FACTS:

A Special Audit Team from COA Regional Office No. VIII audited the accounts of Leyte Metropolitan Water District (LMWD). For its auditing services, COA requested payment but was denied by Petitioner Feliciano as General Manager of LMWD, citing PD198 and Section 18 of RA 6758. He further requested that COA cease all audit services, stop charging auditing fees and refund all auditing fees previously paid by LMWD.

On March 16, 2000, petitioner received the Resolution of COA Chairman Celso Gangan, holding that local water districts are not private corporations, and are therefore under its audit jurisdiction, as pronounced by the Supreme Court in the case of Davao City Water District vs. CSC and COA.

ISSUES:

1. Whether or not a local water district created under PD198, as amended, is a government-owned or controlled corporation subject to the audit jurisdiction of COA;

2. Whether or not Section 20 of PD 198, as amended, prohibits COA’s certified public accountants from auditing local water districts; and

3. Whether or not Section 18 of RA 6758 prohibits COA from charging government-owned and controlled corporations auditing fees.

RULING:

The petition lacks merit.

A local water district is considered a GOCC with an original charter. It exists as a corporation only by virtue of PD198, which expressly confers on LWDs corporate powers. Without PD198, LWDs would have no corporate powers. PD 198 constitutes the special enabling charter of LWDs. Thus, LWDs are government-owned and controlled corporations with a special charter, and not private corporations created under the Corporation Code.

LWDs, therefore, are subject to the audit jurisdiction of COA, as provided under Section 2(1), Article IX-D of the Constitution, which mandates the latter to audit all government agencies or instrumentalities, including government-owned and controlled corporations (GOCCs) with original charters, as well as other government-owned or controlled corporations without original charters.

As regards the second issue, the petitioner argues that PD 198 expressly prohibits COA auditors, or any government auditor for that matter, from auditing LWDs, as stated in Section 18 of the aforementioned law, which provides in part that "auditing shall be performed by a certified public accountant not in the government service."

The Supreme Court however ruled that PD 198 cannot prevail over the Constitution, as it provides in Section 3, Article IX-C that "no law shall be passed exempting any entity of the government or its subsidiary in any guise whatever, or any investment of public funds, from the jurisdiction of the Commission on Audit. And since there is an irreconcilable conflict between Section 20 of PD 198, prohibiting COA auditors from auditing LWDs, and Sections 2(1) and 3, Article IX-D of the Constitution, vesting in COA the power to audit all GOCCs, it is ruled that the second sentence of Section 20 of PD 198 is unconstitutional since it violates the aforementioned section of the Constitution.

The third issue is likewise bereft of merit. COA is not prohibited from charging GOCCs auditing fees. As opposed to petitioner’s contention, COA may charge GOCCs actual audit cost, but the same must be paid directly to COA and not to COA auditors. What Section 18 of RA 6758 prohibits is the receiving of COA personnel of any kind of compensation from any government entity except "compensation paid directly by COA out of its appropriations and contributions." Petitioner has not alleged that COA charges LWDs auditing fees in excess of COA’s actual audit cost. Neither has he alleged that the auditing fees are paid by LWDs directly to individual COA auditors.