Oriondo Vs COA
Oriondo Vs COA
Doctrines:
a. A corporation, whether with or without an original charter, is under the audit jurisdiction
of the Commission on Audit so long as the government owns or has controlling interest
in it.
b. "Totality test"—the totality of the relation of a corporation to the State-that determines a
corporation's status as a government-owned or controlled corporation.
Facts:
Executive Order No. 58, series of 1954, 5 made certain battlefield areas in Corregidor
open to the public and accessible as tourist attractions. Executive Order No. 123, series
of 1968, further amended Executive Order No. 58, thereby authorizing the Ministry of
National Defense to enter into contracts for the conversion of areas within the Corregidor
as tourist spots.
The Ministry of National Defense and the Philippine Tourism Authority executed a
Memorandum of Agreement7 dated July 10, 1986 for the development of Corregidor and
its neighboring islands into major tourist attractions.
The Philippine Tourism Authority Board of Directors adopted Resolution No. B-7-
87, approving the creation of a foundation for the development of Corregidor. On
October 28, 1987, the Corregidor Foundation, Inc. was incorporated under Securities
and Exchange Commission Registration No. 145674.
On August 3, 1993, the Philippine Tourism Authority executed a Memorandum of
Agreement with Corregidor Foundation, Inc. to centralize the island's planning and
development. The Philippine Tourism Authority agreed to release to the Corregidor
Foundation, Inc. its operating funds based on a budget for its approval. For its part, the
Corregidor Foundation, Inc. agreed to submit a quarterly report on the receipts and
disbursements of Philippine Tourism Authority funds. It additionally agreed to deposit all
collections of revenues in a distinct and separate account in the name of the island of
Corregidor, with the disposition of the funds at the sole discretion of the Philippine
Tourism Authority.
A subsequent Agreement reiterated the provisions of the August 3, 1993 Agreement but
added some stipulations. In particular, the second paragraph of item 4 was included,
providing that the disbursements of the Philippine Tourism Authority's funds by
Corregidor Foundation, Inc. shall be subject to the audit of the Internal Auditor of the
Philippine Tourism Authority and the Commission on Audit.
The Audit Team was of the opinion that the grant of honoraria to Oriondo, Hernandez,
Basco, Merino, and Salvador were contrary to Department of Budget and Management
Circular No. 2003-5.14 This budget circular, applicable to all national government
agencies, government-owned and/or controlled corporations, and government financial
institutions, enumerated in item 4 those exclusively entitled to honoraria:
4. General Guidelines
Heads of entities are authorized to use their respective appropriation for the
payment of honoraria only to the following:
4.2 those who act as lecturers, resource persons, coordinators and facilitators in
seminars, training programs and other similar activities in training institutions,
including those conducted by entities for their officials and employees; and
Further, according to the Audit Team, the cash gifts given to Oriondo, Hernandez,
Basco, Merino, and Salvador, as officers of the Corregidor Foundation, Inc., constituted
double compensation prohibited in Article IX-B, Section 816 of the Constitution because
they had already received honoraria and cash gifts as employees of the Philippine
Tourism Authority.
On June 15, 2006, the Legal and Adjudication Office-Corporate of the Commission on
Audit issued Notice of Disallowance No. CFI-2006-001,19 disallowing in audit the
honoraria and cash gift paid to Oriondo, Hernandez, Basco, Merino, and Salvador. Aside
from the payees, the persons made liable for the amount were Corregidor Foundation,
Inc.'s Chief Accountant Noria Jane Perez, Finance Office Lauro Legazpi, and Executive
Director Artemio G. Matibag.
Petitioners filed a Motion for Reconsideration of the Disallowance, arguing that
Corregidor Foundation, Inc. is a private corporation created under the Corporation Code
and, therefore, cannot be audited by the Commission on Audit. This was denied by the
Legal Adjudication Office-Corporate in its Decision No. 2007-037,22 where it held that
Corregidor Foundation, Inc. is a government-owned or controlled corporation. Petitioners
appealed the decision.
Citing the definition of a government owned or controlled corporation in the
Administrative Code of 1987, the Adjudication and Settlement Board held that
Corregidor Foundation, Inc. is a government-owned or controlled corporation under the
audit powers of the Commission on Audit. Corregidor Foundation, Inc., according to the
Adjudication and Settlement Board, is a non-stock corporation which receives funds from
the government, through the Philippine Tourism Authority. The Adjudication and
Settlement Board highlighted that Memorandum of Agreement dated September 3, 1996
provided that the funds received and disbursed by the Corregidor Foundation, Inc. is
subject to the audit of the Internal Auditor of the Philippine Tourism Authority and the
Commission on Audit. Finally, Corregidor Foundation, Inc. was deemed created for a
public purpose, which is the maintenance and preservation of Corregidor.
Not satisfied, petitioners elevated the case to COA Proper, which maintained that the
Corregidor Foundation, Inc. is a government-owned or controlled corporation given the
following circumstances: (1) the incorporators of the Corregidor Foundation, Inc. are all
government officials; (2) the Corregidor Foundation, Inc. is substantially subsidized by
the government, with 99.66% of its budget coming from the Department of Tourism, Duty
Free Philippines, and the Philippine Tourism Authority; (3) the budget of Corregidor
Foundation, Inc. needs prior approval of the Philippine Tourism Authority; (4) Corregidor
Foundation, Inc. is required to submit a quarterly report of its receipts and disbursement
of Philippine Tourism Authority funds; (5) all collections of revenues are to be deposited
and taken up in the books of Corregidor Foundation, Inc. as accountability to the
Philippine Tourism Authority, and the disposition of the funds are at the sole discretion of
the Philippine Tourism Authority; and (6) Corregidor Foundation, Inc. has no authority to
dispose of the properties subject of the Memorandum of Agreement.
Issue/s:
a. Whether COA has jurisdiction to determine whether an entity is a government-owned or
controlled corporation; and
b. Whether Corregidor Foundation, Inc. is a government-owned or controlled corporation.
When Corregidor Foundation, Inc. was organized, all of its incorporators were
government officials. Corregidor Foundation, Inc.'s Articles of Incorporation also require
that the members of its Board of Trustees be all government officials and shall so hold
their position as members of the Board by reason of their office. As the foregoing
established, the government has substantial participation in the selection of Corregidor
Foundation, Inc.'s governing board. The government controls Corregidor Foundation,
Inc. making it a government-owned or controlled corporation.