PESHAWAR: A recent audit of Rs97 billion Khyber Pakhtunkhwa Cities Improvement project has uncovered alarming and shocking financial irregularities, misappropriations, unlawful payments and wasteful expenditure.
The audit findings indicate total financial discrepancies amounting to Rs8.4853 billion, raising serious concerns over governance, oversight and accountability in the province.
The Asian Development Bank (ADB) project aims to improve the livability of five cities: Abbottabad, Kohat, Mardan, Mingora and Peshawar. It was launched at the end of 2022 and is expected to be completed by the end of 2026.
The audit report highlights multiple instances of financial mismanagement, including misappropriation of funds, unauthorised work, unapproved variations and deliberate cost escalations. Funds were disbursed for work that was never executed, resulting in significant losses. Payments of Rs8.800 million were misappropriated for non-executed work at the site, while Rs11.219 million was falsely claimed for fiberglass installation in a parking area. Fake measurements led to a loss of Rs34.890 million, and Rs5.483 million was wrongly paid for excavation work at the Chlorination Building despite no physical execution. These fraudulent activities resulted in a total misappropriation of Rs60.392 million.
The auditors have identified several discrepancies including the same work on higher rates. The loss to the government awarding the same item of work for the same lot (STP) at the same time at a higher rate of Rs1,052 million. The report includes the irregular purchase of vehicles of higher capacity than approved PC-1 for Rs38.915 million.
The audit report said significant deviations from the approved design and project scope have led to substantial cost escalations. Unauthorised BOQ enhancements resulted in additional costs of Rs463.308 million, while Rs28.392 million was wasted on a flawed design for the Green Spaces Initiative. Faulty planning and cost assumptions led to the allocation of Rs812.244 million for overhead reservoirs, and irregular cost enhancements amounted to Rs441.402 million. These unauthorised expenses totaled Rs1,745.346 million.
The auditors stated that excessive and unjustified payments to contractors further deepened financial losses. Construction supervision consultancy was awarded under questionable circumstances, leading to an expenditure of Rs2,535.968 million. Unjustified escalations added Rs11.082 million, and overpayments due to excess quantities and higher rates totaled Rs16.139 million. Additional financial discrepancies included Rs65.169 million for inadmissible higher rates, Rs157.416 million in irregular escalations paid to consultants, and Rs952.985 million in unauthorised remunerations. In total, overpayments and escalations contributed to a loss of Rs3,738.759 million.
Deliberate cost increases and abnormal delays caused the project cost to rise by 41.77 percent, amounting to an extra Rs441.401 million. Furthermore, Rs105.666 million in delay damages was not recovered. These project inefficiencies led to a total financial burden of Rs547.067 million.
The illegal appointment of project staff without proper testing added another layer of irregularities. Additionally, financial mismanagement severely impacted public funds, with Rs1,709.055 million lost due to awarding contracts at higher rates, Rs76.061 million paid in excessive monthly salaries to consultants, and Rs263.491 million lost due to inflated costs. Another Rs49.472 million was unlawfully paid to a contractor beyond the achieved physical progress. Furthermore, the insurance contract was given to a private company instead of NICL, and Rs47 million was paid in US dollars instead of PKR, violating the approved PC-I.
The KPCIP’s management informed this correspondent that the audit was conducted for FY2023-24 and the auditor made observations mostly related to the civil works payments in view of the local procurement laws and ignored ADB’s procurement policy. The contract was awarded by KPCIP management under FIDIC contracts (FIDIC formally known as the International Federation of Consulting Engineers). However, management is confident to settle the audit paras in the Departmental Accounts Committee based on the available supporting documentation. The management also informed that the auditor’s management letter, issued in December 2024, initially marked 72 audit paras. However, after discussions and clarifications, the final signed audited report contained a total of 34 audit paras. In addition, ADB’s disbursement team conducted its own audit for the same period and acknowledged that the expenditures claimed by KPCIP management align with the loan agreement and ADB’s disbursement procedures.