G.R. No. 258100 . September 27, 2022.
PHILIPPINE HEALTH INSURANCE CORPORATION, PETITIONER, VS. COMMISSION ON AUDIT, AS REPRESENTED BY ITS CHAIRPERSON, MICHAEL G. AGUINALDO, RESPONDENT.

FACTS

The Commission on Audit (COA) issued Notices of Disallowance (NDs) against the Philippine Health Insurance Corporation (PHIC) Regional Office IV-A, disallowing the payment of transportation allowance and project completion incentive for contractual employees, and educational assistance allowance for regular employees for calendar years 2009 and 2010, totaling P15,287,405.63. COA based the disallowances on the lack of proper authority and violation of existing laws and circulars, including the General Appropriations Acts and DBM and CSC issuances, which regulate the grant of such benefits to government personnel. The approving officers and the recipients were held liable for the refund.
PHIC appealed, arguing it possessed fiscal autonomy under Section 16(n) of its charter, Republic Act No. 7875 , and that its Board of Directors had the exclusive authority to approve such benefits from its internally generated funds. It further cited letters from former President Arroyo purportedly confirming this autonomy and contended that the recipients accepted the benefits in good faith. COA’s Regional Director and later the Commission Proper denied the appeal, affirming the disallowances and holding the approving officers and the Board solidarily liable.

ISSUE

Whether the COA committed grave abuse of discretion in affirming the disallowance of the subject allowances and incentives granted by PHIC to its employees.

RULING

The Supreme Court dismissed the petition and affirmed the COA rulings. The Court held that PHIC does not enjoy absolute fiscal autonomy in setting compensation. While Section 16(n) of RA 7875 grants the PHIC Board corporate powers, it does not exempt the corporation from the overarching statutory regime governing public compensation. The Court reiterated its ruling in Philippine Health Insurance Corporation v. COA ( G.R. No. 213453 , 2016) that all government-owned or -controlled corporations (GOCCs) without a specific charter-granted exemption are governed by the Salary Standardization Law ( Republic Act No. 6758 ) and related issuances from the President and the DBM. These laws require that any increase in allowances and benefits must have prior approval from the President upon DBM recommendation. PHIC’s internally generated funds do not negate this requirement. The cited letters from the former President were general statements that did not constitute the specific approval required by law for the disallowed benefits.
Consequently, the grant of allowances without the requisite DBM and Presidential approval was illegal. On liability, the approving officers who authorized the disbursements were not in good faith, as similar disallowances had been issued previously, putting them on notice of the irregularity. They are thus solidarily liable for the refund. However, following the Madera doctrine, the recipient employees, whether regular or contractual, who received the disallowed amounts in good faith are liable to return only what they individually received, absent proof of their participation in the illegality. The principle of solutio indebiti applies, as they received payments without a lawful basis.