GR 90364; (September, 1991) (Digest)
G.R. No. 90364 September 30, 1991
VIRGILIO C. ARRIOLA AND JULIAN L. FERNANDEZ, petitioners, vs. COMMISSION ON AUDIT AND THE BOARD OF LIQUIDATORS, respondents.
FACTS
The National Coal Authority (NCA) undertook the Batangas Water Well Project. After a failed initial bidding, a rebidding was conducted where P.I. Well Drilling Corporation emerged as the winning bidder with a bid of P277,662.00. Through negotiation, the contract price was reduced to P262,662.00. The contract was approved by NCA officials, including petitioners Arriola (Deputy Administrator) and Fernandez (Internal Auditor), and subsequently submitted to the Commission on Audit (COA) for post-audit. Upon completion of the project, the COA Technical Service Office, reviewing detailed cost estimates, found the contract price excessive by 46.94% or P83,914.22, attributing this to higher unit costs in the agency estimates.
The COA subsequently issued a Certificate of Settlement demanding payment from several NCA officials who were signatories to the payment, including petitioners. The NCA sought reconsideration, arguing the estimates reviewed were the contractor’s breakdown, not its official version, and pointed to possible price variances. The COA affirmed its disallowance. Petitioners Arriola and Fernandez, who were then singled out for personal liability by the Board of Liquidators, filed this petition.
ISSUE
Whether the Commission on Audit committed grave abuse of discretion in disallowing the amount and holding petitioners personally liable.
RULING
The Supreme Court granted the petition and set aside the COA decision. The Court found a violation of petitioners’ right to due process. The COA’s disallowance was based on a finding that the contract price was excessive compared to its own cost estimates. However, petitioners were denied access to the fundamental documents supporting this comparison, specifically the actual canvass sheets or price quotations from suppliers used by COA auditors to determine the reasonable price. This prevented them from effectively contesting the audit findings.
On the merits, the disallowance lacked sufficient evidentiary support. COA Circular No. 85-55-A sets specific standards for declaring an expenditure “excessive,” requiring consideration of factors like market forces, government price quotations, and product warranties. The COA failed to demonstrate that its audit adhered to these standards or that it proved the price variance exceeded the allowable 10% threshold against a proper canvass. The basis for the finding remained undocumented. Consequently, absent due process and evidentiary foundation, the COA’s ruling on the disallowance and the consequent personal liability of the petitioners had no legal basis. The audit process must be a tool for justice and partnership, not a means to work injustice.