Delos Santos v. Commission on Audit
REITERATIONFacts
The Antecedents: Sometime in October 2001, then Congressman Antonio V. Cuenco (Cuenco) of the Second District of Cebu City entered into a Memorandum of Agreement (MOA) with the Vicente Sotto Memorial Medical Center (VSMMC), represented by Dr. Eusebio M. Alquizalas, appropriating P1,500,000.00 from his Priority Development Assistance Fund (PDAF) for the Tony N' Tommy (TNT) Health Program. The MOA stipulated that Cuenco would identify indigent patients, with a P5,000.00 limit per patient, and that the hospital would purchase medicines not available in its pharmacy from outside sources, subject to reimbursement. Ma. Isabel Cuenco, Project Director of the TNT Program, requested petitioner Nelanie Antoni (Antoni), Pharmacist V of VSMMC, to purchase medicines from Sacred Heart Pharmacy or Dell Pharmacy. Allegations of forgery and falsification of prescriptions and referrals for medicine availment under the TNT Program subsequently surfaced. Procedural History: On December 14, 2004, petitioner Filomena G. Delos Santos (Delos Santos), who succeeded Dr. Alquizalas as Medical Center Chief, created a fact-finding committee to investigate. State Auditor IV Beatriz M. Booc issued Audit Observation Memoranda (AOM) Nos. 2004-21, 2004-21B, and 2004-21C, recommending investigation into fictitious patients and falsified prescriptions for drugs and medicines totaling over P3.9 million. The fact-finding committee's report affirmed irregularities but claimed VSMMC was an "unwilling tool" and its personnel could not detect falsifications. A subsequent AOM No. 2005-001 found numerous falsified prescriptions. Delos Santos explained that the TNT Office, run by Cuenco's staff, took over patient screening and that Dell Pharmacy was chosen as the sole supplier, bypassing public bidding. A special audit team (SAT) was formed, which reported non-compliance with National Budget Circular No. 476, existing auditing laws, procurement rules, and the MOA itself. The SAT found 133 falsified prescriptions for anti-rabies vaccines costing P3,345,515.75 and 46 falsified prescriptions for other drugs costing P695,410.10, among other irregularities. On September 8, 2008, the SAT Team Supervisor, Boado, issued Notice of Disallowance (ND) No. 2008-09-01, disallowing P3,386,697.10 and holding petitioners Delos Santos, Josefa A. Bacaltos, Nelanie A. Antoni, and Maureen A. Bien, along with others, solidarily liable. The Commission on Audit (CoA) denied petitioners' appeals through Decision No. 2010-051 and their Motion for Reconsideration in Decision No. 2011-045, affirming their solidary liability. The Petition: Petitioners filed a petition for certiorari under Rule 64 in relation to Rule 65 of the Rules of Court before the Supreme Court. They assailed CoA Decision Nos. 2010-051 and 2011-045, arguing that the CoA committed grave abuse of discretion in holding them solidarily liable for the disallowed amount. They invoked good faith in the performance of their respective duties, contending that VSMMC was merely a passive entity in the disbursement of funds under the TNT Program and that their lapses were not attended by malice or bad faith.
Issue(s)
Whether or not the Commission on Audit committed grave abuse of discretion in holding petitioners solidarily liable for the disallowed amount of P3,386,697.10 due to violations of accounting and auditing rules, procurement rules, and MOA provisions.
Ruling
The petition is hereby DISMISSED.
Ratio Decidendi
On Issue 1: The Supreme Court ruled that the Commission on Audit (CoA) did not commit grave abuse of discretion in holding petitioners solidarily liable. The Court emphasized that the CoA is constitutionally endowed with broad latitude to determine, prevent, and disallow irregular expenditures of government funds, and its decisions are generally sustained due to its presumed expertise, unless tainted with grave abuse of discretion. In this case, the Court found no such grave abuse. VSMMC, through its officials, was a party to the Memorandum of Agreement (MOA) and acted as custodian and disbursing agency of the Priority Development Assistance Fund (PDAF), undertaking to ensure payments complied with government accounting and auditing rules. However, the Special Audit Team (SAT) found numerous violations, including non-compliance with National Budget Circular No. 476, existing auditing laws, procurement rules (e.g., lack of public bidding), and specific MOA provisions (e.g., exceeding patient limits, multiple availments). The hospital and its accountable officers reneged on their undertaking to "cooperate/coordinate and monitor" the program and violated Presidential Decree No. 1445, which mandates a "sound system of internal control." The petitioners' defense of good faith was rejected because jurisprudence holds that this presumption fails in the presence of an explicit rule that was violated. Their neglect to properly monitor the disbursement facilitated the validation and payment of falsified prescriptions and fictitious claims, despite patent irregularities. Delos Santos, in particular, was aware of irregularities but failed to take stringent measures until much damage had been done. Thus, their failure to faithfully discharge their duties and exercise required diligence resulted in irregular disbursements, making them liable under Sections 104 and 105 of the Government Auditing Code of the Philippines and Section 16 of the 2009 Rules and Regulations on Settlement of Accounts.
Main Doctrine
The Commission on Audit (CoA) is endowed with enough latitude to determine, prevent, and disallow irregular, unnecessary, excessive, extravagant or unconscionable expenditures of government funds. The Court generally sustains decisions of administrative authorities, especially constitutionally-created ones like the CoA, based on the doctrine of separation of powers and their presumed expertise. Grave abuse of discretion exists when there is an evasion of a positive duty or a virtual refusal to perform a duty enjoined by law or to act in contemplation of law, or when a judgment is based on caprice, whim, and despotism. Public officers are held solidarily liable for disallowed amounts if their acts or omissions, even without malice, constitute gross negligence or a patent disregard of explicit rules, leading to irregular disbursements.