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DEVELOPMENT ACADEMY OF PHILIPPINES v. CHAIRPERSON MA. GRACIA M. PULIDO TAN

FACTS:

The case involves a Petition for Certiorari filed by the Development Academy of the Philippines (DAP) against the Commission on Audit (COA). The COA disallowed the payment of the Financial Performance Award by DAP to its employees due to lack of legal basis and several deficiencies. DAP Memorandum Circular provided eligibility criteria for the award, which was to be released in two tranches. The Corporate Auditor issued an Audit Observation Memorandum stating various deficiencies in the award, such as excess payments, inclusion of non-eligible employees, lack of supporting documents, and lack of approval from the DAP Board of Trustees and Executive Committee. Based on this memorandum, COA issued Notice of Disallowance disallowing the payment.

The Development Academy of the Philippines (DAP) asserted that there was ample legal basis for the Financial Performance Award, citing the Civil Service Decree, the Omnibus Rules Implementing Book V of the Administrative Code of 1987, and the Implementing Rules and Regulations of Republic Act No. 6713. The DAP addressed the deficiencies identified in the Notice of Disallowance, including the lack of Request for Obligation Allotments, the clear-cut policy on Financial Performance Award computations, the inclusion of additional employees after validation, the utilization of amounts collected from service charges, the inclusion of consultants, and the revision of the payroll attached to the original obligation made in calendar year 2002. The Commission on Audit affirmed the Notice of Disallowance, stating that there was no legal authority for the Financial Performance Award. The DAP filed a Petition for Certiorari, alleging grave abuse of discretion on the part of the Commission on Audit.

The petitioner, Philippine Fisheries Development Authority (PFDA), implemented an Employee Suggestions and Incentive Award System which included a Financial Performance Award for its employees based on their productivity and financial performance. The award was granted to all employees, en masse, regardless of their individual contributions.

The respondents, the Commission on Audit (COA) and the Solicitor General, argued that the Financial Performance Award was not permitted under Republic Act No. 6758 as it goes against the standardization of salary rates among government personnel and the prohibition of multiple allowances and incentive packages. The respondents emphasized that the Employee Suggestions and Incentive Award System should only be granted for personal efforts that contribute to the efficiency, economy, or improvement of government operations. They argued that the indiscriminate granting of benefits to all employees, as done by the petitioner, is not valid.

The Court upheld the respondents' position, stating that the Financial Performance Award was not permitted under Republic Act No. 6758. The Employee Suggestions and Incentive Award System should only be granted for personal efforts and not for en masse payment. The Court emphasized that the petitioner's argument based on the supposed approval of the Civil Service Commission was not persuasive.

ISSUES:

  1. Whether the Financial Performance Award granted to petitioner employees is covered by the exception provided under Section 12 of Republic Act No. 6758.

  2. Whether the Employee Suggestions and Incentive Award System (ESIAS) covers the indiscriminate grant of benefits to all employees.

  3. Whether granting incentive packages to all employees under the Employee Suggestions and Incentive Award System is in line with its nature.

  4. Whether good faith of public officers and employees can exempt them from personal liability for unauthorized disbursements.

  5. Whether recipients or payees in good faith need to refund disallowed amounts.

  6. Whether approving officers are required to refund if they acted in bad faith or were grossly negligent.

  7. Whether the individuals named in the Notice of Disallowance should be held personally liable to refund the disallowed amount.

RULING:

  1. The Financial Performance Award granted to petitioner employees is not covered by the exception provided under Section 12 of Republic Act No. 6758. Petitioner has failed to establish that the award is given due to the unique nature of the office and the work performed by the employees. The award does not qualify as an exceptional incentive package sanctioned by Section 12, therefore it is not allowed under the law.

  2. The Employee Suggestions and Incentive Award System (ESIAS) does not cover the indiscriminate grant of benefits to all employees. The system only pertains to personal efforts contributed by an employee to the efficiency, economy, or other improvement of government operations. It does not permit en masse payment of the award to all employees.

  3. Granting incentive packages to all employees under the Employee Suggestions and Incentive Award System is not in line with its nature as it is meant to recognize exemplary personal effort and contributions beyond the ordinary.

  4. Good faith of public officers and employees does not exempt them from personal liability for unauthorized disbursements.

  5. Recipients or payees in good faith do not need to refund disallowed amounts, as long as there is no showing of ill intent and the disbursement was made in good faith.

  6. Approving officers are only required to refund if they are found to have acted in bad faith or were grossly negligent amounting to bad faith.

  7. The persons named in the Notice of Disallowance are relieved of personal liability to refund the disallowed amount.

PRINCIPLES:

  • Republic Act No. 6758 was passed to standardize salary rates among government personnel and eliminate differences in compensation.

  • The factors listed in Section 9 of Republic Act No. 6758 should guide the Department of Budget and Management in the standardization of salary rates.

  • All allowances are deemed included in the standardized salary, unless they are covered by the exception provided in Section 12.

  • Section 12 of Republic Act No. 6758 allows for certain specified allowances to be given, on top of or in addition to standardized salaries, if they are necessary for the performance of the employees' official functions.

  • The exceptional allowances permitted by Section 12 are those granted to defray or reimburse expenses incurred in the performance of official functions.

  • The catch-all proviso in Section 12 allows for the inclusion of similar allowances not otherwise specified.

  • The Employee Suggestions and Incentive Award System aims to encourage creativity, innovativeness, efficiency, integrity, and productivity in the public service by recognizing and rewarding officials and employees for their suggestions, inventions, superior accomplishments, and other personal efforts that contribute to the efficiency, economy, or other improvement of government operations, or for other extraordinary acts or services in the public interest.

  • The grant of incentives under the Employee Suggestions and Incentive Award System is not for the indiscriminate en masse payment to all employees, but for the recognition of exemplary personal effort and contributions.

  • The Employee Suggestions and Incentive Award System is meant to recognize exceptional innovations or accomplishments beyond the ordinary efforts of the work force.

  • Expenditures of government funds or uses of government property in violation of law or regulations shall be a personal liability of the official or employee found directly responsible.

  • Good faith of public officers and employees does not dispense with personal liability for unauthorized disbursements.

  • Recipients or payees in good faith need not refund disallowed amounts, as long as there is no showing of ill intent and the disbursement was made in good faith.

  • Approving officers are only required to refund if they acted in bad faith or were grossly negligent amounting to bad faith.

  • Good faith is a requisite for dispensing with the need to reimburse or refund an invalid payment.

  • Individuals may be relieved of personal liability to refund a disallowed amount if they acted in good faith and relied on the approval of a government agency.