KARACHI, May 16 The Auditor General of Pakistan has detected financial mismanagement, irregularities and lack of fiscal discipline of over Rs264 million in the accounts of six cantonment boards in the city during the financial year 2008-09.

The Karachi Cantonment Board tops the list of six cantonment boards in financial mismanagement with detection of over Rs134 million irregularities. The mismanaged finances in accounts of the KCB that controls the city's centre, including Saddar, are more than 50 per cent of the combined financial irregularities of all six cantonment boards.

More than Rs70 million were outstanding against various property owners as well as lessees under the head of rent, taxes, charges, etc, the audit report said. The KCB failed to recover the dues despite a clear mention of tax recovery in Paras 91 and 92 of the Cantonment Act, 1924, which says “if the tax is not paid to the cantonment board within 30 days from service of notice or demand or the taxpayer did not show sufficient cause of non-payment the amount is required to be recovered either by a suit of law or through the magistrate”. The KCB informed auditors in July 2009 that notices had been sent, but the recovery had not been finalised till December.

The KCB recovered conservancy tax at the rate of two per cent on a plea that all sewers passing through its areas were connected with the Karachi Water and Sewerage Board system in accordance with a statutory notification (SRO 423(1)/83), the audit report noted. However, the audit termed the SRO discriminatory vis-à-vis other SROs and not in line with the four per cent rate of conservancy tax applied in other cantonments of the city. Due to the levy on lower side, the KCB suffered a loss of Rs31 million between 2007 and 2009. The audit, which was informed that the KCB had been charging conservancy tax at the rate of two per cent since 1954, directed the cantonment board that tax rate be revised for uniformity and rationalisation of taxes.

The KCB could not recover over Rs21 million conservancy charges from 2006 to 2009 from numerous government organisations, including the National Institute of Cardiovascular Diseases, Sindh Medical College, Kidney Centre, National Institute of Child Health and certain other government buildings near the Cantonment station.

The Coast Guards Headquarters (Survey 59, Doli Khata) as well as Coast Guards Mess (Survey 181 C/1, Sarwar Shaheed Road) were not paying the conservancy tax which increased to over Rs5 million in the three years. The KCB said that these buildings were constructed on 'A-1' land and pertained to the army. However, the audit told KCB that neither the army nor coast guards was exempted from conservancy tax. The coast guards was neither administratively under the ministry of defence nor was financed through defence budget, the audit said, directing that arrears must be recovered from the coast guards. However, the recovery was not done till finalisation of this report.

Two commercial plazas were built on 'A-1' land that pertained to army authorities, but house tax and conservancy tax were not being recovered due to lack of assessment, which had so far caused a loss of over Rs2 million. The KCB said that the survey (No 252/A and 253, Sarwar Shaheed Road) where the two plazas were located were Coast Guards Mess and Military Estate Officer (Land) and were on 'A-1' land. The board said any 'A-1' land could be used for benefit of the army as per Rule No V, amended by the quartermaster-general. The audit rejected the KCB contention, stating that the commercial plazas had been built and rented out therefore these should have been assessed for taxation. Besides, the quartermaster-general was not competent to amend or bypass any rule issued by the government, the audit pointed out.

Cantonment Board Clifton

The Cantonment Board Clifton (CBC) could not recover liquidated damages totalling over Rs27 million from the DHA Cogen plant. Under the water purchase agreement, the Cogen plant was to pay liquidated damages at the rate of Rs30 per 1,000 gallons if it failed to deliver a minimum of 2.5mgd (million gallons on a daily basis) water for two consecutive days. Since the DHA Cogen plant remained out for more than a year, the CBC issued notices and reminders to the authorities for the payment of Rs27 million arrears. However, the CBC could not recover the arrears.

When audit pointed out that the CBC had not recovered over Rs45 million conservancy charges from various property owners, the board collected Rs9.5 million dues while the remaining dues were still pending, the audit said.

On a reminder by the audit that the CBC had not recovered Rs4.7 million property tax and Rs1.5 million conservancy charges from Sir Syed Hospital, the CBC did issue a notice to the hospital. But the amount was not recovered.

The CBC also failed to recover Rs1.5 million property tax and Rs0.5 million conservancy charges from the owners of the Foundation School (Navy), which had been rented out at Rs150,000 a month since 2002.

Though the owners of seven properties had rented out their houses to the diplomatic staff of the Japan Consulate-General in the city, their taxes were being assessed on a self-occupied basis rather than on a commercial basis, causing a loss of more than Rs6.9 million. The CBC on the directives of the audit sent notices to the defaulting owners with arrears since 2002, but the payment was not done till the completion of the audit report.

Cantonment Board Korangi Creek

More than Rs22 million was outstanding under the heads of house tax, water tax, conservancy tax, rent etc on account of property which had not been recovered by the Cantonment Board Korangi Creek (CBKC).

The board also did not recover over Rs2.3 million development charges from the owner of Survey No 333/NC-24, Deh Korangi Creek. Similarly, the CBKC imposed development charges of over Rs1.5 million on the Paramount Floor Mills, the owner of Survey No 249/4 No 24, Deh Korangi Creek, but did not recover the amount.

Cantonment Board Faisal

Over Rs9.6 million was spent on the construction of sub-floors of Gulistan-i-Jauhar footpaths, which was neither admissible as per MES Schedule of Rates-2000 nor was it justified. The audit rejected the CBF claims that the footpaths with certain specifications had been constructed so that these could be used for car parking at night. The audit said that the footpaths had caused a loss of over Rs9.6 million to the government.

Cantonment Board Malir

The Cantonment Board Malir did not recover the composition fees from the builder who got the building plans processed/ approved under different names - Humair Associates, Gulshan-i-Roomi, Sobia Enterprise - since 1991. The audit rejected the board's claim that only Rs2.8 million was arrears, stating that Rs5.2 million was outstanding.

Though the board had imposed over Rs1 million composition charges on plot No 83/E, the Cantt Bazaar area, on account of unauthorised construction, it did not recover the charges.

The audit directed the CBM to recover all arrears immediately.

Cantonment Board Manora

The Cantonment Board Manora did not recover over Rs1.5 million rent from the occupants of its flats and shops and over Rs655,582 income tax from its contractors for goods and services.

The board though deducted Rs253,182 as sales tax (at the rate of 15 per cent instead of 16 per cent) from its contractors, but did not deposit the amount in government treasury and instead kept it in 'Cantonment Fund'. The audit directed the board to recover the remaining amount from the contractor and deposit the entire amount in the government treasury.

The cantonment board did not charge a mobile phone company, Mobilink, the annual rent for antenna/ tower fee as decided by the agreement that mentioned a yearly increase of 15 per cent. The audit directed for the recovery of Rs580,200 dues in this regard.