G.R. No. 212022 , August 20, 2019
PHILIPPINE INSTITUTE FOR DEVELOPMENT STUDIES, PETITIONER, V. COMMISSION ON AUDIT, RESPONDENT.

FACTS

The Philippine Institute for Development Studies (PIDS) sought to establish a health maintenance program for its employees by enrolling them in a private Health Maintenance Organization (HMO), in lieu of the annual medical checkup program authorized under Administrative Order No. 402 issued by President Fidel V. Ramos. PIDS requested authorization from the Department of Health (DOH), the Philippine Health Insurance Corporation (PhilHealth), and the Department of Budget and Management (DBM). These agencies expressed no objection but advised PIDS to seek exemption from the Office of the President, as the program was established via a presidential administrative order. On March 1, 2000, the Office of the President, through Senior Deputy Executive Secretary Ramon B. Cardenas, approved PIDS’s request “subject to the usual accounting and auditing rules and regulations.” Relying on this approval, PIDS executed a Health Care Agreement with PhilamCare Health System, Inc. in 2005. The Commission on Audit (COA) disallowed the related payments, citing a violation of COA Resolution No. 2005-001, which prohibits the procurement of healthcare insurance from private agencies. PIDS sought and eventually obtained another approval from the Office of the President, through Executive Secretary Eduardo R. Ermita, to continue the program from 2005 onwards, again subject to accounting and auditing rules. Despite this subsequent approval, COA issued Notice of Disallowance No. 11-001-(06-10) disallowing payments totaling P1,647,235.06 for HMO agreements from 2006 to 2010. COA Proper upheld the disallowance, ruling that the HMO agreements provided benefits (hospitalization, outpatient, emergency services) exceeding the simple diagnostic medical checkup authorized under Administrative Order No. 402, and that the approvals by the Office of the President did not validly exempt PIDS from the prohibition in COA Resolution No. 2005-001.

ISSUE

Whether the Commission on Audit committed grave abuse of discretion in upholding the disallowance of PIDS’s payments for the HMO-based health program, despite the approvals granted by the Office of the President.

RULING

No, the Commission on Audit did not commit grave abuse of discretion. The Supreme Court denied the petition and affirmed the COA’s decision. The Court held that the approvals granted by the Office of the President through the Senior Deputy Executive Secretary and the Executive Secretary were valid exercises of authority under the doctrine of qualified political agency (or alter ego principle). These officials acted within their delegated authority from the President in approving PIDS’s request. However, the Court ruled that these approvals could not validly authorize a benefit that was expressly prohibited by COA Resolution No. 2005-001. The COA, under its constitutional mandate, has the exclusive authority to define the scope of its audit and to disallow irregular, unnecessary, excessive, extravagant, or unconscionable expenditures. COA Resolution No. 2005-001, which prohibits the use of government funds to procure health care insurance from private entities for government employees, is a valid exercise of this constitutional power. An administrative issuance from the Office of the President cannot override a valid COA resolution promulgated pursuant to its constitutional audit authority. Furthermore, the Court found that the HMO agreements provided comprehensive healthcare benefits (hospitalization, outpatient, emergency services) that went beyond the simple “annual medical checkup” limited to specific diagnostic procedures authorized by Administrative Order No. 402. Therefore, the expenditures were properly disallowed for being contrary to law and regulations.