G.R. No. 239936 - National Housing Authority vs. Commission on Audit

Case Summary (G.R. No. 239936)

Factual Background

The NHA, acting through its officers and in representation of the liable parties, filed a Petition for Review before the COA Commission Proper. The petition assailed COA Corporate Government Sector (CGS)-Cluster 2 Decision No. 2015-013 dated August 13, 2015, which had affirmed several Notices of Disallowance (NDs) issued by a special audit team. These NDs questioned the legal basis and authority of NHA disbursements for the CYs 2008 and 2009, specifically disallowing payments for items such as cash incentive awards, economic subsidy, Christmas bonus, citation bonus, mid-year financial assistance (MYFA), meal subsidy, children’s allowance, rice subsidy, and representation and transportation allowance (RATA), among others.

The audit team’s issuance followed an Office Order dated September 3, 2010, which created a special audit team to audit NHA salaries and allowances, bonuses, and RATA paid to NHA officers, employees, and members of the NHA Board of Directors for CYs 2008 to 2009. The audit team concluded that the incentives and allowances violated Section 12 of R.A. No. 6758, Section 3 of Memorandum Order (MO) No. 20 dated June 25, 2001, and sections on compensation limits and related coverage in R.A. Nos. 9498 and 9524.

The NDs named various persons as liable. These included NHA executives and managers who allegedly approved, recommended, certified availability of funds for, disbursed, or otherwise processed the questioned benefits. The NHA Board of Directors was also named for approving the grant and for receiving the same benefits, together with officers and employees as payees, all tied to the disallowed payments.

Appeals Within COA and the Parties’ Grounds

Aggrieved by the NDs, the liable parties appealed to the COA CGS Cluster Director, raising multiple justifications. They anchored their defense on earlier issuances and asserted statutory authority for NHA to adopt additional incentives and determine allowances through internal governance mechanisms. Their principal contentions included reliance on Letter of Implementation (LOI) No. 97 dated August 31, 1979, which they argued authorized additional incentives for GOCCs performing critical functions; reliance on Section 10 of P.D. No. 757, which they claimed allowed the NHA General Manager, subject to Board approval, to determine rates of allowances and additional compensation; and reliance on compensation provisions under E.O. No. 292, particularly the employee suggestions and incentive award framework under Section 35.

They also argued that the grants were justified by operational needs and employee welfare: the economic subsidy purportedly addressed financial difficulties and inflation; the Christmas bonus and citation bonus purportedly followed recognized incentive systems and awards schemes; and the MYFA purportedly had become a longstanding corporate tradition predating R.A. No. 6758 and thus allegedly protected by the principle of non-diminution of benefits. They further claimed that the grants of meal and rice subsidy derived from LOI No. 97 and NHA board action and that any increases were allegedly sanctioned through approvals communicated by the Office of the President. As to RATA, petitioners asserted that its grant outside authorized positions was already discontinued in 2011, and they also asserted good faith and the existence and binding force of a Collective Negotiation Agreement (CNA), arguing that the CNA governed and had legal force between the parties.

In opposition, the Audit Team Leader and the supervising auditor argued that the invoked authorities could not shield the disbursements because these authorities had been repealed or rendered inconsistent by later compensation standardization measures, including P.D. No. 985, P.D. No. 1597, and R.A. No. 6758. They further maintained that good faith could not be appreciated due to the presence of notarized deeds of undertaking showing awareness of irregularity and illegality, and that those who approved and certified disbursements remained liable to refund disallowed amounts.

Rulings of the COA CGS Cluster Director and COA Commission Proper

The COA CGS Cluster Director denied the appeals and affirmed the disallowances. It ruled that the policy under R.A. No. 6758, as emphasized in Maritime Industry Authority v. COA (as cited in the COA ruling), was to standardize compensation and eliminate multi-level allowances and incentive packages that created differences in compensation among government personnel. Applying the rule that allowances were integrated into standardized salary rates, the COA CGS Cluster Director concluded that the disallowed allowances and benefits were not legally sustained. It also held that petitioners failed to present evidence or cite the specific Civil Service Commission (CSC) rules needed to implement the E.O. No. 292 employee incentive system for awards such as the CIB or SONA incentive award, and that no CSC approval was shown for the citation bonus.

For MYFA, the COA ruled that the President’s approval for the initial grant did not authorize successive increases without further presidential approval. It held that increases contravened applicable austerity rules, including Section 3(b) of Administrative Order (AO) No. 103 (s. 2004). It also found violations of the General Appropriations Act (GAA) for CYs 2008 and 2009 when NHA granted RATA to employees allegedly not entitled under the legal enumerations for that benefit. The COA CGS Cluster Director rejected the argument that the approving officers were insulated by the alter ego doctrine, reasoning that the Cabinet Secretaries sitting as members of the NHA Board were not acting solely as alter egos of the President.

When the matter reached the COA Commission Proper, the COA denied the petition for review. It affirmed the disallowances under the questioned NDs, totaling P367,844,754.36.

Petitioners’ Arguments in the Supreme Court

In the Supreme Court, petitioners maintained that the disallowed payments were legally granted and that the NDs were flawed, arbitrary, and lacking in legal basis. They also reiterated that the disbursements were made in good faith, and that petitioners should not be held to refund disallowed amounts because they did not act with malice or bad faith and relied on prior doctrinal rulings and what they considered lawful authority. They thus asserted that COA gravely abused its discretion by affirming the NDs.

Issue Presented

The Supreme Court framed the sole issue as whether the COA Commission Proper acted without or in excess of jurisdiction, or with grave abuse of discretion amounting to lack or excess of jurisdiction, when it rendered Decision No. 2018-124 dated January 26, 2018, affirming the disallowances under the NDs.

Supreme Court’s Disposition on the Merits

The Court dismissed the consolidated petitions for lack of merit and affirmed COA Decision No. 2018-124 in toto. As an initial procedural clarification, the Court explained that the NDs originally challenged in the earlier petition were not the same NDs affirmed in the COA Commission Proper’s decision. It noted that the disallowances included Program Administration Fees (PAF) for CYs 2013 and 2014, which were the subject of another pending COA case. The NHA later moved to amend its petition after acknowledging that the original NDs attached to the petition had been incorrect, and the Court granted leave to amend in a resolution dated July 2, 2019. The amended petition then presented the correct arguments tied to the NDs actually affirmed by COA.

Substantively, the Court held that COA did not commit grave abuse of discretion. It emphasized that grave abuse of discretion requires capricious, whimsical, arbitrary action that effectively amounts to evasion of duty or refusal to perform duties enjoined by law. It stressed that the burden lay with petitioners to prove not only reversible error but grave abuse of discretion.

The Court then found that COA’s decision aligned with prevailing laws and jurisprudence.

Legal Basis and Reasoning

The Court agreed with COA that the NHA Board’s power under Sections 8 and 9 of P.D. No. 757 to fix and grant additional compensation had already been repealed by Section 16 of R.A. No. 6758, which repealed issuances inconsistent with the System. Once R.A. No. 6758 took effect, GOCCs fell within the Compensation and Position Classification System it prescribed. The Court further held that, therefore, legal provisions exempting entities from standardized compensation rules or authorizing compensation inconsistent with R.A. No. 6758 had been repealed or modified.

The Court also underscored that the authority to determine which allowances or benefits may be continuously granted was lodged with the Department of Budget and Management (DBM), pursuant to DBM’s implementing rules and circulars. Using the logic applied by COA, it held that the benefits and allowances disallowed—except for RATA—were not among those excluded from integration into standardized salary rates. For meal and rice subsidy and children’s allowances, the Court held that continuation required that the employee be an incumbent as of June 30, 1989 and must have been receiving those allowances on or prior to that date. Thus, continued payment outside the qualified category amounted to illegal disbursement.

With respect to RATA, the Court held that it belonged to a class of allowances intended to defray expenses considered avoidable in the discharge of office and that eligibility depended on enumerations under Section 45 of R.A. Nos. 9498 and 9524 or equivalency determinations by DBM. As a result, RATA granted to NHA employees whose positions were not within the purview of those legal provisions was disallowable. The Court thus upheld COA’s view that RATA payments lacked legal authority.

On the invocation of the CNA, the Court held that the NHA could not rely on a CNA to justify benefits that were not legally negotiable. It

Case Syllabus (G.R. No. 239936)

The case involved consolidated petitions filed by the National Housing Authority (NHA) and by NHA officers, employees, and members of the NHA Board of Directors against the Commission on Audit (COA).
The petitioners sought (a) certiorari under Rule 64 in relation to Rule 65 of the Rules of Court and Rule XII of the 2009 Revised Rules of Procedure of the Commission on Audit to assail COA Decision No. 2018-124 dated January 26, 2018, and (b) injunction to nullify the Notice of Finality of Decision issued on March 4, 2020.
The Court dismissed the consolidated petitions for lack of merit and affirmed the COA decision in toto.

Parties and Procedural Posture

The petitioners in G.R. No. 239936 included NHA, represented by its General Manager, and rank-and-file NHA employees represented by the Consolidated Union of Employees of NHA (CUE).
The respondents were the COA and its officials, including the Chairperson and COA Directors and auditors involved in the corporate government audit sector.
Separately, NHA filed G.R. No. 252584 to challenge COA action, which the Court consolidated with G.R. No. 239936.
The Court noted that the petition for certiorari filed in the earlier pleading had initially attached incorrect Notices of Disallowance (NDs).
The Supreme Court En Banc later granted a motion for leave of court to amend the petition in a resolution dated July 2, 2019.
The petitioners also filed a request for TRO and/or writ of preliminary mandatory injunction to nullify the COA Notice of Finality of Decision, but the En Banc had already denied that request in a resolution dated August 25, 2020 in G.R. No. 252584.

Key Factual Allegations

COA findings centered on the payment of allowances, bonuses, and other emoluments by the NHA to its officers and employees for calendar years 2008 and 2009.
The COA-disputed payments had been objected to through multiple Notices of Disallowance amounting to a total of P367,844,754.36, covering cash incentive awards, economic subsidies, Christmas bonuses, citation bonuses, mid-year financial assistance (MYFA), meal subsidy and children’s allowance with rice subsidy, and representation and transportation allowance (RATA).
The COA Corporate Government Sector (CGS)-Cluster 2 affirmed the earlier disallowances through COA CGS-Cluster 2 Decision No. 2015-013.
The COA Commission Proper later denied the petition for review through COA Decision No. 2018-124 dated January 26, 2018.
COA directed refunds by holding the approving and certifying officers solidarily liable and the payee-recipients individually liable based on the amounts respectively received.
The Court specifically clarified that the NDs challenged in the original petition were not the same NDs affirmed in COA Decision No. 2018-124, because the original petition had mistakenly used NDs involving Program Administration Fees (PAF) for CYs 2013 and 2014.
The petitioners corrected the record through an amended petition, and the disputed NDs became those concerning the CY 2008 to 2009 allowances and benefits.

COA Audit Basis

COA found that the questioned disbursements lacked legal authority to the extent that they violated the controlling compensation and standardization regime.
COA tied the audit action to perceived conflicts with Section 12 of R.A. No. 6758 and with MO No. 20 dated June 25, 2001, as well as to the framework associated with R.A. Nos. 9498 and 9524 governing appropriations for the relevant years.
COA’s audit team issued the subject NDs after questioning the legal basis or authority of the allowances, bonuses, and emoluments granted and paid.
The NDs named multiple categories of liable persons, including:
- former and incumbent NHA general managers and managers involved in approval and recommendations,
- financial officers who certified availability of funds and certified the propriety of expenditures,
- accounting and treasury officials involved in the disbursement and certification of vouchers,
- NHA Board of Directors members who approved the grants and received the benefits, and
- recipient officers and employees who received the disallowed benefits.

Petitioners’ Arguments

The petitioners insisted that the COA NDs and COA decisions were flawed for lack of legal basis and were allegedly arbitrary and whimsical.
They argued that various NHA actions were authorized by Letter of Implementation (LOI) No. 97 dated August 31, 1979, which they claimed authorized additional incentives for GOCCs performing critical functions.
They relied on Section 10 of PD No. 757 to justify the NHA General Manager’s authority, subject to Board approval, to determine allowance rates and other additional compensation.
They asserted that the Cash Incentive Award (CIB) or SONA Incentive Award was consistent with Section 35, Chapter 5, Subtitle A, Title I of Book V of EO No. 292, and its implementing rules.
They argued that the economic subsidy was designed to help employees cope with increasing prices of basic commodities and inflation.
They claimed the Christmas bonus was a recognition of employee dedication and aligned with the spirit of gift-giving.
They anchored the citation bonus on EO No. 292 as implemented through CSC Memorandum Circular No. 1 (s. 2001).
They argued that the MYFA was an annual tradition and corporate practice since 1988 and predated R.A. No. 6758, so the principle of non-diminution of benefits and salaries should apply.
They argued that meal subsidy and Christmas bonus were anchored on LOI No. 97, while the rice subsidy had been granted pursuant to Board Resolution No. 1725 dated June 6, 1989, with later increases supposedly approved through Office of the President letters.
They asserted that RATA was discontinued as early as July 1, 2011 and thus could not be used as a basis for liability for the questioned years.
They argued that approving NBA officers should not be held liable because approval and release purportedly complied with a Collective Negotiation Agreement (CNA) and that a CNA has the force of law between the parties.
They invoked a theory of constructive notice and tacit approval by the Office of the President due to the alleged alter-ego composition of the Board leadership, and they sought to apply the alter ego principle.
They also claimed good faith and argued that the officers and employees should not be compelled to refund amounts already received.

Respondents’ Arguments

COA and the audit officials contended that the NHA officers could not invoke authorities such as PD No. 757 and LOI No. 97 because they had allegedly been repealed by PD No. 985, PD No. 1597, and R.A. No. 6758.
They argued that the petitioners could not claim good faith in view of the Notarized Deed of Undertaking executed by the liable officers and employees.
They asserted that the petitioners became aware of the irregularity and illegality of the allowances and benefits they received, hence they were bound to refund.

COA Reasoning

COA held that R.A. No. 6758 expressed a policy to standardize government compensation and to eliminate multi-level allowances and incentive packages that produced differences inconsistent with the standardized salary system.
COA ruled that allowances could not legally remain outside the standardized salary integration, except to the extent the law and its implementing rules recognized continuing fringe benefits that were excluded from integration.
COA ruled that the petitioners failed to adduce evidence and cite CSC rules and regulations governing the grant of CIB or SONA Incentive Award mandated by Section 35, Chapter 5, Subtitle A, Title I of Book V of EO No. 292.

COA found no proof of CSC approval for the grant of the citation bonus.

On MYFA, COA held that the initial presidential authorization in a December 18, 1995 letter did not justify succeeding increases without prior presidential approval.

COA found that the NHA failed to obtain the required approval and thus violated applicable austerity directions under AO No. 103 (s. 2004).

COA ruled that NHA violated the GAA for CYs 2008 and 2009 by granting RATA to employees not entitled under the legal enumeration.

COA ruled that the benefits involved were non-negotiable, hence cannot be subjected to a CNA as a source of authority.

COA rejected the alter ego doctrine as improperly invoked because the cabinet secretaries and related officials served as members of the NHA Board of Directors by law and office, not as mere alter egos of the President for the acts in question.

Supreme Court Issues

The sole issue was whether the COA Commission Proper acted without o
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