Business World, 25 August 2015


The Supreme Court (SC) decision on the Development Acceleration Program (DAP) is now part of the laws of the land. As duly elected officials, it is the responsibility of President Benigno S. C. Aquino III and his officials to respect and embrace, rather than resist, this path-changing decision.

Congress is vested with the power of the purse. It exercises this when it decides how the budget will be spent in the General Appropriations Act (GAA).

This is pursuant to Section 29 (l) of the Constitution which provides:

“Section 29 (l). No money shall be paid out of the treasury except in pursuance of an appropriation made by law.”

The Executive branch is expected to faithfully execute the GAA by spending the budget in accordance with the provisions of the GAA unless exigencies result in deficiencies for which augmentation is authorized, subject to the conditions provided by law.

The power to augment by the President is a delegated power of Congress. While in essence it diminishes the congressional power of the purse, it does not and should not override Congress’ authority over the budget.

But before the President can exercise this delegated power, the Supreme Court said that “savings should be actual.” “‘Actual’ denotes something that is real or substantial, or something that currently exists in fact, as opposed to something that is merely theoretical, possible, potential or hypothetical,” according to the Supreme Court (Araullo, et al. v. Aquino, et al., GR Nos. G.R. Nos. 209287, 209135, 209136, 209155, 209164, 209260, 209442, 209517 & 209569, July 1, 2014.)

In the 2011, 2012, and 2013 GAAs, the Supreme Court referred to savings to “portions or balances of any programmed appropriation in this Act free from any obligation or encumbrance which are:

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

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

(iii) 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.”

Thus, savings could be generated only upon the purpose of the appropriation being fulfilled, or upon the need for the appropriation being no longer existent. The savings concept espoused by the Department of Budget and Management (DBM) in Araullo v. Aquino in which the “pooling of unreleased appropriations such as unreleased Personnel Services appropriations which will lapse at the end of the year, unreleased appropriations of slow moving projects and discontinued projects per Zero-Based Budgeting findings” was disallowed by the Court.

“The Supreme Court defined unobligated allotments as encompassed by the first part of the definition of “savings” in the GAA, that is, as “portions or balances of any programmed appropriation in this Act free from any obligation or encumbrance.” But the first part of the definition was further qualified by the three enumerated instances of when savings would be realized. As such, unobligated allotments could not be indiscriminately declared as savings without first determining whether any of the three instances existed. This signified that the DBM’s withdrawal of unobligated allotments had disregarded the definition of savings under the GAAs.”

Budget Secretary Florencio “Butch” B. Abad issued National Budget Circular (NBC) No. 541 which authorizes him to withdraw unobligated allotments. The allotments to be withdrawn will be based in the list of slow moving projects to be identified by the agencies concerned. But a review of NBC No. 541 did not specify how such unobligated allotments can be withdrawn:

As the Supreme Court declared:

“A perusal of its various provisions reveals that NBC No. 541 targeted the ‘withdrawal of unobligated allotments of agencies with low levels of obligations’ ‘to fund priority and/or fast-moving programs/projects.’ But the fact that the withdrawn allotments could be ‘[r]eissued for the original programs and projects of the agencies/ODs concerned, from which the allotments were withdrawn’ supported the conclusion that the Programs, Activities, and Projects (PAPs) had not yet been finally discontinued or abandoned. Thus, the purpose for which the withdrawn funds had been appropriated was not yet fulfilled, or did not yet cease to exist, rendering the declaration of the funds as savings impossible.

“Worse, NBC No. 541 immediately considered for withdrawal all released allotments in 2011 charged against the 2011 GAA that had remained unobligated based on the following considerations, to wit:

5.4.1 The departments/agencies’ approved priority programs and projects are assumed to be implementation-ready and doable during the given fiscal year; and

5.4.2 The practice of having substantial carryover appropriations may imply that the agency has a slower-than-programmed implementation capacity or agency tends to implement projects within a two-year time frame.

“Such withdrawals pursuant to NBC No. 541, the circular that affected the unobligated allotments for continuing and current appropriations as of June 30, 2012, disregarded the 2-year period of availability of the appropriations for MOOE [maintenance and other operating expenses] and capital outlay [CO].


“Thus, another alleged area of constitutional infirmity was that the DAP and its relevant issuances shortened the period of availability of the appropriations for MOOE and capital outlays.”

Congress provided a one-year period of availability of the funds for all allotment classes in the 2013 GAA (Republic Act No. 10352). However, Budget Secretary Abad further shortened the one-year validity period of the affected appropriations to only a quarter of a year under the DBM’s memorandum dated May 20, 2013.

Mr. Abad sought omnibus authority to consolidate savings and unutilized balances to fund the DAP on a quarterly basis. “The Aquino administration forced the generation of savings in order to have a larger fund available for discretionary spending. By withdrawing unobligated allotments in the middle of the fiscal year, it deprived funding for PAPs with existing appropriations under the GAAs.

The withdrawals were done upon the initiative of the DBM itself and not from the implementing agencies, the Supreme Court noted. The high court ruled that the withdrawal and transfer of unobligated allotments and the pooling of unreleased appropriations were invalid.


The Supreme Court said that the exercise of the power to augment shall be strictly construed by virtue of its being an exception to the general rule that the funding of PAPs shall be limited to the amount fixed by Congress for the purpose.

This is to ensure that the utilization and management of savings by the Executive and other implementors of the budget will be kept within the limits of their prerogatives during budget execution and will not intrude upon the power of the purse of Congress.

The high court ruled: “In a society governed by laws, even the best intentions must come within the parameters defined and set by the Constitution and the law. Laudable purposes must be carried out through legal methods.” It clarifed “Section 38 refers to the authority of the President “to suspend or otherwise stop further expenditure of funds allotted for any agency, or any other expenditure authorized in the General Appropriations Act.”

When the President suspends or stops expenditure of funds, savings are not automatically generated until it has been established that such funds or appropriations are free from any obligation or encumbrance, and that the work, activity or purpose for which the appropriation is authorized has been completed, discontinued, or abandoned.

As a way of circumventing the SC ruling on the DAP, the Aquino administration changed the concept of savings. The concept of savings used in the 2011, 2012 and 2013 GAAs was changed in the 2014 GAA and again in the 2015 GAA and in the proposed 2016 budget.

All these redefinitions of the concept of savings and augmentation after the Supreme Court ruling on the DAP show a President who is trying to wiggle out of the adverse SC ruling.

But if President Aquino and his budget guru Abad were truly committed to the rule of law and to institutionalizing good budget policy and practices, they should resist and desist from undermining the Supreme Court’s landmark ruling on the DAP.

On the part of Congress, the high court’s ruling on the DAP is a rare opportunity for it to reform the imperfect budget system. It should not be squandered. In the spirit of strengthening political institutions and for the sake of future legislatures, the incumbent members of Congress should seize the opportunity by embracing the SC ruiling and by reasserting its power of the purse.