01) Boy Scouts of the Philippines v Coa

 [L OP E Z] G. R . No. 177131 J une 7, 2011 BOY S COUNTS COUNTS OF THE PHILIPPINES,  petitioner  vs.  vs. C OMMISS OMMISS ION ON  A UDI T, respondents Topic:  Unit 1, General Principles Facts: 1. 2.

3. 4.

5. 6.

COA issued a Resolution “Defining the Comission’s  Policy with respect to the audit of the Boy Scouts of the Philippines”. The COA Resolution stated that: a. BSP was was created as a public corporation corporation under under Commonwealth Commonwealth Act No. 111 b. In Boy Scouts Scouts of the Philippines Philippines v NLRC, the SC ruled that that BSP was a “government“government-controlled controlled corporation” under Art. IX(B)(2)(1) of the Constitution c. Under the 1987 Admin. Code, BSP is regarded as a government instrumentality Under the COA Resolution, Resolution, the COA COA resolved to conduct an an annual financial audit of the Boy Scouts of the Philippines. BSP, through its National National President President Jejomar Binay, sought sought for reconsideration reconsideration of the COA Resolution but was denied (reasons for denial are mostly the same as the COA arguments below). Hence, this petition petition for prohibition by the BSP. BSP argues that: a. BSP v NLRC is is inapplicable inapplicable in determining the audit  jurisdiction of of COA as the issue there was the jurisdiction jurisdiction of the NLRC; b. Although the functions functions of BSP relate to those that the government can do on its own, this alone cannot be determinative of COA’s COA’ s audit jurisdiction over it. BSP v. NLRC just stated that it is “akin to a public corporation” but this is not synonymous to holding BSP as a government corporation or entity subject to COA’s audit; c. R.A. 7278 introduced crucial amendments amendments to its charter; hence, BSP v. NLRC findings are no longer valid. BSP v. NLRC classified BSP as a government-controlled corporation based on the “substantial government participation” participation” in its Executive Board. But  R.A. 7278 eliminated “substantial government participation” in the National Executive Board by removing: (1) the Pr esident + Exec. Secretaries, and (2) the appointment and confirmation power of the President of the PH as Chief Scout. R.A. 7278 suggest that governance of BSP has come to be overwhelmingly a private affair or nature. d. The assets of the BSP were acquired from the Boy Scouts of

the Boy Scouts themselves. BSP is not even included in any appropriations for the Government. e. BSP is neither a government-owned or controlled controlled corporation; nor is it an instrumentality, agency or subdivision of the Government, as defined by t he  Administrative Code. Code. f. While it is not a public corporation within purview of COA’ s audit jurisdiction, neither is it a private corporation created by special law. law . BSP has unique characteristics which “neither classifies it as a purely public nor a purely private corporation 7. COA, however, argues that: a. BSP is a public corporation corporation created created under Commonwealth Commonwealth  Act No. 111, whose whose functions relate relate to the forstering of of public virtues of citizenship and patriotism and the general improvement of the moral spirit and fiber of youth. Such manner of creation and purpose prove that it is a government agency. b. Any attempt to classify classify BSP as as a private private corporation corporation would be incomprehensible since no less than the law which created it had designated it as a public corporation and its statutory mandate embraces performance of sovereign functions. c. Since BSP is an attached agency agency of the DECS, BSP is an agency of the government; and that BSP is a chartered institution under the Administrative Code, embraced under the term instrumentality. instrumentality. d. The government government is not precluded precluded from extending extending financial support to the BSP and adding to its funds, and that as a government instrumentality imbued with public interest, the BSP’s funds from whatever source are public funds, and can be used solely for public purpose.

Issue: Whether or not the BSP falls under the COA’s audit jurisdiction Held: Yes. BSP is a public corporation and its funds are subject to the COA’s audit jurisdiction. BSP as a Public Corporation under the Civil Code 1. Under Art. 44 of the Civil Civil Code, there there are three classes classes of juridical juridical persons and BSP falls under the second classification: “xxx (2) other corporations, institutions and entities for public interest or purpose created by law.” 2. BSP, which is is a corporation corporation created for public interest, interest, is subject subject to

3.

Charter (Commonwealth Act No. 111) as amended by R.A. 7278, 1 shows that it was created in order to “inculcate in the youth patriotism and nationalism, and encourage their involvement in public and civic affairs. 2 Hence, the BSP, which was created by a special law to serve a public purpose, comes within the class of “public corporations” defined by par. 2, Art. 44 of the CC.

BSP’s Classification under the Administrative Code of 1987  1. The public character of the BSP is recognized by the fact that, along with the Girl Scouts of the Philippines, it is classified as an attached agency of the DECS under Sec. 20 of the Admin. Code of 1987. 2. As an attached agency, the BSP enjoys operational autonomy, as long there is at least one government representative in its governing board, which in this case is the DECS Secretary. In this sense, BSP is not under governmental control; but still, this characteristic does not make an attached chartered agency into a private corporation. 3. Assuking for the sake of argument that the BSP ceases to be owned/controlled by the government because of the reduction of government representatives in its Board, it does not follow that it ceases to be a government instrumentality as it still retains all the characteristics of an attached agency 3 under the Administrative Code. Discussion on Art. XII, Sec. 16 of the Constitution 1. Art. XII, Sec. 16 of the Constitution deals with the regulation of PRIVATE CORPORATIONS, which should be done through a general law enacted by Congress. Such provision bans creation of private corporations by special law. But such provision should not be construed so as to prohibit the creation of PUBLIC CORPORATIONS intended to serve a public purpose. Congress has enacted numerous laws creating government agencies vested with corporate powers. 1

 "Sec. 3. The purpose of this corporation shall be to promote through organization and cooperation with other agencies, the ability of boys to do useful things for themselves and others, to train them in scoutcraft, and to inculcate in them patriotism, civic consciousness and responsibility, courage, self-reliance, discipline and kindred virtues, and moral values, using the method which are in common use by boy scouts." 2  Art. II, Sec. 13 of the Constitution 3  Book IV, Chapter 7, SEC. 38. Definition of Administrative Relationship. Unless otherwise expressly stated in the Code or in other laws defining the special relationships of particular agencies, administrative relationships shall

2. The BSP is a public corporation or a government agency/instrumentality, which does not fall within the constitutional prohibition in Art. XII, Sec. 16, notwithstanding the amendments to its charter. 3. Not all corporations which are not government-owned or controlled, are ipso facto to be considered private corporations as there exists another distinct class of corporations known as “public corporations”. Such corporations are not subject to tests of ownership/control and economic viability, but to different criteria relation to public purposes. Economic Viability and Ownership and Control Tests are Inapplicable to Public Corporations 1. According to the discussion of the 1986 Constitutional Convention, the framers intended not to apply the economic viability tests on the creation of public corporations, as said test would only aply if the corporation is engaged in some economic activity or business function for the govenrmnet. 2. In this case, BSP performs functions that are impressed with public interest, as proven by the discussion on the Senate Bill that eventually became R.A. 7278, stating that that BSP “will inculcate moral uprightness among the young people”. BSP is a Public Corporation Impressed with Public Interest  1. R.A. 7278 did not intend to “return the BSP to the private sector” (as stated by Justice Carpio in his dissent in BSP v. NLRC). It was not the intention of the Congress to give up all interests in this basic youth organization. It intended to rejuvenate the organization, as BSP suffered from low morale as Secretaries in different departments who were too busy to attend meetings of the BSP Board sent respresentatives who changed from meeting to m eeting. Hence, such Secretaries were not in touch with everything that’s happening.

(3)  Attachment.  (a) This refers to the lateral relationship between the department or its equivalent and the attached agency or corporation for purposes of policy and program coordination. The coordination may be accomplished by having the department represented in the governing board of the attached agency or corporation, either as chairman or as a member, with or without voting rights, if this is permitted by the charter; having the attached corporation or agency comply with a system of periodic reporting which shall reflect the progress of programs and projects; and having the department or its equivalent provide general policies through its

2.

3.

Therefore, even though the amended BSP charter did away with most of the governmental presence in the BSP Board, this was done to more strongly promote the BSP objectives. The amendments were not done with the view of changing BSP into a privatized corporation, but remains to be an agency attached to the DECS.

Re: COA’s juri sdiction to audit BSP  1. Section 8 of its amended charter 4 allows the BSP to receive contributions or donations from the government. 2. Historically, therefore, the BSP had been subjected to government audit in so far as public funds had been infused thereto. However, this practice should not preclude the exercise of the audit jurisdiction of COA, clearly set forth under the Constitution 5. 3.

Since the BSP, under its amended charter, continues to be a public corporation or a government instrumentality, it is subject to the exercise by the COA of its audit jurisdiction in the manner consistent with the provisions of the BSP Charter.

WHEREFORE, petition for prohibition is DISMISSED.

4

 Section 8. Any donation or contribution which from time to time may be made to the Boy Scouts of the Philippines by the Government or any of its subdivisions, branches, offices, agencies or instrumentalities shall be expended by the Executive Board in pursuance of this Act.

government-owned and controlled corporations with original charters, and on a postaudit 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 with original