Favorito v. Commission on Audit

EN BANC

[G.R. No. 213368. November 10, 2015.]

BURT B. FAVORITO, petitioner, vs. COMMISSION ON AUDIT, respondent.

NOTICE

Sirs/Mesdames :

Please take notice that the Court en banc issued a Resolution dated NOVEMBER 10, 2015, which reads as follows:

"G.R. No. 213368 — BURT B. FAVORITO, Petitioner, v. COMMISSION ON AUDIT, Respondent.

The petitioner assails on certiorari the decision promulgated on June 28, 2013, 1 whereby the Commission on Audit En Banc (COA) affirmed the several Notices of Disallowance (NDs) and upheld his liability for the disallowed transactions; and the COA's resolution promulgated on March 13, 2014, 2 denying his motion for reconsideration, alleging that the COA thereby gravely abused its discretion amounting to lack or excess of jurisdiction.

The antecedents are undisputed.

A Special Audit Team from the COA Legal and Adjudication Office-National conducted a special audit of the vehicles of the Department of Public Works and Highways (DPWH) covering calendar years (CY) 1999 and 2000. As a result, the COA issued various NDs to the persons determined to be liable for the disallowed payments, including the petitioner, observing that because the disallowed payments were in the nature of reimbursements, the official receipts (ORs) covering the transactions should be attached as proof of payment for the repairs of the vehicles, but no such ORs were attached as supporting documents.

The summary of the disallowed transactions follows: 3

Date	Notice of	Amount	Vehicle Plate No.
	Disallowance No.
March 26, 2010	N-2010-03-003	P391,791.25	PCJ — 773
March 26, 2010	N-2010-03-006	42,736.00	LCN — 864
March 26, 2010	N-2010-03-008	241,933.00	PAH — 817
March 26, 2010	N-2010-03-011	62,578.00	PFL — 820
March 26, 2010	N-2010-03-013	38,468.00	SAR — 867
March 26, 2010	N-2010-03-018	545,454.30	SCV — 850
March 26, 2010	N-2010-03-021	72,270.00	SFD — 883
April 26, 2010	SA-N-2010-04-024	857,475.90	PGG — 946
April 26, 2010	SA-N-2010-04-026	48,500.00	SEA — 986
June 10, 2010	SA-N-2010-06-065	302,299.40	PLM — 321
Undated	SA-N-2010-06-066	796,734.45	PLR — 352
June 10, 2010	SA-N-2010-06-071	67,360.00	SCF — 350
June 10, 2010	SA-N-2010-06-072	327,079.10	SCW — 322
June 10, 2010	SA-N-2010-06-073	375,127.00	SDG — 350
June 10, 2010	SA-N-2010-06-081	72,864.50	TCA — 309
		––––––––––––
	TOTAL	P4,242,670.90
		===========

 

In his quest to be absolved of liability, the petitioner filed a consolidated appeal with the COA's Fraud Audit and Investigation Office — Legal Services Sector (FAIO-LSS), insisting that his participation in the disallowed transactions was limited to approving the reimbursement of expenses, a merely ministerial act once all the necessary documents were attached; that conformably with the ruling in Arias v. Sandiganbayan (G.R. No. 81563, December 19, 1989, 180 SCRA 309), he could rely on his subordinates to complete all the needed documents supporting the transactions because he could not be expected to check all the documents himself to enable him to approve the transactions; and that the COA erroneously applied COA Circular No. 97-002 dated February 10, 1997 which covered only regular and special cash advances, not reimbursements. Hence, he prayed that the non-payment through check should be excused. 4

After the FAIO-LSS denied his consolidated appeal through the decision dated March 1, 2011, 5 the petitioner appealed to the COA En Banc, substantially reiterating his arguments.

The COA En Banc denied the petitioner's appeal by underscoring the importance of the ORs to justify the claims for reimbursement. It ruled that his failure to notice the absence of the ORs corresponding to the disallowed transactions signified his failure to exercise due diligence. 6

Issues

The petitioner submits two issues, namely: (a) whether or not the COA gravely abused its discretion in disallowing the transactions; and (b) whether or not he was liable for the disallowed transactions. cSEDTC

Ruling

The petition for certiorari has no merit.

The general policy of the Court is to sustain the decisions of administrative authorities, especially one those that are constitutionally-created like the COA. The policy is rooted not only on the doctrine of separation of powers but also on the presumption in favor of the administrative authorities' expertise in the laws and matters entrusted to them for enforcement. Thus, we have followed the rule that the findings of administrative agencies are accorded not only respect but also finality provided such findings are not tainted with unfairness or arbitrariness that would amount to grave abuse of discretion. 7

To assail the findings and rulings of the COA, therefore, the proper remedy of the aggrieved party is the special civil action for certiorari under Rule 64 of the Rules of Court on the ground that such findings and rulings were made with grave abuse of discretion amounting to lack or excess of jurisdiction. An act, to be considered as committed with grave abuse of discretion, must be done in an arbitrary, or capricious, or whimsical manner as is equivalent to lack of jurisdiction; the abuse of discretion must be so patent and gross as to amount to an evasion of a positive duty or to a virtual refusal to perform a duty enjoined by law, or to act at all in contemplation of law, such as where the power is exercised in an arbitrary and despotic manner by reason of passion and hostility. 8

In upholding the NDs, the COA En Banc opined:

This Commission would like to stress that in any claim for reimbursement, the OR is the first document that needs to be checked by the approving authority because it is the proof that payment was previously made by the claimant to a supplier or repair shop and it contains the amount to be reimbursed, so much so that without the OR there would be no basis for reimbursement.

Parenthetically, the absence of the OR from all the DVs in the disallowed reimbursements gives rise to a suspicion that the amounts reimbursed were overstated or even fictitious. Unfortunately, the petitioner miserably failed to do his primary duty of making sure that the DVs were accompanied by the corresponding ORs.

xxx xxx xxx

As regards COA Circular 97-002, suffice it to say that in instances where it may be impractical or impossible to make payments by check, such payments may be made in cash by the designated disbursing officer by way of cash advance. In the instant case, when responsible officials of DPWH, e.g., petitioner, allowed the payment of vehicle repair expenses by officers/employees who were not designated disbursing officers, there is no question that they violated the said circular. Respondent correctly cited the case of People vs. Teddy M. Pajaro, et al. (G.R. Nos. 167860-65, June 17, 2008), where it was held that:

Appellants admitted that the disbursements were made in cash in violation of Section 9 of COA Circular 92-382 which provides that all disbursements shall be made by check except in cases where cash advance is drawn and maintained according to COA rules. When appellants disbursed the amounts in cash, purportedly for reason of expediency and practically, they did not only make it difficult to keep track of the disbursements' whereabouts but they also engendered suspicion that they were hiding something. Had they followed the prescribed procedure and released the funds in the form of checks, they would have had documents at their disposal to prove the legitimacy of said transactions. 9

xxx xxx xxx

Based on its ratiocination, the COA En Banc was neither arbitrary, nor capricious, nor whimsical in upholding the requirement for the ORs to support the disallowed requests for reimbursement. The COA En Banc was, in fact, reasonable and logical in its requirement for the ORs. The transactions were of the nature of reimbursement, which meant that the expenses had already been incurred and paid. Indeed, to reimburse is to repay money spent or to refund; to pay back or to compensate another party for money spent or for losses incurred. The ORs, or their equivalents, became indispensable as proof of the expenses. The requirement of the COA was a matter of common sense.

We remind that the Constitution empowers the COA to determine, prevent and disallow irregular, unnecessary, excessive, extravagant or unconscionable expenditures of government funds. 10 Implementing its mandate on the matter of the claim for the reimbursements, the COA properly disallowed expenditures on the ground that they were not supported by documents and the ORs. As such, the NDs were properly sustained.

Should the petitioner be personally liable for the disallowances?

Section 103 of Presidential Decree No. 1145 (The Government Auditing Code of the Philippines) provides that expenditures of government funds or uses of government property in violation of law or regulations shall be the personal liability of the official or employee found to be directly responsible therefor. Anent this statutory liability, the COA has issued COA Circular 94-001 (January 20, 1994) to prescribe the Manual on Certificate of Settlement and Balances (Manual), wherein it has laid down the procedure to be followed in the determination of the persons liable for transactions disallowed upon an audit. The Manual relevantly sets forth:

19.1 The liability of public officers and other persons for audit disallowances shall be determined on the basis of: (a) the nature of the disallowance; (b) the duties, responsibilities or obligations of the officers/persons concerned; (c) the extent of their participation or involvement in the disallowed transaction; and (d) the amount of losses or damages suffered by the government thereby. The following are illustrative examples: SDAaTC

xxx xxx xxx

19.1.3. Public officers who approve or authorize transactions involving the expenditure of government funds and uses government properties shall be liable for all losses arising out of their negligence or failure to exercise the diligence of a good father of a family. (bold emphasis supplied)

The COA found that the petitioner had been remiss in his duty to exercise the diligence of a good father of a family in passing upon and approving the requests for reimbursement despite the absence of the corresponding ORs on the basis of the following circumstances, to wit:

Furthermore, the petitioner should have been alerted that there was something wrong or anomalous in the series of transactions in the repairs of DPWH vehicles for the following reasons:

1. Many of the amounts reimbursed per repaired vehicle were so unbelievably huge that some instances they were sufficient to buy brand new vehicles at the then prevailing car prices in 1999 and 2000.

2. The disbursements were far from being petty yet paid out of the petty cash fund and worse, not by the designated disbursing officer.

3. There was apparent splitting of transactions as shown by the frequency of the repairs, the similar dates of the checks, similar payees and suppliers, and the fact that the amounts did not exceed the limit of P25,000.00 so as not to take them out of petty cash disbursement. 11 (bold emphasis supplied)

The above-mentioned circumstances, and the fact that the petitioner did not notice that the transactions had not been accompanied by ORs indicated his failure to exercise the required diligence expected of him. Verily, a reasonably prudent person in his place would have been quickly alerted by the above-mentioned circumstances, and withheld his approval of the request. In other words, that he did not notice the red flag was already a red flag in itself. AaCTcI

The petitioner relies on the Arias doctrine. Under Arias, a superior whose signature of approval appears on the questionable transactions is insulated from liability as a co-conspirator because he can affix his signature after relying on his subordinates in the completion of all the documentary requirements for the transactions. The point of Arias is that the superior need not personally look into every document supporting the transactions in question. The superior's signature or approval alone should not be enough to sustain against him the conspiracy charge. However, Arias is not a blanket shield for the superior in all cases. If there are circumstances other than the signature of the superior indicating that he should have himself looked into the vouchers of the transactions in question, instead of merely relying on the subordinates' expected examinations, then he should be held to account for the signature or approval. 12

We do not think that the Arias doctrine can apply to the petitioner's situation. There were admittedly circumstances that should have prodded him to probe deeper into the vouchers, and to examine each voucher and its attachments before he could approve. For one, the patent absence of the ORs to support the requests for reimbursement should have promptly alerted the petitioner to check the vouchers individually. He should not have simply relied on his subordinates without question. 13 That he allegedly did so established his having acted without prudence.

We further reject the petitioner's contentions that, firstly, it was not his duty to check each individual voucher, for his duty was a merely ministerial one; and, secondly, that he could process the claims for the minor repairs and for the reimbursement of the expenses as long as the requisite attachments were present. Both contentions were flimsy and devoid of factual support considering that his supposedly merely ministerial duty would arise only after all the necessary documents were present. There is no longer any question about the absence of the ORs, which were essential to the claims for reimbursement. As such, the supporting documents for the claims were not complete. Under the circumstances, he should have himself personally checked the attachments and demanded the submission of the ORs. Otherwise, he should have already disapproved the claims himself. He was obviously other than prudent.

WHEREFORE, the Court DISMISSES the petition for certiorari for lack of merit, without pronouncement on the costs of suit." Brion and Mendoza, JJ., on leave. (adv46)

Very truly yours,

(SGD.) FELIPA B. ANAMAClerk of Court

 

Footnotes

1. Rollo, pp. 20-28.

2. Id. at 29.

3. Id. at 20-21.

4. Id. at 21-22.

5. Id. at 115-119.

6. Id. at 25-27.

7. Sanchez v. Commission on Audit, G.R. No. 127545, April 23, 2008, 552 SCRA 471, 489.

8. Yu v. Reyes-Carpio, G.R. No. 189207, June 15, 2011, 652 SCRA 341, 348.

9. Rollo, pp. 25-26.

10. Section 2 (2) Article IX-D, 1987 Constitution; see Sanchez v. Commission on Audit, G.R. No. 127545, April 23, 2008, 552 SCRA 471, 487.

11. Rollo, pp. 25-26.

12. In Arias v. Sandiganbayan, 180 SCRA 309, 315-316, the Court explained:

We would be setting a bad precedent if a head of office plagued by all too common problems — dishonest or negligent subordinates, overwork, multiple assignments or positions, or plain incompetence — is suddenly swept into a conspiracy conviction simply because he did not personally examine every single detail, painstakingly trace every step from inception, and investigate the motives of every person involved in a transaction before affixing his signature as the final approving authority.

xxx xxx xxx

We can, in retrospect, argue that Arias should have probed records, inspected documents, received procedures, and questioned persons. It is doubtful if any auditor for a fairly sized office could personally do all these things in all vouchers presented for his signature. The Court would be asking for the impossible. All heads of offices have to rely to a reasonable extent on their subordinates and on the good faith of those who prepare bids, purchase supplies, or enter into negotiations. If a department secretary entertains important visitors, the auditor is not ordinarily expected to call the restaurant about the amount of the bill, question each guest whether he was present at the luncheon, inquire whether the correct amount of food was served, and otherwise personally look into the reimbursement voucher's accuracy, propriety, and sufficiency. There has to be some added reason why he should examine each voucher in such detail. Any executive head of even small government agencies or commissions can attest to the volume of papers that must be signed. There are hundreds of documents, letters, memoranda, vouchers, and supporting papers that routinely pass through his hands. The number in bigger offices or departments is even more appalling.

There should be other grounds than the mere signature or approval appearing on a voucher to sustain a conspiracy charge and conviction. (bold underscoring supplied for emphasis)

13. Cruz v. Sandiganbayan, G.R. No. 134493, August 16, 2005, 467 SCRA 52.