COA Case Digests

Section 1: Purpose, composition, appointment

Doctrine: COA as a collegial body

Case: Mison v COA

Facts:The case is about customs case no. 813 where the

commissioner of customs, MIson, declaring illegal the seizure byelements of the Philippine Navy of the M/V "Hyojin Maru" a vesselof Japanese registry, and ordered the release of the vessel andits cargo to the claimants, Chan Chiu On and Cheung I.

However, the vessel was never released because it sank whilein the custody of the bureau of customs and it could not besalvaged. The claimants filed a claim with the Commission onAudit for the payment of the vessel.

Acting thereon "(b)y authority of the Acting Chairman," Mr.Rogelio B. Espiritu, Manager, Technical Service Office of theCOA, denied the claim for the reasons set forth in his registeredletter to the claimant's lawyer dated November 3, 1977-captioned"Decision No. 77-142."

In a letter dated May 10, 1978, claimant’s counsel, Mr.David replied that said Decision No. 77-142-rendered only by theManager, Technical Service Office of the COA, and "not (by) theActing Chairman, much less . . . the Commission on Audit" — wasvoid because the matter could validly be acted upon only by "theCommission on Audit duly constituted, by the appointment andqualification of its Chairman and two Commissioners," "asspecifically provided by Section 2, Article XII-D of the (1973)Constitution. In a 4th Indorsement dated June 22, 1987 addressed"to the Auditor, Bureau of Customs," Chairman Eufemio C. Domingo,acting "FOR THE COMMISSION," reconsidered Decision No. 77-142 ofActing Commissioner of Audit Tantuico, supra.

He declared that the vessel sank while in illegal custody ofthe Bureau of Customs, which "should have pre-eminently takenadequate measures to preserve" it but did not.; hence, hedeclared that "this Commission will interpose no objection" tothe instant claim, subject to the usual auditing and accountingrequirements." Petitioner seasonably filed with this Court apetition for certiorari to nullify said COA Decisions pursuant toSection 7, Article IX of the 1987 Constitution.

Issues: Whether or not the decision to reverse the Espiritu Decision

was proper?

Decision:In the first place the "Espiritu decision" was void ab initio.

As manager of the COA Technical Service Office, Mr. Espirituobviously had no power whatever to render and promulgate adecision of or for the Commission. Indeed, even the Chairman,alone, had not that power. As clearly set out in the Constitutionthen in force, the power was lodged in the Commission on Audit,"composed of a Chairman and two Commissioners." 20 It was theCommission, as a collegial body, which then as now, had thejurisdiction to "(d)ecide any case brought before it within sixtydays from the date of its submission for resolution," subject toreview by the Supreme Court on certiorari. 21

Hence, the adoption or ratification of the Espiritu decisionby the Acting COA Chairman was inconsequential. Ratificationcannot validate an act void ab initio because done absolutelywithout authority. The act has to be done anew by the person orentity duly endowed with authority to do so.

Moreover, even conceding the contrary, no properratification or validation could have been effected by the ActingChairman since he was not the Commission, and he himself had nopower to decide any case brought before the Commission, thatpower, to repeat, being lodged only in the Commission itself, asa collegial body. it must be made clear that the EspirituDecision was not merely "technically invalid," as the petitioner

describes it. It was substantively void ab initio, because renderedwithout jurisdiction. It had an essential inherent defect thatcould not be cured or waived.

Doctrine: Promotional appointments

Case: Funa v COA

Facts:Following the retirement of Carague on February 2, 2008 and

during the fourth year of Villar as COA Commissioner, Villar wasdesignated as Acting Chairman of COA from February 4, 2008 toApril 14, 2008.  Subsequently, on April 18, 2008, Villar wasnominated and appointed as Chairman of the COA.  Shortlythereafter, on June 11, 2008, the Commission on Appointmentsconfirmed his appointment. 

He was to serve as Chairman of COA, as expressly indicatedin the appointment papers, until the expiration of the originalterm of his office as COA Commissioner or on February 2, 2011.Challenged in this recourse, Villar, in an obvious bid to lendcolor of title to his hold on the chairmanship, insists that hisappointment as COA Chairman accorded him a fresh term of seven(7) years which is yet to lapse. He would argue, in fine, thathis term of office, as such chairman, is up to February 2, 2015,or 7 years reckoned from February 2, 2008 when he was appointedto that position.

Meanwhile, Evelyn R. San Buenaventura (San Buenaventura) wasappointed as COA Commissioner to serve the unexpired term ofVillar as Commissioner or up to February 2, 2011.

Issues:Whether or not Villar’s appointment as COA Chairman, while

sitting in that body and after having served for four (4) yearsof his seven (7) year term as COA commissioner, is valid in light

of the term limitations imposed under, and the circumscribingconcepts tucked in, Sec. 1 (2), Art. IX(D) of the Constitution

Decision:WHEREFORE the petition is PARTLY GRANTED.  The appointment

of then Commissioner Reynaldo A. Villar to the position ofChairman of the Commission on Audit to replace Guillermo N.Carague, whose term of office as such chairman has expired, ishereby declared UNCONSTITUTIONAL for violation of Sec. 1(2), Art.IX(D) of the Constitution.

Sec. 1 (2), Art. IX(D) of the Constitution, reads:(2) The Chairman and Commissioners [on Audit] shall beappointed by the President with the consent of theCommission on Appointments for a term of seven years withoutreappointment. Of those first appointed, the Chairman shallhold office for seven years, one commissioner for fiveyears, and the other commissioner for three years, withoutreappointment. Appointment to any vacancy shall be only forthe unexpired portion of the term of the predecessor. In nocase shall any member be appointed or designated in atemporary or acting capacity. (Emphasis added.)

The Court restates its ruling on Sec. 1(2), Art. IX(D) of theConstitution, viz:

1. The appointment of members of any of the threeconstitutional commissions, after the expiration of the uneventerms of office of the first set of commissioners, shall alwaysbe for a fixed term of seven (7) years; an appointment for alesser period is void and unconstitutional.

i. The appointing authority cannot validly shorten thefull term of seven (7) years in case of the expiration ofthe term as this will result in the distortion of therotational system prescribed by the Constitution.

2. Appointments to vacancies resulting from certain causes

(death, resignation, disability or impeachment) shall only be forthe unexpired portion of the term of the predecessor, but suchappointments cannot be less than the unexpired portion as thiswill likewise disrupt the staggering of terms laid down underSec. 1(2), Art. IX(D).

3. Members of the Commission, e.g. COA, COMELEC or CSC, whowere appointed for a full term of seven years and who served theentire period, are barred from reappointment to any position inthe Commission.  Corollarily, the first appointees in theCommission under the Constitution are also covered by theprohibition against reappointment.

4. A commissioner who resigns after serving in theCommission for less than seven years is eligible for anappointment to the position of Chairman for the unexpired portionof the term of the departing chairman.  Such appointment is notcovered by the ban on reappointment, provided that the aggregateperiod of the length of service as commissioner and the unexpiredperiod of the term of the predecessor will not exceed seven (7)years and provided further that the vacancy in the position ofChairman resulted from death, resignation, disability or removalby impeachment.  The Court clarifies that “reappointment” foundin Sec. 1(2), Art. IX(D) means a movement to one and the sameoffice (Commissioner to Commissioner or Chairman to Chairman). On the other hand, an appointment involving a movement to adifferent position or office (Commissioner to Chairman) wouldconstitute a new appointment and, hence, not, in the strict legalsense, a reappointment barred under the Constitution.

5. Any member of the Commission cannot be appointed ordesignated in a temporary or acting capacity.

Section 2: Power and Functions

Examine and audit government revenues

Examine and audit government expenditures

Doctrine: post-audit authority

Case: Blue Bar Coconut Phils v Tantuico

Facts:Sometime in 1976, the respondent Acting Chairman of the

Commission on Audit initiated a special audit of coconut end-usercompanies, which include herein petitioners, with respect totheir Coconut Consumers Stabilization Fund levy collections andthe subsidies they had received.

As a result of the initial findings of the Performance AuditOffice with respect only to the petitioners, respondent ActingCOA Chairman directed the Chairman, the Administrator, and theMilitary Supervisor of PCA and the Manager of the CoconutConsumers Stabilization Fund, in various letters to them (AnnexesG-2 H, I, J, L and N of petition) to collect the short levies andoverpaid subsidies, and to apply subsidy claims to the settlementof short levies should the petitioners fail to remit the amountdue.

Issues: Whether or not the respondent COA Chairman may disregard the

PCA rules and decisions has become moot.

Decision:In the case at bar, the petitioners have failed to show that

acts were done with grave abuse of discretion amounting to lackof jurisdiction. Case dismissed.

Petitioners contend that they are outside the ambit ofrespondents' "audit" power which is confined to government-ownedor controlled corporations.

Section 2 (1) of Article IX-D of the Constitution providesthat "The Commission on Audit shall have the power, authority andduty to examine, audit, and settle all accounts pertaining to therevenues and receipts of, and expenditures or uses of funds andproperty, owned or held in trust by or pertaining to, the

Government, or any of its subdivisions, agencies orinstrumentalities, including government-owned or controlledcorporation with original charters, and on a post-auditbasis. ... (d) such non-governmental entities receiving subsidy or equity directlyor indirectly from or through the Government which are required by law or the grantinginstitution to submit to such audit as a condition of subsidy or equity." (Emphasissupplied) The Constitution formally embodies the long establishedrule that private entities who handle government funds orsubsidies in trust may be examined or audited in their handlingof said funds by government auditors. n view of the aboveconsiderations, we apply the principle of primary jurisdiction:

In cases involving specialized disputes, the trend hasbeen to refer the same to an administrative agency ofspecial competence. As early as 1954, the Court in PambujanSur United Mine Workers v. Samar Mining Co., Inc. (94 Phil.932,941), held that under the sense-making and expeditiousdoctrine of primary jurisdiction ... the courts cannot orwill not determine a controversy involving a question whichis within the jurisdiction of an administrative tribunalprior to the decision of that question by the administrativetribunal, where the question demands the exercise of soundadministrative discretion requiring the special knowledge,experience, and services of the administrative tribunal todetermine technical and intricate matters of fact, and auniformity of ruling is essential to comply with thePurposes of the regulatory statute administered." Recently,this Court specaking thru Mr. Chief Justice ClaudioTeehankee said that "In this era of clogged court dockets,the need for specialized administrative boards orcommissions with the special knowledge, experience andcapability to hear and determine promptly disputes ontechnical matters or essentially factual matters, subject tojudicial review in case of grave abuse of discretion, hasbecome well nigh indispensable." The court reminds us thatThe legal presumption is that official duty has been dulyperformed.

Doctrine: Limitations to post-audit authority

Case: Eslao v. COA

Facts:In 1988, Pangasinan State University entered into a

Memorandum of Agreement (MOA) with the Department of Environmentand Natural Resources (DENR) to evaluate government reforestationprograms in Pangasinan. The evaluation project was being fundedby the government under an Asian Development Bank loan to thePhilippines.

In January 1989, the Board of Regents (BOR) of PSU approvedand confirmed the rates of honoraria and per diems for the PSUpersonnel involved in the project. Subsequently, PSU issuedauthority to pay P70, 375.00 representing honoraria to PSUpersonnel engaged in the project. This amount was reducedpursuant to the National Compensation Circular (NCC) #53 whichwas promulgated by the Department of Budget (DBM) in June 21,1988.

In July 1989, the resident auditor of PSU alleged that therewere excesses in the payment of honoraria based on the provisionsof the Compensation Policy Guidelines (CPG) #80-4 which waspromulgated also by the DBM in August 7, 1980.

The resident auditor argues that CPG #80-4 should be appliedin this case and not NCC #53.

Due to the request of PSU DBM clarified the matter, thru aletter, saying that the basis for the project's honoraria shouldnot be CPG No. 80-4 which pertains to locally funded projects butrather NCC No. 53 which pertains to foreign-assisted projects”.

However, COA decided against the reconsideration filed byPSU and it argued the following:

since under the MOA a Coordinating Committee shall be createdwhich shall be responsible for the overall administration and coordination of theevaluation to be chaired by the DENR and co-chaired by the PSU VP for Researchand Development this type of project contemplated under theMOA fits the description of a locally funded project whichis an “inter-agency activity” between DENR and PSU and

therefore it also fits the description of a “specialproject”. And (2) COA argues that the DBM ruling classifying the

project as foreign-assisted does not rest on solid ground sinceloan proceeds, regardless of source, eventually become publicfunds for which the government is accountable. Hence any projectfunded under the ADB loan agreement is considered to be locallyfunded.

Issue: WON the NCC #53 should govern the payment of honoraria and

per diem to the personnel of PSU involved in the DENR and PSUproject.

Decision: The court granted the petition. NCC should apply not CPG 80-

4First: Special project is defined under Sec 2.1 of the CPG

80-4 as “an inter-agency or inter-committee activity or an undertaking by acomposite group of officials/employees from various agencies which [activity orundertaking] is not among the regular and primary functions of the agenciesinvolved.”

There are two components of a special project (1) thereshould be an inter-agency or inter-committee activity orundertaking by a group of officials or employees who are drawnfrom various agencies and (2) the activity or undertakinginvolved is not part of the "regular or primary" functions of theparticipating agencies. The first component refers to the groupof personnel from 2 or more government agencies which willactually carry out the project in the field and not to thecoordinating body. In this case, the project team who willactually carry out the work is composed of only PSU personnel.Thus, the project team is not a "composite group" as required by thedefinition of CPG No. 80-4 of "special projects.

CPG 80-4 was issued 8 years before NCC#53 was promulgated.Examination of the provisions of NCC No. 53 makes it crystal

clear that the circular is applicable to foreign-assistedprojects only. Pertinent provision of NCC#53 states that :prescribe/authorize the classification and compensation rates of positions in foreign-assisted projects (FAPs) including honoraria rates for personnel detailed to FAPs andguidelines in the implementation thereof pursuant to Memorandum No. 173 dated 16May 1988 19. Clearly, NCC No. 53 amended the earlier CPG No. 80-4by carving out from the subject matter originally covered by CPGNo. 80-4 all "foreign-assisted [special] projects."

The MOA between PSU and DENR also state that the project ispart of the commitment with the ADB under the Forestry SectorProgram Loan and the DERN certification which states that theproject being done by PSU and other state universities areforeign funded under the ADB/OECF Forestry Sector Program Loan

Second: Under the Administration Code of 1987, theCompensation and Position Classification Bureau of the DBM "shallclassify positions and determine appropriate salaries forspecific position classes and review appropriate salaries forspecific position classes and review the compensation benefitsprograms of agencies and shall design job evaluation programs."

COA is not authorized under its constitutional mandate tosubstitute its own judgement for any applicable law oradministrative regulation with the wisdom or propriety of which,however, it does not agree, at least before such law orregulation is set aside b the authorized agency of government orby the courts

Note: “COA post audit involves doing the same kind of workunder pre-audit and looking at exactly the same disbursementvouchers and supporting documents already available even prior topayment, except that it is intentionally done later, or AFTERexecution and payment of transactions”

According to Eslao v COA the post-audit authority is limitedto determining compliance to government laws and regulations likechecking if there is an appropriation or budget, inquiring aboutthe legality of transactions, and checking if proper approval anddocumentation was followed not to determine which law is moreapplicable.

Doctrine: Limitation to post-audit authority

Case: J.F.F Manacop v. CA

Facts:Petitioner Manacop Construction Corporation constructed a

perimeter fence along MIA road in order to prevent squatters fromentering the area.

The construction was done without Notice to Proceed due tothe need and urgency of the project.

After the 1986 February Revolution, a new general managerwas appointment to MIA and 95% of the fence worth Php 282,068.00was already constructed by the petitioner.

A letter from the petition demanding payment for work donewas sent to the GM of MIA. However, the GM denied the request ofthe petitioner.

This prompted petitioner to file a complaint before thetrial court which granted the petition and ordered MIA to paypetitioner the amount of the partially completed project based onquantum meruit since there was an absence of written contractbetween the parties.

Respondent MIA protested against this decision in so far asbasing the payment on quantum meruit when the trial court shouldhave referred the computation to the COA based on what was donein Eslao v COA.

The CA affirmed that petitioners should be paid but it setaside the trial court decision to base the payment on quantummeruit and referred it to COA.

Issue: WON Manacop construction corporation should be paid based on

quantum merit

Decision:The court ruled in favor of the petition. The CA decision is

set aside and the RTC decision is reinstated.The court settled first the issue that petitioners should be

paid for the construction made which arose from a quasi-contractual relation.

Quantum meruit allows recovery of the reasonable valueregardless of any agreement as to value. It entitles the party to"as much as he, reasonably deserves," as distinguished fromquantum valebant or to "as much as what is reasonably worth."

Unliquidated claims present a justiciable question ripe forjudicial determination which is beyond the powers of the COA toadjudicate. Recovery based on quantum meruit is in the nature ofsuch claim because its settlement requires the application ofjudgment and discretion and cannot be adjusted by simplearithmetical processes

The case of Eslao v COA and Royal Trust Co does not apply inthe instant case. Eslao and Royal Trust Co are applicable tocases when the issue is who will determine the computation andnot the exact amount. In this case, the lower court had alreadymade a factual finding on the amount reasonably due to petitionerand scrutinized the evidence to sustain the claim. Besides, thereis nothing in the cited cases which would imply that only the COAcan determine the specific amount due to a contractor guided bythe equitable principle of quantum meruit. The courts are notpowerless to determine a factual matter in accordance with bothstandards

COA’s authority is limited to settling liquidated accountswhich are those accounts whihcc may be adjusted simply byarithmetical process. It does not include the power to fix theamount of an undetermined debt.

Recovery in based on quantum meruit is based on unliquidatedclaims. In the cases, JFF Manacop was also due to receive aspecific amount based on the evaluation of the work it hasalready compeleted. The case of Eslao v CA does not apply herebecause in Eslao, the amounts of honoraria and per diems to bepaid to the PSU personnel who were yet specified and there was an

exisiting regulation that governs what standard should be used.Eslao is applicable to cases when the issue is who will determinethe computation and not the exact amount

Doctrine: Prevention of unnecessary expenses

Case: Polloso v Gangan

Facts:National Power Corporation (NPC) hired by way of service

contract, Atty,Benemerito Satorre, a private lawyer to performand provide legal functions and services.

Satorre was to receive 21,749 as monthly salary withrepresentation and transportation allowance of 5,300.

In January 1995, the unit auditor of NPC issued a Notice ofDisallowance for the payment of the services rendered by AttySatorre because it violates COA Circular No 86-255 which requiresthat contract of services should have the written conformity andacquiessence of the Solicitor General or Corporate Counsel andthe concurrence of the Commission on Audit (COA).

Petitioner, Dante Polloso submitted a letter-explanationrefuting the alleged violation contained in the Notice ofDisallowance and sought reconsideration.

This was denied by COA. Hence the instant petition whichrefutes the reasons provide by COA why it issued the Notice ofDisallowance.

Petitioner argues that the phrase “handling of legal cases”should be construed to mean as conduct of cases or handling ofcourt cases or litigation and not to other legal matters, such aslegal documentation, negotiations, counseling or right of waymatters

Issue:

WON COA-Circular 86-255 applies to the nature of hiring ofAtty. Sattore who handled only right of way matters and did nothandle court cases

Decision:The court ruled against the petition.The COA circular was issued recognizing the problem of

hiring private lawyers or law praticioners practitioners torender legal services for them and/or to handle their legal casesin consideration of fixed retainer fees, at times in unreasonableamounts, paid from public fund despite numerous laws thatrestrict the practice.

The COA circular provides that:” the payment out of public funds ofretainer fees to private law practitioners who are so hired or employed without theprior written conformity and acquiescence of the Office of the Solicitor General or theGovernment Corporate Counsel, as the case may be, as well as the written concurrenceof the Commission on Audit shall be disallowed in audit and the same shall be apersonal liability of the officials concerned.”

Based on the Circular government agencies andinstrumentalities are restricted in their hiring of privatelawyers to render legal services or handle their cases. Contraryto the view espoused by petitioner, the prohibition covers thehiring of private lawyers to render any form of legal service.

It makes no distinction as to whether or not the legalservices to be performed involve an actual legal controversy orcourt litigation Public funds will not be disbursed top payprivate lawyers unless there is prior written conformity andacquiescence from the Solicitor General or the GovernmentCorporate Counsel.

The court said the circular was a safeguard to prevent theirregular, unnecessary, excessive and extravagant orunconscionable expenditure.

COA conducts audit proceedings in order to prevent theirregular, unnecessary, excessive and extravagant orunconscionable expenditure of government/public funds. Thecircular recognizes the problem of hiring private lawyers or law

practitioners to render legal services in consideration of fixedretainer fees, at times in unreasonable amounts, paid from publicfund despite numerous laws that restrict the practice

Doctrine: Prevention of unnecessary expenses

Case: Uy v COA

Facts:Petitioners were among the more than sixty permanent

employees of the Provincial Engineering Office, Province ofAgusan del Sur, who were dismissed from the service by thenGovernor Ceferino S. Paredes, Jr. when the latter assumed office,allegedly to scale down the operations of the said office.

On July 11, 1988, a petition for reinstatement was filedbefore the Merit Systems Protection Board (MSPB) alleging thatGovernor Paredes was motivated by political vengeance when hedismissed them and hired new employees to replace them. Itappears that during the pendency of the petition forreinstatement, Governor Paredes issued Memorandum Order No. 3-Adated March 20, 1989 providing for the hiring of casual employeesto replace the dismissed employees, allegedly due to exigency ofservice.

On February 1, 1989, the governor specifically denied theallegations of petitioners that their dismissal was illegal.

On January 29, 1993, the MSPB rendered a decision holdingthat the reduction in work force was not done in accordance withcivil service rules and regulations, and ordering thereinstatement of petitioners. The pertinent portions of saiddecision state, viz:

"… The law applicable in the case at bar, which ishereby quoted as follows are Section 29 of E.O. 292 andSection 14 of the Rules on Personnel Actions and Policies,thus:

'Sec. 29. Reduction in Force. – Whenever it becomesnecessary for lack of work or funds or due to change in thescope or nature of an agency’s program or as a result ofreorganization, to reduce the staff of any department oragency, those in the same group or class of positions in oneor more agencies within the particular department or agencywherein the reduction is to be effected, shall be reasonablycompared in terms of relative fitness, efficiency and lengthof service, and those found to be least qualified for theremaining position shall be laid off. (underliningsupplied).

Sec. 14. The names of permanent employees laid offshall be entered in a reemployment list for the appropriateoccupation. The list, arranged in the order of theemployees’ retention credit, shall be kept by the Departmentor agency where the reduction took place, and a copy thereofshall be furnished the Commission. The manifest repugnance of the action taken by Governor

Paredes, Jr. was further exacerbated by the issuance of thehighly questionable Memorandum Order No. 3-A s. 1989 dated March20, 1989. Said memorandum provides for the hiring of casualsunder the façade of exigency of the public service. It was also ablatant violation of Section 14 of the Rules on Personnel Actionsand Policies which succinctly states that the names of permanentemployees laid off shall be entered in a reemployment list forthe appropriate occupation.

Pursuant to a Motion for Clarification filed by petitioners,the MSPB issued an Order dated April 19, 1993 which directed theProvincial Government of Agusan del Sur to pay petitioners theirback salaries and other money benefits for the period that theyhad been out of the service until their reinstatement.

The difficulties of petitioners did not end, for on July 9,1994, the Provincial Administrator, for and in behalf of GovernorPlaza, wrote a letter to respondent COA through the ProvincialAuditor, inquiring on whether or not:

"1. The MSPB Civil Service Commission decisiondirecting the incumbent Provincial Governor, Agusan del Surto pay back salaries and other benefits of the reinstated

sixty one (61) PEO employees, illegally dismissed by theformer Provincial Governor Ceferino S. Paredes Jr., is finaland executory;-COA: YES

2. The Commission on Audit is the only proper authorityto determine disbursement of such is in order-COA: YES. Themoney claim should first be brought to the Commission onAudit.

3. The former Provincial Governor Ceferino S. Paredes,Jr., who perpetrated the illegal act of dismissing the 61PEO employees, would be personally liable for payment ofback salaries and other benefits."

Petitioners filed a special civil action for certiorari to raise thefollowing assignment of errors:

"(A)......The Honorable Commission on Audit committedgrave abuse of discretion by ruling that payment of theirback salaries and other money benefits became the personalliability of former Governor Ceferino Paredes Jr. and not ofthe Provincial Government of Agusan del Sur, after the MeritSystems Protection Board and the Civil Service Commissiondeclared its decisions final and executory;

(B)......The Honorable Commission on Audit has noappellate authority to revise, amend and modify the finaland partially executed decisions/orders of the Merit SystemsProtection Board and the Civil Service Commission, being thesame constitutional commission and co-equal with each other;

(C)......The decisions of the Merit Systems ProtectionBoard and the Civil Service Commission have already beenpartially executed by the local government unit of theProvince of Agusan del Sur by reinstating petitioners totheir former positions in 1993 and partially paying theirback wages; and

Issues:Whether respondent COA, in the exercise of its power to

audit, can disallow the payment of back wages of illegallydismissed employees by the Provincial Government of Agusan del

Sur which has been decreed pursuant to a final decision of theCivil Service Commission

Decision:No. The COA is bereft of power to disallow the payment of

petitioners' back wages. Orders of the respondent Commission onAudit are SET ASIDE.

FIRST. The ruling of the respondent COA is based on itsfinding that bad faith attended the dismissal of petitioners. Inarriving at this conclusion, respondent COA relied solely on theMSPB decision of January 29, 1993 holding that the dismissal wasillegal because first, it was made in violation of Section 29 ofEO 292 and Section 14 of the Rules on Personnel Action andPolicies, and second, new casual employees were hired under theguise of exigency of the public service. A careful perusal ofsaid Decision will disclose that the MSPB never made acategorical finding of fact that former Governor Paredes acted inbad faith and hence, is personally liable for the payment ofpetitioners' back wages.

SECOND. The case at bar brings to the fore the parameters ofthe power of the respondent COA to decide administrative casesinvolving expenditure of public funds. Undoubtedly, the exerciseof this power involves the quasi-judicial aspect of governmentaudit. As statutorily envisioned, this pertains to the"examination, audit, and settlement of all debts and claims ofany sort due from or owing to the Government or any of itssubdivisions, agencies and instrumentalities". The COA’s work asadjudicator of money claims for or against the government meansthe exercise of judicial discretion. It includes theinvestigation, weighing of evidence, and resolving whether itemsshould or should not be included, or as applied to claim, whetherit should be allowed or disallowed in whole or in part. Itsconclusions are not mere opinions but are decisions which may beelevated to the Supreme Court on certiorari by the aggrieved party.

Accordingly, the fundamental requirements of procedural dueprocess cannot be violated in proceedings before the COA. In the

case at bar, former Governor Paredes was never made a party tonor served a notice of the proceedings before the COA.

THIRD. In the case at bar, the action taken by COA indisallowing the further payment by the Provincial Government ofAgusan del Sur of backwages due the petitioners amended the finaldecision of the MSPB. The jurisdiction of the MSPB to render saiddecision is unquestionable. This decision cannot be categorizedas void. Thus, we cannot allow the COA to set it aside in theexercise of its broad powers of audit.

The audit authority of COA is intended to prevent irregular,unnecessary, excessive, extravagant or unconscionableexpenditures, or uses of government funds and properties. Paymentof backwages to illegally dismissed government employees canhardly be described as irregular, unnecessary, excessive,extravagant or unconscionable. This is the reason why the ActingProvincial Treasurer, despite the pendency of his query with theCOA, proceeded to release government funds in partial payment ofthe claims of petitioners.

We are not unaware of our ruling in Aguinaldo v.Sandiganbayan, that the conclusive effect of the finality of theCOA’s decision on the executive branch of the government relatessolely to the administrative aspect of the matter. However, inthe case at bar, the disallowance of the payment of backwagesradically alters the MSPB decision which held the provincialgovernment, not the provincial governor, personally liable. TheCOA decision affects not only the procedural, but moreimportantly the substantive rights of the parties.

Doctrine: Independent Administrative Ruling

Case: Aguinaldo v Sandiganbayan

Facts:Petitioner is the Provincial Governor of Cagayan. At the

time material to this decision he was serving his first term as

Governor of that province.In 1990, the Commission on Audit (COA) found that claims of

petitioner for intelligence operations in 1988 and 1989 in theamounts of P400,000 and P350,000, respectively, had been chargedto the 20% Development Fund and that some of the claims werecovered by disbursement vouchers with only reimbursement receiptsto support them, most of which were signed by only one person,while other claims had no supporting papers at all. For thisreason the audit team submitted a report (SAO Report No. 90-25),recommending the following measures to be taken:

Require the submission of the required documentscovering claims for intelligence activities, beforemaking payment. Require claimant to complete thedocumentation on payments made with incomplete papersotherwise, refund of the same should be made. Stopprovincial officials from using the 20% Development Fundfor purposes other than for development projects underMLG Circular No. 83-4.On February 3, 1992, the COA Director, Feliciano B.

Clemencio, filed with the Office of the Ombudsman a complaint,alleging “anomalies consisting of irregular/illegal disbursementsof government funds.” Named respondents in the complaint werepetitioner and the members of the Provincial Board of Cagayan,the Assistant Provincial Treasurer and the Accountant.

In a resolution dated May 31, 1994 the Ombudsman found that,in all, petitioner had distributed the amount of P750,000 to themilitary, police and civilian informers to fight insurgency.

There is prima-facie evidence that he has put suchmissing funds to personal use and therefore liable formalversation of public funds under Article 217 of the RevisedPenal Code. Likewise there is also prima-facie evidence tocharge respondent Governor Aguinaldo with violation of Section3 , paragraph (3) of R.A. 3019 (Anti-Graft and CorruptPractices Act).

Two cases of Malversation of Public Funds under Art. 217 ofthe Revised Penal Code were accordingly filed against petitioneron August 16, 1994.

Upon motion of petitioner, the Sandiganbayan ordered theOffice of the Ombudsman to reinvestigate the cases.

Prosecutor Espinosa requested information from the Specialand Technical Audit Division of the COA whether there had beencompliance with the recommendations in the latter’s SAO ReportNo. 90-25 which, as already stated, required the submission ofdocuments covering claims for intelligence activities and thecomplete documentation of payments made, and the provincialofficials to stop using the 20% Development Fund for purposesother than for development projects. He also inquired whether onthe basis of the affidavits executed by the twelve militaryofficers, the disbursements could be considered fully liquidated.In reply, COA Special and Technical Audit Division, throughProvincial Auditor Teresita Rios, stated:

[E]xcept for the list of recipients and the machinecopies of the duly subscribed affidavits of some of therecipients, records do not show that this officereceived the documents required from the Governor.However, the list of recipients and the duly subscribedaffidavits including the representations made in theletter of the Provincial Treasurer and the ProvincialAuditor, may be a convincing proof that the questioneddisbursements were disbursed according to the intendedpurpose and not for private consumption. Apparently not satisfied with the explanation, Prosecutor

Espinosa recommended to the Ombudsman that the malversation casesagainst petitioner be pressed. His recommendation was approvedand so, on April 26, 1995, he asked the Sandiganbayan for thesuspension pendente lite of petitioner.The Sandiganbayan said:

the COA could have been more responsive to the requestboth of the Court and of the accused itself in statingits position on the matter more categorically. However,the fact is that it did not do so. Instant Urgent Motionto Defer Arraignment and Motion to Quash DENIED. The Sandiganbayan withheld action on the prosecution’s

motion to suspend petitioner pending the pretrial.

When asked by the prosecutor whether Marquez’s credit advicewas final, COA Chairman Celso D. Gangan stated that it was“normally not subject to the review of [COA], the matter beingwithin [Director Marquez’s] audit competence.”i[2]

The Sandiganbayan was unconvinced. On March 4, 1996, itterminated the pretrial and, on April 12, 1996, ordered thesuspension of petitioner as Provincial Governor for ninety (90)days. Its resolution reads:

It is well to note that prosecution of cases is left in thehands of the prosecutor. While the COA can and may assist incollating evidence to substantiate a charge of malversation, itdoes not preclude the Ombudsman from conducting its owninvestigation, and filing the appropriate charge if, by its owndetermination, the evidence warrants the same.

The COA is merely the source of the facts in these cases.Any determination made by the COA outside of the narration offacts duly supported by evidence will not by itself determinewhether or not adequate cause exists to prosecute a case. Todemonstrate this point, the Supreme Court has ruled that “… apublic officer may be held guilty of malversation based on a‘preliminary’ audit report …” (De Guzman v. People, 119 SCRA 337,348 (1982) and that “…[t]he absence of a post-audit is not … afatal omission” nor is it a “… preliminary requirement to thefiling of an information for malversation as long as the primafacie guilt of the suspect has already been established.” (Corpuzv. People, 194 SCRA 73, 79 (1990))

Nor is COA’s final determination required for a malversationcase to prosper, much less will it decide one way or the otherthe propriety of the suspension of an accused in a malversationcase filed, as sought herein.

The prosecution argues that the affidavits of militaryofficers are inadequate for the purpose of liquidatingdisbursements in view of COA Circular No. 92-385 which providesthat “any disbursement from the confidential and/or intelligencefund shall be accounted for solely on the certification of thehead of the agency or by the officer-in-charge of theintelligence, confidential or national security mission” and MLGCircular No. 83-4, dated February 7, 1983, which provides that

the 20% Development Fund should be utilized exclusively fordevelopment projects and excludes expenditures for counter-insurgency operations.

Issues:Whether or not the Sandiganbayan gravely abused its

discretion in denying the motion to quash and directing thepreventive suspension of the petitioner given the COA’s findingsand post-audit clearances, including the COA Chairman’sconfirmation?

Decision:Indeed, petitioner failed to submit certain documents

required by COA rules to support claims for disbursements. Hiscounter-affidavit falls short of the requirements of COA CircularNo. 88-293 which, while allowing the use of “mere certification”to support liquidation vouchers (Par. VII(G)), nonethelessrequires the prescribed form to state that “the details andsupporting documents are in our custody and kept in ourconfidential file and may be audited if the circumstances sodemand.”

The indecisive nature of the Regional Director’scertification did not escape the notice of the Sandiganbayan. Itrequired the prosecution to secure a more definite andcategorical ruling from the COA. The effort failed to produceanything more reassuring. Instead of concurring in the opinionof the Regional Director, the Chairman of the COA tossed thematter to the latter on the ground that “final authority toconduct post audit of confidential and intelligence expenses hadbeen delegated to Regional Directors like Director Rafael Marquezand the latter’s decision is normally not subject to review of[the central office].”

In Ramos v. Aquino,ii[5] we ruled that the fact thatpetitioners’ accounts and vouchers had been passed in audit isnot a ground for enjoining the provincial fiscal from conductinga preliminary investigation for the purpose of determining thecriminal liability of petitioners for malversation of public

funds through falsification of public documents.COA’s approval of petitioner’s disbursements only relates to

the administrative aspect of the matter of his accountability butit does not foreclose the Ombudsman’s authority to investigateand determine whether there is a crime to be prosecuted for whichpetitioner is answerable.

Case: DBP v COA

Facts:Development Bank of the Philippines (“DBP”) seeks to set

aside COA Decision which disallowed in audit the dividendsdistributed under the Special Loan Program (“SLP”) to the membersof the DBP Gratuity Plan.

The DBP is a government financial institution with anoriginal charter, Executive Order No. 81, as amended by RepublicAct No. 8523 (“DBP Charter”).

In 1983, the Bank established a Special Loan Program availedthru the facilities of the DBP Provident Fund and funded byplacements from the Gratuity Plan Fund. This Special LoanProgram was adopted as “part of the benefit program of the Bankto provide financial assistance to qualified members to enhanceand protect the value of their gratuity benefits” because“Philippine retirement laws and the Gratuity Plan do not allowpartial payment of retirement benefits.” The program wassuspended in 1986 but was revived in 1991 thru DBP BoardResolution No. 066 dated January 5, 1991.

Under the Special Loan Program, a prospective retiree isallowed the option to utilize in the form of a loan a portion ofhis “outstanding equity” in the gratuity fund and to invest it ina profitable investment or undertaking. The earnings of theinvestment shall then be applied to pay for the interest due onthe gratuity loan which was initially set at 9% per annum subjectto the minimum investment rate resulting from the updatedactuarial study. The excess or balance of the interest earnings

shall then be distributed to the investor-members.Pursuant to the investment scheme, DBP-TSD paid to the

investor-members a total of P11,626,414.25 representing the netearnings of the investments for the years 1991 and 1992. Thepayments were disallowed by the Auditor under Audit ObservationMemorandum No. 93-2 dated March 1, 1993, on the ground that thedistribution of income of the Gratuity Plan Fund (GPF) to futureretirees of DBP is irregular and constituted the use of publicfunds for private purposes which is specifically proscribed underSection 4 of P.D. 1445.

Chairman Antonio of DBP also asked COA to lift thedisallowance of the P11,626,414.25 distributed as dividends underthe SLP on the ground that the latter was simply a normal loantransaction. 

Issues:Whether or not the distribution of dividends under the SLP

is valid.

Decision:NO. The beneficiaries or cestui que trust of the Fund are the DBP

officials and employees who will retire. Retirement benefits “canonly be demanded and enjoyed when the employee shall have met thelast requisite, that is, actual retirement under the GratuityPlan.” In this case, dividends were distributed to employees evenbefore retirement.

As Chairman Zalamea himself noted, neither the Gratuity Plannor our laws on retirement allow the partial payment ofretirement benefits ahead of actual retirement. It appears thatDBP sought to circumvent these restrictions through the SLP,which released a portion of an employee’s retirement benefits tohim in the form of a loan.

Severance of employment is a condition sine qua non for therelease of retirement benefits. Retirement benefits are not meantto recompense employees who are still in the employ of thegovernment. That is the function of salaries and other

emoluments. Retirement benefits are in the nature of a rewardgranted by the State to a government employee who has given thebest years of his life to the service of his country.

Case: DBP v COA (2006)

Facts:In 1988, DBP purchased 5 Mitsubishi L-300 vans and 14

Mitsubishi Lancer cars worth a total of P5,525,000 for its 5regional offices and 14 branches pursuant to its modernizationprogram. During this period, DBP was undergoing a process ofrehabilitation and the vehicles were utilized to bolster itsefforts at fund generation which required the mobilization of itspersonnel in order to reach out to a wider base of clientele.

In its 1992 Annual Audit Report, COA included thesetransactions among its adverse audit findings alleging DBP’s non-compliance with Letter of Instruction No. 667 and Letter ofImplementation No. 29 which require Presidential approval forpurchase of transport. The auditor recommended the filing ofadministrative charges against the responsible officers but itwas never effected for the responsible officers later ceased tobe connected with the agency.

In 1998, the COA Auditor issued a Notice of Disallowance onthe subject transaction. This impelled DBP, through theirPresident and CEO’s letter, to move for the lifting of thedisallowance of P5,525,000.00. The purchase was justified asnecessary for its modernization program since it was undergoing aprocess of rehabilitation at the time and that their brancheswere in dire need of additional vehicles for improved mobility tosupport its thrust of providing financial assistance to small andmedium enterprises in the countryside to generate employment andspur economic development.

The COA Auditor recommended the lifting of the auditdisallowance. But contrary thereto, the Director, Corporate AuditOffice I, issued a Memorandum finding DBP wantonly disregardedthe requirement of Presidential approval which is a condition

sine qua non for the purchase of vehicles under Letter ofInstruction No. 667 which provides, inter alia, that:

When authorized to purchase motor vehicles pursuant toLetter of Implementation No. 29 dated December 5, 1975, nationalgovernment agencies, including government-owned and controlledcorporations and state colleges and universities shall observethe following maximum standard specifications:

x x x x x x x x x5.0 Exceptions may be allowed only as specificallyauthorized by the President.

Letter of Implementation No. 29 provides:Pursuant to Presidential Decree No. 830, dated November 27,1975 and in connection with Letter of Implementation No. 28placing the Budget Commission immediately under thePresident of the Philippines, the Commissioner of the Budgetis hereby delegated authority to take final action on thefollowing budgetary matters heretofore referred by thisCommission to the Executive Secretary:x x x x x x x x xThe following, among others, shall continue to be referredto the President for personal consideration and action:x x x x x x x x x5. Purchase of transport and construction equipment, books,drugs and medicines, and other items.

DBP assailed COA Decision No. 2001-151 which denied its motionfor the lifting of the disallowance. The Commission affirmed thesubject disallowance for want of prior Presidential approvalcontrary to Letter of Implementation No. 29 and LOI No. 667.

Issue:Whether or not COA committed GADALEJ in disallowing the

purchase of motor vehicles by DBP

Decision:COA did not commit grave abuse of discretion in disallowing

the purchase of motor vehicles by DBP.Based on Letter of Instruction No. 667 and Letter of

Implementation No. 29, prior Presidential authorization isrequired before DBP, being a government-owned and controlledcorporation, could purchase the subject vehicles. Verily, Letterof Instruction No. 667 is not a "mere technicality" as DBPcontends, otherwise, administrative agencies would be free toutilize such funds freely as long as they can justify their usethrough the mere invocation of laudable purposes. Since thedisallowance was made pursuant to the applicable law, it cannotbe assailed as an act of grave abuse of discretion.

Case: Home Development Mutual Fund v COA

Facts:22 Nov. 1990: RA 6971, “An Act to Encourage Productivity and

Maintain Industrial Peace by Providing Incentives to Both Laborand Capital,” was approved and took effect on 9 Dec. 1990. TheSecretary of Labor and Employment and the Secretary of Financepromulgated the Rules Implementing RA 6971. Pursuant to Sec. 1Coverage, the Rules shall apply to:

a. All business enterprises with or without existing dulyrecognized or certified labor organization, includingGOCC performing proprietary functionsb. All employees and workers including casual, regular,rank-and-file, supervisory and managerial employees

21 Nov. 1991: HDMF granted Productivity Incentive Bonusequivalent to one month salary plus allowance to all itspersonnel pursuant to RA 6971 and its Implementing Rules. TheHDMF granted said bonus despite the advice of UndersecretarySalvador Enriquez of Dept. Of Budget and Management (DBM) to allGOCCs and governmental financial institutions (GFIs) withoriginal charters performing proprietary functions to defer

payment of the productivity incentive bonus to their employees,pending the issuance of a definite ruling by the Office of thePresident.

27 Dec. 1991: DOLE and Dept. Of Finance issued SupplementalRules Implementing RA 6971

Section 1.—Paragraph (a) Section 1, Rule II of the RulesImplementing RA 6971, shall be amended to read as follows:

Coverage. These Rules shall apply to:

(a) All business enterprises with or without existingduly certified labor organizations including government-owned and controlled corporations performing proprietaryfunctions which are established solely for business orprofit or gain and accordingly excluding those created, maintainedor acquired in pursuance of a policy of the state, enunciated in theconstitution or by law, and those whose officers and employees are coveredby the Civil Service.

29 Nov. 1996: the grant of productivity incentive bonus tothe HDMF personnel was disallowed in audit under Notice ofDisallowance. The disallowance was based on COA Decision No. 96-288, stating that RA 6971 does not apply to GOCCs or to GFIs withoriginal charters performing proprietary functions, such as theHDMF.

28 May 1997: HDMF, through its President and CEO ZoraydaAlonzo, requested for the lifting of the disallowance arguingthat RA 6971 applies to HDMF employees since coverage of the lawincludes GOCCs performing proprietary functions, and thesupplemental rules excluding it from coverage was issued afterthe HDMF had already granted the productivity incentive bonus toits employees.

16 June 1998: COA affirmed the audit disallowance in itsDecision No. 98-245

Issues:

Whether or not the Supplemental Rules are valid? If so,whether or not it may be given retroactive effect?

Decision:HDMF is a GOCC performing proprietary functions with

original charter or created by special law, PD 1752 amending PD1530. As such, HDMF is covered by the Civil Service pursuant toArticle IX, Section 2(1) of the 1987 Constitution, and therefore,excluded from the coverage of RA 6971.

Since RA 6971 intended to cover only GOCCs incorporatedunder the general corporation law, the power of administrativeofficials to promulgate rules in the implementation of thestatute is necessarily limited to what is intended and providedfor in the legislative enactment. Hence, the Supplemental Rulesclarified that GOCCs performing proprietary functions which are“created, maintained or acquired in pursuance of a policy of thestate, enunciated in the constitution or by law, and those whoseofficers and employees are covered by the Civil Service” areexcluded from the coverage of RA 6971.

Therefore, even if petitioner HDMF granted the ProductivityIncentive Bonus before the Supplemental Rules were issuedclarifying that petitioner was excluded from the coverage of RA.6971, the employees of HDMF did not acquire a vested right oversaid bonus because they were not entitled to it under RA 6971.

Moreover, the DBM advised HDMF, on August 26, 1991, to deferpayment of the productivity incentive bonus to their employees,pending the issuance of a definite ruling by the Office of thePresident on the matter. Despite said advice, the Board ofTrustees of HDMF opted to grant the said bonus on a voluntarybasis as stated in its Resolution No. 91-549, Series of 1991. Itexpressed its “concern over the welfare of the officers andemployees of the Fund rather than adhering to the stringenttechnicality of the law.” The Board, therefore, was aware thatpossibly HDMF may not be covered by RA 6971. It should haveexercised prudence by awaiting the definite ruling on thecoverage to prevent legal problems.

Anent the validity of the Supplemental Rules Implementing RA6971, the SC held that said rules issued by the Secretary of DOLEand Secretary of Finance were in accord with the intendment andprovisions of RA 6971.

In view of the foregoing, COA did not commit GADALEJ inaffirming the audit disallowance. The petition was dismissed andCOA’s Resolution and Decision were affirmed.

Case: Nava v Pallatao

Facts:COA conducted an audit of the DECS Region 11 Offices and

found that the money allotted to for the improvement of 155 HShave been spent for purchase of Science Laboratory Tool andDevices (SLDT) by 7 school superintendents.

Respondent question the validity of the COA’s audit. Court ruled that COA has the authority and duty to examine,

audit and settle all accounts pertaining to the revenue andreceipts of, and expenditures or uses of fund and property ownedby or pertaining to the government.

It has the exclusive authority to define the scope of itsaudit and examination and to establish the required techniquesand methods. The contention of the respondents are untenablesince they fail to show that the audit made by COA was irregular

Issues:Was the audit conducted by COA valid?

Decision:COA has the exclusive authority to define the scope of its

audit and examination and to establish the required techniquesand methods; COA’s findings are accorded not only respect butalso finality, when they are not tainted with grave abuse ofdiscretion

COA always has the authority to define the scope of theiraudit. This is based on the two cases (Nava vs Palattao & DelaLlana vs. COA). The second sentence is wrong since what theconstitutional provision provides is that only a post-audit isneeded.

Doctrine: Audit Power

Case: Caltex v COA

Facts: Petition questioning the authority of COA in disallowing

petitioner’s claims for reimbursement from the OPSF and seekingreversal of COA’s decision denying its claim for recovery offinancing charges from the Fund and reimbursement ofunderrecovery arising from sales to Napocor, Atlas, Marcopper,preventing it from offsetting remittances against itsreimbursement vis-à-vis the OPSF and disallowing its claims

OPSF created under Section 8 of PD 1956 as amended by EO 137COA sent letter to Caltex directing latter to remit to OPSF

its collection (P1.2B); pending remittance, all its claims fromOPSF shall be held in abeyance

Caltex submitted to COA a proposal for payment ofcollections and recovery of claims sicne outright payment ofP1.2B will impair its cash position

COA accepted proposal but prohibited Caltex from furtheroffsetting remittances and reimbursements for ensuing years

Subd D Art IX of the 1987 Constitution – audit power ofAuditor General under all 3 Constitutions authorizes disallowanceof illegal expenditure of funds; power strengthened by COA’sgeneral jurisdiction in Sec 26 of Government Auditing Code ofPhil and Admin Code of 1987

Issues: Can Caltex offset its claims against its OPSF contributions?

Decision:Taxpayer may not offset taxes due from the claims that he

may have against the governmentTaxes cannot be the subject of compensation because the

government and taxpayer are not mutually creditors and debtors ofeach other and a claim for taxes is not such a debt, demand,contract, or judgment as is allowed to be set-off

COA decision affirmed except portion disallowing claim forreimbursement of underrecovery arising from sales to Napocorwhich is allowed

Doctrine: Audit power

Case: Mamaril v Domingo

Facts:Petitioner was Evaluator/Computer in LTO. He committed lots

of errors. Money lost.COA Decision 1614 – holding him liable for 44k+Petitioner availed of the early retirement programBut 44k+ was withheld by LTO because of the COA DecisionPetitioner claims he cannot be liable on the audit

disallowances because:He was not an accountable officerHe did not come into possession of money/propertyHe did not act in bad faithCOA cannot direct LTO to withhold the 44k+SC ruled that COA has the power to adopt its own measures

regarding state audit. Directing the LTO to withhold the 44k waswithin the power of the COA because the petitioner owed money toa government agency (LTO)

Issue:Whether or not it is within COA’s power to adopt its own

measures regarding state audit

Decision:The COA has the power to adopt its own measures when doing

its duty of examining and managing state expenses. State audit isnot limited to the auditing of the accountable officers and thesettlement of accounts, but includes accounting functions and theadoption in the audited agencies of internal controls to see toit, among other matters, that the correct fees and penalties duethe government are collected

Doctrine: Power over GOCC

Case: Philippine Airlines v COA

Facts:PAL is a domestic corp, engaged in the air transport

business.Majority of stocks are GSIS ownedUsually, PAL would use a system of bidding to get fuel60% of fuel purchases awarded to the lowest bidder40% to second lowest bidderPetron, Caltex, Shell were usual biddersCOA told PAL to stop the bidding and only get from PetronBased on DO 19 requiring GOCC to only get from PetronPAL sought reconsideration, saying DO 19 should not include

PAL because:Bidding ensured the best fuel price

Petron alone might not be sufficient for PAL’s fuel needsCOA denied. Told PAL to just negotiate with Petron. Hence,

petitioner.

Issue: Whether or not DO 19 should cover PAL

Decision:SC ruled that:DO 19 really included PAL (GSIS owns stocks)HOWEVER, COA committed GADALEJ in not exempting PALThe reasons that PAL gave were really persuasive. They had

more weight than the policy enunciated in DO 19. It was COA’sduty to exempt PAL because not exempting PAL would lead tounnecessary spending – the very evil sought to be prevented bythe creation of COA

Department Order 19 required all GOCCs to get their fuelfrom Petron. In the case of PAL v. COA, COA ordered PAL to followDO 19

The very evil sought to be avoided in the creation of theCOA the irregular, excessive or unconscionable expenditures ofthe government. Thus, it has the power and the duty to exemptcertain branches from any regulation if, obedience to it wouldlead to those kinds of excessive expenditures.

Case: CSC v Pobre

Facts: Respondent Hermogenes P. Pobre is a former government

official who retired from the government service three times.On his third retirement, respondent Pobre claimed payment of

his terminal leave based on his highest monthly salary as PRCchairman but to be reckoned from the date he first entered thegovernment service

Petitioner CSC promulgated CSC Resolution No. 01-1739stating that all respondent Pobre was entitled to were histerminal leave benefits based only on his accrued leave creditsfrom the date of his assumption to office as PRC chairman and nothis total terminal leave credits

Respondent Pobre sought reconsideration of the aboveresolution, which petitioner denied.

The Court of Appeals set aside the resolutions of petitionerCSC and declared that it was the COA, not petitioner CSC, whichhad jurisdiction to adjudicate respondent Pobre’s claim forterminal leave benefits

CSC petitions, but SC upholds CA’s decision, and rules towait for the decision of COA regarding Pobre’s benefits.

Issue: Does the Civil Service Commission have exclusive

jurisdiction over a matter which involves the terminal leavebenefits of a retired government official?

Decision: While the implementation and enforcement of leave benefits

are matters within the functions of the CSC as the centralpersonnel agency of the government, the duty to examine accountsand expenditures relating to leave benefits properly pertains tothe COA. Where government expenditures or use of funds isinvolved, the CSC cannot claim an exclusive domain simply becauseleave matters are also involved.

The COA, the CSC and the Commission on Elections are equallypre-eminent in their respective spheres. Neither one may claimdominance over the others. In case of conflicting rulings, it isthe Judiciary which interprets the meaning of the law andascertains which view shall prevail.

Doctrine: Audit Jurisdiction

Case: Luciano v COA

Facts:Assailed are decisions of the COA sustaining the Notice of

Disallowance disallowing the payment of monetary reward as partof the Exemplary Public Service Award (EPSA) to former three-termcouncilors of the City of Manila authorized by a City Ordinance.

The COA opined that the monetary reward under the EPSA iscovered by the term “compensation.” Though it recognizes thelocal autonomy of LGUs, it emphasized the limitations thereof setforth in the Salary Standardization Law. It explained that theSSL does not authorize the grant of such monetary reward orgratuity. It also stressed the absence of a specific law passedby Congress which ordains the conferment of such monetary rewardor gratuity to the former councilors.

In Decision No. 2010-077, COA said they have jurisdiction torule on the legality of the disbursement, because the COA heldthat it is vested by the Constitution the power to determinewhether government entities comply with laws and regulations indisbursing government funds and to disallow irregulardisbursements.

Issue:Does COA have the authority to disallow the disbursement of

local government funds and was there grave abuse of discretion indisallowing?

Decision:Under the 1987 Constitution, however, the COA is vested with

the authority to determine whether government entities, includingLGUs, comply with laws and regulations in disbursing governmentfunds, and to disallow illegal or irregular disbursements ofthese funds under Section 2, Article IX-D of the 1987Constitutionas echoed by Section 11, Chapter 4, Subtitle B, Title

I, Book V of the Administrative Code of 1987. LGU's thoughgranted local fiscal autonomy, are still within the auditjurisdiction of the COA

Undoubtedly, the rewards to be received is excessive andtantamount to double and additional compensation. This cannot bejustified by the mere fact that the awardees have been electedfor three (3) consecutive terms in the same position. Verily, theCOA's assailed decisions were made in faithful compliance withits mandate and in judicious exercise of its general audit poweras conferred on it by the Constitution. The COA adheres to thepolicy that government funds and property should be fullyprotected and conserved and that irregular, unnecessary,excessive or extravagant expenditures or uses of such funds andproperty should be prevented.

Pursuant to its mandate as the guardian of public funds, theCOA is vested with broad powers over all accounts pertaining togovernment revenue and expenditures and the uses of public fundsand property. This includes the exclusive authority to define thescope of its audit and examination, establish the techniques andmethods for such review, and promulgate accounting and auditingrules and regulations. The COA is endowed with enough latitude todetermine, prevent and disallow irregular, unnecessary,excessive, extravagant or unconscionable expenditures ofgovernment funds. It is tasked to be vigilant and conscientiousin safeguarding the proper use of the government's, andultimately the people's, property. The exercise of its generalaudit power is among the constitutional mechanisms that giveslife to the check and balance system inherent in our form ofgovernment.

Doctrine: Audit Jurisdiction

Case: Boy Scouts v COA

Facts:

Assailed is a resolution from COA stating that Boy Scouts ofthe Philippines is a public corporation based on its charterunder a Commonwealth Act as amended by a Presidential Decree. TheCOA resolution stated that they can conduct an annual financialaudit of the BSP in accordance with generally accepted auditingstandards.

Issue: The jurisdiction of the Commission on Audit (COA) over the

Boy Scouts of the Philippines (BSP)

Decision:The BSP Charter shows that it was created as a public

corporation under Commonwealth Act No. 111. The Commonwealth Actwas amended by Presidential Decree No. 460 which providedsubstantial changes in the BSP structure. Also, Republic Act 7278further amended Commonwealth Act No. 111 “by strengthening thevolunteer and democratic character” of the BSP and reducinggovernment representation in its governing body. Although thereare substantial changes to the charter of the BSP it stillcontinues to be a public corporation or a governmentinstrumentality, therefore, the court comes to the conclusionthat it is subject to the exercise by the COA of its auditjurisdiction in the manner consistent with the provisions of theBSP Charter.

Doctrine: Power to settle government accounts

Case: POI v Auditor General

Facts:Philippine Operations, Inc., (POI) entered into a barter

agreement with the Bureau of Prisons whereby it agreed to deliverto the Bureau a sawmill, complete, with a diesel fuel engine, astop saw edge and log turner, etc., and two LCMs in good turning

condition, in exchange for 350,000 board feet of sawed lumber.The sawmill machine delivered to the Bureau was lacking parts forthe installation. Due to the defect, the Bureau would not be ableto complete the delivery of sawed lumber. The attorney for POI filed a claim with the Auditor Generaldemanding that cash payment of P70,000 be paid to it, plusP35,000 for damages suffered. The Auditor General denied theclaim of POI because the agreement entered into was one of barterand no money consideration came to mind and that the Bureau ofPrisons was willing to perform its part of the obligation.

Issue:Whether or not the Auditor General has jurisdiction over

unliquidated claim?

Decision:Auditor General has no jurisdiction or power to take

cognizance of claims for unliquidated damages. All that is vestedin the Auditor General is the settlement of accounts. “Accounts,”because of the absence of any reasons to the contrary, must bedeemed to have the same meaning as accounts under the laws inforce before the approval of the Constitution. On the merits ofthe claim, the claim of the petitioner for damages cannot besustained, for admitting that the said amounts represent thedifference in the value between the lumber delivered in April,1950, and that which was to be delivered within thirty days afterthe installation of the sawmill, the delay in the delivery wasdue to petitioner's own fault, namely, its failure to deliver thesawmill and the landing barges complete and in satisfactorycondition it had guaranteed them, and in part to its desire tochange the lumber for surplus materials. For the foregoing

considerations, the petition for review is hereby dismissed, withcosts against the petitioner.

Doctrine: Power to act on specific debt claim

Case: ICNA v Republic

Facts:Insurance Company of North America filed an action for the

recovery of P86,081.30, the insured value of shipment allegedlylost in the custody of the carrier, United States Lines, Co., orof the lighter operator, Luzon Stevedoring Corporation, or of thearrastre operator, Bureau of Customs, an agency of defendant,Republic of the Philippines (RP). The RP and the Bureau ofCustoms moved to dismiss the complaint by claiming State immunityfrom suit. However, the court, in lieu of a decision rendered inMobil Philippines Exploration, Inc. vs. Bureau of Customs andCustoms Arrastre denied the petition to dismiss

Issue: WON the plaintiff should have filed its claim through the

Auditor General?

Decision:In the decided case of Compañia General de Tabacos, it was

said that money claims not easily determinable and which callsfor the application of judgment and discretion upon the measureof damages are not within the competence of the Auditor Generalto decide. However, those, which the claim is already fixed andis readily determinable, can be addressed directly to the AuditorGeneral. This is the case of the present petition. Since therewas an assertion of the existence of a specific and fixedindebtedness on the part of the Government, it should be lodgedwith the Auditor General.

Doctrine: Power to disapprove payments

Case: Dingdong v Guingona

Facts:Atty. Praxedio P. Dingcong, former Acting Regional Director

of Regional Office No. VI of the Bureau of Treasury in IloiloCity, on three occasions, contracted the services of one RamesesLayson, a private carpenter and electrician. Subsequently, Laysonwas hired by the Bureau of Treasury Office as a private carpenterand electrician.

On January 17, 1984, the Resident Auditor disallowed theamount of P6,574 from the labor contracts with Layson, byreducing the daily rate from P40/day to P18/day. Petitioner thenappealed to the Chairman of the Commission on Audit, who affirmedthe disallowance as being excessive and disadvantageous to thegovernment.

Issue: WON the disallowance is invalid for being a usurpation of

management function and an impairment of contract

Decision:Commission on Audit (COA) is vested with the power and

authority, and is also charged with the duty, to examine, auditand settle all accounts pertaining to the expenditures or uses offunds owned by, or pertaining to the Government, or any of itssubdivisions, agencies, or instrumentalities.

The COA found that the labor contract, which theydisallowed, was excessive and was thus disadvantageous to theGovernment. The rate applied by the petitioner was P40/day whilethe prevailing rate at the time was only P25/day. However, thecourt notes that since the total cost of the work does not exceedP3,000, the same may be performed under the “pakyao” contract,and is therefore, not necessarily disadvantageous. The Bureau ofTreasury Office hired Layson since he was the one who submitted

the lowest price in the auction for the contract. Thus, it beingfound that the contract is not disadvantageous, the decision ofthe COA is set aside and is ordered to refund the petitioner ofthe disallowed item.

Doctrine: Power to disapprove funds

Case: NHC v COA

Facts:The Philippine Government forged an agreement on financial

cooperation with the Republic of Germany. The agreement involvedthe Republic of the Philippines as “Borrower” and the NationalHousing Authority (NHA) as “Project Sponsor”, and theKreditanstalt Fur Weidaraufbau (KWF) as the lender, for the UrbanHousing Dagat-Dagatan Project II.

However, despite all the negotiations and contracts, theUrban Housing Dagat-Dagatan Project II was not completed asscheduled. Thus an extension of the contract was made since theNHA did not appear to have much choice. Several extensions weremade which triggered the difficulties experienced by NHA.

Issue: WON the COA has authority to disallow a duly entered

contract and substitute its own judgment or disposition in lieuof the decision of the management or governing body of governmententities

Decision:The COA has been enshrined by the government with powers to

"promulgate accounting and auditing rules and regulations,including those for the prevention and disallowance of irregular,unnecessary, excessive, extravagant, or unconscionableexpenditures, or uses of government funds and properties." It has

been recognized in Caltex Philippines, Inc. vs. COA, that COA hasauthority to disallow irregular, unnecessary, excessive,extravagant or unconscionable expenditures.

The nature of the terminal phase of the Dagat-Dagatanproject does not require the expertise of a foreign consultantand that the finishing stage merely requires simple advisoryservices that can be undertaken by NHA or DPWH in-house technicalstaff or at the most a local consultant. Our Constitutionprohibits unnecessary expenses of public funds. The postulates ofour Constitution are not mere platitudes, which we should honoronly in rhetorics but not in reality. The power to contract aforeign loan does not carry with it the authority to bargain awaythe ideals of our Constitution.

Doctrine: Define scope and techniques for its own auditingprocedures

Case: Danville Maritime v COA

Facts:Disapproval of the result of a public bidding held by the

PNOC by COA1988, the PNOC BoD passed a resolution authorizing the sale

by public bidding of its tanker-vessel T/T Andres BonifacioFloor price was set at US$14M with a 10% deposit. Bids were

to be made on Sept. 1, 1988Danville Maritime, Inc was the sole bidder

(US$14,158,888.88)COA issued a memorandum stating:The contract must first be submitted to COAThe bidding suffers deficiency due to the lack of

competitionNegotiation was not applicable

Oct 12, 1988, PNOC received an offer from Fearnly Finans, aNorwegian company, to buy the vessel at least US$1M more thanDanville’s

PNOC BoD ordered a rebidding pursuant to the COA directive

Issue:W/N COA committed GADALEJ when it ruled that there was a

failure of bidding when there was only one bid and subsequentlyordered a rebidding

Decision:COA Cir No 88-264: There should be at least two bidders,

otherwise there is a failure of biddingNegotiated sale may only be undertaken after the failure of

the second biddingOnly the SC can review the decisions made by COA

Doctrine: Promulgate accounting and auditing rules

Case: Leycano v COA

Facts:Petitioner Manuel Leycano, Jr. was the Provincial Treasurer

of Oriental Mindoro and at the same time a member of theProvincial School Board (PSB) of that province.

During his tenure, he was appointed by the PSB as a memberof its Inspectorate Team which, according to him, had thefunction of "monitoring the progress of PSB projects. “In theyear 1995, several checks were issued to various privatecontractors in connection with the repair, rehabilitation,and construction projects covered by the Special Education Fund(SEF) of Oriental Mindoro to several public schools.

The Special Audit Team, COA Regional Office No. IV,headed by State Auditor Joselyn Cirujano (the Auditor),

subsequently audited selected transactions under the SEFof the Province of Oriental Mindoro, which included thoseprojects covered by the checks issued.

The Special Audit Team found deficiencies in the projects;hence, it issued the questioned Notices of Disallowance holdingpetitioner, liable for signing the Certificates of Inspectionrelative to the projects and thereby falsely attesting to their100% completion

Petitioner appealed that he be excluded from those listsheld liable for the deficiency of the project

Issue: Whether or not petitioner is held accountable for

the deficiency of the said project?

Decision:In light of this function of the Inspectorate Team, its

members may be held liable by the COA for any irregularexpenditure of the SEF if their participation insuch irregularity can be established. While petitioner, in hiscapacity as member of the Inspectorate Team, is not anaccountable officer as contemplated in Section101 of P.D.No. 1445, which states:

SEC. 101.  Accountable officers; bond requirement — (1) Everyofficer of any government agency whose duties permitor require the possession or custody of governmentfunds or property shall be accountable therefore andfor the safekeeping thereof in conformity with law.(2) Every accountable officer shall be properly bondedin accordance with law, he may, nonetheless, be held liableby the COA under the broad jurisdiction vested on it by theConstitution" to examine, audit, and settle all accountspertaining to the revenue and receipts of, and expendituresor uses of funds and property, owned or held in trust by, orpertaining to, the Government." In addition, the authorityof the COA to hold petitioner liable is also implied in its

duty to “promulgate accounting and auditing rules andregulations, including those for the prevention anddisallowance of irregular, unnecessary, excessive,extravagant, or unconscionable expenditures, or uses ofgovernment funds and properties.”Furthermore, Section 340 of the Local Government Code (LGC)

clearly provides: SECTION 340.  Persons Accountable for Local Government Funds —

Any officer of the local government unit whose dutypermits or requires the possession or custody of localgovernment funds shall be accountable and responsible forthe safekeeping thereof in conformity with the provisions ofthis Title. Other local officers who, though not accountableby the nature of their duties, may likewise be similarlyheld accountable and responsible for local government fundsthrough their participation in the use or applicationthereof.  (Emphasis and underscoring supplied)Payment should not be made to a contractor without the prior

inspection of the project by the Inspectorate Team, the membersthereof who sign the certificate of inspection participatein the use and application of local government funds (in thiscase, the Special Education Fund of the Province of OrientalMindoro). Thus, if there is an irregularity in the performance ofthis duty, they may be held liable for any loss that is incurredby the government as a consequence thereof. In this case, therewas such irregularity when petitioner and other members of theTeam attested to the 100% completion of the projectsnotwithstanding their undisputed deficiencies.

Section 340 of the LGC states: “…Other local officers who,though not accountable by the nature of their duties, maylikewise be similarly held accountable and responsible for localgovernment funds through their participation in the use orapplication thereof.” Expressly provides that even officersthough not accountable by the nature of their duties shall beaccountable upon involvement of local government funds. A memberof the inspectorate team is not an accountable person, but may beheld liable by the above provision.

Doctrine: Discretion to the most competent people

Case: NCMH v COA

Facts:The National Center for Mental Health Management (NCMHM) was

given an increase in their budgetary allocation for improvementsthereof.

Soon, after the work was almost finished, the NCMHM NursesAssociation lodged with the Office of the Ombudsman a complaintassailing herein petitioners for mismanagement of funds,thereafter, the group asked COA to undertake an audit of theNCMHM to which the Special Audit Team (SAT) conducted andsubmitted the Special Audit Office (SAO) report that states thatthe use of a bulk of the budget was unnecessary, excessive and/orextravagant. A request for re-evaluation and reconsideration wasmade and a hearing was held along with the final report of theCOA Review Panel.

The SAO report and the Evaluation report was brought to COAen banc for review and was denied alleging that there was an“overprice, splitting, violation of rules of public bidding,unnecessary, extravagant and/or expensive expenditures, unlawfulalteration of dates.” Hence this petition that alleged COA tohave committed Grave Abuse of Discretion, that they were denieddue process and that the findings found in the SAO report was notsubstantiated by evidence but by suspicion.

Issue:Whether or not the expenditures were considered to beunnecessary, extravagant and/or expensive

Decision:Expenditures on such other items as P5.26 million for

furnishing the hospitals with curtains, P1.837 million for gardensoil, P1.150 million for repairs of street light, a laser, dental

equipment, together with light cure machines, for a total priceof P1,240,000.00, an incinerator for P99,000.00 and vibrationcompacts for P176,055.00, are reported to be unnecessary, andextravagant. The charge is said to be not consistent with the COACircular No. 88-55A that defines the terms “unnecessary” and“extravagant”.

COA Circular 88-55A – 2.2  The service mission, size,systems, structure, strategy, skills, style, spirit and financialperformance of government agency are the primary considerationsin determining whether or not their expenditures are irregular,unnecessary, excessive or extravagant.”

The terms ’irregular,’ ‘unnecessary,’ ‘excessive,’ and‘extravagant,’ when used in reference to expenditure of funds oruses of property, are relative.  The determination of whichexpenditures of funds or use of property belongs to this or thattype is situational.  Circumstances of time and place,behavioural and ecological factors, as well as political, socialand economic conditions, would influence any suchdetermination.  Viewed from this perspective, transactions underaudit are to be judged on the basis of not only the standards oflegality but also those of regularity, necessity, reasonablenessand moderation, (COA Chairman Francisco Tantuinco, Jr.)

The court ruled: In passing, nothing before us suggests,even remotely, that the disbursements have been made for personalor selfish ends. Petition GRANTED

In accordance with the COA Circular that defines whatunnecessary, extravagant and/or expensive is.

Case: Ramos vs. Aquino

Facts:Appellants are assailing the jurisdiction of Benjamin

Aquino, the Provincial Fiscal of Rizal, to conduct thepreliminary investigation of the alleged commission ofmalversation through falsification of public, official and

commercial documents imputed to them by the Romeo Espino, theCommanding General, Philippine Army, Fort Bonifacio, Rizal.

They contest that under the Constitution, the AuditorGeneral is vested with the duty of not only to examine or auditall expenditures of funds of the Government, but also to audit orinvestigate and "bring to the attention of the properadministrative officer expenditures of funds or property which inhis opinion are irregular, unnecessary, excessive, orextravagant." The latter duty includes the obligation todetermine whether there is criminal responsibility for anyanomaly.

Issues:WON the investigation of the cases by the Provincial Fiscal

(Benjamin Aquino), encroached upon the powers of the AuditorGeneral?

Decision:There is the explicit requirement then that there be no

expenditure of public founds except in pursuance of anappropriation made by law. Though the power of the purse belongsto the legislative, they are not in a position to oversee andsupervise the actual release of each and every appropriation.That is where the Auditor General comes in. He serves as thenecessary check to make certain that no department of thegovernment exceeds the statutory limits of the appropriation towhich it is entitled.

Petitioner relying on section 657 of the RevisedAdministrative Code: "Accounts once finally settled shall in nocase be opened or reviewed except as herein provided" is withoutmerit. Preceding paragraph states that in case any settledaccount "appears to be infected with fraud, collusion or error ofcalculation or when new and material evidence is discovered, theAuditor General may within three years after original settlement,open such account, and after a reasonable time for his reply orappearance, may certify thereon a new balance." This grant doesnot carry with it the power to determine who may be constituted

in the event that in the preparation thereof a crime has beencommitted.

The exclusive jurisdiction of the Auditor General refer toauditorial requirements and approval but not to the criminalliability, if any, of the persons involved in an allegedirregular or anomalous disbursement of public funds. Theauthority of the Fiscal to investigate whether a criminal act hasbeen committed or not in the disbursement of public funds is notincluded in the administrative findings of the Auditor General.

COA’s interest is merely administrative.

Doctrine: Deciding administrative cases involving expenditure ofpublic funds.Case: Salva v Carague

Facts:Petitioner Dr. Teresita L. Salva, President of the Palawan

State University (formerly Palawan State College [PSC]), is beingheld personally liable by the Commission on Audit (COA) for thedisallowance made on the construction of Phase II, Multi-PurposeBuilding of the PSC in the amount of P274,726.38.

In 1992, the PSC and the Integrand Development Construction,Inc. (IDCI) entered into a Construction Agreement for theconstruction of the PSC Multi-Purpose Building (Phase II) for theprice of P1,685,883.45 When the COA-Technical Audit Specialist(COA-TAS) reviewed the contract, it found excess amountsattributed to the costs of items of mobilization/demobilizationand earthfill and compaction.

In COA Decision No. 95-211 dated March 28, 1995, petitioner,together with PSC Vice-President Francisco M. Romantico and PSCAccountant Carolina S. Baloran, were held jointly and severallyliable for the amount of P274,726.38 which was the excess amount.The COA further affirmed said disallowance in COA Decision No.2000-273 dated September 26, 2000, with the modification thatRomantico and Baloran were excused from any liability, while

Engineers Norberto S. Dela Cruz and Lucy Janet Pasion, and theIDCI Manager, were included as persons liable for the amount.

Issues:WON petitioner should be held personally liable for the

disallowed amount of P274,726.38?

Decision:Petitioner is found liable under Section 103 of Presidential

Decree No. 1445 or the Government Auditing Code of thePhilippines. Under this provision, an official or employee shallbe personally liable for unauthorized expenditures if thefollowing requisites are present, to wit: (a) there must be anexpenditure of government funds or use of government property;(b) the expenditure is in violation of law or regulation; and (c)the official is found directly responsible.

According to COA, applying the provision above, since thepetitioner directly caused such diversion which resulted in theuse of additional equipment and expense, then she should bepersonally liable for the resulting additional expense. But courtfound that her only participation is to approve the ApprovedAgency Estimates (AAE) prepared by PSU Engineers Norberto S. delaCruz and Lucy Janet R. Pasion. She cannot be held personallyliable for the disallowance simply because she was the finalapproving authority of the transaction in question. Also, beingthe president of PSU does not automatically make her the partyultimately liable in case of disallowance of expenses forquestionable transactions of her agency.

Further, in National Center for Mental Health Management v. Commissionon Audit, the term “irregular”, as with the terms “unnecessary,”“excessive,” and “extravagant,” was explained in reference toexpenditure of funds or uses of property. Its determination issituational taking into consideration circumstances of time andplace, behavioral and ecological factors, as well as political,social and economic conditions. In this light, it cannot be saidthat the additional expense incurred for the construction wereirregular or excessive, unnecessary or unconscionable since it

was spent for the benefit of PSU. The additional expense was alsowithin the Approved agency Estimates. Further, there is noshowing that petitioner was ill-motivated, or that she hadpersonally profited or sought to profit from the transactions.

Doctrine: City Council without power to abolish COA position

Case: City of Basilan v Hechanova

Facts:The City of Basilan, by ordinance created the position of

Assistant City Auditor in 1954. Private respondent Miguel Antoniowas appointed to this position. In 1964, the city abolished theposition by through another ordinance, deleting the position fromthe plantilla and specifying no compensation for the office.Respondents contested the authority of the City of Basilan toabolish the position, hence Antonio continued to discharge thefunctions of his office

Issue:Can the City of Basilan dissolve the office of Assistant

City Auditor by ordinance?

Decision:NO. The office of Assistant City Auditor is dissimilar from

that of a city employee. It comes within the purview of theAuditor General, a constitutionally created position. It is aposition primarily under the General Auditing Office. Therefore,the City of Basilan does not have sole jurisdiction over theposition, much less the power to abolish it.

Section 3: Exemption from Jurisdiction

Doctrine: Power of COA to audit government agencies cannot betaken away

Case: Luciano Veloso v COA

Facts:The city council of Manila enacted City Ordinance No. 8040

authorizing the grant of an Exemplary Public Service Award (EPSA)to elective officials of the City of Manila who have been electedfor 3 consecutive terms. The award includes gratuity payamounting to 3 years worth of salary subject to availability andminimal restrictions. Petitioners Veloso et al were recipients ofthe EPSA and correspondingly received gratuities from the City ofManila.

Respondent Commission on Audit evaluated the EPSA programand found it excessive and in contrast to provisions of theSalary Standardization Law (SSL). In a Decision by the respondentcommission, the disbursement of the EPSA to petitioners wasdeemed illegal. The petitioners contest this decision, positingthat the Commission on Audit has committed grave abuse ofdiscretion in interfering with LGU’s in the disbursement of theEPSA. They also contend that the COA has no authority todisapprove payments simply because they are unreasonable, citingGuevara vs. Gimenez.

Issues:Does the COA have the authority to disallow the disbursement

of local government funds?Did the COA commit grave abuse of discretion amounting to

lack of jurisdiction by disallowing the disbursement of the EPSApursuant to Ordinance 8040?

Decision:YES. Article IX-D of the Constitution gives a broad outline

of the powers and functions of the COA, to wit:

The Commission on Audit shall have the power,authority, and duty to examine, audit, and settle allaccounts pertaining to the revenue and receipts of, andexpenditures or uses of funds and property, owned or held intrust by, or pertaining to, the Government, or any of itssubdivisions, agencies, or instrumentalities, includinggovernment-owned or controlled corporations with originalcharters, and on a post-audit basis

The Commission shall have exclusive authority, subject tothe limitations in this Article, to define the scope of its auditand examination, establish the techniques and methods requiredtherefor, and promulgate accounting and auditing rules andregulations, including those for the prevention and disallowance ofirregular, unnecessary, excessive, extravagant, or unconscionable expenditures,or uses of government funds and properties.

NO. Section 11, Chapter 4, Subtitle B, Title I, Book V ofthe Administrative Code of 1987 states that the jurisdiction ofthe COA Under the first paragraph of the above provision, theCOA's audit jurisdiction extends to the government, or any of itssubdivisions, agencies, or instrumentalities, including government-owned orcontrolled corporations with original charters.

Case: Versoza v Carague

Facts:MR of 2011 Decision affirming COA’s 1998 and 2003 ruling

that petitioner is personally and solidarily liable forPhp881,819.00 (overprice of computers purchased by CDA)

Petitioner’s counsel (petitioner’s son) confirmed demise ofpetitioner in 2010

Candelario Versoza – former Exec. Dir. Of CooperativeDevelopment Agency

Guillermo Carague – Chairman of COA

DAP-TEC modified initial result of technical evaluation ofcomputers to favour bidder TETRA. Petitioner signed documentsfor purchase.

Issues:WON COA violated its own rules and jurisprudence in the

determination of overpricingWON petitioner may be ordered to reimburse the disallowed

amount in the purchase of subject computers

Decision:There was no violation of COA rules.1997 COA Memorandum which had guidelines on evidence to

support audit findings of overpricing provided that auditfindings on overpricing are to be given to audited agency

Cannot give Memo retroactive effect; Audit was conducted in1993

Brand is irrelevant on basis of finding of technicalpersonnel

COA under Constitution is empowered to examine and audit useof funds by an agency of the national government on a post-auditbasis

“shall have exclusive authority, subject to the limitationsin this Article, to define the scope of its audit andexamination, establish the techniques and methods requiredtherefor, and promulgate accounting and auditing rules andregulations, including those for the prevention and disallowanceof irregular, unnecessary, excessive, extravagant, orunconscionable expenditures, or uses of government funds andproperties.”

What is important is that the specifications and functionsof compared computers are similar

COA’s observation that CDA should have been entitled tovolume discount was valid

COA Circular: price is excessive if discounts allowed inbulk purchases is not reflected in the price offered

No grave abuse by COA in holding petitioner personally andsolidarily liable for overpricing of computers procured by CDA

It was petitioner who ordered reconstitution of PBAC whichnullified previous bidding

It was petitioner who secured services of DAP-TEC fortechnical evaluation. DAP-Tech came out with two evaluationreports where Tetra got lowest ranking at first then eventuallywon

General policy of Court to sustain administrative authoritydecisions especially one which is constitutionally-created notonly because of separation of powers doctrine but also for theirexpertise

MR denied with finality

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