Audit embarrassment: CDA keeps spending and ‘losing’ money it doesn’t have

AGP report says revenue generation low, non-development costs, corruption losses high.

ISLAMABAD:

An audit report has highlighted the capital’s civic agency for achieving the poor governance trifecta --- failure to generate revenue, increasing administrative expenses and rampant corruption.

The latest Capital Development Authority audit report has exposed missed developmental targets, low revenue generation, weak internal controls, a spike in non-developmental expenditure and losses of up to Rs 19.2 billion due to fraud, misappropriation and underperformance in several transactions.

Developmental Targets

The Auditor General of Pakistan (AGP) report for 2013-14 stated that the capital’s civic agency achieved only 22.48 per cent of its planned developmental targets during the financial year (FY) 2012-13.

The CDA had earmarked Rs14.3 billion for developmental activities in FY 2012-13 through self financing, but was only able to generate Rs8.09 billion, or 56.43 per cent of the required revenue. Out of this, only Rs3.2 billion was spent on development activities.

Missed revenue targets

The report says that in FY 2012-13, CDA budget documents claimed in would generate Rs21.4 billion from the CDA’s own revenue sources, which include the sale of plots, municipal receipts, and property, toll, and water taxes, among others. But it collected only 37.76 per cent of the estimated receipts.

The report adds that receipt estimates shown in budget document were either overambitious and unrealistic, or the CDA failed exploit and derive benefits from the available resources.

Non-developmental expenditure

As the civic agency struggled to raise funds, non-developmental expenditures were more than twice that of the previous year, up by 137.24 per cent.

The report said that this indicates expenditure was on the rise and development activities were not being given priority. “Expenditure on non-developmental activities was incurred at the cost of development,” the report states.

Other flaws

The AGP reported that the CDA did not submit its budget for FY 2012-13 to the government of Pakistan for approval, which is mandatory under federal law and the CDA Ordinance. Similarly, the CDA did not maintain its accounts in accordance with the CDA Ordinance and negative balances have been appearing in its accounts since FY 2005-06. The AGP report also pointed towards heavy closing balances, failure to adjust letter of credit amounts, failure to prepare of pro forma accounts, failure to remit government receipts, and its utilisation of deposits towards expenditure without proper authorisation.

Losses

Some 148 paragraphs of the audit report refer to Rs19.2 billion in losses attributed to fraud, irregularities, misappropriation, internal weaknesses and underperformance.

Most of the largest irregularities were related to the CDA Estate Wing.

The report pointed out that the biggest loss of Rs 4.5 billion was incurred due to weak internal controls, as the CDA failed to retrieve land from the adverse possession of different housing schemes near Kuri Village and Sector E-11.

The CDA also lost Rs2.28 billion due to its failure to impose or recovery commercialisation charges for operating commercial activity on plots allotted for the establishment of manufacturing industries.

Another Rs 944.99 million was not recover under the heads of cost of plots, delayed payment charges, capital value tax and advance income tax. The CDA also failed to collect Rs550.51 million from violators of building by-laws.

In many cases, the authority also failed to obtain insurance policies from contractors, which resulted in losses to the tune of Rs739.18 million.

Similarly, hundreds of millions were lost due to the sale of plots at low rates, failure to recover commercialisation charges for plots, irregular award of extra work to contractors without competitive bidding, failure to accept the highest bids against residential and commercial plots, failure to sell off industrial and residential plots in Sector I-9, inefficient and ineffective utilisation of public funds without achieving prescribed targets, failure to take possession of commercial properties for which the leases have expired, and failure to collect penalties from contractors and others.

Suggestions

The AGP suggested that the CDA improve its budgetary mechanism, review its financial rules and make appropriate amendments for better performance. The auditors also suggested that the CDA should prescribe and notify the rates of penalties for encroachments on its land.

To safeguard the CDA’s immoveable assets and land, the AGP suggested that it should retrieve encroached land and take possession of cancelled plots from illegal occupants at the earliest.

Published in The Express Tribune, October 29^th, 2014.