Audit Report on the Accounts of Defence Services Audit Year 2016-17

AUDIT REPORT ON THE ACCOUNTS OF DEFENCE SERVICES AUDIT YEAR 2016-17

AUDITOR-GENERAL OF PAKISTAN

TABLE OF CONTENTS

Page ABBREVIATIONS AND ACRONYMS iii PREFACE vi EXECUTIVE SUMMARY vii AUDIT STATISTICS I. Audit Work Statistics xi II. Audit Observations Classified by Categories xi III. Outcome Statistics xii IV. Irregularities Pointed Out xiii V. Cost-Benefit Analysis xiii CHAPTER-1 Ministry of Defence

1.1 Introduction 01 1.2 Status of Compliance of PAC Directives 01

AUDIT PARAS

Pakistan Army 1.3 Recoverables / Overpayments 03 1.4 Irregular / Un-authorized Expenditure 18 1.5 Mis-procurement of stores 31 1.6 Non-production of Record 38 Military Lands and Cantonments 1.7 Recoverables / Overpayments 41 1.8 Loss to State 72 1.9 Mis-procurement of stores 75

Pakistan Air Force 1.10 Recoverables / Overpayments 76 1.11 Loss to State 83 1.12 Irregular / Unauthorized Expenditure 83 1.13 Mis-procurement of stores 86 Pakistan Navy 1.14 Recoverables / Overpayments 91 1.15 Loss to State 94 1.16 Irregular / Unauthorized Expenditure 95 1.17 Mis-procurement of stores 98 Military Accountant General 1.18 Recoverables / Overpayments 108 1.19 Irregular / Unauthorized Expenditure 109 1.20 Mis-procurement of stores 110

CHAPTER-2 Ministry of Defence Production

2.1 Introduction 112 2.2 Status of Compliance of PAC Directives 112

AUDIT PARAS 2.3 Recoverables / Overpayments 114 2.4 Loss to State 116 2.5 Irregular / Unauthorized Expenditure 118 2.6 Mis-procurement of stores 121

Annexure-I MFDAC Paras (DGADS North) 122 Annexure-II MFDAC Paras (DGADS South) 134

ABBREVIATIONS AND ACRONYMS

ACAS Assistant Chief Air Staff AGP Auditor-General of Pakistan AHQ Air Headquarters AMF Aircraft Manufacturing Factory ASRF Advance System Rebuild Factory BA (Fee) Building Application Fee BMP Dte Budget Marketing and Procurement Directorate BTS Base Trans receiver Station AWACS Air Borne Warning and Control System AOC Air Officer Commanding CBR Cantonment Board Resolution CLAR Cantonment Lands Administration Rules CMA Controller of Military Accounts CEO Cantonment Executive Officer CIMLA Cantonment Institute of Municipal and Land Administration CMH Combined Military Hospital CNE Civilian Non-Entitled CNA Controller of Naval Accounts COMSAT College of Management Science and Technology CRV Certified Receipt Voucher DAC Departmental Accounts Committee DBA Director Budget Accounts DG DP Directorate General Defence Purchase DGP (Army) Directorate General Procurement (Army) DG RV&F Director General Remount Veterinary and Farms DHA Defence Housing Authority DMA Daily Messing Allowance DP (Air / Navy) Directorate Procurement (Air / Navy) DP Draft Para DSR Defence Services Regulations EME Electrical and Mechanical Engineering E-in-C Engineer in Chief

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ESD Engineering Stores Depot FA Financial Advisor FAM Financial Audit Manual FBR Federal Board of Revenue FOB Free on Board FOR Free on Rail FR Financial Regulations GE Garrison Engineer GHQ General Headquarters GST General Sales Tax HIT Heavy Industries Taxila HRA House Rent Allowance HRF Heavy Rebuilt Factory HSR Hospital Stoppage Receipts INTOSAI International Organization of Supreme Audit Institutions JCOs Junior Commissioned Officers JSHQ Joint Staff Headquarters JSI Joint Services Instruction KARF Kamra Avionics and Radar Factory LC Letter of Credit / Local Currency LD Liquidated Damages LUMS Lahore University of Management and Sciences MEO Military Estate Office MES Military Engineering Services MFDAC Memorandum for Departmental Accounts Committee MH Military Hospital MIS Management Information System ML&C Military Lands and Cantonments MoD Ministry of Defence MoDP Ministry of Defence Production MOQs Married Officer Quarters MRF Mirage Rebuild Factory NDU National Defence University NHQ Naval Headquarters NOC No Objection Certificate NIV Not in Vocabulary

NLC National Logistics Cell NUST National University of Science and Technology OC Officer Commanding PAC Pakistan Aeronautical Complex PAF Pakistan Air Force PAO Principal Accounting Officer PESCO Peshawar Electric Supply Company PNS Pakistan Navy Ship PPRA Public Procurement Regulatory Authority QMG Quarter Master General RHQ Regional Headquarter R&E Risk and Expense RV&F Remount Veterinary and Farms SMA Special Messing Allowance SNGPL Sui Northern Gas Pipeline Limited SOP Standing Operating Procedure SRO Statutory Regularity Order STA Special Transfer Account TESCO Tribal Electric Supply Company TIP Transfer of Immovable Property TO&E Table of Organization and Equipment UA Unit Accountant UNRA United Nations Reimbursement Account WAPDA Water and Power Development Authority WTI Walton Training Institute

Preface

Articles 169 and 170 of the Constitution of Islamic Republic of Pakistan, 1973 read with Sections 8 and 12 of the Auditor- General (Functions, Powers and Terms and conditions of Service) Ordinance, 2001 require the Auditor-General of Pakistan to conduct audit of accounts of the Federation and the accounts of any authority or body established by the Federation. The Report is based on Audit of receipts and expenditure of the Defence Services (Ministry of Defence and Ministry of Defence Production) for the Financial Year 2015-16. The Directorates General Audit Defence Services conducted Audit of the accounts of Defence Services during 2016-17 on test check basis with a view to reporting significant findings to the relevant stake holders. The main body of the Audit Report includes only the systemic issues and audit findings carrying value of Rs. 1 million or more. Relatively less significant issues are listed in the Annexure-I & II of the Audit Report. The audit observations listed in Annexure-I & II shall be pursued with the Principal Accounting Officer at the DAC level and in all cases where the PAO does not initiate appropriate action, the Audit observation will be brought to the notice of the Public Accounts Committee through the next year’s Audit Report. The Audit findings indicate the need for adherence to the regularity framework besides instituting and strengthening internal controls to avoid recurrence of similar violations and irregularities. Most of the observations included in this Report have been finalized in the light of discussions in the DAC meetings. The Audit Report is submitted to the President in pursuance of Article 171 of the Constitution of Islamic Republic of Pakistan, 1973 for causing it to be laid before the Parliament.

(Rana Assad Amin) Auditor General of Pakistan Islamabad Dated:26-02-2017

Executive Summary

The Directorates General of Audit Defence Services (North and South) are Field Audit Offices (FAOs) of the Department of Auditor- General of Pakistan responsible for conducting the audit of budgetary grants of Defence Services (except Pakistan Ordnance Factories Wah) and Federal Government Educational Institutions in Cantonments & Garrisons, managed by Ministry of Defence (MoD) and Ministry of Defence Production (MoDP). Audit 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 entities which are under these Ministries but do not get allocation from the Government e.g. Cantonment Boards, Frontier Works Organization are also under the audit purview of these offices. The jurisdiction of Directorates General Audit Defence Services (North & South) has been made on geographical basis. The two Directorates conducted audit of 492 formations of MoD and 40 formations of MoDP during the audit year 2015-16. This report highlights systemic issues like huge outstanding dues in various Cantonment Boards, rampant violations of Public Procurement Rules across the formations, disregard to delegated financial powers and contractual obligations. a. Scope and objectives of Audit Out of total expenditure of the Federal Government for the financial year 2015-16, auditable expenditure under the jurisdiction of Directorates General Audit Defence Services (North and South) was Rs. 791.569 billion covering 02 PAO’s and 3620 formations. Of this, Directorates General Audit Defence Services (North and South) audited an expenditure of Rs. 306.794 billion which, in term of percentage, is 39% of the auditable expenditure. In addition, Directorates General Audit Defence Services (North and South) conducted performance audit of 02 projects and 09 special audit studies. Reports of these audits are being published separately.

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Overall audit objective was to assess compliance with financial rules, assessment and accountal of receipts, examine the issues of propriety, economy of expenditure and adequacy of internal controls. b. Recoveries at the instance of audit Recovery of Rs. 54.010 billion was pointed out during audit, out of which recovery of Rs. 1.153 billion and US $ 0.110 million was effected during year 2016-17 at the time of compilation of report. c. Audit Methodology The activities, policies, procedures and internal controls of audited organizations were reviewed for identifying risk areas, where occurrence of irregularities and misappropriation could be possible, and for devising strategy for audit scrutiny. Audit was conducted on the test-check basis with special emphasis on high monetary value and risk areas which could be prone to irregularities. Budgeted allocations made by Services Headquarters were compared and verified with the actual expenditure. d. Audit Impact (i) The issue of unauthorized use of A-I Land by Defence Services for commercial purposes has regularly been raised by Audit since 1986. However, a policy was finalized in April, 2008 but instances were noticed where Policy was being violated. Audit pointed out the issue during DACs and PACs and as a result of the persistent audit objections, a revised policy is being processed in the Ministry of Defence. The said policy is being framed in the light of issues raised by the audit from time to time. e. In view of the proactive approach of the Public Accounts Committee (PAC) and professional role of Audit, the MoD constituted various audit committees at Services Headquarters and also at lower level to comply with the observations. f. Comments on Financial and Accounting Management i. The final grant No. 26 pertaining to Ministry of Defence for financial year 2015-16 was Rs. 799,480.147 million against which

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expenditure of Rs. 791,569.416 million was incurred. Thus, showing an overall saving of Rs. 7,910.731 million. ii. The accounts of CMA (RC), Rawalpindi revealed that Rs. 214.153 million was paid for purchase of medical store in excess of the actual budget allocation for the financial year 2015-16. The case was required to be regularized from Ministry of Defence which was not done till finalization of this report. g. Comments on Internal Control and Internal Audit Department i. An elaborate structure comprising rules, regulations and procedures specifying internal checks regarding procurements, personnel payments and receipts is available in MoD, MoDP and MAG. An Internal Audit Department (Controller Local Audit, Defence Services) also exists to check irregularities and violation of rules and regulations in Defence Services. Despite existing arrangement, recurrence of irregularities was observed. ii. There is no internal audit structure available in Military Lands and Cantonments. h. The key audit findings of the report i. Recoverables of Rs. 5,021.910 million and US $ 0.214 million in 61 cases1 ii. Loss to State valuing of Rs. 3,633.644 million and US $ 0.377 Million in 08 cases 2 iii. Unauthorized Expenditure of Rs. 4,215.200 million and US $ 2.680 million in 23 cases 3 iv. Mis-procurement of Stores of Rs. 5,175.449 million in 22 cases 4 v. Non-production of Auditable Record of Rs. 36.077 million in 02 cases5

1 1.3, 1.7, 1.10, 1.14, 1.15, 1.18, 2.3 2 1.8, 1.11, 1.15, 2.4 3 1.4, 1.9, 1.12, 1.16, 1.19, 2.5 4 1.5, 1.13, 1.17, 1.20, 2.6 5 1.6

Audit Paras for the Audit Year 2015-16 involving procedural violations including Internal Control weaknesses and irregularities not considered worth reporting to the PAC are included in Annexure – I & II MFDAC. i. Recommendations (i) Policy regarding payment of HRA to Armed Forces officers availing facilities of non-standard Government accommodation be formulated expeditiously and implemented after vetting from Ministry of Housing and Works and Finance Division. (ii) Serious irregularities in procurement contracts have been noticed. Public Procurement Rules, 2004 are needed to be observed. Existing departmental rules which are inconsistence with the PP Rules should be amended accordingly. (iii) Policy issued by the Government for expenditure out of allocation for Al-Mizan was not being followed and funds were being incurred on works not covered under the policy. PAO should take necessary steps to follow Government policy while incurring expenditure from Al-Mizan funds. (iv) The unauthorized/unlawful 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. (v) The management needs to take steps to recover large amounts of Government dues pointed out in this report and fix responsibility thereof. (vi) An internal audit wing comprising qualified officers and staff should be institutionalized in Military Lands and Cantonments Department to mitigate the risk of errors / irregularities. (vii) The scope of Corps Audit Committees at services HQrs should be made more effective to fix responsibilities for violation of rules and to take remedial measures to avoid recurrence of irregularities.

Summary Tables & Charts

Table-1: Audit Work Statistics (Rs. in Million) Budget/Actual Sr # Description No Expenditure

1 Total Entities (Ministries/PAOs) in Audit 2 Jurisdiction 799,480.147 2 Total formations in audit jurisdiction 3620

3 Total Entities (Ministries/PAOs) audited 2

4 Total Formations audited 532 306,794.888

5 Audit and Inspection Reports (LTAR) 532

6 Special Audit Reports 9 -

7 Performance Audit Reports 2 -

8 Other Reports - -

Table-2: Audit Observations by Categories (Rs in Million) S # Description Amount placed under Audit Observation 1 Unsound asset management 30,641.350 2 Weak financial management 67,212.940 3 Weak internal controls 62,296.933 4 Others 6,160.937

Total 166,311.710

Table-3: Outcome Statistics (Rs. in Million) Sr Description Expenditure Civil Others Receipts Total Total last # on Works current year year acquiring Physical Assets Outlays 1 126,024.621 93,837.022 51,703.089 35,230.156 306,794.88 166,225.697 Audited Amount 2 under Audit 79,422.993 51,996.341 6,160.937 28,731.439 166,311.710 109,727.342 observation Recoverables 3 pointed out 3,394.134 23,598.517 1,262.969 25,754.880 54,010.500 34,393.970 by Audit Recoverables 4 498.749 329.265 296.356 786.966 1,911.336 1,989.801 accepted Recoverables 999.750 + 1,153.615 1,290.716 5 78.708 40.664 34.493 realized $ 0.110 + $ 0.110 + US $ 0.509

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Table-4: Irregularities Pointed Out (Rs. in Million) Amount S # Description under Audit Observation Violation of rules and regulations as well as principle of 108,800.543 1 propriety and probity Cases of fraud, embezzlement, thefts and misuse of public 2 - resources

3 Misclassification of expenditure and receipts. 1,442.959

4 Weaknesses of internal control system 47,715.700 Established recoverable and overpayments, or misappropriation 5 1,911.336 of public money

6 Non-production of record 280.235

7 Others, including cases of accidental loss, negligence etc. 6,160.937

Total 166,311.710

Table-5: Cost-Benefit Analysis (Rs. in Million)

S # Description Amount

1 Outlays audited (Item 1 of Table 3) 306,794.888

2 Expenditure on audit 275.723

3 Recoverable realized at the instance of audit 1,153.615 + US $ 0.110 4 Cost - Benefit Ratio 1 : 4

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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. 1.2 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 2015-16 discussed during its various meetings held from July, 1992 to December, 2016 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 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 03 0 0 0% 1995-96 102 09 01 08 11% 1996-97 106 104 78 26 75% 1997-98 651 05 01 04 20%

1998-99 762 762 705 57 92.52% 1999-00 443 222 85 137 38.29% 2000-01 699 85 34 51 40% 2001-02 570 12 0 12 0% 2002-03 166 166 151 15 90.96% 2003-04 112 112 90 22 80.36% 2004-05 55 55 34 21 61% 2005-06 138 121 73 48 60% 2006-07 95 35 13 22 37% 2007-08 56 56 40 16 71.43% 2008-09 39 18 0 18 0% 2009-10 Report yet not discussed 2010-11 Report yet not discussed 2011-12 Report yet not discussed 2012-13 Report yet not discussed 2013-14 69 35 11 24 31.43% 2013-14 Not yet discussed by Sub-PAC 2014-15 Report yet not discussed 2015-16 Report yet not discussed Total 4849 1941 1360 578 70.07%

Ministry of Defence fully complied with 1360 PAC‟s directives out of 1941. The Principal Accounting Officer should take necessary steps to expedite further compliance of PAC‟s directives.

Pakistan Army Audit Paras 1.3 Recoverables / Overpayments 1.3.1 Non-recovery of House Rent Allowance from Army officers living in Married Accommodation – Rs. 440.453 Million According to Rule-66 of Pay and Allowances Vol-II 1999, “Married officers not provided with Government/hired/requisitioned married accommodation shall be entitled to House Rent Allowance”. During audit, it was observed that officers of following 10 Army units were living in Government accommodations and were regularly drawing HRA in their pay and allowances, which resulted into an overpayment of Rs. 440.453 million. (Rs. in Million) S # DP No. Unit / Formation Amount 1 DP-N-243/2015-16 Pakistan Military Academy, Kakul 1.324 2 DP-N-299/2015-16 Military College, Murree 421.405 3 DP-N-282/2015-16 66 Medical Battalion, Lhr Cantt 1.324 4 DP-N-283/2015-16 HQ 30 Indep Int Brgde Lhr 2.200 5 DP-N-289/2015-16 CMH, Sargodha 2.923 6 DP-N-314/2015-16 CMH, Peshawar 4.328 7 DP-N-424/2015-16 CMH, Multan 3.939 8 DP-N-429/2015-16 502 Central Workshop, EME Rwp 1.577 9 DP-N-469/2015-16 HQ 333 Brgd, Rawalpindi 0.328 10 DP-N-19/2016-17 20-MBRL Regt Arty Bahawalpur Cantt 1.105 Total 440.453

When pointed out by Audit in January 2015, it was replied that MAG authorized HRA to all married officers living in any accommodation other than proper service accommodation vide letter dated 6th December, 2003. However, 5% of the recovery of rank pay was being made from the officers. The reply was not acceptable as the HRA was not admissible under the rule cited above. The paras were discussed by the DAC in its meetings held on 28th and 30th September, 2016 and 4th January, 2017. The DAC pended the paras till formulation of Policy on House Rent Allowance in the light of PAC‟s directives. No further progress was reported till finalization of this report. Audit stresses for recovery of HRA from Army officers. DPs-N-243, 299, 282, 283, 289, 314, 424, 429 and 469/2015-16 and DP-N-19/2016-17 1.3.2 Non-recovery of lease rent from the lessee of agriculture land – Rs. 260.042 Million According to Rule-88 of Financial Regulations Volume-I 1986, “officers entering into contracts are charged with the responsibility of making all arrangements necessary to effect a contract”. During audit, it was noticed in 02 Military Farms that agricultural land was being used by farmers on lease but its rent amounting to Rs. 260,041,820 was not recovered as transpired from the rent recovery register and trading profit and loss accounts, which needed recovery. (Rs. in Million) S # DP No. Unit / Formation Period Amount 1 DP-N-201/2015-16 Military Farm, Sargodha 2013-14 10.398 2 DP-N-27/2016-17 Military Farm, Renala 2014-15 249.644 Total 260.042

When pointed out by Audit in May and August, 2016, no reply was furnished by the executive. The paras were discussed by the DAC in its meetings held on 30th September, 2016 and 4th January, 2017. The DAC pended the para till full recovery against serial No. 01. Against serial No. 02, the DAC pended the para being subjudice. No further progress was reported till finalization of this report. Audit stresses for full recovery. DP-N-201/2015-16, DP-N-27/2016-17 1.3.3 Non-realization of proportionate share from allottees of Stud Land – Rs. 196.950 Million According to General Head Quarters QMG‟s Branch (RVF Dte) Rwp letter No. 5804/269/Rem/C, dated 1st August, 2001 those stud grantees who are in litigation against resumption order of stud land 65% of the total produce of land may be forfeited through concerned District collector from the dates of their illegal possession under the provision of clause-49(5) to lease deed 1983. While examining the accounts of District Remount Office Sahiwal, it was noticed that stud land was allotted to following allottees for a period of 10 years on animal breeding conditions. After completion of allotment period, Ministry of Defence issued orders for resumption of stud land in favour of State. The ex-grantee entered into litigation against resumption orders. The cases were decided in the favour of State for illegal occupation, 65% share of total produce amounting to Rs. 196.950 million as detailed below required recovery.

(Rs. in Million) Amount Name of Property Land of Govt. S # DP No. Unit / Grantee Name No. occupied share Formation (65%) District Chak No. Remount 2/14-L Sardar Khizar 1 23/16-17 32 square 171.600 Office Kassowal Hayat & others Sahiwal Chak 30/ 198 kanal Naib Sub 2 24/16-17 -do- 4.875 2-9 Okara 12 marlas Maqbool Ahmed Chak Maj (Rtd) 399 kanal 3 25/16-17 -do- No.30/2-R Khalid Iftikhar 14.625 16 marlas Okara Asghar & others Chak 397 kanal Muhammad 4 26/16-17 -do- No.28/2-R 15 5.850 Iqbal Okara marlas Total 196.950

When pointed out by Audit in May, 2016 it was replied that the case regarding recovery would be initiated with DCO office/Provincial Government. The matter was discussed by the DAC in its meeting held on 4th January, 2017. The DAC directed that case may be discussed with the DGADS (North) and position be explained to find the way out. No further progress was reported till finalization of this report. Audit stresses for early recovery from occupants of land. DP-N-23, 24, 25 and 26/2016-17 1.3.4 Non-recovery of training charges from foreign trainees – Rs. 91.784 Million + USD 0.179 Million According to Joint Services Instructions 4/2006, “Training charges will be recovered from foreign trainees/cadets when they are provided such facilities in various institutions of the Pakistan Armed Forces training institutions”.

During audit of below mentioned formations, it was noticed that training charges valuing Rs. 91,784,500 and USD 0.179 million against foreign trainees were lying outstanding for the period April, 2014 to August, 2015, which needed to be recovered. (Rs. in Million) S # DP No. Unit / Formation Amount 1 DP-N-199/2015-16 Pakistan Military Academy, Kakul 91.784 2 DP-N-450/2015-16 Junior Leader Academy, Shinkari US $ 0.179 91.784 Total US $ 0.179

When pointed out by Audit in July and December, 2015 it was replied that training charges of objected period in respect of foreign trainees had already been forwarded to GHQ for realization of the same from respective countries. The para was discussed by the DAC in its meeting held on 28th September, 2016. The DAC directed to recover outstanding training charges. During verification, no documentary evidence relating to recovered amount was provided to audit by both units. No further progress was reported till finalization of this report. Audit stresses that overall amount of Rs. 91.784 million and US $ 0.179 million needed recovery. DP-N-199 and 450/2015-16 1.3.5 Non-recovery of electricity and sui gas consumed beyond authorization – Rs. 52.847 Million Under Rule-81(a) of Quarter and Rents 1985, “free supply of sui gas shall be made at places where fire wood and K-II is so authorized for cooking/heating purpose as per scale given in the rule. Excess consumption shall be paid by the consumer at the supplying agency rates”.

While examining the accounts of following formations, it was noticed that a sum of Rs. 52.847 million on account of excess consumption of electricity and sui gas was lying outstanding against different consumers. (Rs. in Million) S # DP No. Unit / Formation Amount

1 DP-N-114/2016-17 GE (Army), Jhelum 1.647 2 DP-N-206/2016-17 GE (Army), Murree 51.200 Total 52.847

When pointed out by Audit in September, 2016, it was replied that objected amount would be recovered from all concerned shortly. The para was discussed by the DAC in its meeting held on 4th January, 2017. The DAC directed to convene Board of Officers, recovery be reconciled and action be finalized. No further progress was reported till finalization of this report. Audit stresses for early recovery action. DPs-N-114 and 206/2016-17 1.3.6 Non-recovery of rent and allied charges from various consumers – Rs. 19.572 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”. It was observed from the accounts of following G.E offices that rent and allied charges amounting to Rs. 19.572 million were not recovered.

(Rs. in Million) S # DP No. Unit / Formation Amount 1 DP-N-250/2015-16 GE (Army) Svcs, Okara 6.317 2 DP-N-261/2015-16 GE (Svcs), Sialkot 1.035 3 DP-N-263/2015-16 GE (Svcs), Sialkot 1.611 4 DP-N-264/2015-16 GE (Svcs), Sialkot 2.097 5 DP-N-453/2015-16 GE (Army), Abbottabad 1.385 6 DP-N-483/2015-16 AGE (Army), D.I Khan 2.314 7 DP-N-128/2016-17 AGE (Army), Attock 2.332 8 DP-N-253/2016-17 GE (Svcs), Gujranwala 1.249 9 DP-N-255/2016-17 GE (Svcs), Multan 1.232 Total 19.572

When pointed out by Audit during the year 2015-16, it was replied that partial recoveries were effected and balance would be recovered shortly but no documentary evidence was presented for audit verification regarding partial recoveries. The DAC in its meeting held on 28th September, 2016 and 4th January, 2017 directed the executives to provide documentary evidence of the recovered amount to audit and expedite the recovery of remaining amount. No further progress was reported till finalization of this report. Audit stresses for early recovery action. DPs-N-250, 261, 263, 264, 453 and 483/2015-16, DPs-N-128, 253 and 255/2016-17 1.3.7 Non-recovery of rent and allied charges – Rs. 88.752 million According to Para-442 of Defence Services Regulations for MES 1998, the GE is responsible for making demands for payment of all revenues, whether credited to Main Head VIII/X-H/XI-C or D, or compiled as deduction from expenditure, and for taking steps for its prompt realization.

It was observed from the record held with Army formations/units that a sum of Rs. 88.752 million on account of rent and allied charges was outstanding for the years 2014-15 and 2015-16. The details are as under:- (Rs. in million) S.No. Unit/Formation DP No. Amount 1 GE (Army) Services Quetta S-290 41.011 2 GE (Army) Karachi S-233 16.873 3 GE (m Army) Services Quetta S-294 10.971 4 GE (Army) Services PanoAqil S-19 5.363 5 GE (Army) Services Quetta S-287 5.209 6 GE (Army) Hyderabad S-27 3.531 7 AGE (Army) Rahim Yar Khan S-79 1.669 8 GE (Army) Services PanoAqil S-330 1.287 9 GE (Army) Services Quetta S-288 1.168 10 AGE (Army)-Khuzdar S-156 0.930 11 GE (Army)-I Quetta S-221 0.740 T o t a l 88.752

When pointed out by Audit from July 2015 to December 2016, it was replied that efforts were being made to recover the outstanding amount. The paras were discussed during DAC meetings held on 28th December, 2016, 10th and 31st January 2017. The DAC in respect of paras at serial No. 1 to 7, was apprised that partial recoveries had been affected while efforts were being made to recover the outstanding amount. The DAC directed that full recovery be effected and recovered amount got verified from Audit. In respect of paras at serial No. 5, 9 and 10, the DAC directed that fresh reply be submitted within three weeks for examination by Audit. . During verification carried out by Audit, recovery of Rs. 5.082 million in respect of para at serial No. 02 was verified. No

progress was reported in case of the remaining paras till finalization of this report. Audit suggests expeditious recovery of the pointed out amount. DP-S-290, 233, 294, 19, 287, 27, 79, 330, 288, 156 and 221/2016-17 1.3.8 Non-recovery of Sales Tax from contractors – Rs. 32.302 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. In various Army units, amount was expended on purchase of store from suppliers/ market, but the Sales Tax amounting to Rs. 32.302 million was either not deducted or less deducted. Besides, no Sales Tax invoices were available on record. The details are as under; (Rs. in million) S.No. Unit/Formation DP No. Amount 1 GE (Army)-II Malir S-401 19.27 2 GE (Army)-I Malir S-398 7.55 3 GE (Army) PanoAqil S-302 2.101 4 AGE (Army )Chorr S-144 1.215 5 GE (Army) PanoAqil S-303 0.855 6 AGE (Army) Khuzdar S-157 0.821 7 GE (Army) Hyderabad S-09 0.490 T o t a l 32.302

When pointed out in March 2015 to October 2016, the executive stated that contract agreements in question were for execution / completion of works. No particular supply was made by contractor, therefore, no Sales Tax was deducted.

The DAC in its meeting held on 28th December, 2016, 10th and 31st January, 2017 directed the executive to provide relevant record to Audit for verification. No record / documents were produced to Audit for verification till the finalization of this report. Audit suggests expeditious recovery of pointed out amount. DP-S-401, 398, 302, 144, 303, 157 and 09/2016-17 1.3.9 Non-recovery of Income Tax from contractors – Rs. 23.936 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. In various Army units, a sum of Rs. 23.936 million on account of income tax was not deducted from the final bills of contractors. The details are as under: (Rs. in million) S.No. Unit/Formation DP No. Amount 1 GE (Army) Services, Quetta S-286 6.932 2 GE (Army) Karachi S-235 6.667 3 Station HQ, Quetta S-206 6.375 4 GE (Army)-I, Quetta S-220 3.962 T o t a l 23.936

When pointed out by Audit in March 2015, the executive replied that the efforts were being made for recovery. The paras were discussed during DAC meeting held on 10th January, 2017. The DAC in respect of paras at serial 1 and 2 directed that documents be provided to Audit for examination/verification. For paras at

serial no 3 and 4, the DAC directed the executive to submit fresh replies within three weeks for examination by Audit. No record / documents were produced to Audit for verification till the finalization of this report. Besides, replies from the executive were also awaited. Audit suggests expeditious recovery of pointed out amount. DP-S-286, 235, 206 and 220/2016-17 1.3.10 Non-deposit of Government’s share of rental income – Rs. 15.628 Million According to policy on use of A-1 Land circulated vide MoD letter dated 2nd April, 2008, in order to launch 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. In Central Ordnance Depot, Karachi commercial/ agricultural activities were being carried out on “A-1” land. However, Government‟s share in the rent amounting to Rs. 15.628 million was not deposited into Government Treasury. The details are as under; (Rs. in million) S.No. Detail of activities DP No. Amount 1 Banquet Halls/ Marriage Lawns S-346 12.749 2 Agricultural activities S-344 2.879 T o t a l 15.628

When pointed out by Audit in December 2016, the executive replied that the cases for assessment of rent had been initiated for approval from competent authority. 13

The paras were discussed in DAC meeting held on 31st January, 2017. The executive apprised the DAC that agricultural activities were being carried out on Ordinance Estate Land and not A-1 Land. Furthermore, Government‟s share in the rent from banquet halls/marriage lawns was being deposited as per A-1 Land Policy. The DAC directed that clarification regarding existence of land category „Estate Land‟ may be obtained from MoD and documents / records be produced to Audit for examination / verification. No record / documents were produced to Audit for verification / examination till the finalization of this report. Audit suggests early deposit of government share in treasury. DP-S-346 and 344 /2016-17 1.3.11 Non-recovery of stamp duty from contractors – Rs. 7.903 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. As per Government of Sindh Finance Act 2009, “Stamp duty of Thirty paisa for every hundred rupees or part thereof of the amount of the contract will be charged”. Contrary to above rule, the record held with the units/formations revealed that a sum of Rs. 7.903 million on account of stamp duty was not recovered against certain contracts during the years 2012-13, 2013-14 and 2014-15. The details are as under;

(Rs. in Million) S.No. Unit/Formation DP No. Amount 1 ACE 5 Corps, Karachi S-25 1.798 2 GE (Army)-II, Malir S-404 1.569 3 C.M.H, Malir S-386 0.924 4 GE (Army)-I, Malir S-400 0.921 5 SSD, ASC, Hyderabad S-97 0.880 6 SSD, ASC, Karachi S-99 0.653 7 GE (Army) Karchi S-236 0.570 8 602, EME, Workshop, Karachi S-160 0.357 9 Station Headquarter, Quetta S-205 0.231 T o t a l 7.903

When pointed out by Audit in December 2015 to November 2016, it was replied that Finance Act of Government of Sindh was not applicable on departments working under Federal Government. The paras were discussed during DAC meetings held on 28th December, 2016 and 10th and 31st January, 2017. The DAC directed the executive to refer the case to Ministry of Defence for clarification. No progress was reported to Audit till finalization of this report. Audit suggests recovery of the pointed out amount. DP-S-25, 404, 386, 400, 97, 99, 236, 160 and 205/2016-17 1.3.12 Non-recovery of gas charges on account of excess consumption beyond free authorization limit – Rs. 6.338 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, according to Para-442 of Defence Services Regulations for MES 1998, the

GE is responsible for making demands for payment of all revenue, and taking steps for its prompt realization. In four Army units, gas was consumed in excess of authorized quantity amounting to Rs. 6.338 million during the year 2014-15 and 2015-16. However, the amount was not recovered from the concerned units/formations. The details are as under:- (Rs. in million) S.No. Unit/Formation DP No. Amount 1 GE (Army) Services Quetta S-291 3.086 2 GE (Army) Services Malir S-295 1.130 3 Station Headquarters Quetta S-208 1.063 4 AGE (Army) SI&T Quetta S-01 1.059 T o t a l 6.338

When pointed out by Audit from March 2016 to November 2016, the executive replied that efforts were being made to recover the outstanding amount. The Paras were discussed in the DAC meeting held on 10th January, 2017. The DAC in respect of Para at serial No. 1 and 2 was apprised that partial recoveries had been made. In respect of para at serial No 4, the executive informed that a case had been sent for regularization to HQ, Southern Command. In respect of paras at serial No. 1 and 2, the DAC directed the executive to recover the amount in question and get the recovery verified from Audit. In respect of para at serial No. 3, the DAC directed the executive to submit fresh reply within three weeks for examination by Audit. In respect of the para at serial No. 4, the DAC directed that status of gas meter be got verified from Sui Southern Gas Company Limited. No progress of the cases was reported till the finalization of this report. Audit suggests for expeditious recovery of pointed out amount. DP-S-291, 295, 208 and 01/2016-17

1.3.13 Non-recovery of electricity charges on account of excess consumption beyond free authorization limit – Rs. 3.845 Million According to Para-772 of Defence Services Regulations for MES 1998 “Energy for any unauthorized appliances will be charged for. Any allowance for hot weather establishment which would be admissible may be drawn where fans are installed at unit expense and the energy is paid for by the unit. Further, according to Rule-85, Quarters and Rents Rules, 1985 “ Except when occupied by non-entitled consumers, military buildings for which power points are authorized in Barrack Synopsis, shall be supplied free electric energy for authorized consuming apparatus.” In Garrison Engineer (Army) Services, payment of electric bills was made to QESCO on account of unit/formation lines in excess of authorization, amounting to Rs. 3.845 million which needed to be recovered from concerned units. When pointed out by Audit in November 2016, the executive replied that the electric supply was being provided to units / formation through bulk electric meters and recovery was under process. The para was discussed in the DAC meeting held on 10th January, 2017. Since no reply was submitted, the DAC directed the executive to submit fresh reply within three weeks for examination by Audit. No progress of the case was reported to Audit till the finalization of this report. Audit recommends expeditious recovery of pointed out amount. DP-S-289/2016-17

1.4 Irregular / Un-authorized expenditure

1.4.1 Unauthorized expenditure on works out of Al- Mizan funds – Rs. 658.867 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 shall be used for procurement of stores and for replenishment of stock. According to Standing Operating Procedure of Al- Mizan Package-2008 Para-1(a) issued by GHQ Chief of Logistic Staff Secretariat Monitoring and Budget Cell, “This fund is utilized only for the procurement of store/equipment required for the troops deployed in operation Al-Mizan”. During audit of following formations, it was noticed that contracts valuing Rs. 658.867 million were concluded for different types of works out of Al-Mizan funds, which were not covered as per above cited letter. Therefore, the expenditure incurred on this account stood unauthorized and needed regularization by the Government of Pakistan. (Rs. in million) S # DP No. Name of Unit / Formation Amount 1 DP-N-353/2015-16 GE (Army)-I, Kharian 19.935 2 DP-N-377/2015-16 GE (Army)-I, Sialkot 109.679 3 DP-N-413/2015-16 EME College, Rawalpindi 13.312 4 DP-N-446/2015-16 GE (Army)-II, Gujranwala 43.677 5 DP-N-479/2015-16 AGE (Army) Chunnian 36.691 6 DP-N-488/2015-16 GE (Army) Constn, Lahore 85.505 7 DP-N-511/2015-16 GE (Army), Mangla 20.983 8 DP-N-16/2016-17 GE (Army), Multan 42.969 9 DP-N-83/2016-17 GE (Army) Svcs, Rawalpindi 33.173 10 DP-N-95/2016-17 GE (Army), Multan 46.226 11 DP-N-113/2016-17 GE (Army), Jhelum 32.759 12 DP-N-122/2016-17 GE (Army), Mangla 71.261 13 DP-N-204/2016-17 GE (Army), Murree 22.808 14 DP-N-207/2016-17 GE (Army), Mangla 27.756 15 DP-N-216/2016-17 GE (Army) Constn, Lahore 13.323

16 DP-N-239/2016-17 AGE (Army) Khanewal 38.810 Total 658.867

When pointed out by Audit in August, 2015 and March, 2016, it was replied that works were carried out on the basis of funds released by the QMG Branch GHQ Rawalpindi. The reply was not correct as incurring of expenditure other than procurement of stores and replenishment of stock was not admissible under Ministry of Defence letter dated 30th November, 2004. The paras were discussed by the DAC in its meetings held on 29th, 30th September, 2016 and 5th January, 2017. The DAC directed for verification of relevant record/documents from Audit. During verification, no relevant record was provided for verification. Audit suggests early regularization of the expenditure. DPs-N-353, 377, 413, 446, 479, 488 and 511/2015-16, DPs-N-16, 83, 95, 113, 122, 204, 207, 216 and 239/2016-17 1.4.2 Un-authorized advance payment on account of electricity and water charges bills – Rs. 609.626 Million Under rule-47(e) 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”. While examining the accounts of GE (A) Services Rawalpindi and Peshawar, it was noticed that advance payments amounting to Rs. 609.626 million were released on account of electricity/water bills to WAPDA, PESCO and TESCO in the month of June to avoid lapse of funds, which was violation of above rule. When pointed out by Audit in August 2015 it was replied that funds for payment to WAPDA/PESCO/TESCO were not received during July, August and September. Usually funds for these months were

received in advance during June and payments were made accordingly to avoid late payment surcharge. The para was discussed by the DAC in its meeting held on 5th January, 2017. The DAC directed to hold departmental inquiry and fix responsibility. No further progress was reported till finalization of this report. Audit suggests early implementation of DAC‟s directives. DP-N-84 and 245/2016-17 1.4.3 Un-authorized utilization of fund out of United Nation Reimbursement Account – Rs. 308.987 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 financially concurred by the Finance Secretary on case to case basis. During audit, it was noticed in 08 Army units that an amount of Rs. 308.987 million was expended on different works out of UNRA in violation of above authority.

(Rs. in million) S # DP No. Name of Unit / Formation Amount 1 DP-N-253/2015-16 GE (Army) GHQ, Rawalpindi 58.449 2 DP-N-374/2015-16 GE (Army) Constn-I, Rawalpindi 20.028 3 DP-N-388/2015-16 Ordnance Depot, Nowshera 10.688 4 DP-N-494/2015-16 GE (Army), Jhelum 14.021 5 DP-N-01/2016-17 GE (Army), Jhelum 8.013 6 DP-N-115/2016-17 GE (Army), Jhelum 126.289 7 DP-N-131/2016-17 GE (Army), Mangla 69.844 8 DP-N-248/2016-17 ESD, Jhelum 1.655 Total 308.987

When pointed out by Audit in February 2015, no reply was furnished by the executive authorities. The paras were discussed by the DAC in its meetings held on 29th, 30th September, 2016 and 4th, 5th January, 2017. The DAC directed for verification of relevant documents / record from audit. No documentary evidence regarding funds approval by the Ministry of Finance was produced till finalization of this report. Audit stresses for early regularization. DPs-N-253, 374, 388 and 494/2015-16, DPs-N-01, 115, 131 and 248/2016-17 1.4.4 Un-authorized encroachment on Army land by civilians – Rs. 267.300 Million As per Rule-26 (ix) (a) of Cantonment Land Administration Rules (CLAR) 1937, an encroachment is an un-authorized occupation of government land and should not be permitted to remain in existence under any circumstances unless it is properly regularized. While examining of the accounts of 399 EME Battalion, Dhamial Road, Rawalpindi, it was noticed that 48 Kanal 12 Marlas A-I Army land valuing Rs. 267,300,000 (972 Marlas x Rs. 275,000 (DC Rate 2014) situated at Qasim Aviation Base was encroached, as evident from 21

the Garrison HQ C/O HQ 10 Corps Chaklala letter dated 7th April, 2008. Therefore, the same needed to be vacated. When pointed out by Audit in May 2015, it was replied that encroachment on the land was initially highlighted in 1996 by HQ 10 Corps. Responsibility for demarcation was assigned to HQ 101 Aviation Group and 399 EME Bn. Efforts were being made by this Battalion to remove the encroachment on the land. However, any forced demarcation at present will damage the civil-military relations. The para was discussed by the DAC in its meeting held on 30th September, 2016. The DAC constituted a committee consisting of MEO Rwp, Representative of Land and Qtg Dte GHQ under the chairmanship of JS-I. The committee will determine the demarcation of encroached land and submit report to DAC in its next meeting. Progress of the constituted committee was not reported till finalization of this report. Audit suggests immediate implementation of DAC‟s directives. DP-N-477/2015-16 1.4.5 Un-authorized conclusion of contracts beyond financial power – Rs. 63.393 Million According to Annexure-H of Rule-89 of Financial Regulations Volume-I 1998 (Army & Air Force) as amended vide Ministry of Defence letter No. F.3/1/98/D-15, dated 23rd February, 2008, the contractual power of DGRV&F for conclusion of contracts is Rs. 4,500,000.00. During audit, it was noticed in 02 Army formations that the contracts for procurement of Cattle Feed/LW Bhossa/MO Cake and works projects valuing Rs. 63.393 million was accorded by the DGRV&F beyond his financial powers.

(Rs. in Million) S # DP No. Name of Unit / Formation Amount 1 DP-N-200/2015-16 Remount Depot, Mona 35.700 2 DP-N-202/2015-16 Military Farm, Sargodha 27.693 Total 63.393

When pointed out by Audit in August 2015, it was replied that the procurements were made after approval of the competent authority. The para was discussed by the DAC in its meeting held on 30th September, 2016. The DAC directed for verification of relevant documents/record from Audit. No further progress was reported till finalization of this report. Audit stresses for early regularization of the expenditure. DPs-N-200 and 202/2015-16 1.4.6 Unauthorized payment of project allowance in violation of Government orders – Rs. 3.065 Million According to Govt. of Pakistan, Ministry of Finance (Regulation Wing) letter No.F-16 (1)R-14/2003 dated 18th April, 2012, project allowance will be discontinued in all types of projects with immediate effect to remove distortion in the system. While examining the accounts of National University of Science and Technology (NUST) Islamabad, it was noticed that project allowance amounting to Rs. 3,065,000 was paid to officers of NUST though all type of project allowances had been discontinued by the Ministry of Finance (Regulation Wing) vide its letter dated 18th April, 2012. When pointed out by Audit in January, 2016 it was replied that comprehensive reply would be furnished to audit shortly.

No DAC was convened by the Ministry of Science and Technology on paras relating to NUST. Audit stresses for recovery of unauthorized project allowance. DP-N-201/2016-17 1.4.7 Unauthorized payments to contractors before physical completion of work – Rs. 534.618 Million According to Rule-408 to 417 of Defence Services Regulations for MES 1998, “there is no provision of advance payment to contractor except secured advance”. In various Army units, final payments against different contracts were released during June 2015 and June 2016, showing completion of 100% work. However, Audit observed that the works were still in progress and the final payments were released to contractors to avoid the lapse of funds at the end of June 2015 and June 2016, instead of surrendering the funds. Final / Running payments were made to contractors without physical completion of works resulted in undue financial aid to contractor amounting to Rs. 534.618 million. The details are as under:- (Rs. in Million) S.No. Unit/Formation DP No. Amount 1 GE (Army) Chorr S-332 217.508 2 GE (Army) Hyderabad S-179 83.059 3 AGE (Army) Chorr S-200 70.105 4 GE (Army) Hyderabad S-180 66.206 5 AGE (Army) Chorr S-141 30.830 6 AGE (Army) Rahim Yar Khan S-232 19.675 7 GE (Army) Pano Aqil S-301 14.140 8 GE (Army)-II, Quetta S-66 8.612 9 GE (Army)-II, Quetta S-50 7.391 10 AGE (Army) Construction, Karachi S-189 7.289 11 GE (Army)-II, Quetta S-68 4.834 12 GE (Army) Construction, Karachi S-184 3.516

13 GE (Army) Construction, Karachi S-185 1.453 T o t a l 534.618

When pointed out by Audit from February 2016 to November 2016, it was replied that payments were released to contractors after completion of 100% work done / work actually executed. In this regard completion certificates were issued by SDO/Engineer in–charge. Hence, no undue favor was given to contractors. The DAC in its meeting held on 28th December, 2016, 10th and 31st January, 2017, directed to hold fact finding inquiry besides fixing responsibility and taking disciplinary action against those found responsible and report be submitted to MoD/Audit. Furthermore, regularization action may be initiated. The paras at serial No. 2 and 3 were pended by the DAC due to non-receipt of reply. No progress was reported to Audit till the finalization of this report. Audit recommends regularization of the unauthorized payments. DP-S-332, 179, 200, 180, 141, 232, 301, 66, 50, 189, 68, 184 and 185/2016-17 1.4.8 Unauthorized advance payment to QESCO – Rs. 241.235 Million According to Para-408 to 417 of Defence Services Regulations for MES 1998, “there is no provision of advance payment to contractor except secured advance”. Contrary to above rule, in Garrison Engineer (Army) Services, Quetta, an amount of Rs. 241.235 million was paid as advance to QESCO on account of electric bills for the month of June 2016. The payment was made just to avoid lapse of funds. When pointed out by Audit in November 2016, the executive replied that the consumption of electricity for the month of June

2016, was not included in the bill. To avoid arrears and late payment surcharge, payment was made which had already been adjusted. The para was discussed in DAC meeting held on 31st January, 2017. The executive reiterated their earlier stance. The DAC directed that relevant record/documents be produced to Audit for examination / verification. The DAC also directed to discontinue such advance payments in future. Audit recommends regularization of the unauthorized advance payment. DP-S-293/2016-17 1.4.9 Unauthorized utilization of Al-Mizan Grant – Rs. 75.504 Million As per Para 1(v) of MoD letter No.7/6/2004-05/D- 21(Budget) dated 30th November 2004, the releases from “Special Transfer Account” (Al-Mizan) shall be used for replenishment of stores and for procurement . Further, according to Standing Operating Procedure of AL-Mizan Package-2008 Para 1(a) issued by GHQ Chief of Logistics Staff Secretariat, Monitoring and Budget Cell, “This fund is utilized only for the procurement of store/equipment required for the troops deployed in operation AL-Mizan”. In three Army units, Rs. 75.504 million were utilized from Al-Mizan funds for procurement of machinery/equipment and construction work in areas which were not declared as operational area for the Al-Mizan Package. The details are as under; (Rs. in million) S No. Unit / Formation DP No. Amount 1 C.M.H, Malir S-360 62.371 2 GE (Army)-II Quetta S-56 11.029 3 AGE (Army) Rahim Yar Khan S-230 2.104 Total 75.504

As the said funds could be only used for procurement of Defence Stores for the troops deployed in operation AL-Mizan, the expenditure stood as unauthorized, When pointed out by Audit in October, 2016, the executive stated the funds were allocated by the competent Authority i.e. QMG. The DAC in its meetings held on 28th December, 2016, 10th and 31st January, 2017 directed for regularization of the expenditure in respect of para at serial No. 2. With respect to paras at serial No. 1 and 3, the DAC directed the executive to provide relevant record / documents to Audit for examination / verification. No further progress was reported / record produced to Audit till finalization of this report. Audit suggests regularization of unauthorized expenditure. DP S-360, 56 and 230/2016-17 1.4.10 Unjustified expenditure on repair of pumps – Rs. 51.870 Million According to Rule-11 of Equipment Regulations Volume-II (Instructions) 1987, for stores condemned as unserviceable/repairable due to wear and tear, a copy of the condemnation board proceedings will be linked with the office copy of the demand to meet the audit requirements. In SCARP-VI, Rahim Yar Khan, an amount of Rs. 51.870 million was incurred on repair/replacement of 99 submersible pumps of 1.5 cusecs due to less discharge of water. Examination of contract agreement revealed that each pump had same fault and required same type of repair which was not understood and not justified. Furthermore, no documentary evidence regarding holding of condemnation board or board proceedings was produced to Audit. Therefore, the expenditure was held irregular and doubtful in audit.

When pointed out in March 2016, the executive replied that all repair/replacement works were done on the report received from concerned SDOs. Further, repair and maintenance works were segregated category wise for similar type of fault/repair and contracts concluded for each category separately. The DAC in its meeting held on 28th December, 2016 directed the executive to provide relevant documents to Audit for verification within one month. No record / documents were produced for verification till the finalization of this report. Audit suggests regularization of the expenditure. DP S-85/2016-17 1.4.11 Irregular expenditure on replacement of heating system – Rs. 37.658 Million According to Rule 25 of Defence Services Regulations for MES 1998, the power of administrative sanction of QMG for all ordinary repairs renewal and replacement work is up to Rs. 6,000,000. In Garrison Engineer (Army) Command and Staff College (C&SC) Quetta, a sum of Rs. 37,658,189 (Rs. 29,960,699 + Rs. 7,697,490) was incurred during 2014-15, against two administrative approvals of Rs. 28.000 and Rs. 7.000 million, issued by QMG for replacement of unserviceable Boiler Heating System installed in main building. However, the QMG was empowered to issue sanction up to Rs. 6.000 million only. Thus the said expenditure stood as irregular. When pointed out by Audit in March, 2016, the executive replied that the expenditure sanctioned by QMG pertained to budget “Cost of War” Main Head 26. “Cost of War” was a special code head under which QMG was empowered to sanction work of any value.

The DAC in its meeting held on 28th December, 2016 directed for regularization of the expenditure within two months. No progress was reported to Audit till finalization of this report. Audit suggests regularization of the expenditure. DP S-20/2016-17 1.4.12 Irregular revision of sanction for change in structural design after construction of building – Rs. 2.573 Million Under Rule-6(a) F.R. Vol –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.”

In Garrison Engineer (Army)-I Quetta, admin approval for construction of 16 x BOQs (D/S) at Quetta Cantonment, dated 26th March 2013, was issued by QMG for Rs. 17,652,000. Later, revised admin approval, dated 11th May 2015, for the said work for Rs. 20,213,000 was issued by the same authority and final payment of Rs. 19,762,187 was paid to the contractor. It was observed from 1st Running Accounts Receipt (RAR) that Rs. 15,939,613 were paid to a contractor against percentage of work done shown in RAR as 99.99% vide CBI No. 149 dated 19th June, 2013. As per record, the work was completed on 09th April, 2014 and the only formality left was payment of final bill. Instead, however, a revised admin approval was issued by QMG on 11th May 2015. Further, an amendment in contract, bearing No. 1 for Rs. 2,573,158 was approved by DGW&CE on 01st June, 2015 through which the reason for revision was recorded as “due to change of structural drawing for Seismic Zone-IV.” Audit was of the view that reason for amendment was not valid as 100% structural work had already been completed. The revised 29

admin approval and amendment were issued just to favour the contractor, which needed recovery/regularization. When pointed out by Audit in October 2016, the executive replied that as per amendment attached in final bill, drawing as per Seismic Zone - IV was prepared on 23rd April, 2016 and was incorporated accordingly during execution on site. There was only a delay in sanction from competent authority and financial effect of amendment was paid in final bill. Reply was not tenable as the work was completed 99.99% as per 1st RAR and reason for amendment was not valid. The DAC in its meeting held on 10th January, 2017 directed the executive to submit fresh reply to Audit within three weeks for examination. Response of the executive was awaited till finalization of this report. Audit recommends recovery / regularization of the expenditure. DP-S-215/2016-17 1.4.13 Irregular expenditure on repair of footpath - Rs. 2.384 Million According to Para 12.22, Schedule of Rates, 2014 the sub base for the areas to be used for pedestrians only, well compacted earth is sufficient. In Garrison Engineer (Army) Services, Quetta, payment for repair/replacement of footpath was made to a contractor, but quantity and rates of cement concrete and crush stone were incorporated in the composite rate. As these items were not required, it resulted in unjustified/irregular payment of Rs. 2,384,795 to the contractor.

When pointed out by Audit in November 2016, the executive replied that the work was executed as per drawings approved by competent technical authority according to the site requirement. The specification could be verified from the drawings and specifications. The generalized specification could be altered by the competent technical authority according to the site requirement. The reply was not tenable as method of laying footpath was clearly defined under Para-12.22 Schedule of Rates 2014, duly approved by E-in-C. The drawings mentioned in the reply were not part of the said contract. The DAC in its meeting held on 10th January, 2017 directed the executive to submit fresh reply to Audit for examination within three weeks. Response of the executive was awaited till finalization of this report. Audit suggests regularization of the expenditure. DP S-283/2016-17 1.5 Mis-procurement of stores

1.5.1 Mis-procurement of stores in violation of Public Procurement Rules – Rs. 726.801 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. 2.000 million shall be advertised on the authority‟s website. Further procurement 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, it was noticed in 30 formations that contracts valuing Rs. 726.801 million were awarded to different contractors without

calling for open competition through newspapers and PPRA‟s website, which was violation of above PP rules.

(Rs. in million) S # DP No. Name of Unit / Formation Amount 1 DP-N-239/2015-16 Military Farm, Sargodha 34.245 2 DP-N-240/2015-16 CMH (AK), Rawalakot 20.050 3 DP-N-286/2015-16 HQ 23 Div, Jhelum 85.818 4 DP-N-287/2015-16 Remount Depot, Sargodha 23.127 5 DP-N-300/2015-16 Military College, Jhelum 4.079 6 DP-N-320/2015-16 CMH, Gujranwala 34.000 7 DP-N-322/2015-16 CMH, Gujranwala 75.268 8 DP-N-323/2015-16 CMH, Gujranwala 61.062 9 DP-N-327/2015-16 Remount Depot, Sargodha 29.201 10 DP-N-328/2015-16 Remount Depot, Sargodha 5.794 11 DP-N-367/2015-16 Military Farm, Jhelum 34.200 12 DP-N-368/2015-16 CMH, Rawalakot 2.500 13 DP-N-493/2015-16 CMH, Bannu 9.638 14 DP-N-02/2016-17 GE (Army), Jhelum 4.611 15 DP-N-94/2016-17 GE (Army), Multan 2.499 16 DP-N-112/2016-17 4 Engr Btn, Bahawalpur 7.000 17 DP-N-116/2016-17 GE (Army), Jhelum 8.053 18 DP-N-130/2016-17 GE (Army), Mangla 8.342 19 DP-N-150/2016-17 Remount Depot, Sargodha 164.794 20 DP-N-159/2016-17 AGE (Army), Risalpur 22.223 21 DP-N-166/2016-17 GE (Army), Terbella 12.760 22 DP-N-168/2016-17 HQ Engr Centre, Risalpur 2.500 23 DP-N-175/2016-17 HQ Engr Centre, Risalpur 4.500 24 DP-N-200/2016-17 SSD, D.I. Khan 1.950 25 DP-N-202/2016-17 Arty Centre, Attock 4.819 26 DP-N-209/2016-17 GE (A) Services Mangla 5.783 27 DP-N-213/2016-17 Signal Training Centre Kohat 9.000 28 DP-N-242/2016-17 GE (Army), Abbottabad 2.904 29 DP-N-244/2016-17 GE (Army) Svcs, Rawalpindi 41.505 30 DP-N-256/2016-17 GE (Army), Kohat 4.576 Total 726.801

When pointed out by Audit in 2015 and 2016, it was replied that contracts of stores and works were awarded to firms after 32

meeting all codal formalities. The replies of executives were not acceptable as documentary evidences regarding advertisement in newspapers or PPRA‟s invoices were not produced. The paras were discussed by the DAC in its meetings held on 28th, 30th September, 2016 and 4th, 5th January, 2017. The DAC directed to hold inquiry and fix responsibility. No progress was reported to Audit till finalization of this report. Audit stresses for implementation of DAC‟s directive. DPs-N-239, 240, 286, 287, 300, 320, 322, 323, 327, 328, 367, 368 and 493/2015-16, DPs-N-02, 94, 112, 116, 130, 150, 159, 166, 168, 175, 200, 202, 209, 213, 242, 244 and 256/2016-17 1.5.2 Award of contracts without open tendering in violation of PPRA Rules – Rs. 564.321 Million According to Rule-12 (1, 2) of PPRA Rules-2004, all procurements over one hundred thousand rupees and upto the limit of Rs. 2.000 million shall be advertised on the authority‟s website. Further, procurement 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 different units/formations, it was observed that contracts were concluded without advertisement on PPRA website/ newspapers in violation of PPRA Rules, 2004. The details are listed below:- (Rs. in million) S # Name of Unit / Formation DP No. Amount 1 SSD ASC, Hyderabad S-61 249.674 2 305 Spare Depot, Karachi S-248 134.532 3 C.M.H Malir S-353 49.421 4 SSD ASC, Karachi S-98 42.495 5 GE (Army)-II, Quetta S-48 31.408 6 C.M.H Malir S-381 21.176

7 C.M.H, Badin S-171 12.238 8 AGE (Army) Chorr S-142 8.197 9 C.M.H Malir S-358 5.930 10 C.M.H, Malir S-384 4.400 11 AGE (Army Rahim Yar Khan S-81 2.745 12 GE (Army)-I, Quetta S-223 1.525 13 Station Headquarter Badin S-183 0.580 Total 564.321

When pointed out by Audit from December 2015 to November 2016, the executive submitted evasive replies without substantive documentary evidence. The DAC in its meetings held on 28th December, 2016, and 10th and 31st January, 2017 directed the executive to hold inquiry, fix responsibility, take disciplinary action against those found responsible and submit report to MoD/Audit. Furthermore, in respect of paras at serial no 2, 3, 4, 7, 9 and 11, the DAC directed that documents be provided to Audit for examination/verification. No progress was reported / record produced to Audit till finalization of this report. Audit suggests regularization of the PPRA Rules violation. DP-S-61, 248, 353, 98, 48, 381, 171, 142, 358, 384, 81, 223 and 183/2016-17 1.5.3 Conclusion of contracts giving less than prescribed response time in bidding process – Rs. 33.135 Million According to Rule-13(1) of PPRA Rules, 2004 under no circumstances the response time shall be less than 15 days for national competitive bidding. In two Army units/formations, contracts were concluded with less than fifteen days response time given in the bidding process. The details are listed below:-

(Rs. in million) S # Name of Unit / Formation DP No. Amount 1 GE (Army) Services, Quetta. S-292 30.00 2 AGE (Army) Khuzdar S-158 3.135 Total 33.135

When pointed out by Audit in October and December 2016, the executive either did not furnish reply or submitted evasive replies without substantive documentary evidence. The DAC in its meeting held on 10th January, 2017 directed the executive to conduct fact finding inquiry, fix responsibility and take disciplinary action against the person(s) found at fault. The DAC also directed that the violation of rules may be got regularized. No progress was reported to Audit till finalization of this report. Audit suggests regularization of the PPRA Rules violation. DP-S-292 and 158/2016-17 1.5.4 Award of contracts before publication of tenders – Rs. 14.839 Million According to Rule-38 of PPRA Rules, 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. In three Army units/formations tenders were advertised on the PPRA website but the related contracts had already been awarded to contractors. The irregular advertisement /tendering process was carried out merely to fulfill a formality. The details are as under;

(Rs. in million) S # Name of Unit / Formation DP No. Amount 1 GE (Army)-I, Malir. S-397 5.660 2 GE (Army)-II Quetta. S-53 3.951 3 GE (Army)-II Quetta. S-59 3.044 4 AGE (Army) Khuzdar S-155 2.184 Total 14.839

When pointed out by Audit from June 2015 to August 2016, the executive either did not furnish reply or submitted evasive replies without substantive documentary evidence. The DAC in its meetings held on 28th December, 2016 and 10th and 31st January, 2017 directed the executive in respect of paras at serial No 2 to 4 to hold fact finding inquiry, fix responsibility and take disciplinary action against the person(s) found at fault. Furthermore, the violation of rules may be got regularized. In respect of the para at serial No 1, the DAC directed that relevant record / documents be produced to Audit for examination / verification. No progress was reported / record produced to Audit till finalization of this report. Audit suggests regularization of the PPRA Rules violation. DP-S-397, 53, 59 and 155/2016-17 1.5.5 Purchase of medicines from other than lowest bidders without prior formulation of evaluation criteria- Rs 4.744 Million According to Rule 29 of PPRA Rules, 2004 states that procuring agencies shall formulate an appropriate evaluation of criteria, listing all 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 unambiguous evaluation criteria in the bidding documents shall amount to mis-procurement. Furthermore, Rule 38 states

that “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.” In CMH Malir, orders for purchase of medicines were issued to bidders who did not offer lowest rates. As a result, the Government sustained a loss of Rs 4,743,504 on account of difference between the rates at which medicines were procured and the lowest rates offered. When pointed out by Audit in October 2016, the executive stated that medicines were being purchased on recommendations of consultants. None of the items had been purchased at higher rates. The reply was not tenable since no evaluation criteria was formulated and made an integral part of bidding documents as required under PPRA Rules. The para was discussed in DAC meeting held on 31st January, 2017. The DAC directed the executive to hold fact finding inquiry, fix responsibility, take disciplinary action against the responsible persons and initiate regularization action. No progress was reported to Audit till the finalization of this report. Audit suggests regularization of the PPRA Rules violation. DP-S-382/2016-17 1.5.6 Rejection of a bid after technical acceptance in violation of PPRA Rules – Rs. 1.760 Million According to Rule 33(1) of PPRA Rules 2004, The procuring agency may reject all bills or proposals at any time prior to the acceptance of a bid or proposal.

In CMH Malir, Karachi, tender was called for purchase of medical equipment amounting to Rs. 1.760 million. M/S Endo Kare submitted technical bid conforming to specifications of equipment as per tender requirement. The bid was first accepted but later on rejected and contract was awarded to M/S Allmed Solutions. M/S Allmed Solutions had submitted bid for a medical equipment which did not meet the requisite specification. The award of contract was, therefore, in violation of PPRA rules. When pointed out by Audit in October, 2016, the executive stated that equipment was purchased on recommendation of a consultant. The para was discussed in DAC meeting held on 31st January, 2017. The DAC directed the executive to provide relevant record / documents to Audit for examination / verification. No record / documents were produced to Audit for examination / verification. Audit suggests regularization of the PPRA Rules violation. DP-S-357/2016-17 1.6 Non-production of auditable record 1.6.1 Non-provision of auditable documents – Rs. 36.077 Million As per Article 170(2) of the Constitution of Islamic Republic of Pakistan 1973, “the audit of the accounts of the Federal and of the Provincial Governments and the accounts of any authority or body established by, or under the control of, the Federal or a Provincial Government shall be conducted by the Auditor-General, who shall determine the extent and nature of such audit”. According to Para-5(d) of Government of Pakistan Ministry of Defense Rawalpindi letter No F.2/5/D-12/ML&C/99 dated 20th November, 2009 issued in continuation of Ministry‟s letter No.

F.2/5/D-12/ML&C/99 dated 2nd April, 2008, accounts for use of A-1 land for commercial and welfare purpose (for category A & C activities) shall be auditable. While examining the accounts of Station Head Quarter Lahore, it was noticed that four accounts i.e. Pakistan Park Account, Vehicle Sticker Account, E-Lane Account, Cable Account were being maintained by the Station Headquarters Lahore. An amount of Rs. 36,076,984 was received by Station HQ against above mentioned accounts during the year 2013-14 since the activities were being carried out on A-I land therefore relevant record was requisitioned for audit but not provided. According to Para-2(b)(2) of Government of Pakistan Ministry of Defense Rawalpindi letter dated 2nd April, 2008, an amount of Rs. 9,019,246 (25% of Rs. 36,076,984) was required to be deposited by the Station HQ into Government treasury. When pointed out by Audit in June, 2014 it was replied that available documents of these accounts were already provided to audit. The reply was not acceptable as complete record of these accounts was not produced. The para was discussed by the DAC in its meeting held on 28th September, 2016. The DAC constituted a Board of Officers under the chairmanship of DS (PAC) and representative from HQ 4 Corps and Audit to resolve the issue. The Director Audit Lahore being member of the aforementioned committee informed the Ministry of Defence vide letter dated 2nd November, 2016 regarding non-production of the record by the formation concerned. Audit stresses for implementation of DAC‟s directive. DP-N-268/2015-16 1.6.2 Non-provision of record of NUST Funds Account As per Article 170(2) of the Constitution of Islamic Republic of Pakistan 1973, “the audit of the accounts of the Federal and of 39

the Provincial Governments and the accounts of any authority or body established by, or under the control of, the Federal or a Provincial Government shall be conducted by the Auditor-General, who shall determine the extent and nature of such audit”. During audit of National University of Science and Technology Islamabad, it was noticed that NUST Funds Account was maintained by the NUST authorities but record regarding receipts during July, 2013 to June, 2015 was not produced to audit, which was against the above cited Constitutional provisions. When pointed out by Audit in January, 2016 the management stated that as per NUST Act Part II, Chapter 15, Clause 124, only Government budgetary allocations/grants shall be carried out by auditors appointed by the Auditor General of Pakistan. The reply was not satisfactory because statutory audit of both allocations and receipts is mandatory under the Constitution. No DAC was convened by the Ministry of Science and Technology on the paras relating to NUST. Audit stresses for provision of auditable documents of NUST Funds Account. DP-N-61/2016-17

Military Lands and Cantonments

1.7 Recoverables / Overpayments 1.7.1 Non-recovery of property tax from Lahore University of Management and Sciences – Rs. 1,036.246 Million According to Para-92(1) of the Cantonment Act 1924 “ if a person liable of the payment of any tax does not pay within 30 days from the receipt of notice of demand pay the amount or show sufficient cause of non-payment of the same to the satisfaction of the Cantt Executive Officer such sum with all costs of recovery may be recovered under warrant”. While examining the accounts of Cantonment Board Lahore, it was noticed that Lahore University of Management and Sciences was running business on commercial basis but property tax amounting to Rs. 1,036,246,916 was not paid by the LUMS Management, which resulted into loss to the Cantt Fund. When pointed out by Audit in August, 2015, it was replied that matter had already taken up with LUMS management. The reply was not acceptable, as property tax of LUMS was lying outstanding since 2005. The para was discussed by the DAC in its meeting held on 16th December, 2016. The DAC was apprised that the appeal filed by the LUMS for exemptions of property tax is under consideration with DG ML&C Rawalpindi. The DAC directed that the case be finalized at the earliest. No further progress was reported till finalization of this report. Audit stresses for immediate recovery of property tax from LUMS management.

DP-N-124/2016-17 41

1.7.2 Non-recovery of property tax from various property owners – Rs. 337.048 Million Under section-259 of Cantonment Act 1924, Cantt Board is liable to recover any tax and any other money together with the cost recovery either by suit or an application to Magistrate. During audit, it was noticed in 14 Cantonment Boards that an amount of Rs. 337.048 million was outstanding on account of property tax, which needed recovery.

(Rs. in Million) S No. DP No. Unit / Formation Amount 1 DP-N-506/2015-16 Cantt Board, Abbottabad 6.375 2 DP-N-12/2016-17 Cantt Board, Nowshera 2.507 3 DP-N-105/2016-17 Cantt Board, Sargodha 2.463 4 DP-N-123/2016-17 Cantt Board, Abbottabad 4.727 5 DP-N-126/2016-17 Cantt Board, Lahore 12.879 6 DP-N-176/2016-17 Cantt Board, Walton Lahore 21.490 7 DP-N-181/2016-17 Cantt Board, Chaklala 171.801 8 DP-N-193/2016-17 Cantt Board, Lahore Cantt 2.258 9 DP-N-221/2016-17 Cantt Board, Chaklala 4.490 10 DP-N-228/2016-17 Cantt Board, Rawalpindi 44.394 11 DP-N-233/2016-17 Cantt Board, Chaklala 4.123 12 DP-N-234/2016-17 Cantt Board, Chaklala 27.649 13 DP-N-236/2016-17 Cantt Board, Chaklala 7.001 14 DP-N-237/2016-17 Cantt Board, Chaklala 24.891 Total 337.048

When pointed out by Audit in August, September, November, 2016 and January, 2017, it was replied that assessment was made under section 60 and 64 of the Cantt Act, 1924 and notices for recovery had already been issued. The paras were discussed by the DAC in its meetings held on 16th and 22nd December, 2016. The DAC directed all Cantt Boards for taking immediate measures for recoveries. Against serial No. 14, the DAC

was apprised that the case is subjudice. The DAC directed to pursue the case in court. No further progress was reported till finalization of this report. Audit stresses for implementation of DAC‟s directives for early recovery. DP-N-506/2015-16, DPs-N-12, 105, 123, 126, 176, 181, 193, 221, 228, 233, 234, 236 and 237/2016-17 1.7.3 Non-recovery of premium and development charges due to unauthorized use of residential property as commercial – Rs. 325.355 Million As per Para-3 (h) (General Conditions) of 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 respective Station HQrs. Paid premium of revenue rate applicable for the said purposes, imposition of composition fee by the respective Cantt Board and those who fail to pay the above their property will be resumed”. During audit it was noticed that in 05 Cantonment Boards, under mentioned properties were held on lease for residential purpose but the same were un-authorizedly being used for commercial purpose, which resulted into loss to Cantt Funds amounting to Rs. 325.355 million on account of premium and development charges. (Rs. in Million) S DP No. Unit / Formation Property No. Amount No. Cantt Board, 1 DP-N-10/2016-17 958, Moti Bazzar NSR 1.753 Nowshera Bungalow No. 108, 2 DP-N-11/2016-17 -do- 41.485 Sher Shah Road, NSR 1231 & 1231/1-6 3 DP-N-42/2016-17 -do- Khushal Coly, NSR 60.813 Cantt 43

1062/1-2 and House 4 DP-N-44/2016-17 -do- No. 1056-57, Manki 29.771 Road NSR Bungalow No. 30, 5 DP-N-229/2016-17 Cantt Board, Rwp 162.943 Haidar Road, Rwp Cantt Board, Bangalow No. 12 6 DP-N-232/2016-17 28.590 Jhelum Lalazar Coly, Jhelum Total 325.355

When pointed out by Audit in September, 2015 and January, 2016 it was replied that action for determination of lease or regularization of unauthorized commercial use was under process. The para was discussed by the DAC in its meeting held on 16th and 22nd December, 2016. The DAC directed that the case for determination of lease or regularization be finalized. Whereas the DAC against serial No. 2 and 4 directed to pursue the court case. No further progress was reported till finalization of this report. Audit stresses for early determination of lease or regularization of the case. DP-N-10, 11, 42, 44, 229 and 232/2016-17 1.7.4 Non-recovery of development charges and House Tax from COMSATS Institute – Rs. 272.910 Million According to Section-92 (1) of Cantonment Act-1924, if a person liable of 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 executive officer, such sum with all costs of recovery, may be recovered under a warrant. During audit of Cantonment Board Abbottabad, it was noticed that COMSATS Institute of Information Technology was established on 38 kanal on B-3 land vide Ministry of Defence letter dated 15th January, 2008 and GHQ letter dated 25th May, 2001 but house tax 44

amounting to Rs. 86,570,000 and development charges amounting to Rs. 186,340,000 as evident from Ministry of Defence letter dated 30th April, 2004 and CBR No. 9 dated 24th November, 2006 were still lying outstanding. When pointed out by Audit in October 2014, it was replied that objected amount would be recovered shortly. The para was discussed by the DAC in its meeting held on 4th October, 2016. The DAC was apprised that the matter is subjudice. The DAC directed to pursue the case in the Court of Law. No further progress was made till finalization of this report. Audit stresses for vigorous pursuance of court case. DP-N-515/2015-16 1.7.5 Non-recovery of property tax from WAPDA – Rs. 200.000 Million According to Para-92 (1) of the cantonment Act 1924 “if a person liable of the payment of any tax does not pay within 30 days from the receipt of notice of demand pay the amount due or show sufficient cause of nonpayment of the same to the satisfaction of the Cantonment Executive Officer such sum with all costs of recovery may be recovered under warrant.” While examining the accounts of Cantt Board Walton Lahore, it was noticed that an amount of Rs. 199.861 million on account of property tax was outstanding against WAPDA since 1984, but after passage of three decades no efforts were made to recover outstanding Cantt fund dues. When pointed out by Audit in August, 2015 it was replied that matter was already taken up with WAPDA authorities. The reply was not convincing, as amount is outstanding since 1984.

The para was discussed by the DAC in its meeting held on 16th December, 2016. The DAC directed Cantt Board authorities to file civil suit against WAPDA. No further progress was reported till finalization of this report. Audit stresses for early recovery. DP-N-238/2016-17 1.7.6 Non-recovery of conversion / development charges from property developers/owners – Rs. 118.601 Million According to Para-16(a)(1) of Government of Pakistan Ministry of Defence (ML&C Deptt) Rawalpindi letter No. 55/45/Lands/ML&C/99, dated 17th February, 2011, “Depending on usage of land on which the housing scheme as purposed, following conversion charges will apply according to area carved for Agricultural to Residential or commercial”. (i) Agriculture to residential 5% of the valuating table (ii) Agriculture to commercial 25% of valuating table (iii) Residential to commercial 20% of valuating table

During audit of Cantonment Board Sargodha, it was noticed that agricultural land was converted into residential and commercial plots, but conversion / development charges of Rs. 118.601 million were not recovered from the owners. When pointed out by Audit in August, 2016, it was replied that objected amount would be recovered from the concerned owners shortly. The para was discussed by the DAC in its meeting held on 16th December, 2016. The DAC was apprised that a sum of Rs. 20.000 million out of Rs. 118.601 million had already been recovered. The DAC

directed that recovery made so far be got verified and balance amount be recovered. No evidence in support of recovery was produced till finalization of this report. Audit stresses for immediate recovery of conversion/development charges from the owners. DP-N-106/2016-17 1.7.7 Non-recovery of hoarding charges – Rs. 107.830 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, on application to Magistrate having jurisdiction in the Cantt. As per record of following Cantonment Boards, hoardings were installed within the cantonments limit but hoarding charges amounting to Rs. 107.830 million was not recovered. (Rs. in Million) S No. DP No. Unit / Formation Amount 1 DP-N-326/2015-16 Cantt Board, Walton, Lahore 18.600 2 DP-N-349/2015-16 Cantt Board, Rawalpindi 21.015 3 DP-N-125/2016-17 Cantt Board, Rawalpindi 40.459 4 DP-N-169/2016-17 Cantt Board, Rawalpindi 27.756 Total 107.830

When pointed out by Audit in September 2015, it was replied that partial recoveries had been effected and rest of the cases are subjudice. The paras were discussed by the DAC in its meeting held on 4th October, 2016 and 22nd December, 2016. The DAC directed against serial No. 1 and 2 that recovery be expedited. However, serial No. 3 and 4 were subjudice.

No further progress was reported till finalization of this report. Audit suggests expeditious recovery of the amount. DPs-N-326 and 349/2015-16, DPs-N-125 and 169/2016-17 1.7.8 Non-recovery of premium due to unauthorized use of residential property as commercial – Rs. 77.177 Million According to Para-3 of “General condition” contained in sub Para-h to Ministry of Defence letter No 3/6/D-12 (ML&C)/97-2007 dated 31st December, 2007, residential property being used for commercial purpose will be charged premium @ 100% revenue rates applicable for the said purpose and after approval, composition fee also be charged as per existing rules. While examining the accounts of MEO Rawalpindi, it was noticed that residential properties were being used by the lessees for commercial purpose without obtaining approval of the Competent Authority. Thus, premium at full market price as well as development charges amounting to Rs. 77.177 million needed to be recovered from the lessees. When pointed out by Audit in August 2015, it was replied that notices were issued to concerned lessees and case for determination of lease was being processed against the said properties. The para was discussed by the DAC in its meeting held on 4th October, 2016. The DAC pended the draft para till finalization of process of commercialization and determination of lease of properties involved. No further progress was reported till finalization of this report. Audit stresses that the case for determination of lease be finalized expeditiously. DP-N-211/2015-16

1.7.9 Non-recovery of rent from CIMLA/WTI building – Rs. 70.924 Million Under Section 259 of 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, on application to Magistrate having jurisdiction in the Cantt. While examining the accounts of Cantt Board Walton Lahore, it was noticed that rent of CIMLA/WTI building @ Rs. 1,000,000 per year and 10% annually increase w.e.f. 1st January, 2011 was fixed by Cantt Board authorities, but no rent was recovered from CIMLA/WTI, which resulted into loss to Cantt funds amounting to Rs. 70.924 million. When pointed out by Audit in August, 2015 it was replied that the matter had already been taken up with CIMLA authorities. The para was discussed by the DAC in its meeting held on 16th December, 2016. The DAC directed the Cantt Board authorities to finalize the recoveries within 01 month. No further progress was reported till finalization of this report. Audit stresses for recovery action. DP-N-196/2016-17 1.7.10 Non-recovery of rent of A-1 Land used for commercial purpose – Rs. 64.529 Million As per policy on use of A-1 land for welfare and other projects of the armed forces by Ministry of Defence, Rawalpindi letter No. F-2/5/D-12/ML&C/99 dated 2nd April, 2008 that rent was required to be charged @ 6% per annum of existing revenues rates of the land used in commercial projects. Out of total amount so calculated, 25% was to be deposited into the Govt. treasury and 75% balance was to be utilized by the respective formation. Moreover, Rule-14(3) of cantonment land administration (CLA) 1973 provides land in class-A would not be used or occupied for any purpose other than those stated in sub rule (i) of Rule- 49

5 without prior sanction of the Central Government or such authority as they may appoint in this behalf. During Audit of MEO Rawalpindi, it was noticed that below mentioned properties were being run on commercial basis but neither 25% Government share on rent as per above Government policy was recovered from the occupants nor Government approval was obtained for commercial use of A-I Land, which needed recovery amounting to Rs. 64.529 million. (Rs. in Million) S Amount Area of No. Property No. Period (25% Govt. Plot share) 1 Shell Pump, Bangalow No. 142 33 Marlas 2008 to 4.208 Murree Road Rwp 2015 2 Total Pump, Khasra No. 16 and 715 143 -do- 12.441 Chaklala Cantt Marlas 3 Blue Lagoon AWT 320 -do- 45.840 Marlas 4 Safe Way, CNG Murree Road, Rwp 16 Marlas -do- 2.040 Total 64.529

When pointed out by Audit in August 2015, it was replied that the requisite properties are being run directly by Army authorities and governed under A-I land policy. The para was discussed by the DAC in its meeting held on 22nd December, 2016. The DAC pended the para as the same would be discussed in presence of Army representative. No further progress was reported till finalization of this report. Audit stresses for early recovery of rent. DP-N-197/2015-16

1.7.11 Non-recovery of Transfer of Immovable property tax – Rs. 53.542 Million According to Federal Board of Revenue S.R.O No. 382 (1)/94 dated 3rd May, 1994, the Federal Government imposed a tax on the transfer of immovable 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. While examining the accounts of following Cantonment Boards, it was noticed that Transfer of Immovable Property (TIP) Tax amounting to Rs. 53.542 million was not recovered. (Rs. in Million) S DP No. Unit / Formation Property owner Amount No. 1 DP-N-144/2016-17 Cantt Board, Rawalpindi Shell, Pakistan 4.144 2 DP-N-147/2016-17 Cantt Board, Rawalpindi Daewoo, Pakistan 17.528 3 DP-N-194/2016-17 Cantt Board, Lahore PTCL 9.310 UBL Officer Co- Cantt Board, Walton, 4 DP-N-198/2016-17 operating Housing 22.560 Lahore Society Total 53.542

When pointed out by Audit in August, 2015 it was replied that the cases were under process for recovery. The paras were discussed by the DAC in its meetings held on 16th and 22nd December, 2016. The DAC directed to recover/resolve the cases. No further progress was reported till finalization of this report. Audit stresses for immediate recovery action. DP-N-144, 147, 194 and 198/2016-17

1.7.12 Non-recovery of premium from owners of the shops – Rs. 17.796 Million According to Para-92 (1) of the Cantonment Act-1924 “if a person liable of the payment of any tax does not pay within 30 days from the receipt of notice of demand pay the amount due or show sufficient cause of non-payment of the same to the satisfaction of the Cantt Executive Officer such sum with all costs of recovery may be recovered under warrant”. While examining the accounts of Cantonment Board Nowshera, it was observed that an amount of Rs. 17,796,500 was lying outstanding against the owners of the shops situated at commercial complex Nowshera Cantt, which needed to be recovered. When pointed out by Audit in January 2016, it was replied that an amount of Rs. 575,000 out of Rs. 17,796,500 had already been recovered and notices for balance amount were also issued to defaulters. The para was discussed by the DAC in its meeting held on 22nd December, 2016. The DAC directed that reported recovery be got verified from audit and balance amount be recovered. No further progress was reported till finalization of this report. Audit stresses for early recovery of premium from the owners. DP-N-41/2016-17 1.7.13 Non-recovery of Cantt Board dues from M/s Daewoo Pakistan Express Bus Services Ltd – Rs. 13.044 Million According to Cantt Board Resolution No. 36 dated 25th September, 2013, Cantt Board dues was recoverable from Daweoo Pakistan Bus Services.

While examining the accounts of Cantt Board Rawalpindi, it was noticed that an amount of Rs. 13,043,575 was outstanding against M/S Daewoo Pakistan Express Bus Service Ltd on account of checking fee, BA Fee, Development charges and security, which was required to be deposited into Cantt funds. When pointed out by Audit in January, 2015 the executive authorities agreed to recover the amount. The para was discussed by the DAC in its meeting held on 22nd December, 2016. The DAC was apprised that the matter is subjudice. The DAC directed to pursue the case in the Court. Audit suggests vigorous pursuance of court case. DP-N-146/2016-17 1.7.14 Non-recovery of composition and parking fee – Rs. 9.647 Million According to Ministry of Defence letter No. 75/853/Lands/ 92/4970/D-2/ML&C/94 dated 6th November, 1994, “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, it was noticed in 03 Cantonment Boards that an amount Rs. 9.647 million on account of composition/parking fee was lying outstanding, which needed recovery action. (Rs. in Million) S # DP No. Unit / Formation Property No. Amount Cantt Board, 1 DP-N-142/2016-17 784/75 Moza, Nothia 2.693 Rawalpindi Cantt Board, Khasra No.1704 and 2 DP-N-148/2016-17 3.912 Rawalpindi 1705, Mouza Chur Harpal Cantt Board, 3 DP-N-182/2016-17 Various properties 3.042 Chaklala Total 9.647 53

When pointed out by Audit in November, 2014 and January, 2015 the executives agreed to recover the amount. The paras were discussed by the DAC in its meeting held on 22nd December, 2016. The DAC directed that the objected amount be reconciled and reported recovery be got verified from audit. No further progress was reported till finalization of this report. Audit stresses for early recovery action. DPs-N-142, 148 and 182/2016-17 1.7.15 Non-recovery of composition fee – Rs. 8.466 Million According to Ministry of Defence letter No. 75/853/Lands/ 92/4970/D-2/ML&C/94 dated 6th November, 1994, “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”. While examining the accounts of Cantonment Board Abbottabad, it was noticed that M/s Usman Bashir & Others constructed Triple Story Hospital i.e. Rehmat Hospital without prior approval of revised building plan and deposit of composition fee of Rs. 8,466,000 as detailed below:- 1. Area of Plot 8295 Sft or 30 Marlas Cost of land @ Rs. 1,495,000 per marla 8295 Sft or 30 marlas (30 marla x 1,495,000) = Rs. 44,850,000 2. Cost of Const (i) Ground Floor 8295 sft (ii) First Floor 8295 sft (iii) Second Floor 8295 sft

Total covered area 24885 sft @ Rs. 1600 Per Sft = Rs.39,816,000 Total (1+2) = Rs. 84,666,000 10% Composition fee = Rs. 8,466,600

When pointed out by Audit in August, 2016 it was replied that the owner was asked for submitting revised building plan for approval of the Board and composition fee would be recovered. The para was discussed by the DAC in its meeting held on 22nd December, 2016. The DAC directed the executive for recovery of composition fee. No further progress was reported till finalization of this report. Audit stresses for early recovery action. DP-N-225/2016-17 1.7.16 Non-recovery of rent of Cantonment fund building – Rs. 6.484 Million According to Rule-2 (A) 5 of Cantonment Account Code 1955, “ it is duty of the Executive Officer and the staff employed by the Cantonment Board to see that dues of the Board are correctly and promptly assessed collected and paid into the treasury”. While examining accounts of Cantt Board Chaklala, it was noticed that Bungalow No. 84 Khadim Hussain Road was hired to MEO Rawalpindi for official residence purpose of the ML&C officers, but rent amounting to Rs. 6.484 million was lying outstanding against MEO Rawalpindi. When pointed out by Audit in August 2016, it was replied that case was pended with MEO Rawalpindi for seeking final approval of the DG ML&C. The para was discussed by the DAC in its meeting held on 22nd December, 2016. The DAC directed that the case for hiring of MEO Building be finalized and recovery be made accordingly. No further progress was reported till finalization of this report. Audit suggests early recovery action. DP-N-219/2016-17

1.7.17 Non-recovery of antenna fee from Cellular companies – Rs. 4.007 Million According to Para – 7 (B) of the Government of Pakistan Ministry of Defence (ML&C Deptt) Rawalpindi letter No. 51/1411/ Lands/ML&C/2005 dated 24th June, 2015, “the cellular companies will be required to pay an antenna fee @ Rs. 20,000 per month with an annual enhancement @ 10 %”. While examining the accounts of Cantonment Board Sargodha, it was noticed that 03 cellular companies installed towers within the Cantonment limits, but antenna fee / sky charges amounting to Rs. 4.007 million were not deposited for the year 2015-16 which needed to be recovered from cellular companies. When pointed out by Audit in August, 2016, it was replied that objected amount would be recovered. The para was discussed by the DAC in its meeting held on 16th December, 2016. The DAC directed that objected amount be reconciled with audit and recovery be made accordingly. No further progress was reported till finalization of this report. Audit suggests for early recovery action. DP-N-104/2016-17 1.7.18 Non-recovery of composition fee – Rs. 1.087 Million Under Section-92 (1) of Cantonment Act, 1924, “If person liable of the payment of any tax dues not, within 30 days from the service of notice of demand, pay the amount due or show sufficient cause of nonpayment of the same to the satisfaction of the executive officer, such sum with all costs of recovery, may be recovered under warrant”. During audit of Cantonment Board Shorkot, it was noticed that composition fee and conversion charges amounting to Rs. 1,087,034 was outstanding against property No. CB-20 and 832 situated at Shorkot

Cantt as confirmed from C.B.R No. 38 & 39 of 31st January, 2014, which needed recovery action. When pointed out by Audit in August 2015, it was replied that objected amount would be recovered. The para was discussed by the DAC in its meeting held on 4th October, 2016. The DAC directed to recover the full objected amount. No further progress was reported till finalization of this report. Audit stresses for early recovery of amount involved. DP-N-288/2015-16 1.7.19 Loss to state due to non-recovery of premium and ground rent from WAPDA – Rs. 267.769 Million As per Policy issued by the Government of Pakistan, Ministry of Defence Rawalpindi vide letter dated 31st December, 2007, fresh lease of land was to be granted on payment of premium @ of 50% of DC rate of land. Moreover, ground rent was required to be charged @ Rs 4 per sq yds per annum.

In MEO Hyderabad, 11.33 acres of land were allocated to WAPDA in the year 1973 . However, premium of Rs. 258.557 million [11.33 acres x 4840 = 54837.2 sq yds x Rs. 9430 (DC rate) x 50%] and ground rent of Rs. 9.212 million [54837.2 sq yds x Rs. 4 x 42 years] were not recovered till to date. When pointed out by Audit in October 2016, the executive stated that M.E.O office had forwarded a case to the ML&C Department in June, 2008, for obtaining Government‟s sanction for transfer of land to the WAPDA authorities. The sanction was still awaited. The para was discussed in the DAC meeting held on 30th January, 2017. The DAC directed that Government‟s sanction be obtained

immediately and recovery on account of premium and ground rent be made within three months. No progress was reported to Audit till the finalization of this report. Audit suggests that recovery may be expedited. DP-S-368/2016-17 1.7.20 Non-recovery of cantonment taxes – Rs. 178.174 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. It was observed from the record for the year 2015-16 held with six Cantonment Boards that a sum of Rs. 178.174 million was outstanding on account of cantonment boards‟ taxes. The details are given below: (Rs. in million) S.No. Name of Unit DP No. Amount 1 CB Clifton (Rs. 245.568 M – Rs. 213.196 M) S-249 32.372 2 CB Hyderabad S-277 53.834 3 CB Faisal S-52 30.644 4 CB Clifton S-372 22.122 5 CB Clifton S-375 16.902 6 CB Malir (Rs. 10.544 M – Rs. 2.569 M) S-209 7.975 7 CB Korangi Creek S-391 6.810 8 CB Manora S-95 3.595 9 CB Clifton S-335 2.031 10 CB Clifton S-336 1.889 T o t a l 178.174 58

When pointed out by Audit from January 2016 to November 2016, it was replied that efforts were being made to recover the outstanding amount. The paras were discussed in DAC meetings held on 27th December, 2016, 11th and 30th January, 2017. The DAC was apprised that partial recoveries had been made in some cases. Efforts were being made to recover the balance amount. The DAC directed the executive to recover the balance amount in full and get the recoveries verified form Audit. During verification carried out by Audit, recovery of Rs. 213.196 million in respect of para at serial No. 01 and Rs. 2.569 million in respect of para at serial No. 06 was verified. No progress was reported in case of remaining paras to Audit till finalization of this report. Audit suggests expeditious recovery of outstanding dues. DP-S-249, 277, 52, 372, 375, 209, 391, 95, 335 and 336/2016-17 1.7.21 Loss of scrutiny fee due to non-approval of building plans of Army Housing Schemes – Rs. 145.855 Million According to Rule-2(1) of Building By-Laws SRO No.(1)/99 dated 30th April, 1999 and SRO No.(1)/2006 dated 17th April, 2006, every person intending to erect, re-erect or alter a building shall apply for sanction under Section 179 of Cantonment Act, 1924 in Form 1 along with the necessary documents specified therein. According to CBR No. 16 dated 4th November, 2011 scrutiny fee @ Rs. 15 per sq ft will be charged. In Cantonment Board Malir, 1870 houses were constructed by Army without submission of building plans to the Cantonment Board and without obtaining approval of the Board during the year 2015-16. Due to non-submission of building plans for approval, the Cantonment

Board sustained a loss of Rs. 145.855 million, in the shape of Scrutiny Fee. When pointed out by Audit in August 2016, the executive replied that the case would be taken up with the concerned quarters. Further outcome would be intimated accordingly. The DAC in its meeting held on 11th January, 2017, was apprised that the case had been taken up with HQ ML&C Department/ concerned quarters in November, 2016. The DAC directed that the amount may be recovered within two months and documentary evidence produced to Audit for verification. Further progress was not reported till finalization of this report. Audit suggests that building plans be got approved from the Board and scrutiny fee recovered expeditiously. DP-S-210/2016-17 1.7.22 Loss to state due to non-recovery of premium and ground rent from M/s PTCL/Etisalat – Rs. 51.575 Million As per Policy issued by the Government of Pakistan, Ministry of Defence Rawalpindi vide letter dated 31st December, 2007, fresh lease of land was to be granted on payment of premium @ of 50% of DC rate of land. Moreover, ground rent was required to be charged @ Rs. 4 per sq yds per annum. In MEO Hyderabad, it was observed from Military Land Register/Mutation entry that land measuring 2.88 acres in Freek Hill Colony, Sukkur was leased out to PTCL on the basis of guarantee given by Government of Pakistan, Ministry of Finance vide DO letter dated 28th February, 2011. However, premium of Rs. 51,296,256 and ground rent of Rs. 278,784 were still outstanding against the PTCL.

When pointed out in October 2016, the executive replied that the ML&C Department had approached the Ministry of Finance. The Ministry vide office memorandum dated 25th August, 2016 stated that the settlement would take place according to the said DO letter on receipt of dues from M/s Etisalat. The DAC in its meeting held on 11th January, 2017 was apprised that partial recovery of ground rent amounting to Rs. 55,757 had been made. DAC directed to pursue the matter vigorously to recover the amount. The case may also be taken up with Finance Division, Islamabad for early recovery. Further progress was not reported till finalization of this report. Audit suggests expeditious recovery of outstanding dues. DP-S-279/2016-17 1.7.23 Non-recovery of conservancy charges from Pak Army – Rs. 25.405 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. Cantonment Boards were providing conservancy services regularly to Pakistan Army by concluding agreements with Station Headquarters, but an amount of Rs. 25.405 million, as detailed below, was outstanding upto June 30, 2016. The details are as under;

(Rs. in million) S.No. Name of Units DP No. Amount 1 CB Hyderabad S-275 23.151 CB Malir 2 S-211 2.254 (Rs 30.096 M – Rs 27.842 M) Total 25.405

When pointed out by Audit in August, 2016, the executive stated that the case for recovery of arrears had been initiated with Station HQs. The DAC in its meeting held on 11th January, 2017 was apprised that in case of para at serial No 1, Rs. 27.842 million had been recovered. In respect of para at serial No. 2 it was stated that efforts were being made to recover the amount. DAC directed that recovered amount be got verified from Audit and balance amount i.e. Rs. 2.25 million be recovered within two months. In case of para at serial No. 02, DAC directed that Army authorities be approached for recovery of amount within six months. During verification carried out by Audit, recovery of Rs. 27.842 million in respect of para at serial No. 01 was verified. No progress was reported in case of the other para till finalization of this report. Audit suggests expeditious recovery of conservancy charges. DP-S-211 and 275/2016-17 1.7.24 Non- Recovery of Cantonment Fund Loans and Advances – Rs. 23.107 Million According to rule-42 (1) & (2) of Pakistan Cantonment Accounts Code, 1955, All advances, other than permanent advances and advances from the provident fund, shall be entered in a Register. The Executive Officer shall be responsible for the recovery or adjustment of all 62

such advances and shall bring to the notice of the Board twice a year all cases in which the recovery of adjustment has not been made in due time. Rule-76 of Pakistan Cantonment Account Code, 1955, further provided that all loans received by the Cantonment Board shall be recorded in a register of loans. Each entry in the register shall be attested by the Executive Officer.

In Cantonment Board Clifton, Karachi, a sum of Rs. 22,852,744 was outstanding since long on account of loans given to other cantonment boards. Similarly, a sum of Rs. 255,260 was recoverable from staff on account of advances given to them up to June 2015. When pointed out by Audit in January 2016, the executive replied that letters for refund of loans and advances amounting to Rs. 23.107 million had been issued to all concerned. The para was discussed in the DAC meeting held on 30th January, 2017. The DAC was apprised that a sum of Rs. 1.784 million had been recovered so far. The DAC directed that recovery made so far be got verified from Audit and balance amount be recovered within three months. No record / documents were produced to Audit for verification till the finalization of this report. Audit suggests early recovery of the outstanding amount. DP-S-348/2016-17 1.7.25 Non-receipt of project dues from Housing Directorate, QMG – Rs. 15.000 Million According to Rule-2(A)(3) of The Pakistan Cantonments Account Code, 1955, it is not sufficient that Cantt officer‟s accounts should be correct to his own satisfaction. A disbursing officer has to satisfy not only himself, but also the audit, that a claim, which has been accepted, is valid, that a voucher is complete proof of the payment which it supports, and that an account is correct in all respects.

In Cantonment Board Malir, an amount of Rs. 25.000 million was outstanding on account of sewerage network project against Housing Directorate, QMG Branch, Rawalpindi. It was observed from the accounts that only Rs. 10.000 million were received up to March 2008 and Rs. 15.000 were still recoverable. When pointed out by Audit in August 2016, the executive replied that the case would be initiated with Housing Directorate, QMG Branch. The DAC in its meeting held on 11th January, 2017 directed that amount be recovered within three months. Further progress was not reported till finalization of this report. Audit suggests expeditious recovery of outstanding amount. DP-S-228/2016-17 1.7.26 Non-recovery of composition charges – Rs. 14.852 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. In Cantonment Board Malir, composition charges amounting to Rs. 14.852 million were outstanding despite lapse of considerable time. The details are as under;

(Rs. in million) S.No. Name of Defaulter D.P No Amount

1 M/s Al-Farooq Builders S-213 13.452 2 M/s Orient Housing Services S-214 1.400 Total 14.852

When pointed out by Audit in August 2016, the executive replied that completion plan of buildings were under process. Action would be completed after finalization of completion plan. The DAC in its meeting held on 11th January, 2017 directed that full amount may be recovered and record produced to Audit for verification. No record / document was produced to Audit for verification till finalization of this report. Audit suggests immediate recovery of the outstanding amount. DP-S-213 and 214/2016-17 1.7.27 Overpayment to contractors due to non-deduction of running payments while making final payments – Rs. 4.800 Million According to Rule 65(6)(ii) of the Pakistan Cantonments Account code, 1955, an undertaking shall be obtained from the contractor before the payment is actually made that should the amount of advance paid to him be subsequently found to be more than the cost of the work done in respect of which the advance was paid, he shall refund forthwith the amount overpaid. The Executive Officer shall be responsible for the adjustment of the advance before final payment of the bill. In Cantonment Board Quetta, two running payments amounting to Rs. 4.000 million and Rs. 0.800 million were made to two

contractors namely, M/s Ghulam Hussain & Co. and M/s Aga Salahud- din Bazai & Co. on 18th November, 2013 and 29th June, 2015 respectively. However, the same were not adjusted while making final payments to them, resulting in loss of Rs. 4.800 million to Cantonment Fund. When pointed out in March 2016, the executive agreed to affect recovery as pointed out by Audit. The DAC in its meeting held on 27th December, 2016, was apprised that recovery of Rs.1.071 million had been made. However, the executive objected to the recoverable amount pointed out by Audit. The DAC directed that relevant record/ documents be provided to Audit for examination / verification and reconciliation of objected amount. No record was produced to Audit for verification/ reconciliation till finalization of this report. Audit suggests expeditious recovery of over payment made to the contractors. DP-S-15/2016-17 1.7.28 Overpayment to contractors due to calculation errors /application of incorrect Rates – Rs. 5.795 Million According to Rule-2(A)(3) of The Pakistan Cantonment Account Code, 1955, it is not sufficient that an officer‟s accounts should be correct to his own satisfaction. A disbursing officer has to satisfy not only himself, but also the audit, that a claim, which has been accepted, is valid, that a voucher is a complete proof of the payment which it supports, and that an account is correct in all respects. In Cantonment Board Quetta several cases of overpayments were detected during the financial year 2015-16. The details are as under;

(Rs. in million) S. No DP No. Name of Unit Description Amount 1 S-10 CB Quetta Application of incorrect rates 2.949 2 S-12 CB Quetta Calculation errors 1.925 3 S-13 CB Quetta Calculation errors 0.265 4 S-16 CB Quetta Application of incorrect rates 0.656 Total 5.795

When pointed out in February, 2016 and March 2016, the executive agreed to affect recovery as pointed out by Audit. The DAC in its meeting held on 27th December, 2016, was apprised that partial recoveries had been made. The DAC directed that recoveries may be got verified from Audit and balance amount be recovered within 01 month. Neither record / documents were produced to Audit for verification nor any progress reported till finalization of this report. Audit suggests expeditious recovery of pointed out amount. DP-S-10, 12, 13 and 16/2016-17 1.7.29 Non recovery of road cutting charges – Rs. 4.994 Million According to Rule 2 (5&6) of Cantonment Accounts Code 1955, it is the duty of the executive officer and the staff employed by the Cantonment Board to see that dues of the Board are correctly and promptly assessed, collected and paid in to the treasury. In Cantonment Board Manora, an amount of Rs. 4.994 million was outstanding on account of Road Cutting charges against AGE (Navy) Maintenance, Manora, since January 2009. When pointed out by Audit in January, 2016 the executive did not furnish reply.

The DAC in its meeting held on 27th December, 2016, directed that the recovery be pursued with AGE (Navy) vigorously and amount be recovered within 03 months Further progress was not reported to Audit till finalization of this report. Audit suggests expeditious recovery of cantonment dues. DP-S-107/2016-17 1.7.30 Non Recovery of Sales Tax on auction of vehicles / stores – Rs. 4.235 Million As per Sales Tax Act 1990, amended from time to time, Sales Tax @ 17% is to be recovered on auction amount from Sales Tax registered persons / company and 18% from unregistered persons / companies. In Cantonment Board Clifton Karachi it was observed that: (i) Unserviceable vehicles were auctioned for Rs. 10,485,000 during 2014-15 but Sales Tax amounting to Rs. 1,887,300 was not deducted. (ii) Unserviceable stores were auctioned for Rs. 13,100,000 from May, 2011 to March, 2015 but Sales Tax @ 18% Rs. 2,358,000 was not collected. When pointed out by Audit in January 2016, the executive replied that SRO for levy of Sales Tax against auctions had never been served upon this office nor ever collected. The para was discussed in the DAC meeting held on 30th January, 2017. The DAC directed that the amount of Sales Tax be recovered within two months. No progress was reported to Audit till finalization of this report.

Audit suggests expeditious recovery of the outstanding amount. DP-S-334 and S-339/2016-17 1.7.31 Non-recovery of shop board fee from contractor – Rs. 2.775 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. In Cantonment Board, Hyderabad contract for collection rights of shop board fee for the financial year 2014-15, was awarded to M/s. H.S. Enterprises for Rs. 11,100,000. Scrutiny of record revealed that Rs. 2,775,000 were still recoverable from the contractor. When pointed out by Audit in August, 2016, the executive stated that F.I.R. had been lodged against the said contractor. The DAC in its meeting held on 11th January, 2017 directed that civil suit be filed against the contractor for recovery of Government dues. Case may be processed to black list the contractor. Further progress was not reported till finalization of this report. Audit suggests expeditious recovery of pointed out amount. DP-S-276/2016-17 1.7.32 Irregular retention of income tax amount of – Rs. 2.143 Million Section 160 of Income Tax Ordinance 2001 provides that any tax that has been deducted shall be paid to the Commissioner by the person making the deduction within the time and in the manner as may be 69

prescribed. Section 161 of Income Tax Ordinance 2001 provides that where a person fails to pay the tax to the Commissioner as required under section 160, 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. In Cantonment Board, Korangi Creek, Rs. 2,143,477 were deducted on account of Income Tax from suppliers/contractors during the year 2015-16, but the same was not deposited into Government treasury. When pointed out by Audit in October, 2016 the executive stated that Rs 2,268,594 were payable to the FBR. The Board had approved to clear the financial liability. The para was discussed in the DAC meeting held on 30th January, 2017. The DAC directed that the objected amount be deposited into Government treasury and got verified from Audit. No record / documents were produced to Audit for verification till finalization of this report. Audit suggests early deposit of income tax deducted at source in government treasury. DP-S-388/2016-17 1.7.33 Non-recovery of income tax on account of auction – Rs. 1.110 Million As per section 236(A) of Income Tax Ordinance 2001, the rate of collection of tax shall be 10% of the gross sale price of any property or goods sold by auction. In Cantonment Board Manora, income tax amounting to Rs. 1,110,600 was not recovered during the financial year 2014-2015, from eight contractors on account of auction of different services.

When pointed out by Audit in January, 2016 the executive did not furnish reply. The DAC in its meeting held on 27th December, 2016, was apprised that notices to the contractors had been issued and necessary proceedings for initiation of disciplinary action against responsible staff had been recommended. The DAC directed that the recovery of Income tax be made within 01 month and disciplinary proceedings against the responsible be finalized within 02 months. Further progress was not reported till finalization of this report. Audit suggests expeditious recovery of the pointed out amount. DP-S-108/2016-17 1.7.34 Non-recovery of auction dues from contractors – Rs. 1.345 Million Rule-2(A)(1) of the Pakistan Cantonments Account Code, 1955, states 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. In Cantonment Board Manora, Rs. 1.345 million were outstanding against five contractors on account of auction of toll collection etc. The executive did not recover full contract amount till to date although the contracts were awarded in 2014-15. When pointed out by Audit in January, 2016 the executive did not furnish reply. The DAC in its meeting held on 27th December, 2016, was apprised that efforts were being made for recovery of the amount. The DAC directed that outstanding amount be recovered within 02 months.

No progress of the case was reported to Audit till finalization of this report. Audit suggests early recovery of the outstanding amount. DP-S-110/2016-17 1.8 Loss to State 1.8.1 Loss due to encroachment of Government land – Rs. 75.094 Million According to Rule-26(ix) (a) of Cantonment Land Administration Rules-1937, an encroachment is an un-authorized occupation of government land and should not be permitted to remain in existence under any circumstances unless it is properly regularized. During audit of Military Estate Office Peshawar, it was noticed that A-I land within Cantonment area was encroached un- authorizedly, which resulted into loss of Government revenue amounting to Rs. 75,093,600 on account of rent. When pointed out by Audit in February 2016, it was replied that efforts had been made for removal of encroachment as most of A-I land was in occupation of Provincial Government Departments. The para was discussed by the DAC in its meeting held on 4th October, 2016. DAC directed that the land encroached by the Provincial Government be got vacated. No further progress was reported till finalization of this report. Audit stresses for implementation of DAC‟s directive. DP-N-486/2015-16

1.8.2 Loss to Cantonment fund due to non-finalization of cantonment code lease into regular lease – Rs. 19.754 Million In terms of Para-3 to Government of Pakistan Ministry of Defence Rawalpindi policy-2007, “premium @ 20% of Revenue Rate for conversion of residential accommodation into Regular lease will be charged”. While examining the accounts of Cantonment Board Nowshera, it was noticed that the lessees of HATA No 1054, Survey No. 269/940 held on schedule-VI for “Residential Purpose” applied for conversion of above lease in schedule-IX-C of CLA Rules-1937 for “Residential Purpose” on 13th December, 2012 as evident from “Schedule- V Form” but premium, development charges and ground rent amounting to Rs. 19,754,072 was not recovered against the property, which needed to be deposited into cantonment fund. When pointed out by Audit in January, 2016, it was replied that the case for conversion of Schedule IX-C of the CLA rules 1937 for residential purpose into regular lease in Schedule IX-C was forwarded to RHQ Peshawar. The para was discussed by the DAC in its meeting held on 22nd December, 2016. The DAC directed that the case for obtaining sanction of the competent authority for finalization of cantonment code lease into regular lease be finalized. No further progress was reported till finalization of this report. Audit recommends early regularization action. DP-N-65/2016-17

1.8.3 Loss to cantonment fund due to irregular conclusion of parking fee contract by Station HQ – Rs. 4.000 Million As per Para-259 of Cantonment Board Act-1924, “Any tax or any other money recoverable by a Board under this Act may be recovered together with the cost of recovery either by suit or on application to a Magistrate having jurisdiction in the Cantonment”. During audit of Cantonment Board Murree, it was noticed that contract of parking fee was awarded for financial year 2009-10 @ Rs. 910,000 per annum. The subject contract was cancelled by the Cantonment Board authorities vide Station Headquarters letter dated 13th October, 2009 but recovery of parking fees @ Rs. 1,000,000 P.A for the period 2009 to 2013 was not made from the Station Head Quarter Murree, which needed to be recovered. When pointed out by Audit in August 2014, it was replied that the cases regarding recovery of parking fees and possession of parking area had already been taken up with Station Headquarter. The reply was not convincing, as outstanding parking fees needed to be recovered and deposited into Cantonment fund. The para was discussed by the DAC in its meeting held on 4th October, 2016. DAC pended the Para and decided to discuss the same in presence of rep of Station HQ Murree. No further progress was reported till finalization of this report. Audit stresses for early recovery of parking fees. DP-N-505/2015-16

1.9 Mis-procurement of Stores 1.9.1 Award of contracts in violation of Public Procurement Rules – Rs. 28.362 Million According to Rule-12(1,2) of PPRA-2004, all procurements over one hundred thousand rupees and upto 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. In Cantonment Board Clifton, different contracts were concluded during the financial year 2014-15, without advertisement on PPRA website/ newspapers. The details are listed below; (Rs. in million) S # DP No. Description Amount 1 S-378 Local purchase of medical equipment 19.318 2 S-338 Local purchase of Pre-casted barriers 5.750 3 S-380 Local purchase of firefighting equipment 3.294 Total 28.362

When pointed out by Audit in February 2016, the executive submitted evasive replies without substantive evidence. The paras were discussed in the DAC meeting held on 30th January, 2017. The DAC directed that violation of PPRA Rules may be got regularized. No further progress was reported to Audit till the finalization of this report. Audit suggests regularization of PPRA Rules violation. DP-S-378, 338 and 380 /2016-17

Pakistan Air Force 1.10 Recoverables / Overpayments 1.10.1 Non-recovery of Base Trans-receiver Station tower fee – Rs. 9.723 Million According to Military Lands and Cantonment Department Rawalpindi letter No. 50/14/Land/MLC/2005 dated 24th June, 2005, the cellular companies will be required to pay an antenna/tower fee @ Rs. 20,000 per month with annual enhancement of 10%. While examining of the accounts of following units, it was noticed that 20 BTS tower/antenna were installed at different locations, but tower/antenna fee amounting to Rs. 9.723 million was not recovered from the cellular companies. (Rs. in Million) S # DP No. Unit / Formation Amount 1 DP-N-269/2015-16 GE (Air), Sargodha 2.811 2 DP-N-292/2015-16 PAF Base Lahore 2.112 3 DP-N-510/2015-16 GE (Air) Maintenance, Islamabad 4.800 Total 9.723

When pointed out by Audit in May, August and December 2014, it was replied that concerned authorities had been approached for deposit of amount. The paras were discussed by the DAC in its meeting held on 15th December, 2016. The DAC directed that objected amount be recovered. No further progress was reported till finalization of this report. Audit stresses for early recovery action. DP-N-269, 292 and 510/2015-16

1.10.2 Non-recovery of House Rent Allowance from PAF officers living in married accommodation – Rs. 15.830 Million According to Rule-66 of Pay and Allowances Vol-II 1999, Married officers not provided with Government/hired/requisitioned married accommodation shall be entitled to House Rent Allowance. While examining the accounts of following units, it was noticed that certain PAF officers were living in Government accommodations but were also drawing HRA in their monthly pay and allowances, which resulted into loss to state amounting to Rs. 15.830 million. (Rs. in Million) S # DP No. Unit / Formation Amount 1 DP-N-272/2015-16 PAF Base Lahore 3.317 2 DP-N-317/2015-16 PAF Base MM Alam, Mianwali 4.263 3 DP-N-439/2015-16 PAF Base Mushaf 4.960 4 DP-N-91/2016-17 PAF Base, Shorkot 3.290 Total 15.830

When pointed out by Audit, it was replied that HRA was admissible to all married officers living in any accommodation other than proper service accommodation vide MAG letter dated 6th December, 2003. However 5% of the recovery of the pay had been affected from the officers. The reply was not acceptable as Army officers provided with government accommodations including BOQs and MOQs shall not receive HRA as per rule cited above. The paras were discussed by the DAC in its meeting held on 15th December, 2016. The DAC pended the paras till formulation of policy on house rent allowance.

No further progress was reported till finalization of this report. Audit suggests recovery of the objected amount till finalization/approval of policy. DPs-N-272, 317 and 439/2015-16, DP-N-91/2016-17 1.10.3 Non-deposit of Government share into Government Treasury -Rs. 149.793 Million Para-2 (b) (1) of the A-1 land Policy issued vide Government of Pakistan, Ministry of Defence Rawalpindi letter dated April 02, 2008 , the rent shall be charged @ 6% per annum of existing revenue rate (earlier known as DC rates) of the said land used in commercial projects and 25% of the calculated rent will be deposited into Government treasury. In PAF Base Masroor, Karachi, 1.830 acres of A-1 land within the Base were given to a commercial entity, M/s Shaheen Knitwear. The government share of rent amounting to Rs. 149,793,658 from July 2008 to June 2016, as per A-1 Land Policy was not deposited into government treasury. When pointed out by Audit in December 2016, the executive stated that the land was acquired by M/s Shaheen Knitwear on lease from Military Estate Office (MEO) Karachi and rent was being paid to MEO as per lease agreement. The reply was not acceptable as A-1 Land could not be awarded on lease. The para was discussed in the DAC meeting held on 30th January, 2017. The DAC was apprised that a Board of Officer had been ordered to determine the Government‟s share in rent. The DAC directed that the Board proceeding may be completed immediately and Government share be deposited in treasury within two months. No progress was reported to Audit till the finalization of this report.

Audit suggests early deposit of government„s share in treasury. DP-S-321/2016-17 1.10.4 Non-recovery of Sales Tax on services – Rs. 17.554 Million The Sindh Sales Tax on Services Rules, 2011 prescribes the procedure and manner for collection and payment of sales tax on taxable services @ 16%. In Project Shahbaz Islamabad, a contract for consultancy services was concluded between Pakistan Air Force and M/s Kashif Aslam and Associates (Pvt) Ltd in March, 2009, for up gradation of PAF Base Shahbaz, Jacobabad. An amount of Rs. 109.714 million was paid to the contractor upto October, 2015 for services rendered. However, Sales Tax on services amounting to Rs. 17.554 million was not recovered from the contractor. When pointed out by Audit in May 2016, the executive replied that Sales Tax was neither paid nor deducted from contractor as the contract was executed within cantonment limits where Sales Tax on services was not applicable. Reply of executive was not tenable. The Sales Tax on services was applicable without any exemption. The DAC meeting held on 10th January, 2017, directed that documents be provided to Audit for examination / verification. No record was produced to Audit till finalization of this report. Audit suggests expeditious recovery of pointed out amount. DP-S-247/2016-17

1.10.5 Loss to state due to less recovery of water charges from consumers – Rs. 9.129 Million As per appendix “O” (i) of Defence Services Rules for MES, 1998 the all Pakistan flat rate for water will be notified from time to time. The annexed note to appendix „O‟ further elaborates that any increase of water rates by supplying agency when notified shall be recovered in addition to the rates specified above. In GE (Air) Masroor Karachi, it was observed that Rs. 100 per 1000 Gallons of water were paid to Karachi Water & Sewerage Board (KW & SB) and an amount of Rs. 5,000,000 was also paid for supply of fresh water through water tankers during the financial year 2013-14. However, recovery @ Rs. 40 per month was made from consumers for water supplied. This was in contravention of above rule and resulted into less recovery of Rs. 9,129,600. The details are as under;

S.# Accommodation Recovery per Recovery Difference Recovery Type & No month as per per month (Rs.) Rules made from Consumers 1 749 Rs. 960 (9600 Rs. 40 Rs. 920 920 x 749 x M.O.Q GL / 1000 GL x 12= 8,268,960 Rs. 100 Per 1000 GL = 960) 2 B.O.Q Rs. 480 (9600 Rs. 40 Rs. 440 440x163x12= 163 GL / 1000 GL x 860,640 50% for B.O.Q) Total 9,129,600

Water charges were being recovered @ Rs. 960 per month in Pakistan Navy formations. When pointed out by Audit in November 2016, the executive replied that PAF Base Masroor was facing shortage of water

since long, therefore, rate of water charges were not revised. The reply was not tenable. The DAC in its meeting held on 10th January, 2017 was apprised that recovery affected @ Rs. 40 per month was already on higher side. The DAC directed that the matter be discussed with Audit to resolve the issue within one week. No record was produced or discussion held with Audit by the executive till finalization of this report. Audit suggests that either special circumstances under which subsidized rate is being charges may be explained or pointed out amount may be recovered expeditiously. DP-S-177/2016-17 1.10.6 Non-deduction of Sales Tax on account of purchase of furniture – Rs. 8.736 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. Project Shahbaz, Air Head Quarter, Islamabad, purchased furniture items, costing to Rs. 39.606 million, during the year 2015-16. However, Sales Tax of Rs. 8.736 million was not deducted on those supplies. When pointed out by Audit in June 2016, executive replied that Sales Tax was not applicable on construction package. The para was discussed in the DAC meeting held on 30th January, 2017. The DAC was apprised that as per Clause-14(iii) of Sindh Sales Tax on Services Act, 2011 Government‟s civil works were

exempted from levy of Sales Tax. The DAC directed that relevant record / documents may be got verified from Audit. No record / document was produced to Audit during verification carried out on 1st February, 2016. The rule quoted by the executive were not relevant as Audit‟s objection was not on non-deduction of Sales Tax on services. Audit suggests expeditious recovery of the Sales Tax amount in question. DP-S-313/2016-17 1.10.7 Non-recovery of training charges from foreign trainees – Rs. 5.865 Million JSI-4/2006 provides complete procedure for recovering of training and allied charges from the Governments of foreign trainees attending courses in various institutions of the Pakistan Armed Forces through their respective embassies. In PAF Base Masroor Karachi, Rs. 5,865,900 (US $ 58,659) were outstanding against 34 foreign trainees from different countries on account of training charges upto 31st December, 2014. When pointed out by Audit in February 2015, the executive replied that recovery of outstanding training charges was in process. The DAC in its meeting held on 10th January, 2017 directed that efforts be made to recover the outstanding amount expeditiously. No progress was reported to Audit till finalization of this report. Audit recommends expeditious recovery of the training charges. DP-S-174/2016-17

1.11 Loss to State 1.11.1 Loss to State due to excess consumption of Sui gas – Rs. 21.369 Million Under Rule-81(a) of Quarter and Rents 1985, “free supply of sui gas shall be made at places where fire wood and K-II is so authorized for cooking/heating purpose as per scale given in the rule. Excess consumption shall be paid by the consumer at the supplying agency rates”. While examining the accounts of GE (Air) Rafiuqui, it was noticed that an amount of Rs. 24,305,690 was paid to the SNGPL on account of Sui Gas charges. The free authorization of barracks, messes, and hospital came to Rs. 2,936,794, which resulted into loss to state due to payment of sui gas bills in excess of free authorization. When pointed out by Audit in September 2015, it was replied that mess authorities would be approached for depositing the amount. The para was discussed by the DAC in its meeting held on 15th December, 2016. The DAC directed for verification of Board of Officers for authorization of Sui Gas besides reconciliation of amount with Audit. No further progress was reported till finalization of this report. Audit stresses for recovery of sui gas charges. DP-N-203/2015-16 1.12 Irregular / Un-authorized expenditure 1.12.1 Un-authorized conclusion of contract beyond financial power – Rs. 33.000 Million

Under Rule-89 of Financial Regulations Volume-I, 1986 as amended vide Government of Pakistan, Ministry of Defence, letter No.

F.3/98/D-15, dated 23rd February, 2008, the financial powers of Base Commander, AOC and ACAS for concluding the contract are Rs. 13,500,000, Rs. 6,000,000 and Rs. 4,500,000 respectively. While examining the accounts of PAF Hospital MM Alam Mianwali, it was noticed that contract valuing Rs. 3,300,0000 for life saving medicine of 2014-15 was concluded by the AOC/ACAS beyond financial powers. The sanction of contract was required to be obtained from CAS instead of AOC, which resulted into unauthorized payment of Rs. 33,000,000 and needed regularization action. When pointed out by Audit in November 2015, it was replied that sanctions for local purchase of NIV lifesaving medicines were accorded by the OC hospital/Base Commander being competent authority. The para was discussed by the DAC in its meeting held on 15th December, 2016. The DAC directed the executive to amend the existing policy so as to remove ambiguity in future cases. The DAC directed for verification of contracts from Audit. No further progress was reported till finalization of this report. Audit suggests for early regularization. DP-N-443/2015-16 1.12.2 Un-authorized payment of Special Messing Allowance/Daily Messing Allowance to Airmen and Officers – Rs. 23.225 Million According to Para-39 and 81 of Pay and Allowances Regulation (PAF) 1998 & Ministry of Defence letter No. 3/331/PP&A dated 8th May, 1999, SMA is only admissible for trainings, camps and exercises in operational area. While examining the accounts of PAF Base Lahore and Mushaf, it was noticed that SMA/DMA amounting to Rs. 23.225 million was paid to officers, airmen and civilian employees who were deployed

for security duties within Base area, which was not declared operational area and thus resulted into un-authorized payment of SMA/DMA. When pointed out by Audit in November, 2015 it was replied that the Bases had the status of operational area/activities keeping in view of prevailing security situation, The reply was not acceptable, as both bases were not declared as operational area. The para was discussed by the DAC in its meeting held on 15th December, 2016. The DAC directed for verification of deployment orders duly issued by the competent authority from audit. No further progress was reported till finalization of this report. Audit stresses for implementation of DAC‟s directives. DP-N-274 and 437/2015-16 1.12.3 Irregular construction of non-public buildings from public fund – Rs. 5.660 Million Rule-72(a) of Quarter and Rents Rules, 1985 refers to re- appropriation of surplus military buildings, if required for use as welfare centers, without any extra cost to Government subject to the condition that such re-appropriation shall not entail new construction at a later date. In Project Shahbaz, Air Head Quarters (AHQ), Islamabad, a building for PAFWA, a non-public organization, was constructed, costing to Rs. 5,660,722 through the budget allocation (2014-15) for Project Shahbaz, AHQ Islamabad from Defence budget in violation of rules. The MES Scale of Accommodation for Defence services also did not authorize construction of such building. When pointed out by Audit in June 2016, the executive replied that in order to facilitate the Base personnel, the building was constructed as per policy in vogue. The reply of executive was not acceptable as expenditure was incurred in violation of rules.

The para was discussed in the DAC meeting held on 30th January, 2017. The executive stated that PAFWA Center was constructed as training center for welfare of troops. The same was allowed under Para 16 of the Defence Services Accommodation Scales, 2000 and Rule-72(a) of the Quarter & Rents Rules, 1985. The DAC directed that the relevant record / document may be provided to Audit for verification. The rules had been misquoted in the DAC meeting. The Para 16 of the Defence Services Accommodation Scales 2000, does not mention training center. Moreover, the Rule-72(a) of Quarter & Rents Rules, 1985 does not allow construction of building for use as welfare center. Audit suggests regularization of the expenditure. DP-S-316/2016-17 1.13 Mis-procurement of stores 1.13.1 Award of contracts in violation of Public Procurement Rules – Rs. 15.614 Million According to 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 the 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”. While examining the accounts of GE (Air) Mushaf Sargodha, it was noticed that 02 contracts amounting to Rs. 15.614 Million were concluded without calling for open tendering in newspapers and PPRA‟s website, which was violation of above PP rule. When pointed out by Audit in August, 2016, it was replied that expenditure would be regularized.

The para was discussed by the DAC in its meeting held on 15th December 2016. The DAC directed for verification of relevant record. No further progress was reported till finalization of this report. Audit suggests prompt action for regularization of mis-procured amount besides fixing responsibility on concerned officers/officials. DP-N-152/2016-17 1.13.2 Irregular award of contracts without open tendering – Rs. 2,299.610 Million As per Rule 15, PPRA Rules 2004, a procuring agency, prior to the floating of tenders, invitation to proposals or offers in procurements proceedings, may engage in pre-qualification of bidders in case of services, civil works etc. In Project Shahbaz, Air Head Quarter, Islamabad three different contracts for construction work, costing Rs. 2,299.610 million, were concluded in 2013-14. It was observed that contracts were awarded after advertisement for pre-qualification of contractors was published in newspapers. However, no tenders were floated after pre-qualification, as required under Rule-15 of PPRA Rules, 2004. When pointed out by Audit in June 2016, the executive replied that PPRA rules were followed. Advertisement was published in newspapers on 25th July, 2013 and on PPRA website. The para was discussed in the DAC meeting held on 30th January, 2017. The executive stated that newspapers clippings had been obtained from concerned quarters for verification. The DAC directed that relevant documents / record be provided to Audit for verification. Verification of documents / record was carried out on 1st February, 2017. It was verified from record that only advertisement for pre-qualification of contractors was published in newspapers.

Audit suggests regularization of the PPRA Rules violation. DP-S-314/2016-17 1.13.3 Irregular award of contracts without open tendering – Rs. 61.724 Million As per Rule 12, PPRA Rules 2004, All Procurement opportunities over two million rupees should be advertised on the Authority‟s 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. In two PAF units/formations different contracts for costing Rs. 61.724 million were concluded without advertisement on PPRA website/ newspapers. The details are listed below; (Rs. in million) S # Name of Unit / Formation DP No. Amount 1 Project Shahbaz, AHQ, Islamabad S-323 37.787 2 Project Shahbaz, AHQ, Islamabad S-333 20.167 3 PAF Base, Masroor, Karachi S-202 3.770 Total 61.724

When pointed out by Audit in March 2016 and June 2016, the executive in respect para at serial No. 1 stated that the contract was awarded to contractor on the basis of experience. In respect of para at serial No 2, it was replied that tender was not published due to security reasons. In respect of para at serial no 3, the executive stated that contracts were offered to prequalified contractors. The replies of the executive were not convincing as deviation from advertisement requirement was permissible with prior approval of the authority. The paras were discussed in the DAC meetings held on 10th and 30th January, 2017. The DAC directed that relevant documents / record be provided to Audit for verification.

Verification of documents / record of paras at serial No. 1 and 2 was carried out on 1st February, 2017. No documentary evidence regarding prior approval for deviation from PPRA requirement was produced. No progress regarding para at serial No. 3 was reported till finalization of this report. Audit suggests regularization of the PPRA Rules violation. DP-S-323, 333 and 202/2016-17 1.13.4 Irregular procurement of medicine – Rs. 7.437 million According to Rule-10 of PPRA Rules 2004, “Specifications shall allow the widest possible competition and shall not favor any single contractor or supplier nor put others at a disadvantage. Specifications shall be generic and shall not include references to brand names, model numbers, catalogue numbers or similar classifications. However if the procuring agency is convinced that the use of or a reference to a brand name or a catalogue number is essential to complete an otherwise incomplete specification, such use or reference shall be qualified with the words “or equivalent”. In PAF Base Malir, Senior Medical Officer, issued demand for medicines using brand names instead of generic names in violation of rule during the year 2014-15. Thus entire expenditure of Rs. 7,437,755 stood as irregular. When pointed out by Audit in December 2015, executive replied that purchases were made as per prescription of specialists with brand names on basis of efficacy. The reply is not tenable. As per Rule 10, brand names could be used only with the words “or equivalent”. The DAC in its meeting held on 27th December, 2016 directed that relevant record be provided to audit for verification.

No record was produced to Audit for verification till finalization of this report. Audit suggests regularization of the PPRA Rules violation. DP-S-136/2016-17

Pakistan Navy 1.14 Recoverables / Overpayments 1.14.1 Non-recovery of allied charges – Rs. 38.009 Million According to Rule-442 of Defence Services Regulations for MES, 1998, GE is responsible for making demands for payment of all revenues and for taking steps for its prompt realization. In three MES formations of Navy Rs. 38.009 million were outstanding on account of allied charges up to June 2016. The details are as under; (Rs. in million) S. No. Unit/Formation DP No. Amount 1 GE (Navy) East, Karachi S-326 32.268 2 GE (Navy) South, Karachi S-243 4.040 3 GE (Navy) Logistics Karachi S-327 1.701 T o t a l 38.009

When pointed out by Audit in August 2016 and October 2016, the executive replied that efforts were being made to recover the outstanding amount. The paras were discussed in the DAC meetings held on 12th and 30th January, 2017. The DAC was apprised in respect of para at serial No 1 that Rs 15.375 million had been recovered. In case of remaining paras, the executive stated that efforts were being made to recover the amount. The DAC directed that amount recovered so far be got verified from Audit and balance amount be recovered within three months. No record /documents were produced to Audit for verification till finalization of this report.

Audit suggests expeditious recovery of the pointed out amount. DP-S-326, 243 and 327/2016-17 1.14.2 Non-recovery of income tax from contractors – Rs. 26.986 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. In various Naval units, a sum of Rs 26.986 million on account of income tax was not deducted/less deducted from the final bills of contractors. The details are as under; (Rs. in million) S.No. Unit/Formation DP No. Amount 1 GE (Navy) Central Construction, Karchi S-259 8.531 2 GE (Navy) Construction, Turbat S-149 5.897 3 PNS Shifa, Karachi S-131 5.068 4 PNS Shifa. Karachi S-126 2.832 5 PNS Shifa, Karachi S-153 1.252 6 GE (Navy) Central Construction, Karchi S-260 0.910 7 GE (Navy) East, Karachi S-06 0.799 8 GE (Navy) Comwest, Gawadar S-40 0.518 9 GE (Navy) Fleet, Karachi S-182 0.503 10 GE (Navy) Central Construction, Karchi S-07 0.417 11 PNS Karsaz, Karachi S-37 0.259 T o t a l 26.986

When pointed out by Audit from August 2015 to August 2016, the executive replied that recovery in some cases was under process, whereas in other cases income tax was rightly deducted.

The DAC in its meetings held on 11th and 12th January, 2017 was apprised in respect of paras at serial No 2, 6, 9 and 11 that recovery was in process. In respect of paras at serial No 1, 3, 4, 5, 7, 10, and 12, the executive stated that the recovery of Income Tax was rightly deducted. The DAC directed that balance amount of tax may be recovered and got verified from Audit. The executive was also directed to provide record/ documents to Audit for examination/verification that Income Tax was rightly deducted. No record / documents were produced to Audit till finalization of this report. Audit suggests expeditious recovery of the pointed out amount. DP-S 259, 149, 131, 126, 153, 260, 06, 40,182, 07 and 37 /2016-17 1.14.3 Non-recovery of stamp duty from contractors – Rs. 16.370 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. As per Government of Sindh Finance Act 2009, “Stamp duty of thirty paisa for every hundred rupees or part thereof of the amount of the contract will be charged”. In various units/formations of Pakistan Navy Rs. 16.370 million on account of stamp duty was not recovered against certain contracts during the years 2014-15 and 2015-16. The details are as under; (Rs. in Million) S.No. Unit/Formation DP No. Amount 1 GE (Navy) Construction-I, Ormara S-365 6.195 2 GE (Navy) Central Construction, Karachi S-257 4.304 93

3 PN MSD, Karachi. S-62 1.300 4 GE (Navy) Construction Turbat S-104 1.099 5 AGE (Navy) Mehran, Karachi S-188 0.927 6 PNS Raza, Karachi S-74 0.761 7 AGE (Navy) Maint. Manora, Karachi S-181 0.511 8 GE (Navy) South, Karachi S-298 0.446 9 CMES (Navy) Comcoast, Karachi S-05 0.326 10 PNS Shifa, Karachi S-130 0.296 11 CMES (Navy) Comlog, Karachi S-04 0.205 T o t a l 16.370

When pointed out by Audit from February 2015 to October 2016, the executive stated that Finance Act of Government of Sindh was not applicable on departments working under the Federal Government. The DAC in its meetings held on 11th, 12th and 30th January, 2017 directed that clarification from MoD may be obtained and produced to Audit for verification. No progress of the case was reported to Audit till finalization of this report. Audit suggests expeditious recovery of the pointed out amount. DP-S-365, 257, 62 104, 188, 74, 181, 298, 05, 130, and 04/2016-17 1.15 Loss to State 1.15.1 Blockage of public money due to non-disposal of inventory – Rs. 3,476.918 Million According to Rule 0214 (3) (a) (2) of Financial Regulations (Navy) 1993, disposal of unserviceable, waste and scrap stores of any value held on charge of various PN Store Depots, will be arranged by commanding officers of the respective stores depots through public auction in accordance with instructions contained herein and detailed procedure laid down in Annex-E.

In PNS Raza, Karachi, the Standing Stores Disposal Committee (SSDC) in its meeting held on 19th June, 2013, declared 20,384 inventory items of aircrafts as surplus/redundant, having assessed value of Rs. 3,476,917,759. The SSDC recommended disposal of the items by finding potential buyers. However, the same could not be disposed till the close of audit. When pointed out by Audit in February 2016, the executive stated that after SSDC‟s recommendations, continuous efforts had been made to sell the spares to prospective buyers on every platform. The DAC in its meetings held on 11th January, 2017 directed that efforts be made for disposal of the store at the earliest. No progress was reported to Audit till finalization of this report. Audit suggests early disposal of the inventory. DP-S-100/2016-17 1.16 Irregular / Un-authorized expenditure 1.16.1 Irregular administrative sanction and conclusion of contracts beyond sanctioning power – Rs. 1,082.473 Million According to Table A of the Para 25 and the Para 389 of Defense Services Regulations for MES, 1998, the power of administrative sanction of DCNS is upto 30 million and the contractual powers of E-in-C and DW& CE are Rs. 35 million and Rs. 30 million, respectively. In GE (Navy) Central Construction, Karachi, seven contracts, each valuing more than Rs. 35 million, totaling to Rs. 1,082.473 million were sanctioned by DCNS(A) and contracts accepted by DW&CE, beyond their respective powers. Each contract required to be sanctioned by Government of Pakistan and accepted by E-in-C with prior financial concurrence.

When pointed out by Audit in August 2016, the executive stated that contracts were concluded by DW& CE. The GE office only executed the works. The DAC in its meeting held on 12th January, 2017 directed that action be taken to get the violation regularized. No progress was reported to Audit till finalization of this report. Audit suggests regularization of the expenditure. DP-S-256/2016-17 1.16.2 Irregular construction of building – Rs. 174.151 Million According to the items mentioned in BQ of construction contracts, the number of days required for completion of ground floor were as under:

As per BQ No. of Days 1. Excavation 2 2. PCC foundation 5 3. RCC footing foundation 28 4. Beams 28 5. Roof slabs 28 According to BQ minimum days required for ground floor 91

In GE (Navy) Central Construction, Karachi, 3 contracts for construction of three separate buildings (ground plus three floors each) amounting to Rs 174,151,053 were executed during 2015-16. It was observed that each building was completed and paid within a period of 80 to 86 days. However, minimum 91 days were required for execution of work for only ground floor structure. When pointed out by Audit in August 2016, the executive stated that the procedure was adopted as mentioned in Schedule of Rates.

DAC in its meeting held on 12th January, 2017 was apprised that works were executed under para -17 of DSR 1998. The DAC directed to hold fact finding inquiry, fix responsibility, take disciplinary action and get the irregular work regularized. No progress was reported to Audit till finalization of this report.

Audit suggests regularization of the expenditure. DP-S-265/2016-17 1.16.3 Unauthorized payment of final bill to contractors before completion of works – Rs. 30.571 Million According to Para 412 of Defence Services Regulations- 1998, 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 AGE (Navy) Mehran Karachi, various contracts were concluded by the CMES/DW&CE and work orders issued by the AGE (Navy) Mehran. A sum of Rs. 30, 571,143 was paid to contractors against the final bills, but works were still in progress as per record. The final bills were paid to contractors in advance just to avoid lapse of funds. When pointed out by Audit in September 2016, the executive did not furnish reply. The para was discussed in the DAC meeting held on 31st January, 2017. The DAC directed the executive to hold a fact finding inquiry, fix responsibility and take disciplinary action those found responsible. Furthermore, regularization action may also be initiated. No progress was reported to Audit till the finalization of this report. Audit suggests regularization of unauthorized payment. DP-S-331/2016-17 97

1.16.4 Irregular purchase of non-schedule furniture – Rs. 2.321 million Section II, Para 182 of Defence Services Regulations for MES, 1998 states that Articles of Barrack & Hospital furniture will be manufactured in accordance with the general descriptions and dimensions sanctioned by the Government of Pakistan. Further, Section II, Para-181 states that authorized scale of furniture will not be exceeded without the previous sanction of the Government of Pakistan. In CMES (Navy), COMPAK, a sum of Rs. 2.321 million was spent on procurement of special/non-schedule furniture items under different contracts without obtaining sanction from the Government of Pakistan as per rules. Therefore, the expenditure was held irregular in audit. When pointed out by Audit in December 2015, the executive stated that HQ COMPAK had been approached for Ex-Post Facto sanction. The DAC in its meetings held on 11th January, 2017 directed that violation may be got regularized from competent Authority.

Audit suggests regularization of the expenditure. DP-S-111/2016-17 1.17 Mis-procurement of stores 1.17.1 Award of contracts in violation of Public Procurement Rules – Rs. 2.600 Million According to Rule-12 (1) of Public Procurement Rules 2004 “procurements over one hundred thousand rupees and up to the limit of two million rupees shall be advertised on the Authority‟s website in the manner and format specified by regulation by the Authority from time to time. These procurement opportunities may also be advertised in print media, if deemed necessary by the procuring agency”. 98

While examining the accounts of PNS Zafar Islamabad, it was noticed that an expenditure amounting to Rs. 2.600 million was incurred on procurement of stores for improvement of security without calling for open competition through newspapers and PPRA‟s website, which was violation of above PP Rule. When pointed out by Audit in November 2015, it was replied that due to high level of security threats, option of advertisement was not opted. However, admin approval was obtained for inviting contractors having cleared security from Naval for said work in the light of PPRA Rule-42(c). The para was discussed by the DAC in its meeting held on 16th December, 2016. The DAC directed for verification of competent authority orders invoking emergency for procurement of equipment. No further progress was reported till finalization of this report. Audit stresses for early regularization action. DP-N-85/2016-17 1.17.2 Finalization of tenders in violation of PPRA Rules – Rs. 519.869 Million According to PPRA Rule-2 (1) (c) “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. In PN Medical Store Depot, Karachi tenders for procurement of drugs/medicines, totaling to Rs. 519.869 million were published inviting bids only from registered firms during the year 2014-15. Invitation of tenders from only registered firms was in violation of PPRA Rules which required open / competitive bidding in procurement process.

When pointed out by Audit in December 2015, the executive stated that scrutiny method was adopted due to security reasons and only registered persons were allowed to participate in tenders as directed by HQ COMKAR. Reply was not convincing as PPRA Rules provided equal opportunities to all interested parties while registration imposed bar and encouraged collusive/ limited competition to favor a few. The DAC in its meetings held on 11th January, 2017 directed the executive to get the violation of PPRA Rules regularized from the competent Authority. No progress of the case was reported till finalization of this report.

Audit suggests regularization of the PPRA Rules violation. DP-S-88/2016-17 1.17.3 Conclusion of contracts through negotiations in violation of PPRA Rules – Rs. 194.864 Million Rule-40 of PPRA Rules, 2004, states that “Save as otherwise provided, there shall be no negotiations with the bidder having submitted the lowest evaluated bid or with any other bidder; Provided that the extent of negotiation permissible shall be subject to the regulations issued by the Authority.” Furthermore, Rule 38 states that “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.” In PN Medical Store Depot, Karachi various firms submitted bids in response to tenders invited by the Unit, amounting to Rs. 194.864 million. The executive first selected firms from among the bidders without regard to rates offered by them. Contracts were then

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awarded to the selected firms after holding negotiations. Thus, the entire procurement process was completed in violation of PPRA Rules. When pointed out by Audit in December 2015, the executive stated that Standard Operating Procedure for local purchase allowed price reasonableness meetings for brands selected on the basis of quality. Final approval was accorded by DGMS. The reply is not tenable as the procurement was done in complete violation of the PPRA Rules quoted above. The para was discussed in the DAC meetings held on 11th January, 2017. The DAC directed that documents be provided to Audit for examination/verification. Neither documents were produced for examination / verification nor any progress reported to Audit till finalization of this report. Audit suggests regularization of the PPRA Rules violation. DP-S-90/2016-17 1.17.4 Award of works without publication of tender – Rs. 190.469 Million According to Rule 12 (1) of PPRA Rules 2004, procurements over one hundred thousand rupees and up to the limit of two million rupees shall be advertised on the Authority‟s website in the manner and format specified by regulation of the Authority from time to time. These procurement opportunities may also be advertised in print media, if deemed necessary by the procuring agency. In GE (Navy) Central Construction, Karachi, six contracts amounting to Rs 190.469 million were awarded to contractors without publication of tenders during 2012 to 2016. To avoid publication of tender, the executive published corrigenda in newspapers for change in date of opening of tender, after expiry of the original date fixed for

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tenders‟ opening. The Construction Account of each work indicated that payment was made only for publication of corrigenda. Further, documentary evidence (news clippings) of publication of original tenders were not produced for verification. The details are as under; (Rs. in million) S # Contract No DP No. Amount 1 ENC-N-23/2016 & ENC-N-24/2016 S-255 139.136 2 CEN-N-43/2015 S-251 16.341 3 CEN-N-16/2013 S-253 15.349 4 CEN-N-02/2014 S-250 13.235 5 CEN-39/2013 S-252 6.408 Total 190.469

When pointed out by Audit in August 2016, the executive stated that contracts were concluded by DW&CE. The GE office only executed the work after receiving the acceptance letter. The DAC in its meetings held on 12th January, 2017 was apprised that the dates were revised for issuance and opening of tenders. The DAC directed to hold fact finding inquiry, fix responsibility, take disciplinary action and initiate regularization action. No progress was reported to Audit till finalization of this report. Audit suggests regularization of the PPRA Rules violation. DP-S-255, 251, 253, 250 and 252/2016-17 1.17.5 Award of contracts without open tendering – Rs. 156.624 Million According to Rule-12(1,2) of PPRA-2004, all procurements over one hundred thousand rupees and upto 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. 102

During audit of different Naval units/formations, it was observed that contracts were concluded without advertisement on PPRA website/ newspapers which was violation of Rule-12 of PPRA 2004. The details are as under:- (Rs. in million) S # Name of Unit / Formation DP No. Amount 1 GE (Navy) Eastern, Karachi S-42 44.101 2 PNS Shifa, Karachi S-127 29.762 3 GE (Navy) Central Construction, Karachi S-261 21.968 4 PNS Bahadur, Karachi S-31 21.360 5 GE (Navy) Central Construction, Karachi S-258 18.032 6 AGE (Navy) Mehran, Karachi S-187 8.995 7 PN MSD, Karachi S-63 8.755 8 PNS Shifa, Karachi S-128 3.651 Total 156.624

When pointed out by Audit from December 2015 to October 2016, the executive stated that all codal formalities were fulfilled. However, the replies of the units/formations were not convincing as no substantive evidence was provided. The paras were discussed in DAC meetings held on 11th and 12th January, 2017. The DAC directed that documents/relevant record be provided to Audit for examination/verification. No record was provided to Audit till finalization of this report. Audit suggests regularization of the PPRA Rules violation. DP-S-42, 127, 261, 31, 258, 187, 63 and 128/2016-17 1.17.6 Loss due to mis-procurement of medicines – Rs. 124.851 Million Rule 29 of PPRA Rules, 2004 states that procuring agencies shall formulate an appropriate evaluation of criteria, listing all

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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. According to PPRA Rule 38 “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.” In PN Medical Store Depot, Karachi, purchase orders were issued for medicines to companies of choice without considering the lowest rates offered during the financial year 2014-15. No evaluation criteria were formulated to be made an integral part of bidding documents. As a result, the Government sustained a loss of Rs. 124.851 million. When pointed out by Audit in December 2015, the executive stated that brands were selected by a committee appointed by DGMS. Since patients‟ health care was of prime importance, the quality of medicines was never compromised for economy. The para was discussed in DAC meeting held on 11th January, 2017. The DAC was apprised that quotations were called as per PPRA Rules. From the quoted brands, best brands having economy and quality were selected. The DAC directed that violation of PPRA Rules may be got regularized. No progress was reported to Audit till finalization of this report. Audit suggests regularization of the PPRA Rules violation. DP-S-91 2016-17

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1.17.7 Irregular contract for supply of medicine – Rs. 112.638 Million According to Rule 10 of PPRA Rules 2004, “Specifications shall allow the widest possible competition and shall not favor any single contractor or supplier nor put others at a disadvantage. Specifications shall be generic and shall not include references to brand names, model numbers, catalogue numbers or similar classifications. However if the procuring agency is convinced that the use of or a reference to a brand name or a catalogue number is essential to complete an otherwise incomplete specification, such use or reference shall be qualified with the words “or equivalent”. In PNS Shifa, Karachi, an amount of Rs. 112.638 million was expended for procurement of medicines during the financial year 2014-15, using brand names of medicine instead of generic names in violation of above Rule. It indicated that purchases were made on favoritism basis instead of competitive rates. When pointed out by Audit in March 2016, the executive replied that PNS Shifa‟s medical store purchased medicines which were NA in PVMS / NIV and NIF. It was also stated that local purchase of medicines could not be made on generic names basis as consultants were prescribing medicines using brand names. The DAC in its meetings held on 11th January, 2017 directed to hold fact finding inquiry, fix responsibility, take disciplinary action and get the violation regularized. No progress was reported to Audit till finalization of this report. Audit suggests regularization of the PPRA Rules violation. DP-S-140/2016-17

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1.17.8 Conclusion of contract by giving less than prescribed response time in bidding process – Rs. 5.750 Million According to Rule-13(1) of PPRA 2004, under no circumstances the response time shall be less than 15 days for national competitive bidding. In GE (Navy) Central Construction, Karachi, tender for a construction work amounting to Rs. 5.750 million was published in two newspapers on 10th March 2016. The date for opening of tender was given as 18th March 2016. Thus, response time of only 8 days was allowed, which was violation of above Rule. When pointed out by Audit in August 2016, the executive stated that contract was awarded as per financial and contractual powers of CMES. The GE office only executed and monitored the work. The DAC in its meeting held on 12th January, 2017 directed for regularization of the expenditure. No progress was reported to Audit till finalization of this report. Audit suggests regularization of the PPRA Rules violation. DP-S-271 /2016-17 1.17.9 Award of contract before the publication of tender – Rs. 3.637 Million Rule-38 of Public Procurement Rules, 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” Further, Rule-12(1) of PPRA Rule-2004 stipulated that Procurements over one hundred thousand rupees and up to the limit of two 106

million rupees shall be advertised on the Authority‟s website in the manner and format specified by regulation by the Authority from time to time. These procurement opportunities may also be advertised in print media, if deemed necessary by the procuring agency. In GE (Navy) Eastern Karachi, tender advertisements of 06 works for uploading on PPRA web site, showing the date of opening of tenders as 30th September 2014, were sent to PPRA Authority on 11th September, 2014. However the contracts for above works were accepted by Garrison Engineer between 1st September and 09th September, 2014. This resulted in irregular expenditure costing Rs. 3,637,490. When pointed out by Audit in December, 2015 executive replied that works were uploaded on PPRA website. More over due to urgency for commencement / completion of work from users‟ side, the contracts were concluded before due course of time. The DAC in its meeting held on 11th January, 2017 was apprised that the irregularity occurred as the concerned staff was not aware of PPRA Rules. The DAC directed to hold fact finding inquiry, fix responsibility, take disciplinary action and regularize the expenditure. No progress was reported to Audit till finalization of this report. Audit suggests regularization of the PPRA Rules violation. DP-S-45/2016-17

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Military Accountant General

1.18 Recoverables / Overpayments 1.18.1 Non-recovery of House Rent Allowance from Officers living in married accommodation – Rs. 2.029 Million According to Rule-66 of Pay and Allowances Vol-II 1999, Married officers not provided with Government/hired/requisitioned married accommodation shall be entitled to House Rent Allowance. While examining the accounts of MAG Office Rawalpindi, it was noticed that 08 civilian officers/officials living in MOQs were also drawing HRA in their monthly pays, which was violation of rule cited above. When pointed out by Audit in April 2015, it was replied that HRA was admissible at specified accommodation subject to recovery of assessed or 5% rent. The reply was not acceptable as HRA to officers living in Government accommodations was not admissible. The para was discussed by the DAC in its meeting held on 18th October, 2016. The DAC pended the DP till formulation of new policy regarding HRA. No further progress was reported till finalization of this report. Audit stresses for early recovery of HRA from officers. DP-N-405/2015-16 1.18.2 Non-recovery of hoarding charges – Rs. 3.437 Million Under Section-14(1)(b) of the Auditor General‟s (functions, powers and terms and conditions of service) Ordinance No. XXIII of 2001, the Auditor General of Pakistan shall, in connection with the performance of his duties under this ordinance have authority to 108

require that any accounts, book, papers and other documents which deal with or form the basis of or otherwise relevant to the transactions to which his duties in respect of audit extend, shall be sent to such place as he may direct for his inspection. After 18th Amendment in Constitution of Islamic Republic of Pakistan 1973, there is no room for denial of disclosure and withholding of accounts from Auditor General of Pakistan. During audit of CMA (LC) Lahore Cantt, it was observed that 02 hoarding boards were located near CMA Dispensary but rent recovery record was not produced to audit. When pointed out by Audit in July 2015, no reply was furnished by the executive. The para was discussed by the DAC in its meeting held on 18th October, 2016. The DAC was apprised that relevant documents/record had already been provided to audit. The DAC directed to provide relevant record/documents for audit verification. During verification of auditable documents, it was transpired that rent on account of hoarding / sign boards valuing Rs. 3.437 million was yet to be recovered. No further progress was reported till finalization of this report. Audit stresses for immediate expediting of recovery pointed out. DP-N-185/2015-16 1.19 Irregular / Un-authorized expenditure 1.19.1 Un-authorized advance payment of electricity bill to WAPDA – Rs. 2.840 Million According to Rule-51 of Financial Regulations (Volume-II) 1986, “It is not permissible to draw any money to prevent the lapse of amounts provided in estimates”. While examining the accounts of Dy. CAAF Lahore, it was noticed that an advance amounting to Rs. 2,840,000 on account of

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electricity bills was paid to WAPDA authorities in violation of above rule, which need regularization action. When pointed out by Audit in October 2015, it was replied that the matter had already been referred to formation concerned for resolving the issue. The reply was not agreed to as incurring of expenditure merely to avoid lapse of funds was not permissible under rules. The para was discussed by the DAC in its meeting held on 18th October, 2016. The DAC observed that making advance payments against utility bills has become a recurring feature to exhaust available funds at the close of financial year. The DAC directed to regularize the expenditure and to avoid recurrence of such cases in future. No further progress was reported till finalization of this report. Audit stresses for early regularization action. DP-N-427/2015-16 1.20 Mis-procurement of stores 1.20.1 Award of contracts in violation of Public Procurement Rules – Rs. 12.170 Million According to Rule-12 (2) of PP Rules-2004, “all procurement opportunities over two million rupees should be advertised on the Authority‟s website as well as in the 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”. While examining the accounts of E-section CMA (LC) Lahore, it was observed that contract agreements worth Rs. 12,170,809 as detailed below for supply of furniture items were concluded during the financial year 2014-15 by the Garrison HQs of different stations without

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calling for open competition through newspaper and PPRA‟s website, which was violation of above PP rules.

S. Contract Agreement/Job Work Contract Total amount No. No. Awarded by awarded to of contract (Rs.) 1 No. SC/SLK/01 of 2014-15 Garrison HQ M/S SAM 2,482,584 (Job No. 1613 of 2014-15) Sialkot Traders Gujrat 2 LC/LHR/05 of 2014-15 Garrison HQ M/S Khokhar 2,382,575 (Job No. 1680 of 2014-15) Lahore Wood Crafts Lahore 3 GC/KHN/02 of 2014-15 Garrison HQ M/S SAM 2,375,250 (Job No. 1649 of 2014-15) Kharian Traders Gujrat 4 No. GC/SGD/03 of 2014-15 Garrison HQ M/S SAM 2,469,150 (Job No. 1688 of 2014-15) Sargodha Traders Gujrat 5 GC/KHN/03 of 2014-15 Garrison HQ M/S SAM 2,461,250 (Job No. 1689 of 2014-15) Kharian Traders Gujrat Grand Total Rs. 12,170,809

When pointed out by Audit in July, 2015 the Accounts authorities replied that concerned formations were approached to submit replies on audit observations. The reply was not correct, as compliance of rules was required to be checked by Accounts authorities during pre/post audit of vouchers. The para was discussed by the DAC in its meeting held on 18th October, 2016. The DAC directed the executive to get the relevant documents and record verified from Audit. During verification, no relevant record was provided by executive. Audit suggests for early regularization action. DP-N-309/2015-16

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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 2015-16 discussed during its various meetings held from July, 1992 to December, 2016 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 7.6% 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%

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1992-93 15 03 0 03 0% 1993-94 26 04 0 04 0% 1994-95 22 0 0 0 0% 1995-96 28 12 03 09 25% 1996-97 91 63 15 48 24% 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 17% 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 Report not yet discussed 2010-11 Report not yet discussed 2011-12 Report not yet discussed 2012-13 Report not yet discussed 2013-14 Report not yet discussed 2014-15 Report not yet discussed 2015-16 Report not yet discussed Total 671 254 90 167 35.433%

Ministry of Defence Production fully complied with only 90 PAC‟s directives out of 254 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.

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Audit Paras 2.3 Recoverables / Overpayments

2.3.1 Non-imposition of L.D charges USD 34,625 According to Para-I of Chapter-XI of Purchase Procedures & Instructions 2002, the specified delivery period is the essence of the contract. All the deliveries must be completed by the specified date. Upon failure by the supplier to deliver the stores within the stipulated time frame the purchaser has to resort to the following in the best interest of state. (a) To cancel the contract on the firm‟s risk and expense in case of complete failure. (b) To impose liquidated damages @ 2% per month up to a maximum 10% against the unsupplied stores. While examining the accounts of Aircraft Manufacturing Factory, Kamra it was noticed that delivery period against 12 contracts valuing USD 346,249.89 were neither extended by procuring agency nor LD charges amounting to US $ 34,625 were imposed under relevant clause of contract. When pointed out by Audit in February 2016, it was replied that all the contracts pertained to current financial year and LD charges would be imposed on receipt of payment documents of the supplier. The reply was not acceptable, as the contract delivery period was already expired and needed imposition of LD. The para was discussed by the DAC in its meeting held on 7th November, 2016. The DAC directed the executive to take following actions: imposition of LD charges, amendment in delivery period and finalization of contract.

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During verification, relevant record was not produced to audit. Audit stresses for implementation of DAC‟s directive. DP-N-76/2016-17 2.3.2 Non-recovery on account of liquidated damages – Rs. 4.470 Million According to Para-I of Chapter-XI of Purchase Procedures & Instructions 2002, upon failure of supplier to deliver the stores within the stipulated time frame the purchaser has to resort to the following in the best interest of state. (a) To cancel the contract on the firm‟s risk & expense in case of complete failure. (b) To impose liquidated damages @2% per month up to a maximum 10% against the unsupplied stores. While examining the accounts of Director General Procurement (Army) Rawalpindi, it was noticed that an amount of Rs.4,470,008 was lying outstanding on account of liquidated damages against Contract No‟s 27-0979-3-0 dated 30th June, 2007 and 27-1147-2-0 dated 30th June, 2010, which needed recovery action. When pointed out by the Audit in January, 2016 it was replied that CMA (DP) Rwp was already proposed for recovery of LD charges of Rs. 3,237,275 in the light of DGP (Army) letter dated 3rd January, 2014. The para was discussed by the DAC in its meeting held on 14th December, 2016. The DAC directed that recovered amount be got verified from audit. During verification, relevant record was not provided by the executive. Audit stresses for early recovery action. DP-N-60/2016-17

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2.4 Loss to State

2.4.1 Loss to State due to non-replacement of rejected stores – Rs. 36.529 Million Para-02 of standard warranty/guarantee clause of contract provides that in case of failure to replace the defective stores free of cost within a reasonable period specified by the purchaser, the suppliers will refund the relevant cost. During audit of Mirage Rebuild Factory, Kamra it was noticed that the stores valuing Rs. 36.529 million against six contracts were found defective and rejected during inspection. Technical authorities raised discrepancy reports during the period from 2013 to 2015 but neither defective stores was replaced by the firms nor 80% payment already made to firms on shipment documents against rejected stores was recovered by the procuring agency. When pointed out by Audit in November 2015, it was replied that replacement of rejected items was ongoing process and firms were being pressed hard for its early replacement. The para was discussed by the DAC in its meeting held on 7th November, 2016. The DAC directed for imposition of LD charges on all firms. No further progress was reported till finalization of this report. Audit stresses for early recovery action. DP-N-504/2015-16 2.4.2 Loss to State due to un-necessary blockade of public money USD 342,319 According to Rule-480 of Army Regulation that purchase may only be resorted to when the required stores is not held with authorized supply agency and when circumstance of emergent requirement arises. 116

During audit of Advance System Rebuilt Factory (ASRF) Taxila, it was noticed that 54 different spares valuing US $ 342,319 were procured and taken on charge vide CRV No. 07/OPT/S-5/ASRF dated 31st December, 2013, but entire quantity of spares were held in balance till April 2015, which resulted into un-necessary blockade of public money. When pointed out by Audit in April 2015, it was replied that due to sustenance of Tank Al-Khalid, T-80UD and Tank T-59 /69, a delay was occurred to obtain expertise of a technical team for the project which resulted non consumption of store. The para was discussed by the DAC in its meeting held on November 15, 2016. The DAC directed for verification of relevant record/documents by audit. During verification, it was transpired that out of 54 items, only 21 items having nominal value were issued and remaining 33 items were still lying in stock. Audit stresses for holding of inquiry against responsible(s). DP-N-48/2016-17 2.4.3 Non-replacement of rejected stores USD 25,425 and non-forfeiture of Performance Bank Guarantee USD 9,350 According to Para-2 of Annex-E DPL-15 of contract agreement No. 223/2006/5041/IT-Gen/CP/P-871/Proc dated 28th April, 2006, in case of failure to replace the defective stores as stipulated in the contract, the supplier hereby undertakes to refund the relevant cost as the case may be in the currency/currencies in which paid plus freight charges. During audit of HRF (M), HIT Taxila, it was noticed that Part No. 8925578 Starter Engine Qty 53 valuing USD 25,425 were rejected vide BMP Directorate letter dated 7th April, 2008 and 15th December, 2014 but firm consistently failed to replace the rejected stores.

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Moreover, performance bank guarantee USD 93,500 was also required to be forfeited but the same was already expired. When pointed out by Audit, it was replied that the case had already been taken up with BMP Dte for recovery action. The para was discussed by the DAC in its meeting held on 15th November, 2016. The DAC directed for verification of relevant record/documents from audit. During verification, executive did not provide documentary evidence regarding recovery of amount of rejected stores and forfeiture of Performance Bank Guarantee. Audit recommends for holding of inquiry to fix responsibility. DP-N-38/2016-17 2.5 Irregular / Un-authorized expenditure

2.5.1 Unauthorized extension in delivery period of contract US $ 2.680 Million According to Para-6(b)-3 of Chapter-VIII of Purchase Procedures and Instructions 2002, the extensions beyond 18 months will be granted by Secretary MoDP / DGDP in consultation with finance, keeping in view value of contract i.e. upto Rs. 40.00 million by DGDP and above Rs. 40.000 million by Secretary MoDP. While examining the accounts of Director General Procurement (Army) Rawalpindi, it was noticed from Contract Agreement No. 27-1277-1-0 dated 30th June, 2012 for procurement of Linear Accelerator System (Dual Photon and Multiple Electron Energy) of valuing US $ 26,80,000 (Rs. 246,024,000) was concluded. The record revealed that extensions in delivery period beyond 18 months were granted without obtaining approval of the Secretary MODP.

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When pointed out by the Audit in January 2016, it was replied that subject contract consisted of two consignments having two different LCs. Extension request in delivery date was entertained on merits. However, imposing of LD would be determined after shipment of complete stores. The para was discussed by the DAC in its meeting held on 14th December, 2016. The DAC directed to produce proprietary certificate from Secretary MoDP and relevant documents of CRVs and imposition of LD to audit for verification within two weeks. During verification, relevant record was not provided by the executive. Audit stresses early regularization action. DP-N-70/2016-17 2.5.2 Unjustified expenditure on procurement of vehicles – Rs. 3.879 Million 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. Further, Rule-46(a) of Financial Regulation Vol-II 1986 explains that all payments should be made through pre-audit/post audit from the concerned Controller of Accounts. While examining the accounts of Mirage Rebuild Factory Kamra, it was noticed that FOR Contract No. PACB/741/51415107/0557/P-1 dated 30th June 2015 was concluded with M/s Suzuki Taxila Motors Taxila for procurement of 06 No‟s of vehicle. Following discrepancies were pointed out: i. The payment of FOR contracts was required to be paid through CMA (ISO) on pre-audit basis whereas the payment was released by Director Budget Accounts MRF Kamra itself instead of placing funds on the disposal of CMA (ISO) as per procedure in vogue.

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ii. The contract for the above vehicles was concluded with M/s Suzuki Taxila on 30th June, 2015 and under Contract Clause No. 03 the stores were required to be delivered on 29th September, 2015. However, the firm provided all vehicles on 10th June, 2015 as transpired from CRV even before conclusion of contract and got all the payment on 30th June, 2015. As per contract clause-13, 100% payment will be made to firm on production of Certified Receipt Voucher (CRV) and inspection reports. Relevant log books of vehicles revealed that the vehicles were inducted/delivered in October, 2015 and inspection of vehicles were carried out on 16th October, 2015. The executive had violated the rules and made 100% advance payment on the date of conclusion of contract i.e. 30th June, 2015. When pointed out by Audit in November 2015, it was replied that the payment was made to the firm through DBA MRF as per contractual clauses and the case was duly concurred by Member Finance and the Chairman PAC Board. The reply was not convincing as releasing of 100% advance payment to firm before actual deliveries and inspection reports was against CA clause-13. The para was discussed by the DAC in its meeting held on 7th November, 2016. The DAC directed the management to hold a court of inquiry at PAC Board level and take disciplinary action. No further progress was reported till finalization of this report. Audit stressed for implementation of the DAC directives. DP-N-68/2016-17

120

2.6 Mis-procurement of stores

2.6.1 Award of contracts in violation of Public Procurement Rules – Rs. 93.630 Million According to Rule-12 (2) of Public Procurement Rules 2004, all procurement opportunities over Rs. 2.000 million should be advertised on the Authority‟s website as well as in order print media or newspapers having wide circulation. The advertisement in newspapers shall principally appear in at least two national dailies, one in English and other in Urdu. While examining the accounts of following procuring agencies, it was noticed that stores valuing Rs. 93.630 million were procured without calling for open tendering through newspapers as well as PPRA‟s website, which was violation of above PP Rule.

(Rs. in Million) S # DP No. Name of Unit / Formation Amount 1 DP-N-236/2015-16 PAC Board, Kamra 11.567 2 DP-N-71/2016-17 DGP (A), Rawalpindi 82.063 Total 93.630

When pointed out by the audit in November, 2014 and January, 2016 it was replied that procurements were made after getting approval from the competent authority. The paras were discussed by the DAC in its meeting held on 7th November, 14th December, 2016. The DAC directed the executive mentioned at serial No. 01 to justify reasons of spot tendering. In the second case the DAC pended the draft para till regularization action. No further progress was reported till finalization of this report. Audit stresses for early regularization action. DP-N-236/2015-16 and DP-N-71/2016-17

121

Annexure-I

MFDAC Paras (DG North) 2015-16 and 2016-17

Pakistan Army (Rs. in million) S DP Year Subject Unit/Formation Amount No. No. Non regularization of expenditure 1. N-5 2016-17 GE (A) Jhelum 112.882 incurred under para-17 of DSR Un-authorized local purchase of 2. N-6 2016-17 GE (A) Multan 2.499 stores Payment made to contractor AGE (Army) 3. N-7 2016-17 without completion of 20.346 Attock work Un-authorized expenditure on 4. N -17 2016-17 GE (A) Multan 15.325 abnormal repair Un-authorized payment through MT Trg Bn 5. N -21 2016-17 262.320 cash instead through cheque Nowshera Non-adoption of proper procedure HQ 31 Corps 6. N -22 2016-17 for supply of material & execution 3.240 Bahawalpur of works Military Farm 7. N -28 2016-17 Running of Military Farm in loss 5.867 Renala Khurd Unjustified secured advance GE (Army) PMA 8. N -45 2016-17 20.449 payment Kakul Un-authorized conclusion of GE (NDU) 9. N -47 2016-17 contract after 15th April without 43.393 Islamabad proving urgent military necessity Unauthorized release of advance 10. N -82 2016-17 GE (A) Mangla 5.930 payment to contractors Un-authorized conclusion of AGE (Army) 11. N -90 2016-17 36.691 contracts Chunian Unauthorized expenditure on 12. N -97 2016-17 GE (A) Multan 12.219 abnormal repair Purchase of stores without HQ 31 Corps 13. N -99 2016-17 233.895 advertisement Bahawalpur Purchase of stores without HQ 31 Corps 14. N -100 2016-17 10.000 advertisement Bahawalpur

122

Purchase of stores without HQ 31 Corps 15. N -101 2016-17 150.000 advertisement Bahawalpur Unauthorized payment to HQ 31 Corps 16. N -102 2016-17 1.713 contractor Bahawalpur Overpayment to contractor due to HQ 31 Corps 17. N -103 2016-17 12.704 non-application Bahawalpur Overpayment to contractor due to HQ 31 Corps 18. N -134 2016-17 1.009 non-application of schedule rates Bahawalpur Overpayment to contractor due to HQ 31 Corps 19. N -136 2016-17 7.838 non-application of schedule rates Bahawalpur Non-recovery of assessed rent GE (Services) 20. N -110 2016-17 4.349 from occupants Multan Irregular expenditure made out of 4 Engr Bn 21. N -111 2016-17 Defence Fund Grant for the FY 8.355 Bahawalpur 2015-2016 Irregular expenditure on HQ 31 Corps 22. N -127 2016-17 225.150 construction of different buildings Bahawalpur Unauthorized release of advance 23. N -129 2016-17 GE (A) Mangla 13.700 payment to contractors

24. N -153 2016-17 Irregular conclusion of contracts GE (A)-I Lahore 1.399

Irregular conclusion of contract GE (A)-II 25. N -155 2016-17 7.901 by splitting of financial powers Bahawalpur Non recording of payment / AGE (Army) 26. N -156 2016-17 8.826 expenditure in contractor ledger Risalpur Irregular expenditure due to AGE (Army) 27. N -157 2016-17 3.917 execution of special work Risalpur AGE (Army) 28. N -158 2016-17 Less recovery of income tax 2.590 Risalpur Un-justified payment made to AGE (Army) 29. N -160 2016-17 43.363 contractors Risalpur Irregular conclusion of contracts AGE (Army) 30. N -161 2016-17 20.988 in piecemeal Risalpur Irregular conclusion of AGE (Army) 31. N -162 2016-17 89.393 contracts in piecemeal Risalpur Irregular conclusion of contracts 32. N -164 2016-17 GE (A) Terbela 102.683 in piecemeal Irregular conclusion of contracts 33. N -167 2016-17 GE (A) Terbela 90.788 in piecemeal Un-authorized payment to GE A-II 34. N -168 2015-16 40.006 contractor Bahawalpur

123

Loss to state due to non-recovery GE (Services) 35. N -170 2015-16 1.757 of market rent Okara Expenditure in excess of budget 36. N -187 2015-16 CMH Peshawar 24.727 allotment

37. N -188 2016-17 Less recovery of Income tax GE (A) Murree 2.698

AGE (Army) 38. N -189 2016-17 Less recovery of Income tax 4.742 Bannu Non production of sales tax GE A-I 39. N -192 2015-16 2.669 invoices Bahawalpur Un-authorized sanctioning of GE Army GHQ 40. N -193 2015-16 work in piecemeal to avoid 6.227 Rawalpindi Government approval Un-authorized expenditure 41. N -198 2015-16 PMA Kakul 4.950 beyond the financial powers

42. N -203 2016-17 Blockade of Government money Arty Centre Attock 2.127

Overpayment to contractors due 43. N -205 2016-17 GE (A) Murree 3.495 to less deduction of income tax GE Army GHQ 44. N -206 2015-16 Over payment to contractor 1.134 Rawalpindi Unauthorized expenditure of 45. N -207 2015-16 PMA Kakul Atd 5.400 flooring / tiling Un-authorized release of advance GE (Services) 46. N -208 2016-17 14.079 payment to contractors Mangla Less recovery on account of 47. N -210 2016-17 GE (A) Abbottabad 5.765 income tax from contractors Unauthorized expenditure on 48. N -211 2016-17 GE (A) Abbottabad 209.157 account of electricity charges Un-authorized payment on HQ Sig Centre 49. N -212 2016-17 8.301 account of IS allowance Kohat Remount Depot 50. N -214 2016-17 Irregular conclusion of contracts 47.453 Mona Remount Depot 51. N -237 2015-16 Overpayment to contractor 1.770 Mona Remount Depot 52. N -238 2015-16 Overpayment to contractor 3.727 Mona

53. N -240 2016-17 Unauthorized approval of work GE (A) Murree 41.000

Un-authorized expenditure against 54. N -241 2015-16 174 Engr Bn Okara 1.566 lapsable grant

124

Non-recovery of outstanding 55. N -241 2016-17 GE (A) Murree 2.970 amount from contractor Mis-appropriation of public 56. N -244 2015-16 PMA Kakul 4.050 money Irregular local purchases beyond 57. N -246 2016-17 CMH, Lahore 14.611 the financial power Irregular conclusion of contracts Remount Depot 58. N -247 2016-17 159.336 in piecemeal Mona Unjustified procurement of store 59. N -249 2016-17 ESD Jhelum 7.510 at exorbitant rate Loss to State due to un-authorized Military Farm, 60. N -250 2016-17 1.437 retention of staff Okara GE (Services) 61. N -252 2015-16 Irregular payment 5.201 Multan Un-authorized release of advance 62. N -252 2016-17 GE (A) Jhelum 13.574 payment to contractors GE (A)-I 63. N -254 2016-17 Splitting up financial powers 131.534 Gujranwala Un-authorized payment of Pay & GE (Services) 64. N -262 2015-16 1.304 Allowances Sialkot Remount Depot 65. N -267 2015-16 Overpayment to contractor 1.830 Mona GE (Services) 66. N -280 2015-16 Non-recovery of allied charges 1.340 Sialkot Un authorized payment to Un GE (Services) 67. N -281 2015-16 4.372 authorized staff Sialkot Remount Depot 68. N -291 2015-16 Over payment to contractor 1.315 Sargodha GE A-II 69. N -295 2015-16 Splitting up financial powers 52.646 Bahawalpur GE (Services) 70. N -306 2015-16 Un-authorized expenditure 79.646 Multan Loss to State due to purchase of 71. N -311 2015-16 CMH Peshawar 0.820 store on exorbitant rate Loss to State due to purchase of 72. N -324 2015-16 CMH Peshawar 12.000 store on exorbitant rate Un-authorized use of Government GE (Services) 73. N -325 2015-16 0.000 building Multan

74. N -332 2015-16 Less recovery of income tax CMH Gujranwala 1.610

125

Un-authorized acceptance of charges of pension contribution and cost of new construction work 75. N -339 2015-16 SHQ Gujranwala 1.420 by the Cantt board in the conservancy contract for the year 2014-15 Un-authorized expenditure made 173 Engr Bn 76. N -341 2015-16 out of defence fund grant for the 46.960 Lahore FY 2014-2015 Payment from Defence Estimate 173 Engr Bn 77. N -342 2015-16 4.658 for non Govt expenditure Lahore Un-authorized issuance of high POL Depot 78. N -347 2015-16 2.379 speed diesel (D-20) on payment Sargodha Loss to State due to irregular 79. N -351 2015-16 CMH Peshawar 0.921 transfer of profit to private fund

80. N -383 2015-16 Non recovery of cost of ration BSD Rawalpindi 5.610

Un-authorized local purchase of 173 Engr Bn 81. N -393 2015-16 44.460 store beyond financial powers Lahore Un-authorized payment to 82. N -395 2015-16 GE (A) Kakul 8.815 contractor

83. N -406 2015-16 Non finalization of CNE cases CMH Attock 7.766

AGE (Army) 84. N -412 2015-16 Non recovery of allied charges 3.396 Risalpur Un-authorized payment to GE (Services) 85. N -417 2015-16 4.478 contractor Lahore Un-authorized local purchase of 86. N -425 2015-16 CMH Multan 15.000 electro medical equipment’s Un-authorized retention of money 502 CWS 87. N -430 2015-16 3.395 on Unit Account Rawalpindi Loss to State due to charge off POL Depot 88. N -455 2015-16 12066 Ltrs of POL on packed 0.976 Sargodha stock Un-authorized expenditure due to AGE (Army) 89. N -459 2015-16 provision of fiber class parking 5.041 Risalpur sheds for BOQs Excess payment to firm for an 90. N -461 2015-16 item of work neither required nor GE (A) Bagh 1.500 provided at site Garrison Furniture 91. N -470 2015-16 Un-authorized expenditure 14.078 Yard Lahore

126

Un-justified expenditure on AGE (Army) D.I 92. N -497 2015-16 1.815 provision of parameter lights Khan

Total 183,496.252

ML&C Department (Rs. in million) S DP Year Subject Unit/Formation Amount No. No. Non-recovery of income tax from Cantt Board 93. N -13 2016-17 4.092 owners of the shops Nowshera Loss to cantonment fund due to Cantt Board 94. N -14 2016-17 non-realization of Conservancy 3.112 Nowshera charges Non-recovery of income tax from Cantt Board 95. N -15 2016-17 owners of the shops (commercial 4.859 Nowshera complex) Non-recovery of antenna fee from Cantt Board 96. N -40 2016-17 1.140 cellular companies Sargodha Non conversion of old grant into Cantt Board 97. N -66 2016-17 regular lease in schedule IX-C for 22.201 Nowshera commercial use Non-recovery of development Cantt Board 98. N -93 2016-17 1.622 charges Sialkot Loss of revenue due to non- Cantt Board 99. N -107 2016-17 1.363 recovery of house tax Sialkot Loss to Cantonment fund due to Cantt Board 100. N -120 2016-17 non-recovery of conservancy 11.964 Abbottabad charges from Army authorities Non-production of auditable 101. N -137 2016-17 documents and non-deposit of MEO Sargodha 15.370 rent on account of agriculture land Loss to Cantt fund due to irregular Cantt Board 102. N -141 2016-17 6.126 approval of extension of land Rawalpindi Less recovery of premium & surcharge due to irregular Cantt Board 103. N -143 2016-17 2.865 conversion of property into Sch- Rawalpindi IX-C Un-authorized payment to Cantt Board 104. N -145 2016-17 7.200 contractor Rawalpindi Cantt Board 105. N -177 2016-17 Non recovery of Cantt fund dues 1.671 Abbottabad

127

Loss to Cantt fund due to un- Cantt Board 106. N -179 2016-17 4.000 litigate expenditure, Rawalpindi Non assessment and construction Cantt Board 107. N -180 2016-17 17.760 without approval of building plan Rawalpindi

108. N -182 2015-16 Unauthorized use of A-1 Land MEO Abbottabad 167.200

Loss due to non-assessment of Cantt Board 109. N -187 2016-17 2.246 commercial building, Chaklala Irregular approval and non- Cantt Board 110. N -191 2016-17 recovery of conversion charges 59.862 Walton from green fort housing society Non recovery of advertisement Cantt Board 111. N -195 2016-17 10.078 charges Lahore Irregular approval and non- recovery of Government dues Cantt Board 112. N -197 2016-17 18.828 from Premier Villas Housing Walton Society Loss due to less recovery of Cantt Board 113. N -213 2015-16 16.212 conservancy charges Gujranwala Non-recovery of rent from Cantt Cantt Board 114. N -215 2015-16 1.116 fund commercial buildings Gujranwala Non-recovery of tower fee from Cantt Board 115. N -216 2015-16 1.095 cellular companies Gujranwala Cantt Board 116. N -217 2015-16 Non-realization of pension share 2.544 Gujranwala Non-recovery of outstanding Cantt Board 117. N -218 2015-16 1.550 property tax Gujranwala Loss to cantonment fund due to Cantt Board 118. N -218 2016-17 non-realization of conservancy 66.700 Chaklala charges Non deposit of Income tax into Cantt Board 119. N -222 2016-17 2.000 Govt treasury Chaklala Loss to Cantt fund due to non- Cantt Board 120. N -223 2016-17 recovery of dues on account of 48.484 Abbottabad conservancy charges Loss to Cantt fund due to non- Cantt Board 121. N -224 2016-17 8.740 realization of BTS tower fee Abbottabad Loss to Cantt fund due to non- payment of hoarding charges Cantt Board 122. N -230 2016-17 1.622 (open sites) Rs.1.622 million and Jhelum submission of fake CDRs

128

Loss to Cant fund due to non- Cantt Board 123. N -235 2016-17 3.100 recovery of shops rent Chaklala Non recovery of conservancy Cantt Board 124. N -302 2015-16 1.680 charges Sargodha Loss of revenue due to non- Cantt Board 125. N -310 2015-16 recovery of rent from Cantt fund 1.107 Sargodha commercial buildings Cantt Board 126. N -329 2015-16 Non-recovery of composition fee 2.209 Multan Non-production of auditable 127. N -331 2015-16 MEO Sargodha 15.720 documents Unauthorized encroachment of Cantt Board 128. N -333 2015-16 508.284 Cantt acquired land DHA Chaklala Un-authorized expenditure on Cantt Board 129. N -350 2015-16 2.000 account of re-carpeting of road Rawalpindi Cantt Board 130. N -387 2015-16 Non deposit of Income Tax 30.000 Rawalpindi Non-recovery of long outstanding Cantt Board D.I 131. N -391 2015-16 dues on account of conservancy 13.400 Khan charges Less recovery of premium from Cantt Board D. I 132. N -398 2015-16 4.280 SBP, D.I.Khan Khan Non-recovery of arrears on Cantt Board 133. N -399 2015-16 7.294 account of conservancy services Murree Cantt Board 134. N -404 2015-16 Non-recovery of Cantt dues 1.290 Risalpur Loss to Cantt fund due to less Cantt Board 135. N -421 2015-16 assessment of house tax (Askari-I 2.049 Multan & II) Cantt Board 136. N -448 2015-16 Non-realization of pension share 14.890 Sargodha Loss to Cantt fund due to non- Cantt Board 137. N -473 2015-16 recovery of conservancy charges 72.923 Abbottabad from Army authorities Loss to Cantt fund due to non- Cantt Board 138. N -474 2015-16 7.139 recovery of dues Abbottabad Loss to Cantt fund due to less 139. N -484 2015-16 Cantt Board Kamra 0.509 recovery of conversion charges Non-recovery of composition fee development charges and other 140. N -499 2015-16 Cantt Board Kamra 0.893 CB dues from the owner of commercial building

129

Loss due to less recovery of Cantt Board 141. N -508 2015-16 73.392 transfer fee Abbottabad Total 1282.441 Pakistan Air Force (Rs. in million) S DP Year Subject Unit/Formation Amount No. No. Un-authorized incurred of 142. N -88 2016-17 expenditure GE (Air) Lahore 10.166

Un-authorized provision of non- scheduled furniture items without 143. N -251 2016-17 AGE (Air) Mureed 2.143 obtaining sanction of Government of Pakistan Extra / un authorized expenditure 144. N -258 2016-17 on construction of garages with GE (Air) Risalpur 1.794 BOQs Un-authorized construction of 145. N -259 2016-17 MOQs against the sanction for GE (Air) Risalpur 23.000 BOQs Un-due benefit to the contractor 146. N -261 2016-17 by releasing payment before GE (Air) Risalpur 13.139 completion of work Un-authorized payment of pay 147. N -271 2015-16 and allowances to the staff PAF Base Lahore 12.720 deputed in “AFOHS” Un-authorized consumption of pol 148. N -273 2015-16 PAF Base Lahore 2.070 against Fazaia Housing Scheme Loss to State due to excess issue 149. N -275 2015-16 PAF Base Lahore 3.720 of chicken and mutton Unauthorized expenditure on 150. N -294 2015-16 GE Air Sargodha 35.969 abnormal repairs Loss to State due to excess issue PAF Base 151. N -319 2015-16 6.238 of mutton Mianwali Non-recovery of expenses PAF Hospital 152. N -415 2015-16 incurred on MES employees as 0.950 Raifqui CNE patients Non-recovery of treatment PAF Hospital 153. N -426 2015-16 2.766 charges Mushaf Un-authorized receipt of allied 154. N -438 2015-16 charges from the Officers Airmen PAF Base Mushaf 25.110 and non-booking in account

130

Un-authorized payment for provision of 03 (x) phase 155. N -460 2015-16 GE (Air) Risalpur 0.899 electricity for AC units in officer mess Non-depositing of electric charges 156. N -498 2015-16 GE (Air) Lahore 4.400 other than free authorization

Total 145.084 Pakistan Navy (Rs. in million) S DP Year Subject Unit/Formation Amount No. No. Un-authorized payment of daily PNS Zafar 157. N -86 2016-17 2.576 messing allowance Islamabad Inter Services Organization (Rs. in million) S DP Year Subject Unit/Formation Amount No. No. Loss due to non fulfilment of AFIU 158. N -385 2015-16 1.946 contracts Rawalpindi Un authorized transfer of profit to AFIC 159. N -407 2015-16 12.491 Pvt fund Rawalpindi

Total 14.437

131

DP Division (Rs. in million) S DP Year Subject Unit/Formation Amount No. No. Non recovery of overdrawn amount US $ 15,548 against rejected store HRF (M) HIT 160. N -33 2016-17 US $ 0.040 and liquidated damages US $ Taxila 24,493 from defaulted firm HRF (M) HIT 161. N -35 2016-17 Blockade of Government money 12.400 Taxila Non recovery of risk and expense HRF (M) HIT 162. N -36 2016-17 US $ 0.019 and liquidated damages from firm Taxila Non recovery from firm against HRF (M) HIT 163. N -37 2016-17 US $ 0.057 rejected and deficient store Taxila Gun Factory 164. N -43 2016-17 Doubtful payment 0.790 HIT Taxila Non deposit of labour and overhead APC Factory 165. N -49 2016-17 charges of commercial projects in 92.715 HIT Taxila to Government treasury Un-authorized finalization of DGP (A) 166. N -54 2016-17 contract and un-justified payment US $ 0.159 Rawalpindi thereof Un-authorized extensions and non- DGP (A) 167. N -56 2016-17 US $ 0.734 imposition of LD charges Rawalpindi DGP (A) 168. N -58 2016-17 Non recovery from suppliers 16.537 Rawalpindi

169. N -67 2016-17 Unauthorized payment to the firm MRF Kamra 2.443 Loss to state due to non- DGP (A) 170. N -69 2016-17 cancellation of contract on firm’s 6.210 Rawalpindi risk & expense Non conclusion of contract on risk 171. N -74 2016-17 AMF Kamra 2.179 & expense of the contractor Non-replacement of rejected store against regular contracts & non- 172. N -77 2016-17 ARF Kamra US $ 0.166 receipt of outstanding store against regular and rate running contracts Un-due benefit to supplier on GE (DP) Const 173. N -79 2016-17 16.040 account of advance payment Kamra In-fructuous expenditure on GE (DP) Const 174. N -81 2016-17 18.451 purchase of UPS Kamra

132

Loss to State due to non-receipt of HRF (M) HIT 175. N -217 2016-17 6.303 rejected stores Taxila GE DP Maint 176. N -361 2015-16 Non rec of rent and allied charges 1.149 Taxila Un-justified/un-authorized DGMP 177. N -401 2015-16 execution of work without approval 12.168 Rawalpindi of competent authority Total 54.111

Ministry of Science & Technology

S No. DP No. Year Subject Unit/Formation Amount Uneconomical expenditure on repair & maintenance of triple NUST 178. N-215 2016-17 4.795 play services for the residential Islamabad area out of public fund

133

Annexure-II MFDAC Paras (DG South) 2016-17

Pakistan Army (Rs. in million) S # DP No. Year Subject Unit/Formation Amount Outstanding Conservancy charges 1. S-207 2016-17 of Cantt Boards against Station HQ Station HQ Quetta 144.924 Quetta Split-up of contracts to avoid 2. S-396 2016-17 GE (Army) I, Malir 114.937 sanction of Government of Pakistan Irregular sanction of abnormal CMES (Army) 3. S-204 2016-17 95.622 work Malir Unauthorized/ irregular expenditure 4. S-359 2016-17 on local purchase of Electro CMH Malir 62.867 Medical Equipment GE (Army) II, 5. S-54 2016-17 Unlawful award of contracts 38.092 Quetta Irregular expenditure due to split of AGE (Army) SI&T, 6. S-02 2016-17 29.999 Project Quetta Irregular expenditure on repair/maintenance of POL Bulk GE (Army) 7. S-285 2016-17 installation through MES without 23.888 Services, Quetta obtaining admin approval from Govt. of Pakistan Irregular award of two contracts to GE (Army) C & S 8. S-22 2016-17 23.176 same contractor College, Quetta Irregular Establishment of UNMSD 9. S-347 C.O.D Karachi 12.758 2016-17 and Recruitment of Civilian Staff. Irregular expenditure on provision 10. S-218 2016-17 GE (Army) I, Quetta 10.022 of solarization for tube wells 11. S-225 2016-17 Non confirmation of saving GE (Army) I, Quetta 9.492 Irregular/unjustified budget GE (Army) I, Quetta 12. S-222 2016-17 8.85 allocation without record Irregular expenditure without GE (Army) 13. S-280 obtaining Admin approval from 8.539 2016-17 Services, Quetta Govt. of Pakistan Irregular Administrative approval AGE (Army) , 14. S-159 without drawing and release of 8.303 2016-17 Khuzdar payment in advance Non recovery of House Rent

15. S-356 Allowance of officer allotted CMH Malir 7.276 2016-17 accommodation

134

Non-recovery of sales tax on 16. S-227 2016-17 Station HQ Quetta 6.375 services Avoidable extra expenditure on redesigning of existing speed GE (Army) 17. S-282 6.225 2016-17 breakers and Introducing a new Services, Quetta practice Irregular expenditure on provision of footpath without obtaining GE (Army) 18. S-284 2016-17 5.881 admin approval from competent Services, Quetta authority 19. S-385 2016-17 Non-recovery of income tax CMH Malir 5.106 Award of contract on choice 20. S-363 2016-17 without considering the CMH Malir 5.100 specifications Irregular expenditure on repair/maint work without 21. S-219 2016-17 GE (Army)-I Quetta 4.821 obtaining admin approval from competent authority Irregular retention of time bared SCARP VI-Rahim 22. S-84 2016-17 4.526 claims outside state revenue Yar Khan Irregular sanctioning / execution of CMES (Army) 23. S-278 2016-17 4.468 work Hyderabad Award of purchase order on 24. S-355 2016-17 favoritism in violation of PPRA CMH Malir 3.600 Rules F.G Minwalia Girls Illegal collection of security 25. S-178 2016-17 Public School 3.222 charges costing Karachi Award of contract on choice 26. S-362 2016-17 without considering the CMH Malir 2.970 specifications Non-obtaining of GST invoice from GE (Army)-II 27. S-67 2016-17 2.747 contractors Quetta

28. S-217 Irregular issue of RTE store to units GE (Army)-I Quetta 2.680 2016-17 Unauthorized electric connection to

29. S-234 commercial consumers caused extra GE (Army) Karachi 2.400 2016-17 burden on Defence Budget Irregular expenditure through D.O. GE (Army) Services 30. S-367 against the amendment issued by 2.353 2016-17 Quetta sanctioning authority un-authorized collection of security FG School Malir 31. S-118 2016-17 2.196 charges Cantt

135

Non Deposit of Revenue Generated

32. S-345 From Agricultural Activities into C.O.D Karachi 2.000 2016-17 Government Treasury. Irregular/ unauthorized excess payment made to contractor beyond GE (Army) Services 33. S-304 1.998 2016-17 permissible limit without obtaining Pano Aqil revised sanction Irregular award of conservancy 34. S-341 2016-17 C.O.D, Karachi 1.964 contract Purchase of medicine without 35. S-361 2016-17 CMH Malir 1.668 calling tenders Irregular/unjustified expenditure 36. S-226 2016-17 through requisition from works GE (Army)-I Quetta 1.518 saving Rs 1.518 million Non-Deposit of tender fee in the 37. S-26 2016-17 ACE 5 Corps Khi 1.450 Government treasury Non-Recovery of electricity 38. S-402 2016-17 GE (Army)-II Malir 1.439 charges Irregular expenditure on account of HQ Signal 5 Corp, 39. S-349 2016-17 Repair/Maintenance & purchase of 1.300 Karachi Air Conditioners. Irregular/unjustified replacement of GE (Army) Services 40. S-281 2016-17 0.952 LED lights in excess of demolition Quetta Non-Recovery of electricity 41. S-395 2016-17 GE (Arm) I, Malir 0.926 charges Irregular payment made to GE (Army) const 42. S-191 2016-17 0.881 contractor before allotment Karachi Less deduction of sales tax from the 43. S-224 GE (Army)-I Quetta 0.772 2016-17 suppliers Loss to state due to non-recovery of

44. S-320 cost of X-Ray films used for CNE CMH Hyderabad 0.701 2016-17 patients Non recovery of House Rent

45. S-72 Allowance of officer allotted Army S&RC, Khi 0.655 2016-17 accommodation Non-Deposit of Rent of BTS towers Com & Staff 46. S-151 2016-17 0.480 into Govt. treasury College, Quetta GE (Army) Services 47. S-403 2016-17 Non-recovery of water charges 0.475 Quetta 48. S-216 2016-17 Overpayment to the contractor GE (Army)-I Quetta 0.466 Irregular payment of House Rent Army S & R Centre, 49. S-113 2016-17 0.332 Allowance Hyd 50. S-399 2016-17 Non-recovery of water charges GE (Army)-I Malir 0.312

136

Non-Obtaining of GST Invoice AGE (Army) Rahim 51. S-231 2016-17 0.273 from Contractors Yar Khan Total 723.538 Pakistan Air Force (Rs. in million) S # DP No. Year Subject Unit/Formation Amount Irregular local purchase of electro medical equipments without Project Shahbaz, 52. S -312 2016-17 192.389 approval of unit To&E from AHQ, Islamabad Government of Pakistan Non-recovery of rent and allied GE (Air) Shahbaz, 53. S -105 2016-17 142.893 charges Jacobabad Irregular Development of Non-

public fund buildings and Project Shahbaz, 54. S -319 79.168 infrastructure from public fund and AHQ, Islamabad 2016-17 payment of engineering design fees Irregular award of wire line access Project Shahbaz, 55. S -322 2016-17 78.22 network AHQ, Islamabad Irregular purchasing of misc. stores

56. S -139 and doubtful payment made to PAF Base Malir, 11.993 2016-17 contractors Karachi Undue favouritism extended to Project Shahbaz, 57. S -311 2016-17 10.925 contractor AHQ, Islamabad Irregular conclusion of joint filling GE (Air) Masroor, 58. S -175 2016-17 contracts and overpayment to 10.056 Karachi contractor R Irregular conclusion of conservancy PAF Base Masroor, 59. S -172 contract without observing PPRA 8.400 2016-17 Karachi Rules Outstanding Allied charges against GE (Air) Korangi 60. S -238 2016-17 6.981 Private consumers Creek, Karachi Non Imposition of Liquidated Damages due to late Supply of Project Shahbaz, 61. S -310 4.948 2016-17 Electro Medical equipment and less AHQ, Islamabad recovery of Income Tax Loss to state due to non-recovery of GE (Air) Korangi 62. S -237 2016-17 2.700 rent Creek, Karachi Non-recovery of sales tax on supply GE (Air) Masroor 63. S -300 2.538 2016-17 of fresh water Karachi Unauthorized electric connection to GE (Air) Korangi 64. S -239 private consumer causing loss to 2.040 2016-17 Creek, Karachi state

137

Non recovery of rent & allied PAF Base Masroor, 65. S -212 2016-17 1.978 charges against SIF contractor Karachi Loss to State due to non-availing of PAF Base Malir, 66. S -135 1.145 2016-17 discount on trade price Karachi Unauthorized expenditure incurred GE (Air) Korangi 67. S -242 1.126 2016-17 on supply of fresh water Creek, Karachi unjustified provision of additional GE (Air) Masroor, 68. S -176 furniture for newly constructed 1.081 2016-17 Karachi B.O.Qs and non-recovery of GST Non-deposit of Government share GE (Air) Masroor, 69. S -299 2016-17 1.022 against the A-1 land Karachi Non recovery of Electric charges GE (Air) Malir, 70. S -296 from residents of Falcon Housing 0.796 2016-17 Karachi Scheme Un-authorized purchase of non- GE (Air) Masroor, 71. S -24 schedule furniture without govt. 0.597 2016-17 Karachi sanction Less recovery of Income Tax from PAF Base Malir, 72. S -134 2016-17 0.260 the supplier Karachi GE (Air) Korangi 73. S -241 2016-17 Non-recovery of Stamp Duty 0.239 Creek, Karachi Total 561.495 ML&C Department (Rs. in million) S.No DP No Year Subject Unit/Formation Amount Loss to state due to non-utilization M.E.O 74. S -392 2016-17 19,785.324 of land Hyderabad Illegal construction of houses on a-1

75. S-69 land by AFOHS without M.E.O Karachi 6,472.613 2016-17 reclassification of land Undue favor extended M/s NIP in the shape of non-recovery of CB Korangi 76. S -389 428.340 2016-17 Development Charges and non- Creek Utilization Fee 77. S -337 2016-17 Non-adjustment of Octroi Share CB Clifton Khi 308.896 Non recovery of cantonment dues 78. S -371 2016-17 CB Clifton Khi 44.157 from hotel Non recovery of cantonment dues 79. S -373 2016-17 CB Clifton Khi 43.800 from three cinemas

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Encroachment of land By M/S. 80. S-49 2016-17 MEO Khi 30.419 Shaheen Knitwear Irregular local purchase of medical 81. S -379 2016-17 equipment and non-recovery of CB Clifton Khi 29.310 income tax and G.S.T Illegal construction of marriage Hall on land under litigation and 23.625 82. S -393 MEO Hyderabad 2016-17 non-recovery of Premium and Ground Rent Irregular hiring of private water 83. S -376 2016-17 CB Clifton Khi 16.320 tankers 84. S-18 2016-17 Irregular purchase of store CB Quetta 14.128 Loss to Cantt. Fund due to non- 85. S-46 2016-17 assessment of various properties for CB Faisal Khi 6.575 tax purpose 86. S-11 2016-17 Infructuous expenditure CB Quetta 4.800 Loss to state due to non-deposit of M.E.O 87. S -369 premium and ground rent of 4.754 2016-17 Hyderabad Majestic Cinema Loss to cantt. fund due to non- 88. S-51 2016-17 assessment of a building for tax CB Faisal Khi 4.275 purpose Less recovery of additional 89. S -229 CB Malir 2.674 2016-17 sewerage charges from residents Expenditure without sanction of the 90. S-14 2016-17 CB Quetta 2.301 Board Non-Recovery of road

91. S -109 cutting/reinstatement charges from CB Manora 1.991 2016-17 karachi Port Turst Non-collection of Octroi/GST share 92. S-94 2016-17 CB Manora 1.225 from Provincial Government Unjustified payment of monthly 93. S -377 2016-17 CB Clifton Khi 0.861 mobile phone charges CB Korangi 94. S -390 2016-17 Less recovery of G.S.T 0.844 Creek Illegal payments to Judicial 95. S -340 2016-17 CB Clifton Khi 0.682 Magistrates Overpayment to contractor due to 96. S -308 2016-17 CB Clifton Khi 0.661 Incorrect application of length Loss to state due to less recovery of 97. S-17 2016-17 CB Quetta 0.331 income tax Illegal construction and 98. S -370 2016-17 MEO Hyderabad 0 encroachment of Pak City Towers Total 27,228.906

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Pakistan Navy (Rs. in million) Unit/ S.No DP No Year Subject Amount Formation Finalization of tenders in violation 99. S-89 2016-17 PN MSD Khi 519.869 of directives of DGMS. Publication of tender before GE (Navy) 100. S -114 administrative sanction of 395.293 2016-17 Const.Turbat construction work GE (Navy) Irregular execution of work under 101. S -266 Central Cons. 182.478 2016-17 para 17 of DSR 1998. Karachi GE (Navy) Irregular award of new capital work 102. S -254 Central Cons. 99.032 2016-17 after 15th April Karachi Un-justified expenditure made PNS Himaliya 103. S -154 2016-17 88.000 without Budget/funds allocation Karachi Irregular Repair and Maintenance GE (Navy) East, 104. S -324 carried out at Sea view 84.000 2016-17 Karachi Flats/Bungalows AGE (Navy) Irregular execution of contracts of 105. S -273 Maint Manora, 69.999 2016-17 water supply in piecemeal Karachi Un-justified expenditure made PNS Haider, 106. S -196 without allocation of budget/funds 60.950 2016-17 Karachi allocation GE (Navy) Award of tenders after negotiation 107. S -264 Central Cons. 49.674 2016-17 in violation of PPRA Karachi Irregular/Unauthorized expenditure GE (Navy) 108. S -246 2016-17 45.000 incurred on supply of fresh water South, Karachi GE (Navy) Irregular award by split of two 109. S -262 Central Cons. 40.441 2016-17 contracts to same contractor Karachi GE (Navy)

110. S -328 Irregular free gas supply to NSSD Logistics D/Yard 26.616 2016-17 Karachi Unauthorized contract of GE (Navy)

111. S -263 consultancy by superseding the Central Cons. 21.968 2016-17 mandate of MES Karachi Less recovery of income tax from PN MSD, 112. S -120 2016-17 18.195 whole sellers Karachi

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Loss to state by paying excess per Sft Rate payment against the work GE (Navy) 113. S -270 having less bearing capacity for Central Const, 16.274 2016-17 same type of contract with same Karachi specification Irregular expenditure due to GE (Navy)

114. S-44 sanctioning of minor works by Eastern, Karachi 12.743 2016-17 incompetent authority Irregular payment of fresh water through Bowzer to contractor GE (Navy) 115. S-43 within one or two days after 12.500 2016-17 Eastern, Karachi conclusion of contract Rs. 12.500 million Less Recovery of G.S.T/Non- GE (Navy) 116. S -244 production of documentary 9.378 2016-17 South, Karachi evidence of deposit of G.S.T Unjustified work issued to AGE (Navy) 117. S -199 2016-17 9.160 contractors. Mehran Karachi Irregular execution of electrical AGE (Navy) 118. S -197 2016-17 6.063 work by unlicensed contractor Mehran Karachi Undue benefit given to contractor AGE (Navy) 119. S -190 2016-17 5.593 not enlisted with MES Mehran Karachi Irregular expenditure on

120. S -101 consumption of POL & repair V.S.D Karachi 5.223 2016-17 against unauthorized vehicles Unauthorized allocation of POL for 121. S -148 2016-17 PNS Himalya 2.645 generator GE (Navy) Less recovery from contractor 122. S -267 2016-17 Central Const, 2.541 against retained store Karachi PNS Bahadur, 123. S-29 2016-17 Non-recovery of sales tax 2.136 Karachi Non recovery of House Rent PNS Raza, 124. S-73 2016-17 1.917 Allowance Karachi Irregular Expenditure due to PNS Karsaz, 125. S-35 2016-17 1.800 splitting up of contract Karachi PNS Karsaz, 126. S-33 2016-17 Non-recovery of sales tax 1.038 Karachi GE (Navy) Recoverable excess payment issued 127. S -272 2016-17 Central Const, 1.000 for Soil Investigation Karachi GE (Navy) 128. S-08 2016-17 Irregular repair of furniture items Comwest, 0.791 Gawadar

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Over Payment to Contractor on GE (Navy) East, 129. S -325 2016-17 Account of wrong Implementation 0.775 Karachi of Schedule of rates Irregular conclusion of contract GE (N) logistic 130. S -329 2016-17 0.718 before sanction / approval Dockyard, Kci Non-Recovery of Sales Tax on PNS Shifa, 131. S -123 2016-17 0.693 Services Karachi Less recovery of GST/Non AGE (Navy) 132. S-34 2016-17 production of GST invoice Rs 0.631 Maint Ormara 0.631 million GE (Navy) Non recovery of sales tax on 133. S -268 2016-17 Central Const, 0.570 furniture Karachi Unjustified award of works without AGE (Navy) 134. S -186 2016-17 obtaining security deposit from the 0.475 Mehran Karachi contractors Non-recovery of sales tax on PNS Raza, 135. S-76 2016-17 0.382 services Karachi PNS Karsaz, 136. S-38 2016-17 Non-production of auditable record 0 Karachi Total 1658.245 Military Accountant General (Rs. in million) Unit/ S.No DP No Year Subject Amount Formation Irregular Execution of F.M.I.S. Project for Development of Data 137. S-309 2016-17 Centre Rs. 177.60 million, Non .C.N.A Karachi 225.560 Recovery of Income Tax Rs. 17.760 million & G.S.T. 138. S-201 2016-17 Non-deduction of income tax C.M.A Karachi 0.201 Total 225.761

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