RODOLFO S. DE JESUS, EDELWINA DG. PARUNGAO, HERMILO S. BALUCAN, AVELINO C.

CASTILLO,
DANILO B. DE LEON (Interim Board of Directors, Catbalogan Water District), and ALICE MARIE
C. OSORIO (Board Secretary), petitioners,
vs. 
COMMISSION ON AUDIT, respondent.
FACTS:

An auditing team from the COA Regional Office No. VIII in Candahug, Palo, Leyte, audited the accounts of
the Catbalogan Water District (CWD) in Catbalogan, Samar. The auditing team discovered that between May
to December 1997 and April to June 1998, members of CWDs interim Board of Directors (Board) granted
themselves the following benefits:
a. Representation and Transportation Allowance (RATA),
b. Rice Allowance,
c. Productivity Incentive Bonus,
d. Anniversary Bonus,
e. Year-End Bonus and cash gifts.
These allowances and bonuses were authorized under Resolution No. 313, series of 1995, of the Local Water
Utilities Administration (LWUA).
During the audit, the COA audit team issued two notices of disallowance dated 1 October 1998 disallowing
payment of the allowances and bonuses received by petitioners, namely: Rodolfo S. De Jesus, Edelwina DG.
Parungao, Hermilo S. Balucan, Avelino C. Castillo and Danilo B. De Leon as members of the CWD Board as
well as Alice Marie C. Osorio as the Boards secretary (collectively petitioners). The audit team disallowed the
allowances and bonuses on the ground that they run counter to Section 13 of Presidential Decree No. 198 (PD
198).

ISSUES:

Petitioners contend that the COA committed grave abuse of discretion amounting to lack or excess of
jurisdiction in -
1. Motu proprio exercising jurisdiction to declare LWUA Board Resolution No. 313, Series of 1995, as
amended, not in conformity with Section 13 of PD 198, as amended;
2. Ruling that Section 13 of PD 198, as amended, prohibits payment to petitioners of RATA,
extraordinary and miscellaneous expenses (EME), and other allowances and bonuses;
3. Demanding the refund of the disallowed allowances and bonuses received by petitioners as interim
members and secretary of the CWD Board.

RULING OF THE STATE

ON THE FIRST ISSUE

The Constitution and existing laws [5] mandate the COA to audit all government agencies, including
government-owned and controlled corporations with original charters. Indeed, the Constitution specifically
vests in the COA the authority to determine whether government entities comply with laws and regulations in
disbursing government funds, and to disallow illegal or irregular disbursements of government funds. [6] This
independent constitutional body is tasked to be vigilant and conscientious in safeguarding the proper use of the
governments, and ultimately, the people’s property.[7]
 The Court already ruled in several cases[8] that a water district is a government-owned and controlled
corporation with a special charter since it is created pursuant to a special law, PD 198. The COA has the
authority to investigate whether directors, officials or employees of government-owned and controlled
corporations, receiving additional allowances and bonuses, are entitled to such benefits under applicable laws.
Thus, water districts are subject to the jurisdiction of the COA.[9]

ON THE SECOND ISSUE

Section 13 of PD 198, as amended, reads as follows:

Compensation. - Each director shall receive a per diem, to be determined by the board, for each meeting of the board
actually attended by him, but no director shall receive per diems in any given month in excess of the equivalent of the
total per diems of four meetings in any given month. No director shall receive other compensation for services to the
district.

Any per diem in excess of P50 shall be subject to approval of the Administration. (Emphasis supplied)

This issue was already resolved in the similar case of Baybay Water District v. Commission on Audit.
[16]
 In Baybay Water District, the members of the board of Baybay Water District also questioned the
disallowance by the COA of payment of RATA, rice allowance and excessive per diems. The Court ruled that
PD 198 governs the compensation of members of the board of water districts. Thus, members of the board of
water districts cannot receive allowances and benefits more than those allowed by PD 198. Construing Section
13 of PD 198, the Court declared:

xxx Under S 13 of this Decree, per diem is precisely intended to be the compensation of members of board of directors of
water districts. Indeed, words and phrases in a statute must be given their natural, ordinary, and commonly-accepted
meaning, due regard being given to the context in which the words and phrases are used. By specifying the compensation
which a director is entitled to receive and by limiting the amount he/she is allowed to receive in a month, and, in the same
paragraph, providing No director shall receive other compensation than the amount provided for per diems, the law quite
clearly indicates that directors of water districts are authorized to receive only the per diem authorized by law and no
other compensation or allowance in whatever form.

ON THE THIRD ISSUE

The CWD Board appointed petitioners pursuant to PD 198. Petitioners received allowances and bonuses
other than those granted to their office by PD 198. Petitioners cannot claim any compensation other than the
per diem provided by PD 198 precisely because no other compensation is attached to their office.

Considering, however, that all the parties here acted in good faith, we cannot countenance the refund of subject
incentive benefits for the year 1992, which amounts the petitioners have already received. Indeed, no indicia of bad faith
can be detected under the attendant facts and circumstances. The officials and chiefs of offices concerned disbursed such
incentive benefits in the honest belief that the amounts given were due to the recipients and the latter accepted the same
with gratitude, confident that they richly deserve such benefits.

Petitioners here received the additional allowances and bonuses in good faith under the honest belief that
LWUA Board Resolution No. 313 authorized such payment. At the time petitioners received the additional
allowances and bonuses, the Court had not yet decided Baybay Water District.[21] Petitioners had no
knowledge that such payment was without legal basis. Thus, being in good faith, petitioners need not refund
the allowances and bonuses they received but disallowed by the COA.