G.R. No. 218241 EN BANC August 6, 2019
ENGR. REYNALDO C. LIWANAG, in his capacity as the GENERAL MANAGER of the ANGELES CITY WATER DISTRICT (ACWD), Petitioner vs. COMMISSION ON AUDIT, Respondent

FACTS

The Angeles City Water District (ACWD) granted grocery allowances and year-end financial assistance to its employees for 2008 and 2009. These disbursements were initially audited and allowed by the assigned Audit Team Leader (ATL). Years later, a new ATL, acting on a memorandum from the COA’s Fraud Audit and Investigation Office (FAIO) to reopen ACWD’s accounts, issued Notices of Disallowance (NDs) against these same benefits totaling P14,556,195.00. The NDs were based on the grounds that the allowances lacked legal basis and were not among the standardized benefits for government-owned and controlled corporations.
Petitioner Engr. Reynaldo C. Liwanag, ACWD General Manager, appealed the NDs to the COA Regional Office and subsequently to the COA Proper. The COA Proper dismissed the petition for being filed one day late, rendering the Regional Director’s decision affirming the disallowances final and executory. The petitioner then elevated the case to the Supreme Court via a petition for certiorari.

ISSUE

Whether the COA committed grave abuse of discretion in affirming the disallowances based on a special audit that was irregularly conducted.

RULING

Yes, the COA committed grave abuse of discretion. The Supreme Court annulled the COA decision and invalidated the special audit. The legal logic rests on the principle that while the COA has the constitutional power to audit, this power must be exercised within the bounds of its own established rules and due process. The special audit that reopened the previously settled accounts of ACWD was initiated by a mere internal FAIO memorandum. This memorandum did not constitute a formal, written order from the COA Commission Proper as required by its own auditing rules and procedures.
The Court emphasized that a special audit, which effectively re-examines and reverses a prior audit conclusion, is a extraordinary measure. For such an audit to be valid, it must strictly comply with the COA’s prescribed guidelines to ensure fairness and finality in government transactions. The haphazard initiation via a memorandum, without a proper order, rendered the entire special audit proceeding irregular. Consequently, the NDs issued therefrom were invalid. The Court did not rule on the substantive legality of the allowances but on the procedural infirmity of the audit process, which violated due process by unjustly reopening a settled matter without proper authority.