Islamabad: Financial anomalies during fiscal year 2006-07 cost CDA kitty Rs 1bn

[Naveed Yaseen]

* Irregularity in IJ Principal Road construction resulted in a loss of Rs 289.6 million
* Advance payment of Rs 202.9 million by utility service providers not adjusted

By Muhammad Bilal

ISLAMABAD: The Auditor General of Pakistan (AGP) has detected over one billion rupees worth of irregularities in the Capital Development Authority (CDA) expenditures during fiscal year 2006-07. The AGP pointed out such anomalies as non-recovery of dues and wasteful expenditures in its audit report, 2006-07, placed before the National Assembly on Wednesday.

IJ Principal Road: The report highlighted a loss of Rs 289.6 million to the CDA exchequer during the IJ Principal Road construction.

It said the CDA canceled the contract for the construction of the road in question from Pirwadhai Intersection to Faizabad Interchange (Phase-II) in Islamabad and entrusted the remaining work to another contractor in November 2005 ‘at risk and cost’ of the original contractor. However, the authority failed to recover Rs 289.6 million from the original contractor, it said.

Advance payment: The report also revealed the CDA made advance payments to Islamabad Electric Supply Company (IESCO), Sui Northern Gas Pipelines Limited (SNGPL) and Pakistan Telecommunication Company Limited (PTCL) for the shifting of utility lines during 2005-06.

These utility service providers were required to submit adjustment vouchers/documents to the CDA on completion of the assigned tasks for adjustment in accounts but this didn’t happen resulting in non-adjustment of advance payment of Rs 202.9 million, it said.

The audit report pointed out non-recovery of Rs 149.3 million property tax by the CDA from the IESCO. The tax has been outstanding since 1995 against various buildings and land owned by the IESCO.

It also said the CDA failed to recover Rs 145.8 million property tax and water charges from the owners and occupants of commercial buildings. It said the amount had been awaiting recovery since 1991.

The CDA, however, managed to recover Rs 32 million outstanding dues during 2006-07 leaving behind Rs 113.8 million worth of balance, it said.

Also highlighted in the audit report was a loss of Rs 33.5 million through non-transfer of funds in profit and loss account.

According to it, the CDA Directorate of Land Rehabilitation maintained a current account in a scheduled bank for acquisition of land with an amount of Rs 1.291 billion. An amount of Rs 652.688 million was disbursed leaving unspent 49 percent of the released funds (Rs 638.386 million).

This unspent balance remained in current account for seven months during 2005-06, which was neither invested in the short-term deposit scheme nor was it transferred to profit and loss account of the authority. This non-transfer of funds in profit and loss account resulted in a loss of Rs 33.5 million to the authority.

In another case, the CDA failed to obtain performance bond valuing Rs 32.2 million from a contractor of an approved local insurance company within 20 days of the issuance of acceptance letter in 2005. A bond by unapproved insurance company was accepted. The contractor defaulted and the contract was cancelled in 2007, so the performance bond couldn’t be encashed within validity period, causing the CDA Rs 32.2 million financial loss.

The audit also revealed Rs 32.2 million worth of damage to the CDA kitty through payment of a mobilisation advance to a contractor on a conditional bank guarantee of a non-scheduled bank instead of irrevocable one in violation of terms and conditions of the original contract. Under the rules, neither a building or structure can be raised nor can an addition/alteration to it be made without the CDA’s prior approval.

In the above case, the CDA issued notices to the owners of plots including Shifa International Hospital for said violations during 2005-06 but couldn’t impose/recover penalties valuing Rs 22.2 million.

The report also showed wasteful expenditures of Rs 21.6 million in the rehabilitation of Kashmir Highway. The AGP report revealed non-recovery of Rs 20 million annual fee from cellular operators by the CDA.

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