G.R. No. 245830 - Power Sector Assets and Liabilities Management Corp. vs. Commission on Audit

PSALM Corporation, a government-owned and controlled corporation created under Republic Act No. 9136, was tasked with managing power sector assets and liabilities.
The genesis of the controversy involved attempts by the corporation to implement a Corporate Performance-Based Incentive (CPBI) scheme as an alternative to a harmonized compensation plan that was earlier proposed but not approved by the Department of Budget and Management (DBM).
Republic Act No. 9136 requires that any grant of new or increased salaries, emoluments, and benefits for officials and employees of PSALM must be subject to the approval of the President of the Philippines, under Section 64.

On 13 March 2002, the Office of the President approved a Uniform Compensation Plan (UCP) for several corporations including PSALM.
In June 2007, PSALM and two other corporations sought DBM’s approval for a Harmonized Power Sector Compensation Plan; however, the DBM advised them to instead devise a performance-based incentive package.
Starting in calendar year (CY) 2008, the PSALM Board of Directors developed its own Corporate Action Plan, performance metrics, and strategic plan.
On 16 October 2009, PSALM approved its CAP/CPM/CSP resolution, and on 15 December 2009, the Board subsequently approved Resolution No. 2009-1215-006 to grant an across-the-board CPBI equivalent to five and one-half (5.5) months of basic pay, totaling Php56,604,286.37.

The CPBI was justified by PSALM on the basis of surpassing its corporate targets for CY 2009, which included achievements such as privatization of certain plants, rate adjustments, and ISO certification.
The disbursement, however, was audited and subsequently disallowed by the Commission on Audit (COA) on several grounds:

The grant did not have the requisite presidential approval mandated under Section 64 of RA 9136.
It violated provisions of Administrative Order No. 103, which suspends the grant of new or additional benefits to full-time officials and employees.
The amount disbursed was deemed “excessive” and “extravagant” when measured against the allowable limit (not exceeding three months’ basic pay, as established in earlier executive orders).

Several PSALM officials and employees were named in the Notice of Disallowance (ND) No. 10-003-(2009), with specific roles identified—from approving and certifying officers to mere payees.

After the issuance of the ND and subsequent COA decisions (Decision No. 2011-015 and Decision No. 2015-085), petitioners (PSALM and its personnel) sought to reverse the disallowance by filing for certiorari under Rules 64 and 65 of the Rules of Court.
The petition also raised issues regarding the timeliness of the filing and compliance with procedural attachments.
On a motion for reconsideration, COA Proper (via Decision No. 2018-301) partially granted relief by excusing certain officers from solidary liability while holding all payees accountable for the amounts received.

Whether the issuance of the Notice of Disallowance without first issuing an Audit Observation Memorandum (AOM) violated the petitioners’ right to due process.
Whether the technical deficiencies—including the alleged belated filing and non-compliance with attachment requirements—should render the petition inadmissible.

Whether the CPBI granted by PSALM was legitimately characterized as a “performance-based incentive” exempt from the requirement of prior presidential approval under Section 64 of RA 9136.
Whether the incentive grant of 5.5 months’ basic pay is excessive and contravenes established ceilings provided by executive issuances (e.g., Executive Orders No. 486 and 518) which cap incentives at three months’ basic pay.
Whether the actions of the approving and certifying officers, as well as those of the payees, were in good faith or exhibited malice, gross negligence, and an attempt to circumvent statutory requirements.

Whether public officers and employees who received the CPBI must return the disbursed amounts under the principle of solutio indebiti.
The extent to which the concept of solidary liability applies to those who authorized or approved the disbursement, particularly where bad faith or gross negligence is evident.