GRANT OF BONUS AND ALLOWANCES

MEGA MAGAZINE PUBLICATIONS, INC., JERRY TIU, AND SARITA V. YAP v. MARGARET A. DEFENSOR; G.R. No. 162021, June 16, 2014
Facts: 1. Petitioner Mega Magazine Publications, Inc. (MMPI) first employed the respondent as an Associate Publisher in 1996, and later promoted her as
a Group Publisher. In a memorandum dated February 25, 1999, the respondent proposed to MMPI’s Executive Vice-President Sarita V. Yap (Yap)
year-end commissions for herself and a special incentive plan for the Sales Department.
2. Yap made marginal notes of her counter-proposals on her copy of the respondent’s memorandum dated February 25, 1999 itself, proposing instead
that outright commissions be at 0.1% of P35-P38 million.
3. The respondent sent another memorandum on April 5, 1999 setting out the 1999 advertisement sales, target and commissions, and proposing that
the schedule of her outright commissions should start at .05% of P34.5 million total revenue, or P175,000.00;6 and further proposing that the special
incentives be given when total revenues reached P35-P38 million.
4. On August 31, 1999, the respondent sent Yap a report on sales and sales targets. On October 1999, the respondent tendered her letter of resignation
effective at the end of December 1999. Yap accepted the resignation.
5. On December 8, 1999, Yap responded with a “formalization” of her approval of the 1999 special incentive scheme proposed by the respondent
through her memorandum dated February 25, 1999, 10 revising anew the schedule The respondent replied to Yap, pointing out that her memorandum
dated April 5, 1999 had been the result of Yap’s own comments on the special incentive scheme she had proposed, and that she had assumed that Yap
had been amenable to the proposal when she did not receive any further reaction from the latter. 12
6. On May 2000, after the respondent had left the company, she filed a complaint for payment of bonus and incentive compensation with
damages,13 specifically demanding the payment of P271,264.68 as sales commissions, P60,000.00 as 14th month pay, and P8,500.00 as her share in
the incentive scheme for the advertising and sales staff.

Labor The Labor Arbiter (LA) dismissed the respondent’s complaint, ruling that the respondent had not presented any evidence showing that MMPI had
Arbiter agreed or committed to the terms proposed in her memorandum of April 5, 1999; that even assuming that the petitioners had agreed to her terms, the
table she had submitted justifying a gross revenue of P36,216,624.07 was not an official account by MMPI;16 and that the petitioners had presented a
1999 statement of income and deficit prepared by the auditing firm of Punongbayan & Araullo showing MMPI’s gross revenue for 1999 being only
P31,947,677.00.
NLRC NLRC denied the appeal for its lack of merit,18 with the NLRC concurring with the LA’s ruling that there had been no agreement between the
petitioners and the respondent on the terms and conditions of the incentives reached.
CA CA dismissed the respondent’s petition for certiorari and upheld the resolutions of the NLRC.

On motion for reconsideration by the respondent, however, the CA promulgated on November 19, 2003 its assailed amended decision granting the
motion for reconsideration and giving due course to the respondent’s petition for certiorari; annulling the challenged resolutions of the NLRC; and
remanding the case to the NLRC for the reception of additional evidence. The CA opined that the NLRC had committed a grave abuse of discretion
in finding that there had been no special incentive scheme approved and implemented for 1999, 22 and in disallowing the respondent from presenting
additional evidence that was crucial in establishing her claim about MMPI’s gross revenue.
Issue Is the respondent entitled to the commissions and the incentive bonus being claimed?
Ruling YES.

The grant of a bonus or special incentive, being a management prerogative, is not a demandable and enforceable obligation, except when the bonus
or special incentive is made part of the wage, salary or compensation of the employee,29 or is promised by the employer and expressly agreed upon
by the parties.30 By its very definition, bonus is a gratuity or act of liberality of the giver,31 and cannot be considered part of an employee’s wages if
it is paid only when profits are realized or a certain amount of productivity is achieved. If the desired goal of production or actual work is not
accomplished, the bonus does not accrue.

Due to the nature of the bonus or special incentive being a gratuity or act of liberality on the part of the giver, the respondent could not validly insist
on the schedule proposed in her memorandum of April 5, 1999 considering that the grant of the bonus or special incentive remained a management
prerogative. However, the Court agrees with the CA’s ruling that the petitioners had already exercised the management prerogative to grant the bonus
or special incentive. At no instance did Yap flatly refuse or reject the respondent’s request for commissions and the bonus or incentive. This is plain
from the fact that Yap even “bargained” with the respondent on the schedule of the rates and the revenues on which the bonus or incentive would be
pegged.

Accordingly, the Court concludes that the respondent was entitled to her 0.05% outright commissions and to the special incentive bonus of P8,500.00
based on MMPI having reached the minimum target of P35 million in gross revenues paid in “bartered goods and cash in direct proportion to
percentage of cash and bartered goods revenue for the year,” as provided in Yap’s memorandum of December 8, 1999.

Accordingly, the Court concludes that the respondent was entitled to her 0.05% outright commissions and to the special incentive bonus of P8,500.00
based on MMPI having reached the minimum target of P35 million in gross revenues paid in “bartered goods and cash in direct proportion to
percentage of cash and bartered goods revenue for the year,” as provided in Yap’s memorandum of December 8, 1999.

DP WHEREFORE, the Court REVERSES AND SETS ASIDE the amended decision promulgated on November 19, 2003; ENTERS a new decision
granting respondent Margaret A. Defensor’s claim for outright commissions in the amount of P181,083.12 and special incentive bonus of P8,500.00,
or a total of P189,583.12; and DIRECTS petitioner Mega Magazine Publications, Inc. to pay the costs of suit.
EASTERN TELECOMMUNICATIONS PHILIPPINES, INC., v. EASTERN TELECOMS EMPLOYEES UNION; G.R.No.185665;February 8, 2012
Facts: 1. Eastern Telecommunications Phils., Inc. (ETPI) is a corporation engaged in the business of providing telecommunications facilities. Eastern
Telecoms Employees Union (ETEU) is the certified exclusive bargaining agent of the company’s rank and file employees. It has an existing CBA
with the company to expire in the year 2004 with a Side Agreement signed on September 3, 2001.
2. In essence, the labor dispute was a spin-off of the company’s plan to defer payment of the 2003 14th, 15th and 16th month bonuses sometime in
April 2004. The company’s main ground in postponing the payment of bonuses is due to allege continuing deterioration of company’s financial
position which started in the year 2000. However, ETPI while postponing payment of bonuses sometime in April 2004, such payment would also
be subject to availability of funds.
3. Invoking the Side Agreement of the existing CBA for the period 2001-2004 between ETPI and ETEU, the union strongly opposed the deferment
in payment of the bonuses by filing a preventive mediation complaint with the NCMB.
4. Later, the company made a sudden turnaround in its position by declaring that they will no longer pay the bonuses until the issue is resolved
through compulsory arbitration.
5. Thus ETEU filed a Notice of Strike on the ground of unfair labor practice for failure of ETPI to pay the bonuses in gross violation of the economic
provision of the existing CBA.
6. ETPI insists that it is under no legal compulsion to pay 14th, 15th and 16th month bonuses for the year 2003 and 14th month bonus for the year
2004 contending that they are not part of the demandable wage or salary and that their grant is conditional based on successful business
performance and the availability of company profits from which to source the same. To thwart ETEU’s monetary claims, it insists that the distribution
of the subject bonuses falls well within the company’s prerogative, being an act of pure gratuity and generosity on its part. Thus, it can withhold the
grant thereof especially since it is currently plagued with economic difficulties and financial losses.
7. ETPI further avers that the act of giving the subject bonuses did not ripen into a company practice arguing that it has always been a contingent one
dependent on the realization of profits and, hence, the workers are not entitled to bonuses if the company does not make profits for a given year. It
asseverates that the 1998 and 2001 CBA Side Agreements did not contractually afford ETEU a vested property right to a perennial payment of the
bonuses. It opines that the bonus provision in the Side Agreement allows the giving of benefits only at the time of its execution. For this reason, it
cannot be said that the grant has ripened into a company practice.
NLRC NLRC RULING: On April 28, 2005, the NLRC issued its Resolution dismissing ETEU’s complaint and held that ETPI could not be forced to pay
the union members the 14th, 15th and 16th month bonuses for the year 2003 and the 14th month bonus for the year 2004 inasmuch as the payment
of these additional benefits was basically a management prerogative, being an act of generosity and munificence on the part of the company and
contingent upon the realization of profits. The NLRC pronounced that ETPI may not be obliged to pay these extra compensations in view of the
substantial decline in its financial condition.

Respondent ETEU moved for reconsideration but the motion was denied by the NLRC in its Resolution dated August 31, 2005.
CA CA RULING: Aggrieved, ETEU filed a petition for certiorari8 before the CA ascribing grave abuse of discretion on the NLRC for disregarding its
evidence which allegedly would prove that the subject bonuses were part of the union members’ wages, salaries or compensations. In addition,
ETEU asserted that the NLRC committed grave abuse of discretion when it ruled that ETPI is not contractually bound to give said bonuses to the
union members.

In its assailed June 25, 2008 Decision, the CA declared that the Side Agreements of the 1998 and 2001 CBA created a contractual obligation on
ETPI to confer the subject bonuses to its employees without qualification or condition. It also found that the grant of said bonuses has already
ripened into a company practice and their denial would amount to diminution of the employees’ benefits. It held that ETPI could not seek refuge
under Article 1267 of the Civil Code because this provision would apply only when the difficulty in fulfilling the contractual obligation was
manifestly beyond the contemplation of the parties, which was not the case therein.
Issue Is the petitioner (ETPI) liable to pay 14th, 15th and 16th month bonuses for the year 2003 and 14th month bonus for the year 2004 to the members
of respondent union?
Ruling YES.

From a legal point of view, a bonus is a gratuity or act of liberality of the giver which the recipient has no right to demand as a matter of right. The
grant of a bonus is basically a management prerogative which cannot be forced upon the employer who may not be obliged to assume the onerous
burden of granting bonuses or other benefits aside from the employee’s basic salaries or wages.

A bonus, however, becomes a demandable or enforceable obligation when it is made part of the wage or salary or compensation of the employee.
Particularly instructive is the ruling of the Court in Metro Transit Organization, Inc. v. NLRC, where it was written:
Whether or not a bonus forms part of wages depends upon the circumstances and conditions for its payment. If it is additional compensation which
the employer promised and agreed to give without any conditions imposed for its payment, such as success of business or greater production or
output, then it is part of the wage. But if it is paid only if profits are realized or if a certain level of productivity is achieved, it cannot be considered
part of the wage. Where it is not payable to all but only to some employees and only when their labor becomes more efficient or more productive, it
is only an inducement for efficiency, a prize therefore, not a part of the wage.

In the case at bench, it is indubitable that ETPI and ETEU agreed on the inclusion of a provision for the grant of 14th, 15th and 16th month bonuses
in the 1998-2001 CBA Side Agreement, as well as in the 2001-2004 CBA Side Agreement, which was signed on September 3, 2001. The provision,
which was similarly worded, states:

Employment-Related Bonuses: The Company confirms that the 14th, 15th and 16th month bonuses (other than the 13th month pay) are granted.

A reading of the above provision reveals that the same provides for the giving of 14th, 15th and 16th month bonuses without qualification. The
wording of the provision does not allow any other interpretation. There were no conditions specified in the CBA Side Agreements for the grant of
the benefits contrary to the claim of ETPI that the same is justified only when there are profits earned by the company. Terse and clear, the said
provision does not state that the subject bonuses shall be made to depend on the ETPI’s financial standing or that their payment was contingent
upon the realization of profits. Neither does it state that if the company derives no profits, no bonuses are to be given to the employees. In fine,
the payment of these bonuses was not related to the profitability of business operations.

The records are also bereft of any showing that the ETPI made it clear before or during the execution of the Side Agreements that the bonuses shall
be subject to any condition. Indeed, if ETPI and ETEU intended that the subject bonuses would be dependent on the company earnings, such
intention should have been expressly declared in the Side Agreements or the bonus provision should have been deleted altogether. Verily, by virtue
of its incorporation in the CBA Side Agreements, the grant of 14th, 15th and 16th month bonuses has become more than just an act of generosity on
the part of ETPI but a contractual obligation it has undertaken. Moreover, the continuous conferment of bonuses by ETPI to the union members
from 1998 to 2002 by virtue of the Side Agreements evidently negates its argument that the giving of the subject bonuses is a management
prerogative.

Granting arguendo that the CBA Side Agreement does not contractually bind petitioner ETPI to give the subject bonuses, nevertheless, the Court
finds that its act of granting the same has become an established company practice such that it has virtually become part of the employees’ salary or
wage. A bonus may be granted on equitable consideration when the giving of such bonus has been the company’s long and regular practice.
In Philippine Appliance Corporation v. CA, it was pronounced:
 To be considered a “regular practice,” however, the giving of the bonus should have been done over a long period of time, and must be shown to
have been consistent and deliberate. The test or rationale of this rule on long practice requires an indubitable showing that the employer agreed to
continue giving the benefits knowing fully well that said employees are not covered by the law requiring payment thereof.

The records show that ETPI, aside from complying with the regular 13th month bonus, has been further giving its employees 14th month bonus
every April as well as 15th and 16th month bonuses every December of the year, without fail, from 1975 to 2002 or for 27 years whether it earned
profits or not. The considerable length of time ETPI has been giving the special grants to its employees indicates a unilateral and voluntary act on
its part to continue giving said benefits knowing that such act was not required by law. Accordingly, a company practice in favor of the employees
has been established and the payments made by ETPI pursuant thereto ripened into benefits enjoyed by the employees.
The giving of the subject bonuses cannot be peremptorily withdrawn by ETPI without violating Article 100 of the Labor Code:

Art. 100. Prohibition against elimination or diminution of benefits. – Nothing in this Book shall be construed to eliminate or in any way diminish
supplements, or other employee benefits being enjoyed at the time of promulgation of this Code.

The rule is settled that any benefit and supplement being enjoyed by the employees cannot be reduced, diminished, discontinued or eliminated by
the employer. The principle of non-diminution of benefits is founded on the constitutional mandate to protect the rights of workers and to promote
their welfare and to afford labor full protection.22

Interestingly, ETPI never presented countervailing evidence to refute ETEU’s claim that the company has been continuously paying bonuses since
1975 up to 2002 regardless of its financial state. Its failure to controvert the allegation, when it had the opportunity and resources to do so, works in
favor of ETEU. Time and again, it has been held that should doubts exist between the evidence presented by the employer and the employee, the
scales of justice must be tilted in favor of the latter.
DP WHEREFORE, the petition is DENIED. The June 25, 2008 Decision of the Court of Appeals and its December 12, 2008 Resolution
are AFFIRMED.
ZAMBOANGA CITY WATER DISTRICT v. COMMISSION ON AUDIT; G.R. No. 213472, January 26, 2016
Facts: 1. Petitioner Zamboanga City Water District (ZCWD) is a government-owned and/and controlled corporation (GOCC) which was created
pursuant to the provisions of Presidential Decree (P.D.) No. 198 or the Provincial Water Utilities Act of 1973 (PWUA), as amended by
Republic Act (R.A.) No. 9286. On January 9, 2007, Catalino S. Genel, Audit Team Leader for ZCWD, Zamboanga City, issued the
following Notices of Disallowance (ND) for ZCWD's various payments

2. The NDs covered the disbursements made during the tenure of then General Manager Juanita L. Bucoy (GM Bucoy).7 On April 12, 2007,
ZCWD filed its omnibus appeal before the LAO.
LAO LAO rendered a decision upholding all the NDs in the aggregate amount of P27,293,621.40. Undaunted, ZCWD appealed before the COA.
1. LAO disagreed with the contention of the ZCWD that its Board of Directors (BOD) had the right to fix the compensation of its GM
pursuant to R.A. No. 9286.9 It stated that the compensation of the GMs of Local Water Districts (LWDs) was still subject to the provisions of
R.A. No. 6758 or the Salary Standardization Law (SSL). Further, it emphasized that any salary increase of government employees must be
authorized through a legislative enactment or pronouncement from the President, through the DBM.
2. LAO opined that the payment of the Representation Allowance and Transportation Allowance (RATA) of the GM and the Representation
Allowance (RA) of the Assistant GMs and the back payment of the Cost of Living Allowance (COLA) and the Amelioration
Allowance (AA) were correctly disallowed because LWDs were not covered by Letter of Implementation (LOI) No. 97. Further, even if
LWDs were covered by LOI No. 97, the payment of RATA and RA should still be disallowed because they were receiving the RATA at the
rate of 20% of their basic salary, and not the rate provided for by LOI No. 97.
3. LAO also insisted that the payments corresponding to the midyear incentive and the Collective Negotiation Agreement (CNA) incentives
were improper because they were without basis. It opined that ZCWD could not rely on the CSC approval 10 of its Program on Awards and
Incentives for Service Excellence (PRAISE) because it had no authority to do so. Likewise, it noted that ZCWD failed to establish
compliance with Public Sector Labor Management Council (PSLMC) Resolution No. 2 to warrant the payment of CNA incentives.
Moreover, the LAO pointed out that the payment of life insurance benefits other than that provided by the GSIS was contrary to Section
28(b) of Commonwealth Act (C.A.) No. 186,11 as amended by R.A. No.4968.
4. LAO found that the per diems paid to the BOD, as well as the 141 month pay given to ZCWD employees, were in excess of the amount
allowed by law. The LOA stated that the per diems granted to the members of the BOD were in excess of the amount allowed by
Administrative Order (A.O.) No. 103 and the 14th month pay was in excess of the amount authorized under R.A. No. 8441.
COA NLRC denied the appeal for its lack of merit,18 with the NLRC concurring with the LA’s ruling that there had been no agreement between the
petitioners and the respondent on the terms and conditions of the incentives reached.
CA On October 28, 2010, the COA rendered the assailed decision affirming the LAO ruling. The COA highlighted that the CNA incentives
should not be paid because ZCWD failed to prove compliance with PSLMC Resolution No. 2, particularly: (a) identifying specific cost-
cutting measures; and (b) proof that the funds for the incentives were taken from savings as a result of the cost-saving measures.

Aggrieved, ZCWD moved for reconsideration but its motion was denied by the COA in its assailed resolution, dated June 6, 2014.

Issue (1) Were the disbursements under the NDs improper; and (2) in the event the disbursements were improper, is the petitioner liable to refund
the same?
Petitioner’s 1. Petitioner ZCWD insists that its BOD has the power to determine and fix the salaries and compensation of its GM, in accordance with
Contetions Section 23 of P.D. No. 198, as amended. It contends that its employees were entitled to COLA and AA pursuant to the ruling of the Court
in PPA Employees hired after July 1, 1989 v. COA (PPA Employees),13 which stated that the government employees were entitled to the said
allowances as the integration of benefits took place only on March 16, 1999 when Department of Budget and
Management (DBM) Corporate Compensation Circular (CCC) No. 10 took effect.
2. Moreover, ZCWD claims that the payment of the CNA incentives was in accordance with the requirements of PSLMC Resolution No. 2.
It pointed out that its employees had always been paid the 14 th month pay since July 1, 1989 and that disallowing the payment of the
14th month pay to employees hired after July 1, 1989 would violate the equal protection clause.
3. Furthermore, ZCWD argues that the payment of the per diems to its BOD was in order because, prior to the passage of A.O. No. 103, its
BOD had a fixed right to the new rate of per diems.
Ruling 1. ZCWD's contention that, pursuant to Section 23 of P.D. No. 198, as amended by R.A. No. 9286, the BOD has the discretion to fix the
compensation of the GM is misplaced. As held in Mendoza v. COAX (Mendoza),16 unless specifically exempted by its charter, GOCCs are
covered by the provisions of the SSL. The Court in Mendoza recognized the power of the BOD to fix the compensation of the GM but
limited the same to the extent that the rates approved must be in accordance with the position classification system under the SSL. Here in
this case, the salary increase of GM Bucoy, including the corresponding increase in her monetized leave credits, was properly disallowed for
being in excess of the amounts allowed under the SSL.
2. The Court agrees with ZCWD that LWDs are within the coverage of LOI No. 97. Nevertheless, the payment of RATA and RA in favor of
the GM and Assistant GMs of ZCWD based on the rates under LOI No. 97 is inappropriate. In the case at bench, GM Bucoy and the
assistant GMs of ZCWD, although incumbent as of July 1, 1989, were not receiving RATA, a non-integrated benefit, based on the rates
provided in LOI No. 97. Consequently, they are no longer entitled to enjoy the RATA benefit given by LOI No. 97.
3. ZCWD employees not entitled to back payment of COLA and AA. Pursuant to Section 12 of the SSL, employee benefits, save for
some exceptions, are deemed integrated into the salary. In Maritime Industry Authority v. CO A (MIA),21 the Court emphasized that the
general rule was that all allowances were deemed included in the standardized salary and the issuance of the DBM was required only if
additional non-integrated allowances would be identified. In accordance with the MIA ruling, the COLA and AA were already deemed
integrated in the standardized salary.
4. ZCWD employees not entitled to 14th month pay. The COA disallowed the 14th month pay on the ground that ZCWD failed to prove
that it had granted the same to its employees since July 1, 1989 and even it were true, it could not be extended to employees hired after the
said date. ZCWD is adamant that it submitted documentary evidence to support the payment of 14 th month pay even before July 1, 1989. It
asserts that the documents it presented showed that what was paid to the employees was the "Year-end Christmas Bonus" but it claims that
the same was the 14th month pay.

The Court agrees with the COA that the documents presented by ZCWD did not unequivocally show that it had paid its employees the
14th month pay because the "Year-end Christmas Bonus" could have referred to the usual year-end benefit equivalent to one (1) month salary
as provided by Memorandum Order No. 324.

Even if ZCWD could prove that it had granted the 14 th month pay to its employees, it could not insist that the same should be given to the
employees hired after July 1, 1989. The 14th month pay was in the nature of an additional benefit, a non-integrated benefit, which had been
given on top of an employee's usual salary. As discussed above, in order for a non-integrated benefit to be continuously enjoyed, it must
have been given since July 1, 1989 to incumbents as of the said date. It could not be extended to employees hired after July 1, 1989 or to
those which had replaced the incumbents as of July 1, 1989.
DP WHEREFORE, the October 28, 2010 Decision and the June 6, 2014 Resolution of the Commission on Audit
are AFFIRMED with MODIFICATION in that the recipients and the officers who had authorized the following disbursements be absolved
from refunding the amounts paid in connection with the following: (1) the salary increase of GM Bucoy and the corresponding increase in her
monetized leave credits; (2) the back payment of the COLA and AA; and (3) the midyear incentives, pursuant to its PRAISE Program. As to
the other items, only the officers who authorized their release are bound to refund the same.
 DUTY FREE PHILIPPINES CORPORATION v. COMMISSION ON AUDIT; G.R. No. 210991, July 12, 2016
Facts: 1. Executive Order (EO) No. 46 authorized the Ministry (now Department) of Tourism (DOT), through the Philippine Tourism Authority (PTA), to
operate stores and shops that would sell tax and duty free merchandise, goods and articles, in international airports and sea ports throughout the country.
The Duty Free was established pursuant to this authority.
2. The Duty Free Philippines Services, Inc. (DFPSI), a private contracting agency, initially provided the manpower needs of the Duty Free. The DFPSI
employees organized the Duty Free Philippines Employees Association (DFPEA) and filed a petition for certification election with the Department of
Labor and Employment.On April 22, 1997, the Med-Arbiter granted the application for certification election. The Med-Arbiter found that the Duty Free
was the direct employer of the contractual employees and that DFPSI was a labor-only contractor.
3. The Duty Free subsequently terminated its manpower services contract with DFPSI and assumed the obligations of the latter as the employer of the
contractual personnel.
4. In 2002, the Duty Free granted the 14th Month Bonus to its officials and employees in the grand sum of Php 14,864,500.13.
5. On July 13, 2006, the COA Director disallowed the payment of the 14th Month Bonus. as the same constitutes irregular expenditures and unnecessary
use of public funds and the said grant being without the approval from the [PTA] Board of Directors and Office of the President as required under Section
5 of P.D. No. 159712 and Memorandum Order No. 20.
*The Duty Free moved for reconsideration before the COA Legal and Adjudication Sector (LAS).
6. The COA LAS denied the motion for reconsideration17 and ruled that: (1) pursuant to this Court's ruling in Duty Free Philippines v. Mojica, the Duty
Free is a government entity under the exclusive authority of the PTA, a corporate body attached to the DOT; 19 and thus, (2) the Duty Free is not bound to
pay the employee benefits previously granted by DFPSI, a private entity.
7. The COA LAS explained that the finding of the Med-Arbiter that DFPSI is a labor-only contractor converted the status of the employees from private to
government. Thus, the non-payment of the 14th Month Bonus is not a diminution of the workers' benefits since their salaries and benefits are governed by
law, rules and regulations applicable to government employees.
8. The Duty Free appealed to the COA Proper and claimed that: (1) this Court in Duty Free Philippines v. Duty Free Philippines Employees Association
(DFPEA)20 mandated the grant of the 14th Month Bonus; (2) the COA erred in applying the Mojica case; and (3) the grant of the 14th Month Bonus had
legal basis.
COA The COA partly granted the Duty Free's petition for review and ruled as follows:
1. First, the DFPEA case did not rule that the Duty Free is bound to pay the 14 th Month Bonus.22 In that case, the Court denied through a minute
resolution, the Duty Free's petition questioning the Med-Arbiter decision allowing the certification election. The Duty Free's petition was insufficient in
form (lacks material dates) and substance (the Med-Arbiter did not gravely abuse his discretion).23 This Court did not resolve the propriety of the
14th Month Bonus.
2.Second, the Duty Free employees are government employees. Their compensation structure is subject to Republic Act No. 6758 or the Salary
Standardization Law (SSL for brevity). Applying our decision in Philippine Ports Authority v. COA,25cralawred the COA ruled that the additional
(i.e., not integrated with the base salary) allowances and benefits granted to incumbent government employees before the effectivity of the SSL (July 1,
1989)26 shall not be diminished. The Duty Free employees who have been receiving the 14th Month Bonus as of July 1, 1989 shall continue to receive it.
The Duty Free employees hired after July 1, 1989 shall not be entitled to the 14th Month Bonus although their employment contracts with DFPSI gave
such entitlement.
*Citing the Civil Code, the COA stressed that contracting parties may establish stipulations, clauses, terms and conditions as they may deem
convenient, provided they are not contrary to law, morals, good customs, public order, or public policy. 28 Since salaries and compensation
benefits of government employees are governed by the SSL, they cannot be the subject of negotiation, and any benefit not allowed under the SSL
although stipulated in the employment contracts is disallowed.
Duty The Duty Free maintains that it was authorized and had the duty to grant the 14th Month Bonus on the main ground that it would have diminished the
Free’s employees' benefits if it had discontinued the payment. The Duty Free argues that there is no substantial distinction between the employees hired before
Contention the effectivity of the SSL and the employees hired after. All Duty Free employees whether hired before or after July 1, 1989 had the vested right to the
14th Month Bonus granted under their employment contracts.

The Duty Free submits that the distinction between employees hired before and after the effectivity of the SSL in Philippine Ports Authority case is
inapplicable here. Unlike the Philippine Ports Authority employees who are clearly government employees, the Duty Free employees were initially hired
by DFPSI, a private contracting agency.

The Duty Free posits that the Med-Arbiter's ruling did not allow the diminution of employee benefits. In any case, it was only in 1998 in the DFPEA case
that this Court upheld that the Duty Free is the employer of the DFPSI personnel. Even then, it was only in the 2005 Mojica case that this Court held that
the Duty Free officials and employees are subject to Civil Services rules. The Duty Free underscores that before Mojica, disputes in Duty Free involving
terms of employment were resolved under the Labor Code. The Duty Free also insists that the COA erred when it invoked the 2005 Mojica case in
disallowing the payment of the 14th Month Bonus made in 2002. Assuming the SSL is applicable to the Duty Free employees, it should only be applied to
cases after Mojica.

Finally, the Duty Free submits that the payment of the 14th Month Bonus was made in good faith, supported by then existing jurisprudence, and based on
the recognition of the Duty Free employees' vested rights to the benefits granted under their employment contracts.
COA’s The COA refutes the Duty Free's claims on the following grounds:
comment 1. First, the Med-Arbiter did not rule that the Duty Free must continue paying all the benefits enjoyed by the contractual personnel supplied by DFPSI.
The Med-Arbiter's determination of the employer-employee relationship between the Duty Free and the members of the DFPEA was necessary in
deciding whether to allow the certification election. That determination did not require the Duty Free to pay the 14th Month Bonus.
The COA posits that when we dismissed the Duty Free's petition questioning the Med-Arbiter decision, what we upheld was the propriety of the
certification election and not the payment of the 14th Month Bonus.
2. Second, the July 1, 1989 cut-off date to determine the entitlement of the Duty Free employees to the 14 th Month Bonus is consistent with the Court's
past ruling42 construing Section 1243 of the SSL on the consolidation of allowances and compensation. The Court has held that incumbent government
employees as of July 1, 1989, who were receiving allowances or fringe benefits, whether or not included in the standardized salaries under the SSL,
should continue to enjoy such benefits.
3. Third, the Duty Free employees are government employees subject to the SSL.45 The employees did not retain their benefits under the employment
contracts with DFPSI when, in view of the Med-Arbiter's decision, Duty Free terminated its manpower services contract with DFPSI.

Issues 1. The basic issue is whether the COA gravely abused its discretion when it disallowed the payment of the 14 th Month Bonus.
2. We also resolve whether the concerned Duty Free officers and employees may be held personally liable for the disallowed amount.
Ruling 1. The Duty Free employees are government employees subject to the SSL.
There is no dispute that PTA, a government-owned and controlled corporation attached to the DOT, operates and manages the Duty Free. 46 There is also
no question that the employees supplied by DFPSI became government employees when the Duty Free terminated its manpower services contract with
DFPSI. The only question now is whether the Duty Free had the duty to continue paying the 14 th Month Bonus. The Duty Free argues in the
affirmative and invokes the principle of non-diminution of benefits. The COA insists the opposite and cites the SSL, the primary law on the compensation
structure of government employees.

We agree with the COA's contention. The Duty Free was established under Executive Order (EO) No. 46 to improve the service facilities for tourists
and to generate revenues for the government. In order for the government to exercise direct and effective control and regulation over the tax and duty free
shops, their establishment and operation were vested in the DOT through its implementing arm, the PTA. All the net profits from the merchandising
operations of the shops accrued to the DOT. Thus, the Duty Free is without a doubt a government entity.

Executive Order No. 180, on the other hand, defines government employees as all employees of all branches, subdivisions, instrumentalities, and
agencies, of the Government, including government-owned or controlled corporations with original charters. Plainly, as government employees working
in a government entity, the Duty Free personnel's compensation structure must comply with and not contradict the SSL.
 For better focus, we identify when the SSL became applicable to the Duty Free employees originally supplied by DFPSI.

The record does not disclose the exact date but based on the COA's findings, the Duty Free terminated its manpower services contract with DFPSI after this
Court denied its petition questioning the Med-Arbiter's decision in 1998, but before it paid the 14th Month Bonus in 2002.
At the time the Duty Free paid the disallowed amount, the employees were already under its direct supervision and control. They were by then government
employees, whose compensation and benefits must, from that point onward, be consistent with the SSL.

We emphasize that Section 12 of the SSL mandates that only incumbents as of July 1, 1989 are entitled to continue receiving additional compensation,
whether in cash or in kind, not integrated with the standardized salary rates.52 The 14th Month Bonus was an additional benefit granted under the employees'
contracts with DFPSI. The COA thus correctly ruled that the 14 th Month Bonus had no legal basis as far as the employees hired after July 1, 1989 are
concerned.

Viewed from another perspective, there is no diminution of benefits because the SSL is deemed to have superseded the contracts of the employees with
DFPSI. The link between DFPSI and the employees was severed when the Duty Free terminated its manpower services contract with DFPSI and assumed
the obligations of the latter. The Duty Free, however, could not legally assume an obligation (granting the 14 th Month Bonus) that contradicts an express
provision of law (Section 12 of the SSL).

We thus uphold the COA's ruling that only those incumbents as of July 1, 1989 are entitled to continue receiving the 14 th Month Bonus. We are aware,
however, that the Duty Free employees and management had been exempted from the coverage of the SSL upon the effectivity of Republic Act No. 9593
or the Tourism Act of 2009.53 Our ruling here is thus relevant only to the period before the employees' exemption from the SSL.

Finally, we reject the Duty Free's claim that we upheld the payment of the 14 th Month Bonus in the DFPEA case.

In that case, we denied, through a minute resolution, the Duty Free's petition for certiorari, which sought to void the Med-Arbiter's order to conduct a
certification election. We did not discuss the propriety of the 14 th Month Bonus because the sole issue was whether the Med-Arbiter gravely abused his
discretion. The DFPEA case had nothing to do with the legality of the 14th Month Bonus.

2. The Duty Free officers who approved and the employees who received the 14 th Month Bonus are not required to return the disallowed amount.
Although the 14th Month Bonus may have been paid without legal basis, we find that the Duty Free officials who approved and the employees who received
the disallowed amount can take refuge under the good faith doctrine.

Good faith, in relation to the requirement of refund of disallowed benefits or allowances, is "that state of mind denoting 'honesty of intention, and freedom
from knowledge of circumstances which ought to put the holder upon inquiry; an honest intention to abstain from taking any unconscientious advantage of
another, even through technicalities of law, together with absence of all information, notice, or benefit or belief of facts which render transactions
unconscientious."

Citing earlier jurisprudence, this Court in Mendoza v. COA55 and in the more recent case of Zamboanga Water District v. COA56 recognized that the officers
who approved and the employees who received the disallowed amount may not be held personally liable for refund absent a showing of bad faith or malice.
This recognition stems from the rule that every public official is entitled to the presumption of good faith in the discharge of official duties.
In particular, we held in Zamboanga Water District that lack of knowledge of a similar ruling by this Court prohibiting a particular disbursement is a badge
of good faith. Applying these rulings to the present case, we find no credible basis to hold the concerned Duty Free officials and employees personally liable
for the disallowed amount. On the contrary, we find that there are compelling grounds to believe that they acted in good faith.
DP WHEREFORE, in view of the foregoing findings and legal premises, we PARTLY GRANT the petition and MODIFY the August 17, 2011 decision and
December 6, 2013 resolution of the Commission on Audit in Decision No. 2011-059, such that the officers who approved and the employees who received
the 14th Month Bonus are NOT personally liable to refund the disallowed amount.

The Temporary Restraining Order issued on April 22, 2014 is LIFTED

 PHILIPPINE ECONOMIC ZONE AUTHORITY (PEZA) v. COMMISSION ON AUDIT (COA) AND HON. MA. GRACIA M. PULIDO TAN,
CHAIRPERSON, COMMISION ON AUDIT; G.R. No. 210903, October 11, 2016
Facts: 1. The PEZA Charter, Republic Act (R.A.) No. 7916, was amended by R.A. No. 8748 in 1999 exempting PEZA from existing laws, rules and regulations
on compensation, position classification and qualification standards. The PEZA Board in Resolution No. M-99-266 dated October 29, 1999, adjusted
PEZA's compensation plan and included in the said compensation plan is the grant of Christmas bonus in such amount as may be fixed by the Board and
such other emoluments. Petitioner PEZA had been granting Christmas bonus in the amount of Fifty Thousand Pesos (P50,000.00) to each of its officers
and employees for CY 2000 to 2004, however, for the years 2005 to 2008, the Christmas bonus was gradually increased per PEZA Board Resolution Nos.
05-450 and 06-462 dated November 28, 2005 and September 26, 2006, respectively. For 2005, the Christmas bonus was increased to P60,000.00 and was
again increased to P70,000.00 in 2006 and 2007. In 2008, the Christmas bonus was increased to P75,000.00 per PEZA officer/employee.
2. State Auditor V Aurora Liveta-Funa, on May 27, 2010, issued Notice of Disallowance (ND) No. 10-001-101-(05-08)6 that was received by PEZA on
May 31, 2010. The ND stated that the payment of additional Christmas bonus to PEZA officers and employees for calendar years 2005-2008 violated
Section 3 of Memorandum Order (M.O.) No. 20 dated June 25, 2001 which provides that any increase in salary or compensation of government-owned
and controlled corporations (GOCCs) and government financial institutions (GFIs) that is not in accordance with the Salary Standardization Law shall be
subject to the approval of the President.
3. The matter was brought to the Corporate Government Sector-B which later on rendered the Decision No. 2011-008 dated August 31, 2011 not giving
credence to the arguments of petitioner and affirmed the Notice of Disallowance No. 10-001-101-(05-08) dated May 27, 2010 in the aggregate amount of
Php20,438,750.00. Thereafter, pursuant to Rules V and VII of the 2009 Revised Rules of Procedure of the COA, petitioner filed the Petition for Review
with respondent COA.
4. The COA in its Decision No. 2013-231 dated December 23, 2013 ruled that notwithstanding Section 16 of the PEZA Charter, petitioner is still duty-
bound to observe the guidelines and policies as may be issued by the President citing Intia, Jr. v. COA9 where this Court ruled that the power of the board
to fix the compensation of the employees is not absolute. The COA further cited Section 6 of Presidential Decree (P.D.) No. 1597 which mandates
presidential review and approval, through the Department of Budget and Management (DBM), of the position classification and compensation plan of an
agency exempt from the Office of Compensation and Position Classification (OCPC) coverage.
5. Furthermore, according to the COA, M.O. No. 20 requires presidential approval on salary increases, while Administrative Order (A.O.) No. 103
suspends the grant of new or additional benefits in line with the austerity measures of the government. The COA added that these presidential issuances
are not abhorrent to the authority of the PEZA Board of Directors to fix the remuneration of PEZA officers and employees. It stated that the requirement
of presidential approval does not remove from the board the power to fix the compensation and allowances of PEZA officers and employees but is meant
to determine whether or not the standards set by law have been complied with.
Issues DID COA ERR IN RULING THAT THE ADDITIONAL CHRISTMAS BONUS TO PEZA OFFICERS AND EMPLOYEES NEEDS THE APPROVAL
OF THE OFFICE OF THE PRESIDENT BECAUSE REPUBLIC ACT NO. 7916, AS AMENDED BY REPUBLIC ACT NO. 8748, AUTHORIZES THE
PEZA BOARD OF DIRECTORS TO FIX THE REMUNERATIONS AND OTHER EMOLUMENTS OF PEZA OFFICERS AND EMPLOYEES.

PEZA’ Petitioner argues that it is not covered by P.D. No. 1597 because its provisions are inconsistent with R.A. No. 7916, as amended, which authorizes the PEZA
(Petitioner) Board to determine the compensation of its officers and employees and that even assuming without admitting that it is covered by P.D. No. 1597, the law
Contention mentions of reporting to the President through the Budget Commission and does not say that the approval of the President, through the Budget Commission,
should be secured.
OSG’s The Office of the Solicitor General (OSG), on the other hand, claims that despite the exception clause in Section 16 of R.A. No. 7916, as amended, said
Contention provision should nonetheless be read in conjunction with the existing laws pertaining to compensation among government agencies, as it is undoubtedly a
GOCC over which the President exercises his power of control, through the DBM, aside from the parameter set by the provision itself, i.e., that PEZA
"shall, however, endeavor to make its system conform as closely as possible with the principles under Republic Act. No. 6758.”
Ruling NO. Court finds no merit to the petition.

It is not disputed that after the enactment of the Salary Standardization Law (Republic Act No. 6758 became effective on July 1, 1989), laws have been
passed exempting some government entities from its coverage. The said government entities were allowed to create their own compensation and position
classification systems that apply to their respective offices, usually through their Board of Directors. Petitioner's Charter is no different from those
Government entities.

In fact, a close reading of the charters of those other government entities exempted from the Salary Standardization Law shows a common provision stating
that although the board of directors of the said entities has the power to set a compensation, position classification system and qualification standards, the
same entities shall also endeavor to make the system to conform as closely as possible to the principles and modes provided in R.A. No. 6758. This Court,
in Trade and Investment Development Corporation of the Philippines v. Civil Service Commission,22 recognized the Trade and Investment Development
Corporation's exemption from the Salary Standardization Law. However, this Court ruled that the said Corporation should, however, "endeavor" to conform
to the principles and modes of the Salary Standardization Law in making its own system of compensation and position classification. The phrase "to
endeavor" means "to devote serious and sustained effort" and "to make an effort to do." It is synonymous with the words to strive, to struggle and to seek.
The use of "to endeavor" in the context of Section 7 of R.A. No. 8494 means that despite TIDCORP's exemption from laws involving compensation, position
classification and qualification standards, it should still strive to conform as closely as possible with the principles and modes provided in R.A. No. 6758.
The phrase "as closely as possible," which qualifies TIDCORP's duty "to endeavor to conform," recognizes that the law allows TIDCORP to deviate from
R.A. No. 6758, but it should still try to hew closely with its principles and modes. Had the intent of Congress been to require TIDCORP to fully, exactly
and strictly comply with R.A. No. 6758, it would have so stated in unequivocal terms. Instead, the mandate it gave TIDCORP was to endeavor to conform
to the principles and modes of R.A. No. 6758, and not to the entirety of this law. 2

Thus, the charters of those government entities exempt from the Salary Standardization Law is not without any form of restriction. They are still required
to report to the Office of the President, through the DBM the details of their salary and compensation system and to endeavor to make the system to conform
as closely as possible to the principles and modes provided in Republic Act No. 6758. Such restriction is the most apparent indication that the legislature
did not divest the President, as Chief Executive of his power of control over the said government entities.

It must always be remembered that under our system of government all executive departments, bureaus and offices are under the control of the President
of the Philippines. This precept is embodied in Section 17, Article VII of the Constitution which provides as follows:

Sec. 17. The President shall have control of all the executive departments, bureaus and offices. He shall ensure that the laws be faithfully executed.
Thus, respondent COA was correct in claiming that petitioner has to comply with Section 325cralawred of M.O. No. 20 dated June 25, 2001 which provides
that any increase in salary or compensation of GOCCs/GFIs that is not in accordance with the Salary Standardization Law shall be subject to the approval
of the President. The said M.O. No. 20 is merely a reiteration of the President's power of control over the GOCCs/CFIs notwithstanding the power granted
to the Board of Directors of the latter to establish and fix a compensation and benefits scheme for its employees.
DP WHEREFORE, the Petition dated February 6, 2014 of petitioner Philippine Economic Zone Authority (PEZA) is DISMISSED. Consequently,
Commission on Audit Decision No. 2013-231 dated December 23, 2013, which affirmed Corporate Government Sector-B Decision No. 2011-008 dated
August 31, 2011 and Notice of Disallowance No. 10-001-101-(05-08) dated May 27, 2010, disallowing the payment of additional Christmas bonus/cash
gifts to PEZA officers and employees for Calendar Years (CY) 2005 to 2008 is AFFIRMED. However, PEZA and its officers are absolved from
refunding the amount covered by the same notice of disallowance.
 PHILIPPINE HEALTH INSURANCE CORPORATION v. COMMISSION ON AUDIT, MA. GRACIA PULIDO TAN, CHAIRPERSON; AND JANET D.
NACION, DIRECTOR IV; G.R. No. 213453, November 29, 2016
Facts: The instant case stems from petitioner PHIC's grant of several allowances to its officers and employees that were subsequently disallowed by respondent
COA.

1. On February 7, 2008, however, pursuant to the recommendations of the Supervising Auditor of the PHIC in various Audit Observation Memoranda
(AOM),8 respondent Janet D. Nacion, Director IV of the Legal and Adjudication Office - Corporate of the COA, issued ND PHIC 2008-003 (2004),
disallowing the payment of the aforementioned allowances granted to PHIC officers and employees in the total amount of P87,699,144.00.
2. According to respondent Nacion, the payment of the Collective Negotiation Agreement Signing Bonus (CNASB) was contrary to the doctrine
enunciated in Social Security System (SSS) v. COA10 wherein the Court expressly invalidated the payment of the same. With respect to the Welfare
Support Assistance (WESA), Nacion maintained that its payment was made without legal basis in the absence of approval from the Office of the
President.11 As for the payment of the LMRG, Nacion found that it was merely a duplication of the Performance Incentive Bonus (PIB) which was
granted to employees based on their good performance, increased efficiency and productivity. Lastly, Nacion disallowed the payment of back Cost of
Living Allowance COLA to PHIC personnel ratiocinating that it should be collected not from petitioner PHIC but from the government agency where the
services have been rendered prior to its creation in January 1995.
3. Petitioner filed its motion for reconsideration which was, however, denied by the COA Legal Services Sector (LSS) in its Decision No. 2010-
02013 issued on May 21, 2010. On appeal, the COA Commission Proper (CP) sustained the disallowance in its Decision No. 2013-208 dated November
20, 2013.14 Thereafter, in a Resolution15 dated April 4, 2014, the COA CP en banc further denied petitioner's motion for reconsideration.

Aggrieved, petitioner filed the instant petition before the Court raising the following issues:
Issues: 1. WHETHER THE COA DISREGARDED THE FISCAL AUTONOMY GRANTED TO PHIC UNDER SECTION 16 (N), R.A. 7875, AS AMENDED,
AS WELL AS EXISTING AND RELEVANT JURISPRUDENCE, IN AFFIRMING THE ND PHIC 2008-003 (2004).chanroblesvirtuallawlibrary
2. WHETHER PHIC'S PAYMENTS OF THE CNASB, LMRG, WESA, AND BACK COLA IN FAVOR OF ITS OFFICERS AND EMPLOYEES
AMOUNTING TO PHP87,699,144.00 WAS PROPER.
3. GRANTING THAT THE PAYMENTS WERE NOT PROPER, WHETHER THE PHIC OFFICERS AND EMPLOYEES CAN BE REQUIRED TO
REFUND THE AMOUNTS RECEIVED.

Petitioner’s Petitioner PHIC raises several infirmities attendant in respondent COA's disallowance. First, contrary to respondent's findings, petitioner paid the CNASB
Contention to its regular plantilla personnel in 2001 and not in 2004 as evinced by the Certification and payrolls it duly presented.16 During said year, such grant was
expressly sanctioned by Budget Circular No. 2000-19 issued by the Department of Budget and Management (DBM) on December 15, 2000 which
authorizes the payment of the signing bonus to each entitled rank-and-file personnel. During said year, moreover, the ruling in SSS v. COA17 had not yet
been laid down by the Court, which was actually promulgated on July 11, 2002, or more than a year after the payment of the subject CNASB. Thus, on
the basis of the established principle of prospective application of laws, the invalidation of the CNASB enunciated in the SSS case cannot be used as legal
basis in disallowing the issuance of said bonus.18

Second, petitioner asserts that the WESA was duly granted in compliance with applicable law, particularly R.A. No. 7305 or the Magna Carta of Public
Health Workers (PHW). According to petitioners, the WESA was issued in lieu of the subsistence and laundry allowance due to PHWs under Section 22
of the Magna Carta, which provides that said subsistence allowance shall be "computed in accordance with prevailing circumstances as determined by the
Health Secretary in consultation with the Management Health Worker's Consultative Councils." Petitioner explains that respondent COA's assertion that
the WESA should be disallowed because it was granted without the participation of the Health Secretary is not entirely accurate. Under Section 18 (a) of
R.A. No. 7875, the Board of Directors of the PHIC is composed of eleven (11) members (which was increased to sixteen (16) members under R.A. No.
10606 passed in June 2013) with the Health Secretary sitting as the Ex-Officio19 As part of said PHIC board, its unanimous passage of PHIC Board
Resolution No. 385, s. 2001 granting the subject WESA was compliantly the positive act of then Health Secretary Dr. Alberto G. Romualdez, Jr. required
under the law.20 Any official act of the PHIC Board, with the Health Secretary sitting as Ex-Officio Chairperson, cannot be considered as an exclusive act
of the board, but also as an act of the Health Secretary in his primary capacity as such.

Third, petitioner contends that contrary to respondent's allegation, the LMRG is not merely a duplicate of the PIB. The LMRG was passed in the exercise
of the PHIC Board of its "fiscal autonomy" to fix compensation and benefits of its personnel under Section 16 (n) of R.A. No. 7875 in recognition of
notable labor-management relations, while the PIB was granted as a performance-based incentive under Executive Order (E.O.) No. 486,
entitled Establishing a Performance-Based Incentive System for Government-Owned or Controlled Corporations and for Other Purposes.21 In addition,
the two (2) grants not only have different requirements for entitlement but also differ in their amounts and manner of computation.

Fourth, with respect to the grant of the COLA back pay, petitioner posits that while it agrees with the position taken by respondent COA Director Nacion
that the Court, in De Jesus v. COA,22 has given imprimatur on the propriety of the said COLA during the time when the DBM Corporate Compensation
Circular (CCC) 10 was in legal limbo, it, nevertheless, disagrees with her view that the PHIC is not legally bound to pay the same to its absorbed
personnel for their services were not rendered to PHIC but to another government agency prior to PHIC's creation. 23 Petitioner recounts that the COLA
back pay was for services rendered between July 1989 and January 1995 when the payment of the same had been discontinued by reason of DBM CCC
10 issued in July 1995, pursuant to R.A. No. 6758, or the Salary Standardization Law (SSL). But the failure to publish the DBM CCC 10 integrating
COLA into the standardized salary rates meant that the COLA was not effectively integrated as of July 1989 but only on March 16, 1999 when the
circular was published as required by law. Thus, in between those two dates, the employees were still entitled to receive the COLA. But unlike respondent
Nacion, who opined that petitioner PHIC has no business to settle the obligations of other government entities having a separate and distinct legal
personality therefrom, petitioner PHIC invokes Section 51 of R.A. No. 7875 which transfers all the functions and assets of the defunct PMCC to PHIC.
According to petitioner, the term "functions" necessarily means to include then PMCC's obligation to pay the benefits due to its employees who have been
absorbed by PHIC such as the COLA that was unduly withdrawn from their salaries after the issuance of DBM CCC 10 in 1989.24 This is in keeping with
the principle of equal protection of laws guaranteed under the Constitution. In the end, petitioner posits that since PHIC personnel received the CNASB,
WESA, LMRG and back COLA in good faith, they should not be required to refund them.

COA’s COA asseverates that PHIC's socalled "fiscal autonomy" does not preclude the COA's power to disallow the grant of allowances.27 In the exercise of said
comment power, respondent COA claims that petitioner, in granting the subject allowances, cannot rely on Section 16 (n) 28 of R.A. No. 7875. This is because as
held in Government Service Insurance System (GSIS) v. Civil Service Commission,29 the term "compensation" "excludes all bonuses, per diems,
allowances and overtime pay, or salary pay or compensation given in addition to the base pay of the position or rank as fixed by law or regulations."

Respondent COA further insists that with respect to the CNASB, the payment of the same was made not in 2001, as petitioner claims, but on June 11,
2004, based on an Automatic Debit Advice "dated 6-11-2004."30 Consequently, SSS v. COA31 is applicable. In fact, in a letter dated October 18, 2004, the
DBM reminded the PHIC of the said ruling. Thus, respondent COA posits that while it is true that the payment of the CNASB was allowed under DBM
Budget Circular No. 2000-19, dated December 15, 2000, which was the basis of PHIC Board Resolution No. 406, s. 2001 approving said grant, actual
payment thereof by petitioner PHIC, however, was made only on June 11, 2004, or after the pronouncement in SSS v. COA. Moreover, said Board
Resolution has already been made ineffective by Resolution No. 04, s. 2002 and Resolution No. 02, s. 2003 of the Public Sector LaborManagement
Council (PSLMC), which allows the grant of the CNA Incentive but declares the CNASB illegal as a form of additional compensation. 32 Respondent adds
that the pieces of evidence submitted by petitioner consisting of the Certification and payrolls are self-serving for they were made out of court, the COA
having no opportunity to impugn the same in open court.33

Respondent COA also rejects petitioner's assertions on the validity of the grant of the WESA claiming that the act of the PHIC Board is not the act of the
individual composing the Board in view of the settled rule that a corporation is invested by law with a personality separate and distinct from those of the
persons composing it.34 Thus, the act of the PHIC Board of which the Health Secretary is the ex-officio chair is separate and distinct from the Health
Secretary. Consequently, the benefit given as WESA is invalid because the rate thereof was not determined by the Health Secretary as mandated by the
Magna Carta of PHWs.
 As regards the LMRG, respondent maintains that it is exactly the same as the PIB earlier granted to PHIC employees based on their good performance,
increased productivity and efficiency, for good performance is the result of a harmonious relationship between the employees and the
management.35 Even assuming that the LMRG does not partake of the nature of the PIB, the former nonetheless remains an additional benefit that
requires prior approval of the Office of the President (OP) as mandated by Memorandum Order (MO) No. 20 dated June 25, 2001. Said MO requires
presidential approval, for any increases in salary or compensation of Government-Owned and Controlled Corporations (GOCCs) that are not in
accordance with the SSL.
Ruling Petitioner's contentions are devoid of merit.

The extent of the power of GOCCs to fix compensation and determine the reasonable allowances of its officers and employees had already been
conclusively laid down in Philippine Charity Sweepstakes Office (PCSO) v. COA,49 to wit: The PCSO stresses that it is a self-sustaining government
instrumentality which generates its own fund to support its operations and does not depend on the national government for its budgetary support. Thus, it
enjoys certain latitude to establish and grant allowances and incentives to its officers and employees.

We do not agree. Sections 6 and 9 of R.A. No. 1169, as amended, cannot be relied upon by the PCSO to grant the COLA. Section 6 merely states, among
others, that fifteen percent (15%) of the net receipts from the sale of sweepstakes tickets (whether for sweepstakes races, lotteries, or other similar
activities) shall be set aside as contributions to the operating expenses and capital expenditures of the PCSO. Also, Section 9 loosely provides that among
the powers and functions of the PCSO Board of Directors is "to fix the salaries and determine the reasonable allowances, bonuses and other incentives of
its officers and employees as may be recommended by the General Manager x x x subject to pertinent civil service and compensation laws." The PCSO
charter evidently does not grant its Board the unbridled authority to set salaries and allowances of officials and employees. On the contrary, as a
government owned and/or controlled corporation (GOCC), it was expressly covered by P.D. No. 985 or "The Budgetary Reform Decree on
Compensation and Position Classification of 1976," and its 1978 amendment, P.D. No. 1597 (Further Rationalizing the System of Compensation
and Position Classification in the National Government), and mandated to comply with the rules of then Office of Compensation and Position
Classification (OCPC) under the DBM.

Even if it is assumed that there is an explicit provision exempting the PCSO from the OCPC rules, the power of the Board to fix the salaries and
determine the reasonable allowances, bonuses and other incentives was still subject to the DBM review. In Intia, Jr. v. COA, the Court stressed
that the discretion of the Board of Philippine Postal Corporation on the matter of personnel compensation is not absolute as the same must be
exercised in accordance with the standard laid down by law, i.e., its compensation system, including the allowances granted by the Board, must
strictly conform with that provided for other government agencies under R.A. No. 6758 in relation to the General Appropriations Act. To ensure
such compliance, the resolutions of the Board affecting such matters should first be reviewed and approved by the DBM pursuant to Section 6 of P.D. No.
1597.

The Court, in the same case, further elaborated on the rule that notwithstanding any exemption granted under their charters, the power of
GOCCs to fix salaries and allowances must still conform to compensation and position classification standards laid down by applicable law.

Accordingly, that Section 16(n) of R.A. 7875 granting PHIC's power to fix the compensation of its personnel does not explicitly provide that the same
shall be subject to the approval of the OBM or the OP as in Section 19(d) thereof does not necessarily mean that the PHIC has unbridled discretion to
issue any and all kinds of allowances, limited only by the provisions of its charter. As clearly expressed in PCSO v. COA, even if it is assumed that there
is an explicit provision exempting a GOCC from the rules of the then Office of Compensation and Position Classification (OCPC) under the OBM, the
power of its Board to fix the salaries and determine the reasonable allowances, bonuses and other incentives was still subject to the standards laid down
by applicable laws: P.O. No. 985,52 its 1978 amendment, P.O. No. 1597,53 the SSL, and at present, R.A. 10149.54 To sustain petitioners' claim that it is the
PHIC, and PHIC alone, that will ensure that its compensation system conforms with applicable law will result in an invalid delegation of legislative
power, granting the PHIC unlimited authority to unilaterally fix its compensation structure. 55 Certainly, such effect could not have been the intent of the
legislature.

Thus, the general rule is that all allowances are deemed included in the standardized salary except for the following: (1) representation and transportation
allowances; (2) clothing and laundry allowances; (3) subsistence allowance of marine officers and crew on board government vessels and hospital
personnel; (4) hazard pay; (5) allowances of foreign service personnel stationed abroad; and (6) such other additional compensation not otherwise
specified herein as may be determined by the DBM.

Time and again, the Court has ruled that Section 12 of the SSL is self-executing. This means that even without DBM action, the standardized salaries of
government employees are already inclusive of all allowances, save for those expressly identified in said section. 58 It is only when additional non-
integrated allowances will be identified that an issuance of the DBM is required. Thus, until and unless the DBM issues rules and regulations identifying
those excluded benefits, the enumerated nonintegrated allowances in Section 12 remain exclusive.59 When a grant of an allowance, therefore, is not
among those excluded in the Section 12 enumeration or expressly excluded by law or DBM issuance, such allowance is deemed already given to its
recipient in their basic salary. As a result, the unauthorized issuance and receipt of said allowance is tantamount to double compensation justifying COA
disallowance.

In view of the foregoing, the Court holds that the PHIC Board members who approved PHIC Board Resolution No. 717, series of2004 and the PHIC
officials who authorized its release are bound to refund the LMRG. It is unclear, however, from a review of the records of the case, which of the PHIC
Board members and officials named in the COA's Notice of Disallowance were the ones responsible for the issuance of the LMRG, considering that what
was listed therein were the "Persons Liable" for the grant and release of all four (4) allowances lumped together as subject of the instant case, without any
distinction as to the particular set of officers responsible for the approval of a respective type of allowance as well as its corresponding amount.95 Hence,
for the proper implementation of this judgment, the COA is hereby ordered to identify, in a clear and certain manner, the specific PHIC Board members
and officials who approved the grant of the LMRG and authorized its release as well as to compute the exact amount they received.

With respect to the PHIC officials and employees, however, who merely received the subject LMRG but had no participation in the approval and release
thereof, the Court deems them to have acted in good faith, honestly believing that the PHIC Board Resolution was issued in the Board's valid exercise of
its power. Thus, they are absolved from refunding the LMRG they received.

DP WHEREFORE, premises considered, the instant petition is PARTLY GRANTED. The November 20, 2013 Decision and April 4, 2014 Resolution of
the COA Commission Proper, which affirmed the Notice of Disallowance PHIC 2008-003 (2004) dated February 7, 2008, are AFFIRMED WITH
MODIFICATION. The recipients and officers who authorized the following disbursements need not refund the amounts paid in connection therewith:
(1) the Collective Negotiation Agreement Signing Bonus; (2) the Welfare Support Assistance; and (3) the back payment of Cost of Living Allowance. As
for the Labor Management Relations Gratuity, only the PHIC Board members who approved PHIC Board Resolution No. 717, series of 2004 and the
PHIC officials who authorized its release are bound to refund the same. For this purpose, the COA is hereby ordered to: (1) particularly identify the
PHIC Board members and officials responsible for the approval and release of the LMRG; and (2) compute the exact amount of the LMRG that said
officers and employees respectively received.