G.R. No. 169637 - Benguet State University vs. Commission on Audit

Congress enacted Republic Act No. 8292 (Higher Education Modernization Act of 1997) on July 6, 1997, which governs the composition and powers of the governing bodies of state universities and colleges.
Section 4 (d) of R.A. No. 8292 provided that income generated by a university from tuition fees, auxiliary services, and land grants may be disbursed by its governing board for "instruction, research, extension or other programs/projects of the university or college."

On October 31, 1997, the Board of Regents of Benguet State University (BSU) approved Board Resolution No. 794 to grant a rice subsidy and health care allowance to BSU employees.
The funds for these benefits were drawn from BSU’s operational income and disbursed at various periods in 1998.

On October 20, 1999, an audit under Notice of Disallowance No. 99-001-STF (98) disallowed the grant of P4,350,000.00 for the rice subsidy and health care allowance.

The audit held that R.A. No. 8292 did not authorize such benefits for employees and officials.
It cited Section 55(2) of R.A. No. 8522 (General Appropriation Act of 1998), emphasizing that a non-existent item or purpose cannot be funded by appropriation augmentation.

BSU’s request to lift the disallowance before the COA Regional Office was denied in COA-CAR Decision No. 2000-3 (January 26, 2000).

BSU filed a petition for review of COA Decision No. 2000-3, which was denied in Decision No. 2003-112 (July 17, 2003).
A motion for reconsideration was later filed by BSU but was likewise denied in COA Decision No. 2005-019 (March 17, 2005).

BSU, represented by its President Rogelio D. Colting, filed a Petition for Review on Certiorari, alleging grave abuse of discretion and reversible legal error against the COA decisions.
Although labeled as a Petition for Review on Certiorari, the Court treated it as a petition for certiorari under Rule 65 since it targeted the COA’s decisions on the ground of grave abuse of discretion.

BSU contended that Section 4(d) of R.A. No. 8292 provided it with the autonomous power to disburse funds for incentives like rice subsidy and health care allowance.
It argued that:

The allowances were justified as incentives in view of the economic plight of its employees.
The benefits did not violate the constitutional prohibition against additional, double, or indirect compensation.
The allowances were funded from income retained from the university’s operations, integral to its fiscal autonomy.

BSU further asserted that the additional benefits were not expressly prohibited by the Salary Standardization Law.

Whether BSU, as a state university, is legally authorized under R.A. No. 8292 and its implementing rules to grant rice subsidy and health care allowance to its employees.

Whether the recipients of the rice subsidy and health care allowance should be required to refund the amounts disbursed to them after the benefits were disallowed by COA.