ENCARNACION E. SANTIAGO, G. R. No. 146824
- versus - SANDOVAL-GUTIERREZ,
COMMISSION ON AUDIT and TINGA,
THE DIRECTOR OF THE CHICO-NAZARIO,
COMMISSION ON AUDIT, GARCIA, and
REGIONAL OFFICE NO. V, VELASCO, JR., JJ.
This is a special civil action for certiorari raising a question of law: Can the salary of a government employee be ordered withheld, retained and applied to the payment of public funds allegedly embezzled under the employee’s care on the basis of an audit report and the filing of administrative and criminal cases against the employee?
The antecedents are as follows:
Municipal Treasurer Encarnacion E. Santiago was found
short of her accountability totaling
2. Rampant manipulation of books of account perpetrated by Municipal Treasurer Encarnacion E. Santiago and Municipal Accountant Designate Generoso V. Ortua were detected by the examining auditors during their audit.
Trust liabilities under General Fund totaling
were not remitted to the agencies concerned in violation of GSIS Act of 1997.
4. All vouchers covering cash advances were not certified by the Municipal Budget Officer as to the existence of appropriation, which is a violation of Sec. 344 of the Local Government Code of 1991.
5. Cash advances made by Claro G. Pitallano, Cashier II, totaling P5,031,746.57 were granted by means of cash transfer from Municipal Treasurer Encarnacion E. Santiago which is in gross violation of Section 4.1.6 of COA Circular No. 97-002 dated February 10, 1997.
Cash advances were drawn by Municipal Treasurer
Encarnacion E. Santiago with no legal specific purpose. Additional cash advances were likewise drawn
even if the previous cash advances given were not settled, nor proper
accounting was made, which is in violation of Sec. 339 of the Local Government
Code in relation to Sec. 4.1.1 and 4.1.2 of COA Circular No. 97-002 dated
Payments for recurring expenses exceeding
were paid by Municipal Treasurer Encarnacion E. Santiago out of her cash
advances in violation of Section 4.3.2 of COA Circular No. 97-002 dated
8. Report of Collection and Disbursements together with the corresponding journals and supporting documents were not prepared and submitted to the auditor on the date required under Sections 8 and 9 of the Manual on the Certificate of Settlement and Balances.
Petitioner was informed about her cash
P3,580,378.80 in a demand letter dated
In her Comment, respondent COA
Director Linda N. Solite, Regional Office No. V,
Due to the cash shortage and the failure of
petitioner to submit all the supporting documents enumerated in the demand
letter dated August 19, 1998, State
Auditors del Rosario and Follero informed petitioner through a letter dated
September 24, 1998 that she was relieved from her duties and responsibilities as
municipal treasurer effective September 24, 1998 in
accordance with paragraph 2, Section 348 of Republic Act No. 7160. The
Municipal Mayor and Municipal Accountant were also informed of the fact.
Thereafter, a second demand letter dated
and apprising her of additional credits to
her accountability. A final demand was made on petitioner to submit
immediately all supporting documents stated in the accompanying schedules and
to submit within 72 hours a written explanation why said documents were not
submitted within the reglementary period.
In her Comment, respondent COA Region
V Director stated that petitioner
In a letter
dated July 20, 1999, State Auditor del Rosario directed Municipal Mayor Marcel
S. Pan of Goa, Camarines Sur to “withhold payment of the salary and other emoluments due Mrs. Encarnacion E. Santiago
or so much thereof as may be necessary, effective immediately and to apply the said
withheld amounts in full satisfaction of her x x x shortage of
pursuant to Section 37 of Presidential
Decree (PD) No. 1445, otherwise known as the “Government Auditing Code of the
Philippines,“ which provides:
Sec. 37. Retention of money for satisfaction of indebtedness to government. – When any person is indebted to any government agency, the Commission [on Audit] may direct the proper officer to withhold the payment of any money due such person or his estate to be applied in satisfaction of the indebtedness.
Due to the directive of State Auditor
del Rosario, petitioner was not able to collect her salary for the period from
October 1998 to July 1999. After five
(5) checks in payment of her salary were
issued, the Municipal Mayor of Goa,
Camarines Sur, endorsed the checks and
the proceeds thereof, in the total amount of
P124,606.20, was used to pay petitioner’s cash shortage, which is evidenced
by official receipts of
the Republic of the Philippines.
In a letter dated
In a First Indorsement dated
Petitioner appealed from the denial
to COA. In a letter dated
In a letter dated
Petitioner’s motion for
reconsideration was denied by COA in a letter dated
“. . . Clearly stated, what this Commission has denied is your Motion for Early Resolution and not the Petition for Review. The Commission has its legal grounds in withholding the salary of the petitioner until the amount defalcated has been satisfied.”
Hence, petitioner filed this petition.
Petitioner states that the issue she raised before COA is whether the State Auditor can order the suspension and retention of her salary based merely on an audit finding of a shortage in her account and the pendency of the criminal case against her. She contends that in archiving her petition for review to await the resolution of the administrative and criminal actions against petitioner, COA, in effect, sustained the decision of COA Regional Office No. V and adversely resolved her petition.
Petitioner alleges that she is filing this petition for review of the judgment of COA under Rule 64 of the Rules of Court if COA’s denial of her motion for reconsideration may be considered a final decision of COA of the petition. However, if the action of COA is not yet appealable, petitioner submits that this petition should alternatively be considered as a petition for certiorari under Rule 65, there being no appeal nor any plain and speedy remedy in the ordinary course of law.
Petitioner prays that judgment be
issued setting aside the Director’s First Indorsement dated January 25, 2000, the
Commission’s Letters dated December 8, 2000 and January 22, 2001, the Second
December 8, 2000, and that the respondents, including the Municipal Mayor of
Goa, Camarines Sur, be ordered to immediately pay her salary in the accumulated
P124,606.21, and the
salary accruing after the month of July 1999 to which she may be entitled.
It is true that COA has not yet
formally ruled on the petition for review of petitioner because it archived the
same to await the resolution of the pending criminal and administrative cases
it filed against petitioner. The Court notes, however, that in the letter dated
The Court takes cognizance of this petition insofar as it raises this question of law: Can the salary of a government employee be ordered withheld, retained and applied to the payment of public funds allegedly embezzled under the employee’s care on the basis of an audit report and the filing of an administrative case and a criminal case for malversation of public funds?
Stated otherwise, may State Auditor del Rosario direct that the salary and other emoluments of petitioner be withheld and applied to her cash shortage determined merely in an audit examination?
Petitioner contends that there is no legal basis for the seizure of her salaries and other emoluments. She argues that the finding of a cash shortage during the audit examination does not definitely and finally establish that she is already indebted to the government in the amount of the shortage. She points out that Section 37 of PD No. 1445, which is the legal basis cited by State Auditor del Rosario for directing the withholding of her salary, is identical with Section 21, Chapter 4, Subtitle B (Commission on Audit), Book V of Executive Order No. 292, otherwise known as the “Administrative Code of 1987.” She asserts that the meaning of “indebtedness” in said Section 21 is defined in Villanueva v. Tantuico as follows:
“Unless admitted by a debtor himself, the conclusion that he is in truth indebted to the Government cannot be definitely and finally pronounced by a Government auditor, no matter how convinced he may be from his examination of the pertinent records of the validity of that conclusion. Such a declaration, that a government employee or officer is indeed indebted to the government, if it is to have binding authority, may only be made by a court. That determination is after all, plainly a judicial, not an administrative function. No executive officer or administrative body possesses such a power.”
Petitioner thus contends that the Auditor cannot definitely and finally pronounce that she is indebted to the government based merely on the audit examination conducted on her account; hence, the withholding and seizure of her salaries and other emoluments is not in accordance with law.
Villanueva referred to the propriety of setting
off the indebtedness to the Government
of the petitioner therein against his salary and other monetary benefits
payable to him by the Government. In that case, Auditor Emiliana Cruz of the
Bureau of Records Management made the finding that petitioner therein Villanueva was indebted to
the government in the sum of
P31,949.15, and pursuant to Section 624
of the Revised Administrative Code of 1919, as amended, which is
substantially the same as Section 21 of the Administrative Code of 1987, the indebtedness may properly be set off against
Villanueva’s salary and other monetary benefits due from the Government. The
Court therein ruled that before set off can take place under Section 624 of the Revised
Administrative Code of 1919, as amended, a person’s indebtedness must be one that is admitted by
pronounced by final judgment of a
competent court. The ruling of the Court reads:
While Section 624 of the Revised Administrative Code does indeed authorize the set-off of a person’s indebtedness to the Government against “any money due him or his estate to be applied in satisfaction of such indebtedness,” that indebtedness must be one that is admitted by the alleged debtor or pronounced by final judgment of a competent court. In such a case, the person and the Government are in their own right both debtors and creditors of each other, and compensation takes place by operation of law in accordance with Article 1278 of the Civil Code. Absent, however, any such categorical admission by an obligor or final adjudication, no legal compensation can take place, as this Court has already had occasion to rule in an early case. Unless admitted by a debtor himself, the conclusion that he is in truth indebted to the Government cannot be definitely and finally pronounced by a Government auditor, no matter how convinced he may be from his examination of the pertinent records of the validity of that conclusion. Such a declaration, that a government employee or officer is indeed indebted to the government, if it is to have binding authority, may only be made by a court. That determination is after all, plainly a judicial, not an administrative function. No executive officer or administrative body possesses such a power.
Regarding the propriety of withholding petitioner’s salary, the Court holds that COA can direct the proper officer to withhold petitioner’s salary and other emoluments under Section 21, Chapter 4, Subtitle B, Book V of the Administrative Code of 1987, which is substantially the same as Section 37 of PD No. 1445, the legal basis of COA, thus:
SEC. 21. Retention of Money for Satisfaction of Indebtedness to Government.—When any person is indebted to any government agency, the Commission may direct the proper officer to withhold the payment of any money due such person or his estate to be applied in satisfaction of the indebtedness.
It is noted that the directive of State Auditor del Rosario to the Municipal Mayor of Goa, Camarines Sur to withhold the salary of petitioner is in accordance with the COA Guidelines to the Examiner/Auditor in case of a cash shortage contained in Chapter 3 of the COA Handbook on Cash Examination, thus:
SPECIFIC GUIDELINES FOR CASH
1. Should the examination disclose cash shortages, the examiner shall not immediately make any announcement, notice or report until all arithmetical and mathematical computations are rechecked and documents reviewed.
2. The examiner shall prepare the report on the shortage after completion of the examination when all amounts and computations have been reviewed and after the reconciliation of related accounts and the verifications of all transactions.
3. He/She shall issue a demand letter to the AO for the immediate restitution of the shortage (for sample refer to Appendix 10).
4. Within seventy-two (72) hours upon receipt of demand letter, the examiner shall obtain from the AO a written explanation of the shortage.
5. Upon failure by the AO to immediately restitute the amount, the examiner shall recommend to the agency head in writing for the immediate relief of the AO from his/her duties. The letter-recommendation should be duly acknowledged by the agency head or his/her authorized representative. The acknowledgement shall form part of the examiner’s working paper.
6. The examiner shall see to it that all cash and records pertaining to the account are adequately safeguarded.
7. He/She shall submit an interim or advance report to the appropriate COA official in case there will be a delay in the completion of the report.
8. He/She shall direct the proper officer to withhold the payment of any money due the AO, except retirement pay or gratuity due her/him, as soon as the cash shortage is ascertained and is not contested. Please refer to Appendix 11 for sample copy of the withholding order. The amount withheld shall be applied to the shortage pursuant to Section 73 (should be Section 37), PD 1445. The examiner shall report the ordering of the withholding to the COA Chairman immediately.
9. In the case of a local treasurer, the [examiner] shall seize the office and its contents and shall notify the COA and the local chief executive. He/She shall immediately take full possession of the office and its contents, close and render his/her accounts at the date of taking possession and temporarily continue the public business of the office. The auditor who takes possession of the office of the local treasurer shall ipso facto supersede the local treasurer until the officer involved is restored, or other provision has been lawfully made for filling the office. (Sec. 46, PD 1445)
10. The examiner shall submit his/her report to the RCD/CD. The latter shall review it and forward [it] to the RLAO/LAO. (The Report shall be submitted to RLAO/LAO for shortages and overages)
11. If the shortage is material, the examiner shall request thru the Chairman, the Department of Foreign Affairs, the National Bureau of Investigation, the Commission on Immigration and Deportation and the National Intelligence and Security Agency that no clearance for purposes of travel abroad should be issued to erring AO and that he/she be included in the hold order list unless cleared by COA.
Under Paragraph 8 of the aforequoted Guidelines, the examiner/auditor is authorized to direct the proper officer to withhold the payment of any money due the accountable officer, except retirement pay or gratuity due her/him, as soon as the cash shortage is ascertained and is not contested.
In this case, respondent COA Regional
Director Linda N. Solite stated in her Comment that petitioner
The State Auditors’ finding of cash shortage against petitioner municipal treasurer, which has not been satisfactorily disputed is prima facie evidence against her. The prima facie evidence suffices for the withholding of petitioner’s salary, in order to safeguard the interest of the Government.
However, it must be stated that although
State Auditor del Rosario properly directed the Municipal Mayor of
As a result, the amount of petitioner’s salary remitted to the local government treasurer as payment of petitioner’s cash shortage should be considered merely withheld until final resolution on her indebtedness. In the event that petitioner is found not liable for the cash shortage, the withheld salary and other emoluments will be released to her; otherwise, it will be applied in payment of her indebtedness.
WHEREFORE, the petition is PARTLY GRANTED in that respondent COA is authorized merely to withhold petitioner’s salary but not to apply it to the alleged shortage for which her liability is still being litigated. No costs.
ADOLFO S. AZCUNA
ARTEMIO V. PANGANIBAN
REYNATO S. PUNO
LEONARDO A. QUISUMBING
ANTONIO T. CARPIO
MA. ALICIA AUSTRIA-MARTINEZ
RENATO C. CORONA
CONCHITA CARPIO MORALES
ROMEO J. CALLEJO, SR.
DANTE O. TINGA
MINITA V. CHICO-NAZARIO
CANCIO C. GARCIA
PRESBITERO J. VELASCO, JR.
Pursuant to Section 13, Article VIII of the Constitution, it is hereby certified that the conclusions in the above Decision were reached in consultation before the cases were assigned to the writer of the opinion of the Court.
ARTEMIO V. PANGANIBAN
* On Leave.
 Comment to Petition of Respondent Director, COA Regional Office No. V, Rollo, pp. 115-116.
 “In case an examination of the accounts of a local treasurer discloses a shortage in cash which should be on hand, it shall be the duty of the examining officer to seize the office and its contents and notify the COA, the local chief executive concerned, and the local accountant. Thereupon, the examining officer shall immediately turn over to the accountable officer next-in-rank in the local treasury service, unless the said officer is likewise under investigation, the office of the treasurer and its contents, and close and render his accounts on the date of turnover. In case the accountable officer next-in-rank is under investigation, the auditor shall take full possession of the office and its contents, close and render his accounts on the date of taking possession, and temporarily continue the public business of such office until such time that the local treasurer is restored or a successor has been duly designated. The local treasurer or accountable officer found with such shortage shall be automatically suspended from office.”
 The Local Government Code of 1991.
 Rollo, p. 34.
 The provision is also contained in Section 21, Chapter 4, Subtitle B, Book V of Executive Order No. 292, otherwise known as the “Administrative Code of 1987.”
 Rollo, pp. 36-37.
Second Indorsement dated
 Executive Order No. 292, Subtitle B, Book V, Chapter 4, Sec. 21. Retention of Money for Satisfaction of Indebtedness to Government. – When any person is indebted to any government agency, the Commission [on Audit] may direct the proper officer to withhold the payment of any money due such person or his estate to be applied in satisfaction of the indebtedness.
 Supra note 7, at 267-268.
624. Retention of salary for satisfaction of indebtedness to Government.-- When any person is indebted to the Government
 Petitioner quoted the italicized portion to support her argument.
 Emphasis supplied.