The Supreme Court held that public officials can be held personally liable for the unauthorized disbursement of public funds for private legal services if they fail to secure the necessary authorizations. While securing the legal services of a private lawyer, Dr. Oñate, President of Camarines Norte State College (CNSC), did not obtain the prior written concurrence of the Commission on Audit (COA). This case clarifies the responsibilities of public officials in ensuring compliance with auditing regulations when engaging external legal counsel and underscores the importance of securing proper authorization to avoid personal liability for disallowed expenses.

Who Pays the Lawyer? State College Engagement Without Proper COA Approval

In 2009, Camarines Norte State College (CNSC), through its President Dr. Wenifredo T. Oñate, entered into a retainership contract with Atty. Alex A. Arejola to serve as its legal counsel. The agreement stipulated a monthly retainer fee and appearance fees for court hearings. The Office of the Solicitor General (OSG) granted deputation to Atty. Arejola as a special attorney authorized to represent CNSC, subject to existing rules and regulations of the Department of Budget and Management (DBM) and the Commission on Audit (COA). However, the COA subsequently denied Dr. Oñate’s request for written concurrence, citing violations of COA Circular No. 86-255, as amended by COA Circular No. 95-011, which prohibits the use of public funds to pay for private legal counsel without prior authorization. The COA then issued a Notice of Disallowance for the payments made to Atty. Arejola, holding Dr. Oñate and several other CNSC officials liable for the disallowed amount.

Dr. Oñate contested the disallowance, arguing that he had acted in good faith and with the approval of the CNSC Board of Trustees. The COA, however, affirmed its decision, relying on established jurisprudence that holds officials personally liable for securing and benefiting from unauthorized legal services. This prompted Dr. Oñate to file a petition for certiorari with the Supreme Court, seeking to overturn the COA’s ruling. This case brings to the forefront the critical issue of accountability in government spending and the extent to which public officials can be held personally liable for decisions made in their official capacity.

The Supreme Court granted the petition, albeit with modifications. The Court reiterated that as a chartered institution, CNSC is covered by Executive Order (E.O.) No. 292, or the Administrative Code of 1987, which mandates that only the OSG is authorized to represent government agencies in legal matters. Citing COA Circular No. 95-011, the Court emphasized that public funds cannot be used to pay for private legal counsel without the written conformity of the OSG or the Office of the Government Corporate Counsel (OGCC), and the written concurrence of the COA. It is important to note that the purpose of this prohibition is to prevent the unnecessary disbursement of public funds for services that the government legal offices are mandated to provide. The Court has consistently upheld this requirement across various government entities, including government-owned and/or controlled corporations, local government units, and state colleges.

COA Circular No. 95-011 stresses that public funds shall not be utilized for the payment of services of a private legal counsel or law firm to represent government agencies in court or to render legal services for them. Despite this, the same circular provides that in the event that such legal services cannot be avoided or is justified under extraordinary or exceptional circumstances, the written conformity and acquiescence of the OSG or the Office of the Government Corporate Counsel (OGCC), as the case may be, and the written concurrence of the COA shall first be secured before the hiring or employment of a private lawyer or law firm.

The Court noted that while Dr. Oñate obtained OSG authorization, the request for COA concurrence was made belatedly, just before the expiration of the contract. The Supreme Court emphasized that ignorance of the law is not a valid defense. However, the Court also recognized that Dr. Oñate had secured the approval of the CNSC Board of Trustees before engaging Atty. Arejola’s services. Building on this principle, the Court held that the members of the Board of Trustees who approved the engagement without requiring prior OSG conformity and COA concurrence should also be held liable.

In relation to Section 103 of Presidential Decree-No. 1445 (Government Auditing Code of the Philippines) as well as Section 52, Chapter 9, Title I-B, Book V and Section 43, Chapter V, Book VI of the Administrative Code, the board of trustees who approved Board Referendum No. 2, s. 2009 should also be held liable for the unauthorized disbursement of public funds. The relevant provision from the Government Auditing Code states:

SEC. 103. General liability for unlawful expenditures. – Expenditures of government funds or uses of government property in violation of law or regulations shall be a personal liability of the official or employee found to be directly responsible therefor.

The Court reasoned that when a government entity engages private legal services without the necessary authorization, its officials bind themselves to be personally liable for the costs. While Atty. Arejola was also deemed responsible for receiving the payments, the Court clarified that this was without prejudice to any action against those involved in the unlawful release of public funds. This ruling highlights the shared responsibility of those involved in authorizing and receiving unauthorized payments. The Supreme Court ultimately affirmed the COA decision with the modification that the CNSC Board of Trustees should also be held liable along with Dr. Oñate and other officials. The Court directed the COA to order the Board of Trustees to file a memorandum and/or call a hearing to allow the presentation of evidence that may exempt them from liability. This ensures that all parties involved are given an opportunity to present their case and that liability is fairly distributed.

FAQs

What was the main issue in this case?	The main issue was whether Dr. Oñate, as President of CNSC, should be held personally liable for the disallowed payments to a private lawyer hired without the required COA concurrence.
Why was the COA concurrence required?	COA concurrence is required under COA Circular No. 95-011 to prevent the unauthorized and unnecessary disbursement of public funds for private legal services that should be provided by government legal offices.
Did Dr. Oñate obtain any authorization for hiring the private lawyer?	Yes, Dr. Oñate obtained authorization from the OSG, but the COA noted that he requested for the COA’s concurrence belatedly, which was less than a week prior to the expiration of the contract.
What was the Supreme Court’s ruling?	The Supreme Court affirmed the COA decision with modification, holding Dr. Oñate, the CNSC Board of Trustees, and other liable officials personally and solidarily liable for the disallowed amount.
Why were the members of the Board of Trustees also held liable?	The Board of Trustees were held liable because they approved the retainer’s contract without ensuring that the necessary OSG conformity and COA concurrence were obtained.
What does ‘solidarily liable’ mean in this context?	Solidarily liable means that each of the liable parties is individually responsible for the entire amount, and the COA can recover the full amount from any one of them.
What should government officials do to avoid similar liabilities?	Government officials should ensure that they obtain the necessary authorizations, including OSG conformity and COA concurrence, before engaging private legal services.
What was the effect of the Supreme Court’s order to the COA?	The Supreme Court directed the COA to order the Board of Trustees to file a memorandum and/or call a hearing to allow the presentation of evidence that may exempt them from any liability.

This case underscores the importance of due diligence and compliance with auditing regulations when engaging private legal services in government. Public officials must ensure that all necessary authorizations are obtained to avoid personal liability for disallowed expenses. The ruling serves as a reminder that ignorance of the law is not an excuse and that all parties involved in the disbursement of public funds have a responsibility to ensure compliance with applicable regulations.

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: Dr. Wenifredo T. Oñate vs. Commission on Audit, G.R. No. 213660, July 05, 2016