Local Budget Circular No. 55, issued by the Department of Budget and Management, is null and void because it overstepped the President's power of general supervision over local government units by imposing a specific monetary limit on additional allowances not found in the enabling law (R.A. 7160), and because it was not published as required for administrative rules intended to enforce or implement existing law.

For several years, RTC and MTC judges in Mandaue City had been receiving monthly additional allowances from the city government through appropriation ordinances. In 1991, this amount was P1,500. In 1994, the Department of Budget and Management (DBM) issued Local Budget Circular No. 55 (LBC 55), which limited such additional allowances from provinces and cities to P1,000.00 per month. This circular led to the Mandaue City Auditor issuing notices of disallowance for the amounts received by the petitioner judges in excess of P1,000 and requiring reimbursement.

• In 1986, RTC and MTC judges of Mandaue City began receiving monthly allowances of P1,260 each through yearly appropriation ordinances enacted by the Sangguniang Panlungsod of Mandaue City.
• In 1991, Mandaue City increased the allowance to P1,500 for each judge.
• On March 15, 1994, the Department of Budget and Management (DBM) issued Local Budget Circular No. 55 (LBC 55), providing that additional allowances in the form of honoraria from LGUs to national government officials assigned in their locality should not exceed P1,000.00 in provinces and cities.
• LBC 55 stated it would take effect immediately without need of publication.
• Acting on LBC 55, the Mandaue City Auditor issued notices of disallowance to the petitioner judges for amounts received in excess of P1,000 authorized by LBC 55.
• Beginning October 1994, the additional monthly allowances of the petitioner judges were reduced to P1,000 each.
• The judges were also asked to reimburse the amounts they received in excess of P1,000 from April to September 1994.
• The petitioner judges protested the disallowances, but the COA ultimately upheld the City Auditor's decision, leading to this petition.

• LBC 55 is void for infringing on the local autonomy of Mandaue City by dictating a uniform amount for additional allowances, thereby limiting the Sangguniang Panlungsod's power.
• LBC 55 is not supported by any law and goes beyond the supervisory powers of the President (exercised through the DBM).
• LBC 55 is void for lack of due publication as required by law for administrative circulars that enforce or implement existing law.
• Mandaue City has a statutory and constitutional basis to provide additional allowances to judges stationed in the city, as per Section 458 (a)(1)[xi] of R.A. 7160.
• The COA incorrectly interpreted LBC 55 to include members of the judiciary when fixing the ceiling for additional allowances, despite the judges receiving P1,500.00 monthly for the past five years.

• The constitutional and statutory authority of a city government to provide allowances to judges is not absolute and can be limited by Congress.
• The President, through the DBM, has the power to check if legislative limitations on LGU autonomy are being followed.
• Section 458 (a)(1)[xi] of R.A. 7160, which authorizes additional allowances "when the finances of the city government allow," is the limitation DBM enforces by setting a uniform maximum amount through LBC 55.
• Even if LBC 55 is void, Mandaue City's ordinance granting additional allowances is still prohibited by annual General Appropriations Acts (GAAs), as the funds (allegedly from the Internal Revenue Allotment - IRA) are not specified for such use in the GAAs of 1994 and 1995.

• Whether Local Budget Circular No. 55 issued by the DBM is void for going beyond the supervisory powers of the President and for not having been published.
• Whether the yearly appropriation ordinance enacted by the City of Mandaue providing for additional allowances to judges contravenes the annual appropriation laws enacted by Congress.

• The Supreme Court declared LBC 55 null and void.
• The Court reasoned that the President's power over LGUs is one of general supervision, not control. LBC 55, by setting a definite maximum limit (P1,000) on allowances that LGUs can grant, went beyond mere supervision and constituted control, as Section 458 (a)(1)[xi] of R.A. 7160 only requires that "the finances of the city government allow" such grants, without imposing a specific monetary ceiling. The DBM overstepped its authority by imposing a prohibition not found in the law it sought to implement.
• LBC 55 was also declared void for lack of publication. Citing Tañada vs. Tuvera and De Jesus vs. Commission on Audit, the Court held that administrative rules and regulations whose purpose is to enforce or implement existing law must be published to be effective and enforceable. LBC 55 is not merely an interpretative or internal regulation.
• Regarding the Mandaue City appropriation ordinance, the Court found that the COA failed to prove that Mandaue City used its IRA to fund the additional allowances for judges. The COA did not present evidence breaking down the city's expenses and fund sources.
• Moreover, the DBM did not conduct a formal review or order a disapproval of Mandaue City's appropriation ordinances within the 90-day period prescribed by Sections 326 and 327 of R.A. 7160. Thus, the ordinances were deemed reviewed and in full force and effect.

• Power of Supervision vs. Power of Control — Supervision means overseeing or the power of an officer to see that subordinate officers perform their duties. Control means the power of an officer to alter, modify, nullify, or set aside what a subordinate officer has done and to substitute the judgment of the former for that of the latter. The President exercises general supervision over local governments. In this case, the DBM (as an alter ego of the President) issuing LBC 55 to set a specific limit on allowances exceeded supervisory powers by attempting to control the LGU's discretion granted under R.A. 7160, which only required that finances allow such allowances, without setting a monetary cap.
• Requirement of Publication for Administrative Rules — Administrative rules and regulations must be published if their purpose is to enforce or implement existing law pursuant to a valid delegation. This is a condition precedent to their effectivity. LBC 55, which aimed to implement Section 458 of R.A. 7160 by setting limits on allowances, was deemed void because it was not published in the Official Gazette or a newspaper of general circulation, thus denying affected parties due notice.
• Local Autonomy — The Constitution guarantees autonomy to local government units, subject to the power of control by Congress and the power of supervision by the President. The DBM's LBC 55, by imposing a uniform amount for additional allowances, infringed on Mandaue City's autonomy to decide on such matters based on its financial capacity as allowed by R.A. 7160.
• Deemed Approval of Ordinances — Under R.A. 7160, if the DBM (for highly urbanized cities) or the Sangguniang Panlalawigan (for component cities/municipalities) fails to take action on an appropriation ordinance within ninety (90) days from receipt, the ordinance is deemed to have been reviewed in accordance with law and shall continue to be in full force and effect. Mandaue City's appropriation ordinance was deemed valid as the DBM failed to act on it within the prescribed period.

• "In administrative law, supervision means overseeing or the power or authority of an officer to see that subordinate officers perform their duties. If the latter fail or neglect to fulfill them, the former may take such action or step as prescribed by law to make them perform their duties. Control, on the other hand, means the power of an officer to alter or modify or nullify or set aside what a subordinate officer ha[s] done in the performance of his duties and to substitute the judgment of the former for that of the latter."
• "Supervisory power, when contrasted with control, is the power of mere oversight over an inferior body; it does not include any restraining authority over such body."
• "Administrative rules and regulations must also be published if their purpose is to enforce or implement existing law pursuant to a valid delegation."
• "Publication is required as a condition precedent to the effectivity of a law to inform the public of the contents of the law or rules and regulations before their rights and interests are affected by the same."

• Pimentel vs. Aguirre — Cited to define the supervisory power of the President over LGUs and distinguish it from the power of control exercised by Congress.
• Mondano v. Silvosa — Referenced for its distinction between the President's power of supervision over local government officials and the power of control over executive officials of the national government.
• Taule v. Santos — Cited for the principle that the Chief Executive's authority over LGUs is limited to checking if they perform their duties according to law and statutes, without interfering if they act within their authority.
• Drilon v. Lim — Referenced for further delineating the difference between control (laying down rules, ordering acts undone/redone) and supervision (seeing that rules are followed).
• Tañada vs. Tuvera — Cited as the landmark case establishing the requirement of publication for laws and administrative rules and regulations that enforce or implement existing law.
• De Jesus vs. Commission on Audit — Referenced as a similar case where a DBM circular (DBM-CCC No. 10) disallowing allowances was declared void for lack of publication.
• Philippine International Trading Corporation vs. Commission on Audit — Cited for reiterating that subsequent publication of a circular does not cure the defect retroactively, emphasizing publication as a condition precedent for effectivity.

• 1987 Philippine Constitution, Article X, Section 4 — "The President of the Philippines shall exercise general supervision over local governments." Relevant as it defines the scope of Presidential power over LGUs, which LBC 55 was found to have exceeded.
• 1987 Philippine Constitution, Article II, Section 25 — "The State shall ensure the autonomy of local governments." Relevant as LBC 55 was argued to infringe upon this principle.
• R.A. 7160 (Local Government Code of 1991), Section 458 (a)(1)[xi] — Authorizes the Sangguniang Panlungsod to provide for additional allowances to judges "when the finances of the city government allow." This was the provision LBC 55 purportedly sought to implement but was found to have unduly restricted.
• R.A. 7160, Section 326 — "Review of Appropriation Ordinances of Provinces, Highly Urbanized Cities, Independent Component Cities, and Municipalities within the Metropolitan Manila Area." Outlines the DBM's role in reviewing such ordinances. Relevant because the DBM failed to follow this procedure for Mandaue City's ordinance.
• R.A. 7160, Section 327 — "Review of Appropriation Ordinances of Component Cities and Municipalities." Details the review process by the Sangguniang Panlalawigan and the consequence of inaction (deemed approved). Relevant by analogy to the DBM's inaction concerning Mandaue City (a highly urbanized city).
• R.A. 7160, Section 348 — Grants COA auditorial visitation powers over LGUs. Mentioned by the Solicitor General in arguing COA's limited role.
• R.A. 7160, Section 354 — Authorizes DBM to promulgate a Budget Operations Manual for LGUs. Mentioned by the Solicitor General to argue LBC 55 was not issued under this authority.
• R.A. 7845 (General Appropriations Act of 1995), Special Provisions — Cited by COA to argue that the IRA cannot be used for additional allowances for judges. The Court found COA failed to prove IRA was used.
• R.A. 7663 (General Appropriations Act of 1994), Special Provisions — Cited by COA similarly to R.A. 7845. The Court found COA failed to prove IRA was used.
• Administrative Order No. 42 (1993) — Clarified the role of DBM in compensation and classification of LGU positions under RA 7160 and RA 6758. COA cited this to support DBM's authority to issue LBC 55.