Findings No.3 COA Annual Audit Report 2004

July 25, 2008

3. The City officials and employees were reimbursed/repaid of the refunds made on the disallowed Hazard Pay, Staple Food Incentives and Fringe Benefits totaling P12,273,821.22 despite that these disallowances were already final and executory pursuant to Section 48 and 51 of Presidential Decree 1445.

Section 48 of Presidential Decree No. 1445, otherwise known as the Government Auditing Code of the Philippines, states that any person aggrieved by the decision of an auditor of any government agency in the settlement of an account or claim may within six months from receipt of a copy of the decision appeal in writing to the Commission.

Section 51 of said Decree provides that the party aggrieved by any decision, order, or ruling of the Commission may within thirty days from his receipt of a copy thereof appeal on certiorari to the Supreme Court in the manner provided by law and the Rules of Court. When the decision, order, or ruling adversely affects the interest of any government agency, the appeal may be taken by the proper head of that agency.

Records showed that payment of Hazard Pay was disallowed for failure to meet the requirements provided under National Compensation Circular No. 76, and Joint CSC and DBM Circular Letter No. 1 s. 1995. These are issuances promulgating Local Executive Order No. 007 s. 1995 authorizing the availment of the Hazard Pay benefits.

The Notices of Disallowances issued on December 22, 1997 were received by the City Mayor’s Office, City Accountant’s Office, City Budget Office, and City Engineer’s Office on April 22, 1998. No request for reconsideration was made within the period of six months after receipt of the notices, hence, the disallowances became final and executory.

Payment of the Staple Food was disallowed for lack of approval and authority from the Office of the President, pursuant to Section 2, Administrative Order No. 37, prohibiting the grant of Amelioration Assistance or any other similar benefits without prior approval and authorization by the Office of the President. The Notices of Disallowances were issued on October 8, 1999, received by City Mayor’s Office and Sangguniang Panlungsod on October 20, 1999, City Treasurer’s Office on October 21, 1999, City Accountant’s Office on October 22, 1999, and City Budget Office on October 22, 1999. Staple Food Incentives was already the subject of COA Decision No. 2002-290 dated December 17, 2002. No request for reconsideration was made within the period after receipt of said COA Decision. This decision is a Commission Ruling, which denied the petition for review of the decision made by the Director COA Regional Office No. 10, Cagayan de Oro City denying the grant of Staple Food Incentives to officers and employees of the City Government.

Payment of Fringe Benefits was disallowed for lack of approval and authority via Administrative Order duly approved from the Office of the President to grant such benefits. Notices of Disallowances issued on December 14, 2000 were received by the City Mayor’s Office on January 5, 2001, City Treasurer’s Office on January 4, 2001 and Sangguniang Panlungsod on January 8, 2001. No request for reconsideration was received within the period of six months after receipt of the notices, hence, the disallowances became final and executory.

Before receiving all of these benefits, the claimants made certification/waivers on the received benefits that in case of COA disallowances, the claimants were willing to refund.

Records showed that from October 2001 to August 2003, officials and employees of Gingoog City started to refund COA disallowances on Hazard Duty Pay, Staple Food Incentives and Fringe Benefits thru payroll deductions at the rate of P500.00 per month for each employee. The collected refund covering the said period accumulated to P12,273,821.22.

On June 23, 2004, the Sangguniang Panlungsod approved Appropriation Ordinance No. 2004-09 appropriating P12,000,000.00, more or less, granting the repayment of the refunds made by the city officials and employees.

Total amount of repayments made on the subject refunds amounted to P12,273,821.22 paid from July 15, 2004 to July 30, 2004, as follows:

July 15, 2004P 2,514,855.75July 16, 20045,630,153.91July 19, 20041,984,855.63July 20, 2004689,425.92July 21, 200494,950.00July 22, 2004563,366.51July 26, 20043,789.05July 27, 200420,200.00July 28, 20044,900.00July 29, 200466,000.00July 30, 2004701,324.45———————-TOTALP 12,273,821.22

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The agency justified that said benefits were all received in good faith.

Quoted in part is the letter of the City Accountant addressed to Hon. Romulo S. Rodriguez, Jr., former City Mayor, this City dated June 24, 2004:

“The basis of the GCGEA’s demands for the return of the refund is the decision of the Supreme Court in the case of De Jesus, et. al. vs. COA. With due respect to the opinion of our very capable City Administrator, I believe that there is a probability that COA or the court may rule differently and declare that the situation and facts cited in the case of De Jesus, et. al. vs. COA and our own not identical .

In our case, it is possible that COA or the court may rule that “good faith” may not apply inasmuch as at the time we granted those benefits, we were not able to comply with some requirements of the circular authorizing them prompting us to include in our payroll a promise that we will refund the same in case of COA disallowances.

The Office of the Regional Legal and Adjudication Cluster in its 3rd Indorsement dated September 8, 2003 in answer to the letter request dated July 31, 2003 of Mr. Edilberto Cago, President, Gingoog City Government Employees Association (GCGEA) for reconsideration or suspension of deduction on the disallowed payments of Hazard Duty Pay, Staple Food

Incentives, and Fringe Benefits amounting to P3,670,799.00, P6,771,600.00 and P3,190,250.00 respectively, stated that:

“Upon a circumspect evaluation of the facts and circumstances herein obtaining, inasmuch as said disallowances are already final and executory, this Office finds no cogent reason therefore to disturb the adverse stand under the Notices of Disallowances. Reliance on stare decisis is misplaced. The doctrine applies to pending cases, not settled cases as the subject disallowances herein referred to. Premises considered, it is regretted that the instant request for reconsideration and suspension of deduction could not be given due course.”

In effect the City resources was unlawfully depleted by P12,273,821.22.

In response to our AOM, management commented the following:

“The basis for the return of the refund is anchored on the doctrine of good faith pursuant to the decision of the Supreme Court en banc, Remedios Blanquera, et. al. versus Hon. Angel C. Alcala, et. al. GR No. 109406 dated Sept. 11, 1998 as well as Rodulfo S. de Jesus, et. al. versus Commission on Audit, GR No. 14915 dated June 10, 2003,as cited by the written opinion rendered by Atty. Vincent V. Dangazo, City Administrator dated June 9, 2004 to the effect that the aforesaid employees should not be required to refund all benefits received in good faith.

Furthermore, the Gingoog City Employees Association has an outstanding communication addressed to the Director of Legal and Adjudication Office, COA Commonwealth Avenue, Quezon City, subject: Follow-up the status of petition for review of disallowance deductions on Hazard Duty Pay, Staple Food Incentives and Fringe Benefits filed as early as November 14, 2003, through registered mail as per postal registry receipt no. 4241, of which until this time employees have not received any action from the Commission.”

During the exit conference, the City Administrator assured compliance with our recommendation.

Good Faith cannot be asserted as a defense. Atty. Celso L. Vocal, Attorney VI, Regional Cluster Director, Regional Legal and Adjudication Cluster, COA Regional Office No.10, Cagayan de Oro City, in his 5th Indorsement dated January 3, 2005 stated thus:

“Noteworthy also, that as borne out by the records, the impropriety of the claims of Staple Food Incentive was already the subject of COA Decision No. 2002-290 dated December 17, 2002. Likewise, gleaned from the records, the Notices of Disallowances (NDs) relative to the disallowed Hazard Pay and “Fringe Benefits” had long become final and executory. Records further show that a Motion for Reconsideration was only filed after several years has elapsed from receipt of the NDs. Consequently, it may be stated that a person deemed liable for an audit disallowance who fails to exercise his right to move for reconsideration or appeal from the adverse action or decision of an auditor within the reglementary period is estopped from asserting such rights. Estoppel by laches arises from the negligence or omission to assert a right within a reasonable time, warranting a presumption that the party entitled to assert has abandoned it or declined to assert it. (Media vs. Patcho,et.al. 132 SCRA 540 and Tijano, et. al. vs. Sibonghanoy, 23 SCRA) Henceforth, good faith cannot be asserted as defense.”

Recommendation:

Stop the practice of granting benefits and other forms of additional compensation unless prior approval and authorization via Administrative Order by the Office of the President is secured.

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Written by admin · Filed Under Commission on Audit, Gingoog City