Philippine Health Insurance Corporation v. Commission on Audit
REITERATIONFacts
The Antecedents: On May 29, 2008, the Board of Directors (BOD) of the Philippine Health Insurance Corporation (PHIC), a chartered Government-Owned or Controlled Corporation (GOCC), issued Resolution No. 1135 creating the position of Corporate Secretary with Salary Grade 28. Subsequently, the Board issued Resolution No. 1301 appointing Atty. Valentin C. Guanio to the position effective September 1, 2009. Between September 2009 and December 2010, Atty. Guanio received salaries, allowances, and benefits totaling P1,445,793.69. On post-audit, the Supervising Auditor issued an Audit Observation Memorandum (AOM) noting that the creation of the position lacked the required approval from the Department of Budget and Management (DBM). Procedural History: On May 19, 2011, Notice of Disallowance (ND) No. HO 11-001 was issued against the payments to Atty. Guanio. The Commission on Audit (COA) Cluster Director affirmed the disallowance in 2013. On appeal, the COA Proper affirmed the disallowance in Decision No. 2018-175, ruling that PHIC's fiscal autonomy is not absolute and requires DBM approval for new positions. However, the COA Proper absolved Atty. Guanio from refunding the amount, classifying him as a de facto employee who received the funds in good faith. PHIC's motion for partial reconsideration was denied in 2020. The Petition: PHIC filed a Petition for Certiorari under Rule 64, in relation to Rule 65, arguing that it possesses express fiscal autonomy under Section 16(n) of Republic Act No. 7875. PHIC contended that the creation of the Corporate Secretary position was a valid corporate act consistent with the Code of Corporate Governance for GOCCs and that it had received 'marginal' presidential approval from then-President Gloria Macapagal-Arroyo.
Issue(s)
Whether the COA committed grave abuse of discretion in disallowing the salaries and benefits of the PHIC Corporate Secretary for lack of DBM approval. Whether the approving and certifying officers of PHIC are civilly liable to return the disallowed amount.
Ruling
The Petition is PARTLY GRANTED. The COA's disallowance is AFFIRMED, but the liability of the officers is MODIFIED. Certifying officers Arcenas, Bumacod, Garrido, and Cruz are ABSOLVED due to the ministerial nature of their duties. Other approving and certifying officers are EXCUSED from returning the amount because the recipient's absolution has attained finality, reducing the net disallowed amount to nil.
Ratio Decidendi
On the Propriety of the Disallowance: The Court ruled that PHIC's fiscal autonomy under Section 16(n) of Republic Act No. 7875 is not absolute and does not exempt it from the Salary Standardization Law (SSL). Applying Intia, Jr. v. COA, the Court emphasized that even GOCCs with the power to fix compensation must follow standards laid down in Presidential Decree No. 1597, which requires reporting to the President through the DBM. PHIC failed to demonstrate that the creation of the Corporate Secretary position and its corresponding salary grade were evaluated or approved by the DBM. Furthermore, the alleged presidential approval via marginal notes was insufficient as it was never reduced to a formal memorandum. Consequently, the COA did not act with grave abuse of discretion in sustaining the disallowance. On the Liability of Certifying and Approving Officers and the Net Disallowed Amount: Following the doctrine in Celeste v. COA, the Court held that officers performing purely ministerial acts should be absolved from the obligation to return disallowed amounts. Specifically, Lynie S. Arcenas, Willie M. Bumacod, Lilia R. Garrido, and Bibiana T. Cruz merely certified the availability of funds, which is a factual determination rather than a discretionary legal judgment. Since the disallowance was based on the illegality of the position's creation and not the lack of funds, these officers' functions were unrelated to the cause of the disallowance. Therefore, they cannot be held solidarily liable for the illegal expenditure. The Court found that the PHIC Board and other approving officers acted with gross negligence by violating explicit rules requiring DBM approval, thereby failing the test of good faith. Under Madera v. COA, such officers would normally be solidarily liable to return the disallowed amount. However, the Court applied the 'net disallowed amount' principle from Pastrana v. COA, noting that the COA Proper's decision to absolve the recipient, Atty. Guanio, had already attained finality. Because the recipient is no longer required to return the funds, that amount is deducted from the total liability of the approving officers. In this specific case, since the recipient was excused from the entire amount, the remaining balance to be paid by the officers is reduced to nil, effectively excusing them from the refund without prejudice to administrative or criminal liability.
Main Doctrine
The power of a Government-Owned or Controlled Corporation (GOCC) to fix compensation and organize its office is subject to the standards of the Salary Standardization Law (SSL) and the reporting requirements of Presidential Decree No. 1597. Fiscal autonomy does not grant unbridled discretion to create positions or grant benefits without the imprimatur of the Department of Budget and Management (DBM). Regarding liability, the 'net disallowed amount' rule dictates that if a recipient's absolution from refunding disallowed amounts becomes final, the solidary liability of the approving officers is reduced by that amount, regardless of their bad faith or gross negligence.