Water District Directors' Per Diems Are Their Only Compensation

The board members of a local water district often wear two hats: they serve the district while holding positions elsewhere in government. That arrangement raises a recurring question — how much may a director lawfully receive from the district? In Barbo v. Commission on Audit (G.R. No. 157542, October 10, 2008), the Supreme Court answered with a rule that has governed water districts for years: per diems are the only compensation a director may receive, and nothing more.

The facts of the case

The petitioners were officials of the Local Water Utilities Administration (LWUA) who also sat as designated members of the Interim Board of Directors of the San Fernando Water District (SFWD).

In 1995 and 1996, the LWUA Board of Trustees issued resolutions authorizing the SFWD board to receive representation and transportation allowance, travel allowance, extraordinary and miscellaneous expenses, Christmas bonus, uniform allowance, rice allowance, medical and dental benefits, and a productivity incentive bonus.

Relying on those resolutions, the petitioners received extraordinary and miscellaneous expenses, rice allowance, Christmas bonus, and productivity bonuses from 1994 to 1996.

In 1997, a Commission on Audit special audit team examined the district's accounts and disallowed the payments. The team found them excessive and contrary to the Government Accounting and Auditing Manual and to Civil Service Commission Resolution No. 954073, read with Section 13 of Presidential Decree No. 198, the Provincial Water Utilities Act of 1973. The petitioners were ordered to refund the amounts.

What the COA and the Court were asked to decide

The petitioners appealed to the COA Regional Director, then to the COA itself, and finally to the Supreme Court. They raised three main questions:

• Whether the COA had jurisdiction to declare the LWUA board resolutions contrary to Section 13 of PD 198;
• Whether that provision barred their allowances and bonuses; and
• Whether they were obliged to refund what they had received.

The COA may rule on the legality of disbursements

The Court held that the COA acted within its authority. Under Section 2, Subdivision D, Article IX of the 1987 Constitution, the COA audits all government agencies, including government-owned and controlled corporations with original charters, and may disallow illegal or irregular disbursements.

A water district, the Court explained, is such a corporation because it is created under a special law, PD 198. The Court had already settled this point in Rodolfo S. de Jesus (Catbalogan Water District) v. COA (G.R. No. 149154, June 10, 2003), and it reaffirmed that the COA's power does not clash with the jurisdiction of the courts, the Department of Budget and Management, or the LWUA.

Per diems are the only compensation allowed

Section 13 of PD 198 provides that each director shall receive a per diem for each board meeting actually attended, subject to a monthly ceiling equivalent to four meetings, and that no director shall receive other compensation for services to the district.

The Court gave the provision its plain meaning. In Baybay Water District v. Commission on Audit (G.R. No. 147248-49, January 23, 2002), it had already ruled that directors may receive only the per diem allowed by law and no other compensation or allowance in any form. Because the law is clear, it leaves water districts no discretion to grant other allowances and bonuses — and the LWUA board resolutions could not supply authority that the statute withheld.

Good faith excused the refund

The Court nevertheless ruled for the petitioners on the refund. It found that they had received the benefits in good faith, honestly believing that LWUA Board Resolution No. 313 authorized the payments. At the time, the Court had not yet decided Baybay Water District, so the petitioners had no knowledge that the payments lacked legal basis.

Following Abanilla v. Commission on Audit (G.R. No. 142347, August 25, 2005), the Court held that officials who disburse and receive benefits in good faith cannot be compelled to refund amounts already received. The disallowance stood, but the petitioners were excused from returning the money.

Practical takeaways

• A director of a local water district may receive only per diems for board meetings actually attended, subject to the statutory monthly ceiling under Section 13 of PD 198.
• Allowances and bonuses of any kind — RATA, rice allowance, Christmas bonus, productivity bonus, and similar benefits — are not permitted for water district directors.
• LWUA board resolutions cannot expand what PD 198 allows; the COA may disallow payments made under them.
• The COA has constitutional authority to audit water districts and disallow illegal or irregular disbursements.
• Recipients who acted in good faith, before the controlling ruling was handed down, may keep what they received even if the payment is disallowed.

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