G.R. No. 213330 , November 16, 2015
Aleli C. Almadovar, General Manager, Isabela Water District (ISAWAD), Isabela City, Basilan Province, Petitioner, vs. Chairperson Ma. Gracia M. Pulido-Tan, Commission on Audit, Respondent.

FACTS

Petitioner Aleli C. Almadovar is the General Manager of Isabela Water District (ISAWAD), a government-owned and controlled corporation. The Commission on Audit (COA) issued several Notices of Disallowance (NDs) concerning ISAWAD’s payments for 2005: 1) ND 2006-001(2005) disallowed the increase in the General Manager’s salary from P20,823 to P35,574 per month from August to December 2005 for lack of legal basis; 2) ND 2006-002(2005) disallowed payment of a legal retainer’s fee of P4,000 per month from January to December 2005 without proper authority from the Office of the Government Corporate Counsel (OGCC) and written concurrence from COA; 3) ND 2006-003(2005) disallowed payment of honorarium to an OGCC lawyer without express authority from OGCC and proof of service; and 4) ND 2006-004(2005) disallowed payment of Representation and Transportation Allowance (RATA) to the General Manager exceeding the authorized rate under relevant budget circulars. Petitioner appealed to the COA Regional Office, which affirmed the NDs with modification, reducing the disallowed amount for the retainer’s fee to P40,000 as services for November and December 2005 were covered by an approved contract. The COA proper and the COA En Banc subsequently affirmed the Regional Office’s decision. Petitioner filed this petition for certiorari, arguing that her salary increase was authorized under Republic Act No. 9286 , that the payments to the private lawyer and OGCC lawyer were proper, and that she acted in good faith and should not be liable to refund the disallowed amounts.

ISSUE

1. Whether the disbursements under the Notices of Disallowance were improper.
2. In the event the disbursements were improper, whether petitioner is liable to refund the same.

RULING

1. Yes, the disbursements were improper.
a. The increase in the General Manager’s salary was improper. The Supreme Court ruled that the Salary Standardization Law ( Republic Act No. 6758 ) applies to all government positions, including those in government-owned and controlled corporations, unless specifically exempted. Local Water Districts are not exempt. While Republic Act No. 9286 (amending the Provincial Water Utilities Act) empowers the board of directors to fix the General Manager’s compensation, such compensation must still conform to the position classification and compensation standards of the Salary Standardization Law. There is no implied repeal of the SSL by R.A. No. 9286 .
b. The payment of RATA exceeding the authorized rate was improper. The disallowance was correct as the RATA paid exceeded the allowable rate for her position under the applicable Department of Budget and Management circulars.
c. The payments to the private lawyer, Atty. Quirino Esguerra Jr., from January to October 2005 were improper. COA Circular No. 95-011 requires the written conformity of the OGCC and the written concurrence of the COA for the engagement of a private lawyer. These requirements were not secured for that period. Only the retainership contract effective November 1, 2005, had the necessary approvals.
d. The payment of honorarium to the OGCC lawyer, Atty. Fortunato G. Operario Jr., was improper. The payment was made without the required prior authority from the OGCC.
2. Regarding liability for refund:
a. Petitioner is not liable to refund the disallowed amount corresponding to her salary increase. Following the doctrine in Mendoza v. COA, she is not required to refund as she received the increased salary in good faith under a honest belief that the payees were entitled thereto, and there was no prior jurisprudence at the time settling the applicability of the Salary Standardization Law to Local Water Districts.
b. Petitioner, as the approving officer, is liable to refund the disallowed RATA payments she received. Good faith is not a valid defense for approving officers who authorize payments exceeding legally prescribed rates.
c. Petitioner is liable to refund the disallowed payments made to the private lawyer and the OGCC lawyer. As the approving officer, she is solidarily liable with the payees to return the amounts. The defense of good faith is unavailing as the rules requiring OGCC conformity and COA concurrence were already in place and well-established.
The Supreme Court affirmed the COA Decision with modification, absolving petitioner from refunding the disallowed salary increase but holding her liable to refund the other disallowed amounts.