G.R. No. 252198 - Securities and Exchange Commission vs. Commission on Audit

Case Summary (G.R. No. 252198)

Petitioner and Respondent

Petitioner: Securities and Exchange Commission (SEC)
Respondent: Commission on Audit (COA)

Key Dates

• April 1, 2013 – COA-NGS Decision No. 2013-004 disallowing P19,723,444.66.
• January 17, 2018 – COA En Banc Decision No. 2018-010 affirming disallowance and holding approving officers liable.
• January 29, 2020 – COA En Banc Resolution No. 2020-180 denying SEC’s motion for reconsideration.
• April 27, 2021 – Supreme Court decision under 1987 Constitution.

Applicable Law

• 1987 Philippine Constitution – budgeting and auditing mandates.
• Securities Regulation Code (Republic Act No. 8799), Sections 7.2 (compensation system exemption) and 75 (retained income authority).
• General Appropriations Act 2010 (RA 9970), Special Provision No. 1 limiting use of retained income to Maintenance and Other Operating Expenses (MOOE) and Capital Outlay (CO).
• Administrative Code of 1987 (EO 292), Sections 38, 39, and 43.
• Presidential Decree No. 1177 and EO 292 provisions on compensation system approval.
• COA Revised Rules of Procedure.

Antecedents

• 2002–2004: SEC En Banc Resolutions established a provident fund and set a 15% employer counterpart contribution sourced from retained income, offset by 3% employee deductions.
• August 19, 2004 DBM letter stated SEC’s retained income was “off-budget” and at SEC’s discretion, subject to accounting and auditing rules.
• December 21, 2004 SEC Resolution approved annual allocation of 15% of payroll from retained income.
• FY 2010 budget submissions to DBM allocated P81 million from retained income for personnel benefits; P19,723,444.66 disbursed as the provident fund counterpart for January–December 2010.

COA Disallowance

Under Notice of Disallowance No. 11-003-101-(10) dated December 10, 2011, COA disallowed the P19,723,444.66 disbursement on grounds that:

RA 9970 Special Provision No. 1 restricts retained income use to MOOE and CO.
PD 1177 requires presidential approval for new personnel benefits.
Compensation plans must conform to the Compensation and Position Classification Act and be approved by the President.
COA directed seven SEC officers and all payees to settle the disallowed amount.

Proceedings Before COA

• SEC’s June 22, 2012 appeal argued the retained income was an off-budget fund under SRC § 75, not subject to GAA appropriation limits, and that provident fund contributions were authorized by law and practice.
• COA-NGS Cluster 2 (Apr 1, 2013) affirmed disallowance but absolved approving officers from refund due to their honest belief in entitlement.
• COA En Banc (Jan 17, 2018) affirmed the disallowance and modified liability: employees need not refund, but certifying officers held solidarily liable. Its Jan 29, 2020 resolution denied reconsideration.

Issues

Whether COA validly disallowed SEC’s P19,723,444.66 provident fund payment.
Whether approving, certifying, and authorizing SEC officers must refund the disallowed amount.

Supreme Court’s Analysis on Disallowance Validity

• Under the “plain meaning” rule, SRC § 75 authorizes use of retained income “subject to the auditing requirements, standards and procedures under existing laws.”
• GAA 2010 Special Provision No. 1 is an existing law that limits SEC’s retained income to augmenting MOOE and CO only.
• Contributions to a provident fund are classified as Personal Services, not MOOE or CO, and thus fall outside the permitted uses.
• The Supreme Court held that Special Provision No. 1 does not repeal SRC § 75 but lawfully restricts its exercise; SEC’s disbursement was therefore correctly disallowed.

Supreme Court’s Analysis on Officer Liability

• Under the Administrative Code and Madera rules, approving officers acting in good faith are not civilly liable absent