G.R. No. 242644 - Engineer Alex C. Paguio, et al. vs. Commission on Audit, Nilda M. Blanco, et al.

The petitioners are officials of the Pagsanjan Water District—a government-owned and controlled corporation operating as a local water utility in the Municipality of Pagsanjan, Laguna.
Key petitioners include Engineer Alex C. Paguio (the General Manager), Angeline R. Aguilar (Administrative Division Manager), and board members Edita B. Abarquez, Marifel B. Pabilonia, Nina P. Velasco, Fred V. Capistrano, and Angelito T. Bombay.

On January 25, 2005, the Interim Board, by Board Resolution No. 04, series of 2005, authorized the payment of Extraordinary and Miscellaneous Expenses to the General Manager at PHP 13,000.00 per month, effective January 1, 2005.
Subsequent to this, Board Resolution No. 136, series of 2006, increased the allowance to PHP 18,000.00 per month, which was regularly disbursed to Paguio.

On June 2, 2011, Audit Observation Memorandum No. 2011-100-005 was issued by COA officials, identifying irregularities in the payment of the allowance for the period January 2009 to December 31, 2010.
The memorandum noted that PHP 432,000.00 (18,000 per month for 24 months) was paid to Paguio and charged to Extraordinary and Miscellaneous Expenses, allegedly violating Section 25 of the 2009 General Appropriations Act and Section 28 of the 2010 General Appropriations Act.
It was further observed that payments were made on a commutable basis via certifications instead of being reimbursed with proper receipts, contrary to the guidelines of COA Circular No. 2006-01.

On May 10, 2012, the Notice of Disallowance (No. 2012-100-002 (09 & 10)) was issued, disallowing the PHP 432,000.00 paid in 2009 and 2010.
The Notice held Paguio as the claimant and the agency head who approved the payments; it also pinpointed Aguilar for her role in pre-auditing and certifying the supporting documents, as well as the board members for approving the disbursement.

Petitioners contended that the allowance was validly granted based on the Board’s authority—provided under Republic Act No. 9286—to fix the compensation of the General Manager, emphasizing that Paguio’s role entailed tremendous responsibilities justifying the expense.
They further argued that the payments were made in good faith and in compliance with applicable circulars (notably Circular No. 2006-01 and Circular No. 89-300), which they claimed validated the method of payment through certifications.

The Commission, in a Decision dated January 29, 2018 (COA Decision No. 2018-187), affirmed the Notice of Disallowance on the ground that the payment exceeded statutory limits, did not comply with reimbursement guidelines, and violated position classification requirements under the Salary Standardization Law.
Petitioners subsequently filed a petition for review on certiorari under Rules 64 and 65, challenging the COA’s decision and asserting that no grave abuse of discretion had been committed by the Commission.

Whether the Commission on Audit committed grave abuse of discretion amounting to lack or excess of jurisdiction in disallowing the grant of Extraordinary and Miscellaneous Expenses to the General Manager of Pagsanjan Water District.

Whether the disallowance was a valid exercise of the Commission’s constitutional mandate to scrutinize and disallow irregular government expenditures.
Whether the statutory limitations, particularly the ceilings provided under the 2009 and 2010 General Appropriations Acts, were properly considered.

Whether the Commission on Audit committed grave abuse of discretion in holding the General Manager, Administrative Division Manager, and Board members jointly and solidarily liable to return the disallowed amount.

Whether the imposition of liability via the principle of solutio indebiti was justified given the alleged procedural and substantive irregularities in the payment process.
Whether the reliance on the non-reimbursable mode of payment and the failure to submit proper receipts, as required by COA Circular No. 2006-01, adequately supports the disallowance and subsequent liability.