leycano vs. coa.doc

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Republic of the PhilippinesSUPREME COURT

Manila

EN BANC

G.R. No. 154665 February 10, 2006

MANUEL LEYCANO, R., Petitioner,vs.COMM!SS!ON ON AU"!T, Respondent.

D E C I S I N

CARP!O MORALES, J.:

!he Co""ission on Audit #C A$ Decision No. %&&%'(%) dated *ul+ ( , %&&% -hich denied petitioner s appeal of the Notices of Disallo-anceNos. ))'&&('%%( #)/$ to ))'&&/'%%( #)/$, all dated *une (&, ())), is bein0 challen0ed in the present Petition for Certiorari .

Petitioner Manuel 1e+cano, *r. -as the Provincial !reasurer of riental Mindoro and at the sa"e ti"e a "e"ber of the Provincial SchoolBoard #PSB$ of that province . ( Durin0 his tenure, he -as appointed b+ the PSB as a "e"ber of i ts Inspectorate !ea" -hich, accordin0 tohi", had the function of 2"onitorin0 the pro0ress of PSB pro3ects.2

In the +ear ())/, several chec4s -ere issued to various private contractors in connection -ith the repair, rehabilitation, and constructionpro3ects covered b+ the Special Education 5und #SE5 $% of riental Mindoro in the follo-in0 public schools6

(. Bethel Ele"entar+ School

%. Papandun0in Ele"entar+ School

7. Palan0an Ele"entar+ School

8. Ba+anan II ES

/. Calin0a0 ES

9. Nabuslot CS

:. Batino ES

. Calapan CS

). D. Safaden MS

(&. B. del Mundo ES

((. Bansud Proper ES

(%. Bansud CS

(7. P. !olentino MS

(8. Mala+a ES

(/. rdivilla ES

(9. Casili0an ES

(:. Pola CS

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( . Ba+uin ES

(). Malad ES

%&. Mala+as ES

%(. Manaul ;S

%%. Su<ui ES

%7. San Antonio ES

%8. Nabuslot N;S

%/. Mel0ar MS

!he Special Audit !ea", C A Re0ional ffice No. I=, headed b+ State Auditor *osel+n Ciru3ano #the Auditor$, subse<uentl+ audited selectedtransactions under the SE5 of the Province of riental Mindoro, a"on0 -hich -ere the above"entioned pro3ects #the pro3ects$.

!he Special Audit !ea" found deficiencies in the pro3ects, hence, i t issued the <uestioned Notices of Disallo-ance holdin0 petitioner, alon0-ith Sangguniang Panlalawigan Me"ber Re"edios Marasi0an and Schools Division Superintendent Ben3a"in Cru>, liable for si0nin0 theCertificates of Inspection #the dates of -hich have not been alle0ed b+ either part+$ relative to the pro3ects and thereb+ falsel+ attestin0 totheir (&&? co"pletion.

!he Notices also held liable the follo-in0 officers for havin0 certified or r eported the (&&? co"pletion of the pro3ects6 Provincial En0ineerEl"er Dila+, En0ineerin0 Assistant @erardo Ila0an, Municipal !reasurer Nelson Bu a0, Chief of Plannin0 and Pro0ra""in0 Section=enancio Austria, and Maintenance and Construction 5ore"en Rod =illanueva and Richard Ma0tiba+.

Petitioner appealed the Notices of Disallo-ance to the C A, throu0h the Re0ional Director, C A Re0ional ffice No. I=, pra+in0 that hisna"e be deleted fro" a"on0 the persons liable.

!he Re0ional Director, b+ decision e"bodied in a (st Indorse"ent dated *une %(, %&&&, "odified the Auditor s findin0s b+ e cludin0petitioner fro" those liable, notin0 inter alia the 3oint certification of the Schools Division Superintendent and the Provincial En0ineer statin0that the pro3ects underta4en and char0ed a0ainst the SE5 -hich -ere found either inco"plete or ine istent b+ the Auditor in ())9 hadalread+ been corrected b+ the contractors concerned. And he certified the case to the Co""ission Proper pursuant to Rule = Section 9 ofthe Revised Rules of Procedure of the C A .7

n re<uest of the 1ocal @overn"ent Audit ffice of the C A, the pro3ects -ere re'inspected b+ the !echnical Audit Specialist, -ho still founddeficiencies in the co"pletion of the pro3ects in the total a"ount of P1,0#$,##$.5% .

!he C A, b+ the assailed Decision dated *ul+ ( , %&&%, findin0 no sufficient 3ustification to e clude petitioner fro" liabilit+, denied hisappeal6 1avvphil.net

pon all the fore0oin0 considerations, the instant re<uest has to be, as it i s hereb+ denied. ;o-ever, the disallo-ance should be reducedfro" P(, % ,)9).99 to P(,&7),7))./: based on the result of the reinspection b+ the !echnical Audit Specialist. Accordin0l+, the Auditor ishereb+ directed to ad3ust the Certificate of Settle"ent and Balance and "onitor the settle"ent of the disallo-ance b+ the persons na"edliable under the Notices of Disallo-ance and to sub"it a periodic report thereon to the Co""ission.

;ence, the present petition. Petitioner faults the C A for havin0 2co""itted reversible error in the interpretationFapplication of the la- andacted -ith 0rave abuse of discretion a"ountin0 to e cess of 3urisdiction in the appreciation of the facts and evidence presented,2 in supportof -hich he advances the follo-in0 ar0u"ents6

I. C A relied solel+ on the findin0s of the State AuditorG

II. C A "ade erroneous findin0s of fact and la-G

III. Audit report is not in accordance -ith prescribed Auditin0 Standard

I=. Audit Report -as "eant to harass

!he first and second ar0u"ents are inter'related and -ill be discussed to0ether. 1avvphil.net






Petitioner ad"its havin0 si0ned the Certificate of Inspection in -hich he attested that the pro3ects -ere (&&? co"pleted. Si0nificantl+, hedoes not dispute the findin0 of the C A that the sub3ect pro3ects -ere not co"pleted . ;e alle0es, ho-ever, that the C A overloo4ed the factthat the PSB "erel+ intended the Inspectorate !ea", of -hich he -as a "e"ber, to perfor" "onitorin0 functions, leavin0 the stricti"ple"entation and supervision of the pro3ects in the hands of the Provincial En0ineerin0 ffice. ;e thus concludes that he is not theaccountable officer and instead points to the Pro3ect En0ineer and Provincial En0ineer, -ho are in char0e of the supervision and control ofPSB Pro3ects.

In support of his clai" that the dut+ of strict supervision over PSB pro3ects belon0s to the Provincial En0ineerin0 ffice and not to the

Inspectorate !ea", petitioner invo4es PSB Resolution No. &/')9 APPR =IN@ AND AD P!IN@ !;E NEH @ IDE'1INESFPR CED RESIN !;E IMP1EMEN!A!I N 5 PSB PR *EC!S approved on March %/, ())9. !hese ne- 0uidelinesFprocedures are in the for" of a flo-chart indicatin0 the different sta0es in the i"ple"entation of PSB pro3ects fro" 2INC MIN@ RE ES!2 to 2PAJMEN!.2

At the outset, it bears stressin0 that petitioner s reliance on this Resolution is "isplaced, as the sa"e -as approved b+ the PSB onl+ onMarch %/, ())9, -hereas all the chec4s paid to the concerned contractors herein -ere issued in the +ear ())/.

But assu"in0 arguendo that the above'said PSB Resolution accuratel+ reflects the functions of the Inspectorate !ea" at the ti"e the eventsrelevant to this case occurred, it onl+ refutes, rather than stren0thens, petitioner s contention that the !ea" -as created 2"erel+ for"onitorin0 functions.2

!he flo- char t8 clearl+ sho-s that, after the PR *EC! IMP1EMEN!A!I N sta0e, the pro3ect "ust be inspected b+ the PR *EC!INSPEC! RA!E !EAM before there can be ACCEP!ANCEF! RN =ER and thereafter, PAJMEN!. Notabl+, there is no indication that theInspectorate !ea" is an unessential part of the process such that pa+"ent "a+ be released to contractors even before it has perfor"ed itsfunctions, as petitioner see"s to i"pl+ -hen he clai"s that it "erel+ perfor"s "onitorin0 functions. Rather, it can be deduced fro" the flo-chart that prior e a"ination of the pro3ect b+ the Inspectorate !ea" is &e'e((ary before there can be acceptance or turnover of PSB

pro3ects and pa+"ent to the contractors concerned.

In li0ht of this function of the Inspectorate !ea", its "e"bers "a+ be held liable b+ the C A for an+ irre0ular e penditure of the SE5 if theirparticipation in such irre0ularit+ can be established. Hhile petitioner, in his capacit+ as "e"ber of the Inspectorate !ea", is not anaccountable officer as conte"plated in Section (&( of P.D. No. (88/ , / -hich states6

SEC. (&(. Accountable officers; bond requirement . K #($ Ever+ officer of an+ 0overn"ent a0enc+ -hose duties per"it or r e<uire thepossession or custod+ of 0overn"ent funds or propert+ shall be accountable therefor and for the safe4eepin0 thereof in confor"it+ -ith la-.

#%$ Ever+ accountable officer shall be properl+ bonded in accordance -ith la-,

he "a+, nonetheless, be held liable b+ the C A under the broad 3urisdiction vested on it b+ the Constitution 2to e a"ine, audit, and settle allaccounts pertainin0 to the revenue and receipts of, and e penditures or uses of fundsand propert+, o-ned or held in t rust b+, or pertainin0 to,the @overn"ent. 29 In addition, the authorit+ of the C A to hold petitioner liable is also i"pli ed in its dut+ to 2pro"ul0ate accountin0 andauditin0 rules and re0ulations, includin0 those for the prevention and disallo-ance of irr e0ular, unnecessar+, e cessive, e trava0ant, or

unconscionable e penditures, or uses of 0overn"ent funds and properties.2:

5urther"ore, Section 78& of the 1ocal @overn"ent Code #1@C$ clearl+ provides6

SEC!I N 78&. Persons Accountable for Local Government Funds . K An+ officer of the local 0overn"ent unit -hose dut+ per"its or re<uiresthe possession or custod+ of local 0overn"ent funds shall be accountable and responsible for the safe4eepin0 thereof in confor"it+ -ith theprovisions of this !itle. ther local officers -ho, )*ou+* &o) a''ou&)ab e by )*e &a)ure o- )*e r /u) e(, ay e (e be ( ar y *e /a''ou&)ab e and responsible for local 0overn"ent funds )*rou+* )*e r 3ar) ' 3a) o& & )*e u(e or a33 'a) o& )*ereo-. #E"phasis andunderscorin0 supplied$

Since, as earlier noted, pa+"ent should not be "ade to a contractor -ithout the prior inspection of the pro3ect b+ the Inspectorate !ea", the"e"bers thereof -ho si0n the certificate of inspection participate in the use and application of local 0overn"ent funds #in this case, theSpecial Education 5und of the Province of riental Mindoro$. !hus, if there is an irre0ularit+ in the perfor"ance of this dut+, the+ "a+ be heldliable for an+ loss that is incurred b+ the 0overn"ent as a conse<uence thereof. In this case, there -as such irre0ularit+ -hen petitioner andother "e"bers of the !ea" attested to the (&&? co"pletion of the pro3ects not-ithstandin0 their undisputed deficiencies.

In another vein, petitioner ar0ues that his "e"bership in the Inspectorate !ea" is not a valid basis for the C A to e ercise 3urisdiction overhi" since, b+ his clai", the creation of such !ea" is null and void, i t bein0 be+ond the po-ers of the PSB as defined b+ the 1@C.

It bears notin0, ho-ever, that Section ))#b$ of the 1@C, -hich enu"erates the functions of the PSB, provides that the PSB shall 2 a uthori>ethe provincial, cit+, or "unicipal treasurer, as the case "a+ be, to disburse funds fro" the Special Education 5und pursuant to the bud0etprepared and in accordance -ith e istin0 rules and re0ulations.2 H hile this provision does not "andate the PSB to create inspectoratetea"s, it i"plicitl+ e"po-ers the PSB to institute "easures for ascertainin0 that the disburse"ents intended -ill, in f act, be in accordance-ith the prepared bud0et. !he creation of the Inspectorate !ea" in this case "a+ be considered as one such "easure and is, therefore, notnull and void.

















Petitioner, nonetheless, invo4es 0ood faith, clai"in0 that he "erel+ relied on the reports and representations of subordinates and otherofficers that the sub3ect pro3ects -ere alread+ co"pleted.

Specificall+, petitioner alle0es that, due to the 0eo0raphical location of the various PSB pro3ects, coupled -ith his i""ense responsibilities asProvincial !reasurer, he had to dele0ate the actual inspection of PSB pro3ects to the Municipal !reasurers. Moreover, he clai"s that he -asconvinced to si0n the Certificate of Inspection b+ the representation of the Pro3ect En0ineer and Provincial En0ineer appearin0 in theState"ents of Hor4 Acco"plished that there -as (&&? pro3ect co"pletion, as -ell as b+ the e istence of Acceptance Reports issued b+officials of the Depart"ent of Education Culture and Sports #DECS$.

Petitioner concludes that he cannot be held liable in vie- of the doctrine enunciated in Arias v. Sandiganba an , to -it6

He can, in retrospect, ar0ue that Arias should have probed records, inspected docu"ents, received procedures, and <uestioned persons. Itis doubtful if an+ auditor for a fairl+ si>ed office could personall+ do all these thin0s in all vouchers presented for his si0nature. !he Court-ould be as4in0 for the i"possible. All *ea/( o- o-- 'e( have to rel+ )o a rea(o&ab e e )e&) on their subordinates and on the 0ood faith ofthose -ho prepare bids, purchase supplies, or enter into ne0otiations. If a depart"ent secretar+ entertains i"portant visitors, the auditor isnot ordinaril+ e pected to call the restaurant about the a"ount of the bill, <uestion each 0uest -hether he -as present at the luncheon,in<uire -hether the correct a"ount of food -as served, and other-ise personall+ loo4 into the rei"burse"ent voucherLs accurac+, propriet+,and sufficienc+. !here has to be so"e a//e/ rea(o& -h+ he should e a"ine each voucher in such detail. An+ e ecutive head of even s"all0overn"ent a0encies or co""issions can attest to the volu"e of papers that "ust be si0ned. !here are hundreds of docu"ents, letters,"e"oranda, vouchers, and supportin0 papers that routinel+ pass throu0h his hands. !he nu"ber in bi00er offices or depart"ents is even"ore appallin0 . #E"phasis and underscorin0 supplied$

Circu"stances obtainin0 in this case, ho-ever, preclude the application of Arias .

!o be0in -ith, -hen petitioner si0ned the certificate of inspection, he -as actin0 not in his capacit+ as treasurer but as a "e"ber of theInspectorate !ea". !he function of inspectin0 PSB pro3ects is not a"on0 the duties of a treasurer enu"erated in Section 8:& of the1@C. ) Since, petitioner -as not then actin0 as a head of office, Arias finds no application.

Si0nificantl+, petitioner hi"self ac4no-led0es the distinction bet-een his office as treasurer and his position as "e"ber of the Inspectorate!ea". In fact, he ta4es it to the e tre"e, ar0uin0 that, in his capacit+ as "e"ber of the !ea", he -as not even a public officer6 2It is ad"ittedthat herein petitioner bein0 then the Provincial !reasurer of riental Mindoro -as a public officer. But there is a clear and un"ista4abledistinction bet-een the ffice of Provincial !reasurer and "e"bership in the PSB Inspectorate !ea". As a "e"ber of the PSB, petitioner-as not vested -ith public office as such.2 # nderscorin0 supplied$ I f, as petitioner ar0ues, he -as not a public officer in his capacit+ as"e"ber of the Inspectorate !ea", then he certainl+ could not have been a head of office in such capacit+.

Moreover, the application of Arias "a+ be barred in certain cases in vie- of e ceptional circu"stances. !hus, in !ru" v. Sandiganba an , thisCourt ruled6

nli4e in Arias# ho-ever, there e ists in the present case a& e 'e3) o&a ' r'u ()a&'e -hich should have prodded petitioner, if he -ere

out to protect the interest of the "unicipalit+ he s-ore to serve, to be curious and 0o be+ond -hat his subordinates prepared orreco""ended. In fine, )*e a//e/ rea(o& 'o&)e 3 a)e/ & Arias -hich -ould have put petitioner on his 0uard and e a"ine the chec4Fsand vouchers -ith so"e de0ree of circu"spection before si0nin0 the sa"e -as obtainin0 in this case.

He refer to the unusual fact that the chec4s issued as pa+"ent for construction "aterials purchased b+ the "unicipalit+ -ere not "adepa+able to the supplier, $ell Lumber , but to petitioner hi"self even as the disburse"ent vouchers attached thereto -ere in the na"eof $ell Lumber . !he discrepanc+ bet-een the na"es indicated in the chec4s, on one hand, and those in the disburse"ent vouchers, on theother, should have alerted petitioner ' if he -ere conscientious of his duties as he purports to be ' that so"ethin0 -as definitel+ a"iss.

(&#E"phasis and underscorin0 supplied$

Such an e ceptional circu"stance e ists in the present case. Assu"in0 a0ain that PSB Resolution No. &/')9, -hich petitioner cites,accuratel+ reflects the functions of the Inspectorate !ea" in the i"ple"entation of PSB pro3ects, i t should have been clear to petitioner thatthe acceptance or turnover of PSB pro3ects is effected onl+ after these pro3ects have 0one throu0h the Inspectorate !ea". !hus, petitionershould have perceived the ano"al+ in the e istence of Acceptance Reports e ecuted b+ DECS officials prior to the Inspectorate !ea" sassess"ent of the pro3ects and its issuance of a certificate of inspection. Stran0el+, rather than bein0 alerted b+ this circu"stance, petitionereven clai"s that these Acceptance Reports -ere a"on0 his bases for si0nin0 the Certifi cate of Inspection.

!he Court, therefore, finds no 0rave abuse of discretion on the part of the C A -hen it denied petitioner s appeal.

n the third 0round of the petition K that petitioner cannot be held liable for the disallo-ed a"ount since the C A released the sub3ectNotices of Disallo-ance -ithout first i ssuin0 a Certificate of Settle"ent and Balances #CSB$ and a Notice of Suspension, the sa"e i s bereftof "erit.

Section 7./ of the Manual on Certi ficate of Settle"ent and Balances prescribed b+ C A Circular No. )8'&&( , (( cited b+ petitioner, defines2Certificate of Settle"ent and Balances2 as 2 a -rit ten notification b+ the auditor to the a0enc+ head and the accountable officer concernedof the total suspensions, disallo-ances and char0es found in audit, as -ell as the total settle"ents thereof.2 Section ((.(.( of the sa"edocu"ent states that the CSB 2su""ari>es all suspensions, disallo-ances and char0es found in audit, includin0 settle"ents thereof, as of a

















0iven date.2 It can thus be 0athered fro" the Manual that the CSB is a "ere su""ar+ of findin0s in audit -hich is furnished to the officersconcerned. In the present case, the alle0ed failure to issue the CSB could not have pre3udiced petitioner, since he -as alread+ a"pl+ notifiedb+ the C A of his total liabilit+ throu0h the issuance of the sub3ect Notices of Disallo-ance -hich -ere all received b+ hi" on the sa"e da+ . (%

Neither is petitioner s contention that a Notice of Suspension should have been issued prior to a Notice of Disallo-ance i"pressed -ith"erit. 2Suspension2 is defined b+ Section 7.( of the Manual as 2 t he defer"ent of action to allo- or disallo- in audit a transaction pendin0co"pliance -ith certain re<uire"ents.2 A Notice of Suspension, as provided in Section ((.% of the Manual, infor"s the concerned officer ofthe re<uire"ents he "ust sub"it to the auditor so that the suspension "a+ be l ifted. (7 In the present case, petitioner is bein0 held liable, not

for failure to sub"it an+ re<uired docu"ent, nor even for the deficienc+ in the pro3ects the"selves, but for his act of certif+in0 the (&&?co"pletion of these pro3ects -hen, in fact, the+ -ere not co"pleted. !hus, a Notice of Suspension -ould have served no purpose in thiscase.

In li0ht of the fore0oin0 discussions, consideration of petitioner s fourth ar0u"ent has beco"e unnecessar+.

EREFORE , the petition is "!SM!SSE" .

Costs a0ainst petitioner.

S RDERED.

CONC !TA CARP!O MORALES Associate *ustice

HE C NC R6

ARTEM!O 7. PANGAN!8AN Chief *ustice

REYNATO S. PUNO Associate *ustice

CONSUELO YNARES9 SANT!AGO Asscociate *ustice

LEONAR"O A. :U!SUM8!NG Associate *ustice

#on sic4 leave$ANGEL!NA SAN"O7AL9GUT!ERRE;

Asscociate *ustice

ANTON!O T. CARP!O Associate *ustice

MA. AL!C!A AUSTR!A9MART!NE; Asscociate *ustice

#on leave$RENATO C. CORONA

Associate *usticeA"OLFO S. A;CUNA

Asscociate *ustice

ROMEO . CALLE O, SR. Associate *ustice

"ANTE O. T!NGA Asscociate *ustice

M!N!TA 7. C !CO9NA;AR!O Associate *ustice

CANC!O C. GARC!A Asscociate *ustice

C E R ! I 5 I C A ! I N

Pursuant to Article =III, Section (7 of the Constitution, it is hereb+ certif ied that the conclusions in the above Decision -ere reached inconsultation before the case -as assi0ned to the -riter of the opinion of the Court.

ARTEM!O 7. PANGAN!8ANChief *ustice





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