Communication & Works Department of KP: AGP detects overpayment of Rs94.68m to contractors

PESHAWAR: The Auditor General of Pakistan (AGP) has detected overpayment of Rs.94.684 million in eleven cases by the Communication & Works Department of Khyber Pakhtunkhwa during 2018-19, said Audit Report on Accounts of the province.

The report has already been presented in the provincial assembly, wherein the Speaker has referred it to the Public Accounts Committee (PAC) of the house for further deliberation.

In first and major case of overpayment an amount of Rs.42.540 million has been made due to non-reducing cost estimates for withholding tax.

According to a letter dated 21.04.2015 all Provincial Works Departments while preparing cost estimates of developmental projects, which fall in the tax exempted areas such as Provincial Administered Tribal Area (PATA), shall frame the same on Market Rate System, but with 7.5% less cost to defray the amount added in the rate analysis of all works/ construction/ supply items to meet withholding tax.

During audit of the Executive Engineer Building Division Swat for the Financial Year 2017-18, it was observed that the payment of Rs.847,084,634/- was made to various contractors for the work awarded after 5/2015. The estimates were required to have been reduced for withholding tax @ 7.5% or an amount of Rs.62,578,865/- should have been recovered. Contrarily, the local office had recovered Rs.19,539,043/- only. This resulted in an overpayment of Rs.42,939,822/- to contractors.

The irregularity has occurred due to violation of rules. However, when pointed out in June 2019, the department stated that a detailed reply will be furnished after scrutiny of the record.

As Audit requested the department for convening Departmental Audit Committee (DAC) meeting twice, but till finalization of this report no meeting was convened so the audit recommended the recovery of the overpaid amount.

In the second case, an overpayment of Rs.24.162 was made to the contractor due to allowing 5% rebate overhead in violation of the summary to the Chief Minister for awarding work to Frontier Works Organization (FWO) on MRS-2015 with 5% rebate overhead charges and completion of work within 15 months.

According to Para-26 of the Chief Minister Summary, the C&W Department should have worked out the justification for 5% premium on MRS-2015 as recently notified MRS-2016 is below the MRS-2015 providing already a premium to FWO on current rates. However, if the work is to be executed in multiple shifts for completion of the project in a shorter time, then FWO has to put in additional resources for which the proposal of the premium is justified.

During audit of the Executive Engineer Building Division Nowshera for the Financial Year 2017-17, it was observed that a 5% rebate overhead was allowed to contractor in the work ‘Establishment of Medical College Nowshera’ on the justification to complete the work within the stipulated time period, i.e.,. 15 months.

Further verification of record revealed that the work order was issued to the contractor on 16/12/2016 for the work ‘Construction of Nowshera Medical College’. The work was required to be completed in August 2017, as per agreement and time of completion mentioned in the work order. The work was in progress up to the date of the audit, i.e., February 2019, meaning thereby that the contractor badly failed to complete work within 15 months for which 5% rebate overhead was allowed.

Audit says that lapse occurred due to violation of the chief minister directives and weak internal controls. But, when pointed out in February 2019, the department replied that a detailed reply will be furnished later on.

Audit requested twice for convening DAC meeting, but no such meeting was convened till the finalization of this report, so the audit recommended the recovery of the overpaid amount to contractors.

In the third case, an amount of Rs.6.578 million was paid to contractor on account of roof insulation in violation of Composite Schedule of Rates (CSR) 2012, which states that a full-fledge item of work for roof insulation is provided in he said schedule namely ‘P/L roof insulation with thermopore sheet 1’ thick @ 94.36sft.

During audit of the Executive Engineer C&W Division Haripur for the Financial Year 2018-19, it was observed that a work ‘Construction of Judicial Complex at Haripur’ was done by M/S Muhammad Irfan & Co (government contractor) and was paid an amount of Rs.22.123 million vide voucher dated 6.08.2018. Further scrutiny record revealed that Engineer-In-Charge paid Rs.10.558 million on account of the ‘P/L topping of concrete 2.1/2 thick screed’ and roof insulation 2 core of Bitumen thermopore sheet 1’ think.

Further scrutiny of CSR 2012 revealed that a full-fledge item of work for roof insulation was provided in the said schedule namely ‘P/L roof insulation with thermopore sheet 1 thick’ @ 94.36 feet, but instead of executing the said item of work, the Engineer-In-Charge misused his authority and allowed the item of works @ 59.26 and 191.036 per sft unnecessarily, which resulted into overpayment of Rs.6,579,841/-.

Audit held that execution of unnecessary item instead of a full-fledged item of work in the schedule, caused overpayment to contractor and resulted in loss to the government work Rs.6,579,841/-.

The lapse occurred due to weak internal controls and financial mismanagement. When pointed out in October 2019, the department replied that a detailed reply will be furnished after consulting of record. Audit requested the department for holding DAC meeting. But, no DAC meeting was convened till finalization of this report, so, the audit recommended recovery from the contractors.

AGP has also detected overpayments in several more cases including overpayment of Rs.5.309 million made to the contractor due to allowing an excess quantity.

During audit of the Executive Engineer Provincial Building Maintenance Cell Peshawar for the Financial Year 2018-19, it was observed that the contract for the AOM&R of Provincial Assembly Peshawar was awarded to M/S Rahim Dad & Sons against the contract cost Rs.12,661,529/-. Scrutiny of the 2nd running bill of Rs.12,661,529/- paid vide voucher dated 14.01.2019 revealed that excess quantity of 17352 M (19280-1928) was paid against the item of work ‘Applying emulsion paint 2nd & each subsequent coat’ as worked.

The payment was allowed for an excess quantity of 17352 M2 (19280-1928) as the execution of applying emulsion paid 2nd & each subsequent coat will be equivalent to the auxiliary items of works, i.e., scrapping ordinary distemper and primary coat. Contrarily, the item ‘Applying emulsion paint 2nd & each subsequent coat were paid over its auxiliary items. This resulted in overpayment of Rs.2,674,637/-.

Furthermore, scrutiny of the 3rd running bill paid to M/S Rahim Dad & Sons against the AOM&R of MPA Hostel vide voucher dated 12.11.2018 revealed that excess quantity of 17091.07 M2 (24415.81-7324.74) was paid against the item of work ‘Applying emulsion paint 2nd & each subsequent coat.

The lapse occurred due to weak management and supervision of the civil work activities and when pointed out, the department replied that a detailed reply will be furnished after consulting of relevant record. Despite the request of audit, no meeting of the DAC was convened, so, the audit has directed recovery of the overpayment.

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