Audit Report 2010-11: Rs 14.67 billion embezzlement detected in CAA

The Auditor General of Pakistan (AGP) has detected massive irregularities, embezzlement, losses and mismanagement worth Rs 14.67 billion in Civil Aviation Authority. According to Audit Report 2010-11, the national kitty faced loss of Rs 3.32 billion due to non-recovery of aeronautical charges from airlines.
The report says that Civil Aviation Authority (Finance Wing) failed to recover Rs 3.32 billion from different airlines on account of aeronautical charges. The audit observed that non-recovery was due to weak financial and administrative controls. The authority said recovery of Rs 423.00 million was made from PIA, while the case of Askari Aviation was in the court. Regarding others, the authority explained that recoveries were being pursued.
The authority was requested to produce record regarding reported recovery of Rs 423.00 million, but no record was produced for verification. The DAC in its meeting held on January 11-14, 2011 directed the Authority to expedite full recovery of the outstanding amount. Non-compliance of the DAC directive was reported till finalisation of the audit report.
The audit stresses early recovery of the dues and strengthening of internal control system. In another case, the report revealed that the institution faced loss of Rs 2.61 billion due to non-preparation and approval of PC-I & PC-II.
The report further reveals that CAA awarded two contracts for procurement of 24 Airport Rescue Fire Fighting Vehicles to M/s Oshkosh Corporation valued at Rs 1.37 billion ($16.09 million) and 19 vehicles valued at Rs 1.24 billion (including foreign exchange component of $11.57 million) without approval of PC-I and PC-II. The audit observed that irregular procurement was due to non-adherence of instructions of the government.
The audit pointed out the irregularity in September 2010. The authority replied that PC-I & PC-II are essentially prepared for cases being forwarded for approval of CDWP/Ecnec. In this case the CAA Board was empowered to approve these projects; therefore, the said documents were not prepared. Further, on 31.10.2007 Deputy Chairman, Planning Commission and subsequently Member (Infrastructure) expressed surprise as to why self-financed projects of CAA (not requiring government guarantees) are being referred to the Central Development Working Project (CDWP) for approval. This was done while examining a case of radar upgradation at an estimated cost of Rs 455 million.
The reply was not relevant as the value of each contract was more than one billion and 100 percent foreign exchange was involved. Further, CAA has not been exempted from observing the instructions of the Planning Commission. Hence, preparation and approval of PC-I and PC-II was required.
The DAC in its meeting held on January 11-14, 2011 directed the authority to refer the case to Planning Commission for clarification. Non-compliance of the DAC directive was intimated till finalisation of the audit report. The audit stresses strict action on non-adherence of instructions of the government on project execution. Similarly in another case, Rs 1.1 billion of public money was wasted due to unrealistic requirement to purchase two aircraft.
The report says that Director Logistics, Civil Aviation Authority purchased two aircraft costing Rs 1.075 billion for the purpose of Flight Inspection, one aircraft fitted with Flight Inspection System (FIS) and the other without FIS. The log books of the aircraft showed that the new aircraft made flight for 141 hours and 100 hours respectively since induction in CAA against expected 400 hours per year per aircraft as prescribed in tender documents.
CAA had installed new Automatic Flight Inspection System in already available Beech King-200 Aircraft in the year 2002 at a cost of US $3.00 million and induction of new aircraft was left pending for the next 15 years but new aircraft were procured in the year 2008, ie only after six years.
Log Book of old aircraft showed that the aircraft was in operation even after induction of the two new aircraft which indicated that the old CAA aircraft fitted with costly Flight Inspection System could be utilised. Sufficient infrastructure, such as qualified pilots, Calibration Console Engineer and qualified engineers for operation/ maintenance of the aircraft components, such as engine, airframe, electrification, etc were not available with CAA.
Further, CAA was maintaining one hangar with capacity of only two aircraft, whereas the third aircraft fitted with sensitive calibration system worth US $3.00 million, was parked in the open without mooring arrangement, making it susceptible to damage. The audit observed that irregularities in procurement of aircraft were due to weak financial controls.
The audit pointed out the wasteful/irregular expenditure in December 2009. The Authority replied that the old Normrac system did not have the capability to inspect the latest Navigation Aids and procedures; therefore, its utilisation in the current advanced avionics was limited.
The old aircraft was kept operational to meet emergency requirements till such time as the new aircraft were fully inducted. Improvements in infrastructure were already in process and would meet the targets soon. However, old vintage aircraft was being auctioned shortly; thereafter, existing hangar would meet the parking of two aircraft.
The reply was not tenable because induction of new aircraft was kept pending for next 15 years in the year 2002 at the time of installation of new automatic Flight Inspection System in the Beech King-200 aircraft. The reply was indicative of the non-availability of infrastructure/capacity for operation of additional two aircraft.
The matter was discussed in the DAC meeting held on January 11-14, 2011. The Committee observed that it was planning/execution failure. Optimum utilisation of aircraft was not being made due to non-availability of sufficient air crew/engineers. The issue of manpower must be addressed and placed before CAA Board in its next meeting. No compliance of the DAC directive was reported till finalisation of the audit report. Audit stressed strict action on the irregularities in procurement of aircraft along with investigation of the matter and fixation of responsibility.
The AGP also revealed that the national kitty faced 1.075 billion loss due to non-preparation/approval of PC-I from Ecnec and inauthentic cost estimates; Rs 173.08 million non-recovery of dues from commercial concerns/airlines; Rs 76.57 million loss due to allotment of space at lower rates; 67.57 million loss due to utilisation of excessive area; and Rs 31.21 million loss due to increase in licence fee at lower rate and many other irregularities were noted.