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NINIA P. LUMAUAN v. COA

FACTS:

Ninia P. Lumauan (Lumauan) was the Acting General Manager of Metropolitan Tuguegarao Water District (MTWD), a government-owned and controlled corporation (GOCC). The Board of Directors of MTWD approved the payment of accrued Cost of Living Allowance (COLA) to qualified MTWD employees for calendar years 1992 to 1997. However, the Commission on Audit (COA) issued a Notice of Disallowance, disallowing the payment for lack of legal basis. Lumauan appealed the disallowance to the COA Regional Director, who denied the appeal. Lumauan then elevated the matter to the COA-Commission Proper (CP). The CP denied the appeal, ruling that it was belatedly filed and that the payment of COLA was prohibited. Lumauan filed a Motion for Reconsideration, which the COA-CP denied. Lumauan then filed a Petition for Certiorari, challenging the COA-CP's decision to disallow the payment of COLA.

ISSUES:

  1. Whether the Appeal Memorandum was filed on time.

  2. Whether the payment of the accrued COLA for CYs 1992 to 1997 was correctly disallowed.

  3. Whether the cost of living allowance (COLA) should be integrated into the standardized salary rates of government officials and employees.

  4. Whether the petitioner is personally liable for the disallowed COLA payments.

  5. Whether petitioner is liable to return the disallowed amount of accrued COLA received by her.

RULING:

  1. The Appeal Memorandum was filed on time. The Court found that it was filed on the same day a copy of the Decision of the Regional Director was received, as evidenced by the Registry Receipt and stamp of receipt on the Decision.

  2. The payment of the accrued COLA for CYs 1992 to 1997 was correctly disallowed. The Court upheld the disallowance based on Torcuator v. Commission on Audit, which stated that the grant of COLA was already integrated in the compensation of government employees under Section 12 of RA 6758. The Court also declared that the absence of any Department of Budget and Management issuance was immaterial.

  3. The Supreme Court ruled that COLA should be integrated into the standardized salary rates of government officials and employees. It is not in the nature of an allowance intended to reimburse expenses incurred in the performance of official duties. COLA is a benefit intended to cover increases in the cost of living and should be deemed incorporated in the standardized salary rates, unless specifically excluded by law or an issuance by the Department of Budget and Management (DBM).

  4. The petitioner is personally liable for the disallowed COLA payments she received. The Court cited Madera v. Commission on Audit, wherein it was ruled that if a Notice of Disallowance is upheld, recipients, including approving and certifying officers, are liable to return the disallowed amounts received by them, unless they can show that they received said amounts in good faith, in the regular performance of their official functions, and with the diligence of a good father of the family.

  5. The Court held that petitioner is liable to return the disallowed amount corresponding to the amount she actually and individually received. Recipients of disallowed amounts, whether approving or certifying officers or mere passive recipients, are all liable to return the amounts received unless they are able to show that the amounts received were genuinely given in consideration of services rendered. However, there may be bona fide exceptions to the application of the rule on return, such as when the amounts received constitute disallowed benefits that were genuinely given in consideration of services rendered, or when undue prejudice will result from requiring payees to return or where social justice or humanitarian considerations are present. In this case, the Court found none of these extenuating circumstances to be present, so petitioner is directed to return the disallowed amount within fifteen days from the finality of the decision.

PRINCIPLES:

  • Section 12 of RA 6758 standardized the salaries of government officials and employees. All allowances, except for certain specified ones, were deemed included in the standardized salary rates.

  • Department of Budget and Management Circular No. 10 provided for the discontinuance of all allowances and fringe benefits, including COLA, of government employees over and above their basic salaries.

  • The nullification of DBM-CCC No. 10 does not affect the validity of RA 6758. Statutory provisions control the rules and regulations issued pursuant to the statute. The validity of the law should not depend on the validity of its implementing rules.

  • All allowances and benefits received by government officials and employees are deemed integrated in their salaries, unless excluded by law or an issuance by the DBM (Gutierrez v. Commission on Audit).

  • COLA is a benefit intended to cover increases in the cost of living and should be integrated into the standardized salary rates of government officials and employees (Gutierrez v. Commission on Audit).

  • The integration of benefits and allowances under Republic Act No. 6758 is by legal fiction (MIA v. COA).

  • Recipients of disallowed amounts, including approving and certifying officers, are personally liable to return the amounts received, unless they can prove good faith, regular performance of official functions, and diligence of a good father of the family (Madera v. Commission on Audit).

  • Recipients of disallowed amounts are liable to return the amounts received, unless they can show that the amounts were genuinely given in consideration of services rendered.

  • The civil law principles of solutio indebiti and unjust enrichment apply to cases involving disallowed benefits.

  • Solutio indebiti prevents undue fiscal leakage that may occur if the government is unable to recover disallowed amounts from passive recipients.

  • There may be bona fide exceptions to the application of solutio indebiti, depending on the purpose and nature of the disallowed amount.

  • Payees may be excused from returning disallowed amounts if they can show that they were actually entitled to what they received, or if requiring them to return the amounts would result in undue prejudice or go against social justice or humanitarian considerations.