GR 144516; (February, 2004) (Digest)
G.R. No. 144516; February 11, 2004
DEVELOPMENT BANK OF THE PHILIPPINES, petitioner vs. COMMISSION ON AUDIT, respondent.
FACTS
The Development Bank of the Philippines (DBP) established a Gratuity Plan Fund (GPF) for its employees, administered by a Board of Trustees. In 1991, DBP revived a Special Loan Program (SLP) funded by the GPF, allowing prospective retirees to borrow a portion of their “outstanding equity” in the fund for investment. The earnings from these investments were used to pay the loan interest, with any excess distributed as dividends to the employee-borrowers. DBP paid P11,626,414.25 in such dividends for 1991 and 1992.
The Commission on Audit (COA) disallowed these payments through an Audit Observation Memorandum. COA asserted that the GPF remained public funds, as the employees only had an inchoate right to the benefits until actual retirement. The distribution of earnings before retirement constituted an illegal use of public funds for private purposes under Section 4 of P.D. 1445. COA affirmed the disallowance, ordering the recipients to refund the amounts and for DBP to record the fund’s income as its own miscellaneous income.
ISSUE
Whether the COA correctly disallowed the payment of dividends from the Gratuity Plan Fund’s earnings to DBP employees under the Special Loan Program.
RULING
Yes, the Supreme Court upheld the COA’s disallowance. The legal logic centers on the nature of the GPF and the employees’ rights thereto. While the GPF was held in trust, the trust was established for the specific purpose of funding retirement gratuities. An employee’s right to the fund is contingent and inchoate, vesting completely only upon compliance with all retirement conditions, particularly actual retirement. The SLP effectively allowed the pre-retirement enjoyment and distribution of the fund’s income, which constitutes an advance payment of benefits.
This advance payment violates the fundamental condition of the gratuity plan and applicable retirement laws, which prohibit the partial disbursement of benefits before retirement. Consequently, the distributed dividends were deemed irregular expenditures of public funds. The Court also found the SLP scheme disadvantageous to the government, as it entangled the GPF’s resources in a program that diverted higher potential investment earnings for the fund to private individuals. Therefore, COA correctly disallowed the payments for being contrary to law.