G.R. No.

127515 May 10, 2005

RODOLFO DE JESUS, EDELWINA DG. PARUNGAO and REBECCA A. BARBO, petitioners,


 vs.
 COMMISSION ON AUDIT, respondent.

G.R. No. 127544 May 10, 2005

ANTONIO R. DE VERA, in his capacity as Administrator, Local Water Utilities

Administration, in his behalf and of other LWUA Officials and employees, petitioners,

 vs.
 COMMISSION ON AUDIT, respondent.

Facts:

Petitioners were incumbent officers of Local Water Utilities Admin, a GOCC created by
PD 198. The petitioners were receiving rice subsidy for every 2 months in pursuant to board
resolution no. 5.

Not for digest: President Aquino then issued memorandum order 177 which directed the
payment of a "transition allowance" to incumbents of positions in corporate entities receiving
additional fringe benefits for a period of at least twelve (12) months prior to its effectivity. On july
1, 1989, congress passed RA 6798 also known as Salary Standardization Law. Pursuant to such,
the DBM issued Corporate Compensation Circular No. 10 (DBM-CCC No. 10). Paragraph 5.5.1 of
DBM-CCC No. 10 included a rice subsidy as among the allowances/fringe benefits not likewise
integrated into the basic salary and allowed to be continued only for incumbents as of June 30,
1989 but subject to the condition that the grant of the same is with appropriate authorization
either from the DBM, Office of the President or legislative issuances.

The LWUA Corporate Auditor, however, disallowed a series of payrolls intended for the rice
allowances for the years 1991 to 1994, citing Section 12 of R.A. No. 6758 and its implementing
rule, paragraph 5.5 of DBM-CCC No. 10, and the provisions of M.O. No. 177 and DBM-CBC No.
15.

Consequently, petitioner De Vera a letter-appeal to respondent COA for reconsideration of the

disallowance of the rice subsidies for 1991 to 1992 in the total amount of P2,059,700.00. De Vera
argued that the disallowance of the rice subsidies was without legal basis considering that DBM-
CCC No. 10, upon which the disallowance was based, was never published in the Official
Gazette. De Vera also invoked the due process and equal protection clauses and the principle of
non-diminution of salary and compensation to further his appeal.

Thereafter, COA denied the appeal on the ground that until DBM-CCC No. 10 was nullified by the
proper court, respondent COA must faithfully observe and carry out its mandate. Respondent
COA also sustained the disallowance of the grant of the rice allowance to LWUA officials and
employees for non-submission by LWUA of the list of allowances being received by its employees
as required by M.O. No. 177 and DBM-CBC No. 15.

Issue:
WON RESPONDENT COA COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO
LACK OF JURISDICTION IN UPHOLDING THE DISALLOWANCE OF THE RICE ALLOWANCE
OF LWUA OFFICIALS AND EMPLOYEES.
Held:

YES.

The Court altogether struck down DBM-CCC No. 10 as ineffective in the absence of the requisite
publication in the Official Gazette or newspaper of general circulation.

In Philippine Ports Authority v. Commission on Audit,14 the Court emphasized the intention of the
legislature to protect incumbents receiving allowances over and above those authorized by R.A.
No. 6758 so that they may continue to receive them even after the passage of R.A. No. 6758.
Thus, the Court declared petitioners therein to be entitled under the second sentence of Section
12 of R.A. No. 6758 to receive higher rates of representation and transportation allowance
provided by Letter of Instruction No. 97:

Moreover, the second sentence of Section 12, R.A. No. 6758 does not qualify as to the source of
the benefit. It is enough that the benefit has been existing prior to the effectivity of R.A. No. 6758
and that it has not been included in the standardized salary rates. The continuous grant, however,
is limited to incumbents only to gear the compensation policy toward standardization without
upsetting the principle of non-diminution of pay.

On the premise that LWUA had allegedly failed to submit to the DBM a complete list of all the
allowances and fringe benefits granted to LWUA officials and employees as required under
paragraph 5.2 of DBM-CBC No. 15, the SC ruled that “Section 2 of M.O. No. 177 expressly
directs the continuous grant of allowances, including those which were authorized solely by the
governing boards, without qualification. Said provision is an explicit authorization for the giving of
certain allowances or benefits on top of the standardized salary rates to the end that there would
be no undue diminution of pay

Finally, this Court does not see the relevance to respondent COA’s cause of the pronouncement
in Baybay Water District v. Commission on Audit20 to the effect that R.A. No. 6758 applies to
positions in government-owned or controlled corporations. Its contention that the LWUA must
"comply with the required prior authority (from the DBM, the Office of the President, or a
legislative issuance) for the separate grant of a rice subsidy since LWUA is covered by R.A. No.
6758 does not find support in the aforementioned case. As explained before, under Section 12 of
R.A. No. 6758, the only requirements for the continuous grant of allowances and fringe benefits
on top of the standardized salary rates are as follows: (1) the employee must be an incumbent as
of July 1, 1989; and (2) the allowance or benefit was not consolidated in the standardized salary
rate as prescribed by R.A. No. 6758.