EX Officio Roles and Compensation When Extra Pay Violates the Constitution

The Supreme Court has affirmed the Commission on Audit's (COA) disallowance of P5,451,500.00 in per diems paid to ex officio members of the Philippine Economic Zone Authority (PEZA) Board of Directors. In Philippine Economic Zone Authority v. Commission on Audit (G.R. No. 189767, July 3, 2012), the Court En Banc ruled that the payments violated the constitutional prohibition against additional compensation for ex officio positions. The ruling clarifies the limits on compensating public officials who serve in multiple capacities and underscores the importance of heeding COA notices.

The Constitutional Prohibition on Double Compensation

The case centers on Section 13, Article VII of the 1987 Constitution, which prohibits the President, Vice-President, Cabinet members, and their deputies or assistants from receiving, during their tenure, any other emoluments from the government. The Court had earlier explained in Civil Liberties Union v. Executive Secretary (G.R. Nos. 83896 & 83815, February 22, 1991) that an ex officio position is "actually and in legal contemplation part of the principal office." When an official performs duties in an ex officio capacity, those services are already covered by the compensation attached to the principal office. Any extra payment—whether called a per diem, honorarium, or allowance—constitutes prohibited additional compensation.

The PEZA Board and the Deleted Provision

The PEZA Board is composed of 13 members, including the Undersecretaries of various departments such as Finance, Labor, Interior and Local Government, and Environment. These officials serve in an ex officio capacity. Under the original Section 11 of Republic Act No. 7916 (the Special Economic Zone Act of 1995), board members were authorized to receive per diems. However, the amendatory law, Republic Act No. 8748 (1999), deleted this provision.

The Court in Bitonio, Jr. v. Commission on Audit (G.R. No. 147392, March 12, 2004) already settled that this deletion was deliberate—the framers recognized that the per diem provision conflicted with the constitutional proscription. The Court in the PEZA case found no reason to revisit this doctrine.

The Disallowed Payments and the Good Faith Defense

COA issued Notices of Disallowance (NDs) covering per diems paid to ex officio board members from 2001 to 2006. PEZA argued that it acted in good faith, believing the payments were legal, and that the ex officio members received them honestly.

The Court rejected this defense. Good faith requires "honesty of intention, and freedom from knowledge of circumstances which ought to put the holder upon inquiry." PEZA could not claim ignorance of the payments' questionable legality. The Civil Liberties Union doctrine had been on the books since 1991—a decade before the disallowed payments began. Moreover, COA had issued NDs as early as 1998 for similar per diem payments, and the Bitonio case was decided in 2004. Despite these repeated warnings, PEZA continued the disbursements through 2006. The Court noted that if PEZA genuinely believed it had a legal basis while the issue was pending, the prudent course would have been to withhold payment rather than continue disbursing funds.

Practical Takeaways

• Ex officio board members of government agencies generally cannot receive per diems or other extra compensation for their board attendance, as this violates Section 13, Article VII of the Constitution.
• Public officials and agencies should heed COA notices of disallowance promptly. Continued payment after receiving such notices negates any claim of good faith.
• When a law appears to authorize additional compensation for ex officio roles, verify whether the provision survives constitutional scrutiny—deletion by an amendatory law may signal a constitutional conflict.
• The doctrine from Civil Liberties Union applies broadly: any additional compensation for ex officio service, by whatever name, is constitutionally suspect.
• Agencies facing uncertainty about the legality of payments should consider withholding disbursements pending judicial clarification, rather than risking personal liability for refunds.

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