Audit Report on the Accounts of Defence Services Audit Year 2018-19

AUDIT REPORT ON THE ACCOUNTS OF DEFENCE SERVICES AUDIT YEAR 2018-19

AUDITOR-GENERAL OF PAKISTAN

TABLE OF CONTENTS

Page No. PREFACE iv ABBREVIATIONS AND ACRONYMS v EXECUTIVE SUMMARY xi SUMMARY TABLES & CHARTS I. Audit Work Statistics xx II. Audit Observations Classified by Categories xx III. Outcome Statistics xxi IV. Irregularities Pointed Out xxii V. Cost-Benefit Analysis xxii CHAPTER-1 Ministry of Defence

1.1 Introduction 1 1.2 Status of Compliance of PAC Directives 1

AUDIT PARAS

Pakistan Army 1.3 Irregular / Un-authorized Expenditure 3 1.4 Recoverables / Overpayments 22 1.5 Loss to State 42 1.6 Mis-procurement of stores 52 1.7 Non-production of Record 58 Military Lands and Cantonments 1.8 Irregular / Un-authorized Expenditure 61

1.9 Recoverables / Overpayments 65 1.10 Loss to State 96 1.11 Mis-procurement of stores 104 Pakistan Air Force 1.12 Irregular / Unauthorized Expenditure 106 1.13 Recoverables / Overpayments 117 1.14 Loss to State 125 1.15 Mis-procurement of Stores 131 Pakistan Navy 1.16 Irregular / Unauthorized Expenditure 140 1.17 Recoverables / Overpayments 152 1.18 Loss to State 163 1.19 Mis-procurement of Stores 166 1.20 Non-production of Record 170 Military Accountant General 1.21 Irregular / Unauthorized Expenditure 172 1.22 Recoverables / Overpayments 175 Inter Services Organizations 1.23 Irregular / Unauthorized Expenditure 177 1.24 Recoverables / Overpayments 178 CHAPTER-2 Ministry of Defence Production

2.1 Introduction 180 2.2 Status of Compliance of PAC Directives 180

AUDIT PARAS 2.3 Irregular / Unauthorized Expenditure 182 2.4 Recoverables / Overpayments 191 2.5 Loss to State 196 Annexure-I MefDAC Paras (DGADS North) 205 Annexure-II MefDAC Paras (DGADS South) 239

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PREFACE

The Auditor-General conducts Audit subject to Articles 169 and 170 of the Constitution of Islamic Republic of Pakistan 1973, read with Sections 8 and 12 of the Auditor-General’s (Functions, Powers and Terms and Conditions of Service) Ordinance, 2001. The Audit of Defence Services was carried out accordingly. The Directorates General of Audit Defence Services (North and South) conducted Compliance Audit on the accounts of Defence Services during July to November for the financial year 2017-18 with the view to report significant findings to the relevant stakeholders. Audit examined the economy, efficiency and effectiveness aspects of the Defence Services. In addition, Audit also assessed, on test check basis whether the management complied with applicable laws, rules and regulations in managing the resources. The Audit Report indicates specific actions that, if taken, will help the management realize the objectives of the Defence Services. Most of the observations included in this Report have been finalized in the light of discussions in DAC meetings. The Audit Report is submitted to the President in pursuance of the Article 171 of the Constitution of Islamic Republic of Pakistan 1973, for causing it to be laid before the Parliament.

(Javaid Jehangir) Auditor-General of Pakistan

Dated: 2019

ABBREVIATIONS AND ACRONYMS

ACAS Assistant Chief Air Staff ACE Additional Chief Engineer AFDP Armed Forces Development Programme AFI Air Force Instruction AFNS Armed Forces Nursing Services AFOHS Air Force Officers Housing Scheme AG Accountant General AGE Assistant Garrison Engineer AGP Auditor General of Pakistan AHQ Air Headquarters AMF Aircraft Manufacturing Factory AOC Air Officer Commanding ARV Annual Rental Value ASC Army Services Corps ASID Army Stores Inspection Depot ASRF Advance System Rebuild Factory ATG Annual Training Grant AWACS Airborne Warning and Control System BA Fee Building Application Fee BG Bank Guarantee BMP Dte Budget Marketing and Procurement Directorate BOO Board of Officers BOQ Bachelor Officer Quarter BoQ Bill of Quantity BTS Base Trans-receiver Station BTU British Thermal Unit C&SC Command & Staff College CA Contract Agreement CNA Controller of Naval Accounts CBC Cantonment Board Clifton

CBI Cash Book Item CBR Cantonment Board Resolution CBs Cantonment Boards CDR Cash Deposit Receipt CEO Cantonment Executive Officer CFA Competent Financial Authority CIF Cost Insurance and Freight CIMLA Cantonment Institute of Municipal and Land Administration CLAR Cantonment Lands Administration Rules CLS Chief of Logistics Staff CMA Controller of Military Accounts CMES Commander Military Engineering Services CMH Combined Military Hospital CNE Civilian Non-Entitled COD Central Ordnance Depot COMLOG Commander Logistics COMPAK Commander Pakistan COMSAT College of Management Sciences and Technology CP Dte Civilian Personnel Directorate CPD Chief Project Director CRV Consignee Receipt Voucher DAC Departmental Accounts Committee DBA Director Budget Accounts DCAS Deputy Chief of Air Staff DCI Defence Complex Islamabad DCNS Deputy Chief of Naval Staff DG DP Directorate General Defence Purchase DG RV&F Director General Remount Veterinary and Farms DGMP Director General Munition Production DGP (Army) Directorate General Procurement (Army) DGW&CE Director General Works & Chief Engineer

DHA Defence Housing Authority DMA Daily Messing Allowance DOHS Defence Officers Housing Scheme DP Draft Para DP (Air / Navy) Directorate Procurement (Air / Navy) DP Establishment Defence Production Establishment DRTS Damage Repair Training Simulator DSAS 2000 Defence Services Accommodation Scales 2000 DSR Defence Services Regulations DW&CE Director Works & Chief Engineer EDO Executive District Officer E-in-C Engineer-in-Chief EME Electrical and Mechanical Engineering Engr. Engineer ESD Engineering Stores Depot FA Financial Advisor FAM Financial Audit Manual FBR Federal Board of Revenue FIA Federal Investigation Agency FOB Free on Board FOR Free on Rail FR Financial Regulations FTO Federal Treasury Office FWO Frontier Works Organization GE Garrison Engineer GHQ General Headquarters GSR General Staff Requirements GST General Sales Tax HEC Higher Education Commission HESCO Hyderabad Electric Supply Company HIT Heavy Industries Taxila HQ SC Headquarter Southern Command HQ SC Headquarter Southern Command vii

HRA House Rent Allowance HRF (T) Heavy Rebuilt Factory (Tank) HSR Hospital Stoppage Receipts IE&I Institute of Electronics and Instruments INTOSAI International Organization of Supreme Audit Institutions ISPR Inter Services Public Relations IT Invitation of Tender JCOs Junior Commissioned Officers JSHQ Joint Staff Headquarters JSI Joint Services Instruction KARF Kamra Avionics and Radar Factory KCB Karachi Cantonment Board KW&SB Karachi Water & Sewerage Board LAC Land Acquisition Collector LC Letter of Credit / Local Currency LD Liquidated Damages LP Local Purchase LS Logistic Support LUMS Lahore University of Management Sciences MAG Military Accountant General Mef DAC Memorandum for Departmental Accounts Committee MEO Military Estate Office MES Military Engineering Services MH Military Hospital MIS Management Information System ML&C Military Lands and Cantonments MOD Ministry of Defence MODP Ministry of Defence Production MOL Memorandum of Law MOQs Married Officer Quarters MRF Mirage Rebuild Factory NAB National Accountability Bureau NAM New Accounting Model viii

NHQ Naval Headquarters NHS Naval Housing Scheme NIV Not in Vocabulary NLC National Logistics Cell NLI Northern Light Infantry NOC No Objection Certificate NORE Naval Officer Residential Estate NUST National University of Science and Technology OC Officer Commanding PA Dte Personnel Administration Directorate PAC Pakistan Aeronautical Complex PAF Pakistan Air Force PAO Principal Accounting Officer PBG Performance Bank Guarantee PC Peshawar Command PEC Pakistan Engineering Council PESCO Peshawar Electric Supply Company PNAD Pakistan Naval Ammunition Depot PNS Pakistan Navy Ship PPRA Public Procurement Regulatory Authority PTDC Pakistan Tourism and Development Corporation QCC Quality Control Committee QMG Quarter Master General R&E Risk and Expense RAR Running Account Receipt RC Rawalpindi Command RHQ Regional Headquarter RO Reverse Osmosis RSPA Revised System of Pay & Accounting RTLT Repair Through Local Trade RV&F Remount Veterinary and Farms SADA Special Army Development Account SAR Special Audit Report ix

SI&T School of Infantry & Tactics SMA Special Messing Allowance SOP Standing Operating Procedure SRB Sindh Revenue Board SRO Statutory Regulatory Order SSD Special Security Division SSD Station Supply Depot SSGC Sui Southern Gas Company STA Special Transfer Account TC/ DC Term Contract/ Decoration Contract TESCO Tribal Electric Supply Company TIP Transfer of Immovable Property TO&E Table of Organization and Equipment TR Treasury Receipt UA Unit Accountant UNRA United Nations Reimbursement Account VOQ Visiting Officers Quarter WAPDA Water and Power Development Authority WTI Walton Training Institute

EXECUTIVE SUMMARY

The Directorates General of Audit Defence Services (North and South) being Field Audit Offices (FAOs) of the Department of Auditor- General of Pakistan are responsible for conducting the audit of budgetary grants of Defence Services (except Pakistan Ordnance Factories), administered by Ministry of Defence (MoD) and Ministry of Defence Production (MoDP). Audit of accounts of other allocations made to Defence Services like Special Transfer Account, United Nations Reimbursement Account and Defence Pension is also conducted by these FAOs. Moreover, audit of the Federal Government Education Institutions (FGEI) under the Ministry of Defence with their budget allocation from civil grant is also within mandate of these FAOs. Besides, these FAOs conduct audit of Cantonment Boards, Military Lands and that of NUST, DHA and FWO. The jurisdiction of Directorates General Audit Defence Services (North & South) has been made on geographical basis. The two Directorates conducted audit of 310 formations of MoD and 23 formations of MoDP during the Audit Year 2018-19. This Report highlights systemic issues like payments to contractors on documents without receipt of stores to avoid lapse of funds, unauthorized use of military lands, mis-procurement, allotment of residential accommodation without recovery of HRA, weak internal controls in Cantonment Boards, departures from codal formalities / delegated financial powers, contractual deviations, loopholes in supply chain, policy deviations in case of Al-Mizan, UNRA and DCI, etc. Remaining draft paras are listed in the Annexures-I & II of this Report for pursuance at DAC level. However, all cases in Annexure-I & II where appropriate action is not forthcoming from the relevant Ministry, the Audit observation will be reported to the Public Accounts Committee through the next year’s Audit Report.

a. Scope and objectives of Audit Out of total expenditure of the Federal Government for the financial year 2017-18, auditable expenditure under the jurisdiction of Directorates General Audit Defence Services (North and South) was Rs.1,022,595.838 million1 covering 3882 entities under the 2 PAOs. Out of this, Directorates General Audit Defence Services (North and South) audited an expenditure of Rs. 269,084.451 million out of normal defence budget which, in terms of percentage, was 26.31% of the auditable expenditure. In addition, accounts of special packages of entities selected during the year have also been audited and observations raised thereon are reflected in this Audit Report. Overall audit objective was to assess compliance with financial rules, accountal of receipts, examination of propriety, economy of expenditure, observance of regulation, adequacy of internal controls and review of internal audit. b. Recoveries at the instance of audit Through audit paras, recovery of Rs. 93,601.362 million was pointed out, out of which recovery of Rs. 7,937.298 million was accepted by the management. However, a sum of Rs.1,884.558 million, US $ 0.0645 million and EUR 0.290 million was recovered up to the time of compilation of report. The remaining recovery remains outstanding at the time of issue of this Report and updated position will be brought into notice of PAC during discussion on the relevant paras. c. Audit Methodology In accordance with the themes approved by the AGP, the Audit Plan was framed and implemented. The activities, workflows, procedures and internal controls of audited organizations were reviewed for identifying risk areas of irregularities. Accordingly, a unit-wise audit

1 This figure does not contain budget of Al-Mizan/AFDP/UNRA/Pension/FGEIs/CBs/FWO

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strategy was devised with such selection of method and employment of tactics which may help in devising strategy for audit scrutiny. Remaining within available resources, audit was conducted on test-check basis with emphasis on risk areas of high monetary value. Budget allocation, actual expenditure and account reconciliation of each audited unit was assessed as far as possible within the system in vogue because system-based spending-level detailed head-wise allocation as documented on civil side was not available. d. Audit Impact As mentioned earlier, Defence Audit has an institutional compatibility with the Defence Services, developed over a century. Hence, Audit advice is always valued by the executive. Audit observations are deliberated upon at appropriate level and remedial actions taken wherever required. Hence, Defence Audit has been able to form an impact on strengthening of control environment in Defence entities. As a result of raising of observations on following issues, the executive agreed to revise policy matters: - i) Policy on recovery of HRA from allottees of Government accommodation below entitlement has been deliberated by MOD with all stakeholders and is now in MOD for approval in consultation with Military Finance. ii) Policy on commercial use of A-1 land was devised in 2008. Audit has critically examined its implementation and raised objections. A revised policy covering these issues is now under active consideration. iii) All departures from PPRA reported by Audit have been taken seriously by MOD and inquiry has been ordered to fix responsibility in each case. iv) The issue of defence expenditure pointed out by Audit as incurred in deviation of policy decision for use of special budget package of

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Al-Mizan has been conceded to by MOD for regularization. A case to this effect is now with Military Finance for concurrence. v) Expenditure made out of UNRA budget on purposes other than replenishment has been identified by Audit during 2017-18. MOD has agreed to regularize it. Moreover, policy letter will be revised to bring it in line with present requirements. vi) The procedure for verification of bank guarantees of procurement contracts is being revised by the executive due to audit observations relating to non-confirmation and provision of fake documents. As per revised procedure, verification will be carried out through regional offices of banks instead of concerned branches. vii) With instructions from the Services HQs, steps to improve working and output of field audit committees have been taken. viii) MoD and MODP have held regular DAC Meetings during the year and pending workload is, therefore, less if compared with other Ministries / Divisions. ix) Issue of Audit of DHA is being discussed at top level to find a way forward to satisfy Supreme Court Judgment in line with Articles 169 and 170 of the Constitution. x) An inquiry against FWO as Audit refusing entity is presently in progress in MOD on direction of the PAC. e. Comments on Financial and Accounting Management The final Grant No. 26 pertaining to Ministry of Defence for financial year 2017-18 was Rs. 998,200.400 million against which expenditure of Rs. 1,022,595.838 million was incurred. Thus, showing an overall excess of Rs. 24,395.438 million. This issue has been highlighted by Audit during the course of Certification Audit 2017-18 and reported in Management Letter to the MAG. It is pertinent to mention here that Defence Audit also audits all other expenditure made by its auditees out of xiv

funds made available through other sources for AFDP, UNRA, Defence Pension, Aid to civil power, Election duty, FWO accounts, Civil Grant of Defence-managed organizations, Defence receipts, Cantonment Funds, DP establishments, etc. f. Comments on Internal Controls and Internal Audit i. An elaborate structure comprising rules, regulations and procedures specifying internal checks regarding procurements, HR payments, inventory management and receipts is available in entities under MoD, MoDP and MAG. Internal Audit Department conducts internal audit of Defence Services. ii. There is no internal audit structure available in Cantonment Boards. iii. Defence budget is centrally controlled at Service HQ level. CMA- wise budget allocation is not available. Moreover, detailed head- wise spending level budget is not made for all heads of Accounts. Centralization of budget has its pros and cons. Excess expenditure to the tune of Rs. 24.00 billion is one such shortfall. iv. System-based non-availability of data, unlike civil audit side, continues to be a hindrance for Defence Audit. v. PAF and PAC Kamra follow imprest-based post-audit and accounting under AFI 42/57 in departure of FR 1986. vi. As a result of gradual IT interventions in Defence Services, forms and procedures have undergone revisions without due approval from the AGP. vii. Internal controls on databases such as payroll master data, inventory, pension etc. as well as internal audit, including IT audit, is required to be established.

viii. There is no formal mechanism to reconcile MAG’s monthly expenditure figures with the executive, which raises questions on correctness of accounting reports. ix. MAG does not reconcile data with State Bank of Pakistan on monthly basis. x. Defence receipt via NBPs is unreconciled and unverified because no authentic direct information from AG/FTO is available with MAG. Verification of genuineness of Treasury Receipts remains an issue on Defence side. xi. Public Account master-data as well as transactional data is unreconciled and is without updation of review of balances. xii. Decentralization of data management by the MAG to CMAs is without development of quality assurance mechanism at both ends. xiii. System based transfer of accounting data from CMAs to MAG for consolidation and reporting, is presently on parallel run with the paper centric legacy system of punching media. An authentic quality control system at CMA, MAG and CLA levels should be in place before full abandonment of legacy system. xiv. Formal conveying of sanction of expenditure with full particulars of each transaction along with details of budget, entity and authority to CMA concerned should be put in place in the whole Defence Services in line with civil practices. xv. Consolidation of payments to reduce number of cheques in CMAs lacks maturity, wherever done which is in departure of usual workflow of PMAD by disengaging it with PMAD HR and their respective JDs. g. The key audit findings of the report

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i. Irregular/Unauthorized Expenditure of Rs 64,229.300 million and US $ 0.117 million in 94 DPs contained in 7 Paras 2 ii. Recoverables of Rs 7,410.629 million and US $ 2.616 million in 187 DPs contained in 7 Paras3 iii. Loss to State valuing Rs 24,611.299 million, US $ 0.617 Million and EURO 0.096 million in 37 DPs contained in 5 Paras 4 iv. Mis-procurement of Stores of Rs 14,067.582 million in 31 DPs contained in 4 Paras5 v. Non-production of Auditable Record of Rs 2,008.764 million in 09 DPs contained in 2 Para6 h. Recommendations (i) PPRA should be included in syllabi of all training courses in defence institutes. (ii) The unauthorized use of A-I land should be checked limiting its use for the specified purposes only. The income earned from the use of A-I land should be made transparent, disclosed in the public accounts and provided to Audit for scrutiny. (iii) The management needs to take steps to recover large amounts of Government dues pointed out in this report and fix responsibility thereof. (iv) An internal audit wing comprising qualified officers and staff should be institutionalized in Military Lands and Cantonments Department to mitigate the risk of irregularities. (v) HRA should not be paid to allottees of Government accommodations.

2 1.3, 1.8, 1.12, 1.16, 1.21, 1.23, 2.3 3 1.4, 1.9, 1.13, 1.17, 1.22, 1.24, 2.4 4 1.5, 1.10, 1.14, 1.18, 2.5 5 1.6, 1.11,1,15, 1.19 6 1.7, 1.20 xvii

(vi) Policy implementation in relation to expenditure on DCI out of funds generated through sale of land etc is seemingly confusing as civil works are also being carried out at DCI by GEs other than GEs (DCI). MOD / GHQ should take steps to clarify this amalgamation. (vii) The PAO should issue instructions to produce the auditable documents to the audit teams during Audit to avoid the reported cases of non-production of auditable record in future and constitute service wise standing committees to sort out recurring issue of non-production of auditable documents to Audit by units selected by AGP in Annual Audit Plan. (viii) MOD and MODP should take up cases with the Auditor General of Pakistan for approval of revised forms and procedures adopted as a result of automation by the three services and other Defence entities, under Article 170(1) of the Constitution. (ix) Monthly account reconciliation between executive and account office should be made at entity level to authenticate budget and account figures. (x) CMA wise budget should be allocated for budgetary controls at each transaction level. (xi) Erstwhile mechanism of commitment budgeting should be substantially revived to avert last quarter vulnerabilities reflected in this Audit Report because of which entities resort to fictitious documentation to get payment released to contractors without supply of goods or services secured through CDR, thereby putting undue cashflow burden on the Government. Ordering staff to fabricate documents without receipt of store to get huge payments released is in fact a mismanagement tool which is weakening internal controls.

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(xii) BG verification authentication system should be strengthened by MOD / MODP in consultation with SBP / SECP. (xiii) Given the magnitude of present commercial activities in Defence Services relating to land, dairy, medical, DP Establishments, etc there is an emerging need to frame rules to formalize existing arrangements thereby introducing controls far beyond SOPs / drills. (xiv) No CMA cheque should be issued to non-public fund against sanction for payment to units. (xv) UA offices attached with Engineering units (other than RSPA) needs to be upgraded to proper account offices linked with the CMAs through system based accounting system for daily transfer of booked data. (xvi) Issue of recovery of rent and allied charges has been repetitively pointed out by Audit over the years. MOD should tackle this problem holistically. (xvii) Successive Audit Reports reflect rampant internal control weaknesses in Cantonment Boards. MOD / ML&C should take steps to strengthen controls in the Boards for efficient and effective service delivery / value for money. It should include creation of internal audit structure in ML&C. (xviii) Procurement / award of contract by splitting to keep in financial power of lower authority is a nagging issue raised by Audit. MOD should take initiative to remove the interpretationary aspect of this issue. (xix) In view of existing Pre-Audit / Post Audit / Internal Audit weaknesses, extent, scope and frequency of Statutory Audit of PAF and PAC Kamra should be enhanced.

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Summary Tables & Charts

Table-1: Audit Work Statistics (Rs. in Million) Sr # Description No Budget/ Expenditure 1 Total Entities (Ministries/PAOs) in Audit 2 Budget 998,200.400 Jurisdiction 2 Total formations in audit jurisdiction 3882 Exp 1,022,595.838 3 Total Entities (Ministries/PAOs) audited 2 269,081.451 4 Total Formations audited 333 5 Audit and Inspection Reports (LTAR) 333 6 Special Audit Reports 7 - 7 Performance Audit Reports 3 - 8 Other Reports - -

Table-2: Audit Observations by Categories (Rs in Million) Sr # Description Amount placed under Audit Observation 1 Unsound asset management 86,297.526 2 Weak financial management 162,507.090 3 Weak internal controls 41,053.007 4 Others 4,547.142 Total 294,404.765

Table-3: Outcome Statistics

(Rs. in Million) Expenditur e on Total Sr Total last Description acquiring Civil Works Receipts Others current # year Physical year Assets Outlays 1 131,077.562 61,970.629 11,510.610 64,522.650 269,081.451 126,461.834 Audited Amount 2 under Audit 106,248.376 119,630.326 32,822.559 35,703.504 294,404.765 172,366.385 observation Recovery 3 pointed out 3,518.073 15,729.337 30,920.889 43,433.063 93,601.362 82,507.106 by Audit Recovery 4 51.014 840.596 507.838 6,537.850 7,937.298 23,641.949 accepted 1,843.238 1,884.558 Recovery 1,213.486 5 9.720 29.027 2.573 + EUR0.290 +EUR 0.290 realized +US$0.866 +US$0.0645 +US$0.0645

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Table-4: Irregularities Pointed Out (Rs. in Million) S # Description Amount under Audit Observation 1 Violation of rules and regulations as well as principle of propriety and 238,520.800 probity 2 Cases of fraud, embezzlement, thefts and misuse of public resources 17.309 1,920.097 3 Misclassification of expenditure and receipts.

4 Weaknesses of internal control system 41,052.715 5 Established recoverable and overpayments, or misappropriation of 10,284.109 public money 75.682 6 Non-production of record

7 Others, including cases of accidental loss, negligence etc. 2,534.053

Total 294,404.765

Table-5: Cost-Benefit Analysis (Rs. in Million) S # Description Amount

1 Outlays audited (Item 1 of Table 3) 269,081.451

2 Expenditure on audit 300.880

3 Recoverable realized at the instance of audit 1,884.558

+EUR 0.290

+US$0.0645

4 Cost - Benefit Ratio 6:1

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CHAPTER-1 Ministry of Defence 1.1 Introduction Ministry of Defence (MoD) deals with all policy and administrative matters pertaining to the three armed forces, defence treaties, defence agreements and military assistance to foreign countries. MoD also administers Inter Services Organizations, Pakistan Military Accounts Department, Military Lands and Cantonments and Federal Government Educational Institutions in Cantonments and Garrisons. Besides, coordination of civil grants relating to pension and FGEI, the MoD administers Grant relating to Defence Services which encompasses budget of Army, Air Force, Navy, ISOs, DP Establishments, PMAD and SSD. 1.2 Brief comments on the status of compliance with PAC directives The status of compliance of Public Accounts Committee (PAC) directives for the Audit Reports from 1985-86 to 2017-18 discussed during its various meetings held from July, 1992 to December, 2018 is given below:-

Year Total No. of Compliance Compliance Percentage Paras Paras Made awaited / Non of Discussed Complied Compliance 1 2 3 4 5 6 1985-86 76 05 02 03 40% 1986-87 36 06 03 03 50% 1987-88 49 08 01 07 12.5% 1988-89 48 15 03 12 20% 1989-90 69 03 0 03 0% 1990-91 63 04 01 03 25% 1991-92 65 05 0 05 0% 1992-93 91 12 06 06 50% 1993-94 198 83 28 55 34% 1994-95 91 0 0 0 0% 1

1995-96 102 09 01 08 11% 1996-97 106 104 58 46 55% 1997-98 651 05 0 05 0% 1999-00 443 222 78 144 35% 2000-01 699 696 85 611 40% 2001-02 570 15 10 5 66.67% 2002-03 161 161 152 9 94.40% 2003-04 111 21 03 18 14.29% 2004-05 55 55 34 21 61% 2005-06 138 121 73 48 60% 2006-07 95 35 13 22 37% 2007-08 56 40 05 35 12.05% 2008-09 39 18 0 18 0% 2009-10 124 59 25 34 42.37% 2010-11 Report yet not discussed 2011-12 Report yet not discussed 2012-13 Report yet not discussed 2013-14 33* 30 04 26 13.33% 2013-14 Not yet discussed by Sub-PAC up to 50 million 2014-15 Report yet not discussed 2015-16 Report yet not discussed 2016-17 Report yet not discussed 2017-18 Report yet not discussed Total 4169 1732 585 1147 33.77%

Ministry of Defence fully complied with 585 PAC directives out of 1732. The Principal Accounting Officer should take necessary steps to expedite further compliance of PAC directives.

* Above 50 million paras discussed by PAC

Pakistan Army Audit Paras 1.3 Irregular / Unauthorized expenditure – Rs 14,290.245 Million 1.3.1 Un-authorized expenditure on works out of Al-Mizan fund – Rs 8,942.278 Million According to Para 1(V) of Government of Pakistan Ministry of Defence letter No. 7/6/4004-05/D-21 (Budget) dated 30th November, 2004, “the releases from Special Transfer Accounts shall be used for replenishment of stores and procurement under Armed Forces Development Plan”. During audit of following units / formations for the years 2016-17 and 2017-18, it was observed that contracts / package valuing Rs. 8,942,278,000 were sanctioned out of Al-Mizan fund, which were not covered as per above cited Government orders:- (Rs. in million) S # DP No. Name of Unit / Formation Amount 1 DP-N-156/2017-18 GE Const-II, Rawalpindi 6,394.165 2 DP-N-199/2017-18 GE (Army) Abbottabad 93.460 3 DP-N-202/2017-18 GE (Army) Services, Lahore 12.560 4 DP-N-208/2017-18 GE (Army) Jhelum 267.908 5 DP-N-323/2017-18 GE (Army) Services, Rawalpindi 137.311 6 DP-N-332/2017-18 ACE (A), Mangla 152.522 7 DP-N-349/2017-18 702 PWS, Bhimber 27.652 8 DP-N-432/2017-18 GE (Army), Jhelum 16.003 9 DP-N-436/2017-18 ACE (A) 11 Corp, Peshawar 490.021 10 DP-N-448/2017-18 GE (Army), Mangla 8.995 11 DP-N-103/2018-19 GE (Army) Const-I, Rawalpindi 299.226 12 DP-N-110/2018-19 GE (Army-I), Sialkot 85.048 13 DP-N-116/2018-19 AGE (Army), Bannu 58.618 14 DP-N-155/2018-19 GE (Army) Const-I, Rawalpindi 821.00 15 DP-N-90/2018-19 ACE (Army) 10 Corps, Rawalpindi 33.289 16 DP-N-365/2017-18 11 Corps, Peshawar 44.500 Total 8,942.278 3

Audit was of the opinion that incurring of expenditure other than the specified purpose was a violation of Government policy. The irregularity was pointed out by Audit during 2016-17 and 2017-18. The executives replied that works were carried out on the basis of funds released by QMG‟s Branch GHQ Rawalpindi. The reply was not tenable being in departure of the above stated Government policy. The DAC vide meetings held in November & December, 2018 directed the management to get the irregular expenditure regularized. However, no progress was reported to Audit till finalization of this report. Audit recommends an expeditious implementation of DAC directive, besides, remedial measures. 1.3.2 Un-authorized utilization of funds out of United Nations Reimbursement Account – Rs 3,246.312 Million

According to provision of Government of Pakistan, Ministry of Defence letter No. 7/7/2004/05/D-21(Budget) dated 27th November, 2004, expenditure out of UNRA could be utilized for:- a) Purchase and replenishment of equipment and stores for Army contingents deployed on UN peace keeping missions. b) Pay and allowances and transportation of troops. c) Incidental and Misc expenditure of Army contingents directly related to UN peace keeping mission. Further, as per amendment made by the Ministry of Defence letter dated 7th March, 2009, expenditure can be incurred on projects approved by the Chief of Army Staff and concurred by the Finance Secretary on case to case basis. During audit of the accounts of following MES formations for the year 2016-17 and 2017-18, it was observed that an amount of Rs 3,246,312,000 was expended on different works out of UNRA which did not fall under the parameters mentioned above:-

(Rs. in Million) S # DP No. Unit / Formation Amount 1 DP-N-306/2017-18 GE (Army) Services, Rawalpindi 43.865 2 DP-N-307/2017-18 GE (Army) GHQ Rawalpindi 231.370 3 DP-N-329/2017-18 GE (Army) Abbottabad 41.926 4 DP-N-451/2017-18 GE (Army) Mangla 348.546 5 DP-N-502/2017-18 GE (Army) Peshawar 406.19 6 DP-N-573/2017-18 GE (Army) Const-II, Rawalpindi 171.99 7 DP-N-100/2018-19 GE (Army) Const-I, Rawalpindi 1,417.850 8 DP-N-132/2018-19 GE (Army) Bahawalpur 69.701 9 DP-N-189/2018-19 ACE (Army) Mangla 78.591 10 DP-N-347/2017-18 ACE (Army) 11 Corps Peshawar 83.599 11 DP-N-453/2017-18 GE (Army) Jhelum 352.684 Total 3,246.312

Audit was of the view that incurring of expenditure other than the specified purpose without approval of Competent Authority was unauthorized. The irregularity was pointed out by Audit in 2016-17 and 2017-18. The executive replied that the expenditure was sanctioned by the GHQ, QMG‟s Branch (Qtg & Land Dte) and MES was bound to execute the work as per orders of the Competent Financial Authority. The reply was not tenable as funds were used without any authorization. The DAC vide meetings held in November and December, 2018 directed the management that expenditure may be got regularized. However, no progress was reported to Audit till finalization of this report. Audit recommends an early regularization and its verification by Audit. 1.3.3 Un-authorized expenditure out of defence budget – Rs 476.337 Million

According to Government of Pakistan, Ministry of Defence Rawalpindi letter No.F.48/49/S/GHQ/F-2/18/D-12/2008, dated 6th November, 2003, a QMG Fund was established for shifting of GHQ to Islamabad. Further, according to para-2 (f) of Ministry of Defence 5

Rawalpindi letter No F.2/18/D-12 (ML&C)/2003 dated 11th November 2003 “QMG Fund shall be used to bear all expenses related to shifting/ construction of Defence Complex Islamabad (DCI)”. During audit of following Army formations, it was observed that works valuing Rs 476,337,000 relating to works of DCI Islamabad were sanctioned by QMG from Normal Defence budget estimates, instead of QMG fund, and payments were made to contractors. This resulted into unauthorized expenditure of Rs 476,337,000. (Rs. In Million) S # DP No. Formation Amount 1 DP-N-66-2018-19 GE (A) Construction-II, Rawalpindi 125.072 2 DP-N-122-2018-19 Additional Chief Engineer (Army) 10 Corps 24.856 Rawalpindi 3 DP-N-422-2017-18 Garrison Engineer (A) Services Rawalpindi 326.409 Total 476.337

The irregularity was pointed out by Audit in 2017-18. The executive replied that their responsibility was only execution / completion of works. Contention of audit pertains to allotments of funds which falls under purview of Budget Directorates and QMG Branch (Qtg & Land Dte) GHQ Rawalpindi. Further, funds from regular budget were also expendable against DCI projects in addition to the QMG fund. The works were also included in priority list of Capital Works FY 2016-17 approved by Govt. of Pakistan/MOD without objecting to the proposal. The reply was not tenable because expenditure was debitable to DCI Head of Account of QMG Fund which was established for construction of Defence Complex Islamabad and not from defence budget. Audit, therefore, emphasized that amount incurred, so far, be reimbursed from QMG Fund, besides, stoppage of further sanctioning of expenditure from normal defence budget. The DAC vide meetings held on 12th, 13th and 14th December, 2018 directed to shift the draft para to GHQ for appropriate

response. No further progress was reported to Audit till finalization of this report. Audit recommends refund of expenditure incurred on DCI out of normal Defence budget, besides, stoppage of further sanctioning of expenditure on DCI from normal Defence Budget. 1.3.4 Payment without actual execution of work - Rs 399.248 Million

Under Para-412 of Defence Services Regulations for MES, payment on running account may be made by the GE for work done. The amount of such payment shall not exceed the difference between the approximate value of work done and the cost of stores issued up-to-date. In making such an advance due regard is to be paid to total value of work done.

During Audit of Garrison Engineer (Army) Peshawar for the year 2016-17, it was observed that payment on account of Running Account Receipts (RARs) against 17 contracts was released up to 90% of total value of contracts during May and June, 2017, whereas record showed that work was not physically carried out at site and in some of the cases work was not even started. This showed that undue favor was extended to the contractors and unjustified payment of Rs 399,248,000 was released to them. The irregularity was pointed out by Audit in August 2017. The executive replied that payments were made to contractors due to allotment of funds by QMG in closing month of financial year. These funds were cost of war / UNRA and lapsable. Therefore funds were utilized for sake of early completion of project. The management hence accepted that payment was made just to avoid lapse of funds. The DAC vide meeting held on 13th December 2018 was apprised that the works had been completed and handed over to the users. DAC directed not to repeat such practice in future and relevant record be 7

provided to audit. Record regarding completion of the work was not produced to Audit till finalization of this report. Audit recommends that the matter should be investigated to fix responsibility, besides, regularization of the expenditure. Moreover, remedial measures should be taken to avoid such lapses in future. DP-N-520/2017-18 1.3.5 Irregular award of work before admin approval - Rs. 325.00 Million

According to para-16 (a) of MES Regulation, 1998, no works / service will be executed without administrative and technical sanction having first been obtained from the authority appropriate in each case and without funds being available to meet expenditure on it. During audit of GE (A) Hospital Rawalpindi, it was observed from contingent bills that payment against Ist Running Account Receipt was made amounting to Rs.325,000,000/- vide CBI No. 244 dated 23-06-2017 for construction of OPD Block Urology Department at CMH Rawalpindi. However, it was observed from acceptance letter issued by E-in-C to contractor vide letter No. 2000/21-A/DP&W/E-2 dated 14- 06-2017 that date of admin sanction was mentioned as 02-06-2017 whereas competent authority i.e. QMG in consultation with Deputy Financial Adviser issued administrative sanction on 20-06-2017 amounting to Rs 473,161,000/-. Hence issuance of acceptance letter to contractor without administrative approval was not in order and indicates weakness of process of work award and favour to the contractor. Audit was further of the view that the whole exercise was made in haste at a belated stage of financial year to avoid lapsing of funds and 68 % (approx.) of the administratively sanctioned amount was paid to contractor in just 2 days, even without issuing work order (the same was not enclosed with the RAR payment voucher). The work amounting to Rs. 325,000,000/- was not possible in just 2 days.

The irregularity was pointed out by Audit in December 2017. The executive replied that work was verbally sanctioned by QMG and hence the work was started early whereas allotment was received late from higher authority. The reply was not tenable as there was no provision in the rules whereby a high budget work can be started on mere verbal approval. The DAC vide meeting held on 12th December 2018 was apprised that work was started on verbal orders of QMG in February, 2017, due to urgent medical requirement. DAC directed that relevant record may be provided to Audit for verification. No further progress was reported to Audit till finalization of this report. Audit recommends an inquiry into the matter for fixing responsibility on person(s) at fault. Moreover, the expenditure should be got regularized from competent authority. DP-N-12/2018-19 1.3.6 Splitting-up of sanctions - Rs 237.375 Million

According to Table- A of Para-25 and Para-389 of DSR 1998, as amended vide MoD letter No. 2/12/D-15/2001 dated 12-6-2006, the power of administrative sanction of QMG is up to Rs 30 million and the contractual powers of E-in-C and DW & CE are up to Rs 35 million and Rs 30 million respectively. Further, Para-27 of DSR 1998 stipulates that no project will be split up merely to bring it within the powers of an approving authority. During scrutiny of record relating to GE(A)-I Quetta for the financial year 2017-18, it was observed that 13 contracts valuing Rs 237,375,000 were split up in order to avoid sanction of higher authority. Audit was of the opinion that the splitting up of expenditure was due to weak internal controls and financial management. The irregularity was pointed out in September 2018 The executive replied that the works were sanctioned through administrative 9

approvals at different locations. The reply was not tenable as the nature of works and their location was the same. Administrative sanctions were issued on the same date. This showed split-up. The DAC vide meeting held in December, 2018 directed the management that relevant documents in rebuttal of DP be provided to audit for examination. No further progress on the matter was reported to audit till finalization of this report. Audit recommends regularization of expenditure by the competent authority. DP-S-92/2018-19

1.3.7 Un-authorized utilization of funds - Rs 215.714 Million

According to provision of Government of Pakistan, Ministry of Defence letter No. 7/7/2004-05/D-21(Budget) dated 27th November, 2004, the expenditure out of UNRA could be utilized for:-

(a) Purchase and replenishment of equipment and stores for Army contingents deployed on UN peace-keeping missions. (b) Pay & Allowances and transportation of the troops. (c) Incidental and miscellaneous expenditure of Army contingents directly related to UN peace-keeping mission.

Further, as per amendment made by the Ministry of Defence letter dated 7th March, 2009, expenditure can be incurred on projects approved by the Chief of Army Staff with the concurrence of Secretary Finance.

During audit of accounts of the following MES (Army) formations for the period 2015-17, it was observed that an amount of Rs 215,714,268 was expended on different unrelated works out of UNRA funds in violation of above government orders/ instructions.

(Rs in million) S.No DP No Name of Unit/ Formation Amount 1 DP-S- 45 GE (Army) Services Quetta 102.165 2 DP -S- 42 GE (Army) Karachi 98.387 3 DP -S- 18 AGE (Army) Rahim Yar Khan 15.162 Total 215.714

Audit was of the opinion that incurring of expenditure for other than the specified purpose without approval of competent authority tantamounted to misuse of funds and reflected weak financial management.

The irregularity was pointed out in December, 2017 and January, 2018. The executive, however, furnished irrelevant reply.

The DAC vide meeting held in December, 2018 directed that the expenditure out of UNRA fund be got regularized from the competent authority. No further progress was reported to audit till finalization of this report.

Audit recommends for regularization of expenditure and its verification by audit, besides, fixing of responsibility against the person(s) at fault.

1.3.8 Un-authorized purchase of buffaloes beyond financial powers - Rs 100.775 Million As per Rule-89 Annexure H of Financial Regulations Vol-I 1986, QMG is empowered to conclude contract up to Rs.13.500 Million. While examining the record of Military Farm Punjnad Okara, it was observed that contracts were concluded on the basis of rate offered by M/S Junni Traders for purchase of 550 buffaloes-in-milk amounting to Rs 100,777,500/- by GHQ QMG Branch RV&F Directorate Rawalpindi vide their letter No.5804/119/Farms-4WP8x2 dated 15th Sep

2015 which was in contravention of the above Rule. This resulted into unauthorized purchase of buffaloes beyond Rs13,500,000. The irregularity was pointed out by Audit in November 2017. The auditee stated that separate contracts were made by each military farm. The reply was not tenable as overall expenditure in question was over and above the powers of QMG. The DAC vide meeting held on 15th November, 2018 directed that revised reply be provided to audit for scrutiny. No further progress was reported to Audit till finalization of this report. Audit recommends for regularization of expenditure from the competent financial authority. DP-N-567/2017-18 1.3.9 Irregular sanctioning of expenditure beyond financial limit – Rs 94.60 Million

Under the provisions of Rule-43 (d) of FR Vol-I 1986, amended vide Ministry of Defence letter No: F.3/1/98/D-15 dated 23-02- 2018, financial powers of IGT&E on behalf of COAS for procurement of training aids are Rs. 450,000/- per item (not exceeding Rs. 13,500,000 in one year). During audit of PMA Kakul for the financial year 2015-16, it was observed from payment vouchers that Rs. 94,600,000/- were sanctioned by IGT&E during the whole financial year for incurring expenditure on training facilities for foreign trainees. Audit was of the view that maximum limit of IGT&E to sanction the expenditure under the rules ibid was Rs 13,500,000 in one year, whereas Rs 94,600,000 was sanctioned, which was violation of above rule. The irregularity was pointed out by Audit in March 2017. The executive replied that the works were carried out in the light of CCMA GHQ Rawalpindi letter No. AT/Misc-2281-xxxiv dated 24-12-

2013. Reply was not satisfactory because the CCMA letter only clarifies about splitting of expenditure through sanctions of Rs. 450,000/- each and confirms the limit of sanctions up to Rs13,500,000/- in one year. Audit has accordingly pointed out sanctioning of expenditure of Rs 94,600,000 in one year, which was beyond the financial powers of COAS. The DAC vide meeting held on 14th November, 2018 was apprised that expenditure was made under different heads and the same was not in one specific head. DAC directed that relevant documents be provided to audit for scrutiny. No further progress was reported to Audit till finalization of this report. Audit recommends that expenditure incurred beyond the financial limits may be got regularized from the Government, besides, initiation of remedial measures to avoid such lapses in future. DP-N-324/2017-18 1.3.10 Unauthorized expenditure due to split-up sanctions - Rs 93.425 Million

According to Para-27 of Defence Services Regulations for MES 1998, “No project will be split up merely to bring it within the power of an approving authority”. Further, according to Govt. of Pakistan Ministry of Defence letter No. 2/12/D-15/2001 dated 12th June, 2006, the power of QMG for granting Admn sanction to a particular project / work is Rs. 30.00 million. While examining the accounts of Garrison Engineer (Const-I) Rawalpindi, it was observed that six sanctions for construction of three blocks of (E-type flats) at Rawalpindi costing Rs. 93,425,790/- were sanctioned by QMG in piecemeal by issuing two separate sanctions for each block i.e. one for ground and first floor and the other for second and third floor. The sanctions were also issued on one date i.e. 2nd March, 2012, which was beyond the financial powers of QMG.

The irregularity was pointed out by Audit in August 2014. The management stated that on the basis of sanction accorded by the QMG and contract concluded by the DW&CE (A) Rawalpindi the work was executed by GE (A) Const-I at site according to recommended drawing and BoQ of contract. Reply was not acceptable as the entire expenditure related to one work which was split into blocks merely to bring the job into financial powers of Q.M.G. The DAC vide meeting on 14th December, 2018 directed the management to get the expenditure regularized from Government of Pakistan. No further progress was reported to Audit till finalization of this report. Audit recommends implementation of DAC directives, besides, adoption of remedial measures to avoid such lapses in future. DP-N-156/2018-19 1.3.11 Award of contracts to ineligible firm – Rs 61.744 Million

According to Rule-6(a) of Financial Regulations Volume-I, 1986, “Every officer should exercise the same vigilance in respect of expenditure incurred from government revenue as a person of ordinary prudence would exercise in respect of the expenditure of his own money”. Likewise, Clause 8 of Contract Agreement specifies that “if tender of a contractor not enlisted with MES is accepted he shall be required to deposit 5% of CA amount as security in the form as demanded by accepting officer”.

During scrutiny of record pertaining to ACE 5 Corps for the financial year 2016-17, it was observed that 11 contracts amounting to Rs 61,744,400 were awarded to M/s Proof Tech which was not enlisted with the MES. Besides, requisite security deposit was not obtained.

The irregularity was pointed out by audit in May, 2018. The executive stated that necessary notices had been issued to the contractor for the purpose. The reply was not tenable as the management failed to follow due process of work award.

The DAC vide meeting held in December, 2018 directed that a fact-finding inquiry be conducted to investigate the matter and record thereof be produced to audit for examination. No further progress was reported to audit till finalization of this report.

Audit recommends an early implementation of DAC directive. DP-S-38/2018-19 1.3.12 Payment without execution of work – Rs 32.092 Million

Under para-412 of DSR, payment on running account may be made by the GE for work done. The amount of such payment shall not exceed the difference between the approximate value of work done and the cost of stores issued up-to-date. In making such an advance due regard is to be paid to total value of work done. Moreover, according to Rule 22 of FR(Vol-I) 1986, no advance payment (except in case of Govt to Govt contracts) and letter of credit will be authorized without the concurrence of the Finance Division even the contract may have been approved without reference to the finance division.

During audit of Garrison Engineer (Const)-I Rawalpindi, it was observed that payment on account of RARs against several contracts was released up to 95% of total cost of CAs whereas record showed that work was not physically carried out at site and progress was nil as per progress report. This was irregular and indicated an undue favor to the contractors by releasing advance payment of Rs 32,092,000 to avoid lapse of funds.

The irregularity was pointed out by Audit in October 2017. The executive replied that although the process was for adjustment of expenditure against lapsable allotments but the same amount was received back in form of CDR in order to keep the same amount held with the Government and to release according to the work done. Therefore, no undue benefit was rendered to the contactor. Release of payment without actual execution of work was in violation of rules. Moreover, release of payment without actual execution of work at the close of financial year shows lack of planning and weak controls on the part of management. The DAC vide meeting held on 13th December 2018 was apprised that as the funds were lapsable, the payments were released with consultation of higher authorities on retention of CDRs from the contractor to avoid surrender of funds. DAC pended the Draft Para and directed the executive to get the case scrutinized from the MAG. No further progress was reported to Audit till finalization of this report. Audit recommends inquiry, besides, regularization of the expenditure. DP-N-522/2017-18 1.3.13 Irregular conclusion of contract with a de-registered firm - Rs 16.835 Million

According to Rule-6(a) of Financial Regulations Volume-I, 1986 “Every officer should exercise the same vigilance in respect of expenditure incurred from government revenue as a person of ordinary prudence would exercise in respect of the expenditure of his own money”. Moreover, according to PEC Engineering Bye-Laws, 1987, Rule (3)(1),”No engineering work shall be constructed except by a constructor or operated except by an operator licensed as such by the Council”.

During scrutiny of record related to the office of GE (Army) C&SC Quetta for the financial year 2016-17, it was observed that 03 of the contracts valuing Rs 16,835,979 were awarded to M/s Zardan 16

Khan & Co, which was already de-registered by Pakistan Engineering Council w-e-f 01.01.2016. This resulted into irregular award of contract.

The irregularity was pointed out by audit in January, 2018. The executive provided an attested photocopy of PEC certificate bearing serial No 327873 PEC-II, license No 57706, category C, showing validity up to December, 2017 which was found non-genuine as the PEC website clearly reflected the status of the contractor as being “De-Registered” after 31.12.2015.

The DAC vide meeting held in December, 2018 directed for proof of registration of the contractor with PEC during the corresponding period for verification to audit and that inquiry may be conducted and responsibility fixed against the concerned.

Audit recommends an early implementation of DAC directive, besides, fixing of responsibility.

DP-S-59/2018-19 1.3.14 Non-recovery of liquidity damages – Rs 12.752 Million

As per Para-52(a) of PAFW-2249 forming part of contract that, if the contractor fails to complete the works and clear the site as stated in clause-53, such breach shall be liable to payment of compensation amount equal to 1% of the sum or of the measured value of the works order for every week, provided that total amount of compensation so payable under this condition shall not exceed 10% of the contract sum.

During audit of accounts of following MES (Army) formations for the period 2016-18, it was observed that the management failed to effect liquidated damages of Rs 12,752,551 from 11 of the contracts not completed within stipulated time, not extended by the Executive. 17

(Rs in million) S.No DP No Name of Unit/Formation Amount 1 DP-S- 187 GE (Army) Kashmore 4.582 2 DP -S- 227 GE (Army) Karachi 4.486 3 DP -S- 110 GE (Army) Services Quetta 3.684 Total 12.752

The irregularity was pointed out by audit in August and September, 2018. The executive at Sr. Nos 01 and 03 replied that the works had been completed by the contractors within stipulated time and extended dates. For Sr. No. 2, the executive replied that the works were suspended due to some reasons and the extensions were granted. Therefore, no LD was leviable. The reply was not tenable as the executive failed to provide any documentary evidence.

The DAC vide meeting held in December, 2018 in case of Sr. Nos 01 and 02 directed that the handing/taking over report of the Board and completion report (part-A and B) of works be provided to audit for verification. In case of Sr. No. 03, the DAC directed that relevant documents in rebuttal of DP be provided to audit for examination. No further progress in the matter was reported to audit till finalization of this report.

Audit recommends expeditious implementation of DAC directives/ recovery of LD charges from the contractors concerned.

1.3.15 Unauthorized advance payment to electric utility – Rs 11.531 Million

According to Para-408 to 417 of DSR, 1998, "There is no provision of advance payment to contractor except secured advance". As per Rule-47(c) of Financial Regulations Volume-I 1986, “The most careful supervision over expenditure will be exercised and on no account shall money be spent simply because it is available.” 18

While examining the accounts of AGE(A) Chhor for the financial year 2016-17, it was observed that advance payment amounting to Rs 11,531,293 was released on account of electricity bill to HESCO in the month of June to avoid lapse of funds. This resulted into unauthorized advance payment of Rs 11,531,293.

The irregularity was pointed out by audit in November, 2017. The executive replied that the advance payment would be adjusted against bills of the upcoming months. The reply was not tenable as the advance payment was not covered under the rules.

Audit recommends early regularization of expenditure and avoidance of such violations in future.

DP-S-240/2018-19

1.3.16 Un-authorized expenditure out of public fund against an un-approved officers mess – Rs 9.230 Million

According to Rule-6 of Financial Regulations (Vol-I) 1986, Government revenue shall not be utilized for the benefit of a particular person or section of community. During audit of Garrison Engineer (Army) Maint-II Rawalpindi, it was noted that GHQ QMG‟s Branch (Quartering and Lands Dte) Rawalpindi accorded 03 (x) sanctions for different works of Garrison Officers Mess, Rawalpindi. Contracts were concluded accordingly and final payment amounting to Rs 9,229,979/- was released out of public fund. Audit observed that Government sanction for establishment of “Garrison Officer Mess” was neither available in record nor did the mess exist at site. On ascertaining the position from CMA (RC) Rawalpindi, it was confirmed that “Mess Maintenance Allowance” was not being claimed for Garrison Officers Mess, indicating that the building

was not being used as Officers Mess. Therefore, the expenditure was not a bonafide charge against public fund and, hence, needed recovery from the management of the Garrison Officers Mess Rawalpindi and deposit into Govt. Treasury. The irregularity was pointed out by Audit in February 2015. The executive did not provide any reply. The DAC vide meeting held on 14th December, 2018 was apprised that contracts were awarded for provision of parking for sports area and footpaths. DAC directed that either sanctions may be got revised from Competent Authority as per actual work done or recovery may be effected and got verified from audit. No further progress was reported to Audit till finalization of this report. Audit recommends immediate recovery of the amount involved, besides, regularization of the expenditure so incurred. DP-N-195/2018-19 1.3.17 Irregular conclusion of contracts with blacklisted firms - Rs 8.997 Million

According to Rule-6(a) of Financial Regulations Volume-I, 1986, “Every officer should exercise the same vigilance in respect of expenditure incurred from government revenue as a person of ordinary prudence would exercise in respect of the expenditure of his own money”. Moreover, according to Rule 04 of PPRA Rules 2004, “Procuring agencies, while engaging in procurements, shall ensure that the procurements are conducted in a fair and transparent manner, the object of procurement brings value for money to the agency and the procurement process is efficient and economical”.

During scrutiny of record related to the office of AGE (Army) Badin for the year 2016-17, it was observed that the contracts amounting to Rs 8,997,200 were concluded with M/s Mayo Builder & M/s

KB Associates which were blacklisted in FBR since 23-08-2008 & 08-12- 2015, respectively.

The irregularity was pointed out by audit in January, 2018. The executive replied that the contractors could have been defaulter in tax payment matters at FBR but no other significant discrepancy & contract violation was found against them during the currency of contract.

Audit was of the view that while concluding contract the executing authorities were under obligation to protect government interest.

The DAC vide meeting held in December, 2018 directed that a fact-finding inquiry be conducted to investigate the matter and record thereof be produced to audit for examination. No further progress in terms of outcome of inquiry was however reported to audit till finalization of this report.

Audit recommends an early implementation of DAC directive, besides, fixing of responsibility.

DP-S-84/2018-19 1.3.18 Unauthorized local purchase beyond financial powers – Rs 6.00 Million

According to Rule 43 (a) (5) of Financial Regulations Volume -I, 1986, an officer‟s financial powers in the matter of the purchase of stores ordinarily extend to the limits to which he is empowered to enter into contracts. But in the case of local purchase of stores the limits up to which power to purchase any one article or any number of similar articles purchased at one time are pre-defined. The financial power of Commandant or equivalent is up to Rs 250,000/- per transaction.

During audit of School of Army Air Defence, Malir for the year 2016-17, it was observed that an amount of Rs 6,000,000 was expended on local purchase of items through 14 supply/work orders each valuing Rs 450,000, which was beyond financial authority vested with the Commandant.

Audit was of the opinion that the unauthorized expenditure was due to poor internal controls and weak financial management.

The irregularity was pointed out by audit in February, 2018. The executive furnished an irrelevant reply.

The DAC vide meeting held in December, 2018 directed that the expenditure may be got regularized from the competent authority under intimation to Audit/MoD. No further progress in terms of regularization was reported to audit till finalization of this report.

Audit recommends an early implementation of DAC directive, besides, fixing of responsibility.

DP-S-218/2018-19 1.4 Recoverable / Overpayments – Rs 1,621.724 Million and US $ 2.616 Million

1.4.1 Overpayment of electricity charges - Rs. 954.00 Million

Under Rule 47 (e) FR Vol-II 1986, “most careful supervision over expenditure shall be exercised and on no account shall money be spent simply because it is available. Moreover, according to Rule-1 of the above regulations, the Government servant shall also be held personally responsible for any loss sustained by the Government through fraud or negligence on his part and for any loss arising from fraud or negligence on the part of any other Government servant to extent to which

it may be shown that he contributed to the loss by his own action or negligence.

During audit of Garrison Engineer (Army) Services Peshawar, it was observed that PESCO had charged over billing for an amount of Rs. 954,000,000 as was evident from Additional Chief Engineer Peshawar letter No.400 / PESCO /11/E-4 dated 30th November, 2015, which required to be refunded. On scrutiny of the case, it was observed that only an amount of Rs. 6,423,570/- was deducted by the MES while making payment to the PESCO up to May 2017. Audit was of the view that payment should have been made after due verification. The irregularity was pointed out by Audit in January 2017. The executive stated that the case was already in NEPRA. Reply furnished by the executives was not satisfactory. PESCO was overbilling the Unit since 2007-08, but the management failed to check overbilling and payments were released without due verification by MES. The DAC vide meeting held on 13th December, 2018 was apprised that the case for refund was referred to PESCO but claim of excessive units was denied by PESCO and filed appeal in Peshawar High Court. DAC directed to pursue the court case for recovery of the amount involved and updated position be shared with audit. No further progress was reported to Audit till finalization of this reports Audit recommends inquiry into the matter for fixing responsibility on the person(s) at fault and following court case meticulously, besides, adoption of remedial measures to avoid such lapses in future. DP-N-463/2017-18 1.4.2 Non recovery of training charges from foreign students - US $ 2.616 (M)

According to JSI-4/2006, “Tuition fee @ US $ 300 per week per student was required to be recovered from foreign students / allied officers”.

Further according to Annexure-E to JSI-4/2006, “Messing charges @ US $ 8 per day, Accommodation charges @ US $ 12 per day single bed room single occupancy and US $ 6 double occupancy and Medical charges @ US $ 3 per day per student was required to be recovered from foreign students / allied officers”. During audit of PMA Kakul, it was observed that messing, accommodation, medical charges and tuition fees amounting to US $ 2,616,236 were not recovered from students of Saudi Arabia, Libya and Bahrain who attended / completed their courses. The irregularity was pointed out by audit in March 2017. The executive replied that charges of objected period in respect of foreign Cadets have already been claimed and forwarded to GHQ. Further disposal of claims was being carried out at GHQ level and no action was required at PMA end. Reply was not tenable as a mechanism should have been adopted which ensured timely recovery of fee / charges from the international trainees / government. The DAC vide meeting held on 14th November, 2018 was apprised that the claims have already been forwarded to GHQ and being pursued at GHQ level. DAC directed that record of recovery for the financial year 2016-17 may be provided to audit for verification. No further progress was reported to Audit till finalization of this report. Audit stresses for early compliance of DAC directives and verification of recovery by Audit. DP-N-357/2017-18 1.4.3 Non recovery of rent and allied charges from private consumers - Rs. 133.368 Million

According to Para-442 of Defence Services Regulations 1998, “the GE is responsible for making demands for payment of all revenue and for taking steps for its prompt realization”. During audit of the accounts of following (08) MES formations for the years 2016-17 and 2017-18, it was observed that rent and allied charges amounting to Rs. 133,368,000 were lying outstanding against various consumers, which needed immediate recovery. (Rs. in Million) S # DP No. Unit / Formation Amount

1 DP-N-91/2017-18 AGE (A), Bannu 1.642 2 DP-N-223/2017-18 GE (A), Abbottabad 1.166 3 DP-N-289/2017-18 GE (A) Svcs, Rwp 115.30 4 DP-N-298/2017-18 GE (A) Svcs, Multan 6.917 5 DP-N-311/2017-18 GE (A), Thal 1.915 6 DP-N-500/2017-18 702 PWS Bhimber 3.424 7 DP-N-580/2017-18 AGE (A), Risalpur 1.615 8 DP-N-128/2018-19 GE (A) Svcs, Okara 1.389 Total 133.368

Audit was of the view that non-recovery of Government dues was loss to state and showed weak internal controls. The irregularity was pointed out by Audit during the year 2017-18 and 2018-19. The executive replied that partial recoveries were effected and balance thereof would be recovered shortly but no documentary evidence was presented to audit for verification. The DAC vide meetings held in November and December, 2018 directed the management to get verified the recovered amount from Audit and unit wise recovery schedule be provided to Audit. No further progress was reported to Audit till finalization of this report. Audit recommends expeditious recovery of the amount involved and its verification by Audit.

1.4.4 Non-recovery of Government dues from tenants - Rs. 117.971 Million

According to Rule 2 of FR Vol-II 1986, “All transactions to which any officer of Government in his official capacity is a party, shall, without any reservation, be brought to account and all moneys received by or tendered to Government officer which are due to, or are required to be deposited with Government shall, without undue delay, be paid, in full, into a Government treasury or into the bank to be credited to the appropriate account or they shall be credited through the pay bill or other public account if it is so authorized”. During audit of Military Farm Sargodha, it was observed that Land of Chak No. 39 & 44 of MF Sargodha was leased out to tenants for cultivation but the tenants were not depositing rent of the farm. Therefore, an amount of Rs. 117,971,095 for the period ending 2015-16 was outstanding against lessees, which needed immediate recovery. The irregularity was pointed out by audit in November 2016. The executive replied that case for recovery of lease rent was under process at Lahore High Court. The case as and when finalized the amount would be recovered accordingly. Audit stresses upon to pursue the court case vigorously. The DAC vide meeting held on 15th November, 2018 was apprised that case is subjudice. DAC directed that court case be pursued vigorously. No further progress was reported to Audit till finalization of this report. Audit recommends vigorous pursuance of court case for early recovery of rent besides adoption of remedial measures to avoid such lapses in future. DP-N-310/2017-18 1.4.5 Non-recovery of Sales Tax on services – Rs 107.758 Million 26

According to Balochistan Sales Tax Ordinance, 2000 dated 29th June 2000, as amended vide Balochistan Sales Tax on Services Act, 2015, Schedule II, Part-B, services provided or rendered by persons engaged in contractual execution of work or furnishing supplies are liable to pay 15% Sales Tax on their rendered services.

A) During audit of following army units covering period 2013- 18, it was observed that Sales Tax on services @ 15% amounting Rs 106,295,292 was not recovered from the contractor payments.

(Rs in million) S. No Name of Unit/Formation DP No Amount 1 GE (Army) I, Quetta S-144 66.847 2 GE (Army) Command & Staff , Quetta S-54 25.932 3 SI & T, Quetta S-270 13.516 T o t a l 106.295

Non-recoveries were pointed out by audit during January to September, 2018. The executive at Sr. Nos 1 & 2 replied that no Sales Tax was applicable on TC/DC works. Executive at Sr. No. 3 replied that the unit being federal entity was not authorized to deduct Sales Tax on services. The contention of the management was not tenable as the Sales Tax on services was a provincial subject and was recoverable.

The DAC vide meeting held in December, 2018 was informed by executive at Sr. No. 1 that the matter had been taken up with FBR and its clarification was awaited. Executive at Sr. No. 2 replied that no Sales Tax was chargeable on civil works and with reference to Sr. No.3 the management replied that being a federal entity, it was not authorized to deduct Sales Tax on services. DAC pended the DP till formulation of policy/decision at MoD level, whereas the audit suggested recovery of tax due as per rules/instructions of the provincial government. Further progress in terms of recovery was not intimated to audit till finalization of this report.

Audit recommends expeditious recovery of the Sales Tax on services. B) According to Sindh Sales Tax Act No XII of 2011, issued by Sindh Revenue Board (SRB), Government of Sindh, vide Notification No. SRB/TP/51/2016/212146 dated 08th March 2017, Sales Tax would be charged @ 13% to 16% (from 2011 to 2017) on contractors‟ services.

During audit of 544 HY EME Bn Malir Cantt Karachi for the period 2012-17, it was observed that an amount of Rs 10,327,000 was expended on repair and maintenance of various vehicles and machinery from Repair Through Local Trade(RTLT) head. However, Sales Tax on services amounting to Rs 1,463,000 was not recovered from the contractors, which was in violation of rule quoted above.

Non-recovery of applicable taxes caused financial loss to the public exchequer and it indicated weak financial management.

The matter was pointed out by audit in June, 2018. The executive replied that Account Offices were responsible for making payment against bills and that they were required to deduct Sales Tax at source. The reply was not tenable as tax was not recovered.

The DAC vide meeting held in December, 2018 pended the DP till formulation of policy/ decision at MoD level, whereas the audit suggested recovery of tax due as per rules/instructions of the provincial government. Further progress in terms of recovery was however not reported to audit till finalization of this report.

Audit recommends expeditious recovery of the Sales Tax on services. DP-S-48/2018-19

1.4.6 Non-recovery of Sales Tax on goods – Rs 72.475 Million

Section 3 of Sales Tax Act, 1990 stipulates that subject to the provisions of this Act, there shall be charged, levied and paid a tax known as Sales Tax @ 17% of the value of taxable supplies made by a registered person in the course of furtherance of any taxable activity carried on by the person. Further, as per Rules 2(2) and (3)of the Sales Tax Special Procedure (Withholding) Rules, 2007 under S.R.O. 660(1)/2007, Islamabad, the 30th June, 2007, "A withholding agent shall deduct an amount equal to one-fifth of the total Sales Tax shown in the Sales Tax invoice issued by the supplier and make payment of the balance amount to him." Further, 2% extra tax levy was imposed on spare parts of vehicles w.e.f 4-10-2013 (SRO 896(1)/2013).

During audit of following Army units for the period 2013- 18, it was observed that Sales Tax amounting to Rs 72,475,526 was not deducted from the contractors‟/suppliers‟ payments as per following details: (Rs in million) S. No Name of Unit/Formation DP No Amount 1 CMH Quetta S-114 27.276 2 305 Spare Depot, Karachi S-276 26.815 3 601 Regional Workshop, Quetta S-166 10.871 4 SI&T, Quetta S-237 2.622 5 305 Spare Depot, Karachi S-299 2.310 6 GE (Army)-II, Malir S-194 1.814 7 AGE (Army), Khuzdar S-241 0.767 T o t a l 72.475

Audit was of the opinion that due to non-recovery of Sales Tax on goods, government exchequer was deprived of hefty amount of revenue on account of recoverable tax. Non-recoveries were pointed out by audit during 2017-19. The executive at Sr. Nos1,2,3& 5 replied that the deduction of GST was the responsibility of CMA. The executive at Sr. No. 4 replied that the rate of GST had been amended vide FBR SRO in 2013. The executive at Sr. 29

No. 6 furnished irrelevant reply, while no reply was furnished by executive at Sr. No. 7.

The DAC vide meeting held in December 2018 directed the executive at Sr. Nos 1, 2, 5, 6 & 7 that relevant documents showing recovery be provided to audit. In case of Sr. No. 4, the DAC directed the executive that deduction of GST as per applicable rate of the relevant year be recovered and record produced to audit for verification. No reply was furnished by formation at Sr. No. 3. Record in terms of recovery was not produced to audit till finalization of this report.

Audit recommends early recovery of Sales Tax amount along-with fixation of responsibility against the person(s) at fault.

1.4.7 Non-recovery of electric charges- Rs 50.188 Million

According to Para 442 of DSR, 1998, “the Garrison Engineer is responsible for making demands for all revenues and its realization into government treasury”. Further, according to Rule 5 of Financial Regulations 1986, Volume – I, “Defence expenditure may be sanctioned by the Ministry of Defence and by the authorities subordinate to it provided the expenditure pertained to Defence”.

During audit of GE (Army) Karachi for the year 2017-18, it was observed that an amount of Rs 50,188,534 was lying outstanding against FWO on account of electricity charges since long. Audit was of the opinion that FWO was a separate commercial entity having its own accounting procedures and budget. Hence, the provision of electricity connection to FWO by the MES organization also stood as un-authorized.

Non-recovery was pointed out by audit in October 2018. The executive replied that the unit concerned was being approached for recovery.

The DAC vide meeting held in December, 2018 was informed that recovery had been effected from the concerned. DAC accordingly directed that the recovered amount be got verified from audit and balance amount be recovered within 04 months. Relevant record in terms of recovery was not produced to audit for verification till finalization of this report.

Audit recommends for an early implementation of DAC directive. DP-S-184/2018-19

1.4.8 Less recovery of Income Tax from contractors – Rs 38.546 Million

As per Section-153 of Income Tax Ordinance 2001, as amended from time to time, every prescribed person making a payment for rendering or providing of services is liable to deduct Income Tax from the gross amount of the bills at prescribed rates. During audit of following MES (Army) units for the period 2016-2018, it was observed that Income Tax amounting to Rs 38,546,864 was less deducted from various contractors‟ payments as required under the rules. (Rs in million) S. No Name of Unit/Formation DP No Amount 1 GE (Army) I, Quetta S-85 18.025 2 GE (Army), Karachi S-39 5.585 3 AGE (Army), Khuzdar S-244 4.319 4 AGE (Army), Chhor S-11 3.772 5 GE (Army) Services, Quetta S-118 3.363 6 GE (Army), Kashmore S-197 1.816 7 GE (Army), Karachi S-35 1.149 8 GE (Army) II, Malir S-19 0.517 T o t a l 38.546

Non-recovery of government tax reflected poor financial management and weak internal controls. The matter was pointed out by audit during January, 2017 to October, 2018. The executive replied that all the contractors were filers. The replies were not substantiated by relevant documentary evidence. The DAC vide meeting held in December, 2018 directed that proof regarding filer status of the contractors be provided to audit. In case of non –filer, the difference of Income Tax be recovered from the contractors and record thereof be produced to audit for verification. No further response on the matter was reported by executive to audit till finalization of this report.

Audit recommends recovery of Income Tax as per rules along-with fixation of responsibility against the person(s) at fault.

1.4.9 Non-recovery of allied charges – Rs 40.272 Million According to Para-442 of DSR, 1998, “the GE is responsible for making demands for payment of all revenue and for taking steps for its prompt realization”.

During audit of following MES (Army) formations for the period 2016-18, it was observed that allied charges amounting to Rs 40,272,643 were lying outstanding against various consumers. (Rs in million) S. No Name of Unit/Formation DP No Amount 1 GE (Army), Karachi S-231 16.227 2 GE (Army),Karachi S-49 9.114 3 GE (Army) Services, Quetta S-196 5.161 4 GE (Army) Services, Malir S-16 4.310 5 AGE (Army), Chhor S-04 2.239 6 AGE (Army), Badin S-93 2.225 7 GE (Army), Karachi S-50 0.996 T o t a l 40.272 32

Audit was of the view that non-recovery of allied charges indicated weak financial management. Non-recoveries were pointed out by audit during November, 2017 to September, 2018. The executive at Sr. Nos 1 to 4, 6 and 7 replied that all the concerned consumers had been approached for recovery. No reply was furnished by executive at Sr. No 05. The DAC vide meeting held in December, 2018 was informed that partial recoveries had been made and action was being taken for recovery of the balance amount. The DAC directed that recovery made so far be got verified from audit and balance amount be recovered expeditiously. No further progress in terms of recovery was reported by executive to audit till finalization of this report.

Audit recommends expeditious recovery of amount and its verification by audit. 1.4.10 Non-recovery of House Rent Allowance (HRA) – Rs 27.032 Million

During audit of accounts of following Army formations for the period 2016-18, it was observed that army officers were availing the facility of government married accommodation and also drawing House

Rent Allowance. This resulted into irregular payment amounting to Rs 27,032,684.

(Rs in million) S. No Name of Unit/Formation DP No Amount 1 CMH, Quetta S-226 14.761 2 GE (Army) Karachi S-47 10.829 3 6 Punjab MIB, Malir S-27 0.865 4 544 EME Bn, Malir S-44 0.577 T o t a l 27.032

Non-recovery was pointed out by audit in 2016-2018. The executive replied that allotted accommodations were below entitlement and MAG allowed withdrawal of HRA. The reply was not tenable as HRA was not admissible to those who availed of government accommodation as a policy. The DAC vide meeting held in December, 2018 pended the DP till finalization of HRA policy at MoD level, whereas the audit suggested recovery of HRA as per government instructions on priority. No further progress in terms of recovery was reported to audit till finalization of this report. Audit recommends early recovery of HRA as per rules/ policy.

1.4.11 Non-recovery of stamp duty from contractors – Rs 16.970 Million As per Section 35 of Stamp Act 1899, no instrument chargeable with duty shall be admitted in evidence for any purpose by any person having by law or consent of parties authority to receive evidence, or shall be acted upon, registered or authenticated by any such person or

by any public officer, unless such instrument is duly stamped. Further, as per Government of Sindh Finance Act 2009, “Stamp duty of Thirty five paisa for every hundred rupees or part thereof of the amount of the contract will be charged”. Contrary to above rule provisions, the record pertaining to the period 2016-18 held with the following units/formations showed that a sum of Rs 16,970,147 on account of stamp duty was not recovered by them against different contract agreements executed within their jurisdiction. (Rs in million) S.No Name of Unit/Formation DP No Amount 1 GE (Army)-I, Quetta S-80 8.594 2 GE (Army)-II, Malir S-40 3.190 3 ACE 5 Corps, Karachi S-31 2.708 4 GE (Army) Services, Malir S-30 0.744 5 GE (Army) Hyderabad S-34 0.728 6 GE (Army) C & SC, Quetta S-56 0.518 7 305 Spares Depot, Karachi S-36 0.488 T o t a l 16.97

When pointed out by audit in 2016-18, it was replied that Finance Act of Government of Sindh and Stamp Act 1899 were not applicable on departments working under Federal Government. The contention of the management was not tenable as it was in disregard of rules quoted above. The DAC vide meeting held in December, 2018 pended the DP till formulation of policy/decision on recovery of stamp duty at MoD level, whereas the audit suggested recovery of stamp duty in question on priority. No progress in terms of recovery of stamp duty was reported to audit till finalization of this report. Audit recommends recovery of provincial duty as per rules on priority.

1.4.12 Non-recovery of Income Tax from contractors – Rs 16.419 Million As per Section-153 of Income Tax Ordinance 2001, as amended from time to time, every prescribed person making a payment for rendering or providing of services is liable to deduct Income Tax from the gross amount of the bills at prescribed rates. During audit of following army formations for the period 2015-17, it was observed that Income Tax amounting to Rs 16,419,426 was not deducted from various contractors‟ payments as required under the rules. (Rs in million) S. No Name of Unit/Formation DP No. Amount 1 CMH Quetta S-126 4.665 2 601 Regional Work Shop EME Quetta S-169 3.611 3 CMH Malir Cantt S-222 3.413 4 CMH Quetta S-200 2.868 5 CMH Malir Cantt S-207 1.212 6 CMH Quetta S-199 0.650 T o t a l 16.419

The issue was pointed out by audit during February - September, 2018. The executive at Sr. Nos 02, 03, 04, 05 & 06 replied that the responsibility of recovery of Income Tax rested with CMAs. No reply was furnished by the formation at Sr. No 01.

The matter was discussed in DAC meeting held in December, 2018. For Sr. Nos 03 to 06, the DAC directed that the distributor certificate from the concerned health authority in rebuttal of DP be provided to audit for verification/examination. Formations at Sr. Nos 01 & 02 did not furnish reply to the DP. No further progress in terms of recovery was reported by executive to audit till finalization of this report.

Audit recommends implementation of DAC‟s directives and recovery of Income Tax as per rules along-with fixation of responsibility against the concerned. 1.4.13 Non-recovery of House Rent Allowance from Army Officers allotted Married Accommodation - Rs. 16.286 Million

According to Ministry of Housing and Works O.M No. F- 11(33)/2012-Policy dated 17th May, 2013 endorsed by Finance Division (Military Finance Wing) Rawalpindi vide U.O No. 134/R-1/ASMF/2014 dated 31st January, 2014, armed forces officers allotted residential accommodations may not be paid 45% house rent allowance and 5% of their running basic pay should be charged to bring them at par with civilian set up. During audit of the accounts of following 06 Army formations for the year 2016-17 and 2017-18, it was observed that Army officers were availing of the facility of Government married accommodation and also drawing House Rent Allowance which was irregular and resulted into overpayment amounting to Rs 16,286,000, which needed recovery. (Rs. in Million) S # DP No. Unit / Formation Amount 1 DP-N-162/2017-18 CMH, Sialkot 1.043 2 DP-N-339/2017-18 HQ AAD Commod, Rwp 1.060 3 DP-N-346/2017-18 HQ 11 Corp, Peshawar 5.709 4 DP-N-584/2017-18 Military College, Murree 1.579 5 DP-N-44/2018-19 HQ 4 Corps, Lahore 2.625 6 DP-N-151/2018-19 CMH, Kharian 4.27 Total 16.286

Audit was of the opinion that payment of house rent allowance to the Army officers availing married accommodation was loss to state.

The irregularity was pointed out by Audit during 2017-18 and 2018-19. The executives replied that HRA was authorized to all married officers who were residing in MOQ vide MAG letter No. AT/MES/2254-XVIII dated 15th February, 2003. In this connection, it is pointed out that the practice of non-recovery of HRA on allotment of MOQs / BOQs / VOQs continues in units other than mentioned above but not reported by auditors in anticipation of revised HRA policy presently under review in MOD as mentioned in impact of ARDS 2017-18. The DAC vide meetings held in November and December 2018 directed to pend the paras till formulation of House Rent Allowance Policy. No progress regarding formulation of House Rent Allowance Policy was reported till finalization of this report. Audit recommends recovery of House Rent Allowance and its verification by Audit, besides, remedial measures. 1.4.14 Non recovery of rent and allied charges from cellular companies - Rs 14.022 Million

According to Para-442 of DSR for MES 1998, GE is responsible for making demands for all revenue, and for taking steps for its prompt realization. During audit of Garrison Engineer (A) Murree, it was observed that two cellular companies, M/s. Zong and M/s. Mobilink, had installed one BTS tower/antenna each within the premises of School of Military Intelligence (SMI) Murree. However, an amount of Rs. 14,022,831/- was lying outstanding on account of rent and allied charges against both companies from July, 2012 to June, 2017 as was evident from UAGE (A) Murree Cantt letter No. UA/TA/2017-18 dated 08-11- 2017. The irregularity was pointed out by Audit in October 2017. The executive replied that office had intimated General Officer Commanding 12 Div Murree for effecting recovery vide letter

No.UA/TA/2017-18 dated 08 Nov 2017. The reply was not satisfactory because even after lapse of one year no fruitful response was received therefrom. The matter, therefore needed proper pursuance at higher level. The matter was reported to Ministry of Defence on 1st October, 2018 and formal request for convening DAC meeting was also made on 4th October, 2018 and 6th November, 2018 for arranging of DAC. However, till finalization of this report no DAC was arranged. Audit recommends for early recovery of the amount involved and its verification by Audit besides adoption of remedial measures to avoid such lapses in future. DP-N-134/2018-19 1.4.15 Less recovery and non-deposit of towers fee into treasury- Rs 8.800 Million

According to Para 7(b) of MOD letter No:51/411/lands/ML&C/2005, dated 24-06-2005, “the cellular companies will be required to pay an antenna/ tower fee @ Rs 20,000 per month with an annual enhancement @ 10%”.

During audit of accounts of HQ 16 Div Pano Aqil Cantt for the period 2013-17, it was observed that 4 of BTS towers of cellular companies were installed on A-1 land at different locations. The record showed that BTS towers fee at the DC rate of Rs15,628/- per month amounting to Rs 757,000 for four years instead of Rs 9,557,143 was recovered by the executive from the cellular companies, which was not in order as the recovery was to be effected at the flat rate of Rs 20,000 per month with 10 % annual enhancement and not at the DC rate as decided by the formation.

Audit was of the view that non-implementation of government orders resulted in less recovery of the fees due and it exhibited weak financial management at the end of the executive.

Less recovery of Rs 8,800,143 was pointed out by audit in May, 2018. The executive however didn‟t furnish any reply nor did it hold discussion on the specified date.

Audit recommends expeditious recovery of BTS fees as per government orders, their deposit into treasury and verification by audit. DP-S-157/2018-19 1.4.16 Non-recovery of gas charges –Rs 5.409 Million

According to Rule-81 of Quarters and Rents Rules 1985, as amended vide letter No. F.5620/109/Qtg-4/F-2/D-3 (AIII)/2002 dated October 14, 2009, scale for free consumption of Sui Gas to a cook house is prescribed by the government @ 400 cft per month. Consumption in excess of this scale is to be paid by the consumer concerned. Further, as per Para 442 of DSR, 1998, the Garrison Engineer is responsible for making demands for all revenue and its realization into government treasury.

In following Army units, gas was consumed in excess of authorized quantity amounting to Rs 5.409,000 during the period 2016-18. However, the amount on account of excess consumption was not recovered from the concerned units/formations. (Rs in million) S. No Name of Unit/Formation DP No Amount 1 GE(Army) Services, Quetta S-198 4.636 2 GE (Army) Services, Malir S-32 0.773 T o t a l 5.409

The irregularity was pointed out by audit in 2016-2018. The executive replied that recovery when realized would be intimated to audit. The matter was discussed in DAC meeting held in December, 2018, wherein it was directed that recovery on account of 40

excess consumption of gas beyond authorization be effected within 3 to 6 months and recovery got verified from audit. Audit recommends early recovery of gas charges beyond authorization. 1.4.17 Non-deposit of profit into Government treasury - Rs. 2.833 Million

Rule 2 of FR Vol-II 1986 stipulates that “All transactions to which any officer of Government in his official capacity is a party, shall, without any reservation, be brought to account and all moneys received by or tendered to Government officer which are due to, or are required to be deposited with Government shall, without undue delay, be paid, in full, into a Government treasury or into the bank to be credited to the appropriate account or they shall be credited through the pay bill or other public account if it is so authorized.” During audit of following Combined Military Hospitals, it was observed from bank statement of “CNE” Account that an amount of Rs 2,833,000 was earned as profit on cash balance held in Askari Bank but was not deposited in to Government Treasury alongwith interest. (Rs. in Million) S # DP No. Unit / Formation Amount 1 DP-N-171/2018-19 CMH, Peshawar 1.370 2 DP-N-177/2018-19 CMH, Attock 1.463 Total 2.833

The irregularity was pointed out by Audit in April, 2015 and May, 2018. The executive replied that the amount was earned on account of profit on balance amount deposited by patients. As per existing policy of CNE Accounts, HSR / Government share was regularly deposited into Government treasury on monthly basis. Reply was not justified as audit has pointed out amount of profit earned on the balance of CNE account, which was required to be deposited into Government Treasury. 41

The DAC vide meetings held on 11-12 December 2018 pended the paras till finalization of policy of the subject matter. No further progress was reported to Audit till finalization of this report. Audit recommends early deposit of the whole amount into Federal Government Treasury, besides, adoption of remedial measures to avoid such lapses in future. 1.4.18 Non-deposit of government share against CNE patients-Rs 2.208 Million

As per Government of Pakistan, Ministry of Defence th letter NO.3532/32/DMS-3(c)/F.6/16/D-2(A-II)/2014 dated 26 November, 2014, addressed to Director General Medical Services (Inter Services) government share is to be deposited into government treasury as per prescribed sharing percentage. Further, under Rule 2 of Financial Regulations Volume II 1986, it is provided that all transactions to which any officer of government in his official capacity is a party, shall, without any reservation, be brought to account and all moneys received by or tendered to government officer which are due to or are required to be deposited with government shall, without undue delay, be paid, in full, into a government treasury.

During audit of CMH Malir for the year 2016-17, it was observed that government share amounting to Rs 2,208,466 on account of advances received from CNE patients was not deposited into government treasury.

Audit was of the view that the retention of public money indicated poor financial management.

The irregularity was pointed out by audit in March, 2018. The executive replied that the government share against CNE patients had already been deposited into treasury, which was not substantiated by relevant documentary evidence.

The DAC vide meeting held in December, 2018, directed that the delay in deposit of government share be justified and the amount due be deposited into treasury on priority.

Audit recommends early compliance of DAC`s directives.

DP-S-217/2018-19 1.5 Loss to State – Rs 17,344.529 Million 1.5.1 Unauthorized transfer of A-1 land for commercial use – Rs 16,480.00 Million

According to Rule 5 of CLA Rules 1937 “ a land which is actually used or occupied by military authorities, for the purpose of fortification, arsenals, aerodromes, bungalow for military officer, which are the property of Government, parade grounds, military recreation grounds, rifle ranges, grass farms, dairy fields, brick fields, soldier & hospital, gardens and other official requirements of military authority. As per para 2(3) of policy on the use of A-1 land issued under the Government of Pakistan, Ministry of Defence Rawalpindi letter No. F- 2/5/D-12/ML & C/99 dated 2-04-2008, detailed procedure for the utilization of A-1 land shall be formulated by GHQ to ensure complete transparency and got approved from Govt. through Ministry of Defence” Para 6 of A-1 land policy ibid stipulates that, “in future, no welfare project shall be established/initiated without prior approval of respective Service Chief”. During audit of Military Farm Lahore, it was observed that 103 acres of cultivatable land against survey No. 251 & 251-A was earmarked for establishment of special commercial project & sport facilities. The Government had recently expended millions of rupees on construction of modern animal sheds to fulfill the need of milk for army personnel. Contrary to the provisions of Rule 5 of CLA rules & A-1 Land

policy, the said land was being used for commercial purpose without obtaining permission, which resulted into unauthorized encroachment on cultivated land of Rs. 16,480,000,000/- (103 Acres x 160 = 16,480 Marlas x Rs. 1,000,000/- per Marla = Rs.16,480,000,000). The irregularity was pointed out by Audit in December 2017. It was stated by the military farm authorities that the case was under process with Quartering & Land Directorate and that assets, cultivated crops standing with assessed value, price of trees were included in the board of officers. The reply was not agreed to as status of land was changed without the permission of competent authority. The DAC vide meeting held on 14th December, 2018 directed to shift the para to 4 Corps Lahore. No further progress was reported to Audit till finalization of this report. Audit stresses that change of status should be got regularized, procedure be got approved and government share deposited in treasury retrospectively. DP-N-24/2018-19 1.5.2 Unnecessary purchase of land - Rs. 485.00 Million

Under Rule 47 (e)(5) of Financial Regulations (FR) Volume-I, 1986, most careful supervision over expenditure shall be exercised and on no account shall money be spent simply because it is available. During audit of Military Estate Office Lahore Cantt, it was observed that a land measuring 4201 Kanal 14 Marla at Chunian and 781 Kanal 01 Marla at Pattoki was acquired for transfer of Ammunition Depot from Lahore to Pattoki with the approval of Ministry of Defence vide letter No. 3605/122/Land.3.A/1/30/D-12/12 dated 07-06-2012. Award bearing No. 1/2014 was announced by Land Acquisition Controller on 20- 01-2014. Ammunition Depot has however not so far been shifted to the acquired location. This showed that the land was purchased unnecessarily 44

without proper planning, which resulted into loss to state amounting to Rs 485,000,953. The irregularity was pointed out by audit in January 2018. The executive replied that army authorities were ready to shift their entire infrastructure pertaining to Ammunition Depot. However, Geo Technical survey of acquired land was carried out which revealed that land was un- suitable for the envisaged purpose due to high water level and concerned formation reported that Ammunition Depot from Lahore was not likely to be shifted to a new location in near future as the site was under reevaluation for ascertaining suitability. The reply of the executive substantiates audit view point that the lands were purchased without proper planning. The DAC vide meeting held on 08th November, 2018 directed to shift the Draft Para to Army authorities for responding to Audit observation. No further progress was intimated to audit till finalization of this Report. Audit is of the view that the expenditure incurred on acquisition of the land was not properly planned and resulted into loss to state exchequer. Audit recommends early disposal of above land and its deposit into Govt. treasury besides holding court of inquiry to fix responsibility. DP-N-13/2018-19 1.5.3 Irregular transfer of defence fund to private fund account - Rs 114.00 Million According to Rule-6(a) of Financial Regulations 1986, Volume – I “Every officer should exercise the same vigilance in respect of expenditure incurred from government revenue as a person of ordinary prudence would exercise in respect of the expenditure of his own money”.(b) “No authority shall exercise its power of sanctioning

expenditure to pass an order which will directly or indirectly be to its own advantage”.

A) During audit of HQ 16 Div Pano Aqil Cantt for the period 2013-17, it was observed that an amount of Rs 100,000,000 had been received by HQ 16 Div from HQ 5 Corps, which was initially deposited into defence fund. Subsequently, on 02-11-2015 the amount was shifted by HQ 16 Div to Non-Public Fund on the plea that it was erroneously deposited into defence fund.

Audit was of the opinion that the transfer of money from defence fund into private fund account tantamounted to a loss to the state and it reflected weak financial management and internal controls.

The irregularity was pointed out by audit in May, 2018 but no reply was furnished.

Audit requires the reason of transfer of Rs 100,000,000 by HQ 5 Corps to HQ 16 Div and subsequent shifting of this amount from defence fund to non-public fund account along-with provision of complete expenditure details, its break-up, PPRA rules compliance documents, bank statements and other related record for a detailed examination. Audit also recommends senior level inquiry into the matter to fix responsibility, and deposit of government money into treasury.

DP-S-143/2018-19 B) During audit of 662 Engineers Battalion Karachi for the financial year 2016-17, it was observed that an amount of Rs 14,000,000 was drawn as consumed / expended on execution of works reflecting payment to the contractor M/s AL Hakeem Traders. The review of record showed that the said amount was allotted by HQ 5 Corps to 662 Engrs Battalion vide letter No. 171/1/GS(T)/-SBJAOQ dated 14-03-2017 on account of Special ATG for the financial year 2006-17 with the condition

that “Prepare all bills/quotations and claim the amount from CMA and reimburse to this HQ Trg Branch Pvt Fund Account”.

This indicated that the above expenditure was not actually incurred and all the bills were prepared merely to claim the amount from CMA which was unjustified and tantamounted to a loss to the state.

The irregularity was pointed out by audit in April, 2018 but no reply was received.

The DAC vide meeting held in December, 2018 was informed that the letter referred to was not an auditable document and that the payment was released to the party against the expenditure incurred. The DAC, however, directed that the record reflecting complete money trail leading to transfer of funds, approvals, utilization/ expenditure details/break-up, bank statement and compliance of PPRA rules provisions in the said expenditure be provided to audit for a detailed examination. No further response on the matter was reported by executive to audit till finalization of this report. Audit recommends early implementation of DAC directive along-with due fixation of responsibility. DP-S-10/2018-19 1.5.4 Un-due payment without delivery of dozers - Rs. 108.810 Million

According to clause 14 (a&b) of contract No. 14-0736-00, dated 06-04-2016 “the payment will be made to supplier by CMA DP Rawalpindi on submission of bill duly supported by the CRV and Inspection note”.

While examining the accounts of CMT & SD Golra, it was observed that above contract was concluded with M/S Pak Japan Trading Co-Lahore by DGP Army Rawalpindi for the supply of 03 x Dozer size II Liebherr PR-734-4 (NATO Green Colours) for Rs. 108,810,000/-. CRV 47

bearing No. VSDR-394-C15 dated 25-05-2016 and Inspection Note dated 11-05-2016 were issued by CMT&SD Golra and IV & EE respectively. Accordingly, CMA (DP) Rawalpindi paid the entire amount to the firm on 21-06-2016. However, as per CMT&SD Golra letter No. 3106/289/Con/Veh Dep dated 22-12-2016 and even number dated 20-03- 2017 the store was not delivered by the firm.

The irregularity was pointed out by Audit in March 2017. The executive replied that delivery period was expired and this depot was regularly approaching DGP (Army) for supply of contracted stores. Reply was not acceptable as payment against fictitious CRVs & Inspection Note was made to supplier before actual delivery of store and undue favour was extended to supplier.

The matter was reported to Ministry of Defence on 4th May 2018 and it was requested on 28th June, 2018, 1st October, 2018 and 6th November, 2018 for arranging of DAC meeting. However, no DAC meeting was convened till finalization of this report.

Audit recommends safeguarding and delivery of government store and ensure proper delivery alongwith verification by Audit besides holding of an inquiry for fixing responsibility of person(s) at fault.

DP-N-427/2017-18

1.5.5 Unjustified local purchase of combat boots – Rs. 106.898 Million

According to Government of Pakistan Ministry of Defence Army Branch Rawalpindi letter No: F.5/32/ME/D-5/04, Dated 27-12-2004 Local Purchase will be resorted to only those “Items which are not available in depots, but are urgently required by the units, and their non- availability or drawn in normal supply may affect the unit efficiency, training or morale of troops”. 48

During audit of Central Ordnance Depot, Lahore Cantt, it was observed that 44615 pairs of Combat Boot (Black with Cordura Cloth Double Density (PU+Rubber) Sierra) of different sizes worth Rs 106,897,540/- were locally purchased by the Depot @ Rs.2,396/- each from M/S Askari Shoes Project during 2016-17, which was unnecessary as 7117 pairs of boot were already available in stock with the Depot received against contract. It was evident from record that the Depot issued only 3248 pair of boots during 2016-17. As such, un-necessary local purchase of store was made without any emergent requirement.

The irregularity was pointed out by Audit in February, 2018. The executive replied that Combat Boots (Black with Cardura Cloth Double Density (PU+Rubber) Sierra) were authorized to army personnel and were purchased on the orders of GHQ. Reply was not tenable as there was no emergent requirement. Besides, a reasonable contracted quantity of Combat Boots was already available in the Depot to meet with requirement of units.

The DAC vide meeting held on 11th December 2018 was apprised that GHQ OS Dte was responsible to maintain / update overall data of the ordnance inventory based on monthly reports and returns received from all ordnance entities. DAC directed that relevant record may be provided to audit for verification. No further progress was reported to Audit till finalization of this report.

Audit recommends inquiry besides regularization of procurement beyond requirements and initiation of remedial measures to avoid such lapses in future.

DP-N-35/2018-19

1.5.6 Non-recovery of GST –Rs 23.625 Million

Section 3 of Sales Tax Act, 1990 stipulates that subject to the provisions of this Act, there shall be charged, levied and paid a tax 49

known as Sales Tax @ 17% of the value of taxable supplies made by a registered person in the course of furtherance of any taxable activity carried on by the person. Further, 2% extra tax levy was imposed on spare parts of vehicles w-e-f 4-10-2013 (SRO 896(1)/2013).Likewise, under Ministry of Finance S.R.O. 603(1)/2009, Islamabad, dated 25-06 2009, “A withholding agent shall deduct an amount equal to one-fifth of the total Sales Tax shown in the Sales Tax invoice issued by the supplier and make payment of the balance amount to him.

During audit of 544 HY EME Bn Malir Cantt Karachi for the period 2012-17, it was observed that a sum of Rs 138,969,990 was paid to various contractors for procurement of different spares for the formation. The record did not show any proof of deduction of Sales Tax amounting to Rs 23,624,898.

Audit was of the opinion that non-recovery of amount of Sales Tax tantamounted to a loss to the state which reflected weak financial management and internal controls.

The matter was pointed out by audit in June, 2018. The executive furnished irrelevant reply.

The DAC vide meeting held in December, 2018 directed that relevant documents be provided to audit. No further response in terms of proof of recovery was reported to audit till finalization of this report.

Audit recommends early implementation of DAC‟s directives along-with fixation of responsibility against the person(s) at fault.

DP-S-101/2018-19

1.5.7 Non-recovery of risk and expense money - Rs. 22.077 Million

According to Para - 67 (b) ASC Regulations Vol - II, 1986 “A party which exercises the right to make purchase at the risk and expense of a contractor under the law, may be required to prove that it had taken reasonable precautions to minimize the loss suffered by the defaulting contractor as a result of such purchases. Risk purchases should, therefore be resorted to with great care. Items purchased at the risk and expense of the contractors must be those which are actually demanded from the contractors and which they fail to supply despite their availability in the market. Risk purchases of a variety of fruit and vegetable against the demand for another variety would be justifiable only after placing the demand on the contractor and giving him reasonable time to comply with the same. Care should however be taken to ensure that risk purchases are not in ordinarily delayed.

During audit of Reserve Supply Depot ASC Sialkot, it was observed that two contracts for supply of meat and chicken were awarded to M/S Yasir Humayun for the year 2015 vide Contract Deeds No.5271 of 2015 and No.5291 of 2015 respectively. After supplying meat & chicken for 2 months, the contractor failed to supply said items for rest of the period. As a result, the formation procured meat & chicken from local market and later on through another contract agreement at higher rates. Due to failure of M/s. Yasir Hamayun to fulfill their contractual obligations, Government sustained a loss of Rs. 22,077,144/- on account of purchase of meat and chicken for the remaining period at higher rates. Therefore, amount of risk purchase needed recovery from the defaulting contractor.

The irregularity was pointed out by Audit in December 2017. The executive replied that action would be taken for regularization of amount. Reply was not agreed to as the amount of risk purchase was required to be recovered from the defaulting contractor besides confiscation of security held by the unit.

The DAC vide meeting held on 11th December, 2018 was apprised that case regarding recovery of risk purchase from defaulting contractor had already been forwarded to GHQ for necessary action. DAC directed that amount may be recovered within one month. No further progress was reported to Audit till finalization of this report.

Audit recommends for early recovery of the amount involved from defaulting contractor and its verification by Audit besides adoption of remedial measures to avoid such lapses in future.

DP-N-23/2018-19

1.5.8 Irregular charging of GST on exempted items - Rs 4.119 Million

According to Section 13 (1) Table -1 of The Sixth Schedule, Sales Tax Act 1990, bricks etc are exempted from application of GST.

During audit of SI&T Quetta for the period 2013-17, it was observed that different suppliers included the amount of GST in the sales invoice @ 17% on bricks etc totaling to Rs 4,119,360, whereas, the items were exempted from the applicability of GST.

Audit was of the opinion that the incorporation of Sales Tax amount by the suppliers on exempted items resulted in extra financial burden and loss to the state which also indicated weak financial management at the end of the executive.

The matter was pointed out by audit in March, 2018. The executive replied that Rs 4,119,360 had been paid to the suppliers for supply of different items out of “Cost of war head”. They further informed that the GST @ 1/10th had been deducted through TR and the balance amount had been deposited through FBR return. The reply furnished by the executive was without any documentary proof.

The DAC vide meeting held in December, 2018 directed that relevant documents be provided to audit for verification. No further response on the matter proving payment to FBR/government was reported to audit by the executive till finalization of this report.

Audit recommends for early implementation of DAC‟s directives along-with fixing of responsibility against the concerned.

DP-S-268/2018-19

1.6 Mis-procurement of stores – Rs 1,511.114 Million 1.6.1 Irregular procurement of stores– Rs 1,101.464 Million According to Section-12(1-2) of Public Procurement Rules- 2004, “Procurements over one hundred thousand rupees and up to the limit of Rs 2.000 million shall be advertised on the authority‟s website. Further, procurements over Rs 2.000 million should be advertised on the authority‟s website as well as in two national dailies, one in English and the other in Urdu”. Further, According to PPRA Rule 35, procuring agencies shall announce the results of bid evaluation in the form of a report giving justification for acceptance or rejection of bids at least ten days prior to the award of procurement contract. Further, according to PPRA‟s S.R.O.1170(1)/2009 dated July 9, 2009, all procuring agencies whether within or outside Pakistan shall post Contract Awards over fifty million rupees on PPRA‟s website. on the proformas as set out in Annexure-I and Annexure-II to these regulations, provided that where any information related to the award of a contract is of proprietary nature or where the procuring agency is convinced that such disclosure of information shall be against the public interest, it can withhold only such information from uploading on PPRA‟s website subject to the prior approval of the Public Procurement Regulatory Authority. [F.No. 2/1/2008/PPRA-RA.III]

During audit of accounts of the following Army formations for the period 2016-18, it was observed that different contracts works valuing Rs 1,101,464, 428 were awarded without advertisement. In case of SSD Malir, PPRA Rule 35 and above SRO dated 09-07-2009 were also violated.

(Rs in million) S No DP No Name of Unit / Formation Amount 1 DP-S-07/2018-19 SSD Malir 639.955 2 DP-S-08/2018-19 AGE (Army) SI&T, Quetta 146.137 3 DP-S-43/2018-19 CMH Quetta 81.934 4 DP-S-266/2018-19 601 Regional Workshop, Karachi 78.471 5 DP-S-12/2018-19 AGE (Army) SI&T, Quetta 52.143 6 DP-S-01/2018-19 Military Dairy Farm, Quetta 41.272 7 DP-S-171/2018-19 CMH Malir 26.955 8 DP-S-300/2018-19 305 Spare Depot, Karachi 20.597 9 DP-S-06/2018-19 662 Engr Bn Karachi 14.00 Total 1,101.464

Audit was of the view that incurring of public expenditure without adoption of PPRA Rules could lead to misuse of government funds which indicated weak financial management at the end of the executive. The irregularity was pointed out by audit in 2016-18. The executive replied that the contracts of stores and works were awarded to firms after meeting all codal formalities. The replies were not tenable as documentary evidence regarding advertisement in newspapers and PPRA‟s invoices were not produced in support of such contention. The DAC vide meeting held in December, 2018 directed that relevant documents be provided to audit for examination. No further progress was reported to audit till finalization of this report.

Audit recommends expeditious compliance of DAC`s directives and avoidance of such violations in future. 1.6.2 Non-transparent award of contracts– Rs 224.396 Million

During audit of accounts of the following MES (Army) formations for the financial year 2017-18, it was observed that works contracts amounting to Rs 224,396,328 were awarded to different contractors without announcing the results of bid evaluation on justification for acceptance or rejection of bids. This resulted into non- transparent award of contracts.

(Rs in million) S. No DP No Name of Unit / Formation Amount 1 DP-S-89/2018-19 GE(Army)-1 Quetta 173.735 2 DP-S-103/2018-19 GE (Army) -Services Quetta 50.661 Total 224.396

Audit was of the view that incurring of public expenditure without adoption of PPRA Rules could lead to misuse of government funds which indicated weak internal controls. The irregularity was pointed out by audit in September, 2018. The executive replied that the PPRA rules had been followed. The reply of the management was not substantiated by relevant documentary evidence.

The DAC vide meeting held in December, 2018 directed that relevant documents be provided to audit for examination. No further progress was reported to audit till finalization of this report.

Audit recommends expeditious compliance of DAC‟s directives and avoidance of such violations in future. 1.6.3 Irregular expenditure on procurement and repair & maintenance-Rs 136.227 Million Under Rule-12 (2) of PPRA Rules 2004 “All procurement opportunities over two million rupees should be advertised on the Authority‟s website as well as in other print media or newspapers having wide circulation. The advertisement shall principally appear in at least two national dailies, one in English and the other in Urdu. Likewise, under Rule-13(1)of PPRA Rules 2004 “The procuring agency may decide the response time for receipt of bids or proposals (including proposals for pre- qualification) from the date of publication of an advertisement or notice, keeping in view the individual procurement‟s complexity, availability and urgency. However, under no circumstances the response time shall be less than fifteen days for national competitive bidding”.

During audit of accounts of SI&T Quetta for the period 2013-17, it was observed that an amount of Rs 136,227,500 was expended by the formation on account of procurement and repair/maintenance wherein NIT response time in different procurements was less than 15 days. Besides, the advertisements were not published in national dailies, which rendered the entire expenditure as irregular.

Audit was of the view that incurring of public expenditure without following PPRA Rules could lead to misuse of government funds and indicated weak internal controls.

The irregularity was pointed out by audit in March, 2018. The executive replied that all the advertisements were processed through HQ SC and that the late publishing of advertisements was due to delay at their end.

The DAC vide meeting held in December, 2018 directed that an inquiry be conducted and responsibility be fixed against the concerned. No further progress on the matter was reported to audit till finalization of this report.

Audit recommends early implementation of DAC directives.

(DP-S-281 /2018-19)

1.6.4 Procurement of stores without tender – Rs 22.039 Million According to Rule-12(1-2) of Public Procurement Rules 2004, “all procurement over one hundred thousand rupees and up to the limit of Rs.2.00 Million shall be advertised on the authority‟s website. Further procurement over Rs. 2.00 Million should be advertised on the authority‟s website as well as in two national dailies, one in English and the other in Urdu”. During audit of following formations, it was observed that contracts valuing Rs 22.039,000 were awarded to different contractors without fulfilling requirements of Public Procurement Rules i.e. publication of advertisements in newspapers and hosting on the Authority‟s website. (Rs. in Million) S # DP No. Unit / Formation Amount 1 DP-N-321/2017-18 GE (Army)-II, Kharian 6.218 2 DP-N-536/2017-18 GE (Army), Peshawar 9.960 3 DP-N-305/2017-18 GE (Army) Svc, Rwp 5.861 Total 22.039

The irregularity was pointed out by Audit during 2017-18. The reply furnished by the executives were not tenable.

The DAC vide meetings held in November and December, 2018 directed the management to hold fact finding inquires in each case. No further progress was reported to Audit till finalization of this report. Audit recommends finalization of inquiry proceedings and fixing of responsibility on the person(s) at fault, besides, regularization of the amount involved and adoption of remedial measures to avoid such lapses in future. 1.6.5 Unauthorized and improper procurement of electro- medical equipment - Rs 17.150 Million According to Rule-12(1,2) of PPRA Rules -2004, all procurements over one hundred thousand rupees and up to the limit of Rs 2.00 million shall be advertised on the authority‟s website. Further, procurements over Rs 2.00 million rupees should be advertised on the Authority‟s website as well as in two national dailies, one in English and other in Urdu. Moreover, T.O & E, dated 5th December, 2012 of C.M.H, Malir Cantt “No Electro-Medical Equipment is authorized”. During audit of accounts of CMH Malir for the year 2016- 17, it was observed that a sum of Rs 17,150,000 was expended by the formations on purchase of electro-medical equipment. The record showed that a tender notice was published for the subject procurement in only one newspaper instead of two widely circulated newspapers. The details in terms of the cost, description and specification of items were also not mentioned in the tender notice. Moreover, the electro-medical equipment purchased was not authorized in the T.O&E of the hospital. Audit was of the opinion that the total expenditure of Rs17,150,000 was incurred in violation of above rules which indicated weak financial management and internal controls. The irregularity was pointed out by audit in March, 2018. The executive replied that the EM equipment was purchased according to need of the patients after approval of GHQ Medical Dte, Rawalpindi and

that the case involving revision in TO & E was already under process with higher authorities. The DAC vide meeting held in December, 2018 directed that record on following of PPRA rules and revision of TO & E be provided to audit for examination. Relevant record was not produced to audit till finalization of this report. Audit recommends early implementation of DAC directives. (DP-S-17 & 167/2018-19)

1.6.6 Award of contracts before publication of tenders –Rs 9.838 Million

According to Rule-12(1,2) of PPRA Rules - 2004, all procurements over one hundred thousand rupees and up to the limit of Rs 2.00 million shall be advertised on the authority‟s website. Further, procurements over Rs 2.00 million rupees should be advertised on the Authority‟s website as well as in two national dailies, one in English and other in Urdu. Likewise, Rule-50 of PPRA Rules, 2004 stipulates that “any unauthorized breach of rules shall amount to mis-procurement”. During audit of accounts of GE (Army) Karachi for the year 2017-18, it was observed that tenders of different works amounting to Rs 9,838,280 were advertised in newspapers merely as a formality as the contracts had been awarded to the contractors before hand and without following due process. The irregularity was pointed out by audit in October, 2018. The executive replied that the works were concluded by ACE office after fulfilling PPRA requirements. The contention of the management was not supported by relevant documentary evidence. The DAC vide meeting held in December, 2018 directed that documents be provided to audit for verification within 2 weeks and in

case of failure, an inquiry be conducted. No record was produced to audit for verification till finalization of this report. Audit recommends for early implementation of DAC‟s directives. (DP-S-181/2018-19) 1.7 Non-production of record – Rs. 1,993.764 Million 1.7.1 Non-production of auditable documents – Rs. 1,988.542 Million In terms of Articles 169 and 170 of the Constitution of the Islamic Republic of Pakistan read with the Auditor General Ordinance, 2001 and orders of the Supreme court of Pakistan passed in CMAs 3330, 3471, 3594/13 in Constitution Petition No. 105/12, audit is a constitutionally mandated process and after 18th Amendment in the Constitution, there is no room for denial of disclosure and withholding of accounts from Auditor General for audit. Under section-14(3) of above Ordinance, any person or authority hindering the auditorial functions of the Auditor General regarding inspection of accounts shall be subject to disciplinary action under relevant Efficiency and Discipline Rules, applicable to such person. During audit of following formations for the year 2016-17, auditable record requested through written requisitions and verbal requests was not produced to the audit teams, which was a serious violation on the part of the executive. (Rs. in Million) S # DP No. Unit / Formation Amount 1 DP-N-125/2017-18 HQ Log Area, Gujranwala --- 2 DP-N-186/2017-18 Station HQ, Sialkot --- 3 DP-N-418/2017-18 Remount Depot, Sargodha --- 4 DP-N-529/2017-18 POL Depot, Lahore 7.703 5 DP-N-392/2017-18 HQ 1 Corps, Mangla 1,949.64 6 DP-N-391/2017-18 Military Farm, Lahore 31.199 7 DP-N-29/2018-19 CMH Lahore --- 60

Total 1,988.542

Audit was of the view that non-production of auditable documents tantamounts to hindering the auditorial functions of the Auditor General of Pakistan and serious lapse which showed weak internal and financial controls on the part of the management. The irregularity was pointed out by Audit during 2017-18. The reply furnished by the executive was not satisfactory. The DAC vide meetings held in November and December, 2018 directed the management that documents be provided to audit for verification within three months. No further progress was reported to Audit till finalization of this report. Audit stresses for expeditious implementation of DAC directive, besides, investigation and adoption of remedial measures to avoid recurrence of such instances in future.

1.7.2 Non-production of auditable record – Rs 5.222 Million

Under Section-14(3) of Auditor General`s Ordinance 2001, “any person or authority hindering the auditorial functions of the Auditor General regarding inspection of accounts shall be subject to disciplinary action under relevant Efficiency and Disciplinary Rules, applicable to such person”.

During audit of accounts pertaining to HQ 16 Div. Pano Aqil Cantt, it was observed that an amount of Rs 5,222,000 was allocated to the Div during the financial year 2016-17 vide HQ 5 Corps Karachi Cantt letter No. 786/23/CBMC-WYJ44A dated 17-05-2017. The auditable record against the said allocation was requested through written requisitions and verbal requests. However, the HQ 16 Div did not produce record to the audit team which was a serious violation on the part of the auditee organization and it entailed strict action against the concerned. 61

Audit was of the opinion that non-production of auditable documents to audit constituted a serious lapse and it also indicated poor management.

The irregularity was pointed out by audit in May, 2018 to which the management did not reply.

Audit recommends early production of complete auditable record, expenditure‟s purpose and its break-up, PPRA Rules compliance, bank statements and other related details along-with fixation of responsibility against the concerned.

DP-S-148/2018-19

Military Lands and Cantonments

1.8 Irregular / Unauthorized expenditure – Rs 9,200.577 Million 1.8.1 Illegal sale of amenity plots - Rs 9,128.21 Million

According to Rule 2.1.4 of DHA Karachi By-Laws 2017, "Amenity Plot means a non-leasable plot allocated exclusively for the purpose of amenity such as worship places, burial grounds and recreational areas (parks and play grounds)”.

According to Article 78 of the Constitution of Islamic Republic of Pakistan, receipt of any kind is required to be deposited into Federal Consolidated Fund. According to Rule-11 of Cantonment Land Administration Rules 1937, “all receipts from land entrusted to the management of the MEO shall be credited in full to the central government.”

During scrutiny of record relating to MEO Karachi, it was observed that ML&C Department, Rawalpindi through letter No: 42/348/lands/ML&C/2001 dated 19-10-2006 addressed to DML&C Karachi allowed DHA Karachi to obtain market value of the amenity plots from the allottees to enable it to liquidate its liabilities worth Rs 9,128,210,000. The same authorization was re-confirmed/ reiterated by ML&C Department vide its letter No: 42/348/Lands/ML&C/2001 dated 17-4-2008. The action by DHA in terms of sale of amenity plots at market value to buyers to liquidate its liabilities was not in order as the amenity lands/ plots were meant for provision of amenity facilities to the community and they couldn‟t be re-categorized for any residential or commercial use.

The matter was pointed out by audit in May-2018. The executive while submitting an evasive reply and admitting unauthorized 63

use of amenity plots stated that a comprehensive report had been submitted to HQ ML&C vide letter dated 03-9-2008, copy of which was not found attached with the reply. Audit is of the view that the DHA should not have sold amenity plots to clear its dues nor the ML & C Department should have permitted any such sale, as it constituted serious violation of purpose of land, the misuse of such facilities has also been objected to by the Supreme Court of Pakistan from time to time.

The DAC vide meeting held in December 2018, directed that fresh reply be provided to audit for verification, which was provided by the executive immediately after discussion on 19-12-2018, which was irrelevant.

Audit opined that the serious matter involving illegal sale of amenity plots be got investigated at appropriate level and responsibility fixed. Also the sale proceeds amounting to Rs 9,128,210,000 be deposited into government treasury and record got verified from audit. No further progress on the matter was reported to audit till finalization of this report.

Audit recommends finalization of action as outlined above.

DP-S-63/2018-19

1.8.2 Non-realization of composition fees on un-authorized construction - Rs. 60.00 Million

In accordance with Section 181 of Cantonment Act, 1924 read with Ministry of Defence letter No.75/853/Lands/92/4970/D- /ML&C/94 dated 06th November 1994, “unauthorized construction within the limits of a cantonment is an offence and Board is empowered to demolish the unauthorized construction or regularize it on payment of composition fee”. During audit of Cantonment Board Havelian, it was observed from Board Resolution No. 16 dated 06-08-2015 that building

plans of 40 properties situated in Prime Minister Housing Scheme Havelian were approved for 2 storey buildings. The owners of properties constructed 3rd storey without any authorization in the relevant lease deed. The Board imposed minimum lump sum composition fee @ Rs. 1,500,000/- for each building amounting to Rs. 60,000,000/- (Rs. 1,500,000/-x 40) for regularization of un-authorized construction of 3rd storey on leased land. Later on, the Board revoked above decision vide another Resolution No. 8 dated 17/02/2016, which was indicative of undue favour to owners and loss to Cantonment Fund. The irregularity was pointed out by Audit in April 2017. The executive replied that as per Section 185 of Cantonment Act 1924, the Board was competent to impose or write off composition fee in respect of unauthorized construction and since the Board had revoked the case, recovery was not required. Reply was not satisfactory because as per Cantt Act 1924, the 3rd storey was required to be either demolished or compounded, which was not done. The DAC vide meeting held on 08th November, 2018 was apprised that construction of 3rd storey was not allowed for security reason and lessees had been issued notices for demolition of 3rd storey. DAC directed that this case be placed before the Board in its next meeting for decision so as to finalize action within two months. No further progress of the matter was reported to audit till finalization of this report. Audit recommends that the matter may be investigated to fix responsibility on the person(s) at fault, besides, regularization of 3rd storey on payment of composition fee or demolition of unauthorized construction. DP-N-293/2017-18 1.8.3 Irregular conclusion of contract with de-registered firm - Rs 9.793 Million

According to Rule-6(a) of Financial Regulations Volume-I, 1986 “Every officer should exercise the same vigilance in respect of expenditure incurred from government revenue as a person of ordinary prudence would exercise in respect of the expenditure of his own money”. Moreover, according to PEC Engineering Bye-Laws, 1987, Rule (3)(1),”no engineering work shall be constructed except by a constructor or operated except by an operator licensed as such by the Council”.

During scrutiny of record related to the office of Cantonment Board Clifton for the financial year 2017-18, it was observed that an amount of Rs 9,793,754 was paid to M/s Hassan Eng.& Contractors (Pvt) Ltd during the year on account of different works. The above firm was de-registered by Pakistan Engineering Council w-e-f 01.01.2017.

The irregularity was pointed out by audit in November, 2018, The executive stated that the registration with PEC was pre-requisite for enlistment of contractor with CBC and that the said contractor was registered with PEC. The reply furnished by the executive was not tenable as the PEC on its website reflected the status of the said firm as being de- registered w.e.f. 01-01-2017

The DAC vide meeting held in December, 2018 directed that relevant documents be provided to audit for examination.

Audit recommends an early implementation of DAC directives, besides, fixing of responsibility against the person(s) at fault.

DP-S-279/2018-19

1.8.4 Irregular payment of drainage charges out of Cantt Fund – Rs 2.574 Million

As per Rule-4 (iv) of Cantonment Account Code-1955, ”public monies should not be utilized for the benefit of particular person or section of the community”. During audit of Cantt Board Walton, it was observed that an amount of Rs 2,574,000/- was paid vide voucher No. 178 dated 09-11- 2015 by Cantt Board Walton to Irrigation Department on account of drainage service charges on account of Charrar Drain which passes through DHA Lahore, under Board Resolution No. 36 dated 15-11-2014. The bills of waste water were sent to DHA by Irrigation Department, which were unjustifiably forwarded to Cantt Board by DHA vide letter dated 05-06-2014. Audit is of the view that drainage services charges were related to DHA and needed no forwarding to Cantt Board and payment therefrom. The irregularity was pointed out by Audit in August 2017. Cantt Board Walton replied that the case would be taken up with concerned authority. The DAC vide meeting held on 08th November, 2018 was apprised that another bill for the subsequent period, received from DHA, had been placed before the Board for decision keeping in view the Audit observation. The Board decided to ask DHA for the payment of bills as DHA is charging sewerage charges from its residents. DAC directed that recovery be effected from DHA expeditiously. No further progress was intimated to Audit till finalization of this report. Audit recommends recovery of Rs. 2.574 million, besides, taking measures to avoid recurrence of such lapse in future. DP-N-181/2017-18 1.9 Recoverables / Overpayments – Rs 4,961.798 Million 1.9.1 Non-recovery of sky charges - Rs 1,645.754 Million

According to Government of Pakistan, Ministry of Defence (ML&C Deptt) letter No. 1-4/Gen/Hoarding Policy/ML&C/2012 dated 4th July, 2012, Sky Charges shall be recovered by respective Cantt Boards. During audit of Cantt. Board Chaklala, it was observed that Sky Charges of billboards / hoardings amounting to Rs 1,645,754,000/- recoverable from 16 hoarding contractors were not effected. The irregularity was pointed out by Audit in October 2017. The executive stated that notices for recovery of Sky Charges have been issued to defaulters and recovery of objected amount will be made. The DAC vide meeting held on 08th November, 2018 was apprised by Cantt Board Chaklala that actual recoverable amount comes to Rs 524,850,000. DAC pended the para and directed the Department that policy for recovery of Sky Charges, Bill Boards and Hoardings be got verified from MoD. Audit recommends that the matter may be reconciled with audit and actual recoverable amount be realized and got verified from audit. DP-N-41/2018-19 1.9.2 Non-recovery of cantonment taxes – Rs 1,096.027 Million

Section-92 of Cantonments Act, 1924, states that if a person liable for payment of any tax does not, within thirty days from the service of the notice of demand, pay the amount due, or show sufficient cause for non-payment of the same to the satisfaction of the Executive Officer, such sum, with all costs of the recovery, may be recovered under a warrant, issued in the form set forth in Schedule II, by distress and sale of the movable property of the defaulter.

During audit of following Cantonment Boards for the financial year 2017-18, it was observed that an amount of Rs 68

1,096.027,686 was lying outstanding against different parties/properties on account of house tax, conservancy tax and water charges, which was in violation of rule stated above.

(Rs. in million) S.No Name of Unit/ Formation DP No Amount 1 CB Karachi S-138, S-140 & S-141 387.109 2 CB Clifton, S-243 348.390 3 CB Quetta S-75 198.957 4 CB Faisal, Karachi S-61 121.030 5 CB Hyderabad S-106 26.300 6 CB Korangi Creek, Karachi S-173 6.095 7 CB Malir, Karachi S-280 & S-290 6.822 8 CB Pano Aqil S-264 1.324 Total 1096.027

Audit was of the view that due to slow pace of recovery there accumulated arrears in huge amount.

Non-recoveries were pointed out by audit in August and November, 2018. It was replied by the management that partial recoveries had been made and efforts were afoot to recover the outstanding amount.

The DAC vide meeting held in December, 2018 directed the executive to recover the amount in full and get the recoveries verified from audit.

Audit recommends expeditious compliance of DAC directives.

1.9.3 Non-realization of premium charges and composition fee on unauthorized use of residential property as commercial – Rs 848.045 Million As per para-3(h) (General Conditions) of the Government of Pakistan Ministry of Defence letter No. 3/6/D-12/(ML&C)/97-2007 dated 31st December, 2007, “usage of residential property for commercial

purpose will require NOC from the respective Garrison HQrs. Premium shall be charged on revenue rate applicable for the said purposes. After approval of conversion, the respective Cantt Board to charge due composition fee as per existing rule and those who fail to pay the above, their property will be resumed”. During audit of following Cantonment Boards for the financial year 2016-17, it was observed that properties as mentioned against each Cantonment Board were held on lease for residential purpose. However, these were being used for commercial purpose in violation of above stated Government orders. This resulted into non-recovery of Govt dues including premium, development charges and ground rent amounting to Rs 848.045,000. Audit is of the view that un-authorized change of purpose without approval of competent forum showed weak controls of the department entailing loss to the Cantt Fund due to non-imposition of commercialization charges. (Rs. in Million) S. # DP No. Unit / Property No. Amount Formation 1 DP-N-230/2017-18 Cantt Board, 09 Residential Buildings at 438.935 Rawalpindi Westridge Housing Scheme Rawalpindi 2 DP-N-234/2017-18 Cantt Board, Bungalow No. 32, Haider 99.670 Rawalpindi Road Rawalpindi 3 DP-N-246/2017-18 Cantt Board, 293/A Jami Road, 5, 16 & 207.869 Rawalpindi 283/4 Raja Akram Road Rawalpindi 4 DP-N-248/2017-18 Cantt Board, Plot-3 Bung-113 Saddi 29.095

Rawalpindi Road Rawalpindi 5 DP-N-235/2017-18 Cantt Board, Plot-12 Svy 160/18 Defence 72.476 Abbottabad officer Housing scheme Abbottabad Total 848.045

The irregularity was pointed out by Audit in August 2017. The executive replied that the properties were under the management of

concerned MEO. The reply was not acceptable as building plans for residential purpose were approved by Cantonment Boards and it was their responsibility to prevent un-authorized commercial use. The DAC vide meeting held on 8th November, 2018 was apprised that the properties objected by Audit are under the control / management of MEO concerned. DAC directed that para be shifted to concerned MEO for finalization of action. No further progress was intimated to Audit till finalization of this Report. The Audit recommends early regularization and recovery. 1.9.4 Non-realization of conservancy charges from the local military authorities. - Rs. 365.505 Million

As per Section-98 of Cantonment Act-1924, the Cantonment Board is liable to provide services for the collection, removal and disposal of rubbish, filth, night soil and sludge from all places within the control of local military authority. As per the conservancy agreement, the military authority concerned makes payment to the Cantonment Board for the above services. During audit of following Cantt Boards, it was observed that conservancy agreements were concluded between Station Headquarters and Cantt Boards. However, outstanding dues on account of conservancy charges amounting to Rs 365.505,000 against Army were still outstanding since long. This resulted into loss to Cantt Fund of Rs 365,505,000. (Rs. in million) S # DP No. Unit / Formation Amount 1 DP-N-113/2017-18 Cantt Board, Sialkot 39.225 2 DP-N-180/2017-18 Cantt Board, Multan 17.100 3 DP-N-244/2017-18 Cantt Board, Attock 6.609 4 DP-N-303/2017-18 Cantt Board, Gujranwala 64.450 5 DP-N-343/2017-18 Cantt Board, Kohat 30.572 6 DP-N-402/2017-18 Cantt Board, Peshawar 18.941 7 DP-N-18/2018-19 Cantt Board, Bahawalpur 42.940 71

8 DP-N-51/2018-19 Cantt Board, Lahore 101.505 9 DP-N-57/2018-19 Cantt Board, Jhelum 37.596 10 DP-N-95/2018-19 Cantt Board, Mardan 5.439 11 DP-N-179/2018-19 Cantt Board, Risalpur 1.128 Total 365.505

The irregularity was pointed out by Audit in 2016 & 2017. The executives replied that the matter had been taken up with Army authorities for the payment of outstanding dues. The DAC vide meetings held in November and December, 2018 was reported nominal recoveries in few cases. DAC directed that recovery be pursued with Army authorities vigorously. No further progress was intimated to Audit till finalization of the report. Audit recommends realization of outstanding cantonment dues and verification by audit, besides, adoption of measures by the Cantt Boards concerned for timely recovery. 1.9.5 Non-recovery of property tax of commercial building - Rs 183.089 Million

According to section 92 (1) of the Cantonment Act-1924 “if the person liable for the payment of any tax does not, within 30 days from the service of notice of demand, pay the amount due or show sufficient cause of non-payment of the same to the satisfaction of the Cantonment Executive Officer, such sum, with all costs of recovery, may be recovered under warrant”. During audit of Cantonment Board, Peshawar, it was observed that property tax in respect of undermentioned properties amounting to Rs183,089,000 was lying outstanding since long, which needed recovery. (Rs. in Million) S # DP # Formation Property Detail Amount 1 DP-N-464/2017-18 Cantonment Deans Trade Centre 143.675 Board, Peshawar Peshawar

2 DP-N-144/2018-19 Cantonment State Bank of Pakistan, 39.414 Board, Peshawar Peshawar Total 183.089

The irregularity was pointed out by Audit in 2016-17 & 2017-18. The executive replied that efforts were being made to recover the amount. However, no further progress of recovery was intimated.

The DAC vide meetings held on 08th November, 2018 and 4th December, 2018 was apprised that Rs 29,314,000 has been recovered from the owner of Deans Trade Centre. Owners of the property have approached civil court for status quo against Cantonment Board for stoppage of sealing process. As regards SBP, they have been requested for recovery of the property tax but no response was received. The case has therefore been forwarded to Cantt Magistrate under section 259 of Cantonment Act 1924. DAC directed that recovery made so far be got verified besides intimation of progress of outstanding recovery and present position of court case. No further progress was reported to audit till finalization of this report. Audit recommends immediate recovery of cantonment dues and its verification by audit besides initiation of remedial measures to avoid such lapses in future. 1.9.6 Non-recovery of conservancy charges – Rs 160.761 Million

Under Rule 2(A)(1) of the Pakistan Cantonments Account Code, 1955, it is laid down that the Executive Officer is the Principal Executive Officer of the Board and all other officers and servants of the Board are subordinate to him. He is the officer, who has been entrusted by government with the responsibility of assessing and collecting cantonment revenues. Further, according to Section 98 of Cantonments Act 1924, “a Board may make special provisions for the cleansing of any factory, hotel, club or group of buildings or lands used for any one purpose and one management, and may fix a special rate and the dates and other conditions 73

for periodical payments thereof, which shall be determined by a written agreement with the person liable for the payment for the conservancy or scavenging tax in respect of such factory, hotel , club or group of buildings or land”.

During audit of following Cantonment Boards for the financial year 2017-18, it was observed that the municipal bodies provided conservancy services regularly to Pakistan Army by concluding agreements with Station Headquarters, but an amount of Rs 160,761,000 on account of conservancy charges was lying outstanding against Pakistan Army up to June 30, 2018. (Rs. in million) S. No Name of Unit/ Formation DP No Amount 1 Cantonment Board Pano Aqil S-253 141.657 2 Cantonment Board Malir S-94 19.104 Total 160.761

Non-recoveries were pointed out by audit during July to November, 2018. The executive stated that the case for recovery of arrears had been initiated with army authorities. The executive at Sr. No 2 further contended that the actual recoverable amount was Rs 13,041,000 instead of 19,104,000.

Non-recovery of huge arrears reflected weak financial management within the Cantonment Boards causing loss to cantonment fund.

The DAC vide meeting held in December, 2018 directed the executive at Sr. No 1 that conservancy charges be recovered from Army authorities and record produced to audit for verification. In case of Sr. No 2, the DAC directed to reconcile the recoverable amount with audit and get the recovery verified from it. No progress in terms of recovery was reported till finalization of this report.

Audit recommends expeditious implementation of DAC directives. 1.9.7 Non- recovery of premium due to use of old grant property for commercial purpose – Rs 114.849 Million

According to para 3(h) of Govt. of Pakistan/ Min of Defence Rwp letter No.3/6/D-12(ML&C)/97-2007 dated 31.12.2007, any un-authorized change of purpose (residential to commercial) in respect of properties held on old grant terms cannot be regularized unless: (a) NOC has been obtained from Sta HQrs/CB. (b) full market price of land is paid as premium (c) in case of failure to comply with the above conditions the property rights were to be resumed. Further, according to Govt. of Pakistan /Min of Defence letter No-55/305/Lands/ML&C/2007-P dated 13.8.2015, all grantees of old grant properties were advised to regularize the cases of change of purpose up to 31.12.2016. During audit of Cantonment Board Rawalpindi, it was observed that property No. 486 & 496, Adamjee Road, Saddar Rawalpindi Cantt held on old grant was being used for commercial purposes by constructing 55 shops, as evident from Cantonment Board, Rawalpindi letter No. P-486 & 496/SB/L/5188, dated 20.04.2017. Audit observed that neither premium, development charges and ground rent amounting to Rs. 114,848,651 were recovered nor property rights got resumed. The irregularity was pointed out by Audit in August 2017. The executive replied that Government old grant conversion policy expired on 31-12-2016. However, after extension of the policy, the case for conversion of old grant properties into regular commercial lease would be processed. After approval of the case, premium would be recovered. Reply was not tenable as the owner did not avail the facility for regularization of un-authorized use of property under the Government policy. Therefore, property rights needed to be resumed.

The DAC vide meeting held on 08th November, 2018 was apprised that Government policy for conversion of old grant cases into regular leases have been extended for five years up to 31-12-2021. Accordingly, public notices have been published in newspapers. DAC directed that notices be issued to the concerned lessees with direction to get the lease regularized. No further progress was reported to audit till finalization of this report. Audit recommends that either properties be resumed or regularized through recovery of cantonment dues, besides, holding of inquiry for fixing responsibility on person(s) at fault. DP-N-341/2017-18 1.9.8 Non-recovery of Sales Tax on services – Rs 104.150 Million

A) According to Sindh Sales Tax Act No XII of 2011, issued by Sindh Revenue Board (SRB), Government of Sindh, as also implemented through Notification No. SRB/Com-III/AC (Unit- 27)/Tender/JS/2016-17/ 00595 dated 20-6-2017, Sales Tax would be charged @ 10% w.e.f 01-07-2014 on janitorial services.

During audit of following Cantonment Boards for the financial year 2017-18, it was observed that Sales Tax on conservancy services amounting Rs 66,302,541 was not recovered from the contractors‟ payments. (Rs in million) S. No Name of Unit/Formation DP No. Amount 1. Cantonment Board Clifton S-256 47.277 2. Cantonment Board Faisal S-53 10.800 3. Cantonment Board Malir S-284 8.225 T o t a l 66.302

Audit was of the view that due to non-recovery of Sales Tax, public exchequer was deprived of hefty revenue on account of recoverable tax.

Non-recoveries were pointed out by audit in August and September, 2018. The executive at Sr. No1 submitted an evasive reply. The executive at Sr. Nos. 2 and 3 replied that the Sindh Sales Tax on Services was not applicable over Federal organizations. The contention of the management was not tenable as the Sales Tax on Services was a provincial subject and the tax was recoverable on such services in the province.

The matter was discussed in DAC meeting held in December, 2018. The executive at Sr. No 1 replied that the issue was under deliberation at MoD. The executive at Sr. Nos 2 and 3 replied that the ML&C Department vide letter dated 06-08-2018 had directed all the CEOs not to collect/deduct/remit amount on account of Sales Tax to Sindh Revenue Board, which was not understood.

The DAC pended the DP till formulation of policy/decision at MoD level, whereas the audit suggested recovery of tax due as per rules/instructions of the provincial government. Further progress in terms of recovery was not reported to audit till finalization of this report.

Audit recommends expeditious recovery of the Sales Tax amount along-with fixation of responsibility against the person(s) concerned.

B) According to Balochistan Sales Tax on Services Act, 2015, Schedule II, Part-B, services provided or rendered by persons engaged in contractual execution of work or furnishing supplies are liable to pay 15% Sales Tax on their rendered services.

During audit of Cantonment Board Quetta for the year 2017-18, it was observed that Sales Tax on services @ 15% amounting Rs 37,848,000 was not recovered from the contractors‟ payments.

Audit was of the view that due to non-recovery of Sales Tax, public exchequer was deprived of hefty revenue on account of recoverable tax.

Non-recoveries were pointed out by audit in August 2018. The executive however furnished an evasive reply.

The matter was discussed in DAC meeting held in December, 2018 wherein the executive repeated their earlier evasive stance.

The DAC however pended the DP till formulation of policy/decision at MoD level, whereas the audit suggested recovery of tax due as per rules/instructions of the provincial government. Further progress in terms of recovery was not reported to audit till finalization of this report.

Audit recommends expeditious recovery of the Sales Tax on services. DP-S-77/2018-19

1.9.9 Non-recovery of property tax – Rs 82.912 Million

As per Cantonment Act 1924 Section 64, “annual value” means (a) In the case of railway stations, hotels, colleges, schools, hospitals, factories and any other buildings which a [Board] decides to assess under this clause, one-twentieth of the sum obtained by adding the estimated present cost of erecting the building to the estimated value of the land appertaining thereto. Section 68 of Cantonment Act, 1924 provided that the Board shall, at the same time, give public notice of a date, not less

than one month thereafter, when it will proceed to consider the valuations and assessment entered in the assessment list, and, in all cases in which any property is for the first time assessed or the assessment is increased, it shall also give written notice thereof to the owner and to any lessee or occupier of the property (Section 90 of Cantonment Act,1924).Further, under Section-92 (1) of Cantonment Act 1924, it is laid down that if the person liable for the payment of any tax does not, within thirty days from the service of notice of demand, pay the amount due or show sufficient cause for no-payment of the same to the satisfaction of the executive officer, such sum with all costs of recovery, may be recovered under a warrant.

During audit of accounts of the following Cantonment Boards for the year 2017-18, it was observed that the ARV on account of 02 properties was not finalized since long, which resulted in non-recovery of property/ conservancy tax from the facilities.

(Rs in million) S. No DP No Name of Unit/ Description of activity Amount Formation 01 DP-S-73 Cantonment Board Fauji Foundation School 77.440 Quetta 02 DP-S-90 Cantonment Board M/s Megaplex Cinemas (Pvt) Ltd 5.472 Faisal (Nueplex Cinema) Total 82.912

When the matter was pointed out by audit in August, 2018 the executive at Sr. No 01 replied that the due amount from Fauji Foundation School would be recovered by adopting all the legal means. The executive at Sr. No 02 informed that the notice was issued to M/s Megaplex for the purpose.

The reply furnished by the executive was not tenable as no serious effort was made for recovery of the cantonment dues.

The matter was discussed in DAC meeting held in December, 2018. The DAC directed the executive at Sr. No 1 that the action regarding recovery of property tax be expedited. The executive at Sr. No 2 was advised to furnish revised reply along-with proof of class of land as A-1 or otherwise for examination by audit and effect recovery from the concerned as per rules.

Audit recommends early implementation of DAC‟s directives.

1.9.10 Non-recovery of rent of hoardings from the advertisers - Rs 70.285 Million

Under Section-259 of Cantt Board Act, 1924, any tax or any other money recoverable by a board may be recovered, together with the cost of recovery either by suit or, an application to Magistrate having jurisdiction in the Cantt.

During audit of accounts of Cantonment Board Clifton for the financial year 2017-18, it was observed that a sum of Rs 70,285,530 on account of hoarding charges was lying outstanding against different advertisers since long.

Audit was of the opinion that non-recovery of hoarding charges from the advertisers indicated weak financial management and internal controls within the formation.

The irregularity was pointed out by audit in August, 2018. The executive replied that the notices had been served to the defaulters for recovery of the said dues.

The matter was discussed in DAC meeting held in December, 2018 wherein it was replied that necessary recovery suit in light of Section 259 of the Cantonment Act 924 had been filed. The DAC directed the executive to recover the amount due within 6 months. 80

However, no progress in terms of recovery was reported to audit till finalization of this report.

Audit recommends for an expeditious implementation of DAC's directives.

DP S-57/2018-19

1.9.11 Non-recovery of cantonment dues on account of premium - Rs 50.791 Million

Under Section-259 of Cantt Board Act, 1924, any tax or any other money recoverable by a board may be recovered, together with the cost of recovery either by suite or, an application to Magistrate having jurisdiction in the Cantt. During audit of Cantonment Board, Peshawar, it was observed from record that an amount of Rs. 50,791,050/- on account of premium was lying outstanding against owners of shops and flats, which needed recovery. The irregularity was pointed out by Audit in August 2017. The executive authority stated that a sum of Rs 8,045,500/- was recovered and balance amount of Rs 50,791,050/- of premium would be recovered. Reply was not acceptable, as required action for recovery of outstanding amount was not initiated. The DAC vide meeting held on 08th November, 2018 was apprised that recovery of Rs. 30,002,000 has been made. DAC directed that balance amount i.e. Rs. 20,789,000 be recovered within three months. No further progress was reported to audit till finalization of this report. Audit recommends early recovery of the whole amount and its verification from audit, besides, adoption of remedial measures to avoid such lapses in future. DP-N-449/2017-18

1.9.12 Non-recovery of hoarding charges – Rs 43.114 Million

During audit of the accounts of following Cantonment Boards for the year 2016-17, it was observed that a sum of Rs 43,114,000 on account of hoarding charges were lying outstanding, which needed recovery. (Rs. in Million) S # DP No. Unit / Formation Amount 1 DP-N-206/2017-18 Cantt Board, Rawalpindi 23.628 2 DP-N-317/2017-18 Cantt Board, Sialkot 2.800 3 DP-N-01/2018-19 Cantt Board, Lahore 16.686 Total 43.114

The irregularity was pointed out by Audit in July-August 2017. The executive replied that concerned Army authorities had allowed the hoardings and hence recovery is due from them. The DAC vide meeting held on 8th November, 2018 directed that recovery be pursued with concerned Army authorities and updated position be provided in three months besides clarification from MOD in A-I land policy. However, no further progress was reported to Audit till finalization of this report. Audit recommends for expeditious implementation of DAC recommendations, besides, initiation of remedial measures to avoid such lapses in future. 1.9.13 Non-recovery of premium on auction- Rs 39.469 Million

According to Rule-23 read in conjunction with Rule-47 of Cantonment Land Administration Rules – 1937, “the successful bidder

shall be required to deposit immediately 10 percent of the amount of his bid and to sign an agreement consenting to forego the deposit in case the balance of the price is not paid within thirty days of the confirmation of the auction”. During audit of Cantonment Board Pano Aqil for the financial year 2017-18, it was observed that a sum of Rs 39,469,500 on account of premium against auction of 4th batch of plots in Bazar area/Defence Housing Scheme Pano Aqil Cantt was lying outstanding against the allottees which required recovery and its deposit into cantonment fund.

Non-recoveries were pointed out by audit in August, 2018. The executive replied that the complete premium amount would be recovered after obtaining government sanction.

The matter was discussed in DAC meeting held in December, 2018 wherein the executive repeated its earlier stance. The DAC directed that relevant documents be provided to audit for verification/examination.

Audit recommends expeditious recovery of the premium amount and its deposit into cantonment fund.

DP-S-273/2018-19

1.9.14 Non-return of unspent amount – Rs 34.267 Million

According to Rule-4 (1) of Cantonment Accounts Code 1955, “every public officer is expected to exercise the same vigilance in respect of expenditure incurred from public money as a person of ordinary prudence would exercise in respect expenditure of his own money”. Further, under Rule-47(e) (v) of Financial Regulations Volume-I 1986, the unexpended portion of any existing grant shall lapse on 30th of June each year. 83

During scrutiny of record relating to Military Estate Office, Hyderabad for the financial year 2016-17, it was observed that private land measuring 85 Acres, at Deh Lakhmir Taluka Nawabshah District, Shaheed Benazirabad was acquired for PAF. An amount of Rs 85,501500 was paid for the land by MEO Hyderabad to Land Acquisition Collector (LAC) Nawabshah. However, only Rs 49,234,375 was expended by the LAC and the balance amount of Rs 34,267,125 which was required to be deposited into government treasury as being unspent/unutilized was not refunded by LAC Nawabshah to MEO Hyderabad.

The irregularity was pointed out by audit in February, 2018 but no reply was furnished by the executive.

Audit was of the view that non-recovery of unspent money from LAC indicated weak financial management at the end of the executive.

The matter was discussed in DAC meeting held in December, 2018 wherein it was apprised that the LAC Nawabshah had been asked to return the remaining amount of Rs 34,267,125 to the MEO Hyderabad. The DAC directed that the matter regarding refund of amount be pursued vigorously and the amount retrieved be deposited into government treasury and record got verified from audit. No progress in terms of recovery was reported to audit till finalization of this report.

Audit recommends expeditious compliance of DAC‟s directives.

DP S-02/2018-19 1.9.15 Non-recovery of composition fee due to un-authorized construction – Rs 25.676 Million

As per Section 178 (a) of Cantonment Act, 1924 no person shall erect a building on any land in a Cantonment without getting 84

building plan sanctioned by the Board. Further Govt. of Pakistan Ministry of Defence vide their letter No. 75/853/Lands/92/4970/D-/ML&C/94 dated 06-11-1994, provides that unauthorized construction within the limits of a Cantt is an offence and Board is empowered to demolish the unauthorized construction or regularize it on payment of Composition Fee which in case of commercial construction should not be less than 10% of the assessed capital cost of land & building.

During audit of Cantonment Board Rawalpindi, it was observed that owners of properties as mentioned against each carried out unauthorized constructions without approved building plan from the concerned Board, which resulted into non-recovery of composition fee of Rs 25,676,000.

(Rs. In million) S # DP # Formation Property Amount Cantonment Plot Khasra No.3419/647 5.416 1 DP-N-232/2017-18 Board Rawalpindi Moza Chur Harpal Kh: No. 772, 773 Mouza Siham Rawalpindi 2 DP-N-233/2017-18 Cantonment 41 properties at 20.260 Board Rawalpindi Rawalpindi Total 25.676

The irregularity was pointed out by Audit in 2017. The executive replied that in case of Sl No. 1, owners of the properties had submitted revised building plans along with willingness for regularization of unauthorized construction which has been placed before the Board. After approval of the Board, recovery will be made. Whereas, in the other case, executive agreed to recover the amount. The DAC vide meeting held on 08th November, 2018 was apprised that in case of Sl No. 1, matter was placed before Board, which

resolved that 30 days notice be served upon owners for restoration of parking failing which demolition of unauthorized structure be made. Accordingly a notice was served but no response received from owner. Afterwards local police authority has been approached for provision of contingent for demolition. However, police did not respond and hence shops were sealed. DAC directed that documents relating to action taken by the Board be got verified from audit and to pursue the case further as per rules in vogue. Whereas in the second case, executive apprised that Rs 7,288,000 had been recovered. DAC directed for verification of the recovered amount and recovery of balance amount within 8 months. No further progress was reported to Audit till finalization of this report. Audit recommends immediate recovery of composition fee or demolition of the un-authorized construction besides investigation into the matter to fix responsibility on the person(s) at fault.

1.9.16 Non-deposit of government taxes into treasury - Rs 18.218 Million

Para-2 (6) of Cantonment Account Code, 1955 provides that executive officer is responsible for enforcing financial order and for observance of all relevant rules both by himself and his subordinates. Further, Section 160 of Income Tax Ordinance 2001 stipulates that any tax that was deducted shall be paid to the Commissioner by the person making the deduction within the time and in the manner as may be prescribed. Likewise, Section 161 of Income Tax Ordinance 2001 provides that where a person fails to pay the tax to the Commissioner as required under this Section, the person shall be personally liable to pay the amount of tax to the Commissioner who may pass an order to that effect and proceed to recover the same.

During scrutiny of record pertaining to the following Cantonment Boards for the financial year 2017-18, it was observed that

the formations withheld Rs18,218,818 on account of Income Tax from the contractors being withholding agents but the said amounts were not remitted to FBR, which was not in order.

(Rs in million) S. No Name of Unit/Formation DP No. Amount 1 Cantonment Board Korangi Creek S-183 9.509 2 Cantonment Board Hyderabad S-104 8.709 T o t a l 18.218

When the matter was pointed out by audit in August, 2018 the executive stated that the pointed out recovery would be remitted to FBR.

The DPs were discussed in DAC meeting held in December, 2018. The DAC directed that the total withheld amount on account of tax be remitted into government treasury immediately and such practice should not be repeated in future. No further response in terms of proof of remittance to FBR was reported to audit till finalization of this report.

Audit recommends early implementation of DAC‟s directives along-with fixation of responsibility against the concerned.

1.9.17 Non-recovery of Income Tax – Rs 12.699 Million

Under Rule 2(A)(1) of the Pakistan Cantonments Account Code, 1955, it is laid down that the "Executive Officer is the principal officer of the Board and all other officers and servants of the Board are subordinate to him. He is the officer, who has been entrusted by government with the responsibility of assessing and collecting cantonment revenues". Further, according to Section 236 (A) of Income Tax Ordinance 2001, the newly enhanced tax rate on account of advance tax on sales by auction is 10% for filer and 15% on non-filer.

During audit of accounts of the following Cantonment Boards for the year 2017-18, it was observed that a sum of Rs 12,699,250 on account of advance tax against auction of plots/shops and services was lying outstanding against different parties.

(Rs in million) S No. DP No. Name of Unit/ Formation Amount 01 DP-S- 258/2018-19 Cantonment Board Pano Aqil 6.578 02 DP-S- 174/2018-19 Cantonment Board Hyderabad 5.576 03 DP-S- 233/2018-19 Cantonment Board Hyderabad 0.545 Total 12.699

The matter was pointed out by audit in August and September, 2018. The executive at Sr. No 01 replied that the advance tax would be applicable once the lease agreements were finalized and complete amount of bid money was successfully recovered as per schedule, while the executive at Sr. Nos 02 and 03 agreed to recover the amount of Income Tax from the parties. Reply furnished by the executive is not tenable as they should have recovered the tax due in a timely manner.

The matter was discussed in DAC meeting held in December, 2018. The DAC directed the executive to get the recoverable amount reconciled with audit and effect recovery of the amount due and get the record verified from audit expeditiously.

Audit recommends compliance of DAC`s directives on priority. 1.9.18 Non recovery of cantonment dues from the contractor - Rs. 11.520 Million

According to Rule 14 (2) of Pakistan Cantonment Accounts Code, 1955, remission of money due over one thousand rupees in respect of miscellaneous contracts for special reasons be sanctioned by the government in each individual case.

As per clause 3 of agreement for Cattle Mandi executed on 1st December, 2016 by Cantonment Board Okara with Muhammad Ilyas Qureshi, annual payment of Rs. 65,100,000/ as contract money will be paid in equal monthly installments in advance. If the contractor fails to deposit outstanding dues, his contract will be cancelled and the collection rights of cattle mandi shall be carried out by other means at the risk and cost of the contractor. During audit of Cantt Board Okara, it was observed that cantonment dues up to June 2017 i.e. Rs.11,520,000/- as was evident from Cantonment Board Okara Cantt letter No. 181/CA/114/OK/2100 dated 3rd July 2017 were not recovered from Cattle Mandi contractor. Moreover, required action under the terms and conditions of the agreement was not taken. Further, a case of rebate was forwarded to DG ML&C. The irregularity was pointed out by audit in July, 2017. The executive replied that after approval of 20% rebate by the Board, the case was submitted to DG ML&C and the net amount would be recovered accordingly. The executive reply was not convincing as the cantonment dues were required to be recovered as per contract schedule. The DAC vide meeting held on 08th November, 2018 was apprised that 20% rebate has been granted to the contractor therefore, recoverable amount against the contractor stands regularized. DAC directed that relevant record/documents regarding grant of rebate under rules, be provided to audit. However, no further progress was intimated till finalization of this report. Audit recommends regularization of the matter from the Federal Government as under rule 14 of Cantonment Accounts Code, 1955 sanction from the Government was required which was not done. DP-N-121/2017-18 1.9.19 Non recovery of BTS tower rent - Rs 11.352 Million

According to Para-92 (1) of the Cantonment Act-1924 “if the person liable for the payment of any tax does not, within 30 days from the service of notice of demand, pay the amount due or show sufficient cause of non-payment of the same to the satisfaction of the Cantonment Executive Officer, such sum, with all costs of recovery may be recovered under warrant” During audit of Cantonment Board Peshawar, it was observed that a sum of Rs 11,351,635/- on account of tower fee in respect of six BTS Towers for the period 2013-14 to 2016-17 was outstanding against Warid Telecom Company, which needed immediate recovery. The irregularity was pointed out by Audit in August 2017. The executive replied that case was referred to Secretary Cabinet Division, Government of Pakistan, Islamabad in the light of court decision and would be decided accordingly. However, further progress in the matter was not intimated to Audit. The DAC vide meeting held on 08th November, 2018 was apprised that concerned telecom company has been requested time and again for recovery of BTS tower fee. DAC directed to recover the amount within two weeks. No further progress was reported to Audit till finalization of this report. Audit recommends immediate recovery of cantonment dues and its verification by audit besides initiation of remedial measures to avoid such lapses in future. DP-N-461/2017-18 1.9.20 Less deduction of Income Tax from conservancy contractors - Rs 9.133 Million

As per Section-153 of Income Tax Ordinance 2001, as amended from time to time, every prescribed person making a payment for rendering or providing of services is liable to deduct tax from the gross amount of the bills at prescribed rates. 90

During audit of accounts of the following Cantonment Boards for the financial year 2017-18, it was observed that Income Tax was deducted from the net amount of the bills of the contractors after deduction of salaries instead of gross amount which resulted in less recovery of Income Tax amounting to Rs 9,133,563. (Rs in million) S. No Name of Unit/Formation DP No. Amount 1 Cantonment Board Faisal S-52 8.327 2 Cantonment Board Malir S-277 0.806 T o t a l 9.133

The less recovery of Income Tax was pointed out by audit in August, 2018. The executive furnished an evasive reply. Audit held the view that the Income Tax was recoverable on gross amount whereas the Cantonment Boards deducted Income Tax after deduction of salaries of sanitary workers, which was not in order.

The matter was discussed in DAC meeting held in December, 2018. The DAC directed the executive at Sr. No 01 that the recovered amount be got verified from audit and the plan for balance recovery be provided to audit and remaining recovery effected within six months. While in case of Sr. No 02, the DAC directed that the recoverable amount be reconciled with audit and Income Tax be recovered on gross amount as per rules. No progress in terms of recovery was reported to audit till finalization of this report.

Audit recommends recovery of Income Tax as per rules on priority.

1.9.21 Non-recovery of Stamp Duty from contractors – Rs 8.810 Million

As per Section 35 of Stamp Act 1899, no instrument chargeable with duty shall be admitted in evidence for any purpose by any person having by law or consent of parties authority to receive evidence,

or shall be acted upon, registered or authenticated by any such person or by any public officer, unless such instrument is duly stamped. Further, as per Government of Sindh Finance Act 2009, “Stamp duty of Thirty five paisa for every hundred rupees or part thereof of the amount of the contract will be charged”.

Contrary to above rule, the record pertaining to the following Cantonment Boards for the year 2017-18 showed that a sum of Rs 8,810,683 on account of Stamp Duty was not recovered by the Cantonment Boards against different contract agreements.

(Rs in million) S.No Name of Unit/Formation DP No Amount 1 Cantonment Board Clifton S-249 6.257 2 Cantonment Board Faisal S-60 1.134 3 Cantonment Board Malir S-95 0.820 4 Cantonment Board Quetta S-76 0.599 T o t a l 8.810

The non-recovery was pointed out by audit in August to November, 2018. The executive at Sr. No 01 replied that the Finance Act 2009 of Sindh Government was not applicable on Cantonment Boards, whereas the executive at Sr. Nos 2 to 4 agreed to recover the Stamp Duty.

The DAC vide meeting held in December, 2018 pended the DPs till formulation of policy/decision on recovery of Stamp Duty at MoD level, whereas the audit suggested recovery of the amount of Stamp Duty on priority. No progress in terms of recovery of Stamp Duty was reported to audit till finalization of this report.

Audit recommends for recovery of provincial duty as per rules on priority.

1.9.22 Less recovery of scrutiny fees – Rs 8.491 Million

According to Cantonment Act, 1924 Rule 178A, “No person shall erect or re‑erect a building on any land in a cantonment, except with the previous sanction of the Board, nor otherwise than in accordance with the provisions of this Chapter and of the rules and bye‑laws made under this Act relating to the erection and re‑erection of buildings”. Likewise, according to Cantonment Board Resolution No. 16 dated 4-11-2011, scrutiny fee at a uniform rate of Rs 15/- Per sqft will be charged and security fee @ 1% of the cost of construction will also be charged.

During audit of record related to the office of Cantonment Board Malir for the year 2017-18, it was observed that an amount of Rs 8,491,784 was less recovered on account of scrutiny fee from the owners of 2 properties. Audit was of the view that less recovery of the fee resulted in loss of revenue to the cantonment fund.

The irregularity was pointed out by audit in August, 2018. The executive replied that the amount would be recovered. The DAC vide meeting held in December, 2018 directed that the amount be recovered and record produced to audit for verification.

Audit recommends expeditious recovery of amount due and its verification by audit. DP-S-287/2018-19 1.9.23 Non recovery of fine from commercial properties due to illegal water connections – Rs 7.175 Million

Under section 259 of the cantonment Act 1924 “any tax or any other money recoverable by a board may be recovered, together with the cost of recovery either by suit or an application to Magistrate having jurisdiction in the cantt.” During audit of Cantt Board Walton, it was observed that forty four (44) illegal water connections were installed at commercial units

from Cantt Board water supply line. The board vide CBR No. 40 dated 29.4.2016 regularized un-authorized connections subject to recovery of fine amounting to Rs. 7,175,000/-. However, no recovery was made by the Cantt Board. The irregularity was pointed out by Audit in August, 2016. The executive authorities agreed to take necessary action. The DAC vide meeting held on 08th November, 2018 was apprised that survey of all properties will be conducted and after completion of survey, recovery action will be initiated. DAC directed that process of survey / regularization of illegal water connections be completed within one month and recovery effected. No further progress was intimated to Audit till finalization of this report. Audit recommends implementation of the DAC directive, besides, investigation of the matter to fix responsibility on the persons at fault. DP-N-204/2017-18 1.9.24 Non-deduction of Income Tax –Rs 3.900 Million

According to Section 153 (1) (c) of Income Tax Ordinance 2001, every prescribed person making a payment in full or part including a payment by way of advance to a resident person or permanent establishment in Pakistan, on the execution of a contract, other than a contract for the sale of goods or the rendering or providing of services shall, at the time of making the payment, deduct tax from the gross amount payable at the rate of 7.5 % from filer and 10 % from non-filer.

During scrutiny of record relating to Cantonment Board Quetta for the financial year 2017-18, it was observed that 3 of the contractors were paid an amount of Rs 39,000,000 against different works. However, Income Tax @ 10% amounting to Rs 3,900,000 was not deducted from the payments.

The matter was pointed out by audit in August, 2018. The executive replied that the tax would be deducted from the final bill.

Audit was of the view that the tax should have been deducted at source from the payments which indicated poor financial management at the end of the executive.

The DAC vide meeting held in December, 2018 directed that proof regarding filer status of the contractors be provided to audit. In case of non –filer, the pointed out amount of Income Tax be recovered from the contractors and record produced to audit. No further response on the matter was reported by executive till finalization of this report.

Audit recommends early recovery of Income Tax as per rules.

DP-S-70/2018-19

1.9.25 Non-recovery of composition fee – Rs 3.004 Million

According to Section 185 of Cantonments Act, 1924, a Board may direct the owner, lessee or occupier of any land in the cantonment to stop the erection or re-erection of a building in any case in which the Board considers that such erection or re-erection is an offence under Section 184. The Board may direct the alteration or demolition of the building or accept, by way of composition, such sum as it thinks reasonable. Further, Government of Pakistan Ministry of Defence vide their letter No. 75/853/Lands/92/4970/D-2/ML&C/94 dated 6-11-1994 stated that “unauthorized construction within the limits of Cantonment Board is an offence and the Board is empowered to demolish the unauthorized construction or regularize it on payment of composition fee”.

During audit of record of Cantonment Board Hyderabad for the financial year 2017-18, it was observed that the owner of the property

No 14 & 15 (Survey No 41) Saddar, Hyderabad Cantt carried out unauthorized construction work. The composition fee was not recovered from the lessee.

Non-recovery was pointed out by audit in August, 2018. The executive replied that they had directed the lessee to deposit the amount. Audit was of the view that the Cantonment Board could not pursue the matter of recovery of composition fee meticulously, which reflected weak internal controls.

The DAC vide meeting held in December, 2018 was informed that the lessee of the property had been approached for deposit of composition fee. The DAC directed that the recovery of the composition fee be expedited and it be got verified from audit. No progress in terms of recovery was reported to audit till finalization of this report.

Audit recommends expeditious implementation of DAC‟s directives along-with fixation of responsibility against the concerned

DP-S-100/2018-19 1.9.26 Non-recovery of Transfer of Immoveable Property Tax - Rs. 1.784 Million

According to Section 60 of Cantonment Act, 1924, the Board may, with the previous sanction of the Federal Government, impose in any cantonment any tax which under any enactment for the time being in force, may be imposed in any municipality in the Province wherein such cantonment is situated. According to S.R.O.382(1)/94 dated 3-5-1994, Federal Government imposed a tax on transfer of immoveable property (lands and buildings) payable by the transferee at the rate of three percent of the consideration money of such property as recorded in the sale deed or as

assessed by the Cantonment Executive Officer for the purpose of assessment of tax as market value of the property, whichever is higher. During audit of Cantt Board Walton, it was observed that Punjab Co-operative Housing Society Limited purchased a piece of land measuring 09 Kanal, 08 Marlas. However, Transfer of Immoveable Property tax amounting to Rs. 1,784,400/- was not recovered from the society. The irregularity was pointed out by Audit in August 2016. It was replied by the executive that amount would be recovered at the time of transfer of property. The reply is not agreed to as all the formalities had already been completed. The DAC vide meeting held on 08th November, 2018 was apprised that the Society has been approached for provision of relevant record. However, no response has been received. DAC directed that matter regarding recovery of TIP tax be finalized within two months. No further progress was intimated to Audit till finalization of this report. Audit recommends recovery of Cantonment taxes and adoption of remedial measures to avoid such lapses in future. DP-N-115/2017-18 1.9.27 Non-recovery of GST from suppliers – Rs 1.019 Million

During audit of Cantonment Board Clifton for the financial year 2017-18, it was observed that an amount of Rs 7,016,805 was expended by the formation on procurement of various stores‟ items.

However, GST amounting to Rs 1,019,535 was not deducted from the suppliers‟ payments.

Non-recovery was pointed out by audit in November, 2018. The executive agreed to recover the 1/5th amount of GST in due course of time. The audit is of the view that the 1/5th amount of GST was deductible by Board as the withholding agent only at the time of payment and the remaining 80% amount was to be remitted to FBR by the supplier through Sales Tax return. The copy of invoice was to be obtained from the supplier by the Board in proof of deposit of full amount of GST into government treasury, which was not done.

The DAC vide meeting held in December 2018, was informed that the actual recoverable amount was Rs 412,000 which would be deducted from the concerned suppliers. It was further informed that the suppliers had also been asked to provide documentary evidence in support of 80% GST amount with FBR. The DAC directed that recoverable amount be reconciled with audit within two months.

Audit recommends expeditious recovery of GST and its deposit into government treasury.

DP-S-262/2018-19

1.10 Loss to State – Rs 6,660.941 Million 1.10.1 Non-recovery of Cantonment Board dues against commercial buildings – Rs 5,235.056 Million.

According to Section 178-A of Cantonment Act, 1924, “No person shall erect or re-erect a building on any land in a cantonment, except with the previous sanction of the Board, nor otherwise than in accordance with the provisions of this Chapter and of the rules and bye‑ laws made under this Act relating to the erection and re‑erection of buildings”. Further, according to minutes of meeting held on 15th June, 2015 at MoD under the chairmanship of Additional Secretary II(para d), it was decided that building plan/ maps of the buildings to be constructed on A-1 land for commercial purposes will be approved by the Cantonment Board concerned. Likewise, according to Cantonment Board Resolution No. 4 dated 1. 9. 2016, the rates/ fees fixed for approval of building plan and development charges were to be recovered from the parties/ end-users as per approved recoverable rates.

During scrutiny of record relating to Cantonment Board Quetta for the financial year 2017-18, it was observed that 20 different properties covering shopping malls, schools, hospitals and others were constructed on A-1 land without approval of their building plans by the Cantonment Board. Besides, requisite fees/ charges which were recoverable by the Cantonment Board amounting to Rs 5,235,056,000 were not recovered.

The matter was pointed out by audit in August, 2018. The executive stated that the A-1 land was under the control of Military Estate Office and that the army authorities were not submitting building plans for approval. Reply furnished by the executive was not tenable as the approval of building plans was the prime responsibility of the Cantonment Board within its defined limits.

The DAC vide meeting held in December, 2018 pended the DP till revision of A-1 Land Policy, whereas the audit suggested recovery of Cantonment Board dues on priority. No further response in terms of proof of recovery was reported to audit till finalization of this report.

Audit recommends early implementation of DAC‟s directives along-with recovery of Cantonment Board dues on priority.

DP-S-69/2018-19

1.10.2 Irregular deposit of government receipts into QMG’s Fund – Rs 757.715 Million

As per Article 78 of the Constitution of Islamic Republic of Pakistan, receipt of any kind is required to be deposited into Federal Consolidated Fund. Furthermore, as per Rule 11 of CLAR 1937, all receipts from land entrusted to the management of the Military Estates Officer shall be credited in full to the Central Government.

During scrutiny of record relating to MEO Karachi, it was observed that an amount of Rs 757,715,850 was collected on account of premium, conversion & sale/lease proceeds in respect of different properties and deposited into QMG‟s fund.

Audit was of the view that the deposit of the said amount into QMG‟s fund was irregular as the entire amount of receipts was required to be deposited into government treasury as per rules.

The matter was pointed out by audit in May-2018. The executive replied that the funds were deposited into the QMG‟s fund under the directions of Ministry of Defence conveyed vide letter No.F- 2/18/D-12/ML&C/2003 dated 11-11-2003. Reply furnished by the executive was not tenable as government receipts could not be diverted for the indicated purpose.

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The DAC vide meeting held in December, 2018 advised the management to submit revised reply to the DPs, which was received immediately after discussion on 19-12-2018. The executive repeated their earlier stance in the fresh communication. Audit opined that the deposit of the said amount into QMG‟s Fund was irregular as the total amount of receipts needed to be deposited into government treasury on priority. No further response on the matter showing deposit of amount into central treasury was reported to audit by executive till finalization of this report.

Audit recommends early deposit of total receipts into government treasury as per rules. DP-S-74, S-79, S-81 & S-97/ 2018-19

1.10.3 Non-recovery of cost of land from Punjab Highway Department – Rs 449.65 Million

According to Rule 7 of CLA Rules 1937, no alteration in the classification of land which is vested in the state or in the Board shall be made except by the Federal Government. Further Note 3 below the Rule ibid stipulates that “the Government will be the sole judge whether they wish to retain any particular land or not. Should any land in class B (4) be required by a Provincial Government and the Government of Pakistan agreed to transfer it, the amount payable will in all cases be its market value at the date of transfer”. During audit of Military Estate Office Lahore, it was observed that 19 kanals 11 Marlas was used by the Punjab Highway Authority for construction of overhead bridge and road after obtaining NOC from GHQ QMG Branch Qtg & Lands Dte vide letter No.5631/342/180/Land-1V0IRD Dated 20/03/2012. However, neither Government sanction was obtained for use of the land nor any compensation was deposited into Federal Government treasury. The omission resulted into huge loss to the state amounting to Rs 449,650,000/- (391 Marlas @ Rs1,150,000/- per marla). 101

The irregularity was pointed out by Audit in January 2018. The executive replied that land in question was classified as A-1 land and comes under the direct control of Military authorities. The case was being taken up with Military authorities for compensation of amount at market rate. Reply was not satisfactory because the land was transferred to Punjab Highway Authority without obtaining approval of the Federal Government besides cost of land was also not recovered from the provincial government. The DAC vide meeting held on 4th December, 2018 was apprised that efforts were in hand for expeditious disposal of the case. DAC directed that financial effect may be revised as per current market value and matter be finalized within 6 months. Audit recommends investigation into the matter to fix responsibility for transfer of land without obtaining Govt. approval, besides, recovery of cost of land at current market rate as per recommendation of DAC. DP-N-201/2018-19 1.10.4 Loss to Cantt Fund due to un-authorized use of Cantonment Board land - Rs 125.503 Million

According to the Clause 187 of the Cantonment Ordinance 2002, no person shall make an encroachment moveable or immovable on an open space or land vested in or managed, maintained or controlled by local government. A) During audit of Cantt Board D.I.Khan, it was observed that cantonment land (Class-C) measuring 5 kanals 7 marlas valuing Rs. 45,600,000/- was encroached by local army authorities as evident from Military Police, D.I. Khan letter No. 251/Q-20E10Z dated 03-11-2015 and Cantonment Board D.I.Khan letter No. 4-14/Land/14873 dated 04-06- 2015. Audit was of the view that encroached C land needs to be vacated.

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The irregularity was pointed out by Audit in February 2017. The executive replied that security authorities have made pickets on the said land. Efforts would be made for vacation of said premises. The reply was not satisfactory as a portion of land placed under observation was being used as parking area and jogging tracks. As such re-possession of land from concerned army authorities was required. B) As per Cantonment Board Wah letter No. IV/Misc/G.Land/III dated 13-07-2016 18.56 kanals B-4 land comprising survey No.108 situated at 27-Area was unauthorizedly occupied by University of Wah for construction of boys hostel. Audit was of the view that encroachment of above land was a clear violation of rules which resulted into loss to Cantonment fund amounting to Rs. 79,903,456/- (18.56 Kanals or 371.34 Marlas x Rs. 215,176/- per Marla). The irregularity was pointed out by Audit in November 2017. The executive replied that management of University of Wah encroached upon Cantt Board B-4 land comprising survey no.108 measuring 18.56 Kanals situated at 27 Area by constructing hostel since long. Cantonment Board Wah vide letter No. IV/Misc/G.Land/III dated 13-7-2016 requested Station Headquarter POFs Wah Cantt to direct the management of University of Wah to vacate the encroached Government land or apply on Sch-V of CLA Rules, 1937 for leasing of said encroached land for obtaining necessary Government sanction. The DAC vide meeting held on 08th November, 2018 was apprised that concerned authorities were repeatedly requested for vacation of land. DAC directed against (A) that Army Authorities be approached through Ministry of Defence for vacation of land and against (B) DAC directed Cantonment Board to take up the matter with POF authorities and ML&C Department to take up the case with MoDP for swap over of land besides representative of MoDP be called in next DAC meeting. No further progress was reported to Audit till finalization of this report.

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Audit recommends implementation of DAC directives besides adoption of remedial measures. DP-N-291 & 565/2017-18 1.10.5 Un-authorized retention of 15% share of provincial government from house tax - Rs 69.539 Million

As per provision contained in Presidential Order No.13 of 1979, the Cantonment Boards were authorized to levy and collect the tax assessed on annual rental value of buildings and land w.e.f. 13.11.1977, subject to the condition that 15% of the net proceeds of the tax is payable by the Cantonment Board to the Provincial Govt. During audit of Cantonment Board Peshawar, it was observed that Rs 69,538,827/- being 15% share of property tax collected by the Cantonment Board during financial year 2013-14 to 2016-17, was not paid to the Provincial Government. This resulted into unauthorized retention of Rs 69,538,827. The irregularity was pointed out by Audit in August 2017, the executive replied that due to non-availability of funds 15 % share of provincial government from House Tax was not paid. The DAC vide meeting held on 08th November, 2018 was apprised that a sum of Rs 6,500,000 has been paid to the provincial government. DAC directed that amount paid so far be got verified and balance amount i.e. Rs 63,038,827 be paid in installments. DAC further directed that plan of payment of balance amount be provided to audit. However, no further progress was intimated to Audit till finalization of the report. Audit recommends immediate payment of outstanding provincial government share and its verification by audit besides improvement in financial management to avoid such lapses in future. DP-N-459/2017-18

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1.10.6 Non-recovery of conservancy tax from housing societies - Rs 12.535

Section 68 of Cantonment Act, 1924 provided that the Board shall, at the same time, give public notice of a date, not less than one month thereafter, when it will proceed to consider the valuations and assessment entered in the assessment list, and, in all cases in which any property is for the first time assessed or the assessment is increased, it shall also give written notice thereof to the owner and to any lessee or occupier of the property (Section 90 of Cantonment Act,1924).Further, according to Government of Pakistan SRO 1514(I)/74 dated 13th December, 1974 conservancy tax @ of 4% on the annual letting value of buildings and lands situated within the Cantonment of Drigh Road is to be charged from the occupiers of the properties.

During audit of accounts of Cantonment Board Faisal for the financial year 2017-18, it was observed that recovery on account of conservancy tax of under-mentioned housing societies was not started till date which resulted in loss to the Cantonment Fund of Rs 12,535,896 per annum.

(Rs in million) S.No Name of society/ housing No of assessed Amount scheme units/Properties 1 ASKARI-IV 1536 4.807 2 A.F.O.H.S 571 3.939 3 A.O.H.S 53 0.731 4 OVERSEAS 360 0.566 5 N.H.S 199 2.492 Total 12.535

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The loss was pointed out to the executive by audit in August, 2018. The executive replied that the notices for recovery of conservancy tax were being issued.

The DAC vide meeting held in December, 2018 directed the management for recovery of conservancy tax expeditiously and its verification by audit. No further progress in terms of recovery was reported to audit till finalization of this report.

Audit recommends for expeditious compliance of DAC‟s directives.

DP-S-64/2018-19

1.10.7 Non-recovery of scrutiny/ security fees- Rs 10.943 Million

According to Section 178-A of Cantonment Act, 1924, “No person shall erect or re‑erect a building on any land in a cantonment, except with the previous sanction of the Board, nor otherwise than in accordance with the provisions of this Chapter and of the rules and bye‑ laws made under this Act relating to the erection and re‑erection of buildings”. Further, under Section-92 (1) of Cantonment Act 1924, it is laid down that if the person liable for the payment of any tax does not, within thirty days from the service of notice of demand, pay the amount due or show sufficient cause for no-payment of the same to the satisfaction of the executive officer, such sum with all costs of recovery, may be recovered under a warrant. Likewise, according to Cantonment Board Resolution No. 16 dated 4-11-2011, scrutiny fee at a uniform rate of Rs 15/- Per sqft will be charged and security fee @ 1% of the cost of construction will also be charged.

During review of record relating to Cantonment Board Malir for the financial year 2017-18, it was observed that 130 of the 106

houses/ flats located in AFOHS and Askari-V were assessed in 2017-18 but scrutiny& security fees amounting to Rs 10,943,421 was not recovered from the owners of the properties.

The matter was pointed out by audit in August, 2018. The executive stated that the notices for recovery were being issued to the concerned. Reply furnished by the executive was not tenable as they should have pursued the Cantt Board‟s recovery meticulously.

The DAC vide meeting held in December, 2018 pended the DP and directed the department to take up the case with PAF/ Army authorities for seeking their stance on the issue. No further response on the matter showing deposit of amount into Cantt Fund was reported to audit by executive till finalization of this report.

Audit recommends early recovery of Cantt Board dues from the concerned. DP-S-288/2018-19 1.11 Mis-procurement of stores – Rs 180.909 Million

1.11.1 Procurement of stores without tender – Rs 180.909 Million

According to Rule 12(1-2) of Public Procurement Rules- 2004, “Procurements over one hundred thousand rupees and up to the limit of Rs 2.000 million shall be advertised on the authority‟s website. Further, procurements over Rs 2.000 million should be advertised on the authority‟s website as well as in two national dailies, one in English and the other in Urdu”.

During audit of accounts of the following Cantonment Boards for the period 2017-18, it was observed that contracts involving different works valuing Rs 180,909,000 were awarded to different

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contractors without advertisement through PPRA‟s website and newspapers.

(Rs in million) S No DP No. Name of Unit / Formation Amount 1. DP-S-131/2018-19 Cantonment Board Hyderabad 178.400 2. DP-S-274/2018-19 Cantonment Board Clifton 2.509 Total 180.909

Audit was of the view that no wider competition was generated in the public spending, transparency was not maintained in the procurement and the value for money was not fully achieved in the process, which indicated weak financial management and poor internal controls.

The irregularity was pointed out by audit in August & November, 2018. The executive at Sr. No 01 replied that the PPRA rules were followed which was however not substantiated. The executive at Sr. No 02 replied that due to urgency of work involving safeguard of main bulk supply pipeline, the deployment of security guards was unavoidable and therefore the process of tendering was not adopted. Reply was not tenable as procurement so made was without competition and was non- transparent.

The DAC vide meeting held in December, 2018 directed the executive at Sr. No. 01 that relevant documents be produced to audit for verification, while in case of Sr. No 02, the DAC directed that a fact- finding inquiry be conducted and record produced to audit for examination. No further progress on the matter was reported to audit till finalization of this report.

Audit recommends expeditious compliance of DAC directives and avoidance of such violations in future.

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Pakistan Air Force

1.12. Irregular / Unauthorized expenditure – Rs 24,260.090 Million 1.12.1 Irregular outsourcing/ execution of project work - Rs 23,745.350 Million.

As per Para 2, 3 and 4 of DSR, 1998 (General Rules for MES), only MES shall carry out engineering services work both Capital and Maintenance for the Armed Forces of Pakistan like Army, Navy and Air Force. Further, Para 98 of DSR 1998 provides that the Director Planning and Works, Engineer-in-Chief, General Headquarters (GHQ) will be responsible for design, consultancy, inspection and evaluation of all development works of Defence Services and as per Para 3(a), table “C” the Director Works and Chief Engineer of MES (Air) is responsible for planning, designing, contracting and execution of all works of the Air Force. Likewise, according to Rule-6(a) of Financial Regulations Volume- I, 1986, “Every officer should exercise the same vigilance in respect of expenditure incurred from government revenue as a person of ordinary prudence would exercise in respect of the expenditure of his own money”. (b)” No authority shall exercise its power of sanctioning expenditure to pass an order which will, directly or indirectly, be to its own advantage”.

During scrutiny of record pertaining to Project Bholari for the financial year 2016-17, it was observed that an amount of Rs 23,745,350,000 was allotted for construction and development of PAF Base Bholari at Hyderabad, Sindh through Government of Pakistan, Ministry of Defence, Rawalpindi letter No. 12/51/D-10(AF-II)/14 dated 5th October, 2015. The expenditure for the project was subject to observance of rules, regulations and instructions of Government of Pakistan, as issued from time to time. The review of record also showed that the management, contrary to above rules, hired the services of a private consultant M/s Kashif Aslam & Associates for consultancy in the 110

subject work and a Resident Engineer was appointed for work supervision and execution. As per rules, this work was mandated to MES (Air) through E-in-C at Rawalpindi, which was avoided.

The record further disclosed that after hiring of the above consultancy contract, the CPD Project Bholari vide letter no AHQ/78781/5/Bhol dated 05-10-2015 approached E-in-C Branch DD & C Dte. Rawalpindi for seeking NOC for hiring of the already hired above private consultant for the job, which was regretted by the E-in-C, Branch on the plea that the NOC was provided only for the projects which were undertaken by MES, and concluded by E-in-C Branch and that as the subject project was being directly undertaken by AHQ, therefore, no NOC was required from E-in-C Branch.

The irregularity was pointed out by audit in May, 2018. The executive furnished an irrelevant reply.

The DAC vide meeting held in December, 2018 directed that relevant documents along-with a copy of government approvals (NOC) and Board proceedings for undertaking of work by other than MES authorities, duly approved by the competent authority, be provided to audit for examination.

Audit recommends implementation of DAC directives, fixation of responsibility at multiple-levels and regularization of expenditure already incurred.

DP-S-150/2018-19 1.12.2 Un-justified sanction of works in the name of emergent need – Rs 230.556 Million According to Para-17(a)(c) of DSR, 1998, “unexpected circumstances may arise which make it imperative to short-circuit from normal procedure. Such circumstances may arise from operational military

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necessity or on urgent medical grounds when reference to the appropriate CFA would entail dangerous delay. If such circumstances arise, any of the authorities detailed in Table-A may order the commencement of a work by functioning in order „writing‟ to the engineer office concerned and forwarding immediately and a copy of his order to superior engineer authority with his reasons for giving the orders and the engineer officer‟s estimates of the liability incurred. In all cases which may arise above the earliest possible steps must be taken to regularize matters by normal action contemplated by these Regulations”. During scrutiny of record pertaining to GE (Air) Korangi Creek Karachi for the year 2017-18, it was observed that contracts of 16 construction works (residential and non-residential)valuing Rs 230,556,147 were sanctioned by DCAS Admin invoking para-17 of DSR, which was apparently its misuse as the works did not involve operational military necessity or urgent medical requirement as required in above rule provisions. Audit was of the opinion that the authority avoided normal procedures without sufficient justification which exhibited weak financial management and internal controls. The irregularity was pointed out by audit in August, 2018. The executive replied that the works were of priority and would be regularized in due course of time. The DAC vide meeting held in December, 2018 directed that detailed justification/necessity of urgent/emergent works be provided to audit along-with a copy of sanction and regularization status of works. No further progress on the matter was reported to audit till finalization of this report. Audit recommends an expeditious implementation of DAC directives. DP-S-127/2018-19

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1.12.3 Un-authorized booking of expenditure of abnormal repairs – Rs 138.679 Million

According to Government of Pakistan Ministry of Defense Rawalpindi letter No: 2/21/D-15/2001 dated 12-06-2006, abnormal repairs, renewals and replacements costing more than Rs: 6.000 Million requires Government sanction. During audit of GE (Air) Base Nur Khan Chaklala, it was observed that undermentioned contracts valuing Rs 138,679,000 were concluded for rehabilitation / improvement of different residential building at the Base. However, the expenditure was booked against major head F- 0/211/01 (Residential accommodation) instead of relevant head of work for abnormal repair head (1/762/09). (Rs in million) Sr # CA # Nature of Work Amount 1 CEAF-NZ 32/2016 Rehabilitation of “D” type bungalow 6.948 2 CEAF-NZ 50/2016 Rehabilitation of 2x A/men blocks 14.839 3 CEAF-NZ 97/2016 Rehabilitation of MES office 8.089 4 CEAF-NZ 1/2017 Rehabilitation of OPS support 16.137 Infrastructure 5 CEAF-NZ 19/2017 Rehabilitation of A/men Qtrs 9.815 6 CEAF-NZ 26/2017 Rehabilitation of Sewerage system 13.349 7 CEAF-NZ 35/2017 Rehabilitation of “E” type block 9.160 8 CEAF-NZ 53/2017 Rehabilitation of W/S network 9.829 9 CEAF-NZ 55/2017 Rehabilitation of drainage system 19.77 10 CEAF-NZ 151/2017 Rehabilitation of road infrastructure at 20.220 Jinnah Camp 11 CEAF-NZ 181/2017 Rehabilitation of road infrastructure 10.5 Total 138.679

The irregularity was pointed out by Audit in December, 2017. The executive replied that Air HQ Islamabad has obtained approval from Government of Pakistan Ministry of Defence for each work costing Rs. 6,000,000. Reply was not correct because the expenditure was booked against capital work instead of abnormal repair.

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The DAC vide meeting held on 26th November, 2018 observed that the rehabilitation work is not covered under new work / capital work and directed for regularization of the expenditure. No further progress was reported to Audit till finalization of this report. Audit recommends regularization of the expenditure and its verification by Audit. DP-N-570/2017-18 1.12.4 Un-authorized construction of MOQs against the sanction for BOQs - Rs. 88.239 Million

As per para-94 of Defence Services Accommodation Scales, one bed room with bath, one dressing room and one sitting room is authorized in BOQs (F-Type). Whereas, as per para-98 2 bed rooms are authorized in E type MOQs. During audit of following Garrison Engineer (Air), it was observed that admin approval for the “Construction of F Type BOQs” was accorded by AHQ. However, it was observed from the relevant drawings that actually MOQs were constructed comprising two bed rooms, two baths, one common / living room, servant room and two verandah against the sanction of BOQs, which required revised admin approval according to the work (MOQs) actually executed at site. (Rs. in million) S # DP No. Formations Amount 1 DP-N-579/2017-18 GE (Air) AHQ Peshawar 21.203 2 DP-N-476/2017-18 AGE (Air) Lower Topa 10.303 3 DP-N-553/2017-18 GE (Air) Lahore 35.978 4 DP-N-135/2018-19 GE (Air) AHQ Peshawar 20.755 Total 88.239

The irregularity was pointed out by Audit in 2015-16, 2016-2017 and 2017-18. The executive replied that regularization action would be intimated to Audit. Whereas, in case of S No. 4, executive replied that work was executed as per specifications provided in 114

Accommodation Scales. Reply was not convincing as the work was carried out in violations of sanctions. The DAC vide meetings held on 26th November and 4th December, 2018 was apprised that F type BOQs were constructed and not MOQs as per para 94 of Defence Services Accommodation Scale 2000, according to which 03 bed rooms 02 bath rooms are authorized. The DAC directed that authorizations as per rules may be reconciled with Audit. However, no reconciliation has been made till finalization of this report. Audit recommends that revised sanctions of MOQs as actually constructed at site be obtained from competent authority and verified from Audit besides adoption of remedial measures to avoid such lapses in future. 1.12.5 Un-authorized receipt of allied charges – Rs 30.202 Million.

According to Sl No. 9 of Annexure-A to Rule-9 of FR Vol- I, 1986, sanction of Government of Pakistan is required in case of any change in procedure

According to Para 442 of MES Regulations, 1998 GE is responsible for making demands for payment of all revenues and taking steps for its prompt recovery.

During audit of following formations, it was observed that a sum of Rs 30,202,000 was recovered by the base authorities from the airmen during the period 2016-17 and taken on cash book which was unauthorized as the same was the responsibility of GE (Air). (Rs. In million) S # DP # Formation Amount 1 DP-N-150 -2018-19 PAF Base Rafiqui 19.531 2 DP-N-69 -2018-19 PAF Base Mianwali 10.671 Total 30.202

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The irregularity was pointed out by Audit in June 2018. The Base Authorities replied that in accordance with the Rule 40 Chapter VII of Defence Services Regulations, (Quarter & Rent 1985), the office of Unit Accountant on the basis of occupation returns and the reports prescribed submit monthly rent bills through Web Based System (including charges for electricity and water charges) to pay authority concerned. And that the amount is deducted at source from the pay and taken on cash book for subsequent adjustment against next recoupment of imprest, where after accounting is made under MAG code head 01/786/07 followed by allotment of TE number through DCAAF Lahore Cantt. Reply was not agreed as in GE (Air) office separate heads of accounts i.e. 1/786/04(rent), 1/786/06(water) and 1/786/07(electric) were allotted for the purpose, so recovery of rent and allied charges by the base authorities was unauthorized. The DAC vide meetings held on 26th November and 4th December, 2018 was apprised by PAF authorities that due to non- availability of appropriate mechanism and to ensure 100% recovery of the dues, system of UAGE was linked with the salary system of PAF. As such the recovery is made through monthly salary of the concerned personnel and the amount is taken on cash book before being booked under relevant code head allotted by MAG. DAC directed that relevant record alongwith complete procedures of recovery and its book adjustment with DCAAF may be got verified from Audit within two weeks. No further progress was reported to Audit till finalization of this report. Audit recommends reconciliation of the government receipts and its proper adjustment and accounting in accounts besides approval of the procedures from the Government. 1.12.6 Unauthorized procurement of water beyond permissible limit - Rs 16.817 Million

Para-5 of Appendix “K” of DSR 1998 puts limit of Rs 5 million per annum on agreements or memoranda for taking a supply of 116

electric energy, gas or water from an outside source for military buildings, when the annual payment in the case of each station does not exceed Rs 5 million. Further, according to Rule-6(a) of Financial Regulations Volume- I, 1986, “Every officer should exercise the same vigilance in respect of expenditure incurred from government revenue as a person of ordinary prudence would exercise in respect of the expenditure of his own money”.

During scrutiny of record relating to GE (Air) Korangi Creek for the year 2017-18, it was observed that the contract bearing No.53/20-18 for procurement of fresh water through bowzers was executed with M/s Shamraiz Water Tanker Suppliers as per permissible limit fixed in the DSR-1998 provisions. The review of record further showed that, in addition to above, supply of fresh water through tanker amounting to Rs 16,816,799 was unauthorizedly obtained from KW & SB @ Rs 1 per gallon without government sanction for the purpose. Record reflecting consumption of water procured from KW & SB was also not produced to audit for examination. This resulted into unauthorized procurement of water amounting to Rs 16,816,799.

The irregularity was pointed out by audit in August, 2018. The executive replied that the PAF Korangi Creek was located at the tail end of water supply pipeline of KW & SB and that the Base was receiving short supply of water and that in order to control the acute shortage, the fresh water was being procured through water tankers from KW & SB on payment. Reply furnished by the executive was not tenable as they did not obtain government approval for additional outsourcing of water from the supplier.

The matter was discussed in DAC meeting held in December, 2018. The DAC directed that relevant record in rebuttal of DP along-with water consumption details may be provided to audit for examination. No further progress on the matter was reported to audit till finalization of this report.

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Audit recommends implementation of DAC‟s directives along-with fixation of responsibility and regularization of expenditure already incurred.

DP-S-145/2018-19

1.12.7 Irregular issuance of special work sanctions- Rs 5.360 Million

According to Para-2 and 21(2) of DSR, 1998, “services not falling within authorized works are referred to as “special works”. Special works should NOT be approved if the effect would be to introduce a new practice or change of scale. According to Table- A of Para-25 and Para- 389 of DSR 1998, as amended vide MoD letter No. 2/12/D-15/2001 dated 12-6-2006, the power of administrative sanction of Base Commander is up to Rs 1.00 million. Further, under Para-27 of DSR 1998 “No project will be split up merely to bring it within the powers of an approving authority. According to the Government of Pakistan, Ministry of Defence letter No 12/51/D-10(AF-II)/14 dated 5th October 2015 stipulates that Bholari Development Board shall exercise full administrative, financial and technical powers within the scope of the project and that all matters related to infrastructure development shall be regulated and decided by the Board.

During scrutiny of record relating to PAF Base Faisal for the year 2016-17, it was observed that 06 minor work sanctions regarding provision of containers used as office/residential accommodation at PAF Base Bholari amounting to Rs 5,360,000 issued by the Base Commander PAF Base Faisal were irregular as:

a) Provision of pre-fabricated containers used as office/residential accommodation was a new practice/ change of scale which fell under the category of special works which required Government of Pakistan sanction.

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b) The expenditure was sanctioned by the Base Commander in transgression of financial authority vested in him. c) Out of 06, 05 minor work sanctions were issued on 08-03- 2017 in piecemeal to avoid the sanction of higher authority. d) Bholari Base was authorized for all expenditure through their own approved allotment under the Bholari Development Board. However, this expenditure was incurred by GE(Air) Faisal beyond its mandate.

The matter was pointed out by audit in June, 2018. The executive didn‟t furnish any reply.

The DAC vide meeting held in December, 2018 was informed that the AHQ tasked the nearby base to provide support to any other unit/ base and therefore the GE (Air), Faisal was tasked for provision of pre-fabricated containers and admin approvals involving different nature of works were issued accordingly. The DAC directed that relevant record be provided to audit for examination. No further progress on the matter was reported to audit till finalization of this report.

Audit recommends implementation of DAC directives and regularization of expenditure already incurred. DP S-151/2018-19

1.12.8 Non-execution of work against advance paid -Rs 4.891 Million

According to Para-408 to 417 of DSR, 1998, "there is no provision of advance payment to contractor except secured advance". Under Rule – 47(c) of Financial Regulations Volume-I 1986, “the most careful supervision over expenditure will be exercised and on no account shall money be spent simply because it is available.”

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During scrutiny of record pertaining to GE Air (Faisal), it was observed that admin approval of AHQ dated 28-02-2011 was accorded for revamping of Sui Gas network at PAF Base Faisal for Rs 23,178,125. Accordingly, the management paid to SSGC Rs 6,977,800 on 11-03-2011 against supply of meters. The review of record further showed that despite lapse of 7 years, only 784 meters were installed in residences at PAF Base Faisal out of a total of 2622 meters. Remaining 1838 meters were not installed by the SSGC despite repeated written requests by the formation. The advance payment of Rs 4,891,377 thus stood blocked without completion of the job since long, which was in violation of rule stated above.

The irregularity was pointed out by audit in September, 2018. The executive replied that the internal Sui Gas network along-with meters had been completed and the work completion report had been submitted to the SSGC for further installation of Sui Gas meters. The executive also informed that the matter had been taken up at a higher level for completion of the balance work at the earliest.

The DAC vide meeting held in December, 2018 directed that details in terms of adjustment of advance to SSGC be provided to audit for examination, which were not provided till finalization of this report.

Audit recommends implementation of DAC directives, fixation of responsibility and regularization of expenditure already incurred.

DP-S-291/2018-19

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1.13 Recoverable / Overpayments – Rs 189.509 Million

1.13.1 Non-recovery of Stamp Duty from contractors – Rs 50.320 Million

As per Section 35 of Stamps Act 1899, no instrument chargeable with duty shall be admitted in evidence for any purpose by any person having by law or consent of parties authority to receive evidence, or shall be acted upon, registered or authenticated by any such person or by any public officer, unless such instrument is duly stamped. Further, as per Government of Sindh Finance Act 2009, “Stamp Duty of Thirty five paisa for every hundred rupees or part thereof of the amount of the contract will be charged”.

During scrutiny of record of following units, it was observed that a sum of Rs 50,320,325 on account of Stamp Duty was not recovered by the formations against different contract agreements executed.

(Rs in million) S No Name of Unit/Formation DP No. Amount 1 Project Bholari, Hyderabad S-116 39.175 2 GE (Air) Masroor, Karachi S-247 7.616 3 GE (Air) Samungli S-41 2.260 4 GE (Air) Korangi Creek, Karachi S-99 1.269 T o t a l 50.320

Non-recoveries were pointed out by audit during January to October, 2018. The executive at Sr. No 1 replied that the matter would be dealt in the light of clarification. The executive at Sr. No 2 did not discuss the audit observation. The executive at Sr. No 3 replied that there was no practice of recovery of Stamp Duty in MES, while the executive at Sr. No replied that the Stamp Duty pertained to Government of Sindh and was not

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applicable on MES formations working under MoD. The contention of the management was not tenable as recovery was not effected.

The DAC vide meeting held in December, 2018 pended the DP till formulation of policy/decision on recovery of Stamp Duty at MoD level, whereas the audit suggested recovery of Stamp Duty in question on priority. No progress in terms of recovery of Stamp Duty was reported to audit till finalization of this report.

Audit recommends recovery of provincial duty as per rules expeditiously.

1.13.2 Non-recovery of allied charges from consumers – Rs 33.198 Million

According to Para-442 of DSR, 1998, “The GE is responsible for making demands for payment of all revenue and for taking steps for its prompt realization”.

During audit of following MES (Air) formations for the period 2016-18, it was observed that allied charges amounting to Rs 33,198,620 were lying outstanding against various consumers.

(Rs. in million) S No. Name of Unit/Formation DP No. Amount 1 GE (Air) Korangi Creek S-33 10.407 2 GE (Air) Masroor S-252 7.923 3 GE (Air) Shahbaz S-03 7.601 4 GE (Air) Faisal S-37 4.747 5 GE (Air) Faisal S-293 2.126 6 GE (Air) Samungli S-26 0.394 T o t a l 33.198

Audit was of the view that non-recovery of allied charges indicated weak financial management.

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Non-recoveries were pointed out by audit during January to October 2018. No reply was furnished by the executive at Sr. Nos 1 and 4. The executive at Sr. No. 2 did not discuss the audit observation. The executive at Sr. No. 3 replied that the electric bills of Fazaia College had been forwarded for recovery. The executive at Sr. No. 5 submitted evasive reply. The executive at Sr. No. 6 replied that the building was not on charge of MES. They further informed that the said recoveries had been intimated to Provost Sqn of PAF Base Samungli.

The DAC vide meeting held in December, 2018 was informed that partial recoveries had been made and action was being taken for recovery of the balance amount. The DAC directed that recovery made so far be got verified from audit and balance amount recovered expeditiously. No further progress in terms of recovery was reported by executive to audit till finalization of this report.

Audit recommends expeditious recovery of amount on account of allied charges and its verification by audit.

1.13.3 Non recovery of electricity consumption charges from Air University – Rs 31.672 Million

Under Para 442 & 445 of Defence Services Regulations for MES-1998, Garrison Engineer is responsible for making monthly demands and prompt realization of rent and allied charges from the users of military buildings and allied services. During audit of Garrison Engineer (Air) Maintenance Islamabad, it was observed that an amount of Rs 31,671,943/- on the accounts of electricity consumptions charges for the period from June 2014 to June 2017 was outstanding against Air University Islamabad Block A to C, and old TTI building, which needed recovery. The irregularity was pointed out by Audit in 2016-17. The executive replied that this office prepared electric bills as per meter

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reading of actual consumption of all consumers and forwarded to UA GE. Reply was not convincing as GE was responsible for making monthly demands and prompt realization of rent and allied charges from the users. Early action needed to be taken for prompt realization of Government dues. The DAC vide meeting held on 26th November, 2018 directed for recovery of electricity charges from Air University within one month. No further progress was reported to Audit till finalization of this report. Audit recommends recovery of the amount involved, besides, adoption of remedial measures to avoid such lapses in future. DP-N-508/2017-18 1.13.4 Non-recovery of Sales Tax on goods– Rs 27.593 Million

During audit of Project Bholari, Hyderabad for the financial year 2016-17, it was observed that an amount of Rs 189,910,309 was expended by the formation on GST applicable goods through different contracts but GST on goods amounting to Rs 27,593,804 was not deducted from the contractors‟/suppliers‟ payments.

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Audit was of the opinion that due to non-recovery of Sales Tax, government exchequer was deprived of hefty amount of revenue on account of recoverable tax.

Non-recovery was pointed out by audit in May 2018. The management informed that the GST of Rs 2,015,087 was deposited by the contractor, which was a partial recovery.

The DAC vide meeting held in December 2018 was informed that the contractor had been approached for provision of challans of tax deposited. The executive also intimated that the recovery of GST on furniture items would be ensured at the time of payment. The DAC directed that the proof of recovery of GST against supply of goods be provided to audit for examination. Relevant record was not produced to audit till finalization of this report.

Audit recommends early recovery of Sales Tax amount due along-with fixation of responsibility against the person(s) at fault.

DP S-124/2018-19

1.13.5 Less recovery of Income Tax from contractors – Rs 25.852 Million

As per Section-153 of Income Tax Ordinance 2001, as amended from time to time, every prescribed person making a payment for rendering or providing of services is liable to deduct “income” tax from the gross amount of the bills at prescribed rates.

During audit of following MES (Air) units for the year 2017-18, it was observed that Income Tax amounting to Rs 25,852,296 was less deducted from various contractors‟ payments in violation of above rule.

(Rs in million) 125

S No Name of Unit/Formation DP No. Amount 1. GE (Air) Masroor, Karachi S-255 25.262 2. GE (Air) Korangi Creek S-149 0.590 T o t a l 25.852

Non-recovery of government dues reflected weak financial management, which deprived government of potential revenue.

Non-recoveries were pointed out by audit during August & October, 2018. The executive replied that the contractors were filers. Reply furnished by the executive was not substantiated by relevant documentary evidence.

The DAC vide meeting held in December 2018 directed that proof regarding filer status of the contractors be provided to audit for verification. In case of non –filer, the difference of Income Tax be recovered from the contractors and record produced to audit for verification. No further response in terms of recovery was reported by executive to audit till finalization of this report.

Audit recommends implementation of DAC directives / recovery of Income Tax as per rules on priority.

1.13.6 Less recovery of water charges from consumers – Rs 15.367 Million

As per Rule 1, Annex A (to Appendix „O‟) of DSR 1998, the All-Pakistan flat rate for water charges will be as notified from time to time in Joint Services Instruction (JSI) or other government orders. Further, according to Notes at the end of Rule 2 of Annexure-A (Appendix „O‟) of DSR 1998, any increase of rates as and when notified/imposed by the Provincial Government/ supplying agency shall be recovered in addition to the rates specified in this rule.

During audit of following MES (Air) formations for the period 2016-18, it was observed that water charges were paid to Karachi 126

Water & Sewerage Board (KW&SB) @ Rs 100/- &Rs 142/- per 1000 gallons whereas the recovery was made from consumers at nominal rates. This was in contravention of above rule and resulted in less recovery of Rs 15,367,240.

(Rs in million) S. No Name of Unit/Formation DP No. Amount 1 GE (Air) Korangi Creek, Karachi S-132 10.101 2 GE (Air) Masroor, Karachi S-21 5.266 T o t a l 15.367

Audit was of the opinion that less recoveries were due to poor financial management and weak internal controls.

The recoveries were pointed out by audit in December 2017 & August 2018. The executive at Sr. No1 submitted irrelevant reply. The executive at Sr. No. 2 did not discuss the audit observation.

The DAC vide meeting held in December, 2018 was informed by executive at Sr. No. 1 that the recovery was already being made at higher rates whereas, the executive at Sr. No. 2 replied that the recovery was being made at revised rates approved by the Board. The DAC directed the executive at Sr. No. 1 that the Board of Officers be convened and rates of water charges revised as per rules within two months. The executive at Sr. No. 2 was directed to produce record involving recovery as per Board‟s recommendations to audit for verification. No record showing recovery was produced to audit till finalization of this report.

Audit recommends early compliance of DAC directives/ recovery of water charges as per policy.

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1.13.7 Non-recovery of House Rent Allowance (HRA) – Rs 3.972 Million

During audit of accounts of PAF Base Faisal, Karachi for the financial year 2016-17, it was observed that PAF officers were availing of the facility of government married accommodation and also drawing HRA. This resulted in irregular payment amounting to Rs 3,972,695.

Audit was of the opinion that the payment of HRA to the officers availing government accommodation tantamounted to causing recurring financial loss.

Non-recovery was pointed out by audit in June, 2018 which was not replied.

The DAC vide meeting held in December, 2018 was informed that the officers were residing in below standard accommodation and therefore only 5% of their basic pay was being recovered, which was however in negation of rules quoted above. The DAC pended the DP till finalization of HRA policy at MoD level, whereas the audit recommended recovery of HRA as per government instructions on priority. No further

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progress in terms of recovery was reported to audit till finalization of this report.

Audit recommends early recovery of HRA as per rules.

DP S-177/2018-19

1.13.8 Non-recovery of Sales Tax on Services – Rs 1.535 Million

According to Sindh Sales Tax Act No XII of 2011, issued by Sindh Revenue Board (SRB), Government of Sindh, circulated vide Notification No. SRB/TP/51/2016/212146 dated: 08th March 2017, Sales Tax would be charged @ 13% on contractors‟ services.

During audit of PAF Base Faisal for the year 2016-17, it was observed that Sales Tax on Services amounting Rs 1,535,393 was not recovered from the contractors‟ payments. Audit was of the view that due to non-recovery of Sales Tax on Services, public exchequer was deprived of hefty amount of revenue on account of recoverable tax.

Non-recoveries were pointed out by audit in June, 2018. The executive replied that the PAF was a federal department and FBR taxation rules were applicable and that the SRB‟s GST was not applicable on hiring of civil transport and conservancy contracts. The contention of the management was not tenable as the Sales Tax was a provincial subject and tax was recoverable on services in the province.

The DAC vide meeting held in December, 2018 was informed that the issue was already under consideration amongst the office of MAG, FBR and MoD. The DAC pended the DP till formulation of policy/decision at MoD level, whereas the audit suggested recovery of tax due as per rules/instructions of the provincial government. Further

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progress in terms of recovery was not reported to audit till finalization of this report.

Audit recommends expeditious recovery of the Sales Tax on services. DP-S-192/2018-19 1.14 Loss to State – Rs 246.340 Million 1.14.1 Non-recovery of electricity charges - Rs 138.922 Million

According to Rule-6 (a) of Financial Regulations Volume-I 1986, “Every officer should exercise the same vigilance in respect of expenditure incurred from government revenue as a person of ordinary prudence would exercise in respect of the expenditure of his own money”.

During audit of GE (Air) Korangi Creek for the year 2017- 18, it was observed that an amount of Rs 138,922,825 was paid by the formation to K-electric on account of electricity charges against bulk supply of electricity without determining the free allowance of electricity by the Board for the formations and without recovering the amount from the consumers beyond free authorization.

The matter was pointed out by audit in August, 2018. The executive stated that the electricity charges were being recovered as per actual consumption/meter-reading and that the remaining units were consumed at the Base for operational purposes for which no recovery could be made. Reply furnished by the executive was not tenable as the copy of Board`s recommendations/ findings authorizing free consumption of electricity for operational use and for individual recovery were not shared with audit.

The DP was discussed in DAC meeting held in December, 2018, wherein the executive repeated their earlier stance. The DAC however directed that the Board findings/recommendations be provided to

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audit for examination and irregular consumption of electricity be got regularized/ recovered. No further response on the matter was reported till finalization of this report.

Audit recommends early implementation of DAC‟s directives.

DP-S-109/2018-19

1.14.2 Unjustified overpayment to contractors - Rs 65.312 Million.

According to Rule 6 (a) FR Volume I 1986, “Every officer should exercise the same vigilance in respect of expenditure incurred from government revenue as a person of ordinary prudence would exercise in respect of the expenditure of his own money”.(b) “No authority shall exercise its power of sanctioning expenditure to pass an order which will, directly or indirectly, be to its own advantage”. Further, under Rule 27.1 of Standard Form of Bidding Documents (Civil Works) 2007 of Pakistan Engineering Council, Islamabad, “bids determined to be substantially responsive will be checked by the employer for any arithmetic errors. Errors will be corrected by the Employer.”

During scrutiny of record pertaining to the Project Bholari for the financial year 2016-17, it was observed in BOQs of different contracts that the items of similar/ same nature were procured by the management at different rates. Likewise, quantity of material/store consumed in similar nature of jobs was dissimilar. The sample check of only 06 contracts reflected rate difference and enhanced quantity usage worth Rs 65,312,135.

Audit was of the view that these errors were intentionally allowed to provide undue favoritism to the contractors. Such nature of errors was not objected to by the management, the Resident Engineer, the

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Director Finance and the Internal Auditor of the Project, which was not understood. The expenditure thus incurred stood as a loss to the state in light of rules quoted above.

When pointed out by audit in May, 2018 the executive stated that the said discrepancies would be discussed with the concerned authorities and appropriate course of action undertaken in BOQ items/rates. The discrepancies involved in rates of similar nature items and enhanced quantity of material used in different works/jobs were not removed despite management`s assurance.

The DP was discussed in DAC meeting held in December, 2018. The DAC directed that relevant documents in rebuttal of DP proving no loss to the state be produced to audit for examination. No further response on the matter was reported by executive till finalization of this report.

Audit recommends early implementation of DAC‟s directives along-with rationalization of rates in all the contracts.

DP-S-165/2018-19

1.14.3 Non-recovery of allied charges - Rs 35.122 Million

As per Para 442 of DSR, 1998, Garrison Engineer is responsible for making demands for all revenues and its realization into government treasury.

During scrutiny of record pertaining to GE (Air) Korangi Creek, it was observed that an amount of Rs 35,122,307 was outstanding against Golf Club and Chalet authorities on account of allied charges (electricity & water) since January, 2013. It was further observed from record that the allied charges‟ bills were regularly being issued to the

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consumers but the utilities were not disconnected despite persistent non- payment (un-metered connections fed at government expense).

The irregularity was pointed out by audit in August, 2018. The executive stated that recovery was under process. Reply furnished by the executive was not tenable as no serious effort was made for recovery of the government dues and nor was the reply substantiated by relevant documentary evidence.

The DAC vide meeting held in December, 2018 directed that the recoverable amount may be reconciled with audit and recovery effected from the concerned consumers expeditiously. No further response on the matter was reported by executive till finalization of this report.

Audit recommends expeditious recovery of amount from the consumers and its verification by audit along-with fixing responsibility against the concerned.

DP-S-105/2018-19

1.14.4 Non-recovery of conveyance allowance - Rs 3.840 Million

Under Rule-6(a) of Financial Regulations Volume-I 1986, it is laid down that "Every officer should exercise the same vigilance in respect of expenditure incurred from government revenue as person of ordinary prudence would exercise in respect of the expenditure of his own money. (b) No authority shall exercise its power of sanctioning expenditure to pass an order which will, directly or indirectly, be to its own advantage”. Further, according to Government of Pakistan, Finance Division Regulations Wing letter No.F.3(1)-R-5/2010 dated 03-07-2012, the rates of Conveyance Allowance for the Civil Servants of the Federal Government in BPS 16-19 as well as Armed Forces Personnel were revised up to Rs 5000/pm.

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During audit of PAF Base Faisal for the year 2016-17, it was observed that 64 vehicles were under the use of officers of the base who also received conveyance allowance amounting to Rs 3,840,000 during the year. The record relating to Pay & Allowances of the officers reflecting recovery of the conveyance allowance in lieu of government transport was demanded, but the same was not produced to audit for examination.

The irregularity was pointed out by audit in June, 2018, but no reply was furnished by the executive.

The DAC vide meeting held in December, 2018 directed that relevant record be provided to audit for examination. No further response on the matter was reported by executive to audit till finalization of this report.

Audit recommends expeditious recovery of conveyance allowance and its verification by audit.

DP-S-186/2018-19

1.14.5 Award of contract at lower discount rate - Rs. 3.144 Million

Rule 6 (d) of the Financial Regulation Vol-I, 1986 specifies that Government revenues shall not be utilized for the benefit of a particular person or a section of the community. Further, according to Rule 38 of Public Procurement Rules, 2004 “The bidder with the lowest evaluated bid, if not in conflict with any other law, rule, regulation or policy of the Federal Government shall be awarded Procurement Contract” During audit of PAF Hospital Mushaf, Sargodha, it was observed that contract for daily local purchase of NIV / lifesaving medicines for the financial year 2015-16 was awarded to M/S SMS

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Shaheen Foundation PAF Rawalpindi at 18.26% discount instead of award of contract to M/S Photon Pharma, Sargodha at its offered discounted rate of 20.78%. Audit was of the view that an undue favour was extended to M/S SMS Shaheen Foundation which resulted into a loss of Rs 3,144,901 to national exchequer. The irregularity was pointed out by the Audit in November, 2016. The executive replied that M/S Photon Pharma agreed to supply hundred items only. The reply was not acceptable as quotation of M/S Photon Pharma Sargodha was based on 20.78 % discount rate and it was not restricted to the supply of 100 medicines. Further, the above mentioned plea of executive was not on record of procurement proceedings. Furthermore, reasons for acceptance of 2nd lowest bid was also not mentioned in comparative statement which was mandatory under Rule 35 of Procurement Rules 2004. The DAC vide meeting held on 26th November, 2018 directed for verification of letter of M/s Photon regarding his ability to provide only 100 lifesaving medicine within one month. No further progress was reported to Audit till finalization of this report. Audit recommends an inquiry into the matter for fixing responsibility besides regularization of amount of loss sustained by state and adoption of remedial measures to avoid such lapses in future. DP-N-144/2017-18 1.15 Mis-procurement of stores – Rs 11,276.983 Million 1.15.1 Irregular award of work - Rs 10,004 Million

According to Rule -2 (1) (c) of PPRA Rules-2004 “competitive bidding” means a procedure leading to the award of a contract whereby all the interested persons, firms, companies or organizations may bid for the contract and includes both national competitive bidding and international competitive bidding”. Rule – 4 of PPRA states, “Procuring agencies, while engaging in procurements, shall 135

ensure that the procurements are conducted in a fair and transparent manner, the object of procurement brings value for money to the agency and the procurement process is efficient and economical”. Further, according to Rule 29 of PPRA Rules –2004 “Procuring agencies shall formulate an appropriate evaluation criteria listing all the relevant information against which a bid is to be evaluated”. Likewise, according to PPRA Rule 35, “procuring agencies shall announce the results of bid evaluation in the form of a report giving justification for acceptance or rejection of bids at least ten days prior to the award of procurement contract”.

Further, according to PPRA‟s S.R.O.1170(1)/2009 dated July 9, 2009, all procuring agencies whether within or outside Pakistan shall post Contract Awards over fifty million rupees on PPRA‟s website. on the proformas as set out in Annexure-I and Annexure-II to these regulations, provided that where any information related to the award of a contract is of proprietary nature or where the procuring agency is convinced that such disclosure of information shall be against the public interest, it can withhold only such information from uploading on PPRA‟s website subject to the prior approval of the Public Procurement Regulatory Authority. [F.No. 2/1/2008/PPRA-RA.III]. Rule 50 of PPRA rules 2004 stipulates that any unauthorized breach of these rules shall amount to mis- procurement.

During audit of accounts of Project Bholari for the period 2016-17, it was observed that a pre-qualification notice seeking contractors` interest in the construction of a new Air Base at Bholari Hyderabad was published in different newspapers dated 16/07/15. In response thereof, 41 contractors submitted their bids for pre-qualification process, out of which 22 were shortlisted and were called for presentations. Finally, 12 contracting firms were selected/cleared on the basis of scoring recorded by the management. However, instead of getting/opening the financial bids of the 12 firms, the executive further

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shortlisted only 4 - 6 contractors in 13 works for financial bids costing Rs 10,003,907,089. It was further observed that a clear evaluation criteria was not included in the bidding documents nor was the Award of Contracts involving expenditure in billions posted on PPRA website on the given format. The reasons of acceptance/rejection of bids in the form of a report were also not shared with the bidders.

Audit was of the view that incurring of public expenditure without adoption of PPRA Rules could lead to misuse of government funds which indicated weak financial management and poor internal controls.

The irregularity was pointed by audit in May, 2018. The executive submitted irrelevant replies. Audit opined that the award of works through the process of tendering was a mere formality as all the prequalified parties/contractors were not provided opportunity to offer financial bids, which rendered the entire process as being irregular and non-competitive. The management also violated different pre/ post-bid PPRA formalities and Financial Regulations in the said process as already enumerated above.

The DAC vide meeting held in December, 2018 directed that relevant documents be provided to audit for examination. No further progress on the serious violations was reported to audit till finalization of this report.

Audit recommends regularization of expenditure by the competent authority along-with fixation of responsibility at multiple levels in order to deter such serious violations in future.

DP-S-139/2018-19

1.15.2 Irregular, unjustified award of consultancy contract on single offer - Rs 159.362 Million

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According to Rule-6 (a) & (d) of Financial Regulations Volume-I, 1986, “Every officer should exercise the same vigilance in respect of expenditure incurred from government revenue as a person of ordinary prudence would exercise in respect of the expenditure of his own money”. “government revenues shall not be utilized for the benefit of a particular person or a section of the community”.

According to Rule -2 (1) (c) & 29 of PPRA Rules – 2004 “competitive bidding” means a procedure leading to the award of a contract whereby all the interested persons, firms, companies or organizations may bid for the contract and includes both national competitive bidding and international competitive bidding”. “Procuring agencies shall formulate an appropriate evaluation criteria listing all the relevant information against which a bid is to be evaluated.” Likewise, according to PPRA Rule 35, procuring agencies shall announce the results of bid evaluation in the form of a report giving justification for acceptance or rejection of bids at least ten days prior to the award of procurement contract.

According to Sindh Sales Tax Act No XII of 2011, issued by Sindh Revenue Board (SRB), Government of Sindh, as also clarified

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vide letter No. SRB/TP/51/2016/212146 dated 08th March 2017, Sales Tax would be charged @ 13% (2017) on contractors‟ services.

During audit of accounts of Project Bholari for the year 2016-17, it was observed that the Chief Project Director (CPD) Shahbaz, Air Headquarters, Islamabad issued advertisement in different newspapers dated 10.05.2015 and on PPRA website seeking pre-qualification of leading firms regarding consultancy for the master planning of an Air Base at Bholari Hyderabad. In response, 20 consultancy firms submitted their pre-qualification documents, which were evaluated by the management, out of which only 5 firms were shortlisted, being fit for the said consultancy. The record further showed that the executive recommended the name of M/s Kashif Aslam and Associates PVT (Ltd) for hiring as project consultant based on single financial bid of Rs 100,386,000, which was later on revised to Rs 159,362,000. All the technically shortlisted firms as a matter of fact were not given the opportunity to submit financial bids except M/s Kashif Aslam& Associates which tantamounted to giving undue favor to one party and it negated the very purpose of advertisement too. The process of pre- qualification was a mere formality as the management had already decided to award consultancy contract to that firm. Further, Sales tax on hiring of consultant‟s services amounting to Rs 20,717,000 was also not recovered. The record also showed that the management did not comply with pre/ post bid evaluation criteria as quoted above.

The irregularity was pointed out by audit in May, 2018. The executive furnished an irrelevant reply.

The DAC vide meeting held in December 2018 directed that relevant documents be provided to audit for examination. No further progress on the serious violations was reported to audit till finalization of this report.

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Audit recommends regularization of expenditure by the competent authority along-with fixation of responsibility at multiple-levels in order to prevent such serious violations of rules in future.

DP-S-117/2018-19

1.15.3 Irregular, non-transparent award of contracts – Rs 688.591 Million

According to Rule 29 of PPRA Rules – 2004 “Procuring agencies shall formulate an appropriate evaluation criteria listing all the relevant information against which a bid is to be evaluated. Such evaluation criteria shall form an integral part of the bidding documents. Failure to provide for an unambiguous evaluation criteria in the bidding documents shall amount to mis-procurement. Further, according to PPRA Rule 35, procuring agencies shall announce the results of bid evaluation in the form of a report giving justification for acceptance or rejection of bids at least ten days prior to the award of procurement contract.

Likewise, according to PPRA‟s S.R.O.1170(1)/2009 dated July 9, 2009, all procuring agencies whether within or outside Pakistan shall post Contract Awards over fifty million rupees on PPRA‟s website. on the proformas as set out in Annexure-I and Annexure-II to these regulations, provided that where any information related to the award of a contract is of proprietary nature or where the procuring agency is convinced that such disclosure of information shall be against the public interest, it can withhold only such information from uploading on PPRA‟s website subject to the prior approval of the Public Procurement Regulatory Authority. [F.No. 2/1/2008/PPRA-RA.III]

During audit of accounts of GE (Air) Masroor for the financial year 2017-18, it was observed that 4 works contracts valuing Rs 688,590,874 were awarded by the executive to different contractors, wherein following irregularities were noticed; 140

a) An appropriate evaluation criteria listing all the relevant information against which a bid was to be evaluated was not formulated, b) The results of bid evaluation in the form of a report giving justification for acceptance or rejection of bids at least ten days prior to the award of procurement contract were not announced, c) The four Contract Awards bearing Nos. ENC PAF 13, 14, 31 and 52 each amounting to Rs 291,543,552, Rs. 70,161,856, Rs 220,742,926 and Rs 106,142,540 respectively, totaling to Rs 688,590,874, all these works exceeded fifty million rupees but they were not posted on PPRA‟s website on the given format.

The entire expenditure thus incurred stood as being irregular and non-transparent.

The irregularities were pointed out by audit in October, 2018, but no reply was furnished by the executive.

The DAC vide meeting held in December, 2018 directed that relevant documents be provided to audit for examination. No further progress was reported to audit till finalization of this report.

Audit recommends expeditious compliance of DAC directives along-with fixation of responsibility against the person(s) at fault.

DP-S-246/2018-19

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1.15.4 Procurement of stores without tender – Rs 407.022 Million

According to Rule 12 of PPRA Rules 2004, “Procurements over one hundred thousand rupees and up to the limit of Rs 2.000 million shall be advertised on the authority‟s website. Further, procurements over Rs 2.000 million should be advertised on the authority‟s website as well as in two national dailies, one in English and the other in Urdu”.

During audit of accounts of the following MES (Air) formations for the period 2016-18, it was observed that contract works valuing Rs 407,022,379 million were awarded to different contractors without advertisement through PPRA‟s website and newspapers in violation of PPRA Rules.

(Rs in million) S No. DP No. Name of Unit / Formation Amount 1 DP-S-261/2018-19 GE (Air) Masroor 397.047 2 DP-S-05/2018-19 GE (Air) Faisal 9.975 Total 407.022

The irregularity was pointed out by audit in 2016-2018. The executive replied that PPRA rules were followed. The replies were not found tenable as documentary evidence showing advertisement in newspapers and on PPRA website were not produced in support of management‟s contention.

The DAC vide meeting held in December, 2018 directed that relevant documents be produced to audit for verification. No further progress on the matter was reported to audit till finalization of this report. 142

Audit recommends expeditious compliance of DAC directives and avoidance of such violations in future.

1.15.5 Mis-procurement of store on repeat orders Rs 18.003 Million

Rule-2(J) of Public Procurement Rules-2004 defines “repeat orders” as procurement of same commodity from same source without competition and includes enhancement of contracts”. Further, as per Rule-42 (c)(iv) “a procuring agency shall only engage in direct contracting for repeat orders not exceeding fifteen per cent of the original procurement”.

As per Rule 12(2) of Public Procurement Rules-2004, “All procurement opportunities over two million rupees should be advertised on the Authority‟s website as well as in other print media or newspapers having wide circulation. The advertisement in the newspapers shall principally appear in at least two national dailies, one in English and the other in Urdu”.

During Audit of Northern Air Command Peshawar for the year 2016-17, it was observed that contract for supply of 400,514 ltrs of cooking oil was concluded with M/S Hanif Traders at a total cost of Rs 57,473,559/-. However, in actual 525,968 ltrs cooking oil was supplied against the above contract, including additional quantity of 125,454 ltrs (31.32%) cooking oil, which was beyond the permissible limit of 15% provided under the procurement rules. Additional requirement of cooking oil valuing Rs.18,002,649/- (125,454 Ltrs x Rs.143.50) was required to be procured after proper competition, which was not done. The irregularity was pointed out by Audit in December 2017. The executive replied that requirement was a rough estimate which may exceed or under draw as per contract. PAF Bases were required to maintain 45 days war reserves of each ration item at all times. This war reserve was maintained over and above the monthly running ration which 143

may vary from Base to Base. During the month of May and June frequent deployments and exercise merited stocking up of rations items for increased no of days to cater for the inflated deployment of man power at NAC Bases. Hence, the firm was asked to deliver excess quantity. Reply was not agreed as additional quantity was procured in violation of rules. The DAC vide meeting held on 26th November, 2018 directed the management for regularization with the instructions that appropriate clause regarding 15% permissible limit be included in contract agreement in future. No further progress was reported to Audit till finalization of this report. Audit recommends regularization of the matter besides adoption of remedial measures to avoid such lapses in future. DP-N-499/2017-18

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Pakistan Navy

1.16 Irregular / unauthorized expenditure – Rs 2,006.494 Million 1.16.1 Splitting-up of sanctions - Rs 1,121.913 Million

According to Table-A of Para-25 and Para-389 of DSR 1998, the power of administrative sanction of DCNS (A) is up to Rs 30 million and the contractual powers of E-in-C and DW& CE are up to Rs 35 million and Rs 30 million respectively. Para-27 of DSR 1998 stipulates that no project will be split up merely to bring it within the powers of an approving authority.

During audit of following formations of MES (Navy) for the year 2017-18, it was observed that contracts valuing Rs 1,121,913,089 were split up in order to avoid sanction of higher authority.

(Rs in million) S No DP No. Name of Unit / Formation Amount 1 DP-S-224/2018-19 GE (N) Construction Manora, Karachi 1116.804 2 DP-S-119/2018-19 GE (N) Logistics Dockyard, Karachi 5.109 Total 1,121.913

Audit was of the opinion that splitting up of expenditure was due to poor financial management within the entities.

The irregularity was pointed out by audit in September & October, 2018. The executive in case of Sr. No 01 replied that the projects had been processed separately and administrative approvals were issued separately and in case of Sr. No 02 it was replied that the funds were allotted by HQ Comlog for each job and that all the works were carried out through separate sanctions accorded by HQ Comlog. Reply furnished by the executive was not tenable as the nature of works and their location was the same and the administrative sanctions were issued on the same 145

date, which was in transgression of powers vested with the above authority.

The DAC vide meeting held in December 2018 directed that relevant documents be provided to audit for examination. No further progress was reported to audit till finalization of this report.

Audit recommends regularization of expenditure by the competent authority.

1.16.2 Un-authorized advance payment for utility bills – Rs 344.909 Million

During audit of accounts of following MES (Navy) formations for the period 2017-18, it was observed that advance payment amounting to Rs 344,909,616 was released on account of utility bills to K- electric, SSGC and KW&SB in the month of June to avoid lapse of funds.

(Rs in million) S. No DP No Name of Unit/ Formation Payment date Amount 01 DP -S- 210 GE (Navy) South Karachi 25th June, 2018 193.066 02 DP -S- 203 GE (Navy) East Karachi 25th June, 2018 111.963 03 DP-S- 154 GE (Navy) Fleet Karachi 27th June, 2018 39.880 Total 344.909

The irregularity was pointed out by audit in July to October, 2018. The executive stated that the advance payment would be adjusted against bills of the upcoming months. Reply furnished by the

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executive was not tenable as the advance payment was not covered under the rules.

The DAC vide meeting held in December, 2018 directed that relevant documents may be produced to audit for verification and such practice may not be repeated in future. No further progress was reported till finalization of this report.

Audit recommends implementation of DAC directives and regularization of expenditure already incurred.

1.16.3 Unjustified advance payment to contractors – Rs 178.537 Million

According to Para 408 - 417 of DSR-1998, there is no provision of advance payment to contractor except secured advance. Further, according to Para 15 (C) (4) of DSR -1998, all payments to contractors and employees should correctly represent the services rendered (i.e., work done and stores supplied) in accordance with the contract or other agreement under which those services have been rendered.

During scrutiny of record pertaining to GE (Navy) Construction Manora for the year 2017-18, it was observed that an amount of Rs 178,537,120 was paid in advance to various contractors without physical progress of works within 5-10 days of their commencement which tantamounted to extending undue favor to them.

The irregularity was pointed out by audit in October, 2017. The executive replied that the payment was made to the contractors against works done. Reply furnished by the executive was not tenable as the works involving such hefty payments could not be executed in a week's time and such assertion could not also be established during currency of audit.

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The DAC vide meeting held in December, 2018 directed that an inquiry be conducted and responsibility fixed against the individual(s) involved. No further progress on the matter was reported to audit till finalization of this report.

Audit recommends early implementation of DAC`s directives.

DP-S-232/2018-19

1.16.4 Irregular procurement of fresh water beyond authorization at exorbitant rates - Rs 90 Million

Para-5 of Appendix “K” of DSR 1998 puts limit of Rs 5 million per annum on agreements or memoranda for taking a supply of electric energy, gas or water from an outside source for military buildings, when the annual payment in the case of each station does not exceed Rs 5 million. Further, as per Rule-0104 (1)(a) of FR (Navy) 1993, “Every officer should exercise the same vigilance in respect of expenditure incurred from government revenue as a person of ordinary prudence would exercise in respect of the expenditure of his own money”.

During scrutiny of record pertaining to GE (Navy) East, Karachi for the year 2017-18, it was observed that an amount of Rs 90,000,000 was expended by the formation on supply of fresh water through 18 contracts by dividing NORE-I station into eighteen sub- stations. The review of record further showed that the procurement of water was made @ Rs 2.37 per gallon from private contractors instead of procuring it @ Rs 1 per gallon from KW & SB. This resulted in loss to the state amounting to Rs 52,025,300 due to price difference between the two sources of procurement.

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Audit was of the opinion that the expenditure of Rs 90,000,000 on one station (NORE-I) was in violation of government rules and it indicated weak financial management & internal controls.

The irregularity was pointed out by audit in October, 2017. The executive replied that due to short supply of water from KW&SB, private contracts were concluded by CMES after proper tendering at reasonable rates. Reply furnished by the executive was not tenable as one station of NORE-I was irregularly divided into eighteen sub-stations and water was procured at much higher rates, which was in violation of rules quoted above.

The DAC vide meeting held in December, 2018 while reiterating its earlier decision dated 1st& 2nd January, 2018 directed that the prescribed limit of Rs 5,000,000 for conclusion of fresh water contracts for each station should not be exceeded by any unit / formation. It also directed that SoP may be formulated within three months and approval from respective Admin Authority be obtained for supply of fresh water accordingly. No further progress in terms of regularization of expenditure/ fixation of responsibility etc was reported to audit till finalization of this report.

Audit recommends implementation of DAC directives, fixation of responsibility and regularization of expenditure already incurred.

DP-S-201/2018-19

1.16.5 Un-authorized sanction of residential accommodation under para-17 of DSR – Rs 85.076 Million

According to Para-17(a)(c) of DSR, 1998, “unexpected circumstances may arise which make it imperative to short-circuit from normal procedure. Such circumstances may arise from operational military necessity or on urgent medical grounds when reference to the appropriate 149

CFA would entail dangerous delay. If such circumstances arise, any of the authorities detailed in Table-A may order the commencement of a work by functioning in order„ writing‟ to the engineer office concerned and forwarding immediately and a copy of his order to superior engineer authority with his reasons for giving the orders and the engineer officer‟s estimates of the liability incurred. In all cases which may arise above the earliest possible steps must be taken to regularize matters by normal action contemplated by these Regulations”.

During scrutiny of record pertaining to AGE (Navy) Mauripur Karachi for the year 2017-18, it was observed that a contract valuing Rs 85,076,292 involving construction of 256 Men Barracks at PNAD Mauripur was sanctioned by DCNS Admin, which apparently did not involve operational military necessity or urgent medical requirement as per above rule provisions. This resulted into unauthorized expenditure amounting to Rs 85,076,292.

Audit was of the opinion that the authority avoided normal procedures without sufficient justification which exhibited weak financial management and internal controls.

The irregularity was pointed out by audit in September, 2018. The executive replied that the work was sanctioned under Para – 17 of DSR 1998. The contention of the management was not convincing as Para-17 could not be invoked for construction of routine residential buildings.

The DAC vide meeting held in December, 2018 directed that detailed justification/necessity of urgent/emergent works be provided to audit along-with a copy of sanction and regularization status of works. No further progress on the matter was reported to audit till finalization of this report.

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Audit recommends expeditious implementation of DAC directives.

DP-S-128/2018-19

1.16.6 Non regularization of expenditure on construction works - Rs. 72.701 Million

According to Para -17(a)(b) & (c) of Defence Services Regulations for MES-1998, “notwithstanding anything laid down in these Regulations un-expected circumstances may arise which make it imperative to short circuit normal procedure. Such circumstances may arise from operational military necessity or on urgent medical grounds when reference to the appropriate CFA would entail dangerous delay. If such circumstances arise, any of the authorities detailed in Table-„A‟ may order the commencement of a work by furnishing an order in writing to the engineer officer concerned and forwarding immediately a copy of his orders to superior engineer authority with his reasons for giving the orders and the engineer officer‟s estimates of the liability incurred. In all cases the earliest possible steps must be taken to regularize matters by normal action contemplated by the Regulations”. During Audit of Garrison Engineer (Navy) Const. Islamabad, it was observed that 03 contract agreements valuing Rs. 72,701,360/- were concluded during 2016-17 with different contractors for construction works at Naval Complex Islamabad under Para-17 of Defence Services Regulations, however, the regularization action was not completed. The irregularity was pointed out by Audit in June 2017. The executive replied that due to acute shortage of accommodation, it was necessary to accommodate the troops and the same was required on emergent basis by the users. Reply was not satisfactory because works executed under Para-17 of DSR needed regularization.

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The DAC vide meeting held on 26th November, 2018 directed that expenditure may be got regularized. No further progress was reported to Audit till finalization of this report. Audit recommends regularization of the expenditure and its verification by Audit. DP-N-87/2018-19 1.16.7 Irregular conclusion of contract beyond financial powers - Rs 48.457 Million

As per Para 389 of DSR 1998, as amended vide MoD`s letter No.2/12/D.15/2001 dated 12-6-2006, the contractual power of AGEs is up to Rs 500,000/.

During audit of Assistant Garrison Engineer (Navy) Maintenance Manora for the year 2017-18, it was observed that an agreement for providing drinking water through Reverse Osmosis (RO) Plant amounting to Rs 48,457,000 was concluded by AGE beyond his financial powers.

The irregularity was pointed out by audit in July, 2018. The executive furnished an irrelevant reply. The AGE was not competent to exercise powers of over Rs 500,000 in the instant case.

The DAC vide meeting held in December, 2018 directed the executive to obtain ex-post facto sanction/approval of Government of Pakistan and produce relevant record to audit for verification. No further progress was reported to audit till finalization of this report.

Audit recommends an early implementation of DAC directives along-with fixing of responsibility against the person(s) at fault.

DP-S-111/2018-19

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1.16.8 Award of contracts by splitting up - Rs. 20.188 Million

According to Government of Pakistan Ministry of Defence Rawalpindi letter No. 2/12/D-15/2001 dated 12th June, 2006, the financial powers of GE for acceptance of contract is up to Rs. 2 million. During Audit of Garrison Engineer (Navy) Const. Islamabad, it was observed that eleven contracts valuing Rs. 20,188,965/- for car parking sheds were concluded with M/s Manzoor Builders by the GE on 3rd June, 2016 just in one day by splitting up financial powers in order to avoid obtaining sanction of higher authority. The irregularity was pointed out by Audit in June 2017. The executive authorities stated that the works were required for different departments. Therefore separate sanctions were issued and contracts were concluded accordingly. Reply was not satisfactory because contracts were concluded by the GE by splitting up financial powers, which required regularization. The DAC vide meeting held on 26th November, 2018 directed the management for regularization from competent authority. No further progress was reported to Audit till finalization of this report. Audit recommends regularization of the expenditure besides adoption of remedial measures to avoid such lapses in future. DP-N-129/2017-18 1.16.9 Non-invoking of liquidity damages clause – Rs 19.361 Million

As per Para – 52(a) of PAFW-2249 forming part of contract that, if the contractor fails to complete the works and clear the site as stated in clause-53, such breach shall be liable to payment of 153

compensation amount equal to 1% of the sum or of the measured value of the works order for every week, provided that total amount of compensation so payable under this condition shall not exceed 10% of the contract sum.

During audit of accounts of following MES (Navy) formations for the period 2017-18, it was observed that 02 of the works contracts valuing Rs 193,617,738 were awarded to different contractors who failed to complete their works within the specified time. No extensions were found to have been allowed to the contractors by the management. The liquidated damages amounting to Rs 19,361,738 were required to be recovered from them, which was not recovered. (Rs in million) S. No DP No Name of Unit/Formation Amount 01 DP -S- 152 GE (Navy) Fleet 10.854 02 DP-S- 125 GE (Navy) Mauripur Karachi 8.507 Total 19.361

The irregularity was pointed out by audit in September, 2018. The executive replied that the works had been completed by the contractors within stipulated and extended dates and therefore no LD was leviable in the said contracts. Reply furnished by the executive was not tenable as the work at Sr. No 01 was still incomplete as could be observed from a number of warnings and instructions issued by the management to the contractor even beyond extended date in the said work. Further, the executive in case of Sr. No 02 failed to provide any documentary evidence wherefrom it could be established that the works had been completed in time i.e. by 31.03.2017.

The DAC vide meeting held in December, 2018 directed that the handing/taking over report of the Board and completion report (part-A and B) of works be provided to audit for verification. No further progress in the matter was reported to audit till finalization of this report.

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Audit recommends expeditious implementation of DAC`s directives/ recovery of LD charges from the contractors as per rules.

1.16.10 Un-authorized advance payment of electricity charges – Rs 13.223 Million

In accordance with Rule 47 (e) of FR Vol-1 1986, most careful supervision over expenditure shall be exercised and on no account money shall be spent simply because it is available. Moreover sub rule 5 of Rule ibid stipulates that unexpended portion of any existing grant shall lapse on 30th June of each year. During Audit of Garrison Engineer (Navy) Lahore Cantt, it was observed that an amount of Rs 16,049,866/- was paid to LESCO for the month of May 2017 on account of electricity bill whereas actual electricity bill for the month of May 2017 was Rs 2,826,579/-. Remaining amount of Rs 13,223,287 paid in advance was just to avoid the lapse of funds in the month of June 2017, which was unauthorized, being not covered under Rules. The irregularity was pointed out by Audit in February 2018. The auditee replied that the amount objected paid to LESCO was regularized by the LESCO bills received for the months of June, July, August, September 2017 including fuel price adjustment. Reply was not acceptable as there was no provision in rules to make advance payment against future bills, just to avoid lapse of funds. The DAC vide meeting held on 26th November, 2018 directed the management that relevant record regarding adjustment of bill in subsequent months may be got verified from Audit. Further, in future no such payments be made. No further progress and record was provided to Audit for verification till finalization of this report.

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Audit recommends that matter may be inquired for making advance payment on account of electricity charges, besides, provision of record of adjustment of advance payment and adoption of remedial measures to avoid such lapses in future. DP-N-36/2018-19 1.16.11 Un-authorized payment of Daily Messing Allowance – Rs 12.129 Million

According to Rule-210 (b) of Pay and Allowance Regulations 1976 (Navy), “Daily Messing Allowance will be admissible to officers and men participating in the Exercises, maneuvers ordered by NHQ/Administrative authorities viz Compak, Comkar, Comlog”.

During audit of accounts of PNS Ahsan Ormara for the year 2016-17, it was observed that a sum of Rs 12,128,775 was paid to the officers/officials on account of Daily Messing Allowance (DMA) on normal duties, whereas the same was admissible only to the officers and men participating in exercises and maneuvers. This resulted into unauthorized payment amounting to Rs 12,128,775.

Audit was of the view that non-implementation of government regulations caused irregular expenditure which indicated weak financial management.

The irregularity was pointed out by audit in January, 2018. The executive replied that the objected DMA was paid to officers/ men who participated in operation Talwars & Tuhafuz. The reply furnished by the executive was not tenable as it was not substantiated by relevant documentary evidence.

The DAC vide meeting held in December, 2018 directed that admin sanction/order of operational/ exercise duty, schedule of exercises along-with detail of participants, nominal roll of officers/

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officials and CO`s certificate regarding payment of Daily Messing Allowance may be provided to audit for examination. No further progress on the matter was reported to audit till finalization of this report.

Audit recommends expeditious implementation of DAC directives/ recovery of unjustified payment from the concerned.

DP-S-13/2018-19 1.17 Recoverables/ Overpayments – Rs 175.94 Million

1.17.1 Non-recovery of sales tax on services – Rs 59.748 Million

According to Balochistan Sales Tax on Services Act, 2015, Schedule II, Part-B, services provided or rendered by persons engaged in contractual execution of work or furnishing supplies are liable to pay 15% Sales Tax on their rendered services.

A) During audit of following MES (Navy) formations for the year 2017-18, it was observed that the Sales Tax on services @ 15% amounting Rs 48,664,587 was not recovered from the contractors‟ payments.

(Rs in million) S No Name of Unit/Formation DP No. Amount 1. GE (Navy) Construction-1, Ormara S-135 29.023 2. AGE (Navy) Maintenance, Ormara S-162 19.641 T o t a l 48.664

Non-recoveries were pointed out by audit in August & September 2018. The executive at Sr. No 1 did not furnish reply, whereas the executive at Sr. No. 2 submitted evasive reply.

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Audit was of the view that due to non-recovery of Sales Tax, public exchequer was deprived of hefty revenue on account of recoverable tax.

The matter was discussed in DAC meeting held in December, 2018. The DAC was informed by executive that no Sales Tax was leviable on civil works contracts. The contention of the management was not tenable as the Sales Tax on services was a provincial subject and the tax was therefore recoverable as per rules. The DAC, however, pended the DP till formulation of policy/decision at MoD level, whereas the audit suggested recovery of tax due as per rules/instructions of the provincial government. Further progress in terms of recovery was not reported to audit till finalization of this report.

Audit recommends expeditious recovery of Sales Tax on services.

B) According to Sindh Sales Tax Act No XII of 2011, issued by Sindh Revenue Board (SRB), Government of Sindh circulated vide Notification No. SRB/TP/51/2016/212146 dated: 08th March 2017, Sales Tax would be charged @ 13% to 14% (from 2015 to 2017) on contractors‟ services.

During audit of following MES (Navy) units and other formations covering period 2015-17, it was observed that the Sales Tax on services amounting Rs 11,084,099 was not recovered from the contractors‟ payments.

(Rs in million) S No Name of Unit/Formation DP No. Amount 1 GE (Navy) Construction, Dockyard S-223 4.845 2 PNS Karsaz S-68 3.934 3 PNS Qasim S-206 1.584 4 GE (Navy) Construction, Manora S-160 0.721

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T o t a l 11.084

Non-recoveries were pointed out by audit during December, 2017 to June, 2018. No reply was furnished by the executive at Sr. No1. The executive at Sr. No. 2 replied that the payment had been released to the contractor after deduction of Sales Tax by Controller of Naval Accounts. Sr. No 3 replied that Sales Tax on services was not applicable on federal government entities. Sr No. 4 replied that additional amount of GST as per SRB had not been catered for.

The contention of the management was not tenable as the Sales Tax on services was a provincial subject and the tax was recoverable on services in the province. Audit was of the view that due to non- recovery of Sales Tax, public exchequer was deprived of hefty revenue on account of recoverable tax.

The DAC vide meeting held in December, 2018 was informed by the executive at Sr. No. 1 that the FBR exempted levy of Sales Tax over building maintenance/ construction. Sr. No 2 replied that the payment against conservancy bills was released by CNA which was responsible to deduct all applicable taxes at source. Sr. No 3 replied that being a federal entity, it was not applicable to Pakistan Navy. Sr. No 4 replied that the tax was not catered for in the works. Replies furnished by the executive were in disregard to government instructions, hence not acceptable.

Audit recommends expeditious recovery of Sales Tax on services.

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1.17.2 Non-recovery of allied charges from consumers – Rs 37.039 Million

According to Para-442 of DSR, 1998, “the GE is responsible for making demands for payment of all revenue and for taking steps for its prompt realization”.

During audit of following MES (Navy) formations for the period 2016-18, it was observed that allied charges amounting to Rs 37,039,081 were lying outstanding against various consumers.

(Rs. in million) S No. Name of Unit/Formation DP No. Amount 1 GE (Navy), Karsaz S-188 21.148 2 GE (Navy) Fleet, Karachi S-134 7.876 3 GE (Navy) Turbat S-72 4.870 4 GE (Navy) Fleet, Karachi S-15 3.145 T o t a l 37.039

Audit was of the view that non-recovery of allied charges indicated weak financial management at the end of the executive.

Non-recoveries were pointed out by audit during November, 2017 to September, 2018. The executive at Sr. No 1 replied that the HQ Comkar had been approached for convening of Board of Officers for assessment and recovery. The executive at Sr. Nos 2 and 4 replied that the electric bills had been forwarded for recovery. The executive at Sr. Nos 3 replied that the electric charges against contractors/commercial consumers had been recovered.

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expeditiously. No further progress in terms of recovery was reported by executive to audit till finalization of this report.

Audit recommends expeditious recovery of amount and its verification by audit.

1.17.3 Non-recovery of Sales Tax on goods– Rs 30.118 Million

As per Finance Bill 2010 "After amendments in the Sales Tax Act, 1990, the applicable rate of sales tax on items in Third Schedule has been increased to 17% with effect from 1st July 2010". Further, as per Rules 2(2) and (3) of the Sales Tax Special Procedure (Withholding) Rules, 2007 under S.R.O. 660(1)/2007, Islamabad, the 30th June, 2007, "A withholding agent shall deduct an amount equal to one-fifth of the total Sales Tax shown in the Sales Tax invoice issued by the supplier and make payment of the balance amount to him" and "All withholding agents shall make purchase of taxable goods from a person duly registered under Sales Tax Act, 1990, provided that under unavoidable circumstances and for reasons to be recorded in writing, if purchases are made from unregistered persons, the withholding agent shall deduct Sales Tax at 19% of the value of the taxable supplies made to him from the payment due to the supplier".

During audit of following MES (Navy) units for the period 2016-18, it was observed that Sales Tax on goods amounting to Rs 30,118,000 was not deducted from the contractors‟/suppliers‟ payments.

(Rs. in million) S No. Name of Unit/Formation DP No. Amount 1 GE (Navy) Logistics, Karachi S-172 25.722 2 GE (Navy) Construction, Manora, Karachi S-164 4.396 T o t a l 30.118

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Audit was of the opinion that due to non-recovery of Sales Tax, government exchequer was deprived of hefty amount of revenue on account of recoverable tax.

Non-recoveries were pointed out by audit in December 2017 & September 2018. The executive at Sr. No. 1 replied that the supplier was registered with FBR for payment of Sales Tax. The executive at Sr. No 2 replied that 3.4% GST was deducted from the contractors. Relevant record supporting full recovery was not produced to audit for verification.

The DAC vide meeting held in December, 2018 directed the executive at Sr. No1 that relevant documents showing recovery be provided to audit for examination. In case of Sr. No. 2, the DAC directed that the tax return of the contractor reflecting payment of remaining 80% GST to FBR be provided to audit for verification. Record proving recovery was however not produced to audit till finalization of this report.

Audit recommends early recovery of Sales Tax amount along-with fixation of responsibility against the person(s) at fault.

1.17.4 Less recovery of Income Tax from contractors – Rs 24.506 Million

During audit of following MES (Navy) units for the period 2016-2018, it was observed that Income Tax amounting to Rs 24,506,181 was less deducted from various contractors‟ payments in violation of above rule. (Rs in million) S No Name of Unit/Formation DP No. Amount 162

1 GE (Navy) Const. Manora, Karachi S-235 7.012 2 GE (Navy) Const. Manora, Karachi S-219 7.074 3 AGE (Navy), Maint. Manora, Karachi S-112 4.260 4 GE (Navy) East, Karachi S-204 1.973 5 GE (Navy) Logistics, Karachi S-20 2.418 6 GE (Navy) Dockyard, Karachi S-14 0.325 7 GE (Navy) Maint Karsaz, Karachi S-191 0.896 8 GE (Navy) Const-II, Ormara S-269 0.548 T o t a l 24.506

Non-recovery of government dues reflected weak financial management which deprived government of potential revenue.

Non-recoveries were pointed out by audit during January to October 2018. The executive at Sr. Nos 2, 4, 5 & 7 replied that all the contractors were filers. The executive at Sr. No 3 replied that Income Tax on water through RO Plant was not applicable. The executive at Sr. No 1 also submitted evasive reply. The executive at Sr. No 8 replied that the contractors were asked for provision of documentary evidence of being the filers. The executive at Sr. No 6 did not furnish reply to DP. The replies furnished were not found tenable as they were not substantiated by relevant documentary evidence.

The DAC vide meeting held in December, 2018 directed that proof regarding filer status of the contractors be provided to audit for verification. In case of non –filer, the difference of Income Tax be recovered from the contractors and record produced to audit for verification. No further response on the matter was reported by executive to audit till finalization of this report.

Audit recommends implementation of DACs‟ directives / recovery of Income Tax as per rules on priority.

1.17.5 Less deduction of Income Tax against MES stores - Rs 12.408 Million 163

During audit of GE (N) Construction Manora, Karachi for the financial year 2017-18, it was observed that an amount of Rs 768,350,000 was paid to the contractors against execution of 35 Nos of contracts. The record showed that the Income Tax was deducted from the contractors‟ bills after deduction of MES stores instead of making tax deductions over gross amount of the bills, which resulted in less recovery of Income Tax amounting to Rs 12,408,158.

Less recovery of Income Tax indicated weak financial management at the end of the executive.

The irregularity was pointed out by audit in October, 2018. The executive‟s reply was irrelevant.

The DAC vide meeting held in December, 2018 directed the management to reconcile the recoverable amount with audit, recover the amount due and get it verified from audit. No further progress was reported to audit till finalization of this report.

Audit recommends recovery of Income Tax as per rules.

DP-S-229/2018-19

1.17.6 Non-recovery of stamp duty from contractors – Rs 9.758 Million

During scrutiny of record of following units, it was observed that a sum of Rs 9,758,267 on account of Stamp Duty was not recovered by the formations against different contract agreements executed.

(Rs in million) S.No Name of Unit/Formation DP No. Amount 1 GE (Navy) Eastern, Karachi S-66 3.816 2 GE (Navy) Turbat S-71 2.117 3 GE (Navy) Logistics, Dockyard, Karachi S-123 1.236 4 GE (Navy) Maint. Karsaz, Karachi S-265 1.150 5 GE (Navy) Const-II, Ormara S-272 0.988 6 Central Div. Stock, Karachi S-209 0.451 T o t a l 9.758

Non-recoveries were pointed out by audit during February to September 2018. The executive at Sr. Nos 3, 4, 5 submitted evasive replies. The executive at Sr. No 1 replied that the SRB had been approached for recovery of stamp duty. The executive at Sr. No 2 replied that the case had been taken up with appropriate authority for recovery of stamp duty. The executive at Sr. No 6 replied that the Stamp duty pertained to Government of Sindh and was not applicable on departments working under Federal Government. The contention of the management was not tenable as it was in disregard of rules quoted above.

The DAC vide meeting held in December, 2018 pended the DPs till formulation of policy/decision on recovery of stamp duty at MoD 165

level, whereas the audit suggested recovery of stamp duty in question on priority. No progress in terms of recovery of stamp duty was reported to audit till finalization of this report.

Audit recommends recovery of provincial duty as per rules expeditiously.

1.17.7 Non-deposit of government's share of rental income - Rs 1.408 Million

According to policy on use of A-I Land circulated vide MoD`s letter dated 2nd April, 2008, for launch of essential commercial activities required to serve the residents of the respective garrison, survey will be conducted by a Board of Officers to determine the actual area under usage. The rent shall be charged @ 6% per annum of existing revenue rate of the said land. Government's share @ 25% of the rent so charged will be deposited into government treasury. Besides, the entire amount of rent charged for use of A-I land for agricultural purposes will be deposited into government treasury.

During scrutiny of record relating to GE (N) Karsaz for the financial year 2017-18, it was observed that M/s Aquagen (Pvt) Ltd utilized “A-1” land for commercial purposes at Karsaz. However, the government's share in the rent amounting to Rs 1,408,462 was not deposited into treasury in violation of A-1 Land Policy referred above.

Audit was of the view that the delay in deposit of government share reflected weak financial management on the part of the executive.

The irregularity was pointed out by audit in September, 2018. The management replied that the matter involving recovery of rent

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was being looked after by PNS Karsaz and that the observation would be shared with the concerned authorities.

The issue was discussed in DAC meeting held in December, 2018. The DAC directed the executive to reconcile the recoverable amount and get the recovery verified from audit. No record in terms of recovery was however produced to audit for verification till finalization of this report.

Audit recommends early deposit of government‟s share into treasury as per policy.

DP-S-260/2018-19

1.17.8 Overpayment to contractor - Rs 0.955 Million

According to Para 15 (c) (4) of DSR – 1998, all payments to contractors and employees correctly represent the services rendered (i.e., work done and stores supplied) in accordance with the contract or other agreement under which those services have been rendered. According to Rule 0104 (a) of Financial Regulations (Navy) 1993 “Every public officer should exercise the same vigilance in respect of expenditure incurred from government revenue as a person of ordinary prudence would exercise in respect of the expenditure of his own money”.

During scrutiny of record pertaining to GE (N) Logistics for the year 2016-17, it was observed that an amount of Rs 16,077,000 was paid to the contractor through final bill against construction work for establishment of air conditioning workshop at PN Dockyard, whereas the total payable cost of the work as per agreement was Rs 15,121,559, which resulted into overpayment of Rs 955,441 to the contractor.

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Audit was of the opinion that the overpayment to the contractor was due to weak financial management and internal controls at the end of the executive.

The irregularity was pointed out by audit in January, 2018. The management replied that the contract was finalized within the permissible limits and no overpayment was made to the contractor. The contention of the management was not supported by relevant record/ documentary evidence.

The matter was discussed in DAC meeting held in December, 2018, wherein it was directed that relevant documents in rebuttal of DP be provided to audit for verification. No response was intimated to audit till finalization of this report.

Audit recommends expeditious recovery of amount involved besides fixing of responsibility against the person(s) at fault.

DP-S-23/2018-19

1.18 Loss to State– Rs 273.957 Million

1.18.1 Non-recovery of electricity charges - Rs 261.075 Million.

According to Rule 0104 (a) of Financial Regulations (Navy) 1993, “Every officer should exercise the same vigilance in respect of expenditure incurred from government revenue as a person of ordinary prudence would exercise in respect of the expenditure of his own money”.

During audit of following MES (Navy) formations for the year 2017-18, it was observed that an amount of Rs 261,075,000 was paid by the formations to K-electric on account of electricity charges against bulk supply of electricity without determining the free allowance of electricity by the Board for the formations and without recovering the amount from the consumers beyond free authorization. 168

(Rs in million) S. No Name of Unit/Formation DP No. Amount 1 GE (Navy) East, Karachi S-205 115.445 2 AGE (Navy) Mehran, Karachi S-234 81.971 3 GE (Navy) Fleet, Karachi S-161 63.659 Total 261.075

When the matter was pointed out by audit in September to October 2018, the executive stated that the Board for the purpose of authorization of units was under process. Reply furnished by the executive was not tenable as the consumption beyond free authorization was to be recovered.

The DPs were discussed in DAC meeting held in December, 2018. The executive repeated their earlier stance. The DAC directed that the Board findings/recommendations be provided to audit for examination and irregular consumption of electricity be got regularized/ paid. No further response on the matter was reported by executive till finalization of this report.

Audit recommends early implementation of DAC directives.

1.18.2 Wasteful expenditure on re-location/shifting of barriers - Rs. 6.984 Million

Under Rule 47 (e) of FR Vol-I 1986, most careful supervision over expenditure shall be exercise and on no account shall money be spent simply because it is available. During audit of Garrison Engineer (Navy) Const. Islamabad, it was observed that an amount of Rs. 6,984,946/- was paid in June 2016, to M/s Muhammad Ramzan Construction for relocation/shifting/erection of spare jersey barriers against contract agreement No. CEN-114/2016, despite the fact that these barriers were 169

erected/installed only a year ago, which resulted into wasteful expenditure. Hence due to ill planning and mis-management government sustained a loss of Rs 6,984,946/- due to shifting/relocation of barriers, which needed regularization. The irregularity was pointed out by Audit in June 2017, the executive replied that due to user requirement security hazard jersey Barriers were relocated/shifted. Reply was not justified as due to ill planning and mis-management Government sustained a loss of Rs 6,984,946. The DAC vide meeting held on 26th November, 2018 directed the management for provision of revised reply within 3 months. No further progress was reported to Audit till finalization of this report. Audit recommends regularization of the expenditure involved besides adoption of remedial measures to avoid such lapses in future. DP-N-123/2017-18 1.18.3 Loss of revenue due to infructuous expenditure – Rs 5.898 Million

According to Para 210 (a) of DSR, 1998 “Infructuous expenditure arises when government funds have been expended for which government receives no useful return or in which there has been unnecessary or avoidable extra expenditure. As per Rule-71 of Quarter& Rent 1985 “It shall be the duty of the Unit Commander or Head of the Department concerned to bring into the notice of the Station Commander/Headquarters any military buildings that may be lying vacant in order to admit of their being let, sold, dismantled or disposed off in any other way under the appropriate regulations". Further, according to Para - 442 of DSR 1998 "The GE is responsible for making demands for payment of all revenue and for taking steps for its prompt realization."

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During audit of accounts of GE (N) Eastern Karachi for the year 2017-18, it was observed that 12 MOQs were constructed at Sajawal in the past but the same were lying unutilized / un-allotted since their construction. Thus the expenditure on construction was found as being infructuous. Further, due to non-allotment of MOQs, the government also sustained additional estimated loss to the tune of Rs 5,898,240 on account of non-recovery of HRA because of the MOQs` non-allotment.

Audit was of the view that due to weak financial management within the organization and its ill-planning the financial loss was caused to the state.

The irregularity was pointed out by audit in July, 2018. The executive replied that the concerned authorities had been approached for providing occupation/vacation status of the 12 MOQs at Sajawal along-with recovery details against HRA and utilities.

The DAC vide meeting held in December, 2018 was informed that the MOQs were not allotted to the officers. The past expenditure on MOQs was thus wasteful. The DAC directed that fresh reply be provided to audit for examination. No further response on the matter was however reported to audit till finalization of this report.

Audit recommends early implementation of DAC directives along-with fixation of responsibility against the person(s) at fault.

DP-S-179/2018-19 1.19 Mis-procurement of stores – Rs 1,098.576 Million

1.19.1 Irregular conclusion of contracts - Rs 764.487 Million

According to PPRA‟s S.R.O.1170(1)/2009 dated July 9, 2009, all procuring agencies whether within or outside Pakistan shall post 171

Contract Awards over fifty million rupees on PPRA‟s website on the proformas as set out in Annexure-I and Annexure-II to these regulations, provided that where any information related to the award of a contract is of proprietary nature or where the procuring agency is convinced that such disclosure of information shall be against the public interest, it can withhold only such information from uploading on PPRA‟s website subject to the prior approval of the Public Procurement Regulatory Authority. [F.No. 2/1/2008/PPRA-RA.III].

According to Table- A of Para-25 and Para-389 of DSR 1998, as amended vide MoD`s letter No.2/12/D-15/2001 dated 12-06- 2006, the contractual power of E-in-C is up to Rs 35 million and the full power is subject to concurrence of Military Finance. According to Para 51 of DSR – 1998, after the 15th April, no new capital/major work will be commenced and no allotment will be made thereto unless on ground of urgent military necessity or for urgent medical reasons. Further, according to Para 369 of DSR-1998, original contract together with drawing, specifications and comparative statement of tenders will be submitted to Controller of Accounts for scrutiny.

During audit of GE Navy Construction Manora for the year 2017-18, it was observed that 9 contracts each exceeding Rs 50 million totaling to Rs 764,487,196 were concluded by the E-in-C without posting Contract Awards on PPRA website and without getting concurrence of Military Finance. It was also observed that the contracts were concluded in June after 15th April and payment of 1st RAR amounting to Rs 264,150,000 was made in the same month without physical progress of the works in question and without scrutiny and vetting by the Controller of Naval Accounts, Karachi as required under the rules. The entire expenditure thus incurred stood as irregular.

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Audit was of the view that incurring of public expenditure without adoption of PPRA and other rules could lead to misuse of government funds which indicated weak financial management.

The irregularity was pointed out by audit in October, 2018. The executive‟s reply was found irrelevant.

The DAC vide meeting held in December, 2018 directed the executive to provide relevant documents to audit for examination. No further progress was reported to audit till finalization of this report.

Audit recommends expeditious compliance of DAC directives and avoidance of such violations in future. (DP-S-239/2018-19) 1.19.2 Irregular, non-transparent award of contracts – Rs 321.962 Million

According to PPRA Rule 35, procuring agencies shall announce the results of bid evaluation in the form of a report giving justification for acceptance or rejection of bids at least ten days prior to the award of procurement contract. Further, according to PPRA‟s S.R.O.1170(1)/2009 dated July 9, 2009, all procuring agencies whether within or outside Pakistan shall post Contract Awards over fifty million rupees on PPRA‟s website. on the proformas as set out in Annexure-I and Annexure-II to these regulations, provided that where any information related to the award of a contract is of proprietary nature or where the procuring agency is convinced that such disclosure of information shall be against the public interest, it can withhold only such information from uploading on PPRA‟s website subject to the prior approval of the Public Procurement Regulatory Authority. [F.No. 2/1/2008/PPRA-RA.III]

During audit of accounts of following MES (Navy) formations for the financial year 2017-18, it was observed that works contracts amounting to Rs 321,962,671 were awarded to different 173

contractors without meeting the requirement of above rules, which rendered the entire expenditure as being irregular and non-transparent.

(Rs in million) S. No DP No. Name of Unit / Formation Amount 1 DP-S-170/2018-19 AGE (N) Maintenance, Ormara 175.676 2. DP-S-130/2018-19 GE (N) Construction-I, Ormara 146.286 Total 321.962

The irregularity was pointed out by audit in August &September 2018. The executive in case of Sr. No 01 replied that the higher authority had been approached for provision of the required documents and in case of Sr. No.2 no reply was furnished to audit.

The DAC vide meeting held in December, 2018 shifted the DPs to E-in-C Branch for immediate reply. No further progress was reported to audit till finalization of this report.

Audit recommends for expeditious compliance of DAC directives along-with fixation of responsibility against the person(s) at fault.

1.19.3 Irregular procurement of stores – Rs 12.127 Million

According to Rule 12(1-2) of PPRA Rules-2004, “Procurements over one hundred thousand rupees and up to the limit of Rs 2.000 million shall be advertised on the authority‟s website. Further, procurements over Rs 2.000 million should be advertised on the authority‟s website as well as in two national dailies, one in English and the other in Urdu”. 174

During audit of accounts of the following MES (Navy) formations for the year 2017-18, it was observed that contracts involving different works valuing Rs 12,127,110 were awarded to different contractors without advertisement through PPRA‟s website and newspapers in violation of PPRA Rules.

(Rs in million) S.No DP No. Name of Unit / Formation Amount 1 DP-S-115/2018-19 AGE (N) Maintenance, Manora 8.227 2 DP-S-147/2018-19 GE (N) Turbat 3.900 Total 12.127

The irregularity was pointed out by audit in July to August 2018. The executive replied that the contracts of works were awarded to firms after meeting all codal formalities. The replies were not found tenable as documentary evidence showing advertisement in newspapers and on PPRA‟s website was not produced in support of management‟s contention.

The DAC vide meeting held in December, 2018 directed that relevant documents in support of reply be produced to audit for examination. In case of failure, the DAC directed the conduct of inquiry on the matter. No further progress on the matter was reported to audit till finalization of this report.

Audit recommends expeditious compliance of DAC directives and avoidance of such violations in future. 1.20 Non-production of record – Rs 15.00 Million

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1.20.1 Non-production of auditable record – Rs 15.00 Million

Under Section – 14(3) of Auditor General‟s Ordinance 2001, any person or authority hindering the auditorial functions of the Auditor General regarding inspection of accounts shall be subject to disciplinary action under relevant Efficiency and Disciplinary Rules, applicable to such person.

During audit of accounts pertaining to PNS Karsaz, it was observed that an amount of Rs 15,000,000 was allocated to the NBCD School PNS Karsaz during the financial year 2016-17 out of Disbursement of Training Charges Fund under code head 1/877/54 by Naval HQ Islamabad for revitalization of Damage Repair Training Simulator (DRTS).The auditable record like break-up of the above expenditure, sanctions, PPRA advertisements, related vouchers, tax recovery details, and items‟ procured details against the said allocation was requested through written requisitions and verbal requests. However, the formation did not produce record to the audit team till the close of audit, which was a serious violation on the part of the auditee organization and entailed strict action against the concerned as per above rule provisions.

Audit was of the opinion that non-production of auditable documents to audit team constituted serious lapse and indicated weak internal controls and financial management.

The irregularity was pointed out by audit in June, 2018. The management furnished an irrelevant reply.

The DAC vide meeting held in December, 2018 directed that relevant documents/adjustment account be provided to audit for examination. No record was produced to audit till finalization of this report.

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Audit recommends early production of complete auditable record as enumerated above along-with fixation of responsibility against the person(s) at fault.

DP-S-163/2018-19

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Military Accountant General 1.21 Un-authorized / Irregular Expenditure - Rs 11,337.123 Million 1.21.1 Un-authorized remittance of public money into commercial bank – Rs 7,593.00 Million Para 1 (vii) of Govt. of Pakistan, Ministry of Defence letter No. 7/6/2004-05/D-21 (Budget) dated 30th November, 2004 states that all expenditure against defence budget shall be pre-audited. Rule 48 (a) of Financial Regulations Volume-I 1986 categorically specifies that within the limits of budget provision, Controllers are authorized to draw cheques on the State Bank of Pakistan and the National Bank of Pakistan at places where the cash business of Govt. is conducted by that bank or on a Govt. Treasury or Sub Treasury at any other place in Pakistan. Rule 36 (d) of Financial Regulations ibid lays down that all units and formations should open a current account with the State Bank of Pakistan or National Bank of Pakistan where such bank exists, otherwise in a local treasury. During audit of CMA (RC) Rawalpindi, it was observed that an amount of Rs.7,592,598,000 was released to Military Intelligence Directorate (M.I Dte) GHQ Rawalpindi. Scrutiny of available contingent bills amounting to Rs 882,500,000 showed that these contingent bills marked as “Secret” were passed and the amount was released by the CMA (RC) without pre-audit. Cheques were issued in favour of Askari Bank, GHQ Rawalpindi to deposit the amount in Account No. 28-01-165-0163- 1, on the advice of Military Intelligence Directorate, merely on the basis of certificate provided by that Directorate that “Funds for cost of war will be utilized for Secret Intelligence Operation”. There was no provision in the rules referred above to transfer Public Funds in a private bank account of any unit. Hence release of amount on this account by the CMA needed regularization from Government of Pakistan, besides provision of details

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of expenditure against released amount and profit earned if any, against retention of public money in a commercial bank account. The irregularity was pointed out by Audit in February, 2017. The executive replied that this office had called the justification from M.I. Dte GHQ Rawalpindi vide this office letter No. S/STA/Misc/Corr of March, 2017 but no reply has been received. The Draft Para was reported to Ministry of Defence on 5th December, 2017. Ministry of Defence was requested vide DGADS letter dated 28th June and 1st October, 2018 for convening of DAC meeting. DAC meetings were scheduled on 6th, 22nd and 29th November, 2018 but postponed by the Ministry and could not be held till finalization of this report. Audit recommends immediate transfer of Public Funds into National Bank besides deposit of amount of profit (if any) into Government Treasury and regularization of bank account in other than National Bank. Details of expenditure against released amount be provided to CMA for accounting and adoption of remedial measures by MAG for strengthening of pre-audit in such cases, to avoid such lapses in future. DP-N-163/2017-18

1.21.2 Unauthorized expenditure out of Al-Mizan fund – Rs. 3,744.123 Million As per Para-1(v) of Ministry of Defence letter No. 7/6/2004-05/D-21 (Budget) dated 30th November, 2004, the releases from Special Transfer Account (STA) shall be used for procurement of stores and for replenishment of stock. During audit of the accounts of following two CMAs, it was observed that the payments were released by CMA to different Army units out of Al-Mizan Fund (drawn on STA) on account of purchase of sports items, construction work, repair / maintenance work, pay and

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allowance of security guards and expenditure of Yuam-e-Shuhada which were not covered as per above cited Government orders. (Rs. in million) S DP No. Nature of Expenditure Amount # 1 DP-N-151/2017-18 CMA (RC) Procurement of sports items. 7.00 (Sports Dte. GHQ) 2 DP-N-164/2017-18 CMA (RC) Construction of House. 500.00 (AGs Branch Welfare & Rehabilitation Dte.) 3 DP-N-253/2017-18 Expenditure of Yuam-e-Shuhada 211.937 CMA (RC) 4 DP-N-258/2017-18 Pay and Allowances of Security 180.660 CMA (RC) Guards. (HQ‟r 10 Corp) 5 DP-N-261/2017-18 Const /Repair & Maintenance 2,844.526 CMA (PC) Work. (GE‟s) Total 3,744.123

Audit is of the opinion that CMA should have pointed out that expenditure other than the specified purpose was a violation of Government policy. Release of funds indicates failure of pre-audit check. The irregularity was pointed out by Audit in 2016-17. The accounts authority replied that matter has been referred to concerned Army authorities and reply is awaited. The Draft Paras were reported to Ministry of Defence during February to May, 2017. Ministry of Defence was requested vide DGADS letter dated 28th June and 1st October, 2018 for convening of DAC meeting. DAC meetings were scheduled on 6th, 22nd and 29th November, 2018 but postponed by the Ministry and could not be held till finalization of this report. Audit recommends regularization of the whole expenditure, besides, adoption of remedial measures by MAG to strengthen pre-audit system to avoid such lapses in future.

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1.22 Recoverable / Overpayments – Rs 39.00 Million

1.22.1 Double payment on account of repair and maintenance - Rs 39.00 Million

According to Rule 6 (d) of Financial Regulation Volume-I, 1986 that Govt. revenues shall not be utilized for the benefit of a particular person or a section of the community. According to Rule 47 (e) of Financial Regulations Volume- I, 1986, “most careful supervision over expenditure shall be exercised and on no account shall money be spent simply because it is available”. During Audit of accounts of CMA (PC) Peshawar, the following irregularities were observed; (i) An amount of Rs 24,000,000 was paid vide DV No. 148 of 10/2015 against a bill preferred by 14 Engineers Battalion Camp Area Miran Shah to M/s Farukh & Sons Peshawar on account of repair and maintenance of 24 check posts at North Wazirastan Agency (NWA) @ Rs.1.000 million per post. Whereas Rs 24,000,000 for the same posts was again paid to another contractor M/s RWK Enterprises Peshawar vide DV No. 121 of 12/2015, which resulted into double payment of Rs 24,000,000 against one and the same work. (ii) An amount of Rs 15,000,000 was paid vide DV No.004 of 05/2016 of HQ 21 Div Arty Operational Area Malakand Division to M/S Royal Business System on account of repair and maintenance of 15x check posts / surveillance tower at Malakand Division @ Rs. 1,000,000 per post /surveillance tower, whereas Rs 15,000,000 for the same work had also been paid to the same contractor vide DV No.27 of 06/2016 which resulted into double payment of Rs 15,000,000 for the same work. The irregularities were pointed out by Audit in 2016-2017. The accounts authorities replied that the objections had been forwarded to unit/formation concerned and replies are awaited.

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The Draft Paras were reported to Ministry of Defence during 2017-18. Ministry of Defence was requested vide DGADS letter dated 28th June and 1st October, 2018 for convening of DAC meeting. DAC meetings were scheduled on 6th, 22nd and 29th November, 2018 but postponed by the Ministry and could not be held till finalization of this report. Audit recommends recovery of the amount involved, besides, holding of inquiry for fixing responsibility on person(s) at fault and adoption of remedial measures to avoid such lapses in future. DP-N-175 & 373/2017-18

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Inter Services Organizations 1.23 Un-authorized / Irregular Expenditure- Rs 5.463 Million 1.23.1 Un-justified payment to contractor on provisional CRVs – Rs 5.463 Million

According to Rule- 105 of Financial Regulation (Army & Air Force) Vol-1 1986, unless specially authorized by the Government no cash advances should be made to contractors. Rule-51 of Financial Regulation Vol-II 1986 stipulates that it is not permissible to draw any money to prevent the lapse of amounts provided in estimates. While examining the accounts of AFIMH Rawalpindi, it was observed that unjustified payment amounting to Rs 5,463,000 was made to the contractor M/s ALM Enterprises for procurement of patient lift (Qty-03) on provisional CRVs, whereas lifts were not delivered by the contractor despite lapse of 09 months (April 2017 to January 2018) as neither inspection nor physical installation of lifts took place till close of audit on 31.01.2018. The irregularity was pointed out by Audit in January 2018. The executive replied that the size of the lifts in AFIMH building was not of international standards. It came into notice once the lifts were received in Karachi Port. So the lifts ordered by M/s ALM Enterprises were to be sent back to China for modification by the manufacturers. Lifts would soon be installed as soon as they reach and inspection report would be submitted accordingly. Reply advanced by the executive was itself admittance of irregularities as no lifts were delivered/installed/inspected. The DAC vide meeting held on 15th November, 2018 was apprised that cheque for equivalent amount has been obtained from the firm and will be deposited into Government treasury in case lifts are not

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delivered by 31st January 2019. DAC directed that shipping documents and latest deadline given to the firm be provided to Audit. No further progress was reported to Audit till finalization of this report. Audit recommends delivery and installation of the lifts, besides, holding of inquiry for releasing payment without receipt of store and adoption of remedial measures to avoid such lapses in future. DP-N-21/2018-19 1.24 Recoverable / Overpayments- Rs 6.680 Million 1.24.1 Non-deposit of interest earned on public receipts - Rs 6.680 Million

As per Rule-2 of Financial Regulations, 1986 (Vol-II) “all transactions to which any officer of Government in his official capacity is a party, shall, without any reservation, be brought to account and all moneys received by or tendered to Government officer which are due to, or are required to be deposited with Government shall, without undue delay, be paid, in full, into a Government treasury”. While examining the accounts of Armed Forces Post Graduate Medical Institute (AFPGMI) Rawalpindi, it was observed that a private PLS Account No.0084602010003180 in the name of commandant AFPGMI was being maintained at MCB Bank Chaklala Rawalpindi, for the purpose of collection of training charges from the civilian doctors against the courses being arranged in the Institute. Accordingly a sum of Rs 6,679,519 received from the civilian doctors was kept in non-public fund account, which needed to be deposited into Government Treasury along with interest earned on these deposits. The irregularity was pointed out by Audit in January 2017. The executive replied that amount received from civilian doctors as tuition fee is distributed among various heads, as per GHQ instructions and Government share is regularly deposited on TRs. Funds available in bank account is a private fund belonging to the Institute and is not a public 184

money. Reply advanced was not acceptable, as money received on behalf of Government was required to be deposited into Government treasury. The DAC vide meeting held on 15th November, 2018 was apprised that training charges are being collected and kept in private account on the authority of GHQ ltr No. 79/489/R/DMS-1(IS), dated 17-9- 2008. DAC directed that GHQ ltr No. 79/489/R/DMS-1(IS), dated 17-9- 2008 alongwith relevant record of its approval from Competent Authority be provided for audit scrutiny. However, no further progress was reported till finalization of this report. Audit recommends recovery of the whole amount along with interest accrued and its deposit into Government Treasury, besides, adoption of remedial measures to avoid such lapses in future. DP-N-118 & 128/2017-18

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CHAPTER-2 Ministry of Defence Production 2.1 Introduction Ministry of Defence Production deals with procurement, indigenous production and manufacture of defence equipment and stores. This Ministry negotiates agreements and Memorandums of Understanding (MoUs) for foreign assistance or collaboration, loans for purchase of military stores, technical knowledge and transfer of technology. It also deals with export of defence products, marketing, and promotion of activities relating to export of defence products and procurement and research & development related matters of the defence sector. Under Armed Forces Development Plan this Ministry has undertaken mega projects like JF-17, Al-Khalid Tank, F-22P Frigate and AWACS Air Refueling System as well as F-16 Block 52, Radar System etc. 2.2 Brief comments on the status of compliance with PAC's directives. The status of compliance of Public Accounts Committee (PAC) directives for the Audit Reports from 1985-86 to 2017-18 discussed during its various meetings held from July, 1992 to December, 2018 is given below:-

Year Total No. of Paras Compliance Compliance Percentage Paras Discussed Made awaited / Non of Complied Compliance 1 2 3 4 5 6 1985-86 15 01 0 01 0% 1986-87 12 0 0 0 0% 1987-88 17 13 01 12 7.69% 1988-89 14 05 0 05 0% 1989-90 14 02 0 02 0% 1990-91 10 02 01 01 50% 1991-92 15 04 0 04 0% 1992-93 15 03 0 03 0% 1993-94 26 04 0 04 0% 186

1994-95 22 0 0 0 0% 1995-96 28 12 03 09 25% 1996-97 91 63 02 61 23.80% 1997-98 55 05 0 05 0% 1998-99 0 0 0 0 0% 1999-00 86 33 03 30 9% 2000-01 140 48 34 14 70.83% 2001-02 44 27 10 17 37% 2002-03 0 0 0 0 0% 2003-04 01 01 01 0 100% 2004-05 08 08 04 04 50% 2005-06 27 06 05 01 83% 2006-07 07 06 02 04 33% 2007-08 08 08 08 0 100% 2008-09 16 03 03 03 100% 2009-10 13 01 0 01 0.00% 2010-11 Report not yet discussed 2011-12 Report not yet discussed 2012-13 Report not yet discussed 2013-14 7* 4 0 3 0.00% 2013-14 Not yet discussed by sub PAC up to 50 million 2014-15 Report not yet discussed 2015-16 Report not yet discussed 2016-17 2 2 1 1 50.00% 2017-18 Report not yet discussed Total 693 261 78 185 29.73%

Ministry of Defence Production fully complied with only 78 PAC directives out of 261 which indicates that compliance of PAC directives was very slow and the Principal Accounting Officer should take necessary steps to expedite compliance of PAC‟s directives.

* Above 50 million paras discussed by PAC

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Audit Paras 2.3 Unauthorized / Irregular payments – Rs 3,134.771 Million and US $ 0.117 Million 2.3.1 Irregular advance payment against provisional CRVs/Inspection Notes – Rs 2,274.0 Million

According to paras 3-b (2 & 3) of Chapter XIII (Payments) of Purchase Procedure and Instruction (2002 DGDP), if the stores are to be inspected at firm‟s premises and dispatched by the firm by rail/road ,50%-80% of the value of accepted stores as stipulated in the contact be paid by CMA (DP) on production of (a) Inspection Note and Invoice, (b) an original copy of the Railway Receipt/Road Carrier Receipt under which stores were dispatched to the consignee duly verified and endorsed by the inspector. The remaining 50%-20% of the value of accepted stores, as the case may be, will be claimed and paid on receipt of stores by the consignees duly supported by the CRV. Further, as per rule-51 of Financial Regulations Vol-II” no money shall be drawn unless it is required for immediate disbursement. It is not permissible to draw any money to prevent the lapse of amounts provided in estimates”. As per para 15 of contract clause “80% payment of the value of consignment will be paid to supplier on receipt of bills dully supported by CRV /Inspection note. The balance 20% will be paid to supplier on submission of bill duly supported by the consignee‟s CRV.” It was observed from the record held with Central Ordnance Depot, Rawalpindi that 35 contracts valuing Rs 2,274,001,815 were concluded by DGP (A) for supply of different stores with delivery period as noted against each & terms of payment of contract mentioned above. It was revealed from verification of receipt of stores passed by Inspection Agencies Form (in lieu of LP-386) that advance/provisional CRV & Inspection Notes were prepared/ issued without actual receipt of 188

stores. Executive authorities were asked to provide DSR (Daily Record of Stores) showing description of stores i.e. weight, bundles/bales, vehicle number etc.), delivery challans, packing material list and issue of stores vouchers to indenting units but the same were not provided till completion of audit. The irregularity was pointed out by Audit in February, 2017. The executive replied that firm had not yet delivered the contracted stores. They also added that provisional advance CRVs & Inspection note were issued on instruction of LS Branch CLS Secretariat vide letter dated 25 May 2015 to avoid lapse of funds. BG/CDRs of equal amount were obtained. Quantity against advance CRVs had been recorded on the accounts cards as dues (receivables). On the receipt of stores the same would be issued to concerned units. Reply was not acceptable as the action taken was not covered under the rules and resulted into blockade of public money. Moreover, in reply dated 22-08-2017, the executive stated that the store against only few contracts was delivered while supplies were still waited. The DAC vide meeting held on 14th November, 2018 directed to shift the Draft Para to DGP (A) / MoDP. No further progress was reported to Audit till finalization of this report. Audit recommends the following: 1. Matter needs to be investigated at appropriate level and responsibility fixed for payment against advance CRVs and Inspection Notes before actual delivery of stores against contracts concluded by DGP (Army). 2. Provision of up-to-date position of actual receipt of stores against each contract, inspection of said stores by ITD, Chaklala and its further issuance to quarter concerned units. 3. Detail of imposition & recovery of LD charges with reference to actual date of delivery of stores.

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4. Recovery of PR and deposit in government treasury. 5. Regularization of the lapse for blockade of money. 6. Adoption of remedial measures to forestall recurrence of such lapses in future. DP-N-429/17-18 2.3.2 Purchase of imported vehicles beyond the quantity approved by the Prime Minister – Rs 684.881 Million. According to Government of Pakistan Cabinet Secretariat Division letter No. 6-1(4)/07-MII dated 06-10-2007, imported vehicles could only be purchased after prior approval of Prime Minister. Approval of the Prime Minister for purchase of qty 508 Trucks (5 Ton 4x4) was conveyed to GHQ vide Ministry of Defence letter No. 1/2015-16-D-21 (Budget) dated 8-03-2016. During audit of Director General Procurement (Army) Rawalpindi, it was observed that two contracts were concluded for purchase of 647 imported Trucks (5 Ton 4x4) against the approved qty of 508 trucks. Thus, an unauthorized expenditure of Rs 684,881,465/- being the cost of 139 additional trucks was incurred against the approval of Prime Minister which needed regularization. The irregularity was pointed out by Audit in December 2016. The executive replied that being a procurement agency this Directorate was bound to purchase the vehicles as per indenter‟s requirement to meet the existing deficiencies. Additional 139 x vehicles were purchased by DGP (Army) to make up the deficiency of Truck 5 Ton 4 x 4 out of balance amount left after purchase of vehicles at most economical rates. The reply furnished by the executive was not justified as 139 additional vehicles were procured beyond the approval of the Prime Minister. The DAC vide meeting held on 12th April, 2018 was apprised that ex-post facto sanction for purchase of additional vehicles 190

was under process. DAC directed to get the expenditure regularized. No further progress was reported to Audit till finalization of this report. Audit recommends for holding an inquiry and fixing responsibility for procurement of vehicles beyond approved quantity, besides, regularization of the expenditure involved and adoption of remedial measures to avoid such lapses in future. DP-N-177/2017-18 2.3.3 Award of contract on fake bank guarantees - Rs 120.68 Million. Clause 26 (a) of Contract No. 21-0663-4-0 dated 08-12-215 and 23 (a) of Contract No. 21-0611-4-0 dated 08-11-2013 states: “to ensure timely and correct supply of stores, the firm will furnish an unconditional Bank Guarantee from Schedule Bank of Pakistan on a Judicial stamp paper” A) Director General Procurement (ARMY) Rawalpindi concluded four contracts bearing No. 21-0663-4-0, 21-0663-4-1, 21-0663- 4-2 and 21-0663-4-3 with M/s Rahat Marketing, Lahore for supply of sugar during financial year 2015-16. M/s Rahat Marketing furnished four Bank Guarantees from “Allied Bank Limited Main Branch Gulberg Lahore” valuing Rs 99,269,870/- and the same were forwarded to Controller Military Accounts, Defence Production, Rawalpindi after confirmation by DGP (Army). At a later stage, on a reference from DGP (A), the Allied Bank Limited in their letter No. ABL/BSG 2016 dated 28- 04-2016 categorically denied existence of “Main Branch Gulberg Lahore” from whom these bank Guarantees had been provided by the above named firm. It shows flaws in DGP (A)‟s verification process because of which these Bank Guarantees were certified as genuine. B) Similarly, another Contract No. 21-0611-4-0 dated 08-11- 2013 was concluded with M/s Supply Pro, Islamabad for Provision of Sugar valuing Rs. 495,467,000/-. The Bank vide letter No. BIPL/

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AIT/LHR/01 dated 03-02-2016, showed its inability to confirm genuiness of the Guarantee No. PG000002857001/2697 dated 15-01-2015 of Rs. 21,500,000/- furnished by the firm. Thus the said Bank Guarantee remained unconfirmed. The irregularities were pointed out by Audit in December 2016. The executive replied that appropriate disciplinary action in the light of prevailing rules would be initiated at the closure of the contract and firms had already been informed accordingly. The DAC vide meetings held on 12th April, 2018 was apprised that one year embargo has been imposed on the firms besides revision / improvement of procedure for processing of Bank Guarantees. After detailed discussion it was agreed that implementation of revised procedure will be got cross-checked from Audit in DGP (A)/ CMA (DP). No further progress was reported to Audit till finalization of this report. Audit recommends that BG verification procedure may be got approved from the Ministry of Defence besides holding inquiry for fixing responsibility if any lapse was made in acceptance of fake bank guarantees. Moreover, appropriate action may be taken against firms which provided them the said BGs. DP-N-195/2017-18 2.3.4 Release of payment before delivery of store and non- recovery of interest Rs 29.678 Million

Para 3(b)(1) to Defence Purchase Procedure and Instructions (Revised 2002) stipulates that, “If the stores are delivered to the inspecting agency for inspection and subsequently dispatched to the consignee(s), 60%-80% value of the accepted stores as stipulated in the contract, will be paid by CMA (DP) on production of Inspection Note/Certificate issued by the inspecting agency after inspection and acceptance of stores. The remaining 40%-20% will be paid duly supported by CRV after receipt of stores by the Consignees”.

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As per record held by Directorate General Procurement (Army) Rawalpindi, a Contract Agreement No.14-757-00/Askari dated 28-04-2016 valuing Rs 26,977,822 was concluded with M/s Askari Enterprises for procurement of spare parts for tank Al-Khalid. During scrutiny of contract, it was observed that full payment was released to the contractor in June, 2016 on the basis of Inspection Note and CRV dated 27-05-2016, showing that complete store was delivered by the contractor and taken on charge. However, as per Askari Enterprises letter No.AE/01/Spares dated 03-04-2017 and delivery challan dated 27-03- 2017, the store was actually delivered by the contractor on 27th March, 2017. Thus, unauthorized payment was made on provisional CRVs and against the established practice. The irregularity was pointed out by Audit in April 2018. The management replied that they are responsible for release of payment to firm on receipt of Inspection Notes from inspection authorities and CRVs from consignees and both documents are held in record. Reply was not tenable as full payment was authorized for release to contractor in June 2016 but store was delivered by the contractor in March 2017. The para was reported to Ministry of Defence Production on 29th October, 2018. The DAC was convened by the PAO on 4th January 2019. However, minutes of the meeting could not be finalized till meeting of external QCC. Audit recommends investigation of matter through an inquiry alongwith fixing of responsibility against the responsible for issuance of provisional CRVs / Inspection note besides regularization from Government of Pakistan. DP-N-205/2018-19 2.3.5 Release of final payment without execution of work - Rs. 22.612 Million.

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According to Para-52 of Defence Services Regulations for MES 1998, “No funds will be spent un-economically merely to prevent them from lapsing.” While examining the accounts of Garrison Engineer (DP) ARF Kamra, it was observed from Contract Agreement bearing No. CEDP-2017-57 that Admin approval was granted by Chairman PAC Board Kamra vide letter No. ARF/1564/762/ Wks/PACB/1008/5/work dated 25.05.2017 for Rs 23,770,000 for re-routing / improvement of U/S sewerage pipe lines with UPVC pipelines and rehabilitation of Sewerage Treatment Plant in domestic area ARF PAC Kamra. As per acceptance letter, dates of commencement and completion of work were 29-05-2017 and 28-01-2018 respectively. However, final payment of Rs 22,612,423 was made to the contractor on 19.06.2017 vide CBI No. 209 i.e. just after 21 days from acceptance of tender without completion of work. Audit was of the view that subject work was neither commenced nor completed on 19.06.2017 and payment was made just to avoid lapse of funds in violation of Govt. rules, which needed regularization. The irregularity was pointed out by audit in July 2017. The executive authorities admitted that payment was made to the contractor to avoid lapse of funds. The irregularity admitted by the executive needed regularization. The DAC vide meeting held on 12th April, 2018 pended the draft para till verification of documents regarding completion reports of work. Audit recommends holding of an inquiry for making advance payment without execution / completion of work and fixing of responsibility besides implementation of the DAC directives and its verification by Audit. DP-N-243/2017-18 2.3.6 Non-provision of performance security - US $ 0.117 (M)

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As per clause 8 of Contract Agreement No. 74/5001/IT- Gen/6TD-1 & 6TD-2/2016/ CP-1/FE/Proc/UDE-18,4-59-K/KE-16 dated 17 Jun 2016, the supplier shall furnish a bank guarantee within 30 days of signing of the contact. While examining the accounts of Heavy Rebuild Factory (T) HIT Taxila, it was observed that CA No. 74/5001/IT-Gen/6TD-1 & 6TD-2/2016/CP-1/ FE/Proc/UDE-18,4-59-K/KE-16 dated 17 Jun 2016 valuing US$. 2,344,802.49 was concluded with M/S UKRSPECEXPORT, Islamabad for procurement of spares for Tank T-80UD and Tank Al- Khalid. However, contractor failed to furnish 5% Performance Bank Guarantee of US$. 117,240 (2,344,802.49 x 5%) which was against the above cited provision. The irregularity was pointed out by Audit in August 2017. Executive stated that reply would follow in due course of time. Audit was of the view that non-provision of 5% Performance Bank Guarantee was a clear violation of contract clauses. The DAC vide meeting held on 09th October, 2018 was apprised that due to low credit rating of Ukrainian banks, Pakistani banks did not accept counter bank guarantees of Ukrainian banks. Due to non- provision of PBG, terms of payment had been amended and early shipment of stores was expected. DAC pended the draft para and directed HIT management to submit the progress on monthly basis. No further progress was reported till finalization of this report. Audit recommends that the matter needs to be investigated with respect to any favour extended to the firm. If required, Ministry of Defence Production should formulate a policy in consultation with SBP to safeguard interest of State. DP-N-213/2017-18 2.3.7 Un-authorized expenditure on provision of kitchen facility with single men barrack – Rs 2.920 Million

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Para 115 of Defence Service Accommodation Scales, 2000 provides detail of a typical barrack and accommodation authorized therein. Further, according to para 121 of Defence Services Accommodation Scales, 2000 the number of Cook Houses and Dining Halls provided should be the minimum compatible with the authorization of the unit and should be constructed in as few blocks as practicable. While examining the accounts of Garrison Engineer (DP) Construction / Services Taxila, it was observed that contract agreement No. TXL-2017-17 was concluded with M/S Shiba Associates at a cost of Rs. 2,928,335/- for construction of kitchen for single men staff at HIT Taxila Cantt, whereas no provision exists in Defence Services Accommodation Scales - 2000 for construction of kitchen facility for single men barrack. This resulted into unauthorized expenditure on provision of kitchen facility with single men barrack of Rs. 2,920,541/-. The irregularity was pointed out by Audit in October 2017. The executive replied that kitchen was constructed in phase -1 keeping in view that the funds were available with the authority. As and when the funds get available the other portions of cook house, i.e. stores, washing area and dining hall will also be constructed to complete the requirements. Reply was not tenable due to the fact that provision of kitchen facility for single men barrack was not authorized under accommodation scales. The para was reported to Ministry of Defence Production on 1st September 2018, The DAC was convened by the PAO on 4th January 2019. However, minutes of the meeting could not be finalized till meeting of external QCC. Audit recommends holding of an inquiry for fixing responsibility on the person(s) at fault besides regularization and verification of actual utilization of the building by Audit. DP-N-157/2018-19

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2.4 Recoverable / Overpayments – Rs 415.978 Million 2.4.1 Overpayment to contractor due to non-deduction of amount of taxes – Rs 332.050 Million

Under para-3 (a) of Sales Tax Special Procedure (withholding) Rules-2007, in case the sales tax amount is not indicated on the invoices, the recipient shall deduct sales tax at the applicable rate of the value of taxable services from the payments due to the Services provider. Moreover, as per purchase proposal of contract agreement No. 02/5126/IT-3073/2014-15/18/CP/Gun (F)/Proc, dated 7th November 2014, 17% GST was included in the quoted rates. As per purchase proposal, the contract was made on FOR basis. Moreover, according to note (d) under schedule of stores of the said contract, the unit price “is inclusive of all taxes”. Vide clause 22 (a) of the contract, only “custom clearance” was HIT responsibility. Inland charges were also payable by the firm. On a reference made by HIT, the FBR clarified vide letter No. 3(10)ST/L&P/2007(Pt) dated 20-12-2018 that the tax payable at import stage should be deposited. While examining the accounts of Gun Factory HIT Taxila, it was observed that the above contract agreement valuing Rs 850,320,000 (including 17% GST), was awarded to M/s Trojans Islamabad for procurement of 125 mm Tank Guns Barrels blanks quantity 120. The firm claimed payment through HIT contingent bills which clearly disclosed that the claims included 17% GST. Full payment i.e. Rs 850,320,000 was released to the firm without deduction of GST inspite of the fact that bill of entry attached with the bill showed that it had been got cleared by Embarkation HQ Karachi without payment of GST (RS 166,237,000) by the firm. Similarly, neither 15% custom charges (Rs 127,548,000) were 197

paid nor 4.5% income tax (Rs 38,260,000) deducted at source by the CMA. The irregularity was pointed out by audit in October 2016. The executive replied that procurement of Barrel Blanks of 110 Tk Al- Khalid-I Program (Qty-120) was contracted after approval of Chairman HIT on 10th July 2014. CP Branch BMP Directorate HIT was approached for deduction of 17% Sales Tax from the firm. The reply furnished by the management was not satisfactory because the purchase proposal was inclusive of 17% GST. Therefore, payment without GST invoice was unauthorized and needed recovery. Moreover, FOB process involving port clearance as defence store in FOR contract was irregular, as it led to clearance of imported stores without payment of any import charges or deduction of income tax at the time of payment. The DAC vide meeting held on 13th September, 2017 directed HIT management to conduct a court of inquiry and submit the findings/recommendations within 3 months. The para was again discussed by DAC in its meeting held on 09th October, 2018. DAC directed HIT management to submit detail of progress to MoDP within two months. However, no further progress in regard to findings of the inquiry was reported to Audit till finalization of this report. Audit recommends recovery of the amount from the firm besides finalization of the inquiry, fixing responsibility and initiation of disciplinary proceedings. Moreover, Audit recommends adoption of process of port clearance though Embarkation HQ without payment of duties in this case as well as in similar cases should be investigated. DP-N-550/2016-17 2.4.2 Overpayment to contractors due to non-recovery of price reduction – Rs 44.467 Million

As per para-7 (a) of Chapter-XVII (Inspection and Discrepancies) of Purchase Procedure (Revised) 2002, Inspector, being a

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specialist, will be responsible for inspection of all kind of defence stores indented for purchase and assist the indenter ensuring that the terms of contract as to the standard specifications and drawings are strictly complied with, in letter and spirit. Where there be an event of sub-standard stores being supplied involving Price Reduction (PR), then both the inspector and the Services HQ will inform the Purchaser (Procurement Agency) for doing so. Further, as para-7 (f) unless a different intention appears from the terms of the contract, the Controller Military Accounts (DP), shall deduct the amount of Price Reduction (PR) as notified on inspection note of respective Services HQ and make the remaining payment against the bill. During Audit of COD Rawalpindi, it was observed that CRVs were issued for payment from CMA (DP) Rawalpindi to the firms and payment was made accordingly. As per inspection notes, inspection authority imposed price reductions on total contracted store, which was not recovered from the firms concerned. Thus, an amount of Rs 44,467,222/- was overpaid to the contractors, which needed immediate recovery besides justification for acceptance of substandard stores. The irregularity was pointed out by Audit in December, 2017. The executive stated that as per contract clause-4, being a consignee, COD was only responsible for receipt of contracted stores. Funds against contract were placed at the disposal of DGP (A) by the indenter and recovery of price reduction was sole responsibility of DGP (A) / CMA (DP) instead of consignee department. The DAC vide meeting held on 11th December, 2018 directed to shift the Para to DGP (A). No DAC was held in MODP inspite of reminders from Audit. Audit recommends holding of inquiry to fix responsibility and early recovery of the price reductions amount and its deposit into government treasury, besides, initiation of remedial measures to avoid such lapses in future.

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DP-N-107/2018-19 2.4.3 Overpayment to contractor due to non-deduction of income tax - Rs. 32.177 Million

According to Government of Pakistan Regional Tax Office Rawalpindi letter No.MAC-III/2016-17/31 dated 03-08-2016, Income Tax @ 4.5% is required to be deducted while making payment to contractor. According to para 18 (Sl No. 9 & 10) of Special Conditions of the contract, type of contract was FOR (Indigenous) and country of origin was indigenous (Pakistan). As per record held with Directorate General Procurement (Army) Rawalpindi, a Contract Agreement No. 21-657-7-1 dated 31-5- 2016 valuing Rs 715,050,000/- was concluded with M/S ARUS International, Faisalabad for procurement of 3,150 Metric Ton Dall Mash. However, it was observed that income tax amounting to Rs 32,177,250/- (Rs 715,050,000 X @ 4.5%) was not deducted from the payment made to contractor, which needed recovery. The irregularity was pointed out by Audit in August 2018. The executive replied that recovery of income tax from firm is the responsibility of CMA (DP) Rawalpindi which makes payment after deduction of all kinds of taxes and other recoveries. However, Directorate General Procurement (Army) had already approached CMA (DP), Rwp to provide recovery detail of Income Tax. Reply of Directorate General (Procurement Army) Rawalpindi was found unsatisfactory because as confirmed from CMA (DP) record Income Tax was not deducted. The para was reported to MoDP on 29th October, 2018. The DAC was convened by the PAO on 4th January 2019. However, minutes of the meeting could not be finalized till meeting of external QCC.

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Audit recommends investigation into the matter to fix responsibility on the person(s) at fault besides immediate recovery of the amount involved and its verification by Audit. DP-N-206/2018-19 2.4.4 Non recovery of risk & expense amount Rs 7.284 Million

According to para I of Chapter XI of Purchase Procedure and Instructions (PP & I) 2002, specified delivery period is the essence of the contract. All the deliveries must be completed by the specified date. Upon failure of supplier to deliver the store within the stipulated time frame the purchaser shall be entitled: - a) To cancel the contract. b) To purchase elsewhere stores not delivered at the risk and expense of the supplier c) To impose/recover liquidated damages @2% per month up to a maximum 10% against the unsupplied store. While examining the accounts of Directorate Procurement (Navy) Rawalpindi, it was observed that a contract No.525021 /R511/ 330278 dated 22-05-06 was concluded with M/S Sara Corporation Karachi, for procurement of clothing items, at a cost of Rs. 19,582,000 with delivery period up to 31-10-2006. However, the contractor failed to supply the store, and later on contract was cancelled on firm‟s Risk & Expense in October 2012. Thereafter, another contract No. 525021 /R511/ 330278/A dated: 28-12-15 was concluded with M/S Excel Tex Industries, Karachi at a cost of Rs 14,041,544.40 at Risk & Expense of the defaulting contractor. However, recovery of Risk & Expense amount of Rs 7,283,678 from defaulting firm was still outstanding. The irregularity was pointed out by Audit in October 2016. The executive replied that contract was cancelled on firm‟s Risk &

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Expense in October 2012. CMA (DP) was requested to recover the amount from other bills of the firm and bank guarantee amounting to Rs. 979,100/- was extended and adjusted against risk and purchase amount. Reply was not acceptable because no recovery of risk and expense amount was made and no action was taken against the firm. Furthermore, as per verification by audit, bank guarantee expired on 31/05/2010 and not encashed / forfeited well in time. The DAC vide meeting held on 09th October, 2018 pended the draft para with the directions to blacklist the firm besides a “Court of Inquiry”. No further progress was reported to Audit till finalization of this report. Audit recommends recovery of the amount involved, besides, blacklisting of the firm and early finalization of court of inquiry and fixing responsibility. DP-N-376/2017-18 2.5 Loss to State – Rs 85.532 Million, US $ 0.617 Million and EURO 0.096 Million 2.5.1 Non-acceptance of lowest bid - Rs 72.602 Million.

According to Rule 38 of the Public Procurement Rule 2004, “the bidder with the lowest evaluated bid, if not in conflict with any other law, rules, regulations or policy of the Federal Government, shall be awarded the procurement contract, within the original or extended period of bid validity”. While examining the accounts of HRF (T) Taxila, it was observed that tender inquiry No. 70/5001/IT-3019/6TD-2/2013/CP- 1/FE/Proc dated 4/9/2013, regarding procurement of spares for rebuild of 12 x 6TD-2 engine (85 items) was published in the newspaper and on PPRA website. Technical & Commercial Quotations were received from three firms, which were technically accepted. M/S Business Associate submitted lowest bid of US $ 103,924.87 whereas M/S USE quoted US $ 202

837,278.00 for all 85 items required. Consequently, M/S Business Associate being the lowest evaluated bidder requested vide letter dated: 19-12-2013 that it would furnish 05% Bank Guarantee within 30 days of the signing of contract & OEM Certificate up to 5th January 2014 due to holidays. However, his request was not acceded to and bid of M/S Business Associate was subsequently rejected and the contract was awarded to 2nd bidder (M/S USE Islamabad) with a difference in bid value of Rs 72,601,960 (US $ 837,278 - US $ 103,924.87 = US $ 733,353 x Rs. 99) on the grounds that M/S Business Associate had not provided earnest money and OEM certificate in time. Furthermore, no evidence regarding deposit of earnest money by M/S USE (being un-registered with HIT) was found in the record. Due to non-acceptance of lowest bid the state had to bear additional cost of Rs 72,601,960, which could have been avoided by considering the request made by M/s Business Associates (1st lowest) or re-bidding due to huge difference in bid value of 1st & 2nd lowest bidders. The irregularity was pointed out by Audit in August 2017. The executive replied that reply would follow in due course of time. Audit suggested that matter be investigated at appropriate level beside recovery / regularization action. The DAC vide meeting held on 09th October, 2018 directed HIT Board to hold a “Court of Inquiry” and submit the findings/recommendations duly approved by Chairman, HIT to MoDP within one month. No further progress was reported to Audit till finalization of the report. Audit recommends implementation of the recommendations of the DAC besides regularization of the extra expenditure. DP-N-276/2017-18 2.5.2 Non-receipt of stores from defaulting contractor US $ 0.361 Million.

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As per clause No. 17 of Contract Agreement No. 225/5001/IT-Gen/2009/CP-1/Proc dated 27 Jun 2009, “If the Supplier fails to deliver the stores within the period prescribed, then on the expiry of 21 days (grace period) the Purchaser shall be entitled at his option to cancel the contract without any notice and /or purchase from elsewhere stores not delivered, at risk and expense of the supplier. The Supplier shall also be liable for any loss which the Purchaser may sustain on this account but shall not be entitled to any gain on repurchase”. While examining the accounts of Heavy Rebuild Factory (T) HIT Taxila, it was observed that CA No. 225/5001/IT-Gen/2009/CP- 1/Proc dated 27 Jun 2009 valuing US$ 1,768616.82 plus 6% freight charges was concluded with M/S “PROGRESS” Ukraine for procurement of 221 different spares. The supplier refused to supply 34 outstanding items valuing US$ 360,902.84/- due to increase in cost of material & components vide its letter No. USE/Pk/568 dated 24 Mar 2017. However, neither the contact was cancelled nor risk & expense purchases were made. The irregularity was pointed out by Audit in August 2017. The executive replied that 34 items of stores were still outstanding. Firm‟s representative had suggested during meeting held on 10th April 2017 to short close the contract after recovering 30 % pre-payment against balance 34 x items from other contracts of HIT Taxila. Firm‟s suggestion was not accepted by user project. Therefore, the firm was advised to adhere to the contractual obligations and provide balance stores on priority against subject contract vide last reminder issued to firm dated 30 May 2017. Reply was not accepted as neither 34 outstanding items were provided by the supplier nor procured from elsewhere at the risk and expense of supplier. The DAC vide meeting held on 09th October, 2018 was apprised that Letter of Credit and Delivery Period have been extended up to May 2019 & March 2019 respectively with imposition of 5% LD charges and 5% Performance Bank Guarantee will be deducted from the 204

forthcoming supply. DAC directed HIT for provision of revised reply to audit and verification by audit. No further progress was intimated till finalization of the report. Audit recommends expeditious supply of the outstanding items and recovery of the LD imposed by the management. DP-N-242/2017-18 2.5.3 Blockade of public money due to non-fulfillment of contractual obligation by the firm - EURO 96,940.61

According to serial-5 of Notes of Schedule of Store of contract No. PACB/751/310308082/JF-17/0398-A/P-2, dated 28-06-2008 (AMF) Installation and Commissioning at AMF would be free of charge by the OEM or its representative along with operational acceptance after commissioning. While examining the accounts of PAC Board Kamra, it was observed that CA No. PACB/751/310308082 /JF-17/0398-A/P-2 dated 28- 06-2008 (AMF) was concluded with M/S Shaheen Aero Traders Islamabad for the provision of one Spectrum Analyzer at a total cost of Euro 96,940.61. The supplier delivered the contracted store on 28-10- 2013. However, installation and commissioning at AMF was not done by the firm. Resultantly the equipment remained un-operational for last four years. The irregularity was pointed out by audit in July 2017, the executive replied that the equipment was delivered by the firm without provision of accessory/option FSU-B4, which was subsequently delivered in Aug 2015 but could not be installed due to provision of wrong accessory. The replacement of the accessory is under process and expected in the near future. Upon the receipt of correct accessory the outstanding installation / commissioning will be completed by the supplier. Further in- lieu of outstanding commissioning of delivered store, 10% FOB payment Euro 8,588.72 was withheld by AMF. The reply of the executive was not

205

tenable because timely and free installation and commissioning was the responsibility of the firm. The DAC vide meeting held on 09th October, 2018 pended the para and directed PAC Board, Kamra to blacklist the firm and submit the progress of the case to MoDP. No further progress was intimated till finalization of the report. Audit recommends implementation of the DAC recommendations and initiation of corrective measures to avoid such lapses in future. DP-N-401/2017-18 2.5.4 Non-recovery of cost of rejected stores from firm US $ 0.099 million

According to clause 7 ( C ) of C.A No. 165/5001/IT-Gen/ 6TD-I/2013/CP-1/FE/Proc/USE-18-4-114-K/KE-13 dated 26 Jun 2013, the supplier shall replace/repair the defective/damaged stores free of cost at consignee‟s end within three months, starting from the date of defect/reject report signed. Further under clause 7 (a) para-2 of Annex E of the said Contract Agreement, “in case of failure to replace the defective stores as stipulated in the contract the supplier under takes to refund the relevant cost in the currency / currencies in which received plus freight charges”. During audit of HRF (T) for the financial year 2016-17, it was observed that a contract agreement No. 165/5001/IT-Gen/ 6TD- I/2013/CP-1/FE/Proc/USE-18-4-114-K/KE-13 dated 26 Jun 2013 valuing US$, 2,401,113.28 was concluded with M/S UKRSPECEXPORT Islamabad for procurement of different spares. During scrutiny of contract, it was observed that 28 spare parts out of 390 valuing US$. 99,832.11/- were found rejected as evident from HRF (T) letter no. 1711/T- 80UD/165/Receipt/-S dated 3 Feb 2017 and HIT BMP Dte (CP Br) letter no. 165/5001/IT-Gen/6TD-I/2013/CP-1/ /Proc dated 22 Mar 2017.

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However, the rejected items were neither replaced by the supplier nor cost was recovered. This resulted into non-recovery of cost of rejected stores of US$ 99,832.11. The irregularity was pointed out by Audit in August 2017. The executive stated that firm had already been asked for replacement of rejected items. The para was discussed by DAC in its meeting held on 09th October, 2018. DAC was apprised that the firm is agreed for the replacement of store and 2 out of 28 items have been replaced and remaining store will be replaced by the end of 2018. DAC pended the draft para till completion of the contract/replacement of the rejected stores. No further progress was intimated till finalization of the report. Audit recommends early replacement or recovery of the cost of rejected stores from the firms besides adoption of remedial measures to avoid such lapses in future. DP-N-300/2017-18 2.5.5 Non-replacement of rejected store / non-cancellation of contract on firm’s risk & expense - Rs 9.234 (M) & US $ 0.0766 (M)

According to para 2 of Annexure-C to Clause No. 10 (2) of Contract No. 27/2015-16/5041/IT-3004/CP/HRF(M)/Proc dated 31-03- 2016 "In case of failure to replace the defective store free of cost within two months, firm will refund the relevant cost on FOR Taxila in the currency / currencies in which received and the purchaser shall have right to purchase the vehicle declared defective at their risk and expense."

Further, according to Clause No. 18.2 of Contract No. 69/2015-16/5041/IT-3010/CP/HRF(M)/Proc dated 19-05-2016 "Replacement against rejected / defective stores will be provided by the supplier free of cost within two months of detecting the discrepancies / issue of inspection report." 207

While examining the accounts of Marketing & Procurement (M&P) Directorate HIT Taxila, it was observed that 1,056 units of "Wheel Solid" for rebuild of APCM 113 delivered by the firm concerned i.e., M/s Paradigm Technologies International Islamabad against the aforementioned contracts were checked, inspected by the user and rejected as evident from C.P Branch letter No. 69/14-15/5041/IT- 3051/CP/HRF (M)/Proc dated 04-08-2017. The firm failed to replace the defective / rejected stores valuing Rs. 9,233,600 & USD 76,664 within the prescribed period as mentioned in the above cited contract clause. The amount of objected stores needed to be recovered / refunded to Government. The irregularity was pointed out by Audit in October 2017. The executive stated that firm would be approached for replacement of rejected stores. Reply was not acceptable as it did not justify the delay in replacement of the rejected stores as per contract clause. The para was reported to Ministry of Defence Production on 15th August, 2018, The DAC was convened by the PAO on 4th January 2019. However, minutes of the meeting could not be finalized till meeting of external QCC. Audit recommends early replacement of rejected stores and adoption of remedial measures to avoid such lapses in future. DP-N-40/2018-19 2.5.6 Non-replacement of rejected store. US $ 0.080 Million

As per Para 2 Annexure-B, DPL-15 of Purchase Procedure (Revised 2002) the supplier undertakes that “in case of failure of supplier to replace the defective stores free of cost within three months of reporting by the consignees, we will refund the relevant cost and the purchaser shall have the right to purchase the stores declared defective at his risk and expense from elsewhere”.

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While examining the accounts of Revolving Fund PAC Board Kamra, it was observed that an amount of US $ 80,072.23 was paid to contractors against the supply of store which was found defective by the inspecting authority. However, replacement of same was not made despite passage of considerable time. The irregularity was pointed out by Audit in November 2017. The executives replied that contracts were concluded with various firms/suppliers. All stores except the rejected one was delivered. Suppliers were being regularly approached to get the contracts materialized. Reply was not agreed as process regarding replacement of rejected store needed to be completed immediately which was not done. Therefore, payments already received need to be recovered in the light of supplier‟s warranty. The para was reported to Ministry of Defence Production on 11th July 2018. The DAC was convened by the PAO on 4th January 2019. However, minutes of the meeting could not be finalized till meeting of external QCC. Audit recommends early supply of rejected stores and adoption of remedial measures to avoid such lapses in future. DP-N-548/2017-18 2.5.7 Non-recovery of tools/tool holders issued to contractor as advance samples - Rs. 3.696 Million.

According to Rule 1 (b) of FR Vol-II, 1986 “the Government servant shall also be held personally responsible for any loss sustained by Government through fraud or negligence on his part. While examining the accounts of APC Factory HIT Taxila, it was observed that contract No. 213/10/5061/IT-Gen/CP/P-881/Proc dated 20-06-2010 was concluded with M/s. Gantner Pakistan Lahore for procurement of tools and tool holders for HBM TC-40 CNC machine. Against this contract, 21 sample tools/tool holders worth U.S $ 35,209 were issued to the said contractor on demand as evident from BMP Dte 209

letter No. 213/10/5061/IT-Gen/CP/APC/Proc dated 19-07-2013. The said samples have however, not been returned by the firm concerned even after lapse of a considerable period. The omission resulted into a loss of Rs. 3,696,945/- (US $ 35,209x@Rs. 105/each). The irregularity was pointed out by Audit in June 2017. The executive authorities stated that unserviceable samples were issued to firm, which was being approached to return the same. The executive‟s reply was not convincing because the firm vide letter dated 27-07-13 refused to return the samples on the plea that these were consumed. The para was reported to Ministry of Defence Production on 31st July, 2018. The DAC was convened by the PAO on 4th January 2019. However, minutes of the meeting could not be finalized till meeting of external QCC. Audit recommends recovery of cost of the sample and its verification by Audit. DP-N-32/2018-19

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Annexure-I

MefDAC Paras (DGADS North) 2017-18 and 2018-19

Pakistan Army

(Rs. In million) S DP Year Unit / Subject Amount No. No. Formation 1. 99 2017-18 MF Bolan Un-authorized purchase of 1.118 tractors and issuance to military farm bolan, Okara over & above authorization 2. 100 2017-18 MF Bolan Un-authorized payment to 7.476 contractor 3. 101 2017-18 CMH Sialkot Un-authorized conclusion of 20.732 contract 4. 102 2017-18 CMH Sialkot Loss to state due to less 6.147 recovery of income tax 5. 103 2017-18 CMH Okara Less deduction of income tax 1.262

6. 104 2017-18 CMH Okara Fixation of pay on last pay 1.167 drawn instead of initial pay scale on re- employment 7. 105 2017-18 CMH Okara Advance payment made to 8.920 contractor 8. 119 2017-18 ACE (A) 10 Un-authorized conclusion of 59.816 Corps contract Rawalpindi 9. 120 2017-18 GE (Const-II) Un-authorized construction 303.878 Rawalpindi work

10. 124 2017-18 GE (A)-II Un-authorized advance 51.950 Gujranwala payment 11. 127 2017-18 Station HQr Non surrender of budget 1.760 Tarbela 12. 131 2017-18 MF Okara Irregular payment to 391.040 contractor 13. 132 2017-18 701 Regt Premature overhauling of 2.150 W/Shop Okara vehicles

14. 133 2017-18 GE (A)Svs Un-authorized release of 101.491 Mangla advance payment 211

15. 141 2017-18 MF Payment to contractor without 14.357 Gujranwala actual execution of work

16. 142 2017-18 MCE Risalpur Non-recovery of government 2.441 charges from cadets 17. 146 2017-18 GE(A) Kohat Overpayment to contractor 5.817 18. 147 2017-18 CMH Multan Irregular purchase made 21.029 violating policy 19. 154 2017-18 MF Jhelum Non-recovery of dues on 21.230 account of dairy produce (credit, cash and coupons) 20. 155 2017-18 GE Const-II Irregular expenditure on 2425.000 Rawalpindi operational and emergency works 21. 182 2017-18 GE (Svs) Un-authorized payment to 3.150 Sialkot contractor 22. 183 2017-18 GE (A)-II Non-production of sales tax 4.032 Gujranwala invoice 23. 184 2017-18 GE (A) Jhelum Overpayment to contractor 2.197 due to taking excess area of an item of work 24. 185 2017-18 GE JSHQ Un-authorized conclusion of 24.154 Chaklala contracts in piece meal 25. 187 2017-18 DRO Sahiwal Violation of PPRA rules 220.989 26. 200 2017-18 GE (A) Jhelum Un-authorized expenditure on 267.908 construction works 27. 201 2017-18 GE (A-1) Un-authorized expenditure by 20.384 Rawalpindi splitting 28. 212 2017-18 GE(Army) Irregular conclusion of 70.915 Abbottabad contract in piecemeal 29. 214 2017-18 District Excess consumption of 8.215 Remount ration item Office Sahiwal 30. 221 2017-18 GE Un-authorized expenditure on 1114.028 (Army)PMA construction works due to Kakul non-observance of PPRA rules 31. 222 2017-18 GE (Army) Un-authorized payment due to 1.530 Abbottabad excessive area in SM barrack

32. 224 2017-18 GE (Army)-I Un-authorized conclusion of 175.811 Rawalpindi contract due to non- advertising on PPRA website 33. 225 2017-18 GE (Army)-I Un-authorized expenditure by 11.879 Rawalpindi splitting the requirement 212

34. 226 2017-18 GE (Army) Non-recovery of electric / 1.340 Abbottabad water / sui gas charges from FC kpk recruits 35. 227 2017-18 GE (Army) Un-authorized award of 8.418 Tarbela contract 36. 228 2017-18 GE (Army) Un-justified advance payment 241.026 Tarbela made to contractor 37. 247 2017-18 GE (Army)Svs Less recovery of income tax 1.782 Peshawar

38. 259 2017-18 MF Overpayment to contractor 1.376 Gujranwala 39. 271 2017-18 GE (Army) Non-recovery of CGI sheets 1.994 Jhelum and iron from contractor 40. 272 2017-18 41 Baloch Expenditure incurred by 2.000 Regt Sialkot splitting up financial powers 41. 273 2017-18 CMH Okara Non deposit of electricity 2.797 charges 42. 274 2017-18 GE (Army) Un-authorized execution of 22.061 Abbottabad work beyond the authorized scale 43. 279 2017-18 District Mis-procurement due to 318.666 Remount violation of PPRA rules Office Sahiwal 44. 280 2017-18 Military Dairy Un-authorized local purchase 1723.173 Factory Renala of fresh milk

45. 281 2017-18 GE (Army) Loss to state due to less 111.837 Svc Mangla recovery of electricity charges from consumers 46. 282 2017-18 Remount Un-authorized conclusion of 2.272 Depot contracts Sargodha 47. 288 2017-18 GE (Army) Un-authorized conclusion of 206.035 Tarbela contracts in piecemeal 48. 290 2017-18 GE (Army)-I Loss to state due to excess 1.356 Rawalpindi expenditure 49. 294 2017-18 CMH Mardan Mis-procurement of store due 5.807 to non-observance of PPRA rules 50. 295 2017-18 CAD Havelian Non deposit of cost of brass 54.441 scrap from POF Wah

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51. 296 2017-18 Military Dairy Blockage of public money due 24.800 Factory Renala to purchase and retention of furnace oil without necessity 52. 297 2017-18 Military Dairy Un-authorized issuance of 1003.463 Factory Renala cheques to the incharge of MCCs 53. 299 2017-18 GE (Army)-I Overpayment to contractor 1.406 Gujranwala due to an item of work not provided for in the drawing 54. 301 2017-18 19 CGT Co. Undue favor to 4.524 Rawalpindi owners/contractors due to hiring of old model vehicles 55. 304 2017-18 GE (Army) Un-authorized expenditure out 11.108 Svc Mangla of united nations re - imbursement account 56. 309 2017-18 GE (Army) Overpayment to contractor 1.256 Jhelum due to taking excess area of an item of work 57. 312 2017-18 GE (Army)-II Loss to state due to an un- 3.030 Gujranwala authorized item of work

58. 313 2017-18 MF Un-authorized purchase of 11.895 Gujranwala buffaloes beyond financial powers and unjustified issuance of fresh milk 59. 314 2017-18 MF Jhelum Conclusion of contracts 63.453 beyond financial power 60. 315 2017-18 PMA Kakul Un-authorized expenditure on 115.544 procurement by non- advertising on PPRA website

61. 325 2017-18 DASB Kasur Non-provision of auditable documents 62. 326 2017-18 POL Depot Non provision of lab reports to 327.192 Kharian audit regarding pol 63. 330 2017-18 GE (Army) Un-authorized release of 8.111 Svs Peshawar payment to PESCO for MES feeder 64. 333 2017-18 Station HQr Non-Production of auditable -- Multan record 65. 334 2017-18 GE (Army) Less recovery of income tax 1.288 Rawalpindi

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66. 337 2017-18 501 C/W EME Un-authorized expenditure 16.167 Rawalpindi due to holding of excess establishment 67. 338 2017-18 ACE (A) 11 Un-authorized expenditure in 16.412 Corps piece meal Peshawar 68. 342 2017-18 GE (A) Svs Un-authorized payment for 1.716 Peshawar new construction 69. 348 2017-18 PWS Bhimber Un-authorized expenditure on 9.025 abnormal repair 70. 350 2017-18 GE (A)-I Irregular purchase of store 13.314 Kharian 71. 352 2017-18 GE (Svs) Irregular payment on account 6.838 Lahore of un - authorized work

72. 353 2017-18 GE(A) Svs Un-authorized payment 7.734 Mangla to IESCO on account of further tax. 73. 356 2017-18 CMH Un-authorized enhancement of 15.909 Gujranwala contract

74. 358 2017-18 206 Svs Sector Un-authorized expenditure 6.047 Peshawar 75. 359 2017-18 PMA Kakul Un-authorized payment of 5.276 messing allowance 76. 366 2017-18 MSD Non-replacement of rejected 3.800 Sargodha store by the firm 77. 371 2017-18 HQr 11 Corps Un-authorized payment of pay 28.653 Peshawar and allowances to the officers posted in DHA 78. 372 2017-18 ACE(Army) Un-authorized expenditure 63.970 10 Corps on abnormal repairs Rawalpindi 79. 380 2017-18 GE (A) Kohat Un-authorized advance 75.411 payment to contractor 80. 382 2017-18 GE (A) Advance payment made to 4.768 Sargodha contractor 81. 383 2017-18 GE (A) Jhelum Un-authorized expenditure on 2.142 provision of first class soft wood 82. 386 2017-18 GE (A) Svs Non recovery on account of 6.541 Peshawar excess consumption of electricity charges

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83. 387 2017-18 GE (A) Svs Un-authorized advance 40.009 Rawalpindi payment to contractor without supporting documents 84. 389 2017-18 POL Depot Un-authorized issuance of 4.453 Kharian Cantt unfit MS-87 85. 393 2017-18 Remount Un-authorized conclusion of 301.788 Depot Mona contract 86. 394 2017-18 HQ AAD Un-justified expenditure 10.000 Command without supporting documents Rawalpindi 87. 395 2017-18 ACE (A) 10 Un-authorized award of 46.790 Corps contracts Rawalpindi 88. 396 2017-18 Ordnance Non pursuance of long 0.600 Depot outstanding fraudulent Nowshera withdrawal of public money 89. 397 2017-18 GE CMH Loss due to non-conclusion of 1.136 Gujranwala contract with lowest bidder

90. 398 2017-18 Military Dairy Non recovery of risk & 4.200 Factory expense amount from Renala defaulting contractor 91. 404 2017-18 GE Const-II Non finalization of contracts 289.440 Rawalpindi within stipulated time

92. 405 2017-18 GE (A)Svs Loss to state due to allotment 1.396 Lahore Cantt of accommodation free of cost

93. 406 2017-18 GE (A)Svs Un-authorized usage of 6.963 Lahore Cantt bunglows/ MOQ,s as guest rooms without re- appropriation 94. 407 2017-18 GE (A)Svs Loss to state due to allotment 1.279 Lahore Cantt of married accommodation other than defence paid 95. 408 2017-18 Remount Irregular conclusion of 15.909 Depot contracts in piecemeal Sargodha 96. 409 2017-18 Headquarter Un-authorized expenditure on 12.269 11 Corps pol due to holding of vehicles Peshawar in excess of authorization 97. 410 2017-18 CMH Loss due to holding of surplus 27.971 Gujranwala staff

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98. 411 2017-18 GE (A) Un-authorized payment of 9.784 Sargodha adjustment charges to SNGPL in addition to monthly bill 99. 415 2017-18 GE (A) Extra expenditure due to 4.657 Tarbela provision of expensive specification in SM barrack 100. 416 2017-18 GE (A) Non-accountal of store 2.594 Abbottabad arranged by the contractor 101. 417 2017-18 District Advance payment to 176.669 Remount contractor & non-production Office of auditable documents Sahiwal 102. 419 2017-18 (ACE) A 11 Non-deposit of bank guarantee 55.261 Corps by the contractors Peshawar, 103. 420 2017-18 GE (A)Svs Un-authorized release of final 16.472 Peshawar, payments to contractors before completion of works 104. 424 2017-18 GE (A) Non-recovery of electric 4.118 Abbottabad charges from army unit 105. 425 2017-18 GE (A) Multan Overpayment to contractor 4.317

106. 428 2017-18 MF Sargodha, Casualties of animals caused 6.200 due to negligence of farm authorities 107. 430 2017-18 Remount Overpayment to contractor 2.420 Depot due to excess quantity of an Sargodha, item of work 108. 431 2017-18 GE (A-I) Un –due benefit to contractors 1.225 Okara 109. 433 2017-18 HQ 30 Corps Non observance of public 10.000 Gujranwala, procurement rules 110. 434 2017-18 HQ AAD Irregular payment made 1.300 Command through cash instead of Rawalpindi, cheques 111. 435 2017-18 Military Dairy Un-authorized local purchase 1.440 Factory Okara of machines in violation of pp. rules 112. 437 2017-18 MF Loss to state due to casualties 1.400 Gujranwala of animals caused due to negligence of farm authorities 113. 440 2017-18 GE (A-I) Un-authorized local purchase 27.538 Gujranwala of store

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114. 441 2017-18 GE(A) II Overpayment to contractor 1.400 Okara 115. 442 2017-18 HQ 30 Corps Loss to state due to allotment 2.208 Gujranwala of accommodation free of cost

116. 443 2017-18 HQ 30 Corps Non deposit of rent into govt. 56.799 Gujranwala treasury 117. 445 2017-18 MF Okara Un-authorized conclusion of 22.900 contract for supply of loose white bhoosa 118. 447 2017-18 HQ 12 Div Non recovery of house rent 0.903 Murree allowance 119. 452 2017-18 GE(A) Jhelum Non recovery of outstanding 4.591 electricity charges

120. 454 2017-18 702 PWS Infructuous expenditure on 5.501 Bhimber replacement of meters 121. 456 2017-18 Punjab Loss to state due to non- 5.156 Regimental deposit of rent of commercial Centre projects Mardan 122. 466 2017-18 MF Sargodha Wasteful expenditure on dry 8.719 animals during the period July 2015 to June, 2016 123. 472 2017-18 POL depot Un-authorized charge off pol 2.950 Kharian leaked from packed stock

124. 474 2017-18 HQ AAD Un-authorized payment of kit 1.472 Command items Rawalpindi 125. 475 2017-18 CMT & SD Mis-procurement due to non- 7.271 Golra observance of public Rawalpindi, procurement rules 126. 478 2017-18 Additional Less recovery of income tax 1.738 Garrison from non-filers Engineer (A) Risalpur 127. 479 2017-18 Garrison Non-accounting of store 4.966 Engineer arranged by the contractor (Army) Peshawar 128. 484 2017-18 702 PWS Non-accounting of store 1.141 Bhimber arranged by the contractor

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129. 485 2017-18 GE (A)-I Un-due benefit to contractor 1.789 Kharian due to change of specifications

130. 487 2017-18 HQ Signal Less recovery of income tax 3.743 Training Centre & Records Kohat 131. 488 2017-18 HQ 12 Div Un-authorized payment of 2.757 Murree HMT charges 132. 489 2017-18 Garrison Non-accounting of store 42.903 Engineer arranged by the contractor (Const-I) Rawalpindi 133. 494 2017-18 11 Corps Loss to state due to less 11.805 Peshawar deposit of government share against commercial projects 134. 495 2017-18 Remount Un-authorized conclusion of 16.081 Depot Mona contract 135. 496 2017-18 Ordnance Mis-procurement of store due 7.671 Depot to non-advertisement in Nowshera newspapers 136. 497 2017-18 Military Farm Un-authorized conclusion of 3.000 Khyber Okara contract on lump sum basis

137. 501 2017-18 Garrison Overpayment to contractor for 5.590 Engineer applying contractor‟s (Const-I) percentage on market rate of Rawalpindi items 138. 503 2017-18 Garrison Overpayment to contractor 2.317 Engineer due to conclusion of contracts Tarbela at higher percentages 139. 504 2017-18 Garrison Non recovery of outstanding 22.865 Engineer (A) amount Hospital Rawalpindi 140. 512 2017-18 701 Pak Un-authorized splitting of 35.202 Works Section necessity Muzzafarabad 141. 513 2017-18 Para Training Un-authorized sanction of 42.800 School (PTS) expenditure beyond financial Peshawar power, 142. 515 2017-18 Headquarter Loss to state due to non- 14.905 11 Corps observance of revenue rates Peshawar issued by FBR 219

143. 516 2017-18 Remount Un-authorized conclusion of 28.238 Depot works contracts without Sargodha adopting MES schedule of rates 144. 521 2017-18 Garrison Less recovery of income tax 34.680 Engineer from non-filers (Army) Construction Kakul 145. 523 2017-18 Garrison Un-authorized expenditure on 71.487 Engineer (A) construction of soldier flats by Construction– splitting up of work II Rawalpindi 146. 524 2017-18 GE (Army)-II Non finalization of contract 6.772 Lahore agreement

147. 525 2017-18 Garrison Infructuous expenditure on 2.000 Engineer account of low power factor (Army) penalty Tarbela 148. 526 2017-18 477 Army Un-justified issuance of CRV 54.818 Survey Group in advance and release of Engineers 100% payment for entire Rawalpindi quantity, 149. 527 2017-18 MH Loss to state due to purchase 11.877 Rawalpindi of medicines at higher rates,

150. 528 2017-18 Military Farm Irregular purchase of 236 ton 7.788 Gujranwala commercially prepared concentrated cattle feed (cat-a) beyond financial powers 151. 543 2017-18 GE (Const-I) Irregular conclusion of 4.679 Rawalpindi contracts in violation of public procurement rules 152. 545 2017-18 Garrison Non accounting of stores 84.844 Engineer (A) arranged by the contractor, Construction Kakul 153. 549 2017-18 Garrison Overpayment to contractor 1.423 Engineer (A) Multan 154. 550 2017-18 702 PWS Non-recovery from 1.858 Bhimber contractors

220

155. 555 2017-18 Military Dairy Non retention of remaining 9.069 Farm Renala amount deducted from contractor 156. 556 2017-18 Military Farm Un-justified payment to 4.738 Bolan Okara WAPDA against well meter

157. 557 2017-18 Military Farm Un-authorized conclusion of 5.948 Sialkot contract for supply of 195 ton commercially prepared concentrated cattle feed (CAT- B) 158. 558 2017-18 Military Farm Un-authorized payment out of 8.894 Lahore normal budget 159. 562 2017-18 Director Award of contracts in 6.170 Remount violation of public Officer procurement rules (D.R.O) Sahiwal 160. 566 2017-18 Military Farm Loss to state due to purchase 12.399 Gujranwala of un-authorized dry ration items 161. 569 2017-18 GE (Cont-I) Un-authorized conclusion of 199.323 Rawalpindi contract 162. 571 2017-18 Garrison Un-authorized expenditure on 58.800 Engineer provision of elevators (Const-I) Rawalpindi 163. 572 2017-18 Garrison Un-authorized conclusion of 314.534 Engineer (A) contract Const-I Rawalpindi 164. 581 2017-18 RSD ASC Procurement of stores in 32.689 Peshawar violation of public procurement rules 165. 589 2017-18 Garrison Overpayment to contractor for 1.747 Engineer (A)- an item of work not provided I, Kharian in drawing 166. 590 2017-18 Garrison Unauthorized award of 13.027 Engineer (A) contract Services Peshawar 167. 591 2017-18 Garrison Un-authorized expenditure 20.375 Engineer (A) due to execution of special Construction work Kakul 221

168. 592 2017-18 GE (Army) irregular expenditure out of 34.300 Peshawar Al-Mizan fund 169. 9 2018-19 GE (A) Un-authorized expenditure on 11.999 Mangla addition/alteration of government buildings 170. 11 2018-19 HQ 30 Corps Un-authorized payment to 6.380 Gujranwala officers posted at special works department 171. 17 2018-19 Military Dairy Violation of public 174.680 Factory Okara procurement rules due to conclusion of contracts by negotiation 172. 20 2018-19 Garrison Un-authorized conclusion of 11.457 Engineer contract (Army)-II Lahore 173. 25 2018-19 Military Farm UN-authorized advance 1.424 Kharian payment to contractor 174. 26 2018-19 BSD (ASC) Loss to state due to non- 1.188 Multan recovery of government dues

175. 27 2018-19 80 EME Violation of public 1.482 Battalion procurement rules Gujranwala 176. 28 2018-19 Garrison Overpayment to contractor 1.196 Engineer (A- II) Okara 177. 30 2018-19 HQ 4 Corps Non recovery of pay and 26.520 Lahore allowances from officers serving in DHA 178. 33 2018-19 09 Engineers Non-provision of auditable Battalion documents Lahore 179. 34 2018-19 Garrison Non submission of copies of 351.423 Engineer CAs to N.A.B (Army)-II Lahore 180. 46 2018-19 Garrison Overpayment to contractor 3.573 Engineer (Army)-I Lahore 181. 47 2018-19 Garrison Un-authorized execution of 3.685 Engineer work in piecemeal (Army)

222

Lahore

182. 49 2018-19 Military Dairy Un-authorized payment in 1230.052 Factory Okara cash to the incharge of MCCs

183. 52 2018-19 R.S.D ASC Loss to state due to non- 62.063 Sialkot recovery of cost of risk purchase 184. 54 2018-19 Military Non recovery of training $ 0.1062 College of charges from foreign trainees Signals Rawalpindi 185. 58 2018-19 MH Un-authorized local purchase 90.467 Rawalpindi of electro medical equipment

186. 59 2018-19 MH Un-authorized deposited of 15.199 Rawalpindi CNE service charges into unit account, 187. 61 2018-19 302 Spare Unjustified local purchase of 8.887 Depot EME store, Rawalpindi 188. 62 2018-19 Garrison Overpayment due to incorrect 1.798 Engineer (A) application of rate, Construction Kakul 189. 63 2018-19 Garrison Overpayment to the contractor 1.239 Engineer (A) Construction Kakul 190. 71 2018-19 Military Farm Infructuous expenditure on 12.500 Bolan Okara installation of milking line system at MF Lahore 191. 73 2018-19 COD Non-recovery of liquidated 43.964 Rawalpindi damages charges from the contractor / firm 192. 86 2018-19 ACE (A) 10 Un-authorized award of 59.983 corps contracts Rawalpindi 193. 106 2018-19 Garrison Un-authorized expenditure on 4.245 Engineer provision of weather shield (Army) paint in SM barracks Tarbela

223

194. 111 2018-19 SSD Okara Un-authorized payment to 4.117 HMT contractor in violation of Public Procurement Rules 2004 195. 112 2018-19 Garrison Violation of Public 225.611 Engineer Procurement Rules Okara 196. 113 2018-19 Garrison Un-authorized expenditure 2.110 Engineer due to provision of glazed tiles (Army)-I, in BQ in violation of drawing Sialkot 197. 119 2018-19 Supply & Un-authorized conclusion of 757.574 Transport contracts beyond the contract Branch Log carrying capacity of area Peshawar contractors 198. 120 2018-19 Garrison Un-authorized expenditure on 5.490 Engineer execution of works out of al- (Army) Mizan funds Construction– II Rawalpindi 199. 123 2018-19 Garrison Un-authorized retention of 2.660 Engineer MOQs without re- (Services) appropriation and non- Bahawalpur recovery of market rent from defence housing authority 200. 127 2018-19 HQ 4 Corps Loss to state due to non- 1.132 Def Coy deduction/deposit of income Lower Topa tax 201. 133 2018-19 ACE (A) 10 Un-authorized expenditure on 94.661 Corps abnormal repair Chaklala 202. 138 2018-19 Garrison Loss to state due to less 2.370 Engineer(A) quantity of scrap iron taken on Nowshera charge 203. 140 2018-19 Additional Unjustified payment to 3.545 Garrison contractor without provision Engineer of original invoices Bannu 204. 147 2018-19 Garrison Un-authorized commencement 35.727 Engineer of major works and allotment (Army) Maint- of funds II Rawalpindi 205. 152 2018-19 Garrison Un-authorized payment to 5.186 Engineer(Svc) contractor for provision of Sialkot sub-standard cable electric 224

206. 153 2018-19 701 Pak Undue favour to contractor 11.658 Works Section due to non-imposition of Muzaffarabad liquidated damages 207. 154 2018-19 Garrison Irregular utilization of 17.638 Engineer (A) allotment Maint-II Rawalpindi 208. 158 2018-19 Garrison Un-authorized expenditure 187.696 Engineer over and above the admin (Army) sanction Construction Kakul 209. 159 2018-19 502 Central Un-authorized local purchase 8.268 Workshop of store beyond financial Rawalpindi powers 210. 162 2018-19 Garrison Overpayment to contractor for 2.260 Engineer(Arm recording of redundant item y)-I Sialkot 211. 163 2018-19 Military Farm Un-authorized advance 2.290 Multan payment made to contractor

212. 166 2018-19 Garrison Un-authorized expenditure on 30.573 Engineer execution of work on private (Army)-II, drawing Bahawalpur 213. 167 2018-19 GE (A) A-II Splitting up of project and 110.523 Sialkot issue of irregular administrative sanction. 214. 170 2018-19 Garrison Irregular award of bazar 15.613 Engineer (A) supply contracts without Murree advertising on PPRA‟s website 215. 172 2018-19 Garrison Un-authorized expenditure 1.847 Engineer due to provision of tiles in (Army) GHQ office block Rawalpindi 216. 173 2018-19 Garrison Un-authorized conclusion of 29.358 Engineer contracts without (Army) Maint- advertisement II Rawalpindi 217. 174 2018-19 701 PWS Un-authorized advance 37.844 Muzzafarabad payment of electric bills

225

218. 185 2018-19 CMES (Army) Un-authorized expenditure on 2.011 Rawalpindi provision of security lights,

219. 187 2018-19 Garrison Un-authorized conclusion of 12.771 Engineer contract without (Army) advertisement, Services Mangla 220. 188 2018-19 Garrison Un-authorized conclusion of 73.921 Engineer (A) contracts in piecemeal Murree 221. 192 2018-19 701 Pak Un-authorized construction of 5.943 Works Section guest rooms under the Muzaffarabad sanction of store block – 222. 193 2018-19 Garrison Non-disposal of demolished 106.400 Engineer building/ stores through open (Army) Maint- tenders, II Rawalpindi

223. 197 2018-19 Junior Leaders Non recovery of training $0.0751 Academy charges from foreign trainees Shinkiari Rs 16337.83 Total & US $0.1813

Pakistan Air Force

(Rs. In million) S DP Year Unit/ Subject Amount No. No. Formation 224. 88 2017-18 PAF Hospital Un-necessary purchase of 27.501 Islamabad electro medical equipment‟s 225. 93 2017-18 PAF Base Un-authorized payment of 3.850 Lower Topa pay and allowances 226. 134 2017-18 PAF Base Un-authorized deposit of 14.108 Sakesar huge receipt 227. 145 2017-18 AGE(Air) Conclusion of contract by 51.402 Sakesar violating Public Procurement Rules 226

228. 278 2017-18 PAF Base Un-authorized payment of 2.129 Kohat SMA/DMA

229. 364 2017-18 PAF Hospital Non recovery of expenses 2.040 Rafiqui made against treatment of MES employees and their families 230. 467 2017-18 AGE (Air) Execution of contracts 6.875 Sakesar beyond financial powers 231. 470 2017-18 PAF Hospital Un-authorized conclusion of 1.718 Rafiqui contracts 232. 477 2017-18 Additional Un-authorized conclusion of 64.181 Garrison contracts in piecemeal Engineer (Air) Risalpur 233. 505 2017-18 Garrison Infructuous expenditure on 4.108 Engineer (Air) account of low power factor Nur khan penalty 234. 506 2017-18 Garrison Non accounting of store 16.503 Engineer (Air) arranged by contactor Base Nur khan 235. 507 2017-18 GE (Air) Nur Un-authorized expenditure 127.641 khan on account of electricity charges out of public fund against a private housing society 236. 537 2017-18 Assistant Un-authorized expenditure 1.358 Garrison on provision of additional Engineer (AGE) coat of painting Air Lower Topa 237. 551 2017-18 Additional Un-authorized expenditure 3.005 Garrison on provision of work not Engineer (AGE) provided in sanction, Air Lower Topa 238. 552 2017-18 Garrison Loss to state due to non- 1.278 Engineer (Air) disposal of inactive store Machine, Pool Organization MPO Chaklala 239. 554 2017-18 Garrison Unauthorized expenditure on 2.907 Engineer (Air) replacement of damaged Maintenance window panes in followers Islamabad quarters

227

240. 574 2017-18 PAF Base Irregular deposit of huge 531.240 Mushaf receipts into non-public fund account 241. 578 2017-18 Garrison Loss to state due to payment 1.235 Engineer (Air) of low power factor (LPF), AHQ Peshawar 242. 2 2018-19 AGE (Air) Less recovery of income tax 1.894 Lower Topa 243. 6 2018-19 AGE Less recovery of income tax 1.966 (Air)Lower Topa 244. 48 2018-19 PAF Base Loss to state due to non- 1.056 Lahore recovery of tower fee 245. 124 2018-19 Garrison Non accountal of stores 6.679 Engineer (Air) arranged by the contractors Islamabad 246. 126 2018-19 Assistant Non accountal of stores 1.458 Garrison arranged by the contractor Engineer (Air) Lower Topa 247. 160 2018-19 Assistant Non-accounting of stores 8.149 Garrison arranged by the contractor Engineer (Air) Kalabagh 248. 164 2018-19 PAF Base Un-authorized excess 160.836 Rafiqui achievement of flying hours/sorties than authorized limit 249. 182 2018-19 PAF Base Un-authorized expenditure 54.360 Murid due to holding of surplus staff 250. 183 2018-19 DW&CE (Air) Unauthorized sanction of 9.666 Chaklala expenditure out of original works- Total= 1109.143 Pakistan Navy (Rs. In million) S DP Year Unit / Subject Amount No. No. Formation 251. 89 2017-18 PNS Zafar Un-justified payment of DMA 33.620 Islamabad

228

252. 90 2017-18 PNS Hafeez Un-justified payment of DMA 4.902 Islamabad 253. 277 2017-18 GE (Navy)- Mis-procurement due to award of 41.409 Const bazar supply contracts without Islamabad advertisement in newspapers and on PPRA website 254. 588 2017-18 PNS Hafeez Un-authorized distribution of 6.494 Hospital CNE share without deduction of Islamabad cost of x-ray films and laboratory kits Total 86.425

ML&C Deptt

(Rs. In million) S.No DP Year Unit / Subject Amount . # Formation 255. 106 2017-18 CB Multan Loss to cantt fund due to less 11.600 assessment for house tax (Askari-II) 256. 107 2017-18 CB Kharian Non-fulfillment of contractual 6.923 obligation 257. 108 2017-18 CB Kharian Non-realization of pension 1.094 share from other boards 258. 109 2017-18 CB Sialkot Loss to cantt fund due to non- 1.912 recovery of property tax 259. 110 2017-18 CB Sialkot Non-realization of pension 8.245 share from other boards 260. 111 2017-18 CB Sialkot Loss to cantt fund due to mis- 3.670 management 261. 112 2017-18 CB Sialkot Non-recovery of BTS tower / 6.722 antenna fee from world call telecom Ltd 262. 114 2017-18 CB Walton Unauthorized payment to 1.500 Jung News Paper 263. 116 2017-18 CB Walton Loss to cantt fund due to non- 2.088 recovery of T.I.P Tax 264. 135 2017-18 CB Non-recovery of composition 1.384 Rawalpindi fee and development charges

229

265. 136 2017-18 CB Loss to cantonment fund due 2.071 Rawalpindi to non-assessment of commercial building

266. 137 2017-18 CB Okara Loss to government due to 3.175 non-deduction of sales tax from contractors 267. 139 2017-18 CB Havelian Loss to State due to non- 2.353 recovery of Property Tax

268. 140 2017-18 CB Okara Embezzlement Of 1.033 Cantonment Funds And Un Necessary Delay To Decide The Discipline Case

269. 143 2017-18 CB Multan Non recovery of Cantt Board 16.736 dues amounting to 270. 148 2017-18 CB Wah Overpayment due to wrong 3.145 application of rates 271. 161 2017-18 CB Walton Unauthorized approval of 30.610 Housing Scheme in haphazard way and non- recovery of TIP Tax, Conversion charges & composition Fee 272. 196 2017-18 CB Unauthorized expenditure on 31.900 Abbottabad construction works due to non-observance of public procurement rules 273. 197 2017-18 CB Unauthorized procurement of 1.916 Abbottabad Staff Car 274. 198 2017-18 CB Non recovery of Cantt Fund 14.425 Rawalpindi dues 275. 203 2017-18 CB Non recovery of Tower Fee 3.401 Abbottabad 276. 205 2017-18 CB Outstanding dues on account 34.954 Rawalpindi of Bulk Water Supply 277. 215 2017-18 CB Overpayment to contractor 3.860 Abbottabad 278. 216 2017-18 CB Non recovery of composition 6.478 Abbottabad Fee and Development Charges 279. 217 2017-18 CB Non recovery of composition 8.089 Rawalpindi fee

230

280. 229 2017-18 CB Loss to Cantt Fund due to less 3.714 Rawalpindi assessment of property tax 281. 231 2017-18 CB Non recovery of cantt fund 12.133 Rawalpindi dues from occupants of various building 282. 236 2017-18 CB Non recovery of premium / 72.476 Abbottabad development charges from change of purpose 283. 237 2017-18 CB Multan Non depositing of Half Pay 2.270 of CEO 284. 239 2017-18 CB Unauthorized construction by 7.465 Rawalpindi the owner of the building 285. 245 2017-18 CB Attock Unauthorized encroachment 7.820 of “C” Class Land 286. 249 2017-18 CB Unauthorized execution of 21.750 Abbottabad contracts of maintenance & repair 287. 267 2017-18 CB Infructuous expenditure on 19.703 Abbottabad construction of sport complex 288. 268 2017-18 CB Non recovery of withholding 3.740 Rawalpindi tax 289. 269 2017-18 CB Non recovery of Cantt Fund 4.598 Rawalpindi dues 290. 283 2017-18 CB Taxila Undue financial favour to 6.200 cattle mandi contractor due to less receipt of security deposit 291. 284 2017-18 CB DI Khan Non deduction of withholding 2.500 tax on auction 292. 285 2017-18 CB Loss to Cantt Fund due 2.414 Rawalpindi favoritism/less recovery of commercialization fee 293. 302 2017-18 CB Non recovery of premium 17.032 Rawalpindi 294. 320 2017-18 CB Non recovery of installments 2.825 Abbottabad of Pole Signs Premium from defaulting contractors 295. 335 2017-18 CB Multan Loss to Cantt Fund due to less 7.360 Assessment of House Tax 296. 344 2017-18 CB Kohat Unauthorized change of 5.842 purpose due to use of residential property as commercial 297. 345 2017-18 CB DI Khan Non recovery of house tax 1.163 231

298. 354 2017-18 CB Mardan Loss to cantt fund due to 1.800 encroachment of land

299. 355 2017-18 CB Walton Loss to state due to 6.240 unauthorized encroachment of government land

300. 369 2017-18 CB Risalpur Loss to Cantt Fund due to 0.801 illegal allotment of Cantt Flat

301. 403 2017-18 CB Peshawar Non recovery of income tax 4.720 from owners of shops

302. 412 2017-18 CB Peshawar Loss to Cantonment Fund due 13.173 to Non recovery of rent from owners of shops

303. 413 2017-18 CB Multan Non assessment of property 2.100 tax 304. 414 2017-18 CB Multan Nonreflecting of the Cantt Fund in Annual Accounts 305. 460 2017-18 CB Peshawar Loss to Cantonment Fund due 4.910 to non-recovery of House Tax 306. 462 2017-18 CB Sargodha Loss to Cantt Fund due to 13.980 non-imposition of composition fee 307. 471 2017-18 CB Sargodha Loss to Cantt Fund due to 5.203 non-recovery of composition Fee and Cantt Board dues 308. 473 2017-18 CB Kohat Unauthorized change of 6.879 purpose due to use of residential property as commercial 309. 493 2017-18 CB Kohat Unauthorized change of 7.109 purpose due to use of residential property as commercial 310. 510 2017-18 CB D.I Khan Non observance of Public 4.592 Procurement Rules 311. 518 2017-18 CB Kamra Non recovery of premium on 3.100 allotment of commercial building hall 312. 519 2017-18 CB Lahore Less recovery of composition 3.414 fee 232

313. 530 2017-18 CB Lahore Non recovery of surcharge 6.359 from purchaser on Late payment 314. 531 2017-18 CB Wah Non recovery of 22.904 premium/development charges and composition fee for unauthorized cant fund 315. 532 2017-18 CB Lahore Non realization of pension 6.811 share from other Cantt Boards 316. 541 2017-18 CB Murree Non-recovery of property tax. 3.655 House Tax and Rent from the owners of properties 317. 542 2017-18 CB Multan Loss due to non-recovery of 5.650 property tax of Bomanjee commercial plaza 318. 559 2017-18 CB Walton Non imposition of 8.008 composition fee 319. 560 2017-18 CB Less recovery of account of 12.277 Rawalpindi income tax 320. 561 2017-18 CB Chaklala Loss to Cantt Fund due non- 4.231 recovery of outstanding hoardings charges 321. 564 2017-18 CB Multan Non recovery of hoarding 34.700 charges 322. 577 2017-18 CB Unauthorized reduction of 31.796 Gujranwala land in GLR worth 323. 595 2017-18 CB Wah Non recovery of pension 12.942 share from various Cantt Boards 324. 596 2017-18 CB Chaklala Non recovery of composition 2.629 fee 325. 3 2018-19 CB Wah Loss to Cantonment fund due 3.413 to non-recovery of House Tax 326. 8 2018-19 CB Peshawar Loss to Cantt Fund due to 5.545 non-imposition of composition fees 327. 10 2018-19 CB Lahore Unauthorized purchase of 151.720 vehicles 328. 14 2018-19 CB Lahore Unauthorized local purchase 1.050 of Suzuki Pick Up 329. 19 2018-19 CB Nowshera Non recovery of composition 5.034 fee against unauthorized construction

233

330. 22 2018-19 CB Unauthorized payment to 2.377 Bahawalpur contractor 331. 31 2018-19 CB Lahore Loss to Cantt Fund due to 23.102 non-finalization of rent agreement 332. 37 2018-19 CB Nowshera Loss to Cantt Fund due to 1.502 non-recovery of Tower / Antenna fee from cellular companies 333. 38 2018-19 CB Nowshera Non recovery of rent from 13.078 SNGPL- 334. 42 2018-19 CB Chaklala Non recovery of BTS Tower 2.500 fee 335. 43 2018-19 CB Mardan Non recovery of Balance 9.380 Premium on auction of shops 336. 55 2018-19 CB Nowshera Non recover of income tax on 2.395 account of auction 337. 56 2018-19 CB Nowshera Non recovery of outstanding 2.778 amount of loan from other officers 338. 72 2018-19 CB Nowshera Loss of revenue due to non- 26.075 reaction of shops 339. 74 2018-19 CB Jhelum Non recovery of outstanding 1.383 amount of hoarding charges 340. 80 2018-19 CB Chaklala Encroachment of Govt / Cantt 2.155 Land 341. 81 2018-19 CB Nowshera Non recovery of auction dues 7.831 from contractors 342. 83 2018-19 CB Unauthorized encroachment 4.301 Abbottabad over Cantt Board Land 343. 89 2018-19 CB Sargodha Loss due to less deduction of 1.891 Income Tax 344. 91 2018-19 CB Nowshera Non recovery of balance 2.780 amount of conservancy charges from Army authorities 345. 92 2018-19 CB Chaklala Non recovery of rent from the 1.090 tenets of Cant Market / Old dispensary shops 346. 94 2018-19 CB Chaklala Non recovery of balance 1.000 amount of contract for collection rights slaughtering fee

234

347. 96 2018-19 CB Mardan Non deposit the rent realized 37.000 by TMA from shops constructed on encroached land 348. 97 2018-19 CB Mardan Non deposit deduction of 6.984 withholding Tax on auction of shops (ground floor

349. 99 2018-19 CB Dera Loss to Cantt Fund due to 4.572 Ismail Khan non-recovery of conservancy charges 350. 101 2018-19 CB Chaklala Unauthorized payment 22.693 without supporting documents 351. 102 2018-19 CB Chaklala Non recovery of income tax 3.000 on auction of collection rights of slaughter house 352. 114 2018-19 CB Loss due to non-finalization 6.000 Gujranwala of assessment of commercial buildings for property tax 353. 117 2018-19 CB D.I Khan Non deduction / remittance of 0.860 withholding tax on auction of Adda collection contract 354. 125 2018-19 CB Nowshera Non recovery of premium and 962.205 development charges due to unauthorized use of residential property for commercial purposes 355. 139 2018-19 CB Undue favour due to less 6.119 Abbottabad imposition of composition charges 356. 141 2018-19 CB Risalpur Loss to cantt fund due to non- 2.453 recovery of cantt fund dues 357. 165 2018-19 CB Violation of public 0.697 Bahawalpur procurement rules Rs. 4.80 million and non-deposit of sales tax 358. 168 2018-19 CB Mardan Loss to cantt fund due to 3.600 encroachment of class „c‟ land 359. 181 2018-19 CB Loss to cantt fund due to non- 1.103 Rawalpindi imposition of composition fee 360. 190 2018-19 CB Loss to cantt fund due to non- 2.586 Rawalpindi imposition of composition 235

fees,

361. 191 2018-19 CB Chaklala Non recovery of income tax 1.520 on auction of collection rights of slaughter house, 362. 198 2018-19 CB Risalpur Loss to cantt fund due to un- 25.657 authorized commercial use of residential property 363. 199 2018-19 CB Risalpur Non recovery of premium and 15.520 development charges due to unauthorized use of residential property for commercial purposes 364. 200 2018-19 CB Unauthorized expenditure on 5.970 Bahawalpur uplift of a public park by cantt board without transfer of its land by TMA Total 1582.068

MAG (Rs. In million) S.No DP Year Unit / Subject Amount . # Formation 365. 150 2017-18 CMA (RC) Irregular sanctioning of 33.120 Rawalpindi expenditure 366. 152 2017-18 CMA (RC) Mis-procurement due to 16.454 Rawalpindi non-observance of PPRA rules 367. 160 2017-18 CMA (RC) Overpayment to contractor 9.017 Rawalpindi 368. 165 2017-18 CMA (RC) Loss to state due to non- 2.125 Rawalpindi acceptance of lowest bid 369. 166 2017-18 CMA (RC) Unauthorized payment to 5.831 Rawalpindi contractor at exorbitant rates 370. 167 2017-18 CMA (RC) Unauthorized payment to 1.125 Rawalpindi contractor at exorbitant rates

236

371. 168 2017-18 CMA (RC) Invalid sanctioning of 14.847 Rawalpindi expenditure 372. 169 2017-18 CMA (RC) Irregular expenditure beyond 5.000 Rawalpindi financial powers 373. 170 2017-18 CMA (RC) Un-authorized expenditure 3.481 Rawalpindi on procurement of electro medical equipment for up gradation purpose out of al- Mizan fund 374. 171 2017-18 CMA (RC) Un authorized expenditure 100.000 Rawalpindi on repair/maintenance works due to non-observance of PPRA rules 375. 172 2017-18 CMA (RC) Un authorized payment to 10.056 Rawalpindi contractor due to acceptance of higher rates 376. 173 2017-18 CMA (PC) Over payment to contractor 2.000 Peshawar on account of repair and maintenance of bridges 377. 174 2017-18 CMA (PC) Unauthorized expenditure on 1.021 Peshawar repair & maintenance of civil work & provision of MES store 378. 176 2017-18 CMA (PC) Over payment to contractor 10.000 Peshawar on account of repair and maintenance of kacha track (2xkm) at north Waziristan agency 379. 178 2017-18 CMA (RC) Irregular procurement of 5.105 Rawalpindi store 380. 179 2017-18 CMA (PC) Over payment on account of 14.716 Peshawar repair and maintenance of 10 x bridges and 8 x fences walls at south Waziristan agency 381. 189 2017-18 CMA (MC) Un-authorized expenditure 40.561 Multan 382. 190 2017-18 CMA (RC) Un-authorized payment to 35.462 Rawalpindi contractor 383. 191 2017-18 CMA (RC) Non recovery of income tax 10.000 Rawalpindi 384. 192 2017-18 CMA (RC) Un-authorized release of 24.353 Rawalpindi fund 237

385. 193 2017-18 CMA (RC) Undue favour to contractor 1.132 Rawalpindi 386. 194 2017-18 CMA (RC) Over payment to contractor 1.216 Rawalpindi 387. 209 2017-18 CMA (RC) Non deduction of income tax 20.000 Peshawar on repair / maintenance 388. 210 2017-18 CMA (PC) Loss to state due to non- 89.750 Peshawar acceptance of the lowest bid for repair and maintenance of check posts 389. 211 2017-18 CMA (RC) Un-authorized payment of US $ Rawalpindi DA and cost of air tickets 0.1452 out of Al-Mizan fund 390. 220 2017-18 CMA (PC) Non deduction of income tax 1.171 Peshawar on supply of goods 391. 250 2017-18 CMA (RC) Un-authorized expenditure 2.000 Rawalpindi on procurement of gift 392. 251 2017-18 CMA (RC) Un-authorized expenditure 66.989 Rawalpindi on procurement of cover outer in piecemeal 393. 252 2017-18 CMA (RC) Irregular expenditure on 124.586 Rawalpindi procurement of stores beyond financial powers 394. 254 2017-18 CMA (RC) Un authorized expenditure 29.350 Rawalpindi on Pak day parade civil works due to non- observance PPRA rules 395. 255 2017-18 CMA (RC) Mis-procurement beyond 42.892 Rawalpindi financial powers 396. 256 2017-18 CMA (RC) Mis-procurement of civil 39.331 Rawalpindi works material 397. 257 2017-18 CMA (RC) Un-authorized expenditure 185.854 Rawalpindi on procurement of electro medical equipment out of al- Mizan fund 398. 260 2017-18 CMA (PC) Non deduction of income tax 3.000 Peshawar 399. 262 2017-18 CMA (RC) Un-authorized expenditure 10.141 Rawalpindi out of Al-Mizan fund 400. 263 2017-18 CMA (RC) Irregular expenditure on 8.770 Rawalpindi procurement out of Al- Mizan fund 401. 264 2017-18 CMA (RC) Unauthorized expenditure in 19.000

238

Rawalpindi piecemeal

402. 265 2017-18 CMA (RC) Non-Observance of PPRA 41.700 Rawalpindi Rules 403. 266 2017-18 CMA (RC) Un-authorized local 21.536 Rawalpindi purchase of stores 404. 286 2017-18 CMA (PC) Un authorized expenditure 20.000 Peshawar due to non-observance of PPRA rules 405. 287 2017-18 CMA (PC) Un authorized expenditure 2.000 Peshawar due to non-observance of PPRA rules 406. 308 2017-18 CMA (PC) Doubtful payment on 13.000 Peshawar account of development of swimming pool at Punjab regiment Centre Mardan Total= 1087.692 US $ 0.1452

ISO’s

(Rs. In million) S DP Year Unit / Subject Amount No. No. Formation

407. 130 2017-18 Army Cardiac Less deduction of income 2.810 Centre Lahore tax 408. 362 2017-18 AFPGMI Un-authorized expenditure 3.000 Rawalpindi due to non-observance of PPRA rules 409. 374 2017-18 JSHQ Non deduction of HRA 1.641 Chaklala 410. 533 2017-18 AFIT Un-authorized procurement 27.165 Rawalpindi of electro medical equipment 411. 583 2017-18 AFIT Excess procurement of 19.785 Rawalpindi medical store 412. 7 2018-19 AFIT Non-recovery of income tax 2.119 Rawalpindi from CNE share paid to various individuals 413. 143 2018-19 AFIC/ NIHD Un-authorized local 6.000 Rawalpindi purchase of motorized

239

electric beds in violation of PPRA rules 414. 145 2018-19 AFIC Unauthorized retention of 3.741 Rawalpindi diesel 415. 161 2018-19 AFIC/ NIHD Un-authorized procurement 204.031 Rawalpindi of human resource (staff)/ non-production of hiring/ expenditure record 416. 169 2018-19 AFIMH, Loss to state due to non- 3.761 Rawalpindi conclusion of contract with successful bidder 417. 186 2018-19 AFIC Un-authorized receipt of 5.487 Rawalpindi CNE patients share 418. 202 2018-19 AFIC / NIHD Non-recovery of 13.020 Rawalpindi outstanding medical treatment charges from panel departments Total= 292.56

MODP (Rs. In million) S DP Year Unit / Subject Amount No. No. Formation 419. 87 2017-18 DP(Air) Non conclusion of contract 10.242 Chaklala at risk and expense of defaulting firm 420. 96 2017-18 DGP (Army) Non deposit of un-spent $ 0.2073 Rawalpindi balance into government treasury 421. 218 2017-18 HRF (T) HIT Non-recovery of cost of $0.0915 Taxila rejected stores from firm 422. 219 2017-18 GE JSHQ Un-authorized expenditure 8.171 Chaklala without prior approval of competent authority 423. 238 2017-18 GE (DP) ARF Loss to state due to non- 5.136 Kamra recovery of rent on account of shops / cabins 424. 241 2017-18 HRF (T) HIT Non observance of PPRA 6.275 Taxila rules

240

425. 292 2017-18 HRF (T) HIT Non-recovery of cost of Taxila rejected stores from supplier $0.314 426. 318 2017-18 PAC Board Loss to state exchequer due Kamra to ill-planning $0.0651 427. 319 2017-18 GE (DP) MRF Non recovery of outstanding 5.405 Kamra rent & allied charges 428. 327 2017-18 HRF (T) Un-authorized award of 2.670 Taxila contract

429. 328 2017-18 GE (DP) ARF Un-authorized expenditure 13.256 Kamra due to splitting of work 430. 360 2017-18 GE (DP) ARF Less deduction of income 2.917 Kamra tax

431. 361 2017-18 MRF Kamra Un-authorized 100% 39.731 advance payment to firms on provisional CRVs 432. 368 2017-18 GE Maint Non recovery of rent & 4.166 (DP) Taxila allied charges from private consumers 433. 375 2017-18 GE (DP) Un-authorized / doubtful 7.218 Maint. Taxila expenditure on account of renovation of workers married accommodation 434. 377 2017-18 Gun Factory Loss to state due to non- 5.303 Taxila receipt of store, PBG & non-imposition of LD charges 435. 400 2017-18 PAC Board Non imposition of LD Euro Kamra 0.7668 & $0.0054 436. 426 2017-18 GE DP Maint Undue favour to contractor 1.639 Taxila 437. 438 2017-18 GE DP Maint Un-authorized payment to 1.700 Taxila contractor 438. 455 2017-18 GE Maint Un-authorized expenditure 4.037 (DP) for construction of Taxila badminton court 439. 457 2017-18 MRF Kamra Un-authorized payment to 101.790 surplus officers & staff 440. 458 2017-18 ASRF Kamra Mis procurement of store 8.076

241

441. 465 2017-18 MRF Kamra Loss to state due to non- EURO replacement of rejected 0.0034 store AND US $ 0.0071 442. 469 2017-18 HRF (HIT) Non-provision of 20% US$ Taxila advance payment bank 0.4689 guarantee 443. 481 2017-18 Garrison Un-authorized conclusion of 52.482 Engineer (DP) contracts in piece meal to Taxila avoid sanction of higher authority 444. 482 2017-18 Garrison Un-authorized advance 22.700 Engineer (DP) payment to contractor Maintenance without execution of work Taxila 445. 483 2017-18 HRF (T) Loss to state due to non- 18.247 Taxila deposit of earnest money 446. 490 2017-18 Heavy Non-provision of 5% US $ Rebuild revised performance bank 0.0884 Factory (HIT) guarantee Taxila 447. 491 2017-18 Mirage Un-authorized inclusion of 33.935 Rebuild contract clause regarding Factory advance payment (MRF), Kamra 448. 492 2017-18 Directorate Mis-procurement of store 38.769 Procurement (Navy) Rawalpindi 449. 534 2017-18 HRF (T) Excess holding of staff 47.105 Taxila beyond authorization 450. 535 2017-18 Directorate Non-Replacement of US $ Procurement rejected store- 0.015 (Navy) Rawalpindi 451. 538 2017-18 PAC Hospital Mis-procurement of store 1.927 Kamra 452. 539 2017-18 Directorate Loss to state due to 6.450 Procurement procurement of store at (DP) Navy higher rates- Rawalpindi 453. 546 2017-18 HRF (T) Un-authorized / substantial 3.753 Taxila increase in quantity before award of contracts 242

454. 547 2017-18 HRFT (P-711) Blockade of public money 2.061 Taxila due to purchase of stores without emergent requirement 455. 563 2017-18 Directorate Loss to state due to 11.500 Procurement purchase of water boozers at (DP) Navy higher rates Rawalpindi 456. 575 2017-18 PAC Board Un-authorized payment to 3.385 Kamra supplier 457. 582 2017-18 PAC Board Loss to state due to non- 248.728 Kamra finalization of export related commercial projects 458. 586 2017-18 DP(Air) Un-authorized conclusion of 740.908 Rawalpindi rate running contracts 459. 587 2017-18 HRF (T) HIT Non-recovery of cost of $0.0472 Taxila rejected store from supplier - 460. 4 2018-19 Directorate Non-delivery of store after $0.637 Procurement lapse of six years and non- (Navy) cancellation of contract at Rawalpindi risk and expense 461. 5 2018-19 Garrison Avoidable extra expenditure 1.060 Engineer (DP) due to provision of richer Maintenance specification Taxila 462. 39 2018-19 Marketing & Blockage of public money 39.174 Procurement due to non-installation / (M&P) commissioning of painting Directorate & baking booth HIT Taxila 463. 77 2018-19 Marketing & Irregular conclusion of 10.970 Procurement contract without availability (M&P) of funds Directorate Taxila 464. 78 2018-19 Marketing & Loss due to non-supply of 1.056 Procurement contracted stores (M&P) Directorate 465. 88 2018-19 Garrison Over payment to contractor 2.444 Engineer (DP) due to excess provision of Maintenance premix – Taxila

243

466. 98 2018-19 Garrison Un-authorized conclusion of 8.076 Engineer contracts in piecemeal, Maint (DP) Rawalpindi 467. 104 2018-19 Garrison Avoidable extra expenditure 10.256 Engineer (DP) due to provision of false const/Svcs ceiling through deviation Taxila order 468. 105 2018-19 Garrison Unjustified advance 67.302 Engineer payments to contractors Maintenance through RARs without (DP) Chaklala execution of work 469. 108 2018-19 DP (Air) Non-production of record -- Rawalpindi requisitioned by audit

470. 175 2018-19 Directorate Loss to state due to non- 37.058 General cancellation of contracts at Procurement risk and expense of the (A), contractor Rawalpindi 471. 176 2018-19 Directorate Un-authorized procurement 156.980 & General of stores JPY- Procurement 166.117 (Army) Rawalpindi 472. 180 2018-19 Garrison Unjustified advance 3.861 Engineer payment to contractor Maintenance through RAR without (DP) Chaklala provision of cooling system, 473. 194 2018-19 Directorate Non-deposit of it/tender 0.836 General processing fee into Govt Procurement treasury (Army) Rawalpindi 474. 196 2018-19 Directorate Un-authorized release of 20.520 General advance CRVs before Procurement receipt of stores (Army) Rawalpindi 475. 203 2018-19 DGMP Non production of auditable Rawalpindi documents

476. 204 2018-19 Directorate Over payment to contractor 1.841 General due to inclusion of income Procurement tax in quoted price 244

(Army) Rawalpindi

Total= Rs 1821.317 US$ 1.947 Euro 0.7702 JPY 166.177

Annexure-II MefDAC Paras (DGADS South) 2018-19

Pakistan Army

(Rs in million) S DP No. Year Unit/Formation Subject Amount # 1 S-25 2018-19 Military Dairy Unauthorized 40.630 Farm, Quetta conclusion of contracts beyond financial power 2 S-46 2018-19 GE( Army) Non-recovery of sales 31.572 Hyderabad tax on services 3 S-62 2018-19 AGE (Army) RY Irregular sanction of 10.760 Khan abnormal repair works 4 S-78 2018-19 AGE (Army) Unjustified excess 1.275 Chorr Cantt payment to the contractor 5 S-87 2018-19 GE (Army)-I Non-recovery of allied 0.509 Quetta charges from private consumers 6 S-91 2018-19 AGE (Army) Non-recovery of Sales 10.996 Badin tax on services 7 S-96 2018-19 GE (Army)-I Irregular 115.810 Quetta administrative 245

sanction and conclusion of contracts beyond sanctioning power 8 S-175 2018-19 GE (Army)-I, Undue favoritism 95.493 Malir resulting in regular award of works 9 S-185 2018-19 GE (Army) Irregular sanction of 4.554 Kashmore abnormal repair works 10 S-190 2018-19 GE (Army) Irregular expenditure 104.666 Kashmore on account of unauthorized award of contracts 11 S-195 2018-19 GE (Army) Irregular 68.330 Karachi commencement of work after 15th April 12 S-208 2018-19 CMH Malir Non-recovery of sales 2.897 tax on services from specialists on private practice 13 S-211 2018-19 GE (Army) Non-recovery of sales 60.796 Hyderabad tax on services 14 S-212 2018-19 GE (Army) Non-recovery of GST 1.397 Hyderabad from contractors/ suppliers 15 S-214 2018-19 GE (Army) Unjustified excess 70.494 Hyderabad payment to the contractors 16 S-221 2018-19 School of Army Irregular sanction of 11.000 Air Defence, expenditure in Malir Cantt installments 17 S-228 2018-19 GE (Army) Non-recovery of Sales 4.690 Kashmore tax on services 18 S-230 2018-19 SI&T Quetta Irregular sanction of 2.000 expenditure in installments 19 S-236 2018-19 GE (Army) Unjustified advance 30.303 Hyderabad payment to the contractors 20 S-271 2018-19 AGE (Army) Execution of contract 1.260 Khuzdar Cantt without Performance guarantee 21 S-282 2018-19 GE (Army) Irregular 21.195 Kashmore administrative

246

sanction and conclusion of contracts 22 S-283 2018-19 GE (Army) Execution of contract 4.642 Kashmore without Performance guarantee Total 695.269 Pakistan Air Force

(Rs in million) S DP No. Year Formation Subject Amount # 1 S-24 2018-19 GE (Air) Unauthorized 3.140 Masroor expenditure on purchase of furniture 2 S-29 2018-19 GE(Air) Unjustified payment to 3.253 Shahbaz, SSGC Jacobabad 3 S-98 2018-19 GE(Air) Korangi Non-recovery of allied 1.707 Creek charges from private consumers 4 S-113 2018-19 Project Bholari Non-recovery of Sales 1,091.589 Tax on services 5 S-133 2018-19 GE (Air) Irregular purchase of 11.493 Korangi Creek non-scheduled furniture 6 S-137 2018-19 GE (Air) Loss of revenue on 54.996 Korangi Creek account of non- recovery of sales tax on services 7 S-176 2018-19 PAF Base Faisal Irregular, unaccounted 2.754 for expenditure 8 S-180 2018-19 GE (Air) Irregular execution of 47.278 Korangi Creek abnormal repair works 9 S-182 2018-19 PAF Base Faisal Unjustified expenditure 2.101 on non-functional APC vehicles 10 S-189 2018-19 PAF Base Faisal Unauthorized excess 3.611 procurement of store in transgression of scale 11 S-216 2018-19 GE (Air) Irregular purchase of 4.164 Samungli non-scheduled furniture 12 S-245 2018-19 GE (Air) Irregular purchase of 3.730 Masroor non-scheduled furniture 247

13 S-250 2018-19 GE (Air) Loss of revenue on 232.672 Masroor account of non- recovery of Sales tax on services 14 S-251 2018-19 GE (Air) Irregular expenditure 108.123 Masroor by split up of sanctions 15 S-254 2018-19 GE (Air) Irregular administrative 409.036 Masroor sanction and conclusion of contracts 16 S-257 2018-19 GE (Air) Unjustified invoking of 85.083 Masroor emergency clause under Para-17 DSR 1998 17 S-259 2018-19 GE (Air) Irregular expenditure 28.530 Masroor without prior administrative and technical sanction 18 S-286 2018-19 GE Air (Faisal) Non-recovery of 142.768 electrical charges from petrol pumps 19 S-289 2018-19 GE Air (Faisal)7 Loss to state on 135.363 account of unauthorized use of Air Conditioners 20 S-292 2018-19 GE Air (Faisal) Non-recovery of water 2.400 charges from Falcon Mall 21 S-295 2018-19 GE Air (Faisal) Overpayment to 0.801 contractor 22 S-296 2018-19 PAF Base Non-recovery of 3.634 (Faisal) training and medical charges from international trainees 23 S-297 2018-19 GE Air (Faisal) Irregular expenditure 5.289 without admin approval 24 S-298 2018-19 PAF Base Non-deposit of allied 1.285 (Faisal) charges into Government treasury Total 2384.800 ML&C

(Rs in million) S DP No Year Unit/Formation Subject Amount 248

# (Rs.) 1 S-51 2018-19 CB Faisal Non-recovery of 20.575 composition fees from M/s Millennium Classic Mega Mall 2 S-65 2018-19 CB Faisal Loss of revenue on 6.240 account of non- recovery of sales tax on services 3 S-67 2018-19 MEO Karachi Non-deduction of 4.503 Income Tax on disposal of surplus Defence land by auction 4 S-88 2018-19 MEO Karachi Unjustified 4.412 expenditure on account of hiring of land by MEO Karachi 5 S-108 2018-19 MEO Karachi Improper / unjustified 1,100.000 allotment of plots at throw-away price to civilian officers 6 S-120 2018-19 Karachi Cantt Loss to state due to 3.004 Board non-recovery of GST from contractors/ suppliers 7 S-129 2018-19 CB Korangi Non-recovery of rent 1.307 Creek from different parties 8 S-178 2018-19 CB Korangi Loss of revenue on 11.020 Creek account of non- recovery of Sales Tax on Services 9 S-248 2018-19 Cantonment Non-recovery of 1.685 Board Clifton outstanding dues on account of road- cutting charges 10 S-275 2018-19 Cantonment Award of contracts 3.075 Board Clifton without open tendering in violation of PPRA Rules 11 S-278 2018-19 Cantonment Award of contract 3.681 Board Clifton without open tendering in violation of PPRA Rules

249

12 S-285 2018-19 Cantonment Award of contract to 3.322 Board Malir advertising firm without open tendering in violation of PPRA Rules Total 1162.824 PAK NAVY

(Rs in million) S. DP No Year Unit/Formation Subject Amount No 1 S-28 2018-19 CDS (Navy), Blockage of 4.774 Karachi Government money due to non- disposal of surplus stores 2 S-58 2018-19 GE (Navy) Const-I, Irregular 51.998 Ormara expenditure involving splitting of contracts 3 S-82 2018-19 GE (Navy) Eastern, Non-recovery of 141.734 Karachi sales tax on services 4 S-86 2018-19 GE (Navy) Turbat Loss to 14.932 government due to less deduction of Income tax from contractors 5 S-102 2018-19 AGE (Navy) Maint. Less recovery of 2.100 Manora, Karachi Income Tax from contractor 6 S-107 2018-19 AGE (Navy) Maint. Non-recovery of 2.000 Manora Karachi Sales tax on services 7 S-121 2018-19 GE (Navy) Non-recovery of 45.915 Logistics Dockyard, Sales tax on Karachi services 8 S-122 2018-19 GE (Navy) Execution of work 8.416 Logistics Dockyard, without prior Karachi approval 9 S-136 2018-19 AGE (Navy) PNAD Irregular sanction 8.139 Maripur Karachi of abnormal repairs 250

10 S-146 2018-19 AGE (Navy) Maint. Irregular invoking 10.313 Ormara of emergency clause under Para- 17 of DSR-1998 11 S-153 2018-19 AGE (Navy) Non-recovery of 0.962 Mauripur, Karachi Sales tax on services 12 S-155 2018-19 GE (Navy) Fleet, Irregular & 9.872 Karachi unauthorized expenditure in excess of allotment 13 S-158 2018-19 GE (Navy) Fleet, Loss of revenue on 36.000 Karachi account of non- recovery of Sales Tax on Services 14 S-159 2018-19 AGE (Navy) Maint. Conclusion of 38.365 Ormara, Karachi contracts through negotiation in violation of PPRA Rules 15 S-168 2018-19 PNS Karsaz Non-deposit of 79.944 hoarding charges into Government Treasury 16 S-193 2018-19 GE (Navy) Karsaz Irregular 41.578 expenditure involving splitting of contracts 17 S-202 2018-19 GE(Navy) East Irregular 246.929 expenditure in violation of PPRA Rules 18 S-213 2018-19 PNS Qasim Unjustified 0.977 expenditure on hiring of private transport 19 S-220 2018-19 GE (Navy) Cons, Irregular purchase 1.156 Dockyard of non-scheduled furniture 20 S-238 2018-19 AGE (Navy) Maint. Irregular 37.154 Ormara, Karachi administrative sanction beyond financial powers 21 S-242 2018-19 AGE (Navy) Non-recovery of 2.235 Mehran, Karachi Sales Tax on 251

services 22 S-263 2018-19 GE (Navy) Karsaz, Award of contracts 12.260 Karachi without obtaining security deposit 23 S-294 2018-19 AGE (Navy) Irregular sanction 4.554 Mehran of abnormal repair works 24 S-83 2018-19 GE(Navy) Eastern Irregular 39.700 conclusion of contracts without authority- Rs. 29.700 m Total 842.007

252