The Telegraph
Since 1st March, 1999
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Loan peril in figures fracas
- Civic body urges ADB to blacklist audit firm

A row has broken out between Calcutta Municipal Corporation (CMC) and PricewaterhouseCoopers (PwC), the firm appointed by the Asian Development Bank (ADB) to audit the civic body’s accounts. This clouds the fate of the Rs 1,245-crore loan package offered by the ADB for developing Calcutta’s infrastructure.

The ADB cannot sanction the loan as the CMC’s financial statements from 1993 to 2000 — when the ruling Left Front was in control of the civic body —have remained unaudited.

On Thursday, policy-makers and officials in the government and the CMC headquarters appeared “uncertain” about the loan which they have been planning to divert for building 30 bridges over sewerage canals, desilting of the canals and laying sewers for the overall improvement of the city’s environment.

Central to the row is a four-page, harshly-worded letter that municipal commissioner Debasis Som sent on September 28 to the ADB headquarters in Manila, listing the CMC’s charges against PwC and asking it be blacklisted by the bank.

“Carefully considering all factors, it has been felt that PwC’s performance has been highly unsatisfactory. I am even constrained to observe that their action during last five months may be construed (as) an attempt to hoodwink both ADB and CMC from meeting the contractual obligation. CMC feels that their continuance as consultant is not going to serve any fruitful purpose or meet the ultimate objective of CMC of finalising the accounts of CMC,” Som writes.

“ …We would like to submit that ADB may consider taking a very careful look at the level of sincerity of PwC in meeting contractual obligations and whether their performance warrants taking action against PwC, like imposition of sanction or blacklisting.”

Writing back within a week of Som’s letter, the ADB on October 3 informed the CMC that the bank had taken note of the civic body’s position and that it had notified the audit firm that its services had been suspended.

“Also, we have requested PwC to immediately return to you all documents and data relevant to CMC,” writes Edward M. Haugh Jr, director, social sectors division, South Asia department of the ADB.

PwC said it was not rattled by the CMC’s criticisms because the assignment given to it originally by the ADB, namely finalising the civic body’s accounts as an external auditor, was still in place.

Said Amitava Basu, executive director, PwC, from Delhi: “We consider ADB to be our client that has asked us to carry out certain functions relating to the CMC’s financial statements. We are in no way connected with the CMC, so they will be seen as transgressing the bounds of ethics and decency if they call for our blacklisting. And, lastly, we have not received any copy of Haugh’s October 3 letter.”

Basu claimed that the contract his firm was awarded by the ADB under the Rs 2-million technical assistance scheme was still in place.

“The work has only been kept in abeyance,” Basu said, adding that the PwC’s main task is to train the CMC’s accounts officials in international accounting standards.

The CMC-PwC spat has broken out against the backdrop of the special warning ADB’s India director Louis de Jonghe had issued late in September to the civic body about the risks involved in non-compliance with the key covenants of the agreement with the bank on the hefty loan.

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