G.R. No. 218052 - National Power Corp. Board of Directors vs. Commission on Audit

Case Summary (G.R. No. 218052)

Key Dates and Applicable Law

Decision date considered by the Court: January 26, 2021 (thus governed by the 1987 Constitution and relevant post-1987 statutes and issuances). Primary authorities and rules applied: Administrative Order (AO) No. 103 (Aug. 31, 2004) suspending grant of new/additional benefits except as expressly provided; Memorandum Order (MO) No. 198 (Mar. 24, 1994) establishing the NPC Compensation Plan and its “pay for performance” provisions; COA Circular No. 85-55A on extravagant expenditures; COA Circular No. 2009-006 on service of Notices of Disallowance; Presidential Decree (PD) No. 1445 (Government Auditing Code of the Philippines); Administrative Code of 1987 (Sections 38 and 43); Republic Acts cited (RA 7648, RA 9136/EPIRA).

Factual Background

On February 1, 2010 the NPC Board confirmed and ratified Board Resolution No. 2009-72 (Dec. 18, 2009) granting CY2009 PIB equivalent to five and one-half months’ basic salary to specified NPC personnel. NPC Circular No. 2009-58 (Dec. 21, 2009) implemented the grant. Total disbursed: P327,272,424.91. COA issued a Notice of Suspension (Feb. 15, 2012) and subsequently Notice of Disallowance (ND No. NPC 12-007 (09,10), Oct. 15, 2012) on grounds of lack of presidential approval (AO No. 103 requirement) and extravagance under COA Circular 85-55A given NPC’s CY2009 net loss (P2,874,144,564.00). The ND was addressed to Tampinco (with attention to VP Loma T. Dy); Tampinco received it on Oct. 23, 2012.

Administrative Appeals and Procedural Chronology

Petitioners appealed to COA Corporate Government Sector (CGS) Cluster 3 on April 11, 2013, asserting presidential authorization via MO No. 198 and contending the Board members acted as the President’s alter egos; they also defended the grant on performance and privatization accomplishments and argued compliance with MO No. 198’s four-month limit. COA CGS denied the appeal (Decision No. 2014-03, Feb. 28, 2014), affirming the ND. Petitioners filed a Petition for Review to COA Proper on March 26, 2014 (12 days after receipt of the CGS decision), which COA Proper dismissed as filed out of time (Decision No. 2015-108, Apr. 6, 2015), rendering the disallowance final and executory. Petitioners then sought certiorari before the Supreme Court alleging grave abuse of discretion by COA in dismissing the appeal as time-barred and contesting the merits.

Issue Framing Before the Court

The Supreme Court framed three principal issues: (1) whether COA committed grave abuse of discretion in dismissing the appeal as untimely; (2) whether COA committed grave abuse in affirming the disallowance on substantive grounds; and (3) if disallowance is upheld, whether COA erred in imposing refund liability on petitioners and payees.

Court’s Analysis on Finality, Service, and Timeliness

The Court applied COA procedural rules (2009 Revised Rules of Procedure and COA Circular No. 2009-006) and PD No. 1445. The ND became subject to an administrative appeal period of six months (180 days). Tampinco’s receipt of the ND on Oct. 23, 2012 started the appeal period; petitioners filed to CGS on April 11, 2013 after 170 of the 180 days had elapsed, leaving only 10 days to file to COA Proper upon receipt of an adverse CGS decision. Petitioners filed to COA Proper 12 days after receipt of the CGS decision, exceeding the remaining period; thus the petition was time-barred. The Court upheld constructive service rules: for disallowed payrolls involving numerous payees, service to the accountable officer or accountant (here, Tampinco and the NMA Department Manager-Finance) constitutes constructive service to all payees under Section 7, Rule IV of the COA Rules and Section 12.1 of COA Circular No. 2009-006. The Court emphasized that due process requires an opportunity to be heard; petitioners were afforded that opportunity by timely filing to CGS and by the administrative process, so there was no denial of due process. Consequently, COA did not commit grave abuse in dismissing the COA Proper petition as untimely.

Court’s Analysis on Substantive Propriety of the Disallowance

Even if procedural rules were excused, the Court found the disallowance substantively correct. The Court examined MO No. 198’s terms: the NPC Compensation Plan’s “pay for performance” component required (a) a Productivity Enhancement Program (PEP) for each year; (b) a limit of zero to four months basic salary for the corporate/group productivity bonus; and (c) lump-sum payment for the year covered by the PEP. MO No. 198 also provided a four-year implementation framework beginning in 1994 with presidential review/clearance required for later phases. The Court held MO No. 198 could not be treated as standing presidential approval for the 2009 PIB because (i) the pay-for-performance component was intended to be implemented in the mid-1990s and subject to annual presidential clearance for later phases; (ii) the 2009 grant lacked evidence of any PEP for that year; (iii) the 2009 PIB exceeded the four-month maximum (it amounted to five and one-half months); and (iv) the PIB was paid in installments across 2009 and 2010 rather than in a single lump-sum for the covered year. AO No. 103’s categorical suspension of new or additional benefits remained applicable, and the 2009 PIB was neither a Collective Negotiation Agreement incentive nor expressly authorized by a presidential issuance as required by AO No. 103, Section 3(b). The Court rejected the petitioners’ “alter ego” argument: cabinet secretaries participating on the NPC Board served in ex officio capacities under law (EPIRA) and did not thereby supply the President’s required approval; the doctrine of qualified political agency does not extend automatically to ex officio board acts.

Court’s Assessment of Extravagance and Financial Capacity

Applying COA Circular No. 85-55A, the Court considered agency operations, mission, profitability, and availability of financial r

Case Syllabus (G.R. No. 218052)

Procedural Posture

Petition for Certiorari under Rule 64 in relation to Rule 65 of the Revised Rules of Court challenging COA Decision No. 2015-108 dated April 6, 2015.
COA Decision No. 2015-108 dismissed the Petition for Review filed by petitioners (NPC Board of Directors and various NPC payees) for being filed out of time and affirmed Notice of Disallowance (ND) No. NPC 12-007 (09,10) dated October 15, 2012.
Petitioners did not file a motion for reconsideration before coming to the Supreme Court.
Relief sought: reversal of COA Proper Decision No. 2015-108 on grounds of alleged grave abuse of discretion and requests that the case be resolved on the merits.

Facts

On December 18, 2009, Board Resolution No. 2009-72 granted Calendar Year (CY) 2009 Performance Incentive Benefits (PIB) equivalent to five and one-half months’ basic salary to NPC NMA-SPUG/Watershed and OMA Head Office and Engineering officials and employees.
NPC Board confirmed and ratified Board Resolution No. 2009-72 on February 1, 2010.
NPC President and CEO Froilan A. Tampinco approved NPC Circular No. 2009-58 dated December 21, 2009 to implement the grant.
Total amount released for the PIB was P327,272,424.91.
NPC incurred a net loss of P2,874,144,564.00 for CY 2009.
Petitioners comprised: named members of the NPC Board of Directors (including Margarito B. Teves, Ronaldo V. Puno, Jose L. Atienza, Augusto B. Santos, Peter B. Favila, Arthur C. Yap, Rolando G. Andaya) and President/CEO Froilan A. Tampinco; various payees listed in Schedules I and II who received the PIB.
The ND was addressed to Tampinco with notation “[ATTN]: Loma T. Dy, Vice President, Human Resources Administration and Finance (HRAF).”
Tampinco received the ND on October 23, 2012.
Petitioners filed an appeal to COA Corporate Government Sector (CGS) Cluster 3 a Public Utilities on April 11, 2013.
COA CGS Decision No. 2014-03 issued February 28, 2014 denied petitioners’ appeal and affirmed ND No. NPC 12-007 (09,10).
Petitioners received COA CGS Decision on March 14, 2014 and filed Petition for Review to COA Proper on March 26, 2014 (12 days after receipt).
COA Proper Decision No. 2015-108 dated April 6, 2015 dismissed Petition for Review as filed beyond the six-month (180-day) reglementary period and affirmed COA CGS Decision No. 2014-03 and ND No. NPC 12-007 (09,10), rendering the disallowance final and executory.

Notice of Suspension, Audit Findings, and Notice of Disallowance

On February 15, 2012, the NPC Audit Team issued a Notice of Suspension (NS) requiring NPC to explain why the PIB should not be disallowed on two grounds:
- Lack of prior approval of the President as required under Section 3 of Administrative Order (AO) No. 103 dated August 31, 2004.
- The grant was “extravagant” under Section 3.4 of COA Circular No. 85-55A dated September 5, 1985, given the NPC-SPUG’s net loss in CY 2009.
NPC management responded by Letter dated April 10, 2012, justifying the grant by reference to successful privatization of several power plants, a “High Very Satisfactory” corporate performance rating under the balanced scorecard, and implementation of organizational right-sizing in 2010; however, no law or presidential issuance was cited as basis.
COA Audit Team disallowed the PIB in ND No. NPC 12-007 (09,10) dated October 15, 2012 for lack of presidential approval and for being extravagant; petitioners were charged liable to settle the disallowed transaction amounting to P327,272,424.91.

Administrative and Statutory Authorities Invoked or Discussed

Administrative Order No. 103 (August 31, 2004) — directed suspension of new or additional benefits to full-time officials and employees except CNA incentives or benefits expressly provided by presidential issuance; Section 3(b) requires presidential approval for additional benefits.
COA Circular No. 85-55A (September 5, 1985) — defines “extravagant expenditures” and prescribes standards to determine extravagance, including agency operations, mission, profitability, and availability of financial resources.
Memorandum Order No. 198 (MO No. 198) (March 24, 1994) — “Directing and Authorizing the Upgrading of Compensation of Personnel of the National Power Corporation,” containing NPC Compensation Plan and “Pay for Performance” provisions (Section 2.2) and a four-year implementation framework (Section 4; Annex D).
NPC Circular No. 2009-58 (December 21, 2009) — issued by Tampinco prescribing rules and regulations for grant and payment of CY 2009 PIB.
COA Circular No. 2009-006 (September 15, 2009) — rules and regulations on settlement of accounts; Section 12.1 provides for constructive service to multiple payees by serving the accountant responsible for informing payees.
PD No. 1445 (Government Auditing Code of the Philippines) — Section 48 (appeal within six months from receipt of copy of auditor’s decision) and Section 51 (finality of decision if not appealed).
COA 2009 Revised Rules of Procedure — provisions on finality of auditor’s decision (Rule IV, Section 8), appeals before the Director (Rule V), period of appeal to COA Proper (Rule VII, Section 3), and service of ND/NC/NS (Rule IV, Section 7).

Petitioners’ Arguments on Appeal and in COA Proper Petition for Review

Petitioners asserted the PIB was authorized by President Fidel V. Ramos through MO No. 198 (March 24, 1994) issued pursuant to Section 5 of RA No. 7648 (Electric Power Crisis Act of 1993) and that PIB is a “pay for performance” component of NPC Compensation Plan under Section 2.2 of MO No. 198.
Petitioners argued alternative ground that presidential approval was deemed given because the NPC Board consisted of cabinet secretaries who were alter egos of the President.
Petitioners defended the amount as justified by (a) privatization efforts mandated by RA No. 9136 (EPIRA), (b) “High VS” rating in 2009, and (c) implementation of right-sizing in 2010.
Petitioners contended disbursements were within the four-month basic salary limitation under Section 2.2 of MO No. 198 because the PIB released in 2009 equaled four months basic salary and remaining one and one-half months were not given until 2010.
Petitioners contended they acted in good faith and maintained lack of individual service of ND prevented commencement of appeal period for each person.

COA CGS Cluster 3 Ruling (Decision No. 2014-03)

COA CGS (Cluster 3 a Public Utilities) denied petitioners’ appeal in Decision No. 2014-03 dated February 28, 2014, and affirmed ND No. NPC 12-007 (09,10) totaling P327,272,424.91.
COA CGS conclusions included:
- AO No. 103 already superseded MO No. 198 for purposes of suspending new or additional benefits.
- Even if MO No. 198 applied, the 2009 PIB was not based on a Productivity Enhancement Program (PEP) as required under Section 2.2 of MO No. 198.
- The PIB amount (five and one-half months basic salary) was extr