G.R. No. 218304, December 09, 2020
Ninia P. Lumauan, Petitioner, vs. Commission on Audit, Respondent.

FACTS

Petitioner Ninia P. Lumauan was the Acting General Manager of the Metropolitan Tuguegarao Water District (MTWD), a government-owned and controlled corporation. In 2009, the MTWD Board of Directors issued resolutions approving the payment of accrued Cost of Living Allowance (COLA) to qualified employees for calendar years 1992 to 1997, totaling P1,689,750.00. After post-audit, the Supervising Auditor and Audit Team Leader issued a Notice of Disallowance, disallowing the payment for lack of legal basis, as COLA was deemed integrated into the basic salary pursuant to Section 12 of Republic Act No. 6758 (the Compensation and Position Classification Act of 1989) and DBM Corporate Compensation Circular No. 10. The notice held petitioner, the Division Manager-Administrative, the Cashier, and the employee-payees liable.
Petitioner appealed to the COA Regional Director, citing the case of Philippine Ports Authority Employees Hired After July 1, 1989 v. Commission on Audit. The Regional Director denied the appeal, affirming the disallowance on the ground that COLA was integrated and its payment prohibited, and found the defense of good faith meritless. Petitioner then elevated the matter to the COA Commission Proper (COA-CP).
The COA-CP, in its June 4, 2014 Decision, denied the appeal for being filed late and for lack of merit. It ruled the disallowance had become final and executory as the Appeal Memorandum was filed 12 days after receipt of the Regional Director’s Decision. On the merits, it affirmed that COLA payment was prohibited due to integration and that recipients were obliged to return the amounts under the principle of solutio indebiti. A Motion for Reconsideration was denied. Petitioner then filed a Petition for Certiorari before the Supreme Court.

ISSUE

Whether the Commission on Audit committed grave abuse of discretion in disallowing the payment of COLA for calendar years 1992-1997 to the employees of MTWD.

RULING

The Supreme Court denied the petition, finding no grave abuse of discretion by the COA.
1. On the Timeliness of the Appeal: The Court found that the COA-CP erred in ruling the appeal was filed late. Evidence (Registry Receipt, Appeal Memorandum statement, and stamp of receipt) showed the Appeal Memorandum was filed by registered mail on November 25, 2011, the same day the Regional Director’s Decision was received. Therefore, the appeal was timely filed.
2. On the Validity of the Disallowance: The Court upheld the disallowance as correct and proper.
Legal Basis: The grant of accrued COLA for 1992-1997 was correctly disallowed. Citing Torcuator v. Commission on Audit*, the Court reiterated that Section 12 of R.A. No. 6758 standardized salaries and deemed all allowances, except those specifically enumerated, integrated into the basic salary. COLA is among the integrated allowances. This provision is self-executing; the absence of a DBM issuance does not affect its validity.
Application to the Case: The Court rejected petitioner’s reliance on Metropolitan Waterworks and Sewerage System v. Bautista*. It emphasized that the general rule under R.A. No. 6758 is the integration of allowances like COLA. Any exemption or authorization for continued payment must be explicit. The MTWD Board Resolutions authorizing payment did not constitute the required explicit legal basis to exempt the allowance from integration. Therefore, the payment lacked legal authority.
* Liability for Refund: The Court affirmed that all payees (the approving officers and the recipient employees) are liable to refund the disallowed amounts. The defense of good faith was unavailing. Citing Madera v. Commission on Audit, the Court applied the principle of solutio indebiti. Recipients are obliged to return what they received without a valid legal basis. The approving officers, having authorized an illegal payment, are solidarily liable. The Court noted that while the petition primarily questioned the disallowance’s validity, the liability of the payees follows as a necessary consequence.
In conclusion, while the COA-CP erred on the procedural issue of timeliness, its substantive ruling to sustain the disallowance was legally sound. The payment of accrued COLA was correctly disallowed for lack of legal basis, and the liability to refund stands.