Title
Efraim C. Genuino vs. Commission on Audit , Commission Proper, Office of the Director, Corporate Government Sector, Cluster 6
Case
G.R. No. 258159
Decision Date
Jun 13, 2023
PAGCOR donations to private association disallowed by COA; Genuino held personally liable for approving non-public purpose funds. SC upheld COA jurisdiction.
petition for
certiorari
commission on

Case Summary (G.R. No. 258159)

Factual Background

Genuino, as PAGCOR’s Chairperson and CEO, approved two donations made by PAGCOR to Magallanes Village Association, Inc. (MVAI): the First Donation in the amount of P350,000.00 by check dated June 27, 2008, and the Second Donation in the amount of P200,000.00 by check dated May 8, 2009, for a total of P550,000.00. On August 16, 2011, Supervising Auditor Resurreccion Quieta issued Notice of Suspension (NS) No. 2011-002(08/09), suspending both donations for lack of Fund Utilization Reports and for irregularities concerning the timing of the board approval for the First Donation, as the check date preceded the PAGCOR Board approval date of July 8, 2008. The NS required explanations for the First Donation’s release prior to board approval and demanded submission of Fund Utilization Reports for both donations. It identified Genuino among those responsible for compliance because he had approved the payments to MVAI.

Notice of Disallowance and Supplemental Expansion of Liability

On March 23, 2012, Supervising Auditor Quieta issued Notice of Disallowance (ND) No. 2012-001(08/09), stating that due to failure of the persons responsible for compliance with NS requirements, the total amount of the donations, P550,000.00, had matured into disallowance in audit. On February 20, 2013, Supervising Auditor Belen Ladines issued ND No. 2013-001(08/09), disallowing the P550,000.00 because COA re-evaluation allegedly showed that the donations were for a private purpose, given that MVAI is a private association. The ND further grounded disallowance on the allegation, based on a letter from the City Administrator of Makati City, that the subject areas had not been turned over to the local government, rendering the donations inconsistent with paragraph 2, Section 4 of Presidential Decree (PD) No. 1445, the Government Auditing Code, which requires that government funds be spent solely for public purposes. The persons held liable were Genuino and MVAI. Subsequently, on May 17, 2013, Ladines issued Supplemental ND No. 2013-008(08/09), expanding the number of accountable persons in response to a memorandum dated April 16, 2013, which informed COA of deficiencies in the Second ND for failing to include other PAGCOR officials among those liable.

COA CGS Cluster 6 Ruling and Automatic Review

On October 29, 2015, CGS Cluster-6 issued Decision No. 2015-024. It lifted the First ND because the items required by the NS had been complied with. It then affirmed the Second ND as amended by the Supplemental ND, but with modification: it excluded Estela Ramos from liability and reduced the liability of Philip Lo to P350,000.00. The Decision was subject to COA’s automatic review under its rules of procedure.

Ruling of the COA Commission Proper

On April 22, 2019, COA rendered Decision No. 2019-115, affirming in substance the CGS Cluster-6 ruling. COA lifted the First ND, but sustained the Second ND as amended. COA held that the donations violated the public-purpose principle under PD No. 1445, paragraph 2, Section 4, because PAGCOR’s donations to MVAI—specifically for customized lighted street signs and for repainting street gutters and curbs—were considered to serve a private purpose since the sidewalks were privately owned and were not yet transferred to local government. COA later denied Genuino’s Motion for Partial Reconsideration through Decision No. 2021-263 dated October 7, 2021.

Genuino’s Arguments Before COA

In his Motion for Partial Reconsideration, Genuino contended that COA lacked audit jurisdiction over the donations because they were sourced from PAGCOR’s private corporate funds, invoking PD No. 1869 or the PAGCOR Charter. He also argued that the donations were for a public purpose. Finally, he challenged his personal liability, asserting that there was no basis to hold him accountable under the NDs.

Issues Raised in the Petition

In the petition for certiorari, Genuino reiterated that COA committed grave abuse of discretion because: (1) COA’s audit jurisdiction did not cover the donations; (2) the donations were valid because they were for a socio-civic and public purpose; and (3) he should not be personally liable because he allegedly had no actual participation in the approval of the donations.

The Supreme Court’s Disposition and Reliance on Controlling Precedent

The Court dismissed the petition. It explained that the core arguments had already been thoroughly scrutinized in another case involving Genuino with “almost identical facts,” and that the Court reaffirmed its earlier ruling and applied it here. The Court emphasized that it relied largely on the Court’s recently promulgated Resolution in Genuino v. Commission on Audit (the 2023 Genuino Resolution), which reversed the Court’s earlier June 15, 2021 ruling in the 2021 Genuino Decision. The Court also rejected the notion that the prospective application language in the 2023 Genuino Resolution should insulate Genuino in this case, reasoning that the disallowed transactions here occurred in 2008 and 2009, while the disallowed transaction in the 2023 Genuino Resolution involved 2010, such that Genuino could not claim reliance on the reversed doctrine for the earlier period.

COA Audit Jurisdiction Over PAGCOR Funds Not Limited by PD No. 1869

On the first issue, the Court rejected the contention that COA’s audit jurisdiction over PAGCOR was limited by Section 15 of PD No. 1869 to the five percent (5%) franchise tax and the government’s fifty percent (50%) share of PAGCOR gross earnings. The Court stated that the 2023 Genuino Resolution had already debunked the same claim and clarified that the constitutional audit jurisdiction granted to COA by Art. IX-D, Sec. 2 and Sec. 3 of the 1987 Constitution could not be curtailed by Section 15 of PD No. 1869, which the Court deemed inconsistent with the Constitution and thus rendered inoperative. In effect, the Court held that COA had jurisdiction to audit PAGCOR funds regardless of source, and thus the Notice of Disallowance was valid on that jurisdictional ground.

Donations Properly Disallowed for Lack of Public Purpose

On the second issue, the Court agreed that the donations were properly disallowed because they were not mainly for a public purpose. It began by acknowledging that PAGCOR may fund socio-civic activities and may do so as mandated under PD No. 1869, but it stressed that validity depends on the nature of the socio-civic project. The Court then reiterated the public-expenditure test taken from Pascual v. Secretary of Public Works (Pascual): the essential character of the direct object of an expenditure determines validity; incidental benefit to the public does not justify the use of public money when private interest is promoted.

The Court further treated the issue in the light of the jurisprudence regarding improvements within privately owned subdivisions and explained that the rule in Pascual operates as a guard against abuse, especially because the disbursement of public funds demands that public benefit be weightier and primary. While Genuino argued that improvements were not restricted to MVAI residents because roads were allegedly open to public use, the Court found the claim insufficient when measured against the facts and findings in COA records. It noted that Genuino did not dispute that Lapu-Lapu Street was not government property and that any access to the public allegedly depended merely on MVAI permission. The Court also relied on Makati City’s categorical manifestation, as stated in the record, that MVAI had not turned over the affected streets to local government. It thus concluded that any alleged public benefit would be speculative and could cease absent governmental action.

Most importantly, the Court found that the record did not show that the donations were specifically intended for or actually used for Lapu-Lapu Street. It pointed to the Makati City Administrator’s letter dated December 28, 2012, which described the areas covered by the donations as streets in Magallanes Avenue, San Gregorio, and Magdalena, and stated that those areas had not been turned over to Makati City. It also observed that CGS Cluster-6, in the decision affirmed by COA, contradicted Genuino’s position by stating that the subject areas were the three identified streets and not Lapu-Lapu Street. The Court noted that the minutes and board resolutions in the record described only assistance for the installation of street signs and repainting of street gutters and curbs in Magallanes Village, without identifying Lapu-Lapu Street. Given the lack of evidentiary support for the asserted public-oriented project and the absence of proof that the benefit was mainly public, the Court held that the donations were not deemed to serve a public purpose, contrary to PD No. 1445.

Personal Liability of Genuino as Approving Officer

On the third issue, the Court held that Genuino was personally liable for the disallowed transactions. It rejected his argument that COA failed to show that he personally approved, initialed, or signed the payments, and that the PAGCOR Board approved payments out of PAGCOR’s funds. The Court stressed that Genuino was not only PAGCOR’s former CEO but also its Chairman of the Board, and that he was present at and chaired the board meeting where the First Donation was approved. It characterized his attempt to divide responsibility between board action and his own role as overly technical.

The Court adopted the reasoning that “approve” includes giving formal sanction, and it found that Genuino’s signing of checks and check vouchers and his approval of the payment constit

...continue reading

Analyze Cases Smarter, Faster
Jur helps you analyze cases smarter to comprehend faster, building context before diving into full texts. AI-powered analysis, always verify critical details.

About Privacy Terms