G.R. No. 88435; January 16, 2002
DEVELOPMENT BANK OF THE PHILIPPINES, ET AL., petitioners, vs. COMMISSION ON AUDIT, respondent.

FACTS

In 1986, the Philippine government secured an Economic Recovery Loan from the World Bank. A condition for the loan was the rehabilitation of the Development Bank of the Philippines (DBP), which included a requirement for DBP to undergo an annual audit by a private external auditor. This commitment was formalized in a government policy statement and implemented through Central Bank Circular No. 1124, mandating such an audit for all banks, including government-owned ones, in addition to the audit conducted by the Commission on Audit (COA). Acting on this, DBP sought and initially received from COA a “no objection” to hiring a private auditor, Joaquin Cunanan & Co., for its 1986 financial statements.
Subsequently, a new COA Chairman reversed this position. COA asserted that its constitutional power to examine and audit government-owned and controlled corporations, including DBP, was exclusive. It issued a decision prohibiting DBP from proceeding with the private audit and disallowing in audit the payment of fees to the private auditor. DBP filed this petition, arguing that the private audit was mandated by the Central Bank under its supervisory powers and was a condition for a vital international loan.

ISSUE

Whether the constitutional audit power of the COA over DBP is exclusive, thereby precluding a concurrent audit by a private external auditor required by the Central Bank.

RULING

The Supreme Court ruled in favor of DBP, holding that the COA’s constitutional audit power is not exclusive and does not preclude a concurrent audit by a private external auditor. The Court clarified that the constitutional grant of authority to COA to examine and audit government agencies is not worded as an exclusive power. The Court emphasized the principle that constitutional provisions should be interpreted in harmony, not in isolation. It noted that the Central Bank, under its constitutional mandate to supervise the operations of banks, possesses the authority to require financial audits by private external auditors as a vital regulatory tool to ensure the soundness of the banking system. This power is essential for the Central Bank to fulfill its duty of maintaining monetary and financial stability. The requirement for a private audit, imposed via Central Bank Circular No. 1124, serves a different primary purpose—banking supervision—compared to COA’s audit, which focuses on ensuring government funds are properly accounted for. Therefore, the two audits can coexist without conflict, as they are exercises of distinct constitutional mandates by separate independent bodies. The Court found that COA’s disallowance of the payment for the private audit was an unwarranted encroachment on the Central Bank’s supervisory powers.