G.R. No. 211966 - Abagat vs. Spouses Clarito

Engr. Numeriano M. CastaAeda, Jr., as General Manager of San Rafael Water District (SRWD), along with other SRWD officials and employees, questioned the Notices of Disallowance (NDs) Nos. 12-001-101(11) and 12-002-101(11) issued by the Commission on Audit (COA) disallowing payments made by SRWD.
The disallowed payments included additional allowances and bonuses to employees hired after December 31, 1999, totaling PHP 857,340.75, and year-end financial assistance and cash gift to the SRWD Board of Directors (BOD) amounting to PHP 239,000.00 for the 2011 period.
The COA held the petitioners liable for refunding these disallowed amounts.

San Rafael Water District (SRWD) is a government-owned and controlled corporation (GOCC) organized under Presidential Decree No. 198 and amendments.
Republic Act No. 6758 (Compensation and Position Classification Act of 1989), specifically Section 12, prescribes that all allowances are deemed integrated into standardized salary rates except for certain enumerated allowances and those additional compensations determined by the Department of Budget and Management (DBM).
Only incumbents receiving additional compensations as of July 1, 1989, are authorized to continue receiving them.
In 2011, SRWD paid 22 employees hired after December 31, 1999, additional benefits including rice, grocery, medical allowances, and year-end financial assistance totaling PHP 1,727,409.75, and year-end financial assistance and cash gift amounting to PHP 239,000.00 to its BOD.
The Audit Team issued an Audit Observation Memorandum finding these payments to have no legal basis.
SRWD defended the payments by reliance on an authorization letter from DBM dated February 11, 2003 (Garcia Letter) and authorizations from the Local Water Utility Administration (LWUA).

COA issued Notices of Disallowance (NDs) disallowing the payments and naming petitioners liable for refunding the amounts.
Petitioners appealed at COA Regional Office No. III but the appeal was denied.
A Petition for Review was filed by petitioners asserting reliance on valid DBM and LWUA authority.

COA affirmed the disallowance but initially excused employee recipients from refunding.
Upon motion for partial reconsideration, COA reversed its ruling and held all payees liable to refund the amounts received, except the approving and certifying officers are solidarily liable for the net amounts after refunds.
The approving officers’ claim of good faith reliance on the Garcia Letter and LWUA authorizations was rejected due to gross negligence and disregard of laws and regulations.

Whether the COA gravely abused its discretion in upholding the disallowance notices disallowing additional allowances and year-end benefits paid to employees and BOD members of SRWD.
Whether petitioners, including employees and officials, are liable to refund the disallowed amounts.