EN BANC

G.R. No. 236725, February 02, 2021

IRENE G. ANCHETA, ET AL., (RANK-AND-FILE EMPLOYEES OF THE

SUBIC WATER DISTRICT), Petitioners, v. COMMISSION ON AUDIT
(COA), Respondent.

DECISION

LOPEZ, M., J.:

In this Petition for Certiorari1 under Rule 64, in relation to Rule 65 of the
Revised Rules of Court, petitioner Irene G. Ancheta (Ancheta) with the
officers and the rank-and-file employees2 of the Subic Water District (SWD)
impute grave abuse of discretion on respondent Commission on Audit
(COA) in issuing Decision No. 2016-4733 dated December 28, 2016 and
Resolution4 dated December 27, 2017.

Facts

SWD is a government-owned and controlled corporation (GOCC) organized

under Presidential Decree (PD) No. 198,5 as amended. In 2010, it released
an aggregate amount of P3,354,123.50 worth of benefits, which include:
rice allowance,6 medical allowance,7 Christmas groceries,8 year-end
financial assistance,9 mid-year bonus,10 and year-end bonus11 for its
officers and employees; and Christmas groceries12 for its Board of
Directors.13

These disbursements were disallowed in Notice of Disallowance (ND) No.

2011-00214 dated August 22, 2011 because they were granted to persons
employed after June 30, 1989, in violation of Department of Budget and
Management (DBM) Corporate Compensation Circular (CCC) No. 10 dated
February 15, 1999.

DBM CCC No. 10 provides guidelines in the implementation of Republic Act

(RA) No. 675815 or the "Salary Standardization Law." The COA Audit Team
particularly cited paragraph 5.516 of DBM CCC No. 10, which enumerated
the additional allowances that are not integrated in the standardized salary
rate, and allowed to be continuously given only to incumbent employees,
who are actually receiving such benefits as of June 30, 1989. Considering
that the SWD officers and employees who received the additional benefits
in 2010 were employed after June 30, 1989, the COA Audit Team concluded
that the grants were unauthorized.17

The following persons were charged responsible to settle the disallowed

amounts: (1) Ancheta, General Manager, who approved the transaction;
(2) Ariel Rapsing (Rapsing), Corporate Budget Specialist, who certified that
the expenses were necessary; (3) Agnes Corpuz (Corpuz), Cashier A, as
the disbursing officer; and (4) the other officers and employees who
received the disallowed benefits, except those incumbents as of June 30,
1989.18

Ancheta appealed to the COA Regional Office No.3 (COA-R03).

COA-R03 Ruling

In COA-R03 Decision No. 2012-1419 dated March 28, 2012, the benefits
were declared illegal for violating Section 1220 of RA No. 6758, which
limited the grant of additional allowances only to employees who are
incumbent and receiving such benefits as of July 1, 1989, thus:

WHEREFORE, premises considered, we concur and affirm the stand taken

by the Audit Team Leader in her Notice of Disallowance No. 2011-002 dated
August 22, 2011 in the total amount of [P]3,354,123.50. Consequently,
the herein Appeal to set aside the herein disallowance is
hereby DENIED.21 (Emphasis in the original.)

Ancheta, representing the officers and rank-and-file employees of SWD,

then filed a Petition for Review22 with the COA Proper.

COA Proper Ruling

COA Decision No. 2016-47323 dated December 28, 2016 affirmed the COA-
R03 ruling:

WHEREFORE, premises considered, the Petition for Review is

hereby DENIED for lack of merit. Accordingly, [the COA-R03] Decision No.
2012-14 dated March 28, 2012, affirming [ND No. 2011-002] dated August
22, 2011, on the payment of various benefits and allowances granted to
officials and employees of (SWD] in the total amount of [P]3,354,123.50
is AFFIRMED.24 (Emphasis in the original.)

Ancheta belatedly moved for reconsideration.25 But, in a Resolution26 dated

December 27, 2017, the COA Proper sustained its Decision with
modification as to the liability of the persons held responsible for the return
of the disallowed amounts:

WHEREFORE, premises considered, the [MR] is hereby PARTIALLY

GRANTED. Accordingly, [COA] Decision No. 2016-473 dated December
28, 2016, which denied the Petition for Review of (Ancheta] x x x,
is AFFIRMED, insofar as the propriety of [ND] No. 2011-002 dated August
22, 2011, relative to the payment of various benefits and allowances to
SWD officials and employees for the year 2010 in the total amount of
[P]3,354,123.50. However, the regular, casual, and contractual
employees need not refund the amounts they received for being
passive recipients of the subject benefits. All the approving and
certifying officers for the payments, and the members of the Board of
Directors who authorized the grant of the benefits shall remain solidarily
liable for the total amount of disallowance. [Corpuz] is excluded from
solidary liability under the ND.

Moreover, the Audit Team Leader and Supervising Auditor are

hereby directed to issue a Supplemental ND to include the
members of the Board of Directors of SWD as persons solidarily
liable for the total disallowance under NO No. 2011-002 in the total
amount of [P]3,354,123.50, for authorizing the grant of Medical
Allowance, Christmas Groceries, Financial Assistance, and Rice
Allowance.27 (Emphases supplied.)

Unconvinced, petitioners are before this Court, insisting that the

disbursements were authorized by DBM Secretary Benjamin Diokno 's
(Secretary Diokno) Letter28 dated November 8, 2000 addressed to certain
local water districts (LWD), namely, the Davao City Water District and
Metropolitan Cebu Water District. Secretary Diokno opined that:

LWDs were created by virtue of a special law, PD No. 198, as

amended by PD Nos. 768 and 1749. Although LWDs were created
by a special law, they operated as private corporations,
independent of and free from the coverage, mandatory review and
examination of national government agencies, such as DBM, CSC
and COA.

A Supreme Court ruling with Entry of Final Judgment on March 12,

1992 in the case of Davao City Water District, et al. v. Civil Service
Commission and Commission on Audit, GR No. 95237-38 declared
all LWOs as government-owned corporations subject to policies,
rules and regulations of, and to the usual mandatory review and
examination by above oversight agencies.

The grant of allowances/fringe benefits has long been an

established and existing practice in LWDs when they were still
treated as private entities and prior to said Supreme Court ruling.
Said benefits were granted to the employees by virtue of Collective
Bargaining Agreements and board Resolutions executed before the said SC
ruling and their coverage under RA 67[5]8 which were well within the
inherent powers of the Board of Directors of LWDs. However, certain
modifications which were limited only to the rates and nomenclature of
their benefits were effected after their coverage under RA 6758 and CCC
No. 10 to reflect the rationale behind the grant thereof.

While the SC ruling was effective March 12, 1992, LWDs were not
yet formally placed under the coverage of RA 6758 as of January 1,
1997.

The same requisites and considerations for LWDs existed in cases of

GOCCs/GFIs which were resolved favorably in the latter's favor such that
they were allowed to continue to grant allowances/fringe benefits being
enjoyed prior to the implementation of RA 6758.

Premised on considerations (1) that the grant of allowances/fringe

benefits in question has long been an established and existing
practice of LWDs prior to their coverage under RA 6758/CCC No.
10 and to said Supreme Court ruling that they are GOCCs; (2) that
LWDs are self-sustaining GOCCs and they receive no funding support from
the National Government; and (3) of the Supreme Court position/
interpretation of the provisions of Section 12 of RA No. 6758, we
are hereby authorizing the following:

The subject LWDs shall be allowed to continue the grant of

allowances/fringe benefits that are found to be an established and
existing practice as of December 31, 1999, details are in Annex A; and

� Confirmation of the allowances/fringe benefits already granted as of

December 31, 1999, to resolve the disallowances made by COA.

The above authority, however, is subject to the following conditions:

1. That the grant shall be limited only to Incumbents as of

December 31, 1999, of regular positions in the Plantilla of Positions (POP)
duly approved by DBM and whose appointments were duly
approved/attested by CSC;

2. That casual and contractual personnel hired outside of the regular POP
as of December 31, 1999 may also be allowed said allowances/fringe
benefits, provided they were hired with prior approval by DBM and
appointment papers duly approved by CSC;

3. That the grant of allowances/fringe benefits that are outside of what has
been prescribed by law and other compensation issuances and were being
enjoyed prior to the declaration by the Supreme Court that LWDs are
GOCCs, will be allowed only if the following are met by the concerned
LWD:29 (Emphases supplied.)

Petitioners also invoked the Letter30 dated April 27, 2001 addressed to the
Philippine Association of Water Districts, Inc. (PAWDI), of DBM Secretary
Emilia Boncodin that echoed Secretary Diokno's opinion and explained
that:

Subject authority is, however, subject to certain conditions, among which,

are that the grant of allowances/fringe benefits that are outside of what
has been prescribed by law and other compensation issuances and were
being enjoyed prior to the declaration by the Supreme Court that LWDs are
GOCCs will be allowed only if the financial and operational parameters are
met as indicated in condition number 3 of said authorization.

As contemplated in said authorization, the grant of allowances and fringe

benefits that are found to be an established and existing practice and
already granted as of December 31, 1999 shall not be subject to the
said condition to resolve the disallowances made by the Commission on
Audit (COA). Subject allowances/benefits already form part of the
compensation being regularly received by LWD personnel, hence,
any disallowance action constitute violation of the established
policy on "non-diminution in pay." On the other hand, such condition
shall be prospective in application and shall apply only to the continued
grant after December 31, 1999 of already existing allowances/fringe
benefits as of said date. The grant of new benefits after December 31,
1999, however. shall not be allowed even if such conditions are
met.31 (Emphasis supplied.)

In fine, subject only to certain conditions,32 the DBM Letters authorized the
continuous grant of allowances or fringe benefits found to be an established
practice of LWDs as of December 31, 1999 despite the effectivity of RA No.
6758 on July 1, 1989.

Guided by the foregoing Letters, petitioners contend that the endowment

of additional benefits to incumbents as of December 31, 1999 is
authorized; and that assuming the disallowance is sustained, they should
not be held liable for the refund considering their good faith. In addition to
their reliance upon the DBM opinions, petitioners argue that the power to
grant allowances is with the Board of Directors, and the approving and
certifying officers merely implemented the board resolutions as a matter
of duty. They further invoke the authority given by the DBM to the former
general manager of SWD, Isaias Q. Vindua (Vindua), to continue with the
payment of specific allowances or fringe benefits in 2002 and 2003.33

On the other hand, the COA maintains that LWDs are GOCCs upon their
creation under PD No. 198. The COA stands firm that only those additional
compensations given to incumbents as of July 1, 1989 shall be allowed in
accordance with RA No. 6758. The violation of this law renders the
approving and certifying officers' solidarily liable to settle the disallowed
amounts.34

Issues

I. Was SWD already covered by RA No. 6758 when the

2010 benefits' were granted?

II. Was the disallowance of the 2010 benefits proper?

III. In the affirmative, should petitioners be held liable for the refund of
the disallowed amounts?

Ruling

RA No. 6758 took effect on July 1, 1989 to standardize the salary rates of
government officials and employees, amending PO No. 98535 and PD No.
1597.36 Section 12 of RA No. 6758 provides:

SEC. 12. Consolidation of Allowances and Compensation. - All

allowances, except for representation and transportation allowances;
clothing and laundry allowances subsistence allowance of marine officers
and crew on board government vessels and hospital personnel; hazard
pay; allowances of foreign service personnel stationed abroad; and such
other additional compensation not otherwise specified herein as may be
determined by the DBM, shall be deemed included in the standardized
salary rates herein prescribed. Such other additional compensation,
whether in cash or in kind, being received by incumbents only as of July 1,
1989 not integrated into the standardized salary rates shall continue to be
authorized. (Emphasis supplied.)

Hence, at present, the overarching rule is that all allowances are

deemed included in the standardized salary rate, unless excluded
by law or by a DBM issuance.37 This rule was premised upon the distinct
policy to eliminate multiple allowances and other incentive packages,
resulting in differences of compensation among government personnel.

Nonetheless, due to the inequity and injustice that RA No. 6758 may cause
to incumbents, the legislature cushioned its effect and adopted the policy
of non-diminution of pay as embodied under Sections 12 and 17 of RA No.
6758. The second sentence of Section 12 allows government workers to
continue receiving non-integrated remuneration and benefits provided
that: (1) they were incumbents when RA No. 6758 took effect on July 1,
1989; (2) they were actually receiving such benefits as of that date; and
(3) such additional compensation is distinct and separate from the specific
allowances enumerated in the first sentence of Section 12.28 As well,
Section 17 states:

SEC. 17. Salaries of Incumbents. Incumbents of positions presently

receiving salaries and additional compensation/fringe benefits
including those absorbed from local government units and other
emoluments, the aggregate of which exceeds the standardized salary rate
as herein prescribed, shall continue to receive such excess
compensation, which shall be referred as transition allowance. The
transition allowance shall be reduced by the amount of salary adjustment
that the incumbent shall receive in the future. (Emphasis supplied.)

Coverage of RA No. 6758

Section 4 of RA No. 6758 provides that its provisions "shall apply to all
positions, appointive or elective, on full or part-time basis, now existing
and hereafter created in the government, including [GOCCs] and
government financial institutions." SWD is a GOCC with a special charter,
created and organized pursuant to PD No. 198, which took effect in 1973.
This was confirmed in the case of Davao City Water District v. Civil Service
Commission and Commission on Audit,39 citing the earlier cases of Baguio
Water District V. Hon. Trajano40 and Tanjay Water District v. Gabaton,
thus:41cj

After a fair consideration of the parties' arguments coupled with a careful

study of the applicable laws as well as the constitutional provisions
involved, We rule against the petitioners and reiterate Our ruling in
Tanjay case declaring water districts government-owned or
controlled corporations with original charter.

As early as Baguio Water District v. Trajano, et al., (G.R. No. 65428,

February 20, 1984, 127 SCRA 730), We already ruled that a water district
is a corporation created pursuant to a special law -P.D. No. 198, as
amended, and as such its officers and employees are covered by the Civil
Service Law.

xxx

By "government-owned or controlled corporation with original charter," We

mean government owned or controlled corporation created by a special law
and not under the Corporation Code of the Philippines.

xxx

[PD No.] 198, as amended, is the very law which gives a water district
juridical personality.

xxxx

ACCORDINGLY, the petition is hereby DISMISSED. Petitioners are

declared "government-owned or controlled corporations with
original charter" which fall under the jurisdiction of the public
respondents CSC and COA.42 (Emphases supplied.)

This confirmation was iterated in the recent cases of De Jesus v.

Commission on Audit,43Feliciano v. Commission on Audit,44Mendoza v.
Commission on Audit,45 and Metropolitan, Naga Water District v.
Commission on Audit,46 to cite a few. Thus, it is erroneous for petitioners
to insist that S WD became a GOCC only on March 12, 1992 or after the
finality of the Court's decision in Davao City Water District. The decision of
the Court merely interpreted PO No. 198 in declaring LWDs as GOCCs. The
Court's interpretation constitutes part of the law, effective from the date it
was originally passed, because it merely established the contemporaneous
legislative intent that the interpreted law carried into effect.47 Accordingly,
upon its creation by PO No. 198, SWD was already a GOCC covered by RA
No. 6758 effective July 1, 1989.

The only exception to the extensive coverage of the Salary Standardization

Law is when the GOCC's charter specifically exempts the corporation from
it.48 In the case of LWDs, there is no provision in PD No. 198, as amended,
which exempts them from RA No. 6758's application.
However, it was clarified that only LWD officers and employees are covered
by RA No. 6758. In the landmark case of Baybay Water District v.
Commission on Audit,49 the Court explained that RA No. 6758 does not
apply to LWD directors because their functions are not those contemplated
in the "positions" described under Sections 450 and 551 of RA No. 6758, and
also because of the nature of their compensation, thus:

It is obvious that [RA No. 6758] does not apply to petitioners

because directors of water districts are in fact limited to policy-
making and are prohibited from the management of the districts.

[PD] No. 198, [Sec.] 18 described the functions of members of boards of

directors of water districts as follows:

Sec. 18. Functions Limited to Policy-Making. - The function of the board

shall be to establish policy. The Board shall not engage in the detailed
management of the district.

Furthermore, the fact that [Sections] 12 and 17 of [RA No. 67581

speak of allowances as "benefits" paid in addition to the salaries
incumbents are presently receiving makes it clear that the law does
not refer to the compensation of board of directors of water
districts as these directors do not receive salaries but per diems for
their compensation.

It is noteworthy that even the Local Water Utilities Administration (LWUA),

in Resolution No. 313, s. 1995, entitled "Policy Guidelines on Compensation
and Other Benefits to WD Board of Directors," on which petitioners rely for
authority to grant themselves additional benefits, acknowledges
that directors of water districts are not organic personnel and, as
such, are deemed excluded from the coverage of [RA No. 6758].
Memorandum Circular No. 94-002 of the DBM-CSC� LWUA-PAWD
Oversight Committee states in part:

As the [L]WD Board of Directors' function is limited to policy-

making under Section 18 of [PD No. 198], as amended, it is the
position of the Oversight Committee that said WD Directors are not
to be treated as organic personnel, and as such are deemed
excluded from the coverage of RA No. 6758, and that their powers,
rights and privileges are governed by the pertinent provisions of
PD [No.] 198, as amended, not by RA [No.] 6758 or Executive Order
No. 164, s. 1994.52 (Emphases supplied.)

In the light of the foregoing, we now examine whether the 2010 allowances
were correctly disallowed.

Propriety of the Disallowance

I. Rice allowance, medical allowance, Christmas groceries, year-end

financial assistance, mid-year bonus, and year-end bonus granted to
SWD officers and employees
By virtue of the authority given to the DBM under the first sentence of
Section 12 of RA No. 6758, DBM CCC No. 10 was issued. Sub�paragraphs
5.453 and 5.554 of DBM CCC No. 10 allowed the grant of benefits, other than
those specifically enumerated in the first sentence of Section
12, conditioned upon the incumbency requirement and the authority
from the DBM, Office of the President, or other legislative issuances.
Among those listed are rice subsidy and medical benefits. Petitioners are,
however, not incumbents as of July 1, 1989.

We stress that the Court has consistently construed the qualifying date to
be July 1, 1989 or the effectivity date of RA No. 6758, in determining
whether an employee was an incumbent and actually receiving the non-
integrated remunerations to be continuously entitled to them.55
Accordingly, the DBM Letters, which authorized the grant of these
disallowed benefits as an established practice since December 31, 1999
were erroneous and cannot be relied upon. Petitioners cannot, by their own
interpretation, change the meaning and intent of the law. In Torcuator v.
Commission on Audit,56 the Court emphatically ruled that these Letters,
which prescribed a different date cannot be validly invoked to replace the
specific date provided by law. The Court also observed that the opinions
lacked any explanation as to why December 31, 1999 was prescribed as
the reckoning date. In Agra v. Commission on Audit,57 it was ordained that
"'if a benefit was not yet existing when the law took effect on July 1, 1989,
there [is] nothing to continue and no basis for applying the policy [of non-
diminution of pay]." Hence, the COA did not commit grave abuse of
discretion in disallowing the rice subsidy and medical allowance that the
non-incumbent petitioners received.

On the other hand, the Christmas groceries, year-end financial assistance,

mid-year bonus, and year-end bonus are not excluded from the
standardized salary under the first sentence of Section 12 of RA No. 6758
or under any DBM issuance. Petitioners could not cite any specific authority
for their grant except the DBM Letters. Again, these Letters are not the
authority contemplated in RA No. 6758 because they were merely advisory
opinions, which do not have the force and effect of a valid rule or law
considering that they went beyond the scope of the statutory authority that
they were supposed to implement by arbitrarily prescribing a different date
to replace that which the legislature fixed.58 To be sure, the invoked DBM
Letters cannot legitimize the grant of benefits beyond what was authorized
by the law. Thus, the grant of the Christmas groceries, year-end financial
assistance, mid-year bonus, and year-end bonus to SWD's officers and
employees, being based on mere advisories, are unauthorized and
appropriately disallowed regardless of incumbency.

II. Christmas groceries granted to the Board of Directors

As earlier intimated, RA No. 6758 does not apply to LWD board of directors.
As such, the additional compensation given to the SWD Board of Directors
is governed under PD No. 198, as amended by RA No. 9286.59 Section
1360 of PD No. 198, as amended by RA No. 9286, allows the grant of
allowances and benefits to LWD directors, in addition to the per diems that
they receive as compensation, subject to the board's prescription and
the approval of the Local Water Utilities Administration (LWUA).
However, no board resolution or LWUA approval for the additional benefits
to SWD directors was alleged or proved in this case. Thus, the grant of
such benefits to the Board of Directors was unauthorized and properly
disallowed.

Considering the propriety of the disallowance, we now proceed to discuss

petitioners' liability in the disallowed transactions.

Liability to Refund

We note that the following matters were no longer raised in this Petition:
(1) Corpuz's exemption from solidary liability; and (2) the recipients'
absolution from liability. As such, the COA Resolution dated December 27,
2017 is considered final and immutable insofar as they are concerned. We
further note that the SWD Board of Directors, who were not included in the
original ND, but made liable in the COA Resolution dated December 27,
2017 and are yet to be included in a Supplemental ND, are not represented
in the present Petition. Consequently, this resolution shall be limited to the
disposition of the civil liabilities of the SWD approving and certifying
officers.

Ancheta and Rapsing, as approving and certifying officers, invoke good

faith to justify exoneration from civil liability.61 They arguthat they only
relied on the DBM Letters and board resolutions, which they ought to
implement as a matter of duty.62

The Court is not impressed.

In Madera v. Commission on Audit,63 we said that the civil liability of

approving or certifying officers provided under Sections 3864 and
39,65 Chapter 9, Book I of the Administrative Code of 1987, and the
treatment of such liability as solidary under Section 43,66 Chapter 5, Book
Vl of the same Code, are grounded upon the manifest bad faith, malice, or
gross negligence of the public officers in the performance of their official
duties because of the presumption of good faith and regularity in the
performance of official dutv in their favor.67 Good faith has been defined in
disallowance cases as:

that state of mind denoting honesty of intention and freedom from

knowledge of cumstances which ought to put the holder upon
inquiry; an honest intention to abst in from taking any unconscientious
advantage of another, even though technicalities of law, together with
absence of all infonnation, notice, or benefit or belief of facts which render
transactions unconscientious.68 (Emphasis supplied.)

Whereas, gross negligence refers to:

[N]egligence characterized by the want of even slight care, or by acting

or omitting to act in a situation where there is a duty to act, not
inadvertently but willfully and intentionally, with a conscious
indifference to the consequences, insofar as other persons may be
affected. It is the omission of that care that even inattentive and
thoughtless men never fail to give to their own property. It denotes a
flagrant and culpable refusal or unwillingness of a person to
perform a duty. In cases involving public officials, gross negligence occurs
when a breach of duty is flagrant and palpable.69 (Emphases supplied.)

We recognized the following badges of good faith and diligence that may
be considered to absolve the approving or certifying officers' liability, viz.:

(1) Certificates of Availability of Funds pursuant to Section 40 of the

Administrative Code, (2) In-house or Department of Justice legal
opinion, (3) that there is no precedent disallowing a similar case in
jurisprudence, (4) that it is traditionally practiced within the
agency and no prior disallowance has been issued, [or] (5) with
regard the question of law, that there is a reasonable textual interpretation
on its legality. [Emphasis supplied]

Gleaned from the rules and prevailing jurisprudence, the presumption of

good faith and regularity in the performance of official duty is negated, not
only by evident bad faith, but also by the gross negligence of the approving
and certifying officers in the performance of their duties.70

There are no hard and fast rules to establish good faith or bad
faith. Madera reminds us that the ultimate analysis of good faith or bad
faith for purposes of liability determination will still depend on the unique
facts obtaining in every case. Here, Ancheta and Rapsing utterly neglected
existing factual, legal, and jurisprudential circumstances when they
approved and certified the release of the challenged benefits in 2010, viz.:

First. SWD's own charter, PD 198, as amended by RA No. 9286, explicitly

requires authority from the board of directors and approval of the LWUA
before additional allowances and benefits may be granted to its
directors.71 Thus, the release of Christmas groceries to the Board of
Directors without the corresponding board resolution and LWUA approval
is a patent violation of the clear provisions of SWD's own charter, PO 198,
as amended by RA No. 9286.

Second. Well-established case laws with regard to the application of

Section 12 of RA No. 6758 were prevailing at the time of the disbursements
in 2010.72 In 2005, the case of De Jesus vs. Commission on Audit73 settled
that Section 12 of RA No. 6758 applies to LWDs. In that case, the Court
ruled that additional allowances other than those authorized by RA No.
6758 may be continuously given only to incumbents as of July 1, 1989
consistent with the policy of non-diminution of benefits, citing the earlier
cases of Philippine Ports Authority v. Commission on Audit (1992)74 and
Philippine International Trading Corp. v. Commission on Audit (
1999).75 Without doubt the ambiguities raised by SWD in the application of
RA No. 6758 had long been settled by these case laws before the release
of the disallowed benefis in 2010. Ancheta and Rapsing cannot be
permitted to conveniently feign ignorance to these jurisprudential
precedents to legitimize illegal disbursements of public funds.
Third. Ancheta and Rapsing's failure to exercise due diligence is further
demonstrated by the following circumstances:
(1) the 2010 benefits were based on board resolutions dating back from 1995 to
1999;76

(2) the DBM opmwns heavily relied upon were issued in 2000 and 2001 upon
inquiry and request for authority to grant specific benefits posed by officers
of other LWDs;

(3) the authority given to SWDs former general manager, Vindua, was also for
the grant of particular benefits in 200277 and 200378 when he also requested
for such authority; and

(4) some of the benefits released (Christmas groceries and additional year-end
bonus) were not supported by any board resolution.79
Evidently, unlike Vindua and the other LWD officers, who had the initiative
to clarify and request authority from the DBM before disbursing public
funds for payment of benefits,80 Ancheta and Rapsing took it upon
themselves to continue the grant of benefits based on previous SWD board
resolutions and DBM authorizations despite contrary prevailing rules and
jurisprudence.

Undeniably, Ancheta and Rapsing's reliance upon the DBM Letters,

previous board resolutions, and dated authorizations fell short of the
standard of good faith and diligence required in the discharge of their duties
to sustain exoneration from solidary liability. The established rules and
prevailing case laws at the time of the disbursements are notice enough
for them to inquire as responsible and diligent public officers before
approving and certifying the release of public funds.81 Ancheta and Rapsing
failed to abide faithfully with the clear and explicit provisions of PD No. 198,
as amended, and RA� No. 6758, read in conjunction with DRM CCC No.
10 and the relevant case laws. By jurisprudence, the palpable disregard of
laws, prevailing jurisprudence, and other applicable directives amounts to
gross negligence which betrays the presumption of good faith and
regularity in the performance of official functions enjoyed by public
off1cers.82 � Accordingly, the COA correctly held Ancheta ar1d Rapsing
solidarily liable to refund the disallowed amounts.

Their liability should, however, be limited to the "net disallowed amounts"

or the total disallowed amount less the amounts excused to be returned by
the other recipients. To rule otherwise would impose an inequitable burden
upon the approving and certifying officers of shouldering the entire amount
disbursed, when some recipients were already allowed to retain the
amounts that they received. As we have exhaustively explained in Madera:

[A]ny amounts allowed to be retained by payees shall reduce the solidary

liability of officers found to have acted in bad faith, malice, and gross
negligence. In this regard, Justice Bernabe coins the term "net disallowed
amount" to refer to the total disallowed amount minus the amounts
excused to be returned by the payees. Likewise, Justice Leonen is of the
same view that the officers held liable have a solidary obligation only to
the extent of what should be refunded and this does not include the
amounts received by those absolved of liability. In short, the net disallowed
amount shall be solidarity shared by the approving/authorizing officers who
were clearly shown to have acted in bad faith, with malice, or were grossly
negligent.83 (Citations omitted.)

FOR THESE REASONS, the Decision No. 2016-473 dated December 28,
2016 and Resolution dated December 27, 2017 of the Commission on Audit
are AFFIRMED with MODIFICATION in that petitioners Irene Ancheta
and Ariel Rapsing, as approving and certifying officers, are solidarity liable
to return only the net disallowed amounts.

SO ORDERED.

Peralta, C.J., Perlas-Bernabe, Leonen, Caguioa, Gesmundo, Hernando,

Carandang, Lazaro-Javier, Inting, Zalameda, Delos Santos, Gaerlan,
Rosario and Lopez, J, JJ., concur.

NOTICE OF JUDGMENT

Sirs/Mesdames:

Please take notice that on February 2, 2021 a Decision, copy

attached herewith, was rendered by the Supreme Court in the
above-entitled case, the original of which was received by this
Office on July 5, 2021 at 4:20 p.m.

Very truly yours,

EDGAR O. ARICHETA
Clerk of Court

By:

(Sgd.) ANNA-LI R. PAP-GOMBIO

Deputy Clerk of Court

Endnotes:

1
Rollo, pp. 1-18.

2
Irene G. Ancheta signed the Petition and the Verification and
Certification of Non-Forum Shopping as "petitioner and representative of
the affected officers and employees of SWD:" id. at 16 and 18.
3
Id. at 26-32.

4
Id. at 33-37.

5
DECLARING A NATIONAL POLICY FAVORING LOCAL OPERATION AND
CONTROL OF WATER SYSTEMS; AUTHORIZING THE FORMATION OF
LOCAL WATER DISTRICTS AND PROVIDING FOR THE GOVERNMENT AND
ADMINISTRATION OF SUCH DISTRICTS; CHARTERING A NATIONAL
ADMINISTRATION TO FACILITATE IMPROVEMENT OF LOCAL WATER
UTILITIES; GRANTING SAID ADMINISTRATION SUCH POWERS AS ARE
NECESSARY TO OPTIMIZE PUBLIC SERVICE FROM WATER UTILITY
OPERATIONS, AND FOR OTHER PURPOSES; approved on May 25, 1973. .

6
Rollo, pp. 40-41.

7
Id. at 42-43.

8
Id. at 44-45 and 47.

9
Id. at 48-49.

10
Id. at 50-51.

11
Id. at 52-53.

12
Id. at 46.

13
These benefits were granted pursuant to previous board resolutions
dating from 1995 to 1999; id. at 60.

14
Id. at 38-39.

15
AN ACT PRESCRIBING A REVISED COMPENSATION AND POSITION
CLASSIFICATION SYSTEM IN THE GOVERNMENT AND FOR OTHER
PURPOSES; approved on July 1, 1989.

16
5.5 The following allowances/fringe benefits authorized to GOCCs/GFis
pursuant to the aforementioned issuances are not likewise to be
integrated into the basic salary and allowed to be continued only
for incumbents of positions as of June 30, 1989 who are
authorized and actually receiving said allowances/benefits as of
said date at the same terms and conditions prescribed in said
Issuances:cj
5.5.1 Rice Subsidy;
5.5.2 Sugar Subsidy;
5.5.3 Death Benefits other than those granted by the GSIS:
5.5.4 Medical/dental/optical allowances/benefits;
5.5 .5 Children's Allowance;
5.5.6 Special Duty Pay/Allowance;
5.5.7 Meal Subsidy;
5.5.8 Longevity Pay; and
5.5.9. Teller's Allowance. (Emphases supplied.)
17
Rollo, p. 38.

18
Id.

19
Id. at 54-57.

20
Sec. 12. Consolidation of Allowances and Compensation. --All
allowances, except for representation and transportation allowances;
clothing and laundry allowances; subsistence allowance of marine officers
and crew on board government vessels and hospital personnel; hazard
pay; allowances of foreign service personnel stationed abroad; and such
other additional compensation not otherwise specified herein as may be
determined by the DBM. shall be deemed included in the standardized
salary rates herein prescribed. Such other additional compensation,
whether in cash or in kind, being received by incumbents only as of July
1, 1989 not integrated into the standardized salary rates shall continue to
be authorized.

21
Rollo, p. 57.

22
Id. at 58-63.

23
Id. at 26-32.

24
Id. at 30-31 .

25
Id. at 64-75.

26
Id. at 33-37.

27
Id. at 36.

28
Id. at 76-78.

29
Id. at 76-77.

30
Id. at 81-82.

31
Id.

32
1) That the grant shall be limited only to incumbents as of December
31, 1999 or regular positions in the Plantilla of Positions (POP) duly
approved by DMB and whose appointments were duly approved/attested
by CSC; 2) That casual and contractual personnel hired outside of the
regular POP as of December 31, 1999 may also allowed said
allowances/fringe benefits, provided they were hired with prior approval
by the DBM and appointment papers duly approved by CSC; 3) That the
grant of allowances/fringe benefits that are outside of what has been
prescribed by law and other compensation issuances and were being
enjoyed prior to the declaration by the Supreme Court that LWDs are
GOCCs, will be allowed only if the [requirements of Financial and
Operational Efficiency] are met by the concerned LWD: rollo, pp. 77-
�78.

33
Rollo, pp. 92-94.

34
Comment, id. at 107-129.

35
A DECREE REVISING THE POSITION CLASSIFICATION AND
COMPENSATION SYSTEMS IN THE NATIONAL GOVERNMENT, AND
INTEGRATING THE SAME: approved on August 18, 1976.

36
FURTHER RATIONALIZING THE SYSTEM OF COMPENSATION AND
POSITION CLASSIFICATION IN THE NATIONAL GOVERNMENT; approved
on June 11, 1978.

37
Id.

38
Philippine International trading Corporation v. Commission on
Audit, 401 Phil. 737,747 (2003).

39
278 Phil. 605 ( 1991).

40
212 Phil. 674 (1984).

41
254 Phil. 253 (1989).

42
Davao City Water District v. Civil Service Commission and Commission
on Audit. supra note 39 at 617.

43
451 Phil. 812 (2003).

44
464 Phil. 439 (2004).

45
717 Phil. 491 (2013).

46
782 Phil. 281 (2016).

47
Metropolitan Naga Water District v. Commission on Audit, id. at 287.

48
Mendoza v. Commission on Audit, supra note 45 at 517.

49
425 Phil. 326 (2002).

50
SEC. 4. Coverage.- The Compensation and Position Classification
System herein provided shall apply to all positions, appointive or elective,
on full or part-time basis, now existing or hereafter created in the
government, including government-owned or controlled corporations and
government financial institutions.

The term "government" refers to the Executive, the Legislative and the
Judicial Branches and the Constitutional Commissions and shall include
all, but shall not be limited to, departments, bureaus, offices, boards,
commissions, courts, tribunals, councils, authorities, administrations,
centers, institutes, state colleges and universities, local government
units, and the armed forces. The term government�-owned or
controlled corporations and financial institutions" shall include all
corporations and financial institutions owned or controlled by the National
Government, whether such corporations and financial institutions perform
governmental or proprietary functions.

51
SEC. 5. Position Classification System. � The Position Classification
System shall consist of classes of positions grouped into four main
categories, namely: professional supervisory, professional non-
�supervisory, sub-professional supervisory, and sub-professional non-
supervisory. and the rules and regulations for its implementation.
Categorization of these classes of positions shall be guided by the
following considerations:
(a) Professional Supervisory Category. - This category includes
responsible positions of a managerial character involving the exercise of
management functions such as planning, organizing, directing,
coordinating, controlling and overseeing within delegated authority the
activities of an organization, a unit thereof or of a group, requiring some
degree of professional, technical or scientific knowledge and experience,
application of managerial or supervisory skills required to carry out their
basic duties and responsibilities involving functional guidance and control,
leadership, as well as line supervision These positions require intensive
and thorough knowledge of a specialized field usually acquired from
completion of a bachelor's degree or higher degree courses.
The positions in this category are assigned Salary Grade 9 to Salary
Grade 33.
(b) Professional Non-Supervisory Category. � This category includes
positions performing task which usually require the exercise of a
particular profession or application of knowledge acquired through formal
training in a particular field or just the exercise of a natural, creative and
artistic ability or talent in literature, drama, music and other branches of
arts and letters. Also included are positions involved in research and
application of professional knowledge and methods to a variety of
technological, economic, social, industrial and governmental functions;
the performance of technical tasks auxiliary to scientific research and
development and in the performance of religious, educational, legal ,
artistic or literary functions.
These positions require thorough knowledge in the field of arts and
sciences or learning acquired through completion of at least four (4)
years of college studies.
The positions in this category are assigned Salary Grade 8 to Salary
Grade 30.
(c) Sub-Professional Supervisory Category. � This category includes
positions performing supervisory functions over a group a employees;
engaged in responsible work along technical, manual or clerical lines of
work which are short of professional work, requiring training and
moderate experience or lower training but considerable experience and
knowledge of a limited subject matter or skills in arts, crafts or trades.
These positions require knowledge acquired from secondary or vocational
education or completion of up to two (2) years of college education.
The positions in this category are assigned Salary Grade 4 to Salary
Grade 18.
(d) Sub-Professional Non-Supervisory Category. � This category
includes positions involves in structured work in support of office or fiscal
operations or those engaged in crafts, trades or manual work. These
positions usually require skills acquired through training and experience
of completion of elementary education. secondary or vocational education
or completion of up to two (2) years of college education.
The positions in this category are assigned Salary Grade 1 to Salary
Grade 10.

52
Baybay Water District v. Commission on Audit, supra note 49 at 341;
See also Molen, Jr. v. Commission on Audit, 493 Phil. 874 (2005);
and Magao v. Commission on Audit, 558 Phil. 76 (2007).

53
5.4 The following allowances/fringe benefits which were authorized to
GOCCs/GFIs under the standardized Position Classification and
Compensation Plan prescribed for each of the five (5) sectoral groupings
of GOCCs/GFIs pursuant to P.O. No. 985, as amended by P. D. No. 1597,
the Compensation Standardization Law in operation prior to R.A. No.
6758, and to other related issuances are not to be integrated into the
basic salary and allowed to be continued after June 30, 1989 only to
incumbents of positions who are authorized and actually receiving such
allowances/benefits as of aid date. at the same terms and conditions
provided in said issuances:cj

5.4.1 Representation and Transportation Allowances (RATA);

5.4.2 Uniform and Clothing Allowance;
5.4.3 Hazard Pay as authorized by law;
5.4.4 Honoraria/additional compensation for employees on detail with
special projects or inter-�agency undertakings;
5.4.5 Honoraria for services rendered by researchers, experts and specialist
who are of acknowledged authorities in their fields of specialization;
5.4.7 Overtime Pay as authorized by law;
5.4.8 Laundry and subsistence allowances of marine officers and crew on
board GOCCs/GFIs� owned vessels and used in their operations, and
of hospital personnel who attend directly to patients and who by nature
of their duties are required to wear uniforms;
5.4.9 Quarters Allowance of officials and employees who are entitled to the
same;
5.4.10 Overseas Living Quarters and other allowances presently authorized for
personnel stationed abroad:
5.4.11 Night Differential of personnel night duty;
 5.4.12 Per Diems of members of the governing Boards of GOCCs/GFIs at the
rate as prescribed in their respective Charters.
5.4.13 Flying Pay of personnel undertaking aerial flights;
5.4.14 Per Diems/Allowances of Chairman and Members/Staff of Collegial
bodies and Committees; and
5.4.15 Per Diems/Allowances of officials and employees on official foreign
and local travel outside of their official station.
54
Supra note 16.

55
Ambros v. Commission on Audit, 501 Phil 255, 268-269 (2005).

56
G.R. No.210631, March 12, 2019.

57
677 Phil. 608, 634 (2011).

58
See Victorias Milling Company, Inc. v. Social Security Commission, 114
Phil. 555. 558 (1962).

59
See Baybay Water District v. Commission on Audit, supra note 49 at
337.

60
SEC. 13. Compensation. - Each director shall receive per diem to be
determined by the Board, for each meeting of the Board actually
attended by him, but no director shall receive per diems in any given
month in excess of the equivalent of the total per diem of four meetings
in any given month.
Any per diem in excess of One hundred fifty, pesos (P150.00) shall be
subject to the approval of the Administration. In addition thereto, each
director shall receive allowances and benefits as the Board may
prescribe subject to the approval of the Administration. (Emphasis
supplied.)

61
Rollo, p. 15.

62
Id. at 200-204.

63
G.R. No. 244128, September 8, 2020.

64
SEC. 38. Liability of Superior Officers. � (1) A public officer shall not
be civilly liable for acts done in the performance of his official duties,
unless there is a clear showing of bad faith, malice or gross negligence.

xxx

(3) A head of a department or a superior officer shall not be civilly liable

for the wrongful acts, omissions of duty, negligence, or misfeasance of
his subordinates, unless he has actually authorized by written order the
specific act or misconduct complained of.
65
SEC. 39. Liabililty of Subordinates Officers. � No subordinate officer
or employee shall be civilly liable for acts done by him in good faith in the
performance of his duties. However, he shall be liable for willful or
negligent acts done by him which are contrary to law, morals, public
policy and good customs even if he acted under orders or instructions of
his superiors.

66
� SEC. 43. Liability for Illegal Expenditures � Every expenditure or
obligation authorized or incurred in violation of the provisions of this Code
or of the general and special provisions contained in the annual General
or other Appropriations Act shall be void. Every payment made in
violation of said provisions shall be illegal and every official or employee
authorizing or making such payment, or taking part therein, and every
person receiving such payment shall be jointly and severally liable to
the� Government for the full amount so paid or received.

Any official or employee of the Government knowingly incurring any

obligation, or authorizing any expenditure in violation of the provisions
herein, or taking part therein, shall be dismissed from the service, after
due notice and hearing by the duly authorized appointing official. If the
appointing official is other than the President� and should be fail to
remove such official or employee the President may exercise the power of
removal.

67
Blaquera v. Hon. Alcala, 356 Phil. 678, 765 (1998).

68
Philippine Health Insurance Corporation v. Commission on Audit, G.R.
No. 222838, September 4, 2018, citing Zamboanga Water Distict v.
Commission on Audit, 779 Phil. 225 (2016); Maritime Industry Authority
v. Commission on Audit, 750 Phil 288 (2015); and Philippine Economic
Zone Authority (PEZA) v. Commission on Audit, 690 Phil. 104 (2012).

69
Office of the Ombudsman v. De Leon, 705 Phil. 26, 37-38 (2013)

70
Supra note 64 and 65; Madera v. Commission on Audit, supra note 63.

71
Supra note 60.

72
� See Bureau of Fisheries and Aquatic Resources Employees Union v.
Commission on Audit, 584 Phil. 132 (2008); Benguet State University v.
Commission on Audit, 551 Phil. 878 (2007); Ambros v. Commission on
Audit, 501 Phil. 255 (2005; De Jesus vs. Commission on Audit, 497 Phil.
675 (2005).

73
497 Phil. 675 (2005).

74
289 Phil. 266 (1992).

75
368 Phil. 478 (1999).

76
Board Resolution No. 032-96-03 dated August 29, 1996, which granted
medical benefits, which was reiterated under Board Resolution No. 013-
99-02 dated June 14, 1999; Board Resolution No. 014-99-03 dated June
14, 1999, which granted mid-year bonus, Board resolution No. 013-99-03
dated June 14, 1999, which granted rice allowance and Board Resolution
No. 022-98-03 dated December 14, 1998. which granted year-end
financial assistance; rollo, p. 60.

77
Rice allowance (equivalent to one sack or cash equivalent per month);
Christmas groceries (P3,000.00); Mid-year bonus (equivalent to one
month basic salary); and Yearly anniversary bonus (P3,000.00 per
employee), id. at 92. �

78
Medical benefits; Life Insurance; and Pension Plans to officials and
employees; id. at 94.

78
The Board resolutions stated involved medical benefits, mid-year
bonus, rice allowance, and year-end financial assistance. No board
resolution was mentioned with regard to Christmas groceries and
additional year-end bonus, id. at 92.

80
Id. at 83-89.

81
See Sambo v. Commission on Audit, 811 Phil. 344 (2017), citing Casal
v. Commission on Audit, 538 Phil. 634 (2006); and Dr. Velasco v.
Commission on Audit, 695 Phil. 226 (2012); See also Zamboanga City
Water District v. Commission on Audit, supra note 68; and De Guzman v.
Commission on Audit, 791 Phil. 376 (2016). �

82
Metropolitan Waterworks and Sewerage System v. Commission on
Audit, 821 Phil. 117, 139-140 (2017); Tetangco, Jr. v. Commission on
Audit, 810 Phil. 459, 467 (2017).

83
Supra note 63.