G.R. No. 79255 - Union of Filipro Employees vs. Benigno Vivar Jr. and Nestle Philippines, Inc.

On December 21, 1994, the Sangguniang Panlalawigan of Negros Occidental passed Resolution No. 720-A, allocating P4,000,000 of its retained earnings for the hospitalization and health care insurance benefits for 1,949 provincial officials and employees.
Following a public bidding process, the Committee on Awards granted the insurance coverage contract to Philam Care Health System Incorporated (Philam Care), leading to a Group Health Care Agreement with a total premium amount of P3,760,000.
The premium was duly paid on January 25, 1996.

On January 23, 1997, the Provincial Auditor, after a post-audit investigation, issued Notice of Suspension No. 97-001-101, suspending the premium payment due to the lack of prior approval from the Office of the President (OP) as required under Administrative Order No. 103 (AO 103) dated January 14, 1994.
The Provincial Auditor justified the suspension on the ground that the premium payment violated Republic Act No. 6758 (the Salary Standardization Law).
Petitioner eventually complied by sending a letter-request dated January 12, 1999, to the OP, seeking retroactive approval.

President Joseph E. Estrada, in a memorandum dated January 26, 1999, directed COA to lift the suspension but limited the directive to only P100,000.
In contrast, the Provincial Auditor issued Notice of Disallowance No. 99-005-101(96) on September 10, 1999, reiterating the failure to secure presidential approval and citing similar grounds as the initial suspension.

In its Decision No. 2006-044 dated July 14, 2006, the COA affirmed the Provincial Auditor’s disallowance, holding that under AO 103 all government entities, including local government units (LGUs), must secure prior presidential approval for additional benefits.
The COA relied on the provision in Republic Act No. 7160 (Local Government Code of 1991) and its need to harmonize with Section 12 of RA 6758.
The COA found that the insurance benefits duplicated statutory benefits provided under the Medicare program and imposed liability on:

All 1,949 officials and employees for their proportionate share;
Former Governor Rafael L. Coscolluela for executing the contract and disbursement voucher;
The Sangguniang Panlalawigan members who adopted Resolution No. 720-A.

Petitioner filed a Motion for Reconsideration on October 23, 2006, which was subsequently denied in Resolution No. 2008-010 dated January 30, 2008.
Dissatisfied with the COA ruling, petitioner elevated the issue through a petition for certiorari before the Supreme Court.

Whether the Commission on Audit (COA) committed grave abuse of discretion in affirming the disallowance of the P3,760,000 premium paid for the hospitalization and health care insurance benefits provided by the Province of Negros Occidental to its 1,949 personnel.

Whether, as an LGU, the Province was subject to the presidential approval requirements under AO 103, originally aimed at government offices/agencies, rather than LGUs exercising their fiscal autonomy.
Whether the disallowance was proper under the framework of RA 6758 and the state policy on salary standardization for government employees.
Whether the additional health care benefits, as distinct from productivity incentive benefits authorized by AO 103, warranted the need for prior presidential approval.