The Supreme Court (SC) has affirmed the P13.7 million disallowed by the Commission on Audit (COA) for the payment of the health care benefits of personnel of the Securities and Exchange Commission (SEC) for 2010 and 2011.

But the SC also ruled that since the SEC officials who approved the payment and the personnel who received the benefits acted in good faith, they were absolved of any civil liability for the disallowances.

In a resolution made public last Dec. 15, the SC said: “Lastly, the Court recognizes that the authorizing officers were impelled by altruistic motives in procuring health care insurance benefits for the well-being of the SEC personnel and that they believed, in good conscience, that they were simply complying with Civil Service Memorandum Circular No. 33 which directs all government offices to provide, among others, a health program for their employees.”

Absolved of liability, aside from the employees who received the benefits, were former SEC officials Fe B. Barin, Ma. Juanita E. Cueto, Eladio M. Jala, Adelaida C. Navarro-Banaria, Thoureth I. Dela Cruz, and Renato A. Santos, and Rosalinda Tividad-Tesorio who was then president of SEC Employees Association, Inc. (SECEAI).  
The SEC issued resolutions in 2010 and 2011 appropriating funds for the personnel’s health care benefits out of the agency’s retained earnings for those two years.

The funds were disbursed by SEC to the SECEAI which paid the money to Medicard Philippines, Inc., a private health maintenance organization.

Under the Securities Regulation Code (SRC), SEC is authorized to retain and utilize P100,000,000 from its income, subject to the auditing requirements, standards, and procedures under existing laws.

The COA issued notices of disallowances on the P13.7 million disbursement as it ruled that the use of the funds for health care benefits was improper because the retained earnings are supposed to be used to augment SEC’s maintenance and other operating expenses (MOOE) and capital outlay requirements.

The disallowances were affirmed by the COA’s central office. SEC elevated the issue before the SC.

The SC’s public information office (PIO), in a summary of the decision in the case docketed as G.R. No. 251615, said:

“In resolving the petition, the Court stressed that pursuant to Section 75 of the SRC, the use of income generated by the SEC is subject to auditing requirements, standards, and procedures under existing laws.

“Such ‘existing laws’ include the Special Provisions for the SEC in the 2010 and 2011 GAAs, which explicitly direct that income generated pursuant to Section 75 of the SRC ‘shall be used to augment the MOOE and Capital Outlay requirements of the [SEC].’

“Thus, the SEC should have strictly followed the plain letter of the law and refrained from using its retained income for purposes other than the augmentation of its MOOE and capital outlay items, as in the case of the disallowed health care insurance payments.

“The Court added that the disallowed payments to Medicard cannot be considered as having been made for the purpose of SEC’s MOOE, which are ‘expenses necessary for the regular operations of an agency like, among others, traveling expenses, training and seminar expenses, water, electricity, supplies expense, maintenance of property, plant and equipment, and other maintenance and operating expenses.’

“Neither can the disallowed payments be deemed a form of capital outlay since they were not spent for the ‘purchase of goods and services, the benefits of which extend beyond the fiscal year and which add to the assets of Government.

“The Court further ruled that the disallowed health care insurance payments, being a form of personnel benefit, aptly fall within the ambit of ‘personal services’ which is an expense category for ‘basic pay, all authorized allowances, bonus, cash gifts, incentives and other personnel benefits of officials and employees of the government.’

“As to who are civilly liable for the disallowance, the Court referred to the rules of return laid down in its 2020 Decision Madera v. COA, which state that approving and certifying officers who acted in good faith are absolved from civil liability, while those in bad faith are civilly liable. The rules also state that all recipients, whether approving or certifying officers or mere passive recipients, are liable to return the disallowed amounts received by them.

“In the present case, however, the payees who received the health care benefits in good faith were absolved by the COA and their liability was no longer raised as an issue before the Court.

“As to the approving and certifying officers, the Court found that the factual circumstances support a finding that they acted in good faith in authorizing or taking part in the authorization of the disallowed health care insurance benefits. Hence, they are also absolved from civil liability.”