EN BANC
G.R. No. 250787. September 27, 2022
PHILIPPINE HEALTH INSURANCE CORPORATION, Petitioner, v. COMMISSION ON AUDIT, HON. MICHAEL G. AGUINALDO, CHAIRPERSON, Respondent.
D E C I S I O N
INTING, J.:
Before the Court is a Petition for Certiorari1 under Rule 64, in relation to Rule 65, of the Rules of Court filed by Philippine Health Insurance Corporation (Philhealth) assailing the Commission on Audit (COA) Commission Proper (COA Proper) Decision2 dated January 29, 2018 and Resolution3 dated August 15, 2019 in COA CP Case No. 2015-683. In the assailed issuances, the COA Proper affirmed the Notices of Disallowance (NDs) issued by the COA Auditor relative to Philhealth's payment of Educational Assistance Allowance (EAA) and Birthday Gift to its officials and employees in the Head Office (HO) and Regional Offices (RO) during 2014.4chanRoblesvirtualLawlibrary
The COA Auditor found that Philhealth granted the EAA and Birthday Gift to its officials without the President's approval, contrary to the requirement set forth under the following legal provisions:8chanRoblesvirtualLawlibrary
Benefit/Allowance AmountEAA — HO P51,529,824.29EAA — NCR and Rizal RO 27,837,560.98Birthday Gift 3,695,000.00Total P83,062,385.277
SECTION 5. Allowances, Honoraria, and Other Fringe Benefits. — Allowances, honoraria and other fringe benefits which may be granted to government employees, whether payable by their respective offices or by other agencies of government, shall be subject to the approval of the President upon recommendation of the Commissioner of the Budget. For this purpose, the Budget Commission shall review on a continuing basis and shall prepare, for the consideration and approval of the President, policies and levels of allowances and other fringe benefits applicable to government personnel, including honoraria or other forms of compensation for participation in projects which are authorized to pay additional compensation.2) Republic Act No. (RA) 6758,10 otherwise known as the Salary Standardization Law (SSL)
SECTION 6. Exemptions from OCPC Rules and Regulations. — Agencies positions, or groups of officials and employees of the national government, including government owned or controlled corporations, who are hereafter exempted by law from OCPC coverage, shall observe such guidelines and policies as may be issued by the President governing position classification, salary rates, levels of allowances, project and other honoraria, overtime rates, and other forms of compensation and fringe benefits. Exemptions notwithstanding, agencies shall report to the President, through the Budget Commission, on their position class4ication and compensation plans, policies, rates and other related details following such specifications as may be prescribed by the President. (Italics supplied)
SECTION 12. Consolidation of Allowances and Compensation. — All allowances, except for representation and transportation allowances; clothing and laundry allowances; subsistence allowance of marine officers and crew on board government vessels and hospital personnel; hazard pay; allowances of foreign service personnel stationed abroad; and such other additional compensation not otherwise specified herein as may be determined by the DBM, shall be deemed included in the standardized salary rates herein prescribed. Such other additional compensation, whether in cash or in kind, being received by incumbents only as of July 1, 1989 not integrated into the standardized salary rates shall continue to be authorized.3) Memorandum Order No. (MO) 2011 dated June 25, 2001
Existing additional compensation of any national government official or employee paid from local funds of a local government unit shall be absorbed into the basic salary of said official or employee and shall be paid by the National Government. (Italics supplied)
SECTION 3. Any increase in salary or compensation of [government-owned or -controlled corporations (GOCCs)/government financial institutions (GFIs)] that are not in accordance with the SSL shall be subject to the approval of the President.4) Administrative Order No. (AO) 10312 dated August 31, 2004
SECTION 3. All NGAs, SUCs, GOCCs, GFIs and OGCEs, whether exempt from the Salary Standardization Law or not, are hereby directed to:5) Executive Order No. (EO) 713 dated September 8, 2010
x x x x
(b) Suspend the grant of new or additional benefits to full-time officials and employees and officials, except for (i) Collective Negotiation Agreement (CNA) Incentives which are agreed to be given in strict compliance with the provisions of the Public Sector Labor-Management Council Resolutions No. 04, s. 2002 and No. 2, s. 2003, and (ii) those expressly provided by presidential issuance x x x. (Italics supplied)
SECTION 9. Moratorium on Increases in Salaries, Allowances, Incentives and Other Benefits. — Moratorium on increases in the rates of salaries, and the grant of new increases in the rates of allowances, incentives and other benefits, except salary adjustments pursuant to Executive Order No. 811 n dated June 17, 2009 and Executive Order No. 900 dated June 23, 2010, are hereby imposed until specifically authorized by the President. (Italics supplied)6) RA 10149,14 otherwise known as the GOCC Governance Act of 2011
SECTION 8. Coverage of the Compensation and Position Classification System. — The GCG, after conducting a compensation study, shall develop a Compensation and Position Classification System which shall apply to all officers and employees of the GOCCs whether under the Salary Standardization Law or exempt therefrom and shall consist of classes of positions grouped into such categories as the GCG may determine, subject to the approval of the President. (Italics supplied)When the COA Director denied its subsequent appeal from the disallowances, Philhealth15 elevated the case to the COA Proper.16chanRoblesvirtualLawlibrary
A. SECTION 16(n) OF R.A. NO. 7875, AS AMENDED, EXPLICITLY BESTOWED [PHILHEALTH] WITH "FISCAL AUTONOMY OR INDEPENDENCE" TO FIX THE COMPENSATION OF ITS PERSONNEL, AS CONFIRMED BY [THE OFFICE OF THE GOVERNMENT CORPORATE GENERAL COUNSEL (OGCC)] OPINIONS, THEN PRESIDENT GLORIA ARROYO, AND LEGISLATIVE DELIBERATIONS ON SECTION 16(n).Philhealth relies heavily on its supposed fiscal autonomy and the Board of Directors' authority to fix the compensation of Philhealth personnel to justify the grant and payment of EAA and Birthday Gift. It points out that its fiscal autonomy has been twice confirmed by former President Arroyo and supported by OGCC Opinions. It classifies itself as part of a "distinct class" of entities (i.e., GOCCs/GFIs) that are allowed fiscal autonomy and, thus, exempted from the application of the SSL.
B. THE FISCAL AUTHORITY OF [PHILHEALTH] UNDER ARTICLE IV, SECTION 16 (N) OF R.A. NO. 7875, AS AMENDED, HAD BEEN CONFIRMED TWICE BY THEN PRESIDENT GLORIA M. ARROYO, IN 2006 AND IN 2008.
C. [PHILHEALTH] IS CLASSIFIED AS A [GFI] AND MUST BE ACCORDED THE FISCAL AUTONOMY ENJOYED BY OTHER GFIs AS RECOGNIZED BY THIS COURT IN THE CASE OF CENTRAL BANK EMPLOYEES ASSOCIATION INC vs. BANGKO SENTRAL NG PILIPINAS.
D. THE DISALLOWED BENEFITS WERE GRANTED PURSUANT TO THE DULY EXECUTED [CNA] BETWEEN [PHILHEALTH] MANAGEMENT AND [PHILHEALTH] EMPLOYEES ASSOCIATION (PHICEA)
E. THE [PHILHEALTH] OFFICIALS AND EMPLOYEES RECEIVED THE SUBJECT BENEFITS IN GOOD FAITH AND, THEREFORE, EVEN IF THE DISALLOWANCE IS SUSTAINED, THEY CANNOT BE REQUIRED TO REFUND THE SAME.
F. THE SUPREME COURT HAS ALREADY RULED IN THE CASE OF PHILHEALTH CARAGA VS COMMISSION ON AUDIT [DECISION], G.R. No. 230218, AUGUST 14, 2018, THAT BOTH THE APPROVING OFFICERS AND PASSIVE RECIPIENTS ARE IN GOOD FAITH IN RECEIVING BENEFITS APPROVED BY THE PHILHEALTH BOARD, HENCE, BOTH NEED NOT REFUND THE DISALLOWED BENEFITS.34chanRoblesvirtualLawlibrary
1) Sections 5 and 6 of PD 1597;The Court observes that Philhealth does not deny that the subject benefits and allowances were granted without executive approval or confirmation. Instead, Philhealth insists that it belongs to a special class of entities exempted from the requirements in the SSL and relevant laws/regulations,51 particularly obtaining prior executive approval in relation to the grant and payment of salaries and benefits. It continues to rely on its supposed fiscal autonomy and authority to fix the compensation of its personnel in justifying the grant and in seeking exemption from the application of the SSL. In other words, Philhealth believes that it has a free hand in determining the compensation of its personnel, without the intervention of the executive, and that the resolutions passed by the Board of Directors are sufficient legal bases for the grant and payment of the EAA and Birthday Gift.
2) Section 12 of the SSL;
3) Section 3 of MO 20 dated June 25, 2001;
4) Section 3 of AO 103 dated August 31, 2004;
5) Section 9 of EO 7 dated September 8, 2010; and
6) Section 8 of the GOCC Governance Act.
Accordingly, that Section 16(n) of R.A. 7875 granting PHIC's power to fix the compensation of its personnel does not explicitly provide that the same shall be subject to the approval of the DBM or the OP as in Section 19(d) thereof does not necessarily mean that the PHIC has unbridled discretion to issue any and all kinds of allowances, limited only by the provisions of its charter. As clearly expressed in PCSO v. COA, even if it is assumed that there is an explicit provision exempting a GOCC from the rules of the then Office of Compensation and Position Classification (OCPC) under the DBM, the power of its Board to fix the salaries and determine the reasonable allowances, bonuses and other incentives was still subject to the standards laid down by applicable laws: P.D. No. 985, its 1978 amendment, P.D. No. 1597, the SSL, and at present, R.A. 10149. To sustain petitioners' claim that it is the PHIC, and PHIC alone, that will ensure that its compensation system conforms with applicable law will result in an invalid delegation of legislative power, granting the PHIC unlimited authority to unilaterally fix its compensation structure. Certainly, such effect could not have been the intent of the legislature.53 (Citations omitted)The Court reiterated its rejection of Philhealth's fiscal autonomy as justification for the payment of allowances and benefits in the following disallowance cases also involving Philhealth:
That Philhealth's fiscal autonomy had been purportedly confirmed by the Chief Executive and the OGCC, as Philhealth argues,54 cannot undermine the consistent and unequivocal Court pronouncements.
(a) Philippine Health Insurance Corp. v. Commission on Audit, G.R. No. 235832, November 3, 2020; (b) Philippine Health Insurance Corp. v. Commission on Audit, G.R. No. 222129, February 2, 2021; (c) Philippine Health Insurance Corp. Regional Office-CARAGA v. Commission on Audit (Resolution), G.R. No. 230218, July 6, 2021; and (d) Philippine Health Insurance Corp. v. Commission on Audit, G.R. No. 250089, November 9, 2021.
In the present controversy: first, the subject EAA and Birthday Gift are not among the allowable non-integrated allowances expressly enumerated under Section 12; second, Philhealth does not point to any DBM issuance identifying the EAA and Birthday Gift as allowable nonintegrated benefits; third, it admits that the grant of EAA commenced in 2000.59 On the other hand, it claims that the grant of Birthday Gift was made pursuant to the CNA executed and approved in 2010.60 In other words, the subject benefits were introduced to Philhealth's compensation scheme long after the passage of the SSL.
(1) representation and transportation allowances, clothing and laundry allowances, subsistence allowance of marine officers and crew on board government vessels and hospital personnel, hazard pay, allowances of foreign service personnel stationed abroad; (2) other additional compensation not otherwise specified herein as may be determined by the DBM as non-integrated;58 (3) other additional compensation of a government employee, whether or not integrated, if the employee had been already receiving such additional compensation prior to the SSL's effectivity (i.e., before and as of July 1, 1989).
Wherefore, the Council resolves as it hereby resolved, to adopt the following guidelines for all GOCCs/GFIs whether covered by or exempted from the SSL;cralawlawlibraryThe import of the above-cited provisions is that GOCCs/GFIs do not have the authority to grant CNA Incentives at will. A valid and justified grant turns upon the concurrence of several conditions, thus: that there is a valid CNA between labor and management and that the parties have endeavored to attain more efficient and viable operations. "Whether the parties have in fact achieved these objectives shall be determined by the criteria and benchmark expressly stipulated by the parties in the CNA, particularly the provisions on the improvement of income and productivity, streamlining of systems and procedures, and cost-cutting measures to be undertaken."64chanRoblesvirtualLawlibrary
Section 1. In recognition of the joint efforts of labor and management to attain more efficient and viable operations, a CNA Incentive may be provided in the CNA to be granted to the rank-and-file.
Section 2. The CNA must include, among others, provisions on improvement of income and productivity, streamlining of systems and procedures, and cost cutting measures that shall be undertaken by both the management and the union so that the operations of the GOCC/GFI can be undertaken at a lesser cost.
Section 3. The CNA Incentive may be granted if all the following conditions are met by the GOCC/GFI:
a) Actual operating income at least meets the targeted operating income in the Corporate Operating Budget (COB) approved by the [DBM]/Office of the President for the year; For GOCCs/GFIs, which by nature of their functions consistently incur operating losses, the current year's operating loss should have been minimized or reduced compared to or at most equal that of prior year's level; b) Actual operating expenses are less than the DBM approved level of operating expenses in the COB as to generate sufficient source of funds for the payment of CNA Incentive; and c) For income generating GOCCs/GFIs, dividends amounting to at least 50% of their annual earnings have been remitted to the National Treasury in accordance with the provisions of [RA] 7656 dated November 9, 1993. (Italics supplied)
Specifically, the birthday gifts, educational assistance allowance, contractor's gifts and sustenance allowance, transportation allowance, and shuttle services assistance were allegedly included in the Collective Negotiation Agreement between PhilHealth Employees Association, the duly recognized union of PhilHealth rank-and-file employees, and the PhilHealth management for the year 2007 to 2010.The above-mentioned ruling applies squarely to the present controversy.
x x x x
With respect to the rest of the benefits and incentives, the disbursements lacked legal basis. Again, petitioners failed to present any law or [DBM] issuance authorizing the grant of these benefits and incentives in question. By legal fiction, these disallowed benefits and incentives are deemed incorporated in the standardized salary.67chanRoblesvirtualLawlibrary
(1) | PHIC NDs 2008-056(07) and 2008-056(07), both dated December 18, 2008, disallowed Birthday Gift and EAA payments, respectively, during calendar year 2007. These disallowances were affirmed by the Court in 2020.73 |
(2) | NDs 09-005-501-(09) to 09-019-501-(09) issued in 2009, disallowed the payment of various benefits to Philhealth CARAGA officers, employees and contractors during calendar year of 2009, which included among others, EAA and Birthday Gift. These disallowances were upheld by the Court in 2018.74 Notably, Philhealth acknowledges75 that these 2009 NDs also dealt with the same benefits that are now subject of this controversy. |
Endnotes:
* Per Special Order No. 2914 dated September 15, 2022.
1 Rollo, pp. 3-35.
2 Id. at 42-51. Approved by COA Chairperson Michael G. Aguinaldo and Commissioners Jose A. Fabia and Isabel D. Agito.
3 Id. at 62.
4 Id. at 42.
5 ND Nos. HO 2015-001-COB (14) dated January 21, 2015 and NCR 2015-003 COB (14) dated April 29, 2015.
6 Rollo, p. 42.
7 Id.
8 Id. at 43.
9 Entitled "Further Rationalizing the System of Compensation and Position Classification in the National Government," approved on June 11, 1978.
10 "Compensation and Position Classification Act of 1989," approved on August 21, 1989.
11 Directing Heads of Government-Owned-and-Controlled Corporations (GOCCs), Government Financial Institutions (GFIs) and Subsidiaries Exempted from or Not Following the Salary Standardization Law (SSL) to Implementation of Pay Rationalization Plan in All Senior Officer Positions, signed on June 25, 2001.
12 Directing the Continued Adoption of Austerity Measures in the Government, signed on August 31, 2004.
13 Entitled "Directing the Rationalization of the Compensation and Position Classification System in the GOCCs and GFIs," signed on September 8, 2010.
14 Entitled "An Act to Promote Financial Viability and Fiscal Discipline in Government-Owned or -Controlled Corporations and to Strengthen the Role of the State in its Governance and Management to Make them More Responsive to the Needs of Public Interest and For Other Purposes," approved on June 6, 2011.
15 Through Ramon F. Ariztoza, Jr., Officer-in-Charge President and Chief Executive Officer.
16 Rollo, p. 43. Philhealth did not attach a copy of the COA Corporate Government Section-Cluster 6 (COA Director) Decision dated September 10, 2015.
17 Id. at 42-51.
18 717 Phil. 491 (2013).
19 Republic Act No. 7875, otherwise known as the "National Health Insurance Act of 1995," as amended, approved on February 14, 1995.
20 Rollo, p. 45.
21 SECTION 16. Powers and Functions. — The Corporation shall have the following powers and functions:
chanroblesvirtuallawlibraryx x x x22 366 Phil. 273 (1999).
n) to organize its office, fix the compensation of and appoint personnel as may be deemed necessary and upon the recommendation of the president of the Corporation;cralawlawlibrary
x x x x
23 SECTION 26. Financial Management. — The use, disposition, investment, disbursement, administration and management of the National Health Insurance Fund, including any subsidy, grant or donation received for program operations shall be governed by resolution of the Board of Directors of the Corporation, subject to the following limitations:
chanroblesvirtuallawlibrarya) All funds under the management and control of the Corporation shall be subject to all rules and regulations applicable to public funds.24 Rollo, p. 45.
x x x x
25 Id. at 46.
26 Id. at 47, citing the Civil Service Commission Primer on Collective Negotiation Agreement.
27 Id. at 48.
28 Id.
29 Id.
30 Id. at 49.
31 Id.
32 Id. at 62.
33 Id. at 64-96.
34 Id. at 7-8.
35 Id. at 156-157.
36 Id. at 158.
37 Citing Engr. Mendoza v. Commission on Audit, supra note 18.
38 Rollo, p. 160.
39 Id. at 162.
40 Id. at 163.
41 Citing Rotoras v. Commission on Audit, G.R. No. 211999, August 20, 2019.
42 Section 2, Rule 64, in relation to Section 1, Rule 65 of the Rules of Court.
43 Social Security System v. Commission on Audit, G.R. No. 231391, June 22, 2021.
44 Zamboanga City Water District v. Commission on Audit, G.R. No. 218374, December 1, 2020.
45 Ramiscal v. Commission on Audit, 819 Phil. 597 (2017).
46 Zamboanga City Water District v. Commission on Audit, supra note 44, citing Fernandez v. Commission on Audit, G.R. No. 205389, November 19, 2019.
47 Social Security System v. Commission on Audit, supra note 43.
48 National Tobacco Administration v. Commission on Audit, G.R. No. 217915, October 12, 2021.
49 See Philippine Health Insurance Corporation v. COA, 837 Phil. 90 (2018).
50 Social Security System v. Commission on Audit, supra note 43.
51 Rollo, pp. 16-18.
52 801 Phil. 427 (2016).
53 Id. at 452-453.
54 Rollo, pp. 24-25.
55 Philippine Health Insurance Corp. v. Commission on Audit, G.R. No. 222129, February 2, 2021.
56 See Metropolitan Waterworks and Sewerage System v. Commission on Audit, 821 Phil. 117 (2017).
57 Zamboanga City Water District v. Commission on Audit, supra note 44.
58 Philippine Health Insurance Corp. v. Commission on Audit, supra note 52, at 454.
59 Rollo, p. 12.
60 Id. at 11-12.
61 Philippine Health Insurance Corp. v. Commission on Audit, supra note 52, at 455.
62 Rollo, p. 26.
63 Entitled "Grant of Collective Negotiation Agreement (CNA) Incentive for Government Owned or Controlled Corporations (GOCCs) and Government Financial Institutions (GFIs)," adopted and approved on May 19, 2003.
64 National Tobacco Administration v. Commission on Audit, supra note 48.
65 Id.
66 G.R. No. 230218, July 6, 2021.
67 Id.
68 Madera v. Commission on Audit, G.R. No. 244128, September 8, 2020.
69 National Transmission Corp. v. Commission on Audit, G.R. No. 232199, December 1, 2020.
70 Patadon v. Commission on Audit, G.R. No. 218347, March 15, 2022.
71 Section 19.1.3 of the Manual on Certificate of Settlement and Balances (as prescribed in COA Circular 94-001, January 20, 1994) provides:
Section 19.1.3 Public officers who approve or authorize transactions involving the expenditure of government funds and uses of government properties shall be liable for all lossess arising out of their negligence or failure to exercise the diligence of a good father of a family.
72 Patadon v. Commission on Audit, supra.
73 Philippine Health Insurance Corp. v. Commission on Audit, G.R. No. 235832, November 3, 2020.
74 See Philippine Health Insurance Corp. Regional Office-Caraga v. Commission on Audit, 838 Phil. 600 (2018).
75 Rollo, p. 18.
76 In Madera v. Commission on Audit, supra note 68, following Justice Leonen's proposal, the Court declared that an approving/certifying officer, despite the disallowance, may be considered to have exercised the diligence of a good father of the family and thus continue to benefit from the presumptions of regularity in the performance of official functions and good faith if, among others, "[the disbursement] is traditionally practiced within the agency and no prior disallowance has been issued."
77 Supra note 66.
78 Supra note 74.
79 Rollo, p. 32.
80 Philippine Health Insurance Corp. Regional Office-CARAGA v. Commission on Audit (Resolution), supra note 66.
81 Social Security System v. Commission on Audit, G.R. No. 231391, June 22, 2021.
82 Supra note 68.
83 Id.
84 In Abrigo v. Commission on Audit, G.R. No. 253117, March 29, 2022, the Court made a similar pronouncement: "Notwithstanding the similarities between this case and MWSS, We only deem instructive the Court's previous disquisition on the propriety of the NDs. We cannot arrive at a similar conclusion regarding petitioners' liability to return. MWSS involved a different set of allowances and NDs. Accordingly, the actions of the approving/certifying officers, as well as the possible bases of their good faith, vary. Also, the civil liability of petitioners in MWSS was adjudged under a different framework. As mentioned, jurisprudence had since evolved to clarify the rules on return."
85 Madera v. Commission on Audit, supra note 68.
86 G.R. No. 185806, November 17, 2020.
87 Id.cralawredlibrary