G.R. No. 230218 . July 06, 2021.
PHILIPPINE HEALTH INSURANCE CORPORATION REGIONAL OFFICE – CARAGA, JOHNNY Y. SYCHUA, ET AL., PETITIONERS, VS. COMMISSION ON AUDIT, CHAIRPERSON MICHAEL G. AGUINALDO, MA. GRACIA PULIDO-TAN, ET AL., RESPONDENTS.

FACTS

In 2008 and 2009, the Philippine Health Insurance Corporation Regional Office CARAGA (PhilHealth CARAGA) granted its officers, employees, and contractors various benefits amounting to P49,874,228.02. These included contractor’s gifts, special events gifts, project completion incentives, labor management relations gifts, nominal gifts, and birthday gifts. The Audit Team Leader of PhilHealth CARAGA disallowed these payments through several Notices of Disallowance, citing lack of approval from the Office of the President, through the Department of Budget and Management, as required under Presidential Decree No. 1597, Memorandum Order No. 20, and Administrative Order No. 103. The Commission on Audit Regional Director affirmed the disallowances with modifications, ordering a recomputation net of tax. The Commission on Audit En Banc upheld this decision. PhilHealth CARAGA filed a Petition for Certiorari. In an August 14, 2018 Decision, the Court partly granted the petition, finding no grave abuse of discretion in the disallowance but held that the recipients need not refund the amounts due to good faith, relying on OGCC opinions and board resolutions. The respondents filed a Motion for Partial Reconsideration, contesting the no-refund ruling.

ISSUE

Whether the officers, employees, and contractors of PhilHealth CARAGA are required to refund the disallowed benefits they received.

RULING

The motion for partial reconsideration is granted. The Court abandoned the “good faith rule” for passive recipients as stated in the recent case of Madera v. Commission on Audit. The approving or certifying officers who acted in bad faith, malice, or gross negligence are solidarily liable for the disallowed amounts. For passive recipients, the general rule is they must refund the disallowed amounts received, regardless of good faith. Exceptions to this refund rule apply only when: (a) the recipient is a low-ranking official or employee, such as a teacher or clerical staff; (b) the disallowed amount was received in good faith; and (c) requiring a refund would be unjust and inequitable. In this case, the recipients, including contractors, are not low-ranking employees, and the disallowance was based on the absence of required presidential approval. The existence of prior Audit Observation Memoranda for similar disbursements in 2007 and 2008 negates a claim of good faith. Furthermore, some PhilHealth office orders explicitly stated that employees shall refund the full amount in the event of a disallowance. Therefore, the recipients are liable to refund the disallowed amounts, except for benefits granted under valid Collective Negotiation Agreements or those expressly authorized by law, which must be identified and excluded from the refund. The case is remanded to the Commission on Audit for determination of these exclusions and the precise amounts to be refunded.