THE Supreme Court has ruled that the Commission on Audit (COA) has no authority to conduct an audit of the Philippine Amusement and Gaming Corporation’s (Pagcor) account beyond its 5-percent franchise tax and 50 percent of the government’s share in its gross earnings.
In a 12-page decision penned by Associate Justice Edgardo delos Santos, the Court en banc unanimously granted the petition for certiorari with application for the issuance of temporary restraining order and/or a writ of preliminary injunction filed by former Pagcor Chairman Efraim Genuino against COA’s rulings issued in 2015 and 2017 that disallowed the P2-million financial assistance granted by Pagcor for the construction of a flood control and drainage system project for Pleasant Village Homeowners Association (PVHA) located in Barangay Tuntungin-Putho, Los Baños, Laguna in 2013 due to its failure to submit certain documentary requirements.
The COA also argued that the financial assistance violates Presidential Decree 1445 for being spent for a private purpose.
In its petition before the SC, Pagcor argued that COA’s jurisdiction over the agency is limited to 5-percent franchise tax remitted to the Bureau of Internal Revenue (BIR) and 50 percent of its gross earnings remitted to the National Treasury.
It stressed that since the P2-million financial assistance to PVHA was sourced from Pagcor’s operating expenses, in particular its marketing expenses, it was beyond COA’s audit jurisdiction.
In ruling in favor of Pagcor, the Court held that COA acted with grave abuse in ordering the disallowance of the Pagcor’s financial assistance to PVHA.
“By law, COA’s audit jurisdiction over Pagcor is limited to the latter’s remittances to the BIR as franchise tax and the National Treasury with respect to the government’s share in its gross earnings,” the SC noted.
The SC said based on Section 15 of Presidential Decree 1869 (COA’s Charter), COA’s audit jurisdiction is limited to the 5-percent franchise tax and 50-percent share of the government in its gross earnings.
“Here, the P2,000,000.00 financial assistance granted by Pagcor to PVHA was sourced from Pagcor’s operating expenses, in particular, its marketing expenses. It is, thus, clear that the audit conducted by COA in this case was not made in relation to either the 5-percent franchise tax or the government’s 50-percent share in its gross earnings and therefore, beyond the scope of COA’s audit authority,” the Court stated.
The Court added that unless otherwise repealed by a subsequent law or adjudged unconstitutional by the court, a law will always be presumed valid and must be applied.
“It is, thus, apparent that COA’s actions in this case, from the issuance of Notice of Disallowance 2013-002 [10] and correspondingly, the assailed decision and resolution, are null and void. They create no rights and produce no legal effect. Thus, we find that a reversal of the assailed COA decision and resolution is in order,” the SC declared.