Incentive Payments in Government Agencies: Lessons from the TransCo EME Case

The Supreme Court’s 2020 ruling in National Transmission Corporation v. Commission on Audit (G.R. No. 244193) provides crucial guidance for government-owned and controlled corporations (GOCCs) on the proper disbursement of extraordinary and miscellaneous expenses (EME). The case clarifies the documentary requirements for EME reimbursement and settles the rules on liability when the Commission on Audit (COA) disallows such payments.

The Case: Unsupported EME Payments

The National Transmission Corporation (TransCo), a GOCC created under the Electric Power Industry Reform Act (RA 9136), paid EME to its officials in 2010 pursuant to the General Appropriations Act. The payments were supported only by certifications from the officials stating that they had incurred expenses for official purposes—not by receipts or other documents evidencing actual disbursement.

COA disallowed the payments totaling P1,841,165.44 for violating COA Circular No. 2006-001, which requires EME claims to be supported by receipts or other documents evidencing disbursement. TransCo appealed, arguing that certifications should suffice, but COA sustained the disallowance.

The Issue: What Counts as Valid Proof?

The central question was whether a mere certification—without receipts—can support an EME reimbursement claim. TransCo relied on COA Circular No. 89-300, which allows certifications for national government agencies (NGAs). However, the Court clarified that this circular does not apply to GOCCs.

Under COA Circular No. 2006-001, EME payments must be strictly on a reimbursable basis, and claims must be supported by receipts or other documents that actually evidence disbursement. A certification that merely states expenses were incurred "for official purposes" does not qualify. To be valid, the document must reflect transaction details—the nature of the expenses, amounts, and dates incurred—similar to what a receipt would show.

The Ruling: Disallowance Upheld, But Liability Modified

The Court upheld the disallowance, ruling that TransCo failed to prove the payments were legitimate. However, it modified the liability of the officers involved.

Applying the framework from Madera v. Commission on Audit (G.R. No. 244128, September 8, 2020), the Court distinguished between approving officers and recipients:

• Approving and certifying officers who acted in good faith, without malice or gross negligence, are not civilly liable to return the disallowed amount. The Court found that TransCo's officers acted in good faith—they had relied on certifications for years without prior disallowances, and the judicial interpretation of the rules came only later in Espinas v. COA (2014).
• All recipients—including approving officers who received the amounts—must return what they personally received, based on the civil law principle of solutio indebiti (return of undue payment). This applies regardless of good faith.

Practical Takeaways

• Keep receipts. For EME reimbursement in GOCCs, certifications alone will not suffice. Maintain receipts and documents that clearly show the nature, amount, date, and place of each expense.
• Know which rules apply. COA Circular No. 2006-001 governs GOCCs and is stricter than the rules for NGAs. Do not assume NGA rules extend to GOCCs.
• Burden of proof is on the agency. The GOCC and its officials must prove that EME payments were legitimate and properly documented.
• Good faith protects approving officers—but not recipients. Officers who approve payments in good faith may avoid personal liability, but anyone who received the disallowed amount must return it.
• Uniform amounts raise red flags. Payments of identical amounts to multiple officials may be treated as "commutable" (fixed allowances) rather than reimbursable expenses, inviting disallowance.

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