[LOPEZ] G.R. No. 177131 June 7, 2011
BSP is not even included in any
BOY SCOUNTS OF THE PHILIPPINES, petitioner vs. COMMISSION ON
AUDIT, respondents
Topic: Unit 1, General Principles
Facts:
1. COA issued a Resolution Defining the Comissions Policy with
respect to the audit of the Boy Scouts of the Philippines.
2. The COA Resolution stated that:
a. BSP was created as a public corporation under
Commonwealth Act No. 111
b. In Boy Scouts of the Philippines v NLRC, the SC ruled that
BSP was a government-controlled corporation under Art.
IX(B)(2)(1) of the Constitution
c. Under the 1987 Admin. Code, BSP is regarded as a
government instrumentality
3. Under the COA Resolution, the COA resolved to conduct an annual
financial audit of the Boy Scouts of the Philippines.
4. BSP, through its National President Jejomar Binay, sought for
reconsideration of the COA Resolution but was denied (reasons for
denial are mostly the same as the COA arguments below).
5. Hence, this petition for prohibition by the BSP.
6. BSP argues that:
a. BSP v NLRC is inapplicable in determining the audit
jurisdiction of COA as the issue there was the jurisdiction of
the NLRC;
b. Although the functions of BSP relate to those that the
government can do on its own, this alone cannot be
determinative of COAs audit jurisdiction over it. BSP v.
NLRC just stated that it is akin to a public corporation but
this is not synonymous to holding BSP as a government
corporation or entity subject to COAs audit;
c. R.A. 7278 introduced crucial amendments to its charter;
hence, BSP v. NLRC findings are no longer valid. BSP v.
NLRC classified BSP as a government-controlled
corporation based on the substantial government
participation in its Executive Board. But R.A. 7278
eliminated substantial government participation in the
National Executive Board by removing: (1) the President +
Exec. Secretaries, and (2) the appointment and confirmation
power of the President of the PH as Chief Scout. R.A. 7278
suggest that governance of BSP has come to be
overwhelmingly a private affair or nature.
d. The assets of the BSP were acquired from the Boy Scouts of
America, and not from the PH Government, and that their
operations were financed chiefly from membership dues of
the Boy Scouts themselves.
appropriations for the Government.
e. BSP is neither a government-owned or controlled
corporation; nor is it an instrumentality, agency or
subdivision of the Government, as defined by the
Administrative Code.
f. While it is not a public corporation within purview of COAs
audit jurisdiction, neither is it a private corporation created by
special law. BSP has unique characteristics which neither
classifies it as a purely public nor a purely private
corporation
7. COA, however, argues that:
a. BSP is a public corporation created under Commonwealth
Act No. 111, whose functions relate to the forstering of public
virtues of citizenship and patriotism and the general
improvement of the moral spirit and fiber of youth. Such
manner of creation and purpose prove that it is a
government agency.
b. Any attempt to classify BSP as a private corporation would
be incomprehensible since no less than the law which
created it had designated it as a public corporation and its
statutory mandate embraces performance of sovereign
functions.
c. Since BSP is an attached agency of the DECS, BSP is an
agency of the government; and that BSP is a chartered
institution under the Administrative Code, embraced under
the term instrumentality.
d. The government is not precluded from extending financial
support to the BSP and adding to its funds, and that as a
government instrumentality imbued with public interest, the
BSPs funds from whatever source are public funds, and can
be used solely for public purpose.
Issue: Whether or not the BSP falls under the COAs audit jurisdiction
Held: Yes. BSP is a public corporation and its funds are subject to the COAs
audit jurisdiction.
BSP as a Public Corporation under the Civil Code
1. Under Art. 44 of the Civil Code, there are three classes of juridical
persons and BSP falls under the second classification: xxx (2) other
corporations, institutions and entities for public interest or purpose
created by law.
2. BSP, which is a corporation created for public interest, is subject to
the law creating it. The purpose of the BSP, as stated in the BSP
 Charter (Commonwealth Act No. 111) as amended by R.A. 7278,1
shows that it was created in order to inculcate in the youth
patriotism and nationalism, and encourage their involvement in
public and civic affairs.2
3. Hence, the BSP, which was created by a special law to serve a
public purpose, comes within the class of public corporations
defined by par. 2, Art. 44 of the CC.
BSPs Classification under the Administrative Code of 1987
1. The public character of the BSP is recognized by the fact that, along
with the Girl Scouts of the Philippines, it is classified as an attached
agency of the DECS under Sec. 20 of the Admin. Code of 1987.
2. As an attached agency, the BSP enjoys operational autonomy, as
long there is at least one government representative in its governing
board, which in this case is the DECS Secretary. In this sense, BSP
is not under governmental control; but still, this characteristic does
not make an attached chartered agency into a private corporation.
3. Assuking for the sake of argument that the BSP ceases to be
owned/controlled by the government because of the reduction of
government representatives in its Board, it does not follow that it
ceases to be a government instrumentality as it still retains all the
characteristics of an attached agency3 under the Administrative
Code.
Discussion on Art. XII, Sec. 16 of the Constitution
1. Art. XII, Sec. 16 of the Constitution deals with the regulation of
PRIVATE CORPORATIONS, which should be done through a
general law enacted by Congress. Such provision bans creation of
private corporations by special law. But such provision should not be
construed so as to prohibit the creation of PUBLIC
CORPORATIONS intended to serve a public purpose. Congress has
enacted numerous laws creating government agencies vested with
corporate powers.
1 (3) Attachment. (a) This refers to the lateral relationship
"Sec. 3. The purpose of this corporation shall be to promote through organization
and cooperation with other agencies, the ability of boys to do useful things for
themselves and others, to train them in scoutcraft, and to inculcate in them patriotism,
civic consciousness and responsibility, courage, self-reliance, discipline and kindred
virtues, and moral values, using the method which are in common use by boy
scouts."
2 Art. II, Sec. 13 of the Constitution
3 Book IV, Chapter 7, SEC. 38. Definition of Administrative Relationship.
Unless otherwise expressly stated in the Code or in other laws defining the
special relationships of particular agencies, administrative relationships shall
be categorized and defined as follows:
xxxx
2. The BSP is a public corporation or a government
agency/instrumentality, which does not fall within the constitutional
prohibition in Art. XII, Sec. 16, notwithstanding the amendments to its
charter.
3. Not all corporations which are not government-owned or controlled,
are ipso facto to be considered private corporations as there exists
another distinct class of corporations known as public corporations.
Such corporations are not subject to tests of ownership/control and
economic viability, but to different criteria relation to public purposes.
Economic Viability and Ownership and Control Tests are Inapplicable to
Public Corporations
1. According to the discussion of the 1986 Constitutional Convention,
the framers intended not to apply the economic viability tests on the
creation of public corporations, as said test would only aply if the
corporation is engaged in some economic activity or business
function for the govenrmnet.
2. In this case, BSP performs functions that are impressed with public
interest, as proven by the discussion on the Senate Bill that
eventually became R.A. 7278, stating that that BSP will inculcate
moral uprightness among the young people.
BSP is a Public Corporation Impressed with Public Interest
1. R.A. 7278 did not intend to return the BSP to the private sector (as
stated by Justice Carpio in his dissent in BSP v. NLRC). It was not
the intention of the Congress to give up all interests in this basic
youth organization. It intended to rejuvenate the organization, as
BSP suffered from low morale as Secretaries in different
departments who were too busy to attend meetings of the BSP
Board sent respresentatives who changed from meeting to meeting.
Hence, such Secretaries were not in touch with everything thats
happening.
between the department or its equivalent and the attached agency
or corporation for purposes of policy and program coordination. The
coordination may be accomplished by having the department
represented in the governing board of the attached agency or
corporation, either as chairman or as a member, with or without
voting rights, if this is permitted by the charter; having the attached
corporation or agency comply with a system of periodic reporting
which shall reflect the progress of programs and projects; and having
the department or its equivalent provide general policies through its
representative in the board, which shall serve as the framework for
the internal policies of the attached corporation or agency.
(Emphasis ours.)
 2. Therefore, even though the amended BSP charter did away with
most of the governmental presence in the BSP Board, this was done
to more strongly promote the BSP objectives.
3. The amendments were not done with the view of changing BSP into
a privatized corporation, but remains to be an agency attached to the
DECS.

Re: COAs jurisdiction to audit BSP

1. Section 8 of its amended charter4 allows the BSP to receive
contributions or donations from the government.
2. Historically, therefore, the BSP had been subjected to government
audit in so far as public funds had been infused thereto. However,
this practice should not preclude the exercise of the audit jurisdiction
of COA, clearly set forth under the Constitution 5.

3. Since the BSP, under its amended charter, continues to be a

public corporation or a government instrumentality, it is subject
to the exercise by the COA of its audit jurisdiction in the manner
consistent with the provisions of the BSP Charter.

WHEREFORE, petition for prohibition is DISMISSED.

4 Section 8. Any donation or contribution which from time to time may be made to the
Boy Scouts of the Philippines by the Government or any of its subdivisions, branches,
offices, agencies or instrumentalities shall be expended by the Executive Board in
pursuance of this Act.
5 Section 2. (1) The Commission on Audit shall have the power, authority, and duty to
examine, audit, and settle all accounts pertaining to the revenue and receipts of, and
expenditures or uses of funds and property, owned or held in trust by, or pertaining to,
the Government, or any of its subdivisions, agencies, or instrumentalities, including
government-owned and controlled corporations with original charters, and on a post-
audit basis: (a) constitutional bodies, commissions and offices that have been granted
fiscal autonomy under this Constitution; (b) autonomous state colleges and
universities; (c) other government-owned or controlled corporations with original
charters and their subsidiaries; and (d) such non-governmental entities receiving
subsidy or equity, directly or indirectly, from or through the Government, which are
required by law of the granting institution to submit to such audit as a condition of
subsidy or equity. x x x.