MANILA, Philippines -- The Commission on Audit (COA) has questioned the Department of National Defense (DND) for making advanced payments worth P39.04 million last year to Petron Corp. for gasoline "without basis."

In its 2007 audit report on the DND, it pointed out that the department did not receive any product from the gasoline company upon payment contrary to the provisions of the Presidential Decree 1445.

Under the law, the government is prohibited to make advanced payments for services not yet rendered or for supplies not yet delivered under any contract.

It also noted that the disbursements were carried out despite the implementation of the Petron Fleet Card Program in May 2007.

The program is a credit-card scheme that allows Petron customers -- primarily corporate accounts with a number of vehicles -- to enjoy a specific period of interest-free credit.

The scheme also provides customers with an "efficient, secured, convenient and economical way" of managing their fleet of vehicles.

"We were informed that there is no MOA (memorandum of agreement) nor a contract executed by and between the DND and the Petron Corp. regarding the procurement of gasoline through the fleet-card scheme," noted COA.

It also disclosed that the DND and the Office of the Philippine Defense Reform (PDR) continued to make advance payments to the oil company despite rolling out the program last year instead of "enjoying" the scheme's credit feature.

From May to December 2007, the advanced payments made to Petron amounted to P36,426,434.85. Of the said amount, P19,209,416.16 was attributed to the DND office of the secretary, while the rest to the PDR.

COA further noted that prior to the implementation of the program during the second quarter of 2007, the DND made prepayments to Petron for petroleum, oil and lubricants, which were delivered to the fuel depot at Camp Aguinaldo.

But the department closed the depot following the adoption of the fleet-card scheme. Only oil and lubricants were being delivered to the motor pool, it added.

The COA ordered the DND to stop carrying out advanced disbursements to the oil firm and exhaust the remaining unutilized balance before making payments for actual consumption.

It also said that the government and the oil firm must enter into a contract for the purchase of gasoline through the fleet card scheme.