DOJ Opinion No. 128, s. 1983

DOJ OPINION NO. 128 , s. 1983 August 15, 1983 The General Manager Human Settlement Development Corporation Baas Bldg., Meralco Avenue Pasig, Metro Manila Sir : This refers to your request for legal opinion on the following queries: "a. Is WUDCO a private or government-controlled corporation, considering that the HSDC which controls WUDCO has a personality district from government? b. Are the employees of WUDCO covered by the GSIS and Civil Service Law or the SSS and Labor Laws or would the WUDCO Board of Directors have discretion to determine what law covers its employees' tenure, security; benefits and discipline as it is stated in Opinion No. 94, series of 1981, that 'it (GEMCOR) may not be deemed to be one of those government-owned or controlled corporations which are to be considered 'employers' as defined in Section 3 of the GSIS law (P.D. No. 1146)'. c. Would the internal auditing systems and procedures for processing of WUDCO transactions, duly approved by the WUDCO Board of Directors supersede the auditing requirements and procedures prescribed by the Commission on Audit, or would transaction and expenditures made by WUDCO which are not in substantial compliance with COA rules and regulations, but which are consistent with the WUDCO internal systems, be subject to disallowance or disapproval by COA? d. Under P.D. No. 1445 fiscal accountability and responsibility rests with the head of agency. Does this necessarily imply that the COA function and authority may not transcend the role of an external auditor" LexLib You state that pursuant to a Memorandum of Agreement entered into by and between the Ministry of Human Settlement (MHS) and the Ministry of Natural Resources (MNR), the Executive Committee of the Human Settlement Development Corporation (HSDC) approved in its meeting dated July 26, 1982 under Resolution No. 010, series of 1982, the creation of a subsidiary corporation for the implementation of the Forest Waste Utilization Project. The subsidiary corporation, named Woodwaste Utilization and Development Corporation (WUDCO), was registered with the Securities and Exchange Commission last March 23, 1983. Majority of the capital stock of WUDCO is owned by the HSDC. You further state that WUDCO is engaged in the establishment of wood processing plants in several forest areas of Luzon to utilize logging wastes (e.g. residuals, branches, tops and abandoned logs) for the production of cut-to-size lumber and knock-down components and create greater livelihood opportunities in the forest area. In connection with your aforestated queries, you refer to Opinion No. 94, s. 1981 of this Ministry involving the Gasifier and Equipment Manufacturing Corporation (GEMCOR) which is similarly situated as the WUDCO. In the said opinion, we ruled that GEMCOR is a subsidiary of the Farm System Development Corporation, a government corporation organized under special law. In said opinion we ruled that officials and employees of GEMCOR are not deemed government employees for purpose of coverage by the GSIS and the Civil Service Law. This Ministry has repeatedly opined that a stock corporation is deemed owned by the government when all of its stocks are owned or controlled by the government and it is deemed controlled by the government when majority of its voting stocks are owned by the government (Op. dated August 2, 1968; Op. No. 312, s. 1954; Op. Nos. 206 and 208, s. 1953 and Op. No. 103, s. 1983). In the case of WUDCO, considering that except for six shares of stock held by its incorporators all the other shares of stock are owned by the HSDC, a government corporation duly organized and existing by virtue of P.D. 1396, our aforestated ruling on GEMCOR likewise applies to it. As to whether the employees of WUDCO are covered by the GSIS and the Civil Service Law or the SSS and Labor Laws or whether the WUDCO Board of Directors would have discretion to determine which law should govern the employees' tenure, security, benefits and discipline, we are of the view that the GEMCOR ruling (Op. No. 94, s. 1981) and lately the opinion of this Ministry pertaining to TMDC-Technology Management and Development Corporation (TMDC), Op. No. 103, s. 1983, on the same issue, are squarely in point. LexLib In said Opinion No. 103, this Ministry stated: "In Opinion No. 94, s. 1981, this Ministry ruled that the employees of GEMCOR are not covered by the GSIS and the Civil Service Law but by the SSS and Labor laws citing the ruling in Opinion No. 62, s. 1976 to the effect that the coverage of the Civil Service as defined in Article XII-B, Section 1(1) of the Constitution only extends to employees of government-owned or controlled corporation created by special law and not to employees in subsidiaries of the said corporation created by special law and not to employees in subsidiaries of the said corporations which were incorporated by their parent government corporation under the general incorporation law. In said opinion (Op. No. 62, 1976), the Secretary of Justice opined that 'whenever the Constitution mentions government owned or controlled corporations, the intent is to refer to those created by special law ' since both under the 1935 Constitution and the new Constitution, the formation, organization or regulation of private corporation can be provided for only ' by general law' with the exception of government-owned or controlled corporations which may be established by special law. The same interpretation was given to the terms 'corporations owned and/or controlled by the Government' found in Section 2(c) of P.D. No. 1146, the GSIS law, so much so that only those employees in government-owned and controlled corporations created by special law may be deemed covered by GSIS Law. (Op. No. 94, s. 1981). Considering that TMDC, like GEMCOR, was organized under the provisions of the general corporation law and not under a special law its employees are not deemed government employees within the coverage of the GSIS and the Civil Service Law notwithstanding that the said corporations, by reason of the extent of the government's stock ownership therein, are considered corporations owned or controlled by the government. The TMDC employees not being deemed government employees in this respect, they may be considered employees in a private enterprise subject of the SSS and Labor laws. In this connection, it is believed that the TMDC Board of Directors has no discretion to determine what law governs the tenure, security, benefits and discipline of its employees. Discretion lies if the law imposes a duty upon a public officer and gives him the right to decide how or when the duty shall be performed (Henkel vs. Millard, 97 Md., 24). We are unable to find any provision of law which empowers the TMDC Board of Directors to exercise discretion in the choice of the law that shall govern its employees' tenure, security, benefits and discipline". Like, as in the case of TMDC, we are unable to find any provision of law which empowers the WUDCO Board of Directors to exercise discretion in the choice of the law that shall govern its employees' tenure, security, benefits and discipline. LexLib The last two queries refer to the working relationship of WUDCO with the Commission on Audit (COA) which should properly be threshed out with the said Commission whose audit jurisdiction does not appear to be disputed. We may add the observation that our perception of the extent of the limits of COA jurisdiction cannot bind the said office, which is an independent constitutional body. Suffice it to state that by express provision of the General Auditing Code (P.D. No. 1445) the responsibility to take care that the declared policy of the state to the effect that "all resources of the government shall be managed, expended or utilized in accordance with law and regulations, and safeguarded against loss or wastage through illegal or improper disposition" is faithfully adhered to rests directly with the chief or head of the government agency concerned. (Sec. 2) In the case of government corporations, this responsibility rests directly with the governing board charged with the management of its corporate affairs. As opined in a previous opinion of this Ministry, the exercise of general audit jurisdiction of the then Auditor General should be regarded as limited to seeing to it that the disbursements of corporate funds and properties and collections of amounts due the corporations are made in accordance with the applicable provisions of law or regulations and decisions of the Board of Directors. The main powers of the Auditor General over government-owned or controlled corporations to audit their financial transactions (Sec. 15, Executive Order No. 399, Jan. 5, 1951) and to examine and audit all debts and claims of any sort due from or owing to them (see Sec. 584, Revised Administrative Code) . . ." are not intended to curtail in whole or in part, the power of the Board to control and direct the fiscal affairs of the corporation ". (Emphasis supplied) In fine, it may be stated as a general proposition that the WUDCO Board of Directors may adopt its own internal auditing rules but the same cannot be in derogation of relevant auditing requirements and procedures that may be prescribed by the COA for government corporate entities. LexLib Wherefore, your queries are answered accordingly. Very truly yours, (SGD.) RICARDO C. PUNO Minister of Justice