PEOPLE v. VIZCARRA et.

al
May 10, 2006
Sandiganbayan

The last sentence, on the other hand, contains the rule peculiar to savings,
i.e. it recognizes the nature of savings as unappropriated surplus which
cannot fall under the first and second sentences (Sec. 336, LGC91) that deal
exclusively with appropriated funds.

FACTS:

Accused herein was charged for violation of Art. 220 of the Revised
Penal Code or Illegal Use of Public Funds for incurring overdrafts in
appropriation allocated for fuel and oil under the Maintenance and Other
Operating Expenses (MOOE) in the amount of P338,715.43 and offset the
said overdrafts with funds pertaining to other specific items as provided in
Appropriation Ordinance No. 98-01 without authority from the Sangguniang
Bayan of Ramon, Isabela, thus, diverting and applying public funds in the
total amount of P338,715.43 to a public use other than that for which said
fund was appropriated by Appropriation Ordinance No. 98-01, to the damage
and prejudice of the government.

Thereafter, accused moved for demurrer to evidence contending that

the prosecutions evidence is insufficient to convict them since (a) they
performed their official functions in all good faith by implementing the
Mayors Executive Order No. 2 (pertaining to accused Vizcarras order
to use any unexpended appropriation of particular items under the
MOOE to augment the appropriation for fuel and oil); (b) Executive
Order No. 2 covered only savings from the maintenance and other operating
expenses (MOOE) to augment the appropriation for fuel and oil in order not
to paralyze the operations of the municipality; and (c) their acts do not
violate Article 220 of the RPC.

The prosecution negates the argument of good faith by insisting that it

has proven beyond reasonable doubt that Executive Order No. 2 was a mere
afterthought hatched by all the accused to cover-up their criminal act.

ISSUE/S:

Whether or not municipal funds denominated as savings at the end of the

year are in the nature of free funds not otherwise earmarked or appropriated
for a specific public use.

RULING:

YES.
 The term savings under Article 417 of the Implementing Rules of RA
7160 is well-defined. It refers to --
Xxx portions or balances as of any given point in the fiscal
year of any programmed or allotted appropriation which remain
free of any obligation or encumbrance and which are still
available after the satisfactory completion or the unavoidable
discontinuance or abandonment of the work, activity, or purpose
for which the appropriation was originally authorized, or which
result from unobligated compensation and related costs
pertaining to vacant positions and leaves of absence without
pay.

The above-quoted definition of savings as a balance of any

programmed or allotted appropriation should be cross-referenced with
Section 322 of RA 7160 which provides:
SEC. 322. Reversion of Unexpended Balances of
Appropriation, Continuing Appropriations. Unexpended
balances of appropriations authorized in the annual
appropriations ordinance shall revert to the unappropriated
surplus of the general fund at the end of the fiscal year
and shall not thereafter be available for expenditure except by
subsequent enactment. However, appropriations for capital
outlays shall continue and remain valid until fully spent, reverted
or the project is completed. Reversions of continuing
appropriations shall not be allowed unless obligations therefore
have been fully paid or otherwise settled.

The balances of continuing appropriations shall be

reviewed as part of the annual budget preparation and the
sanggunian concerned may approve, upon recommendation of
the local chief executive, the reversion of the funds no longer
needed in connection with the activities funded by said
continuing appropriations subject to the provisions of this
Section.1

The general rule, therefore, is that all unexpended balances of

appropriations -- e.g. savings -- revert to the unappropriated surplus of the
general fund at the end of the year and the only exception refers to
continuing appropriations2 or capital outlays3 which the MOOE, by

1
Emphasis supplied.
2
SEC. 306, Local Government Code. Definition of terms
elimination, is not.4 As the MOOE is not in the nature of a continuing
appropriation or a capital outlay, any savings therefrom revert to the general
fund at the end of the fiscal year and are considered as unappropriated
surplus. This means that the savings from the MOOE at the end of the year
is taken out of the coverage of appropriated funds which they originally
formed part of.

In the cases of Parungao v. Sandiganbayan5 and Abdulla v. People,6 the

Supreme Court had categorically declared that in the absence of law or
ordinance appropriating the public fund allegedly technically malversed, the
(e) "Continuing appropriation" refers to an appropriation available to
support obligations for a specified purpose or project, such as those for the
construction of physical structures or for the acquisition of real property or equipment,
even when these obligations are incurred beyond the budget year.

3
SEC. 306, Local Government Code. Definition of terms

(d) "Capital Outlays" refers to appropriations for the purchase of goods and
services, the benefits of which extend beyond the fiscal year and which add to the
assets of the local government unit concerned, including investments in public utilities
such as public markets and slaughterhouses.
4
The Government Accounting and Auditing Manual (GAAM) Volume 1, Chapter 6
enumerates the items comprising the MOOE, viz:
1. Traveling expenses
2. Communication Services
3. Repair and maintenance of government facilities
4. Use, repair and maintenance of government vehicles
5. Transportation services
6. Supplies and material
7. Rents
8. Interests
9. Grants, subsidies and contributions
10. Awards and indemnities
11. Loan repayments and sinking fund contributions
12. Losses/Depreciation/Depletion
13. Water, illumination and power services
14. Social security benefits, rewards and other claims
15. Auditing services
16. Training and seminar
17. Extraordinary and miscellaneous expenses
18. Confidential and intelligence expenses
19. Anti-insurgency/contingency/emergency expenses
20. Taxes and other duties
21. Trading/production
22. Advertising and publication expenses
23. Fidelity bond and insurance premium
24. Loss on foreign exchange
25. Commitment fees/charges
use thereof for another public purpose will not amount to a violation of
Article 220 of the RPC.

As applied to herein case, as savings are unappropriated surplus,

accused-movants use thereof to off-set the overdraft in the appropriation
allocated for fuel and oil for fiscal year 1998 does not render them liable for
technical malversation as the third element of the crime which requires that
the public fund used should have been appropriated by law or ordinance is
missing.

The prosecution insists, however, that the accused are still guilty of
technical malversation as they violated Section 336 of RA 7160 requiring an
ordinance before any item in the approved annual budget can be augmented
from savings in other items within the same expense class. The prosecution
thus equates the violation of a provision of the Local Government Code with
the violation of a penal provision. This is an obvious non-sequitur. Section
336 of RA 7160 states:
SEC. 336. Use of Appropriated Funds and Savings. -- Funds shall
be available exclusively for the specific purpose for which they
have been appropriated. No ordinance shall be passed
authorizing any transfer of appropriations from one item to
another. However, the local chief executive or the presiding
officer of the sanggunian concerned may, by ordinance, be
authorized to augment any item in the approved annual budget
for their respective offices from savings in other items within the
same expense class of their respective appropriations.

It bears stress that accused-movants were charged under the

Information for violation of Article 220 of the RPC and not Section 336 of RA
7160. Section 336 of RA 7160 is not a penal provision and any violation
thereof will only render the accountable officer administratively and/or civilly
liable.7 Moreover, the acts constitutive of a violation of Section 336 are not
elements of the crime of technical malversation such that an infraction of the
former will not necessarily give rise to criminal liability under the latter.

As above-discussed, when the accused used the savings from the

MOOE to offset the overdraft in the fuel and oil allocation for fiscal year 1998
26. Other services
a. Repair and maintenance
b. Printing and binding
c. Subscription to periodicals and magazines
d. radiocast, telecast and documentary films
5
G.R. No. 96025, 15 May 1991, 197 SCRA 173.
6
G.R. No. 150129, 06 April 2005, 455 SCRA 78.
7
See penal provisions of RA 7160 (Sections 511 to 520) in relation to Sections
340, 342 and 351 of the same Code.
they were not in breach of Article 220 of the RPC as savings cannot be
considered as having been appropriated by law or ordinance. This means
that an accountable public officer can utilize savings for any public purpose
and not run afoul of the provision on technical malversation. He can, with
seeming impunity and without incurring any criminal liability under Article
220 of the RPC, by-pass the sanggunian concerned and augment the budget
by utilizing funds denominated as savings at the end of the year. Our law-
making body, perhaps aware of such an anomalous situation, has mandated
precisely in Section 336 of RA 7160 that the use of savings must be with the
blessing of the sanggunian concerned thru an ordinance for such purpose. In
other words, as it is not technical malversation to use the savings from funds
which have been originally appropriated for another purpose sans an
ordinance, RA 7160 has come to the rescue by imposing civil and/or
administrative sanctions upon accountable public officials who use the
savings of the local government unit concerned without an ordinance
authorizing them to do so.

It is ironic therefore that Section 336 of RA 7160 provides the clearest

proof that savings are unappropriated surplus. The first sentence thereof is
a statement of the general rule that funds shall be available exclusively for
the specific purpose for which they have been appropriated. Corollarily, the
second sentence mandates that no ordinance shall be passed authorizing
any transfer of appropriations from one item to another. The last sentence,
on the other hand, contains the rule peculiar to savings, i.e. it recognizes the
nature of savings as unappropriated surplus which cannot fall under the first
and second sentences that deal exclusively with appropriated funds. Being
unappropriated surplus, it is necessary that savings have to be appropriated
anew, so to speak, before they can be utilized; hence, the requirement for an
ordinance.