G.R. No. 210905 - Philippine Overseas Employment Administration vs. Commission on Audit

The Welfare Fund for Overseas Workers was created on May 1, 1977, pursuant to LOI No. 537.
The administration of the Fund was reorganized twice:

Through Presidential Decree Nos. 1694 (May 1, 1980) and 1809 (January 16, 1981).
Later, on January 30, 1987, the Fund was reorganized into the Overseas Workers Welfare Administration (OWWA) by Executive Order No. 126.

In 2016, Republic Act (R.A.) No. 10801, known as the Overseas Workers Welfare Administration Act, renamed the Welfare Fund into the OWWA Fund and further defined the agency’s mandate.
The Philippine Overseas Employment Administration (POEA) was created on May 1, 1982 under Executive Order No. 797, absorbing functions of various agencies and later reorganized under Executive Order No. 247 in 1987.

On November 10, 1982, the Welfare Fund’s Board of Trustees approved Resolution No. 35, which:

Recognized POEA’s role in processing and determining Welfare Fund fees.
Moved for the Welfare Fund to pay POEA a service fee equivalent initially to 2% of total collections, payable on a semiannual basis.

On November 21, 2001, the OWWA Board of Trustees approved an Incentive Allowance to POEA employees for assisting in fee collection, reduced later to 1%.
The Joint Memorandum dated November 28, 2001 formalized that:

OWWA fees would be collected at the time a contract was submitted to POEA.
POEA would issue the Overseas Employment Certificate only after proof of payment was submitted.

On May 31, 2004, an anonymous letter alleged that 1% of all OWWA collections through POEA were being paid to POEA officials and employees.
POEA resident auditors investigated:

Issuing Audit Observation Memorandum No. 2004-018 on July 29, 2004.
The memorandum stated that the payment of the Incentive Allowance, amounting to P19,356,934.18, violated Section 12 of R.A. No. 6758 and Article IX, Section 8 of the Constitution.

Issuing Notice of Disallowance No. 2005-015 on April 5, 2005.
Denying POEA’s subsequent motions for reconsideration, first by the COA Legal and Adjudication Office-National (LAO-N) in 2005 and again in 2008.
COA proper later affirmed its disallowance in Decisions No. 2011-023 (January 31, 2011) and No. 2013-226 (December 23, 2013).

POEA filed a petition for review before the COA proper and subsequently a petition for certiorari with the Supreme Court.
On February 18, 2014, the Court directed the impleading of OWWA as a necessary party.
On August 8, 2014, an Amended Petition for Certiorari was filed by POEA, joined by OWWA.
The issue revolved around whether the incentive allowance should be treated as additional compensation or as part of POEA’s statutory mandate for fee collection.

Whether the grant of an incentive allowance to POEA employees, sourced from OWWA fees, is legally justified.

Does the collection of OWWA dues fall within POEA’s statutory mandate so that such compensation is inherent and non-extraordinary?

Whether the incentive allowance payments violate Section 12 of R.A. No. 6758 on allowance consolidation and the constitutional prohibition on double compensation.
Whether Section 64 of P.D. No. 1177, which governs contracting-out of services, can justify the payment of additional compensation for functions that are part of POEA’s core responsibilities.
Whether historical practice and administrative memoranda (including the 1982 resolution and 2001 board meetings) support the existence and continuity of the incentive allowance.
Whether the approval and disbursement procedures met legal standards, particularly concerning the integration of benefits into the basic salary and the absence of any proof that such payments were rendered for services beyond regular duties.