Feliciano vs. COA (G.R. No. 147402, January 14, 2004

Facts: COA assessed Leyte Metropolitan Water District (LMWD) auditing fees. Petitioner Feliciano, as General Manager of LMWD, contended that the water district could not pay the said fees on the basis of Sections 6 and 20 of P.D. No. 198 as well as Section 18 of R.A. No. 6758. He primarily claimed that LMWD is a private corporation not covered by COA's jurisdiction. Petitioner also asked for refund of all auditing fees LMWD previously paid to COA. COA Chairman denied petitioner’s requests. Petitioner filed a motion for reconsideration which COA denied. Hence, this petition.

Issue: Whether a Local Water District (“LWD”) created under PD 198, as amended, is a government-owned or controlled corporation subject to the audit jurisdiction of COA or a private corporation which is outside of COA’s audit jurisdiction.

Held: Petition lacks merit. The Constitution under Sec. 2(1), Article IX-D and existing laws mandate COA to audit all government agencies, including government-owned and controlled corporations with original charters. An LWD is a GOCC with an original charter.

The Constitution recognizes two classes of corporations. The first refers to private corporations created under a general law. The second refers to government-owned or controlled corporations created by special charters. Under existing laws, that general law is the Corporation Code.

Obviously, LWD’s are not private corporations because they are not created under the Corporation Code. LWD’s are not registered with the Securities and Exchange Commission. Section 14 of the Corporation Code states that “all corporations organized under this code shall file with the SEC articles of incorporation x x x.” LWDs have no articles of incorporation, no incorporators and no stockholders or members. There are no stockholders or members to elect the board directors of LWDs as in the case of all corporations registered with the SEC. The local mayor or the provincial governor appoints the directors of LWDs for a fixed term of office. The board directors of LWDs are not co-owners of the LWDs. The board directors and other personnel of LWDs are government employees subject to civil service laws and anti-graft laws. Clearly, an LWD is a public and not a private entity, hence, subject to COA’s audit jurisdiction.