SC stops enforcement of COA’s disallowance of P747.17-M vs DBP

February 18, 2014 10:18 pm 

MANILA, Feb. 18 — The Supreme Court (SC) on Tuesday stopped the enforcement of a "Notice of Disallowance" issued by the Commission on Audit (COA) against the Development Bank of the Philippines (DBP) in the amount of P747,174,594.28.

During the SC en banc session, the justices decided to grant a temporary restraining order (TRO) effective immediately and until further orders against the directive to return the benefits subject of the COA’s notice of disallowance of DBP’s Early Retirement Incentive Program IV (ERIP IV).

The case involves the determination of what is covered under the prohibition on supplementary retirement plans of government agencies and the application of the “receipt in good faith” principle in Nazareth vs Villar case, that is, benefits received in good faith need not be returned to the government.

The subject of the petition is the DBP’s Resolution No. 0176 containing the ERIP IV, which among others, granted retirement benefits to qualified officials and employees for calendar years 2003 and 2008.

This was later amended by DBP Circular No. 27 dated July 6, 2005.

The COA’s supervising auditor issued on Feb. 19, 2007 an audit observation memorandum stating that the ERIP IV violated provisions of the DBP charter or Republic Act No. 8523, which would require the approval of the Secretary of the Department of Finance (DOF).

The supervising auditor recommended the suspension of the ERIP IV and the return of benefits received in excess of that allowed by DBP’s gratuity plan.

The DBP received a notice of disallowance from the supervising auditor on May 17, 2007 informing it that the amount of P747,174,594.28 was disallowed.

It noted that the supervising auditor’s notice of disallowance advanced additional grounds not mentioned in the audit observation report memorandum, thereby denying DBP due process.

It filed a notice of appeal on Oct. 9, 2007 before the COA’s corporate auditor.

While the appeal was pending, the DOF Secretary confirmed that ERIP IV needed no further approval from his office.

The Office of the President (OP) confirmed on April 22, 2010 the implementation of DBP’s compensation plan.

As a result, the DBP argued that the disallowance of the ERIP IV by the COA was a "moot and academic" case.

The COA, through the Corporate Government Sector, denied on Dec. 28, 2010 the DBP’s appeal and affirmed the notice of disallowance on the ERIP IV.

This prompted DBP to file a petition for review before the COA.

The COA denied the petition on Jan. 30, 2013 on the ground, among others, that the ERIP IV is a supplemental retirement plan that is prohibited by R.A. No. 4968, or the Teves Retirement Law.

It affirmed the disallowance.

The DBP filed a petition for review before the SC arguing, among others, that the ERIP IV is not prohibited.

It also asked the SC to issue a TRO to restrain the enforcement of the notice of disallowance.

The SC granted the application for TRO because the applicant had established the elements necessary before the order can be issued.

It noted that the ruling in Nazareth vs. Villar which provided for the “receipt in good faith” principle may apply.

The SC said that the petitioner claims that the beneficiaries of ERIP IV acted in good faith in availing of the benefits, if this is true, under Nazareth vs. Villar, they will not be required to return the benefits received.

Without making a pronouncement on whether good faith was present, the SC noted that injustice or irreparable injury to the beneficiaries may result if they were immediately ordered to return the significant sums equivalent to the benefits received under ERIP IV, only to be found later that they were in good faith in receiving such payments. (PNA)

LGI/PTR/UTB

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