Title
National Transmission Corp. vs. Commission on Audit
Case
G.R. No. 244193
Decision Date
Nov 10, 2020
TransCo's EME payments disallowed due to lack of receipts; COA upheld, but approving officers absolved in good faith. Recipients ordered to return funds.
disallowed payments
burden of proof
doctrine of good faith
A

Case Summary (G.R. No. 244193)

Factual Background

In various dates in 2010, TransCo paid its officials EME pursuant to Republic Act No. 9970 and the General Appropriations Act (GAA) of 2010. On June 1, 2011, Supervising Auditor Corazon V. Espano and Audit Team Leader Minerva T. Cabigting issued Notice of Disallowance (ND) No. 11-58-(2010). The ND disapproved TransCo’s EME payments amounting to P1,841,165.44. It stated that EME were paid on a commutable basis and were not supported by receipts, contrary to Item III of COA Circular No. 2006-001 dated January 3, 2006.

TransCo appealed to COA-CGS. In the meantime, COA Decision No. 2017-115 was later rendered on automatic review on April 26, 2017, and a motion for reconsideration was denied by resolution dated January 23, 2018. On August 6, 2019, COA Commission Secretary Nilda B. Plaras issued a Notice of Finality of Decision (NFD) confirming finality and executory status, subject to the COA’s execution rules.

COA-CGS Proceedings and Reversal of Disallowance

COA-CGS Cluster 3 granted TransCo’s appeal in Decision No. 2014-16 dated September 17, 2014. The Cluster Director reasoned that a certification could be accepted as supporting document for reimbursements of EME by GOCCs, drawing from the allowance for certifications in National Government Agencies (NGAs) under COA Circular No. 89-300. The Cluster Director also stated that the uniformity of the amounts claimed did not support the allegation that EME were paid on a commutable basis.

The COA’s Automatic Review and Sustained Disallowance

On April 26, 2017, COA, upon automatic review, reversed the Cluster Director’s lifting of the ND. In COA Decision No. 2017-115, it disapproved COA-CGS Cluster 3 Decision No. 2014-16 and sustained ND No. 11-58-(2010) for P1,841,165.44 in EME paid to TransCo officials in 2010.

The COA relied on Espinas v. Commission on Audit, holding that a mere certification was not sufficient to support reimbursement of EME because it did not qualify as a document evidencing disbursement under Item III(3) of COA Circular No. 2006-001. The COA also ruled that TransCo could not invoke COA Circular No. 89-300, since it applied to NGAs and not GOCCs. According to the COA, the EME of GOCCs and their funding source differed from that of NGAs, and this distinction justified strict adherence to the circular governing GOCC reimbursements.

COA further found that the absence of receipts and supporting documents evidencing disbursements, coupled with the uniformity of amounts paid, was conclusive proof that EME were paid on a commutable basis. It dismissed TransCo’s good faith defense for disregard of the applicable law or rules, and it ordered solidary liability for those officials who had direct participation in and/or authorized the payments.

Petition and Issues Raised

TransCo filed a petition to assail COA’s disallowance and accountability findings. It argued, in substance, that (a) the COA acted with grave abuse of discretion because Supervising Auditor Espano failed to substantiate that payments were made on a commutable basis; and (b) the COA acted with grave abuse of discretion in holding the doctrine of good faith inapplicable.

Legal Framework on EME Reimbursement and COA Authority

The Court emphasized that COA Circular No. 2006-001 dated January 3, 2006 governed the disbursement of EME and similar expenses for GOCCs/GFIs and their subsidiaries. The circular aimed to regulate the incurrence of EME by qualified officials of GOCCs/GFIs and to prevent or disallow irregular, unnecessary, excessive, extravagant, or unconscionable uses of public funds. The Court linked this function to COA’s constitutional mandate as guardian of public funds to promulgate accounting and auditing rules under its general audit authority (citing the constitutional text quoted as Section 2, Article IX(D) of the 1987 Constitution).

The Court quoted Item III of COA Circular No. 2006-001, particularly the requirements that EME be paid strictly on a non-commutable or reimbursable basis, that claims for reimbursement be supported by receipts and/or other documents evidencing disbursements, and that EME be within authorized ceilings and subject to restrictions on appropriations for other covered expense categories.

The Court’s Treatment of the Burden of Proof

The Court held that TransCo bore the burden of proving that it was entitled to reimbursement of the EME incurred by its officials. It applied the rule that the claimant must establish compliance with COA requirements, noting that even if TransCo was authorized under the GAA to grant EME to qualified officials, reimbursement could be claimed only if the conditions in COA Circular No. 2006-001 were clearly met.

The Court treated the absence of receipts and supporting documents as fatal. It found that TransCo’s only presented document was a “certification”, which was evaluated against the requirement that “other documents” must evidence disbursement.

Certification as Not Sufficient Evidence of Disbursement

The Court declared that whether a certification suffices depends on whether it substantiates the paying out of an account payable, or a disbursement. The Court anchored this interpretation in Espinas v. Commission on Audit, which held that a certification cannot be properly considered supporting evidence under Item III(3) of COA Circular No. 2006-001 unless it substantiates an actual disbursement. Espinas required certification content that reflects transaction details typically found in receipts, including the nature and description of expenditures, amount, date, and place of incurrence.

Applying Espinas, the Court found that TransCo’s certifications merely stated that the expenses had been incurred for purposes contemplated under the law or regulation and in relation to or by reason of the payees’ positions. The Court held that such general assertions did not demonstrate “paying out of an account payable” and did not qualify as valid evidence of disbursement contemplated in COA Circular No. 2006-001. It therefore found no basis to disturb COA’s disallowance for noncompliance with the circular.

Irregular Expenditure and COA’s Disallowance

Because the supporting documentation requirements were not met, the Court treated the grant and reimbursement as an irregular expenditure under COA Circular No. 85-55-A. The Court explained that irregular expenditures were those incurred without adhering to established rules, regulations, procedural guidelines, and recognized policies, and that the concept differed from illegal expenditures, which involved violation of the law.

Review of COA’s “Commutable Basis” Reasoning

The Court declined to accept COA’s conclusion that the absence of evidence of payment and the uniformity of amounts were conclusive proof of commutability. It characterized COA’s statement as conjectural because the ND supposedly did not provide details showing the basis of that conclusion. It also noted that COA did not identify the specific law, regulation, jurisprudence, or accounting and auditing principle that would support the commutable-basis determination under the circular.

However, the Court held that even if COA’s commutable-basis reasoning was infirm, no grave abuse of discretion arose because the disallowance was still justified by TransCo’s failure to present receipts and/or proper documents evidencing disbursements.

Good Faith, Payee Liability, and Refund Principles After Madera

The Court then addressed liability for return. It ruled that even if the approving/certifying officers did not act in bad faith, malice, or gross negligence, payees who received disallowed amounts were still required to return those amounts as solutio indebiti recipients, subject to doctrinal exceptions.

In doing so, the Court relied on Madera v. Commission on Audit, which laid down a structured set of return rules, including that when a notice of disallowance is upheld, approving and certifying officers who acted in good faith and with the diligence of a good father of a family are not civilly liable to return under Section 38 of the Administrative Code of 1987; those shown to have acted in bad faith, malice, or gross negligence are solidarily liable to return only the net disallowed amount under Section 43; and recipients—whether approving/certifying officers or mere passive recipients—are liable to return the amounts they respectively received unless they show the amounts were genuinely given in consideration of services rendered. The Court also recognized that it may excuse return based on undue prejudice, social justice considerations, humanitarian grounds, or bona fide exceptions, but it would do so only case by case.

The Court discussed good faith as a state of mind fixed in time, requiring honesty of intention and absence of knowledge of circumstances that should prompt inquiry. It acknowledged that public officials are presumed to have regularly performed duties absent clear indicia of bad faith.

On the evidentiary record,

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