G.R. No. 238005 , July 27, 2021.
POWER SECTOR ASSETS AND LIABILITIES MANAGEMENT CORPORATION (PSALM), REPRESENTED BY MR. ARNOLD C. FRANCISCO, IN HIS CAPACITY AS OFFICER-IN-CHARGE, OFFICE OF THE PRESIDENT AND CEO, AND IN BEHALF OF THE CONCERNED AND AFFECTED OFFICERS AND EMPLOYEES OF PSALM, PETITIONERS, VS. COMMISSION ON AUDIT, RESPONDENT.

FACTS

Petitioner PSALM, a government-owned and controlled corporation, approved a Health Maintenance Program (HMP) for its officials and employees through Board Resolution No. 06-46 on August 2, 2006, which it claimed was the substantial equivalent of the annual medical check-up program under Administrative Order (AO) No. 402 and Civil Service Commission Memorandum Circular No. 33. On October 31, 2007, PSALM expanded the HMP through Board Resolution No. 07-67 to include additional benefits such as the purchase of prescription drugs, dental and optometric medications, and reimbursement of expenses in emergency and special cases. The HMP was further expanded through Board Resolution No. 2008-1124-004 on November 24, 2008, to include the Board of Directors and others in its coverage and to add payment of consultation fees and diagnostic, laboratory, and other medical examination services. On May 9, 2011, the COA Audit Team Leader issued Notice of Disallowance (ND) No. 11-02-(2010) disallowing the medical assistance benefits for the year 2010 in the total amount of P5,642,739.95 for lack of legal basis and for being unnecessary. PSALM’s appeals to the COA Cluster Director and the COA Proper were denied, leading to the filing of this Petition for Certiorari.

ISSUE

1. Whether the COA acted with grave abuse of discretion in affirming the disallowance of the 2010 expanded medical allowances for lack of legal basis.
2. Whether the COA acted with grave abuse of discretion in requiring PSALM’s Board of Directors, officers, and employees to refund the disallowed amounts.

RULING

The Supreme Court DENIED the petition and AFFIRMED with MODIFICATION the assailed COA Decision and Resolution. The Court held that the expanded medical assistance benefits granted under Board Resolution Nos. 07-67 and 2008-1124-004 were devoid of legal basis. The Court, citing a previous case involving PSALM, ruled that AO No. 402 establishes only a limited annual medical check-up program confined strictly to diagnostic procedures. The expanded benefits, which included purchase of drugs, payment of consultation fees, reimbursement for emergencies, and optometric, dental, and dermatological treatments, went beyond the diagnostic scope permitted by AO No. 402 and the principle of ejusdem generis. The Court also ruled on the refund liability. PSALM officers and members of the Board of Directors who approved the unauthorized benefits were found to have acted with gross negligence and are jointly and severally liable for the return of the disallowed amounts. The recipient employees, having received benefits without legal basis, are individually liable to return the amounts they respectively received, as none of the exceptions under the Madera Rules excusing return were present.