G.R. No. 209712

Ruling

WHEREFORE, premises considered, the disallowance of subject [AGCs] is hereby AFFIRMED. In addition, the P10,000.00 out of the P35,000.00 [AGCs], granted to each personnel not previously disallowed in audit, is hereby disallowed for lack of legal basis. Accordingly, an ND disallowing the P10,000.00 portion of the P35,000.00 [AGCs] shall now be issued by this Office. [27] The Director explained as follows: first , BMHI's employees are not automatically entitled to the benefits accruing to the personnel of the parent corporation . BMHI, a subsidiary , has a personality separate and distinct from BCDA, its parent . BCDA Board Resolution No. 2003-09-186 cannot justify BMHI's grant/payment of AGCs to the latter's employees. Verily, BMHI's own Board is empowered to adopt a compensation plan and prepare/approve BMHI's annual budget. However, the BMHI Board did not pass a separate resolution exercising these powers to grant the subject AGCs. [28] Second , the BMHI Board is not entitled to AGCs. Under the BMHI by-laws; the members of the Board shall be entitled only to a reasonable per diem allowance per board meeting and compensation , which shall not exceed 10% of the preceding year's net income before income tax. Based on this ruling, the LAO-C issued Supplemental ND No. BMHI-2008-008 [29] dated March 26, 2008 to completely disallow the payment for AGCs amounting to P2,912,000.00, not merely portions thereof. Undaunted, the persons held liable for the disallowance appealed [30] to the COA Proper. Ruling of the COA Proper A. Original COA Proper Decision. In the assailed Original COA Proper Decision , the COA Proper sustained the disallowance for lack of legal basis. [31] It reiterated that the BMHI Board did not pass a resolution granting AGCs to BMHI personnel, from BCDA Board Resolution No. 2003-09-186. "BMHI employees are not automatically entitled to whatever benefits the BCDA may grant to its personnel precisely because BCDA and BMHI have distinct and separate juridical personalities." [32] The appellants pointed out that the BMHI Board issued Resolution No. 04-15 dated April 15, 2008 ratifying the grant of AGCs. However, the COA Proper ruled that this does not "cure the defect of the irregular disbursement x x x because BMHI did not have authority to grant something which its parent corporation, the BCDA, did not have authority to grant." Furthermore, Administrative Order No. (AO) 37 [33] dated November 21, 1998 and DBM Circular No. 16-98 dated November 26, 1998, prohibit government-owned and -controlled corporations from granting incentives and/or allowances, unless previously authorized by the Office of the President via administrative order. [34] Lastly, relying on Executive Director Casal v. Commission on Audit , [35] the COA Proper ruled on the appellants' liabilities as follows: (a) all payees , except the members of the Board, are absolved from liability, having received the AGCs without participating in the approval thereof and without know