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PHILIPPINE CHARITY G.R. No. 246313

SWEEPSTAKES OFFICE,
REMELIZA M. GABUYO, ET Present:
AL.,
Petitioners, . GESMUNDO, C.J,,
PERLAS-BERNABE,
LEONEN,
CAGUIOA,
- versus - HERNANDO,
LAZARO-JAVIER,
INTING,
ZALAMEDA,
THE COMMISSION ON AUDIT, LOPEZ, M,,
Respondent, GAERLAN,
ROSARIO,
LOPEZ, J,,
DIMAAMPAO, and
. MARQUEZ, JJ

Promulgated:

February 15, 2022

X - - - - - - - - - - - - - - - - - - - - - - - - - - - - ~~ - - X
-· ~
DECISION

ZALAMEDA, J.:

Before the Court is a Petition for Certiorari1 under Rule 64, in relation
to Rule 65, of the Rules of Court assailing Decision No. 2017-0842 dated 07
April 2017 and Resolution No. 2018-328 3 dated 09 July 2018 of the
Commission on Audit (COA) Proper. It affirmed the decision of the COA

1
Rollo, pp. 3-20.
' Rollo, pp. 27-30; penned by Chairperson Michael G. Aguinaldo with Commissioners Jose A. Fabia and
Isabel D. Agito.
Id at 31-41.
 ~- . -~·--..,.
.-

Decision 2 G.R. No. 246313

Regional Office IV-A dated 20 March 2014, which upheld Notice of

Disallowance (ND) Nos. PCSO 2010-16-101(2010), PCSO 2010-17-
. 101(2010), and PCSO 2010-18-101(2010), all dated 08 December 2010,
disallowing the payment of several allowances to the ·personnel of the
Laguna Provincial District Office (LPDO) of petitioner Philippine Charity
Sweepstakes Office (PCSO) in the total amount of f'l,601,067.49. 4

In November 2010, the PCSO-LPDO granted certain monetary

benefits to its personnel. Upon audit, however, the Audit Team Leader
assigned to the PCSO-LPDO issued the following NDs: 5

NDNo. Allowance/Benefit A.rnount Grounds for Disallowance

PCSO 2010- Christmas Bonus [l"] 1,459,050.60 Lack of legal basis since it
16-101(2010) for calendar year was merely based on the
(CY) 2010 PCSO-Sweepstakes
equivalent to three Employees Union (SEU)
months basic Collective Negotiation
salary Agreement (CNA) dated 04
March 2008 and PCSO
Resolution No. A-0103,
series of2010.
PCSO 2010- Weekly Draw [1"]40,200.00 Lack of legal basis since it
17-101(2010) Allowance for the was merely based on the
period of 8 to 28 PCSO-SEU CNA
November 2010
PCSO 2010- Staple Food [l"J!0l,816.89 Lack of legal basis, since it
18-101(2010) Allowance, was merely based on the
Hazard Pay, Cost PCSO-SEU CNA; and. the
of Living COLA was already
Allowance integrated into the basic
(COLA), and salary per Section 12 of
Medicine Republic Act (RA) No. 6758,
Allowance also known as the Salary
Standardization Law (SSL)
Total lf'll,61ll,!l66.89

Petitioners failed to file the appeal on time causing the issuance of a

Notice of Finality of Decision (NFD). Claiming inadvertence and that the
disallowed benefits had supposedly been approved by the Office of the
President post facto, PCSO sought reconsideration. COA Assistant
Commissioner Elizabeth Zosa (Assistant Commissioner Zosa) granted
PCSO's request and ordered the COA Regional Director to take cognizance
of the appeal. The Regional Director, nevertheless, affirmed the validity of
the NDs. Undaunted, petitioners filed a petition for review before the COA

4
Id. at 3-4.
5
Id. at 32-33.
 Decision 3 G.R. No. 246313

Proper. 6

Ruling of the Commission Proper

On 07 April 2017, the COA Proper dismissed the petition for review
for being filed out of time. Upon motion, however, the COA Proper granted
reconsideration and went on to resolve the case on the merits. 7

In its assailed Decision, the COA Prop~r affirmed the disallowance. It

held that Republic Act No. (RA) 1169, 8 or the PCSO Charter, does not give
absolute authority to the PCSO Board of Directors (PCSO Board) to fix the
salaries and other monetary benefits of PCSO's officials and employees.
This power is always subjected to the "pertinent civil service and
compensation laws," and PCSO has the duty to follow these laws relating to
disbursement of public funds. 9

It was also ruled that petitioners cannot rely on the alleged post facto
approval given by the Office of the President through the letter dated 19
May 2011 of then Executive Secretary Paquito N. Ochoa, Jr. (Executive
Secretary Ochoa). The COA Proper explained that the letter is not an
omnibus approval of all past grants and should not be taken as a ratification
of benefits granted in violation of compensation laws. The COA Proper also
noted that the Supreme Court already held that said post facto approval was
invalid. 10

Further, the COA Proper explained that petitioners did not acquire
vested rights over the benefits as there were no evidence that they were part
of the employees' compensation for a reasonable length of time.
Nonetheless, the COA Proper ruled that the employee-recipients need not
return what they received in good faith, leaving the approving/certifying
officers liable for the total disallowed amount. 11

Issues

Petitioners now come before the Court to assail the COA Proper's
decision. They argue that the COA Proper erred when it dismissed the
petition for review for being filed out of time. They claim that since their late
appeal was allowed by Assistant Commissioner Zosa, the petition for review
should have also been accepted and decided on the merits. As regards the

6
Id. at 6-8.
7
Id. at 29.
8
Entitled "An Act Providing for Charity Sweepstakes Horse Races and Lotteries," approved on 18 June
!954.
' Id at 34-36.
'° Id. at 36-38.
" Id at 38-39.
 /~ . ... ....
J

Decision 4 G.R. No. 246313

grant of the disallowed benefits, petitioners argue that it was within the
power of the PCSO Board under RA No. 1169, and that it bears the post
facto approval of the President through the letter dated 19 May 2011 of
Executive Secretary Ochoa. They claim that while the letter only authorized
the benefits paid to PCSO employees prior to 07 September 2010, it does not
state that PCSO is no longer authorized to grant the same. Petitioners also
allege that the disallowed benefits form part of the employees' compensation
and disallowing them would violate the principle of non-diminution of
benefits. Finally, PCSO asserts that the named petitioners acted in good
faith in authorizing the benefits as they were only following the orders of the
PCSO Board. Thus, they should not be made to suffer the burden of
returning the disallowed amount."

Ruling of the Court

The Petition lacks merit.

The Court accords respect and finality to the decisions of

administrative authorities, like the COA, in deference to their presumed
expertise in the laws they are entrusted to enforce. It is only when the COA
has acted without or in excess of jurisdiction, or with grave abuse of
discretion amounting to lack or excess of jurisdiction, that the Court
entertains a petition questioning its ruiings. Abuse of discretion is present
when there is an evasion of a positive duty or a virtual refusal to perform a
duty enjoined by law, or to act in contemplation of law, as when the
judgment rendered is not based on law and evidence but on caprice, whim,
and despotism. 13

To overturn the assailed decision, it must be shown that the COA

committed grave abuse of discretion when it affirmed the NDs disallowing
the benefits PCSO-LPDO granted to its employees. Petitioner, however,
failed miserably in this undertaking.

At the outset, it must be stressed that petitioners are mistaken in their

belief that the COA Proper merely applied technicality in dismissing their
petition for review for being filed out of time. It is clear from the COA
Proper's decision that the arguments on the merits forwarded by petitioners
were sufficiently discussed and considered.

Make no mistake, the relaxation of procedural rules still cannot be

made without any valid reasons to support it. To merit liberality, petitioners
must show reasonable cause justifying its non-compliance with the rules and
must convince the tribunal concerned that the outright dismissal of the

1
' Id at 10-18.
13
Veloso v. Commission on Audit, 672 Phil. 419,432 (2011) [Per J. Peralta].
Decision 5 G.R. No. 246313

petition would defeat the administration of substantive justice. '4

In this case, the COA, in fact, relaxed its own rules when Assistant
Commissioner Zosa allowed petitioners to file its memorandum of appeal,
and even proceeded to resolve the merits of their petition for review.

The Board of Directors of PCSO has

no unrestricted authority to fvc the
monetary benefits of PCSO s
employees and officials.

Petitioners also erroneously assert that the benefits granted are

authorized by law because the PCSO Board had the power to do so. The
PCSO Board's power to fix the salaries of employees is not plenary and
unfettered. In Philippine Charity Sweepstakes Office v. Commission on
Audit,'' the Court held:

The Court already ruled that R.A. 1169 or the PCSO Charter, does
not grant its Board the unbridled authority to fix salaries and allowances of
its officials and employees. PCSO is still duty bound to observe pertinent
laws and regulations on the grant of allowances; benefits, incentives and
other forms of compensation. The power of the Board to fix the salaries and
determine the reasonable allowances, bonuses and other incentives are still
subject to the review of the DBM. 16

The PCSO Board has the duty to ensure that, in exercising its power
to fix the salaries and detennine the reasonable allowances, benefits, and
other incentives of PCSO's employees, the pertinent budgetary legislation
laws and rules are observed to the letter. It may not grant additional salaries,
incentives, and benefits unless all the laws relating to these disbursements
are complied with.

The disallowed Weekly Draw

Allowance, Staple Food Allowance,
Cost of Living Allowance (COLA),
and Medicine Allowance are already
deemed integrated into the new
standardized salary rate and should
each require presidential approvals
for their separate grant.

" Daikoku Electronics Phils., Inc. v. Raza, 606 Phil. 796. 803 (2009) [Per J. Velasco. Jr].
15
G.R. No. 243607, 09 December 2020 [Per J. Carandang].
16 Id.
Decision 6 G.R. No. 246313

Section 12 of RA 6758 17 provides that, as a rule, allowances due to

government employees are deemed integrated into the new standardized
salary rate save for some specific exceptions. Meanwhile, Department of
Budget and Management (DBM) Budget Circular (BC) No. 16, s. 1998
prohibits the grant of food, rice, gift checks, or any other form of
incentives/ailowances, except those authorized by an Administrative Order
from the Office of the President. 18

Since the disallowed Weekly Draw Allowance, Staple Food

Allowance, COLA, and Medicine Allowance are not among the enumerated
exceptions in Section 12 of RA No. 6758, they are, therefore, deemed
included in the standardized salary. The only way to justify their separate
grant is to show that it was sanctioned by the DBM, or it was authorized by
the President.

Sections 5.4, 5.5 and 5.6 ofDBI\1-Corporate Compensation Circular

10 (DBM-CCC 10) to implement RA 6758 provides the allowances excepted
by DBM. 19 Notably, the Weekly Draw Allowance, Staple Food Allowance,

" Section 12. Consolidation of Allowances and Compensation. - All allowances, except for
representation and transportation allowances, clothing and laundry allowances; subsistence allowance
of marine officers and crew on board government vessels and hospital personnel: hazard pay;
aHowances of foreign service personnel stationed abroad; and such other additional compensation not
otherwise specified herein as may be determined by the DBM, shall be deemed included in
the standardized salary rates herein prescribed. Sµch other additional compensation, whether in cash or
in kind. being received by incumbents only as of July l, 1989 not integrated into
the standardized salary rates shall continue to be authorized.
'" Bureau of Fisheries i, Commission on Audit, 584 Phil. 132, 138 (2008) [Per J. Puno].
19 5.4 The following allowances/fringe benefits which were authorized to GOCCs/GFls under the

standardized Position Classification and Compensation Plan prescribed for each of the five (5) sectoral
groupings of GOCCs/GF!s pursuant to P.D. No. 985, as amended by P.D. No. 1597, the Compensation
Standardization Law in operation prior to R.A. No. 6785, and to other related issuances are not to be
integrated into the basic salary and allowed to be continued after June 30, I 989 only to incumbents of
positions who are authorized and actually receiving such allowances/benefits as of said date, at the same
terms and conditions provided in said issuances.
5.4.1 Representation and Transportation Allowance (RATA);
5.4.2 Unifom1 and Clothing Allowance;
5.4.3 Hazard Pay as authorized by law;
5.4.4 Honoraria/additional compensation for employees on detail with special projects or inter-
agency_undertakii:-igs;
5.4.5 Honoraria for services rendered by researchers, experts and specialists who are of
acknowledged authorities in their fields of specialization;
5.4.6 Honoraria for lecturers and resource persons/speakers;
5.4.7 Overtime pay as authorized by law;
· 5.4.8 Laundry and subsistence allowance for marine officers and crew on board GOCCs/GFls
owned vessels, and used in their operations, and of hospital personnel who attend directly to
patients and who by nature of their duties are required to wear uniforms;
5.4.9 Quarters Allowance of officials and employees who are entitled to the same;
5.4.10 Overseas, Living Quarters and other allowances preselltly authorized for personnel
stationed abroad;
5.4. l l Night Differential of personnel on night duty;
s-4:.12 Per Diems of members of the governing Boards of GOCCs/GFis at the rate prescribed in
their respective Charters;
5.4.13 Flying Pay of personnel undertaking aerial flights;
5.4. l 4 Per Dicms/ Allowances of Chairman and Members/Staff of collegial bodies and
Committees; and
5.4.15 Per Diems/Allowances of officials and employees on official foreign and local travel
- outside of their official station.
Decision 7 G.R. No. 246313

COLA, and Medicine Allowance are not among those excepted by the
DBM. Petitioners, however, maintain, that all these benefits were granted
post facto approval by the late fonner President Benigno Aquino III
(President Aquino), through the letter of Executive Secretary Ochoa dated 19
March 2011.

In its effort to maintain the validity of the benefits subject of the NDs,
PCSO has repeatedly utilized the letter of Executive Secretary Ochoa
supposedly containing the post facto approval of then President Aquino
However, the Court has been consistent in rejecting post facto approval to
justify disallowed disbursements. In Philippine Charity Sweepstakes Office
v. Pulido-Tan (Pulido-Tan), 20 We ruled:

In this petition, We cannot rule on the validity of the alleged post

facto approval by the Office of the President as regards the grant of COLA
to the PCSO officials and employees. The PCSO failed to prove its
existence since no documentary evidence, original copy or otherwise, was
submitted before Us. Even so, where there is an express provision of the law
prohibiting the grant of certain benefits, the law must be enforced even if it
prejudices certain parties on account of an error committed by public
officials in granting the benefit. An executive act shall be valid only when it
is not contrary to the laws or the Constitution. 21

Meanwhile, in the 2020 case of Philippine Charity Sweepstakes

Office v. Commission on Audit, 22 which, interestingly, also involved PCSO-
LPDO, the Court rejected the same post facto approval after it was found
that the 19 May 2011 letter was vague for failing to specify what benefits
and allowances were being allowed.

There appears to be no reason to depart from these rulings.

Interestingly, the PCSO failed to attach the 19 May 2011 letter in its petition
before the Court. Be that as it may, said executive act cannot be accorded

5.5 The following allowances/fringe benefits authorized to GOCCs/GF!s pursuant to the

aforementioned issuances are not likewise to be integrated into the basic salary and allowed to be
continued only for incumbents of positions as of June 30, 1989 who are authorized and actually
receiving such allowances/benefits as of said date, at the same terms and conditions prescribed in said
issuances[.]
5.5.1 Rice Subsidy;
5.5.2 Sugar Subsidy;
5.5.3 Death Benefits other than those granted by the GSIS;
5.5.4 Medical/dental/optical allowances/benefits;
5.5.5 Children's allowance;
5.5.6 Special Duty Pay/Allowance;
5.5.7 Meal Subsidy;
5.5.8 Longevity Pay; and
5.5.9 Teller's Allowance.
5.6 Payment of other allowance/fringe benefits and all other fonns of compensation granted on top of
basic salary, whether in cash or in kind, not mentioned in Sub-Paragraphs 5.4 and 5.5 above shall
continue be not authorized. Payment made for such unauthorized allowances/fringe benefits shall be
considered as illegal disbursements of public funds.
20
785 Phil. 266 (2016) [Per J. Peralta].
21
Id. at 285.
22
Supra note 15.
Decision 8 G.R. No. 246313

validity as it sanctions benefits that are in clear violation of ex1stmg

budgetary and auditing laws. Further, the COA correctly pointed out in its
Comment that the disallowed benefits were no longer covered by Executive
Secretary Ochoa's letter. The letter approved only those given prior to 07
September 2010, while the benefits were granted starting November 2010.
There is no other proof that the authority was extended to that date.

The PCSO 's grant of Christmas

Bonus exceeded the amount
authorized by the relevant law, rules,
and regulations, while the grant of
Hazard Duty Pay did not meet the
requirements set forth by the DBM

RA 6686, 23 as amended by RA 8441, 24 allows the grant of Christmas

Bonus equivalent to one month salary plus additional cash gift of PS,000.00.
In this case, the Christmas Bonus authorized by the PCSO Board was
equivalent to three months' salary. Thus, We affirm its disallowance on the
ground that the amounts given by PCSO to its employees in this case
exceeded those authorized by law. The disallowance, however, should be
limited to the excess. In this regard, the COA should compute anew the
correct disallowed amount.

The Court also sustains the disallowance of the Hazard Pay given to
each official and employee, even if it is among those exempted under RA
6758 and DBM-CCC 10. The latter provides that for recipient-employees to
be entitled to hazard pay, it must be shown that they are assigned to and
performing their duties and responsibilities in strife-tom and embattled areas
for a certain period. Petitioners, however, failed to establish that the
recipients of the Hazard Pay met these requirements.

The disallowance of the subject

benefits did not diminish the existing
benefits enjoyed by the concerned
employees.

There is, likewise, no merit in petitioners' argument that the

disallowance would violate the principle of non-diminution of benefits

23
Entitled '"An Act Authorizing Annual Christmas Bonus to National and Local Government Officials and
Employees Starting CY 1988," approved on 14 December 1988.
" Entitled "An Act Increasing the Cash Gift to Five Thousand Pesos ([1']5,000.00), Amending for the
Purpose Certain Sections of Republic Act Numbered Six Thousand Six Hundred Eighty-Six, and for
Other Purposes," approved on 22 December 1997.
Decision 9 G.R. No. 246313

because the subject benefits form part of the employees' compensation.

The fact of diminution of benefits should be proved by sufficient

evidence. In Pulido-Tan, We ruled:

The Court has steadily held that, in accordance with second sentence
(first paragraph) of Section 12 ofR.A. No. 6758, allowances, fringe benefits
or any additional financial incentives, whether or not integrated into the
standardized salaries presc1ibed by R.A. No. 6758, should continue to be
enjoyed by employees who were incumbents and were actually receiving
those benefits as of July 1, 1989. Here, the PCSO failed to establish that its
officials and employees who were recipients of the disallowed COLA
actually suffered a diminution in pay as a result of its consolidation into
their standardized salary rates. It was not demonstrated that such officials
and employees were incumbents and already receiving the COLA as of July
1, 1989. Therefore, the principle of non-diminution of benefits finds no
application to them.

Neither is there merit in the contention that the PCSO officials and
employees already acquired vested rights over the COLA as it has been a
part of their compensation for a considerable length of time. Such
representation was not supported by any evidence showing that a substantial
- period of time had elapsed. Nevertheless, practice, without more - no
matter how long continued - cannot give rise to any vested right if it is
contrary to law. While We commiserate with the plight of most government
employees who have to make both ends meet, the letter and the spirit of the
law should only be applied, not reinvented or modified. 25

In this case, petitioners could only proffer mere allegations bereft of

any evidence to support their claim of diminished benefits.

Based on the foregoing, We rule that the COA Proper did not commit
grave abuse of discretion in upholding the validity of the NDs. With this
issue finally resolved, the Court now turns its attention to determine whether
petitioners, all approving/certifying officers, are liable to return the
disallowed amount.

The COA Propers exoneration of the

payees. on the ground of good faith
already attained finality and may no
longer be disturbed.

In Madera v. Commission on Audit,'6 the Court laid down a definitive

set of rules ( Madera Rules) to determine the liability of government officers
and employees being made to return employee benefits that were disallowed
in audit. Thus:

25
Supra note 20 at 285-286.
26
G.R. No. 244128, 08 September 2020 [Per J. Caguioa].
Decision 10 G.R. No. 246313

I. If a Notice of Disallowance is set aside by the Court, no return shall

be required from any of the persons held liable therein.

2. If a Notice of Disallowance is upheld, the rules on return are as

follows:

a. Approving and certifying officers who acted in good faith, in

regular performance of official functions, and with the diligence of
a good father of the family are not civilly liable to return consistent
with Section 38 of the Administrative Code of 1987.

b. Approving and certifying officers who are clearly shown to

have acted in bad faith, malice, or gross negligence are, pursuant to
Section 43 of the Administrative Code of 1987, solidarily liable to
return only the net disallowed amount which, as discussed herein,
excludes amounts excused under the following sections 2c and 2d.

v- Recipients - whether approving or certifying officers or mere

passive recipients - are liable to return the disallowed amounts
respectively received by them, unless they are able to show that the
amounts they received were genuinely given in consideration of
services rendered.

d. The Court may likewise excuse the return of recipients based

on undue prejudice, social justice considerations, and other bona
fide exceptions as it may determine on a case to case basis. 27

Good faith is a defense no longer available to payees of disallowed

benefits. Nevertheless, their liability to return may still be excused based on
these grounds now embodied in Rules 2c and 2d of the Madera Rules: (1)
when the amount disbursed was genuinely given in consideration of services
rendered; (2) when undue prejudice will result from requiring payees to
return; (3) where social justice or humanitarian considerations are attendant;
and (4) other bona fide exceptions as may be determined on a case to case
basis."

In Abellanosa v. Commission on Audit (Abellanosa), 29 the Court

supplemented Madera and explained that for the first exception under Rule
2c to apply, certain requisites must be present. Thus:

As a supplement to the Madera Rules on Return, the Court now

finds it fitting to clarify that in order to fall under Rule 2c, i.e., amounts
genuinely given in consideration of services rendered, the following
requisites must concur:

(a) the personnel incentive or benefit has proper basis

in law but is only disallowed due to irregularities that are
merely procedural in nature; and

21 Id.
2s Id.
" G.R. No. 185806, 17 November 2020 [Per J. Perlas-Bernabe].
Decision 11 G.R. No. 246313

(b) the persom1el incentive or benefit must have a clear,

direct, and reasonable connection to the actual performance
of the payee-recipient's official work and functions for
which the benefit or incentive was intended as further
compensation.

Verily, these refined parameters are meant to prevent the

indiscriminate and loose invocation of Rule 2c of Madera Rules on Return
which may virtually result in the practical inability of the government to
recover. To stress, Rule 2c as well as Rule 2d should remain true to their
nature as exceptional scenarios; they should not be haphazardly applied as
an excuse for non-return, else they effectively override the general rule
which, again, is to return disallowed public expenditures. 30

Abellanosa instructs us that the legality of the expenditure is the

primary consideration before a benefit could be considered as genuinely
given in consideration of services rendered. 31 This "legality" includes
compliance with all the legal conditions for the disbursement. Further, the
disallowance should have been the result of some procedural error not
affecting the genuineness of the payout. 32 These circumstances would show
that the payees would have no issue receiving the benefit disallowed were it
not for that minor mistake. 33

As regards the second requisite, Abellanosa explains:

Aside from having proper basis in law, the disallowed incentive

or benefit must have a clear, direct, reasonable commection to the actual
performance of the payee-recipient's official work and functions. Rule
2c after all, excuses only those benefits "genuinely given in
consideration of services rendered"; in order to be considered as "genuinely
given," not only does the benefit or incentive need to have an ostensible
statuto1yilegal cover, there must be actual Work performed and that the
benefit or incentive ·bears · a clear, direct, and reasonable relation to the
perfonnance of such official work or functions. To. hold otherwise would
allow incentives or benefits to be excused based on a broad and sweeping
association to work that can easily be feigned by unscrupulous public
officers and in the process, would severely limit the ability of the
government to recover. (Emphasis supplied)"

Finally, on the grounds of undue prejudice, social justice or

humanitarian considerations, or other bona fide exceptions, all of which are
subsumed under Rule 2d of the Madera Rules, Abellanosa explains:

The same considerations ought to underlie the application of Rule 2d

as a ground to excuse return. In Madera, the Court also recognized that the
existence of undue prejudice, social justice considerations, and other bona

30
Id
31
Supra note 29.
32 Id.
33 Id.
3
.1 Supra at note 29,
Decision 12 G.R. No. 246313

fide· exceptions, as determined on a case-to-case basis, may also negate the

strict application of solutio indebiti. This exception was borne from the
recognition that in certain instances, the attending facts of a given case may
furnish an equitable basis for the payees to retain the amounts they had
received. While Rule 2d is couched in broader language as compared to
Rule 2c, the application of Rule 2d should always remain true to its
purpose: it mll.lst constitll.lte a bona fide instance which strongly impels
the Court to prevent a clear il1equity arising from a directive to
return. Ultimately, it is only in 11.igillly exceptioi:u1l drcumstam.:es, after
taking into accoulilt all factors (such as the nature and purpose of the
disbursement, and its underlying conditions) that the civil liability to return
may be excused. For indeed, it was never the Court's intention for Rules 2c
and 2d of Madera to be a jurisprudential ioophole that would cause the
government fiscal leakage a.'1d debilitating loss. (Emphasis supplied) 35

Notwithstanding the deletion of good faith as a defense, the COA

Proper's exoneration of the payees here on the ground of good faith must be
upheld. Their absolution was no longer raised as an issue here, and therefore,
already attained finality. 36 To disturb their exoneration is to violate the
doctrine of immutability of final judgments.

The exoneration, nonetheless, does not extend to the individually

named petitioners' liability as recipient of the disallowed benefit, if they
received any. By filing the present petition, their liability in general, i.e.,
whether as approving/authorizing officers or as payees, had not yet attained
finality. More importantly, We ruled in Pastrana v. Commission on Audit, 37
that approving/certifying officers who are also payees cannot benefit from
the COA Proper's exoneration if said officers acted in bad faith, to wit:

At this juncture, it is well to clarify that while petitioners were also

payee-recipients of the CNA incentives, they were explicitly named as
approving/certifying officers liable for the disallowance. In the recent case
of Securities and Exchange Commission v. Commission on Audit, the Court
held that the approving/certifying officers in good faith are on the same
plane as the payee-recipients absolved at the COA level. Hence, the
absolution of civil liability extended by the COA to the payee-recipients
equally applies to the approving/certifying officers in good faith who have
also received the disallowed amounts. The Court concluded that the SEC
officers would suffer undue prejudice should they be compelled to return the
amounts paid under their nan1es in the provident fund using SEC's retained
earnings, a scenario contemplated in Rule 2d of the Madera Rules. Under
Rule 2d, payee-recipients may be excused from returning the disallowed
a_rnount when undue prejudice will result from requiring them to return or
· where social justice or humanitarian considerations are attendant.

Unfortunately, in this case, petitioners - who had also received the

CNA incentives - are not in good faith as they are grossly negligent in the
performance of their duties as approving/certifying officers. Consequently,

" Id.
36
Pastrana v. Commission on Audit. G.R. Nos. 242082 & 242083, 15 June 2021 [Per J. Delos Santos].
37 Id
 Decision 13 G.R. No. 246313

they cannot avail of the equitable exceptions under Rule 2d because equity
should not be accorded to a party in bad faith or who is grossly
negligent. On this score, petitioners should individually return the amounts
they respectively received. 38

In the present case, good faith cannot be appreciated in petitioners'

favor because they were grossly negligent in approving the disallowed
benefits.

The approving and certifying officers

were grossly negligent in failing to
observe the clear and unequivocal
provrswns of laws and rules
applicable to the disbursement of the
disallowed benefits.

Rules 2a and 2b of the Madera Rules were based on Sections 38 39 and

39,4° Chapter 9, Book I, in relation to Section 43,'' Chapter 5, Book VI of the
Administrative Code, 42 which provide that government officials who
approved and certified the grant of disallowed benefits are held solidarily
liable to return said disallowed amount when they are found to have acted in
evident bad faith, with malice, or if they were grossly negligent in the
performance of their official duties. These rules are further anchored on the
principle that "public officers are accorded with the presumption of
regularity in the performance of their official functions - [t]hat is, when an
act has been completed, it is to be supposed that the act was done in the

3s Id.
" SECTION 38. liability of Superior Qfjicers. - (1) A public officer shall not be civilly liable for acts
done in the perfom1ance of his official duties, unless there is a clear showing of bad faith, malice or
gross negligence.
xxxx
(3) A head of a department or a superior officer shall not be civilly liable for the wrongful acts,
omissions of duty, negligence, or misfeasance of his subordinates, unless he has actually authorized by
written order the specific act or misconduct complained of.
0
' SECTION 39. Liability ofSubordinate Officers. - No subordinate officer or employee shall be civilly
liable for acts done by him in good faith in the performance of his duties. However, he shall be liable for
willful or negligent acts done by him which are contrary to law, morals, public policy and good customs
even ifhe acted Under orders or instructions of his superiors.
" SECTION 43. Liability for Illegal Expenditures. - Every expenditure or obligation authorized or
incurred in violation of the provisions of this Code or of the general and special provisions contained in
the annual General or other Appropriations Act shall be void. Every payment made in violation of said
provisions shall be illegal and every official or employee authorizing or making such payment, or taking
part therein, and every person receiving such payment shall be jointly and severally liable to the
Government for the full amount so paid or received.
Any official or employee of the Government knowingly incurring any obligation, ·or authorizing any
expenditure in violation of the provisions herein, or taking part therein, shall be dismissed from the
service, after due notice and hearing by the duly authorized appointing official. If the appointing official
is other than the President and should he faii to remove such official or employee, the President may
exercise the power of removal.
" Executive Order No. 292, 25 July 1987.
Decision 14 G.R. No. 246313

manner prescribed and by an officer authorized by law to do it.""

In Pulido-Tan, the Court declared the approving/certifying officers

liable to return the disallowed amount by reason of their failure to abide by
the provisions of the pertinent laws and rules. Thus:

ln view of the above issuances, the PCSO Board of Directors who

approved Resolution No. 135 are liable. Their authority under Sections 6
and 9 ofR.A. No. 1169, as amended, is not absolute. They cannot deny
knowledge of the DBM and PSLMC issuances that effectively prohibit the
grant of the CO LA as they are presumed to be acquainted with and, in fact,
even duty-bound to know and understand the relevant laws/rules and
regulations that they are tasked to implement. Their refusal or failure to do
do not exonerate them since mere ignorance of the law is not a justifiable
excuse. As it is, t.he presumptions of "good faith" and "regular
performance of official duty" are disputable and may be contradicted and
overcome by other evidence.

The same thing can be said as to the five PCSO officials who were
held accountable by the COA. They cannot approve the release of funds
and certi.fy that the subject disbursement is lawful without ascertaining its
legal basis. If they acted on the honest belief that the COLA is allowed by
law/rules, they should have assured themselves, prior to their approval and
the release of funds, that the conditions imposed by the DBM and PSLMC,
particularly the need for the approval of the DBM, Office of the President
or legislature, are complied with. Like the members of the PCSOBoard,
the approving/certifying officers' positions dictate that they are familiar of
governing laws/rules. Knowledge of basic procedure is part and parcel of
their shared fiscal responsibility. They should have alerted
the PCSO Board of the validity of the grant of COLA. Good faith further
dictates that they should have denied the grant and refrained from
receiving the questionable amount. 44

The Court ruled in a similar fashion in Philippine Charity

Sweepstakes Office, et al. v. Commission on Audit, 45 thus:

Accordingly, the named PCSO-LPDO officials in this case, who

implemented the same, authorized its release without ascertaining its legal
basis and even received the disallowed amounts, are held liable. Despite
the lack of authority for granting the said allowances and benefits, they
still approved its grant and release in excess of the allowable amounts and
extended the same benefits to other officials and employees, as well as to
themselves, in deliberate violation of the letter and spirit ofR.A. 6758 and
related laws. x x x46

We find no reason to treat the approving/certifying officers of PCSO

differently here. In The Officers and Employees of Jloilo Provincial

43
Madera v. Commission on Audit, supra note 26.
44
Supra note 20 at 290.
45
Supra note 15.
46 Id.
Decision 15 G.R. No. 246313

Government v. ·Commission on Audit, 47 We held that failure to follow a clear

and straightforward legal provision constitutes gross negligence, to wit:
Gross negligence has been defined as negligence characterized by
the want of even slight care, acting or omitting to act in a situation where
there is a dnty to act, not inadvertently but willfully and intentionally with
a conscious indifference to consequences insofar as other persons may be
affected. As discussed by Senior Associate Justice Perlas-Bernabe, "[g]ross
negligence may become evident through the non-compliance of· an
approving/authorizing officer of clear and straightforward requirements of
an appropriation law, or budgetary rule or regulation, which because of their
clarity and straightforwardness only call for one [reasonable]
interpretation."48 (Citations omitted)

Indeed, Section 12 of RA 6758 and DBM-CCC 10 clearly provided

for the benefits, allowances, and incentives not included in the standardized
salary rates. Further, laws goven1ing the other benefits disallowed for being
excessive were also unequivocal as to the amount authorized to be given.
Thus, an interpretation of these laws that seems to permit the grant of a
higher amount could not be countenanced. Finally, the approving/certifying
officials carmot feign ignorance of PCSO's own charter that restricts the
power of the PCSO Board to fix the salaries and benefits of PCSO's officials
and employees.

Thus, for their gross negligence, the Court finds the

approving/certifying officers solidarily liable for the disallowed amount
pursuant to Section 43, Chapter 5, Book VI of the Administrative Code,
which reads:

SECTION 43. Liability for lllegal Expenditures. - Every

expenditure or obligation authorized or incurred in violation of tl1e
provisions of this Code or of the general and special provisions contained
in the annual General or other Appropriations Act shall be void. Every
payment made in violation of said provisions shall be illegal and every
official or employee authorizing or making such payment, or taking
part therein, and every person receiving such payment shall be jointly
and severally lial.Jle to the Government for the full amount so paid or
received.

Any official or employee of the Government knowingly

incurring any obligation, oir authorizing any expenu:liture in violation
of the provisions herein, or taking part therein, shall he dismissed
from the service, after due notice and hearing by the duly authorized
appointing official. U the appointing official is other than the
President and should he fail to remove such official or employee, the
President m:aiy exercise the power of removal. (Emphasis supplied)

There is also no merit in petitioners' contention that they were mere

" G.R. No. 218383, 05 January 202! [Per J. Zalameda].

,s Id.
Decision 16 G.R. No. 246313

good soldiers and had no choice but to obey the PCSO Board's directives to
authorize the benefits. We are mindful that in the determination of who
among the approving/certifying officers should be held liable, the Court
should also inquire about the nature and extent of the participation of the
officers concerned, so much so that those merely performing ministerial
duties should be exonerated because they were not involved in the decision-
making process. 49 Such is not the case here. The assailed NDs indicate that
the approving/certifying officers found liable were: (1) members of the
PCSO Board who issued the resolution authorizing the grant; (2) officers of
the employees' union who issued the collective negotiation agreement on
which the benefits were also based; and (3) officers who certified the
propriety and correctness of the claim or approved the transaction. As such,
these officers' acts were discretionary and not merely ministerial. Indeed,
without their participation, the grant of the disallowed benefits would not
have been possible.

In any event, petitioners are solidary liable only for the net disallowed
amount, which is the total disallowed amount minus the amounts excused to
be returned by the payees. 5° For the net disallowed amount, the COA may
proceed against any of the approving/certifying officers named liable in the
NDs, without prejudice to the latter's claim against the rest of the persons
liable." In addition, petitioners should be individually liable for any of the
disallowed amounts they received as payees. However, these amounts are
practically the same as the net disallowed amount. For obvious reasons,
petitioners should only be held liable for the latter."

WHEREFORE, the petition is DISMISSED. The Decision No.

2017-084 dated 07 April 2017 and Resolution No. 2018-328 dated 09 July
2018 of the Commission on Audit are hereby AFFIRMED WITH
MODIFICATION. Petitioners are solidarily liable to return the net
disallowed amount. This pronouncement is without prejudice to the filing of
appropriate administrative or criminal charges against the officials
responsible for the illegal disbursement. Further, the Commission on Audit
is DIRECTED to compute the correct amount of the disallowed benefits to
be returned.

SO ORDERED.

" Celestev. Commission on Audit, G.R. No. 237843, 15 June2021 [Per J. Caguioa].
50
Madera v. Commission on Audit, supra note 20.
" Supra note 36.
52 Id.
Decision 17 G.R. No. 246313

WE CONCUR:

~ · ~----
AL,.EXA~R~:f.ciSMUNDO
/ W&i:f Justice
I-

'
~~~·
~ ~ . V . F . LEONEN
Associate Justice

~~~o Associate Justice

~
a. .
AMY A RO-JAVIER HEN~~INTING
A ociate Justice Assoc&e Justice

S~MU;=~N
Associate Justice

RICA~. ROSARIO JHOS;~PEZ

As\ociate Justice Associate Justice

0
' ~
. yt,ii4~ .
J(s&IDAS P. JV ARQUEZ
\ ___i<'ssociate Justice
Decision 18 G.R. No. 246313

CERTIFICATION

Pursuant. to the Sect.ion 13, Article VIII of the Constitution, I certify

that the conclusions in the above Decision had been reached in consultation
before the case was assigned to the writer of the opinion of the Court.

~ & ? A - , ~ --
AljEXbV~Eif2 GESMUNDO
/ / Chief Justice

Clerk of Court
Supreme Court