The Supreme Court has ruled that members of the Board of Directors of water districts are only entitled to receive per diems as compensation for their services, as expressly stated in Presidential Decree No. 198. This means they cannot receive additional allowances, bonuses, or other benefits beyond the per diem amount. This decision clarifies the scope of allowable compensation for individuals serving on water district boards and reinforces the Commission on Audit’s (COA) authority to disallow unauthorized disbursements of public funds.

Water Works and Wages: Did the Catbalogan Board Overstep Its Authority?

The Catbalogan Water District (CWD), like other water districts in the Philippines, was established under Presidential Decree (PD) 198, known as the Provincial Water Utilities Act of 1973. This law empowers local bodies to create water districts while also establishing the Local Water Utilities Administration (LWUA) to regulate them. In this case, the interim Board of Directors of CWD granted themselves various benefits, including Representation and Transportation Allowance (RATA), rice allowance, productivity incentives, anniversary bonuses, year-end bonuses, and cash gifts. The Commission on Audit (COA) questioned these payments, arguing they violated Section 13 of PD 198, which governs compensation for water district board members. This conflict raised a crucial legal question: Can water district board members receive compensation beyond the per diem authorized by law?

The COA disallowed the payments, citing Section 13 of PD 198, which stipulates that directors shall receive a per diem for each meeting attended, but “no director shall receive other compensation for services to the district.” The COA argued that LWUA Resolution No. 313, which authorized these additional benefits, was inconsistent with PD 198. Petitioners countered that LWUA had the authority to issue such resolutions and that the COA was overstepping its jurisdiction. The Supreme Court, however, upheld the COA’s authority to audit and disallow irregular disbursements of government funds.

The Court emphasized that the Constitution grants the COA the power to examine, audit, and settle all accounts pertaining to government revenue, receipts, and expenditures, including those of government-owned and controlled corporations (GOCCs) with original charters. Water districts fall under this category. The Court stated that the COA’s role is to ensure that government entities comply with laws and regulations when disbursing funds, and to disallow any illegal or irregular disbursements.

Sec. 2(1). The Commission on Audit shall have the power, authority, and duty to examine, audit, and settle all accounts pertaining to the revenue and receipts of, and expenditures or uses of funds and property, owned or held in trust by, or pertaining to the Government… including government-owned and controlled corporations with original charters…

Building on this principle, the Supreme Court rejected the petitioners’ argument that the COA encroached on the LWUA’s powers. Allowing an administrative agency’s resolution to override the COA’s constitutional mandate would undermine its ability to independently oversee government financial operations.

Furthermore, the Supreme Court found that Section 13 of PD 198 clearly prohibits any compensation beyond per diems. The Court cited a previous ruling, Baybay Water District v. Commission on Audit, which addressed a similar issue. This precedent further reinforces the view that “directors of water districts are authorized to receive only the per diem authorized by law and no other compensation or allowance in whatever form.”

However, the Court, drawing from Blaquera v. Alcala, recognized that the petitioners acted in good faith when receiving the additional allowances and bonuses, since there was no prior knowledge the payments were without legal basis at the time the payment was disbursed and received. Consequently, the Court ruled that the petitioners were not required to refund the disallowed amounts.

FAQs

What was the main issue in this case?	The main issue was whether members of the Catbalogan Water District’s interim Board of Directors could receive additional allowances and bonuses beyond the per diem authorized by Presidential Decree No. 198.
What is a ‘per diem’?	A per diem is a daily allowance paid to cover expenses for each day a person is working away from their home or regular place of business. In this case, it’s the payment received by board members for attending board meetings.
What did the Commission on Audit (COA) decide?	The COA disallowed the payment of additional allowances and bonuses, arguing that they violated Section 13 of PD 198, which limits compensation to per diems. The Supreme Court affirmed the COA’s decision.
What is Presidential Decree No. 198?	Presidential Decree No. 198, also known as the Provincial Water Utilities Act of 1973, governs the creation, regulation, and operation of water districts in the Philippines. It also specifies the allowable compensation for members of the board of directors of these districts.
Did the board members have to return the money they received?	No, the Supreme Court ruled that the board members did not have to refund the allowances and bonuses because they had received them in good faith, believing they were authorized by LWUA Board Resolution No. 313.
What is the role of the Local Water Utilities Administration (LWUA)?	The LWUA is a national agency that regulates and controls water districts created under PD 198. It is tasked with ensuring that water districts provide optimal public service.
Why did the Supreme Court uphold the COA’s decision?	The Supreme Court upheld the COA’s decision because the Constitution grants the COA the authority to audit government agencies and disallow illegal or irregular disbursements of public funds, and because PD 198 expressly prohibits compensation beyond per diems.
What does this ruling mean for other water districts in the Philippines?	This ruling clarifies that members of the boards of directors of all water districts in the Philippines are only entitled to receive per diems as compensation for their services. They cannot receive additional allowances or bonuses unless explicitly authorized by law.

This case serves as a reminder of the importance of adhering to established legal frameworks when dealing with public funds. The Supreme Court’s decision underscores the COA’s vital role in safeguarding government resources and ensuring transparency and accountability in the management of water districts. While the petitioners were not required to refund the disallowed amounts due to good faith, this ruling sets a clear precedent for future compensation practices.

For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
Source: De Jesus v. COA, G.R. No. 149154, June 10, 2003