Philippine Charity Sweepstakes Office v. Commission on Audit
REITERATIONFacts
The Antecedents: This case concerns the disallowance of various allowances and benefits totaling P5,977,610.97 granted to officials and employees of the Philippine Charity Sweepstakes Office (PCSO) - Laguna Provincial District Office for the calendar years 2009 to 2011. These disallowances were issued by the Commission on Audit (COA) and covered a range of items including CNA incentives, longevity pay, loyalty awards, productivity enhancement incentives, financial assistance, rice allowances, representation and transportation allowances, staple food, hazard pay, cost of living allowances, medicine allowances, and medical and dental expenses. Procedural History: The Commission on Audit (COA) issued 32 Notices of Disallowance (NDs) against the PCSO officials and employees for the aforementioned allowances and benefits. The PCSO, through its concerned officers and employees, appealed these disallowances. The COA, in its Decision dated November 23, 2017, and Resolution dated August 16, 2018, affirmed the disallowances. Aggrieved, the Philippine Charity Sweepstakes Office, represented by Betsy B. Paruginong, filed a Petition for Certiorari under Rule 64, in relation to Rule 65 of the Rules of Court, before the Supreme Court. The Petition: The Petition for Certiorari seeks to annul and set aside the COA's decision and resolution affirming the 32 Notices of Disallowance. The petitioners argue that the PCSO Board of Directors is authorized to fix employee compensation, that the benefits have become part of the compensation package, that the funds were sourced from PCSO's charter-mandated 15% restriction and charged against savings, that the Office of the President (OP) subsequently approved these benefits, and that the recipients acted in good faith and should not be required to refund the amounts. The petition challenges the COA's finding of grave abuse of discretion in upholding the disallowances.
Issue(s)
Whether the COA committed grave abuse of discretion in upholding the 32 Notices of Disallowances on the various allowances and benefits received by the officials and employees of PCSO-LPDO. Whether the grant of the disallowed benefits has legal basis. Whether the doctrine of non-diminution of benefits applies. Whether the release of the benefits was properly sourced from the 15% built-in restriction pursuant to PCSO's charter and charged against savings. Whether the subsequent approval by the Office of the President (OP) covers the disallowed allowances and benefits. Whether the officials and employees of PCSO-LPDO are liable for the refund of the disallowed transactions.
Ruling
The petition is dismissed. The Supreme Court affirmed the Decision dated November 23, 2017, and the Resolution dated August 16, 2018, of the Commission on Audit, with a modification. The certifying and approving officers, as well as all the employees of the PCSO-LPDO, are liable to return what they had individually received. They must reimburse the amounts they individually received through salary deduction, or any other mode which the Commission on Audit may deem just and proper under the circumstances.
Ratio Decidendi
On the issue of whether the COA committed grave abuse of discretion in upholding the disallowances: The Court found no grave abuse of discretion on the part of the COA. The petition failed to demonstrate that the COA acted arbitrarily or capriciously in sustaining the disallowances. The arguments presented by the petitioners were found to be without merit and had been previously passed upon by the Court in similar cases. The Court reiterated that government agencies, including PCSO, must adhere to pertinent laws and regulations regarding the grant of allowances and benefits, and that the authority of governing boards is not absolute and remains subject to review by the Department of Budget and Management (DBM). On the issue of the legal basis for the disallowed benefits: The Court ruled that the grant of the disallowed benefits lacked legal basis. Republic Act No. (R.A.) 1169, the PCSO Charter, does not grant its Board of Directors unbridled authority to fix salaries and allowances. Furthermore, R.A. 6758, which prescribes a revised compensation and position classification system in the government, mandates that all allowances, except for specific exclusions, are deemed integrated into standardized salary rates. The disallowed benefits were not among those expressly excluded by R.A. 6758, thus they should be considered integrated into the standardized salaries, and their continuous payment was unauthorized and illegal. On the applicability of the doctrine of non-diminution of benefits: The Court held that the doctrine of non-diminution of benefits does not apply in this case. This doctrine protects benefits that are in accordance with law and have been enjoyed for a considerable length of time. Since the allowances granted were contrary to law and it was not established that the recipients were incumbents as of July 1, 1989, or that they suffered a diminution in pay due to consolidation into standardized salary rates, the principle of non-diminution of benefits cannot be invoked. Institutional practice cannot justify disbursements that are contrary to law. On the sourcing of the benefits from the 15% built-in restriction and savings: The Court clarified that Section 6(C) of the PCSO Charter, which allocates 15% of net receipts for operating expenses and capital expenditures, does not permit the Board to declare these funds as savings that can be reallocated as employee benefits. Section 6(D) of the same law mandates that all fund balances revert to the Charity Fund. Therefore, the 15% allocation is for specific purposes and not for the creation of employee benefits, and any remaining balances must go to the Charity Fund, not be treated as savings for distribution. On the effect of the subsequent approval by the Office of the President (OP): The Court found that the subsequent approval by the OP, as evidenced by the letter dated May 19, 2011, did not cover the allowances and benefits subject of the petition. The COA correctly noted that the OP's approval pertained to benefits granted prior to September 8, 2010, the effectivity date of Executive Order No. 7, which imposed a moratorium on increases in salaries and benefits. Moreover, the OP's letter was too vague, and there was no certainty as to which specific benefits were approved. Even if the letter were considered valid, it required strict compliance with other issuances, including DBM Budget Circular No. 2006-1, which was violated by the premature payment of CNA incentives before the end of the year. On the liability and refund of officials and employees: The Court affirmed the liability of both the approving and certifying officers, as well as the recipients of the disallowed benefits. Citing Madera v. COA, the Court stated that recipients, regardless of good faith, are liable to refund the disallowed amounts unless they can show that the amounts were received in consideration for services actually rendered, or if undue prejudice, social justice, or humanitarian considerations warrant an exception. The Court emphasized that approving and certifying officers cannot claim good faith if they failed to ascertain the legal basis for the disbursements. Therefore, all officials and employees who received the disallowed amounts are liable to refund them.
Main Doctrine
The Commission on Audit (COA) did not commit grave abuse of discretion in upholding the disallowances of various allowances and benefits granted to officials and employees of the Philippine Charity Sweepstakes Office (PCSO) as these benefits were not among those expressly excluded from integration into standardized salary rates under Republic Act No. 6758, and their grant lacked legal basis. The doctrine of non-diminution of benefits does not apply as the allowances were not in accordance with law, and it was not established that recipients were incumbents as of July 1, 1989, or that they suffered a diminution in pay. Approving and certifying officers, as well as recipients, are liable to refund the disallowed amounts.