COMMISSION ON AUDIT (Article IX-D) CASES
5(a) of PD 1638, petitioner was not actually underpaid but was
REBLORA v. AFP (2013)
Facts:
This is an appeal via Petition for Review on Certiorari, assailing
the Decision dated 20 January 2010 and Resolution dated 31
January 2011 of the Commission on Audit (COA), which denied
the petitioner’s claim for additional retirement benefit.
Petitioner, a retired Captain of the Philippine Navy born on May
22, 1944, questioned the judgment or decision made by COA
with regards to his retirement benefit computation. Instead of
supposedly 34 years length of service, from 1969 to 2003, as
petitioner alleged in accordance with Sec. 3 of P.D. 1638, COA
discerned that petitioner has only 31 years length of service
reckoned at the beginning of petitioner’s active service in the
military from his stint as civilian worker at the DILG.
Section 3. For purposes of this Decree, active service
of a military person shall mean active service
rendered by him as a commissioned officer, enlisted
man, cadet, probationary officer, trainee, or draftee
in the Armed Forces of the Philippines and service
rendered by him as a civilian official or employee in
the Philippine government prior to the date of his
separation or retirement from the Armed Forces of
the Philippines; […] provided, that for purposes of
retirement he shall have rendered at least ten (10)
years of active service as an officer or enlisted man in
the AFP; and provided further, that no period of such
civilian government service longer than his active
military service shall be credited for purposes of
retirement.
Prior to the decision made by COA, the AFP, in computing for
petitioner’s retirement benefit, did not include petitioner’s
civilian government service at the DILG. It only considered
petitioner’s actual military service i.e., covering the period
between 1973 to 2003, or a period of only 30 years. Petitioner
disagreed and insisted that the computation should include the
period of his civilian government service at the DILG before he
entered military service (1969-1973), or for a total of four (4)
years and five (5) months.
The COA denied petitioner’s claim. It agreed that his civilian
service at the DILG should and ought to be included as part of
his active service in the military. However, since his civilian
service should be included, the COA opined that petitioner
should also have been considered as compulsorily retired on
May 22, 2000 and not on May 22, 2003.
Section 5 (a). Upon attaining fifty-six (56) years or
upon accumulation of thirty (30) years of satisfactory
active service, whichever is later, an officer or
enlisted man shall be compulsorily retired […]
Verily, the COA found that, applying the provisions of Section
rather overpaid.
The petitioner filed a Motion for Reconsideration but the COA
remained steadfast in its Resolution. Aggrieved, petitioner
questioned the Decision and Resolution of the COA via the
present Rule 45 petition before the Court.
Issue/s:
1. WON the COA’s decision/judgment be reviewed by the
Supreme Court via Rule 45
2. WON the COA committed a grave abuse of discretion
in regarding its Decision/Judgment regarding
petitioner’s computation of retirement benefits
Ruling:
We deny the petition.
Petitioner availed of the wrong remedy. Decisions and
resolutions of the COA are reviewable by this Court, not via an
appeal by certiorari under Rule 45, as is the present petition,
but through a special civil action of certiorari under Rule 64 in
relation to Rule 65 of the Rules of Court.
Section 2. Mode of Review. A judgment or final order
or resolution of the Commission on Elections and the
Commission on Audit may be brought by the aggrieved
party to the Supreme Court on certiorari under Rule
65, except as herein provided.
By restricting the review of judgments or resolutions of the
COA only through a special civil action for certiorari before this
Court, the Constitution and the Rules of Court precisely limits
the permissible scope of inquiry in such cases only to errors of
jurisdiction or grave abuse of discretion. Hence, simple errors
of judgment committed by the COA cannot be reviewed even
by this Court.
Nevertheless, even if this Court should take a liberal
appreciation of the present petition under Rule 65, such
petition would still fail. The main controversy in this case is the
computation of petitioner’s retirement benefits under PD 1638,
as amended.
Of the allegations and decisions rendered, this Court finds that
the computation of COA is the one supported by PD No. 1638.
The clear import of the assailed COA Decision and Resolution is
that petitioner’s civilian service at the DILG should be included
in is active military service for the purpose of computing his
retirement benefits under PD No. 1638 only that the services
he rendered after May 22, 2000, in accordance with Sec. 5 of
PD No. 1638, should also be excluded from the same
computation. The other two simply finds no basis in law.
 FUNA v. VILLAR (2012)
Facts:
Funa challenges the constitutionality of the appointment of
Reynaldo A. Villar as Chairman of the COA.
Following the retirement of Carague on February 2, 2008 and
during the fourth year of Villar as COA Commissioner, Villar was
designated as Acting Chairman of COA from February 4, 2008 to
April 14, 2008. Subsequently, on April 18, 2008, Villar was
nominated and appointed as Chairman of the COA. Shortly
thereafter, on June 11, 2008, the Commission on Appointments
confirmed his appointment. He was to serve as Chairman of
COA, as expressly indicated in the appointment papers, until
the expiration of the original term of his office as COA
Commissioner or on February 2, 2011.
Challenged in this recourse, Villar, in a n obvious bid to lend
color of title to his hold on the chairmanship, insists that his
appointment as COA Chairman accorded him a fresh term of 7
years which is yet to lapse.
Petitioner now asseverates the view that Sec, 1(2), Art. IX(D) of
the 1987 Constitution proscribes reappointment of any kind
within the commission, the point being that a second
appointment, be it for the same position (commissioner to
another position of commissioner) or an upgraded position
(commissioner to chairperson) is a prohibited reappointment
and is a nullity ab initio.
Before the Court could resolve the petition, Villar, via a letter
dated Febraury 22, 2011, addressed to President Benigno S.
Aquino III, signified his intention to step down from office upon
the appointment of his replacement. True to his word, Villar
vacated his position when the President named Ma. Garcia
Pulido-Tan COA Chairman. This development has rendered this
petition and the main issue moot and academic.
Issue/s:
1. WON the petitioner has locus standi to bring the case
to Court
2. WON Villar’s appointment as COA Chairman, while
sitting in that body and after having served four (4)
years of his seven-year (7) term as COA Commissioner,
is valid in light of the term limitations imposed under,
and the circumscribing concepts tucked in, Sec, 1 (2) of
Art. IX (D) of the Constitution
Ruling/s:
Issue of Locus Standi
This case before us is of transcendental importance since it
obviously has far-reaching implications and there is a need to
promulgate rules that will guide the bench, bar, and the public
in future analogous cases. We, thus, assume a liberal stance
and allow petitioner to institute the instant petition.
Substantive Issue
Article IX(D). Sec. 1(2) provides that:
The Chairman and Commissioners [on Audit] shall be
appointed by the President with the consent of the
Commission on Appointments for a term of seven (7) years
without reappointment. Of those first appointed, the
Chairman shall hold office for seven years, one
commissioner for five years, and the other commissioner
for three years, without reappointment. Appointment to
any vacancy shall be only for the unexpired portion of the
term of the predecessor. In no case shall any member be
appointed or designated in a temporary or acting capacity.
The petition is bereft of merit. The Court ruled on the following:
1. The appointment of members of any of the three
constitutional commissions, after the expiration of the
uneven terms of office of the first set of
commissioners, shall always be for a fixed term of
seven (7) years; an appointment for a lesser period is
void and unconstitutional. The appointing authority
cannot validly shorten the full term of seven (7) years
in case of the expiration of the term as this will result
in the distortion of the rotational system prescribed by
the Constitution.
2. The provision, on its face, does not prohibit a
promotional appointment from Commissioner to
Chairman as long as the commissioner has not served
the full term of seven years. Appointments to
vacancies resulting from certain causes (death,
resignation, disability or impeachment) shall only be
for the unexpired portion of the term of the
predecessor, but such appointments cannot be less
than the unexpired portion as this will likewise disrupt
the staggering of terms laid down under Sec. 1(2), Art.
IX(D).
3. Members of the Commission, e.g. COA, COMELEC or
CSC, who were appointed for a full term of seven years
and who served the entire period, are barred from
reappointment to any position in the Commission.
Corollarily, the first appointees in the Commission
under the Constitution are also covered by the
prohibition against reappointment.
4. There is nothing in Sec. 1(2), Article IX(D) that explicitly
precludes a promotional appointment from
Commissioner to Chairman, provided it is made under
the aforementioned circumstances or conditions. A
commissioner who resigns after serving in the
Commission for less than seven years is eligible for an
appointment to the position of Chairman for the
unexpired portion of the term of the departing
chairman. Such appointment is not covered by the ban
on reappointment, provided that the aggregate period
of the length of service as commissioner and the
 unexpired period of the term of the predecessor will
not exceed seven (7) years and provided further that
the vacancy in the position of Chairman resulted from
death, resignation, disability or removal by
impeachment. The Court clarifies that
“reappointment” found in Sec. 1(2), Art. IX(D) means a
movement to one and the same office (Commissioner
to Commissioner or Chairman to Chairman). On the
other hand, an appointment involving a movement to
a different position or office (Commissioner to
Chairman) would constitute a new appointment and,
hence, not, in the strict legal sense, a reappointment
barred under the Constitution.
5. Any member of the Commission cannot be appointed
or designated in a temporary or acting capacity.
FUNA v. MANILA ECONOMIC and CULTURAL OFFICE (2015)
Facts:
The Manila Economic and Cultural Office (MECO) was organized
on December 16, 1997 as a non-stock, non-profit corporation
under Batas Pambansa 68 or the Corporation Code. The
purposes underlying the incorporation of MECO, as
stated in its articles of incorporation, are as follows:
1. To establish and develop the commercial and
industrial interests of Filipino nationals here and
abroad, and assist on all measures designed to
promote and maintain the trade relations of the
country with the citizens of other foreign
countries;
2. To receive and accept grants and subsidies that
are reasonably necessary in carrying out the
corporate. To receive and accept grants and
subsidies that are reasonably necessary in carrying
out the corporate purposes provided they are
not subject to conditions defeatist for or
incompatible with said purpose;
3. To acquire by purchase, lease or by any gratuitous
title real and personal properties as may be
necessary for the use and need of the corporation,
and to dispose of the same in like manner when
they are no longer needed or useful; and
4. To do and perform any and all acts which
are deemed reasonably necessary to carry out the
purposes.
On August 23, 2010, petitioner sent a letter to the COA
requesting for ‘a copy of the latest financial and audit report’ of
the MECO invoking, for that purpose, his ‘constitutional right to
information on matters of public concern.’ The petitioner made
the request on the belief that the MECO, being under the
‘operational supervision’ of the Department of Trade and
Industry (DTI), is a government-owned and controlled
corporation (GOCC) and thus, subject to the audit jurisdiction of
the COA.
On August 25, 2010, Assistant Commissioner Jaime Naranjo
issued a memorandum referring the petitioner’s request to
COA Assistant Commissioner Emma M. Espina for ‘further
disposition’. In this memorandum, however, Assistant
Commissioner Naranjo revealed that the MECO was ‘not among
the agencies audited by any of the three Clusters of the
Corporate Government Sector”.
Taking the August 25, 2010 memorandum as an admission that
the COA had never audited and examined the accounts of the
MECO, the petitioner filed the instant petition for mandamus.
Petitioner posits that by failing to audit the accounts of the
MECO, the COA is neglecting its duty under Section 2 (1), Article
IX-D of the 1987 Constitution to audit the accounts of an
otherwise bona fide GOCC or government instrumentality.
According to petitioner, the MECO possesses all the essential
characteristics of a GOCC and instrumentality under the
Executive Order No. 292 of the Administrative Code, funds of
which partake the nature of public funds.
Issue:
WON MECO is a GOCC covered by the auditing power
of COA
Ruling:
The MECO is not a GOCC or a government instrumentality. The
Administrative Code defines a GOCC:
(13) Government-owned or controlled corporation
refers to any agency organized as a stock or non-stock
corporation, vested with functions relating to public
needs whether governmental or proprietary in nature,
and owned by the Government directly or through its
instrumentalities either wholly, or, where applicable as
in the case of stock corporations, to the extent of at
least fifty-one (51) per cent of its capital stock: . . . .
The above definition is, in turn, replicated in the more recent
Republic Act No. 10149 or the GOCC Governance Act of 2011 m,
to wit:
(o) Government-Owned or -Controlled Corporation (GOCC)
refers to any agency organized as a stock or non-stock
corporation, vested with functions relating to public needs
whether governmental or proprietary in nature, and owned by
the Government of the Republic of the Philippines directly or
through its instrumentalities either wholly or, where applicable
as in the case of stock corporations, to the extent of at least a
majority of its outstanding capital stock: . . . .
By definition, three attributes thus make an entity a GOCC: first,
its organization as stock or non-stock corporation; second, the
public character of its function; and third, government
ownership over the same. In this case, there is not much dispute
that the MECO possesses the first and second attributes. It is the
third attribute, which the MECO lacks.
THE MECO is not owned or controlled by the government
organization as a non-stock corporation and the mere
performance of functions with a public aspect, however, are not
by themselves sufficient to consider the MECO as a GOCC. In
order to qualify as a GOCC, a corporation must also, if not more
importantly, be owned by the government. The government
owns a stock or non-stock corporation if it has controlling
interest in the corporation. In a stock corporation, the
controlling interest of the government is assured by its
ownership of at least 51% of the corporate capital stock. In a
non-stock corporation like the MECO, jurisprudence teachers
that the controlling interest of the government is affirmed when
‘at least majority of the members are government officials
holding such membership by appointment or designation’ or
there is otherwise ‘substantial participation of the government
in the selection’ of the corporation’s governing board.
The MECO is not a GOCC or government instrumentality. It is a
sui generis private entity especially entrusted by the government
with the facilitation of unofficial relations with the people in
Taiwan without jeopardizing the country’s faithful commitment
to the One China policy of the PROC. The other government
instrumentalities i.e., the regulatory agencies, chartered
institutions, and government corporate entities or government
instrumentalities with corporate powers (GCE/GICP) are all, by
explicit or implicit definition, creatures of the law. The MECO
cannot be any other instrumentality because it was, as
mentioned earlier, merely incorporated under the Corporation
Code. It is evident that the MECO was not intended to operate
as any other ordinary corporation. However, despite its non-
governmental character, the MECO handles government funds
in the form of the “verification fees” it collects on behalf of the
DOLE and the “consular fees” it collects under Section 2 (6) of EO
No. 15, s. 2001. Hence, under existing laws, the accounts of the
MECO pertaining to its collection of such “verification fees” and
“consular fees” should be audited by the COA.
Petition is partially granted. The MECO is hereby declared a non-
governmental entity. However, the accounts of the MECO
pertaining to the verification fees that the former collects on
behalf of the DOLE and the fees it was authorized to collect are
subject to the audit jurisdiction of the COA.
PARAISO-ABAN v. COA (2016)
Facts:
Petitioner comes to this Court on Petition for Certiorari under
Rule 64, in relation to Rule 65, of the Rules of Court with Prayer
for Immediate Issuance of Temporary Restraining Order seeking
to nullify the Decision and Resolution of the COA which denied
her request for exclusion from liability under the COA’s Notice
of Disallowance.
During the 11th Congress, the Senate’s Committees on
Accountability of Public Officers and Investigations and on
National Defense and Security held various hearings to
investigate the alleged anomalous acquisitions of land by the
Armed Forces of the Philippines Retirement and Separation
Benefits System (AFP-RSBS) in Calamba, Laguna and Tanauan,
Batangas. Acting on resolutions passed by the said Senate
committees, the Deputy Ombudsman for the Military and
Other Law Enforcement Offices requested the COA to conduct
an audit of the past and present transactions of the AFP-RSBS.
Issue:
WON AFP-RSBS is within the general audit power of
COA
Ruling:
Yes. It is well to be reminded that the exercise by COA of its
general audit power is among the mechanisms of check and
balance instituted under the 1987 Constitution on which our
democratic form of government is founded.
Section 2(1) of Article IX-D of the Constitution provides that
COA has ‘the power, authority, and duty to examine, audit, and
settle all accounts pertaining to the revenue and receipts of,
and expenditures or uses of funds and property, owned or held
in trust by, or pertaining to, the Government or any of its
subdivisions, agencies, or instrumentalities, including
government-owned or controlled corporations with original
charters.’ Corollary to the COA’s audit power, Section 2(2) of
Article IX-D further provides:
Sec. 2(2). The Commission shall
have exclusive authority, subject to the limitations in
this Article, to define the scope of its audit and
examination, establish the techniques and methods
required therefor, and promulgate accounting and
auditing rules and regulations, including those for the
prevention and disallowance of irregular, unnecessary,
excessive, extravagant, or unconscionable
expenditures or uses of government funds and
properties.
In Delos Santos v. COA, the Court explained that:
At the outset, it must be emphasized that the CoA is
endowed with enough latitude to determine,
prevent, and disallow irregular, unnecessary,
excessive, extravagant or unconscionable
expenditures of government funds. It is tasked to be
vigilant and conscientious in safeguarding the proper
use of the government's, and ultimately the people's,
property. The exercise of its general audit power is
among the constitutional mechanisms that gives life
to the check and balance system inherent in our form
of government.
Corollary thereto, it is the general policy of the Court
to sustain the decisions of administrative authorities,
especially one which is constitutionally-created, such
as the CoA, not only on the basis of the doctrine of
separation of powers but also for their presumed
expertise in the laws they are entrusted to enforce.
 NAYONG PILIPINO FOUNDATION, INC. v. PULIDO-TAN, ET.
AL. (2017)
Facts:
This is a petition for certiorari under Rule 64 and 65 of the Rules
of Court filed by Nayong Pilipino Foundation, Inc. (NPFI) seeking
to annul COA’s decision which sustained the Notice of
Disallowance relating to the payments of Anniversary Bonus
and Extra Cash Gift for NPFI’s officers and employees
amounting P108,000.00 and P90,500.00, respectively, and
excess honoraria to the members of the Bids and Awards
Committee (BAC) and Technical Working Group (TWG) in the
amount of P132,000.00.
NPFI maintains in this petition that the COA gravely abused its
discretion when it disallowed payment of the total aggregate
amount of P330,500.00 comprising of the aforementioned
allocations. It argues that the grants, bonus, and gifts were
authorized and supported by DBM Budget Circular No. 2002-04
approved by PGMA. All told, NPFI points out that COA should
not have disallowed the grant of Anniversary Bonus and Extra
Cash Gift as it is still the subject of a Motion of Reconsideration
pending before the Office of the President through the DBM.
On the matter of honoraria, NPFI alleges that COA erred in
making a sweeping disallowance absent any evidence that the
same is in excess of the 25% (of the basic salary) ceiling set
forth under Sec. 15 of RA. 9184.
COA claims that no grave abuse of discretion may be attributed
to them in affirming the disallowance as the same is supported
by pertinent laws, circulars, and orders.
Issue:
WON the COA gravely abused its discretion when it
disallowed NPFI’s payment of Anniversary Bonus and
Extra Cash Gift to its trustees, officials, and personnel;
and honoraria to its BAC and TWG members.
Ruling:
Th petition is partly meritorious.
The COA, by mandate of the 1987 Constitution, is the guardian
of public funds, vested of broad powers over all accounts
pertaining to government revenue and expenditures and the
uses of public funds and property, including the exclusive
authority to define the scope of its audit and examination, to
establish the techniques and methods for such review, and to
promulgate accounting and auditing rules and regulations.
In the exercise of its constitutional duty, the COA is given a
wide latitude of discretion "to determine, prevent, and disallow
irregular, unnecessary, excessive, extravagant, or
unconscionable expenditures of government funds" and has
the power to ascertain whether public funds were utilized for
the purpose for which they had been intended by law.
In the performance of COA's functions, the Court has been
consistent with its policy enunciated in the case of Nazareth v.
Hon. Villar, et al.:
Verily, the Court has sustained the decisions of
administrative authorities like the COA as a matter of
general policy, not only on the basis of the doctrine of
separation of powers but also upon the recognition that
such administrative authorities held the expertise as to
the laws they are entrusted to enforce.
Thus, the Court has accorded not only respect but also finality
to COA's findings particularly when their decisions are not
tainted with unfairness or arbitrariness that would amount to
grave abuse of discretion.
In this case, the Court finds the respondents did not commit
any grave abuse of discretion as their concurrence to the
decisions of the LAO-Corporate and ASB is based on cogent
legal grounds.
First, the Court agrees with the COA in that the award of
Anniversary Bonus for the year 2004 is unwarranted for failure
to comply with the requirements set forth under A.O. No. 263
and DBM NBC No. 452-96.
A.O. No. 263, issued on March 28, 1996 provides for general
authority to Government-owned and controlled corporations
(GOCCs), Government Financial Institutions (GFIs), and national
government agencies to commemorate milestone anniversaries
through the grant of anniversary bonus to their employees in
an amount not exceeding Php 3,000.00.
Applied in this case, considering that the grant specifically
covers government entities and commemorates their creation
as such, the DBM and COA are correct in that for the purpose of
determining entitlement to Anniversary Bonus, NPFI's
milestone year should be reckoned from the date it was
incorporated as a public corporation by virtue of Presidential
Decree No. 37 or on November 6, 1972 instead of June 11,
1969 when it was then incorporated as a private corporation. It
follows therefore, that NPFI is entitled to Anniversary Bonus in
1997 for its 25th Anniversary, 2002 for its 30th and 2007 for its
35th Anniversary. Clearly, the payment of Anniversary Bonus in
2000 and 2004 is therefore unauthorized.
Similarly, the Court finds no error on the part of COA in
disallowing the grant of honoraria to the members of the BAC
and TWG of NPFI.
NPFI argues that its grant of honoraria is supported by Section
15 Article V of R.A. No. 9184 otherwise known as the
Government Procurement Reform Act, which provides:
SEC. 15. Honoraria of BAC Members. - The Procuring Entity may
grant payment of honoraria to the BAC members in an amount
not to exceed twenty five percent (25%) of their respective basic
monthly salary subject to availability of funds. For this purpose,
the Department of Budget and Management (DBM) shall
promulgate the necessary guidelines.
In effect, NPFI claims that even in the absence of a DBM
Circular at the time of payment, the law offers sufficient basis
for the allowance of the honoraria in an amount not exceeding
25% of the basic salary. NPFI is mistaken.
The Court in Sison, et al. v. Tablang, et al. ruled that the
provision of itself cannot serve as basis for the grant of
honoraria to the members of the BAC without an enabling rule
or guideline from the DBM; and compliance therewith is
necessary for the right to accrue. Thus, in this case, petitioners
should have first waited for the rules and guidelines of the DBM
before payment of the honoraria. Furthermore, albeit in
hindsight, the DBM Budget Circular provides that the payment
of honoraria should be made only for "successfully completed
procurement projects." A procurement project shall be
considered successfully completed once the contract has been
awarded to the winning bidder.
No interpretation is needed for a law that is clear, plain and
free from ambiguity. Now, the DBM has already set the
guidelines for the payment of honoraria as required by law.
Since the payment of honoraria to petitioners did not comply
with the law and the applicable rules and guidelines of the
DBM, the notices of disallowance are hereby upheld.
FERNANDO v. COA (2018)
Facts:
This petition for Certiorari under Rule 64, in relation to Rule 65
of the Rules of Court, seeks the reversal of the Fraud Audit
Office of Notice of Finality of Decision and Notices of
Disallowance against the Executive Committee of the Metro
Manila Film Festival (MMFF).
Petitioner Bayani Fernando was the Chairman of the Executive
Committee of MMFF from 2002-2008. On 2009, the COA issued
an Office Order authorizing the Fraud Audit and Investigation
Office to conduct a special audit on the disbarments of the
Executive Committee from 2002-2008.
Through such investigation, the FAIO found that petitioner
certain amounts from the Executive Committee of the MMFF
for the Special Projects/Activities of the Metro Manila
Development Authority (MMDA) sourced from the advertising
sponsorship of the MMFF for 2002 and 2003. The COA also
found that petitioner received an amount from MMFF as
payment/release of funds for petitioner’s cultural projects,
which payments was sourced from non-tax revenues of the said
committee.
Afterwards, the COA issued three Notices of Disallowance
against petitioner covering the aforesaid amounts. It made an
observation claiming that the check was encashed and was not
issued an Official Receipt by the Collecting Officer of the
MMDA. This constitutes a violation of irregular transaction as
defined under COA Circular No. 85-55A.
Aggrieved, petitioner comes before this Court, submitting that
the COA committed grave abuse of discretion in disallowing
said amounts. Petitioner contends that the COA has no
jurisdiction over the Executive Committee of the MMFF, an
organization composed of private individuals from the movie
industry, and whose funds come from non-tax revenues and
private donations. He claims that the Committee is neither a
government-owned or controlled corporation nor a
government instrumentality or agency for it to be subject to
COA’s audit jurisdiction.
Issue:
WON the Executive Committee of the MMF is subject
to the COA’s audit jurisdiction
Ruling
Section 2, Article IX-D of the 1987 Constitution for the COA’s
audit jurisdiction:
The Commission on Audit shall have the power, authority,
and duty to examine, audit, and settle all accounts pertaining
to the revenue and receipts of, and expenditures or uses of
funds and property, owned or held in trust by, or pertaining
to, the Government, or any of its subdivisions, agencies, or
instrumentalities, including government-owned or
controlled corporations with original charters, and on a
post-audit basis: (a) constitutional bodies, commissions and
offices that have been granted fiscal autonomy under this
Constitution; (b) autonomous state colleges and
universities; (c) other government-owned or controlled
corporations and their subsidiaries; and (d) such non-
governmental entities receiving subsidy or equity, directly
or indirectly, from or through the Government, which are
required by law or the granting institution to submit to
such audit as a condition of subsidy or equity. However,
where the internal control system of the audited agencies is
inadequate, the Commission may adopt such measures,
including temporary or special pre-audit, as are necessary
and appropriate to correct the deficiencies. It shall keep the
general accounts of the Government and, for such period as
may be provided by law, preserve the vouchers and other
supporting papers pertaining thereto.
The COA was envisioned by our Constitutional framers to be a
dynamic, effective, efficient, and independent watchdog of the
Government. It granted the COA the authority to determine
whether government entities comply with laws and regulations
in disbursing government funds, and to disallow illegal or
irregular disbursements of government funds.
COA’s authority to examine and audit the accounts of
government and, to a certain extent, non-governmental
entities is consistent with Section 29 of Presidential Decree No.
1445, otherwise known as the Auditing Code of the Philippines,
which grants the COA visitorial authority over the following
non-governmental entities:
 1. Non-governmental entities “subsidized by the
government”;
2. Non-governmental entities “required to pay levy or
government share”;
3. Non-governmental entities that have “received
counterpart funds from the government”; and
4. Non-governmental entities “partly funded by
donations through the government.”
The COA’s audit jurisdiction generally covers public entities.
However, its authority to audit extends even to non-
governmental entities insofar as the latter receives financial aid
from the government. Thus, it is clear that the determination of
COA’s jurisdiction over a specific entity does not merely require
an examination of the nature of the entity. Should the entity be
found to be non-governmental, further determination must be
had as to the source of its funds or the nature of the accounts
sought to be audited by the COA.
Nature of the Executive Committee of Manila Film Festival
Considering the establishment and mechanism of the Executive
Committee of the MMFF, it is at once apparent that it is not a
government-owned and controlled corporation. In this case,
there is nothing in the records which establishes that the
Executive Committee of the MMFF is organized as a stock or
non-stock corporation. It does not have capital which is to be
divided into shares of stock nor stockholders and voting shares
as to qualify as a stock corporation. WE cannot also deem it a
non-stock corporation as it is ostensibly just a group of
representatives of various stakeholders in the Philippine movie
industry. It has no other members.
Such finding notwithstanding, we find that the Executive
Committee is subject to COA jurisdiction, considering its
administrative relationship to the Metro Manila Development
Authority, a government agency tasked to perform
administrative, coordinating, and policy-setting functions for
the local government units in the Metropolitan Manila area.
This Court finds that any such funds, though coming from
private resources, become public upon receipt by the Executive
Committee, for use in the purpose for which it was created. For
all intents and purposes, the Executive Committee, an office
under the MMDA and created pursuant to PP 1459, as donee,
has already become the owner of the funds and may dispose of
the same as it deems fit; thus, such funds are considered public
funds. Being public in character, the COA can therefore validly
conduct an audit over such funds in accordance with its
auditing rules and regulations.
CIVIL SERVICE COMMISSION (Article IX-B) CASE
HDMF v. COA (2004)
Facts:
On November 21, 1991, petitioner granted Productivity
Incentive Bonus equivalent to one month salary plus allowance
to all its personnel pursuant to RA 6971, “An Act to Encourage
Productivity and Maintain Industrial Peace by Providing
Incentives to Both Labor and Capital”, and its Implementing
Rules despite the advice on August 26, 1991 of Undersecretary
Salvador Enriquez of the DBM to all GOCCs and government
financial institutions (GFI) with original charters performing
necessary proprietary functions to defer payment of the
productivity incentive bonus to their employees, pending the
issuance of a definite ruling by the Office of the President on
the matter.
On December 27, 1991, the DOLE and the Department of
Finance issued the Supplemental Rules Implementing RA 6971,
which provides that paragraph (a) Section 1, Rule II of the Rules
Implementing RA 6971, shall be amended to read as follows:
“(a) All business enterprises with or without existing
duly certified labor organizations including
government-owned and controlled corporations
performing proprietary functions which are
established solely for business or profit or gain and
accordingly excluding those created, maintained or
acquired in pursuance of a policy of the state,
enunciated in the constitution or by law, and those
whose officers and employees are covered by the Civil
Service.”
On November 29, 1996, the grant of productivity incentive
bonus to the HDMF personnel was disallowed in audit under
notice of disallowance. The disallowance was based on COA
Decision No. 96-288, dated June 4, 1996, stating that R.A. No.
6971 does not apply to government-owned or controlled
corporations or to government financial institutions with
original charters performing proprietary functions, such as the
HDMF.
In a letter-request, HDMF, through its President and Chief
Executive Officer, Zorayda Amelia C. Alonzo, requested for the
lifting of the disallowance. Alonzo argued that R.A. No. 6971
applies to the employees of HDMF since the coverage of the
said law includes government-owned and controlled
corporations performing proprietary functions, and the
supplemental rules excluding it from coverage was issued after
the HDMF had already granted the productivity incentive bonus
to its employees.
The COA affirmed the audit disallowance in a later decision
stating that it finds the HDMF’s argument, that the
supplemental rules should not be given retroactive effect,
untenable. It must be noted that the grant of the Productivity
Incentive Bonus was made on November 21, 1991 or after
receipt of the advice of the Department of Budget and
Management Undersecretary dated August 26, 1991 to defer
payment of Productivity Incentive Bonus to all GOCCs/GFIs with
original charters performing proprietary functions, pending
definite ruling of the Office of the President. Despite the said
notice, management proceeded with the payment.
and employees of the Fund rather than adhering to the stringent
technicality of the law." The Board, therefore, was aware that
possibly HDMF may not be covered by Republic Act No. 6971. It
should have exercised prudence by awaiting the definite ruling
on the coverage to prevent legal problems.

HDMF filed a motion for reconsideration that was denied by

the Commission on Audit in Resolution No. 2000-086 dated
March 7, 2000.

Issue:

Whether or not the Commission on Audit acted in

excess of its jurisdiction or with grave abuse of
discretion amounting to lack of jurisdiction in affirming
the audit disallowance.

Ruling:

No. The Commission on Audit did not commit grave abuse of

discretion amounting to lack of jurisdiction in affirming the audit
disallowance.

Petitioner is a government-owned and controlled corporation

performing proprietary functions with original charter or created
by special law, specifically Presidential Decree (PD) No. 1752,
amending PD No. 1530. As such, petitioner HDMF is covered by
the Civil Service pursuant to Article IX, Section 2(1) of the 1987
Constitution, and, therefore, excluded from the coverage of
Republic Act No. 6971.

Since Republic Act No. 6971 intended to cover only government-

owned and controlled corporations incorporated under the
general corporation law, the power of administrative officials to
promulgate rules in the implementation of the statute is
necessarily limited to what is intended and provided for in the
legislative enactment. Hence, the Supplemental Rules clarified
that government-owned and controlled corporations
performing proprietary functions which are "created,
maintained or acquired in pursuance of a policy of the state,
enunciated in the constitution or by law, and those whose
officers and employees are covered by the Civil Service" are
excluded from the coverage of Republic Act No. 6971.

Therefore, even if petitioner HDMF granted the Productivity

Incentive Bonus before the Supplemental Rules were issued
clarifying that petitioner was excluded from the coverage of
Republic Act No. 6971, the employees of HDMF did not acquire
a vested right over said bonus because they were not entitled to
it under Republic Act No. 6971.

Moreover, the DBM advised petitioner herein, HDMF, on August

26, 1991, to defer payment of the productivity incentive bonus
to their employees, pending the issuance of a definite ruling by
the Office of the President on the matter. Despite said advice,
the Board of Trustees of HDMF opted to grant the said bonus on
a voluntary basis as stated in its Resolution No. 91-549, Series of
1991. It expressed its "concern over the welfare of the officers