Ngalob v. Commission on Audit

EN BANC

[G.R. No. 241561. October 5, 2021.]

JUAN B. NGALOB, IN HIS CAPACITY AS FORMER REGIONAL DIRECTOR OF THE NATIONAL ECONOMIC AND DEVELOPMENT AUTHORITY-CORDILLERA ADMINISTRATIVE REGION [NEDA-CAR], HERMINIA B. SAMUEL, IN HER CAPACITY AS REGIONAL ACCOUNTANT, PATERNO C. LABOY, IN HIS CAPACITY AS FORMER CHIEF ADMINISTRATIVE OFFICER, and ALL PAYEES IN THE PAYROLL [AS RECIPIENTS OF THE CNA INCENTIVES AND COST ECONOMY MEASURE AWARD],petitioners, vs. COMMISSION ON AUDIT,respondent.

NOTICE

Sirs/Mesdames :

Please take notice that the Court en banc issued a Resolution datedOCTOBER 5, 2021, which reads as follows:

"G.R. No. 241561 (Juan B. Ngalob, in his capacity as former Regional Director of the National Economic and Development Authority-Cordillera Administrative Region [NEDA-CAR], Herminia B. Samuel, in her capacity as Regional Accountant, Paterno C. Laboy, in his capacity as former Chief Administrative Officer, and All Payees in the Payroll [as recipients of the CNA Incentives and Cost Economy Measure Award] vs. Commission on Audit). — This resolves the Petition for Certiorari1 filed under Rules 64 and 65 of the Revised Rules of Court, by petitioners Juan B. Ngalob (Ngalob), Herminia B. Samuel (Samuel), Paterno C. Laboy (Laboy), and all recipients of the Collective Negotiation Agreement (CNA) Incentives and Cost Economy Measure Award (CEMA), against respondent Commission on Audit (COA), assailing COA-Commission Proper (CP) Decision No. 2018-048 2 dated March 8, 2018, which denied petitioners' motion for reconsideration of COA-CP Decision No. 2017-174 3 dated June 15, 2017.

The antecedent facts, as found by COA-CP and COA-Cordillera Administrative Region (CAR), are as follows: 4

For the months of April, June, and December 2010, National Economic Development Authority (NEDA)-CAR granted all its personnel various CNA incentives in the aggregate amount of P891,936.00. In December of the same year, NEDA-CAR likewise granted across-the-board CEMA to all its employees in the total sum of P34,445.02.

Upon post-audit, the Audit Team Leader and Supervising Auditor of NEDA-CAR issued Audit Observation Memorandum (AOM) No. 2011-04 5 dated February 18, 2011, which noted the following:

1. On the payment of CNA incentives, NEDA-CAR did not comply with the provisions of Public Sector Labor-Management Council (PSLMC) Resolution No. 4, series of 2002, particularly the provision on cost-cutting measures and systems improvement in the CNA that will be undertaken by both the management and union, as reiterated in Administrative Order (AO) No. 135 dated December 27, 2005 and Department of Budget and Management (DBM) Budget Circular No. 2006-1 dated February 1, 2006; and

2. On the payment of CEMA, the same was granted without observing the NEDA Awards and Incentives System Guidelines, which states that CEMA is granted to an employee or team whose contributions — such as ideas, suggestions, inventions, discoveries, or performance of functions — result in savings in terms of manhours and cost, or otherwise benefit the agency and government as a whole.

In a letter 6 dated March 23, 2011, NEDA-CAR Regional Director Ngalob replied to the AOM and explained that:

1. Despite the absence of a provision on cost-cutting measures in the CNA, NEDA-CAR was able to realize savings. Thus, the grant of CNA incentives was justified;

2. The payment of CNA incentives during the first two quarters of 2010 was in compliance with the special orders issued by NEDA Central Office; and

3. The payment of CEMA to the employees was justified since they were able to accomplish their deliverables for the year in spite of the lean workforce.

Unsatisfied with the justifications, the Audit Team Leader and Supervising Auditor issued Notice of Disallowance (ND) No. 11-001-101 (10) dated May 25, 2011, disallowing the payment of CNA incentives and CEMA on the same grounds cited in the AOM. They further observed that NEDA-CAR failed to comply with the requirement to revert 20% of its savings to the National Government. 7

The persons held liable in the ND for their participation in the transaction included Ngalob, in his capacity as Regional Director, for approving the payment of CNA incentives and CEMA; Samuel, in her capacity as Regional Accountant, for certifying the availability of funds and completeness and propriety of the supporting documents therefor; Laboy, in his Capacity as Chief Administrative Officer, for certifying the validity, propriety, and legality of supporting documents therefor; and the NEDA-CAR personnel as payees thereof.

On August 25, 2011, petitioners filed before the COA-CAR Regional Director a letter-appeal from the ND, reiterating their justifications for the grant of CNA incentives and CEMA.

The letter-appeal was denied and the ND was effectively affirmed under COA-CAR Decision No. 2012-015 dated April 25, 2012.

Aggrieved, Ngalob filed before COA-CP a petition for review of the COA-CAR decision on July 24, 2021, alleging that:

1. The COA-CAR erred in holding that the inclusion of the cost-cutting measures in the CNA is a condition to the payment of the CNA incentives;

2. The COA-CAR erred in holding that there was contravention of Item V.B.6 of the NEDA Awards and Incentives System Guidelines;

3. The COA-CAR erred in holding that NEDA-CAR failed to comply with the requirement for the reversion of 20% of the savings to the national treasury; and

4. In the interest of social justice, substantial compliance, liberal interpretation, and good faith, the grant of CEMA should be sustained.

In Decision No. 2017-174 dated June 15, 2017, COA-CP denied the petition and affirmed COA-CAR's decision and ND as follows:

"WHEREFORE, premises considered, the Petition for Review of Regional Director Juan B. Ngalob, National Economic and Development Authority-Cordillera Administrative Region (CAR), is hereby DENIED. Accordingly, Commission on Audit-CAR Decision No. 2012-015 dated April 25, 2012 and Notice of Disallowance No. 11-001-101 (10) dated May 25, 2011 on the payment of Collective Negotiation Agreement Incentives and Cost Economy Measure Award in the amounts of P891,936.00 and P34,445.02, respectively, are hereby AFFIRMED." 8

Ngalob filed a motion for reconsideration, but the same was denied by COA-CP in Decision No. 2018-048 dated March 8, 2018, to wit:

"The CP denied the Motion for Reconsideration [of Former Regional Director Juan B. Ngalob, National Economic and Development Authority-CAR] for failure of the movant[s]; to raise a new issue that would warrant the reversal or modification of the assailed COA Decision." 9

Hence, this petition.

Petitioners submit that public respondent COA acted without or in excess of its jurisdiction or with grave abuse of discretion amounting to lack or excess of jurisdiction in the issuance of the assailed decisions. They pray that COA-CP Decision No. 2018-048 and COA-CAR Decision No. 2012-015 be reversed and set aside, and that a temporary restraining order or writ of preliminary injunction be issued to enjoin COA from implementing the assailed decisions pending resolution of the petition. 10

In its Comment 11 dated December 11, 2018, COA, through the Office of the Solicitor General (OSG), sought the denial of the petition for lack of merit.

Petitioners filed their Reply 12 dated May 8, 2019, reiterating their assertions in the petition to address COA's comment.

After a painstaking evaluation of the records of the case and the applicable law and jurisprudence, We find the petition to be bereft of merit.

Petitioners aver that an examination of PSLMC Resolution No. 4, series of 2002, does not in any way convey that the inclusion of cost-cutting provisions is a prerequisite to the grant of CNA incentives. They insist that the inclusion in the CNA of provisions on cost-cutting measures and systems improvement is mandatory only with respect to ensuring that savings will be generated by the agency. 13

We are not persuaded.

The CNA, under which the subject CNA incentives were granted, failed to comply with Section 2 of PSLMC Resolution No. 4, which reads:

"Section 2. To ensure that savings will be generated after the signing, the CNA must include provisions on cost cutting measures and systems improvement that will be undertaken by both the management and the union so that the delivery of service or achievement of agency targets can be made at less cost." (Underscoring and emphasis supplied)

To underscore, the foregoing provision used the word "must," which as a general rule, implies that the provision is mandatory. Although the PSLMC resolution did not directly condition the grant of CNA incentives upon the inclusion of provisions on cost-cutting measures and systems improvement in the CNA, omission of the latter adversely affected the force and validity of the CNA itself. The absence of the required provision rendered the CNA defective and the grant of incentives thereunder, unauthorized and irregular.

In Zamboanga City Water District v. COA, 14 We upheld the disallowance of CNA incentives for lack of cost-cutting measures in the CNA as required by PSLMC Resolution No. 2, series of 2003, to wit:

"Disallowance of CNA

PSLMC Resolution No. 2 provides for the guidelines in connection with the payment of CNA incentives to rank-and-file employees of [government-owned or controlled corporations] GOCCs. Section 2 thereof requires that the CNA must include cost-cutting measures that shall be undertaken by both the management and the union.

The COA was correct in finding that ZCWD failed to identify the specific cost-cutting measures undertaken, pursuant to the CNA x x x." (Underscoring supplied)

PSLMC Resolution No. 2, which was the subject of the aforequoted case, states that:

"Section 2. The CNA must include, among others, provisions on improvement of income and productivity, streamlining of systems and procedures, and cost cutting measures that shall be undertaken by both the management and the union so that the operations of the GOCC/[Government Financial Institution] GFI can be undertaken at a lesser cost." 15 (underscoring supplied)

Notably, PSLMC Resolution No. 2, which deals with CNA incentives for GOCCs and GFIs, is similarly worded as PSLMC Resolution No. 4, which deals with CNA incentives for national government agencies such as NEDA. Both resolutions require that CNAs must include a provision on cost-cutting measures. Hence, this Court's interpretation of Section 2 of PSLMC Resolution No. 2 under prevailing jurisprudence may apply to Section 2 of PSLMC Resolution No. 4, as well.

Petitioners also contend that Section 1, paragraph 2 of AO No. 135 dated December 27, 2005 confirmed the grant of CNA incentives pursuant to CNAs entered into on or after the effectivity of the PSLMC resolutions, thus eliminating all doubts as to the propriety of granting additional benefits from agency savings. They further state that AO No. 135 is in effect equivalent to the President's approval of the incentives granted to government employees through their respective CNAs.

Unfortunately for the petitioners, We vividly see through their attempt to mislead this Court. Nothing in AO No. 135 states that government agencies can pay such incentives in violation of existing jurisprudence, regulations, and AO No. 135 itself. It would be illogical to interpret AO No. 135 as a grant of blanket authority to pay CNA incentives.

Hereunder quoted verbatim are the relevant portions of AO No. 135:

"WHEREAS, the grant of Collective Negotiation Agreement (CNA) incentive, pursuant to Public Sector Labor-Management Council (PSLMC) Resolution No. 4, series of 2002, for national government agencies (NGAs), local government units (LGUs) and state universities and colleges (SUCs), and PSLMC Resolution No. 2, series of 2004 for government-owned or controlled corporations (GOCCs) and government financial institutions (GFIs), is one of the negotiable matters enumerated in Section 2, Rule XII of the Amended Rules and Regulations Implementing the Right of Government Employees to Organize under Executive Order No. 180;

xxx xxx xxx

WHEREAS, Administrative Order No. 103 dated August 31, 2004 directs the continued adoption of austerity measures in the government and suspends the grant of new or additional benefits to government employees except the CNA Incentive, which may be given in strict compliance with the provisions of the above-stated PSLMC Resolutions and those expressly provided by Presidential issuance;

xxx xxx xxx

Section 1. Grant of Incentive. — The grant of the Collective Negotiation Agreement (CNA) incentive to national government agencies (NGAs), local government units (LGUs), state universities and colleges (SUCs), government-owned or controlled corporations (GOCCs), and government financial institutions (GFIs), if provided in their respective CNAs and supplements thereto executed between the management and employees' organization accredited by the Civil Service Commission, is hereby authorized.

Furthermore, the grant of the CNA incentive pursuant to CNAs entered into on or after the effectivity of PSLMC Resolution No. 4, series of 2002, and PSLMC Resolution No. 2, series of 2003, and in strict compliance therewith, is confirmed.

xxx xxx xxx

Section 3. Cost-Cutting Measures and Systems Improvement. — The management and the accredited employees' organization shall identify in the CNA the cost-cutting measures and systems improvement to be jointly undertaken by them so as to achieve effective service delivery and agency targets at lesser costs." 16 (Underscoring supplied)

Evidently, grants of the CNA incentive authorized after the PSLMC resolution took effect and in strict compliance with its provisions prior to the effectivity of AO No. 135 were confirmed. The latter also required that the frugality schemes be identified in the CNA and that the CNA incentives be exclusively sourced from the savings that may be generated during the term of the CNA. 17

In light of the policy of AO No. 135 that CNA incentives may only be given in strict compliance with PSLMC Resolution No. 4, this Court cannot uphold the petitioners' theory that Section 2 of such resolution only serves as a reminder to the employees to adhere to cost consciousness for purposes of facilitating the generation of agency savings. Where the law speaks in clear and categorical language, there is no room for interpretation. There is only room for application. 18

As admitted by the petitioners, no provision on cost-cutting measures was included in their CNA. The fact that they supposedly generated savings, notwithstanding the absence of such provision, did not automatically rectify the flaw in the CNA or absolve the petitioners of their violation of the PSLMC Resolution. The petitioners' non-compliance with the requirement that CNAs must contain cost-cutting measures, proves that COA correctly disallowed the payment of the CNA incentives to the petitioners on such ground.

II

Based on the findings of COA-CP, which were not controverted in the petition, the petitioners paid CNA incentives on three separate instances in April, June, and December 2010.

Such timing of the grant of the CNA incentives also violated paragraph 5.7 of DBM Budget Circular No. 2006-1, which states that:

"5.7. The CNA Incentive for the year shall be paid as a one-time benefit after the end of the year, provided that the planned programs/activities/projects have been implemented and completed in accordance with the performance targets for the year." (Underscoring supplied)

The provision employed the word "shall," which similarly connotes a compulsory, as opposed to a suggestive or optional, application. In this case however, the grants were made not only once but thrice, specifically in April, June, and December 2010, in glaring disregard of the above DBM guidelines.

The public respondent also alleged in its comment that in Ngalob's letter dated March 23, 2011, he referred to the payment of CNA incentives in the first two quarters of the year. This was impliedly admitted by the petitioners in their reply.

Such undertakings are fatal to the petitioners' feigned compliance with DBM Budget Circular No. 2006-1. The payments of the CNA incentives during the first two quarters of the year patently violated the said DBM regulation, which explicitly requires that the CNA be paid as a onetime benefit for the year. Worse, petitioner Ngalob's statement that the practice will be stopped shows knowledge on his part that the same was not proper.

In light of the petitioners' failures to comply with the DBM budget circular, and to raise any argument in their petition to assail the ruling of respondent COA on the impropriety of the three separate payments of the CNA incentives in 2010, COA's disallowance is affirmed.

III

Petitioners argue that while Section 5 of PSLMC Resolution No. 4 listed the apportionment of savings, it was vague if not silent on exact implementation, as it did not specifically identify the manner by which an agency should remit 20% of its savings to the National Treasury. They then conclude that the NEDA-CAR reverted 20% of its savings to the National Treasury before releasing the CNA incentives.

We disagree.

Section 5 of the PSLMC Resolution, as reiterated under paragraph 6.1.3 of DBM Budget Circular No. 2006-1, provides:

"Section 5. Total savings, as defined in Section 3 and net of the priorities in Section 4, generated after the signing of the CNA shall be apportioned, as follows:

Fifty percent (50%) for CNA Incentive;

Thirty percent (30%) for improvement of working conditions and other programs and/or to be added as part of the CNA Incentive, as may be agreed upon in the CNA;

Twenty percent (20%) to be reverted to the General Fund for the national government agencies or to the General Fund of the constitutional commissions, state universities and colleges, and local government units concerned, as the case may be." (Underscoring supplied)

While petitioners alleged compliance, stating that the NEDA-CAR reverted P204,766.80 to the National Treasury, they failed to substantiate such claim as they did not show any competent evidence thereof. Other than a simple computation that the petitioners reverted 20% of the agency's savings to the national treasury prior to the grant of the CNA incentives, they did not present any document to prove the fulfillment of their remittance obligation.

It is basic in the rule of evidence that bare allegations, unsubstantiated by evidence, are not equivalent to proof. In short, mere allegations are not evidence. 19

Because of the failure of the petitioners to prove their allegation of compliance, there exists no basis to conclude that they indeed made the reversion of funds required under PSLMC Resolution No. 4 and DBM Budget Circular No. 2006-1. Hence, COA-CP properly disallowed the grant of the CNA incentives.

IV

Petitioners posit that COA-CP erroneously classified the accomplishments of the NEDA-CAR as part of their regular functions and cannot be considered as extraordinary. They allege that even with only 45 out of the 53 NEDA-CAR positions filled, the employees performed additional workloads, over and beyond their specified functions, to deliver the output requirements of the vacant plantilla positions, including that of the Assistant Regional Director. In conclusion, they deduce that NEDA-CAR realized savings because of the unexpended allotment on personnel services for the vacant plantilla positions, which savings were declared as the source of funding for the grant of the CEMA.

It is undisputed that the CEMA was made in the form of incentives to reward NEDA-CAR employees under the NEDA Awards and Incentives System. Paragraph V.B.6 of the pertinent guidelines states that:

"The CEMA is granted to an employee or team whose contributions, such as ideas, suggestions, inventions, discoveries or performance of functions result in savings in terms of man hours and cost or otherwise benefit the agency and government as a whole.

There is no limit to the number of recipients to this incentive. Likewise, nominations can be directly submitted to the Committee by the proponents of the productivity improvements projects/activities. The proposal should be properly documented and should highlight the expected benefits to be derived therefrom." (Underscoring supplied)

Here, COA-CP correctly disallowed the CEMA payments, since based on a careful reading of the NEDA-CAR Accomplishment Reports, the accomplishments were the results of the regular functions of the NEDA-CAR employees, and there was nothing in particular that can be considered as an extraordinary idea, suggestion, invention, or discovery that resulted in savings that benefitted the agency or the government in general.

Insistent, petitioners submit that the NEDA Incentives and Awards System Guidelines do not require that the employee's contribution should be extraordinary for purposes of entitlement to an award or incentive.

But as aptly pointed out by COA-CP, the said reports, at the most, only attest to the accomplishments of the NEDA-CAR personnel in the ordinary course of their functions. The mere fact that the agency was undermanned, as claimed by the petitioners, does not ipso facto transform their accomplishments into extraordinary feats that justify the grant of CEMA. Even granting, for the sake of argument, that the agency had a lean workforce, the NEDA-CAR employees were still duty-bound to perform and strive to achieve their targets, regardless of the size of the agency's manpower complement.

Furthermore, COA-CP determined that the records failed to show any nomination made to the NEDA Awards and Incentives System Committee to grant all NEDA-CAR personnel with the CEMA. This clearly runs counter to the NEDA Awards and Incentives System Guidelines.

Based on the failure of the petitioners to specify the ideas, suggestions, inventions, or discoveries that resulted in savings in terms of work-hours and cost, or otherwise benefited the NEDA-CAR or the government as a whole, as well as the omission of the petitioners in presenting the required documentation for the nomination of the recipients of the CEMA, COA therefore appropriately disallowed the questioned CNA incentives.

V

According to petitioners, the PSLMC resolution should not be interpreted with absolute literalness as to subvert its own objective of upholding the right of government employees to self-organization and collective bargaining and negotiations, as well as rewarding employees out of agency savings particularly in view of their contributions and productivity. They argue that inasmuch as the principle of social justice, which is inclined to give protection to labor, is applicable in this case, the doubt in the law should be interpreted in favor of the working class.

We find no credence in such contention.

Respondent COA did not disregard the intent of PSLMC Resolution No. 4 and the NEDA Awards and Incentives System Guidelines when it ensured strict compliance with their provisions. Petitioners' reliance on the principle of social justice, and the latter's inclination to resolve doubts in favor of labor, is misplaced because there is essentially no doubt to speak of. At the risk of redundancy, We emphasize that where the law speaks in clear and categorical language, there is no room for interpretation. There is only room for application. 20

As explained in the whereas clauses of PSLMC Resolution 4, the same was issued in response to SocialSecurity System v. COA, 21 where We disallowed the payment of a signing bonus since it formed an additional compensation prohibited under the Constitution, in order to clarify and harmonize the rules on the payment of CNA incentives.

Given the express purpose of PSLMC Resolution No. 4, its supposed intent cannot overcome its express provisions and those of the other issuances, namely AO No. 135 and DBM Budget Circular 2006-1, which particularly require the inclusion of cost-cutting measures in the CNA, the payment of the CNA as a one-time benefit after the year, and the reversion of 20% of agency savings to the general fund.

Relative to the CEMA, petitioners' assertion — that the NEDA Awards and Incentives System intended to grant awards and incentives to all employees — contradicts the express wording of its guidelines, which requires specific projects or activities, proper documentation, and indication of expected benefits. A contrary interpretation would mean unbridled discretion for the NEDA management to give the CEMA to all employees, who are merely performing their regular functions. The baseless grant of the CEMA, without any attempt of compliance with its own NEDA Awards and Incentives System Guidelines, cannot be justified by a simple proclamation of social justice.

Petitioners similarly entreat Us to rule against directing the concerned personnel and officials to refund the amounts they purportedly received in good faith. They raise good faith, maintaining that despite the absence of a provision on cost-cutting measures, the agency still generated savings precisely due to the awareness and efforts towards the conservation of resources, which ultimately enabled the agency to meet and deliver the targets, programs, and services approved in the annual budget at a lesser cost.

In this case, the presumption of good faith was overturned. As elucidated by COA-CP, an ND had previously been issued against NEDA-CAR in a similar case, disallowing in audit the CNA incentives granted for the year 2009. Having knowledge of such ND, petitioners should have already been forewarned that such CNA grants were unlawful and should therefore be discontinued. Instead, NEDA-CAR still granted CNA incentives in 2010, belying their assertion of good faith.

Assuming that petitioners accepted the payments in good faith, Ngalob, Samuel, and Laboy still cannot escape the consequences of their approval and release of the CNA incentives and CEMA, in view of the explicit provision of Section 8 of PSLMC Resolution No. 4, that:

"Section 8. Should the grant of CNA Incentive be disallowed by the Commission on Audit, the management shall be held personally responsible for the payment thereof." (Underscoring supplied)

The claimed intent and good faith of petitioners Ngalob, Samuel, and Laboy cannot prevail over the positive statement of the relevant issuance. Since they participated in the payment of the CNA incentives which were disallowed by COA, they should be held personally liable therefor.

Such ruling is consistent with Manila International Airport Authority v. COA, 22 where this Court held the officers who participated in the approval and release of the disallowed CNA incentives accountable for the refund thereof.

In Casal v. COA, 23 this Court similarly sustained the liability of certain officers of the National Museum who, notwithstanding their good faith, participated in approving and authorizing the incentive award granted to its officials and employees in violation of AOs. Even if the grant of the incentive award were not for a dishonest purpose as they claimed, the Court ruled that the patent disregard of the issuances of the President and the directives of COA amounted to gross negligence, making the approving officers liable for the refund thereof.

Based on Casal v. COA, 24 the respondent was justified in finding that petitioners Ngalob, Samuel, and Laboy, who also participated in the approval and release of the CEMA, should be held personally liable not only for the CNA incentive but also for the CEMA.

VI

All told, petitioners failed to prove that COA gravely erred when it disallowed the payment of CNA incentives and CEMA to the NEDA-CAR employees.

In the discharge of its constitutional mandate, COA is endowed with enough latitude to determine, prevent, and disallow irregular, unnecessary, excessive, extravagant, or unconscionable expenditures of government funds. It has the power to ascertain whether public funds were utilized for the purpose for which they had been intended. The 1987 Constitution has expressly made COA the guardian of public funds, vesting it with broad powers over all accounts pertaining to government revenue and expenditures and the uses of public funds and property, including the exclusive authority to define the scope of its audit and examination, establish the techniques and methods for such review, and promulgate accounting and auditing rules and regulations. 25

In a petition for certiorari under Rule 64, in relation to Rule 65 of the Rules of Court, the primordial issue to be resolved is whether the respondent tribunal committed grave abuse of discretion amounting to lack or excess of jurisdiction in issuing the assailed resolution. The term "grave abuse of discretion" is defined as a capricious and whimsical exercise of judgment so patent and gross as to amount to an evasion of a positive duty or a virtual refusal to perform a duty enjoined by law, as where the power is exercised in an arbitrary and despotic manner because of passion or hostility. Grave abuse of discretion arises when a court or tribunal violates the Constitution, the law or existing jurisprudence. 26

The burden is on the part of the petitioner to prove not merely reversible error, but grave abuse of discretion amounting to lack or excess of jurisdiction on the part of the public respondent issuing the impugned order. Mere abuse of discretion is not enough; it must be grave. 27

Significantly, it is the general policy of the Court to sustain the decisions of administrative authorities, especially one that was constitutionally created like herein respondent COA, not only on the basis of the doctrine of separation of powers, but also of their presumed expertise in the laws they are entrusted to enforce. It is, in fact, an oft-repeated rule that findings of administrative agencies are accorded not only respect but also finality when the decision and order are not tainted with unfairness or arbitrariness that would amount to grave abuse of discretion. 28

In this case, petitioners failed to overcome the burden of proving that COA committed grave abuse of discretion amounting to lack or excess of jurisdiction. On the contrary, COA lawfully disallowed the payment of CNA incentives and CEMA to petitioners in fulfillment of its duties as guardian of public funds.

As a corollary, petitioners likewise failed to prove their entitlement to injunctive relief.

VII

Relative to the liability of the approving/certifying officers and payees/recipients for the return of the disallowed payment of CNA incentives and CEMA, petitioners implore Us to rule against directing the refund of the amounts they received allegedly in good faith. In this regard, the meticulous and comprehensive discourse of this Court in Madera v. COA29(Madera) is illuminating.

In Madera, it was held that "personal liability to return the disallowed amounts must be understood as civil liability based on the loss incurred by the government because of the transaction, while administrative or criminal liability may arise from irregular or unlawful acts attending the transaction. This should be the starting point of determining who must return. The existence and amount of the loss and the nature of the transaction must dictate upon whom the liability to return is imposed." 30

Nonetheless, since the provisions covering the civil liability of officers for unlawful expenditures are situated in Book I, Chapter 9, Sections 38 and 39 of the Administrative Code of 1987, "the liability is inextricably linked with the administrative law sphere. Thus, the civil liability provided under these provisions is hinged on the fact that the public officer performed his official duties with bad faith, malice, or gross negligence." For these errant approving and certifying officers, Section 43 of the same code additionally holds them solidarily liable for amounts that they may or may not have received, but have been received by the payees, "considering that the payees would not have received the disallowed amounts if it were not for the officers' irregular discharge of their duties. 31

As for the civil liability of payees, "being civil in nature, the liability of officers and payees for unlawful expenditures provided in the Administrative Code of 1987 will have to be consistent with civil law principles such as solutio indebiti and unjust enrichment. These civil law principles support the propositions that (1) the good faith of payees is not determinative of their liability to return; and (2) when the Court excuses payees on the basis of good faith or lack of participation, it amounts to a remission of an obligation at the expense of the government." 32 These principles have been applied by this Court with respect to disallowed benefits given to government employees. 33 COA similarly applies the principle of solutio indebiti to require the return from payees regardless of good faith. 34

We acknowledge that retention by passive payees of disallowed amounts received in good faith has been previously justified by their lack of participation in the disbursement. "However, this justification is unwarranted because a payee's mere receipt of funds not being part of the performance of his official functions still equates to him unduly benefiting from the disallowed transaction; this gives rise to his liability to return." 35

Moreover, both COA Circular Nos. 2009-006 dated September 15, 2009 36 and 94-001 dated January 20, 1994 37 explicitly define a transaction as an event or condition the recognition of which gives rise to an entry in the accounting records. To a certain extent, therefore, payees always do have an indirect "involvement" and "participation" in the transaction where the benefits they received are disallowed because the accounting recognition of the release of funds and their mere receipt thereof results in the debit against government funds in the agency's account and a credit in the payees favor. Notably, when COA includes payees as persons liable in an ND, the nature of their participation is stated as "received payment." . . . [T]he loss incurred by the government stated in the ND as the disallowed amount corresponds to the amounts received by the payees. Thus, consistent with the application of civil law principles on unjust enrichment and solutio indebiti, the return by payees primarily rests upon this conception of a payee's undue receipt of amounts as recognized within the government's auditing framework. 38

Subsequent to having established that payees who receive unlawful or undue payment, regardless of good faith, are liable for the return of the amounts they received, it is worth noting that "in situations where officers are covered . . . either by presumption or by proof of having acted in good faith, in the regular performance of their official duties, and with the diligence of a good father of a family, payees remain liable for the disallowed amount unless the Court excuses the return. For the same reason, any amounts allowed to be retained by payees shall reduce the solidary liability of officers found to have acted in bad faith, malice, and gross negligence. In this regard, Senior Associate Justice Estela Perlas-Bernabe coins the term "net disallowed amount" to refer to the total disallowed amount minus the amounts excused to be returned by the payees." 39

Guided by the foregoing principles, this Court pronounced the following rules on the return of disallowed amounts:

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. 40

Applying the aforementioned standards to the present case, the Court holds that the approving and certifying officers need to refund the disallowed amounts inasmuch as they acted in bad faith, malice, or gross negligence.

To reiterate, CNA incentives were granted by NEDA-CAR to its employees during the immediately preceding year and COA issued disallowances against the same. This patently disproves the petitioners' claim of good faith, as the ND issued by COA against identical allowances for the previous year should have raised questions in the petitioners' minds regarding the lawfulness of their grant. At the very least, the existence of a prior ND for 2009 should have already prompted the petitioners to exercise an increased level of diligence in ensuring that the 2010 incentives strictly comply with the laws and regulations governing their grant.

Indeed, unless an ND becomes final, the continued grant of a benefit or allowance should not automatically destroy the presumption of good faith on the part of the approving/certifying officers, especially when there is sufficient or, at the very least, colorable legal basis for such grant. 41 In the present case however, there wasn't even a discernible basis for the incentive. As discussed, both the CNA incentives and CEMA were issued and released without due compliance with categorical legal requirements. Coupled with petitioners' blatant disregard of the ND pertaining to an earlier audit period, their nonchalance as to the requirements, under the exact same laws and regulations relied upon for the grant of the questioned incentives, inevitably connotes bad moral judgment and/or dishonest purpose on the part of petitioners.

Thus, the approving and certifying officers are subject to civil liability for the disallowance. In light of their bad faith, malice, or gross negligence, they are held solidarily liable for the return of the total disallowed amount. As for the payees, the Court rules that they are individually liable to return the amounts they respectively received. Unfortunately for the recipients, no case was made to prove that requiring them to return the said amounts will cause them undue prejudice.

WHEREFORE, premises considered, the petition, with prayer for the issuance of a temporary restraining order or writ of preliminary injunction, is DISMISSED for lack of merit, and COA-CP Decision No. 2018-048 dated June 8, 2018, which sustained COA-CP Decision No. 2017-174 dated June 15, 2017, is AFFIRMED. Accordingly, petitioners Juan B. Ngalob, Herminia B. Samuel, and Paterno C. Laboy, in their capacity as approving and certifying officers of the NEDA-CAR, are found SOLIDARILY LIABLE for the total disallowed amount, while the payees are in turn DIRECTED to refund the amounts they respectively received as CNA incentives and CEMA for 2010." Leonen, J., on official leave. (16)

By authority of the Court:

(SGD.) MARIFE M. LOMIBAO-CUEVASClerk of Court

 

Footnotes

1.Rollo, pp. 3-21.

2.Id. at 30.

3.Id. at 31-37.

4.Id.; and id. at 39-41.

5.Id. at 43-45.

6.Id. at 46-47.

7.Id. at 42.

8.Id. at 31-37.

9.Id. at 30.

10.Rollo, p. 20.

11.Id. at 106-132.

12.Id. at 144-151.

13.Id. at 1.

14. 779 Phil. 225, 244-245 (2016).

15. Adopted and approved on 19 May 2013.

16. Adopted and approved on 27 December 2005.

17.Manila International Airport Authority v. Commission on Audit, 681 Phil. 644, 661 (2012).

18.Garcia y Fernandez v. People, G.R. No. 252815, February 17, 2021 citing Cebu Portland Cement Company v. Municipality of Naga, Cebu, 133 Phil. 695, 699 (1968), and Ruben E. Agpalo, Statutory Construction, p. 62 (2003).

19.Villarama v. Guno, 838 Phil. 236, 244-246 (2018), citing Government Service Insurance System v. Prudential Guarantee and Assurance, Inc., 721 Phil. 740, 753-754 (2013).

20.Garcia y Fernandez v. People, supra note 16.

21. 433 Phil. 946 (2002).

22.Supra note 15 at 668.

23.Casal v. Commission on Audit, 538 Phil. 634, 644 (2006).

24.Id.

25.Metropolitan Waterworks and Sewerage System v. Commission on Audit, 821 Phil. 117, 138 (2017).

26.Albania v. Commission on Elections, 810 Phil. 470, 477 (2017).

27.Manila International Airport Authority v. Commission on Audit, supra note 15 at 667.

28.Daraga Press, Inc. v. Commission on Audit, 760 Phil. 391, 409 (2015) citing Yap v. Commission on Audit, 633 Phil. 174, 195 (2010).

29. G.R. No. 244128, September 8, 2020.

30.Id.

31.Id. Citations omitted.

32.Id.

33.Id., citing Government Service Insurance System v. Commission on Audit (Resolution), 484 Phil. 507-523 (2004).

34.Madera v. Commission on Audit, supra note 20, citing Jalbuena v. Commission on Audit, G.R. No. 218478, June 19, 2018, Development Bank of the Philippines v. Commission on Audit, 835 Phil. 268, 275 (2018), and Montejo v. Commission on Audit, 837 Phil. 193, 198 (2018).

35.Madera v. Commission on Audit, supra note 27.

36. Prescribing the Use of the Rules and Regulations on Settlement of Accounts.

37. Prescribing the Use of the Manual on Certificate of Settlement and Balances.

38.Madera v. Commission on Audit, supra note 27, underscoring and emphasis in the original.

39.Madera v. Commission on Audit, supra note 27, as coined by Senior Associate Justice Estela Perlas-Bernabe in her Separate Concurring Opinion.

40.Id.

41.Id.