A $250 million loan is going down the drain as auditors have caught Pakistan Poverty Alleviation Fund’s management spending money through organisations selected without a competitive process in low priority areas, wasting valuable assets and undertaking activities having no relation with poverty eradication.
A detailed draft report on the PPAF’s third project, PPAF-III worth $250 million, showed how an organisation that is meant to provide small loans to poverty-stricken people misused the funds for personal benefit and caused financial losses.
The audit report is prepared by Ernst & Young Ford Rhodes Sidat Hyder on behalf of the World Bank and remains pending due to lack of cooperation from the PPAF management.
In 2009, the country obtained a $250 million loan (over Rs25 billion at current exchange rate) from the WB to support poverty reduction activities.
The disclosure came hard on the heels of the Microfinance Summit organised by the PPAF where it did not hesitate to spend over Rs1 million just on two singers to entertain the audience which had gathered to find ways to help marginalised people of Pakistan.
The PPAF gets money from international lenders and provides it to partner organisations – the NGOs – for onward lending to poor borrowers. The first startling revelation is that the PPAF undertakes no evaluation and there is no competition between pre-qualified partner organisations before subletting the projects. “Only one partner organisation from the pre-qualified list is requested to submit its proposal for the project,” according to the draft report.
Furthermore, there is no mechanism in place to periodically review the performance of these NGOs.
Owing to this ongoing practice, “a partner organisation having the best capability and experience to work on the project may not be selected while the partner organisations which are not performing up to acceptable standards may be awarded further projects,” wrote the auditors.
The auditors have asked the PPAF management to discontinue this practice.
When approached for comments, the PPAF’s Senior Group Head Ahmad Jamal said the PPAF follows a comprehensive eligibility criteria approved by the board of directors for the selection of partner organisations.
In yet another disclosure, the PPAF gave 21 contracts worth Rs1.5 billion in areas, which did not fall in its priority category. Top priority is given to areas and pockets where the level of poverty is higher, requiring state intervention.
“Overall project objectives may not be met if activities are carried out in the non-priority zone,” warned the auditors. The auditors have asked the PPAF management to restrict its activities to only high-priority areas.
Jamal said there were no explicitly defined priority districts in the PPAF-III.
The PPAF management was also found causing financial losses and misusing valuable assets procured by using proceeds of loans. The PPAF provides equipment like vehicles, furniture, computers and expensive laptops in the name of enhancing capacity of partner organisations for achieving project objectives.
The auditors revealed that no capacity assessment of the partner organisations was conducted before handing over assets to them. Furthermore, in most cases the assets were not taken back from these NGOs, resulting in not only wastage of existing resources but also putting additional burden in shape of buying vehicles and furniture for new projects.
Ironically, most of the assets were bought for one year to three years after initiation of projects, many on the last date of closing of the projects, highlighting the misuse of borrowed money. The auditors have enlisted about Rs19 million worth of assets that were misused and never taken back from the NGOs.
In a final blow to the PPAF, the auditors found that the PPAF management hired people and paid them Rs14.3 million that had nothing to do with the poverty eradication business. It has asked the management to exclude this cost from the programme cost.
“Achievement of project objectives may be hampered in case activities not relevant to the project are charged to the projects,” the auditors warned.
Jamal said the draft report was preliminary in nature and subject to discussion.
Ironically, the draft report also accuses Jamal of getting Rs3.9 million benefits as the activities he undertook had nothing to do with poverty eradication. Jamal resigned from the PPAF and hired again on the same day as consultant on a package, which was many times more than his salary as PPAF employee, according to the draft report.
Published in The Express Tribune, July 13th, 2013.
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