G.R. No. 218124 , October 05, 2021
PHILIPPINE CHARITY SWEEPSTAKES OFFICE, ET AL., PETITIONERS, VS. THE COMMISSION ON AUDIT, RESPONDENT.

FACTS

The Commission on Audit (COA) Regional Office XIII issued Notices of Disallowance (NDs) disallowing various benefits granted by the Philippine Charity Sweepstakes Office Region XIII (PCSO-XIII) to its officials and employees for calendar years 2008 and 2009, totaling Php2,744,654.73. The disallowed benefits included Productivity Incentive Bonus, Cost of Living Allowance (COLA), Anniversary Cash Gift, Hazard Duty Pay, Christmas Bonus, Grocery Allowance, and Staple Food Allowance. PCSO appealed, arguing that its Board of Directors had the authority under its Charter ( R.A. No. 1169 ) to fix salaries and benefits, that the grants had prior presidential approval, that the benefits had become part of the compensation package, and that the funds came from PCSO’s 15% operating fund and savings. The COA Regional Director modified some NDs but largely affirmed the disallowances. On automatic review, the COA Proper affirmed the Regional Director’s decision with modifications, directing a recomputation for the Christmas Bonus.

ISSUE

Whether the COA Proper committed grave abuse of discretion in affirming the disallowance of the various benefits granted by PCSO-XIII to its officials and employees.

RULING

The Supreme Court dismissed the petition, finding no grave abuse of discretion by the COA Proper. The Court held:
1. The PCSO Board of Directors does not have unrestricted authority to fix monetary benefits. Its power under R.A. No. 1169 is subject to pertinent civil service and compensation laws and review by the Department of Budget and Management (DBM).
2. The COLA, Grocery Allowance, and Staple Food Allowance are deemed integrated into the standardized salary under Section 12 of R.A. No. 6758 (the Compensation Standardization Law). Their separate grant requires either DBM sanction or presidential approval, which was lacking.
3. The Productivity Incentive Bonus was disallowed as it was granted without the required recommendation from the Productivity Incentive Committee and approval from the President, as mandated by Administrative Order No. 161.
4. The Hazard Duty Pay was properly disallowed as the duties of PCSO-XIII personnel did not satisfy the stringent conditions for its grant under relevant rules, requiring direct contact with hazardous substances or situations.
5. The Anniversary Cash Gift was disallowed as it constituted an unauthorized incentive not falling under any recognized category of legitimate benefits.
6. The Christmas Bonus disallowance was affirmed in part. The COA Proper correctly ordered a recomputation based on the allowable rate under R.A. No. 6686 , as amended (one month basic salary plus a P5,000 cash gift), not the higher rate claimed by PCSO.
7. The defense of good faith was rejected for the approving officers. They were presumed to know the rules and their approval of unauthorized benefits constituted gross negligence. However, the Court ruled that passive recipients (employees who received the disallowed amounts in good faith) need not refund them, following the principle of solutio indebiti. The liability to return the disallowed amounts rests solely with the approving officers.