Case Summary (G.R. No. 251178)
Facts of the Case
On June 1, 2009, the SBC Board of Directors approved Board Resolution No. 1610, revising its organizational structure, staffing pattern, qualification standards, and salary structure, which was later confirmed by DTI Secretary Peter B. Favila on February 8, 2010. In the context of these developments, Executive Order No. 7 was issued on September 8, 2010, imposing a moratorium on salary increases, allowances, and benefits for government-owned and controlled corporations and government financial institutions, which remained effective unless specifically authorized by the President.
Despite this moratorium, the SBC Board of Directors issued Resolution No. 1863 on October 28, 2011, implementing guidelines for the revised salary structure, allowing step increments based on merit or length of service. Between September 1, 2012, and September 30, 2014, salary increases totaling PHP 4,489,002.09 were approved and disbursed to SBC personnel, which later drew scrutiny from the COA.
COA's Action
In response to the salary increases, the COA issued notices of disallowance in 2014, citing violations of EO No. 7. The disallowed payments became the subject of appeals by SBC on the grounds that the salary increases were approved prior to EO No. 7, alleging that the executive order was retroactively applied.
Ruling of COA Cluster Director and COA Proper
The COA Cluster Director affirmed the disallowances, stating that the salary increases violated EO No. 7. The COA Proper upheld this finding in a decision dated December 29, 2017, reiterating that the increases were implemented during the moratorium period and reaffirming the need for Presidential approval for such salary adjustments.
Issue Before the Court
The primary issue for resolution is whether the COA gravely abused its discretion when it upheld the disallowances concerning salary increases granted by SBC.
Court's Ruling
The Supreme Court ruled against SBC, asserting that the COA acted within its constitutional mandate to disallow illegal expenditures. The Court noted the clear directives of EO No. 7, highlighting that any salary increases implemented after its issuance were subject to disallowance. The Court emphasized that while the SBC's revised salary structure received prior approval, its actual implementation and payment occurred during the moratorium.
On the Power to Fix Salary Structures
The Court acknowledged the SBC’s authority under RA 6977 to set salary structures, but clarified that such authority is still subject to oversight by the President and applicable laws governing compensation frameworks for GOCCs. It highlighted that the Governance Commission for Government-Owned or Controlled Corporations (GCG), established under RA 10149, is tasked with formulating compensation policies to prevent excessive remuneration packages and that SBC itself recognized this authority when it sought confirmation regarding the salary increases from the GCG.
Related Jurisprudence
The Court also noted that a similar issue had been resolved in the prior case of SBC v. COA (G.R. No. 230628), establishing that salary increa
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Case Background
- The case involves a petition for certiorari by the Small Business Corporation (SBC) against the Commission on Audit (COA) regarding the disallowance of salary increases granted to its personnel from September 1, 2012, to September 30, 2014, totaling P4,489,002.09.
- COA's decisions, specifically Decision No. 2017-494 and Resolution dated September 27, 2018, are being contested by SBC.
Relevant Statutes and Resolutions
- On June 1, 2009, SBC's Board of Directors issued Board Resolution No. 1610, approving a revised organizational structure and salary structure in line with Republic Act No. 6977.
- The revised salary structure was confirmed by then-DTI Secretary Peter B. Favila on February 8, 2010.
- Executive Order No. 7, issued by then-President Benigno S. Aquino III on September 8, 2010, imposed a moratorium on salary increases and grants of new allowances for government-owned and controlled corporations (GOCCs) and government financial institutions (GFIs).
SBC's Actions and Subsequent Developments
- Despite the moratorium, SBC approved salary increases based on the revised salary structure, which were disbursed between September 1, 2012, and September 30, 2014.
- A letter was sent to the Governance Commission for GOCCs (GCG) by SBC requesting confir