G.R. No. 217285 - Department of Agrarian Reform Employees Association vs. Commission on Audit

Execution of the Collective Negotiation Agreement (CNA) and Incentive Disbursements

On October 29, 2004, then-DAR Secretary Rene Villa and the Department of Agrarian Reform Employees Association (DAREA) executed a CNA.
Pursuant to the CNA, DAR Regional Office No. 02 (DAR-RO2) released a total of P6,598,000.00 as incentives to its officials and employees for achieving targets from 2008 to 2009.

ii. P1,584,000.00 for January to June 2009; and iii. P3,120,000.00 for October to December 2009.

The disbursements were disallowed through three separate Notices of Disallowance (ND Nos. 08-001-158-(08), 09-003-158-(09), and 10-001-158-(09)), issued between September 2008 and February 2010.
The COA Audit Team found that the CNA Incentives were improperly charged against the CARP Fund (Fund 158), a fund legally restricted for agrarian reform purposes, citing Section 4(3) of PD No. 1445.

DAR-RO2, represented by its Executive Committee, appealed the disallowances before COA Regional Office No. 2 (COA-RO2).
The appeal contended that the CARP Fund was a special fund—not a trust fund—and that the DBM Budget Circular 2006-1 allowed for the sourcing of incentives from available savings, including those from the CARP Fund.
COA-RO2, however, ruled that the CARP Fund is a special fund as defined in Section 20 of EO No. 229, and that CNA Incentives must be sourced solely from savings derived from the Maintenance and Other Operating Expenses (MOOE) allotment.

In a consolidated decision dated December 17, 2014, COA upheld the Notices of Disallowance and affirmed that the CARP Fund could not be used to finance the CNA Incentives.
The COA declared that the disbursements were illegal, ordering that:

Approving officers and employees who released the funds are solidarily liable, while rank-and-file employees are liable only to the extent of the amounts actually received under the principle of solutio indebiti.

Darwin-RO2 did not challenge the COA decision further, leaving unresolved liability issues for its rank-and-file members.

Representing its rank-and-file members, DAREA filed a petition for certiorari before the Court, alleging grave abuse of discretion by the COA.
DAREA argued that:

The CNA Incentives were derived from CARP Fund savings, based on opinions expressed in communications from DBM Undersecretary Relampagos and DBM Secretary Andaya, and thus were justified;
It would be “grossly unfair, unjust, and inequitable” to require refund of benefits received in good faith.

For its part, COA maintained that even a claim of good faith by passive recipients does not negate the obligation to refund disallowed funds.

The case noted that rank-and-file employees were not mere passive recipients; they had actively participated in the negotiation and approval of the CNA.
This participation implied awareness of the legal and procedural requirements governing the proper sourcing of CNA Incentives, particularly the necessity of using savings from the MOOE allotment instead of funds from the CARP Fund.

Whether the release and disbursement of CNA Incentives from the CARP Fund, instead of the necessary savings from the MOOE allotment, complies with the legal and regulatory frameworks governing special funds.
Whether the CARP Fund, being a special fund dedicated exclusively to agrarian reform, could lawfully be used to finance incentives.

Whether holding DAREA’s rank-and-file employees liable for refund under the principle of solutio indebiti is appropriate despite their argument of receiving benefits in good faith.
The extent of the employees’ participation in the negotiation and approval process as a determinant of liability in the context of unlawful fund disbursements.

Whether the COA, through its disallowance and subsequent ruling, committed grave abuse of discretion in denying the merits of the petition.
Whether the evidentiary and legal bases presented by DAREA suffice to overcome the established guidelines and precedents on the use of special funds for CNA Incentives.