ASG Law

Tag: Honoraria

  • Per Diem vs. Honoraria: Defining Compensation Limits for Government Board Members

    The Supreme Court has ruled that government officials cannot receive additional compensation in the form of honoraria if they are already receiving a per diem allowance, as this would violate established laws and regulations. This decision clarifies the boundaries of permissible compensation for members of government boards, emphasizing adherence to prescribed limits and preventing unauthorized financial benefits. It reinforces the importance of transparency and accountability in public service, ensuring that government funds are used appropriately and in accordance with legal provisions.

    ICAB’s Extra Pay: Was Reviewing Adoption Files Beyond the Call of Duty?

    This case revolves around the Inter-Country Adoption Board (ICAB), the central authority in the Philippines for inter-country adoptions. In this case, Bernadette Lourdes B. Abejo, the Executive Director of the ICAB, challenged the Commission on Audit’s (COA) disallowance of additional remuneration paid to ICAB members. The COA disallowed the payments, arguing they lacked legal basis and violated existing regulations. The core legal question is whether ICAB members, who already receive a per diem, could also be paid honoraria for reviewing prospective adoptive parents’ (PAPs) dossiers, a task they undertook to address a heavy workload. The Supreme Court was asked to determine if this additional compensation was justified or if it ran afoul of the laws governing compensation for government officials.

    The ICAB was created under Republic Act No. 8043 (RA 8043), also known as the “Inter-Country Adoption Act of 1995.” Its members include the Secretary of the Department of Social Welfare and Development (DSWD) as ex-officio Chairman, along with six other members appointed by the President. An Inter-Country Adoption Placement Committee (ICPC) operates under the Board’s direction, managing the selection and matching of applicants and children. From 2008 to 2010, the ICAB experienced a surge in applications, prompting its members to assist the ICPC with reviewing PAPs Dossiers. In response to this increased workload, Undersecretary Luwalhati F. Pablo authorized additional remuneration for ICAB members: P250.00 for each reviewed application, later increased to P500.00.

    However, after an audit, the COA issued a Notice of Disallowance (ND) for P162,855.00, citing the lack of legal basis, conflict with Department of Budget and Management (DBM) Budget Circular (BC) No. 2003-5, and Section 49 of RA 9970. The COA also pointed out that the DSWD Legal Service had denied the grant of honoraria to ICAB members and that Section 5 of RA 8043 limited compensation to a per diem of P1,500.00 per meeting. Abejo, as the Executive Director and approving officer, was identified as liable for the disallowed amount. The COA Proper affirmed the disallowance, stating that the additional remuneration violated Section 5 of RA 8043 and DBM BC No. 2003-5, which prohibits honoraria for those already receiving per diem.

    A key procedural point arose: Abejo did not file a motion for reconsideration of the COA Proper’s decision before filing a certiorari petition with the Supreme Court. Generally, failure to move for reconsideration is fatal to a certiorari petition because it deprives the tribunal of the opportunity to correct its errors. However, the Supreme Court recognized an exception: when the issues raised in the certiorari proceedings have already been addressed by the lower court. Because Abejo raised the same issues before the COA Proper, the Court proceeded to resolve the petition on its merits.

    The Supreme Court emphasized that while government employees may be compensated for work outside their regular functions, such compensation must comply with applicable laws and rules. The Court quoted Sison v. Tablang, which states that while honoraria are given in appreciation for services, their payment must be circumscribed by the DBM’s rules and guidelines. In this case, RA 8043 and DBM BC No. 2003-5 prevented the ICAB members from receiving additional compensation. Section 5 of RA 8043 limits the per diem ICAB members can receive, and Item 4.3 of DBM BC 2003-5 prohibits honoraria for officers already receiving per diem.

    The Court rejected the argument that the Intercountry Adoption Board Manual of Operation authorized the honoraria because Section 5 of the manual applied only to members of the ICPC, not the ICAB. Further, the manual itself was subordinate to express provisions of law and auditing rules. It states: “A Committee member shall receive an honorarium which shall be determined by the Board subject to usual accounting and auditing rules and regulations.” The Court also dismissed the claim that the ICAB members’ work constituted a “special project” compensable under Section 49 of RA 9970. To qualify as a special project, the undertaking must be a duly authorized inter-office or intra-office endeavor outside the regular functions of the agency, reform-oriented or developmental in nature, and contributory to improved service delivery.

    In Ngalob v. Commission on Audit, the Supreme Court laid out specific requirements for a “special project,” including an approved project plan with defined objectives, outputs, timelines, and cost estimates. Abejo failed to demonstrate any approved special project plan, leaving the Court without a basis to determine if the ICAB members’ dossier review qualified as such.

    Paragraph 4.3 of DBM Circular No. 2007-2 is explicit in requiring that a special project plan should be “prepared in consultation with all personnel assigned to a project and approved by the department/agency/lead agency head,” containing the following:

    • title of the project;
    • objectives of the project, including the benefits to be derived therefrom;
    • outputs or deliverables per project component;
    • project timetable;
    • skills and expertise required;
    • personnel assigned to the project and the duties and responsibilities of each;
    • expected deliverables per personnel assigned to the project per project component at specified timeframes; and
    • cost by project component, including the estimated cost for honoraria for each personnel based on man-hours to be spent in the project beyond the regular work hours; personnel efficiency should be a prime consideration in determining the man-hours required.

    Despite upholding the disallowance, the Supreme Court absolved Abejo from liability to return the disallowed amount. The Court applied the Madera v. Commission on Audit rules, which provide that approving and certifying officers are not civilly liable if they acted in good faith, in the regular performance of official functions, and with the diligence of a good father of the family. The Madera ruling provides a definitive set of rules in determining the liability of government officers and employees:

    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.

    The Court found that Abejo had acted in good faith because there was no prior disallowance of the same benefit against ICAB, and no precedent disallowing a similar case in jurisprudence. This decision underscores the importance of adhering to compensation limits for government officials, while also protecting those who act in good faith from personal liability. Lastly, the Court noted that the individual ICAB members who received the additional remuneration were not held liable in the ND, and this determination had already attained finality. The Court stated, “To disturb their exoneration is to violate the doctrine of immutability of final orders or judgments.”

    FAQs

    What was the key issue in this case? The key issue was whether members of the Inter-Country Adoption Board (ICAB), who already received a per diem, could also be paid honoraria for reviewing applications, and whether the Executive Director could be held liable for the disallowed amounts.
    What is a per diem? A per diem is a daily allowance given to government officials to cover expenses incurred while performing official duties, such as attending meetings. It is meant to cover costs like transportation, meals, and lodging.
    What are honoraria? Honoraria are payments given as a token of appreciation for services rendered, typically for special or additional tasks. They are not considered a salary but rather a voluntary donation in consideration of services.
    Why did the COA disallow the additional remuneration? The COA disallowed the payments because they lacked legal basis, conflicted with Department of Budget and Management (DBM) Budget Circular No. 2003-5, and violated Section 5 of RA 8043, which limits compensation to a per diem.
    What is the significance of DBM Budget Circular No. 2003-5? DBM Budget Circular No. 2003-5 provides guidelines on the payment of honoraria and stipulates that individuals already receiving a per diem are not eligible to receive honoraria for the same services.
    What did the Supreme Court rule regarding the disallowance? The Supreme Court affirmed the COA’s decision, ruling that the additional remuneration was correctly disallowed because it violated RA 8043 and DBM BC No. 2003-5. The Court emphasized that the existing laws prevent the ICAB member from receiving additional compensation for the work they have done reviewing the PAPs Dossiers.
    Why was the Executive Director absolved from liability? The Executive Director, Bernadette Lourdes B. Abejo, was absolved from liability because the Court found that she had acted in good faith, with no prior disallowance of the same benefit and no precedent disallowing a similar case in jurisprudence.
    What are the Madera Rules mentioned in the decision? The Madera Rules, established in Madera v. Commission on Audit, provide a framework for determining the liability of government officers and employees in cases of disallowed benefits. They specify that those who act in good faith and with due diligence are not held civilly liable.
    What was the Court’s ruling about the ICAB members who received the money? The individual ICAB members who received the additional remuneration were not held liable in the ND, and this determination had already attained finality. To disturb their exoneration is to violate the doctrine of immutability of final orders or judgments

    This case clarifies the importance of adhering to prescribed compensation limits for government officials. While acknowledging that additional responsibilities may warrant additional compensation, the ruling emphasizes that such compensation must be within the bounds of existing laws and regulations. The absolution of the Executive Director from personal liability underscores the protection afforded to public officials who act in good faith, even when errors in judgment occur.

    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: BERNADETTE LOURDES B. ABEJO VS. COMMISSION ON AUDIT, G.R. No. 251967, June 14, 2022

  • Honoraria for State University Board Members: Restrictions and Recoupment

    The Supreme Court has ruled that additional honoraria granted to members of governing boards of state universities and colleges (SUCs), sourced from the SUCs’ special trust funds, are unlawful. These funds, derived from tuition fees and other charges, must be used strictly for instruction, research, extension, or similar programs. Board members who approved and received such disallowed honoraria are now obligated to return the amounts, as the defense of good faith is no longer applicable. This decision reinforces fiscal responsibility and proper allocation of resources within state educational institutions.

    Tuition Fees or Board Perks? Examining Allowable Use of SUC Funds

    This case, Ricardo E. Rotoras v. Commission on Audit, arose from the practice of several state universities and colleges granting additional honoraria to their governing board members for attending meetings. These honoraria, beyond the standard per diem, were drawn from the universities’ special trust funds, which are primarily composed of tuition fees. The Commission on Audit (COA) disallowed these payments, arguing that they lacked legal basis and violated the permitted uses of the special trust funds. The central legal question before the Supreme Court was whether these additional honoraria were a legitimate use of the special trust funds under Republic Act No. 8292, the Higher Education Modernization Act of 1997.

    The petitioner, representing the Philippine Association of State Universities and Colleges, contended that the governing boards were empowered to grant these honoraria under Section 4(d) of Republic Act No. 8292. This section allows governing boards to disburse funds generated by the universities for programs or projects, notwithstanding any existing laws, rules, or regulations. They argued that board meetings and the resulting policies directly related to instruction, research, and extension activities. Furthermore, the petitioner invoked Section 36(10) of the Corporation Code, asserting the power to extend benefits to directors or trustees. Finally, they claimed good faith, relying on legal opinions from the Office of the Solicitor General that supported the grant of additional honoraria.

    In contrast, the Commission on Audit maintained that the additional honoraria were improperly charged against the special trust funds. The COA argued that Section 4(d) of Republic Act No. 8292 limits the use of these funds specifically to “instruction, research, extension, or other programs/projects of the university or college.” According to the COA, board meetings did not fall within these categories. They emphasized that members of governing boards were only entitled to per diem sourced from appropriations or savings, not from the special trust funds. The COA also refuted the claim of good faith, stating that the board members’ approval of their own honoraria was a self-serving act. Therefore, they should be held accountable for refunding the amounts received.

    The Supreme Court sided with the Commission on Audit. The Court emphasized that while Section 4(b) of Republic Act No. 8292 grants broad discretion in using appropriated funds, Section 4(d) specifically restricts the use of special trust funds. According to the ruling, “other programs/projects” must be of the same nature as instruction, research, or extension, applying the principle of ejusdem generis. The Court cited Benguet State University v. Commission on Audit, where it held that disbursements for rice subsidy and healthcare allowances did not fall under this category.

    Moreover, the Court noted that Republic Act No. 8292 already specifies the entitlements of board members attending meetings: compensation in the form of per diem and reimbursement of actual expenses. By implication, no other benefits or allowances were authorized. The Court rejected the argument that board meetings were integral to instruction, research, and extension, stating that policymaking extended to all matters necessary to carry out the university’s functions, not just academic programs. To allow the additional honoraria would create an absurd situation where entitlement would vary based on the meeting agenda.

    Building on this principle, the Court then addressed the issue of refund. Historically, public officials acting in good faith were not required to return disallowed benefits. However, more recent jurisprudence, emphasizes the principle of unjust enrichment. Individuals who receive funds without a valid legal basis are considered trustees of those funds for the benefit of the government. Therefore, regardless of good faith, they are obligated to return the disallowed amounts. In this case, the court emphasized that the use of special trust funds for board members’ honoraria was a clear violation of Republic Act No. 8292.

    Considering these precedents, the Court determined that the members of the governing boards acted in a self-serving manner by approving additional honoraria for themselves. Their reliance on legal opinions from the Office of the Solicitor General was deemed insufficient, as these opinions failed to adequately consider the specific restrictions on the use of special trust funds under Republic Act No. 8292. For these reasons, the Supreme Court dismissed the petition and affirmed the COA’s decision, ordering the members of the governing boards to return the disallowed benefits. The decision clarified that the obligation to return would not be solidary, meaning each member is responsible for the amount they personally received.

    This decision has significant implications for state universities and colleges. It underscores the importance of adhering to strict guidelines regarding the use of special trust funds and highlights that such funds can only be used for specified purposes such as instruction, research and extension. It also reinforces the accountability of governing board members, making them fiscally responsible in overseeing the allocation of funds. By mandating the return of disallowed benefits, the Court aims to prevent unjust enrichment and ensure that public funds are used appropriately for the benefit of the educational institutions and the students they serve.

    FAQs

    What was the key issue in this case? The key issue was whether the additional honoraria granted to members of state universities and colleges’ governing boards, sourced from special trust funds, were a legitimate expense. The Supreme Court ruled that these honoraria were not a valid use of the funds.
    What is a special trust fund in the context of state universities? A special trust fund consists of tuition fees, school charges, government subsidies, and other income generated by the university or college. These funds are designated for specific purposes, primarily instruction, research, extension, and similar programs.
    What does ‘ejusdem generis’ mean? ‘Ejusdem generis’ is a legal principle stating that when a statute lists specific things followed by a general term, the general term applies only to things similar to the specific items listed. In this case, “other programs/projects” must be similar to instruction, research, or extension.
    What is ‘per diem,’ and how does it relate to this case? ‘Per diem’ is a daily allowance provided to cover expenses incurred while performing official duties. The Supreme Court clarified that members of governing boards are entitled to per diem and reimbursement of expenses, but not additional honoraria from the special trust funds.
    Why did the Court order the members to return the honoraria? The Court ordered the return of the honoraria based on the principle of unjust enrichment. Since there was no legal basis for the additional payments, the recipients were considered trustees of the funds and were obligated to return them to the government.
    What is the significance of ‘good faith’ in this case? While good faith was traditionally a defense against the requirement to return disallowed benefits, the Court emphasized the principle of unjust enrichment. Therefore, even if the board members acted in good faith, they are still obligated to return the funds.
    What was the role of the Office of the Solicitor General’s opinions? The Office of the Solicitor General’s opinions were cited by the petitioners as evidence of their good faith. However, the Court found these opinions unpersuasive because they did not adequately consider the restrictions on the use of special trust funds.
    What is the effect of this ruling on state universities and colleges? This ruling clarifies the permissible uses of special trust funds, reinforcing the need for strict adherence to legal guidelines. It promotes fiscal responsibility and proper allocation of resources within state educational institutions.

    In conclusion, the Supreme Court’s decision in Ricardo E. Rotoras v. Commission on Audit serves as a crucial reminder of the importance of fiscal discipline and accountability in state universities and colleges. By strictly interpreting the provisions of Republic Act No. 8292, the Court aims to ensure that special trust funds are used for their intended purpose: to enhance instruction, research, and extension programs. This ruling sets a precedent for the proper management of public funds in the education sector.

    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: RICARDO E. ROTORAS v. COMMISSION ON AUDIT, G.R. No. 211999, August 20, 2019

  • Government Control vs. Corporate Structure: Defining Audit Jurisdiction in the Philippines

    In the Philippines, the Commission on Audit (COA) has the power to examine the financial records of entities where the government has a controlling interest. This authority extends to corporations, regardless of whether they were originally established through a special charter or under the general corporation law. This means that even if a corporation operates like a private entity, it falls under COA’s audit jurisdiction if the government exerts significant control over its operations or finances. The Supreme Court’s decision in Oriondo v. Commission on Audit clarifies that the determining factor is the extent of government influence, ensuring accountability in the use of public funds.

    Corregidor Foundation: Public Mission, Public Money, Public Scrutiny?

    The case of Adelaido Oriondo, et al. v. Commission on Audit (G.R. No. 211293) arose from a disallowance of honoraria and cash gifts paid to officers of the Philippine Tourism Authority (PTA) who also served concurrently with the Corregidor Foundation, Inc. (CFI). The COA argued that these payments violated Department of Budget and Management (DBM) circulars and the constitutional prohibition against double compensation. Petitioners contested that CFI was a private corporation and therefore not subject to COA’s audit jurisdiction. The central legal question was whether CFI was indeed a government-owned or controlled corporation (GOCC), despite its incorporation under the general corporation law, thus subjecting it to COA’s oversight.

    The factual backdrop involves Executive Orders and Memoranda of Agreement aimed at developing Corregidor Island as a tourist destination. Executive Order No. 58 opened battlefield areas in Corregidor to the public, while Executive Order No. 123 authorized contracts for converting areas within Corregidor into tourist spots. The Ministry of National Defense and PTA then entered into a Memorandum of Agreement to develop Corregidor. Subsequently, PTA created CFI to centralize the island’s planning and development. PTA provided operating funds to CFI, which led to the questioned honoraria and cash gifts to PTA officers also working for CFI. This arrangement triggered an audit observation by COA, leading to the disallowance.

    The legal framework for this case rests on the powers and jurisdiction of the COA, as defined in the Constitution, the Administrative Code of 1987, and the Government Auditing Code of the Philippines. Article IX-D, Section 2 of the Constitution grants COA the authority to examine, audit, and settle all accounts pertaining to the revenue and expenditures of the government, including GOCCs. The Administrative Code echoes this provision. Critically, the COA’s jurisdiction extends to non-governmental entities receiving subsidies or equity from the government. This broad mandate empowers COA to ensure proper use of public funds.

    The Supreme Court emphasized that the COA has the power to determine whether an entity is a GOCC as an incident to its constitutional mandate. To argue otherwise would impede COA’s exercise of its powers and functions. Several laws define a GOCC, including Presidential Decree No. 2029, the Administrative Code, and Republic Act No. 10149 (GOCC Governance Act of 2011). These definitions generally require three attributes: (1) organization as a stock or non-stock corporation; (2) functions of public character; and (3) government ownership or control.

    In analyzing whether CFI met these criteria, the Court found that it was organized as a non-stock corporation under the Corporation Code. Furthermore, its stated purpose—to maintain war relics and develop tourism in Corregidor—aligned with public interest. The Court highlighted that all of CFI’s incorporators were government officials, and its Articles of Incorporation required that its Board of Trustees be composed of government officials holding positions ex officio. The Supreme Court quoted Section 8 Article IX-B which states:

    SECTION 8. No elective or appointive public officer or employee shall receive additional, double, or indirect compensation, unless specifically authorized by law, nor accept without the consent of the Congress, any present, emolument, office, or title of any kind from any foreign government. Pensions or gratuities shall not be considered as additional, double, or indirect compensation.

    Petitioners argued that CFI was not a GOCC because it was not organized as a stock corporation under a special law. The Court dismissed this argument, citing that government-owned or controlled corporations can exist without an original charter, as clarified in Feliciano v. Commission on Audit (464 Phil. 439). The determining factor is government control, regardless of the corporation’s structure or manner of creation. Here, government control was evidenced by the composition of the Board and the financial dependence of CFI on the PTA.

    The Court also rejected the argument that CFI’s employees were under the Social Security System (SSS) somehow indicated CFI was not a GOCC. The fact that Corregidor Foundation, Inc. is a government-owned or controlled corporation subject to Budget Circular No. 2003-5 and Article IX-B, Section 8 of the Constitution. Corregidor Foundation, Inc. had no authority to grant honoraria to its personnel and give cash gifts to its employees who were concurrently holding a position in the Philippine Tourism Authority. This also means that jurisdiction of the Civil Service Commission is over government-owned or controlled corporations with original charters, not over those without original charters like Corregidor Foundation, Inc. as per Article IX-B, Section 2(1) of the Constitution.

    Moreover, while the petitioners contended that CFI’s funding came primarily from grants and donations, the Court found that, in 2003, 99.66% of its budget came from the Department of Tourism, Duty Free Philippines, and PTA. The September 3, 1996 Memorandum of Agreement further underscored government funding and control, as CFI was required to submit its budget for PTA approval and subjected itself to COA’s audit jurisdiction. The ruling clarifies that even if CFI received funds from international organizations, these funds became public funds upon donation to CFI, subject to COA audit.

    The Supreme Court highlighted that DBM Circular No. 2003-5 explicitly lists those entitled to honoraria, which did not include the petitioners. It is obvious that Corregidor Foundation, Inc. is not an educational institution and petitioners are not its teaching personnel. Neither are petitioners lecturers by virtue of their positions in Corregidor Foundation, Inc. nor are there laws or rules allowing the payment of honoraria to personnel of the Corregidor Foundation, Inc.

    Finally, the Court distinguished this case from Blaquera v. Alcala (356 Phil. 678) and De Jesus v. Commission on Audit (451 Phil. 812), where refunds of disallowed amounts were not required due to the recipients’ good faith. In those cases, there were ostensible legal bases for the payments. Here, there was no reason for the petitioners to believe they were entitled to additional compensation for their ex officio positions in CFI, especially given the constitutional prohibition against double compensation. Thus, the Court upheld the disallowance and required the refund of the amounts received, finding that the COA did not gravely abuse its discretion.

    FAQs

    What was the key issue in this case? The central issue was whether the Corregidor Foundation, Inc. (CFI) was a government-owned or controlled corporation (GOCC) subject to the audit jurisdiction of the Commission on Audit (COA).
    Why did the COA disallow the payments to the petitioners? The COA disallowed the honoraria and cash gifts paid to the petitioners, who were officers of the Philippine Tourism Authority (PTA) also serving with CFI, because these payments violated Department of Budget and Management (DBM) circulars and the constitutional prohibition against double compensation.
    What factors did the Supreme Court consider in determining if CFI was a GOCC? The Court considered whether CFI was organized as a stock or non-stock corporation, whether its functions were of a public character, and whether it was owned or controlled by the government.
    How did the Court determine that CFI was under government control? The Court noted that all of CFI’s incorporators were government officials, its Articles of Incorporation required that its Board of Trustees be composed of government officials holding positions ex officio, and it was financially dependent on the PTA.
    Did it matter that CFI was incorporated under the general corporation law? No, the Court clarified that government-owned or controlled corporations can exist without an original charter, as also stated in Feliciano v. Commission on Audit, and the critical factor is government control, regardless of the corporation’s structure or manner of creation.
    What was the significance of the Memorandum of Agreement between PTA and CFI? The Memorandum of Agreement highlighted government funding and control, as CFI was required to submit its budget for PTA approval and subjected itself to COA’s audit jurisdiction.
    Why were the petitioners required to refund the disallowed amounts? The petitioners were required to refund the disallowed amounts because they did not have a reasonable basis for believing they were entitled to additional compensation, especially given the constitutional prohibition against double compensation, and the COA did not gravely abuse its discretion in disallowing the payment of honoraria and cash gift to petitioners.
    What is the practical implication of this ruling for other similar organizations? The ruling reinforces that organizations substantially controlled by the government are subject to COA’s audit jurisdiction, even if they operate like private entities, ensuring accountability in the use of public funds.

    The Oriondo v. Commission on Audit case serves as a significant reminder of the expansive reach of COA’s audit authority. It highlights that government control, rather than corporate structure, is the key determinant in establishing audit jurisdiction. This case clarifies the importance of ensuring transparency and accountability in organizations receiving government funds or operating under significant government influence.

    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: Oriondo v. COA, G.R. No. 211293, June 04, 2019

  • Good Faith vs. Gross Negligence: Defining Liability in Government Benefit Disallowances

    This Supreme Court case clarifies when government officials and employees must return disallowed benefits. The Court ruled that anniversary bonuses received in good faith need not be refunded, while extra cash gifts and honoraria, lacking proper legal basis, must be returned by approving officers who acted with gross negligence. This decision underscores the importance of adhering to specific legal and regulatory requirements when disbursing public funds.

    Celebrating Milestones or Misspending Funds? Unpacking Anniversary Bonuses and COA Disallowances

    The case of Nayong Pilipino Foundation, Inc. v. Chairperson Ma. Gracia M. Pulido Tan, et al. (G.R. No. 213200, September 19, 2017) revolves around the Commission on Audit’s (COA) disallowance of certain benefits granted by the Nayong Pilipino Foundation, Inc. (NPFI) to its employees. These benefits included anniversary bonuses, extra cash gifts, and honoraria paid to members of the Bids and Awards Committee (BAC) and Technical Working Group (TWG). The central legal question is whether the COA correctly disallowed these payments, and if so, who should be held liable for their refund.

    The facts show that NPFI, in commemoration of its 30th and 35th founding anniversaries, granted anniversary bonuses to its officers and employees. Additionally, an extra cash gift was given in 2004. The COA issued Audit Observation Memoranda (AOMs), questioning the legal basis of these grants. The Department of Budget and Management (DBM) later opined that the anniversary bonus was unauthorized because NPFI’s anniversary should be reckoned from its incorporation as a public corporation in 1972, not its initial incorporation as a private entity. This raised questions about the validity of payments made based on the earlier date.

    In response to the AOMs, NPFI sought approval from the Office of the President (OP) and DBM, arguing that Administrative Order (A.O.) No. 263 and DBM National Budget Circular No. 452 authorized the anniversary bonus. They also cited DBM Budget Circular No. 2002-04 for the extra cash gift. However, the DBM found the payments improper, leading to a Notice of Disallowance (ND) issued by the COA Legal and Adjudication Office (LAO)-Corporate. The NPFI appealed, but the disallowance was upheld by the Adjudication and Settlement Board (ASB) and eventually by the COA itself.

    NPFI then elevated the matter to the Supreme Court, arguing that the COA gravely abused its discretion. They contended that the anniversary bonus was authorized by A.O. No. 263 and DBM National Budget Circular No. 452, and the extra cash gift was supported by DBM Budget Circular No. 2002-04. They also argued that the COA should have considered the pending motion for reconsideration before the OP. As for the honoraria, NPFI claimed that the COA failed to prove that the payments exceeded the 25% ceiling set by Republic Act (R.A.) No. 9184. Finally, NPFI invoked good faith, urging the Court to rule in its favor.

    The Supreme Court partly granted the petition, distinguishing between the anniversary bonus and the extra cash gift and honoraria. The Court emphasized the COA’s constitutional mandate as the guardian of public funds, with broad powers over government revenue and expenditures. This includes the authority to prevent irregular, unnecessary, excessive, extravagant, or unconscionable expenditures.

    However, the Court also acknowledged the principle of good faith. It found that NPFI had acted in good faith when granting the anniversary bonus, relying on the honest belief that its founding anniversary was in 1969. Citing precedents like Blaquera v. Alcala (356 Phil. 678 (1998)) and De Jesus v. Commission on Audit (451 Phil. 814 (2003)), the Court held that recipients of the anniversary bonus need not refund the amounts received.

    However, this finding of good faith did not extend to the extra cash gift and honoraria. The Court noted that DBM Budget Circular 2002-4 explicitly authorized the extra cash gift only for the year 2002. Therefore, NPFI could not reasonably rely on it as a basis for granting the benefit in 2004 without further approval. This represents a clear violation of existing regulations.

    Regarding the honoraria, the Court cited Sison, et al. v. Tablang, et al. (606 Phil. 740 (2009)), which held that Section 15 of R.A. No. 9184 alone is insufficient to justify the payment of honoraria to BAC members without enabling guidelines from the DBM. As the payments in this case were made before the issuance of DBM Circular No. 2004-5, which set forth the guidelines, the disallowance was proper. The Supreme Court emphasized that compliance with the DBM guidelines is a necessary condition for the right to the honoraria to accrue.

    The Court then addressed the issue of liability for the refund of the disallowed amounts. Citing Section 103 of Presidential Decree No. 1445 and Section 19 of the Manual of Certificate of Settlement and Balances, COA Circular No. 94-001, the Court reiterated that public officials directly responsible for unlawful expenditures are personally liable. While recipients who received the benefits in good faith are not required to refund, officers who approved the disallowed allowances or benefits in bad faith or with gross negligence must do so. This liability exists regardless of whether they personally received the disallowed benefit.

    The Court clarified that NPFI’s Board of Trustees and officers, despite the presumption of regularity in the performance of their duties, could not claim good faith in this instance. They were aware of the limitations of DBM Budget Circular 2002-4 and the need for DBM guidelines under R.A. No. 9184. Therefore, the Court held that NPFI’s Board of Trustees and officers who participated in the approval and authorized the release of the disallowed extra cash gift and honorarium were solidarily liable for their refund. This means that they are jointly and individually responsible for the entire amount.

    The decision underscores the importance of due diligence and adherence to legal and regulatory requirements in the disbursement of public funds. Public officials are expected to be knowledgeable about the laws and regulations governing their actions and cannot claim good faith when they knowingly violate those provisions. This ruling serves as a reminder that public office is a public trust, and those who wield it are accountable for their actions.

    FAQs

    What was the key issue in this case? The key issue was whether the COA correctly disallowed the payment of anniversary bonuses, extra cash gifts, and honoraria by NPFI, and who should be liable for refunding these amounts. The court distinguished between benefits received in good faith and those disbursed in violation of clear legal guidelines.
    Why was the anniversary bonus initially disallowed? The anniversary bonus was initially disallowed because COA determined that NPFI calculated its anniversary from the wrong date. COA said NPFI should have used the date it was incorporated as a public corporation, not when it was initially a private entity.
    Why did the Supreme Court allow the recipients to keep the anniversary bonus? The Supreme Court allowed the recipients to keep the anniversary bonus because they received it in good faith, believing the initial anniversary calculation was correct. The Court applied the principle that benefits received in good faith need not be refunded.
    Why was the extra cash gift disallowed? The extra cash gift was disallowed because NPFI based its grant on a DBM circular that only authorized the gift for a specific year (2002). Extending the benefit without further approval was deemed a violation of existing regulations.
    What was the issue with the honoraria payments? The honoraria payments were disallowed because they were made before the DBM issued the necessary guidelines for such payments. The Supreme Court emphasized that the guidelines were a prerequisite for the legality of the honoraria.
    Who is liable for refunding the disallowed extra cash gift and honoraria? NPFI’s Board of Trustees and officers who participated in the approval and authorization of the extra cash gift and honoraria are solidarily liable for the refund. The Court found they could not claim good faith due to their awareness of the relevant legal limitations.
    What does “solidarily liable” mean? “Solidarily liable” means that each of the responsible individuals is liable for the entire amount of the disallowed payments. The government can recover the full amount from any one of them, or from all of them collectively.
    What is the significance of “good faith” in this case? “Good faith” is crucial because it determines whether recipients of disallowed benefits must return the money. If the benefits were received in good faith, recipients are typically not required to refund them, but those who authorized the payment without legal basis can still be liable.
    What is the role of the Commission on Audit (COA)? The COA is the government’s audit body responsible for ensuring accountability and transparency in the use of public funds. It has the power to disallow irregular, unnecessary, or excessive expenditures.
    What is Administrative Order (A.O.) No. 263 and DBM National Budget Circular No. 452? Administrative Order No. 263 authorizes government entities to grant anniversary bonuses. DBM National Budget Circular No. 452 clarifies the implementation, specifying eligibility and funding requirements for anniversary bonuses.

    In conclusion, this case illustrates the delicate balance between granting employee benefits and adhering to strict legal and regulatory requirements. The Supreme Court’s decision underscores that public officials must exercise due diligence and ensure a solid legal basis for all expenditures. Good faith can protect recipients, but it does not absolve approving officers from liability when they act with gross negligence or in violation of explicit legal provisions.

    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: Nayong Pilipino Foundation, Inc. v. COA, G.R. No. 213200, September 19, 2017

  • Honoraria for Government Procurement: DBM Guidelines are Mandatory

    The Supreme Court ruled that government agencies cannot grant honoraria to Bids and Awards Committee (BAC) members exceeding 25% of their basic monthly salary without following the guidelines set by the Department of Budget and Management (DBM). The ruling clarifies that Section 15 of R.A. No. 9184 requires agencies to wait for the DBM guidelines before granting honoraria. This decision emphasizes that the right to receive the compensation is subject to guidelines to ensure lawful use of public funds and proper oversight.

    Can Government Workers Claim Honoraria Before DBM Sets the Rules?

    This case revolves around the question of whether members of the Bids and Awards Committee (BAC) and Technical Working Group (TWG) of the National Housing Authority (NHA) were entitled to receive honoraria based on Republic Act No. 9184, even before the Department of Budget and Management (DBM) had issued implementing guidelines.

    The petitioners, Joseph Peter Sison, et al., were members of the BAC and TWG of the NHA. From March 2003 to June 2004, the NHA paid them honoraria amounting to 25% of their basic monthly salaries, based on their interpretation of R.A. No. 9184. However, the Commission on Audit (COA) issued Notices of Disallowance (NDs) for these payments, arguing that they lacked a legal basis because the DBM had not yet issued the necessary implementing guidelines. The petitioners contested the disallowance, claiming that they were entitled to the honoraria based on the number of projects completed, and the applicable law. The petitioners sought reconsideration of the NDs arguing that they should be entitled to a straight 25% and should not be required to refund until there was computation based on the recommendation of award.

    The COA’s Legal and Adjudication Office-Corporate (LAO-C) denied their motion for reconsideration, and the Adjudication and Settlement Board (ASB) of the COA affirmed the LAO-C’s decision. Aggrieved, the petitioners elevated the matter to the Supreme Court. The Supreme Court considered the application of R.A. No. 9184 and DBM guidelines and delved into the principle of exhausting all administrative remedies before appealing to the court.

    At the heart of the legal framework is Section 15 of R.A. No. 9184, also known as the Government Procurement Act, which states:

    Section 15. Honoraria of BAC Members – The Procuring Entity may grant payment of honoraria to the BAC members in an amount not to exceed twenty five percent (25%) of their respective basic monthly salary subject to availability of funds. For this purpose, the Department of Budget and Management (DBM) shall promulgate the necessary guidelines.

    The Court noted that the petitioners failed to appeal the ASB’s decision to the COA Proper before filing their petition with the Court. The general rule is that before seeking court intervention, a party must first exhaust all available administrative remedies. In this case, this failure meant that the disallowance had become final and executory.

    Despite this procedural lapse, the Court addressed the merits of the case, finding sufficient basis to uphold the NDs. While Section 15 of R.A. No. 9184 allows the payment of honoraria to BAC and TWG members, it is subject to the availability of funds and the guidelines promulgated by the DBM. In this context, DBM Budget Circular No. 2004-5, issued on March 23, 2004, is significant.

    The Court underscored that Section 15 of R.A. No. 9184 is not self-executing. The provision authorizing agencies to grant honoraria to BAC members needed an implementing guideline from the DBM. Without the DBM guidelines, the NHA lacked the proper basis for granting honoraria amounting to 25% of the BAC members’ basic monthly salaries.

    The Supreme Court also refuted the argument that not paying the honoraria for work already performed was unjust. Quoting previous decisions, the Court noted that honorarium is given not as a matter of obligation but in appreciation for services rendered.

    The use of the word “may” in Section 15 of R.A. No. 9184 signifies that the honorarium cannot be demanded as a matter of right. While the government acknowledges the value of government employees performing duties beyond their regular functions, the payment of honoraria to BAC and TWG members must adhere to the applicable rules and guidelines prescribed by the DBM, as stipulated by law.

    As the DBM had yet to issue the implementing rules and guidelines at the time of payment, the Supreme Court determined that the NHA officials had been premature to grant themselves the straight amount of 25% of their monthly basic salaries as honoraria. Thus, the petition was dismissed.

    FAQs

    What was the key issue in this case? The central issue was whether the National Housing Authority (NHA) could grant honoraria to its Bids and Awards Committee (BAC) members without the implementing guidelines from the Department of Budget and Management (DBM). The Supreme Court clarified that the agencies should wait for the DBM guidelines before paying honoraria.
    What is an honorarium according to this case? The court defined honorarium as a payment given as a token of appreciation for services rendered, not as a matter of obligation. It is essentially a voluntary donation in consideration of services for which monetary compensation is not typically demanded.
    What does R.A. 9184 say about honoraria for BAC members? R.A. 9184, or the Government Procurement Act, allows procuring entities to pay honoraria to BAC members, but the amount cannot exceed 25% of their basic monthly salary and is subject to the availability of funds. The law mandates that the DBM issue the necessary guidelines for such payments.
    Why were the payments disallowed in this case? The payments were disallowed because the NHA paid honoraria to its BAC members before the DBM issued the necessary guidelines. The Supreme Court determined that the payments were premature and lacked a legal basis.
    What is the significance of DBM Budget Circular No. 2004-5? DBM Budget Circular No. 2004-5 outlines the guidelines for granting honoraria to government personnel involved in procurement activities. It prescribes that honoraria should only be paid for successfully completed procurement projects and should not exceed the rates indicated per project.
    What is the principle of exhaustion of administrative remedies? The principle of exhaustion of administrative remedies requires that parties exhaust all available administrative channels before seeking judicial intervention. In this case, the petitioners failed to appeal the ASB’s decision to the COA Proper before filing their petition with the Supreme Court.
    Is Section 15 of R.A. No. 9184 self-executing? No, the Supreme Court held that Section 15 of R.A. No. 9184 is not self-executing. It requires implementing guidelines from the DBM to be operational.
    What does the word “may” signify in Section 15 of R.A. No. 9184? The word “may” indicates that the grant of honoraria is discretionary and not a matter of right. It is subject to the procuring entity’s discretion, the availability of funds, and compliance with DBM guidelines.

    This decision emphasizes the importance of adhering to administrative procedures and regulatory guidelines in government transactions. Agencies must wait for the appropriate rules from the DBM before disbursing funds. Non-compliance may result in disallowances.

    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: JOSEPH PETER SISON, ET AL. VS. ROGELIO TABLANG, ET AL., G.R. No. 177011, June 05, 2009