G.R. No. 245830 , December 09, 2020
POWER SECTOR ASSETS AND LIABILITIES MANAGEMENT (PSALM) CORPORATION, ET AL., PETITIONERS, VS. COMMISSION ON AUDIT, RESPONDENT.

FACTS

Pursuant to the Electric Power Industry Reform Act (EPIRA), the Power Sector Assets and Liabilities Management (PSALM) Corporation, along with two other power sector corporations, sought a salary increase from the Department of Budget and Management (DBM). The DBM denied the request but suggested the creation of a performance-based incentive package as an alternative. Consequently, PSALM’s Board of Directors approved a Corporate Action Plan and Performance Metrics in October 2009. Merely two months later, in December 2009, the Board passed a resolution granting an across-the-board Corporate Performance Based Incentive (CPBI) equivalent to five and a half months of basic pay, totaling Php56,604,286.37, to its officers and employees, citing surpassed corporate targets for the year.
The Commission on Audit (COA) issued a Notice of Disallowance against the grant. COA held that the disbursement was illegal for violating Section 64 of the EPIRA, which mandates prior presidential approval for any additional emoluments and benefits to PSALM personnel. It also contravened Administrative Order No. 103, which suspended the grant of new benefits. Furthermore, COA ruled the incentive was excessive under its circulars. The COA Commission Proper affirmed the disallowance, holding the approving, certifying, and payee officers liable.

ISSUE

Whether the COA correctly disallowed the grant of the CPBI for being illegal and excessive.

RULING

Yes, the Supreme Court upheld the COA’s disallowance. The legal logic is anchored on the clear statutory violation. Section 64 of the EPIRA explicitly states that any grant of benefits, allowances, or emoluments to PSALM officials and employees requires prior approval from the President of the Philippines. PSALM’s Board resolution granting the CPBI conspicuously lacked this mandatory presidential approval, rendering the disbursement patently illegal. The Court rejected PSALM’s argument that the DBM’s suggestion to create an incentive package constituted implied approval, emphasizing that the EPIRA’s requirement for explicit presidential approval is a specific condition that cannot be circumvented.
The Court also found the grant excessive. The creation of the performance metrics merely two months before the grant, and the across-the-board nature of the benefit without detailed individual performance assessment, demonstrated it was not a genuine performance incentive but a disguised salary increase, which the DBM had already denied. The approving officers, being aware of the EPIRA’s requirements, acted with gross negligence amounting to bad faith in authorizing the illegal disbursement. Consequently, all approving and certifying officers are solidarily liable for the refund. The payee-officers and employees, having received the benefits in good faith, are liable to return the amounts received only if they are shown to have participated in the approval or certification of the illegal transaction; otherwise, their liability is limited to the return of the amounts they individually received.