05 August 2011

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Read Complete CAG Report on XIX Common wealth Games 2010 Part One

Read Complete CAG Report on XIX Common wealth Games 2010 Part One

Audit Report on the XIX Commonwealth Games 2010
This Audit Report for the year ending March 2011 has been prepared for
submission to the President under Article 151 of the Constitution.

The Comptroller and Auditor General (CAG) report on Commonwealth Games has been tabled in Parliament.

1. During the meeting of Commonwealth Games Federation (CGF) General Assembly in November 2003, Delhi won the bid to host the DXIX Commonwealth Games 2010.

2. the host city contract was signed in November 2003 between the CGF, Indian Olympic Association, Government of India (GOI) and the Government of National Capital Territory of Delhi (GNCTD) with the Organizing Committee (OC) (which was constituted later), becoming a subsequent signatory.

3. the XIX Commonwealth Games were successfully held in Delhi from 3 to 14 October 2010

4. The competing bid from Hamilton, Canada did not involve deficit guarantees from the Canadian Federal and Provincial Governments, nor did they agree to be parties to the HCC

5. In the case of India thus, the Games became the property of the nation

6. SM – Canada showed the intelligence and did not accept the guarantee. Government guarantee for meeting the cost of the Games surely gives the scope for corruption. How many people you know who use government property properly. Ever saw anyone burning private properties in the protest.

7. bid document of May 2003 envisaged the OC as a
8. Government-owned registered society, with the Chairman of the OC Executive Board (EB) being a government appointee, and the IOA President being only the EB Vice-Chairman
9. the OC was ultimately set up in February 2005 as a non-Government registered society, with the IOA President Mr. Suresh Kalmadi as the Chairman of the OC EB.

10. This change was orchestrated through a sequence of events, commencing with a document titled as an “updated bid” of December 2003 (which had no legal sanctity or relevance), indicating a changed structure. This “updated bid” dated December 2003 surfaced only in September 2004, viz. 16 months after the IOA made its bid and 10 months after that bid had already been declared successful!

11. Despite serious objections from the erstwhile Minister, YAS, late Shri Sunil Dutt, Shri Kalmadi was appointed as the OC Chairman, based on a PMO recommendation of December 2004.

12. This decision facilitated the conversion of the originally envisaged Government-owned OC into a body outside Governmental control, without commensurate accountability to Government and concomitant controls to ensure propriety and transparency (despite full financial guarantee and funding from Government)

13. In the absence of a single point of authority and accountability and the lack of a clear governance structure, a multiplicity of co-ordination committees were created, disbanded, and reconstituted at different points of time.

14. There was a seven-year window from the award of CWG-2010 to Delhi in November 2003 to its hosting in October 2010, which was not appropriately utilized.

15. The time window from November 2003 to mid-2006, which could have been effectively used for planning, clearances and approvals, was wasted. The OC itself was registered only in February 2005, while EKS was appointed by the OC as the consultant for preparation of venue briefs and site plans only in July 2006.

16. The IOA bid of May 2003 estimated an all-inclusive cost of just Rs. 1200 crore (after setting off operational expenses against estimated revenues from hosting the Games).

17. By contrast, the overall budget estimate for CWG-2010 for GoI and GNCTD (including MCD, NDMC and other agencies) as of October 2010 was Rs. 18,532 crore. This excludes investments by other agencies (such as DMRC and AAI/ DIAL) on allied infrastructure.

18. The internal control environment and decision making structures within the OC were highly inadequate. The state of documentation in the OC was so inadequate that we are unable to derive assurance as to either the authenticity or the completeness of records
19. Contract management by the OC was irregular and deficient.

20. The state of contract documentation is such that we are neither sure of the entire sequence of events leading to award of contracts, nor about the total number of contracts and work orders awarded.

21. We were also unable to ascertain complete contract-wise payments and outstanding liabilities.

22. The processing of certain sensitive contracts/ cases was allocated in an arbitrary and ad hoc manner to certain officials who had no linkages with the concerned Functional Area. Such action diluted the process of due diligence and scrutiny.

23. The argument of urgency was used to obviate the regular process of tendering for award of contracts.

24. CAG found numerous instances of single tendering, award on “nomination basis”, award of contracts to ineligible vendors, inconsistent use of restrictive Pre-Qualification (PQ) conditions to limit competition to favor particular vendors, inadequate time for bidding, cancellation and re-tendering of contracts, and inexplicable delays in contract finalization, all of which seriously compromised transparency and economy. Further, there were numerous deficiencies in the appointment of external consultants and advisors and management of the multiplicity of contracts thereof.

25. We also found that the OC-IOA relationship was blurred, facilitating grant of irregular benefits to IOA at the expense of the OC/ GoI through various means
26. between March 2007 and July 2008, the revenue projections skyrocketed from Rs. 900 crore to Rs. 1780 crore. In our view, this increase in revenue projections (mainly on account of inflated projections of sponsorship revenue and donations) was made with the sole objective of keeping pace with the vastly increased operating expenditure estimates, so as to maintain the claim of revenue neutrality.

27. Both MYAS and MoF failed to exercise necessary due diligence, and did not seriously challenge the OC's claim of revenue neutrality.

28. In reality, the total committed revenues amounted to just Rs. 682.06 crore, and the net revenue actually realized by OC (after deducting revenue generation costs) was just Rs. 173.96 crore

29. It could generate committed sponsorship revenue of just Rs. 375.16 crore (against the target of Rs. 960 crore), out of which nearly 67 per cent was from Government agencies/ PSUs.
30. No revenue has been received on account of merchandising and licensing rights. The engagement of SMAM as the consultant for sponsorship and erchandising/ licensing rights was flawed, as it was based on a single financial bid. It was also unduly influenced by the recommendation of the CGF CEO, and placed undue emphasis on international experience (ignoring the vast potential of the Indian market).

31. OC chose not to derive lessons from the poor performance of SMAM leading upto the Games, and terminated its contract only in August 2010.

32. The agreement for national broadcasting rights between OC and Prasar Bharati was signed only on 23 September 2010, resulting in generation of just Rs. 24.70 crore of revenues for the OC. With regard to international broadcasting rights, OC could sign agreements for only Rs. 213.46 crore, of which only Rs. 191.40 crore has been received.

33. Gross ticketing revenue of just Rs. 39.17 crore was realized (against the target of Rs. 100 crore). The appointment of the ticketing consultant and the ticketing agency was delayed enormously, and sale of tickets commenced only in September 2010. The generous distribution of high value complimentary tickets was excessive (nearly thrice that of earlier CW Games at Manchester and Melbourne). Also, OC adopted a wide range of ticket pricing, contrary to the recommendations of consultants, which contributed to low ticket sales (particularly of high denominations).

34. OC included a revenue target of Rs. 300 crore in July 2008 from donations/ raffle, against which it collected a paltry sum of Rs. 0.99 crore.

Reality views by sm –
Friday, August 05, 2011

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