DECISION NO.

2022-269
January 24, 2022

Subject: Appeal Memorandum, treated as a Petition for Review of Ms. Ma. Gladys Cruz-Sta. Rita,
Ms. Lorna T. Dy, Mr. Alexander P. Japon, Ms. Monica R. Legaspi, Ms. Marina Del Rosario
and Ms. Marciana B. Guinto, all of the National Power Corporation, of Commission on
Audit Corporate Government Sector-Cluster 3 Decision No. 2016-26 dated June 27, 2016,
which affirmed Notice of Disallowance No. NPC 15-008 (14) dated July 21, 2015, on the
payment of premium for the Group Hospitalization and Life Insurance Plan of its
employees to the Power Generation Employees Association for the period of April 1, 2014
to March 31, 2015, in the total amount of P34,047,188.03

DECISION

FACTS OF THE CASE

Before this Commission is the Appeal Memorandum,1 treated as a Petition for Review, of Ms. Ma. Gladys Cruz-Sta. Rita,
Ms. Lorna T. Dy, Mr. Alexander P. Japon, Ms. Monica R. Legaspi, Ms. Marina Del Rosario and Ms. Marciana B. Guinto, all of the
National Power Corporation (NPC), of Commission on Audit (COA) Corporate Government Sector (CGS)-Cluster 3 Decision No.
2016-26 dated June 27, 2016. The decision affirmed Notice of Disallowance (ND) No. NPC 15-008 (14) dated July 21, 2015, on
the payment of premiums for the Group Hospitalization and Life Insurance Pl a n (GHLIP) of its employees to the Power
Generation Employees Association (PGEA), for the period of April 1, 2014 to March 31, 2015, in the total amount of
P34,047,188.03.

The following is the summary of jurisdictional facts to determine the timeliness of the filing of the petition for review:

Date the ND was received July 23, 2015 2

Date appeal was filed before the Cluster October 14, 2015 3
Director (CD), CGS-Cluster 3
Days elapsed 82
Date the CD decision was received July 4, 2016 4
Date the petition for review was filed October 4, 2016 5
Days elapsed 92
Total days elapsed 174

As shown, Ms. Sta Rita et al. filed the petition within the reglementary period of six months or 180 days, as prescribed
under Section 48 6 of Presidential Decree No. 1445 and Section 3 7 of Rule VII of the 2009 Revised Rules of Procedure of COA.

For the period of April 1, 2014 to March 31, 2015, NPC paid the premiums for the GHLIP of its employees to the PGEA, in
the total amount of P34,047,188.03. On post audit, the Audit Team Leader (ATL) and the Supervising Auditor (SA) disallowed the
payment and issued the corresponding ND No. NPC 15-008 (14),8 for violation of Section 28(b)9 of Commonwealth Act No. 186
a s amended by Republic Act (RA) No. 4968, COA Resolution No. 2005-001 dated February 3, 2005 10 and Section 7.1.2 of
Department of Budget and Management (DBM) Budget Circular (BC) No. 2013-4 dated November 25, 2013.11

The following persons were determined liable for the transaction:

Nature of
Name Position/Designation Participation in the
Transaction
Ma. Gladys Cruz- President and Chief Approved the
Sta. Rita Executive Officer transaction
Lorna T. Dy Vice-President Approved the
Administration and Disbursement Vouchers
Finance
Alexander P. Japon Senior Department
Manager
Monica R. Legaspi Manager
Certified the availability
Disbursement
of funds
Accounts Monitoring
Division
Marina Del Rosario Section Chief
Marciana B. Guinto Manager Human Certified that expenses
Resource Department w e re necessary, lawful
and authorized under
her direct supervision
PGEA-NPC NPC Employees Received check
Association payments
Various Employees Various Beneficiary of insurance
coverage

In their Appeal Memorandum dated October 14, 2015, petitioners argued that:
 1) The payment of premiums for GHLIP is not a Collective Negotiations Agreement (CNA) Incentive. The GHLIP
was given by virtue of Labor Management Consultative Committee (LMCC) Resolution No. 2014-001,
authorizing the utilization of the savings for the Maintenance and Other Operating Expenses for calendar year
2013;

2) The payment of premiums for the GHLIP was a program for the improvement of working conditions of NPC
employees. The 1987 Constitution recognizes the enforceable rights of the labor sector to demand protection,
and to promote in particular, the right and welfare of workers, including the right to suitable working
conditions and healthy balance between work and physical fitness; and

3) The employees should not be made to refund the amount of premium paid by NPC for the GHLIP of the
employees as both the grantor and the grantees acted in good faith.

In COA CGS-Cluster 3 Decision No. 2016-26, the CD denied the appeal and affirmed the ND. Th e C D reiterated COA
Resolution No. 2005-001 that prohibits the procurement of private health insurance by any agency or instrumentality of the
government; the transaction was deemed an irregular expenditure and unnecessary use of public funds.

Hence, the herein petition for review which raises the same grounds as those in the appeal.

ISSUE

The issue to be resolved is whether the petition for review is meritorious.

DISCUSSION

This Commission finds the petition for review devoid of merit.

The payment of GHLIP premiums for the PGEA members is an illegal expenditure for violation of Section 12 of RA No.
6758 which provides that:

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.

The above provision of the law is clear that all allowances and compensation of government personnel, with some
enumerated exceptions, are consolidated into the standardized salary of the employees. The procurement of GHLIP for the benefit
of the PGEA-NPC members provides an additional compensation to employees that is not included in the exception from the
general rule of integration. The authority to receive additional compensation, not integrated into the standardized salary rates,
pertains only to those being received by incumbents as of July 1, 1989 and not to those hired afterwards.

In this case, there is no showing that the employees who received the GHLIP were incumbents and have been receiving the
disallowed GHLIP as of July 1, 1989. Thus, the GHLIP is properly disallowed.

The National Health Insurance Program (NHIP) was created under Section 5, article III of RA No. 7875 12 to provide health
insurance coverage and ensure affordable, acceptable, available and accessible health c a r e services for all citizens of the
Philippines. Considering that the health insurance plan is already provided by the NHIP, no additional insurance shall be procured
by the NPC for its employees, be it a group hospitalization or a life insurance to be paid by the agency. Petitioners claim that the
GHLIP is not a CNA incentive and i s sanctioned by LMCC Resolution No. 2014-001 dated March 21, 2014. This Commission
finds the claim misplaced. Whether it is through a CNA or through an LMCC resolution, the fact remains that the GHLIP premium
is proscribed to be given because it is an allowance already integrated into the basic salary and violates COA Resolution No.
2005-001, which categorically prohibits government agencies from securing health care insurance from private insurance
companies since it partakes of the nature of an additional allowance and compensation which requires prior approval from the
President.

The disallowance of the payment of GHLIP premiums is not a new issue. This Commission has affirmed the NDs
disallowing similar benefit under COA Decision No. 2016-385 dated November 21, 2016, which ruled that GHLIP is a medical
allowance or benefit falling under sub-paragraph 5.5.4 13 of DBM Corporate Compensation Circular (CCC) No. 10 dated February
15, 1999.

Th e prohibition was also affirmed in COA Decision No. 2012-251 dated December 20, 2012, on the propriety of
procurement of health care maintenance insurance from the private agencies, as herein quoted:

This Commission is not unaware that government agencies procure health insurance from private health
insurance providers; thus, it issued COA Resolution No. 2005-001 dated February 3, 2005. It rationalizes
therein that procurement thereof is a disbursement of public funds for a purpose similar to that
appropriated for PHIC premiums and is viewed as an additional allowance and compensation, which is
contrary to the SSL.

Lastly, under COA Circular No. 2012-003 dated October 29, 2012, premium payments for the health insurance of the
officials and employees of government-owned and controlled corporations without prior authority from the Office of the
President is considered an irregular expenditure. In this case, there is no proof to show that NPC obtained the said authority.

As to the officers who approved and certified the payment of the disallowed benefit/s or allowance/s, jurisprudence holds
that, absent any showing of bad faith and malice, there is a presumption of regularity in the performance of official duties.
However, this presumption must fail in the presence of an explicit rule that was violated. This is consistent with the pertinent
provisions of the Administrative Code of 1987, to wit:
 Chapter 9, Subtitle B, Book V

Section 52. General Liability for Unlawful Expenditures. – Expenditures of government funds or uses of
government property in violation of law or regulations shall be a personal liability of the official or
employee found to be directly responsible therefor. (Emphasis and underscoring supplied)

Chapter 5, Book VI

Section 43. Liability for Illegal Expenditures. – Every expenditure or obligation authorized or incurred
in violation of the provisions of this Code or of the general and special provisions contained in the
annual General or other Appropriations Act shall be void. Every payment made in violation of said
provisions shall be illegal and every official or employee authorizing or making such payment shall be
jointly and severally liable to the Government for the full amount so paid or received. (Emphasis and
underscoring supplied)

I n Casal vs COA,14 th e Supreme Court (SC) had the opportunity to elaborate the liability of the approving officers for
disregarding Presidential issuance and directives of the COA, thus:

The failure of these petitioners-approving officers to observe all these issuances cannot be deemed a
mere lapse consistent with the presumption of good faith. Rather, even if the grant of incentive award
were not for the dishonest purpose as they claimed, the patent disregard of the issuances of the President
and the directives of COA amounts to gross negligence, making them liable for the refund thereof.
(Emphasis supplied and underscoring in the original)

As regards the recipient-beneficiaries, they are required to refund the amounts they have been benefited applying the
principles of unjust enrichment and solutio indebiti under Articles 22 and 2154 of the Civil Code of the Philippines.

Article 22. Every person who through an act or performance by another, or any other means, acquires or
comes into possession of something at the expense of the latter without just or legal ground, shall return
the same to him.

Article 2154. If something is received when there is no right to demand it, and it was unduly delivered
through mistake, the obligation to return it arises.

The provision on unjust enrichment was made as basis by the SC in requiring the recipients to return the amount disallowed
in the case of Chozas vs. COA.15 The SC held that the natural consequence of finding that the allowances and benefits were
illegally disbursed, is the consequent obligation on the part of all recipient-beneficiaries to restore said amounts to the
government coffers. In Madera vs. COA,16 the SC clarified that the principles of unjust enrichment and solutio indebiti apply
regardless of the good faith of passive recipients, thus:

In the ultimate analysis, the Court, xxx has returned to the basic premise that the responsibility to return
is a civil obligation to which fundamental civil law principles, such as unjust enrichment and solutio
indebiti apply regardless of the good faith of passive recipients. This, as well, is the foundation of the
rules of return that the Court now promulgates. (Underscoring supplied, emphasis with underscoring
in the original)

Clearly, the approving and certifying officers, are solidarily liable to refund the amount disallowed; while the recipient-
beneficiaries are liable only to the extent of the amount that they have been benefited.

The members of the NPC Board responsible for issuing Board Resolution No. 2013-25 series of 2013 17 should also be held
solidarily liable for the full amount disallowed.

The ATL and the SA shall verify the participation of the NPC Board in issuing Board Resolution No. 2013-25 series of
2013, and the Chairperson and members of the Labor Management Consultative Committee (LMCC) who issued LMCC
Resolution No. 2014-001 18 dated March 21, 2014 authorizing the PGEA to enter into a Contract with Insular Life Assurance
Company, and issue the Supplemental ND, if warranted.

RULING

WHEREFORE, the Petition for Review of Ms. Gladys Cruz-Sta. Rita, Ms. Lorna T. Dy, Mr. Alexander P. Japon, Ms.
Monica R. Legaspi, Ms. Marina Del Rosario and Ms. Marciana B. Guinto, all of the National Power Corporation (NPC), of
Commission on Audit Corporate Government Sector-Cluster 3 Decision No. 2016-26 dated June 27, 2016, is hereby DENIED.
Accordingly, Notice of Disallowance No. NPC 15-008 (14) dated July 24, 2015, on the payment of premiums for the Group
Hospitalization and Life Insurance Plan (GHLIP) of the National Power Corporation employees to the Po we r Generation
Employees Association, for the period April 1, 2014 to March 31, 2015, in the amount of P34,047,188.03, is AFFIRMED.

The Audit Team Leader and the Supervising Auditor are directed to verify the participation of the members of the Board of
NPC who issued Resolution No. 2013-25 series of 2013 on the payment of GHLIP; and the Chairperson and members of the Labor
Management Consultative Committee (LMCC) who issued LMCC Resolution No. 2014-001 dated March 21, 2014 authorizing the
Power Generation Employees Association to enter into a Contract with Insular Life Assurance Company, and issue a Supplemental
ND, if warranted.

(SGD.) MICHAEL G. AGUINALDO

Chairperson
 (SGD.) ROLAND C. PONDOC
Commissioner

Attested by:

(SGD.) BRESILO R. SABALDAN

Director IV
Commission Secretary

Copy furnished:

Atty. Melchor P. Ridulme

Atty. Delfin L. Buenafe II
Atty. Rodolfo M. De Guzman, Jr.
Counsels for the Petitioners
National Power Corporation
BIR Road corner Quezon Avenue
Diliman, Quezon City

The Audit Team Leader

The Supervising Auditor
National Power Corporation
BIR Road corner Quezon Avenue
Diliman, Quezon City

The Directors
Cluster 3, Corporate Government Sector
Information Technology Office, Administration Sector

The Assistant Commissioners

Corporate Government Sector
Commission Proper Adjudication Sector

All of this Commission

RLU/JAT/RCL/RMF/NRP
CPCN 2016-930

1 Pursuant to Section 2, Rule VII, 2009 Revised Rules of Procedure of the Commission on Audit.
2 Stamp receipt, rollo, p. 32.
3 Stamp receipt, rollo, pp. 91-101.
4 Stamp receipt, rollo, p. 269 and Memo dated July 4, 2016 of the Supervising Auditor to the President and Chief Executive Officer, National Power Corporation, rollo,
p.270.
5 Stamp receipt by the Office of the Commission Secretariat, rollo, pp. 40-50.
6 Any person aggrieved by the decision of an auditor of any government agency in the settlement of an account or claim may within six months from receipt of a copy of
the decision appeal in writing to the Commission.
7 The appeal shall be taken within the time remaining of the six (6) months period under Section 4, Rule V, taking i nto account the suspension of the running thereof
under Section 5 of the same Rule in case of appeals from the Director’s decision, or under Sections 9 and 10 of Rule VI in case of decision of the ASB.
8 Rollo, pp. 184-186.
9 Hereafter no insurance or retirement plan for officers or employees shall be created by any employer. All supplementary retirement or pension plans heretofore in force in
any government office, agency, or instrumentality or corporation owned or controlled by the government, are hereby declared inoperative or abolished: Provided, that
the rights of those who are already eligible to retire thereunder shall not be affected.
10 Prohibition from Securing Health Care Insurance from Private Insurance Agencies.
11 Guidelines on the Grant of Collective Negotiation Agreement (CNA) Incentive for 2013.
12 An Act Instituting a National Health Insurance Program for all Filipinos and Establishing the Philippine Health Insurance Corporation for the Purpose.
13 The following allowances/fringe benefit authorized to GOCC/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 said allowances/benefits as of said date at
the same terms and conditions prescribed in said issuances.
xxx
5.5.4 Medical/dental/optical allowances/benefits; x x x.
14 G.R. No. 149633, November 30, 2006.
15 G.R. Nos. 226319 and 235031, October 8, 2019.
16 G.R. No. 244128, September 8, 2020.
17 Rollo, pp. 74-77.
18 Rollo, pp. 174-175.