OFFICE OF THE PRINCIPAL ACCOUNTANT GENERAL D ANDHRA PRADESH, HYDERABAD - 500 004. Lr. NoI.PAG(Audt)/AP/SS/EAP&SAW2#18-19/ [ 04.01.2#19 To The Engineer in Chief (R&B) SH,PPP,CP & Managing Director, APRDC, 5th Floor, R & B Complex, M.G.Road, ViJayawada - 520010 Andhra Pradesh Sir, Sub: Issue of Audit Certificate for the year 2017-18 in respect of Andhra Pradesh Road Sector Project (APRSP) (Loan/Credit No.7792-IN) I am to forward the reports of Comptroller and Auditor General of India for the year 2017-18 in respect of World Bank assisted " Andhra Pradesh Road Sector Project (APRSP), Vijayawada, (Loan/Credit No.7792-IN) alongwith enclosures viz., 1. Statement of Admittance (Annexure-I) 2. Statement showing details of disallowances made from expenditure incurred ( Annexure-II) 3. Statement of Previous Disallowances allowed in the current year (Annexure-III) Receipt of the above mentioned documents may please be acknowledged. Encl: As above Yours fa ully, Dy. A u n eral/SS E-Mail: agauandhrapradesh2@cag.gov.in Fax No. 040-23210125 INDIAN AUDIT AND ACCOUNTS DEPARTMENT O/o The PR. ACCOUNTANT GENERAL (AUDIT) ANDHRA PRADESH HYDERABAD 500 004 Report of the Comptroller and Auditor General of India To The Engineer in Chief (R&B) SH,PPP,CP & Managing Director, APRDC, 5'h Floor, R & B Complex, LG.Road, Vijayawada - 520010 Andhra Pradesh Report on the Project Financial Statements We have audited the accompanying financial statements of the Andhra Pradesh Road Sector Project (APRSP) financed under World Bank Loan No. 7792- IN, Vijayawada which comprise the Statement of Sources and Applications of Funds and the Reconciliation of Claims to Total Applications of Funds for the year ended 31st March 2018. These statements are the responsibility of the Project management wing. Our responsibility is to express an opinion on the accompanying financial statements based on our audit. We have conducted our audit in accordance with the Auditing Standards promulgated by the Comptroller and Auditor General of India. Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. Our audit examined, on a test basis, evidence supporting the amounts and disclosures in the financial statements. It also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the Project Financial Statements present fairly, in all material respects, the sources and applications of funds of Andhra Pradesh Road Sector Project (APSRP) for the year ended 31st March 2018 in accordance with Government of India accounting standards. In addition, in our opinion, (a) with respect to SOEs, adequate supporting documentation has been maintained to support claims to the world bank for reimbursements of expenditure incurred; and (b) except for ineligible expenditure of Rs. 12,65,38,793/- as detailed in the audit observations, appended to this audit report, expenditures are eligible for financing under the Loan/Credit Agreement. During the course of the audit, SOEs / FMRs and the connected documents were examined and these can be relied upon to support reimbursement under the Loan/Credit Agreement. This report is issued without prejudice to Comptroller and Auditor General of India's right to incorporate the audit observations in the Report of Comptroller and Auditor General of India being laid before Parliament/State or UT Legislature. DEPUTY A CO NTANT GENERAL (SS) WVF~ 74,2, 941141 - 500 004 OFFICE OF THE PRINCIPAL ACCOUNTANT GENERAL (AUDIT) ANDHRA PRADESH, HYDERABAD - 500 004. AUDIT CERTIFICATE The Expenditure Statement/Financial Statement relating to Andhra Pradesh Road Sector Project (APRSP), (Loan/Credit No.7792-IN) for the year ended 3 1" March 2018 attached hereto have been audited in accordance with the regulations and standards of audit of the Comptroller and Auditor General of India and accordingly included such tests of accounting records, internal checks and controls and other auditing procedures necessary to confirm. a) that the resources were used for the purpose of the project and b) that the expenditure statements/financial statements are correct During the course of the audit referred to above, Statement of Expenditure (SOE) (fqr An amount of Rs.100,26,91,972/-) and the connected documents were examined and these can be relied upon to support reimbursement under the aforesaid loan/credit agreement. On the basis of the information and explanations that have been obtained as required and according to the best of our information as a result of the test audit it is certified that the expenditure statement/financial statements read with the observations set out below represent a true and fair view of the implementation (and operations) of the project for the year 2017-18. This certificate is issued without prejudice to CAG's right to incorporate any further/detailed audit observations if and when made in the Report of' CAG of India for being laid before Parliament /State Legislature. U AM LADA Deputy ccountant General/SS E-Mail: agauandhrapradesh2@cag.govin Fax No. 040-23210125 Inspection Report of Audit Observations/Disallowances on Certification Audit of Externally Aided Project "Andhra Pradesh Road Sector Project (APRSP)" Loan No.7792 for the year 2017-18 (Dates of Audit: 17.09.2018 to 10.11.2018) I. Unadjusted Mobilization Advance disallowed Rs.7.16 crore As per Para 3.17.21 of the Manual of Standing Orders (MSO) (Audit), advances given are reimbursable when the advances are totally adjusted. During scrutiny of the IPC-01 dated 25-07-2017 and Interim Payment Certificate (IPC) -01 dated 09-08-2017 of the work PNV-08-A and PNV- 08-B respectively Audit noticed that an amount of Rs.4,32,71,184/- and Rs.3,16,00,000/- was paid to the agency towards Mobilization advance. Items Name of Work Bill Amount Paid Amount Balance to be description Recovered recovered s (In Rs) (In Rs) Mobilizati Widening and IPC-01 4,32,71,184.00 19,82,544.00 4,12,88,640.00 on Strengthening of Pedana- dated 25- (Vide IPC- Advance Nuzvid-Vissannapet Road 07-2017 03,Dt:- from to Km 7/100 to 16.03.2018) 22/100 in Krishna dist(Balancework)(Package No-PNV-08A) -do- Widening and IPC-01 3,16,00,000.00 12,98,411.00 3,03,01,589.00 Strengthening of Pedana- dated 09- (Vide IPC- Nuzvid-Vissannapet Road 08-2017 02,Dt:- from to Km 22/100 to 08.02.2018) 40/000 in Krishna dist(Balance work)(Package No PNV- 08B) Total 7,48,71,184.00 32,80,955 7,15,90,229.00 The above amount was unadjusted during the financial year of 2017-18. Hence, the same is disallowed for reimbursement. H. Unadjusted Machinery Mobilization advance disallowed Rs. 4.03 crore While scrutiny of the records pertaining to IPC-02 dated 16-03-2018 of the work "Widening and Strengthening of Pedana-Nuzvid-Vissannapet Road from 7/000 to 22/100 in Krishna District (Package No PNV-08A)" Audit observed that Machinery Mobilization advance was paid to the agency in the bill for an amount of Rs.4,03,27,609/- in March 2018 and the same was unadjusted during the financial year of 2017-18 and hence it is disallowed for reimbursement. III. Unadjusted Secured Advance disanowed- Rs. 1.04 crore As per Para 3.17.21 of the Manual of Standing Orders (MSO) (Audit), secured advances given for material are not reimbursable. During scrutiny of the records, it was noticed that secured advance for material was paid in the bills given as appended below. The secured advances paid are permanently disallowed for reimbursement. Items Name of Work Bill Amount(In Rs) descriptions Material Widening and Strengthening of IPC-01 dated 39,47,142.00 Advance Pedana-Nuzvid-Vissannapet Road 16.03.2018 from 40/000 to 58/920 in Krishna District(Package No PNV-08C)" -do- Widening and Strengthening of IPCO3 31,68,284-00 Pedana-Nuzvid-Vissannapet Road Dt. 16.03.2018 from to Km 7/100 to 22/100 in Krishna dist(Balance work)(Package No-PNV-08A) -do- Widening and Strengthening of IPC-02, 33,19,598.00 Pedana-Nuzvid-Vissannapet Road 08.02.2018 from to Km 22/100 to 40/000 in Krishna dist(Balance work)(Package No PNV-08B) Total 1,04,35,024.00 IV. Non-submission of Utilization Certificates for the amount advanced to Social Forestry, Vijayawada and Kurnool Rs.0.23 crore As per Para 3.17.21 of the Manual of Standing Orders (MSO) (Audit), advances given are reimbursable only when the advances are fully adjusted. On scrutiny of records Audit observed that an amount of Rs.25,00,000/- and 13,00,000/- (A4 component) were paid vide PAO token No.10356 dated 08-09-2017 and token No. 10205, dated 06-09-2017 respectively towards advance payment for raising and maintenance of Avenue Plantation. However, it is noticed that Utilization certificates (UCs) for Rs.91,36,170/- and Rs.5,47,000- only were furnished by the DFO, SF, Vijayawada and Kurnool respectively. Hence an amount of Rs.23,16,830/-is disallowed in view of the pendency of UCs. V. Short recovery towards free sand policy Rs. 0.15 crore As per Memorandum No.DWA/AP/Hyd./Sn.1/Al/2016-17/No.217 dt.22.8.16, the Director of Works Accounts issued instructions (in respect of free sand) to deduct overhead charges and contractor's profit along with loading and unloading charges from the basic rate to arrive at the rate of free sand. However, it was observed that the department has not considered the free sand policy announced by the Government of Andhra Pradesh (GoAP) and allowed the entire amount without deducting the free sand amount in the IPCs (Basic rate - loading and unloading + overhead charges + contractor's profit). Thus, non-recovery of free sand amount resulted in excess payment to agencies as detailed in the table below: Total expenditure Non-recovery Sl. Name of Work during the year (In towards Free No. Rs.) sand (In Rs.) Widening and Strengthening of Kurnool- Devanakonda Road from KM-4+400 to 65+300 in Kurnool District. (Contract Package - KD-02) Widening and Strengthening of Mydukur- 2 Jammalamadu Road From KM 177/400 to 8,97,39,509.00 2,13,110.00 194/670(MJ-04) Widening and Strengthening of Pedana- Nuzvid-Vissannapet Road from Km. 62+250 3 to Km. 95+460 in Krishna District, Andhra 19,14,85,982.00 3,84,206.00 Pradesh.(Contract Package - PNV-09) Contract : Widening and Strengthening of 4 Pedana - Nuzvid - Vissannapet Road from 9,64,34,042.00 12,258.00 Km 7/000 to 22/000 in Krishna District(Balance work))PNV-08A Contract: Widening and Strengthening of 5 Pedana - Nuzvid - Vissannapet Road from 4,10,90,135.00 48,273.00 Km 22/000 to 40/000 in Krishna District(Balance work))PNV-08B Contract: Widening and Strengthening of 6. Pedana - Nuzvid - Vissannapet Road from 1,73,41,060.00 14,418.00 Km 40/000 to 58/920 in Krishna District (Balance Work)PNV-08C 7. Widening and Strengthening of Mydukur- 2,49,53,630.00 1,61,838.00 Jammalamadu Road From KM 153/000 to 171/000(MJ Road) TOTAL 14,70,035.00 When this was brought to notice, the Department replied that the recovery of free sand amount would be implemented as per the corresponding year's SSR. Hence, the amount is disallowed for reimbursement in the year 2017-18 VI. Short Recovery of Income Tax - Rs.3,54,672/- (EE, R&B Div, Guntur} During scrutiny of the records of Road Development Corporation (RDC), Guntur under World Bank Assisted Project (EAP), Package-16 revealed a short recovery of Income Tax from the Contractors Bills as detailed below:- Sl Name of the Work Bill No./ Total value of Income Tax Income tax Difference No. and Contractor Vr. No. work recovered to be done(Rs.) till bill No. recovered Amount LS 25th @ 2%(In (In Rs.) @2%(In Rs.) Rs.) 1. Output and LS 25& 28,70,31,264.00 53,85,953.00 57,40,625.28 3,54,672.28 Performance based Part Bill Road Contract for the Vr. No. Maintenance of 155RB. Package-16 Roads in Dated-29- Guntur District of AP. 03-17 M/s Prudhvi Construction, Pvt. Ltd.(Component:-A2) When this was brought to notice, the Department replied that Income Tax would be recovered from the future Bills. Hence, the amount is disallowed for reimbursement for the year 2017-18. VIL Non-deduction of NAC charges @ 0.1% from work bills Rs. 44,394/- (EE,R&B Div. Parvathipuram) The Government of Andhra Pradesh vide GO.Ms.No.27 dt.29.6.2015, issued instructions to deduct 0.1% in the work bills towards NAC from the amount payable to the contractor. Name of work Output and Performance based road contract for the manintenance of package-28 Roads in Srikakulam and Vizianagram District. Name of contractor M/s. Sri Sitarama construction &M/s Srinivasa Reddy Constrtuction(JV) During scrutiny of records pertaining to above agency, Audit noticed that during the year 2016-17 and 2017-18 three bills were paid (details given below) to the agency under the head MH 5054-04-337-GHO3-SH26-530-531 (OE) and the same was shown in SOE (Statement of Expenditure) figure for reimbursement to the project head of account. However, it is observed that while making the payments deduction towards NAC charges @ 0.1% was not made from the work bills. Non-recovery of NAC charges works out to Rs.44,394/- as detailed below. Bill No. Value of work done in the NAC charges to be bill deducted @ 0.1% LSXXIX Part bill 23165134 23,165 LSXXX Part bill 6113108 6,113 LSXXXI Part bill 15116217 15,116 Total 44,394.00 When this was brought to notice, the Department replied that NAC would be recovered from future bills. Hence, the amount is disallowed for reimbursement for the year 2017-18. 4Dy. ou ant nel _(SS) Annexure-I STATEMENT SHOWING THE DETAILS OF EXPENDITURE INCURRED i.e., CATEGORY-WISE, COMPONENT-WISE, UNIT OFFICE-WISE/DISTRICT-WISE FOR THE PERIOD FROM 01.04.17 TO 31.03.18 IN RESPECT OF WORLD BANK ASSISTED/EXTERNALLY AIDED PROJECT (Loan No.7792-IN/APRSP) Actual amount Actual Expenditure Expenditure Percentage Amount SI.No Category Name of the Auditee Unit SOE figure claimed by Expenditure as disallowed in admitted in Percentage Amunt Componentadisberiusbl department verified in audit audit audit 1 Component Al PMU, Hyderabad/Vijayawada 543823626 543823626 543823626 123822897 420000729 80 336000583 2 Component A3 PMU, Hyderabad/Vijayawada 78949188 78949188 78949188 0 78949188 80 63159350 3 Component A4 PMU, Hyderabad/Vijayawada 4668600 4668600 4668600 2316830 2351770 80 1881416 4 Component A4(cc) PMU, Hyderabad/Vijayawada 42006000 0 42006000 0 42006000 0 0 5 Component A5 PMU, Hyderabad/Vijayawada 110098205 0 110098205 0 110098205 0 0 6 Component C4 PMU, Hyderabad/Vijayawada 24124586 24124586 24124586 0 24124586 80 19299669 7 Component C5 PMU, Hyderabad/Vijayawada 123564 123564 123$64 0 123564 80 98851 8 Component E1 PMU, Hyderabad/Vijayawada 10327600 10327600 10327600 0 10327600 80 8262080 9 Component D2 PMU, Hyderabad/Vijayawada 10193273 10193273 10193273 0 10193273 80 8154618 10 Component A2 R&B Division, Ananthapur 9733835 9733835 9733835 0 9733835 20 1946767 11 Component A2 R&B Division, Gudur 44426496 44426496 44426496 0 44426496 20 8885299 12 Component A2 RDC Division, Guntur 27866447 27866447 27866447 354672 27511775 20 5502355 13 Component C2 RDC Division, Guntur 675000 675000 675000 0 675000 80 540000 14 Component A2 R&B Division, Kanigiri 3439867 3439867 3439867 0 3439867 20 687973 15 Component DI R&B Division, Kanigiri 11723538 11723538 11723$38 0 11723538 80 9378830 16 Component C2 RDC Division, Kurnool 89806 89806 89806 0 89806 80 71845 17 Component A2 R&B Division, Nandyal 31131447 31131447 31131447 0 31131447 20 6226289 18 Component A2 R&B Division, Ongole 6203368 6203368 6203368 0 6203368 20 1240674 19 Component A2 R&B Division, Parvathipuram 15071823 20 3014365 15116217 151116217 15116217 44394______ ____ 20 Component A2 RDC Division, Rajahmundry 14158317 1415 8317 14158317 0 1415:8317 20 2831663 21 Component C2 RDC Division, Rajahmundry 552000 552000 552000 0 552000 80 441600 22 Component A2 R&B Division, Visakhapatnam 13188992 13188992 13188992 0 13188992 20 2637798 23 Component C2 R&B Division, Visakhapatnamo 72000 72000 72000 0 72000 80 57600 GRANT TOTAL 1002691972 850587767 1002691972 126538793 876153179 480319627 AO/SS(EAP-SAR)