De Jesus vs. Commission on Audit

Members of a water district board may receive only the per diems authorized by Section 13 of PD 198 and no other compensation in whatever form, although amounts already received in good faith under an LWUA authorization need not be refunded.

The Catbalogan Water District was created pursuant to PD 198, as amended, otherwise known as the Provincial Water Utilities Act of 1973. PD 198 authorized local legislative bodies to create water districts and created the Local Water Utilities Administration as national regulatory agency to optimize public service from water districts. Petitioners served as interim members and secretary of the Board of the Catbalogan Water District, a government-owned and controlled corporation with special charter created under that law.

Rodolfo S. De Jesus, Edelwina DG. Parungao, Hermilo S. Balucan, Avelino C. Castillo and Danilo B. De Leon served as members of the interim Board of Directors of the Catbalogan Water District in Catbalogan, Samar, with Alice Marie C. Osorio as Board secretary. Between May to December 1997 and April to June 1998, the Board granted themselves Representation and Transportation Allowance, Rice Allowance, Productivity Incentive Bonus, Anniversary Bonus, Year-End Bonus and cash gifts, invoking Resolution No. 313, series of 1995, of the Local Water Utilities Administration entitled Policy Guidelines on Compensation and Other Benefits to WD Board of Directors.

Thereafter, an auditing team from COA Regional Office No. VIII in Candahug, Palo, Leyte audited the accounts of the Catbalogan Water District and discovered the payments. On 1 October 1998 the audit team issued two notices of disallowance covering the allowances and bonuses received by petitioners on the ground that they ran counter to Section 13 of PD 198.

Petitioners appealed to the COA Regional Office, but Regional Director Dominador T. Tersol denied the appeal. On review, the COA in its Decision dated 12 September 2000 denied the petition, explaining that Section 13 speaks only of per diems and any resolution granting other allowances was null and void, and on 5 July 2001 denied reconsideration.

• COA Jurisdiction and LWUA Authority: Petitioner argued that COA committed grave abuse of discretion in motu proprio construing Section 13 of PD 198 and declaring LWUA Board Resolution No. 313, series of 1995, as amended, not in conformity therewith, the LWUA being the agency tasked to regulate water districts with power to implement PD 198, while compensation administration belonged to the DBM, not the COA.
• Presumption of Regularity and Eslao: Petitioner maintained that COA encroached on LWUA powers, violated the presumption of legality accorded to administrative circulars, and, citing Eslao vs. COA, was bound to observe LWUA Resolution No. 313 until set aside by courts.
• Meaning of Compensation: Petitioner argued that the term compensation in Section 13 of PD 198 does not include RATA, extraordinary and miscellaneous expenses, bonuses and other similar benefits.
• Good Faith and Refund: Petitioner maintained that COA erred in demanding refund of amounts received in good faith, relying on Civil Liberties Union vs. Executive Secretary on retention of emoluments for actual services rendered.

• Per Diems Only: Respondent countered that members of the CWD Board cannot receive compensation and other benefits in addition to the per diems allowed by Section 13 of PD 198.
• Invalid Administrative Fiat: Respondent argued that Resolution No. 313, s. 1995, as amended, is not in harmony with Section 13 of PD 198, which speaks only of per diems, and any resolution granting other allowances is null and void because a statutorily proscribed benefit may not be amended by mere administrative fiat.

• COA Authority: Whether COA committed grave abuse of discretion in motu proprio exercising jurisdiction to declare LWUA Board Resolution No. 313, series of 1995, as amended, not in conformity with Section 13 of PD 198, as amended.
• Scope of Allowable Compensation: Whether Section 13 of PD 198, as amended, prohibits payment to petitioners of RATA, extraordinary and miscellaneous expenses, and other allowances and bonuses.
• Refund: Whether petitioners must refund the disallowed allowances and bonuses received as interim members and secretary of the CWD Board.

• COA Authority: No. Audit and disallowance of illegal disbursements to a water district, a government-owned and controlled corporation with original charter, falls within COA's exclusive constitutional power and does not usurp LWUA or DBM functions.
• Scope of Allowable Compensation: Yes. Section 13 of PD 198, being clear and plain, limits directors to per diems and expressly provides that no director shall receive other compensation, preempting any discretion to grant RATA, EME, allowances and bonuses.
• Refund: No. Refund is excused, petitioners having received the benefits in good faith under honest belief in LWUA Resolution No. 313 before Baybay Water District vs. Commission on Audit clarified the lack of legal basis.

• COA Authority: Section 2, Subdivision D, Article IX of the 1987 Constitution vests COA with power to examine, audit and settle all accounts pertaining to expenditures of government agencies, including government-owned and controlled corporations with original charters, and exclusive authority to define audit scope and disallow irregular, unnecessary, excessive, extravagant or unconscionable expenditures. A water district created pursuant to PD 198 is such a corporation, hence subject to COA jurisdiction to determine entitlement to additional allowances. Allowing an administrative board by mere resolution to defeat that constitutional watchdog function would produce an absurd result. Reliance on Eslao vs. COA was misplaced because there both conflicting circulars were issued by DBM under its legislative compensation authority, whereas here COA merely audited disbursements patently beyond what the law allows. Confusion between DBM's executive budget and compensation administration functions and COA's independent constitutional audit duty was rejected.
• Scope of Allowable Compensation: Section 13 provides each director shall receive a per diem for each meeting actually attended, capped at the equivalent of four meetings per month, that no director shall receive other compensation for services to the district, and that any per diem in excess of P50 shall be subject to Administration approval. Following Baybay Water District vs. Commission on Audit, per diem was intended as the sole compensation, the words given their natural and ordinary meaning in context. By specifying the compensation, limiting the monthly amount, and simultaneously prohibiting other compensation, only the per diem authorized by law was permitted in whatever form. The provision being clear, plain and free from ambiguity, literal application without interpretation was required, rendering LWUA Resolution No. 313 void insofar as it authorized more.
• Refund: Civil Liberties Union vs. Executive Secretary was distinguished because there respondents were de facto officers entitled to emoluments attached to offices they actually served, while here no compensation other than the statutory per diem was ever attached to petitioners' offices. Nevertheless, Blaquera vs. Alcala, which sustained disallowance of incentive benefits prohibited by Administrative Order No. 29 but refused refund for 1992 benefits received in good faith without indicia of bad faith, was applied. Petitioners disbursed and accepted the benefits in honest belief that LWUA Resolution No. 313 authorized payment, at a time when Baybay Water District had not yet been decided and they had no knowledge of absence of legal basis.

• COA's constitutional audit and disallowance power — The Constitution vests COA with authority to examine, audit and settle all accounts of government revenues and expenditures, including those of government-owned and controlled corporations with original charters, and exclusive authority to define audit scope and promulgate rules for disallowance of irregular, unnecessary, excessive, extravagant or unconscionable expenditures. Applied to sustain COA jurisdiction over water districts and its disallowance of directors' allowances beyond statutory limits.
• Water district as government-owned and controlled corporation with special charter — A water district created pursuant to the special law PD 198 is a government-owned and controlled corporation with original charter. Applied to place the Catbalogan Water District and its directors, officials and employees within COA audit jurisdiction.
• Literal construction of clear statutes — If a statute is clear, plain and free from ambiguity, it must be given literal meaning and applied without attempted interpretation. Applied to Section 13 of PD 198 to prohibit any compensation beyond per diems, rendering contrary LWUA Resolution No. 313 null and void as mere administrative fiat cannot amend statutory prohibition.
• Limitation of water district directors' compensation to per diems — Under Section 13 of PD 198, specifying per diem as compensation, capping it monthly, and providing that no director shall receive other compensation authorizes only the statutory per diem and no other compensation or allowance in whatever form. Applied per Baybay Water District vs. Commission on Audit to disallow RATA, rice allowance, productivity, anniversary and year-end bonuses, and cash gifts.
• Good faith excuse from refund of disallowed benefits — Where officials and employees disbursed and received disallowed benefits in honest belief of entitlement without indicia of bad faith, refund is not countenanced for amounts already received. Applied per Blaquera vs. Alcala to excuse petitioners who relied on LWUA Resolution No. 313 before Baybay Water District clarified the law.

• "It is a fundamental rule in statutory construction that if a statute is clear, plain and free from ambiguity, it must be given literal meaning and applied without attempted interpretation." — States the interpretive rule used to enforce the plain prohibition in Section 13 of PD 198 against other compensation.
• "A statutorily proscribed benefit may not be amended by a mere administrative fiat." — Defines the limit of LWUA Resolution No. 313 and voids additional allowances granted thereunder.
• "Considering, however, that all the parties here acted in good faith, we cannot countenance the refund of subject incentive benefits for the year 1992, which amounts the petitioners have already received." — Provides the Blaquera formulation for excusing refund, extended to petitioners' good-faith reliance on LWUA authorization.
• "No director shall receive other compensation for services to the district." — Reproduces the controlling statutory prohibition in Section 13 of PD 198 grounding the disallowance.

• Baybay Water District vs. Commission on Audit, G.R. Nos. 147248-49, 22 January 2002 — Followed as controlling and similar case holding PD 198 governs board compensation and Section 13 allows only per diems, preempting other allowances and bonuses.
• Blaquera vs. Alcala, 356 Phil. 678 (1998) — Followed to excuse refund where parties acted in good faith in disbursing and receiving disallowed incentive benefits.
• Eslao vs. COA, G.R. No. 108310, 1 September 1994, 236 SCRA 161 — Distinguished; there COA refused to apply an exception in one DBM circular to another DBM circular issued under legislative compensation authority, unlike the present audit of disbursements patently beyond statutory allowance.
• Civil Liberties Union vs. Executive Secretary, G.R. No. 83896, 22 February 1991, 194 SCRA 317 — Distinguished; de facto officers entitled to emoluments attached to offices actually served, whereas no compensation beyond statutory per diem attached to petitioners' offices.

• Section 2(1) and (2), Subdivision D, Article IX, 1987 Constitution — Vests COA with power to examine, audit and settle government accounts including those of government-owned and controlled corporations with original charters, and exclusive authority to define audit scope and disallow irregular expenditures; applied to uphold COA jurisdiction over CWD disbursements.
• Section 13, PD 198, as amended — Provides each director shall receive a per diem per meeting attended capped at four meetings monthly, no director shall receive other compensation, and per diem over P50 needs Administration approval; applied to limit petitioners to per diems and disallow RATA, EME, allowances, bonuses and cash gifts.
• Section 26, Government Auditing Code of the Philippines; Section 11, Chapter 4, Subtitle B, Book V, Administrative Code of 1987 — Extend COA authority to all government-owned or controlled corporations and audit of accountable funds; cited as statutory mandate supporting COA audit of water districts.

Davide, Jr., C.J., Bellosillo, Puno, Vitug, Panganiban, Quisumbing, Ynares-Santiago, Sandoval-Gutierrez, Austria-Martinez, Corona, Carpio-Morales, Callejo, Sr., and Azcuna, JJ., concur.