EN BANC Recipients or payees need not refund disallowed benefits or

allowances when it was received in good faith and there is no

G.R. No. 213453, November 29, 2016
PHILIPPINE HEALTH INSURANCE CORPORATION v.
COMMISSION ON AUDIT, MA. GRACIA PULIDO TAN,
CHAIRPERSON; AND JANET D. NACION, DIRECTOR IV.
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. In its PHIC
Board Resolution No. 406, s. 2001 dated May 31, 2001, for
one, petitioner granted the payment of the Collective
Negotiation Agreement Signing Bonus (CNASB) of P5,000.00
each to all qualified employees due to the extension of the then
existing CNA between the PHIC management and the
PhilHealth Employees Association (PHICEA) for the period of
another three (3) years beginning April of 2001. For another, in
its PHIC Board Resolution No. 385, s. 2001 effective January
1, 2001, petitioner approved. the payment of the Welfare
Support Assistance (WESA) of P4,000.00 each, in lieu of the
subsistence and laundry allowances paid to public health
workers under Republic Act (R.A.) No. 7305, otherwise known
as the Magna Carta of Public Health Workers. Petitioner then
resolved to approve the grant of the Labor Management
Relations Gratuity (LMRG) by virtue of its PHIC Board
Resolution No. 717, s. 2004 dated July 22, 2004, in recognition
of harmonious labor-management relations of its employees
with the management. Finally, for the services rendered during
the period beginning July 1989 until January 1995, petitioner
paid the Cost of Living Allowance (COLA) to personnel it had
absorbed from the Philippine Medical Care Commission
(PMCC) by virtue of Section 516 of R.A. No. 7875, otherwise
known as The National Health Insurance Act of 1995.
finding of bad faith or malice. On the other hand, officers who
participated in the approval of such disallowed amount are
required to refund only those received if they are found to be in
bad faith or grossly negligent amounting to bad faith. Public
officials who are directly responsible for, or participated in
making the illegal expenditures, as well as those who actually
received the amounts therefrom shall be solidarity liable for
their reimbursement. The receipt or non-receipt of illegally
disbursed funds is immaterial to the solidary liability of
government officials directly responsible.
As previously discussed, PHIC's grant of the WESA was aptly
sanctioned not only by Section 12 of the SSL which explicitly
identifies laundry and subsistence allowance as excluded from
the integrated salary, but also by statutory authority,
particularly, Section 22 and 24 of the Magna Carta. In view of
such fact, the PHIC officers cannot be found to have approved
the issuance of the same in bad faith or in gross negligence
amounting to bad faith for it was well within the parameters set
by law. Thus, the WESA need not be refunded.
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.

On February 7, 2008, however, pursuant to the PHIC officials who authorized its release are bound to
recommendations of the Supervising Auditor of the PHIC in refund the same.
various Audit Observation Memoranda (AOM), 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 P87,699,144.00.9According to respondent Nacion,
the payment of the CNASB was contrary to the doctrine
enunciated in Social Security System (SSS) v. COA wherein
the Court expressly invalidated the payment of the same. With
respect to the WESA, Nacion maintained that its payment was
made without legal basis in the absence of approval from the
Office of the President. 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 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.

COA LEGAL SERVICE SECTOR: DENIED THE MOTION

FOR RECONSIDERATION

COA COMMISSION PROPER: SUSTAINED THE DECISION

OF COA LSS

Petitioner filed its motion for reconsideration

ISSUE:

1. Whether the COA gravely abused its discretion when it

disallowed the payment of the 14th Month Bonus.

HELD:

Nevertheless, even assuming the invalidity of the WESA due to

the irregular manner by which the Health Secretary determined
its rates, the Court does not find that the PHIC Board of
Directors, other responsible officers, and recipients thereof
should be ordered to refund the same. On this matter, PCSO v.
COA summarized the rules as follows: