G.R. No. 260458 , June 04, 2024
PATRICK ALEX M. HAGEDORN, TRISHA MAE C. ASUNCION, MARIA REGINA S. CANTILLO, MARIA CORAZON A. ABAYARI, ROSALIA B. ORTIZ, AND AQUILINO B. CARIÑO, JR., PETITIONERS, VS. COMMISSION ON AUDIT, RESPONDENT.

FACTS

The Sangguniang Panlungsod of Puerto Princesa City enacted Ordinance No. 438 on June 15, 2010, establishing the Early and Voluntary Separation Incentive Program (EVSIP) for city government employees. Its purposes included streamlining the organization, granting incentives for loyalty, and encouraging retirement. The ordinance provided specific monetary benefits computed based on years of service (e.g., 10-20 years: basic monthly salary x 1.5 x years of service). To qualify, an employee must be regular, have at least ten years of service, and be 64 years old at application but with mandatory retirement not falling between January 1, 2011, to June 30, 2011. The program was to run from July 1, 2011, to June 30, 2013, with an initial appropriation of at least PHP 50 million. Ordinance No. 438 was later amended by Ordinance No. 500 on October 3, 2011, increasing the required service to at least 15 years.
After a post-audit in 2013, the Commission on Audit (COA) issued multiple Notices of Disallowance (NDs) dated November 25, 2013, and December 2, 2013, disallowing the EVSIP payments totaling PHP 89,672,400.74. The NDs held liable the approving/releasing officials and the recipient employees, including the petitioners (City Treasurer, Executive Assistant IV, City Budget Officer, Senior Bookkeeper, City Councilor, and Assistant City Accountant). Petitioners appealed to the COA Regional Director, who denied the appeal, ruling that some NDs had become final due to late filing and that the EVSIP was invalid because it was not enacted pursuant to a reorganization law, was not authorized by the Local Government Code, and constituted a prohibited supplementary retirement plan under the Government Service Insurance Act. The COA Commission Proper affirmed the disallowance in Decision No. 2021-247. Petitioners then filed this Petition for Certiorari.

ISSUE

Whether the Commission on Audit committed grave abuse of discretion in affirming the disallowance of the payments made under the Early and Voluntary Separation Incentive Program (EVSIP) of the Puerto Princesa City Government.

RULING

The Supreme Court DISMISSED the petition and AFFIRMED the assailed Commission on Audit Decision No. 2021-247. The COA did not commit grave abuse of discretion.
The Court, citing its prior ruling in Bayron v. Commission on Audit ( G.R. No. 253127 , November 29, 2022), which involved the same EVSIP and parties, held that the program was invalid. The Local Government Code ( Republic Act No. 7160 ) does not grant local government units the power to create an early retirement incentive program separate from existing general laws. The EVSIP was essentially a supplementary retirement plan, which is expressly prohibited under Section 28(b) of Commonwealth Act No. 186 (Government Service Insurance Act), as amended. The program was not tied to any bona fide reorganization, streamlining, or redundancy program within the city government. Since the ordinance creating the EVSIP was void for being ultra vires, the disbursements made pursuant to it were correctly disallowed. The petitioners, as approving and certifying officers, were liable for the illegal expenditures. The recipient employees, having received payments under a void ordinance, were obligated to return the amounts under the principle of solutio indebiti.