G.R. No. 218461 , September 14, 2021
ILDEFONSO T. PATDU, JR., PETITIONER, VS. COMMISSION ON AUDIT, RESPONDENT.

FACTS

In 1992, the Department of Transportation and Communications (DOTC) bid out the construction of the Davao Fishing Port Complex, a foreign-assisted project funded by the Overseas Economic Cooperation Fund (OECF). The contract was awarded to the joint venture of Engineering Equipment, Inc. and J.E. Manalo (EEI/Manalo Joint Venture). During construction, the DOTC agreed to pay an Early Completion Incentive Bonus and issued several Variation Orders. Petitioner Ildefonso Patdu, Jr., as the project engineer, was responsible for reviewing the amounts in Variation Order Nos. 5, 7, and 8. The COA Auditor issued Notice of Disallowance (ND) No. 97-011-102, disallowing P53,951,955.03 for exceeding COA’s estimated project cost, and ND No. 98-004-102, disallowing P15,315,715.55 from the Incentive Bonus. The DOTC argued the project was exempt from COA’s auditorial review under COA Resolution No. 91-052 because it was foreign-assisted, citing an exempting clause in the IRR of P.D. No. 1594. The COA Auditor and the NGAO II Director initially recommended lifting ND No. 97-011-102 based on this exemption. However, the COA’s Legal and Adjudication Office later denied the request to lift ND No. 98-004-102, finding P.D. No. 1594 applicable because the bidding documents incorporated its provisions. The COA Proper, in its Decision, denied DOTC’s appeal, affirmed ND No. 98-004-102, set aside the NGAO II Director’s lifting of ND No. 97-011-102, and reinstated it. Petitioner, held civilly liable under ND No. 97-011-102, filed this petition.

ISSUE

1. Whether the NGAO II Director’s decision to lift ND No. 97-011-102 had attained finality and immutability.
2. Whether ND No. 97-011-102 should be lifted and set aside.
3. Whether petitioner should be held liable for the audit disallowance arising from Variation Order Nos. 5, 7, and 8.

RULING

1. No, the NGAO II Director’s decision did not attain finality. The COA Proper has the inherent power and jurisdiction to review, reverse, and modify the decisions of its subordinate officers. The NGAO II Director’s action was an intermediate step in the administrative process, not a final judgment. The COA Proper validly exercised its supervisory authority to correct errors and ensure uniformity in the application of auditing rules.
2. No, ND No. 97-011-102 should not be lifted. The project is not exempt from the auditorial review under COA Resolution No. 91-052. The bidding documents for the project explicitly stated that the provisions of P.D. No. 1594 and its IRR shall apply. By voluntarily agreeing to these terms, the parties bound themselves to the applicable rules, including the COA’s review for reasonableness of the contract price. The project cost exceeded the COA estimate by more than 10%, warranting the disallowance.
3. Yes, petitioner is liable for the disallowance arising from the Variation Orders. As the project engineer, petitioner was responsible for reviewing the Variation Orders. His approval of the amounts, despite the project’s total cost already exceeding the COA estimate, contributed to the irregular expenditure. There was no showing of good faith. Under the doctrine of collective responsibility, approving officers who participate in the illegal expenditure are solidarily liable for the disallowance. The Court affirmed the COA’s ruling holding petitioner civilly liable. The petition was dismissed.