G.R. No. 220211 - Edron Construction Corp. vs. Provincial Government of Surigao del Sur

The case centers on the grant of allowances and incentives to the officers and employees of the petitioner Maritime Industry Authority (MIA).
MIA is an attached agency of the Department of Transportation and Communication, created under Presidential Decree No. 474.
Republic Act (RA) No. 6758, effective July 1, 1989, standardized the compensation and position classification of government employees.
Section 12 of RA 6758 consolidated allowances into the standardized salary, except for enumerated non-integrated allowances such as representation and transportation allowances, clothing and laundry allowances, specific subsistence allowances, hazard pay, and allowances of foreign service personnel.
The provision also allows for “such other additional compensation not otherwise specified herein as may be determined by the DBM” to continue for those already receiving them as of July 1, 1989.

On September 30, 1989, the Department of Budget and Management (DBM) issued National Compensation Circular Nos. 56 and 59 to implement RA 6758.
In light of these circulars, MIA discontinued certain allowances and incentives previously granted to its employees.
A memorandum dated February 10, 2000, recommended the restoration (or approval) of various allowances and incentives to ameliorate inflation effects and to enhance employee welfare and retention.
The memorandum, allegedly stamped with “approved” and bearing the signature of then-President Joseph Ejercito Estrada on October 16, 2000, formed the basis for MIA to resume granting specific allowances starting January 2001.

Inflation-caused hardships potentially prompting the exodus of qualified personnel.
The need to enhance employee welfare and productivity and deter corrupt practices.

The Resident Auditor of MIA issued several notices of disallowance for amounts totalling approximately ₱5,565,445.02, covering disbursements from January to May 2001.
The notices specified disallowed items such as rice, medical, performance incentive, birthday/employment anniversary, and representation allowances.
The grounds for disallowance were:

The allowances, by law, were deemed to be integrated into the standardized salary under Section 12 of RA 6758.
The payment of such allowances would constitute double compensation in violation of Article IX(B), Section 8 of the 1987 Constitution.
The alleged approval by the President, evidenced only by a photocopy of the memorandum (with no original on file in Malacañang), was insufficient as it did not meet the legislative or legal requirements for granting additional allowances.

MIA filed a request for reconsideration, which was denied by the Commission on Audit (COA) in a decision dated June 23, 2003.
MIA subsequently filed a petition for review before the COA.
In the decision dated March 3, 2005, COA denied most of the petition except for a limited relief concerning the per diem and monthly commutable allowance of Board members.
MIA sought further relief via a petition for certiorari before the Supreme Court.
The Supreme Court, while noting that not all errors or decisions by COA are reviewable, examined the issue primarily under the ambit of grave abuse of discretion and questions of jurisdiction.

Argued that the allowances and incentives for its employees were not integrated into the standardized salary based on a particular reading of Section 12 of RA 6758.
Maintained that the DBM was to issue a circular expressly identifying which additional allowances could remain non-integrated; in the absence of such publication for certain allowances, they could continue as valid additional benefits.
Relied on precedent cases to support the contention that non-publication of the circular should render some allowances non-integrated.

Asserted that Section 12 of RA 6758 is self-executing and that, absent specific exclusions within the law and supporting DBM issuance, all allowances are automatically deemed integrated into the standardized salary.
Maintained that even if the President’s approval existed through the memorandum, it did not have the legal force to grant additional allowances since a law is required for such grant.
Emphasized that under constitutional principles on double compensation, the continued grant of these allowances is unauthorized.

The court noted the remarkable disparities in disbursed amounts among employees, particularly pointing to the exorbitant sums received by one cashier (Erlinda Baltazar) compared to minimal amounts received by other officials.
There was an indication of potential irregularities or a failure to exercise due diligence by the approving officers.
COA held several individuals solidarily liable for the disallowed amounts, including approving officers and the cashier who received the highest amounts.
The decision underscores that an officer or employee may retain disbursements received in good faith unless bad faith or gross negligence is established.
The case also touched upon the proper method of reviewing administrative agency decisions under Rule 64 (petitions for certiorari) with a limited scope confined to questions of jurisdiction and grave abuse of discretion.

Whether the approval (allegedly obtained by a memorandum with the President’s signature) provided a lawful basis for MIA to restore the allowances and incentives.
Whether the allowances granted were correctly characterized as additional, non-integrated benefits or if they should have been considered as part of the standardized salary under RA 6758.

Whether the integration of allowances as provided by Section 12 of RA 6758 was correctly applied in this case.
Whether receiving disbursed amounts corresponding to the allowances would amount to double compensation in violation of Article IX(B), Section 8 of the 1987 Constitution.

Whether MIA’s reliance on a photocopy of the memorandum (without the original on file) sufficiently established the alleged presidential approval.
Whether due process was observed in the issuance and review of the notices of disallowance, including proper administrative channels and the opportunity to present evidence.

Determining which officers or employees should be held liable for refunding the disallowed amounts.
Whether the disparity in disbursed amounts, particularly in the case of Erlinda Baltazar, contributed to a finding of bad faith or gross negligence upon the part of the approving officers.