Case Summary (G.R. No. 147402)
Key Dates
• July 19, 1999 – COA issues letter requesting LMWD to pay audit fees
• October 12, 1999 – Petitioner formally declines payment, citing PD 198 and RA 6758
• January 3, 2000 – COA Resolution denies petitioner’s requests to stop audits and to refund fees
• January 30, 2001 – COA denies motion for reconsideration
• March 13, 2001 – Petition for certiorari filed before the Supreme Court
• January 14, 2004 – Supreme Court decision
Antecedent Facts
A Special Audit Team of COA Region VIII audited LMWD’s accounts and billed LMWD audit fees. Petitioner Feliciano, relying on PD 198 Sections 6 and 20 and RA 6758 Section 18, refused payment and sought refund. COA denied both requests at two levels of internal proceedings. Petitioner then sought judicial relief via certiorari under Rule 64, alleging grave abuse of discretion.
Ruling of the Commission on Audit
COA invoked Supreme Court precedents (notably Davao City Water District v. CSC & COA) holding that LWDs are not private corporations but government-owned or controlled entities. COA maintained its statutory authority to audit LWDs and to collect fees for audit services rendered.
Issues for Resolution
- Whether a local water district (LWD) created under PD 198 is a government-owned or controlled corporation (GOCC) with an original charter subject to COA’s audit jurisdiction.
- Whether PD 198 Section 20 prohibits COA auditors from auditing LWDs.
- Whether RA 6758 Section 18 prohibits COA from charging GOCCs auditing fees.
Constitutional Basis for COA’s Audit Jurisdiction
Article IX-D Section 2(1) of the 1987 Constitution grants COA authority to examine, audit, and settle accounts of government entities, including “government-owned and controlled corporations with original charters” and other GOCCs. Article IX-D Section 3 forbids any law exempting government entities or investments of public funds from COA jurisdiction.
Nature and Status of Local Water Districts
• PD 198 serves as LWDs’ special charter, designating them quasi-public corporations with corporate powers expressly conferred by that Decree.
• LWDs are not formed under the Corporation Code, have no shareholders, and their boards are appointed by local chief executives.
• The Constitution permits GOCCs to be created by special charter; private corporations require a general law. LWDs, lacking registration under the Corporation Code, qualify as GOCCs with original charters.
Unconstitutionality of PD 198 Section 20’s Restriction on Audit
PD 198 Section 20 provides that auditing “shall be performed by a certified public accountant not in the government service,” permitting only optional annual audits by LWUA-retained auditors. This provision conflicts with the Constitution’s grant of exclusive audit power to COA and its prohibition against any exemption. Accordingly, the Supreme Court declared that sentence of Section 20 void for inconsistency with Article IX-D Sections 2(1)
...continue readingCase Syllabus (G.R. No. 147402)
Procedural Context
- Petition for certiorari under Rule 64 of the 1997 Revised Rules of Court
- Seeks to annul COA Resolution dated January 3, 2000 and Decision of January 30, 2001
- Petitioner’s requests denied by COA:
• Cease all audit services to LMWD
• Stop charging auditing fees to LMWD
• Refund all auditing fees previously paid by LMWD - Motion for Reconsideration filed March 31, 2000 and denied January 30, 2001
- Instant petition filed March 13, 2001, with supporting resolutions from VAWD and PAWD
Antecedent Facts
- Special Audit Team from COA Region VIII audited LMWD accounts
- COA letter of July 19, 1999 demanded payment of auditing fees
- Petitioner’s reply (Oct. 12, 1999) invoked:
• Sections 6 and 20, PD 198 (as amended)
• Section 18, RA 6758 - Regional Director referred petitioner’s reply to the COA Chairman on Oct. 18, 1999
- Petitioner’s refund request sent Oct. 19, 1999
- COA Chairman’s Resolution (Jan. 3, 2000) denied all relief
- COA denied Motion for Reconsideration (Jan. 30, 2001)
COA’s Determination
- Relied on settled doctrine in Davao City Water District v. CSC & COA:
• LWDs are not private corporations; they are quasi-public entities created by special law
• Board members appointed by local executives, unlike privately elected boards - Denied petitioner’s demand to stop charging fees and to refund past fees
Issues Presented
- Whether a Local Water District under PD 198 is a GOCC with original charter subject to COA audit
- Whether Section 20 of PD 198 prohibits COA auditors from auditing LWDs
- Whether Section 18 of RA 6758 prohibits COA from charging GOCCs auditing fees
Supreme Court’s Holding
- Pe