G.R. No. 149154 ; June 10, 2003
RODOLFO S. DE JESUS, et al. (Interim Board of Directors, Catbalogan Water District), and ALICE MARIE C. OSORIO (Board Secretary), Petitioners, vs. COMMISSION ON AUDIT, Respondent.

FACTS

The Commission on Audit (COA) disallowed various allowances and bonuses, including Representation and Transportation Allowance (RATA), rice allowance, and year-end bonuses, paid to the interim Board of Directors and the Board Secretary of the Catbalogan Water District (CWD). These payments, made from May to December 1997 and April to June 1998, were authorized under Local Water Utilities Administration (LWUA) Board Resolution No. 313, series of 1995. The COA audit team disallowed the payments, ruling they contravened Section 13 of Presidential Decree No. 198 (PD 198), the Provincial Water Utilities Act of 1973, which only authorizes the payment of per diems to board members. Petitioners appealed to the COA Regional Office and subsequently to the COA Commission Proper, but both upheld the disallowance.

ISSUE

Whether the COA committed grave abuse of discretion in disallowing the payment of allowances and bonuses to the petitioners and in demanding their refund.

RULING

The Supreme Court partially granted the petition. It upheld the COA’s authority and duty to disallow the payments but modified the ruling on refund. The Court affirmed that the COA possesses the constitutional and statutory power to examine and audit all government accounts, including those of government-owned or controlled corporations like water districts. This power includes the authority to disallow expenditures that are illegal or contrary to law.
On the merits, the Court ruled that the disallowance was proper. Section 13 of PD 198 explicitly states that members of the board of a water district shall receive “a per diem of not to exceed Fifty Pesos for each meeting actually attended.” The law is clear and leaves no room for interpretation; it does not authorize the grant of salaries, allowances, or bonuses beyond the specified per diem. Therefore, LWUA Resolution No. 313, which granted additional benefits, could not amend or contravene this statutory prohibition. An administrative issuance cannot validate a benefit expressly prohibited by law.
However, the Court ruled that petitioners, being members of an interim board appointed by LWUA, are not obligated to refund the disallowed amounts. Following the principle of solutio indebiti and the ruling in Blaquera v. Alcala, recipients need not refund disallowed benefits received in good faith. The Court found petitioners acted in good faith, relying on the LWUA resolution, and there was no showing they were aware of the illegality of the payments at the time of receipt. The demand for refund was thus set aside.