G.R. No. 232272 - Montejo vs. Commission on Audit

Petitioner, Secretary Mario G. Montejo in his capacity as DOST Secretary, authorized the release of Collective Negotiation Agreement Incentives (CNA Incentives) amounting to ₱5,870,883.79 to DOST employees.
The payment was supported by various reference documents and particulars, including check numbers and dates:

May 25, 2010 – Mario P. Bravo received ₱25,000.00; a lump sum of ₱2,575,000.00 directed to “DOST Officers and Employees” on the same day with check no. 307423.
May 28, 2010 – Lilibeth O. Furoc received ₱25,000.00;
December 16, 2010 – Payments to Mario G. Montejo, Marilyn M. Yap, and Mario P. Bravo, each of ₱25,000.00 via checks 534033, 534034, and 534035 respectively;
December 22, 2010 – “DOST Officers and Employees” received ₱3,166,667.12 (check no. 307547);
December 29, 2010 – Maxima M. Taparan received ₱4,166.67 (check no. 534285).

On July 5, 2011, petitioner received an Audit Observation Memorandum (AOM) from the COA’s Audit Team Leader noting several deficiencies in the grant of CNA Incentives.
The deficiencies cited included:

Lack of supporting documentation such as a written resolution by DOST Management or certification by the Head of the Agency.
Absence of detailed computation of unencumbered savings and proof of a planned program.
Non-compliance with specific provisions—namely, alleged violations of Section 3 of Administrative Order No. 135, paragraph 5.6.1 of Budget Circular No. 2006-1, and Section 5.7 regarding mid-year payment to officers and managerial employees.

Petitioner filed a Letter-Reply on July 11, 2011 providing the required documents, certifications, and justifications.
On November 17, 2011, State Auditors Ares and Sebial issued Notice of Disallowance No. 2011-021-101-(11), disallowing the grant for the entire ₱5,870,883.79 on grounds of non-compliance with PSLMC Resolution No. 4 (2002), Budget Circular No. 2006-1, and Administrative Order No. 135.

In CY 2011, petitioner released another round of CNA Incentives amounting to ₱4,773,821.49, with payments such as:

May 31, 2011 – “DOST Officers and Employees” received ₱4,557,800.00 and individual payments to Mario G. Montejo and Rodel A. Lara of ₱40,000.00 each.
December 31, 2011 – Individual payments of ₱40,000.00 to Wilhelmina R. Mercado, Marilyn M. Yap, and Mario P. Bravo; plus payments to Floramel E. Gaerlan (₱9,354.83) and Corazon M. Garcia (₱6,666.66).

On November 18, 2011, COA issued Notice of Disallowance No. 2011-022-101-(11) covering these payments.
Petitioner appealed these disallowances to the National Government Sector (NGS), Cluster B – General Public Services II and Defense.

The NGS rendered its Decision on October 4, 2012, affirming the Notices of Disallowance and denying the appeal, stating that the disallowed amounts remained valid and without prejudice for further appeal.
Petitioner then filed a Petition for Review with COA, challenging the NGS decision.
On October 18, 2016, the COA En Banc rendered a Decision denying the petition for review due to lack of merit, thereby affirming the disallowance of the payment of CNA Incentives totaling ₱10,644,705.28 (sum of CY 2010 and CY 2011 disbursements).

Petitioner maintained that the grant of CNA Incentives was based on duly identified cost-cutting measures and that the funds were sourced from savings generated from these measures, evidenced by comparative statements of DBM-approved operating expenses versus actual expenses.
He argued that the payment substantially complied with the requirements under Budget Circular No. 2006-1 and that the disbursement was executed in good faith—hence, no liability should attach.
In his contentions, petitioner raised issues regarding the interpretation of the DBM Circular which, in his view, allowed for mid-year disbursements provided that the planned activities were implemented and savings were realized.

The COA and its auditors maintained that the CNA Incentives must be paid as a one-time benefit after the end of the year once all programs have been implemented and completed.
They asserted that the mid-year disbursements contravened the specific provisions of Budget Circular No. 2006-1 (particularly Sections 5.7, 7.1, and 7.1.1).
The respondents further contended that there was failure to prove that the disbursements were sourced solely from the savings derived from cost-cutting measures.
Cited jurisprudence underscored the deference accorded to COA’s decisions and explained that public officers acting in good faith may be absolved from personal liability for refund, but only when no clear evidence of bad faith or malice is present.

Whether the disbursement of the CNA Incentives by the DOST, particularly the mid-year releases in 2010 and 2011, complied with the mandates of Budget Circular No. 2006-1 and other applicable administrative orders.

Whether the timing of the disbursement—to be made only as a one-time benefit after the end of the year—was a mandatory requirement.
Whether the documentary proof presented was sufficient to show that the funds for the CNA Incentives were indeed sourced from the savings generated through cost-cutting measures.

Whether the petitioner’s exercise of authority in releasing the funds and relying on internal guidelines amounted to an act in good faith that should absolve him and the other responsible officers from personal liability for refund.
Whether the COA committed grave abuse of discretion or acted within its constitutional and statutory mandate in disallowing the CNA Incentives and holding the approving officers solidarily liable.