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Araullo vs Aquino

GR Nos. 209287m 209135, 209136, 209155, 209164, 209260, 209442, 209517 and 209569
July 1, 2014

When President Benigno Aquino III took office, his administration noticed the sluggish growth
of the economy. The World Bank advised that the economy needed a stimulus plan. Budget
Secretary Florencio Butch Abad then came up with a program called the Disbursement
Acceleration Program (DAP).

The DAP was seen as a remedy to speed up the funding of government projects. DAP enables
the Executive to realign funds from slow moving projects to priority projects instead of waiting
for next years appropriation. So what happens under the DAP was that if a certain
government project is being undertaken slowly by a certain executive agency, the funds
allotted therefor will be withdrawn by the Executive. Once withdrawn, these funds are
declared as savings by the Executive and said funds will then be reallotted to other priority
projects. The DAP program did work to stimulate the economy as economic growth was in fact
reported and portion of such growth was attributed to the DAP (as noted by the Supreme
Court).

Other sources of the DAP include the unprogrammed funds from the General Appropriations
Act (GAA). Unprogrammed funds are standby appropriations made by Congress in the GAA.
Meanwhile, in September 2013, Senator Jinggoy Estrada made an expos claiming that he, and
other Senators, received Php50M from the President as an incentive for voting in favor of the
impeachment of then Chief Justice Renato Corona. Secretary Abad claimed that the money
was taken from the DAP but was disbursed upon the request of the Senators.

This apparently opened a can of worms as it turns out that the DAP does not only realign funds
within the Executive. It turns out that some non-Executive projects were also funded; to name
a few: Php1.5B for the CPLA (Cordillera Peoples Liberation Army), Php1.8B for the MNLF
(Moro National Liberation Front), P700M for the Quezon Province, P50-P100M for certain
Senators each, P10B for Relocation Projects, etc.

This prompted Maria Carolina Araullo, Chairperson of the Bagong Alyansang Makabayan, and
several other concerned citizens to file various petitions with the Supreme Court questioning
the validity of the DAP. Among their contentions was:

DAP is unconstitutional because it violates the constitutional rule which provides that no
money shall be paid out of the Treasury except in pursuance of an appropriation made by law.
Secretary Abad argued that the DAP is based on certain laws particularly the GAA (savings and
augmentation provisions thereof), Sec. 25(5), Art. VI of the Constitution (power of the
President to augment), Secs. 38 and 49 of Executive Order 292 (power of the President to
suspend expenditures and authority to use savings, respectively).

Issues:
I. Whether or not the DAP violates the principle no money shall be paid out of the Treasury
except in pursuance of an appropriation made by law (Sec. 29(1), Art. VI, Constitution).
II. Whether or not the DAP realignments can be considered as impoundments by the
executive.
III. Whether or not the DAP realignments/transfers are constitutional.
IV. Whether or not the sourcing of unprogrammed funds to the DAP is constitutional.
V. Whether or not the Doctrine of Operative Fact is applicable.

HELD:

I. No, the DAP did not violate Section 29(1), Art. VI of the Constitution. DAP was merely a
program by the Executive and is not a fund nor is it an appropriation. It is a program for
prioritizing government spending. As such, it did not violate the Constitutional provision cited
in Section 29(1), Art. VI of the Constitution. In DAP no additional funds were withdrawn from
the Treasury otherwise, an appropriation made by law would have been required. Funds,
which were already appropriated for by the GAA, were merely being realigned via the DAP.

II. No, there is no executive impoundment in the DAP. Impoundment of funds refers to the
Presidents power to refuse to spend appropriations or to retain or deduct appropriations for
whatever reason. Impoundment is actually prohibited by the GAA unless there will be an
unmanageable national government budget deficit (which did not happen). Nevertheless,
theres no impoundment in the case at bar because whats involved in the DAP was the
transfer of funds.

III. No, the transfers made through the DAP were unconstitutional. It is true that the President
(and even the heads of the other branches of the government) are allowed by the Constitution
to make realignment of funds, however, such transfer or realignment should only be made
within their respective offices. Thus, no cross-border transfers/augmentations may be
allowed. But under the DAP, this was violated because funds appropriated by the GAA for the
Executive were being transferred to the Legislative and other non-Executive agencies.
Further, transfers within their respective offices also contemplate realignment of funds to an
existing project in the GAA. Under the DAP, even though some projects were within the
Executive, these projects are non-existent insofar as the GAA is concerned because no funds
were appropriated to them in the GAA. Although some of these projects may be legitimate,
they are still non-existent under the GAA because they were not provided for by the GAA. As
such, transfer to such projects is unconstitutional and is without legal basis.
On the issue of what are savings
These DAP transfers are not savings contrary to what was being declared by the Executive.
Under the definition of savings in the GAA, savings only occur, among other instances, when
there is an excess in the funding of a certain project once it is completed, finally discontinued,
or finally abandoned. The GAA does not refer to savings as funds withdrawn from a slow
moving project. Thus, since the statutory definition of savings was not complied with under
the DAP, there is no basis at all for the transfers. Further, savings should only be declared at
the end of the fiscal year. But under the DAP, funds are already being withdrawn from certain
projects in the middle of the year and then being declared as savings by the Executive
particularly by the DBM.

IV. No. Unprogrammed funds from the GAA cannot be used as money source for the DAP
because under the law, such funds may only be used if there is a certification from the
National Treasurer to the effect that the revenue collections have exceeded the revenue
targets. In this case, no such certification was secured before unprogrammed funds were used.

V. Yes. The Doctrine of Operative Fact, which recognizes the legal effects of an act prior to it
being declared as unconstitutional by the Supreme Court, is applicable. The DAP has definitely
helped stimulate the economy. It has funded numerous projects. If the Executive is ordered to
reverse all actions under the DAP, then it may cause more harm than good. The DAP effects
can no longer be undone. The beneficiaries of the DAP cannot be asked to return what they
received especially so that they relied on the validity of the DAP. However, the Doctrine of
Operative Fact may not be applicable to the authors, implementers, and proponents of the
DAP if it is so found in the appropriate tribunals (civil, criminal, or administrative) that they
have not acted in good faith.