G.R. No. 236725 , February 02, 2021
Irene G. Ancheta, et al. (Rank-and-File Employees of the Subic Water District), Petitioners, vs. Commission on Audit (COA), Respondent.

FACTS

Subic Water District (SWD), a government-owned and controlled corporation (GOCC) under Presidential Decree No. 198, as amended, disbursed an aggregate amount of P3,354,123.50 in 2010 as benefits (rice allowance, medical allowance, Christmas groceries, year-end financial assistance, mid-year bonus, and year-end bonus) to its officers and employees, and Christmas groceries to its Board of Directors. The Commission on Audit (COA) Audit Team disallowed these disbursements via Notice of Disallowance (ND) No. 2011-002, citing violation of Department of Budget and Management (DBM) Corporate Compensation Circular (CCC) No. 10, which implements Republic Act No. 6758 (the Salary Standardization Law). The circular allows the continuous grant of certain additional allowances only to incumbent employees actually receiving them as of June 30, 1989. Since the SWD recipients were employed after that date, the grants were deemed unauthorized. Persons held liable for settlement were: Irene G. Ancheta (General Manager, approving officer), Ariel Rapsing (Corporate Budget Specialist, certifying officer), Agnes Corpuz (Cashier A, disbursing officer), and the recipient officers and employees (except those incumbent as of June 30, 1989).
Petitioners appealed, arguing the disbursements were authorized by DBM Letters dated November 8, 2000 and April 27, 2001, which allowed local water districts (LWDs) to continue granting allowances/fringe benefits that were an established and existing practice as of December 31, 1999, subject to conditions, to resolve COA disallowances and based on the principle of non-diminution of pay. They also invoked board resolutions and alleged good faith. The COA Regional Office and the COA Proper affirmed the disallowance. The COA Proper’s Resolution modified liability, exempting regular, casual, and contractual employees (as passive recipients) from refund but maintaining the solidary liability of the approving/certifying officers and the Board of Directors (who were ordered to be included via a Supplemental ND).

ISSUE

1. Whether the SWD was already covered by RA No. 6758 when the 2010 benefits were granted.
2. Whether the DBM Letters dated November 8, 2000 and April 27, 2001 authorized the grant of the 2010 benefits.
3. Whether the petitioners are liable to refund the disallowed amounts.

RULING

The Court DISMISSED the petition and AFFIRMED the Commission on Audit’s assailed Decision and Resolution.
1. On Coverage by RA No. 6758 : Yes. SWD, as a GOCC created under P.D. No. 198, is subject to RA No. 6758 . The law took effect on July 1, 1989. The Court, in Davao City Water District v. Civil Service Commission (1992), declared all water districts as GOCCs subject to rules of oversight agencies like the DBM and COA. This ruling became final on March 12, 1992. Therefore, SWD has been covered by RA No. 6758 since at least March 12, 1992. The DBM’s formal placement of LWDs under RA No. 6758 ’s coverage by January 1, 1997, as mentioned in the DBM Letters, did not alter the law’s mandatory effectivity date of July 1, 1989.
2. On the Authority of the DBM Letters: No. The DBM Letters cannot override the clear provision of Section 12 of RA No. 6758 , which explicitly limits the grant of additional compensation not integrated into the standardized salary to incumbents as of July 1, 1989. Administrative issuances must not contravene the law they seek to implement. The Letters’ use of December 31, 1999 as a cutoff is a unilateral alteration of the statutory date (July 1, 1989) and is therefore invalid. Furthermore, the conditions in the Letters (e.g., being an established practice as of December 31, 1999) were not proven to have been complied with by SWD for the 2010 grants. The board resolutions petitioners relied on were issued in 1996, 1998, and 1999, which is after the July 1, 1989 cutoff mandated by law, and thus cannot legitimize the benefits.
3. On Liability for Refund:
* Approving and Certifying Officers (Ancheta and Rapsing): They are solidarily liable for the disallowed amounts. As officers who approved and certified the disbursements, they are presumed to know the relevant laws and circulars ( RA No. 6758 and DBM CCC No. 10). Their reliance on the invalid DBM Letters and unverified board resolutions constitutes gross negligence amounting to bad faith. The duty to ensure the legality of expenditures rests primarily on them.
* Board of Directors: They are solidarily liable. The COA Proper correctly ordered their inclusion via a Supplemental ND, as they authorized the grant of the disallowed benefits.
* Recipient Employees (Rank-and-File): They are not liable to refund. The COA Proper correctly classified them as passive recipients who received the benefits in good faith. There was no showing they participated in the approval process or were aware of the illegality.
* Disbursing Officer (Corpuz): She is correctly excluded from solidary liability by the COA Proper, as her role was merely ministerial.
The Court emphasized that the disallowance stands because the benefits were granted contrary to the explicit cutoff date in Section 12 of RA No. 6758 . The principle of non-diminution of pay invoked by petitioners does not apply because the benefits were illegally granted from the outset; there was no lawful “pay” to be diminished.