G.R. No. 88435 - Development Bank of the Philippines vs. Commission on Audit

In 1986, the Philippine government secured a US$310 million Economic Recovery Loan (ERL) from the World Bank to support post-Marcos economic recovery.
As a condition, the government agreed to rehabilitate the Development Bank of the Philippines (DBP), requiring it to engage a private external auditor alongside the Commission on Audit (COA), and to open its board to private-sector representation.

On November 28, 1986, the Monetary Board adopted Resolution No. 1079 amending Central Bank regulations; on December 5, 1986, Central Bank Circular No. 1124 was issued, requiring every bank, including government-owned banks like DBP, to secure an annual external audit “in addition to and without prejudice to” COA’s audit.
Pursuant to Circular No. 1124 and the government’s loan commitment, DBP Chair Jesus Estanislao wrote COA (December 12, 1986) seeking concurrence for hiring a private auditor. COA Chairman Teofisto Guingona interposed no objection (January 20–21, 1987), subject to COA review of audit terms.
DBP’s Board engaged Joaquin Cunanan & Co. (February 18, 1987). The World Bank President certified DBP’s compliance for tranche releases (February 23, 1987).

Upon a leadership change, COA Chairman Eufemio Domingo (April 27, 1987) protested Circular No. 1124 as unconstitutional and contrary to COA’s exclusive mandate, urging its amendment.
After DBP paid P487,321.14 to the private auditor, COA issued a memorandum (October 30, 1987) disallowing the payment and holding DBP officers personally liable.
DBP sought reconsideration (January 19, 1988); COA denied concurrence via letter-decision (August 29, 1988). DBP appealed to COA en banc, which denied relief (May 20, 1989).

DBP filed a petition for review on certiorari (June 14, 1989) under Rule 45, assailing both COA letter-decisions as unconstitutional and violative of existing law.
A temporary restraining order was issued (June 15, 1989), enjoining COA from enforcing its decisions. The Office of the Solicitor General declined to represent COA, which was later represented pro bono.

Whether Section 2, Article IX-D of the 1987 Constitution vests COA with sole and exclusive power to examine and audit government banks, thereby precluding concurrent private audits.

Whether any statute (e.g., PD No. 1445 Sections 26, 31, 32) prohibits government banks from hiring private auditors alongside COA.
Whether any statute expressly authorizes government banks to engage private external auditors.

If not prohibited by law, whether DBP’s hiring of a private auditor was necessary.
Whether the fees paid by DBP to the private auditor were reasonable under the circumstances.