G.R. No. 222838 - Philippine Health Insurance Corp. vs. Commission on Audit

Case Summary (G.R. No. 222838)

Parties, Court, and Principal Legal Provisions

COA’s rulings were issued through its internal review mechanisms: the COA-Corporate Government Sector (COA-CGS) and the COA Proper. The Supreme Court evaluated the legality of COA’s actions in relation to the disallowance of IME under RA No. 7875—particularly Section 18(d)—and the annual appropriations and budgetary controls relevant to extraordinary and miscellaneous expenses under the General Appropriations Act (GAA), including COA Circular No. 2006-01. The case also implicated constitutional limits on additional compensation and double compensation, as discussed through jurisprudence.

Factual Background: BOD Resolutions, Intended Allowance, and Budget Appropriations

PhilHealth’s BOD issued Board Resolution No. 1055 in October 2007, approving that BOD members (or their authorized representatives) would be entitled to a Board Extraordinary and Miscellaneous Expense (BEME) allowance, reimbursable at P30,000.00 each per month effective October 4, 2007. The declared purpose was to cover expenses incurred by BOD members in performing official functions that they would otherwise have to shoulder personally. A corresponding supplemental budget of P1,560,000.00 was appropriated to support the scheme.

In December 2007, the BOD amended Board Resolution No. 1055 through Board Resolution No. 1084, allowing the unexpended monthly extraordinary and miscellaneous expense balance to be carried over and used in succeeding months within the same calendar year, retroactive from October 5, 2007. Later, in a Resolution dated February 12, 2009, the BOD allocated P4,320,000.00 from the 2009 Corporate Operating Budget of the Office of the Corporate Secretary and every year thereafter, for reimbursement of expenses incurred by BOD members (or authorized representatives) in discharging official functions and duties outside board meetings.

Audit Observation and Disallowance: IME and Committee Meeting Expenses as Vehicles for EME Reimbursements

On May 24, 2011, the COA Supervising Auditor issued an Audit Observation Memorandum (AOM) noting that reimbursements of extraordinary and miscellaneous expenses totaling P19.95 million in calendar year 2010 were charged to Representation Expense sub-accounts for Institutional Meeting Expenses (865-10) and Committee Meeting Expenses (865-20). COA observed that PhilHealth had been using IME and Committee Meeting Expenses accounts to accommodate EME reimbursements because charges to the EME account had already substantially exceeded the limitation prescribed by the 2010 GAA for each official.

COA treated the practice as irregular. It held that the nature and purpose of these expenses fell within the budgetary controls governing EME disbursements as required by the GAA and COA Circular No. 2006-01. COA also noted that the irregular charging increased the “excess from the GAA prescribed annual rate for EME.” In addition, COA found that P5.63 million of the total amount represented reimbursements made by BOD members and personnel whose positions were not entitled to EME.

PhilHealth submitted a comment on the AOM, but COA found it unsatisfactory. Consequently, Notice of Disallowance (ND) No. HO 12-004 (10) was issued on July 18, 2012, disallowing the IME payments for January to December 2010 in the amount of P2,965,428.59, for lack of legal basis.

COA Review and the Procedural Barrier Raised: Untimeliness Before COA Proper

PhilHealth appealed to the COA-CGS, but the COA-CGS denied the appeal. It affirmed the Supervising Auditor’s interpretation that Section 18(d) of RA No. 7875 expressly provides that a per diem is intended compensation for members of the PhilHealth BOD. It ruled that RA No. 7875 did not authorize PhilHealth to grant additional compensation, allowances, or benefits to its BOD beyond the statutory per diems. While acknowledging that the BOD could formulate rules and regulations under RA No. 7875, the COA-CGS emphasized that such power must remain within legislative bounds. Thus, it held that the BOD exceeded its authority when it issued Board Resolution No. 1193 authorizing EME in a manner contrary to Section 18(d) of RA No. 7875.

The COA-CGS further rejected PhilHealth’s reliance on prior rulings on non-refund, reasoning that the disallowed expenses had already been identified in audit. It concluded that BOD members already knew at the time they received the IME that the benefits lacked legal basis.

PhilHealth then petitioned for review before the COA Proper. The COA Proper dismissed the petition for being filed out of time. It observed that PhilHealth appealed the ND and the COA-CGS decision after 181 and 42 days, respectively, from receipt. It also refused to relax procedural rules, holding that PhilHealth offered no justification for the belated filing. A motion for reconsideration was likewise denied.

The Supreme Court’s Approach: Timeliness of Appeal Under COA Rules

PhilHealth argued that the term “month” in the six-month reglementary period under the 2009 Revised Rules of Procedure of COA should be understood as a 30-day month, so that the six-month period should be computed without equating it to 180 days. The Supreme Court rejected the argument. It examined Section 4, Rule V of the 2009 Revised Rules, which required that an appeal to the COA Director be filed within six months after receipt of the decision appealed from, and Section 3, Rule VII, which required that an appeal before the COA Proper be taken within the time remaining of the six-month period, accounting for suspension of the running.

The Court treated one month as 30 days for purposes of determining the last day of the reglementary period. It distinguished Commissioner of Internal Revenue v. Primetown Property Group, Inc. (Primetown), noting that Primetown involved a different incompatibility issue regarding the computation of “year” for tax refund prescription under the Civil Code versus the Administrative Code of 1987. Here, the Court held there was no comparable incompatibility for the computation of a “month” because both laws treat a month as 30 days. The Court therefore found that the COA employed the correct equivalent of six months as 180 days, making January 23, 2013 the last day to file the appeal. Since PhilHealth filed its appeal to the COA-CGS only on January 24, 2013, the Supreme Court upheld COA’s conclusion that the appeal had already lapsed.

Merits: Lack of Legal Basis for IME Under RA No. 7875

Even assuming that procedural strictness could be relaxed, the Supreme Court held that the IME disallowance still had no legal basis.

Distinguishing Appointive and Ex Officio BOD Members

The Court distinguished the appointive members of the BOD from the ex officio members. It explained that the BOD composition under RA No. 9241 (amending RA No. 7875) included members whose participation was based on appointment and members who served by virtue of their office. It adopted the conceptual distinction between appointment as the selection of an individual to exercise office functions and designation as the imposition of duties upon a person already in public service by reason of earlier appointment or election.

The Court then interpreted Section 18(d) of RA No. 7875, which allows BOD members to receive per diems for every meeting actually attended. The Court held that the provision referred only to appointive members, not to those serving in an ex officio capacity. It reasoned that ex officio positions are part of the principal office already legally and functionally integrated into the official’s duties. Accordingly, such officials have no right to receive any other form of additional compensation for their ex officio services, otherwise violating constitutional prohibitions against holding multiple government positions and receiving additional or double compensation. The Court referenced jurisprudence emphasizing that attending meetings in an ex officio capacity is already encompassed by compensation attached to the principal office, regardless of whether the extra compensation is denominated as per diem, honorarium, allowance, or otherwise.

Error in PhilHealth’s Reliance on Charter Authority and DBM Circular

On that premise, the Court upheld COA’s disallowance of IME granted to ex officio BOD members. It observed that those members were already receiving allowances from their respective departments through their EME, as appropriated in the GAA.

The Court also rejected PhilHealth’s invocation of DBM-National Budget Circular No. 2007-510, particularly its provision allowing certain departmental officials who are ex officio members of governing boards to receive reimbursement for actual transportation and miscellaneous expenses incurred in attending board meetings. The Court interpreted the circular as permitting such reimbursements only as appropriated under the officials’ respective departments under the GAA.

As to appointive members, the Court likewise held PhilHealth’s scheme lacked statutory authority. It ruled that PhilHealth’s charter did not authorize BOD to grant allowances beyond per diems. It emphasized that although Section 18(d) is titled “allowances and per diems,” its body only mentioned per diems and did not mention any other allowances or benefits besides per diems. Invoking the statutory construction maxim expressio unius est exclusio alterius, the Court reasoned that when a statute expressly enumerates one thing, it excludes others. It further supported the conclusion through the Court’s discussion in Bases Conversion and Development Authority v. COA (BCDA), which had recognized that specifying compensation and limiting its amount signals legislative intent to restrict board members’ entitlement to authorized per diems and no other benefits. The Court stressed that it could not enlarge a statute by judicial interpretation to add benefits that Congress did not include.

Rejection of Claims of Fiscal Autonomy and Alleged Executive Approval

PhilHealth

Case Syllabus (G.R. No. 222838)

The case arose from a petition for review on certiorari under Rule 64 of the Rules of Court, assailing Commission on Audit (COA) Decision No. 2015-093 and Resolution dated December 15, 2015, both of which sustained the disallowance of Institutional Meeting Expenses (IME) for 2010 paid to members of the Board of Directors (BOD) of Philippine Health Insurance Corporation (PhilHealth) in the total amount of P2,965,428.59.
The COA affirmed the disallowance because the payment of the IME lacked legal basis, as determined from audit findings concerning violations of budgetary controls under the applicable General Appropriations Act (GAA) and COA Circular No. 2006-01.

Parties and Procedural Posture

The petitioner was Philippine Health Insurance Corporation, which sought to annul the COA rulings that disallowed the IME and affirmed the disallowance on appeal.
The respondents were Commission on Audit, Chairperson Michael G. Aguinaldo, Director Joseph B. Anacay, and Supervising Auditor Elena L. Agustin.
The petition challenged COA’s rulings in multiple layers: first by the COA Supervising Auditor who issued a Notice of Disallowance, then by COA-Corporate Government Sector (COA-CGS) which denied PhilHealth’s appeal, and finally by COA Proper which dismissed the petition due to untimeliness.
The COA Proper dismissed the petition for being filed out of time and declined to relax procedural rules because PhilHealth did not provide justification for belated filing.
The Supreme Court denied the petition and affirmed the COA denial and disallowance.

Key Factual Allegations

In October 2007, the PhilHealth BOD adopted Board Resolution No. 1055, approving entitlement of BOD members (or their authorized representatives) to Board Extraordinary and Miscellaneous Expense (BEME) reimbursable allowances of P30,000.00 per month, effective October 4, 2007, intended to cover expenses in the performance of official functions.
A supplemental budget of P1,560,000.00 was appropriated to support the BEME arrangement.
In December 2007, the BOD amended Board Resolution No. 1055 via Board Resolution No. 1084, allowing the unexpended balance of monthly Extraordinary and Miscellaneous Expense (EME) to be carried over and expended in succeeding months within the same calendar year, effective retroactively from October 5, 2007.
In February 12, 2009, the BOD adopted another resolution allocating P4,320,000.00 from the 2009 Corporate Operating Budget of the Office of the Corporate Secretary and every year thereafter for reimbursement of expenses incurred by BOD members (or authorized representatives) in the discharge of official duties outside board meetings.
On May 24, 2011, the COA Supervising Auditor issued an Audit Observation Memorandum (AOM) showing that reimbursements of EME totaling P19.95 million in calendar year 2010 were charged to representation accounts specifically under sub-accounts for Institutional Meeting Expenses (865-10) and Committee Meeting Expenses (865-20).
The AOM stated that PhilHealth had used IME and Committee Meeting Expenses accounts to accommodate reimbursements of EME because direct charges to the EME account had already exceeded the GAA-prescribed limitation for each official.
The AOM also noted an additional irregularity: P5.63 million of the total was reimbursement of expenses incurred by BOD members and personnel whose positions were not entitled to EME.
After PhilHealth’s comment on the AOM was found unsatisfactory, Notice of Disallowance (ND) No. HO 12-004 (10) was issued on July 18, 2012, disallowing payment for IME for January to December 2010 in the amount of P2,965,428.59 for lack of legal basis.

COA Findings and Appeals

PhilHealth appealed the ND to COA-CGS, but the appeal was denied.
COA-CGS affirmed the view that Section 18(d) of RA No. 7875 expressly provided that a per diem is the intended compensation for BOD members, and that RA No. 7875 did not authorize additional compensation, allowances, or benefits for the BOD.
COA-CGS held that while the BOD may formulate rules and regulations under RA No. 7875, the power must be exercised within the legislative scope, and Board Resolution No. 1193 exceeded authority by authorizing receipt of EME contrary to Section 18(d) of RA No. 7875.
COA-CGS rejected PhilHealth’s reliance on prior rulings regarding non-refund of disallowed benefits, reasoning that the expenses had already been disallowed in audit, so BOD members allegedly knew at the time of receipt that the benefits had no legal basis.
PhilHealth then filed a petition for review before the COA Proper, but the COA Proper dismissed it as filed out of time.
The COA Proper calculated that PhilHealth’s appeal from the ND and its subsequent appeal before COA Proper were beyond the reglementary periods, and it found no compelling reason to relax procedural rules because no sufficient justification was offered for the delay.

Primary Issues Raised

The principal threshold issue was whether the COA Proper erred in dismissing PhilHealth’s appeal on mere procedural grounds due to alleged untimeliness.
The merits issue was whether COA correctly disallowed IME for 2010 for lack of legal basis.
A related issue was whether PhilHealth could avoid refund liability by invoking good faith of the BOD members who received the questioned IME.
Another merits sub-issue concerned statutory interpretation of Section 18(d) of RA No. 7875 as to whether it limited BOD compensation to per diems and excluded other allowances or benefits.
Still another sub-issue involved the distinction between appointive and ex officio BOD members and the legal consequences of that distinction for additional compensation.

Procedural Timeliness Ruling

The Court held that PhilHealth’s argument that the term “month” in the six-month appeal period should mean a 30-day month was unpersuasive when applied to the COA computation used in the case.
The Court relied on Section 4, Rule V of the 2009 Revised Rules of Procedure of COA, which required filing an appeal within six months after receipt of the decision appealed from.
The Court observed that the COA computation used 180 days as the equivalent of the six-month period for the purpose of determining the last day to file.
The Court noted that PhilHealth received the ND on July 27, 2012 and filed an appeal before COA-CGS on January 24, 2013.
The Court found that since the six-month period began to run upon receipt and ended on January 23, 2013, PhilHealth’s appeal on January 24, 2013 was filed after the period lapsed.
The Court distinguished Commissioner of Internal Revenue v. Primetown Property Group, Inc. on the ground that Primetown addressed incompatibilities in computing legal periods for a “year,” whereas the case involved computing a legal period for a “month.”
The Court held that, unlike the incompatibility discussed in Primetown, there was no such incompatibility because both the Civil Code and the Administrative Code of 1987