Per Diem Limits for Water District Directors: Harmonizing Executive Orders and Governing Laws

The Supreme Court has settled a recurring question for directors of local water districts and other government-owned or controlled corporations (GOCCs): what is the legal limit on their monthly per diems? In De Guzman v. Commission on Audit (G.R. No. 217999, July 26, 2016), the Court harmonized Presidential Decree No. 198 with Administrative Order No. 103, confirming that the President's P20,000 monthly cap prevails over conflicting issuances of the Local Water Utilities Administration (LWUA).

The Facts of the Case

Five directors of the Baguio Water District (BWD) each received P33,600 in per diems for September 2004, covering four board meetings at P8,400 per meeting. The Commission on Audit (COA) disallowed the amounts exceeding the P20,000 monthly cap set by Administrative Order No. 103, which President Arroyo issued on August 31, 2004 to impose austerity measures across government.

The directors argued that their per diems were valid because an LWUA issuance authorized P8,400 per meeting. They insisted that PD 198, the law creating water districts, should prevail over an executive order.

The Issue Presented

The case raised two questions: whether COA erred in applying AO 103 instead of PD 198, and whether the directors should refund the P68,000 aggregate excess.

The Court's Ruling: No Conflict Between PD 198 and AO 103

The Court rejected the premise that PD 198 and AO 103 were irreconcilable. Section 13 of PD 198, as amended by RA 9286, allows boards to set per diems above P150 per meeting, subject to LWUA approval. AO 103, meanwhile, imposes a separate ceiling: no director may receive more than P20,000 per month in combined per diems, honoraria, and fringe benefits.

These provisions operate on different planes. PD 198 governs how per diems are fixed and approved; AO 103 caps the monthly total. There is no conflict because AO 103 does not strip LWUA of its approval power—it merely limits the amount.

The President's Power of Control Resolves the True Conflict

The real conflict was between AO 103 and the LWUA issuance that allowed per diems far exceeding the P20,000 cap. The Court held that the President can overrule LWUA's issuance. Under Section 17, Article VII of the Constitution, the President has control over all executive departments, bureaus, and offices. This power includes the authority to "alter or modify or set aside what a subordinate officer had done."

Because LWUA is a GOCC subject to presidential control, its issuances may be modified or abrogated by the President. The conflicting LWUA issuance was effectively superseded when AO 103 took effect.

Good Faith Defense Rejected

The directors invoked good faith, citing cases where the Court excused refunds. The Court distinguished those precedents. AO 103 took effect immediately upon publication on September 3, 2004. The directors received copies by September 16, 2004, yet still accepted the fourth check for P8,400. Unlike earlier cases where the law was ambiguous, AO 103 was categorical: no per diems above P20,000 per month. The directors were ordered to refund P13,600 each, totaling P68,000.

Practical Takeaways

• The P20,000 monthly cap applies broadly. Directors of water districts and other GOCCs cannot receive combined per diems, honoraria, and fringe benefits exceeding P20,000 per month, regardless of what LWUA or similar agencies approve.
• Executive orders can override agency issuances. The President's power of control allows the abrogation of conflicting circulars issued by GOCCs under the executive branch.
• Publication triggers effectivity. Administrative orders take effect upon publication in newspapers of general circulation, not upon receipt by affected offices. Officers cannot claim ignorance after publication.
• Good faith has limits. The defense of good faith fails when the governing rule is clear and published, and the recipient accepts payment after its effectivity.
• Review per diem structures promptly. Boards should audit existing compensation arrangements against AO 103 and any successor issuances to avoid personal liability for disallowed amounts.

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