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April 9, 2019

Audit report reveals massive irregularities in first two PSL editions

Top Story

April 9, 2019

ISLAMABAD: The special audit report of first two editions of Pakistan Super League (PSL) has revealed massive irregularities in the T20 League as the national exchequer has to face hundreds of millions of dollars loss due to sale proceeds of commercial rights to franchises on cheaper rates.

The Auditor General of Pakistan (AGP) conducted a special audit report for the first two editions of PSL. The report has revealed that the market value of the PSL was up to $300 million in 2017 but the PCB management sold the commercial rights to the initial franchises in just $93 million in 2015.

As per the special audit report, the cricket board awarded $14.08 million contract to the same company which was already working with PCB. According to PCB record given to audit authorities, the PSL contracts were not widely advertised in international press and media. Advertisement in international media was not available with the PCB management. Rather conspicuously, PCB’s earlier partner got the PSL contract as well. It was found that only an Indian firm/consortium was handling all major PSL contracts. The parent company name was M/s Technology Frontier established in Madras, India.

Similarly, the audit report further reveals that PCB awarded irregular and non-transparent award to the tune of $57 million to the franchises that were not even qualified for the franchise rights. According to the report, bids were required to be received at designated email address but bids against firms namely M/s JW International, ARY Digital and Qatar Lubricants were received in hard form only. It was mandatory for a competing firm to produce financial statement of previous two years (with at least one year account being audited) in order to qualify for the selection process.

This implied all such firms/companies, which were not maintaining or could not produce their annual audited financial statements, were not eligible to apply for the franchise rights. Contrary to such a basic requirement, franchise rights for Islamabad United were awarded to M/s Lenonine Global, which was a British Virgin Island (BVI) based company, having no prior annual audited financial statement. Similarly, Salman Iqbal (of ARY Digital) applied as an individual for franchise rights acquisition tender. He was unable to submit his financial bid by the prescribed deadline; even then his bid was accepted.

Moreover as per terms of his franchise agreement with PCB, he was required to establish an SPV for his PSL franchise team (Karachi Kings) within one month of signing of the franchise agreement. The same was also not done within time. In fact it was done after the lapse of four months beyond deadline. The payment of franchise fee was delayed by the franchise owner and PCB (as per governing council minute) had to encash his bank guarantee.

Similarly, the PCB spent Rs12.64 million on the TA/DA of journalists covering the PSL. The report further reveals that the state has to face Rs176.43 million loss due to non-deduction of tax on payments to non-resident and resident parties.

When contacted PCB Chief Operating Officer (COO) Subhan Ahmed for the cricket board’s version, instead of him, PCB’s senior manager media Raza Kitchlew contacted this scribe and said the the Board would not respond to any query of this scribe.

Below are the key findings of AGP’s special audit report:

1. Loss to PCB due to irregular payments to franchises in excess of agreed shares of central pool income for Rs248.61 million.

2. Loss to PCB due to irregular award of compensation to the PSL franchises - Rs54.49 million.

3. Unjustified auction of franchises causing loss - $11 million.

4. Irregular advance payments to vendors - Rs246.04 million.

5. Extra expenses due to non-charging of venue hiring costs to Central Pool Income - Rs306 million.

6. Non recovery of amounts due from franchises - Rs32.05 million.

7. Non-recovery on account of gate receipts from M/s Kayzoonga Rs4.99 million.

8. Irregular excess expenditure on production of PSL-II Final without proper estimation $179,815 (Rs18.88 million)

9. Loss to government exchequer due to non-deduction of government dues - $255,591.

10. Unauthorised and unlawful transfer of PSL funds in the third party bank accounts outside Pakistan -Rs145.14 million.

11. Irregular financial management due to receipts of PCB’s revenue in third party US dollar account —Rs166.76 million.

12. Loss due to non-auction of commercial/broadcasting rights Rs13.08 million.

13. Wasteful expenditure on account of TA/DA of journalists Rs12.64 million.

14. Loss to PCB due to non-charging of branding expenses to central pool income account of PSL Rs11.86 million.

15. Irregular and non-transparent award of franchise rights to the unqualified firms $57 million.

16. Non-transparent award of contracts in Dubai to same firm/consortium $14.08 million.

17. Loss due to sale of media rights at a price even lower than the purchase price $0.14 million.

18. Irregular award of instadia media management rights $4.5 million.

19. Irregular and uneconomic award of event management contracts $3.86 million (Rs403.94 million).

20. Irregular award of contract for broadcasting rights (excluding Pakistan) $4.44 million.

21. Unauthorised novation of franchise team rights for PSL resulting into financial loss $0.52 million.

22. Irregular award of contract for Pakistan media rights to M/s Blitz -$8.65 million.

23. Irregular expenditure on marketing campaign for PSL-II $1.22 million (Rs126.71 million).

24. Irregular and extra expenditure borne by PCB on branding $194,679 (Rs20.34 million).

25. Wasteful expenditure on account of 2nd live feed to M/s Sunset+ Vine during PSL-II $15,000.

26. Loss due to avoidable expenditure on engagement of Anil Mohan without open competition $80,000 (Rs8.36 million).

27. Irregular award of sponsorship rights without open competition $1.716 million.

28. Irregular award of contract for catch a crore and YouTube deals to Pepsi $175,000.

29. Loss to PCB due to non-charging of marketing and advertisement expenses to central pool income Rs160 million.

30. Irregular award of production services contract and payment of cost overrun $2.9 million.

31. Non-transparent award of media agency contract to M/s Blitz $1 million.

32. Irregular expenditure on account of PSL valuation, commercial strategy and concept development without open competition $810,000.

33. Irregular sponsorship agreement with Pepsi Cola International $250,000.

34. Mis-procurement at exorbitant rates at logo launching ceremony Rs20.24 million.

35. Loss to state due to non-deduction of tax on payments to non-resident parties Rs167 million and resident parties Rs9.43 million.

36. Loss of revenue due to awarding of media advertising (Pakistan region) rights at lower value Rs169.61 million.

37. Unauthorised expenditure due to hiring of legal consultant without approval from the Law and Justice Division — Rs34.05 million.

38. Another unjustified payments to a company $209,881 (Rs21.95 million).