Province of Camarines Sur vs. Commission on Audit

The Special Education Fund may be utilized for the salaries and allowances of non-teaching personnel hired in connection with the establishment and operation of extension classes, and approving officers are not liable to refund disallowed funds when actual services were rendered by the recipients and the officers acted in good faith.

The Province of Camarines Sur, through its Local School Board, utilized its Special Education Fund (SEF) to pay the allowances and honoraria of locally funded teaching and non-teaching personnel hired to handle and support extension classes in public schools. The SEF is a fund created under R.A. No. 5447 and further governed by Section 272 of the Local Government Code (R.A. No. 7160), intended for the operation and maintenance of public schools. The disbursement of SEF is subject to guidelines issued via Joint Circulars by the DECS (now DepEd), DBM, and DILG.

To accommodate growing public school enrollees, the Province of Camarines Sur began hiring temporary teaching personnel in 1999 to handle extension classes, along with non-teaching personnel for their establishment and maintenance. The salaries and allowances of these locally funded personnel were charged to the province's Special Education Fund (SEF). From July to October 2008, the province disbursed P5,820,843.30 for the allowances and honoraria of these personnel.

On February 18, 2009, the Commission on Audit (COA) Audit Team Leader issued an Audit Observation Memorandum stating that the payments contravened Section 272 of the Local Government Code and DECS-DBM-DILG Joint Circular No. 01, Series of 1998, regarding the utilization of the SEF. The province commented that the payments were within the purpose and intent of the SEF. Subsequently, on November 15, 2011, the COA issued Notice of Disallowance No. 2011-200-010(08) disallowing the payments for several violations, including the lack of prior approval from the DECS Secretary for the extension classes, the lack of recommendation from the DECS Regional Director, the absence of a Memorandum of Agreement and Accomplishment Report, and the failure to take up the allowances in the SEF books properly. The Notice held several provincial officers liable for the disbursement.

The province appealed to the COA Regional Office V, arguing that the payments were properly charged to the SEF based on the Court's ruling in Commission on Audit vs. Province of Cebu and that the personnel actually rendered services. The COA Regional Office V denied the appeal on July 29, 2013, ruling that the province failed to comply with the mandatory conditions for establishing extension classes and that paying non-teaching personnel from the SEF was irregular. The province elevated the matter to the COA proper, which initially denied the petition for being filed out of time, and upon motion for reconsideration, denied it for lack of merit on September 26, 2016, affirming the disallowance with finality. The province then filed a Petition for Certiorari before the Supreme Court.

• Compliance with the LGC: Petitioner maintained that it complied with all requirements laid down by the Local Government Code before utilizing the SEF, and that the power to use the SEF for the operation and maintenance of public schools necessarily implies the power to pay the salaries of non-teaching personnel under the doctrine of necessary implication.
• Validity of Joint Circulars: Petitioner argued that DECS-DBM-DILG JC No. 01-A is null and void for being an invalid exercise of administrative rule-making power, as it imposed conditions not required by the LGC and violated the principle of local autonomy by allowing national agencies to substitute their judgment for that of the LGUs.
• Sufficiency of Certifications: Petitioner averred that the joint certification issued by the acting PHRMO and Schools Division Superintendent attesting to the authenticity of the claims sufficiently addressed the deficiency noted by the COA regarding the lack of certification by the Provincial HRMO.
• Good Faith and Non-Liability: Petitioner asserted that the approving officers could not be held personally liable because they processed the disbursements in good faith, following procedures unchallenged by the COA for almost a decade.

• Failure to Comply with Mandatory Requirements: Respondent countered that the disallowance was proper because the province failed to comply with the mandatory requirements under DECS-DBM-DILG JC No. 01-A, specifically the prior approval of the DepEd Secretary and the recommendation of the DepEd Regional Director.
• Irregularity of Non-Teaching Personnel Payments: Respondent argued that paying non-teaching personnel from the SEF was irregular under JC No. 01-B, which provides that only the salaries and authorized allowances of teaching personnel hired to handle extension classes may be charged against the SEF, as explicitly stated in R.A. No. 5447 and Commission on Audit vs. Province of Cebu.
• Validity of Administrative Regulations: Respondent insisted that the joint circulars have the force of law, are entitled to a legal presumption of validity, and cannot be collaterally attacked in a certiorari petition.
• Insufficiency of Joint Certification: Respondent claimed the joint certification was properly rejected because it was impossible for the signatories to have personally witnessed the daily attendance of all personnel, and the absence of certification by head teachers cast doubt on the validity of the claims.

• Validity of Joint Circulars: Whether the DECS-DBM-DILG Joint Circulars constitute an invalid exercise of administrative rule-making power and violate the principle of local autonomy.
• Coverage of SEF for Non-Teaching Personnel: Whether the Special Education Fund may be utilized for the payment of allowances and honoraria of non-teaching personnel hired in connection with extension classes.
• Liability for Refund: Whether the approving officers and recipients are liable to refund the disallowed amounts.

• Validity of Joint Circulars: Not ruled upon. The Court declined to pass upon the validity of the joint circulars because the petitioner failed to question their validity at the earliest opportunity in the proceedings below.
• Coverage of SEF for Non-Teaching Personnel: Yes. The SEF may be utilized for the salaries and allowances of non-teaching personnel hired for extension classes, applying the doctrine of necessary implication, as their services are indispensable to the organization and operation of such classes.
• Liability for Refund: No. The approving officers are not liable to refund the disallowed funds because actual services were rendered by the recipients, warranting the application of quantum meruit, and the officers acted in good faith given the COA's decade-long inaction.

• Validity of Joint Circulars: While the petitioner attacked the validity of the joint circulars as an invalid exercise of administrative rule-making power that violates local autonomy, the Court found that the issue was not raised at the earliest opportunity. The prevailing rule in constitutional litigation requires that the question of validity be raised immediately in the proceedings below. Because the petitioner only raised the circular's validity before the Supreme Court, the Court declined to rule on the constitutionality or validity of the issuance, agreeing with the respondent that administrative regulations have the force of law and a legal presumption of validity.
• Coverage of SEF for Non-Teaching Personnel: The Court agreed with the petitioner that the authority to expend the SEF for the operation and maintenance of extension classes carries with it the authority to utilize the SEF for non-teaching personnel. Applying the doctrine of necessary implication, every statutory grant of power includes all incidental powers necessary to effectuate its object and purpose. Because non-teaching personnel are essential to the sound and efficient operation of extension classes, their salaries and allowances are included in the permissible uses of the SEF under Section 1(a) of R.A. No. 5447 and the broad provisions of JC No. 01. The Court distinguished Commission on Audit vs. Province of Cebu by noting that the issue of non-teaching personnel was never passed upon in that case.
• Liability for Refund: The Court applied the principle of quantum meruit, which prevents undue enrichment by allowing recovery for services rendered. Because the PHRMO and SDS certified that the personnel actually rendered services, and the COA's disallowance was based solely on procedural lapses rather than a lack of actual service, it would be unjust to require the recipients to return the allowances they worked for. By necessary implication, it would also be inequitable to require the approving officers to shoulder the refund. Furthermore, the Court found no bad faith on the part of the approving officers, as the COA did not question the allowances from 1999 to 2008, providing no indicia that the disbursements were irregular.

• Doctrine of Necessary Implication — Every statutory grant of power, right, or privilege is deemed to include all incidental power, right, or privilege necessary to effectuate its object and purpose. The Court applied this doctrine to hold that the authority to use the SEF for the operation and maintenance of extension classes necessarily includes the authority to pay the salaries of non-teaching personnel, as their services are indispensable to such operation.
• Quantum Meruit — Literally meaning "as much as he deserves," this principle acts as a device to prevent undue enrichment based on the equitable postulate that it is unjust for a person to retain a benefit without paying for it. The Court applied this to excuse the recipients and approving officers from refunding the disallowed allowances, as actual services were rendered.
• Presumption of Regularity in the Performance of Official Duties — Official duties are presumed to have been regularly performed. The Court gave weight to the joint certification of the PHRMO and SDS attesting to the actual services rendered by the personnel, rejecting the COA's warrantless imputation of malfeasance.

• "In light of the principles of quantum of meruit and unjust enrichment, we find that it would be the height of injustice if the personnel who rendered services for the period in question would be asked to return the honoraria and allowances they actually worked for, simply because the approving officers failed to comply with certain procedural requirements." — This passage articulates the equitable basis for excusing the refund of the disallowed amounts despite the procedural lapses.
• "The phrase which states that the SEF shall be expended for the organization and operation of such number of extension classes as may be needed to accommodate all children of school age desiring to enter Grade 1 shows that the salaries and allowances of non-teaching personnel which, as previously discussed, are indispensable to the organization and operation of extension classes, are also included in the list for which the SEF may be utilized." — This explains the application of the doctrine of necessary implication to expand the coverage of the SEF to non-teaching personnel.

• Commission on Audit vs. Province of Cebu, 422 Phil. 519 (2001) — Cited by the petitioner to argue that SEF may be used for teachers handling extension classes. The Court distinguished this case, clarifying that it only dealt with teaching personnel and did not rule on non-teaching personnel.
• Pimentel, Jr. vs. Aguirre, 391 Phil. 84 (2000) — Cited to delineate the scope of Executive supervision over local government units as exclusive of control, relevant to the local autonomy argument.
• Department of Environment and Natural Resources vs. United Planners Consultants, Inc., 754 Phil. 513 — Cited to explain the doctrine of necessary implication used to justify the inclusion of non-teaching personnel salaries under SEF coverage.
• Samahan ng mga Progresibong Kabalaan (SPARK) vs. Quezon City, 815 Phil. 1067 (2017) — Cited for the requisites of judicial inquiry into the constitutionality or validity of a law or governmental act.

• Section 272, Republic Act No. 7160 (Local Government Code of 1991) — Provides that the proceeds of the Special Education Fund shall be allocated for the operation and maintenance of public schools.
• Section 1(a), Republic Act No. 5447 — Created the Special Education Fund and stated that it shall be expended for the organization and operation of extension classes, including the creation of positions of classroom teachers, head teachers, and principals.
• DECS-DBM-DILG Joint Circular No. 01, Series of 1998; JC No. 01-A, Series of 2000; and JC No. 01-B, Series of 2001 — Issued to govern the utilization of the SEF for the operation and maintenance of public schools, including the establishment of extension classes and the payment of salaries and allowances of personnel.
• Section 4, Article X, 1987 Constitution — Provides that the President shall exercise general supervision over local governments, interpreted to exclude the power of control.

Peralta, C. J., Perlas-Bernabe, Caguioa, A. Reyes, Jr., Gesmundo, Hernando, Carandang, Lazaro-Javier, Inting, Zalameda, Lopez, Delos Santos, and Gaerlan, JJ., concur. Leonen, J., filed a separate concurring opinion.