Funa vs. Manila Economic and Cultural Office | G.R. No. 193462 | February 4, 2014 | Ponente: PEREZ, J.

Nature of Case: Constitutional Commissions: Non-government office with governmental functions

Petitioners(s): Dennis Funa
Respondent(s): Manila Economic and Cultural Office (MECO), Commission on Audit (COA)

SUMMARY: Petitioner sent a letter to the COA requesting for a copy of the latest financial and audit report of MECO. Petitioner made the request on the
belief that MECO, being under the "operational supervision" of the Department of Trade and Industry (DTI), is a government owned and controlled
corporation (GOCC) and thus subject to the audit jurisdiction of COA. Assistant Commissioner Naranjo issued a memorandum revealing that the MECO
was not among the agencies audited by any of the three Clusters of the Corporate Government Sector. Hence, petitioner filed the instant petition for
mandamus compeling COA to audit and examine the funds of MECO and for MECO to submit to such audit and examination. Court partially granted the
petition. MECO is declared a non-governmental entity. The accounts of MECO pertaining to verification fees and consular fees are subject to the audit
jurisdiction of the COA.

FACTS
• Petition for mandamus to compel:
1. COA to audit and examine the funds of MECO
2. MECO submit to such audit and examination
• after the Chinese civil war, two governments competed for sovereignty:
- communist People’s Republic of China (PROC) — controls the mainland territories
- nationalist Republic of China (ROC) — controls the island of Taiwan
• both adhered to a policy of “One China” (view that there is only one legitimate government in China) but differed in their
respective interpretation as to which that government is (either PROC or ROC)
• ROC used to enjoy diplomatic recognition from a majority of the world’s states, partly due to being a founding member
of the United Nations (UN)
- after the UN General Assembly adopted Resolution 2758 in 1971, a number of states who recognize PROC’s
version of the One China policy gradually increased in the 1960s and 70s
- and so, those who previously recognize ROC as the legitimate government of China, terminated their official
relations with the said government, in favor of establishing diplomatic relations with the PROC
• Philippines (PH) formally ended its official diplomatic relations with the government in Taiwan on 9 June 1975
- PH and the PROC expressed mutual recognition thru the Joint Communiqué of the Government of the Republic
of the Philippines and the Government of the People’s Republic of China (Joint Communiqué)
- this did not mean however, that it would stop PH from keeping its unofficial relations with Taiwan on a “people-to-
people basis”
• as long as it is permissible by the terms of the Joint Communiqué, meaning, that it would course any such
relation thru offices outside of the official or governmental organs
• the people of Taiwan and of the PH maintained an unofficial relationship facilitated by the offices of the Taipei Economic
and Cultural Office, for the former, and the MECO, for the latter
• MECO was organized on 16 December 1997 as a non-stock, non-profit corporation under Batas Pambansa Blg. 68 or
the Corporation Code
- PURPOSE (there are four but this is the most important): to establish and develop the commercial and industrial
interests of Filipino nationals here and abroad, and assist on all measures designed to promote and maintain the
trade relations of the country with the citizens of other foreign countries
• MECO became the corporate entity "entrusted" by the PH government with the responsibility of fostering "friendly" and
"unofficial" relations with the people of Taiwan, particularly in the areas of trade, economic cooperation, investment,
cultural, scientific and educational exchanges
- was "authorized" by the government to perform certain "consular and other functions" that relates to the
promotion, protection and facilitation of Philippine interests in Taiwan
• MECO oversees the rights and interests of Overseas Filipino Workers (OFWs) in Taiwan; promotes the Philippines as a
tourist and investment destination for the Taiwanese; and facilitates the travel of Filipinos and Taiwanese from Taiwan to
the Philippines, and vice versa

Mandamus petition
• petitioner sent a letter to the COA requesting for a copy of the latest financial and audit report of MECO invoking his
constitutional right to information on matters of public concern
- he believes that MECO, being under the "operational supervision" of the Department of Trade and Industry (DTI),
is a government owned and controlled corporation (GOCC) and thus subject to the audit jurisdiction of COA
- Assistant Commissioner Naranjo issued a memorandum revealing that MECO was not among the agencies
audited by any of the three Clusters of the Corporate Government Sector
• Taking the memorandum as an admission that the COA had never audited and examined the accounts of the MECO,
the petitioner filed the instant petition for mandamus
- capacities as taxpayer, concerned citizen, a member of the Philippine Bar and law book author
• Petitioner posits that by failing to audit the accounts of the MECO, the COA is neglecting its duty under Section 2(1),
Article IX-D of the Constitution to audit the accounts of an otherwise bona fide GOCC or government instrumentality

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 - petitioner claims that MECO is a GOCC without an original charter or, at least, a government instrumentality, the
funds of which partake the nature of public funds
• According to petitioner, MECO possesses all the essential characteristics of a GOCC and an instrumentality under the
EO No. 292 or the Administrative Code —
1. MECO is vested with government functions
- performs functions that are equivalent to those of an embassy or a consulate of the Philippine government
- authorized functions of the MECO reveals that they are substantially the same functions performed by the
Department of Foreign Affairs (DFA)
2. MECO is controlled by the government
- President of the Philippines actually indirectly appoints the directors of the MECO by way of "desire letters"
addressed to the MECO’s board of directors
3. MECO is under the operational and policy supervision of the DTI
- was placed under the operational supervision of the DTI by EO No. 328, series of 2004, and again under the
policy supervision of the same department by EO No. 426, series of 2005
• the American Institute in Taiwan (AIT) — the counterpart entity of the MECO in USA — is supposedly audited by that
country’s Comptroller General

Position of MECO
• MECO denies that it is a GOCC or a government instrumentality
- it is not owned or controlled by the government
- its funds are private funds
- the government merely has policy supervision over it (government’s oversight is limited only to ensuring that the
corporation’s activities are in tune with the country’s commitments under the One China policy of the PROC)

Position of COA
• COA argues that the instant petition already became moot when COA Chairperson Maria Gracia M. Pulido-Tan issued
Office Order No. 2011-698 on 6 October 2011
- Pulido-Tan already directed a team of auditors to proceed to Taiwan, specifically for the purpose of auditing the
accounts of, among other government agencies based therein, the MECO
• concedes that it has audit jurisdiction over the accounts of the MECO, however, the COA clarifies that it does not
consider the former as a GOCC or a government instrumentality (COA maintains that the MECO is a non-governmental
entity)
• COA argues that, despite being a non-governmental entity, MECO may still be audited with respect to the "verification
fees" for overseas employment documents that it collects from Taiwanese employers on behalf of the DOLE
- COA classifies the MECO as a non-governmental entity "required to pay xxx government share" subject to a
partial audit of its accounts under Section 26 of the Presidential Decree No. 1445 or the State Audit Code of
the Philippines

ISSUE(S) + RULING
Procedural
1. WON petition has already become moot when the COA Chairperson issued Office Order No. 2011-698 — NO
• the issuance by the COA of Office Order No. 2011-698 would have rendered the petition moot but the issues raised
involve the commission of a grave violation of the Constitution and of paramount public interest
a. petition makes a serious allegation that the COA had been remiss in its constitutional or legal duty to audit and
examine the accounts of an otherwise auditable entity in the MECO
b. there is paramount public interest in the resolution of the issue concerning the failure of the COA to audit the
accounts of the MECO — whether COA was able to faithfully fulfill its constitutional role as the guardian of the
public treasury, in which any citizen has an interest
c. there is also paramount public interest in the resolution of the issue regarding the legal status of the MECO —
whether it may be considered as a government agency or not, has a direct bearing on the country’s commitment
to the One China policy of the PROC
• Court would also like to rule on the case at bar for the formulation of controlling principles for the education of the
bench, bar and the public in general
• Assuming that the allegations of neglect on the part of the COA were true, Office Order No. 2011-698 does not offer the
strongest certainty that they would not be replicated in the future
- Office Order No. 2011-698 did not state any legal justification as to why, after decades of not auditing the
accounts of the MECO, the COA suddenly decided to do so
- the inclusion of the MECO in Office Order No. 2011-698 appears to be entirely dependent upon the judgment of
the incumbent chairperson of the COA; susceptible of being undone, with or without reason, by her or even her
successor
- the case now before this Court is dangerously capable of being repeated yet evading review

2. WON petitioner has standing — YES

• The case at bar raises issues of transcendental importance as they involve the performance of a constitutional duty,
allegedly neglected, by COA
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 - petitioner, as a concerned citizen, has the requisite legal standing to file the instant mandamus petition

3. WON petitioner violated the principle of hierarchy of courts such that it could have first filed at the CA or the RTC —
NO
• In view of the transcendental importance of the issues raised in the mandamus petition, as earlier mentioned, this
Court waives this last procedural issue in favor of a resolution on the merits

Substantive
Introduction before the issues
• Sec 2 (1) of Article IX-D of the Constitution vests COA with the power, authority and duty to examine, audit and
settle the accounts of the following entities:
1. Government, or any of its subdivisions, agencies and instrumentalities
2. GOCCs with original charters
3. GOCCs without original charters
4. Constitutional bodies, commissions and offices that have been granted fiscal autonomy under the Constitution
5. Non-governmental entities receiving subsidy or equity, directly or indirectly, from or through the government,
which are required by law or the granting institution to submit to the COA for audit as a condition of subsidy or
equity
• “Accounts” pertains to the "revenue," "receipts," "expenditures" and "uses of funds and property" of such entities
• power of the COA to audit accounts of “non-governmental entities receiving subsidy or equity xxx from or
through the government" is Section 29(1) of the Audit Code, which grants the COA visitorial authority over the
following non-governmental entities:
1. Non-governmental entities "subsidized by the government"
2. Non-governmental entities "required to pay levy or government share”
3. Non-governmental entities that have "received counterpart funds from the government”
4. Non-governmental entities "partly funded by donations through the government”
- limits the audit of the foregoing non-governmental entities only to "funds xxx coming from or through the
government”
• both petitioner and the COA claim that the accounts of the MECO are within the audit jurisdiction of the COA,
but vary on the extent of the audit and on what type of auditable entity the MECO is

1. WON MECO is a GOCC or a government instruentality — NO

• Government instrumentalities are agencies of the national government that, by reason of some "special function or
jurisdiction" they perform or exercise, are allotted "operational autonomy" and are "not integrated within the
department framework”; they are —
1. regulatory agencies
2. chartered institutions
3. government corporate entities or government instrumentalities with corporate powers (GCE/GICP)
4. GOCCs
• Administrative Code defines a GOCC —"stock or non-stock" corporations "vested with functions relating to public
needs" that are "owned by the Government directly or through its instrumentalities”
- possession of all three attributes is necessary to deem an entity a GOCC
- MECO possesses the first and second attributes, it is the third attribute which MECO lacks — hence, MECO is
not a GOCC

A. WON MECO is organized as a non-stock corporation — YES

• records disclose that MECO was incorporated as a non-stock corporation under the Corporation Code on 16 December
1977
• purposes for which the MECO was organized also establishes its non-profit character
- its purposes are somewhat analogous to those of a trade, business or industry chamber, but only on a much
larger scale — MECO seeks to promote the general interests of the Filipino people in a foreign land
• none of the income derived by MECO is distributable as dividends to any of its members, directors or officers

B. WON MECO performs functions with a public aspect — YES

• to a certain degree, the functions of the MECO can be said to partake of the nature of governmental functions — it is
MECO that, on behalf of the people of the Philippines, currently facilitates unofficial relations with the people in Taiwan
• MECO was "authorized" by the Philippine government to perform certain "consular and other functions" relating to
the promotion, protection and facilitation of Philippine interests in Taiwan as found in Secs 1 and 2 of EO No. 15, series
of 2001
- its functions are similar to some of the functions performed by the DFA itself, through the latter’s diplomatic and
consular missions

C. WON MECO is owned or controlled by the Government — NO

• Government owns a stock or non-stock corporation if it has controlling interest in the corporation
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 - in a stock corporation, the controlling interest of the government is assured by its ownership of at least fifty-one
percent (51%) of the corporate capital stock
- in a non-stock corporation, like the MECO, the controlling interest of the government is affirmed when "at least
majority of the members are government officials holding such membership by appointment or
designation” or there is otherwise "substantial participation of the government in the selection" of the
corporation’s governing board”
• MECO, as a corporation organized under the Corporation Code, is governed by the appropriate provisions of the said
code, its articles of incorporation, and its by-laws.
- in this case, it is the by-laws of the MECO that stipulates that its directors are elected by its members; its officers
are elected by its directors; and its members, other than the original incorporators, are admitted by way of a
unanimous board resolution
• none of the original incorporators of the MECO were shown to be government officials at the time of the corporation’s
organization
- none of the members, officers or board of directors of the MECO, from its incorporation up to the present day,
were established as government appointees or public officers designated by reason of their office
- no law or executive order that authorizes such an appointment or designation
• it appears that the presidential "desire letters" pointed out by petitioner—if such letters even exist outside of the case of
Mr. Basilio—are, no matter how strong its persuasive effect may be, merely recommendatory

MECO is not a government instrumentality: it is a sui generis entity

• the other government instrumentalities i.e., the regulatory agencies, chartered institutions, and GCE/GICP are all, by
explicit or implicit definition, creatures of the law — MECO cannot be any other instrumentality because it was
incorporated under the Corporation Code
• it is necessary for the executive branch to place MECO under the policy supervision of the DTI
- MECO was not intended to operate as any other ordinary corporation
- despite its private origins, MECO was entrusted by the government with the delicate and precarious responsibility
of pursuing unofficial relations with the people of a foreign land whose government the PH is bound not to
recognize
• to avoid incidents wherein MECO might engage in dealings or activities that can directly contradict the
Philippines’ commitment to the One China policy of the PROC, it is important that the executive department
exercises some form of oversight, no matter how limited, over the operations of this otherwise private entity
• it is clear that MECO is uniquely situated as compared with other private corporations
- from its over-reaching corporate objectives, its special duty and authority to exercise certain consular functions,
up to the oversight by the executive department over its operations — all the while maintaining its legal status as
a non-governmental entity — the MECO is, for all intents and purposes, sui generis

2. WON MECO may be audited by COA — YES

• despite being a non-governmental entity, MECO may still be audited with respect to the —
1. accounts of MECO pertaining to its collection of "verification fees”
- refers to the service fee for the verification of overseas employment contracts, recruitment agreement or
special powers of attorney that DOLE was authorized to collect under Section 7 of EO No. 1022
- Since the Philippines does not maintain an official post in Taiwan, DOLE entered into a series of Memorandum
of Agreements with MECO, which made the latter the former’s collecting agent with respect to the verification
fees that may be due from Taiwanese employers of OFWs
- the entire verification fees being collected by MECO are receivables of the DOLE by virtue of Section 7 of EO
No. 1022
2. accounts of MECO pertaining to consular fees it was authorized to collect under Section 2(6) of EO No. 15,
series of 2001 (fees it collects from the exercise of its delegated consular functions)
- Sec 2 (6) of EO No. 15, series of 2001 authorizes the MECO to collect "reasonable fees" for the performance
of its consular functions
- just like the peculiarity that attends the DOLE "verification fees," there is no consular office for the collection of
the "consular fees”
- “consular fees," although held and expended by MECO by virtue of EO No. 15, s. 2001, are, without question,
derived from the exercise by the MECO of consular functions — functions it performs by and only through
special authority from the government
- fees received by the MECO are used strictly for the purpose set out under EO No. 15, s. 2001
• must be reasonable as the authorization requires
• it is the government that has ultimate control over the disposition of the "consular fees”
• Section 14(1), Book V of the Administrative Code authorizes COA to audit accounts of non-governmental entities
"required to pay xxx or have government share" but only with respect to "funds xxx coming from or through the
government"
a. MECO receives the "verification fees" by reason of it being the collection agent of the DOLE—a government
agency
- MECO is required, by agreement, to remit a portion thereof to the DOLE — hence, MECO is accountable to the
government for its collections of such "verification fees" and, for that purpose, may be audited by the COA
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 b. "consular fees" are also received by the MECO through the government
- MECO remains accountable to the government for its collections of "consular fees" and, for that purpose, may
be audited by the COA

Petition is PARTIALLY GRANTED.

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