BSP v. COA (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.


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 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.

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