G.R. No. 224182 , March 02, 2021
Social Security System, Petitioner, vs. Commission on Audit, Respondent.

FACTS

From January 2005 to December 2009, the Social Security System (SSS) Central Visayas Division granted Collective Negotiation Agreement (CNA) incentives to its employees totaling P41,311,073.83, pursuant to various Social Security Commission Resolutions. On June 26, 2012, the Commission on Audit (COA) Central Visayas Division issued Notice of Disallowance No. 12-002-CF (2005-2009), disallowing the grant on the grounds that: (1) the cash incentives for 2005, 2006, and 2007 were paid despite not being provided for in the CNA, contrary to Department of Budget and Management Budget Circular No. 2006-01; (2) excessive accruals of cash incentives for 2006, 2007, and 2008 were used as basis for additional payments, contrary to Budget Circular No. 2006-01; and (3) no conclusive proof showed that savings from Maintenance and Other Operating Expenses from 2005 to 2009 were generated from cost-cutting measures. The Notice also cited non-compliance with Public Sector Labor Management Council (PSLMC) Resolution No. 2, s. 2003. The disallowance named the recipients and several approving/certifying officers as liable.
SSS, through its President and CEO, filed an Appeal Memorandum on December 21, 2012, arguing the incentives were lawfully granted under its charter and relevant rules. The COA Corporate Government Sector Cluster 2 denied the appeal and affirmed the Notice of Disallowance in Decision No. 2015-003 dated January 27, 2015. SSS received a copy of this Decision on March 5, 2015, and its Legal Services Division received it on March 9, 2015. SSS filed a Petition for Review with the COA Proper on March 12, 2015. The COA Proper dismissed the petition in Decision No. 2015-450 dated December 29, 2015, for being filed out of time, ruling that the reglementary period ended on March 8, 2015. SSS then filed a Petition for Certiorari before the Supreme Court.

ISSUE

1. Whether or not the COA Corporate Government Sector Cluster 2 Decision became final and executory due to SSS’s failure to file its Petition for Review on time.
2. Whether or not the COA correctly disallowed the grant of CNA incentives to SSS’s Central Visayas Division employees.
3. Whether or not the approving and certifying officers, and the recipients of the CNA incentives, should be held liable to return the disallowed amounts.

RULING

1. On the Timeliness of the Appeal: The Supreme Court ruled that the COA Proper correctly dismissed the Petition for Review for being filed out of time. Under the 2009 Revised Rules of Procedure of the COA, an appeal must be filed within six months after receipt of the decision. The period to appeal is interrupted by the filing of an Appeal Memorandum with the Director, which then resumes upon receipt of the Director’s decision. The SSS President and CEO received the Cluster 2 Decision on March 5, 2015. The reglementary period to appeal to the COA Proper thus ended on March 8, 2015. The filing on March 12, 2015, was late. Service to the SSS President was proper as he was the signatory to the prior Appeal Memorandum. The subsequent receipt by the Legal Services Division on March 9 did not alter the reckoning date. Therefore, the Cluster 2 Decision had become final and executory.
2. On the Propriety of the Disallowance: The Supreme Court affirmed the disallowance. The grant of CNA incentives must strictly comply with applicable laws and rules, particularly PSLMC Resolution No. 2, s. 2003, and DBM Budget Circular No. 2006-01. The COA correctly found that the conditions for granting such incentives were not met. Specifically: (a) The incentives for 2005, 2006, and 2007 were not provided for in the CNA, violating Section 5.1 of Budget Circular No. 2006-01. The purported Supplemental CNA was not sufficiently proven. (b) The requirement under PSLMC Resolution No. 2 that the agency’s actual operating income must meet or exceed its target for the year was not satisfied for 2005 and 2007. (c) The payments were based on excessive accruals and not solely on savings from cost-cutting measures, violating Sections 5.7 and 7.1 of Budget Circular No. 2006-01. The Court rejected SSS’s claim of operational autonomy under its charter, stating that such autonomy does not exempt it from complying with general laws and rules governing compensation and incentives.
3. On the Liability to Return: The Supreme Court ruled that both the approving/certifying officers and the employee-recipients are liable to return the disallowed amounts. The officers are liable for their participation in the illegal disbursement. The recipients are liable because they received the incentives without legal basis. The Court emphasized the principle of solutio indebiti under Article 2154 of the Civil Code: what was paid without legal cause must be returned. Good faith is not a defense for recipients against the obligation to return, though it may affect the manner of enforcement. The Court cited established jurisprudence that recipients of disallowed benefits are obliged to refund them, and approving officers are personally liable for their unlawful actions.