Balayan Water District v. Commission on Audit
REITERATIONFacts
The Antecedents: This case concerns the disallowance of payments of accrued Cost of Living Allowance (COLA) from 1992 to 1999 made by the Balayan Water District (BWD) to its employees. The BWD Board of Directors, through Resolution No. 16-06, authorized the payment of this accrued COLA on an installment basis starting in 2006. The Commission on Audit (COA) subsequently issued Notices of Disallowance (NDs) against these payments, asserting that water districts were not covered by Letter of Instruction (LOI) No. 97, which authorized COLA for certain government-owned and controlled corporations (GOCCs), and that entitlement to COLA required employees to have been receiving it on or before July 1, 1989, or prior to the effectivity of Republic Act (R.A.) No. 6758. Procedural History: The petitioners, including the Balayan Water District, its General Manager, and a representative of the employee recipients, appealed the initial Notices of Disallowance to the COA Regional Director. The COA Regional Director denied the appeal, affirming the disallowances. Subsequently, the petitioners filed a petition for review with the main Commission on Audit. The COA, in its December 27, 2016 Decision, affirmed the Regional Director's decision, agreeing that local water districts were excluded from LOI No. 97 and reiterating that COLA had been integrated into standardized salary rates under R.A. No. 6758, regardless of the ineffectivity of certain Department of Budget and Management (DBM) circulars. The Petition: The petitioners filed a petition for certiorari under Rule 64 of the Revised Rules of Court, seeking to reverse the COA's decision. They argued that the COA gravely abused its discretion by denying the employees' entitlement to accrued COLA based on LOI 97 and by failing to appreciate their good faith. Petitioners relied heavily on the Supreme Court's ruling in Metropolitan Naga Water District v. Commission on Audit (MNWD), asserting that local water districts are covered by LOI No. 97 and that the requirements of incumbency and prior receipt of COLA were inapplicable. They also contended that they should be absolved from refunding the disallowed amounts due to good faith. The COA, in its comment, countered that MNWD ultimately upheld disallowances and that the petitioners did not act in good faith, citing the existence of DBM National Budget Circular No. 2005-502 prior to the COLA disbursement.
Issue(s)
Whether the COA gravely abused its discretion tantamount to lack or excess of jurisdiction in denying BWD employees' entitlement to accrued COLA for the period 1992-1999 based on Letter of Instruction (LOI) 97. Whether the COA gravely abused its discretion tantamount to lack or excess of jurisdiction when it failed to appreciate "good faith" in favor of petitioners as recipients of COLA/AA, and the corresponding liability for refund.
Ruling
The petition is partly meritorious. The December 27, 2016 Decision of the Commission on Audit in Decision No. 2016-425 is AFFIRMED with MODIFICATION in that the employees of the Balayan Water District who were mere passive recipients of the disallowed disbursement are absolved from refunding the amount they have received.
Ratio Decidendi
On the entitlement to accrued COLA: The Court affirmed the COA's disallowance of the COLA back payments. It reiterated the principle that under Section 12 of R.A. No. 6758, all allowances, except those specifically enumerated, are deemed integrated into the standardized salary rates. The COLA, not being among the enumerated non-integrated benefits, is considered integrated in the salaries of government employees by operation of law. Therefore, there is no basis for the redundant back payment of COLA, as it is already incorporated in the basic salary. The ineffectivity of DBM Corporate Compensation Circular (CCC) No. 10 did not alter this integration, as DBM issuances are only required to identify additional non-integrated benefits, not to implement the initial integration mandated by R.A. No. 6758. On the refund of disallowed amount due to good faith: The Court modified the ruling regarding the refund. While the responsible officers of BWD could not claim good faith due to the existence of DBM NB Circular No. 2005-502, which clearly prohibited the payment of integrated allowances and held officials liable, the passive recipients of the COLA back payments were absolved from refunding the disallowed amount. The Court emphasized that passive recipients who received the benefits in good faith, without knowledge of any irregularity and under the honest belief of entitlement, are exempt from reimbursement. This is consistent with jurisprudence holding that government officials and employees who unwittingly received disallowed benefits are not liable if there is no finding of bad faith.
Main Doctrine
The Cost of Living Allowance (COLA) is deemed integrated in the standardized salary rates of government employees under Section 12 of Republic Act No. 6758, and its redundant back payment is disallowed unless specifically excluded by law or by the Department of Budget and Management (DBM). Passive recipients of disallowed benefits who acted in good faith are absolved from refunding the amount received.