TL;DR

The Supreme Court largely upheld the Commission on Audit’s (COA) disallowance of various allowances and benefits granted by PhilHealth to its employees from 2011-2012, totaling PHP 5,010,607.83. While longevity pay was deemed valid due to subsequent legislation, other benefits like Medical Mission Critical Allowance, Sustenance Gift, Contractor’s Gift, Excess RATA, Special Representation Allowances, Rice Allowance, Shuttle Service Assistance, Birthday Gift, Transportation Allowance for Job Order Contractors, and Public Health Workers Benefits lacked proper legal basis and presidential approval. Recipients, including approving officers who received the benefits, must refund the amounts, while approving officers are solidarily liable, and certifying officers are generally not liable unless bad faith is proven. This case underscores that PhilHealth’s fiscal autonomy is not absolute and is subject to standard government compensation regulations and audit power.

The Cost of Independence: When PhilHealth’s Fiscal Discretion Met COA’s Scrutiny

This case revolves around the tension between the fiscal autonomy claimed by the Philippine Health Insurance Corporation (PhilHealth) and the Commission on Audit’s (COA) mandate to ensure public accountability. At the heart of the dispute are several Notices of Disallowance (NDs) issued by COA against PhilHealth for various allowances and benefits disbursed between 2011 and 2012. PhilHealth argued that its charter granted it fiscal autonomy, allowing it to fix employee compensation without needing external approvals for benefits beyond basic salaries. COA, however, asserted that PhilHealth, as a government-owned and controlled corporation (GOCC), is subject to standard government regulations, including the need for presidential approval for allowances and benefits, and compliance with the Salary Standardization Law. The core legal question is whether PhilHealth’s claimed fiscal autonomy exempts it from these standard government compensation rules.

PhilHealth anchored its defense on Section 16(n) of its charter, Republic Act No. 7875, which empowers it “to fix the compensation of and appoint personnel.” They contended this provision, along with opinions from the Office of the Government Corporate Counsel (OGCC) and past presidential communications, confirmed their fiscal independence. Furthermore, PhilHealth cited Executive Order (EO) 203, series of 2016, which allowed GOCCs to maintain their current compensation frameworks. They also argued that as a Government Financial Institution (GFI), they should enjoy similar fiscal autonomy as other GFIs, referencing the Central Bank Employees Association Inc v. Bangko Sentral ng Pilipinas case. PhilHealth further invoked good faith, arguing that officers and recipients relied on board resolutions and OGCC opinions, and that a prior Supreme Court case, PhilHealth Caraga v. COA, supported non-refund for benefits approved by the PhilHealth Board.

COA countered by emphasizing the Supreme Court’s ruling in PhilHealth v. COA (G.R. No. 222710), which clarified that Section 16(n) does not grant absolute power to fix compensation, and PhilHealth remains subject to the Salary Standardization Law (Republic Act No. 6758). COA argued that Presidential Decree No. 1597 necessitates presidential approval for allowances and fringe benefits in GOCCs. They dismissed PhilHealth’s reliance on OGCC opinions and presidential communications as insufficient legal basis. COA maintained that the disallowed benefits lacked the required presidential approval and were therefore illegal disbursements.

The Supreme Court sided largely with COA, emphasizing that PhilHealth’s fiscal autonomy is not absolute. The Court reiterated its stance from previous cases, stating unequivocally that PhilHealth is not exempt from the Salary Standardization Law and must adhere to Presidential Decree No. 1597, which mandates presidential approval for allowances and benefits. The Court found that PhilHealth’s reliance on OGCC opinions and presidential communications regarding its Rationalization Plan did not constitute the requisite presidential approval for the specific benefits in question.

Regarding specific benefits, the Court addressed PhilHealth’s claims:

For benefits purportedly based on Collective Negotiation Agreements (CNAs) like shuttle service and birthday gifts, the Court found them improperly granted. CNA incentives must be funded by savings generated after the CNA signing, paid as a one-time benefit at year-end, and cannot be predetermined. The disallowed benefits, paid mid-year, failed these criteria.

On Public Health Workers (PHW) benefits, the Court made a crucial distinction. While acknowledging PhilHealth employees as PHWs entitled to benefits under Republic Act No. 7305 and Republic Act No. 11223, particularly longevity pay, the Court disallowed the Welfare Support Assistance (WESA) or subsistence allowance. The Court clarified that WESA is not a blanket benefit and requires specific qualifications related to work location and uniform usage, which PhilHealth failed to demonstrate compliance with for all recipients. Notably, the Court reversed the COA’s disallowance of longevity pay, citing the curative effect of Republic Act No. 11223, which retroactively confirmed PhilHealth personnel as public health workers.

The Court upheld the disallowance of other allowances like Medical Mission Critical Allowance, Sustenance Gift, Contractor’s Gift, Excess RATA, Special Representation Allowances, Rice Allowance, Shuttle Service Assistance, and Birthday Gift, as they lacked proper legal basis and presidential approval. Only longevity pay was deemed valid.

Regarding liability for refund, the Court applied the principles from Madera v. COA. Recipients, including approving officers who also received benefits, are generally liable to refund the amounts unless they prove the benefits were genuinely for services rendered or exceptional circumstances exist. The Court found no such exceptions here, emphasizing that allowing illegal disbursements would prejudice the government. Approving officers were held solidarily liable due to gross negligence in disregarding established jurisprudence regarding PhilHealth’s limited fiscal autonomy. However, certifying officers, performing ministerial duties of verifying fund availability and document completeness, were generally not held liable absent bad faith.

Finally, recognizing the complexity in determining specific approving officers for each disallowed benefit, the Court directed COA to clearly identify the responsible PhilHealth officials for each Notice of Disallowance to ensure proper implementation of the refund order.

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: PHILIPPINE HEALTH INSURANCE CORPORATION VS. COMMISSION ON AUDIT, G.R. No. 258424, January 10, 2023