SC sets new rules for cases of NDs

The Supreme Court has harmonized its existing jurisprudence in resolving cases involving notices of disallowance of illegally disbursed public funds and the liability of those who have participated in the transactions.

In a decision, the SC sets a harmonized and coherent legal parameters in the resolution of cases involving dispute over notices of disallowance, disapproval in audit of disbursements, issued by the Commission on Audit.

If the NDs are upheld by the SC, the rules on return should be complied within the following requirements: 1) Approving and certifying officers who acted in good faith, in regular performance of official functions, and with the diligence of a good father of the family are not civilly liable to return; 2) Approving and certifying officers who are clearly shown to have acted in bad faith, malice, or gross negligence are solidarily liable to return only the net disallowed amount and 3) “Recipients — whether approving or certifying officers or mere passive recipients — are liable to return the disallowed amounts respectively received by them, unless they are able to show that the amounts they received were genuinely given in consideration of services rendered.”

According to the high court, if the NDs are set aside or nullified, “no return shall be required from any of the persons held liable.”

The tribunal also ruled that it may “excuse the return of recipients based on undue prejudice, social justice considerations, and other bona fide exceptions as it may determine on a case to case basis.”

“The ultimate analysis of each case would still depend on the facts presented, and these rules are meant only to harmonize the previous conflicting rulings by the Court as regards the return of disallowed amounts –after the determination of the good faith of the parties based on the unique facts obtaining in a specific case has been made,” the SC said, in a decision penned by Associate Justice Alfredo Benjamin S. Caguioa.

“The assessment of the presumptions of good faith and regularity in the performance of official functions and proof thereof will be done by the Court on a case-to-case basis,” it added.

In previous decisions, the SC ruled that public officials who are directly responsible for, or participated in making the illegal expenditures, as well as those who actually received the amounts therefrom, should be solidarily liable for their reimbursement.

In another decided case, the SC “relied on good faith to excuse the return of the disallowed amounts.”

“Indeed, the Court recognizes that the jurisprudence regarding the refund of disallowed amounts by the COA is evolving, at times conflicting, and is primarily dealt with on a case-to-case basis,” the SC said.

“There is now a need to harmonize the various rulings of the Court. For this reason, the Court takes this opportunity to lay down the rules that would be applied henceforth in determining the liability to return disallowed amounts, guided by applicable laws and rules as well as the current state of jurisprudence,” the high court stressed.

With these new parameters, the SC resolved the petition filed by the officials and employees of Mondragon town in Northern Samar where they challenged the validity of COA’s 2017 decision and its 2018 resolution which both affirmed the NDs for P7.7 million in allowances given to them in 2013.

The petitioners were led by Mayor Mario M. Madera, accountant Beverly C. Mananguite, treasurer Carissa D. Galing, and budget officer Josefina O. Pelo.

Case records showed that the municipality passed a resolution and approved an ordinance for the grant of various allowances for its officials and employees. These were for Economic Crisis Assistance, Monetary Augmentation of Municipal Agency, Agricultural Crisis Assistance, and Mitigation Allowance to Municipal Employees.

“In this case, petitioners failed to show that the COA gravely abused its discretion in affirming the subject NDs. Nevertheless, there is merit to their contention that they should not be held liable to refund the disallowed amounts, the high court ruled.

“The return (of the disbursed amount) is excused in its entirety in favor of all persons held liable in the NDs,” it said.

“A review of the Sangguniang Bayan Resolutions and Ordinance used as basis for the grant of the subject allowances shows that these were primarily intended as financial assistance to municipal employees in view of the increase of cost on prime commodities, shortage of agricultural products, and the vulnerability of their municipality to calamities and disasters,” it added.

The SC noted that the subject allowances were granted after the onslaught of typhoon ‘Yolanda’ which greatly affected the Municipality. “While noble intention is not enough to declare the allowances as valid, it nevertheless supports petitioners’ claim of good faith,” the SC said.

“These additional allowances had been customarily granted over the years and there was no previous disallowance issued by the COA against these allowances further bolster petitioners’ claim of good faith,” the SC said.

“Indeed, while it is true that this customary scheme does not ripen into valid allowances, it is equally true that in all those years that the additional allowances had been granted, the COA did not issue any ND against these grants, thereby leading petitioners to believe that these allowances were lawful,” the high court pointed out.

The tribunal noted that since the issuance of the NDs in 2014, the Municipality has stopped giving these allowances to their employees.

The petitioners relied on the resolutions and ordinance of the Sangguniang Bayan which have not been invalidated; hence, it was within their duty to execute these issuances in the absence of any contrary holding by the Sangguniang Panlalawigan or the COA, the SC said.

Petitioners disbursed the subject allowances in the honest belief that the amounts given were due to the recipients and the latter accepted the same with gratitude, confident that they richly deserve such reward, the high court said.

“There was no showing of some dishonest purpose or some moral obliquity and conscious doing of a wrong, a breach of a sworn duty through some motive or intent, or ill will in the grant of these benefits,” it said.

“There was no fraud nor was there a state of mind affirmatively operating with furtive design or some motive of self-interest or ill will for ulterior purposes. Thus, petitioners-approving and certifying officers are shielded from civil liability for the disallowance . . . , “ it added.

As for the payees, the tribunal noted that the COA already excused their return; hence, they no longer appealed.

“In any case, while they are ordinarily liable to return for having unduly received the amounts validly disallowed by COA, the return was properly excused not because of their good faith but because it will cause undue prejudice to require them to return amounts that were given as financial assistance and meant to tide them over during a natural disaster,” the SC said.

“In view of the foregoing, the return is excused in its entirety in favor of all persons held liable in the NDs,” it added.