Bustamante vs.

COA
Facts:
Petitioner is the Regional Legal Counsel of the National Power Corporation (NPC) for the Northern Luzon Regional Center
covering the provinces of Rizal up to Batanes. As such he was issued a government vehicle.
Pursuant to NPC policy as reflected in the Board Resolution No. 81-95 authorizing the monthly disbursement of
transportation allowance, the petitioner, in addition to the use of government vehicle, claimed his transportation allowance
for the month of January 1989. However, said transportation allowance was disallowed by COA Regional Auditor.
A motion for reconsideration was likewise denied, so an appeal to the COA Central Office was fried, but was also denied.
Hence, this petition
Issue:
Whether such denial to give due course to the appeal of herein petitioner constitutes grave abuse of discretion amounting
to lack of jurisdiction.
Held:
NO. It must be beyond dispute that the discretion exercised in the denial of the appeal is within the power of the
Commission on Audit as it is provided in the Constitution:
Sec. 2. The Commission on Audit shall have the following powers and functions:
(1) Examine, audit, and settle, in accordance with law and regulations, and receipts of, and expenditures or uses of funds
and property, owned or held in trust by, or pertaining to, the Government, or any of its subdivisions, agencies, or
instrumentalities, including government-owned or controlled corporations; keep the general accounts of the Government
and, for such period vouchers pertaining thereto; and promulgate accounting and auditing rules and regulations including
those for the prevention of irregular, unnecessary, excessive, or extravagant expenditures or uses of funds and
property. . . . (Article XII-D, 1973 Constitution) 2
The Court continued to state that it cannot sustain petitioner's contention that the Commission, in the exercise of its power
granted by the Constitution, usurped the statutory functions of the NPC Board of Directors for its leads to the absurd
conclusion that a mere Board of Directors of a government-owned and controlled corporation, by issuing a resolution, can
put to naught a constitutional provision which has been ratified by the majority of the Filipino people. If We will not sustain
the Commission's power and duty to examine, audit and settle accounts pertaining to this particular expenditures or use of
funds and property, owned or held in trust by this government-owned and controlled corporation, the NPC, We will be
rendering inutile this Constitutional Body which has been tasked to be vigilant and conscientious in safeguarding the proper
use of the government's, and ultimately, the people's property.
Construed in the light of the applicable law and rules on the matter, the decision of the Commissioner on Audit disallowing
the petitioner's claim for transportation allowance does not indicate a grave abuse of discretion which will warrant setting
aside and nullifying the said COA ruling.
WHEREOF, the instant petition is hereby DISMISSED for lack of merit.
Orocio v COA 213 SCRA 109
FACTS:
On accident occurred at the Malaya Power Plant of the National Power Corporation (NPC) where two individuals
suffered injury Ernesto Pumaloy, an NPC employee, and Domingo Abodizo, a casual employee OPLGS, the janitorial
contractor of the NPC. The two injured personnel were brought to the hospital.
NPC initially advanced the amount for hospitalization expenses for the treatment of Abodizo, and set up this as an
account receivable from OPLGS deducted on a staggared basis from the latter's billing against the NPC util the same was
fully satisfied. Subsequently, OPLGS requested a refund of the total amount deducted from their billings representing
payment of the advances made by the NPC. In the light of the favorable recommendation of the NPC legal counsel, the
amount of hospitalization expenses was refunded to the contractor OPLGS.
The Unit Auditor of the Commission on Audit disallowed the refund of the hospitalizattion expenses of Abodizo
contending that under the contract, there is no employee-employer relation between the NPC and the OPLGS employees.
Hence,NPC is not answerable for such expenses. General Counsel asked for a reconsideration of the said disallowance
denied. The COA Regional Director, herein respondent, confirmed the disallowance. NPC General Counself submitted a
second request for reconsideration and justifies that his legal opinion is based on Sec 15-A of RA 6395 (NPC Charter)
which provides that ... all legal matters shall be handled by the General Counsel of the Corporation...

ISSUE:
Whether the disbursement on the basis of the legal opinion of the legal counsel of the NPC (quasi-judicial function)
is within the scope of the auditing power of the COA?
HELD:
The Constitution grants the COA the power, authority and duty to examine, audit and settle all accounts pertaining
to the expenditures or uses of funds and property pertaining to the Government or any of its subdivisions, agencies or
instrumentalities, including government-owned or controlled corporations. The matter of allowing in audit a
disbursement account is not a ministerial function, but one which necessitates the exercise of discretion. Besides, the
OPLGS, Abodizo's employer, admitted that the incident was purely accidental and that there is no showing whatsoever in
the accident report of any negligence on the part of the NPC or its employees.
The NPC, as a government-owned corporation, is under the COA's audit power. The COA should not be bound by
the opinion of the legal counself of said agency or instrumentality which may have been the basis for the questioned
disbursements, otherwise it would become a toothless tiger and its auditing functions would be a meaningless and futile
exercise.

Caltex Philippines, Inc. v COA (1992)

Caltex Philippines, Inc. v Commission on Audit GR No. 92585, May 8, 1992

FACTS:
In 1989, COA sent a letter to Caltex, directing it to remit its collection to the Oil Price Stabilization Fund (OPSF), excluding
that unremitted for the years 1986 and 1988, of the additional tax on petroleum products authorized under the PD 1956.
Pending such remittance, all of its claims for reimbursement from the OPSF shall be held in abeyance. The grant total of its
unremitted collections of the above tax is P1,287,668,820.
Caltex submitted a proposal to COA for the payment and the recovery of claims. COA approved the proposal but prohibited
Caltex from further offsetting remittances and reimbursements for the current and ensuing years. Caltex moved for
reconsideration but was denied. Hence, the present petition.
ISSUE:
Whether the amounts due from Caltex to the OPSF may be offsetted against Caltexs outstanding claims from said funds
RULING:
No. Taxation is no longer envisioned as a measure merely to raise revenue to support the existence of government. Taxes
may be levied with a regulatory purpose to provide means for the rehabilitation and stabilization of a threatened industry
which is affected with public interest as to be within the police power of the State.
PD 1956, as amended by EO 137, explicitly provides that the source of OPSF is taxation. A taxpayer may not offset taxes
due from the claims he may have against the government. Taxes cannot be subject of compensation because the
government and taxpayer are not mutually creditors and debtors of each other and a claim for taxes is not such a debt,
demand,, contract or judgment as is allowed to be set-off.
Hence, COA decision is affirmed except that Caltexs claim for reimbursement of underrecovery arising from sales to the
National Power Corporation is allowed.
Doctrine: Prevention of unnecessary expenses
Case: Polloso v Gangan
Facts:
National Power Corporation (NPC) hired by way of service contract, Atty,Benemerito Satorre, a private lawyer to
perform and provide legal functions and services.
Satorre was to receive 21,749 as monthly salary with representation and transportation allowance of 5,300.
In January 1995, the unit auditor of NPC issued a Notice of Disallowance for the payment of the services rendered
by Atty Satorre because it violates COA Circular No 86-255 which requires that contract of services should have the written
conformity and acquiessence of the Solicitor General or Corporate Counsel and the concurrence of the Commission on
Audit (COA).
Petitioner, Dante Polloso submitted a letter-explanation refuting the alleged violation contained in the Notice of
Disallowance and sought reconsideration.
This was denied by COA. Hence the instant petition which refutes the reasons provide by COA why it issued the
Notice of Disallowance.
Petitioner argues that the phrase handling of legal cases should be construed to mean as conduct of cases or
handling of court cases or litigation and not to other legal matters, such as legal documentation, negotiations, counseling or
right of way matters

Issue:
WON COA-Circular 86-255 applies to the nature of hiring of Atty. Sattore who handled only right of way matters
and did not handle court cases
Decision:
The court ruled against the petition.
The COA circular was issued recognizing the problem of hiring private lawyers or law praticioners practitioners to
render legal services for them and/or to handle their legal cases in consideration of fixed retainer fees, at times in
unreasonable amounts, paid from public fund despite numerous laws that restrict the practice.
The COA circular provides that: the payment out of public funds of retainer fees to private law practitioners who
are so hired or employed without the prior written conformity and acquiescence of the Office of the Solicitor General or the
Government Corporate Counsel, as the case may be, as well as the written concurrence of the Commission on Audit shall
be disallowed in audit and the same shall be a personal liability of the officials concerned.
Based on the Circular government agencies and instrumentalities are restricted in their hiring of private lawyers to
render legal services or handle their cases. Contrary to the view espoused by petitioner, the prohibition covers the hiring of
private lawyers to render any form of legal service.
It makes no distinction as to whether or not the legal services to be performed involve an actual legal controversy
or court litigation Public funds will not be disbursed top pay private lawyers unless there is prior written conformity and
acquiescence from the Solicitor General or the Government Corporate Counsel.
The court said the circular was a safeguard to prevent the irregular, unnecessary, excessive and extravagant or
unconscionable expenditure.
COA conducts audit proceedings in order to prevent the irregular, unnecessary, excessive and extravagant or
unconscionable expenditure of government/public funds. The circular recognizes the problem of hiring private lawyers or
law practitioners to render legal services in consideration of fixed retainer fees, at times in unreasonable amounts, paid
from public fund despite numerous laws that restrict the practice
Case: DBP v COA
Facts:
Development Bank of the Philippines (DBP) seeks to set aside COA Decision which disallowed in audit the
dividends distributed under the Special Loan Program (SLP) to the members of the DBP Gratuity Plan.
The DBP is a government financial institution with an original charter, Executive Order No. 81, as amended by
Republic Act No. 8523 (DBP Charter).
In 1983, the Bank established a Special Loan Program availed thru the facilities of the DBP Provident Fund and
funded by placements from the Gratuity Plan Fund. This Special Loan Program was adopted as part of the benefit
program of the Bank to provide financial assistance to qualified members to enhance and protect the value of their gratuity
benefits because Philippine retirement laws and the Gratuity Plan do not allow partial payment of retirement benefits.
The program was suspended in 1986 but was revived in 1991 thru DBP Board Resolution No. 066 dated January 5, 1991.
Under the Special Loan Program, a prospective retiree is allowed the option to utilize in the form of a loan a portion
of his outstanding equity in the gratuity fund and to invest it in a profitable investment or undertaking. The earnings of the
investment shall then be applied to pay for the interest due on the gratuity loan which was initially set at 9% per annum
subject to the minimum investment rate resulting from the updated actuarial study. The excess or balance of the interest
earnings shall then be distributed to the investor-members.
Pursuant to the investment scheme, DBP-TSD paid to the investor-members a total of P11,626,414.25
representing the net earnings of the investments for the years 1991 and 1992. The payments were disallowed by the
Auditor under Audit Observation Memorandum No. 93-2 dated March 1, 1993, on the ground that the distribution of income
of the Gratuity Plan Fund (GPF) to future retirees of DBP is irregular and constituted the use of public funds for private
purposes which is specifically proscribed under Section 4 of P.D. 1445.
Chairman Antonio of DBP also asked COA to lift the disallowance of the P11,626,414.25 distributed as dividends
under the SLP on the ground that the latter was simply a normal loan transaction.
Issues:
Whether or not the distribution of dividends under the SLP is valid.
Decision:

NO. The beneficiaries or cestui que trust of the Fund are the DBP officials and employees who will retire.
Retirement benefits can only be demanded and enjoyed when the employee shall have met the last requisite, that is,
actual retirement under the Gratuity Plan. In this case, dividends were distributed to employees even before retirement.
As Chairman Zalamea himself noted, neither the Gratuity Plan nor our laws on retirement allow the partial payment
of retirement benefits ahead of actual retirement. It appears that DBP sought to circumvent these restrictions through the
SLP, which released a portion of an employees retirement benefits to him in the form of a loan.
Severance of employment is a condition sine qua non for the release of retirement benefits. Retirement benefits
are not meant to recompense employees who are still in the employ of the government. That is the function of salaries and
other emoluments. Retirement benefits are in the nature of a reward granted by the State to a government employee who
has given the best years of his life to the service of his country.
Case: DBP v COA (2006)
Facts:
In 1988, DBP purchased 5 Mitsubishi L-300 vans and 14 Mitsubishi Lancer cars worth a total of P5,525,000 for its
5 regional offices and 14 branches pursuant to its modernization program. During this period, DBP was undergoing a
process of rehabilitation and the vehicles were utilized to bolster its efforts at fund generation which required the
mobilization of its personnel in order to reach out to a wider base of clientele.
In its 1992 Annual Audit Report, COA included these transactions among its adverse audit findings alleging DBPs
non-compliance with Letter of Instruction No. 667 and Letter of Implementation No. 29 which require Presidential approval
for purchase of transport. The auditor recommended the filing of administrative charges against the responsible officers but
it was never effected for the responsible officers later ceased to be connected with the agency.
In 1998, the COA Auditor issued a Notice of Disallowance on the subject transaction. This impelled DBP, through
their President and CEOs letter, to move for the lifting of the disallowance of P5,525,000.00. The purchase was justified as
necessary for its modernization program since it was undergoing a process of rehabilitation at the time and that their
branches were in dire need of additional vehicles for improved mobility to support its thrust of providing financial assistance
to small and medium enterprises in the countryside to generate employment and spur economic development.
The COA Auditor recommended the lifting of the audit disallowance. But contrary thereto, the Director, Corporate
Audit Office I, issued a Memorandum finding DBP wantonly disregarded the requirement of Presidential approval which is a
condition sine qua non for the purchase of vehicles under Letter of Instruction No. 667 which provides, inter alia, that:
When authorized to purchase motor vehicles pursuant to Letter of Implementation No. 29 dated December 5,
1975, national government agencies, including government-owned and controlled corporations and state colleges and
universities shall observe the following maximum standard specifications:
xxxxxxxxx
5.0 Exceptions may be allowed only as specifically authorized by the President.
Letter of Implementation No. 29 provides:
Pursuant to Presidential Decree No. 830, dated November 27, 1975 and in connection with Letter of
Implementation No. 28 placing the Budget Commission immediately under the President of the Philippines, the
Commissioner of the Budget is hereby delegated authority to take final action on the following budgetary matters
heretofore referred by this Commission to the Executive Secretary:
xxxxxxxxx
The following, among others, shall continue to be referred to the President for personal consideration and action:
xxxxxxxxx
5. Purchase of transport and construction equipment, books, drugs and medicines, and other items.
DBP assailed COA Decision No. 2001-151 which denied its motion for the lifting of the disallowance. The Commission
affirmed the subject disallowance for want of prior Presidential approval contrary to Letter of Implementation No. 29 and
LOI No. 667.
Issue:
Whether or not COA committed GADALEJ in disallowing the purchase of motor vehicles by DBP
Decision:
COA did not commit grave abuse of discretion in disallowing the purchase of motor vehicles by DBP.
Based on Letter of Instruction No. 667 and Letter of Implementation No. 29, prior Presidential authorization is
required before DBP, being a government-owned and controlled corporation, could purchase the subject vehicles. Verily,

Letter of Instruction No. 667 is not a "mere technicality" as DBP contends, otherwise, administrative agencies would be free
to utilize such funds freely as long as they can justify their use through the mere invocation of laudable purposes. Since the
disallowance was made pursuant to the applicable law, it cannot be assailed as an act of grave abuse of discretion.
Parreno vs. COA
Topic:

Prospective

and

retrospective

effect

of

laws.

Facts:
a petition for certiorari assailing the January 9, 2003 decision and January 13, 2004 resolution of the COA filed by 2lt
Salvador
Parreno
(ret)
represented
by
his
daughter.
Salvador Parreno served in the AFP for 32 years and was retired on January 1982. He received payment of his lump sum
pension and started receiving his monthly pension in 1985. Petitioner migrated to Hawaii and became a naturalized
American citizen. In January 2001, the AFP stopped petitioners monthly pension in accordance with sec. 27 of P.D. 1638
which provides that a retiree who loses his Filipino citizenship shall be removed from the retired list and his retirement
benefits terminated upon loss of Filipino citizenship. Petitioner requested for reconsideration but AFP JAGO denied his
request.
Petitioner filed a claim before the COA for the continuance of his monthly pension but on January 9, 2003, COA denied his
claim for lack of jurisdiction. COA ruled that the issue at hand requires the courts as mandated by the constitution to
determine
the
validity
of
the
law
re:
P.D.
1638
sec.
27.
Petitioner filed a motion for reconsideration but on January 13, 2004, in its resolution COA denied the motion further ruling
that even if assumed jurisdiction over the claim, petitioners entitlement to the retirement benefits he was previously
receiving must necessarily cease upon the loss of his Filipino citizenship in accordance with sec. 27 of P.D. 1638 as
amended.
Petitioner argued that P.D. 1638, as amended applies prospectively and should apply only to those who joined the military
service
after
its
effectivity.
ISSUE:
Is the petitioner correct in maintaining that P.D. 1638, as amended applies prospectively and should apply only to those
who
joined
the
military
service
after
its
effectivity?
HELD:
Yes, petitioner is correct in saying that P.D. 1638 applies prospectively. There is no question that P.D. 1638 as amended
applies prospectively and it does not provide for its retroactive application. But in petitioners contention that it should only
apply to those who joined the military service after its effectivity, he is wrong because P.D. 1638 as amended, is about the
new system of retirement and separation from service of military personnel, it should apply to those who were in the
service at the time of its approval. Sec. 2 of P.D. 1638, as amended provides that, the decree shall apply to all military
personnel in the service of the AFP. P.D. 1638 as amended was signed into law on September 10, 1979 while petitioner
retired in 1982, which is long after the approval of P.D. 1638, as amended. Hence, the provisions of P.D. 1638, as
amended, apply to petitioner.
Case: POI v Auditor General
Facts:
Philippine Operations, Inc., (POI) entered into a barter agreement with the Bureau of Prisons whereby it agreed to
deliver to the Bureau a sawmill, complete, with a diesel fuel engine, a stop saw edge and log turner, etc., and two LCMs in
good turning condition, in exchange for 350,000 board feet of sawed lumber. The sawmill machine delivered to the Bureau
was lacking parts for the installation. Due to the defect, the Bureau would not be able to complete the delivery of sawed
lumber.
The attorney for POI filed a claim with the Auditor General demanding that cash payment of P70,000 be paid to it, plus
P35,000 for damages suffered. The Auditor General denied the claim of POI because the agreement entered into was one
of barter and no money consideration came to mind and that the Bureau of Prisons was willing to perform its part of the
obligation.

Issue:
Whether or not the Auditor General has jurisdiction over unliquidated claim?

Decision:
Auditor General has no jurisdiction or power to take cognizance of claims for unliquidated damages. All that is
vested in the Auditor General is the settlement of accounts. Accounts, because of the absence of any reasons to the
contrary, must be deemed to have the same meaning as accounts under the laws in force before the approval of the
Constitution. On the merits of the claim, the claim of the petitioner for damages cannot be sustained, for admitting that the
said amounts represent the difference in the value between the lumber delivered in April, 1950, and that which was to be
delivered within thirty days after the installation of the sawmill, the delay in the delivery was due to petitioner's own fault,
namely, its failure to deliver the sawmill and the landing barges complete and in satisfactory condition it had guaranteed
them, and in part to its desire to change the lumber for surplus materials. For the foregoing considerations, the petition for
review is hereby dismissed, with costs against the petitioner.

Case: Blue Bar Coconut Phils v Tantuico

Facts:
Sometime in 1976, the respondent Acting Chairman of the Commission on Audit initiated a special audit of coconut
end-user companies, which include herein petitioners, with respect to their Coconut Consumers Stabilization Fund levy
collections and the subsidies they had received.
As a result of the initial findings of the Performance Audit Office with respect only to the petitioners, respondent
Acting COA Chairman directed the Chairman, the Administrator, and the Military Supervisor of PCA and the Manager of the
Coconut Consumers Stabilization Fund, in various letters to them (Annexes G-2 H, I, J, L and N of petition) to collect the
short levies and overpaid subsidies, and to apply subsidy claims to the settlement of short levies should the petitioners fail
to remit the amount due.
Issues:
Whether or not the respondent COA Chairman may disregard the PCA rules and decisions has become moot.
Decision:
In the case at bar, the petitioners have failed to show that acts were done with grave abuse of discretion amounting
to lack of jurisdiction. Case dismissed.
Petitioners contend that they are outside the ambit of respondents' "audit" power which is confined to governmentowned or controlled corporations.
Section 2 (1) of Article IX-D of the Constitution provides that "The Commission on Audit shall have the power,
authority and duty to examine, audit, and settle all accounts pertaining to the revenues and receipts of, and expenditures or
uses of funds and property, owned or held in trust by or pertaining to, the Government, or any of its subdivisions, agencies
or instrumentalities, including government-owned or controlled corporation with original charters, and on a post-audit basis.
... (d) such non-governmental entities receiving subsidy or equity directly or indirectly from or through the Government
which are required by law or the granting institution to submit to such audit as a condition of subsidy or equity." (Emphasis
supplied) The Constitution formally embodies the long established rule that private entities who handle government funds
or subsidies in trust may be examined or audited in their handling of said funds by government auditors. n view of the
above considerations, we apply the principle of primary jurisdiction:
In cases involving specialized disputes, the trend has been to refer the same to an administrative agency
of special competence. As early as 1954, the Court in Pambujan Sur United Mine Workers v. Samar Mining Co.,
Inc. (94 Phil. 932,941), held that under the sense-making and expeditious doctrine of primary jurisdiction ... the
courts cannot or will not determine a controversy involving a question which is within the jurisdiction of an
administrative tribunal prior to the decision of that question by the administrative tribunal, where the question
demands the exercise of sound administrative discretion requiring the special knowledge, experience, and services
of the administrative tribunal to determine technical and intricate matters of fact, and a uniformity of ruling is
essential to comply with the Purposes of the regulatory statute administered." Recently, this Court specaking thru
Mr. Chief Justice Claudio Teehankee said that "In this era of clogged court dockets, the need for specialized
administrative boards or commissions with the special knowledge, experience and capability to hear and determine
promptly disputes on technical matters or essentially factual matters, subject to judicial review in case of grave
abuse of discretion, has become well nigh indispensable." The court reminds us that The legal presumption is that
official duty has been duly performed.

Case: NHA v COA

Facts:
The Philippine Government forged an agreement on financial cooperation with the Republic of Germany. The
agreement involved the Republic of the Philippines as Borrower and the National Housing Authority (NHA) as Project
Sponsor, and the Kreditanstalt Fur Weidaraufbau (KWF) as the lender, for the Urban Housing Dagat-Dagatan Project II.
However, despite all the negotiations and contracts, the Urban Housing Dagat-Dagatan Project II was not
completed as scheduled. Thus an extension of the contract was made since the NHA did not appear to have much choice.
Several extensions were made which triggered the difficulties experienced by NHA.
Issue:
WON the COA has authority to disallow a duly entered contract and substitute its own judgment or disposition in
lieu of the decision of the management or governing body of government entities
Decision:
The COA has been enshrined by the government with powers to "promulgate accounting and auditing rules and
regulations, including those for the prevention and disallowance of irregular, unnecessary, excessive, extravagant, or
unconscionable expenditures, or uses of government funds and properties." It has been recognized in Caltex Philippines,
Inc. vs. COA, that COA has authority to disallow irregular, unnecessary, excessive, extravagant or unconscionable
expenditures.
The nature of the terminal phase of the Dagat-Dagatan project does not require the expertise of a foreign
consultant and that the finishing stage merely requires simple advisory services that can be undertaken by NHA or DPWH
in-house technical staff or at the most a local consultant. Our Constitution prohibits unnecessary expenses of public funds.
The postulates of our Constitution are not mere platitudes, which we should honor only in rhetorics but not in reality. The
power to contract a foreign loan does not carry with it the authority to bargain away the ideals of our Constitution.