Nacion vs. Commission on Audit

COA officials and employees are prohibited from receiving salaries, honoraria, bonuses, allowances, or other emoluments, including advantageous loan and housing benefits, from any government entity under their audit jurisdiction, except compensation paid directly by the COA out of its appropriations and contributions, in order to preserve COA independence and integrity.

Nacion was a COA State Auditor V assigned to the MWSS, a government-owned and controlled corporation subject to COA audit. COA auditors assigned to agencies are constitutionally mandated to examine expenditures and prevent irregular use of government funds, requiring insulation from influence by the audited entity. To enforce that independence, Section 18 of Republic Act No. 6758 and the Code of Ethics for Government Auditors prohibit COA personnel from receiving additional compensation or benefits from agencies under their audit jurisdiction.

From October 16, 2001 to September 15, 2003, Nacion was assigned by the COA to the MWSS as State Auditor V. By the time administrative proceedings commenced, she was already Director IV of the COA, National Government Sector. COA's investigation of its personnel assigned to MWSS was prompted by a letter from then MWSS Administrator Diosdado Jose M. Allado complaining of unrecorded checks and irregularly issued disbursement vouchers traced to bonuses and other benefits of COA MWSS personnel.

On June 27, 2011, COA Chairperson Ma. Gracia M. Pulido Tan issued a formal charge, docketed as Administrative Case No. 2011-002, based on the June 21, 2011 Administrative Case Evaluation Report of the Fraud Audit and Investigation Office, Legal Services Sector and investigation reports grounded on MWSS journal vouchers, disbursement vouchers, and claims control index. Nacion was charged with receiving benefits and bonuses from MWSS totaling P73,542.00 from 1999-2003, availing of the MWSS Housing Project, and availing of the Multi-Purpose Loan Program – Car Loan.

In her Affidavit/Answer, Nacion admitted availment of the MWSS Housing Project, under which she was awarded a 300-square-meter lot at the MWSS Employees Corporate Office Housing Project in Novaliches, Quezon City pursuant to an Individual Notice of Award dated April 8, 2003 issued by the MWSS Corporate Office Multi-Purpose Cooperative Housing Project, at P500.00 per square meter or P150,000.00 total, exclusive of development cost and miscellaneous expenses. She likewise admitted availing of the Multi-Purpose Loan Program – Car Loan, asserting as to both that she acted upon honest belief that no prohibition existed, since COA Resolution No. 2004-005 prohibiting COA employees from availing of loans and monetary benefits from agencies under audit was issued only on July 27, 2004, and emphasizing that her car purchase was unsubsidized and fully payable with interest and expenses. She denied receiving bonuses and benefits, arguing that the claims control index and journal vouchers were not conclusive without payrolls bearing her signature, but offered in good faith to restitute P73,542.00 and to give up the lot provided her investment therein would be returned.

The COA found the three acts established and Nacion guilty as charged, while mitigating the penalty to one year suspension without pay in view of her non-request for formal investigation, admission of the housing and car loan availment, and long years in public service, with additional orders to refund P73,542.00, detailed as Extra Christmas Bonus for CY 2001 of P10,000.00, Mid-Year Bonus for CY 2002 of P26,771.00, Mid-Year Bonus for CY 2003 of P26,771.00, and Anniversary Bonus for CY 2003 of P10,000.00, and to return the housing lot.

• Due Process and Authority to Investigate: Petitioner argued that the records during her tenure with the MWSS should not have been included by the audit team in its investigations, as no office order covering that period was issued by the COA Chairman, the existing office order having referred only to Atty. Norberto Cabibihan and his staff whose stint postdated hers, and that inclusion of her tenure deprived her of due process.
• Substantial Evidence: Petitioner maintained that the documentary evidence considered by the Fraud Audit and Investigation Office did not constitute substantial evidence, particularly because the MWSS claims control index and journal vouchers were not conclusive proof of receipt absent payrolls showing her signature.
• Good Faith and Absence of Prohibition: Petitioner argued that she availed of the housing project and car loan upon honest belief that no prohibition existed, since COA Resolution No. 2004-005 was issued only on July 27, 2004, that her car purchase was not subsidized, and that availment by officials of other agencies confirmed good faith.
• Separate Cooperative Entity: Petitioner argued that the lot was awarded by the MWSS Corporate Office Multi-Purpose Cooperative Housing Project, a private entity separate and distinct from MWSS.

• Due Process and Fact-Finding: Respondent countered through the Office of the Solicitor General that the constitution of a separate fact-finding team specifically for Nacion's case was not necessary to satisfy due process.

• Due Process: Whether the COA committed grave abuse of discretion by investigating Nacion's tenure without a separate office order and by initiating the case motu proprio through the Chairperson's formal charge.
• Substantial Evidence and Administrative Liability: Whether the COA committed grave abuse of discretion in finding Nacion guilty of grave misconduct and violation of reasonable office rules and regulations based on documentary evidence and undisputed availment of housing and car benefits.

• Due Process: No. Due process in administrative proceedings requires only reasonable opportunity to explain one's side, which was satisfied by the formal charge, answer under oath, and motion for reconsideration, and the Chairperson may commence proceedings motu proprio.
• Substantial Evidence and Administrative Liability: No. Guilt was supported by substantial evidence, as the claims control indices corroborated by journal vouchers proved receipt of P73,542.00 and the housing and car loan availment was undisputed and prohibited under Section 18 of R.A. No. 6758 and auditor ethics rules.

• Due Process: The essence of due process in administrative proceedings is the opportunity to explain one's side, seek reconsideration, and submit supporting evidence before judgment. That requisite was met because Nacion was formally charged by the Chairperson after fact-finding pointed to irregularities, filed her answer under oath, declined to request formal investigation, and moved for reconsideration. Under Section 2 of COA Memorandum No. 76-48, proceedings may be commenced by the Chairman motu proprio or upon sworn written complaint of another person, so no prior sworn complaint was needed when the Chairperson herself initiated the case. Prior team investigations were merely fact-finding before issuance of the formal charge; no separate office order or separate team for Nacion was necessary, and jurisdiction was not exceeded by examining records from her 2001-2003 assignment even if the initial office order named later personnel.
• Substantial Evidence and Administrative Liability: Administrative liability requires only substantial evidence, or such relevant evidence as a reasonable mind might accept as adequate to justify a conclusion, and factual findings of administrative bodies supported thereby are controlling. Receipt of P73,542.00 was duly proved because the MWSS Claims Control Index, a mandatory internal-control tool for recording payments, corroborated by journal vouchers and entries constituting public records, established extension of allowances to Nacion; presentation of signed payrolls was not indispensable since recipients of unauthorized sums ordinarily evade traces, and no countervailing evidence impeached the documents. Availment of the housing and car programs was admitted and likewise punishable: Section 18 of R.A. No. 6758 mandatorily prohibits COA personnel from receiving bonuses and emoluments from audited entities to preserve independence; the car loan conferred advantageous 0-6% three-tier interest rates even if principal was repayable, and the housing lot was obtained despite non-employment with MWSS, producing the conflict and temptation the prohibition seeks to avoid under COA Resolution No. 86-50 and Executive Order No. 292. Good faith, absence of COA Resolution No. 2004-005 at the time, availment by other officers, and the cooperative's separate personality were unavailing, since a prohibited act is not justified by others' conduct, the prohibition predated the 2004 resolution, and the housing project, site, guidelines, and officers were controlled by the MWSS Board and officials, making the cooperative its conduit or adjunct.

• Grave abuse of discretion — Grave abuse exists only upon evasion of a positive duty or virtual refusal to perform a duty enjoined by law, or action in contemplation of law rendered not on law and evidence but on caprice, whim, and despotism; it must be so patent or gross, equivalent to lack of jurisdiction through capricious or whimsical exercise of judgment. Mere error in proceedings or erroneous conclusions of law or fact does not qualify. Applied to reject Nacion's claim, no such patent abuse attended the COA's procedure, findings, and conclusions.
• Due process in administrative proceedings — The essence is the opportunity to explain one's side or seek reconsideration and to submit supporting evidence, satisfied when parties are given opportunity to be heard before judgment. Applied to hold Nacion's answer to the formal charge and motion for reconsideration, plus the foregone opportunity for formal investigation, sufficient despite absence of a separate office order or fact-finding team.
• Commencement of COA administrative proceedings motu proprio — Under Section 2 of COA Memorandum No. 76-48, proceedings against a subordinate official may be commenced by the Chairman motu proprio or upon sworn written complaint of any other person; a sworn complaint is required only when commenced by another person. Applied to sustain the Chairperson's issuance of the formal charge without a prior complaint.
• Substantial evidence — In cases before administrative or quasi-judicial bodies, a fact may be deemed established if supported by substantial evidence, defined under Section 5, Rule 133 of the Rules of Court as that amount of relevant evidence which a reasonable mind might accept as adequate to justify a conclusion; supported factual findings of administrative bodies are controlling. Applied to uphold reliance on claims control indices, journal vouchers, and entries, and undisputed admissions, without need for signed payrolls or conclusive proof.
• Prohibition on additional compensation of COA personnel — Under Section 18 of R.A. No. 6758, to preserve COA independence and integrity, its officials and employees are prohibited from receiving salaries, honoraria, bonuses, allowances, or other emoluments from any government entity, local government unit, government-owned and controlled corporation, and government financial institution, except compensation paid directly by the COA out of its appropriations and contributions. Applied together with Executive Order No. 292 and COA Resolution No. 86-50 (Code of Ethics for Government Auditors) to condemn receipt of bonuses and availment of preferential car and housing benefits from the audited MWSS, the rationale being removal of temptation that would diminish impartiality and effectiveness of auditors, as explained in Villareña vs. The Commission on Audit.

• "The concept is well-entrenched: grave abuse of discretion exists when there is an evasion of a positive duty or a virtual refusal to perform a duty enjoined by law or to act in contemplation of law as when the judgment rendered is not based on law and evidence but on caprice, whim, and despotism." — States the controlling definition of grave abuse of discretion used to test the certiorari attack on the COA rulings.
• "In administrative proceedings, the essence of due process is the opportunity to explain one's side or seek a reconsideration of the action or ruling complained of, and to submit any evidence he may have in support of his defense." — Defines the due process standard applied to sustain the COA procedure based on formal charge, answer, and reconsideration.
• "Sec. 5. Substantial evidence. – In cases filed before administrative or quasi-judicial bodies, a fact may be deemed established if it is supported by substantial evidence, or that amount of relevant evidence which a reasonable mind might accept as adequate to justify a conclusion." — States the quantum of proof justifying reliance on claims control indices and journal vouchers without signed payrolls.
• "The primary function of an auditor is to prevent irregular, unnecessary, excessive or extravagant expenditures of government funds. To be able properly to perform their constitutional mandate, COA officials need to be insulated from unwarranted influences, so that they can act with independence and integrity." — Articulates the rationale, drawn from Villareña vs. The Commission on Audit, for prohibiting extra benefits from audited agencies.

• Atty. Villareña vs. The Commission on Audit, 455 Phil. 908 (2003) — Controlling precedent on COA independence; followed to explain that extra emoluments create temptation, impair impartiality, and must be removed to enforce the mandate against irregular expenditures.
• Dycoco vs. Court of Appeals, G.R. No. 147257, July 31, 2013, 702 SCRA 566 — Followed for the formulation that grave abuse requires capricious or whimsical exercise of judgment equivalent to lack of jurisdiction.
• Arnaldo M. Espinas, Lillian N. Asprer, and Eleanora R. De Jesus vs. Commission on Audit, G.R. No. 198271, April 1, 2014 — Cited for the entrenched concept of grave abuse of discretion as evasion of positive duty or judgment based on caprice and despotism.
• Lacson vs. Executive Secretary, G.R. Nos. 165399 and 165475, May 30, 2011, 649 SCRA 142 — Cited for the rule that due process in administrative proceedings is satisfied by opportunity to be heard before judgment.
• Office of the Ombudsman (Visayas) vs. Zaldarriaga, 635 Phil. 361, 367-368 (2010) — Cited for the rule that administrative liability requires only substantial evidence.
• Gonzales III vs. Office of the President of the Philippines, G.R. No. 196231, September 4, 2012, 679 SCRA 614, 661 — Cited for the rule that factual findings of administrative bodies supported by substantial evidence are controlling.
• Yu vs. Judge Reyes-Carpio, G.R. No. 189207, June 15, 2011, 652 SCRA 341, 348 — Cited through Dycoco vs. Court of Appeals for the grave abuse formulation.

• Section 18, Republic Act No. 6758 (Compensation and Position Classification Act of 1989) — Prohibits COA officials and employees from receiving salaries, honoraria, bonuses, allowances, or other emoluments from any government entity, local government unit, government-owned and controlled corporation, and government financial institution, except COA-paid compensation; applied to hold receipt of MWSS bonuses unlawful.
• Section 5, Rule 133, Rules of Court — Defines substantial evidence as the quantum sufficient in administrative or quasi-judicial cases; applied to sustain findings based on claims control indices and journal vouchers.
• Section 2, COA Memorandum No. 76-48 (Rules of Procedure in the Investigation of Administrative Cases against Personnel of the Commission on Audit) — Allows commencement by the Chairman motu proprio or upon sworn written complaint of another person; applied to uphold the Chairperson-issued formal charge without a separate complaint.
• Executive Order No. 292 (Administrative Code of 1987) and COA Resolution No. 86-50 (Code of Ethics for Government Auditors) — Demand integrity, avoidance of conflict of interest, and resistance to prejudicial temptations; applied to hold loan availment prohibited even before COA Resolution No. 2004-005.
• COA Resolution No. 2004-005, July 27, 2004 — Prohibits COA employees from availing of loans, monetary benefits, or credit assistance from agencies under audit jurisdiction; invoked by petitioner as the starting point of prohibition but held not to excuse earlier availment already proscribed by statute and ethics rules.

Sereno, C.J. (on official leave), Carpio, J., Velasco, Jr., J., Leonardo-De Castro, J., Brion, J., Peralta, J., Bersamin, J., Del Castillo, J., Villarama, Jr., J., Perez, J., Mendoza, J., Perlas-Bernabe, J., Leonen, J. No part: Jardeleza, J., in view of his participation in the Office of the Solicitor General.