Highlights: Carpio's separate opinion on DAP

MANILA, Philippines (UPDATED) – “The road to unconstitutionality is often paved with ostensibly good intentions,” wrote Supreme Court (SC) Associate Justice Antonio Carpio in his separate opinion on the controversial Disbursement Acceleration Program (DAP).

Parts of the program, meant to address government underspending and stimulate economic growth by realigning unused funds to fast-disbursing ones, were declared unconstitutional by the Supreme Court – voting 13-0-1 – on July 1, 2014.

Carpio, the SC’s most senior magistrate, concurred with the High Court’s main decision, and offered further explanation as to why certain parts of the DAP violated Section 25(5), Article VI of the 1987 Constitution. (READ: Understanding the SC ruling on the DAP)

He voted to declare unconstitutional 4 acts and practices under the DAP and National Budget Circular (NBC) No. 541 of the Department of Budget and Management (DBM). Here are highlights of his opinion:

(1) Cross-border transfers – The transfers of appropriations from the executive department to the legislative department and constitutional commissions

During oral arguments, Budget Secretary Florencio “Butch” Abad said the House of Representatives and the Commission on Audit (COA) requested the executive department for additional funds for their respective projects – thus the fund transfers. Carpio, however, wrote the constitutional prohibition on cross-border transfers is clear: the President, the Senate President, the Speaker of the House of Representatives, the Chief Justice, and the heads of constitutional bodies “are only authorized to augment any item in the general appropriations law for their respective offices from savings” obtained from other items of their respective appropriations.

Addressing Solicitor General Francis Jardeleza’s point that President Aquino made available to the COA, the House of Representatives, and the Commission on Elections (Comelec) the savings of his department only upon their request for funds, Carpio said: “The Constitution clearly prohibits the President from transferring appropriations of the executive branch to other branches of government or to constitutional bodies for whatever reason. Congress cannot even enact a law allowing such transfers.” 

Taking note of the DAP funds amounting to P6.5 billion used to augment the Priority Development Assistance Fund (PDAF) or the pork barrel of lawmakers in 2011, he said, “Clearly, the transfer of DAP funds... to augment the unconstitutional PDAF is also unconstitutional because it is an augmentation of an unconstitutional appropriation.” The PDAF was itself declared unconstitutional in November 2013.

Quoting former SC Justice Teodoro Padilla, Carpio wrote, “The fundamental policy of the Constitution is against transfer of appropriations even by law, since this ‘juggling’ of funds is often a rich source of unbridled patronage, abuse and interminable corruption.” It also “impairs the independence” of constitutional bodies.  

(2) The release of uncommitted funds for “maintenance and other operating expenses” (MOOE) as savings, and their transfer to other items in the General Appropriations Act (GAA or the national budget)

Savings, as defined in the GAA, refer to portions or balances from any programmed appropriation “free from any obligation or encumbrance.” This means there is no contract that requires payment out of these funds. Savings include funds that are still available after the completion or final discontinuance or abandonment of work, activity or purpose for which the appropriation was authorized. For example, a half-way completed bridge is destroyed by an earthquake and is discontinued because remaining funds are inadequate to complete construction of the bridge. These funds can be considered savings. Abandonment refers to activity or work that cannot be started because say, a month or two before the end of a fiscal year, there is no more time to conduct public bidding that would commit funds. These funds set aside for this discontinued activity also constitute savings.

The government, however, invoked Section 38, Chapter 5, Book VI of the Administrative Code, which authorizes the President to “suspend or otherwise stop further expenditure of funds allotted for any agency” or any other expense authorized in the GAA. Section 38 was used as the basis for NBC 541, which authorized the withdrawal of uncommitted funds of agencies with low levels of obligations as of June 30, 2012 (the middle of the fiscal year) to augment or fund “priority and/or fast moving programs/projects of the national government.”

Carpio contended that the power granted to the President by Section 38 of the Administrative Code – in the event he orders a suspension of a project, for example, because of suspected anomalies – results in only a temporary discontinuance of the work. Thus funds remain committed and cannot qualify as savings.

As for MOOE appropriations, Carpio said these are divided into 12 monthly allocations. Excess or unused MOOE funds are deemed savings only at the end of each month. Uncommitted MOOE appropriations from previous months can be pooled as savings and realigned or transferred, but “MOOE funds for future months are not savings and cannot be realigned,” said Carpio.

“As of June 30 of a fiscal year, there are still 6 months left to obligate the funds. Six months are more than enough time to conduct public bidding to obligate the funds,” he wrote. Appropriations for future MOOEs also cannot be considered savings.

(3) The release of uncommitted funds for capital outlay as savings, and their transfer to other items in the GAA

As for capital outlay appropriations, Carpio said that the two-year life span of these funds as stated in the GAA “cannot be shortened by the President,” unless they are “savings” as defined by the GAA.

Capital outlays can be committed anytime within the two-year period, as long as there is sufficient time to conduct public bidding.

(4) The release of uncommitted funds as savings and their transfer to items or projects not found in the GAA

Carpio cited the Sanchez v. Commission on Audit case, which provided two requirements for a valid transfer of appropriations: “the existence of savings, and the existence in the appropriations law of the item, project or activity to be augmented from savings.”

Other unlawful acts

Carpio agreed with the other justices in voiding the use of unprogrammed funds in the GAA without the certification of the National Treasurer that revenue collections for the fiscal year had exceeded that year’s revenue target.

He also objected to the idea of a “presidential power of impoundment” or the authority to “cancel, prevent or permanently stop” an expenditure provided in the GAA once it becomes law. Carpio said the President can only veto “specific line items” in the GAA when the proposed budget is submitted to him for approval. But once it becomes law, “the President can no longer veto or cancel any item in the GAA or impound the disbursement of funds authorized to be spent in the GAA.” Impounding funds in effect reverses the will of Congress.

He pointed out it is surprising for the majority in the Senate and the House of Representatives to support the DAP and NBC 541 when these “actually castrate the power of the purse of Congress. This Court cannot allow a castration of a vital part of the checks-and-balances enshrined in the Constitution, even if the branch adversely affected suicidally consents to it.”

Doctrine of operative fact

Only those “who relied in good faith on the law or the administrative issuance” can invoke it. Those who acted “in bad faith or with gross negligence” cannot invoke the operative fact doctrine.

To illustrate his point, Carpio wrote that “if DAP funds were used to build school houses without anomalies other than the fact that DAP funds were used, the contract could no longer be rescinded, for to do so would prejudice the innocent contractor who built the school houses in good faith.”

In contrast, “if DAP funds were used to augment the PDAF of members of Congress whose identified projects were in fact non-existent or anomalously implemented, the doctrine of operative fact would not apply.” – Rappler.com

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Read more stories on the DAP here.

Michael Bueza

Michael Bueza is a researcher and data curator under Rappler's Research Team. He works on data about elections, governance, and the budget. He also follows the Philippine pro wrestling scene and the WWE. Michael is also part of the Laffler Talk podcast trio.