G.R. No. 149941 ; August 28, 2007
GABRIEL A. MAGNO, NIEVES P. CASTRO, EMIDIO S. MORALES, CONCEPCION Y. AQUINO AND RODOLFO Y. CERVAS, AS MEMBERS OF THE BOARD OF DIRECTORS, MANGALDAN WATER DISTRICT, Petitioners, vs. HON. COMMISSION ON AUDIT, Respondent.

FACTS

Petitioners were members of the Board of Directors of the Mangaldan Water District (MAWAD) for calendar year 1997. During their tenure, they received various monetary benefits (bonuses, allowances, etc.) totaling ₱303,172.00, pursuant to Resolution No. 313 (as amended) issued by the Local Water Utilities Administration (LWUA). The Commission on Audit (COA), through its auditors, conducted a special audit and subsequently issued a Notice of Disallowance against these payments. The COA based its disallowance on Section 13 of Presidential Decree No. 198 (The Provincial Water Utilities Act of 1973), as amended, which explicitly states that a director shall receive only a per diem for meetings actually attended and that “[n]o director shall receive other compensation for services to the district.” The COA affirmed the disallowance in its Decision, prompting this petition.
Petitioners argued that the COA committed grave abuse of discretion. They contended that the disallowance relied heavily on an opinion of the COA General Counsel which was not approved by the COA as a collegial body. They also asserted that they acted in good faith, believing LWUA Resolution No. 313 authorized the payments, and that the implementing rules (DBM CCC No. 10) of the Compensation and Position Classification Act (RA 6758) were not yet enforceable against them in 1997 due to lack of proper publication at that time.

ISSUE

Whether the Commission on Audit committed grave abuse of discretion in disallowing the payment of various monetary benefits to the petitioners, who were members of the MAWAD Board of Directors, for calendar year 1997.

RULING

The Supreme Court ruled that the COA did not commit grave abuse of discretion in disallowing the payments. The legal basis for the disallowance is clear and unequivocal. Section 13 of P.D. No. 198, as amended, is the specific law governing the compensation of water district board members. It explicitly limits their compensation to per diems for meetings attended and categorically prohibits the receipt of “other compensation.” The LWUA resolution granting additional benefits contravenes this express statutory prohibition and is therefore without legal force. The COA correctly applied the law in disallowing payments made under an unauthorized administrative issuance.
However, the Court modified the COA’s decision regarding the refund. It held that petitioners, being members of a water district board, were not covered by RA 6758 and its implementing circular (DBM CCC No. 10) for the year 1997, as these were not applicable to them at that time. More importantly, the Court found that petitioners received the disallowed amounts in good faith. They relied on the LWUA resolution, which was issued by the very administrative agency overseeing water districts, and there was no prior judicial pronouncement at the time declaring such benefits illegal. Consequently, while the disallowance was proper for being contrary to law, the petitioners are not required to refund the amounts they received in 1997.