Securities and Exchange Commission v. Commission on Audit

EN BANC [G.R. No. 251615. July 25, 2023.] SECURITIES AND EXCHANGE COMMISSION , petitioner , vs. COMMISSION ON AUDIT , respondent . NOTICE Sirs/Mesdames : Please take notice that the Court en banc issued a Resolution dated JULY 25, 2023 , which reads as follows: "G.R. No. 251615 (SECURITIES AND EXCHANGE COMMISSION v. COMMISSION ON AUDIT). Assailed in this Petition for Certiorari 1 under Rule 64 in relation to Rule 65, Rules of Court, are Decision No. 2018-220 2 dated March 9, 2018 and Resolution No. 2020-069 3 dated January 14, 2020 of respondent Commission on Audit (COA), affirming the disallowances 4 of health care insurance premiums in the aggregate amount of PHP13,775,406.25 paid by petitioner Securities and Exchange Commission (SEC) for the benefit of its personnel. On January 28, 2010, the SEC issued Resolution No. 40-A, 5 s. of 2010, appropriating funds in the amount of PHP6,830,850.00 to cover the cost of health care insurance benefits of its officials and employees for the year 2010. The funds were sourced from the retained earnings of the SEC pursuant to Section 75, Republic Act No. 8799 (R.A. 8799), 6 entitled "The Securities Regulation Code (SRC)," which states: SEC. 75. Partial Use of Income . To carry out the purposes of this Code, the Commission is hereby authorized, in addition to its annual budget, to retain and utilize an amount equal to One hundred million pesos (P100,000,000) from its income. The use of such [an] additional amount shall be subject to the auditing requirements, standards[,] and procedures under existing laws. HTcADC The funds were subsequently disbursed to the SEC Employees Association, Inc. (SECEAI), which, on behalf of the SEC personnel, applied the same as payment for health care insurance premiums paid to Medicard Philippines, Inc. (Medicard), a private health maintenance organization. Such payment was done pursuant to a Corporate Health Program Agreement 7 entered into between SECEAI and Medicard, whereby the latter agreed to arrange for preventive, diagnostic, and treatment services from its medical service units, accredited dental clinics, and accredited hospitals and medical centers in favor of qualified beneficiaries of the SEC from the period of February 1, 2010 to January 31, 2011. 8 Upon its expiry, the agreement was renewed by the parties on April 12, 2011 for the period of February 1, 2011 to January 31, 2012. 9 For this purpose, the SEC, once again, appropriated funds in the amount of PHP6,830,850.00 sourced from its retained earnings through Resolution No. 16 10 dated January 13, 2011. As borne out by the records, a total amount of PHP13,775,406.25 was disbursed by the SEC to cover the premiums due on the health care insurance of each of its personnel for the years 2010 and 2011. 11 However, on various dates in September 2011, the Audit Team Leader and Supervising Auditor of the COA issued a total of three Notices of Disallowance 12 (subject disallowances) against the aforementioned disbursements, summarized as follows: ND No./Date Particulars Amount 11-001-101-(10) dated September 14, 2011 Payments for health insurance of SEC personnel for the year 2010 PHP6,846,387.50 11-001B-101-(10) dated September 14, 2011 Payments for health insurance of SEC personnel for the year 2010 PHP90,400.00 11-002-101-(11) dated September 24, 2011 Payments for health insurance of SEC personnel for the year 2011 PHP6,838,618.75 Total PHP13,775,406.25 As indicated in the subject disallowances, the payments were disallowed by the COA for being an improper use of the SEC's retained income, which, by virtue of Item 1 of the Special Provisions for the SEC of the 2010 and 2011 General Appropriations Act (GAA), or R.A. 9970 13 and R.A. 10147, 14 respectively, should have been used to augment the agency's maintenance and other operating expenses (MOOE) and capital outlay requirements. Both provisions similarly read: CAIHTE Special Provision(s) 1. Use of Income. In addition to the amounts appropriated therein, One Hundred Million Pesos (P100,000,000.00) sourced from registration and filing fees collected by the Commission pursuant to Section 75 of R.A. No. 8799 shall be used to augment the MOOE and Capital Outlay requirements of the Commission . (Emphasis and underscoring supplied) Furthermore, the payments were also disallowed on account of COA Resolution No. 2005-001 15 dated February 3, 2005 that prohibits the "procurement of private health insurance by any agency or instrumentality of the government," viz. : NOW, THEREFORE, BE IT RESOLVED as it is, hereby RESOLVED, that the procurement of private health insurance by any agency or instrumentality of the government is an irregular expenditure and constitutes unnecessary use of public funds which cannot be countenanced by this Commission. BE IT FURTHER RESOLVED that violation of this Resolution shall cause the disallowance of the corresponding disbursement of funds and the heads of the agencies or instrumentalities involved including government[-]owned and/or [-]controlled corporations and those officials participating therein shall be held personally liable therefor. (Emphasis and underscoring supplied) In addition, the COA found the following persons to be civilly liable for the disallowed amounts under each of the subject disallowances: 16 aScITE Person Liable Position/Designation Nature of Participation Ms. Fe B. Barin Former Chairperson, SEC Signed the disbursement the payments Atty. Ma. Juanita E. Cueto Commissioner Signed the check payments Mr. Eladio M. Jala Commissioner Signed the check payments Ms. Adelaida C. Navarro-Banaria Director, Financial Management Department (FMD) Signed the obligation requests as to availability of allotment and check payments Mr. Thoureth I. Dela Cruz Assistant Director, Budget and Fiscal Division, FMD Signed the obligation requests as charged to appropriation, lawful, and supporting documents valid, proper, and legal Mr. Renato A. Santos Assistant Director, Accounting Division, FMD Signed the disbursement vouchers certifying the availability of funds and complete/proper documentation Atty. C.A. Gerard M. Lukban Commission Secretary For issuing SEC Resolution No. 40-A, s. of 2010, appropriating funds to cover the cost of the health care benefits for CY 2010 Ms. Rosalinda Tividad-Tesorio President, SECEAI For signing the "conforme" of the revised offer for renewal of Medicard Payees Aggrieved, the SEC appealed to the Office of the Cluster Director of the COA's National Government Sector (COA Cluster Director), arguing that: (1) the special provisions of R.A. 9970 and R.A. 10147 should not be interpreted as having exclusively restricted the SEC's use of retained income for only its MOOE and capital outlay requirements; (2) the procurement of a private health care program for SEC personnel was merely done in compliance with Civil Service Commission Memorandum Circular No. 33, 17 which directs all government offices to provide, among others, a health program for government employees; (3) COA Resolution No. 2005-001 should not be applied against the SEC since the coverage of the health care program provided by the Philippine Health Insurance Corporation was limited, and thus, insufficient to address the needs of SEC personnel; (4) it was exempted from the coverage of the Salary Standardization System by Sec. 7.2 of the Securities Regulation Code (SRC); and (5) in any case, its officials and employees acted in good faith relative to the disallowed transactions, and therefore, should not be made civilly liable to refund the disallowed amounts. 18 In Decision No. 2013-003 dated March 25, 2013, the COA Cluster Director affirmed the subject disallowances with modification , finding that the disallowed transactions were in violation of prevailing laws and regulations. 19 However, the payees who received the health care benefits in good faith were absolved from refunding the payments to Medicard on their behalf, leaving the approving and certifying officers liable for the total disallowed amount. 20 The matter was then elevated to the COA Proper for automatic review consistent with the Commission's rules. 21 In Decision No. 2018-220 22 dated March 9, 2018, the COA Proper affirmed the ruling of the COA Cluster Director with modification . 23 Concurring with the COA Cluster Director's findings, it held that the issuance of the subject disallowances was proper since the procurement of a private health care program for SEC personnel was done in violation of existing laws and regulations. Apart from Item 1 of the Special Provisions for the SEC of the 2010 and 2011 GAAs and COA Resolution No. 2005-001 dated February 3, 2005, the COA Proper observed that the health care insurance benefits also violated Item 9 of Congressional Joint Resolution No. 4, series of 2009, for having been granted without the requisite presidential approval for increases in personnel benefits. Nonetheless, the COA Proper found that Atty. Gerard M. Lukban, the Commission Secretary, did not participate in the approval of the disallowed transactions, and thus, likewise absolved him from civil liability. 24 DETACa The SEC moved for reconsideration of the COA Proper decision, which was denied in Resolution No. 2020-069 25 dated January 14, 2020. Hence, the instant petition. In its petition before the Court, the SEC further argues that: (1) as supported by official correspondences 26 with the Department of Budget and Management (DBM), it has wide discretion on how to utilize its retained income since the same is an off-budget fund that is not subject to the annual appropriations by Congress and is accounted for solely under the Commission's books and (2) the requirement of presidential approval for new benefits under Item 9 of Congressional Joint Resolution No. 4 should not be applied against it since, being a mere congressional resolution, it cannot be deemed to have amended the relevant statutory provisions of the SRC granting the Commission wide discretion over its retained income. 27 Thus, the issue for the Court's resolution is whether the COA gravely abused its discretion in affirming the subject disallowances of health care insurance premiums paid by the SEC for the benefit of its personnel for the years 2010 and 2011 and holding the approving and certifying officers civilly liable therefor. The petition is partly meritorious. Preliminarily, it is well to note that the COA is constitutionally endowed with enough latitude to determine, prevent, and disallow the illegal, irregular, unnecessary, excessive, extravagant, or unconscionable expenditures of government funds. The exercise of this audit power is among the constitutional mechanisms that give life to the check and balance system inherent in our form of government. 28 For this reason, the Court has generally sustained the COA's decisions or resolutions in deference to its expertise in the implementation of the laws it has been entrusted to enforce. It is only when the COA has clearly acted without or in excess of jurisdiction or with grave abuse of discretion amounting to lack or excess of jurisdiction that the Court may intervene to correct its decisions or resolutions. 29 Guided by the foregoing considerations, the Court finds that, while the assailed disallowances must be upheld, the approving and certifying officers of the subject disbursements should be absolved from civil liability for the disallowed sum. As correctly found by the COA, the payments made by the SEC to cover the disputed health care insurance premiums of its personnel for the years 2010 and 2011 were illegally sourced from its retained income. To recall, the use of income generated by the SEC is governed by Section 75, SRC, which subjects the same to the "auditing requirements, standards[,] and procedures under existing laws," viz. : SEC. 75. Partial Use of Income . To carry out the purposes of this Code, the Commission is hereby authorized, in addition to its annual budget, to retain and utilize an amount equal to One hundred million pesos (P100,000,000) from its income. HEITAD The use of such [an] additional amount shall be subject to the auditing requirements, standards[,] and procedures under existing laws . (Emphasis and underscoring supplied) Verily, the phrase "under existing laws" in the foregoing provision necessarily includes the Special Provisions for the SEC in the 2010 and 2011 GAAs, i.e. , R.A. 9970 and R.A. 10147, which explicitly direct that income generated pursuant to Sec. 75 of the SRC "shall be used to augment the MOOE and Capital Outlay requirements of the Commission ," viz. : Special Provision(s) 1. Use of Income. In addition to the amounts appropriated herein, One Hundred Million Pesos (P100,000,000) sourced from registration and filing fees collected by the Commission pursuant to Section 75 of R.A. No. 8799 shall be used to augment the MOOE and Capital Outlay requirements of the Commission . (Emphasis and underscoring supplied) Following the maxim verba legis non est recedendum which means "from the words of a statute there should be no departure" a statute that is "clear, plain, and free from ambiguity must be given its literal meaning and applied without any attempted interpretation." 30 Accordingly, applying the verba legis rule, since the aforecited provision contains a mandatory directive by the use of the word "shall" 31 the SEC should have strictly followed the plain letter of the law and refrained from using its retained income for purposes other than the augmentation of its MOOE and capital outlay items, as in the case of the herein disallowed health care insurance payments. To expound, reference to pertinent laws and administrative issuances reveals that the disallowed payments by the SEC cannot be considered as having been made for the purpose of its MOOE. This is because they are not "expenses necessary for the regular operations of an agency like, among others, traveling expenses, training and seminar expenses, water, electricity, supplies expense, maintenance of property, plant and equipment, and other maintenance and operating expenses." 32 Neither can the disallowed payments be deemed a form of capital outlay since they were not spent for the "purchase of goods and services, the benefits of which extend beyond the fiscal year and which add to the assets of Government." 33 aDSIHc Instead, the disallowed health care insurance payments, being a form of personnel benefit, 34 aptly fall within the ambit of " personal services ," which is an expense category for "basic pay, all authorized allowances, bonus, cash gifts, incentives and other personnel benefits of officials and employees of the government." 35 Such expense category is, by definition and as a matter of budget practice, treated as separate and distinct from "MOOE" and "capital outlays." Indeed, the same ratiocination and conclusion were reached in the fairly similar case of Securities and Exchange Commission v. Commission on Audit . 36 In said case, the COA had also disallowed payments sourced from the SEC's retained income in the form of contributions to a provident fund for the benefit of the Commission's personnel during the year 2010. Equally applying the verba legis rule, the Court upheld the assailed disallowances and ruled that the SEC had indeed failed to comply with the plain letter of Special Provision No. 1 of the 2010 GAA by sourcing its provident fund contributions which were found to be neither MOOE nor capital outlay items from its retained income, viz. : The primary rule in addressing any problem relating to the understanding or interpretation of a law is to examine the law itself to see what it plainly says. This is the plain meaning rule of statutory construction. To go beyond what the law says and interpret it in its ordinary and plain meaning would be tantamount to judicial legislation. The plain meaning rule or verba legis is the most basic of all statutory construction principles. When the words or language of a statute is clear, there may be no need to interpret it in a manner different from what the word plainly implies. This rule is premised on the presumption that the legislature knows the meaning of the words, to have used words advisedly, and to have expressed its intent by use of such words as are found in the statute. We apply verba legis to Section 75 of the SRC, viz. : SEC. 75. Partial Use of Income. To carry out the purposes of this Code, the Commission is hereby authorized, in addition to its annual budget, to retain and utilize an amount equal to [O]ne hundred million pesos (P100,000,000.00) from its income. The use of such [an] additional amount shall be subject to the auditing requirements, standards[,] and procedures under existing laws. The provision bears two (2) parts. The first grants the SEC the authority to retain and utilize P100,000,000.00 from its income, [sic] in addition to its annual budget[,] while the second imposes a restriction to this authority "subject to the auditing requirements, standards[,] and procedures under existing laws." One such law is the GAA 2010[,] which contains the following Special Provision No. 1 for the SEC, viz. : Special Provision(s) 1. Use of Income. In addition to the amounts appropriated herein, One Hundred Million Pesos (P100,000,000) sourced from registration and filing fees collected by the Commission pursuant to Section 75 of R.A. 8799 shall be used to augment the MOOE and Capital Outlay requirements of the Commission. ATICcS This provision clearly limits the use of income for augmenting only the MOOE and [capital outlay] allocations of the SEC. Special Provision No. 1 did not repeal Section 75 of the SRC, [sic] but simply imposed a limitation on how the SEC could use its retained income. The two provisions are, therefore, supplementary; not contradictory. But the SEC failed to comply with the plain letter of Special Provision No. 1 when it used its retained income to pay for its counterpart contribution to the provident fund, which is neither an MOOE nor a [capital outlay] item. xxx xxx xxx Applying the [aforementioned] provisions, the payment of the counterpart contribution of the SEC to the provident fund did not have anything to do with augmenting its MOOE or [capital outlay] as required under Special Provision 1. To elucidate, a provident fund "is a type of retirement plan where both the employer and employee make fixed contributions. Out of the accumulated fund and its earnings, employees receive benefits upon their retirement, separation from service[,] or disability." Thus, when [the] SEC utilized its retained income to pay for its counterpart in the provident fund, it was not for the purpose of paying for "expenses necessary for the regular operations of an agency like, among others, traveling expenses, training and seminar expenses, water, electricity, supplies expense, maintenance of property, plant and equipment, and other maintenance and operating expenses." Nor was the payment used for the "purchase of goods and services, the benefits of which extend beyond the fiscal year and which add to the assets of [the] Government." Verily, the COA correctly classified contributions to the provident fund within the category of "personal services[,]" which include an expenditure category/expense class for payment of salaries, wages[,] and other compensation ( e.g. , merit, salary increase, cost-of-living-allowances, honoraria [,] and commutable allowances, etc.) of permanent, temporary, contractual, and casual employees of the government. Consequently, the disbursement of the SEC's retained income of P19,723,444.66 to augment its funds for personal services, instead of the MOOE and [capital outlay], warrants its disallowance. (Emphasis supplied, citations omitted) In fine, since the disputed payments were illegally sourced from the SEC's retained income, their disallowance by the COA is proper. Having settled the issue of the propriety of the subject disallowances, the Court now examines the civil liability of the individuals directed to return the disallowed amounts pursuant to prevailing jurisprudence. ETHIDa On the propriety of holding the approving/certifying officers civilly liable for the subject disallowances, the prevailing jurisprudence is the landmark case of Madera v. Commission on Audit (Madera) . 37 In Madera , the Court, cognizant of the need to harmonize the seemingly conflicting case law on the subject, established the following parameters to govern the respective civil liabilities of the parties involved in the improper grant of personnel benefits: E. The Rules on Return In view of the foregoing discussion, the Court pronounces: 1. If a Notice of Disallowance is set aside by the Court, no return shall be required from any of the persons held liable therein. 2. If a Notice of Disallowance is upheld, the rules on return are as follows: a. Approving and certifying officers who acted in good faith, in regular performance of official functions, and with the diligence of a good father of the family are not civilly liable to return consistent with Section 38 of the Administrative Code of 1987. b. Approving and certifying officers who are clearly shown to have acted in bad faith, malice, or gross negligence are, pursuant to Section 43 of the Administrative Code of 1987, solidarily liable to return only the net disallowed amount which, as discussed herein, excludes amounts excused under the following Sections 2c and 2d. c. Recipients whether approving or certifying officers or mere passive recipients are liable to return the disallowed amounts respectively received by them, unless they are able to show that the amounts they received were genuinely given in consideration of services rendered. d. The Court may likewise excuse the return of recipients based on undue prejudice, social justice considerations, and other bona fide exceptions as it may determine on a [case-to-case] basis. Notably, the foregoing rubric was further refined in Abellanosa v. Commission on Audit , 38 where the Court distinguished the civil liability of persons held liable under disallowance cases involving personnel benefits, i.e. , (1) the approving or certifying officers and (2) the recipients. The distinction is crucial as their respective civil liabilities are treated differently. The former personalities are governed by the Administrative Code, while the latter are governed by the Civil Code. 39 TIADCc Approving or certifying officers, who actively participated in the authorization of an improper transaction in their official capacities, are not automatically held liable for the return of disallowed amounts. Consistent with Section 38 (1), Chapter 9, Book I, Administrative Code of 1987, 40 a clear showing of bad faith, malice, or gross negligence must first be established in order to hold them civilly liable under the accountability framework of the Administrative Code. Otherwise, the presumption of good faith obtains, which, if not overcome, negates any civil liability on their part (See Rule 2a, Madera Rules). However, once the existence of bad faith, malice, or gross negligence is clearly established, the liability of approving/certifying officers for illegal expenditures is solidary with respect to the disallowed amount. This is pursuant to Section 43, 41 Chapter 5, Book VI, Administrative Code of 1987. Meanwhile, when public officers are to be held civilly liable not in their official capacities as approving/certifying officers but merely as payees or recipients of public funds, their liability is governed by the Civil Code provisions on unjust enrichment and solutio indebiti . As such, the same is limited to the amounts they had individually received at the expense of the government. In this regard, it is noteworthy to highlight that as the obligation is based on solutio indebiti , good faith is immaterial . 42 Hence, per Madera , the general rule is that recipients are civilly liable to return the disallowed amounts they had received on the basis of solutio indebiti (See Rule 2c, Madera Rules). Nonetheless, in view of pragmatic realities and equitable considerations, Madera also recognized certain exceptions to the general rules on return. These exceptions pertain to disallowed personnel benefits which are either: (1) genuinely given in consideration of services rendered (See Rule 2c, Madera Rules) or (2) excused by the Court to be returned on the basis of undue prejudice, social justice considerations, and other bona fide exceptions as may be determined on a case-to-case basis (See Rule 2d, Madera Rules). In these exceptional cases, the return of the disallowed amounts on the part of the recipients is excused. Notably, aside from the Madera exceptions, another instance when recipients are excused from their liability to return the amounts they had unduly received is when they have already been exonerated from liability at the COA level , and such exoneration was not anymore raised as an issue before the Court. In such circumstance, case law exhorts that the COA's absolution of the recipients has already become final and immutable and thus, must be respected. 43 In the recent case of Philippine Mining Development Corp. v. Aguinaldo (PMDC) , 44 it was discussed: cSEDTC To recall, the COA-[Commission Proper (CP)] similarly excluded the recipient employees from refunding the medical benefits they received. While they were absolved on the basis of good faith as abandoned by Madera , this Court must give due deference to the doctrine of finality of judgments, considering that their corresponding liability was no longer raised as an issue in the instant petition . Concomitantly, in Social Security System v. Commission on Audit , the Court affirmed the COA-CP Decision, excusing the passive payees from returning the disallowed amounts on the ground of having received the same in good faith. Since their liability was no longer questioned or put in issue in the instant petition, this Court considered the COA-CP's Decision "final and immutable." Consistently, this Court shares the observation of Senior Associate Justice Estela Perlas-Bernabe . . . that there is no cogent reason to deviate from the prevailing rule that when the payee-recipients have already been finally absolved from civil liability by the COA, the merits of such absolution should be respected and not touched upon by the Court in an appeal filed by the approving or certifying officers , [sic] who[,] in contrast, were held liable under the subject disallowances. As such, this Court maintains the absolution of herein recipient employees pursuant to the finality of judgment as elucidated in the earlier rulings of SSS and SEC. (Emphasis supplied, citations omitted) In the foregoing scenario, it is well to point out that the absolution of the recipients from liability at the COA level would also redound to the benefit of the approving or certifying officers who had acted with bad faith, malice, or gross negligence. Following Rule 2b, Madera Rules, such erring approving or certifying officers are only liable for the " net disallowed amount ," which refers to the total disallowed amount minus the amounts excused to be returned to the payees . Thus, practically speaking, when recipients are excused from liability, the erring public officers are only accountable in solidum for the amounts they themselves had collectively received as recipients. In other words, the amounts received by the mere payees are already removed from the equation in the determination of liability before the Court. This discounting effect was also touched upon in the PMDC case: 45 Thus, as eloquently pointed out by Justice Perlas-Bernabe, in cases where the recipient employees' civil liability was already absolved by the COA, only the amounts received by the approving and certifying officers, as recipients themselves, if any, would form part of the net disallowed amount , to which their civil liability shall be determined . Since petitioners acted with gross negligence, as approving and certifying officers, in granting the disallowed medical benefits, they should be held solidarily liable only for the total amount of the disallowed insurance premiums that was paid in their favor as recipients themselves . (Emphasis and underscoring supplied) AIDSTE However, a different outcome would result if any of the approving or certifying officers had acted in good faith in the performance of their official functions with respect to the disallowed amounts and had at the same time received part of the same as recipients themselves. In this regard, jurisprudence instructs that approving or certifying officers in good faith should be similarly treated as recipients exonerated at the COA level since they are similarly situated . Consequently, when recipients were already excused by the COA from refunding the amounts they unduly received, such magnanimity should likewise be extended to the innocent approving/certifying officers who otherwise would still remain liable for the amounts they individually received as recipients under solutio indebiti . In this situation, such officers would be completely absolved from civil liability, i.e. , both in their capacities as approving or certifying officers and recipients. As succinctly explained in Pastrana v. Commission on Audit 46 citing Securities and Exchange Commission v. Commission on Audit , 47 the Court considered the foregoing scenario as an equitable permutation of the undue prejudice exception under Madera Rule 2d, viz. : At this juncture, it is well to clarify that while petitioners were also payee-recipients of the [Collective Negotiation Agreement] incentives, they were explicitly named as approving/certifying officers liable for the disallowance. In the recent case of Securities and Exchange Commission v. Commission on Audit , the Court held that the approving/certifying officers in good faith are on the same plane as the payee-recipients absolved at the COA level . Hence, the absolution of civil liability extended by the COA to the payee-recipients equally applies to the approving/certifying officers in good faith who have also received the disallowed amounts. The Court concluded that the SEC officers would suffer undue prejudice should they be compelled to return the amounts paid under their names in the provident fund using SEC's retained earnings, a scenario contemplated in Rule 2d of the Madera Rules. Under Rule 2d, payee-recipients may be excused from returning the disallowed amount when undue prejudice will result from requiring them to return or where social justice or humanitarian considerations are attendant. (Emphasis and underscoring supplied, citations omitted) Here, it is recognized that the COA already absolved from liability the SEC personnel who were the beneficiaries of the disallowed health care insurance benefits. Considering that the absolution was not raised in the petition before the Court, the same must be deemed final and immutable. Consequently, only the amounts that inured to the benefit of the approving and certifying officers as recipients themselves remain at issue in the present case . On this score, the Court finds that the records fail to establish a clear showing of bad faith, malice, or gross negligence against the SEC officers named under the assailed disallowances. Therefore, the presumption of good faith must stand. SDAaTC In audit cases, "good faith" has been defined as a "state of mind denoting 'honesty of intention, [sic] and freedom from knowledge of circumstances [that] ought to put the holder upon inquiry; an honest intention to abstain from taking any unconscientious advantage of another, even through technicalities of law, together with [the] absence of all information, notice, or benefit or belief of facts which render transaction unconscientious.'" 48 Thus, in order to overcome the presumption of good faith on the ground of bad faith or malice, there must be a clear showing that the said officer authorized an unlawful expenditure, acting with full knowledge of the circumstances and with the intention of taking unconscientious advantage of his or her public position. This intention may be shown by, for instance, proof that he or she authorized the unlawful expenditure for his or her personal gain or to benefit another. 49 Alternatively, the presumption may also be overturned on a clear showing that the officer concerned was grossly negligent in the performance of his or her official functions. To be specific, such kind of negligence is "characterized by the want of even slight care, or by acting or omitting to act in a situation where there is a duty to act, not inadvertently but willfully and intentionally, with a conscious indifference to the consequences, insofar as other persons may be affected." 50 In short, gross negligence occurs when a breach of duty is flagrant and palpable. 51 In this case, it was not clearly shown that the SEC officers, i.e. , Fe B. Barin (Barin), Ma. Juanita E. Cueto (Cueto), Eladio M. Jala (Jala), Adelaida C. Navarro-Banaria (Navarro-Banaria), Thoureth I. Dela Cruz (Dela Cruz), Renato A. Santos (Santos), and Rosalinda Tividad-Tesorio (Tividad-Tesorio), acted with full knowledge of the irregular circumstances surrounding the disallowed expenditures or with the intention of taking unconscientious advantage of their public position. Neither was it clearly shown that there was "want of even slight care" or "conscious indifference" on their part. On the contrary, the factual circumstances support a finding that such approving and certifying officers acted with good faith in authorizing, or taking part in the authorization of, the disallowed health care insurance benefits. First , records do not show that the approving and certifying officers were alerted of the illegality of the subject disbursements by a prior disallowance. In this case, when the health benefits were authorized, there was no showing that the COA had already disallowed the grant of similar personnel benefits for being improperly sourced from the SEC's retained earnings. Second , it appears that the SEC merely relied on the opinion of the DBM, which, in a Letter dated August 19, 2004, said that "[t]he utilization of the retained income is left to the discretion of the Commission subject to the usual accounting and auditing rules and regulations." 52 Lastly , the Court recognizes that the authorizing officers were impelled by altruistic motives in procuring health care insurance benefits for the well-being of the SEC personnel and that they believed, in good conscience, that they were simply complying with Civil Service Memorandum Circular No. 33, 53 which directs all government offices to provide, among others, a health program for their employees. Meanwhile, insofar as Tividad-Tesorio, the President of SECEAI, is concerned, the disallowances indicate that she merely participated in the disputed transactions by signing the "conforme" of the revised offer for the renewal of the health care insurance benefits on behalf of the SEC personnel. As such, it cannot be said that she even had an active role in the improper sourcing of public funds. Hence, pursuant to prevailing jurisprudence 54 and the underlying facts of this case, SEC officers Barin, Cueto, Jala, Navarro-Banaria, Dela Cruz, Santos, and Tividad-Tesorio are completely absolved from civil liability as approving/certifying officers and recipients of the disallowed amounts. AaCTcI FOR THESE REASONS , the instant petition for certiorari is PARTLY GRANTED . Decision No. 2018-220 55 dated March 9, 2018 and Resolution No. 2020-069 56 dated January 14, 2020 of respondent Commission on Audit are AFFIRMED with MODIFICATION that Fe B. Barin, Ma. Juanita E. Cueto, Eladio M. Jala, Adelaida C. Navarro-Banaria, Thoureth I. Dela Cruz, Renato A. Santos, and Rosalinda Tividad-Tesorio are ABSOLVED from civil liability for the disallowed amounts under (1) Notice of Disallowance (ND) No. 11-001-101-(10) dated September 14, 2011; (2) ND No. 11-001B-101-(10) dated September 14, 2011; and (3) ND No. 11-002-101-(11) dated September 24, 2011." Caguioa and Rosario, JJ., on leave. Dimaampao, J., on official business. (6) acEHCD By authority of the Court: (SGD.) MARIFE M. LOMIBAO-CUEVAS Clerk of Court Footnotes 1. Rollo , pp. 3-175. 2. Id. at 33-39. Signed by Chairperson Michael G. Aguinaldo and Commissioner Jose A. Fabia. 3. Id. at 43-48. Signed by Chairperson Michael G. Aguinaldo and Commissioners Jose A. Fabia and Roland C. Pondoc. 4. Id. at 49-54. (1) Notice of Disallowance (ND) No. 11-001-101-(10) dated September 14, 2011, pp. 49-50; (2) ND No. 11-001B-101-(10) dated September 14, 2011, pp. 51-52; and (3) ND No. 11-002-101-(11) dated September 24, 2011, pp. 53-54. 5. Id. at 84. 6. Approved on July 19, 2000. 7. Rollo , pp. 141-161. 8. Id. at 157. 9. Id. at 163-164. 10. Id. at 162. 11. Id. at 125-130. 12. Id. 13. Republic Act No. 9970 (2010), "An Act Appropriating Funds for the Operation of the Government of the Republic of the Philippines from January One to December Thirty-One, Two Thousand and Ten, and for Other Purposes." 14. Republic Act No. 10147 (2010), "An Act Appropriating Funds for the Operation of the Government of the Republic of the Philippines from January One to December Thirty-One, Two Thousand and Eleven, and for Other Purposes." 15. With the subject, "Prohibition from Securing Health Care Insurance from Private Insurance Agencies"; rollo , pp. 216-217. 16. With the exception of Ms. Rosalinda Tividad-Tesorio who was held liable only under ND No. 11-001-101-(10) dated September 14, 2011; rollo , pp. 49-54. 17. Series of 1997, with the subject: "Policy on Working Conditions at the Workplace," dated December 22, 1997; rollo , pp. 171-172. 18. See Appeal Memorandum filed before the Office of the Cluster Director of the Commission on Audit-National Government Sector; rollo , pp. 86-167. 19. Rollo , p. 35. 20. Id. 21. Pursuant to Sec. 7, Rule V of the 2009 Revised Rules of Procedure of the Commission on Audit. 22. Rollo , pp. 33-39. Signed by Chairperson Michael G. Aguinaldo and Commissioner Jose A. Fabia. 23. Id. at 38. 24. Id. at 36-37. 25. Id. at 43-48. Signed by Chairperson Michael G. Aguinaldo and Commissioners Jose A. Fabia and Roland C. Pondoc. 26. Id. at 167-170. 27. Id. at 11-13. 28. Delos Santos v. Commission on Audit , 716 Phil. 322, 332 (2013) [Per J. Perlas-Bernabe, En Banc ]. 29. See Miralles v. Commission on Audit , 818 Phil. 380 (2017) [Per J. Bersamin, En Banc ]. 30. See Apex Bancrights Holdings, Inc. v. Bangko Sentral ng Pilipinas , 819 Phil. 127, 136 (2017) [Per J. Perlas-Bernabe, Second Division]. 31. "The use of the word 'shall' in a statute connotes a mandatory order or an imperative obligation. Its use rendered the provisions mandatory and not merely permissive[.]" Philippine Mining Development Corp. v. The Commissioner of Internal Revenue , G.R. No. 250748, October 6, 2021 [Unsigned Resolution, First Division]. 32. Sec. 7 (b), Chapter 1, Volume III of COA Circular No. 2002-02, entitled "Prescribing the Manual on the New Government Accounting System (Manual Version) for Use in All National Government Agencies," approved on June 18, 2002. 33. See Department of Budget and Management, Budget of Expenditures and Sources of Financing FY 2020, available at https://www.dbm.gov.ph/wp-content/uploads/BESF/BESF2020/GLOSSARY.pdf (last accessed on May 25, 2022). 34. See Sec. 41 of R.A. No. 9970 (2010), "An Act Appropriating Funds for the Operation of the Government of the Republic of the Philippines from January one to December thirty-one, two thousand and ten, and for Other Purposes," which reads: Personnel benefits costs shall include salary increases, step increment, incentive and service fees, commutation of vacation and sick leaves, retirement and life insurance premiums, compensation insurance premiums, health insurance premiums, HDMF contributions, hospitalization and medical benefits, scholarship and educational benefits, training and seminar expenses, all kinds of allowances, whether commutable or reimbursable, in cash or in kind, and other personnel benefits and privileges authorized by law, including the payment of retirement gratuities, separation pay and terminal leave benefits. 35. Sec. 7 (a) of COA Circular No. 2002-02, entitled "Prescribing the Manual on the New Government Accounting System (Manual Version) for Use in All National Government Agencies," approved on June 18, 2002. 36. G.R. No. 252198, April 27, 2021 [Per J. Lazaro-Javier, En Banc ]. 37. 882 Phil. 744 (2020) [Per J. Caguioa, En Banc ]. 38. 890 Phil. 413 (2020) [Per J. Perlas-Bernabe, En Banc ]. 39. Id. 40. Executive Order No. 292 (1987), "Instituting the Administrative Code of 1987," Book I, Chapter 9, Sec. 38 (1) reads: Sec. 38. Liability of Superior Officers . (1) A public officer shall not be civilly liable for acts done in the performance of his [or her] official duties, unless there is a clear showing of bad faith, malice[,] or gross negligence. 41. Sec. 43. Liability for Illegal Expenditures . Every expenditure or obligation authorized or incurred in violation of the provisions of this Code or of the general and special provisions contained in the annual General or other Appropriations Act shall be void. Every payment made in violation of said provisions shall be illegal and every official or employee authorizing or making such payment , or taking part therein , and every person receiving such payment shall be jointly and severally liable to the Government for the full amount so paid or received . (Emphasis and underscoring supplied) 42. Good faith cannot be appreciated as a defense against an obligation under solutio indebiti as it is "'forced' by operation of law upon the parties, not because of any intention on their part but in order to prevent unjust enrichment." See Philippine National Bank v. Court of Appeals , 291 Phil. 356, 367 (1993) [Per J. Romero, Third Division]. 43. See Ancheta v. Commission on Audit , G.R. No. 236725, February 2, 2021 [Per J. M. Lopez, En Banc ]; Securities and Exchange Commission v. Commission on Audit , G.R. No. 252198, April 27, 2021 [Per J. Lazaro-Javier, En Banc ]. 44. G.R. No. 245273, July 27, 2021 [Per J. J. Lopez, En Banc ]. 45. Id. 46. G.R. Nos. 242082 & 242083, June 15, 2021 [Per J. Delos Santos, En Banc ]. 47. Securities and Exchange Commission v. Commission on Audit , G.R. No. 252198, April 27, 2021 [Per J. Lazaro-Javier, En Banc ]. 48. See Maritime Industry Authority v. Commission on Audit , 750 Phil. 288, 337 (2015) [Per J. Leonen, En Banc ]; Philippine Economic Zone Authority v. Commission on Audit , 690 Phil. 104, 115 (2012) [Per J. Villarama, En Banc ]. 49. See J. Perlas-Bernabe, Separate Concurring Opinion in Madera v. Commission on Audit , 882 Phil. 744 (2020) [Per J. Caguioa, En Banc ]. 50. Office of the Ombudsman v. De Leon , 705 Phil. 26 (2013) [Per J. Bersamin, First Division]. 51. Id. 52. Rollo , p. 169. 53. Id. at 171-172. 54. See Securities and Exchange Commission v. Commission on Audit , G.R. No. 252198, April 27, 2021 [Per J. Lazaro-Javier, En Banc ]; National Transmission Corp. v. Commission on Audit , G.R. No. 246173, June 22, 2021 [Per J. M. Lopez, En Banc ]; Abejo v. Commission on Audit , G.R. No. 251967, June 14, 2022 [Per J. Zalameda, En Banc ]. 55. Rollo , pp. 33-39. Signed by Chairperson Michael G. Aguinaldo and Commissioner Jose A. Fabia. 56. Id. at 43-48. Signed by Chairperson Michael G. Aguinaldo and Commissioners Jose A. Fabia and Roland C. Pondoc.