The Supreme Court (SC) has unanimously affirmed the notices of disallowance (NDs) issued by the Commission on Audit (COA) on Philhealth’s grant of new allowances for its employees amounting to P43.8 million without the approval of the President in 2010.
In a 15-page en banc decision released on June 11, 2024, the SC denied the petition filed by Philhealth seeking to set aside the said COA’s decision issued on December 28, 2016, and resolution issued on January 31, 2020, denying Philhealth’s petition for review with respect to the NDs for lack of merit.
Authored by Associate Justice Maria Filomena D. Singh, the tribunal said the COA did not commit grave abuse of discretion when it dismissed Philhealth’s petition for review and that it correctly ruled that the state-run insurance firm’s authority to fix the compensation of its employees is regulated by law.
“As the manager of the State’s National Health Insurance Fund, PHIC must ensure the availability of funds and must carry out its fiduciary responsibility through effective stewardship, proper management, and maintenance of reserves,” the SC ruled.
“Hence, it is only proper if not imperative, for PHIC (Philhealth) to be more circumspect in utilizing the funds for the salaries and allowances of its employees,” it said.
In its petition, Philhealth insisted that it is granted fiscal autonomy under Republic Act No. 7875, the law that created the agency.
It particularly cited Article IV, Section 16(n) of R.A. No. 7875 which states: “The Corporation shall have the following powers and functions:… 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.”
Philhealth also asserted that its authority provided by Section 16(n) of Republic Act No. 7875 was confirmed by former President Arroyo in two separate documents: the letter of former Health Secretary Francisco Duque III dated September 18, 2006, requesting for the early approval of the Philhealth’s Rationalization Plan (which President Arroyo approved in her marginal note) and the letter of Duque to Arroyo dated March 7, 2008, seeking the confirmation of the approval of the Philhealth’s Rationalization Plan.
It insisted that the confirmation given by Arroyo in these two communications was tantamount to presidential approval of the disbursed benefits and recognition of Philhealth’s fiscal authority and independence.
But the SC found Philhealth’s arguments “untenable”, saying the the issue on Philhealth’s fiscal independence has long been settled in the case of Philhealth v. COA where the Court ruled in 2016 that R.A. 7875 does not give the agency unbridled authority to fix the compensation of its employees and unilaterally provide allowances.
The SC stressed that it adopted the same position in the 2018 case of Philhealth v. COA.
“Simply put, the Court has consistently ruled that the fiscal autonomy provision under PHIC›s charter is not without limitations and should be read in conjunction with applicable laws ‹and regulations,” the SC declared.
The SC also held that Philhelth cannot seek refuge behind its argument that the disbursement of allowances was coupled with the approval of Arroyo.
It noted that while the letters were indeed signed by Arroyo, the letters referred to the approval of the Philhealth’s Rationalization Plan, not the disbursement of the disallowed benefits and allowances.
Besides, the high court held that the Collective Negotiation Agreement (CAN) Incentive included in the computation of the Productivity Incentive Bonus for 2008 in the amount of P10.46 million received by Philhealth on March 29, 2010 was contrary to Administrative Order (AO) No. 135, Series of 2015 and Department of Budget Management (DBM Circular No. 2006-1.
AO 135 mandates that “the CNA Incentive should be sourced only from the savings generated during the life of the CNA.”
DBM Circular No. 2006-1, on the other hand, requires the amount of individual CNA incentive “shall not be pre-determined in the CNAs or in the supplements thereto since it is dependent on savings generated from cost-cutting measures and systems improvement, and also from improvement of productivity and income in GOCCs (government-owned and-controlled corporations) and GFis (government financial institutions)
“A review of the CNA will show that PHIC failed to comply with the cited issuances. First, the CNA made no reference to the source of funding of the benefits and that savings were generated by PHIC that would allow the application of Administrative Order No. 135,” the SC said.
“Second, the CNA provided for a fixed amount with a yearly increase contrary to the requirement of DBM Circular No. 2006-1 that the benefit shall not be-predetermined as the same is based on the generated savings of PHIC…” it added.