Audit reveals Rs12b in irregularities

About half of CDA annual budget in 2008-09 had irregularities, says report.

ISLAMABAD: About half of Capital Development Authority’s (CDA) annual budget in 2008-09 had irregularities, said an audit report issued by Auditor General of Pakistan.

The report found irregularities in projects worth Rs12050.5 million. The auditor attributed these irregularities to mismanagement, loss, contractual management, overpayment and non-recovery, among others.

The major irregularities identified in the audit report are:

Approval of Building Plan without getting NOC - Rs4,882 million

In March 2008, CDA approved a building plan of a 47-storey five-star hotel. The building would have an estimated height of 710 feet. However the plan violated Civil Aviation Authority’s (CAA’s) rules. Any buildings falling within a certain radius of the air fields can have a maximum height of 310.64 feet.

CDA was required to obtain a No Objection Certificate from both CAA and the Pakistan Air Force before giving the go ahead to the project. It did not do so.

Construction work on the hotel was stopped in November 2008 after CAA raised objections. This caused the hotel management to stop the lease payments, which cost CDA Rs4,882 million (approximately Rs4.9 billion) in revenues.

Losses due to land acquisition- Rs3,149 million

CDA suffered losses of Rs3,149.9 million (roughly Rs3.15 billion) during fiscal year 2008-09, the report said.

A significant portion of this loss comes from the land acquisition in Sarai Kharbuza village, where CDA paid about 81 per cent more than the estimated market value of the land.

CDA acquired 7141 kanals and 3 marlas (roughly 893 acres) at Rs835,000 per kanal against the prevailing market price of Rs460,000. The calculated market price includes a 15 per cent compulsory acquisition surcharge as per CDA rules (400,000 + 15 per cent).

The land acquired in Sarai Kharbuza alone cost CDA a loss of Rs2,677.9 million.

Unauthorised extension of commercial area- Rs1262.5 million

As per CDA rules, 5 per cent of the total land is allowed to be allocated for commercial areas. However an agreement between the authority and a private housing society allowed 13 per cent of the northern strip of sector E-11 to be allocated for commercial use- wrongly allocating Rs1,262.5 million worth of land for commercial use.

Non-cancellation and possession of agro-farms- Rs930 million

Any agro-farm allotted to a person must be developed within three years of its possession.

The allottee may be fined and evicted if he/she fails to develop the farm within the given time.

Once developed, about 610 agro-farms around Islamabad would have been able provide the city with a fresh daily supply of vegetables, poultry, dairy, fruits, fish and flowers.

However a survey carried out in June 2009 found 169 of the allotted 610 agro-farms were undeveloped and 339 agro-farms were being used for unintended purposes despite the passage of three years.

CDA did not reclaim any of the 508 plots violating their contractual agreements. Moreover none of the owners were fined. The audit report puts the value of these 508 plots at Rs930 million.

Irregular investment in bank- Rs500 million

While CDA is allowed to invest its money in any bank (provided the bank has a minimum A rating on State Bank of Pakistan’s website), any investment of more than Rs10 million must be approved by the authority’s board of directors. Moreover, before any decision is made, the authority is required to solicit bids from at least three banks.

However, the directors of Estate Management I and II invested Rs500 million in Muslim Commercial Bank, CDA Secretariat Branch, for one year at 11 per cent return without inviting other bids. Thus they violated the rules and this money has been identified by the audit report as “irregular investment… without competitive bidding”.

Irregular award of work- Rs303.7 million

CDA awarded projects worth Rs303.7 million without following standard procedure.

Additional work of Rs165.9 million was awarded to existing contractors without inviting additional bids. While a contractor can revise its bid later on, CDA rules call for additional bids in case the enhancements are “abnormally large”.

CDA did not invite additional bids even though the enhancements in these projects were more than warranted.

Similarly CDA awarded work worth Rs133.6 million without approval of PC-I, according to the audit report.

The authority also did not invite bids for a project “Cladding of wall of underpass at 7th Avenue, Islamabad”. The project, worth Rs4.2 million, was awarded through a single tender without even a detailed estimate.

Published in The Express Tribune, September 23^rd, 2010.