LAW ON PUBLIC OFFICERS

TOPIC BENEFITS AND ALLOWANCES; PUBLIC PURPOSE TEST

CASE TITLE RAMON R. YAP, Petitioner, v. COMMISION ON AUDIT, G.R. NO.
Respondent 158562

PONENTE LEONARDO-DE CASTRO, J.: DATE April 23, 2010

DOCTRINE PUBLIC PURPOSE in relation to disbursement of public funds

- traditional sense: any purpose or use directly available to the general public as a matter of right;
an activity as will serve as benefit to [the] community as a body and which at the same time is
directly related function of government."
- However, such was discarded.
- The SC ruled that "public purpose" is not defined: it is an elastic concept that can be hammered to
fit modern standards.
- broad interpretation; it does not only pertain to those purposes that are traditionally viewed as
essentially government functions (e.g. building roads and delivery of basic services), but also
includes those purposes designed to promote social justice (e.g. relocation of illegal settlers, low-
cost housing and urban or agrarian reform)
- In short, public use is now equated with public interest and that it is not unconstitutional merely
because it incidentally benefits a limited number of persons.

PUBLIC PURPOSE TEST

THUS, the disbursement of salaries and benefits should be granted to compensate them for valuable
public services rendered, and the salaries or benefits paid to such officers or employees must be
commensurate with services rendered and necessary or relevant to the fulfillment of the official duties
and functions of the government officers and employees.

The public purpose requirement for the disbursement of public funds is a valid limitation on the types of
allowances and benefits that may be granted to public officers.

Burden of proof: Incumbent upon petitioner to show that his allowances and benefits were authorized by
law and that there was a direct and substantial relationship between the performance of his public
functions and the grant of the disputed allowances to him.
FACTS Yap is the Department Manager (regular) of the National Development Company (NDC) (GOCC with original
charter), and simultaneously, was appointed by the Board of Directors, Manila Gas Corporation (MGC), a
subsidiary of NDC, as VP for Finance. The additional employment entitled him to honoraria (50% basic salary
at NDC) and various allowances attached to the office.

However, the Corporate Auditor of MGC issued the notices of disallowances against Yap for his car
maintenance and gasoline allowances, executive check-ups, monthly allowances, annual fees of VISA cards,
and subscription to magazines, in contravention with Section 7 (2) and Section 8, Article IX-B of the
Constitution.1 Petitioner appealed to the CAO II, but was denied. The said disallowances was upheld by the

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"Section 7. x x x Unless otherwise allowed by law or by the primary functions of his position, no appointive official shall hold any other office or
employment in the Government or any subdivision, agency or instrumentality thereof, including government-owned or controlled corporations or
their subsidiaries."

"Section 8. x x x No elective or appointive public officer or employee shall receive additional, double or indirect compensation, unless specifically
authorized by law, x x x"

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 COA, which also ruled that the said allowances and reimbursements claimed by petitioner "failed to pass
the test of 'public purpose requirement' of the law" and that "it is not enough that payments made to Yap
be authorized by the Board of Directors of the MGC but it is likewise necessary that said payments do not
contravene the principles provided for under Section 4 of PD 1445 (Government funds or property shall be
spent or used solely for public purposes) on the use of government funds. Hence, this petition.

Petitioner argues that the public purpose test is wrong since the said salaries, allowances and benefits are
intended to compensate MGC employees for services, and that if it be applied in the audit of these salaries
and allowances, no such compensation could ever pass audit. Further, he argues that such benefits and
allowances are normally given to officers of corporations, whether private or GOCC.
ISSUE/S (1) Is the public purpose requirement applicable in disallowing the allowances and benefits of herein
petitioner?
(2) Does the mere payment of salaries and benefits to a public officer, which are intended purely for
the personal benefit of such officers, satisfies the public purpose requirement?
(3) Assuming that the answer in I1 is in the affirmative, must the rest of the allowances, such as the
basic monthly allowances, executive check-up and the gasoline allowances not be disallowed, as
they are normally given to officers of corporations?
RULING/S (1) YES. Any disbursement of public funds, which includes payment of salaries and benefits to
government employees and officials, must (a) be authorized by law, and (b) serve a public purpose
pursuant Sec. 4 of PD 1445 (law on disbursement of public funds).
In view of the public purpose requirement, the disbursement of public funds, salaries and benefits
of government officers and employees should be granted to compensate them for valuable public
services rendered, and the salaries or benefits paid to such officers or employees must be
commensurate with services rendered. In the same vein, additional allowances and benefits must
be shown to be necessary or relevant to the fulfillment of the official duties and functions of the
government officers and employees.
(2) NO. In view of the foregoing, affirming the said question would lead to the anomalous conclusion
that government officers and employees may be paid enormous sums without limit or without any
justification necessary other than that such sums are being paid to someone employed by the
government. Public funds are the property of the people and must be used prudently at all times
with a view to prevent dissipation and waste.
(3) NO.

First, respondent COA is in the best position to determine which allowances and benefits may be
properly allowed under the circumstances, as it is the sole constitutional body mandated to
examine, audit and settle all accounts pertaining to the revenue and receipts of, and expenditures
or uses of funds and property owned or held in trust by, or pertaining to, the government, including
government-owned or controlled corporations such as the MGC and the NDC in the case at bar.
Even if we assume the truth of the petitioner's assertion, this fact alone does not operate to
preclude respondent COA from performing its constitutional mandate.

Second, the funds of GOCCs are still public funds and that is precisely the reason such funds are
subject to audit by the COA. Thus, there is a valid distinction between the officers of public
corporations and those of private corporations.

Third, it was incumbent upon the petitioner to show that his allowances and benefits were
authorized by law and that there was a direct and substantial relationship between the
performance of his public functions and the grant of the disputed allowances to him. Petitioner
failed to prove the same.

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While subscriptions to newspapers and magazines by government offices may be justified,
petitioner's personal subscriptions to the same and the cc annual fee cannot ipso facto be
considered as part of his remunerations. Likewise, there is no evidence that "fellowship" expenses
are necessary and related to petitioner's work as VP for Finance of the MGC. Medical expenses (i.e.
executive check-up) may be justified if specifically authorized by the appropriate laws, rules or
circularsm as well as car maintenance, and gasoline allowances. However, the petitioner failed to
point to the existence of such law or regulation applicable to his case. It also appears that petitioner
already receives medical benefits, gasoline and/or transportation allowance from the NDC; and
that the vehicle involved was his personal vehicle.

Fourth, in order to demonstrate the legality of the grant of his benefits, the disputed allowances
and benefits must not only be proven to have been approved by the board of directors of the MGC,
but that such board action should in itself be authorized by law or regulation or have valid legal
basis. Otherwise, it becomes an illegal corporate act that is void and cannot be validated. In this
case, the MGC board action that permitted the disallowed disbursements was not shown to have
complied with the GAA, which prohibits paying of honoraria, allowances, or other forms of
compensation to any government official not authorized by law.

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