Per Diem Is the Limit: Examining Compensation for Water District Directors

The Supreme Court has settled a recurring question in local water utilities: what compensation may directors of water districts legally receive? In De Jesus v. Civil Service Commission (G.R. No. 156559, September 30, 2005), the Court ruled that under Section 13 of Presidential Decree No. 198 (PD 198), per diem is the only compensation a water district director may receive. No other allowance, bonus, or benefit may be added on top of it.

The ruling affects not only regular directors but also employees of the Local Water Utilities Administration (LWUA) who sit on the boards of water districts. It also clarifies the jurisdiction of the Civil Service Commission (CSC) over such matters.

The Case

The controversy began when the LWUA Employees Association for Progress (LEAP) filed a complaint with the CSC against LWUA officials. LEAP questioned the legality of an LWUA deputy administrator receiving per diems, Representation and Transportation Allowance (RATA), discretionary funds, and other expenses from the Olongapo City Water District, where he sat as a board member, on top of his regular LWUA salary.

The LWUA argued that its personnel appointed to water district boards were entitled to the same compensation and benefits as regular directors. The CSC disagreed, ruling that it was illegal for any LWUA officer or employee sitting as a water district director to receive additional, double, or indirect compensation, except per diems under Section 13 of PD 198.

The Court of Appeals modified this ruling, allowing some benefits depending on their nature. The Supreme Court, however, reinstated the CSC's position, with one important modification regarding refunds.

The Issue

The central question was whether Section 13 of PD 198 prohibits LWUA-designated representatives to water district boards from receiving allowances and benefits on top of their regular per diems.

The Ruling

The Supreme Court ruled that per diem is precisely intended to be the compensation of water district directors. Section 13 of PD 198 states that each director shall receive a per diem for each board meeting actually attended, but no director shall receive per diems in any month exceeding the equivalent of four meetings. Critically, it adds: "No director shall receive other compensation for services to the district."

The Court applied the plain meaning rule of statutory interpretation. By specifying the compensation directors are entitled to receive, limiting the monthly amount, and stating they shall receive no other compensation, the law clearly authorizes directors to receive only per diems. No other compensation or allowance in whatever form may be given to or received by them.

The Court also addressed the CSC's jurisdiction. Water districts are government-owned and controlled corporations with original charters, making them part of the civil service under Article IX-B of the 1987 Constitution. The CSC, as the central personnel agency, has the power to construe PD 198 when deciding administrative cases involving public officials.

Good Faith and Refunds

Although the allowances and benefits were illegal, the Court ruled that the petitioners need not refund what they had already received. The payments were made in good faith, before the Court's earlier ruling in Baybay Water District v. Commission on Audit (425 Phil. 326, January 23, 2002) clarified that per diem was the only allowed compensation. Since the recipients had no knowledge the payments lacked legal basis, refunding them would be inequitable.

Practical Takeaways

• Water district directors may receive only per diems for board meetings actually attended, subject to the monthly cap of four meetings' worth of per diems.
• RATA, travel allowances, extraordinary and miscellaneous expenses, bonuses, cash gifts, uniform, rice, medical, and dental benefits are all prohibited for water district directors.
• LWUA employees who sit on water district boards cannot collect these benefits on top of their regular government salaries.
• The CSC has jurisdiction over compensation issues involving water district directors because water districts are government-owned and controlled corporations.
• Directors who received disallowed benefits in good faith before the Baybay Water District ruling may not be required to refund them, but payments made after the ruling would likely be subject to disallowance.

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