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The Commission on Audit has flagged the Office of the Solicitor-General lawyers’ continued receipt of allowances exceeding 50 percent of their salaries.
In its 2016 annual audit report, the COA called on the government’s primary law firm to refund the excess allowances and limit receipt to the 50-percent cap. These allowances and honoraria were paid by OSG’s client government agencies for its legal services.
The OSG has resisted the audit recommendation, insisting that it has been following the law and that the COA Circular No. 85-25-E does not apply to its lawyers.
In fact, two notices of disallowance issued by auditors on February 2014 and August 2016 are currently pending appeal before the COA proper.
The COA’s recommendations in the 2016 audit report was a reiteration of that made in the previous year.
Millions past the cap
In 2016, incumbent Solicitor-General Jose Calida and predecessor Florin Hilbay received excess allowances of P1,123,742 and P4,662,144.41, respectively.
For the COA, they could only receive allowances up to P351,258, half their 2016 salaries of P702,516. (Calida and Hilbay each served for six months under President Rodrigo Duterte and predecessor Benigno
Aquino III, respectively.)
All in all, the excess allowances including those received by 15 other OSG officials totaled P8,555,767.80.
The other officials who received allowances above the 50-percent cap were: Myrna Agno Canuto, Herman Cimafranca, James Cundangan, Renan Ramos, Bernard Hernandez, Eric Remegio Panga, Ma. Antonia Edita Dizon, Danilo Leyva, Raymund Rigodon, Liway Czarina Ruizo, Sonny Von Ruaya, Lilian Abenojar, John Dale Ballinan, Melbourn Ziro Pana, and Ma. Hazel Acantilado.
While the OSG lawyers are authorized by Section 7 of Republic Act No. 9417 to receive allowances and honoraria, this is “not without limitations,” according to the COA.
It cited Item 4 of the COA circular issued in April 1985, which limits a government employee’s “extra compensation” equivalent to “fifty per centum of his annual salary.”
Pending resolution of the appeal on the NDs, the COA said: “The OSG officers and employees who rendered legal services and advise to client agencies should have collected only the amount of up to 50 percent of their basic salary.”
The excess allowances should be deposited in the OSG trust fund in the meantime, so they could later be given if the CoA issues a favorable decision.
For now, the COA said the Financial Management Service should only process allowances up to the 50-percent threshold.
Not reported for taxation
Yet, the COA observed that not all the allowances passed through the FMS because the OSG officials have not reported them as required by OSG Office Order No. D-188, series of 2009.
This meant the allowances were not properly monitored for taxation purposes, the CoA said.
Of the P8.56 million figure cited above, the listed OSG officials were found to have directly received P2,747,250 of the allowances from the client agencies. This figure includes P342,500 and P466,000 directly received by Calida and Hilbay.
Upon confirmation, the COA also found that a total of P3,372,756.85 in allowances was directly remitted by eight agencies: Aklan State University, Department of Education Division of Rizal, Development Bank of the Philippines, Film Development Council of the Philippines, Land Transportation Office, Occidental Mindoro State College, Philippine National Railways, and the Central Bank Board of Liquidators.
“The failure of the OSG employees to report the allowances directly given to them by client agencies provides no assurance that the correct taxes were indeed withheld or no taxes were withheld at all,” the audit report read.
The COA urged the OSG to require lawyers to abide by the said office order.
OSG takes exception
The OSG acknowledged the need to enforce the requirement so the allowances may be properly taxed.
But, the agency took exception to the CoA’s insistence on the 50-percent allowance cap.
The audit report noted that the OSG invoked Section 1(i) of Presidential Decree No. 478 (the 1974 OSG law) and Section 35(9), Chapter 12, Title III, Book IV of Executive Order No. 292 (Administrative Code of 1987).
Citing the rules, the OSG said its lawyers have been authorized to receive honoraria and allowances for their legal services “without qualification as to the number of agreements” they can enter into.
The OSG also told the COA that the Administrative Code and the OSG law repealed the 1985 circular that imposed the allowance cap, since it was effectively inconsistent with the regulations.
It also said the COA exceeded its authority by imposing a ceiling on allowances when it was only mandated to guard against irregular, unnecessary and excessive expenditures.
“Thus, COA Circular No. 85-25-E, which was issued beyond the scope of the statutory authority granted by the legislature to an administrative agency, is void,” the OSG told the COA
As a rejoinder, state auditors stood firm that the allowances should be limited. Since RA 9417 and EO 292 did not fix the allowable amount of benefits, they said the COA Circular on the 50-percent cap was deemed applicable to the OSG.
In a text message to reporters, Hilbay maintained that “obviously, the COA doesn’t have the authority to countermand an act of Congress.”
He explained that the matter of excess allowances has been an “old, recurring issue between OSG and COA.”
“The CoA can’t amend a law, especially a specific provision of law that goes back to the Administrative Code of 1987 and reiterated under [RA] 9417. That’s always been the position of the OSG under every SolGen,” he said.
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