FACTS:

The City of General Santos enacted Ordinance No. 08, series of 2009 entitled An Ordinance Establishing the GenSan Scheme on Early Retirement for Valued Employees Security (GenSan SERVES), which was designed “to entice those employees who were unproductive due to health reasons to avail of the incentives being offered therein by way of early retirement package.”

The city’s audit team leader, through its supervising auditor, sent a query on the legality of the ordinance to respondent Commission on Audit’s director for Regional Office No. XII, Cotabato City.

Respondent Commission’s regional director postulated that the grant lacked legal basis and was contrary to the GSIS Act because it partakes of the nature of a supplementary retirement benefit plan proscribed by law; and that since Ordinance No. 08 is in the nature of an ERP [Early Retirement Program] of the City Government of General Santos, a law authorizing the same is a requisite for its validity. In the absence, however, of such law, the nullity of Ordinance No. 08 becomes a necessary consequence

ISSUE:

Whether or  not  Ordinance No. 08, series of 2009 is invalid in the absence of a law passed by Congress specifically authorizing the enactment of an ordinance granting an early retirement scheme.

RULING:

The constitutional mandate for local autonomy supports petitioner city’s issuance of Executive Order No. 40, series of 2008, creating change management teams as an initial step for its organization development masterplan.

Local autonomy also grants local governments the power to streamline and reorganize. 

Section 5, paragraph (a) of the Local Government Code states that “any provision on a power of a local government unit shall be liberally interpreted in its favor, and in case of doubt, any question thereon shall be resolved in favor or devolution of powers x x x.”

Section 5, paragraph (c) also provides that “the general welfare provisions in this Code shall be liberally interpreted to give more powers to local government units in accelerating economic development and upgrading the quality of life for the people in the community.”

These rules of interpretation emphasize the policy of local autonomy and the devolution of powers to the local government units.

Thus, in Province of Negros Occidental v. Commissioners, Commission on Audit, this court declared as valid the ordinance passed by the province granting and releasing hospitalization and health care insurance benefits to its officials and employees.consistent with the state policy of local autonomy as guaranteed by the 1987 Constitution, and the Local Government Code of 1991.

Local autonomy allows an interpretation of Sections 76 and 16 as granting petitioner city the authority to create its organization development program.

This court has previously explained that a streamlining of organization for a more efficient system must pass the test of good faith in order to be valid.

There are indicia of bad faith, none of which are present in this case.

Consequently, the Commission on Audit acted with grave abuse of discretion when it declared the entire ordinance void and of no effect.