The Auditor General of Pakistan has detected embezzlement, losses and irregularities of more than Rs 2 billion in National Insurance Company Limited (NICL). According to Audit Report 2010-11, the national exchequer faced Rs 1.7 billion losses due to irregular procurement of a building with no utilisation.
The NICL acquired premises (six units of the Liberty House, Dubai International Finance Center, Dubai, UAE) on lease-hold land with a total area of 27,000 sq ft amounting to Rs 1.7 billion in the year 2009. The procurement of the said property was irregular as neither the procurement was advertised nor bidding documents were formulated or made available to the prospective bidders. Moreover, the management has not been able to rent out the office premises even after one year of its purchase.
The report said that procurement of the property in Dubai was ill-timed as during that year the real estate market in Dubai crashed. The move to invest in the fragile market with uncertain prices was questionable as other investors at that time were fleeing the market.
The irregularity was brought to the notice of management on August 18, 2010. The management in its reply dated September 14, 2010 stated that the property was procured on the basis of evaluation conducted by property consultants. The report said that the reply was not tenable as PPRA rules are required to be followed in all procurements. Audit suggested investigation of the case for fixing of responsibility on the person(s) at fault and taking remedial measures.
The issue was discussed in Departmental Accounts Committee (DAC) meeting held on December 15, 2010. The management did not contest the audit observation; therefore, the DAC decided to place the matter before Public Accounts Committee (PAC). The report shows that NICL management acquired shares of a private limited company on July 1, 2005 at a cost of Rs 358.56 million. These shares were purchased at a rate of Rs 8 per share against the face value of Rs 10 per share.
The share value of the company varied marginally by an increase at Rs 8.63 per share as on December 31, 2007 which is insignificant as the company has not yet become operational since it has not been able to develop, locate and prepare business operations of its own even after a lapse of more than five years. Moreover, NICL did not receive any dividend from the investment in Civic Centre Company.
The issue was discussed in DAC meeting held on December 15, 2010. The management did not contest the audit observation; therefore, the DAC decided to place the matter before PAC. It was also seen that management expenses of NICL have risen by 29.1 percent while general and administrative expenses also increased substantially during the year by 21.1 percent.