G.R. No. 241394 (Formerly UDK No. 16255), December 09, 2020
FLORDELIS B. MENZON, ET AL., PETITIONERS, VS. COMMISSION ON AUDIT, ET AL., RESPONDENTS.

FACTS

Petitioners were officials and employees of the Home Development Mutual Fund (HDMF or Pag-IBIG) Region VIII. They approved and released housing loan proceeds totaling P13,791,000.00 to an accredited developer, Ray F. Zialcita, under the express take-out mechanism for the Villa Perla Subdivision. This mechanism allowed developers to pre-process and approve member-borrowers’ loan applications, with HDMF releasing funds upon submission of required documents. The disbursements covered 21 loan applications filed between 2007 and 2009.
A post-audit by the Commission on Audit (COA) audit team revealed numerous irregularities in the supporting documents. These deficiencies included uncertified pay slips and employment contracts, missing signatures of approving officers and borrowers, identical residence certificates for different borrowers, proof of billing under another person’s name, ongoing site development at the time of fund release, unnotarized deeds, incomplete application forms, and lack of proof of income for some borrowers. Consequently, COA issued Notices of Suspension and, after petitioners failed to justify the irregularities, Notices of Disallowance (NDs).

ISSUE

Whether the Commission on Audit committed grave abuse of discretion in affirming the disallowance of the loan take-out releases and in holding the petitioners solidarily liable for the amount.

RULING

No, the COA did not commit grave abuse of discretion. The Court upheld the COA’s findings and the consequent disallowance. The legal logic rests on the fundamental principle that public funds can only be disbursed upon strict compliance with pertinent laws, rules, and regulations. The COA, under its constitutional mandate to examine and audit government expenditures, possesses the authority to disallow transactions that are illegal, irregular, excessive, extravagant, or unconscionable.
The audit findings established that the petitioners, in the performance of their official duties, failed to exercise the required diligence in evaluating the loan applications. The multitude of documentary deficiencies—from missing signatures to lack of income verification—constituted a patent disregard of established Pag-IBIG guidelines and auditing rules. By approving the releases despite these glaring irregularities, the petitioners failed in their duty to ensure that public funds were spent for lawful purposes and supported by complete and proper documentation. Their actions or omissions directly facilitated the irregular disbursement. Therefore, their liability, in solidum with the developer who received the funds, was correctly imposed. The Court emphasized that public officers are bound to observe the highest degree of care and prudence in the custody and management of public funds. Their failure to do so renders them accountable for the loss.