Sounding Board

DAP and good faith

DAP, of course, is the Disbursement Acceleration Program used by the government to speed up the use of government money for the accomplishment of public purposes. The money involved is public money in the national treasury and the fundamental constitutional rule is that no money may be taken out of the public treasure except in accordance with an appropriation made by law. And even after the money is appropriated by law, it may be spent only within the limits prescribed by law.

The DAP involves money that were placed in the hands of President Aquino. It is broken up into “items.” An item consists of two parts: an amount of money and the purpose for which it is to be spent. Normally such money may be used only for the purpose specified in the item. However, in order to give some flexibility to the President in the handling of money, he may be authorized by law to augment the money in one item in his department with “savings” from another item. “Savings” mean leftover money after the purpose of an item has been accomplished.


There are therefore two important limitations here: (1) The President can transfer only savings and (2) the transfers can only be to augment items in the President’s budget. In declaring the DAP unconstitutional, the Court said that (1) the President moved money which were not savings in an item but which were sourced from various places, and (2) that he transferred money from his budget to other offices (e.g., the Commission on Audit and Congress).

This was all done by the budget secretary and therefore effectively by the President because in our presidential system, the acts of department heads are presumptively the acts of the President, unless the President expressly reprobates them. I am not sure if in fact it was he who signed the documents needed. But certainly he considered it an important accomplishment. Unfortunately, by the unanimous vote of the Supreme Court justices, the accomplishment was declared partly unconstitutional. Why only partly?


The reason is the operation of what is called the “operative fact doctrine.” What is this? The doctrine of operative fact recognizes that a law or executive act, before it is declared unconstitutional, is an “operative fact” which produces consequences that cannot always be erased, ignored or disregarded. The law is nullified, but its effect is sustained. “Unless the doctrine is held to apply, the Executive as the disburser and the offices under it and elsewhere as the recipients could be required to undo everything that they had implemented in good faith under the DAP. That scenario would be enormously burdensome for the Government. Equity alleviates such burden.”

However, as Justice Arturo Brion has clarified, the doctrine of operative fact cannot apply to the authors 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. The Supreme Court is not the proper tribunal to determine that.

Necessarily, therefore, the question must be asked about the good faith of the author of the law that has been declared unconstitutional. But what is good faith?

Good faith is an abstract term which includes a sincere belief without any malice or intent to defraud. It is a term often found in Commercial Law—e.g., a buyer who purchases from one who did not have title to the object bought may be called a buyer in good faith if he observed honesty in the transaction and observed reasonable commercial standards. To meet this test, the person must have demonstrated honesty in the conduct of the transaction concerned, and must have observed reasonable commercial standards of fair dealing in the trade.

If the purchaser acquires the property by an honest contract or agreement and without knowledge of any defect in the title of the seller or means of knowledge sufficient to charge the buyer with such knowledge, the purchaser is deemed a purchaser in good faith.

By analogy, if the President and the budget secretary did not know that what they were doing was illegal and could not have reasonably known its illegality and only wanted to accelerate the movement of public money for the public good, they would be in good faith. Remember, however, that what is involved here is not just peanuts but billions and billions of pesos. How believable would the claim be that the President and the budget secretary, both veterans of Congress, had no inkling or the slightest suspicion of what the Constitution requires for handling public money?

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