National Electrification Administration

v. Commission on Audit
Petitioner National Electrification Administration is a GOCC created under PD 269. NEA is charged
with the responsibility of organizing, financing and regulating electric cooperatives throughout the country.
Government employee salaries were raised via a Joint Resolution of Congress, urging the President to
revise the existing compensation. This was made into a 4-year program. In 1996, President Ramos issued
EO 389 to implement the final year salary increases authorized by the joint Resolution. EO 389 called for a 2tranche salary increase: one on January 1, 1997, and another on November 1, 1997.
In January 1997, NEA implemented the salary increases. However, they implemented such increase
in a single lump sum beginning January 19, 1997 (NEA accelerated the implementation by paying the second
tranche starting January 1 instead of November 1). The Commission on Audit issued a Notice of Suspension
and Notices of Disallowance. The Notices of Disallowance were appealed by NEA, but rejected the COA en
banc. The decision of COA was then challenged in the Supreme Court.

ISSUES:
1) Whether or not COA committed a grave abuse of discretion amounting to lack or excess of
jurisdiction in disallowing the increased salaries NO
2) Whether or not NEA is allowed to accelerate the implementation of the salaries depending
on the availability of funds NO

HELD:
No, the Commission on Audit did not commit any grave abuse of discretion. Neither is NEA allowed to
accelerate the implementation.

On NEAs accelerated implementation

The Court ruled that such acceleration was not in accordance with the law. NEA claimed that RA
8250 (GAA of 1997) was their legal basis. However, such law was not self-executory. Budgetary
appropriations under the GAA do not constitute unbridled authority to government agencies to spend the
appropriated amounts as they wish.
Itemization of the Personal Services (the appropriation used by NEA) is prepared after the enactment
of the GAA, and requires the approval of the President. The execution of the GAA is subject to a program of
expenditure to be approved by the President, which will be the basis for the fund release.
No portion of the appropriations in the GAA shall be used for payment of any salary increase, unless
authorized by law. Salary increases are subject to the approval of the President.

In essence, the mere approval of Congress of the GAA does not make the funds automatically
available for spending instantly. The funds must still be collected during the fiscal year.
NEA also argues, from Sec 10 of EO 389, that GOCCs are exempted from the rule. The Court rejected
this argument, for only GOCCs with insufficient funds are exempted. There is no rule that allows those with
sufficient funds to accelerate their schedule. There is no express or implied authorization.
NEA also argues that such acceleration was allowed in a Memo of the Office of the President.
However, SC pointed out that the accelerated implementation is also allowed upon the approval of the
Department of Budget and Management, upon meeting certain terms and conditions. NEA did not comply by
seeking approval from the DBM.
The Court pointed out that NEA cannot assail the authority of the President to issue EO 389. The
Administrative Code gives the President such power. Joint Resolution 01 has also acknowledged such
authority.

On the DBMs approval of NEAs proposed budget

Once the proposed budget was approved by the DBM, it is submitted to Congress for evaluation and
inclusion in the appropriation law. This authorization does not include the authority to disburse.

On the Presidents control of all executive departments

Art 7, Sec 17
The President shall have control of all the executive departments, bureaus, and offices. He
shall ensure that the laws be faithfully executed.
The Supreme Court held that the presidential power of control over the executive branch of
government extends to all executive employees from Cabinet Secretary to the lowliest clerk. This
power is self-executing and does not require statutory implementation. It cannot be limited nor
withdrawn by the Congress.
All other executive officials must implement in good faith the Presidents directives and orders. The
case would not have arisen had NEA complied in good faith with the directives and orders of the President.
NEAs reasons in disregarding the President were patently flimsy, even ill-conceived.