Social Security System v. Commission on Audit
REITERATIONFacts
The Antecedents: The Social Security System (SSS) proposed a Corporate Operating Budget (COB) for Calendar Year (C.Y.) 2010, including P5,384,737,000.00 for Personal Services (PS). The Department of Budget and Management (DBM) approved the COB with modifications, reducing the PS to P4,934,200,000.00. The DBM emphasized that this approval did not authorize specific expenditures and that allowances not in accordance with the Salary Standardization Law (SSL) required Presidential approval. Despite this, the SSS paid its employees P554,109,362.03 in benefits and allowances for C.Y. 2010. Upon audit, P335,594,362.03 of these payments were found to be in excess of the DBM-approved COB, specifically for Special Counsel Allowance, Overtime Pay, and Incentive Awards. Procedural History: Following the audit findings, a Notice of Disallowance (ND) No. 2012-07 was issued against SSS National Capital Region (NCR) branches for P71,612,873.00. The SSS appealed to the COA Corporate Government Sector Cluster 2, which denied the appeal. The SSS then filed a Petition for Review with the Commission on Audit Commission Proper (COA-CP). Initially dismissed for being out of time, the COA-CP reconsidered and gave due course to the petition. Ultimately, the COA-CP issued Decision No. 2018-379, affirming the disallowance but excusing passive recipients in good faith. This decision is now under review by the Supreme Court. The Petition: The SSS filed a Petition for Review on Certiorari under Rule 64 in relation to Rule 65 of the Rules of Court, assailing COA-CP Decision No. 2018-379. The SSS argues that the COA-CP erred in concluding that the approving officers acted in bad faith, asserting its authority under Republic Act No. 8282 to fix compensation and that Presidential approval was not explicitly required. The SSS seeks to reverse the COA-CP decision, annul the Notice of Disallowance, and have the paid allowances and benefits declared as passed in audit. The core issue is whether the COA-CP gravely abused its discretion in affirming the disallowance and holding approving and certifying officers liable.
Issue(s)
Whether the Commission on Audit (COA) Commission Proper (COA-CP) acted with grave abuse of discretion in affirming the COA CGS-2 Decision and holding the approving and certifying officers of the SSS liable for the return of the disallowed amounts. Whether the Social Security System (SSS) is exempt from the requirement of Presidential approval for the grant of allowances and benefits to its officers and employees; and, if not, whether the approving and certifying officers are liable for the return of disallowed amounts.
Ruling
The Supreme Court granted the Petition in part, affirming the COA-CP Decision with modification. The approving and certifying officers of the SSS, including the Board of Trustees, and the payees/recipients of the subject Incentive Awards were excused from returning the disallowed amounts.
Ratio Decidendi
On the issue of whether the COA-CP acted with grave abuse of discretion in affirming the disallowance and holding officers liable: The Court found that the COA-CP did not act with grave abuse of discretion. The SSS's contention that its charter (R.A. 8282) grants it the sole authority to fix compensation and benefits, exempting it from Presidential approval, was found to be without merit. The Court reiterated the doctrine that Government Owned and Controlled Corporations (GOCCs), including the SSS, are subject to the control of the President, as enshrined in Section 17, Article VII of the Constitution. This control extends to the grant of allowances and benefits, which requires prior approval from the President through the Department of Budget and Management (DBM), as mandated by Presidential Decree (P.D.) No. 1597, Memorandum Order No. 20, s. 2001, Joint Resolution No. 4, s. 2009, and Executive Order No. 7, s. 2010. The SSS's claim that its charter supersedes these issuances was rejected, as no explicit repeal or irreconcilable conflict was found. Therefore, the disallowance of the Special Counsel Allowance, Overtime Pay, and Incentive Awards for non-compliance with the Presidential approval requirement was proper. On the issue of whether the SSS is exempt from the requirement of Presidential approval; and the liability of approving officers: The Court held that the SSS is not exempt. While R.A. 8282 grants the SSS the authority to fix reasonable compensation, allowances, and other benefits for its personnel, this authority is not absolute and does not override the President's power of control over GOCCs. The exemption from the Salary Standardization Law (SSL) does not equate to exemption from the requirement of Presidential approval for benefits not in accordance with the SSL. The Court cited jurisprudence, such as Philippine Economic Zone Authority (PEZA) v. Commission on Audit and Philippine Health Insurance Corporation v. Commission on Audit, which affirmed that GOCCs are still subject to Presidential supervision and that their charters do not grant them unbridled discretion in compensation matters. The SSS's argument that the disallowed benefits were already being received prior to C.Y. 2010 and that certain issuances only covered new benefits was also dismissed for lack of proof and because Section 5 of P.D. 1597 categorically applies to all allowances, honoraria, and fringe benefits. Despite the propriety of the disallowance, the Court excused the approving and certifying officers, including the Board of Trustees, from returning the disallowed amounts based on badges of good faith. The Court noted that at the time of disbursement, there was no prevailing ruling specifically on the SSS's exemption from the SSL versus the requirement of Presidential approval. The delay in DBM's approval of the SSS's COB, the nature of some disallowed amounts as direct compensation for services rendered, and the fact that the DBM later made subsequent partial reconsiderations for other benefits suggested a lack of malice or bad faith. The Court applied the ruling in Madera v. Commission on Audit, which provides that officers acting in good faith, in the regular performance of official functions, and with the diligence of a good father of a family are not civilly liable to return disallowed amounts. The Court found that the circumstances presented indicated that the SSS officers acted in good faith, banking on their understanding of their charter and the lack of clear jurisprudence to the contrary at the time.
Main Doctrine
Government Owned and Controlled Corporations (GOCCs), even if exempt from the Salary Standardization Law (SSL), are still subject to the supervision and control of the President, particularly concerning the grant of allowances and benefits to their officers and employees, which requires prior Presidential approval through the Department of Budget and Management (DBM). However, approving and certifying officers who acted in good faith and with the diligence of a good father of a family may be excused from returning disallowed amounts.