Project Implementation Unit (PIU) was established (July 2002) as a Cell under the Health and Family Welfare Department (H&FWD) for implementation of post-earthquake redevelopment programme in affected areas of the State from the funds provided by the European Commission. On completion of works approved under earthquake redevelopment programme, H&FWD decided (February 2006) to continue PIU for carrying out the construction activities of the department and accordingly, transferred construction activities of Public Healthcare Facilities (PHFs) from Roads and Buildings (R&B) Department to PIU. Subsequently, Maintenance and Repairs (M&R) work of PHFs were also entrusted (May 2012) to PIU. During 2014-19, against available funds of INR 9,017 crore, PIU had incurred expenditure of INR 5,833 crore (65 per cent) on new construction and M&R works. The objectives of the Compliance Audit were to assess whether (i) institutional framework was established for proper functioning, (ii) norms prescribed for approval, tendering and execution of works were adhered to and (iii) funds provided for new construction and M&R works were properly accounted and efficiently utilized. To achieve the audit objectives, Gujarat Public Works (GPW) Manual, 1987, tender documents, Gujarat Financial Rules and instructions issued by State Government were adopted as criteria for evaluation. Audit examined the records maintained at the head office of PIU and eight district units. Selection of districts was done by adopting Probability Proportional to Size without Replacement method. Out of 805 works awarded during 2014-19 in the selected districts, 136 works and four out of six projects were selected on judgmental basis for detailed scrutiny. Joint physical verification of 94 buildings in the selected districts were also conducted to assess the quality of construction and maintenance. After performance audit, CAG of India arrived at the following conclusion: State Government entrusted (February 2006) new construction works and Maintenance & Repair (M&R) works (May 2012) of Public Healthcare Facilities to PIU without proper establishment. Government decision (October 2008) to convert PIU into Gujarat State Health Infrastructure Development Corporation (GSHIDC) to cope up with workload could not be implemented as of July 2020. Institutional arrangement of PIU was not found robust in terms of (i) framework of rules and procedures, (ii) quality control mechanism and (iii) accounting, auditing and funds management systems. PIU wrongly incorporated a special condition “free of cost construction of buildings for district units of PIU” and “supply of electronic gadgets”. This clause was neither consistent with basic principle of contracts nor implemented uniformly. Norms prescribed for approvals of works were not scrupulously adhered to, as 2,160 (33 per cent) out of 6,504 sanctioned works could not be undertaken due to non-allotment of clear sites. Designs and estimates for works were not prepared with due diligence. Tender procedure lacked transparency and fairness as provisions for invitation of tender, time for submission of bids, evaluation of pre-qualification bids, etc. were not adhered to. PIU incurred additional expenditure of INR 37.86 crore due to deficient design. Five buildings constructed at a cost of INR 196.94 crore were either not put to use or utilised partly. Quality Control (QC) was found deficient as 68 per cent of works were not inspected by QC teams. Financial management of PIU was not found robust due to deficient accounting system and not following Treasury Rules for management of funds.