BFAR Employees Union vs. Commission on Audit

A food basket allowance granted to government employees without an authorizing law or Administrative Order from the Office of the President is properly disallowed, as it violates the Salary Standardization Law's consolidation of allowances, the General Appropriations Act's prohibition on unauthorized compensation, and Budget Circular No. 16's requirement of presidential authorization for any form of incentive or allowance.

The BFAR Employees Union, Regional Office No. VII, Cebu City is the organized employee union of the Bureau of Fisheries and Aquatic Resources in Cebu. The Commission on Audit (COA) is the constitutional body tasked with post-audit of government expenditures. The dispute centers on the legality of a ₱10,000 Food Basket Allowance granted to 130 BFAR Region VII employees in 1999, which COA disallowed on post-audit for lack of legal basis, citing violations of the General Appropriations Act of 1999, Budget Circular No. 16, and Republic Act No. 6758 (Salary Standardization Law of 1989).

On October 18, 1999, the BFAR Employees Union, Regional Office No. VII, Cebu City issued Resolution No. 01, series of 1999, requesting the BFAR Central Office for a Food Basket Allowance. The Union justified its request on the high cost of living, citing the increase in petroleum prices and their cascading effect on food commodity costs, which had greatly affected the economic conditions and living standards of BFAR Region VII employees. The Union also relied on the Employees Suggestions and Incentive Awards System (ESIAS), pursuant to Book V of Executive Order No. 292 (Administrative Code of 1987), as approved by the Civil Service Commission on December 3, 1996, which included the granting of incentives to help employees overcome economic difficulties and boost morale.

Regional Director Corazon M. Corrales of BFAR Region VII indorsed the Resolution, and BFAR Director Malcolm I. Sarmiento, Jr. recommended its approval. Undersecretary Cesar M. Drilon, Jr. of the Department of Agriculture, acting for the Undersecretary for Fisheries and Livestock, approved the request for Authority to Grant a Gift Check or Food Basket Allowance at ₱10,000 each to 130 employees of BFAR Region VII, totaling ₱1,322,682.00. On the strength of this approval, Regional Director Corrales released the allowance to the BFAR employees.

On post-audit, the COA-LAO Regional Office No. VII, Cebu City disallowed the grant under Notice of Disallowance No. 2003-022-101 dated September 19, 2003. COA ruled that the allowance had no legal basis and violated: (a) Section 15(d) of the General Appropriations Act of 1999, prohibiting the payment of honoraria, allowances, or other forms of compensation except those specifically authorized by law; (b) paragraph 4.5 of Budget Circular No. 16 dated November 28, 1998, prohibiting the grant of food, rice, gift checks, or any other form of incentives/allowances except those authorized via Administrative Order by the Office of the President; and (c) Section 12 of Republic Act No. 6758, the Salary Standardization Law of 1989, which includes all allowances in the standardized salary rates subject to specified exceptions.

On February 26, 2004, BFAR Regional Office No. VII, through Regional Director Corrales, moved for reconsideration and prayed for the lifting of the disallowance. It argued that the grant would enhance employee welfare and productivity, and that the Undersecretary's approval constituted the specific authority for its release. The COA-LAO Regional Office denied the motion. Petitioner then appealed to the COA-LAO National, Quezon City, which denied the appeal in a Decision dated April 8, 2005. Petitioner's motion for reconsideration was likewise denied in a Resolution dated August 5, 2005, prompting the present appeal to the Supreme Court.

• Constitutionality: Petitioner argued that the disallowance contravened Sections 9 and 10, Article II of the 1987 Constitution, which mandate the State to promote a just and dynamic social order and social justice in all phases of national development.
• Presidential Authority: Petitioner maintained that the DA Undersecretary for Fisheries and Livestock is an extension of the Secretary of Agriculture, who is an alter-ego of the President, such that his approval was tantamount to authority from the Office of the President as contemplated in DBM Budget Circular No. 16.
• Salary Standardization Law Compliance: Petitioner contended that the Food Basket Allowance falls under the seventh exception in Section 12 of R.A. No. 6758 — "such other additional compensation not otherwise specified herein as may be determined by the DBM."
• Statutory Construction: Petitioner invoked the rule inclusio unius est exclusio alterius, arguing that the Food Basket Allowance is distinct and separate from the specific allowances listed in National Compensation Circular No. 59 and therefore excluded from those deemed integrated into the basic salary.

• Exhaustion of Administrative Remedies: Respondent, through the Office of the Solicitor General, argued that petitioner failed to exhaust administrative remedies by not appealing the COA-LAO Regional Office's adverse decision to the Commission on Audit proper, rendering the disallowance final and executory.

• Constitutionality: Whether the social justice provisions of the 1987 Constitution (Sections 9 and 10, Article II) are self-executing and can warrant the grant of the Food Basket Allowance.
• Authority to Grant Allowance: Whether the approval of the DA Undersecretary for Fisheries and Livestock constitutes authority from the Office of the President as contemplated in Budget Circular No. 16.
• Salary Standardization Law: Whether the Food Basket Allowance falls under the exceptions to the consolidation of allowances under Section 12 of R.A. No. 6758.
• Statutory Construction: Whether the Food Basket Allowance is excluded from the allowances deemed integrated into basic salary under National Compensation Circular No. 59 by virtue of inclusio unius est exclusio alterius.
• Exhaustion of Administrative Remedies: Whether petitioner's failure to appeal the COA-LAO Regional Office's decision to the Commission on Audit proper rendered the disallowance final and executory.

• Constitutionality: No. The social justice provisions of Article II of the Constitution are not self-executing; they are mere statements of principles and policies requiring legislative enactment for judicial enforcement.
• Authority to Grant Allowance: No. The DA Undersecretary had no authority to grant the allowance, as Budget Circular No. 16 expressly requires an Administrative Order from the Office of the President, which was never issued.
• Salary Standardization Law: No. The Food Basket Allowance is financial assistance, not a reimbursable allowance for expenses incurred in the performance of official functions, and thus falls within the standardized salary rates under Section 12 of R.A. No. 6758.
• Statutory Construction: No. The Food Basket Allowance falls under the 14th category of National Compensation Circular No. 59 — "incentive allowance/fee/pay" — which is deemed integrated into the basic salary, and no applicable exception exists.
• Exhaustion of Administrative Remedies: Yes. Petitioner failed to appeal the COA-LAO Regional Office's decision to the Commission on Audit proper, rendering the disallowance final and executory under Sections 48 and 51 of P.D. No. 1445.

• Constitutionality: The social justice provisions of the 1987 Constitution — specifically Sections 9 and 10, Article II — are not self-executing principles ready for enforcement through the courts. They are merely statements of principles and policies that require legislative enactment to give them effect. As held in Kilosbayan, Inc. vs. Morato, the principles and state policies enumerated in Article II and some sections of Article XII "do not embody judicially enforceable constitutional rights but guidelines for legislation." The disregard of these provisions cannot give rise to a cause of action in the courts. Petitioner therefore could not invoke these constitutional provisions to warrant the grant of the Food Basket Allowance.

• Authority to Grant Allowance: Section 4.5 of Budget Circular No. 16 dated November 28, 1998 expressly prohibits all agencies from granting any food, rice, gift checks, or any other form of incentives/allowances except those authorized via Administrative Order by the Office of the President. No Administrative Order was issued by the Office of the President to exempt BFAR from this prohibition. While petitioner argued that the DA Undersecretary's approval was tantamount to presidential authority under the alter-ego doctrine, the Court found this untenable — the Undersecretary simply had no authority to grant the allowance in the absence of the required presidential Administrative Order.

• Salary Standardization Law: Section 12 of R.A. No. 6758 was enacted to standardize salary rates among government personnel and eliminate multiple allowances and the resulting disparities in compensation. Under Section 12, all allowances are integrated into the standardized salary rates, with seven specified exceptions. The Court, relying on National Tobacco Administration vs. Commission on Audit, held that the excluded allowances are those granted to defray or reimburse expenses incurred in the performance of official functions — such as RATA, clothing and laundry allowance, subsistence allowance, and hazard pay. The phrase "such other additional compensation not otherwise specified herein as may be determined by the DBM" is a catch-all proviso for benefits in the nature of allowances similar to those enumerated. The Food Basket Allowance was not in the nature of a reimbursable allowance; it was financial assistance to all BFAR employees, as petitioner itself stated its purpose was to alleviate the employees' economic condition. It therefore did not qualify for any exception and was deemed included in the standardized salary rates.

• Statutory Construction: Petitioner invoked inclusio unius est exclusio alterius to argue that the Food Basket Allowance was excluded from the allowances listed in National Compensation Circular No. 59. The Court rejected this, finding that the Food Basket Allowance fell under the 14th category — "incentive allowance/fee/pay" — because petitioner itself justified it as an incentive to encourage productivity and efficiency. Under the Circular, exceptions to this category are those authorized under the GAA and Section 33 of P.D. No. 807. Section 15(d) of the GAA for Fiscal Year 1999 (R.A. No. 8745) expressly prohibits the payment of honoraria, allowances, or other forms of compensation except those specifically authorized by law, and no such law existed. Section 33 of P.D. No. 807 authorizes incentives for suggestions, inventions, superior accomplishment, and other personal efforts contributing to efficiency, economy, or improvement of government operations — but the Food Basket Allowance was granted to all BFAR employees without distinction, not for any extraordinary contribution or exceptional accomplishment. It was primarily economic monetary assistance, not an incentive award under the decree.

• Exhaustion of Administrative Remedies: Petitioner stopped seeking remedies at the level of the COA-LAO Regional Office and failed to appeal the latter's adverse decision to the Commission on Audit proper. Under Sections 48 and 51 of P.D. No. 1445 (Government Auditing Code), a person aggrieved by an auditor's decision may appeal to the Commission within six months, and a decision not appealed becomes final and executory. The disallowance, as upheld by the COA-LAO Regional Office and the COA-LAO National, became final and executory due to petitioner's failure to exhaust administrative remedies.

• Non-self-executing nature of social justice provisions — The social justice provisions of the 1987 Constitution (Article II, Sections 9 and 10) are not self-executing principles ready for enforcement through the courts. They are mere statements of principles and policies requiring legislative enactment to give them effect. The disregard of these provisions cannot give rise to a cause of action. The Court applied this doctrine to reject petitioner's argument that the constitutional mandate on social justice warranted the grant of the Food Basket Allowance.

• Consolidation of allowances under the Salary Standardization Law — Under Section 12 of R.A. No. 6758, all allowances are deemed included in the standardized salary rates, except for seven enumerated categories: (1) representation and transportation allowance (RATA); (2) clothing and laundry allowance; (3) subsistence allowance of marine officers and crew on board government vessels; (4) subsistence allowance of hospital personnel; (5) hazard pay; (6) allowances of foreign service personnel stationed abroad; and (7) such other additional compensation not otherwise specified as may be determined by the DBM. The seventh exception is a catch-all proviso for benefits in the nature of allowances similar to those enumerated — i.e., allowances that reimburse expenses incurred in the performance of official functions. A Food Basket Allowance, being financial assistance rather than reimbursement for official expenses, does not qualify for any exception and is deemed integrated into the standardized salary rates.

• Requirement of presidential Administrative Order for agency-granted allowances — Budget Circular No. 16 prohibits all agencies from granting food, rice, gift checks, or any other form of incentives/allowances except those authorized via Administrative Order by the Office of the President. An Undersecretary's approval does not satisfy this requirement. The Court applied this rule to hold that the DA Undersecretary's approval of the Food Basket Allowance was insufficient absent a presidential Administrative Order.

• Finality of auditor's decision upon failure to exhaust administrative remedies — Under Sections 48 and 51 of P.D. No. 1445 (Government Auditing Code), a decision of an auditor not appealed to the Commission within six months becomes final and executory. The Court found that petitioner's failure to appeal the COA-LAO Regional Office's decision to the Commission on Audit proper rendered the disallowance final and unappealable.

• "the principles and state policies enumerated in Article II and some sections of Article XII are 'not self-executing provisions, the disregard of which can give rise to a cause of action in the courts. They do not embody judicially enforceable constitutional rights but guidelines for legislation.'" — This passage, quoting Kilosbayan, Inc. vs. Morato, establishes the canonical formulation of the non-self-executing nature of the Constitution's social justice provisions, a doctrine frequently invoked to reject claims based solely on Article II principles.

• "the benefits excluded from the standardized salary rates are the 'allowances' or those which are usually granted to officials and employees of the government to defray or reimburse the expenses incurred in the performance of their official functions." — This passage, drawn from National Tobacco Administration vs. Commission on Audit, defines the scope of allowable exceptions under Section 12 of the Salary Standardization Law and explains why a financial assistance allowance does not qualify.

• "the phrase 'and such other additional compensation not otherwise specified herein as may be determined by the DBM' is a catch-all proviso for benefits in the nature of allowances similar to those enumerated." — This passage clarifies the interpretive scope of the seventh exception to the consolidation of allowances, confining it to reimbursable-type allowances and excluding blanket financial assistance.

• Kilosbayan, Incorporated vs. Morato, G.R. No. 118910, July 17, 1995, 246 SCRA 540 — Controlling authority for the proposition that the social justice and state policy provisions of Article II of the Constitution are not self-executing and do not embody judicially enforceable rights. Followed and applied to reject petitioner's constitutional challenge.
• National Tobacco Administration vs. Commission on Audit, 370 Phil. 793 (1999) — Controlling authority for the interpretation of Section 12 of R.A. No. 6758, defining the excluded allowances as those that defray or reimburse expenses incurred in official functions, and characterizing the seventh exception as a catch-all proviso for similar allowances. Followed.
• Philippine Ports Authority vs. Commission on Audit, G.R. No. 100773, October 16, 1992, 214 SCRA 653 — Cited to explain the rationale for excluding reimbursable allowances from the standardized salary rates: if such allowances were consolidated, officials and employees would be compelled to spend personal funds in attending to their duties. Followed.
• Ambros vs. COA, G.R. No. 159700, June 30, 2005, 462 SCRA 572 — Cited for the legislative purpose of the Salary Standardization Law: to standardize salary rates among government personnel and do away with multiple allowances and the resulting differences in compensation.
• Tañada vs. Angara, 338 Phil. 546 (1997) — Cited as secondary authority for the non-self-executing nature of Article II provisions, referencing the Kilosbayan doctrine.

• Sections 9 and 10, Article II, 1987 Constitution — Provide that the State shall promote a just and dynamic social order and social justice in all phases of national development. The Court held these provisions are not self-executing and cannot serve as a legal basis for granting the Food Basket Allowance.
• Section 12, Republic Act No. 6758 (Salary Standardization Law of 1989) — Consolidates all allowances into the standardized salary rates, with seven enumerated exceptions. The Court held that the Food Basket Allowance did not fall under any exception because it was financial assistance, not a reimbursable allowance for official expenses.
• Section 15(d), General Appropriations Act of 1999 (Republic Act No. 8745) — Prohibits the payment of honoraria, allowances, or other forms of compensation to any government official or employee except those specifically authorized by law. No law authorized the Food Basket Allowance.
• Paragraph 4.5, Budget Circular No. 16 (Nov. 28, 1998) — Prohibits all agencies from granting food, rice, gift checks, or any other form of incentives/allowances except those authorized via Administrative Order by the Office of the President. No such Administrative Order was issued for BFAR.
• National Compensation Circular No. 59 (Sept. 30, 1989) — Lists allowances/additional compensation deemed integrated into the basic salary. The Court held the Food Basket Allowance falls under the 14th category (incentive allowance/fee/pay), and no exception under the GAA or P.D. No. 807 applies.
• Section 33, Presidential Decree No. 807 (Civil Service Decree of the Philippines) — Establishes the Employee Suggestions and Incentive Award System, authorizing the President or head of agency to incur expenses for honorary recognition of employees who contribute to efficiency, economy, or improvement of government operations through suggestions, inventions, or superior accomplishment. The Court held the Food Basket Allowance did not qualify because it was granted to all employees without distinction, not for extraordinary contributions.
• Sections 48 and 51, Presidential Decree No. 1445 (Government Auditing Code of the Philippines) — Section 48 allows appeal from an auditor's decision to the Commission within six months; Section 51 provides that a decision not appealed becomes final and executory. The Court held that petitioner's failure to exhaust administrative remedies rendered the disallowance final.

Leonardo A. Quisumbing, Consuelo Ynares-Santiago, Antonio T. Carpio, Ma. Alicia Austria-Martinez, Renato C. Corona, Conchita Carpio Morales, Adolfo S. Azcuna, Dante O. Tinga, Minita V. Chico-Nazario, Antonio Eduardo B. Nachura, Ruben T. Reyes, Teresita J. Leonardo-De Castro, and Arturo D. Brion. (Presbitero J. Velasco, Jr. was noted as "No part.")