The Auditor General of Pakistan (AGP) has detected irregularities worth over Rs 644 million in Pakistan State Oil (PSO) on account of untraceable fixed assets and procurement automation equipment. According to auditor general report for 2009-10, in Pakistan State Oil (PSO), verification and reconciliation of fixed assets was carried out for the year 2008-09.
The report indicated that out of total 42,001 fixed assets, 16,402 having book value of Rs 325 million could not be physically traced. This was also discussed in the 182nd meeting of the Board of Management (BoM) held on April 22, 2009. The Board directed the management to examine the cases involving Rs 100,000 and above, fix responsibility for displacement, theft or loss. However, in disregard of the directives, no action seemed to have been taken by the management till audit in November 2009.
The matter was taken up with the management and the Ministry in November 2009. However, no reply was received. The case was discussed in the DAC meeting held on December 18, 2009. The management informed that they had carried out the exercise of physical verification for the first time.
The extent of loss had been substantially reduced on second check, which had been reviewed and written off with the approval of BoM. DAC directed the management to fix the responsibility for causing huge loss. However, no progress was intimated till the finalisation of this report. The auditor general also unearthed scam worth Rs 312 million, irregularly awarding contract for installation of Retail Automation System.
The Purchase Policy, June 2002 (Section-03, 2.1, 4.1 & 4.2) of Pakistan State Oil Company Limited (PSO) provides that indenting department shall originate Purchase Requisition for items over Rs 5000 and after obtaining financial approval according to the prescribed limit, this shall be forwarded to Procurement Service Department.
Open tender through press advertisement shall be made for procurement of over Rs 10 million. The bidders will be required to deposit 5 percent of the bids as earnest money and the successful bidder have to submit bank guarantee equivalent to 5 percent of the contract money in case contract exceed Rs 5 million.
PSO awarded a contract for installation of Retail Automation System to a firm, Zaqsoft in September 2003 at a cost of Rs 0.240 million per outlet. The purpose of Retail Automation System was to automatically check the sale terminal used for PSO Cards Transactions. Retail Automation System was installed at more than 1300 Retail Outlets (petrol stations) across the country costing more than Rs 312 million.
From the report of Retail Automation System Investigation & Re-evaluation Committee, which was constituted by the management to investigate the matters of Retail Automation Project on July 7, 2009; it transpired that the contract was awarded to a firm in violation of procurement policy framed by the organisation, which is as follows; (i) no Purchase requisition Cost estimate was generated; (ii) no tendering process was executed; (iii) No vendor prequalification based on technical and financial strength was carried out; (iv) no competitive bidding was held; (v) no formal technical evaluation of the offered system was carried out; and (vi) no commercial price negotiations were held as per rules.
The report further stated that during tendering of a similar project in 2007 (ie after 4 years of agreement with the firm) unit price of pump controller system offered by the lowest bidder @ Rs 0.177 million was much lower than the existing pump controls being installed by the firm. It was also evident from the report that the performance of the firm was highly unsatisfactory indicating that the vendor did not possess the capacity to execute the project.
The whole picture illustrated that the award of contract was not transparent and it was awarded on exorbitant rates; the interest of the Company was not safeguarded at the time of awarding the contract and the management failed to implement internal controls in their organisation in awarding the contract. The irregularity was pointed out to the management and the Ministry in November 2009. However, no reply was received.
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