Paguio v. Commission on Audit
REITERATIONFacts
The Antecedents: The Pagsanjan Water District (PWD), a Government-Owned and Controlled Corporation (GOCC), through its Board of Directors (Board), issued resolutions in 2005 and 2006 authorizing and increasing the Extraordinary and Miscellaneous Expenses (EME) for its General Manager (GM), Alex C. Paguio. For the years 2009 and 2010, Paguio received a monthly EME of PHP 18,000.00, totaling PHP 432,000.00. The payments were made on a commutable basis and supported only by certifications rather than receipts. Procedural History: On June 2, 2011, the Commission on Audit (COA) issued Audit Observation Memorandum (AOM) No. 2011-100-005, noting that the EME grant violated the General Appropriations Act (GAA) because Paguio's Salary Grade (SG) was 24, whereas the GAA required a minimum of SG 26 for such entitlement. On May 10, 2012, COA issued Notice of Disallowance (ND) No. 2012-100-002. The COA Regional Director and the COA Proper subsequently affirmed the disallowance, holding the GM, the Administrative Division Manager, and the Board members solidarily liable. The Petition: Petitioners filed a Petition for Review on Certiorari under Rule 65 in relation to Rule 64. They argued that the Board has the authority to fix the GM's compensation under Republic Act (RA) No. 9286 and that the EME grant was made in good faith. They further contended that COA Circular No. 89-300 allowed the use of certifications in lieu of receipts and that denying the EME based on Salary Grade violated the equal protection clause.
Issue(s)
Whether the COA Proper committed grave abuse of discretion in disallowing the EME grant to the General Manager of Pagsanjan Water District. Whether the petitioners are solidarily liable to refund the disallowed EME amount.
Ruling
The Supreme Court DISMISSED the petition and AFFIRMED the Commission on Audit Decision No. 2018-187.
Ratio Decidendi
On Issue 1: The Court ruled that while the Board of a Local Water District (LWD) has the power to fix the General Manager's (GM) compensation under Section 23 of Presidential Decree (PD) No. 198, this power is not unbridled and must comply with the Salary Standardization Law (SSL). Applying Mendoza v. COA, the Court held that LWDs are not exempt from the SSL as their charter does not expressly provide for such an exemption. Under Section 12 of the SSL, all allowances are deemed integrated into the standardized salary unless specifically excluded; EME is not among the excluded allowances. Furthermore, the 2009 and 2010 General Appropriations Acts (GAA) limit EME to officials of specific ranks (usually SG 26 and above) or their DBM-authorized equivalents. Since Paguio held an SG 24 position and no DBM authorization for equivalence was presented, there was no legal basis for the EME grant. The Court also rejected the equal protection argument, noting a substantial distinction between GMs of different categories of water districts based on resources and complexity of operations. On Issue 2: Applying the Rules on Return from Madera v. COA, the Court found the approving and certifying officers solidarily liable due to gross negligence. The Board and the Administrative Division Manager violated clear provisions of the GAA and COA Circular No. 2006-01, which requires EME to be on a reimbursable basis supported by receipts. The petitioners' reliance on COA Circular No. 89-300 was misplaced because that circular applies only to National Government Agencies (NGAs), whereas Circular No. 2006-01 specifically governs GOCCs. As for Paguio, the recipient, his liability is grounded on the principle of solutio indebiti and unjust enrichment. The Court clarified that the 'good faith' of a recipient is generally immaterial to the obligation to return. Additionally, the Court declined to apply the three-year excuse rule from Cagayan de Oro Water District v. COA because the petitioners were served an Audit Observation Memorandum (AOM) in 2011, which was within three years of the 2009-2010 payments, thereby putting them on notice of the illegality.
Main Doctrine
The Salary Standardization Law (SSL) applies to all government positions, including those in Government-Owned and Controlled Corporations (GOCCs) like Local Water Districts (LWDs), unless their charters explicitly grant an exemption. Consequently, any compensation or allowance fixed by an LWD Board must comply with the position classification and integration rules of the SSL. Furthermore, the disbursement of Extraordinary and Miscellaneous Expenses (EME) in GOCCs is strictly governed by COA Circular No. 2006-01, which requires that such expenses be on a non-commutable, reimbursable basis supported by actual receipts, rather than mere certifications.