G.R. No. 108310 September 1, 1994
RUFINO O. ESLAO, in his capacity as President of Pangasinan State University, petitioner, vs. COMMISSION ON AUDIT, respondent.

FACTS

Pangasinan State University (PSU) entered into a Memorandum of Agreement with the Department of Environment and Natural Resources (DENR) on December 9, 1988, for the evaluation of government reforestation operations, a project funded under a foreign-assisted Asian Development Bank loan. PSU personnel performed the work and were paid honoraria based on rates under National Compensation Circular (NCC) No. 53, issued by the Department of Budget and Management (DBM) for foreign-assisted projects. The PSU Board of Regents confirmed the appointments and rates. However, the COA resident auditor disallowed a portion of these payments, asserting that Compensation Policy Guidelines (CPG) No. 80-4, which prescribes lower rates for locally-funded projects, was the applicable rule. PSU sought reconsideration, submitting a DBM clarification that NCC No. 53 governed foreign-assisted projects like this one.
The COA, in Decisions Nos. 1547 and 2571, denied PSU’s requests for reconsideration. It ruled that CPG No. 80-4 was applicable because its text did not explicitly distinguish between locally-funded and foreign-assisted projects. Consequently, COA affirmed the disallowance and issued a Certificate of Settlement and Balances requiring the refund of alleged excess payments. PSU filed this Petition for Certiorari, arguing that the COA committed grave abuse of discretion in applying the wrong compensation guideline.

ISSUE

Whether the Commission on Audit committed grave abuse of discretion in disallowing the honoraria payments to PSU personnel based on CPG No. 80-4 instead of NCC No. 53.

RULING

The Supreme Court granted the petition, annulling the COA decisions. The Court held that the COA acted with grave abuse of discretion in applying CPG No. 80-4. The legal logic is anchored on the principle that administrative rules must be interpreted in harmony with each other and their intended scope. NCC No. 53, issued in 1988, specifically governs compensation for personnel involved in foreign-assisted projects. In contrast, CPG No. 80-4, issued earlier in 1980, pertains to “special projects” which are contextually and historically understood to refer to locally-funded initiatives. The DENR certification and, decisively, the DBM’s authoritative clarification explicitly stated the project was foreign-assisted and fell under NCC No. 53. The DBM, as the government entity vested with the primary expertise and mandate to classify positions and prescribe compensation guidelines, possesses contemporaneous construction of its own rules that commands great respect. The COA’s insistence on a literal reading of CPG No. 80-4, ignoring the clear classification made by the DBM based on the source of funding, was arbitrary and capricious. Therefore, the honoraria paid pursuant to NCC No. 53 were valid and should be passed in audit.