Case Summary (G.R. No. 88435)
Constitutional Authority
Article IX-D, Section 2(1) grants COA power to “examine, audit, and settle all accounts” of government entities but does not expressly declare it exclusive. Section 2(2) grants COA “exclusive authority” to define audit scope and disallow irregular expenditures. Deliberations reveal framers rejected proposals to make audit power exclusive, permitting concurrent private audits for investment or privatization needs. Section 3 prohibits exempting any government entity from COA jurisdiction but does not bar concurrent audits. Article XII, Section 20 empowers the Central Bank to supervise and regulate banks, including examination and audit, establishing concurrent constitutional audit jurisdiction between COA and Central Bank.
Statutory Framework
Presidential Decree No. 1445 (Government Auditing Code) defines COA’s general jurisdiction (§ 26) and authorizes COA to deputize private professionals (§ 31) or review government contracts for audit-related services (§ 32) but does not prohibit government entities from hiring independent auditors. Central Bank Circular No. 1124, pursuant to RA 337 and the 1973/Freedom Constitutions, mandated independent audits for all banks alongside COA audits. Subsequent statutes (RA 7653, RA 8791) preserved Central Bank and Monetary Board powers to require and supervise independent audits.
Issues
- Whether the COA’s constitutional power to audit government banks is exclusive and precludes concurrent private audits.
- Whether any statute prohibits or authorizes government banks to hire private auditors in addition to COA.
- If hiring private auditors is lawful, whether DBP’s engagement was necessary and fees reasonable.
Court’s Analysis & Ruling
- Exclusive Power to Audit: The Constitution distinguishes non-exclusive audit power (§ 2(1)) from exclusive regulatory authority (§ 2(2)). Framers intentionally omitted “exclusive” in § 2(1), permitting concurrent private audits where commercial practice demands. Central Bank’s constitutional supervision and audit power under Article XII, Section 20 further confirm concurrent jurisdiction. 2. Statutory Prohibitions/Authorizations: PD 1445 §§ 26, 31, 32 define COA’s jurisdiction and deputization authority but do not bar independent audits by government banks. Central Bank Circular No. 1124, valid under freedom and 1987 Constitutions and banking laws, imposed mandatory independent audits “in addition to” COA audits. RA 8791 and RA 7653 reiterate Central Bank’s audit powers. 3. Necessity and Reasonableness: Private audit was a Worl
Case Syllabus (G.R. No. 88435)
The Nature of the Petition
- Petition for review on certiorari under Rule 45 challenging two COA letter-decisions
- COA Chairman’s decision (Aug. 29, 1988) and COA en banc decision (May 20, 1989) prohibited DBP from hiring a private external auditor
- Raises question of first impression: whether COA’s constitutional audit power is exclusive and bars concurrent private audit of DBP
Antecedent Facts
- 1986: Philippine government obtained US$310 million Economic Recovery Loan from World Bank
- World Bank condition: rehabilitate DBP through private external audit and enhanced private sector representation on DBP board
- Policy Statement and Central Bank Resolution No. 1079 (Nov. 28, 1986) and Circular No. 1124 (Dec. 5, 1986) required annual external independent audit of all banks, government or private, “in addition to and without prejudice to” COA audit
- DBP Chairman sought COA approval (Dec. 12, 1986); COA under Chairman Guingona interposed no objection, subject to scope approval
- DBP Board hired Joaquin Cunanan & Co. (Feb. 18, 1987); World Bank certified compliance (Feb. 23, 1987)
- New COA Chairman Domingo protested Circular No. 1124 (Apr. 27, 1987) as unconstitutional and directed resident auditors to disallow payments to private auditor
- DBP paid private auditor P 487,321.14 (1986) despite COA objection
- COA Chairman issued Memorandum disallowing those payments and held DBP officers personally liable (Oct. 30, 1987)
- DBP sought reconsideration; COA denied concurrence (Aug. 29, 1988) and COA en banc affirmed denial (May 20, 1989)
- DBP filed petition June 14, 1989; SC issued TRO June 15, 1989, enjoining COA enforcement
Issues Presented
- Whether the Constitution vests in COA sole and exclusive power to examine and audit government banks, precluding concurrent private audit
- Whether any statute prohibits government banks from hiring private auditors alongside COA
- If no prohibition, whether any statute authorizes such hiring
- Whether DBP’s engagement of private auditor was necessary and fees reasonable
Relevant Constitutional Provisions
- 1987 Constitution, Art. IX-D, Sec. 2(1): COA shall have power, authority, and duty to examine, audit, and settle all government accounts (no exclusivity clause)
- 1987 Constitution, Art. IX-D, Sec. 2(2): COA “shall have the exclusive authority” to define scope of its audit, methods, rules, and disallow irregular expenditures
- 1987 Constitution, Art. IX-D, Sec. 3: No law shall exempt any government entity from COA jurisdiction
- 1987 Constitution, Art. XII, Sec. 20: Monetary Board of Bangko Sentral shall have supervision over banks