Hagonoy Water District v. Commission on Audit
REITERATIONFacts
The Antecedents: Petitioner Hagonoy Water District (HWD), a government-owned and controlled corporation, along with its General Manager and Division Manager-Finance, released anniversary bonuses and rice allowances to its officials and employees in 2012. These disbursements were based on existing board resolutions. Subsequently, two Notices of Disallowance (NDs) were issued by the Commission on Audit (COA). The first ND disallowed P582,000.00, comprising P174,000.00 in excess anniversary bonus payments and P408,000.00 for rice allowances paid to employees hired after July 1, 1989. The disallowance of the anniversary bonus was based on a violation of the Office of the President's Administrative Order No. 263, which capped such bonuses. The rice allowance disallowance was grounded on Section 12 of Republic Act No. 6758 and COA Resolution No. 2004-006, which permit such benefits only for incumbents as of July 1, 1989. The second ND disallowed P150,000.00 in additional allowances granted to the HWD Board of Directors for lacking the required approval from the Local Water Utilities Administration (LWUA), violating Section 13 of Presidential Decree No. 198, as amended. Procedural History: Petitioners appealed both NDs to the COA Regional Office No. III, arguing in good faith for the continued grant of the rice allowance due to its established practice since 1993 and their immediate cessation of the practice upon receiving the ND. The COA Regional Office denied the appeal, affirming both NDs. Aggrieved, petitioners filed a Petition for Review with the COA Proper. The COA Proper sustained the validity of both NDs but ruled that passive recipients who received the disallowed benefits in good faith would not be required to refund them. However, the members of the HWD Board of Directors were held solidarily liable to refund the disallowed amounts. Petitioners' subsequent motion for reconsideration was denied by the COA Proper. The Petition: This Petition for Certiorari under Rule 64, in relation to Rule 65 of the Revised Rules of Court, challenges the COA's Decision No. 2017-486 and Resolution dated November 26, 2018. Petitioners contend that the COA gravely abused its discretion in sustaining the disallowance of the rice subsidy, arguing that its long-standing practice since 1993, authorized by a board resolution, should be respected under the principle of non-diminution of pay. They also assert good faith on the part of the HWD Board of Directors in approving the grant and argue that officers who merely implemented the resolution should be excused from refunding, similar to the passive recipients. The petition specifically focuses on the disallowance of the rice allowance, as the disallowance of the excess anniversary bonus was not appealed to the Supreme Court.
Issue(s)
Whether the COA gravely abused its discretion in sustaining the disallowance of the rice subsidy. Whether the COA gravely abused its discretion on its disposition with regard to the liability to refund the disallowed rice subsidy.
Ruling
The Supreme Court dismissed the petition, affirming the COA's Decision No. 2017-486 and Resolution dated November 26, 2018, with modifications. The Court ruled that recipients of the rice allowance are liable to return the amounts they individually received, and the members of the Hagonoy Water District Board of Directors, along with approving and certifying officers, are solidarily liable to return the disallowed rice allowance.
Ratio Decidendi
On the disallowance of the rice subsidy: The Court affirmed the COA's disallowance of the rice allowance granted to HWD officials and employees hired after July 1, 1989. This is in accordance with Section 12 of RA No. 6758, which mandates that all allowances are deemed included in standardized salary rates, with exceptions only for specific enumerated allowances. The law further provides that only incumbents as of July 1, 1989, who were actually receiving such benefits, may continue to receive them, based on the policy of non-diminution of pay. The rice subsidy in question was granted to all employees, regardless of their incumbency status as of July 1, 1989, which is a clear violation of Section 12 of RA No. 6758 and DBM Corporate Compensation Circular (CCC) No. 10. The Court emphasized that established practice cannot legitimize unauthorized disbursements of public funds, citing Kapisanan ng mga Manggagawa sa Government Service Insurance System (KMG) v. Commission on Audit. Therefore, the COA did not commit grave abuse of discretion in disallowing the rice subsidy for non-incumbent petitioners. On the liability to refund the disallowed amounts: The Court modified the COA's ruling regarding liability. It held that passive recipients of the disallowed rice allowance are liable to return the amounts they individually received, regardless of good faith. This is based on the principles of solutio indebiti and unjust enrichment, as mere receipt of public funds without a valid basis constitutes an undue benefit. The Court clarified that good faith may excuse the liability of approving or certifying officers, but not that of the recipients. The HWD Board of Directors and the approving/certifying officers were found solidarily liable for the disallowed rice allowance due to manifest bad faith and gross negligence. This was because RA No. 6758 and DBM CCC No. 10 had long been implemented, and the Board Resolution approving the allowance was issued in patent disregard of these explicit provisions and existing jurisprudence. Their reliance on an old board resolution and alleged existing practices did not meet the standard of good faith and diligence required in the discharge of their duties.
Main Doctrine
The grant of allowances and benefits to government employees is strictly governed by law, and established practice cannot legitimize unauthorized disbursements. The principle of non-diminution of pay protects incumbents receiving benefits at the time of the law's effectivity, but does not extend to new hires. Approving and certifying officers are solidarily liable for disallowed expenses due to manifest bad faith or gross negligence, while recipients must refund disallowed amounts received without legal basis, regardless of good faith, based on principles of solutio indebiti and unjust enrichment.