SC Upholds COA’s Disallowance of CNA Incentive to DARPO-Cavite and DPWH IV-A Employees

May 22, 2019

The Supreme Court En Banc recently affirmed in two separate decisions the disallowance by the Commission on Audit (COA) of the grant of the Collective Negotiation Agreement (CNA) Incentive to the Department of Agrarian Reform Provincial Office-Cavite (DARPO-Cavite) employees for 2009-2010 and the Department of Public Works and Highways IV-A employees for 2008, respectively.

Public Sector Labor Management Council (PSLMC) Resolution No. 4, Series of 2002 (Grant of Collective Negotiation Agreement (CNA) Incentive for National Government Agencies, State Universities and Colleges and Local Government Units) states that the CNA Incentive may be provided in the CNA between a government agency and the employees association therein in recognition of the joint efforts of labor and management to achieve all planned targets, programs, and services approved in the budget of the agency at a lesser cost.

In both decisions penned by Justice Jose C. Reyes, Jr., the Court noted that the same Resolution also mandates that “only savings generated after the signing of the CNA may be used for the CNA Incentive.”Administrative Order No. 135, Series of 2005 specifically states that the CNA Incentive shall be sourced only from the savings generated during the life of the CNA and further clarifies that the CNA Incentive may be extended to rank-and-file employees only. Department of Budget and Management Circular No. 2006-1 provides that the CNA incentive “shall be sourced solely from savings from released Maintenance and Other Operating Expenses (MOOE) allotments for the year under review…”

In the case of the DARPO-Cavite employees (GR No. 237813, Dubongco v. COA, March 5, 2019), however, the Court found that the CNA Incentives of P1,518,800.00 for 2009 and P1,176,000.00 for 2010 were taken from the Comprehensive Agrarian Reform Program (CARP) Fund. The Court held the same as “not only illegal but also inconsiderate of the plight of Filipino farmers for whose benefit the CARP Fund is allocated.”  Citing the principle of unjust enrichment, the Court ordered all recipients of the disallowed incentives to refund through salary deduction or any other mode the COA may deem proper. It pointed out that their participation in the negotiation and approval of the CNA “allows them to acquire knowledge as to the prerequisites for the valid release of the CNA Incentive” and that the refund is also supported by Section 103 of Presidential Decree 1445 (General Auditing Code of the Philippines). The Court also stated that its ruling is without prejudice to any other administrative or criminal liabilities of the officials responsible for the illegal disbursement.

In the case of the DPWH Region IV-A employees (GR No. 237987, DPWH IV-A v. COA, March 19, 2019), the Court affirmed the COA’s  disallowance of the 2008 CNA Incentive  of P3,915,000.00 paid to them  as it was funded from the Engineering and Administrative Overhead instead of the MOOE. However, it held that the COA erred when it ruled that the DPWH IV-A employees who benefited from the incentive need not refund as this goes against the principle of unjust enrichment under Article 22 of the Civil Code. The Court explained that the principle of unjust enrichment requires 1) that a person is benefited without a valid basis or justification and 2) that such benefit is derived at another’s expense or damage. It held that the DPWH IV-A employees received the CNA Incentive without valid basis or justification and that they benefited at the expense of the government. The Court thus ordered not just the certifying and approving officers but all the DPWH IV-A employees who received the subject CNA Incentive to refund through salary deduction or whatever mode of payment the COA may deem just and proper under the circumstances.

GR No. 237813, Dubongco v. COA, March 5, 2019

GR No. 237987, DPWH IV-A v. COA, March 19, 2019