Title
Abella vs. Commission on Audit
Case
G.R. No. 238940
Decision Date
Apr 19, 2022
Butuan City officials disbursed EMEs despite DBM disapproval, violating LGC Section 325(h). COA disallowed payments; SC upheld refund liability, rejecting good faith claims and affirming no speedy disposition violation.
extraordinary and miscellaneous expenses
refund
violation

Case Summary (G.R. No. 238940)

Factual Background

The Department of Budget and Management (DBM) Regional Office No. XIII disapproved a separate annual item for EME appropriation in the City of Butuan’s fiscal year 2000 budget on the ground that it duplicated the purpose of discretionary funds and thus contravened Section 325(h) of RA No. 7160. Despite DBM Legal Opinion No. L-B-2001-10 affirming that EME cannot be appropriated separately from the mayor’s discretionary fund, the Sangguniang Panlungsod enacted SP Ordinance No. 2557-2004 to grant EME allowances to certain city officials, and disbursements followed. COA Regional Office No. XIII issued an ND on January 12, 2006 disallowing EMEs paid in June and July 2004 in the amount of P973,409.09; no timely appeal was taken and the ND became final with a Notice of Finality of Decision and Final Order of Adjudication issued October 26, 2009. Additional NDs disallowing EMEs paid in 2008 and other years were issued in 2009 and 2012, aggregating the contested disallowances.

Procedural History

Petitioners, as recipients of the EMEs, appealed seven of the 2009 NDs and the 2012 NDs to COA Regional Office No. XIII on July 31, 2012. The Regional Office denied the consolidated appeals in Decision No. 2013-007 dated May 6, 2013, sustaining the disallowances in reliance on DBM Legal Opinion No. L-B-2001-10 and on the DBM’s authority under Section 326 of the LGC to review appropriation ordinances. Petitioners elevated the matter to the COA Proper, which denied relief in Decision No. 2016-488 and ordered execution where applicable; the COA En Banc affirmed by Resolution No. 2018-012. Petitioners then filed a Petition for Certiorari under Rule 64 in relation to Rule 65, seeking annulment of the COA Proper decision.

The Parties’ Contentions

Petitioners principally contended that their right to a speedy disposition of cases under Art. III, Sec. 16, 1987 Constitution was violated by the protracted proceedings before COA Regional Office No. XIII and the COA Proper, that they were not bound by DBM Legal Opinion No. L-B-2001-10 because it answered the SP’s query and they were not signatories, that the disallowances infringed the City’s constitutionally-guaranteed fiscal autonomy, and that they acted in good faith as passive recipients of the EMEs and thus should be exculpated from refund liability. The COA Proper answered that the time taken to resolve the appeals was reasonable given the complexity and volume of the files, that petitioners never seasonably asserted their right to speedy disposition, that DBM Legal Opinion No. L-B-2001-10 was binding on the city and its officials, and that the disallowances were lawful and required refund of amounts received without legal basis.

Issues Presented

The Supreme Court framed the controversy in three issues: whether petitioners’ right to speedy disposition of cases was violated; whether the issuance of the Notices of Disallowance was proper; and whether petitioners’ claimed good faith can exonerate them from liability to refund the disallowed EMEs.

Ruling of the Supreme Court

The petition was dismissed for lack of merit. The Supreme Court affirmed COA Proper Decision No. 2016-488 dated December 29, 2016 and COA En Banc Resolution No. 2018-012 dated October 26, 2017. The Court held that petitioners failed to prove a constitutional violation of the right to speedy disposition, that the EME disbursements were lawfully disallowed under Section 325(h), RA No. 7160, and that petitioners’ good faith as passive recipients did not relieve them of the obligation to refund the amounts received without legal basis.

Legal Basis and Reasoning on Speedy Disposition

The Court reiterated that Art. III, Sec. 16, 1987 Constitution guarantees a speedy disposition of cases but that not every delay amounts to a constitutional violation. It applied the established balancing test derived from precedent, weighing (1) length of delay, (2) reason for the delay, (3) assertion of the right by the aggrieved party, and (4) prejudice to the party. The Court further invoked guidelines in Cagang v. Sandiganbayan for assessing inordinate delay and allocating the burden of proof. Applying those principles, the Court found that the consolidated appeals involved 94 disallowances dating from 2004 to 2009, each encompassing multiple transactions, responsible persons, and disbursement vouchers; the COA had to audit extensively and to research relevant laws and jurisprudence. The Court took judicial notice that pertinent records for 87 of the 94 NDs were destroyed in a COA office fire on February 4, 2011, complicating the audit. Petitioners also failed to assert their right to speedy disposition at the COA level; they raised the claim for the first time in the present petition. Absent a showing of vexatious, capricious, or oppressive delay or concrete prejudice resulting from the lapse of time, the Court concluded that the proceedings did not violate the constitutional guarantee.

Legal Basis and Reasoning on the Merits of the Disallowances

The Court examined Section 325(h), RA No. 7160, which prohibits appropriation for the same purpose as the local chief executive’s discretionary fund and caps discretionary appropriations at two percent of actual receipts from basic real property tax in the preceding year. It held that EME and discretionary funds serve the same purpose: to provide available funds for expenses related to official functions not covered by regular budget allocations. The Court relied on COA issuances—COA Circular No. 85-55A, COA Circular No. 89-300, COA Circular No. 2006-001, and COA Circular No. 2012-001—which consistently characterized EME as analogous to discretionary or similar expenses and prescribed the nature and permissible uses of such funds. The enactment of SP Ordinance No. 2557-2004, which appropriated separate EME amounts notwithstanding an existing appropriation for the mayor’s discretionary expenses and which designated local officials as equivalent in rank to certain national officials without DBM authorization, constituted a circumvention of the limitation under Section 325(h) and contravention of the General Appropriations Acts. The Court emphasized that local autonomy does not permit LGUs to appropriate and expend funds in a manner inconsistent with national supervision and statutory limits; DBM’s review authority under Section 326 and COA’s plenary auditing power remain operative to ensure judicious use of public funds. Consequently, the COA properly disallowed the EMEs.

Legal Basis and Reasoning on Liability of Passive Recipients

The Court held that petitioners’ claim of good faith as passive recipients did not absolve them from r

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