CAG Report No. 11 of 2025 — Implementation of Smart City Mission, Government of Karnataka

Financial Management
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The purpose of release of funds to SLNA is meant for onward transmission to
SPVs towards implementation of scheme rather than earning interest.
The State Government replied (April 2025) the interest earned will be remitted
to concerned accounts on pro-rata basis.
3.4 Inappropriate use of SCM Funds beyond intended objective
Review of records relating to expenditure incurred by KUIDFC (from April
2023 to June 2024) towards following items amounting to ₹0.75 crore revealed
that the Administrative & Office Expenses (A&OE), does not pertain to the
Smart City project/cell as detailed below:
1. An amount of ₹0.25 crore was paid (November 2023) to the City
Managers Associations, Karnataka for participation in Municipalika
though the demand was raised by UDD. Usage of SCM funds towards
the event was not covered under guidelines.
2. An expenditure of ₹0.48 crore (₹0.27 crore for office maintenance and
₹0.21 crore for security charge) has been booked under SCM funds. This
expenditure, which pertains to the maintenance and security of the entire
KUIDFC office, was paid from SCM funds without adequate
justification.
3. The Institute of Directors (IOD) requested ₹0.02 crore for an
international conference on environmental management and climate
change. This amount was paid by KUIDFC from SCM funds on 14 June
2024.
The State Government replied (April 2025) that the funds were utilised for
capacity building activities and to bring better technologies to smart cities.
However, expenditure incurred towards above items which were not forming
part of SCM purview was inadmissible.
3.5 Other deficiencies in Financial Management
3.5.1 Excess payment to Project Management Consultant
MSCL appointed (April 2017) M/s Wadia Techno-Engineering Services Ltd in
consortium with M/s Louis Berger Consulting Pvt Ltd and C-DAC as PMC to
implement the Mission. As the PMC failed to perform its contract obligations,
MSCL issued (November 2020) notice to terminate the contract. PMC in its
reply (December 2020) offered to handover projects handled by them to the
agencies nominated by MSCL. For settlement of outstanding dues, PMC
submitted a claim of ₹7.19 crore out of which MSCL had already paid ₹3.95
crore. The MSCL paid the balance amount of ₹3.44 crore (January 2022) after
due verification of the claims by a Chartered Accountant (CA).
On scrutiny of Chartered Accountant’s report and payments made to PMC,
Audit observed the following: