G.R. No. 227715 - Aquino vs. Commission on Audit

On December 19, 2014, Dr. Romeo Quilang, President of Cagayan State University, issued Special Order No. OP-2005-SO-2014-736 authorizing the payment of incentives not exceeding ₱40,000.00 to all officials and employees.

The incentives were to be sourced from the unused appropriated income for Fiscal Year 2014 and were approved by the Campus Executive Officers during an Academic and Administrative Council meeting.

Guidelines pursuant to CHED Memorandum Order No. 20, series of 2011 were followed, and a waiver was to be executed by the employees stating their willingness to refund the incentive if later disallowed.

On May 18, 2015, the COA issued a Notice of Disallowance disallowing a total of ₱7,688,000.00, holding that the disbursement was not in accordance with Republic Act No. 8292 (Higher Education Modernization Act).

The notice cited that the legal basis for the incentive payment was flawed and that the proper authority to disburse funds was vested in the board of regents, not solely with the university president.

A Notice of Finality was issued on August 31, 2016, and despite allegations by the petitioners that they were not properly informed (with service defects noted), the notice ultimately attained finality.

Petitioners Fr. Ranhilio Callangan Aquino and Dr. Pablo F. Narag filed a Petition for Certiorari on behalf of themselves and in representation of the “Permanent Employees of the Cagayan State University.”

The petition questioned both the disallowance of the year-end incentives and the process by which the incentives were granted and later disallowed.

Respondent COA argued that the petitioner-represented entity lacked juridical personality and that petitioners had not complied with procedural requirements (e.g., failing to attach certified true copies of the assailed issuances and using appropriate representative labels).

Petitioners contended that the year-end incentives were authorized by the university’s fiscal autonomy under Republic Act No. 8292 and properly constructed under CHED CMO No. 20-2011.

They argued that the incentives not only served to “incentivize” efficiency in teaching and loyalty to the institution but also had been traditionally received by employees in past years without dispute.

They further asserted that, because the funds were received in good faith, there was no basis for requiring their return, and that COA’s disallowance amounted to grave abuse of discretion.

In contrast, COA maintained that the university president’s unilateral action lacked proper Board of Regents’ endorsement and that proper procedural requirements, including proper service of the notice, were essential for invoking appeal rights.

The petition primarily challenges (a) the legal capacity of the petitioners to represent the “Permanent Employees of CSU” (given their unincorporated status) and (b) the propriety of COA’s disallowance of the incentives, including the alleged lapse in proper notice.

Additionally, the case raises broader issues on the limits of the fiscal autonomy of state universities and the strict construction of representative suits under the Rules of Court.

Does the petitioner (acting in purported representation of the “Permanent Employees of Cagayan State University”) have the legal capacity and authority to file a representative suit given the unincorporated nature and lack of established juridical personality of the association?
Is the direct recourse to the Supreme Court through a Petition for Certiorari proper, particularly when an appeal or reconsideration could have been pursued against the COA’s Notice of Disallowance?
Did the COA commit grave abuse of discretion in disallowing the year-end incentives on the basis that the disbursement violated Republic Act No. 8292?
Are the petitioners (and by extension, the employees who had the incentives deposited in their bank accounts) required to return the received incentives, notwithstanding their claim of having acted in good faith?