COA: PEZA, 3 other economic zones must pay back P664 million in illegal perks

MANILA, Philippines – The Commission on Audit demanded top-level agency officials with “approving and certifying” authority in the Philippine Economic Zone Authority (PEZA), Baguio City Economic Zone (BCEZ), Cavite Economic Zone (CEZ), and the Mactan Economic Zone (MEZ), to refund P664,365,000 in illegal allowances, bonuses, and cash benefits paid to officials and employees of the zones.

In a 14-page Decision released Monday, August 13, the COA Commission Proper denied PEZA officials’ petition for review. It affirmed 112 notices of disallowance issued by state auditors between January 2010 to January 2014, which represented the P664.365 million in unauthorized extra compensations given to staff empoyees and other officials. 

Auditors said the illegal perks came from a PEZA board resolution from July 21, 2009. This board resolution aproved compensation increases for the agency, effective July 1, 2009.

Due to it, the following items were increased: salary rates, representation and transportation allowances (RATA), overtime pay and night differentials, bonuses, benefits, monetization of leave credits, gratuity pay, employer’s share in the Provident Fund, and the government’s share in the personnel’s contributions to the Government Service Insurance System (GSIS).

The resolution, however, needed to be approved by the Office of the President before it could be done. Furthermore, the Department of Budget and Management (DBM) also made conditions for the approval of PEZA’s corporate operating budget for 2009 to 2012.

Specifically, the increases to benefits and salaries must be supported by legal basis.

PEZA claimed – in its attempt to lift the disallowance – that its charter authorized the Board of Directors to handle the pay and emoluments matters for officers and employees. It also said it was exempted from requiring presidential approval by arguing while it was required to report to the Office of the President, it did not require the president’s approval to have the compensation plans greenlit.

COA said, however, sustained auditor’s positions, saying it is “only the DBM which has the mandate to classify positions, determine the appropriate salaries for specific positions, and review the compensation benefits or programs of agencies.”

“Without DBM’s imprimatur, the creation of position, appointment, and payment of salaries and benefits lack legal basis and should be disallowed in audit,” the commission said.

It went on to say PEZA’s exemption from the Salary Standardization Law does not give the Board of Directors absolute power in creating and classifying positions. “It is still duty-bound to observe laws, rules and regulations pertaining to compensation system and benefits to be granted to its employees,” the COA said.

“As to the liability for the refund of the disallowed benefits, the Supreme Court has ruled that public officials who are directly responsible for, or participated in the making of illegal expenditures, as well as those who actually received the amount therefrom shall be solidarily liable for their reimbursement,” COA ruled. – Rappler.com