AOM No.

2019-015
March 26, 2019

Honorable CRISOSTOMO C. GARBO

City Mayor
City Government of Mabalacat
Pampanga

Attention: Engr. Jesusa Santiago Atty. Aileen C. Rigor, CPA

City ENRO City Accountant

Rosanno S. Paquia
BAC Chairman-Goods

We have audited the gasoline expenditures of the City and observed the following
deficiencies:

The contract price of the gasoline consumption sourced from RGQ Gas Refilling Station were
relatively higher by 10% from the prevailing pump prices of petroleum products in North
Luzon, thus deemed to be excessive contrary to COA Circular No. 2012-003 dated October 29,
2012.

1. As iterated from AOM No. 2019-007, the non-submission of copy of notarized contract
entered into with RGQ Refilling station and Gas Initiative (Shell Station), the two gas stations
where the City sourced its fuel consumption, preclude further evaluation of the reasonableness and
regularity of gasoline consumption of the City contrary to Item 3.1.1 of COA Circular 2009-001
dated February 12, 2009 which states that:

Within five (5) working days from the execution of a contract by the
government or any of its subdivisions, agencies or instrumentalities, including
government-owned and controlled corporations and their subsidiaries, a copy
of said contract and each of all the documents forming part thereof by
reference or incorporation shall be furnished to the Auditor of the agency
concerned.
(madame wala tyo pwede ireply dito if not mere inadvertence of the part of BAC for not
submitting on time)

2. Evaluation of the City gasoline consumption for CY 2018 showed that most of its fuel
requirements for the year were sourced from RGQ Gas Refilling Station (RGQ). Accordingly,
based on statistics, the RGQ Refilling Station is the purported ‘preferred’ supplier by the City
which reported an average 94.61% usage for the year.

Gasoline Consumption (in Peso) Percentage of Usage

Period
RGQ Gas Refilling Gas RGQ
Covered Gas Initiative* Total
Station Initiative Gas
January 311,698.40 2,277,685.55 2,589,383.95 12.04% 87.96%
February 61,161.10 665,599.36 726,760.46 8.42% 91.58%
March 21,213.49 2,037,649.56 2,058,863.05 1.03% 98.97%
April 50,310.53 1,862,522.76 1,912,833.29 2.63% 97.37%
May 83,710.13 1,588,717.06 1,672,427.19 5.01% 94.99%
June 36,799.53 2,329,651.12 2,366,450.65 1.56% 98.44%
 Period Gasoline Consumption (in Peso) Percentage of Usage
Covered
July 215,791.61 2,488,054.37 2,703,845.98 7.98% 92.02%
August 65,382.42 2,677,378.57 2,742,760.99 2.38% 97.62%
September 57,468.17 1,140,434.78 1,197,902.95 4.80% 95.20%
October 103,038.74 1,687,603.44 1,790,642.18 5.75% 94.25%
November 85,113.62 276,803.96 361,917.58 23.52% 76.48%
December 0.00 132,769.02 132,769.02 0.00% 100.00%
Total 1,091,687.74 19,164,869.55 20,256,557.29 5.39% 94.61%

3. According to the City Accountant, the huge dependency of the City to RGQ Gas Refilling
Station as the main supplier in providing their fuel requirements is attributed to strict credit policy
imposed by Gas Initiative Corporation and low credit limits being offered by other oil companies
within the vicinity which the City cannot complied upon. Whereas, RQG Gas Refilling Station
could loan or extend up to approximately ₱1.6 million per month to the City. The good credit
scoring of RGQ could be indirectly attributed to the former ownership of the gas company. The
Audit Team learned that the former owner was the brother of incumbent City Mayor who divested
his interest prior to City’s procurement of gasoline at the said gas station. Further, the
Management mentioned that the current owner is a distant relative of the incumbent City Mayor
which is beyond the fourth degree of consanguinity or affinity as mandated by RA No. 6713 or
known as Code of Conduct and Ethical Standards for Public Officials and Employees. However,
the DTI registration and other pertinent documents to substantiate the assertion was not provided
to the Audit Team to date. (delete) (mere speculation; the COA findings is vague and no specific
law or provision that was violated was provided)

4. The City Accountant further mentioned that, in previous months, the Management has
been contemplating to undertake public bidding of gasolines purchases but constraint to proceed
pending the resolution of the following issues:

a. security deposit requirements of gas stations,

b. low credit limits imposed by gas stations,
c. reasonable distance of gas stations/bidder from the City Hall, and
d. amount of fixed gasoline prices to be indicated in the contract considering the
fluctuating nature of gasoline prices. (delete) (the statement resembles more of an
answer to a finding already) REPLACE with
4.No public bidding was conducted for the purchase of gasoline as required by Sec 10
of RA 9184 to wit: All procurement shall be done through competitive bidding, except
as provided in Rule XVI of the IRR

5. As gathered from sample transactions of submitted vouchers, comparison of rates revealed

that RGQ’s fuel prices were relatively higher by 10% of the prevailing pump rate of petroleum
products as sourced from published rates in the Department of Energy (DOE) website. See Annex
A for complete details of DOE price monitoring report.

Price
Invoice RGQ SHELL %age of Within %age of
Difference Difference
Date Prices1 Price2 Variance Angeles Variance
City3
(a) (b) (c) (d) (e) (f) (g)
(a-b) (a-f)
PREMIUM GASOLINE
06-Aug 60.29 51.81 8.48 16% 54.02 6.27 12%
12-Aug 58.79 51.81 6.98 13% 54.02 4.77 9%
03-Sep 59.34 52.54 6.80 13% 54.72 4.62 8%
04-Sep 60.29 52.54 7.75 15% 54.72 5.57 10%
05-Sep 60.29 52.54 7.75 15% 54.72 5.57 10%
06-Sep 60.29 52.54 7.75 15% 54.72 5.57 10%
07-Sep 60.29 52.54 7.75 15% 54.72 5.57 10%
08-Sep 60.29 52.98 7.31 14% 55.44 4.85 9%
 Price
Invoice RGQ SHELL %age of Within %age of
Difference Difference
Date Prices1 Price2 Variance Angeles Variance
City3
09-Sep 60.29 52.98 7.31 14% 55.44 4.85 9%
24-Sep 61.44 53.13 8.31 16% 55.78 5.66 10%
25-Sep 61.84 53.13 8.71 16% 55.78 6.06 11%
26-Sep 61.84 53.13 8.71 16% 55.78 6.06 11%
27-Sep 61.84 53.13 8.71 16% 55.78 6.06 11%
28-Sep 61.84 53.13 8.71 16% 55.78 6.06 11%
29-Sep 61.84 53.13 8.71 16% 55.78 6.06 11%
30-Sep 61.84 53.13 8.71 16% 55.78 6.06 11%
Average 60.79 52.76 8.03 15% 55.19 5.60 10%
UNLEADED GASOLINE
12-Aug 58.29 51.19 7.10 14% 53.42 4.87 9%
03-Sep 58.84 51.89 6.95 13% 54.26 4.58 8%
04-Sep 59.79 51.89 7.90 15% 54.26 5.53 10%
05-Sep 59.79 51.89 7.90 15% 54.26 5.53 10%
06-Sep 59.79 51.89 7.90 15% 54.26 5.53 10%
08-Sep 59.79 51.89 7.90 15% 54.26 5.53 10%
09-Sep 59.79 52.32 7.47 14% 54.69 5.10 9%
24-Sep 60.94 52.32 8.62 16% 54.69 6.25 11%
25-Sep 61.34 52.49 8.85 17% 54.69 6.65 12%
26-Sep 61.34 52.49 8.85 17% 54.69 6.65 12%
27-Sep 61.34 52.49 8.85 17% 54.69 6.65 12%
28-Sep 61.34 52.49 8.85 17% 54.69 6.65 12%
29-Sep 61.34 52.49 8.85 17% 54.69 6.65 12%
Average 60.29 52.13 8.16 16% 54.43 5.86 11%
DIESEL
01-Aug 51.93 42.07 9.86 23% 43.09 8.84 21%
03-Aug 51.93 42.07 9.86 23% 43.09 8.84 21%
12-Aug 51.93 42.07 9.86 23% 43.09 8.84 21%
03-Sep 52.78 43.27 9.51 22% 44.09 8.69 20%
04-Sep 53.98 43.27 10.71 25% 44.09 9.89 22%
05-Sep 53.98 43.27 10.71 25% 44.09 9.89 22%
06-Sep 53.98 43.27 10.71 25% 44.09 9.89 22%
07-Sep 53.98 43.27 10.71 25% 44.09 9.89 22%
24-Sep 54.78 43.81 10.97 25% 44.57 10.21 23%
25-Sep 54.98 43.81 11.17 26% 44.57 10.41 23%
26-Sep 54.98 43.81 11.17 26% 44.57 10.41 23%
27-Sep 54.98 43.81 11.17 26% 44.57 10.41 23%
28-Sep 54.98 43.81 11.17 26% 44.57 10.41 23%
30-Sep 54.98 43.81 11.17 26% 44.57 10.41 23%
Average 53.87 43.24 10.62 25% 44.08 9.79 22%
Notes:
1. RGQ price were based on billed rates on various sales invoices;
2. Shell’s price is based on the average rate listed from the three nearby cities namely City of San Fernando, Angeles City and Tarlac, Tarlac City. No available data
specifically posted for Mabalacat City;
3. Price within Angeles City is the average rate from the three big oil companies within the vicinity of the City namely Shell, Petron, and Caltex.

6. Accordingly, RGQ rates were relatively higher by 10-15% on premium gasoline, 11-16%
on unleaded gasoline, and 22-25% on diesel which thereof considered to be unreasonable and
excessive in nature as defined in Item 1, Annex D of the COA Circular 2012-003 dated October
29, 2012.

7. As defined in COA Circular 2012-003, Excessive Expenditures are unreasonable expense

or expenses incurred at an immoderate quantity and exorbitant price. It also includes expenses
which exceed what is usual or proper, as well as expenses which are unreasonably high and
beyond just measure or amount. They also include expenses in excess of reasonable limits.

8. Amongst the cases enumerated in Annex D of the same circular, items that are considered
“excessive” expenditures of government funds is the overpricing of purchases, characterized by
grossly exaggerated or inflated quotations, in excess of the current and prevailing market price
by a 10 percent variance from the purchased item.

9. On the side note, the Department of Energy thru its DOE’s Oil Industry Management
Bureau (OIMB) is drafting a circular that would require the weekly notice of price adjustment to
be announced publicly by the oil companies to promote a higher level of transparency and guide
consumers in making informed decisions. (Source: https://www.doe.gov.ph/energist/doe-orders-oil-
firms-report-cost-breakdowns) This would give the Management timely information on the
prevailing gasoline prices in order to monitor the City’s gasoline consumption. (delete) (what is
this? Advisory opinion?)

10. Further, verification disclosed that there were inconsistencies in the rates use by RGQ Gas
Refilling Station on its billing. As shown in the sample invoices in Annex B, the gas company
uses two different rates on its billing dated September 25, 2019, Sales Invoice No. 0031278 were
priced at ₱60.94 while Sales Invoice No. 0031290 were billed at ₱61.34. This flagged
inconsistencies further raised doubt on the regularity and reasonableness of the fuel rates imposed
by RGQ.

11. Due to the foregoing deficiencies, the reasonableness of the fuel consumption and the
regularity of the disbursements on gasoline were not established.

12. We recommend that the Management to strictly observe economy and austerity
measures in the disposition of the City’s funds and resources especially on gasoline
consumption. We also recommend that the Local Chief Executive to direct:

a. City ENRO to submit a copy of notarized contract with Gas Initiative

Corporation and RGQ Gas Refilling Station as required under Item 3.1.1 of COA
Circular 2009-001 dated February 12, 2009;

b. BAC Chairman to immediately resolve the issues surrounding the procurement of

gasoline paving the way for its public bidding in soonest possible time and submit
the RGQ Gas Refilling Station’s DTI certificate and other pertinent documents to
determine its ownership for the evaluation of the City’s compliance with RA No.
6713, and

c. City Accountant to strictly observe the COA Circular No. 2012-003 dated October
29, 2012 especially on excessive prices on purchases of gasoline.

13. May we have your comments on the foregoing audit observation within fifteen (15) calendar
days from receipt hereof.

MARC ANTHONY P. SAZON

State Auditor IV
Audit Team Leader

JOSEFINA M. SERRANO
Supervising Auditor

Proof of Receipt of AOM:

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