G. Appropriation and re-alignment

Atty. Jericho Del Puerto

Atty. Jericho Del Puerto

Lawyer, Author, Mentor

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1. No transferring of appropriations – with exception

GENERAL RULE: No law shall be passed authorizing any transfer of appropriations. (Section 25[5], Article VI, Ibid.)

EXCEPTION: … however, 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 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. (Ibid.)

BAR EXAM QUESTION

(Question VI-B, Political Law, 2017 Bar Exam)

The Executive Department has accumulated substantial savings from its appropriations. Needing ₱3,000,000.00 for the conduct of a plebiscite for the creation of a new city but has no funds appropriated soon by the Congress for the purpose, the COMELEC requests the President to transfer funds from the savings of the Executive Department in order to avoid a delay in the holding of the plebiscite.

May the President validly exercise his power under the 1987 Constitution to transfer funds from the savings of the Executive Department, and make a cross-border transfer of ₱3,000,000.00 to the COMELEC by way of augmentation? Is your answer the same if the transfer is treated as aid to the COMELEC? Explain your answer. (4%)

Suggested Answer:

(a) No. Answer

Under the 1987 Constitution, transferring of appropriations is prohibited. However, by way of exception, the President, and other certain officials, by law, is authorized to augment any item in the general appropriations law for their respective offices from savings in other items of their respective appropriations. Rule

In the case at bar, the President intends to transfer appropriations outside of the Executive Department and into a Constitutional Commission – the COMELEC. This is not permitted under the 1987 Constitution. Apply

Thus, the president may not validly exercise his power under the 1987 Constitution to transfer funds from savings of the Executive Department to the COMELEC by way of augmentation. Conclusion

(b) My answer is the same even if it is treated as aid to the COMELEC. This is because such cross-border transfer of funds is expressly prohibited by the 1987 Constitution.

2. Requisites

There are two essential requisites in order that a transfer of appropriation with the corresponding funds may legally be effected:

1) There must be savings in the programmed appropriation of the transferring agency.

2) There must be an existing item, project or activity with an appropriation in the receiving agency to which the savings will be transferred. (Sanchez v. Commission on Audit, En Banc, G.R. No. 127545, 23 April 2008)

a. Actual savings

DEFINITION: Savings – refer to portions or balances of any programmed appropriation in this Act free from any obligation or encumbrance which are:

1) still available after the completion or final discontinuance or abandonment of the work, activity or purpose for which the appropriation is authorized;

2) from appropriations balances arising from unpaid compensation and related costs pertaining to vacant positions and leaves of absence without pay; and

3) from appropriations balances realized from the implementation of measures resulting in improved systems and efficiencies and thus enabled agencies to meet and deliver the required or planned targets, programs and services approved in this Act at a lesser cost. (Section 60, Section 54, and Section 53 of the 2011, 2012, and 2013 GAAs, respectively, cited in Araullo v. Aquino III, En Banc, G.R. No. 209287, 01 July 2014)

SINE QUA NON: Actual savings is a sine qua non to a valid transfer of funds from one government agency to another. The word “actual” denotes that something is real or substantial, or exists presently in fact as opposed to something which is merely theoretical, possible, potential or hypothetical. (Sanchez v. Commission on Audit, supra.)

EXAMPLE: The Chief Justice himself transfers funds only when there are actual savings, e.g., from unfilled positions in the Judiciary. (Ibid.)

SAVINGS CANNOT BE ASSUMED/PRESUMED: The thesis that savings may and should be presumed from the mere transfer of funds is plainly anathema to the doctrine laid down in Demetria v. Alba as it makes the prohibition against transfer of appropriations the general rule rather than the stringent exception the constitutional framers clearly intended it to be. It makes a mockery of Demetria v. Alba as it would have the Court allow the mere expectancy of savings to be transferred. (Ibid.)

1) The 3 sources of savings

Section 60, Section 54, and Section 53 of the General Provisions of the 2011, 2012 and 2013 GAAs, respectively, contemplate three sources of savings:

1) There can be savings when there are funds still available after completion of the work, activity or project, which means there are excess funds remaining after the work, activity or project is completed. There can also be savings when there is final discontinuance of the work, activity or project, which means there are funds remaining after the work, activity, or project was started but finally discontinued before completion.

2) There can be savings when there is unpaid compensation and related costs pertaining to vacant positions.

3) There can be savings from cost-cutting measures adopted by government agencies.

FINAL DISCONTINUANCE – SAVINGS: To illustrate, a bridge, half-way completed, is destroyed by floods or earthquake, and thus finally discontinued because the remaining funds are not sufficient to rebuild and complete the bridge. Here, the funds are obligated but the remaining funds are de-obligated upon final discontinuance of the project. On the other hand, abandonment means the work, activity or project can no longer be started because of lack of time to obligate the funds, resulting in the physical impossibility to obligate the funds. This happens when a month or two before the end of the fiscal year, there is no more time to conduct a public bidding to obligate the funds. Here, the funds are not, and can no longer be, obligated and thus will constitute savings. Final discontinuance or abandonment excludes suspension or temporary stoppage of the work, activity, or project.

TEMPORARY DISCONTINUANCE – NOT SAVINGS: Section 38, Chapter 5, Book VI of the Administrative Code of 198716 authorizes the President, whenever in his judgment public interest requires, “to suspend or otherwise stop further expenditure of funds allotted for any agency, or any other expenditure authorized in the GAA.” For example, if there are reported anomalies in the construction of a bridge, the President can order the suspension of expenditures of funds until an investigation is completed. This is only a temporary, and not a final, discontinuance of the work and thus the funds remain obligated. Section 38 does not speak of savings or realignment. Section 38 does not refer to work, activity, or project that is finally discontinued, which is required for the existence of savings. Section 38 refers only to suspension of expenditure of funds, not final discontinuance of work, activity or project. Under Section 38, the funds remain obligated and thus cannot constitute savings.

SAME; TEMPORARY SUSPENSION ONLY: Funds which are temporarily not spent under Section 38 are not savings that can be realigned by the President. Only funds that qualify as savings under Section 60, Section 54, and Section 53 of the 2011, 2012 and 2013 GAAs, respectively, can be realigned. If the work, activity or program is merely suspended, there are no savings because there is no final discontinuance of the work, activity or project. If the work, activity or project is only suspended, the funds remain obligated. If the President “stops further expenditure of funds,” it means that the work, activity or project has already started and the funds have already been obligated. Any discontinuance must be final before the unused funds are de-obligated to constitute savings that can be realigned.

SAME; SAME; SUMMARY: To repeat, funds pertaining to work, activity or project merely suspended or temporarily discontinued by the President are not savings. Only funds remaining after the work, activity or project has been finally discontinued or abandoned will constitute savings that can be realigned by the President to augment existing items in the appropriations for the Executive branch.

3. Who may only exercise the power to transfer savings:

The power to transfer savings under Sec. 25(5), Art. VI of the 1987 Constitution pertains exclusively to:

1) The President;

2) The President of the Senate;

3) The Speaker of the House of Representatives;

4) The Chief Justice of the Supreme Court; and,

5) The heads of Constitutional Commissions – and no other. (Sanchez v. Commission on Audit, supra.)

PURPOSE AND CONDITIONS – TO BE SPECIFIED: 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 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 transfer may be made only if there are savings from another item in the appropriation of the government branch or constitutional body. (Demetria v. Alba, En Banc, G.R. No. 71977, 27 February 1987)

a. President

PRESIDENT’S POWER: To further enable the President to run the affairs of the executive department, he is likewise given constitutional authority to augment any item in the General Appropriations Law using the savings in other items of the appropriation for his office. In fact, he is explicitly allowed by law to transfer any fund appropriated for the different departments, bureaus, offices and agencies of the Executive Department which is included in the General Appropriations Act, to any program, project or activity of any department, bureau or office included in the General Appropriations Act or approved after its enactment. (Pichay, Jr. v. Executive Secretary, En Banc, G.R. No. 196425, 24 July 2012)

SAME; ONLY THE PRESIDENT MAY EXERCISE: Only the President is authorized to use savings to augment items for the Executive branch. (Araullo v. Aquino III, En Banc, G.R. No. 209287, 01 July 2014)

LIMITATIONS; ACTUAL SAVINGS – REQUIRED: The President cannot indiscriminately transfer funds from one department, bureau, office or agency of the Executive Department to any program, project or activity of any department, bureau or office included in the General Appropriations Act or approved after its enactment, without regard to whether the funds to be transferred are actually savings in the item from which the same are to be taken, or whether or not the transfer is for the purpose of augmenting the item to which the transfer is to be made. (Sanchez v. Commission on Audit, En Banc, supra.)

AFP CHIEF OF STAFF – NOT ALLOWED: the Chief of Staff of the Armed Forces of the Philippines may not be given authority to transfer funds under this article because the realignment of savings to augment items in the general appropriations law for the executive branch must and can be exercised only by the President pursuant to a specific law. (Sanchez v. Commission on Audit, En Banc, supra.)

b. Congress

The Senate President and the Speaker of the House of Representatives, as the case may be, shall approve the realignment (of savings). However, before giving their stamp of approval, these two officials will have to see to it that:

1) The funds to be realigned or transferred are actually savings in the items of expenditures from which the same are to be taken; and

2) The transfer or realignment is for the purpose of augmenting the items of expenditure to which said transfer or realignment is to be made. (Ibid.)

MEMBERS OF CONGRESS: Individual members of Congress may only determine the necessity of the realignment of savings in the allotments for their operating expenses because they are in the best position to know whether there are savings available in some items and whether there are deficiencies in other items of their operating expenses that need augmentation. However, it is the Senate President and the Speaker of the House of Representatives who shall approve the realignment. (Ibid.)

4. Safeguards

These were the safeguards designed to forestall abuses in the expenditure of public funds:

1) The restriction on the transfer of funds;

2) The specification of purpose for special appropriations bill;

3) The restriction on disbursement of discretionary funds;  and

4) The conditions on the release of money from the Treasury. (Ibid.)

PROHIBITION ON CROSS-BORDER TRANSFER (NON-TRANSFERRABILITY OF FUNDS TO OTHER BRANCHES): Section 25(5), Article VI of the Constitution likewise mandates that savings from one branch, like the Executive, cannot be transferred to another branch, like the Legislature or Judiciary, or to a constitutional body, and vice versa. In fact, funds appropriated for the Executive branch, whether savings or not, cannot be transferred to the Legislature or Judiciary, or to the constitutional bodies, and vice versa. Hence, funds from the Executive branch, whether savings or not, cannot be transferred to the Commission on Elections, the House of Representatives, or the Commission on Audit. (Ibid.)

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