The Supreme Court has disallowed payments for health insurance premiums of Securities and Exchange Commission personnel for being illegally sourced from the SEC's retained income.

This was the ruling of the SC en banc in a resolution partly granting the petition for certiorari filed by the SEC. 

The petition challenged the ruling of the Commission on Audit (CoA), affirming the disallowance of health insurance premiums in the aggregate amount of P13,775,406. 

In 2010 and 2011, the SEC issued resolutions appropriating funds sourced from its retained earnings to cover the cost of health insurance for its officers and employees.    

The funds were subsequently disbursed to the SEC Employees Association Inc., which, on behalf of the SC personnel, applied the same as payment for health insurance premiums to Medicard Philippines Inc., a private health maintenance organization.

Under the Securities Regulation, the SEC is authorized to retain and utilize P100,000,000 from its income, subject to auditing requirements, standards, and procedures under existing laws. 

But the SEC received from the CoA notices of disallowance on the disbursement for being an improper use of the SEC's retained income, which, by virtue of the Special Provisions for the SEC in the 2010 and 2011 General Appropriations Act, should have been used to augment the agency's maintenance and other operating expenses, or MOOE, and capital outlay requirements. 

This was affirmed by the CoA cluster director and the CoA proper, prompting the petition before the SC.  

In resolving the petition, the High Court said that pursuant to Section 75 of the SRC, the use of income generated by the SEC is subject to auditing requirements, standards, and procedures under existing laws.

The "existing laws" include the Special  Provisions  for  the  SEC  in  the 2010 and 2011 GAAs, which explicitly directed that income generated pursuant to  Section  75  of  the  SRC  "shall  be  used  to  augment  the  MOOE  and  capital outlay requirements of the [CoA]."

The SEC should have strictly followed the letter of the law and refrained from using its retained income for purposes other than the augmentation of its MOOE and capital outlay items, as in the case of the disallowed health insurance payments. 

Also, the Court added that the disallowed payments to Medicard could not be considered as having been made for SEC's MOOE.