Benguet State University vs. Commission on Audit

A chartered state university’s power under Section 4(d) of Republic Act No. 8292 to disburse income generated from tuition, fees, and auxiliary operations is confined to instruction, research, extension, and other programs or projects of the same academic genus; the grant of rice subsidy and health care allowance to employees, being outside that class and lacking specific statutory authorization, violates the constitutional prohibition on additional, double, or indirect compensation and is properly disallowed by the Commission on Audit.

Congress enacted Republic Act No. 8292, the Higher Education Modernization Act of 1997, granting governing boards of chartered state universities and colleges certain powers, including authority to retain and disburse income derived from university operations. Pursuant to Section 4(d) of the law, the Board of Regents of Benguet State University passed Board Resolution No. 794 on October 31, 1997, providing a rice subsidy and a health care allowance to its employees. The amounts were taken from income generated by the university and were released to employees in 1998. On post-audit, the Commission on Audit disallowed the disbursements, prompting the university to challenge the disallowance through administrative appeals and ultimately before the Supreme Court.

• The Grant of Allowances: Pursuant to Section 4(d) of Republic Act No. 8292, the Board of Regents of Benguet State University approved Board Resolution No. 794 on October 31, 1997, granting rice subsidy and health care allowance to BSU employees. The funds were drawn from income generated by the university’s operations and were released to employees at different periods in 1998, totaling P4,350,000.00.

• The Audit Disallowance: On October 20, 1999, the Commission on Audit issued Notice of Disallowance No. 99-001-STF (98), disallowing the entire amount on the ground that R.A. No. 8292 did not authorize the grant of such allowances to university employees and officials.

• COA Regional Denial: BSU requested the lifting of the disallowance with the COA Regional Office. In COA-CAR Decision No. 2000-3 dated January 26, 2000, the Regional Office denied the request, holding that: (a) under Section 55(2) of the General Appropriations Act of 1998 (R.A. No. 8522), a non-existent item of expenditure cannot be funded by augmentation from savings or by the use of appropriations; (b) the grant lacked statutory basis; (c) it transgressed the constitutional prohibition on additional, double, or indirect compensation; and (d) it ran counter to the provisions of the Salary Standardization Law.

• COA Commission Proper’s Denial: BSU appealed to the COA Commission Proper, which denied the petition in Decision No. 2003-112 dated July 17, 2003. The Commission applied the maxim ejusdem generis to hold that the phrase “other programs/projects” in Section 4(d) of R.A. No. 8292 referred only to programs of the same nature as instruction, research, and extension—i.e., academic undertakings—and did not embrace employee benefits. It also reiterated that the grant violated the constitutional prohibition on additional compensation and the Salary Standardization Law.

• Motion for Reconsideration: BSU’s motion for reconsideration was denied in Decision No. 2005-019 dated March 17, 2005.

• Petition Before the Supreme Court: BSU elevated the matter captioned as a Petition for Review on Certiorari. The Supreme Court treated the petition as one for certiorari under Rule 65 of the Rules of Court, which is the proper mode to review judgments or final orders of the Commission on Audit, because the allegations asserted grave abuse of discretion and reversible legal error.

• Fiscal Autonomy and Statutory Authority: Petitioner maintained that R.A. No. 8292 vests chartered state universities with fiscal autonomy and grants their governing boards ample leeway in the appropriation and disbursement of funds. It argued that Section 4(d) authorized the grant of the rice subsidy and health care allowance because the phrase “other programs/projects” embraces all university programs, including those designed to uplift the economic plight of employees, and is not limited to academic programs.

• No Violation of Constitutional and Civil Service Rules: Petitioner contended that the allowances were incentives granted in appreciation of services rendered and in recognition of the employees’ economic condition, not additional compensation within the constitutional prohibition. It added that the amounts were taken from income generated by its operations and retained by the university, which the Governing Board was empowered to disburse in any manner necessary to carry out its programs.

• Salary Standardization Law: Petitioner argued that the Salary Standardization Law (R.A. No. 6758) does not expressly prohibit the benefits because they are in the nature of financial assistance, not additional income.

• Limited Scope of Section 4(d): The Commission on Audit countered that the term “other programs/projects” in Section 4(d) must be read under the maxim ejusdem generis as limited to activities of the same genus as instruction, research, and extension—namely, academic-related undertakings. The rice subsidy and health care allowance, being employee welfare benefits, did not fall within that genus and were therefore patently beyond the university’s statutory authority.

• Constitutional and Statutory Prohibitions: Respondent argued that the grant offended the constitutional prohibition on additional, double, or indirect compensation under Section 8, Article IX-B of the 1987 Constitution because no specific law authorized the payment. It further maintained that the allowances were not among the permissible benefits enumerated in Section 12 of the Salary Standardization Law and thus could not be received over and above standardized salary rates.

• Statutory Authority: Whether Benguet State University is authorized under Section 4(d) of Republic Act No. 8292 to grant rice subsidy and health care allowance to its employees.

• Refund of Disallowed Benefits: Whether the employee-recipients of the disallowed rice subsidy and health care allowance must refund the amounts they received.

• Statutory Authority: The grant of rice subsidy and health care allowance found no legal basis in Section 4(d) of R.A. No. 8292. Under the principle of ejusdem generis, the general phrase “other programs/projects” following the specific enumeration of “instruction, research, extension” was limited to undertakings of the same academic nature. The rice subsidy and health care allowance, designed as employee welfare benefits, were entirely unrelated to the university’s academic mission and thus beyond the scope of the disbursement authority. The statutory language, read in full, revealed that the powers of the Governing Board were subject to limitations and not plenary and absolute. Academic freedom, as defined in the Constitution and recognized in R.A. No. 8292, encompassed only the institution’s prerogative over who may teach, what may be taught, how it shall be taught, and who may be admitted to study; it did not confer unbridled authority to disburse funds or grant additional benefits without specific statutory authorization. The allowances additionally contravened Section 8, Article IX-B of the 1987 Constitution, which prohibits elective or appointive public officers or employees from receiving additional, double, or indirect compensation unless specifically authorized by law, because no such authorizing law existed. The benefits were also not among the allowances excluded from consolidation under Section 12 of R.A. No. 6758 (Salary Standardization Law), which provides an exclusive list of allowances that may be received over and above standardized salary rates. Consequently, the Commission on Audit did not commit grave abuse of discretion in disallowing the disbursement.

• Refund of Disallowed Benefits: The employee-recipients need not refund the amounts they received. The rule in Philippine Ports Authority v. Commission on Audit was applied: where employees received disallowed benefits in good faith, under a duly issued board resolution, and without knowledge that the grant lacked legal basis, equity precludes a refund. The BSU employees received the rice subsidy and health care allowance in good faith because the benefits were authorized by Board Resolution No. 794, series of 1997, and they had no knowledge of the statutory defect.

• Ejusdem Generis — Where a statute enumerates things of a particular class followed by words of a generic character, the general term is limited to things of the same nature as those specifically enumerated, unless the context indicates otherwise. In this case, the “other programs/projects” in Section 4(d) of R.A. No. 8292 was read to include only academic undertakings akin to instruction, research, and extension, excluding employee welfare benefits.

• Good Faith Exception to Refund of Disallowed Benefits — Government employees who receive disallowed benefits in good faith, under an official authorization and without knowledge of the lack of legal basis, are not obliged to refund the amounts received. This principle, drawn from Philippine Ports Authority v. Commission on Audit, was applied to exempt BSU employees from refunding the rice subsidy and health care allowance.

• Scope of Academic Freedom — Academic freedom, as guaranteed in the Constitution and referenced in R.A. No. 8292, is limited to the institution’s discretion over academic matters—who may teach, what may be taught, how it shall be taught, and who may be admitted to study. It does not extend to granting the institution unbridled fiscal power to disburse funds and confer additional compensation absent specific statutory authorization.

• Constitutional Prohibition on Additional Compensation (Article IX-B, Section 8) — Elective or appointive public officers and employees may not receive additional, double, or indirect compensation unless specifically authorized by law. A university board resolution, without a direct statutory basis, does not satisfy the requirement of specific legal authorization.

• Consolidation of Allowances under the Salary Standardization Law (Section 12, R.A. No. 6758) — All allowances are deemed integrated into standardized salary rates except for those expressly enumerated (representation and transportation allowances, clothing and laundry allowances, subsistence allowance, hazard pay, and other additional compensation determined by the DBM). Rice subsidy and health care allowance, not being among the enumerated exclusions, cannot be granted on top of standardized salaries.

• “Under the principle of ejusdem generis, where a statute describes things of a particular class or kind accompanied by words of a generic character, the generic word will usually be limited to things of a similar nature with those particularly enumerated, unless there be something in the context of the statute which would repel such inference.” — This passage articulates the maxim the Court used to limit “other programs/projects” to academic undertakings.

• “Academic freedom as adverted to in the Constitution and in R.A. No. 8292 only encompasses the freedom of the institution of higher learning to determine for itself, on academic grounds, who may teach, what may be taught, how it shall be taught, and who may be admitted to study. The guaranteed academic freedom does not grant an institution of higher learning unbridled authority to disburse its funds and grant additional benefits sans statutory basis.” — This excerpt delimits the constitutional concept of academic freedom and forecloses its use as a source of unlimited spending power.

• “x x x Petitioners received the hazard duty pay and birthday cash gift in good faith since the benefits were authorized by PPA Special Order No. 407-97 … Petitioners at the time had no knowledge that the payment of said benefits lacked legal basis. Being in good faith, petitioners need not refund the benefits they received.” — The portion of Philippine Ports Authority v. COA applied by the Court to excuse refund, underscoring the good-faith reliance rationale.

• Philippine Ports Authority v. Commission on Audit, G.R. No. 159200, February 16, 2006, 482 SCRA 490 — Followed and applied. The ruling that employees who received disallowed benefits in good faith need not refund them was extended to BSU employees.

• Ching v. Salinas, G.R. No. 161295, June 29, 2005, 462 SCRA 241 — Cited for the definition and application of the ejusdem generis principle to statutory interpretation.

• Camacho v. Coresis, G.R. No. 134372, August 22, 2002, 387 SCRA 628 — Cited for the meaning and limited scope of academic freedom under the Constitution and R.A. No. 8292.

• Reyes v. Commission on Audit, G.R. No. 125129, March 29, 1999, 305 SCRA 512 — Cited to establish that a judgment or final order of the Commission on Audit is properly brought to the Supreme Court via a petition for certiorari under Rule 65.

• Partido ng Manggawa v. Commission on Elections, G.R. No. 164702, March 15, 2006, 484 SCRA 671 — Cited for the principle that the nature of an action is determined by the allegations in the complaint, not by its caption, supporting the treatment of the mislabeled petition as one for certiorari.

• Philippine International Trading Corporation v. Commission on Audit, G.R. No. 152688, November 19, 2003, 416 SCRA 245 — Cited to explain that the allowances excluded from consolidation under Section 12 of the Salary Standardization Law are those granted to defray or reimburse expenses incurred in the performance of official functions.

• Republic Act No. 8292, Section 4(d) — Higher Education Modernization Act of 1997 — Specifies that income generated by a chartered state university from tuition and other charges, auxiliary services, and land grants may be retained and disbursed by the Governing Board for “instruction, research, extension, or other programs/projects of the university or college.” Construed under ejusdem generis to limit “other programs/projects” to activities of the same academic nature, thereby excluding employee rice subsidy and health care allowance.

• 1987 Constitution, Article IX-B, Section 8 — Prohibits elective or appointive public officers or employees from receiving additional, double, or indirect compensation unless specifically authorized by law. Applied to invalidate the grant of allowances that had no specific statutory basis.

• Republic Act No. 6758, Section 12 — Salary Standardization Law — Consolidates all allowances into standardized salary rates except for a closed list (representation and transportation allowances; clothing and laundry allowances; subsistence allowance of marine officers and hospital personnel; hazard pay; allowances of foreign service personnel; and other compensation determined by the DBM). Rice subsidy and health care allowance, not being among the enumerated exceptions, were deemed included in the standardized salary and could not be granted separately.

• CHED Memorandum No. 03-01, Rule V, Section 18 — Revised Implementing Rules and Regulations for R.A. No. 8292 — Reiterates the same limited power of governing boards to disburse income for instruction, research, extension, or other programs/projects, reinforcing the statutory interpretation.

• 1997 Rules of Civil Procedure, Rule 64, Section 2 and Rule 65 — Prescribes that judgments or final orders of the Commission on Audit may be brought to the Supreme Court on certiorari under Rule 65. The Court treated the mistitled petition accordingly.

Quisumbing (Acting Chief Justice), Ynares-Santiago, Sandoval-Gutierrez, Carpio, Austria-Martinez, Corona, Azcuna, Tinga, Chico-Nazario, Garcia, Velasco, Jr., JJ., concur. Puno, C.J. and Carpio-Morales, J., on leave.