9/15/2015 G.R. No.

127545

ENBANC

ANDRESSANCHEZ,LEONARDOG.R.No.127545
D.REGALA,RAFAELD.BARATA,
NORMAAGBAYANI,andCESARPresent:
N.SARINO,
Petitioners,PUNO,C.J.,
QUISUMBING,
YNARESSANTIAGO,
versusSANDOVALGUTIERREZ,
CARPIO,
AUSTRIAMARTINEZ,
CORONA,
CARPIOMORALES,
COMMISSIONONAUDIT,AZCUNA,
Respondent.TINGA,
CHICONAZARIO,
VELASCO,
NACHURA,
REYES,
DECASTRO,and
BRION,JJ.

Promulgated:

April23,2008

xx


DECISION

TINGA,J.:

The 1987 Constitution has made the Commission on Audit (COA) the guardian of public
funds, vesting it with broad powers over all accounts pertaining to government revenue and
expendituresandtheusesofpublicfundsandproperty,includingtheexclusiveauthoritytodefine
thescopeofitsauditandexamination,establishthetechniquesandmethodsforsuchreview,and
[1]
promulgateaccountingandauditingrulesandregulations. Itsexerciseofitsgeneralauditpower
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isamongtheconstitutionalmechanismsthatgivelifetothecheckandbalancesysteminherentin
[2]
ourformofgovernment.

TheexerciseofthispowerbytheDepartmentAuditoroftheDepartmentoftheInteriorand
[3]
LocalGovernment(DILG)isthesubjectoftheinstantPetitionforReview dated 10 February
1997.

Achronicleoftheoperativeincidentsisneeded.

In 1991, Congress passed Republic Act No. 7180 (R.A. 7180) otherwise known as the
GeneralAppropriationsActof1992.ThislawprovidedanappropriationfortheDILGunderTitle
XIIIandsetasidetheamountofP75,000,000.00fortheDILGsCapabilityBuildingProgram.

The usage of the Capability Building Program Fund (Fund) is provided under the Special
Provisionsofthelawasfollows:

SpecialProvisions

1. CapabilityBuildingProgramforLocalPersonnel.Theamounthereinappropriatedforthe
CapabilityBuildingProgramforlocalpersonnelshallbeusedforlocalgovernmentandcommunity
capabilitybuildingprograms,suchastrainingandtechnicalassistance,withthenecessarysupport
fortrainingmaterials,suppliesandfacilities:PROVIDED,Thatsavingsfromtheappropriationmay
beusedtoacquireequipment,exceptmotorvehicles,infurthersupportoftheprograms.

TheCapabilityBuildingProgramshallbeimplementednationwidebytheDepartmentofthe
Interior and Local Government through the Local Government Academy and shall involve local
officialsandemployees,includingbarangayofficials,electedandappointed.

TheappropriationsauthorizedhereinshallbeadministeredbytheDepartmentoftheInterior
and Local Government and shall be released upon submission of a work and financial plan
supportedbyadetailedbreakdownoftheprojects,activitiesandobjectsofexpendituresproposedto
befunded.

SavingsgeneratedoverandabovetherequirementsprescribedinSection18oftheGeneral
Provisions of this Act shall be made available for the Capability Building Program of the
Department of the Interior and Local Government for local officials and employees, subject to
Section40ofP.D.1177(Sec.35,BookVIofE.O.No.292).


On11November1991,Atty.HiramC.Mendoza(Atty.Mendoza),ProjectDirectorofthe
AdHocTaskForceforInterAgencyCoordinationtoImplementLocalAutonomy,informedthen
Deputy Executive Secretary Dionisio de la Serna of the proposal to constitute and implement a
shamrock type task force to implement local autonomy institutionalized under the Local
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GovernmentCodeof1991.

Thestatedpurposeforthecreationofthetaskforcewastodesignprograms,strategizeand
prepare modules for an effective program for local autonomy. The estimated expenses for its
operationwasP2,388,000.00foraperiodofsixmonthsbeginningon1December1991upto31
May1992unlesstheaboveceilingissoonerexpendedand/ortheprojectisearlierpreterminated.


The proposal was accepted by the Deputy Executive Secretary and attested by then DILG
SecretaryCesarN.Sarino,oneofthepetitionersherein,whoconsequentlyissuedamemorandum
for the transfer and remittance to the Office of the President of the sum of P300,000.00 for the
operationalexpensesofthetaskforce.AnadditionalcashadvanceofP300,000.00wasrequested.
TheseamountsweretakenfromtheFund.

Two(2)cashadvancesbothintheamountofP300,000.00werewithdrawnfromtheFund
by the DILG and transferred to the Cashier of the Office of the President. The Particulars of
Payment column of the disbursement voucher states that the transfer of funds was made to the
OfficeofthePresidentforAdHocTaskForceforInterAgencyCoordinationtoImplementLocal
[4]
Autonomy.

ThefirstcashadvanceintheamountofP300,000.00wasliquidatedinthefollowingmanner
althoughnoreceiptswerepresentedtosupporttheexpenditures:

PayrollP226,000.00
Officerentals60,000.00
Officefurnitures7,500.00
Officesupplies3,682.50
Xerox300.30
Transportationexpense406.00
Bankcharges75.00
Miscellaneous60.00
P298,023.80
[5]
Balance31March1992P1,976.00


ThereisnorecordoftheliquidationofthesecondcashadvanceintheamountofP300,000.00.

Upon postaudit conducted by Department auditor Iluminada M.V. Fabroa, however, the
amounts were disallowed for the following reasons stated in the 3rd Endorsement dated 25 May
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1992:

1.NolegalbasisforthecreatedTaskForcetoclaimpaymentthruDILGbywayofcashadvance.
2.Previouscashadvancegrantedtoaccountableofficerhasnotyetbeenliquidated.
3. Expendituresfundedfromcapabilitybuildingaresubjecttorestrictions/conditionsembodiedin
theSpecialProvisionsoftheDILGAppropriationsofR.A.7180whichshouldbemet.
[6]
4.Estimateofexpensescoveredbythecashadvancenotspecified.


ThedisallowancewasreiteratedintheNoticeofDisallowancedated29March1993,which
states:


The transfer of fund from DILG to the Office of the President to defray salaries of
personnel, office supplies, office rentals, foods and meals, etc. of an Ad Hoc Task Force for
InterAgency Coordination to Implement Local Autonomy taken from the Capability Building
[7]
ProgramFundisviolativeoftheSpecialProvisionsofR.A.7180.


ANoticeofDisallowancedated29March1993wasthensenttoMr.Sarino,etal.holding
thelatterjointlyandseverallyliablefortheamountanddirectingthemtoimmediatelysettlethe
disallowance.



Aggrievedbysuchaction,Mr.Sarino,etal.requestedreconsiderationofthedisallowance
onthefollowinggrounds:


1.Thatthetransferwasfortheoperationalexpensesofanadhoctaskforceforinteragency
coordinationtoimplementlocalautonomyhence,forapublicpurpose

2. Legally,thequestionofwhetherornotthetransferoffundsbytheDILGtakenfromthe
capability building program of the Office of the President is violative of R.A. 7180 is
exclusivelywithinthecompetenceandjurisdictionofthecourtsandnotofanyotheroffice.
Asitis,thematterinvolvesaprejudicialissuethatnecessitatespriorauthoritativedetermination
bythecourts.Unlessthereisapronouncementtothecontrary,thetransferoffundsforapublic
purposeeffectedbytheexecutivebranchofgovernmentthruthedepartmentheadispresumed
legal and regular. Likewise, the DILG Auditors conclusion of violation of the law cannot
overcome the presumption of legality and regularity of acts done by public officers in the
performanceofpublicduty.Atbest,suchconclusionisgratuitousanddevoidoflegalforceand
effect

3. That the alleged violation is not specific and stated with particularity so as to apprise the
respondentsofthenatureandcauseoftheallegedviolation.Legally,therefore,thedisallowance
iscompletelyvoidforbeingviolativeoftheconstitutionalguaranteeofdueprocessand

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4. InthecaseofBinamirav.Garrucho,188SCRA155,theSupremeCourtheldthattheactsof
department heads, unless reprobated or disapproved by the Chief Executive, performed and
promulgatedintheregularcourseofbusinessarepresumedvalidandpresumptivelyconsidered
[8]
actsofthePresidentofthePhilippines.


Countering the foregoing points raised in the request for reconsideration, the Department
Auditordeniedtherequest,thus:



1.Thattheexpenseswasforapublicpurpose.

Yes,itmaybegrantedthattheexpenseswasforapublicpurpose,butitwasdifferent
from the purpose for which the fund was created. Expenditures, as earlier pointed out, funded
from the Capability Building Program are subject to compliance to the restrictions/conditions
embodiedintheSpecialProvisionsoftheGeneralAppropriationsActof1992.

Section 37, P.D. 1177 provides that All money appropriated for functions, activities, projects and
programs shall be available solely for the specific purpose for which these are appropriated.
(Underscoringsupplied)

2. We believe that there is no prejudicial issue involved in this particular case that needs the
pronouncement by the Courts. It is clearly stated in the Special Provisions of the DILG
AppropriationsofR.A.No.7180thattheCapabilityBuildingProgramFundshallbeusedfor
local government and community capability building programs. Therefore the transfer and
expenditures of the funds in the Office of the Deputy Executive Secretary has completely
abandonedtheraisondetreforwhichthefundwasestablished.

Every expenditure or obligation authorized or incurred in violation of law shall be the
personalliabilityofthepersonswhoauthorizedtheexpenditure.Thereisnoneedfortheofficer
oremployeetomisappropriatepublicfundsbutmerelyappropriatingpublicfundsforapurpose
otherthanthatauthorizedbylaw.(Underscoringsupplied)

3. WebegtodisagreetotheCounselsclaimthattheallegedviolationwasnotspecificandstated
withparticularitysoastoapprisetheclientsofthenatureandcauseoftheallegedviolation.

Thegroundsfor our disallowancewerespecificallyenumerated inour3rdIndorsement
datedMay25,1992,totheFMSDirector,thisDepartment.

4. ThemeretransferofthefundfromDILGtotheOfficeoftheDeputyExecutiveSecretaryto
defray the salaries of the personnel, office supplies, office rentals, foods and meals, etc. is
alreadyinviolationoflaw.Section84(2)ofP.D.1445providesthatTrustfundsshallnotbe
paidoutofanypublictreasuryordepositoryexceptinfulfillmentofthepurposeforwhichthe
trustwascreatedorfundsreceived,anduponauthorizationofthelegislativebodyorheadofany
otheragencyofthegovernmenthavingcontrolthereof,andsubjecttopertinentbudgetlaw,rules
[9]
andregulations.(Underscoringsupplied)


Finding no reason to deviate from the findings of the Department Auditor, the COA
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[10]
affirmedthedisallowanceinitsassailedCOADecisionNo.96654 dated21November1996.

ItisworthnotingatthisjuncturethatwhileCommissionerSofronioB.Ursal(Commissioner
Ursal)signedtheassailedDecision,henonethelesssubmittedadissentingopinionstatingthatthe
transferoffundsfromtheFundtotheOfficeoftheExecutiveSecretaryfallswithintheauthority
ofthePresidenttoaugmentanyiteminthegeneralappropriationslawasprovidedinSec.25(5),
Art. VI of the 1987 Constitution. Thus, he concludes that the transfer is deemed an act of the
President.Further,theuseoftheFundbythetaskforcetoimplementlocalautonomyfallswithin
thepurposeforwhichtheFundwascreated.However,headdsthattheindividualdisbursements
madebythetaskforceforsuchexpensesassalaries,allowances,rentals,foodandthelikeshould
beauditedbytheAuditorfortheOfficeofthePresidentinaccordancewithexistingaccounting
[11]
andauditingrules.

PetitionersarguethatthetransferofthequestionedamountfromtheFundoftheDILGto
theOfficeofthePresidentwaslegalandthattheNoticeofDisallowancedated29May1993was
withoutbasis.TheyexplainthattheCapabilityBuildingProgramwhichwasfinancedbytheFund
wasadministeredbytheDILGandwasintendedasacomplementaryresourcetoaidtheDILGin
itstaskofpursuinganintensifiedprogramofenhancinglocalgovernmentautonomycapabilities.
Itwaspursuanttothisgoalthatataskforcewascreatedtodesignprograms,strategizeandprepare
modules for an effective program for local autonomy with the expenses therefor to be charged
againsttheFund.Thus,petitionersarguethatthepurposeofthetaskforcewasactuallywithinthe
frameworkoftheSpecialProvisionsofR.A.No.7180,andthetransferoffundstoeffectuatethis
purposewasnotviolativeofthesaidlawcontrarytotheDepartmentAuditorsconclusion.

Further,petitionersaverthatthelawdidnotprohibittheDILGfromdirectlycoordinating
withtheOfficeofthePresidentinattainingtheobjectivesoflocalautonomy.

The Office of the Solicitor General (OSG) filed a Manifestation and Motion in Lieu of
[12]
Comment dated19January1998,whichitlaterdisavowed,however,statingthatthepetitionis
meritorious.AccordingtotheOSGthen,farfrombeingcategoricallydifferentfromthepurpose
for which the Fund was created, the transfer of the amount in question complemented, if not
enhanced,theDILGsprogramtopromotelocalautonomy.ThetransferofaportionoftheFund
for the operational expenses of the task force to implement local autonomy did not therefore
violatetheSpecialProvisionsofR.A.No.7180.
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[13]
Because of the position initially taken by the OSG, the COA filed its own Comment
dated 16 March 1998, maintaining that it acted according to its constitutional mandate when it
disallowedthedisbursementconsideringthatthetransferoffundsfromtheDILGtotheOfficeof
the President was violative of the Special Provisions of R.A. No. 7180. The COA considers the
Fundatrustfundwhichmaynotbepaidoutexceptinfulfillmentofthepurposeforwhichitwas
created and upon authorization of the head of agency and subject to budget law, rules and
regulations.

[14]
PetitionersfiledtheirReply dated9March2001.Thereafter,thepartieswererequiredto
[15]
submittheirrespectivememorandaintheResolution dated12February2002.In compliance
[16]
withthisdirective,thepartiesfiledtheirmemoranda inreiterationoftheirrespectivepositions.

Forfurtherelucidationoftheissues,theCourtsetthecasefororalargument,crystallizing
thedecisiveissuesinthiscaseasfollows:



(1) WhetherthereislegalbasisforthetransferoffundsoftheCapabilityBuildingProgramFund
appropriated in the 1992 General Appropriation Act from the Department of Interior and Local
GovernmenttotheOfficeofthePresident

(2) Whether the conditions or requisites for the transfer of funds under the applicable law were
presentinthiscase

(3)WhethertheCapabilityBuildingProgramFundisatrustfund,aspecialfund,atrustreceiptora
regularappropriationandfinally

[17]
(4)WhetherthequestioneddisallowancebytheCommissiononAuditisvalid.


The parties were required to simultaneously submit their memoranda in amplification of
theirargumentsontheforegoingissues.

[18]
Retractingitspreviousstance,theOSGaversinitsMemorandum dated6July2005that
thetransferoffundsfromtheDILGtotheOfficeofthePresidenthasnolegalbasisandthatCOAs
disallowance of the transfer is valid. According to the OSG, the creation of a task force to
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implement local autonomy, if one was necessary, should have been done through the Local
GovernmentAcademywiththeapprovalofitsboardoftrusteesinaccordancewithR.A.No.7180.

Moreover,Sec.25(5),Art.VIoftheConstitutionauthorizesthetransferoffundswithinthe
OPifmadebythePresidentforpurposes

ofaugmentinganitemintheOfficeofthePresident.Inthiscase,itwasnotthePresidentbutthe
DeputyExecutiveSecretarywhocausedthetransfersandthelatterwasnotshowntohavebeen
authorizedbythePresidenttodoso.

The OSGs Memorandum also brings to the surface several facts which had theretofore
remainedhidden.Forinstance,itwasdisclosedthatthedisallowedtransferswerereleasedwithout
the submission of a work and financial plan supported by a detailed breakdown of the projects,
[19]
activities and objects of expenditures proposed to be funded. There was also no proper
liquidation of the P600,000.00 cash advance made to Atty. Mendoza who, in addition, was not
[20]
evenanemployeeeitheroftheDILGortheOfficeofthePresident.

In the absence of evidence of bad faith, malice or gross negligence, however, the OSG
submits that petitioners may not be held civilly and personally liable for the disallowed
expenditure.

[21]
TheCOA,initsMemorandum dated18July2005,reiteratesitspositionthatthereisno
legal basis for the transfers in question because the Fund was meant to be implemented by the
Local Government Academy. Further, transfer of funds under Sec. 25(5), Art. VI of the
Constitutionmaybemadeonlybythepersons

mentioned in the section and may not be redelegated being already a delegated authority.
Additionally,thefundstransferredmustcomeonlyfromsavingsoftheofficeinotheritemsofits
appropriationandmustbeusedforotheritemsintheappropriationofthesameoffice.Inthiscase,
therewerenosavingsfromwhichaugmentationcanbetakenbecausethereleasesoffundstothe
OfficeofthePresidentweremadeatthebeginningofthebudgetyear1992.

TheCOAalsopositsthatwhiletheFundisaregularappropriation,itpartakesthenatureof
a trust fund because it was allocated for a specific purpose. Thus, it may be used only for the
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specificpurposeforwhichitwascreatedorthefundreceived.TheCOAconcludesthatpetitioners
shouldbeheldcivillyandcriminallyliableforthedisallowedexpenditures.

[22]
Fortheirpart,petitionersmaintainintheirMemorandum thatthetransferoffundswas
never repudiated by the President and that operational control over the amount transferred
remainedwiththeDILGasevidencedbythefactthatliquidationwasdonebythelatterandnotby
theOfficeofthePresident.PetitionersalsoinsistthattheFundisaregularitemofappropriation
and not a trust fund because after the end of the calendar year, any unexpended amount will be
revertedtotheGeneralFund.

WeaffirmtherulingoftheCOA.

The COA is endowed with enough latitude to determine, prevent and disallow irregular,
[23]
unnecessary, excessive, extravagant or unconscionable expenditures of government funds. It
hasthepowertoascertainwhetherpublicfundswereutilizedforthepurposeforwhichtheyhad
beenintended.

TheCourthadthereforepreviouslyupheldtheauthorityoftheCOAtodisapprovepayments
which it finds excessive and disadvantageous to the Government to determine the meaning of
public bidding and when there is failure in the bidding to disallow expenditures which it finds
unnecessaryaccordingtoitsrulesevenifdisallowancewillmeandiscontinuanceofforeignaidto
[24]
disallowacontractevenafterithasbeenexecutedandgoodshavebeendelivered. Likewise,
we sustained the findings of the COA disallowing the disbursements of the National Home
Mortgage Finance Corporation for failure to submit certain documentary requirements and for
[25]
beingirregularandexcessive.

WehavealsoruledthatthefinaldeterminationoftheDepartmentofFinanceandtheBIRas
to a persons entitlement to an informers reward is conclusive only upon the executive agencies
[26]
concernedandnotontheCOA,thelatterbeinganindependentconstitutionalcommission. The
COAistraditionallygivenfreereinintheexerciseofitsconstitutionaldutytoexamineandaudit
expendituresofpublicfundsespeciallythosewhicharepalpablybeyondwhatisallowedbylaw.

Verily, it is the general policy of the Court to sustain the decisions of administrative

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authorities,especiallyonewhichisconstitutionallycreated,notonlyonthebasisofthedoctrineof
separationofpowersbutalsofortheirpresumedexpertiseinthelawstheyareentrustedtoenforce.
[27]
Itis,infact,anoftrepeatedrulethatfindingsofadministrativeagenciesareaccordednotonly
respectbutalsofinalitywhenthedecisionandorderarenottaintedwithunfairnessorarbitrariness
[28]
thatwouldamounttograveabuseofdiscretion.

ItisonlywhentheCOAhasactedwithoutorinexcessofjurisdiction,orwithgraveabuse
of discretion amounting to lack or excess of jurisdiction, that this Court entertains a petition
[29]
questioningitsrulings.

WefindnograveabuseofdiscretiononthepartoftheCOAinissuingtheassailedDecision
aswillbediscussedhereafter.

Petitioners have flipflopped on whether an actual transfer of the disallowed amount had
takenplace.Inresponseapointedquestionduringoralargument,counselforpetitionersstatedthat
[30]
therewasnotransferofevenacentavooftheP600,000.00totheOfficeofthePresident. On
[31]
theotherhand,intheirMemorandum dated28August2005,petitionersaverthatthetransfer
offundswasmadebytheDILGtotheOfficeofthePresident,throughtherequestofthenDeputy
Executive Secretary Dionisio de la Serna. The transfer of funds was never repudiated nor
[32]
questionedbythePresident.

TheOSG,ontheotherhand,unmistakablyconfirmstheactualtransferinitsMemorandum
attachingthedisbursementvoucherandreceiptscoveringthetransferoffundsfromtheDILGto
theOfficeofthePresident.

The resolution of these divergent theories is critical. If, on one hand, there was no actual
transferoffunds,theproprietyofthedisallowancewouldbeevaluatedonthebasisofwhetherthe
purposeforwhichthefundwasusedwasindeedviolativeofR.A.No.7180.Ontheotherhand,if
therewasanactualtransferoffunds,theCourtwouldhavetoascertainwhetherthecriterialaidout
inSec.25(5),Art.VIofthe1987Constitutionhadbeenmet.

In the following exchange between then Justice (now Chief Justice) Puno and COA
AssistantCommissionerRaquelHabitan,thelatterreiteratedthatpetitionershavealwaysstoodpat
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ontheirargumentthattherewasatransferoffundsbutthatthetransferwasvalidasitwasfora
publicpurpose:

JUSTICEPUNO:

MayIgotothequestionoftransfer,amIcorrectinassumingthatthiscasewasresolvedbyyour
officeonthetheorythatthetransferoffundsviolatedtheprovisionoftheConstitutionandrelated
laws?

COMMISSIONERHABITAN:

Yes,YourHonor.

JUSTICEPUNO:
Wasthequestionoftransferanissueraisedbythepetitionerswhenthiscasewasunder
litigationuptothetimewhenitreachedyouroffice.Inotherwords,didthepetitionersever
raisetheissuethattherewasnotransferofanyfundsinvolvedinthecase?

COMMISSIONERHABITAN:
Your Honor, in the motion for reconsideration of then Secretary Sarino when he
requestedreconsiderationofdisallowancehereliedonthefollowinggroundsthatthetransfer
was for the operational expenses of an Ad Hoc Task Force for inter agency coordination
implementlocalautonomyhenceforapublicpurposethatwasthenumberonegroundforthe
motionforreconsiderationforthedisallowance,YourHonor.




JUSTICEPUNO:

ButdidtheyevertakethepositionthatindeedtherewasnotransferoffundsfromtheDILGtothe
OfficeofthePresidentandthenback,wasthatpositiontakenbypetitioner?

COMMISSIONERHABITAN:

But the records will show Your Honor that there was two (2) separate vouchers one for Three
HundredThousandeachwhichwasactuallydisallowedbytheCOA,YourHonor.

JUSTICEPUNO:

No,Iamaskingyouwhetherthepetitionersevertookthatpositionthattherewasnotransfer
offundsatallfromtheDILGtotheOfficeofthePresident.IaskthatquestionbecauseIam
confused by the change of answers of the counsel for the petitioners. So, I am asking that
questionwhetherthefactoftransferwasasubjectoflitigationuptoyouroffice.

COMMISSIONERHABITAN:

Yes,YourHonor,IamreadingtheCOAdecisionitselfandinthemotionforreconsideration
of Secretary Sarino. It was one of the grounds relied upon, that the transfer was for the
operational expenses. He tried to justify that the operational expenses of the Ad Hoc Task
Forcewasforapublicpurpose.

JUSTICEPUNO:

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Heconcedesthattherewasatransfer,butthedefensewasthevalidityofthetransfer?

COMMISSIONERHABITAN:

Yes,YourHonor.

JUSTICEPUNO:

Whatisthetestonwhethertherewasatransferoffundsfromoneagencytoanotheragency?Letus
takeforexample,asituationwhereaTaskForceiscreatedandthetaskofthatcommitteeissubject
thatproperlybelongsinthiscasewiththeDILGandsothetaskforceagreedthatdisbursementsof
moneyshouldbeundertakenandcontrolledbytheheadoftheDILG,wouldthefactofcontrolof
disbursementshowthattherewasnotransferoffunds?

COMMISSIONERHABITAN:

Buttheycannoterasethefactfortherecordofthecasethatthereweretwo(2)separatevouchersas
Isaid.

JUSTICEPUNO:

Exactly,Iamaskingyouthatquestionwouldthemerefactthatdisbursementswereunderthe
control of the DILG, would that lead to the conclusion that there was no transfer of funds
fromtheDILGtotheOfficeofthePresident?

COMMISSIONERHABITAN:

But the check, Your Honor, was in the name of the Task Force. So, evidently there was an
actual transfer of the funds from DILG to the Office of the President pursuant to the
[33]
MemorandumofAgreementcreatingtheTaskForce. [Emphasissupplied]


Thetheorythattherewasanactualtransferoffundsbutthesamewasforapublicpurpose
hasbeenatthecoreofpetitionersargumentssincetheyrequestedreconsiderationoftheNoticeof
Disallowancedated29March1993.EventheirpleadingsbeforetheCourtrevealanunwavering
adherencetotheirtheorythatthetransferredfundsshouldnothavebeendisallowedbecausethey
wereusedforapublicpurpose.

Commissioner Ursals dissent, which first brought to fore the opinion that the disallowed
transferwasavalidexerciseofthePresidentspowertoaugmentunderSec.25(5),Art.VIofthe
1987 Constitution, is therefore clearly just a gratuitous argument because petitioners themselves
neverjustifiedthetransferasanexerciseofthePresidentsconstitutionalprerogative.

Atanyrate,inordertofinallylaythiscasetorest,weshalldiscusswhetherthedisallowedtransfer
satisfiesthestandardlaiddownfortheaugmentationfromsavingsunderSec.25(5),Art.VIofthe
1987Constitution.

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TheGeneralProvisionsofR.A.No.7180providesthat[E]xceptbyactoftheCongressof
the Philippines, no change or modification shall be made in the expenditure items authorized in
this Act and other appropriations laws unless in cases of augmentations from savings in
[34]
appropriationsasauthorizedunderSection25(5)ofArticleVIoftheConstitution.

Sec.25(5),Art.VIofthe1987Constitution,inturn,provides:

Sec.25(5)NolawshallbepassedauthorizinganytransferofappropriationsHowever,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
authorizedtoaugmentanyiteminthegeneralappropriationslawfortheirrespectiveofficesfrom
savingsinotheritemsoftheirrespectiveappropriations.


ItisimportanttounderscorethefactthatthepowertotransfersavingsunderSec.25(5),Art.
VIofthe1987ConstitutionpertainsexclusivelytothePresident,thePresidentoftheSenate,the
SpeakeroftheHouseofRepresentatives,theChiefJusticeoftheSupremeCourt,andtheheadsof
ConstitutionalCommissionsandnoother.

[35]
In Philippine Constitution Association v. Enriquez, the Court declared that individual
members of Congress may only determine the necessity of the realignment of savings in the
allotmentsfortheiroperatingexpensesbecausetheyareinthebestpositiontoknowwhetherthere
are savings available in some items and whether there are deficiencies in other items of their
operatingexpensesthatneedaugmentation.However,itistheSenatePresidentandtheSpeakerof
[36]
theHouseofRepresentativeswhoshallapprovetherealignment.

In the same case, the Court also ruled that the Chief of Staff of the Armed Forces of the
Philippinesmaynotbegivenauthoritytotransferfundsunderthisarticlebecausetherealignment
ofsavingstoaugmentitemsinthegeneralappropriationslawfortheexecutivebranchmustand
[37]
canbeexercisedonlybythePresidentpursuanttoaspecificlaw.

Parenthetically, petitioners fail to point out to the Court the specific law and provision
thereofwhichauthorizesthetransferoffundsinthiscase.

Thus, the submission that there was a valid transfer of funds within the Executive
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Departmentshouldberejectedasitoverlooksthefactthatthepowerandauthoritytotransferin
this case was exercised not by the President but only at the instance of the Deputy Executive
Secretary,nottheExecutiveSecretaryhimself.EveniftheDILGSecretaryhadcorroboratedthe
initiativeoftheDeputyExecutiveSecretary,itdoesnotevenappearthatthematterwasauthorized
bythePresident.Morefundamentally,aswillbeshownlater,eventhePresidenthimselfcouldnot
havevalidlyauthorizedthetransferundertheConstitution.
ThedeliberationsoftheConstitutionalCommissionareinstructiveasregardstheextentof
thePresidentspowertoaugment:


MR.SARMENTO:Ihaveonelastquestion.Section25,paragraph(5)authorizestheChief
Justice of the Supreme Court, the Speaker of the House of Representatives, the President, the
PresidentoftheSenatetoaugmentanyitemintheGeneralAppropriationsLaw.Dowehavealimit
intermsofpercentageastohowmuchtheyshouldaugmentanyitemintheGeneralAppropriations
Law?

MR.AZCUNA:Thelimitisnotinpercentagebutfromsavings.Soitisonlytotheextentof
[38]
theirsavings.

The1973Constitutioncontainedanidenticalprovision:

Sec.16(5).Nolawshallbepassedauthorizinganytransferofappropriations,however,the
President,thePrimeMinister,theSpeaker,theChiefJusticeoftheSupremeCourt,andtheheadsof
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.

[39]
Construingthisprovision,theCourtruledinthepreeminentcaseofDemetriav.Alba:




The prohibition to transfer an appropriation for one item to another was explicit and
categoricalunderthe1973Constitution.However,toaffordtheheadsofthedifferentbranchesof
the government and those of the constitutional commissions considerable flexibility in the use of
publicfundsandresources,theconstitutionallowedtheenactmentofalawauthorizingthetransfer
offundsforthepurposeofaugmentinganitemfromsavingsinanotheritemintheappropriation
concerned.Theleewaygrantedwasthuslimited.Thepurposeandconditionsforwhichfunds
maybetransferredwerespecified,i.e.transfermaybeallowedforthepurposeofaugmenting
an item and such transfer may be made only if there are savings from another item in the
appropriationofthegovernmentbranchorconstitutionalbody.[Emphasissupplied]


Thus, we declared unconstitutional par. 1, Sec. 44 of Presidential Decree No. 1177 which
authorizedthePresidenttotransferanyfund,appropriatedforthedifferentdepartments,bureaus,
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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 because it unduly
overextendstheprivilegegrantedunderSec.16(5)ofthe1973Constitution.

We ruled that the President cannot 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,withoutregardtowhetherthefundstobetransferredareactuallysavingsintheitem
from which the same are to be taken, or whether or not the transfer is for the purpose of
[40]
augmentingtheitemtowhichthetransferistobemade.

R.A.7180containsasimilarprovisiononthePresidentspowertoaugmentandprovidesthe
meaningofsavingsandaugmentation,thus:


Sec. 17. Use of Savings. The President of the Philippines, the President of the Senate, the
Speaker of the House of Representatives, the Chief Justice of the Supreme Court, the Heads of
Constitutional Commissions under Article IX of the Constitution, the Ombudsman and the
Commission on Human Rights are hereby authorized to augment any item in this Act for their
respectiveofficesfromsavingsinotheritemsoftheirrespectiveappropriations.

xxx

Sec.19.MeaningofSavingsandAugmentation.Savingsrefertoportionsorbalancesofany
programmedappropriationfreeofanyobligationorencumbrancestillavailableafterthesatisfactory
completion or unavoidable discontinuance or abandonment of the work, activity or purpose for
which the appropriation is authorized, or arising from unpaid compensation and related costs
pertaining to vacant positions and leaves of absence without pay. Augmentation implies the
existence in this Act of an item, project, activity or purpose with an appropriation which upon
implementation or subsequent evaluation of needed resources is determined to be deficient. In no
case, therefore, shall a nonexistent item, project, activity, purpose or object of expenditure be
fundedbyaugmentationfromsavingsorbytheuseofappropriationsauthorizedotherwiseinthis
[41]
act.

Clearly,therearetwoessentialrequisitesinorderthatatransferofappropriationwiththe
corresponding funds may legally be effected. First, there must be savings in the programmed
appropriationofthetransferringagency.Second,theremustbeanexistingitem,projectoractivity
withanappropriationinthereceivingagencytowhichthesavingswillbetransferred.
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Actualsavingsisasinequanontoavalidtransferoffundsfromonegovernmentagencyto
another.Thewordactualdenotesthatsomethingisrealorsubstantial,orexistspresentlyinfact
[42]
asopposedtosomethingwhichismerelytheoretical,possible,potentialorhypothetical.

Asacaseinpoint,theChiefJusticehimselftransfersfundsonlywhenthereareactual
[43]
savings,e.g.,fromunfilledpositionsintheJudiciary.

The thesis that savings may and should be presumed from the mere transfer of funds is
plainlyanathematothedoctrinelaiddowninDemetriav.Albaasitmakestheprohibitionagainst
transfer of appropriations the general rule rather than the stringent exception the constitutional
framers clearly intended it to be. It makes a mockery of Demetria v. Alba as it would have the
Courtallowthemereexpectancyofsavingstobetransferred.


Contrarytoanothersubmissioninthiscase,thePresident,ChiefJustice,SenatePresident,
and the heads of constitutional commissions need not first prove and declare the existence of
savingsbeforetransferringfunds,theCourtinPhilconsav.Enriquez,supra,categoricallydeclared
that the Senate President and the Speaker of the House of Representatives, as the case may be,
shall approve the realignment (of savings). However, [B]efore giving their stamp of approval,
thesetwoofficialswillhavetoseetoitthat:(1)Thefundstoberealignedortransferredare
actuallysavingsintheitemsofexpendituresfromwhichthesamearetobetakenand(2)
The transfer or realignment is for the purpose of augmenting the items of expenditure to
[44]
whichsaidtransferorrealignmentistobemade.
Asitis,thefactthatthepermissibletransferscontemplatedbySection25(5),ArticleVIof
the 1987 Constitution would occur entirely within the framework of the executive, legislative,
judiciary,ortheconstitutionalcommissions,alreadymakeswantonandunmitigatedmalversation
ofpublicfundsalltooeasy,withouttheCourtabettingitbyrulingthattransferoffundsipsofacto
denotestheexistenceofsavings.

Precisely,therestrictiononthetransferoffunds,andsimilarconstitutionallimitationssuch
[45]
asthespecificationofpurposeforspecialappropriationsbill, therestrictionondisbursement
[46] [47]
ofdiscretionaryfunds, theconditionsonthereleaseofmoneyfromtheTreasury, among
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[48]
others,wereallsafeguardsdesignedtoforestallabusesintheexpenditureofpublicfunds.

The following exchange between Mdme. Justice SandovalGutierrez and counsel for
petitionersinexorablyrevealsthatpetitionershadknownthattherewerenosavingsintheDILGat
thetimeofthequestionedtransfers,thus:


JUSTICEGUTIERREZ:

All Right, according to the law augmentation implies the existence of an item, project,
activity or purpose with an appropriation upon which implementation or subsequent evaluation of
neededresourcesisdeterminedtobedeficient,myquestionisisthereafundinginthetaskforceto
beaugmentedorwasthereinsufficientfundsinthetaskforcetobeaugmented?

ATTY.MADRIAGA:

IfYourHonorsplease,IamnotprivytotheappropriationfortheOfficeofthePresident,butwe
know,YourHonor,isthattheseamountofSixHundredThousandPesoswasonlytoaugmentorto
increasewhateverfundsperhapswouldbeundertheOfficeofthePresidentforsuchagargantuan
taskastheimplementationorpreparationfortheimplementationoftheCode,YourHonor.So,Iam
sorrybutIdonnothaveknowledgeastotheappropriationsoftheOfficeofthePresidentinregard
tothistypeofactivities,YourHonor.

JUSTICEGUTIERREZ:

In that case, Counsel, you cannot say categorically that the transfer is valid because you
cannotinformtheCourtwhetherornottherewasaneedtoaugmentandwhetherornotthere
wasreallyafunding,asufficientfundingforthetaskforce,isthatright?

ATTY.MADRIAGA:

Yes,YourHonor.

JUSTICEGUTIERREZ:

Secondrequirementisthattheremustbeactualsavingsintheitemfromwhichthesamearetobe
taken,canyoutellusnowifyouknowforafactthattherewereactualsavingsbeforethefundwas
transferred?

ATTY.MADRIAGA:

If Your Honor please, the transfer of funds was made at the start of the calendar year 1992. The
GeneralAppropriationsAct,RepublicAct7180tookeffectthatyear.So,Iwouldsurmise,Your
Honors,soasofthattimetherewasnosavingsasyetthatwasaccumulatedbythedepartment
butbecauseoftheexigencyofthepurpose,YourHonor,consideringthattheDepartmentofInterior
and Local Government had only two (2) months and twenty (20) days for the preparation of the
implementation oftheLocalGovernmentCodewhich wassigned,asIsaid,onOctober10,1991
andwhichwassupposedtobecomeeffectiveonJanuary1,1992,therewastheurgentneed,Your
Honor,toprepareandtherewasthereforethattransferoffunds,YourHonor.


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JUSTICEGUTIERREZ:

Whatyouaresayingrightnowisthatactuallytherewerenosavingstobetransferred?

ATTY.MADRIAGA:

[49]
Asofthattime,YourHonor.[Emphasissupplied]


Further,therecordsofthiscaseunmistakablypointtotherealitythattherewerenosavings
atthetimeofthequestionedtransfer.Tobeginwith,thefirstdisallowedvoucherintheamountof
P300,000.00waspaidunderCheckNo.160404dated31January1992.Therecordsindicatethat
[50]
the second transfer occurred on 28 April 1992. Presumably, the disallowed amount was
[51]
remittedtoandspentbytheadhoctaskforcewithinthefirsttwoquartersoffiscalyear1992.
TherecouldnothavebeensavingsfromtheFundon31January1992becausethe1992GAAtook
[52]
effectonlyon1January1992or30daysbefore.

Obviously,theamounttransferredfromtheFunddidnotconstitutesavingsastherewereno
suchsavingsatthetimeofthetransfer.Itispreposteroustopronouncethatsavingsalreadyexisted
asearlyas31January1992.Itisevenmoreridiculoustoclaimthatsavingsmaybepresumedfrom
[53]
themeretransferoffunds.

[54]
The fact that the subsequent years appropriations acts, i.e., the 1993 and 1994 GAA,
providedanappropriationfortheCapabilityBuildingProgram,moreover,signifiesthattherewere
nosavingsfromtheFundfromtheprioryearsappropriationinthe1992GAAthatcouldhavebeen
validlytransferred.

TheappropriationfortheCapabilityBuildingProgramwaspresentedinthe1992GAAin
[55]
thefollowingmanner:
.
B.Locally PersonalServices Maintenanceand CapitalOutlays Total
FundedProjects OtherOperating
Expenses
.
4.Capability 75,000,000 75,000,000
BuildingProgram


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It is worthy of note, therefore, that the 1992 GAA only provided an appropriation for
maintenance and other operating expenses in the appropriation for the Capability Building
Program,andnotasinglecentavoforcapitaloutlayorforpersonalservices.

Maintenance and other operating expenses cover traveling expense communication
services repair and maintenance of government facilities use, repairs and maintenance of
government vehicles transportation services supplies and materials rents interests grants,
subsidies and contributions awards and indemnities loan repayments and sinking fund
contributionslosses/depreciation/depletionwater,illuminationandpowerservicesocialsecurity
benefits, rewards and other claims auditing services training and seminars extraordinary and
miscellaneous expenses confidential and intelligence expenses anti
insurgency/contingency/emergency expenses taxes and other duties trading/production
advertising and publication expenses fidelity bond and insurance premiums loss on foreign
exchangecommitmentfees/chargesandotherservicessuchasrepairsandmaintenanceprinting
andbindingsubscriptiontoperiodicalsandmagazinesradiocast,telecastanddocumentaryfilms
[56]
legalexpensessecurityandjanitorialservicesandmealandtransportationallowance.

Personalservices,ontheotherhand,includethepaymentofsalariesandwagesper diem
[57]
compensationsocialsecurityinsurancepremiumovertimepayandcommutableallowances,
whilecapitaloutlaysrefertoappropriationsforthepurchaseofgoodsandservices,thebenefitsof
which extend beyond the fiscal year and which add to the assets of government, including
investmentsinthecapitalofgovernmentownedorcontrolledcorporationsandtheirsubsidiaries
[58]
aswellasinvestmentsinpublicutilitiessuchaspublicmarketsandslaughterhouses.

Maintenance and operating expenses and personal services are classified as current
operating expenditures or appropriations for the purchase of goods and services for current
[59]
consumptionorforbenefitsexpectedtoterminatewithinthefiscalyear.

Bythenatureofmaintenanceandoperatingexpenses,savingsmaygenerallybedetermined
attheendoftheyear,orearlierincaseofcompletion,discontinuanceorabandonmentofthework
for which the appropriation was authorized. In contrast, savings from personal services may
generally be determined even at the opening of the fiscal year in case of unpaid compensation
pertainingtovacantpositionsandleavesofabsencewithoutpay.

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Itshouldbeemphasizedthatthe1992GAAdidnotprovideanappropriationforpersonal
services for the Capability Building Program. Savings from vacant positions which pertain to
personal services, therefore, may not be considered savings from the Fund which may be
transferred.

Itisoddthatduringoralargument,petitionersdidnotbothertoasserttotheCourtthatthere
was actual savings from the Fund which could have been transferred, prompting Justice (later
Chief Justice) Panganiban to point out that petitioners should have ascertained the existence of
actualsavingslestthepetitionbedismissedasitisbasedonspeculation.

JUSTICEPANGANIBAN:

SoyoustillagreewiththepositionofJusticeGutierrezthatfirst,thefirstrequirementisthatthere
mustbeanexistingitemtobeaugmented.Meaning,thereisinsufficiencyoffundsinthatitemand
then there are savings in another item in another department of government which can be
transferred?

ATTY.MADRIAGA:

Yes,YourHonor.

JUSTICEPANGANIBAN:

Butyouarenotawareofanysavings,actualsaving,itisjustprojectedsaving?

ATTY.MADRIAGA:

Atthattime,YourHonor,Isaid.



JUSTICEPANGANIBAN:

Howaboutnow?


ATTY.MADRIAGA:

YourHonor?
Nowwasthereanactualsaving?
IthinktheCommissiononAuditwouldbeinabetterpositiontoanswerthat,YourHonor,because
theyareinpossessionoftherecords(interrupted)

JUSTICEPANGANIBAN:

Butwhenyoufiledyourpetitionhereyoumusthaveresearchedonthiswhetherinfacttherewas
savingstotransfer.

ATTY.MADRIAGA:

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Asamatteroffact,YourHonor,(interrupted)

JUSTICEPANGANIBAN:

[60]
Otherwise,yourpetitionwouldhavebeenbasedonmerespeculation?


From the foregoing, there is no question that there were no savings from the Fund at the
timeofthetransfer.TheCourtcannotholdontothedisputablepresumptionsthatofficialduty
hadbeenregularlyperformedandthatthelawhadbeenobeyed.

Furthermore,the1992GAAitselfforeclosestheuseofsavingsfromtheFundforpurposes
other than those for which it was established as specified under the law. The Special Provisions
plainlystate:


SpecialProvisions

2. CapabilityBuildingProgramforLocalPersonnel.Theamounthereinappropriatedforthe
CapabilityBuildingProgramforlocalpersonnelshallbeusedforlocalgovernmentandcommunity
capabilitybuildingprograms,suchastrainingandtechnicalassistance,withthenecessarysupport
for training materials, supplies and facilities: PROVIDED, That savings from the appropriation
maybeusedtoacquireequipment,exceptmotorvehicles,infurthersupportoftheprograms.

TheCapabilityBuildingProgramshallbeimplementednationwidebytheDepartmentofthe
Interior and Local Government through the Local Government Academy and shall involve local
officialsandemployees,includingbarangayofficials,electedandappointed.

TheappropriationsauthorizedhereinshallbeadministeredbytheDepartmentoftheInterior
and Local Government and shall be released upon submission of a work and financial plan
supportedbyadetailedbreakdownoftheprojects,activitiesandobjectsofexpendituresproposedto
befunded.

Savings generated over and above the requirements prescribed in Section 18 of the
GeneralProvisionsofthisActshallbemadeavailablefortheCapabilityBuildingProgramof
the Department of the Interior and Local Government for local officials and employees,
subjecttoSection40ofP.D.1177(Sec.35,BookVIofE.O.No.292).


Thus, assuming that there were savings from the appropriation for the Executive
Department, the Capability Building Program should have been the recipient of any transfer
[61]
thereof subject only to Section 18 of the 1992 GAA. The Fund should have been the
beneficiaryandnotthebenefactor.Moreover,suchsavingsshouldhavefirstbeenusedtoacquire
equipmentinfurtheranceoftheCapabilityBuildingProgramaswastheclearintentofthelaw.
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Asregardstherequirementthattherebeanitemtobeaugmented,whichisalsoasinequa
nonlikethefirstrequirementontheexistenceofsavings,therewasnoitemforaugmentationin
the appropriation for the Office of the President at the time of the transfers in question.
Augmentation denotes that an appropriation was determined to be deficient after the
implementation of the project or activity for which an appropriation was made, or after an
evaluation of the needed resources. To say that the existing items in the appropriation for the
OfficeofthePresidentalreadyneededaugmentationasearlyas31January1992isputtingthecart
beforethehorse.

ThetaskforcespentthedisallowedamountonbehalfoftheDILGallegedlytoimplement
an item of appropriation of the DILG. This evinces the fact that there was no item in the
appropriationfortheOfficeofthePresidentwhichthedisallowedamountcouldhaveaugmented.

[62]
Theadhoc natureofthetaskforcewhoseoperationstheillegallytransferredfundswere
supposedtofinancepreciselyunderscorestheimpermanenceandtransitorinessofthegroupandits
activities.Hence,theadhocbodyitselfisinconsistentwiththenotionthattherewasanexisting
itemofappropriationwhichneededtobeaugmented.

Theabsenceofanyitemtobeaugmentedstarklyprojectstheillegalityofthediversionof
thefundsandtheprofligatespendingthereof.

Withtheforegoingconsiderations,itisclearthatnovalidtransferoftheFundtotheOffice
ofthePresidentcouldhaveoccurredinthiscaseastherewasneitherallegationnorproofthatthe
amounttransferredwassavingsorthatthetransferwasforthepurposeofaugmentingtheitemto
whichthetransferwasmade.

Further, we find that the use of the transferred funds was not in accordance with the
purposeslaiddownbytheSpecialProvisionsofR.A.7180.

The Capability Building Program was established pursuant to the mandate of local
autonomyunderthe1987ConstitutioncarriedoutbytheLocalGovernmentCodeof1991.Itwas
supposed to guide local communities to become selfreliant and capable of selfgovernance. In
ordertofinancetheprogram,R.A.No.7180setuptheFundexplicitlydeclaringthatitshallbe
used for local government and community capability building programs, such as training and

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technicalassistance,withthenecessarysupportfortrainingmaterials,suppliesandfacilities. The
FundwastobeadministeredbytheDILG.




Construed flexibly in the context of the general objective of attaining local autonomy, the
stated purpose for the creation of the task force, which was to design programs, strategize and
preparemodulesforaneffectiveprogramforlocalautonomy,wouldhavefallenwithinthegeneral
intendmentoftheFund.Itisnotenough,however,forpetitionerstolooselyclaimthattheamount
wasusedforapublicpurposeorthatitwasusedtoadvancelocalautonomy.Itisimperativefor
themtoshowthatthequestionedamountwasuseddirectlyinfulfillmentofthepurposeforwhich
theFundwascreated.

In this case, there is no evidence on record as to how the task force was created, what its
functionswereandwhocomposedit.Atty. Mendoza, the project director of the task force, does
notevenappeartohavebeenanofficeroremployeeoforconnectedinanycapacitytoeitherthe
DILGortheOfficeofthePresident,oratleasttohavebeenactingundertheauthorityofeither
office. The proposal to create the task force was initiated by Atty. Mendoza in his personal
[63]
capacityandonhisownauthority.

There is also no evidence to the effect that the amount taken from the Fund was actually
spentforthetaskforcesavowedobjectivesorthatthepurposeofthetaskforcecametofruition.
Thereisnoindicationatallwhetherthetaskforcewasactuallyabletodesignprograms,strategize
andpreparemodulesinfurtheranceoflocalautonomyusingtheFund.




Whatisapparentfromtherecordsisthattheamountinquestionwasspenttodefraysalaries
[64]
ofpersonnel,officesupplies,officerentals,foodsandmeals,etc. Theauditconductedbythe
DILG Auditor covered both the invalidity of the transfer of funds and the illegality of the use
thereof. The Department Auditor concluded that the questioned amount was not used for the
purposesenumeratedintheSpecialProvisionsofR.A.7180.

ThisevaluationwasupheldbytheCOAitselfalsoonbothpoints.Itsaid:
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Reviewing the grounds of this motion for reconsideration, this Commission finds no legal
justification to deviate from the stand taken by the DILG Auditor. Appellants postulate that the
transferoffundswasforapublicpurpose.However,itwascategoricallydifferentfromthepurpose
for which the fund was created. Expenditures funded from the capability building program are
subjecttocomplianceoftherestrictions/conditionsembodiedinthespecialprovisionsofR.A.No.
7180andSection37ofP.D.1177alsoprovides:

All money appropriated for functions, activities, projects and programs shall be
available solely for the specific purpose for which these were appropriated. (Underscoring
supplied)

It cannot also be validly argued that this case involves a prejudicial issue that necessitates
prior determination by the courts. Thus, it is clearly stated in the special provisions of the DILG
Appropriations of R.A. 7180 that the capability building program fund shall be used for local
governmentandcommunitycapabilitybuildingprograms.Therefore,thetransferandexpenditureof
subject fund to the Office of the Executive Secretary has completely abandoned the reason or
purposeforwhichthefundwasestablished.Itbearsstressingthatthemereappropriationofpublic
funds for a purpose other than that authorized by law such as the subject transfer of funds from
DILGtotheOfficeoftheExecutiveSecretarytodefraythesalariesofofficepersonnel,supplies,
rentals,foodsandmeals,etc.isalreadyaviolationoflaw.Section84,par.2,ofP.D.1445provides,
viz:

Trust funds shall not be paid out of any public treasury or depository except in
fulfillment of the purpose for which the trust was created or funds received, and upon
authorizationofthelegislativebodyorheadofanyotheragencyofthegovernmenthaving
control thereof and subject to pertinent budget law, rules and regulations. (Underscoring
supplied)

Appellantscannotdisputethefactthattheyweredulyinformedofthenatureandcauseof
theallegedinfraction.Theconstitutionalguaranteeofdueprocessoflawwasstrictlyobservedas
thegroundsforthedisallowancewerespecificallyenumeratedinthe3rdIndorsementdatedMay25,
1992totheFMSDirector,DILG.

Lastly,thecaseofBinamiravs.Garruchocitedbytheappellantsreferstoapetitionforquo
warrantofiledbyMr.RamonP.BinamiraagainstthenSecretaryofTourismPeterD.Garruchofor
reinstatementtotheOfficeoftheGeneralManagerofthePhilippineTourismAuthorityfromwhich
he claims to have been removed without cause in violation of his security of tenure. Appellants
contendthatpursuanttotheaforementionedcase,thetransferoffundsfromtheDILGtotheOffice
oftheExecutiveSecretarywasperformedandpromulgatedintheregularcourseofbusinessandis
presumptively the act of the Chief Executive, unless disapproved or reprobated. This argument
cannotprevailbecausewhatisdisputedintheinstantcaseistheexpenditureofpublicfundswhich
issubjecttoauditbythisCommissionasconstitutionallymandated.Necessarily,forauditpurposes,
thisCommissionhasthesolejurisdictiontodeterminewhetherornotthedisbursementisinthefirst
[65]
placelegalandproper.


ThefactthattheauditwasconductedbytheDILGAuditorandnotbytheAuditorofthe
Office of the President is inconsequential because the findings and conclusion of the DILG
AuditorwerepasseduponandupheldbytheCOAitself.

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[66]
In Olaguer v. Domingo, the COA affirmed the ruling of the Resident Auditor for the
National Home Mortgage Finance Corporation disallowing in audit the latters disbursements for
thepurchaseofaparceloflandundertheCommunityMortgageProgram.WesustainedtheCOA
reiterating that in this jurisdiction, findings which have been affirmed and reaffirmed along the
administrativehierarchyaregenerallyconclusiveonthecourts.Weheld:

Withthesesubstantialfindings,weaffirmtherulingofrespondentCommissiononAudit.As
to the other claims raised by petitioners, suffice it to state that in this jurisdiction, courts will not
interfereinmatterswhichareaddressedtothesounddiscretionofgovernmentagencieswhichare
entrustedwiththeregulationofactivitiescomingunderthespecialtechnicalknowledgeandtraining
ofsuchagencies.With all the more reason should this rule hold when, as in the instant case, the
findingsofrespondentRazonhavebeenaffirmedandreaffirmedalongtheadministrativehierarchy.
[67]

The ineluctable conclusion is that petitioners should be held personally liable for the
disalloweddisbursementbyvirtueoftheirpositionaspublicofficialsheldaccountableforpublic
[68]
funds. Sec.103ofP.D.No.1445provides:


Sec.103.General liability for unlawful expenditures.Expenditures of government funds or
uses of government property in violation of law or regulations shall be a personal liability of the
officialoremployeefoundtobedirectlyresponsibletherefor.




Section19oftheManualofCertificateofSettlementandBalancesstates:

19.1 The liability of public officers and other persons for audit disallowances shall be
determined on the basis of: (a) the nature of the disallowance (b) the duties, responsibilities or
obligationsoftheofficers/personsconcerned(c)theextentoftheirparticipationorinvolvementin
the disallowed transaction and (d) the amount of losses or damages suffered by the government
thereby.Thefollowingareillustrativeexamples:

xxxxxxxxx


19.1.3 Public officers who approve or authorize transactions involving the expenditure of
governmentfundsandusesofgovernmentpropertiesshallbeliableforalllossesarisingoutoftheir
negligenceorfailuretoexercisethediligenceofagoodfatherofafamily.

xxxxxxxxx

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19.2 The liability for audit charges shall be measured by the individual participation or
involvement of persons in the charged transaction i.e. public officers whose duties require the
appraisal/assessment/collection of government revenues and receipts shall be liable for under
appraisal,underassessment,andundercollectionthereof.

Petitioners Sarino, Sanchez, Regala, Barata and Agbayani, at the time of the disallowed
transfers, were all responsible officers of the DILG being then the Departments Secretary,
Undersecretary,ChiefAccountant,Director,andChiefoftheManagementDivision,respectively.
Their participation, assent and approval were indispensable to the consummation of the illegal
transferoffundsandrenderthemaccountabletherefor.




In view of the foregoing, we find no grave abuse of discretion on the part of the COA in
renderingtheassailedDecision.Theconstitutionalbodyshouldevenbelaudedforitscommitment
in ensuring that public funds are not spent in a manner not strictly within the intendment of the
law.

WHEREFORE, the instant petition is DISMISSED and the assailed Decision of the
CommissiononAuditisAFFIRMED.Nopronouncementastocosts.

SOORDERED.






DANTEO.TINGA
AssociateJustice


WECONCUR:






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REYNATOS.PUNO
ChiefJustice





EONARDOA.QUISUMBING CONSUELOYNARESSANTIAGO
AssociateJustice AssociateJustice




ANTONIOT.CARPIO MA.ALICIAAUSTRIAMARTINEZ
AssociateJustice AssociateJustice





RENATOC.CORONA CONCHITACARPIOMORALES
AssociateJustice AssociateJustice




ADOLFOJ.AZCUNA MINITAV.CHICONAZARIO
AssociateJustice AssociateJustice





RESBITEROJ.VELASCO,JR. ANTONIOEDUARDOB.NACHURA
AssociateJustice AssociateJustice





RUBENT.REYES TERESITAJ.LEONARDODECASTRO
AssociateJustice AssociateJustice
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ARTUROD.BRION
AssociateJustice


CERTIFICATION


Pursuant to Article VIII, Section 13 of the Constitution, it is hereby certified that the
conclusions in the above Decision were reached in consultation before the case was
assignedtothewriteroftheopinionoftheCourt.



REYNATOS.PUNO
ChiefJustice

[1]
Sec.2(1)and(2),Art.IX,1987CONST.

[2]
Olaguerv.Domingo,G.R.No.109666,20June2001,359SCRA78.

[3]
Rollo,pp.1527.

[4]
AnnexB1.MemorandumoftheOSGdated6July2005Rollo,p.208.

[5]
Id.at211.AnnexC.

[6]
Id.at212,AnnexD.

[7]
Rollo,p.22,AnnexAofthepetition.

[8]
Id.at2324.

[9]
COA Records, 1st Indorsement dated 16 September 1994, signed by Danilo M. Rodriguez, State Auditor IV, Department
Auditor.

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[10]
Supranote3at2326,AnnexBofthepetition.ChairmanCelsoD.GanganwrotethedecisionwithCommissionersRogelio
B.EspirituandSofronioB.Ursalsigning.

[11]
Supranote6,DissentingOpiniondated6September1996signedbyCommissionerSofronioB.Ursal.

[12]
Id.at6675.

[13]
Id.at8695.

[14]
Id.at123124.

[15]
Id.at128129.

[16]
MemorandumoftheOSGdated17May2002,Rollo,pp.133141MemorandumoftheCOAdated22May2002,id.at143
153PetitionersMemorandumdated28June2002,id.at167175.

[17]
Rollo(unpaginated).

[18]
Id.at184203.

[19]
Id.at197198.

[20]
Id.at198,189.

[21]
Id.at228240.

[22]
Id.at259274.

[23]
Sec. 2(1) The Commission on Audit shall have the power, authority and duty to examine, audit, and settle all accounts
pertainingtotherevenueandreceiptsof,andexpendituresorusesoffundsandproperty,ownedorheldintrustby,orpertainingto,the
government, or any of its subdivisions, agencies, or instrumentalities, including governmentowned and controlled corporations with
original charters, and on a postaudit basis (a) constitutional bodies, commissions and offices that have been granted fiscal autonomy
underthisconstitution(b)autonomousstatecollegesanduniversities(c)othergovernmentownedorcontrolledcorporationsandtheir
subsidiariesand(d)suchnongovernmentalentitiesreceivingsubsidyorequity,directlyorindirectly,fromorthroughthegovernment,
whicharerequiredbylaworthelawgrantinginstitutiontosubmittosuchauditasaconditionofsubsidyorequity.However,wherethe
internalcontrolsystemoftheauditedagenciesisinadequate,thecommissionmayadoptsuchmeasures,includingtemporaryorspecial
preaudit,asarenecessaryandappropriatetocorrectthedeficiencies.Itshallkeepthegeneralaccountsofthegovernmentand,forsuch
periodasmaybeprovidedbylaw,preservethevouchersandothersupportingpaperspertainingthereto.

(2)TheCommissionshallhaveexclusiveauthority,subjecttothelimitationsinthisarticle,todefinethescopeofitsauditand
examination, establish the techniques and methods required therefor, and promulgate accounting and auditing rules and regulations,
includingthoseforthepreventionanddisallowanceofirregular,unnecessary,excessive,extravagantorunconscionableexpenditures,or
usesofgovernmentfundsandproperties.[Art.IXConstitutionalCommissions]1987Constitution

[24]
Supranote1citingDingcongv.Guingona,Jr.,162SCRA782(1988)CaltexPhilippinesv.COA,G.R.No.92585,8May
1992Sambeliv.ProvinceofIsabela,G.R.No.92279,18June1992DanvilleMaritime,Inc.v.COA,175SCRA701(1989)National
HousingCorporationv.COA,226SCRA55(1993).

[25]
Supranote2.

[26]
CommissionerofInternalRevenuev.COA,G.R.No.101976,29January1993,218SCRA203.
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[27]
Cuerdo v. COA, No. L84592, October 27, 1988, citing Tagum Doctors Enterprises v. Gregorio Apsay, et al., G.R. No.
81188,30August1988.

[28]
Id.citingMangubatv.deCastro,No.L33892,28July1988.

[29]
Reyesv.COA,G.R.No.125129,29March1999,305SCRA512.

[30]
TSN,Vol.I,21June2005,p.118.

[31]
Rollo,pp.255274.

[32]
Id.at259.

[33]
TSN,Vol.II,21June2005,pp.168174.

[34]
Sec.16,GeneralProvisions,R.A.No.7180.

[35]
G.R.No.113105,19August1994.

[36]
Id.at528

[37]
Id.at544.

[38]
RECORDOFTHECONSTITUTIONALCOMMISSION,Vol.Two,p.111.

[39]
No.L71977,27February1987,148SCRA208.

[40]
Id.

[41]
GeneralProvisions,R.A.No.7180.

[42]
BLACKSLAWDICTIONARY,6thed.

[43]
AccordingtoMrs.CorazonM.Ordoez,Chief,FiscalManagementandBudgetOffice,SupremeCourt.

[44]
Atp.528.

[45]
Sec.25(4),Art.VI,1987CONST.

[46]
Sec.25(6),Art.VI,1987CONST.

[47]
Sec.29(1),Art.VI,1987CONST.

[48]
Demetriav.Alba,supra,p.215.

[49]
TNS,21June2005,Vol.I,pp.2529.

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[50]
Notethaton17February1992,Atty.HiramMendoza,ProjectDirectoroftheadhoctaskforcerequestedreplenishmentof
the initial transfer in the amount of P300,000.00 allegedly in anticipation of additional legal and technical personnel. Upon Deputy
ExecutiveSecretaryDionisiodelaSernarequestforapproval,SecretaryCesarSarinodirectedtheFinancialManagementService(FMS)to
process progress payments. Consequently, Mr. Rafael D. Barata, FMS Director, issued a memorandum addressed to Undersecretary
Leonor de Jesus requesting that the additional amount of P300,000.00 be charged to the Fund. However, there is no proof that
UndersecretarydeJesusapprovedMr.Baratasproposal.SeeRecords,1stIndorsementdated16September1994.

[51]
Eachfiscalyearisdividedintofourquarterlyallotmentperiodsbeginning,respectively,onthefirstdayofJanuary,April,
JulyandOctober.[Sec.146,Title2,BookIII,GovernmentAccountingandAuditingManual.

[52]
Sec.74,GeneralProvisions,1992GAA.

[53]
ThegreatbulkoftheappropriatedmoneyisremittedbytheDBMtotheagenciesinMarchandAprilfollowingthecollection
ofincometaxes.

[54]
RepublicActNo.7645andRepublicActNo.7663,respectively.

[55]
TitleXIII(A),1992GAA.

[56]
Title6,BookIII,GovernmentAccountingandAuditingManual.

[57]
Title5,BookIII,GovernmentAccountingandAuditingManual.

[58]
Sec.155(b),Art.1,Title3,BookIII,GovernmentAccountingandAuditingManual.

[59]
Sec.155(a),Art.1,Title3,BookIII,GovernmentAccountingandAuditingManual.

[60]
TSN,Vol.I,21June2005.pp.3440.

[61]
Section18oftheGeneralProvisionofthe1992GAAreferredtoprovides:

Sec.18.PriorityintheUseofSavings.Intheuseofsavingspriorityshallbegiventotheaugmentationofthe
amountssetasideforsalarystandardization,bonusandretirementandterminalleavebenefitsintheorderlisted.

[62]
TheLatinwordsmeanforaparticularorspecialpurpose.LATINWORDS&PHRASESFORLAWYERS.Publishedfor
LawandBusinessPublications,Inc.,1006575MadisonAvenue,NewYork,N.Y.10022,USA(1980)p.23.

[63]
TSN,Vol.II,21June2005,pp.197200TSN,Vol.3,21June2005,pp.281284.

[64]
Supranote4.

[65]
COADecisionNo.96654dated21November1996.

[66]
Supranote2.

[67]
Id.at8990.

[68]
Osmeav.COA,G.R.No.98355,2March1994.

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