EN BANC

G.R. No. 211293, June 04, 2019

ADELAIDO ORIONDO, TEODORO M. HERNANDEZ, RENATO L. BASCO, CARMEN MERINO,

AND REYNALDO SALVADOR, PETITIONERS, v. COMMISSION ON AUDIT, RESPONDENT.

DOCTRINE: A corporation whether with or without an original charter, is under the audit jurisdiction
of COA so long as the Government owns or has controlling interest in it.

FACTS: Philippine Tourism Authority (PTA) Board of Directors adopted a Resolution approving the
creation of a foundation for the development of Corregidor. The Corregidor Foundation INC. was
incorporated under Securities and Exchange Commission.

PTA executed a Memorandum of Agreement (MOA) with the said foundation and agreed to release
its operating funds based on its budget for its approval and said foundation will also submit a
quarterly report on the receipts and disbursement of PTA funds and shall deposit all the revenues
collected in a distinct and separate account in the name of Corregidor, and the disposition of the
funds at the sole discretion of the PTA. Also as additional stipulations, the disbursement of PTA-
funds by Corregidor shall be subject of Internal Auditor of PTA and Commission on Audit.

Thereafter the audit team noted that the petitioners, former officers of PTA concurrently rendering
service to the foundation received gifts and honoraria which is contrary to Department of Budget
Management Circular No. 2003-5. Thus, the COA issued a notice of disallowance to the said
petitioners. The petitioners contended that Corregidor foundation is a private corporation created by
the Corporation code, thus cannot be audited by the COA.

The Adjudication Settlement Board held that the foundation is a government-owned controlled
corporation (GOCC) and under the audit powers of the COA, and the same is a non-stock
corporation which receives funds from the government through the PTA. The Commission on Audit
sustained the decision of the settlement Board, being a government owned corporation as the
incorporators of the foundation are all government officials and its budget is substantially subsidized
by the Government.

However, the petitioners insist that the Corregidor Foundation is not a government-owned or
controlled corporation because the same is neither organized as a stock corporation nor created by
a special law. It is a private corporation which assets are allegedly exclusive property, not
government owned.

ISSUE: Whether or not Corregidor Foundation Inc is a government owned or controlled Corporation
under the audit jurisdiction of the Commission on Audit.’

HELD: Yes, The Supreme Court held that Corregidor Foundation Inc is a government owned or
controlled corporation under the audit jurisdiction of the Commission on Audit.
Under Presidential Decree No. 2029, government-owned or controlled corporation is a stock or a
non-stock corporation, whether performing governmental or proprietary function, which is directly
chartered by a special law or if organized under the general corporation law is owned or controlled
by the government directly, or indirectly through a parent corporation or subsidiary corporation, to
the extent of at least a majority of its outstanding capital stock or of its outstanding voting capital
stock.

In the case at bar, Corregidor Foundation Inc was organized as a non-stock corporation under the
Corporation Code. It was issued a certificate of registration by the SEC and according to its Articles
of Incorporation, it was organized and operated in the public interest. Also, it was organized primarily
to maintain and preserve the war relics in Corregidor and develop the area’s potential as an
international and local tourist destination. Also, all of its incorporators were government officials, and
requires that the members of its Board of Trustees be all government officials. The government also
has substantial participation in the selection of Corregidor foundation Inc.’s governing board. The
government controls said foundation making it a government-owned or controlled corporation.

Further, it is immaterial whether a corporation is private or public for purposes of exercising the audit
jurisdiction of the COA. So long as the government owns or controls the corporation, as in this case,
the COA may audit corporation’s accounts. Indeed, the MOA executed by the Corregidor foundation
and PTA indubitably show that said foundation is funded by the government through the PTA and
hence, Corregidor Foundation is required to submit its budget for approval of the PTA and it even
voluntarily submitted itself to the audit jurisdiction of the COA.

Lastly, the Corregidor Foundation Inc may determine voluntarily and solely the successors of its
members in accordance with its own by-laws, this does not change the public character of its
functions and the control the government has over it. The promotion and development of tourism is a
public function and the members of the foundation must be government officials who shall hold their
membership by reason of their office.

Hence, Corregidor Foundation Inc. is a government-owned or controlled corporation. Thus it is under

the audit jurisdiction of the Commission on Audit.

All told, Corregidor Foundation, Inc. is a government-owned or controlled corporation. It is subject to

Department of Budget and Management Circular No. 2003-5 limiting the payment of honoraria to
certain personnel of the government. Furthermore, petitioners, being employees of the Philippine
Tourism Authority, are public officers prohibited from receiving additional, double or indirect
compensation as per Article IX-B, Section 8 of the Constitution. The Commission on Audit did not
gravely abuse its discretion in disallowing the payment of honoraria and cash gift to petitioners.