The Supreme Court (SC) has ordered the officials and employees of the Zamboanga City Water District (ZCWD) to return the more than P5.1 million in “financial subsidy” they illegal received in 2009.

In a full court decision written by Associate Justice Henri Jean Paul B. Inting and made public last Feb. 2, the SC dismissed the petition filed by ZCWD officials against the notice of disallowance (ND) issued by the Commission on Audit (COA) on the disbursement of the fund.

The SC ruled:

“All ZCWD officials and employees who received the financial subsidy, as passive recipients, are liable to return the amount they individually received….

“Aside from what they have received by virtue of Board Resolution No. 206, the Board shall be solidarily liable for the disallowed amount on account of their unauthorized and imprudent directive to pay the subject financial subsidy.”

With its ruling, the SC upheld the March 9, 2015 COA resolution that upheld ND No. 10-127(09) issued on Sept. 7, 2010 and dismissed the petition filed by ZCWD, a government-owned corporation.

The basis of ZCWD’s board of directors to grant the financial subsidy was then President Gloria Macapagal Arroyo’s May 13, 2009 Memorandum Circular (MC) No. 174 that called on all government agencies, including government owned and controlled corporations (GOCCs) and state colleges and universities to support the Philippine Government Employees Associations’ public sector agenda.

Among other things, the MC mandates the provision of financial subsidy for shuttle service, access to “Botika ng Bayan,” and scholarship of workers’ children.

In its Nov. 25, 2009 letter to the Office of the Government Corporate Counsel (OGCC), the ZCWD inquired if it has the power to prescribe the amount for financial subsidy, if the amount is in the nature of ‘de minimis (a Latin word to describe something for the court to bother with), and how often can the subsidy be given.

Without waiting for the OGCC’s reply, ZCWD proceeded to grant the financial subsidy to all officials and employees – whether permanent, casual, temporary or contractual -- provided they have been in service of an aggregate period of four months.

On Dec. 7, 2009 the board of directors issued a resolution and two days later on Dec. 9, 2009, more than P5.1 million in ZCWD’s funds were given to all officials and employees.

On July 21, 2010, COA’s audit team issued an Audit Observation Memorandum which stated that the amount disbursed by ZCWD violate the General Appropriations Act of 2009.

Then came COA’s ND on Sept. 7, 2010 which directed all ZCWD’s officials and employees to return the subsidy they received. A petition was filed before the SC against COA’s ND.

Resolving the issue, the SC said

“While MC 174 prescribes the provision of a financial subsidy directly to government employees, it did not mention the amount thereof. In the present case, the Board… effectively took upon itself to fix the financial subsidy at an amount equal to one month salary.

“That the circular was silent as to the financial subsidy amount cannot be construed as a government instrumentality's implied authority to fix it on its own. To be sure, ZCWD Board has no authority to fill in the details of what MC 174 may have been lacking.

 “Verily, the Provincial Water Utilities Act of 1973 empowers the boards of local water districts such as ZCWD to promulgate rules and regulations. However, their rule-making power shall be limited to setting policies in relation to ‘local water supply and wastewater disposal systems… to achieve national goals….’

“As things presently stand, there is no law supporting the Board's self-determination of the financial subsidy amount. Thus, their decision to grant and pay the subject financial subsidy was made ultra vires (an action beyond the limits of one’s authority) which renders the subsequent disbursement illegal.”