TL;DR

The Supreme Court affirmed that directors of water districts in the Philippines are only entitled to receive per diems for their services, as explicitly stated in Presidential Decree (P.D.) No. 198. This means they cannot receive additional compensation or benefits beyond the authorized per diems, regardless of any prior practices or approvals from the Local Water Utilities Administration (LWUA). The court rejected arguments that the Salary Standardization Law (R.A. No. 6758) repealed this restriction, emphasizing that the law doesn’t apply to water district directors since their role is limited to policy-making, not management. This ruling ensures financial accountability and adherence to the legal framework governing water districts, preventing unauthorized disbursement of public funds.

Can Water District Directors Double-Dip? Extra Benefits Under Scrutiny

This case revolves around the legality of granting additional benefits to the board of directors and officers of the Baybay Water District (BWD) in Leyte. The Commission on Audit (COA) disallowed certain payments, including excessive per diems, representation and transportation allowances (RATA), and rice allowances, deeming them unauthorized under existing laws. Petitioners, composed of BWD directors and officers, contested this disallowance, arguing that these benefits were legally justified, guaranteed by the Constitution, and protected by the rule against diminution of benefits. This legal battle underscores the tension between local practices, management prerogatives, and the strict financial regulations governing government-owned and controlled corporations.

The central issue before the Supreme Court was whether water district directors are entitled to receive benefits beyond those authorized by their charter and LWUA guidelines, particularly after the enactment of Republic Act No. 6758, the Salary Standardization Law. The petitioners argued that Section 13 of P.D. No. 198, which limits directors’ compensation to per diems, had been repealed or superseded by R.A. No. 6758. They also claimed that disallowing these benefits would violate the policy against diminishing benefits and infringe upon the management prerogative of water districts.

However, the Court disagreed, emphasizing the specific language of P.D. No. 198, §13, as amended, which explicitly states that “No director shall receive other compensation for services to the district.” The Court clarified that the term “compensation” in this context encompasses not only salaries but also allowances and other benefits. The Court also rejected the argument that R.A. No. 6758 repealed this restriction, citing Section 4 of the law, which outlines the positions covered by the Salary Standardization Law. It states that these positions involve supervisory roles and technical skills and since the directors of water districts are in fact limited to policy-making, the Salary Standardization Law does not apply to petitioners.

Compensation. — Each director shall receive a per diem, to be determined by the board, for each meeting of the board actually attended by him, but no director shall receive per diems in any given month in excess of the equivalent of the total per diems of four meetings in any given month.  No director shall receive other compensation for services to the district.

Building on this principle, the Court addressed the petitioners’ claim of vested rights, arguing that the long-standing practice of granting additional benefits, even with LWUA approval, could not override the express prohibition in P.D. No. 198. The court noted that the erroneous application of the law by public officers does not prevent the government from correcting such errors. The Court also rejected the invocation of management prerogative, emphasizing that the terms and conditions of employment for government employees are governed by law, thus limiting the exercise of management prerogative by government corporations.

This approach contrasts with the petitioners’ reliance on cases like De Jesus v. Commission on Audit, where the Court ruled that the Department of Budget and Management (DBM) circular implementing the Salary Standardization Law, which discontinued certain allowances and benefits, was ineffective due to lack of publication. Here, the Court distinguished those cases, highlighting that the central issue in this case revolves around the interpretation and application of P.D. No. 198 and R.A. No. 6758 to water district directors and employees, not the validity of DBM circulars.

The Court also noted the contrast between this case and the situation with the National Power Corporation (NAPOCOR), whose charter (R.A. No. 6395, as amended) explicitly grants its board of directors the right to receive allowances in addition to per diems, subject to the approval of the Secretary of Energy. The court noted that unlike P.D. No. 198, §13, the Charter of NAPOCOR expressly granted members of its board of directors the right to receive allowances in addition to their per diems.

FAQs

In conclusion, the Supreme Court’s decision serves as a reminder that public officials must adhere strictly to the legal framework governing their compensation and benefits. The ruling underscores the importance of financial accountability and transparency in the management of public resources, ensuring that funds are used for their intended purposes and that deviations from the law are promptly corrected. The case settles an important consideration concerning the compensation of water district directors.

For inquiries regarding the application of this ruling to specific circumstances, please contact Atty. Gabriel Ablola through gaboogle.com or via email at connect@gaboogle.com.

Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
Source: Baybay Water District vs. Commission on Audit, G.R. Nos. 147248-49, January 23, 2002