G.R. No. 218241 - Liwanag vs. Commission on Audit

Engr. Reynaldo C. Liwanag, in his capacity as the General Manager of the Angeles City Water District (ACWD), is the petitioner challenging actions of the Commission on Audit (COA).
The dispute arises from a series of Notices of Disallowance (NDs) issued by the COA related to the disbursement of grocery allowance and year-end financial assistance granted to ACWD employees for the years 2008 and 2009.

The Audit Team Leader (ATL) of ACWD initially issued the following NDs on November 26, 2012:

ND No. 2012-003-101 (2008) disallowing the grocery allowance amounting to ₱7,248,000.00.
ND No. 2012-004-101 (2008) disallowing a portion of the year-end financial assistance (disallowed ₱5,348,855.00 from a benefit amount of ₱6,418,626.00).
ND No. 2012-005-101 (2009) concerning the grocery allowance with a minor variance between the audited and disallowed amounts.
ND No. 2012-006-101 (2009) concerning year-end financial assistance disallowing ₱6,462,708.50 from a benefit amount of ₱7,745,632.50.

The aggregate amounts involved were originally ₱14,556,195.00; however, the Supervising Auditor later advanced a representation to increase the aggregate disallowance to ₱26,462,024.00.
Disallowances were based on:

The absence of a legal basis for granting the grocery allowance, as similar expenses in previous years (2010–2011) were disallowed.
The year-end financial assistance not being issued in accordance with benefits established by DBM letters and PAWAD memoranda, particularly relative to the guidelines stipulated as of December 31, 1999.

The petitioner appealed the initial NDs with the COA Regional Office 3 (COA-RO3) on May 28, 2013.
The regional appeal was denied via Decision No. 2013-91 (dated September 18, 2013), received by the petitioner on September 19, 2013.
The petitioner subsequently filed a petition for review with the COA Proper on October 7, 2013, and paid the filing fee on December 27, 2013.
The COA Proper dismissed the petition for review on February 23, 2015, ruling it was filed out of time under Section 3, Rule VII of the 2009 Revised Rules of Procedure of the COA (RRPC), rendering the decision of the Regional Director final and executory.

The commencement of a “special audit” sought to reopen previously audited transactions pertaining to grocery allowance and year-end financial assistance.
The petitioner argued that the special audit was irregular because:

The auditor conducting the reopening (the ATL) lacked proper authority since the accounts had already been audited by earlier auditors.
The COA did not comply with its own guidelines, particularly those set forth in COA Circular 2009-006, which demanded preliminary discussion with the previous auditors and strict observance of office orders.

The alleged irregularities highlighted violation of due process, given that the procedural guidelines intended to safeguard against arbitrariness were not observed.

Whether the COA erred by ruling that ACWD’s petition for review was filed out of time, given the contention that the increase in disallowance amounts rendered the review automatic and ongoing under Section 7, Rule V of the 2009 RRPC.

Whether the petitioner, by virtue of his position as General Manager, had the inherent authority to institute the recourse without being limited solely to a motion for reconsideration as purportedly indicated by ACWD’s Board Resolution.

Whether the disallowance of the grocery allowance and year-end financial assistance was proper considering:

The nature of the allowances as “consolidated” into employees' compensation under the Salary Standardization Law.
The arguments regarding whether such benefits were an established and existing practice subject to compliance with parameters issued by DBM correspondence and compensation circulars.

Whether the COA abused its discretion in failing to rule that the special audit conducted by the ATL was invalid and illegal due to non-compliance with prescribed procedures and guidelines, specifically the requirements for preliminary discussions with previous auditors as mandated by COA Circular 2009-006.

Whether the COA erred in not applying settled jurisprudence on the entitlement to and refund of the disallowed allowances granted to ACWD employees.