The Importance of Proper Documentation for Reimbursement Claims in Government Agencies

National Transmission Corporation v. Commission on Audit, G.R. No. 244193, November 10, 2020

Imagine a government official diligently working to keep the lights on across the nation, but when it comes time to claim back expenses incurred in the line of duty, they find themselves in a legal tangle. This is precisely what happened with the National Transmission Corporation (TransCo) when their claims for extraordinary and miscellaneous expenses (EME) were disallowed by the Commission on Audit (COA). The central question in this case was whether a simple certification could suffice as proof for reimbursement claims, and what the consequences would be for those involved in the process.

The case revolved around TransCo’s attempt to reimburse its officials for EME in 2010. The COA disallowed these payments because they were not supported by receipts, only by certifications. This led to a legal battle over the validity of these certifications and the liability of those who approved and received the payments.

Legal Framework Governing Extraordinary and Miscellaneous Expenses

In the Philippines, government agencies, including government-owned and controlled corporations (GOCCs) like TransCo, are governed by strict rules regarding the disbursement of funds for extraordinary and miscellaneous expenses. These rules are primarily outlined in COA Circular No. 2006-001, which aims to prevent irregular, unnecessary, excessive, or extravagant expenditures.

COA Circular No. 2006-001 stipulates that EME claims must be supported by receipts or other documents evidencing disbursement. The circular emphasizes that payments must be made on a non-commutable or reimbursable basis, and no portion of the funds can be used for salaries, wages, allowances, or other expenses covered by separate appropriations.

The term “extraordinary and miscellaneous expenses” refers to costs incurred by officials for activities such as meetings, seminars, official entertainment, public relations, and other similar purposes. These expenses are crucial for officials to perform their duties effectively, but they must be carefully documented to ensure transparency and accountability.

Consider a scenario where a government official attends a crucial international conference to represent the country’s interests in the energy sector. The expenses for travel, accommodation, and official dinners are considered EME. However, without proper documentation, such as receipts, the official might face challenges in getting reimbursed.

The Journey of TransCo’s Disallowed EME Claims

TransCo, established under the Electric Power Industry Reform Act (EPIRA), assumed the electrical transmission functions of the National Power Corporation. In 2010, TransCo officials claimed EME based on certifications rather than receipts, a practice they believed was compliant with COA rules.

In June 2011, the COA issued a Notice of Disallowance (ND) for these payments, citing a lack of supporting receipts. TransCo appealed this decision to the COA Corporate Government Sector (COA-CGS), which initially overturned the ND, accepting certifications as valid supporting documents.

However, upon automatic review, the COA reversed this decision in April 2017, stating that certifications were insufficient under COA Circular No. 2006-001. The COA emphasized that certifications must substantiate the payment of an account payable, akin to receipts, to be valid.

TransCo challenged this ruling through a Petition for Certiorari, arguing that the officials acted in good faith and that the payments were not made on a commutable basis. The Supreme Court, in its decision, upheld the COA’s disallowance but modified the liability aspect.

Here are key excerpts from the Supreme Court’s reasoning:

“[T]he 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…”

“The approving/certifying officers who are recipients of the disallowed amounts are liable to return the same pursuant to our pronouncement in Madera that ‘recipients — whether approving or certifying officers or mere passive recipients — are liable to return the disallowed amounts respectively received by them…”

The procedural steps involved in this case were:

1. TransCo officials claimed EME based on certifications in 2010.
2. The COA issued a Notice of Disallowance in 2011.
3. TransCo appealed to the COA-CGS, which initially overturned the ND in 2014.
4. The COA reversed the COA-CGS decision in 2017.
5. TransCo filed a Petition for Certiorari with the Supreme Court.
6. The Supreme Court upheld the disallowance but modified the liability in 2020.

Practical Implications and Key Lessons

This ruling underscores the importance of strict adherence to COA guidelines for EME claims. Government agencies must ensure that all claims are supported by receipts or documents that clearly evidence disbursement. This case also highlights the accountability of officials in handling public funds.

For businesses and individuals dealing with government agencies, it is crucial to understand that certifications alone may not suffice for reimbursement claims. Proper documentation is essential to avoid disallowances and potential liabilities.

Key Lessons:

• Always support EME claims with receipts or detailed documents evidencing disbursement.
• Understand the specific COA circulars and guidelines applicable to your agency or organization.
• Be aware of the liability implications for approving and certifying officers, even if acting in good faith.

Frequently Asked Questions

What are extraordinary and miscellaneous expenses?

Extraordinary and miscellaneous expenses are costs incurred by government officials for activities such as meetings, seminars, and official entertainment that are necessary for their roles but not covered by regular budget allocations.

Why did the COA disallow TransCo’s EME claims?

The COA disallowed the claims because they were supported only by certifications, which do not meet the requirement of COA Circular No. 2006-001 for receipts or documents evidencing disbursement.

Can certifications ever be used for EME claims?

Certifications can be used if they clearly substantiate the payment of an account payable, similar to receipts. However, a general declaration of expenses incurred is not sufficient.

What are the liabilities for approving and certifying officers?

Approving and certifying officers who acted in good faith are not liable for the disallowed amount. However, they are liable for amounts they received as payees unless the expenses were genuinely for services rendered.

How can government agencies avoid similar issues?

Agencies should ensure strict compliance with COA guidelines, maintain detailed records of expenses, and educate their officials on the proper procedures for EME claims.

ASG Law specializes in government procurement and auditing. Contact us or email hello@asglawpartners.com to schedule a consultation.