The Supreme Court affirmed the Commission on Audit’s (COA) disallowance of Institutional Meeting Expenses (IME) paid to the Board of Directors (BOD) of the Philippine Health Insurance Corporation (PhilHealth). The Court held that the PhilHealth charter does not authorize the grant of additional allowances to the BOD beyond per diems. This decision underscores the principle that government-owned and controlled corporations (GOCCs) must adhere strictly to the limitations defined in their charters regarding compensation and benefits, safeguarding public funds and ensuring their proper allocation.

PhilHealth’s Board Perks: Are They Justified Under the Law?

This case revolves around the propriety of Institutional Meeting Expenses (IME) granted to the members of the Board of Directors (BOD) of the Philippine Health Insurance Corporation (PhilHealth). The Commission on Audit (COA) disallowed these expenses, leading to a legal battle that reached the Supreme Court. At the heart of the issue is whether PhilHealth’s BOD has the authority to grant additional allowances and benefits beyond the per diems explicitly mentioned in its charter. This decision involved a detailed examination of Republic Act (RA) No. 7875, the law that established PhilHealth, and its subsequent amendments. The Court needed to determine if PhilHealth overstepped its authority in providing these allowances, and if the recipients should be required to return the disallowed amounts.

The legal framework rests primarily on the interpretation of RA No. 7875, specifically Section 18(d), which pertains to the allowances and per diems of the BOD members. The COA argued that this section only authorizes per diems for each meeting actually attended. The phrase “allowances and per diems” in the heading of Sec. 18(d) cannot be interpreted as granting PhilHealth authority to provide additional allowances. The Supreme Court supported this view, applying the principle of statutory construction known as expressio unius est exclusio alterius. This principle means that the express mention of one thing implies the exclusion of others. Since the law specifically mentions per diems but remains silent on other allowances, it indicates that the legislature intended to limit the compensation of the BOD members to per diems alone. To further illustrate the principle, the Court stated, “If the legislature intended to give PhilHealth the authority to grant allowances to the BOD other than the per diems, it could have facilely mentioned so.”

PhilHealth, however, argued that its fiscal autonomy under Section 16(n) of RA No. 7875 grants it the authority to fix the compensation of its personnel, including the BOD members. Section 16(n) states that the Corporation has the power “to organize its office, fix the compensation of and appoint personnel as may be deemed necessary and upon the recommendation of the president of the Corporation.” The Court rejected this argument, referencing its previous ruling in PhilHealth v. COA, which emphasized that PhilHealth’s power to fix compensation is not absolute and is subject to the standards laid down by applicable laws. The Supreme Court said, “To sustain petitioners’ claim that it is the PHIC, and PHIC alone, that will ensure that its compensation system conforms with applicable law will result in an invalid delegation of legislative power, granting the PHIC unlimited authority to unilaterally fix its compensation structure. Certainly, such effect could not have been the intent of the legislature.” The Court clarified that this power pertains to the compensation of PhilHealth’s personnel and not the BOD members, who are governed by separate provisions regarding their compensation.

Furthermore, the Court distinguished between appointive and ex officio members of the BOD. Appointive members are those selected by proper authority, while ex officio members serve by virtue of their existing office. The Court emphasized that the constitutional prohibition against receiving double compensation applies to ex officio members. They are not entitled to additional compensation for their services on the BOD. To illustrate the point, the Court explained: “The reason is that these services are already paid for and covered by the compensation attached to his principal office. It should be obvious that if, say, the Secretary of Finance attends a meeting of the Monetary Board as an ex-officio member thereof, he is actually and in legal contemplation performing the primary function of his principal office in defining policy in monetary and banking matters, which come under the jurisdiction of his department. For such attendance, therefore, he is not entitled to collect any extra compensation, whether it be in the form of a per diem or an honorarium or an allowance, or some other such euphemism. By whatever name it is designated, such additional compensation is prohibited by the Constitution.”

PhilHealth also attempted to justify the IME by referencing Department of Budget and Management (DBM) Circular No. 2007-510. This circular allows ex officio members of governing boards to receive reimbursement for actual transportation and miscellaneous expenses. The Court clarified that this provision only allows for reimbursements appropriated in the GAA of their respective departments. However, the Supervising Auditor observed that PhilHealth irregularly charged these expenses to other accounts in order to circumvent the limitations set by the 2010 GAA. As the Court ruled, “There is no cogent reason to overturn these findings of the Supervising Auditor, which PhilHealth failed to refute squarely in their comment to the AOM.”

Finally, the Court addressed PhilHealth’s defense that the BOD members acted in good faith when receiving the IME, arguing that they should not be required to refund the disallowed amounts. The Supreme Court rejected this argument, pointing to the fact that the COA had already disallowed similar reimbursements. This meant the BOD members knew or should have known that the IME lacked legal basis. The Court explained that good faith requires “honesty of intention, and freedom from knowledge of circumstances which ought to put the holder upon inquiry; an honest intention to abstain from taking any unconscientious advantage of another, even though technicalities of law, together with absence of all information, notice, or benefit or belief of facts which render transactions unconscientious.”

The principle of expressio unius est exclusio alterius played a crucial role in the Court’s decision. The Court applied the principle to emphasize the intention of legislature when drafting Section 18(d) of RA 7875. By specifically mentioning per diems, it implied that no other benefits or allowances were authorized. The Court also reiterated the importance of fiscal responsibility and the proper use of public funds, especially in government-owned and controlled corporations (GOCCs). This case reinforces the principle that GOCCs must adhere strictly to their charters and applicable laws when determining the compensation and benefits of their board members. This ensures transparency and accountability in the management of public resources.

FAQs

What was the key issue in this case?	The key issue was whether PhilHealth’s Board of Directors (BOD) had the authority to grant additional allowances and benefits beyond the per diems explicitly mentioned in its charter, RA No. 7875. The COA disallowed the Institutional Meeting Expenses (IME), arguing they lacked a legal basis.
What is per diem?	A per diem is a daily allowance paid to individuals for expenses incurred while performing their duties, often covering costs like meals and accommodations. It’s typically a fixed amount paid for each day of service, such as attending board meetings.
What does expressio unius est exclusio alterius mean?	Expressio unius est exclusio alterius is a principle of statutory construction. It means that the express mention of one thing implies the exclusion of others.
What is an ex officio member of a board?	An ex officio member is someone who is a member of a board by virtue of their position or office. These members typically do not receive additional compensation for serving on the board, as their existing salary covers their duties.
What is fiscal autonomy?	Fiscal autonomy refers to the independence of an entity in managing its financial resources. It typically includes the power to generate revenue, allocate funds, and control expenditures within the limits provided by law.
What was the COA’s basis for disallowing the expenses?	The COA disallowed the expenses because they found that PhilHealth’s charter, RA No. 7875, only authorized per diems and did not provide a legal basis for granting additional allowances. They also found that PhilHealth circumvented GAA limitations.
Why did the Supreme Court reject the good faith defense?	The Supreme Court rejected the good faith defense because the COA had previously disallowed similar reimbursements. This meant the BOD members knew or should have known that the IME lacked legal basis.
What is the significance of this ruling?	This ruling reinforces the principle that GOCCs must adhere strictly to their charters and applicable laws when determining the compensation and benefits of their board members. It emphasizes transparency and accountability in the management of public resources.

This case serves as a reminder to government-owned and controlled corporations to adhere strictly to the provisions of their charters and other relevant laws when it comes to granting benefits and allowances to their board members. The decision underscores the importance of ensuring that public funds are used responsibly and in accordance with legal mandates. This promotes transparency, accountability, and good governance in the management of public resources.

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: PHILHEALTH vs. COA, G.R. No. 222838, September 04, 2018