G.R. No. 189774 - Velasco vs. Commission on Audit

Establishment and Approval of the Employee Suggestions and Incentives Awards System (ESIAS)

The Tariff Commission established its own ESIAS after the effectivity of the Administrative Code of 1987 (E.O. 292) pursuant to Section 35, Chapter 5, Subtitle A, Title I, Book V.
The ESIAS was approved by the Civil Service Commission (CSC) on December 2, 1993.
The CSC later ordered the Tariff Commission to revise its system to meet specific requirements, prompting the submission of the revised ESIAS on January 24, 1994.

Without waiting for further CSC action on the revised ESIAS, the Tariff Commission, through then Chairman Emmanuel T. Velasco, issued Special Order No. 95-02 on December 12, 1995, granting a Merit Incentive Award in amounts ranging from P1,000.00 to P7,000.00, totaling P929,000.00.
On December 16, 1996, Resolution No. 96-01 (amended by Resolution No. 96-01A) was issued, granting a Birthday Cash Gift of P2,000.00 to eligible officials and employees, with total disbursement amounting to P794,000.00.

A post-audit by the Commission on Audit (COA) resulted in the suspension of both the Merit Incentive Award and the Birthday Cash Gift due to the lack of approval from the Office of the President and absence of a proper legal basis.
The disallowances matured into final rejections, prompting Chairman Velasco to request reconsideration from the COA in a letter, suggesting that the Merit Incentive Award be converted into Hazard Pay and the Birthday Cash Gift into Amelioration Assistance.
The request was denied by State Auditor Malaya R. Ochosa, who cited Presidential Administrative Order No. 161 (AO 161) and Department of Budget and Management National Compensation Circular No. 73 (NCC 73) as prohibiting the establishment of separate incentive awards.

In a Decision rendered by COA En Banc on September 15, 2009, the disallowances were upheld.
The ruling was based on the observation that the Tariff Commission had authorized the awards in contravention of AO 161, which required prior presidential approval and revoked previous bases under EO 292.
The COA found that the petitioners had acted without due regard to valid presidential orders and, consequently, held them personally liable for the disallowed awards.

Whether the grant of the Merit Incentive Award and Birthday Cash Gift bears any legal basis given the existing administrative orders.

Petitioners argued that the ESIAS provided a valid basis for the awards.
The contention included the assertion that AO 161 should not affect the already existing ESIAS.

Whether the petitioners, particularly the approving officers who authorized the payments, should refund the awards disbursed.

Petitioners claimed that the benefits were received in good faith and thus should not be subject to refund.
The issue required determining if the presumption of good faith could prevail over the clear violation of existing administrative orders.