National Power Corp. v. Commission on Audit

EN BANC

[G.R. No. 240519. February 19, 2019.]

NATIONAL POWER CORPORATION, petitioner, vs.COMMISSION ON AUDIT AND MS. CORAZON V. ESPAÑO, IN HER CAPACITY AS SUPERVISING AUDITOR, COMMISSION ON AUDIT, respondents.

NOTICE

Sirs/Mesdames :

Please take notice that the Court en banc issued a Resolution dated FEBRUARY 19, 2019, which reads as follows:

"G.R. No. 240519 — (National Power Corporation v. Commission on Audit and Ms. Corazon V. Españo, in her capacity as Supervising Auditor, Commission on Audit)

RESOLUTION

This is a petition for certiorari seeking to annul and set aside the May 15, 2017 Decision 1 and March 8, 2018 Resolution 2 of the Commission on Audit (COA) in Decision No. 2017-149 and Resolution No. 2018-063, respectively. The COA disapproved the August 29, 2014 Decision of the COA Corporate Government Sector (COA-CGS) and affirmed Notice of Disallowance (ND) No. NPC-2011-02(10) 3 dated July 29, 2011. The ND disallowed the payment of Extraordinary and Miscellaneous Expense (EME) in the total amount of P2,011,998.65.

On February 13, 2003, the National Power Corporation (NPC) Board of Directors (Board) approved Resolution No. 2003-15, 4 which implements the Salary/Pay Plan and List of Allowances for the personnel of the NPC.

Subsequently, the NPC issued Circular Nos. 2003-06 and 2003-08 5 dated March 6 and 10, 2003, respectively, prescribing the rules and regulations governing payment of salaries and allowances including the EME of qualified officials. It was stated therein that claims for EME shall be supported by receipts and/or other documents evidencing disbursement, if these are available or in lieu thereof, by certification executed by the official concerned that the expenses sought have been incurred. 6 Thus, in lieu of the receipts, the NPC officials simply executed a certification regarding the EME they incurred.

On January 3, 2006, COA issued Circular No. 2006-001 7 prescribing the guidelines for disbursement of EME in government-owned and controlled corporations (GOCCs), government financial institutions (GFIs), and their subsidiaries. The circular specifically states that EME of GOCCs and GFIs should be supported by receipts and/or other documents evidencing disbursements.

In its Letter 8 dated May 5, 2006, the NPC requested the COA for exemption and/or flexibility in the implementation of COA Circular No. 2006-001 because their guidelines for providing EME to their officials allow, in lieu of receipts and/or other documents evidencing payment, the execution of certifications. CAIHTE

According to NPC, COA never replied to their May 5, 2006 letter. Nevertheless, on March 12, 2009, COA issued Audit Observation Memorandum No. 2009-006 9 against the NPC regarding the EME granted to its officials. In its Letter 10 dated September 4, 2009, the NPC reiterated that it sought exemption and/or flexibility from COA Circular No. 2006-001.

On July 9, 2010, COA issued Audit Observation Memorandum No. 2010-13 11 against the NPC regarding the EME granted to its officials. The COA underscored that the claims for EME should be supported by official receipts and/or other documents evidencing disbursements to erase doubt on the commutability of the payments. 12 Nevertheless, the NPC continued the payments of EME to its officials in 2010.

The Notice of Disallowance

On July 29, 2011, the COA Audit Team Leader and Supervising Auditor for NPC issued ND No. NPC-2011-02(10) disallowing the payment of EME to Small Power Utilities Groups (SPUGs)/Watershed officials of the NPC from January to November 2010 in the total amount of P2,011,998.65. According to the ND, the amounts were disallowed because the payments were made on a commutable basis and not supported by receipts and/or documents evidencing disbursements contrary to COA Circular No. 2006-001.

Aggrieved, NPC appealed the ND to the COA-CGS.

The COA-CGS Ruling

In its decision dated August 29, 2014, the COA-CGS granted the appeal of NPC. It held that treating officials of GOCCs differently from the National Government Agencies (NGAs) by requiring NPC officials to present receipts to support their claim for EME, is discriminatory and violative of the equal protection clause of the 1987 Constitution. The COA-CGS also held that the uniformity of the amounts claimed by the NPC officials was insufficient to warrant the conclusion that the payment of EME was indeed made on a commutable basis.

Thus, there was an automatic review to the COA.

The COA Ruling

In its decision dated May 15, 2017, the COA disapproved the August 29, 2014 decision of the COA-CGS and affirmed ND No. NPC-2011-02(10). It held that in Espinas, et al. v. Commission on Audit13(Espinas v. COA), the Court already ruled that under COA Circular No. 2006-001, a certification does not fall within the category of "other documents evidencing disbursements." The COA underscored that the certifications of the NPC officials that the expenses they incurred were necessary was not a valid document evidencing disbursements, thus, the ND properly disallowed in audit the EME disbursement in violation of COA Circular No. 2006-001.

The COA also highlighted that there was a substantial distinction between the allocation of EME by the NGAs and by the GOCCs. It explained that EME of the GOCCs, GFIs, and their subsidiaries were allocated by their own internal governing boards; while the EME of the NGAs were fixed by the annual GAA enacted by Congress. As there was substantial distinction, the COA concluded that there was no violation of the equal protection clause. The dispositive portion states:

WHEREFORE, premises considered, Commission on Audit Corporate Government Sector-Cluster 3 Decision No. 2014-15, which granted the appeal of National Power Corporation, Quezon City, is hereby DISAPPROVED. Accordingly, Notice of Disallowance No. NPC-2011-02 (10) dated July 29, 2011 on the payment of Extraordinary and Miscellaneous Expenses to the Small Power Utilities Group/Watershed officials from January to November 2010 in the total amount of P2,011,998.65 is AFFIRMED. 14

NPC filed a motion for reconsideration but it was denied by the COA in its resolution dated March 8, 2018. DETACa

Hence, this petition.

ISSUES

I.

WHETHER OR NOT THE CLAIM FOR EME MUST BE SUPPORTED STRICTLY BY RECEIPTS, OR WHETHER OR NOT OTHER DOCUMENTS EVIDENCING DISBURSEMENTS WOULD SUFFICE.

II.

WHETHER OR NOT NPC'S PAYMENT OF EME TO ITS OFFICIALS WAS MADE ON A COMMUTABLE BASIS[.]

III.

WHETHER OR NOT COA CAN IMPOSE PERSONAL LIABILITY TO EACH PERSONS (SIC) ADJUDGED LIABLE BY COA UNDER ITS 29 JULY 2011 NOTICE OF DISALLOWANCE ABSENT NOTICE PERSONALLY SERVED TO EACH OF THEM. 15

NPC argues that the certification executed by the officials regarding the EME is sufficient proof that expenses were incurred; that the disbursement of EME did not go beyond the amount fixed by Republic Act No. 9970, or the General Appropriations Act of 2010; that under COA Circular No. 89-300, it allows a certification as an evidence of EME for NGAs; that there is no substantial distinction between NGAs and GOCCs, hence, COA Circular No. 89-300 should be applied, instead of COA Circular No. 2006-01; that not all of the persons held liable were served copies of the ND; and that its officers exercised good faith in disbursing the EME.

In its Comment, 16 the COA countered that COA Circular No. 2006-001, which specifically applies to GOCCs, clearly states that the claim for reimbursement of EME should be supported by receipts and/or other documents evidencing disbursement; that the certification signed by the officials concerned is not a sufficient evidence of disbursement; that Espinas v. COA already settled that there is substantial distinction between GOCCs and NGAs, thus, COA Circular No. 2006-001 should be applied to GOCCs; that COA Circular No. 2009-006 only requires that service of the ND be made to the accountant, and not to all of the payees; and that NPC and its officers did not exercise good faith because the disbursement was a plain violation of COA Circular No. 2006-001.

The Court's Ruling

The petition is bereft of merit because the COA did not commit any grave abuse of discretion.

COA Circular No. 2006-001

COA Circular No. 89-300 dated March 21, 1989, provides for the "Audit Guidelines on Disbursement for Extraordinary and Miscellaneous Expenses in National Government Agencies x x x." It was addressed to all Secretaries of Departments, Heads of Constitutional Commissions, the Chief Justice of the Supreme Court, Presiding Justices of other Courts, the Ombudsman and Heads of other constitutional offices, Chiefs of Bureaus, Agencies and Offices of the National Government. It provides:

III. GENERAL AUDIT PRINCIPLE AND GUIDELINES: —

xxx xxx xxx

4. The entitlement to the benefit provided under the General Appropriations Act shall be on a strictly non-commutable or reimbursement basis. The corresponding claim for reimbursement of such expenses shall be supported by receipts and/or other documents evidencing disbursement, if these are available, or, in lieu thereof, by a certification executed by the official concerned that the expenses sought to be reimbursed have been incurred for any of the purposes contemplated under Section 19 and other related sections of [R.A. No.] 6688 (or similar provision in subsequent General Appropriations Acts) in relation to or by reason of his position. In the case of miscellaneous expenses incurred for an office specified in the law, such certification shall be executed solely by the head of the office. 17 (emphasis supplied) ATICcS

Thus, under the audit guidelines for disbursement of EME for NGAs, a certification executed by the official concerned that the expenses sought to be reimbursed have been incurred is deemed sufficient proof of disbursement in lieu of receipts and/or other documents evidencing disbursement. Thus, COA Circular No. 89-300 is the general rule that applies to all NGAs, including the Judiciary, Constitutional Commissions, and the Ombudsman. 18

On the other hand, COA Circular No. 2006-001 dated January 3, 2006, provides for the "Guidelines on the Disbursement of Extraordinary and Miscellaneous Expenses and Other Similar Expenses in Government-Owned and Controlled Corporations/Government Financial Institutions and their Subsidiaries." It was addressed to all members of Governing Boards and heads of Government-Owned and Controlled Corporations/Government Financial Institutions. COA Circular No. 2006-001 states:

III. AUDIT GUIDELINES

1. The amount of extraordinary and miscellaneous expenses, as authorized in the corporate charters of GOCCs/GFIs, shall be the ceiling in the disbursement of these funds. Where no such authority is granted in the corporate charter and the authority to grant extraordinary and miscellaneous expenses is derived from the General Appropriations Act (GAA), the amounts fixed thereunder shall be the ceiling in the disbursements;

2. Payment of these expenditures shall be strictly on a non-commutable or reimbursable basis;

3. The claim for reimbursement of such expenses shall be supported by receipts and/or other documents evidencing disbursements; and

4. No portion of the amounts appropriated shall be used for salaries, wages, allowances, intelligence and confidential expenses which are covered by separate appropriations. 19 (emphasis supplied)

Hence, under the guidelines for disbursement of EME to GOCCs, GFIs, and their subsidiaries, it is imperative that the claim for reimbursement of such expenses be supported by receipts and/or other documents evidencing disbursements. Consequently, a certification executed by such officials regarding the EME is not sufficient proof of claim for reimbursement. COA Circular No. 2006-001 is the specific rule that applies particularly to GOCCs, GFIs, and their subsidiaries.

In Espinas v. COA, the Court ruled that COA Circular No. 2006-001 should be applied to GOCCs and COA Circular No. 89-300 to NGAs because there is a substantial distinction between GOCCs and NGAs, to wit:

Lastly, the Court upholds the CoA's finding that there exists a substantial distinction between officials of NGAs and the officials of GOCCs, GFIs and their subsidiaries which justify the peculiarity in regulation. Since the EME of GOCCs, GFIs and their subsidiaries, are, pursuant to law, allocated by their own internal governing boards, as opposed to the EME of NGAs which are appropriated in the annual GAA duly enacted by Congress, there is a perceivable rational impetus for the CoA to impose nuanced control measures to check if the EME disbursements of GOCCs, GFIs and their subsidiaries constitute irregular, unnecessary, excessive, extravagant, or unconscionable government expenditures. Case in point is the LWUA Board of Trustees which, pursuant to Section 69 of [P.D. No.] 198, as amended, is "authorized to appropriate out of any funds of the Administration, such amounts as it may deem necessary for the operational and other expenses of the Administration including the purchase of necessary equipment." Indeed, the Court recognizes that denying GOCCs, GFIs and their subsidiaries the benefit of submitting a secondary-alternate document in support of an EME reimbursement, such as the "certification" discussed herein, is a CoA policy intended to address the disparity in EME disbursement autonomy. As pertinently stated in CoA Circular No. 2006-01, the consideration underlying the rules and regulations contained therein is the fact that "[g]overning boards of [GOCCs/GFIs] are invariably empowered to appropriate through resolutions such amounts as they deem appropriate for extraordinary and miscellaneous expenses." 20 (emphasis supplied) TIADCc

Applied in this case, NPC is indisputably a GOCC. The EME of their officials are allocated by their own internal governing board, thus, such disbursements must be subjected to COA Circular No. 2006-001 to check if the EME disbursements constitute irregular, unnecessary, excessive, extravagant, or unconscionable government expenditures. Indeed, COA Circular No. 2006-001 was properly issued pursuant to the COA policy intended to address the disparity in EME disbursement autonomy. Verily, the application of COA Circular No. 2006-001 to the EME disbursements of NPC officials must be upheld.

A certification is not a document

Under COA No. 2006-001, it is required that the claim for reimbursement of EME shall be supported by receipts and/or other documents evidencing disbursements. In Espinas v. COA, the Court discussed that a mere certification stating that the official has spent a particular amount and that such amount is within the authorized budget ceiling is an insufficient document evidencing disbursement, viz.:

First off, the Court concurs with the CoA's conclusion that the "certification" submitted by petitioners cannot be properly considered as a supporting document within the purview of Item III(3) of CoA Circular No. 2006-01 which pertinently states that a "claim for reimbursement of [EME] expenses shall be supported by receipts and/or other documents evidencing disbursements." Similar to the word "receipts," the "other documents" pertained to under the above-stated provision is qualified by the phrase "evidencing disbursements." Citing its lexicographic definition, the CoA stated that the term "disbursement" means "to pay out commonly from a fund" or "to make payment in settlement of debt or account payable." That said, it then logically follows that petitioners' "certification," so as to fall under the phrase "other documents" under Item III(3) of CoA Circular No. 2006-01, must substantiate the "paying out of an account payable," or, in simple term, a disbursement. However, an examination of the sample "certification" attached to the petition does not, by any means, fit this description. The signatory therein merely certifies that he/she has spent, within a particular month, a certain amount for meetings, seminars, conferences, official entertainment, public relations, and the like, and that the certified amount is within the ceiling authorized under the LWUA corporate budget. Accordingly, since petitioners' reimbursement claims were solely supported by this "certification," the CoA properly disallowed said claims for failure to comply with CoA Circular No. 2006-01. 21 (emphasis supplied)

In this case, the NPC officials only submitted certifications stating that the expenses incurred were necessary for the purpose contemplated under the pertinent provisions of the applicable General Appropriations Act in relation to or by reason of the position. 22 Evidently, said certification is not a document evidencing disbursement because it does not substantiate the payment out of an account payable or a disbursement. Such general statements cannot justify the claim for reimbursement of such EME.

As properly held by the COA, since the payment of EME to NPC officials failed to comply with COA Circular No. 2006-001 on the submission of receipts, this alone is sufficient to support the disallowance. 23

No good faith

In its last ditch attempt to escape liability, NPC argues that the concerned NPC officials sincerely believed in good faith that a certification was sufficient and could not have known the requirements of the auditor.

The Court is not convinced.

In DBP v. COA, 24 the Court stated that there can only be a claim of good faith when the petitioners satisfy the following: (1) that they acted in good faith believing that they could disburse the disallowed amounts based on the provisions of the law; and (2) that they lacked knowledge of facts or circumstances which would render the disbursements illegal, such as when there is no similar ruling by this Court prohibiting a particular disbursement or when there is no clear and unequivocal law or administrative order barring the same.

In this case, the Court finds that the claim of good faith cannot be appreciated in favor of the NPC officials. First, COA Circular No. 2006-001 was issued on January 3, 2006. It specifically applies to GOCCs and it states that the claim for reimbursement of EME shall be supported by receipts and/or other documents evidencing disbursements; execution of a mere certification is not allowed anymore. However, in spite of the issuance of such circular, the NPC still continued to grant EME to its officials even without the required receipts and/or documents evidencing disbursements. NPC even acknowledged that COA Circular No. 2006-001 applies to the use of funds for EME by GOCCs, 25 but it still failed to comply therewith. Thus, at the time of the disallowed disbursement in 2010, NPC had knowledge of a particular administrative circular regarding the disbursement of EME but it did not respect the said circular.

Second, after COA Circular No. 2006-001 was issued and NPC still continued its non-compliance, COA issued several audit observation memoranda against NPC for the irregular grant of EME. Particularly, COA issued Audit Observation Memorandum No. 2009-006 dated March 12, 2009, and Audit Observation Memorandum No. 2010-13 dated July 9, 2010, against the NPC regarding the EME granted to its officials. An audit observation memorandum is a written notification to the agency head and concerned officer/s informing of deficiencies noted in the audit of accounts, operations or transactions and requiring comments thereto and/or submission of documentary and other information requirements within a reasonable period. 26 AIDSTE

Verily, when COA issued these audit observation memoranda, NPC should have exercised prudence and immediately discontinued its practice of granting EME to its officials based merely on certifications. Instead, NPC continued to defy COA Circular No. 2006-001 even though it was specifically applicable to GOCCs. Glaringly, NPC failed to attach these relevant and important audit observation memoranda in its petition before the Court. These documents could have been utilized by NPC to bolster their position but they failed to do so. Again, these circumstances raise serious doubts on the genuineness of NPC in its invocation of good faith.

Lastly, in Espinas v. COA, which is squarely applicable to the present case, the Court did not apply the claim of good faith. As there was a clear substantial distinction between COA Circular No. 2006-001 and COA Circular No. 89-300, then the claim for reimbursement of EME is required to be supported by receipts and/or other documents evidencing disbursements. To reiterate, a mere certification is not allowed. Accordingly, for consistency and uniformity, coupled with the blatant disregard by the NPC of the COA circular and audit observation memoranda, the Court shall similarly not apply the claim of good faith in the case at bench.

With respect to the issue of notice, the Court finds that COA properly gave the required notice. Section 12.1 of COA Circular No. 2009-006 dated September 15, 2009, or the 2009 Rules and Regulations on the Settlement of Accounts, states that in case there are several payees, service to the accountant who shall be responsible for informing all payees concerned, shall constitute constructive service to all payees listed in the payroll. Here, the ND involved several payees and it was properly issued to Froilan A. Tampinco, President and CEO of NPC, and Alexander P. Japon, Sr. Department Manager-Finance, Non-OMA. These officers were responsible for informing all other payees concerned regarding the ND. Thus, the ND was properly served pursuant to COA Circular No. 2009-006.

As NPC failed to prove all the requisites for the claim of good faith, then COA evidently did not exercise grave abuse of discretion in upholding the validity of the ND.

WHEREFORE, the petition is DISMISSED. The May 15, 2017 Decision and March 8, 2018 Resolution of the Commission on Audit in Decision No. 2017-149 and Resolution No. 2018-063, respectively, are AFFIRMED." (adv41) SDAaTC

Very truly yours,

(SGD.) EDGAR O. ARICHETAClerk of Court

 

Footnotes

1.Rollo, pp. 29-35; concurred by Chairperson Michael G. Aguinaldo, Commissioners Jose A. Fabia and Isabel D. Agito.

2.Id. at 36.

3.Id. at 24-28.

4.Id. at 37-38.

5.Id. at 39-44.

6.Id. at 41.

7.Id. at 45-47.

8. Id. at 48-49.

9. Not attached in the petition; See rollo, p. 50.

10. Id.

11. Not attached in the petition; See id. at 51.

12. Id. at 8.

13. 731 Phil. 67 (2014).

14. Rollo, pp. 33-34.

15. Id. at 10.

16. Id. at 103-122.

17. COA Circular No. 89-300 dated March 21, 1989.

18. See Maritime Industry Authority v. Commission on Audit, 750 Phil. 288 (2015), where the Court discussed the grant of allowances of the NGA vis-à-vis the Judiciary, the Constitutional Commissions, and the Ombudsman.

19. Rollo, pp. 46-47.

20. Supra note 13, at 80-81.

21. Id. at 78-79.

22. Rollo, p. 85.

23. Id. at 33.

24. G.R. No. 221706, March 13, 2018.

25. Rollo, p. 11.

26. Section 4.4.9, COA Circular No. 2009-006, Prescribing the Use of the Rules and Regulations on Settlement of Accounts, September 15, 2009.