Araullo vs. Aquino

The following acts and practices under the Disbursement Acceleration Program (DAP), National Budget Circular No. 541, and related executive issuances are unconstitutional and void:

1. The withdrawal of unobligated allotments from implementing agencies and the declaration of withdrawn unobligated allotments and unreleased appropriations as "savings" prior to the end of the fiscal year and without complying with the statutory definition of savings contained in the GAAs;
2. Cross-border transfers of the savings of the Executive to augment the appropriations of other offices outside the Executive (e.g., the Legislature, the Commission on Audit, and the Commission on Elections); and
3. The funding of projects, activities, and programs that were not covered by any appropriation in the GAA.

Additionally, the use of unprogrammed funds is declared void where there is no certification by the National Treasurer that revenue collections exceeded the revenue targets for non-compliance with the conditions provided in the relevant GAAs.

The controversy arose after Senator Jinggoy Estrada delivered a privilege speech on September 25, 2013, revealing that certain senators received additional funds from the DAP as an "incentive" for voting to convict Chief Justice Renato Corona. This exposed the existence of the DAP, a program implemented by the Department of Budget and Management (DBM) since 2011 to address economic slowdown caused by government underspending. The DAP involved pooling funds from various sources—including unreleased appropriations, unobligated allotments from "slow-moving" projects, and unprogrammed funds—to finance priority projects and augment existing items in the budget. The revelation sparked public outrage, leading various petitioners to challenge the program's constitutionality before the SC.

N/A. The nine consolidated petitions were filed directly with the SC between October 7, 2013, and November 8, 2013, as special civil actions for certiorari and prohibition under Rule 65 of the Rules of Court. Oral arguments were held on November 19, 2013, and January 28, 2014. During the proceedings, the Solicitor General manifested that the DAP had been terminated as it had fully served its purpose.

• Nature of Action: Special civil actions for certiorari and prohibition challenging the constitutionality of the DAP, NBC No. 541, and related executive issuances implementing the DAP.
• The DAP Mechanism: The DAP was designed to stimulate the economy by accelerating spending. It sourced funds from: (a) unreleased appropriations (e.g., Personnel Services); (b) unobligated allotments from slow-moving projects; and (c) unprogrammed funds. These were pooled to augment existing items or fund new priority projects.
• NBC No. 541: Issued on July 18, 2012, this circular authorized the withdrawal of unobligated allotments as of June 30, 2012, from agencies with low obligation levels to fund "priority and/or fast-moving programs/projects."
• Cross-Border Transfers: The Executive Department transferred funds from its savings to: (a) the House of Representatives (P250 million for the Legislative Library/e-library); (b) the Commission on Audit (P143.7 million for IT infrastructure and litigation experts); and (c) the Commission on Elections.
• Funding Non-Existent Items: DAP funds were used to finance projects not appropriated in the GAAs, including personnel services and capital outlays for the Department of Science and Technology's (DOST) DREAM project, and augmentation of the Priority Development Assistance Fund (PDAF).
• Unprogrammed Funds: The DBM released unprogrammed funds despite the lack of certification from the National Treasurer that total revenue collections exceeded the original revenue targets submitted to Congress.

• The DAP violates Section 29(1), Article VI of the Constitution because it creates a "budget within a budget," allowing the Executive to spend public funds without specific legislative appropriation.
• The DAP violates Section 25(5), Article VI because: (a) it treats unreleased appropriations and unobligated allotments as "savings" when they do not meet the statutory definition (savings must arise from completion, final discontinuance, or abandonment of projects); (b) it funds projects not provided in the GAAs; and (c) it involves cross-border transfers of savings to other branches of government, violating the "respective offices" limitation.
• The release of unprogrammed funds was unlawful because revenue collections did not exceed original targets as certified by the National Treasurer.
• The DAP violates the Equal Protection Clause, the system of checks and balances, and the principle of public accountability.

• The DAP is not an appropriation measure but a fiscal management policy/program to accelerate spending; no separate law is required for its creation.
• The President has constitutional authority under Section 25(5), Article VI and statutory authority under the GAAs to augment items from savings. Unobligated allotments constitute "savings" as defined in the GAAs (portions/balances free from obligation).
• Cross-border transfers were not "augmentations" but "aid" to other branches, or were made upon the recipient branches' own requests.
• The President has inherent power to realign funds and impound appropriations under Section 38, Chapter 5, Book VI of the Administrative Code of 1987 (power to suspend or stop further expenditure).
• The doctrine of operative fact should apply to validate the effects of the DAP.

• Procedural Issues:
  • Whether certiorari and prohibition are proper remedies to assail the constitutionality of the DAP and its implementing issuances.
  • Whether there is an actual controversy ripe for adjudication.
  • Whether petitioners have legal standing (locus standi).
• Substantive Issues:
  • Whether the DAP violates Section 29, Article VI of the Constitution (no money shall be paid out of the Treasury except in pursuance of an appropriation made by law).
  • Whether the DAP, NBC No. 541, and related issuances violate Section 25(5), Article VI insofar as they: (a) treat unreleased appropriations and unobligated allotments as "savings"; (b) authorize disbursement for projects not provided in the GAAs; and (c) involve cross-border transfers.
  • Whether the DAP violates the Equal Protection Clause, checks and balances, and public accountability.
  • Whether the release of unprogrammed funds was in accord with the GAAs.

• Procedural:

  • Certiorari and prohibition are proper remedies to raise constitutional issues and review acts of legislative and executive officials under the SC's expanded judicial power (Section 1, Article VIII).
  • An actual controversy exists because public funds were actually allocated and disbursed under the DAP.
  • Petitioners have legal standing as taxpayers and citizens given the transcendental importance of the issues to the nation.
  • The case is not moot despite the termination of the DAP because it involves grave violations of the Constitution and issues capable of repetition yet evading review.

• Substantive:

  • The DAP as a program is not an appropriation measure per se and does not require a separate law; it is a policy to accelerate spending.
  • Unconstitutional Acts: (1) The withdrawal of unobligated allotments and declaration of unreleased appropriations as "savings" prior to the end of the fiscal year without complying with the statutory definition (savings must be free from obligation after completion, final discontinuance, or abandonment of the work); (2) Cross-border transfers of savings to other branches (violates the "respective offices" limitation in Section 25(5)); (3) Funding projects not covered by GAA appropriations (violates Section 29(1) and the rule that augmentation requires an existing item).
  • Unprogrammed Funds: The use is void without certification that revenue collections exceeded original targets.
  • No Impoundment: The withdrawal of allotments was not impoundment (which requires retention/deduction), but transfer. The President has no inherent impoundment power beyond Section 38 of the Administrative Code.
  • Doctrine of Operative Fact: Applies to protect beneficiaries who relied in good faith on the DAP's validity, but cannot apply to the authors, proponents, and implementors of the DAP.

• Doctrine of Operative Fact — Recognizes that an unconstitutional executive act, prior to its declaration of nullity, is an operative fact that produced consequences which cannot always be erased. It applies only as a matter of equity and fair play to protect those who relied in good faith on the invalid act, but cannot be invoked to validate the unconstitutional act itself or to protect those directly responsible for its commission. Here, it applies to the DAP's implementation to protect good faith beneficiaries, but not the authors/implementors.
• Expanded Judicial Power (Section 1, Article VIII) — The SC has the duty to determine whether there has been grave abuse of discretion amounting to lack or excess of jurisdiction by any branch of government. Petitions for certiorari and prohibition are appropriate remedies to raise constitutional issues against executive acts.
• Power of the Purse / Appropriation — Congress wields the power of the purse. No money shall be paid out of the Treasury except in pursuance of an appropriation made by law (Section 29(1), Article VI). The President's power to spend is delegated by Congress and must be faithful to the GAA.
• Augmentation from Savings (Section 25(5), Article VI) — The President may augment any item in the GAA for their respective offices from savings in other items of their respective appropriations. Requisites for valid transfer: (1) a law authorizing the transfer; (2) the funds must be actual savings (portions/balances free from obligation after completion/final discontinuance/abandonment of work, vacant positions, or improved efficiencies); (3) the purpose is to augment an existing item in the GAA for the same office (no cross-border transfers).
• Cross-Border Transfers — Prohibited. The phrase "for their respective offices" in Section 25(5) delineates borders between branches; funds cannot cross over to another office even in the guise of augmentation.
• Definition of Savings — Under the GAAs, savings are portions/balances of programmed appropriations free from obligation/encumbrance still available after: (a) completion/final discontinuance/abandonment of the work; (b) unpaid compensation for vacant positions; or (c) improved systems resulting in lesser costs. Unobligated allotments and unreleased appropriations are not automatically savings.
• Unprogrammed Funds — Appropriations providing standby authority to incur additional obligations when revenue collections exceed targets or when additional foreign funds are generated. Condition sine qua non for release: revenue collections must exceed original revenue targets submitted by the President to Congress.

• "The doctrine of operative fact recognizes the existence of the law or executive act prior to the determination of its unconstitutionality as an operative fact that produced consequences that cannot always be erased, ignored or disregarded."
• "Section 25(5), Article VI of the Constitution has delineated borders between their offices, such that funds appropriated for one office are prohibited from crossing over to another office even in the guise of augmentation of a deficient item or items."
• "The power to spend the public wealth resided in Congress, not in the Executive."
• "The withdrawal of unobligated allotments under the DAP should not be regarded as impoundment because it entailed only the transfer of funds, not the retention or deduction of appropriations."
• "The Executive cannot circumvent the prohibition by Congress of an expenditure for a PAP by resorting to either public or private funds."

• Demetria v. Alba — Struck down provision allowing President to transfer any fund without regard to whether funds were actually savings; established that actual savings is sine qua non to valid transfer.
• Sanchez v. Commission on Audit — Reiterated twin requisites for valid transfer: existence of savings and existence of item to be augmented.
• Nazareth v. Villar — Strictly construed the exception in Section 25(5); emphasized that the authority to transfer savings only to augment another item in the GAA is exclusive.
• Belgica v. Executive Secretary Ochoa — Declared PDAF unconstitutional; cited for principles on separation of powers and post-enactment legislative participation in budget execution.
• Philippine Constitution Association v. Enriquez — Defined impoundment as refusal by President to spend funds made available by Congress.
• Chicot County Drainage Dist. v. Baxter State Bank (US) — Source of the doctrine of operative fact.

• 1987 Constitution, Article VI, Section 25(5) — Prohibition on transfer of appropriations; exception for augmentation from savings within respective offices.
• 1987 Constitution, Article VI, Section 29(1) — No money shall be paid out of the Treasury except in pursuance of an appropriation made by law.
• 1987 Constitution, Article VIII, Section 1 — Expanded judicial power to determine grave abuse of discretion.
• Administrative Code of 1987 (EO No. 292), Book VI, Chapter 5, Section 38 — President's power to suspend or otherwise stop further expenditure of funds.
• General Appropriations Acts of 2011, 2012, and 2013 — Definitions of savings and augmentation; provisions on unprogrammed funds; prohibition on impoundment.

• Justice Antonio T. Carpio — Concurred but emphasized that unreleased appropriations are not savings; unobligated allotments for Capital Outlays cannot be declared savings in the middle of the fiscal year; the President has no power of impoundment; cross-border transfers are unconstitutional regardless of whether the recipient requested the funds.
• Justice Arturo D. Brion — Concurred but wrote separately to emphasize the transcendental importance of the case and that the DAP violated separation of powers and checks and balances by allowing the Executive to encroach on the legislative domain of appropriation.
• Justice Estela M. Perlas-Bernabe — Concurred but clarified the distinction between "realignment" (moving funds within the same item/purpose without increasing statutory value) and "augmentation" (increasing statutory value of an item using savings).
• Justice Marvic M.V.F. Leonen — Concurred but emphasized that the President has inherent discretion to spend up to limits provided by law (realignment), distinct from augmentation; suspension is not impoundment; the case is moot but guidelines are laid down for bench and bar.

• Justice Mariano C. Del Castillo (Concurring and Dissenting) — Upheld the validity of the DAP insofar as it involved the withdrawal of unobligated allotments from slow-moving projects pursuant to Section 38 of the Administrative Code (permanent stoppage of expenditure for public interest). Found that the President validly exercised power to permanently stop expenditure to generate savings. Disagreed with the majority on the interpretation of Section 38 and the two-year availability period for appropriations. Limited unconstitutionality to: (1) Sections 5.4, 5.5, 5.7 of NBC 541 allowing withdrawal without final discontinuance; (2) Section 5.7.3 funding non-existent items; and (3) cross-border transfers.