G.R. No. 162372; October 19, 2011
GOVERNMENT SERVICE INSURANCE SYSTEM (GSIS), HERMOGENES D. CONCEPCION, JR., WINSTON F. GARCIA, ET AL., Petitioners, vs. COMMISSION ON AUDIT (COA), AMORSONIA B. ESCARDA, MA. CRISTINA D. DIMAGIBA, and REYNALDO P. VENTURA, Respondents.

FACTS

1. On May 30, 1997, Republic Act No. 8291, or “The Government Service Insurance System Act of 1997,” was enacted.
2. On October 17, 2000, the GSIS Board of Trustees, invoking its powers under Section 41(n) of R.A. No. 8291, approved Board Resolution No. 326 adopting the “GSIS Employees Loyalty Incentive Plan” (ELIP). The plan aimed to motivate and reward employees for meritorious service by providing a loyalty incentive benefit computed based on total government service and highest monthly salary, minus the 5-year lump sum or previously received retirement benefits.
3. On November 21, 2000, Board Resolution No. 326 was amended by Board Resolution No. 360, which provided a single rate for computing creditable service regardless of salary grade.
4. On January 16, 2001, Board Resolution No. 69 was approved, renaming the ELIP as the “GSIS Retirement/Financial Plan” (RFP) to conform strictly to the wording of Section 41(n) of R.A. No. 8291.
5. The GSIS Corporate Auditor, Ma. Cristina D. Dimagiba, communicated that the GSIS RFP was contrary to law. The GSIS Legal Services Group opined that the Board was authorized under R.A. No. 8291.
6. Dimagiba sought the assistance of the COA. On August 7, 2001, the COA General Counsel issued a Memorandum opining that the GSIS RFP was a supplementary retirement plan prohibited under R.A. No. 4968 (the “Teves Retirement Law”), and that Board Resolution Nos. 360 and 6 were null and void for violating Section 28(b) of Commonwealth Act No. 186 (as amended by R.A. No. 4968) and Section 41(n) of R.A. No. 8291.
7. Dimagiba, based on this Memorandum, issued Notices of Disallowance for the portion of retirement benefits granted under the GSIS RFP.
8. GSIS President Winston F. Garcia objected, arguing the disallowance was irregular and premature, that the COA had no power to declare board resolutions void, and that the GSIS RFP was a valid compensation package under Section 41(m) and (n) of R.A. No. 8291.
9. The COA, through its Director of the Corporate Audit Office I, Amorsonia B. Escarda, affirmed the disallowances in CAO I Decision No. 2002-009. This was upheld by the COA Commission Proper in Decision No. 2003-062 and subsequently denied reconsideration in Decision No. 2004-004.
10. The GSIS and its officials filed the present petition to annul the COA decisions.

ISSUE

Whether the Commission on Audit committed grave abuse of discretion in affirming the disallowance of the benefits granted under the GSIS Retirement/Financial Plan for being contrary to law.

RULING

The Supreme Court DISMISSED the petition and AFFIRMED the assailed Commission on Audit Decisions.
1. The GSIS RFP is a Supplementary Retirement Plan Prohibited by Law. The Court ruled that the GSIS RFP is a supplementary retirement benefit plan. Section 28(b) of Commonwealth Act No. 186, as amended by Republic Act No. 4968 (the Teves Law), explicitly prohibits any government agency from “establishing or administering any supplemental retirement or pension plan.” The Court found that the GSIS RFP, which grants an additional “loyalty incentive” computed on top of the standard 5-year lump sum retirement benefit, constitutes precisely such a prohibited supplemental plan.
2. Republic Act No. 8291 Did Not Repeal the Prohibition. The Court held that R.A. No. 8291 did not repeal, either expressly or impliedly, the prohibition under the Teves Law. There is no irreconcilable inconsistency between the two laws. R.A. No. 8291 is a general law governing the GSIS as an institution and its membership, while the Teves Law is a special law specifically prohibiting supplemental retirement plans for all government offices, agencies, and instrumentalities, including the GSIS. The Teves Law’s specific prohibition remains valid and applicable.
3. The GSIS Board’s Authority Under R.A. No. 8291 is Not Absolute. The Court clarified that while Section 41(n) of R.A. No. 8291 grants the GSIS Board the power to “establish an early retirement incentive plan for its own personnel,” this authority must be exercised within the bounds of other existing laws. The Board cannot use this power to create a benefit plan that violates an express statutory prohibition like that in the Teves Law. The GSIS RFP, being a loyalty incentive payable upon retirement, is distinct from and not synonymous with an “early retirement incentive plan” as contemplated by the law.
4. No Grave Abuse of Discretion by COA. The Commission on Audit acted within its jurisdiction and constitutional mandate to disallow illegal expenditures. Its findings were based on a correct interpretation of applicable laws. Therefore, the COA did not commit grave abuse of discretion in affirming the disallowance of the disbursements made under the illegal GSIS RFP.