In the report, the auditors observed that the investment in non-government securities was a violation of Section 7(f) of FEB & GIF Act. ILLUSTRATION: JAMAL KHURSHID/FILE
According to the report, prepared by the Auditor General of Pakistan, FEB & GIF illegally invested a huge amount in the private sector and because of this investment in non-government securities it caused a loss of Rs1.224 billion.
FEB & GIF was meant for paying insurance and welfare grants to the families of government employees, the report said.
Section 70(f) of the Federal Employees Benevolent and Group Insurance Funds Act 1969 states that the board shall have powers to invest money held in the benevolent fund in government securities and units of investment Corporation of Pakistan or National Investment Trust, in the construction of buildings for purposes of raising income, and in other profitable ventures the plans whereof have been previously approved by the federal government.
The FEB & GIF management invested Rs1.224 billion from insurance funds in Term Finance Certificates (TFCs) of Pak American Fertilizer Limited (the Azgard-9 Group) from June 2009 to April 2010 at a profit of six-month Karachi Inter-bank Offered Rate (Kibor) plus 1.75%. According to the redemption schedule, profit and principal were payable semi-annually and the entire investment would mature on January 14, 2015.
In the report, the auditors observed that the investment in non-government securities was a violation of Section 7(f) of FEB & GIF Act. Pak American Fertilizer paid Rs80.606 million as profit and amortisation up to January 14, 2010, after which it failed to continue making payments.
On April 2, 2012, the FEB & GIF management approached the Securities and Exchange Commission of Pakistan, the corporate sector regulator, asking it to intervene and protect its investment in the TFCs of Pak American Fertilizer.
FEB & GIF is yet another state-owned institution, like National Insurance Company Limited and Employees Old-age Benefit Institution, which has lost a big amount in investment in the private sector.
The auditors were of the view that the investment in non-government securities was prone to risk. The company’s failure to pay profit and return the principal resulted in a loss to the insurance fund meant for payment of insurance and welfare grants to the families of government employees, they said.
The auditors recommended that the matter may be investigated by an independent agency to fix responsibility for making investment in non-government securities, causing loss to the government.
The report also pointed out unauthorised payment of Rs11.702 million in various allowances, failure to recover pay and allowances amounting to Rs1.711 million from the ex-managing director, unauthorised utilisation of FEB & GIF – Rs159.323 million on pay and allowances and operational expenses, irregular purchase of vehicles amounting to Rs5.47 million, irregular monetisation of an official vehicle amounting to Rs2.520 million, irregular execution of development works amounting to Rs50.778 million and unauthorised investment of Rs3.186 billion.
Published in The Express Tribune, September 25th, 2013.
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