PhilHealth v. COA

When a statute specifies the compensation of board members of a government-owned and controlled corporation (e.g., per diems) and omits any provision for other allowances or benefits, the board members are entitled only to the compensation expressly authorized by law and no other—by operation of the maxim expressio unius est exclusio alterius. The board's power to adopt a compensation scheme is not unlimited and cannot be enlarged by interpretation to include benefits Congress did not provide.

PhilHealth is a government-owned and controlled corporation created under Republic Act No. 7875 (the National Health Insurance Act) to administer the National Health Insurance Program. It is governed by a Board of Directors composed of both appointive members (representatives of the labor sector, employers, self-employed, overseas workers, and health care providers) and ex officio members (the Secretaries of Health, Labor and Employment, Interior and Local Government, and Social Welfare and Development, the SSS Administrator, the GSIS General Manager, and the Vice Chairperson for the basic sector of the National Anti-Poverty Commission). Section 18(d) of RA No. 7875, entitled "allowances and per diems," provides that BOD members may receive per diems for every meeting actually attended. The National Health Insurance Fund, which PhilHealth manages, consists of contributions from members, government appropriations, and other earmarked sources, and is held in trust for the purpose of providing universal and affordable health care to all Filipinos.

In October 2007, the PhilHealth Board of Directors passed Board Resolution No. 1055, approving the entitlement of its members (or their authorized representatives) to a Board Extraordinary and Miscellaneous Expense (BEME) in the reimbursable amount of ₱30,000.00 each per month, effective October 4, 2007. These allowances were intended to cover expenses incurred by BOD members in the performance of their official functions, which they would otherwise personally shoulder. A supplemental budget of ₱1,560,000.00 was correspondingly appropriated for the purpose. In December 2007, the BOD amended the resolution through Board Resolution No. 1084, allowing the unexpended balance of the monthly EME to be carried over and expended in succeeding months within the same calendar year, retroactive to October 5, 2007. By a resolution dated February 12, 2009, the BOD further allocated ₱4,320,000.00 from the 2009 Corporate Operating Budget of the Office of the Corporate Secretary—and every year thereafter—for reimbursement of expenses incurred by BOD members in the discharge of official functions and duties outside board meetings.

On May 24, 2011, the COA Supervising Auditor issued an Audit Observation Memorandum revealing that reimbursements of EME totaling ₱19.95 million in calendar year 2010 had been charged to the Representation Expenses account under the sub-accounts "Institutional Meeting Expenses (865-10) and Committee Meeting Expenses (865-20)." The Supervising Auditor noted that PhilHealth had been using the IME and Committee Meeting Expenses accounts to accommodate EME reimbursements because charges to the EME account had already far exceeded the General Appropriations Act prescribed limitation for each official. This charging was viewed as irregular because it deviated from the budgetary controls on EME disbursement set out in the GAA and COA Circular No. 2006-001, and it also increased the amount of the excess over the GAA-prescribed annual rate. The Supervising Auditor further observed that ₱5.63 million of the total amount represented reimbursements made to BOD members and personnel whose positions were not entitled to EME.

PhilHealth commented on the AOM, but its comment was found unsatisfactory. On July 18, 2012, Notice of Disallowance No. HO 12-004 (10) was issued, disallowing the IME payments to PhilHealth BOD members for January to December 2010 in the amount of ₱2,965,428.59 for lack of legal basis. PhilHealth received the ND on July 27, 2012, but filed its appeal before the COA-Corporate Government Sector only on January 24, 2013—181 days later. The COA-CGS denied the appeal, ruling that Section 18(d) of RA No. 7875 expressly provides per diem as the compensation for BOD members and that the BOD exceeded its authority in granting EME. The COA-CGS also noted that the expenses had already been disallowed in audit, so the BOD members knew at the time they received the IME that the benefits had no legal basis. PhilHealth then filed a petition for review before the COA Proper, but did so 42 days after receiving the COA-CGS Decision. The COA Proper dismissed the petition for being filed out of time and found no compelling reason to relax its procedural rules, as PhilHealth offered no justification for the belated filing. The motion for reconsideration was likewise denied.

• Computation of Reglementary Period: PhilHealth maintained that the term "month" in the six-month reglementary period under the 2009 Revised Rules of Procedure of the COA should be understood as a calendar month (i.e., from a given date to the corresponding date of the next month), not as 30 days, relying on the Court's ruling in Commissioner of Internal Revenue vs. Primetown Property Group, Inc.
• Fiscal Autonomy: PhilHealth argued that it may grant additional benefits to its BOD members on the strength of its fiscal autonomy under Section 16(n) of RA No. 7875, as tempered by the limitations in Section 26(b).
• Absence of Express Prohibition: PhilHealth asserted that RA No. 7875 does not expressly prohibit the BOD from granting additional benefits to its members beyond per diems.
• Presidential Approval: PhilHealth invoked the alleged approval or confirmation by former President Gloria Macapagal-Arroyo of PhilHealth's fiscal autonomy through two executive communications relative to its request to exercise fiscal authority in line with the PhilHealth Rationalization Plan.
• Good Faith: PhilHealth contended that its BOD members were reimbursed the IME in good faith and should therefore not be required to refund the disallowed amount.

• Per Diem as Sole Compensation: The COA-CGS countered that Section 18(d) of RA No. 7875 expressly provides per diem as the compensation for BOD members, and nowhere in the law is PhilHealth authorized to grant additional compensation, allowances, or benefits to its BOD; the BOD exceeded its authority in issuing Board Resolution No. 1193 authorizing EME contrary to Section 18(d).
• Prior Knowledge of Irregularity: The COA-CGS argued that the expenses in question had already been disallowed in audit, such that the BOD members already knew at the time they received the IME that said benefits had no legal basis.
• Procedural Bar: The COA Proper maintained that the petition for review was filed out of time—181 days after receipt of the ND and 42 days after receipt of the COA-CGS Decision—and that PhilHealth offered no justification for the belated filing, warranting no relaxation of procedural rules.

• Computation of Reglementary Period: Whether the six-month reglementary period to appeal under the 2009 Revised Rules of Procedure of the COA should be computed as 180 days or as six calendar months.
• Authority to Grant Additional Allowances to Ex Officio Members: Whether ex officio members of the PhilHealth BOD may receive additional allowances beyond per diems.
• Authority to Grant Additional Allowances to Appointive Members: Whether appointive members of the PhilHealth BOD may receive additional allowances beyond per diems.
• Fiscal Autonomy as Basis for Additional Benefits: Whether PhilHealth's fiscal autonomy under Section 16(n) of RA No. 7875 authorizes the BOD to grant additional allowances to its members.
• Irregular Charging of EME: Whether the charging of EME reimbursements against the IME and Committee Meeting Expenses accounts, to circumvent GAA-prescribed ceilings, was irregular.
• Good Faith Defense Against Refund: Whether the BOD members are entitled to the presumption of good faith and thus exempt from refunding the disallowed amounts.

• Computation of Reglementary Period: No. The six-month period is equivalent to 180 days; PhilHealth's appeal was filed one day late. There is no incompatibility between the Civil Code and the Administrative Code on the definition of a month—both treat a month as 30 days, unlike the year computation that triggered the different rule in Primetown.
• Authority to Grant Additional Allowances to Ex Officio Members: No. Ex officio members are barred from receiving additional compensation by the constitutional prohibition on double compensation, because their services on the board are already paid for and covered by the compensation attached to their principal office.
• Authority to Grant Additional Allowances to Appointive Members: No. RA No. 7875 specifies per diems as the compensation for BOD members and omits any provision for other allowances; by expressio unius est exclusio alterius, appointive members are entitled only to the per diems authorized by law and no other.
• Fiscal Autonomy as Basis for Additional Benefits: No. PhilHealth's power to fix compensation under Section 16(n) is limited to its personnel and does not extend to BOD members, who are not salaried officials; the power to adopt a compensation scheme is not unlimited and is subject to standards laid down by applicable laws.
• Irregular Charging of EME: Yes, the charging was irregular. PhilHealth used IME and Committee Meeting Expenses accounts to accommodate EME reimbursements that had already exceeded GAA-prescribed ceilings, deviating from budgetary controls in the GAA and COA Circular No. 2006-001.
• Good Faith Defense Against Refund: No. The BOD members failed to earn the presumption of good faith because prior audit disallowances had already put them on notice that the reimbursements lacked legal basis; patent disregard of case law and COA directives amounts to gross negligence.

• Computation of Reglementary Period: Section 4, Rule V of the 2009 Revised Rules of Procedure of the COA provides that an appeal before the Director of a Central Office Audit Cluster must be filed within six months after receipt of the decision appealed from. Section 3, Rule VII provides that the appeal before the COA Proper shall be taken within the time remaining of the six-month period. PhilHealth received the ND on July 27, 2012 and filed its appeal on January 24, 2013. Using 180 days as the equivalent of six months, the last day to appeal was January 23, 2013. PhilHealth's reliance on Primetown was misplaced because that case involved the two-year prescriptive period for tax refunds under the National Internal Revenue Code, where the Court found a manifest incompatibility between the Civil Code (365 days) and the Administrative Code (12 calendar months) definitions of a year. No such incompatibility exists with respect to the definition of a month: both the Civil Code and the Administrative Code treat a month as 30 days. Accordingly, six months equals 180 days, and the appeal was filed out of time.

• Authority to Grant Additional Allowances to Ex Officio Members: The BOD under RA No. 9241 (which amended RA No. 7875) includes members who are appointed to the position and those designated to serve by virtue of their office (ex officio). Appointment is the selection by the proper authority of an individual to exercise the functions of an office; designation connotes the imposition of additional duties upon a person already in public service. Section 18(d) of RA No. 7875, allowing per diems for meetings attended, must be understood to refer only to appointive members. The ex officio position is part of the principal office, so the official has no right to receive additional compensation for services in that position; otherwise, it would violate the constitutional prohibitions against holding multiple positions and receiving double compensation. These services are already paid for by the compensation attached to the principal office. The disallowance of IME granted to ex officio members is therefore warranted, especially since they were already receiving EME from their respective departments as appropriated in the GAA. DBM-National Budget Circular No. 2007-510, which allows ex officio members of governing boards to receive reimbursement for transportation and miscellaneous expenses, must be understood to mean only as appropriated in the GAA of their own departments.

• Authority to Grant Additional Allowances to Appointive Members: RA No. 7875 does not authorize the grant of additional allowances to the BOD beyond per diems. While Section 18(d) is entitled "allowances and per diems," its body mentions only per diems and no other allowances. By expressio unius est exclusio alterius—the express mention of one thing excludes all others—and casus omissus pro omisso habendus est—a person or thing omitted must have been omitted intentionally—the specification of per diems and the omission of other benefits lead to the inference that Congress intended to limit BOD compensation to per diems. This is consistent with the Court's ruling in Bases Conversion and Development Authority vs. COA, where it held that the specification and limitation of compensation in a statute indicate that board members are entitled only to the per diem authorized by law and no other. Congress's intention to allow other benefits is demonstrated by contrast in Section 1 of RA No. 9286, which expressly states that directors "shall receive allowances and benefits as the Board may prescribe"—language absent from RA No. 7875. The Court cannot enlarge the scope of a statute or insert what Congress omitted.

• Fiscal Autonomy as Basis for Additional Benefits: PhilHealth's reliance on Section 16(n) of RA No. 7875, which empowers it to "fix the compensation of and appoint personnel," is unavailing. This power is limited to PhilHealth's personnel; BOD members are not salaried officials of the government and thus are not entitled to PERA, ADCOM, YEB, or retirement benefits unless expressly provided by law, as held in BCDA citing DBM Circular Letter No. 2002-2. The Court's ruling in PhilHealth vs. COA already declared that PhilHealth does not have unbridled discretion to issue allowances, and that to sustain such a claim would result in an invalid delegation of legislative power. The alleged presidential approval of PhilHealth's fiscal autonomy was merely a marginal note on executive communications and was never reduced to a formal memorandum; moreover, presidential approval of a compensation scheme found unauthorized by law does not estop the State from correcting the erroneous application of a statute. Applying the reasoning from SSS vs. COA, the funds managed by PhilHealth—the National Health Insurance Fund—are held in trust for the purpose of providing universal and affordable health care, and must be utilized with circumspection and restraint.

• Irregular Charging of EME: While the authority to grant EME may be derived from the GAA, as recognized by COA Circular No. 2006-001, the amounts fixed under the GAA serve as the ceiling. Section 28 of RA No. 9970 (the 2010 GAA) prescribes specific ceilings for EME by rank of official. The Supervising Auditor found that PhilHealth irregularly charged EME reimbursements against the IME and Committee Meeting Expenses accounts to circumvent these GAA-prescribed ceilings, resulting in an increase in the excess over the prescribed annual rate. This charging deviated from the standards set in the GAA and COA Circular No. 2006-001. PhilHealth failed to refute these findings squarely in its comment to the AOM.

• Good Faith Defense Against Refund: As to ex officio members, the Court applied its ruling in Tetangco vs. COA: patent disregard of case law and COA directives amounts to gross negligence, so good faith on the part of approving officers cannot be presumed. There was already a law (the GAA) limiting EME grants; COA Memorandum No. 97-038 enforced the constitutional prohibition on double compensation; and the irregularity of giving additional compensation to ex officio members had already been settled by jurisprudence. As to appointive members, while the Court acknowledged that the BOD might have erroneously relied on PhilHealth's fiscal autonomy and the absence of an express prohibition, the COA-CGS found that the BOD members already knew at the time of receipt that the benefits had no legal basis, because claims for reimbursement of EME by the PhilHealth BOD had already been disallowed in audit. This finding remained unrebutted. Good faith requires honesty of intention and freedom from knowledge of circumstances that ought to put the holder upon inquiry; the BOD members failed to earn the presumption of good faith.

• Expressio unius est exclusio alterius — The express mention of one person, thing, act, or consequence excludes all others. Applied here to Section 18(d) of RA No. 7875: because the statute mentions only per diems and omits any other allowances, the BOD is entitled only to per diems and no other compensation. The companion maxim casus omissus pro omisso habendus est (a person or thing omitted must have been omitted intentionally) reinforces this conclusion.

• Specification-and-Limitation Doctrine for Board Compensation — When a statute specifies the compensation of board members and limits the amount they may receive, the law indicates that board members are entitled only to the compensation expressly authorized and no other. This doctrine was established in Magno vs. COA, Cabili vs. CSC, De Jesus vs. CSC, Molen Jr. vs. COA, and Baybay Water District vs. COA, and applied in BCDA vs. COA. The organic law must expressly provide the allowances and benefits due the BOD; entitlement can never be implied.

• Constitutional Prohibition on Double Compensation for Ex Officio Members — An ex officio position is part of the principal office; the official concerned has no right to receive any additional compensation for services in that position, whether called per diem, honorarium, allowance, or any other designation. Such additional compensation is prohibited by the Constitution. (Citing Civil Liberties Union vs. Executive Secretary.)

• Good Faith Cannot Be Presumed in the Face of Patent Disregard of Law — Patent disregard of case law, COA issuances, and the Constitution amounts to gross negligence; good faith on the part of approving officers cannot be presumed. Officials are expected to keep abreast of laws affecting their functions, and when the law, jurisprudence, and COA issuances are of such clearness that the officials could not have mistaken their meaning, they cannot find shelter in the defense of good faith. (Citing Tetangco vs. COA.)

• Trust Fund Doctrine for GOCCs — Funds held by a GOCC such as PhilHealth or SSS are held in trust for the benefit of their intended beneficiaries and must be devoted primarily to their statutory purpose. The power to allocate funds for salaries and benefits is not absolute and unrestricted; salaries and benefits must always be reasonable so that the trust funds will be devoted to the corporation's primary purpose. (Citing SSS vs. COA.)

• "The specification that Board members shall receive a per diem of not more than ₱5,000 for every meeting and the omission of a provision allowing Board members to receive other benefits lead the Court to the inference that Congress intended to limit the compensation of Board members to the per diem authorized by law and no other. Expressio unius est exclusio alterius. Had Congress intended to allow the Board members to receive other benefits, it would have expressly stated so." — This passage, quoted from BCDA vs. COA, articulates the canonical formulation of the specification-and-limitation doctrine for board compensation, which the Court applied to hold that PhilHealth's charter authorizes only per diems and no additional allowances.

• "The ex officio position being actually and in legal contemplation part of the principal office, it follows that the official concerned has no right to receive any other form of additional compensation for his services in the said position; otherwise, it would run counter with the constitutional prohibitions against holding multiple positions in the government and receiving additional or double compensation." — This passage states the ratio decidendi for disallowing additional allowances to ex officio BOD members, grounding the rule in the constitutional prohibition on double compensation.

• "In ascertaining the last day of the reglementary period to appeal, one month is to be treated as equivalent to 30 days, such that six months is equal to 180 days." — This sentence resolves the procedural issue by distinguishing the computation of months from the computation of years addressed in Primetown, establishing that under both the Civil Code and the Administrative Code, a month equals 30 days.

• "The Court cannot, in the guise of interpretation, enlarge the scope of a statute or insert into a statute what Congress omitted, whether intentionally or unintentionally." — This passage, quoted from BCDA vs. COA, defines the boundary of permissible statutory construction in the context of GOCC board compensation, barring judicial or administrative expansion of benefits beyond what the charter expressly provides.

• Commissioner of Internal Revenue vs. Primetown Property Group, Inc., G.R. No. 162155, August 28, 2007 — Distinguished. PhilHealth relied on this case for the proposition that a "month" should be computed as a calendar month. The Court distinguished it on the ground that Primetown involved the computation of a "year" under the NIRC, where a manifest incompatibility existed between the Civil Code (365 days) and the Administrative Code (12 calendar months). No such incompatibility exists for the definition of a "month," which both laws treat as 30 days.

• Bases Conversion and Development Authority vs. COA, G.R. No. 178160, February 26, 2009 — Followed. The Court applied BCDA's holding that the specification and limitation of compensation in a statute indicate that board members are entitled only to the per diem authorized by law and no other, and that the Court cannot enlarge the scope of a statute by interpretation. BCDA was also cited for the propositions that board members are not salaried officials and that presidential approval of an unauthorized compensation scheme does not estop the State.

• PhilHealth vs. COA, G.R. No. 213753, November 29, 2016 — Followed. The Court applied its prior ruling that PhilHealth does not have unbridled discretion to issue allowances and that granting it sole authority to determine compensation would result in an invalid delegation of legislative power.

• SSS vs. COA, G.R. No. 210940, September 6, 2016 — Followed. The Court applied the reasoning that funds held by a GOCC are held in trust for their beneficiaries and must be devoted primarily to the corporation's statutory purpose, requiring circumspection in utilizing funds for salaries and allowances of board members.

• Tetangco, Jr. vs. COA, G.R. No. 215061, June 6, 2017 — Followed. The Court applied the holding that patent disregard of case law and COA directives amounts to gross negligence, precluding the presumption of good faith for approving officers who authorized additional compensation to ex officio members.

• Civil Liberties Union vs. Executive Secretary, G.R. No. 83896, February 22, 1991 — Followed. Cited for the principle that an ex officio member performing the primary function of his principal office is not entitled to collect any extra compensation, as such additional compensation is prohibited by the Constitution.

• Baybay Water District vs. COA — Followed (as cited within BCDA). Cited for the holding that by specifying the compensation a director may receive and limiting the amount, the law clearly indicates that directors are authorized to receive only the per diem authorized by law and no other compensation.

• Section 18(d), Republic Act No. 7875 (National Health Insurance Act) — Entitled "allowances and per diems," this provision allows BOD members to receive per diems for every meeting actually attended. The Court held that its body mentions only per diems and no other allowances, so by expressio unius est exclusio alterius, BOD members are entitled only to per diems and no other compensation.

• Section 16(n), Republic Act No. 7875 — Empowers PhilHealth to "organize its office, fix the compensation of and appoint personnel as may be deemed necessary." The Court held this power is limited to PhilHealth's personnel and does not extend to BOD members, who are not salaried officials.

• Section 26(b), Republic Act No. 7875 — Limits the total annual costs for administering the Program to not exceed 12% of total contributions and not more than 3% of investment earnings. PhilHealth invoked this as a limitation tempering its fiscal autonomy, but the Court held that fiscal autonomy does not authorize grants to BOD members beyond what the charter expressly provides.

• Section 28, Republic Act No. 9970 (2010 General Appropriations Act) — Prescribes ceilings for extraordinary and miscellaneous expenses by rank of official (e.g., ₱220,000 for each Department Secretary, ₱90,000 for each Undersecretary, etc.). The Court held that PhilHealth's charging of EME against other accounts to circumvent these ceilings was irregular.

• COA Circular No. 2006-001 — Provides guidelines on the disbursement of EME in GOCCs/GFIs, stating that where the authority to grant EME is derived from the GAA, the amounts fixed thereunder shall be the ceiling; payment shall be on a reimbursable basis supported by receipts; and no portion shall be used for salaries, wages, or allowances covered by separate appropriations. The Court held that PhilHealth's charging of EME against IME and Committee Meeting Expenses accounts deviated from these guidelines.

• Section 4, Rule V and Section 3, Rule VII, 2009 Revised Rules of Procedure of the COA — Provide that an appeal before the Director of a Central Office Audit Cluster must be filed within six months after receipt of the decision, and that the appeal before the COA Proper shall be taken within the time remaining of the six-month period. The Court held that six months equals 180 days, rendering PhilHealth's appeal filed one day late.

• Section 13, Article VII, 1987 Constitution — Prohibits the President and official family, their deputies and assistants, or their representatives from holding multiple offices and receiving double compensation. Applied to ex officio BOD members who are department secretaries.

• Article XIII, Section 11, 1987 Constitution — States the State shall adopt an integrated and comprehensive approach to health development, giving priority to the needs of the underprivileged. Cited as the constitutional policy underlying RA No. 7875 and the trust character of the National Health Insurance Fund.

Chief Justice Teresita J. Leonardo-De Castro, Associate Justice Antonio T. Carpio, Associate Justice Diosdado M. Peralta, Associate Justice Lucas P. Bersamin (on official leave), Associate Justice Mariano C. Del Castillo, Associate Justice Estela M. Perlas-Bernabe, Associate Justice Marvic M.V.F. Leonen, Associate Justice Alfredo Benjamin S. Caguioa, Associate Justice Noel Gimenez Tijam, Associate Justice Andres B. Reyes, Jr., Associate Justice Alexander G. Gesmundo, and Associate Justice Jose C. Reyes, Jr. All concurred in the decision; no separate concurring opinions were written.