EN BANC
G.R. No. 213212, April 27, 2021
RENE FIGUEROA, Petitioner, v. COMMISSION ON AUDIT, Respondent.
G.R. NO. 213497
PHILIP G. LO AND MANUEL C. ROXAS, Petitioners, v. COMMISSION ON AUDIT, Respondent.
G.R. NO. 213655
EFRAIM C. GENUINO, Petitioner, v. COMMISSION ON AUDIT (COA), COA OFFICE OF THE DIRECTOR, CORPORATE GOVERNMENT SECTOR, CLUSTER 6, REPRESENTED BY HON. DIRECTOR JOSEPH B. ANACAY, AND THE OFFICE OF THE COA SUPERVISING AUDITOR - PHILIPPINE AMUSEMENT AND GAMING CORPORATION (PAGCOR), REPRESENTED BY ATTY. RESURRECCION C. QUIETA AND AUDITOR BELEN B. LADINES, Respondents.
D E C I S I O N
GAERLAN, J.:
Before Us are three (3) consolidated petitions for certiorari under Rule 64 of the Rules of Court, as amended, assailing Decision No. 2013-1911 dated 20 November 2013 and Decision No. 2014-1152 dated 18 June 2014 issued by public respondent Commission on Audit (COA). The challenged issuances affirmed the Notice of Disallowance (ND) No. 2011-002(08)3 dated 30 June 2011 which, in turn, disallowed the Philippine Amusement and Gaming Corporation's (PAGCOR) release of funds amounting to P26,700,000.00, as purchase price for 89,000 tickets to the movie "Baler," in favor of Batang Iwas Droga (BIDA) Foundation, Inc. (BFI).
Name | Position/Designation | Nature of Participation in the Transaction |
Efraim C. Genuino | Chairman and CEO | Approved the payment / Approved the purchase of Baler tickets |
Manuel C. Roxas | Member, PAGCOR Board of Directors | Approved the purchase of Baler tickets |
Philip G. Lo | Member, PAGCOR Board of Directors | Approved the purchase of Baler tickets |
Gamaliel A. Cordoba | Member, PAGCOR Board of Directors | Approved the purchase of Baler tickets |
Rene C. Figueroa | Senior Vice President | Signed the Check and Check Voucher on behalf of the Chairman |
Edward P. King | Vice President - CCSD | Certified in the RFP that [the] expense was necessary, lawful and incurred under his direct supervision |
Ester P. Hernandez | Vice President - Accounting Dept. | Certified that [the] supporting documents were complete[,] and proper, and [that the] expenditure [was] properly certified per RFP |
BIDA Foundation, Inc. / BIDA Production, Inc. c/o Josephine Sumangil- Evangelista | Payee | Received the payment |
WHEREFORE, premises considered, Corporate Government Sector-C Decision No. 2012-007 dated September 28, 2012 is hereby AFFIRMED WITH MODIFICATION. Accordingly, Notice of Disallowance No. 2011-002(08) dated June 30, 2011 is hereby AFFIRMED sustaining the disallowance amounting to 26,700,000.00 and all the persons named liable therefor, except Mr. Edward F. King, who shall be excluded therefrom. Board of Directors Member Rafael A. Francisco Ms. Estela P. Ramos and Mr. Pedro Michael M. Cendana IV, shall however be included as persons liable m the Notice of Disallowance.34
WHEREFORE, the instant Motions for Reconsideration of Mr. Efraim C. Genuino, Mr. Philip G. Lo and Mr. Manuel C. Roxas, Mr. Gamaeliel A. Cordoba, Mr. Rene C. Figueroa and Ms. Ester P. Hernandez are hereby DENIED for lack of merit. Accordingly, COA Decision No. 2013-191 dated November 20, 2013, affirming Notice of Disallowance No. 2011-002(08) dated June 30, 2011, is AFFIRMED WITH FINALITY, with respect to the aforesaid Movants.Hence, the present recourse.
The Audit Team Leader and Supervising Auditor. Philippine Amusement and Gaming Corporation are instructed to issue a Supplemental Notice of Disallowance to Mr. Rafael Francisco, Ms. Estela Ramos and Mr. Pedro Michael M. Cendana IV as additional persons liable, copy furnished the General Counsel, this Commission.39chanRoblesvirtualLawlibrary
- In ignoring the factual findings of its own auditor, not to mention its own director;
- In deeming petitioner liable for the subject transaction despite having acted in good faith;
- In not affording petitioner his right to equal protection;
- In overlooking the fact that petitioner was not actually even an accountable officer in this case.40
I.
THE COMMISSION ON AUDIT, WITH GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OF JURISDICTION, GRAVELY ERRED IN ITS FINDING THAT THE BOARD AUTHORIZED THE PURCHASE OF BALER MOVIE TICKETS FOR PAGCOR[;]II.
THE COMMISSION ON AUDIT, WITH GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OF JURISDICTION, GRAVELY ERRED IN ITS FINDING THAT THE CHARGING OF THE COST OF THE TICKETS TO THE PTS POINTS OF THE PLAYERS IS EQUIVALENT TO PAGCOR PURCHASING THE BALER TICKETS.41chanRoblesvirtualLawlibrary
RESPONDENTS COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR EXCESS OF JURISDICTION IN ISSUING AND AFFIRMING NOTICE OF DISALLOWANCE (N.D.) NO. 211 - 002.(08) DATED 30 JUNE 2011 BECAUSE:
- RESPONDENTS HAVE NO AUDIT JURISDICTION OVER PAGCOR'S OPERATING EXPENSES FUND, MUCH LESS THE BALER TRANSACTION;
- RESPONDENTS ARROGATED UNTO THEMSELVES THE AUTHORITY NOT' CONFERRED BY LAW OR THE CONSTITUTION WHEN THEY STRUCK DOWN AS ULTRA VIRES 'THE BOARD'S APPROVAL OF THE BALER TRANSACTION;
- DESPITE RESPONDENTS' LACK OF JURISDICTION, N.D. NO. 2011-002(08) DATED 30 JUNE 2011 WAS ISSUED IN CONTRAVENTION OF PERTINENT RULES AND REGULATIONS; AND
- PETITIONER COULD NOT BE HELD LIABLE FOR THE QUESTIONED BALER TRANSACTION.42
At the outset, it must be emphasized that the CoA is endowed with enough latitude to determine, prevent, and disallow irregular, unnecessary, excessive, extravagant or unconscionable expenditures of government funds. It is tasked to be vigilant and conscientious in safeguarding the proper use of the government's, and ultimately the people's, property. The exercise of its general audit power is among the constitutional mechanisms that gives life to the check and balance system inherent in our form of government.
Corollary thereto, it is the general policy of the Court to sustain the decisions of administrative authorities, especially one which is constitutionally-created, such as the COA, not only on the basis of the doctrine of separation of powers but also for their presumed expertise in the laws they are entrusted to enforce. Findings of administrative agencies are accorded not only respect but also finality when the decision and order are not tainted with unfairness or arbitrariness that would amount to grave abuse of discretion It is only when the CoA has acted without or in excess of jurisdiction, or with grave abuse of discretion amounting to lack or excess of jurisdiction, that this Court entertains a petition questioning its rulings,45chanRoblesvirtualLawlibrary
However, We are reminded that said general policy should not be applied in a straitjacket as there are instances wherein the decisions of these agencies should be reviewed by this Court. One of those instances is when the administrative agency committed grave abuse of discretion, as in this case. There is grave abuse of discretion when there is an evasion of a positive duty or a virtual refusal to perform a duty enjoined by law or to act in contemplation of law as when the judgment rendered is not based on law and evidence but on caprice, whim, and despotism.47chanRoblesvirtualLawlibraryMeasured against these standards, We find that the COA committed grave abuse of discretion amounting to lack or excess of jurisdiction in rendering the herein assailed issuances. Accordingly, the petitions must be granted.
SECTION 2. (1) The Commission on Audit shall have the power, authority, and duty to examine, audit, and settle all accounts pertaining to the revenue and receipts of, and expenditures or uses of funds and property, owned or held in trust by, or pertaining to, the Government, or any of its subdivisions, agencies, or instrumentalities, including government-owned or controlled corporations with original charters, and on a post-audit basis: (a) constitutional bodies, commissions and offices that have been granted fiscal autonomy under this Constitution; (b) autonomous state colleges and universities; (c) other government-owned or controlled corporations and their subsidiaries; and (d) such non-governmental entities receiving subsidy or equity, directly or indirectly, from or through the Government, which are required by law or the granting institution to submit to such audit as a condition of subsidy or equity. However, where the internal control system of the audited agencies is inadequate, the Commission may adopt such measures, including temporary or special pre-audit, as are necessary and appropriate to correct the deficiencies. It shall keep the general accounts of the Government and, for such period as may be provided by law, preserve the vouchers and other supporting papers pertaining thereto.Indeed, the Constitution has conferred upon the COA broad and extensive powers, having been envisioned by the Framers as a dynamic, effective, efficient and independent watchdog of the Government.50 The COA is vested with the authority to determine whether government entities, including LGUs, comply with laws and regulations in disbursing government funds, and to disallow illegal or irregular disbursements of these funds.51 It has the power to ascertain whether public funds were utilized for the purpose for which they had been intended.52
(2) The Commission shall have exclusive authority, subject to the limitations in this Article, to define the scope of its audit and examination, establish the techniques and methods required therefor, and promulgate accounting and auditing rules and regulations, including those for the prevention and disallowance of irregular, unnecessary, excessive, extravagant, or unconscionable expenditures, or uses of government funds and properties. (Emphasis ours)
Indeed, the COA's audit jurisdiction generally covers public entities. In addition, the COA's authority to audit extends even to non-governmental entities insofar as the latter receives financial aid from the government.55
- The government, or any of its subdivisions, agencies and instrumentalities;
- GOCCs with original charters;
- GOCCs without original charters;
- Constitutional bodies, commissions and offices that have been granted fiscal autonomy under the Constitution; and
- Non-governmental entities receiving subsidy or equity, directly or indirectly, from or through the government, which are required by law or the granting institution to submit to the COA for audit as a condition of subsidy or equity.54
Sec. 12. Special Condition of Franchise. — After deducting five (5%) percent as Franchise Tax, the fifty (50%) percent share of the government in the aggregate gross earnings of the Corporation from this Franchise, or 60% if the aggregate gross earnings be less than P150,000,000.00, shall immediately be set aside and shall accrue to the General Fund to finance the priority infrastructure development projects and to finance the restoration of damaged or destroyed facilities due to calamities, as may be directed and authorized by the Office of the President of the Philippines.In view of the policy to enable the private sector to take a more active role in PAGCOR: (a) Section 461 of the PAGCOR Charter allots 550,000 shares of stock of PAGCOR to be subscribed to and paid for by the Government, while the remaining 450,000.00 shares may be subscribed to by private persons or entities; and (b) Section 662 mandates that two (2) of the members of PAGCOR's Board of Directors shall come from the private sector and who shall be elected by its stockholders.
SEC. 15. Auditor — The Commission of Audit or any government agency that the Office of the President may designate shall appoint a representative who shall be the Auditor of the Corporation and such personnel as may be necessary to assist said representative in the performance of his duties. The salaries of the Auditor or representative and his staff shall be fixed by the Chairman of the Commission on Audit or designated government agency, with the advice of the Board, and said salaries and other expenses shall be paid by the Corporation. The funds of the Corporation to be covered by the audit shall be limited to the 5% franchise tax and the 50% of the gross earnings pertaining to the Government as its share.Cognizant of the above-stated principle of statutory construction, Section 15 must not be read in isolation, but as part of the entire PAGCOR Charter. Indeed, it bears stressing that P.D. No. 1869 was enacted to increase the participation of the private sector in the subscription of the authorized capital stock of PAGCOR. To this end, the share of the Government in the gross earnings was adjusted to fifty percent (50%). Likewise, to provide for greater flexibility in PAGCOR's operations, governmental audit was limited to the five percent (5%) franchise tax and the Government's fifty percent (50%) share of the gross earnings. This allows PAGCOR greater flexibility in generating revenues. Towards this end, the relevant provisions of P.D. No. 1869 were decreed.
SEC. 7. Powers, Functions and Duties of the Board of Directors. — The Board shall have the following powers, functions and duties;Petitioners assert that PAGCOR had purchased and sponsored, in previous years, projects that may be considered as socio-civic in nature, such as the concerts of Frank Sinatra and Andrea Bocelli, and the musical "Miss Saigon." As far as the records show, these disbursements were never questioned by the COA.
a) To allocate and distribute, with the approval of the Office of the President of the Philippines, the earnings of the Corporation earmarked to finance infrastructure and socio-civic projects; b) To designate the commercial bank that shall act as the depository bank of the Corporation and/or trustee of the funds of the Corporation; c) To prepare and approve at the beginning of each calendar year the budget that may be necessary under any franchise granted to it, to insure the smooth operation of the Corporation; and to evaluate and approve budgets submitted to it by other corporations or entities with which it might have any existing contractual arrangement; d) To submit to the Office of the President of the Philippines before the end of February of each year a list of all the infrastructure and/or socio-civic projects that might have been financed from the Corporation's earnings, and to submit such periodic or other reports as may be required of it from time to time; and e) To perform such other powers, functions and duties as may be directed and authorized by the President of the Philippines or as may be necessary or proper for the accomplishment of its purposes and objectives.
Endnotes:
1Rollo (G.R. No. 213212), pp. 45-60; signed by Chairperson Ma. Gracia M. Pulido Tan and Commissioners Heidi L. Mendoza and Rowena V. Guanzon.
2 Id. at 38-44; signed by Chairperson Ma. Gracia M. Pulido-Tan and Commissioner Heidi L. Mendoza.
3Rollo (G R. No. 213497). pp. RC-90.
4 Signed on 11 July 1983.
5 Signed on 31 October 1985.
6 Signed on 25 July 1987.
7 Signed on 20 June 2007.
8Rollo G. R. No. 213497). p.75.
9 "Baler" big winner in MMff awards night" < https://news.abs-cbn.com/entertainment/12/27/08/baler-big-winner-mmff-wards-night > last accessed on 4 january 2021.
10Rollo (G.R. No. 213497), p. 76.
11Rollo (G.R. No. 213655), Vol. I, pp. 287-289.
12Rollo (G.R. No. 213497). p. 77.
13Rollo (G.R. No. 213212). p. 170.
14 Id. at 169.
15 Id. at 168.
16Rollo (G.R. No. 213497), p. 81.
17 Id. at 83-86.
18 Id. at 87-88.
19 Id. at 89-90.
20 Section 4. Audit Disallowances/Charges/Suspensions. - In the course of the audit, whenever there are differences arising from the settlement of accounts by reason of disallowances or charges, the auditor shall issue Notices of Disallowance/Charge (ND/NC) which shall be considered as audit decisions. Such ND/NC shall be adequately established by evidence and the conclusions, recommendations or dispositions shall be supported by applicable laws, regulations, jurisprudence and the generally accented accounting and auditing principles. The Auditor may issue Notices of Suspension (NS) for transactions of doubtful legality/validity/propriety to obtain further explanation or documentation.
21Rollo, (G.R. No. 213212), p. 86.
22 Id. at 88.
23 Id. at 95.
24 Id. at 90.
25 Id. at 80-81.
26Rollo, (G.R. No. 213497), p. 62.
27 Id. at 63.
28Rollo (G.R. No. 213655). Vol. I, p. 272.
29 Id. at 279.
30 Id. at 280.
31 Id. at 284.
32 Id. at 284.
33Rollo, (G.R. no. 213212), p. 52.
34 Id. at 59.
35 Id. at 53-54.
36 Id. at 57.
37 Id. at 58.
38 Id. at 58-59.
39 Id. at 42-43.
40 Id. at 9.
41Rollo (G.R. No. 213497). p. 11-12.
42 Rollo (G.R. No. 213655). Vol. I, p. 11.
43 See Paraiso-Aban v. Commission on Audit, 777 Phil. 730, 737 (2016).
44 716 Phil. 322 (2013).
45 Id. at 332-333 (citations omitted).
46 820 Phil. 485 (2017).
47 Id. at 496.
48The Special Audit Team, COA v. Court of Appeals, et al., 709 Phil. 167, 181 (2013).
49Dela Llana v. The Chairperson, Commission on Audit, et al., 681 Phil. 186, 195 (2012
50Caltex Philippines, Inc. v. Commission on Audit, 284-A Phil. 233, 257 (1992).
51Veloso, et al. v. Commission on Audit, 672 Phil. 419, 429 (2011).
52Sanchez, et al. v. Commission on Audit, 575 Phil. 428, 445 (2008).
53 726 Phil. 63 (2014).
54 Id. at 86.
55Fernando Commission on Audit, G.R. Nos. 237938 and 237944-45. December 4. 2018.).
56 See Basco v. PAGCOR, 274 Phil. 323, 333 (1991).
57Yun Kwan Byung v. PAGCOR, 623 Phil. 23, 28 (2009).
58Philippine Amusement and Gaming corp. (PAGCOR) v. The Commissioner of Internal Revenue, et al., 824 Phil. 508, 512 (2017).
59 Id.
60 Id.
61 Section 4. Authorized Capital Stock. —The Corporation shall have an authorized capital stock divided into one million voting and no par value shares, to be subscribed, paid for and voted as follows:
a) 550,000 shares of stock to be subscribed to and paid for by the Government of the Republic of the Philippines at an original issue value of P200.00 per share, and
b) 450,000 shares remaining may be subscribed to by persons or entities acceptable lo the Board of Directors at issue value to be determined by such Board of Directors.
The voting power pertaining to shares of stock subscribed to by the Government of the Republic of the Philippines shall be vested in the President of the Philippines or in such person or persons as he may designate.
The voting power pertaining to shares of stock subscribed by private persons or entities shall be vested in them.
62 Section 6. Board of Directors. —The Corporation shall be governed and its activities be directed, controlled and managed by a Board of Directors, hereinafter referred to as the Board, composed of five (5) members, three (3) of whom shall come from the Government sector and shall be appointed by the President, while the other two (2) shall be from the private sector, who own at least I share of stock in the Corporation and who shall be elected by the stockholders of the corporation in the annual general meeting or in a special meeting called for such purpose.
Each Director shall serve for a term of one (i) year and until his successor shall have been duly appointed and qualified.
63Enriquez v. Enriquez, 505 Phil. 193. 199 (2005).
64Mactan-Cebu International Airport Authority v. Urgello, 549 Phil. 302, 322 (2007), citing Civil Service Commission v. Joson, Jr., 473 Phil. 844, 858 (2004).
65Commissioner of Internal Revenue v. Pilipinas Shell Petroleum Corporation, 744 Phil. 313, 326-327 (2014).
66Phil International Trading Corp. v. COA, 635 Phil 447, 454 (2010).
67Rep. of the Phils. v. Reyes, et al., 123 Phil. 1035, 1039 (1966).
68 See Valdez v. Tuason, 40 Phil. 943, 950 (1920).
69UP Board of Regents, et al. v. Auditor General, et al., 140 Phil. 393, 409 (1969).
70Lacson v. The Executive Secretary, 361 Phil. 251, 263 (1999).
71Lorin v. Executive Secretary, 345 Phil. 962, 979 (1997).
72Tan v. Bausch & Lamb, Inc., 514 Phil. 307, 316. (2005).
73Kilusang Mayo Uno, represented by its Secretary General Rogelio Soluta, et al. v. Hon. Benigno Simeon C. Aquino III. et al., G.R. No. 210500, April 2, 2019.
74Rollo, (G.R. No. 213655), Vol. I, pp. 85-150.
75 Id. at 106.
76 PRESIDENTIAL DECREE NO. 1869, Section 7(e).
77Magallanes Watercraft Association, Inc. v. Auguis, et al., 785 Phil. 866, 872 (2016).
78 Id.
79Principal Duties < https://www.coa.gov.ph/index.php/2013-06-19-13-06-03/principal-duties > Last accessed on 25 January 2021.
80Kilusang Mayo Uno, represented by its Secretary General Rogelio Soluta, et al. v. Hon. Benigno Simeon C. Aquino III, et al., supra note 73.
PERLAS-BERNABE, J.:
Endnotes:
1 See Section 15, in relation to Presidential Decree No. 1869's whereas clauses, which reads:
WHEREAS, to make it more dynamic and effective in its tasks, PAGCOR should now be reorganized by x x x (c) providing for greater flexibility in operation by limiting governmental audit only to the determination of the 5% franchise tax and the Government's share of 50% of the gross earnings:
x x x
SECTION 15. Auditor. — The Commission on Audit or any government agency that the Office of the President may designate shall appoint a representative who shall be the Auditor of the Corporation and such personnel as may be necessary to assist said representative in the performance of his duties. The salaries of the Auditor or representative and his staff shall be advice of the Board and said salaries and other expenses shall be paid by the Corporation. The funds of the Corporation to be covered by the audit shall be limited to the 5% franchise tax and the 50% of the gross earnings pertaining to be Government as its share. (Emphases and underscoring supplied)
2 Entitled "CONSOLIDATING AND AMENDING PRESIDENTIAL DECREE NOS. 1067-A, 1067-B, 1067-C, 1399 AND 1632, RELATIVE TO THE FRANCHISE AND POWERS OF THE PHILIPPINE AMUSEMENT AND GAMING CORPORATION (PAGCOR), "approved on July 11, 1983.
3 See ponencia, pp. 12-14.
4 See id.
5 See id at 17.
6 See Lim v. Pacquing, 310 Phil. 722(1995); Macalintal v. Commission on Elections, 453 Phil. 586 (2003).
7 See Liban v. Gordon (654 Phil. 680 [2011]), where one of the reasons cited by the Court in modifying its earlier Decision declaring void the Philippine National Red Cross (PNRC) charter and holding that it should have exercised judicial restraint in ruling upon the constitutionality of the said law, was that the PNRC was not an original party to the case (though it intervened subsequently):
x x x x this Court should not have declared void certain sections of R.A. No. 95, as amended by Presidential Decree (P.D.) Nos. 1264 and 1643, the PNRC Charter. Instead, the Court should have exercised judicial restraint on this matter, especially since there was some other ground upon which the Court could have based its judgment. Furthermore, the PNRC, the entity most adversely affected by this declaration of unconstitutionality, which was not even originally a party to this case, was being compelled, as a consequence of the Decision, to suddenly reorganize and incorporate under the Corporation Code, after more than sixty (60) years of existence in this country. (Emphases and underscoring supplied)
8Vivas v. Monetary Board of the Bangko Sentral ng Pilipinas, 716 Phil. 132, 153 (2013).
LEONEN, J.:
(1) generate sources of additional revenue to fund infrastructure and socio-civic projects, such as flood control programs, beautification, sewerage and sewage projects, Tulungan ng Bayan Centers/Nutritional Programs, Population. Control and such other essential public services; (2) expand and improve the country's existing tourist attractions; (3) minimize, if not totally eradicate, the evils, mal-practices and corruptions that normally are found prevalent in the conduct and operation of gambling clubs and casinos without direct government involvement.3
After more than two decades, or on June 20, 2007, Republic Act No. 9487 was passed: (1) extending PAGCOR's franchise for another 25 years, renewable for another 25 years; and (2) expanding PAGCOR's regulatory powers by granting it the authority to license gambling casinos.29TITLE IIIAffiliation Provisions
SECTION 8. Registration. — All persons primarily engaged in gambling, together with their allied business, with contract or franchise from the Corporation, shall register and affiliate their businesses with the Corporation The Corporation shall issue the corresponding certificates of affiliation upon compliance by the registering entity with the promulgated rules and regulations thereon.
SECTION 9. Regulatory Power. — The Corporation shall maintain a Registry of the affiliated entities, and shall exercise all the powers, authority and the responsibilities vested in the Securities and Exchange Commission over such affiliated entities mentioned under the preceding section, including but not limited to amendments of Articles of Incorporation and By-Laws, changes in corporate term, structure, capitalization and other matters concerning the operation of the affiliating entities, the provisions of the Corporation Code of the Philippines to the contrary notwithstanding, except only with respect to original incorporation.
TITLE V
Government Audit
SECTION 15. Auditor. — The Commission on Audit or any government agency that the Office of the President may designate shall appoint a representative who shall be the Auditor of the Corporation and such personnel as may be necessary to assist said representative in the performance of his duties. The salaries of the Auditor or representative and his staff shall be fixed by the Chairman of the Commission on Audit or designated government agency, with the advice of the Board, and said salaries and other expenses shall be paid by the Corporation. The funds of the Corporation to be covered by the audit shall be limited to the 5% franchise tax and the 50% of the gross earnings pertaining to the Government as its share. (Emphasis supplied)
A completely "independent" body is alien to our constitutional system. There is no office that is insulated from a possible correction from another office. The executive, legislative and judicial branches of government operate through the system of checks and balances. All independent constitutional bodies are subject to review by the courts. A fiscally autonomous body is subject to audit by the Commission on Audit, and Congress cannot be compelled to appropriate a bigger budget than that of the previous fiscal year.
. . . under a system of checks and balances, an external disciplinary authority is desirable and is often the norm.35 (Citation omitted)
Section. 1. Public office is a public trust. Public officers and employees must, at all times, be accountable to the people, serve them with utmost responsibility, integrity, loyalty, and efficiency, act with patriotism and justice, and lead modest lives[.]
The term "accounts" pertains to all forms of government revenue and expenditure and "uses of funds and property."40
- The government, or any of its subdivisions, agencies and instrumentalities;
- GOCCs with original charters;
- GOCCs without original charters;
- Constitutional bodies, commissions and offices that have been granted fiscal autonomy under the Constitution; and
- Non-governmental entities receiving subsidy or equity, directly or indirectly, from or through the government, which are required by law or the granting institution to submit to the COA for audit as a condition of subsidy or equity.39
. . . any agency organized as a stock oi non-stock corporation, vested with functions relating to public needs whether governmental or proprietary in nature, and owned by the Government directly or through its instrumentalities either wholly, or, where applicable as in the case of stock corporations, to the extent of at least fifty-one (51) per cent of its capital stock: Provided, That government-owned or controlled corporations may be further categorized by the Department of the Budget, the Civil Service Commission, and the Commission on Audit for purposes of the exercise and discharge of their respective powers, functions and responsibilities with respect to such corporations.44chanRoblesvirtualLawlibraryIn Orlando v. Commission on Audit,45 an entity is considered a government-owned or controlled corporation if all three attributes are present: (1) the entity is organized as a stock or non stock corporation; (2) its functions are public in character; and (3) it is owned or, at the very least, controlled by the government."
[T]he constitutional criterion on the exercise of COA's audit jurisdiction depends on the government's ownership or control of a corporation. The nature of the corporation, whether it is private, quasi-public, or public is immaterial.
The Constitution vests in the COA audit jurisdiction over "government-owned and controlled corporations with original charters," as well as "government-owned or controlled corporations" without original charters. GOCCs with original charters are subject to COA pre-audit, while GOCCs without original charters are subject to COA post-audit. GOCCs without original charters refer to corporations created under the Corporation Code but are owned or controlled by the government. The nature or purpose of the corporation is not material in determining COA's audit jurisdiction. Neither is the manner of creation of a corporation, whether under a general or special law.47chanRoblesvirtualLawlibrary
In the case presently before the Court, the funds involved are clearly public in nature. The funds to be generated by the proposed lottery are to be raised from the population at large. Should the proposed operation be as successful as its proponents project, those funds will come from well-nigh every town and barrio of Luzon. The funds here involved are public in another very real sense: they will belong to the PCSO, a government owned or controlled corporation and an instrumentality of the government and are destined for utilization in social development projects which, at least in principle, are designed to benefit the general public.... The interest of a private citizen in seeing to it that public funds, from whatever source they may have been derived, go only to the uses directed and permitted by law is as real and personal and substantial as the interest of a private taxpayer in seeing to it that tax monies are not intercepted on their way to the public treasury or otherwise diverted from uses prescribed or allowed by law. It is also pertinent to note that the more successful the government is in raising revenues by non-traditional methods such as PAGCOR operations and privatization measures, the lesser will be the pressure upon the traditional sources of public revenues, i.e., the pocket books of individual taxpayers and importers.52chanRoblesvirtualLawlibrary
As to the committee's funds coming from non-tax revenues, the fact that such funds come from purported private sources, do not convert the same to private funds. Such funds must be viewed with the public purpose for which it was solicited, which is the management of the MMFF. In Confederation of Coconut Farmers Organizations of the Philippines, Inc. (CCFOP) v. His Excellency President Benigno Simeon C. Aquino III, et al., reiterating this Court's ruling in Republic of the Philippines v. COCOFED:chanroblesvirtualawlibraryBeing public funds or funds imbued with public interest, PAGCOR's revenues are subject to audit by the Commission.Even if the money is allocated for a special purpose and raised by special means, it is still public in character. In the case before us, the funds were even used to organize and finance State offices. In Cocofed v. PCGG, the Court observed that certain agencies or enterprises "were organized and financed with revenues derived from coconut levies imposed under a succession of laws of the late dictatorship . . . with deposed Ferdinand Marcos and his cronies as the suspected authors and chief beneficiaries of the resulting coconut industry monopoly. The Court continued: ". . . It cannot be denied that the coconut industry is one of the major industries supporting the national economy. It is, therefore, the State's concern to make it a strong and secure source not only of the livelihood of a significant segment of the population, but also of export earnings the sustained growth of which is one of the imperatives of economic stability.
In The Veterans Federation of the Phils., represented by Esmeraldo R. Acordo v. Hon. Reyes, this Court also declared as public funds contributions from affiliate organizations of the VFP:chanroblesvirtualawlibrary. . . .In the case at bar, some of the funds were raised by even more special means, as the contributions from affiliate organizations of the VFP can hardly be regarded as enforced contributions as to be considered taxes. They are more in the nature of donations which have always been recognized as a source of public funding.53 (Citations omitted)
TITLE V
Government Audit
SECTION 15. Auditor. -— The Commission on Audit or any government agency that the Office of the President may designate shall appoint a representative who shall be the Auditor of the Corporation and such personnel as may be necessary to assist said representative in the performance of his duties. The salaries of the Auditor or representative and his staff shall be fixed by the Chairman of the Commission on Audit or designated government agency, with the advice of the Board, and said salaries and other expenses shall be paid by the Corporation. The funds of the Corporation to be covered by the audit shall be limited to the 5% franchise tax and the 50% of the gross earnings pertaining to the Government as its share. (Emphasis supplied)
PD. 198 cannot prevail over the Constitution. No amount of clever legislation pan exclude GOCCs like LWDs from COA's audit jurisdiction. Section 3. Article IX-C of the Constitution outlaws any scheme or devise to escape COA's audit jurisdiction, thus:Section 15 of Presidential Decree No. 1869 does not totally deprive the Commission of its audit jurisdiction over PAGCOR funds. Still, the limitation on extent of audit is a curtailment of its power, which is inconsistent with Article IX-D, Sections 2(1) and 3, of the Constitution.. . . .
The framers of the Constitution added Section 3, Article IX-D of the Constitution precisely to annul provisions of Presidential Decrees, like that of Section 20 of PD 198, that exempt GOCCs from COA audit. The following exchange in the deliberations of the Constitutional Commission elucidates this intent of the framers:chanroblesvirtualawlibraryMR. OPLE:
I propose to add a new section on line 9, page, 2 of the amended committee report which reads: NO LAW SHALL BE PASSED EXEMPTING ANY ENTITY OF THE GOVERNMENT OR ITS SUBSIDIARY IN ANY GUISE WHATEVER, OR ANY INVESTMENTS OF PUBLIC FUNDS, FROM THE JURISDICTION OF THE COMMISSION ON AUDIT.
May I explain my reasons on record.
We know that a number of entities of the government took advantage of the absence of a legislature in the past to obtain presidential decrees exempting themselves from the jurisdiction of the Commission on Audit, one notable example of which is the Philippine National Oil Company which is really an empty shell. It is a holding corporation by itself, and strictly on its own account. Its funds were not very impressive in quantity but underneath that shell there were billions of pesos in a multiplicity of companies. The PNOC — the empty shell — under a presidential decree was covered by the jurisdiction of the Commission on Audit, but the billions of pesos invested in different corporations underneath it were exempted from the coverage of the Commission on Audit.
Another example is the United Coconut Planters Bank. The Commission on Audit has determined that the coconut levy is a form of taxation; and that, therefore, these funds attributed to the shares of 1,400,000 coconut farmers are, in effect, public funds. And that was, I think, the basis of the PCGG in undertaking that last major sequestration of up to 94 percent of all the shares in the United Coconut Planters Bank. The charter of the UCPB, through a presidential decree, exempted it from the jurisdiction of the Commission on Audit, it being a private organization.
So these are the fetuses of future abuse that we are slaying right here with this additional section.
. . . .
MR. DE CASTRO:
Thank you. May I just ask a few questions of Commissioner Ople.
Is that not included in Section 2(1) where it states: "(c) government-owned or controlled corporations and their subsidiaries"? So that if these government-owned and controlled corporations and their subsidiaries are subjected to the audit of the COA, any law exempting certain government corporations or subsidiaries will be already unconstitutional.
So I believe, Madam President, that the proposed amendment is unnecessary.
MR. MONSOD:
I think the Commissioner is trying to avoid the situation that happened in the past, because the same provision was in the 1973 Constitution and yet somehow a law or a decree was passed where certain institutions were exempted from audit. We are just reaffirming, emphasizing, the role of the Commission on Audit so that this problem will never arise in the future.
There is an irreconcilable conflict between the second sentence of Section 20 of PD 198 prohibiting COA auditors from auditing LWDs and Sections 2(1) and 3, Article IX-D of the Constitution vesting in COA the power to audit all GOCCs. We rule that the second sentence of Section 20 of PD 198 is unconstitutional since it violates Sections 2(1) and 3, Article IX-D of the Constitution.58 (Citation omitted)
Endnotes:
1 Creating the Philippine Amusements and Gaming Corporation (January 1, 1977).
2 Presidential Decree No. 1067-A. sec. 1.
3 Presidential Decree No. 1067-A, Section 1.
4 Presidential Decree No. 1067 A, Section 4.
5 Presidential Decree No. 1067-A, sec. 5 provides:
SECTION 5. Board of Directors. — The Corporation shall be governed and its activities be directed, controlled and managed by a Board of Directors that shall be composed of five (5) ex-officio members, namely (1) The Chairman of the "National Development Corporation, who shall act as Chairman; (2) The Secretary of Public Works; (3) The Secretary of the Department of Social Welfare; and two other members to be appointed by the President of the Philippines.
The two appointive directors shall each serve for a term of two (2) years or until their successors shall have been appointed and qualified.
6 Presidential Decree No. 1067-%., sec. 3 provides:
SECTION 3. Corporate Powers. — The Corporation shall have the power:
(a) to prescribe its by-laws;
(b) to adopt, alter and use a corporate seal;
(c) to make contracts and to sue and be sued:
(d) to own real or personal property and to sell, mortgage or otherwise dispose of the same;
(e) to employ such officers and personnel as may be necessary to carry on its business:
(f) to acquire, lease or maintain, whether on land, water, or air, personal property and such other equipment and facilities as may be necessary to carry out its purposes;
(g) to import, buy, sell or otherwise trade or deal in merchandise, goods, wares and objects of all kinds and descriptions that may be necessary to carry out the purposes for which it has been created;
(h) to enter into, make, perform, and carry out contracts tracts of every kind and for any lawful purpose pertaining co the business of the corporation, or in any manner incident thereto, as principal agent or otherwise, with any person, firm, association, or corporation;
(i) to do anything and everything necessary, desirable, convenient, appropriate, suitable or proper for the accomplishment of any of the purposes or the attainment of any of the objects or the furtherance of any of the powers herein stated, either alone, or in association with other corporations, firms or individuals, and to do every other act or thing incidental or pertaining to, or growing out of, or connected with the aforesaid purposes, objects, or powers or any part thereof.
j) to borrow money from local, or foreign sources as may be necessary for its operation;
(k) to invest its funds as the corporation may deem proper and necessary in any activity related to its principal operations, including in any bonds or securities issued and guaranteed by the Government of the Philippines,
(l) to establish and maintain clubs casinos, branches agencies or subsidiaries, or other units anywhere in the Philippines as may be needed by the Corporation and reorganize or abolish the same as it may-deem proper'
(m) to perform such other functions as may be provided by law.
7 Granting PAGCOR of Franchise to Establish, etc. Gambling Casinos (January 1, 1977).
8 Presidential Decree No. 1067-B, sec. 1.
9 Presidential Decree No. 1067-B. sec. 2(1).
10 Presidential Decree No. 1067-B, sec. 2(5).
11 Presidential Decree No. 1067-B, sec. 3 provides:
SECTION 3. Special Condition of Franchise. — Sixty (60%) percent of the aggregated gross earnings derived by the franchise holder from this franchise shall be immediately set aside and allocated to fund the following infrastructure and socio-civic projects within the Metropolitan Manila Area.(a) Flood Control.12 Presidential Decree No. 1067-B, sec. 5 provides:
(b) Sewerage and Sewage.
(c) Nutritional Programs.
(d) Population Control.
(e) "Tulungan ng Bayan" Centers.
(f) Beatification. (Emphasis in the original)
SECTION 5. Other Conditions. —
(4) Audit of income. — T he books of accounts of the franchise holder, as well as all financial records and other supporting documents, shall be subject to audit by the Commission on Audit or his duly authorized representative.
13 Presidential Decree No. 1067-B. sec. 4.
14 Presidential Decree No. 1067-B, sec. 5(5).
15 Presidential Decree No. 1399, 1st and 2nd Whereas Clauses.
16 Amending Certain Sections of Presidential Decree No. 1067-A dated January 1, 1977 and Presidential Decree No. 1067-B dated January 1, 1977 (June 2. 1978).
17 Presidential Decree No. 1399, sec. 1 provides:
SECTION 1. Section 5 of Presidential Decree No. 1067-A dated January 1. 1977, is hereby amended to read as follows: :
"SEC. 5. Board of Directors. — The Corporation shall be governed and its activities be directed, controlled and managed by a Board of Directors that shall be composed of five (5) members, namely: (1) The Chairman of the National Development Corporation, who shall act as Chairman; (2) Government Corporate Counsel: (3) Office of the Executive Assistant, Office of the President, or their respective representatives; and two other members to be appointed by the President of the Philippines from the private sector."
18 Presidential Decree No. 1399, sec. 2 provides:
SECTION 2. Section 3 of Presidential Decree No. 1067-B is hereby amended to read as follows: Section 3. SPECIAL CONDITION OF FRANCHISE. — . . .
. . . .
In addition to the priority infra-structure and socio-civic projects within the Metropolitan Manila Areas specifically enumerated above, the 60% share of the government in the aggregate gross earnings derived by the Franchise Holder from this Franchise may now be appropriated and allocated to fund and finance any infrastructure and/or socio-civic projects throughout the Philippines as may be directed and authorized by the Office of the President (Emphasis supplied)
19 Presidential Decree No. 1869. sec 4.
20Commissioner of Internal Revenue v. Acesite (Philippines) Hotel Corp. 545 Phil. 113 (2007) [Per J. Velasco, Jr., Second Division].
21 Consolidating and Amending Presidential Decree Nos. 1067-A, 1067-B, 1067-C, 1399 and 1632, Relative to the Franchise and Powers of the Philippine Amusement and Gaming Corporation (PAGCOR) (July 11, 1983).
22 Amended Presidential Decree No. 1067-B, PAGCOR's franchise, by adding the following provision: This franchise shall become exclusive in character, subject only to the exception of existing franchises and games of chance heretofore permitted by law, upon the generation by the Franchise Holder of gross revenues amounting to P1.2 Billion and its contribution therefrom of the amount of P720 Million as the government's share. (Section 1)
23 Amending Sections Three and Four of Presidential Decree No. 1067-B . . . , as amended by Presidential Decree No. 1399 . . . (August 13, 1979).
24 2nd Preambular Clause.
25 Presidential Decree No, 1869, sec. 4.
26 Presidential Decree Nc. 1869, sec. 12.
27 5,th Preambular Clause
TITLE V
Government Audit
SECTION 15. Auditor — The Commission on Audit or any government agency that the Office of the President may designate shall appoint a representative who shall be the Auditor of the Corporation and such personnel as may be necessaiy to assist said representative in the performance of his duties. The salaries of the Auditor or representative and his staff shall be fixed by the Chairman of the Commission on Audit or designated government agency, with the advice of the Board, and said salaries and other expenses shall be paid by the Corporation. The funds of the Corporation to be covered by the audit shall be limited to the 5% franchise tax and the 50% of the gross earnings pertaining to the Government as its share. (Emphasis supplied)
28 Presidential Decree no. 1869, sec. 3.
29 Republic Act No. 9487, sec. 1 provides:
SECTION 1. The Philippine Amusement and Gaming Corporation (PAGCOR) franchise granted under Presidential Decree No, 1869, otherwise known as the PAGCOR Charter, is hereby further amended to read as follows:
(1) Section 10, Nature and Term of Franchise, is hereby amended to read as follows:
SEC. 10. Nature, and Term of Franchise. —
Subject to the terms and conditions established in this Decree, the Corporation is hereby granted from the expiration of its original term on July 11, 2008, another period of twenty-five (25) years, renewable for another twenty-five years, the rights, privileges and authority to operate and license gambling casinos, gaming clubs and other similar recreation or amusement places, gaming pools, i.e. basketball, football, bingo, etc. except, jai-alai, whether on land or sea, within the territorial jurisdiction of the Republic of the Philippines: Provided, That the corporation shall obtain the consent of the local government unit that has territorial jurisdiction over the area chosen as the site for any of its operations.
The operation of slot machines and other gambling paraphernalia and equipment, shall not be allowed in establishments open or accessible to the general public unless the site of these operations are three-star hotels and resorts accredited by the Department of Tourism authorized by the corporation and by the local government unit concerned.
The authority and power, of the PAGCOR to authorize, license and regulate games of chance, games of cards and games of numbers shall not extend to: (1) games of chance authorized, licensed and regulated by, in, and under existing franchises or other regulatory bodies; (2) games of chance, games of cards and games of numbers authorized, licensed, regulated by, in, and under special laws such as Republic Act No. 7922, and (3.) games of chance, games of cards and games of numbers like cockfighting, authorized licensed and regulated by local government units. The conduct of such games of chance, games of cards and games of numbers covered by existing franchises, regulatory bodies or special laws, to the extent of the jurisdiction and powers granted under such franchises and special laws, shall be outside the licensing authority and regulatory powers of the PAGCOR.
30 Presidential Decree No. 1869, sec. 14(5).
31Basco v. Philippine Amusements and Gaming Corp., 274 Phil. 323 (1991) [Per J Paras, En Banc].
32 Presidential Decree No. 1869, sec. 12.
33 Presidential Decree No. 1869, 5th Whereas Clause.
34 694 Phil 52 (2012) [Per J. Perlas-Bernabe, En Banc].
35 Id. at 118-119.
36Lim v. Pacquing, 310 Phil. 722 (1995) [Per J. Padilla, En Banc].
37Miralles v. Commission on Audit, 818 Phil. 389, 389 (2017) [Per J. Bersamin, En Banc].
38Funa v. Manila Economic & Cultural 0ffice, 726 Phil. 63, 86 (2014) [Per J. Perez, En Banc].
39 Id.
40 Id.
41 Id. at 87, citing sec. 29(1) of the Audit Code and sec. 14(1), Book V, of the Administrative Code.
42Orocio v. Commission on Audit, 287 Phil. 1045 [Per J. Davide. Jr. Third Division],
43 CONST, art. IX-D, sec. 2(2).
44 Introductory Provisions. E.G. 292. sec. 2(13).
45 G.R. No. 211293, June 4, 2019 [per J. Leonen, En Banc].
46Feliciano v. Commission on Audit, 464 Phil. 439. 462 (2004) [Per J. Caipio, En Banc].
47 Id. at 461-462
48Basco v. Philippine Amusements and Gaming Corp., 274 Phil. 323 (1991) [Per J. Paras, En Banc].
49Republic v. COCOFED, 423 Phil. 735 (2001) [Per J. Panganiban, En Banc].
50Caltex Philippines, Inc. v. Commission on Audit, 284-A Phil. 233 (1992) [Per J. Davide, Jr., En Banc].
51 302 Phil. 107 (1994) (PerJ. Davide, Jr., En Banc],
52 J. Feliciano. Separate Concurring Opinion in Kilosbayan, Inc. v. Guingona, Jr., 302 Phil. 107, 116-11" (1994) [Per J. Davide, Jr.. En Banc;
53Fernando v. Commission v. Audit, December 4, 2018, [Per J. Tijam, En Banc], Presidential Decree No. 1067-B, sec 5.
54 Presidential Decree No. 1067-B, sec. 5.
55 CONST, sec. 2, art. IX-D provides:
Section. 2. ...
....
(2) The Commission shall have exclusive authority, subject to the limitations in this Article, to define the scope of its audit and examination, establish the techniques and methods required therefor, and promulgate accounting and auditing rules and regulations, including those for the prevention and disallowance of irregular, unnecessary, excessive, extravagant, or unconscionable expenditures or uses of government funds and propertied] (Emphasis supplied)
56Barbo v. Commission on Audit, 589 Phil. 289, 297 (2008) [Per J. Leonardo-De Castro, En Banc].
57Feliciano v. Commission on Audit, 464 Phil. 439. 465 (2004) [Per J. Carpio, En Banc].
58 Id. at 465-468.cralawredlibrary