The Supreme Court affirmed the Commission on Audit’s (COA) disallowance of certain allowances granted to the Philippine Charity Sweepstakes Office (PCSO) Laguna Provincial District Office (LPDO) personnel. The Court reiterated that while the PCSO Board has the power to fix salaries and benefits, this power is not absolute and is subject to pertinent civil service and compensation laws. This decision underscores the importance of adhering to established legal and budgetary regulations in the disbursement of public funds, even in government-owned and controlled corporations like PCSO.

PCSO’s Discretion vs. Fiscal Prudence: Can Employee Benefits Exceed Legal Boundaries?

This case arose from Notices of Disallowance (NDs) issued by the COA against PCSO-LPDO for the payment of unauthorized benefits to its personnel, totaling P1,601,067.49. These benefits included a Christmas Bonus exceeding the legally prescribed amount, a Weekly Draw Allowance, Staple Food Allowance, Hazard Pay, Cost of Living Allowance (COLA), and Medicine Allowance. The COA grounded its disallowance on the lack of legal basis for these benefits, citing that they were merely based on the PCSO-Sweepstakes Employees Union (SEU) Collective Negotiation Agreement (CNA) and PCSO Resolution No. A-0103, series of 2010.

PCSO argued that the grant of these benefits was within the power of its Board under Republic Act (RA) No. 1169, its charter, and that it had received post facto approval from the Office of the President. They also contended that disallowing the benefits would violate the principle of non-diminution of benefits. The Supreme Court, however, found these arguments unconvincing. It emphasized that the PCSO Board’s authority to fix salaries and benefits is not unfettered. As the Court stated in Philippine Charity Sweepstakes Office v. Commission on Audit:

The Court already ruled that R.A. 1169 or the PCSO Charter, does not grant its Board the unbridled authority to fix salaries and allowances of its officials and employees. PCSO is still duty bound to observe pertinent laws and regulations on the grant of allowances, benefits, incentives and other forms of compensation. The power of the Board to fix the salaries and determine the reasonable allowances, bonuses and other incentives are still subject to the review of the DBM.

Building on this principle, the Court highlighted that PCSO must ensure compliance with relevant budgetary legislation laws and rules when exercising its power to fix employee compensation. This means that any additional salaries, incentives, and benefits must adhere to all applicable laws regarding these disbursements.

The Court also addressed the specific allowances in question. It noted that Section 12 of RA 6758 provides that, as a rule, allowances due to government employees are deemed integrated into the new standardized salary rate save for some specific exceptions. Since the disallowed Weekly Draw Allowance, Staple Food Allowance, COLA, and Medicine Allowance are not among the enumerated exceptions, they are considered included in the standardized salary. For these allowances to be granted separately, they would need to be sanctioned by the Department of Budget and Management (DBM) or authorized by the President. Furthermore, Department of Budget and Management (DBM) Budget Circular (BC) No. 16, s. 1998 prohibits the grant of food, rice, gift checks, or any other form of incentives/allowances, except those authorized by an Administrative Order from the Office of the President.

PCSO relied on a letter from the Executive Secretary as post facto approval for these benefits. However, the Court has consistently rejected this argument, emphasizing that where there is an express provision of the law prohibiting the grant of certain benefits, the law must be enforced. Even an executive act shall be valid only when it is not contrary to the laws or the Constitution. Furthermore, the Court pointed out that the letter only approved benefits given prior to 07 September 2010, while the disallowed benefits were granted starting November 2010, with no proof that the authority was extended.

Regarding the Christmas Bonus, RA 6686, as amended, allows a Christmas Bonus equivalent to one month’s salary plus a cash gift of P5,000.00. The Christmas Bonus authorized by the PCSO Board exceeded this amount, leading the Court to affirm its disallowance, but only to the extent of the excess. The Hazard Pay was also disallowed because PCSO failed to demonstrate that the recipients met the requirements of being assigned to and performing duties in strife-torn or embattled areas.

The Court dismissed PCSO’s argument that the disallowance violated the principle of non-diminution of benefits. The Court emphasized that PCSO failed to establish that its officials and employees actually suffered a diminution in pay as a result of the disallowance. Mere allegations without supporting evidence are insufficient to prove such a claim. In light of the foregoing, the Court ruled that the COA did not commit grave abuse of discretion in upholding the validity of the NDs.

Turning to the liability for the disallowed amounts, the Court applied the rules established in Madera v. Commission on Audit. These rules dictate that approving and certifying officers who acted in good faith, in the regular performance of official functions, and with the diligence of a good father of the family are not civilly liable to return the disallowed amounts. However, those who acted in bad faith, with malice, or with gross negligence are solidarily liable to return the net disallowed amount. Recipients, whether approving officers or mere passive recipients, are liable to return the amounts they received, unless they can show that the amounts were genuinely given in consideration of services rendered or that other equitable considerations apply.

While the COA Proper had exonerated the payees on the ground of good faith, the Court found that the approving and certifying officers in this case were grossly negligent. They failed to observe the clear and unequivocal provisions of laws and rules applicable to the disbursement of the disallowed benefits. Specifically, the Court held that failure to follow a clear and straightforward legal provision constitutes gross negligence. As the Supreme Court emphasized in The Officers and Employees of Iloilo Provincial Government v. Commission on Audit, “Gross negligence has been defined as negligence characterized by the want of even slight care, acting or omitting to act in a situation where there is a duty to act, not inadvertently but willfully and intentionally with a conscious indifference to consequences insofar as other persons may be affected.”

The officers’ reliance on the PCSO Board’s directives was not a valid excuse. The Court clarified that while it considers the nature and extent of participation of officers, those performing discretionary duties cannot be exonerated simply by claiming they were following orders. Ultimately, the approving and certifying officers were held solidarily liable for the net disallowed amount, which is the total disallowed amount minus the amounts excused to be returned by the payees. The Court directed the COA to compute the correct amount of the disallowed benefits to be returned.

FAQs

What was the key issue in this case?	The central issue was whether the Commission on Audit (COA) correctly disallowed certain allowances and benefits granted to the Philippine Charity Sweepstakes Office (PCSO) employees due to lack of legal basis and non-compliance with existing laws and regulations.
What benefits were disallowed by the COA?	The disallowed benefits included a Christmas Bonus exceeding the legally prescribed amount, a Weekly Draw Allowance, Staple Food Allowance, Hazard Pay, Cost of Living Allowance (COLA), and Medicine Allowance.
Did the PCSO have the authority to grant these benefits?	While the PCSO Board has the power to fix salaries and benefits, this power is not absolute. It is subject to pertinent civil service and compensation laws, meaning that all disbursements must comply with existing legal and budgetary regulations.
What is the significance of RA 6758 in this case?	RA 6758 standardizes salary rates and provides that certain allowances are deemed integrated into the new standardized salary. The disallowed allowances in this case were not among the exceptions and therefore should have been integrated unless specifically authorized by the DBM or the President.
What did the Supreme Court say about the post facto approval from the Office of the President?	The Court rejected the argument of post facto approval, stating that it cannot validate benefits that are in clear violation of existing budgetary and auditing laws. Furthermore, the specific letter presented as evidence only approved benefits granted prior to a certain date.
Who is liable to return the disallowed amounts?	The approving and certifying officers were held solidarily liable for the net disallowed amount because they were found to be grossly negligent in approving the benefits. The payees were initially exonerated by COA, and this was not appealed.
What does gross negligence mean in this context?	Gross negligence is defined as negligence characterized by the want of even slight care, acting or omitting to act in a situation where there is a duty to act, not inadvertently but willfully and intentionally with a conscious indifference to consequences insofar as other persons may be affected.
Can the approving officers claim they were just following orders?	No, the approving officers cannot simply claim they were following orders. The Court clarified that those performing discretionary duties cannot be exonerated simply by claiming they were following orders, especially when they failed to exercise due diligence in ensuring compliance with the law.

This case serves as a crucial reminder to government agencies and GOCCs to exercise fiscal responsibility and adhere to established legal and budgetary regulations when granting employee benefits. The ruling reinforces the principle that public funds must be disbursed in accordance with the law, and that those responsible for authorizing illegal expenditures will be held accountable.

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 Charity Sweepstakes Office vs. Commission on Audit, G.R. No. 246313, February 15, 2022