COA has no power to audit all accounts, fund disbursements of PAGCOR – SC

Published September 27, 2021, 3:21 PM

by Rey Panaligan 

Supreme Court (SC)

The Supreme Court has ruled that the Commission on Audit (COA) has no authority to audit all the accounts and fund disbursements of the Philippine Amusement and Gaming Corporation (PAGCOR).

In a decision made public last Sept. 24, the SC ruled that the power of COA to audit PAGCOR is limited to the “five percent franchise tax and the 50 percent of the gross earnings pertaining to the government as its share.”

With its decision, the SC reversed and set aside COA’s 2015 and 2017 rulings that disallowed the P2 million in financial assistance given by PAGCOR in 2013 for the construction of a flood control and drainage system project in Los Banos, Laguna.

It granted the petition filed by Efraim C. Genuino, then chairman of the board of directors and chief executive officer of PAGCOR against COA.

In a decision written by the now retired Associate Justice Edgardo L. Delos Santos, the SC said:

“Despite COA’s general mandate to ensure that ‘all resources of the government shall be managed, expended or utilized in accordance with law and regulations, and safeguard against loss or wastage through illegal or improper disposition,’ the same cannot prevail over a special law such as Presidential Decree No. 1869 or the ‘PAGCOR Charter.’

“In granting a special charter to PAGCOR, legislature is presumed to have specially considered all the relevant factors and circumstances in granting the same, being mindful of PAGCOR’s dual role: first, to operate and to regulate gambling casinos, and second, to generate sources of additional revenue to fund infrastructure and socio-civic projects, and other essential public services.

“It remains a basic fact in law that the decision of a court or tribunal without jurisdiction is a total nullity.

“It is, thus, apparent that COA’s actions in this case, from the issuance of Notice of Disallowance 2013-002 and correspondingly, the assailed Decision and Resolution, are null and void. They create no rights and produce no legal effect. Thus, we find that a reversal of the assailed COA Decision and Resolution is in order.”

The SC said that under PD 1869, “the funds of the corporation (PAGCOR) to be covered by the audit shall be limited to the five percent franchise tax and the 50 percent of the gross earnings pertaining to the government’s share.”

“It is a cardinal rule in statutory construction that when the law is clear, ‘there is no room for construction or interpretation.’ As Section 15 of P.D. No. 1869 is clear, plain, and free from ambiguity, it must be given its literal meaning and applied without attempted interpretation. Thus, as it stands, the COA’s authority to audit PAGCOR is not unrestricted,” the SC pointed out.

It said the financial assistance granted by PAGCOR to the Pleasant Village Homeowners Association (PHVA) for the construction of a flood control and drainage system project for Pleasant Village Subdivision (Pleasantville) located in Barangay Tuntungin-Putho, Los Baños, Laguna was sourced from PAGCOR’s operating expenses, in particular its marketing expenses.

Thus, the SC said that COA acted with grave abuse of discretion when it exceeded its audit jurisdiction over PAGCOR.

The SC said: “It is, thus clear that the audit conduct by COA in this case was not made in relation either the five percent franchise tax or the Government’s 50 percent share in its gross earnings and therefore, beyond the scope of COA’s audit authority…. The limitation imposed on COA’s authority to audit PAGCOR is further bolstered by the fact that there are bills in Congress that have been filed precisely to expand COA’s audit jurisdiction beyond the said franchise tax and the Government’s share in its gross earnings. By implication, these bills would have been unnecessary had COA been empowered to conduct a general audit on all of PAGCOR’s funds.”

“As it stands, since Section 15 of P D No. 1869 has yet to be amended, repealed, or declared unconstitutional, the Court is left with no recourse except to apply the law as presently written, that is, any government audit over PAGCOR should be limited to its five per cent franchise tax and 50 percent of its gross earnings pertaining to the government as its share,” it said.

“Resultantly, any audit conducted by COA beyond the aforementioned is accomplished beyond the scope of its authority and functions,” it added.

“WHEREFORE, the Petition for Certiorari with Application for the Issuance of a Temporary Restraining Order and/or Writ of Preliminary Injunction is GRANTED. The Commission on Audit Decision No. 2015-420 dated Dec. 28, 2015 and the Resolution dated March 21, 2017 are hereby REVERSED and SET ASIDE,” the SC ruled.