Araullo v Aquino:

This case is a petition assailing the constitutionality of the DAP on the grounds that
it allowed the Executive to allocated public money pooled from programmed and
unprogrammed funds of its various agencies in the guise of the President exercising
his constitutional authority under Sec 25(5) of the 1987 Constitution to transfer
funds out of savings to augment the appropriations of offices within the Executive
Branch of Government.
Notes:
Overview:
The DAP was seen as a remedy to speed up the funding of government projects.
DAP enables the Executive to realign funds from slow moving projects to priority
projects instead of waiting for next years appropriation. So what happens under the
DAP was that if a certain government project is being undertaken slowly by a certain
executive agency, the funds allotted therefor will be withdrawn by the Executive.
Once withdrawn, these funds are declared as savings by the Executive and said
funds will then be reallotted to other priority projects. The DAP program did work to
stimulate the economy as economic growth was in fact reported and portion of such
growth was attributed to the DAP (as noted by the Supreme Court):
DAP was a program designed to promote economic growth
-

National budget for government spending specific for public funds

Stimulate the economy through accelerated spending

The Disbursement Allocation Program Fund (unappropriated from previous GAAs)

consist of:
1.
2.
3.
4.

Unreleased appropriations under Personnel Services

Unprogrammed funds
Carry-over appropriations unreleased from previous year
Budgets for slowing moving items

Requisites for a valid transfer of appropriated funds under Sec 25(5):

1. There is law authorizing the President, et al to transfer funds within their
respective offices
2. Funds to be transferred are savings generated
3. Purpose of the transfer is to augment an item in the general appropriations
law for their respective offices
Philippine Budget Process:
1. Budget Preparation
- Budget call contains the budget paramaters in preparation for the budget
proposals
- National Expenditure Program is consolidated which provides the details of
the spending for each department
2. Budget Legislation (Budget Authorization Phase)

Congress receive the Presidents budget, inclusive of the NEP and BESF
Initially assigned to the HoR Appropriations Committee who then drafts the
General Appropriations Bill
- The Senate conducts its won committee hearings and then Bicameral
Conference Committee
- The harmonized version of the GB is presented for Presidents approval
3. Budget Execution
- DBM issue programs for release of funds; prepares Allotment and Cash
Release Program ,release allotments, issue disbursements authorities
- Actual disbursement terminates the Budget Execution Phase and
accomplished through the Modified Disbursement Scheme
4. Accountability
- Agencys accountability may be examined and evaluated trhough
performance targets and outcomes; budget accountability reports; review of
agency programs; audit conducted by COA
Issues:
1. WON the DAP violates the principle no money shall be paid out of the
Treasury except in pursuance of an appropriation made by law (Sec. 29(1),
Art. VI, Constitution).
DAP did not violate Section 29(1), Art. VI of the Constitution. DAP was merely
a program by the Executive and is not a fund nor is it an appropriation. It is a
program for prioritizing government spending. In DAP no additional funds
were withdrawn from the Treasury otherwise, an appropriation made by law
would have been required. Funds, which were already appropriated for by the
GAA, were merely being realigned via the DAP.

DAP was not an appropriation measure; hence no appropriation law was

required to adopt or to implement it

2. Whether or not the DAP realignments can be considered as impoundments by

the executive.
No, there is no executive impoundment in the DAP. Impoundment of funds
refers to the Presidents power to refuse to spend appropriations or to retain
or deduct appropriations for whatever reason. Impoundment is actually
prohibited by the GAA unless there will be an unmanageable national
government budget deficit (which did not happen). Nevertheless, theres no
impoundment in the case at bar because whats involved in the DAP was the
transfer of funds.

3. Whether or not the DAP realignments/transfers are constitutional.

No, the transfers made through the DAP were unconstitutional. It is true that
the President (and even the heads of the other branches of the government)
are allowed by the Constitution to make realignment of funds, however, such
transfer or realignment should only be made within their respective offices.
Thus, no cross-border transfers/augmentations may be allowed. But under
the DAP, this was violated because funds appropriated by the GAA for the
Executive were being transferred to the Legislative and other non-Executive
agencies.

Further, transfers within their respective offices also contemplate

realignment of funds to an existing project in the GAA. Under the DAP, even
though some projects were within the Executive, these projects are nonexistent insofar as the GAA is concerned because no funds were appropriated
to them in the GAA. Although some of these projects may be legitimate, they
are still non-existent under the GAA because they were not provided for by
the GAA. As such, transfer to such projects is unconstitutional and is without
legal basis.

On the issue of what are savings

There were no savings from which funds could be sourced for DAP the
unreleased appropriations were not actual savings within the context of Sec
25(5)
Savings are those funds which had been appropriated to programs actually
implemented or finally abandoned; Court contends savings are balances of
programmed obligations which are still available after the completion or
abandonment of work; form appropriations balances arising from unpaid
compensation; balances realized from implementation

These DAP transfers are not savings contrary to what was being declared
by the Executive. Under the definition of savings in the GAA, savings only
occur, among other instances, when there is an excess in the funding of a
certain project once it is completed, finally discontinued, or finally
abandoned. The GAA does not refer to savings as funds withdrawn from a
slow moving project. Thus, since the statutory definition of savings was not
complied with under the DAP, there is no basis at all for the transfers.
Further, savings should only be declared at the end of the fiscal year. But
under the DAP, funds are already being withdrawn from certain projects in
the middle of the year and then being declared as savings by the Executive
particularly by the DBM.

Augment is to enlarge or increase in size; this is for projects with an

appropriation determined to be deficient. In no case shall non-existent
program, funded by augmentation from savings otherwise authorized in this
Act

4. Whether or not the sourcing of unprogrammed funds to the DAP is

constitutional.
No. Unprogrammed funds from the GAA cannot be used as money source for
the DAP because under the law, such funds may only be used if there is a
certification from the National Treasurer to the effect that the revenue
collections have exceeded the revenue targets. In this case, no such
certification was secured before unprogrammed funds were used.

Section 25(5) is not a self executing provision GAAs of 2011 and 2012
lacked valid provisions to authorize transfers of funds under the DAP; hence
the transfers under DAP were unconstitutional --- in addition provisions of
GAA regarding use of savings did not carry the phrase for their respective
offices, rather it stated to augment any item in this Act this contravenes
the Constitution

5. Whether or not the Doctrine of Operative Fact is applicable.

Yes. The Doctrine of Operative Fact, which recognizes the legal effects of an
act prior to it being declared as unconstitutional by the Supreme Court, is
applicable. The DAP has definitely helped stimulate the economy. It has
funded numerous projects. If the Executive is ordered to reverse all actions
under the DAP, then it may cause more harm than good. The DAP effects can
no longer be undone. The beneficiaries of the DAP cannot be asked to return
what they received especially so that they relied on the validity of the DAP.
However, the Doctrine of Operative Fact may not be applicable to the
authors, implementers, and proponents of the DAP if it is so found in the
appropriate tribunals (civil, criminal, or administrative) that they have not
acted in good faith.

Discretionary authority of the Executive does not allow the President to substitute
his own will for that of Congress; he was still required to remain faithful to the
provisions of the GAA. It is the President who proposes the budget but it is Congress
that has the final say on matters of appropriation.