AGP report 2010-11: massive irregularities detected in CDA affairs

The Auditor General of Pakistan (AGP) has detected embezzlement and irregularities worth billions of rupees in the Capital Development Authority (CDA) affairs.
The Auditor General of Pakistan's Report 2010-11 has unveiled that Director Project Management office CDA, entered into an agreement with M/s Pak Gulf Construction (Private) Limited for lease of a plot at a total cost of Rs 6090.96 million with 25 percent advance, whereas balance 75 percent was payable in twelve equal quarterly instalments up to 10.08-2008.
CDA rescheduled the terms of payment time and again through amendments in the contract and granted relaxation in payment up to December 2012 without approval of the Ministry of Finance. Despite repeated re-scheduling the lessee failed to deposit balance amount. This resulted in non-deposit of cost of plot ie, Rs 2605.65 million.
The audit report observed that unauthorised re-scheduling was made due to weak financial controls. It pointed out lapse in July-August 2010. The report unveiled the mismanagement/ irregularity regarding non-recovery of instalments of cost of land of Rs 816.27 million. According to the report Director Project Management office did not receive four quarterly instalments @ Rs 82.06 million from December 2008 to September 2009 and three instalments @ Rs 162.67 million from December 2009 to June 2010. This resulted in non-recovery of Rs 816.27 million.
It said that revised schedule B-2 of third amended agreement dated January 3, 2009 provides that M/s Pak Gulf Construction (Pvt) Ltd was to pay to CDA the balance quarterly instalments of principal amount of the cost of land @ Rs 82.06 million from December 2008 to September 2009 and @ Rs 162.67 million from December 2009 to December 2012 for "Centaurus Shopping Mall", F-8/G-8 Islamabad.
The Auditor General's report further revealed the mismanagement of CDA regarding non-recovery of instalments worth Rs 427.80 million. It said that Director Project Management office CDA did not recover 6th to 9th quarterly instalments @ Rs 103.59 million each along with interest accrued thereon, which resulted non-recovery of Rs 427.80 million. It said that as per clause 3 of the contract agreement dated 10-01-2007 for construction of Three Star Hotel at Plot No 13 Main Club road Rawal Lake Roundabout Murree Road, Near Palace Motel, Islamabad, total premium for lease of plot was Rs 1657.361 million. Schedule-B of payment of principal amount and interest thereon provided that the principal amount of Rs 1243.21 million was recoverable in twelve quarterly instalments @ Rs 103.59 million each. The audit observed that non-recovery of instalments along with interest there upon was due to weak financial controls.
The report further revealed that Director Management Office CDA did not encash the bank guarantee after default on payment of instalments of Rs 1138.69 million due in December 2008. According to it, as per Schedule-D of contract/sale agreement dated 09-08-2005 between Capital Development Authority and Pak-Gulf Construction (Private) Limited, Bank Guarantee amounting to Rs 1522.74 million was to be provided by the lessee. In case of any default for payment of instalment on due date bank was bound to make payment within seven days on written demand signed by the CDA Chairman. The audit report observed that bank guarantee was not encashed due to weak financial controls.
The report further unveiled loss of revenue due to irregular/inauthentic waiver of Right of Way (ROW) charges worth Rs 184.45 million. It said that Director, Project Management Office, CDA Islamabad awarded a work "Laying of Fiber Optic Duct Project" to M/s World Call Telecom Limited and signed an agreement with Right of Way (as defined term) as the Authority's equity in the joint venture. The Right of Way charges were later on waived off through a post-tender change without prior approval of the Ministry of Finance. Irregular/unauthorised waiver of Right of Way charges resulted in a recurring loss of Rs 184.99 million per annum to the Authority. The report said that Rule 19 (iv) of General Financial Rules (Volume-I) provides that the terms of a contract once entered into shall not be materially varied without the previous consent of the authority competent to enter into the contract as so varied. No payment to contractor by way of compensation or otherwise, outside the strict terms of the contract or in excess of the contract rates may be authorised without the previous approval of the ministry of finance.
The AG report also revealed irregular enhancement of work worth Rs 936.48 million. According to it, Deputy Director Road Division-V, CDA awarded works, ie construction of vehicular roads at a cost of Rs 166.874 million and Service road (South & North) at a cost of Rs 68.87 million in sector I-16, Islamabad.
The works were revised to Rs 405.91 million and Rs 253. 88 million, respectively by awarding additional work in continuation of already awarded work. Total enhancement of both the works was Rs 423.23 million (180 percent above the original cost). This resulted in irregular award of work.
The report further unmasked the mismanagement of the CDA because of its non-recovery due to non-charging for additional storeys worth Rs 275.10 million. It said that Deputy Director, Building Control Section-III, CDA did not recover charges for allowing additional storeys from 4th to 10th for a plot measuring 21,000 square yards allotted to Pakistan Red Crescent Society, Islamabad, which resulted in non-recovery of Rs 275.10 million.
The AG audit report detected unauthorised provision of six Category-I plots and three Category-II plots in Sector I-8, Islamabad from CDA quota to FGEHF worth Rs 210.00 million. It said that Director, Estate Management-I, CDA placed these nine plots at the disposal of the FGEHF out of CDA quota and federal government officers in Sector I-8, Islamabad without any approved policy.
The Category-I plots were further sold/transferred in the same month, ie March 2009. This resulted in unauthorised provision of plots to FGEHF worth Rs 210.00 million. It observed that the unauthorised provision of CDA quota plots to the FGEHF in the absence of any such policy occurred because the management over-rid its own internal controls. It further pointed out unauthorised provision of plots in September 2010.
The audit report revealed loss due to allotment of land at lesser rates to Air University, Islamabad worth Rs 2913.68 million. It said that according to Finance Wing (Costing Section), CDA Corrigendum No CDA/CA/C-397/XV/2004/575 dated 25.08.2007 the revised price/sale premium rate for institutional plots in "H-Series" was Rs 13,100 per square yard. It said Director, Estate Management-II CDA allotted land measuring 70 acres (338,800 square yards) in Sector H-11/2, Islamabad on 33 years lease, extendable for further two subsequent terms of 33 years each, for construction of building of Air University @ Rs 4500 per square year instead of Rs 13,100 per square yard as notified by the Finance Wing. Allotment of land at a lesser rate resulted in a loss of Rs 2,913.68 million.
The report said that Drawing and Disbursing Officer of MPO Directorates, CDA drew temporary advances of Rs 290.53 million during the period from 2001 to 2010 for purchase of various parts of machinery, vehicles, POL, bitumen, cement, lubricants and light diesel oil, but did not adjust the amounts despite lapse of period of ten years which resulted in non-adjustment of temporary advances of Rs 290.53 million. It observed that non-adjustment of temporary advances occurred due to weak internal controls.
The audit report further revealed non-recovery of cost of various jobs/works from sister division worth Rs 137.02 million. It said that Deputy Director MPO (Maintenance & Operation) CDA executed jobs of road carpeting, issued premix concrete, repaired vehicles and issued machinery on the demand of various divisions of CDA during the year 2009-10. But cost thereof was neither deposited in advance by the respective division nor recovered even after completion of the jobs, which resulted in non-recovery of Rs 137.02 million.
The AG report detected non-provision of Bank Guarantee worth Rs 100 million. It said Director Planning CDA, allowed construction of Zarkoon Heights Zone-II and Shaia's River View Apartments, Zone-V after approval of buildings plans on December 29, 2009 and April 14, 2009, respectively but the sponsors did not submit bank guarantee, which resulted in undue benefit of Rs 100 million to sponsors. It appointed out the lapse in October 2010.
The report revealed the negligence of CDA due to which the Authority faced a loss of Rs 78 million. It said that Director, Estate Management-II CDA cancelled the allotment of Plot No 36-B on November 30, 1998 due to non-payment of balance premium, delayed charges and Annual Ground Rent. Later, a request of the allottee for restoration of the plot was also not acceded but the possession of the said plot was not taken over despite lapse of considerable time of 12 years, which resulted in loss of Rs 78 million.