Limits to PhilHealth’s Fiscal Autonomy: Accountability for Improperly Granted Benefits

G.R. No. 249061, May 21, 2024

Imagine a government corporation freely dispensing bonuses and allowances, regardless of established rules. This scenario highlights the need for checks and balances, even with fiscal autonomy. In a recent case, the Supreme Court clarified the limits of the Philippine Health Insurance Corporation’s (PhilHealth) power to grant benefits, particularly to job order and project-based contractors. This ruling underscores the importance of adhering to government regulations and the potential liability of approving officers for disallowed disbursements.

This case revolves around the Commission on Audit’s (COA) disallowance of various benefits and allowances granted by PhilHealth Regional Office No. V (ROV) to its job order and project-based contractors. These benefits, totaling PHP 4,146,213.85, were deemed to lack legal basis. The key question is whether PhilHealth’s claim of fiscal autonomy shields it from these disallowances and whether approving officers can be held liable for the improperly granted benefits.

Understanding the Legal Framework

Several legal principles and regulations govern the grant of benefits and allowances in government-owned and controlled corporations (GOCCs) like PhilHealth. While Republic Act No. 7875, or the National Health Insurance Act of 1995, grants PhilHealth certain powers, including the authority to fix the compensation of its personnel, this power is not absolute.

The Supreme Court has consistently held that PhilHealth’s fiscal autonomy is limited by:

• The Salary Standardization Law (Republic Act No. 6758)
• Presidential Decree No. 1597, requiring presidential approval for certain allowances
• Department of Budget and Management (DBM) regulations
• Civil Service Commission (CSC) rules

Crucially, CSC Memorandum Circular No. 40, Series of 1998, explicitly states that job order and contract of service employees are not entitled to the same benefits as regular government employees. This includes allowances like PERA, COLA, and RATA. The Court emphasized this principle, stating that “contract of service or job order employees do not enjoy the benefits enjoyed by government employees”.

For example, imagine a government agency giving Christmas bonuses to its contractual janitorial staff. While well-intentioned, this would violate CSC rules and be subject to disallowance.

The Case Unfolds: COA’s Disallowance and PhilHealth’s Appeal

Between 2009 and 2011, PhilHealth ROV provided various benefits to its job order and project-based contractors, including transportation allowances, sustenance gifts, and productivity enhancement incentives. The COA subsequently disallowed these payments, issuing 19 Notices of Disallowance (NDs). Here’s a simplified overview:

• 2009-2011: PhilHealth ROV grants benefits to contractors.
• COA Audit: The Audit Team Leader and Supervising Auditor of PhilHealth ROV disallowed the payment of benefits
• NDs Issued: COA issues 19 NDs totaling PHP 4,146,213.85.
• PhilHealth Appeal: PhilHealth argues fiscal autonomy and good faith.
• COA ROV Decision: Affirms the disallowances, citing lack of legal basis.
• COA CP Decision: Partially grants the appeal, absolving the contractors (payees) from liability but holding the approving officers solidarily liable.

PhilHealth then appealed to the Supreme Court, arguing that the COA committed grave abuse of discretion. The Court was asked to determine if PhilHealth’s fiscal autonomy justified the granting of the benefits and if the approving officers acted within their authority.

The COA CP, in its decision, emphasized that “the corporate powers of PhilHealth to determine the compensation of its officers and employees are limited by law, the policies of the Office of the President (OP) and the Department of Budget and Management (DBM).”

The Supreme Court noted that a post facto request for approval from the Office of the President (OP) did not validate the illegal disbursements to non-employees. Even with presidential approval, the disbursement of the disallowed benefits and incentives in favor of the job order and project-based contractors will remain legally infirm.

Practical Implications and Key Takeaways

This case serves as a crucial reminder to GOCCs about the limits of their fiscal autonomy. It emphasizes that while they may have the power to fix compensation, they must still adhere to existing laws, rules, and regulations.

The ruling also clarifies the liability of approving officers in cases of disallowed disbursements. Approving officers can be held solidarily liable for illegal and irregular disbursements, especially when they demonstrate gross negligence or disregard for established rules.

Key Lessons

• Fiscal Autonomy is Not Absolute: GOCCs must operate within the bounds of the law.
• Compliance is Crucial: Adhere to CSC rules and DBM regulations regarding benefits.
• Due Diligence is Required: Approving officers must ensure disbursements have a legal basis.
• Good Faith Alone is Not Enough: Gross negligence can still lead to liability.

Let’s say a GOCC approves a new allowance for its employees without consulting DBM guidelines. Even if the GOCC believes the allowance is justified, it could face disallowance and potential liability for its approving officers.

Frequently Asked Questions

Q: What is fiscal autonomy?

A: Fiscal autonomy grants government entities the power to manage their own finances, including budgeting and spending. However, this power is not unlimited and is subject to legal restrictions.

Q: What are the consequences of a COA disallowance?

A: A COA disallowance means that certain government expenditures are deemed illegal or irregular. This can lead to the return of the disallowed amounts and potential administrative or criminal charges for responsible officers.

Q: Who is liable to return disallowed amounts?

A: Generally, approving and certifying officers who acted in bad faith or with gross negligence are solidarily liable. Recipients may also be required to return amounts they received without a valid legal basis. In this case the payees were absolved and only the approving officers were held liable.

Q: What is the role of good faith in disallowance cases?

A: Good faith can be a mitigating factor for approving and certifying officers. If they acted in good faith and with due diligence, they may not be held personally liable. However, good faith is not a defense against gross negligence.

Q: How does this ruling affect GOCCs moving forward?

A: This ruling reinforces the need for GOCCs to carefully review their compensation and benefits policies to ensure compliance with all applicable laws and regulations. It also highlights the importance of seeking guidance from the DBM and CSC when in doubt.

Q: What is the effect of a post-facto presidential approval on an otherwise illegal disbursement?

A: The Supreme Court held that a post facto request for approval from the Office of the President (OP) did not validate the illegal disbursements to non-employees. Even with presidential approval, the disbursement of the disallowed benefits and incentives in favor of the job order and project-based contractors will remain legally infirm.

Q: What does it mean when the Supreme Court says approving officers are solidarily liable as to the “net disallowed amounts only?”

A: It means that the approving officers are only liable for the total amount disallowed, MINUS any amounts that the payees (recipients) are excused from returning.

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