Employees Receiving Government Incentives in Good Faith Are Not Required to Repay Disallowed Benefits

TLDR: This case clarifies that government employees who receive incentive awards in good faith are not required to reimburse the government if the Commission on Audit (COA) later disallows the payment due to violations by superior officials. However, approving officers who disregarded existing administrative orders are liable for the refund.

G.R. NO. 149633, November 30, 2006

Introduction

Imagine receiving a bonus at work, only to be told years later that you have to pay it back. This happened to employees of the National Museum, highlighting a crucial question: when are government employees required to return benefits that are later disallowed by the Commission on Audit (COA)? This case, Executive Director Gabriel S. Casal vs. The Commission on Audit, provides clarity on this issue, protecting employees who received benefits in good faith while holding accountable those who authorized the payments in violation of existing regulations.

In this case, the National Museum granted an incentive award to its employees in 1993. However, the COA subsequently disallowed the award, citing violations of administrative orders prohibiting such payments without proper authorization. The COA sought to recover the funds from both the approving officers and the employees who received the award.

Legal Context: Administrative Orders and Good Faith

This case hinges on the interpretation and application of administrative orders related to the grant of productivity incentive benefits in government. Key to understanding this case are Administrative Order (A.O.) No. 268 and A.O. No. 29, which aimed to control the disbursement of government funds for such incentives.

A.O. No. 268, issued in 1992, strictly prohibited heads of government agencies from authorizing productivity incentive benefits for 1992 and future years pending a comprehensive study. Section 7 of A.O. 268 states:

“[A]ll heads of agencies, including the governing boards of government-owned or -controlled corporations and financial institutions, are hereby strictly prohibited from authorizing/granting productivity incentive benefits or other allowances of similar nature for Calendar Year 1992 and future years pending the result of a comprehensive study…”

A.O. No. 29, issued in 1993, reiterated this prohibition. The concept of “good faith” also plays a crucial role. In legal terms, good faith implies an honest intention to abstain from taking any unconscientious advantage of another. Previous Supreme Court decisions, such as Blaquera v. Alcala, established the principle that government employees who receive benefits in good faith should not be required to refund them, even if the grant was later found to be improper.

Case Breakdown: The National Museum Incentive Award

The story unfolds with the National Museum granting an incentive award to its employees in December 1993. The COA Resident Auditor, after an inquiry with the Department of Budget and Management (DBM), disallowed the award due to the lack of authorization and the existing prohibitions in A.O. No. 268 and A.O. No. 29.

The COA issued a Notice of Disallowance, naming Executive Director Gabriel S. Casal, Acting Director Cecilio Salcedo, and other officers as liable, along with all National Museum employees who received the award. The case then proceeded through the following steps:

• Appeal to COA: Casal appealed the disallowance to the COA, which was denied.
• Motion for Reconsideration: Casal’s motion for reconsideration was also denied by the COA.
• Petition to the Supreme Court: Casal, Salcedo, and Herrera (representing the employees) filed a petition for certiorari with the Supreme Court.
• Temporary Restraining Order (TRO): The Supreme Court issued a TRO, temporarily stopping the COA from enforcing its decision.

The Supreme Court distinguished this case from Blaquera v. Alcala. The Court emphasized that the incentive awards in Blaquera were paid before the issuance of A.O. 29, whereas in this case, the awards were released in December 1993, well after A.O. 29 was already in effect. Furthermore, the Civil Service Commission (CSC) had specifically warned Casal about the prohibition in A.O. 268 prior to the release of the awards.

As the Supreme Court stated:

“[W]hen petitioner Casal and the approving officers authorized the subject award then, they disregarded a prohibition that was not only declared by the President through A.O. 268, but also brought to their attention by the CSC…”

The Court ultimately ruled that the employees who received the incentive award in good faith were not required to refund the money. However, the approving officers, including Casal and Salcedo, were held liable due to their gross negligence in disregarding the existing administrative orders.

The Supreme Court emphasized the importance of executive officials complying with the President’s directives:

“Executive officials who are subordinate to the President should not trifle with the President’s constitutional power of control over the executive branch…This cannot be countenanced as it will result in chaos and disorder in the executive branch to the detriment of public service.”

Practical Implications: Accountability and Good Faith

This case provides important guidance for government employees and officials regarding the grant and receipt of incentive benefits. It underscores the importance of due diligence and adherence to existing administrative orders and regulations. It also reinforces the protection afforded to employees who receive benefits in good faith.

Key Lessons:

• Good Faith Matters: Employees who receive benefits without knowledge of any impropriety are generally protected from being required to refund the money.
• Approving Officers Beware: Government officials who authorize payments in violation of existing regulations will be held accountable.
• Compliance is Key: Strict adherence to administrative orders and regulations is crucial in government transactions.

Frequently Asked Questions

Q: What does “good faith” mean in this context?

A: Good faith means that the employee received the benefit honestly and without knowledge that it was improperly granted.

Q: Who is responsible for ensuring compliance with administrative orders?

A: The primary responsibility lies with the heads of government agencies and approving officers.

Q: What happens if an employee suspects that a benefit is being improperly granted?

A: The employee should raise their concerns with the appropriate authorities or seek legal advice.

Q: Can the COA still disallow benefits even if they have been paid out for years?

A: Yes, the COA has the authority to disallow irregular or unauthorized expenditures, even if they have been previously paid.

Q: What is the significance of Administrative Order No. 268 and No. 29?

A: These administrative orders highlight the President’s control over the executive branch and the importance of adhering to established regulations regarding the grant of benefits.

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