The DAP decision

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.

Backgrounder. 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 Court’s decision (p.36) acknowledged the program’s 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.”

Unconstitutional acts. 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.

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