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CASE DIGEST: BOY SCOUTS OF THE PHILIPPINES v. COMMISSION ON AUDIT. G.R.

No.177131; June 7, 2011.

FACTS: This case arose when the COA issued Resolution No. 99-011on August 19, 1999 ("the COA
Resolution"), with the subject "Defining the Commissions policy with respect to the audit of the Boy
Scouts of the Philippines." In its whereas clauses, the COA Resolution stated that the BSP was
created as a public corporation under Commonwealth Act No. 111, as amended by Presidential
Decree No. 460 and Republic Act No. 7278; that in Boy Scouts of the Philippines v. National Labor
Relations Commission, the Supreme Court ruled that the BSP, as constituted under its charter, was a
"government-controlled corporation within the meaning of Article IX(B)(2)(1) of the Constitution"; and
that "the BSP is appropriately regarded as a government instrumentality under the 1987
Administrative Code." The COA Resolution also cited its constitutional mandate under Section 2(1),
Article IX (D).Finally, the COA Resolution reads:

NOW THEREFORE, in consideration of the foregoing premises, the COMMISSION PROPER HAS
RESOLVED, AS IT DOES HEREBY RESOLVE,to conduct an annual financial audit of the Boy Scouts
of the Philippines in accordance with generally accepted auditing standards, and express an opinion
on whether the financial statements which include the Balance Sheet, the Income Statement and the
Statement of Cash Flows present fairly its financial position and results of operations.

xxxx

BE IT RESOLVED FURTHERMORE, that for purposes of audit supervision,the Boy Scouts of the
Philippines shall be classified among the government corporations belonging to the Educational,
Social, Scientific, Civic and Research Sectorunder the Corporate Audit Office I, to be audited, similar
to the subsidiary corporations, by employing the team audit approach

Thursday, May 25, 2017

BSP V. COA (G.R. NO.177131; JUNE 7, 2011)

CASE DIGEST: BOY SCOUTS OF THE PHILIPPINES v. COMMISSION ON AUDIT. G.R.

No.177131; June 7, 2011.

FACTS: This case arose when the COA issued Resolution No. 99-011on August 19, 1999 ("the COA
Resolution"), with the subject "Defining the Commissions policy with respect to the audit of the Boy
Scouts of the Philippines." In its whereas clauses, the COA Resolution stated that the BSP was
created as a public corporation under Commonwealth Act No. 111, as amended by Presidential
Decree No. 460 and Republic Act No. 7278; that in Boy Scouts of the Philippines v. National Labor
Relations Commission, the Supreme Court ruled that the BSP, as constituted under its charter, was a
"government-controlled corporation within the meaning of Article IX(B)(2)(1) of the Constitution"; and
that "the BSP is appropriately regarded as a government instrumentality under the 1987
Administrative Code." The COA Resolution also cited its constitutional mandate under Section 2(1),
Article IX (D).Finally, the COA Resolution reads:

NOW THEREFORE, in consideration of the foregoing premises, the COMMISSION PROPER HAS
RESOLVED, AS IT DOES HEREBY RESOLVE,to conduct an annual financial audit of the Boy Scouts
of the Philippines in accordance with generally accepted auditing standards, and express an opinion
on whether the financial statements which include the Balance Sheet, the Income Statement and the
Statement of Cash Flows present fairly its financial position and results of operations.

xxxx

BE IT RESOLVED FURTHERMORE, that for purposes of audit supervision,the Boy Scouts of the
Philippines shall be classified among the government corporations belonging to the Educational,
Social, Scientific, Civic and Research Sectorunder the Corporate Audit Office I, to be audited, similar
to the subsidiary corporations, by employing the team audit approach
ISSUE: Does COA have jurisdiction over BSP?

HELD: After looking at the legislative history of its amended charter and carefully studying the
applicable laws and the arguments of both parties, [the Supreme Court found] that the BSP is a public
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corporation and its funds are subject to the COA's audit jurisdiction.

The BSP Charter (Commonwealth Act No. 111, approved on October 31, 1936), entitled "An Act to
Create a Public Corporation to be Known as the Boy Scouts of the Philippines, and to Define its
Powers and Purposes" created the BSP as a "public corporation"

There are three classes of juridical persons under Article 44 of the Civil Code and the BSP, as
presently constituted under Republic Act No. 7278,falls under the second classification.Article 44
reads:

Art. 44. The following are juridical persons:

(1) The State and its political subdivisions;

(2)Other corporations,institutions and entities for public interest or purpose created by law; their
personality begins as soon as they have been constituted according to law;
(3) Corporations, partnerships and associations forprivate interest or purposeto which the law grants a
juridical personality, separate and distinct from that of each shareholder, partner or member.

The BSP, which is a corporation created for a public interest or purpose, is subject to the law creating
it under Article 45 of the Civil Code, which provides:

Art. 45.Juridical persons mentioned in Nos. 1 and 2 of the preceding article are governed by the laws
creating or recognizing them.

Private corporations are regulated by laws of general application on the subject.

Partnerships and associations for private interest or purpose are governed by the provisions of this
Code concerning partnerships.

The purpose of the BSP as stated in its amended charter shows that it was created in order to
implement a State policy declared in Article II, Section 13 of the Constitution, which reads:

Section 13. The State recognizes the vital role of the youth in nation-building and shall promote and
protect their physical, moral, spiritual, intellectual, and social well-being. It shall inculcate in the youth
patriotism and nationalism, and encourage their involvement in public and civic affairs.

Evidently, the BSP, which was created by a special law to serve a public purpose in pursuit of a
constitutional mandate, comes within the class of "public corporations" defined by paragraph 2, Article
44 of the Civil Code and governed by the law which creates it, pursuant to Article 45 of the same
Code. DENIED.

Funa vs Manila Economic and Cultural Office

G.R. No. 193462 February 4, 2014
J. Perez
Facts: On 23 August 2010, petitioner sent a letter to the COA requesting for a “copy of the latest
financial and audit report” of the MECO invoking, for that purpose, his “constitutional right to
information on matters of public concern.” The petitioner made the request on the belief that the
MECO, being under the “operational supervision” of the Department of Trade and Industry (DTI), is a
government owned and controlled corporation (GOCC) and thus subject to the audit jurisdiction of the
COA.
Petitioner’s letter was received by COA Assistant Commissioner Jaime P. Naranjo, the following day.
On 25 August 2010, Assistant Commissioner Naranjo issued a memorandum referring the petitioner’s
request to COA Assistant Commissioner Emma M. Espina for “further disposition.” In this
memorandum, however, Assistant Commissioner Naranjo revealed that the MECO was “not among
the agencies audited by any of the three Clusters of the Corporate Government Sector.”
Issue: Whether or not MECO is a GOCC covered by the auditing power of COA.
Held: No. Government instrumentalities are agencies of the national government that, by reason of
some “special function or jurisdiction” they perform or exercise, are allotted “operational autonomy”
and are “not integrated within the department framework.” Subsumed under the rubric “government
instrumentality” are the following entities: 
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1. regulatory agencies,
2. Chartered institutions,
3. government corporate entities or government instrumentalities with corporate powers (GCE/GICP),
and
4. GOCCs
The Administrative Code defines a GOCC:
(13) Government-owned or controlled corporation refers to any agency organized as a stock or 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: . . . .
The above definition is, in turn, replicated in the more recent Republic Act No. 10149 or the GOCC
Governance Act of 2011 m, to wit:
(o) Government-Owned or -Controlled Corporation (GOCC) refers to any agency organized as a stock
or non-stock corporation, vested with functions relating to public needs whether governmental or
proprietary in nature, and owned by the Government of the Republic of the Philippines directly or
through its instrumentalities either wholly or, where applicable as in the case of stock corporations, to
the extent of at least a majority of its outstanding capital stock: . . . .
GOCCs, therefore, are “stock or non-stock” corporations “vested with functions relating to public
needs” that are “owned by the Government directly or through its instrumentalities.” By definition,
three attributes thus make an entity a GOCC: first, its organization as stock or non-stock corporation;
second, the public character of its function; and third, government ownership over the same.
Possession of all three attributes is necessary to deem an entity a GOCC.
In this case, there is not much dispute that the MECO possesses the first and second attributes. It is
the third attribute, which the MECO lacks.
The MECO is not a GOCC or government instrumentality. It is a sui generis private entity especially
entrusted by the government with the facilitation of unofficial relations with the people in Taiwan
without jeopardizing the country’s faithful commitment to the One China policy of the PROC. However,
despite its non-governmental character, the MECO handles government funds in the form of the
“verification fees” it collects on behalf of the DOLE and the “consular fees” it collects under Section 2
(6) of EO No. 15, s. 2001. Hence, under existing laws, the accounts of the MECO pertaining to its
collection of such “verification fees” and “consular fees” should be audited by the COA.
PHILIPPINE FISHERIES DEVELOPMENT AUTHORITY v. CENTRAL BOARD OF ASSESSMENT
APPEALS, GR No. 178030, 2010-12-15
Facts:
Lucena Fishing Port Complex (LFPC) is one of the fishery infrastructure projects undertaken by the
National Government under the Nationwide Fish Port-Package.
Located at Barangay Dalahican, Lucena City, the fish port was constructed on a... reclaimed land with
an area of 8.7 hectares more or less
The Philippine Fisheries Development Authority (PFDA) was created by virtue of P.D. 977 as
amended by E.O. 772, with functions and powers to (m)anage, operate, and develop the Navotas
Fishing Port Complex and such other fishing port complexes that may be established by the
Authority. Pursuant thereto, Petitioner-Appellant PFDA took over the management and operation of
LFPC in February 1992.
On October 26, 1999, in a letter addressed to PFDA, the City Government of Lucena demanded
payment of realty taxes on the LFPC property for the period from 1993 to 1999 in the total amount of
P39,397,880.00.
On October 17, 2000 another demand letter was sent by the Government of Lucena City on the same
LFPC property, this time in the amount of P45,660,080.00 covering the period from 1993 to 2000.
On December 18, 2000 Petitioner-Appellant filed its Appeal before the Local Board of Assessment
Appeals of Lucena City, which was dismissed for lack of merit. On November 6, 2001 Petitioner-
Appellant filed its motion for reconsideration; this was denied by the Appellee Local
Board on December 10, 2001.
PFDA appealed to the CBAA. In its Decision dated 5 October 2005, the CBAA dismissed the appeal
for lack of merit.
The ownership of LFPC as passed on by the Republic of the Philippines to PFDA is bourne by Direct
evidence: P.D. 977, as amended (supra). Therefore, Petitioner-Appellant's claim for realty tax
exemption on LFPC is untenable.
On appeal, the Court of Tax Appeals denied PFDA's petition for review and affirmed the 5 October
2005 Decision of the CBAA.
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The Court of Tax Appeals held that PFDA is a government-owned or controlled corporation, and is
therefore subject to the real property tax imposed by local government units pursuant to Section 232
in relation to Sections 193 and 234 of the Local Government Code.
Issues:
whether PFDA is liable for the real property tax assessed on the Lucena Fishing Port Complex.
Ruling:
The petition is meritorious.
The ruling of the Court of Tax Appeals is anchored on the wrong premise that the PFDA is a
government-owned or controlled corporation. On the contrary, this Court has already ruled that the
PFDA is a government instrumentality and not a government-owned or controlled... corporation.
In the 2007 case of Philippine Fisheries Development Authority v. Court of Appeals,6 the Court
resolved the issue of whether the PFDA is a government-owned or controlled corporation or an
instrumentality of the national government.
The Court rules that the Authority [PFDA] is not a GOCC but an instrumentality of the national
government which is generally exempt from payment of real property tax. However, said exemption
does not apply to the portions of the IFPC which the Authority leased to... private entities. With
respect to these properties, the Authority is liable to pay property tax. Nonetheless, the IFPC, being a
property of public dominion cannot be sold at public auction to satisfy the tax delinquency.
Under Section 133(o)[10] of the Local Government Code, local government units have no... power to
tax instrumentalities of the national government like the PFDA. Thus, PFDA is not liable to pay real
property tax assessed by the Office of the City Treasurer of Lucena City on the Lucena Fishing Port
Complex, except those portions which are leased to private persons or... entities.
Besides, the Lucena Fishing Port Complex is a property of public dominion intended for public use,
and is therefore exempt from real property tax under Section 234(a)[11] of the Local Government
Code. Properties of public dominion are owned by the State or... the Republic of the Philippines.
Article 420 of the Civil Code provides:
Art. 420. The following things are property of public dominion:
(1) Those intended for public use, such as roads, canals, rivers, torrents, ports and bridges
constructed by the State, banks, shores, roadsteads, and others of similar character;
(2) Those which belong to the State, without being for public use, and are intended for some public
service or for the development of the national wealth.
Feliciano v. Commission on Audit
G.R. No. 147402; Jan. 14, 2004
FACTS:
A Special Audit Team from COA Regional Office No. VIII audited the accounts of Leyte Metropolitan
Water District (LMWD). Subsequently, LMWD received a letter from COA dated 19 July 1999
requesting payment of auditing fees. As General Manager of LMWD, petitioner sent a reply informing
COA’s Regional Director that the water district could not pay the auditing fees. Petitioner cited as
basis for his action Sections 6 and 20 of Presidential Decree 198 (“PD 198”, as well as Section 18 of
Republic Act No. 6758 (“RA 6758”). The COA denied petitioner Ranulfo C. Feliciano’s request for
COA to cease all audit services, and to stop charging auditing fees, to LMWD. The COA also denied
petitioner’s request for COA to refund all auditing fees previously paid by LMWD.
ISSUES:
1) Whether a Local Water District (“LWD”) created under PD 198, as amended, is a government-
owned or controlled corporation subject to the audit jurisdiction of COA;
2) Whether Section 20 of PD 198, as amended, prohibits COA’s certified public accountants from
auditing local water districts; and
HELD:
The petition lacks merit. LWDs are not private corporations because they are not created under the
Corporation Code. LWDs exist by virtue of PD 198, which constitutes their special charter. Since
under the Constitution only government-owned or controlled corporations may have special charters,
LWDs can validly exist only if they are government-owned or controlled. To claim that LWDs are
private corporations with a special charter is to admit that their existence is constitutionally infirm.
Petitioner’s claim that the auditing fees COA charges LWDs for audit services violate the prohibition in
Section 18 of RA 6758 has no basis. Section 18 of RA 6758 prohibits COA personnel from receiving
any kind of compensation from any government entity except “compensation paid directly by COA out
of its appropriations and contributions.” COA may charge GOCCs “actual audit cost” but GOCCs must
pay the same directly to COA and not to COA auditors. Petitioner has not alleged that COA charges
LWDs auditing fees in excess of COA’s “actual audit cost.” Neither has petitioner alleged that the