COMMISSION ON AUDIT DECISION NO. 2011-055 - August 17, 2011

Republic of the Philippines
COMMISSION ON AUDIT
Commonwealth Avenue, Quezon City, Philippines
Subject: Petition for Review of the
Development Bank of the Philippines
(DBP), Makati City, of COA Legal
Servict.:!s Sector (LSS) Decision No.
2009-334 dated October 13, 2009
affirming Notice of Disallowance
(NO) No. BOD-2006-003 (2005)
dated April 4 , 2007 in the total amount
of Pl,574, l21.62, relative to the
foreign travels of DBP officials
without the approval of the President
of the Philippines
FACTS OF THE CASE
DECISION
DECISION NO. 201 I - 055
AUG l 7 2011
On April 5, 2005, Ms. Adela L. Dondonilla, then DBP Supervising
Auditor (SA), issued Audit Observation Memorandum (AOM) No. HO­
BOD-A0-2004-002, noting that the following foreign travels of DBP
Chairman Vitaliano N . Nanagas II and Director Eligio V. Jimenez were not
cleared by the O ffice of the President as required by Section l of
Administrative Order (AO) No. 103 dated August 3 1, 2004 (Directing the
Continued Adoption of Austerity Measures in the Government), to wit:
Name Country
Chairman Vital iano N. Nanagas II Vietman
Japan
Japan and
Hongkong
Director Eligio V. Jimenez
USA
Period
October 5-9, 2004
October 18-23, 2004
November l-7, 2004
October 1-29,2004

Subsequently, NO No. BOD-2006-003 (2005) dated April 4, 2007,
was issued by Atty. Hilconeda P. Abril, SA, DBP, disallowing the total
amount of Pl,574,121.62 consisting of 1'678,992.76 and 1'895,128.86 for
the reimbursement of travel expenses of Chairman Nai\agas II and Director
Eligio V. Jimenez. respectively.
Chairman Nai\agas II, through counsel, filed with the COA
Commission Proper on October I 0, 2007, an appeal briet/memorandum to
lift the disallowance against him, stating the f(JIIowing arguments:
1) The amount of P67R,992.76 disallowed in audit was
disbursed in connection with his oflicial foreign travel fi·om
May I 5 to June 11, 2004, which took place long before the
issuance and effectivity of AO No. 103. The said AO was
issued C>n!y on August 31, 2004.
Chairman Naiiagas II submitted a copy of Memorandum
dated September 23, 2007 issued by the then Chief
Presidential Legal Counsel, Sergio A. F. Apostol, which
claritied that at the time of the questioned travel. the
requirement of a presidential approval or clearance was not
yet in effect. The law in force at that time was Executive
Order (EO) No. 298 dated March 23, 2004, which amended
EO No 248. Section 5 of the latter, as amended, provides
that the approval of travels of ofticials of government-owned
and/or controlled corporations (GOCCs) and government
financial institutions (GFis) lasting not more than one month
shall bt subject to policies, rules and regulations adopted by
their respective governing boards.
2) The disallowed disbursement is not a liquidation of a prior
travel cash advance, rather, it is constitutive of reimbursement
of expenses chargeable against an expense allowance to
which :til members of the DBP Board, him included, arc
entitled to. The documentation requirement for travel
expenses cannot be applied to the availment of said expense
allowance.
3) The disallowance was arrived at without gtv111g him due
process as the first time that he knew that the subject
expenses were questioned was when he received the said N D.
Thus, he did not have the opportunity to address any negative
audit observation before the same ripened into a
disallowance.
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ISSUES
2. If COA tinds that the said opmion is erroneous, the DBf'
officials who approved the questioned travels should be
accorded the benefit of good faith and not be held liable.
The two is,ues tor resolution are:
I. Whether or not the foreign travels require prior approval by the
Office c•fthe President; and
2. Whether or not the defense of good faith on the part of those who
approved the said travels is meritorious.
DISCUSSION
EO No. 24X, as amended by EO 298, applies to the foreign travels in
question. However, the specific applicable provision is not Section 5 of
EO No. 248 under Title I thereof but Section 8 of Title II (Otlicial Travel
Abroad of Government Personnel), as pointed out by SA Abril.
In his September 23, 2007 opinion, Chief Presidential Legal Counsel
Apostol said that Section 5 of EO No. 248, as amended by EO No. 298,
provides that approval of travels of officials and employees of GOCCs
lasting not more than one calendar month shall he subject to policies, rules
and regulations adopted by their respective governing boards.
However, the said Section 5 of EO No. 248 covers official domestic
travels only. Official foreign travels are governed by Title II of EO
No. 248, Section 8 of which expressly requires prior approval by the
President of all otTicial travels abroad of Department Secretaries,
Undersecretaries, Assistant Secretaries, heads, senior assistant heads and
assistant heads of GOCCs.
Section 8 of EO No. 248 was left as is by EO No. 298. Also, the
amendment introduced by EO No. 298 on Section 5 of Title I was on the
tirst paragraph only pertaining to the domestic travels of otlicials and
employees of the National Government, not on the second paragraph
pertaining to domestic ofticial travels of GOCC personnel.
By way of claritication, AO No. I 03, directing adoption of austerity
measures, also requires presidential clearance of the foreign travels of
GOCC and GFI officials. This clearance requirement is not inconsistent
with the required prior presidential approval of foreign travels of these
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