ARAULLO vs.

AQUINO GR 209287 July 1, 2014

FACTS:
On September 25, 2013, Sen. Jinggoy Estrada disclosed that he and several senators were
allotted additional P50M as incentive for voting in favor of CJ Coronas impeachment.

DBM Sec. Abad responded by issuing a statemebt saying the funds released were from the
Disbursement Acceleration Program (DAP) of the DBM, which was formulated to increase
spending for infra & other projects for the acceleration of the countrys economic expansion.

Further, press releases were posted in the DBM website expounding that releases of the DAP is
sourced from the following savings:
o Personnel services savings which were appropriated but will expire at yearend (kaya pala
tinipid kaming mga empleyado ng GOCCs by GCG during Penoys time! Grrr! Lahat ng bonuses
and benefits naming hino hold!)
o Unreleased allotments for programs earlier released to government agencies; and
o Unobligated allotments of slow-moving programs.

Petitioners now assail the constitutionality of DAP as well as other DBM issuances and Natioanl
Budget circulars, including the implementing circular NBC No. 541 entitled Adoption of
Operational Efficiency Measure Withdrawal of Agencies Unobligated Allotments as of June 30,
2012, alleging that NBC No. 541, which directed the withdrawal of unobligated allotments of
government agencies and offices with low levels of obligations, both for continuing and current
allotments.

ISSUES:
WON 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?

WON the DAP, NBC No. 541, and all other executive issuances implementing the DAP violate Sec.
25(5), Art. VI of the 1987 Constitution insofar as:
o They treat the unreleased appropriations and unobligated allotments withdrawn from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;
o They authorize the disbursement of funds for projects or programs not provided in the
GAAs for the Executive Department; and

WON the DAP violates:

o the Equal Protection Clause,
o the system of checks and balances, and
o the principle of public accountability considering that it authorizes the release of funds
without the request of legislators?

WON the Doctrine of Operative Fact is applicable?

HELD:
No. The SC agreed with the OSGs position that no law was necessary for the adoption and
implementation of the DAP because it was not a fund nor an appropriation but savings. The DAP as a
program is 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.
o The DAP was a government policy or strategy designed to stimulate the economy through
accelerated spending. In the context of the DAPs adoption and implementation being a
function pertaining to the Executive during the Budget Execution Stage to faithfully execute
the laws, Congress did not need to legislate to adopt or implement the DAP. Congress could
appropriate but would have nothing more to do during the Budget Execution Stage.

o 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
countrys economic situation. He could adopt a plan like the DAP for the purpose. He could
pool the savings and identify the PAPs to be funded under the DAP.

o The pooling of savings pursuant to the DAP, and the identification of the projects to be
funded under the DAP did not involve appropriation 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.

No. The transfer of appropriated funds, to be valid under Section 25(5), must be made upon a
concurrence of the following requisites, namely:

There is a law authorizing the President etc within their respective offices;

o Section 25(5) is not a self-executing provision of the Constitution. The GAA should
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 etc enjoying fiscal
autonomy, 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:
Section 53. Use of Savings. The President etc. enjoying fiscal
autonomy, are authorized to augment any item in this Act from savings
in other items of their respective appropriations.
The above provisos 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
 The provisions carried a different phrase ("to augment any item
in this Act"), and the effect was that the 2011 and 2012 GAAs
thereby literally allowed the transfer of funds from savings to
augment any item in the GAAs even if the item belonged to an
office outside the Executive.
To that extent , 2011 and 2012 GAAs contravened the
Constitution.

The funds to be transferred are savings generated from the appropriations for their
respective offices

o The petitioners claim that the funds used in the DAP were not actual savings within the
context of Section 25(5), supra, and the relevant provisions of the GAAs. The SC partially
agreed with the petitioners.
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.

In ascertaining the meaning of savings, certain principles should be borne in mind.

First: Congress wields the power of the purse and decides how the budget
will be spent; what PAPs to fund; and the amounts of money to be spent for
each PAP.
Second: The Executive is tasked to enforce the laws, to faithfully execute the
GAA, spend it according to the provisions, faithfully implement the PAPs,
and to limit the expenditures, unless exigencies result to deficiencies and
augmentation is authorized, subject to the conditions provided by law.
Third: The Presidents power to augment under the GAA is a concession of
the Congress that flexibility is necessary for budget execution. In making the
Presidents power to augment operative under the GAA, Congress
recognizes the need for flexibility in budget execution as it delegates a
fraction of its power to the Executive. Congress does not thereby allow the
Executive to override its authority over the purse as to let the Executive
exceed its delegated authority.
Fourth: Savings should be actual - real or substantial, something that exists
presently in fact.
 The power to augment is to be used when the funds purpose have
been satisfied or ceased to exist.
Unallotted or unreleased appropriations have not yet ripened into
categories from which savings can be generated.

The purpose of the transfer is to augment an item in the general appropriations law for
their respective offices.

For valid transfer of funds , 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.

By providing that the President etc. may be authorized to augment any item in
the GAA "for their respective offices," Section 25(5), 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.

Such transfers of funds are cross-border transfers or cross-border augmentations

which are constitutionally prohibited.

The records show that funds of P143,700,000.00 to P250,000,000.00 were

transferred under the DAP respectively to the COA and the House of
Representatives. Those transfers of funds, which constituted cross-border
augmentations for being from the Executive to the COA and the House of
Representatives.

Also, the President "made available" to the "Commission on Elections the savings of
his department upon [its] request for funds" This was another instance of a cross-
border augmentation.

o Sourcing the DAP from unprogrammed funds despite the original revenue targets not having
been exceeded was invalid.
The unprogrammed funds, as standby appropriations, were to be released only when there
were revenues in excess of what the programmed appropriations required.
Release of unprogrammed funds because there was an excess revenue as to one source
while all others were merely on target or even deficient, would be an unsound fiscal
management measure because it would disregard the budget plan and foster budget
deficits, in contravention of the Governments surplus budget policy.

No. The denial of equal protection of any law should be an issue to be raised only by the
legislators who may have been discriminated against in the release of funds under the DAP. 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.

Yes. Although the OSG rightly contends that the Executive was authorized to spend, such
authority did not translate to unfettered discretion that allowed the President to substitute his
own will for that of Congress.
 No. DAP constituted an assumption by the Executive of Congress power of appropriation. 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.

Yes. Doctrine of operative fact was applicable. The doctrine 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.

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.

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.

DISPOSITIVE PORTION:
The SC 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 conditions provided in the relevant General Appropriations Acts.