G.R. No. 237813 - Dubongco vs. Commission on Audit

Background and Issuance of the Collective Negotiation Agreement (CNA) Incentive

On November 14, 2002, the Public Sector Labor Management Council (PSLMC) issued Resolution No. 4, Series of 2002, entitled “Grant of Collective Negotiation Agreement (CNA) Incentive for National Government Agencies, State Universities and Colleges and Local Government Units.”
The CNA Incentive is designed to reward employees in recognition of the joint efforts between labor and management in achieving planned targets, programs, and services approved in the agency’s budget at a reduced cost.
Section 1 of the Resolution mandates that only the savings generated after the signing of the CNA may be used for the CNA Incentive, where “savings” refers to the uncommitted balance from the agency’s released allotment that is free from any obligation or specific purpose.
The savings may derive from:

Balances remaining after the completion of the authorized work or activity.
Unused funds arising from unpaid compensation and costs for vacant positions.
Savings generated from improved systems, efficiencies, and cost-cutting measures under the CNA.

Administrative Order (A.O.) No. 135, Series of 2005, issued by former President Gloria Macapagal-Arroyo, confirmed the grant of the CNA Incentive to rank-and-file employees.
The Department of Budget and Management (DBM) issued Budget Circular No. 2006-1 on February 1, 2006, to implement A.O. No. 135, which provided the detailed guidelines on the grant of the CNA Incentive.

Section 7.1 of the Circular explicitly stated that the CNA Incentive must be sourced solely from savings from released Maintenance and Other Operating Expenses (MOOE) allotments for the year under review.

In 2009 and 2010, the Department of Agrarian Reform-Provincial Office-Cavite (DARPO-Cavite) released the CNA Incentive to its officials and employees, sourcing the funds from the Comprehensive Agrarian Reform Program (CARP) Fund (Fund 158).
The Commission on Audit (COA), through its provincial audit team, issued two Notices of Disallowance:

The reasons for the disallowance centered on the allegation that the appropriation and expenditure of the CARP Fund should strictly follow the law creating it, and that its use for the CNA Incentive, instead of the mandated MOOE savings, was illegal.

The COA Regional Office No. IV, in a Decision dated September 1, 2011, ruled that the CNA Incentive may only be sourced from MOOE savings based on the DBM Circular’s mandatory provisions.

The regional office denied the appeals of Cynthia E. Lapid and Felixberto Q. Kagahastian on the disallowances.

The COA En Banc, in a Decision dated May 2, 2017, affirmed that the use of the CARP Fund for the CNA Incentive was illegal.

It emphasized that the CARP Fund is a special trust fund dedicated exclusively to CARP projects.
The decision noted that good faith could not overcome the explicit statutory limitations and previous disallowances on the ground of illegality.

Petitioner James Arthur T. Dubongco, as the current Provincial Agrarian Reform Program Officer II of DARPO-Cavite, filed a petition for certiorari under Rule 64 of the Revised Rules of Court seeking to set aside the COA decisions.

A motion for reconsideration was likewise filed by the petitioner but was denied by the COA on October 26, 2017.

Whether the CARP Fund (Fund 158) can be legally utilized as a valid source for granting the CNA Incentive to rank-and-file employees.
Whether DARPO-Cavite’s use of the CARP Fund, rather than the mandated MOOE savings, complies with the explicit provisions stipulated in PSLMC Resolution No. 4, A.O. No. 135, and DBM Budget Circular No. 2006-1.

Whether the recipients of the disallowed CNA Incentive may be held personally liable and required to refund the amounts disbursed.
Whether the doctrine of unjust enrichment and the provisions of Section 103 of Presidential Decree No. 1445 impose personal liability on public officials or employees involved in the illegal expenditure.