Power Sector Assets and Liabilities Management Corporation v. Commission on Audit
REITERATIONFacts
The Antecedents: Pursuant to Republic Act No. (RA) 9136, the Department of Budget and Management (DBM) approved a Uniform Compensation Plan (UCP) for PSALM. PSALM's request for a Harmonized Power Sector Compensation Plan was denied by the DBM, which instead recommended an equitable performance-based incentive package. Starting CY 2008, PSALM's Board of Directors approved a Corporate Action Plan and Corporate Performance Matrix. On October 16, 2009, PSALM's Board approved its CAP/CPM/CSP. On December 15, 2009, the Board approved Resolution No. 2009-1215-006, granting an across-the-board Corporate Performance Based Incentive (CPBI) equivalent to five and a half (5.5) months of basic pay net of tax, totaling Php56,604,286.37, citing corporate accomplishments for CY 2009. Procedural History: The COA Audit Team Leader issued Notice of Disallowance (ND) No. 10-003-(2009) disallowing the CPBI for being illegal and excessive, violating Section 64 of RA 9136 (requiring Presidential approval for emoluments and benefits) and Section 3(b) and (c) of Administrative Order No. 103 (suspending grant of new benefits). The COA Corporate Government Sector (CGS) - Cluster B affirmed the disallowance in Decision No. 2011-015. The COA Proper, in Decision No. 2015-085, initially dismissed PSALM's appeal for being filed out of time. However, in Decision No. 2018-301, the COA Proper partially granted the motion for reconsideration, affirming the disallowance but excluding some officers from liability as approving/certifying officers, while holding them liable as payees. The COA Proper also directed the forwarding of the case to the Ombudsman for investigation. The Petition: Petitioners sought reversal of the COA decisions, raising issues of due process, the nature of CPBI as an incentive not requiring Presidential approval, and the presumption of good faith. The respondent, through the Office of the Solicitor General, argued for dismissal due to procedural defects and the merits of the disallowance.
Issue(s)
Whether the constitutional right to due process was violated by the non-issuance of a prior Audit Observation Memorandum (AOM). Whether the grant of the 2009 CPBI was excessive. Whether CPBI is a financial reward or incentive not covered by the Presidential approval requirement under Section 64 of RA 9136. Whether PSALM officials who authorized and received the CPBI are entitled to the presumption of good faith, and the extent of their liability for the disallowed amounts.
Ruling
The petition is DENIED. The decision of the Commission on Audit is AFFIRMED with clarification that the approving and certifying officers are solidarily liable for the disallowed amounts while the payees are liable only for the amounts they personally received.
Ratio Decidendi
On the issue of due process and the non-issuance of an Audit Observation Memorandum (AOM): The Court ruled that the non-issuance of an AOM did not violate petitioners' right to due process. Under the 2009 Revised Rules of Procedure of the Commission on Audit, an AOM is not a mandatory prerequisite for issuing a Notice of Disallowance (ND). Section 4 of Rule IV explicitly states that auditors shall issue NDs for audit disallowances, which are considered audit decisions. While auditors may issue Notices of Suspension (NS) for transactions of doubtful legality, an AOM is only issued when an audit decision cannot be reached due to incomplete documentation or when deficiencies do not involve pecuniary loss, as per Section 5.3 of Chapter II of the 2009 Rules and Regulations on the Settlement of Accounts. Petitioners were afforded due process as they had the opportunity to be heard through their appeals to the COA CGS-Cluster B and the COA Proper. The COA Proper even gave due course to their petition for review despite its belated filing, demonstrating adherence to due process principles. On the excessiveness of the CPBI: The Court found the grant of CPBI equivalent to five and a half (5.5) months' basic pay net of tax to be excessive and extravagant. This rate had no basis in law or existing issuances. Executive Orders No. 486 and 518, which established a performance-based incentive system for Government-Owned or Controlled Corporations (GOCCs), set a maximum allowable incentive bonus at three (3) months' basic salary or its equivalent. PSALM's grant far exceeded this limit. The Court noted that the performance metrics and targets were set and approved only in the last quarter of 2009, with the CPBI granted shortly thereafter, suggesting a potential manipulation to justify the exorbitant amount. The fact that only 257 officials and employees benefited from the substantial amount, with some receiving as much as Php472,680.00, further underscored the excessiveness and inequity of the disbursement. On the nature of CPBI and the requirement for Presidential approval: The Court held that the grant of CPBI was subject to Presidential approval under Section 64 of RA 9136, which mandates that "all other emoluments and benefits" of PSALM personnel require such approval. The term "all other emoluments and benefits" is broad and encompasses financial grants like CPBI. The DBM's recommendation for an "equitable performance-based incentive package in lieu of the salary increase" further indicated that CPBI was considered a form of compensation or benefit. Petitioners' attempt to distinguish CPBI as an "incentive" and not a "benefit" was deemed specious semantics. Furthermore, Administrative Order No. 103 suspended the grant of new or additional benefits, and any exception required Presidential issuance, which was not sufficiently demonstrated by PSALM. The purported "confidential" approval document lacked the President's signature and was not found in official records, rendering it inadmissible. On the liability of approving/certifying officers and payees: Applying the ruling in Madera v. Commission on Audit, the Court clarified the liability of officers and recipients. Approving and certifying officers who acted in bad faith, malice, or gross negligence are solidarily liable to return the disallowed amount. The Court found that the remaining approving and certifying officers (Jose C. Ibazeta, Dorothy M. Calimag, and the PSALM Board of Directors) acted with malice and gross negligence, evidenced by their patent disregard for the clear legal requirement of Presidential approval and the irregular process of formulating performance metrics and granting the CPBI. Recipients (payees) are liable to return the disallowed amounts they received based on the principle of solutio indebiti and unjust enrichment, unless exceptions like genuine consideration for services rendered, undue prejudice, or social justice apply. In this case, no exceptions were found, as the CPBI was an illegal disbursement, and the amounts received were exorbitant, precluding social justice considerations for the payees.
Main Doctrine
The grant of Corporate Performance Based Incentive (CPBI) equivalent to five and a half (5.5) months of basic pay net of tax to PSALM employees was correctly disallowed for lack of Presidential approval as required by Section 64 of RA 9136 and for being excessive, violating COA Circular 85-55A. Approving and certifying officers who acted with malice and gross negligence are solidarily liable, while recipients are liable to return the amounts received under the principle of solutio indebiti, absent any exceptions.