(MANILA BULLETIN)

The Supreme Court (SC) has reversed its 2021 decision as it now ruled that all funds of the Philippine Amusement and Gaming Corporation (PAGCOR), regardless of source, are subject to audit scrutiny by the Commission on Audit (COA).

A press statement issued by the SC’s public information office (PIO) said that in 2021, the High Court “had declared that COA exercises limited audit jurisdiction over PAGCOR by virtue of Section 15 of Presidential Decree (PD) 1869, enacted in 1983, which states that with respect to PAGCOR, the COA’s audit jurisdiction is limited to the five percent franchise tax and 50 percent share of the government in its gross earnings.” 

The PIO said that the 2021 decision “held that this express limitation on the COA’s general audit power was purposely adopted to provide some flexibility in PAGCOR’s operations.”

In its Feb. 14, 2023 full court decision that was made public last Aug. 22, the PIO said: “The Court ruled that Section 15 of PD 1869 has been impliedly repealed by the 1987 Constitution, specifically by Article IX-D, Sections 2 and 3. Section 2 states that the COA shall have the ‘power xxx 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, xxx including government-owned or controlled corporations [GOCC] with original charters.’” 

The new SC’s full court decision was written by Justice Ramon Paul L. Hernando. 

The SC said that Section 3, on the other hand, provides that “[n]o law shall be passed exempting any entity of the Government or its subsidiary in any guise whatever, or any investment of public funds, from the jurisdiction of the [COA].”

“The Court held that the broad and encompassing language used by the foregoing provision (Section 3) unmistakably discloses the objective to avert any exception or limitation to COA’s jurisdiction, and to do away with provisions of law with similar import, such as Section 15 of PD 1869,” the PIO said quoting from the decision.

It said the SC “further stressed that Article XVIII, Section 3 of the 1987 Constitution provides that all existing laws, decrees, executive orders, proclamations, letters of instructions, and other executive issuances inconsistent with the provisions of the 1987 Constitution are rendered inoperative.”

It also said that “the Court noted that Article IX-D, Section 3 of the 1987 Constitution, which prohibits the passage of a law exempting any government entity from the jurisdiction of the COA, neither existed nor had a counterpart provision in the 1973 Constitution, the Constitution in effect when PD 1869 was enacted.”

“Given that Section 15 of PD 1869 is inconsistent with Article IX-D, Sections 2 and 3 of the 1987 Constitution, the former is hence deemed inoperative,” the PIO said citing the decision.

Thus, the PIO said that “the Court pronounced that PAGCOR, being a GOCC (government owned and controlled corporation) with its own original charter, and its funds, regardless of source, come within the broad purview of Article IX-D, Sections 2 and 3 of the 1987 Constitution.” 

“In effect, the ‘revenue and receipts of, and expenditures or uses of funds’ which are held in trust by or pertaining to it, are subject to COA’s audit jurisdiction, contrary to Section 15 of PD 1869, and the restrictions mentioned therein,” said the PIO as it cited the conclusion reached by the SC in its decision.

The new decision granted the motion for reconsideration filed by COA as it denied the petitions filed by Efraim C. Genuino and Rene C. Figueroa, former PAGCOR officials.

Citing court records, the PIO said that in 2013, Genuino and Figueroa were issued by COA a Notice of Disallowance over PAGCOR’s payment of P2 million in financial assistance for a flood control project at the Pleasant Village Homeowners Association (PVHA) of Los Baños, Laguna, a private association. 

Genuino filed with the SC a petition challenging COA’s notice of disallowance.  In a decision promulgate on June 15, 2021, the SC granted Genuino’s petition. 

Figueroa also filed a petition with the SC challenging COA’s alleged abuse of discretion.  The petition was consolidated with that of Genuino’s case.  The SC ruled in favor of two petitions.  COA filed a motion for reconsideration.

The SC granted COA’s motion for reconsideration as it reversed its 2021 decision.

In the new decision, the PIO said the SC also reiterated that government funds or property should be spent or used solely for public purposes and the mandate also applies to PAGCOR.

The PIO said that “while the Court noted that PAGCOR can fund infrastructure and socio-civic projects, such as flood control programs, beautification, sewerage and sewage projects, such must be in the nature of an essential public service, consistent with the requirement that government funds must be used solely for public purposes.”

“Incidental advantage to the public or to the state, which results from the promotion of private interests and the prosperity of private enterprises or business, does not justify their aid by the use of public money,” the PIO also said citing the SC decision.

On the liability of Genuino and Figueroa, the PIO also said the SC ruled:

“The Court thus ruled that Genuino and Figueroa, as PAGCOR Board Chairperson and Senior Vice President, respectively, are liable for the disallowance as approving officers and for having exhibited gross negligence.

“The Court emphasized that considering the novelty of the pronouncements in the instant Decision, this ruling shall be applied prospectively and shall not affect parties who had relied on, and acted upon, the force of former contrary views,” the PIO added.

This means, in effect, that Genuino and Figueroa are not liable for their acts in behalf of PAGCOR.