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December 4, 1995

TO     :   Heads of Departments, Bureaus and Offices of the National Government; Managing Heads and Governing Bodies of Government-owned and/or controlled Corporations, including their Subsidiaries, Self-governing Boards, Commissions or Agencies, and State Colleges and Universities; Local Chief Executives; All Accountable Officers; COA Directors, Regional Directors and Unit Auditors; and Others Concerned.

SUBJECT     :   Prohibition against employment by government agencies and instrumentalities, including government-owned or controlled corporations, of private lawyers to handle their legal cases.

For the information and guidance of all concerned, quoted hereunder are excerpts from the decision of the Supreme Court in the case of the Municipality of Pililla, Rizal vs. Court of Appeals, et. al., G.R. No. 105909, promulgated on June 28, 1994:

"Under the above-provision (Section 1683 of the Revised Administrative Code), complemented by Section 3, Republic Act No. 2264, the Local Autonomy Law, only the Provincial Fiscal and the Municipal Attorney can represent a Province or Municipality in their lawsuits. The provision is mandatory. The municipality's authority to employ a private lawyer is expressly limited only to situations where the Provincial Fiscal is disqualified to represent it.

"For the aforementioned exception to apply, the fact that the Provincial Fiscal Disqualified to handle the Municipality's case must appear on record. In the instant case, there is nothing in the records to show that the Provincial Fiscal is disqualified to act as Counsel for the Municipality of Pililla on appeal, hence the appearance of herein private Counsel is without authority of law."

The decision of the Supreme Court in the above case clearly indicates that where a government agency is provided by law with a legal officer or office who or which can handle its legal requirements or cases in courts, it (agency) may not be allowed to hire the services of private lawyers for a fee, chargeable against public funds, unless exceptional or extraordinary circumstances obtain as exemplified in the above-cited case of Municipality of Pililla, Rizal vs. Court of Appeals, et. al.

Accordingly and pursuant to this Commission's exclusive authority to promulgate accounting and auditing rules and regulations, including for the prevention and disallowance of irregular, unnecessary, excessive, extravagant and/or unconscionable expenditure or uses of public funds and property (Sec. 2-2, Art. IX-D, Constitution), public funds shall not be utilized for payment of the services of a private legal counsel or law firm to represent government agencies in court or to render legal services for them. In the event that such legal services cannot be avoided or is justified under extraordinary or exceptional circumstances, the written conformity and acquiescence of the Solicitor General or the Government Corporate Counsel, as the case may be, and the written concurrence of the Commission on Audit shall first be secured before the hiring or employment of a private lawyer or law firm.

This amends or modifies COA Circular No. 86-255, dated April 2, 1986 and all other existing COA issuances inconsistent herewith.

This Circular shall take effect immediately.