G.R. No. 169637 ; June 8, 2007
Benguet State University represented by its President Rogelio D. Colting, petitioner, vs. Commission on Audit, respondent.

FACTS

Benguet State University (BSU), pursuant to Section 4(d) of Republic Act No. 8292 (the Higher Education Modernization Act of 1997), passed Board Resolution No. 794 granting rice subsidy and health care allowance to its employees. The funds were sourced from BSU’s internally generated income. In 1999, the Commission on Audit (COA) issued a Notice of Disallowance for the total amount of P4,350,000.00, asserting the grant lacked statutory basis and violated constitutional and legal prohibitions against additional compensation without specific authorization.
BSU appealed the disallowance. The COA Regional Office and subsequently the Commission Proper affirmed the disallowance. The COA ruled that R.A. No. 8292 authorizes the use of income only for “instruction, research, extension or other programs/projects” directly related to academic objectives. Applying the ejusdem generis principle, “other programs/projects” must be of the same genus as the enumerated academic functions. Employee fringe benefits like rice and health allowances were deemed unrelated to these core functions and thus ultra vires.

ISSUE

The primary issue is whether BSU is authorized under R.A. No. 8292 to grant rice subsidy and health care allowance to its employees using its generated income.

RULING

The Supreme Court denied the petition and affirmed the COA’s disallowance. The Court clarified that while the petition was improperly captioned as a Petition for Review on Certiorari, it was treated as a Petition for Certiorari under Rule 65 due to its allegations of grave abuse of discretion.
On the substantive issue, the Court upheld the COA’s interpretation of R.A. No. 8292 . The law permits the use of university income for “instruction, research, extension or other programs/projects.” The term “other programs/projects” is limited by the ejusdem generis rule to activities of the same kind or class as the specifically enumerated academic functions—instruction, research, and extension. Rice subsidies and health care allowances are employee welfare benefits, not academic programs, and therefore fall outside the statutory grant of authority. The grant, being without a specific legal mandate, constituted unauthorized additional compensation in violation of the Constitution and the Salary Standardization Law.
However, the Court modified the COA decision regarding refund. Citing Philippine Ports Authority v. Commission on Audit, the recipients who received the benefits in good faith, relying on the official Board Resolution, are not required to refund the amounts. There was no showing of bad faith on the part of the employees.