Philippine Health Insurance Corporation vs. Commission On Audit

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Philippine Health Insurance Corporation vs. Commission On Audit 

G.R. No. 250787, September 27, 2022 

Facts: 

PhilHealth assailed the COA Decision affirming the Notice Disallowance (NDs) issued by the COA Auditor relative to payment of Educational Assistance Allowance (EAA) and Birthday Gift to its officials and employees on 2014. 

The COA Auditor found that Philhealth granted the EAA and Birthday Gift without the President’s approval contrary to Secs. 5 and 6 of PD No. 1597, Sec. 12 of the Salary Standardization Law (R.A. No. 6758), Sec. 3 of M.O. No. 20 – June 25, 2001, Sec. 3 (b) of A.O. 103 – Aug. 31, 2004, Sec. 9 of E.O. 7 – Sept. 8, 2010, and Sec. 8 of the GOCC Governance Act of 2011 (R.A. No. 10149). 

Issue: 

Whether or not the COA Proper commit grave abuse of discretion in affirming the disallowances against Philhealth. 

Ruling: 

I. Fiscal Autonomy 

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 Bod are sufficient legal bases for the grant and payment of the EEA and Birthday Gift. The Court ruled, citing Philhealth vs. COA, that Philhealth does not have absolute discretion in determining the compensation of its officials. Sec. 16 (n) of Philhealth Charter does not explicitly provide that the same shall be subject to approval of the DBM or the OP, however, it does not necessarily mean that Philhealth has unbridled discretion to issue any and all kinds of allowances, limited only by the provisions of its charter. Even if it assumed that there is an explicit provision exempting a GOCC from the rules of the then 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, otherwise, it will result to invalid delegation of legislative power. 

Thus, the resolutions of the BOD grating the EEA and Birthday Gift sans executive/DBM review and approval as required under laws are ultra vires acts. 

II. EEA and Birthday Gift are not among the exceptions to the standardization of salaries 

SSL is that basic salary of civil service personnel is deemed to already include allowances and other forms of additional compensation. By exception, Section 12 of the SSL enumerates those that may be paid on top of the standardized basic salary. EAA and Birthday Gift are not among the exceptions to the standardization of salaries, hence, these are deemed incorporated in the basic salary of Philhealth personnel. Consequently, “the unauthorized issuance and receipt of these benefits are tantamount to double compensation justifying COA disallowance.” 

III. Invalid CNA Incentives 

The import of the provisions in PSLMC Resolution No. 02, s. 2003 (Entitled “Grant of CNA Incentive for GOCCs and GFIs,” adopted and approved on May 19, 2003) is that GOCCs/GFIs do not have the authority to grant CNA Incentives at will. It is granted specifically to reward good performance and efficiency. The Court ruled that there appears to be no connection between the grant of the EAA and Birthday Gift and Philhealth’s institutional productivity/performance. 

IV. To be valid, every allowance/benefit payment shall be supported by a DBM issuance expressly declaring it as non-integrated. 

Citing Philhealth RO-CARAGA v. COA, the Court categorically declared that “with respect to the rest of the benefits and incentives, the disbursements lacked legal basis. Again, petitioner 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 incentive are deemed incorporated in the standardized salary.” 

V. Liability of approving/certifying officers and payees 

Approving/Certifying Officers The presumptions of regularity and good faith are negated when it is shown that the office did not act with diligence of a good father of a family. In line with the diligence required of them approving/certifying officers are duty-bound to be conversant with the transactions falling within their fiscal responsibility. 

It appears that the COA had been questioning Philhealth’s payment of EAA and Birthday Gift as early as 2008 and already disallowed these types of disbursements on previous occasions. Notwithstanding the 2008/2009 disallowances that cast doubt over the validity/regularity of the exact same benefit types, only tell the Court that they were either ignorant of the investigations/disallowance proceedings or aware of those developments but chose to turn a blind eye thereto. In the Court’s mind, they cannot be regarded to have regularly performed their duties or to have acted in good faith. Payees They may be excused from this obligation only when: 

    (1) they are able to show that the amounts they received were genuinely given in consideration of the services rendered, or 

    (2) the Court excuses them based on undue prejudice, social justice considerations, or the bona fide exceptions as will be determined on a case-to-case basis. 

As later clarified by the Court, a payee may benefit from exception only when the following conditions concur: 

     (a) if the personnel incentive or benefit has a proper basis in law but is only disallowed due to irregularities that are merely procedural in nature; and 

     (b) the personnel incentive or benefit must have a clear, direct, and reasonable connection to the actual performance of the payee recipient’s official work and functions for which the benefit or incentive was intended as further compensation. 

The Court does not find any of the above-mentioned exceptions to be availing in the present case as the EAA and Birthday Gift lack legal basis, granted ultra vires, cannot be classified as valid CNA Incentives, and there are no circumstances in the present case that compel the Court to excuse them.