Power Sector Assets and Liabilities Management Corporation v. Commission on Audit
REITERATIONFacts
1. The Antecedents: Power Sector Assets and Liabilities Management Corporation (PSALM), a government-owned and controlled corporation tasked with managing the sale and privatization of National Power Corporation (NPC) assets to liquidate NPC's financial obligations, had its Corporate Operating Budget (COB) for 2008 approved by the Department of Budget and Management (DBM). This budget included an allocation for Business Development Expenses (BDE), which required the establishment of a separate account for BDE, distinct from Representation Expenses (RE), and subject to the approval of the Commission on Audit (COA). Despite this, PSALM failed to set up a separate BDE account. PSALM subsequently issued a Board Resolution authorizing its officials to incur and claim BDE, and a Memorandum Order providing guidelines for these claims, stipulating that receipts or certifications would suffice as supporting documents. An Audit Observation Memorandum (AOM) by the COA Auditor noted deficiencies in the BDE claims, including incomplete supporting documents and the charging of BDE against the RE account, contrary to the GAAM and COA Circular No. 85-55-A. 2. Procedural History: Following the AOM and PSALM's reply, the COA Auditor issued Notice of Disallowance (ND) No. 09-0003-(08) disallowing P1,110,078.89 in BDE claims as irregular, unnecessary, excessive, or extravagant expenditures. PSALM appealed this disallowance to the COA Corporate Government Sector (COA-CGS) Cluster B, arguing the ND was a nullity. The COA-CGS Director denied the appeal, citing PSALM's failure to comply with the requirement of a separate BDE account, lack of Presidential approval for BDE entitlement, and the inadequacy of certifications as supporting documents. PSALM then filed a Petition for Review with the COA Proper, which dismissed the petition in its Decision No. 2012-230 and subsequently denied PSALM's Motion for Reconsideration in a Resolution dated December 6, 2013. The COA Proper's decision and resolution were later declared final and executory, and an Order of Execution was issued. 3. The Petition: PSALM, its Board of Directors, and concerned officers filed a Petition for Certiorari under Rule 64, in relation to Rule 65, of the Rules of Court, assailing the COA Proper's decision and resolution. They argued that the ND was void for violating due process and COA rules, and that the BDE payments had factual and legal bases, with petitioners having complied with all applicable requirements. Specifically, they contended that the ND merely stated a legal conclusion without characterizing the BDE claims as irregular, unnecessary, excessive, or extravagant (IUEE) based on defined standards, and that it was unsupported by evidence. The Supreme Court, however, dismissed the petition primarily because it was filed out of time, noting that the petitioners' mistaken belief about a fresh 30-day period did not warrant relaxation of procedural rules. Even if the procedural defect were disregarded, the Court found no grave abuse of discretion by the COA, affirming that PSALM lacked authority to pay the expenses without COA approval for a separate BDE account and that the claims lacked proper substantiation and documentation, rendering them irregular expenditures. The Court also upheld the liability of approving officers for acting in bad faith and recipients for unjust enrichment.
Issue(s)
Whether the Petition for Certiorari was filed within the reglementary period under Rule 64. Whether the Notice of Disallowance violated the petitioners' right to due process. Whether the Business Development Expenses (BDE) were properly substantiated and validly disbursed. Whether the approving/certifying officers and the recipients are liable to refund the disallowed amounts.
Ruling
The Supreme Court DISMISSED the petition. The Court affirmed the COA Proper's Decision and Resolution, ruling that the petition was filed out of time and that the disallowance was valid. The approving and certifying officers were held solidarily liable, while the recipients were held liable for the amounts they individually received.
Ratio Decidendi
On Issue 1: The petition was filed eight days late. Under Rule 64, Section 3, a petition must be filed within 30 days from notice of the judgment; an MR interrupts this period, and if denied, the party has only the remaining period (not less than five days) to file. The Court emphasized in Fortune Life Insurance Company, Inc. v. COA that the 'fresh period rule' from Neypes v. Court of Appeals does not apply to Rule 64. Consequently, the COA Decision had already attained finality and immutability. On Issue 2: There was no violation of due process. Due process in administrative proceedings is satisfied when a party is notified of the allegations and given an opportunity to explain their side. PSALM was issued an AOM, to which it replied, and it subsequently appealed the ND through multiple levels of the COA. The AOM and ND clearly indicated the factual and legal bases, specifically the violation of the Government Auditing and Accounting Manual (GAAM) and COA Circular No. 85-55-A. On Issue 3: The BDE claims lacked proper substantiation. BDE is similar in nature to Extraordinary and Miscellaneous Expenses (EME), and under COA Circular No. 2006-001, such claims must be supported by receipts or documents 'evidencing disbursements.' Applying Espinas v. COA, the Court held that a 'certification' is not a valid substitute for a receipt unless it substantiates the actual 'paying out' of an account. PSALM's receipts for groceries and amusement parks failed to show a reasonable connection to official business or public purpose. On Issue 4: Under the Madera v. COA rules, the approving and certifying officers are liable because they acted with gross negligence. They ignored the DBM's requirement for COA approval of the BDE account for the third consecutive year and authorized reimbursements based on insufficient documentation. The recipients are also liable to return the amounts received under the principle of solutio indebiti and unjust enrichment, as the payments were not genuinely given in consideration of services rendered nor were there humanitarian grounds to excuse the return.
Main Doctrine
The Supreme Court clarified that the procedural 'fresh period rule' is limited to appeals under Rules 40, 41, 42, 43, and 45, and cannot be extended to Rule 64 petitions involving the Commission on Audit (COA) or the Commission on Elections (COMELEC). Substantively, the Court ruled that Business Development Expenses (BDE) are in the nature of Extraordinary and Miscellaneous Expenses (EME) and are subject to the same auditing requirements. To be valid, these expenses must be supported by receipts or documents that prove a 'disbursement' (the actual paying out of funds), and a mere certification by the officer who incurred the expense is not a valid substitute for a receipt as it fails to provide the necessary audit trail for public funds.