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633 Phil. 174


[ G.R. No. 158562, April 23, 2010 ]




This is a Petition for Certiorari and Prohibition, in accordance with Rule 65 of the Rules of Court, with application for temporary restraining order (TRO) and/or preliminary injunction. The said Petition seeks to annul and set aside the following decisions of respondent Commission on Audit (COA): (1) COA Decision No. 2002-213[1] dated September 24, 2002 on the "Request of Mr. RAMON YAP for reconsideration of the decision of the Director, Corporate Audit Office II (CAO II), affirming the disallowance of various allowances and reimbursements paid to him in his capacity as Vice-President for Finance and Treasurer of the Manila Gas Corporation (MGC)"; and (2) COA Decision No. 2003-087[2] dated June 17, 2003, denying petitioner's motion for reconsideration.

The undisputed facts of this case as gathered from the assailed COA Decision No. 2002-213[3] are as follows:

x x x Ramon R. Yap is holder of a regular position of Department Manager of the National Development Company (NDC), a government-owned and controlled corporation with original charter. He was appointed by the Board of Directors, Manila Gas Corporation (MGC), a subsidiary of NDC as Vice-President for Finance effective June 14, 1991 while remaining as a regular employee of NDC. The additional employment entitled him to honoraria equivalent to fifty percent (50%) of his basic salary at NDC and various allowances attached to the office.

In the course of the regular audit, the Corporate Auditor, MGC issued the following notices of disallowances against Mr. Ramon R. Yap:

Notice of Disallowance
ND 99- 03(98)MGC
Subscription to National Geographic and Reader's Digest
ND 99-10(98)MGC
Car maintenance allowance

Annual fee of VISA card
ND 99-12(98) MGC
Representation expense on a Sunday
ND 99-16(98)MGC
Fellowship with other PCA club Members on Sunday
ND 99-07(98)IIGSI
Car maintenance allowance
ND 99-14(98)IIGSI
Executive check-up
ND 99-09(99)MGC
Monthly allowance
ND 2000-01(99)MGC
Car maintenance allowance
ND 2000-08(99)MGC
Monthly allowance
ND 2000-07(99) MGC
Car maintenance allowance

Car maintenance allowance
ND 2000-01(99)MGC
Gasoline allowance and driver's subsidy

which were predicated on the ground that appellant's appointment to MGC in addition to his regular position as Department Manager III of NDC and the subsequent receipt of the questioned allowances and reimbursements from the former directly contravened the proscription contained in Section 7 (2) and Section 8, Article IX-b of the Constitution to wit:

"Section 7. x x x

Unless otherwise allowed by law or by the primary functions of his position, no appointive official shall hold any other office or employment in the Government or any subdivision, agency or instrumentality thereof, including government-owned or controlled corporations or their subsidiaries."

"Section 8. x x x

No elective or appointive public officer or employee shall receive additional, double or indirect compensation, unless specifically authorized by law, x x x"

Mr. Yap appealed the Auditor's disallowances primarily contending that the questioned benefits were all approved by the MGC Board of Directors. x x x x.

Petitioner's appeal was denied by the CAO II,[4] which affirmed the MGC Corporate Auditor's findings that the allowances and reimbursements at issue were given in violation of Sections 7(2) and 8, Article IX-b of the 1987 Constitution.

Unperturbed, petitioner sought a reconsideration of the CAO II ruling from respondent COA via a Letter[5] addressed to the COA Chairman wherein he argued that his assignment to MGC was required by the primary functions of his office and was also authorized by law, namely Executive Order No. 284 issued on July 25, 1987, the pertinent provision of which provides:

SECTION 1. Even if allowed by law or by the primary functions of his position, a member of the Cabinet, undersecretary, assistant secretary or other appointive official of the Executive Department may, in addition to his primary position, hold not more than two positions in the government and government corporations and receive the corresponding compensation therefore: Provided, That this limitation shall not apply to ad hoc bodies or committees, or to boards, councils or bodies of which the President is the Chairman. (Emphasis supplied.)

In turn, respondent COA denied petitioner's appeal in herein assailed COA Decision No. 2002-213. [6] It upheld the CAO II's ruling that characterized the disallowed allowances and reimbursements as prohibited by the Constitution. Furthermore, it also ruled that the said allowances and reimbursements claimed by petitioner "failed to pass the test of `public purpose requirement' of the law" and further emphasized that "it is not enough that payments made to [petitioner] be authorized by the Board of Directors of the MGC but it is likewise necessary that said payments do not contravene the principles provided for under Section 4 of [Presidential Decree No.] 1445 on the use of government funds," more specifically on the public purpose requirement that is provided in Section 4(2) of Presidential Decree No. 1445, otherwise known as the Government Auditing Code of the Philippines, to wit:

Section 4. Fundamental Principles. - Financial transactions and operations of any government agency shall be governed by the fundamental principles set forth hereunder, to wit:

x x x x

(2) Government funds or property shall be spent or used solely for public purposes.

In elaborating this point, respondent COA stated that:

x x x [T]his Commission sees no connection to link payments for subscription to the National Geographic and Reader's Digest, car maintenance allowance, annual fee of VISA card, representation on a Sunday, a non-working day, fellowship with PCA club members to social services, promotion of the general welfare, social justice as well as human dignity and respect for human rights, slum clearance, low-cost housing, squatter resettlement, urban and agrarian reform and the like. For it is not enough that payments made to him be authorized by the Board of Directors of the MGC but it is likewise necessary that said payments do not contravene the principles provided for under Section 4 of P.D. 1445 on the use of government funds.

Viewed from all the foregoing premises, it is regretted that the herein request for reconsideration of Mr. Yap is DENIED. Accordingly, the audit disallowances as heretofore mentioned are affirmed in toto.[7]

A Motion for Reconsideration[8] was subsequently filed by petitioner, but this was likewise denied by respondent COA in COA Decision No. 2003-087, [9] wherein it ruled that although petitioner was correct in arguing that there was no legal impediment to the validity of petitioner's appointment as Vice-President and Treasurer of MGC and to his entitlement to compensation for the second office, "[s]ince the constitutionality of Executive Order No. 284 has been upheld by the Court insofar as other appointive officials are concerned x x x[,]" however, "of more important consideration is the condition sine qua non, that `government funds or property shall be spent or used solely for public purpose' (Section 4(2), PD 1445)." Therefore, respondent COA affirmed its original finding that the disallowed allowances and reimbursements did not satisfy the public purpose requirement. The dispositive portion of the said Decision reads:

WHEREFORE, premises considered, the instant motion for reconsideration is hereby DENIED and the assailed COA Decision No. 2002-213 dated September 24, 2002 is hereby AFFIRMED in toto.

Hence, this Petition wherein petitioner puts forth the following grounds in support:







We rule to deny the instant Petition.

As regards the first ground, petitioner puts forward the argument that although it cannot be denied that the MGC, being a government-owned and controlled corporation, is under the jurisdiction of respondent COA, the respondent's act of subjecting the salaries, allowances and benefits of MGC employees to the "public purpose test" is not only wrong, but also an act of grave abuse of discretion since the said salaries, allowances and benefits are intended to compensate MGC employees for services performed on behalf of the corporation. According to petitioner, if the "public purpose requirement" will be applied in auditing these salaries, allowances and benefits being given to government employees, no such compensation could ever pass audit, as, by their very nature, they are solely intended to benefit their recipients, who are the employees of the government department, office, agency or corporation concerned.[11]

We cannot countenance petitioner's misleading assertion on this point. The mere act of disbursing public funds to pay the allowances and salaries of government employees does not by itself constitute release of government funds for public purpose as petitioner would want us to believe; otherwise, as petitioner dares to conclude, no salary, benefit or allowance would ever pass the requisite government audit. This is a rather simplistic and narrow view of the nature of government employee compensation. Not unlike other government expenditures, it is necessary that the release of public funds to pay the salaries and allowances of government employees must not contravene the law on disbursement of public funds. Section 4 of Presidential Decree No. 1445 lays out the basic guidelines that government entities must follow in disbursing public funds, to wit:

Section 4. Fundamental principles. - Financial transactions and operations of any government agency shall be governed by the fundamental principles set forth hereunder, to wit:

(1) No money shall be paid out of any public treasury or depository except in pursuance of an appropriation law or other specific statutory authority.

(2) Government funds or property shall be spent or used solely for public purposes.

(3) Trust funds shall be available and may be spent only for the specific purpose for which the trust was created or the funds received.

(4) Fiscal responsibility shall, to the greatest extent, be shared by all those exercising authority over the financial affairs, transactions, and operations of the government agency.

(5) Disbursements or disposition of government funds or property shall invariably bear the approval of the proper officials.

(6) Claims against government funds shall be supported with complete documentation.

(7) All laws and regulations applicable to financial transactions shall be faithfully adhered to.

(8) Generally accepted principles and practices of accounting as well as of sound management and fiscal administration shall be observed, provided that they do not contravene existing laws and regulations. (Emphases supplied.)

To summarize, any disbursement of public funds, which includes payment of salaries and benefits to government employees and officials, must (a) be authorized by law, and (b) serve a public purpose.

In this regard, it is necessary for this Court to elaborate on the nature and meaning of the term "public purpose," in relation to disbursement of public funds. As understood in the traditional sense, public purpose or public use means any purpose or use directly available to the general public as a matter of right. Thus, it has also been defined as "an activity as will serve as benefit to [the] community as a body and which at the same time is directly related function of government."[12] However, the concept of public use is not limited to traditional purposes. Here as elsewhere, the idea that "public use" is strictly limited to clear cases of "use by the public" has been discarded.[13] In fact, this Court has already categorically stated that the term "public purpose" is not defined, since it is an elastic concept that can be hammered to fit modern standards. It should be given a broad interpretation; therefore, it does not only pertain to those purposes that which are traditionally viewed as essentially government functions, such as building roads and delivery of basic services, but also includes those purposes designed to promote social justice. Thus, public money may now be used for the relocation of illegal settlers, low-cost housing and urban or agrarian reform.[14] In short, public use is now equated with public interest,[15] and that it is not unconstitutional merely because it incidentally benefits a limited number of persons.[16]

To our mind, in view of the public purpose requirement, the disbursement of public funds, salaries and benefits of government officers and employees should be granted to compensate them for valuable public services rendered, and the salaries or benefits paid to such officers or employees must be commensurate with services rendered. In the same vein, additional allowances and benefits must be shown to be necessary or relevant to the fulfillment of the official duties and functions of the government officers and employees. We cannot accept petitioner's theory that the compensation and benefits of public officers are intended purely for the personal benefit of such officers, or that the mere payment of salaries and benefits to a public officer satisfies the public purpose requirement. That theory would lead to the anomalous conclusion that government officers and employees may be paid enormous sums without limit or without any justification necessary other than that such sums are being paid to someone employed by the government. Public funds are the property of the people and must be used prudently at all times with a view to prevent dissipation and waste.

With regard to the second ground, petitioner underscores the fact that respondent COA abandoned the ground of double compensation as a basis for the questioned disallowances and affirmed the same on the new ground that the allowances did not meet the test of "public purpose requirement." Petitioner argues that this was an arbitrary and whimsical action on the part of respondent COA, since petitioner had already legally justified his opposition to the ground originally cited by the MGC Corporate Auditor in support of the questioned disallowances, and yet respondent COA affirmed said disallowances on a new ground - failure to pass the "public purpose requirement" - that was never mentioned in the findings made by the MGC Corporate Auditor and the CAO II ruling that was appealed to respondent COA by the petitioner.[17] In response, respondent COA maintains that there is no provision in the Constitution, the Government Auditing Code or the Administrative Code that restricts its power and authority to examine and audit government expenditures to merely reviewing and deciding on the validity of the findings and conclusions of its auditors.[18]

In resolving this issue, it is imperative that we examine the powers vested in respondent COA by the pertinent laws of the land. The 1987 Constitution has made the COA the guardian of public funds, vesting it with broad powers over all accounts pertaining to government revenue and expenditures and the uses of public funds and property including the exclusive authority to define the scope of its audit and examination, establish the techniques and methods for such review, and promulgate accounting and auditing rules and regulations.[19] Section 11, Chapter 4, Subtitle B, Title I, Book V of the Administrative Code of 1987 echoes this constitutional mandate given to COA, to wit:

Section 11. General Jurisdiction. - (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, or any of its subdivisions, agencies, or instrumentalities, including government-owned or controlled corporations with original charters, and on a post-audit basis: (a) constitutional bodies, commissions and offices that have been granted fiscal autonomy under this Constitution; (b) autonomous state colleges and universities; (c) other government-owned or controlled corporations and their subsidiaries; and (d) such non-governmental entities receiving subsidy or equity, directly or indirectly, from or through the Government, which are required by law or the granting institution to submit to such audit as a condition of subsidy or equity. However, where the internal control system of the audited agencies is inadequate, the Commission may adopt such measures, including temporary or special pre-audit, as are necessary and appropriate to correct the deficiencies. It shall keep the general accounts of the Government and, for such period as may be provided by law, preserve the vouchers and other supporting papers pertaining thereto.

(2) The Commission shall have exclusive authority, subject to the limitations in this Article, to define the scope of its audit and examination, establish the techniques and methods required therefor, and promulgate accounting and auditing rules and regulations, including those for the prevention and disallowance of irregular, unnecessary, excessive, extravagant, or unconscionable expenditures, or uses of government funds and properties.

In light of these express provisions of law granting respondent COA its power and authority, we have previously ruled that its exercise of its general audit power is among the constitutional mechanisms that give life to the check and balance system inherent in our form of government.[20] Furthermore, we have also declared that COA is endowed with enough latitude to determine, prevent and disallow irregular, unnecessary, excessive, extravagant or unconscionable expenditures of government funds.[21]

Based on the foregoing discussion and due to the lack or absence of any law or jurisprudence saying otherwise, we rule that, in resolving cases brought before it on appeal, respondent COA is not required to limit its review only to the grounds relied upon by a government agency's auditor with respect to disallowing certain disbursements of public funds. In consonance with its general audit power, respondent COA is not merely legally permitted, but is also duty-bound to make its own assessment of the merits of the disallowed disbursement and not simply restrict itself to reviewing the validity of the ground relied upon by the auditor of the government agency concerned. To hold otherwise would render COA's vital constitutional power unduly limited and thereby useless and ineffective.

As a third ground for the petition, petitioner also contends that assuming, without conceding, that the other allowances and benefits do not pass the "public purpose" test, the rest of the allowances, such as the basic monthly allowances, executive check-up and the gasoline allowances should not be disallowed, as they are normally given to officers of corporations, whether private or government- owned and controlled.[22]

We cannot uphold petitioner's plausible but unsubstantiated argument on this point since, as previously discussed, respondent COA is in the best position to determine which allowances and benefits may be properly allowed under the circumstances, as it is the sole constitutional body mandated 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 or controlled corporations such as the MGC and the NDC in the case at bar. Even if we assume the truth of petitioner's assertion that the said allowances are "normally given," this fact alone does not operate to preclude respondent COA from performing its constitutional mandate.

That certain allowances are enjoyed by corporate officers in the private sector does not justify the grant of the same benefits to similarly designated public officers, even if they are officers of government-owned and controlled corporations (GOCCs), which perform purely proprietary functions. As aptly observed by the Solicitor General, the funds of GOCCs are still public funds and that is precisely the reason such funds are subject to audit by the COA. Thus, there is a valid distinction between the officers of public corporations and those of private corporations.

To reiterate, the public purpose requirement for the disbursement of public funds is a valid limitation on the types of allowances and benefits that may be granted to public officers. It was incumbent upon petitioner to show that his allowances and benefits were authorized by law and that there was a direct and substantial relationship between the performance of his public functions and the grant of the disputed allowances to him.

While subscriptions to newspapers and magazines by government offices may be justified, petitioner's personal subscriptions to magazines and the annual fee of his credit card cannot ipso facto be considered as part of his remunerations or benefits as a public official.

There is likewise no evidence that the purported representation and "fellowship" expenses on weekends are necessary and related to petitioner's work as Vice-President of Finance and Treasurer of the MGC. We find no reason to believe that as an MGC officer, his duties include business relations or clientele-building functions, since a finance officer and treasurer, even in the private sector, is ordinarily tasked with accounting, disbursement and custody of corporate funds.

Medical expenses, such as those for an executive check-up, may be justified if specifically authorized by the appropriate laws, rules or circulars. However, petitioner failed to point to the existence of such law or regulation applicable to his case. It also appears from the records that petitioner already receives medical benefits from the NDC,[23] and that the ground cited by the MGC Corporate Auditor for the disallowance of his expense for executive check-up was his own failure to submit appropriate supporting documents to claim such benefit.[24]

The COA's disallowance of the car maintenance, gasoline allowance and driver's subsidy was likewise in order since petitioner neither alleged nor proved that these benefits were also authorized by law or regulation.[25] He did not even allege that the car was an official company vehicle or that the driver was an employee of the MGC. On the contrary, the MGC Corporate Auditor found that the vehicle involved was the personal vehicle of petitioner, although it was granted to him under an NDC car plan, and that he was already receiving gasoline and/or transportation allowance from the NDC.[26] It was also found that petitioner reported to the MGC office, at most, once a week to attend meetings; and documents, which required his signature, were often brought to him at the NDC.[27] Since petitioner did not dispute these findings, he failed to show that the grant of similar or additional gasoline and transportation benefits to him by the MGC was warranted.

In order to demonstrate the legality of the grant of his benefits, it was insufficient for the petitioner to assert that the disputed allowances and benefits were approved by the board of directors of the MGC. Such board action should in itself be authorized by law or regulation or have valid legal basis. Otherwise, it becomes an illegal corporate act that is void and cannot be validated.[28] In this case, the MGC board action that permitted the disallowed disbursements was not shown to have complied with Section 15(d) of both Republic Act No. 8522 and Republic Act No. 8745, otherwise known as the General Appropriations Act of 1998 and the General Appropriations Act of 1999, respectively, which provide:

Sec. 15. Restrictions on the Use of Government Funds. - No government funds shall be utilized for the following purposes:

x x x x

d. To pay honoraria, allowances or other forms of compensation to any government official or employee, except those specifically authorized by law;

x x x x

The provisions of this Section shall also apply to government- owned and/or controlled corporations.

On a final note, petitioner claims that respondent COA acted with grave abuse of discretion since, as a result of the disallowances, petitioner in effect rendered his services to MGC for free. This, petitioner points out, would constitute unjust enrichment on the part of MGC.[29]

We have ruled before that there is unjust enrichment when a person unjustly retains a benefit to the loss of another, or when a person retains the money or property of another against the fundamental principles of justice, equity and good conscience.[30] In the case at bar, the assailed COA Decision No. 2002-213 dated September 24, 2002 and the CAO II's 1st Indorsement dated December 12, 2000 recognized that petitioner's appointment to the Board of Directors of MGC "entitled him to honoraria equivalent to fifty percent (50%) of his basic salary at NDC and various allowances attached to the office."[31] Furthermore, petitioner's own assertion in his Motion for Reconsideration of COA Decision No. 2002-213 belies his claim of being totally uncompensated, since petitioner stated therein that "[a]s the NDC representative in MGC, he was not getting the entire compensation package for such position."[32] Thus, petitioner did not render his services to MGC for free, because it did not appear that his honoraria were among the expenditures that were disallowed by respondent COA.

We have previously declared that it is the general policy of the Court to sustain the decisions of administrative authorities, especially one that was constitutionally created like herein respondent COA, not only on the basis of the doctrine of separation of powers, but also of their presumed expertise in the laws they are entrusted to enforce. It is, in fact, an oft-repeated rule that findings of administrative agencies are accorded not only respect but also finality when the decision and order are not tainted with unfairness or arbitrariness that would amount to grave abuse of discretion.[33] Thus, only when the COA acted without or in excess of jurisdiction, or with grave abuse of discretion amounting to lack or excess of jurisdiction, may this Court entertain a petition for certiorari under Rule 65 of the Rules of Court.[34]

There is grave abuse of discretion when there is an evasion of a positive duty or a virtual refusal to perform a duty enjoined by law or to act in contemplation of law as when the judgment rendered is not based on law and evidence but on caprice, whim and despotism.[35] In the case at bar, we find no grave abuse of discretion on the part of respondent COA in issuing the assailed Decisions. On the contrary, we hold that respondent COA's pronouncements in both assailed rulings were made in faithful compliance with its mandate and in judicious exercise of its general audit power as conferred on it by the Constitution and the pertinent laws.

WHEREFORE, premises considered, the petition is DISMISSED. The assailed COA Decision No. 2002-213 dated September 24, 2002 and COA Decision No. 2003-087 dated June 17, 2003 are both AFFIRMED.


Puno, C.J., Carpio, Corona, Carpio Morales, Velasco, Jr., Nachura, Brion, Peralta, Bersamin, Del Castillo, Abad, Villarama, Jr., Perez, and Mendoza, JJ., concur.

[1] Penned by Commission on Audit (COA) Chairman Guillermo N. Carague with Commissioners Raul C. Flores and Emmanuel M. Dalman concurring. Rollo, pp. 18-21.

[2] Id. at 14-17.

[3] Supra note 1.

[4] Rollo, pp. 19, 22-23.

[5] Id. at 24-27.

[6] Supra note 1.

[7] Rollo, p. 21.

[8] Id. at 28-35.

[9] Supra note 2.

[10] Rollo, pp. 8-9.

[11] Id. at 98-99.

[12] Black's Law Dictionary, p. 1231, (6th ed., 1990), citing Pack v. Southern Bell Tel. & Tel. Co., 215 Tenn. 503, 387 S.W. 2d 789, 794.

[13] Heirs of Juancho Ardona v. Reyes, Nos. L-60549, 60553-60555, October 26, 1983, 125 SCRA 220, 223.

[14] Planters Products, Inc. v. Fertiphil Corporation, G.R. No. 166006, March 14, 2008, 548 SCRA 485, 510-511.

[15] Bengzon v. Drilon, G.R. No. 103524, April 15, 1992, 208 SCRA 133, 155.

[16] Binay v. Domingo, G.R. No. 92389, September 11, 1991, 201 SCRA 508, 516.

[17] Rollo, p. 99.

[18] Id. at 22.

[19] Sec. 2(1) and (2), Art. IX, 1987 Constitution.

[20] Olaguer v. Domingo, G.R. No. 109666, June 20, 2001, 359 SCRA 78, 90.

[21] Sanchez v. Commission on Audit, G.R. No. 127545, April 23, 2008, 552 SCRA 471, 487.

[22] Rollo, p. 100.

[23] See 2nd Indorsement dated October 25, 2000 of the Corporate Auditor, MGC.

[24] See Notice of Disallowance dated August 31, 1999 [N.D. No. 99-014 (98)].

[25] Significantly, Section 15(c) in both Republic Act No. 8522 (General Appropriations Act of 1998) and Republic Act No. 8745 (General Appropriations Act of 1999) allows the use of government funds for car fuel, maintenance and parts only for government vehicles that are properly identified as such. The relevant portions of Section 15 reads:

Sec. 15. Restrictions on the Use of Government Funds. - No government funds shall be utilized for the following purposes:

x x x x

c. To provide fuel, parts, repair and maintenance to any government vehicle which is not permanently marked "For Official Use Only" with the name or logo of the agency, nor otherwise properly identified as a government vehicle and does not carry its official government plate number x x x.
[26] Supra note 23.

[27] Id.

[28] Atrium Management Corporation v. Court of Appeals, G.R. No. 109491, February 28, 2001, 353 SCRA 23, 30.

[29] Rollo, p. 101.

[30] Allied Banking Corporation v. Lim Sio Wan , G.R. No. 133179, March 27, 2008, 549 SCRA 504, 524 citing Reyes v. Lim, 408 SCRA 560, 570.

[31] Rollo, pp. 18 and 22.

[32] Id. at p. 34.

[33] Supra note 20 at 489.

[34] Reyes v. Commission on Audit, G.R. No. 125129, March 29, 1999, 305 SCRA 512, 517.

[35] Ferrer v. Office of the Ombudsman, G.R. No. 129036, August 6, 2008, 561 SCRA 51, 65.

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