SC: “COA’s Authority to Audit PAGCOR is Not Unrestricted”

September 27, 2021

The Supreme Court has ruled that Commission on Audit (COA) has limited audit jurisdiction over the Philippine Amusement and Gaming Corporation (PAGCOR) as it reversed and set aside the COA’s rulings that disallowed in 2013 the P2 million financial assistance granted by PAGCOR for the construction of a flood control and drainage system project.

The Court ruled on the audit jurisdiction of COA over PAGCOR based on the former’s own Charter, P.D. No. 1869. Section 15 of P.D. No. 1869 states that the “the funds of the Corporation to be covered by the audit shall be limited to the 5% franchise tax and the 50% of the gross earnings pertaining to the Government as its share.”

“It is a cardinal rule in statutory construction that when the law is clear, ‘there is no room for construction or interpretation. There only room for application.’ As Section 15 of P.D. No. 1869 is clear, plain, and free from ambiguity, it must be given its literal meaning and applied without attempted interpretation. Thus, as it stands, the COA’s authority to audit PAGCOR is not unrestricted,” the Court held.

The Court held that the said financial assistance granted by PAGCOR to the Pleasant Village Homeowners Association (PHVA) for the construction of a flood control and drainage system project for Pleasant Village Subdivision (Pleasantville) located in Barangay Tuntungin-Putho, Los Baños, Laguna was sourced from PAGCOR’s operating expenses, in particular its marketing expenses.

Hence, the Court found that COA acted with grave abuse of discretion when it exceeded its audit jurisdiction over PAGCOR. By law, COA’s audit jurisdiction over PAGCOR is limited to the latter’s remittances to the BIR as franchise tax and the National Treasury with respect to the Government’s share in its gross earnings.

“It is, thus clear that the audit conduct by COA in this case was not made in relation either the 5% franchise tax or the Government’s 50% share in its gross earnings and therefore, beyond the scope of COA’s audit authority…[T]he limitation imposed on COA’s authority to audit PAGCOR is further bolstered by the fact that there are bills in Congress that have been filed precisely to expand COA’s audit jurisdiction beyond the said franchise tax and the Government’s share in its gross earnings. By implication, these bills would have been unnecessary had COA been empowered to conduct a general audit on all of PAGCOR’s funds,” the Court said.

The Court added that unless otherwise repealed by a subsequent law or adjudged unconstitutional by this Court, a law will always be

presumed valid and the first and fundamental duty of the court is to apply the law. It stressed: “As it stands, since Section 15 of P. D. No. 1869 has yet to be amended, repealed, or declared unconstitutional, the Court is left with no recourse except to apply the law as presently written, that is, any government audit over PAGCOR should be limited to its 5% franchise tax and 50% of its gross earnings pertaining to the Government as its share. Resultantly, any audit conducted by COA beyond the aforementioned is accomplished beyond the scope of its authority and functions.”

The Court did not make any pronouncement on whether the financial assistance granted to PVHA was violative of the public purpose requirement under P.D. No. 1445 and the propriety of holding petitioner Efraim C. Genuino, then PAGCOR Chair of Board of Directors and Chief Executive Office, civilly liable therefor, for having been rendered moot and academic.

The Court stressed that the disposition of the case “rests solely on the fact that COA acted with grave abuse of discretion in conducting an audit of PAGCOR’s accounts beyond the 5% franchise tax and 50% of the Government’s share in its gross earnings as stated in Section 15 of P.D. No. 1869.”

In 2010, PVHA requested financial assistance from PAGCOR, which the PAGCOR Board of Directors granted. In 2011, the COA suspended the financial assistance for failure to submit certain documentary requirements provided under COA Circular No. 2007-001. The suspension was lifted after PAGCOR complied with the documentary requests but with reservation to the effect that the financial assistance was still under evaluation, pending confirmation on whether the subject roads have been donated to the municipality of Los Baños.

The COA disallowed in 2013 the PAGCOR’s P2 Million financial assistance to PVHA and held petitioner Genuino personally and solidarily liable to refund the said amount under Section 103 of P.D. No. 1445 and Sections 16.1 and 16.3 of the 2009 Rules and Regulations on the Settlement of Accounts.

Petitioner Genuino appealed COA’s ruling but COA dismissed the same for being filed out of time. The COA also filed his subsequent motion for reconsideration, which prompted him to elevate the matter to the SC.

(G.R. No. 230818, Genuino v. COA, et al., June 15, 2021)

READ FULL TEXT: https://sc.judiciary.gov.ph/21251/