Proposed Draft Para

Para No. 1
Loose internal control leading to misappropriation of funds - Rs 15.193 million
According to Rule 20 of PSC Service Rules circulated vide notification dated March 17,
2007, “the Corporation may recover from any officer or employee by deduction from his salary or
pay or from any other sums that may be due to him, for any loss or damage sustained by the
Corporation by reasons of negligence or misconduct of the officer or the employee and the
decision of the Competent Authority in respect of the monetary valuation of the loss shall be final
and binding on the officer or employee concerned.

During audit of Punjab Seed Corporation (PSC) for the year 2017-18 and 2018-19, it was
found that at PSC Marketing Center Lodhran an accounts clerk misappropriated funds amounting
to Rs 15.193 million. The funds were misappropriated on account of credit sale, forgery in
accounts, funds received from dealer but adjusted in other account, supply order issued without
deposited slips/cheques, non-preparation of stock reconciliation and non-deposited amount in
bank account. The local management lodged FIR in police station and Anti-corruption
Department and Anti-corruption Bahawalpur proved in inquiry the misappropriation of funds.
The PSC HO did not conduct the inquiry in this case till completion of audit.

Audit is of the view that funds were misappropriated due to poor internal control. The
supervisory officer did not check the bank record and sale record.

Audit Requires:

i. Matter may be investigated to fix the responsibility.

ii. Misappropriate amount along with interest be recovered on person(s) at fault.
iii. Internal control should be strengthened to avoid occurrence of such incident in future.

Director
 Proposed Draft Para
Para No.2
Loss due to sale of Wheat seed as non –seed Rs 203.203 million
As per PSC Marketing Plan /Sale Policy Wheat Seed 2017-18 for certified seeds, all the
marketing officers should make efforts to achieve their allocated sale targets and poor
performance will be taken into account.

During audit of Punjab Seed Corporation for the year 2017-18 & 2018-19, it was found
that the management failed to sell the wheat seed in 2017-18 due to poor marketing strategy.
Later on this wheat seed was sold as non-seed. The sale price of non-seed was less then wheat
seed price due to which corporation sustained loss amounting to Rs 203.20 million. The detail of
loss for the year 2017-18 is given below:-

Qty of Non Seed Sale price of Non Sale Price of Difference Amount
50 Kg per Per Bags Seed Amount in Wheat Seed Rs Rs
Rs Rs
265,626 1585 2350 765 203,203,890

The above data indicated that management failed to sale wheat seed during 2017-18 due to which
corporation sustained huge loss amounting to Rs 203.203 million.
Audit is of the view management failed to sell wheat seed due to poor marketing plan.

Audit requires:-
i. Matter may be investigated and responsibility may be fixed.
ii. Loss amount may be recovered from person (s) held responsible for loss.

Director
 iii. .
Proposed Draft Para
Para No. 3
Irregular procurement of Paddy seed in violation of its Procurement Plan 2018-19 -
Rs 35.63 million
According to clause 9 of procurement plan of Paddy seed Kharif 2018-19, the prescribed
limit of moisture contents for coarse /fine varieties is 14%. No seed lot will be procured above
14% moisture. Seed will be free from red rice.
During audit of PSC for the year 2017-18 & 2018-19, it was found that management of
Sahiwal Center procured Paddy seed amounting to Rs 125.93 million (Paddy fine amounting to
Rs 105.94 and Paddy coarse amounting to Rs 19.99 million) during the year 2018-19. The
different varieties were procured from different growers. Audit on sample basis reviewed the
procurement and the laboratory result of Paddy seed. It was found that management procurement
Paddy seed amounting to Rs 35.63 million having moisture content of more than 14%. The detail
is given in Annex-A. It was also revealed that Paddy seed was procured from un-registered
growers and contents of red rice were also found.
The data indicated that management procured Paddy seed in violation of procurement plan
and therefore, payment is held irregular in audit. It is also pertinent to mention that due to
procurement of high moisture content and red seed amounting to Rs 34.45 million (17733 bag @
Rs 2,000 per bag) were returned by dealers.
Audit is of the view that management procured Paddy seed in violation of PSC
procurement plan therefore payment made to growers is held irregular in audit.

Audit requires:-
i. Matter may be investigated to fix responsibility on the person (s) at fault.
ii. Expected loss amounting to Rs 34.45 million may be recovered from person (s) held
responsible.

Director
Annexure –A

Name of Grower Variety Moisture Qty per Rate per 60 Kg Amount

% bags 60 Kg Rs
Malik Muhammad Tahseen KSK-133 17 244 2400 585600
Mian Muhammad Zafar Iqbal KSK-434 20 600 2400 1440000
Muhammad Shahid IRRI -9 26 170 2400
408000
Abdul Rasheed B-Kissan 17 235 2400 564000
Army SeedFarm KSK-133 16 510 2400 1224000
Haji Abul Rasheed B-Kissan 17.5 206 2400 494400
Mirza Muhammad Ilyas B-Kissan 17 510 2400 1224000
Muhammad Iqbal 17 596 2400 1430400
Haji Manzoor Ahmed 16.36 30 2400 72000
Qamar Zia PK-1121 17.7 252 2400 604800
17.43 186 2400 446400
Mian Sajjad Rehman 15.9 400 2400 960000
17 250 2400 600000
Haji Manzoor Ahmed B-Kissan 15.4 203 2400 487200
Ch.Muhammad Shahid 16 454 2400 1089600
Mirza Muhammad Ilyas 17.30 510 2400 1224000
16.6 507 2400 1216800
Mian Moazam Ali PK-1121 14.5 294 2400 705600
Dr.Iftikhar Ahmad B- Super 15.6 170 2400 408000
Mirza Muhammad Ilyas Kissan -016 17.30 280 2400 672000
17 227 2400 544800
Mian Hussain Khan 17.58 450 2400 1080000
17.0 79 2400 189600
Mian Sajjad Rehman PK-1121 16.5 465 2400 1116000
Ch. Muhmmad Rasheed PK-1121 16.5 282 2400 676800
Mirza Muhammad Ilyas B- Kissan 15.9 507 2400 1216800
Haji Abdul Rehman B- Super 17.08 200 2400 480000
Tariq Zaman Khan PK-1121 17.5 280 2400 672000
17.71 217 2400 520800
17.20 206 2400 494400
Mirza Muhamamd Ilyas B.Kissan 15.82 507 2400 1216800
Mian Sajid Rehman PK-1121 17.14 250 2400 600000
16.71 460 2400 1104000
Muhmmad Rafiq 17 .0 187 2400 448800
Mian Umair Hassan B-515 16 392 2400 940800
Ch. Amir Ud Din PK-1121 15 500 2400 1200000
Ch. Amir Ud Din 14.9 450 2400 1080000
Tariq Zaman Khan 17.5 109 2400 261600
Mian Sajid Rehman 16.42 250 2400 600000
Mian Ali Hassan B-515 17.14 522 2400 1252800
Mian Sajid Rehman PK-1121 16.71 400 2400 960000
15.9 210 2400 504000
Dr. Ifitkhar Ahmad B- Super 16 409 2400 981600
Mian Sajid Rehman PK-1121 16.14 250 2400 600000
Ch. Sajid Rehman PK-1121 17.43 250 2400 600000
Manager Government Farm Muhammad B- Super 18 68 2400
Nagar 163200
B-Kissan 18 58 2400 139200
Seed Farm Sahiwal PK-1121 18 72 2400 172800
14864 35,673,600
 Proposed Draft Para
Para No. 4
Irregular purchase of cotton in violation of procurement policy Rs 5.87 million
According to clause (10) procurement plan of seed Cotton Kharif 2017-18 No PSC/HQ-
Proc/03/2017/210 dated 28.09.2017, the germination standard of seed Cotton will be 70 % &
above but preference will be given 75% & above. The germination of seed Cotton for all varieties
will be 60 % for Khanewal center only.
During audit of PSC for the year 2017-18 & 2018-19, it was found that the management of
Khanewal center procured less germination Cotton seed in violation of procurement plan
2017-18. The detail is given below
Name of Grower Variety Qty in Germination Average Qty per Amount
Name Boars 67 Standard in rate per 40 Kg Rs
Kg in % 40 Kg
one bora As per Lab
results
Ch. Muhammad Sharif F.H .142 120 40 201 3400 683,400
Naseem Hassan BS-70 99 43 165.825 3400 563,805
Masood Ahmad Bhatti BS-52 197 58 329.975 3400 1,121,915
PSC Farm Piplan IUB-13 71 43 118.925 3400 404,345
PSC Farm Piplan IUB-13 71 48 118.925 3400 404,345
Haji Muhammad Akram Khan BS o-70 152 42 254.6 3400 865,640
Ch .Zafar Iqbal M-878 215 51 360.125 3400 1,224,425
Muhammad Afzal Khan BS-15 107 54 179.225 3400 609,365
Total 5,877,240

Above data indicated that management procured cotton seed against procurement plan,
hence payment held irregular in audit.

Audit is of the view that management procured less germinated Cotton seed against
procurement plan standard of germination which was 60 % therefore payment made on account of
purchase of Cotton seed held irregular in audit.

Audit requires:-
i. Matter may be investigated for procurement of less germination seed.
ii. Amount may be recovered from person (s) held responsible.

Director
 Proposed Draft Para
Para No.5

Loss due sale of Cotton lint bales below market rate Rs 5.873 million

According to rule 20 of PSC Service Rules circulated vide notification dated Mar 17, 2007, “the
Corporation may recover from any officer or employee by deduction from his salary or pay or
from any other sums that may be due to him, for any loss or damage sustained by the Corporation
by reasons of negligence or misconduct of the officer or the employee and the decision of the
Competent Authority in respect of the monetary valuation of the loss shall be final and binding on
the officer or employee concerned.

During audit of Punjab Seed Corporation (PSC) for the year 2017-18 & 2018-19, it was found
that the management auctioned the lint bales of Rahim Yar Khan Center and Khanewal Center
through tender. The management did not fix reserve price of lint bales. The management issued
tender on January 19, 2018 for sale of 1852 cotton lint bales and tenders were opened on February
06, 2018. The market rate issued by Karachi Cotton Association (KCA) of lint bale was
Rs 7,445 per lint bale equivalent to 37.324 kg as on February 03, 2018 and the same was reported
in Daily Business Recorder dated February 07, 2018. The management awarded contract to M/s
New Abu Baker Cotton Ginners @ Rs 6835 per lint bale on March 22, 2018 without considering
market rate and reserve price. Similarly, management issued tender notice for sale of 2574 Cotton
lint bales on February 07, 2019 and tender was opened on February 21, 2019. The market rate
issued by KCA was Rs 9,495 per bale as on January 23, 2019. The management awarded contract
to M/s New Abu Bakar on April 05, 2019 @ Rs.7,650 per cotton bale. The contract was awarded
below market rate due to which corporation sustained loss of Rs 5.873 details is given below:

Name of center Qty of lint Market Price Sale price Difference Loss due to
bales Karachi Cotton Rs due to sale at lower
Association market rate
printed in price and Rs
Business sale price
recorder and Rs
other
Khanewal 747 7445 6835 610 455670
Rahim Yar Khan 1105 7445 6835 610 674,050
Khanewal 421 9495 7663 1832 771,272
Rahim Yar Khan 2153 9495 7650 1845 3,972,285
Total 5,873,277

Audit is of the view that due to negligence of management cotton bales were sold at lower rate
than market rates. The management neither considered market rate nor fixed reserve price which
caused loss to corporation.
Audit requires:

i. Responsibility may be fixed for sale of bales at lower rate

ii. Amount of loss may be recovered from person (s) held responsible.

Director
 Proposed Draft Para
Para No. 6

Non deduction of Provincial Sales Tax on services from contractors amounting to Rs 21.013
million

According to serial no 16 and 48 of 2nd Schedule of Punjab Sale Tax Act 2012 16% Sale
Tax is to be deducted on labor and transport services.

During audit of PSC for the year 2017-18 & 2018-19, it was found that the management
hired the services of different contractors for transportation, labor and other services during 2016-
17. The management did not deduct the Provincial Sales Tax (PST), as per details given below:

Head of Accounts/Description Amount in PST amount@ 16

Rs % not deducted
Capital work in process (Civil) 13,148,791 2,103,807
Labor and carriage (Cost of sale) 62,235,191 9957,631
Repair and maintenance (Direct) 5,502,665 880,426
Storage Charges 3,156,119 504,979
Repair & maintenance (Ind-direct) 1,629,048 260,647
Legal and professional charges 635,240 101,638
Auditor Remuneration 535,000 85,600
Contracted labor and carriage (Selling & Distribution) 44,486,706 7,117,873
131,328,760 21,012,601

Above data indicated that the management hired the services from different
contractors/vendor but did not deduct PST therefore exchequer sustained loss of Rs 21.013
million.

Audit is of the view that the management failed to perform duty as withholding agent and
did not deduct PST on services from service provider resultantly exchequer sustained loss of
amounting to Rs 21.013 million.

Audit requires:

i. Matter may be investigated to fix the responsibility.

ii. Amount of PST may be recovered from contractors and deposited with PRA.

Director
 Proposed Draft Para
Para No. 07
Loss due to low yield of Okra in PSC farms Rs 7.514 million
According to rule 20 of PSC Service Rules circulated vide notification dated March 17,
2007, “the Corporation may recover from any officer or employee by deduction from his salary or
pay or from any other sums that may be due to him, for any loss or damage sustained by the
Corporation by reasons of negligence or misconduct of the officer or the employee and the
decision of the Competent Authority in respect of the monetary valuation of the loss shall be final
and binding on the officer or employee concerned.
During audit of PSC for the year 2017-18 & 2018-19, it was found that the management of
PSC Piplan farm & Khanewal farm sowed Okra during the year 2017-18 & 2018-19. The yield
per acre remains very low as compared to previous years. Due to low yield per acre Corporation
sustained loss as per details given below:
Name of Year No of Acre Per Acre Average Loss due Loss in Rs
Farm Yield mds Yield per to low Loss per
acre mds yield per mds* rate
in previous mds per mds
years Rs 8000 per
mds
Piplan 2017-18 89 3.2 7.4 4.2 2,990,400
2018-19 50 3.1 7.4 4.3 1,720,000
Khanewal 2017-18 44 3.65 7.4 3.75 1,320,000
2018-19 36 2.25 7.4 5.15 1,483,200
Total Loss 7,513,600
Data provided by Farm management, Average calculated on last 5 year yield per acer basis

Above data indicated that yield per acre of Okra decreased during 2017-18 & 2018-19 due
to which the Corporation sustained loss of Rs 7.514 million.
Audit is of the view that the management failed to manage crop of okra during the year
2017-18 & 2018-19 which resulted in low yield per acre.

Audit requires:-

i- Matter may be investigated to fix responsibility for low yield.

ii- Loss may be recovered from person (s) held responsible.

Director
 Proposed Draft Para

Para No.8

Loss due to invisible loss on processing of Wheat seed at PSC center Sahiwal -
Rs 5.07 million

According to processing reports of Wheat seed plant Piplan, there was no invisible during the
year 2017-18.

During audit of Punjab Seed Corporation for the year 2017-18 & 2018-19, it was found that the
management of Piplan Processing Center issued qty 4.7 million kgs Wheat for processing as
Wheat seed . The management received the same quantity as seed and non-seed after processing.
However, management of Sahwial Center issued Wheat 11.22 million kg for processing but after
processing received 10.47 million kgs seed and 0.60 kgs as non-seed and others which comes to
11.07 million kgs. Due to inefficiency in processing of Wheat seed/low standard procurement of
Wheat caused loss 0.156 million kgs. Due to loss of Wheat seed, corporation sustained loss of
Rs 5.07 million {0.156 million kgs (/40*1300)}.

Audit is of the view that inflated invisible loss is on account of substandard Wheat or
misappropriation.

Audit requires:

i. Matter may be investigated to fix responsibility.

ii. Loss may be recovered from person (s) held responsible.

AAO AO D.D Director

 Proposed Draft Para
Para No.10

Unjustified utilization of vehicle on protocol duty - Rs 5.23 million

According to rule 20 of PSC Service Rules circulated vide notification dated March 17,
2007, “the Corporation may recover from any officer or employee by deduction from his salary or
pay or from any other sums that may be due to him, for any loss or damage sustained by the
Corporation by reasons of negligence or misconduct of the officer or the employee and the
decision of the Competent Authority in respect of the monetary valuation of the loss shall be final
and binding on the officer or employee concerned.

During audit of PSC for the year 2017-18 & 2018-19, it was found that vehicle No LEJ-
1515 and LWP-8925 were used for protocol duty. The log books of these vehicles were not
maintained properly as these were neither signed by supervisory officer nor was mentioned the
purpose of duty. Vehicle No LWP-8925 covered only 102,489 KMs during the year 2017-18 &
2018-19 and incurred Rs 1.53 million as POL expenses which comes to Rs 10 per KM.
approximately Similarly vehicle LWJ- 1515 covered 377,009 KMs April 23, 2018 to June 29,
2019 and incurred Rs 3.7 million on POL. Moreover, the expense incurred on repair and
maintenance was not provided till close of audit. Therefore expenditure on POL amounting to
Rs 5.23 million is held unjustified.

Audit is of the view that expense of Rs 5.23 million incurred on protocol vehicles without
documentary evidence held irregular and unjustified.

Audit Requires:

i. Matter may be investigated for use of vehicles for protocol duty without documentary
and non-maintenance of log books.
ii. Provide detail of repair and maintenance expense.

Director
 Proposed Draft Para

Heavy losses due ill planned management of potato tissue cultural lab /potato pilot project:
Rs 10.50 million

According to rule 20 of PSC Service Rules circulated vide notification dated Mar 17, 2007, “the
Corporation may recover from any officer or employee by deduction from his salary or pay or
from any other sums that may be due to him, for any loss or damage sustained by the Corporation
by reasons of negligence or misconduct of the officer or the employee and the decision of the
Competent Authority in respect of the monetary valuation of the loss shall be final and binding on
the officer or employee concerned.

During Audit of PSC for the year 2017-19 PSC center farm production and profit was analyzed it
PDP
was found that Potato crop was sustained huge losses during the five years . The detail is given
based on
below:-
Para #
11of AIR Year Net Profit / Loss Rs in million Accumulated Profit (Loss)
2018-19 2014-15 9.89 9.89
2015-16 (7.877) 2.02
2016-17 (5.67) (3.59)
2017-18 1.46 (2.13)
2018-19 (8.370) (10.5)

Above data indicated that potato crops accumulated loss was Rs 10.5 million during last five
years. The corporation sustained loss of Rs 8.370 million during the year 2018-19. This huge loss
indicated that farm was neither manage professional nor crop output was sale at reasonable price.
Audit is of the view that due to poor management of potato crop caused loss to corporation.

Audit requires

i- Matter may be investigate for losses of potato crop

ii- Step should be taken to avoid further losses.
 Proposed Draft Para

Para 13

Non recovery from Dealers– Rs 14.64 million

According to Clause-8(C) (ii) of Marketing Plan of Wheat Seed for Rabi 2017-18, the sale
of wheat seed will be carried out strictly on cash and carry basis, however, credit sale will be
restricted only to cooperative and reliable dealers against 30 days postdated cheques for a
maximum quantity of one truck load at one time. Further, according to clause 8 (C) (iii), the
collected cheques against one month credit sale shall be handed over to the Account Personnel as
security and will only be deposited in Bank in case of non deposit of sale proceed within due
date/time. Marketing Officer who will allow the credit sale against postdated cheque shall be held
personally responsible. For this purpose, officer is required to verify the signature of the dealer on
the prescribed form from the concerned bank branch. If the dealer fails to make the payment
within due time, the PSC will lodge F.I.R in concerned Police Station against said dealer with the
assistance of PSC, HQ (Legal Advisor).

During audit of Punjab Seed Corporation for the year 201718 & 2018-19, it was observed
that Rs 14.64 million were outstanding against dealers on account of credit sale for the year 2017-
18 & 2018-19. The details is given below:-
Rs in million
Name of center Year 2017-18 Year 2018-19 Total
Marketing Center Gujranwala 1.590 5.6 7.19
Marketing Center Sargodha Jhang 2.75 4.7 7.45
4.34 10.3 14.64

The above amounts were outstanding from the parties / dealers despite lapse of financial
year. The wheat season/maize seed season ended but management failed to recover the amount. It
was also found that management did not obtain cross cheques from dealer as required in sale
Policy.

Audit is of the view that the concerned officer (s) of the Corporation should be held
responsible for not following the instructions regarding credit sale/other receivables and amount
of receivables along with interest for late period should be recovered from concerned dealers or
responsible officers of PSC since due.

Audit requires:

i. Explain the reasons of non-recovery.

ii. Intimate the measures taken to strengthen internal controls.
iii. Retrieve the amount from person (s) held responsible.

Director
 Proposed Draft Para

Un Justified & Wasteful expenditures on account of sales promotion and publicity

Rs. 1.012 million

According to Marketing Policy of Paddy seed dated 08-01.2019 12(2) to promote sale of paddy
through interpersonal communication techniques, conferences ,seminar dealer convention and
farm corner meeting may be arranged in collaboration with Agriculture Department

According to Para- 2.10 (a) of Punjab Financial Rules “ Same vigilance should be exercised in
respect of expenditure incurred from Government revenues, as a person of ordinary prudence
would exercise in respect of the expenditure of his own money”.
PDP
based on During the audit of Punjab Seed Corporation Head Office, Lahore for the years 2017-18 to 2018-
19 it was observed that the management has paid sum of Rs. 1.022 million to various parities on
Para # 14
account of Jashan-E- Baharan cricket match played on 23.02.2019 between PSC V/s LCCI. The
of AIR
main purpose of this match was to promote the sales of the paddy seed and maize. These expenses
2018-19 were against marketing policy. The management was asked to provide the data for increases of
the sales of the both seeds after incurring of such huge expenses on match for promotion of paddy
seed and maize but management was failed to provide any data. This concluded that all these
expenses were wasteful as no fruitful results were obtained.

Audit is of the view that the management should make proper planning for such promotion
activities in line with marketing policy and the math was required to be arranged between
dealers/seed grower and farmers which have direct stake and positively effective/boost the sales
of the both seeds but ill planed sales promotion of the activity of the management despite of the
fats that the corporation has a full fledge independent marketing department comprising of the
experienced and qualified staff resulted into wasteful expenditures of Rs. 1.012 million.

Audit Requires:

i. Investigate the reasons for incurrence of such wasteful expenditure for sales promotion
without proper planning.
ii. Fix responsibility on the persons held responsible.
iii. Recover the loss from the persons held responsible
iv. Avoid incurrence of such expenses on wasteful activities in future
 Proposed Draft Para
Para 29

Irregular award of contract valuing Rs 2.00 million

In terms of Rule (4) of the Punjab Procurement Rules 2014 Principles of procurements a
procuring agency, while making any procurement, shall ensure that the procurement is made in a
fair and transparent manner, the object of procurement brings value for money to the procuring
agency and the procurement process is efficient and economical. Further, as per rule 40 of Punjab
Procurement Rules, 2014 negotiations with the bidder having submitted the lowest evaluated bid
or with any other bidder are not allowed as provided.

During audit of Punjab Seed Corporation for the year 2014-15, it was observed that
management procured security accessories in consequences of tender opened on 20.08.2014 and
the contract was awarded to M/s Computer Tips on 20.01.2015 for the supply of following items:

Sr Items Quantity Revised rates GST Cost Total

per No (Revised)
1 CCTV system /DVR (16 channel) 5 19,000 2,320 22,230 111,150
2 CCTV system /IR Camera 40 3,400 578 3,978 159,120
3 CCTV system /LED TV display 5 45,000 7,650 52,650 263,250
40” Changuhung Ruba
4 UPS (Ikva) imported China 5 26,000 4,420 30,420 152,100
685,620

Further probe into the matter reveals that management procured the items other than of the
specification as advertised on 24.07.2014 such as, as per specification 8 channel DVR with
accessories and LCD/LED display screen 32`` was advertised whereas, as per work order given to
M/s Computer Tips the management ordered for purchase of CCTV system 16 Channels and 40``
inches LED/LCD. It is also mentioned here that initially the rates of M/s Computer Tips for
certain items were not the lowest but the management after negotiation with M/s Computer Tips
alone and by changing the specification from advertisement issued the work order.

Moreover, grant of work for installation of CCTV System /DVR etc. to M/s Computer
Tips for Rs 1,318,403 is also unjustified, as the contractor was awarded undue favour by changing
specification and negotiation.

Audit is of the view that, grant of contract for purchase of items of Rs 2,004,023 = (Rs 685,620 +
Rs 1,318,403) as mentioned above is considered irregular. In DAC meeting held on September
15, 2017 the committee kept the para pending with direction to probe whether department can
change specification after uploading tender on PPRA for purchase of CCTV Cameras and DVR
channel in the light of PPRA Rules.

Audit requires:

i. Explain the reasons of negotiation with M/s Computer Tips alone

ii. Explain the reasons for changing of specification.
iii. Take remedial measures to avoid such instances in future.

Director
 Proposed Draft Para
Para No.30

Wasteful expenditure on incorporation and preliminary cost of Joint Venture Company -

Rs 7.19 million

According to clause 1 (1.1) of joint venture agreement signed on August 6, 2009 between
Punjab Seed Corporation and Beijing Silver Land Biotechnology Company Limited, the object of
this joint venture is to implement and commercialize Bt +CPTi and hybrid and OP technologies in
Pakistan and to maximize the market share for and to develop and establish an indigenous
research and development infrastructure in Pakistan for the advancement of the business, all
through the transfer of technology, and the provision of training, technical assistance and
expertise by Silver land to the Punjab Silver land Biotechnology (Private) Limited.

Further, according to clause 2.2, the authorized capital of the company shall be Rs.500
million. The initial subscribed and paid up capital of the company shall be equivalent to
$1,250,000, the PSC shall contribute 60% and Silver land shall contribute 40%. The clause 21.1
states that the cost and expenses associated with the negotiation, preparation and conclusion of
this agreement and the agreements and documents contemplated herein shall be borne by the
Party which has incurred them. All costs and expenses incurred for and after the incorporation of
the company shall be born by the company.

During audit of PSC it was found that management incorporated the joint venture
company on December 04, 2009 and Rs.2.10 million (Rs.1.27 million + Rs.0.83 million) were
incurred on its registration and incorporation. Thereafter, the PSC incurred a sum of Rs.5.09 for
other preliminary expenses i.e. for developing basic infrastructure of the joint venture company.
Subsequently, the joint venture partner (M/s Silver Land) did not take any interest for
continuation of the company business and showed their inability to perfume required functions in
Pakistan due to binding of their country laws for transfer of technologies. Hence, the PSC
terminated the contract with the party on December 02, 2010 and asked the partner for mutual
winding of joint venture company on February 17, 2011 which was agreed by them vide letter
dated February 21, 2011 but after lapse of period of one year no sincere efforts have been made
by PSC for mutual winding up of the company and claiming / adjusting the expenses incurred by
PSC. The entire expenses of Rs.7.19 million incurred for incorporation/ preliminary cost on the
joint venture company had gone to waste.

Audit is of the view that management of the PSC should pursue the mutual winding up of
the company and claiming the expenses of Rs.7.19 million from the joint venture Partner (M/s
Silver Land) incurred on registration and incorporation of the company.

The matter was discussed in DAC meetings held on April 26, 2016 & September 15,
2017, the committee pended the para with the condition for regularization from PSC Board of
Directors as well as the Finance Department.
Audit requires:

i. The reasons for non pursue the case of mutual winding up of the company may be
justified.
ii. The expenses of Rs.7.19 million may be recovered from the joint venture Partner
(M/s Silver Land) incurred on registration and incorporation of the company by adopting
permissible approach.
iii. The total expenses sustained by the corporation may also be brought to the notice of Board
of Directors of the Corporation as well Finance Department for necessary advice.
iv. The management is requested to implement the directives of the DAC.

AAO AO D.D Director

 Proposed Draft Para

Para No. 15

Wasteful expenditure due to imprudent decision of procurement and transfer of plant

Rs 2.77 million

According to rule 20 of PSC Service Rules circulated vide notification dated March 17,
2007, “the Corporation may recover from any officer or employee by deduction from his salary or
pay or from any other sums that may be due to him, for any loss or damage sustained by the
Corporation by reasons of negligence or misconduct of the officer or the employee and the
decision of the Competent Authority in respect of the monetary valuation of the loss shall be final
and binding on the officer or employee concerned.

During audit of Punjab Seed Corporation (PSC) Lahore for the years 2017-18 & 2018-19,
it was observed that management purchased mini processing plant for Sargodha Center from M/s
Bhatti Zarai @ cost of Rs 2.77 million (cost of plant amounting to Rs 1.94 + Rs 0.83 million cost
of accessories) on November 30, 2015.The plant was purchased for the processing of various
types of seeds at Marketing Centre Sarghoda and plant was successfully installed. The
management on June 01, 2018 decided to dismantle the plant and transferred it to the Piplan
Center due to shortage of space at Sargodha.

Audit is of the view that decision of procurement of such expensive plant was taken by the
management without proper planning due to weak internal controls. Furthermore, due to the
imprudent decision of the management to transfer the functional plant to another place where it is
kept idle under deteriorating conditions it resulted in wasteful expenditure of Rs 2.77 million.

Audit requires:

i. Reason for procurement of plant without proper planning needs to be explained.

ii. Review the decision of transfer to devise strategy to save public interest
iii. Fix the responsibility on the person at fault.

Director
 Proposed Draft Para
Para No.18
Un-authorized appointments of 40 daily paid labor by the corporation - Rs. 17.280 million

According to item No 7 of the 97th Board of Directors (BoDs) meeting dated May 05,
2011, the BoDs decided that “No daily paid labor (DPL) will be engaged in future”. A committee
will be constituted to examine the justification of engagement of DPLs and also rationalize its
requirements.

During audit of Punjab Seed Corporation Lahore for the years 2017-18 & 2018-19, it was
observed that 40 Nos of daily paid labor (DPL) employees were engaged on daily wages basis by
the management in violation of the decision of the Board till June,2019 as per detailed below.

Average
Average salary per Total Amount
No. of Date of No. of month in million
Category Employees engagement months Rs Rs.
DTL From July2015
40
Un- Skilled to June 2018 36 Rs.12,000 17.280

Audit is of the view that appointment of daily paid labor (DPLs) was unauthorized and
contrary to the standing instructions of Board of Directors. Therefore, payments of wages
amounting to Rs.17.28 million made to these Daily Paid Labor/employees is held irregular in
audit.

Audit requires:

i. Reason for non-observance of the Board’s instructions needs to be explained.

ii. Obtain the approval from Board for appointment of DPL, otherwise recovery made from
the person(s) at fault.
iii. Fix the responsibility on the person at fault.

Director