In 2009, Pakistan obtained a $250m loan from the WB to support poverty reduction activities, which is being wasted without achieving the objective. PHOTO: ARIF SOOMRO/EXPRESS
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.
Like Business on Facebook, follow @TribuneBiz on Twitter to stay informed and join in the conversation.
COMMENTS (26)
Comments are moderated and generally will be posted if they are on-topic and not abusive.
For more information, please see our Comments FAQ
Haha, its going everywhere in Pakistan. Nothing new. I agree with few of the people commented here, let's start focusing on positive things, it will make life much better
I am sure this such a big organization must be doing something good, bring that on board too. Aren't others enough for the bulk of bad stories we hear.
I have heard that the singers were paid by commercial sponsors and banks for the summit. Not a single penny of the fund was used for that.
As for as i know the organization has perform well in last decade, but in the recent years it became routine to hear such type of news about the organization it shows that there is sumthing wrong. so its responsibilty of management to tell the facts. if they realy mismanage we should also follow the practices of developed countries, means management should resign and present themselves for accountability, governing body should suspend them till time obligations are not cleared.
i think the accuse person Jamal should have courage to resign and present himself in public for accountability.
May be the organiztion is doing well i d,nt know. but it is really schoking ! waistage of poor money on singers & such type of hiring in 1 day at 3.9 million. May Allah Bless this countary.
I am sure this such a big organization must be doing something good. Bring that on board too. Aren’t others enough for the bulk of bad stories we hear.
Being an ex radio broadcaster, I have heard a lot about great work this organization is doing in all over the country, reaching where no one does. Disappointed to read this article. Journalists should also not forget the meritorious services of this organization.
I worked as a volunteer in Muzaffargarh in 2010 floods and found out that this organization had an immense contribution there.
Because of its scale and success, PPAF is one of the most scruitinized organizations in the country. Its real problem is overregulation both internally and by the World BAnk, which actually reduces its effectiveness, and makes it potentially vulnerable to pointless audit objections. PPAF works with over 100 POs which are themselves monitored to death by donors, regulatory authorities, auditors, and media. There is no way PPAF can keep a tab on each and every PO, which is the job of their own governing bodies. Part of the problem is that PPAF has to work with both large and well established POs, which follow highest oversight standards and in most cases regulated by SECP; as well as smaller POs, which are more effective in more challenging environments, but which may have capacity and governance issues. PPAF should be proud of what it is doing, and follow a more simplified oversight system relevant and consistent with its operating environment. Too much paper regulation will increase the cost of delivery and get you into trouble!!
why cant we ever focus on the positivity and always try digging out the negativity. we should highlight the positive work to encourage such organizations which are atleast trying to bring change.
who were the two singers?
Out of context and spicy publication from Tribune. That is pitty/shameful!! Pple who do not understand ABC of what audits and reviews mean provide these with out context 'through cherry picking' to make it look sensational. The report is still draft and its objectives were never an investigation or audit but transactions review. There may be some issues and best parties to resolve these are its stakeholders World Bank and PPAF not the masses or Tribune.
The report seems representing one side of the picture, as PPAF is working from fourteen years, and nothing such sort of alegations have been observed in past. Secondly; the above report clearly evident that the basics of the critics is a draft report. A draft report which has been submitted by the same auditors who are also their annual auditors already given unqualified audit. Microfinance sector is being largely supported by PPAF in the country, also ranked number one by the Economist Intelligence Unit (EIU). We need to understand that our education system hinders quality persons resulting quality institutions. It requires time, efforts and money to build the resources and institutions. In current scenerio, it wont be a good option to select partners each time, as ilustrated above in the case of PPAF, for every new year. A continuetion of projects with enhanced capacity building of partners is suggested to reach the poor families.
ET should stop making a mountain out of a molehill. The project has entered into fourth year and the same auditors have given unqualified audit reports in previous years. Living in 'non-priority' areas should not disqualify or exclude a poor benefiting from poverty eradication initiatives. Majority of PPAF funds are channeled through Rural Support Programmes which have heavy representation of govt and renowned professionals in their boards. There are many other trivial issues on which we can write one-sided story to entertain readers. Poor of the country and poverty need serious thought and a rigorous analysis.
The very idea that a nuclear powered country with a huge army needs to borrow dollars to alleviate poverty raises many red flags. Pakistan is not Somalia. Apparently, borrowing of $250M smells of corruption and theft by the establishment actors.
There can be little doubt that these corrupt officials, especially in high places, have pocketed most of the money. At least, if it were free aid money, this may be the end of the story. But, being a loan, it has to be paid back by Pakistan, further adding to the country's rapidly rising foreign debt.
This 25 billion rupees should have been given to Ministry of Social welfare so that this land of pure should have become a better place.
Surprise surprise, after all someone woke up after wastage of all the money. Few of those implementing partner organizations are owned by PPAF officials to take advantage of huge funds. They were paying from one end of the table and receiving from other end of the table. Actual and working organization were very rare which were awarded with any fund, most of the big funded organizations were owned by PPAF officials with fake organizing and governing bodies, procuring millions of assets and reselling after few months.
Need some data ;p ??
PPAF is one of the best organizations in this country, where merit and procedures are followed. As a nation it has become our habit of tarnishing anyone and any organization without due investigations. PPAF publishes its accounts annually audited by top audit firms. It is ironic that an organization that is chosen by most of the donors due to its quality of work for the poor and marginalized is being criticized on a "draft report". If multiple international donors are providing funds to PPAF they must be following due processes.
in the world Pakistan said to be among the riches countries, but its economy n people suffer the poverty. The problem is related with the infrastructure of different facts i.e education, health, knowledge n awareness. Our leaders has to focus on not a rich country but only on rich economy. We are in need to improve fiscal n monetary policy and towards the management of country.
Any govt sponsored poverty eradication, welfare scheme are not meant for the people. It is meant for the fortunate few who end up running this on behest of their masters - whoever is in Power.
Looks at Benazir income support scheme....can we audit that or its too sacred right now?
No surprise, where corruption is neatly woven into the fabric of our society. A referendum should be submitted to change the name of our country as = Pakistan the land of the outstretched palm!
Only single question, Was WB sleeping before while PPAF / any such institution is straight away supposed to do such parts with the aid money in countries like Pakistan.
At least the poverty of the well connected has been eradicated. Those big houses in Islamabad and Dubai will def help.