G.R. No. 218041. August 30, 2022.
POWER SECTOR ASSETS AND LIABILITIES MANAGEMENT CORPORATION (PSALM), ET AL., PETITIONERS, VS. COMMISSION ON AUDIT, RESPONDENT.

FACTS

Petitioner PSALM, a GOCC created under the EPIRA Law, engaged several private lawyers as legal advisors for its privatization projects in 2009-2010. In March 2010, due to a change in its appointing authority, PSALM considered these contracts terminated but subsequently renewed them in April 2010, deeming the services vital to achieving its 70% privatization threshold. The COA, through an Opinion, later informed PSALM that such engagements required prior written conformity from the Office of the Government Corporate Counsel (OGCC) and concurrence from the COA itself, pursuant to relevant circulars. PSALM then secured OGCC’s conformity in May 2010 and subsequently sought COA’s concurrence in August 2010.
The COA General Counsel, however, denied concurrence via a Legal Retainer Review in January 2011. The denial was based on PSALM’s failure to obtain COA’s prior concurrence before the contract renewals took effect, a violation of COA Circular No. 98-002. COA also found the consultancy fees excessive. PSALM’s appeals were denied by the COA Commission Proper, which upheld the disallowance of the related disbursements. This prompted PSALM to file the present petition for certiorari.

ISSUE

Whether the Commission on Audit acted with grave abuse of discretion in denying concurrence to the renewal of PSALM’s legal consultancy contracts and in consequently disallowing the related payments.

RULING

No, the COA did not commit grave abuse of discretion. The Supreme Court emphasized that the COA’s constitutional audit power includes the authority to disallow irregular, unnecessary, excessive, extravagant, or unconscionable expenditures. The legal requirement for prior COA concurrence for the hiring of private lawyers by government agencies, as stipulated in COA Circular No. 98-002, is a valid exercise of this audit jurisdiction. This rule is designed to prevent the incurrence of irregular obligations and to ensure the prudent use of public funds.
The Court found that PSALM clearly violated this rule by renewing the contracts and allowing the consultants to render services before securing the required COA concurrence. The subsequent approval from the OGCC did not cure this defect, as the COA’s concurrence is a separate and mandatory precondition. The Court also upheld the COA’s finding on the excessiveness of the fees, noting that PSALM failed to justify the necessity and reasonableness of the amounts compared to standard government rates. The disallowance was therefore proper. The petition was dismissed, affirming that the COA’s actions were within its constitutional mandate and not tainted by grave abuse of discretion. The decision reinforces the principle that compliance with audit rules is indispensable, even for GOCCs with specialized mandates, to safeguard public treasury.