Power Sector Assets v. Commission on Audit
REITERATIONFacts
The Antecedents: Petitioners, Power Sector Assets and Liabilities Management Corporation (PSALM) and its officers/employees, questioned the Commission on Audit - Commission Proper (COA-CP) decisions affirming the disallowance of Medical Assistance Benefits (MABs) granted in 2008 and 2009. These MABs were expanded from an initial health program approved in 2006, which provided diagnostic procedures. The expanded MABs, approved through Board Resolutions, included purchase of prescription drugs, reimbursement for emergency and special cases, dental and optometric medications, and extended coverage to dependents and Board members. Procedural History: State Auditor IV Gina Maria P. Molina issued Audit Observation Memorandum No. 2008-06 and Notices of Disallowance (ND) No. 2008-002 (2008) and ND No. 10-001-(2009) for the 2008 and 2009 MABs, respectively, citing lack of legal and factual bases. PSALM's appeals to the COA-Office of the Cluster Director were affirmed by Decision Nos. 2011-003 and 2011-005. The COA-CP affirmed these disallowances in Decision No. 2014-036 and Resolution dated January 26, 2015, for the 2008 MAB, and Decision No. 2012-270 for the 2009 MAB. PSALM did not seek reconsideration of the 2009 MAB disallowance. The Petition: Petitioners sought to nullify the COA-CP dispositions, arguing that the expanded MAB was authorized by AO 402 and CSC Memorandum Circular No. 33, that Section 3 of AO 402 allowed for increased benefits, that the COA-CP's interpretation was retrogressive, that the President had approved the retroactive grant, and that the officers and employees acted in good faith, warranting the application of the doctrine of operative fact.
Issue(s)
Whether the COA-CP acted with grave abuse of discretion in affirming the disallowance of the 2008 and 2009 expanded Medical Assistance Benefits (MABs). Whether the PSALM officers who authorized the MABs and the employees who received them are liable to return the disallowed amount.
Ruling
The Supreme Court affirmed the assailed COA-CP decisions with modification. It ruled that the 2008 and 2009 expanded MABs were devoid of legal basis. The Court held that PSALM employees are individually liable to return the amounts received by them and their dependents. The PSALM officers and members of the Board of Directors who approved the unauthorized benefits are jointly and solidarity liable for the return of the disallowed amounts.
Ratio Decidendi
On the First Issue (Legality of Expanded MABs): The Court held that the expanded Medical Assistance Benefits (MABs) granted by PSALM under Board Resolution Nos. 07-67 and 2008-1124-004 were devoid of legal basis. Administrative Order No. 402 (AO 402) clearly established an "annual medical check-up program" which contemplates diagnostic procedures only, such as physical examinations, X-rays, and laboratory tests. The expanded benefits, which included purchase of prescription drugs, reimbursement for emergency and special cases, optometric and dental procedures (like braces and retainers), and dermatological treatments (like acne surgery), went beyond the scope of diagnostic procedures authorized by AO 402 and the initial PSALM Board Resolution No. 06-46. The Court emphasized that any increase in benefits under Section 3 of AO 402 must conform to the principle of ejusdem generis, meaning the increased benefits must be akin to those specifically enumerated, which are diagnostic in nature. The Court also noted that the 2008 MAB disbursement exceeded the approved budget for that year, and that the benefits were extended to dependents, which was not authorized by AO 402. The claim of presidential approval was dismissed for lack of a signed document and verification from the Malacañang Records Office. On the Second Issue (Liability to Return): The Court applied the principles established in Madera, et al. v. COA. It held that the PSALM employees, as recipients, are liable to return the disallowed amounts received by them and their dependents based on the principles of solutio indebiti and unjust enrichment, as they were paid without legal right. The Court found no exceptions, such as services genuinely rendered or undue prejudice, that would excuse their return. Regarding the PSALM officers and members of the Board of Directors who authorized the payments, the Court found them guilty of gross negligence, not malice or bad faith. This was based on their failure to harmonize the expanded benefits with the clear provisions of AO 402, the expansion of benefits twice without proper legal basis, the disbursement exceeding available funds in 2008, and the continuation of granting benefits despite a prior Audit Observation Memorandum and Notice of Disallowance for the 2008 MAB. Consequently, these approving and certifying officers are jointly and solidarity liable to return the disallowed amounts, consistent with Section 43 of the Administrative Code of 1987 and the ruling in Madera.
Main Doctrine
The expanded Medical Assistance Benefits (MABs) granted by PSALM, which included prescription drugs, reimbursement for emergency and special cases, and benefits for dependents, were found to be without legal basis as they exceeded the scope of Administrative Order No. 402, which limited benefits to a medical check-up program. Approving officers were found liable for gross negligence, and recipient employees were liable to return the disallowed amounts.