TL;DR

The Supreme Court upheld the Commission on Audit’s (COA) disallowance of Extraordinary and Miscellaneous Expenses (EME) reimbursements claimed by officials of the Power Sector Assets and Liabilities Management Corporation (PSALM). The Court ruled that certifications alone are insufficient documentation for EME claims from Government-Owned and Controlled Corporations (GOCCs). This decision reinforces the strict requirement for receipts and similar documents to substantiate government expenditures, ensuring accountability and preventing misuse of public funds. GOCCs must adhere to COA Circular No. 2006-001, which mandates receipts for EME reimbursement claims, and cannot rely on certifications as alternative proof of disbursement.

Beyond the Certification: Why Receipts Matter in Government Spending

Can a simple certification suffice as proof of government expenditure, or is a more robust paper trail of receipts necessary? This question lies at the heart of the PSALM vs. COA case, where the Supreme Court scrutinized the reimbursement practices of a government-owned corporation. The Power Sector Assets and Liabilities Management Corporation (PSALM) sought to justify its Extraordinary and Miscellaneous Expenses (EME) reimbursements using certifications from its officials, a practice allowed under older COA circulars for National Government Agencies (NGAs). However, the Commission on Audit (COA) disallowed these claims, citing COA Circular No. 2006-001, which mandates receipts for GOCCs. PSALM challenged this disallowance, arguing that certifications should be considered sufficient and that the stricter receipt requirement was discriminatory and violated due process.

The legal battle stemmed from two Notices of Disallowance (NDs) issued by COA against PSALM for EME reimbursements made in 2008 and 2009, totaling over five million pesos. PSALM had been using certifications as supporting documents, relying on a provision in the Government Accounting and Auditing Manual (GAAM) and COA Circular No. 89-300, which were applicable to NGAs and allowed certifications in lieu of receipts under certain conditions. However, COA Circular No. 2006-001, specifically for GOCCs, explicitly required receipts or other documents evidencing disbursement. Despite being notified of this new circular, PSALM continued to use certifications.

In its defense, PSALM raised several arguments. Firstly, it claimed a violation of due process, arguing that no Audit Observation Memorandum (AOM) was issued before the ND. Secondly, PSALM contended that COA Circular No. 2006-001 did not apply to them because their authority to disburse EME came from the General Appropriations Act (GAA), not their corporate charter. They argued that the GAA ceilings already controlled spending, making strict receipt requirements unnecessary. Furthermore, PSALM asserted that their certifications should be considered as “other documents evidencing disbursements” under COA Circular No. 2006-001. Finally, they alleged a violation of the equal protection clause, citing preferential treatment supposedly given to other GOCCs like NPC and TransCo, and the differential treatment between NGAs and GOCCs regarding documentation requirements.

The Supreme Court, however, sided with the COA on all fronts. Addressing the due process argument, the Court clarified that an AOM is not a prerequisite for an ND, especially when a clear violation of regulations is evident. The Court emphasized that the essence of due process is the opportunity to be heard, which PSALM was afforded through multiple levels of appeal within the COA system. Regarding the applicability of COA Circular No. 2006-001, the Court firmly stated that this circular unequivocally applies to all GOCCs, regardless of whether their EME authority derives from their charter or the GAA. The Court invoked the legal maxim “ubi lex non distinguit, nec nos distinguere debemus” (where the law does not distinguish, neither should we).

The Court further reasoned that the purpose of COA Circular No. 2006-001 was to prevent irregular, unnecessary, excessive, extravagant, or unconscionable expenditures in GOCCs. Simply adhering to GAA ceilings was insufficient, as expenses could still be excessive even within those limits. Receipts, the Court explained, are crucial for verifying the propriety of expenditures, providing transaction details necessary for audit. The certifications submitted by PSALM were deemed inadequate as they merely stated that expenses were incurred for official purposes without providing specific details of disbursement, failing to meet the “other documents evidencing disbursements” requirement of COA Circular No. 2006-001.

On the equal protection argument, the Court dismissed PSALM’s claims of preferential treatment to other GOCCs, noting that even NPC and TransCo had faced similar disallowances for using certifications. The Court also justified the differential treatment between NGAs and GOCCs, citing a “substantial distinction” in their EME disbursement autonomy. NGAs’ EME is strictly regulated by the GAA, while GOCCs have more discretion through their governing boards, necessitating stricter COA oversight. The Court reiterated that the equal protection clause does not mandate identical treatment for entities with inherent differences.

Finally, the Court addressed the liability of PSALM officials and employees. For the 2008 EME disallowance, which had become final, the issue of good faith was deemed immaterial. For the 2009 EME, the Court found no good faith on the part of approving and certifying officers, citing PSALM’s prior notice of COA Circular No. 2006-001 and their continued defiance of its receipt requirement. The Court reiterated the principles of solutio indebiti and unjust enrichment, holding recipients liable to refund disallowed amounts, regardless of good faith, unless specific exceptions applied, which were not present in this case.

In conclusion, the Supreme Court’s decision in PSALM vs. COA underscores the importance of documentary evidence, specifically receipts, in government spending. It clarifies the applicability of COA Circular No. 2006-001 to all GOCCs and reinforces COA’s authority to set stringent auditing rules to safeguard public funds. This ruling serves as a crucial reminder to government entities about the necessity of meticulous record-keeping and compliance with COA regulations to ensure transparency and accountability in public expenditure.

FAQs

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: PSALM vs. COA, G.R No. 216606 & 213425, April 27, 2021