G.R. No. 202733 , September 30, 2014
DEVELOPMENT BANK OF THE PHILIPPINES, Petitioner, vs. COMMISSION ON AUDIT, JANEL D. NACION, Director IV, Legal Services Sector of COA, and the Supervising Auditor of the Development Bank of the Philippines, Respondents.

FACTS

The Corporate Auditor of the Development Bank of the Philippines (DBP) issued an Audit Observation Memorandum noting that the foreign travels of former DBP Chairman Vitaliano N. Nañagas II and former Director Eligio V. Jimenez in October and November 2004 were not cleared by the Office of the President as required by Administrative Order No. 103. The DBP Supervising Auditor subsequently issued a Notice of Disallowance for the reimbursement of their travel expenses totaling ₱1,574,121.62, citing the absence of presidential clearance. The officials appealed, arguing that the applicable law at the time of travel was Executive Order No. 248, as amended by Executive Order No. 298, and they submitted an Opinion from the Chief Presidential Legal Counsel, Sergio A. F. Apostol, stating that under Section 5 of said orders, approval of travels for officials of government-owned and controlled corporations lasting not more than one month was subject to the policies of their governing boards, not the President. The Commission on Audit (COA) Legal Services Sector denied the appeal, and the COA Proper affirmed, ruling that Section 5 of EO No. 248, as amended, governed only official domestic travels, while Section 8 under Title II governed official foreign travels and expressly required prior presidential approval for officials like the DBP Chairman and Director. The COA also held that the Opinion of the Chief Presidential Legal Counsel was erroneous and could not substitute for the required presidential approval.

ISSUE

Whether the Commission on Audit gravely abused its discretion in disallowing the reimbursement of foreign travel expenses of the DBP officials for lack of prior presidential clearance, despite an Opinion from the Chief Presidential Legal Counsel stating such clearance was not required under the applicable executive orders.

RULING

The Supreme Court denied the petition and affirmed the COA’s decision. The Court held that the applicable provision for the foreign travels in question was Section 8 of Executive Order No. 248, as amended by Executive Order No. 298, under Title II governing official foreign travels, and not Section 5 under Title I governing official local travels. Section 8 expressly required prior approval by the President for the foreign travels of heads of government-owned and controlled corporations. The Opinion of the Chief Presidential Legal Counsel incorrectly cited Section 5 and was therefore erroneous; it could not be deemed an act of the President excusing compliance, nor could it bind the COA in the exercise of its constitutional audit authority. The disallowance was proper as the travels were undertaken without the required presidential approval. The defense of good faith was unavailing given the clear language of the law differentiating local from foreign travel requirements.