G.R. No. 178160 ; February 26, 2009
Bases Conversion and Development Authority, Petitioner, vs. Commission on Audit, Respondent.

FACTS

Congress approved Republic Act No. 7227 (Bases Conversion and Development Act of 1992), creating the Bases Conversion and Development Authority (BCDA). Section 10 of RA 7227 provides that the BCDA Board of Directors shall adopt a compensation and benefit scheme at least equivalent to that of the Bangko Sentral ng Pilipinas (BSP). On December 20, 1996, the Board adopted a new scheme including a ₱10,000 year-end benefit for contractual employees, regular permanent employees, and Board members, which was approved by President Fidel V. Ramos on October 9, 1997. In 1999 and 2000, the BSP granted year-end benefits of ₱30,000 and ₱35,000, respectively. Pursuant to RA 7227, the BCDA Board increased its year-end benefit to ₱30,000 for 2000, 2001, and 2002 (via Resolution No. 2002-10-193). Full-time consultants also received this benefit.
On February 20, 2003, the Commission on Audit (COA) issued an Audit Observation Memorandum stating that the grant of year-end benefits to Board members was contrary to Department of Budget and Management (DBM) Circular Letter No. 2002-2 dated January 2, 2002. Subsequently, COA disallowed the benefits granted to Board members and full-time consultants. The BCDA’s request for reconsideration was denied, and its appeal was affirmed by COA in Decision No. 2007-020, which held that Board members and full-time consultants were not entitled to the year-end benefit and ordered its refund. Hence, this petition.

ISSUE

Whether the BCDA Board members and full-time consultants are entitled to receive the year-end benefit.

RULING

No. The Supreme Court affirmed the COA’s disallowance of the year-end benefit granted to the BCDA Board members and full-time consultants.
First, the Court held that the Board’s power to adopt a compensation scheme under Section 10 of RA 7227 is not unlimited. Section 9 of RA 7227 specifically provides that Board members shall receive a per diem for meetings, limited to not more than ₱5,000 per meeting and not exceeding four meetings per month. Citing Magno v. Commission on Audit, Cabili v. Civil Service Commission, De Jesus v. Civil Service Commission, Molen, Jr. v. Commission on Audit, and Baybay Water District v. Commission on Audit, the Court ruled that the specification and limitation of compensation in the statute indicate that Board members are entitled only to the per diem authorized by law and no other compensation or allowance. DBM Circular Letter No. 2002-2 explicitly states that members of the Board of Directors are not salaried officials and are not entitled to year-end benefits unless expressly provided by law, which RA 7227 does not.
Regarding full-time consultants, DBM Circular Letter No. 2002-2 states that year-end benefits are personnel benefits granted in addition to salaries and shall be paid only when a basic salary is also paid. The consultancy contracts (e.g., that of Dr. Faith M. Reyes) expressly stated that no employer-employee relationship existed and that consultants were paid a contract price. Since they were not salaried employees, they were not entitled to the year-end benefit.
Second, the Court rejected the BCDA’s argument that the grant was consistent with Sections 5 and 18, Article II of the Constitution (promotion of general welfare and protection of workers’ rights), holding that these provisions are not self-executing and do not confer enforceable rights, as established in Tondo Medical Center Employees Association v. Court of Appeals.
Third, the Court dismissed the equal protection claim under Section 1, Article III of the Constitution , finding a substantial distinction between salaried employees (who receive basic salary) and non-salaried Board members and consultants (who do not). The law validly classifies them differently for the purpose of granting fringe benefits.
The presumption of good faith did not apply to the Board members and consultants because the DBM circular clarifying their non-entitlement was issued before the Board’s 2002 resolution granting the benefit. Thus, they were liable to refund the disallowed amounts.