The Supreme Court affirmed that ex officio members of the Philippine Economic Zone Authority (PEZA) Board are not entitled to receive per diems for their attendance in board meetings. This decision reinforces the principle that public officials serving in an ex officio capacity are already compensated through their primary positions and cannot receive additional payments for fulfilling duties related to those positions. The ruling underscores the constitutional prohibition against double compensation for public officials, ensuring that public funds are used judiciously and in accordance with the law.

Double Dipping Debacle: Can PEZA Board Members Claim Extra Pay?

The Philippine Economic Zone Authority (PEZA) found itself in hot water over its practice of granting per diems to ex officio members of its Board of Directors. These members, primarily Undersecretaries from various government departments, were receiving additional compensation for attending PEZA board meetings. The Commission on Audit (COA) flagged these payments, issuing Notices of Disallowance (NDs) for a total of P5,451,500.00 paid out between 2001 and 2006. This prompted a legal battle that ultimately reached the Supreme Court, centering on the legality of these per diems and the good faith of PEZA in disbursing them.

PEZA argued that Section 11 of Republic Act (R.A.) No. 7916, which initially authorized per diems for board members, was never explicitly repealed by R.A. No. 8748, the amendatory law. However, the COA countered that R.A. No. 8748 intentionally omitted the provision allowing per diems, aligning the law with the constitutional prohibition against double compensation. The COA also pointed to prior Supreme Court rulings, such as Civil Liberties Union v. Executive Secretary, which clarified that public officials serving in an ex officio capacity are not entitled to additional compensation for their services, as their primary compensation already covers these duties.

The Supreme Court sided with the COA, firmly establishing that the ex officio members of the PEZA Board were not entitled to the disputed per diems. The Court referenced its previous decision in Bitonio, Jr. v. Commission on Audit, which explicitly stated that R.A. No. 8748 deleted the provision in R.A. No. 7916 authorizing per diems for PEZA Board members. The deletion was a deliberate act to rectify a flaw in the original law and align it with the constitutional proscription against double compensation.

The Court emphasized that the Civil Liberties Union case, decided well before the disallowed payments were made, clearly articulated the constitutional prohibition. This prohibition states that public officials performing additional duties in an ex officio capacity should not receive additional compensation if those duties are already within the scope of their primary functions. To allow such additional compensation would be a violation of Section 13, Article VII of the 1987 Constitution.

Furthermore, the Court rejected PEZA’s claim of good faith in granting the per diems. Good faith, in this context, implies an honest intention and a lack of knowledge of circumstances that should prompt further inquiry. Given the existing legal precedent, particularly the Civil Liberties Union case, PEZA could not credibly claim ignorance of the potential illegality of the payments. The Court noted that PEZA was already aware that the disbursements were being questioned through the Notices of Disallowance issued by the COA.

The Supreme Court also addressed the constitutional implications of allowing ex officio members to receive additional compensation. The Court referenced Civil Liberties Union v. Executive Secretary, stating:

It bears repeating though that in order that such additional duties or functions may not transgress the prohibition embodied in Section 13, Article VII of the 1987 Constitution, such additional duties or functions must be required by the primary functions of the official concerned, who is to perform the same in an ex-officio capacity as provided by law, without receiving any additional compensation therefor.

The ex-officio position being actually and in legal contemplation part of the principal office, it follows that the official concerned has no right to receive additional compensation for his services in the said position. The reason is that these services are already paid for and covered by the compensation attached to his principal office. It should be obvious that if, say, the Secretary of Finance attends a meeting of the Monetary Board as an ex-officio member thereof, he is actually and in legal contemplation performing the primary function of his principal office in defining policy in monetary and banking matters, which come under the jurisdiction of his department. For such attendance, therefore, he is not entitled to collect any extra compensation, whether it be in the form of a per diem or an honorarium or an allowance, or some other such euphemism. By whatever name it is designated, such additional compensation is prohibited by the Constitution.

The Court emphasized that the Civil Liberties Union case was promulgated in 1991, or a decade before the subject disallowed payments of per diems for the period starting 2001 were made by PEZA. This underscored the fact that PEZA should have been aware of the legal restrictions and acted accordingly.

Therefore, the Supreme Court dismissed PEZA’s petition and affirmed the COA’s decision, holding the recipients liable for refunding the disallowed per diems. This case serves as a crucial reminder of the limits on compensation for public officials and the importance of adhering to constitutional principles in the disbursement of public funds.

FAQs

What was the key issue in this case?	The key issue was whether ex officio members of the PEZA Board of Directors were legally entitled to receive per diems for attending board meetings. The COA disallowed the payments, arguing they violated the constitutional prohibition against double compensation.
What does “ex officio” mean in this context?	“Ex officio” refers to a position held by virtue of one’s office or position. In this case, the Undersecretaries served on the PEZA Board because of their positions in their respective government departments.
Why did the COA disallow the per diems?	The COA disallowed the per diems because it considered them a form of double compensation, as the ex officio members were already being paid salaries in their primary government positions. The COA argued that such payments violated Section 13, Article VII of the 1987 Constitution.
What was PEZA’s main argument?	PEZA argued that the law authorizing the per diems (Section 11 of R.A. No. 7916) had not been explicitly repealed and that they acted in good faith when granting the payments. They claimed they believed the payments were legal at the time.
How did the Supreme Court rule?	The Supreme Court ruled against PEZA, affirming the COA’s decision. The Court held that the law authorizing the per diems had been effectively repealed and that PEZA could not claim good faith due to existing legal precedents.
What is the significance of the Civil Liberties Union v. Executive Secretary case?	The Civil Liberties Union case established the principle that public officials serving in an ex officio capacity are not entitled to additional compensation for duties related to their primary positions. This case served as a key precedent in the PEZA case.
What does this ruling mean for other government agencies?	This ruling reinforces the importance of adhering to constitutional principles regarding compensation for public officials. It serves as a reminder that ex officio members generally cannot receive additional compensation for serving on boards or committees.
Who is responsible for refunding the disallowed per diems?	The recipients of the disallowed per diems, the ex officio members of the PEZA Board, are responsible for refunding the payments to the government. The responsible PEZA officials may also be held liable.

This decision highlights the judiciary’s commitment to upholding constitutional principles and ensuring accountability in the use of public funds. By disallowing the per diems, the Supreme Court has reinforced the prohibition against double compensation, promoting transparency and fiscal responsibility in government.

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: Philippine Economic Zone Authority (PEZA) vs. Commission on Audit and Reynaldo A. Villar, Chairman, Commission on Audit, G.R. No. 189767, July 03, 2012