National Housing Authority v. Commission on Audit
REITERATIONFacts
The Antecedents: The National Housing Authority (NHA) faced disallowances from the Commission on Audit (COA) for payments made to its officers and employees for calendar years 2008 to 2009. These disallowances, totaling P367,844,754.36, covered various allowances, bonuses, and emoluments, including a Cash Incentive Award, Economic Subsidy, Christmas Bonus, Citation Bonus, Mid-Year Financial Assistance, meal subsidy, children's allowance, rice subsidy, and Representation and Transportation Allowance (RATA). The COA found these payments to be in violation of Republic Act No. 6758 (the Salary Standardization Law), Memorandum Order No. 20, and specific provisions within the General Appropriations Acts for 2008 and 2009. Procedural History: Following the issuance of Notices of Disallowance (NDs), various NHA officers and employees appealed to the COA Corporate Government Sector (CGS)-Cluster 2 Director, who denied their appeals and affirmed the NDs. The NHA then filed a petition for review with the COA Commission Proper, which also denied the petition, affirming the disallowances. Subsequently, the NHA filed a Petition for Certiorari with the Supreme Court, later amended to correctly identify the assailed disallowances. Separately, the NHA filed a Petition for Injunction seeking to nullify a Notice of Finality of Decision issued by the COA. The Petition: The consolidated petitions before the Supreme Court sought to nullify the COA's decision affirming the disallowances. Petitioners argued that the disallowances were flawed and lacked legal basis, and that the payments were made in good faith, thus precluding the need for refund. They invoked the doctrine of qualified political agency and argued for the application of equitable considerations. The Supreme Court, however, affirmed the COA's findings, ruling that the NHA lacked the authority to grant the disallowed benefits due to the repeal of relevant provisions by R.A. No. 6758, that the payments were not in accordance with applicable laws and regulations, and that good faith could not be appreciated given the circumstances, including the execution of Deeds of Undertaking by the recipients. The Court also denied the prayer for injunctive relief.
Issue(s)
Whether the COA committed grave abuse of discretion in affirming the disallowance of the subject benefits and allowances. Whether the NHA officers and employees are liable to refund the disallowed amounts despite their claim of good faith. Whether the three-year prescriptive period for passive recipients applies to excuse the employees from refunding.
Ruling
The Supreme Court DISMISSED the consolidated petitions and AFFIRMED the COA Decision. The approving and certifying officers were held solidarily liable, while the payee-recipients were held individually liable for the return of the amounts they respectively received.
Ratio Decidendi
On Issue 1: The Court held that the COA did not commit grave abuse of discretion because the NHA Board's power to fix compensation under Section 10 of PD No. 757 was repealed by Section 16 of RA No. 6758 (Salary Standardization Law). Upon the effectivity of RA No. 6758, Government-Owned or Controlled Corporations (GOCCs) were included in the Compensation and Position Classification System, and any inconsistent charter provisions were modified. The Court emphasized that the authority to determine which allowances are integrated into the standardized salary rests solely with the DBM. Since the subject benefits (except RATA) were not excluded from integration by the DBM, their separate disbursement was illegal. Furthermore, the RATA was disallowed because it was granted to employees whose positions were not authorized under the General Appropriations Act (GAA). On Issue 2: The Court ruled that good faith cannot be appreciated for the approving officers because they had knowledge of circumstances rendering the disbursements illegal. Specifically, the DBM had already disallowed some of these bonuses in the NHA's Corporate Operating Budget (COB) for 2008 and 2009, yet the NHA proceeded with the payments. The Board members, many of whom are Cabinet Secretaries, are expected to know and implement the law regarding government compensation. Under the rules in Madera v. COA, approving officers who act with gross negligence are solidarily liable. Payee-recipients are also generally liable to return disallowed amounts unless they can show the amounts were genuinely given for services rendered, which was not the case here. On Issue 3: The Court held that the three-year prescriptive period established in Cagayan de Oro City Water District v. COA does not apply in this case. While that rule normally excuses passive recipients if they were not notified of any illegality within three years, the NHA employees here executed notarized 'Deeds of Undertaking.' These documents explicitly authorized the NHA to deduct the amounts from their salaries if a refund became necessary. The Court reasoned that these instruments gave the employees sufficient notice of the potential illegality and irregularity of the benefits. Because they had notice, they chose to spend the funds at their own risk and cannot benefit from the equitable three-year rule.
Main Doctrine
The power of the National Housing Authority (NHA) Board of Directors to fix compensation under Presidential Decree No. 757 was repealed by the Salary Standardization Law (SSL). All allowances are deemed integrated into the standardized salary unless specifically excluded by the Department of Budget and Management (DBM). Regarding refunds, while passive recipients are generally excused after three years of non-notice, the signing of a 'Deed of Undertaking' to refund the amounts serves as sufficient notice of potential illegality, thereby making the recipients liable for the refund regardless of the lapse of time.