G.R. No. 252198 , April 27, 2021
SECURITIES AND EXCHANGE COMMISSION, PETITIONER, VS. COMMISSION ON AUDIT, RESPONDENT.

FACTS

Petitioner Securities and Exchange Commission (SEC) established a provident fund for its officials and employees pursuant to the Securities Regulation Code (SRC). Through SEC-EXS Resolution No. 144, Series of 2003, the SEC En Banc approved a 15% increase of its counterpart contribution to the provident fund, sourced from its retained income under Section 75 of the SRC, with employees contributing 3% from their salaries. The SEC relied on a Department of Budget and Management (DBM) Letter dated August 19, 2004, stating that the utilization of retained income was left to the discretion of the Commission. Subsequently, SEC-EXS Resolution No. 137, series of 2004, approved the annual allocation of its provident fund contribution from its retained income starting 2004. In Fiscal Year 2010, the SEC disbursed P19,723,444.66 from its retained income as its counterpart contribution to the provident fund. The Commission on Audit (COA), through Notice of Disallowance No. 11-003-101-(10) dated December 10, 2011, disallowed this disbursement on the grounds that: (a) the use of retained income for personnel benefits was not in accord with the Special Provisions for the SEC in the General Appropriations Act for FY 2010, which limited its use to augmenting Maintenance and Other Operating Expenses (MOOE) and Capital Outlay (CO); (b) the grant of personnel benefits without specific appropriation was unauthorized under Presidential Decree No. 1177; and (c) the compensation plan, though comparable to other financial institutions, required approval of the Office of the President. The SEC appealed to the COA National Government Sector, which affirmed the disallowance. The COA Commission Proper, in Decision No. 2018-010 and Resolution No. 2020-180, sustained the disallowance and held the approving, certifying, and authorizing officers solidarily liable for the return of the entire amount. The SEC filed this Petition for Certiorari.

ISSUE

Whether the Commission on Audit committed grave abuse of discretion in affirming the disallowance of the SEC’s payment of contribution to the provident fund for its officers and employees, sourced from its retained income, and in holding the approving officers solidarily liable.

RULING

The Supreme Court DISMISSED the petition and AFFIRMED the Commission on Audit’s Decision No. 2018-010 and Resolution No. 2020-180. The Court held that the COA did not commit grave abuse of discretion. The disallowance was proper because the use of the SEC’s retained income for provident fund contributions violated the specific limitation under the Special Provisions of the General Appropriations Act for Fiscal Year 2010, which authorized the use of retained income solely to augment the MOOE and CO requirements of the Commission. The Court ruled that the SEC’s retained income, although an “off-budget” account, is still subject to the conditions imposed by law, including the annual appropriations act. The Court further held that the approving officers acted in good faith but were negligent in failing to observe the specific statutory limitation. Consequently, they are not liable to return the disallowed amount, provided that the payee-employees who received the benefits in good faith shall refund the amounts they received. The Court modified the liability, ordering the payee-employees to return the disallowed amounts they received, while the approving officers are not solidarily liable.