Case Digest: Francis Saturnino C. Juan, Isabelo Joseph P. Tomas II, Noel J. Salvanera, Sharon O. Montañer, Floresinda G. Baldo-Digal, and Maria Corazon C. Gines, et al. v. Commission on Audit G.R. Nos. 237835, 237860, 237883 & 237884, February 7, 2023 Supreme Court, En Banc Ponente: Justice Ricardo R. Rosario

 

FACTS

The petitioners were officials and employees of the Energy Regulatory Commission (ERC) who questioned the Commission on Audit's (COA) disallowance of the educational allowance granted to ERC personnel in 2010. The ERC released an educational allowance of ₱35,000.00 per employee, amounting to ₱7,433,834.00, in three separate tranches. The grant was made in addition to the Collective Negotiation Agreement (CNA) incentive already received by the employees.

Upon post-audit, COA issued Notice of Disallowance No. 2011-002-101-(10), holding that the educational allowance had no legal basis. COA found that the grant violated Section 17 of the General Appropriations Act of 2010, which prohibits the payment of allowances not authorized by law; Joint Resolution No. 4, s. 2009, requiring presidential approval for new allowances granted by exempt entities; and the opinion of the Department of Budget and Management (DBM) that there was no authority for the benefit. COA held the approving and certifying officers solidarily liable but exempted the ordinary employees who merely received the benefit in good faith.

The petitioners argued that the educational allowance was authorized by Memorandum Circular No. 174, which encouraged government agencies to provide scholarship programs for employees' children. They likewise contended that, as an exempt agency under Republic Act No. 9136 (Electric Power Industry Reform Act), the ERC had authority to grant the benefit without presidential approval. One petitioner also argued that she merely signed the documents upon the instruction of her superior and should not be held personally liable.

The COA denied their motions, prompting the petitioners to file petitions for certiorari before the Supreme Court under Rule 64 in relation to Rule 65 of the Rules of Court, alleging that the COA committed grave abuse of discretion in sustaining the notice of disallowance and in holding them liable.

ISSUE

Whether or not the Commission on Audit correctly disallowed the grant of the educational allowance to ERC personnel for lack of legal basis.

Whether or not Memorandum Circular No. 174, Section 39 of Republic Act No. 9136, and the ERC's status as an exempt entity authorized the grant of the educational allowance without presidential approval.

Whether or not the ERC officials who approved, certified, or authorized the payment should be personally liable to refund the disallowed amount, and whether the passive recipients may be required to return the benefits they received.

HELD

The Supreme Court partly granted the petitions. It affirmed the validity of the Notice of Disallowance, holding that the educational allowance had no legal basis. The Court ruled that Memorandum Circular No. 174 merely encouraged government agencies to establish scholarship programs for the children of government employees with siblings and did not authorize the grant of a uniform cash educational allowance to all employees. Moreover, although the ERC is exempt from the Salary Standardization Law under Section 39 of Republic Act No. 9136, Joint Resolution No. 4 (2009) still requires presidential approval, upon recommendation of the DBM, before new allowances or increases in benefits may be granted. Since no such approval existed, COA correctly disallowed the benefit.

The Court likewise sustained COA's finding that the approving and certifying officers were generally liable under Section 103 of Presidential Decree No. 1445 (Government Auditing Code) because government officials who authorize expenditures in violation of law may be held personally accountable. However, applying the Court's rulings in Madera v. COA and related cases on notices of disallowance, liability to refund depends on the nature and extent of each officer's participation, as well as the presence or absence of good faith. Mere participation in ministerial acts does not automatically result in personal liability.

The Court further ruled that the passive recipients of the educational allowance should not be required to refund the amounts they received. They merely accepted the benefit in good faith, relying on the validity of the ERC's action, and had no participation in approving or authorizing the unlawful expenditure. Accordingly, while the disallowance remained valid, the determination of the approving officers' respective liabilities was modified in accordance with the principles laid down in Madera v. COA, whereas the passive recipients remained exempt from refunding the disallowed amounts.