The Congress establishes by law Philippine Funds, Inc., a private corporation, to receive foreign donations coming from abroad during national and local calamities and disasters, and to enable the unhampered and speedy disbursements of the donations through the mere action of its Board of Directors. Thereby, delays in the release of the donated funds occasioned by the stringent rules of procurement would be avoided. Also, the releases would not come under the jurisdiction of the Commission on Audit (COA).
(a) Is the law establishing Philippine Funds, Inc. constitutional? Explain your answer. (3%)
(b) Can the Congress pass the law that would exempt the foreign grants from the jurisdiction of the COA? Explain your answer. (3%)
Suggested answer only. Not an official answer and not legal advice.
(a) No, the law establishing Philippine Funds, Inc. is unconstitutional, and (b) No, Congress cannot exempt the foreign grants from COA jurisdiction. Under Article XII, Section 16 of the Constitution, Congress cannot create
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Quick check
Under Article XII, Section 16 of the Constitution, how may private corporations be validly established?
Article XII, Section 16 explicitly restricts the creation of private corporations to a general incorporation law.
Why is a law creating Philippine Funds, Inc. as a private corporation via special charter unconstitutional?
Congress is constitutionally prohibited from creating private corporations by special legislative enactments.
What legal character do foreign donations acquire upon receipt by the State for public disaster relief?
Foreign grants donated to the State for public disaster relief automatically become public funds upon receipt.
Which constitutional provision prohibits Congress from exempting public funds from COA audit jurisdiction?
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Can Congress pass a statute exempting foreign disaster relief grants from COA jurisdiction to speed up disbursements?
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Learn more about these topics
1. Private Corporations Creation
Under Article XII, Section 16 of the 1987 Constitution, Congress is constitutionally prohibited from creating private corporations by special law or legislative charter. Private corporations may only be formed, organized, or established under a general incorporation law enacted by Congress, such as the Revised Corporation Code. The sole exception allows Congress to create government-owned or controlled corporations through special charters, provided they are owned or controlled by the State and serve a public interest. Creating a private corporation like Philippine Funds, Inc. via a special statutory charter directly violates this constitutional mandate regardless of its disaster relief objectives.
2. Audit Jurisdiction Scope
Under Article IX-D, Section 2(1) of the 1987 Constitution, the Commission on Audit (COA) possesses the exclusive constitutional power, authority, and duty to audit all accounts pertaining to the revenue, receipts, expenditures, or uses of government funds and property. Foreign donations, grants, and contributions received by or for the Republic or any of its political subdivisions or instrumentalities to assist disaster victims automatically become public funds upon receipt. Because these funds belong to the public domain and are dedicated to a public purpose, they fall directly within the comprehensive audit jurisdiction of the Commission on Audit.
3. Prohibition On Exemption
Article IX-D, Section 3 of the 1987 Constitution explicitly commands that no law shall be passed exempting any entity of the Government or its subsidiary, or any investment of public funds, from the audit jurisdiction of the Commission on Audit. This constitutional prohibition prevents Congress from enacting statutory provisions that strip, diminish, or impair the COA's auditing authority over public funds. Consequently, any statutory provision attempting to exempt foreign disaster relief donations or their disbursement from COA audit jurisdiction is unconstitutional, null, and void for directly violating the constitutional mandate protecting COA's independence and jurisdiction.