ESTRELLA C. ASERON, ELMER J. MANZANA. LIGAYA M. ANURI, JOSELITO L. ROSAS, JOSEPHINE M. VILORIA, AND RODELLA T. BUENAFLOR, PETITIONERS, VS. COMMISSION ON AUDIT, RESPONDENT.

Aseron versus Commission on Audit

The Case

This is a petition for certiorari under Rule 64, in relation to Rule 65, of the Rules of Court, brought by six school officials of Muntinlupa National High School against the Commission on Audit. The petitioners assail the Commission Proper's decision upholding a notice of disallowance in the amount of 1,393,520 pesos and 21 centavos, representing payments for the repair and rehabilitation of retaining walls in the school quadrangle in 2013. The case matters because it is a teaching case on three things at once: the strict six-month reglementary period for appeals within the Commission on Audit, the doctrine of immutability of final judgments and its recognized exceptions, and the prohibition against contract splitting under the Government Procurement Reform Act. It also shows how a criminal and administrative exoneration by the Office of the Ombudsman can bear on civil liability under a disallowance.

Procedural History

On August 25, 2016, the Commission on Audit auditor issued a Notice of Disallowance covering the payments for the project. The petitioners appealed to the Commission on Audit National Government Sector, Cluster 5. In Decision No. 2018-012 dated May 10, 2018, the COA Director upheld the disallowance and the liability of the persons named in the notice. The petitioners then filed a petition for review before the Commission on Audit Commission Proper. In Decision No. 2020-497 dated January 31, 2020, the Commission Proper denied the petition for having been filed out of time, and held that even on the merits the petition was unmeritorious. On February 29, 2024, the Commission Proper Secretariat issued a Notice of Finality of Decision. The petitioners then came to the Supreme Court by petition for certiorari under Rule 64, in relation to Rule 65. The Office of the Solicitor General filed its comment for the Commission, and the petitioners failed to file a reply despite two extensions granted by the Court.

Facts

In 2013, soil erosion occurred within the Muntinlupa National High School quadrangle, causing soil accumulation and cracks that threatened structural collapse. The school undertook a project for the repair and rehabilitation of retaining walls. Instead of a competitive public bidding, the project was covered by three separate Owner-Contractor Agreements with JLR Builders and Trading, divided into Phase I, Phase II, and Phase III. Each phase cost below 500,000 pesos. The procurements were posted on the Philippine Government Electronic Procurement System, but no competitive public bidding was conducted; the school resorted to Small Value Procurement through requests for quotation from three pre-qualified contractors.

The COA auditor found the payments irregular for noncompliance with the mandatory procedures of the Government Procurement Reform Act, principally because the school split the contracts to justify resort to an alternative method of procurement. The auditor held liable the approving and certifying officials: the former principal who approved payment, the senior bookkeeper who certified availability of cash and completeness of documents, the cashier who released the check despite incomplete documentation, the physical facilities coordinator who signed as witness and technical inspector, the property officer who posted on the electronic procurement system and witnessed the contract, the administrative officer who certified the obligation request, and the contractor as payee.

For their part, the petitioners maintained that the soil erosion was an emergency, that the project was divided into phases only to accommodate the limits of the school's maintenance and other operating expenses budget, and that the funds were released in monthly tranches. Meanwhile, the Office of the Ombudsman, in a Joint Resolution dated January 26, 2021, dismissed the criminal and administrative complaints, finding that the splitting was due to the staggered release of funds rather than an intent to circumvent public bidding, that the project was actually implemented, that there was no overpricing, and that no undue injury or unwarranted benefit was shown.

Issues

• Whether or not the disallowance had already attained finality, and if so, whether or not there is a justifiable reason for the Court to review the same.
• Whether or not the Commission on Audit Proper committed grave abuse of discretion amounting to lack or excess of jurisdiction in disallowing the disbursement on account of noncompliance with procurement rules.
• Whether or not the petitioners are civilly liable for the disbursement despite the completion of the project.

Applicable Provisions

Section 51 of the Government Auditing Code, on the finality of decisions of the Commission, provides:

The decision of the Commission on Audit or of any of its duly authorized representatives shall become final and executory after the lapse of thirty days from receipt of the decision by the party concerned, unless a motion for reconsideration is filed within the same period.

This fixes the point at which the disallowance became immutable and unappealable, which the Court applies against the petitioners' belated recourse.

Section 54.1 of the Revised Implementing Rules and Regulations of the Government Procurement Reform Act, on the prohibition against splitting, provides:

Splitting of Government Contracts is strictly prohibited. Splitting of Government Contracts means the division or breaking up of a Government Contract into smaller quantities or Phases to evade or circumvent the requirements of Republic Act No. 9184 and its IRR.

This is the provision the COA auditor invoked in finding the payments irregular, and which the Court upholds as the correct standard.

COA Circular No. 2009-002, on pre-audit and the prohibition against splitting, provides:

No splitting of requisitions, purchase orders, vouchers, and the like shall be allowed in order to circumvent the control measures provided in this circular and other laws and regulations. For this purpose, a project funded under a single obligating authority and implemented in several phases whether by the same or different contractors shall be deemed splitting of contracts.

This supplies the operational test the Court uses: a single obligating authority implemented in several phases is deemed splitting, regardless of whether the same or different contractors are involved.

Ruling

On the first issue, the Court held that the disallowance had indeed attained finality. The Government Auditing Code and the COA Rules allow an appeal to the COA Director and then to the Commission Proper, but both must be lodged within a single six-month reglementary period counted from receipt of the notice of disallowance, tolled upon filing the appeal with the Director, with the time to proceed to the Commission Proper limited to the remainder of that same period. Four of the petitioners had already exhausted the full period at the Director level and still waited 79 days to file their petition for review; the principal had only 23 days left and exceeded the period by 56 days. Their recourse to the Court was likewise defective: they failed to state the material dates and to attach a copy of the assailed decision, and the registry receipts and post office certifications showed that copies were served by registered mail on March 16, 2022, giving them until April 19, 2022 to act. Nonetheless, the Court relaxed the rule of immutability, following Cabreros versus Commission on Audit, because the Office of the Ombudsman had dismissed the criminal and administrative charges, and because the records, including the post-audit working papers, the Ombudsman Joint Resolution, and photographs taken on April 29, 2024, showed that the project was actually implemented.

On the second issue, the Court held that the Commission Proper did not commit grave abuse of discretion. Review under Rule 64 is limited to jurisdictional errors, and the petitioners' imputations were mere errors of judgment. The Commission has authority to disallow irregular expenditures, and the payments were correctly disallowed for contract splitting and noncompliance with the procurement law. The Court defined contract splitting as the fragmentation of a procurement agreement into smaller segments or artificial phases to make it appear that each phase falls below regulatory thresholds, thereby sidestepping stricter rules and procedural safeguards. The prohibition is in line with the general rule that all government procurement shall be through competitive bidding, and splitting is often employed to circumvent control measures such as inspection of deliveries and review or approval by higher authorities.

On the third issue, the Court held that the completion of the project bears on the petitioners' liability under the notice of disallowance, and on that basis took cognizance of the petition and set aside the Notice of Finality.

Doctrine

First, the six-month reglementary period for appeals within the Commission on Audit is a single period, not two: it is counted from receipt of the notice of disallowance, tolled upon filing the appeal with the COA Director, and the time to proceed to the Commission Proper is limited to the remainder of that same period. Second, a decision of the Commission becomes final and executory after the lapse of thirty days from receipt, under Section 51 of the Government Auditing Code, and finality is the general rule. Third, the doctrine of immutability of final judgments admits recognized exceptions, and the Court will relax it where the judgment would cause manifest injustice, as where the goods or works were actually delivered or implemented and the persons held liable were exonerated in related criminal and administrative proceedings. Fourth, contract splitting is prohibited under Section 54.1 of the Revised Implementing Rules and Regulations of the Government Procurement Reform Act, and under COA Circular No. 2009-002 a project funded under a single obligating authority and implemented in several phases, whether by the same or different contractors, is deemed splitting. Fifth, review of COA decisions under Rule 64 is confined to grave abuse of discretion amounting to lack or excess of jurisdiction, not to mere errors of judgment.

Disposition

The petition was granted: the Court set aside the Notice of Finality and took cognizance of the petition, while upholding the disallowance as a valid exercise of the Commission's authority.

Remember This

The one line to memorize: a project funded under a single obligating authority and implemented in several phases, whether by the same or different contractors, is deemed contract splitting. Examiners like to use this case on the single six-month appeal period within the Commission on Audit, and on the Cabreros exception to the immutability of final judgments where the project was actually implemented and the officials were exonerated by the Ombudsman.