G.R. No. 185806; July 24, 2012
Generoso Abellanosa, Carmencita D. Pineda, Bernadette R. Laigo, Menelio D. Rucat, and Doris A. Siao, Petitioners, vs. Commission on Audit and National Housing Authority, Respondents.

FACTS

The National Housing Authority (NHA) Board of Directors issued Resolution No. 464 on June 23, 1982, granting an Incentive Allowance equivalent to 20% of basic pay to personnel assigned to a different region and 10% to those assigned within their region. This was implemented via a 1984 Memorandum Circular. The petitioners, NHA employees, received these allowances from 1999 to 2001. However, in audit years 2003-2004, the Commission on Audit (COA) disallowed these payments totaling P401,284.39, ruling they were illegally granted.
The COA held that the grant required prior presidential approval under Section 5 of Presidential Decree No. 1597, which the NHA failed to secure. The NHA and the petitioners appealed, arguing the allowance was a valid exercise of the NHA’s corporate power under its charter (P.D. No. 757) and was a long-standing practice. They contended the allowance was not integrated into standardized salaries under Republic Act No. 6758 and that the disallowance of settled accounts was improper.

ISSUE

Whether the COA correctly disallowed the payment of the Incentive Allowance to the petitioners.

RULING

Yes, the Supreme Court affirmed the COA’s disallowance. The legal logic centers on the hierarchy of laws and the specific requirement for presidential approval for such benefits. While P.D. No. 757 granted the NHA Board the power to determine allowances, this general authority was subsequently restricted by P.D. No. 1597. Section 5 of P.D. No. 1597 explicitly mandates that all allowances, honoraria, and fringe benefits for government employees require the approval of the President upon recommendation of the Commissioner of the Budget. The NHA’s Resolution No. 464, issued in 1982, did not comply with this mandatory condition. The absence of the required presidential approval rendered the grant of the Incentive Allowance void from its inception.
The Court rejected the argument that the allowance was saved from disallowance under R.A. No. 6758 as an existing additional compensation being received as of July 1, 1989. For an allowance to be considered “existing” and thus continue, it must have been granted pursuant to lawful authority. Since the NHA’s grant lacked the requisite presidential approval under P.D. No. 1597, it was not lawfully authorized and could not be deemed a valid existing benefit protected by R.A. No. 6758. The Court also held that the petitioners’ long receipt of the allowance and the prior settlement of accounts did not create a vested right or estop the government from correcting the illegal disbursement. An act contrary to law cannot be validated by practice or passage of time. The Petition was dismissed.