AUDITOR GENERAL OF PAKISTAN

AUDIT REPORT

THE ACCOUNTS OF

CDA, CAA, NHA, PAK. PWD,

ESTATE OFFICE, FGEHF,

NCL, PHAF, HEC AND

WWF/BOARDS

GOVERNMENT OF PAKISTAN

AUDIT YEAR 2017-18

AUDITOR GENERAL OF PAKISTAN

TABLE OF CONTENTS

ABBREVIATIONS AND ACRONYMS .............................................................. i

PREFACE ............................................................................................................ vi

EXECUTIVE SUMMARY ................................................................................. ix

SUMMARY TABLES AND CHARTS .......................................................... xxiii

I: Audit Work Statistics ...................................................................... xxiii

II: Audit Observations classified by Categories .................................. xxiv

III: Outcome Statistics .......................................................................... xxiv

IV: Irregularities pointed out .................................................................. xxv

V: Cost-Benefit Ratio ........................................................................... xxv

CHAPTER 1 ......................................................................................................... 1

PUBLIC FINANCIAL MANAGEMENT ISSUES (PAKISTAN

PUBLIC WORKS DEPARTMENT) ................................................................ 1

1.1 AUDIT PARA ................................................................................................. 1

1.1.1 Unauthorized transfer of funds from lapsable PLA-I to non-lapsable

PLA-IV - Rs 1,776.376 million ....................................................................... 1

CHAPTER 2 ......................................................................................................... 4

CAPITAL DEVELOPMENT AUTHORITY ................................................... 4

2.1 Introduction ..................................................................................................... 4

2.2 Comments on Budget and Accounts (Variance Analysis) ............................... 5

2.3 Brief comments on the status of compliance with PAC‟s directives ............. 13

2.4 AUDIT PARAS ............................................................................................. 15

Fraud/Mis-appropriations ........................................................................................... 15

2.4.1 Embezzlement of entry fee in Lake View Park Islamabad - Rs 16.250

million ............................................................................................................ 15

2.4.2 Non-recovery of advances and salary paid to Ex-official dismissed

from service due to fake certificates - Rs 2.145 million ................................ 16

2.4.3 Non-initiation of disciplinary as well as criminal proceedings against

employees having fake degrees ..................................................................... 18

Irregularity and Non-Compliance ............................................................................... 19

2.4.4 Non-cancellation of commercial plots due to non-renewal of lease -

Rs 40,155.648 million .................................................................................... 19

2.4.5 Loss due to un-competitive disposal of plot - Rs 10,527.026 million ............ 20

2.4.6 Overpayment to IESCO due to excessive billing of street lights -

Rs 5,360.991 million ...................................................................................... 23

2.4.7 Non-realization of long outstanding dues of commercial plots -

Rs 5,831.043 million ...................................................................................... 26

2.4.8 Unauthentic approval of Layout Plan of Housing Scheme on the basis

of fake and fictitious documents - Rs 8,198.60 million ................................. 28

2.4.9 Non-imposition of penalty/non-recovery of ground rent from

marquees / wedding halls - Rs 1,032.000 million .......................................... 30

2.4.10 Irregular execution of works without approval by the competent

authority - Rs 341.543 million ....................................................................... 31

2.4.11 Non-mutation/non-taking over possession of land besides payments to

selective land owners - Rs 261.781 million ................................................... 32

2.4.12 Execution of project without PC-I - Rs 228.431 million ............................... 36

2.4.13 Replacement of existing road lights with LED lights without PC-I and

award of work to non-responsive bidder - Rs 363.242 million ...................... 37

2.4.14 Deployment of staff in excess of sanctioned strength resulting in

excess expenditure - Rs 73.085 million ......................................................... 42

2.4.15 Enhancement of work beyond the original scope - Rs 58.113 million........... 44

2.4.16 Non-remittance of Government receipt in Federal Treasury -

Rs 104.465 million ......................................................................................... 46

2.4.17 Appointment of consultant without registration with PEC and payment

of consultancy fee without proper performance - Rs 46.825 million ............ 48

2.4.18 Execution of work without insurance guarantee saving inbuilt cost of

premium - Rs 40.018 million ......................................................................... 49

2.4.19 Non-recovery of expenditure incurred in excess of the deposits

received from sponsors - Rs 35.956 million .................................................. 51

2.4.20 Award of work without technical evaluation - Rs 30.408 million ................. 53

2.4.21 Non-accounting of excavated rock material - Rs 27.835 million ................... 54

2.4.22 Award of works without open competition - Rs 24.834 million .................... 55

2.4.23 Payment of President‟s House Allowance, Fuel and Electricity

Subsidy to non-entitled officers - Rs 24.474 million ..................................... 56

2.4.24 Payment without recording detailed measurement in log/work books -

Rs 22.113 million........................................................................................... 58

2.4.25 Non-auction of advertisement sites/non-maintenance of record of open

spaces for licenses - Rs 20.350 million .......................................................... 59

2.4.26 Theft of electric transformers, electric cable, street light poles, etc. -

Rs 15.165 million........................................................................................... 60

2.4.27 Award of work in violation of procurement rules - Rs 17.536 million .......... 62

2.4.28 Non-recovery of mobilization advance - Rs 7.723 million ............................ 66

2.4.29 Extra payment due to incorrect rate - Rs 6.531 million ................................. 67

2.4.30 Procurement of vehicles and equipment without provision in TS

Estimate - Rs 9.600 million ........................................................................... 68

2.4.31 Overpayment due to non-deduction of earth available from roadway

excavation - Rs 4.855 million ........................................................................ 71

2.4.32 Award of works at higher rates - Rs 2.852 million ........................................ 73

Performance ................................................................................................................. 74

2.4.33 Non-development of sectors despite receipt of funds from allottees -

Rs 63,413.335 million .................................................................................... 74

2.4.34 Inordinate delay in completion of project despite sufficient funds ................ 75

2.4.35 Procurement of sub-standard alum sulphate - Rs 1.287 million .................... 76

2.4.36 Non-taking of remedial measures for the treatment of polluted water ........... 78

Internal Control Weaknesses....................................................................................... 80

2.4.37 Non-revision of rates of property tax, water and conservancy charges.......... 80

2.4.38 Non-recovery of outstanding property tax - Rs 1,901.553 million ................ 83

2.4.39 Carpeting of roads without obtaining NOC from MPO - Rs 845.232

million ............................................................................................................ 85

2.4.40 Non-completion of work despite incurring expenditure of Rs 295.00

million ............................................................................................................ 87

2.4.41 Non-recovery on account of Operation & Maintenance Charges of

Water Treatment Plant from beneficiaries - Rs 195.327 million .................. 88

2.4.42 Non-adjustment of advance payment - Rs 94.902 million ............................. 89

2.4.43 Overpayment to the contractors due to higher estimation - Rs 30.253

million ............................................................................................................ 90

2.4.44 Delay in completion of water supply scheme due to non-removal of

encroachment - Rs 27.274 million ................................................................. 92

2.4.45 Non-recovery of secured advance - Rs 15.109 million .................................. 93

2.4.46 Non-recovery of room rent and utility charges of hostels/lodges -

Rs 11.097 million........................................................................................... 94

2.4.47 Award of work at higher rates without assessment of reasonability of

rates - Rs 7.115 million .................................................................................. 95

2.4.48 Payment of overtime allowance over and above the approved rates -

Rs 6.602 million............................................................................................. 96

2.4.49 Procurement of imported electrical items without ensuring

genuineness of the items supplied - Rs 6.069 million .................................... 97

2.4.50 Non-imposition of penalty for non-compliance of Fire Prevention and

Life Safety Regulations - Rs 5.210 million .................................................... 99

2.4.51 Non-auction of kiosks and non-revision of license fee - Rs 5.040

million .......................................................................................................... 101

2.4.52 Non-recovery of advance income tax - Rs 4.436 million............................. 102

2.4.53 Overpayment due to non-adjustment of prices of specified material -

Rs 8.521 million........................................................................................... 104

2.4.54 Award of licenses of kiosks without open auction - Rs 3.636 million ......... 105

2.4.55 Non-acceptance of highest bid of car parking license - Rs 3.506

million .......................................................................................................... 106

2.4.56 Overpayment due to duplication and calculation mistake - Rs 3.42

million .......................................................................................................... 108

2.4.57 Non-deduction of General Sales Tax - Rs 2.250 million ............................. 111

2.4.58 Non-cancellation/ vacation of Government accommodation allotted to

ineligible employees .................................................................................... 112

2.4.59 Payment of Capital Allowance, Special Allowance and Danger

Allowance etc. without approval of Finance Division ................................. 113

2.4.60 Non-imposition of fine - Rs 2.405 million ................................................... 114

CHAPTER 3 .................................................................................................. 116

CIVIL AVIATION AUTHORITY ................................................................ 116

3.1 Introduction ................................................................................................. 116

3.2 Comments on Budget and Accounts (Variance Analysis) ........................... 117

3.3 Brief comments on the status of compliance with PAC‟s directives ........... 121

3.4 AUDIT PARAS ............................................................................... 123

Irregularity and Non-compliance .............................................................................. 123

3.4.1 Procurement without approval of ECNEC - Rs 1,144.068 million .............. 123

3.4.2 Award of work to an ineligible contractor - Rs 842.145 million ................. 124

3.4.3 Irregular acquisition of land for airport without feasibility study -

Rs 450.389 million ....................................................................................... 126

3.4.4 Irregular award of additional works in violation of procurement rules -

Rs 304.429 million ....................................................................................... 128

3.4.5 Procurement of works through different formations instead of project

management resulting in understatement of project cost - Rs 237.972

million .......................................................................................................... 130

3.4.6 Non-utilization of residential building - Rs 144.633 million ....................... 131

3.4.7 Award of contract on doubtful bidding documents - Rs 17.387 million ...... 132

3.4.8 Mis-procurement due to award of work on quotation basis - Rs 15.198

million .......................................................................................................... 134

Performance ............................................................................................................... 136

3.4.9 Loss of revenue due to non-completion of the project within stipulated

period - Rs 9,675 million ............................................................................. 136

Internal Control Weaknesses..................................................................................... 137

3.4.10 Procurement of imported equipment and materials without

authentication of the authorized manufacturers / from other than

approved manufacturer - Rs 6,508.716 million ........................................... 137

3.4.11 Non-recovery of outstanding dues on account of licence fee, rent and

electricity charges - Rs 2,159.481 million ................................................... 140

3.4.12 Non-maintenance of Measurement Books - Rs 1,217.443 million .............. 143

3.4.13 Non-recovery from the defaulting contractor - Rs 580.786 million ............ 144

3.4.14 Transfer of funds as deposit work instead award of work through

competitive bidding - Rs 260.000 million ................................................... 145

3.4.15 Loss due to non-encashment of bank guarantees - Rs 171.771 million ....... 147

3.4.16 Undue financial aid due to allowing inadmissible secured advance -

Rs 85.55 million........................................................................................... 148

3.4.17 Non-recovery of advance income tax - Rs 20.022 million .......................... 150

3.4.18 Unjustified expenditure of Rs 32.000 million involving excess beyond

provision in revised PC-I of Rs 19.200 million ........................................... 152

3.4.19 Non-imposition and recovery of liquidated damages for delay in

completion of work - Rs 22.286 million ...................................................... 154

3.4.20 Unauthorized up-gradation of staff without authentication of

qualification certificates - Rs 17.655 million ............................................... 155

3.4.21 Overpayment due to inclusion of machinery/equipment component in

the rate analysis beyond technical requirement of site - Rs 17.435

million .......................................................................................................... 157

3.4.22 Overpayment due to non-deduction of shrinkage allowance -

Rs 15.596 million......................................................................................... 158

3.4.23 Non-recovery of dues from the ex-licencee - Rs 12.608 million ................. 160

3.4.24 Award of licence at lesser rate - Rs 12.013 million ..................................... 161

3.4.25 Overpayment due to difference in rates - Rs 17.299 million ....................... 163

3.4.26 Acceptance of high rates due to bid tempering - Rs 11.328 million ............ 164

3.4.27 Overpayment to the contractor due to inadequate tender/bid evaluation

- Rs 9.295 million ........................................................................................ 166

3.4.28 Overpayment due to excessive measurement of height of drain -

Rs 4.322 million........................................................................................... 167

3.4.29 Overpayment due to allowing higher component of labour in the non-

BOQ rate - Rs 3.924 million ........................................................................ 169

3.4.30 Overpayment due to non-adjustment of prices as a result of de-

escalation - Rs 3.398 million ....................................................................... 170

3.4.31 Incorrect enhancement in the bid amount by the Evaluation Committee

- Rs 3.117 million ........................................................................................ 171

3.4.32 Overpayment due to deviation from the contract agreement - Rs 1.892

million .......................................................................................................... 173

CHAPTER 4 ..................................................................................................... 175

NATIONAL HIGHWAY AUTHORITY ...................................................... 175

4.1 Introduction ................................................................................................. 175

4.2 Comments on Budget and Accounts (Variance Analysis) ........................... 177

4.3 Brief comments on the status of compliance with PAC‟s directives ........... 180

4.4 AUDIT PARAS ........................................................................................... 182

Irregularity and Non-Compliance ............................................................................. 182

4.4.1 Award of contract on rates 59.95% higher than the approved PC-I ............. 182

4.4.2 Award of contract without forming of joint venture by Chinese

Companies with Pakistani Firms ................................................................. 184

4.4.3 Major change in approved scope of work in violation of approved

PC-I.............................................................................................................. 187

4.4.4 Award of work to unqualified firm .............................................................. 190

4.4.5 Mis-procurement of consultancy contract - US$ 3,849,460 and

Rs 1,112.618 million .................................................................................... 192

4.4.6 Award of construction of motorways on Build Operate and Transfer

(BOT) basis without adhering Government‟s interest ................................. 195

4.4.7 Award of work to technically unqualified contractor - Rs 7,410.794

million .......................................................................................................... 201

4.4.8 Mis-procurement of consultancy services as Assistant to Employer‟s

Representative - US$ 3.552 million and Rs 460.724 million ...................... 202

4.4.9 Undue amendment in the contract resulting into financial aid to the

contractor - Rs 8,770.800 million ................................................................ 205

4.4.10 Award of toll operation contracts to the defaulters - Rs 6,542.899

million .......................................................................................................... 207

4.4.11 Award of Routine Maintenance works relating to AMP 2016-17

without detailed quantities in BOQ - Rs 4,730.38 million ........................... 209

4.4.12 Appointment of Design Review Consultant by the contractor in

violation of contract agreement involving Rs 2,085.986 million ................. 211

4.4.13 Revival of works by extending undue favour to the contractors .................. 214

4.4.14 Award of work to a disqualified firm due to non-adherence to

condition of bidding documents - Rs 715.455 million ................................. 217

4.4.15 Unauthorized execution of the work without approval and without re-

rating on excess quantity - Rs 515.829 million ............................................ 218

4.4.16 Excess expenditure due to deviation from approved scope of work

resulted in utilization of saving - Rs 240.882 million .................................. 220

4.4.17 Irregular transfer of work from N-70 to N-50 - Rs 198.156 million ............ 222

4.4.18 Loss due to non-taking over the possession of toll plazas from

defaulters - Rs 156.267 million and non-encashment of performance

bonds of defaulting operators - Rs 39.597 million ....................................... 224

4.4.19 Payment without approval from competent authority and overpayment

due to allowing enhanced rate - Rs 39.370 million ...................................... 227

4.4.20 Mis-procurement of Rs 19.064 million and irregular payment -

Rs 5.338 million........................................................................................... 229

Performance ............................................................................................................... 231

4.4.21 Non-mutation of land in the name of NHA - Rs 37,415.00 million ............. 231

Internal Control Weaknesses..................................................................................... 232

4.4.22 Irregular/unauthorized investment of surplus funds in Zarai Taraqiati

Bank - Rs 9,700.00 million .......................................................................... 232

4.4.23 Mismanagement of NHA resulting into accumulated toll income

receivable - Rs 7,968.409 million ................................................................ 235

4.4.24 Abnormal defective engineer‟s estimation due to high estimation of

rates in CSR 2014 - Rs 5,104.01 million ..................................................... 238

4.4.25 Violation of contract provision due to non-hiring of design and

supervisory consultants by the contractor - Rs 4,616.210 million ............... 240

4.4.26 Non-recovery due to non-provision of evidence for payments of

financial charges/premium against bank guarantees/ insurance -

Rs 3.986 billion ........................................................................................... 242

4.4.27 Loss on account of land acquisition and compound interest -

Rs 2,958.00 million and non-finalization of inquiry .................................... 244

4.4.28 Unjustified hiring of consultant for monitoring resulted in extra

expenditure of Rs 1,112.618 million and US$ 3.849 million ....................... 246

4.4.29 Loss of revenue due to short receipt of toll collection than reserved

prices - Rs 2,173.873 million ....................................................................... 248

4.4.30 Excess payment due to less execution of work - US$ 25.213 million ......... 250

4.4.31 Non-provision of construction performance bond by the

concessionaire - Rs 1,831.75 million ........................................................... 251

4.4.32 Non-recovery due to non-rectification/repair of defective road work -

Rs 1,631.519 million .................................................................................... 252

4.4.33 Unauthorized/Irregular payment of claims through Variation Orders -

Rs 1,371.328 million .................................................................................... 254

4.4.34 Unauthorized payment of escalation due to change in Factor-C

through Post bid change - Rs 1,338.369 million .......................................... 256

4.4.35 Overpayment due to non-deduction of de-escalation - Rs 1,127.831

million .......................................................................................................... 257

4.4.36 Loss to Government due to payment of work in dollars and fixation of

exchange rate through addendum - US$ 10.675 million .............................. 260

4.4.37 Grant of additional Mobilization Advance through post-bid

amendment - Rs 695.151 million ................................................................. 262

4.4.38 Borrow areas within 250 meters of right of way in violation of

contract provisions - Rs 631.300 million ..................................................... 263

4.4.39 Unjustified expenditure on closed projects - Rs 606.56 million .................. 264

4.4.40 Overpayment due to higher rates of earthworks - Rs 581.292 million......... 266

4.4.41 Loss due to arriving at reserve price of lesser amounts by the NTRC

without taking actual price escalation based on effective traffic

counting on toll plazas - Rs 501.70 million ................................................. 268

4.4.42 Non-recovery of rental charges from licensee - Rs 442.958 million ........... 269

4.4.43 Non-recovery of cost of stone obtained from hard rock excavation -

Rs 388.239 million ....................................................................................... 270

4.4.44 Extra expenditure due to unjustified revision of rates - Rs 350.01

million .......................................................................................................... 271

4.4.45 Overpayment due to incorrect payment of Foreign Exchange

difference - Rs 342.675 million ................................................................... 273

4.4.46 Unjustified application of current and base rates for steel resulting in

less recovery of de-escalation calculations - Rs 331.661 million ............... 275

4.4.47 Non-remittance of income tax in government treasury - Rs 290.267

million .......................................................................................................... 277

4.4.48 Non-recovery of secured and escrow advance - Rs 280.885 million ........... 279

4.4.49 Loss due to inclusion of cost of stone - Rs 248.299 million ........................ 279

4.4.50 Overpayment due to enhancement of agreed rates through post tender

change - Rs 239.689 million ........................................................................ 281

4.4.51 Loss of revenue due to award of contracts below reserved prices -

Rs 200.130 million ....................................................................................... 282

4.4.52 Non-rationalization of cost of vehicles as per the current market prices

resulted in excess cost - Rs 156.865 million ................................................ 285

4.4.53 Inadmissible payments of price escalation - Rs 156.156 million ................. 286

4.4.54 Overpayment of escalation through post bid amendment by enhancing

factor C - Rs 139.484 million ...................................................................... 287

4.4.55 Inadmissible provision of expenditure on Control & Monitoring Office

in the contract - Rs 134.159 million ............................................................. 288

4.4.56 Unjustified extra provision of training in China by the contractor

without provision in the tender documents - Rs 121.393 million ............... 289

4.4.57 Undue financial burden on the public exchequer on account of storage

charges - Rs 117.14 million ......................................................................... 291

4.4.58 Loss to the government due to non-rectification of the damaged work

at contractor‟s expense - Rs 116.766 million ............................................... 293

4.4.59 Excess payment on account of escalation beyond the provision of PC-I

- Rs 94.396 million ...................................................................................... 295

4.4.60 Irregular payment due to allowing escalation on disputed value of

work - Rs 93.186 million ............................................................................. 296

4.4.61 Grant of additional mobilization advance through post-bid amendment

- Rs 107.594 million and non-recovery of balance amount - Rs 86.902

million .......................................................................................................... 297

4.4.62 Unjustified expenditure of pay and allowances - Rs 77.464 million............ 299

4.4.63 Unjustified change in scope of work through Variation Orders -

Rs 64.483 million......................................................................................... 301

4.4.64 Non-recovery of ROW dues from filling stations and other business

operators - Rs 53.636 million....................................................................... 303

4.4.65 Unauthorized expenditure on construction of service road outside

Motorway fence on NHA Land for the benefit of Private Housing

Societies - Rs 53.331 million ....................................................................... 304

4.4.66 Non-completion of works by contractor - Rs 10.230 million and non-

imposition of liquidated damages - Rs 7.800 million .................................. 306

4.4.67 Unauthentic execution of work against day-work - Rs 40.099 million ........ 307

4.4.68 Excess percentage of overheads than the salary cost in violation of

RFP resulted in excess payment of Rs 34.704 million and US$

170,599 ........................................................................................................ 308

4.4.69 Un-authorized change in rate and quantities after rationalized bid and

approved PC-I resulted in extra benefit to the contractor - Rs 30.590

million .......................................................................................................... 310

4.4.70 Non-deduction of sales tax from the consultant‟s payments -

Rs 27.092 million......................................................................................... 311

4.4.71 Overpayment due to allowing enhanced rate - Rs 25.364 million ............... 313

4.4.72 Loss due to toll operation departmentally on interim basis - Rs 24.242

million .......................................................................................................... 314

4.4.73 Overpayment due to paying excavation cost twice - Rs 21.399 million ...... 315

4.4.74 Overpayment due to allowing escalation on provisional sum items -

Rs 18.362 million......................................................................................... 317

4.4.75 Non-forfeiture of performance bond due to non-commencement of

work - Rs 17.748 million ............................................................................. 318

4.4.76 Overpayment due to incorrect implementation of revised rates -

Rs 15.312 million......................................................................................... 319

4.4.77 Overpayment due to non-reduction in quoted rate of BOQ item -

Rs 14.547 million......................................................................................... 321

4.4.78 Less recovery from the toll plaza contractor - Rs 9.561 million .................. 322

4.4.79 Overpayment due to price adjustment - Rs 9.540 million ............................ 323

4.4.80 Unjustified and irregular lease of commercial land without

competition and at lesser rent - Rs 8.996 million ......................................... 324

4.4.81 Overpayment due to allowing price escalation on un-justified

weightage - Rs 8.395 million ....................................................................... 326

4.4.82 Less recovery of Income Tax on consultant payments - Rs 5.512

million .......................................................................................................... 327

4.4.83 Overpayment due to measurement of steel weight on higher side as

compared to the steel actually used in the work - Rs 4.369 million ............ 328

4.4.84 Non-recovery of sales tax - Rs 5.410 million .............................................. 329

4.4.85 Non-finalization of the matter regarding embezzlement of GPF

amount - Rs 2.837 million ........................................................................... 330

4.4.86 Wasteful/irrelevant expenditure from project account - Rs 2.064

million .......................................................................................................... 332

CHAPTER 5 ..................................................................................................... 334

PAKISTAN PUBLIC WORKS DEPARTMENT AND ESTATE OFFICE ............... 334

5.1 Introduction ................................................................................................. 334

5.2 Comments on Budget and Accounts (Variance Analysis) ........................... 335

5.3 Brief comments on the status of compliance with PAC‟s directives ........... 338

5.4 AUDIT PARAS ........................................................................................... 340

Irregularity and Non-compliance .............................................................................. 340

5.4.1 Award of works at higher rates - Rs 229.216 million .................................. 340

5.4.2 Non-recovery of Mobilization Advance - Rs 95.968 million ...................... 341

5.4.3 Irregular award of work - Rs 94.799 million ............................................... 343

5.4.4 Unjustified advance payment - Rs 53.758 million ....................................... 344

5.4.5 Irregular award of work due to excess over PC-I - Rs 25.533 million ........ 346

5.4.6 Unjustified payment - Rs 27.113 million ..................................................... 348

5.4.7 Unauthentic payment without recording detailed measurement of work

in Measurement Book - Rs 10.196 million .................................................. 349

Internal Control Weaknesses..................................................................................... 350

5.4.8 Overpayment due to non-application of price adjustment clause -

Rs 716.623 million ....................................................................................... 350

5.4.9 Unjustified payment of escalation beyond the provision of PC-I

/agreement - Rs 462.811 million .................................................................. 352

5.4.10 Irregular expenditure on work charged establishment - Rs 429.269

million .......................................................................................................... 354

5.4.11 Non-deduction of income tax - Rs 416.818 million ..................................... 356

5.4.12 Excess payment due to taking excessive measurement - Rs 364.881

million .......................................................................................................... 357

5.4.13 Wasteful expenditure due to abandoned work/non-completion of

works - Rs 271.342 million .......................................................................... 367

5.4.14 Unjustified inclusion of diesel in the component of asphaltic base

course & wearing course worth - Rs 261.006 million .................................. 369

5.4.15 Excess payment due to violation of approved design in revised PC-I -

Rs 173.189 million ....................................................................................... 370

5.4.16 Loss due to non-execution of work through original contractor -

Rs 160.057 million ....................................................................................... 371

5.4.17 Overpayment due to inclusion of higher rate of equipment in rate

analyses - Rs 153.364 million ...................................................................... 374

5.4.18 Unjustified payment due to changing mode of hard rock excavation

from blasting to hammering/chiseling - Rs 127.817 million ........................ 376

5.4.19 Overpayment due to non-adjustment of sorting and stacking cost -

Rs 127.134 million ....................................................................................... 378

5.4.20 Overpayment due to payment of certain quantity of gravelly soil and

soft rock excavation under hard rock excavation item beyond the

classified proportion - Rs 105.724 million ................................................... 379

5.4.21 Non-confiscation of security deposits - Rs 163.330 million ........................ 381

5.4.22 Undue retention of balance funds of PWP-II (placed under PLA-I and

PLA-III) after completion/handing over of respective schemes to the

TMAs - Rs 47.603 million ........................................................................... 383

5.4.23 Overpayment of escalation due to inclusion of inadmissible weightage

of coefficient - Rs 24.383 million ................................................................ 385

5.4.24 Overpayment/ undue benefit to contractor due to inadmissible

execution of higher rate - Rs 18.778 million ................................................ 387

5.4.25 Irregular/unauthentic payment -Rs 19.907 million and overpayment

due to non-deduction of crust - Rs 11.319 million ....................................... 390

5.4.26 Excess payment due to higher rates - Rs 16.803 million ............................. 392

5.4.27 Overpayment due to inadmissible cartage - Rs 12.804 million.................... 393

5.4.28 Blockage of Government funds - Rs 10.989 million ................................... 394

5.4.29 Overpayment due to non-adjustment of price of bitumen less used in

tack coat - Rs 10.299 million ....................................................................... 395

5.4.30 Non-recovery - Rs 10.282 million ............................................................... 396

5.4.31 Loss due to non-fulfillment of contractual obligation - Rs 9.814

million .......................................................................................................... 400

5.4.32 Unjustified payment - Rs 7.750 million and non-deduction of rock

filling from formation of embankment quantity - Rs 3.201 million ............ 401

5.4.33 Loss to Government - Rs 7.650 million ....................................................... 402

5.4.34 Excess payment of supervision charges - Rs 7.353 million ......................... 403

5.4.35 Overpayment due to avoidable/unnecessary item - Rs 7.213 million .......... 404

5.4.36 Overpayment on account of supervision charges - Rs 5.944 million ........... 405

5.4.37 Non-adjustment of structural excavated material - Rs 3.796 million .......... 407

5.4.38 Execution of defective/substandard work of Steel Reinforcement due

to utilization of steel having yield/ultimate strength less than normal -

Rs 2.765 million........................................................................................... 408

5.4.39 Overpayment due to non-adjustment of cost of excavated material -

Rs 2.736 million........................................................................................... 409

5.4.40 Excess payment due to non-deduction of GST – Rs 1.939 million and

non-deduction of Tax on Services - Rs 4.159 million .................................. 410

5.4.41 Overpayment of price escalation due to application of incorrect base

rate of HSD - Rs 1.377 million .................................................................... 411

5.4.42 Unauthorized expenditure - Rs 1.117 million .............................................. 412

5.4.43 Undue burden over government exchequer of millions of rupees by

cutting the hard rock with excessive slope beyond the technical

requirements of site ...................................................................................... 413

ESTATE OFFICE ....................................................................................................... 415

Irregularity and Non-compliance .............................................................................. 415

5.4.44 Irregular allotments/possession and improper maintenance of General

Waiting Lists (GWLs) and non-uploading of GWLs on website in

violation of Accommodation Allocation Rules ............................................ 415

5.4.45 Irregular allotment of government owned accommodation/ house of

higher category in violation of Accommodation Allocation Rules .............. 419

5.4.46 Irregular allotment of government owned accommodation ......................... 422

5.4.47 Irregular allotments to Provincial government employees ........................... 423

Internal Control Weaknesses..................................................................................... 425

5.4.48 Non-ejecting retired employees / unauthorized occupants and non-

recovery of government dues from defaulters - Rs 13.314 million .............. 425

5.4.49 Recurring loss to government due to lack of interest on account

of non-recovery of rent from the allottees of shops and petrol pumps -

Rs 164.415 million ....................................................................................... 427

5.4.50 Loss to government due to non-recovery of ceiling rent from

unauthorized occupants of government accommodation - Rs 5.433

million .......................................................................................................... 429

5.4.51 Non-recovery of rental ceiling of government accommodation –

Rs 4.877 million........................................................................................... 432

5.4.52 Non-ejectment / non-recovery of rent - Rs 1.448 million ............................ 435

5.4.53 Non-recovery of government dues from the ex-allottee - Rs 26.672

million .......................................................................................................... 438

5.4.54 Irregular retention of double accommodation and non-recovery of

dues - Rs 6.607 million ................................................................................ 440

5.4.55 Irregular/inauthentic issuance of NOC without recovery of outstanding

dues - Rs 3.445 million ................................................................................ 441

5.4.56 Non-retrieval of 78.17 Acres government land from unauthorized

occupants ..................................................................................................... 443

5.4.57 Non-cancellation of house / non-recovery of rental ceiling -

Rs 827,487 and less recovery of 5% HRA - Rs 171,800 ............................. 444

5.4.58 Non issuance of final No Demand Certificate, non-vacation of

government accommodation and non-clearance of government dues.......... 445

CHAPTER 6 ..................................................................................................... 448

FEDERAL GOVERNMENT EMPLOYEES HOUSING

FOUNDATION ............................................................................................. 448

6.1 Introduction ................................................................................................. 448

6.2 Comments on Budget and Accounts (Variance Analysis) ........................... 450

6.3 Brief comments on the status of compliance with PAC‟s directives ........... 451

6.4 AUDIT PARAS ........................................................................................... 452

Irregularity and Non-Compliance ............................................................................. 452

6.4.1 Execution of projects without appointment of Project Director ................... 452

6.4.2 Award of contract to an ineligible firm ........................................................ 453

6.4.3 Purchase of land from an ineligible firm - Rs 4,250 million ........................ 456

6.4.4 Loss to allottees due to purchase of land at higher rates - Rs 1,725

million .......................................................................................................... 457

6.4.5 Irregular payment of mobilization advance - Rs 756.250 million................ 459

6.4.6 Launching of housing scheme without mutation of 100 kanals of raw

land as Performance Security in the name of FGEHF - Rs 42.500

million .......................................................................................................... 460

Performance ............................................................................................................... 462

6.4.7 Non-development of housing scheme due to poor performance .................. 462

Internal Control Weaknesses..................................................................................... 463

6.4.8 Excess payment due to execution of quantities more than contract

agreement - Rs 805.566 million ................................................................... 463

6.4.9 Overpayment due to application of higher rate for similar item -

Rs 152.197 million ....................................................................................... 466

6.4.10 Overpayment of price escalation - Rs 99.215 million .................................. 468

6.4.11 Unjustified inclusion of item of Street Lights in BOQ of Infrastructure

Development Works in G-13 - Rs 83.113 million ....................................... 470

6.4.12 Non-recovery of defective work from the Design Consultants/

Contractor - Rs 69.825 million .................................................................... 471

6.4.13 Overpayment due to non-deduction of earth available from structural

excavation - Rs 55.078 million .................................................................... 474

6.4.14 Overpayment due to non-adjustment of prices because of de-escalation

- Rs 2.745 million ........................................................................................ 476

CHAPTER 7 ..................................................................................................... 479

NATIONAL CONSTRUCTION LIMITED ................................................. 479

7.1 Introduction ................................................................................................. 479

7.2 Comments on Audited Accounts ................................................................. 479

7.3 Brief comments on the status of compliance with PAC‟s directives ........... 487

7.4 AUDIT PARAS ........................................................................................... 489

Performance ............................................................................................................... 489

7.4.1 Slow execution/progress in execution of project - Rs 168.934 million ...... 489

7.4.2 Unjustified execution of Joint Venture beyond the company‟s

objectives depriving NCL from its legitimate revenue ................................ 491

CHAPTER 8 ..................................................................................................... 494

PAKISTAN HOUSING AUTHORITY FOUNDATION ............................. 494

8.1 Introduction ................................................................................................. 494

8.2 Comments on Budget and Accounts/Financial Statements (Variance

Analysis) ...................................................................................................... 495

8.3 Brief comments on the status of compliance with PAC‟s directives ........... 497

8.4 AUDIT PARAS ........................................................................................... 498

Irregularity and Non-Compliance ............................................................................. 498

8.4.1 Irregular award/implementation of development schemes without

approval of PC-I of the schemes .................................................................. 498

8.4.2 Non-determination of weightages of specified items violating standard

procedures and parameters of the PEC standard formula ............................ 500

8.4.3 Excess payment due to execution of items of work beyond BOQ

quantities - Rs 17.05 million ........................................................................ 503

8.4.4 Overpayment due to allowing payment for the excavated material /

soil used in filling - Rs 31.588 million......................................................... 504

8.4.5 Overpayment due to allowing higher rate of substituted / Non-BOQ

item - Rs 7.604 million ................................................................................ 506

8.4.6 Overpayment due to allowing transportation deemed included in

another pay item of work - Rs 12.029 million ............................................. 509

8.4.7 Excess payment due to non-deduction of compaction factor from

filling in area development - Rs 2.104 million ............................................ 510

8.4.8 Irregular construction of residential buildings without prior approval

of building plans from CDA ........................................................................ 511

8.4.9 Non-appointment of Project Directors in violation of Guidelines for

Project Management for proper execution of housing projects.................... 513

Performance ............................................................................................................... 515

8.4.10 Non-realization of receipt from allottees as per schedule of payment -

Rs 3,429.436 million .................................................................................... 515

8.4.11 Loss sustained by allottees due to non-completion/handing over of

apartments - Rs 529.920 million .................................................................. 516

Internal Control Weaknesses..................................................................................... 518

8.4.12 Loss due to delay in implementation/award of work - Rs 3,886.120

million .......................................................................................................... 518

8.4.13 Loss due to delay in implementation/award of works - Rs 409.492

million .......................................................................................................... 520

8.4.14 Acceptance of tenders having same scope, specifications, estimated

cost, location of work and date of tender, at different rates -

Rs 256.440 million ....................................................................................... 521

CHAPTER 9 ..................................................................................................... 526

HIGHER EDUCATION COMMISSION ......................................................... 526

9.1 Introduction ................................................................................................. 526

9.2 Comments on Budget and Accounts (Variance Analysis) ........................... 527

9.3 Brief comments on the status of compliance with PAC‟s directives ........... 530

9.4 AUDIT PARAS ........................................................................................... 531

Irregularity and Non-Compliance ............................................................................. 531

9.4.1 Construction of building without prior approval of Building Plan from

CDA resulting in imposition of fine/penalty - Rs 6.903 million ................. 531

9.4.2 Irregular procurement of equipment through quotations instead of

calling tenders - Rs 9.357 million ................................................................ 532

Internal Control Weaknesses..................................................................................... 534

9.4.3 Excess expenditure over and above the approved components in PC-I -

Rs 69.378 million......................................................................................... 534

9.4.4 Acceptance of tender beyond the permissible limit of PC-I - Rs 48.598

million .......................................................................................................... 535

9.4.5 Upward correction in bid rates in violation of tender instructions -

Rs 36.081 million......................................................................................... 536

9.4.6 Execution of plastering work below the agreed specification -

Rs 32.785 million......................................................................................... 539

9.4.7 Overpayment due to non-adjustment of prices of specified material -

Rs 6.717 million........................................................................................... 541

9.4.8 Undue benefit to contractor through extra item - Rs 3.405 million ............. 542

9.4.9 Overpayment due to acceptance of higher rates - Rs 1.101 million ............. 544

9.4.10 Overpayment due to excessive excavation - Rs 1.106 million ..................... 544

9.4.11 Overpayment due to allowing excessive weight of steel - Rs 1.003

million .......................................................................................................... 546

CHAPTER 10 ................................................................................................... 547

WORKERS WELFARE FUND/BOARDS .................................................. 547

10.1 Introduction ................................................................................................. 547

10.2 Comments on Budget and Accounts (Variance Analysis) ........................... 548

10.3 Brief comments on the status of compliance with PAC‟s directives ........... 549

10.4 AUDIT PARAS ........................................................................................... 550

Irregularity and Non-Compliance ............................................................................. 550

10.4.1 Unjustified payment of scholarships to children of employees of non-

entitled units/industries - Rs 58.037 million ................................................ 550

10.4.2 Non-recovery on account of rent of flats and shops - Rs 4.334 million

and non-revision of rates of shops ............................................................... 551

10.4.3 Non-allotment of 2040 completed flats - Rs 3,916.57 million .................... 552

10.4.4 Loss to the shelterless workers due to non-completion of project

within stipulated period and extending undue benefit to the sponsor -

Rs 869.050 million ....................................................................................... 554

10.4.5 Unauthentic payment to contractor without detailed measurement of

works - Rs 440.469 million .......................................................................... 556

10.4.6 Non-recovery of contribution and penalty from defaulting firms -

Rs 300.48 million......................................................................................... 557

10.4.7 Inadmissible payment on account of price adjustment for extended

period of contract - Rs 44.766 million ......................................................... 559

10.4.8 Award of Talent Scholarship to ineligible employees - Rs 14.943

million .......................................................................................................... 560

10.4.9 Payment on account of award of marriage/death grants to ineligible

employees - Rs 13.660 million .................................................................... 562

10.4.10 Inadmissible payment due to violation of specification/drawing -

Rs 5.289 million........................................................................................... 564

10.4.11 Payment on account of removal of debris in violation of contract

agreement - Rs 4.631 million ....................................................................... 566

10.4.12 Procurement of vehicles without provision in BOQ - Rs 4.074 million ...... 567

10.4.13 Payment of excessive quantities without approval - Rs 17.810 million

and overpayment due to separate payment of scaffolding - Rs 3.333

million .......................................................................................................... 568

10.4.14 Overpayment due to application of incorrect rate - Rs 3.040 million .......... 569

10.4.15 Hiring of Legal Advisor in violation of rules - Rs 2.683 million ................. 571

10.4.16 Non-mutation of land in the name of Workers Welfare Fund (2,119

Kanal 10 Marla) ........................................................................................... 572

Annexure-1: MFDAC ....................................................................................... 574

Annexure-2: Comments on Internal Controls ................................................... 575

ABBREVIATIONS AND ACRONYMS

ACWC

Asphaltic Concrete Wearing Course

ADA

Airport Development Agency

ADB

Asian Development Bank

ADP

Annual Development Programme

AER

Assistant to Employer Representative

AGPR

Accountant General Pakistan Revenues

AGR

Annual Ground Rent

AIIAP

Allama Iqbal International Airport

AIMS

Airport Information Management System

AMP

Annual Maintenance Plan

APM

Airport Manager

ASF

Airport Security Force

BBIAP

Benazir Bhutto International Airport

BCS

Building Control Section

BOD

Board of Directors

BOQ

Bill of Quantities

BOT

Build, Operate and Transfer

BUP

Build up Property

CAA

Civil Aviation Authority

CATI

Civil Aviation Training Institute

CBA

Collective Bargaining Agent

CCD

Central Civil Division

CDA

Capital Development Authority

CDR

Call Deposit Receipt

CDL

Cash Deposit Loan

CDWP

Central Development Working Party

Cft

Cubic Foot

CGA

Controller General of Accounts

CoC

Condition of Contract

CPEC

China-Pakistan Economic Corridor

CPWA

Central Public Works Accounts

CPWD

Central Public Works Department

CSR

Composite Schedule of Rates

cu.m

Cubic Meter

D.G.

Director General

DAC

Departmental Accounts Committee

DBA

Directorate of Budget and Accounts

DCO

District Coordination Officer

DDO

Drawing and Disbursing Officer

DDWP

Departmental Development Working Party

DLP

Defect Liability Period

DMA

Directorate of Municipal Administration

Draft Para

DST

Double Surface Treatment

DWP

Department Working Party

EALS

Environment Afforestation Land and Social

E&M

Electrical and Mechanical

ECC

Economic Coordination Committee

ECNEC

Executive Committee of the National Economic Council

EIA

Environmental Impact Assessment

Estate Office

EOBI

Employees Old-age Benefit Institution

EOI

Expression of Interest

EOT

Extension of Time

EPC

Engineering, Procurement and Construction

EPC

Escalation Payment Certificate

ETTM

Electronic Traffic Toll Management

Financial Advisor

FBR

Federal Board of Revenue

FGEHF

Federal Government Employees Housing Foundation

FIA

Federal Investigation Agency

FIDIC

Federation Internationale Des Ingenieurs-Conseils

(International Federation of Consulting Engineers)

FOR

Free on Rail

FWO

Frontier Works Organization

Financial Year

Gilgit-Baltistan

GFR

General Financial Rules

GPF

General Provident Fund

GVM

Gross Vehicle Mass

GVW

Gross Vehicle Weight

iii

GWL

General Waiting List

HEC

Higher Education Commission

Headquarters

HSD

High Speed Diesel

HVAC

Heating, Ventilating and Air-conditioning

Instructions to Bidders

ICAO

International Civil Aviation Organization

ICB

International Competitive Bidding

ICT

Islamabad Capital Territory

IEE

Initial Environmental Examination

IPC

Interim Payment Certificate

IPDF

Infrastructure Project Development Facility

ITS

Intelligent Transport System

JCR

Japan Credit Rating

JIAP

Jinnah International Airport

Joint Venture

KIBOR

Karachi Interbank Offered Rate

KKH

Karakoram Highway

KLM

Karachi Lahore Motorway

Khyber Pakhtunkhwa

LAC

Land Acquisition Collector

LED

Light Emitting Diodes

Measurement Book

MCI

Metropolitan Corporation Islamabad

MES

Military Engineering Service

MFDAC

Memorandum for Departmental Accounts Committee

MoC

Ministry of Communications

MoU

Memorandum of Understanding

MPO

Machinery Pool Organization

MSSR

Monopulse Secondary Surveillance Radar

NAM

New Accounting Model

NCB

National Competitive Bidding

NCL

National Construction Limited

NDC

No Demand Certificate

NESCOM

National Engineering and Scientific Commission

NESPAK

National Engineering Services of Pakistan

NGIA

New Gwadar International Airport

NHA

National Highway Authority

NHC

National Highway Council

NHEB

National Highway Executive Board

NHIP

National Highway Improvement Programme

NIIAP

New Islamabad International Airport Project

NIT

Notice Inviting Tender

NLC

National Logistics Corporation

NOC

No Objection Certificate

NTRC

National Transport Research Centre

O&M

Operation and Management

P&CA

Procurement and Contract Administration

PAC

Public Accounts Committee

PACRA

Pakistan Credit Rating Agency

PAO

Principal Accounting Officer

PAR

Performance Audit Report

PCC

Plain Cement Concrete

PC-I

Planning Commission (Proforma-I)

PCFC

Pak-China Friendship Centre

PD&R

Planning, Development and Reform

PDP

Proposed Draft Para

PEC

Pakistan Engineering Council

PHA

Pakistan Housing Authority

PHAF

Pakistan Housing Authority Foundation

PIAC

Pakistan International Airline Corporation

PLA

Personal Ledger Account

Periodic Maintenance

PMC

Present Management Consultants

PMDC

Pakistan Medical and Dental Council

PMO

Project Management Office

PMU

Project Management Unit

POL

Petroleum, Oil and Lubricants

PPRA

Public Procurement Regulatory Authority

PPWD

Pakistan Public Works Department

PSDP

Public Sector Development Programme

PSO

Pakistan State Oil

PSR

Primary Surveillance Radar

Motor Transport

PWD

Public Works Department

PWP

Peoples Works Programme

PWWB

Punjab Workers Welfare Board

RCC

Re-inforced Cement Concrete

RCB

Rawalpindi Cantonment Board

RDA

Rawalpindi Development Authority

RFP

Request for Proposal

Rft

Running Foot

Routine Maintenance

RMA

Road Maintenance Account

ROW

Right of Way

SAR

Special Audit Report

SBD

Standard Bidding Documents

SDGs

SECP

Sustainable Development Goals

Securities and Exchange Commission of Pakistan

Sub-Head

SOP

Standard Operating Procedure

Special Provisions

SRO

Statutory Regulatory Order

TST

Triple Surface Treatment

Variation Order

WBM

Water Bound Macadam

WWB

Workers Welfare Board

WWF

Workers Welfare Fund

vii

Preface

Articles 169 and 170 of the Constitution of the Islamic Republic of

Pakistan 1973, read with Sections 8 and 12 of the Auditor General

(Functions, Powers and Terms and Conditions of Service) Ordinance,

2001 require the Auditor General of Pakistan to conduct audit of the

accounts of the Federal and of the Provincial Governments and the

accounts of any authority or body established by, or under the control of,

the Federal or a Provincial Government.

The report is based on audit of the accounts of CDA, CAA, NHA,

Pak. PWD, EO, FGEHF, NCL, PHAF, HEC and WWF/Bs for the

financial year 2016-17 and also contains some audit observations for the

financial years 2013-14, 2014-15 and 2015-16. The Directorate General

Audit Works (Federal), Islamabad conducted audit during 2017-18 on a

test check basis with a view to reporting significant findings to the

relevant stakeholders. The main body of the Audit Report includes only

the systemic issues and audit findings carrying value of Rs 1 million or

more. Relatively less significant issues are listed in the Annexure-1 of the

Audit Report. The audit observations listed in Annexure-1 shall be

pursued with the Principal Accounting Officers at the DAC level and in all

cases where the PAO does not initiate appropriate action, the audit

observations will be brought to the notice of the Public Accounts

Committee through the next year‟s Audit Report.

Audit findings indicate the need for adherence to the regularity

framework besides instituting and strengthening the internal controls to

avoid recurrence of similar violations and irregularities.

Audit observations included in this Audit Report have been

finalized after due consideration of written responses of the audited

entities and discussions in DAC meetings.

The Audit Report is submitted to the President of Pakistan in

pursuance of Article 171 of the Constitution of the Islamic Republic of

Pakistan 1973, for causing it to be laid before the Parliament.

Sd/-

Islamabad

(Javaid Jehangir)

Dated: 12

February, 2018

Auditor General of Pakistan

viii

EXECUTIVE SUMMARY

The Directorate General Audit Works (Federal), Islamabad, carried

out audit of the Federal Government entities engaged in construction

works, namely, Capital Development Authority, Civil Aviation Authority,

National Highway Authority, Pakistan Public Works Department, Estate

Office, Federal Government Employees Housing Foundation, National

Construction Limited, Pakistan Housing Authority Foundation, Higher

Education Commission (PSDP/Infrastructure development works executed

by federally chartered universities/institutions), Workers Welfare

Fund/Boards and Ministry of Planning, Development and Reform (Special

Project Cell/Afghan Projects). These entities function under the

administrative control of various Principal Accounting Officers and

consume major portion of the funds provided under the Public Sector

Development Programme.

The Directorate General Audit Works (Federal), Islamabad, has

existing human resource of 155 personnel including officers and staff. The

annual budget of the Directorate General for the current financial year is

Rs 160.350 million. The Directorate General is mandated to conduct

Financial Attest Audit, Compliance with Authority Audit and Performance

Audit of civil works including mega projects of Federal Government. As

part of its Audit Plan (2017-18), for the Compliance with Authority Audit,

the Directorate General Audit Works (Federal) conducted audit of 85

formations, out of the 264 under its audit jurisdiction during Phase-I of the

Audit Plan, by deputing fifteen (15) Field Audit Teams with an input of

3,582 man-days. Moreover, regularity audit of ten (10) formations relating

to CDA, NHA, PHAF and PD&R were conducted in Phase-II of Audit

Plan of 2016-17 and audit observations have been included in this Audit

Report. One (01) Special Audit and nine (09) Performance Audits are also

under process, reports of which would be published separately.

The objectives of audit were to:

i. ascertain whether or not the moneys shown as expenditure

in the accounts were authorized for the purpose for which

they were spent;

ii. observe whether the expenditure incurred is in conformity

with the laws, rules and regulations framed to regulate the

procedure for expending public money;

iii. ascertain whether every item of expenditure is incurred

with the approval of the competent authority in the

Government for expending the public money;

iv. examine propriety of transactions to ascertain whether due

vigilance has been exercised in respect of expenditure

incurred from public moneys;

v. review, analyze and comment on impact and implications

of various government policies relating to the audited

entities;

vi. review, analyze and comment on budget, accounts,

financial statements, balance sheet, etc. and

vii. verify that rules and procedures were followed in

assessment and collection of revenues.

i. Scope of Audit

Auditable expenditure under the jurisdiction of Directorate General

Audit Works (Federal), Islamabad for the year 2016-17 was

Rs 419,483.449 million covering 264 formations under eight (08)

PAOs. Out of this, the Directorate General Audit Works (Federal)

audited an expenditure of Rs 118,445.660 million under the

category of compliance audit, which in terms of percentage is

28.24% of auditable expenditure. In addition, as part of its Audit

Plan (2017-18), the Directorate General Audit Works (Federal)

conducted a financial attest audit of the accounts of Pakistan Public

Works Department (Government of Pakistan) and nine (09)

Foreign Aided Projects executed by NHA. The Financial Attest

Audit Report of Pak. PWD has been published separately. The

Financial Attest Audit Reports of Foreign Aided Projects have

been sent to the stakeholders/development partners through

Economic Affairs Division. The significant issues of financial

governance and project management relating to Foreign Aided

Projects are also included in this Audit Report.

The audit coverage also includes the revenue collection amounting

to Rs 142,692.513 million against estimates of Rs 176,867.477

million by the audited entities.

ii. Recoveries at the instance of audit

The Directorate General Audit Works (Federal), Islamabad pointed

out „overpayments‟ and „recoverables‟ amounting to Rs 11,303.53

million. The management accepted the stance of Audit to the

extent of Rs 5,638.62 million. Recovery amounting to Rs 238.97

million was made by the audited entities and verified by Audit till

the finalization of this Audit Report. Recovery of Rs 174.21

million out of Rs 231.97 million was not in the notice of the

executives before audit.

In addition to the above stated recoveries, a sum of Rs 782.23

million was recovered by audited entities in relation to audit

observations pertaining to previous years. Total recovery of

Rs 1,021.20 million was verified by Audit during 2017-18 till the

finalization of this Audit Report. The sum included Rs 594.34

million pertaining to overpayments and Rs 426.86 million on

account of revenue receipt expedited.

iii. Holding of Departmental Accounts Committee meetings

Para 5 (f) of System of Financial Control and Budgeting, 2006

issued by Finance Division, Government of Pakistan provides that

the Principal Accounting Officer/Additional Secretary or

equivalent shall regularly hold meetings of DAC as Chairperson,

xii

with Financial/Deputy Financial Adviser and Director General

(Audit) as Members and Chief Finance and Accounts Officer as

Member/Secretary to watch the processing of Audit & Inspection

Reports and decide upon appropriate measures so as to aid and

accelerate the process of finalization of Audit Report.

The Principal Accounting Officers are regularly requested to

convene DAC meeting to discuss Audit Reports. During the period

from 1

July, 2017 till the finalization of this Audit Report, thirty-

one (31) DAC meetings were convened by various PAOs. Audit

paras included in this Audit Report have been discussed in DAC

meetings. However, PAOs of certain departments/authorities have

not convened DAC meetings to discuss audit paras included in this

Audit Report despite requests made by Audit.

iv. Audit Methodology

Desk audit was carried out to understand systems, procedures and

control environment of audited entities. Permanent files of the

audited entities were updated and utilized for understanding the

institutional framework. Detailed planning, documentation of

findings and quality assurance was conducted. The desk audit also

included in-house meetings of Field Audit Teams for experience

sharing and reviewing potential risk areas. A Risk Area Digest

earmarking potential risk areas was prepared for guidance of the

Field Audit Teams. Audit methodology included:

i. Updating the understanding of the business processes with

respect to control mechanism.

ii. Identification of key controls on the basis of prior years‟

audit experience/special directions from the Auditor

General‟s office.

iii. Prioritizing risk areas by determining significance and risks

associated with the identified key controls.

iv. Design/update audit programmes for testing the identified

risk conditions.

xiii

v. Selection of audit formations on the basis of:

a. Materiality/significance

b. Risk assessment

vi. Selecting samples as per sampling criteria/high value

items/key items.

vii. Execution of audit programmes.

viii. Identification of weaknesses in internal controls and

development of audit observations and recommendations

relating to non-compliance of rules, regulations and

prescribed procedures.

ix. Evaluating results.

x. Reporting.

xi. Follow-up.

v. Audit Impact

There has been a positive change in the responsiveness of audited

entities towards audit due to continuous functioning of Public

Accounts Committee in the recent years. The viewpoint of Audit

on financial/technical issues has been acknowledged by DAC/PAC

and administrative departments which is a healthy sign for the

financial and regulatory discipline in the audited entities.

Following are instances of major audit impact:

i. While discussing Para 3.4.4 of Audit Report on the

accounts of CAA for the year 2016-17, PAC in its meeting

held on 7.11.2017, issued directions to all PAOs that tender

documents should not be issued to any participating

firm/JV unless it has a valid registration with the Pakistan

Engineering Council. PAC also directed that PEC should

devise a mechanism for prompt processing of registration

of firms/JVs particularly of foreign firms. (National

Assembly Secretariat O.M. No. F.10(1)/2016-17/2017-PAC

dated 8

November, 2017)

ii. Pakistan Public Works Department accounted for receipts

on account of Federal Lodges in the Summary of

xiv

Appropriation Accounts so as to depict actual picture of

recovery adjusted in reduction of expenditure.

iii. CAA agreed that in future rate running contracts will be

executed through open tenders. (DP.30)

iv. DAC directed CAA that in future provision be made

through special condition that additional guarantee will be

obtained for upward revision of contract cost. (DP. 60, 175)

v. DAC directed CAA that that all tender notices/eligibility

criteria should be in line with PEC bye-laws and PPRA

rules so that sanctity of competitive bidding process is not

hampered and it is not restricted by imposing unnecessary

conditions. (DP. 119)

vi. CAA deleted specified item from variable portion of

Appendix-C of the contract agreement, having cost impact

less than 5%. (DP. 162, 163)

vii. NHA issued a circular to consultants to use Statistical

Bulletins published by Federal Bureau of Statistics (FBS)

as source of index for steel to remove discrepancy. (DP.

129)

viii. DAC observed with concern that purpose of formation of

Joint Venture is to provide an opportunity for local firm to

participate in unique projects and also a source of

technology transfer and capacity building of local firms,

which was not pursued actively by NHA. DAC directed

NHA to pursue it with the contractor, incorporate

obligations under “Corporate Social Responsibility” and

must involve local firms in future. (DP. 254)

ix. DAC directed NHA that it may be ensured that 40% of the

project vehicles would be purchased by the contractor of

Havelian-Thakot Project and the same be handed over to

NHA after completion of the project, as a property of NHA.

(DP.261)

x. In order to ensure transparency of tendering process, NHA

issued instructions that separate letter of rebate may not be

accepted while evaluating tenders. (DP.233)

xi. DAC directed NHA that a framework be devised to link the

market fluctuations with Composite Schedule of Rates for

proper estimation of cost and evaluation of works.

Frequency of revision of CSR be rationalized for proper

estimation. (DP. 124)

xii. DAC directed that NHA should adopt more scientific

approach and proper computer generated count/data for

determination of proper reserved price for revenue contract.

(DP. 113)

xiii. DAC directed NHA to review the provision of NHA Code

wherein %age has been given rather than absolute financial

value for power of approval of variation order. DAC

constituted a Committee under the chairmanship of

Additional Secretary, Ministry of Communications to

examine the increasing trend of variation orders in

execution of works and financial of powers of Members to

approve the variation. (DP. 46, 179)

xiv. DAC directed NHA to generate pre-numbered bills to the

users of Right of Way and book these as receivables in the

financial statements of NHA in accordance with

international financial reporting standards. (Para 4.4.30 AR

2015-16, DAC meeting held on 31

October, 2017)

xv. DAC directed the management of Pakistan Institute of

Engineering and Applied Sciences, Islamabad that a

separate procedure regarding escalation/de-escalation and

similar financial issues relating to HEC PSDP funded

projects may be devised. (DP.1)

xvi

vi. Comments on Internal Controls and Internal Audit

Department

The management of audited entities is generally not sensitized to

the imperative of strengthening internal control environment

within the organizations. The present report has identified a range

of irregularities, which have been recurring over the years. The

recurrence of these irregularities indicates the systemic issues were

cropping up either due to inadequate oversight mechanism or

ineffective implementation of internal controls. The pre-auditing,

expected to apply internal control checks during processing of

claims for payment, was weak mainly due to the influence of

management.

Although CDA, CAA, NHA and Pak. PWD have an internal audit

setup, but the financial irregularities observed during the present

audit reflect that this function was not exercised effectively. The

efficient functioning of internal audit would have helped the

management in effective implementation of internal controls and

strengthening the internal control environment in audited entities.

Audit underscores the need for addressing the systemic issues,

which are instrumental in occurrence of every irregularity, through

a detailed review of the financial management practices.

In case of other audited entities (FGEHF, PHAF, NCL), which do

not have internal audit function, Audit emphasizes the need for

establishing an internal audit regime in these organizations,

directly reporting to the Principal Accounting Officers.

Comments on internal controls, highlighting irregularities are

given at Annexure-2.

xvii

vii. Key audit findings of the report

Audit Report contains irregularities which have been clustered as

under just to present a graphical view:

i. Non-adherence to Public Procurement Rules, Planning

Commission‟s guidelines and Land Disposal Regulations

while procuring works, services, goods, lease, etc.

ii. Recoverable dues and overpayments to the contractors due to

non-adherence to provisions of contract agreement, contract

specifications and clauses, etc.

iii. Miscellaneous irregularities, including unauthorized

expenditure, etc.

Monetary value of audit observations against these categories is

shown in the table and chart below:

Categories of Irregularities

Amount (Rs in million)

Mis-procurements

16,992.67

Overpayments/Recoverables

11,303.53

Miscellaneous irregularities

90,148.92

Total

118,445.12

Mis-

procurements

14%

Overpayments/

recoverables

10%

Miscellaneous

irregularities

76%

Categories of Irregularities

xviii

Major audit findings included in this Audit Report are:

i. Plot for the development of wholesale super market in Sector

I-11/4, Islamabad was allotted to M/s Metro Cash & Carry

Pakistan Private Limited in violation of Islamabad Land

Disposal Regulations 2005 regarding open auction and no

mechanism/reserved price yardstick was followed. Besides,

CDA Board approved auction of plot for allotment of 8 acres

but possession was given for 9 acres of land.

ii. Excessive billing was paid by CDA to IESCO due to non-

deducting the effect of load shedding and un-illuminated

lights from the monthly bill payments. The payment for

excessive billing was a result of non-installation of energy

meter over the entire system and bills were raised on the

basis of units consumed during average 12 hours per day.

Fifty seven percent (57%) street lights remained un-

illuminated despite incurring expenditure involving

procurement of stores and salaries of a fleet of employees.

iii. CDA approved layout plan of a housing scheme despite the

fact that it failed to prove the land ownership.

iv. Revenue of Rs 5,040.462 million on account of licence fee,

toll collection, rent, property tax, operation and maintenance

charges, utility charges, entrée fee, etc. was not realized by

CDA, CAA, NHA, Estate Office and WWB.

v. Overpayments of Rs 3,349.567 million were made by CDA,

NHA, Pak. PWD, FGEHF, HEC and WWB due to price

escalation/de-escalation and incorrect interpretation/

Para 2.4.5

Para 2.4.6

Para 2.4.8

Paras 2.4.1, 2.4.38, 2.4.41, 2.4.46, 2.4.50, 2.4.60, 3.4.11, 3.4.23, 4.4.42, 4.4.64, 4.4.78,

5.4.48, 5.4.49, 5.4.50, 5.4.51, 5.4.52, 5.4.53, 5.4.54, 5.4.55, 5.4.57, 10.4.2

xix

application of price adjustment clause of the respective

contract agreements.

vi. Overpayments of Rs 3,786.201 million were made by CDA,

CAA, NHA, Pak PWD, FGEHF, PHAF, HEC and WWBs

due to higher rates, excessive measurements, separate

payment of in-built component, non-adherence to

specifications, foreign exchange difference, non-adjustment

of advances, non-adjustment of rates beyond technical

requirement, inadmissible component, insurance premium,

non-recoveries of taxes, etc.

vii. Procurement of works/services valuing Rs 16,992.668

million was made by CDA, CAA and NHA without calling

open tenders/in violation of Public Procurement Rules.

viii. Works valuing Rs 1,861.056 million were awarded by CDA,

CAA and PHAF without PC-I in violation of Project

Management Guidelines.

ix. Payments of Rs 1,690.221 million were made by CDA,

CAA, Pak. PWD and WWB against the „work done‟ without

recording mandatory and certified measurements in the

respective Measurement Books.

x. Pay & allowances and other employee related benefits

amounting to Rs 177.168 million were paid by CDA and

NHA in violation of rules.

Paras 2,4.53, 3.4.30, 4.4.35, 4.4.46, 4.4.53, 4.4.54, 4.4.59, 4.4.60, 4.4.74, 4.4.79, 4.4.81,

5.4.8, 5.4.9, 5.4.23, 5.4.41, 6.4.10, 6.4.14, 9.4.7, 10.4.7

Paras 2.4.18, 2.4.19, 2.4.28, 2.4.29, 2.4.31, 2.4.43, 2.4.45, 2.4.48, 2.4.52, 2.4.56, 2.4.57,

3.4.13, 3.4.17, 3.4.19, 3.4.21, 3.4.25, 3.4.28, 3.4.29, 4.4.19, 4.4.43, 4.4.45, 4.4.48, 4.4.50,

4.4.61, 4.4.70, 4.4.71, 4.4.73, 4.4.77, 4.4.82, 4.4.84, 5.4.11, 5.4.17, 5.4.19, 5.4.20, 5.4.25,

5.4.27, 5.4.29, 5.4.30, 5.4.32, 5.4.35, 5.4.36, 5.4.37, 5.4.39, 5.4.40, 6.4.9, 6.4.12, 6.4.13,

8.4.5, 8.4.6, 8.4.7, 9.4.9, 9.4.10, 9.4.11, 10.4.6, 10.4.10, 10.4.13, 10.4.14

Paras 2.4.13.2, 2.4.15, 2.4.20, 2.4.22, 2.4.27, 2.4.54, 3.4.2, 3.4.4, 3.4.8, 4.4.4, 4.4.5,

4.4.8, 4.4.20

Paras 2.4.10, 2.4.12, 2.4.13.1, 3.4.1, 8.4.1

Paras 2.4.24, 3.4.12, 5.4.7, 10.4.5

Paras 2.4.2, 2.4.14, 2.4.23, 2.4.59, 4.4.62

A list, indicating number of audit observations, made during the

Audit Year 2017-18, which are considered to be materially less

significant for reporting to the PAC, is at Annexure-1 (MFDAC).

viii. Recommendations

i. Internal controls be strengthened to ensure that irregularities,

as reported in this Audit Report, are preempted and fair value

for money is obtained from public spending.

ii. Fact finding inquiries and disciplinary actions be initiated to

fix responsibility in respect of cases involving overpayments,

losses and irregular expenditure.

iii. All receipts be realized in a timely manner and deposited in

the treasury/relevant account.

iv. Public Procurement Rules, 2004 be adhered to in letter and

spirit while making procurement of goods, services and

works.

v. Coordinated measures be put in place to remove

encroachments on state lands and structures.

vi. Detailed internal controls should be developed for payment

to the affectees on accounts of acquisition of land.

vii. The Planning Commission‟s guidelines for approval and

funding of projects (project management life cycle) be

followed in letter and spirit.

viii. The contractual obligations be monitored by the management

at every stage of contract execution.

ix. Advances to the contractors be granted strictly in line with

contractual provisions and recovered accordingly.

x. Public money be kept in authorized accounts only and

unspent balances be transferred to government.

xxi

xi. Reconciliation of expenditure/revenue be carried out

regularly.

xii. Timely convening of DAC meetings and compliance to the

directives of DAC and PAC be ensured.

xiii. Internal controls be periodically reviewed and made capable

of forestalling chances of pilferage and defalcation.

xiv. The Internal Audit Wings in the audited entities be instituted/

strengthened to act as facilitator in this regard.

xxii

SUMMARY TABLES AND CHARTS

xxiii

SUMMARY TABLES AND CHARTS

Table 1: Audit Work Statistics

(Rs in million)

No.

Description

No.

Budget

(Expenditure &

Receipts)

Total Entities (Ministries/PAOs) in

Audit Jurisdiction

688,637.586*

Total formations in audit jurisdiction

264

Total Entities(Ministries/PAOs) Audited

Total Formations Audited

291,746.809 **

Audit Inspection Reports

Special Audit Reports

Performance Audit Reports

Other Reports

a. Financial Attest of Pak. PWD

Appropriation Accounts***

b. Foreign Aided Projects****

16,191.129

60,081.360

* This figure includes budget estimates of respective audited entities (Rs 511,770.109

million) and their estimated revenue receipts (Rs 176,867.477 million) for the year

2016-17. Actual expenditure was Rs 419,483.449 million whereas actual receipts were

Rs 142,692.513 million.

**This figure represents total budget allocation (Rs 207,805.337 million) and estimated

receipts (Rs 83,941.472 million) of the formations audited. The actual expenditure of the

formations audited was Rs 118,445.660 million and actual receipts were Rs 54,480.201

million.

*** Actual expenditure against final grants of Appropriation Accounts of Pak PWD is

Rs 15,095.610 million.

**** Actual expenditure on account of 09 Foreign-Aided Projects is Rs 120,057.855

million which includes Rs 5,444.996 million local component and Rs 119,612.889

million foreign component.

xxiv

Table 2: Audit Observations classified by Categories

(Rs in million)

Table 3: Outcome Statistics

(Rs in million)

Description

Expenditure

Acquiring

Physical

Assets

(Procurement)

Civil Works

Receipts

Others

Total

current

year

Total last

year

Outlays

Audited

2,151.96

178,605.89

83,941.47

27,047.49

291,746.81

291,084.08

Monetary

Value of

Audit

Observations

668.34

70,428.02

42,921.15

4,427.61

118,445.12

165,453.81

Recoveries

pointed out

at the

instance of

Audit

32.50

6,705.97

4,532.87

32.19

11,303.53

18,329.98

Recoveries

Accepted/

Established

at the

instance of

Audit

2,416.87

3,221.75

5,638.62

3,975.17

Recoveries

Realized at

the instance

of Audit

594.34

426.86

1,021.20

2,782.60

Note: Recovery realized includes total recovery verified from July 2017 to

January 2018.

S. No.

Description

Monetary Value of Audit

Observations

Unsound asset management

48.40

Weak financial management

3,396.35

Weak internal controls relating to

financial management

115,000.37

Total

118,445.12

xxv

Table 4: Irregularities pointed out

(Rs in million)

No.

Description

Monetary Value of

Audit Observations

Violation of rules and regulations and

violation of principles of propriety in public

operations

11,828.42

Reported cases of fraud, embezzlement, theft

and misuse of public resources

31.41

Accounting Errors (accounting policy

departure from NAM, misclassification, over

or understatement of account balances)

1,776.38

Quantification of weaknesses of internal

control systems

99,170.29

Recoveries and overpayments, representing

cases of established overpayment or

misappropriation of public monies

5,638.62

Table 5: Cost-Benefit Ratio

(Rs in million)

No.

Description

Current Year

Last Year

Outlays audited

291,746.81

291,084.08

Expenditure on Audit

160.35

149.69

Recoveries realized at the

instance of Audit

1,021.20

2,782.60

Cost-Benefit Ratio

1:6.37

1:18

Note: Current year‟s figures are upto January 2018 while previous year‟s

figures are for whole year from 1

July, 2016 to 30

June, 2017.

xxvi

CHAPTER 1

PUBLIC FINANCIAL MANAGEMENT ISSUES

(PAKISTAN PUBLIC WORKS DEPARTMENT)

Pakistan Public Works Department (Pak. PWD) maintains its

accounts as a self-accounting entity. Directorate General Audit Works

(Federal), Islamabad conducted Financial Attest Audit of the

Appropriation Accounts of Pak. PWD as per Section 7 of the Auditor

General‟s (Functions, Powers and Terms and Conditions of Service)

Ordinance, 2001. The results of Financial Attest Audit were reported to

the Department through Management Report. Audit para on budget

utilization and accounting procedures is as follows:

1.1 AUDIT PARA

1.1.1 Unauthorized transfer of funds from lapsable PLA-I to non-

lapsable PLA-IV - Rs 1,776.376 million

The Finance Division (Budget Wing), Government of Pakistan

vide letter No. F-3(20) BR/II/94-B-Vol-I/313 dated 15

April, 1997

allowed operation of four (4) Personal Ledger Accounts (PLAs) in

Pakistan Public Works Department (Pak. PWD) with zero balances

operative from 1

July, 1997, as detailed below:

PLA No.

Description

Nature

PLA-I

Annual Development Programme

Lapsable

PLA-II

Maintenance only

Lapsable

PLA-III

Deposit Works

Non-lapsable

PLA-IV

Other Deposits such as Contractor‟s

Securities, GP Fund receipts, etc.

Non-lapsable

Audit noticed that the Executive Engineers of fifteen (15) divisions

of Pak. PWD transferred a sum of Rs 1,776.376 million from PLA-I

(lapsable) to PLA-IV (non-lapsable) on account of withheld amounts of

contractor‟s claims, retention of excess security deposit, etc., as detailed in

Annexure-A and booked the expenditure against work done during the

financial year 2016-17.

Audit was of the view that these transactions not only violated the

PLA system in a planned manner but also casts serious doubts on the

system of internal controls. By converting the lapsable nature of funds into

non-lapsable funds, the mandate of the Parliament was infringed upon by

Executive Engineers.

Audit pointed out the irregularity during certification audit of the

appropriation accounts of Pak PWD in September-October 2017. The

matter was discussed with the Controller General of Accounts in

December 2017 wherein it was informed that action had been initiated

against Divisional Accounts Officers for such violation. Director General

Pak PWD informed that the Executive/Divisional Offices of Pak PWD

received the major portion of funds for execution of the development

schemes pertaining to Parliamentarians under Sustainable Development

Goals (SDGs) Programme during the month of May and June 2017.

Therefore, utilization of the same in a very short span of time was not

possible as codal formalities were required to be fulfilled before physically

taking the schemes in hand. Moreover, on the other side as the release of

funds was a cumbersome process, there was always pressure from the

Parliamentarians that these funds should not be lapsed in any case and that

development schemes be completed.

Audit contended that transfer of funds to non-lapsable account and

booking the same as expenditure without physical execution of work was

in violation of rules and as a matter of fact it led to qualification of the

accounts. Audit, however, endorsed that a proper case be prepared for

taking up the issue with Finance Division to regulate the funding and

release mechanism.

The matter was also discussed in DAC meeting held in December

2017. Audit apprised that PAC while discussing similar issue had directed

that PAO shall be personally responsible for such irregularity.

The DAC directed the department to stop this practice and action

be taken against all persons at fault. DAC further decided that the matter

may be taken up with Finance Division to sensitize the matter that due to

the delayed release of funds, works could not be completed before 30

June which resulted in withholding of amount by the executing

department.

Audit recommends that the irregularity be investigated to fix the

responsibility against persons at fault.

CHAPTER 2

CAPITAL DEVELOPMENT AUTHORITY

(CAPITAL ADMINISTRATION AND DEVELOPMENT DIVISION)

2.1 Introduction

Capital Development Authority (CDA), established under the CDA

Ordinance promulgated on 27

June, 1960, is governed through an

Executive Board, constituted by the Federal Government, under Section 6

of CDA Ordinance, 1960. Secretary, Capital Administration and

Development Division is the Principal Accounting Officer of CDA. The

major objectives/services entrusted to CDA include:

 Development of new Sectors

 Municipal Services

 Allotment and transfer of plots

 Maintenance of Sectors

 Provision of health and medical services in Islamabad and

Federal Capital Territory

 Traffic engineering and signals control

 Rescue Service 1122 in Islamabad

Financial Advisor/Member (Finance), CDA is in-charge of the

Finance/Accounts Wing and is responsible for preparation of budget and

allocation/distribution of funds to different Divisions/Formations.

Major resources of receipts of CDA include:

 Revenue generated from sale of plots, municipal receipts,

sanitation receipts, environmental/horticulture receipts,

property tax, toll tax, water charges, conservancy charges,

interest/markup, commercial receipts (rent from shopping

centers, bus stands), etc.,

 Grant-in-aid from Federal Government for development

purpose through Public Sector Development Programme,

 Grant-in-aid from Federal Government for maintenance of

specified government buildings (Maintenance Grant).

As per notification vide S.R.O 1(2016) dated 14

June, 2016 by

the Government of Pakistan, Ministry of Interior, twenty-three (23)

Directorates of CDA were placed under the administrative control of the

Mayor of Metropolitan Corporation Islamabad (MCI) along with all

rights, assets and liabilities by virtue of Islamabad Capital Territory local

Government Act 2015 with immediate effect.

However, due to administrative reasons, financial arrangements

are still under CDA and practical distribution of work is yet to be

finalized. Therefore, a combined Audit Report comprising CDA and MCI

has been prepared.

2.2 Comments on Budget and Accounts (Variance Analysis)

Comments on „Receipt and Expenditure Account‟ for the financial

year 2016-17, are as under:

(A) Expenditure:

Budget allocation and expenditure for the financial year 2016-17 is

shown in the table below:

(Rs in million)

Type of

Funds

Budget

Allocation

Actual

Receipt of

funds

Actual

Expenditure

Variation*

Excess/

(Saving)

Excess/

(Saving) in

(A) Non-Development

Maintenance

Grant

2,197.000

1,483.461

2,183.060

699.599

47.160

Revenue

Account

7,081.030

5,821.790

11,828.245

6,006.455

103.172

Sub-Total (A)

9,278.030

7,305.251

14,011.305

6,706.054

91.798

(B) Development

PSDP

643.660

87.587

88.759

1.172

1.338

Self-Financing

26,895.580

18,765.591

4,377.912

(14,387.679)

(76.671)

Sub-Total (B)

27,539.240

18,853.178

4,466.671

(14,386.507)

(76.308)

Total

(A) + (B)

36,817.270

26,158.429

18,477.976

(7,680.453)

(29.361)

Type of

Funds

Budget

Allocation

Actual

Receipt of

funds

Actual

Expenditure

Variation*

Excess/

(Saving)

Excess/

(Saving) in

Other debts

and deposits

2,652.341

3,178.688

526.347

19.845

Remittance

(1,569.205)

(100)

Sub-Total (C)

1,083.136

3,178.688

(1,042.858)

(96.281)

Grand Total

(A)+(B)+(C)

36,817.270

27,241.565

21,656.664

(8,723.311)

(32.022)

* Variation figures represent difference of actual receipt of funds and actual expenditure.

i. Funds of Rs 9,278.03 million were allocated in Revenue Account

(expenditure on establishment and maintenance from CDA‟s self-

generated revenues) against which Rs 7,305.251 million (78.74%)

were received during 2016-17. Expenditure of Rs 14,011.305

million was incurred with an excess of Rs 6,706.054 million

(47.86%) over the actual revenue.

ii. Funds of Rs 643.660 million were allocated in the Public Sector

Development Programme for the year 2016-17 against which funds

of Rs 87.587 million were released and expenditure of Rs 88.759

million was incurred. There was excess expenditure of funds for

Rs 1.172 million.

iii. An allocation of Rs 26,895.580 million was earmarked for the

development activities under the head „Self-Financing‟ against

which, actual funds of Rs 18,765.591 million (69.77%) were

realized but an expenditure of Rs 4,377.912 million was incurred.

This indicated that CDA could only achieve 16.28% of planned

targets/objectives of development activities.

iv. CDA Board approved development budget for financial year 2016-

17 for Rs 27,539.24 million, which was 74.80% of the total budget

of Rs 36,817.27 million. Audit observed that key milestones

envisaged in the original budget estimates for 2016-17 were not

materialized. CDA incurred development expenditure of

Rs 4,466.671 million which was 16.22% of the original

development budget estimates of Rs 27,539.24 million. Incurrence

of expenditure only 16.22% of the development budget revealed

that financial managers of CDA did not conduct proper exercise to

review their financial resources keeping in view the quantum of

receipts and expenditure.

v. From the above, it is evident that the development funds were not

fully utilized during 2016-17 and there was a saving of 76.67%.

On the other hand, there was an excess of 91.80% in non-

development budget. This indicated that non-development

expenditure was on rise and development activities were not being

given priority.

vi. Balance of Rs 1,896.074 million was shown against Cash

Development Loan (CDL) on 1

July, 2016. Nothing was released

by the Federal Government during 2016-17 but Authority incurred

expenditure of Rs 1,341.281 million, leaving a balance of

Rs 554.793 million. This showed that the Authority incurred the

expenditure without release of funds.

vii. Federal Government released fund of Rs 2,645.946 million for

Metropolitan Corporation Islamabad (MCI) during financial year

2016-17. An expenditure of Rs 2,645.946 million (100%) was

shown incurred but the expenditure was not incorporated in the

CDA Consolidated Account for June 2017. Final Account for June

2017 was not provided to Audit.

(B) Receipts:

Receipts of CDA from its own resources are as follows:

(Rs in million)

Description

2015-16

2016-17

Self-Financing Sector

Estimated Receipts

28,245.950

28,617.210

Actual Receipts

12,377.849

18,765.591

Shortfall

15,868.101

9,851.619

Shortfall in %age

56.178

34.426

Description

2015-16

2016-17

Other Receipts

Estimated Receipts

6,826.840

3,685.110

Actual Receipts

3,039.394

5,821.790

Shortfall/(Excess)

3,787.446

(2,136.68)

Shortfall/(Excess) in %age

55.478

(57.981)

Total Receipts

Estimated Receipts

35,072.720

32,302.320

Actual Receipts

15,417.243

24,587.381

Shortfall

19,655.477

7,714.939

Shortfall in %age

56.04

23.88

i. As per CDA account for the year 2016-17, the estimated receipts

under self-financing were Rs 28,617.21 million against which a

sum of Rs 18,765.591 million was actually realized (65.57% of the

estimates) and estimated „other receipts‟ were Rs 3,685.11 million

while Rs 5,821.79 million were realized (58.198% above of the

estimates). This showed an excess of Rs 2,136.68 million

(57.981%) in collection of „other receipts‟.

ii. There was a shortfall of Rs 7,714.939 million (23.88%) against

overall estimated receipts of Rs 32,302.320 million as the

Authority could generate a revenue of only Rs 24,587.381 million

during 2016-17. This indicated that either the estimates of receipts

were overambitious/unrealistic or the Authority could not exploit

the available resources to derive due benefits. CDA should

improve and rationalize mechanism of estimation and realization

of revenues.

iii. According to PC-I of the Project “Metropolitan Water Supply

Phase-I” the ECNEC decided that the beneficiaries of the Project

i.e. CDA, Federal Government, Rawalpindi Development

Authority-Water and Sanitation Agency (RDA-WASA) and

Rawalpindi Cantonment Board (RCB) shall repay the loan (PK-P-

24) on the following sharing basis:

CDA = 11%

Federal Government = 22%

WASA = 28.80%

RCB = 38.20%

Audit noted that Deputy Director Khanpur Dam, Directorate of

Bulk Water Management CDA, Islamabad being the executing and

coordinating agency of the project did not recover the installments

of the loan due on 20

September, 2016 and 20

March, 2017 as

per amortization schedule during the financial year 2016-17 from

the above beneficiaries for onward repayment of foreign loan up to

June, 2017.

This resulted into non-recovery of Rs 626.093 million, as detailed

below, for repayment to the development partner to avoid levy of

interest @ 2.50%.

CDA

Federal Govt.

WASA

RCB

Total (Rs)

11%

22%

28.80%

38.20%

100%

68,870,270

137,740,540

180,314,888

239,167,664

626,093,362

(DP. 29)

Comments on „Receipt and Expenditure Account‟ of CDA for the

year 2016-17 are as under:

2.2.1 Incurrence of expenditure in excess of budget allocation/

releases by the Federal Government - Rs 11,881.70 million

Para 5(d) of System of Financial Control and Budgeting 2006

provides that the Principal Accounting Officer is responsible for ensuring

that the expenditure is not incurred in excess of the budget allocation. He

shall ensure that all payments are correctly classified under the appropriate

head of account and that departmental accounts are regularly reconciled

every month with the figure communicated by the Controller General of

Accounts (CGA), Accountant General of Pakistan Revenue (AGPR). He

shall, in addition keep himself well informed not only of the actual

expenditure but also of the liabilities, which have been incurred and must

ultimately be met.

During scrutiny of the consolidated monthly account for June-2017

it was observed that an expenditure amounting to Rs 11,881.70 million as

detailed below, was incurred by CDA in excess of the budget allocations/

releases under annual PSDP and Maintenance Grants by the Federal

Government.

(Rs. in million)

Particulars

Balance as on

01.07.2016

Receipt up to

06/2017

Expenditure

up to

06/2017

Balance as

30.06.2017

Grant in Aid

Capital

(PSDP Grant)

(2,307.276)

87.587

88.769

(2,308.448)

Khanpur Dam

(102.054)

Grant in Aid

Revenue

(Maintenance

Grant)

(8,771.631)

1,483.461

2,183.060

(9,471.230)

Total

(11,180.96)

1,571.048

2,271.829

(11,881.70)

Audit pointed out the irregularity in December 2017 but the

management did not reply.

(DP.165)

2.2.2 Negative balance appearing in Accounts since FY 2005-06

against Khanpur Dam (Capital Account item) - Rs 102.05

million

Opening balance of Rs 102.05 million was appearing in the

accounts for the financial year 2016-17 under Capital Account (CDA

Funds). This amount kept on appearing in the opening balance since

financial year 2005-06 and was being carried forward every year. The

amount was recoverable from Rawalpindi Cantonment Board as share of

expenditure on Khanpur Dam.

2.2.3 Heavy closing balances with DDOs and non-reconciliation of

Bank Balance - Rs 11,703.742 million

Audit noted that Director Accounts CDA compiled account for

June 2017 in which cash balances of CDA on 30

June, 2017 were shown

Rs 11,703.742 million, as detailed below:

i. Bank balance

(including Municipal Treasury bills) Rs 11,355.264 million

ii. Balance with D.D.O Rs 348.478 million

Total Rs 11,703.742 million

Audit observed that verification of cash balance and bank balances

was not made. Bank balance of Rs 11,355.264 million was posted without

giving detailed reconciled figures in each bank account. In absence of

reconciled figures against each bank account, cash balance was found un-

authentic. This resulted into non-verification and non-reconciliation of

cash balance of Rs 11,703.342 million.

(DP.163)

2.2.4 Non-preparation of Proforma Accounts

Para 389 (Chapter-VII) of CDA Procedure Manual Part-III

provides that accounts of formations established for departmental purposes

should be maintained in such a way as to enable the organization to

prepare Proforma Account annually to facilitate review of financial results

of the organization at the end of every year.

Proforma Accounts of MPO and other semi-commercial

formations like Central Engineering Laboratory and Convention Centre,

Islamabad were not prepared.

CDA replied that Directorate of MPO and Central Engineering Lab

had been asked to submit proforma account. The compliance would be

shared with Audit.

2.2.5 Expenditure in excess of receipt in the head “Grant-in-Aid

Revenue”

CDA received a sum of Rs 1,483.461 million under head „Grant-

in-Aid‟ and incurred expenditure of Rs 2,183.060 million during the year

2016-17. In this way, an expenditure of Rs 699.599 million was incurred

in excess of the actual receipts during the year increasing the overall

excess to Rs 9,471.230 million upto 30

June, 2017.

2.2.6 Non-compilation of separate accounts of Metropolitan

Corporation Islamabad (MCI) for the financial year 2016-17

Audit noted that accounts of 23 Directorates transferred to MCI

were required to be compiled separately. Budget of MCI for Rs 2,645.946

million was released and booked as expenditure.

Audit observed that consolidated account of CDA for June 2017

was prepared including those Directorates since transferred to MCI.

Audit pointed out non-compilation of MCI accounts separately in

December 2017 but the Authority did not reply.

(DP. 160)

2.2.7 Compilation of surplus/deficit account and depreciation

account without certification - Rs 544.523 million

Para 255 of Procedure Manual Part-III Accounting Procedure CDA

provides that registers and schedules relating to the suspense and deposit

heads of account, contractor‟s ledger, works abstract, register of works,

rent register and record of assessment and realization of revenue should be

reviewed monthly so that the steps necessary to effect expeditious

clearance of outstanding balances be taken.

During audit inspection of the compiled accounts of CDA for June

2017, abstract of CDA‟s Account with opening and closing balance at

serial No.B-4 Surplus/deficit account balance was shown as Rs 515.218

million, without giving details of this deficit. Similarly, a sum of

Rs 29.305 million was shown as depreciation, without preparation of

manufacturing accounts of machinery and equipment.

Audit observed that balances in various accounts heads were being

carried forwarded without verification of actual figures and authenticity of

transactions. The accounts of all liabilities and assets awaiting settlement

and to effect clearance in the account of June were liable to be cleared. In

absence of details and certified figures, Compilation of Surplus Deficit

Account and depreciation account amounting to Rs 544.523 million was

unauthentic. Audit was of the view that unauthentic compilation of

surplus/deficit account and depreciation account without certification was

due to weak internal and financial controls of CDA. Audit pointed out the

irregularity in December 2017 but the Authority did not reply.

(DP.162)

2.3 Brief comments on the status of compliance with PAC’s

directives

Compliance position of PAC‟s directives on Audit Reports relating

to CDA is as under:

Year

Total

Paras

No. of

Paras

Discussed

Compliance

made

Compliance

awaited

Percentage

compliance

1988-89

57.14

1989-90

100

1990-91

100

SAR-9

88.89

1991-92

70.59

1992-93

100

1993-94

12.28

1994-95

1995-96

3.57

1996-97

84.38

SAR

100

PAR

1997-98

312

214

68.58

1998-99

79.75

Year

Total

Paras

No. of

Paras

Discussed

Compliance

made

Compliance

awaited

Percentage

compliance

2 SAR

1 SAR

50.00

1999-00

66.28

1 SAR

100

2 PAR

2000-01

79.45

184-

SAR

184

108

58.69

2001-02

93.33

2002-03

71.43

2003-04

59.26

SAR

86.36

PAR

80.0

2004-05

62.06

2005-06

77.19

2006-07

48.72

2007-08

51.52

2009-10

59.26

2005-08

SAR

57.45

2010-11

18.18

*PAR

77.78

*PAR

38.89

*PAR

2011-12

20.34

2012-13

5.75

2013-14

20.75

Note: Audit Reports for 1985-86, 1987-88, 2014-15, 2015-16 and 2016-17

have not been discussed by PAC till the finalization of this Audit Report.

SAR stands for Special Audit Report, PAR for Performance Audit Report and

*PAR for Project Audit Report. Other figures represent Annual Regularity

Audit Reports.

2.4 AUDIT PARAS

Fraud/Mis-appropriations

2.4.1 Embezzlement of entry fee in Lake View Park Islamabad -

Rs 16.250 million

As per rule 7 of Appendix-2 of General Financial Rules (Vol-I), in

all cases of fraud, embezzlement or similar offences, departmental

proceedings should be instituted at the earliest possible moment against all

the delinquents and conducted with strict adherence to the rules. There is

no legal bar to the holding and finalizing of such proceedings even against

a Government servant who is being prosecuted in a criminal court also.

As per Human Resource Directorate CDA Office Order issued

vide No. CDA-5(47)/HRD-I/2012/4796 dated 17

November, 2015, four

(04) CDA Officers were found guilty of misconduct/in-efficiency/

corruption and misuse of powers regarding entry fee collection in Lake

View Park Islamabad whereby huge loss of Rs 16.250 million was

sustained by CDA. The Chairman CDA imposed penalties of stoppage of

increment for one year against three (03) defaulting officers and major

penalty of time scale demotion by three increments with recurring effect

against one officer. In addition to above said penalties, the loss of

Rs 16.250 million would be recovered from the defaulting officers in

different proportions in case it was not recovered from the contractor

through decree passed by the Civil Court, Islamabad, as detailed below:

No.

Name

Designation

Amount

(Rs in

million)

Irfan Azeem

Khan

Deputy Director

(Parks)

50%

8.125

Asif Majeed

Director

40%

6.500

Muhammad

Zubair

Manager Parks

10%

1.625

Total

16.250

Audit observed from the record of Accounts Directorate, CDA that

the recovery of embezzled amount of Rs 16.25 million was neither made

from the contractor M/s Fazal-e-Wahab & Co., nor from the officers held

responsible. This resulted into non-recovery of Rs 16.25 million.

Audit was of the view that embezzlement occurred due to weak

financial controls.

Audit pointed out the non-recovery in April 2017. The Authority

replied that HRD Directorate vide letter dated 25

January, 2016 had

withdrawn the penalties imposed. However, matter had been transferred to

HRD Directorate on 9

May, 2017 for review. The updated position

would, therefore, be submitted later on. The reply was not tenable because

recovery of Rs 16.25 million either from the contractor or the officers held

responsible was not effected.

The matter could not be discussed in DAC meeting despite

requests made by Audit in November, December 2017 and January 2018.

Audit recommends recovery of embezzled amount.

(DP. 95)

2.4.2 Non-recovery of advances and salary paid to Ex-official

dismissed from service due to fake certificates - Rs 2.145

million

As per HRD Directorate, CDA order vide No.CDA-5(253)/HRD-

I/2016/2132 dated 24

October, 2016, Chairman CDA imposed the major

penalty of “Dismissal from Service” upon Agha Haroon Nawaz, Senior

Auditor (IRMIS Section) Accounts Directorate, CDA with immediate

effect, as he submitted fake/bogus certificate of HSSC/Intermediate.

Audit noticed that the official was suspended from service on

account of misconduct/corruption vide HRD Office order No. CDA-

5(253)HRD-1/2015/262 dated 3

February, 2016, and subsequently

dismissed from service vide letter dated 24

October, 2016, after

establishment of fake/bogus certificates of HSSC/ Intermediate.

Audit observed that the personnel in addition to salary, drew

House Building Advance, Motor Car Advance and GP Fund Advance

during his service in CDA which was still outstanding against the ex-

official. This resulted into non-recovery of Rs 2.145 million, as detailed

below:

S. No.

Description

Amount Outstanding

(Rs)

Motor Car Advance (MCA)

50,000

House Building Advance (HBA)

561,600

Ex-Gratia

14,800

Salary

1,518,734

Total

2,145,134

Audit was of the view that non-recovery occurred due to weak

financial controls.

Audit pointed out the non-recovery in April 2017. The Authority

replied that during service the officer drew advances as a normal course of

employment. Later on, the officer was dismissed from service on the basis

of submission of fake/bogus certificate of HSSC/Intermediate. The reply

was not tenable as the Authority did not reply regarding recovery of the

outstanding advances.

The matter could not be discussed in DAC meeting despite

requests made by Audit in November, December 2017 and January 2018.

Audit recommends early recovery of the amount from the ex-

officer.

(DP. 96)

2.4.3 Non-initiation of disciplinary as well as criminal proceedings

against employees having fake degrees

As per provision of CDA Employees Service Regulations, 1992

and condition of offer letter, the regularization of service was subject to

checking of original documents, viz. first engagement letter, last

extension, letter of service, CNIC, academic certificate/degrees,

experience certificates, domicile, etc. at the time of joining. As per

condition of the offer letter, later on these documents shall be verified

from concerned Boards/Universities/Departments by concerned

Directorate, CDA within three months. In case, during their verification

these record/documents found counterfeit, a criminal as well as

disciplinary proceeding shall be initiated against the individuals under

CDA (Employees) Service Regulations, 1992.

Audit observed from the record of Security Directorate that

certificates/degrees/experience certificates of forty-eight (48) employees

(BPS-1 to 16) were found fake during verification by the Boards/

Universities/Educational Institutions concerned but the record of the

Directorate produced to Audit was silent about the disciplinary as well

criminal proceedings against the individuals concerned under CDA

(Employees) Service Regulations, 1992.

Audit was of the view that non-initiation of appropriate

departmental/criminal proceedings was due to weak administrative

controls.

Audit pointed out the issue in August-September 2017. The

Authority did not reply.

The matter could not be discussed in DAC meeting despite

requests made by Audit in November, December 2017 and January 2018.

Audit recommends that the matter be investigated and disciplinary

action be initiated against the individuals under CDA (Employees) Service

Regulations, 1992.

(DP. 142)

Irregularity and Non-Compliance

2.4.4 Non-cancellation of commercial plots due to non-renewal of

lease - Rs 40,155.648 million

According to condition No.1 of allotment letters, the land will be

leased out for a period of 33 years and may be extended for two

subsequent terms of 33 years each on such terms and conditions as may be

determined by the Authority at the time of each renewal of the lease. The

condition No. 19 stipulates that in case of default/non- conforming use, the

allottee of lease will be withdrawn and structure, if any on the plot will be

confiscated and no compensation will be paid. The condition No. 29

provides that in case of breach of any one or more of the above cited

conditions and non-observance of the obligations, the allotment will be

liable to be withdrawn/cancelled after deduction 10% of the total premium

of the plot.

Audit observed that 524 commercial plots situated in I&T Centers,

Markaz of Sectors G-6 to G -10, Fruit and Vegetable Market

I-11/4, Industrial Area I-9, I-10/3 Industrial Triangle Kahuta, Diplomatic

Enclave and in Agro farming area were allotted in or before 1983 for a

period of 33 years (extendable up to 99 years). As per terms and

conditions of leases, the first term of lease period has already expired.

After the expiry of lease period of said properties, the CDA was required

to force the allottees for extension of lease for another term but no efforts

were forthcoming from the record produced. Due to non-pursuance of the

extension cases, the Authority was deprived of millions of rupees in shape

of extension fee. CDA also failed to cancel the 524 plots valuing

Rs 40,155.648 million and re-allot through open auction to safeguard the

Authority‟s interest.

Audit was of the view that non-renewal of leases was due to weak

internal controls.

The matter was discussed in DAC meeting held in March 2017.

CDA explained that as per terms and conditions of the lease agreement,

initial term of 30/33 years was extendable for two subsequent terms of

30/33 years. CDA Board in its meeting held on 7

August, 2004 decided

to extend leases of commercial plots subject to payment of 1% of market

price and NOC of Building Control Section and SOP for renewal of lease.

Notices were issued to the lessees for renewal of lease. Extension of lease

would be decided on case to case basis after fulfillment of codal

formalities.

Audit stressed that a pro-active approach be adopted by CDA for

best use of its assets and renewal of lease/disposal of commercial plots be

expedited.

The DAC directed CDA to adopt a pro-active approach to enhance

its revenue and devise a policy regarding expired leases for extension or

cancellation, as the case may be, and to furnish details of plots, where first

lease expired but neither extension was granted nor recovery effected.

Compliance to the DAC‟s directive was not made till the

finalization of this report.

Audit recommends early compliance to DAC‟s directives

regarding formulation of policy for extension or cancellation of the leases.

(Para 2.3 SAR)

2.4.5 Loss due to un-competitive disposal of plot - Rs 10,527.026

million

According to Rule 6 (1) of Islamabad Land Disposal Rules 2005,

all commercial and business plots shall be sold or leased out through open

auction as commercial plots, or for one of the specific activities mentioned

in clause 3 (2). According to Rule 3 (2) of Islamabad Land Disposal Rules

2005, plots for any kind of commercial activity having profit as a primary

aim, and include plots earmarked for shops showrooms, markets,

departmental stores, hotels, motels, guest houses, marriage halls,

restaurants, cafes, banks, insurance companies, petrol/CNG filling and or

service stations, sites for multi-storey building meant for shops, offices

and or residential apartments, sites for multi-storey parking and offices

connected with industrial and commercial enterprises.

Audit noted that commercial plot No.1-A Sector I-11/4 was not

disposed of through open auction by CDA (Estate Management-II) as

required under above-mentioned rules. Instead of open auction following

three firms out of six were prequalified for disposal of plot.

S. No.

Party/Firm Name

M/s Metro Cash & Carry Pakistan Private Limited

M/s Makro Habib Pakistan Limited

M/s S.G.M Group

Audit further noted that plot No.1-A Sector I-11/4 measuring 8.97

acres (36,300 sq. meters or 43,414 sq. yards) for the development of

wholesale super market in Sector I-11/4, Islamabad was allotted to M/s

Metro Cash & Carry Pakistan Private Limited (MCCP) @ US$ 200 per sq.

meter (equivalent to Rs 10,020 per sq. yard) for a period of 30 years under

lease deed of August 2007 between CDA and M/s Metro Cash & Carry.

The full premium of plot amounting to Rs 435.000 million was deposited

by the lessee as advance payment on signing of lease deed.

Audit observed that two prequalified firms i.e. M/s MCCP and

Makro Habib Pakistan Limited (MHPL) combined their wholesale Cash &

Carry business and of the properties of M/s MCCP and M/s MHPL

through a scheme of arrangement for the reconstruction of M/s MCCP and

M/s MHPL. As such, the scheme of arrangement, inter alia will provide

that lease hold rights of plot of land located at survey No.1.A, Sector

I-11/4, would transfer to and vest in M/s MHPL by virtue of the orders of

Sindh High Court under section 287 of the Companies Ordinance 1984,

and upon the scheme of arrangement being sanctioned by the Sindh High

Court, M/s MHPL shall become the owner of all lease hold rights in and to

the plot aforesaid on same terms and conditions on which the said plot was

leased by M/s MCCP being the terms set out in the registered lease deed

dated 20

August, 2007, and M/s MHPL will assume full responsibility to

discharge all debts, obligations and liabilities relating to said plot.

Audit further observed that during the same period plots bearing

No.2-B and 3-B (Fruit and Vegetable) Sector I-11/4 were also auctioned

on 13

February, 2007 @ Rs 300,000 and Rs 205,000 per sq yard.

Average rate of these two plots was Rs 252,500 per sq yard. Audit was of

the view that had the plot disposed of through open auction the CDA

would have earned additional amount of Rs 10,527.027 million. Non-

transparent and uncompetitive disposal of plot resulted into a loss of

Rs 10,527.027 million to Authority, as detailed below:

Plot

No.

Area of

plot (sq

yards)

Rate

accepted in

August

2007

(Rs per sq

yard)

Average Auctioned

rate of plot No. 2-B

& 3-B sector I-11/4

on 13.02.2007 (Rs

per sq yard)

Difference

(Rs per sq

yard)

Amount (Rs)

1-A,

I-

11/4

43,414

10,020

252,500

242,480

10,527,026,720

Audit pointed out the irregularity in February 2017. The matter

was discussed in DAC meeting held in March 2017. CDA explained that

Plot No.1-A, measuring 8.47 acres (34276.9 sq meters) was offered to M/s

Metro Cash & Carry Pakistan (Pvt) Ltd on 30

April, 2007, after

acceptance of financial proposal for the development of whole sale Super

Market I-11, Islamabad. According to Chapter-3 clause-4 of Islamabad

Land Disposal Regulation 2005 CDA Board may decide to enter into joint

venture with any private or public sector agency regarding property vested

into for any specific project. Property in question was leased out @ US$

200 per Sq. meter (equivalent to Rs 10,020 per Sq yard) for a period of 30

years after approval of CDA Board and completion of all relevant codal

formalities. So far as, the plot No.2-B & 3-B (F&V) Sector 1-11/4,

Islamabad are concerned, it was clarified that being a small unit in a most

popular area of wholesale (F&V) market, the average rates of two plots

was calculated as Rs 252,500 per sq yard however, being a whole sale

super market of 36,300 Sq meter area could not be put into auction in

order to ensure timely completion of project to facilitate the people of both

the cities. It was further submitted that such property was transferred

through a scheme of arrangement from the name of Metro Cash & Carry

Pakistan (Pvt) Ltd, to the name of M/s Makro Habib Pakistan Ltd by

virtue of the order of the High Court Sindh under section 287 of the

Company Ordinance, 1984 which was approved by the CDA Board.

Moreover, in cases where lease deeds are executed, transfer through NDC

was not permissible.

Audit contended that it was a clear violation of Islamabad Land

Disposal Regulations 2005 regarding open auction and no

mechanism/reserved price yardstick was followed. Besides, CDA Board

approved auction of plot for allotment of 8 acres but possession was given

for 9 acres of land. Incomplete list of commercial plots auctioned during

2007 was provided to Audit.

The DAC directed that an inquiry be conducted at CA&DD level

for fixing responsibility against the persons at fault and report be shared

with Audit.

Compliance to the DAC‟s directive was not made till the

finalization of this report.

Audit recommends early compliance to DAC‟s directive.

(Para 2.6, SAR)

2.4.6 Overpayment to IESCO due to excessive billing of street lights

- Rs 5,360.991 million

Director General (EM&C), Pakistan Electric Power Company

Limited (PEPCO), Energy Management and Conservation (EM&C)

Division, Lahore issued Load Management Plan from time to time for

guidance and implementation by all distribution companies including

Islamabad Electric Supply Company (IESCO). In compliance thereof,

IESCO issued circle-wise Load Management Schedule from time to time.

According to which, load shedding was observed for four to seven hours

in urban areas of Islamabad during different periods from December 2010

to July 2017.

As per Cabinet Secretariat (Cabinet Division) meeting of the

Implementation Committee on Energy Conservation Strategy held on 23

April 2010, it was decided “Street lights in Islamabad will be illuminated

alternately”.

Audit noted that CDA, Islamabad is responsible to maintain the

road/street light system in Islamabad since taking over from WAPDA in

January 1999. IESCO was billing for electric consumption of street lights

on the basis of units consumed per day @ average 12 hours after the

energy meters installed became out of order. Despite the fact that CDA

made payments of Rs 7.800 million during the period 1996-97, 2006-07

and 2013-14 for installation of energy meters on street light circuits for

raising such bills on actual meter readings, meters were never installed.

During a meeting held on 07

February, 1998, in the Ministry of Water

and Power, it was decided that CDA would start paying current electricity

bills of all the street light circuits on the basis of 75% of agreed connected

load of the circuits until the meters are installed.

Audit observed during scrutiny of the accounts record that CDA

(Street Light Division) made payments of Rs 7,237.914 million to IESCO

on account of street/road lights electricity bills for the period from July

2006 to July 2017. Electricity consumption was being billed at average

rate per unit including all taxes/charges and meter rent although meters

have not been installed.

Audit further observed that the payment worth

Rs 5,360.991 million, out of total payment of Rs 7,237.914 million on

account of electricity bills, was considered unjustified due to excessive

billing of street lights in absence of the circuit-wise electric energy meters,

and non-application of following factors, reducing the actual consumption

of units.

i. Load shedding factor as per Load Management Plan of IESCO

was not taken into account while making monthly payments of

electricity bills. Audit was of the view that reduction factor

up to average 2 to 3-1/2 hours at nights on account of load

shedding was to be applied.

ii. Physical verification of 2,283 street lights selected randomly

(6.33% of total 36,050 street lights) in various areas of

Islamabad by Joint Team consisting of concerned Assistant

Directors and Audit staff at night on 27

January, 2017,

revealed that 57% street/road lights were found un-

illuminated/non-functional. This load reduction factor was not

kept in view while paying the electric bills to IESCO.

iii. In compliance to the above referred energy conservation

strategy, CDA switched off 50% poles and requested the

IESCO vide letter dated 26

November, 2012 to reduce the

electricity consumption bills for street lights to the extent

accordingly but the same was not reduced from the monthly

bills.

CDA failed to maintain the street lights as observed during

physical verification despite fleet of 235 employees (involving

expenditure of Rs 505.247 million on pay and allowances) and

procurement of stores/repairs worth Rs 1,363.286 million during 2006-07

to December 2016.

Audit was also of the view that CDA made excess payment of

Rs 5,360.991 million to IESCO without considering the reduction factors.

Unjustified payment of Rs 5,360.991 million was made due to non-

pursuance of the installation of meters, non-adherence to the rules,

regulations and policy for watching the interests of the Authority.

The matter was discussed in DAC meeting held in March 2017.

CDA explained that Audit Team had inspected only 6% lights mostly of

125 watts in those areas/sectors which were comparatively in deteriorated

condition. Twenty seven thousand (27,000) lights of 250 watts which

consumed major portion of electricity and were in good condition were

not inspected. It was not justified to attribute and assess position of last ten

and half years to the result of inspection on a particular day, time and

limited location. The street light network was scattered and any fault

occurred was rectified on regular basis. The matter of installation of

meters was pursued at every level.

Audit contended that joint inspection (CDA Staff and Audit Team)

was conducted in randomly selected areas and results were extrapolated

besides other reduction factors to highlight the most likely financial

impact of core issues of incorrect/higher electricity bills and non-

installation of energy meters.

The DAC directed CDA that:

i. Reconciliation be carried out regarding electricity

consumption in the light of load adjustment and other

reduction factors as pointed out by Audit.

ii. Efforts may be made to get the electricity meters installed

and matter also be taken up with Ministry of Water and

Power.

iii. Responsibility be fixed for not following up the matter

actively despite making payment of Rs 7.8 million to

IESCO in 2005 on account of installation of meters.

Audit recommends early compliance to the DAC‟s directive.

(Para 1.1, SAR, DP.138)

2.4.7 Non-realization of long outstanding dues of commercial plots -

Rs 5,831.043 million

According to condition No.2 (mode of payment) in case the bid is

finally accepted by the CDA Board, the successful bidder will be informed

accordingly requiring him to pay the remaining 60% of the premium in two

equal quarterly installments, first of which would be payable within three

months from the date of issuance of acceptance of bid letter. The bidder

will be required to submit undertaking regarding payment of Capital Value

Tax (CVT) to the Government in case imposition of said tax by the

Government at any later stage, other duties i.e. advance tax and/or charges,

if any levied and payable on such transactions will be deposited in

Government treasury or authorized branches of Banks and submit receipts

to CDA within 45 days. In case of non-payment of the premium and taxes,

etc., by him/her after acceptance of the bid, the acceptance of the bid will

stand withdrawn and 10% of total price of the plot shall be forfeited.

CDA (Estate Management-II) auctioned 35 commercial plots/agro

farms in Blue Area, Sectors G-11, G-9, G-5, F-7, F-11, F-10, E-12, I-8,

I-12, I-16, D-12, Fruit and Vegetable Market I-11/4, Orchard Schemes and

Park Enclave of different sizes on lease basis through auction held during

the period from 2007 to 2016 subject to terms and conditions contained in

the respective allotment letters and brochures of different auctions.

Audit observed during scrutiny of allotment files, auction ledger

accounts and decision of the Board in meetings regarding acceptance or

rejection of auction results that an amount of Rs 5,831.043 million was

outstanding on account of premium against the lessee who failed to

deposit the installment of plots as per payment schedule. Fruitful efforts

for early recovery by the Authority were not on record. A sufficient period

elapsed after the auction held but the Authority did not cancel the lease

agreement due to non-payment of premium of plots by the lessee.

The matter was discussed in DAC meeting held in March 2017.

CDA explained that out of 34 auctioned plots with remaining premium, 04

plots were pending due to court case/stay order. Two (02) plots were

cancelled due to non-payment of premium. Payments of 04 plots had been

completely recovered, whereas payment of six plots was not due yet. Rest

of the cases, were being processed for acceptance of part payment/sectoral

development issues.

The DAC directed CDA:

i. to provide detail of cases with amount involved by

bifurcating into two categories, i.e. first where CDA has

developed the area and plots are available for possession

and second where area has not been developed as yet.

ii. to adopt a pro-active approach and devise a policy

regarding cancellation of plots in case of non-payment of

dues in respect of developed area, determination of delayed

payment charges, follow up of court cases, etc.

Audit recommends early compliance to DAC‟s directive.

(Para 2.2, SAR)

2.4.8 Unauthentic approval of Layout Plan of Housing Scheme on

the basis of fake and fictitious documents - Rs 8,198.60 million

Rule 2 (a) & (b) iii & iv, of ICT Zoning Regulations, 1992

provides that in Zone-2, private sector will be allowed to purchase/acquire

land and develop residential schemes on the pattern of residential sectors

planned in Zone-1. The boundaries of the schemes shall conform to the

configuration of a standard sector inclusive of right-of-way (ROW) of

principal inter-sector roads as per provision of Master Plan of Islamabad

and permission for such schemes (Zone-2 and 5) shall be granted by the

Authority subject to the condition that development of the scheme shall be

in accordance with the layout plan, services plan and building plan as

approved by the Authority.

Clause 21 of Modalities and Procedures framed under ICT (Zoning)

Regulations, 1992 provides that the CDA shall assume the control of

scheme, if the sponsor is incapable of completing the scheme after expiry

of the extended period of completion.

During scrutiny of record of private housing societies following

irregularities were noted:

i. Layout Plan of Paradise City Housing Scheme in Sector F-16

and F-17 in Zone-2 Islamabad over an area 2,453.43 kanals

was approved by CDA on 22

December, 2006. After approval

of the Layout Plan, the sponsor was required to fulfill the legal

formalities i.e. Mortgage deed of saleable plots, transfer deed,

ROW/open area of land and engineering design etc. within 90

days up to 21

March, 2007 but the same were not submitted.

The Layout Plan was withdrawn by the CDA. The sponsor

failed to prove the land ownership of 2,399 kanals within the

boundary even after 8 years of issuance of the Layout Plan.

After issuance of Layout Plan the sponsor could not complete

the legal formalities and started sale of 2,137 plots to general

public without developing the land and collected a sum of

Rs 5,243.40 million.

ii. Layout Plan of M/s RP Corporation (Pvt.) Ltd. (a private

housing scheme) was approved on land measuring 1,619 kanals

for 931 residential plots and NOC was issued on 11

March,

2006 with completion period of 60 months. The sponsor could

not start development work after issuance of NOC. An analysis

of Fard Jamabandi and other Revenue documents was carried

out after 8 years and it was noticed that the society had the

ownership/possession of only 861 kanals of scattered land

which could not be developed until its conversion into the

compact/consolidated ownership and possession and revision

of Layout Plan. After issuance of NOC and approval of Layout

Plan, the sponsor was authorized to advertise the scheme

comprising 931 plots over an area measuring 1,619 kanals with

30% mortgage of saleable plots in favour of CDA. The sponsor

sold all 931 plots for Rs 2,955.20 million. The developer could

not develop the Scheme despite lapse of nine (09) years.

This resulted in unauthentic approval of Housing Schemes based

on fake and fictitious documents of land for Rs 8,198.60 million.

Audit was of the view that irregularity occurred due to weak

internal controls.

The matter was discussed in DAC meeting held in March 2017.

CDA explained that improved administrative and internal controls had

been introduced to avoid irregularities in future. An inquiry was under

process to investigate the approval of layout plan of Roshan Pakistan

Housing Scheme. Layout Plan of Paradise City was cancelled but the

sponsor had applied for restoration, which was being examined.

The DAC observed with concern that layout plans were initially

approved which were exploited by housing societies to attract the people

to purchase plots. The DAC directed CDA to complete the inquiry and

take action to safeguard public interest.

Audit recommends early compliance to the DAC‟s directive.

(Para 2.26, SAR)

2.4.9 Non-imposition of penalty/non-recovery of ground rent from

marquees / wedding halls - Rs 1,032.000 million

According to Section 46-A Chapter-VII of CDA Ordinance,

1960, “whoever willfully causes damage or allows damage to be caused to

any property which vests in the Authority or unlawfully converts it to his

own use or to that any other person shall be punishable with imprisonment

for a term which may extended to one year or with fine, or with both.”

Section 46-B of the ibid Ordinance states that whoever, without

lawful excuse, fails or refuses to comply with any direction or order issued

by the Authority was punishable under Section-46.

Audit noted from the record of the Directorate of Housing

Societies Planning Wing, CDA Islamabad that near the Khyaban-e-Iqbal

Road (Northern Strip Blue Area) in Sector E-11, Islamabad, there were

many marquees/wedding halls/event management service professionals

running their business without any approval of competent authority. All

the event management service providers were using the Northern strip 156

feet wide and Khyaban-e-Iqbal road for their access / approach and car

parking but did not pay any kind of ground rent or service charges to

CDA. This resulted into loss of Rs 1,032.000 million.

Audit was of the view that CDA failed to implement the CDA

Ordinance, 1960 and allowed unauthorized occupation of CDA land. The

irregularity occurred due to lack of oversight mechanism for

implementation of internal controls.

Audit pointed out the irregularity in March 2016 but the Authority

did not reply.

The matter could not be discussed in the DAC meeting despite best

efforts by Audit.

Audit recommends that measures be taken to evict unauthorized

occupation.

(DP 166/2016-17)

2.4.10 Irregular execution of works without approval by the

competent authority - Rs 341.543 million

As per clause 1-(b) of CDA Delegation of Financial Powers, 2007

administrative approval of CDA‟s all self-financing schemes will be

obtained from the CDA Development Working Party. Clause 2 states that

Member concerned had full power to sanction Technical Estimates and

clause 3 provides that acceptance of tenders having value above Rs 50

million will be granted by the Chairman CDA.

Audit noticed that Sanitation Directorate (Metropolitan

Corporation Islamabad) awarded work “Privatization/provision of

sanitation services, cleaning, sweeping, collection and transportation of

solid waste/ garbage from Sectors G-6, G-7, G-8, G-9, G-10, I-10 and I-11

including Vegetable Market of Islamabad in July 2015 at 28% above the

T.S estimates for Rs 341.543 million against estimated cost of

Rs 266.870 million.

Audit observed that the Directorate executed the works without

Admin Approval from CDA-DWP and Technical Sanction by the Member

concerned. The works, having cost above Rs 50 million, were awarded

without approval of acceptance of tenders from Chairman CDA.

Audit was of the view that award of the works costing Rs 341.543

million without observing codal formalities was due to weak internal

controls.

Audit pointed out the irregular execution of works in July 2017.

The Authority replied that the works were awarded after acceptance of

tenders above Rs 50.00 million from Chairman CDA. The reply was not

accepted because due process of administrative approval and technical

sanction of estimates was not followed.

The matter could not be discussed in DAC meeting despite

requests made by Audit in November, December 2017 and January 2018.

Audit recommends that matter be investigated and action be taken

against persons responsible.

(DP 74)

2.4.11 Non-mutation/non-taking over possession of land besides

payments to selective land owners - Rs 261.781 million

As per Awards announced by the Deputy Commissioner, CDA,

Islamabad, Tehsildar Islamabad, was required that awarded land be

mutated in the name of Capital Development Authority. The copies of

mutation duly attested were to be sent to the office of the Director Land

and Rehabilitation, CDA for record at the earliest.

Further, section 28 of CDA Ordinance, 1960, provides that

immediately on the making of the award under section 28, the land shall

vest in the Authority free from all encumbrances (and thereupon the

Deputy Commissioner may, after giving reasonable notice to the occupier,

enter upon and take possession of the same).

Section 25 of CDA Ordinance, 1960, provides that subject to the

other provisions of this Ordinance, the rules made there-under, and the

directions of the Authority, the Deputy Commissioner may, by order in

writing acquire any land for the further purposes of this Ordinance. No

order under sub-section (1) shall be issued except on the receipt by the

Deputy Commissioner of specific directions from the Authority.

Section 26 of CDA Ordinance, 1960, provides that Where any land

is proposed to be acquired under section 25, the Deputy Commissioner

shall cause the land (unless it has been already marked out) to be marked

out and measured, and if no plan has been made thereof, a plan to be made

of the same.

Building Control Rules, 2005 (Chapter-II Zoning of ICT Section-3

Delineation of Zones) provides that the entire Islamabad Capital Territory

shall be divided into five zones as delineated in the Master Plan wherein

Zone-1 constitutes sectors up to the existing alignment of the G.T. Road

from the point of intersection of G.T. Road with Shahrah-e-Kashmir to the

point of the Nicolson Monument inclusive of Sector H-14, H-15, H-16,

H-17, I-14, I-15, I-16, I-17. Building Control Rules, 2005, Chapter-III,

Section- Development Strategies of Zones provides that the development

of land in the zones shall be subject to the following conditions:

A. Un-acquired Sectoral Areas: In these areas of Zone-1,

(i) Land shall be acquired under a phased program and

developed by the Authority in accordance with the land use

pattern spelled out in the Master plan;

(ii) No sale/ purchase of land which entails change in land use

shall be allowed.

This provision was inserted with the intention to acquire the land

directly from the original affectees by avoiding heavy cost in case of

admissibility of sale/purchase of land of Zone-1.

Audit observed that payments to certain housing societies as

detailed below were made by issuing 30 cheques on the same day to M/s

Elite Estate Housing Society for Rs 124.500 million and 37 cheques to

M/s Global Utopia Housing Society for Rs 137.281 million on different

dates to keep the compensation within 05 kanals. CDA manipulated the

circumstances and made payment to big land owners by splitting acquired

land giving impression that the payment was made to small land owners

up to 5 kanals. This resulted in irregular payments of Rs 261.781 million.

(Amount Rs in million)

Name of Payee

Cheque No

Amount of cheque x

No. of cheque

Amount

Elite Estate Housing

Society (I-17)

114338 to 114367

(30 cheques) dated

25.09.2015

Rs 4,150,000 x 30

Cheques.

124.500

Global Utopia

Housing Society (I-

17 and H-16)

114301 to 114337

(37 cheques)

November-

December 2015

Rs 4,150,000 x 36

Cheques.

Rs 744,257 x 1 cheque

137.281

Rs 1,035,893 x 1

Cheque

Rs 1,845,902 x 1

Cheque

Rs 2,904,908 x 1

Cheque

Rs 655,410 x 1 Cheque

Rs 4,150,000 x 32

Cheques

Total

261.781

Audit was of the view that influential middlemen/housing societies

were able to get payment @ Rs 830,000 per kanal against purchase cost of

Rs 100,000 and Rs 200,000 per kanal. On the other hand the original land

affectees were still in the possession of the said land. These middlemen

managed to get the payment of compensation on priority basis and real

affectees/owners up to 5 kanal were not paid till date.

The irregularity occurred due to weak internal controls.

The matter was discussed in DAC meeting held in March 2017.

CDA explained that CDA had requested the Revenue Department for

mutation. As regard possession and payment to selective affectees was

concerned, it was decided only to acquire land for Sectors H-16 and I-17

due to pressing need of land reserved for District Prison Islamabad in

Sector H-16 and Industrial Sector in I-17. However, BUP could not be

acquired due to financial constraints and non-survey. BUP would be paid

as existed at the time of acquisition. Any subsequent addition to BUP will

not be compensated. The Deputy Commissioner CDA announced the

award on 15

January, 2009 at flat rate of Rs 830,000 per kanal. After

Award, some land owners having major share were pressing hard for

either payment or to de-notify the Award and accordingly, it was decided

to release payment. Further, payment was released on the orders of

Islamabad High Court to owners having land up to 2 kanals and later on

up to 5 kanals.

Audit contended that payments were made to the influential

parties. Piecemeal payments on the same day to the same party were made

in some cases to keep the payment of compensation in single case up to 5

kanals under the cover of orders of the Islamabad High Court (as per CDA

response).

The DAC was not satisfied with the explanation given by CDA

and directed to conduct inquiry at CA&DD level for fixing responsibility

against persons at fault.

Audit recommends that:

 Early mutation of land be made in the name of CDA and

possession be taken over immediately besides

responsibility be fixed for negligence against those

responsible.

 A proper Standard Operating Procedure be devised to

streamline system of payment to the land affectees. Survey

of built up property be conducted at the time of land

acquisition. Compensation to the affectees may be fixed at

the rates prevailing at the time of land acquisition.

 Matter of out of the way/irregular payments to influential

parties be investigated for fixing responsibility against

those responsible.

 Measures be taken to ensure that no sale and transfer of

land especially phased out program spelled out in the CDA

Master Plan, is executed.

(Para 3.1.1, SAR)

2.4.12 Execution of project without PC-I - Rs 228.431 million

The Guidelines for Project Management issued by the Planning

Commission of Pakistan denotes that feasibility report (PC-II) and Project

Cost (PC-I) are mandatory prior to execution. Under these guidelines, the

Authority is required to constitute DWP with one member each from

Planning Commission and Finance Division for approval of self-financed

projects. Further, Para 10.1(v) of the guidelines provides that no project

under directive of any authority is started without proper preparation of

PC-I /PC-II and approval of the competent forum.

Audit noticed that Deputy Director, Works Directorate (Division-

I), CDA Islamabad, undertook the project, “Construction of additional

rooms in 22 Federal Government Educational Institutes under Prime

Minister Education Reforms Program Islamabad” at estimated cost of

Rs 228.431 million. Eight contracts valuing Rs 95.915 million were

awarded during 2016-17 and expenditure of Rs 31.597 million incurred up

to 30

June, 2017. Non-adherence to rules resulted in execution of project

costing of Rs 228.431 million without PC-I & II.

Audit was of the view that non-preparation/approval of PC-I

occurred due to weak internal controls.

Audit pointed out the irregularity in October 2017. The Authority

replied that works relating to repair/maintenance, equipment and

construction of new rooms with furnishing were taken up by CDA in the

22 Educational Institutions upon the demand of Federal Directorate of

Education under directive issued from the Prime Minister‟s Office vide

letter No. D-3611/ASPM/ 2015 dated 16

October, 2015. The funds were

pursued at different tiers of CDA and also at Ministry and a letter was

issued by the Secretary, Capital Administration and Development

Division, vide letter No. F.1-6/2016-Secy (CA&DD) dated 14

June,

2016, wherein, funds for additional rooms with furnishing amounting to

Rs 228.431 million were also demanded from Planning Development and

Reforms Division.

The reply was not tenable as preparation and approval of PC-I was

mandatory under the rules. Further, Buildings of Educational Institutes

were not on charge of CDA.

The matter could not be discussed in DAC meeting despite

requests made by Audit in November, December 2017 and January 2018.

Audit recommends that matter be got regularized from competent

forum besides recoupment of funds.

(DP 147)

2.4.13 Replacement of existing road lights with LED lights without

PC-I and award of work to non-responsive bidder - Rs 363.242

million

As per para 3.8 of Project Management Guidelines issued by the

Planning Commission, Government of Pakistan, all the projects

irrespective of the cost are to be considered by the DDWP. The Project

costing up-to Rs 60 million are approved by the DDWP, while project

costing more than Rs 60 million are submitted to the CDWP for their

approval.

Para 3.11 of the guidelines states that the autonomous

organizations having Board are competent to sanction their development

schemes with 100% self-financing with no government guarantee and

involving less than 25% foreign exchange/foreign assistance, subject to

fulfillment of prescribed conditions.

As per clause 1.2.1(ii) of PEC guidelines for evaluation of bids for

procurement of works, the bidders must have a current valid license to

practice as constructor. Clause 2.2.1 (i) (a) requires that the bidder should

fall within the category allowed to participate for the size of the project.

As per clause 3.4 (f) (xvi), a bid is likely not to be considered if the bidder

is not valid license holder of PEC.

2.4.13.1 Audit noticed that Deputy Director Street Light Division,

Directorate of E&M (Maintenance), CDA, Islamabad prepared rate

analysis of LED Lights on the basis of single quotation collected from M/s

Philips. The detailed estimate of the work, “Providing/Replacement with

LED road light fixture at various major roads in Islamabad” was prepared

for Rs 146.946 million and work was awarded to M/s Philips at contract

cost of Rs 106.817 million i.e. 27.30% below the NIT cost.

Audit observed that the work was awarded to the contractor M/s

Philips without preparation of PC-I and approval of the competent forum

in violation of above referred guidelines issued by the Planning

Commission. Further, the replacement of existing lights, in good working

condition with expensive LED lights without analyzing all the parameters

including benefit-cost ratio, energy saving from LED lights, maintenance

cost, comparison of existing and replaced LED light, net financial benefit

or loss and financial & economic benefits was unjustified. This resulted

into unauthorized replacement of existing road lights, functional in all

respect, with LED lights without approval of PC-I for Rs 146.946 million.

Audit was of the view that irregularity occurred due to inadequate

mechanism for enforcing relevant rules and weak administrative/internal

and financial controls.

Audit pointed out the irregularity in January 2017. The Authority

replied that in order to minimize the energy consumption through

installation of energy efficient and environmental friendly LED lights on

various major roads. The subject work was maintenance work for which

PC-I approval was not mandatory as per prevailing rules. Moreover, the

work was awarded after obtaining approval in principle by the Chairman

CDA. The reply was not accepted being against Planning Commission

Instructions.

(DP 109)

2.4.13.2 Audit noticed that Director E&M (Maintenance) CDA Islamabad

invited tenders through press for a work “Providing/Replacement with

Light Emitting Diodes (LED) road light fixtures at various major roads in

Islamabad”. In response to the Notice Inviting Tender (NIT), nine (09)

firms submitted tenders. Five (05) firms, including M/s Philips and M/s

Al-Karam International were declared responsive in preliminary

evaluation of bids.

Audit observed that M/s Philips, whose bid was declared

responsive, had no valid license at the time of bidding as the same was

issued by PEC on 7

June, 2016, whereas tenders were opened on 12

January, 2016. Similarly, M/s Al-Karam International had license of C-5

Category eligible for project up-to Rs 50.00 million only and also was not

registered under specialized filed of EE-06 (Specialized Lighting System)

having only one Engineer but his bid was also declared responsive. On the

other hand, a firm M/s CCS Pvt. Ltd. having license of PEC of C-1

category and vast experience in LED lighting was declared non-

responsive. After detailed evaluation, the remaining three (03) firms i.e.

M/s Evershine, M/s Northern Engineering and M/s HSM (all three

registered with PEC as C-1 Category and EE-06), having vast experience

were also declared non-responsive.

Financial bids of M/s Philips and M/s Al-Karam International,

declared responsive in detailed evaluation in violation of PEC Bye-laws,

were opened and work was awarded to M/s Philips being the lowest

bidders @ 27.31% below the Engineer‟s Estimates which was prepared on

the basis of single quotation obtained from M/s Philips instead of

obtaining at least three (03) quotations from different firms/

makers/manufacturers.

This state of affair indicated a correlation between preparation of

engineer‟s estimates on the basis of single quotation obtained from M/s

Philips and then awarding the same work to the same firm M/s Philips.

This resulted into irregular award of work for Rs 106.817 million to a non-

responsive bidder in violation of PEC Bye-laws and on the basis of

defective estimate that deprived the entity of benefits of fair and

transparent competition.

Audit was of the view that irregular award of work occurred due to

inadequate mechanism for enforcing relevant rules.

Audit pointed out the irregular award of work to non-responsive

bidder in January 2017. The Authority replied that the tender for the

subject woks was invited through national press and uploaded on PPRA as

well as CDA‟s Websites after fulfilling all codal formalities. Moreover,

the PEC license of M/s Philips Pakistan was valid upto 31

March, 2017.

Further, nine (09) bidders were participated who submitted their technical

and financial bids. During scrutiny of the technical bids seven firms were

found dis-qualified/non-responsive by Scrutiny Committee due to non-

fulfilling the basic criteria as per terms and conditions. Only two firms

were technically qualified. M/s Philips were the lowest bidder with their

quoted rates 27.31% below the NIT cost. The reply was not accepted

being against the P.E.C guidelines for evaluation of bids.

(DP 110)

2.4.13.3 Audit observed that Deputy Director General (DDG) NESCOM

Foundation approached CDA high ups with the idea that the Foundation

designs, develops and produces LED Lights and also possesses expertise

to convert conventional streetlights into LED lights by utilizing available

fixtures, ensuring conformance to required standards. DDG NESCOM

Foundation requested CDA that some conventional street lights fixture

may be provided to NESCOM Foundation for retrofitting of LED kit for

subsequent installation and testing. Three (03) street light fixtures were

handed over to M/s NESCOM, which were retrofitted with LED Kits of

70 Watt and 60 Watt and installed on Street Light Poles at CDA Chairman

Office on 26.03.2014. No adverse point was noted on the basis of which

Deputy Director, Street Light Division recommended that contract for

provision of 125 lights of 70 Watt and 60 Watt each retrofitted with the

LED kits be awarded to M/s NESCOM Foundation with two years

replacement guarantee and five years repair service at nominal cost of 70

watt and 60 watt LED lights @ Rs 9,500 and Rs 9,000 each respectively.

The contract was awarded and executed by M/s NESCOM.

Audit observed that without approaching/negotiation with

NESCOM Foundation for converting the required conventional lights with

LED by retrofitting the existing fixture at low cost the work

“Providing/replacement of existing street light with LED road lights” was

awarded to M/s Philips at an agreed cost of Rs 106.817 million i.e. 180

watt @ Rs 73,700 and 150 watt @ Rs 62,700 each less 27.30% which

resulted into loss of Rs 87.335 million.

Audit was of the view that loss occurred due to weak financial

controls.

Audit pointed out the loss in January 2017. The Authority replied

that a pilot project of retrofitting/modification of existing lights into 60

watts and 70 watts Margallah Road F-6, F-7 portion was carried out.

These modified lights could not be compared with latest efficient, smart

lights. It was further added that 60 to 70 watts retrofitted lights did not

fulfill the requirements of main highways/avenues in replacement of 250

watts of conventional lights. The reply was not accepted as retrofitting of

existing street lights with LED lights by the NESCOM Foundation at

economical rates was agreed and accepted by the CDA authorities.

(DP 112)

2.4.13.4 Audit noted that Director, E&M (Maintenance) CDA, Islamabad

awarded a work, “Providing/ Replacement with LED road light fixture at

various major roads in Islamabad”, to M/s Philips at an agreed cost of

Rs 106.817 million on 22

March, 2016.

Audit observed that light fixtures on existing street light

infrastructure, being replaced with LED light fixture, were in

operational/working condition. Further, the existing lights having capacity

of 150 watts were being replaced with LED lights of the same capacity of

150 watts. Thus, there would be no saving of energy, if the purpose of

replacement was energy saving. The cost-benefit analysis of LED lights of

the same capacity was not carried out before award and execution of the

work as the work was being executed without preparation and approval of

PC-I from competent forum. This resulted into unjustified replacement of

existing and operational 150 watt road lights with 150 watt LED lights

valuing Rs 22.144 million.

Audit was of the view that the irregularity occurred due to weak

internal controls.

Audit pointed out the unjustified replacement of existing

operational road lights with LED lights in January 2017. The Authority

did not reply.

(DP 111)

The matter was discussed in DAC meeting held in November

2017. The DAC directed CDA to get the relevant record verified from

Audit within three weeks.

Compliance to the DAC‟s directive was not made till the

finalization of this report.

Audit recommends early compliance to DAC‟s directive.

2.4.14 Deployment of staff in excess of sanctioned strength resulting

in excess expenditure - Rs 73.085 million

As per CDA Service Regulations, all appointments in CDA shall

be made against sanctioned posts only and appointments to all the posts

shall be made with the approval of the competent authority.

As per Para 2.03 of Central Public Works Department Code, „the

engagement of work charged establishment shall be subject to the rules

laid down by the Government. The work charged staff shall not be

engaged on any work unless provided for in the estimate as a separate sub-

head of the estimate for that work‟. Muster Roll Employees and Daily

Labourer as their name denotes, are meant for casual labour to be engaged

as per requirement.

2.4.14.1 Audit noticed that certain posts of different categories / trades

from BPS-1 to BPS-17 were sanctioned by the competent authority and

accordingly, allocation for salary was made in the budget.

Audit observed that the Environment Directorates (East & West)

CDA, Islamabad appointed employees in excess of the sanctioned posts

without approval of the competent authority. Appointment of excess

employees resulted in disbursement of excess salaries Rs 66.000 million

(approximate) during the year 2016-17, as detailed in Annexure-B.

Audit was of the view that excess employment was made due to

non-adherence to the sanctioned strength, weak administrative and

financial controls.

Audit pointed out the irregularity during July-August 2017. The

Authority replied that during the last few years the Capital city had

expanded and new sectors/locations, major roads, service roads, avenues,

roundabouts, green belts, and VVIP routes were developed and regularly

maintained by the Environment Wing. The sanctioned strength of the

CDA was insufficient to meet the actual requirements of environmental /

horticultural activities. The reply was not accepted because different posts

were filled in bulk without sanctioned posts and budget in the relevant

head of account.

(DP 24)

2.4.14.2 As per sanctioned strength 155 posts of security guards had been

approved for Parks in different Sectors of Islamabad.

Audit noticed that Director, Parks, CDA Islamabad deployed 185

security guards during 2016-17 and incurred expenditure of Rs 7.085

million on account of salary of 32 employees excessive than the

sanctioned strength during the financial year 2016-17. This resulted in

unauthorized expenditure on staff excessive than the sanctioned strength

for Rs 7.085 million. (185 – 155 x 30 x 12 x Rs 656).

Audit was of the view that irregularity was due to inadequate

mechanism for enforcing relevant rules and weak administrative/internal

controls.

Audit pointed out the unauthorized payment in November 2017.

The Authority replied that that the staff engaged on Muster Roll was

purely on need basis not necessarily against the sanctioned strength.

However, as the services of these Muster Roll employees were needed

regularly to safeguard the safety and security of the park equipment.

Therefore, the competent authority was being requested to sanction more

posts of security guards in Parks Directorate. The reply was not tenable as

the deployment of staff in excess of approved posts was unauthorized.

(DP 155)

The matter could not be discussed in DAC meeting despite

requests made by Audit in November, December 2017 and January 2018.

Audit recommends that mater be investigated and responsibility be

fixed against persons at fault.

2.4.15 Enhancement of work beyond the original scope - Rs 58.113

million

Rule 42 (c) (iv) of Public Procurement Rules, 2004 provides that a

procuring agency shall only engage in direct contracting if the repeat

orders do not exceed fifteen percent (15%) of the original agreement.

According to Rule 50 of ibid Rules, any violation of these Rules

constitutes mis-procurement.

The Inter-Departmental Committee (IDC) of the Public Accounts

Committee (PAC) in its meeting dated 17

July, 2001 decided that the

management is not empowered to award a new work as additional work to

an existing contractor without calling open tenders. It only allows minor

adjustments in the already awarded work so as to complete it in all respect.

Audit noted that Director Roads (South), CDA, Islamabad awarded

a work, “Rehabilitation of MR-II NESCOM to IJP Road Sector I-11,

Islamabad” to M/s Zaffar & Co. for Rs 199.769 million.

Audit observed that the scope of work was enhanced upto

Rs 257.882 million which constituted an excess of 29.09% over and above

the original scope of work without calling open tenders. Award of work

costing Rs 58.113 million without open competitive bidding was

unjustified. In the absence of open competition, CDA compromised the

transparency, depriving the entity of the advantage of competitive rates,

and denied a fair opportunity to other prospective bidders of participation

in the bidding process.

Audit was of the view that the violation occurred due to weak

internal controls.

Audit pointed out the irregularity in July 2017. The Authority

replied that while carrying out the work, design was raised by 6 inch to 1

foot from the existing level of all approach link roads, so to give proper

i.e. adjoining roads with the rigid pavement of MR-II the level was to be

synchronized for ensuring safety and ease of the traffic flow. This

additional work was urgently required otherwise the benefits of

rehabilitation could not be achieved. The contract agreement clause 51.1

empowered the engineer to increase, alter quantities as deemed necessary

for the smooth execution of the project and enhanced work was executed

after approval by the employer / Chairman, CDA. However, it was worth

mentioning that the contract agreement had been based on PEC documents

duly approved by ECNEC and PPRA rules also provides that the

procuring agency shall use the PEC documents for executing construction

contracts. The work was executed at the lowest bidder rates i.e. 32%

below, which were very competitive and was in the best interest of the

Authority. Tendering for this portion of work may have invited rates

higher than the existing bid and subsequent loss would have been faced by

the Authority.

The reply was not tenable because entirely new work, not included

in the original scope of work was executed in violation of PPRA Rules

and directions of the Public Accounts Committee as well. The contention

regarding competitive rates on 32% below was also not justified as in

another work of the same division; the received rebate was 40.20% on

NHA Composite Schedule of Rates, 50% on MES Schedule of Rates and

70% on non-scheduled item (Construction of external infrastructure in

H-10, Islamabad).

The matter was discussed in the DAC meeting held in November

2017. The Authority reiterated its earlier stance. The contention of the

Authority was not agreed by the DAC. The DAC directed the Authority to

provide detailed justification within three weeks.

Compliance to the DAC‟s directive was not made till the

finalization of this report.

Audit stresses for fixing of responsibility for the irregularity

against the person(s) at fault.

(DP 20)

2.4.16 Non-remittance of Government receipt in Federal Treasury -

Rs 104.465 million

According to Government of Pakistan, Cabinet Secretariat

(Cabinet Division) letter No. 4/16/2012-CDA-III dated 11

June, 2014, it

has been decided by FA‟s Organization, Finance Division that CDA

should deposit all earnings from Pak-China Friendship Center (PCFC) in

Government Treasury. After that, Finance Division will release the

amount against operational expenditure of PCFC.

Audit noted that Director (Coordination) Parliament House, CDA

Islamabad collected receipt of Rs 104.465 million, as detailed below:

Name of Centre

2016-17

(DP-118/16-17)

2017-18

(DP-129)

Jinnah Convention

Centre

Rs. 21,835,000

Rs 13,595,000

Pak-China

Friendship Centre

Rs. 31,020,000

Rs 38,015,500

Total

Rs. 52,855,000

Rs 51,610,500

Grand total

Rs 104.465 million

Audit observed that the amount collected on behalf of the

Government was not deposited in the Government Treasury as required

under the Finance Division, Government of Pakistan decision. This

resulted in non-remittance of the Government receipt of Rs 104.465

million.

Audit pointed out the non-remittance of dues in August 2016 and

September 2017. The Authority did not reply.

Audit was of the view that government receipt was not remitted

due to non-adherence to the instructions of the Finance Division,

Government of Pakistan.

The matter was discussed in the DAC meeting held in February

2017, wherein, the CDA representative explained that receipt of Pak-

China Friendship Centre was deposited in the CDA Treasury. However, an

amount of Rs 45.800 million was deposited in government treasury in

2013-14. DAC was not satisfied with the explanation and directed CDA to

remit due receipt in Federal Government Treasury and get it verified from

Audit.

Compliance to DAC‟s directive was not reported despite lapse of

a period of one year.

Audit recommends early compliance to the DAC‟s directive

regarding remittance of dues.

(DP 118 /2016-17 & DP 129/17-18)

2.4.17 Appointment of consultant without registration with PEC and

payment of consultancy fee without proper performance -

Rs 46.825 million

According to Clause 2.71 of the consultancy agreement, the

consultant will undertake detailed supervision of various stages of the

project construction. The consultant will appoint following registered

Professional Graduate Engineers/Graduate Professionals/Diploma

Engineers (For site inspection only after approval of the client).

Article 11(iv) of the consultancy agreement provides that the

consultant will ensure presence of required staff and implementation of

proper documentation for the supervision process and later on the same

record shall be transferred to the client. Proper targets/goals and monthly

progress reports must be submitted regularly during construction phase.

Audit noticed that Deputy Director, Works Division-I, CDA

Islamabad, made payment of Rs 46.825 million vide 28

running bill, on

April, 2017 for the period upto December 2016. The payment was

held irregular in the light of following observations:

i. Name of the consultant was not available in the approved list

of registered consultants with PEC (List placed on

www.verification.pec.org.pk).

ii. Prior approval of the client (CDA) for appointment of staff of

the consultant was not available on record.

iii. The project authorities had not certified availability/ attendance

of staff for which salary was claimed.

iv. Quality assurance certificate issued by the consultant for

payment to the contractor was not available on the record in

compliance to clause 2.7.3 (d).

v. Consultancy fee beyond 30 months was paid without extension

in time.

vi. Submission of monthly progress report was not ensured to

release payment in terms of clause 2.7.3(a-vi).

vii. Salary of HVAC Engineer was paid for three months against

approval of two months.

Audit was of the view that excess payment of consultancy fee was

made due to weak administrative and financial controls.

Audit pointed out the irregularity in October 2017. The Authority

replied that approval was obtained and attendance of staff and monthly

progress reports were submitted by the consultants. The consultancy

contract period was linked with construction period.

The reply was not tenable because approval for appointment of

staff from CDA and their attendance was not attached with the invoices.

Formal time extension in consultancy contract was not obtained from the

competent authority. Quality assurance certificates were not attached with

the contractor‟s bills. Moreover, award of contract to a consultant not

registered with PEC was irregular.

The matter could not be discussed in DAC meeting despite

requests made by Audit in November, December 2017 and January 2018.

Audit recommends that matter be investigated and appropriate

corrective action be taken.

(DP 148)

2.4.18 Execution of work without insurance guarantee saving inbuilt

cost of premium - Rs 40.018 million

As per clause 21.1 of the contract agreement, the contractor shall

insure:

(a) the works, together with materials and plant to the full

replacement cost,

(b) An additional sum of 15 per cent of such replacement cost, to

cover any additional costs of and incidental to the

rectification of loss or damage and

for their replacement at the site.

As per clause 25.3, if the contractor fails to provide the policies to

the employer, then the employer may effect and keep in force any such

insurance and pay premium and recover the same from the contractor.

Audit noticed that Deputy Director, Sector Development, and

Works Directorate, CDA, Islamabad awarded four works, as detailed

below:

No.

Name of Work

Agreement Cost

(Rs in million)

Construction of Additional (104) Family Suites for

the Members of the Parliament Including Servant

Quarters Block for 500 Persons. (M/s Habib Rfique

(Pvt) Ltd)

2,728.451

Construction/Up-Gradation of Mosque at Pak.

Secretariat, Islamabad. (M/s Zarif Khan Hussain Zai

& Brothers)

400.446

Construction of Major Roads in Sector I-12,

Islamabad

248.486

Development of Markaz in Sector D-12 at

Islamabad - Construction of Parking Area,

Drainage, Sewerage & Water Supply System

102.446

Total

3,479.829

Additional sum of 15%

521.974

Sum to be insured

4,001.803

Audit observed that work insurance policies were neither obtained

from the contractors nor effected by the Authority itself. The contract

clauses regarding insurances were not invoked which not only

tantamounts to undue benefit to the contractors but also put the entire

works, equipment, property and labour at risk.

This resulted into non-obtaining of insurance policies for the works

worth Rs 4,001.803 million and extension of benefit of Rs 40.018 million

(1% of the cost) to the contractors as they saved inbuilt charges to

maintain the insurance cover.

Audit was of the view that non-obtaining of insurance guarantee

occurred due to weak contract administration.

Audit pointed out the non-obtaining of insurance guarantee in

August 2017. The Authority replied the contractor had been instructed to

arrange insurance as per contract agreement. The Authority replied in

other case that matter was sub-judice. The reply was not accepted as

insurance guarantee was not obtained, which was violation of the contract

agreement.

The matter was discussed in the DAC meeting held in November

2017 wherein CDA explained that insurance policy had been obtained in

one case and in other case it was being pursued. DAC directed CDA to get

the insurance verified from Audit and recover the premium cost for un-

insured period within one-week.

Compliance to the DAC‟s directive was not made till the

finalization of this report.

Audit recommends compliance to DAC‟s directive at the earliest.

(DP 01 & DP 146)

2.4.19 Non-recovery of expenditure incurred in excess of the deposits

received from sponsors - Rs 35.956 million

Para 410 of CPWA Code provides that a consolidated record of the

transactions of the month related to all deposit work of the division should

be prepared in Form-65 (schedules of deposit works). This schedule shows

in respect of each work, the amount of deposit received and the

expenditure incurred, both during the month and up to date. Refund of

unspent balances of completed works should be taken as reduction of the

deposits and, therefore, shown in the schedule of minus realization and not

as expenditure.

Audit noticed from scrutiny of the Consolidated Account of CDA

for the month of June 2016 maintained in Accounts Directorate that CDA

being engineering and executing department executed 30 deposit works.

The sponsoring departments deposited sum of Rs 534.219 million as an

advance for execution of the deposit works.

Audit observed that CDA incurred an expenditure of Rs 570.175

million on the execution of deposit works. The expenditure incurred was

Rs 35.956 million in excess than the sum deposited by the sponsoring

departments but the record produced to Audit showed nothing about the

reconciliation and recovery of the excess expenditure. The accounts of

deposits works since completed were not finalized by the executing CDA

divisions since long. This resulted in non-recovery of Rs 35.956 million.

Audit was of the view that incurring of expenditure in excess of

deposit received and non-recovery thereof was due to weak financial

controls.

Audit pointed out the non-recovery in April 2017. The Authority

replied that expenditure incurred over and above the allocated budget

against one project was adjusted against the other project of the same

sponsoring agency. In reply the Authority admitted that the excess

expenditure incurred over and above the deposits of the projects. The

adjustment claimed to be made against deposit of other projects of the

same sponsoring agency was without lawful authority and following

proper accounting procedures.

The matter could not be discussed in DAC meeting despite

requests made by Audit in November, December 2017 and January 2018.

Audit recommends early recovery and reconciliation/finalization of

accounts of the completed deposit works.

(DP. 97)

2.4.20 Award of work without technical evaluation - Rs 30.408 million

Job description/specifications of the work require garbage

compacting vehicle, 4 x 2, right-hand drive model 2005 or above,

minimum GVW 18000 Kg, having minimum loading capacity of 10 tons

of solid waste, equipped with hydraulic operated mechanism comprising

of lifting arms and others related attachments for lifting of DIN type

garbage trolleys, including 01 driver and 02 loaders with each vehicle”.

Audit noticed that Sanitation Directorate (MCI) awarded the work

“Hiring of four garbage compactors for collection and transportation of

solid waste from Islamabad” to M/s M. Maqsood & Co amounting to

Rs 30.408 million which was 40.70% above the estimated cost Rs 21.612

million. Audit also noted that the management during technical evaluation

declared the bidder qualified for financial bidding in violation of bid

evaluation criteria. The Authority allowed all those bidders to participate

in financial bidding who possessed vehicles of below Gross Vehicles Mass

(GVM) i.e. 10,000 kg instead of 18,000 kg (The gross vehicle weight

rating (GVWR), or gross vehicle mass was the maximum operating

weight/mass of a vehicle as specified by the manufacturers including the

vehicle‟s chassis, body, engine, engine fluids, fuel, accessories, driver,

passengers and cargo but excluding that of any trailers) and loading

capacity in accordance with job description / bidding documents.

Audit observed that the Authority awarded the work to the

contractor without technical evaluation because the contractor possessed

below specification vehicles. The award of the work by setting aside the

eligibility criteria was an act of favoritism. This resulted in irregular

award of work worth Rs 30.408 million.

Audit was of the view that irregularity occurred due to weak

internal controls.

Audit pointed out irregularity in July 2017. The Authority replied

that the tender for subject work was called as per PPRA rules and work

awarded after scrutiny by the Technical Evaluation Committee. It was

clarified that garbage compactors were not commonly available / used in

the market. The contractors used the available chassis by up-grading them

for fabrication of superstructure of garbage compacting system. The reply

was not accepted as specifications i.e. minimum loading capacity of

garbage vehicle 18,000 kg was not fulfilled, instead 10,000 kg (GVM)

vehicle was purchased, which did not fulfill the required standard.

The matter could not be discussed in DAC meeting despite

requests made by Audit in November, December 2017 and January 2018.

Audit recommends investigation and action against the persons at

fault.

(DP 70)

2.4.21 Non-accounting of excavated rock material - Rs 27.835 million

According to NHA General Specification 106.2, all suitable

material excavated within the limits and scope of the project shall be used

in the most effective manner for the formation of the embankment, for

widening of roadway, for backfill, or for other work included in the

contract.

Audit noticed that Directorate Sector Development CDA,

Islamabad paid an item of work “excavate surplus hard rock material” for

a quantity of 37,113 Cu.m.

Audit observed that excavated rock material was neither accounted

for in stock nor its disposal was recorded. This resulted in non-

accounting/disposal of hard rock material valuing Rs 27.835 million

(37,113 cu.m x Rs 750).

Audit was of the view that non-accounting of rock material was

due to weak financial controls.

Audit pointed out the non-accounting in August 2017. The

Authority replied that the excavated surplus hard rock material had been

stacked, measured and taken on Stock Register. The same was being

handed over to the Environment Directorate for subsequent utilization in

departmental work and record would be got verified from Audit. The reply

was not tenable as adjustment/disposal of serviceable material was not

shown to Audit.

The matter was discussed in the DAC meeting held in November

2017. CDA explained that excavated surplus hard rock had been taken on

stock and handed over to Environment Directorate. DAC directed CDA to

get the further utilization of the surplus material verified from Audit

within one week.

Compliance to the DAC‟s directive was not made till the

finalization of this report.

Audit recommends proper utilization of serviceable material.

(DP 04)

2.4.22 Award of works without open competition - Rs 24.834 million

Rule 12(2) &(3) of Public Procurement Rules 2004, provides that

procurements over one hundred thousand rupees and up to the limit of two

million rupees shall be advertised on the Authority‟s website in the

manner and format specified by regulation by the Authority from time to

time. These procurement opportunities may also be advertised in print

media, if deemed necessary by the procuring agency: All procurement

opportunities over two million rupees should be advertised on the

Authority‟s website as well as in other print media or newspapers having

wide circulation. The advertisement in the newspapers shall principally

appear in at least two national dailies, one in English and the other in

Urdu. In cases where the procuring agency has its own website it may also

post all advertisements concerning procurement on that website as well.

Audit noted that Deputy Director, Mechanical Divisions-II, CDA,

Islamabad awarded several works during financial year 2015-16 to

different contractors at total cost of Rs 24.834 million without

advertisement on the Authority‟s website as well as in other print media or

newspapers having wide circulation. Tender forms were issued to the

selected contractors. Due to non-circulation of tenders on CDA/PPRA

website open competition was negated. This resulted into irregular award

of works without open tendering.

Audit was of the view that the irregularity occurred due to weak

internal controls.

Audit pointed out the irregularity in October 2017. The Authority

replied that works were awarded through quotations on the directions of

the Ministries to meet the emergency, by obtaining approval from the

competent authority (Director General / Member) after completing all the

codal formalities. The reply was not tenable, as approval was not obtained

from the Principal Accounting Officer for emergency works and award of

work without open competition was in violation of PPRA-2004.

The matter could not be discussed in DAC meeting despite

requests made by Audit in November, December 2017 and January 2018.

Audit recommends that matter be investigated and appropriate

corrective action be taken.

(DP 141)

2.4.23 Payment of President’s House Allowance, Fuel and Electricity

Subsidy to non-entitled officers - Rs 24.474 million

As per Finance Division (Regulation Wing) Office Memorandum

No.F.2(1)-R.3/84-1037 dated 18

January, 1992 the employees of

President‟s Secretariat (Public) were given House Allowance and Utility

Services benefits over and above the other allowances admissible to them

under the normal rules. Finance Division Regulation Wing vide U.O.

No.1(1)Rg./2007-Pt 132-2013 dated 18

March, 2013 uncap the

President‟s House Allowance for the President‟s Secretariat (Public &

Personal) equal to one month‟s basic pay with immediate effect which was

frozen at the level of its admissibility as on 30

June, 2011.

Audit noted that Finance Wing (General) CDA issued a

notification vide No. CDA/FW(G)-44(28)(Pay & Allowances) /2018/2411

dated 10

May, 2016 for grant of President‟s House Allowance @ 100%

and Fuel & Electricity Subsidy @ 15% of their running basic pay to all

Officers (BPS-16 & above) of Maintenance Directorate (Aiwan-e-Sadr)

working under administrative control of Member Engineering/Director

General Services, CDA with effect from 6

June, 2014. Further, according

to the notification the expenditure involved was to be met out from pay

and allowances allocated in the assignment account of Maintenance Grant

of Aiwan-e-Sadr building, instead of CDA‟s Head of Account.

Audit observed that Director Accounts, CDA Islamabad paid

President‟s House Allowance and Fuel & Electricity Subsidy to the

Officers not existed on the sanctioned/working strength of the

Maintenance Directorate Aiwan-e-Sadr and also not actually working in

the Aiwan-e-Sadr, CDA and charged the expenditure to the Maintenance

Grant of Aiwan-e-Sadr Building without the approval of Finance Division,

Government of Pakistan. This resulted in irregular payment of Rs 24.474

million.

Audit was of the view that the irregularity was due to weak

financial controls.

Audit pointed out unauthorized payment in April 2017. The

Authority replied that the allowance was paid in accordance with Finance

Division CDA Notification dated 10

May, 2016. However, detailed reply

would be submitted after receipt of position form Finance Wing CDA. The

reply was not accepted as the allowances were paid to non-entitled CDA

employees.

The matter could not be discussed in DAC meeting despite

requests made by Audit in November, December 2017 and January 2018.

Audit recommends stoppage of the irregular payment of

allowances besides recovery.

(DP 94)

2.4.24 Payment without recording detailed measurement in log/work

books - Rs 22.113 million

Clause 8 of the terms & conditions of the contract agreement

describes, (i) the work shall be done in accordance with the schedule,

which will be assigned on daily basis by the Assistant Director, Transport

Officer sanitation, foreman or the other authorized representative of the

Authority. For the purpose, an authenticated log / work book will be

maintained in respect of each garbage compacting vehicle, showing detail

of work assigned. (ii) Each area inspector should deploy a sanitary

supervisor with garbage compacting vehicle to accomplish the assignment

and at the end sign log / work book with date & time. Incharge, waste

containment site will also record on log / work book with counter sign

along with date and time, on each trip made by vehicle and (iii) Each

garbage compacting vehicle should at-least empty 80 garbage trolleys and

make two trips of waste containment site, daily. Quantity will be increased

based on the size of compactor.

Audit noted that a sum of Rs 22.113 million was paid to

contractors against the work “Hiring of four garbage compactors for

collection and transportation of solid waste from Islamabad during the

year 2016-17 by Sanitation Directorate, MCI.

Audit observed that bills for payment were prepared without

recording detailed measurements of work done of each compactor. The

authenticity of payment could not be verified due to non-maintenance of

work / log books. The management did not adopt adequate method of

work measurement/record keeping as prescribed above. The project

authorities adopted an unreliable system by vetting the bill. An irregular

deviation by the project authorities was also a compromise on mandatory

oversight and internal controls of 100% work done certified by the

Assistant Director and 10% test check by the supervisory officer which

resulted in unauthentic payment of Rs 22.113 million.

Audit was of the view that the irregularity occurred due to weak

internal controls.

Audit pointed out unauthentic payment in July 2017. The

Authority replied that work / log book had been maintained in respect of

all four garbage compactors. Said work/ log book had been signed by the

each area Inspector upon completion of work in the sector by mentioning

total number of garbage trolleys emptied. The reply was not accepted as

certified log books of machinery were not shown to Audit.

The matter could not be discussed in DAC meeting despite

requests made by Audit in November, December 2017 and January 2018.

Audit stresses for investigation and appropriate corrective action.

(DP 69)

2.4.25 Non-auction of advertisement sites/non-maintenance of record

of open spaces for licenses - Rs 20.350 million

Rule 26 of General Financial Rules (Volume-I) provides that it

was the duty of the Departmental Controlling Officer to see that all sums

due to Government are regularly and promptly assessed, realized and duly

credited in the public account.

Audit noted that Director Municipal Administration CDA failed

to auction several sites for advertisement panels, bridge panels, etc. during

the process of auction held on 20

November, 2015 and 4

December,

2015. Chairman CDA while approving license of open spaces for

Pappasallis in F-7 Markaz Islamabad dated 11

February, 2014 gave

certain directions to Director Staff to Chairman CDA that Director

Municipal Administration to put up factual position vis-a-vis details of all

cases where permission to use open spaces was granted and reasons of

subsequent cancelation. It was also noted by the Chairman CDA that at a

numbers of places in Islamabad were available in front of restaurants

which can be used without causing hindrance by them at specific time and

for specific purpose.

Audit observed that eight (8) bids of various bridges were either

rejected or with-drawn without recorded reasons for rejection or with

drawl of bids. Since December 2015, no effort was made by the DMA

authorities to re-advertise these sites not previously finalized for auction.

Details of open spaces where permission to use these open spaces were

previously granted by the Directorate of Municipal Administration CDA

and cancelled afterwards was not maintained. Proper record of licenses

issued for use of open space was not maintained by the DMA staff. In

absence of inventories, revenue ledgers, watch and ward of license fee was

not made. This resulted into loss of Rs 20.350 million due to non-auction

of sites and non-maintenance of record / inventory of open spaces, which

was a serious lapse on the part of Directorate of Municipal Administration.

Audit was of the view that the loss was due to weak internal

controls.

Audit pointed out the loss in April 2016. The Authority did not

reply.

The matter could not be discussed in the DAC meeting despite

best efforts by Audit.

Audit recommends that sites be re-auctioned after proper

evaluation and assessment of rates and record/inventory of open spaces be

maintained besides fixing responsibility for non-maintenance of receipt

record.

(DP 73/2016-17)

2.4.26 Theft of electric transformers, electric cable, street light poles,

etc. - Rs 15.165 million

Para-55 of CDA Procedure Manual Part-II provides that every

Government officer should realize fully and clearly that he would be held

personally responsible for any loss sustained by Government through

fraud or negligence on his part and that he will also be held personally

responsible for any loss arising from fraud or negligence on the part of any

other Government officer to the extent to which it may be shown that he

contributed to the loss by his own action or negligence.

Audit noted during scrutiny of record of Street Light Division that

413 transformers for street lights were installed at various sites. However,

Asset Register/Inventory showing accountal and monitoring/physical

verification of transformers regularly was not maintained as evident from

the produced record. Audit further noted that the payment amounting to

Rs 34.148 million was made to the IESCO against Demand Notices for

replacement/installation of 66 transformers during the period from July

2006 to December 2016.

Audit observed that three (03) transformers (having capacity of

63KVA, 25KVA & 100KVA) along with other electric items like electric

cable, light fixtures, street light poles, circuit breakers, copper conductors,

Distribution Boards, solar panels, miscellaneous parts, etc. valuing

Rs 15.165 million were found misplaced/stolen from the sites and matter

was referred to the Police Department for lodging FIRs, however, FIRs

were not got lodged so far despite lapse of a period of more than six years

in most of the cases. Audit further observed that in a case, the

responsibility for replacement of the stolen material/items rested with the

concerned contractor of the “Zero Point Interchange Construction Project”

as theft occurred during the currency of defect liability period. Moreover,

there was no proper watch and ward mechanism at sites and its continuous

absence might warrant further misplacement of the electric items in future.

Audit was of the view that loss occurred due to weak internal

controls.

Audit pointed out the irregularity in February 2017. The matter

was discussed in DAC meeting held in March 2017. CDA explained that

location-wise detail of 413 transformers was provided to Audit, and these

transformers were fully operational. Material stolen from zero point was

brought to the notice of SHO Police Station Aabpara for lodging FIR and

investigation which was still under process. Moreover, applications

regarding theft of street light equipment at 21 different locations were

submitted to respective Police Stations for lodging of FIR and recovery of

stolen material in addition to tightening of field staff to eliminate the

stealing of Government Property. The case was being perused persistently

with the ICT authorities to find out the culprits and to eliminate such

practices in future.

The DAC directed CDA to:

i. pursue the matter with ICT to ensure safeguard of assets

and improve watch and ward system,

ii. pursue FIRs lodged with Police for recovery of stolen

material

iii. maintain inventory of all installations/equipment relating to

street lights

iv. make recovery/adjustment from contractor concerned in

case of theft of cable/installation occurred within the defect

liability period.

Audit recommends early compliance to the DAC‟s directive.

(Para 1.2, SAR)

2.4.27 Award of work in violation of procurement rules - Rs 17.536

million

As per Rule 40 of PPRA 2004 (Limitation on negotiations) Save as

otherwise provided there shall be no negotiations with the bidder having

submitted the lowest evaluated bid or with any other bidder: Provided that

the extent of negotiation permissible shall be subject to the regulations

issued by the Authority.

2.4.27.1 Audit noted that Director, Parliament Lodges and Hostels, CDA

accepted tenders for procurement of “Janitorial/cleaning services at

Parliament Lodges for the year 2016-17” at 47.40% above the estimated

cost based on prevailing market prices.

Audit observed that the acceptance of tenders by allowing

premium on market rates was unjustified and caused a loss of Rs 8.629

million to the Authority because during the year 2014-15 the work was

awarded at 5% below the estimated cost and for the year 2015-16 it was

awarded at 9% below the engineering estimates based on market rates.

Audit further observed that tenders were called for initially in

December 2016 and M/s The Maintainers quoted the rates at 56.31%

above the engineering estimates but was rejected due to higher rates. 2

time the tenders were opened on 11

April, 2017 wherein the existing

contractor M/s Maqsood & Sons was allowed to participate in tendering

despite his poor performance and proposed to be penalized under terms &

conditions of the contract agreement. The existing contractor stood 1

lowest by quoting the rates 56% above the engineering estimates and

reduced the rates through negotiation from 56% to 53% to 47.40% on NIT

in violation of PPRA Rule 42.

Audit was of the view that the irregularity occurred due to

inadequate mechanism for enforcing relevant rules and weak

administrative controls.

Audit pointed out loss in October 2017. The Authority did not

reply.

The matter could not be discussed in DAC meeting despite

requests made by Audit in November, December 2017 and January 2018.

Audit recommends action against person(s) responsible for

violation of rules.

(DP 120)

2.4.27.2 During scrutiny of accounts record of Market and Roads

Maintenance Directorate CDA Islamabad, audit noted that that a work,

“Rehabilitation of Street No.94 alongwith Improvement of Drainage

System in Sector I-8/4 Islamabad was put to tender on 07

May, 2015

against TS Estimated cost of Rs 4.865 million.

Audit observed that the contractor M/s BSK Engineers quoted

37.99% above the NHA CSR 2014, 65.99% above the MES 2009 and

2.99% above the non-schedule items. The total bid cost was worked out as

Rs 7.135 million. After opening of bid, it was shown on record that the

contractor reduced their rates voluntarily as 16.99% above on NHA CSR

2014, 49.99% above on MES 2009 and 2.99% above on non-schedule

items.

Audit further observed that as per recorded reasons, the lowest

bidder further reduced the rates and offered to execute work at 11.99%

above on NHA CSR 2014, 49.99% above on MES 2009 and 2.99% above

on non-schedule items and the work was awarded to M/s BSK Engineers

for an agreement amount of Rs 6.056 million.

Audit was of the view that only the lowest bidder was given the

opportunity to reduce bid and other participant bidders were not informed

of such happenings. There appears to be an under hand negotiation in

violation of PPRA Rule 2004 which tantamount to collusive practice with

in the definition of PPRA Rules. This had not only hampered the sanctity

of tendering process but also raise a question mark on the estimation. This

resulted in irregular award of work of Rs 6.056 million to the contractor

through negotiation.

Audit pointed out the irregularity in August 2016. The Authority

replied that open bids were invited and the lowest bidder voluntarily

offered rebate on his quoted rate which was accepted by the competent

authority. Therefore, question of negotiation does not arise.

The reply was not accepted because only the lowest bidder was

given the opportunity to offer reduced bid and other participant bidders

were not informed of such proceedings.

The matter was discussed in DAC meeting held in February 2017,

wherein, the Authority reiterated its previous stance. The DAC was not

convinced and directed to conduct an inquiry into the matter and submit

report to Ministry/Audit within 30 days. DAC further directed CDA to

stop such practice in future.

Compliance to the DAC‟s directive was not reported till the

finalization of this report.

Audit recommends early compliance to the DAC‟s directive.

(DP 38 /2016-17)

2.4.27.3 Audit noted that Deputy Director, Maintenance Division (E&M),

Aiwan-e-Sadr, Islamabad invited tenders for the work, “Provision of

Main, Sub-main electric supply of horse shed at nursery and allied electric

work at Aiwan-e-Sadr Islamabad” and opened on 15

March, 2016. M/s

AR Engineers was the first lowest bidder with his quoted rates of 95%

above on MES Schedule of Rates 2014 and 55% above on market rates.

Audit observed that after opening the bids the lowest bidder

offered voluntary rebate as stated by the Divisional authorities and the

work was awarded to the lowest bidder M/s AR Engineers at his reduced

rates of 90% above on MES Schedule of Rates-2014 and 49.90% above on

Market Rates. There was no proof in black and white that somebody from

the Division asked for it, but it was evident that negotiation with the

lowest bidder was held and the lowest bidder was persuaded to lower the

quoted rates. This state of affairs led to irregular award of works for

Rs 2.851 million.

Audit pointed out irregularity in August 2017. The Authority

replied that the lowest bidder offered voluntary rebate at its own perhaps

to establish goodwill in the department which was accepted in the interest

of public exchequer. No negotiation whatsoever was made with the 1

lowest bidder.

The reply was not tenable because voluntary rebate of first lowest

bidder without negotiation was irrational. Despite rebate the accepted rates

were on too much higher side as compared to estimate technically

sanctioned.

The matter was discussed in DAC meeting held in November 2017.

The DAC observed that it is serious issue and decided to place it before

PAC for deliberation and decision.

Audit stresses to investigate the matter and fix responsibility for

acceptance of higher premium on market and schedule items.

(DP 88)

2.4.28 Non-recovery of mobilization advance - Rs 7.723 million

According to clause 60.12(b), mobilization advance shall be

recovered in equal installments; first installment at the expiry of 3

month

after the date of payment of first part of Advance and the last installment

two months before the date of completion of the work.

Audit noted that the contractor was paid mobilization advance for

electrical and mechanical works amounting to Rs 12.843 million on 28

June, 2012.

Audit observed that mobilization advance of Rs 5.120 million

could only be recovered upto 9

December, 2013 due to poor performance

of the contractor while the whole work was to be completed upto 23

November, 2013. This resulted in non-recovery of mobilization advance

of Rs 7.723 million.

Audit was of the view that payment of Mobilization Advance on

account of electrical and mechanical works in advance stage without

execution of civil works by the contractor was in violation of the contract

agreement and non-recovery thereof occurred due to non-adherence to

agreement clauses and weak internal controls.

Audit pointed the matter in March 2014. The Authority did not

reply.

The matter was discussed in the DAC meeting held in January and

June 2015. CDA explained that the work remained stalled due to closure

of site as a result of political turmoil. The balance mobilization advance

will be recovered from the forthcoming IPCs. DAC directed CDA to

watch the recovery of balance amount of mobilization advance,

vigorously.

Audit stresses for recovery of mobilization advance besides

fixation of responsibility against the person(s) responsible of the poor

performance.

(DP 40 /2014-15)

2.4.29 Extra payment due to incorrect rate - Rs 6.531 million

According to Approval of CDA Board in its meeting held on 9

December 2016 circulated vide CDA Finance Wing letter No.CDA/CA/C-

132/2016/40 dated 28

December, 2016 revised rate of daily wages was

approved as under:

BPS

Rate for Six Working

Days a Week

Rate for Five Working

Days a Week

1-12

546 Days

656 Days

Audit noted that Deputy Director (Landscape) CDA Islamabad

made a payment Rs 38.947 million to daily wages employees on account

of wages for the period from January 2017 to June 2017.

Audit observed that all the daily wages employees were working

for the whole month (30 or 31 Days) and wages had been paid @ Rs 656

per day applicable five working days a week, whereas wages were payable

@ Rs 546 per day (Six working days a week) as approved by the CDA

Board. This resulted in extra payment of Rs 6.531 million.

Audit was of the view that irregularity was due to inadequate

mechanism for enforcing relevant rules and weak internal controls.

Audit pointed out the extra payment in November 2017. The

Authority replied that the working hours for the employees falling in the

category of 05 days a week are 08 hours daily (08:00 a.m to 04:00 p.m)

whereas the working hours for the employees falling in the category of 06

days in a week is 07 hours (08:00 am to 03:00 pm). The CDA observed

five working days for its offices, therefore, the rate of daily wages was

also calculated on 05 working days basis. The daily wage staff of

Environment Wing works for 08 hours daily, therefore, fell in the category

of wage rate for five working days a week. However, keeping in view the

work load in their respective areas of duty and non-availability of regular

staff during 02 weekly holidays these daily wages workers were engaged

on gazetted holidays with prior approval of the competent authority. The

reply was not tenable as the staff work throughout month without any

break (30 days), therefore, rate approved for 06 working days was

applicable whereas higher rate was allowed which caused extra

expenditure. Further, working of daily labour on gazetted holidays was not

understood.

The matter could not be discussed in DAC meeting despite

requests made by Audit in December 2017.

Audit recommends regularization of the excess expenditure from

the competent authority.

(DP 156)

2.4.30 Procurement of vehicles and equipment without provision in

TS Estimate - Rs 9.600 million

As per Special Provisions of the Contract, Clause SP-1 (Facilities

to be provided) provides that the contractor will provide the following

facilities within one month of letter of start without any additional cost to

the employer. Cost of these facilities is to include in the bid price and no

separate/extra payment shall be made by the Employer against these

facilities.

1) One (01) Hyundai Shahzore Pickup 2600 CC

2) One (01) Tractor Fiat with Trolley (Jack attached)

3) One (01) Suzuki Cultus (1000 CC)

4) One (01) Suzuki Pickup

5) Four (04) Desktop Computer 1.7 Generation with accessories

6) Four (04) HP Laser Jet Printers (Three in One) latest model

All above items /facilities shall be transferred to the Authority.

2.4.30.1 Audit noted during examination of the accounts record of Deputy

Director Market & Roads Maintenance (South) CDA Islamabad that

procurement of the above vehicles and T&P articles was not provided for

and approved in the TS Estimate/PC-I.

Audit observed that employer‟s facilities as provided in the

contract provisions were not provided by the contractor as required. The

Deputy Director neither received the employer facilities nor recovery

effected form the contractor on account of inbuilt cost of Rs 6.00 million.

Audit was of the view that irregularity occurred due to weak

contract administration.

Audit pointed out irregular procurement in July 2017. The

Authority replied that the facilities as per special clause (SP-1) of the

contract were provided by the contractor. The reply was not tenable as

evidence in support thereof was not produced. Further, the procurement of

the above vehicles and T&P articles was not provided for and approved in

the TS Estimate/PC-I which was also irregular.

The matter was discussed in the DAC meeting held in November

2017. The Authority explained that the facilities had been provided by the

contractor as per contract agreement. The DAC directed CDA to get the

original record verified from Audit within three weeks.

Compliance to the DAC‟s directive was not made till the

finalization of this report.

Audit recommends early compliance to the DAC‟s directive.

(DP. 48)

2.4.30.2 Audit noted that employer‟s facilities were included in the

contract agreement of the work “Rehabilitation and Re-carpeting of

various roads in Sectors of F&G Series, Islamabad” awarded to M/s ZKB

at a contract cost of Rs 845.232 million as detailed below:

 Four (04) sets of personal computers

 Two (02) sets of HP Laser Jet Enterprise P3015DN or Pro

M706N (B6SO2A) Single function or equivalent.

 Two (02) sets of HP Laser Jet Pro MFP M225DW Printers or

equivalent.

 One (01) Suzuki Pickup (1000cc) vehicle included all taxes, duties

and registration fee in the name of CDA.

 One (01) 480 HP Tractor with Trolley and attachments (Front

Blade, Front Loading Bucket) included all taxes, duties and

registration fee in the name of CDA.

 One (01) Hyundai Pickup (Shahzore) vehicle included all taxes,

duties and registration fee in the name of CDA.

Audit observed that the contractor neither provided 480 HP tractor

with trolley and Hyundai Pickup (Shahzore) nor the cost of the facilities

was recovered from the contractor. This resulted into non-recovery of

Rs 3.600 million.

Audit was of the view that irregularity occurred due to non-

adherence to the provisions of agreement, weak internal and financial

controls.

Audit pointed out the non-recovery in July 2017. The Authority

replied that since the manufacturing of Shahzore Hyundai Pickup was

discontinued by the manufacturer. Therefore, the same could not be

provided by the contractor. However, as an alternate to the Shahzore

Pickup, the contractor was directed to provide two Suzuki Pickups. In

reply the Authority admitted that Shahzore Hyundai Pickup was not

provided by the contractor.

The matter was discussed in the DAC meeting held in November

2017. DAC directed the management to either get verify the relevant

record from Audit or the amount in question by got recovered in two

weeks‟ time.

Compliance to the DAC‟s directive was not made till the

finalization of this report.

Audit recommends for early recovery.

(DP 52)

2.4.31 Overpayment due to non-deduction of earth available from

roadway excavation - Rs 4.855 million

According to NHA General Specification item 108-C “Formation

of embankment from borrow excavation, measurement shall be made

minus roadway excavation quantity and minus structural excavation

quantity.

NHA specification No.105.4.2 provides that no payment for

roadway or borrow excavation shall be made under this item as the same

is deemed to be included under relative item of formation of embankment.

Specification No. 108.4.2 (b) - formation of embankment from structural

excavation describe that payment for this item include cost of excavation,

haulage, dumping, spreading, watering rolling, labour, equipment, tools

and incidental necessary to complete the item.

During scrutiny of the accounts record of Roads Directorate

South (Road-III) CDA Audit noted that CDA measured and paid an item

formation of embankment from borrow excavation in common material

for the works “Construction of interchange at Karal intersection of

Islamabad Expressway and Development of signal free and controlled

access corridor of Islamabad Highway from Zero Point to Faizabad

Interchange and Construction of interchange at I-8 intersection

Islamabad”.

Audit observed that the earth obtained from structural excavation

of underpasses for a total quantity of 7,044.15 Cu.m was not deducted as

required under the specification referred above. Moreover, cost of

structural excavation was included in the item of formation of

embankment, hence was not payable separately.

Non-adherence to the technical specifications resulted in

overpayment of Rs 4.855 million.

Audit pointed out the overpayment in July 2016. The Authority

replied that the quantity of earth obtained from structural excavation was

declared unsuitable and was stacked at site. The unsuitable earth was

utilized in landscaping works and filling of ditches along the road and also

in horticulture works. The reply was not accepted because test reports

showing the earth obtained from structural excavation as unsuitable were

not on record. It was an afterthought to avoid recovery.

The matter was discussed in DAC meeting held in February 2017,

wherein, the Authority explained that the excavated earth was declared

unsuitable after laboratory testing. The DAC directed CDA to get the

record and lab test reports in support of reply verified from Audit.

Compliance to the DAC‟s directive was not made till the

finalization of this report.

Audit stresses for early compliance to the DAC‟s directives.

(DP 23 /2016-17)

2.4.32 Award of works at higher rates - Rs 2.852 million

According to MES Schedule of Rates 2014, ruling percentage

@ 2% was allowed to be added while preparing the Estimate of the work

bring the cost of the work equivalent to prevailing market rates.

Audit noted that Deputy Director Maintenance Division (Civil),

Aiwan-e-Sadr Islamabad prepared estimates of maintenance works and got

technically sanctioned by allowing 2% ruling premium on BOQ items

based on MES Schedule of Rates-2014 and non-scheduled items at par for

Rs 3.069 million and Rs 3.045 million including 3% contingencies for the

works. The tenders were called and opened on 13

June, 2016. The works

were awarded to M/s Guidelines vide acceptance letter No.CDA/

DDMAS/ Accts/ 2016/1025 & 1024 dated 28

March, 2016.

Audit observed that the management invited tenders for the

maintenance works at Aiwan-e-Sadr. Participant contractors quoted their

rates on NIT based on Schedule of rates and non-scheduled items. M/s

Guidelines stood first lowest by quoting 61% and 66% above the BOQ

items based on scheduled items. Acceptance of higher premium resulted in

loss to Authority and undue burden on the public exchequer for Rs 2.852

million.

Audit was of the view that the irregularity occurred due to

inadequate mechanism for enforcing relevant rules and weak internal

controls.

Audit pointed out the irregularity in August 2017. The Authority

replied that ruling percentage @ 2% was added while preparing estimates

and the works were awarded after fair competition. Further, the site of

work Aiwan-e-Sadr is in red zone and transportation of labour and

material was much expensive as compared to other areas of the capital due

to involvement of security agencies and movement of VVIPs.

The reply was not tenable because application of ruling percentage

in estimate and technical sanction was a proven fact that rates were

considered at prevailing market rates. Scheduled rates along-with ruling

percentage were for all areas of country irrespective of the capital areas.

The matter was discussed in DAC meeting held in November

2017. DAC observed that it is serious issue and decided to place it before

PAC for deliberation and decision.

Audit stresses for investigation and fixing responsibility against the

person (s) responsible for award of work at higher rates.

(DP 87)

Performance

2.4.33 Non-development of sectors despite receipt of funds from

allottees - Rs 63,413.335 million

CDA was established under the CDA ordinance promulgated on

June, 1960 is governed through an executive Board constituted by the

Federal Government under section 6 of CDA ordinance 1960. The main

objective/ services entrusted to CDA include Development of new sectors.

Audit noted from the compiled accounts of CDA for the month of

June 2017 that funds of Rs 49,025.656 million were shown as balance on

July 2016 for self-finance sectors. Receipt of Rs 18,765.591 million

was provided in the budget of 2016-17 and progressive receipt was

Rs 67,791.247 million for the financial year 2016-17 and expenditure of

Rs 4,377.912 million was incurred on development activities leaving

unspent balance of Rs 63,413.335 million on 30

June 2017. CDA sectors

D-12 and E-12 were launched in 1982 where as Sector I-16 was launched

in 1992 but all three sectors have not been developed despite lapse of

thirty years. Money deposited by the allottees was blocked and value for

money was not achieved by the depositors/allottees. This resulted into

undue blockage of allottees money of Rs 63,413.335 million due to non-

development of CDA Sectors.

Audit was of the view that undue blockade of development funds

was due to weak internal controls.

Audit pointed out the irregularity in December 2017 but the

management did not reply.

The matter could not be discussed in the DAC meeting.

Audit recommends early development of CDA sectors opened for

residential purposes at the earliest to facilitate the allottees.

(DP.164)

2.4.34 Inordinate delay in completion of project despite sufficient

funds

As per para 18 of (II Implementation stage) of Project

Management Guidelines every activity should be time based and chased

vigorously.

According to Rule 10 of GFR (Vol-I), every public officer is

expected to exercise the same vigilance in respect of expenditure incurred

from public moneys as a person of ordinary prudence would exercise in

respect of expenditure of his own money.

As per original contract agreement, the work “Construction of

Additional (104) Family Suites for the Members of the Parliament

Including Servant Quarters Block for 500 persons” Islamabad” was to be

completed in 728 calendar days from 23

May, 2011.

Audit noted that Deputy Director, Works Directorate (Division-I),

CDA Islamabad awarded the said work at agreement cost

Rs 2,728.451 million to M/s Habib Rafique (Pvt) Ltd and made payment

Rs 823.652 million upto June 2017.

Audit observed that the work was not completed despite time

overrun of four years since 19

November 2013 as financial progress was

Rs 1,292.898 million upto 30

June 2017 against original contract cost of

Rs 2,728.451 million. This indicates that contractor achieved 47%

progress with 160% time overrun. Audit further observed that sufficient

funds Rs 3,251.117 million were released upto 30

June 2011 but could

not be utilized in full.

Audit was of the view that contractor/consultant did not perform

the job as per approved schedule which caused inordinate delay in

completion of project despite availability of funds and expended amount

Rs 1,292.898 million was blocked as the project had been facing litigation

which would further delay the completion.

Audit was of the view that irregularity was due to weak

administrative/internal controls.

Audit pointed out the delay in completion of work in October

2017. The Authority replied that the matter was sub-judice and CDA was

also defending its stance during arbitration for the inordinate delay caused

by the contractor.

The matter could not be discussed in DAC meeting despite

requests made by Audit in November, December 2017 and January 2018.

Audit recommends to take appropriate action by invoking contract

clauses for early completion of the project.

(DP 145)

2.4.35 Procurement of sub-standard alum sulphate - Rs 1.287 million

According to specification and nomenclature of the item, supply of

Alum Sulphate including cost of loading/unloading and stacking at plant

(well packed in bags weighing 50 kg each) as per specification and

instruction of Engineer in-charge, as under.

i. Alumina as Al2O3 = 17% (Min)

ii. Iron as Fe = 0.5%(Max)

iii. Insoluble matter = 0.5%(Max)

iv. Toxic Impurities

a. Arsenic = 3.0 ppm (Max)

b. Lead = 6.0 ppm (Max)

c. Other = Almost NIL with no toxic effects

d. Moisture = 20% (Max)

Audit noted that Deputy Director, Khanpur Dam Division, CDA

awarded a Rate Running Contract for Procurement of Alum Sulphate for

Water Treatment Plant Sangjani Islamabad to M/s Waqar Const. &

Developers at his quoted rates of 10.11% below the NIT cost of Rs 8.580

million on 6

March, 2017.

Audit observed that Khanpur Dam Division received a quantity of

55 Metric Ton of Alum Sulphate up-to 12

June, 2017 and made payment

Rs 1.287 million to the contractor. Water Quality Control Cell, Central

Engineering Lab, Metropolitan Corporation Islamabad (MCI) reported

with the description that insoluble matter, iron and toxic matter did not

analyze due to non-availability of equipment in the lab. This showed that

alum sulphate received and being used in the treatment of water was sub-

standard. The existence of toxic material in alum sulphate was hazardous

for health of human being using the water. This resulted in procurement of

sub-standard alum sulphate worth Rs 1.287 million.

Audit was of the view that irregularity was due to weak

administrative/internal controls.

Audit pointed out the matter in July-August 2017. The Authority

provided a test report issued by CDA Lab on 10

August, 2017 which also

supported the audit contention that toxic impurities in alum sulphate were

not analyzed due to non-availability of equipment in the Lab.

The matter could not be discussed in DAC meeting despite

requests made by Audit in November, December 2017 and January 2018.

Audit recommends that alum sulphate may be got tested from

some reputable laboratory equipped with the facilities of testing toxic

material to ensure the provision of alum sulphate of standard specification.

(DP 31)

2.4.36 Non-taking of remedial measures for the treatment of polluted

water

Environmental Protection Cell, Environment Directorate

(Regional) CDA is responsible for collecting and analyzing of data of

water, solid waste and air pollution, suggest remedial measures to CDA

formations, preparation of Environmental Impact Assessment (EIA),

Initial Environmental Examination (IEE) for the development projects,

provide technical assistance in the field of environment to Directorates of

CDA, in coordination with environmental institutions especially with Pak-

EPA and Ministry of Environment, promulgation of Environment

Protection Regulation and enlistment of Environmental Consultants.

Audit noted during examination of the record of Environmental

Protection Cell, (R) CDA that the existing sewerage system in Islamabad

was designed as a separate system from the storm water which was

collected in a different system. The sewage disposal system in Islamabad

provides disposal from each house through pipes and its conduction to

trunk sewers.

Three main sewers were designed in the sewage system in

Islamabad:

(a) The first one collects sewage from Sectors-5 to 7 of F to G

series. The sewage is delivered at the plants called Sewage

Treatment Plants Phase-I and II.

(b) The second one collects sewage from Sectors 8 and 9 of F,

G and H series. The sewage was delivered at the plant

called Sewage Treatment Plant Phase-III.

E, F, G & H series. The sewage is delivered to the newly

constructed plant called Sewage Treatment Plant Phase-IV.

Audit further noted that as per CDA (Environmental Protection

Regulation, 2008), no one shall dispose-off unauthorized or untreated

affluent of any industrial or commercial concern or contaminated water in

any street, stream, sewerage system, open place, park, road drain etc.

Audit observed that the Sewage Treatment Plant was treating only

an average of 6 million gallons of sewage per day against the planned

quantity of 17 million gallon for the reason that sewage could not reach

the plant due to non-linking of the existing sewage network, which was

choked and broken down at various places. Sewage of about 11 million

gallon was, therefore, flowing in different ravines passing through various

sectors of Islamabad, thus causing pollution. The Environmental

Protection Cell, CDA could not take corrective measures for restoration

and linking of broken sewage lines with main sewage network. This

resulted in flowing sewage in different ravines and causing pollution.

Audit was of the view that irregularity was due to weak

administrative/internal controls.

Audit pointed out the irregularity during July-August 2017. The

Authority did not reply.

The matter could not be discussed in DAC meeting despite

requests made by Audit in November, December 2017 and January 2018.

Audit recommends that matter be investigated for violation of rules

and action be taken against the person(s) at fault.

(DP 22)

Internal Control Weaknesses

2.4.37 Non-revision of rates of property tax, water and conservancy

charges

According to SRO 806 (I)/91, in exercise of the powers conferred

by rule 6(I) of the Capital Development Authority (Imposition of Taxes)

Rules, 1981, the Federal Government sanctioned levy of property tax in

Islamabad with immediate effect vide the Gazette of Pakistan

(Extraordinary) dated 20

August, 1991. The rates were operational for a

period of three years.

In supersession of SRO 806 (I)/91 dated 20

August, 1991,

Cabinet Division pleased to levy tax at the rate of one-twelfth of the

annual value of buildings and lands located within the areas specified in

Cabinet Division‟s Notification No. SRO 805(I)/91 dated 20

August,

1991 effective from 28

June, 1995.

Punjab Urban Immovable Property Tax Act 1958 enforced by the

Government of Punjab provides that under the provisions of the Act, the

property tax is levied on the annual value of buildings and land located in

the rating area. It is levied at the rate of 5% of annual value at which the

property may be let out from year to year basis.

Property Tax was levied and collected under Sindh Urban

Immovable Property Tax Act, 1958. A uniform rate of tax is levied on all

categories of properties @ 25% of annual rental value (ARV).w.e.f. 1

July, 2013.

Finance Wing CDA vide its letter dated 28

October, 2016 also

conceded that the Authority was facing severe financial crunch with

reduced revenue inflows while having huge ongoing routine works and

administrative expenditures and an enormous amount of outstanding

liabilities.

2.4.37.1 Audit noted that various formations/divisions of CDA (Water

Production-I & II, Water Supply South & North, Bulk Water

Management) incurred an expenditure of Rs 1,655.955 million for

production and supply of water in Islamabad for the year 2015-16.

Similarly Sanitations Directorate incurred an expenditure of Rs 466.605

million (for the year 2016-17).

Audit observed that Authority incurred an expenditure of

Rs 1,655.955 million for water supply production for the year 2015-16

against which Revenue Directorate CDA collected water charges

amounting to Rs 193.101 million. Similarly, Sanitation Directorate CDA

incurred an expenditure of Rs 466.205 million for cleaning and municipal

services etc. for the year 2016-17 against which Revenue Directorate CDA

collected conservancy charges of Rs 78.17 million only. This resulted into

loss of

Rs 1,851.289 million. The loss sustained by Authority due to non-revision

of rates of water and conservancy charges since year 2000.

Audit was of the view that non-revision of rates was due to

inadequate mechanism for enforcing relevant rules and weak

administrative/internal controls.

Audit pointed out the loss in August 2017. The Authority replied

that a summary for revision of the rates of property tax water and allied

charges was moved after fulfillment of codal formalities to the Federal

Government soliciting approval. As and when summary is got approved

and revised rates will be applicable to the consumers audit will be

informed accordingly. The reply was not tenable as the rates were not got

revised since 2001 and the Authority was facing recurring loss every year

which needs corrective action for approving of the summary with

presenting facts and figures of expenditure incurring for water supply and

municipal services to minimize the loss sustained by Authority annually.

The matter could not be discussed in DAC meeting despite

requests made by Audit in November, December 2017 and January 2018.

Audit recommends appropriate measures for recovery of Property

Tax and water charges on updated rates.

(DP 64)

2.4.37.2 Audit noted that CDA made last revision of property tax rates in

2001. The revised rates were effective from 1

February, 2001 till further

orders. Revenue Directorate CDA Islamabad collected the following

Property Tax in last seven years.

(Rs in Million)

Year

Target

Collection

Shortfall

2010-11

1,200.00

617.989

582.011

2011-12

1,200.00

620.721

579.279

2012-13

1,200.00

730.799

469.201

2013-14

1,200.00

752.690

447.31

2014-15

1,200.00

747.568

452.432

2015-16

1,200.00

786.899

413.101

2016-17

1,200.00

813.114

386.886

Audit observed that rates of Property Tax since 2001 were not

revised despite increase in the valuation of property manifold in

Islamabad. Due to non-revision of rates, there was a financial impact of

less recovery of Rs 1,200 million (approx.)

Audit further observed that estimated/budgeted receipts/target for

property tax was fixed lump sum and detail working on the number of

units along with the long outstanding arrears amount was not given. The

target receipt remained constant despite increase in number of units every

year.

Audit was of the view that revision of rates of Property Tax and

allied charges was not made due to deficient revenue-recognition policies,

disregard to the rules/regulations and weak internal controls. The

Authority failed to increase due revenue in a climate of financial

constraint and declining resource availability.

Audit pointed out the irregularity in July 2017. The Authority

replied that a summary for revision of the rates of property tax, water and

allied charges was moved after fulfillment of codal formalities to the

Federal Government soliciting approval. As and when summary was got

approved and revised rates will applicable to the consumers. The reply

was not satisfactory. The matter needs to be brought into the notice of

CDA high-ups and revision of rates taken with Federal Government to

minimize the huge loss sustained by the Authority annually.

The matter could not be discussed in DAC meeting despite

requests made by Audit in November, December 2017 and January 2018.

Audit recommends earlier actions to effect actual recovery of taxes

and strengthen the internal control system to impose financial health of

CDA.

(DP 65)

2.4.38 Non-recovery of outstanding property tax - Rs 1,901.553

million

According to Section 49-A of CDA Ordinance, 1960, any sum due

to the Authority from or any sum wrongly paid to any person under this

Ordinance shall be recoverable as arrears of land revenue. Rule-26 of

General Financial Rules Vol-I provides that it is the duty of departmental

officer to see that all sums due to Government are regularly assessed,

demanded, realized and remitted into Treasury.

According to S.R.O. 806(1)/91 dated 20

August, 1991, the

Federal Government, in exercise of the powers conferred by rule 6(1) of

the Capital Development Authority (Imposition of Taxes), Rules, 1981,

has sanctioned levy of property tax in Islamabad, with immediate effect at

the rate and on the conditions given in the SRO.

Audit observed that Revenue Directorate CDA did not recover

outstanding dues of Rs 1,901.553 million on account of property tax,

water and allied charges from various residential buildings, commercial

buildings, educational institutions, offices, etc., as detailed below:

DP. No.

Description

Amount

(Rs in million)

Remarks

Property tax

21.667

Workers Welfare Fund,

residential

houses/offices of F6-G6,

F6-G5, Emigration

Tower G-8/1 and FPCCI

G-8/1 Islamabad

Property Tax

6.169

Benevolent Fund

Building

Property Tax

5.091

Printing Corporation

Press

Property Tax

828.003

801 Residential building

and 459 commercial

buildings

102

Property Tax

111.839

E, F, G and I Sectors

103

Property, water

and allied

charges

36.882

Commercial buildings

57 & 58

Property, water

and allied

charges

52.978

Media groups

Property Tax

32.175

Zarai Taraqiati Bank

Property Tax

53.066

Gun and Country Club

104

Property Tax

678.430

Educational institutions

105

Property Tax

42.716

PTV

107

Property tax

5.872

Millennium Heights and

Golden Heights,

Economy flats, F-11

Water and

conservancy

charges

11.806

US Embassy

(less billing)

Water and

conservancy

charges

3.580

Pak China Friendship

Centre

Water and

conservancy

charges

11.279

US Embassy (Rs 4.578

million) and Centaurus

Mall (Rs 7.151 million)

Total

1,901.553

Audit was of the view that non-recovery of outstanding dues was

due to inadequate mechanism for enforcing relevant rules and weak

administrative/internal controls.

Audit pointed out non-recovery in April and August 2017. The

Authority replied that notices had been served. As and when recovery is

effected Audit would be informed accordingly. The reply was not

accepted as property tax was not recovered in violation of the CDA

Ordinance 1960. Early action was required to be taken against the

defaulters including referring the case to Assistant District Collector for

legal proceeding for effecting recovery along with arrears and surcharges

besides taking corrective measures for identification of the non-tax payer,

devising of concrete policy/procedure to safeguard the revenue sources of

CDA.

The matter could not be discussed in DAC meeting despite

requests made by Audit in November, December 2017 and January 2018.

Audit stresses for early recovery.

2.4.39 Carpeting of roads without obtaining NOC from MPO -

Rs 845.232 million

According to Rule-I of CDA Procedure Manual Part-II, every

public officer is expected to exercise the same vigilance in respect of

expenditure incurred from public funds as a person of ordinary prudence

would exercise in respect of expenditure of his own money. The

expenditure should not be prima facie more than the occasion demands.

Audit noted that Director Market & Roads Maintenance CDA

Islamabad awarded a work of re-carpeting of various roads in Sectors of

F&G Series, Islamabad. The work was started on 10

Novembr, 2015 and

to be completed in six (06) months upto 9

May, 2016. The work was still

in progress.

Audit observed that carpeting work was got executed mostly in

various streets of Sector F&G not included in the detailed estimates. On

the other hand MPO Directorate was also executing carpeting work in the

same localities and Sectors of Islamabad. The NOC from MPO

Directorate was required to be obtained before estimation and execution of

carpeting work to avoid any overlapping/duplication of the streets but the

same was not obtained. This resulted into execution of carpeting work for

Rs 845.232 million without obtaining NOC from MPO.

Audit was of the view that irregularity was due to inadequate

mechanism for enforcing relevant rules and weak administrative/internal

controls.

Audit pointed out the irregularity in July 2017. The Authority

replied that the re-carpeting was executed as per scope of work/estimation

in F&G Series, however, some streets of different sectors were got

executed on the special directions of high-ups. In reply, the Authority

admitted that some streets of different sectors were got re-carpeted on the

special directions without provision in the approved estimates and

reconciliation with the MPO which was also doing carpeting work in the

same Sectors, so chances of overlapping cannot be overruled.

The matter was discussed in the DAC meeting held in November

2017. The Authority reiterated its previous stance. The DAC directed to

obtain NOC from MPO that there was no duplication between the works

carried out by them and Market and Road Directorate.

Compliance to the DAC‟s directive was not made till the

finalization of this report.

Audit stresses to reconcile the position of carpeting with MPO to

avoid any overlapping/duplication.

(DP 50)

2.4.40 Non-completion of work despite incurring expenditure of

Rs 295.00 million

According to Rule 23 GFR, every Government officer should

realize fully and clearly that he would be held personally responsible for

any loss sustained by Government through fraud or negligence on his part

and that he will also be held personally responsible for any loss arising

from fraud or negligence on the part of any other Government officer to

the extent to which it may be shown that he contributed to the loss by his

own action or negligence. Detailed instructions for regulating the

enforcement of such responsibility are embodied in Appendix 2.

Audit noted that CDA Development Working Party in its meeting

held in May 2006 approved PC-I for “Recreation Facilities of Ladies Club

Markaz G-10, Islamabad” to provide recreational facilities in Islamabad

for Rs 335.69 million. Audit further noted that the Authority awarded the

work in December 2006 to the contractor M/s Expertise (Pvt.) Ltd at a cost

of Rs 182.85 million. The work was started on 19

January, 2007 with a

completion period of 18 months and an expenditure of Rs 295.00 million

incurred up to May 2009 including a sum of Rs 247.629 million on civil

works (upto 27

running bill).

Audit observed that the work could not be completed despite lapse

of a period of eight years. The work at site was stopped in May 2009 and

still not resumed due to the reasons best known to the Authority. This

resulted in wasteful expenditure of Rs 295.00 million.

Audit was of the view that expenditure already incurred has gone

waste due to stoppage of work since 2009.

Audit pointed out the matter in August 2017. The Authority replied

that delay in project was due to delay in administrative approvals, change

of design and overall financial constrains in CDA, furthermore, it was

explained that the Revised PC-I was duly approved by CDA DWP. As

soon as the work will restart on the said facility, the progress report will be

shared with the audit. The reply was not accepted as stoppage of work was

due to ill planning and weak technical supervision.

The matter was discussed in the DAC meeting held in November

2017, DAC observed that it was a serious issue and decided to place it

before PAC for deliberation and decision.

(DP 81)

2.4.41 Non-recovery on account of Operation & Maintenance

Charges of Water Treatment Plant from beneficiaries -

Rs 195.327 million

Rule 8 of General Financial Rules (Vol.-I) provides that a

departmental controlling officer is required to promptly assess, realize and

deposit the Government revenue into Government funds.

Audit noted that Deputy Director, Khanpur Dam Division,

Directorate of Bulk Water Management, CDA, Islamabad operates and

maintains water treatment plant at Sangjani and supplied treated water to

Rawalpindi Cantonment Board (RCB), WASA Rawalpindi and CDA

Islamabad as per their approved share.

Audit observed that Operating and Maintenance Charges incurred

on the plant during financial year 2016-17, as per share of the treated

water supplied to the beneficiaries i.e. RCB and WASA Rawalpindi were

not recovered from the beneficiaries. This resulted into non-recovery of

Rs 195.327 million as detailed below:

(Rs in million)

Period

RCB

WASA

Total

Amount outstanding upto June 2017

771.902

260.427

1,032.329

Less arrears upto June 2016

656.306

180.696

837.002

Total amount due for FY 2016-17

115.596

79.731

195.327

Less received during FY 2016-17

Amount outstanding for FY 2016-17

115.596

79.731

195.327

Audit was of the view that the non-recovery was due to non-

implementation of relevant rules and weak administrative/internal

controls.

Audit pointed out non-recovery in July-August 2017. The

Authority replied that recovery of O&M charges from beneficiaries was

being pursued and in a meeting with Additional Secretary Cabinet

Division, it was decided that RCB will arrange funds for payment to CDA.

The Authority in its reply admitted that RCB and WASA Rawalpindi were

not paying their shares on account of Operation & Maintenance (O&M)

Charges of Water Treatment Plant. Non-recovery/non-repayment of loan

was in violation of the approved PC-I.

The matter could not be discussed in DAC meeting despite

requests made by Audit in November, December 2017 and January 2018.

Audit recommends early recovery of the outstanding amount from

the beneficiaries.

(DP 30)

2.4.42 Non-adjustment of advance payment - Rs 94.902 million

According to Federal Treasury Rules (Responsibility for the

money withdrawn (Rules 205 to 216) “Every Government officer

entrusted with the payment of money should obtain for every payment he

makes a voucher setting forth the full and clear particulars regarding the

claims and all relevant information necessary for its proper identification

and classification in accounts.

Audit noted that the Directorate Sector Development CDA,

Islamabad made an advance payment of Rs 5.00 million to Deputy

Director MPO (Maintenance) in November 2016 on account of

½ inches

thick carpeting of roads in Sector D-12. Audit further noted that

previously payment of Rs 94.902 million was also made on this account.

Audit observed that vouched account on the basis of actual work

done was not obtained to adjust the advance payments. This resulted into

non-adjustment of advance payment of Rs 94.902 million.

Audit was of the view that the non-adjustment was due to weak

financial controls.

Audit pointed out the issue in August 2017. The Authority replied

that adjustment of the advance payment will be obtained from MPO and

record will be got verified by Audit. The reply was not accepted as

adjustment of advance payment was not made, which was in violation of

Treasury rules.

The matter was discussed in the DAC meeting held in November

2017. DAC directed CDA to provide the area wise details to Audit and

adjustment of amount be got verified from Audit within one week.

Compliance to the DAC‟s directive was not made till the

finalization of this report.

Audit stresses for early adjustment of advance payments.

(DP 07)

2.4.43 Overpayment to the contractors due to higher estimation -

Rs 30.253 million

Clause 9 (a) of SOP for management of Sanitation services in

Islamabad describes the Sector Team as under:-

There shall be a team for every Sector, consisting of:

- One Sanitary Inspector

- Five Sanitary Supervisors

- 10 Mates

- 150 Cleaners.

Audit noted that Sanitation Directorate (MCI) awarded the work

“Privatization/ Provision of Sanitation Services, Cleaning, Sweeping,

Collection & Transportation of Solid Waste/ Garbage for Sectors G-6, G-

7, G-8, G-9, G-10, I-10 & I-11 to seven (07) contractors 28% above the

estimated rates.

Audit further noted that following components were included in

the estimate of work:

No.

Particulars

Quantity

Cost per

annum

Driver

Rs 154,800

Truck loaders

Rs 288,000

POL charges

Rs 672,000

Repair & maintenance charges of

tractor towed with mechanical

sweeper

Rs 420,000

Contractor‟s profit

10% of each

component

Audit observed that the estimates were prepared and got approved

from the competent authority on the basis of SOP adopted by the

Sanitation Directorate, wherein provision of the tractor toed with

mechanical sweeper was not available. Hence, the inclusion of this

machinery without reduction in number of cleaners, resulted in

overpayment to the contractor for Rs 15.127 million. Audit further

observed that the log/work books were also not maintained by the

authority to verify actual area covered by the mechanical sweeper.

Audit was of the view that overpayment was due to weak financial

controls.

Audit pointed out the overpayment in July 2017. The

Authority/MCI did not reply.

The matter could not be discussed in DAC meeting despite

requests made by Audit in November, December 2017 and January 2018.

Audit stresses for recovery and corrective measures.

(DP 73)

2.4.44 Delay in completion of water supply scheme due to non-

removal of encroachment - Rs 27.274 million

According to Rule-I of CDA Procedure Manual Part-II, every

public officer is expected to exercise the same vigilance in respect of

expenditure incurred from public funds as a person of ordinary prudence

would exercise in respect of expenditure of his own money. The

expenditure should not be prima facie more than the occasion demands.

Audit noted that Deputy Director (Zone-A) awarded the work

“Providing & Laying Water Supply System in Sector I-14/2&3 Islamabad

at a cost of Rs 84.828 million”. The wok was started on 24

May, 2012

and was to be completed on or before 23

August, 2013. Monthly

Progress Report of Annual Work Plan for June 2017 indicates that an

expenditure of Rs 27.274 million was incurred on the work.

Audit observed that the work was not completed for last five years

due to non-availability of land which reflects mismanagement.

Audit was of the view that award of work without availability of

land was contrary to codal provisions and expenditure on incomplete work

termed as wasteful.

Audit pointed out the mismanagement in August 2017. The

Authority replied that expenditure of Rs 27.274 million was incurred

against work done at site. However, despite numerous letters issued to

Land & Rehabilitation Directorate, CDA for safe land possession in order

to complete the remaining works timely at site but possession of land was

not given yet causing delay in completion of work and upon this hope the

account of the contractor was not yet been finalized. Balance work shall

be taken in hand upon provision of safe land possession. The Authority

agreed in its reply that work was not completed due to non-availability of

land. This indicates that work executed for Rs 27.274 million has no

utilization over years which tantamounts to loss to the Authority. Award

of work without availability of site was in violation of standing rules.

The matter could not be discussed in DAC meeting despite

requests made by Audit in November, December 2017 and January 2018.

Audit stresses upon investigation and appropriate corrective action.

(DP 32)

2.4.45 Non-recovery of secured advance - Rs 15.109 million

As per clause 60.11-a (Particular Conditions of Contract) the

contractor shall be entitled to receive from the Employer Secured Advance

against Indemnity Bond acceptable to the Employer of such sum as the

Engineer may consider proper in respect of non-perishable materials

brought at the site but not yet incorporated in the payment works provided

that (b) the recovery of the secured advance paid to the contractor under

the provisions shall be effected from the monthly payment on actual

consumption basis.

Audit noted that Deputy Director, Works Division-I, CDA

Islamabad awarded the work “Construction of Additional (104) Family

Suites for the Members of the Parliament Including Servant Quarters

Block for 500 Persons” Islamabad at agreement cost of Rs 2,728.451

million to M/s Habib Rafique (Pvt) Ltd and made payment of Rs 823.652

million upto June 2017.

Audit observed that secured advance of Rs 189.494 million was

paid to the contractor upto 14

running bill out of which Rs 174.385

million was recovered upto 16

running bill. Balance secured advance of

Rs 15.109 million was recoverable since May 2016. This resulted in non-

recovery of secured advance amounting to Rs 15.109 million.

Audit was of the view that the non-recovery of secured advance

was due to weak internal controls and inadequate oversight mechanism for

enforcing relevant rules and regulations.

Audit pointed out the non-recovery in October 2017. The

Authority replied that recovery of the secured advance had been adjusted

in subsequent IPC. The reply was not tenable as the recovery of the

secured advance was not made and shown to Audit.

The matter could not be discussed in DAC meeting despite

requests made by Audit in November, December 2017 and January 2018.

Audit recommends early recovery of long outstanding secured

advance besides interest thereon.

(DP 150)

2.4.46 Non-recovery of room rent and utility charges of hostels/lodges

- Rs 11.097 million

Para-26 of GFR Vol-I provides that it is the duty of the

departmental Controlling officers to see that all sums due to Government

are regularly and promptly assessed, realized and duly credited in the

Public Account.

Audit noted that the Authority could not recover dues on account

of room rent/utility charges from the allottees of rooms/space in

parliament lodges, family suites, government & officers hostels during the

year 2016-17. This resulted in non-recovery of rent of Rs 11.097 million,

as detailed below:

Detail of outstanding Dues

Amount

(Rs in million)

Family suites: Government Hostels

0.738

Single room: Government Hostels

0.942

CDA Officer hostels

1.900

Arrears of utilities of Parliament Lodges

2.900

Detail of outstanding Dues

Amount

(Rs in million)

Outstanding Dues of Parliament Lodges

0.492

Arrears of utilities of Cafeteria of Parliament

Lodges

2.262

Rent of Cafeteria (Government Hostel)

1.863

Total

11.097

Audit was of the view that non-recovery occurred due to weak

internal controls.

Audit pointed out non-recovery in October 2017. The Authority

did not reply.

The matter could not be discussed in DAC meeting despite

requests made by Audit in November, December 2017 and January 2018.

Audit recommends early recovery.

(DP 118)

2.4.47 Award of work at higher rates without assessment of

reasonability of rates - Rs 7.115 million

Rule 36(b)(ix) of Public Procurement Rules, 2004 regarding

procedures of open competitive bidding provides that the bid found to be

the lowest evaluated bid shall be accepted.

Audit noted that Director, Parliament Lodges & Hostels

Directorate CDA, Islamabad floated advertisement and opened tenders on

May, 2017 for the work “Renovation/Up gradation of 07 Passenger

lifts at Parliament Lodges Islamabad”. The estimates of the work were

prepared on market rates basis for an amount of Rs 4.365 million.

Audit observed that only a single bidder M/s Abdul Wahab

Enterprises participated in the bidding process by quoting bid 65% higher

than the estimated cost involving Rs 7.202 million which was further

negotiated for Rs 7.115 million (63% above on the engineering estimates)

and contract was awarded to single bidder M/s Abdul Wahab Enterprises.

Award of works at higher rates i.e. 63% above the market based estimates

stood irregular for Rs 7.115 million.

Audit was of the view that irregular award of work occurred due to

weak internal/financial controls and inadequate oversight mechanism for

enforcing relevant rules and regulations.

Audit pointed out irregularity in October 2017. The Authority

replied that the work was of specific nature and the firms having specified

code of ME-03 (lifts & escalators) as per registration category and

specialization codes issued by Pakistan Engineering Council, Islamabad

were eligible for issuance of tender documents. The applications were

scrutinized and only one firm i.e. M/s Abdul Wahab Enterprises was of

specialized code of ME-03 and accordingly tender documents were issued

to the said firm and as per Clause 4(b)(b) of BOI the next higher authority

i.e. Member (Engineering) CDA accepted the lowest bid and work was

awarded. The reply was not tenable as acceptance of single tender @ 63%

above the engineer‟s estimates was not competitive. It was required to be

re-tendered through wide publicity to obtain competitive rates through

open bidding.

The matter could not be discussed in DAC meeting despite

requests made by Audit in November, December 2017 and January 2018.

Audit recommends investigation for fixing responsibility.

(DP 123)

2.4.48 Payment of overtime allowance over and above the approved

rates - Rs 6.602 million

According to Government of Pakistan, Finance Division

(Regulation Wing) OM No.F.4 (1) R-5/2010 dated 6

July, 2015,

overtime allowance admissible to Staff Car Drivers / Dispatch Riders was

enhanced from Rs 25 per hour to Rs 40 per hour subject to a maximum

limit of Rs 240 per day with effect from 1

July, 2015. The allowance was

payable only after verification of the officer concerned.

Audit noted that Director, Environment (Regional & Transport),

CDA allowed overtime allowance at the rate of 150% of the pay to the

Drivers and OGMs.

Audit observed that the rate of overtime allowance was paid in

excess of the notified rates of the Finance Division, Government of

Pakistan which resulted in overpayment of Rs 6.602 million.

Audit was of the view that overpayment was due to weak internal

and financial controls.

Audit pointed out the irregularity in July-August 2017. The

Authority did not reply.

The matter could not be discussed in DAC meeting despite

requests made by Audit in November, December 2017 and January 2018.

Audit recommends early recovery of the overpaid amount of

overtime.

(DP 23)

2.4.49 Procurement of imported electrical items without ensuring

genuineness of the items supplied - Rs 6.069 million

As per Para 6 of instructions contained in MB (with reference to

Paras 209 to 211 of CPWA Code), the measurement should be recorded

only by Executive, Assistant Executive or Assistant Engineers or by

executive subordinates in-charge of work to whom MBs were supplied for

the purpose. All such measurements (i.e. those recorded by subordinates)

should, however, be test checked to the extent of at least 50% by the sub-

divisional officer himself in each case, and he will be responsible for the

general correctness of the bill as whole. Para 8 provides that the Divisional

Officer should test check at least 10% of measurements recorded by his

subordinates, and accept responsibility for the general correctness of the

bill as whole.”

Audit noted that Deputy Director, Street Light Division-I, CDA,

Islamabad awarded a work procurement of Store Material for repair &

maintenance of Street Light System in Islamabad to M/s Hunjra Auto &

Engineering on 27

February, 2017. Supply order was to be completed in

45 days upto 13

April, 2017.

Review of the case file and measurement book No.16557 revealed

that supplies of material was not completed in stipulated time. Total

supply made and recorded in MB upto 30

June, 2017 was for Rs 6.069

million against agreed amount of Rs 14.609 million.

Audit observed that supplies were not made on time and only

supplies worth Rs 6.069 million were provided to date. Audit further

observed that supplies contained mostly imported electric items. Payment

of supply for Rs 6.069 million was released without ensuring and

confirming genuineness of the imported items. Following documents were

not found attached with the claim/payment record: -

1. Supplier Indents/Requisitions to manufacturer of electrical

items as per TS estimate.

2. Invoices, Inspection note duly authenticated by the responsible

officers.

3. Landing documents, Sales Tax Custom Duties, if paid by the

supplier.

This resulted in un-authentic payment Rs 6.069 million in violation

of the codal provisions.

Audit was of the view that the un-authentic payment was due to

inadequate mechanism for enforcing relevant rules and weak

administrative/internal controls.

Audit pointed out the un-authentic payment in October 2017. The

Authority replied that invoices and other essential documents will be

obtained before finalization of the account of the subject work as per terms

and conditions of the contract.

The reply was not tenable because for payment of imported items,

necessary landing documents were required. Further paid receipts and pre

shipment inspection were mandatory to be obtained before releasing

payment. Almost 50% payment of imported E/M items was released

without submission of necessary document.

The matter could not be discussed in DAC meeting despite

requests made by Audit in November, December 2017 and January 2018.

Audit stresses for investigation and appropriate corrective action.

(DP 136)

2.4.50 Non-imposition of penalty for non-compliance of Fire

Prevention and Life Safety Regulations - Rs 5.210 million

As per Director Emergency Disaster Management CDA letter

issued on 12

November, 2015, penalty @ Rs 500,000 each was imposed

against the owners of multistory buildings for non-compliance of Fire

Prevention & Life Safety Regulations, 2010. Last notices were issued to

the owners during September to November 2015, with the warning that in

case of non-implementation to the requisite regulations a sum of Rs 3,000

shall be charged (every passing day) until complete adoption of CDA

Building Standards 2010.

Audit noted that certain multi-storey buildings/towers were

constructed in Islamabad but the owners of the buildings/towers did not

install required equipment within the meaning of the CDA Building

Standards for Fire Protection & Life Safety 2010, which was a serious

negligence on the part of the owners of the Building/Towers, which may

result in serious disaster at any time and loss to precious human lives.

100

Audit observed that neither the fire safety systems were installed

nor any recovery was made on account of penalty from the owners of the

buildings. This resulted into non-compliance of Fire Prevention and Life

Safety Regulations, 2010 and non-recovery of the penalty for Rs 5.210

million.

(Rs in million)

Name of building

No. of days

(12.11.15 to

31.03.17)

Penalty @

Rs 300

per day

Lump-sum

penalty

imposed

Total

Millennium Heights,

F-11/1

504 days

0.151

0.500

0.651

Tariq Heights, F-11/1

504 days

0.151

0.500

0.651

Sughra Tower, F-11/1

504 days

0.151

0.500

0.651

Al- Safa Heights, F-

11/1

504 days

0.151

0.500

0.651

Hamza Tower, F-11/1

504 days

0.151

0.500

0.651

Golden Heights, F-

11/1

504 days

0.151

0.500

0.651

Al Mustafa Tower, F-

10/3

504 days

0.151

0.500

0.651

UBL Tower, Jinnah

Avenue

504 days

0.151

0.500

0.651

Total

1.210

4.000

5.210

Audit was of the view that non-recovery was due to inadequate

mechanism for enforcing relevant rules and weak administrative/internal

controls.

Audit pointed out the matter in April 2017. The Authority replied

that concerned formation would be conveyed audit observation. Interim

reply was submitted. Non-installation of fire prevention & life safety

system in the high-rise buildings was a public importance issue which

should have been addressed accordingly.

The matter could not be discussed in DAC meeting despite

requests made by Audit in November, December 2017 and January 2018.

101

Audit recommends to investigate the matter at appropriate level

and ensure installation of fire prevention system in high rise buildings

besides recovery of the penalty.

(DP 108)

2.4.51 Non-auction of kiosks and non-revision of license fee - Rs 5.040

million

According to Licenses for Kiosks in Lake View Park awarded by

the CDA in 2007-08, the license fee was required to be revised as and

when approved by the Authority from time to time.

Audit noted that Deputy Director Parks (Landscape) awarded

twenty-one (21) licenses of kiosks of different sizes in 2007-08 to

different contractors/vendors in Lake View Park Islamabad. Licenses for

these kiosks were awarded with the approval of Chairman/Member (Env)

without open bidding @ Rs 2,000 per month without mentioning period of

license.

Audit observed that license fee of these kiosks was not revised for

last 10 Years, whereas rent prevailing in market was not less than

Rs 25,000 per month approx.

Audit was of the view that award of licenses without open bidding

for indefinite period was irregular and non-revision of fee is recurring loss

to CDA. This resulted in recurring loss of CDA revenue for Rs 5.040

million.

Audit was of the view that loss occurred due to inadequate

mechanism for enforcing relevant rules and weak administrative/internal

controls.

Audit pointed out the loss in November 2017. The Authority

replied that during 2007-08, 21 kiosks of different sizes were licensed out

to the vendors belonging to poor / lower middle class of society. These

102

kiosks were awarded at the monthly rent of Rs 2,000 per month with

annual increase of 10% as per approved rental rate of DMA in accordance

with municipal by-laws. Presently this rate has increased Rs 4,600 per

month which was 130% more than the initial rate. To address the query

raised by the audit, Costing Section, CDA and DMA was being requested

to re-evaluate the rental rates of Kiosks which would be got approved

from the competent forum as per municipal by-laws. The reply was not

tenable because the rates should have been revised from time to time as

per prevalent market rates.

The matter could not be discussed in DAC meeting despite

requests made by Audit in December 2017 and January 2018.

Audit recommends corrective measures and observance of Public

Procurement Rules in its true spirit.

(DP 158)

2.4.52 Non-recovery of advance income tax - Rs 4.436 million

According to Clause 236A (Advance Tax at the Time of Sale by

Auction with Explanation) Any person making sale by public auction or

auction by a tender], of any property or goods including property or goods

confiscated or attached) either belonging to or not belonging to the

Government, local Government, any authority, a company, a foreign

association declared to be a company under sub-clause (vi) of clause (b) of

sub-section (2) of section 80, or a foreign contractor or a consultant or a

consortium or Collector of Customs or Commissioner of Inland Revenue

or any other authority, shall collect advance tax, computed on the basis of

sale price of such property and at the rate specified in Division VIII of Part

IV of the First Schedule, from the person to whom such property or goods

are being sold. For the purposes of this section, sale of any property

includes the awarding of any lease to any person, including a lease of the

right to collect tolls, fees or other levies, by whatever name called.

Further as per Clause 15 of the lease agreement, the lessee will pay

to any local authority all taxes, rates, royalties (if any be payable)

103

assessments, charges and imposition of every description which now are

or during the said term shall be charged, assessed or imposed upon by any

lawful authority or be payable thereon only on the business conducted at

the site/structure therein under any law, rule or order for the time being

and from time to time in force.

Audit noted that the Director Parks, CDA Islamabad leased out

various sites in parks for collection of Entry Tickets, Car Parking and

KIOSK etc. and received fee Rs 30.138 million during the year 2016-17.

Audit further noted that CDA Leased out old Traditional House

Shakarparian for a period of 20 Years to M/s Al-Hamdo-Lillah since 2008

@ monthly rent Rs 500,000 per month with 10% increase per annum.

Audit observed that CDA received leased money Rs 44.358

million during the year 2016-17 but advance tax @ 10% was not collected.

This resulted in non-recovery of income tax amounting to Rs 4.436

million.

Audit was of the view that non-recovery of advance income tax

occurred due to inadequate mechanism for enforcing relevant rules and

weak administrative/internal controls.

Audit pointed out the non-recovery of advance income tax in

November 2017. The Authority replied that Additional Commissioner

(Inland Revenue) East Zone-II Regional Tax Office Islamabad has been

conveyed for taking necessary action as per relevant tax rules. The reply

was not tenable because collection of advance tax from the licensee was

the responsibility of the Authority. Audit stresses for collection of advance

tax at the earliest.

The matter could not be discussed in DAC meeting despite

requests made by Audit in December 2017 and January 2018.

Audit stresses for early recovery of the Income Tax.

(DP 157)

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2.4.53 Overpayment due to non-adjustment of prices of specified

material - Rs 8.521 million

According to Clause 70.1 of agreement and Appendix-C, the

amounts payable to the contractor, pursuance to Sub-Clause 60.1 shall be

adjusted in respect of the rise or fall in the cost of bitumen (80/100) by

applying to such amount as prescribed in the adjustment formula.

Audit noted that during the years 2015-16 and 2016-17 there was a

constant decrease in the prices of HSD and bitumen.

Audit observed that neither the Authority processed the de-

escalation on account of rise or falls in prices nor the contractors claimed

any escalation/de-escalation. Audit worked out the de-escalation on

account of HSD bitumen and other decreased rate items and found that an

overpayment of Rs 8.521 million has been made to the contractors on

three (03) projects. Project-wise detail of de-escalation is as under:

(Rs in million)

DP No.

Name of Project

Amount of

De-escalation

Construction of Major Roads in Sector I-12,

Islamabad

4.107

Dualization of Service Roads (East & North)

Sector E-11 to Sector D-12, Islamabad

2.263

Construction of 2

Carriageway from

roundabout of service road (west) Sector G-10

to Khayaban-e-Iqbal, Islamabad

2.151

Total

8.521

Audit was of the view that overpayment was due to weak

internal/financial controls.

Audit pointed out the overpayment in August 2017. The Authority

admitted the overpayment and promised to recover the same from the

contractors. However, no recovery was reported to Audit.

105

The matter was discussed in DAC meeting held in November 2017.

Audit contended that price adjustment claims to cater downward trend

were to be obtained and processed to watch the public interest which was

not done. DAC directed CDA that recovery in this regard be made in one

month time and got verified from Audit.

Compliance to the DAC‟s directive was not made till the

finalization of this report.

Audit stresses for early recovery.

(DP 05,89,90)

2.4.54 Award of licenses of kiosks without open auction - Rs 3.636

million

According to Para 6 of the Land Disposal Regulations, 2005, all

commercial and business plots shall be sold or leased out through open

auction as commercial plots. As per Paragraphs 72-76 of CDA Procedure

Manual Part-III, every officer of the Authority will be held personally

responsible for any loss sustained by the Authority through fraud or

negligence on his part and that he will also be held responsible for any loss

arising from fraud or negligence on the part of any other employee of the

Authority to the extent to which it may prove that he contributed to the

loss by his own action or negligence.

Audit noted from the record maintained by Environment

Directorate (Regional), CDA, Islamabad that temporary licenses for

operating tuck shops / various kiosks/ stalls at Daman-e-Koh and Monkey

Point were issued to the licensees.

Audit observed that the licenses were issued on simple applications

at a very nominal license fee of Rs 3,000 to Rs 6,000 per year. The

temporary licenses were issued for one year from 2009 and were being

extended without any increase in rates or advertisement in press. It was

also noted that licenses have since been expired in 2014 and 2015 but the

106

licensees were running kiosks without any extension or deposit of license

fee. This resulted in loss due to award of licenses without open auction of

Rs 3.636 million.

Audit was of the view that in absence of open competition, the

Authority compromised the transparency, deprived the entity of the

advantage of competitive rates and denied a fair opportunity to other

prospective bidders for participation in the bidding process.

Audit pointed out the irregularity in July-August 2017. The

Authority did not reply.

The matter could not be discussed in DAC meeting despite

requests made by Audit in November, December 2017 and January 2018.

Audit recommends that responsibility be fixed for violation of

rules.

(DP 25)

2.4.55 Non-acceptance of highest bid of car parking license -

Rs 3.506 million

As per Paragraphs 72-76 of CDA Procedure Manual Part-III, every

officer of the Authority will be held personally responsible for any loss

sustained by the Authority through fraud or negligence on his part and that

he will also be held responsible for any loss arising from fraud or

negligence on the part of any other employee of the Authority to the extent

to which it may prove that he contributed to the loss by his own action or

negligence.

Audit noted that auction of Daman-e-Koh Car Parking was held on

May, 2014 and awarded to M/s Naeem Khan S/o Abdul Rehman at

the rate of Rs 10.610 million for two years. The licence was expired on

July, 2016. After expiry, the Authority started collection of parking

fee through deployment of its seven employees. (Three for morning and

four for evening shift).

107

Audit further noted that case for re-auction of the public car

parking was initiated on 24

June, 2016 which could not be finalized due

to revision of auction TORs till 30

December, 2016. Auction was held on

January, 2017. Three bidders participated in the auction process. M/s

Sher Zaman (Pvt.) Ltd offered highest bid of Rs 7.013 million for two

years which was 38% below the reserve price of Rs 11.353 million. The

highest bid was rejected being lower than the reserve price.

Auction was again held on 28

March, 2017 wherein, M/s

Maqsood General Store offered highest bid of Rs 8.200 million which was

Rs 3.052 million (28%) less than the already awarded contract.

This auction was also cancelled being lower than the already

awarded contract. Auction was held third time on 21

July, 2017. Despite

expiry of one year period, the car parking was not awarded due to

slackness on the part of the management.

Audit also noted that the Authority collected a sum of Rs 3.161

million from 27

July, 2016 to 30

June, 2017 through departmental

employees.

Audit observed the following irregularities in processing of auction

for award of Car Parking at Damn-e-Koh:

(i) Previous contract was expired on 25

July, 2016. Case for re-

auction of the public car parking was initiated on 24

June, 2016.

The Authority did not finalize TORs till 30

December, 2016.

Auction was held on 17

January, 2017. This slackness on the part

of the management resulted in delay about six month in auction.

(ii) The Authority did not accept the highest bids Rs 7.013 million

offered on 17

January, 2017 and Rs 8.200 million received in

auction held on 28

March, 2017. Offers were also called on 21

July, 2017. The auction was not finalized which resulted in delay.

108

(iii) Due to non-acceptance of the bids, seven employees were

deployed for collection of car parking fee. The Authority could

only collect Rs 3.161 million from 27

July, 2016 to 30

June,

2017 through seven departmental employees which costs

approximately equal to the collection made by the employees of

CDA. This resulted into loss of Rs 3.506 million (Rs 7.013 *1/2) in

one year of the offer received in January, 2017.

Audit was of the view that loss was sustained due to deficient

revenue-recognition policies, disregard to the rules/regulations and weak

internal controls.

Audit pointed out the irregularity in July-August 2017. The

Authority did not reply.

The matter could not be discussed in DAC meeting despite

requests made by Audit in November, December 2017 and January 2018.

Audit recommends investigation to fix responsibility against the

person(s) at fault.

(DP 26)

2.4.56 Overpayment due to duplication and calculation mistake -

Rs 3.42 million

NHA specification provides that the aggregate and asphaltic

material measured shall be paid for at the contract unit price per square

meter for a particular item Triple surface treatment shown on the bill of

quantities, which payment shall be full compensation for furnishing all

labour, materials, tools equipment and incidental for performing all the

work in the construction of bituminous surface treatment or seal coat

complete in place and according to specification, including priming of

surface.

According to CPWA Code Para 220, before the bill of a contractor is

prepared, the entries in the measurement hook relating to the description and

109

quantities of work or supplies should be scrutinized by the Sub-Divisional

Officer and the calculations of "Contents or area" should be checked

arithmetically under his supervision.

2.4.56.1 Audit noted that Deputy Director, Road & Market (Maint.), CDA

Islamabad called and opened tenders of the work “Rehabilitation of IJP

Road from Pindora Chowk to GT Road Link Islamabad” on 22

March,

2016. The lowest quoted rates were 27.92% below on NHA schedule of

Rates, 5% below on MES & 10% on Non-scheduled items at NIT cost of

Rs 226.019. The work was awarded at agreement cost of Rs 165.136

million to M/s Zarif Khan Hussainzai & Brothers on 26

May, 2016 with

completion period of six (06) months from the date of issuance of letter of

start.

Audit observed that an item of work Triple Surface Treatment (TST)

including the cost of priming of surface was allowed for execution and

payment, whereas separate item of prime coat was got executed and

measured for the same area/reaches for a quantity of 22,415 square meters.

The Triple Surface Treatment (TST) was got executed and paid to the

contractor simultaneously. Execution of duplicate items of work resulted

in overpayment of Rs 1.965 million to the contractor.

Audit was of the view that the overpayment was due to non-

adherence to nomenclature of pay item, weak internal and financial

controls.

Audit pointed out overpayment in July 2017. The Authority replied

that TST & Prime Coat were executed and paid as per approved

agreement, design and specification. The reply was not tenable because as

per specification of item TST including priming of surface was inbuilt in

the rate of the said item. Thus separate payment of prim coat was not

required.

The matter was discussed in DAC meeting held in November

2017. The Authority explained that prior to application of TST prime coat

was taken for new layer of Base Course material for complete and uniform

110

penetration and effective bonding. The contention of Authority was not

agreed by Audit because specification does not allow execution of prime

coat and TST at same location. The DAC directed to effect recovery from

the contractor and verification of recovered amount from Audit

Compliance to the DAC‟s directive was not made till the

finalization of this report.

Audit stresses for early recovery of overpayment.

(DP 45)

2.4.56.2 Audit noted that Deputy Director-II, Sector Development Division,

CDA, Islamabad made a payment of Rs 38.318 million to M/s M. Ayub &

Brothers on account of 41

running bill for the work “Development of Sector

D-12, Islamabad”.

Audit observed that a payment Rs 1.792 million was made against

the sub-head “hard landscaping” whereas actual amount payable comes to

Rs 336,955. This resulted in overpayment of Rs 1.455 million.

Audit was of the view that the overpayment due to calculation

mistake occurred due to non-adherence to nomenclature of pay item, weak

internal and financial controls.

Audit pointed out the overpayment in August 2017. The Authority

replied that overpayment was made inadvertently and same will be

adjusted in

forthcoming payment of IPC.

However, no recovery was

effected.

The matter was discussed in the DAC meeting held in November

2017. CDA explained that recovery had been made in IPC-42 dated 29

August, 2017. DAC directed CDA to get the recovery verified within one

week.

Compliance to the DAC‟s directive was not made till the

finalization of this report.

111

Audit recommends early verification of recovery.

(DP 08)

2.4.57 Non-deduction of General Sales Tax - Rs 2.250 million

According to the Islamabad Capital Territory (Tax on Services)

Ordinance, 2001, 16% ICT sales tax shall be charged and levied on the

services provided in ICT.

According to Clause-02 (Additional Terms and Conditions) of

agreement the tender %age over rates or amounts should be inclusive of

all taxes, income, and sales taxes, etc. payable to the Central and

Provincial Governments or Local Bodies and no claims on this account

shall be entertained by the CDA.

As per para 2 (sub para 2) of SRO No. 660(1)/2007 dated 30

June, 2007, a withholding agent shall deduct an amount equal to 1/5

total sales tax shown in sales invoice issued by the supplier and make

payment of the balance amount to him.

Audit noted that the Deputy Director, Maintenance (Civil)

Parliament House, CDA Islamabad, made payment for Rs 12.745 million

for Janitorial and Security Services at different locations in Islamabad

during the year 2016-17.

Audit observed that ICT sales tax as required under the above

referred Ordinance was not deducted. This resulted in non-deduction of

ICT sales tax for Rs 2.039 million.

Audit further observed in another case that the Authority made

payment Rs 8.135 million on account of supply of LED lights to

contractors but did not deduct 1/5

of sales tax of total value of General

Sales Tax. This resulted in non-recovery of General Sales Tax Amounting

to Rs 212,229.

112

Audit was of the view that non-deduction of ICT/General Sales

Tax occurred due to inadequate mechanism for enforcing relevant rules

and weak administrative/internal controls.

Audit pointed out the non-recovery in September 2017. The

authority replied that mentioned works were awarded prior to the

implementation of ordinance. The contractor supported their rates

accordingly. Furthermore, while making payment, tax section CDA also

not deducted this tax. The reply was not tenable, as the deduction of sales

tax was due at the time of payment.

The matter could not be discussed in DAC meeting despite

requests made by Audit in November, December 2017 and January 2018.

Audit recommends for early recovery.

(DP 127)

2.4.58 Non-cancellation/ vacation of Government accommodation

allotted to ineligible employees

Rule-3 Eligibility: (5) of Accommodation Allocation Rules, 2002

adopted by the CDA, a FGS/CDA employee who owns a house in his own

name or in the name of his spouse or dependent children, at the station of

his posting shall not be allowed Government accommodation and shall be

allowed self-hiring of the house. Such FGS shall be entitled to six months

grace period from the date of completion of his house. All the FGSs/CDA

employees who are already in possession of government accommodation

shall also be allowed period of six months to shift to their own houses.

Audit noted that Director Administration, CDA allotted

accommodation from CDA pool to various CDA‟s employees. Seventy

four (74) CDA allottees of CDA‟s pool accommodation have their own

houses in Islamabad but the allotments of these employees were neither

cancelled nor the government accommodation got vacated which was

irregular. Non-cancellation/vacation of government accommodation was

113

depriving the entitled CDA‟s employees standing on the General Waiting

List.

Audit was of the view that the irregularity occurred due to weak

internal and administrative controls.

Audit pointed out the irregularity in August-September 2017.

The Authority replied that all these houses were cancelled and notices for

vacation of their houses had been issued. But due to the Stay Orders

granted by the honourable courts, the houses could not be vacated

forcibly. These houses had also been allotted or to be allotted to the

eligible employees on the basis of General Waiting List. The Authority

admitted that the government houses were still in the possession of the

illegal occupants.

The matter could not be discussed in DAC meeting despite best

efforts by Audit.

Audit stresses to get vacate the government residence/houses

from illegal occupants and allot them to the deserving employees.

(DP 143)

2.4.59 Payment of Capital Allowance, Special Allowance and Danger

Allowance etc. without approval of Finance Division

As per SRO 180(1)/2013 notified vide statutory notification dated

March, 2013 through which public sector companies (Corporate

Government) rules, 2013 were introduced to bring clarity in the guidelines

and notified the same as “Public Sector Companies (Corporate

Government) rules 2013 prepared in consultation with SECP to protect the

interest of Government.

During Audit of Directorate of Accounts CDA Islamabad for the

financial year 2016-17 it was noted that CDA is allowing various types of

allowances stated to have approved only by the CDA Board without

getting approval of the Ministry of Finance Division Government of

114

Pakistan. The guidelines were prepared and notified in the Gazette of

Pakistan to improve the governance, frame work and bring transparency.

Code Particulars/details of allowances

225-13 Capital Allowance

120-05 Special Allowance

024-01 Danger Allowance

248-16 Emergency Allowance (E&DM)

241-5 Special Allowance Services

Audit observed that approval of for grant/payment of special

allowances was not obtained from the Finance Division Government of

Pakistan. This resulted into un-authorized/ inadmissible payment of

various types of allowances being paid by CDA to its employees.

Audit was of the view that unauthorized/inadmissible payment

was made due to weak financial controls.

Audit pointed out irregularity in December 2017 but the Authority

did not reply.

The matter could not be discussed in the DAC meeting.

Audit recommends regularization of the allowances from the

Finance Division Government of Pakistan.

(DP.166)

2.4.60 Non-imposition of fine - Rs 2.405 million

Clause 49 of term and conditions of the agreement states that in

case of any failure by the contractor in cleaning / lifting of garbage / debris

green waste/garden waste, etc. or any other work described above, fine

will be imposed on per point/complaint/inspection @ agreed rates.

Audit noted that Sanitation Directorate (MCI) awarded the work

“Privatization/Provision of Sanitation Services, Cleaning, Sweeping,

Collection & Transportation of Solid Waste/Garbage from Sectors G-6,

115

G-7, G-8, G-9, G-10, I-10 & I-11 including vegetable Market of

Islamabad in July 2015.

Audit further noted that in the complaint register, a number of

complaints regarding non-emptying of garbage trolley/skips, non-

collection of garbage from residential areas etc., no-lifting of green/garden

waste/cuttings of trees, debris/unclaimed building material and burning of

Garbage into streets etc. were lodged by the resident of the sectors

privatized by the MCI.

Audit observed that the contractors failed to perform their

contractual obligations in accordance to agreement and made them liable

to imposition of fine of Rs 2.405 million.

Audit was of the view that the irregularity occurred due to weak

internal and financial controls.

Audit pointed out the non- recovery in July 2017. The Authority

replied that fines/penalties were regularly imposed in accordance with

contract agreement on contractors of privatized sectors on violation/short-

comings. Same was deducted from their monthly bills. The reply was not

accepted as complaints record was neither maintained nor recoveries

against complaints were effected from the contractors.

The matter could not be discussed in DAC meeting despite

requests made by Audit in November, December 2017 and January 2018.

Audit recommends inquiry and action against the responsible(s).

(DP 75)

116

CHAPTER 3

CIVIL AVIATION AUTHORITY

(AVIATION DIVISION)

3.1 Introduction

Pakistan Civil Aviation Authority (CAA) is a public sector

autonomous body working under the administrative control of Aviation

Division, Cabinet Secretariat, Government of Pakistan. It was established

on 7

December, 1982 through Pakistan Civil Aviation Authority

Ordinance 1982. Prior to creation of CAA, a Civil Aviation Department in

the Ministry of Defence used to manage the Civil Aviation related

activities. Ministry of Defence continued to be the controlling Ministry

even after creation of CAA on 7

December, 1982. However, in June,

2013, Government of Pakistan assigned this responsibility to Aviation

Division.

The purpose of establishing CAA is to provide for the promotion

and regulations of Civil Aviation activities and to develop an

infrastructure for safe, efficient, adequate, economical and properly

coordinated Civil Air Transport Service in Pakistan. CAA not only plays

the role of the aviation regulator of the country but at the same time

performs the service provider functions of Air Navigation Services and

Airport Services. The core functions of CAA are, therefore, „Regulatory‟,

„Air Navigation Services‟ and „Airport Services‟. These core functions are

fully supported by various corporate functions of the organization.

The general direction and administration of CAA and its affairs

vests in CAA Board which exercises all powers, performs all functions

and does all acts and things that need to be exercised, performed or done

by the Authority. The Chairman CAA Board is the Secretary of the

Aviation Division to which the affairs of the Authority are allocated.

Presently, it is the Secretary Aviation. CAA Executive Committee is the

highest decision making body of the Organization. It exercises such

administrative, executive, financial and technical powers as delegated to it

by the Authority. Director General CAA is the Chairman of CAA

Executive Committee. The Federal Government appoints the Director

117

General who is the Executive head of CAA and exercises such powers and

performs such functions as may be specified in CAA Ordinance or

delegated to him by the CAA Board from time to time. The CAA Board is

assisted by CAA Human Resources Committee and CAA Audit

Committee. The Director General is assisted by the Deputy Director

General, Directors and Additional Directors. The Director (Finance)

controls the budget and enforces the internal financial controls/checks.

Internal Audit Department is headed by an Additional Director under the

direct supervision of the Director General. The Headquarters of the CAA

are situated at Karachi.

3.2 Comments on Budget and Accounts (Variance Analysis)

i. Audited Financial Statements of Civil Aviation Authority

for the financial year 2016-17 were not provided to Audit

till the finalization of this report.

ii. Unaudited financial statements disclosed the figures of

budget and expenditure as under:

a. Budget and Expenditure

(Rs in million)

Description

Budget

Revised

Budget

Actual

Expense

(Un-

audited)

Excess/

(Saving)

Excess/

(Saving)

Establishment

18,910

19,066

14,300

(4,766)

(25.00)

Administrative

Expenditure

4,021

3,787

3,601

(186)

(4.91)

Repair &

maintenance

1,014

1,247

765

(482)

(38.65)

Provision for

doubtful

receivables

10,197

10,803

10,719

(84)

(0.78)

Depreciation

5,635

5,011

4,786

(225)

(4.49)

Financial charges

(1)

(25.00)

Sub-Total

39,781

39,918

34,174

(5,744)

(14.39)

Annual

Development

Programme

35,821

27,972

24,348

(3,624)

(12.96)

Total

75,602

67,890

58,522

(9,368)

(13.80)

118

The total revised budget allocation for the year 2016-17 in non-

development and annual development programme was Rs 67,890 million.

An expenditure of Rs 58,522 million was incurred out of the revised

budget allocation. This resulted in a saving of Rs 9,368 million

representing 13.80% of total budget allocation.

Audit noticed that:

 The non-development expenditure of the Authority was 14.39

% saving than the approved revised budget.

 In Annual Development Programme (ADP) budget, there was a

saving of Rs 3,624 million representing 12.96% of the budget

allocation. This suggests that the Authority was not able to

fully utilize its allocated budget for development resulting

delay in completion of various infrastructure projects.

b. Revenue

(Rs in million)

Description

Target

2016-17

Realized

Excess/

(Shortfall)

Excess/

(Shortfall)

Aeronautical

63,660

63,607

(53.00)

(0.083%)

Non-

Aeronautical

7,858

9,252

1,394.00

17.73%

Total

71,518

72,859

1,341.00

1.87%

 The aeronautical revenue realized was 0.083% less than the

target. This suggests that the Authority was not able to achieve

its targets resulting shortfall in the aeronautical revenue.

 Non-aeronautical revenue was 17.73% more than the targeted

revenue due to increased commercial activities. The overall

revenue realized was Rs 72,859 million for the financial year

2016-17 representing 1.87% more than the targeted revenue.

119

Revenue realized during the year is higher than the revenue

realized for the previous year which was Rs 66,088 million.

c. Balance Sheet

Accounting ratios and trend analysis (along-with comments) have

been used to measure the strengths and weaknesses of the Authority‟s

financial position for the year ended 30

June, 2017.

(i) Liquidity Position

Liquidity ratios (Current Ratio, Quick Ratio and Net Working

Capital) are used to measure the Authority‟s ability to meet the short-term

obligations.

(Rs in million)

Ratios

Formulae

2016-17

2015-16

Current

Ratio

Current Assets

Current Liabilities

53,698

8,094

6.63: 1

44,489

7,615

5.91: 1

Quick

Ratio

Cash + Bank + Short Term

Investments

Current Liabilities

23,334

8,094

2.88: 1

20,612

7,615

2.71: 1

Net

Working

Capital

(Current Assets – Current Liabilities)

53,698-

8,094

=45,604

44,489-

7,615

=36,874

A. Current Ratio

A widely used thumb rule is that a Current Ratio of 2:1 is

satisfactory. By this standard, the Authority‟s current ratio of 6.63:1 for

the Financial Year 2016-17 was satisfactory, and increased from 5.91:1 for

Financial Year 2015-16.

120

B. Quick Ratio

As per generally accepted guidelines, the ratio of 1:1 is considered

satisfactory. By this standard, the Authority‟s Quick Ratio 2.88:1 is also

satisfactory. As compared to the previous Financial Year 2015-16, this

ratio has increased from 2.71:1.

C. Net Working Capital

Positive Working Capital of Rs 45,604 million shows that the

Authority can meet out its current Working Capital needs.

Overall Liquidity Position of Authority is satisfactory.

(ii) Profitability Ratios

These ratios are used to measure the efficiency of the organization

and optimal utilization of assets towards achievement of organizational

goals.

Ratio

Formulae

2016- 17

2015- 16

Net Profit

Margin

Net Profit after Taxes

Net Revenue

25,527

71,419

= 35.72 %

16,946

64,519

=26.26 %

Return on

Investment

Net Profit after Taxes

Total Assets

25,527

413,530

= 6.17%

16,946

372,427

= 4.55%

Total Assets

Turnover

Revenue

Total Assets

71,419

413,530

= 17.27%

64,519

372,427

= 17.32%

It was noticed that during Financial Year 2016-17, the revenue of

the Authority increased by Rs 6,900 million and the net profit also

increased by Rs 8,581 million as compared to the previous year. Net Profit

Margin ratio increased to 35.72% (Financial Year 2015-16: 26.26%).

121

Return on Investment for the year increased to 6.17% (Financial

Year 2015-16: 4.55 %),

Total Asset Turnover decreased to 17.27% (Financial Year 2015-

16: 17.32%).

Authority‟s overall „Profitability Position‟ and „Liquidity Position‟

is satisfactory and depicts a sound financial performance.

3.3 Brief comments on the status of compliance with PAC’s

directives

Compliance position of PAC‟s directives on Audit Reports relating

to Civil Aviation Authority is as under:

Year

Total

Paras

No. of

Paras

Discussed

Compliance

Made

Compliance

Awaited

Percentage of

Compliance

1989-90

100.0

1990-91

09 CAA +

3 Ex-

ADA + 1

PAR (10)

3 Ex ADA+

1 PAR

75.0

1991-92

19.23

1992-93

33 CAA +

5 Ex-

ADA +

1 PAR

(14)

07 + Ex-

ADA+01

PAR

68.42

1993-94

30.61

1994-95

62.50

1995-96

50.0

1996-97

80.0

1997-98

82.41

2 SAR

1998-99

76.09

1999-00

51.00

2000-01

72.00

122

Year

Total

Paras

No. of

Paras

Discussed

Compliance

Made

Compliance

Awaited

Percentage of

Compliance

2001-02

71.42

2003-04

76.19

2004-05

70.0

2005-06

76.92

2006-07

55.55

2007-08

50.0

2008-09

52.94

2009-10

85.71

2010-11

53.57

25 PAR

76.0

16 PAR

68.75

33 PAR

51.52

2016-17

40.00

Note: Audit Reports for 1985-86, 1986-87, 1988-89, 2002-03, 2011-12, 2012-13,

2013-14, 2014-15 and 2015-16 have not been discussed by PAC till the finalization

of this Audit Report.

123

3.4 AUDIT PARAS

Irregularity and Non-compliance

3.4.1 Procurement without approval of ECNEC - Rs 1,144.068

million

Para-3.3 Guidelines for Project Management denotes that it is

mandatory that the projects of Infrastructure Sector and Production Sector

costing Rs 300.00 million and above should undertake proper feasibility

studies before the submission of PC-I. For mega projects, where huge

amount for feasibility studies is involved, a spirit proposal on PC-II

Proforma is to be submitted for approval. Para 3.5 provides that after

preparation of PC-I/PC-II, the Principal Accounting Officer must certify

that “the project proposal has been prepared on the basis of instructions

provided by the Planning Commission for the preparation of PC-I of the

concerned projects”. Thereafter, PC-I/PC-II is to be submitted to the

relevant forum for approval.

As per Planning and Development Division letter dated 18

December, 2004, the autonomous organizations whether commercial or

non-commercial having board by whatever name called, are competent to

sanction their development schemes with 100% self-financing with no

government guarantee and involving less than 25% foreign exchange/

foreign assistance.

Audit noticed that a contract was executed by Director, CNS

Engineering with M/s ELDIS Pardubice S.R.O CZECH Republic for

provision, installation and commissioning of one co-mounted PSR/MSSR

(MODS) at New Islamabad International Airport and one MSSR (MODS)

each at Pasni, Lakpass and Rojhan on turnkey basis of US$ 7.504 million

on 4

November, 2016.

Audit observed that the procurement involved foreign exchange

component of US$ 7,504,096 which was more than 25% of FOR (Free on

Rail) contract cost. Hence, approval of the ECNEC was required. Audit

124

further observed that the Authority got approved the procurement from

CAA Board / Development Working Party (DWP) which was not a

competent forum in this regard. Non-observance of project guidelines

resulted in irregular procurement of Rs 1,144.068 million.

Audit was of the view that non-approval of project was an act of

non-compliance with laid down procedures and Planning Commission

directives governing approval of projects.

Audit pointed out the irregularity in September 2017. The

management replied that PC-I and working paper for obtaining

necessary approval were put up for consideration by DWP. The DWP

cleared the radars replacement plan with the remarks that the said project

being a replacement and non-development activity, the PCAA Board was

a competent forum for approval of the said procurement. The reply was

not tenable because procurements involved foreign exchange more than

25% of the total cost, hence, CAA Board was not competent in this regard

and approval of ECNEC was required as per Planning Commission‟s

Guidelines.

The matter was discussed in DAC meeting held in January 2018.

The Authority reiterated its previous stance. Chairman of DAC was agreed

to the CAA stance. However, Audit was of the view that replacement of

equipment was of capital nature as allocation of budget was made in

Annual Development Programme. Radar for new Islamabad International

airport was also included in the procurement which was entirely a new

installation. Thus whole procurement was against the Planning

Commission‟s guidelines.

Audit recommends that approval of the ECNEC be obtained.

(DP.71)

3.4.2 Award of work to an ineligible contractor - Rs 842.145 million

As per clause 2.2.1(i), prior to proceeding with the laying down of

procedure/instructions for the evaluation of bids, one of the important

125

stages of the bid evaluation is the preliminary examination to see whether

the bidder holds a valid licence from the PEC and falls within the category

allowed to participate for the size of the project.

As per registration categories and specialization of Pakistani

contractor by Pakistan Engineering Council (PEC), category EE-06 relates

to specialized lighting system, category ME-01 relates to the specialized

field heating, ventilation, air conditioning (HVAC) and ME-02 fire

prevention and protection system.

Audit noted that a project “Expansion and renovation of terminal

building and rehabilitation of existing Fokker apron and alpha taxiway at

Faisalabad Airport” was awarded to a contractor on 18

December, 2015

at contract cost of Rs 537.716 million. Additional work of Rs 304.429

million was awarded to the contractor through Variation Orders (VO)

No.1&2 and contract cost was enhanced to Rs 842.145 million. The

contractor was paid a sum of Rs 343.014 million upto 14

running bill.

Audit observed that as per licence issued by the PEC, the

contractor has not the specialization in the fields Heating, Ventilation, Air

Conditioning (ME-01) and Fire Prevention and Protection System (ME-

02) as per requirement mentioned in the notice for pre-qualification of

contractors but the work was awarded to the contractor by ignoring the

specified bid evaluation criteria. Audit further observed that additional

works of E&M and HVAC of Rs 138.189 million and Rs 166.240 million

were also awarded to the contractor through VO-1 & 2 increasing the cost

of the work to Rs 842.145 million.

Audit was of the view that basic requirement regarding

specialization in the relevant field was not observed which resulted in

irregular award of work to ineligible contractor.

Audit pointed out the irregularity in August 2017. The Authority

replied that as per Clause 4.3 of PEC Engineering bylaws, the constructor

or operator enlisted in a particular field or discipline shall be allowed to

undertake work of other disciplines up to twenty-five per cent of the

126

amount of limit of category in which he is entitled. The reply was not

acceptable because work was awarded to an ineligible contractor who had

not specialization in the fields as per requirement mentioned in the notice

for pre-qualification. Further, the contractor executed more than 50%

Electrical & Mechanical and HVAC work.

Audit maintains that violation of cited rule occurred due to non-

adherence to PEC Bye-Laws and weak internal controls.

The matter was discussed in DAC meeting held in January 2018.

The DAC directed CAA to get the matter regularized from competent

authority within one week.

Compliance to DAC‟s directive was not made till the finalization

of this report.

Audit recommends early regularization from the competent

authority.

(DP. 70)

3.4.3 Irregular acquisition of land for airport without feasibility

study - Rs 450.389 million

As per paras 3.1 and 3.3 of Guidelines for Project Management,

project identification and its formulation is the most important segment of

the project cycle in which the sectoral priorities must be followed. It is

mandatory that projects of infrastructure sector costing Rs 300 million and

above should undertake proper feasibility studies before submission of

PC-I. Based on the data and positive findings of the feasibility studies,

PC-I is prepared and submitted for approval by the forum concerned.

As per Para 72 of Central Public Works Department Code, every

payment including repayment of money previously lodged with

Government for whatever purpose, must be supported by a voucher setting

forth full and clear particulars of the claim and all information necessary

for its proper classification and identification in the accounts.

127

Audit noted that Senior Joint Director Works (North) CAA,

Islamabad made payment of Rs 450.389 million to Deputy Collector,

Mansehra for land acquisition of Mansehra Airport on 1

August, 2016.

Audit observed that a period more than one year had elapsed but

the Deputy Collector, Mansehra had neither reported announcement of

Awards / mutation of land in the name of CAA nor had submitted vouched

account for the payment made by CAA. This resulted in unauthentic

expenditure of Rs 450.389 million. The Authority was also asked to

provide the feasibility study report of Mansehra Airport but the same was

not produced.

Audit pointed out the irregularity in September 2017. The

management replied that initial codal formalities as per Land Acquisition

Act 1894 had been completed and the Section 4 of Land Acquisition Act

1894 had been issued in favour of CAA. The amount would be adjusted

after issuance of Acquaintance Roll. The reply was not acceptable.

Mandatory feasibility study was not conducted before acquisition of land.

The Authority could also not obtain mutation of the land in the name of

CAA despite a lapse of one year.

The matter was discussed in DAC meeting held in January 2018

wherein CAA explained that process of acquisition of land for

establishment of Mansehra Airport was started on the instructions of

Federal Government for which funds were provided through PSDP.

Feasibility study of the project is underway. Audit contended that on the

announcement of the establishment of airport at Mansehra by the Prime

Minister, feasibility study of the scheme was required to be conducted

before release of funds and commencement of process of land acquisition.

Further, due process of initiation/appraisal of the project through

feasibility study was not followed by CAA. Audit further contended that

PSDP funds were required to be deposited in CAA account at

headquarters and then transferred to the respective project management.

Instead, the funds were transferred directly to Director, Works (North)

CAA, Islamabad. DAC decided that audit observation may be transferred

128

to Project Management Unit for furnishing detailed reply giving status of

feasibility study and process.

Compliance to DAC‟s directive was not made till the finalization

of this report.

Audit recommends investigation for fixing responsibility of

execution of the project prior to mandatory requirement of feasibility

study

(DP.157)

3.4.4 Irregular award of additional works in violation of

procurement rules - Rs 304.429 million

Rules 20 and 21 of Public Procurement Rules, 2004 provide that

the procuring agencies shall use open competitive bidding as the principal

method of procurement for the procurement of goods, services and works.

Rule 12(2) of ibid rules also provides that all procurement

opportunities over two million rupees should be advertised on the

Authority‟s website as well as in other print media or newspapers having

wide circulation. The advertisement in the newspapers shall principally

appear in at least two national dailies, one in English and other in Urdu.

Rule 42 (c) (iv) of Public Procurement Rules, 2004 provides that a

procuring agency shall only engage in direct contracting if the repeat

orders do not exceed fifteen percent (15%) of the original agreement.

According to Rule 50 of ibid Rules, any violation of these Rules

constitutes mis-procurement.

Audit noted that a project “Expansion and renovation of terminal

building and rehabilitation of existing Fokker apron and alpha taxiway at

Faisalabad Airport” was awarded to a contractor on 18

December, 2015

at cost of Rs 537.716 million. Audit further noted that additional work of

Rs 138.189 million and Rs 166.240 million was awarded through VO-I &

II respectively increasing cost of the project to Rs 842.145 million.

129

Audit observed that additional work of HVAC, Lifts & Escalators

of Rs 138.189 million and Rs 166.240 million was awarded to the

contractor through V.O No.1 and 2. Thus, the scope of work was enhanced

by Rs 304.429 million which constituted an excess of 56.61% against the

original scope of work without calling open tenders. This resulted in

irregular award of additional work of Rs 304.429 million.

In the absence of open competition, CAA compromised the

transparency, depriving the entity of the advantage of competitive rates,

and denied a fair opportunity to other prospective bidders of participation

in the bidding process.

Audit was of the view that award of additional work without

tendering was violation of PPRA Rules and weak internal controls

governing contract management.

Audit pointed out the irregularity in August 2017. The

management replied that at the time of initial design, only minor

modification was taken in the scope of work while in revised PC-I, the

terminal building design was changed from single storey to one and half

level concept. It was not possible to segregate work at that belated stage

from already mobilized contractor. The reply was not acceptable because

scope of work was enhanced by Rs 304.429 million i.e. 56.61% due to ill

planning and poor estimation which resulted enhancement / award of

additional work without competition in violation of Public Procurement

Rules, 2004.

The matter was discussed in DAC meeting held in January 2018.

The DAC observed that the scope of work was increased due to ill

planning, poor estimation and change of design at belated stage. The DAC

directed the CAA to probe the matter of increase in scope of work due to

change of design at belated stage and fix responsibility against the persons

at fault.

130

Compliance to DAC‟s directive was not made till the finalization

of this report.

Audit recommends early compliance to the DAC‟s directive.

(DP.61)

3.4.5 Procurement of works through different formations instead of

project management resulting in understatement of project

cost - Rs 237.972 million

According to ECNEC decision dated 24

April, 2000, the Project

Director should be delegated full administrative and financial powers and

be made accountable for any lapses. This measure would improve

management and help fix technical and financial responsibility.

During audit of the accounts record of Additional Director,

Logistic (CP&C-APS) CAA (HQ), Karachi and Senior Joint Director

(North), Islamabad, it was noticed that thirty-three (33) agreements were

executed for procurement of various E&M, Civil Equipment, Medical and

IT for New Islamabad International Airport involving Rs 237.972 million

(Rs 196.938+Rs 41.034 million).

Audit observed that a Project Director was appointed for the

project New Islamabad International Airport under the provision of PC-I

who has full administrative and financial powers and be made accountable

for any lapses and to improve management and help fix technical and

financial responsibility. Whereas, the procurements were made under the

approval of Director, Engineering Services, etc. Audit was of the view that

the expenditure should be charged to the Project against PC-I provision

and under approval of the Project Director instead of Annual Development

Programme. This resulted in irregular procurements of Rs 237.972

million.

Audit was of the view that the irregular procurements were made

due to inadequate oversight mechanism in the Authority for ensuring

effective exercise of the PEC guidelines, financial and budgetary controls.

131

Audit pointed out the irregularity in September 2017. The

management replied that the referred equipment could not be planned at

the inception of the project i.e. PC-I stage due to essential design changes

during execution of the project.

The matter was discussed in DAC meeting held in January 2018

wherein Authority explained that procurement was made to cater

operational requirement. Audit contended that the cost was to be charged

to the project. The DAC decided to refer the Para to PAC for deliberation

and decision.

Audit recommends that corrective measure be taken to ensure

correct charge of capital cost of the project.

(DP.81 & 158)

3.4.6 Non-utilization of residential building - Rs 144.633 million

Para D 3.14.2 of Policy and Procedure for grant of business licence

at Civil Aviation Authority‟s Airports states, there are still many open

space/land parcels which are not the part of main area that came under

master planning. It also includes space which are not only out of main

master plan, but also distantly located and do not have the facility of

infrastructure. Such types of space and land parcels are not only under

constant threat of encroachment, but also cause extra maintenance

expenditure. Therefore, such space / land parcels shall be utilized for

viable commercial utilization on CAAs prescribed commercial charges.

Audit noticed that seventeen (17) houses (Category-B 01 house,

Category C- 03 floor apartment, Category D- 04 floor apartment and

Category E-09 flat apartment and flats were constructed in Jameelabad

residential colony at cost of Rs 144.633 million from the amount allocated

for the project “Up-gradation of Multan International Airport, Multan”.

Audit observed that the residential accommodations were lying

vacant since its construction in March 2015. CAA was paying fixed utility

132

charges without their use. The accommodation was meant for allotment to

CAA officers/staff, but they were not availing the facility due to high rates

of House Rent Allowance and prefer to reside in the CAA messes

constructed in airport premises. Audit was of the view that due to non-

availing of the residential facility by the employees of CAA, the

expenditure incurred on construction of these residences was wasteful and

CAA is suffering recurring loss on account of monthly utility charges

being paid without its use.

Audit pointed out the issue in August 2017. The Authority replied

that since the house rent allowance of officers had been revised manifolds

and by occupying the CAA accommodation, the individual did not prefer

to forgo his handsome house rent allowance, the officers, therefore, prefer

to stay outside rather than occupying CAA residences. The reply of

Authority was not tenable because officers residing in mess are paying

nominal charges and on the other hand, drew a huge amount as a house

rent allowance. Rates of mess charges were not increased from the date of

enhancement of house rent.

The matter was discussed in DAC meeting held in January 2018.

CAA explained that a policy to attract officers to reside in already

constructed houses is under process. DAC pended the para till finalization

of policy by CAAHQ.

Compliance to DAC‟s directive was not made till the finalization

of this report.

Audit recommends that house rent allowance and mess charges be

reviewed and rationalized.

(DP.169)

3.4.7 Award of contract on doubtful bidding documents - Rs 17.387

million

Rule 22 (1) and (2) of PPRA Rules, 2004 provides that “the bids

shall be submitted in a sealed package or packages in such manner that the

133

contents are fully enclosed and cannot be known until duly opened. A

procuring agency shall specify the manner and method of submission and

receipt of bids in an unambiguous and clear manner in the bidding

documents.

Rule 23 (1) of PPRA Rules, 2004 regarding bidding documents

also relates that “procuring agencies shall formulate precise and

unambiguous bidding documents that shall be made available to the

bidders immediately after the publication of the invitation to bid”

Audit noted that the General Manager Works (North), CAA

BBIAP, Islamabad awarded a contract to M/s Modern Generation at cost

of Rs 17.387 million.

Audit observed that the contract was awarded without fulfilling the

codal formalities as the tender documents were not clear. There was

overwriting and cutting in the tendered rates. Even, frequent overwriting

and cutting was noticed in the rejected tenders. The tender of the

contractor to whom the work was awarded was also ambiguous. Cutting in

rates / discount was made with different ink/pen and with different

handwriting. Moreover, 5% discount was changed to 6%. The figure 7 in

the first line was different than recorded at other line. This resulted in

award of contract based on doubtful bidding documents of Rs 17.387

million.

Audit pointed out the irregularity in November 2016. The

Authority replied that tender proceedings have been made exactly in

compliance to the PPRA rules. However, certain over-writing/addition-

deletions/calculation mistakes were made by contractors. Tender

acceptance was arranged keeping in view the urgency of work.

Furthermore, M/s Modern Refrigeration was the lowest bidder even

without any discount on the quoted rates. No loss occurred to Authority.

The Authority admitted stance of Audit regarding lot of overwriting and

cutting in the bidding documents which made the documents doubtful.

This proves the negligence on the part of the Authority and favourtism to

the contractor.

134

The matter was discussed in the DAC meeting held in February

2017 wherein, after detailed discussion, the DAC directed the CAA to

constitute a fact-finding committee under the Chairmanship of Deputy

Secretary (Admin) to probe in the matter and submit its report to Aviation

Division/Audit within three months.

Compliance to the DAC‟s directive was not made despite lapse of

a period of one year.

Audit recommends early completion of fact finding report

(DP.135/2016-17)

3.4.8 Mis-procurement due to award of work on quotation basis -

Rs 15.198 million

According to Rule 20 of PPRA Rules, 2004 save as otherwise

provided hereinafter, the procuring agencies shall use open competitive

bidding as the principal method of procurement for the procurement of

goods, services and works.

As per PPRA-2004 rule-9, “save as otherwise provided and subject

to the regulation made by the Authority, with the prior approval of the

Federal Government, a procuring agency shall announce in an appropriate

manner, all proposed procurements for each financial year and shall

proceed accordingly without any splitting or regrouping of the

procurements so planned. The annual requirements thus determined would

be advertised in advance on the Authority‟s website as well as on the

website of the procuring agency in case the procuring agency has its own

website”.

During scrutiny of accounts of Principal Civil Aviation Training

Institute Hyderabad, (E/M Section) it was noted that expenditure of

Rs 6.092 million on repair & maintenance of electrical and mechanical

works was incurred through quotations during the financial year 2015-16

and 2016-17. Audit further noted that the Logistic Section incurred

135

expenditure of Rs 9.106 million on printing & stationary, consumable

store, spares, training material, horticulture and repair / maintenance of

building, road, pavements etc.

Audit observed that during the year 2015-16, forty-nine (49) and

during 2016-17, thirty-seven (37) works of repair and maintenance of

electrical and mechanical works were awarded through quotations. It was

further noted that only three (03) bidders i.e. M/s Care Engineer, M/s C.R

Ahmed & Co, and M/s Shafique Electrical Services participated in process

of bidding through quotation. Repetition of same bidders in all bidding

process indicates unfair competition for award of works for Rs 6.092

million. Audit further observed that the procurements made by Logistic

Section were made in piece meal on quotation basis instead of

consolidated annual requirement. Audit was of the view that the method of

procurement was against the PPRA Rules. This resulted in mis-

procurement of Rs 15.198 million.

Audit was of the view that mismanagement and the absence of

effective oversight mechanism deprived the public of the benefit of free

and open competition and compromised on principles of transparency.

Audit pointed out the irregularity in July 2017. The Authority

replied that petty R/M works of E/M section were carried out through laid

down procedure of PPRA for quotation works. The quotations were duly

posted on tender notice board. Due to petty nature of works, the

participation of contractors was very limited. Further, procurement was

made against demands raised by concerned schools and sections on as and

when required basis. The reply was not tenable because PPRA Rule was

not followed and procurements were made through quotations in piece

meal to avoid approval of competent authority and open competition to

achieve most competitive rates.

The matter was discussed in DAC meeting held in January 2018.

The Authority explained that purchases were made to cater day to day

requirement. However, in future rate running contracts will be executed

136

through open tenders. The DAC was not satisfied and decided to refer the

para to PAC.

Audit recommends fixing of responsibility for violation of rules.

(DP. 30)

Performance

3.4.9 Loss of revenue due to non-completion of the project within

stipulated period - Rs 9,675 million

According to the provision of revised PC-I of Islamabad

International Airport Project, approved by the CAA Board in its 148

meeting held on 15

April, 2014, for Rs 81,171 million, the project was

stipulated to be completed in the year 2015-16. The revenue during the

project life of 20 years (from 2016-17 to 2035-36) was forecasted

Rs 454,205 million including Rs 9,675 million for the year 2016-17.

Audit observed that the Project Management remained unable to

get completed the project within stipulated period. Audit further observed

that grant of extensions of time limit and imposition of liquidated damages

on the contractors was also not forthcoming from the record due to which

responsibility of delay could not be ascertained. Non-completion of the

project timely, deprived the CAA from revenue worth Rs 9,675 million

besides bearing additional burden in shape of consultancy payments and

price escalation.

Audit was of the view that the loss occurred due to non-adherence

to the provision of revised PC-I, interest of the Authority and lack of

administrative, financial and internal controls.

Audit pointed out the loss in August 2017. The management

replied that the project could not be completed due to frequent changes in

design and scope of work, delay in tendering process and lack of PSDP

funds, etc.

137

The matter was discussed in DAC meeting held in January 2018.

The DAC directed the CAA to submit revised reply with justification for

delay in completion of work to Audit for verification. The DAC also

directed the Authority to get the recoveries of Rs 134 million and Rs 3.992

million effected on account of liquidated damages in two cases, verified

from Audit within three days.

Compliance to the DAC‟s directive was not reported till

finalization of the report.

Audit recommends early compliance to the DAC‟s directive.

(DP. 134)

Internal Control Weaknesses

3.4.10 Procurement of imported equipment and materials without

authentication of the authorized manufacturers / from other

than approved manufacturer - Rs 6,508.716 million

3.4.10.1 Minutes of meeting dated 7

April, 2011 (part of Contract

Documents) provide a list of country/origin wise names of manufactures

as per Annex-A to contract documents Vol-I. Equipment pertaining to

Heating, ventilation and air-conditioning (HVAC) and electrical and

mechanical system was to be imported from United States/United

Kingdom from the authorized manufacturers.

Audit noted that the work “Construction of Passenger Terminal

Building (Package-3)” including all associated utilities and electro-

mechanical works at Islamabad International Airport (IIAP) was awarded

to M/s CSCECL-FWO (JV) at agreed cost of Rs 20,286.041 million in

April 2011.

Audit observed that the equipment/material valuing Rs 4,449.25

million was not procured from the approved countries/origins/

manufacturers, as its substantiation with reference to Bill of Lading/Bill of

Entry was not forthcoming from the record. Available record showed that

138

Air Handling Unit was procured from Italy instead of USA. Audit further

observed that Granite for flooring valuing Rs 775.451 million was

procured from “M/s Shanghai Kie Yun New Stone Co Ltd.” instead of

authorized dealer/supplier “M/s Fujian Quanzhou Stone/Xiamen Wanli

Stone Co. China”. Thus, authenticity of the procured equipment/material

worth Rs 5,224.70 million could not be ascertained.

Audit was of the view that irregularity occurred due to weak

internal controls.

Audit pointed out the irregularity in August 2017. The

management replied that the minutes of meeting held on 7

April, 2011

which referred to a list of manufacturers along-with countries of origin,

was a post-bid document and provides a guideline for sourcing equipment

but does not supersede the specifications to the contract. No deviation

from the specifications had taken place as it was formulated by Design

Consultant.

The matter was also discussed in DAC meeting held in January

2018. The DAC directed CAA to provide item-wise justification in tabular

form to Audit for verification within one week.

Compliance to the DAC‟s directive was not reported till

finalization of the report.

Audit recommends early compliance to DAC‟s directive regarding

item-wise justification.

(DP.132)

3.4.10.2 Clause 3.1 & 3.2 of Instructions to Bidders provides that all

goods and ancillary services to be supplied under this contract shall have

their origin in eligible countries listed in Appendix „A‟ to the Instructions

to Bidders, and all expenditures made under the contract will be limited to

such goods and services. For this Clause “origin” means the place where

the goods are mined, grown or produced or from where the ancillary

services are supplied. Goods are produced when, through manufacturing,

139

processing of substantial and major assembling of components, a

commercially recognized product results that is substantially different in

basic characteristics or in purpose or utility from its components.

According to the Product Data Sheet containing proposed

manufacturers/countries of origin (based on bid documents and material

submittals documents), received along with M/s CPG Airport (Design

Consultant) letter No. CPG airport/D543.23.2/MMP/0563 dated 29

January, 2016, the components of Baggage Handling System were to be

imported from Switzerland, New Zealand, France, Italy, Spain,

Netherlands, Germany, USA/UK and USA/Canada.

Audit noted that the work Special System-Baggage Handling for

Passenger Terminal Building (Package-4) of Islamabad International

Airport Project was awarded to M/s Thales-Selex-Guarantee (JV) at

agreed cost of Rs 4,503.957 million. The contractor was paid

Rs 2,929.558 million upto IPC-03 dated June 2017.

Audit observed during scrutiny of the record that all 21

components/materials/equipment of Baggage Handling System except 04

components (CT SCAN from USA and EDS, ODD SIZE , ARRIVAL

SCREENING & ETD from Germany) were imported from Italy due to

which the authenticity/genuineness of the imported material /equipment

valuing Rs 1,284.016 million (work done Rs 1,201.933 million + FC

difference Rs 82.083 million) equivalent to $ 13.102 million could not be

confirmed as per Designer‟s proposal. The contractor provided cheaper

quality material/equipment against the bid rates quoted by him. For

instance, in case of contract No. 8C-1, Air Handling units were imported

from Western Europe countries. Rate of the Air Handling unit

manufactured by Italy (York) was 22,073 Euro per unit and the rate of

AHU manufactured by Holland (Carrier) was $ 32,308 Euro per unit.

There was difference of 10,235 Euro per unit.

Audit was of the view that the irregularity occurred due to non-

adherence to the proposal of the design consultant and ineffective

implementation of technical, financial and internal controls.

140

Audit pointed out the irregularity in August 2017. The Authority

replied that PMC / Consultant was aware that some of the equipment/

materials had not come from the proposed manufacturers / countries of

origin provided in the bid documents and the consultant was already

working towards resolution of same. The contractor would provide

appropriate supporting information to PMC / Consultant for such material

along with request to regularize the change of origin. Further, if the

material / equipment supplied is superior / more expensive than the

specified items, then the BOQ rates would be paid and if the material /

equipment supplied is inferior / less expensive than the specified items,

then a reduced price would be paid. The Authority admitted Audit point of

view.

The matter was discussed in DAC meeting held in January 2018.

The DAC directed CAA to provide item-wise cost difference in tabular

form and effect recovery if it is established.

Compliance to the DAC‟s directive was not reported till

finalization of the report.

Audit recommends early compliance to the DAC‟s directive.

(DP.144)

3.4.11 Non-recovery of outstanding dues on account of licence fee,

rent and electricity charges - Rs 2,159.481 million

As per Para D 15.1 of policy and procedure regarding grant of

business (concession) at Airports (2012) it is personal responsibility of the

Airport Manager concerned to ensure that all the dues are realized from

the licencee as soon as they become due. In any case, when the dues

remain in arrears or commercial space remains unutilized for more than 30

days, a report in prescribed form is to be submitted to General Manager,

Commercial giving full particulars of the licence, the amount due and the

reason for non-realization of the dues or non-utilization of the spaces as

the case may be. According to Director General, Civil Aviation Authority

141

Directives No.2/201 1 dated 17

January 2011, in case any dues exceed

the security deposit, Airport Manager/Sectional Head of commercial

section at the airport will be responsible for recovery from them. In

addition to above disciplinary action will also be initiated against the

responsible officers.

Para D3.12.2 states that no licence fee shall be levied for

occupation of space occupied by Government departments where the

space is occupied in connection with embarkation of passengers, clearance

of their baggage and emplaning, deplaning of air cargo, nevertheless

utility charges shall be paid by the Government departments. However,

Governments shall pay licence fee and utility charges both for other

spaces occupied by them.

Audit noticed during audit of the accounts of Airport Managers,

Lahore, Faisalabad, Multan, Islamabad and Peshawar airports that various

licencees were not paying their licence fee, rent, electricity charges, etc.

regularly and huge dues were accumulated during the period from 1

July,

2016 to 30

June, 2017. This resulted in non-recovery of outstanding dues

of Rs 2,159.481 million.

Audit was of the view that non-recovery of outstanding dues

occurred due to non-adherence to the policy, agreement clauses and weak

financial controls.

Audit pointed out non-recovery in July-September 2017. The

management replied that most of the recoveries related to M/s PIAC and

Government agencies. Efforts were underway to effect recoveries from the

defaulting licencees. The Authority also replied that in accordance with

the instructions of DGCAA, a comprehensive and defined policy in this

regard is being formulated at HQCAA, which shall be implemented as and

when approved. The reply was not accepted because a huge amount was

recoverable due to non-implementation of provision of licence

agreements. Moreover, no survey to assess actual requirement of the

Government Departments in operational and non-operational areas of the

142

airport was conducted to sign agreements and make recovery accordingly.

In absence of the survey, actual recovery cannot be ascertained.

The matter was discussed in DAC meeting held in January 2018

wherein the DAC made following decisions:

i. CAA explained that the licencee termed the decision to

increase rental and security deposit thereof for the extended

licence tenure as unilateral, and had requested for review. The

matter is currently under process at higher level for decision

and further action shall be taken accordingly. DAC pended the

para till final action and recovery after resolution of the dispute

with the licensee (DP.08)

ii. CAA explained that actual outstanding dues for the year 2016-

17 were Rs 90.57 million. A recovery of Rs 43.378 million has

been made leaving a balance of Rs 47.192 million. As a result

of verification of recovery of Rs 43.378 million, DAC reduced

amount of para to Rs 47.192 million and directed CAA to

expedite balance recovery. (DP. 14)

iii. CAA explained that recovery of Rs 3.272 million has been

made. However, dues of Rs 68.794 million against government

offices have been written off in accordance with policy. DAC

pended the para till recovery of remaining dues and verification

of written off amount with justification. (DP. 57)

iv. DAC directed CAA to pursue recovery actively and get the

outcome verified from Audit. (DP. 108, 109, 168)

Compliance to the DAC‟s directive was not reported till

finalization of the report.

Audit stresses for early recovery of outstanding amount.

(DP. 08, 14, 57, 108, 109, 168)

143

3.4.12 Non-maintenance of Measurement Books - Rs 1,217.443

million

As per Para 208 of Central Public Works Accounts Code, payments

for all work done are made based on measurements recorded in the

Measurement Book (Form 23) in accordance with the rules in Para 209 of

CPWA Code. The Measurement Book (MB) should, therefore, be

considered as very important accounts record. Para 209(b) states that all

measurements should be neatly taken down in MB.

Audit noted that the Civil Aviation Authority awarded the work

“Expansion and Renovation of Quetta International Airport, Quetta” to

M/s M/s Ittefaq Construction Co-United Construction Co (JV) on 25

November, 2015 at agreement cost of Rs 1,718.545 million and the work

“Expansion and Renovation of Bacha Khan International Airport

Peshawar was awarded to M/s Qavi Engineers (Pvt) Ltd on 28

December, 2015 at an agreement of Rs 1,896.006 million.

During audit, it was found that the Project Directors of Expansion

& Renovation of Quetta International Airport, Quetta and Bacha Khan

International Airport, Peshawar made payments of Rs 449.233 million

and Rs 768.210 million respectively without recording detailed

measurement of each item of work done in MB. Payment made without

recording measurements of work executed in the Measurement Books

resulted in irregular payment of Rs 1,217.443 million.

Audit pointed out the irregularity in July-September 2017. The

management replied that recording of measurements in the MB is not in

vogue in CAA. However, it was agreed that abstract of costs of each and

final Interim Payment Certificate (IPC) would be entered in MB. The

reply was not acceptable because maintenance of MB as per prescribed

format is mandatory.

The matter was discussed in DAC meeting held in January 2018.

The DAC directed CAA to prepare MB as per rules.

144

Compliance to the DAC‟s directive was not reported till

finalization of the report.

Audit recommends that MB be prepared as per codal requirements.

(DP.164, 178)

3.4.13 Non-recovery from the defaulting contractor - Rs 580.786

million

Clause 63 of the contract agreement provides that in any case, the

contractor fails to complete the work within stipulated period, the

employer may issue notice to measure up the work of contractor and to

take such part thereof as shall be unexecuted out of his hand and to give it

to another contractor to complete in which case any expenses which may

be incurred in excess of the sum which would have been paid to the

original contractor shall be borne and paid by the original contractor.

Clause 63.2 of the contract agreement, valuation at date of

termination provides that, the Engineer shall, as soon as may be

practicable after any such entry and termination by the Employer, fix and

determine ex-parte, or by or after reference to the parties or after such

investigation or enquiries as he may think fit to make or institute, and shall

certify:

a) what amount (if any) had, at the time of such entry and

termination, been reasonably earned by or would reasonably

accrue to the Contractor in respect of work then actually done by

him under the Contract, and

b) the value of any of the said unused or partially used materials, any

Contractor's Equipment and any Temporary Works.

Audit noticed that Planning & Development Directorate, CAA

Karachi awarded the work “Construction of Thar Airport Project near

Islamkot / Mithi” to M/s Reliance Consultancy & Engineering Works

(RCEW) for Rs 808.146 million on 15

March, 2011. The contract was

terminated due to poor performance. The technical sanction estimate of

145

Rs 769.318 million for balance work was accorded on 8

July, 2015. It

was further noticed that as per valuation statement, the Engineer finalized

the Ex-Parte valuation showing recovery of Rs 580.786 million which

includes value of work of Rs 72.805 million which was paid without

actual execution and defective work of Rs 76.810 million.

Audit observed that recovery of Rs 580.786 million was not

effected from the defaulting contractor as per ex-parte valuation. Audit

further observed that defective work valuing Rs 76.810 million was not in

the BOQ of the contract awarded to another contractor. This resulted in

non-recovery of Rs 580.786 million.

Audit was of the view that the non-recovery and non-execution of

defective work occurred due to weak internal controls and inadequate

oversight mechanism for enforcing relevant rules and regulations.

Audit pointed out the non-recovery in July 2017. The Authority

replied that recovery of Rs 37.333 million was effected from the retention

money of the contractor. A suit was filed in the Sindh High Court for

recovery of balance amount of Rs 543.432 million on 8

July, 2017.

The matter was discussed in DAC meeting held in January 2018.

The DAC directed the CAA to pursue the court case actively.

Compliance to the DAC‟s directive was not reported till

finalization of the report.

Audit recommends early compliance to the DAC‟s directive.

(DP.18, 23)

3.4.14 Transfer of funds as deposit work instead award of work

through competitive bidding - Rs 260.000 million

Rule 12(2) of PPRA Rules, 2004 provides that all procurement

opportunities over two million rupees should be advertised on the

Authority‟s website as well as in other print media or newspapers having

146

wide circulation. The advertisement in the newspapers shall principally

appear in at least two national dailies, one in English and the other in

Urdu.

Further, Para 53 of CPWD Code provides that there are four main

stages in the project execution namely, (i) Administrative Approval (ii)

Expenditure Sanction (iii) Technical Sanction and (iv) Appropriation / Re-

appropriation of funds.

Audit noted during scrutiny of the accounts record of the General

Manager, Works (North) that in pursuance of Aviation Division letter

No.2696/DS(CAA)/2014 dated 16

June, 2014 and CAA Board‟s decision

in its 156

meeting dated 27

March, 2015 and revised AA No.74 dated

April, 2015, an amount of Rs 260.000 million was transferred to NLC

for executing the work “Expansion/Renovation of BBIAP, Islamabad” as

deposit work without completing pre-requisite formalities like tendering

process and preparation of PC-I/Detailed Technically Sanctioned Estimate

and Construction Drawings by the competent authority.

Audit observed that the said work should have been awarded

through competitive bidding instead of awarding as deposit work because

M/s NLC was working in the capacity of contractor instead of executing

agency. Furthermore, services of M/s Arshad Shahid Abdullah (Pvt.) Ltd

(consultancy cost to be paid by the contractor) were hired by CAA as per

decision in the 149

Board meeting dated 29

May, 2014 to undertake the

necessary consultancy services for the project without adopting

competitive bidding process. Thus, payment of Rs 260.000 million, made

in absence of completion of required formalities, was irregular.

Audit was of the view that irregularity occurred due to non-

adherence to the above referred rules, regulations and inadequate

implementation of internal/financial and technical controls.

Audit pointed out the irregularity in December 2015. The

Authority replied on 14

March 2017 that work was awarded as deposit

work in compliance with approval of CAA Board. Further, certificate of

147

Principal Accounting Officer regarding completion of work on urgent

basis, as approved by CAA Board was also conveyed.

The reply was not accepted because as per rule 42 (d) of PPRA

describes that procuring agency may engage in tendering within one or

more contractors due to specific/unavoidable circumstances for award of

work, whereas CAA deposited huge amount with NLC termed as “deposit

work” and M/s Arshad Shahid Abdulllah was appointed as consultant

without adopting negotiated tendering procedure.

The matter could not be discussed in DAC meeting despite request

made by Audit.

Audit recommends that responsibility be fixed for violation of

rules.

(DP.180/2015-16)

3.4.15 Loss due to non-encashment of bank guarantees - Rs 171.771

million

The contractor M/s Reliance Consultancy & Engineering Works

(RCEW) provided Bank Guarantee No. CAPG/1097/120005 issued on

June, 2012 of Rs 50.549 million with expiry date 31

December, 2015

and Bank Guarantee No. CPDB/0600/110005 issued on 13

November,

2011 for Rs 121.222 million with last expiry date 31

December, 2015.

Audit noticed that Planning & Development Directorate, CAA

Karachi awarded the work “Construction of Thar Airport Project near

Islamkot / Mithi” to M/S Reliance Consultancy & Engineering Works

(RCEW) for Rs 808.146 million on 15

March, 2011. The contract was

terminated due to poor performance of the contractor.

Audit observed that the Bank Guarantee No. CAPG/1097/120005

issued on 28

June, 2012 for Rs 50.549 million and Bank Guarantee No.

CPDB/0600/110005 issued on 13

November, 2011 for Rs 121.222

148

million were not encashed before their expiry dates. This resulted in loss

of Rs 171.771 million.

Audit was of the view that the lapse occurred due to weak internal

controls and inadequate oversight mechanism for enforcing relevant rules

and regulations.

Audit pointed out the loss in July 2017. The Authority replied that

the case had also been filed in Sindh High Court against M/s. Bank

Alfalah Ltd. for encashment of bank guarantees. The reply was not tenable

because matter was not taken up with the bank for encashment within

validity period of the guarantees.

The matter was discussed in DAC meeting held in January 2018.

The Authority informed the DAC that the bank refused to encash the

guarantee as it expired on 31

December, 2015. The matter is subjudice.

The DAC directed CAA to provide evidence that claim was lodged with

the bank within the validity period and provide detailed reply with

evidence within one week and pended the para till final action.

Compliance to the DAC‟s directive was not reported till

finalization of the report.

Audit stresses for departmental inquiry for fixation of

responsibility and active pursuance of the court case.

(DP. 19)

3.4.16 Undue financial aid due to allowing inadmissible secured

advance - Rs 85.55 million

Rule-19 (iv) of General Financial Rules (Vol-I) states that no

payments to contractors by way of compensation or otherwise outside the

strict terms of the contract or more than the contract rates may be

authorized without the previous approval of the Ministry of Finance.

Clause 60.1(c) of Particular Conditions of Contract provides payment

149

conditions/stages of imported equipment and materials/components/parts

(to be imported for the permanent woks) for HVAC Works.

Audit noticed that a Project “Expansion and Renovation of

Terminal Building and Rehabilitation of existing Fokker Apron and Alpha

Taxiway at Faisalabad Airport” was awarded to a contractor on 18

December, 2015 at cost of Rs 537.716 million. Additional work of

Rs 304.429 million was awarded to the contractor through (VO) No.1&2

and contract cost was enhanced to Rs. 842.145 million. Total payment of

Rs 343.014 million upto 14

running bill was made to the contractor.

Audit observed that Project Management made amendment in

Clause 60.1 through Variation Order No.2 Condition 9(iv) as under: -

In clause 60.1(c) after word HVAC, following is added “Conveyor

belts, diesel generator set, FIDS system, Master clock system, Fire alarm

system, electrification works, lifts and escalators.”

Audit was of the view that post-bid amendment in the contract

documents was made without approval of the Ministry of Finance /

competent authority. Audit further observed that advance payment against

bank guarantees in respect of the items pertaining to the lifts & escalators,

conveyor belt, electrification works, etc. amounting to Rs 34.432 million

was allowed to the contractor under the said amended clause. Audit was of

the view that issuance of amendment in contract clause was irregular and

tantamount to undue financial aid to the contractor of Rs 34.432 million.

Audit further observed that project management made payment on

account of secured advance against the material brought at site without

any provision in the contract agreement. Secured advance of Rs 51.118

million was still recoverable from the contractor. By not ensuring the

compliance with contractual terms and conditions, the management

extended undue benefit and favour to the contractor. This also resulted in

undue financial aid to the contractor of Rs 51.118 million.

150

Audit pointed out the inadmissible secured advance/advance

payment in August 2017. The management replied that the original

contract agreement included secured advance/advance payments clause

60.1(c) for HVAC work being major equipment to be imported. At the

time of variation order, lifts and escalators and other items were included

in scope of work. These items are also imported and not available in the

original scope of work thus, same condition was applied on these items

after approval of Director, Finance. Payment was made against bank

guarantee. Further, it was principally agreed that secured advance against

the material brought at site will be paid as per standard clause of PEC. The

reply was not acceptable because undue financial aid by allowing

inadmissible advance payment through post bid amendment in the contract

clause was illegal/irregular. There was also no provision in the contract

agreement for allowing secured advance in addition to Mobilization

Advance.

The matter was discussed in DAC meeting held in January 2018.

The DAC directed CAA to make recovery of profit and overhead on the

amount of advance within one week.

Compliance to the DAC‟s directive was not reported till

finalization of the report.

Audit stresses for early recovery as per directions of the DAC.

(DP. 63 & 66)

3.4.17 Non-recovery of advance income tax - Rs 20.022 million

As per general condition-31 (b) of licence agreement, income tax

will be recovered from successful bidder / licencee under Section 236 A

of the Income Tax Ordinance, 2001 adjustable against the tax liability of

the licencee for that tax year, however no such income tax u/s 236-A will

be recovered from the successful bidder provided, the licencee produces

exemption certificate from the Commissioner, Income Tax where his tax

liability is assessable.

151

Audit noticed that licence for installation, operation and

maintenance of automated car parking system on BOT basis and collection

of car parking fee at Allama Iqbal International Airport, Lahore was

awarded to M/s STHN & Co for the period 22

September, 2015 to 21

September, 2020. Similarly, different agreements were executed at Bacha

Khan International Airport, Peshawar and Faisalabad airport.

Audit observed that Civil Aviation Authority did not recover

advance Income Tax from the contractors as required under Income Tax

Ordinance, 2002 and agreed clause of the agreements. This resulted in

non-recovery of advance Income Tax of Rs 20.022 million.

Audit pointed out the non-recovery in July-September, 2017. CAA

replied that applicability of Section 236A of the Income Tax Ordinance

2001 on the business licenses has been a continuous matter between CAA,

the FBR, and various licencee / concessionaries. CAA had issued notices

to the parties for payment of advance tax. However, M/s STHN & Co filed

writ petition No. 28728/2015 before the honourable Lahore High Court.

The matter was disposed of by the court with the direction to

Commissioner, Inland Revenue to decide the issue in writing whether tax

under Section 236A of Income Tax Ordinance, 2001 is payable in case of

M/s. STHN & Co or shall issue exemption Certificate under the law, if so

permissible. CAA is barred from claiming the amount of tax under Section

236A of Income Tax Ordinance, 2001 till that time.

The matter was discussed in DAC meeting held in January 2018.

DAC pended the DP.5, being sub-judice with direction to CAA to pursue

the case actively. DAC linked the other para (DP. 100) with the decision

by tax tribunal on DP 5. CAA explained in case of DP. 49, that a sum of

Rs 3.5 million had been deposited by one concessionaire, whereas the

other concessionaire had provided the tax exemption certificate. DAC

directed CAA to reconcile recovered amount, effect balance recovery and

get the record verified from Audit.

Compliance to the DAC‟s directive was not reported till

finalization of the report.

152

Audit recommends early compliance to the DAC‟s directive.

(DP. 05, 49 &100)

3.4.18 Unjustified expenditure of Rs 32.000 million involving excess

beyond provision in revised PC-I of Rs 19.200 million

As per Rule 12 of GFR (Vol-I), a Controlling officer must see not

only that the total expenditure is kept within the limits of the authorized

appropriation but also that the funds allotted to spending units are

expended in the public interest and upon objects for which the money was

provided. As per Revised PC-I of the New Islamabad International

Airport, there was provision of two water bowsers for future requirements.

Audit noted during scrutiny of record of the Project Director,

NIIAP that five water bowsers costing Rs 32.000 million (@ Rs 6.400

million each) were procured from M/s Al-Haj FAW Motors (Pvt.) Ltd

during 2014-15. Audit observed following irregularities in procurement of

vehicles:

1. There was provision of only two water bowsers for the

project. Thus, purchase of 3 extra vehicles resulted in

expenditure beyond provision of Revised PC-I for

Rs 19.200 million (Rs 6.400 million x 3).

2. As per purchase order, the warranty period of the vehicles

would be 2 years or 60,000 km whichever earlier. The

contractor provided the vehicles on 1

December, 2014

through delivery challan and on inspection of the vehicles,

several defects were pointed out on 12

May, 2015 i.e.

after lapse of 5 months of delivery. As per agreement, the

defective vehicles were required to be returned to

contractor for replacement with new vehicles. Further,

penalty for defective supply was required to be imposed on

contractor.

153

This resulted in unjustified procurement of vehicles costing

Rs 32.000 million and incurring of expenditure of Rs 19.200 million

beyond provision of PC-I.

Audit pointed out the issue in November 2015. The Authority

replied that:

1. Approval for purchase of 05 water bowsers was accorded

during high level meeting held at IIAP Project on 6

May,

2014 under the Chairmanship of Special Assistant to Prime

Minister and attended by Secretary Aviation and Director

General CAA. Five water bowsers were purchased

considering the actual requirement of landscaping (Airside)

Package-8C2 (Phase-1) and left over horticulture work

under Package-8C2 (Phase-II) being carried out

departmentally after termination of contract.

2. As per purchase order, the warranty of the vehicles was two

years or 60,000 Km whichever is earlier. During said

period, no defect was observed in the main vehicle of

FAW. Some problems related to the water supply pumps

and their plumbing works were attended by the contractor

and pumps were replaced under said warranty.

The reply was not tenable because actually the work of horticulture

was required to be executed through contractors and all these

arrangements were required to be made by contractor himself. The

Authority terminated the work without reason and work was being

executed departmentally against the PPRA rules. The special assistant to

Prime Minister is not competent to accord approval except directions.

Thus, approval regarding procurement of bowsers should be obtained from

the competent authority.

The matter could not be discussed in DAC meeting despite best

efforts made by Audit.

Audit stresses for inquiry and action against the persons at fault.

(AIR-31/2015-16)

154

3.4.19 Non-imposition and recovery of liquidated damages for delay

in completion of work - Rs 22.286 million

According to clause 47.1 of the agreement, if the contractor fails to

complete the work within stipulated time, he shall render himself liable to

pay liquidated damages equal to 0.05% of the contract price for each day

of delay in completion of the works subject to maximum of 5% to 10% of

contract price.

Audit noted that CAA awarded six (06) works which were to be

completed in stipulated period of 90 to 175 days starting from January-

February 2015.

Audit observed that these works were not completed in stipulated

time and extension in time limit was also not granted by the Authority.

Thus, the contractors rendered themselves to pay liquidated damages as

per contract provisions. But liquidated damages were not imposed and

recovered. This resulted in non-imposition and recovery of liquidated

damages of Rs 22.286 million, as detailed below:

Package

No.

Name of work/contractor

Agreement

cost (Rs)

Amount of

liquidated

damages (Rs)

Construction of boarding bridges, fixed

portion and connection passages at

Multan Airport M/s ATCON

33,898,813

203,338

ATC elevator M/s Jeewajee

6,675,000

163,537

ATC equipment and allied works M/s

International Aeradio Pak

51,450,000

2,572,500

Construction of passenger terminal

building and allied facilities M/s

Imperial Electrical Co

199,808,600

9,990,430

Electrical works

M/s Imperial Electrical Co

77,651,796

3,882,585

Construction of Barrack

Accommodation for ASF Personnel at

Multan International Airport

54,742,019

5,474,201

Total

22,286,591

155

Audit pointed out non-recovery in September 2016 and August

2017. The Authority replied that imposition and evaluation of liquidated

damages for packages-4, 9 & 10 was under process with “The Engineer”

and recoveries would be effected from the next/final bill of the contractors

on the recommendations of „The Engineer‟ in accordance with the contract

agreement.

The matter was discussed in the DAC meeting held in February

2017 wherein, CAA explained that recovery of Rs 366,875 relating to

Package-11 and ATC had been made and got verified from Audit. DAC

directed the CAA to recover the remaining amount up to August 2017 and

get it verified from Audit.

In DAC meeting held in January 2018, CAA explained with

reference to DP. 38 that appropriate action will be taken as per contract

agreement at the time of final bill. DAC pended the para till final action by

CAA and its verification by Audit.

Compliance to the DAC‟s directive was not reported till

finalization of the report.

Audit recommends early compliance to the DAC‟s directive.

(DP.38/2017-18 & DP.28/2016-17)

3.4.20 Unauthorized up-gradation of staff without authentication of

qualification certificates - Rs 17.655 million

Para 01 of Director General, CAA letter No. HQCAA /1000 /001 /

DGCAA/249 dated 14

June, 2012 states that the Chairman, Cabinet Sub-

Committee has been pleased to approve the up-gradation of supporting

staff PG-01 on qualification-wise, in pay groups PG-03,04 & 05 w.e.f. 15

May, 2012. According to Para 04, in case, their educational certificates /

degrees are found fake, the above referred letter issued to them shall be

cancelled and necessary disciplinary action will be taken against them

under CAA Service regulations.

156

Audit noticed that Airport Manager, Allama Iqbal International

Airport, Lahore made up-gradation of supporting staff on qualification

basis from PG-01 to PG-03,04 and 05 subject to production/submission of

original educational certificates/degrees. Audit further noticed that in

eighteen (18) cases, the certificates/degrees were found fake/bogus after

verification of certificates from their concerned institutions.

Audit observed that only six (06) employees out of eighteen (18)

were reverted to their initial pay scale i.e. PG-01 and recovery was

started@ Rs 5, 000 per month from their monthly pay. Audit further

observed that in remaining twelve (12) cases, the reversion was not made,

and these were working in upgraded scales. Recovery was also not made

from them. Neither, the reversion was made, nor their pay was fixed in

PG-01. This resulted in overpayment of Rs 17.655 million.

Audit pointed out irregularity in July 2017. The Authority replied

that 06 out of 18 employees were reverted to their initial pay scales and

CAA initiated disciplinary action against those employees but the

employees went to the court. Disciplinary proceedings were stopped. The

reply was not acceptable. Credentials of the employees were required to be

got verified from the concerned institutions before up-gradation to the

higher groups. This was not done before up-gradation which resulted in

litigation and overpayments. Further, no latest status of the court case after

2015 was available on record.

The matter was discussed in DAC meeting held in January 2018.

CAA explained that 04 employees did not fall under the category of up-

gradation. Up-gradation of 06 employees had been cancelled and

departmental action was initiated against remaining 08 employees but they

had obtained stay order from the court. Audit contended that issue of fake

degrees was serious and criminal proceedings should have been initiated

against the employees who submitted fake degrees. DAC directed CAA to

take appropriate action and pursue court case actively.

Compliance to the DAC‟s directive was not reported till

finalization of the report.

157

Audit recommends active pursuance of the court case besides

appropriate action.

(DP. 17)

3.4.21 Overpayment due to inclusion of machinery/equipment

component in the rate analysis beyond technical requirement

of site - Rs 17.435 million

Para 220 of CPWA Code provides that before the bill of contractor

is prepared, the entries in the measurement book relating to the description

and quantities of work should be checked and to see that all the contents of

area are correctly entered and arithmetically checked by the responsible.

Audit noted that the work “NAVAIDS and ATC Equipment

(package-7B)” at Islamabad International Airport Project was awarded to

M/s JGM (JV) at cost of Rs 1,051.249 million. The contractor was paid a

sum of Rs 987.359 million upto 8

IPC paid in June 2017.

Audit observed during scrutiny of rate analysis of the item No. 04

in variation order No. 4 that a quantity of 14,016 Cum earth was filled in

location of GP-10 R in the area having dimension of 310 x 50 meters. The

soil was compacted upto 30% as shown in the rate analysis of the item. It

is further added that the filling was about 0.40 meter in depth and on the

compacted surface, plantation of grass was also to be made. Hence, under

this situation, only spreading/ramming of the earth was required.

Moreover, in the light of the provision of rate analysis, 30% compaction

was made but the equipment and machinery were engaged having capacity

to compact upto 95% AASHTO. Thus, engagement of the machinery

beyond the technical requirement of the site for achieving 95%

compaction resulted in overpayment of Rs 17.435 million.

Audit was of the view that the overpayment occurred due to

including cost component of machinery in the rate analysis of earth work

on excessive side and lack of financial and internal controls.

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Audit pointed out the overpayment in August 2017. The Authority

replied that in compliance with the specification requirements, the fill was

compacted to a density of 95%. Subsequently, the top layer was scarified

3″ for the spreading of sweet soil and grass seeding. The machinery/

equipment was as per requirement to undertake the works and for the

actual durations. The reply was not acceptable. Exit meeting was held on

September, 2017. During meeting it was decided that the matter

would be justified/got verified from Audit with reference to relevant

record i.e. compaction tests, excavated material unsuitability tests,

construction/As-Built Drawings and rate analysis of non BOQ items etc.

within three days otherwise due recovery would be made.

The matter was discussed in DAC meeting held in January 2018.

The DAC pended the Para for three weeks for detailed response and action

by the management.

Compliance to the DAC‟s directive was not reported till

finalization of the report.

Audit recommends early compliance to the DAC‟s directive.

(DP. 142)

3.4.22 Overpayment due to non-deduction of shrinkage allowance -

Rs 15.596 million

Para 14.6.5 of Pakistan Public Works Department Specifications

for Building and Road Works denotes that, where measurements are taken

from stacks made prior to filling-earth, the stacks 14 inches high will be

measured and paid for 12 inches only. The cost of such stacks is included

in the rates for earth.

Audit noted that the management of New Gwadar International

Airport (NGIA) made payment of Rs 578.233 million to the contractor up

to IPC-14.

159

Audit observed that a quantity of 339,777.644 cubic meter earth

was obtained from borrow at the rate of Rs 306 per cubic meter and

payment of Rs 103.972 million was made. Audit further observed that

shrinkage allowance @ 14% was not deducted from the earth obtained

from approved borrow areas (within project boundary). This resulted in

overpayment of Rs 15.596 million.

Audit was of the view that overpayment was due to weak technical

as well as internal control mechanism and non-adherence to relevant rules.

Audit pointed out the overpayment in August 2015. The Authority

replied that the matter is being referred to consultants to give supervisory

remarks.

The management furnished revised reply on 22

December, 2105

wherein it was explained that measurement of acceptable completed work

of constructed embankment would be made on the basis of actual volume

as per technical specification. The management further explained that Pak

PWD specification refer to measurement taken only from stacks, whereas

in the instant case of New Gwadar International Airport project, the

measurement was made of the compacted earth work.

During verification of record, Audit observed that formation of

embankment was paid equal to the quantity of earth obtained from

excavation without deduction of loose factor @ 14%.

The matter could not be discussed in DAC meeting despite best

efforts made by Audit.

Audit stresses for early recovery.

(DP.48/2015-16)

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3.4.23 Non-recovery of dues from the ex-licencee -

Rs 12.608 million

Condition No.9 (d) of licence agreement states that

notwithstanding expiry of this agreement, or sooner determination /

cancellation, if the licencee remains in occupation of the premises for any

reason what so ever, the licencee shall be responsible and liable to make

payment of the dues for the period he occupied/possessed the premises.

Audit noticed that the Airport Manager, Bacha Khan International

Airport, CAA, Peshawar (commercial branch), made an agreement for

collection of Car Parking fee with M/s Sanan & Brothers for the period of

5 years from 7

October, 2014 to 6

October, 2019 at monthly licence fee

of Rs 1.440 million with 10% cumulative increase for each subsequent

year.

Audit observed that the licencee served three months termination

notice w.e.f 25

January, 2016 which was expired on 24

April, 2016.

Later, the licencee got stay order from the Court. However, on vacation of

stay order, the possession was taken and handed over the concession to

new successful bidder but an amount of Rs 12.608 million was still

outstanding against the previous licencee. This resulted in non-recovery of

outstanding dues of Rs 12.608 million.

Audit pointed out the non-recovery in July 2017. The Authority

replied that due to suspension of night operations and imposition of

restriction on entry of only one meeter and greeter with passenger, M/s

Sanan & Brother requested for revision of parking rates. Since it was not

covered in CAA policy, their request was not acceded to by the competent

authority. Hence, they served a termination notice of three months as per

clause 8 (b) of licence agreement. During the notice period, 1-1/2 bay of

parking area was taken over from the contractor by CAA due to ongoing

expansion of Terminal Building. CAA invited tenders, but nil response

was received. M/s Sanan & Brother was asked to run the concession till

finalization of tenders proceedings as per clause 8(b) of the licence

agreement. After inviting tenders for the second time, concession was to

161

be awarded to M/s Prime Trader (being a single participant) but M/s Sanan

& Brother got a stay order from Civil Judge / Judicial Magistrate,

Peshawar. HQCAA granted compensation of Rs 396,000 per month to M/s

Sanan & Brother. As a result, court case was withdrawn by the

concessionaire. After adjustment of their security amount and

compensation amount granted to them, the total recovery against them was

Rs 3.400 million. Efforts were being made to recover the outstanding dues

at the earliest. The reply was not accepted because the compensation

allowed to the concessionaire was not rational.

The matter was discussed in DAC meeting held in January 2018.

DAC pended the para with direction that detailed reply giving break-up of

disputed amount, amount recovered and balance recovery and justification

along with chronology of events/proceedings and supporting record be

provided to Audit for verification.

Compliance to the DAC‟s directive was not reported till

finalization of the report.

Audit recommends rationalization of compensation and recovery.

(DP. 47)

3.4.24 Award of licence at lesser rate - Rs 12.013 million

According to clause 11 of the agreement, the licensor reserve the

exclusive right during the currency of the licence agreement to revise/

enhance the amount of the licence fee or the charges with prior notice and

the licencee shall be bound to pay the revised licence fee from such date

as may be specified prospectively by the licensor and non-payment of

such revised/enhanced rates shall tantamount to a willful default of the

Civil Aviation Authority dues and may result in action under this

agreement.

According to Civil Aviation Authority HQ letter No.

HQCAA/2850/13/com, dated 16

July, 2008, rate of paved space w.e.f 1

July, 2016 was Rs 25.06 per sft and rate of covered space outside

162

terminal building (Non-AC) was Rs 68.95 per sft. These rates were

applied while executing agreement with M/s Royal Airport Services for

the period from 13

June, 2016 to 30

June, 2019.

Audit noticed that licence agreement between Civil Aviation

Authority and M/s Shaheen Airport Services for ground handling services

was executed for five years from 1

April, 2012 to 31

March, 2017 at

Allama Iqbal International Airport. Audit further noticed that area of

182,988 sft for cargo space and 175,560 sft for Technical Ground

Support (TGS) was charged @ Rs 6.90 per sft from 1

July, 2016 to 31

March, 2017 whereas, for same area, in case of M/s Royal Airport

Services, was charged @ Rs 25.06 per sft and Rs 68.95 per sft.

Audit observed that application of different rates of same area

against two ground handling agents performing same activities resulted in

loss of Rs 12.013 million to the Authority.

Audit pointed out the loss in July 2017. The management replied

that HQ had accorded revised approval for renewal of licence agreement

of M/s Shaheen Airport Services for spaces measuring 182,988 sq. ft and

175,560 sq. ft, based on current physical specification of respective

spaces on the same pattern as M/s Royal Airport Services. The reply was

not acceptable because in support of reply, the management has not

produced any record showing recovery of licence fee as per rate charged

against M/s Royal Airport Service.

The matter was discussed in DAC meeting held in January 2018.

CAA explained that applicable charges had been revised from 2013 and

due recovery would be made accordingly. DAC directed CAA that due

recovery be made per revised rates and get it verified from Audit.

Compliance to the DAC‟s directive was not reported till

finalization of the report.

Audit recommends early compliance to the DAC‟s directive.

(DP. 02)

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3.4.25 Overpayment due to difference in rates - Rs 17.299 million

According to Rule 10 (i) of GFR Vol-I, every public officer is

expected to exercise the same vigilance in respect of expenditure incurred

from public money as a person of ordinary prudence would exercise in

respect of expenditure of his own money.

Audit noticed that the work “Expansion and Renovation of Bacha

Khan International Airport” Peshawar was awarded to M/s Qavi Engineers

(Pvt) Ltd on 28

December, 2015 at a cost of Rs 1,896.007 million.

Audit observed that contractor quoted the rates for some items of

work pertaining to CCTV system under sub head-terminal building (New

Construction) as Rs 36,529, Rs 34,857 and Rs 5,429 respectively. Audit

further observed that rates of same items under another subhead terminal

Building (Re-Modeling) were quoted higher than the rates already quoted

under Subhead-Terminal Building (New Construction). Payment of same

item under two sub heads at same location with a huge difference was not

justified. This resulted in overpayment of Rs 11.449 million.

Similarly, the contractor quoted rate of distribution switch with

supervisor duly power supply, 24 plot Giga E downlinks to access

switches 2/6 10 Giga E uplinks ports with slot chassis fans and power

sockets as required complete, etc. @ Rs 2.096 million under Sub Head

terminal building (Remodeling) whereas, rate against same item existed in

another subhead terminal Building (New Construction) as Rs 5.021

million, which was 150 % higher than already quoted rate for same item.

Difference in rates for the same item under two sub heads was unjustified

and resulted in overpayment of Rs 5.850 million.

Audit pointed out overpayment in September 2017. The Authority

replied that the PEC guidelines for the evaluation of bid do not allow for

adjustment in bid price other than correction for arithmetic errors and

other as stated in IB-28 of bid document. In the subject case, the bid price

was 7.9 % above the engineer‟s estimate which was within reasonable

164

range. The reply was not accepted because difference of rate for same item

under two sub heads was about 150 % hence, the bid was irrational and

was liable to rejection at the time of technical evaluation. Rate analysis of

the quoted rates were also not obtained from the contractor.

The matter was discussed in DAC meeting held in January 2018.

The DAC observed that back up of rates should have been obtained while

evaluating the single bid as contractor quoted different rates of same items

in two sub-heads. The DAC directed CAA to provide detailed justification

of rates within one week.

Compliance to the DAC‟s directive was not reported till

finalization of the report.

Audit recommends early adjustment of the higher rates.

(DP. 180)

3.4.26 Acceptance of high rates due to bid tempering - Rs 11.328

million

Clause No. 24.2 of Instruction to Bidders provides that if there is a

discrepancy between the unit price and total price that is obtained by

multiplying the unit price and quantity, the unit price shall prevail, and the

total price shall be corrected. If, there is discrepancy between the words

and figures, the amount in words shall prevail. If, there is discrepancy

between the total Bid price entered in Form of Bid and the total shown in

Schedule of Price Summary, the amount stated in the Form of Bid will be

corrected by the Employer/Engineer in accordance with the Corrected

Schedule prices. If, the bidder does not accept the corrected amount of

Bid, his Bid will be rejected, and his Bid Security forfeited.

Rule 23 of GFR Vol-I provides that Every Government officer

should realize fully and clearly that he will be held personally responsible

for any loss sustained by Government through fraud or negligence on his

part and that he will also be held personally responsible for any loss

arising from fraud or negligence on the part of any other Government

165

officer to the extent to which it may be shown that he contributed to the

loss by his own action or negligence.

Audit noted that the work “External Electrification & Telecom

Works of Islamabad International Airport (IIAP) Project” was awarded to

M/s Design & Engineering System (Pvt.) Ltd. at agreed cost of

Rs 1,135.343 million on 22

September, 2016.

Audit observed during scrutiny of the accepted bid that rates of

item No. 02-12E (d) at page 02-E5, item No. 02-12E (h) at page 02-E6,

item No. 02-25E at page 02-E10, item No. 02-35E at page 02-E12, written

in words, were overwritten by reducing or enhancing the rates and

resultantly, rates in figures and total amounts of the items were changed.

Audit further observed that pen stroke, ink, hand writing style and

signature/initials of the authorized representative of the contractor (who

signed/stamped the bid) of changed rates did not tally with the original pen

stroke, ink, hand writing style and signature/initials. It meant that the

changes were made after bid opening. Bid Opening Committee overlooked

the change of rates in words and figures and accepted the bid which was

21% (1,135-938/938*100) over and above the Engineer Estimate.

Whereas, keeping in view the contractual provision regarding Instructions

to Bidders, the bid having change in rates at various places in words and in

figures was non-responsive and the Authority must accept the option to go

into re-tendering for achieving the competitive and economical rates. The

Authority sustained a loss of Rs 11.328 million [118 Nos. * Rs 100,000

each (164,000-64,000), less 4% rebate] by accepting higher and changed

rate.

Audit was of the view that the loss was sustained by the Authority

due to non-evaluation of the bid by the Bid Opening Committee as per

instructions of the contract agreement and inadequate over sight

mechanism for implementation of financial and internal controls.

Audit pointed out the loss in August 2017. The Authority replied

that a fact-finding committee has been constituted by the competent

166

authority and proceedings are under process. Final position would be

submitted after receipt of Fact Finding report.

The matter was discussed in DAC meeting in January 2018. The

DAC directed CAA to finalize the inquiry report and submit it to Audit

within one week for verification.

Compliance to the DAC‟s directive was not reported till

finalization of the report.

Audit recommends early compliance to the DAC‟s directive.

(DP. 130)

3.4.27 Overpayment to the contractor due to inadequate tender/bid

evaluation - Rs 9.295 million

As per Appendix B to Bid (Schedule of Technical Services

Required), only semi-skilled persons were required for operation of

following systems on round the clock basis:

 Category -1 Aeronautical Ground Lighting System

 Advanced Visual Docking System and 400 Hz Aircraft Ground

Power Supply System

 Electrical Distribution Network System Airport‟s Terminal

Building, Power Generators

 Passenger Boarding Bridges

 Heating Ventilation and Air-conditioning System

 Elevators, Escalators and Baggage Handling system

Audit noted that the Airport Manager, Multan International

Airport, CAA Multan awarded the work “Operation and Maintenance of

electrical and mechanical system installed at MIAP Multan to M/s

Continental Engineering Services (Pvt.) Ltd. in February 2017 at the rate

of Rs 4,671,029 per month. Audit also noted that the contractor in the

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work plan (Appendix-D) added 21 skilled persons for Operation jobs at

the rate of Rs 774,858 per month.

Audit observed that as per Appendix B to the bidding documents,

skilled persons for Operation of electrical and mechanical equipment were

not required whereas, the contractor added the cost of skilled labour for

Operation. CAA management accepted the bid including cost of skilled

labour and made payment of Rs. 9.295 million upto 22

June, 2017.

Payment made to the contractor for skilled labour for Operation activity

without requirement resulted in overpayment of Rs 9.295 million (12

months x Rs 77,858).

Audit pointed out the overpayment in August 2017. The Authority

replied that Request for Proposal (RFP) contained both skilled /semi-

skilled workers for Operation and Maintenance of the equipment. The

stance of the Authority was not acceptable. As per Appendix B to the bid,

only semi-skilled staff was required for Operation requirement. Payment

on account of skilled labour for operation over and above the requirement

of the employer resulted in overpayment of Rs 9.295 million.

The matter could not be discussed in the DAC meeting held in

January 2018.

Audit recommends recovery of overpayment.

(DP.183)

3.4.28 Overpayment due to excessive measurement of height of drain

- Rs 4.322 million

Para No. 220 of CPWA Code provides that before the bill of

contractor is prepared, the entries in the measurement book relating to the

description and quantities of work should be checked and to see that all

the contents of area are correctly entered and arithmetically checked by

the responsible.

168

Construction drawing of the work relating to variation order No.

04 provides maximum height of drain as 1.2 meter and minimum 0.70

meter. The average height of drain becomes 0.95 meter. Thus, the height

of the drain was required to be measured with average height of 0.95

meter instead of maximum height of 1.2 meter.

Audit noted that the work regarding NAVAIDS and ATC

Equipment (package-7B) of Islamabad International Airport Project was

awarded to M/s JGM (JV) at agreement cost of Rs 1,051.249 million. The

contractor was paid Rs 987.359 million upto 8

IPC paid June 2017.

Audit observed that the drain was measured with uniform height of

1.2 meter instead of taking average height of 0.95 meter (1.2 + 0.70 = 1.90

÷ 2 = 0.95 meter). This resulted in overpayment of Rs 4.322 million.

Audit was of the view that the overpayment occurred due to non-

adherence to the provision of contract drawings/rules and lack of financial

and internal controls.

Audit pointed out the overpayment in August 2017. The Authority

replied that the drainage works were surveyed to reflect the actual

measurements rather than take the quantities from the drawings and found

that average height was 1.1m and 25m longer than originally presented.

The quantities will be recalculated and incorporated in the next Interim

Payment Certificate (IPC). The Authority admitted the Audit contention.

The matter was discussed in DAC meeting held in January 2018.

The DAC pended the Para for three weeks for detailed response and action

by the management.

Recalculation and adjustment of quantities were not reported to

Audit till finalization of this report.

Audit recommends early adjustment of the excessive measurement.

(DP.137)

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3.4.29 Overpayment due to allowing higher component of labour in

the non-BOQ rate - Rs 3.924 million

Rule 182 of General Financial Rules (Vol-I) provides that to

facilitate the preparation of estimate, as also serve as a guide in setting

rates in connection with the contract agreement, a schedule of rates for

each kind of work should be maintained. The rates entered in estimate

should generally agree with the scheduled rates.

As per Pak PWD Schedule of Rate, 2012 (Code 123 Page 796

Serial No. 40), 01-hour labour of mason was required to dismantle the

brick/concrete flooring for 9 sq. meter (100 cft).

Audit noted that the work “construction of Passenger Terminal

Building including all associated utilities & E/M Works of Islamabad

International Airport (IIAP) (Package-3)” was awarded to M/s CSCECL –

FWO (JV) at agreed cost of Rs 20,286.041 million in April 2011.

Audit observed that a non-BOQ item of work “dismantling /

removing existing granite floor” was measured to the extent of 3,035 sq.

meters and paid @ Rs 1,694 per sq. meter. While analyzing the rate of

same item on market, 08 labour hours of skilled mason @ Rs 1,271.25 per

hour were added for removal of 09 sq. meter granite flooring area.

Whereas, in accordance with the provision of Pak PWD SR, 2012 (Code

123 Page 796 Serial No. 40) 01-hour labour of the mason was required for

dismantling of the said area. Due to this higher rate to the extent of

Rs 1,293 per sq. meter was allowed. This resulted in overpayment of

Rs 3.924 million.

Audit was of the view that the overpayment was made due to

allowing higher labour component in the rate analysis of non-BOQ item

and inadequate over sight mechanism for implementation of technical,

financial and internal controls.

170

Audit pointed out the overpayment in August 2017. The Authority

replied that the work is based on FIDIC Conditions of Contract and not

based on CAA tender document or PPWD tender document. It is pertinent

to mention that pursuant to contract clause 52.2, “Engineer shall fix rate or

price as in his opinion, appropriate”. However, recovery proportionate to

rate analysis as desired by Audit would be determined but in such way that

the case will not go to Engineer‟s Decision pursuant to clause 67.1 of

general condition of contract (Settlement of Disputes), Dispute Review

Board and Arbitration.

The matter was discussed in the DAC meeting held in January

2018. The Authority committed that recovery would be made in the next

bill. The DAC directed CAA to make recovery and get it verified from

Audit.

Compliance to the DAC‟s directive was not reported till

finalization of the report.

Audit recommends early compliance to the DAC‟s directive.

(DP.131)

3.4.30 Overpayment due to non-adjustment of prices as a result of de-

escalation - Rs 3.398 million

According to Clause 70.1 of agreement and Appendix-C, the

amounts payable to the Contractor, pursuance to Sub-Clause 60.1 shall be

adjusted in respect of the rise or fall in the cost of specified material by

applying to such amount as prescribed in the adjustment formula.

Audit noticed that the Civil Aviation Authority awarded the work

“Expansion and Renovation of Quetta International Airport, Quetta” to a

Joint Venture of M/s Ittefaq Construction Co and United Construction Co

(JV) on 25

November, 2015 at agreement cost of Rs 1,718.545 million.

The work was commenced on 1

January, 2016 and was to be completed

upto 1

July, 2017. The contractors have been granted extension in

completion time upto 31

January, 2018.

171

Audit observed that in the light of provisions of Appendix C to the

agreement, the price of the specified material was required to be adjusted

according to increase / decrease in the price of the specified material.

Audit further observed that rates of the certain specified material were

decreased as noticed from the Statistical Bulletin issued by the Statistical

Division, and HSD as per notification of Oil & Gas Regulatory Authority

(OGRA). The Contractor was paid four IPCs upto June 2017 but no

adjustment because of decrease in the price of the specified material was

made. This resulted in overpayment of Rs 3.398 million.

Audit was of the view that price de-escalation was not made due to

non-adherence to the provisions of agreement, weak internal and financial

controls.

Audit pointed out the overpayment in September 2017. The

management replied that the Engineer had worked out the de-escalation of

Rs 4.939 million upto 6

IPC. The escalation amount shall be adjusted in

next IPC in accordance with clause 70.1.

The matter was discussed in DAC meeting held in January 2018.

The DAC directed CAA to effect recovery within one week and get it

verified from Audit.

Compliance to the DAC‟s directive was not reported till

finalization of the report.

Audit recommends early compliance to the DAC‟s directive

regarding recovery.

(DP.161)

3.4.31 Incorrect enhancement in the bid amount by the Evaluation

Committee - Rs 3.117 million

As per clause 3.6.1 (c) of Standard Procedure for Evaluation of

Bids for Procurement of works issued by Pakistan Engineering Council in

172

March 2009, the amount of the proposed award shall be the bid price as

submitted by the bidder and adjusted as described in the ITB for

corrections and any discount (including cross-discounts). Adjustments to

the final price and scope of the contract to correct for acceptable omissions

in the bid may be clarified and finalized with the lowest evaluated bidder.

Audit noticed that a project “Expansion and Renovation of

Terminal Building and Rehabilitation of existing Fokker Apron and Alpha

Taxiway at Faisalabad Airport” was awarded to a contractor at cost of

Rs 537.716 million on 18

December, 2015.

Audit observed that an item No. 11 “Providing & Fixing fire beater

with 7 ft Bamboo, fire chief brand of Sub-Head-VIII (Provision of Fire

Hydrant System) Part-B Fire Fighting Equipment under Sub-Head E/M

Works & Electronics” was provided in the T.S Estimate as four

@ Rs 1,121 each i.e. Rs 4,484. Audit further observed that rate of the said

item was quoted by the contractor in the bid in figure as Rs 7,875 each and

in words as “Seventy eight hundred seventy five”. The contractor brought

forward the amount of this item in the summary as Rs 7,875 and in grand

total also. The total bid cost mentioned in figures as well as in the words

was Rs 536,174,342. But after bid evaluation report, the tender was

accepted at the contract cost of Rs 537,716,064. Audit also observed that

rate of the said item was taken in the Bid Evaluation Report as Rs 787,070

instead of Rs 7,875. This shows that evaluation of bid was carried out on

higher side by including Rs 3,148,280 (4 Nos @ Rs 787,070) instead of

Rs 31,500 (04 Nos @ Rs 7,875) as provided in the bid. Further, the

preceding item No 10 of said Sub-Head is almost same with slight

difference against which the contractor quoted same rate of Rs 7,875

against NIT rate of Rs 1,507.

Audit was of the view that how it is possible that against NIT rate

of Rs 1,121, the contractor quoted rate of Rs 787,070. Based on Bid

Evaluation Report, the tenders were accepted at the contract cost of

Rs 537,716,064 and acceptance letter was issued by including

Rs 3,116,780 excessively. This resulted in incorrect enhancement in the

bid amount by the Evaluation Committee of Rs 3.117 million.

173

Audit pointed out the matter in August 2017. The Authority replied

that Clause IB27.1 (a) states where there is a discrepancy between the

amounts in figures and in words, the amount in words will govern. The

Contract Branch of HQCAA, during approval of subject bid, has noticed

such discrepancy against Item No.11 of Sub-Head: VIII (Provision of Fire

Hydrant System) and same were corrected in line with Clause IB27.1 (a).

Accordingly, bid was approved, and letter of acceptance was issued to

contractor. The reply was not convincing because rate of the said item was

taken in the Bid Evaluation report as Rs 787,070 instead of Rs 7,875. The

decision of HQCAA in this regard was awaited.

The matter was discussed in DAC meeting held in January 2018.

The Authority admitted the irregularity and committed that necessary

correction in the bid would be made and recovery would be made if

payment released as per incorrect amount. The DAC directed that

correction in the bid amount be made and got verified from Audit.

Compliance to the DAC‟s directive was not reported till

finalization of the report.

Audit recommends early compliance to the DAC‟s directive.

(DP .68)

3.4.32 Overpayment due to deviation from the contract agreement -

Rs 1.892 million

Item No. 1 of the BOQ “installation of tube wells at Islamabad

International Airport Project, Islamabad” provides 8" dia bore for tube

well (at average rate of Rs 1,525 per rft), to be converted into 10" (at

average rate of Rs 1,906 per rft) if required water level is obtained.

Audit noted that the work “Installation of Tube Wells at Islamabad

International Airport Islamabad” was awarded to M/s Ch. Mubarak Ali at

agreed cost of Rs 57.891 million. The contractor was paid 5

& final bill

for Rs 49.185 million in April 2017.

174

Audit observed that 07 bores were carried out at location No. 14,

15, 16, 17, 19, 20 & 21 with 10” dia and quantity of 4,968 rft was

measured instead of 8” dia which were subsequently, declared failed due

to non-achievement of required water level. Whereas, these trial bores

were required to be carried out initially with 8” dia and were to be

converted in 10” dia in case of successful boring. Due to execution of

excessive dia boring at the beginning stage, beyond the agreement

provisions, the payment of Rs 1.892 million was considered unjustified.

Audit was of the view that the unjustified payment occurred due to

non-adherence to the contractual provision and ineffective over sight

mechanism for implementation of technical and financial controls.

Audit pointed out the unjustified payment in August 2017. The

Authority explained that 10” dia bore instead of 8” dia bore was drilled as

per recommendations of the Joint Director Civil (water consultant, hired

specifically for this project) for ease of testing on compressor without

danger of collapsing and subsequent development into slim/micro tube

wells of 6” casing, etc. The reply was not acceptable as bores were

required to be drilled preliminary with 8” dia and were to be converted in

10” dia if found successful.

The matter was discussed in DAC meeting held in January 2018.

The Authority explained that 10” dia bore was executed on the

recommendations of water consultant. Audit was not satisfied as bore was

executed for higher dia against the contract provision. The DAC directed

CAA to submit detailed justification within one week and satisfy Audit,

otherwise recovery be made.

Compliance to the DAC‟s directive was not reported till

finalization of the report.

Audit recommends early compliance to the DAC‟s directive.

(DP.123)

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CHAPTER 4

NATIONAL HIGHWAY AUTHORITY

(MINISTRY OF COMMUNICATIONS)

4.1 Introduction

National Highway Authority (NHA) was established in 1991,

through an Act of Parliament. The purpose and functions of the Authority

are to plan, promote, organize and implement programmes for

construction, development, operation, repair and maintenance of National

Highways and strategic roads specially entrusted to it by the Federal

Government or by a Provincial Government or any other Authority.

NHA has its Headquarters at Islamabad with Regional Offices at

Peshawar, Abbottabad, Burhan, Gilgit, Kallar Kahar, Lahore, Multan,

Karachi, Sukkur, Quetta and Khuzdar. NHA is currently custodian of 39

national highways/motorways/expressways/strategic routes having a total

length of 12,131 kilometers. It is 4.6% of total national road network of

263,775 kilometers, however, it carries 80% of commercial traffic. The

longest route is N-5 (Karachi-Lahore-Peshawar-Torkham) with a length of

1,819 Km. The second largest route is N-55 (Kotri-Larkana-Dera Ghazi

Khan-Dera Ismail Khan-Peshawar) with a length of 1,264 Km.

4.1.1 Duties and Responsibilities

NHA is entrusted with the following functions and duties:

i. To advise Federal Government on matters relating to

national highways and strategic roads.

ii. To frame scheme(s) for construction, expansion, operation

and development of national highways and strategic roads

and undertake work on such scheme(s).

176

iii. To acquire any land in accordance with legal procedure and

obtain and dispose of moveable and immovable property

and interests therein.

iv. To do research and development in the field of highways.

v. To procure plant, machinery, instruments and materials

required for its use.

vi. To enter into and perform all such contracts as it may

consider necessary.

vii. To levy, collect or cause to be collected tolls on national

highways, strategic roads and such other roads as may be

entrusted to it and bridges thereon.

viii. To extend licence facilities on roads under its control on

such terms as it deems fit.

ix. To maintain legal enforcement in Right of Way.

4.1.2 Organizational Structure

NHA is under the administrative control of Ministry of

Communications and is headed by a Chairman. The affairs of the

Authority are regulated through National Highway Council (NHC) and

National Highway Executive Board (NHEB).

Organizational set up of the Authority comprises five core Wings,

i.e. Planning, Construction, Operations, Finance and Administration. Each

Wing is run by Members of NHEB, namely Member (Planning) Member

(Engr-Coord), Member (PKM-North Zone), Member (Motorways-South),

Member (South Zone), Member (Central Zone), Member (West Zone),

Member (North Zone), Member (Finance) and Member (Admn) with the

assistance of a number of General Managers.

4.1.3 Funding/Income sources and positions

Grants

 Federal Government

177

Loans

 Cash Development Loan (loans obtained from Federal

Government including foreign loans through PSDP)

Operating Income

 Toll collection at toll plazas

 Right of Way (ROW) charges of Petrol Pumps, CNG stations,

restaurants, sign boards, bill boards, etc.

 Sale of tender, sale proceeds of assets, land and vehicles

 Bonds, shares and other means

4.2 Comments on Budget and Accounts (Variance Analysis)

Table below shows the position of budget allocation and actual

expenditure for the financial year 2016-17:

(Rs in million)

Type of

Funds

Original

Budget

Revised/

Final

Budget

Actual

Expen-

diture

Excess/

(Saving)

Excess/

(Saving)

in %

Non-Development

Maintenance

Grant (GoP)

2,374.927

1,755.127

1,747.959

(7.168)

(0.41)

Road

Maintenance

Account

38,559.380

14,212.965

(24,346.415)

(63.14)

Sub-Total

40,934.307

40,314.507

15,960.925

(24,353.582)

(60.41)

Development Funds

PSDP.

(Local)

126,650.000

128,350.000

126,053.943

(2,296.057)

(1.79)

PSDP

(Foreign)

61,350.000

140,611.000

Sub-Total

188,000.000

268,961.000

266,664.943

(2,296.057)

(0.85)

Grand Total

228,934.307

309,275.507

282,625.868

(26,649.639)

(8.62)

178

Operating income for the year 2016-17 is as under:

(Rs in million)

No.

Description

Estimated

Revenue

Actual

Receipt

realized

Excess/

(Shortfall)

Percentage

Excess/

(Shortfall)

Toll Collection

18,574.865

18,804.000

229.135

1.23

Weigh

Stations

Income

394.791

345.000

(49.791)

(12.61)

Police Fine

2,277.863

3,908.000

1,630.137

71.56

Right of

Way/Rental

Income

991.921

1,225.000

233.079

23.50

Other

Miscellaneous

1,229.226

397.000

(832.226)

(67.70)

Total

23,468.667

24,679.000

1,210.333

5.16

i. Non-production of audited financial statements for the financial year

2016-17

NHA‟s accounting system is based on double entry book keeping.

Financial Manual of NHA prescribes a system to ensure correct

classification of accounts, maintenance of books of accounts,

compilation of trial balances and financial statements. The end

products of the double entry book keeping are the financial

statements. With the help of financial statements, one can assess

the financial position and efficiency of the organization. As per

para 11 (j) of Chapter 11 of NHA Code (Vol-I), 2005, subject to

section 24 of NHA Act, a firm of chartered accountants appointed

as independent auditors by the Executive Board shall audit the road

maintenance account and financial statements annually. As per

para 11 (k), the auditors shall complete the audit within three

months of submission of financial statements to them but not later

than 31

December each year.

179

Audited financial statements for the year 2016-17 were not

produced by the Authority till the finalization of this report despite

request made by Audit. Therefore, Audit is unable to comments on

the accounts and financial statements.

ii. Audited financial statements for the previous year i.e. 2015-16

took one year for finalization and approval by the Board. While

discussing DP. 137, DAC in its meeting held in January 2018,

directed NHA to implement the timelines for finalization of

audited financial statements strictly. DAC further directed that a

report giving detailed justification for delay be submitted.

iii. Re-valuation of assets in financial statements for the financial year

2015-16

NHA adopted the revaluation model and changed the historical

cost model for the accounting treatment of its non-current assets

during the financial year 2015-16. By adopting revaluation model

the non-current assets increased from Rs 183.483 billion to

Rs 3,633.067 billion. The increase is around Rs 3,449.584 billion

in non-current assets (property, plant and machinery) from

financial year 2014.15. During the process of revaluation of assets,

NHA revalued the work-in-progress assets without observing codal

provisions and without closing of accounts and drawl of

completion reports of the projects.

The matter was discussed in DAC meeting held in January 2018,

wherein NHA took the stance that international financial reporting

standards were followed whereby assets were recognized when

ready for intended use and economic benefit started. Audit

contended that the accounting policy was inconsistently applied as

the assets were not recognized on the said principle during many

previous years. Further, government regulatory framework could

not be set aside and prerequisites of closing of accounts to assess

actual cost and liabilities were to be followed and in absence of

initial value, revaluation of the asset was questionable. DAC

180

directed that revaluation/capitalization process be got verified.

Further, project-wise detail of completion, expenditure after

substantial completion, status of PC-IV, final account be shared

with Audit. (DP. 146, 147)

iv. However, following issues were found during examination of the

budget, expenditure and revenue statements provided by the

management:

a. Saving of Rs 24,346.415 million i.e. 63.14% of total releases

under Road Maintenance Account was observed which

showed that the maintenance targets set for the year 2016-17

were not achieved by NHA and may result into further

deterioration of roads.

b. Against the estimated receipts of Rs 23,468.667 million, the

Authority actualized net receipt of Rs 24,679.000 million

involving an excess of Rs 1,210.333 million (5.16%).

c. Against the estimated receipt of Police Fine Rs 2,277.863

million, the Authority was able to actualize net receipt of

Rs 3,808.000 involving excess of Rs 1,630.137 million

71.56% of original estimate whereas in previous F.Y 2015-16

actual receipt was Rs 2,274.000 million. This depicts that

either Authority failed to implement traffic rules and

regulation through motorway police or pre-empt increase in

traffic.

4.3 Brief comments on the status of compliance with PAC’s

directives

Compliance position of PAC‟s directives on Audit Reports relating

to NHA is as under:

Year

Total

Paras

Total No.

of Paras

Discussed

Compliance

Made

Compliance

Awaited

Percentage

compliance

1987-88

80.00

1989-90

66.67

1990-91

88.89

181

Year

Total

Paras

Total No.

of Paras

Discussed

Compliance

Made

Compliance

Awaited

Percentage

compliance

1991-92

80.65

1992-93

94.32

1993-94

117

22.22

1994-95

89.47

1995-96

92.00

1996-97

93.33

1997-98

468

300

358

110

76.50

1998-99

177

154

87.01

1999-00

185

130

70.27

2000-01

244

213

86.58

2 PAR

2001-02

61.43

2002-03

47.62

2003-04

2004-05

70.37

2005-06

80.00

2006-07

75.38

2007-08

30.56

2009-10

AR-71

56.34

2009-10

PAR-20

15.00

2008-09

SAR-

120

2010-11

50.00

16 PAR

6.25

24 PAR

45.83

36 PAR

50.00

2013-14

31.11

2014-15

11.67

2015-16

117

40.0

Note: Audit Reports for 2011-12, 2012-13 and 2016-17 have not been discussed

by PAC till the finalization of this Audit Report. Audit Report for 1997-98,

Special Audit Report 2008-09 (FY 2005-08) and Audit Reports for 2014-15 and

2015-16 were partially discussed.

182

4.4 AUDIT PARAS

Irregularity and Non-Compliance

4.4.1 Award of contract on rates 59.95% higher than the approved

PC-I

ECNEC on 3

December, 2014 approved in principle, PC-I of

Thakot-Havelian (120 Km) as Phase-I of Islamabad Raikot-Section with

rationalized cost of Rs 84.860 billion including foreign exchange of

Rs 76.374 billion in view of decision of ECNEC and directions of

Planning Development and Reform Division after third party review.

In the tendering process M/s China Communication Construction

Company Ltd quoted much higher rates and quantities than those provided

in the PC-I. The contractor quoted Rs 192.428 billion which was revised

for Rs 133.980 billion with following major adjustments. The EPC

contract “Construction of Thakot-Havelian (120 Km)” was awarded to

M/s China Communication Construction Company vide acceptance letter

dated 22

December, 2015 for total contract amount of Rs 133.980

billion.

Audit noted that the analysis of cost/rates submitted by the

contractor with the bid included the cost of labour, material and machinery

charges and overheads, as under:-

1. 3.5% for the design services and internal supervisory services.

2. 0.5% for the safety facilities of the contractor.

3. 10% for contractor‟s profit and overheads.

4. 7.5% Other Amortization

Audit observed that the accepted cost was 59.95% higher than the

PC-I cost involving Rs 50,217.38 million.

Audit observed that the excess cost was owing to the following:-

183

1. Quantities as quoted by M/s China Communication

Construction Company Ltd were not supported with detailed

calculations and justifications. Bill No.01 Earthworks was

taken into account for comparison and it was found that due to

extraordinary excessive quantities the contract cost against

earthworks was Rs 18,527.58 million against PC-I cost of

Rs 4,028.80 million. Medium and soft rock material was

included in the original PC-I but the contractor quoted

quantities and rates for hard rock material. The comparison of

PC-I and quoted quantities for three major items indicated an

excess of Rs 11,664.47 million.

2. In addition to contractor‟s profit, overheads and amortization

charges, the contractor included the cost of financial charges

for Rs 3,986.00 million in his bid against performance,

insurance and mobilization guarantees.

3. The contractor also included cost on account of contractor‟s

facilities like contractor‟s camp offices, vehicles, laboratories

for Rs 997.53 million.

Audit pointed out the matter in September 2017. The Authority

replied that since EPC/Turnkey contract was a lump sum contract model

and cost of the project bears all risks associated with the execution of the

project. There were few individual items in BOQ that may be high or low

which was a common practice because the bidder allocates the project risk

to those items. The risk included the contingency fees, escalation of goods,

idling of labor and equipment caused by natural disasters, protest and

strike etc. Moreover, in EPC/Turnkey contracts, the BOQ was taken for

reference only. Therefore, in EPC/Turnkey contract model, provision of

the relative evidence was not required. The item of contractor‟s facilities

was reasonable, necessary during execution of the project and it was also

in accordance with the updated PC-I approved in December 2015. The

cost of items i.e. temporary camp, laboratory, investigation of geological

drilling and site transportation was not related to contractor‟s profit,

overheads and amortization charges. Therefore, in EPC/Turnkey contract

model, provision of the relative evidence was not required.

184

The reply was not accepted because PC-I was based on NHA CSR

2014 and after emerging of CSR 2014 there was price decrease trend in

high speed diesel, bitumen and steel (major input materials). In the years

2015-16 and 2016-17, 30% to 40% rebate on CSR 2014 rates was

witnessed in tenders of different development works but the work was

awarded at 59.95% above the PC-I cost. As per breakup of cost of

different items of work the contractor included profit overheads and

amortization charges in his rates of items of work. In addition, the

contractor included the cost of financial charges on insurances, guarantees,

contractor camps, vehicles, etc. in his bid which was unjustified.

The matter was discussed in the DAC meeting held in December

2017 wherein the DAC directed NHA to get it verified that amortization

charges were not included twice i.e. firstly in item rates quoted by

contractor and secondly in financial charges in analysis of rates and cost

summary.

Compliance to DAC‟s directive was not made till the finalization

of this report.

Audit recommends early compliance to DAC‟s directive besides

recovery of double payment on account of amortization charges.

(DP. 253)

4.4.2 Award of contract without forming of joint venture by Chinese

Companies with Pakistani Firms

As per Article-2 of Framework Agreement on Major Transport

Infrastructure Projects under CPEC, signed at Islamabad in April 2015

between the Government of the People‟s Republic of China and the

Government of the Islamic Republic of Pakistan, the Chinese companies

shall be responsible for engineering design, procurement and construction

(EPC) of the projects. The Chinese side will provide a list of

recommended Chinese companies by relevant associations. The technical

design of each Project shall be as per Chinese standards. The Chinese

185

companies shall take Pakistan requirements in consideration for the design

of each Project. Article-3 further provides that for execution of each

Project, Joint Venture may be formed according to the feasibility and

commitments of two Parties with one or more Pakistani companies

involved of each Project.

Audit noted that Economic and Commercial Counselor, Embassy

of China, Islamabad communicated names of three Chinese Companies for

the construction of project Havelian-Thakot Section. NHA moved a

summary to Economic Coordination Committee (ECC) to invoke Rule-5

of the Public Procurement Rules.

Approval of ECC was solicited for permitting NHA to proceed

with the procurement of the Chinese companies. ECC, in its meeting held

on 12

August, 2015 approved to grant EPC contract(s) to the firm(s)

nominated by the Government of China as permissible under PPRA

Regulations.

The Executive Board NHA in its 258

meeting dated 21

December, 2015 approved award of works for “KKH Phase-II Havelian -

Thakot Section” to the lowest evaluated bidder i.e. M/s China

Communications Construction Company Ltd, at their rationalized EPC bid

price of Rs 133.98 billion including 90% Foreign Currency requirement

with completion period of 42 months.

Audit observed that article 03 of the framework agreement was

ignored while submitting summary to ECC and did not mention the

condition of Joint venture of Chinese Companies with Pakistani firms. The

work was awarded to Chinese Company without forming a Joint Venture

with Pakistani Company in violation of framework agreement. Award of

work deprived Pakistani contractors of the experience of mega project.

Audit further observed that after issuance of tender documents to

three nominated Chinese contractors, pre-bid meeting was held on

June, 2015 and major conditions of tender documents were amended

through five addendums as under:

186

A. Condition of Joint Venture, a must requirement was deleted.

B. Condition of past work experience from 91 billion to zero.

C. Rate of Mobilization Advance increased from 7.5% to 15%.

Audit was of the view that addendums were issued only to favour

the contractors without any justification.

Audit pointed out the issue in September 2017. The Authority

replied that as per Article Three of the Framework Agreement signed

between Pakistan and China, Joint Venture may be formed according to

the feasibility and commitments of two parties with one or more Pakistani

companies involved of each Project”. It meant that it was optional for the

Chinese firms to form the joint venture with Pakistani firms or otherwise.

The amendments in bidding documents through addenda were

made to harmonize the bidding documents with the Framework

Agreement and the nominations forwarded by Economic and Commercial

counselor, Embassy of China, Islamabad. M/s CCCC is a state owned

company and was declared as rank first among Engineers News Record

(ENR) largest Chinese international contactor for the sixth consecutive

year. 7.5% mobilization advance was insufficient in order to ensure

smooth execution of the project and necessary cash flow for mobilization

at site for the project. Pakistan Engineering Council allows mobilization

advance upto 15%, hence, was considered to be more rational to achieve

the prompt progress of the project.

The reply was not accepted because in Article two of Framework

Agreement, Chinese companies were responsible for engineering design,

procurement and construction (EPC) of the projects and as per article three

there was a commitment of forming of Joint Venture with Pakistani

companies. The purpose was to engage Pakistani contractors in such mega

projects for having experience. The requirement of Joint Venture was also

provided in tender document which was later deleted through addendum.

As such Pakistani contractors were deprived of the experience of

execution of mega project as provided in the Framework Agreement and

187

Planning Commission‟s guidelines. The addendums to tender documents

were issued to favour the limited participant bidders.

The matter was discussed in the DAC meeting held in December

2017 wherein the Committee observed with concern that purpose of

formation of JV was to provide an opportunity to local firms to participate

in unique projects and also a source of technology transfer and capacity

building of local firms, which was not pursued actively by NHA. DAC

directed NHA to pursue it with the contractor, incorporate obligations

under “Corporate Social Responsibility” and must involve local firms in

future.

Compliance to the DAC‟s directive was not made till the

finalization of this report.

Audit recommends early compliance to the DAC‟s directive

alongwith action against the responsible(s) that deprived the local

contractors.

(DP. 254)

4.4.3 Major change in approved scope of work in violation of

approved PC-I

As per para 2 & 2.1 of Project Management Guidelines, policy of

the Government of Pakistan is to efficiently utilize natural and economic

resources of the country for socio-economic welfare of the people. This

objective may be achieved only when development projects are planned

and executed with vigilant management. Objective of development

planning is to have projects implemented for the benefit and social uplift

of the society. For achievement of stipulated targets and tangible returns, it

is imperative to entrust management and supervision of the project during

implementation stage to capable and competent persons of required

qualifications, experience and caliber.

As per para 56 of NHA Code, Technical Sanction is a guarantee

that the proposal is structurally sound and that the estimates are accurately

188

calculated and based on adequate data. It shall be issued on the basis of

detailed estimates for the project as a whole, after administrative approval

is accorded. Technical Sanction which is concerned with actual design and

execution of the work and accounts for all expenditures, ensures that:

i) Design and specifications are in accordance with sound

engineering practices.

ii) The materials for the execution of the work are in

accordance with the plans and specifications.

iii) In assessment of the project cost, utmost economy has been

observed consistent with good workmanship and good

materials.

iv) The estimate represents carefully budgeted cost of

execution of the work including all accessory and

consequential services calculated as accurately as is

possible at the time of its preparation.

Audit noticed that NHA prepared a PC-I for Construction of

Peshawar-Karachi Motorway Section-II (Multan-Sukkur Section - 392

KM). The PC-I was approved by the ECNEC on 3

July, 2014 with the

cost of Rs 259,353.10 million. Bids were invited for the project with

estimated cost of Rs 240,158.390 million. Three Chinese firms

participated and M/s China State Construction Engineering Corporation

Limited submitted lowest bid of Rs 406,332.270 million. As the bid was

on higher side, negotiations were held with the bidder and work

amounting to Rs 294,352.00 million was awarded accordingly. Audit

further noted that the rationalized bid/BOQ of the contractor was put in the

revised PC-I and the ECNEC approved the revised PC-I of the project

accordingly in December 2015.

Audit observed after analytical study of original PC-I, Revised

PC-I and contract agreement that many structural changes in terms of

quantities were made by the Authority. Audit was of the view that as the

revised PC-I of the project was approved by the competent forum keeping

189

in view the rationalized bid submitted by the contractor, hence, any major

change in the components of the project was unauthorized. Further, the

original feasibility and thereafter investigation/survey and detailed design

was also prepared by the same contractor, therefore, such major changes

in structure creates doubt on the authenticity of the investigations/surveys,

design for which the contractor was paid a sum of Rs 7,300.876 million. A

comparison of structural changes is tabulated below:-

(Amount in Rs)

Description

Quantity

as per

Original

PC-I

Quantity

as per

Revised

PC-I

Quantity as

per

Agreement

Cost of

Structure as

per

Agreement

Short Bridges

112

12,270,435,501

Long Bridges

18,295,524,062

Culverts

800

1148

1215

5,962,399,070

Underpasses

250

112

115

4,987,466,258

Total

41,515,824,891

Audit further observed that quantities of almost 80% items were

deviated (by increasing/decreasing) from the approved revised PC-I in the

manner that the overall cost was the same but in case of enhanced

quantities the unit cost was decreased and in case of reduced quantities,

the unit cost was increased for the components.

Audit is of the view that irregularity occurred due to weak

financial controls.

Audit pointed out the issue during August-September 2017. The

Authority did not reply.

The matter was discussed in the DAC meeting held in December

2017 wherein, the DAC directed NHA to get the changed scope ratified by

Planning Commission. DAC pended the para till ratification of PC-I by

Planning Commission.

190

Compliance to the DAC‟s directive was not made till the

finalization of this report.

Audit recommends that the matter be investigated for such material

changes/deviations after revised PC-I.

(DP. 189)

4.4.4 Award of work to unqualified firm

Clause 11.1(c)(v) of bidding documents, provides that the bidder

has to submit along with his bid Certified Audit Reports for last three (03)

years to demonstrate the current soundness of the applicant‟s financial

position and its prospective long term profitability to evaluate:

a) Cash Flow

b) Average Annual Construction Turnover

Audit noted that pre-qualification notice was published in the

newspapers as well as on the PPRA‟s website on 18

November, 2015 for

pre-qualification of firms for construction of Motorway from Burhan-

Hakla on M-1 to Dera Ismail Khan (Packages-I to V). Fifty-four (54)

national and international firms purchased prequalification documents and

thirty-eight (38) firms submitted prequalification documents. Out of thirty-

eight firms, nineteen (19) firms were pre-qualified for submission of bids.

M/s NLC was not among the pre-qualified firms and was informed

regarding disqualification on 15

February, 2016. Later on, by taking

lenient view in violation of PPR-2004, on the request of the firm, pre-

qualification letter was issued on 10

March, 2016.

Audit further noted that single stage two envelop procedure was

adopted for tendering of Package-I (Yarik to Rahmani Kheil) and ten (10)

firms including M/s NLC purchased bidding documents. After study of the

bidding documents and participation in pre-bid meeting, four (04) firms

submitted technical and financial bids on 14

March, 2016.

191

Audit observed that work awarded to M/s NLC was irregular on

the following grounds:

a. Proof regarding completion of at least one (01) project of

similar size and complexity as a contractor or management

contractor with a value of minimum Rs 13,000 million during

last seven (07) years was not available with bidding

documents.

b. Draft financial statements of last three years were provided

instead of Certified Audit Reports as required under bidding

data clause 11.1(c)(v).

c. In the absence of Certified Audit Reports, one cannot

determine required turnover, cash flow & working capital.

d. Credit limit facility (banks undertaking) Form CL-I was not

provided according to bidding criteria.

Audit pointed out the matter in August 2017. The Authority replied

that M/s NLC fulfilled all the thresholds and qualification criteria. It was

fact that draft audit reports were provided by them instead of certified

audit reports due to some procedural delays in Planning Commission. The

bidder also fulfilled the criterion of similar works experience on the basis

of their experience on Lahore Ring Road Project, as per clarification of the

bidder and certification by Director (Engineering) Lahore Ring Road

Authority.

The reply was not based on fact because without Certified Audit

Report, turnover of cash flow could not be judged. Further, credit limit

facility (banks undertaking) Form CL-I was not provided according to

bidding criteria. During discussion in exit meeting with GM (P&CA) in

the presence of GM (Audit) NHA and other officers on 20

September,

2017, GM (P&CA) promised to obtain the Certified Audit Reports from

the contractor for submission to Audit.

The matter was discussed in the DAC meeting held in December

2017 wherein, Audit contended that M/s NLC did not fulfill the laid down

192

evaluation criteria and qualification for award of work. NHA explained

that being a state owned organization, NLC was given lenient view and

declared qualified. The DAC decided to place the issue before PAC for

deliberation and decision.

Audit recommends for investigation and action against the

responsible(s) for award of work in violation of laid down criteria.

(DP. 130)

4.4.5 Mis-procurement of consultancy contract - US$ 3,849,460 and

Rs 1,112.618 million

Rule-4 of PPRA-2004 provides that procuring agencies, while

engaging in procurements, shall ensure that the procurements are

conducted in a fair and transparent manner, the object of procurement

brings value for money to the agency and the procurement process is

efficient and economical.

As per rule-30(3) of PPRA-2004, a bid once opened in accordance

with the prescribed procedure shall be subject to only those rules,

regulations and policies that are in force at the time of issue of notice for

invitation of bids.

According to clause 3.1.2(f) of letter of invitation, current

commitments and past performance are the basic criteria of technical

proposal. Bidders are required to provide the details of present

commitments/ongoing jobs as referred in the form TECH-9 of technical

proposal. Further, the basis for the past performance is the report from

Design Section and Construction Wing NHA.

Audit noted that request for proposals (RFP) for consultancy

services for Assistant to Employer Representative (AER) for Multan-

Sukkur section (392 km) of Karachi-Lahore Motorway (KLM) was invited

through advertisement in daily Dawn on 05

August, 2015 with

submission date of 02

September, 2015. Later on, the proposal

submission date was extended up to 16

December, 2015 through issuance

193

of five (05) corrigenda. Single stage two envelope procurement method

with quality and cost based selection at 80% technical and 20% financial

weightage was adopted. Ten (10) firms / JV submitted their bids (technical

& financial) on 16

December, 2015.

Audit further noted that technical evaluation committee, after

preparation of Summary Evaluation Sheet (SES) and Personnel Evaluation

Sheet declared three (03) consultancy firms technically qualified.

Technical Evaluation Report was submitted to the Member (Engr. Coord.)

for approval in March 2016. The Member returned the report with the

remarks “kindly review as discussed” on 14

March, 2016. In compliance

to Member (Engr. Coord) directions, M/s Dohwa Engineer Co. Ltd. JV

was declared disqualified on the basis of letter No.1(1)/NHA/GM(E-

35)/2016/589 dated 21

January, 2016 issued by General Manager (E-35)

with the plea that the performance of M/s Dohwa was poor on

construction supervision of Hassanabdal-Havelian Expressway project

(E-35).

M/s Dohwa Engineering Co. Ltd in JV with other consultancy

firms was declared technically qualified by the technical evaluation

committee on the basis of the criteria mentioned in the bidding document

in which clause 3.1.2 (f) of letter of invitation, clearly indicates that past

performance of the prospective bidders to be evaluated whereas, in this

case the technically qualified firm was declared not qualified on the basis

of performance of ongoing project. Further, M/s Dohwa Engineering Co.

Ltd JV was still working as AER consultant on the project construction

supervision of Hassanabdal-Havelian Expressway project (E-35). The firm

had neither been blacklisted nor penalized so far. Further, as per clause

3.1.2(f) of letter of invitation (LOI) past performance report of the

consultant was required by GM(P&CA) from GM (Design) which

remarked as “Design and construction drawings satisfactory”.

Audit observed that during construction of work many such letters

were issued to the consultant firms for improvement of the progress of the

work. In this way, each and every consultant should be disqualified on the

basis of such letters issued to the consultants by Project Directors/General

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Managers. Furthermore, technical bids were opened on 16

December,

2015, whereas, the letter regarding intimation of the poor performance was

issued on 21

January, 2016 after bid opening. After exclusion of M/s

Dohwa Engineering Co. Ltd., the financial bids of remaining two (02)

firms were opened and work was awarded to M/s SMEC Ltd. (lead firm)

in JV.

Audit further observed that after negotiation with the consultant

firm, letter of acceptance was issued in violation of PPRA-2004 and set

forth criteria resulted in mis-procurement of consultancy services of

US$ 3,849,460 and Rs 1,112.618 million.

Audit pointed out the matter in August 2017. The Authority replied

that bidding data clause BDS 1.8 (d) stated that “moreover, any adverse

report regarding performance of consultant on NHA projects received

from NHA‟s any relevant quarter may become basis for its disqualification

from the assignment”. Past performance was not shut on any date as per

RFP and the reports were sought until the price proposals were not

opened. So, the Single Stage Two Envelope procedure was preferred over

Single Stage One Envelope Procedure. Mechanism and manner for

blacklisting was under process and approval by the Executive Board

which had now been notified. The case of un-satisfactory performance of

M/s Dohwa on the basis of poor supervisory control as reported by the

GM (E-35) was now being referred to the M&I Section for their necessary

action.

The reply was not acceptable because a bid once opened in

accordance with the prescribed procedure would be subject to only those

rules, regulations and policies that were in force at the time of issue of

notice for invitation of bids.

The matter was discussed in the DAC meeting held in December

2017 wherein, the DAC pended the para.

Audit recommends that matter be investigated and responsibility

be fixed against persons at fault.

(DP. 132)

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4.4.6 Award of construction of motorways on Build Operate and

Transfer (BOT) basis without adhering Government’s interest

Build-Operate-Transfer (BOT) is defined as a type of arrangement

in which the private sector builds an infrastructure project, operates it and

eventually transfers ownership of the project to the government. In many

instances, the government becomes the firm's only customer and promises

to purchase at least a predetermined amount of the project's output. This

ensures that the firm recoups its initial investment in a reasonable time

span.