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ENGR. REYNALDO C. G.R. No. 218241

LIWANAG, nn his capacity as
the GENERAL MANAGER of
the ANGELES CITY WATER Present:
DISTRICT (ACWD),
Petitioner, BERSAMIN, C.J,
CARPIO,
PERALTA,
PERLAS-BERNABE,
LEONEN,
JARDELEZA,
CAGUIOA,
- versus - REYES, JR., A.,
GESMUNDO,
*
REYES, JR., J.,
HERNANDO,
CARANDANG,
LAZARO-JAVIER, and
INTING, JJ.

COMMISSION ON AUDIT, Promulgated:

Respondent.

x-------------------------------------------------------------------

DECISION

BERSAMIN, C.J.:

The conduct of a special audit to reopen a previous audit allowing a

disbursement should be made in accordance with the prevailing rules and
guidelines defined by the Commission on Audit (COA) itself; otherwise, the
special audit is irregular and should be invalidated.

• On leave.
.
~
Decision 2 G.R. No. 218241 ·

The Case

The petitioner, in his capacity as the General Manager of the Angeles

City Water District (ACWD), hereby assails Decision No. 2015-046 dated
February 23, 2015, 1 whereby the COA affirmed Notice of Disallowance
(ND) No. 2012-003-101(2008), ND No. 2012-004-101(2008), ND No.
2012-005-101(2009) and ND No. 2012-006-101(2009), all issued on
November 26, 2012, relative to ACWD's grant to its employees of grocery
allowance and year-end financial assistance totaling P 14,556,195.00 for the
years 2008 and 2009.

Antecedents

The factual and procedural antecedents, as culled from the decision of

the Regional Director of COA's Regional Office 3 in San Fernando City
(COA-RO3), 2 are as follows:

The Audit Team Leader (ATL) of Angeles City Water District

(ACWD), Angeles City issued Notices of Disallowance (NDs) Nos. 2012-
003-101(2008), 2012-004-101(2008), 2012-005-101(2008) and 2012-006-
101 (2009), all dated 26 November 2012 to Appellant General Manager of
the ACWD. Subject NDs pertained to the grocery allowance for the year
2008 and year-end financial assistance for 2008 and 2009. The basis for
the disallowed grocery allowance was premised on the fact that the same
had no legal basis and that, prior year's (2010-2011) expenses of the same
nature had been disallowed and affirmed by the COA Region III Decision
No. 2012-25 dated July 12, 2012. On the other hand, the year-end
financial assistance were disallowed because it was not in accordance with
the established benefits as of December 31, 1999 per DBM letter dated
April 27, 2001 and PA WAD Memorandum Circular No. 2, s. of 2001
dated May 4, 2001. Both NDs were previously decided and affirmed by
the COA Regional Office No. III under COA Region III Decision No.
2012-25 dated July 12, 2012.

In his Appeal Memorandum dated May 20, 2013, Appellant

invoked that the ATL can no longer audit the assailed grocery allowances
and year-end financial assistance for the years 2008 and 2009 because the
same were already audited by the ATL assigned at ACWD during his time
and that, there were no disallowances issued pertaining to the said
allowances and benefits. Moreover, the NDs issued by the succeeding
ATL runs counter to the non-diminution of benefits principle considering
that the allowances were allowed in principle by DBM Secretary Emilia T.
Boncodin in her letter dated 2 7 April 2001, addressed to President Loreto
G. Limcolioc of the PAWAD, stating therein that the grant of allowances
shall be continued if the same were an established and existing practice.

Rollo, pp. 32-36; penned by Commissioner, Officer-in-Charge Heidi L. Mendoza and Commissioner
Jose A. Fabia, attested by Director IV, Commission Secretariat Nilda B. Plaras.
2
Id. at 37-41.

A
Decision 3 G.R. No. 218241

In her Answer dated 01 July 2013, Appellee, the incumbent

Supervising Auditor for water districts, reiterates the disallowances, citing
Section 4.5 of DBM Budget Circular No. 16 and Section 2 of
Administrative Order No. 365, s. 1997, viz:

Section 4.5 of DBM Budget Circular No. 16

"All agencies are prohibited from granting any food,

rice, gift, checks, or any other form of incentives/allowances
except those authorized via Administrative Order by the
Office of the President; and

Section 2. Administrative Order No. 365, s. of 1997

enjoins and prohibits Heads of Government Agencies, Local
Government Units including Government-Owned and
Controlled Corporations, Government Financing Institution
as well as their respective governing boards from
authorizing/granting Amelioration Allowance or any similar
benefits without prior approval and authorization via
Administrative Order (AO) by the President."

She likewise advanced the justification that there was no proof that
the benefits met the requirements provided under paragraph 2, Section 12
of RA 6758, which showed that the recipients were incumbents as of July
1, 1989 in order that the allowances may be continued. Furthermore,
Appellee is of view that the opinion by the former DBM Secretary cannot
prevail over settled decisions and jurispmdence, as well as the provisions
of Section 12 of RA 6758. On the issue regarding the authority of the ATL
to conduct the audit which resulted in the issuance of the NDs, she cited
the Memorandum dated 9 March 2012 of Atty. Leonor M. Boado, then
Director IV of the Fraud Audit and Investigation Office (F AIO), which
was approved by Assistant Commissioner Elizabeth S. Zosa and
Chairperson Ma. Gracia M. Pulido-Tan, ordering the re-opening of the
accounts of ACWD, in response to the request to audit the long time
corruption at ACWD in terms of monetary benefits received by its
employees and other irregularities. In her prayer, Appellee not only
manifested her denial to lift the subject disallowances but likewise made a
representation that the aggregate amount of the NDs should be increased
from P14,556,195.00 to P26,462,024.00. 3

The NDs in question are summarized as follows: 4

Benefit I Amount
I Audited Disallowed Difference
Grocery Allowance
ND No. 2012-003-101(2008) P7,248,000.00 P7,248,000.00 -
ND No. 2012-005-101(2009) 5,049,765.50 4,955,500.00 P94,265.50
Year-End Financial
Assistance
ND No. 2012-004-101(2008) 6,418,626.00 1,069,771.00 5,348,855.00
ND No. 2012-006-101(2009) 7,745,632.50 1,282,924.00 6,462,708.50
Total P26,462,024.00 Pl4,556,195.00 PI 1,905,829.00

Id. at 37-38.
Id. at 33
(.

A
Decision 4 G.R. No. 21824,1,

On May 28, 2013, the petitioner filed his appeal memorandum with
COA-RO3 seeking the lifting and setting aside of the NDs. 5 However, the
Regional Director denied the appeal through Decision No. 2013-91 dated
September 18, 2013, a copy of which the petitioner received on September
19, 2013. Hence, the petitioner filed with the COA Proper the petition for
review dated October 7, 2013, and paid the corresponding filing fee on
December 27, 2013. 6

Ruling of the COA Proper

On February 23, 2015, the COA Proper dismissed the petitioner's

appeal for being filed out of time pursuant to Section 3, Rule VII of the 2009
Revised Rules of Procedure of the COA (RRPC), 7 and declared the decision
of the Regional Director final and executory pursuant to Section 22.1 8 of the
RRPC and Section 51 9 of Presidential Decree No. 1445. It cited the
following timeline to indicated that the period to file the appeal had already
lapsed, to wit:

Date NDs were received by Engr. Liwanag November 28, 2012

Date ND were appealed to the Regional Director May 28, 2013
Days elapsed from receipt of ND to appeal to the 181 days
Regional Director
Date ofreceipt of Regional Director's Decision September 19, 2013
No. of days remaining of the six months (180 one (1) day
days) period to file appeal
Deadline to file petition for review September 20, 2013
Date petition for review was filed December 27, 2013

Hence, this recourse.

Issues

The petitioner submits for consideration and resolution the following

issues, namely:

Id.
Id.
7
Id. at 33.
Section 22. I of the Rules and Regulations on Settlement of Accounts (RRSA): A decision of the
Commission Proper, ASB, Director or Auditor upon any matter within their respective jurisdiction; if not
appealed as herein provided, shall become final and executory. Id. at 34.
9
Section 51 of Presidential Decree No. 1445: Finality of Decisions of the Commission or Any Auditor -
A decision of the Commission or of any auditor upon any matter within its or his jurisdiction, if not
appealed as herein provided, shall be final and executory. Id.
I.

~
Decision 5 G.R. No. 218241

A. WHETHER COA GRAVELY ABUSED ITS DISCRETION

TANTAMOUNT TO LACK OR EXCESS OF JURISDICTION
WHEN IT RULED THAT ACWD's PETITION FOR REVIEW
WAS FILED OUT OF TIME.

B. WHETHER COA GRAVELY ABUSED ITS DISCRETION

TANTAMOUNT TO LACK OR EXCESS OF JURISDICTION
WHEN IT AFFIRMED THE DISALLOWANCE OF
GROCERY ALLOWANCE AND YEAR END FINANCIAL
ASSISTANCE GRANTED TO ACWD EMPLOYEES.

C. WHETHER COA GRAVELY ABUSED ITS DISCRETION

TANTAMOUNT TO LACK OR EXCESS OF JURISDICTION
WHEN IT FAILED TO RULE THAT THE AUDIT
CONDUCTED BY THE ATL IS INVALID AND ILLEGAL
FOR LACK OF AUTHORITY TO AUDIT ACWD
ACCOUNTS WHICH ALREADY HAD BEEN AUDITED BY
PREVIOUS AUDITORS.

D. WHETHER COA GRAVELY ABUSED ITS DISCRETION

TANTAMOUNT TO LACK OR EXCESS OF JURISDICTION
WHEN IT FAILED TO APPLY EXISTING JURISPRUDENCE
ON THE ENTITLEMENT AND REFUND OF THE SUBJECT
ALLOWANCES OF ACWD EMPLOYEES. 10

Ruling of the Court

We find merit in the petition for certiorari.

I
The petitioner's appeal to
the COA Proper was timely filed

The respondent insists that the petitioner did not file the petition for
review with the COA Proper within the 6-month reglementary period
provided under Section 3 Rule VII of the 2009 RRPC. On the other hand,
the petitioner counters that his appeal was timely because the disallowances
were the proper subject of an automatic review in view of the increase of the
disallowed amounts from P14,556,195.00 to P26,462,024.00.

We sustain the petitioner.

The assailed NDs originally totaled f!14,556,195.00. However, the

Regional Director, in dismissing the appeal, concluded that the decision was
not yet final but still subject to the "automatic review by the Commission

10
Ro11o, p. 9.

---s
Decision 6 G.R. No. 218241 ·

Proper pursuant to Section 7, Rule V of the 2009 Revised Rules of

Procedure of the Commission on Audit." 11

The conclusion of the Regional Director was con-ect. Indeed, Section

7, Rule V of the RRPC reads:

SECTION 7. Power of Director on Appeal - The Director may

affirm, reverse, modify or alter the decision of the Auditor. If the
Director reverses, modifies or alters the decision of the Auditor, the
case shall be elevated directly to the Commission Proper for
automatic review of the Director's decision. The dispositivc portion of
the Director's decision shall categorically state that the decision is not
final and is subject to automatic review by the CP.

If it was subject to the automatic review by the COA Proper, the

decision approving the disallowances did not attain finality. On that basis,
the motion for reconsideration filed by the petitioner was superfluous and
unnecessary.

II
The petitioner was fully authorized
to bring the present recourse

The respondent argues that the petitioner lacked the authority to bring
the present recourse because the ACWD's Board of Directors limited his
authority to the filing of the motion for reconsideration vis-a-vis the assailed
COA Decision.

The argument of the respondent is mistaken.

The sixth Whereas clause of ACWD's Board Resolution No. 19,

Series of 2015, 12 stated thus:

WHEREAS, the Board of Directors thoroughly and carefully

deliberated on the issues at hand and thereafter collectively decided to file
a Motion for Reconsideration with the Supreme Court of the Philippines
on the COA Decision 2013-91.

11 Id. at 41, in which the following paragraph is reflected:

Considering that the incumbent Supervising Auditor for water districts has made
representation to increase the aggregate disallowance to 1!26,462,024.00, which is a modification
to the original amount, the decision is not therefore final and shall be subject to automatic
review by the Commission Proper pursuant to Section 7, Ruic V of the 2009 Revised Rules of
Procedure of the Commission on Audit. (Bold underscoring supplied for emphasis)
12
Id. at 29.

'
,A
Decision 7 G.R. No. 218241

Although such wording of the sixth Whereas clause gave the

impression that only the motion for reconsideration had been thereby
authorized to be filed, it was plain error on the part of the COA Proper to
argue that the intent of ACWD's Board of Directors in issuing Board
Resolution No. 19 was only to authorize the petitioner to file the motion for
reconsideration if it was clear that the Board of Directors adopted the
resolution to enable the petitioner to take the necessary remedies in this
Court that would reverse the assailed COA Decision 2013-91. The proper
recourse for that purpose was the original special civil action under Rule 64,
in relation to Rule 65, of the Rules of Court. Such recourse is the remedy
that the petitioner has precisely resorted to herein. Accordingly, it was
unreasonable and illogical to insist that the aforequoted text of Board
Resolution No. 19 restricted the petitioner's authority to the filing of the
motion for reconsideration.

In reality, the question about the petitioner's was too much fuss over
thing, the petitioner, as the General Manager, inherently possessed the
authority to initiate the proper recourse in behalf of ACWD and in the
process to sign even without the board resolution the verification and
certification of non-forum shopping vis-a-vis the petition for certiorari
brought under Rule 64. Following our ruling in Cagayan Valley Drug
Corporation v. Commission of Internal Revenue, 13 certain officials of a
corporation or juridical entity could sign the verification and execute the
certification of non-forum shopping in behalf of the corporation or entity
despite the lack or absence of a board resolution for that purpose, namely:
(1) the chairperson of the Board of Directors; (2) the president of the
corporation; (3) the general manager or acting general manager; and (4)
in a labor case, the personnel officer or the employment specialist. The
rationale is that any of such officers is "in a position to verify the
truthfulness and correctness of the allegations in the petition." 14 At any rate,
the verification is a merely formal requirement intended only to secure the
assurance that the allegations in the pleading to be verified are true and
correct, and that the pleading is being filed in good faith. That assurance was
competently given herein by the petitioner.

III
The grant of grocery allowance and year-end
financial assistance were probably properly disallowed

The COA Proper considers the assailed NDs covering the grocery
allowances and year-end financial assistance for the years 2008 and 2009 as
justified because such benefits were deemed consolidated in the employees'
compensation due to said benefits not being part of the enumeration of
excepted benefits under Section 12 of R.A. No. 6758, viz.:

n G.R. No. 151413, February 13, 2008, 545 SCRA 10, 18.
14
Yap, Sr. v. Siao, G.R. Nos. 212493 & 212504, June I, 2016, 792 SCRA 135, 144.

'
~
Decision 8 G.R. No. 21824l ·

Section 12. Consolidation of Allowances and Compensation. - All

allowances, except for representation and transportation allowances;
clothing and laundry allowances; subsistence allowance of marine officers
and crew on board government vessels and hospital personnel; hazard pay;
allowances of foreign service personnel stationed abroad; and such other
additional compensation not otherwise specified herein as may be
determined by the DBM, shall be deemed included in the standardized
salary rates herein prescribed. Such other additional compensation,
whether in cash or in kind, being received by incumbents only as of July 1,
1989 not integrated into the standardized salary rates shall continue to be
authorized.

Existing additional compensation of any national government

official or employee paid from local funds of a local government unit shall
be absorbed into the basic salary of said official or employee and shall be
paid by the National Government.

The petitioner disagrees, submitting instead that the local water

districts (L WDs) were still outside the coverage of the COA, the Civil
Service Commission (CSC) and the Department of Budget Management
(DBM) at the time the Salary Standardization Law (SSL) was passed in
1989; and that the grant of allowances and fringe benefits, being already an
established and existing practice as far as those employed as of December
31, 1999 were concerned, should not be disallowed.

Under Section 12 of the SSL, all allowances are deemed included or

integrated into the prescribed standardized salary rates, except (a)
representation and transportation allowances; (b) clothing and laundry
allowances; (c) subsistence allowances of marine officers and crew on board
government vessels; (d) subsistence allowances of hospital personnel; (e)
hazard pay; (f) allowances of foreign service personnel stationed· abroad; and
(g) such other additional compensation not otherwise specified as
determined by the DBM. Evidently, the grocery allowance and year-end
financial assistance, by virtue of their not being expressly mentioned as
excepted, should be treated as part of the employees' standardized
compensation.

Nonetheless, in determining whether or not the disallowances were

proper, the nature and character of LWDs like ACWD at the time the SSL
was passed into law, and the succeeding developments should be taken into
consideration.

The L WDs were fonned under and in accordance with Section 6 of

Presidential Decree 198 (The Provincial Water Utilities Act of 1973).
ACWD was thus established on September 1987 by virtue of Sangguniang

'
Jl.
Decision 9 G.R. No. 218241

Panlungsod Resolution No. 66 dated September 1, 1987.15 On September 13,

1991, the Court promulgated its ruling in Davao City Water District v. Civil
Service Commission, 16 holding that the L WDs were government-owned or
government-controlled corporations with original charters. As a
consequence, the L WDs came under the jurisdiction of the COA, CSC and
DBM only in 1991.

A significant development of relevance to this adjudication was the

issuance of DBM-Corporate Compensation Circular 10 (DBM-CCC 10) to
implement the SSL. Sections 5.4, 5.5 and 5.6 of DBM-CCC 10 provided as
follows:

5.4 The following allowances/fringe benefits which were authorized to

GOCCs/GFis under the standardized Position Classification and
Compensation Plan prescribed for each of the :five (5) sectoral groupings
of GOCCs/GFis pursuant to P.D. No. 985, as amended by P.D. No. 1597,
the Compensation Standardization Law in operation prior to R.A. No.
6785, and to other related issuances are not to be integrated into the basic
salary and allowed to be continued after June 30, 1989 only to incumbents
of positions who are authorized and actually rece1vmg such
allowances/benefits as of said date, at the same terms and conditions
provided in said issuances.

5.4.1 Representation and Transportation Allowance (RATA);

5.4.2 Uniform and Clothing Allowance;
5.4.3 Hazard Pay as authorized by law;
5.4.4 Honoraria/additional compensation for employees on detail with
special projects or inter-agency undertakings;
5.4.5 Honoraria for services rendered by researchers, experts and
specialists who are of acknowledged authorities in their fields of
specialization;
5.4.6 Honoraria for lecturers and resource persons/speakers;
5.4.7 Overtime pay as authorized by law;
5.4.8 Laundry and subsistence allowance for marine officers and crew
on board GOCCs/GFis owned vessels and used in their operations, and of
hospital personnel who attend directly to patients and who by nature of
their duties are required to wear uniforms;
5.4.9 Quarters Allowance of officials and employees who are entitled to
the same;
5.4.10 Overseas, Living Quarters and other allowances presently
authorized for personnel stationed abroad;
5 .4.11 Night Differential of personnel on night duty;
5.4.12 Per Diems of members of the governing Boards of GOCCs/GFis
at the rate prescribed in their respective Charters;
5 .4.13 Flying Pay of personnel undertaking aerial :flights;
5.4.14 Per Diems/Allowances of Chairman and Members/Staff of
collegial bodies and Committees; and
5 .4.15 Per Di ems/Allowances of officials and employees on official
foreign and local travel outside of their official station.

15
http://www.angelescitywd.gov.ph/profile.php last accessed on November 6, 2018.
16
G.R. Nos. 95237-38, September 13, 1991, 201 SCRA 593,599.

'
./4
Decision 10 G.R. No. 218241'

5.5 The following allowances/fringe benefits authorized to

GOCCs/GFis pursuant to the aforementioned issuances are not likewise to
be integrated into the basic salary and allowed to be continued only for
incumbents of positions as of June 30, 1989 who are authorized and
actually receiving such allowances/benefits as of said date, at the same
terms and conditions prescribed in said issuances.

5.5.1 Rice Subsidy;

5.5.2 Sugar Subsidy;
5.5.3 Death Benefits other than those granted by the GSIS;
5.5.4 Medical/dental/optical allowances/benefits;
5.5.5 Children's allowance;
5.5.6 Special Duty Pay/Allowance;
5.5.7 Meal Subsidy;
5.5.8 Longevity Pay; and
5.5.9 Teller's Allowance.

5.6 Payment of other allowance/fringe benefits and all other forms of

compensation granted on top of basic salary, whether in cash or in kind,
not mentioned in Sub-Paragraphs 5.4 and 5.5 above shall continue be not
authorized. Payment made for such unauthorized allowances/fringe
benefits shall be considered as illegal disbursements of public funds.

As a consequence, all allowances and fringe benefits granted on top of

the basic salary that were not otherwise enumerated or mentioned under
sections 5.4 and 5.5, supra, were discontinued effective November 1, 1989.

Yet, DBM-CCC 10 could not be immediately given effect due to its

non-publication as required by law. To give it full force and effect, therefore,
DBM-CCC 10 was re-issued on February 15, 1999 and published on March
1, 1999 as called for by law. Thereafter, then DBM Secretary Emilia
Boncodin issued a letter allowing the L WDs to continue the grant of
allowances/fringe benefits that was an established and existing practice as of
the cut-off date of December 31, 1999. 17

Nonetheless, despite the LWDs being considered as GOCCs with

original charters only after the passage of the SSL, and the cut-off date for
that purpose being set on December 31, 1999 as the result of DBM-CCC 10
coming into effect only as of then, the petitioner still failed to show
ACWD's compliance with the following parameters defined in the letter of
Secretary Boncodin, to wit:

x x x the continued grant of allowances/fringe benefits after

December 31, 1999 that are outside of what has been prescribed by law
and other compensation issuances and were being enjoyed prior to the
declaration of the Supreme Court that L WDs are GOCCs, will be allowed
only if the following are met by the concerned L WDs:

17
Rollo, pp. 44-45.
...
..$
Decision 11 G.R. No. 218241
'

a. positive balance in average net income in prior 12 months

operations;
b. up-to-date debt service payment;
c. unaccounted-for-water (UFW) ratio must not exceed 40%
based on six-month operations;
d. existing benefits are included in the budgets of LWDs;
and
e. total staff to total service connection should not be less
than 1 staff for every 100 active service connections." 18

In the view of the COA Proper, therefore, the petitioner did not
discharge the burden to establish that the grant of allowances and fringe
benefits had been an established and existing practice as of the cut-off date
of December 31, 1999; and that the above-listed parameters for the
continued grant of said allowances and fringe benefits had been met. The
COA Proper further observed that while the grant of year-end financial
assistance had been an existing practice, the petitioner's mere assertion that
ACWD had already complied with the parameters set under the letter issued
by then DBM Secretary Boncodin without presenting proof to substantiate it
was really not enough; and that, moreover, although the petitioner had also
listed the following benefits to have been granted to the employees of
ACWD hired prior to 1999, namely:

• Rice Allowance (since 1993);

• Mid-Year Benefits (since 1990);
• Mid-Year Bonus (Educational Assistance) - since 1993;
• Year-End Financial Assistance - since 1993;
• Productivity/performance Incentive Bonus - since 1995;
• Anniversary Bonus - since 1995; and
• Amelioration Pay -- since 1997

the list did not include the grocery allowances as among the benefits.

Under the circumstances, the COA Proper was probably justified in

considering as insufficient the general assertion made in the board resolution
adopted in 2007 to the effect that the assailed grocery allowance had been
granted since 1999 without the petitioner supporting the assertion with any
documentary evidence.

III
The COA did not comply with its own rules
for the conduct of the special audit;
hence, the special audit became irregular and
should be declared invalid for violation of
due process of law

18
Id. at 45.

fi
Decision 12 G.R. No. 218241·
i 'l

The petitioner validly contends that the special audit became in-egular
and invalid considering that A WCD had already been audited by Regional
Director Amante A. Liberato in 2008 and by Supervising Auditor Edelmira
M. Gonzales in 2009, and such audits did not result in the issuance of any
NDs relating to the disbursement of grocery allowance and year-end
financial assistance.

Section 15 of COA Circular 2009-006 paiiicularly provides:

Section 15. Issuance of Notices by Special Audit Team. -

15.1 The following procedures shall be observed in the issuance of the
notices for transactions disallowed and charged in special audits and
settlements thereof:

15.1.1 The Special Audit Team Leader and Supervisor shall sign
the ND/NC for transactions audited.
15.1.2 The ND and NC issued shall be marked a "Special Audit
ND/NC No._, Office Order No._."
15 .1.3 The ND/NC/ issued shall be transmitted by the Cluster
Director of the Office that conducted the special audit, to the
agency head and the accountant through the Auditor of the agency
audited and the concerned Cluster/Regional Director, together with
the special audit rep01i. The Audit Team Leader shall serve the
copies of the ND/NC on the persons liable and such ND/NC shall
be included in the SASDC for the current quarter.
15 .1.4 In case of settlement of the ND/NC by the persons liable,
evaluation thereof shall be made by the Director of the Office
which conducted the special audit, who shall then advice the
auditor of the agency concerned to issue the NSSDC.

15.2 The Special Audit Team shall be authorized to reopen accounts

already post-audited and/or settled pursuant to Section 52 of PD 1445.
The Office Order directing the special audit is deemed sufficient
authority to reopen the accounts.

15.3 In case the transaction subject of the special audit has been
earlier alllowed in audit, the special audit team shall preliminarily
discuss the disallowance or charge with the Auditor concerned. If the
latter disagrees with the findings of the audit team, the written
comment shall be requested from the Auditor for evaluation of the
special audit team.

15 .4 The Auditor shall consider the significance or impact of the

disallowances and charges issued by the special audit team on the fairness
of presentation of the balance of the accounts of the agency, and
consequently on the audit opinion.

Ostensibly, the COA did not comply with its own aforequoted
guidelines on the conduct of special audits.

")
Decision 13 G.R. No. 218241
• i

The Court has observed that the comment of the COA actually skirted
the non-compliance with COA Circular 2009-006, and just harped on the
COA's jurisdiction and authority as provided in the Constitution. Thereby,
the COA not only failed to satisfactorily show that the conduct of the special
audits had been duly authorized through the relevant office orders as called
for in Section 15.1.2 of COA Circular 2009-006, but also did not justify why
the results of the special audits had not been "preliminarily" discussed with
the previous auditors pursuant to Section 15.3 of COA Circular 2009-006.
The objective for holding the preliminary discussions was to obtain the
grounds or bases for allowance by the earlier auditors, and the written
comment of the former would then be obtained for the evaluation by the
special audit team in view of the conflict between the respective findings of
the auditors. Such requirements for the office orders and for the preliminary
discussions were intended to prevent arbitrariness on the part of the special
auditors.

Therein lay the fundamental basis for invalidating and rendering

ineffectual the results of the special audits. Such non-observance of the
guidelines was significant and could not be lightly brushed aside. The
special audits entailed the re-opening and re-examining of transactions
already allowed and passed in audit. Still conducting the special audits
without observance of the basic guidelines installed obviously to ensure the
fairness and reasonableness of the special audits could very well be arbitrary
and oppressive against the auditee. Thereby, ACWD's right to due process
of law was flagrantly infringed.

The guaranty of due process of law, which is guaranteed in Section 1,

Article III of the Constitution, viz.:

Section 1. No person shall be deprived of life, liberty or property

without due process of law, nor shall any person be denied the equal
protection of the laws.

is truly a constitutional safeguard against any arbitrariness on the part of the

Government, and serves as a protection essential to every inhabitant of the
country. 19 As Justice Cruz, a respected commentator on Constitutional Law,
has vividly written: 20

xx x. If the law itself unreasonably deprives a person of his life, liberty, or

property, he is denied the protection of due process. If the enjoyment of
his rights is conditioned on an unreasonable requirement, due process is
likewise violated. Whatsoever be the source of such rights, be it the
Constitution itself or merely a statute, its unjustified withholding would
also be a violation of due process. Any government act that militates

19 Legaspi v. City of Cebu, G.R. Nos. 159110 and 159692, December 10, 2013, 711 SCRA 771, 789.
°
2
Cruz, Constitutional Law, 2007 Ed., pp. I 00-10 I.
.
~
Decision 14 G.R. No. 218241'
•

against the ordinary norms of justice or fair play is considered an

infraction of the great guaranty of due process; and this is true whether the
denial involves violation merely of the procedure prescribed by the law or
affects the very validity of the law itself.

Accordingly, the special audits and their results should be declared

invalid and ineffectual as to ACWD and the petitioner.

WHEREFORE, the Court GRANTS the pet1t1on for certiorari;

ANNULS and SETS ASIDE Decision No. 2015-046 dated February 23,
2015 issued by the Commission on Audit; and DECLARES the special
audit conducted by Audit Team Leader Rowena R. Bucu INVALID and
INEFFECTUAL.

No pronouncement on costs of suit.

SO ORDERED.

WE CONCUR:

Associate Justice

Mt7.. /._u.J./'
ESTELA l\f PERLAS-BERNABE
Associate Justice

Associate Justice
Decision 15 G.R. No. 218241

u.
ANDRE
{J
REYES, JR.
Assoc te Justice

(On Leave)
JOSE C. REYES, JR.
~v-k-·
RAMOPUtL.HERNANDO
Associate Justice Associate Justice

AMIlfl;~O-JAVIER
Associate Justice

LB. INTING

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, it is hereby

certified that the conclusions in the above Decision were reached in
consultation before the case was assigned to the writer of the opinion of the
Court.

CFR.Tffff.D TlHIF COPY

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