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Funa1 v Manila Economic and Cultural Office GR No. 193462 Feb.

4, 2014

RECIT READY: Because the Philippines subscribes to the One China Policy of the People’s Republic of China, it
ended its diplomatic relations with Taiwan. However it continued to maintain an unofficial relationship with
Taiwan through the MECO. Funa asked COA to furnish him with financial and audit reports of COA’s audit of
MECO. COA initially said that MECO was not under its audit jurisdiction. This prompted Funa to file this
petition for mandamus. COA subsequently sent auditors to Taiwan. Funa argues that MECO is a GOCC or at
least a governmental entity subject to the audit jurisdiction of COA. MECO argues that it is not a GOCC nor is it
a governmental instrumentality and to categorize it as such would violate the one china policy of PROC. COA
concedes that MECO is under its audit jurisdiction because of certain fees that MECO handles which are
receivables of DOLE but insists that the case is moot because it already sent a team to audit MECO. SC ruled
that the case was not moot since it falls under the exceptions. That MECO is not a GOCC nor is it a
governmental entity. MECO is in fact a sui generis entity. However certain transactions of MECO are subject to
the audit jurisdiction of COA particularly its collection of Verification fees and Consular fees.

DOCTRINE. The MECO is not a GOCC or government instrumentality. It is a sui generis private entity
especially entrusted by the government with the facilitation of unofficial relations with the people in Taiwan
without jeopardizing the country’s faithful commitment to the One China policy of the PROC. However,
despite its non-governmental character, the MECO handles government funds in the form of the "verification
fees" it collects on behalf of the DOLE and the "consular fees" it collects under Section 2(6) of EO No. 15, s.
2001. Hence, under existing laws, the accounts of the MECO pertaining to its collection of such "verification
fees" and "consular fees" should be audited by the COA.

FACTS:

 After the Chinese civil war, China was left with 2 governments each asserting its sovereignty
(these are the communist People’s Republic of China (PROC)2 and the nationalist Republic of
China (ROC)3). Both adhered to a policy of “One China”, viewing that there is only one
legitimate government in China, but they differed in their respective interpretations to which
government it is.
 With the existence of two governments with conflicting claims of sovereignty, came the
question as to which of the two is deserving of recognition as that country’s legitimate
government.
 The Philippines formally ended its official diplomatic relations with the government in Taiwan
(ROC), when the Philippines and the PROC expressed mutual recognition thru the Joint
Communiqué4. Under the Joint Communiqué, the Philippines stated its adherence to the One
China policy of the PROC.
 However, such did not keep the Philippines from keeping unofficial relations with Taiwan on a
“people–to–people” basis. Hence, Taiwan and Philippines maintained an unofficial relationship
facilitated by the offices of the Taipei Economic and Cultural Office, for the former, and the
MECO, for the latter.

1
Funa is the chair of the Civil Service Commission appointed by then president GMA.
2
Controls the mainland territories
3
Controls Taiwan
4
Joint Communiqué of the Government of the Republic of the Philippines and the Government of the People’s
Republic of China
 The MECO was organized as a non–stock, non–profit corporation under BP Blg. 68 or the
Corporation Code. It is the corporate entity “entrusted” by the Philippine 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. The MECO 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.
 At present, MECO oversees the rights and interests of 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.
 Funa wrote to COA requesting for the latest financial and audit report of MECO. He invoked his
constitutional right to information on matters of public concern. He believed that MECO was
under the supervision of DTI and is a GOCC thus subject to the audit jurisdiction of COA.
 COA asst. Commissioner Naranjo issued a memorandum which stated that MECO is not among
the agencies audited by any of the three clusters of the Corporate Government Sector.
 Funa: filed a mandamus petition in his capacity as "taxpayer, concerned citizen, a member of
the Philippine Bar and law book author”. He alleged that COA neglected its duty under the
Constitution5. He claimed that MECO was a GOCC or at least a government instrumentality
whose funds partake the nature of public funds.
 MECO: prays for the dismissal of the mandamus based on procedural (it’s prematurely filed.
Funa never demanded for COA to make an audit) and substantial grounds (MECO is not a GOCC.
The “desire letter” that the President sends to MECO is merely recommendatory and not
binding on the corporation (in relation to the election of the Board of MECO). In the end the
members are the ones who elect the directors and these directors are private individuals and
not government officials.)
 COA: wanted the petition to be dismissed on procedural grounds and that the issue is already
moot (since the COA Chair already sent a team to Taiwan to audit MECO and other government
agencies based there).
 COA concedes that MECO is within its jurisdiction, it maintains that MECO is not a GOCC nor is it
a government instrumentality instead MECO is a non-governmental entity. MECO may still be
audited with respect to Verification Fees6.

ISSUE:

WON MECO is a Governmental entity and is subject to the audit jurisdiction of COA? NO. It’s not a
governmental entity.

HELD:

5
Sec. 2(1) Art IX-D of the Consti – stating that COA should audit the accounts of a GOCC
6
These fees are what MECO collects from Taiwanese employers. A portion of these fees are remitted to DOLE.
No. The MECO is a non–governmental entity. However, under existing laws, the accounts of the
MECO pertaining to the “verification fees” it collects on behalf of the DOLE as well as the fees it was
authorized to collect under Section 2(6) of EO No. 15, s. 2001, are subject to the audit jurisdiction of
the COA. Such fees pertain to the government and should be audited by the COA.

Under SEC 2(1) ART IX-D of the constitution, COA was vested with the power, authority and duty to
examine, audit and settle the accounts(revenue," "receipts," "expenditures" and "uses of funds and
property") of the following entitites:

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; and
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.

Complementing the constitutional 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)80 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";
and
4. Non-governmental entities "partly funded by donations through the government."

The Administrative Code also empowers the COA to examine and audit "the books, records and
accounts" of public utilities "in connection with the fixing of rates of every nature, or in relation to
the proceedings of the proper regulatory agencies, for purposes of determining franchise tax."

The Meco is not a GOCC or a government instrumentality

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 include:

1. regulatory agencies
2. chartered institutions
3. government corporate entities or government instrumentalities with corporate powers
(GCE/GICP)
4. GOCCs.

GOCCs: "stock or non-stock" corporations "vested with functions relating to public needs" that are
"owned by the Government directly or through its instrumentalities."
By definition, three attributes thus make an entity a GOCC: first, its organization as stock or non-
stock corporation; second, the public character of its function; and third, government ownership
over the same. Possession of all three attributes is necessary to deem an entity a GOCC. MECO lacks
the 3rd attribute (as discussed below):

MECO is a non-stock corporation based on the records and based on the fact that its earnings are
not distributed as dividends to its members

MECO performs functions with a Public Aspect. 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. The functions of the MECO are of the kind that
would otherwise be performed by the Philippines’ own diplomatic and consular organs, if not only
for the government’s acquiescence that they instead be exercised by the MECO.

The MECO Is Not Owned or Controlled by the Government. The "desire letters" that the President
transmits are merely recommendatory and not binding on it. Under its by-laws, the election of its
directors are done by the members themselves, its officers are elected by the directors and members
are admitted through a unanimous board resolution. None of the incorporators of MECO were
government officials and up to this day, none of the members, directors or officers are government
appointees or public officers designated by reason of their office.

SC: it is a sui generis entity

Since MECO is not a GOCC, it cannot also be either of the other government instrumentalities
primarily because these instrumentalities are creatures of law (meaning an actual law was passed
for their creation) while MECO was incorporated under the Corporation code.

The reason behind it being under the supervision of the DTI is because its functions may result in it
engaged in dealings or activities that can directly contradict the Philippines’ commitment to the
One China Policy. This scenario can be avoided if theExecutive exercises some sort of supervision
over it. But this aspect was not questioned by the petitioner, so this was deemed irrelevant to the
issue by the SC.

Certain accounts may be audited by the COA

MECO should be subjected to the auditing of COA as regards its collection of verification and
consular fees.

Pertinent is the provision of the Administrative Code, Section 14(1), Book V thereof, which
authorizes the 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.”
The said fees collected by MECO are receivables of DOLE.

As to the verification fees ("service fee for the verification of overseas employment contracts,
recruitment agreement or special powers of attorney"): Under Section 7 of EO No. 1022, DOLE has
the authority to collect verification fees. But it entered into a series of MoA with MECO authorizing
the latter to collect such fees since the PH does not have an official post in Taiwan.
As to the consular fees: The authority behind “consular fees” is Section 2(6) of EO No. 15, s. 2001.
The said section authorizes the MECO to collect “reasonable fees” for its performance of consular
functions. Evidently, and just like the peculiarity that attends the DOLE “verification fees,” there is
no consular office for the collection of the “consular fees.” Thus, the authority for the MECO to
collect the “reasonable fees,” vested unto it by the executive order (EO No. 15, s. 2001)

Conclusion

The MECO is not a GOCC or government instrumentality. It is a sui generis private entity especially
entrusted by the government with the facilitation of unofficial relations with the people in Taiwan
without jeopardizing the country’s faithful commitment to the One China policy of the PROC.
However, despite its non–governmental character, the MECO handles government funds in the form
of the “verification fees” it collects on behalf of the DOLE and the “consular fees” it collects. Hence,
under existing laws, the accounts of the MECO pertaining to its collection of such “verification fees”
and “consular fees” should be audited by the COA.

OTHER ISSUES:

Procedural issues:

Mootness: the issue is not moot. Despite the existence of supervening events( the eventual auditing
done by COA in Taiwan), the issue is within the exceptions of rule on dismissal of moot cases.

1. The issue deals with a supposed grave violation of the constitution ( Funa alleged that COA
neglected to audit MECO),
2. that the issue is of paramount public interest (the failure of COA to audit MECO if it was
supposed to audit MECO shows that COA failed to fulfill its duties as guardian of the public
treasury AND the status of MECO has a direct bearing on the country’s commitment to the
One China Policy)
3. and that it is susceptible to repetition (COA suddenly decided to audit MECO, unless the
issue is decided, the successor of the current COA chair might decide to not auditing MECO)

Standing: the instant petition raises issues of transcendental importance

Principle of Hierarchy of Courts: transcendental importance of the issues raised in the mandamus
petition, hence the court waives this procedural issue