Weak controls, pursuit of payments cost CDA billions

Civic body failed to achieve revenue targets in the sale of commercial plots in Blue Area

ISLAMABAD: The Auditor General of Pakistan (AGP) has pointed out serious deficiencies in mechanisms adopted by the Capital Development Authority (CDA), including improperly pursuing recoveries and ineffective oversight mechanism for exercising revenue collection policies, disregarding rules, regulations and weak internal controls which meant the authority lost billions.

This was revealed in a report which the AGP had recently submitted to the Parliament.

The report stated that section 4(2) of the CDA Ordinance 1960, defines the authority a corporate entity and that generates income from collecting taxes in addition to the sale of residential and commercial plots.

The AGP’s report noted that in the fiscal year 2014-15, the CDA had listed receipts worth an estimated Rs45.824 billion in its budget estimates, banking on municipal services recoveries and advertisements and other receipts.

However, a review of the revised budget estimates for the same financial year indicated that these revenue targets were not achieved.

The CDA Directorate of Municipal Administration (DMA) estimated receipts worth Rs1 billion but it actually received around half of that money, Rs528.88 million.

Moreover, the MPO Operation Hiring Charges for machinery were listed at Rs100 million but it never received a penny. Further, CDA was supposed to collect Rs5.5 billion from the open auction of commercial plots. However, it barely managed to raise half of that, settling in for Rs2.16 billion.

The biggest failure, the AGP report noted, was in the sale of plots in the coveted Blue Area of the capital. The CDA had set sights on generating Rs2 billion from selling plots in the posh locality, but it could only muster a paltry Rs380.266 million. On the other hand, the auction of plots in developed sectors saw it collect Rs139.767 million, down from estimated targets of Rs4 billion.

Thus CDA actually collected around Rs3.213 billion, a quarter of its Rs12.6 billion target.

The shortfall, a whopping Rs9.387 billion.

The AGP audit report recommended that the authority adopt appropriate measures to exploit revenue opportunities and avoid pilferage of revenue.

Similarly, the audit report revealed that the CDA finance Wing, per a receipt circular, dated September 30, 2014, notes that the CDA Board in its eleventh board meeting fixed a net target for municipal services receipts at Rs1 billion for the fiscal year 2014-15. A 10 per cent enhanced projection of Rs1.1 billion was made for the subsequent fiscal year of 2015-16.

However, CDA’s receipts showed that the Director (DMA) CDA Islamabad could only receive Rs342.39 million during the financial year 2015-16 for municipal services including fines and penalties, coffin carrier hiring charges, receipts from graveyards, court fines, licence fees, weekly bazaar payments, rent of open spaces, birth and death certificate fees, trade licences, sign boards, banners, and telecom units, with a shortfall of Rs757.609 million.

Audit observed that the shortfall in revenue occurred due to lack of pursuance from the authority for outstanding sums, not revising rates for different fees in line with inflation, market fluctuation and general price index (GPI), not identifying new advertisement and trading sites, not auctioning advertisement sites on regular basis and not disposing of confiscated material timely.

The audit noted that the shortfall in receipts took place due to weak internal and financial controls.

The CDA also fell short in its estimated receipts for property tax, water and allied charges.

The authority had set a target of Rs1.46 billion during the financial year 2014-15 and 2015-16.  However, the CDA could only collect receipts worth Rs747.57 million for property tax and Rs231.81 million in water and allied charges a shortfall of Rs480.62 million. This trend continued in FY 2015-16 when only Rs904.834 million were collected till March 2016.

Audit maintains that loss occurred due to improper pursuance recovery and ineffective oversight mechanism for exercising administrative, internal and financial control.

The AGP had pointed out the irregularities in April 2016, but the CDA did not reply.

The matter could not be discussed in DAC meeting despite repeated requests made by the AGP’s office through late 2016 and early 2017.

The audit recommended that appropriate measures should be taken to exploit revenue opportunities and avoid pilferage of revenue in the CDA.

Published in The Express Tribune, September 2^nd, 2017.