AUDIT REPORT ON THE ACCOUNTS OF DISTRICT MUNICIPAL CORPORATIONS KARACHI DIVISION AUDIT YEAR 2014-15 AUDITOR-GENERAL OF PAKISTAN TABLE OF CONTENTS ABBREVIATIONS AND ACRONYMS ........................................................................ iii PREFACE ......................................................................................................................... iv EXECUTIVE SUMMARY .............................................................................................. v SUMMARY TABLES & CHARTS ............................................................................. viii Table 1: Audit Work Statistics ................................................................................. viii Table 2: Audit Observations Classified by Categories ........................................... viii Table 3: Outcome Statistics......................................................................................... ix Table 4: Irregularities Pointed Out ............................................................................. x CHAPTER-1 ...................................................................................................................... 1 1.1 INTRODUCTION............................................................................................. 1 1.1.1 Karachi Division................................................................................................ 1 1.1.2 Comments on Budget and Accounts (Variance Analysis) ............................. 2 1.1.3 Brief Comments on the Status of Compliance with PAC Directives............ 3 1.2 AUDIT PARAS ................................................................................................ 5 ANNEXURES .................................................................................................................. 69 I. Memorandum for departmental accounts Committee (MFDAC) .................... 70 i. Part-i Paras related to current Audit Year 2014-15 .......................................... 70 ii. Part-ii Paras related to previous Audit Year 2013-14 ....................................... 72 II. Audit Impact Summary .................................................................................... 73 III. Non-Production of Record ............................................................................... 75 IV. Non-Transparency in Government Spending ................................................... 75 V. Less recovery against targeted receipts ............................................................ 76 VI. Non-Deduction of Sales Tax ............................................................................ 76 VII. Expenditure without inviting tender ................................................................. 77 VIII. Payment through open cheques ........................................................................ 78 IX. Un-authorized Revised Expenditure beyond Prescribed Limit ........................ 81 X. Non-Production of Record ............................................................................... 81 i XI. Un-authorized Sanction of Non-schedule items beyond powers ..................... 82 XII. Over-payment of House Rent Allowance ........................................................ 84 XIII. Irregular expenditure by way of Splitting ........................................................ 86 XIV. Irregular Expenditure on Hajj Scheme ............................................................. 95 XV. Non-Production of Record ............................................................................... 96 XVI. Non-Transparency in Government Spending ................................................... 96 XVII. Un-authorized Technical Sanction ................................................................... 97 XVIII. Non-Hoisting of Bid Evaluation Report ........................................................... 99 XIX. Splitting up of Expenditure to Avoid Tender ................................................. 100 XX. Payment through open cheques ...................................................................... 101 XXI. Unauthorized Appointments .......................................................................... 102 XXII. Non-Production of Record ............................................................................. 103 XXIII. Non-Achievement of Targeted Revenue ........................................................ 103 XXIV. Non-Transparency in Govt. Spending ............................................................ 104 XXV. Un-justified transfer of funds ......................................................................... 105 XXVI. Technical Sanction beyond financial powers ................................................. 106 XXVII. Splitting works in parts to avoid tenders ........................................................ 107 XXVIII. Non-Production of Record ............................................................................. 110 XXIX. Less-Realization of Receipts .......................................................................... 110 XXX. Non-Transparency in Govt. Spending ............................................................ 110 XXXI. Irregular Expenditure without Inviting Tender .............................................. 111 XXXII. Non-Transparency in Government Spending ................................................. 112 XXXIII. Irregular Execution of Work without PC-1 .................................................... 112 XXXIV. Unauthorized Execution of Work .................................................................. 113 XXXV. Unauthorized Technical Sanction .................................................................. 114 XXXVI. Splitting of Works .......................................................................................... 115 XXXVII. Expenditure without Tender ........................................................................... 122 ii ABBREVIATIONS AND ACRONYMS AIR Audit & Inspection Report APT Rules Appointment, Promotion & Transfer Rules BS / BPS Basic Scale / Basic Pay Scale CC Cement Concrete / Cylinder Capacity / Cubic Centimeter CNG Compressed Natural Gas CPWD Central Public Works Department CTR Central Treasury Rules DAC Departmental Accounts Committee DDO Drawing & Disbursing Officer DGA Director General Audit DMC District Municipal Corporation GoS Government of Sindh IPSAS International Public Sector Accounting Standards KMC Karachi Municipal Corporation LGD Local Government Department MFDAC Memorandum for Departmental Accounts Committee NBP National Bank of Pakistan NIT Notice Inviting Tender NOC No Objection Certificate PAC Public Accounts Committee PAO Principal Accounting Officer POL Petroleum Oil and Lubricants PWD Public Works Department RCC Reinforced Cement Concrete R/M Repair/Maintenance S&GAD Services and General Administration Department SE Superintending Engineer SFR Sindh Financial Rules SPPRA Sindh Public Procurement Regulatory Authority TMA Taluka / Town Municipal Administration TMO Taluka / Town Municipal Officer TO (F) Taluka/Town Officer (Finance) TO (I&S) Taluka/Town Officer (Infrastructure & Services) TO (P&C) Taluka/Town Officer (Planning & Coordination) TO (R) Taluka/Town Officer (Regulation) TS Technical Sanction UC Union Council iii PREFACE Articles 169 & 170 (2) of the Constitution of the 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 the receipts and expenditure of the Secretary Local Government Department, Karachi Metropolitan Corporation, Karachi Water & Sewerage Board, Municipal Corporation/ Committees, Town Committees and Union Councils. The report is based on audit of District Municipal Corporations of Karachi Division for the year 2012-13 & 2013-14. The Directorate General of Audit, Local Councils Sindh, Karachi, conducted audit during 2013-14 & 2014-15 on test check basis with a view to reporting significant findings to relevant stakeholders. The main body of 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 of the Audit Report. The Audit observations listed in the Annexure-I 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 observations will be brought to the notice of the Public Accounts Committee through the next year’s Audit Report. Audit findings indicate need for adherence to the regularity framework besides instituting and strengthening internal controls to avoid recurrence of similar violations and irregularities. The observations included in this Report have been finalized without written response. The Audit Report is submitted to the Governor of the Sindh in pursuance of Article 171 of the Constitution of the Islamic Republic of Pakistan, 1973 read with Section 116 of the Sindh Local Government Act 2013, for causing it to be laid before the Provincial Assembly of the Sindh. Islamabad (Muhammad Akhtar Buland Rana) Dated: Auditor-General of Pakistan iv EXECUTIVE SUMMARY The DG Audit, Local Councils, Sindh, Karachi is responsible to carry out the audit of 105 Municipal Committees / Town Committees. This Directorate General has a human resource of 40 officers and staff, resulting in 9,960 man days and annual budget amounted to Rs 60.840