Bases Conversion and Development Authority v Commission of Audit

GR 178160 February 26, 2009

TOPIC: State Immunity: Estoppel, SC not estopped from correcting mistake of public official regardless of how long
it has been practiced.

SUMMARY:
BCDA petitions CA ruling disallowing YEB to Board and Consultants and asking them to pay said amount back to
government.

NATURE:

 On 13 March 1992, Congress approved Republic Act (RA) No. 72273 creating the Bases Conversion and
Development Authority (BCDA). Section 9 of RA No. 7227 states that the BCDA Board of Directors (Board)
shall exercise the powers and functions of the BCDA...(including)...adoption of a compensation and
benefit scheme at least equivalent to that of the Bangko Sentral ng Pilipinas (BSP). Accordingly, the
Board...adopted a compensation and benefit scheme for its officials and employees.

 On 20 December 1996, the Board adopted a new compensation...scheme which included a P10,000 year-
end benefit (approved by President Ramos)...In 1999, the BSP gave a P30,000 year-end benefit to its
officials and employees. In 2000, the BSP increased the year-end benefit from P30,000 to
P35,000...Pursuant to Section 10 of RA No. 7227 which states that the compensation and benefit scheme
of the BCDA shall be at least equivalent to that of the BSP, the Board increased the year-end benefit of
BCDA officials and employees from P10,000 to P30,000.

 On 20 February 2003, State Auditor IV Corazon V. Españo of the COA issued Audit Observation
Memorandum (AOM) No. 2003-0047 stating that the grant of year-end benefit to Board members was
contrary to DBM Circular Letter No. 2002-2 dated 2 January 2002 (disallowing YEB to Board
Members/consultants).

 In a letter dated 20 February 2004, BCDA President and Chief Executive Officer Rufo Colayco requested
the reconsideration of Decision No. 2004-013. In a Resolution dated 22 June 2004, Director Tablang
denied the request. The BCDA filed a notice of appeal dated 8 September 2004 and an appeal
memorandum dated 23 December 2004 with the COA.

 COA RULING:
Affirmed disallowance of YEB. Presumption of good faith does not apply because DBM issued clarificatory
memo and Board still proceeded to grant YEB after.

ISSUE:
1. Whether board members and consultants of BCDA entitled to YEB
2. Whether denial of YEB for Board and consultants by CA is against Article III section 1 of Constitution (RA 7227)
3. Whether SC is estopped from correcting the decision of Pres. Ramos who approved of the YEB that has been
received by the Board and Consultants since 1997

HELD:
1. No. Board Members and consultants are not entitled to YEB as per DBM circulars:

 DBM Circular Letter No. 2002-2 states that, "Members of the Board of Directors of agencies are not
salaried officials of the government. As non-salaried officials they are not entitled to PERA, ADCOM, YEB
and retirement benefits unless expressly provided by law.
  DBM Circular Letter No. 2002-2 states that, "YEB and retirement benefits, are personnel benefits granted
in addition to salaries. As fringe benefits, these shall be paid only when the basic salary is also paid."
Consultants do not receive salaries.

2. No. Every presumption should be indulged in favor of the constitutionality of RA No. 7227 and the burden of
proof is on the BCDA to show that there is a clear and unequivocal breach of the Constitution.A law enacted by
Congress enjoys the strong presumption of constitutionality. To justify its nullification, there must be a clear and
unequivocal breach of the Constitution, not a doubtful and unequivocal one. BCDA fails to provide sufficient prove
of unconstitutionality of RA 7227 (which limits BCDA's power to give compensation).

3. No. The State is not estopped from correcting a public officer’s erroneous application of a statute, and an
unlawful practice, no matter how long, cannot give rise to any vested right.

However, petitioners relied on Section 1 of RA 7227 which allows Board to adopt compensation schemes and on
the authorization of President Ramos. They cannot be presumed to have faulted and denied good faith upon their
receipt of the YEBs over the years.

WHEREFORE, the petition is PARTIALLY GRANTED. Commission on Audit Decision No. 2007-020 dated 12 April 2007
is AFFIRMED with the MODIFICATION that the Board members and full-time consultants of the Bases Conversion
and Development Authority are not required to refund the year-end benefits they have already received.