The Commission on Audit (COA) is in charge of making sure that funds and properties of the government are used in accordance with law and rules. With its constitutional mandate, the COA has the power and mandate to go through the documents and acts of government agencies and their officials and employees to ascertain whether public funds are being used properly or not. Government officials and employees are all too familiar regarding disallowances and most have received notices from the COA. In case the Commission finds the expenditure to be improper, it issues a notice of disallowance with all the legal reasons justifying the findings. If the decision of the COA is later upheld or becomes final, the liable or responsible persons are ordered to reimburse or return the amount improperly disbursed. This is the usual process when it comes to disallowances by the COA. The rule has not bee consistent as admitted by the Supreme Court because in several instances, the High Court no longer required the persons responsible for the disbursement to refund the disallowed amount. The situation becomes unfair because some are required to refund while others are not. In a landmark case, the SC clarified the rules to be followed when it comes to disallowances in Madera vs. COA (G.R. No. 244128, September 08, 2020).
In this case, the Supreme Court made the following rules: If a Notice of Disallowance is set aside by the Court, no return shall be required from any of the persons held liable therein.
If a Notice of Disallowance is upheld, the rules on return are as follows:
- Approving and certifying officers who acted in good faith, in regular performance of official functions, and with the diligence of a good father of the family are not civilly liable to return consistent with Section 38 of the Administrative Code of 1987.
- Approving and certifying officers who are clearly shown to have acted in bad faith, malice, or gross negligence are, pursuant to Section 43 of the Administrative Code of 1987, solidarity liable to return only the net disallowed amount which, as discussed herein, excludes amounts excused under the following sections 2c and 2d.
- Recipients – whether approving or certifying officers or mere passive recipients – are liable to return the disallowed amounts respectively received by them, unless they are able to show that the amounts they received were genuinely given in consideration of services rendered.
- The Court may likewise excuse the return of recipients based on undue prejudice, social justice considerations, and other bona fide exceptions as it may determine on a case to case basis.
The Supreme Court said that the liability to refund the amount is a civil liability nature and is not a penalty but primarily to make sure that the government is not deprived of the funds by reason of the disallowed disbursement. For those who received the amount by mistake, they are bound to return the amount because no person can be enriched at the expense of another. The decision written by the ponente, Justice Caguioa entails some minutes of reading and re-reading because of its length and complicated issues involved.