Araullo vs Aquino III (DAP Case)

Facts:
When President Benigno Aquino III took office, his administration noticed the sluggish growth of the economy. The
World Bank advised that the economy needed a stimulus plan. Budget Secretary Florencio Butch Abad then came up
with a program called the Disbursement Acceleration Program (DAP).
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funds allotted therefor will be withdrawn by the Executive. Once withdrawn, these funds are declared as savings by the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).
Other sources of the DAP include the unprogrammed funds from the General Appropriations Act (GAA). Unprogrammed
funds are standby appropriations made by Congress in the GAA.
Meanwhile, in September 2013, Senator Jinggoy Estrada made an expos claiming that he, and other Senators, received
Php50M from the President as an incentive for voting in favor of the impeachment of then Chief Justice Renato Corona.
Secretary Abad claimed that the money was taken from the DAP but was disbursed upon the request of the Senators.
This apparently opened a can of worms as it turns out that the DAP does not only realign funds within the Executive. It
turns out that some non-Executive projects were also funded; to name a few: Php1.5B for the CPLA (Cordillera Peoples
Liberation Army), Php1.8B for the MNLF (Moro National Liberation Front), P700M for the Quezon Province, P50-
P100M for certain Senators each, P10B for Relocation Projects, etc.
This prompted Maria Carolina Araullo, Chairperson of the Bagong Alyansang Makabayan, and several other concerned
citizens to file various petitions with the Supreme Court questioning the validity of the DAP. Among their contentions
was:
DAP is unconstitutional because it violates the constitutional rule which provides that no money shall be paid out of the
Treasury except in pursuance of an appropriation made by law.
Secretary Abad argued that the DAP is based on certain laws particularly the GAA (savings and augmentation provisions
thereof), Sec. 25(5), Art. VI of the Constitution (power of the President to augment), Secs. 38 and 49 of Executive Order
292 (power of the President to suspend expenditures and authority to use savings, respectively).
Issues:
I. Whether or not 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).
II. Whether or not the DAP realignments can be considered as impoundments by the executive.
III. Whether or not the DAP realignments/transfers are constitutional.
IV. Whether or not the sourcing of unprogrammed funds to the DAP is constitutional.
V. Whether or not the Doctrine of Operative Fact is applicable.
HELD:
I. No, the 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. As such, it did not violate
the Constitutional provision cited in Section 29(1), Art. VI of the Constitution. 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.
II. 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.
III. 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 non-existent 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
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.
IV. 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.
V. 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.