The Supreme Court (SC) has affirmed two decisions of the Commission on Audit (COA) which disallowed the P38.8 million used in the construction of venues and facilities for the 2005 Southeast Asian Games in Bacolod City, and the P15.2 million in allowances and incentives given by the Philippine Health Insurance Corporation (PhilHealth) to its regular and contractual employees in 2009 and 2010.

In the decision written by Associate Justice Japar B. Dimaampao, the SC  denied the petition filed by then Bacolod  Southeast Asian Games Committee (BASOC)  Chairperson Monico O. Puentevella who wanted a reversal of COA’s 2016 decision and 2020 resolution which both affirmed the notice of disallowance (ND) issued against him and then secretary general Eric T. Loretizo.

While the ND was affirmed, the SC modified the COA’s decision by remanding the case to the audit agency for the determination of the civil liability of both Puentevella and Loretizo.  

The SC said the suppliers and contractors involved in the construction of the Southeast Asian Games facilities “are still entitled to retain the value of their deliveries and services to BASCO” and should be deducted from the total amount of disallowance.

It ruled that the determination of the amount is factual in nature and it has no authority to do so.

The SC pointed out that “disbursement of large public funds deserves no less; tax payers’ money should always be spent with paramount consideration of full transparency and reasonable budget allocation.”

“Indubitably, these cannot be wantonly sacrificed on the altar of exigency inasmuch as reckless handling and accounting of public funds have no place in a government that endeavor to keep inviolate the trust of the people,” it stressed.

The Council of the SEA Games Federation awarded to the Philippines the hosting of the 23rd SEA Games from Nov. 27, 2005 to Dec. 5, 2005.

To undertake the rehabilitation work in the Bacolod City facilities, the Philippine Sports Commission (PSC) granted P50.5 million financial assistance to the BASOC – through Puentevella.

Pressed for time, BASOC directly negotiated with contractors to hasten the rehabilitation of venues and facilities needed for the Bacolod leg of the sports event.

On Jan. 30, 2014, COA’s special audit team revaluated all the documents submitted by BASOC and flagged P36.8 million in disallowance. Puentevella and Loretizo were held liable.

Puentevella challenged COA’s decision before the SC.

In the case of PhilHealth, the SC – in a decision written by Associate Justice Rodil V. Zalameda – said that the fiscal autonomy of the government’s health insurance agency under Republic Act No. 7585, PhilHealth’s charter, is not absolute and cannot be the sole basis for the grant of benefits or allowances.

A press briefer issued by the SC’s public information office (PIO) stated that “various NDs were first received by PhilHealth Regional Office (RO) IV-A covering the transportation allowance, project completion incentive, and educational assistance allowance paid to regular and contractual employees for 2009 and 2010.”

The PIO said “the said transportation allowance and project completion incentive given to PhilHealth contractual employees were considered irregular expenditures since job order employees are not entitled to the benefits enjoyed by government employees, as stated under COA Circular No. 85- 55A.”

It said the SC ruled “the disallowed educational assistance allowance given to regular employees, on the other hand, was in violation of the 2009 and 2010 General Appropriation Acts.”

It also said that when PhilHealth’s appeals were denied by COA, it elevated the issue before the SC.

In resolving the issue, the PIO said the “SC found no legal basis for the grant of the disallowed amounts.”

It said “the SC held that the grant of transportation allowance and project completion incentive to contractual employees was contrary to the provision in the job order contracts that the only compensation due to the contractor was the daily rate agreed upon.”

“As to the educational assistance allowance given to regular employees, the SC noted that there is no law or issuance from the Department of Budget Management allowing for such grant,” it said.

 Thus, the PIO said the SC ruled that “consistent with the guidelines laid down in the 2020 case of Madera v. Commission on Audit, recipients of the disallowed benefits are bound to return the amounts, regardless of whether or not they received them in good faith.”

On the liability of those who received the amounts, the PIO – also quoting from the SC decision -- said:

"The only exceptions are if such recipients can show that the amounts were genuinely given in consideration of services rendered, or the return is excused based on undue prejudice, social justice considerations, and other bona fide exceptions as may be determined by the Court on a case-to-case basis.

“None of the exceptions apply to the present case.

“As for approving and certifying officers, they are also liable to return the disallowed amounts unless they can show they acted in good faith.

“In the present case, however, good faith cannot be appreciated in favor of the PhilHealth Board of Directors and the approving authorities because they had knowledge of the irregularity of the benefits since disallowances of the same nature had been previously issued.”