Understanding the SC ruling on the DAP

Chay F. Hofileña

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What are the main points and highlights of the Supreme Court decision on the controversial Disbursement Acceleration Program?

MANILA, Philippines – On July 1, 2014, the Supreme Court ruled on the controversial Disbursement Acceleration Program (DAP).

Voting 13-0-1, excluding retired justice Roberto Abad, the High Court ruled 3 schemes under the DAP unconstitutional. Justice Lucas P. Bersamin penned the main decision, with 6 Justices writing separate opinions – Antonio Carpio, Presbitero Velasco Jr, Arturo Brion, Mariano del Castillo, Estela Perlas-Bernabe, and Marvic Leonen. (Read the ruling and separate opinions here.)

Justice Teresita de Castro inhibited from the voting, while Velasco, who was on official leave, gave his vote to Chief Justice Maria Lourdes Sereno. 

The High Tribunal ruled as unconstitutional the following:

  • the creation of savings prior to the end of the fiscal year and the withdrawal of these funds for implementing agencies
  • the cross-border transfers of the savings from one branch of government to another 
  • the allotment of funds for projects, activities, and programs not outlined in the General Appropriations Act

Here are highlights of the 92-page ruling in Question and Answer format:

What is the issue that the Supreme Court addressed in its resolution pertaining to the Disbursement Acceleration Program (DAP)?

Petitioners challenged the constitutionality of DAP, which was intended by the Aquino administration to accelerate government spending. They also questioned National Budget Circular 541 which, in effect, characterized unreleased appropriations and unobligated or unused allotments as savings. The question brought to the Court was whether the Executive exceeded his powers to augment items in the budget within the executive branch of government.

When exactly did the DAP start?

The closest indication is a memorandum dated October 12, 2011 from Budget Secretary Butch Abad seeking approval from the President to implement DAP. The memo listed funding sources that amounted to P72.11 billion (about $1.7 billion) which could be used for other proposed priority projects – among them, National Housing Authority programs, capitalization of the Bangko Sentral, and peace and development interventions in the Autonomous Region in Muslim Mindanao.

How was DAP supposed to be implemented and funded?

There were 3 ways identified: (1) by declaring savings from various departments and agencies derived from pooling unobligated allotments and withdrawing unreleased approprirations; (2) by releasing unprogrammed funds; (3) by applying the “savings” and unprogrammed funds to augment existing programs, activities or projects (PAPs) or to support other priority PAPs.

Can the President transfer funds?

With limits. While the power to transfer funds from one item to another within the executive branch existed since 1909, during the time of American Governors-General, this power was reduced to merely augmenting items from savings. The 1987 Constitution put limits on the President’s discretion over appropriations during the budget execution phase (when the budget law is being implemented).

The Constitution authorizes the President, the Senate President, the Speaker, the Chief Justice, and heads of Constitutional Comissions to transfer funds “within their respective offices”; when these funds involve savings generated from appropriations also for their respective offices; and when the purpose of the transfer is to augment items in the Appropriations Law again for their respective offices.

How is “savings” defined? How did this issue make DAP problematic?

The Court defined savings as funds that remain unspent after the completion or discontinuance of a project. Congress provided that appropriated funds are available for a period of one fiscal year. But in a May 20, 2013 memo, Budget Secretary Butch Abad sought omnibus authority to consolidate savings and unused funds to finance the DAP on a quarterly basis. This shortened the period that funds were supposed to be available for, giving rise to questions about the budget department’s own definition of savings.

How were funds under DAP spent? What are related issues?

According to the Department of Budget and Management (DBM), as of 2013, P144.4 billion (about $3.3 billion) was released to implement programs, activities, projects (PAPs). In 2011, P82.5 billion (about $1.8) was released, while P54.8 billion (about $1.2 billion) was released in 2012. About 9% of the total DAP applied to PAPs were identified by lawmakers.

The DBM also said that 116 PAPs were financed by DAP, each of which had existing appropriations in the budget. The Office of the Solicitor-General submitted 7 evidence packets in support of this claim, but the Court found that there were projects not covered by an existing appropriation – for example, items under the P1.6-billion DREAM project under the Department of Science and Technology. DREAM refers to Disaster Risk, Exposure, Assessment and Mitigation.

Are “cross-border” transfers or augmentations of the budget allowed?

No. Cross-border transfers refer to the movement of funds from one branch of government to another. These are allowed only within respective offices – thus the use of DAP funds to augment funds of the Commission on Audit (for its IT infrastructure program and the hiring of litigation experts in the amount of P143.7 million, or about $3.2 million) and the House of Representatives (for a legislative library and archives building/e-library in the amount of P250 million, or about $5.6 million) violate the Constitution.

What is the operative fact doctrine and why is it relevant to DAP?

In effect, it says let it be, because the consequences resulting from DAP could no longer be undone. For instance, the positive results of DAP funding could include roads, bridges, homes for the homeless, hospitals, classrooms.

Not applying the operative fact doctrine would require the physical undoing and destruction of these infrastructure – a considerable waste. The application of the doctrine, however, does not exonerate the proponents and implementors of the DAP – unless it is established that they acted in good faith. – Rappler.com

See related stories:

Read more stories on the DAP here.

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Chay F. Hofileña

Chay Hofileña is editor of Rappler's investigative and in-depth section, Newsbreak. Among Rappler’s senior founders and editors, she is also in charge of training. She obtained her graduate degree from Columbia University’s School of Journalism in New York.