THE Supreme Court (SC) has held that the Commission on Audit (COA) cannot expand its audit powers to include imposing administrative penalties.

The Court en banc made this clear in a May 28, 2024 ruling penned by Associate Justice Henri Jean Paul Inting, which set aside COA’s disallowance order against PhilHealth Region III Officer Jess Christopher Biong.

Records of the case showed that the COA audit team issued notices of disallowances (NDs) to PhilHealth Region III officers, including Biong, after it found as irregular payments made to a company for printer inks and toners because of the delay in the delivery of the supplies, lack of inspection reports, and falsified supplies withdrawal slips.

Aside from affirming that the payments made to Silicon Valley were irregular, COA also ruled that PhilHealth Region III had a valid obligation to pay the former since it already received the supplies.

Government auditors likewise found Biong civilly liable for the disallowance for certifying, as head of the General Services Unit (GSU), that the items were delivered and for failing to discover the falsified supplies withdrawal slips, leading to PhilHealth paying Silicon Valley despite the lack of supporting documents.

Biong contested the COA finding by filing a petition for certiorari before the High Court.

He maintained that he was not served a copy of the COA decision dated March 21, 2019, and that he only received a certified true copy of the assailed decision on January 25, 2022 after he made a request.

On the merits, Biong argued that he exerted utmost efforts in recognizing Silicon Valley’s claim under the principle of solutio indebiti versus the government’s interest when he issued the Certificate of Delivery after due consultation with the Office of the Auditor.

He also contended that the COA acted with grave abuse of discretion amounting to lack or excess of jurisdiction when it upheld the NDs despite the fact that the inspection and acceptance report had been substantially complied with; that he exercised proper diligence and good faith in the performance of his duties as GSU head; and that the government did not suffer losses due to the payments made to Silicon Valley.

The Court en banc sided with Biong and held that the COA’s power to disallow government expenses arises from its duty to prevent the irregular use of government funds.

For an expense to be irregular, the High Court said there must be a violation of rules and regulations at the time the expense was incurred. If the irregularity happens after, disallowances are not proper, it stressed.

In this case, the SC said it found the disallowance improper, adding that although falsifying supplies withdrawal slips may be irregular, this happened after the transactions were already completed.

It also ruled that the reasons cited by the COA for the disallowance involved the management of office supplies, which are not proper grounds for disallowance, and pointed out that the nature of the liability for disallowance should be reimbursement or return for the loss suffered by the government.

Without such loss, the SC said no reimbursement is necessary.

“Here, the COA found that PhilHealth Region III had a valid legal obligation to pay Silicon Valley. Still, the COA is of the opinion that Silicon Valley’s delay in the delivery of office supplies covered by the subject Purchase Orders, lack of Inspection and Acceptance Reports, and falsified Supplies Withdrawal Slips rendered the payments made to Silicon Valley irregular expenditures. The Court is not convinced,” the SC said.

Since PhilHealth Region III did not suffer any loss by paying Silicon Valley for the supplies it received, Biong cannot be required to reimburse the government, the SC, said, adding that COA’s imposition of a civil liability on Biong is like a fine or penalty, which the COA is not authorized to do.

“Evidently, the disallowances in the case were impelled by the COA’s desire to punish petitioner Biong for his supposed ‘apparent and consistent negligence’ as the GSU head, not to obligate the return of the amounts paid to Silicon Valley. To the Court’s mind, the COA’s imposition of civil liability on petitioner Biong on the ground of his gross negligence already partook of the nature of a fine or a penalty. Verily, the COA overstepped its audit powers and had effectively usurped the disciplinary powers of the PhilHealth, the Civil Service Commission, and/or the Office of the Ombudsman over petitioner Biong,” it added.

The SC also said that the 15-day delivery period was not an established rule, regulation, procedural guideline, policy, principle, or practice recognized by laws.

“It is a mere contract stipulation, the violation of which is regarded as a breach or default on the part of Silicon Valley in the performance of its contractual obligations,” it said.

As to the lack of Inspection and Acceptance Reports, the court said the procedural lapse on the part of the PhilHealth regional office does not warrant a disallowance to the prejudice of Silicon Valley.

Finally, the SC reminded COA that its conduct of an audit is not an exercise of the government’s administrative supervision over public officers and that its authority is limited to initiating the proper administrative, civil, and/or criminal action upon discovering a violation during an audit.

It stressed that the imposition of administrative penalties is outside the scope of COA’s audit powers.