G.R. No. 210903. October 11, 2016.
PHILIPPINE ECONOMIC ZONE AUTHORITY (PEZA), PETITIONER, VS. COMMISSION ON AUDIT (COA) AND HON. MA. GRACIA M. PULIDO TAN, CHAIRPERSON, COMMISSION ON AUDIT, RESPONDENTS.

FACTS

The Philippine Economic Zone Authority (PEZA) granted increased Christmas bonuses to its officers and employees for Calendar Years 2005 to 2008, pursuant to its Board Resolutions. This action was anchored on Section 16 of its Charter (R.A. No. 7916, as amended by R.A. No. 8748), which provides that PEZA “shall be exempt from existing laws, rules and regulations on compensation, position classification and qualification standards.” The Commission on Audit (COA) disallowed these payments through a Notice of Disallowance, citing a violation of Memorandum Order No. 20 dated June 25, 2001, issued by the President. M.O. No. 20 requires that any increase in salary or compensation for Government-Owned and Controlled Corporations (GOCCs) not in accordance with the Salary Standardization Law must have prior presidential approval, which PEZA did not secure.
PEZA appealed the disallowance, arguing that its charter exemption freed it from such executive issuances. The COA Corporate Government Sector-B and later the COA Commission Proper affirmed the disallowance. COA ruled that the charter-granted power to fix compensation is not absolute and remains subject to overarching presidential policy and review as mandated by P.D. No. 1597. PEZA thus filed this Petition for Certiorari.

ISSUE

Whether the COA committed grave abuse of discretion in affirming the disallowance of the additional Christmas bonuses paid by PEZA for CYs 2005-2008 for lack of presidential approval under M.O. No. 20, despite the exemption clause in PEZA’s charter.

RULING

No, the COA did not commit grave abuse of discretion. The Supreme Court upheld the disallowance. The legal logic proceeds from a hierarchy of norms and the principle that specific statutory grants are read in harmony with general laws vesting supervisory authority in the President. While Section 16 of the PEZA Charter grants an exemption from general compensation laws, this exemption is not all-encompassing. Presidential Decree No. 1597 empowers the President to review and adjust compensation and position classification systems across all government entities, including GOCCs. This presidential prerogative is a tool for national fiscal and administrative control.
Memorandum Order No. 20 is a valid exercise of this presidential authority. Its requirement for presidential approval for non-standardized increases is a reasonable condition to prevent unwarranted disparities and ensure fiscal responsibility across all GOCCs. The Court ruled that PEZA’s exemption applies to laws like the Salary Standardization Law but does not insulate it from the President’s constitutional and statutory power of supervision and control over the entire executive branch, which includes ensuring uniform and rational compensation policies. Therefore, PEZA’s failure to secure the required presidential approval rendered the bonus increases illegal, justifying the COA’s disallowance. The petition was denied.