x x.
Section 25(5) mandates that no law shall be passed authorizing any transfer of
appropriations. However, there can be, when authorized by law, augmentation of existing items
in the GAA from savings in other items in the GAA within the same branch or constitutional
body. This power to augment or realign is lodged in the President with respect to the Executive
branch, the Senate President for the Senate, the Speaker for the House of Representatives, the
Chief Justice for the Judiciary, and the Heads of the constitutional bodies for their respective
entities. The 2011, 2012 and 2013 GAAs all have provisions authorizing the President, the Senate
President, the House Speaker, the Chief Justice and the Heads of the constitutional bodies to
realign savings within their respective entities.
Section 25(5) expressly states that what can be realigned are “savings” from an item in the
GAA. To repeat, only savings can be realigned. Unless there are savings, there can be no
realignment.
Savings can augment any existing item in the GAA, provided such item is in the “respective
appropriations” of the same branch or constitutional body. As defined in Section 60, Section 54,
and Section 53 of the General Provisions of the 2011, 2012 and 2013 GAAs, respectively,
“augmentation implies the existence x x x of a program, activity, or project with an
appropriation, which upon implementation or subsequent evaluation of needed resources, is
determined to be deficient. In no case shall a nonexistent program, activity, or project, be
funded by augmentation from savings x x x.”
190

In Demetria v. Alba,[9] this Court construed an identical provision in the 1973 Constitution:[10]
The prohibition to transfer an appropriation for one item to another was explicit and categorical under
the 1973 Constitution. However, to afford the heads of the different branches of the government and those of
the constitutional commissions considerable flexibility in the use of public funds and resources, the
Constitution allowed the enactment of a law authorizing the transfer of funds for the purpose of augmenting
an item from savings in another item in the appropriation of the government branch or constitutional body
concerned. The leeway granted was thus limited. The purpose and conditions for which funds may be
transferred were specified, i.e., transfer may be allowed for the purpose of augmenting an item
and such transfer may be made only if there are savings from another item in the appropriation
of the government branch or constitutional body. (Boldfacing and italicization supplied)
In Sanchez v. Commission on Audit,[11] this Court stressed the twin requisites for a valid
transfer of appropriation, namely, (1) the existence of savings and (2) the existence in the
appropriations law of the item, project or activity to be augmented from savings, thus:
Clearly, there are two essential requisites in order that a transfer of appropriation with the
corresponding
_______________
[9] 232 Phil. 222, 229; 148 SCRA 208 (1987).
[10] Article VIII, Sec. 16[5]. No law shall be passed authorizing any transfer of appropriations, however, the President, the Prime
Minister, the Speaker, the Chief Justice of the Supreme Court, and the heads of constitutional commissions may by law be authorized
to augment any item in the general appropriations law for their respective offices from savings in other items of their respective
appropriations.
[11] 575 Phil. 428, 454; 552 SCRA 471, 495-496 (2008).
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funds may legally be effected. First, there must be savings in the programmed appropriation of
the transferring agency. Second, there must be an existing item, project or activity with an
appropriation in the receiving agency to which the savings will be transferred.
Actual savings is a sine qua non to a valid transfer of funds from one government agency to
another. The word “actual” denotes that something is real or substantial, or exists presently in fact as
opposed to something which is merely theoretical, possible, potential or hypothetical. (Boldfacing supplied)
In Nazareth v. Villar,[12] this Court reiterated the requisites for a valid transfer of
appropriation as mandated in Section 25(5), Article VI of the Constitution, thus:
Under these provisions, the authority granted to the President was subject to two essential
requisites in order that a transfer of appropriation from the agency’s savings would be validly effected. The
first required that there must be savings from the authorized appropriation of the agency. The
second demanded that there must be an existing item, project, activity, purpose or object of
expenditure with an appropriation to which the savings would be transferred for augmentation
purposes only. (Boldfacing supplied)
Section 25(5), Article VI of the Constitution likewise mandates that savings from one branch,
like the Executive, cannot be transferred to another branch, like the Legislature or Judiciary, or
to a constitutional body, and vice versa. In fact, funds appropriated for the Executive branch,
whether savings or not, cannot be transferred to the Legislature or Judiciary, or to the
constitutional bodies, and vice versa. Hence, funds from the Executive branch, whether savings
or not, cannot
_______________

192

be transferred to the Commission on Elections, the House of Representatives, or the Commission

on Audit.
In Pichay v. Office of the Deputy Executive Secretary,[13]this Court declared that the President
is constitutionally authorized to augment any item in the GAA appropriated for the Executive
branch using savings from other items of appropriations for the Executive branch, thus:
x x x [To] x x x enable the President to run the affairs of the executive department, he is likewise given
constitutional authority to augment any item in the General Appropriations Law using the savings in
other items of the appropriation for his office. In fact, he is explicitly allowed by law to transfer any fund
appropriated for the different departments, bureaus, offices and agencies of the Executive Department
which is included in the General Appropriations Act, to any program, project or activity of any department,
bureau or office included in the General Appropriations Act or approved after its enactment. (Boldfacing
supplied)
In PHILCONSA v. Enriquez,[14] this Court emphasized that only the President is
authorized to use savings to augment items for the Executive branch, thus:
Under Section 25(5) no law shall be passed authorizing any transfer of appropriations, and under Section
29(1), no money shall be paid out of the Treasury except in pursuance of an appropriation made by
law. While Section 25(5) allows as an exception the realignment of savings to augment items in
the general appropriations law for the executive branch, such right must and can be exercised
only by the President pursuant to a specific law. (Boldfacing supplied)
_______________
[13] G.R. No. 196425, 24 July 2012, 677 SCRA 408, 424.
[14] G.R. Nos. 113105, 113174, 113766 & 113888, 19 August 1994, 235 SCRA 506, 544.
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II.
Definition and Sources of Savings
One of the requisites for a valid transfer of appropriations under Section 25(5), Article VI of
the Constitution is that there must be savings from the appropriations of the same branch or
constitutional body. For the President to exercise his realignment power, there must first be
savings from other items in the GAA appropriated to the departments, bureaus and offices of the
Executive branch, and such savings can be realigned only to existing items of appropriations
within the Executive branch.
When do funds for an item in the GAA become “savings?” Section 60, Section 54, and Section
53 of the 2011, 2012, and 2013 GAAs,[15] respectively, uniformlydefine the term “savings” as
follows:
_______________
[15] The 2011 and 2012 GAAs contain similar provisions:
2011 GAA
Sec. 60. Meaning of Savings and Augmentation.—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.
xxxx
2012 GAA
final dis-
194


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. (Boldfacing supplied)
The same definition of “savings” is also found in the GAAs from 2003 to 2010. Prior to 2010, the
definition of savings in the GAAs did not contain item (iii) above.
As clearly defined in the 2011, 2012 and 2013 GAAs, savings must be portions or balances
from any programmed appropriation “free from any obligation or encumbrance,” which
means there is no contract obligating payment out of such portions or balances of the
appropriation. Otherwise, if
_______________
continuance or abandonment of the work, activity or purpose for which the appropriation is authorized; (ii) from
xxxx

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there is already a contract obligating payment out of such portions or balances, the funds are not
free from any obligation, and thus cannot constitute savings.
Section 60, Section 54, and Section 53 of the General Provisions of the 2011, 2012 and 2013
GAAs, respectively, contemplate three sources of savings. First, there can be savings when there
are funds still available after completion of the work, activity or project, which means there
are excess funds remaining after the work, activity or project is completed. There can
also be savings when there is final discontinuance of the work, activity or project, which means
there are funds remaining after the work, activity, or project was started but finally
discontinued before completion. To illustrate, a bridge, half-way completed, is destroyed by
floods or earthquake, and thus finally discontinued because the remaining funds are not
sufficient to rebuild and complete the bridge. Here, the funds are obligated but the remaining
funds are de-obligated upon final discontinuance of the project. On the other hand, abandonment
means the work, activity or project can no longer be started because of lack of time to obligate the
funds, resulting in the physical impossibility to obligate the funds. This happens when a month
or two before the end of the fiscal year, there is no more time to conduct a public bidding to
obligate the funds. Here, the funds are not, and can no longer be, obligated and thus will
constitute savings. Final discontinuance or abandonment excludes suspension or temporary
stoppage of the work, activity, or project.

Second, there can be savings when there is unpaid compensation and related costs pertaining
to vacant positions. Third, there can be savings from cost-cutting measures adopted by
government agencies.
196

Section 38, Chapter 5, Book VI of the Administrative Code of 1987[16] authorizes the
President, whenever in his judgment public interest requires, “to suspend or otherwise stop
further expenditure of funds allotted for any agency, or any other expenditure authorized in the
GAA.” For example, if there are reported anomalies in the construction of a bridge, the President
can order the suspension of expenditures of funds until an investigation is completed. This is only
a temporary, and not a final, discontinuance of the work and thus the funds remain
obligated. Section 38 does not speak of savings or realignment. Section 38 does not refer to
work, activity, or project that is finally discontinued, which is required for the existence of
savings. Section 38 refers only to suspension of expenditure of funds, not final discontinuance of
work, activity or project. Under Section 38, the funds remain obligated and thus cannot constitute
savings.
Funds which are temporarily not spent under Section 38 are not savings that can be realigned
by the President. Only funds that qualify as savings under Section 60, Section 54, and Section 53
of the 2011, 2012 and 2013 GAAs, respectively, can be realigned. If the work, activity or program
is merely suspended, there are no savings because there is no final discontinuance of the work,
activity or project. If the work, activity or project is only suspended, the funds remain obligated.
If the President “stops further expenditure of funds,” it means that the work, activity or project
has already started and the funds have already been obligated. Any dis-
_______________
[16] SECTION 38. Suspension of Expenditure of Appropriations.—Except as otherwise provided in the General
Appropriations Act and whenever in his judgment the public interest so requires, the President, upon notice to the head of
office concerned, is authorized to suspend or otherwise stop further expenditure of funds allotted for any agency, or any
other expenditure authorized in the General Appropriations Act, except for personal services appropriations used for
permanent officials and employees.
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continuance must be final before the unused funds are de-obligated to constitute savings that can
be realigned.
To repeat, funds pertaining to work, activity or project merely suspended or temporarily
discontinued by the President are not savings. Only funds remaining after the work, activity or
project has been finally discontinued or abandoned will constitute savings that can be realigned
by the President to augment existing items in the appropriations for the Executive branch.
III.
The DAP, NBC 541 and Other Executive
Issuances Related to DAP
A. Unobligated Allotments are not Savings.
In the present cases, the DAP and NBC 541 directed the “withdrawal of unobligated
allotments of agencies with low level of obligations as of June 30, 2012.” The funds
withdrawn are then used to augment or fund “priority and/or fast moving programs/projects of
the national government.” NBC 541 states:

For the first five months of 2012, the National Government has not met its spending targets. In order to
accelerate spending and sustain the fiscal targets during the year, expenditure measures have
to be implemented to optimize the utilization of available resources.
xxxx
In line with this, the President, per directive dated June 27, 2012, authorized the withdrawal of
unobligated allotments of agencies with low levels of obligations as of June 30, 2012, both for
continuing and current allotments. This measure will allow the maximum utilization of available allotments
to fund and undertake other priority expenditures of the national government. (Boldfacing supplied)
198

Except for MOOE for previous months, unobligated allotments of agencies with low levels of
obligations are not savings that can be realigned by the President to fund priority projects of the
government. In the middle of the fiscal year, unobligated appropriations, other than MOOE for
previous months, do not automatically become savings for the reason alone that the agency has a
low level of obligations. As of 30 June of a fiscal year, there are still six months left to obligate the
funds. Six months are more than enough time to conduct public bidding to obligate the funds. As
of 30 June 2012, there could have been no final abandonment of any work, activity or project
because there was still ample time to obligate the funds.
However, if the funds are not yet obligated by the end of November, and the item involves a
construction project, then it may be physically impossible to obligate the funds because a public
bidding will take at least a month. In such a case, there can be a final abandonment of the work,
activity or project.
In the case of appropriations for MOOE, the same are deemed divided into twelve monthly
allocations. Excess or unused MOOE appropriations for the month, other than Mandatory
Expenditures and Expenditures for Business-type Activities, are deemed savings after the end
of the month because there is a physical impossibility to obligate and spend such funds
as MOOE for a period that has already lapsed. Such excess or unused MOOE can be
realigned by the President to augment any existing item of appropriation for the Executive
branch. MOOE for future months are not savings and cannot be realigned.
The OSG claims that the DAP, which is used “to fund priority and/or fast moving
programs/projects of the national government,” is an exercise of the President’s power to realign
savings. However, except for MOOE for previous months, the DAP funds used for realignment
under NBC 541 do not qualify as savings under Section 60, Section 54 and Section 53 of
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the General Provisions of the 2011, 2012 and 2013 GAAs, respectively. Unobligated allotments
for Capital Outlay, as well as MOOE for July to December 2012, of agencies with low level of
obligations as of 30 June 2012 are definitely not savings. The low level of obligations by agencies
as of 30 June 2012 is not one of the conditions for the existence of savings under the General
Provisions of the 2011, 2012 and 2013 GAAs. To repeat, unobligated allotments withdrawn under
NBC 541, except for excess or unused MOOE from January to June 2012, do not constitute
savings and cannot be realigned by the President. The withdrawal of such unobligated allotments
of agencies with low level of obligations as of 30 June 2012 for purposes of realignment violates
Section 25(5), Article VI of the Constitution. Thus, such withdrawal and realignment of funds
under NBC 541 are unconstitutional.
The OSG’s contention that the President may discontinue or abandon a project as early as the
third month of the fiscal year under Section 38, Chapter 5, Book VI of the Administrative Code is
clearly misplaced. Section 38 refers only to suspension or stoppage of expenditure of obligated
funds, and not to final discontinuance or abandonment of work, activity or project.
Under NBC 541, appropriations for Capital Outlays are sources of DAP funds. However, the
withdrawal of unobligated allotments for Capital Outlays as of 30 June 2012 violates the General
Provisions of the 2011 and 2012 GAAs.
Section 65 of the General Provisions of the 2011 GAA provides:
Sec. 65. Availability of Appropriations.—Appropriations for MOOE and capital outlays authorized in
this Act shall be available for release and obligation for the purpose specified, and under the same special
provisions applicable thereto, for a period extending to one fiscal year after the end of the year in
which such items were appropriated: PROVIDED, That appropriations for MOOE and capital outlays
under R.A. No.
200

9970 shall be made available up to the end of FY 2011: PROVIDED, FURTHER, That a report on these
releases and obligations shall be submitted to the Senate Committee on Finance and the House Committee
on Appropriations. (Boldfacing supplied)

The same provision was substantially reproduced in the 2012 GAA, as follows:

Sec. 63. Availability of Appropriations.—Appropriations for MOOE and capital outlays authorized in this
Act shall be available for release and obligation for the purpose specified, and under the same special
provisions applicable thereto, for a period extending to one fiscal year after the end of the year in
which such items were appropriated: PROVIDED, That a report on these releases and obligations shall
be submitted to the Senate Committee on Finance and the House Committee on Appropriations, either in
printed form or by way of electronic document. (Boldfacing supplied)
The life span of Capital Outlays under the 2011 and 2012 GAAs is two years. This two-year
life span is prescribed by law and cannot be shortened by the President, unless the
appropriations qualify as “savings” under the GAA. Capital Outlay can be obligated anytime
during the two-year period, provided there is sufficient time to conduct a public bidding. Capital
Outlay cannot be declared as savings unless there is no more time for such public bidding to
obligate the allotment. MOOE, however, can qualify as savings once the appropriations for the
month are deemed abandoned by the lapse of the month without the appropriations being fully
spent. The only exceptions are (1) Mandatory Expenditures which under the GAA can be declared
as savings only in the last quarter of the fiscal year; and (2) Expenditures for Business-type
Activities, which under the GAA cannot be realigned.[17]The MOOE is deemed divided into
twelve monthly
_______________
[17] Section 57 of the 2013 GAA provides:
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allocations. The lapse of the month without the allocation for that month being fully spent is an
abandonment of the allocation, qualifying the unspent allocations as savings.
Appropriations for future MOOE cannot be declared as savings. However, NBC 541 allows
the withdrawal and realignment of unobligated allotments for MOOE and Capital Outlays as of
30 June 2012. NBC 541 cannot validly declare Capital Outlays as savings in the middle of the
fiscal year, long before the end of the two-year period when such funds can still be obligated. This
two-year period applies to unused or excess MOOE of previous months in that such unused or
excess MOOE can be realigned within the two-year period.

_______________
Sec. 57. Mandatory Expenditures.—The amounts programmed for petroleum, oil and lubricants as well as for water,
illumination and power services, telephone and other communication services, and rent requirements shall be disbursed
solely for such items of expenditures: PROVIDED, That any savings generated from these items after taking into
consideration the agency’s full year requirements may be realigned only in the last quarter and subject to the rules on the
realignment of savings provided in Section 54 hereof.
Use of funds in violation of this section shall be void, and shall subject the erring officials and employees to disciplinary
actions in accordance with Section 43, Chapter 5 and Section 80, Chapter 7, Book VI of E.O. No. 292, and to appropriate
criminal action under existing penal laws.
Section 58 of the 2013 GAA provides:
Sec. 58. Expenditures for Business-Type Activities.—Appropriations for the procurement of supplies and materials
intended to be utilized in the conduct of business-type activities shall be disbursed solely for such business-type activity
and shall not be realigned to any other expenditure item.
Use of funds in violation of this section shall be void, and shall subject the erring officials and employees to disciplinary
actions in accordance with Section 43, Chapter 5 and Section 80, Chapter 7, Book VI of E.O. No. 292, and to appropriate
criminal action under existing penal laws.
202

However, the declaration of savings and realignment of MOOE for July to December 2012 is
contrary to the GAA and the Constitution since MOOE appropriations for a future period are not
savings. Thus, the realignment under the DAP of unobligated Capital Outlays as of 30 June 2012,
as well as the realignment of MOOE allocated for the second semester of the fiscal year, violates
Section 25(5), Article VI of the Constitution, and is thus unconstitutional.
B. Unlawful release of the Unprogrammed Fund
One of the sources of the DAP is the Unprogrammed Fund under the GAA. The provisions on
the Unprogrammed Fund under the 2011, 2012 and 2013 GAAs state:
2011 GAA (Article XLV)
Special Provision(s)
programmed appropriations for the year x x x. (Boldfacing supplied)
2012 GAA (Article XLVI)
Congress pursuant to Section 22, Article VII of the Constitution x x x. (Boldfacing supplied)
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sources not considered in the aforesaid original revenue targets,as certified by the Btr. x x x. (Boldfacing
supplied)
It is clear from these provisions that as a condition for the release of the Unprogrammed
Fund, the revenue collections, as certified by the National Treasurer, must exceed the
original revenue targets submitted by the President to Congress. During the Oral
Arguments on 28 January 2014, the OSG assured the Court that the revenue collections exceeded
the original revenue targets for fiscal years 2011, 2012 and 2013. I required the Solicitor General
to submit to the Court a certified true copy of the certifications by the Bureau of Treasury that
the revenue collections exceeded the original revenue targets for 2011, 2012 and 2013. The
transcript of the Oral Arguments showed the following exchange:

JUSTICE CARPIO:
Counsel, you stated in your comment that one of the sources of DAP is the Unprogrammed Fund, is that
correct?
SOLGEN JARDELEZA:
Yes, Your Honor.
JUSTICE CARPIO:
Now x x x the Unprogrammed Fund can be used only if the revenue collections exceed the original
revenue targets as certified by the Bureau of Treasury, correct?
SOLGEN JARDELEZA:
Yes, Your Honor.
JUSTICE CARPIO:
In other words, the Bureau of Treasury certified to DBM that the revenue collections
exceeded the original revenue target, correct?
204

SOLGEN JARDELEZA:
Yes, Your Honor.
JUSTICE CARPIO:
Can you please submit to the Court a certified true copy of the Certification by the Bureau of
Treasury for 2011, 2012 and 2013?
SOLGEN JARDELEZA:
We will, Your Honor.
JUSTICE CARPIO:
Because as far as I know, I may be wrong, we have never collected more than the revenue target. Our
collections have always fallen short of the original revenue target. The GAA says “original” because they
were trying to move this target by reducing it. x x x I do not know of an instance where our government
collected more than the original revenue target. But anyway, please submit that certificate.
SOLGEN JARDELEZA:
We will, Your Honor.[18] (Boldfacing supplied)
In a Resolution dated 28 January 2014, the Court directed the OSG to submit the
certifications by the Bureau of Treasury in accordance with the undertaking of the Solicitor
General during the Oral Arguments.
On 14 February 2014, the OSG submitted its Compliance attaching the following certifications:
1. Certification dated 11 February 2014 signed by Rosalia V. De Leon, Treasurer of the
Philippines. It states:
This is to certify that based on the records of the Bureau of Treasury, the amounts indicated in the attached
Certification of the Department of Finance dated 04 March
_______________
[18] TSN, 28 January 2014, p. 106.
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2011 pertaining to the programmed dividend income from shares of stocks in government-owned or -
controlled corporations for 2011 and to the recorded dividend income as of 31 January 2011 are accurate.
This Certification is issued this 11th day of February 2014.
2. Certification dated 4 March 2011 signed by Gil S. Beltran, Undersecretary of the Department
of Finance which states:
This is to certify that under the Budget for Expenditures and Sources of Financing for 2011, the
programmed income from dividends from shares of stock in government-owned and controlled corporations
is P5.5 billion.
This is to certify further that based on the records of the Bureau of Treasury, the National Government has
recorded dividend income amounting of P23.8 billion as of 31 January 2011.
3. Certification dated 26 April 2012 signed by Roberto B. Tan, Treasurer of the Philippines. It
states:

January to March 2012 amounted to P19.419 billion compared to the full year program of P5.5 billion for
2012.
4. Certification dated 3 July 2013 signed by Rosalia V. De Leon, Treasurer of the Philippines
which states:

January to May 2013 amounted to P12.438 billion compared to the full year program of P10.0 billion for
2013.
Moreover, the National Government accounted for the sale of right to build and operate the NAIA
expressway amounting to P11.0 billion in June 2013.
206

The certifications submitted by the OSG are not compliant with the Court’s directive. The
certifications do not state that the revenue collections exceeded the original revenue
targets as submitted by the President to Congress. Except for the P11 billion NAIA
expressway revenue, the certifications refer solely to dividend collections, and programmed
(target) dividends, and not to excess revenue collections as against revenue targets. Programmed
dividends from government-owned or -controlled corporations constitute only a portion of the
original revenue targets, and dividend collections from government-owned or -controlled
corporations constitute only a portion of the total revenue collections. The Revenue Program by
source of the government is divided into “Tax Revenues” and “Non-Tax Revenues.” Dividends
from government-owned and -controlled corporations constitute only one of the items in “Non-Tax
Revenues.”[19] Non-Tax Revenues consist of all income collected by the Bureau of Treasury,
privatization proceeds and foreign grants. The bulk of these revenues comes from the BTr’s
income, which consists among others of dividends on stocks and the interest on the national
government’s deposits. Non-Tax Revenues include all windfall income. Any income not falling
under Tax Revenues necessarily falls under Non-Tax Revenues. For 2011, the total
programmed (target) Tax and Non-Tax Revenues of the government was P1.359
trillion, for 2012 P1.560 trillion, and for 2013 P1.780 trillion.[20]
Clearly, the DBM has failed to show that the express condition in the 2011, 2012 and 2013
GAAs for the use of the Unprogrammed Fund has been met. Thus, disbursements from the
Unprogrammed Fund in 2011, 2012, and 2013 under the DAP and NBC 541 were in violation of
the law.
_______________
[19] See Table C.1 (Revenue Program, By Source, 2011-2013) of 2013 Budget of Expenditures and Sources of Financing
(http://www.
dbm.gov.ph/wp-content/uploads/BESF/BESF2013/C1.pdf)
[20] Id.
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At any rate, dividends from government-owned or -controlled corporations are not savings but
revenues, like tax collections, that go directly to the National Treasury in accordance with
Section 44, Chapter 5, Book VI of the Administrative Code of 1987, which states:

SEC. 44. Accrual of Income to Unappropriated Surplus of the General Fund.—Unless otherwise
specifically provided by law, all income accruing to the departments, offices and agencies by virtue of the
provisions of existing laws, orders and regulations shall be deposited in the National Treasury or in the duly
authorized depository of the Government and shall accrue to the unappropriated surplus of the General
Fund of the Government: Provided, That amounts received in trust and from business-type activities of
government may be separately recorded and disbursed in accordance with such rules and regulations as
may be determined by the Permanent Committee created under this Act.
Dividends form part of the unappropriated surplus of the General Fund of the Government
and they cannot be spent unless there is an appropriations law. The same rule applies to windfall
revenue collections which also form part of the unappropriated General Fund. Proceeds from
sales of government assets are not savings but revenues that also go directly to the National
Treasury. Savings can only come from the three sources expressly specified in Section 60, Section
54 and Section 53 of the General Provisions of the 2011, 2012, and 2013 GAAs, respectively.
Besides, by definition savings can never come from the Unprogrammed Fund since the term
“savings” is defined under the GAAs as “portions or balances of
any programmed appropriation.” The Unprogrammed Fund can only be used for the specific
purpose prescribed in the GAAs, and only if the revenue collections exceed the original revenue
targets for the fiscal year.
208

Section 3 of the General Provisions of the 2011, 2012 and 2013 GAAs uniformly provide that
all fees, charges, assessments, and other receipts or revenues collected by departments, bureaus,
offices or agencies in the exercise of their functions shall be deposited with the National Treasury
as income of the General Fund in accordance with the provisions of the Administrative Code
and Section 65 of Presidential Decree No. 1445.[21] Such income are not savings as understood
and defined in the GAAs.
To repeat, dividend collections of government-owned and -controlled corporations do not
qualify as savings as defined in Section 60, Section 54, and Section 53 of the General Provisions
of the 2011, 2012 and 2013 GAAs, respectively. Dividend collections are revenues that go directly
to the National Treasury. The Unprogrammed Fund under the 2011, 2012 and 2013 GAAs can
only be released when revenue collections exceed the original revenue targets. The DBM
miserably failed to show any excess revenue collections during the period the DAP was
implemented. Therefore, in violation of the GAAs, the Executive used the Unprogrammed Fund
without complying with the express condition for its use — that revenue collections of the
government exceed the original revenue target, as certified by the Bureau of Treasury. In other
words, the use of the Unprogrammed Fund under the DAP is unlawful, and hence, void.[22]
[21] Section 65, PD No. 1445 states:

SECTION 65. Accrual of Income to Unappropriated Surplus of the General Fund.—(1) Unless otherwise specifically
provided by law, all income accruing to the agencies by virtue of the provisions of law, orders and regulations shall be
deposited in the National Treasury or in any duly authorized government depository, and shall accrue to the
unappropriated surplus of the General Fund of the Government.
[22] Article 5 of the Civil Code states:
Acts executed against the provisions of mandatory or prohibitory laws shall be void, except when the law itself authorizes
their validity.
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C. DAP violates the constitutional prohibition on “cross-border” transfers.

Section 25(5), Article VI of the Constitution mandates that savings from one government
branch cannot be transferred to another branch, and vice versa. This constitutional prohibition on
cross-border transfers is clear: the President, the Senate President, the Speaker of the House of
Representatives, the Chief Justice, and the Heads of constitutional bodies are only authorized to
augment any item in the general appropriations law for their respective
offices from savings in other items of their respective appropriations.
Contrary to Section 25(5), Article VI of the Constitution, there were instances of cross-border
transfers under the DAP. In the interpellation by Justice Bersamin during the Oral Arguments,
Budget Secretary Florencio Abad expressly admitted the existence of cross-border transfers of
funds, thus:
JUSTICE BERSAMIN:
Alright, the whole time that you have been Secretary of Department of Budget and Management, did the
Executive Department ever redirect any part of savings of the National Government under your
control cross border to another department?
SECRETARY ABAD:
Well, in the Memos that we submitted to you, such an instance, Your Honor.
JUSTICE BERSAMIN:
Can you tell me two instances? I don’t recall having read yet your material.
SECRETARY ABAD:
Well, the first instance had to do with a request from the House of Representatives. They
started building their e-library in 2010 and they had a
210

budget for about 207 Million but they lack about 43 Million to complete its 250 Million requirement. Prior to
that, the COA, in an audit observation informed the Speaker that they had to continue with that
construction otherwise the whole building, as well as the equipments therein may suffer from serious
deterioration. And at that time, since the budget of the House of Representatives was not enough to
complete 250 Million, they wrote to the President requesting for an augmentation of that particular item,
which was granted, Your Honor. The second instance in the Memos is a request from the
Commission on Audit. At the time they were pushing very strongly the good governance programs of the
government and therefore, part of that is a requirement to conduct audits as well as review financial reports
of many agencies. And in the performance of that function, the Commission on Audit needed information
technology equipment as well as hire consultants and litigators to help them with their audit work and for
that they requested funds from the Executive and the President saw that it was important for the
Commission to be provided with those IT equipments and litigators and consultants and the request was
granted, Your Honor.[23] (Boldfacing supplied)
Attached to DBM Secretary Abad’s Memorandum for the President, dated 12 October 2011, is a
Project List for FY 2011 DAP. The last item on the list, item no. 22, is for PDAF augmentation
in the amount of P6.5 billion, also listed as various other local projects.[24] The relevant
portion of the Project List attached to the Memorandum for the President dated 12 October
2011, which the President approved on the same date, reads:
_______________
[23] TSN, 28 January 2014, pp. 42-43.
[24] Rollo (G.R. No. 209287), p. 536.

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PROJECT LIST: FY 2011 DISBURSEMENT ACCELERATION PLAN
The Memorandum for the President dated 12 December 2011 also stated that savings that
correspond to completed or discontinued projects may be pooled, among others, to augment
deficiencies under the Special Purpose Funds, e.g., PDAF, Calamity Fund, and Contingent Fund.
[25] The same provision to augment deficiencies under the Special Purpose Funds,
including PDAF, was included in the Memorandum for the President dated 25 June 2012.[26]
The Special Provisions on the PDAF in the 2013 GAA allowed “the individual House member
and individualSenator

_______________
[25] Rollo (G.R. No. 209287), p. 537. The relevant portions of the Memorandum for the President dated 12 December 2011
state:
xxxx
BACKGROUND
1.0 The DBM, during the course of performance reviews conducted on the agencies’ operations, particularly on the
implementation of their projects/activities, including expenses incurred in undertaking the same, have (sic) identified
savings out of the 2011 General Appropriations Act. Said savings correspond to completed or discontinued projects under
certain departments/agencies which may be pooled, for the following:
xxxx
1.3 to provide for deficiencies under the Special Purpose Funds, e.g., PDAF, Calamity Fund, Contingent Fund
xxxx
[26] Rollo (G.R. No. 209287), p. 550.
212

to identify the project to be funded and implemented, which identification is made after the
enactment into law of the GAA.”[27] In addition, Special Provision No. 4 allowed the realignment
of funds, and not savings, conditioned on the concurrence of the individual legislator to the
request for realignment. In the landmark case of Belgica v. Executive Secretary,[28] the Court
struck down these Special Provisions on the PDAF primarily for violating the principle of
separation of powers.
Clearly, the transfer of DAP funds, in the amount of P6.5 billion, to augment the
unconstitutional PDAF is also unconstitutional because it is an augmentation of an
unconstitutional appropriation.
The OSG contends that “[t]he Constitution does not prevent the President from transferring
savings of his department to another department upon the latter’s request, provided it is the
recipient department that uses such funds to augment its own appropriation.” The OSG further
submits that “[i]n relation to the DAP, the President made available to the Commission
on Audit, House of Representatives, and the Commission on Elections the savings of
his department upon their request for funds, but it was those institutions that applied
such savings to augment items in their respective appropriations.”[29] Thus, the
OSG expressly admitsthat the Executive transferred appropriations for the Executive branch to
the COA, the House of Representatives and the COMELEC but justifies such transfers to the
recipients’ request for funds to augment items in the recipients’ respective appropriations.
_______________
[27] Carpio, J., Concurring Opinion, Belgica v. Executive Secretary, G.R. Nos. 208566, 208493 and 209251, 19 November
2013, 710 SCRA 1.
[28] Id.
[29] Rollo (G.R. No. 209287), p. 1072. Memorandum for the Respondents, p. 35.
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The OSG’s arguments are obviously untenable. Nowhere in the language of the Constitution is
such a misplaced interpretation allowed. Section 25(5), Article VI of the Constitution does not
distinguish whether the recipient entity requested or did not request additional funds from the
Executive branch to augment items in the recipient entity’s appropriations. The Constitution
clearly prohibits the President from transferring appropriations of the Executive branch to other
branches of government or to constitutional bodies for whatever reason. Congress cannot even
enact a law allowing such transfers. “The fundamental policy of the Constitution is against
transfer of appropriations even by law, since this ‘juggling’ of funds is often a rich source of
unbridled patronage, abuse and interminable corruption.”[30] Moreover, the “cross-border” transfer
of appropriations to constitutional bodies impairs the independence of the constitutional bodies.
IV.
No Presidential power of impoundment
The GAA is a law and the President is sworn to uphold and faithfully implement the law. If
Congress in the GAA directs the expenditure of public funds for a specific purpose, the President
has no power to cancel, prevent or permanently stop such expenditure once the GAA becomes a
law. What the President can do is to veto that specific item in the GAA. But once the
President approves the GAA or allows it to lapse into law, the President can no longer veto or
cancel any item in the GAA or impound the disbursement of funds authorized to be spent in the
GAA.
Section 38, Chapter V, Book VI of the Administrative Code of 1987 allows the President “to
suspend or otherwise stop further expenditure” of appropriated funds but this must
_______________
[30] Padilla, J., Dissenting Opinion, Gonzales v. Macaraig, Jr., G.R. No. 87636, 19 November 1990, 191 SCRA 452, 484.
214

be for a legitimate purpose, like when there are anomalies in the implementation of a project or
in the disbursement of funds. Section 38 cannot be read to authorize the President to
permanently stop so as to cancel the implementation of a project in the GAA because the
President has no power to amend the law, and the GAA is a law. Section 38 cannot also be read to
authorize the President to impound the disbursement of funds for projects approved in the GAA
because the President has no power to impound funds approved by Congress.
The President can suspend or stop further expenditure of appropriated funds only after the
appropriated funds have become obligated, that is, a contract has been signed for the
implementation of the project. The reason for the suspension or stoppage must be legitimate, as
when there are anomalies. The President has the Executive power to see to it that the GAA is
faithfully implemented, without anomalies. However, despite the order to suspend or stop further
expenditure of funds the appropriated funds remain obligated until the contract is rescinded. As
long as the appropriated funds are still obligated, the funds cannot constitute savings because
“savings” as defined in the GAA, must come from appropriations that are “free from any
obligation or encumbrance.”
Section 38 cannot be used by the President to stop permanently the expenditure
of unobligated appropriated funds because that would amount to a Presidential power to
impound funds appropriated in the GAA. The President has no power to impound
unobligated funds in the GAA for two reasons: first, the GAA once it becomes law cannot be
amended by the President and an impoundment of unobligated funds is an amendment of the
GAA since it reverses the will of Congress; second, the Constitution gives the President the
power to prevent unsound appropriations by Congress only through his line item veto power,
which he can exercise only when the GAA is submitted to him by Congress for approval.
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Once the President approves the GAA or allows it to lapse into law, he himself is bound by
it. There is no presidential power of impoundment in the Constitution and this Court
cannot create one. Any ordinary legislation giving the President the power to impound
unobligated appropriations is unconstitutional. The power to impound unobligated
appropriations in the GAA, coupled with the power to realign such funds to any project, whether
existing or not in the GAA, is not only a usurpation of the power of the purse of Congress and a
violation of the constitutional separation of powers, but also a substantial rewriting of the
1987 Constitution.
Under the present Constitution, if the President vetoes an item of appropriation in the GAA,
Congress may override such veto by an extraordinary two-thirds vote of each chamber of
Congress. However, if this Court allows the President to impound the funds appropriated by
Congress under a law, then the constitutional power of Congress to override the President’s veto
becomes inutile and meaningless. This is a substantial and drastic revision of the constitutional
check and balance finely crafted in the Constitution.
Professor Laurence H. Tribe, in his classic textbook American Constitutional Law, explains
why there is no constitutional power of impoundment by the President under the U.S. Federal
Constitution:
The federal courts have traditionally rejected the argument that the President possesses inherent power
to impound funds and thus halt congressionally authorized expenditures. The Supreme Court issued its first
major pronouncement on the constitutional basis of executive impoundment in Kendall v. United States ex
rel. Stokes. There, in order to resolve a contract dispute, Congress ordered the Postmaster General to pay a
claimant whatever amount an outside arbitrator should decide was the appropriate settlement. Presented
with a decision by the arbitrator in a case arising out of a claim for services rendered to the United States in
carrying the mails, President Jackson’s Postmaster General ignored the congres-
216

sional mandate and paid, instead, a smaller amount that he deemed the proper settlement. The Supreme
Court held that a writ of mandamus could issue directing the Postmaster General to comply with the
congressional directive. In reaching this conclusion, the Court held that the President, and thus
those under his supervision, did not possess inherent authority, whether implied by the Faithful
Execution Clause or otherwise, to impound funds that Congress had ordered to be spent: “To
contend that the obligation imposed on the President to see the laws faithfully executed, implies
a power to forbid their execution, is a novel construction of the constitution, and entirely
inadmissible.”
Any other conclusion would have been hard to square with the care the Framers took to limit the scope
and operation of the veto power, and quite impossible to reconcile with the fact that the Framers
assured Congress the power to override any veto by a two-thirds vote in each House. For
presidential impoundments to halt a program would, of course, be tantamount to a veto that no
majority in Congress could override. To quote Chief Justice Rehnquist, speaking in his former capacity
as Assistant Attorney General in 1969: “With respect to the suggestion that the President has a
constitutional power to decline to spend appropriated funds, we must conclude that existence of
such a broad power is supported by neither reason nor precedent. ... It is in our view extremely
difficult to formulate a constitutional theory to justify a refusal by the President to comply with a
Congressional directive to spend. It may be agreed that the spending of money is inherently an executive
function, but the execution of any law is, by definition, an executive function, and it seems an anomalous
proposition that because the Executive branch is bound to exe-
217
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cute the laws, it is free to decline to execute them.”[31](Citations omitted; emphasis supplied)
In the United States, the Federal Constitution allows the U.S. President to only veto an entire
appropriations bill but not line item appropriations in the bill. Thus, U.S. Presidents seldom veto
an appropriations bill even if the bill contains specific appropriations they deem unsound. To stop
the disbursement of appropriated funds they deem unsound, U.S. Presidents have attempted to
assert an implied or inherent Presidential power to impound funds appropriated by Congress.
The U.S. Supreme Court, starting from the 1838 case of Kendall v. United States ex rel. Stokes,
has consistently rejected any attempt by U.S. Presidents to assert an implied presidential power
to impound appropriated funds. In the 1975 case of Train v. City of New York,[32] the U.S.
Supreme Court again rejected the notion that the U.S. President has the power to impound funds
appropriated by Congress because such power would frustrate the will of Congress. This
rationale applies with greater force under the Philippine Constitution, which expressly empowers
the President to exercise line item veto of congressional appropriations. Under our
Constitutional scheme, the President’s line item veto is the checking mechanism to
unsound congressional appropriations, not any implied power of impoundment which
certainly does not exist in the Constitution.
In PHILCONSA v. Enriquez,[33] decided on 19 August 1994, the Court explained the alleged
opposing views in the United States on the U.S. President’s power to impound appropriated

_______________
[31] American Constitutional Law, Volume I, pp. 732-733, 3rd edition (2000), Kendall v. United States ex rel. Stokes, 37
U.S. 524 (1838).
[32] 420 U.S. 35 (1975).
[33] Supra note 14.
218

funds by citing a 1973 Georgetown Law Journal article[34]and a 1973 Yale Law Journal article.
[35] These law journal articles were obviously already obsolete because on 18 February 1975 the
United States Supreme Court issued its decision in Train v. City of New York.
Worse, PHILCONSA failed to mention the 1838 U.S. Supreme Court case of Kendall v. United
States ex rel. Stokes cited by Prof. Tribe in his textbook. In U.S. Federal constitutional
jurisprudence, it is well-settled that the U.S. President has no implied or inherent
power to impound funds appropriated by Congress. In any event, the issue of
impoundment was not decisive in PHILCONSA since the Court based its decision on another
legal ground.
This Court must be clear and categorical. Under the U.S. Federal Constitution as well as in
our Constitutions, whether the 1935, 1973 or the present 1987 Constitution, there is no implied
or inherent Presidential power to impound funds appropriated by Congress. Otherwise, our
present 1987 Constitution will become a mangled mess.
Section 38 cannot be invoked by the President to create “savings” by ordering the permanent
stoppage of disbursement of appropriated funds, whether obligated or not. If the appropriated
funds are already obligated, then the stoppage of disbursements of funds does not create any
savings because the funds remain obligated until the contract is rescinded. If the appropriated
funds are unobligated, such permanent stoppage amounts to an impoundment of appropriated
funds which is unconstitutional. The authority of the President to suspend or stop the
disbursement of appropriated funds under Section 38 can refer only to obligated
funds; otherwise, Section 38 will be patently unconsti-
_______________
[34] Notes: Presidential Impoundment Constitutional Theories and Political Realities, 61 Georgetown Law Journal 1295
(1973).
[35] Notes Protecting Fisc: Executive Impoundment and Congressional Power, 82 Yale Law Journal 1686 (1973).
219
VOL. 728, JULY 1, 2014 219
tutional because it will constitute a power by the President to impound appropriated

funds.
Moreover, the OSG and the DBM maintain that the President, in implementing the DAP and
NBC 541, “never impounded” funds. In fact, the OSG does not claim that the President exercised
the power of impoundment precisely because it is contrary to the purpose of NBC 541, which was
intended “to accelerate spending” and push economic growth. During the Oral Arguments,
Solicitor General Jardeleza stated:
SOLGEN JARDELEZA:
But the facts, Your Honor, showed the president never impounded, impoundment is inconsistent with the
policy of spend it or use it.
JUSTICE ABAD:
Yeah, well anyway...
SOLGEN JARDELEZA:
So, there is no impoundment, Your Honor, in fact, the marching orders is spend, spend, spend. And that
was achieved towards the middle of 2012. There was only DAP because there was slippage, 2010, 2011, and
that’s what were saying the diminishing amount, Your Honor.[36]
Therefore, it is grave error to construe that the DAP is an exercise of the President’s power to
impound under Section 38, Chapter VI, Book VI of the Administrative Code of 1987. The OSG
and DBM do not interpret Section 38 as granting the President the power to impound. The
essence of impoundment is not to spend. The essence of DAP is to “spend, spend, spend,” in the
words of the Solicitor General.
_______________
[36] TSN, 28 January 2014, p. 104.
220

V.
The applicability of the doctrine of operative fact
An unconstitutional act confers no rights, imposes no duties, and affords no protection.[37] An
unconstitutional act is inoperative as if it has not been passed at all.[38] The exception to this rule
is the doctrine of operative fact. Under this doctrine, the law or administrative issuance is
recognized as unconstitutional but the effects of the unconstitutional law or administrative
issuance, prior to its declaration of nullity, may be left undisturbed as a matter of equity and
fair play.[39]
As a rule of equity, the doctrine of operative fact can be invoked only by those who relied in
good faith on the law or the administrative issuance, prior to its declaration of nullity. Those who
acted in bad faith or with gross negligence cannot invoke the doctrine. Likewise, those directly
responsible for an illegal or unconstitutional act cannot invoke the doctrine. He who comes to
equity must come with clean hands,[40] and he who seeks equity must do equity.[41] Only those
who merely relied in good faith on the illegal or unconstitutional act, without any
direct participation in the commission of the illegal or unconstitutional act, can
invoke the doctrine.
_______________
[37] Chavez v. Judicial and Bar Council, G.R. No. 202242, 16 April 2013, 696 SCRA 496, 516.
[38] Id.
[39] League of Cities of the Philippines (LCP) v. Commission on Elections, G.R. Nos. 176951, 177499 & 178056, 24 August
2010, 628 SCRA 819, 832; Commissioner of Internal Revenue v. San Roque Power Corporation, G.R. No. 187485, 8 October
2013, 707 SCRA 66.
[40] Chemplex (Phils.), Inc. v. Pamatian, 156 Phil. 408; 57 SCRA 408 (1974); Spouses Alvendia v. Intermediate Appellate
Court, 260 Phil. 265; 181 SCRA 252 (1990).
[41] Arcenas v. Cinco, 165 Phil. 741; 74 SCRA 118 (1976).
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Moreover, the doctrine of operative fact is applicable only if nullifying the effects of the
unconstitutional law or administrative issuance will result in injustice or serious prejudice to the
public or innocent third parties. To illustrate, if DAP funds were used to build school houses
without anomalies other than the fact that DAP funds were used, the contract could no longer be
rescinded for to do so would prejudice the innocent contractor who built the school houses in good
faith. However, if DAP funds were used to augment the PDAF of members of Congress whose
identified projects were in fact nonexistent or anomalously implemented, the doctrine of operative
fact would not apply.
VI.
Conclusion
The Disbursement Acceleration Program has a noble end — “to fast-track public spending and
push economic growth.” The DAP would fund “high-impact budgetary programs and projects.”
However, the road to unconstitutionality is often paved with ostensibly good intentions. Under
NBC 541, the President pooled funds which do not qualify as savings, and hence, the pooled funds
could not validly be realigned. The unobligated allotments of agencies with low-level of
obligations as of 30 June 2012 are certainly not savings as defined in the GAAs, with the
exception of MOOE from January to June 2012, excluding Mandatory Expenditures and
Expenditures for Business-type Activities. The realignment of these funds to augment items in
the GAAs patently contravenes Section 25(5), Article VI of the Constitution. Thus, such
realignment under the DAP, NBC 541 and other Executive issuances related to DAP is clearly
unconstitutional.
The DAP also violates the prohibition on cross-border transfers enshrined in Section 25(5),
Article VI of the Constitution. No less than the DBM Secretary has admitted that the
222

Executive transferred funds to the COA and the House of Representatives.[254] The OSG has also
expressly admitted in its Memorandum of 10 March 2014 that the Executive transferred
appropriations to the COA, the House of Representatives and the COMELEC.[255] The Executive
transferred DAP funds to augment the PDAF, or the unconstitutional Congressional Pork Barrel,
making the augmentation also unconstitutional.
The Unprogrammed Fund was released despite the clear requirement in the 2011, 2012 and
2013 GAAs that the Unprogrammed Fund can be used only if the revenue collections exceed the
original revenue targets as certified by the National Treasurer, a condition that was never met
for fiscal years 2011, 2012 and 2013.
The GAA is a law enacted by Congress. The most important legislation that Congress enacts
every year is the GAA. Congress exercises the power of the purse when it enacts the GAA. The
power of the purse is a constitutional power lodged solely in Congress, and is a vital part of the
checks and balances enshrined in the Constitution. Under the GAA, Congress appropriates
specific amounts for specified purposes, and the President spends such amounts in accordance
with the authorization made by Congress in the GAA.
Under the DAP and NBC 541, the President disregards the specific appropriations in the GAA
and treats the GAA as the President’s self-created all-purpose fund, which the President can
spend as he chooses without regard to the specific purposes for which the appropriations are
made in the GAA. In the middle of the fiscal year of the GAA, the President under the DAP and
NBC 541 can declare all MOOE for future months (except Mandatory Expenditures and
Expenditures for Business-type Activities), as well as all unobligated Capi-
_______________
[42] TSN, 28 January 2014, pp. 42-43.
[43] Rollo (G.R. No. 209287), p. 1072. Memorandum for Respondents, p. 35.

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tal Outlays, as savings and realign such savings to what he deems are priority projects, whether
or not such projects have existing appropriations in the GAA. In short, the President under the
DAP and NBC 541 usurps the power of the purse of Congress, making Congress inutile and a
surplusage. It is surprising that the majority in the Senate and in the House of Representatives
support the DAP and NBC 541 when these Executive acts actually castrate the power of the
purse of Congress. This Court cannot allow a castration of a vital part of the checks and balances
enshrined in the Constitution, even if the branch adversely affected suicidally consents to it. The
solemn duty of this Court is to uphold the Constitution and to strike down the DAP and NBC 541.
ACCORDINGLY, I vote to declare the following acts and practices under the Disbursement
Acceleration Program and the National Budget Circular No. 541 dated 18 July
2012 UNCONSTITUTIONAL for violating Section 25(5), Article VI of the Constitution:
1. Transfers of appropriations from the Executive to the Legislature, the Commission on
Elections and the Commission on Audit;
2. Disbursements of unobligated allotments for MOOE as savings and their realignment to
other items in the GAAs, where the MOOE that are the sources of savings are appropriations for
months still to lapse;
3. Disbursements of unobligated allotments for Capital Outlay as savings and their
realignment to other items in the GAA, prior to the last two months of the fiscal year if the period
to obligate is one year, or prior to the last two months of the second year if the period to obligate
is two years; and
4. Disbursements of unobligated allotments as savings and their realignment to items or
projects not found in the GAA.
224

In addition, the use of the Unprogrammed Fund without the certification by the National
Treasurer that the revenue collections for the fiscal year exceeded the revenue target for that
year is declared VOID for being contrary to the express condition for the use of the
Unprogrammed Fund under the GAAs.
SEPARATE OPINION
BRION, J.:
Preliminary Statement
I submit this Concurring and Dissenting Opinion to reflect my views on the
constitutionality of the Disbursement Acceleration Program (DAP) and its implementing budget
circular, National Budget Circular No. 541 (NBC 541).
The Court will recall that following the lead of J. Antonio Carpio, I submitted my original
Separate Opinion in April 2014 during the Court’s Baguio session after the
promised ponencia was not issued. This move, to be sure, was an unusual one, as Members of the
Court, in the usual course, wait for the ponencia or the Member-in-Charge’sreport before
expressing their views through their separate opinions. Two reasons, however, compelled me to
act as I did.
First, the Court failed to meaningfully consider the petitioners’ prayer for a temporary
restraining order (TRO);[1] delay intervened until it was too late to consider whether we would or
would not issue a TRO. Based on this experience, I
_______________
[1] G.R. No. 209136, Manuelito R. Luna v. Secretary Florencio Abad, et al.; G.R. No. 209260, Integrated Bar of the
Philippines (IBP) v. Secretary Florencio Abad; G.R. No. 209287, Maria Carolina P. Araullo, et al. v. Benigno Simeon C.
Aquino III, et al.; and G.R. No. 209517, Confederation for Unity, Recognition and Advancement of Government Employees
(COURAGE), et al. v. Benigno Simeon C. Aquino III, et al.

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wanted to avoid any further deferment in resolving this case on the merits as the Court, under
the circumstances,[2] had already been in delay. I surmise that J. Carpio was in a similar frame
of mind when he issued his own original Opinion.
Second, I felt that we should no longer dilly-dally as, together with the closely-related Priority
Development Assistance Fund (PDAF) case,[3] the present DAP case is a part of the country’s
biggest scandal and, on its own, is a precedent-setting case with profound impact on the nation.
Because of what the PDAF involved, namely, the amount (approximately P10 Billion),
the personalities(the members of Congress at the highest levels) and
the circumstances (perceived betrayal of public trust in a national situation of unchecked
poverty and natural calamity), it caused “public outrage” and “emergent public distrust” (to
use the words of J. Mariano Del Castillo in his Separate Opinion).
The present DAP case, for its part, involves circumstances that are similar to the PDAF and
much more: it involves funds amounting to almost P150 Billion or almost 15 times
_______________
[2] On October 25, 2013, the Court issued a Resolution deferring the resolution of the petitioners’ prayer for a
Temporary Restraining Order until after the oral arguments scheduled on November 11, 2013. This schedule was
subsequently moved to November 19, 2013. A continuation of the oral arguments was scheduled on December 10, 2013,
which was also subsequently moved to January 28, 2014. By this time, Solicitor General Francis Jardeleza disclosed to
the Court that the Aquino Administration has terminated the DAP’s implementation, viz.:
In conclusion, your Honors, may I inform the Court that because the DAP has already fully served its purpose, the
Administration’s economic managers have recommended its termination to the President. Transcript of Oral Arguments
on G.R. Nos. 209135, etc. on January 28, 2014, p. 14.
[3] Belgica v. Executive Secretary, G.R. No. 208566, November 19, 2013, 710 SCRA 1.

226

the PDAF case;[4] entanglement with the unconstitutional PDAF; personalities at the
very highest level in both the Executive and the Legislative Departments of government;
and demonstrated lack of respect for public funds, institutions, and the Constitution. This
case, in my view, is the biggest since I came to the Court in terms of these factors alone.
Separate from these circumstances, many other principles underlying our Republic are at stake
and we, as a nation, cannot and should not be perceived to be weak or hesitant in supporting
these principles. Among them are the regime of the rule of law where we cannot afford to fail;
our constitutional system of checks and balances and of the separation of powers that
indicate the health of constitutionalism and democracy in our country; the stability of our
government in light of the possible effect that our ruling, either way, will have on the institutions
and officials involved; and the moral values and the people’s level of trust that we cannot allow
to disintegrate.
Under these circumstances, I felt that before any massive dissatisfaction and unrest among the
populace could set in, the Court should act lest its name also be dragged into the scandal. To
state the obvious, the Judiciary’s complicity — whether by delay or perceptions of mishandling,
cover up, whitewash or unacceptable ruling — could already entail a perception of failure of
government, constitutionalism and democracy because of the involvement of the three great

_______________
[4] For 2011-2012, a total of P142.23 Billion was released for programs and projects identified through the DAP.
In 2013, about P15.13 Billion has been approved for the hiring of policemen, additional funds for the modernization of
PNP, the redevelopment of Roxas Boulevard, and funding for the Typhoon Pablo rehabilitation projects for Compostela
Valley and Davao Oriental. Q&A on the Disbursement Acceleration Program, Oct. 7, 2013,
at http://www.gov.ph/2013/10/07/qa-on-the-disbursement-acceleration-program/.
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branches of government. The people’s inevitable question could then be: who else is there
to trust?
Thus, this Court should be as thorough as possible in the handling of this case, making sure
that, at the very least, both the reality and perception of its integrity would be intact. Towards
this end, we should thoroughly exhaust the discussion of all the issues before us — both express
and implied — to ensure the maximum in transparency, lucidity and logic.
This spirit was apparently the reason why the member-in-charge, J. Lucas Bersamin, suffered
delay in the issuance of his ponencia. To his credit, his Opinion, when it was issued, turned out to
be thorough and comprehensive (although I disagree with some of the points he made).
As defined by J. Bersamin, based on the pleadings and without objection from the parties, the
issues before the Court are quoted below.[5]
Issues
Under the Advisory issued on November 14, 2013, the presentations of the parties during the oral
arguments were to be limited to the following issues, to wit:
Procedural Issue:
A. Whether or not certiorari, prohibition, and mandamus are proper remedies to assail the
constitutionality and validity of the Disbursement Acceleration Program (DAP), National Budget Circular
(NBC) No. 541, and all other executive issuances allegedly implementing the DAP. Subsumed in this issue
are whether there is a controversy ripe for judicial determination, and the standing of petitioners.
_______________
[5] DAP Consolidated Cases Advisory for Oral Arguments of November 19, 2003.

228

Substantive Issues:
B. Whether or not the 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.”
C. 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 issued in Sec. 25(5), in relation to the provisions of the GAAs of 2011,
2012 and 2013;
(b) They authorize the disbursement of funds for projects or programs not provided in the GAAs for the
Executive Department; and
(c) They “augment” discretionary lump sum appropriations in the GAAs.
D. Whether or not the DAP violates (1) the Equal Protection Clause, (2) the system of checks and
balances, and (3) the principle of public accountability enshrined in the 1987 Constitution considering that it
authorizes the release of funds upon the request of legislators.
E. Whether or not factual and legal justification exists to issue a temporary restraining order to restrain
the implementation of the DAP, NBC No. 541, and all other executive issuances allegedly implementing the
DAP.
In its Consolidated Comment, the OSG raised the matter of unprogrammed funds in order to support its
argument regarding the President’s power to spend. During the oral arguments, the propriety of releasing
unprogrammed funds to support projects under the DAP was considerably discussed. The petitioners in G.R.
No. 209442 (Belgica) dwelled on unprogrammed funds in their respective memoranda. Hence, an additional
issue for the oral arguments is stated as follows:
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F. Whether or not the release of unprogrammed funds under the DAP was in accord with the
Constitution.

Separately from these, J. Bersamin dwelt on and discussed in his ponencia the applicability of
the doctrine of operative fact after recognizing that the parties had been fully heard on this
point. The inclusion of this issue, in my view, was a very good call on J. Bersamin’s part as a
discussion of the potential consequences of our ruling cannot be left out without risking the
charge that we have been less than thorough and have made an incomplete decision.
My Positions
In this Concurring and Dissenting Opinion, I CONCURwith the conclusions of J. Bersamin to
the extent discussed below and add my voice to the Separate Concurring Opinion of J. Carpio,
that the DAP is unconstitutional.
Specifically, I hold that:
a) the Court has jurisdiction to hear and decide the petitions under its expanded power of
judicial review, as provided under Section 1, Article VIII of the Constitution and as explained
below;
b) the DAP violates the principles of checks and balances and the separation of powers that the
1987 Constitution integrates into the budgetary process;
c) the DAP violates the constitutional prohibitions against the transfer of appropriations and
against the transfer of funds from one branch of the government to another, both under Section
25(5) of Article VI of the Constitution; and
d) the DAP violates the special conditions for the release of the Unprogrammed Fund.
230

Thus, to me, the DAP is unconstitutional in more ways than one.

Further, I generally agree with the ponente’s conclusion regarding the applicability
of the operative fact doctrine, subject to the details discussed below in this Opinion.
A Brief Background
The Court, as has been mentioned, ruled on the constitutionality of the PDAF and found the
system to be unconstitutional for its disregard and violation of the constitutional separation of
powers and the check and balance principles. These constitutional transgressions resulted from
the irregularities and anomalies that attended the PDAF implementation.
But even before the Court could rule on the constitutionality of the PDAF, the controversy that
it generated had spilled into and had created renewed demands for accountability in yet another
governmental action — the DAP that, until then, had been unknown. The DAP’s existence was
unwittingly disclosed to the public when a senator, charged with anomalies regarding his PDAF,
attempted to clear his name through a privilege speech.[261]
In response, the government (through the Department of Budget and Management [DBM]),
responded by issuing press
_______________
[6] In his Privilege Speech on September 25, 2013, Senator Jose “Jinggoy” Ejercito Estrada, in defending himself against
allegations of misuse of his allocated Presidential Development Assistance Fund (PDAF), revealed that additional PDAF
allocations were given to senators who voted for the conviction of former Chief Justice Renato Corona. The Untold PDAF
Story that the People Should Know –Privilege Speech of Senator Jose “Jinggoy” Ejercito Estrada (Sept. 25, 2013)
(transcript available at http://newsinfo.inquirer.
net/494975/privilege-speech-of-sen-jose-jinggoy-estrada-on-the-porkscam#ixzz2vX315gvi).

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releases[7] and other public communications, explaining how the DAP worked and how it had
been beneficial to the Filipino nation. No less than President Aquino, Jr. himself went on
television to defend the DAP.[8] These efforts, however, proved insufficient and did not prevent
the public’s distrust (heretofore directed against the PDAF) from creeping into the DAP.[9]
_______________
[7] Statement of Secretary Florencio Abad: On the releases to the senators as part of the Spending Acceleration Program,
Official Gazette, Sept. 28, 2013, available at http://www.gov.ph/2013/09/30/
statement-the-secretary-of-budget-on-the-releases-to-senators/; Press Release, Department of Budget and Management,
Constitutional and legal bases for the Disbursement Acceleration Program (DAP), (Oct. 5,
2013), http://www.gov.ph/2013/10/05/constitutional-and-legal-
bases-for-the-disbursement-acceleration-program-dap/; Press Release, Department of Budget and Management, Q&A on
the Disbursement Acceleration Program (Oct. 7, 2013), http://www.gov.ph/2013/10/07/qa-on-the-disbursement-acceleration-
program/; Press Release, Department of Budget and Management, Aquino government pursues P72.11-B disbursement
acceleration plan, (Oct. 12, 2013), http://
www.gov.ph/2011/10/12/aquino-goverment-pursues-p72-11-b-disbursement-acceleration-plan/.
[8] Pambansang Pahayag ng Kagalang-galang Benigno S. Aquino III Pangulo ng Pilipinas Mula sa Palasyo ng
Malacañang Inihayag sa isang live telecast (Oct. 30, 2013) (transcript available
at http://www.gov.ph/2013/10/30/pambansang-pahayag-ni-pangulong-aquino-noong-ika-30-ng-oktubre-2013/). Address of
His Excellency Benigno S. Aquino III President of the Philippines Live via telecast at Malacañang Palace (Oct. 30, 2013)
(transcript available at http://www.gov.ph/2013/10/30/televised-address-of-president-benigno-s-aquino-iii-october-30-2013-
english/)
[9] See Amando Doronilla, Analysis: Pork scam devastates Aquino popularity, Phil. Daily Inq., Oct. 22, 2013, available
at http://
opinion.inquirer.net/63861/pork-scam-devastates-aquino-popularity; Joel M. Sy Egco, Pinoys angry, frustrated with
Aquino – Diokno, Phil. Star, Nov. 3, 2013, available at http://www.manilatimes.net/
pinoys-angry-frustrated-with-aquino-diokno/50207/.
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The DAP, like the PDAF, involved the implementation of the national budget but focused
largely on how the Executive implemented the General Appropriations Act (GAA). As in
the PDAF, the charges involved the unconstitutional intrusion by one branch of government (the
Executive) into the exclusive prerogatives of another (the Legislative) in the budgetary process.
The present petitioners charge that the DAP was used as the means to allow the Executive
to intrude into the legislative budgetary process, thereby subverting and rendering
useless the appropriations Congress made under the GAA. In short, through the DAP,
the Executive effectively exercised the power of appropriation exclusively reserved by
the Constitution to Congress.
I recall at this point that we ruled in Belgica v. Executive Secretary[10] that the PDAF system
was unconstitutional because of the legislative intrusion into the Executive’s implementation
of the PDAF — a violation of the principles of separation of powers and checks and balances.
The DAP, in parallel with the PDAF but going the other way, allegedly allowed the
Executive to disregard the GAA so that the latter could determine the projects,
activities and plans (PAPs) where national funds would be deployed and spent,
creating thereby a budget independently determined by the Executive within the
congressionally-determined budget.
If true, the two systems — the PDAF and the DAP — effectively allowed the two branches of
government to unconstitutionally share in their respective exclusive prerogatives in the
formulation and implementation of the national budget, contrary to the checks and balances and
accountability system envisioned by the Constitution. This overarching sharing system facilitated
— if preliminary congressional and news
_______________
[10] Supra note 3.

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reports are to be believed — the funneling of funds into the pockets of politicians and
unscrupulous private individuals in a widespread and systemic corruption of the country’s
budgetary process.
Notably, this combined application of the PDAF and DAP systems — according to news reports
and the privilege speech of one Senator[11] — enabled the Executive to secure the votes for the
conviction of former Chief Justice Renato Corona and the filing of impeachment charges against
former Ombudsman Merceditas Gutierrez. Another senator also spoke in his own privilege
speech on what transpired while the impeachment case against the former Chief Justice was
before the Senate.[12] Interestingly, both senators were recipients of PDAF funds over and above
the usual PDAF allocation,[13] and both now stand criminally charged in relation with the
implemen-
_______________
[11] In his Privilege Speech on September 25, 2013, Senator Jose “Jinggoy” Ejercito Estrada, in defending himself against
allegations of misuse of his allocated Presidential Development Assistance Fund (PDAF), revealed that additional PDAF
allocations were given to senators who voted for the conviction of former Chief Justice Renato Corona. The Untold PDAF
Story that the People Should Know – Privilege Speech of Senator Jose “Jinggoy” Ejercito Estrada (Sept. 25, 2013)
(transcript available at http://newsinfo.inquirer.net/
494975/privilege-speech-of-sen-jose-jinggoy-estrada-on-the-porkscam#ixzz2vX315gvi).
In a press conference, former Senator Joker Arroyo said that more than P500 million in Presidential Development
Assistance Fund (PDAF) or pork barrel was distributed to 11 senators in April 2012. Senator Arroyo claims that after
former Chief Justice Corona’s conviction, another P1 billion from the Disbursement Acceleration Program (DAP) was
distributed to senators who voted to convict Corona. Macon Ramos-Araneta, Money flowed at Corona trial, Manila
Standard Today, Oct. 2, 2013 at http://manilastandardtoday.
com/2013/10/02/money-flowed-at-corona-trial/.
[12] Privileged Speech of Sen. Revilla, Jr., delivered on January 20, 2014, http://www.rappler.com/move-ph/issues/budget-
watch/48460
-full-text-revilla-on-politicking-by-the-yellow-republic.
[13] Supra note 7.
234

tation of PDAF funds. A third senator, who had not spoken at all about the impeachment,
likewise received additional PDAF funds and also stands similarly charged.[14]
What is truly frightening in all these series of events is that the illegalities — based on
congressional investigations[15] and the initial charges recently brought by the Ombudsman[16]
_______________
[14] Plunder charges were filed before the Sandiganbayan on Friday [June 6, 2014] against Senate Minority Floor Leader
Juan Ponce Enrile, Senators Jinggoy Estrada and Ramon ‘Bong’ Revilla in connection with the multibillion-peso pork
barrel fund scam. Amita O. Legaspi, Napoles, 3 senators charged with plunder at Sandiganbayan, GMA News, June 6,
2014 at http://www.gmanetwork.com/news/
story/364499/news/nation/napoles-3-senators-charged-with-plunder-at-sandiganbayan.
[15] “Approximately 80 percent of the PDAF has been lost probably due to corruption,” the report [Senate Blue Ribbon
Committee draft report presented by Senator T.G. Guingona to the media] said, apparently recalling testimonies made by
Commission on Audit Chairperson Grace Pulido-Tan and Director Susan Garcia, during the first congressional hearings
into the PDAF scam on August 29, 2013. “If this manner of using PDAF is descriptive of how other government funds are
disbursed, then corruption is an endemic cancer insidiously spreading, and leading our government to absolute ruin.”
Interaksyon.com, Ombudsman, Senate panel move to charge Enrile, Estrada, Revilla with plunder, Interaksyon.com –
News5, Apr. 1, 2014, at http://www.interaksyon.com/article/83891/
ombudsman-senate-panel-move-to-charge-enrile-estrada-revilla-with-plunder.
[16] Six months after it received the plunder complaint against a first batch of 38 lawmakers, government officials, and
private individuals involved in the pork barrel scam, the Office of the Ombudsman announced on Tuesday, April 1, the
filing of charges against 10 of them before the Sandiganbayan.
x x x
The charges announced on Tuesday were only for those named in the first batch of PDAF-related complaints. A second
batch, with 34 respondents, was filed by the justice department with the Ombudsman in November 2013.
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— appeared to have been pervasively practiced; thus, they caught in their webs a significant
number of senators and congressmen. All these appeared, based on the evidence presented before
this Court, to have been made possible through the action of no less than the highest levels of the
Executive.[17]
Thus, what appears to be involved is not a one-time and one-shot act of corruption by one or
a few government officials, but by a host of public officials whose functions and interdependent
moves supported their respective private and individual nefarious objectives.
In these lights and if only to clear the air and ensure that the government maintains the people’s
trust, the Court must now decisively exercise its duty to protect and defend the Constitution, if
need be, to declare the unconstitutionality of the DAP in the same decisive manner we declared
the PDAF system unconstitutional. To shirk from this responsibility is to consent to the
perversion of our republican way of life.
At its worst, the continuation of the present systems, if true, can lead to the concentration of
power in the Executive, as the national budget would in effect be its sole prerogative. This
surrender of the Legislative’s power of the purse to the Executive affects not only the budgetary
process and accountability, but injures the legislative power itself, as the funds to finance
legislation crafted by Congress would be subject to the sole will of the Executive Branch. In no
time, intrusion into the Judiciary cannot but follow through intimidation and perversion of
values. We have had a similar incident of this
_______________
Rafanan [Assistant Ombudsman Asryman Rafanan] said the other complaints are being investigated, and charges may be
filed against other lawmakers and other private persons in relation to the
multibillion-peso PDAF scam. Rappler.com, Napoles, 3 senators indicted for plunder, Rappler, Apr. 1, 2014,
at http://www.rappler.
com/nation/54416-ombudsman-plunder-case-filed-pdaf-senators.
[17] DBM Sec. Florencio Abad in a statement admitted that there had been augmentations of the PDAF appropriations of
senators through the DAP, supra note 7.
236

type in our history and we ought, by this time, to have learned our lessons. As one philosopher
cautioned, those who do not remember the past are condemned to repeat it.[18]
While we have the duty to pass upon the validity of the DAP, we must, at the same time, do so
fully aware of the consequences of our decision. As I have said, the highest stakes are involved for
the country.
If indeed the DAP is constitutional as the government claims, we must immediately and
decisively say so to clear the presently muddled constitutional air; to foster the stability of our
government; and to significantly contribute to shoring up our people’s trust and the nation’s
moral values. Our ruling, if it is fair and arrived at with integrity, would help achieve these
objectives.
On the other hand, if the DAP is unconstitutional, then we should unequivocally so declare as
we did in the PDAF case, but we should do this with an eye on consciously protecting our
institutions, whether they be executive, legislative or judicial; we cannot aim to destroy or
weaken, or impose the superiority that the Constitution did not grant us. Our aim should be to
maintain the balance intended by our Constitution, the guiding instrument that must at all times
reign supreme.
These balancing and strengthening acts, of course, cannot come at the sacrifice of the public
accountability that our Constitution has enshrined;[19] institutions are irreplace-
_______________
[18] George Santayana, The Life of Reason: Reason in Common Sense, Scribner Publishing (1905).
[19] The 1987 Constitution has devoted an entire article on “Accountability of Public Officers,” section one of which
provides:
Section 1. Public office is a public trust. Public officers and employees must, at all times, be accountable to the people,
serve them with utmost responsibility, integrity, loyalty, and efficiency; act with patriotism and justice, and lead modest
lives. 1987 Constitution, Article IX, Section 1.
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able but public officials are not and should go and fall if they must. This is the type of
action that will enhance transparency and public accountability. That those who erred must
suffer is a consequence that evildoers should have foreseen even before they undertook their
illegal and unconstitutional act.
For ease of presentation, this Concurring and Dissenting Opinion shall proceed under the
following structure:
A. Factual Antecedents
1. The DAP and its origins
a. The Memoranda from DBM Secretary Florencio Abad to the President
B. Preliminary Matters
1. The Court’s expanded power of judicial review
2. Prima facie showing of grave abuse of discretion
a. The lack of audit findings does not negate grave abuse of discretion
3. Transcendental importance of the issues presented by the petitions
4. Justiciability and Political Questions
5. The Court’s boundary-keeping role in times of political upheaval
C. Substantive Matters
1. The DAP violates the principles of checks and balances and the separation of
powers that the 1987 Constitution integrated in the budgetary process
a. The principle of separation of powers and checks and balances in the budgetary process
b. How the DAP violates these principles
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2. The DAP violates the prohibition against the transfer of appropriations

a. the power to augment is a very narrow exception to the general prohibition against the
transfer of appropriations
b. the need for actual savings before the power to augment may be exercised
c. savings cannot be used to fund programs and projects not appropriated by Congress
d. additional limitations imposed by Congress under the GAA
i. definition of savings
ii. two-year period within which appropriations for Capital Outlay and Maintenance and other
Operating Expense (MOOE) may be spent
iii. general prohibition against impoundment of releases
e. the sources of DAP funds cannot qualify as savings
i. unobligated allotments
i.1 final discontinuance or abandonment
i.2 use of section 38 as justification
f. the DAP violates the prohibition against impoundment
g. qualifications to the President’s flexibilities in budget execution
h. the DAP, in funding items not found in the GAA, violated the Constitution
3. The DAP violates the special conditions for the release of the Unprogrammed Fund
in the 2011 and 2012 GAAs
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4. The operative fact doctrine: concept, limits and application to the DAP’s
unconstitutionality
A. Factual Antecedents
1. The DAP and its origins
On September 28, 2013, Secretary Abad released an official statement, through the DBM
website, explaining that the amounts released to Senators on top of their regular PDAF
allocations towards the end of 2012 were part of a fund he called the DAP.[275] He claimed that
these releases were, in

_______________
[20] Statement of Secretary Florencio Abad: On the releases to the senators as part of the Spending Acceleration Program
[Released on September 28, 2013]
In the interest of transparency, we want to set the record straight on releases made to support projects that were
proposed by Senators on top of their regular PDAF allocation toward the end of 2012. These fund releases have recently
been touted as ‘bribes,’ ‘rewards,’ or ‘incentives.’ They were not. The releases, which were mostly for infrastructure
projects, were part of what is called the Disbursement Acceleration Program (DAP) designed by the Department of Budget
and Management (DBM) to ramp up spending and help accelerate economic expansion. To suggest that these funds were
used as “bribes” is inaccurate at best and irresponsible at worst.
In 2012, most releases were made during the period October-December, based entirely on letters of request submitted to
us by the Senators. Those who received releases during that period and their corresponding amounts were:
· Sen. Antonio Trillanes (October 2012-P50M),
· Sen. Manuel Villar (October 2012-P50M),
· Sen. Ramon Revilla (October 2012-P50M),
· Sen. Francis Pangilinan (October 2012-P30M),
· Sen. Loren Legarda (October 2012-P50M),
· Sen. Lito Lapid (October 2012-P50M),
· Sen. Jinggoy Estrada (October 2012-P50M),
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fact, not the “first time that releases from DAP were made to fund project requests from
legislators” because the DAP had been in existence since the latter part of 2011.
In the course of hearing these petitions, the respondents submitted “evidence packets”
explaining how the DAP came into existence and how it operated. We can thus authoritatively
and with sufficient factual bases discuss these points.

_______________
· Sen. Alan Cayetano (October 2012-P50M),
· Sen. Edgardo Angara (October 2012-P50M),
· Sen. Ralph Recto (October 2012-P23M; December 2012-P27M),
· Sen. Koko Pimentel (October 2012-P25.5M; November 2012-P5M; December 2012-P15M),
· Sen. Tito Sotto (October 2012-P11M; November 2012-P39M),
· Sen. Teofisto Guingona (October 2012-P35M; December 2012-P9M),
· Sen. Serge Osmeña (December 2012-P50M),
· Sen. Juan Ponce Enrile (October 2012-P92M)
· Sen. Frank Drilon (October 2012-P100M).
There were two earlier releases made in late August of that same year: Sen. Greg Honasan (P50M) and Sen. Francis
Escudero (P99M). No releases were made in 2012 to Senators Ping Lacson, Joker Arroyo, Pia Cayetano, Bongbong Marcos
and Miriam Defensor-Santiago. In 2013, however, releases were made for funding requests from the office of Sen. Joker
Arroyo (February 2013-P47M) and Sen. Pia Cayetano (January 2013-P50M). The 24th Senator then, Benigno S. Aquino
III, was already President.
This was not the first time that releases from DAP were made to fund project requests from legislators. In 2011, the DAP
was instituted to ramp up spending after sluggish disbursements — resulting from the governments’ preliminary efforts
to plug fund leakages and seal policy loopholes within key implementing agencies — caused the country’s GDP growth to
slow down to just 3.6%. During this period, the government also accommodated requests for project funding from
legislators and local governments, GOCCs, and national government agencies to help ease the country’s expenditure
performance forward[.]
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a. The Memoranda from Secretary Abad to the President

In a Memorandum dated October 12, 2011,[21]Secretary Abad sought and secured
a formal confirmation of the President’s approval of the DAPfor a total of P72.11 Billion.
[22] He identified the DAP’s fund sources and their description as:

1. FY 2011 Unreleased Personal Services (PS) Appropriations — Unreleased [PS] appropriations which
will lapse at the end of FY 2011.
2. FY 2011 Unreleased Appropriations — Unreleased appropriations (slow moving projects and
programs for discontinuance).
3. FY 2010 Unprogrammed Fund — Supported by the dividends of GFIs.
4. FY 2010 Carryover Appropriation — Unreleased appropriations (slow moving projects and
programs for discontinuance) and savings from Zero-based budgeting initiative.
5. FY 2011 Budget items for realignment — FY 2011 Agency Budget items that can be realigned within
agency to fund new fast-disbursing projects: DPWH, DA, DOTC, DepEd.[23]
_______________
[21] FY 2011 Proposed Disbursement Acceleration Program (Projects and Sources of Fund).
[22] According to the DBM, the Disbursement Acceleration Program (DAP) was approved by the President on October 12,
2011 upon the recommendation of the Development Budget Coordination Committee (DBCC) and the Cabinet Clusters. In
the DBM’s Press Release on October 12, 2011 released through the Official Gazette, the DBM Secretary stated that
“President Aquino instructed his government” to implement a P72.11 billion in additional projects in order to fast-track
disbursements and push economic growth.” (http://www.gov.ph/2011/10/12/aquino-government-pursues-p72-11-b-
disbursement-acceleration-plan/).
[23] Respondent’s 1st Evidence Packet, pp. 2-3.

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Among the DAP-funded projects for National Government Agencies (NGA) were: (i)
the Commission on Audit’s (COA’s) Infrastructure Program and the hiring of additional
litigation experts; and (ii) various other local projects. In the “Project List: FY 2011
Disbursement Acceleration Plan,” the two listed projects were described as follows:
The President approved these requests.[24]

Subsequently, Secretary Abad sent to the President another Memorandum dated
December 12, 2011,[25]requesting for omnibus authority to consolidate savings/unutilized
balances in fiscal year (FY) 2011 corresponding to completed
_______________
[24] Id., at pp. 4, 8.
[25] Omnibus Authority to Consolidate Savings/Unutilized Balances and its Realignment, Respondent’s 1st Evidence Packet,
pp. 13-16.
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or discontinued projects and their realignment. The DBM stated that the savings out of the 2011
GAA were to be pooled for the following purposes:
1.1 to provide for new activities which have not been anticipated during the preparation of the
budget;
1.2 to augment additional requirements of ongoing priority projects
1.3 to provide for deficiencies under the Special Purpose Funds, e.g., PDAF, Calamity Fund,
Contingent Fund
1.4 to cover for the modifications of the original allotment class allocation as a result of ongoing priority
projects and implementation of new activities [underscoring supplied]

In yet another Memorandum dated June 25, 2012,[26]Secretary Abad asked the President
for the grant of authority: (i) to consolidate savings/unutilized balances in FY 2012 corresponding
to unfilled positions and completed or discontinued projects; and (ii) for the withdrawal and
pooling of the available and unobligated balances, for both continuing and current
allotments, of national government agencies as of June 30, 2012.
The DBM stated that the savings out of the 2012 GAA corresponding to unfilled positions and to
completed or discontinued projects were to be pooled for the following purposes:

1.1 to augment additional requirements of ongoing priority projects;

1.2 to provide for deficiencies under the Special Purpose Funds, e.g., PDAF, Calamity Fund,
Contingent Fund;
_______________
[26] Omnibus Authority to Consolidate Savings/Unutilized Balances and their Realignment.

244
1.3 to cover for the modifications of the original allotment class allocation as a result of ongoing priority
projects and implementation of new activities[.] [underscoring and emphases supplied]
Among the “priority projects” identified was the construction of the Legislative Library
and Archive Building/Congressional E-Library with the House of Representative as the
identified agency. This was described as:
Construction of the Legislative Library and Archive Building/Congressional E-Library
This request from House Speaker Feliciano Belmonte, Jr. for the release of P250M shall cover the
completion of the construction of the Legislative Library and Archives Building at the Batasan Pambansa
Complex. This construction project was approved in 2009 at an estimated cost of P320M. Of this amount,
P70M shall be funded from the budget of HOR and P250M from the 2009 DPWH budget.
The initial phase of the construction work (P67.7M) was completed in May 29, 2010. Recently, COA
recommended that completion of the remaining works be undertaken to prevent deterioration of materials
used in the initial work. The Lump-sum for the Construction of Public Biddings under the DPWH budget
where the request could be charged cannot accommodate the P250M requirement. It is recommended
that this be charged against available savings. [emphases supplied]

On June 27, 2012, the President also approved this request.[27]
Consistent with these memoranda, on July 8, 2012, the DBM issued National Budget
Circular (NBC) No. 541, entitled “Adoption of Operational Efficiency Measure — With-
_______________
[27] Respondent’s 1st Evidence Packet, page 31, cf TSN of Oral Arguments dated Jan. 28, 2014, pp. 42-43.

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drawal of Agencies’ Unobligated Allotments as of June 30, 2012.”

Per the President’s “directive” dated June 27, 2012, NBC No. 541 authorized Secretary Abad
to withdraw the unobligated allotments of agencies that had low level of obligations as
of June 30, 2012. These unobligated allotments under NBC No. 541 referred to two kinds of
allotments: one is the continuing allotment that is charged against the GAA for FY 2011, and the
other is the current allotment that is charged against the GAA of FY 2012.[28]
Based on the earlier memoranda and NBC No. 541, the DAP funds were sourced from: (i)
“savings” generated by the government, as well as (ii) the Unprogrammed Fund.
The savings were sourced from:
1. Unreleased appropriations for unfilled positions which will lapse at the end of the year;
2. Available balances from completed or discontinued projects;
3. Unreleased appropriations of slow moving projects and discontinued projects; and

_______________
[28] Based on NBC No. 541, the withdrawn allotments may be (i) reissued for the original programs or projects of the
agency concerned; (ii) re-aligned to cover additional funding for other existing projects of the same agency; or (iii) used
to augment existing programs and projects of any agency and to fund priority programs and projects not considered in
the 2012 budget.” To avail of either of the first two options, the agency is required to submit to the DBM a Special Budget
Request, supported by specified documents. However, the agency has only until September 30, 2012 to comply
therewith. Thereafter, the withdrawn allotments shall be pooled and form part of the overall savings of the government.

246

4. Withdrawn unobligated allotments which have earlier been released to NGA.[29]

In a May 20, 2013 Memorandum,[30] the DBM stated that it had identified savings out of the
2011 GAA which could be pooled for the following purposes:
5.1 to augment additional requirements of ongoing priority projects and other spending
priorities;
5.2 to provide for deficiencies under the Special Purpose Funds, e.g., PDAF, Calamity
Fund, Contingent Fund;
5.3 to cover for the modifications of the original allotment class allocation as a result of ongoing
priority projects and implementation of new activities (e.g., increase/decrease in PS, MOOE,
and CO). [underscoring and emphases supplied]
According to the DBM, with the one-year validity of appropriations in the 2013 GAA, the DBM
had to ensure the maximum use of the available allotment.
Accordingly, all unobligated balances at the end of every quarter, both for continuing and
current allotments, shall be withdrawn and pooled to fund fast moving programs/projects. The
allotments to be withdrawn would be based on the list of slow moving projects to be identified by
the agencies and their catch-up plans to be evaluated by the DBM.[31] The President likewise
granted this request.
Based on these antecedents, the petitioners uniformly claim that the DAP
is unconstitutional for violating Section
_______________
[29] http://www.dbm.gov.ph/?page_id=7362.
[30] Omnibus Authority to Consolidate Savings/Unutilized balances and their Realignment to fund the Quarterly [DAP].
[31] Respondents’ 1st Evidence Packet, p. 79.

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25, paragraph 5[32] and Section 29, paragraph 1, Article VI,[33] as well as Section 17, Article
VII[34] of the 1987 Constitution.
Discussions
B. Preliminary Matters
The challenges against the DAP’s constitutionality were filed with the Court through petitions
for certiorari and prohibition under Rule 65 of the Rules of Court. These are the modes of review
that have been traditionally used by litigants to directly invoke the Court’s power of judicial
review.
Given these cited modes, it was not surprising that part of the respondents’ procedural
counter-arguments focused on the nonfulfillment of all the conditions that a Rule 65 petition
requires. The remainder, on the other hand, focused on the petitioners’ alleged failure to present
a case for grave abuse of discretion against the respondents.
These opposing positions opportunely provide me the chance to reiterate the fresh approach I
first developed in my Separate Opinion in Imbong v. Executive Secretary[35]to clarify the Court’s
approaches in giving due course to and reviewing constitutional cases.
_______________
[32] (5) No law shall be passed authorizing any transfer of appropriations; however, 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
Constitutional Commissions may, by law, be authorized to augment any item in the general appropriations law for their
respective offices from savings in other items of their respective appropriations.
[33] (1) No money shall be paid out of the Treasury except in pursuance of an appropriation made by law.
[34] Section 17. The President shall have control of all the executive departments, bureaus, and offices. He shall ensure
that the laws be faithfully executed.
[35] G.R. No. 204819, April 8, 2014, 721 SCRA 146.

248

As I explained in Imbong, the Court under the 1987 Constitution possesses three powers:
(1) the traditional justiciable cases involving actual disputes and controversies
based purely on demandable and enforceable rights;
(2) the traditional justiciable cases as understood in (1), but additionally
involving jurisdictional and constitutional issues;
(3) pure constitutional disputes attended by grave abuse of discretion in the process
involved or in their result/s.
The present petitions allege that grave abuse of discretion and violations of the Constitution
attended the DAP, from the perspectives of both its creation and terms, and its sourcing and
use of funds. In these lights, the exercise of our expanded power of judicial review falls within
the third kind above, i.e., the duty to determine whether there has been grave abuse of discretion
on the part of any governmental body (in this case, by the Executive) to ensure that the
boundaries drawn by the Constitution have been and are respected and maintained.
That Rule 65 of the Rules of Court has been expressly cited, to my mind, is not a hindrance to
our present review as the allegations of the petitions and the remedies sought, not their titles,
determine our jurisdiction in the exercise of the power of judicial review.
1. The Court’s expanded power of judicial review
In contrast with previous constitutions, the 1987 Constitution substantially fleshed out the
meaning of “judicial power,” not only by confirming the meaning of the term as understood by
jurisprudence up to that time, but by going beyond the accepted jurisprudential meaning of the
term.
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Section 1, Article VIII of the 1987 Constitution reads:

Section 1. The judicial power shall be vested in one Supreme Court and in such lower courts as may be
established by law.
Judicial power includes the duty of the courts of justice to settle actual controversies involving rights
which are legally demandable and enforceable, AND to determine whether or not there has
been a grave abuse of discretion amounting to lack or excess of jurisdiction on the part of any branch or
instrumentality of the Government. (italics, emphases and underscore supplied)

Under these terms, the present Constitution not only integrates the traditional definition
of judicial power, but introduces as well a completely new power and duty to the Judiciary
under the last phrase — “to determine whether or not there has been a grave abuse of
discretion amounting to lack or excess of jurisdiction on the part of any branch or
instrumentality of the Government.”
This addition was apparently in response to the Judiciary’s past experience of invoking
the political question doctrine to avoid cases that had political dimensions but were otherwise
justiciable. The addition responded as well to the societal disquiet that resulted from these past
judicial rulings.
Under the expanded judicial power, justiciability expressly and textually depends only on
the presence or absence of grave abuse of discretion, as distinguished from a situation where the
issue of constitutional validity is raised within a “traditionally” justiciable case which demands
that the requirement of actual controversy based on specific legal rights must exist. Notably, even
if the requirements under the traditional definition of judicial power are applied, these requisites
are complied with once grave abuse of discretion is prima facie shown to have taken place. The
presence or absence of
250

grave abuse of discretion is the justiciable issue to be resolved.

Necessarily, a matter is ripe for adjudication under the expanded judicial power if the
assailed law or rule is already in effect. If something had already been accomplished or
performed by the Legislative and/or the Executive, and the petitioner sufficiently alleges the
existence of an immediate or threatened injury to itself as a result of the challenged action, then
the controversy cannot but already be ripe for adjudication.[36]
In the expanded judicial power, any citizen of the Philippines to whom the assailed law or rule
is shown to apply necessarily has locus standi since a constitutional violation constitutes an
affront or injury to the affected citizens of the country. If at all, a less stringent requirement
of locus standi only needs to be shown to differentiate a justiciable case of this type from the pure
or mere opinion that courts cannot render.
The traditional rules on hierarchy of courts and transcendental importance, far from
being grounds for the dismissal of the petition raising the question of unconstitutionality, are
necessarily reduced to rules relating to the level of court that should handle the controversy, as
directed by the Supreme Court.
Thus, all courts have the power of expanded judicial review, but only when a petition involves
a matter of transcendental importance should it be directly filed before this Court. Otherwise, the
Court may either dismiss the petition or remand it to the appropriate lower court, based on its
consideration of the urgency, importance, or the evidentiary requirements of the case.
_______________
[36] Province of North Cotabato v. Government of the Republic of the Philippines Peace Panel, 589 Phil. 463, 481; 568
SCRA 402, 451 (2008).
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In other words, petitions — in order to successfully invoke the Court’s power of expanded
judicial review — must satisfy two essential requisites: first, they must demonstrate a prima
facie showing of grave abuse of discretion on the part of the governmental body’s actions;
and second, they must prove that they relate to matters of transcendental importance to the
nation.
The first requirement establishes the need for the Court’s exercise of expanded judicial review
powers; the second requirement justifies direct recourse to the Court and a relaxation of standing
requirements.
The present petitions clearly satisfy these requisites as explained below.
2. Prima facie showing of grave abuse of discretion
The respondents posit that the petitioners’ allegations miserably failed to make a case of grave
abuse of discretion considering the “insufficiency and uncertainty of the facts” alleged as they
are mostly based on newspaper clippings and media reports.[37] Given the innumerable
allotments and disbursements, they argue that the petitioners are required to establish with
sufficient clarity the kinds of allotments and disbursements complained of in the petitions. On
this basis, the respondents question the presence of an actual case or controversy in the petitions.
I cannot agree with the respondents’ positions.
I note that aside from newspaper clippings showing the antecedents surrounding the DAP, the
petitions are filled with quotations from the respondents themselves, either through press
releases to the general public or as pub-
_______________
[37] Comment, p. 5.
252

lished in government websites.[38] In fact, the petitions — quoting the press release published
in the respondents’ website — enumerated disbursements released through the DAP;[39] it
also included admissions from no less than Secretary Abad regarding the use of funds from
the DAP to fund projects identified by legislators on top of their regular PDAF allocations.[40]
Additionally, the respondents, in the course of the oral arguments, submitted details of the
programs funded by the DAP,[41] and admitted in Court that the funding of Congress’ e-library
and certain projects in the COA came from the
_______________
[38] The following had been published in the Official Gazette: Statement of Secretary Florencio Abad: On the releases to
the senators as part of the Spending Acceleration Program, Official Gazette, Sept. 28, 2013, available
at http://www.gov.ph/2013/09/30/statement-the-secretary-of-budget-on-the-releases-to-senators/; Press Release,
Department of Budget and Management, Constitutional and legal bases for the Disbursement Acceleration Program
(DAP), (Oct. 5, 2013), http://www.gov.ph/2013/10/05/constitutional-and-legal-bases-for-the-disbursement-acceleration-
program-dap/; Press Release, Department of Budget and Management, Q&A on the Disbursement Acceleration Program
(Oct. 7, 2013), http://www.gov.ph/2013/10/07/
qa-on-the-disbursement-acceleration-program/; Press Release, Department of Budget and Management, Aquino
government pursues P72.11-B disbursement acceleration plan, (Oct. 12, 2013), http://
www.gov.ph/2011/10/12/aquino-goverment-pursues-p72-11-b-disbursement-acceleration-plan/.
[39] Press Release, Department of Budget and Management, Aquino government pursues P72.11-B disbursement
acceleration plan, (Oct. 12, 2013), http://www.gov.ph/2011/10/12/aquino-governmentpursues-p72-11-b-disbursement-
acceleration-plan/.
[40] Statement of Secretary Florencio Abad: On the releases to the senators as part of the Spending Acceleration Program,
Official Gazette, Sept. 28, 2013, available at http://www.gov.ph/2013/09/30/
statement-the-secretary-of-budget-on-the-releases-to-senators/.
[41] The respondents submitted seven evidence packets containing the relevant memoranda and documents about the
DAP’s implementation.
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DAP.[42] They likewise stated in their submitted memorandum that the President “made
available” to the Commission on Elections (COMELEC) the “savings” of his department upon
request for funds.[43]
The mechanics by which funds were pooled together to create and fund the DAP are also evident
from the statements published in the DBM website,[44] as well as in national budget circulars
and approved memoranda implementing the DAP. The respondents also submitted a memo
showing the President’s approval of the DAP’s creation.
All of these cumulatively and sufficiently lead to a prima facie case of grave abuse of discretion by
the Executive in the handling of public funds. In other words, these admitted pieces of evidence,
taken together, support the petitioners’ allegations and establish sufficient basic premises for the
Court’s action on the merits. While the Court, unlike the trial courts, does not conduct
proceedings to receive evidence, it must recognize as establishedthe facts admitted or
undisputedly represented by the parties themselves.
First, the existence of the DAP itself, the justification for its creation, the respondent’s legal
characterization of the source of DAP funds (i.e., unobligated allotments and unreleased
appropriations for slow moving projects) and the various purposes for which the DAP funds would
be used (i.e., for PDAF augmentation and for “aiding” other branches of government and other
constitutional bodies) are clearly and indisputably shown.
_______________
[42] TSN, January 28, 2014, pp. 42-43.
[43] Rollo (G.R. No. 209287), p. 37, Memorandum for the Respondents; See Also: Bersamin, J. at p. 161.
[44] Press Release, Department of Budget and Management, Frequently Asked Questions About the Disbursement
Acceleration Program, http://www.dbm.gov.ph/?page_id=7362.
254

Second, the respondents’ undisputed realignment of funds from one point to another
inevitably raised questions that, as discussed above, are ripe for constitutional scrutiny.[45]
The established prima facie case means that without considering any contradicting evidence,
the allegations, admissions, official statements and documentary evidence before the Court
sufficiently show the existence of grave abuse of discretion. This situation, to my mind, is patent
from the allegations in the petitions, read with the cited admissions and those obtained through
the oral arguments, particularly (1) on how savings had been generated and their uses;
and (2) on the transfer of funds budgeted for the Executive to the Legislative, the COA,
and the COMELEC.
a. The lack of audit findings does not negate grave abuse of discretion
The respondents additionally deny the existence of an actual case because the COA has yet to
render its audit findings to determine whether the DAP-funded projects identified in the petitions
are lawful or not, thus showing that the petitions may be premature.
I do not find this contention persuasive.
The issue of criminal, civil or administrative liability,determined on the basis, among others,
of the COA’s findings, does not and cannot preempt the issue of constitutionality. In fact, the
Court’s finding of unconstitutionality inevitably leads to the determination of the possibility of
the commission of infractions that can give rise to different liabilities. The Court’s findings too
should be material in the appropriate proceedings where the liabilities arising from grave
constitutional violations are properly determined.
_______________
[45] Supra note 36.

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The prima facie case, as established and shown in these proceedings, is sufficient to resolve
the issue of whether the Executive committed grave abuse of discretion in creating and
implementing the DAP. In other words, the absence of any COA finding on the validity of the
disbursements under the DAP cannot render the present petitions premature.
To avoid any confusion, let me restate and clarify my view that while the COA can
rule on the legality or regularity of an item of expense, it cannot rule on the
constitutionality of the measure that made the expenditure possible. This issue remains
for the courts, not for the COA, to decide upon.
On the same reasoning, the invocation of the presumption of constitutionality of legislative
and executive acts immediately loses its appeal when it is considered that the presumption is
never meant to shield government officials from challenges against their official
actions (or from liability) where the violation of the Constitution is otherwise clear and
unequivocal.
3. Transcendental importance of the issues presented by the petitions
The petitions likewise establish the second requirement of transcendental importance.
While the concept of transcendental importance has no doctrinal definition, former Supreme
Court Justice Florentino P. Feliciano came up with the following determinants whose degree of
presence or absence can guide the courts in determining whether a case is one of transcendental
importance: (1) the character of the funds or other assets involved in the case; (2) the presence of
a clear case of disregard of a constitutional or statutory prohibition by the public respondent
agency or instrumentality of the government; and (3) the lack
256

of any other party with a more direct and specific interest in raising the questions being
raised.[46]
I submit that these determinants are all present in the cases before us.
For one, the Executive’s undisputed creation and implementation of the DAP, which involves
billions of taxpayers’ money (and which potentially involves billions more unless halted),
satisfy the first determinant. To point out a present obvious reality, the Executive is even now
engaged in a “shame” campaign to prod people to pay their taxes. If taxes will continue to be
faithfully paid, now and in the future, it is of transcendental importance for the people to know
how their tax money is spent or misspent, and to be informed as well that they have this right.
For another, the petitioners’ serious allegations of constitutional violation by the Executive — in
transferring appropriations despite the nonexistence of savings and the respondents’ commission
of grave abuse of discretion in disregarding the limitations of allowable transfer of appropriations
under Section 25(5), Article VI of the Constitution as admitted by the respondents
themselves — satisfy the second determinant. Based on the admissions made alone, the
incidents of constitutional violations are clear, patent and of utmost gravity; they affect the very
nature of our republican system of government.
Lastly, given the intrinsic nature of the petitions as taxpayers’ suits (to prevent wastage and
misapplication of funds by an unconstitutional executive act), there can really be no other party
with a more direct and specific interest in raising the issue of constitutionality than the
petitioners, suing as taxpayers and invoking a public right.
_______________
[46] Kilosbayan, Incorporated v. Guingona, Jr., G.R. No. 113375, May 5, 1994, 232 SCRA 110.
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Over and above these determinants, the transcendental importance of these present cases lies in
the complementary relation of their presented issues with those raised in the
PDAF which the Court squarely ruled upon in the recent case of Belgica v. Executive Secretary.
[47]
In Belgica, the Court declared the statutorily-created pork barrel system to be unconstitutional
for violating the core doctrine of separation of powers. The Court ruled that the legislator’s post-
enactment participation in the areas of project identification, fund release and fund
realignment or role in the implementation or enforcement of the GAAs are beyond
Congress’ oversight function, and are therefore unconstitutional. The Court pertinently ruled:
Thus, for all the foregoing reasons, the Court hereby declares the 2013 PDAF Article as well as all other
provisions of law which similarly allow legislators to wield any form of post-enactment authority in the
implementation or enforcement of the budget, unrelated to congressional oversight, as violative of the
separation of powers principle and thus unconstitutional. Corollary thereto, informal practices, through
which legislators have effectively intruded into the proper phases of budget execution, must be deemed as acts
of grave abuse of discretion amounting to lack or excess of jurisdiction and, hence, accorded the same
unconstitutional treatment.[48]
In this light, the statement of the COA Chairperson during the oral arguments is particularly
illuminating:

Justice Bersamin: Alright, the next question Chairperson is this, do you remember if your office has in
[sic] pass an audit any activity or any transfer of funds under the DAP?
_______________
[47] Supra note 10.
[48] Id., at p. 43.
258

Chairperson Pulido Tan: Under this particular administration, if I may say, Sir…
Justice Bersamin: DAP only, its existence came only in the last quarter of 2011, 541 was released only in
the middle of 2012, so it is as recent as that, I do not talk about the previous administration.
Chairperson Pulido Tan: Your Honor, if I may, because from the way we have looked at it so far, it
is really nothing new. It’s only called DAP now but in the past, the past administration has been
doing this kind of using funds and appropriated appropriations. In the past, we would account for
them under what we call, what was called then “Reserved Controlled Account” ang tawag po dun, after a
while and then eventually it became a very generic Pooled Savings Programs. In 2011 that was when it was
called the “DAP” but the mechanism, Your Honor, is essentially the same, the items of funds or
appropriations being put together practically the same and… we saw that happening even as far back as
2006. There were other releases because that was how it was [sic] been even in the past, Your Honor, and its
[sic] only been called DAP now in 2011… it has been happening in the past, yes, we passed them on audit, as
in the same way that we also disallowed some in audit.And that is what is going to be the course of
event also in the present, Your Honor.[49]
The Court should find it significant that it was the COA Chairperson herself who spoke in this
quoted transcript of the proceedings. Her statement lends credence to the respondents’ claim
that NBC No. 541 is not really the “face of the DAP.” NBC No. 541 only formalized what
the Executive had been doing even prior to its issuance.
To point out the obvious, if a “practice” similar to the mechanism under the DAP already
existed and was being observed by the Executive in the execution of the enacted
_______________
[49] TSN, Oral Arguments, November 19, 2013, pp. 147-148.
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budget — in the same manner that the PDAF was also a “practice” during the execution stage of a
GAA and which was simply embodied in the GAA provisions — then there is every reason for the
Court to squarely rule on the constitutionality of the Executive’s action in light of the seriousness
of the allegations of constitutional violations in the petitions.
In fact, the nature and amounts of the public funds involved are more than enough to sound
alarm bells to this Court if we are to maintain fealty to our role as the guardian of the
Constitution.
Secretary Abad’s official, public and unrefuted statement that part of the releases of DAP
funds in 2012 was “based entirely on letters of request submitted to us by the Senators” should
neither escape the Court’s attention nor should the Court gloss over it. From the very start, his
statement cast a much darker cloud on the validity of the DAP in light of our pronouncement
in Belgica that—
certain features embedded in some forms of Congressional Pork Barrel, among others the 2013 PDAF
Article, has an effect on congressional oversight. The fact that individual legislators are given post-
enactment roles in the implementation of the budget makes it difficult for them to become
disinterested — observers when scrutinizing, investigating or monitoring the implementation of the
appropriation law. To a certain extent, the conduct of oversight would be tainted as said legislators,
who are vested with post-enactment authority, would, in effect, be checking on activities in which
they themselves participate. Also, it must be pointed out that this very same concept of post-enactment
authorization runs afoul of Section 14, Article VI of the 1987 Constitution which provides x x x
x x x x
Clearly, allowing legislators to intervene in the various phases of project implementation — a matter be-
260

fore another office of government renders them susceptible to taking undue advantage of their own office.
[50]
This ruling effectively emphasizes that the transcendental importance of these cases alone
renders it obligatory for this Court to allow the direct invocation of its expanded judicial review
powers and the relaxation of the strict application of procedural requirements.
4. Justiciability and Political Questions
Justiciability refers to the fitness or propriety of undertaking the judicial review of
particular matters or cases; it describes the character of issues that are inherently susceptible of
being decided on grounds recognized by law.[51]
In contradistinction, political questions refer to those that, under the Constitution, are to be
decided by the people in their sovereign capacity, or in regard to which full discretionary
authority has been delegated to the legislative or executive branch of the government; it is
concerned with issues dependent upon the wisdom, and not the legality of a particular measure.
[52] Where the issues so posed are political, the Court normally cannot assume jurisdiction under
the doctrine of separation of powers except where the court finds that there
are constitutionally-imposed limits on the exercise of the powers conferred on a
political branch of the government.[53]
In these cases, the petitioners have strongly shown the textual limits to the Executive’s power
over the implementation of the GAA, particularly in the handling and management of
_______________
[50] Supra note 3 at p. 52; p. 133.
[51] Integrated Bar of the Philippines v. Zamora, 392 Phil. 618; 338 SCRA 81 (2000).
[52] Tañada v. Cuenco, 103 Phil. 1051, 1068 (1957).
[53] Separate Opinion of Justice Puno in Integrated Bar of the Philippines v. Zamora, supra note 51.
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funds. Far from bordering on political questions, the challenges raised in the present
petitions against the constitutionality of the DAP are actually anchored on specific
constitutional and statutory provisionsgoverning the realignment or transfer of funds.
The increase of government expenditures is a macroeconomic tool that is at the disposal of the
country’s policy-makers to stimulate the country’s economy and improve economic growth. From
this perspective, constitutional provisions touching on economic matters are understandably
broadly worded to accommodate competing needs and to give policy-makers (and even the Court)
the necessary flexibility to decide policy questions or disputes on a case-to-case basis.
A broad formulation and interpretation of this guiding principle, however, cannot
be used to override plain and clear provisions of the Constitution (and relevant laws)
that are in place under the wide umbrella of the rule of law. While the three goals of the
economy under Section 1, Article XIII of the 1987 Constitution — as a legal translation of the
Executive’s economic justification for the DAP — are addressed to the political branches of the
government, sole reliance on these objectives would ignore the constitutional limitations
applicable to the means for achieving them. These legal limitations are precisely at the core
of the issues presented to us in these challenges to the constitutionality of the DAP’s
creation and implementation; the issues before us are legal ones, not economic or
political.
For this reason, I have brushed aside as beyond our authority to consider and rule upon the
views in other Opinions justifying the issuance of the DAP for largely economic practicality
reasons.
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5. The Court’s boundary-keeping role in times of political upheaval

As a final note on the procedural aspects, I believe that the present case provides us with an
excellent opportunity to revisit our role as boundary-keeper, a role assigned to us to ensure that
the limits set by the Constitution between and among the different branches of government are
observed.
As early as Angara v. Electoral Commission,[309] this Court has identified itself as the
mediator in demarcating the constitutional limits in the exercise of power by each branch of
government. We then observed that these constitutional boundaries tend to be forgotten or
marred in times of societal disquiet or political excitement, and it is the Court’s role to clarify and
reinforce the proper allocation of powers so that the different branches of government would not
act outside their respective spheres of influence. We clarified that although we may, in effect,
nullify governmental actions abhorrent to the Constitution, we do not undertake this role because
of “judicial supremacy” but because this duty has been assigned to us by the Constitution.
Time and again, we have looked back to our Angararuling when cases of national interest
reach the Court, and have used its guiding principles to determine whether or not to act on the
cases before us.
Since Angara, things have changed because of developments in our political history. Since
then, the Court has been granted expanded jurisdiction to determine not only the traditional
justiciable controversies that led to Angara, but also the existence of grave abuse of discretion by
any agency or instrumentality of the government. Thus, our jurisdiction has been expanded to
the extent of the new grant, in the process affecting the traditional justiciability requirements
developed since Angara.
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[54] 63 Phil. 139, 156-157 (1936).
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The principles in Angara, to be sure, still carry a lot of truth and relevance, but these
principles now have to be adjusted to make way for the expanded jurisdiction that this landmark
ruling did not contemplate.
We still are the mediators between competing claims for authority but the 1987 Constitution
has taken it one step further: we now also determine the presence or absence of grave abuse of
discretion on the part of any government agency or instrumentality, regardless of the presence of
political questions that may have come with the controversy. This expansion necessarily gives
rise to a host of questions: does our constitutional duty end with the determination of the
presence or absence of grave abuse of discretion and the decision on the constitutional
status of a challenged governmental action? To what extent can we, acting within our
judicial power and the power of judicial review, clarify the consequences of our
decision?
Recent jurisprudence shows that we have been providing guidance to the bench and the bar, to
clarify the application of the law and of our decisions to future situations not squarely covered by
the presented facts and issues, but which may possibly arise again because of the complexity and
character of the issues involved. We have set guidelines, for instance, on how to apply our ruling
in Atong Paglaum, Inc. v. Comelec[310] on the requirements to qualify as a party-list under the
party-list system. As well, we provided guidelines in Republic v. CA and Molina[311]on how to
interpret and apply Article 36 of the Family Code.
It is in these lights that I favorably view the Court’s resolve to clarify the application of the
operative fact doctrine to the issue of the DAP’s constitutionality and the potential conse-
_______________
[55] G.R. No. 203766, April 2, 2013, 694 SCRA 477, 656.
[56] 335 Phil. 664, 676-680; 268 SCRA 198, 209-212 (1997).
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quences under a ruling of unconstitutionality. It is in this spirit that I discuss these topics below.
C. Substantive Matters
1. The DAP violates the principles of checks and balances and the separation of
powers that the 1987 Constitution integrated in the budgetary process
a. The principles of separation of powers and checks and balances in the budgetary
process
The recent Belgica ruling gave this Court the opportunity to discuss and deliberate on the
principle of separation of powers as applied in the budgetary process. We there held that the post-
enactment measures in the PDAF allowed senators and members of the House of Representatives
to wield and encroach on the item veto power of the President.
In so doing, we likewise discussed the budgetary process embodied in the Constitution, as well
as the delineation of the roles each branch of government plays in the formulation, enactment,
and implementation of the national budget, and in the accountability for its proper handling.
As I explained in my Concurring and Dissenting Opinion in Belgica, the budgetary process
— painstakingly detailed in the 1987 Constitution — embodies the general principle of separation
of powers and checks and balances under which the Legislative, the Executive, and the Judiciary
operate. It also provides the specific limitations on what the Executive and Legislature can and
cannot do to ensure that neither branch of government steps beyond its own area and into
another’s constitutionally-assigned role; any intrusive step
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violates the separation of powers and the checks and balances on which our republican system of
government is founded.
In the context of the enactment and implementation of the national budget, the legislature
has been assigned the power of the purse — it determines the taxes necessary to fund
government activities, the programs where these public funds shall be spent, as well as the
amount of funding under which each program shall operate. On the other hand, the Executive is
given the duty to ensure that the laws that Congress enacted are followed and fully
enforced. The roles of these two branches of government are reflected in the provisions
governing their operations. These roles also serve as the limit of their inherent plenary powers.
The 1987 Constitution, recognizing the importance of the national budget, provided not only
the general framework for its enactment, implementation and accountability; it also set
forth specific limits in the exercise of the respective powers by the Executive and the Legislative,
all the time clearly separating them so that they would not overstep into each other’s pre-
assigned domain.
Thus, Congress is granted the power of appropriationsunder the framework provided in the
Constitution, while the Executive is granted the power to implement the programs funded by
these appropriations, also based on the same constitutional framework. It is in this manner that
the separation of powers principle operates in the budgetary process.
Under the complementary principle of checks and balances, as applied to the budget process,
both the Executive and the Legislative play constitutionally-defined roles.
At the budget preparation and proposal stage, the Executive is given the initiative; it
starts the budgetary process by submitting to Congress, within 30 days from the open-
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ing of every regular session, a budget[57] of expenditures and sources of financing that becomes
the basis for the general appropriations bill. This budget contains the appropriations
recommended by the President for the operation of the government.[58]
While the President undertakes the planning and recommendation, the Constitution requires
him to comply with the form, content and manner of its preparation as prescribed by law.
[59] The Constitution relents to the President’s judgment in preparing the budget by
prohibiting Congress from increasing the budget recommended by the Executive for the
next fiscal year.
But while Congress is so limited, to it is given — as the body directly representing the people
— the authority to ultimately determine the country’s policy and spending priorities, both in
terms of the public purpose that an item of expenditure seeks to achieve and the extent of the
amount it sees fit to achieve that purpose. To carry out this intent, the Constitution mandates
that no money shall be paid out of the treasury except in pursuance of an
appropriation[60] made by law.[61] Also, the Constitution prohibits the transfer of
appropriations, with specified exceptions, in order to ensure that the power of
appropriation remains exclusively with Congress.[62]
_______________
[57] Budget refers to a financial plan that reflects national objectives, strategies and programs. Section 2(3), Book VI,
Chapter I, E.O. No. 292;See also Sections 14 and 15, Book VI, Chapter I, E.O. No. 292.
[58] See 1987 CONSTITUTION, Article VI, Section 25(1).
[59] See Book VI, Chapter 3, Section 12, E.O. No. 292.
[60] Appropriation, on the other hand, refers to an authorization made by law, directing payment out of government
funds under specified conditions or for specified purposes.
[61] 1987 CONSTITUTION, Article VI, Section 29(1).
[62] Section 2(1), Book VI, Chapter I, E.O. No. 292. Presidential Decree No. 1177 (the Budget Reform Decree of 1977) also
provides that all moneys appropriated for functions, activities, projects and programs shall be available solely for the
specific purposes for which these are appropriated.
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Aside from the prohibition on the transfer of appropriations, the Constitution also requires that
the procedure in approving appropriations for Congress shall strictly follow the procedure for
approving appropriations for other departments and agencies. Section 25(3), Article VII of the
Constitution seeks to ensure that while Congress is given the power of appropriation, it must
undergo the same process before its budget is approved.[63]
Once Congress has spoken through the passage of the general appropriations bill based on the
budget submitted by the President, the Constitution authorizes the President to exercise some
degree of control over an appropriation legislation by allowing him to exercise an item-veto
power.[64] As a counter-balance, Congress may override the President’s veto by a vote of
2/3 of all its members.[65]
Upon passage of the general appropriations bill into law (either by presidential approval or
inaction allowing the bill to lapse into a law), none of the three branches of government and the
constitutional bodies can thwart congressional budgetary will by crossing constitutional
boundaries through the transfer of appropriations or funds across departmental borders. This is
the added precautionary measure thrown in to secure the painstakingly designed check and
balance mechanisms.
In the end, what appears clear from all the carefully-designed plan is that the Legislative and
the Executive check and counter-check one another, so that no one branch achieves predominance
in the operations of the government. The Constitution, in effect, holds the vision that all these
_______________
that all moneys appropriated for functions, activities, projects and programs shall be available solely for the specific
purposes for which these are appropriated.
[63] See also E.O. No. 292, Book VI, Chapter 3, Section 11, par. 2.
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measures shall result in balanced governance, to the benefit of the governed, with enough
flexibility to respond and adjust to the myriad situations that may transpire in the course of
governance (such as the provision allowing the transfer of appropriations within very narrow
constitutionally-defined limits).
Beyond the internal flexibility measures, the Constitution also provides for an external
measure, specifically, the authority of the President to call Congress to special session at any
time,[321] and his authority to certify a bill (including a special budget bill) for immediate
enactment to meet a public calamity or emergency.[322]
By these measures, the Constitution envisions governance to be effective and responsive, even
in times of calamities and emergencies, while maintaining the carefully-designed separation and
checking principles integrated in the budgetary process. These measures, of course, cannot wholly
address stresses brought about by human frailties such as inefficiencies and malicious designs,
which are management functions for the Executive to handle within the defined parameters of the
constitutional structure.
b. How the DAP violates these principles
Under this carefully laid-out constitutional system, the DAP violates the principles of
separation of powers and checks and balances on two (2) counts: first, by pooling funds that
cannot at all be classified as savings; and second, by using these funds to finance
projects outside the Executive or for projects with no appropriation cover. The details
behind these transgressions and their constitutional status are further discussed below.

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[66] 1987 CONSTITUTION, Article VI, Section 15.
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These violations — in direct violation of the “no transfer” proviso of Section 25(5) of Article VI
of the Constitution — had the effect of allowing the Executive to encroach on the domain of
Congress in the budgetary process. By facilitating the use of funds not classified as savings to
finance items other than for which they have been appropriated, the DAP in effect allowed the
President to circumvent the constitutional budgetary process and to veto items of the GAA
without subjecting them to the 2/3 overriding veto that Congress is empowered to exercise.
Additionally, this practice allows the creation of a budget within a budget: the use of
funds not otherwise classifiable as savings disregards the items for which these funds had been
appropriated, and allows their use for items for which they had not been appropriated.
Worse, the violation becomes even graver when, as the oral arguments and admissions later
showed, the funds provided to finance appropriations in the Executive Department had been used
for projects in the Legislature and other constitutional bodies. In short, the violation allowed
the constitutionally-prohibited transfer of funds across constitutional boundaries.
Through these violations of the express terms of Section 25(5), Article VI of the 1987
Constitution, the DAP directly contravened the principles of separation of powers and checks and
balances that the Constitution built into the budgetary process.
2. The DAP violates the prohibition against the transfer of appropriations
a. the power to augment is a very narrow exception to the general prohibition
against the transfer of appropriations
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Section 25(5), Article VI of the 1987 Constitution prohibits the enactment of any law
authorizing the transfer of appropriations:
5. No law shall be passed authorizing any transfer of appropriations; however, the President, the
general appropriations law for their respective offices from savings in other items of their respective
appropriations. [italics, emphasis and underscore ours]
This general prohibition against the transfer of funds is related to, and supports, the
constitutional rule that “No money shall be paid out of the Treasury except in pursuance of an
appropriation made by law.”[68] Public funds cannot be used for projects and programs other than
what they have been intended for, as expressed in appropriations made by law. Likewise,
appropriated funds cannot, through transfers, be withheld from the use for which they have been
intended.
These two provisions, in tandem, seek to ensure that the power of appropriation remains with
the Legislature. Under the doctrine of separation of powers, the power of appropriation falls
within the domain of the legislative branch of government: what item/s of expenditure will be
given priority in a limited budget and for what amount/s, and the public purposes they seek to
serve, are matters within the discretion of the representatives of the people to determine.
But recognizing that unforeseeable events may transpire in the actual implementation of the
budget, the Constitution allowed a narrow exception to Article VI, Section 25(5)’s general
prohibition: it allowed a transfer of funds allocated for a particular appropriation, once
these have become
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savings, to augment items in other appropriations within the same branch of government.
To ensure that this exception does not become the rule, the Constitution provided a catch: a
transfer of appropriations may only be exercised if Congress authorizes it by law. The
authority to legislate an exception, however, is not a plenary; it must be exercised within the
parameters and conditions set by the Constitution itself, as follows:
First, the transfer may be allowed only when appropriations have become savings;
Second, the transfer may be exercised only by specific public officials (i.e., by 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 Constitutional Commissions);
Third, these savings may only be used to augment and only existing items in the GAA can be
augmented; and
Fourth, these items must be found within each branch of government’s respective
appropriations.
Viewed in this manner, it at once becomes clear that the authority to transfer funds that
Congress may grant by law, can only be a very narrow exception to the general prohibition
against the transfer of funds; all the requisites must fall in place before any transfer of funds
allotted in the GAA may be made.
Significantly, this reading of how the requisites for the application of Section 25(5) and the
treatment of its exception is not at all new to the Court as we have previously ruled on this point
in Nazareth v. Villar.[69] We then said:
budgetary amount contained in the appropriations bill is the
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[69] G.R. No. 188635, January 29, 2013, 689 SCRA 385, 402-404.
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extent Congress will determine as sufficient for the budgetary allocation for the proponent agency. The
only exception is found in Section 25(5), Article VI of the Constitution, by which 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 Constitutional Commissions are authorized to transfer appropriations to augment any item in the
GAA for their respective offices from the savings in other items of their respective appropriations. The plain
language of the constitutional restriction leaves no room for the petitioner’s posture, which we should now
dispose of as untenable.
It bears emphasizing that the exception in favor of the high officials named in Section 25(5), Article VI of
the Constitution limiting the authority to transfer savings only to augment another item in the GAA is
strictly but reasonably construed as exclusive. As the Court has expounded in Lokin, Jr. v. Commission on
Elections:
When the statute itself enumerates the exceptions to the application of the general rule, the exceptions
are strictly but reasonably construed. The exceptions extend only as far as their language fairly warrants,
and all doubts should be resolved in favor of the general provision rather than the exceptions. Where the
general rule is established by a statute with exceptions, none but the enacting authority can curtail the
former. Not even the courts may add to the latter by implication, and it is a rule that an express exception
excludes all others, although it is always proper in determining the applicability of the rule to inquire
whether in a particular case, it accords with reason and justice.
The appropriate and natural office of the exception is to exempt something from the scope of the general
words of a statute, which is otherwise within the scope and meaning of such general words. Consequently,
the existence of an exception in a statute clarifies the intent that the statute shall apply to all cases not
excepted. Exceptions are subject to the rule of strict construction; hence, any doubt will be resolved in favor
of the general provision and against the exception. Indeed, the liberal con-
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struction of a statute will seem to require in many circumstances that the exception, by which the operation
of the statute is limited or abridged, should receive a restricted construction.

b. the need for “actual savings” before the power to augment may be exercised
In several cases, the Court ruled that actual savings must exist before the power to augment,
under the exception in Section 25, Article VI of the Constitution, may be exercised.
In Demetria v. Alba,[71] the Court struck down paragraph 1, Section 44 of Presidential
Decree No. 1177 (that allowed the President to “transfer any fund” appropriated for the Executive
Department under the GAA “to any program, project or activity of any department, bureau, or
office included in the General Appropriations Act”) as unconstitutional for directly colliding with
the constitutional prohibition on the transfer of an appropriation from one item to another.
The Court ruled that this provision authorizes an “[i]ndiscriminate transfer [of] funds x x x
without regard as to whether or not the funds to be transferred are actually savings in the item
from which the same are to be taken, or whether or not the transfer is for the purpose of
augmenting the item to which said transfer is to be made”[72] in violation of Section 16(5), Article
VIII of the 1973 Constitution (presently Section 25(5), Article VI of the 1987 Constitution).
In Demetria, the Court noted that the leeway granted to public officers in using funds allotted
for appropriations to augment other items in the GAA is limited since Section 16(5), Article VIII
of the 1973 Constitution (likewise adopted in toto in the 1987 Constitution) has specified the
purpose and

_______________
[70] 232 Phil. 222; 148 SCRA 208 (1987).
[71] Id., at pp. 229-230; p. 215.
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conditions for the transfer of appropriations. A transfer may be made only if there are savings
from another item in the appropriation of the government branch or constitutional body.
We reiterated this ruling in Sanchez v. Commission of Audit,[72] further emphasizing that
“[a]ctual savings is a sine qua non to a valid transfer of funds from one government agency to
another.”[73]
Thus, two essential requisites must be present for a transfer of appropriation to be validly
carried out. First,there must be savings in the programmed appropriation of the transferring
agency. Second, there must be an existing item, project or activity with an appropriation in the
receiving agency to which the savings will be transferred.
c. savings cannot be used to fund programs and projects not appropriated for by
Congress
Neither can savings be used to fund programs and projects not appropriated for by Congress.
In Sanchez v. Commission on Audit,[74] we noted that the illegality of the transfer of funds
from the Department of Interior and Local Government (DILG) to the Office of the President
stems not only from the lack of actual savings, but from the lack of an appropriation that
authorizes the use of funds for the “ad hoc task force” to which the funds were transferred.
We reiterated this ruling in Nazareth v. Villar[75]where we upheld the COA’s decision to
disapprove the use of the Department of Science and Technology’s (DOST’s) savings to
_______________
[72] 575 Phil. 428; 552 SCRA 471 (2008).
[73] Id., at p. 454; p. 497.
[74] Id., at pp. 462-463; p. 497.
[75] Supra note 69 at pp. 401-402.
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fund its employees’ benefits under the Magna Carta for Scientists, Engineers, Researchers, and
other Science and Technology Personnel in Government. We said that although the source of
funds, i.e., the DOST savings, was legal, its use to fund benefits for which no appropriation had
been provided in the GAAs in the years they were released, violated Sections 29 and 25(5), Article
29 of the 1987 Constitution.
Thus, savings cannot be used to augment nonexistent items in the GAA. Where there are no
appropriations for capital outlay in a specific agency or program, for example, savings cannot be
used to buy capital equipment for that program. Neither can savings be used to fund the hiring of
personnel, where a program’s appropriation does not specify an item for personnel services.
d. additional limitations imposed by Congress under the GAA
Aside from the limitations for exercising the power to augment under the 1987 Constitution,
Congress also provided even stricter and tighter limitations before a transfer of
appropriations may take place in the GAAs for FYs 2010, 2011 and 2012. These congressional
limitations are as follows:
i. definition of savings
The GAAs of 2010, 2011 and 2012 all have identical provisions on the definition of savings and
augmentation; on the terms under which their use may be prioritized; and on how they may be
used. Section 61 of the 2010 GAA, Section 60 of the 2011 GAA and Section 54 of the 2012 GAA all
similarly provided that:
Meaning of Savings x x x. Savings refer to portions or balances of any programmed appropriation in this

Act free from any obligation or encumbrance which are:
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(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.
Augmentation implies the existence in this Act of a program, activity, or project with an appropriation,
which upon implementation or subsequent evaluation of needed resources, is determined to be deficient. In
no case shall a nonexistent program, activity, or project, be funded by augmentation from savings or by the
use of appropriations otherwise authorized in this Act.
These provisions effectively limit the Executive’s exercise of the power to augment, as they
strictly define when funds may be considered as savings and when funds may be used to augment
other items in the GAA. From these provisions, the existence of “savings” required the
concurrence of the following statutory requirements:
1. That there be a programmed appropriation.
2. That there be an unexpended amount (available balance) from this programmed
appropriation.
3. That the available balance be due to, or must arise from, any of the following:
a. A work, activity or purpose under a programmed appropriation is completed, finally
discontinued or abandoned; or
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b. The unpaid compensation and related costs pertaining to vacant positions and leaves of
absence without pay; or
c. The implementation of measures that resulted in improved systems and efficiencies,
enabling agencies to meet and deliver the required or planned targets, programs, and services at
a lesser cost.
4. That the available balance be unobligated or unencumbered.
When the Executive decides to finally discontinue or abandon a project or activity under a
programmed appropriation, the Executive must necessarily stop the expenditure and thereby
reduce or retain the funds. The available balance from a project that is completed, finally
discontinued or abandoned, by clear definition of law, becomes “savings” that may be used to
augment a deficient item of appropriation in the GAA.
ii. two-year period within which appropriations for Capital Outlay and MOOE may be
spent
Aside from specifying the terms under which funds may be considered savings, Congress also
deemed it appropriate to extend the period of validity of the appropriations in the GAA. To
ensure that funds are spent as appropriated, the GAAs of FYs 2010, 2011 and 2012 provided that
MOOE and capital outlays shall be available for release and obligation for a period extending one
FY after the end of the year in which these items were appropriated.[76]
_______________
[76] Section 65 of the 2011 GAA and Section 63 of the 2012 GAA read:
Availability of Appropriations. Appropriations for MOOE and capital outlays authorized in this Act shall be available
for re-
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Thus, funds appropriated for the capital outlays and MOOE in FY 2010 were allowed to be
allotted, obligated and released until FY 2011; funds for FY 2011 until FY 2012; and funds for FY
2012 until FY 2013. The extended period was in recognition of the exigencies that could occur in
implementing an appropriation. In effect, these provisions qualified the definition of savings, as
they extended the period within which a program or project could be completed, discontinued or
abandoned. They also further limited the instances when funds could be used to augment other
items in the GAA.
Notably, the provisions effectively granted the Executive flexibility in implementing the GAA,
and also ensured that public funds shall be spent as appropriated. They were valid policy
decisions that Congress made and, hence, must be fully respected.
iii. general prohibition against impoundment of releases
Lastly, in addition to limiting when funds may be used to augment other items in the GAA,
Congress also prohibited the deduction and retention of their release. Sections 64 and 65 of the
GAAs of 2010, 2011 and 2012 provided that:
Sec. 64. Prohibition Against Impoundment of Appropriations.—No appropriations authorized under this
Act shall be impounded through retention or deduction, unless in accordance with the rules and
regula-
_______________
lease and obligation for the purpose specified, and under the same special provisions applicable thereto, for a period
extending to one fiscal year after the end of the year in which such items were appropriated: PROVIDED, That
appropriations for MOOE and capital outlays under R.A. No. 9970 shall be made available up to the end of FY 2011: PROVIDED,
FURTHER, That a report on these releases and obligations shall be submitted to the Senate Committee on Finance and the House
Committee on Appropriations.
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tions to be issued by the DBM: PROVIDED, That all the funds appropriated for the purposes,
programs, projects, and activities authorized under this Act, except those covered under the
Unprogrammed Fund, shall be released pursuant to Section 33(3), Chapter 5, Book VI of E.O. No. 292.
Sec. 65. Unmanageable National Government Budget Deficit.—Retention or deduction of
appropriations authorized in this Act shall be effected only in cases where there is an unmanageable
National Government budget deficit. Unmanageable National Government budget deficit as used in
this section shall be construed to mean that: (i) the actual National Government budget deficit has exceeded
the quarterly budget deficit targets consistent with the full-year target deficit as indicated in the FY 2011
BESF submitted by the President and approved by Congress pursuant to Section 22, Article VII of the
Constitution; or (ii) there are clear economic indications of an impending occurrence of such condition, as
determined by the Development Budget Coordinating Committee and approved by the President.
Read together, these provisions clearly set out Congress’ intent that the appropriations in
the GAA could be released and used only as programmed. This is the general rule. As an
exception, the President was given the power to retain or reduce appropriations only in case
of an unmanageable National Government budget deficit. A very narrow exception has to
prevail in reading these provisions as the general rule came from the command of the
Constitution itself.
The Constitution expressly provides that no money shall be paid out of the Treasury except in
pursuance of an appropriation made by law. As an authorization to the Executive, the
constitutional provision actually serves as a legislative check on the disbursing power of the
Executive.[77] It carries into
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[77] H. De Leon, Philippine Constitutional Law: Principles and Cases, Vol. II, p. 233, (2004 ed.).

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effect the rule that the President has no inherent authority to countermand what Congress has
decreed since the Executive’s constitutional duty is to ensure the faithful execution of the laws.
[78] Impounding appropriations is an action contrary to the President’s duty to ensure that all
laws are faithfully executed. As appropriations in the GAA are part of a law, the President is
duty bound to implement them; any suspension or deduction of these appropriations amounted to
a refusal to execute the provisions of a law.
The GAA, however, in consideration of unforeseeable circumstances that might render the
implementation of all of its appropriations impracticable or impossible, authorized the President
to impound appropriations in cases of an unmanageable national budget deficit.
Impoundment refers to the refusal by the President, for whatever reason, to spend funds
made available by Congress. It is the failure to spend or obligate budgetary authority of any type.
[79] The President may conceivably impound appropriated funds in order to avoid wastage of
public funds without ignoring legislative will (routine impoundments) or because he disagrees
with congressional policy (policy impoundments).
In the United States (as well as in the Philippines), presidential impoundment does not enjoy
any express or implied constitutional support.[80] Thus, unless supported by the
appropriating act itself, the impoundment of appropriated funds by the Executive is
improper. On the other hand, if a statute providing for a specific appropriation for the
expenditure of the designated funds is non-mandatory, the
_______________
[78] 1987 CONSTITUTION, Article VII, Section 17.
[79] Philconsa v. Enriquez, G.R. No. 113105, August 19, 1994, 235 SCRA 506.
[80] Addressing the Resurgence of Presidential Budgetmaking Initiative: A Proposal to Reform the Impoundment Control
Act of 1974, 63 Tex. L. Rev. 693, citing Kendall v. United States ex rel. Stokes.
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President does not exceed his or her statutory authority by withholding a portion of the
appropriated funds.[81]
In the Philippines, the only instance when retention and reduction of appropriation is allowed
is in the case of reserves. This exception is based on Section 37, Chapter 5, Book VI of the
Administrative Code of 1987 which, by it terms, is not strictly an impoundment provision.
Section 37. Creation of Appropriation Reserves.—The Secretary may establish reserves against
appropriations to provide for contingencies and emergencies which may arise later in the calendar
year and which would otherwise require deficiency appropriations.
The establishment of appropriation reserves shall not necessarily mean that such portion of the
appropriation will not be made available for expenditure. Should conditions change during the fiscal year
justifying the use of the reserve, necessary adjudgments may be made by the Secretary when requested by
the department, official or agency concerned.
Under this provision, retention or deduction may be made from appropriations by creating
reserves for contingency and emergency purposes to be determined by the DBM Secretary, which
reserves must still be spent within the GAA’s FY. Otherwise, they shall revert back to the
General Fund and would be unavailable for expenditure unless covered by a subsequent
legislative enactment.[82]
e. the sources of DAP funds cannot qualify as savings
i. unobligated allotments
_______________
[81] 77 Am. Jur. 2d United States § 20.
[82] Section 28, Chapter 4, Book VI, E.O. No. 292.
282

As I earlier emphasized, funds allotted for particular appropriations may only be used to
augment other items in the GAA when there are actual savings. The DAP, by pooling funds
together to fast-track priority projects of the government, violated this critical requirement as the
sources of DAP funds cannot qualify as savings.
In pooling together “unobligated allotments”[84] to augment other items in the GAA, the DAP
used funds that had already been allotted but had yet to be obligated or spent for its intended
purpose. I fully agree with J. Carpio that these funds cannot be considered as savings, as well as
in the distinction he made on when appropriations for CO and MOOE may be considered as
savings.
NBC No. 541 states that it shall cover the withdrawal of unobligated allotments as of
June 30, 2012 of all national government agencies charged against FY 2011 Continuing
Appropriation (R.A. No. 10147) and FY 2012 Current Appropriation (R.A. No. 10155), pertaining
to
3.1.2 Maintenance and Other Operating Expenses (MOOE) related to the implementation of programs
and projects, as well as capitalized MOOE[.]
This withdrawal is contrary to the intent and language of Section 61 of the 2011 GAA, and
Section 65[84] which extends
_______________
[83] Unobligated allotment refers to the portion of released appropriations which has not been expended or committed.
Annex A, June 25, 2012 Memorandum to the President, Respondents’ 1st Evidence Packet.
[84] The 2012 GAA also provides a substantially similar provision. It states:
Sec. 63. Availability of Appropriations.—Appropriations for MOOE and capital outlays authorized in this Act shall be
available for release and obligation for the purpose specified, and under the same special
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the availability of an appropriation up to the next year, i.e., FY 2012.[85] The two provisions, read
together, provide a guide on when an appropriation for an MOOE and a CO may exactly be
considered as savings. Section 61 enumerates instances when funding for an appropriation may
be discontinued or abandoned, while Section 65 provides the deadline up to when an
appropriation under the 2011 GAA may be spent.
Thus, under Section 65 of the 2011 GAA, appropriations for CO and MOOE may be released and
spent until the end of FY 2012. Funding for CO and MOOE appropriations, in the meantime, may
be discontinued or abandoned during its two year lifespan for any of the reasons enumerated in
Section 61. Appropriations for CO and MOOE may be stopped when the PAPs they fund get
completed, finally discontinued, or aban-
provisions applicable thereto, for a period extending to one fiscal year after the end of the year in which
such items were appropriated: PROVIDED, That a report on these releases and obligations shall be submitted to
the Senate Committee on Finance and the House Committee on Appropriations, either in printed form or by way of
electronic document.
[85] Section 65 of the 2011 GAA reads:
Sec. 65. Availability of Appropriations.—Appropriations for MOOE and capital outlays authorized in this Act shall be
available for release and obligation for the purpose specified, and under the same special provisions
applicable thereto, for a period extending to one fiscal year after the end of the year in which such items
were appropriated: PROVIDED, That appropriations for MOOE and capital outlays under R.A. No. 9970 shall be made
available up to the end of FY 2011: PROVIDED, FURTHER, That a report on these releases and obligations shall be
submitted to the Senate Committee on Finance and the House Committee on Appropriations.
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doned, and the excess funds left, if any, will be considered as savings.
Applying these concepts to the MOOE and CO leads us to the distinctions Justice Carpio set in
his Separate Concurring Opinion. By its very nature, appropriations for the MOOE lapse
monthly, and thus any fund allotted for the month left unused qualifies as savings, with two
exceptions: (1) MOOE which under the GAA can be declared as savings only in the last
quarter of the FY and (2) expenditures for Business-type activities, which under the GAA
cannot be realigned.
Funds appropriated for CO, on the other hand, cannot be declared as savings unless the PAP it
finances gets completed, finally discontinued or abandoned, and there are excess funds allotted
for the PAP. Neither can it be declared as savings unless there is no more time for public
bidding to obligate the allotment within its two-year period of availability.
Thus, NBC 541 cannot validly declare CO as savings in the middle of the FY, long before the end
of the two-year period when such funds could still be obligated. And while MOOE for FY 2012
from January to June 2012 may be considered savings, the MOOE for a future period does not
qualify as such.
In this light, NBC No. 541 fostered a constitutional illegality: the premature withdrawal of
unobligated allotments pertaining to capital outlays and MOOE as of June 30, 2012 under the
presidential directive clearly amounted to a presidential amendment of the 2011 GAA and a
unilateral veto of an item of the GAA without giving Congress the opportunity to override the
veto as prescribed by Section 27, Article VI of the Constitution.[86]

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i.1 final discontinuance or abandonment

I likewise agree with J. Carpio’s characterization of the final discontinuance, on one hand, and
the abandonment, on the other hand, that would result in savings. The GAA itself provides an
illustration of the impossibility or non-feasibility of a project that justified its discontinuance or
abandonment:

Sec. 61. Realignment/Relocation of Capital Outlays.—The amount appropriated in this Act for acquisition,
construction, replacement, rehabilitation and completion of various Capital Outlays may be
realigned/relocated in cases of imbalanced allocation of projects within the district, duplication of
projects, overlapping of funding source and similar cases: PROVIDED, That such
realignment/relocation of Capital Outlays shall be done only

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upon prior consultation with the representative of the legislative district concerned.

Unless the respondents, however, can actually show that the reallocation of unobligated
allotments pertaining to capital outlays was made with prior consultation with the legislative
district representative concerned under the terms of above quoted Section 61, they cannot claim
any legitimate basis to come under its terms.
i.2 use of Section 38 as justification
I likewise find the respondents’ invocation of Section 38, Chapter 5, Book VI of the
Administrative Code to justify the withdrawal and pooling of unobligated allotments and
unreleased appropriations for slow moving projects to be misplaced. This provision reads:

Section 38. Suspension of Expenditure of Appropriations.—Except as otherwise provided in the
General Appropriations Act and whenever in his judgment the public interest so requires, the
President, upon notice to the head of office concerned, is authorized to suspend or otherwise stop
further expenditure of funds allotted for any agency, or any other expenditure authorized in the
General Appropriations Act, except for personal services appropriations used for permanent officials and
employees.

Since the actual execution of the budget could meet unforeseen contingencies, this provision
delegated to the President the power to suspend or otherwise stop further expenditure
of allotted funds based on a broad legislative standard of public interest.
By its clear terms, the authority granted is to stop or suspend the expenditure of allotted
funds. Funds are only considered allotted when the DBM has authorized an agency
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to incur obligation for specified amounts contained in an appropriation law.[87] Unlike an

appropriation which is made by the legislative, an allotment is an executive authorization to the
different departments, bureaus, offices and agencies that obligations may now be incurred.
Allotment is part of the President’s power to execute an appropriations law and it is this power
that he can suspend or reverse, not the will of Congress expressed through the
appropriations law.
Thus, the President cannot exercise the power to suspend or stop expenditure under Section 38
towards appropriations, as funds for it have yet to be released and allotted. Neither can the
President use Section 38 to justify the withdrawal of unobligated allotments under the terms of
NBC 541 and its treatment as savings.
Section 38 authorizes the President to either suspend or stop an expenditure. Suspension of
expenditures connotes a temporary executive action, while the stoppage of funds requires finality,
and must comply with the GAA provision on savings. NBC 541 cannot be deemed a suspension of
expenditure under Section 38. Suspension involves a temporary stoppage while the pooling of
unobligated allotments under the DAP was intended to create savings, which involves the final
discontinuance or abandonment of PAPs. Neither can the withdrawal of unobligated allotments
be justified under the authority to stop expenditures in Section 38, as NBC 541 provides that
these allotments can still be reissued. That the withdrawn allotments can be reissued back
to the “original program or project from which it was withdrawn”only means that the
original program or project has not really been “completed or abandoned” so as to
qualify the funds therefor as “savings.”
In other words, Section 38 authorizes the suspension or stoppage of expenditures; it does not
allow the President to stop an expenditure, use it as savings to augment another
_______________
[87] Section 2 (2), Chapter 1, Book VI, E.O. No. 292.

288

item, and then change his mind and re-issue it back to the original program. Once a program is
finally discontinued or abandoned, its funding is stopped permanently. Suspended expenditures,
on the other hand, cannot be used as savings to augment other items, as savings connote finality.
f. the DAP violates the prohibition against impoundment
To restate, Section 38 of the Administrative Code covers stoppage or suspension of expenditure
of allotted funds. This provision cannot be used as basis to justify the withdrawal and pooling of
unreleased appropriations[88] for slow-moving projects.
The Executive does not have any power to impound appropriations (where otherwise
appropriable) except on the basis of an unmanageable budget deficit or as reserve for
purposes of meeting contingencies and emergencies. None of these exceptions, however,
were ever invoked as a justification for the withdrawal of unreleased appropriations for slow-
moving projects. As the records show, these appropriations were withdrawn simply on the basis
of the pace of the project as a slow-moving project. This executive action does not only directly
contravene the GAA that the President is supposed to implement; more importantly, it is a
presidential action that the Constitution does not allow.
Some members of the Court argue that no impoundment took place because the DAP was
enforced to facilitate spending, and not to prevent it. It must be noted, however, that the
_______________
[88] Unreleased appropriation refers to the balances of programmed authorizations/appropriations pursuant to law (e.g.,
General Appropriations Act) or other legislative enactment, still available for release. Annex A, June 25, 2012
Memorandum to the President, Respondents’ 1st Evidence Packet.

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funds used to spend on DAP projects were funds impounded from other projects. In
order to increase funding on the projects it funded, the DAP had to create savings that would be
used to finance these increases. The process by which DAP created these savings involved the
impoundment of unreleased appropriations for slow-moving projects. As I have earlier explained,
impoundment refers to the refusal by the President, for whatever reason, to spend funds for
appropriations made by Congress. Through the DAP, funds that were meant to finance
appropriations for slow-moving projects were not released, allotted and spent for the
appropriations they were meant to cover. They were impounded. That these funds were used to
finance other appropriations is inconsequential, as the impoundment had already taken place.
Thus, insofar as unreleased appropriations for slow-moving programs are concerned, these had
been impounded, in violation of the clear prohibition against it in the GAA.
g. Qualifications to the President’s flexibility in budget execution
The ponencia, in characterizing the Executive’s actions in formulating the DAP, pointed out
that (1) the DAP is within the President’s power and prerogative to formulate and implement;
and (2) the President should be given proper flexibility in budget execution. If the DAP had been
within the President’s authority to formulate and implement, and is within the flexibility given to
the Executive in budget execution, then how come a majority of this Court is inclined to believe it
to be unconstitutional?
To answer this query, allow me to clarify the scope and context of the Executive’s prerogative
in budget execution. Flexibility in the budget execution means implementing the provisions of the
GAA and exercising the discretion this entails within the limits provided by the GAA and the
Constitution. It does not mean a wholesale authority to choose
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which appropriations should get funding, which appropriations should have less or more, and
which should have none at all. Allowing the President this kind of prerogative robs Congress of
its power of the purse, because whatever changes it may make in the budget legislation phase
would still be subject to changes by the President in budget implementation.
The framers of our Constitution, as well as Congress, however, recognized that there could be
unforeseen instances that would make it unreasonable to implement all the items found in the
GAA. Thus, the Constitution provided for the power of augmentation as an exception to the
general prohibition against transfers of appropriation.
Congress, on the other hand, allowed the President under the Administrative Code to
temporarily suspend or stop the expenditure of funds, subject to certain conditions. Congress also
saw it fit to authorize the President to impound unreleased appropriations in the GAA of 2011
and 2012, but subject to strict conditions.
These are flexibilities given to the President by the Constitution and by Congress, and which
had been over-extended through the DAP. To reiterate, the DAP exceeded these flexibilities
because it did not comply with the requisites necessary before both the power of augmentation
and the power of impoundment can be lawfully exercised.
With respect to these two prerogatives, a distinction should be made between (1) the transfer
of funds from one purpose (project/program/activity) to another where both purposes are covered
by the same item of expenditure authorized in the GAA, and (2) the transfer of funds from one
purpose to another where the other purpose is already covered by a different item of expenditure
authorized in the GAA.
With the first, no constitutional objection can be raised. Given that the government, more
often than not, operates on a budget deficit than on a budget surplus, the President has
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the inherent power to create a policy-system that would govern the spending priority of the
Executive in implementing the appropriations law.
The respondents correctly assert that this power is rooted on the constitutional authority of
the President to faithfully execute the laws, among them, the GAA which is a budgetary statute.
Since both purposes fall within the same item of expenditure authorized by law, then from the
constitutional perspective, no transfer of appropriation is really made.
However, with the second, the general rule against transfer of appropriation applies. While
the President concededly has policy-making power in the exercise of his function of law
implementation, his policy-making power does not exist independently of the policies laid down in
the law itself (however broad they may be) that the President is tasked to execute. Much less can
the President’s power exist outside of the limitations of the fundamental law that he is sworn to
protect and defend.[89] Since the transfer of funds is for a purpose no longer within the coverage
of the original item of appropriation, this transfer clearly constitutes a transfer of appropriation
beyond the constitutional limitation.
In sum, while the President has flexibility in pushing for priority programs and crafting
policies that he may deem fit and necessary, the DAP exceeded and over-extended what the
President can legitimately undertake. Specifically, several
_______________
[89] The government’s power to cut on taxes to address a recessionary level of and stimulate the economy is not a
discretionary power that is lodged solely with the President in the exercise of his policy-making power because the power
of taxation is an exercise of legislative power. While the power of taxation is inherent in the state, the Constitution
provides for certain limitations in its exercise. In the same vein, the decision on whether to pursue an expansionary policy
by increasing government spending (as in the case of the DAP) must adhere not only to what Congress provided in the law
itself but more importantly with what the Constitution provided as a limitation or prohibition.

292

sources of funding used to facilitate the DAP, as well as the programs that the DAP funded, went
beyond the allowed flexibility given to the President in budget execution.
That the DAP resulted in economic advances for the Philippines does not validate its
component actions that overstepped the flexibilities allowed in budget execution, as the ends can
never justify the illegal means. Worthy of note, too, is that the Court is not a competent authority
for economic speculations, as these are matters best left to economists and pundits — many of
whom are never in unison and cannot be considered as the sole authority for economic
conclusions. We are, after all, a court of law bound to make its decisions based on legal
considerations, albeit, admittedly, these decisions have societal outcomes, including consequences
to the economy.
h. the DAP, in funding items not found in the GAA, violated the Constitution
I agree with the ponencia’s conclusion that the DAP, in funding items that are not in
the GAA, violated the Constitution. The ponencia’s exhaustive review of the evidence packets
submitted by the OSG shows that some of the projects and programs that the DAP funded had no
appropriation.
Thus, the ponencia correctly observed that the DAP funded items which had no appropriation
cover, to wit: (i) personnel services and capital outlay under the DOST’s Disaster Risk, Exposure,
Assessment and Mitigation (DREAM) project; (ii) capital outlay for the COA’s “IT Infrastructure
Program and hiring of additional litigation experts”;[90] (iii) capital outlay for the Philippine Air
Force’s “On-Base Housing Facilities and
_______________
[90] 7th Evidence Packet, p. 91.

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Communications Equipment”; [91] and (iv) capital outlay for the Department of Finance’s “IT
Infrastructure Maintenance Project.”
For instance, the DAP facilitated funding for the DOST’s DREAM project through an
appropriation under the DOST central office, i.e., its appropriation for “Generation of new
knowledge and technologies and research capability building in priority areas identified as
strategic to National Development.” The appropriation for the DREAM had no item for Capital
Outlay and Personnel Services; Congress provided only P537,910,000.00 for MOOE. The DAP, in
contravention of the constitutional rules on transfer, funded a nonexisting item of the
appropriation by adding P43,504,024.00 for Personnel Services and P391,978,387.00 for Capital
Outlay.
Following the doctrine established in Nazareth, the items for Personnel Services and capital
outlays under the DREAM project were illegal transfers and use of public funds. Since Congress
did not provide anything for personnel services and capital outlays under the appropriation
“Generation of new knowledge and technologies and research capability building in priority areas
identified as strategic to National Development,” then these cannot be funded in the guise of a
valid transfer of savings and augmentation of appropriations.
The same argument applies to the DAP’s funding of capital outlay for the COA’s appropriation
for “IT Infrastructure Program and hiring of additional litigation experts,”[92] capital outlay for
the Department of Finance’s “IT Infrastructure
_______________
[91] 2nd Evidence Packet, pp. 8-9.
[92] The DAP, in order to finance the “IT Infrastructure Program and hiring of additional expenses” of the Commission on
Audit in 2011 increased the latter’s appropriation for “General Administration and Support.” DAP increased the
appropriation by adding P5.8 million for MOOE and P137.9 million for CO. The COA’s appropriation for General
Administration and Support during the GAA of 2011, however, does not contain any item for CO.

294

Maintenance Project”[93] and capital outlay for the Philippine Air Force’s “On-Base Housing
Facilities and Communication Equipment.”[94] None of the appropriations which fund these
projects had an item for capital outlay, and yet, the DAP introduced funding for capital outlay in
these projects.
Since these expenditures were not given congressional appropriation, the transfer of funds
under the DAP to fund these items cannot be justified even under the exception to the general
prohibition under Section 25(5), Article VI of the 1987 Constitution.
For emphasis, for the power of augmentation to be validly exercised, the item to be augmented
must be an item that has an appropriation under the GAA; if the item funded under the DAP
through savings did not receive any funding from Congress under the GAA, the Executive cannot
provide funding; it may not countermand legislative will by “augmenting” an item that is not
existing and therefore can never be “deficient.”
3. The DAP violates the special conditions for the release of the Unprogrammed
Fund in the 2011 and 2012 GAAs
I agree with the ponencia and Justice Carpio’s arguments that the DAP facilitated the
unlawful release of the Unprogrammed Fund in the 2011 and 2012 GAAs. As an aside, allow me
to cite the legislative history of the provision limit-
_______________
[93] The DAP financed the Department of Finance’s “IT Infrastructure Maintenance Project” by augmenting its “A.II.c1.
Electronic data management processing” appropriation with capital outlay worth P192.64 million. This appropriation,
however, does not have any item for CO.
[94] To finance the Philippine Airforce’s “On-Base Housing Facilities and Communication Equipment,” the DAP
augmented several appropriations of the Philippine Airforce with capital outlay totaling to P29.8 million. None of these
appropriations had an item for CO.

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ing the release of the Unprogrammed Fund only when original revenue targets have been
exceeded to support their conclusion.
The Unprogrammed Fund in both the 2011 and the 2012 GAAs requires as a condition sine
qua non for its release that the revenue collections exceed the original revenue targets for that
year. This requirement had been worded in an exactly the same phraseology in Special Provision
No. 1 in the 2011 GAA and in Special Provision No. 1 in the 2012 GAA:
Congress pursuant to Section 22, Article VII of the Constitution, x x x
Both Special Provisions in the 2011 and 2012 GAAs contain, also in the same language,
a proviso authorizing the use of collections arising from sources not considered in the original
revenue targets, viz.:
PROVIDED, That collections arising from sources not considered in the aforesaid original revenue targets
may be used to cover releases from appropriations in this Fund: x x x
Both the ponente and Justice Carpio conclude that this proviso allows the use of sources not
considered in the original revenue targets, but only if the first condition, i.e., the original targets
having been exceeded, was first complied with. Justice Del Castillo, on the other hand, contends
that the proviso was meant to act as an exception to the general rule, and that windfall revenue
may be used to cover appropriations in the Unprogrammed Fund even if the original targets had
not been exceeded.
The proviso allowing the use of sources not considered in the original revenue targets to cover
releases from the Unpro-
296
grammed Fund was not intended to prevail over the general provision requiring that revenue
collections first exceed the original revenue targets. In the interpretation of statutes, that which
implements the entire statute should be applied, as against an interpretation that would render
some of its portions ineffectual.[95] Neither should a provisobe given an interpretation that
renders the general phrase it qualifies entirely inutile. If we are to follow Justice Del Castillo’s
argument that Special Provision No. 1 allows the use of collections arising from sources not
considered in the original revenue targets even without these targets first being met and
exceeded, then the very restrictive language allowing the release of the Unprogrammed
Fund only when collections exceed original revenue targets would be rendered
useless.
This concern was manifested in the President’s Veto Message in 2009, when the release of
Unprogrammed Fund was first conditioned upon exceeding the original revenue targets and
accompanied by the proviso allowing for the use of sources not considered in the original targets:
Congress revised the first sentence of this special provision so that the release of funds appropriated
under the Unprogrammed Fund shall be made only when the revenue collections for the entire year exceed
the original revenue targets. Allow me to emphasize, however, that reference to revenue collections for
the entire year under this special provision pertain only to regular income sources or those
covered by the same set of assumptions used in setting the computation of revenue targets for
the year as reflected in the
_______________
[95] This principle is expressed in the maxim Ut magis valeat quam pereat, that is, we choose the interpretation which gives effect to
the whole of the statute — its every word. Inding v. Sandiganbayan, G.R. No. 143047, 14 July 2004, 434 SCRA 388, 403, as cited
in Philippine Health Care Providers v. CIR, G.R. No. 167330, September 18, 2009, 600 SCRA 413.

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BESF. It should not, therefore, include new sources of income not considered nor identified in the
original revenue projections. Neither should it cover sources of income not contemplated under the
original assumptions used in setting the revenue targets.[96]
Thus, as it was first intended and implemented, the special provision requiring that the
Unprogrammed Fund be released only when original revenue targets had been met, and sources
not considered in the original revenue targets shall not even be included in determining whether
the original revenue targets had been exceeded. It follows, then, that the only time the sources of
revenue not considered in the original revenue targets may be used is when the original revenue
targets had been exceeded. Otherwise, there is no point in excluding sources not considered in the
original revenue targets to determine whether revenue collections had exceeded these targets,
when a proviso would subsequently allow the use of outside sources even without the targets first
being met.
Verily, had it been the intention of Congress to allow the use of sources of funds not considered
in the original revenue targets even if the latter had not been met, then it could have stated it in
a language clearly pointing towards that intent, as some members of the House of
Representatives attempted to do in House Bill No. 5116, viz.:
Section 1. Appropriation of Funds.—The following sums, or so much as thereof as may be necessary,

are hereby appropriated out of any funds in the National Treasury of the Philippines not
otherwise appropriated, for the operation of the Government of the Republic of the Philippines from
January one to December thirty-one, two thousand nine, except where otherwise specifically provided
herein: (General Observa-
_______________
[96] President’s Veto Message, March 16, 2009, Official Gazette Volume 105, No. 1, p. 264, available at http://www.dbm.gov.ph/wp-
content/uploads/GAA/GAA2009/Pveto/pveto.pdf.

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tion: President’s Veto Message, March 12, 2009, page 1269, RA No. 9524).[97]
House Bill No. 5116 was an attempt by several members of the House of Representatives to
override the President’s interpretation and implementation of Special Provision No. 1 in the 2009
GAA. That this attempt had not succeeded, and that the implementation of the Special Provision
No. 1 in the 2009 continued as the Executive construed it to be meant that the latter’s
interpretation of this Special Provision was the true interpretation of Congress. This
interpretation was carried into the language of Special Provision No. 1 when it was reenacted in
the subsequent years, including the GAAs of 2011 and 2012; thus, it should be the interpretation
that should prevail in this case.
4. The operative fact doctrine: concept, limits, and application to the DAP’s
unconstitutionality.
I generally agree with J. Bersamin’s conclusion on the operative fact doctrine and, for greater
clarity, discuss its application below for the Court’s consideration and understanding. I dwell
most particularly on the concept of the doctrine and the element of “good faith” that, under the
doctrine, assumes a specialized meaning.
To appreciate the circumstances or situations when the doctrine of operative fact may be
applied, I find it useful to review its development in jurisprudence.
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[97] House Bill No. 5116, Fourteenth Congress, available athttp://www.dbm.gov.ph/wp-
content/uploads/GAA/GAA2009/prelim2.pdf.
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a. The Doctrine: Roots and Concept

The doctrine of operative fact is American in origin, and was discussed in the 1940 case
of Chicot County Drainage Dist. v. Baxter State Bank, et al.:[98]
The effect of a determination of unconstitutionality must be taken with qualifications. The

actual existence of a statute, prior to such a determination, is an operative fact and may have
consequences which cannot justly be ignored. The past cannot always be erased by a new
judicial declaration. The effect of the subsequent ruling as to invalidity may have to be considered in
various aspects, with respect to particular relations, individual and corporate, and particular conduct,
private and official. Questions of rights claimed to have become vested, of status, of prior determinations
deemed to have finality and acted upon accordingly, of public policy in the light of the nature both of the
statute and of its previous application, demand examination. These questions are among the most difficult
of those which have engaged the attention of courts x x x and it is manifest from numerous decisions that an
all-inclusive statement of a principle of absolute retroactive invalidity cannot be justified. [emphasis
supplied]
The doctrine was a departure from the old and long established rule (known as the void ab
initio doctrine) that an “unconstitutional act is not a law; it confers no rights; it imposes no
duties; it affords no protection; it creates no office; it is, in legal contemplation, as inoperative as
though it had never been passed.”[99] By shifting from retroactivity to prospectivity, the US
courts took a pragmatic and realistic
_______________
[98] 308 US 371, 318-319, 60 S. Ct. 317.
[99] The void ab initio doctrine was first used in the case of Norton v. Shelby County, 118 US 425, 6 S.Ct. 1121, 30 L. Ed.
178 (1886).

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approach in assessing the effects of a declaration of unconstitutionality of a statute.[100]

Incorporation of the doctrine into our legal system came in the 1950s when, in several cases,
[101] the Court considered the effects of the declaration of unconstitutionality of the Moratorium
laws on contracts and obligations. Despite the invalidity of the Moratorium laws, the Court
recognized that they interrupted the running of the period of prescription while they were in
effect; creditors who were unable to institute their claims during the suspension were, thus,
accorded relief.
In Fernandez v. Cuerva & Co.,[102] a 1967 case, the Court ruled that the invalidation of a
statute conferring jurisdiction to an executive department over claims for unpaid salaries should
not prejudice an employee who had previously instituted a claim with the department. The filing
of his claim, albeit with a department later found to be without jurisdiction, nonetheless tolled
the running of the prescriptive period, and the nullification of the statute did not revive it.
In the 1969 case of Municipality of Malabang, Lanao del Sur v. Benito,[103] the Court affirmed
the “dissolution” of the Municipality of Balabagan, which was created pursuant to an
unconstitutional statute. Despite the municipality’s dissolution, the Court assuaged fears that
the acts done in the exercise of the municipality’s corporate powers would also be voided by
referring to the Chicot County case and acknowledging that the municipality’s acts were done
relying on the
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[100] Kristin Grenfell, California Coastal Commission: Retroactivity of a Judicial Ruling of Unconstitutionality, 14 Duke
Envtl. L. & Pol’y F. 245, 256.
[101] See the following cases of Montilla v. Pacific Commercial, 98 Phil. 133 (1956) and Manila Motor Company, Inc. v.
Flores, 99 Phil. 738 (1956).
[102] No. L-21114, November 28, 1967, 21 SCRA 1095.
[103] 137 Phil. 360; 27 SCRA 533 (1969).

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validity of the statute; prior to its dissolution, its exercise of corporate powers produced effects.
Perhaps the most cited case on the application of the operative fact doctrine is the 1971 case
of Serrano de Agbayani v. Philippine National Bank.[104] As in the earlier Moratorium
cases, Serrano involved the effect of the declaration of the unconstitutionality of the Moratorium
law on claims of prescription of actions for collections of debts and foreclosures of mortgages.
Speaking for the Court, Justice Fernando explained the rationale for the doctrine:
It does not admit of doubt that prior to the declaration of nullity such challenged legislative or executive act
must have been in force and had to be complied with. This is so as until after the judiciary, in an
appropriate case, declares its invalidity, it is entitled to obedience and respect. Parties may have
acted under it and may have changed their positions. What could be more fitting than that in a subsequent
litigation regard be had to what has been done while such legislative or executive act was in operation and
presumed to be valid in all respects. It is now accepted as a doctrine that prior to its being nullified, its
existence as a fact must be reckoned with. This is merely to reflect awareness that precisely
because the judiciary is the governmental organ which has the final say on whether or not a
legislative or executive measure is valid, a period of time may have elapsed before it can
exercise the power of judicial review that may lead to a declaration of nullity. It would be to
deprive the law of its quality of fairness and justice then, if there be no recognition of what had
transpired prior to such adjudication.
In the language of an American Supreme Court decision: “The actual existence of a statute, prior to such
a determination [of unconstitutionality], is an operative
_______________
[104] 148 Phil. 443; 38 SCRA 429 (1971).
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fact and may have consequences which cannot justly be ignored. The past cannot always be erased by a new
judicial declaration. The effect of the subsequent ruling as to invalidity may have to be considered in various
aspects, — with respect to particular relations, individual and corporate, and particular conduct, private and
official.”[105] (emphases supplied)
Planters Products, Inc. v. Fertiphil Corporation[106]further explained this rationale, as
follows:
The doctrine of operative fact, as an exception to the general rule, only applies as a matter of equity and fair
play. It nullifies the effects of an unconstitutional law by recognizing that the existence of a statute prior to
a determination of unconstitutionality is an operative fact and may have consequences which cannot
always be ignored. The past cannot always be erased by a new judicial declaration.
The doctrine is applicable when a declaration of unconstitutionality will impose an undue burden
on those who have relied on the invalid law. [emphasis ours]
But as we also ruled in this same case, the operative fact doctrine does not always
apply and is not a necessary consequence of every declaration of constitutional invalidity. It can
only be invoked in situations where the nullification of the effects of what used to be a valid law
would result in inequity and injustice. Where no such resulting effects would ensue, the
general rule that an unconstitutional law is totally ineffective should apply.
Additionally, the strictest kind of scrutiny should be accorded to those who may claim the
benefit of the operative fact doctrine as it draws no direct strength or reliance from an
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[105] Id., at pp. 447-448; p. 435.

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express provision of the Constitution and should not be applied in case of doubt or conflict with a
constitutional or statutory provision.
In these cited cases, the Court, beyond the consideration of prejudice to the parties, also
considered reliance in good faith on the unconstitutional laws prior to their
declaration of unconstitutionality. The “reliance” requirement underscored the rule that the
doctrine is applied only as a matter of equity, in the interest of fair play, and as a practical
reality. The doctrine limits the retroactive application of the law’s nullification to recognize that
prior to its nullification, it was a legal reality that governed past acts or omissions. “Whatever
was done while the legislative or the executive act was in operation should be duly recognized
and presumed to be valid in all respects”[107] so as not to impose an undue burden on those who
have relied on the invalid law. The question in every case is whether parties who reasonably
relied in good faith on the old rule prior to its invalidation have acquired interests that
justify restricting the retroactive application of a new rule because to declare otherwise would
cause hardship and unfairness on those parties.[108]Good faith becomes a necessity as he who
comes to court must come with clean hands.[109]
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[107] Brandley Scott Shannon, The Retroactive and Prospective Application of Judicial Decisions, 26 Harv. J.L. & Pub.
Pol’y 811.
[108] See Kristin Grenfell, California Coastal Commission: Retroactivity of a Judicial Ruling of Unconstitutionality, 14
Duke Envtl. L & Policy F. 245 (Fall 2003).
[109] It is a general principle in equity jurisprudence that “he who comes to equity must come with clean hands.” North
Negros Sugar Co. v. Hidalgo, 63 Phil. 664 (1936), as cited in Rodulfa v. Alfonso, No. L-144, February 28, 1946. A court
which seeks to enforce on the part of the defendant uprightness, fairness, and conscientiousness also insists that, if relief
is to be granted, it must be to a plaintiff whose conduct is not inconsistent with the standards he seeks to have applied to
his adversary. Concurring Opinion of J. Laurel in Kasilag v. Rodriguez et al., G.R. No. 46623, December 7, 1939.

304

Essentially, the concept of the doctrine is effect-focused, i.e., whether the effect/s of a party’s
reliance on the invalidated law are compelling enough to exempt him or her from the retroactive
application of the new law. The Court never looked far back enough to address
the cause of the invalidity, for which reason we find nothing in our jurisprudence that
extended the operative fact doctrine to validate the invalidated law itself or to absolve
its proponents.
b. Application
Given the jurisprudential meaning of the operative fact doctrine, a first consideration to be
made under the circumstances of this case is the application of the doctrine: (1) to the programs,
works and projects the DAP funded in relying on its validity; (2) to the officials who undertook
the programs, works and projects; and (3) to the public officials responsible for the establishment
and implementation of the DAP.
With respect to the programs, works and projects, I fully agree with J. Bersamin that
the DAP-funded programs, works and projects can no longer be undone; practicality and
equity demand that they be left alone as they were undertaken relying on the validity of the DAP
funds at the time these programs, works and projects were undertaken.
The persons and officials, on the other hand, who merely received or utilized the
budgetary funds in the regular course and without knowledge of the DAP’s invalidity, would
suffer prejudice if the invalidity of the DAP would affect them. Thus, they should not incur any
liability for utilizing DAP funds, unless they committed criminal acts in the course of their
actions other than the use of the funds in good faith.
The doctrine, on the other hand, cannot simply and generally be extended to the officials who
never relied on the
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DAP’s validity and who are merely linked to the DAP because they were its authors and
implementors. A case in point is the case of the DBM Secretary who formulated and sought the
approval of NBC No. 541 and who, as author, cannot be said to have relied on it in the course of
its operation. Since he did not rely on the DAP, no occasion exists to apply the operative fact
doctrine to him and there is no reason to consider his “good or bad faith” under this
doctrine.
This conclusion should apply to all others whose only link to the DAP is as its authors,
implementors or proponents. If these parties, for their own reasons, would claim the benefit of the
doctrine, then the burden is on them to prove that they fall under the coverage of the doctrine. As
claimants seeking protection, they must actively show their good faith reliance; good faith cannot
rise on its own and self-levitate from a law or measure that has fallen due to its
unconstitutionality. Upon failure to discharge the burden, then the general rule should apply —
the DAP is a void measure which is deemed never to have existed at all.
The good faith under this doctrine should be distinguished from the good faith considered
from the perspective of liability. It will be recalled from our above finding that the
respondents, through grave abuse of discretion, committed a constitutional violation by
withdrawing funds that are not considered savings, pooling them together, and using them to
finance projects outside of the Executive branch and to support even the PDAF allocations of
legislators.
When transgressions such as these occur, the possibility for liability for the transgressions
committedinevitably arises. It is a basic rule under the law on public officers that public
accountability potentially imposes a three-fold liability — criminal, civil and
administrative — against a public officer. A ruling of this kind can only come from a
tribunal with direct or original jurisdiction over the issue of liability and where the good or bad
faith in the performance of
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duty is a material issue. This Court is not that kind of tribunal in these proceedings as we merely
decide the question of the DAP’s constitutionality. If we rule beyond pure constitutionality at all,
it is only to expound on the question of the consequences of our declaration of unconstitutionality,
in the manner that we do when we define the application of the operative fact doctrine. Hence,
any ruling we make implying the existence of the presumption of good faith or negating it, is only
for the purpose of the question before us — the constitutionality of the DAP and other related
issuances.
To go back to the case of Secretary Abad as an example, we cannot make any finding on good
faith or bad faith from the perspective of the operative fact doctrinesince, as author and
implementor, he did not rely in good faith on the DAP.
Neither can we make any pronouncement on his criminal, civil or administrative
liability, i.e., based on his performance of duty, since we do not have the jurisdiction to make this
kind of ruling and we cannot do so without violating his due process rights. In the same manner,
given our findings in this case, we should not identify this Court with a ruling that seemingly
clears the respondents from liabilities for the transgressions we found in the DBM Secretary’s
performance of duties when the evidence before us, at the very least, shows that his actions
negate the presumption of good faith that he would otherwise enjoy in an assessment of his
performance of duty.
To be specific about this disclaimer, aside from the many admissions outlined elsewhere in the
Opinion, there are indicators showing that the DBM Secretary might have established the DAP
knowingly aware that it is tainted with unconstitutionality.
Consider, for example, that during the oral arguments, the DBM Secretary admitted that he has
an extensive knowledge
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of both the legal and practical operations of the budget, as the transcript of my questioning of the
DBM Secretary shows.[110]
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[110] During the oral arguments, Sec. Abad admitted to having an extensive knowledge of both the legal and practical
operation of the budget, as the following raw transcript shows:
Justice Brion: And this was not a sole budget circular, there were other budget circular[s]?
Secretary Abad: There were, Your Honor.
Justice Brion: We were furnished copies of Budget Circular 541, 542, all the way up to 547, right?
Secretary Abad: That’s correct, Your Honor.
Justice Brion: And in the process of drafting a budget circular, I would assume that you have a sequent [sic] assistant secretary for legal?
Justice Brion: And an undersecretary for legal?
Secretary Abad: Well, not exclusively for legal, but they do cover that particular area.
Justice Brion: They do legal work?
Secretary Abad: Yes.
Justice Brion: And you yourself, you are a lawyer?
Justice Brion: And you were also a congressman, you were a congressman?
Secretary Abad: That’s also true, Your Honor.
Justice Brion: And in fact, how many years were you in Congress?
Secretary Abad: For 12 years, Your Honor.
Justice Brion: And were you also involved in budget work, or work in the budget process while you were in Congress?
Secretary Abad: Well, I once had the privileged [sic] of sharing [sic] the appropriations committee, Your Honor.
Justice Brion: So the budget was nothing, or is nothing new to you?
Secretary Abad: Well, from the, it was different from the perspective of the legislature, Your Honor. It’s a mordacious [sic] work from the
perspective of the Executive.
Justice Brion: Yes, but in terms of, in terms of concepts, in terms of processes, you have been there, you knew how to carry the budget from the
beginning up to the very end.
Secretary Abad: Well, we were exercising over side [sic] function much more than actually engaged in budget prepara-
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The exchange, to my mind, negates any claim by the respondent DBM Secretary that he did
not know the legal implications of what he was doing. As a lawyer and with at least 12 years of
experience behind him as a congressman who was
tion, budget execution and budget monitoring. So it’s a very different undertaking your Honor.
Justice Brion: When you issued National Budget Circular No. 541, it was you as budget secretary who signed the national budget circular, right?
Justice Brion: And I would assume that because this was prepared by your people there were a lot of studies that went in the preparation of this
budget circular?
Secretary Abad: Yeah, it was actually an expression via an issuance of a directive from the President as was captured by the phrase “use it or lose
it” …
Justice Brion: But that, that point in time you had been doing this expedited thing for almost a year, right?
Justice Brion: And when you drafted this Budget Circular this was [sic], you were using very technical term[s] because your people are veterans in
this thing. For example, you were using the term “savings,” right? And I would assume that when you used the term “savings” then you had, at
the back of your mind, the technical term of the, the technical meaning of that term “savings.”
Secretary Abad: As defined in the General Provisions, Your Honor.
Justice Brion: And also the term “augment,” right?
Secretary Abad: Yes, Your Honor.
Justice Brion: And the term “unobligated allotment.”
Justice Brion: So this was not drafted by, by neophytes?
Justice Brion: And you also had at the back of your mind presumably all the constitutional and statutory limitations in budgeting, right?
Secretary Abad: We had hope so, Your Honor.
Justice Brion: So every word, every phrase in this National Budget Circular was intended for what it wanted to convey and to achieve?
Oral Arguments on the DAP dated January 28, 2014, TSN, pp. 120-128.

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even the Chairman of the House Appropriations Committee, it is inconceivable that he did not
know the illegality or unconstitutionality that tainted his brainchild. Consider, too, in this regard
that all appropriation, revenue and tariff bills emanate from the Lower House[111] so that the
Chair of the Appropriations Committee cannot but be very knowledgeable about the budget, its
processes and technicalities. In fact, the Secretary likewise knows budgeting from the other
end, i.e., from the user end as the DBM Secretary.
Armed with all these knowledge, it is not hard to believe that he can run circles around the
budget and its processes, and did, in fact, purposely use this knowledge for the administration’s
objective of gathering the very sizeable funds collected under the DAP.
J. Carpio, for his part, in one of the exchanges in this Court’s consideration of the present case,
had occasion to cite examples of why Secretary Abad could not have been in good faith.
[112] With J. Carpio’s permission, I cite the following instances he cited:
1) The Court has already developed jurisprudence on savings and the power to realign. The
DBM cannot feign ignorance of these rulings since it was a respondent in these cases. Thus, it
implemented the DAP knowing full well that it contradicts jurisprudence.
2) The DBM was not candid with this Court when it claimed that the Bureau of Treasury had
certified that revenue collections for the FYs 2011, 2012 and 2013 exceeded original revenue
targets. On the contrary, it failed to present evidence establishing this claim.
J. Bersamin likewise had his share of showing that the respondent DBM Secretary knew of the
constitutional provi-
_______________
[112] Draft Opinion of Justice Carpio circulated in the 2014 Baguio Summer Session.

310

sions that the DAP was violating. This came out during his questioning of the DBM Secretary on
cross-border transfers during the oral arguments when the DBM Secretary admitted knowing the
transfers made to the COA and the House of Representatives despite his awareness of the
restrictions under Section 29(1) and Section 25(5), Article VI of the 1987 Constitution.[113]
_______________
[113] The clarity of the language of the constitutional provisions against cross-border transfer of funds was admitted by
Sec. Abad while questioned by Justice Bersamin on this point during the oral arguments:
Justice Bersamin:
No, appropriations before you augmented because this is a cross border and the tenor or text of the Constitution is quite
clear as far as I am concerned. It says here, “The power to augment may only be made to increase any item in the General
Appropriations Law for their respective offices.” Did you not feel constricted by this provision?
Secretary Abad:
Well, as the Constitution provides, the prohibition we felt was on the transfer of appropriations, Your Honor. What we
thought we did was to transfer savings which was needed by the Commission to address deficiency in an existing item in
both the Commission as well as in the House of Representatives; that’s how we saw… (interrupted)
Justice Bersamin:
So your position as Secretary of Budget is that you could do that?
Secretary Abad:
In an extreme instances (sic) because… (interrupted)
Justice Bersamin:
No, no, in all instances, extreme or not extreme, you could do that, that’s your feeling.
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In these lights, we should take the utmost care in what we declare as it can have far reaching
effects. Worse for this Court, any advocacy or mention of presumption of good faith
Secretary Abad:
Well, in that particular situation when the request was made by the Commission [on Audit] and the House of
Representatives, we felt that we needed to respond because we felt… (interrupted)
Justice Bersamin:
Alright, today, today, do you still feel the same thing?
Secretary Abad:
Well, unless otherwise directed by this Honorable Court and we respect your wisdom in this and we seek your guidance…
Justice Bersamin:
Alright, you are yourself a lawyer who is a Secretary, may I now direct your attention to the screen, paragraph 5. Let us
just focus on that part, “… be authorized to augment any item in the general appropriations law for their respective
offices from savings in other items of their respective appropriations.” What do you understand by the phraseology of this
provision, that one, the second?
Secretary Abad:
It means, Your Honor, that savings of a particular branch of government… the…a head of a department is only
authorized to augment… (interrupted)
Justice Bersamin:
Is it the first time for you to read this provision?
Secretary Abad:
It’s not, Your Honor. A head of the department is authorized to augment savings within its own appropriations, Your
Honor, so it’s just within.
Oral Arguments on the DAP dated January 28, 2014, TSN, pp. 42-43.
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may be characterized as an undue and undeserved deference to the Executive, implying that the
rule of law, separation of powers, and checks and balances may have been compromised in this
country. This impression, to be sure, will not help the reputation of this Court or the stability of
our country.
To be very clear about our positions, we can only apply the operative fact doctrine to the
programs, projects and works that can no longer be undone and where the beneficiaries
relied in good faith on the validity of the DAP.
The authors, proponents and implementors of DAP are not among those who can seek
coverage under the doctrine; their link to the DAP was merely to establish and
implement the terms that we now find unconstitutional.
The matter of their good faith in the performance of duty (or its absence) and their
liability therefor, if any, can be made only by the proper tribunals, not by this Court in
the present case.
Based on these premises, I concur that the DAP is unconstitutional and should be struck
down. I likewise concur in the application of the Operative Fact Doctrine, as I have explained
above and adopted by the ponencia.

CONCURRING AND DISSENTING
DEL CASTILLO, J.:

The present case comes before us at the heels of immense public outrage that followed the
discovery of alleged abuses of the Priority Development Assistance Fund (PDAF) committed by
certain legislators involving billions of pesos in public
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funds. In the seminal case of Belgica v. Ochoa, Jr.,[1] the Court declared as unconstitutional, in
an unprecedented all-encompassing tenor, the PDAF and its precursors as well as all issuances
and practices, past and present, appurtenant thereto, for violating the principles of separation of
powers and nondelegability of legislative power as well as the constitutional provisions on the
prescribed procedure of presentment of the budget, presidential veto, public accountability and
local autonomy. The declaration of unconstitutionality elicited the jubilation of a grateful nation.
While the various investigations relative to the PDAF scandal were taking place, public
outrage reemerged after a legislator alleged that the President utilized the then little known
Disbursement Acceleration Program (DAP), which was perceived by the public to be
another specie of the PDAF, involving comparably large amounts of public funds, to favor certain
legislators.
Thus, petitioners come to this Court seeking to have the DAP likewise declared as
unconstitutional.
Amidst the emergent public distrust on the alleged irregular utilization of huge amounts of
public funds, the Court is called upon to determine the constitutional and statutory validity of the
DAP. As in the PDAF case, we must fulfill this solemn duty guided by a singular purpose or
consideration: to defend and uphold the Constitution.
This case affords us the opportunity to look into the nature and scope of Article VI, Section 25(5)
of the Constitution relative to the power of 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 bodies (hereinafter “heads of offices”) to use savings to augment the
appropriations of their respective offices. Though the subject constitutional provision seems plain
_______________
[1] G.R. Nos. 208566, 208493 and 209251, November 19, 2013, 710 SCRA 1.

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enough, our interpretation and application thereof relative to the DAP has far-reaching
consequences on (1) the limits of this power to augment various budgets in order to prevent the
abuse and misuse thereof, and (2) the capability of the three coequal branches of the government
and the constitutional bodies to use such power as a tool to promote the general welfare. The
proper matrix, then, in determining the constitutional validity of the power to augment, as
exercised by the President through the DAP, must of necessity involve the balancing of these
State interests in (1) the prevention of abuse or misuse of this power, and (2) the promotion of the
general welfare through the use of this power.
With due respect, I find that the theories thus far expressed relative to this case have not
adequately and accurately taken into consideration these paramount State interests. Such
theories, if adopted by the Court, will affect not only the present administration but future
administrations as well. They have serious implications on the very workability of our system of
government. It is no exaggeration to say that our decision today will critically determine the
capacity or ability of the government to fulfill its core mandate to promote the general welfare of
our people.
This case must be decided beyond the prevailing climate of public distrust on the expenditure
of huge public funds generated by the PDAF scandal. It must be decided based on the
Constitution, not public opinion. It must be decided based on reason, not fear or passion. It must,
ultimately, be decided based on faith in the moral strength, courage and resolve of our people and
nation.
I first discuss the relevant constitutional provisions and principles as well as the statutes
implementing them before assessing the constitutional and statutory validity of the DAP.
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Nature, scope and rationale of Article VI, Section 25(5) of the Constitution
Article VI, Section 25(5) of the Constitution provides:
No law shall be passed authorizing any transfer of appropriations; however, the President, the President of
Constitutional Commissions may, by law, be authorized to augment any item in the general appropriations
law for their respective offices from savings in other items of their respective appropriations.
The subject constitutional provision prohibits the transfer of appropriations. Congress cannot
pass a law authorizing such transfer. However, it is allowed to enact a law to authorize the heads
of offices to transfer savings from one item to another provided that the items fall within the
appropriations of the same office: the President relative to the Executive Department, the Senate
President with respect to the Senate, the Speaker relative to the House of Representatives, the
Chief Justice with respect to the Judicial Department, and the heads of the constitutional bodies
relative to their respective offices. The purpose of the subject constitutional provision is to afford
considerable flexibility to the heads of offices in the use of public funds and resources.[2] For a
transfer of savings to be valid under Article VI, Section 25(5), four (4) requisites must concur: (1)
there must be a law authorizing the heads of offices to transfer savings for augmentation
purposes, (2) there must be savings from an item/s in the appropriations of the office, (3) there
must be an item requiring augmentation in the appropriations of the office, and (4) the transfer of
savings should be from one item to another of the appropriations within the same office.
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[2] See Demetria v. Alba, 232 Phil. 222, 229; 148 SCRA 208, 214 (1987).
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While the members of the Constitutional Commission did not extensively discuss or debate the
salient points of the subject constitutional provision, the deliberations do reveal its rationale
which is crucial to the just disposition of this case:
MR. NOLLEDO. I have two more questions, Madam President, if the sponsor does not mind. The first
question refers to Section 22, subsection 5, page 12 of the committee report about the provision that “No law
shall be passed authorizing any transfer of appropriations.” This provision was set forth in the 1973
Constitution, inspired by the illegal fund transfer of P26.2 million that Senator Padilla was talking about
yesterday which was made by President Marcos in order to benefit the Members of the Lower House so that
his pet bills would find smooth sailing. I am concerned about the discretionary funds being given to the
President every year under the budget. Do we have any provision setting forth some guidelines for the
President in using these discretionary funds? I understand Mr. Marcos abused this authority. He would
transfer a fund from one item to another in the guise of using it to suppress insurgency. What does the
sponsor say about this?
MR. DAVIDE. If Mr. Marcos was able to do that, it was precisely because of the general appropriations
measure allowing the President to transfer funds. And even under P.D. No. 1177 where the President was
also given that authority, technically speaking, the provision of the proposed draft would necessarily prevent
that. Mr. Marcos was able to do it because of the decrees which he promulgated, but the Committee would
welcome any proposal at the proper time to totally prevent abuse in the disbursements of discretionary
funds of the President.[3]
In another vein, the deliberations of the Constitutional Commission clarified the extent of this
power to augment:
________________
[3] II RECORD, CONSTITUTIONAL COMMISSION, p. 88 (July 22, 1986).
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MR. SARMIENTO. I have one last question. Section 25, paragraph (5) authorizes the Chief Justice of
the Supreme Court, the Speaker of the House of Representatives, the President, the President of the Senate
to augment any item in the General Appropriations Law. Do we have a limit in terms of percentage as to
how much they should augment any item in the General Appropriations Law?
MR. AZCUNA. The limit is not in percentage but “from savings.” So it is only to the extent of their
savings.[4]
Two observations may be made on the above.

First, the principal motivation for the inclusion of the subject provision in the Constitution was
to prevent the President from consolidating power by transferring appropriations to the other
branches of government and constitutional bodies in exchange for undue or unwarranted favors
from the latter. Thus, the subject provision is an integral component of the system of checks and
balances under our plan of government. It should be noted though, based on the broad language
of the subject provision, that the check is not only on the President, even though the bulk of the
budget is necessarily appropriated to the Executive Department, because the other branches and
constitutional bodies can very well commit the aforedescribed transgression although to a much
lesser degree.
Second, the deliberations of the Constitutional Commission on the limits of the power to
augment portray the considerable latitude or leeway given the heads of offices in exercising the
power to augment. The framers saw it fit not to set a limit based on percentage but on the
amount of savings of a particular office, thus, affording heads of offices sufficient flexibility in
exercising their power to augment.
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Equally important, though not directly discussed in the deliberations of the Constitutional
Commission, it is fairly evident from the wording of the subject provision that the power to
augment is intended to prevent wastage or underutilization of public funds. In particular, it
prevents savings from remaining idle when there are other important projects or programs
within an office which suffer from deficient appropriations upon their implementation or
evaluation. Thus, by providing for the power to augment, the Constitution espouses a policy of
effective and efficient use of public funds to promote the common good.
In sum, the power to augment under Article VI, Section 25(5) of the Constitution serves two
principal purposes: (1) negatively, as an integral component of the system of checks and balances
under our plan of government, and (2) positively, as a fiscal management tool for the effective and
efficient use of public funds to promote the common good. For these reasons, as preliminarily
intimated, the just resolution of this case hinges on the balancing of two paramount State
interests: (1) the prevention of abuse or misuse of the power to augment, and (2) the promotion of
the general welfare through the power to augment.
I now proceed to discuss the statutes implementing Article VI, Section 25(5) of the Constitution.
Authority to augment
As earlier noted, Article VI, Section 25(5) of the Constitution states that the power to augment
must be authorized “by law.” Thus, it has become standard practice to include in the annual
general appropriations act (GAA) a provision granting the power to augment to the heads of
offices. As pertinent to this case, the 2011, 2012 and 2013 GAAs provide, respectively—

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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.[5]
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.[6]
enjoying fiscal autonomy, and the Ombudsman are hereby authorized to use savings in the respective
appropriations to augment actual deficiencies incurred for the current year in any item of their respective
appropriations.[7]
I do not subscribe to the view that the above quoted grant of authority to augment under the
2011 and 2012 GAAs contravenes the subject constitutional provision. The reason given for this
view is that the subject provisions in the 2011 and 2012 GAAs effectively allows the
augmentation of any item in the GAA, including those that do not belong to the items of the
appropriations of the office from which the savings were generated.
The subject GAAs are duly enacted laws which enjoy the presumption of constitutionality. Thus,
they are to be construed, if possible, to avoid a declaration of unconstitutionality. The rule of long
standing is that, as between two possible
_______________
[5] General Provisions, 2011 GAA.

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constructions, one obviating a finding of unconstitutionality and the other leading to such a
result, the former is to be preferred.[8] In the case at bar, the 2011 and 2012 GAAs can be so
reasonably interpreted by construing the phrase “of their respective appropriations” as qualifying
the phrase “to augment any item in this Act.” Under this construction, the authority to augment
is, thus, limited to items within the appropriations of the office from which the savings were
generated. Hence, no constitutional infirmity obtains.
Definition of savings and augmentation
The Constitution does not define “savings” and “augmentation” and, thus, the power to define
the nature and scope thereof resides in Congress under the doctrine of necessary implication. To
elaborate, the power of the purse or to make appropriations is vested in Congress. In the exercise
of the power to augment, the definition of “savings” and “augmentation” will necessarily impact
the appropriations made by Congress because the power to augment effectively allows the
transfer of a portion of or even the whole appropriation made in one item in the GAA to another
item within the same office provided that the definitions of “savings” and “augmentation” are
met. Thus, the integrity of the power to make appropriations vested in Congress can only be
preserved if the power to define “savings” and “augmentation” is in Congress as well. Of course,
the power to define “savings” and “augmentation” cannot be exercised in contravention of the
tenor of Article VI, Section 25(5) so as to effectively defeat the objectives of the aforesaid
constitutional provision. In the case at bar, petitioners do not question the validity of the
definitions of “savings” and “augmentation” relative to the 2011, 2012 and 2013 GAAs.
_______________
[8] Paredes v. Executive Secretary, 213 Phil. 5, 9; 128 SCRA 6, 10-11 (1984).

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The definition of “savings” and “augmentation” is uniform for the 2011, 2012 and 2013 GAAs,
to wit:
[S]avings refer to portions or balances of any programmed appropriation in this Act free from any obligation
or encumbrances 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.
Augmentation implies the existence in this Act of a program, activity, or project with an
appropriation, which upon implementation or subsequent evaluation of needed resources, is
determined to be deficient. In no case shall a nonexistent program, activity, or project, be funded by
augmentation from savings or by the use of appropriations otherwise authorized by this Act.[9] (Emphasis
supplied)
Pertinent to this case is the first type of “savings” involving portions or balances of any
programmed appropriation in the GAA that is free from any obligation or encumbrances and
which are still available after the completion or final discontinuance or abandonment of the work,
activity or purpose for which the appropriation is authorized. Thus, for “savings” of this type to
arise the following requisites must be met:
_______________
[9] See Sections 60, 54 and 52 of the 2011, 2012 and 2013 GAAs, respectively.

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1. The appropriation[10] must be a programmed[11]appropriation in the GAA;

2. The appropriation must be free from any obligation or encumbrances;
3. The appropriation must still be available after the completion or final discontinuance or
abandonment of the work, activity or purpose for which the appropriation is authorized.
The portion or balance of the appropriation, when the above requisites are met, thus, constitutes
the first type of “savings.”
On the other hand, for “augmentation” to be valid, in accordance with the Article VI, Section
25(5) in relation to the relevant GAA provision thereon, the following requisites must concur:
1. The program, activity, or project to be augmented by savings must be a program, activity, or
project in the GAA;
2. The program, activity, or project to be augmented by savings must refer to a program,
activity, or project within or under the same office from which the savings were generated;
3. Upon implementation or subsequent evaluation of needed resources, the appropriation of the
program, activity, or project to be augmented by savings must be shown to be deficient.
_______________
[10] An appropriation is “an authorization made by law or other legislative enactment, directing payment out of
government funds under specified conditions or for specified purposes.” [ADMINISTRATIVE CODE, Book VI, Chapter 1, Section
2(1)].
[11] As contradistinguished from the Unprogrammed Fund in the GAA.

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Notably, the law permits augmentation even before the program, activity, or project is
implemented if, through subsequent evaluation of needed resources, the appropriation for such
program, activity, or project is determined to be deficient.
The power to finally discontinue or abandon the work, activity or purpose for which the
appropriation is authorized.
As pertinent to this case, the third requisite of the first type of “savings” in the GAA deserves
further elaboration. Note that the law contemplates, among others, the final discontinuance or
abandonment of the work, activity or purpose for which the appropriation is authorized. Implicit
in this provision is the recognition of the possibility that the work, activity or purpose may be
finally discontinued or abandoned. The law, however, does not state (1) who possesses the power
to finally discontinue or abandon the work, activity or purpose, (2) how such power shall be
exercised, and (3) when or under what circumstances such power shall or may be exercised.
Under the doctrine of necessary implication, it is reasonable to presume that the power to
finally discontinue or abandon the work, activity or purpose is vested in the person given the duty
to implement the appropriation (i.e., the heads of offices), like the President with respect to the
budget of the Executive Department.
As to the manner it shall be exercised, the silence of the law, as presently worded, allows the
exercise of such power to be express or implied. Since there appears to be no particular form or
procedure to be followed in giving notice that such power has been exercised, the Court must look
into the particular circumstances of a case which tend to show, whether expressly or impliedly,
that the work, activity or purpose has
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been finally abandoned or discontinued in determining whether the first type of “savings” arose
in a given case.
This lack of form, procedure or notice requirement is, concededly, a weak point of this
law because (1) it creates ambiguity when a work, activity or purpose has been finally
discontinued or abandoned, and (2) it prevents interested parties from looking into the
government’s justification in finally discontinuing or abandoning a work, activity or
purpose. Indubitably, it opens the doors to abuse of the power to finally discontinue or abandon
which may lead to the generation of illegal “savings.” Be that as it may, the Court cannot remedy
the perceived weakness of the law in this regard for this properly belongs to Congress to remedy or
correct. The particular circumstances of a case must, thus, be looked into in order to determine if,
indeed, the power to finally discontinue or abandon the work, activity or purpose was validly
effected.
Anent the conditions as to when or under what circumstances a work, activity or purpose in
the GAA may or shall be finally discontinued or abandoned, again, the law does not clearly spell
out these conditions, which is, again, a weak point of this law. The parties to this case have failed
to identify such conditions and the GAAs themselves, in their other provisions, do not appear to
specify these conditions. Nonetheless, the power to finally discontinue or abandon the work,
activity or purpose recognized in the definition of “savings” in the GAAs cannot be exercised with
unbridled discretion because it would constitute an undue delegation of legislative powers; it
would allow the person possessing such power to determine whether the appropriation will be
implemented or not. Again, the law enjoys the presumption of constitutionality and it must,
therefore, be construed, if possible, in such a way as to avoid a declaration of nullity.
Consequently, considering that the GAA (1) is the implementing legislation of the constitutional
provisions on the enactment of the national budget under Article VI, and (2) is governed by Book
VI (“National Government Budgeting”) of
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the Administrative Code, there is no obstacle to locating the standards that will guide the
exercise of the power to finally discontinue or abandon the work, activity or purpose in the
Constitution and Administrative Code.[12]As previously discussed, the implicit public policy
enunciated under the power to augment in Article VI, Section 25(5) of the Constitution is the
effective and efficient use of public funds for the promotion of the common good. The same policy
is expressly articulated in Book VI, Chapter 5 (“Budget Execution”), Section 3 of the
Administrative Code:
SECTION 3. Declaration of Policy.—It is hereby declared the policy of the State to formulate and
implement a National Budget that is an instrument of national development, reflective of national
objectives, strategies and plans. The budget shall be supportive of and consistent with the socio-economic
development plan and shall be oriented towards the achievement of explicit objectives and expected
results, to ensure that funds are utilized and operations are conducted effectively, economically
and efficiently. The national budget shall be formulated within the context of a regionalized government
structure and of the totality of revenues and other receipts, expenditures and borrowings of all levels of
government and of government-owned or -controlled corporations. The budget shall likewise be prepared
within the context of the national long-term plan and of a long-term budget program. (Emphasis supplied)
Prescinding from the above, the power to finally discontinue or abandon the work, activity or
purpose, before savings may arise, should, thus, be circumscribed by the standards of effectivity,
efficiency and economy in the utilization of public funds. For example, if a work, activity or
purpose is found to be tainted with anomalies, the head of office can order the final
discontinuance of the work, activity or purpose because
_______________
[12] See Santiago v. Comelec, 336 Phil. 848, 915; 270 SCRA 106, 174 (1997), Puno, J., Concurring and Dissenting.
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public funds are being fraudulently dissipated contrary to the standard of effectivity in the
utilization of public funds.
The power of the President to suspend or otherwise stop further expenditure of funds under Book
VI, Chapter V, Section 38 of the Administrative Code.
The power to finally discontinue or abandon the work, activity or purpose for which the
appropriation is authorized in the GAA should be related to the power of the President to
suspend or otherwise stop further expenditure of funds, relative to the appropriations of the
Executive Department, under Book VI, Chapter V, Section 38 (hereinafter “Section 38”) of the
Administrative Code:
SECTION 38. Suspension of Expenditure of Appropriations.—Except as otherwise provided in the
upon notice to the head of office[13] concerned, is authorized to suspend or otherwise stop further
expenditure of funds allotted for any agency, or any other expenditure authorized in the General
Appropriations Act, except for personal services appropriations used for permanent officials and employees.
(Emphasis supplied)
Section 38 contemplates two different situations: (1) to suspend expenditure, and (2) to
otherwise stop further expenditure.
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[13] The term “head of office” here refers to an officer under the Executive Department who functions like a Cabinet
Secretary with respect to his or her office. This should not be confused with “heads of office” which, for convenience, I used
in this Opinion to refer to 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 bodies.

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“Suspend” means “to cause to stop temporarily; to set aside or make temporarily inoperative;
to defer to a later time on specified conditions”;[14] “to stop temporarily; to discontinue or to cause
to be intermitted or interrupted.”[15]
On the other hand, “stop” means “to cause to give up or change a course of action; to keep from
carrying out a proposed action”;[16] “to bring or come to an end.”[17]
While “suspending” also connotes “stopping,” the former does not mean that a course of action
is to end completely since to suspend is to stop with an expectation or purpose of resumption. On
the other hand, “stop” when used as a verb means “to bring or come to an end.” Thus,
“stopping” brings an activity to its complete termination.
As a general rule, in construing words and phrases used in a statute and in the absence of a
contrary intention, they should be given their plain, ordinary and common usage meaning. They
should be understood in their natural, ordinary, commonly-accepted and most obvious
signification because words are presumed to have been used by the legislature in their ordinary
and common use and acceptation.[18]
That the two phrases are found in the same sentence further bears out the logical conclusion
that they do not refer to the same thing. Otherwise, one of the said phrases would be
_______________
[14] http://www.merriam-webster.com/dictionary/suspend, last visited May 16, 2014.
[15] Samalio v. Court of Appeals, 494 Phil. 456, 467; 454 SCRA 462, 475 (2005).
[16] http://www.merriam-webster.com/dictionary/stop?show=0&t=
1400223671, last visited May 16, 2014.
[17] http://www.thefreedictionary.com/stop, last visited May 16, 2014.
[18] Spouses Alcazar v. Arante, G.R. No. 177042, December 10, 2012, 687 SCRA 507, 518-519.

328

rendered meaningless and a mere surplusage or redundant. This could not have been the
intention of the legislature.[19]
Hence, as used in the first phrase in Section 38, “to suspend” expenditure means to
temporarily stop the same with the intention to resume once the reason for the suspension is
resolved or the conditions for the resumption are met. On the other hand, “to otherwise stop
further expenditure,” as used in the second phrase in Section 38, means to stop
expenditure without any intention of resuming, or simply stated, to terminate
it completely, finally, permanently or definitively.
Consequently, if the President orders the stoppage of further expenditure of funds, pursuant to
the second phrase in Section 38, the work, activity or purpose is completely, finally,
permanently or definitively put to an end or terminated because there is no intention to
resume and thus, no further work or activity can be done without the needed funds. The net
effect is that the work, activity or purpose is finally discontinued or abandoned. In other
words, through the power to permanently stop expenditure, pursuant to the second phrase of
Section 38, the President is effectively given the power to finally discontinue or abandon a work,
activity or purpose under a broader[20] standard of “public interest.” When the President
exercises this power thusly, the first type of “savings” in the GAA, as previously discussed, is
necessarily generated.
Moreover, Section 38 states in broad and categorical terms that the power of the President to
suspend (i.e., temporary stoppage) or to otherwise stop further expenditure (i.e., per-
_______________
[19] In addition, the use of the qualifier “otherwise” vis-à-vis the word “stop” in the second phrase, i.e.,
“to otherwise stop further expenditure,” provides greater reason to conclude that the second phrase, when read in relation
to the first phrase, does not refer to suspension of expenditure.
[20] As compared to the narrower standards of effectivity, efficiency and economy previously discussed.

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manent stoppage) refers to “funds allotted for any agency, or any other expenditure authorized
in the General Appropriations Act, x x x.”[21] Book VI, Chapter 5, Section 2(2) of the
Administrative Code defines “allotment” as follows:

SECTION 2. Definition of Terms.—When used in this Book:
xxxx
(2) “Allotment” refers to an authorization issued by the Department of Budget to an agency, which
allows it to incur obligations for specified amounts contained in a legislative appropriation. (Emphasis
supplied)

When read in relation to the above definition of “allotment,” the phrase “funds allotted” in Section
38, therefore, refers to both unobligated and obligated allotments for, precisely, an unobligated
allotment refers to an authorization to incur obligations issued by the Department of Budget and
Management (DBM). The law says “to suspend or otherwise stop further expenditure of funds
allotted for any agency” without qualification, and not “to suspend or otherwise stop further
expenditure of obligated allotments for any agency.” The power of the President to suspend or to
permanently stop expenditure in Section 38 is, thus, broad enough to cover both unobligated and
obligated allotments.
A contrary interpretation will lead to absurdity. This would mean that the President can only
permanently stop an expenditure via Section 38 if it involves an obligated allotment. But, in a
case where anomalies have been uncovered or where the accomplishment of the project has
become impossible, and the allotment for the project is partly unobligated and partly obligated
(as is the usual practice of releasing the funds in tranches for long-term projects), the logical
course of action would be to stop the expenditure relative to both uno-
_______________
[21] Emphasis supplied.
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bligated and obligated allotments in order to protect public interest. Thus, the unobligated
allotment may be withdrawn while the obligated allotment may be de-obligated. But, if the
President can only permanently stop an expenditure via Section 38 if it involves an obligated
allotment, then in this scenario, the President would have to first obligate the unobligated
allotment (e.g., conduct public biddings) and then order the now obligated allotments to be de-
obligated in view of the anomalies that attended the project or the impossibility of its
accomplishment. The law could not have intended such an absurdity.
Moreover, there is, again, nothing in Section 38 that requires that the project has already
begun before the President may permanently order the stoppage of expenditure. To illustrate, if
reliable information reaches the President that anomalies will attend the execution of an item in
the GAA or that the project is no longer feasible, then it makes no sense to prevent the President
from permanently stopping the expenditure, by withdrawing the unobligated
allotments, precisely to prevent the commencement of the project. The government need not wait
for it to suffer actual injury before it takes action to protect public interest nor should it waste
public funds in pursuing a project that has become impossible to accomplish. In both instances,
Section 38 empowers the President to withdraw the unobligated allotments and thereby
permanently stop expenditure thereon in furtherance of public interest.
To recapitulate, that the project has already been started or the allotted funds has already
been obligated is not a precondition for the President to be able to order the permanent stoppage
of expenditure, through the withdrawal of the unobligated allotment, pursuant to the second
phrase of Section 38. Under Section 38, the President can order the permanent stoppage of
expenditure relative to both an unobligated and obligated allotment, if public interest so requires.
Once the President orders the permanent stoppage of ex-
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penditure, the logical and necessary consequence is that the project is finally discontinued and
abandoned. Hence, savings is generated under the GAA provision on final discontinuance and
abandonment of the work, activity or purpose to the extent of the unused portion or balance of the
appropriation.
I, therefore, do not subscribe to the view that: (1) Section 38 only refers to the suspension of
expenditures, (2) Section 38 does not authorize the withdrawal of unobligated allotments, (3)
Section 38 only refers to obligated allotments, and (4) Section 38 only refers to a project that has
already begun.
Was the withdrawal of the unobligated allotments from slow-moving projects, under Section 5 of
NBC 541, equivalent to the final discontinuance or abandonment of these slow-moving projects
which gave rise to “savings” under the GAA?
This brings us to the first pivotal issue in this case: was the withdrawal of the unobligated
allotments, under Section 5 of National Budget Circular No. 541 (NBC 541), equivalent to the
final discontinuance or abandonment of the covered slow-moving projects which gave rise to
“savings” under the GAA?
As previously discussed, the GAA is silent as to the manner or prescribed form when a work,
activity or purpose is deemed to have been finally discontinued or abandoned for purposes of
determining whether “savings” validly arose. Thus, the exercise of such power may be express or
implied.
In the case at bar, NBC 541 does not categorically state that the withdrawal of the unobligated
allotments from slow-moving projects will result to the final discontinuance or abandonment of
the work, activity or purpose. However, because executive actions enjoy presumptive validity,
NBC 541 should be interpreted in a way that, if possible, will avoid a
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declaration of nullity. The Court may reasonably conceive any set of facts which may sustain its
validity.[22]
Here, I find that the mechanism adopted under NBC 541 may be viewed wholistically in order
to partiallyuphold its constitutionality or validity.
The relevant provisions of NBC 541 state:

5.4 All released allotments in FY 2011 charged against R.A. No. 10147 which remained unobligated as of
June 30, 2012 shall be immediately considered for withdrawal. This policy is based on the following
considerations:
5.4.2 The practice of having substantial carryover appropriations may imply that the agency has a
slower-than-programmed implementation capacity or [that the] agency tends to implement projects within
a two-year timeframe.
5.5 Consistent with the President’s directive, the DBM shall, based on evaluation of the reports cited
above and results of consultations with the departments/
agencies, withdraw the unobligated allotments as of June 30, 2012 through issuance of negative Special
Allotment Release Orders (SAROs).
xxxx
5.7.1 Reissued for the original programs and projects of the agencies/OUs concerned,
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[22] Manila Memorial Park, Inc. v. Secretary of Social Welfare and Development, G.R. No. 175356, December 3, 2013, 711 SCRA 302.

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from which the allotments were withdrawn;

5.7.2 Realigned to cover additional funding for other existingprograms and projects of the agency/OU;
or
5.7.3 Used to augment existing programs and projects of any agency and to fund priority programs and
projects not considered in the 2012 budget but expected to be started or implemented during the current
year. (Emphasis in the original)
When NBC 541 states that the released but unobligated allotments of projects as of June 30,
2012 shall be immediately considered for withdrawal, this may be reasonably taken to mean
that the Executive Department has made an initial determination that a project is slow-moving.
Upon evaluation of the reports and consultation with the concerned departments/agencies by the
DBM, as per Section 5.5 of NBC 541 quoted above, the withdrawn unobligated allotments may,
among others, thereafter be reissued to the same project as per Section 5.7.1. As a result, when
the withdrawn allotments are reissued or ploughed back to the same project, this may be
reasonably interpreted to mean that the Executive Department has made a final determination
that the project is not slow-moving and, thus, should not be discontinued in order to spur
economic growth.
Because of the broad language of Section 5.7 of NBC 541, the amount of withdrawn allotments
that may be reissued or ploughed back to the same project may be: (1) zero, (2) the same amount
as the unobligated allotment previously withdrawn in that project, (3) more than the amount of
the unobligated allotment previously withdrawn in that project, and (4) less than the amount of
the unobligated allotment previously withdrawn in that project.
In scenario (1), where no withdrawn unobligated allotments are reissued or ploughed back to the
project, this may
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be construed as an implied exercise of the power to finally discontinue or abandon a work,

activity or purpose because the withdrawal had the effect of permanently preventing the
completion thereof. Resultantly, there arose “savings” from the discontinuance or abandonment of
these slow-moving projects to the extent of the withdrawn unobligated allotments therefrom.
Thus, the withdrawn unobligated allotments from these slow-moving projects, as
aforedescribed, may be validly treated as “savings” under the pertinent provisions of the GAA.
In scenario (2), where the same amount as the unobligated allotment previously withdrawn
from the project is reissued or ploughed back to the same project, no constitutional or statutory
breach is apparent because the project is merely continued with its original allotment intact.
In scenario (3), two possible cases may arise. If the withdrawn allotments were merely
transferred to another project within the same item or another item within the Executive
Department, without exceeding the appropriation set by Congress for that item, then no
constitutional or statutory breach occurs because the funds are merely realigned. However, if the
withdrawn allotments were transferred to another project within the same item or in another
item within the Executive Department, the result of which is to exceed the appropriation set by
Congress for that item, then an augmentation effectively occurs. Thus, its validity would depend
on whether the augmentation complied with the constitutional and statutory requisites on
“savings” and “augmentation,” as previously discussed. Here, absent actual proof showing
noncompliance with such requisites, it would be premature to make such a declaration.
In scenario (4), a constitutional and statutory breach would be present. If the withdrawn
unobligated allotment for a particular project is partially reissued or ploughed back to the same
project, then the project is not actually finally discontinued or abandoned. And if the project is
not actually finally
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discontinued or abandoned, then no “savings” can validly be generated pursuant to the GAA
definition of “savings.” However, in scenario (4), the project now suffers from a reduction of its
original allotment which, under NBC 541, is treated and used as “savings.” This cannot be validly
done for it would contravene the definition of “savings” under the GAA and, thus, circumvent the
constitutional power of appropriation vested in Congress. As a result, in scenario (4), any use of
the portion of the withdrawn unobligated allotment, not reissued or ploughed back to the same
project, as “savings” to augment other items in the appropriations of the Executive Department
would be unconstitutional and illegal.
Hence, I find that Sections 5.4, 5.5 and 5.7 of NBC 541 are unconstitutional insofar as they (1)
allowed the withdrawal of unobligated allotments from slow-moving projects, which were not
finally discontinued or abandoned, and (2) authorized the use of such withdrawn unobligated
allotments as “savings.” In other words, these sections are void insofar as they permit scenario (4)
to take place.
It should be noted, however, that whether there were actual instances when scenario (4)
occurred involve factual matters not properly litigated in this case. Thus, I reserve judgment on
the constitutionality of the actual implementation of NBC 541 should a proper case be filed. The
limited finding, for now, is that the wording of Sections 5.4, 5.5 and 5.7 of NBC 541 is partially
unconstitutional insofar as it permits: (1) the withdrawal of unobligated allotments from slow-
moving projects, which were not finally discontinued or abandoned, and (2) authorizes the use of
such withdrawn unobligated allotments as “savings.”
Did the President validly order the final discontinuance or abandonment of the subject slow-
moving projects pursuant to his power to permanently
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stop expenditure under Section 38 of the Administrative Code?

When the President ordered the withdrawal of the unobligated allotments of slow-moving
projects, under Section 5 of NBC 541, pursuant to his power to permanently stop expenditure
under the second phrase of Section 38 of the Administrative Code, he made a categorical
determination that the continued expenditure on such slow-moving projects is inimical to public
interest.
This brings us to the second pivotal issue in this case: did the President validly order the final
discontinuance or abandonment of the subject slow-moving projects pursuant to his power to
permanently stop expenditure under Section 38 of the Administrative Code? Or, more to the
point, did he comply with the “public interest” standard in Section 38 when he ordered the
permanent stoppage of expenditure on the subject slow-moving projects?
I answer in the affirmative.
The challenged act enjoys the presumption of constitutionality. The burden of proof rests on
petitioners to show that the permanent stoppage of expenditure on slow-moving projects does not
meet the “public interest” standard under Section 38.
Petitioners failed to carry this burden. They did not clearly and convincingly show that the
DAP was a mere subterfuge by the government to frustrate the legislative will as expressed in
the GAA; or that the finally discontinued slow-moving projects were not actually slow-moving and
that the discontinuance thereof was motivated by malice or ill will; or that no actual and
legitimate public interest was served by the DAP; or some other proof clearly showing that the
requisites for the exercise of the power to stop expenditure in Section 38 were not complied with
or the exercise of the power under Section 38 was done with grave abuse of discretion.
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It is undisputed that, at the time the DAP was put in place, our nation was facing serious
economic woes due to considerable government under spending. The President, thus, sought to
speed up government spending through the DAP by, among others, permanently discontinuing
slow-moving projects and transferring the savings generated therefrom to fast-moving, high
impact priority projects. It is, again, undisputed that the DAP achieved its purpose and
significantly contributed to economic growth. Thus, on its face, and absent clear and convincing
proof that the DAP did not serve public interest or was pursued with grave abuse of discretion,
the Court must sustain the validity of the President’s actions.
It should also be noted that, as manifested by the Solicitor General and not disputed by
petitioners, the DAP has been discontinued in the last quarter of 2013,[23] after the causes of the
low level of spending or under spending of the government, specifically, the systemic problems in
the implementation of projects by the concerned government agencies were presumably
addressed. It, thus, appears that the DAP was instituted to meet an economic exigency which,
after being fully addressed, resulted in the discontinuance thereof. This is significant because it
demonstrates that the DAP was a temporary measure. It negates the existence of an unjustifiable
permanent or continuing pattern or policy of discontinuing slow-moving projects in order to
pursue fast-moving projects under the GAA which, if left unabated, would effectively defeat the
legislative will as expressed in the GAA. At the very least, the move by the Executive Department
to solve the systemic problems in the implementation of its projects shows good faith in seeking to
abide by the appropriations set by Congress in the GAA. This provides added reason to uphold
the determination by the President that public interest temporarily necessitated the
implementation of the DAP.
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[23] Memorandum for the Solicitor General, p. 30.
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This is not to say, however, that the alleged abuse or misuse of the DAP funds should
be condoned by the Court. If indeed such anomalies attended the implementation of the DAP,
then the proper recourse is to prosecute the offenders with the full force of the law. However,
the present case involves only the constitutional and statutory validity of the DAP, specifically,
NBC 541 which was partly used to generate the savings utilized under the DAP. Insofar as this
limited issue is concerned, the Court must stay within the clear meaning and import of Section 38
which allows the President to permanently stop expenditures, when public interest so requires.
Concededly, the “public interest” standard is broad enough to include cases when anomalies
have been uncovered in the implementation of a project or when the accomplishment of a project
has become impossible. However, there may be other cases, not now foreseeable, which may fall
within the ambit of this standard, as is the case here where the exigencies of spurring economic
growth prompted the Executive Department to finally discontinue slow-moving projects. Verily,
in all instances that the power to suspend or to permanently stop expenditure under Section 38 is
exercised by the President, the “public interest” standard must be met and, any challenge
thereto, will have to be decided on a case-to-case basis, as was done here. As previously
noted, petitioners have failed to prove that the final discontinuance of slow-moving projects and
the transfer of savings generated therefrom to high-impact, fast-moving projects in order to spur
economic growth did not serve public interest or was done with grave abuse of discretion. On the
contrary, it is not disputed that the DAP significantly contributed to economic growth and
achieved its purpose during the limited time it was put in place.
Hence, I find that the President validly exercised his power to permanently stop expenditure
under Section 38 in relation to NBC 541, absent sufficient proof to the contrary.
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The power to permanently stop further expenditure under Section 38 and, hence, finally
discontinue or abandon a work, activity or purpose vis-à-vis the two-year availability for release of
appropriations under the GAA.
I do not subscribe to the view that the provisions[24] in the GAAs giving the appropriations on
Maintenance and Other Operating Expenses (MOOE) and Capital Outlays (CO) a life-span of two
years prohibit the President from withdrawing the unobligated allotments covering such items.
The availability for release of the appropriations for the MOOE and CO for a period of two years
simply means that
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[24] Section 65 (General Provisions), 2011 GAA:
Section 65. Availability of Appropriations.—Appropriations for MOOE and capital outlays authorized in this Act shall
be available for release and obligation for the purpose specified, and under the same special provisions applicable thereto,
for a period extending to one fiscal year after the end of the year in which such items were appropriated: PROVIDED,
That appropriations for MOOE and capital outlays under R.A. No. 9970 shall be made available up to the end of FY
2011: PROVIDED, FURTHER, That a report on these releases and obligations shall be submitted to the Senate
Committee on Finance and the House Committee on Appropriations.
Section 65 (General Provisions), 2012 GAA:
Section 65. Availability of Appropriations.—Appropriations for MOOE and capital outlays authorized in this Act shall
be available for release and obligation for the purpose specified, and under the same special provisions applicable thereto,
for a period extending to one fiscal year after the end of the year in which such items were appropriated: PROVIDED,
That a report on these releases and obligations shall be submitted to the Senate Committee on Finance and the House
Committee on Appropriations, either in printed form or by way of electronic document.

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the work or activity may be pursued within the aforesaid period. It does not follow that the
aforesaid provision prevents the President from finally discontinuing or abandoning such work,
activity or purpose, through the exercise of the power to permanently stop further expenditure, if
public interest so requires, under the second phrase of Section 38 of the Administrative Code.
It should be emphasized that Section 38 requires that the power of the President to suspend or
to permanently stop expenditure must be expressly abrogated by a specific provision in the GAA
in order to prevent the President from stopping a specific expenditure:
upon notice to the head of office concerned, is authorized to suspend or otherwise stop further expenditure of
funds allotted for any agency, or any other expenditure authorized in the General Appropriations Act, except
for personal services appropriations used for permanent officials and employees. (Emphasis supplied)
This is the clear import and meaning of the phrase “except as otherwise provided in the General
Appropriations Act.” Plainly, there is nothing in the aforequoted GAA provision on the
availability for release of the appropriations for the MOOE and CO for a period of two years
which expressly provides that the President cannot exercise the power to suspend or to
permanently stop expenditure under Section 38 relative to such items.
That the funds should be made available for two years does not mean that the expenditure
cannot be permanently stopped prior to the lapse of this period, if public interest so requires. For
if this was the intention, the legislature should have so stated in more clear and categorical terms
given the
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proviso (i.e., “except as otherwise provided in the General Appropriations Act”) in Section 38
which requires that the power to suspend or to permanently stop expenditure must be expressly
abrogated by a provision in the GAA. In other words, we cannot imply from the wording of the
GAA provision, on the availability for release of appropriations for the MOOE and CO for a
period of two years, that the power of the President under Section 38 to suspend or to
permanently stop expenditure is specifically withheld. A more express and clear provision must
so provide. The legislature must be presumed to know the wording of the proviso in Section 38
which requires an express abrogation of such power.
It should also be noted that the power to suspend or to permanently stop expenditure under
Section 38 is not qualified by any timeframe for good reason. Fraud or other exceptional
circumstances or exigencies are no respecters of time; they can happen in the early period of the
implementation of the GAA which may justify the exercise of the President’s power to suspend or
to permanently stop expenditure under Section 38. As a result, such power can be exercised at
any time even a few days, weeks or months from the enactment of the GAA, when public interest
so requires. Otherwise, this means that the release of the funds and the implementation of the
MOOE and CO must continue until the lapse of the two-year period even if, for example, prior
thereto, grave anomalies have already been uncovered relative to the execution of these items or
their execution have become impossible.
An illustration may better highlight the point. Suppose Congress appropriates funds to build a
bridge between island A and island B in the Philippine archipelago. A few days before the start of
the project, when no portion of the allotment has yet to be obligated, the water level rises due to
global warming. As a result, islands A and B are completely submerged. If the two-year period is
not qualified by Section 38, then the President cannot order the permanent stoppage of the
expenditure, through the withdrawal of the unobligated
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allotment relative to this project, until after the lapse of the two-year period. Rather, the
President must continue to make available and authorize the release of the funds for this project
despite the impossibility of its accomplishment. Again, the law could not have intended such an
absurdity.
In sum, the GAA provision on the availability for release and obligation of the appropriations
relative to the MOOE and CO for a period of two years is not a ground to declare the DAP invalid
because the power of the President to permanently stop expenditure under Section 38 is not
expressly abrogated by this provision. Hence, the President’s order to withdraw the unobligated
allotments of slow-moving projects, pursuant to NBC 541 in conjunction with Section 38, did not
violate the aforesaid GAA provision considering that, as previously discussed, the power to
permanently stop expenditure was validly exercised in furtherance of public interest, absent
sufficient proof to the contrary.
The power to permanently stop expenditure under Section 38 and the prohibition on
impoundment under Sections 64 and 65 of the GAA
To my mind, the crucial issue in this case is the relationship between the power to
permanently stop expenditure under the second phrase of Section 38 of the Administrative
Code vis-à-vis the prohibition on impoundment under Sections 64 (hereinafter “Section 64”) and
65 of the 2012 GAA.
For convenience, I reproduce Section 38 below:

upon notice to the head of office concerned, is authorized to suspend or otherwise stop further expenditure of
funds allotted for any agency, or any other expenditure author-
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ized in the General Appropriations Act, except for personal services appropriations used for permanent
officials and employees. (Emphasis supplied)
While Sections 64 and 65 of the 2012 GAA provide:

Section 64. Prohibition Against Impoundment of
Appropriations.—No appropriations authorized under this Act shall be impounded through
retention or deduction unless in accordance with the rules and regulations to be issued by the
DBM: PROVIDED, That all the funds appropriated for the purposes, programs, projects, and activities
authorized under this Act, except those covered under the Unprogrammed Fund, shall be released pursuant
to Section 33(3), Chapter 5, Book VI of E.O. No. 292.
Section 65. Unmanageable National Budget Deficit.—Retention or deduction of appropriations
authorized in this Act shall be effected only in cases where there is an unmanageable National Government
budget deficit. x x x (Emphasis supplied)
In American legal literature, impoundment has been defined “as action, or inaction, by the
President or other offices of U.S. Government, that precludes the obligation or expenditure of
budget authority by Congress.”[25] In Philippine Constitution Association v. Enriquez,[26] we had
occasion to expound on this subject:
This is the first case before this Court where the power of the President to impound is put in issue.
Impoundment refers to a refusal by the President, for whatever reason, to spend funds made available by
Congress. It is the failure to spend or obligate budget authority of any type (Notes: Impoundment of Funds,
86 Harvard Law Review 1505 [1973]).
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[25] Black’s Law Dictionary, p. 756, 6th edition (1990).
[26] G.R. No. 113105, August 19, 1994, 235 SCRA 506.

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Those who deny to the President the power to impound argue that once Congress has set aside the fund
for a specific purpose in an appropriations act, it becomes mandatory on the part of the President to
implement the project and to spend the money appropriated therefor. The President has no discretion on the
matter, for the Constitution imposes on him the duty to faithfully execute the laws.
In refusing or deferring the implementation of an appropriation item, the President in effect exercises a
veto power that is not expressly granted by the Constitution. As a matter of fact, the Constitution does not
say anything about impounding. The source of the Executive authority must be found elsewhere.
Proponents of impoundment have invoked at least three principal sources of the authority of the
President. Foremost is the authority to impound given to him either expressly or impliedly by Congress.
Second is the executive power drawn from the President’s role as Commander-in-Chief. Third is the Faithful
Execution Clause which ironically is the same [provision] invoked by petitioners herein.
The proponents insist that a faithful execution of the laws requires that the President desist from
implementing the law if doing so would prejudice public interest. An example given is when through
efficient and prudent management of a project, substantial savings are made. In such a case, it is sheer folly
to expect the President to spend the entire amount budgeted in the law (Notes: Presidential Impoundment
Constitutional Theories and Political Realities, 61 Georgetown Law Journal 1295 [1973]; Notes Protecting
the Fisc: Executive Impoundment and Congressional Power, 82 Yale Law Journal 1686 [1973]).
We do not find anything in the language used in the challenged Special Provision that would imply that
Congress intended to deny to the President the right to defer or reduce the spending, much less to deactivate
11,000 CAFGU members all at once in 1994. But even if such is the intention, the appropriation law is not
the
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proper vehicle for such purpose. Such intention must be embodied and manifested in another law
considering that it abrades the powers of the Commander-in-Chief and there are existing laws on the
creation of the CAFGU’s to be amended. Again we state: a provision in an appropriations act cannot be used
to repeal or amend other laws, in this case, P.D. No. 1597 and R.A. No. 6758.[27]
The problem may be propounded in this manner.
As earlier noted, under Section 38, the President’s power to permanently stop expenditure, if
public interest so requires, is qualified by the phrase “[e]xcept as otherwise provided in the
General Appropriations Act.” Thus, if the GAA expressly provides that the power to permanently
stop expenditure under Section 38 is withheld, the President is prohibited from exercising such
power. The question then arises as to whether Section 64 falls within the ambit of the phrase
“[e]xcept as otherwise provided in the General Appropriations Act.”
The question is novel and not an easy one.
Section 64 indirectly defines “impoundment” as retention or deduction of appropriations.
“Impoundment” in the GAA may, thus, be defined as the refusal or failure to wholly (i.e.,
retention of appropriations) or partially (i.e., deduction of appropriations) spend funds
appropriated by Congress. But note the all-encompassing tenor of Section 64 referring as it does
to the prohibition on impoundment of all appropriations under the GAA, specifically, the
appropriations to the three great branches of government and the constitutional bodies.
It may be observed that the term “impoundment” is broad enough to include the power of the
President to permanently stop expenditure, relative to the appropriations of the Executive
Department, if public interest so requires, under Section 38. The reason is that the permanent
stoppage of expenditure
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[27] Id., at pp. 545-546.
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under Section 38 effectively results in the retention or deduction of appropriations, as the case
may be. Thus, a broad construction of the prohibition on impoundment will lead to the conclusion
that Section 64 has rendered Section 38 wholly inoperative. If that be the case, there arises the
more difficult question of whether the President has an inherent power of impoundment and
whether he can be deprived of such power by statutory command. In Philippine Constitution
Association, as aforequoted, although the issue of impoundment was not decisive therein, the
Court had occasion to outline the opposing views on this subject.
After much reflection, it is my considered view that, for the moment, as our laws are so
worded, there is no imperative need to settle the question on whether the President has an
inherent power of impoundment and whether he can be deprived of such power by statutory fiat
for the following reasons:
First, it is a settled rule of statutory construction that implied repeals are not favored. Note
that Section 64, in prohibiting impoundment of appropriations, made reference to Section 33(3) of
the Administrative Code in its final sentence. The legislature must be presumed to have been
aware of Section 38 in the Administrative Code so much so that if the prohibition on
impoundment in Section 64 was intended to render Section 38 wholly inoperative, then the law
should have so stated in clearer terms. But it did not.
Second, because implied repeals are not favored, courts shall endeavor to harmonize two
apparently conflicting laws, if possible, so as not to render one wholly inoperative.
In the case at bar, Sections 64 and 38 can be harmonized for two reasons.
First, the scope of Section 64 and Section 38 substantially differs. Section 64 covers all
appropriations relative to the three great branches of government and the constitutional bodies
while Section 38 refers only to the appropriations of
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the Executive Department. In other words, Section 64 is broader in scope while Section 38 has
limited applicability. As a consequence, under Section 64, the President cannot impound the
appropriations of the whole government bureaucracy and must authorize the release of all
allotments therefor unless there is an unmanageable national government budget deficit as per
Section 65. Once all allotments have been released, however, there arises the power of the
President under Section 38 to suspend or to permanently stop expenditure, if public interest so
requires, relative to the appropriations in the GAA of the Executive Department.
And second, as aforequoted, “impoundment” is defined in Philippine Constitution
Association as the “refusal by the President, for whatever reason, to spend funds made
available by Congress.”[28] We must reasonably presume that the legislature was aware of, and
intended this meaning when it used such term in Section 64. In contrast, Section 38 provides a
clear standard for the exercise of the power of the President to permanently stop expenditure to
be valid, that is, when public interest so requires. It, thus, precludes the President from
exercising such power arbitrarily, capriciously and whimsically, or with grave abuse of discretion.
Hence, Section 38 may be read as an exception to Section 64.
The practical effects or results of the above construction may be restated and summarized as
follows:
1. The President is prohibited from impounding appropriations, through retention or
deduction, pursuant to Section 64 unless there is an unmanageable national government budget
deficit as defined in Section 65. Consequently, the President must authorize the release orders of
allotments of all appropriations in the
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GAA relative to the three great branches of government and the constitutional bodies.[29]
2. However, once the allotments have been released, the President possesses the power to
suspend or to permanently stop expenditure, relative to the appropriations of the Executive
Department, if public interest so requires, pursuant to Section 38 of the Administrative Code.
3. The power to suspend or to permanently stop expenditure, under Section 38, must comply
with the public interest standard, that is, there must be a sufficiently compelling public interest
that would justify such suspension or permanent stoppage of expenditure.
4. Because the President’s determination of the existence of public interest justifying such
suspension or permanent stoppage of expenditure enjoys the presumption of constitutionality, the
burden of proof is on the challenger to show that the public interest standard has not been met. If
brought before the courts, compliance with the public interest standard will, thus, have to be
decided on a case-to-case basis.
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[29] This interpretation of Section 64, involving the mandatory release of all allotments relative to the appropriations of
the other branches of government and constitutional bodies, is in consonance with the constitutional principles on
separation of powers and fiscal autonomy. Interestingly, these principles are expressly recognized in the 2011 GAA but do
not appear in the 2012 and 2013 GAAs. Section 69 of the 2011 GAA provides:
Sec. 69. Automatic and Regular Release of Appropriations.—Notwithstanding any provision of law to the contrary, the
appropriations authorized in this Act for the Congress of the Philippines, the Judiciary, the Civil Service Commission, the
Commission on Audit, the Commission on Elections, the Office of the Ombudsman and the Commission on Human Rights
shall be automatically and regularly released.
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As a necessary consequence of the above, the power to permanently stop expenditure under
Section 38 is not rendered inoperative by Section 64. Hence, the actions taken by the President,
pursuant to Section 38 in relation to NBC 541, as previously discussed, are valid notwithstanding
the prohibition on impoundment under Section 64.
Section 38, insofar as it allows the President to permanently stop expenditures, is a valid
legislative grant of the power of impoundment to the President.
As previously noted, Section 38, insofar as it allows the President to permanently stop
expenditures, may be treated as an effective grant of the power of impoundment by the
legislature because the permanent stoppage of expenditure effectively results in the retention or
deduction of appropriations, as the case may be. However, its nature and scope is limited in that:
(1) it only covers the appropriations of the Executive Department, and (2) it is circumscribed by
the “public interest” standard, thus, precluding an unbridled exercise of such power.
Assuming arguendo that the President has no inherent or implied power of impoundment
under the Constitution, Section 38 is valid and constitutional because it constitutes an express
legislative grant of the power of impoundment. Indeed, in Kendall v. United States,[30] the U.S.
Supreme Court categorically ruled that the President cannot countermand the act of Congress
directing the payment of claims owed to a private corporation. In so ruling, it found that the
President has no inherent or implied power to forbid the execution of laws.
However, Kendall did not involve a statutory grant of the power of impoundment. It is important
to note that while

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[30] 37 U.S. 524 (1838).
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there is no inherent or implied power of impoundment granted to the President in American

constitutional law, there exist express legislative grants of such power in the aforesaid
jurisdiction.
A helpful overview of the meaning of impoundment and its history in U.S. jurisdiction is
quoted below:

Impoundment
An action taken by the president in which he or she proposes not to spend all or part of a sum of money
appropriated by Congress.
The current rules and procedures for impoundment were created by the Congressional Budget and
Impoundment Control Act of 1974 (2 U.S.C.A. § 601 et seq.), which was passed to reform the congressional
budget process and to resolve conflicts between Congress and President RICHARD M. NIXON concerning
the power of the Executive Branch to impound funds appropriated by Congress. Past presidents, beginning
with Thomas Jefferson, had impounded funds at various times for various reasons, without instigating any
significant conflict between the executive and the legislative branches. At times, such as when the original
purpose for the money no longer existed or when money could be saved through more efficient operations,
Congress simply acquiesced to the president’s wishes. At other times, Congress or the designated recipient
of the impounded funds challenged the president’s action, and the parties negotiated until a political
settlement was reached.
Changes During the Nixon Administration
The history of accepting or resolving impoundments broke down during the Nixon administration for several
reasons. First, President Nixon impounded much greater sums than had previous presidents, proposing to
hold back between 17 and 20 percent of controllable expenditures between 1969 and 1972. Second, Nixon
used impoundments to try to fight policy initiatives that he disagreed with, attempting to terminate entire
programs by
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impounding their appropriations. Third, Nixon claimed that as president, he had the constitutional right to
impound funds appropriated by Congress, thus threatening Congress’s greatest political strength: its power
over the purse. Nixon claimed, “The Constitutional right of the President of the United States to impound
funds, and that is not to spend money, when the spending of money would mean either increasing prices or
increasing taxes for all the people — that right is absolutely clear.”
In the face of Nixon’s claim to impoundment authority and his refusal to release appropriated
funds, Congress in 1974 passed the Congressional Budget and Impoundment Control Act, which
reformed the congressional budget process and established rules and procedures for
presidential impoundment. In general, the provisions of the act were designed to curtail the power of the
president in the budget process, which had been steadily growing throughout the twentieth century.
[31] (Emphasis supplied)
The conditions and procedure through which the President may impound appropriations
under the Impoundment Control Act in U.S. jurisdiction are described as follows:
§ 44 Impoundment Control Act
Congress enacted the Congressional Budget and Impoundment Control Act of 1974. Under the Act,
whenever the President determines that all or part of any budget authority will not be required to carry out
the full objectives or scope of programs for which it is provided, or that such budget authority should be
rescinded for fiscal policy or other reasons, or whenever all or part of budget authority provided for only one
fiscal year is to be reserved from obligation for such fiscal year, the President is required to send a special
message to both houses of Congress, and any amount of budget authority pro-
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[31] http://legal-dictionary.thefreedictionary.com/impoundment, last visited on June 5, 2014.

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posed to be rescinded or that is to be reserved will be made available for obligation unless, within 45 days,
the Congress has completed action on a rescission bill rescinding all or part of the amount proposed to be
rescinded or that is to be reserved. Funds made available for obligation under such procedure may not be
proposed for rescission again. The contents of the special message are set forth in the statute.
The Impoundment Control Act of 1974 further provides that the President, the Director of the Office or
Management and Budget, the head of any department or agency of the Government, or any officer or
employee of the United States may propose a deferral of any budget authority provided for a specific purpose
or project by transmitting a special message to Congress. Deferrals are permissible only to: (1) provide for
contingencies; (2) achieve savings made possible by or through changes in requirements or greater efficiency
of operations; or (3) as specifically provided by law. Moreover, the provisions on deferrals are inapplicable to
any budget authority proposed to be rescinded or that is to be reserved as set forth in a special message.
If fund budget authority that is required to be made available for obligation is not made available, the
Comptroller General is authorized to bring a civil action to require such budget authority to be made
available for obligation. However, no such action may be brought until the expiration of 25 days of
continuous session of Congress following the date on which an explanatory statement by the Comptroller
General of the circumstances giving rise to the contemplated action has been filed with Congress.[32]
As can be seen, it is well within the powers of Congress to grant to the President the power of
impoundment. The reason for this is not difficult to discern. If Congress possesses the power of
appropriation, then it can set the conditions under

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[32] 63C Am. Jur. 2d Public Funds § 44.

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which the President may alter or modify these appropriations subject to guidelines or limitations
that Congress itself deems necessary and expedient. Admittedly, the legislative grant of the
power of impoundment in U.S. jurisdiction is more sophisticated and contains strict guidelines in
order to prevent the President from abusing such power. However, the point remains that
Congress may grant the President the power of impoundment.
For these reasons, I find that Section 38 is an express legislative grant of such power. And the
Court cannot deny the President of that power. Whether this legislative grant of the power of
impoundment under Section 38 is, however, wise or prudent is an altogether different matter. The
remedy lies with Congress to repeal or amend Section 38 in order to set more stringent
safeguards and guidelines. I will return to this important point later.
But, as it now stands, Section 38 is a valid grant of such power because, as already discussed, it
complies with the sufficiency of standard test. For we have long ruled that “public interest” is a
sufficient standard, when read in relation to the goals on effectivity, efficiency and economy in
the execution of the budget under the Administrative Code, thus, precluding a finding of undue
delegation of legislative powers.[33] Further, as previously and extensively discussed, Section 38
can be harmonized with Section 64 in that Section 38 is an exception to the general prohibition on
the power of the President to impound appropriations under Section 64. Consequently, even if we
concede that the President has no inherent or implied power of impoundment under the
Constitution, he possesses that power by virtue of Section 38 which is an express legislative grant
of the power of impoundment.
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[33] See People v. Rosenthal, 68 Phil. 328 (1939).

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The power to finally discontinue or abandon a work, activity or purpose in the GAA vis-à-vis
Section 38
At this juncture, I find it necessary to further discuss the power to finally discontinue or
abandon a work, activity or purpose in the GAA in relation to Section 38. Recall that the GAA
definition of “savings” partly provides—
[S]avings refer to portions or balances of any programmed appropriation in this Act free from any obligation
or encumbrances 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; x x x
However, the GAA does not expressly state under what conditions or standards the power to
finally discontinue or abandon a work, activity or purpose may be validly exercised. As I
previously observed, because of the silence of the GAA on this point, the standards may be found
elsewhere such as the Constitution and Administrative Code which expressly set the standards of
effectivity, efficiency and economy in the execution of the national budget. Additionally, I agree
with Justice Leonen that the “irregular, unnecessary, excessive, extravagant or unconscionable”
standards under the Constitution[34] and pertinent laws may be resorted to in delimiting this
_______________
[34] Article IX-D, Section 2(2) of the Constitution provides:
The Commission shall have exclusive authority, subject to the limitations in this Article, to define the scope of its audit
and examination, establish the techniques and methods required therefor, and promulgate accounting and auditing rules
and regulations, including those for the prevention and disallowance of irregular, unnecessary, excessive, extravagant, or
unconscionable expenditures, or uses of government funds and properties.

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power to finally discontinue or abandon a work, activity or purpose authorized under the GAA.
It should be noted, however, that the power to finally discontinue or abandon a work, activity or
purpose implicitly granted and recognized under the GAA’s definition of “savings”
is independent and separate from the power of the President to permanently stop expenditures
under Section 38 of the Administrative Code. As I previously noted, the power to finally
discontinue or abandon a work, activity or purpose under the GAA may be exercised by all heads
of offices, and not the President alone.
Why is this significant?
Because even if we were to concede that the President could not have validly ordered the
permanent stoppage of expenditure on slow-moving projects under Section 38 in relation to NBC
541, he would still possess this power under his power to finally discontinue or abandon a work,
activity or purpose under the GAA. The lack of specific standards in the GAA and the resort to
the broad standards of “effectivity, efficiency and economy” as well as the “irregular, unnecessary,
excessive, extravagant or unconscionable” standards, as aforementioned, in the Constitution and
pertinent laws permit this result. In particular, the ineffective and inefficient use of funds on
slow-moving projects would easily satisfy the aforementioned standards. From this perspective,
the GAA itself has provided for a limited grant of the power of impoundment through the power
to finally discontinue or abandon the work, activity or purpose.
The above, again, demonstrates the weaknesses of our current laws in lacking proper
procedures and safeguards in the exercise of the power to finally discontinue or abandon a work,
activity or purpose implicitly granted and recognized in the GAA, thus, opening the doors to the
abuse and misuse of such power.
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The enormous powers of the President to: (a) permanently stop expenditures under Section 38 and
(b) to finally discontinue or abandon a work, activity or purpose under the GAA definition of
“savings.”
The ramifications of the positions taken thus far in this case are wide-ranging because they
incalculably affect the powers and prerogatives of the presidency. The net effect of the views
expressed in this case is to effectively deny to the President (1) the power to permanently stop
expenditure, when public interest so requires, under Section 38, and (2) the power to finally
discontinue or abandon a work, activity or purpose implicitly granted and recognized in the GAA.
I have taken the contrary position.
With these powers, in the hands of an able and just President, much good can be accomplished.
But, in the hands of a weak or corrupt President, much damage can be wrought. Truly, we are
adjudicating here, to a large extent, the very capability of the President, as chief implementer of
the national budget, to effectively chart our nation’s destiny.
The underlying rationale of the view I take in this case is not an original one. I fall back on an
age-old axiom of constitutional law: a law cannot be declared invalid nor can a constitutional
provision be rendered inoperative because of the possibility or fear of its abuse. We do not possess
that power. For us to rule based on the possibility or fear of abuse will result in judicial tyranny
because virtually all constitutional and statutory provisions conferring powers upon agents of the
State can be abused. In the timeless words of Justice Laurel, “[t]he possibility of abuse is not an
argument against the concession of the power as there is no power that is not susceptible of
abuse.”[35]
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[35] Angara v. Electoral Commission, 63 Phil. 139, 177 (1936).
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The remedy is and has always been constant unwavering vigilance. The remedy is and
has always been to prosecute instances when the power has been abused with the full force of
the law. The remedy is and has always been to put in place sufficient safeguards, through
remedial legislation and the proper exercise of the legislative oversight powers, to prevent the
abuse and misuse of these powers while giving the holder of the power sufficient flexibility in
pursuing the common good.
The task does not belong to the courts alone. It resides in the criminal justice system. It
resides in Congress and the other governmental bodies (like the Commission on Audit) under our
system of checks and balances. And, ultimately, it resides in the moral strength, courage
and resolve of our people and nation. That alone can stop abuse of power. Not deprivation or
curtailment of powers, out of fear or passion in these turbulent times in the life of our nation,
that the laws specifically grant to the President and which serve a legitimate and vital State
interest; powers that are an essential and integral component of the design of our government in
order for it to respond to various exigencies in the pursuit of the common good.
It is noteworthy that there have been legislative efforts to redefine “savings” in the GAA. The
view has been expressed that the prevailing definition of “savings” in the GAA is highly
susceptible to abuse.[36] In this regard, information is the key, information on, among others, how
funds are spent, how savings are generated, what projects are suspended or permanently
stopped, what projects are benefitted by aug-
_______________
[36] See, for instance, House Bill No. 4992 (AN ACT DEFINING THE TERM “SAVINGS” AS USED IN THE NATIONAL BUDGET AND
PROVIDING GUIDELINES FOR ITS USE AND EXPENDITURE, AND FOR OTHER PURPOSES) introduced by Representative Lorenzo R.
Tañada III [http://www.
erintanada.com/component/content/article/19-budget-reform/240-budget-sacings-act.html, last visited May 22, 2014]
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mentations, the extent of such augmentations, and, most of all, the valid justifications for such
actions on the part of the government. The remedy lies largely with the legislature, through its
oversight functions and through remedial legislation, in making the details of, and the
justifications for all governmental actions and transactions more transparent and accessible to
the people. In fine, information is the light that will scatter the darkness where abuse of
power interminably lurks and thrives.Further, as previously noted, there is an urgent
necessity to set the proper procedures and safeguards in the exercise of the power to finally
discontinue or abandon a work, activity or purpose implicitly granted and recognized under the
GAA’s definition of “savings.”
Anent Section 38, the model followed in U.S. jurisdiction provides meaningful and useful
guidance on how the vast power to impound allotted funds granted to the President under Section
38 can be adequately limited while giving him the flexibility to pursue the common good. We
would do well to study and learn from their experience. Indubitably, there is an imperative
need to provide greater or stricter safeguards and guidelines on how or under what
conditions or limitations the vast power granted to the President under Section 38 is to
be exercised. The remedy, again, lies with the legislature in achieving the delicate balance of
preventing the abuse and misuse of the power under Section 38 while allowing the President to
pursue the common good.
The question of whether the power has been abused is entirely separate and distinct from the
question as to whether the power exists. An affirmative answer to the first gives rise to
administrative, civil and/or criminal liabilities. To the second, we need only look at our
Constitution and laws for the answer. Here, as already stated, the power is clearly and
unequivocally conferred on the President who must exercise
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it, not with an unbridled discretion, but as circumscribed by the standard of public interest.
In the case at bar, it is not disputed that the power was exercised to serve or pursue an
important and legitimate State interest albeit temporary in nature, i.e., the urgent necessity to
spur economic growth for the promotion of the general welfare. That it achieved this purpose is
also not in dispute. And while there have been claims that part of the DAP funds were
fraudulently misused or abused, such claims, if true, necessitate that the government prosecutes
the offenders with the full force of the law. But, certainly, they preclude the Court from depriving
the President of the power to permanently stop expenditures, when public interest so requires,
until and unless Section 38 is amended or repealed.
Our solemn duty is to defend and uphold the Constitution. We cannot arrogate unto ourselves
the power to repeal or amend Section 38 for this properly belongs to the legislature. We must stay
the course of constitutional supremacy. That is our sacred trust.
On the use of unreleased appropriations under the DAP
NBC 541, which was the source of savings under the DAP, categorically refers to
unobligated allotments of programmed appropriations as the sources of the savings generated
therefrom:
3.0 Coverage
3.1 These guidelines shall cover the withdrawal of unobligated allotments as of June 30, 2012 of all
national government agencies (NGAs) charged against FY 2011 Continuing Appropriation (R.A. No. 10147)
and FY 2012 Current Appropriation (R.A. No. 10155), pertaining to:
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3.1.2 Maintenance and Other Operating Expenses (MOOE) related to the implementation of programs
and projects, as well as capitalized MOOE; and
3.1.3 Personal Services corresponding to unutilized pension benefits declared as savings by the agencies
concerned based on their updated/validated list of pensioners.
3.2 The withdrawal of unobligated allotments may cover the identified programs, projects and activities of
the departments/agencies reflected in the DBM list shown as Annex A or specific programs and projects as
may be identified by the agencies. (Emphasis in the original; underline supplied)
Thus, under NBC 541, the “savings” component of the DAP was not sourced from “unreleased
appropriations,” in its strict and technical sense, but from unobligated allotments which were
already released to the various departments or agencies. The implementing executive issuance,
NBC 541, is clear and categorical, unobligated allotments (and notunreleased appropriations)
were the sources of the “savings” component of the DAP. Consequently, it does not contravene the
definition of savings under the pertinent provisions of the GAA for, precisely, an unobligated
allotment is an appropriation that is “free from any obligation or encumbrances.”
Further, to reiterate, the withdrawal of unobligated allotments in the present case should not
be taken in isolation of the reason for its withdrawal. The withdrawal was brought about by the
determination of the President that the continued implementation of slow-moving projects, under
NBC 541, is inimical to public interest because it significantly dampened economic growth. It is,
therefore, inaccurate to state that the subject unobligated allotments were indiscriminately
declared as savings considering that there was a legitimate State interest involved in ordering
their withdrawal and the
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burden of proof was on petitioners to show that such State interest failed to comply with the
“public interest” standard in Section 38. Again, petitioners failed to carry this onus. With the
permanent stoppage of expenditure on these slowing projects and, hence, their final
discontinuance or abandonment, savings were generated pursuant to the definition of “savings”
in the GAA.
On the augmentation of project, activity or program (PAP) not covered by any appropriations in
the pertinent GAAs
Preliminarily, the view has been expressed that the DAP was used to authorize the
augmentations of items in the GAA many times over their original appropriations. While the
magnitude of these supposed augmentations are, indeed, considerable, it must be recalled that
Article VI, Section 25(5) of the Constitution purposely did not set a limit, in terms of percentage,
on the power to augment of the heads of offices:
MR. SARMIENTO. I have one last question. Section 25, paragraph (5) authorizes the Chief Justice of
the Supreme Court, the Speaker of the House of Representatives, the President, the President of the Senate
to augment any item in the General Appropriations Law. Do we have a limit in terms of percentage as to
how much they should augment any item in the General Appropriations Law?
MR. AZCUNA. The limit is not in percentage but “from savings.” So it is only to the extent of their
savings.[37]
Consequently, even if Congress appropriated only one peso for a particular PAP in the
appropriations of the Executive Department, and the Executive Department, thereafter,
generated savings in the amount of P1B, it is, theoretically, possi-
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362

ble to augment the aforesaid one peso PAP appropriation with P1B. The intent to give
considerable leeway to the heads of offices in the exercise of their power to augment allows this
result.
Verily, the sheer magnitude of the augmentation, without more, is not a ground to declare it
unconstitutional. For it is possible that the huge augmentations were legitimately necessitated by
the prevailing conditions at the time of the budget execution. On the other hand, it is also
possible that the aforesaid augmentations may have breached constitutional limitations. But, in
order to establish this, the burden of proof is on the challenger to show that the huge
augmentations were done with grave abuse of discretion, such as where it was merely a veiled
attempt to defeat the legislative will as expressed in the GAA, or where there was no real or
actual deficiency in the original appropriation, or where the augmentation was motivated by
malice, ill will or to obtain illicit political concessions. Here, none of the petitioners have proved
grave abuse of discretion nor have the beneficiaries of these augmentations been properly
impleaded in order for the Court to determine the justifications for these augmentations, and
thereafter, rule on the presence or absence of grave abuse of discretion.
The Court cannot speculate or surmise, by the sheer magnitude of the augmentations, that a
constitutional breach occurred. Clear and convincing proof must be presented to nullify the
challenged executive actions because they are presumptively valid. Concededly, it is difficult to
mount such a challenge based on grave abuse of discretion, but it is not impossible. It will depend
primarily on the particular circumstances of a case, hence, as previously noted, the necessity of
remedial legislation making access to information readily available to the people relative to the
justifications on the exercise of the power to augment.
Further, assuming that the power to augment has become prone to abuse, because it is limited
only by the extent of
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actual savings, then the remedy is a constitutional amendment; or remedial legislation subjecting
the power to augment to strict conditions or guidelines as well as strict real time monitoring. Yet,
it cannot be discounted that limiting the power to augment, based on, say, a set percentage,
would unduly restrict the effectivity of this fiscal management tool. As can be seen, these issues
go into the wisdom of the subject constitutional provision which is not proper for judicial review.
As it stands, the substantial augmentations in this case, without more, cannot be declared
unconstitutional absent a clear showing of grave abuse of discretion for the necessity of such
augmentations are presumed to have been legitimate and bona fide.
In the main, with respect to the PAPs which were allegedly not covered by any appropriation
under the pertinent GAA, I find that such finding is premature on due process grounds. In
particular, it appears that the Solicitor General was not given an opportunity to be heard relative
to the alleged lack of appropriation cover of the DOST’s DREAM project and the augmentation to
the DOST-PCIEETRD because these were culled from the entries in the evidence packets
submitted by the Solicitor General to the Court in the course of the oral arguments of this case. I
find that the proper procedure is to contest the entries in the evidence packets in a proper case
filed for that purpose where the government is given an opportunity to be heard.
Also, with respect to the augmentations relative to the DOST-PCIEETRD, aside from
prematurity on due process grounds as aforediscussed, I note that the GAA purposely describes
items, in certain instances, in general or broad language. Thus, a new activity may be subsumed
in an item, like “Research and Management Services,” for as long as it is reasonably connected to
such item. Again, whether this was the case here is something that should be litigated, if the
parties are so minded, in a proper case, in order to give the DOST an opportunity to be heard.
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On cross-border transfer of savings

The Solicitor General admits[38] that the President made available to the Commission on
Audit (COA), House of Representatives and Commission on Elections (Comelec) a portion of the
savings of the Executive Department in order to address certain exigencies, to wit:
1. The COA requested for funds to implement an infrastructure program and to strengthen its
regulatory capabilities;
2. The House of Representatives requested for funds to complete the construction of its e-
library in order to prevent the deterioration of the work already done on the aforesaid project;
and
3. The Comelec requested for funds to augment its budget for the purchase of the Precinct
Count Optical Scan (PCOS) machines for the May 2013 elections to avert a return to the manual
counting system.
The Solicitor General presents an interesting argument to justify these cross-border transfers.
He claims that the power to augment, under Article VI, Section 25(5) of the Constitution, merely
prohibits unilateral inter-departmental transfer of savings. In the above cases, the other
department or constitutional commission requested for the funds, thus, they are not covered by
this constitutional prohibition. Moreover, once the funds were given, the President had no say as
to how the funds were going to be used.
The theory is novel but untenable.
Article VI, Section 25(5) clearly prohibits cross-border transfer of savings regardless of
whether the recipient office requested for the funds. For if we uphold the Solicitor General’s
theory, nothing will prevent the other heads of offices from subsequently flooding the Executive
Department with
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[38] Memorandum for the Solicitor General, p. 35.

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requests for additional funds. This would spawn the evil that the subject constitutional provision
precisely seeks to prevent because it would make the other offices beholden to the Executive
Department in view of the funds they received. It would, thus, undermine the principle of
separation of powers and the system of checks and balances under our plan of government.
The Solicitor General further argues that the aforesaid transfers were rare and far between,
and, more importantly, they were necessitated by exigent circumstances. Thus, it would have
been impracticable to wait for Congress to pass a supplemental budget to address the aforesaid
exigencies.
I disagree for the following reasons.
First, Article VI, Section 25(5) is clear, categorical and absolute. It admits of no exception. The
lack of means and time to pass a supplemental budget is not an exception to the rule prohibiting
the cross-border transfer of savings from one branch or constitutional body to another branch or
constitutional body. (Parenthetically, it was not even clearly demonstrated that it was
impracticable to pass a supplemental budget or that the reasons for not resorting to the passage
of a supplemental budget to address the aforesaid exigencies was not due to the fault or
negligence of the concerned government agencies.)
Second, the Court cannot allow a relaxation of the rule in Article VI, Section 25(5) on the
pretext of extreme urgency and/or exigency for this would invite intermittent violations of this
rule, which is intended to preserve and protect the integrity and independence of the three great
branches of government as well as the constitutional bodies. The constitutional value at stake is
one of a high order that cannot and should not be perfunctorily disregarded.
Third, the power to make appropriations is constitutionally vested in Congress; the Executive
Department cannot usurp or circumvent this power by transferring its savings to an-
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other branch or constitutional body. It must follow the procedure laid down in the Constitution
for the passage of a supplemental budget if it so desires to aid or help another branch or
constitutional body which is in dire need of funds. The assumption is that Congress will see for
itself the extreme urgency and necessity of passing such a supplemental budget and there is no
reason to assume that Congress will not swiftly and decisively act, if the circumstances warrant.
Fourth, even if we assume that grave consequences would have befallen our people and nation
had the aforesaid cross-border transfers of savings not been undertaken because a supplemental
budget would not have been timely passed to address such exigencies, still, this would not justify
the relaxation of the rule under Article VI, Section 25(5). The possibility of not being able to pass
a supplemental budget to timely and adequately address certain exigencies is one of the
unavoidable risks or costs of this mechanism adopted under our plan of government. If grave
consequences should befall our people and nation as a result thereof, the people themselves must
hold our government officials accountable for the failure to timely pass a supplemental budget, if
done with malice or negligence, should such be the case. The ballot and/or the filing of
administrative, civil or criminal cases are the constitutionally designed remedies in such a case.
In the final analysis, until and unless the absolute prohibition on cross-border transfer of
savings in our Constitution is amended, we must follow its letter, and any deviation therefrom
must necessarily suffer from the vice of unconstitutionality. For these reasons, I find that the
three aforesaid transfers of savings are unconstitutional.
On the Unprogrammed Fund
I do not subscribe to the view that there was an unlawful release of the Unprogrammed Fund
through the DAP. The reason given for this view is that the government was not able
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to show that revenue collections exceeded the original revenue targets submitted by the
President to Congress relative to the 2011, 2012 and 2013 GAAs.
I find that the resolution of the issue, as to whether the release of the Unprogrammed Fund
under the DAP is unlawful, is premature.
The Unprogrammed Fund provisions under the 2011, 2012 and 2013 GAAs, respectively,
state:
2011 GAA (Article XLV):
programmed appropriations for the year: PROVIDED, That collections arising from sources not
considered in the aforesaid original revenue targets may be used to cover releases from
appropriations in this Fund: PROVIDED, FURTHER, That in case of newly approved loans for
foreign-assisted projects, the existence of a perfected loan agreement for the purpose shall be
sufficient basis for the issuance of a SARO covering the loan proceeds: PROVIDED,
FURTHERMORE, That if there are savings generated from the programmed appropriations for
the first two quarters of the year, the DBM may, subject to the approval of the President release
the pertinent appropriations under the Unprogrammed Fund corresponding to only fifty
percent (50%) of the said savings net of revenue shortfall: PROVIDED, FINALLY, That the
release of the balance of the total savings from programmed appropriations for the year shall be
subject to fiscal programming and approval of the President.
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2012 GAA (Article XLVI)

Congress pursuant to Section 22, Article VII of the Constitution: PROVIDED, That collections arising
from sources not considered in the aforesaid original revenue targets may be used to cover
releases from appropriations in this Fund: PROVIDED, FURTHER, That in case of newly
approved loans for foreign-assisted projects, the existence of a perfected loan agreement for the
purpose shall be sufficient basis for the issuance of a SARO covering the loan proceeds.
sources not considered in the original revenue targets, as certified by the Btr: PROVIDED, That in
case of newly approved loans for foreign-assisted projects, the existence of a perfected loan
agreement for the purpose shall be sufficient basis for the issuance of a SARO covering the loan
proceeds.(Emphasis supplied)
As may be gleaned from the aforequoted provisions, in the 2011 GAA, there are
three provisos, to wit:
1. PROVIDED, That collections arising from sources not considered in the aforesaid original revenue
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targets may be used to cover releases from appropriations in this Fund,

2. PROVIDED, FURTHER, That in case of newly approved loans for foreign-assisted projects, the
existence of a perfected loan agreement for the purpose shall be sufficient basis for the issuance of a SARO
covering the loan proceeds,
3. PROVIDED, FURTHERMORE, That if there are savings generated from the programmed
appropriations for the first two quarters of the year, the DBM may, subject to the approval of the President,
release the pertinent appropriations under the Unprogrammed Fund corresponding to only fifty percent
(50%) of the said savings net of revenue shortfall: PROVIDED, FINALLY, That the release of the balance of
the total savings from programmed appropriations for the year shall be subject to fiscal programming and
approval of the President.[39]
In the 2012 GAA, there are two provisos, to wit:
1. PROVIDED, That collections arising from sources not considered in the aforesaid original revenue
targets may be used to cover releases from appropriations in this Fund;
2. PROVIDED, FURTHER, That in case of newly approved loans for foreign-assisted projects, the
existence of a perfected loan agreement for the purpose shall be sufficient basis for the issuance of a SARO
covering the loan proceeds.
And, in the 2013 GAA, there is one proviso, to wit:
1. PROVIDED, That in case of newly approved loans for foreign-assisted projects, the existence of a
perfected loan agreement for the purpose shall be sufficient
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[39] The last two provisos in the 2011 GAA may be lumped together because they are interrelated.
370

basis for the issuance of a SARO covering the loan proceeds.
These provisos should be reasonably construed as exceptions to the general rule that revenue

collections should exceed the original revenue targets because of the plain meaning of the word
“provided” and the tenor of the wording of these provisos. Further, in both the 2011 and 2012
GAA provisions, the phrase “may be used to cover releases from appropriations in this Fund” in
the first proviso is essentially of the same meaning as the phrase “shall be sufficient basis for the
issuance of a SARO covering the loan proceeds” in the second proviso because, precisely, the
SARO is the authority to incur obligations. In other words, both phrases pertain to the
authorization to release funds under the Unprogrammed Fund when the conditions therein are
met even if revenue collections do not exceed the original revenue targets.
I now discuss the above provisos in greater detail.
The first proviso, found in both the 2011 and 2012 GAAs, states that “collections arising from
sources not considered in the aforesaid original revenue targets may be used to cover releases
from appropriations in this Fund.”[40] As previously discussed, a reasonable interpretation of
this proviso signifies that, even if the revenue collections do not exceed the original revenue targets,
funds from the Unprogrammed Fund can still be released to the extent of the collections from
sources not considered in the original revenue targets. Why does the law permit this exception?
The national budget follows a matching process: revenue targets are matched with the
proposed expenditure level. Revenue targets are the expected level of revenue collections for a
given year. These targets are made based on previously identified and expected sources of
revenues like taxes, fees or charges to be collected by the government. By providing for
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this proviso, the law recognizes that revenues may be generated from sources not considered in
the original budget preparation and planning. These revenues from unexpected sources then
become the funding for the items under the Unprogrammed Fund.
But why does the law not require that these revenues from unexpected sources be first used for
the programmed appropriations if the circumstances warrant (such as when there is a budget
deficit)?
The rationale seems to be that Congress expects the Executive Department to meet the needed
revenue, based on the identified sources of the original revenue targets, in order to fund its
programmed appropriations for the given year so much so that revenues from unexpected sources
are not to be used for programmed appropriations and are, instead, reserved for items under the
Unprogrammed Fund. If the Executive Department fails to achieve the original revenue targets
for that year from expected sources, then it suffers the consequences by having inadequate funds
to fully implement the programmed appropriations. In other words, the proviso is a disincentive
to the Executive Department to rely on revenues from unexpected sources to fund its programmed
appropriations. Verily, the Court cannot look into the wisdom of this system; it can only interpret
and apply what it clearly provides. It may be noted though that in the 2013 GAA, the
subject proviso has been omitted altogether, perhaps, in recognition of the possible ill effects of
this proviso because it effectively allows the release of the Unprogrammed Fund even if there is a
budget deficit (i.e., when revenue collections do not exceed the original revenue targets).
I now turn to the next proviso, found in the 2011, 2012 and 2013 GAAs, which states that “in
case of newly approved loans for foreign-assisted projects, the existence of a perfected loan
agreement for the purpose shall be sufficient basis for the issuance of a SARO covering the loan
proceeds.” This proviso, again, permits the release of funds from the Unpro-
372

grammed Fund, to the extent of the loan proceeds, even if the revenue collections do not exceed the
original revenue targets. Why does the law allow this exception?
One conceivable basis is that the loans may specifically provide, as a condition thereto, that
the proceeds thereof will be used to fund items under the Unprogrammed Fund categorized as
foreign-assisted projects. Again, the wisdom of this proviso is beyond judicial review.
The last proviso, found only in the 2011 GAA, states that “if there are savings generated from
the programmed appropriations for the first two quarters of the year, the DBM may, subject to
the approval of the President release the pertinent appropriations under the Unprogrammed
Fund corresponding to only fifty percent (50%) of the said savings net of revenue shortfall.” Here,
again, is another exception to the general rule that funds from the Unprogrammed Fund can only
be released if revenue collections exceed the original revenue targets. Whether these conditions
were met and whether funds from the Unprogrammed Fund were released pursuant thereto are
matters that were not squarely and specifically litigated in this case.
Based on the foregoing, it is erroneous and premature to rule that the Executive Department
made unlawful releases from the Unprogrammed Fund of the 2011, 2012 and 2013 GAAs merely
because the DBM was unable to submit a certification that the revenue collections exceeded the
original revenue targets for these years considering that the funds so released may have been
authorized under the aforediscussed provisos or exception clauses of the respective GAAs.
It may also be noted that the 2013 GAA states—

2013 (Article XLV)
1. Release of Fund. The amounts authorized herein shall be released only when the revenue collections
exceed the original revenue targets submitted by the President of the Philippines to Congress pursu-
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ant to Section 22, Article VII of the Constitution, including collections arising from sources not
considered in the original revenue targets, as certified by the Btr: PROVIDED, That in case of newly
approved loans for foreign-assisted projects, the existence of a perfected loan agreement for the purpose
shall be sufficient basis for the issuance of a SARO covering the loan proceeds. (Emphasis supplied)
Under the 2013 GAA, the condition, therefore, which will trigger the release of the funds from the
Unprogrammed Fund, as a general rule, is that the revenue collections, including collections
arising from sources not considered in the original revenue targets, exceed the original revenue
targets, and not revenue collections exceed the original revenue targets.
In view of the foregoing, a becoming respect to a coequal branch of government should prompt
us to defer judgment on this issue for at least three reasons:
First, as aforediscussed, funds from the Unprogrammed Fund can be lawfully released even if
revenue collections do not exceed the original revenue targets provided they fall within the
applicable provisos or exception clauses in the relevant GAAs. Hence, the failure of the DBM to
submit certifications, as directed by the Court, showing that revenue collections exceed the
original revenue targets relative to the 2011, 2012 and 2013 GAAs does not conclusively
demonstrate that there were unlawful releases from the Unprogrammed Fund.
Second, while the Solicitor General did not submit the certifications showing that revenue
collections exceed the original revenue targets relative to the 2011, 2012 and 2013 GAAs, he did
submit certifications showing that, for various periods in 2011 to 2013, the actual dividend
income received by the National Government exceeded the programmed dividend income as well
as income from the sale of the right to
374

build and operate the NAIA expressway.[41] However, the Solicitor General did not explain why
these certifications justify the release of funds under the Unprogrammed Fund.
Be that as it may, the certifications imply or seem to suggest that the Executive Department is
invoking the proviso “That collections arising from sources not considered in the aforesaid
original revenue targets may be used to cover releases from appropriations in this Fund” to
justify the release of funds under the Unprogrammed Fund considering that these dividend
incomes and income from the aforesaid sale of the right to build and operate are in excess or
outside the
_______________
[41] A. March 4, 2011 Certification signed by Gil S. Beltran, Undersecretary of the Department of Finance:
This is to certify that under the Budget for Expenditures and Sources of Financing for 2011, the programmed income from
dividends from shares of stock in government-owned and controlled corporations is P5.5 billion.
This is to certify further that based on the records of the Bureau of Treasury, the National Government has recorded
dividend income amount of P23.8 billion as of 31 January 2011.
B. April 26, 2012 Certification signed by Roberto B. Tan, Treasurer of the Philippines:
This is to certify that the actual dividend collections remitted to the National Government for the period January to
March 2012 amount to P19.419 billion compared to the full year program of P5.5 billion for 2012.
C. July 3, 2013 Certification signed by Rosalia V. De Leon, Treasurer of the Philippines:
This is to certify that the actual dividend collections remitted to the National Government for the period January to May
2013 amounted to P12.438 billion compared to the full year program of P10.0 billion for 2013.
Moreover, the National Government accounted for the sale of right to build and operate the NAIA expressway amounting
to P11.0 billion in June 2013.
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scope of the programmed dividends or revenues. However, I find it premature to make a ruling to
uphold this proposition.
It is not sufficient to establish that these revenues are in excess or outside the scope of the
programmed dividends or revenues but rather, it must be shown that these collections arose from
sources not considered in the original revenue targets. It must first be established what sources
were considered in the original revenue targets and what sources were not before we can
determine whether these collections fall within the subject proviso. These preconditions have not
been duly established in a proper case where factual litigation is permitted.
Thus, while I find that the failure of the DBM to submit the aforesaid certifications, showing
that revenue collections exceed the original revenue targets relative to the 2011, 2012 and 2013
GAAs, does not conclusively demonstrate that there were unlawful releases from the
Unprogrammed Fund, I equally find that the certifications submitted by the Solicitor General to
be inadequate to rule that the releases from the Unprogrammed Fund were lawful.
Third, and more important and decisive, much of the difficulty in resolving this issue, as already
apparent from the previous points, arose from the unusual way this issue was litigated before us.
Whether the Executive Department can validly invoke the general rule or exceptions to the
release of funds under the Unprogrammed Fund necessarily involves factual matters that were
attempted to be litigated before this Court in the course of the oral arguments of this case. This is
improper not only because this Court is not a trier of facts but also because petitioners were
effectively prevented from controverting the authenticity and veracity of the documentary
evidence submitted by the Solicitor General. It would not have mattered if the facts in dispute
were admitted, like the aforediscussed cross-border transfers of savings, but on this particular
issue on the Unprogrammed Fund, the facts remain in dispute and inadequate to establish that
the general
376

rule and exceptions were not complied with. Consequently, it is improper for us to resolve this
issue, in this manner, considering that: (1) the issue is highly factual which should first be
brought before the proper court or tribunal, (2) the factual matters have not been adequately
established by both parties in order for the Court to properly rule thereon, and (3) the
indispensable parties, such as the Bureau of Treasury and other government bodies or agencies,
which are the custodians and generators of the requisite information, were not impleaded hereto,
hence, the authenticity and veracity of the factual data needed to resolve this issue were not
properly established. Due process requirements should not be lightly brushed aside for they are
essential to a fair and just resolution of this issue. We cannot run roughshod over fundamental
rights.
Thus, I find that the subject issue, as to whether the releases of funds from the
Unprogrammed Fund relative to the relevant GAAs were unlawful, is not yet ripe for
adjudication. The proper recourse, if the circumstances so warrant, is to establish that the
aforediscussed general rule and exceptions were not met insofar as the releases from the
Unprogrammed Fund in the 2011, 2012 and 2013 GAAs, respectively, are concerned. This should
be done in a proper case where all indispensable parties are properly impleaded. There should be
no obstacle to the acquisition of the requisite information upon the filing of the proper case
pursuant to the constitutional right to information.
In another vein, I do not subscribe to the view that the DAP utilized the Unprogrammed Fund
as a source of “savings.”
First, the Executive Department did not claim that the funds released from the
Unprogrammed Fund are “savings.” What it stated is that the funds released from the
Unprogrammed Fund were one of the sources of fundsunder the DAP. In this regard, the DBM
website states—
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C. Sourcing of Funds for DAP

1. How were funds sourced?
Funds used for programs and projects identified through DAP were sourced from savings generated by the
government, the reallocation of which is subject to the approval of the President; as well as the
Unprogrammed Fund that can be tapped when government has windfall revenue collections, e.g.,
unexpected remittance of dividends from the GOCCs and Government Financial Institutions (GFIs), sale of
government assets.[42](Emphasis supplied)
As can be seen, the Unprogrammed Fund was treated as a separate and distinct source of
funds from “savings.” Thus, the Executive Department can make use of such funds as part of the
DAP for as long as their release complied with the aforediscussed general rule or exceptions and,
as previously discussed, it has not been conclusively shown that the afore-discussed requisites
were not complied with.
Second, the Solicitor General maintains that all funds released under the DAP have a
corresponding appropriation cover. In other words, they were released pursuant to a legitimate
work, activity or purpose for which they were authorized. For their part, petitioners failed to
prove that funds from the Unprogrammed Fund were released to finance projects that did not fall
under the specific items on the GAA provision on the Unprogrammed Fund. Absent proof to the
contrary, the presumption that the funds from the Unprogrammed Fund were released by virtue
of a specific item therein must, in the meantime, prevail in consonance with the presumptive
validity of executive actions.
For these reasons, I find that there is no basis, as of yet, to rule that the Unprogrammed Fund
was unlawfully released.
_______________
[42] http://www.dbm.gov.ph/?page_id=7362, last visited May 16, 2014.
378

On Section 5.7.3 of NBC 541

Section 5.7.3 of NBC 541 provides:

xxxx
year. (Emphasis in the original)
Petitioners argue that the phrase “not considered” allows the Executive Department to
transfer the withdrawn allotments to nonexistent programs and projects in the 2012 GAA.
The Solicitor General counters that the subject phrase has technical underpinnings familiar to
the intended audience (i.e., budget bureaucrats) of the subject Circular and assures this Court
that the phrase is not intended to refer to nonexistent programs and projects in the 2012 GAA.
He further argues that the phrase “to fund priority programs and projects not considered in the
2012 budget but expected to be started or implemented during the current year” means “to fund
priority programs and projects not considered priority in the 2012 budget but expected to be
started or implemented during the current year.” Hence, the subject phrase suffers from no
constitutional infirmity.
I disagree with the Solicitor General.
Evidently, the Court cannot accept such an argument. If the meaning of a phrase would be made
to depend on the meaning in the minds of the intended audience of a challenged issuance, then
virtually no issuance can be declared unconstitutional since every party will argue that, in their
minds, the language of the challenged issuance conforms to the Constitution. Naturally, the
Court can only look into the plain meaning of the word/s of a challenged issuance. If the
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words in the subject phrase truly partake of a technical meaning that obviates constitutional
infirmity, then respondents should have pointed the Court to such relevant custom, practice or
usage with which the subject phrase should be understood rather than arguing based on a
generalized claim that in the minds of the intended audience of the subject Circular, the subject
phrase pertains to items existing in the relevant GAA.
The argument that the phrase “to fund priority programs and projects not considered in the
2012 budget” should be understood as “to fund priority programs and projects not
considered priority in the 2012 budget” is, likewise, untenable. Because if this was the intended
meaning, then the subject Circular should have simply so stated. But, as it stands, the meaning
of “not considered” is equivalent to “not included” and is, therefore, void because it allows the
augmentation, through savings, of programs and projects not found in the relevant GAA. This
clearly contravenes Article VI, Section 29(1) of the Constitution and Section 54 of the 2012 GAA,
to wit:
Section 29. (1) No money shall be paid out of the Treasury except in pursuance of an appropriation
made by law.
Section 54. x x x
Augmentation implies the existence in this Act of a program, activity, or project with an appropriation,
which upon implementation or subsequent evaluation of needed resources, is determined to be deficient. In
no case shall a nonexistent program, activity, or project, be funded by augmentation from
savings or by the use of appropriations otherwise authorized by this Act. (Emphasis supplied)
Of course, the Solicitor General impliedly argues that, despite the defective wording of Section
5.7.3 of NBC 541, no nonexistent program or project was ever funded through the
380
DAP. Whether that claim is true necessarily involves factual matters that are not proper for
adjudication before this Court. In any event, petitioners may bring suit at the proper time and
place should they establish that nonexistent programs or projects were funded through the DAP
by virtue of Section 5.7.3 of NBC 541.
On the applicability of the operative fact doctrine
I find that the operative fact doctrine is applicable to this case for the following reasons:
First, it must be recalled that, based on the preceding disquisitions, I do not find the DAP to be
wholly unconstitutional, and limit my finding of unconstitutionality to (1) Sections 5.4, 5.5 and
5.7 of NBC 541, insofar as it authorized the withdrawal of unobligated allotments from slow-
moving projects that were not finally discontinued or abandoned, (2) Section 5.7.3 of NBC 541,
insofar as it authorized the augmentation of appropriations not found in the 2012 GAA, and (3)
the three aforediscussed cross-border transfers of savings. Hence, my discussion on the
applicability of operative fact doctrine is limited to the effects of the declaration of
unconstitutionality relative to the above enumerated.
Second, indeed, the general rule is that an unconstitutional executive or legislative act is void
and inoperative; conferring no rights, imposing no duties, and affording no protection. As an
exception to this rule, the doctrine of operative fact recognizes that the existence of an executive
or legislative act, prior to a determination of its unconstitutionality, is an operative fact and may
have consequences that cannot always be ignored.[43] In other words, under this doctrine, the
challenged executive or legislative act remains unconstitutional,
_______________
[43] Planters Products, Inc. v. Fertiphil Corporation, 572 Phil. 270, 301-302; 548 SCRA 485, 516-517 (2008).

381
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but its effects may be left undisturbed as a matter of equity and fair play. It is applicable when a
declaration of unconstitutionality will impose an undue burden on those who have relied in good
faith on the invalid executive or legislative act.[44]
As a rule of equity, good faith and bad faith are of necessity relevant in determining the
applicability of this doctrine. Thus, in one case, the Court did not apply the doctrine relative to a
party who benefitted from the unconstitutional executive act because the party acted in bad faith.
[45] The good faith or bad faith of the beneficiary of the unconstitutional executive act was the one
held to be decisive.[46] The reason, of course, is that, as previously stated, the doctrine seeks to
protect the interests of those who relied in good faith on the invalid executive or legislative act.
Consequently, the point of inquiry should be the good faith or bad faith of those who benefitted
from the aforediscussed unconstitutional acts.
Third, as earlier discussed, the declaration of unconstitutionality relative to Sections 5.4, 5.5
and 5.7 as well as Section 5.7.3 of NBC 541 was premised on their defective wording. Hence,
absent proof of a slow-moving project that was not finally discontinued or abandoned but whose
unobligated allotments were partially withdrawn, or a program or project augmented through
savings which did not exist in the relevant GAA, the discussion on the applicability of the
operative fact doctrine relative thereto is premature.
Fourth, this leaves us with the question as to the applicability of the doctrine relative to the
aforesaid cross-border transfers of savings. Here, the point of inquiry, as earlier noted, must be
the good faith or bad faith of the beneficiaries of the unconstitutional executive act, specifically,
the House
_______________
[44] Id., at p. 302; p. 516.
[45] Chavez v. National Housing Authority, 557 Phil. 29, 117; 530 SCRA 235, 336 (2007), citing Chavez v. PEA, 451 Phil. 1;
403 SCRA 1 (2003).
[46] Id.
382
of Representatives, COA and Comelec. In the case at bar, there is no evidence clearly showing
that these entities acted in bad faith in requesting funds from the Executive Department which
were part of the latter’s savings or that they received the aforesaid funds knowing that these
funds came from an unconstitutional or illegal source. The lack of proof of bad faith is
understandable because this issue was never squarely raised and litigated in this case as it
developed only during the oral arguments of this case. Thus, as to these entities, the presumption
of good faith and regularity in the performance of official duties must, in the meantime, prevail.
Further, it cannot be doubted that an undue burden will be imposed on these entities which have
relied in good faith on the aforesaid invalid transfers of savings, if the operative fact doctrine is
not made to apply thereto.
Given these considerations, I find that the operative fact doctrine applies to the aforesaid
cross-border transfers of savings. Hence, the effects of the unconstitutional cross-border transfers
of savings can no longer be undone. It is hoped, however, that no constitutional breach of this
tenor will occur in the future given the clear and categorical ruling of the Court on the
unconstitutionality of cross-border transfer of savings.
Because of the various views expressed relative to the impact of the operative fact doctrine on the
potential administrative, civil and/or criminal liability of those involved in the implementation of
the DAP, I additionally state that any discussion or ruling on the aforesaid liability of the persons
who authorized and the persons who received the funds from the aforementioned
unconstitutional cross-border transfers of savings, is premature. The doctrine of operative fact is
limited to the effects of the declaration of unconstitutionality on the executive or legislative act
that is declared unconstitutional. Thus, it is improper for this Court to discuss or rule on matters
not squarely at issue or decisive in this case which affect or may affect their alleged liabilities
without giving them an
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opportunity to be heard and to raise such defenses that the law allows them in a proper case
where their liabilities are properly at issue. Due process is the bedrock principle of our
democracy. Again, we cannot run roughshod over fundamental rights.
Conclusion
I now summarize my findings by discussing the constitutional and statutory requisites for
“savings” and “augmentation” as applied to the DAP.
As stated earlier, for “savings” to arise, the following requisites must concur:
1. The appropriation must be a programmed appropriation in the GAA;
2. The appropriation must be free from any obligation or encumbrances;
3. The appropriation must still be available after the completion or final discontinuance or
abandonment of the work, activity or purpose for which the appropriation is authorized.
Relative to the DAP, these requisites were generally met because:
1. The DAP, as partially implemented by NBC 541, covers only programmed appropriations;
2. The covered appropriations refer specifically to unobligated allotments;
3. The President made a categorical determination to permanently stop the expenditure on
slow-moving projects through the withdrawal of their unobligated allotments which resulted in
the final discontinuance or abandonment thereof. The slow manner of spending on such projects
was found to be inimical to public interest in view of the vital need at the time to spur
384

economic growth through faster government spending. Thus, the power was validly exercised
pursuant to Section 38 absent clear and convincing proof to the contrary. With the final
discontinuance or abandonment of such projects, there remained a balance of the appropriation
equivalent to the amount of the unobligated allotments which may be validly considered as
savings.
As an exception to the above, I find that, because of the broad language of NBC 541, Section
5.4, 5.5 and 5.7 thereof are void insofar as they (1) allowed the withdrawal of unobligated
allotments from slow-moving projects which were not finally discontinued or abandoned, and (2)
authorized the use of such withdrawn unobligated allotments as “savings.”
On the other hand, for “augmentation” to be valid, the following requisites must be satisfied:
1. The program, activity, or project to be augmented by savings must be a program, activity, or
project in the GAA;
2. The program, activity, or project to be augmented by savings must refer to a program,
activity, or project within or under the same office from which the savings were generated;
3. Upon implementation or subsequent evaluation of needed resources, the appropriation of the
program, activity, or project to be augmented by savings must be shown to be deficient.
As applied to the DAP, these requisites were, again, generally met:
1. The DAP, as partially implemented by NBC 541, augmented projects within the GAA;
2. It augmented projects within the appropriations of the Executive Department;
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3. The acts of the Executive Department enjoy presumptive constitutionality. Section 5.5 of
NBC 541 mandates the evaluation of reports of, and consultations with the concerned
departments/agencies by the DBM to determine which projects are slow-moving and fast-moving.
The DBM enjoys the presumption of regularity in the performance of its official duties. Thus, it
may be reasonably presumed that, in the process, the determination of which fast-moving
projects required augmentation was also made. Petitioners did not prove otherwise.
As exceptions to the above, I find that: (1) the admitted cross-border transfers of savings from
the Executive Department, on the one hand, to the Commission on Audit, House of
Representatives and Commission on Elections, respectively, on the other, are void for violating
the second requisite, and (2) the phrase “to fund priority programs and projects not considered in
the 2012 budget but expected to be started or implemented during the current year” in Section
5.7.3 of NBC 541 is void for violating the first requisite.
In sum, I vote to limit the declaration of unconstitutionality to the aforediscussed for the
following reasons:
First, I am of the view that the Court should not make a broad and sweeping declaration of
unconstitutionality relative to acts or practices that were not actually proven in this case. Hence,
I limit the declaration of unconstitutionality to the three admitted cross-border transfers of
savings. To rule otherwise would transgress the actual case and controversy requirement
necessary to validly exercise the power of judicial review.
Second, I find it improper to declare the DAP unconstitutional without specifying the provisions
of the implementing issuances which transgressed the Constitution. The acts or practices
declared unconstitutional by the majority relative to the DAP are a restatement of existing
constitutional and statutory provisions on the power to augment and the defini-
386

tion of savings. These do not identify the provisions in the implementing issuances of the DAP
which allegedly violated the Constitution and pertinent laws. Again, it transgresses the actual
case and controversy requirement.
Third, I do not subscribe to the view of the majority relative to the interpretation and
application of Section 38 of the Administrative Code, and the GAA provisions on savings,
impoundment, the two-year availability for release of appropriations and the unprogrammed
fund, for reasons already extensively discussed. While I find the wording of these laws to be
highly susceptible to abuse and even unwise and imprudent, the Court has no recourse but to
interpret and apply them based on their plain meaning, and not to accord them an interpretation
that lead to absurd results or render them inoperative.
Last, I find that the remedy in this case is not solely judicial but largely legislative in that
imperative reforms are needed in, among others, the limits of Section 38, the definition of
“savings,” the transparency of the exercise of the power to augment, the safeguards and
limitations on this power, and so on. How this is to be done belongs to Congress which must
balance the State interests in curbing abuse vis-à-vis flexibility in fiscal management.
Ultimately, however, the remedy resides in the people: to press for needed reforms in the laws
that currently govern the enactment and execution of the national budget and to be vigilant in
the prosecution of those who may have fraudulently abused or misused public funds. In fine, I am
of the considered view that the abuse or misuse of the power to augment will persist if the needed
reforms in the subject laws are not promptly instituted. Hence, the necessity of calling upon the
moral strength, courage and resolve of our people and nation to address these weaknesses in our
laws which have, to a large extent, precipitated the present controversy.
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ACCORDINGLY, I vote to PARTIALLY GRANT the petitions:

The Disbursement Acceleration Program is PARTIALLY UNCONSTITUTIONAL:
1. Sections 5.4, 5.5 and 5.7 of National Budget Circular No. 541 are VOID insofar as they (1)
allowed the withdrawal of unobligated allotments from slow-moving projects which were not
finally discontinued or abandoned, and (2) authorized the use of such withdrawn unobligated
allotments as “savings” for violating the definition of “savings” under the 2011, 2012 and 2013
general appropriations acts.
2. The admitted cross-border transfers of savings from the Executive Department, on the one
hand, to the Commission on Audit, House of Representatives and Commission on Elections,
respectively, on the other, are VOID for violating Article VI, Section 25(5) of the Constitution.
3. The phrase “to fund priority programs and projects not considered in the 2012 budget but
expected to be started or implemented during the current year” in Section 5.7.3 of National
Budget Circular No. 541 is VOID for contravening Article VI, Section 29(1) of the Constitution
and Section 54 of the 2012 General Appropriations Act.
SEPARATE CONCURRING OPINION

PERLAS-BERNABE, J.:
I concur in the ponencia’s result, but find it necessary to clarify certain points surrounding the
concepts of appropriation, realignment, and augmentation in relation to the Disbursement
Acceleration** Program (DAP).
This Opinion essentially stems from perceived misconceptions in the usage of the term
“augmentation.” The actions
_______________
** As corrected.

388

and/or practices taken under the DAP should not entirely be taken as augmentations. This is
because the “withdrawal of allotments” and “pooling of funds” by the Executive Department for
realignment (in case of suspension under Section 38, infra) and/or simple utilization for projects
without sufficient funding due to fiscal deficits (in case of stoppage under Section 38, infra) is not
“augmentation” in the constitutional sense of the word. The concept of augmentation pertains to
the delegated legislative authority, conferred by law (as Section 25[5], Article VI of the 1987
Philippine Constitution [Constitution] cited below reads), to the various heads of government
to transfer appropriations within their respective offices:
(5) No law shall be passed authorizing any transfer of appropriations; however, the President, the
general appropriations law for their respective offices from savings in other items of their respective
appropriations. (Emphases supplied)
The term “appropriation” merely relates to the authority given by legislature to proper officers
to apply a distinctly specified sum from a designated fund out of the treasury in a given year for a
specific object or demand against the State. In other words, it is “nothing more than the
legislative authorization prescribed by the Constitution that money be paid out of the
Treasury.”[1] Borne from this core premise that an appropriation is essentially a legislative
concept, the process of a “transfer of appropriations” should then be understood to pertain
to changes in the legislative parameters found in selected items of appropriations,
_______________
[1] Gonzalez v. Raquiza, G.R. No. 29627, December 19, 1989, 180 SCRA 254, 260. See also Ponencia, p. 121.
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whereby the statutory value of one increases, and another decreases.

To expound, it is first essential to remember that an appropriation is basically made up of two
(2) legislative parameters, namely: (a) the amount to be spent (or, in other words, the statutory
value); and (b) the purpose for which the amount is to be spent (or, in other words, the statutory
purpose). The word “augmentation,” in common parlance, means “[t]he action or process of
making or becoming greater in size or amount.”[2] Accordingly, by the import of this word
“augmentation,” the process under Section 25(5), supra, would then connote changes in the
selected appropriation items’ statutory values, and not of its statutory purposes. As earlier
stated, augmentation would lead to the increase of the statutory value of one appropriation item,
and a decrease in another.
How does the increase and decrease of statutory values work in the process of augmentation?
The query brings us to the concept of savings.
The incremental value coming from one appropriation item to effectively and actually increase
the statutory value of another appropriation item is what Section 25(5), supra,refers to as
“savings.” The General Appropriations Acts (GAA)[3] define savings as those “portions or balances
of any programmed appropriation x x x free from any obligation or encumbrance x x x.” A
programmed appropriation item produces “portions or balances” “free from any obligation and
encumbrance” when the said item becomes defunct, thereby “freeing-up” either totally or
partially the funds initially allotted thereto. Because an appropriation item is passed at the
beginning of the year, the reality and effect of supervening events hardly figure into the initial
budget picture. According
_______________
[2] <http://www.oxforddictionaries.com/definition/english/augmentation> (last visited June 11, 2014).
[3] See General Provisions of 2011 GAA, Section 60; 2012 GAA, Section 54; and 2013 GAA, Section 53.
390

to the GAAs,[4] the following supervening events would render an appropriation item defunct: (a)
completion or final discontinuance or abandonment of the work, activity or purpose for which the
appropriation is authorized (this may happen, when, take for instance, a project, activity or
program [PAP] is determined to be illegal or involves irregular, unnecessary, excessive,
extravagant, or unconscionable expenditures or uses of government funds and properties); (b)
regarding employee compensation, vacancy of positions and leaves of absence without pay; and (c)
implementation of measures resulting in improved systems and efficiencies, thus enabling
agencies to meet and deliver required or planned targets, programs, and services. When any of
these events happen, an appropriation item — meaning, the statutory license to spend —
becomes defunct and the funds allotted therefor become idle. Envisioning this predicament, the
Constitution allows augmentation as a form of reappropriation so that the various heads of
government may, by law, work with existing but defunct items of appropriation and practically
utilize the funds allotted therefor as “savings” in order to augment another appropriation item
which has been established to be deficient — meaning, the statutory license to spend is not
enough to carry out or achieve the purposes of the PAP to be implemented or under
implementation. The requirement that an item be deficient for it to be augmented may be
gleaned from the GAA’s definition of augmentation which “implies the existence x x x of
program, activity or project with an appropriation, which upon implementation or subsequent
evaluation of needed resources, is determined to be deficient.”[5]
As earlier stated, the term “appropriation” properly refers to the statutory authority to spend.
Although practically related, said term is conceptually different from the term
_______________
[4] See Id.
[5] See Id.

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“funds” which refers to the tangible public money that are allotted, disbursed, and spent.
Appropriation is the province of Congress. The President, in full control of the executive arm of
government, in turn, implements the legislative command in the form of appropriation items
pursuant to his constitutional mandate to faithfully execute the laws.[6] The Executive
Department controls all phases of budget execution;[7] it acts according to and carries out the
directive of Congress. Hence, the constitutional mandate that “[n]o money shall be paid out of the
Treasury except in pursuance of an appropriation made by law.”[8] It is hornbook principle that
when the appropriation law is passed, the role and participation of Congress, except for the
function of legislative oversight, ends, and the Executive’s begins.[9] Based on the foregoing, it is
then clear that it is the Executive’s job to deal with the actual allotment and disbursement of
public funds, whereas Congress’ job is to pass the statutory license sanctioning the Executive’s
courses of action.
When the Executive Department exercises its power of fiscal management through, for instance,
withdrawing unobligated allotments and pooling them under Sections 38 and 39, Chapter 5, Book
VI of the Administrative Code of 1987[10] (Administrative Code), which respectively state that:
_______________
[6] See CONSTITUTION, Article VII, Section 17.
[7] “3. Budget Execution.—Tasked on the Executive, the third phase of the budget process covers the various operational
aspects of budgeting. The establishment of obligation authority ceilings, the evaluation of work and financial plans for
individual activities, the continuing review of government fiscal position, the regulation of funds releases, the
implementation of cash payment schedules, and other related activities comprise this phase of the budget cycle.”
(Guingona, Jr. v. Carague, 273 Phil. 443, 461; 196 SCRA 221, 236 [1991].)
[8] Constitution, Article VI, Section 29(1).
[9] See Belgica v. Executive Secretary, G.R. No. 208566, G.R. No. 208493 and G.R. No. 209251, November 19, 2013, 710
SCRA 1.
[10] Executive Order No. 292 (dated July 25, 1987).
392


SECTION 38. Suspension of Expenditure of Appropriations.—Except as otherwise provided in the General
Appropriations Act and whenever in his judgment the public interest so requires, the President,
upon notice to the head of office concerned, is authorized to suspend or otherwise stop further
expenditure of funds allotted for any agency, or any other expenditure authorized in the General
Appropriations Act, except for personal services appropriations used for permanent officials and employees.
SECTION 39. Authority to Use Savings in Appropriations to Cover Deficits.—Except as otherwise provided
in the General Appropriations Act, any savings in the regular appropriations authorized in the General
Appropriations Act for programs and projects of any department, office or agency, may, with the approval of
the President, be used to cover a deficit in any other item of the regular appropriations: Provided, that the
creation of new positions or increase of salaries shall not be allowed to be funded from budgetary savings
except when specifically authorized by law: Provided, further, that whenever authorized positions are
transferred from one program or project to another within the same department, office or agency, the
corresponding amounts appropriated for personal services are also deemed transferred, without, however
increasing the total outlay for personal services of the department, office or agency concerned. (Emphases
supplied)
the President acts within his sphere of authority for he is merely managing the execution of the
budget taking into account existing fiscal deficits as well as the circumstances that occur during
actual PAP implementation (the matter of fiscal deficits and implementation circumstances will
be expounded on in the succeeding discussion). However, he must always observe and comply
with existing constitutional and statutory limitations when doing so — that is, his directives in
such respect should not authorize or allow expenditures for an unappropriated purpose nor
sanction overspending or the
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VOL. 728, JULY 1, 2014 393

modification of the purpose of the appropriation item, or even the suspension or stoppage of any
expenditure without satisfying the public interest requirement, else he would be substituting his
will over that of Congress and thereby violate the separation of powers principle, not to mention,
act against his mandate to faithfully execute the laws.
An appropriation item’s statutory value is a threshold limit to spend. Meaning, the Executive
can allot, disburse, and/or spend x amount of money for x project for as long as the allotment,
disbursement or expenditure is within the value limit and only for the project provided in the
appropriation item. When the Executive implements an appropriation item, it is not always the
case that it automatically and completely allots, disburses, and spends the specified amount of
public funds to the full extent of that statutory limit. There are two reasons for this: first, the
usual existence of fiscal deficits; and, second, the present circumstances surrounding the
implementation of the PAP for which the appropriation item authorizes the Executive’s
allotment, disbursement, and expenditure of public funds. Fiscal deficits connote that not all
appropriation items are automatically matched with corresponding available funding. The
circumstances of implementation determine whether actual allotments, disbursements, and
expenditures would be needed to be made either immediately or at a later time (in case of
suspension), or not at all (in case of stoppage). Being part of budget execution, the President,
after the GAA is passed, deals with these two realities by exercising his discretion of fiscal
management which must always be consistent with his constitutional mandate to faithfully
execute the laws. In the execution of the budget, he is guided by Section 3, Chapter 2, Book VI of
the Administrative Code which states:
SECTION 3. Declaration of Policy.—It is hereby declared the policy of the State to formulate and
objectives, strategies
394

and plans. The budget shall be supportive of and consistent with the socio-economic development plan and
shall be oriented towards the achievement of explicit objectives and expected results, to ensure that funds
are utilized and operations are conducted effectively, economically and efficiently. The national budget shall
be formulated within the context of a regionalized government structure and of the totality of revenues and
other receipts, expenditures and borrowings of all levels of government and of government-owned or -
controlled corporations. The budget shall likewise be prepared within the context of the national long-term
plan and of a long-term budget program.
When conducting fiscal management through suspending and realigning expenditures under
Section 38, supra, the President is not technically “augmenting” according to Section 25(5), supra,
since he is not changing the legislative parameters of the appropriation items (through
decreasing and increasing their statutory values). This is because, despite the suspension of
expenditures and their realignment (which are matters that connote temporariness), the
legislative parameters of the appropriation items still remain the same; hence, no savings are
generated nor are savings needed. On the contrary, when he permanently stops expenditures
under Section 38, supra, in the interest of the public, he, in relation to the first GAA parameter
on completion, final discontinuance and abandonment, generates savings. The permanent
stoppage of expenditures may then be treated as a precursor act for either: (a) augmentation,
when the statutory value of the target appropriation item resultantly increases (in this case,
savings are used under Section 39, supra in relation to Section 25[5], supra, to address a
deficiency in the appropriation item itself, and not only the funds allocated therefor); or (b) for
simple utilization, when the statutory value of the target appropriation item is not increased and
the PAP covered by the said item only needs sufficient funding (in this case, savings are used
under Section 39, supra, only to ad-
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VOL. 728, JULY 1, 2014 395
dress a fiscal deficit — that is, the actual funds allocated for the item to be implemented or under
implementation were initially inadequate, which is why the funds allocated to the defunct item
[now, as savings] would be utilized for the former). Notably, the budget deliberations prior to the
GAA’s passage only account for projected revenues, and, hence, do not reflect the government’s
actual financial position throughout the course of the year. This is why when the public
interest so requires — taking cue, for instance, from the realities of fiscal deficits and
implementation circumstances — the President, under the authority of Section 38, supra, is given
the power to suspend/stop expenditures which, to stress a previous crucial point, must always
be exercised consistent with his constitutional mandate to faithfully execute the laws.
Any arbitrary or capricious exercise of the same will effectively negate Congress’ power of control
over the purse and, hence, can never be warranted.
When the President approves the wholesale withdrawal of unobligated allotments by invoking
the blanket authority of Section 38, supra, vis-à-vis the generalpolicy impetus to ramp up
government spending, without any discernible explanation behind a particular PAP
expenditure’s suspension or stoppage, or any clarification as to whether the funds withdrawn
then pooled would be used either for realignment or only to cover a fiscal deficit, or for
augmentation (in this latter case, necessitating therefor the determination of whether said funds
are savings or not), a constitutional conundrum arises. What results is a pooling of funds, from
which a multitude of executive options is opened. Under its broad context and the
government’s presentment thereof, the observation I make is that the DAP actually constitutes
an amalgam of executive actions and/or practices whereby augmentations may be undertaken,
and/or funds realigned or utilized to address fiscal deficits. Thus, with this in mind, I concur, with
the ponencia’s limited conclusion that the withdrawal of unobligated allotments not considered as
savings for the purposes of augmentation, or, despite the funds being considered as savings, the
396

augmentation of items cross-border or the funding of PAPs without an existing appropriation

cover are unconstitutional acts and/or practices taken under the DAP. I also maintain a similar
position with respect to the ponencia’s pronouncement on the Unprogrammed Fund considering
the absence of any proof that the general or exceptive conditions[11] for its use had

_______________
[11] Special Provisions, Item 1 of 2011 GAA and 2012 GAA respectively state:
1. Release of Fund. The amounts authorized herein shall be released only when the revenue collections exceed the
original revenue targets submitted by the President of the Philippines to Congress pursuant to Section 22, Article VII of
the Constitution, including savings generated from programmed appropriations for the year: PROVIDED, That collections
arising from sources not considered in the aforesaid original revenue targets may be used to cover releases from
appropriations in this Fund: PROVIDED, FURTHER, That in case of newly approved loans for foreign-assisted projects,
the existence of a perfected loan agreement for the purpose shall be sufficient basis for the issuance of a SARO covering
the loan proceeds: PROVIDED, FURTHERMORE, That if there are savings generated from the programmed
appropriations for the first two quarters of the year, the DBM may, subject to the approval of the President, release the
pertinent appropriations under the Unprogrammed Fund corresponding to only fifty percent (50%), of the said savings net
of revenue shortfall: PROVIDED, FINALLY, That the release of the balance of the total savings from programmed
appropriations for the tear shall be subject to fiscal programming and approval of the president.
1. Release of Fund. The amounts authorized herein shall be released only when the revenue collections exceed the
original revenue targets submitted by the President of the Philippines to Congress pursuant to Section 22, Article VII of
the Constitution, including savings generated from programmed appropriations for the year: PROVIDED, That collections
arising from sources not
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been duly complied with. Ultimately, notwithstanding any confusion as to the DAP’s actual
workings or the laudable intentions behind the same, the one guiding principle to which the
Executive should be respectfully minded is that no policy or program of government can be
adopted as an avenue to wrest control of the power of the purse from Congress, for to do so would
amount to a violation of the provisions on appropriation and augmentation as well as an
aberration of the faithful execution clause engraved and enshrined in our Constitution.
ACCORDINGLY, I concur with the ponencia that the following acts and/or practices taken
under the Disbursement Acceleration*** Program, implemented through National Budget
Circular No. 541 and other related executive issuances, are UNCONSTITUTIONAL:
(a) the withdrawal of unobligated allotments from the implementing agencies not considered as
savings for the purposes of augmentation, the transfer of the savings of the Executive to augment
appropriations of other offices outside the Executive, and the augmentation of items without any
existing appropriation covers to the extent that said acts and/or practices violated Section 25(5) of
the 1987 Philippine Constitution; and
(b) the use of the Unprogrammed Fund despite the absence of any proof that the general
condition for its use under the relevant GAAs, i.e., revenue collections were in excess of the
original revenue targets, was complied with, and without
considered in the aforesaid original revenue targets may be used to cover releases from appropriations in this
Fund: PROVIDED, FURTHER, That in case of newly approved loans for foreign-assisted projects, the existence of a
perfected loan agreement for the purpose shall be sufficient basis for the issuance of a SARO covering the loan proceeds.
*** As corrected.
398

any justification that the exceptive conditions for such use did concur.
CONCURRING OPINION
LEONEN, J.:
I concur in the result.
I agree that some acts and practices covered by the Disbursement Acceleration Program as
articulated in National Budget Circular No. 541 and in related executive issuances and
memoranda are unconstitutional. We declare these principles for guidance of bench and bar
considering that the petitions were mooted. The application of these principles to the 116
expenditures contained in the “evidence packet” submitted by the Solicitor General as well as the
application of the doctrine of operative fact should await proper appraisal in the proper forum.
I
Isolated from their political color and taking the required sterile juridical view, the petitions
consolidated in this case ask us to define the limits of the constitutional discretion of the
President to spend in relation to his duty to execute laws passed by Congress. Specifically, we are
asked to decide whether there has been grave abuse of discretion in the promulgation and
implementation of the Disbursement Acceleration Program (DAP).
The DAP was promulgated and implemented in response to the slowdown in economic growth
in 2011.[1]Economic growth in 2011 was within the forecasts of the National Economic
_______________
[1] The economy slowed from 7.6 percent growth in 2010 to 3.7 percent in 2011. Senate Economic Planning Office
Economic Report, March 2012, ER-12-01, p. 1 <http://www.senate.gov.ph/publications/
ER%202012-01%20-%20March%202012.pdf> (visited May 23, 2014).
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VOL. 728, JULY 1, 2014 399

Development Authority but below the growth target of 7% expected by other agencies and
organizations.[2] The Senate Economic Planning Office Report of March 2012 cited government’s
underspending, specially in infrastructure, as one of the factors that contributed to the weakened
economy.[3] This was a criticism borne during the early part of this present administration.[4]
On July 18, 2012, National Budget Circular No. 541 was issued. This circular recognized that
the spending targets were not met for the first five months of the year.[5] The reasons can be
deduced from a speech delivered by the President on October 23, 2013, wherein he said:
I remember that in 2011, I addressed you for the first time as President of the Republic. Back then, we had
to face a delicate balancing act. As we took a long hard look at the contracts and systems we inherited, and
set about to purge them of opportunities for graft, the necessary pause led to a growing demand to pump
prime the economy.[6]
_______________
[2] Senate Economic Planning Office Economic Report, March 2012, ER-12-01, p. 1
<http://www.senate.gov.ph/publications/ER%
202012-01%20-%20March%202012.pdf> (visited May 23, 2014). These agencies include the Development Budget
Coordination Committee as well as the Asian Development Bank and the World Bank.
[3] Senate Economic Planning Office Economic Report, March 2012, ER-12-01, p. 2
<http://www.senate.gov.ph/publications/ER%
202012-01%20-%20March%202012.pdf> (visited May 23, 2014).
[4] See K. J. Tan, Senators question [government] underspending in 2011, August 9, 2011
<http://www.gmanetwork.com/news/story/
228895/economy/senators-question-govt-underspending-in-2011> (visited May 23, 2014).
[5] DBM NBC No. 541 (2012), 1.0.
[6] President Benigno S. Aquino III’s Speech at the Annual Presidential Forum of the Foreign Correspondents Association
of the Philippines (FOCAP), October 23, 2013 <http://www.pcoo.gov.ph/
speeches2013/speech2013_oct23.htm> (visited May 23, 2014).
400

During the oral arguments of this case, Secretary Florencio Abad of the Department of Budget
and Management (DBM) confirmed that they discovered leakages that resulted in the weakened
capacity of agencies in implementing projects when President Aquino assumed office.[7] Spending
was hampered. Economic growth slowed down.
To address the underspending resulting from that “pause,” “measures ha[d] to be implemented to
optimize the utilization of available resources”[8] and “to accelerate spending and sustain the
fiscal targets during the year.”[9]The President authorized withdrawals from the agencies’
unobligated allotments.[10] National Budget Circular (NBC) No. 541, thus, stated its purposes as:
a. To provide the conditions and parameters on the withdrawal of unobligated allotments of
agencies as of June 30, 2012 to fund priority and/or fast-moving programs/projects of the national
government;
b. To prescribe the reports and documents to be used as bases on the withdrawal of said
unobligated allotments; and
c. To provide guidelines in the utilization or reallocation of the withdrawn allotments.[11]
The Department of Budget and Management describes the Disbursement Acceleration
Program, which petitioners associate with NBC No. 541, as “a stimulus packageunder the
Aquino administration designed to fast-track public spending and push economic
growth. This covers high-impact budgetary programs and projects which will be aug-
[7] TSN, January 28, 2014, p. 10.

[8] DBM NBC No. 541 (2012), 1.0.
[9] Id.
[10] Id.
[11] DBM NBC No. 541 (2012), 2.1-2.3.
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mented out of the savings generated during the year and additional revenue sources.”[12]
According to Secretary Abad, the Disbursement Acceleration Program “is not just about the
use of savings and unprogrammed funds, it is a package of reformed interventions to de-clog
processes, improve the absorptive capacities of agencies and mobilize funds for priority social and
economic services.”[13]
The President explained in the cited 2013 speech that the “stimulus package” was successful
in ensuring that programs delivered the greatest impact in the most efficient manner.
[14] According to the President, the stimulus package’s contribution of 1.3% percentage points to
gross domestic product (GDP) growth in the last quarter of 2011 was recognized by the World
Bank in one of its quarterly reports.[15]
The subject matter of this constitutional challenge is unique. As ably clarified in the ponencia,
the DAP is not covered by National Budget Circular No. 541 alone or by a single legal issuance.
[16] Furthermore, respondents manifested that it
_______________
[12] Frequently Asked Questions about the Disbursement Acceleration Program (DAP) <http://www.dbm.gov.ph/?
[13] TSN, January 28, 2014, p. 11.
[14] President Benigno S. Aquino III’s Speech at the Annual Presidential Forum of the Foreign Correspondents
Association of the Philippines (FOCAP), October 23, 2013 <http://www.pcoo.gov.ph/
speeches2013/speech2013_oct23.htm> (visited May 23, 2014).
[15] President Benigno S. Aquino III’s Speech at the Annual Presidential Forum of the Foreign Correspondents
Association of the Philippines (FOCAP), October 23, 2013 <http://www.pcoo.gov.ph/
speeches2013/speech2013_oct23.htm> (visited May 23, 2014); See alsoPhilippines Quarterly Update: From Stability to
Prosperity for All, March 2012 <http://www-wds.worldbank.org/external/default/
WDSContentServer/WDSP/IB/2012/06/12/000333037_20120612
011744/Rendered/PDF/698330WP0P12740ch020120FINAL0051012.pdf> (visited May 23, 2014).
[16] Ponencia, pp. 99-119.
402

has already served its purpose and is no longer being implemented.[17]

II
The Disbursement Acceleration Program (DAP) is indeed a label for a fiscal management
policy.[18]
Several activities and programs are included within this policy. To implement this policy,
several internal memoranda requesting for the declaration of savings and specific
expenditures[19] as well as the DBM’s National Budget Circular No. 541 were issued. DAP — as a
label — served to distinguish the activities of a current administration from other past fiscal
management policies.[20]
It is for this reason that we cannot make a declaration of constitutionality or
unconstitutionality of the DAP. Petitions filed with this court should be more specific in the acts
of respondents — other than the promulgation of policy and rules — alleged to have violated the
Constitution.[21] Judicial
_______________
[17] Respondents’ Memorandum, pp. 30-33.
[18] See ponencia, p. 99.
[19] Memoranda for the President dated October 12, 2011; December 12, 2011; June 25, 2012; September 4, 2012; December
19, 2012; May 20, 2013 and September 25, 2013. See ponencia, pp. 102-108.
[20] See TSN, November 19, 2013, pp. 147-148.
[21] As I have previously stated:
Generally, we are limited to an examination of the legal consequences of law as applied. This presupposes that there is a
specific act which violates a demonstrable duty on the part of the respondents. This demonstrable duty can only be
discerned when its textual anchor in the law is clear. In cases of constitutional challenges, we should be able to compare
the statutory provisions or the text of any executive issuance providing the putative basis of the questioned act vis-à-vis a
clear constitutional provision. Petitioners carry the burden of filtering events and identifying the textual basis of the acts
they wish to question before the court. This enables the respon-
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VOL. 728, JULY 1, 2014 403

review should not be wielded pursuant to political motives; rather, it is a discretion that should
be wielded with deliberation, care, and caution. Our pronouncements should be narrowly tailored
to the facts of the case to ensure that we do not unduly transgress into the province of the other
departments.[22] Ex facto jus oritur. Law arises only from facts.
III
We also run into several technical problems that can cause inadvisable precedents should we
proceed to make declarations on DBM NBC No. 541 alone.
First, this circular is addressed to agencies and meant to define the procedures for adopting
and achieving operational efficiency in government.[23] Hence, it is a set of rules internal to the
executive. Our jurisdiction begins only when these rules are the basis for actual expenditure of
funds. Even so, the petitions that were filed with us should specify which
_______________
dents to tender a proper traverse on the alleged factual background and the legal issues that should be resolved.
Petitions filed with this Court are not political manifestos. They are pleadings that raise important legal and
constitutional issues.
Anything short of this empowers this Court beyond the limitations defined in the Constitution. It invites us to use our
judgment to choose which law or legal provision to tackle. We become one of the party’s advisers defeating the necessary
character of neutrality and objectivity that are some of the many characteristics of this Court’s legitimacy.—J. Leonen’s
Concurring Opinion in Belgica v. Hon. Secretary Paquito N. Ochoa, Jr., G.R. No. 208566, November 19, 2013, 710 SCRA 1,
275-276 [Per J. Perlas-Bernabe, En Banc].
[22] Dissenting Opinion of J. Leonen in Imbong v. Ochoa, Jr., G.R. No. 204819, April 8, 2014, 721 SCRA 146, 731 and 736
[Per J. Mendoza, En Banc].
[23] DBM NBC No. 541 (2012), 3.0-3.2, 5.0-5.2.
404

expenditures should be appraised in relation to existing law and the Constitution.[24]

Second, there are laudable provisions in this circular that are not subject to controversy. These
include the exhortation that government agencies should effectively and efficiently use their
funds within the soonest possible time so that they become relevant to the purposes for which
they had been allotted.[25] To declare the whole of the circular unconstitutional confuses and
detracts from the constitutional commitment that we should use our power of judicial review
cautiously and effectively. We have to wield our powers deliberately but with precision. Narrowly
tailored constitutional doctrines are better guides to future behavior. These doctrines will not
stifle innovative and creative approaches to good governance.
Third, on its face, the circular covers only appropriations in fiscal years 2011 and 2012.
[26] However, from the “evidence packets” which were submitted by the Solicitor General, there
were expenditures pertaining to the DAP even after the expiration of the circular. Any blanket
declaration of constitutionality of this circular, therefore, will be misdirected.
IV
In the spirit of deliberate precision, I agree with the ponencia’s efforts to clearly demarcate the
discretion granted by the Constitution to the legislature and the executive. I add some
qualifications.
The budget process in the ponencia is descriptive,[27] not normative. That is, it reflects what is
happening. It should
_______________
[25] DBM NBC No. 541 (2012), 1.0, 2.0, 5.2-5.8.
[26] DBM NBC No. 541 (2012), 3.1.
[27] Ponencia, pp. 87-98.
405
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not be taken as our agreement that the present process is fully compliant with the Constitution.
For instance, I am of the firm view that the treatment of departments and offices granted
fiscal autonomy should be different.[28] Levels of fiscal autonomy among various constitutional
organs can be different.[29]
For example, the constitutional protection granted to the judiciary is such that its budget
cannot be diminished below the amount appropriated during the previous year.[30] Yet, we
submit our items for expenditure to the executive through the DBM year in and year out. This
should be only for advice and accountability; not for approval.
In the proper case, we should declare that this constitutional provision on fiscal autonomy
means that the budget for the judiciary should be a lump sum corresponding to the amount
appropriated during the previous year.[31] This may mean that as a proportion of the national
budget and in its absolute amount, the judiciary’s budget cannot be reduced. Any additional
appropriation for the judiciary should cover only new items for amounts greater than what have
already been constitutionally appropriated. Public accountability on our expenditures will be
achieved through a resolution of the Supreme Court En Banc detailing the items for expenditure
corresponding to that amount.
The ponencia may inadvertently marginalize this possible view of how the Constitution
requires the judiciary’s budget to be prepared. It will also make it difficult for us to further define
fiscal autonomy as constitutionally or legally mandated for the other constitutional offices.
_______________
[28] See for example, CONST., Art. VIII, Sec. 3, Art. IX-A, Sec. 5, Art. XI, Sec. 14, and Art. XIII, Sec. 17(4).
[29] Id.
[30] CONST., Art. VIII, Sec. 3.
[31] Id.
406

With respect to the discretions in relation to budget execution: The legislature has the
power to authorize a maximum amount to spend per item,[32] and the executive has the
power to spend for the item up to the amount limited in the appropriations act.[33] The
metaphor that Congress has “the power of the purse” does not fully capture this distinction. It
only captures part of the dynamic between the executive and the legislature.
Any expenditure beyond the maximum amount provided for the item in the appropriations act is
an augmentation of that item.[34] It amounts to a transfer of appropriation. This is generally
prohibited except for instances when “upon implementation or subsequent evaluation of needed
resources, [the appropriation for a program, activity or project existing in the General
Appropriations Act] is determined to be deficient.”[35]
_______________
[32] CONST., Art. VI, Sec. 24, 25(5), and 29.
[33] CONST., Art. VII, Sec. 1.
[34] CONST., Art. VI, Sec. 25(5).
[35] General Appropriations Act (2012), Sec. 54.
Augmentation implies the existence in this Act of a program, activity, or project with an appropriation, which upon
implementation or subsequent evaluation of needed resources, is determined to be deficient. In no case shall a nonexistent
program, activity or project, be funded by augmentation from savings or by the use of appropriations otherwise authorized
in this Act.
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In which case, all the conditions provided in Article VI, Section 25(5) of the Constitution must
first be met.
The limits defined in this case only pertain to the power of the President — and by implication,
other constitutional offices — to augment items of appropriation. There is also the power of the
President to realign allocations of funds to another item — without augmenting that item —
whenever revenues are insufficient in order to meet the priorities of government.
V
The President’s power or discretion to spend up to the limits provided by law is inherent in
executive power. It is essential to his exercise of his constitutional duty to “ensure that the laws
be faithfully executed”[36] and his constitutional prerogative to “have control of all the executive
departments.”[37]
The legislative authority to spend up to a certain amount for a specific item does not mean
that the President must spend that full amount. The President can spend less due to efficiency.
[38] He may also recall any allocation of unobligated funds to control an executive agency.[39] The
expenditure may turn out to be irregular, extravagant, unnecessary, or illegal.[40] It is always
possible that there are contemporary circumstances that would lead to these irregularities that
could not have been seen by Congress.
_______________
See also GENERAL APPROPRIATIONS ACT (2013), Section 53, and GENERAL APPROPRIATIONS ACT (2011), Section 60.
[37] Id.
[38] See EXECUTIVE ORDER NO. 292, Book VI, Chapter 2, Section 3.
[39] EXECUTIVE ORDER NO. 292, Book VI, Chapter 5, Section 38; CONST., Art. VII, Sec. 17.
[40] See Presidential Decree No. 1445 (1978), Sec. 33; Government Accounting and Auditing Manual, Vol. I, Book III, Title
3, Art. 2, Sec. 162.
408

Congress authorizes a budget predicting the needs for an entire fiscal year.[41] But the
President must execute that budget based on the realities that he encounters.
Parenthetically, because of the constitutional principle of independence, the power to spend is
also granted to the judiciary.[42] The President does not have the discretion to withhold any
amount pertaining to the judiciary. The Constitution requires that all appropriations for it shall
be “automatically and regularly released.”[43] The President’s power to implement the
laws[44] and the existence of provisions on automatic and regular release of appropriations[45] of
independent constitutional branches and bodies support the concept that the President’s
discretion to spend up to the amount allowed in the appropriations act inherent in executive
power is exclusively for offices within his department.
VI
Congress appropriates based on projected revenues for the fiscal year.[46] Not all revenues are
available at the beginning of the year. The budget is planned, and the General Appropriations
Act (GAA) is enacted, before the actual generation and collection of government funds. Revenue
collection happens all throughout the year. Taxes and fees, for instance, still need to be
generated.
_______________
[41] EXECUTIVE ORDER NO. 292, Book VI, Chap. 2, Sec. 4.
[43] Id.
[44] Supra note 33.
[45] Supra note 28.
409
VOL. 728, JULY 1, 2014 409

The appropriations act is promulgated, therefore, on the basis of hypothetical revenues of

government in the coming fiscal year. While hypothetical, it is the best educated, economic, and
political collective guess of the President and Congress.
Projected expenditures may not be equal to what will actually be collected. Hence, there is no
prohibition from enacting budgets that may result in a deficit spending. There is no requirement
in the Constitution that Congress pass only balanced budgets.[47]
Ever since John Maynard Keynes introduced his theories of macroeconomic accounts,
governments have accepted that a certain degree of deficit spending (more expenditures than
income) is acceptable to achieve economic growth that will also meet the needs of an increasing
population.[48]The dominant economic paradigm is that developmental goals cannot be achieved
without economic growth,[49] i.e., that the amount of products and services available are greater
than that measured in the prior years.
Economic growth is dependent on many things.[50] It is also the result of government
expenditures.[51] The more that the
_______________
[47] Total projected revenues equals expenditures, thus, the concept of “unprogrammed funds.”
[48] See John Maynard Keynes, THE GENERAL THEORY OF EMPLOYMENT, INTEREST, AND MONEY (1935). For a comparison on the
Keynesian model with alternate models, see also B. Douglas Bernheim, A NEOCLASSICAL PERSPECTIVE ON BUDGET DEFICITS, 3
Journal of Economic Perspectives 55 (1989).
[49] See also D. Perkins, et al., ECONOMICS OF DEVELOPMENT,
p. 60, 6th ed., (2006). There are, however, opinions that it is possible to develop with zero growth. See also Daly, Herman
E., BEYOND GROWTH: THE ECONOMICS OF SUSTAINABLE DEVELOPMENT (1997), but this is not the economic theory adopted by our
budget calls.
[50] The macroeconomic formula is Y = C + I + G + (X-M). Y is income. C is personal consumption. I is Investment. G is
government expenditures. X is exports. M is imports.
410
government spends, the more that businesses and individuals are able to raise revenues from
their transactions related to these expenditures.[52] The monies paid to contractors in public
infrastructure projects will also be used to allow these contractors to purchase materials and
equipment as well as to pay their workers.[53] These workers will use their income to purchase
services and products and so on.[54] The possibility that value will be used to create more value is
what makes the economy grow.
Theoretically, the more the economy grows, the more that government is able to collect in the
form of taxes and fees.
It is necessary for the government to be able to identify the different factors limiting the
impact of expenditures on economic growth.[55] It is also necessary that it makes the necessary
adjustments consistent with the country’s short-term and long-term goals.[56] The government
must be capable of making its own priorities so that resources could be shifted in accordance with
the country’s actual needs.
Thus, it makes sense for economic managers to recommend that government expenditures be
used efficiently: Scarce resources must be used for the project that will have the most impact at the
soonest time. While Congress contributes by putting the frame through the Appropriations Act,
actual economic impact will be decided by the executive who attends to present needs.
_______________
[51] Id.
[52] See John Maynard Keynes, THE GENERAL THEORY OF EMPLOYMENT, INTEREST, AND MONEY (1935), Chapter 10: The
Marginal Propensity to Consume and the Multiplier.
[53] Id.
[54] Id.
[55] See EXECUTIVE ORDER NO. 292, Book VI, Chapter 3, Section 12(1).
[56] See EXECUTIVE ORDER NO. 292, Book VI, Chapter 2, Sections 3-4.
411
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The executive may aim for better distribution of income among the population or, simply, more
efficient ways to build physical and social infrastructure so that prosperity thrives. Certainly,
good economic management on the part of our government officials means being concerned about
projects or activities that do not progress in accordance with measured expectations. At the
beginning of the year or at some regular intervals, the executive should decide on resource
allocations reviewing prior ones so as to achieve the degree of economic efficiency required by
good governance.[57] These allocations are authorities to start the process of obligation. To
obligate means the process of entering into contract for the expenditure of public money.[58]
However, disbursement of funds is not automatic upon allocation or allotment. There are
procurement laws to contend with.[59] Funds are disbursed only after the government enters into
a contract, and a notice of cash allocation is issued.[60]
At any time before disbursement of funds, the President may again deal with contingencies.
Inherent in executive power is also the necessary power for the President to decide on priorities
without violating the law. How and when the President reviews these priorities are within his
discretion. The Constitution should not be viewed with such awkward academic restrictions that
will constrain, in practice, the ability of the President to respond. Constitutional interpreta-
_______________
[58] See Budget Advocacy Project, Philippine Governance Forum, Department of Budget and Management, Frequently
Asked Questions: National Government Budget 13 (2002); Budget Execution
http://budgetngbayan.com/budget-101/budget-execution/ (visited May 9, 2014).
[59] See for example REPUBLIC ACT NO. 9184, GOVERNMENT PROCUREMENT REFORM ACT (2002).
[60] Budget Execution <http://budgetngbayan.com/budget-101/
budget-execution/> (visited May 9, 2014).
412

tion may be complex, but it is not unreasonable. It should always be relevant.
Congress has the constitutional authority to determine the maximum levels of expenditures
per item in the budget.[61] It is not Congress, however, that decides when and how, in fact, the
resources are to be actually spent. Congress cannot do so because it is a collective deliberative
body designed to create policy through laws.[62] It cannot and does not implement the law.
[63] Parenthetically, this was one of the principal reasons why we declared the Priority
Development Assistance Fund (PDAF) as unconstitutional.[64]
Since the President attends to realities and decides according to priorities, our constitutional
design is to grant him the flexibility to make these decisions subject to clear legal limitations.
Hence, changes in the allotment of funds are not prohibited transfers of appropriations if these
changes are still consistent with the maximum allowances under the GAA. They are merely
manifestations of changing priorities in the use of funds. They are still in line with the
President’s duty to implement the General Appropriations Act.
Thus, if revenues have not been fully collected at a certain time but there is a need to fully
spend for an item authorized in the appropriations act, the President should be able to move the
funds from an agency, which is not effectively and efficiently using its allocation, to another
agency. This is the concept of realignment of funds as differentiated from augmentation of an item.
_______________
[61] CONSTITUTION, Article VI, Sections 24-25, 29.
[62] CONSTITUTION, Article VI, Section 1.
[63] Supra note 33.
[64] Belgica v. Hon. Secretary Paquito N. Ochoa, Jr., G.R. No. 208566, November 19, 2013, 710 SCRA 1
<http://sc.judiciary.gov.ph/pdf/
web/viewer.html?file=/jurisprudence/2013/november2013/208566.pdf> [Per J. Perlas-Bernabe, En Banc].
413
VOL. 728, JULY 1, 2014 413

VII
Realignment of the allocation of funds is different from the concept of augmentation contained
in Article VI, Section 25(5) of the Constitution.
In realignment of allocation of funds, the President, upon recommendation of his subalterns
like the Department of Budget and Management, finds that there is an item in the
appropriations act that needs to be funded. However, it may be that the allocated funds for that
targeted item are not sufficient. He, therefore, moves allocations from another budget item to
that item but only to fund the deficiency: that is, the amount needed to fill in so that the
maximum amount authorized to be spent for that item in the appropriations act is
actually spent.
The appropriated amount is not increased. It is only filled in order that the item’s purpose can
be fully achieved with the amount provided in the appropriations law. There is no augmentation
that happens.
In such cases, there is no need to identify savings. The concept of savings is only constitutionally
relevant as a requirement for augmentation of items. It is the executive who needs to fully and
faithfully implement sundry policies contained in many statutes and needs to decide on priorities,
given actual revenues.
The flexibility of realignment is required to allow the President to fully exercise his basic
constitutional duty to faithfully execute the law and to serve the public “with utmost responsibility
. . . and efficiency.”[65]
Unlike in augmentation, which deals with increases in appropriations, realignment involves
determining priorities and deals with allotments without increases in the legislated
_______________
[65] CONSTITUTION, Art. VII, Sec. 5 and Art. XI, Sec. 1.
414

appropriation. In realignment, therefore, there is no express or implied amendment of any of the

provisions of the Appropriations Act. The actual expenditure is only up to the amount contained
in the law.
For purposes of adapting to the country’s changing needs, the President’s power to realign
expenditures necessarily includes the power to withdraw allocations that were previously made for
projects that are not effectively and efficiently moving or that, in his discretion, are not needed at
the present.[66]
These concepts are implicit in law. Thus, Book VI, Chapter 5, Section 3 of the Administrative
Code provides:
Section 3. Declaration of Policy.—It is hereby declared the policy of the State to formulate and
objectives, strategies and plans. The budget shall be supportive of and consistent with the socio-economic
development plan and shall be oriented towards the achievement of explicit objectives and expected results, to
ensure that funds are utilized and operations are conducted effectively, economically, and
efficiently. (Emphasis supplied)
To set priorities is to favor one project over the other given limited resources available. Thus,
there is a possibility when resources are wanting, that some projects or activities authorized in
the General Appropriations Act may be suspended.
Justice Carpio’s interpretation of Section 38, Chapter 5, Book VI of the Administrative Code is
that the power to suspend can only be exercised by the President for appropriated funds that
were obligated.[67] If the funds were appropriated but not obligated, the power to suspend under
Section 38 is not available.[68] Justice Carpio reasons that to allow the Presi-
_______________
[66] See EXECUTIVE ORDER NO. 292, Book VI, Chapter 2, Section 3; EXECUTIVE ORDER NO. 292, Book VI, Chapter 5, Section
38.
[67] J. Carpio, Separate Concurring Opinion, p. 214.
[68] Id.
415
VOL. 728, JULY 1, 2014 415

dent to suspend or stop the expenditure of unobligated funds is equivalent to giving the
President the power of impoundment.[69] If, in the opinion of the President, there are unsound
appropriations in the proposed General Appropriations Act, he is allowed to exercise his line item
veto power.[70] Once the GAA is enacted into law, the President is bound to faithfully execute its
provisions.[71]
I disagree.
When there are reasons apparent to the President at the time when the General
Appropriations Act is submitted for approval, then he can use his line item veto. However, at a
time when he executes his priorities, suspension of projects is a valid legal remedy.
Suspension is not impoundment. Besides, the prohibition against impoundment is not yet
constitutional doctrine.
It is true that the General Appropriations Act provides for impoundment[72] Philconsa v.
Enriquez[73] declined to rule on its
_______________
[69] Id.
[70] Id.
[71] Id.
[72] See e.g., GENERAL APPROPRIATIONS ACT (2011), Section 66.
Section 66. Prohibition Against Impoundment of Appropriations.—No appropriations authorized under this Act shall be
impounded through retention or deduction, unless in accordance with the rules and regulations to be issued by the
DBM: PROVIDED, That all the funds appropriated for the purposes, programs, projects and activities authorized under
this Act, except those covered under the Unprogrammed Fund, shall be released pursuant to Section 33(3), Chapter 5,
Book VI of E.O. No. 292.
Section 33(3), Chapter 5, Book VI of E.O. No. 292 provides:
CHAPTER 5
Budget Execution
SECTION 33. Allotment of Appropriations.—Authorized appropriations shall be allotted in accordance with the
procedure outlined hereunder:
...
416

constitutional validity.[74] Until a ripe and actual case, its constitutional contours have yet to be
determined. Certainly, there has been no specific expenditure under the umbrella of the
Disbursement Allocation Program alleged in the petition and properly traversed by respondents
that would allow us the proper factual framework to delve into this issue. Any definitive
pronouncement on impoundment as constitutional doctrine will be premature, advisory, and,
therefore, beyond the province of review in these cases.[75]
Impoundment is not mentioned in the Constitution. At best, it can be derived either from the
requirement for the President to faithfully execute the laws with reference to the General
Appropriations Act.[76] Alternatively, it can be implied as a limitation imposed by the legislature
in relation to the preparation of a budget. The constitutional authority that will serve as the
standpoint to carve out doctrine, thus, is not yet clear.
To be constitutionally sound doctrine, impoundment should refer to a willful and malicious
withholding of funds for a

_______________
(3) Request for allotment shall be approved by the Secretary who shall ensure that expenditures are covered by
appropriations both as to amount and purpose and who shall consider the probable needs of the department or agency for
the remainder of the fiscal year or period for which the appropriation was made.
[73] G.R. No. 113105, August 19, 1994, 235 SCRA 506 [Per J. Quiason, En Banc].
[74] Id., at pp. 545-546.
[75] See Province of North Cotabato v. Government of the Republic of the Philippines Peace Panel on Ancestral Domain
(GRP), G.R. No. 183591, October 14, 2008, 568 SCRA 402, 450 [Per J. Carpio-Morales, En Banc], Southern Hemisphere
Engagement Network, Inc. v. Anti-Terrorism Council, G.R. No. 178552, October 5, 2010, 632 SCRA 146, 176-179
[Per J.Carpio-Morales, En Banc], and J. Leonen’s Concurring Opinion in Belgica v. Hon. Secretary Paquito N. Ochoa, Jr.,
G.R. No. 208566, November 19, 2013, 710 SCRA 1, 166.
[Per J. Perlas-Bernabe, En Banc].
[76] CONSTITUTION, Article VII, Section 5.
417
VOL. 728, JULY 1, 2014 417

legally mandated and funded project or activity. The difficulty in making broad academic
pronouncements is that there may be instances where it is necessary that some items in the
appropriations act be unfunded.
The President, not Congress, decides priorities when actual revenue collections during a fiscal
year are not sufficient to fund all authorized expenditures. In doing so, the President may have to
leave some items with partial or no funding. Making priorities for spending is inherently a
discretion within the province of the executive. Without priorities, no legal mandate may be
fulfilled. It may be that refusing to fund a project in deficit situations is what is needed to
faithfully execute the other mandates provided in law. In such cases, attempting to partially fund
all projects may result in none being implemented.
Of course, even if there is a deficit, impoundment may exist if there is evidence of willful and
malicious conduct on the part of the executive to withdraw funding from a specific item other
than to make priorities. Whether that situation is present in the cases at bar is not clear. It has
neither been pleaded nor proven. The contrary has not been asserted by petitioners. They have
filed broad petitions unarmed with the specifics of each of the expenditures. They have also failed
to traverse the “evidence packets” presented by respondents.
Impoundment, as a constitutional doctrine, therefore, becomes clear and salient under
conditions of surpluses; that is, that the revenue actually collected and available exceeds the
expenditures that have been authorized. Again, this situation has neither been pleaded nor
proven.
Justice Carpio highlights Prof. Laurence Tribe’s position on impoundment.[77] While I have
the highest admiration for Laurence Tribe as constitutional law professor, I understand that his
dissertation is on American Constitutional Law. I
_______________
[77] J. Carpio, Separate Concurring Opinion, pp. 215-219.
418

maintain the view that the decisions of the United States Supreme Court and the analysis of
their observers are not part of our legal order. They may enlighten us or challenge our heuristic
frames in our reading of our own Constitution. But, in no case should we capitulate to them by
implying that they are binding precedent. To do so would be to undermine our own sovereignty.
Thus, with due respect to Justice Carpio’s views, the discussions in Philconsa v.
Enriquez[78] could not have been rendered outdated by US Supreme Court decisions. They can
only be outdated by the discussions and pronouncements of this court.
VIII
Of course, there are instances when the President must mandatorily withhold allocations and
even suspend expenditure in an obligated item. This is in accordance with the concept of “fiscal
responsibility”: a duty imposed on heads of agencies and other government officials with
authority over the finances of their respective agencies.
Section 25(1) of Presidential Decree No. 1445,[79] which defines the powers of the Commission
on Audit, states:
Section 25. Statement of Objectives.—

....
(1) To determine whether or not the fiscal responsibility that rests directly with the head of the
government agency has been properly and effectively discharged;
....
_______________
[78] G.R. No. 113105, August 19, 1994, 235 SCRA 506, 545-546 [Per J.Quiason, En Banc].
[79] PRESIDENTIAL DECREE NO. 1445 (1978), otherwise known as the GOVERNMENT AUDITING CODE OF THE PHILIPPINES. See
also CONSTITUTION, Article IX-D, Section 2; Executive Order No. 292 S. (1987), Book V, Title I, Subtitle B, Chapter 4.
419
VOL. 728, JULY 1, 2014 419

This was reiterated in Volume I, Book 1, Chapter 2, Section 13 of the Government Accounting
and Auditing Manual,[80] which states:

Section 13. The Commission and the fiscal responsibility of agency heads.—One primary objective
of the Commission is to determine whether or not the fiscal responsibility that rests directly with the head of
the government agency has been properly and effectively discharged.
The head of an agency and all those who exercise authority over the financial affairs, transaction, and
operations of the agency, shall take care of the management and utilization of government resources in
accordance with law and regulations, and safeguarded against loss or wastage to ensure efficient,
economical, and effect operations of the government.

Included in fiscal responsibility is the duty to prevent irregular, unnecessary, excessive, or
extravagant expenses.Thus:
Section 33. Prevention of irregular, unnecessary, excessive, or extravagant expenditures of funds or uses
of property; power to disallow such expenditures.—The Commission shall promulgate such auditing and
accounting rules and regulations as shall prevent irregular, unnecessary, excessive, or extravagant
expenditures or uses of government funds or property.
_______________
[80] The Government Accounting and Auditing Manual (GAAM) was issued pursuant to Commission on Audit Circular
No. 91-368 dated December 19, 1991. The GAAM is composed of three volumes: Volume I — Government Auditing Rules
and Regulations; Volume II — Government Accounting; and Volume III — Government Auditing Standards and Principles
and Internal Control System. In 2002, Volume II of the GAAM was replaced by the New Government Accounting System
as per Commission on Audit Circular No. 2002-002 dated June 18, 2002.
420

The provision authorizes the Commission on Audit to promulgate rules and regulations. But,
this provision also guides all other government agencies not to make any expenditure that
is “irregular, unnecessary, excessive, or extravagant.”[81] The President should be able to prevent
unconstitutional or illegal expenditure based on any allocation or obligation of government funds.
Volume I, Book III, Title 3, Article 2 of the Government Accounting and Auditing Manual
defines irregular, unnecessary, excessive, extravagant, and unconscionable expenditures as:
Section 162. Irregular expenditures.—The term “irregular expenditure” signifies an expenditure
incurred without adhering to established rules, regulations, procedural guidelines, policies, principles or
practices that have gained recognition in law. Irregular expenditures are incurred without conforming with
prescribed usages and rules of discipline. There is no observance of an established pattern, course, mode of
action, behavior, or conduct in the incurrence of an irregular expenditure. A transaction conducted in a
manner that deviates or departs from, or which does not comply with standards set, is deemed irregular. An
anomalous transaction which fails to follow or violate appropriate rules of procedure is likewise irregular.
Irregular expenditures are different from illegal expenditures since the latter would pertain to expenses
incurred in violation of the law whereas the former in violation of applicable rules and regulations other
than the law.
Section 163. Unnecessary expenditures.—The term “unnecessary expenditures” pertains to
expenditures which could not pass the test of prudence or the obligations of a good father of a family,
thereby nonresponsiveness to the exigencies of the service. Unnecessary expenditures are those not
supportive of the implementation of
_______________
[81] PRESIDENTIAL DECREE NO. 1445, Section 33.
421
VOL. 728, JULY 1, 2014 421

the objectives and mission of the agency relative to the nature of its operation. This could also include
incurrence of expenditure not dictated by the demands of good government, and those the utility of which
cannot be ascertained at a specific time. An expenditure that is not essential or that which can be dispensed
with without loss or damage to property is considered unnecessary. The mission and thrusts of the agency
incurring the expenditure must be considered in determining whether or not the expenditure is necessary.
Section 164. Excessive expenditures.—The term “excessive expenditures” signifies unreasonable
expense or expenses incurred at an immoderate quantity or exorbitant price. It also includes expenses which
exceed what is usual or proper as well as expenses which are unreasonably high, and beyond just measure
or amount. They also include expenses in excess of reasonable limits.
Section 165. Extravagant expenditures.—The term “extravagant expenditures” signifies those
incurred without restraint, judiciousness and economy. Extravagant expenditures exceed the bounds of
propriety. These expenditures are immoderate, prodigal, lavish, luxurious, wasteful, grossly excessive, and
injudicious.
Section 166. Unconscionable expenditures.—The term “unconscionable expenditures” signifies expenses
without a knowledge or sense of what is right, reasonable and just and not guided or restrained by
conscience. These are unreasonable and immoderate expenses incurred in violation of ethics and morality by
one who does not have any feeling of guilt for the violation.
These are sufficient guidelines for government officials and heads of agencies to determine
whether a particular program, activity, project, or any other act that involves the expenditure of
government funds should be approved or not.
The constitutional framework outlined and the cited statutory provisions should be the context
for interpreting Section 38, Chapter 5, Book VI of the Administrative Code:
422

Section 38. Suspension of Expenditure of Appropriations.—Except as otherwise provided in the General

Appropriations Act and whenever in his judgment the public interest so requires, the President, upon notice
to the head of office concerned, is authorized to suspend or otherwise stop further expenditure of funds
allotted for any agency, or any other expenditure authorized in the General Appropriations Act, except for
personal services appropriations used for permanent officials and employees.
The General Appropriations Act for Fiscal Years 2011, 2012 and 2013 also uniformly provide:
[S]avings 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.
The President can withhold allocations from items that he deems will be “irregular,
unnecessary, excessive or extravagant.”[82] Viewed in another way, should the President be
confronted with an expenditure that is clearly “irregular, unnecessary, excessive or
extravagant,”[83] it may be an abuse of discretion for him not to withdraw the allotment
or withhold or suspend the expenditure.
_______________
[82] Supra note 81.
[83] Id.
423
VOL. 728, JULY 1, 2014 423

For purposes of augmenting items — as opposed to realigning funds — the President

should be able to treat such amounts resulting from otherwise “irregular, unnecessary,
excessive or extravagant” expenditures as savings.
IX
The Constitution mentions “savings” in Article VI, Section 25(5) in relation to the power of the
heads of government branches and constitutional commissions to augment items in their
appropriations. Thus:
Sec. 25.
....
5. No law shall be passed authorizing any transfer of appropriations; however, the President, the President
of the Senate, the Speaker of the House of Representatives, the Chief Justice of the Supreme Court, and the
appropriations law for their respective offices from savings in other items of their respective appropriations.
....
The existence of savings in one item is a fundamental constitutional requirement for

augmentation of another item.[84] Augmentation modifies the maximum amount provided in the
General Appropriations Act appropriated for an item by way of increasing such amount.[85] The
power to augment items allows heads of government branches and constitutional commissions to
exceed the limitations imposed on their ap-
_______________
[84] Supra note 34.
[85] Id. There is no legal provision that prohibits spending less than the amount provided.
424

propriations, through their savings, to meet the difference between the actual and authorized
allotments.[86]
The law provides for the definition of savings. The law mentioned in Article VI, Section 25(5)
refers not only to the General Appropriations Act’s general provisions but also to other statutes
such as the Administrative Code and the Auditing Code contained in Presidential Decree No.
1445.
The clause in the General Appropriations Act for Fiscal Years 2011, 2012 and 2013, subject to
our interpretation for purposes of determination of savings, is as follows:
[S]avings refer to portions or balances of any programmed appropriation in this Act free from any
obligation or encumbrances 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. . . .[87]
_______________
[86] Id.
[87] The entire provision reads: GENERAL APPROPRIATIONS ACT (2012), Sec. 54.
Augmentation implies the existence in this Act of a program, activity, or project with an appropriation, which upon
implementation or subsequent evaluation of needed
425
VOL. 728, JULY 1, 2014 425

The ponencia,[88] Justice Antonio Carpio,[89] Justice Arturo Brion,[90] and Justice Estela Perlas-

Bernabe[91]drew attention to this GAA provision that qualified “savings” as “free from any
obligation or encumbrances.” The phrase, “free from any obligation or encumbrances,” however,
provides for three situations namely: (1) completion; (2) final discontinuance; or (3) abandonment.
The existence of any of these three situations should constitute an appropriation as free from
obligation.
These words are separated by “or” as a conjunctive. Thus, “final discontinuance” should be
given a meaning that is different from “abandonment.”
The only logical reading in relation to the other provisions of law is that “abandonment” may
be discontinuance in progress. This means that a project is temporarily stopped because to
continue would mean to spend in a manner that is “irregular, unnecessary, excessive or
extravagant.” When the project is remedied to prevent the irregularity in these expenditures,
then the project can further be funded. When the project is not remedied, then the executive
declares a “final discontinuance” of the project.
In these cases, it makes sense for the President to withdraw or withhold allocation or further
obligation of the funds. It is in this light that the Administrative Code provides that
_______________
resources, is determined to be deficient. In no case shall a nonexistent program, activity or project, be funded by
augmentation from savings or by the use of appropriations otherwise authorized in this Act.
See also GENERAL APPROPRIATIONS ACT (2013), Sec. 53 and GENERAL APPROPRIATIONS ACT (2011), Sec. 60, containing the same
provision. These conditions are not, however, relevant to this case.
[88] Ponencia, pp. 137-138.
[89] J. Carpio, Separate Concurring Opinion, pp. 194-195.
[90] J. Brion, Separate Opinion, pp. 276-277.
[91] J. Perlas-Bernabe, Separate Concurring Opinion, pp. 389-390.
426

the President may suspend work or the entire program when, based on his judgment, public
interest requires it.[92]
To further comply with the duty to use funds “effectively, economically and efficiently,”[93] the
President should be able to realign or reallocate these funds. The allocations withdrawn for any
of these purposes should be available either for realignment or as savings to augment certain
appropriation items.
National Budget Circular No. 541 was issued because of the executive’s concern about the
number of “slow-moving projects.”[94] The slow pace of implementation may have been due to
irregularities or illegalities. It could be that it was due to inefficiencies, or it could be that there
were simply projects which the executive refused to implement.
X
There are other species of legitimate savings for purposes of augmentation of appropriation
items that justify withdrawal of allocations.
“Final discontinuance” or “abandonment” can occur when, even with the exercise of good faith
by officials of the executive departments, there are unforeseen events that make it improbable to
complete the procurement and obligation of an item within the time period allowed in the
relevant General Appropriations Act.
DBM NBC No. 541 provides an implicit deadline of June 30, 2012 for unobligated but allocated
items.[95] There is a mechanism of consultation with the agencies concerned.[96]For instance, the
5th Evidence Packet submitted by the Office of

_______________
[92] EXECUTIVE ORDER NO. 292, Book VI, Chapter 5, Section 38.
[94] DBM NBC No. 541 (2012), 1.0-2.0.
[95] DBM NBC No. 541 (2012), Secs. 2.1, 3.1 and 5.4.
[96] DBM NBC No. 541 (2012), Secs. 5.4 and 5.5.
427
VOL. 728, JULY 1, 2014 427

the Solicitor General shows a copy of Department of Transportation and Communication

Secretary Joseph Abaya’s letter to the Department of Budget and Management, recommending
withdrawal of funds from certain projects, [97]which they were having difficulties in
implementing.[98]
In Section 5.4 of Circular No. 541, the bases for the deadline are:
implementation ready and doable during the given fiscal year; and
5.4.2 The practice of having substantial carry over appropriations may imply that the agency has a slower-
than-programmed implementation capacity or agency tends to implant projects within a two-year
timeframe.
These assumptions as well as the determination of a deadline are consistent with the
President’s power to control “all the executive departments, bureaus and offices.”[524] It is also
within the scope of his power to fully and faithfully execute laws. Judicial review of the deadline
as well as its policy basis will only be possible if there is a clear and convincing showing by a
petitioner that grave abuse of discretion is present. Generally, the nature of the expenditure, the
time left to procure, and the efforts both of the agency concerned and the Department of Budget
and Management to meet the obstacles to meet the procurement plans would be relevant. But in
most instances, this is really a matter left to the judgment of the President.
To this extent, I disagree with the proposal of Justice Carpio on our declaration of the
timelines for purposes of determining when there can be savings. Justice Carpio is of the view
that there is a need to declare as unconstitutional:
_______________
[97] 5th Evidence Packet, p. 1.
[98] TSN, January 28, 2014, p. 23.
428

Disbursements of unobligated allotments for Capital Outlay as savings and their realignment to
other items in the GAA, prior to the last two months of the fiscal year if the period to obligate is
one year, or prior to the last two months of the second year if the period to obligate is two years.
[100]
It is not within the scope of our powers to insist on a specific time period for all expenditures
given the nuances of executing a budget. To so hold would be to impinge on the ability of the
President to execute laws and exercise his control over all executive departments.
XI
Article VI, Section 25(5) requires that for any augmentation to be valid, it must be for an
existing item. Furthermore, with respect to the President, the augmentation may only be for
items within the executive department.[101]
The power to augment under this provision is qualified by the words, “respective offices.” This
means that the President and the other officials enumerated can only augment items within their
departments. In other words, augmentation of items is allowed provided that the source
department and the recipient department are the same.
Transfer of funds from one department to other departments had already been declared as
unconstitutional in Demetria v. Alba.[102] Moreover, a corollary to our pronouncement
in Gonzales v. Macaraig, Jr.[103] that “[t]he doctrine of separation of powers is in no way
endangered because the transfer is

_______________
[100] J. Carpio, Separate Concurring Opinion, p. 223.
[102] 232 Phil. 222, 229-230; 148 SCRA 208, 215 (1987) [Per J. Fernan, En Banc].
[103] G.R. No. 87636, November 19, 1990, 191 SCRA 452 [Per J. Melencio-Herrera, En Banc].
429
VOL. 728, JULY 1, 2014 429

made within a department (or branch of government) and not from one department (branch) to
another”[104] is that transfers across departments are unconstitutional for being violative of the
doctrine of separation of powers.
There are admissions in the entries contained in the evidence packets that presumptively
show that there have been at least two (2) instances of augmentation by the executive of items
outside its department.[105] If these are indeed validated upon the proper audit to have been
actually expended, then such acts are unconstitutional.
The Solicitor General suggests that we stay our hand to declare these transfers as
unconstitutional since the Congress has acquiesced to these transfers of funds and have not
prohibited them in the next budget period.[106]Alternatively, respondents also suggest that the
transfers were necessary because of contingencies or for interdepartmental cooperation.[107]
Acquiescence of an unconstitutional act by one department of government can never be a
justification for this court not to do its constitutional duty.[108] The Constitution will fail to
provide for the neutrality and predictability inherent in a society thriving within the auspices of
the rule of law if this court fails to act in the face of an actual violation. The interpretation of the
other departments of government of their powers
_______________
[104] Id., at p. 472.
[105] In the 1st Evidence Packet, p. 4, shows that the Commission on Audit received DAP funds for its IT Infrastructure
Program and for the hiring of additional IT experts. On p. 38, the House of Representatives received DAP funding for the
“Construction of the Legislative Library and Archive/Building/Congressional E-Library.”
[106] TSN, January 28, 2014, p. 16.
[107] Office of the Solicitor General’s Memorandum, p. 35.
430

under the Constitution may be persuasive on us,[109] but it is our collective reading which is final.
The constitutional order cannot exist with acquiescence as suggested by respondents.
Furthermore, the residual powers of the President exist only when there are plainly
ambiguous statements in the Constitution. If there are instances that require more funds for a
specific item outside the executive agencies, a request for supplemental appropriation may be
made with Congress. Interdependence is not proscribed but must happen in the context of the
rule of law. No exigent circumstances were presented that could lead to a clear and convincing
explanation why this constitutional fiat should not be followed.
XII
Definitely, Section 5.7.3 of DBM NBC No. 541 is not an ideal example of good rule writing. By
this provision, withdrawn allotments may be:
year.
This provision is too broad. It appears to sanction the unconstitutional act of augmenting a
nonexisting item in the general appropriations acts (GAAs) or any supplemental appropriations
law.
The Solicitor General suggests that this provision should be read broadly so as to skirt any
constitutional infirmity, thus:
_______________
[109] See J. Leonen, Dissenting Opinion in Umali v. COMELEC, April 22, 2014, 723 SCRA 170, 222.

431
VOL. 728, JULY 1, 2014 431

76. Paragraph 5.7.3 of NBC No. 541 makes no mention of items or appropriations. Instead, it refers to
‘. . . existing programs and projects of any agency and . . . priority programs and projects not considered in
the 2012 budget but expected to be started or implemented during the current year.’ On questioning from
the Chief Justice, respondents submitted that ‘programs and projects’ do not refer to items of appropriation
(as they appear in the GAA) but to specific activities, the specific details and particular justifications for
which may not have been considered by Congress, but are necessarily included in the broad terms used in
the GAA. Activities need not be enumerated for consideration of Congress, as they are already encapsulated
in the broader terms ‘programs’ or ‘projects.’ This finds statutory support in the Revised Administrative
Code which defines ‘programs’ as ‘functions and activities for the performance of a major purpose for which a
government agency is established’ and ‘project’ as a ‘component of a program covering a homogenous group
of activities that results in the accomplishment of an identifiable output.’[110]
Every presumption in interpreting a provision of law should indeed be granted so as to allow
constitutionality in any provision in law or regulation.[111] This presumption applies to facial
reviews of provisions. However, it is unavailing in the face of actual facts that clearly and
convincingly show a breach of the constitutional provision. Such facts must be established
through the rules of evidence.
The Solicitor General himself submitted “evidence packets” which admit projects benefiting from
the DAP.[112] Based on respondent’s allegations, the projects have “appropriations
cover.”[113] Petitioners were unable to refute these allegations.
_______________
[110] Memorandum of Solicitor General, pp. 27-28.
[111] People v. Vera, 65 Phil. 56, 95 (1937) [Per J. Laurel, En Banc].
[112] The Solicitor General submitted seven (7) evidence packets detailing the DAP-funded projects.
[113] Memorandum of Solicitor General, pp. 25-26.
432

Perhaps, it was because it was the first time that they encountered this full accounting of the
DAP.
In my view, it is not in this petition for certiorari and prohibition that the proper traverse of
factual allegations can be done. We cannot go beyond guidance that any allocation — or
augmentation — for an activity not covered by any item in any appropriation act is both
unconstitutional and illegal.
XIII
I agree with the assessment on the constitutionality of using unprogrammed funds as
appropriations cover.[114]An increase in the dividends coming from government financial
institutions and government-owned and -controlled corporations is not the condition precedent for
using revenues for items allowed to be funded from unplanned revenues. The provisions of the
General Appropriations Act clearly provide that the actual revenues exceed the projected
revenues presented and used in the approval of the current law.[115]
I agree with Justice Bernabe’s views relating to the pooling of funds.[116] There are many
laudable intentions in the Disbursement Acceleration Program (DAP). But its major problem lies
in the concept of pooled funds. That is, that there is a lump sum from various sources used both
to realign allocation and to augment appropriations items. It is unclear whether augmentation of
one item is done with funds that are legitimately savings from another. It is difficult to assess
each and every source as well as whether each and every expenditure has appropriations cover.

_______________
[114] Ponencia, pp. 164-171.
[115] See GENERAL APPROPRIATIONS ACT (2011), XLV, A(1); GENERAL APPROPRIATIONS ACT (2012), XLVI, A(1).
[116] J. Perlas-Bernabe, Separate Concurring Opinion, pp. 394-395.

433
VOL. 728, JULY 1, 2014 433

It would have been better if the executive just augmented an item and was clear about its
source for savings. What happened was that there was an intermediary mechanism of
commingling and pooling funds. Thus, there was the confusion as to whether DAP was the source
or ultimately only the mechanism to create savings. Besides, access to information, clarity, and
simplicity of governmental acts can ensure public accountability. When the information cannot be
accessed freely or when access is too sophisticated, public doubt will not be far behind.
In view of this, I, therefore, agree to lay down the basic principles in the fallo of our decision so
that the expenditures can be properly audited.
XIV
Thus, there are factual issues that need to be determined before some or all of the 116
projects[117]contained in the evidence packets admitted by respondents to have benefitted from
the DAP can be nullified:
First, whether the transfers of funds were in the nature of realignment of allocations or
augmentation of items;
Second, whether the withdrawal of allocations, under the circumstances and considering the
nature of the work, activity, or project, was consistent with the definition of savings in the
General Appropriations Act, the Administrative Code, and the Auditing Code;
Third, whether the transfer of allotments and the corresponding expenditures were proper
augmentations of existing items;
Fourth, whether there were actual expenditures from savings that amounted to augmentation
of items outside the executive;
_______________
[117] TSN, January 28, 2014, p. 17.
434

Fifth, whether there were actual expenditures justified with unprogrammed funds as the
appropriations cover.
The accounts submitted by the Solicitor General should be assessed and audited in a proper
proceeding that will allow those involved to traverse the factual issues, thereby ensuring all
parties a full opportunity to be heard. The 116 projects claimed as part of the Disbursement
Allocation Program (DAP) were not alleged by petitioners but were raised as part of the oral
arguments of respondents. The details of each project need to be further examined. Each of the
expenditure involved in every project may, therefore, be the subject of more appropriate
procedure such as a special audit by the Commission on Audit or the proper case filed by any
interested party to nullify any specific transfer based on evidence that they can present.
XV
The general rule is that a declaration of unconstitutionality of any act means that such act has
no legal existence: It is null and void ab initio.[118]
The existing exception is the doctrine of operative facts. The application of this doctrine
should, however, be limited to situations where (a) there is a showing of good faith in the acts
involved or (b) where in equity we find that the difficulties that will be borne by the public far
outweigh rigid application to the effect of legal nullity of an act.
The doctrine saves only the effects of the unconstitutional act. It does not hint or even
determine whether there can be any liability arising from such acts. Whether the constitutional
violation is in good faith or in bad faith, or whether any
_______________
[118] See also Yap v. Thenamaris Ship’s Management, G.R. No. 179532, May 30, 2011, 649 SCRA 369, 380
[Per J. Nachura, Second Division].
435
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administrative or criminal liability is forthcoming, is the subject of other proceedings in other

forums.
Likewise, to rule that a declaration of unconstitutionality per se is the basis for determining
liability is a dangerous proposition. It is not proper that there are suggestions of administrative
or criminal liability even before the proper charges are raised, investigated, and filed.
Any discussion on good faith or bad faith is, thus, premature. But, in our jurisdiction, the
presumption of good faith is a universal one. It assures the fundamental requisites of due process
and fairness. It frames a judicial attitude that requires us to be impartial.
Certiorari and prohibition as remedies are, thus, unavailing for these questions where the
factual conditions per expense item cannot be convincingly established and where the regulations
have become moot and academic. This is definitely not the proper case to assess the effects of
each of the 116 projects under the DAP.
Our decision today should not be misinterpreted as authority to undo infrastructure built or
expenditures made under the DAP. Nor should it be immediately used as basis for saying that
any or all officials or beneficiaries are either liable or not liable. Each expenditure must be
audited in accordance with our ruling.
FINAL NOTE
Cases invested with popular and contemporary political interest are difficult. Sustained public
focus is assured because of the effect of this decision on the current balance of political power. It
makes for good stories both in traditional and social media. The public’s interest can be
captivated because the protagonists live in the here and now.
436

In the efforts to win over an audience, there are a few misguided elements who offer unverified
and illicit peeks into our deliberations. Since they do not sit in our chamber, they provide
snapshots culled from disjointed clues and conversations. Some simply move to speculation on the
basis of their simplified and false view of what motivates our judgments. We are not beholden to
the powers that appoint us. There are no factions in this court. Unjustified rumors are fanned by
minds that lack the ability to appreciate the complexity of our realities. This minority assumes
that their stories or opinions will be well-received by the public as they imagine it to be. Those
who peddle stereotypes and prejudice fail to see the Filipino as they are. They should follow the
example of many serious media practitioners and opinion leaders who help our people as they
engage in serious and deep analytical discussion of public issues in all forms of public media.
The justices of this court are duty-bound to deliberate. This means that we are all open to
listening to the views of others. It is possible that we take tentative positions to be refined in the
crucible of collegial discussion and candid debate. We benefit from the views of others: each one
shining their bright lights on our own views as we search for disposition of cases that will be most
relevant to our people.
We decide based on the actual facts in the cases before us as well as our understanding of the
law and our role in the constitutional order. We are aware of the heavy responsibilities that we
bear. Our decisions will guide and affect the future of our people, not simply those of our public
officials.
DAP is a management program that appears to have had been impelled with good motives. It
generally sought to bring government to the people in the most efficient and effective manner. I
entertain no doubt that not a few communities have been inspired or benefited from the
implementation of many of these projects.
437
VOL. 728, JULY 1, 2014 437

A government of the people needs to be efficient and effective. Government has to find ways to
cause change in the lives of people who have lived in our society’s margins: whether this be
through well thought out infrastructure or a more egalitarian business environment or
addressing social services or ensuring that just peace exists. The amount and timing of funding
these activities, projects, or programs are critical.
But, the frailty of the human being is that our passion for results might blind us from the
abuses that can occur. In the desire to meet social goals urgently, processes that similarly congeal
our fundamental values may have been overlooked. After all, “daang matuwid” is not simply a
goal but more importantly, the auspicious way to get to that destination.
The Constitution and our laws are not obstacles to be hurdled. They assure that the best for
our people can be done in the right way. In my view, the Constitution is a necessary document
containing our fundamental norms and values that assure our people that this government will
be theirs and will always be accountable to them. It is to that faith that we have taken our
oaths. It is in keeping with that faith that we discharge our duties.
We can do no less.
ACCORDINGLY, for guidance of the bench and bar, I vote to declare the following acts and
practices under the Disbursement Acceleration Program (DAP); National Budget Circular No.
541 dated July 18, 2012; and related executive issuances as unconstitutional:
(a) any implementation of Section 5.7.3 insofar as it relates to activities not related to any
existing appropriation item even if in anticipation of future projects;
(b) any augmentation by the President of items appropriated for offices outside the executive
branch;
438

(c) any augmentation of any item, even within the executive department, which is sourced from
funds withdrawn from activities which have not yet been (1) completed, (2) finally discontinued,
or (3) abandoned; and
(d) any use of unprogrammed funds without all the conditions in the General Appropriations
Act being present.
Let a copy of this decision be served on all the other officers covered in Article VI, Section 25(5)
of the 1987 Constitution for their guidance.
The evidence packets submitted by respondents should also be transmitted to the Commission
on Audit for their appropriate action.
Petitions partially granted and certain acts and practices under Disbursement Acceleration
Program, National Budget Circular No. 541 and related executive issuances declared
unconstitutional for being in violation of Section 25(5), Article VI of 1987 Constitution and
doctrine of separation of powers.
Notes.—The power of the Supreme Court is limited to the interpretation of the law. Judicial
power does not include the determination of the wisdom, fairness, soundness, or expediency of a
statute. (Giron vs. Commission on Elections, 689 SCRA 97 [2013])
For a court to exercise its power of adjudication, there must be an actual case or controversy.
(Abdul vs. Sandiganbayan [Fifth Division], 711 SCRA 246 [2013])
——o0o——

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2 SUPREME COURT REPORTS ANNOTATED

BAYAN MUNA PARTY-LIST REPRESENTATIVE; RENATO M. REYES, JR., SECRETARY

G.R. No. 209155. July 1, 2014.*

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G.R. No. 209164. July 1, 2014.*

4 SUPREME COURT REPORTS ANNOTATED

G.R. No. 209569. July 1, 2014.*

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Araullo vs. Aquino III

6 SUPREME COURT REPORTS

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Araullo vs. Aquino III

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Araullo vs. Aquino III

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Araullo vs. Aquino III

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Araullo vs. Aquino III

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government-owned or -controlled corporations and their subsidiaries.Current operating

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Araullo vs. Aquino III

BRION, J., Separate Opinion:

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Araullo vs. Aquino III