The Importance of Exhausting Administrative Remedies Before Seeking Judicial Review

Commission on Audit v. Ferrer, G.R. No. 218870, November 24, 2020

Imagine a scenario where a local government official, after approving several expenditures, finds himself facing notices of disallowance from the Commission on Audit (COA). His immediate reaction might be to seek judicial intervention, hoping for a quick resolution. However, this approach could lead to a prolonged legal battle, as illustrated by the case of former Camarines Sur Governor Luis Raymund F. Villafuerte, Jr. This case underscores a crucial legal principle: before resorting to courts, one must exhaust all administrative remedies, especially when dealing with the specialized jurisdiction of the COA.

In this case, Villafuerte challenged the COA’s notices of disallowance directly in a Regional Trial Court (RTC), bypassing the administrative appeals process. The Supreme Court’s ruling not only clarified the COA’s primary jurisdiction over audit-related issues but also emphasized the importance of adhering to procedural requirements before seeking judicial review.

Legal Context: The Role and Jurisdiction of the Commission on Audit

The Commission on Audit, as established by the 1987 Philippine Constitution, holds a pivotal role in safeguarding public funds. Article IX, Section 2(1) of the Constitution states, “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.” This broad mandate is further supported by Commonwealth Act No. 327 and Presidential Decree No. 1445, which grant the COA authority over money claims against government agencies.

The doctrine of primary jurisdiction dictates that matters requiring specialized knowledge, such as auditing and procurement, should first be addressed by the appropriate administrative body. In the case of government audits, this body is the COA. The rationale behind this doctrine is to ensure that technical and intricate matters of fact are resolved by experts before judicial intervention.

Consider a scenario where a local government unit procures services for a public project. If the COA finds irregularities in the procurement process, the local government must first appeal the COA’s findings within the agency before seeking judicial review. This ensures that the COA can fully exercise its expertise and authority over such matters.

Case Breakdown: From Audit to Supreme Court Ruling

The case began when the COA issued ten notices of disallowance against various expenditures approved by Villafuerte during his tenure as Governor of Camarines Sur. These expenditures ranged from architectural services to security services and infrastructure projects. Instead of appealing these notices within the COA, Villafuerte filed petitions for certiorari and prohibition directly with the RTC, arguing that the notices were improper.

The RTC initially issued a temporary restraining order and later a writ of preliminary injunction against the COA’s implementation of the notices. The COA, represented by its auditors, moved to dismiss these petitions on the grounds of lack of jurisdiction and failure to exhaust administrative remedies. The RTC denied these motions, leading the COA to elevate the matter to the Supreme Court.

The Supreme Court’s ruling emphasized several key points:

• The COA has primary jurisdiction over issues involving disallowances, as mandated by the Constitution and relevant laws.
• Private individuals or entities must exhaust all administrative remedies before seeking judicial review, which in this case meant appealing the notices of disallowance to the COA Commission Proper.
• The RTC lacked jurisdiction to review the COA’s actions directly, as only the Supreme Court can review decisions of constitutional commissions under Article IX, Section 7 of the Constitution.

The Court quoted, “The principle of primary jurisdiction holds that if a case is such that its determination requires the expertise, specialized training and knowledge of the proper administrative bodies, relief must first be obtained in an administrative proceeding before a remedy is supplied by the courts.” It further stated, “The authority to conduct a limited judicial review of acts, decisions or resolutions of the COA is only vested by law to this Court.”

Practical Implications: Navigating COA Disallowances

This ruling has significant implications for government officials and entities facing COA disallowances. It reinforces the necessity of following the proper administrative channels before seeking judicial relief. Failing to do so can result in the disallowance becoming final and executory, as happened in this case.

For businesses and individuals dealing with government contracts, understanding the COA’s role and the importance of timely appeals is crucial. If faced with a notice of disallowance, they should:

• Immediately appeal the notice within the COA within the six-month period prescribed by law.
• Seek legal advice to ensure compliance with all procedural requirements.
• Avoid premature judicial action, which could lead to the disallowance becoming final.

Key Lessons:

• Exhaust all administrative remedies before seeking judicial review.
• Understand the COA’s primary jurisdiction over audit-related issues.
• Adhere to procedural timelines to prevent disallowances from becoming final.

Frequently Asked Questions

What is the Commission on Audit’s role in the Philippines?

The COA is responsible for auditing government accounts to ensure proper use of public funds and property.

What does ‘exhaustion of administrative remedies’ mean?

It refers to the requirement that all available administrative processes must be utilized before seeking judicial review.

Can a disallowance by the COA be appealed?

Yes, a disallowance can be appealed to the COA Commission Proper within six months from receipt of the notice.

What happens if administrative remedies are not exhausted?

Failure to exhaust administrative remedies can result in the disallowance becoming final and executory, as seen in this case.

Can the RTC review COA decisions?

No, only the Supreme Court has the authority to review decisions of constitutional commissions like the COA.

What should I do if I receive a notice of disallowance from the COA?

Immediately consult with a legal expert and file an appeal with the COA within the prescribed period.

ASG Law specializes in government contracts and administrative law. Contact us or email hello@asglawpartners.com to schedule a consultation.