G.R. No. 212348 . June 19, 2018.
CAREER EXECUTIVE SERVICE BOARD, REPRESENTED BY ITS EXECUTIVE DIRECTOR, MARIA ANTHONETTE VELASCO-ALLONES, PETITIONER, V. COMMISSION ON AUDIT; THE AUDIT TEAM LEADER, CAREER EXECUTIVE SERVICE BOARD; AND THE SUPERVISING AUDITOR, CLUSTER A – GENERAL PUBLIC SERVICES I, NATIONAL GOVERNMENT SECTOR, RESPONDENTS.

FACTS

The Career Executive Service Board (CESB) granted its officials and employees various monetary benefits for Calendar Years 2002 and 2003, including fringe benefits, rice subsidy, birthday cash gifts, and Christmas groceries. These were paid from the agency’s savings pursuant to Section 2, Article V of its Collective Negotiation Agreement (CNA) with the accredited employees’ union. The CESB cited National Budget Circular No. 487, issued by the Department of Budget and Management, which authorized agencies to use savings to pay for CNA incentives even without a specific appropriation.
Upon post-audit, the Audit Team Leader issued a Notice of Disallowance (ND No. 2004-67) for the total amount of P2,386,000.00, ruling that the payment of these benefits lacked legal support. The CESB’s subsequent appeals were denied by the Legal and Adjudication Office-National and, ultimately, by the Commission on Audit (COA) in Decision No. 2010-121. The COA affirmed the disallowance, prompting the CESB to file the present petition for certiorari, alleging grave abuse of discretion.

ISSUE

Whether the Commission on Audit committed grave abuse of discretion in affirming the disallowance of the monetary benefits and in ordering the refund of the amounts received by the CESB employees.

RULING

The Court upheld the COA’s disallowance but absolved the approving officers and recipient employees from the obligation to refund the amounts, based on good faith. The COA did not commit grave abuse of discretion in disallowing the payments. Its constitutional mandate as guardian of public funds grants it broad authority to audit and disallow irregular or illegal expenditures. The Court found the disallowance was based on cogent legal grounds. The CESB’s reliance on National Budget Circular No. 487 was misplaced. While the circular allowed the use of savings for CNA incentives, such incentives are strictly limited to those sourced from collective negotiation and resulting from cost-saving measures and productivity improvements. The benefits granted by the CESB—such as fixed cash gifts, rice subsidies, and funeral assistance—were not genuine CNA incentives but were essentially additional allowances granted across-the-board without any relation to productivity gains or cost savings. These constituted unauthorized supplemental compensation, violating the fundamental constitutional rule that no money shall be paid from the Treasury except in pursuance of an appropriation made by law.
However, the Court ruled that the approving officers and the recipient employees acted in good faith and are not liable to refund the disallowed amounts. The officials disbursed the funds in the honest belief that National Budget Circular No. 487 provided sufficient authority, and the employees accepted the benefits in good faith, believing they were rightfully entitled. Following established jurisprudence, recipients who accept disallowed benefits in good faith, without being party to the approval thereof, cannot be compelled to refund. The absence of bad faith or gross negligence on their part warrants their relief from liability.