A.C. No. 3091 - Reyes vs. Tinga

PNCC was originally incorporated in 1966 as the Construction Development Corporation of the Philippines (CDCP), engaged in general construction.
In 1977, CDCP was granted a 30-year franchise under PD 1113 to construct, operate, and maintain toll facilities in NLEX and SLEX.
Due to inability to settle debts, the government's ownership increased to 76.8% after a debt-to-equity conversion in 1983, and the corporation was renamed PNCC.

Following privatization initiatives in the 1980s and 1990s, the Board of Directors (BOD) of PNCC approved resolutions between 2005 and 2009 granting gratuity benefits to directors and senior officers.
Key board resolutions authorized gratuity pay equivalent to one month salary per year of service, created a Retirement Fund for directors and officers, empowered a retirement fund board of trustees to approve payments, and gave special gratuities to selected former presidents.

Based on these resolutions, PNCC paid gratuity benefits amounting to PHP 90,784,975.21 to several directors and senior officers from 2007 to 2010.
The Commission on Audit (COA) Post-Audit Team issued Notice of Disallowance (ND) No. 11-002-(2007-2010) disallowing these payments for being contrary to COA Circular No. 85-55-A, DBM Circular Letter No. 2002-2, excessive, unreasonable due to PNCC's financial losses, unauthorized by law, and the Board lacking authority to create the Retirement Fund.

Some liable directors and officers appealed to COA Corporate Government Sector (COA-CGS) and later to the COA Proper.
COA-CGS affirmed the disallowance in Decision No. 2014-02.
COA Proper initially dismissed the appeal as late but later partially granted reconsideration, affirmed the ND with modification excluding one Vice-President from liability.
COA Proper held that PNCC is a Government-Owned or Controlled Corporation (GOCC) governed by relevant laws requiring prior approval from the Office of the President (OP) for such gratuity benefits, none of which were obtained; and that the Board lacked authority under PNCC By-Laws.

Petitioners filed a Petition for Certiorari before the Supreme Court challenging the COA Resolution.
Petitioners argued PNCC was not a GOCC exempt under AO No. 59, relied on prior cases (Pabion and Cuenca) treating PNCC as private, and invoked the Doctrine of Operative Fact against retroactive application of Radstock, the case confirming PNCC's GOCC status.
COA countered emphasizing PNCC's GOCC status under EO 292, PD 1597, and relevant regulations prohibiting the grant of additional benefits without prior approval.

Whether the COA committed grave abuse of discretion in affirming the disallowance of the gratuity benefits paid to PNCC directors and senior officers from 2007 to 2010.
Whether PNCC is a GOCC or private corporation for the purpose of applying government financial management laws.
Whether the PNCC Board had authority to grant gratuity benefits and create the Retirement Fund without OP approval.
Whether the petitioners are liable to return the disallowed gratuity benefits.