AGP finds Rs56.5b irregularities in PSEs’ audit

Shocking as it may seem, the supreme audit institution of the country has detected irregularities worth Rs56.56 billion in the accounts of the Public Sector Enterprises (PSEs) in the first year of the Pakistan Tehreek-e-Insaf (PTI)-led government.

The Auditor General of Pakistan (AGP)’s report contains results of audit inspection and evaluation of financial performance of PSEs – bodies formed by the government through legal means so that they can take part in activities of commercial nature – for the financial year 2018-19 conducted during the year 2019-20.

According to the key findings, management in nine cases did not produce auditable record at the time of audit amounting to Rs218.8 million.

Meanwhile, five cases of embezzlement or misappropriation of funds worth Rs115.1 million and irregularities in 66 cases of appointment of officials worth Rs4.2 billion were identified.

In addition, the report read, total 129 cases of mis-procurement due to violation of rules, procedures and regulations worth Rs38 billion and four cases of imprudent investment leading to losses of Rs8.4 billion were identified.

It further stated that principle of value for money was not observed while incurring expenditure amounting to Rs3.9 billion in 16 cases and non-performance of services by the contractors in 17 cases amounted to Rs1.5 billion – making the total amount to Rs 56,568.384 million or Rs56.5billion.

The AGP report recommended that the record must be provided by assigning responsibility for conduct of audit in the PSEs, besides fixing responsibility on the persons at fault.

“Internal control structure needs to be strengthening to curb the incidence of embezzlement, fraud and misappropriation,” read the second recommendation.

Appointments may be made in transparent manner and according to the respective HR policies of the organisations with due regard to government policies, it said, adding procedure of procurement in PSEs should be streamlined to achieve economy, efficiency and value of money as per Public Procurement Rules, 2004.

Moreover, the report recommended that efforts should be made by the management to improve its fund management with commercial banks with respect to investment and all expenditure should be incurred after due diligence to ensure effectiveness and value for money spent.

“Efforts should be made to correct the flaws identified” in the PSEs’ monitoring mechanism in respect of contract implementation.

The executive summary stated that Pakistan, being a developing country, had established more than 200 PSEs over the years for initiating economic growth and development, adding that the report contained comments on the audited annual accounts of 29 PSEs.

It noted that comments on 53 PSEs, however, could not be included as the management concerned failed to submit their audited accounts by the prescribed date – December 31, 2019.

Moreover, it said, 10 organisations ceased their operational activities between the years 1990 and 2008 and were still under the process of liquidation/privatisation.

In the sectoral analysis, AGP Javaid Jehangir said that the under-performance of these PSEs and unsustainability was mainly due to corporate governance issues, stemming out of lack of oversight by the government, which included non or improper composition of the Board of Directors, non or delayed appointment of whole time CEO, non-preparation of effective business plans which could appropriately reflect their fair objectives, targets and achievement.

“It is strongly felt that the government should provide a platform for these PSEs to be represented without bureaucratic controls and controlling ministries in order to develop their version and mission, in an integrated, potential-based vibrant and sustainable way,” he said, adding “the government may establish a commission for undertaking its oversight functions.”

In the preface, the AGP stated that most of the observations included in the report had been finalised in the light of discussions in the Departmental Accounts Committee (DAC).

The audit report was submitted to the President in pursuance of Article 171 of the Constitution for causing it to be laid before both the houses of parliament.

Article 169 and 170 of the Constitution read with sections 8 and 15 and other relevant provisions of the Auditor General’s (Functions, Powers and Terms and Conditions of Service) Ordinance of 2001 require the AGP to conduct audit of the expenditure from the federal consolidated fund, public accounts and that of government’s commercial undertakings and of any authority or body established by the federation.