A COA Resident Auditor's unjustified inaction and failure to perform mandated audit activities, such as prioritizing the audit of high-value transactions, demanding compliance with reportorial requirements, suspending salaries for non-compliance, and reporting irregularities, despite the lifting of pre-audit, constitutes grave misconduct due to a clear and deliberate intent to disregard established COA rules and regulations, warranting dismissal from service.

The Philippine National Police (PNP) initiated a program for the repair and refurbishing of twenty-eight (28) V-150 Light Armored Vehicles (LAVs), for which the Department of Budget and Management (DBM) released P409,740,000.00. Subsequent investigations by the Commission on Audit (COA) and the Criminal Investigation and Detection Group (CIDG) revealed significant irregularities and illegalities in the procurement process undertaken by the PNP Logistics Support Service - Bids and Awards Committee (LSS-BAC).

• On August 14, 2007, PNP Director General Oscar C. Calderon sought the repair and refurbishing of ten (10) LAVs, later increased to twenty-eight (28) LAVs with a supplemental budget, totaling P409,740,000.00 released by the DBM.
• On December 12, 2007, the PNP National Headquarters Bids and Awards Committee delegated the procurement to its Logistics Support Service - Bids and Awards Committee (LSS-BAC).
• Audit findings by COA and a CIDG report indicated irregularities in the procurement: non-provision of bidding documents, no pre-procurement conference, publication of bid invitations in a questionable newspaper, no pre-bid conference, non-submission of eligibility/technical/financial documents by bidders, no post-qualification, hurried award and payment on December 27, 2007, and ghost deliveries of engines and transmissions.
• Petitioner Jaime V. Serrano was the COA Supervisor and Resident Auditor of the PNP at the time of these transactions.
• FFIB-MOLEO charged petitioner as an accessory for failing to observe pre-audit requirements and other COA Rules and Regulations.
• Petitioner admitted failing to perform pre-audit or post-audit activities concerning the LAV contracts.
• Petitioner specifically failed to: (a) prioritize the audit of the P409,740,000.00 LAV transactions; (b) bring the non-submission of required documents by PNP to management's attention; (c) suspend salaries of erring PNP employees as per COA Circular No. 95-006; and (d) notify his superiors of his inability to conduct the audit.
• The Ombudsman found petitioner administratively liable for grave misconduct and serious dishonesty, citing violations of COA Memorandum No. 2005-027, COA Circular No. 87-278, COA Memorandum No. 87-480, COA Circular No. 76-34 (failure to conduct contract review and random inspections), COA Circular No. 95-006 (failure to act on non-submission of required documents), and COA Circular No. 94-001 (failure to prepare an Audit Observation Memorandum).

• Petitioner argued that he had no knowledge of the offenses charged.
• Petitioner contended that COA Circular No. 95-006 lifted all pre-audit activities, so he could not be faulted for failing to observe pre-audit conditions.
• Petitioner claimed he was unable to focus on the LAV contracts due to other equally important audit functions, the sheer volume and complexity of PNP transactions, and delayed submission of disbursement vouchers by the PNP.
• Petitioner asserted that a post-audit of all PNP financial transactions was physically impossible.
• Petitioner stated he had instructed PNP Technical Audit Specialist Amor J. Quiambao to conduct inspections and contract reviews and had requested PNP management to submit necessary documents.
• Petitioner argued that his inaction did not constitute grave misconduct or serious dishonesty.
• Petitioner claimed the penalty of dismissal was not commensurate to the alleged infraction, and his 37 years of public service without any prior administrative case should be a mitigating circumstance.

• FFIB-MOLEO countered that petitioner's excuses were flimsy and deliberate attempts to conceal anomalous transactions.
• The Office of the Solicitor General (OSG) argued that petitioner's instruction to Quiambao was insufficient; he should have supervised the work and performed his duties with the government's interest in mind.
• OSG asserted that grave misconduct and serious dishonesty warrant dismissal, and petitioner's length of service should be taken against him for failing to exhibit the required sense of duty.
• Respondent argued that petitioner failed to observe existing COA Rules and Regulations, particularly in not prioritizing the audit of the substantial LAV transactions despite the lifting of pre-audit.
• Respondent contended that petitioner's claim of being understaffed was not an excuse for failing to report irregularities or act on the PNP's non-compliance with COA Circular No. 95-006.

• Whether petitioner Jaime V. Serrano is administratively liable for his inaction as COA Supervisor and Resident Auditor of the PNP in connection with the agency's repair and refurbishing contracts for the LAVs.
• Whether petitioner's inaction constituted grave misconduct and serious dishonesty.
• Whether the penalty of dismissal from service was appropriate.

• The Supreme Court denied the petition and affirmed the Court of Appeals' decision with modification, finding petitioner Jaime V. Serrano guilty of grave misconduct but absolving him of serious dishonesty.
• The Court ruled that petitioner's inaction was unjustified. Although pre-audit was lifted under COA Circular No. 95-006, the submission of certain documents and reports by the agency remained mandatory, and non-compliance warranted suspension of salaries of erring employees, which petitioner failed to enforce.
• Petitioner's failure to prioritize the audit of the P409,740,000.00 LAV transaction, despite its magnitude, was deemed a dereliction of duty. Being undermanned was not a valid excuse.
• Petitioner's instruction to Quiambao was considered a mere afterthought and insufficient to exculpate him, as he failed to ensure compliance or take further action upon PNP's non-submission of documents. His inaction allowed the irregular transaction to proceed.
• The Court found petitioner's omission to be willful and intentional, constituting a clear and deliberate intent to disregard established COA rules, thus qualifying as grave misconduct.
• However, the Court found no malicious intent on petitioner's part to conceal the truth or make false statements, which are elements of serious dishonesty. The Ombudsman itself found petitioner did not conspire with the principal accused.
• The penalty for grave misconduct, under Section 52(A)(3) of the Uniform Rules on Administrative Cases in the Civil Service, is dismissal from service for the first offense. The Court found petitioner's display of arrogance in claiming he did nothing wrong, despite 37 years in COA, indicative of serious moral depravity and lack of judgment, justifying the dismissal.

• Grave Misconduct — Misconduct is a transgression of some established and definite rule of action, more particularly, unlawful behavior or gross negligence by a public officer. It is considered grave where the elements of corruption and clear intent to violate the law or flagrant disregard of established rule are present. The Court found petitioner's inaction, particularly his failure to prioritize the audit of a P409.74 million transaction, demand document submission, suspend salaries for non-compliance, and report irregularities, demonstrated a willful and intentional disregard of various COA Circulars, thus constituting grave misconduct.
• Serious Dishonesty — Dishonesty is a disposition to lie, cheat, deceive, or defraud; untrustworthiness, lack of integrity. Serious dishonesty involves acts causing serious damage to the government, directly involving accountable property or money with intent for material gain, exhibiting moral depravity, etc. The Court found no proof of malicious intent by petitioner to conceal truth or make false statements, nor evidence of conspiracy or acting as an accomplice in corruption, thus absolving him of serious dishonesty.
• COA Circular No. 95-006 (Lifting of Pre-Audit and Responsibilities of Agency Officials and Auditors) — This circular lifted pre-audit activities but mandated agencies to submit specific documents and reports to Resident Auditors (e.g., monthly reports of transactions, notice of scheduled deliveries, pre-repair evaluation reports). Non-submission is a ground for automatic salary suspension of erring officials. The Court emphasized that this circular did not render Resident Auditors powerless; petitioner failed to enforce these reportorial requirements and the corresponding sanction for non-compliance by the PNP regarding the LAV transactions.
• Duty of Resident Auditor post-lifting of Pre-Audit — Even with pre-audit lifted, Resident Auditors are not merely passive. They have a continuing duty to conduct regular audits, detect and prevent irregular transactions, and ensure government funds are properly expended. Petitioner failed in this duty by not acting on the highly irregular and substantial LAV procurement.
• Accountability of Public Officers — Public office is a public trust. Public officers must at all times be accountable to the people, serve them with utmost responsibility, integrity, loyalty, and efficiency. Petitioner's failure to perform his duties as a COA Auditor was a breach of this trust.

• "Being undermanned is nothing new to public service. It is not something we can use as a convenient tool to wax negligence and failure. Time and again, the Court has held that having a heavy workload is not a valid excuse. Otherwise, every government employee charged with dereliction of duty would proffer such a convenient excuse to escape liability, to the great prejudice of the public."
• "Verily, the role of the Resident Auditor did not become passive and reactive by the mere lifting of pre-audit activities, as a rule, under COA Circular No. 95-006. It did not render Resident Auditors powerless when it comes to detecting and preventing irregular or anomalous transactions entered into by various government agencies."
• "This unlawful transaction worth P409,740,000.00 of people's money easily got lost because petitioner, as COA Supervisor and Resident Auditor of the PNP, intentionally neglected to disapprove it. The inculpatory evidence against him is too glaring to ignore."
• "What baffles the Court most is petitioner's display of sheer arrogance in claiming that he did nothing wrong. If this is how petitioner sees his inaction, there is serious moral depravity and lack of judgment on his part as he cannot distinguish between right and wrong despite his thirty-seven (37) years in service in the COA."

• FFIB-MOLEO v. Jandayan — Cited for the definitions of grave misconduct and serious dishonesty, which the Court applied to petitioner's actions and state of mind.
• Seangio v. Parce — Cited in relation to the principle that a heavy workload is not a valid excuse for dereliction of duty by a public employee.

• COA Circular No. 95-006 — This circular lifted pre-audit but maintained the requirement for agencies to submit various documents and reports to COA auditors and empowered auditors to enforce compliance, including salary suspension. Petitioner's failure to enforce its provisions was central to the finding of grave misconduct.
• COA Memorandum No. 2005-027; COA Circular No. 87-278; COA Memorandum No. 87-480; COA Circular No. 76-34 — These were enumerated by the Ombudsman as COA regulations petitioner violated by failing to conduct necessary contract reviews and random inspections despite red flags.
• COA Circular No. 94-001 — Petitioner violated this by failing to prepare an Audit Observation Memorandum despite glaring red flags and fraud indicators in the LAV transactions.
• Section 100 of Presidential Decree No. 1445 — Referenced within COA Circular No. 95-006, requiring disbursing officers to render monthly reports of their transactions to the auditor.
• Section 52(A)(3) of the Uniform Rules on Administrative Cases in the Civil Service (CSC Resolution No. 991936) — This rule classifies grave misconduct as a grave offense punishable by dismissal from service even for the first infraction, which was applied to petitioner.
• Republic Act No. 7080 (Plunder Law) — Mentioned as one of the laws allegedly violated by PNP officials in the initial complaint.
• Republic Act No. 3019 (Anti-Graft and Corrupt Practices Act) — Mentioned as one of the laws allegedly violated by PNP officials in the initial complaint.
• Republic Act No. 9184 (Government Procurement Reform Act) — Mentioned as one of the laws allegedly violated by PNP officials in the initial complaint.

• Caguioa, J. — Justice Caguioa dissented, opining that petitioner Serrano should only be liable for Simple Misconduct, not Grave Misconduct, and consequently not for Serious Dishonesty. He argued that there was no substantial evidence of corruption, willful intent to violate the law, or flagrant disregard of rules (bad faith) to elevate the misconduct to grave. He pointed out that Serrano took some action by instructing Quiambao to inspect and requesting documents, and reported the delayed submission in the PNP Annual Audit Report. Justice Caguioa emphasized that Serrano's 37 years of unblemished service and candid acknowledgment of fault negate ill intent. Even if liable for grave misconduct, he believed mitigating circumstances (first offense, long service, admission) warranted a reduction of penalty from dismissal to one-year suspension.