When Public Service Meets Financial Benefit: Balancing Compensation for Water District Board Members

Compensation for public service: A delicate balance

Serving on the board of a local water district is a form of public service. But what compensation can board members legally receive? A 2004 Supreme Court decision in Querubin v. Commission on Audit (G.R. No. 159299) provides clear guidance on this question, ruling on the limits of board member compensation and the consequences of receiving disallowed benefits.

The case involved members of the Board of Directors of the Bacolod City Water District (BCWD) who received various allowances and bonuses in 1999, including Personal Economic Relief Allowance (PERA), Representation and Transportation Allowance (RATA), Uniform Allowance, Rice Allowance, Mid-Year Bonus, and other benefits. These were granted under Resolution No. 313 of the Local Water Utilities Administration (LWUA).

The legal issue

The Commission on Audit (COA) disallowed these payments, ruling that they violated Section 13 of Presidential Decree No. 198, the Provincial Water Utilities Act of 1973. This provision states that each director shall receive a per diem for each board meeting actually attended, but no director shall receive per diems exceeding the equivalent of four meetings in any month. Critically, it provides that "no director shall receive other compensation for services to the district."

The board members argued that the allowances were validly authorized by LWUA Resolution No. 313. The COA, however, maintained that the resolution conflicted with the clear language of PD 198.

The Supreme Court's ruling

The Court sided with the COA on the disallowance. Citing the earlier case of Baybay Water District v. Commission on Audit (G.R. Nos. 147248-49, January 23, 2002), the Court held that Section 13 of PD 198 is clear: per diem is the intended compensation for board members of water districts. The law expressly prohibits any other compensation or allowance in whatever form.

The Court also ruled that LWUA Resolution No. 313, which granted additional benefits, was not in conformity with the law. Water districts cannot exercise discretion to pay other allowances and bonuses beyond what the law allows.

Good faith and refunds

However, the Court made an important distinction regarding the refund. Citing De Jesus v. Commission on Audit (G.R. No. 149154, June 10, 2003) and Blaquera v. Alcala, the Court ruled that the board members need not refund the amounts they received in 1999.

The reason: they received these benefits before the Court declared in Baybay Water District (promulgated on January 23, 2002) that such payments were illegal. At the time, they honestly believed that LWUA Resolution No. 313 validly authorized the payments. This good faith, the Court held, protects them from the obligation to refund.

Practical takeaways

• Per diem is the only compensation. Board members of local water districts may receive only per diem for meetings actually attended, subject to the monthly limit of four meetings' worth. No other allowances, bonuses, or benefits may be granted.
• LWUA resolutions cannot override the law. Even if the LWUA issues a resolution authorizing additional compensation, such resolution is void if it conflicts with PD 198.
• Good faith can protect against refunds. Board members who received disallowed benefits before the illegality was declared by the Supreme Court may not be required to refund them, provided they acted in good faith.
• COA disallowance is the starting point. The COA has the authority to disallow unlawful disbursements in its post-audit of government accounts.
• Procedural rules matter, but not always. The Court may overlook procedural technicalities to decide cases on their merits, especially when substantial justice is at stake.

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