ISLAMABAD: A massive irregularities of up to Rs.52 billion and US$ 370 million in the affairs of Defence including Defence Procurement and Production, Frontier Work Organization and Defence Land Administration for the financial year 2020-21, have been identified by the Auditor General of Pakistan (AGP).
The report also pointed out severe violations of the criteria lead down by the supreme court of Pakistan.
The audit report noted that number of formations under the Ministry of Defence Production did not provide auditable record for scrutiny which was a serious violation of the Constitution (read with the Auditor General Ordinance and Supreme Court orders). It maintained that it “needs investigation at appropriate level to fix responsibility against those involved besides provision of auditable record to audit.”
“After the 18th Amendment in the Constitution, there is no room for denial of disclosure and withholding of accounts from Auditor General for audit,” the report stated.
It further disclosed that the formations including Mechanical Vehicles Research and Development Establishment (MVRDE) [now called research and development Establishment-RDE] Rawalpindi, Directorate General Procurement, Army (DGP) Rawalpindi and Directorate General Munitions Productions (DGMP) Rawalpindi – did not provide auditable documents causing irregularities of Rs.21.4 billion and US$ 243million – irregularities reported due to unauthorized payment of special allowances at revised rates instead of at the frozen level that resulted in a loss of Rs.93.40 million.
During audit of Heavy Industries Board Taxila, it was observed that Rs.25.4 million was spent on hiring residential accommodation for employees of HIT in violation of government policy.
The procurement related issues accounted for irregularities amounting to Rs.21.2 million, which was awarded to a local supplier in violation of PPRA rules.
During audit of DGMP Rawalpindi it was noted that Naval Head Quarter (NHQ) raised Directorate Procurement -10 for construction of one survey vessel in favor of Karachi Shipyard and Engineering Work (KS&EW) for construction at KS&EW.
Exemption from Public Procurement Rules was issued by Secretary Defence Production being proprietary indent. Contract was awarded to Jiangsu Dajin, China as main contractor at a total cost of US $ 35.40 million and KS&EW US$ 9.6 million as the sub-contractor.
Upon KS&EW failure to meet the timeline, NHQ raised another proprietary certificate for the construction in favor of Jiangsu Dajin, China without an open competition violating rules resulting in irregularities while shifting the contractual liabilities without competition amounting to US$ 5.700million.
A misprocurement of consultancy services causing irregularities of US$ 0.278 million was observed while auditing Pakistan Aeronautical Complex (PAC) Board, Kamra in which ABM info Tech Islamabad, an agent of Avis Avia Consulting Company Bahrain, was awarded the contract of consultancy services in connection with technical and business study for PAC Commercial Maintenance Repair and Overhauling (MRO) set-up at New International Airport Islamabad.
However, it was noted that the ABM info Tech Islamabad was not among the seven quotations received for pre-qualification of firms that were communicated to Technical Adjustment Deputy Managing Director.
The audit report further recorded US $108.2 million loss to the state during an audit of DGMP Rawalpindi. It was observed that NORINCO china was awarded contract to procure 52 Caliber Guns at total cost of US $540.1 million. However, no offset contract was concluded with the firm causing loss of US$108.2.
Another irregular conclusion of contract and non-cancellation at risk and expense of the defaulting firms caused a loss of US$ 12 million. The contract was awarded to Hanwha Corporation, Korea through their local agent Anachor Ltd Karachi for purchase of 275 Automatic Grenade Launcher (AGL weapon system) at a cost of US$12 million despite its non-clearance of security from Field Security Team.
The audit report stated that no further action however has been taken regarding cancellation of contract at firm’s risk and the expense was not initiated despite lapse of considerable time and expiry of stipulated delivery period.
Another unauthorized conclusion of contracts without observing the response time and approval of advance samples caused a loss of Rs. 888.8 million attributable to irregularities during DGP (Army) Audit.
Irregularity caused by unauthorized advance payment to contractors before actual receipt of contracted stores reported a loss of Rs.345.5 million.
Frontier Work Organization
During audit of Frontier Work Organization (FWO), Karachi, it was observed that construction projects amounting to Rs.7.3 billion which include procurement of goods, construction material or services of – Gwadar-Ratodero N-55, Qubo Shaheed Khuzdar and Port Qasim Authority – was awarded through quotations instead of open competition through uploading of tender on PPRA website and advertisement in print media.
Apart from this, Rs.1.6 million of irregularities were noted during some of the formations which concluded the contract in violation of PPRA rules.
“Audit is of the view that due to non-compliance of PPRA rules, possibility of non-transparent procurement could not be ruled our which reflect weak internal controls and poor financial discipline within the formation”, the report stated.
The audit report also pointed out irregularities of Rs.796 million due to unauthorized award of contracts to firms not registered with Pakistan Engineering Council (PEC).
The audit detected the irregular transfer of imprest money into unauthorized bank accounts to the tune of Rs.10.7 billion. It was observed that imprest accounts against different projects were opened in National Bank of Pakistan and the amount was received from CMA FWO Chaklala against different accounts opened in NBP but later the entire amount was transferred into different accounts opened in Bank AL-Habib resulting in unauthorized transfer of funds.
The audit report maintained that the matter needed to be investigated through court of inquiry besides initiation of disciplinary action against those concerned.
The audit also recorded irregularities of Rs.1.2 million against irregular sanction of work beyond financial powers. The audit also noted FWO granted some undue favors amounting to Rs.1.1 billion and concealed the facts which might result in bad debts.
Irregular booking on account of miscellaneous expenditure to the tune of Rs.707 million was recorded during FWO audit and some other irregularities worth Rs.2 billion were also reported including the unauthorized payment made to blacklisted contractor –(M/s Ajwa Construction Company) blacklisted by FBR since 13 May 2019 in respect of sales tax.
Defence Land Administration: During the audit of Military Estate Offices (MEO), it was observed that an amount of Rs.1.9 billion was paid into the account of various pieces of land acquired for defence purposes. However, handing/taking over and mutation of the land was not completed. The value of the land was not assessed before making the payment which resulted in irregular payment.
Around Rs.1 billion of amount was recorded as irregular due to irregular award/renewal of contracts in violation of PPRA rules.
The report detected Rs.245 million of unauthorized change of purpose/conversion of properties.
During audit of MEO Peshawar, it was observed that plot 13 (1000 square yards), plot 57 (624 Square Yards) situated at Peshawar Cantt, was being used commercially since long in violation of the lease agreement and no action was taken against the lessees which is a violation of rules.
During the audit of MEO Quetta, the report detected an irregularity of Rs.82 million in the construction of commercial plaza by Pakistan Armed Services Board (PASB). The land measuring 1,517.52 square meters was leased out for the period of 30 years to PASB for construction of Soldier House in Quetta. However, the land was used for construction of commercial plaza without sanction of Government which is irregular and in violation of Cantonment Land Administration (CLA) Rules.
The report pointed out irregularities of Rs.405 million on account of un-authorized construction of shopping mall on defence land.
During the audit of the accounts of directorate of welfare accounts, Air Headquarters, Islamabad, it was observed that FALCON complex (Super Market/Mall) building was constructed on A-1 land, at PAF Faisal Base Karachi. The value of land as per DV rate is Rs.405 million; and the un-authorized construction of shopping mall by Shaheen foundation was in violation of rules of reference.
Audit maintained that use of A-1 land for purpose other than authorized purpose was gross violation of rules.
During the audit of accounts of MEO Hyderabad, it was observed that an amount of Rs.41.1 million was collected on account of conversation of old grant properties into regular leases and deposited in Quarter Master General’s (QMG) fund under the direction of ministry of defence, but which was required to be deposited in full in the Federal Consolidation Fund as per rules.
Copyright Business Recorder, 2022