(G.R. No. 209287. July 1, 2014.) : en Banc

11/9/2019 G.R. Nos.
209287, 209135, 209136, 209155, 209164, 209260, 209442,
EN BANC
[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.
CARLOS ISAGANI ZARATE, 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 OF
THE DEPARTMENT OF BUDGET AND MANAGEMENT,
respondents.
[G.R. No. 209135. July 1, 2014.]
AUGUSTO L. SYJUCO JR., Ph.D., petitioner, vs. FLORENCIO

B. ABAD, IN HIS CAPACITY AS THE SECRETARY OF
DEPARTMENT OF BUDGET AND MANAGEMENT; AND
HON. FRANKLIN MAGTUNAO DRILON, IN HIS CAPACITY
AS THE SENATE PRESIDENT OF THE PHILIPPINES,
respondents.
[G.R. No. 209136. July 1, 2014.]
MANUELITO R. LUNA, petitioner, vs. SECRETARY

FLORENCIO ABAD, IN HIS OFFICIAL CAPACITY AS HEAD
OF THE DEPARTMENT OF BUDGET AND MANAGEMENT;
AND EXECUTIVE SECRETARY PAQUITO OCHOA, IN HIS
OFFICIAL CAPACITY AS ALTER EGO OF THE PRESIDENT,
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.
[G.R. No. 209164. July 1, 2014.]
PHILIPPINE CONSTITUTION ASSOCIATION (PHILCONSA),

REPRESENTED BY DEAN FROILAN M. BACUNGAN,
BENJAMIN E. DIOKNO AND LEONOR M. BRIONES,
https://cdasiaonline.com/jurisprudences/58309/print?fbclid=IwAR1Sd2OcafB-lXFFTXBJhvushQAN-VIsxMBHS-apvzafIP0rGP6axrchMow 1/73
11/9/2019 G.R. Nos. 209287, 209135, 209136, 209155, 209164, 209260, 209442,
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 PRESIDENT,
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.]
11/9/2019 G.R. Nos. 209287, 209135, 209136, 209155, 209164, 209260, 209442,
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.
DECISION
BERSAMIN, J : p
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 contravened 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. EScIAa
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 unreleased
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-
11/9/2019 G.R. Nos. 209287, 209135, 209136, 209155, 209164, 209260, 209442,
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 (EO) No. 292
(Administrative Code of 1987); and (3) the General Appropriations Acts
(GAAs) of 2011, 2012 and 2013, particularly their provisions on the (a) use of
savings; (b) meanings of savings and augmentation; and (c) priority in the use
of savings.
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. SEIcHa
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, 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.
11/9/2019 G.R. Nos. 209287, 209135, 209136, 209155, 209164, 209260, 209442,
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 provisions of the GAAs of
2011, 2012 and 2013; HCISED
(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 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: EDISaA
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);
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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);
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: CADacT
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);
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); aHICDc
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
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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; IDcHCS
(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;
(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). ITScAE
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: STcADa
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
11/9/2019 G.R. Nos. 209287, 209135, 209136, 209155, 209164, 209260, 209442,
G.R. No. 209164 (PHILCONSA) Certiorari and Prohibition

G.R. No. 209260 (IBP) Prohibition AcEIHC
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 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 SacDIE
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 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. cDHAaT
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
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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 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." ScCIaA
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 supremacy power
to determine whether a given law is valid or not is vested in
courts of justice. AaCTcI
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: —
11/9/2019 G.R. Nos. 209287, 209135, 209136, 209155, 209164, 209260, 209442,
MR. NOLLEDO. . . .
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. ASDCaI
May I ask the Commissioner's opinion about that?

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"? cACEaI
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:
. . . 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 to determine the proper allocation of powers between the
several department and among the integral or constituent units
thereof.
xxx xxx xxx
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
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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. . . . 29 IHAcCS
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.
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 certiorari
evolved, 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. IaHDcT
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.:
xxx xxx xxx
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 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
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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 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
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 DTIaCS
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. Generally, 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 and/or prohibit or nullify the acts of
legislative and executive officials. 34 TaDSHC
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
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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
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
. . . 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
jurisprudence." 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. EHDCAI
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
purpose, the Administration's economic managers have recommended its
termination to the President. . . . ." 39
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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 straight-ticketing our elected
representatives in ways not consistent with our constitutional
structure and democratic principles. 40 aSTECI
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) 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? DTcASE
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
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
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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. HCEaDI
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 test were allowed to
be treated in the same way as in Araneta v. Dinglasan.
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. Jordan 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
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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." ICTcDA
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
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 ADSIaT
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. 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
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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 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 acSECT
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 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 of Budget and Management
(OBM) under EO No. 711. The OBM became the DBM pursuant to EO No.
292 effective on November 24, 1989.
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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.
c.1. Budget Preparation 67 SDIACc
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 presented 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. TDcHCa
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 re-
prioritization. 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 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
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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 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., sub-divided 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 TSIDEa
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 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 of money and/or materials, and do not require any
monetary commitment on the part of the recipient); 82 (4) extra-ordinary
income (i.e., repayment of loans and advances made by government
corporations and local governments and the receipts and shares in income of
the Banko 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 CTaIHE
More specifically, public revenues are classified as follows: 85 TDcCIS
General Income Specific Income

1. Subsidy Income from National 1. Income Taxes
Government
2. Property Taxes
2. Subsidy from Central Office
3. Taxes on Goods and Services
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3. Subsidy from Regional

Office/Staff Bureaus 4. Taxes on International Trade and
Transactions
4. Income from Government
Services 5. Other Taxes
5. Income from Government 6. Fines and Penalties-Tax Revenue
Business Operations
7. Other Specific Income
6. Sales Revenue
7. Rent Income
8. Insurance Income
9. Dividend Income
10. Interest Income
11. Sale of Confiscated Goods and
Properties
12. Foreign Exchange (FOREX)
Gains
13. Miscellaneous Operating and
Service Income
14. Fines and Penalties-Government
Services and Business Operations
15. Income from Grants and
Donations
c.2. Budget Legislation 86 AcSCaI
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. Thereafter, the House of Representatives drafts the General
Appropriations Bill (GAB). 87 cTDIaC
The GAB is sponsored, presented and defended by the House of

Representatives' Appropriations Committee and 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 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.
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 re-enacted and shall remain in force and effect until the GAB
is passed by the Congress. 92
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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 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.
Allotments may be released in two forms — through a comprehensive
Agency Budget Matrix (ABM), 94 or, individually, by SARO. 95 aIcHSC
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
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 non-cash 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.
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.
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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 IHTaCE
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-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 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. SacDIE
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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
xxx xxx xxx
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. SECcAI
A. Fund Sources for the Acceleration Program

Fund Sources Amount (In Description Action
million Php) Requested
FY 2011 30,000 Unreleased Personnel Declare as

Unreleased Services (PS) savings and
Personal appropriations which approve/
will lapse at the end
Services (PS) authorize its use
of
appropriations FY 2011 but may be for the 2011
pooled as savings and Disbursement
realigned for priority Acceleration
programs that require Program
immediate funding
FY 2011 482 Unreleased
Unreleased appropriations (slow
appropriations moving projects and
programs for
discontinuance)
FY 2010 12,336 Supported by the GFI Approve and
Unprogrammed Dividends authorize its use
Fund for the 2011
Disbursement
Acceleration
Program
FY 2010 21,544 Unreleased With prior
Carryover appropriations (slow approval from
Appropriation moving projects and the President in
programs for November 2010
discontinuance) and to declare as
savings from Zero- savings and with
based Budgeting authority to use
for priority
Initiative
projects
FY 2011 Budget 7,748 FY 2011 Agency For information
items for Budget items that can
realignment be realigned within the
agency to fund new
fast
disbursing projects
DPWH - 3.981 Billion
DA - 2.497 Billion
DOT - 1.000 Billion
DepEd - 270 Million
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–––––––
TOTAL 72.110
======
B. Projects in the Disbursement Acceleration Program
(Descriptions of projects attached as Annex A) CSHDTE
GOCCs and GFIs

Agency/Project Allotment
(SARO and NCA Release) (in Million Php)
1. LRTA: Rehabilitation of LRT 1 and 2 1,868

2. NHA: 11,050
a. Resettlement of North Triangle residents to 450
Camarin A7
b. Housing for BFP/BJMP 500
c. On-site development for families living 10,000
along dangerous
d. Relocation sites for informal settlers 100
along Iloilo River and its tributaries
3. PHIL. HEART CENTER: Upgrading of 357
ageing physical plant and medical equipment
4. CREDIT INFO CORP: Establishment of 75
centralized credit information system
5. PIDS: purchase of land to relocate the PIDS 100
office and building construction
6. HGC: Equity infusion for credit insurance 400
and mortgage guaranty operations of HGC
7. PHIC: Obligations incurred (premium 1,496
subsidy for indigent families) in January-June
2010, booked for payment in Jul[y]-Dec.
2010. The delay in payment is due to the
delay in the certification of the LGU
counterpart. Without it, the NG is obliged to
pay the full amount.
8. Philpost: Purchase of foreclosed property. 644
Payment of Mandatory Obligations, (GSIS,
PhilHealth, ECC), Franking Privilege
9. BSP: First equity infusion out of Php 40B 10,000
capitalization under the BSP Law
10. PCMC: Capital and Equipment Renovation 280
11. LCOP: 105
a. Pediatric Pulmonary Program 35
b. Bio-regenerative Technology Program 70
(Stem-Cell Research - subject to legal
review and presentation)
12. TIDCORP: NG Equity infusion 570
––––––
TOTAL 26,945
======
NGAs/LGUs
Allotment Cash
Agency/Project (SARO) Requirement
(In Million (NCA)
Php)
13. DOF-BIR: NPSTAR
centralization of data
processing and others (To be
synchronized with GFMIS
activities) 758 758
14. COA: IT infrastructure
program and hiring of
additional litigational experts 144 144
15. DND-PAF: On Base Housing
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Facilities and Communication

Equipment 30 30
16. DA: 2,959 2,223
a. Irrigation, FMRs and
Integrated Community-
Based Multi-Species
Hatchery and Aquasilvi
Farming 1,629 1,629
b. Mindanao Rural
Development Project 919 183
c. NIA Agno River Integrated
Irrigation Project 411 411
17. DAR: 1,293 1,293
a. Agrarian Reform
Communities Project 2 1,293 132
b. Landowners Compensation 5,432
18. DBM: Conduct of National
Survey of Farmers/Fisherfolks/IPs 625 625
19. DOJ: Operating requirements
of 50 investigation agents and
15 state attorneys 11 11
20. DOT: Preservation of the Cine
Corregidor Complex 25 25
21. OPAPP: Activities for Peace
Process (PAMANA-Project
details: budget breakdown,
implementation plan, and
conditions on fund release
attached as Annex B) 1,819 1,819
22. DOST 425 425
a. Establishment of National
Meterological and Climate
Center 275 275
b. Enhancement of Doppler
Radar Network for National
Weather Watch, Accurate
Forecasting and Flood Early
Warning 190 150
23. DOF-BOC: To settle the
principal obligations with
PDIC consistent with the
agreement with the CISS and
SGS 2,800 2,800
24. OEO-FDCP: Establishment of
the National Film Archive and
local cinematheques, and other
local activities 20 20
25. DPWH: Various infrastructure
projects 5,500 5,500
26. DepEd/ERDT/DOST: Thin
Client Cloud Computing
Project 270 270
27. DOH: Hiring of nurses and
midwives 294 294
28. TESDA: Training Program in
partnership with BPO industry
and other sectors 1,100 1,100
29. DILG: Performance Challenge
Fund (People Empowered
Community Driven
Development with DSWD
and NAPC) 250 50
30. ARMM: Comprehensive Peace
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and Development Intervention 8,592 8,592

31. DOTC-MRT: Purchase of
additional MRT cars 4,500 -
32. LGU Support Fund 6,500 6,500
33. Various Other Local Projects 6,500 6,500
34. Development Assistance to the
Province of Quezon 750 750
–––––– –––––––
TOTAL 45,165 44,000
====== ======
C. Summary
Fund Sources Cash
Requirements
Identified for Allotments
for
Approval for Release Release in FY
(In Million Php) 2011
Total 72,110 72,110 70,895

GOCCs 26,895 26,895
NGAs/LGUs 45,165 44,000
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:
MEMORANDUM FOR THE PRESIDENT
xxx xxx xxx
SUBJECT: Omnibus Authority to Consolidate
Savings/Unutilized Balances and its Realignment SAHEIc
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;
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1.2 to augment additional requirements of on-going

priority projects; and
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 on-going priority projects
and implementation of new activities
2.0 ...
2.1 ...
2.2 ...
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. HICEca
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 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 ...
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
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(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
approved 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: IaEASH
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 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.
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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.
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; SACHcD
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. DCTHaS
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;
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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; SCHATc
• 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);
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 AEScHa
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); EADCHS
• 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
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unobligated allotments as of same period. Example: If

the March 31 SAOB or FRO reflects actual obligations
of P 800M 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:
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 CAIaDT
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.
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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 submission 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. cIACaT
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 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. SCIacA
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
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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."
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. SAEHaC
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 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. cEaSHC
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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. CacTSI
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 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:
cCSDTI
[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.
xxx xxx xxx
. . . 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. Let there be discretion, but channel it and use it
to satisfy the programs and priorities established by Congress. ICESTA
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.:
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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
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. ISCHET
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 Appropriation 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
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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: ITDHSE
(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.
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: cEISAD
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.
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 over-
extends 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:
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Section 25. ...

xxx xxx xxx
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. CSDTac
xxx xxx xxx

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 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. ACTIHa
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.
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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 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 ISCaTE
(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.
In the 2012 GAA, the empowering provision was Section 53, to wit:
Ombudsman are hereby authorized to augment any item in this Act
from savings in other items of their respective appropriations. DcCEHI
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
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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. AIDSTE
Apparently realizing the problem, Congress inserted the omitted phrase

in the counterpart provision in the 2013 GAA, to wit:
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 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 DEScaT
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.
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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 IHcSCA
The foregoing principles caution us to construe savings strictly against

expanding the scope of the power to augment. It is then indubitable that the
power to augment was to be used only when the purpose for which the funds
had been allocated were already satisfied, or the need for such funds had
ceased to exist, for only then could savings be properly realized. This
interpretation prevents the Executive from unduly transgressing Congress'
power of the purse.
The 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. IcTEaC
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 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.
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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. aHECST
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. TDCcAE
Justice Carpio has validly observed in his Separate Concurring Opinion

that MODE 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
11/9/2019 G.R. Nos. 209287, 209135, 209136, 209155, 209164, 209260, 209442,
(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. ECTIcS
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:
3.1.1 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 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: STcAIa
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. cHSIAC
11/9/2019 G.R. Nos. 209287, 209135, 209136, 209155, 209164, 209260, 209442,
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. SCDaET
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 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. SDHITE
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 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.
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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.
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); DcITaC
• 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 P800 M 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
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,
11/9/2019 G.R. Nos. 209287, 209135, 209136, 209155, 209164, 209260, 209442,
such withdrawal of unobligated allotments and the retention of appropriated

funds cannot be considered as impoundment. aCcSDT
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 pursuant 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. AHCcET
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.
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
11/9/2019 G.R. Nos. 209287, 209135, 209136, 209155, 209164, 209260, 209442,
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. aTHASC
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. — Unexpended 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
appropriations 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 non-recurring
expenditures in a subsequent year. ASaTCE
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: —
. . . 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 non-existent
program, activity, or project, be funded by augmentation from savings
or by the use of appropriations otherwise authorized in this Act. ACETID
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:
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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.
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
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; AcHSEa
(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
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 TSEcAD
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:
APPROPRIATION PARTICULARS AMOUNT
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CODE AUTHORIZED
A.03.a.01.a Generation of new knowledge and

technologies and research
capability
building in priority areas identified
as
strategic to National Development
Personnel Services P43,504,024
Maintenance and Other Operating
Expenses 1,164,517,589
Capital Outlays 391,978,387
––––––––––––––
P1,600,000,000
=============
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:
Personnel Maintenance Capital TOTAL
Services and Other Outlays
Operating
Expenditures
III.Operations
Funding Assistance to
a. 177,406,000 1,887,365,000 49,090,000 2,113,861,000
Science
and Technology
Activities
1. Central Office 1,554,238,000 1,554,238,000
Generation of
a.
new
knowledge
and
technologies
and
research
capability
building in
priority
areas
identified as
strategic to
National
Development 537,910,000 537,910,000
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 CTAIHc
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 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
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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: acEHCD
APPROPRIATION PARTICULARS AMOUNT

CODE AUTHORIZED
A.02.a Development, integration and

coordination of the National
Research System for Industry,
Energy and Emerging
Technology
and Related Fields
Capital Outlays P300,000,000
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 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
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
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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. TCcDaE
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. TcEaAS
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: ASICDH
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
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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.
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 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 because . . . (interrupted)
JUSTICE BERSAMIN: DcAaSI
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
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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 TaSEHC
AMOUNT
(In thousand
OFFICE PURPOSE DATE
pesos)
RELEASED Reserve Releases
Imposed
IT Infrastructure
Commission on 11/11/11 143,700
Program and
hiring of additional
Audit
litigation
experts
Completion of the
Congress - 07/23/12 207,034 250,000
construction
of the Legislative Library
House of (Savings
and
RepresentativesArchives Building/ of HOR)
Congressional e-library
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.: cHATSI
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
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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?
HONORABLE MENDOZA:
That's our submission, if Your Honor, please.
JUSTICE LEONEN: ITEcAD
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? ScaCEH
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
extra-ordinary situation?
HONORABLE MENDOZA:
Very extra-ordinary situations.
JUSTICE LEONEN:
But Counsel, this would be new doctrine, in case?
HONORABLE MENDOZA:
Yes, if Your Honor please. 190
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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. HDIATS
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.
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
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: aECTcA
2011 GAA
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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.
2012 GAA
1. Release of the 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: 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
of a SARO covering the loan proceeds. EHTIDA
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, 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 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 collections arising from sources not
considered in the aforesaid original revenue target, as certified
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by the BTr: PROVIDED, That in case of newly approved loans for

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). HCaEAT
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:
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 aETADI
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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 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: HDTSIE
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
P10.0 198 billion for 2013.
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 cTDIaC
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
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revenue surpluses. The requirement 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 DSIaAE
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.
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. DSETac
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 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
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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. EDISaA
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
determination 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. cDHAES
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:
Article 7. Laws are repealed only by subsequent ones,
and their violation or non-observance 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
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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? EACIcH
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 understandable 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. TcADCI
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. 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.
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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 DCcHIS
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, 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. CDISAc
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.
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.' TSADaI
11/9/2019 G.R. Nos. 209287, 209135, 209136, 209155, 209164, 209260, 209442,
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 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.: CSIDEc
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
11/9/2019 G.R. Nos. 209287, 209135, 209136, 209155, 209164, 209260, 209442,
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 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. EIaDHS
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 DECLARES the following acts and practices
under the Disbursement Acceleration Program, National Budget Circular No.
541 and related executive issuances UNCONSTITUTIONAL for being in
violation of Section 25 (5), Article VI of the 1987 Constitution and the doctrine
of separation of powers, namely:
(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 non-compliance with the
11/9/2019 G.R. Nos. 209287, 209135, 209136, 209155, 209164, 209260, 209442,
conditions provided in the relevant General Appropriations Acts.

SO ORDERED. ISDHcT
Sereno, C.J., Peralta, Villarama, Jr., Perez, Mendoza and Reyes, JJ.,
concur.
Carpio and Brion, JJ., see separate opinion.
Velasco, Jr., J., I join the concurring and dissenting opinion of J. Del
Castillo.
Leonardo-de Castro, J., took no part.
Del Castillo, J., pls. see separate concurring and dissenting opinion.
Perlas-Bernabe and Leonen, JJ., pls. see separate concurring opinion.
Footnotes
1. <http://www.dbm.gov.ph/?p=7302> (visited May 27, 2014).
2. Labeled as "Personal Services" under the GAAs.
3. Frequently Asked Questions about the Disbursement Acceleration
Program (DAP) <http://www.dbm.gov.ph/?page_id=7362> (visited May 27,
2014).
4. See note 2.
5. Zero-based budgeting is a budgeting approach that involves the
review/evaluation of on-going 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/?
page_id=7364> (visited May 27, 2014).
7. Belgica v. Executive Secretary Ochoa, G.R. No. 208566, November 19,
2013.
8. The Villegas petition was originally undocketed due to lack of docket
fees being paid; subsequently, the docket fees were paid.
9. Rollo (G.R. No. 209287), p. 119.
10. Id. at 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.
11. Id. at 523-625.
12. Id. at 627-692.
13. Id. at 693-698.
14. Id. at 699-746.
15. Id. at 748-764.
16. Id. at 766-784.
17. Id. at 925.
18. Id. at 786-922.
19. Rollo (G.R. No. 209287), pp. 1050-1051 (Respondents' Memorandum).
11/9/2019 G.R. Nos. 209287, 209135, 209136, 209155, 209164, 209260, 209442,
20. Id. at 1044.

21. Id. at 1048.
22. Id. at 1053.
23. Id. at 1053-1056.
24. Id. at 1056.
25. Bernas, The 1987 Constitution of the Republic of the Philippines: A
Commentary, 2009 Edition, p. 959.
26. I RECORD of the 1986 Constitutional Commission 436 (July 10, 1986).
27. I RECORD of the 1986 Constitutional Commission, 439 (July 10,
1986).
28. 63 Phil. 139 (1936).
29. Id. at 157-158.
30. G.R. No. 153852, October 24, 2012, 684 SCRA 410.
31. Id. at 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.
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 non-interference.
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. . . . 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 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 970.
38. Supra note 7.
39. Oral Arguments, TSN of January 28, 2014, p. 14.
40. Id. at 23.
41. Funa v. Ermita, G.R. No. 184740, February 11, 2010, 612 SCRA 308,
319.
42. Funa v. Villar, supra note 36, at 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, 941 (6th Ed. 1991).
44. G.R. No. 191002, March 17, 2010, 615 SCRA 666.
11/9/2019 G.R. Nos. 209287, 209135, 209136, 209155, 209164, 209260, 209442,
45. Id. at 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.
50. Agan, Jr. v. Philippine International Air Terminals Co., Inc., note 46 at
645.
51. Magtolis-Briones, Leonor, Philippine Public Fiscal Administration,
National Research Council of the Philippines and Commission on Audit,
1983, p. 243.
52. Manasan, Rosario G., Public Finance in the Philippines: A Review of
the Literature, Philippine Institute for Development Studies Working Paper
81-03, March 1981, p. 37.
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 10.
56. Id. at 10-11.
57. Id. at 11.
58. Id. at 12.
59. Manasan, op cit., at. 39; Manasan, Budget Operations Manual Revised
Edition, Operations Budget Commission (1968), p. 3.
60. Magtolis-Briones, op cit., at 80.
61. Id.
62. http://www.dbm.gov.ph/?page_id=352. Visited on May 27, 2014.
63. Id.
64. Magtolis-Briones, op cit., p. 269.
65. http://www.dbm.gov.ph/?page_id=352. Visited on March 27, 2014.
66. http://budgetngbayan.com/the-budget-cycle/. Visited on March 27,
2014.
67. http://budgetngbayan.com/budget-101/budget.preparation.
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 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 operating expenditures as
<appropriations for the purchase of goods and services for current
consumption or within the fiscal year, including the acquisition of
11/9/2019 G.R. Nos. 209287, 209135, 209136, 209155, 209164, 209260, 209442,
furniture and equipment normally used in the conduct of government

operations, and for temporary construction of promotional, research
and similar purposes.>
71. Manasan, op.cit., at 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).
76. Magtolis-Briones, op.cit., at 383.
77. Id. at 139.
78. Quoted in Banzon Abello, op.cit., at 32-33.
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 at 140.
81. Id. at 141.
82. Id.
83. Id. at 142.
84. Id.
85. Manual on the New Government Accounting System, Accounting
Policies, Volume I, Chapter 1, Section 17 (For National Government
Agencies).
86. http://budgetngbayan.com/budget-101/budget-legislation.
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
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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.
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.
92. Section 25, 7, Article VI of the 1987 Constitution, thus:
xxx xxx xxx.
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.
xxx xxx xxx.
93. http://budgetngbayan.com/budget-101/budget-execution.
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. Belgica v. Executive Secretary, supra note 7 clarifies the distinction
between an NCA and SARO, viz.:
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
11/9/2019 G.R. Nos. 209287, 209135, 209136, 209155, 209164, 209260, 209442,
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. .
..
98. http://budgetngbayan.com/budget-101/budget-accountability.
99. Fisher, Presidential Spending Power, 1975, p. 165.
100. Keefe and Ogul, The American Legislative Process: Congress and
the States, 1993, p. 359.
101. Magtolis-Briones, op. cit., p. 79.
102. Diokno, Philippine Fiscal Behavior in Recent History, The Philippine
Review of Economics, Vol. XLVII, No. 1, June 1, 2010, p. 53.
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.
107. Public-Private Partnership.
108. 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
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/2012/06/12/0003330
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. Diokno, Philippine Fiscal Behavior in Recent History, The Philippine
Review of Economics, Vol. XLVII, No. 1, June 1, 2010, p. 51.
113. Id. at 52.
114. Rollo (G.R. No. 209287), p. 539, (Respondent's 1st Evidence Packet).
115. Id. at 526-529, (Respondent's 1st Evidence Packet).
116 Id. at 537-540.
117. Id. at 549-555.
118. Id. at 563-568.
119. Id. at 579-587.
120. Id. at 601-608.
11/9/2019 G.R. Nos. 209287, 209135, 209136, 209155, 209164, 209260, 209442,
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.
122. Rollo (G.R. No. 209287), p. 555, (Respondent's 1st Evidence Packet).
123. Id. at 185-189, (Respondent's Manifestation dated December 6,
2013).
124. Blacks' Law Dictionary (6th Ed.) p. 102.
125. G.R. No. 29627, December 19, 1989, 180 SCRA 254.
126. Id. at 160.
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/BudgetingandBudgetaryInstitutio
(last accessed April 9, 2014).
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/bjackson/ExecutiveSpendingPowers_8.pdf
(last accessed December 3, 2013).
130. Id. at 8.
131. Id.
132. Princeton University Press, 1975, pp. 261-262.
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, 1954, p. 319.
135. The Philippine Commission, which lasted from 1900 to 1916,
comprised the Upper House of the Philippines Legislature. The Philippine
Assembly, which existed from 1907 to 1916, served in its time as the Lower
House of the Philippine Legislature.
136. Waldby, op. cit., pp. 321-322.
137. In his Sponsorship Speech, Delegate Honesto Mendoza, the
Chairman of the Committee on Budget and Appropriations of the 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 9.
141. Id. at 10-11.
142. Demetria v. Alba, No. L-71977, February 27, 1987, 148 SCRA 208.
143. Id. at 214-215.
144. G.R. No. 188635, January 29, 2013, 689 SCRA 385, 402-404.
145. Constitutional and Legal Bases <http://www.dbm.gov.ph/?
page_id=7364> (visited March 27, 2014)
11/9/2019 G.R. Nos. 209287, 209135, 209136, 209155, 209164, 209260, 209442,
146. Rollo (G.R. No. 209442), p. 7.

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.
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.
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).
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.
155. Rollo (G.R. No. 209442), p. 23.
156. Rollo (G.R. No. 209287), p. 1060, (Memorandum for the
Respondents).
157. Rollo (209287), pp. 18-19.
158. Rollo (209442), pp. 21-22.
159. G.R. No. 113105, August 19, 1994, 235 SCRA 506, 545.
160. Webster's Third New International Dictionary.
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. 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).
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.
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).
11/9/2019 G.R. Nos. 209287, 209135, 209136, 209155, 209164, 209260, 209442,
170 See FY2011 National Expenditure Program, p. 1186, available at

http://www.dbm.gov.ph/wp-content/uploads/NEP2011/DOSTG-GAA.pdf.
171. SARO No. E-14-02254; Rollo (G.R. No. 209287), p. 630,
(Respondents' 2nd Evidence Packet).
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.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. Wander and Herbert (Ed.), Congressional Budgeting: Politics,
Process and Power (1984), at 133.
180. Philippine Constitution Association v. Enriquez, supra, note 159, at
522.
181. Stith, Kate, "Congress' Power of the Purse" (1988), Faculty
Scholarship Series, Paper No. 1267, p. 1345, available at
http://digitalcommons.law.yale.edu/cgi/viewcontent.cgi?
article=2282&context=fss_papers (last accessed March 29, 2014).
182. Id. at 1377.
183. TSN of January 28, 2014, pp. 42-45.
184. Rollo (G.R. No. 209287), p. 883, (Respondents' 7th Evidence Packet).
185. Id. at 562, (Respondents' 1st Evidence Packet).
186. See the OSG's Compliance dated February 14, 2014, Annex B, p. 2.
187. Rollo (G.R. No. 209287), p. 35, (Memorandum for the Respondents).
188. Id.
189. TSN of February 18, 2014, p. 32.
190. TSN of February 18, 2014, pp. 45-46.
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/?page_id=7366> (visited May 2,
2014).
11/9/2019 G.R. Nos. 209287, 209135, 209136, 209155, 209164, 209260, 209442,
193. Rollo (G.R. No. 209287), p. 95.

194. Glossary of Terms, BESF.
195. TSN, January 28, 2014, p. 106.
196. Rollo (G.R. No. 209155), pp. 327 & 337.
197. Id. at 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.
199. Rollo (G.R. No. 209155), pp. 337 & 339.
200. Other References: A Brief on the Special Purpose Funds in the
National Budget <http://www.dbm.gov.ph/?page_id=7366> (visited May 2,
2014).
201. Basic Concepts in Budgeting <http://www.dbm.gov.ph/wp-
content/uploads/2012/03/PGB-B1.pdf> (visited May 2, 2014).
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.
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.
205. See Fariñas v. Executive Secretary, G.R. No. 147387, December 10,
2003, 417 SCRA 503.
206. Commissioner of Internal Revenue v. San Roque Power Corporation,
G.R. No. 187485, October 8, 2013.
207. G.R. No. L-23127, April 29, 1971, 38 SCRA 429, 434-435.
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.
211. Commissioner of Internal Revenue v. San Roque Power Corporation,
G.R. No. 187485, October 8, 2013.
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.

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11/9/2019 G.R. Nos.

209287, 209135, 209136, 209155, 209164, 209260, 209442,

[G.R. No. 209287. July 1, 2014.]

MARIA CAROLINA P. ARAULLO, CHAIRPERSON, BAGONG

[G.R. No. 209135. July 1, 2014.]

AUGUSTO L. SYJUCO JR., Ph.D., petitioner, vs. FLORENCIO

[G.R. No. 209136. July 1, 2014.]

MANUELITO R. LUNA, petitioner, vs. SECRETARY

[G.R. No. 209155. July 1, 2014.]

ATTY. JOSE MALVAR VILLEGAS, JR., petitioner, vs. THE

[G.R. No. 209164. July 1, 2014.]

PHILIPPINE CONSTITUTION ASSOCIATION (PHILCONSA),

petitioners, vs. DEPARTMENT OF BUDGET AND

[G.R. No. 209260. July 1, 2014.]

INTEGRATED BAR OF THE PHILIPPINES (IBP), petitioner,

[G.R. No. 209442. July 1, 2014.]

GRECO ANTONIOUS BEDA B. BELGICA; BISHOP REUBEN

[G.R. No. 209517. July 1, 2014.]

CONFEDERATION FOR UNITY, RECOGNITION AND

[G.R. No. 209569. July 1, 2014.]

VOLUNTEERS AGAINST CRIME AND CORRUPTION

For resolution are the consolidated petitions assailing the

Responding to Sen. Estrada's revelation, Secretary Florencio Abad of

based budgeting findings; 5 and (2) the withdrawal of unobligated allotments

Nine petitions assailing the constitutionality of the DAP and the

(b) They authorize the disbursement of funds for

a. NBC No. 528 dated January 3, 2011 (Guidelines on

c. NBC No. 541 dated July 18, 2012 (Adoption of

a. Memorandum for the President dated October 12,

f. Memorandum for the President dated May 20, 2013

g. Memorandum for the President dated September

(4) Fourth Evidence Packet 14 — identifying the DAP-

G.R. No. 209135 (Syjuco) Certiorari, Prohibition and Mandamus

G.R. No. 209164 (PHILCONSA) Certiorari and Prohibition

The respondents argue that it is the application of the DAP to actual

Judicial power includes the duty of the courts of justice to

repositories of judicial power. 25 However, only the Court is a constitutionally

This is why the first part of the second paragraph of Section 1

Briefly stated, courts of justice determine the limits of

May I ask the Commissioner's opinion about that?

the judiciary mediates to allocate constitutional boundaries, it

What are the remedies by which the grave abuse of discretion

The concept of the remedy of certiorari in our judicial system

contemplation of law, such as when such judge, tribunal or board

A petition for prohibition is also not the proper remedy to assail

Necessarily, in discharging its duty under Section 1, supra, to set right

obligation of determining, in appropriate cases, the validity of any assailed

A moot and academic case is one that ceases to present a justiciable

Legal standing, as a requisite for the exercise of judicial review, refers

result of its enforcement, and not merely that he suffers

The Court has cogently observed in Agan, Jr. v. Philippine International

Except for PHILCONSA, a petitioner in G.R. No. 209164, the petitioners

b) Evolution of the Philippine

c) The Philippine Budget Cycle 66

The budget preparation phase is commenced through the issuance of a

On the other hand, public revenues complement public expenditures

More specifically, public revenues are classified as follows: 85 TDcCIS

General Income Specific Income