Supreme Court: Disallow in audit payment of honoria that has no legal basis and does not comply with the law and the applicable rules and guidelines of the DBM

This is a summary of Supreme Court Decision, G.R No. 177011 dated June 5, 2009.

Summary of COA Audit Findings:

• Disallow in audit overpayment of honoraria to petitioners amounting to P73,768.00 for lack of legal basis;
• Disallow in audit payment of honoraria amounting to P290,531.31 on the ground that the petitioners were paid in excess of the allowed rates, contrary to Section 4.1 of Budget Circular No. 2004-5 dated March 23, 2004 of the Department of Budget and Management (DBM); and
• Disallow in audit payment of honoraria amounting to P68,096.00 to regular and provisionary members of the Bids and Awards Committee (BAC) the same having been paid contrary to the allowed rates provided in DBM Circular No. 2004-5 dated March 23, 2004.

Defenses of the Petitioners:

The petitioners made the following defenses for the above stated disallowances:

• The payment of honoraria was based on the number of projects completed by the BAC and technical working group (TWG) under their respective level of responsibility and on the rate provided under the implementing rules and regulations (IRR) of Republic Act (R.A) No. 9184, which should be in an amount not to exceed 25% of their respective basic monthly salary subject to availability of funds;
• Since DBM has yet to issue the IRR for the grant of honoraria, the BAC and TWG members were given straight 25% of their basic monthly salary as honoraria for every month from March 2003 to March 2004.
• That the work of BAC and its TWG is up to the Recommendation of Award to the NHA General Manager. It is Management’s responsibility to present such recommendation to the Board for notation/confirmation/approval. The payment of honoraria should not be based on the Notice of Award but should be reckoned on the date of Recommendation of Award, as it sometimes takes several months before an award is approved by the Board.
• That they should not be made to refund immediately whatever remaining disallowance after a computation of the same is made using the recommendation of Award as the reckoning date, but instead they request that the same be deducted from the remaining unpaid COLA which they are collecting from NHA or from succeeding honoraria they are to receive as members of the BAC and TWG.

The petitioner filed a motion for reconsideration before COA’s Legal and Adjudication Office-Corporate (LAO-C) but the same was denied due to lack of merit. Likewise, COA-LAO-C rejected the petitioners’ request for a set-off of the disallowed amount against future collectibles, as this was not in accordance with law and jurisprudence. A Petition for Review was then filed before the COA’s Adjudication and Settlement Board (ASB) but the same was likewise denied for lack of merit, affirming COA-LAO-C’s decisions, covering the above disallowances.

Hence, aggrieved, the petitioner filed the instant petition before the Supreme Court maintaining that the grant of honoraria, not exceeding 25% of the basic monthly salaries of the BAC members, was justified. The petitioners assert that the payments were in accordance with Republic Act (R.A.) No. 9184, which was the applicable law at that time, and stressed that they did not exceed the 25% limit provided under Section 15 thereof.

SUPREME COURT DECISION: The petition is bereft of merit due to the following grounds:

• The petitioners failed to appeal the decision of the COA-ASB to the Commission on Audit Proper before filing the instant petition to the Suprement Court, in derogation of the principle of exhaustion of administrative remedies. The general rule is that before a party may seek the intervention of the Supreme Court, he should first avail himself of all the means afforded him by administrative processes. The issues which administrative agencies are authorized to decide should not be summarily taken from them and submitted to the Supreme Court without first giving such administrative agency the opportunity to dispose of the same after due deliberation. The Supreme Court stressed that COA issued Resolution No. 2003-001 delegating the authority to adjudicate and settle appeals from the decisions of the Directors involving suspensions and disallowances in amounts not exceeding five hundred thousand pesos (₱500,000.00) to the ASB of the Commission. It also clearly provides that “appeals from the decision of the Board shall be brought before the Commission Proper in the same manner as other cases under the Commission’s existing rules and regulations. Section 1 of the 1997 Revised Rules of Procedures of COA states that the party aggrieved by a final order or decision of the Director may appeal to the Commission Proper.

Nonetheless, even if the Supreme Court disregard the above infirmity, the Court still find sufficient bases to uphold the above disallowances by the Comission on Audit as explained below.

FOR THE LACK OF LEGAL BASIS

The Supreme Court does not dispute that petitioners can be paid honoraria for the services they rendered as BAC and TWG members. However, the payment of honoraria is subject to the availability of funds and shall follow the guidelines and relevant rules which are promulgated by the DBM. During the payment of honoraria, the Circular implementing the provisions of RA 9184 on the payment of honoraria is yet to be issued by the DBM. However, the Supreme Court upheld that error for petitioners to remunerate themselves the amount equivalent to 25% of their basic monthly salaries as honoraria for their services rendered as BAC members even before the DBM guidelines were promulgated. It quoted COA-ASB’s rationale for the disallowance:

A reading of the above-quoted provision would reveal that the first sentence sets the limit as to the amount of honoraria that may be granted to BAC members, that is 25% of their respective basic monthly salary subject to availability of funds. Further reading of the same would reveal that an enabling rule, a DBM guideline, is needed for its implementation as contained in the second sentence thereof. Thus, the “provision of Sec. 15 of the GPRA authorizing procuring entities or agencies to grant honoraria to BAC members is not self-executing, as it still needs an implementing guideline to be promulgated by the DBM”.

(Government Procurement Tool Kit, Sofronio B. Ursal, 2004 ed., p. 90).

Petitioners disputed this and they said that it would be unjust if the BAC and the TWG members were not paid their honoraria for work already performed just because the DBM had not yet promulgated the necessary guidelines. This contention, however, is indefensible according to the Supreme Court.

The Supreme Court explained that an honorarium is defined as something given not as a matter of obligation but in appreciation for services rendered, a voluntary donation in consideration of services which admit of no compensation in money. Section 15 of R.A. No. 9184 uses the word “may” which signifies that the honorarium cannot be demanded as a matter of right.

The Supreme Court asserts that the payment of honoraria to the members of the BAC and the TWG must be circumscribed by applicable rules and guidelines prescribed by the DBM, as provided by law. Section 15 of R.A. No. 9185 is explicit as it states: “For this purpose, the DBM shall promulgate the necessary guidelines.” The word “shall” has always been deemed mandatory, and not merely directory. Thus, in this case, petitioners should have first waited for the rules and guidelines of the DBM before payment of the honoraria. As the rules and guidelines were still forthcoming, petitioners could not just award themselves the straight amount of 25% of their monthly basic salaries as honoraria. This is not the intendment of the law.

FOR OVERPAYMENT OF HONORARIA

The DBM Budget Circular provides that the payment of honoraria should be made only for “successfully completed procurement projects.” This phrase was clarified in DBM Budget Circular No. 2004-5A dated October 7, 2005, to wit:

5.1 The chairs and members of the Bids and Awards Committee (BAC) and the Technical Working Group (TWG) may be paid honoraria only for successfully completed procurement projects. In accordance with Section 7 of the Implementing Rules and Regulations Part A (IRR-A) of RA No. 9184, a procurement project refers to the entire project identified, described, detailed, scheduled and budgeted for in the Project Procurement Management Plan prepared by the agency.

Foregoing considered, the Supreme Court upheld that petitioners could not just award themselves the straight amount of 25% of their monthly basic salaries as honoraria as payment of honoraria should be made only for “successfully completed procurement projects.”

What constitutes “successfully completed procurement projects”?

Pursuant to Section 7 of the Implementing Rules and Regulations Part A (IRR-A) of RA No. 9184, a procurement project refers to the entire project identified, described, detailed, scheduled and budgeted for in the Project Procurement Management Plan (PPMP) prepared by the agency. A procurement project shall be considered successfully completed once the contract has been awarded to the winning bidder. (Item 5.1, DBM Budget Circular No. 2004-5A)

[Read: Easy to Understand Guide on the Grant of Honoraria to Government Personnel Involved in Government Procurement]

Source: G.R No. 177011 dated June 5, 2009, JOSEPH PETER SISON, ROSEMARIE SIOTING, FE P. VALENZUELA, ROBERTO L. BAUTISTA, MARIO P. ESCOBER, ARLENE PUZON, DANILO G. GERONA, NECITAS B. CLEMENTE, RAMON MACATANGAY and NEOFITO HERNANDEZ, Petitioners,
vs.
ROGELIO TABLANG, Director IV, Commission on Audit; ELIZABETH S. ZOSA, Assistant Commissioner – Legal Adjudication and Settlement Board Chairperson; EMMA M. ESPINA, JAIME P. NARANJO, AMORSONIA B. ESCARDA and CARMELA S. PEREZ, Members of the Commission on Audit Legal Adjudication and Settlement Board, Respondents.