National Power Corp. Board of Directors v. Commission on Audit, G.R. No. 218052, [January 26, 2021]

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National Power Corp. Board of Directors v. Commission on Audit

 G.R. No. 218052, [January 26, 2021]

EN BANC, LOPEZ, M.V

 

Powers of COA;Commission on Audit Disallowances; Liability of approving and certifying officers and recipients of the disallowed amounts 

Public officials, specifically approving and certifying officers, who act in bad faith, malice, or gross negligence in the performance of their official duties, are jointly and severally liable to the government for the full amount of disallowed payments. The court clarified that the essence of due process is satisfied when individuals are afforded an opportunity to be heard, and the court may excuse the return of disallowed amounts based on undue prejudice, social justice considerations, and other bona fide exceptions on a case-to-case basis. The absence of legal basis or justification for disallowed payments may result in individual liability for recipients.

 

On February 1, 2010, the NPC Board of Directors confirmed and ratified Board Resolution No. 2009-72, granting Calendar Year (CY) 2009 Performance Incentive Benefits (PIB) to NPC Non-Operation and Maintenance Agreement (NMA)-Small Power Utility Group (SPUG)/Watershed and Operation and Maintenance (OMA) Head Office and Engineering officials and employees. The PIB, equivalent to five and one-half monthly basic salaries, was implemented through NPC Circular No. 2009-585, approved by NPC President and CEO, Froilan A. Tampinco. The total amount released was P327,272,424.91. The COA later issued a Notice of Suspension and disallowed the PIB due to lack of presidential approval and its extravagance, considering NPC-SPUG's net loss in CY 2009.

 

Whether or not the Commission on Audit (COA) Proper is correct in affirming the disallowance, and holding petitioners liable to refund the disallowed amounts.

YES. The court found that the COA properly gave notice of disallowance (ND) through constructive service to Tampinco, who had the duty to inform all involved parties. Despite the late filing of the appeal to the COA Proper, the essence of due process was satisfied as petitioners were given an opportunity to be heard. On the merits, the court held that MO No. 198 did not authorize the PIB for CY 2009, and the grant violated the specific requirements of MO No. 198, including the lack of a Productivity Enhancement Program (PEP). The court rejected the argument that the NPC Board's approval was deemed presidential authorization and emphasized the non-compliance with statutory provisions.

The court ruled that petitioners, both approving and certifying officers, are solidarily liable to refund the disallowed amounts. It affirmed the COA decision, stating that the ND was not void, unjust, or inequitable, and petitioners failed to show entitlement to the PIB or any special circumstances justifying non-refund. The court applied Section 43 of the Administrative Code, holding that officers acting in bad faith are liable, and emphasized the absence of genuine justifications for the recipients. The NPC Board of Directors was specified as solidarily liable, while individual recipients were held individually liable for the amounts received. The Petition was dismissed, and the COA decision was affirmed.

 

 

 

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Power Sector Assets and Liabilities Management Corp. v. Commission on Audit, G.R. Nos. 213425 & 216606, [April 27, 2021]

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Power Sector Assets and Liabilities Management Corp. v. Commission on Audit

G.R. Nos. 213425 & 216606, [April 27, 2021]

EN BANC, LOPEZ, M.V

 

Powers of COA;Commission on Audit Disallowances; Grave abuse of discretion; Net Disallowed Amount 

The essence of due process is an opportunity to be heard, and the absence of an Audit Observation Memorandum (AOM) before the issuance of a Notice of Disallowance (ND) did not violate due process. Good faith or bad faith is evaluated based on the unique facts of each case, and in this instance, non-compliance with relevant regulations justified holding PSALM's officers and employees liable for the disallowed transactions.

 

The petitioner, Power Sector Assets and Liabilities Management Corporation (PSALM), is a government-owned and controlled corporation (GOCC) established under Republic Act No. 9136, also known as the "Electric Power Industry Reform Act of 2001" (EPIRA). PSALM's primary mandate is to facilitate the orderly sale, disposition, and privatization of National Power Corporation (NPC) assets to settle NPC's financial obligations and stranded contract costs. Since 2002, PSALM has been reimbursing Extraordinary and Miscellaneous Expenses (EME) to its officers and employees based on certifications, as allowed by Government Accounting and Auditing Manual (GAAM) and COA Circular No. 89-30. In 2008 and 2009, despite a reminder from the COA, PSALM continued to disburse EME without proper documentation, leading to disallowance notices and subsequent legal actions.

 

Whether or not the Commission on Audit (COA) Proper properly disallowed the Extraordinary and Miscellaneous Expenses (EME) given PSALM’s officers and employees.

YES. The court ruled against PSALM, finding no merit in both petitions. The COA's broad audit powers, enshrined in the Constitution, aim to ensure fiscal responsibility. In addressing the claim of due process violation regarding the 2009 EME ND, the court held that COA Circular No. 2009-006 does not mandate an Audit Observation Memorandum (AOM) before disallowance. PSALM was given the opportunity to be heard, and its failure to avail itself of legal remedies led to the finality of the COA decision.

On the equal protection claim, the court rejected PSALM's argument, citing a lack of evidence supporting preferential treatment for other entities. The court affirmed the COA's decision to hold approving and certifying officers solidarily liable for the disallowed amounts and the individual recipients liable for the amounts they received. The court emphasized that the absence of receipts and non-compliance with COA Circular No. 2006-001 justified the liability of PSALM's officers and employees.

 

 

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Paguio v. Commission on Audit, G.R. No. 223547, [April 27, 2021]

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Paguio v. Commission on Audit

G.R. No. 223547, [April 27, 2021]

EN BANC, LOPEZ, M.V

 

Powers of COA;Commission on Audit Disallowances; Grave abuse of discretion; Net Disallowed Amount 

The COA, in the exercise of its constitutional duty, is accorded plenary discretion to determine, prevent, and disallow irregular, unnecessary, excessive, extravagant, or unconscionable expenditures of government funds. The court generally upholds the decisions of the COA, intervening only when there is a showing of grave abuse of discretion, evasion of a positive duty, or a refusal to perform a duty enjoined by law.

 

Petitioners, including Engr. Alex C. Paguio and Angeline R. Aguilar, officers of Pagsanjan Water District (PAGWAD), and members of the PAGWAD Board of Directors, received various benefits in 2009 and 2010 based on board resolutions. These benefits included extra year-end financial assistance, medical allowance, anniversary bonus, and productivity enhancement incentive. A Notice of Disallowance (ND) was issued on May 10, 2012, disallowing the disbursements amounting to P283,965.00 due to lack of legal basis. The benefits were given without approval from the Local Water Utilities Administration (LWUA), violating relevant regulations. 

 

Whether or not the Commission on Audit (COA) Proper properly disallowed the amounts for lack of legal basis of the benefits given.

YES. The court dismissed the petition, upholding the COA's decision. The COA's authority as the guardian of public funds allows it discretion to determine, prevent, and disallow irregular, unnecessary, excessive, extravagant, or unconscionable expenditures of government funds. The court noted that there was no grave abuse of discretion by the COA in dismissing the petitioners' appeal for being filed beyond the prescribed period.

Regarding the propriety of the disallowance, the court emphasized that the LWUA approval was required for additional allowances to Board Members, and the PAGWAD Board did not comply with this requirement. Even if LWUA issuances were cited, they did not legitimize the grants, especially considering the suspension of new benefits under Administrative Order No. 103. The court concluded that the COA did not commit grave abuse of discretion in upholding the disallowance for lack of legal basis.

As for the liability to refund the disallowed amounts, the court cited Section 43 of the Administrative Code of 1987, holding that officials involved in the disallowed transactions are jointly and severally liable to the government. The court affirmed the liability of the PAGWAD Board of Directors to refund the unauthorized benefits, grounded on their gross negligence and violation of laws and directives.

 

 

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Ngalob v. Commission on Audit, G.R. No. 238882, [January 5, 2021]

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Ngalob v. Commission on Audit

 G.R. No. 238882, [January 5, 2021]

EN BANC, LOPEZ, M.V

 

Powers of COA;Commission on Audit Disallowances; Grave abuse of discretion; Net Disallowed Amount 

The burden of proving the validity or legality of the grant of allowances, benefits, or compensation lies with the government agency or entity granting, or the employee claiming them. Good faith is not a defense to excuse the liability of the recipients to return the disallowed amounts. The mere receipt of public funds without valid basis or justification, regardless of good faith or bad faith, is considered undue benefit, giving rise to the obligation to return the amounts received.

 

On August 28, 2009, the Cordillera Administrative Region (CAR) - Regional Development Council (ROC) Executive Committee (ExCom), headed by petitioner Juan B. Ngalob, issued RDC ExCom Resolution No. 73, authorizing incentives for the period January to June 2008 and quarterly releases for the third and fourth quarters of 2009 to compensate RDC-CAR officials and secretariat for "extra work" related to the RDC-CAR Work Program on Development and Autonomy. A similar resolution, CAR-103, was issued on December 10, 2010, granting year-end incentives. Disbursements totaling P1,095,000.00 and P1,080,000.00 were made for these incentives. The Commission on Audit (COA) disallowed these amounts for lack of legal basis, charging petitioners with liability for the transactions.

 

Whether or not the Commission on Audit (COA) Proper properly disallowed the amounts for lack of legal basis of incentives.

YES. The COA-CAR ruled that social preparation for autonomy is a regular function of the RDC-CAR, not a special project, and there was no appropriation for incentives or honoraria in the RDC-CAR's Personal Services (PS) account under the 2009 and 2010 General Appropriations Acts (GAAs). The COA found no factual and legal basis for the incentives, and the Supreme Court (SC) upheld these rulings, emphasizing the burden on the government agency to prove the legality of grants and the failure of RDC-CAR to provide evidence of a specific project plan, transparent performance evaluation, and proper appropriation. The SC also clarified the liabilities, holding that approving and certifying officers are solidarily liable for refund, given their gross negligence. Payees, including petitioners, are individually liable to return the amounts without the possibility of justifications based on good faith. The civil liability of approving or certifying officers is solidary and is grounded upon the manifest bad faith, malice, or gross negligence of public officers. On the other hand, the obligation of payees in a disallowed transaction is based on civil law principles of solutio indebiti and unjust enrichment. The mere receipt of public funds without valid basis or justification, regardless of good faith or bad faith, is considered undue benefit, giving rise to the obligation to return the amounts received.

In conclusion, the SC dismissed the petition, finding no grave abuse of discretion in the COA's decision and affirming the liabilities of petitioners for the disallowed amounts.

 

 

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Hagonoy Water District v. Commission on Audit, G.R. No. 247228, [March 2, 2021]

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Hagonoy Water District v. Commission on Audit

G.R. No. 247228, [March 2, 2021]

EN BANC, LOPEZ, M.V

 

Powers of COA;Commission on Audit Disallowances; Grave abuse of discretion; Net Disallowed Amount

 

Public funds disbursements must have a legal basis, and good faith may excuse officers' liability but not that of recipients. Mere receipt of public funds without valid basis or justification, regardless of good faith, obligates recipients to return what was unduly received. Officers who approved disallowed transactions may be excused based on good faith, but recipients, including officers, are individually liable to return disallowed amounts. Solidary liability may be imposed on approving/certifying officers and the Board of Directors for disallowed transactions. 

The petition involves the Hagonoy Water District (HWD), a government-owned and controlled corporation, and its officials, including General Manager Celestino S. Vengco, Jr., and Division Manager - Finance Remedios R. Osorio. In 2012, HWD disbursed anniversary bonuses and rice allowances based on board resolutions. Notice of Disallowance (ND) No. 2013-001-HWD(2012) (First ND) was issued on November 14, 2013, disallowing disbursements of P582,000.00, including excess anniversary bonuses and rice allowances. ND No. 2013-002-HWD(2012) (Second ND) disallowed additional allowances to the Board of Directors for lack of LWUA approval. Petitioners appealed, invoking good faith, but the COA Regional Office and COA Proper affirmed the disallowances.

 

Whether or not the Commission on Audit (COA) Proper committed grave abuse of discretion in sustaining the disallowance of the rice subsidy.

NO. The Court affirmed the COA's ruling on the disallowance of the rice subsidy. RA No. 6758, effective July 1, 1989, consolidated allowances into standardized salary rates, allowing exceptions only for certain specified allowances. Subsequent DBM Circulars permitted the continuous grant of certain benefits only to incumbents as of July 1, 1989. The 2012 rice subsidy violated these provisions, as it was given to non-incumbents. The Court rejected the argument that the grant was an established practice since 1993, emphasizing that practice contrary to law cannot give rise to vested rights.

Regarding liability to refund, the Court held that good faith may excuse officers but not recipients. Recipients are absolved only if benefits were genuinely given for services or based on bona fide exceptions. Public funds disbursements must have a legal basis, and good faith may excuse officers' liability but not that of recipients. Mere receipt of public funds without valid basis or justification, regardless of good faith, obligates recipients to return what was unduly received.The Court found no legal basis for the 2012 rice allowance and no evidence of legitimate considerations. Therefore, recipients, including officers who approved the release based on a 1992 board resolution, are individually liable to return the amounts. The Court modified the COA decision to impose solidary liability on the Board of Directors and approving/certifying officers for the disallowed rice allowance.

 

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Estrella v. Commission on Audit, G.R. No. 252079, [September 14, 2021]

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Estrella v. Commission on Audit

 G.R. No. 252079, [September 14, 2021]

EN BANC, LOPEZ, M.V

 

Powers of COA;Commission on Audit Disallowances; Grave abuse of discretion; Net Disallowed Amount 

When there are irregularities in the procurement process and non-compliance with statutory procurement requirements, the liability of approving or certifying officers, such as those involved in the Bids and Awards Committee (BAC), is up the “net disallowed amount” only. It means that the officers' liability for the disallowed amount may be reduced by the amounts due to the contractors if they have fully or substantially accomplished their obligations under the contract. This liability is grounded upon the principles of solutio indebiti and unjust enrichment. This doctrine recognizes that the government should not unjustly enrich itself at the expense of contractors who have fulfilled their obligations, even if there were irregularities in the procurement process.

 

The DPWH-NCR initiated an infrastructure project for the Restoration of the Damaged Revetment/Dredging of Flood Control of Meycauayan River (Valenzuela Side). The project was initially funded under Special Allotment Release Order (SARO) No. A-09-09064 dated December 21, 2009, with P40,000,000.00 released under Sub-Allotment No. SR2009-12-007232 dated December 22, 2009. On the same day, DPWH-NCR Regional Director Edilberto D. Tayao requested the modification of the project into eight phases, each to be separately bid out for P5,000,000.00. The request was approved by DPWH Assistant Secretary Dimas S. Soguilon and Undersecretary Manuel M. Bonoan on December 28, 2009. The DPWH-NCR Bids and Awards Committee (BAC) allegedly conducted a public bidding on the same day, with only one contractor bidding for each phase. The project was awarded and implemented by the lone bidders for each phase. Subsequently, a Notice of Disallowance (ND) was issued, disallowing payments made to the contractors amounting to P36,084,006.06 due to the alleged splitting of the SARO and contract. Assistant Regional Director Armando G. Estrella and BAC Member Lydia G. Chua were charged to settle the disallowance, along with other DPWH officers and BAC Members. 

 

Whether or not the Commission on Audit (COA) Proper committed grave abuse of discretion in sustaining ND No. 10-03 disallowing payments related to the infrastructure project.

NO. The COA National Government Section (NGS) – Cluster D ruled that there was no illegal splitting of the contract, absolving Bonoan, Soguilon, and Tayao. However, it upheld the liability of Estrella and the BAC Members due to irregularities in the procurement process, lack of compliance with pre-procurement requirements, absence of a proper public bidding, and deficiencies in the post-qualification evaluation.

The court acknowledged the importance of adhering to procurement requirements for transparency and fairness but found that DPWH-NCR did not comply with RA No. 9184 and its Revised IRR. The court held that Estrella, as BAC Chairman, was liable for the disallowance due to the absence of a public bidding and deficiencies in post-qualification evaluation. However, considering the completion of the project and rectification of defects, the court deemed it improper and unjust to hold petitioners liable for the entire disallowed amount. The liability of Estrella and Chua was reduced to the "net disallowed amount," subject to further post-audit to determine the value of the completed works. The court emphasized that this decision is without prejudice to administrative or criminal actions against responsible officers as warranted by existing laws and jurisprudence on illegal procurements.

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Abrenica v. Commission on Audit, G.R. No. 218185, [September 14, 2021]

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Abrenica v. Commission on Audit

 G.R. No. 218185, [September 14, 2021]

EN BANC, LOPEZ, M.V

 

Commission on Audit Notice of Disallowances; petition for Review;  Liability of Public Officers; Disallowance of Hazard Pay

 

Administrative rules or regulations, such as Department of Health (DOH) Administrative Order (AO) No. 2006-0011, must conform to and not contradict the provisions of the enabling law. Such administrative issuances may be considered valid only if they align with the clear letter of the law, and any discrepancy between the enabling law and an implementing rule or regulation should be resolved in favor of the former. 

Petitioners, who are employees of San Lazaro Hospital (SLH) with Salary Grades (SG) 20 to 26, received hazard allowances amounting to P4,989.75 per month from January to June 2009. However, this rate was found to be inconsistent with Section 21 of Republic Act (RA) No. 7305, also known as "The Magna Carta of Public Health Workers," and Section 7.1.5.a, Rule XV of its revised implementing rules and regulations (IRR). These provisions mandate hazard allowances to be proportional to the employee's monthly salary, specifically at least five percent (5%) of the monthly basic salary of health workers within SG 20 and above. As a result, a Notice of Disallowance (ND) No. 09-006-101MDS-(09) was issued on November 23, 2009, disallowing an aggregate amount of P1,094,188.98, representing hazard pay paid beyond the prescribed five percent (5%) of basic salaries. 

 

Whether the amounts of hazard pay given beyond the minimum rate prescribed by RA No. 7305 were validly disallowed

YES. The COA National Government Section (NGS) ruled that the hazard pay, based on Department of Health (DOH) Administrative Order (AO) No. 2006-0011, cannot be relied upon as a legal basis, citing a previous court decision that declared the DOH AO void. The Court upheld the COA's decision, reiterating the void status of DOH AO No. 2006-0011 for conflicting with RA No. 7305. The Court rejected petitioners' claims that the DOH AO enjoyed a presumption of validity, stating that the Court's determination in a previous case formed part of the legal system until subsequently overturned. The Court emphasized that administrative issuances must conform to the enabling law, and the DOH exceeded its power by fixing an exact amount for hazard pay. 

 

Whether the petitioners were validly held liable to refund the disallowed amounts.

NO. While the Court upheld the disallowance due to the invalid DOH AO, it found that petitioners should not be held liable to refund the disallowed amounts. The recipients' good faith or bad faith was deemed inconsequential, as liability was grounded on principles of solutio indebiti and unjust enrichment. The Court cited exceptions where liability could be excused, such as genuine consideration for services rendered or undue prejudice, social justice considerations, and other bona fide exceptions. In this case, the hazard pay was within the amount authorized by law, petitioners were entitled to it, and there was a clear connection to the actual performance of their duties. The COA Proper was deemed to have committed grave abuse of discretion in holding petitioners liable.

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