Republic Act No.

6758 (RA 6758), which took effect on July 1, 1989, standardized the salaries of
government employees. Section 12 of RA 6758 provides: Section 12. Consolidation of Allowances
and Compensation. - All allowances, except for representation and transportation allowances;
clothing and laundry allowances; subsistence allowance of marine officers and crew on board
government vessels and hospital personnel; hazard pay; allowances of foreign service personnel
stationed abroad; and such other additional compensation not otherwise specified herein as may be
determined by the DBM, shall be deemed included in the standardized salary rates herein
prescribed. Such other additional compensation, whether in cash or in kind, being received by
incumbents only as of July 1, 1989 not integrated into the standardized salary rates shall continue to
be authorized.

Existing additional compensation of any national government official or employee paid from local
funds of a local government unit shall be absorbed into the basic salary of said official or employee
and shall be paid by the National Government. (Underlines and emphasis ours)

On September 30, 1989, the Department of Budget and Management (DBM) issued National
Compensation Circulars Nos. 56 and 59, enumerating additional allowances that are deemed
integrated into the basic salary.

Due to these developments, Marina discontinued the grant of several allowances to its employees.
In a memorandum dated February 10, 2000, Marina recommended to President Estrada the
restoration of allowances of its employees. The President approved and signed the memorandum on
October 16, 2000.

Relying on this approval, Marina restored the grant of allowances and incentives to its employees
beginning January 2001.

The COA disallowed the granted allowances and incentives, except per diems and monthly
commutable allowances of Marina board members. 1

The COA held that allowances are already integrated as part of the salaries of government
employees under RA 6758.The COA did not give probative value to the memorandum to President
Estrada dated February 10, 2000 for Marinas failure to present its original copy. The COA noted that
the Malacanang Records Office did not have a copy of this memorandum. Furthermore, the COA
ruled that the Presidents approval of the memorandum was insufficient, since a law was required for
the grant of additional allowances and incentives.