ISLAMABAD, Jan 5: Funds provided by the Asian Development Bank under a technical assistance loan in 2006 for improving city planning in Karachi and sustainable and efficient financing of mega-city urban infrastructure were grossly misused, involving unauthorised expenditures.

An audit of the unfinished project reveals that an amount in excess of $400,000 in salary payments above allowed rates, overhaul of vehicle engines on branded-new cars, and missing reports that were claimed to have been funded with no copies being produced on demand.

Project staff paid large salaries, provided with vehicles and petrol allowances, gym memberships, travel for international training with per diems, funds for entertainment and representation, high office rent, etc., all on the government account.

The ADB published on Wednesday completion report of the project and conveyed its displeasure to the government that almost every single technical assistance loan faced serious imple- mentation challenges in Pakistan.

The bank called for a structured dialogue with the government on how best to support the range of needs identified for the Karachi project. Given the low utilisation of the project, there is no need for any significant follow-up. The project has clearly shown that lack of readiness can seriously derail implementation.

The report further reveals that Economic Affairs Division wrote to the ADB notifying that a large portion of the loan be cancelled without waiting till its closure in April 2009.

Despite the challenges in project implementation, the project staff had utilised close to $4 million in counterpart funding, while the ADB disbursed only 15 per cent of the loan. As a result, the actual split between the bank and the government was 15:85, when the agreement was 70:30.