Accountability in Government: When Good Faith Does Not Excuse Negligence in Public Fund Disbursements

The Supreme Court has long recognized that public officers who receive disallowed benefits in good faith may keep them. But the same protection does not automatically extend to the officers who approved or certified those disbursements. In Sambo v. Commission on Audit (G.R. No. 223244, June 20, 2017), the Court En Banc drew a clear line: good faith is not a shield when an approving officer patently disregards explicit rules on public spending.

The case involved disallowed employee benefits paid by QUEDANCOR, a government-owned and controlled corporation, in its Region V office. The Commission on Audit (COA) disallowed payments for Year-End Benefits, Performance Bonus, Productivity Incentive Benefit, and Medicine Reimbursements totaling P94,913.15. The disallowance was based on the fact that the payees were casual employees whose appointments were not approved by the Civil Service Commission, and the medicine reimbursements lacked statutory authority.

The Issue

The petitioners were the Acting Regional Assistant Vice President and the Regional Accountant of QUEDANCOR Region V. They argued that they should not be held personally liable for the disallowed amounts because they merely performed ministerial functions in good faith, following the circulars and authorities issued by their head office. They also claimed that the real liability should fall on the policy-makers who issued the guidelines.

The Ruling: Good Faith Has Limits

The Supreme Court dismissed the petition and affirmed the COA decision. The Court held that under the Government Auditing Code (Presidential Decree No. 1445), an official or employee is personally liable for unlawful expenditures if: (a) there is an expenditure of government funds; (b) the expenditure violates law or regulation; and (c) the official is directly responsible for it.

The Court applied the standard set in earlier cases like Casal v. COA and Velasco v. COA: approving officers are liable for refunds if they acted in bad faith or were grossly negligent amounting to bad faith. The presumption of regularity in the performance of official duties fails when an explicit rule is violated.

In this case, the petitioners violated clear issuances. Budget Circular No. 2005-6 excluded casual employees from Year-End Benefits. Budget Circular No. 2005-07 and National Compensation Circular No. 73 required that employees be covered by CSC-approved appointments to receive Performance Bonus and Productivity Incentive Benefit. The medicine reimbursements were paid without the specific statutory authority required by the Government Auditing Code.

The Court noted that the petitioners' query to their head office was dated April 2007, while some checks were issued even before that date. Their reliance on internal authorities did not excuse their failure to observe the mandatory rules.

Who Is Liable?

The Court clarified that the petitioners' claim that only they were held liable while the President and CEO were exempted was incorrect. The Notice of Disallowance itself named the President and CEO as liable for issuing the circulars authorizing the payments. Under the Administrative Code of 1987, every official or employee who authorizes or makes an illegal payment, or takes part in it, is jointly and severally liable to the government for the full amount paid.

Practical Takeaways

• Good faith protects recipients, not approving officers. Rank-and-file employees who receive disallowed benefits in good faith generally need not refund them. Approving and certifying officers face a stricter standard.
• Patent disregard of rules equals gross negligence. Following internal guidelines does not excuse an officer from complying with explicit laws and COA circulars. The presumption of regularity fails when a clear rule is violated.
• Ministerial duty is not a defense. Claiming that one merely followed orders from superiors does not absolve an officer who certified or approved an illegal disbursement.
• Solidary liability applies broadly. Officers who authorize, certify, or approve illegal payments can be held jointly and severally liable, even if they did not personally receive any of the disallowed amounts.
• When in doubt, verify the legal basis. Before approving any disbursement of public funds, officers should confirm that the payment has a clear statutory or regulatory basis, not just an internal memorandum or circular.

This article is general information and not legal advice. For your specific situation, consult a lawyer or ask ASG Legal AI.