G.R. No. 213789 , April 27, 2021
CAGAYAN DE ORO CITY WATER DISTRICT, PETITIONER, VS. COMMISSION ON AUDIT, RESPONDENT.

FACTS

The Commission on Audit (COA) conducted post-audits of the Cagayan de Oro City Water District (COWD) for calendar years 1994-1997 and 1998-1999. These audits resulted in the issuance of Certificates of Settlement and Balances (CSBs) disallowing various benefits and allowances granted to COWD’s Board of Directors (BOD) and other employees, aggregating to millions of pesos. The disallowed items included per diems, uniform allowances, representation allowances, rice allowances, Christmas bonuses, amelioration allowances, year-end and mid-year incentive pays, hazard pays, anniversary bonuses, car plan benefits, and other miscellaneous expenses. COWD appealed the disallowances through COA’s administrative channels. The COA Legal and Adjudication Office-Corporate (LAO-C) and later the COA Proper, in Decision No. 2012-019, partially granted and partially denied the appeals, ordering the refund of specific disallowed amounts. COWD filed a Petition for Certiorari before the Supreme Court, arguing that the COA committed grave abuse of discretion in affirming the disallowances and ordering refunds.

ISSUE

Whether the Commission on Audit committed grave abuse of discretion in affirming the disallowance of various benefits and allowances granted by the Cagayan de Oro City Water District to its Board of Directors and employees, and in ordering their refund.

RULING

The Supreme Court DENIED the petition. The Court found no grave abuse of discretion on the part of the COA. The Court held that Local Water Districts (LWDs), like COWD, are government-owned or controlled corporations (GOCCs) whose compensation and benefits are governed by the Salary Standardization Law (SSL) and relevant COA circulars. The grant of additional allowances and benefits beyond those authorized by the Local Water Utilities Administration (LWUA) and the Department of Budget and Management (DBM), and without the requisite proof of corporate funds’ availability and prior COA approval, was properly disallowed. The Court sustained the disallowance of items such as car plan benefits, excessive per diems, and various unauthorized allowances. However, applying the principle of solutio indebiti and recognizing the possible good faith of certain recipients, the Court modified the COA’s ruling regarding refunds. It held that approving officers who acted in good faith and passive recipients who received the disallowed amounts in good faith, meaning they were not aware of the disallowance’s defect, need not refund, provided they can prove such good faith. The liability for refund was declared to be solidary among the approving officers and the recipients who acted in bad faith. The case was remanded to the COA to determine the particulars of good faith and the exact amounts to be refunded by liable parties.