Dear Atty. Gab,

Musta Atty! I hope this email finds you well. My name is Maria Hizon, and I work as a Planning Officer II at the Department of Local Development (DLD) here in Quezon City. I’m writing to you because something concerning came up at our office, and many of us are quite worried.

Last December 2023, our department head, based on an internal DLD Circular promoting employee welfare, authorized the release of a special ‘Performance Bonus’ of PHP 15,000 for all regular employees. We were all very grateful, especially with the holidays approaching. We received it along with our year-end paychecks.

However, just last week, we received news that the Commission on Audit (COA) conducted a post-audit and issued a Notice of Disallowance for the Performance Bonus. The notice apparently stated that the grant lacked the necessary approval from the Office of the President and violated certain administrative orders prohibiting agencies from creating their own separate incentive schemes without proper authorization. It mentioned something about needing a uniform system for government benefits.

Now, there are talks that we might have to refund the full PHP 15,000. This is causing a lot of anxiety among us employees. We received the bonus thinking it was completely legitimate, relying on the circular issued by our own department head. We had no part in the decision-making process, other than receiving the benefit. Is it fair for us to return the money when we accepted it in good faith? What are our rights and obligations in this situation? I would really appreciate your guidance on this matter.

Thank you for your time and expertise.

Sincerely,
Maria Hizon

Dear Maria,

Thank you for reaching out. I understand your concern regarding the disallowed Performance Bonus and the potential requirement for a refund. It’s certainly stressful to face such uncertainty, especially when you received the benefit believing it was properly authorized.

Generally, the grant of allowances and benefits in government agencies is subject to specific rules and regulations, often requiring approval beyond the agency head, potentially including the Office of the President. Presidential directives, usually through Administrative Orders (AOs), aim to standardize compensation and prevent disparities among government employees. When such directives are disregarded by agency officials authorizing benefits, the Commission on Audit (COA) may disallow the payments. However, the obligation to refund often distinguishes between the officers who approved the disallowed benefit and the employees who merely received it in good faith.

Navigating Government Benefits: Presidential Authority and Agency Discretion

The situation you described involves fundamental principles of administrative law and the structure of authority within the Philippine government’s executive branch. At the heart of this is the President’s power of control over all executive departments, bureaus, and offices. This power is constitutionally granted and forms the basis for ensuring uniformity and adherence to laws and policies across the government.

“The president shall have control over all the executive departments, bureaus, and offices. He shall ensure that the laws be faithfully executed.” (Article VII, Section 17, 1987 Philippine Constitution)

This power of control means the President can review, modify, or nullify the actions of subordinate officials. It allows the President to issue directives, like Administrative Orders, that set policies for the entire executive branch, including rules on compensation and benefits. Agency heads, while having their own authority, are subordinate to the President and must ensure their actions align with these presidential directives.

Over the years, various presidential issuances have aimed to rationalize the grant of benefits and allowances. Some explicitly require prior approval from the Office of the President before certain types of benefits can be granted. The rationale often involves ensuring funds are available, preventing inequities, and maintaining fiscal discipline. An administrative order might state, for instance:

“All heads of government offices/agencies… are hereby enjoined and prohibited from authorizing/granting Productivity Incentive Benefits or any and all similar forms of allowances/benefits without prior approval and authorization via Administrative order by the Office of the President… Consequently, all administrative authorizations to grant any form of allowance/benefits… that are inconsistent with the legislated policy on the matter or are not covered by any legislative action are hereby revoked.” (Principle derived from AO 103, s. 1994)

This principle underscores that agency heads cannot unilaterally grant certain benefits if a presidential directive requires higher approval. Furthermore, directives have been issued specifically to prohibit the creation of separate incentive awards by individual agencies to ensure a standardized system based on productivity and performance across the government. Such directives often revoke previous authorizations that are inconsistent with the goal of uniformity:

“Heads of departments, agencies… are hereby prohibited from establishing and authorizing a separate productivity and performance incentive award or any form of the same or similar nature; Accordingly, all administrative authorization/decrees issued… relative to grant of any Incentive Award or Bonus… that are not consistent with this Order are hereby revoked.” (Principle derived from AO 161, s. 1994)

When agency officials authorize benefits in disregard of such presidential directives requiring prior approval or prohibiting separate schemes, their actions may be deemed invalid. This leads to COA disallowances. The crucial question then becomes: who is liable to return the disallowed amount?

Philippine jurisprudence generally distinguishes between the liability of the approving officers and the recipient employees. Public officers are presumed to have acted in good faith. However, this presumption can be overcome. Approving officers may be held personally liable if they acted with gross negligence or in bad faith, such as when they patently disregard clear prohibitions or requirements in presidential directives. Their failure to observe these issuances goes beyond a mere lapse in judgment.

“The failure of petitioners-approving officers to observe all these issuances cannot be deemed a mere lapse consistent with the presumption of good faith. Rather… the patent disregard of the issuances of the President and the directives of the COA amounts to gross negligence, making them liable for the refund thereof.”

On the other hand, employees who received the benefit passively and in good faith – meaning they had no participation in the approval process and genuinely believed the grant was valid based on the actions of their superiors – are generally not required to refund the amount received. The approval by high-ranking officials gives the disbursement an appearance of legality from the employees’ perspective.

Party	Basis for Liability/Non-Liability	Obligation to Refund
Approving Officers (e.g., Department Head, Finance Officers involved in authorization)	Potential gross negligence or bad faith if clear directives (like requiring presidential approval or prohibiting the specific bonus type) were disregarded.	Generally Yes, if gross negligence or bad faith is established.
Recipient Employees (like yourself)	Presumption of good faith if they had no role in the approval and merely received the benefit relying on its apparent legality.	Generally No, if good faith is established and maintained.

Therefore, while the COA disallowance itself might be valid if the bonus violated presidential directives, your personal obligation to refund hinges on whether you received it in good faith.

Practical Advice for Your Situation

• Understand the Basis of Disallowance: Request clarification or a copy of the COA Notice of Disallowance to understand the specific rules or directives cited (e.g., requirement for presidential approval under a specific AO, violation of prohibitions on separate incentives).
• Assess Your Role: Confirm that your involvement was solely as a recipient and that you had no part in the decision-making or approval process for the bonus.
• Document Good Faith: Keep records that support your claim of good faith, such as the internal DLD circular authorizing the bonus, payslips showing the receipt, and any communication indicating the bonus was officially granted by management.
• Distinguish Your Liability: Understand that the liability primarily falls on the approving officers if they acted with gross negligence or bad faith by disregarding clear directives. Your liability as a passive recipient is different.
• Follow Internal Procedures: Cooperate with your agency’s response to the COA disallowance. Your HR or Legal department should provide guidance on the official steps being taken.
• Assert Good Faith: If asked to refund, formally communicate your position, emphasizing that you received the bonus in good faith, relying on the authorization provided by your department head, and had no knowledge of any irregularity.
• Monitor COA Appeals: The disallowance can typically be appealed by the agency or the persons held liable. The outcome of the appeal process will determine the finality of the refund order.
• Seek Legal Counsel if Necessary: If COA insists on holding you personally liable despite your position as a recipient in good faith, consider consulting a lawyer specializing in administrative law or government audits for personalized advice.

Facing a COA disallowance can be unsettling, but understanding the legal principles, especially the distinction between the responsibilities of approving officers and the rights of recipients in good faith, is crucial. While the bonus grant itself may have lacked the proper authorization required by higher authorities, your obligation to return the funds is not automatic and depends heavily on the circumstances surrounding your receipt of the benefit.

Hope this helps!

Sincerely,
Atty. Gabriel Ablola

For more specific legal assistance related to your situation, please contact me through gaboogle.com or via email at connect@gaboogle.com.

Disclaimer: This correspondence is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please schedule a formal consultation.