G.R. No. 248977 . September 28, 2021.
Hon. Jed Patrick E. Mabilog [Substituted by Hon. Jerry P. Treñas], City Mayor, Iloilo City, in his capacity as City Mayor, City of Iloilo, and in behalf of the rank and file employees of City of Iloilo, Petitioners, vs. The Commission on Audit [COA], COA Regional Office No. VI and Evelyn P. Reyes, in her capacity as Regional Director, Respondents.

FACTS

On December 16, 2009, the Sangguniang Panlungsod of Iloilo City enacted Ordinance Nos. 2009-095 and 2009-096, which appropriated funds for the grant of a Productivity Enhancement Incentive (PEI) of P30,000.00 each to its officials and employees for calendar year 2009. The funding sources included an amount from the Calamity Fund reverted to unappropriated surplus and a realignment from Personal Services (PS) Savings. The total disallowed amount was P46,424,328.24. Upon audit, COA issued a Notice of Disallowance on August 12, 2010, based on two grounds: (1) the city exceeded the 45% PS limitation under Section 325(a) of the Local Government Code (RA 7160) and DBM Local Budget Circular No. 2009-93, with only P3,228,671.76 available from PS Savings; and (2) the reversion of the Calamity Fund contravened the Implementing Rules of RA 8185, which requires unexpended balances to be reverted only for reappropriation in the succeeding year. The disallowance held liable the approving officials, including the Mayor and Sanggunian members, and the recipient employees. Petitioners appealed, arguing the grant was in good faith, the PS limitation computation was erroneous, and the reversion was valid. The COA Regional Office and the COA Proper denied the appeals and affirmed the disallowance.

ISSUE

Whether the COA Proper committed grave abuse of discretion in affirming the disallowance of the PEI payments for CY 2009.

RULING

The Court denied the petition and upheld the COA Proper’s decision. The grant of PEI was subject to the PS limitation under RA 7160 and relevant administrative issuances (AO 276, DBM Budget Circular No. 2009-5, and DBM LBC No. 2009-93). Iloilo City exceeded its 45% PS limitation, and the reversion of the Calamity Fund for immediate use violated RA 8185’s IRR. The approving officials were grossly negligent in authorizing an illegal expenditure, as they violated clear and unambiguous legal provisions. Their liability is solidary under Section 43 of the Administrative Code. The recipient employees are also liable to return the amounts received under the principle of solutio indebiti, as they received the payments by mistake and without a lawful basis. Good faith cannot be invoked to excuse violations of unequivocal budgetary rules. The Court found no grave abuse of discretion on the part of COA.