SUBSTANTIVE ISSUES

DAP Fund are Savings

The Honorable Court held that the Disbursement Acceleration Program is in violation of a
constitutional provision, specifically, Section 25 (5) Article VI which states that
No law shall be passed authorizing any transfer of appropriations; however, the
President,xxx may, by law, be authorized to augment any item in the general
appropriations law for their respective offices from savings in other items of their
respective appropriations.
It was declared that unreleased appropriations and withdrawn unobligated allotments under
the DAP were not savings and therefore not exempted from the prohibition of transferring
appropriations. As discussed from the decision, the savings described in the foregoing provisions
could be generated only upon the purpose of the appropriation being fulfilled, or upon the need for
the appropriation being no longer existent. Three instances were enumerated in order for savings to
arise, namely
1. The projects, activities and programs (PAPs) for which the appropriation had been
authorized was completed, finally discontinued or abandoned;
2. There were vacant positions and leaves of absence without pay; or
3. The required or planned targets, programs and services were realized at a lesser cost
because of the implementation of measures resulting in improved systems and efficiencies.
The Honorable Court held that these were not met.
The respondents think there are matters not considered.
First, appropriated PAPs from which the DAP fund was generated were actually either
completed, discontinued or abandoned.
The power of the president to discontinue or abandon programs in General Appropriations
Act can be traced from the history. During the term of President Ferdinand Marcos, a law was
enacted authorizing this act. Section 43 of Presidential Decree No. 1177 states that
Except as otherwise provided in the General Appropriations Act and whenever in
his judgment the public interest so requires, the President, upon notice to the head
of office concerned, is authorized to suspend or otherwise stop further
expenditure of funds allotted for any agency, or any other expenditure authorized
in the General Appropriations Act, except for personal services appropriation
used for permanent officials and employees.
This remained valid even after the 1987 Constitution. In the case of Gonzales vs. Macaraig,
if indeed the Congress, as petitioners argue, intended to amend or repeal Presidential Decree No.
1177, with all the more reason should it have provided in a separate enactment, it being basic that
implied repeals are not favoured. For the same reason, we cannot subscribe to petitioners
allegation that Pres. Decree No. 1177 has been revoked by the 1987 Constitution. The 1987
Constitution itself provides for the continuance of laws, decrees, executive orders, proclamations,
letters of instructions, and other executive issuances not inconsistent with the Constitution until
amended, repealed, or revoked1.
In the case of Demetria vs. Alba, the conflict between
This law has been reiterated under Book VI Chapter 5, Section 38 of the Administrative
Code which only upholds the continuity of its validity. It is clearly stated from the foregoing
provisions that for public interest, the president could discontinue or abandon expenditure of
funds from General Appropriations Act. DAP was introduced during the time when the gross
domestic product of the country is going down to speed up public expenditure and boost economic
growth. It is undeniable that public interest requires the implementation of DAP. Various
1

Gonzales v. Macaraig, G.R. No. ______, _____

testaments were given by experts to prove the positive results of this program.

The Executive Department, vested with the power to execute the law, knew more than any of
the other Departments the needs of the State in order to perform efficiently and effectively. For this
very reason, the Executive prepares the budget over which the legislative base the General
Appropriations Act. The appropriations approved by the Congress are actually programs and
activities of the Government where they allow the public funds to be spent.
Whether or not to pursue the implementation of those approved activities and programs,
however, is left upon the discretion of the Executive. Considering the span of time when the Budget
is submitted up to the time when it may be utilized, what may be deemed proper before may no
longer be practical in the actual. It has to be taken into account as well that other important and
urgent matters may arise and had to be addressed due to changing circumstance. To conform
strictly and see to it that all programs and activities are implemented exactly as what the Congress
has approved, if not impossible, would hardly be met.
In order to avoid needless expenditures just to utilize the fund or otherwise, make it
stagnant, the President is authorized to suspend or stop expenditures of funds allotted whenever
the public interest so requires. There is no question on programs completed in the middle of the
year. Whatever excess there may be, it is definitely savings. But if certain projects are not yet
complete or not even started, when projection was made and there were compelling reasons that
made to believe that these projects can no longer be conducted, or must be discontinued or
abandoned, the respondents believe that funds for these projects automatically become savings.
When the President has determined impossibility of its implementation during the year, such
statement must be respected and be given due regard for the Executive possess the competence,
experience, and knowledge in the implementation of the Government projects. Jurisprudence has
said that courts give much weight to the government agency or officials charged with the
implementation of the law, due to their competence, expertness, experience and informed
judgment, and the fact that they frequently are the drafters of the law they interpret.2 The function
of Book VI, Chapter 5, Section 38 of the Administrative Code is to allow the executive to exercise
managerial prerogatives because those in the executive are the ones familiar with the terrain of
implementing projects and activities authorized by the Congress.
The Executives discretionary spending power has been observed even in the United States
where many principles of the common law have been imported into this jurisdiction as a result of
the enactment of laws and establishment of institutions similar to those of the United States.
Comparative law not only provides alternative solutions to be used in legal reform but also give us a
better understanding of our existing law3
In the United States, Congress has traditionally recognized that the president must be given
some flexibility when implementing funds that have been appropriated. Changing circumstances,
such as a less turbulent hurricane season or the cessation of a war, may make the impetus behind
allocated funds no longer relevant. And the president may, too, discover more efficient ways of
accomplishing Congress intended goals and subsequently require fewer discretionary dollars. For
either situations, Congress generally provides the executive branch such discretion by either
including specific language in authorizing bills that permits the president to spend less than a full
appropriation, or by forcing the president to navigate through a set of laws and procedures under
which founds may be impounded.4
In this light, first of the three instances mentioned above that must be present for savings to
arise is actually met. When the President put a stop for the expenditure of certain projects, the fund
becomes free from any obligation or encumbrance and is now available. They become savings that
could be augmented under Section 25(5), Article VI of the 1987 Constitution.

2
3

Republic vs Sandiganbayan, 96 SCAd 842, 293 SCRA 440, 454 (1998)

P. John Jozyris, Comparative Law for the Twenty-First Century: New Horizons and New Technologies, 69 Tul. L. Rev.
165, 167 (1994)
31 U.S.C. 1341-42, 1349-51, 1511-57

With regard to the second instance, where there must be vacant positions and leave of
absence without pay before savings could exist, the Honorable Court ruled that the unreleased
appropriations under the DAP are not savings and the use of such appropriations contravened
Section 25 (5), Article VI of the 1987 Constitution. It held that unreleased appropriations have not
yet ripened into categories of items from which savings can be generated. Appropriations have been
considered released if there has already been allotment or authorization to incur obligations and
disbursement authority.
The respondents disagree. Among the sources of DAP are the unreleased appropriations
most of which is from unfilled positions in personal services. It can be recalled that the Congress
base the General Appropriations Act from budget submitted by the executive. DBM base its Budget
for personal services on Personal Services Itemization and Plantilla of Personnel (PSIPO).
Important fact that is probably overlooked on this matter is that the budget for Personal Services is
given full credit whether the position is filled or unfilled. It is illogical to insist that the second
instance was not met when budget allotted for personal services includes even the unfilled
positions. From this, savings could be generated even from the first month of the year if the unfilled
position remains vacant. Government employees, are paid not on a yearly basis but rather, upon
rendering of service.
The classification of appropriation whether released or unreleased is just a matter of
determining whether the obligation to pay has arisen. In determining whether it is free from
encumbrance, however, the necessity for a fund to become obligated first for payment before
becoming savings is unnecessary. Budget is allotted in this matter based on position and not on
people holding the position. There is no way it could release money for unfilled position because
there is nobody whom the government is obligated to pay. It does not ignore the fact, however, that
the budget allotted for that position becomes free from any encumbrance and therefore, a savings.
The basic concept that a money unspent is savings explains this issue. Even the Court said that if
an agency has unfilled positions in its plantilla and did not receive an allotment and NCA for such
vacancies, appropriations for such positions, although unreleased, may already constitute savings5.
Further, unreleased appropriations under the DAP are savings because they pertain to
appropriation balances arising from unpaid compensation and related costs pertaining to vacant
positions and leaves of absence without pay.6 It would be contradictory to uphold this law and at the
same time maintain that savings could only be generated from released appropriations.
Thus, it is not the status of appropriations as released or unreleased that makes them
available for use, but rather, the fact that the allocations for positions under Personal Services are
vacant or unfilled and therefore unspent. Through the lapse of time, savings is continuously
produced from the unfilled positions and the leave of absence without pay for the filled position.
As for third instance, evidently, projects completed with lower cost are savings. There is no
contention that this could only be determined upon completion of the project. The respondents
would like to insist, however, that not all projects are supposed to be accomplished at the end of the
year. Again, this could be determined even during the year. As such, savings surely arise from
various projects, activities and programs of the Government throughout the year.
Therefore, the respondents conclude that the Court made a mistake in ruling that the fund
from which the DAP was sourced are not savings. Meeting the three instances enumerated, DAP
fund should have been considered savings.

Use of Savings Should not be Limited by General Appropriations Act

Arguing on another issue, section 70 (4) of General Appropriations Act provides that
Realignment of savings by the foregoing agencies from one allotment class to
another, and among objects of expenditures within Capital Outlays shall require
prior approval of the DBM: Provided, that realignment of savings from Capital

5
6

Araullo v. Aquino, GR No. 209287, July 1, 2014

Sec 19, RA 7180

Outlays may only be undertaken not later than the third quarter of the current
year.
Upholding the above provision, the Honorable Court ruled that savings could only be
augmented by or near the end of the year. We contend, however, that to strictly implement this
provision would limit the authority given by the Congress to the President to protect the general
welfare of the people. This is founded on the duty of the President, as steward of the people.7
The three-month duration to spend all the savings generated throughout the year is
insufficient. Such provision, although allows the augmentation, nonetheless, is difficult to realize.
What would be a more possible consequence of this ruling is that most of the savings would be
returned back to National Treasury at the end of the year since projects, activities and programs are
not supposed to be abruptly implemented. The Executive Department, does not save, just to return
excess fund to the National Treasury. The public fund must be utilized to serve the people which is
the very purpose of DAP.
We also consider that the intent of the Constitution, as well as the General Appropriations
Act, with regard to allowing the realignment, is to use the savings for other lawful purposes during
the year rather than let it sit and be returned by the end of the year to the National Treasury. Hence,
we should apply the principle that the spirit of the law controls its letter, that a thing which is within
the intention of the statute is as much within the statute as if it were within the letter, and a thing
which is within the letter of the statute is not within the statute unless it be within the intention of
the lawmaker.8 Applying the principle, when the lawmakers intend to allow realignment and let the
savings be used for other lawful purpose, any literal interpretation of the letter in the statute
limiting its purpose must be disregarded.
Sources of DAP Fund May be Used for Augmentation
As we claim from the foregoing discussions that the fund for DAP is savings, the
respondents maintain that the President is authorized to augment fund under Section 39 of the
Administrative Code stating that
SECTION 39. Authority to Use Savings in Appropriations to Cover Deficits.Except as otherwise
provided in the General Appropriations Act, any savings in the regular appropriations authorized in
the General Appropriations Act for programs and projects of any department, office or agency, may,
with the approval of the President, be used to cover a deficit in any other item of the regular
appropriationsxxx
Since the withdrawn unobligated allotments and unreleased appropriations under the DAP
are savings, the President is authorized under the GAA to use such savings to augment an
appropriation. In further relation to Section 25 (5) Article VI of the Constitution, the President is
authorized to fund his priority projects to speed up disbursement of funds. The various statutes9
promulgated to allow the President of augmentation is indicative of an understandable recognition
by Congress of the need to provide the Executive as much leeway as possible in making judgments
based on facts on the ground.
DAP FUNDS ARE USED IN PROGRAMS COVERED BY THE GAA
The Honorable Court ruled that the "savings" pooled under the DAP were allocated to PAPs
that were not covered by any appropriations in the pertinent GAAs. Projects provided to support
this is the DREAM project and the Establishment of the Advanced Failure Analysis Laboratory
augmented without proper appropriation cover. The augmentation was also deemed too much such
that it constituted 300% of the original allotment of the program.
With due respect, the Honorable Court might have overlooked that what Article VI, Section
25(5) of the Constitution requires is that the augmentation by the President and other
constitutional officers shall be for an item and not an allotment class or expense category. These
are two different terms. Item refers to the particulars, the details, the distinct and severable parts of
the bill. An indivisible sum of money dedicated to a stated purpose and specific appropriation of
money. Allotment class, on the other hand, refers to the expense category of the item, such as

7 Philippine Constitutional Law, Principles and Cases, Vol.2, De Leon

8
Ruben E. Agpalo, Statutory Construction
9
R.A. No 7875, as amended by R.A. 10606; RA No. 10173; R.A. No 10071

Personal Services, Maintenance and Other Operating Expenses and Capital Outlay.10 As long as the
item is in the GAA, augmentation remains valid.
In DBM Memorandums dated December 12, 2011 and June 25, 2012, tables were presented
showing the items of GAA where the fund was realigned. The DREAM project is actually covered
under the Generation of new knowledge and technologies and research capability building in
priority areas identified as strategic to National Development. It need not to specifically provide
the name of project, activity or program because it is not the main concern of the Congress in
budget allotment. Congress are not mandated as well to create classes within an item. Congress on
the other hand create items to conform to the line-item veto of the President.
The respondents therefore contend that DAP did not violate Section 29, Article VI of the
Constitution. DAP Fund merely realigned the public fund within the approved items in GAA.
The Honorable Court might as well consider the fact that the Constitution does not limit the
amount of augmentation made by the President. Sheer magnitude of augmentation alone, however,
is not a ground to declare the DAP or any other augmentation unconstitutional.11 So long as it is
savings and will be transferred in an item provided in the GAA, it remains valid and constitutional.
Deliberations cleared this out:
MR. SARMIENTO. I have one last question. Section 25, paragraph (5)
authorizes the Chief Justice of the Supreme Court, the Speaker of the House of
Representatives, the President, the President of the Senate to augment any item in
the General Appropriations Law. Do we have a limit in terms of percentage as to how much
they should augment any item in the General Appropriations Law?
MR. AZCUNA. The limit is not in percentage but from savings. So it is only to the extent
of their savings.12
The ruling of the Honorable Court that the saving pooled under the DAP were allocated to
PAPs that were not covered by any appropriations in pertinent GAAs, therefore, cannot hold.
CROSS-BORDER TRANSFERS HAS BEEN PRACTICED SINCE PRIOR ADMINISTRATIONS
Section 44(1) of Presidential Decree No. 1177 provides that
The President shall have the authority to transfer any fund, appropriated for the
different departments, bureaus, offices, and agencies of the Executive Department,
which are included in General Appropriations Act, to any program, project or
activity of any department, bureau or office included in the General Appropriation
Act or approved after its enactment.
This provision may be in conflict with Section 25(5), Article VI of the 1987 Constitution
prohibiting the transfer of an appropriation for one item to another, however, the case of Demetria
vs Alba explained that
xxx to afford the heads of the different branches of the government and those of the
constitutional commissions considerable flexibility in the use of public funds and
resources, the constitution allowed the enactment of a law authorizing the transfer
of funds for the purpose of augmenting an item from savings in another item in the
appropriation of the government or constitutional body concerned. The leeway
granted was thus limited. The purpose and conditions for which funds may be
transferred were specified, i.e. transfer may be allowed for the purpose of
augmenting an item and such item may be made only if there are savings from
another item in the appropriation of the government branch or constitutional body.

12

Section 25 (5), Article VI of the 1987 Constitution has provided various positions authorized
to transfer appropriations. These are the President, the President of the Senate, the Speaker of the
House of Representatives, the Chief Justice of the Supreme Court, and the heads of Constitutional
Commissions. These are the heads of the three departments and constitutional commissions where
the law explicitly authorized the augment of items in their respective offices. It is evident then, that
realignment within the department is allowed. What is left in question is the realignment of fund
10
11

Gonzales vs Macaraig, 191 SCRA 452

Concurring and Dissenting Opinion of Associate Justice Del Castillo, p.67

Concurring and Dissenting Opinion of Associate Justice Del Castillo, p. 37

from one department to another.

The practice of cross-border transfers, the respondents would like to mention, exists even
under the prior presidents of the 1987 Constitution. Fidel V. Ramos, Joseph Estrada and Gloria
Macapagal-Arroyo have transferred savings from other departments. This has been a long-standing
practice made after careful consideration and the need to respond to requests of other department.
Even in the United States, this has been a practice. One Congressman explained that it was
sometimes necessary to allow expenditures to deviate from appropriations by taking funds from
one account and applying them to another. Such transfers were technically illegal, but it being the
custom palliates it. Proposals to abolish transfers altogether were countered by two arguments.
Appropriations had been redundant and were deficient, thus providing a convenient guide for
future appropriation bills. Furthermore, removal of transfer authority would encourage executive
departments to submit inflated estimates as a cushion against unexpected expenses. Crawford
warned Congress: The idea that economy will be enforced by repealing the provision will, I am
confident, be found to be wholly illusory. Withdraw the power of transfer, and the Departments will
increase their estimates.13
UNPROGRAMMED FUNDS
General Appropriations Act provided that unprogrammed funds can only be used in two
instances:
(i) when revenue collections exceed its targets; and
(ii) when additional foreign funds are generated
The Honorable Court ruled that unprogrammed funds are standby appropriations and
that revenue targets should be considered as a whole, not individually; otherwise, artificial revenue
surpluses would arise. It further held that the collection of additional revenues from new sources
cannot warrant the release of the unprogrammed funds. As such, the said practice was held to be
void.
With due respect, the interpretation is incorrect. First, following the Honorable Courts
decision would mean that excess revenue could only be determined at the end of the year. In effect,
implementation of the unprogrammed funds during the year will be impossible to which it is
approved. The respondents maintain the contention that such instance for unprogrammed funds to
arise refers to excess of individual revenue collection from its targets.
Likewise, the legislature should explicitly refer to total revenue and avoid the use of
collections and provisions in its plural form to emphasize that this only mean to whole revenue.
The respondents therefore insist that such ruling of the Honorable Court would make
unprogrammed funds unenforceable.
There is no Violation on System of Checks and Balances
The Honorable Court held that certain acts and practices under the DAP did violate the
system of checks and balances and, in fact, infringed on the doctrine of separation of powers.
The respondent would like to point out that under Article 10 of the Civil Code, the
lawmaking body intended right and justice to prevail. The system of checks and balances will not
always be adhered to when doing so would impair the enforcing of right and justice. The legislature,
in enacting a law, needs the approval of the President to make it a law. However, when the
President veto the law, the legislature could still pass the law by two-thirds vote. Same case as in
execution of law, the president may not stick to appropriations enacted by the legislature for public
interest. There is no violation of checks and balances.
EQUAL PROTECTION CLAUSE
The petitioners claimed the DAP violate the equal protection clause because its
implementation was elective since the funds that were allegedly released were no made available to
all the legislators. In addition, there was no reasonable classification used in disturbing the funds
under the DAP. In fact, the Senators who supposedly received money were treated differently as to
the amounts received.
The Supreme Court ruled that they were not in a position to rule on this issue because only
13

30 Annals of Cong. 421 (1817)

by the parties who supposedly suffered from the same could raise the issue. In this case, the
supposedly affected legislators were not the ones who filed a case for violation of the equal
protection clause.
DOCTRINE OF OPERATIVE FACT