SC: All PAGCOR funds are subject to COA jurisdiction

SC: All PAGCOR funds are subject to COA jurisdiction; PAGCOR Officials Liable for Disallowed Financial Assistance to Village Flood Control Project.All funds of the Philippine Amusement and Gaming Corporation (PAGCOR), regardless of source, are subject to the audit jurisdiction of the Commission on Audit (COA). Thus held the Supreme Court En Banc, in a 26-page Decision penned by Justice Ramon Paul L. Hernando, granting the Motion for Reconsideration filed by the COA and denying the petitions of Efraim C. Genuino and Rene C. Figueroa. The Court thus reversed its Decision in G.R. No. 230818 dated June 15, 2021.

In the 2021 Decision, the Court declared that the 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, COA’s audit jurisdiction is limited to the 5% franchise tax and 50% share of the government in its gross earnings. The Court then held that this express limitation on COA’s general audit power was purposely adopted to provide some flexibility in PAGCOR’s operations.

In the present Decision, however, the Court ruled Section 15 of PD 1869 has been impliedly repealed by the 1987 Constitution, specifically by Article IX-D, Sections 2 and 3. The Court held that the broad and encompassing language used by the foregoing provision “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 Court 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.

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. Applying this to the financial assistance granted by PAGCOR for a flood control and drainage project for PVHA, the Court found that PVHA, a private property, is the primary recipient of the intended improvement, and any benefit to the larger community and the public in general shall, at most, be speculative and merely incidental. The financial grant is thus not for a public purpose.

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.”
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