G.R. No.

177131               June 7, 2011

BOY SCOUTS OF THE PHILIPPINES, Petitioner,

FACTS:

The Commission on Audit issued Resolution No. 99-011 on August 19, 1999 which provided for the conduct of
an annual financial audit of the Boy Scouts of the Philippines. In a letter, the BSP sought reconsideration of the
COA Resolution arguing that it is not subject to the Commission’s jurisdiction. It argued that the ruling in the
case of Boy Scouts of the Philippines vs. National Labor Relations Commission classifying the BSP as a
government-controlled corporation is anchored on the "substantial Government participation" in the National
Executive Board of the BSP. However, it asserted that such had already been amended by Republic Act No.
7278 which virtually eliminated the "substantial government participation" in the National Executive Board by
removing the President of the Philippines and executive secretaries, with the exception of the Secretary of
Education, as members thereof; and the appointment and confirmation power of the President of the
Philippines, as Chief Scout, over the members of the said Board. The BSP argued that it was not a
government instrumentality, agency, department or bureau as defined under the Administrative Code with its
governance becoming an overwhelmingly private affair or nature. It further asserted that unlike ordinary public
corporations, the assets and funds of the BSP are not derived from any government grant nor does it hold in
trust properties of the government.

Subsequently, a memorandum was issued wherein the COA General Counsel relayed that the audit would still
be conducted. It opined that Republic Act No. 7278 did not supersede the Court’s ruling in Boy Scouts of the
Philippines v. National Labor Relations Commission, even though said law eliminated the substantial
government participation in the selection of members of the National Executive Board of the BSP. The
Memorandum provided that the manner of creation and the purpose for which the BSP was created indubitably
prove that it is a government agency. Being a government agency, the funds and property owned or held in
trust by the BSP are subject to the audit authority of the Commission on Audit pursuant to Section 2 (1), Article
IX-D of the 1987 Constitution. Furthermore, it also cited that under the Administrative Code of 1987, the BSP
was designated as one of the attached agencies of the Department of Education, Culture and Sports (DECS).

Upon the BSP’s request, the audit was deferred for thirty (30) days. The BSP then filed a Petition for Review
with Prayer for Preliminary Injunction and/or Temporary Restraining Order before the COA. However, such
was denied by the COA which held that the BSP was under its audit jurisdiction. The BSP thereafter moved for
reconsideration which was likewise denied. Hence, a petition for prohibition with preliminary injunction and
temporary restraining order was filed before the Supreme Court against COA.

ISSUE: Whether or not the Boy Scouts of the Philippines falls under the COA’s audit jurisdiction?

RULING:

YES. The Supreme Court held that the BSP is a public corporation and its funds are subject to the COA’s audit
jurisdiction. It stated that the BSP, as presently constituted under Republic Act No. 7278, falls under the
second classification of juridical persons provided under par.2, Art. 2 of the Civil Code - other
corporations, institutions and entities for public interest or purpose created by law. The purpose of the BSP as
stated in its amended charter shows that it was created in order to implement a State policy declared in Article
II, Section 13 of the Constitution which was to inculcate in the youth patriotism and nationalism, and encourage
their involvement in public and civic affairs. Hence, the BSP, which was created by a special law to serve a
public purpose in pursuit of a constitutional mandate, comes within the class of "public corporations" defined by
paragraph 2, Article 44 of the Civil Code and governed by the law which creates it, pursuant to Article 45 of the
same Code.

The public, rather than private, character of the BSP is recognized by the fact that it is classified as an attached
agency of the DECS under Executive Order No. 292, or the Administrative Code of 1987. As an attached
agency, the BSP enjoys operational autonomy, as long as policy and program coordination is achieved by
having at least one representative of government in its governing board, which in the case of the BSP is the
DECS Secretary. In this sense, the BSP is not under government control or "supervision and control."
However, this characteristic does not make the attached chartered agency a private corporation covered by the
constitutional proscription in question.
The BSP is a public corporation or a government agency or instrumentality with juridical personality, which
does not fall within the constitutional prohibition in Article XII, Section 16, notwithstanding the amendments to
its charter. Not all corporations, which are not government owned or controlled, are ipso facto to be considered
private corporations as there exists another distinct class of corporations or chartered institutions which are
otherwise known as "public corporations." The ownership and control test is likewise irrelevant for a public
corporation like the BSP.

Assuming for the sake of argument that the BSP ceases to be owned or controlled by the government because
of reduction of the number of representatives of the government in the BSP Board, it does not follow that it also
ceases to be a government instrumentality as it still retains all the characteristics of the latter as an attached
agency of the DECS under the Administrative Code. Vesting corporate powers to an attached agency or
instrumentality of the government is not constitutionally prohibited and is allowed by the above-mentioned
provisions of the Civil Code and the 1987 Administrative Code.

It was not the intent of Congress in enacting Republic Act No. 7278 to give up all interests in basic youth
organization. Even though the amended BSP charter did away with most of the governmental presence in the
BSP Board, this was done to more strongly promote the BSP’s objectives. The amendments were not done
with the view of changing the character of the BSP into a privatized corporation. The BSP remains an agency
attached to a department of the government, the DECS, and it was not at all stripped of its public character.

Regarding the COA’s jurisdiction over the BSP, Section 8 of its amended charter allows the BSP to receive
contributions or donations from the government. Although the BSP had been subjected to government audit in
so far as public funds had been infused thereto, this practice should not preclude the exercise of the audit
jurisdiction of COA, clearly set forth under the Constitution. Since the BSP, under its amended charter,
continues to be a public corporation or a government instrumentality, The Court concluded that it is subject to
the exercise by the COA of its audit jurisdiction in the manner consistent with the provisions of the BSP
Charter.