Republic of the Philippines

SUPREME COURT
Manila

En Banc

DAP DECISION CASE DIGEST - JULY 1, 2014
ARAULLO,et.al., vs Benigno Simeon Aquino III, GR.No. 209287

FACTS

Araullo vs Aquino (July 1, 2014, penned by Justice Lucas P. Bersamin) declared unconstitutional
four acts and practices under the Disbursement Acceleration Program, National Budget Circular No. 541
and related issuances. It did not declare the DAP unconstitutional, only the acts and practices under it,
unlike Belgica vs Ochoa (Nov. 13, 2013) which plainly declared the Priority Development Assistance
Fund unconstitutional. The four are worded in deep legalese and need to be explained for lay readers.

Annually, Congress approves the General Appropriations Act (GAA) or budget. In general, it
contains an estimate of revenues and funding sources, which are usually (1) taxes, (2) capital revenues
(like proceeds from the sales of assets), (3) grants, (4) extraordinary income (like dividends of
government corporations) and (5) borrowings.The budget also contains itemized public expenditures
allotted to the three main branches of government (executive, legislative and judicial) and the
independent agencies (Commission on Audit or COA, Commission on Elections or Comelec, Office of the
Ombudsman, etc.). The current budget totals about P2 trillion.

Often, the estimated revenues are exceeded by actual receipts. These excess funds are referred
to as unprogrammed funds. Examples are unexpected large dividends from government institutions like
the Social Security System and Government Service Insurance System. Often, too, the estimated
expenditures are not spent; hence savings occur.

The DAP aims to pool these unspent funds, and uses them to fund projects that stimulate the
economy. Citing the World Bank, the Supreme Courts decision (p.36) acknowledged the programs
success, saying that 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.

ISSUE:
Whether or not the DAP is unconstitutional?
Did the Supreme Court erred in ruling DAP as unconstitutional act?

RULING:

Yes DAP is unconstitutional and No, the Supreme Court did not erred in ruling it
Unconstitutional act. The SC says that the Constitution states, No public money shall be paid out of the
Treasury except in pursuance of an appropriation made by law. Also, No law shall be passed
authorizing the transfer of appropriations Under these provisions, money allotted for one program,
activity or project (PAP) cannot be spent for another PAP even if both are in the GAA. Congress cannot
even authorize the transfer of appropriations from one budget item to another.
However, the Constitution allows one limited exception to that rule: [T]he 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, by law, be authorized to augment any item
in the [GAA] (or budget) for their respective offices from savings in other items of their respective
appropriations (bold types mine). This exception is called the power of augmentation.

The bulk of DAP funds may have been pooled in strict adherence to this exception. However, the
Court found that these four acts and practices violated it:

(1) Only actual savings may be transferred from one budget item to another item in the GAA.
Savings are actual only when (a) the PAPs (projects, activities or programs) 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. (p.59)
Thus, the act or practice of transferring funds prior to the end of the fiscal year, which did not
meet any of those three instances, were deemed unconstitutional.

(2) Augmentation can be made only for items allocated for their respective offices, that is, within
the same branch or office. Thus, the act or practice of transferring savings from the executive to the
Congress, or to the Comelec, or to the COA, being cross-border transfers, were declared
unconstitutional.

(3) The funding of PAPs that are not covered by any appropriation in the GAA is also
unconstitutional because augmentation can be made only from one existing item to another existing item
in the budget. The President cannot use budgeted funds for PAPs not found in the GAA.

(4) Unconstitutional also is the use of unprogrammed funds in the absence of a legally required
certification by the national treasurer that the revenue collections exceeded the total of the revenue
targets.

Accountability. As a rule, an unconstitutional act or practice is void and cannot give rise to any
right or obligation. However, the Court held that the exception to this rule, the old doctrine of operative
fact, should be applied in the implementation of the DAP. (p.87) Under this doctrine, acts done in good
faith pursuant to a law or executive act that is later declared unconstitutional would remain valid and
enforceable. It also applies when the nullification of such acts would result in an injustice. In short,
unconstitutionality has prospective effects only.

Example: A bridge is constructed from illegally augmented funds. The government officials who
supervised in good faith the construction cannot be forced to reimburse the government. Neither may
injustice be heaped on suppliers of construction materials by refusing to pay them.
May the President, the author of the augmentation, be impeached? The Court did not take that up.
Neither will I. Impeachment is more political than legal. So, I will leave it to the politicians.